Q4 2023 Ladder Capital Corp Earnings Call
Participants
Pamela McCormack; Founder, President & Director; Ladder Capital Corp
Paul Miceli; CFO; Ladder Capital Corp
Brian Harris; Founder, CEO & Director; Ladder Capital Corp
Craig Robertson; Head of Underwriting & Loan Portfolio Manager; Ladder Capital Corp
Sarah Barcomb; Analyst; BTIG, LLC
Stephen Laws; Analyst; Raymond James & Associates, Inc.
Steven Delaney; Analyst; JMP Securities LLC
Jade Rahmani; Analyst; Keefe, Bruyette, & Woods, Inc.
Matthew Howlett; Analyst; B. Riley Securities, Inc.
Presentation
Operator
Good morning and welcome to Ladder Capital Corp's Earnings Call for the Fourth Quarter of 2023. As a reminder, today's call is being recorded. This morning ladder released its financial results for the quarter and year ended December 31st, 2023.
Before the call begins, I'd like to call your attention to the customary safe harbor disclosure in our earnings release regarding forward-looking statements. Today's call may include forward-looking statements and projections, and we refer you to our most recent Form 10 K for important factors that could cause actual results to differ materially from these statements and projections. We do not undertake any obligation to update our forward-looking statements or projections unless required by law.
In addition, Ladder will discuss certain non-GAAP financial measures on this call, which management believes are relevant to assessing the company's financial performance. The Company's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. These measures are reconciled to GAAP figures in our earnings supplement presentation, which is available in the Investor Relations section of our web. We also refer you to our Form 10 K and earnings supplement presentation for definitions of certain metrics, which we may cite on today's call.
At this time, I'd like to turn the call over to Ladder's President, Pamela McCormack.
Pamela McCormack
Good morning. We are pleased to provide an overview of Ladder's financial performance for the fourth quarter and full year 2023. In the fourth quarter, Ladder generated distributable earnings of $40 million or $0.32 per share, resulting in a 10.5% return on equity.
For the full year 2023 by reported distributable earnings of $167.7 million or $1.34 per share, generating a 10.9% return on equity flat as demonstrated notable financial strengthening across key metrics over the course of the year with a smaller asset base and lower leverage, we achieve higher returns. Our adjusted leverage ratio stands at 0.7 times, excluding investment grade securities and unrestricted cash and cash equivalent.
Distributable earnings increased 13% year over year and undepreciated book value increased to $13.79. Our financial performance benefited from a positive correlation to rising interest rates with net interest income growing 58%. Our commitment to an unsecured capital structure contributed to this growth as we benefited from $[1.6] billion of unsecured bonds at a low fixed rate weighted average coupon of 4.7%.
We increased our liquidity position to over $1.3 billion by year end with cash and cash equivalents up 67% year over year. In 2023, we received approximately $1 billion in cash from paydowns of loans and securities which was accompanied by a $462 million or 11% reduction in total leverage.
Future funding commitments also declined by over $100 million or 36% and our unencumbered asset increased to 55% of total assets. In addition, dividend coverage also rose to 146% in 2023, reinforcing the state and durability of our dividend.
Furthermore, our credit ratings were reaffirmed by all three rating agencies during the year with two agencies continuing to rate ladder, just one notch below investment grade in the face of significant market disruption. The Company's actions have notably strengthened our financial position as evidenced by these positive trends as we enter 2024, our efforts have left us well positioned to quickly pivot to offense. Our originators continue to explore the market for new investments. In an environment we anticipate will offer compelling opportunities for well-capitalized lenders like latter particularly given the pullback by the middle market banks.
Regarding our loan portfolio, we received to $727 million in repayments, reducing the portfolio balance by 19% from the start of the year. This amount includes the full payoff of 35 loans and approximately $100 million in proceeds from the repayment of office loans. Subsequent to year end, we received an additional $70 million in proceeds from the payoff of four unencumbered loans, including one office loan.
We attributed our robust payoff to our strategy of originating smaller loans in the middle market. This approach as far as access to a broader range of capital sources repayment, whether through refinancing or asset sales, our balance sheet loan portfolio stands at $3.1 billion at this as of December 31, with a weighted average yield of 9.65% and an average loan size of $27 million.
We have limited future funding commitments totaling only $204 million with approximately two thirds of that amount contingent upon a favorable leasing activity or other positive developments at the underlying properties. In the fourth quarter, we successfully concluded foreclosure proceedings. Resolving two loans on nonaccrual. This include a $23 million loan on a retail property on the Upper West Side of Manhattan, which had been on non-accrual since the second quarter of 2018 and a $35 million loan on a newly constructed multifamily in Pittsburgh, Pennsylvania discussed on our third quarter earnings call.
Actually, in the fourth quarter, we placed one $15 million loan on nonaccrual status. The loan is collateralized by a newly renovated multifamily portfolio in Los Angeles, California and we anticipate taking title to the asset during the first half of 2024. As Paul discussed, we did not identify any specific impairments during the quarter and increased our General CECL Reserve to align with our assessment of current market conditions heading into 2024, we expect to pivot to offense while continuing to actively monitor our loan portfolio. Despite the liquidity pullback from regional banks impacting our market. We believe that the long-term advantages for non-bank CRE lenders like ladder stemming from reduced competition for lending in our space outweigh any short-term obstacles. In the meantime, we're continuing to work with our well-capitalized sponsors who, in most cases we've seen investing new capital into their assets, expecting more palatable interest rate environment later this year. That said, as we have consistently demonstrated, even during the challenges posed by COVID, we make a clear distinction between the default and a loss of a well-capitalized and experienced real estate owner, we possess the capacity to proficiently own and manage the underlying real estate. Our ongoing objective will be to maximize our value at our conservative loan basis, particularly as we navigate the upcoming quarters with the current HIGHER for now interest rate environment.
Turning to our securities and real estate portfolio. Over the course of 2023, we received $196 million in paydowns in our securities portfolio and acquired over $88 million of new positions ending the year with the $486 million portfolio comprised primarily of triple-A securities, earning an unlevered yield of 6.82%. Our $947 million real estate portfolio, mainly comprised of net lease properties with long-term leases to investment-grade tenants contributed $50 million in net rental income in the fourth quarter and $59 million in 2023.
In summary, we entered 2024 with a strong balance sheet, substantial dry powder, modest leverage and a well-covered dividend. As the commercial real estate market continues to reset. We remain focused on optimizing the credit of our existing loan book, and we are well positioned to deploy our capital for the right opportunities that we believe will present themselves as transaction activity rebounds with that, I'll turn the call over to Paul Baker Bell.
Paul Miceli
As discussed in the fourth quarter of 2023, platter generated distributable earnings of $40 million or $0.32 of distributable earnings per share. And for the full year in 2023, Ladder generated $167.7 million of distributable earnings or $1.34 of distributable earnings per share. A return on equity of 10.9% for 2023.
Our strong earnings in 2023 were driven by robust net interest income and steady net operating income from our real estate portfolio and benefited from our primarily fixed rate liability structure of balance sheet loan book continued to receive a healthy rate of paydowns in the fourth quarter, which totaled $167 million.
This was partially offset by $11 million of fundings on existing commitments. The portfolio totaled $3.1 billion as of year end across 116 loans and represented 56% of our total assets. As previously mentioned, in the fourth quarter of 2023, we completed the foreclosure proceedings on two nonaccrual loans totaling $58 million.
Overall, in 2023, we added three REO assets and sold one $44 million hotel asset previously foreclosed on, which produced an $800,000 gain for distributable earnings, demonstrating our ability to maximize value on assets where we proceed with foreclosure.
In the fourth quarter, we increased our CECL reserve by $6 million, bringing our general reserve to $43 million or an approximate 137 basis points of our loan portfolio. The increase was driven by the current macro view of the state of the US commercial real estate market and overall global macroeconomic conditions. We continue to believe the credit quality of our loan portfolio benefits from the diversity and collateral geography as well as granularity, given our small average loan size, which was demonstrated by the $727 million in proceeds received from paydowns in 2023, including the full payoff of 35 loans.
Our $947 million real estate segment continues to perform well, providing a stable source of net operating income to earnings. The portfolio includes 156 net lease properties, representing approximately 70% of the segment.
Our net lease tenants are strong credits, primarily investment grade rated and committed to long-term leases with an average remaining lease lease term of nine years. As of December 31, the carrying value of our securities portfolio was $486 million. 99% of the portfolio was investment grade rated with 86% being triple-A rated. Over 71% of the portfolio was unencumbered as of year end and readily financeable providing an additional source of potential liquidity, complementing the $1.3 billion of same day liquidity we had as of year end. Ladder same-day liquidity simply represents unrestricted cash and cash equivalents of over $1 billion, plus our undrawn unsecured corporate revolver capacity of $324 million.
It's worth noting in January 2024, we extended our corporate revolver with our nine bank syndicate to a new five-year term out to 2029 facility carries an attractive interest rate of silver plus 250 basis points on an unsecured basis, with further reductions upon achievement of investment grade ratings enhancement demonstrate the strength of our capital structure as well as well as a lot of strong relationships with these financials questions. As of December 31st, 2023, our adjusted leverage ratio was 1.6 times, which was down year over year as we delever our balance sheet while producing steady earnings, strong dividend coverage and an attractive double-digit return on equity.
Unsecured corporate bonds remain the foundation to our capital structure with $1.6 billion outstanding or 41% of our debt with a weighted average maturity of nearly four years and an attractive fixed rate coupon of 4.7%.
We'll also note in 2023, we repurchased $68 million in principal of our unsecured bonds at 83.5% of par, generating $10.7 million of gains. As of December 31, our unencumbered asset pool stood at $3 billion or 55% of our balance sheet. 81% of this unencumbered asset pool is comprised of first mortgage loans, securities and unrestricted cash and cash equivalent. We believe our liquidity position and large pool of high-quality unencumbered assets provided ladder with strong financial flexibility in 2023 and continues to do so as we enter 2024 and as Amit discussed is reflected in our corporate credit rating one notch from investment grade from two or three rating agencies with all three rating agencies reaffirming our credit rating 2023.
In 2023, we also repurchased 2.5 million of our common stock at a weighted average price of $9.22 per share and our current share buyback authorization of $50 million, That's $44 million of remaining capacity as of December 31, 2023. Flatters undepreciated book value per share was $13.79 as of December 31, 2023, with 126.9 million shares outstanding.
Finally, as Tom will discuss, our dividend is well covered. And in the fourth quarter, Ladder declared a $0.23 per share dividend, which was paid on January 16, 2024. For more details on our fourth quarter and full year 2023 operating results, please refer to our earnings supplement, which is available on our website as well as our annual report on Form 10-K, which we expect to file in the coming days.
With that, I will turn the call over to Bryan.
Brian Harris
Thanks, Paul. We were happy when 2023 came to an end and also very pleased with our financial results.
From start to finish, I'd credit our success to having gotten our company ready for turbulent markets in the years leading up to 2023. I tend to highlight our differentiated liability structure with a large component of fixed rate debt when explaining why things went well at Ladder during the year. But in truth, it's more complicated than that.
Over 10 years ago, we decided to finance our business with a greater concentration of corporate unsecured fixed rate debt foregoing that the typical mortgage rate model of using repo lines to level returns, even though floating rate repo finance was cheaper at the time when we issued the bonds, we realized after what happens to the U.S. banking system and 27 and 28, that there would be fewer banks, larger banks and more highly regulated banks. So we felt the usual bank financing models in use might need some shoring up as they were becoming more and more problematic in an increasingly more volatile world with less cushion against market shocks.
While we never saw the pandemic coming or the enormous global central bank intervention that took place in response to it. These items only serve to cement our case to manage our Company with safer debt, even if it came at a higher cost using less leverage, just as we had indicated, we would do when we founded ladder in the fall of 28, we stay true to that model. And while it was helpful that we've got the timing and direction of the Fed hiking cycle, correct, our constant vigilance around avoiding credit mistakes has really been the linchpin to our success. While not perfect. By any means, we believe we were better than most in our approach towards lending over the last three years, although we're not without some headaches in these difficult times. Our disciplined approach in keeping our exposures and assets at a reasonable basis has served us well once again as it has for the better part of our lengthy careers in March of last year after a few banks fell largely due to a basic lack of understanding about duration on the part of bank CDOs and regulators. The funding model for regional banks in the U.S. changed these changes may very well be permanent.
If banks don't compensate savers with appropriate interest rates on deposits, we now see how easily savers can and will move their savings where their capital is treated better at Ladder, we own over $1 billion of T-bills center and approximately 5.4% and mature in less than 90 days. This is not as a result of any plan we have, but rather a luxury we enjoy because we issued about $1.3 billion of fixed rate unsecured bonds with an average rate of just 4.5% with a remaining average maturity of about four years.
We now have a rather barbell asset base of T-bills at 5.4% and a loan portfolio that earns an unlevered return of approximately 9.7%. This combination allows us to cover our quarterly cash dividend using only modest leverage during these precarious times in commercial real estate. While the deficit at the U.S. Treasury is spiraling out of control, our fortress-like balance sheet allows us to turn our attention to getting through the current downturn in commercial real estate values in the aftermath of soaring interest rates and with a banking system with little appetite to finance new commercial real estate loans. We've navigated this environment with considerable success so far.
In 2023, as mentioned earlier, we received $727 million in proceeds from paydowns on balance sheet loans, which did include the full payoff of 35 loans. We also received $196.1 million of principal paydowns and payoffs in our CMBS and CLO securities portfolio, further increasing our liquidity as a result of our low leverage business model because of our high level of liquidity, we are able to work with our sponsors on loans that are having difficulty refinancing. However, if we share this benefit with those borrowers, the borrowers to must pitch in with additional capital to keep the asset in their control. We've been fortunate so far, having modified some large loans after substantial new equity was posted to create more time to resolve stress from higher rates.
In 2023, we received $119 million of an additional equity from our borrowers on 56 loans. We have also received additional credit enhancement in the form of well-heeled sponsors, providing full recourse on some of our larger loans outstanding in our equity portfolio. Our largest office property is triple net leased for another eight years with decades worth of extensions available to the tenants who happens to be one of the largest banks in the United States.
In this case, the tenant is currently putting the finishing touches on buildings that we own that they rent at a tenant containing costs between $250 million and $300 million, including construction of a new 1,400 space parking deck. So they can concentrate even more employees into these buildings were just not worried about that one.
I'll wrap things up here by thanking our employees who worked so hard last year in a daily environment of falling asset prices. We reported distributable earnings of $168 million in a year where our asset base that's smaller every quarter, yet we continued to produce double digit ROEs while holding substantial levels of cash, we feel the Fed is at least done raising rates for the time being if they do begin to lower rates, this will come as welcome relief to property owners with less competition for lending assignments from regional banks. Private credit is indeed moving and to take part in this vast addressable opportunity. And we have every intention of taking advantage of our already strong position in mortgage lending and plan to deploy our large cash holdings into something more interesting than T-bills. Thanks for listening.
And operator, we can open the line for some questions now.
Question and Answer Session
Operator
Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Sarah Barcomb, BTIG.
Sarah Barcomb
Hey, good morning, everyone. Thanks for taking the question on. So you mentioned in the prepared remarks that you're positioned to quickly pivot to offense, and there's a vast opportunity for private credit here. And so should we expect ladder to start originating new loans as soon as this quarter? And are you waiting for the Fed to start cutting rates on?
I'm just looking for more detail on, you know what and when what allows you to be more constructive and start putting that large cash balance to work. Thank you.
Brian Harris
Thanks, Sara. Yes, we you should expect us to start originating loans this quarter. And in full transparency, we've actually been quoting loans through the fourth quarter. Also, admittedly, though we have not been overly successful in getting application signed. Interestingly, because of them, oftentimes, we are losing on the loan opportunity to either an insurance company at lower rates and lower proceeds because the borrower has decided they prefer the lower rate R.L. So we've been getting be buying names of companies that we've never heard of. And so that will get further evidence that the private markets are in fact pushing capital into the space. But I would expect that not to last, we are quoting conduit loans. We're quoting bridge loans. We prefer acquisitions to refinances for obvious reasons, but on and that probably limits the OCR, the amount of opportunities because most of what's in the market right now is refi. But as acquisitions pick up, I think you can expect us to be more active. And there is no it's a deliberate plan on our part to be hoarding capital at this point. However, sitting with a $540 T-bill rate and able to buy securities in the CLO and CMBS world at attractive levels. We've been adding there mostly on the security side. In fact, while we've been on this path we bought 10 million. But I think we'll probably continue to buy more of those than we will make loans, but we are indeed quoting loans on a daily basis.
Sarah Barcomb
Okay, great. Thanks, and I appreciate the comments on the competitive set there, too. That's interesting. Maybe just going back to the in-place portfolio for my follow up on just because the specific seat sold remains pretty low relative to peers and we don't have risk rankings on a loan level here, I was just hoping whether you do think there's certain aspects of your portfolio that could maybe start to become a bigger concern if rates remain elevated throughout the course of the year and also longer. So maybe you could comment on the performance of your 2021 and 2022 vintage multifamily assets on those kind of asked about me, could could we start to see what he's coming back there? Appreciate any commentary. Thank you?
Brian Harris
Sure we are at the late 21 is really the what I would call the dangerous spot for multi-families because cap rates were quite low and leverage was quite high available in markets. I think we're going to continue to see some stress in the system through the first half of this year. And when I say in the system, I don't mean that latter necessarily. But generally, I don't believe we're quite through this, but we feel like we're getting near the tree line here as we exit the forest. And so I would anticipate some if I actually think rates are going to go down a little bit here from what we've been hearing and cap rates have gone down for sure, because of the forward nature of purchasing caps. So what we have right now is a deterioration in the equity ROEs and not necessarily blowing up the debt column yet or taking losses over there. So as long as rates stay here or go lower, I'm pretty optimistic if for some reason, rates start going higher. And I think the events of the New York Community Bank this week is a reminder to all of us that that could possibly happen some. I do think we've got another six months slog. I don't necessarily get overly concerned about where we stand relative to other people in our CECL reserves because we have focused on small loans. And and when I say small, not terribly small, about $20 million, $25 million as opposed to $200 million to $300 million, which are extraordinarily difficult to finance today.
So while we might have some uncertainties about the outcomes of what's come, what's on our books right now. I can only reflect back on the last 12 months, which certainly was no picnic in the markets and we got 35 payoffs. And since January 1, we've got another $70 million in payoffs.
So those are the indisputable parts of the conversation around smaller loans and diversification. And we're pretty optimistic, although we certainly do have some stress points in the system that that could go either way so far, they've been going the right way. However, to the extent that we expect carrying costs of these assets continues to stay high at some point, you do wonder, does the sponsor simply run out of money.
And so far, I think the sponsors who have ability to hang on are hanging on. However, if it got materially worse or if they simply exhausted their equity availability and then yes, we might see some properties come across the transom.
Operator
Stephen Laws, Raymond James.
Stephen Laws
Good morning. I wanted to follow up on Sarah's question. You know, can you talk about the relative returns you're seeing in new loan originations versus securities, some did you buy any securities out of them at one sale a week or two ago? Or kind of what type of securities do you find most attractive? And I think, Brian, you mentioned you just bought some modest morning to Frank.
Brian Harris
We have been primarily focused on either transactions that we've owned for a while that we kind of liken we're adding to it or but then more importantly, I think where we are seeing now a lack of discrimination in pricing between static deals where you know, every loan in the pool and manage deals where depending on how much time you might not know any of the loans in the pool for. So we have been focusing on the static end of things and as I said, we bought something this morning that was 2021 deal and it is static and we know all the loans in the pools, they're performing fine.
So those returns, I can't speak to the new issue market because I think that I mean, I could speculate as to what it is, but we didn't buy those bonds. So I don't know on, but the assets we are acquiring in the security business on the static side are yielding high 10s, low 20s if we lever them. However, given the cash pile that we've done, we haven't even been levering those. So you'll notice that a good part of our own interest expense has, as you have disappeared, the secured debt that we carry has gone down because we're just paying off repo, which is quite expensive and we're paying -- we're not using leverage unless we need to.
Stephen Laws
Yes. And then to touch on whether we talk about the one-three of liquidity or the $1 billion of cash, what is when you think of normal operating environment and how much cash liquidity would you would you hold or past another way, how much of your liquidity do you expect to deploy on? What's the incremental earnings power? When you think about all of that, once that money is deployed.
Brian Harris
I think it's powerful. And I think under normal circumstances, which I wonder if we'll ever see them again going back, I think to 20 end of 19 is the last time I can imagine that I could say that was when we were in normal times but up, you know, in normal times if you if we can go that far, I would say we would carry about $50 million to $100 million in cash. And as long as we've got the revolver, which as Paul mentioned, we've extended for another five years with all of our lenders. That's plenty of day-to-day liquidity. So we could, in theory, depart with $1.2 billion in cash. If you run that leverage at even one-to-one, that's $2.4 billion in assets. If you ran it to three-to-one, it's $3.5 billion in assets with all assets unlevered yielding 6%, 7%. So as powerful earnings power.
Stephen Laws
Seems like a lot of upside there. And then pretty conservative on the dividend from a payout standpoint, thoughts around that. Is that something that will need to move up given re-taxable income as this money is deployed? Or how do you look at your dividend level?
Brian Harris
We will look for where we think the next move will be up rather than down. However, I don't want to forecast first of all, we wouldn't forecast the dividend policy here on a call, but some we were not planning that right now, nor do we feel that we are pressed to do that for any regulatory reasons around read accounting. The main reason being we think capital is important right now. And we do think capital availability allows us to do a lot of things that will exceed our dividend. And so as a result of that, we think this is the kind of market where investors would want us to hold onto cash that we can invest at higher yields and and drives the dividend later as opposed to now.
Yes, I think for the most part in the space, the discussions around dividends are about who's cutting them, not who's raising them and them, yes, but we're pretty comfortable. We like having a lot of cash. We are hopeful that we can even issue another bond deal before the end of the first half. And if we do then we'll have an extraordinary amount of liquidity, in which case we'll probably be forced to lower our returns a little bit. But right now we're being very, very cautious and very discerning on what investments we will. And won't make.
Operator
Steven Delaney, Citizens JMT.
Steven Delaney
Good morning, Brian, Pamela and everyone. Nice to be on with you nice to see the market rewarding your strong report this market morning and sort of a choppy tape. I'm just curious, I Brian, you've talked about the balance sheet lending capacity kind of opportunistically getting ahead a little bit, but any thoughts about the CMBS conduit lending market obviously weak on a quarterly basis, you know, an average about $750 million in 2023.
More importantly, very weak profitability. Kind of there's got to be a lot of good floating rate loans out there where property owners are just maybe waiting for a break in the 10-year and I know you're trying to hit a 10-year fixed rate loan. What what's your view of conduit lending over the next one to two years and should we expect the Ladder to be involved? Thank you.
Brian Harris
Sure. Ladder will be involved and we do expect it to continue to pick up. That has been ticking up it's very reminiscent of 2008 when we started, you had a very, very slow securitization business with very low volumes because spreads were quite high in this situation. It's not that spreads are high. Spreads were, okay. It's that rates are high. But when you set the indicator, so and at the end of the day, it's just the cost of money, and that's what really drives that formula.
The other thing that's going on right now is there there's really little differential between a 5-year and a 10-year on the credit curve and so the sponsor or the borrower wants to borrow 10 years, whereas these lender wants to lend for five years. But that gets very tricky because when you make a five year loan in the conduit business, you start running into BP's mechanics where yields are in the 20s. So if you're to collect a 20%-something return over five years as opposed to something lower in the 10-year category, I think that's the tension going on right now between five and 10-year. Lenders, one 5, the borrowers one 10, I do believe the borrowers will win that argument. And ultimately, you will see a 10-year product coming out because there's plenty of investors looking for duration, I think evidenced yesterday by the largest 10-year ever options off it kind of went out the door pretty comfortably, and that should give a lot of people a lot of comfort then that you can go out 10 years on the curve.
The bigger problem I think right now is up. It's really the difficulty that the sector is having with work from home even in multifamily, which is intuitively a stable category, but expenses are just going through the roof and insurance as well as taxes. So it's a difficult market, but it always does come back and it always does dip for us. And I would say this is what this is, how it looks right before. A really good opportunity occurs back in. I don't know what you're exactly but around 9 or 10, 2009, 2010, we're making over $100 million a year in the conduit business. I would not rule that out. I think we're going to need a normal normalization of the yield curve. We almost started getting there until recently, but I think that this is probably going to be a second half of the year conversation more than a first half of the year.
Steven Delaney
Okay. Thanks for that. And I just would add, you know, I think you're using your buyback selectively. Obviously, when you do that you're we are retiring permanent capital, but also to Stephen's question, when you pay out a dividend, you're getting rid of permanent capital to, I think anything around 80% of book or lower if you need to buy the stock and not increase the dividend. And that's just one person's one man's view. Thanks for your --?
Brian Harris
Yes, I would say, Steve, just also if you look back into our stock repurchases, they kind of kick in at a certain level. And I think if you actually do a little review of that history, you'll find your comment to be pretty aggressive.
Operator
Jade Rahmani, KBW.
Jade Rahmani
And just a follow-up to Sarah's question about multi-family reviewing a report on multi-family and it's called multifamily mortgage credit risk lessons from history. And there's some comments in there that stand out. You know, it's a boom and bust asset class and the ease of build creates excess supply, which resulted in lower vacancies. So I think in addition to the expense headwinds you noted, there's also pressure on new lease rent and probably occupancies will dip in the Sunbelt markets. So can you comment on multifamily, Sunbelt exposure, what you see happening there and just framing expectations? I think that with upcoming maturities in some of these low cap rate deals, there inevitably will be a lot of pressure when it comes to qualify for a refinance.
Brian Harris
I'm going to actually call on Craig Robertson to answer part of this, but I would tell you just from just saying when you say Sunbelt, I don't know if you're talking about latter or general, but however, I don't think the Sunbelt is going to have nearly the problems that a lot of people think. And it's mainly because of the demographics of the United States, the baby boomers continue to retire. They continue to age and there is no shortage of people moving to the Sunbelt. And I think as long as the stock market is plumbing all-time highs and as long as home values are quite high. You'll continue to see that that go on as they even if they partner with their low rate mortgages in Boston, Philadelphia, New York on. But as far as our Sunbelt exposure goes, it appears to be doing okay.
The stresses if there is any is coming from a management that has too many assets at one time and they're struggling with it. You have to keep them focused and also the operating expenses. But the rents are okay. And I do believe there is some overbuilding that has taken place in a few places, principally Austin, Texas has quite a bit, but some are even we're beginning to see some parts of North Carolina look overbuilt too. But some high. We're not seeing problems with rents. If they're not quite where we wanted them to be, they're awfully close. And in many cases, those rents are being achieved without the requisite improvements that were supposed to be made. So a lot of the future advance money is not going out the door. And so if the rents are being achieved or nearly achieved without actually performing those those improvements.
So Craig, I don't know if you have anything on our particular Sunbelt exposure you want to share?
Craig Robertson
No, I mean hard to add much to that. I think when we look at the Sunbelt exposure, the rents really are holding up on. We tended to lend on either newly built product or product at lower leverage points so I think when we look at how the assets are performing, we still very feel very comfortable at where we own them at our basis and at the yields that the properties are generating. And when we have had short-term blips in sponsorship, it's been possible to write them by examining the business plans reevaluating and take them through. So occupancy has held up across the portfolio. And I think we have avoided largely a lot of the markets where that focus is right now, and that are exhibiting some of the stress and Austin is a great example of that.
Jade Rahmani
So I assume you're implying that there's little Austin exposure. Can you just comment on the debt yields that these properties are at or soon to be at based on your underwriting?
Craig Robertson
Yes. Right now, our multi-family portfolio shows a debt yield in the high fives at 85% occupancy with business plans still ongoing. We see those going up as they continue to lease. As I said, we're in the mid 80s occupancy with lease up and turns going. And when we pro forma it forward, even with current expense levels and current rents. We see those normalizing at levels that we're very comfortable with in the mid-sevens and plus depending on the assets.
Jade Rahmani
And that's on a debt yield basis?
Craig Robertson
That's on a debt yield basis.
Jade Rahmani
Yes. Okay. So I mean that could present challenges for the equity with net. Those are those leased those yet that yields don't leave that much room.
Brian Harris
Yes, but there's the the equity calculations on properties that were purchased 2 to 2.5 years ago are less rosy than they were 2.5 years ago for sure, yes.
Jade Rahmani
So what's --?
Craig Robertson
Our experience has been the pain has been highlighted in the equity and there still have been positive returns when the business funds are completed. And that's been manifesting in our payoffs.
Jade Rahmani
Okay. So as a base case, let's say, a property gets to a 7% or 6.5% debt yield, just allowing some inflation pressure, what do you think happens in that situation when the loan comes up for maturity?
Brian Harris
We expect the sponsor to purchase a cap and reload reserves if required and possibly even pay down the debt to a place where the lender us is comfortable. If they don't, then we'll see if they wanted to bring in an additional layer of debt through the mezzanine market. We are seeing that a little bit of that, which would pay us down and accomplish everything other than restoring ROEs to the equity. But it is what does that mean, it's more expensive to own real estate today than it was 2.5 years ago. That's not our fault, not their fault. It's just is a fact. And we're not overly concerned with it. And like for instance, we foreclosed and took title to a property in Pittsburgh, which is mostly multifamily and brand new home. There is nothing wrong with where we own this property. In fact, we're considering if we can take it to Freddie Mac right now on.
However, the sponsor either did not have the capital or did not feel it was worth his while to continue feeding a core ROE and from 2.5 years prior to that. But so as I said earlier in my comments, what we're really experiencing and seeing now so far is most of the pain is on the equity side and the sponsors are deciding do we put more money into this, even though their first ROE calculation didn't pan out the way we wanted it to or do we just say let's not face this.
And as Pamela mentioned, we do we take great pride in not calling default losses until we believe we have evidence of loss occurring. But so far, the all the pain that is existing, not all of it, but most of the pain you're seeing is really on the equity side. And as I said, we're almost through 2021 was when we started seeing extraordinarily leveraged properties, we purchased that three 3.5 caps. It was right around the time where Ladder Capital switched to doing fixed rate on two year loans with fees and fees out. And we attracted brand new properties coming off construction loans. And so as a result of that, that's the that's the season we're dealing with right now. We're dealing with fixed rate loans that are maturing that are doing just fine and they're brand new. And so the borrower has to figure out how to refinance it or pay it down or extend it. But we're happy to work with them. On that if they're performing fine. But I think still the ROE calculation is just not what they had hoped it would be.
Pamela McCormack
And I wanted to add --
Craig Robertson
These are in the mid fives, there's pref available and the sponsor can also sell the assets at the deals we talked about and we're seeing that as well.
Pamela McCormack
The other thing I wanted to add is of our payoffs in this year, 40% were in multifamily. So I agree with your comment, but caveat that you're seeing spot to defend, especially when it's not a widely syndicated asset and they're invested in the asset. We are seeing them pay off and we are seeing them defend and buying that work. I'm comfortable at our bases in any event and I think some of this could actually lead to opportunity.
Operator
(Operator Instructions) Matthew Howlett, B. Riley Securities.
Matthew Howlett
Yes, hey, thanks for taking my question. Just to follow up on the theme around credit. And I look at the headlines every day on commercial real estate, very stern looks that they're seeing a $1 trillion in losses for the office sector. And then look with the fear in the stock prices, even the lenders where your portfolio is holding up well in managing our interest rates, you've taken very few properties back. What's the disconnect I mean, Brian, you talked about the sponsors are going to still holding onto for a while now. Do we really need to see rates just come down, cap rates come down for this to all work out and not see this crisis and defaults that some of the headlines are suggesting.
Brian Harris
And I actually don't think that said, I think what you're seeing the headlines in particular tend to be focused around large cities and media centers. And there was a lot of lending that took place in Washington, D.C. and some of the larger gateway cities and those cities are struggling with and something other than high interest rates there. If there is a work-from-home component of that, there's a criminal element taking place there as people a wealth exit is taking place in some of these states. It's a tax situation where people are moving out of certain Northeast cities down to Sunbelt. So those are fixable it's not like they can't be straightened out, but the market is resetting and some and that's going to be painful.
So the disconnect, I think at Ladder is that we have smaller loans. We do have some large loans. We have a couple of loans over $100 million in two or three of them. Actually two of them are in Miami were oven tour. We feel good there. It's probably the best office market in the United States and on. It is just a high degree of caution and yield, a lack of belief that large institutions would not get a lot of people thought they would never get properties back, but there they are economic animals. These are non-recourse loans and they're handing them back and forth?
Yes, ultimately, it will reset find a new level. And yes, the good part is we are seeing those buildings trade. I mean, and if you start seeing bank selling commercial real estate mortgages at very deep discounts. That's going to add a little more pressure to what I think you have to really look at where the lending has taken place. And I don't think latter will ever be accused of competing in the most competitive markets with the other lenders. In fact, we prefer flyover states and smaller populations and which we always felt that the pandemic would actually broaden out the workforce and allow people to stay in St. Louis, stay in Memphis and stay in Houston rather than move to Los Angeles or New York. So I think that that is the disconnect if there is one of them.
Having said that, there's pressure on all of it. Again, there were, but still some of the work from home items. We're not really talking about a big difference because Friday was already done. So a lot of people are at three and four days a week, you're seeing a lot of companies go to five days a week now. But the real problem is places like Washington, D.C., where the federal government is still operating under an emergency COVID protocol. They are not back at their jobs. They do not go to the office and Starbucks and McDonald's are closing in certain cities, not because the same thing wrong with the city. It's just that everyone staying hope so. And it's also probably one of the reasons that apartments will hold up more than more than people think. And we're we don't think the apartments situation is nearly as bad as a lot of people think at the problem with the apartment situation was people were financing three camps at a time when they probably should not have been if they started looking at the mid-6 six cap. So that normalizes very quickly.
Matthew Howlett
Absolutely. So Brian, do you feel what's happening with New York Community Bancorp. I mean, is this a is this going to fuel a crisis like oh eight, oh nine and it doesn't sound like it? And do you view it as like an opportunity for latter. I mean, it's been more of these banks have to sell assets, retreat from the lending. How you do -- do you think it's getting (multiple speakers) banks go down?
Brian Harris
I'd offer Lehman's opinion on that. And I have no inside information, nor do I really think I have it figured out, but you have to is there something going on there because New York Community Bank was part of the solution around Signature Bank. And so you have to assume before the FDIC. allowed them to participate in taking assets and deposits from Signature Bank. They took a look at them and so they must have been healthy less than a year ago. So what happened now? They do have large loans and there was some discussion about how one of the loans that caused the big headache was a co-op loan in New York.
That's nearly inconceivable to me because co-op loans rarely borrow money. And if they do, it's usually 20%, 30% leverage. So and but they do have a lot of rent-controlled loans on their balance sheet and they probably have some office loans that are probably a little too big for them. But so I guess I struggle with that. There seems to be a disconnect there.
Something happened later about when they started looking at their portfolio. This isn't this isn't Signature Bank and Silicon Valley Bank having 10-year assets that if they sell one, they have to mark the whole book. And that capital goes up and in place, this is something different. And I do think they have some defaults that I can't imagine they didn't know about them, but I do view this as rather idiosyncratic to them. However, I do think lenders with high concentrations of rent-controlled apartments and rent-stabilized apartments, given the changes that have taken place in some of these cities are there, those are going to be problematic.
I don't think they're going to be problematic to the point of like putting them out of business. I do think there will be some losses there that. And then as far as opportunity goes, I don't know. I mean, we've actually bought loans from New York Community Bank in the past. None of that in this round of that for a good lender from what I know of. And so signature was a little bit more aggressive, but not bad at all. And we wouldn't have any trouble buying loans from them if they wanted to sell them. But my suspicion is you're going to want to sell office loans in New York, which which might be a little less comfortable for us?
Yes.
Matthew Howlett
No, it was some packages are now at least on the residual side and others. And last question, you referenced the bond deal first half of this year you've been masterful and how you've structured the balance sheet? Or would you be talking about a CLO or an unsecured deal? I'm just curious, would you want to go a little bit towards more floating rate debt? Or do you feel like, you know, you've got the the way you have a structure now that fixed-rate debt and six, do you want to keep it exactly the way you've done it.
Brian Harris
I think the comment on the first one, no, I don't see a new CLO deal going out until we start originating more loans we have two out there right now. They're they're just coming off their managed periods. So they'll start paying down soon. But Tom, as far as it's a new a new issue that would be a fixed rate unsecured, hopefully longer than seven years because we do have a 2029 outstanding, which will come due and we'd like to always take out more term rather than inside of the longest maturity we've got. But given the liquidity situation we've got we're frankly not going to borrow money unless it's cheap and don't have much to add people who invest in mortgage rates right now want to lend money because it's expensive. And so there's a little bit of a disconnect there. However, we did see some signs of life there. There was a mortgage REIT that -- it did issue $1 billion unsecured the other day at pretty attractive terms. What's that?
Matthew Howlett
It was just over 7%, correct? We're looking at the same one.
Brian Harris
Yes. Yes, that's right. Anyway, I think the name of the company is Mr. Cooper, but that tightens about 50 from where the talk was. So there has been a real lack of supply in that market. And I'd like to get involved in that if we can issue more unsecured corporate debt. However, this recent pop in spreads rates and noise around New York Community Bank has probably dash that for a little while. But I do think as we get out towards if the yield curve starts getting a little bit more on normalized where the two year falls again on? Yes, we might very well go. Then we have to be able to lend money at rates higher than we're borrowing it at.
Matthew Howlett
Right, right. Exactly. So the seven breadth of the same thing is that you saw and not, but we'll just wait for that. You guys have plenty of options and I really appreciate the answers. Thanks, everyone.
Operator
I would now like to turn the call over to Brian Harris for closing remarks.
Brian Harris
Our long here, difficult year successful year at Ladder. Thank you to our investors, our employees, bondholders, and we appreciate you staying with us and with the Fed stressful time. But yes, we tend to do well in those periods of time, and we are very optimistic about the future here. We think that most of the difficulties are going to be ending around June or July, and then things will be a lot better from there, and we're hoping to hit a point where all of our products are contributing to our earnings each quarter. So thank you all, and we'll see at the end of the first quarter.
Operator
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
