Seeking Alpha
Long/short equity, special situations, momentum, event-driven
Profile| Send Message|
( followers)

Ladder Capital Corp (NYSE:LADR), a commercial real estate finance firm with principal offices in New York, New York, plans to raise $225 million in its upcoming IPO.

The company will offer 13.3 million shares at an expected price range of $16-$18 per share. If the IPO can find the midpoint of that range at $17 per share, LADR will command a market value of $1.7 billion.

LADR filed on December 24, 2013.
Lead Underwriters: BofA Merrill Lynch, Citigroup Global Markets Inc, Deutsche Bank Securities Inc, J.P. Morgan Securities LLC, Wells Fargo Securities LLC
Underwriters: FBR Capital Markets & Co, JMP Securities LLC, Keefe Bruyette & Woods Inc

Summary

LADR is a commercial real estate finance firm that offers loan origination through a proprietary platform. The firm is engaged in three major lines of business: commercial mortgage lending, investments in securities backed by first mortgage loans, and investments in net leased and other commercial real estate assets. LADR offers a wide range of products to its borrowers, allowing it to adjust to borrowers' needs.

The firm's central strategy is originating first mortgage "conduit loans" on stabilized, income-generating commercial real estate properties available for sale in securitizations. LADR generates profits through the securitization of these conduit loans. Between the firm's inception in October 2008 through September 30, 2013, the firm originated $5.4 billion in conduit loans, along with $1.1 billion of balance sheet loans held for investment. It also acquired $5.2 billion in investment grade-rated securities backed by first mortgage loans on commercial real estate and $654.2 million in selected net leased and other commercial real estate assets.

Valuation

LADR offers the following figures in its S-1 balance sheet for the nine months ending September 30, 2013:

Revenue: $298,389,000.00
Net Income: $168,988,920.00
Total Assets: $2,506,167,698.00
Total Liabilities: $1,328,846,773.00
Stockholders' Equity: $1,167,956,912.00

Business

LADR is hardly alone in the commercial real estate financing business in the United States, and must contend for lending and investment opportunities with diverse competitors, including institutional lenders, REIT's commercial banks, investment banks, and hedge funds-such as HSBC, GE Real Estate (NYSE:GE), and Apollo Commercial Real Estate Finance.

Management

The core of LADR's management team has worked together for more than a decade. As of September 30, 2013, the firm's management team and chairman held equity capital accounts in the company, totaling $92.1 million of book equity, or 7.9% of total partners' capital.

CEO Brian Harris co-founded LADR and has served as CEO since the company's formation in October 2008. He has over 29 years of experience in the real estate and financial markets. Mr. Harris previously served as a Senior Partner, Managing Director and Head of Global Commercial Real Estate at Dillon Read Capital Management, and as Managing Director and Head of Global Commercial Real Estate at UBS Securities LLC. He also previously worked as Head of Commercial Mortgage Trading at Credit Suisse Securities LLC. He holds a B.S. in Biology and an M.B.A. from The State University of New York at Albany. Together, Ladder Capital's Brian Harris, Michael Mazzei and Greta Guggenheim were ranked #15 on the 50 Most Important People in Commercial Real Estate Finance by the New York Observer on March 5, 2013.

Conclusion

We rate LADR a buy in the proposed range of $16 to $18. Investors have been demanding financial IPOs.

Given the firm's solid national footprint and increasing demand for non-bank sources of commercial real-estate financing, LADR should have significant opportunities to expand its already-booming origination and securitization business in the future.

We're also encouraged by the firm's exceptional management team and its lengthy history of working together. Essentially, the proof of this firm's competence has been in the pudding: LADR is turning huge and growing profits, and we relish the opportunity to get a piece of the action with its IPO.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in LADR over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Ladder Capital IPO Reaches For Success