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More Chatter Around Ladder: The Dividend Is Fatter

Mar. 04, 2020 7:00 AM ETLadder Capital Corp (LADR)96 Comments


  • Ladder shares were down by more than 23% last week.
  • Its dividend yield is now 8.9%, but well covered by core earnings.
  • The company’s multi-cylinder platform gives it optionality to deploy capital across its risk-adjusted pillars.
  • This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Get started today »

Last week was a bad one for most all equities, and real estate investment trusts (REITs) were no exception.

As Hoya Capital Real Estate pointed out" “The S&P 500 finished the week lower by 11.3%.” And “REITs finished lower by 12.5%, a steeper one-week decline than that seen during any single week during the financial crisis.”

While many investors chose to run for cover during the debacle, we believe in staying diligent. Always. And so we kept our eyes trained, looking for opportunity.

As earnings season wound down on Friday, one of our favorite commercial mortgage REITs kept moving lower, possibly indicating a wider margin of safety. At one point, shares of Ladder Capital (NYSE:LADR) were down by more than 23% for the week.

They recovered a bit before the bell, recovering to a mere -16% instead – which still makes for an intriguing buy.

Source: Yahoo Finance

Over the years, we’ve done extremely well with our stake in Ladder. It’s returned an average 15.7% annually since February 2016, when we first entered it:

Source: Sharesight

Ladder already represents 3.2% of the Durable Income Portfolio, which also is this author’s primary investment portfolio. But now might be the time to increase that amount.

Despite its recent price drop – which makes its dividend yield 8.9% – it’s core earnings are solid, making that payout more than sustainable.

Let’s take a closer look at Ladder, including more about its payout ratio. Because of all of this chatter, the dividend is fatter!

And we want to take a closer look.

Ladder’s Business Model

As viewed below, Ladder has three main business lines:

  • Lending
  • Investment-grade rated securities
  • Real estate equity (in mostly net leases).

Together, those focuses add up to more than $6.7 billion of assets.

Also together, it offers an inherently safer

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This article was written by

Brad Thomas profile picture

Brad Thomas has over 30 years of real estate investing experience and has acquired, developed, or brokered over $1B in commercial real estate transactions. He has been featured in Barron's, Bloomberg, Fox Business, and many other media outlets. He's the author of four books, including the latest, REITs For Dummies.

Brad, with his team of 10 analysts, runs the investing group iREIT® on Alpha, which covers REITs, BDCs, MLPs, Preferreds, and other income-oriented alternatives. The team of analysts has a combined 100+ years of experience and includes a former hedge fund manager, due diligence officer, portfolio manager, PhD, military veteran, and advisor to a former U.S. President. Learn more

Analyst’s Disclosure: I am/we are long LADR, BXMT. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (96)

Brad Thomas profile picture
Forget About The Rule Of 72, For At Least 90 Days seekingalpha.com/...
Panzerman profile picture
When the music stops, anything mortgage related goes down like the Titanic. Down 80% in one month from 16 to 3 and change. This can double or triple and you have still lost most of your money. Even darling Starwood and Blackstone Mortgage Trust went down with the ship. The lure of that high dividend will get you....sooner or later. Ladder is different or Starwood is different turns out to not be true, and the facts show they are actually very similar to each other with minor differences only.

The reason for the collapse this time is different than in 2008. But it is a total collapse none the less, and the principle will not be made back for years.

It was a lesson learned by me over decades..... do not get lured by that dividend and avoid anything mortgage related.
If I'm reading this press release correctly, LADR needs a capital infusion (or maybe "wants" is a better word) and does not want to issue common shares at market price and is looking for some type of private equity placement or merger. The question is, is it a "need" or a "want" or a "just in case"?

Consistent with Ladder’s long-standing philosophy of pro-actively managing risk, the Company recently engaged Moelis & Company LLC to evaluate financing alternatives to enable it to both navigate potential further market dislocations as well as take advantage of opportunities created by those dislocations.
Brad Thomas profile picture
I have a call with management this afternoon.

Big Differences, Big Deals, And Big Discussions seekingalpha.com/...
Brad, do you stand by your comment on 3/26 that "LADR ain't going BK"? Because the price is back in the 3's now and I want to buy more....maybe.
D.S. Leach & C.E. Leach profile picture
@Brad Thomas,

Sure looks like the market is voting that LADR BK risk is rising. Any insight here?
staz profile picture
Brad i am following your articles for a long time on wpg . I want to give you thumbs up on how accurate you have been on wpg . I have always compared your articles with those of Rida Morwa who was always so wrong on it and refused to accept his mistake riding the garbage from over $20 to now almost sub $1 .

Just from that background , i respect any of your advise very heavily. Thank you for your strong work .
Brad Thomas profile picture
Thank you @staz ...It's a new paradigm in these unprecedented times...I just published an article on CAKE and there is going to be a wave of store closures....the retail apocalypse is knocking at the door: www.forbes.com/...
My concern with all REITs is not only their tenants ability to pay rent but the availability of credit neither of which is clear at this point. Do we know whether they have financing that puts them at margin call risk?
Brad Thomas profile picture
LADR +100% today ….The stock market seems to offer the most rapid road to fortune. Be safe everyone!!!
Now it’s back in the toilet
Soupy profile picture
Something, anything out of management would be nice to hear.
They need to be super careful about what they announce. The class action lawyers will be on them like flies on you know what.
D.S. Leach & C.E. Leach profile picture
LADR is up 130% just today at 1230 hrs. That says a lot.
what's driving this? My basis for LADR is around $12. Not sure whether to run and hide at this point.
How about a new article now that LADR has crashed and burned. Down 78% YTD. Some "margin of safety" a few weeks ago.
Giannis#32 profile picture
@temprcp - Really? Every time a stock goes down you are going to wet your pants? You guys shouldn't be investors. Price drop has created one of greatest buying opportunities. The fact that you can't see that speaks volumes. Brad does a great job.
Chris Jenkins9157 profile picture
Anyone else load up on $LADR @ under $3 a share? So much is already priced in at under $3.
Chris Jenkins9157 profile picture
Sold at $9. Got another limit order in for $3
HI Brad. Any thoughts on $LADR now that it has been cremated lately? Would you add at these prices or do you see dividend issues in the short term? Thanks for your hard work!
D.S. Leach & C.E. Leach profile picture

I asked the same question the other day. A couple more days of this and LADR will be at risk of being delisted.

Here was Brad's response.

Was that a reply ?
Can anyone give me a clue as to why LADR has imploded to this extent? And useful feedback would be greatly appreciated.
D.S. Leach & C.E. Leach profile picture

LADR looks like a pending BK chart. I can't find anything other than they renewed an ATM Revolver and the SA Editor initially wrote the headline as if LADR was issuing new stock at these prices. Since corrected the headline. I can't imagine that little headline caused LADR to fall off a cliff.

Anybody else got a clue?
Your loans are crap. They call them 'senior,' but you are just first in line for the value of the companies equity in the mortgage, not the building itself.

That is why the loans yield 7%

"Transition' loans are similar junk, buildings being 'repositioned' means they couldn't pay the rent was things were good. Now? Cmon.

Then there is the leverage in the whole system, which hurts whether you have it on or not if you own these kinds of assets as others are de-risked.

You are just short volatility, as if you were selling naked options. It works as long as things stay quiet.

They aren't quiet.
They sold 9M shares last year in ATm. Refiling doesn't mean a secondary, but it doesn't mean they aren't selling stock a little at a time.

Bottom line: They will need capital bad for margin calls.

What did think this was? Magic?
Thank you for replying you're awsome!
I am so new to this area. Is BXMT safer then this?
Brad Thomas profile picture
@pooberry45 Yes, BXMT is 100% senior secured....consider KREF. All the best, Brad

Dollarman1971 profile picture
I may be a buyer at just over $10 and even then it would be a speculative position.
I_like_preferreds profile picture
basically you are not interested in LADR, got it.
The market is telling you something there Brad.

When sectors get crazy overpriced (like commercial real estate levered speculation) they all correlate when the toilet gets flushed. You dont even have to make the case that the "equity in leases" is a zero. The stocks will go down as a group as everybody loses money in everything.

At 3$ it is worth a look, but there will be lots of things work a look.
Dollarman1971 profile picture
At the rate it is going it may be at $3 in a week or two.
birder profile picture
I own a fair portion of LADR relatively speaking. Too much perhaps to add additionally although the dividend at 8.1% is super.
Brad Thomas profile picture
@birder Thanks for reading and have a great weekend. Brad
Please elaborate on "binary risk opportunities"
LADR and a few other selective buys of solid companies have increased my dividend stream by 20% in my retirement portfolio. Most just goes to portfolio building. Though retired I don’t need the income, but use a little for globetrotting. Thanks for the tips
Brad Thomas profile picture
Thanks for reading and commenting @retbiotech1
Brad: Doesn't it bother you that there are so many people in this business of commercial loans? I would think it would drive the margins down due to the competition.
Brad Thomas profile picture
@Alan Kesler Not really, because the commercial mREITs are filling a void, as the bank business has slowed since the last recession. Commercial mREITs are the modern day commercial banks.
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