Ladder Capital Corp (“Ladder” or the “Company”) (NYSE: LADR) today announced that it has entered into a strategic financing arrangement (the “Agreement”) with Koch Real Estate Investments, LLC (“Koch”), an affiliate of Koch Industries, under which Koch will provide the Company with approximately $206.4 million in senior secured financing (the “Koch Facility”) to fund transitional and land loans. The Company also announced the completion of a private CLO with Goldman Sachs Bank USA (“Goldman”), which generated $310.2 million of gross proceeds to Ladder.
Ladder currently has more than $830 million of cash on hand and over $2.6 billion of unencumbered assets. These transactions also enabled Ladder to both increase its use of non-recourse debt and reduce the proportion of its debt that is subject to mark to market provisions.
“Over the last several months, Ladder has taken decisive action to enhance our liquidity and ensure we have the financial flexibility to manage through this challenging period and continue growing our business,” said Brian Harris, Founder and Chief Executive Officer of Ladder. “Our asset values have held up well and we’ve enjoyed strong support from our financing partners. The partnership with Koch is a testament to our hard work, and the strength and resiliency of the platform we have built. The new financings position us to capitalize on attractive investment opportunities, particularly as market conditions normalize.”
“We believe Ladder is one of the premier commercial real estate direct origination platforms in the United States,” said Jake Francis, President of Koch Real Estate Investments. “We’re pleased to back them in this strategic financing and we envision working together to capitalize on other great investment opportunities in the real estate space as the country and the economy begin to stabilize.”
The Koch Facility is non-recourse and does not contain mark to market provisions. Additionally, the Koch Facility provides Ladder optionality to modify or restructure loans or forbear in exercising remedies, which maximizes the Company’s financial flexibility.
As part of the strategic financing agreement, Koch has the right to make a $32 million equity investment in the Company at any time prior to December 31, 2020. Ladder expects that any such investment would additionally benefit Ladder’s liquidity position.
Moelis & Company acted as financial advisor to Ladder in connection with the Koch Facility.
Goldman Private CLO
The completion of the private CLO with Goldman generated $310.2 million of gross proceeds to Ladder, financing $481.3 million of loans at a 64.5% advance rate on a matched term, non-mark to market and non-recourse basis. Ladder will retain a 35.5% subordinate and controlling interest in the collateral, which affords the Company broad discretion in managing these loans in light of the COVID-19 pandemic and preserving or increasing their value. Proceeds from the transaction were used to pay off other secured debt including bank and FHLB financing that was subject to mark to market provisions.
Ladder Capital Corp (NYSE: LADR) is an internally-managed commercial real estate investment trust with over $6 billion of assets. Our investment objective is to preserve and protect shareholder capital while producing attractive risk-adjusted returns. As one of the nation’s leading commercial real estate capital providers, we specialize in underwriting commercial real estate and offering flexible capital solutions within a sophisticated platform.
Ladder originates and invests in a diverse portfolio of commercial real estate and real estate-related assets, focusing on senior secured assets. Our investment activities include: (i) our primary business of originating senior first mortgage fixed and floating rate loans collateralized by commercial real estate with flexible loan structures; (ii) investing in investment grade securities secured by first mortgage loans on commercial real estate; and (iii) owning and operating commercial real estate, including net leased commercial properties.
Founded in 2008, and led by Brian Harris, the Company’s Chief Executive Officer, Ladder is run by a highly experienced management team with extensive expertise in all aspects of the commercial real estate industry, including origination, credit, underwriting, structuring, capital markets and asset management. Members of Ladder’s management and board of directors are highly aligned with the Company’s investors, owning over 10% of the Company’s equity.
About Koch Real Estate Investments
Koch Real Estate Investments, based in Dallas, Texas, focuses its efforts on attractive risk-adjusted capital deployment into real estate assets and operating companies across cycles with an agnostic approach to product, geography, and capital position.
Since 2003, Koch companies have invested nearly $120 billion in growth and improvements. With a presence in more than 70 countries, Koch companies employ 130,000 people worldwide, with about 65,000 of those in the United States. From January 2009 to present, Koch companies have earned more than 1,300 awards for safety, environmental excellence, community stewardship, innovation, and customer service. For more news and information, visit www.KOCHind.com.