Ladder Capital Opts for REIT Status

NEW YORK CITY—Ladder Capital said Monday afternoon it planned to convert to a REIT, effective Jan. 1. The commercial real estate finance company's board has approved the REIT election, which would see LADR operate as an internally managed trust with no changes to its business strategy or asset mix.

 “We've been exploring a range of corporate structural alternatives with our legal, banking, accounting and tax advisors for some time now,” CEO Brian Harris said on a conference call late Monday afternoon. Among those options was conversion to a REIT, and Harris said LADR looked at three considerations: enhancing earnings to its shareholders; preserving “the strong operating synergies we enjoy between our business segments,” including CRE loans, securitizations and equity; and striking “the right balance between paying distributions and retaining capital to position Ladder to seize on opportunities from a position of strength” during market cycles and other periodic disruptions. “We believe our plan today gets this balance right.”

In considering a REIT election, LADR found that much of its asset base is REIT qualified, said Harris. Those operations that wouldn't qualify, such as LADR's conduit securitization and condominium sales efforts, can fit into an appropriately structured taxable REIT subsidiary, he added.

Following its REIT conversion, LADR will continue to focus on investments in senior secured commercial real estate assets.  Consistent with the REIT elections, the company is targeting annual cash distributions of $100 million, which equates to dividends of approximately $0.25 per quarter per share currently outstanding.

LADR will seek a shareholder vote in the first quarter of 2015. Skadden, Arps, Slate, Meagher & Flom LLP and Kirkland & Ellis LLP are serving as the company's legal advisors. J.P. Morgan, Citigroup, Houlihan Lokey and Park Bridge Financial are acting as its financial advisors on certain aspects of the REIT election.