Ladder Capital Corp ($LADR)

Good morning, and welcome to Ladder Capital Corp.'s Earnings Call for the First Quarter of 2026. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter ended March 31, 2026. 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 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 website. 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.

Good morning, and thank you for joining us today. Ladder had a strong first quarter with robust origination activity and earnings growth. We generated distributable earnings of $28 million or $0.22 per share. Our near-term strategy is straightforward: grow distributable earnings and deliver attractive risk-adjusted returns to shareholders across cycles. Since March 31, 2025, we've grown the loan portfolio by nearly 60%. Balance sheet loans now account for 46% of total assets and leverage is moving back towards 3x. The rotation is underway, and the earnings power of the company grows with every dollar deployed into the loan portfolio. That growth has come against the backdrop of elevated payoffs over the past 2 years, which were a net positive. They replaced legacy exposures with newly originated loans at attractive loan-to-value ratios on reset basis and are a key reason our book value has remained stable. With payoffs now normalizing, net portfolio growth is accelerating, and we expect that trajectory to continue. As the portfolio grows, we anticipate returns will strengthen and dividend coverage will expand with credit discipline unchanged. First quarter deployment and early second quarter development. In the first quarter, we deployed approximately $900 million in new investments, over $620 million in new loans with a weighted average spread of 300 basis points and $264 million in securities with a weighted average yield of 5.22%. We remain focused on middle market income-producing collateral, primarily multifamily and industrial properties where we see the best risk-adjusted returns. At the same time, the recent increase in macro market volatility is creating selective opportunities in other asset classes, including office, where dislocation is allowing us to lend against high-quality credit at wider spreads without compromising our underwriting standards. Origination momentum carried into the second quarter. Through mid-April, we've closed over $370 million in new loans, -- aside from one large payoff Brian will discuss, we expect loan payoffs for the remainder of the year to be limited, supporting continued portfolio growth and revenue expansion. Securities portfolio. Our $2.1 billion securities portfolio, representing 36% of total assets is predominantly AAA rated and will serve as the primary source of capital as our loan origination activity continues to ramp. Each dollar redeployed from securities into loans generates meaningful incremental yield, and we expect the securities portfolio to shrink as loan originations accelerate. Book value and credit quality. Our book value has remained stable, reflecting underwriting quality and credit discipline. Our loans are originated at conservative loan-to-value ratios against income-producing collateral, and we actively manage positions to protect principal across cycles. We don't stretch on credit and our balance sheet is positioned for growth, not repair. Real estate portfolio. Our $1 billion real estate portfolio generated $15.9 million of net operating income in the first quarter, and we continue to see opportunities to unlock value above our cost basis in select assets. Capital structure and liquidity. We ended the quarter with adjusted leverage at a modest 2.3x. In the first quarter, we secured $675 million in new unsecured capital commitments. And with over $1 billion in undrawn capacity, we have significant liquidity to fund our growing pipeline. Paul will walk through the details. In closing, we are executing our plan, deploying capital into newly originated loans and growing distributable earnings from a position of strength, modest leverage, full access to the investment-grade capital markets and the credit discipline that has always defined ladder. Management and the Board remain Ladder's largest shareholder group. We are fully aligned on growing earnings, supporting the dividend and creating long-term value, and we are well positioned to capitalize on opportunities amid ongoing geopolitical uncertainty. With that, I'll turn the call over to Paul.

Good morning, and thank you, Pamela. During the first quarter, Ladder generated distributable earnings of $28 million or $0.22 per share. As Pamela discussed, in the first quarter, Ladder raised $675 million in new unsecured capital commitments. First, securing a $400 million full accordion expansion of our unsecured revolving credit facility to $1.25 billion, adding 3 new banks to our syndicate, and second, securing a new unsecured delayed draw term loan facility of $275 million with an accordion feature for a total capacity of up to $500 million. Our expanded use of unsecured capital provides Ladder further financial flexibility with access to same-day capital at attractive cost. The $275 million term loan is priced at 140 basis points over SOFR, which steps down upon credit rating upgrades and maintains a February 2030 fully extended maturity. We anticipate fully drawing on the term loan in the second quarter to fund loan origination. In the first quarter, we were pleased to receive an upgrade to our credit rating by S&P to BB+ just one notch below the investment-grade ratings we benefit from with Moody's and Fitch. We are hopeful that the ratings momentum with S&P continues as we deploy our capital prudently and further demonstrate our access to the broader investment-grade capital markets. As of quarter end, our adjusted leverage ratio was 2.3x as we continue to expand our balance sheet. We maintained robust liquidity of $1.1 billion, including same-day capacity on our unsecured revolver and undrawn term loan. Our unencumbered asset pool represented 73% of total assets as of March 31, of which 85% was comprised of first mortgage loans, investment-grade securities and unrestricted cash and cash equivalents, providing significant balance sheet flexibility. As of March 31, Ladder's undepreciated book value per share was $13.42, which is net of $0.37 per share of CECL reserve we established. In the first quarter, we repurchased $13.4 million of common stock or 1.3 million shares at a weighted average share price of $10.15. As of March 31, $77 million remained outstanding on Ladder's stock repurchase program. Subsequent to quarter end in April, Ladder's Board of Directors approved an increase to Ladder share buyback authorization back to $100 million. In the first quarter, Ladder declared a $0.23 per share dividend, which was paid on April 15, 2026. As our loan portfolio continues to scale and net interest income grows, we endeavor to expand dividend coverage, positioning us for potential dividend growth as we approach full deployment. Turning to credit quality. In the first quarter, we added no new nonaccrual loans, had just $51 million loan on nonaccrual status. During the quarter, we resolved 3 nonaccrual loans through foreclosure. The first, a loan with a $62 million carrying value collateralized by a 3-property 158-unit multifamily portfolio in the East Harland neighborhood of New York City, built between 2017 and 2020 that is currently 88% occupied. The second, a loan with a $12 million carrying value collateralized by a 150-room Marriott Courtyard Hotel in Campus, Ohio, where we successfully extended an existing Marriott franchise agreement by 15 years to a new 17-year term contemporaneous with foreclosure. And third, a loan with a $6 million carrying value collateralized by an office property in Portland, Oregon with a basis of $85 per square foot. Our plan is to continue to stabilize these assets and maximize value for potential sale in the future. As of March 31, our CECL reserve remained steady at $47 million or $0.37 per share. Taking into consideration the current state of our loan portfolio and the macroeconomic backdrop in the U.S., including the impact of ongoing geopolitical uncertainty, we believe this reserve level is sufficient to cover potential loan losses. As of March 31, our securities portfolio totaled $2.1 billion with a weighted average yield of 5.3%. Notably, 99% of the portfolio was investment grade and 96% was AAA rated, underscoring its high credit quality. As of quarter end, approximately 50% or $1 billion of our securities portfolio remained unencumbered, complementing our $1.1 billion of same-day liquidity. This combined firepower reinforces the strength of our balance sheet and positions Ladder to organically fund loan origination that will drive future earnings growth. Our $1 billion Real Estate segment continues to generate stable net operating income. The portfolio includes 149 net lease properties comprised of primarily investment-grade credits committed to long-term leases with an average remaining lease term of 6.5 years. For further details on our first quarter 2026 operating results, please refer to our earnings supplement presentation available on our website and our quarterly report on Form 10-Q, which we expect to file in the coming days. With that, I will turn the call over to Brian.

Thanks, Paul. After a concerted effort to establish a safe and durable liability complex on which to build our growing asset base, our efforts are now paying off. While the first quarter seemed a lot longer than most, given daily volatility caused by numerous global geopolitical headlines, ladder fared nicely with our conservative investing strategy and was able to add to our high-quality asset base at lower prices than we've seen in a while. Our asset base has increased by a net 25% or over $1 billion year-over-year, and we expect this upward trajectory to continue as we execute our differentiated business plan, funding our investments using primarily unsecured debt and lower leverage. Loan origination volume has been good, totaling $1.9 billion over the last 10 months, if we include just the first few weeks of April. We consider this pace of production to be just what we're looking for. I would caution against too much straight-line extrapolation because these production numbers tend to swing up or down from one quarter to the next. In the fourth quarter of 2025 earnings call, we mentioned that a $200-plus million loan fell out of our pipeline during due diligence. And in this quarter, we received a full payoff of our largest office loan just last week for $215 million. On the day after that payoff, we closed on a new first mortgage loan for approximately $275 million related to the acquisition of an office and retail complex on Fifth Avenue in Manhattan at 66% loan to cost. None of those events were coordinated to happen anywhere close to each other on the calendar. In short, it's best to look at our loan origination year-over-year rather than quarter-over-quarter. With our growing asset base, our net interest income is also rising and is positive versus last quarter with no credit deterioration observed, maintaining our stable book value. Our first quarter originations were our highest quarterly volume in years. We recently indicated that we would fund loan growth by drawing on our unsecured revolver and the sale and payoff of securities. When 2026 began, markets were calm, accompanied by the usual credit spread tightening we've witnessed to start the year in years past. We sold $152 million of securities at a weighted average spread of 131 basis points. We also received payoffs of $125 million of those securities during the quarter. However, as we moved into March, volatility royaled markets and spreads widened. So we then acquired $264 million of securities at an average spread of 149 basis points so that if levered, the ROE would exceed 14%. This pivot into higher quality assets and higher liquidity is part of the latter playbook when fears in the markets as our flexible product mix allows us to pivot our capital allocation to the best risk-adjusted returns we can find at the time. We also found value in repurchasing our stock at an accretive discount to book value when the price fell in tandem with overall market indices as investor concerns around a war in the Middle East, energy supply disruption and some apparent cracks in private capital grip markets. We believe the only item on that list that might impact our U.S.-based operation is the spike in the cost of energy. So we acted to buy back our shares at an accretive discount to undepreciated book value. In the months ahead, assuming market volatility subsides, we expect to fully draw our $275 million term loan in the second quarter and coupled with proceeds from additional payoffs and further sales of securities and the use of our unsecured revolving line of credit, we will continue to grow our asset base and earnings using only modest leverage. As we said last quarter, we are now firmly on offense, and we plan to stay that way as conditions permit for the remainder of the year. Our business plan is evolving nicely with our pace of investment across several product types all increasing. We believe our asset base, along with our earnings, should stay on a positive trajectory in the quarters ahead. We can take some questions now.

[Operator Instructions] And the first question comes from the line of Jade Rahmani with KBW.

When do you expect the distributable earnings of the company to exceed the dividend?

Next quarter.

Okay. Do you have a target in mind for the loan portfolio size?

Not particularly, although we do expect things to roll out of securities and into loans. We won't force the issue depending on what's going on with spreads in the markets and what we're seeing. But ideally, we'll ultimately wind up with no securities and all of this -- the $1 billion of unencumbered securities will turn into a loan portfolio and it will take a 5.3% average yield up to something in the near 7% area.

Lastly, on the net lease portfolio, could you give an update as to what your plans are there? Do you aim to grow it? And what's the weighted average lease duration?

I think the weighted average lease duration was given at 6.3 years in this call, but I'll verify that if anybody else has it. But the game plan is we'll sell those occasionally into the 1031 market. The 1031 market does better when stock markets are high because people are protecting gains. But the -- we will grow that portfolio as conditions warrant it, but we believe that business is primarily driven by financing costs. And while we'll be able to find plenty of things to buy, but we've never been overly aggressive. We tend to buy -- even when we want to buy a credit like Dollar General, for instance, we still only buy 1 out of every 3 or 4 that we look at. So there's no act to grow it. I know a lot of our competitors are looking to grow that business. It's a very nice passive income stream generally, but I think it has to be handled accordingly. And right now, cap rates are quite wide, and that's attractive. But if financing rates are high enough that they -- it becomes a less than acceptable return at this point. But if the curve steepens and the Fed starts cutting rates, that all becomes very much more interesting. But it's hard to build a business around it completely, but I do believe it should be one of the verticals that we're involved with.

And the next question comes from the line of Timothy D'Agostino with B. Riley Securities.

I guess we're only about 4 months into 2026, -- but could you maybe provide some more color kind of on the 2026 vintage you're seeing right now compared to years past? Is it more attractive? Just getting a better sense of the loans you're writing today and how they compare to loans that were written in '25, '24 and '23.

Sure. I think it's an interesting bifurcation taking place. We're starting to see some real pricing visibility. So you are seeing, I'll call it, capitulation and that some lenders are just saying, get me out and you're seeing a refinance take place at discounted levels. But if you separate the world into acquisitions and refinances, I would tell you that the refinance world is pretty messy. There is a lot of overleveraged inventory in the markets, and you have to be very careful. It doesn't mean it's all bad, but there are clearly -- if you took out a lot of loans through acquisitions in 2021 and '22, those are coming due now. And so as a result of that, that is a bit of a red flag when you're refinancing in 2021 or '22, obviously, not in all cases, but sometimes. On the other hand, the acquisition side of the business, the entire market has been reset primarily. Certainly, the office market has been drastically reset. We're starting to see apartments that people are disposing of assets at lower prices than they purchased them at in 2021 and '22. So those are -- the acquisition world, we like very much. It's very attractive. The refinance world, I think it is a flea market, and there's a lot of junk on those tables, but there's also a few antiques that we look to get ourselves involved with. If you take a look at the conduit market, the 5- and 10-year business of commercial real estate, it's a rather small market still. You see a lot of deals where there's 5, 6, 7 originators indicating that there's not a lot of business getting done there. But also that is largely a refinance market. And you have to be a little cautious around refinance markets because you basically -- nothing is changing hands. You're pretty much paying an appraiser to come up with a level. And I'm not really sure how they can do that right now. However, when somebody is acquiring a property, you know exactly what the price is at that point, and there's no guessing involved. So we try to keep -- stick to the acquisition side of the world, not exclusively, but generally. And -- we also try to stick to newer properties that have been built recently because we think a lot of the dangerous inventory that's coming up for refinance really has a lot to do with Class B and C properties that were being posted for higher rents and rehabilitation and CapEx dollars. We do think that there's a good amount of brand-new apartment complex assets out there that we tend to try to focus on through the acquisition world.

Okay. Great. That's really helpful color. And then I guess just to clarify, it seems like you're being more opportunistic or selective in the refinance space. Is that correct?

Yes, I would say so. I mean some of them are straight down the middle. The guy bought an empty building and signed a lease and now it's full, but that is few and far between. So I think the the refinance market, as I said, has a few danger points to it. However, like we are seeing some really good opportunities there. I know -- I think it was the second quarter, maybe it was the first quarter, but we had a bank approach one of our sponsors and ask them to refinance the loan that the bank was carrying. The loan was current. And the bank was taking a $20 million loss to get refinanced, and it still didn't underwrite at the $20 million discount to the bank loan. And then the sponsor wrote a rather large check also, and then we wrote a new senior that is way below where the bank's loan amount was. And interestingly enough, the loan was not in default. So those are situations that you have to look at these structures and really see where money is coming from. And in much of the refinance world that we're seeing, especially in the office side, there is capital tension somewhere. And it may be the seller, it may be the lender, it may be the buyer. You never know where it is, but you have to go find it and try to exploit that opportunity. And we're seeing more of that, I think, in banks that are disposing of inventory of loans that have been under some level of distress for years and also, in particular, in the office market.

And the next question comes from the line of Chris Muller with Citizens.

So nice to see the $80 million of loan resolutions through foreclosure, but I don't see any realized losses or write-offs in the quarter. Does that mean that your attachment point on these assets was equal to the fair value marks?

We're comfortable with it, yes. And we have taken some initial write-downs here and there when we foreclose on a property. But because as Pamela has echoed numerous times in prior quarters, we concern ourselves with basis all the time. And oftentimes, we can see some loans that where the borrower owns the property, it's going to be pretty difficult for him to come out of that with an equity return. But oftentimes, when we get the property at the basis we've got and the equity is wiped out, we're pretty comfortable with real estate, not just lending. So we go to work leasing it. And so far, we're having a lot of success there. And so some of the assets that we're foreclosing on, I would anticipate we'll probably hang on to for a very long time inside this REIT because they're doing quite well.

Got it. And I think that guys Sorry...

Chris, I was just going to say in the fourth quarter, one of the loans before closed on this quarter, we did have a write-off that we took in the fourth quarter, the office loan in Portland.

Got it. So that was the $5 million in the fourth quarter. And I think that does speak highly to your guys' underwriting there. You guys do a really good job with that. I guess my other question is, I see the small conduit deal on Slide 7, but I hear Brian's comments about the conduit market. Are you guys seeing any signs of that business starting to pick back up? Or is it just still too volatile rate environment for that business to really work as we sit today?

The business is picking up, but it still has a lot of headwinds. The curve, every time we think it's going to steepen, it doesn't. We'll see what's going to win here, higher rates or lower rates after Wars gets in the seat, I'm assuming he will. But -- so that business works best in a steep yield curve. We don't have one right now. It's not inverted, but it's not terribly steep either. And in addition to that, I think the refinance -- if you look at the actual number of loans in the conduit business, most of them are refinanced, I believe. That's a bit of a guess. I haven't done homework there, but I'm pretty sure. But -- and if you're dealing with the refinance vertical in the mortgage space, you're definitionally dealing with loans from 2021 and '22 that are trying to get refinanced. So the short story is to put it plainly, there's a lot of c*p* out there. So we'll continue sifting through it, and it will get better as '21 and '22 passes and we get into loans that were made in '23 and '24, I think that business will -- the inventory will upgrade, and we'll see where interest rates are. But we are getting ready and are ready to be involved in that business in a big way if we get the right conditions, and we're hopeful, but it's not right away. It's going to -- it will come.

Do you think that flushes through by the back half of the year? Or is that more a 2027 type event?

Probably '27 event.

And the next question comes from the line of John Nicademis with...

Wanted to ask about office exposure. I know that this dropped at least in your loan book by the end of the quarter and then obviously, you had the Miami repayment. But I know you also did selectively invest in the space in 2025. And then, Brian, you mentioned that Austin retail complex that you invested in after the Miami repayment as well. So just curious about your thoughts on that sector sort of as we look into the rest of '26.

Sure. We have been peppered with questions rightfully so over the last few years about office exposure. And we have oftentimes said we don't really manage against a certain number or concentration or percentage. We manage against risk. And while we wrote a loan for over $200 million in Miami in 2021, I believe, -- that is in the vintage where you probably didn't want to have a lot of exposure, but we were always pretty comfortable with it because Miami did quite well during the pandemic and after that. And so we weren't overly worried about it, and that loan paid off. So the office sector, we think, creates great danger and great opportunity. So you mentioned that we made an investment in an office building a couple of years ago. Interestingly enough that you time that question because last night, the last thing I did was check my e-mail, and I got an e-mail from our finance department telling me that our entire equity check that we wrote on a building in Manhattan on Third Avenue, we were in the partnership on the equity. We did not write the loan. The loan refinanced less than 2 years after being acquired for about $185 million. I haven't got the details on it, but I think the property must have appraised between $350 million and $400 million just 2 years later. That is not a fluke. The occupancy in that building went from 50% to 95%. Our partner did a great job leasing it up. So that was an equity investment that we now have the equivalent of an infinite return because all of our equity has been returned, and we still own a small percentage. It's not a -- we don't own most of the building, but it's a very healthy asset, and we expect to hang on to it for a long time. So those things, they occur. And then the last thing you mentioned there was a building, it's in the press now, 575 Fifth Avenue. We wrote over $250 million loan on that. It's an acquisition. The property was purchased at a price where the seller had purchased it in 2005. And in addition to that, there were some refinances that took place at pretty astronomical numbers, too. So we like the basis there. We really like the quality and the asset location on Fifth Avenue and 46th and 47th Street. It is part retail and part office. And it's pretty leased. It's not one of the empty buildings out there. This is -- there's not a lot of rollover going on. There are a lot of below-market rents in the building. So we like the loan in that case, maybe better than the equity, although we did make a small investment in the equity partnership also.

The next question comes from the line of Gabe Poggi with Raymond James.

First question is, can you guys talk about kind of the timing of loan closings during the quarter? It looked like based on the significant volume in 1Q that some of the loan closings may have been back-end weighted. I apologize if you already mentioned this, but curious as to kind of the timing of loan closings for 1Q. And then, Brian, I think I asked this every quarter, so sorry for being a broken record. But any commentary on bank activity, right, with less regulation, et cetera, are you seeing any regional banks, smaller community banks, et cetera, in and around the hoop as from a competitive perspective, you had mentioned that they're actually selling some assets. Just curious to your commentary in that regard.

Sure. If anybody on this call at Ladder knows the back-ended nature of origination this quarter, please put your hand up and I'll name you. But I don't think it was as particularly back-ended as it had been in the prior quarter. I think as we went into -- that happens all the time at the end of the year because people for tax reasons, start getting very serious about closings. So in the first quarter, we had -- I think we had $250 million in the first 3 weeks of the first quarter. And we came out, I think, at $630 million all in. And then we supplemented that further with another $350 million in the first 3 weeks of this quarter. So it's been a very strong 7 months, I would say, and we really like what we're seeing. Some of the loans are a little bit bigger than usual, but we're very comfortable with them. And so I don't want to draw any conclusions about when things closed. But it's a very high-quality portfolio. Most of the assets are really, really nice. And it isn't a whole lot of turnaround stuff going on. So these results are usually either quick or quite apparent as to when they're going to happen. So -- and then I think to address your other question, the banks are returning without a doubt. We are definitely losing some smaller loans where I'll get an e-mail from an originator that says this is going bank. That's a bit of a broken record we're beginning to see. But that tends to be on loans that are under $20 million. We happen to like that part of the market, but we've never chased it, and we encourage our originators that if a broker tells them we're competing with a bank and an insurance company, just go to the next loan. We -- if they want to have it, they can. They've got a different cost of funds and a different business model. And there is no shortage of inventory out there. So we don't really need to start chasing price. We still view capital as very in charge in these markets. A lot of previously aggressive lenders are, as panel said, we're built for growth, not repair. And I think our credit acumen is really coming through here. And the last thing we want to do is screw that up. But -- so we have to pass on a lot, especially in the refinance channels. As I said in the last call, we've learned our lesson a bit on refinancing one of our competitors bridge to bridge because they know more about it than we do. And very happy with the way things are going right now. I think that the banks, while they're going to take their fair share, there just aren't enough of them. And the banking lending apparatus in the United States is drastically smaller than it was before 2008. So we're comfortable with the competitive set. We like that they're out there. Oddly enough, where we are seeing a lot of business is from the banks where banks that have construction loans, they finish a brand-new apartment complex and it's in lease-up, and they don't hang on to those. They want the construction loan to be paid off. So we're pretty comfortable putting loans like that under application where we get to see the leasing for the next couple of months before we close. And it's a very high-quality asset that cannot give you a lot of operational surprises because it's brand new. So you don't have a big CapEx budget. And that's why I say the inventory in times like this, you really want to stick to the high end of quality. And almost everything we're doing now is new-ish like -- but certainly not unless they're just in parts of the city or somewhere that are very old. But most of these apartment loans that we're writing are very new vintage with new -- the apartment complexes have gotten better with a lot of the WiFi and the technology that goes into these smart apartments. So very comfortable there. And so the banks are competing, but they're not competing at the higher loan sizes. That doesn't mean we're targeting higher loan sizes. We just think there's a theme because if you have a $450 million loan, you can go to JPMorgan or Wells Fargo and they will explain to you where AAAs trade and they'll take your loan to market, and you can accept it or not, but they don't usually take the risk of that. At $100 million, it's too small for a single asset securitization with those names, and it's too big for a typical loan. So we really do like this 60,125 area, but we're not targeting it, but we're paying attention to it, and we do see a lot of value there.

That's super helpful. I appreciate all that commentary. I got a quick follow-up. Because Ladder has got a multi-strat and opportunistic tilt, right, is there anything to do in -- potentially in multifamily equity as you just -- particularly in the Sunbelt as you just kind of have those relations as a big multifamily lender. Is that something you look at? I know there's a ton of capital out there chasing multifamily, but just curious what Ladder's view on a potential opportunity maybe in that construct as just another kind of business sliver or business silo, so to speak.

Yes. We like that idea. As you said, there is a lot of capital chasing those things. And sometimes when we'll explore something like a loan will come in, a guy is buying a complex and he wants a 70% loan to cost. If we really like it, we might show them at 85% and take away part of his concern about going out and raising equity, where we'll take an equity kicker in the deal. That's probably a bit of a new term, but we've done it a few times, but not recently. I would love to do more of that, but the equity capital that's out there is still nudging us. We're not pricing it where they are. So where we would put a stretch senior, the mezz component of that loan is we're pricing it wider than equity is pricing on multifamily right now. However, we do see some things that are sort of interesting. As we mentioned, we foreclosed on a 3 building complex in in East Harlam, these are practically brand-new buildings, new construction, luxury, garage in one of them, grocery store on the first floor. And the equity got a little soft because it got a little over its skis on cost. And so as you know, the bane of equity investing in construction is time. If you don't get it done on time, I don't care how good you are, you're probably not going to pull it off. So the equity got flushed and there was a mezzanine in that portfolio also that for the life of me, I don't know why that mezzanine did not protect itself, but it didn't. And so we foreclosed on it, and we love our basis there. I think the address of the big one is 22 11 Third Avenue, if you want to go look at it. We plan on owning that for a long time. In fact, I believe we're in discussions talking to Fannie Mae and Freddie Mac about possibly financing some of that. So we'd like to buy some things. We do see some things in Austin. Austin is a market we like that is overbuilt, and there are some losses being taken from equity investors from 2021 and '22. We have not hit it yet, though. So -- but that is the market we're looking at. The Sunbelt rents are falling in a lot of these markets. They're not falling drastically, and I don't expect them to continue. But -- and I also believe that a lot of these apartments will benefit from no tax on tip as well as social security. Those are meaningful upticks in income to the people that live in these kind of units. So short story, send us some if you have some, we'd love to buy them, but we're not really seeing too many. We have not dipped down into the Class C stuff and B, we believe that those markets and especially in the Sunbelt are plagued by ice rads and general pressure on lower income demographics. So a little bit too dicey still for us, but the higher-end stuff, we're very interested in acquiring.

And the next question comes from the line of Logan Epstein with Wolfe Research.

Just wanted to hit one you touched on in the prepared remarks. Just curious if you could expand on whether or not you're seeing the macro uncertainty and volatility causing any borrower appetite to change at all?

Tough question. I mean borrower appetite is -- it always changes. They live in a world where they think rates are going down. And rates have not been going down, especially since the oil shock has sent through an inflation shock, which has sent through a question about the deficit, which is now forcing rates higher. I think the 10-year is around 430 right now. So the appetite is driven by the rates available in the market. And if you take a look at what the actual interest rate was on a loan in 2021 versus today, even though today's rates are by historic standards, not terribly high, they are way higher than they were in 2021 and '22. And so yes, they react pretty quickly. It's a very -- it's a price-sensitive business unless you have a maturity date staring you down. So we have seen -- and I also think, too, when you have something like U.S. and Israel attacks, Iran one night and you wake up, and I call it the TV moment because it's funny because all the traders go to work really early. They start sending out e-mails about what's going on. Volatility is up, the victs here, stock market is down. But the reality is you don't do anything on those days. You just kind of watch TV. And so I do believe that we will see an air pocket here, probably about 60 or 90 days out from when that all started because I think people just generally stopped doing business in a lot of places. And -- but I think it had more to do with just general levels of anxiety as a result of those events taking place. And so the long answer is it's interrupted here and there when you -- if you really want to know when it gets interrupted, just follow the VIX. When you see the VIX around '24, '25, that's pretty volatile manic markets and not a lot is getting when that's going on because you got lenders putting things on hold, telling them we're subject, we have to wait to close. Credit committees don't meet because they're dealing with other things. So high volatility as measured by the VIX is usually the best indicator I have. And I think if you look at the securitization world, you'll see less securitization. But then it should pick right up once the volatility goes away.

Maybe as a follow-up to that, have you seen spreads? You touched on in the opening remarks that you're seeing some opportunity potentially in office given the volatility. Are you seeing spreads, whether in office or multi-industrial really changing on what you guys are underwriting over the last, say, 60 days?

Yes, I would say so. The office is a little bit more accepted in securitizations now. So I sometimes say the defroster went on. I always thought the office sector had more of a capital markets problem than a real estate problem because there was a time where like I couldn't write a loan, right? No one wants an office loan ever again for the rest of our lives. And that just wouldn't pan out that way. So are we seeing -- I think if you see a refinance of an office loan that's rather large and the dollars per foot are pretty high, yes, those are pretty much great opportunities because a loss is being taken and the basis is being reset. However, you still have to go lease an office building and it costs money to acquire tenants. But we do believe that there is a slice of the office sector, especially in the high-quality portion where if you've got a building in the hands of an owner that has capital and is not going to lose it and is going to pay for things that need to be done as opposed to having a lender dictate payments that are going out to repair things. That's a great opportunity, and we hope to continue to exploit that. But I don't want to open the floodgates on the office market. It does have some challenges without a doubt, especially older properties. But when you see a lender and the sponsor both taking a $10 million or $20 million loss to hang on to a property, that's usually a pretty good place to invest. So we see it there. We don't see it really in apartments. That's not nearly as stressed out. And I think a lot of the -- as I say, the pig going through the python in the office sector, it's getting there. It's not quite done. but I think all of the headlines that you saw when Signature Bank got in trouble and Silicon Valley Bank, you heard about how every bank in the world was going to be dead. That's never happened, nor did I ever think that was going to happen. And I think with -- there was a bit of hoarding that went on in the labor markets, and that kept some buildings full. And now you're seeing AI replace some jobs. So you do have to deal with the vectors that push down on value, but there is plenty of just reset value out there where you can't possibly build a building for less. And a long one C of which we invest in is on Third Avenue, many of the office buildings on Third Avenue are converting to residential. So these are going to become like Battery Park City over there. And then just off Third Avenue over near Park, JPMorgan and Citadel are seemingly buying every square foot of space available. So tenants are hunting for space. So these all add up to good micro dynamics where you've got 50% occupied buildings turning into residential complexes and those tenants that are in those buildings need a place to go. And so we're picking them up from other buildings that are having difficulties and also Park Avenue because the Plaza District is just shut. And whereas Class A buildings were leasing up briskly, you're seeing rates in Manhattan. The rental rates are astronomical in the Plaza District. You're now beginning to see the B products filling up because there's just no room left on A.

Ladies and gentlemen, thank you. That now concludes our question-and-answer session. I would like to turn the floor back over to Brian Harris for any closing comments.

Only closing comments I have for you is thank you for your patience as investors with our deployment strategy. We still think it's the right one, and you're really beginning to see it pick up. As I said plainly, we are on offense. We are not dealing with a lot of problems. And we expect this to continue, and you'll see our earnings power become apparent for -- we suspect over the remainder of the year. Obviously, geopolitical events exist, and we have to be a little careful there. But what I particularly am gratified by right now is we're seeing contributions from all of our products into our distributable earnings, and we hope to continue that. So thank you for listening to us today, and we'll catch you on the next one.

Ladies and gentlemen, thank you for your participation. That does conclude today's teleconference. Please disconnect your lines, and have a wonderful day.