Koch Real Estate Investments, an affiliate of Koch Industries, will provide $206.4 million in senior secured financing to Ladder Capital as part of a strategic financing arrangement. The financing will be used to fund transitional and land loans. Ladder Capital also completed a private CLO with Goldman Sachs Bank, which generated $310.2 million of gross proceeds to Ladder.
Ladder currently has more than $830 million of cash on hand and more than $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,” Brian Harris, founder and CEO of Ladder, said. “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.”
The Koch facility is non-recourse and does not contain mark-to-market provisions. Additionally, the Koch facility provides Ladder the option to modify or restructure loans or forbear in exercising remedies.
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 Dec. 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.
“We believe Ladder is one of the premier commercial real estate direct origination platforms in the United States,” Jake Francis, president of Koch Real Estate Investments, said. “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 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 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 is an internally-managed commercial real estate investment trust with more than $6 billion of assets.
