Summary
- Ladder's valuation is being pushed and pulled by competing market forces. Its peers are in the same bucket. As the largest internally managed commercial mREIT, however, Ladder is unique.
- Q3 earnings were released yesterday, making it a great time to discuss how far this commercial mortgage REIT has come and the challenges that lie ahead.
- This is a story of management doing everything in its power to salvage a difficult situation. We integrate Q3 results into our full-year 2020 and 2021 outlooks.
- I do much more than just articles at iREIT on Alpha: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »
- This article was produced with Williams Equity Research ("WER")
A few days ago, I wrote an article detailing the attributes of owning blue-chips, including the list below:
- Outstanding and proven management
- A track record of effective asset deployment to create shareholder value
- Balance sheet strength and flexibility
- A sector focus with deep regional or local market expertise
- A conservative and intelligent dividend policy
- Good corporate governance
- Meaningful insider stock ownership
I pointed out that "some people want to tout Ladder Capital (LADR) and Simon Property Group (SPG) as blue chips. But they simply don’t fit the bill according to that dividend growth metric."
I added,
"Don’t get me wrong. I own Simon and Ladder, and have buy ratings on both. In fact, I’m working on an iREIT on Alpha exclusive about that second stock even now.
But I would never call a company a blue-chip when it’s sliced its dividend like that. The term should be used to signify excellence, including a conservatively intelligent dividend policy.”
The expression "you cannot get blood out of a stone" is believed to originate from a 1662 Italian proverb Universale di Proverbi Italiani before becoming popularized in an Old English proverb written in 1788.
WER's lead portfolio manager enjoys studying chess, particularly analysis of advanced games, where the phrase "squeezing water from stone" is used to describe certain late game tactics.
In a nutshell,this expression indicates accomplishing the impossible through the utilization of otherwise invisible moves or applying immense pressure to the point that the opponent breaks.
Of all the sectors we follow, none fit this description better in the current environment than mortgage REITs ("mREITs"). We believe the point of maximum pressure is behind us, but that doesn't mean much on its own.
