Randolph Binner • B. Riley FBR

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CEO Jay Jackson explained that policy sales, whether to carriers or other investors, are driven by securing the highest price, and the process has become more competitive due to strong investor demand. He emphasized that the relationship with carriers is expanding beyond buybacks to include services like mortality verification and offering them alternative asset solutions. For the Technology Solutions business, Mr. Jackson reported that it serves just under 1 million lives, with over 700,000 more in trial, and acts as an important entry point for cross-selling other services like asset management.

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CEO Jay Jackson described the carrier buyback program as expanding, with ongoing work to structure large, though sometimes lumpy, transactions. He explained that market volatility is often a positive driver for the business, increasing interest from both individuals seeking liquidity and investors seeking uncorrelated alternative assets.

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CFO JR Herlihy stated the two JV investments are small (under $5 million total) and expected to close in the next one to two quarters, serving to further diversify loan sourcing channels. CEO Laurence Penn emphasized the win-win nature of these deals. Co-CIO Mark Tecotzky explained that the high value of consumer relationships, seen in deals like Rocket-Mr. Cooper, reflects a broader trend of capturing a customer's entire home-buying lifecycle, from commissions to multiple loans and cross-selling opportunities.

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Chief Executive Officer Christopher Bogart clarified that a 'claim family' refers to multiparty litigation where many parties have similar claims, creating efficiencies, and confirmed a new one was launched in Q1. Regarding portfolio size, he explained that periods with high realizations, like the current quarter, can result in flat or even shrinking portfolio growth, which he views as a positive outcome as it recycles capital for future deployment.

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CFO Brandon Filson clarified that for older, lower-coupon securitizations, mortgage rates would need to drop significantly (by about 200 basis points) to see speeds increase, while current coupon deals have about a 100 basis point buffer. CEO Sreeniwas Prabhu added that despite volatility in April, the market remained liquid, allowing them to execute the deal. He noted that while spreads widened temporarily to 180, the key was that capital markets remained open, reflecting their prudent risk management strategy.

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CEO Brian Harris explained that the wide spreads are due to 'special situations' in the current volatile market, where Ladder's ability to provide liquidity and speed allows it to command premium pricing. While he expects such opportunities to continue, he cautioned against extrapolating from a small sample size. He and Executive Adam Siper confirmed that 74% of the quarter's originations were in the multifamily and industrial sectors.

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CFO Tom Mayrhofer explained that the portfolio's asset values increased slightly but came in just below the preferred return hurdle for the quarter, resulting in a small reversal of previously accrued carried interest. He stated he does not expect unusual trends in asset values going forward. CEO Marc Ganzi added that the company maintains a conservative valuation philosophy, which has historically resulted in selling assets at a significant premium to their net asset value (NAV), and that the focus is on credible, defensible marks.

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CEO Marc Ganzi confirmed they will focus on FEEUM and FRE as the primary metrics, aligning with industry peers and reflecting the business's maturity. CFO Thomas Mayrhofer explained that Q4 administrative expenses were 'anomalously high' due to some noise related to significant fundraising efforts and other small items, and that future quarterly expenses would likely fall between the Q4 level and prior, lower run rates.

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CEO Mike Mazzei stated that while he couldn't comment in detail due to the ongoing foreclosure process, the company believes a resolution for the San Jose Hotel is imminent. CFO Frank Saracino explained that the property operating expenses were not unusual and the increase was driven by a full quarter of expenses for a property foreclosed on in Q4 and the addition of another property taken over in Q1.

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CEO Mike Mazzei explained that capital for originations will come from cash on hand and proceeds from resolving REO and under-levered assets. He stated that while the firm prefers loans in the $25-$50 million range, they might consider larger deals given better current debt yields. Mazzei noted that while they are quoting all property types except office, it is difficult to predict the exact composition of future originations due to the highly competitive market. He highlighted construction takeouts and select bridge-to-bridge loans as areas of focus.

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CFO Jerome Baglien stated that a dividend review would be considered if REO sales slow, creating a prolonged drag on earnings and book value. He clarified the cash for the NewPoint acquisition is a separate, short-term strategic matter and not the primary driver of dividend considerations. CEO Richard Byrne reiterated that the dividend is set based on long-term earnings power, not a single quarter's results.

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President Michael Comparato explained that the change in liquidity was due to more loan repayments occurring in CLOs that are in their amortization phase, which delays the recapture of equity. Regarding expenses, he reiterated that the elevated costs are mostly from REO properties and that these expenses and related revenues are roughly a net wash, without providing a specific breakout.

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Scott Ulm, an executive, identified the sovereign backstop as the most critical element in GSE reform, impacting risk weights and market structure. He expressed hope for clear communication to avoid headline risk. Sergey Losyev, an executive, added that the market has not yet priced in reform due to a lack of a concrete plan. He anticipates the first steps will involve adjustments to loan-level risk fees before any long-term structural exits are considered.

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Executive Scott Ulm identified the sovereign backstop as the most critical element to watch in GSE reform, as it impacts risk weights and differentiates GSEs from private entities. Executive Sergey Losyev added that the market is awaiting a more concrete blueprint and that Ginnie/Fannie swaps have remained stable, suggesting the market has not yet priced in major structural changes. Losyev believes the first steps will involve adjusting risk fees rather than a full exit.

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Elias Sabo, an executive, confirmed there was nothing unusual in Lugano's Q4 margin performance, attributing it to operating leverage, a favorable revenue mix, and exceptional execution in sourcing. He cautioned that the three new salon openings in 2025 will increase costs and could temporarily dilute margin percentages. Patrick Maciariello, an executive, named Chicago as one new salon location. Elias Sabo also noted that Lugano's highly affluent customer base is well-insulated from broad economic shifts, with no significant regional changes observed.

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Executive Kenneth Onorio clarified that the primary driver for the commission expense was the ECCU notes issuance. Executive Thomas Majewski added that while costs are incurred for ATM common and perpetual preferred stock issuances, they are profit-generating activities, with the ATM issuances being NAV accretive. Majewski also described the company's proprietary data system used to analyze and track CLOs in real-time, which helps manage the significant market activity and information flow.

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