EQUITY STRUCTURE AND ACCOUNTS

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

EQUITY STRUCTURE AND ACCOUNTS

11. EQUITY STRUCTURE AND ACCOUNTS

A description of the IPO Transactions is included in Note 1. In addition, a description of the distribution policies of, and accounting for, the predecessor capital structure is included later in this Note.

Subsequent to the IPO Transactions, the Company has two classes of common stock, Class A and Class B, which are described as follows:

Class A Common Stock

Voting Rights

Holders of shares of Class A common stock are entitled to one vote per share on all matters to be voted upon by the shareholders. The holders of Class A common stock do not have cumulative voting rights in the election of directors.

Dividend Rights

Subject to the rights of the holders of any preferred stock that may be outstanding and any contractual or statutory restrictions, holders of Class A common stock are entitled to receive equally and ratably, share for share, dividends as may be declared by the board of directors out of funds legally available to pay dividends. Dividends upon Class A common stock may be declared by the board of directors at any regular or special meeting and may be paid in cash, in property, or in shares of capital stock. Before payment of any dividend, there may be set aside out of any funds available for dividends, such sums as the board of directors deems proper as reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any of the Company’s property, or for any proper purpose, and the board of directors may modify or abolish any such reserve.

Liquidation Rights

Upon liquidation, dissolution, distribution of assets or other winding up, the holders of Class A common stock are entitled to receive ratably the assets available for distribution to the shareholders after payment of liabilities and the liquidation preference of any outstanding shares of preferred stock.

Other Matters

The shares of Class A common stock have no preemptive or conversion rights and are not subject to further calls or assessment by the Company. There are no redemption or sinking fund provisions applicable to the Class A common stock. All outstanding shares of Class A common stock are fully paid and non-assessable.

Allocation of Income and Loss

Income and losses are allocated among the shareholders based upon the number of shares outstanding.

Class B Common Stock

Voting Rights

Holders of shares of Class B common stock are entitled to one vote for each share held of record by such holder and all matters submitted to a vote of shareholders. Holders of shares of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our shareholders for their vote or approval, except as otherwise required by applicable law.

No Dividend or Liquidation Rights

Holders of Class B common stock do not have any right to receive dividends or to receive a distribution upon a liquidation or winding up of Ladder Capital Corp.

Exchange for Class A Common Stock

As part of the REIT Structuring Transactions described in Note 1, and pursuant to the Third Amended and Restated LLLP Agreement of LCFH, the Continuing LCFH Limited Partners may from time to time, subject to certain conditions, receive one share of the Company’s Class A common stock in exchange for (i) one share of the Company’s Class B common stock, (ii) one Series REIT LP Unit and (iii) either one Series TRS LP Unit or one TRS Share, subject to equitable adjustments for stock splits, stock dividends and reclassifications.

During the year ended December 31, 2016, 10,521,149 Series REIT LP Units and 10,521,149 Series TRS LP Units were collectively exchanged for 10,521,149 shares of Class A common stock and 10,521,149 shares of Class B common stock were canceled. We received no other consideration in connection with these exchanges.

Stock Repurchases

On October 30, 2014, the board of directors authorized the Company to repurchase up to $50.0 million of the Company’s Class A common stock from time to time without further approval. Stock repurchases by the Company are generally made for cash in open market transactions at prevailing market prices but may also be made in privately negotiated transactions or otherwise. The timing and amount of purchases are determined based upon prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. During the year ended December 31, 2016, the Company repurchased 424,317 shares of Class A common stock at an average of $10.96 per share for a total aggregate purchase price of $4.7 million. During the year ended December 31, 2015, the Company repurchased 84,203 shares of Class A common stock at an average of $11.81 per share for a total aggregate purchase price of $1.0 million. All repurchased shares are recorded in treasury stock at cost. As of December 31, 2016, the Company has a remaining amount available for repurchase of $44.4 million, which represents 4.5% in the aggregate of its outstanding Class A common stock, based on the closing price of $13.72 per share on such date.

The following table is a summary of the Company’s repurchase activity of its Class A common stock during the years ended December 31, 2016 and 2015 ($ in thousands):

	Shares	Amount(1)
Authorizations remaining as of December 31, 2015		$	49,006
Additional authorizations		—
Repurchases paid	424,317	(4,653		)
Repurchases unsettled		—
Authorizations remaining as of December 31, 2016		$	44,353

(1)         Amount excludes commissions paid associated with share repurchases.

	Shares	Amount(1)
Authorizations remaining as of December 31, 2014		$	50,000
Additional authorizations		—
Repurchases paid	84,203	(994		)
Repurchases unsettled		—
Authorizations remaining as of December 31, 2015		$	49,006

(1)         Amount excludes commissions paid associated with share repurchases.

Dividends

In order for the Company to maintain its qualification as a REIT under the Code, it must annually distribute at least 90% of its taxable income. The Company has paid and in the future intends to declare regular quarterly distributions to its shareholders in an amount approximating the REIT’s net taxable income.

Consistent with the Company’s Private Letter Ruling, it may, subject to a cash/stock election by its shareholders, pay a portion of its dividends in stock, to provide for meaningful capital retention; however, the REIT distribution requirements limit its ability to retain earnings and thereby replenish or increase capital for operations. The timing and amount of future distributions is based on a number of factors, including, among other things, the Company’s future operations and earnings, capital requirements and surplus, general financial condition and contractual restrictions. All dividend declarations are subject to the approval of the Company’s board of directors. Generally, the Company expects its distributions to be taxable as ordinary dividends to its shareholders, whether paid in cash or a combination of cash and common stock, and not as a tax-free return of capital or a capital gain. The Company believes that its significant capital resources and access to financing will provide the financial flexibility at levels sufficient to meet current and anticipated capital requirements, including funding new investment opportunities, paying distributions to its shareholders and servicing our debt obligations.

The following table presents dividends declared (on a per share basis) of Class A common stock for the years ended December 31, 2016 and 2015:

Declaration Date	Dividend per Share
March 1, 2016	$	0.275
June 1, 2016	0.275
September 1, 2016	0.275
December 2, 2016	0.460
Total	$	1.285
March 12, 2015	$	0.250
June 8, 2015	0.250
September 1, 2015	0.275
December 1, 2015	1.450
Total	$	2.225

The following table presents the tax treatment for our aggregate distributions per share of common stock paid for the years ended December 31, 2016 and 2015:

Record Date	Payment Date		Dividend per Share		Ordinary Dividends		Qualified Dividends		Capital Gain		Unrecaptured 1250 Gain
March 10, 2016	April 1, 2016		$	0.275	$	0.254	$	—	$	0.021	$	—
June 13, 2016	July 1, 2016		0.275		0.254		—		0.021		—
September 12, 2016	October 3, 2016		0.275		0.254		—		0.021		—
December 27, 2016	January 24, 2017	(1)	0.401		0.370		—		0.031		—
Total			$	1.226	$	1.132	$	—	$	0.094	$	—

(1)      $0.401 of the $0.460 fourth quarter dividend paid on January 24, 2017 is considered a 2016 dividend for U.S. federal income tax purposes. $0.059 is considered a 2017 dividend for U.S. federal income tax purposes and will be reflected in 2017 tax reporting.

Record Date	Payment Date		Dividend per Share		Ordinary Dividends		Qualified Dividends (1)		Capital Gain		Unrecaptured 1250 Gain (2)
April 6, 2015	April 15, 2015		$	0.250	$	0.250	$	0.250	$	—	$	—
June 15, 2015	July 1, 2015		0.250		0.250		0.250		—		—
September 10, 2015	October 1, 2015		0.275		0.275		0.275		—		—
December 10, 2015	January 21, 2016	(3)	1.450		1.306		0.156		0.144		0.020
Total			$	2.225	$	2.081	$	0.931	$	0.144	$	0.020

(1)       For 2015, Qualified Dividends represents the portion of total Ordinary Dividends which constitutes “qualified dividend income,” as defined by the Internal Revenue Code.

(2)       For 2015, Unrecaptured 1250 Gain represents the portion of total Capital Gain which constitutes gain required to be taxed as “Unrecaptured Section 1250 Gain,” as defined by the Internal Revenue Code.

(3)      The fourth quarter dividend paid on January 21, 2016 is considered a 2015 dividend for U.S. federal income tax purposes.

Stock Dividend and Distribution of Accumulated Earnings and Profits

In order to qualify as a REIT the Company must annually distribute at least 90% of its taxable income. In addition, the Company was required to make a one-time distribution of its undistributed accumulated earnings and profits attributable to taxable periods ending prior to January 1, 2015 (the “E&P Distribution”). The E&P Distribution requirement was $48.3 million or $0.90 per share. Pursuant to the terms of an IRS private letter ruling (the “Private Letter Ruling”), the Company elected, subject to the cash/stock election by its shareholders described below, to pay its fourth quarter 2015 and 2016 dividends in a mix of cash and stock and have such dividends be treated as a taxable distribution to its shareholders for U.S. federal income tax purposes.

In order to comply with the Private Letter Ruling, shareholders had the option to elect to receive the fourth quarter 2015 and 2016 dividends in all cash (a “Cash Election”), or all shares of Ladder’s Class A common stock (a “Share Election”). Shareholders who did not return an election form, or who otherwise failed to properly complete an election form, were deemed to have made a Share Election. The total amount of cash paid to all shareholders was limited to a maximum of 20% of the total value of each of the fourth quarter 2015 and 2016 dividends (the “Cash Amount”). The aggregate amount of the dividends owed to shareholders who made Cash Elections exceeded the Cash Amount, and accordingly, the Cash Amount was prorated among such shareholders, with the remaining portion of the fourth quarter 2015 or 2016 dividend, as applicable, paid to such shareholders in shares of Ladder’s Class A common stock plus cash in lieu of any fractional shares. Shareholders making Stock Elections received the full amount of the dividend in shares of Ladder’s Class A common stock plus cash in lieu of any fractional shares. The Company believes that the total value of its 2015 dividends was sufficient to fully distribute its 2015 taxable income and its accumulated earnings and profits.

On January 24, 2017, the Company paid an aggregate of $20.8 million in cash to its Class A shareholders, accrued for dividends payable on unvested restricted stock and unvested options with dividend equivalent rights of $0.7 million and issued 815,819 shares of its Class A common stock, equivalent to $11.5 million, in connection with the fourth quarter 2016 dividend totaling $0.46 per share. The total number of shares of Class A common stock distributed pursuant to the fourth quarter 2016 dividend was determined based on shareholder elections and the volume weighted average price of $14.06 per share of Class A common stock on the New York Stock Exchange for the three trading days after January 12, 2017, the date that election forms were due. The Company also issued 432,314 shares of its Class B common stock and each of Series REIT and Series TRS of LCFH issued 1,248,133 of their respective Series LP units corresponding to the aggregate number of Class A and Class B shares issued by the Company. The Company believes that the total value of its 2016 dividend was sufficient to fully distribute its 2016 taxable income.

Changes in Accumulated Other Comprehensive Income

The following table presents changes in accumulated other comprehensive income related to the cumulative difference between the fair market value and the amortized cost basis of securities classified as available for sale for the years ended December 31, 2016, 2015 and 2014 ($ in thousands):

	Accumulated Other Comprehensive Income (Loss)			Accumulated Other Comprehensive Income of Noncontrolling Interests			Total Accumulated Other Comprehensive Income
December 31, 2015	$	(3,556	)	$	(2,839	)	$	(6,395	)
Other comprehensive income (loss)	3,420			5,099			8,519
Exchange of noncontrolling interest for common stock	1,202			(1,202		)	—
Rebalancing of ownership percentage between Company and Operating Partnership	299			(299		)	—
December 31, 2016	$	1,365		$	759		$	2,124

	Accumulated Other Comprehensive Income (Loss)			Accumulated Other Comprehensive Income of Noncontrolling Interests			Total Accumulated Other Comprehensive Income
December 31, 2014	$	15,656		$	14,494		$	30,150
Other comprehensive income (loss)	(20,046		)	(16,499		)	(36,545		)
Exchange of noncontrolling interest for common stock	645			(645		)	—
Rebalancing of ownership percentage between Company and Operating Partnership	189			(189		)	—
December 31, 2015	$	(3,556	)	$	(2,839	)	$	(6,395	)

	Accumulated Other Comprehensive Income (Loss)			Accumulated Other Comprehensive Income of Noncontrolling Interests			Total Accumulated Other Comprehensive Income
December 31, 2013	$	—		$	12,134		$	12,134
Other comprehensive income (loss)	488			17,528			18,016
Exchange of capital for common stock	14,874			(14,874		)	—
Exchange of noncontrolling interest for common stock	324			(324		)	—
Rebalancing of ownership percentage between Company and Operating Partnership	(30		)	30			—
December 31, 2014	$	15,656		$	14,494		$	30,150

Capitalized Offering Costs

As described in Note 1, the Company completed an IPO of its Class A Common Stock on February 11, 2014. Costs directly attributable to the Company’s IPO of $20.5 million were capitalized and charged against the proceeds of the IPO once completed.

Predecessor Capital Structure

The capital structure discussed below is reflective of LCFH’s structure as it existed at February 11, 2014, immediately prior to the Reorganization Transactions described in Note 1.  Immediately following the Reorganization Transactions, with the exception of the discussions regarding quarterly tax distributions, the provisions set forth below no longer apply.

Cash Distributions to Predecessor Partners

Distributions (other than tax distributions which are described below) will be made in the priorities described below at such times and in such amounts as determined by the Company’s board of directors.  All capitalized items used in this section but not defined shall have the respective meanings given to such capitalized terms in the Amended and Restated Limited Liability Limited Partnership Agreement of LCFH dated as of August 9, 2011, as amended (the “LLLP Agreement”):

• First, to the holders of Series A and Series B participating preferred units pro rata based on the capital account of each such holder’s interests, until the Series A and Series B participating preferred unit holders have each received an amount equivalent to their respective capital accounts; then 

• Second, 20% to the common unit holders, and 80% to the holders of Series A participating preferred units, until the Series A participating preferred unit holders have each received an amount equivalent to $124 per unit; and 

• Thereafter, 20% to common unit holders, and 80% to the holders of Series A and Series B participating preferred units, pro rata based on the units held by each holder.

Notwithstanding the foregoing, subject to available liquidity as determined by Company’s board of directors, the Company intends to make quarterly tax distributions equal to a partner’s “Quarterly Estimated Tax Amount,” which shall be computed (as more fully described in the LLLP Agreement) for each partner as the product of (x) the U.S. federal taxable income (or alternative minimum taxable income, as the case may be) allocated by the Company to such partner in respect of the partnership interests of the Company held by such partner and (y) the highest marginal blended U.S. federal, state and local income tax rate applicable to an individual residing in New York, NY, taking into account for U.S. federal income tax purposes, the deductibility of state and local taxes.

Allocation of Income and Loss

Income and losses and comprehensive income are allocated among the partners in a manner to reflect as closely as possible the amount each partner would be distributed under the LLLP Agreement upon liquidation of the Operating Partnership’s assets.