LADR - NYSE

Good morning, and welcome to Ladder Capital Corp.'s Earnings Call for the Second Quarter of 2025. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter ended June 30, 2025. 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 the 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. During the second quarter, Ladder generated distributable earnings of $30.9 million or $0.23 per share, generating a return on equity of 7.7% with modest adjusted leverage of just 1.6x as of quarter end. The second quarter of 2025 marked a significant milestone for Ladder as we achieved our long-standing goal of becoming an investment-grade rated company with Moody's and Fitch upgrading Ladder to Baa3 and BBB-, respectively. This accomplishment is the culmination of a 13-year journey that began with our inaugural unsecured bond issuance and initial credit rating in 2012. The recent upgrades are a testament to Ladder's consistent record of prudent balance sheet and credit risk management, our disciplined approach to leverage, emphasizing unsecured debt and the strength and flexibility of our diversified business model focused on commercial real estate. In June, we successfully issued our inaugural $500 million 5-year investment-grade unsecured bond issuance with a fixed rate coupon of 5.5%, representing 167 basis point spread over the benchmark treasury, the tightest new issuance spread achieved in Ladder's history. The offering was met with exceptional demand with the order book surpassing $3.5 billion shortly after launch and closing at 5.5x oversubscribed. This strong response underscores investor confidence in our platform and sets a benchmark for future issuance as we aim to become a consistent presence in the investment-grade unsecured bond market. Enhanced liquidity. Pro forma for the offering, 74% of Ladder's debt consisted of unsecured corporate bonds and 83% of our balance sheet assets remain unencumbered. As of June 30, Ladder had $1 billion in liquidity, including our $850 million unsecured revolving credit facility that was fully undrawn. This facility provides same-day liquidity at a highly competitive rate, which was reduced to SOFR plus 125 basis points following our upgrade. Subsequent to quarter end, we also redeemed the remaining $285 million in unsecured bonds maturing in October of 2025. We remain highly liquid, positioning us well to deploy capital into new higher-yielding investments. Second quarter and third quarter-to-date investment activity. During the second quarter and through July 23rd, we made over $1 billion of investments, including acquiring over $600 million in AAA-rated securities at a weighted average unlevered yield of 6.1%. As of June 30, our securities portfolio totaled $2 billion, representing 44% of total assets, and our loan portfolio totaled $1.6 billion, representing 36% of total assets. Loan origination activity remained relatively flat in the second quarter. We received $191 million in loan payoffs, largely offset by $173 million in new loan originations at a weighted average spread of 400 basis points. Following quarter end through July 23rd, we originated an additional $188 million in new loans, bringing total year-to-date origination activity to $690 million. Additionally, we have another $325 million of new loans currently under application. The majority of our loans originated and pipeline are secured by multifamily properties, reflecting continued demand in this sector. In addition, during the second quarter, we sold a $64 million conduit loan, generating a healthy gain and illustrating that conduit lending remains a complementary part of our diversified model, and we are well positioned to participate in when market conditions warrant. We continue to focus on middle market lending, particularly light transitional assets with an average loan size of $25 million to $30 million. The granularity and diversity of our portfolio reflected in an average investment size across all investment products of less than $15 million, enhances our credit profile by minimizing concentration risk to any specific borrower, geography, asset type or product across the commercial real estate space. Consistent carry income from our real estate portfolio. Our $936 million real estate portfolio generated $15.1 million in net operating income during the second quarter. The portfolio primarily consists of net lease properties with long-term leases to investment-grade rated tenants and continues to generate stable income. 2025 outlook. Our recent credit rating upgrades and successful bond issuance have already started to reduce our cost of debt capital. We saw spreads tighten on our June bond issuance, and we would anticipate continued tightening as we become more widely recognized in the investment-grade bond community. As Brian will allude to shortly, we also anticipate that our equity valuation will begin to reflect this shift. As an investment-grade issuer, we believe we should increasingly be compared to a broader set of high-quality peers, including equity REITs rather than solely within the commercial mortgage REIT space. We believe this can help lower our cost of equity capital over time as the market gains a deeper appreciation for our senior secured investment strategy and investment-grade capital structure. With over 11% insider ownership, management and the Board are highly aligned with all stakeholders. We remain well positioned with strong liquidity and a conservative balance sheet to continue to deploy capital into new opportunities as they arise with a focus on delivering strong and stable returns to shareholders. With that, I'll turn the call over to Paul.

Thank you, Pamela. In the second quarter of 2025, Ladder generated $30.9 million of distributable earnings or $0.23 per share of distributable EPS, achieving a return on average equity of 7.7%. As Pamela discussed in the second quarter marked a milestone in Ladder's history with our upgrade to investment grade from Moody's and Fitch, followed by our inaugural investment-grade rated bond issuance. The $500 million 5-year issuance priced at a coupon of 5.5% in June and settled in July. Subsequent to quarter end, we called the remaining $285 million of our 2025 bonds that were maturing in October. The new bond offering further strengthens our balance sheet, and we are pleased that the bonds have traded well in the secondary market since their issuance. Pro forma for the issuance and redemption of our 2025 maturity in July, $2.2 billion or 74% of our debt is comprised of unsecured corporate bonds across 4 issuances with a weighted average remaining maturity of over 4 years and an attractive weighted average fixed coupon rate of 5.3%. Our next maturity is now in 2027. As of June 30, 2025, Ladder's liquidity was $1 billion, comprised of cash and cash equivalents and our $850 million unsecured revolver, which remains undrawn. As Pamela discussed, cost of the facility automatically reduced by 45 basis points, down to SOFR plus 125 basis points on achieving our investment-grade ratings. This reduced cost makes using the facility to finance our operations an attractive option on a fully unsecured basis. In the second quarter, we also called our FL3 CLOs that continue to amortize. Total gross leverage was 1.9x as of quarter end, below our target range of between 2x and 3x. Overall, Ladder's balance sheet remains strong with room to grow leverage as we deploy our capital. As of June 30, 2025, our unencumbered asset pool stood at $3.7 billion, or 83% of total assets. 88% of this unencumbered asset pool is comprised of first mortgage loans, securities and unrestricted cash and cash equivalents. As of June 30, 2025, Ladder's undepreciated book value per share was $13.68, which is net of $0.41 per share of CECL general reserve established. In the second quarter of 2025, we repurchased $6.6 million of common stock or 635,000 shares at a weighted average price of $10.40 per share. As of June 30, 2025, $93.4 million remains outstanding on Ladder's stock repurchase program. In the second quarter, Ladder declared a $0.23 per share dividend, which was paid on July 15, 2025. As Pamela discussed our performance in detail, I will highlight a few additional points regarding the performance of each of our segments in the second quarter. As of June 30, 2025, our loan portfolio totaled $1.6 billion, with a weighted average yield of approximately 9%. As of June 30, 2025, we had 5 loans on nonaccrual, totaling $162.3 million, representing 3.6% of total assets. During the quarter, we added one $50 million loan to nonaccrual, collateralized by a multifamily asset for which we are pursuing foreclosure. Our CECL reserve was $52 million or $0.41 per share, as previously mentioned. We believe this reserve level is adequate to cover any potential losses in our loan portfolio, including consideration of the continued macroeconomic shifts ongoing in the global economy. As of June 30, 2025, the carrying value of our securities portfolio was $2 billion, up 82% from the end of last year with a weighted average yield of 5.9% as we further rotated capital out of T-bills and into AAA securities, while our loan pipeline continues to close. As of June 30, 2025, 99% of the securities portfolio was investment-grade rated with 97% being AAA rated. 81% of the portfolio of almost entirely AAA securities is unencumbered and readily financeable, providing additional source of potential liquidity, complementing our $1 billion of same-day liquidity. Our $936 million real estate segment continued to generate stable net operating income in the second quarter of 2025. The portfolio includes 149 net lease properties of primarily investment-grade rated credits committed to long-term leases, with a weighted average remaining lease term of over 7 years. Portfolio now includes an office property in Carmel, Indiana, which we foreclosed on during the quarter at a basis of $112 per square foot. The property is 82% occupied and generates an over 11% return on our equity on an unlevered basis. For further details on our second quarter 2025 operating results, please refer to our earnings supplement, which is available on our website and Ladder's 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. While our second quarter highlights included achieving investment-grade status, a goal we have communicated to investors for years, the most meaningful impact will be the long-standing improvement in our cost of funds. Just 12 months ago, we issued a $500 million 7-year unsecured corporate bond at 7% interest rate and a spread of plus 275 basis points at the time. By comparison, our second quarter 5-year issuance of the same size, $500 million, now with investment-grade ratings executed at a spread of 167 basis points and an interest rate of 5.5% over 100 basis points tighter than last year. With fixed income investors welcoming us into the investment-grade capital markets, a market that is not only 4x larger than the high-yield market, but also deeper, more liquid and more consistently accessible across market cycles. We have established an optimized financial foundation for Ladder. Building on this momentum, we are now focused on the next phase of our long-term plan, increasing our stock price. As the only current investment-grade mortgage REIT in the country, we have created something new on the investment landscape for equity investors. This unique position requires us to be thoughtful about how we are perceived and compared given our in-between placement between noninvestment-grade mortgage REITs that use significant leverage and investment-grade property REITs that use limited secured debt. and low leverage but have a first loss exposure through direct real estate ownership. Ladder distinguishes itself from the investment-grade property REITs with senior secured exposure at a higher attachment point, supported by a granular and diverse investment portfolio with an average size of $15 million. These factors provide enhanced liquidity, downside protection and risk diversification. And we think that when we point out to income-oriented investors that the assets owned by Ladder, primarily first mortgage loans and AAA securities, they will understand that our assets are a lot safer than the assets held by investment-grade property REITs. Historically, investors have grouped us with both internally and externally managed commercial mortgage REITs. However, our consistent defensive book value per share has earned a strong investor regard as reflected in our relatively lower dividend yield. Unlike our peers in the CRE mortgage space, who primarily rely on CLO issuance, Term Loan B financings and short-term repo debt, Ladder stands apart by financing our business with 74% fixed rate, longer-term unsecured corporate borrowings and maintaining a much lower overall leverage profile. As investors continue to reassess our comp set, it is increasingly clear that our business model and risk profile align more closely with investment-grade property REITs companies that typically offer dividend yields in the 4% to 5% range issue unsecured corporate debt and maintain lower leverage. We believe the reason property REITs trade with lower dividend yields is largely due to the stability and predictability of their revenues, as well as their strong total return profiles over time. While we may not trade at the same yields as property REITs today, given the senior secured nature and higher attachment point of our assets, our total return proposition driven by our highly liquid and secure asset base should be very compelling to shareholders. We believe this will be ultimately reflected in our valuation as the market continues to recognize our differentiated profile. On the equity side, we think we appeal to investors focused on a stay-rich strategy rather than a get-rich strategy, with an emphasis on capital preservation and attractive dividend payments, which we intend to grow in the years ahead. We will try to reach out to family offices and retail banking experts and make a purposeful and targeted marketing push towards this group of wealthy investors. We have not previously highlighted this next phase of our long-term plan, but we do so now following the upgrade because adoption of a new comp set for Ladder is not only credible, it's quite likely. I want to thank the investors who supported us in our inaugural investment-grade issuance as well as the Ladder management team who worked for years to reach this milestone. Our focus is now on protecting our new ratings and growing earnings through deploying capital into new investments at a time of generally higher interest rates. Now with a lower cost of capital than most other lenders in the commercial real estate space. Our future appears bright. Current market conditions have produced some very attractive investment opportunities, and we are taking full advantage of those situations. In the first days of April, markets were roiled by volatility after tariff announcements were made. This volatility caused credit spreads to widen and at Ladder, we purchased $605 million of securities in the second quarter. In the current quarter, volatility has been much lower and with very little new supply coming to market this summer, we see much tighter credit spreads, and we are selectively selling some of our inventory of securities as we now favor mortgage loan origination to CUSIP acquisitions. Looking ahead, we remain constructive on the broader market environment. While volatility and uncertainty persists. We believe our investment-grade status, strong liquidity and disciplined approach toward credit positions us to capitalize on opportunities and deliver attractive risk-adjusted returns to our stakeholders. We can now take some questions.

[Operator Instructions] Our first question comes from Randy Binner with B. Riley.

I'll pick up at the end there on the CMBS. Do you think that -- because there's less volume in the market and the selling activity you mentioned, is that -- would that be getting that portfolio kind of flat for this quarter? Or is it more just kind of selective selling there?

Are you talking about the securities portfolio?

Yes, securities -- in the securities portfolio, the CMBS.

Yes. No, we're -- they're up generally, especially given the volatility of April when the quarter first started. But -- so we did buy quite a few in there, and we kind of think they're at fair value now, which would indicate that we think we're up a bit, but it is a 2-year floating rate AAA, so it doesn't have a lot of price volatility. But it's definitely -- feels good on the positive side of things. We have been selling selectively because we bought a lot in a short period of time. And I think it's largely -- it's a nice carry trade. But on the other hand, I think we're trying to -- while we went from T-bills into securities, we're already underway, moving from securities into loans. So there's no slap on the portfolio not that we don't like it. It's simply -- it has always been designed to be a source of liquidity as the loan book builds.

Okay. That's helpful. And then just kind of related on the loan portfolio. You mentioned the pipeline of, I think you said $300 million plus, mostly multifamily focused. Can you just give us any color on the kind of convertibility of that pipeline into the book and just how conversations are going in the market, kind of the market dynamic there now that the macro environment has stabilized?

Sure. Well, you noticed that we actually had a dip in loan origination volume this quarter, but we've already written more loans in the third quarter than we did in the entire second quarter in the first 3 weeks. So, a lot of that had to do with timing. Towards the end of the quarter, if things had fallen into June, these numbers would be a lot higher. But as a result, some of them have now pushed. The one thing we're noticing across the board in our loan origination activities is oftentimes, there are certain pockets of multifamily where rents are falling. So that can cause some concerns during due diligence, if the loan is of the higher levered idea. But I would also say that, I think the hotel sector in the big cities is particularly concerning right now as far as big a source of loan originations. However, I would really say, for the most part, I don't know exactly why, but the closings take longer than they used to. And as a result of that, it's -- I think it's a reliable -- I think, we have $325 million under application. I would quick thumb in the air tell you probably $275 million of that will close. But the harder question would be when will it close? And you would think at the end of July, you would be closing those at the end of -- in the middle of September in all likelihood. I'd be hard-pressed to make that bet just yet because things, as I said, it's very similar to before the pandemic, except you have to add 30 days to it. And I'm not sure why I don't have that answer. But things are just taking longer. And I think it might be just people are being more cautious on the lending side.

The next question comes from Jade Rahmani with KBW.

Does the IG rating open you up to different investments than you previously might have considered? Perhaps they might be lower-yielding investments or perhaps there's a broader set of equity property investments you might make?

I don't think it's changing our desires or activities on the investment side. But it clearly is making them more profitable. I realize the stock market is a forward-looking instrument, but with a $2.1 billion or $2.2 billion corporate bond portfolio, we've effectively lowered that rate by 150 basis points, you're getting another, I don't know, $30 million to the bottom line over time. Obviously, it doesn't happen right now, because we've got bonds outstanding that will need to be refied. But -- so I think a lot of lenders are really pushing and competing right now to try to add spread and loan volume, but there's another way to add to earnings, and that is to curtail expenses now not in the form of layoffs around here, but by cutting our interest expense, we think that our income should drift higher here with similar types of risks on the balance sheet. It's just a lot easier for us, and there's a lot less -- you can finance anything you buy. And so will it -- I think underneath your question is you're asking me, does that mean with our low cost of funds, we're now going to go out and buy a bunch of B pieces because that is what companies like ours have done in the past, when they see they've got a fixed rate cost of funds regardless of what they buy. We're not going to do that. We have a stay-at-home mentality. We will do what we're good at, and that is discerning credit that is likely to pay us off on time without a lawyer in the room. And we've been pretty adept at that. We're going to stick with it. But could we start moving into AAs instead of AAAs? Yes, that's possible. But I don't see us going for higher octane investments in the mezzanine world.

I was thinking more along the lines of very lightly transitional or stabilized commercial real estate and maybe even fixed rate loans?

Yes, sure. I mean, the curve is -- it's flattened out a bit more, but the fixed rate loan business will pick up around here as the curve steepens, and I suspect it will. We haven't really been terribly active in fixed rate securitizations, but we were somewhat active in this quarter, but we contributed one loan that was 10% of a deal. So, we're kind of knocking the rust off that playbook. And I think that, that should turn into a very high ROE category. But the reality is you're dealing with assets that have depreciated in value. So that's a little harder to start writing 10-year loans unless that cash flow appears to be quite stable. And so, you just said -- if you take a look at just mortgage-backed securities issuance, it's down dramatically. And so, as a result of that, as I said, ties in together with our one product and forms another because there's no supply coming until July. I mean, until September, really. And because a lot of the CLO issuances really had loans from 2018, '19 and '20 that were just called in a previous deal. So, half of the pool that went into the new CLOs is from old CLOs. So, there's just not a lot of production going on. And because of that lack of supply, we expect spreads to continue to tighten. And we will be -- at this point, at least on the security side, we'll be selling into it. We'll still buy things on -- any time there's an interruption in the market with volatility. But generally, we're looking to sell securities, take small gains and redeploy into loans and other.

The only thing I would add, Jade, is, listen, we love that we can be very agnostic towards what we originate. We're not beholden to the CLO market, the lenders. We feel really good about our credit skills. And I think at this point, we can make the loans we like we tend to prefer light transitional loans, but we have a lot of flexibility in our capital structure to originate the type of loans, with the type of terms that we want without regard to lender constraints with this unsecured capital.

And lastly, on the net lease portfolio, I think Paul mentioned 7-year or slightly over weighted average lease duration. Can you talk about if you're thinking about growing that book, and if managing to a certain wall is important to how you view that portfolio?

It's nice to manage to a certain term lease. And I guess we inadvertently target longer leases when we can. But what really drives our desire to participate and acquire assets in that business is the cost of funds versus the cap rate that you're buying it at. So, it's a financially engineered product. And I think, where people get a little caught in that business is when they just buy the credit instead of the asset. And so, we're very discerning in the dollars per foot exposure, which I believe is the best thing you can do to keep your losses to a minimum if there's a problem. So otherwise, you could wind up with Walgreens at $700, $800 a foot, and they may be closing them in some of these cities. So, we're pretty cautious. We own some Dollar General's, as you know. We typically bought 1 out of 3 Dollar General's that was shown to us at the same cap rate. We really focused on areas where there was low crime, reasonable population and an expectation oftentimes moving from the shopping center across the street into a freestanding building that we own. So, I think that our interest in that business will pick up when the cap rates and the financing rates are rather different. The differential there is what drives the ROE. But you are seeing some others like begin to buy portfolios of those things. We saw that portfolio that traded recently. And -- but -- so I don't really see the arbitrage at this point as far as acquiring a big book of it. But it does work in a REIT from a depreciation standpoint and the steadiness of the income. So, we're certainly not against acquiring more. But right now, cap rates are wide, but so are financing costs. So, if financing costs go down as we expect them to, yes, we might very well start buying some more triple net.

The next question comes from John Nickodemus with BTIG.

We saw leverage stay fairly stable this quarter, especially when considering your redemption of the remaining 2025 unsecured notes. Just curious on the team's current thoughts on a ramp there as the Ladder has achieved the investment-grade rating.

John, if you don't mind, that broke up a little at the end. What was the last sentence?

Yes. Just your thoughts on the ramp on leverage now that Ladder has achieved the investment-grade rating. Sorry about that.

That's okay.

This is Pamela. We fully intend to say with -- since inception, we've been 2 to 3x. It's consistent with the rating agency parameters for investment grade. I think I'll say it again, the only thing changing at Ladder is the composition of leverage. We've always run the company. In fact, we've had some of the highest ROE in the space year after year, with our 2 to 3x leverage. We're just going from where we have historically funded ourselves 2/3 secured and 1/3 unsecured. We're now funding ourselves 2/3 unsecured, 1/3 secured. And candidly, as our spreads, and I know Brian and myself, all 3 of us spent a lot of time talking about the potential for tightening in the cost of our funds. As the cost of funds tighten in the unsecured space, it could become very compelling to fund Ladder almost entirely on unsecured debt because the cost of capital is tightening to a point where it's competitive and in some cases, advantageous to other sources of capital. So, I think you should just think about us today as 2/3 unsecured, 1/3 secured with the same leverage we've always had. And I think the only reason you see light leverage is we've been slow to redeploy out of, Brian said, treasuries into securities and now into loans. As we fully deploy the balance sheet, we'll just get back to a use of normal leverage at the -- call it, 2 and 3 quarters.

Yes. By the way, in the quarter, we -- and possibly into the leaking into the third quarter, we paid off the $25 million, $285 million, but we also paid off the only other CLO we had outstanding. And that was really -- and interestingly enough, I think, it was about 45% office loans when we paid it off. But the reason that we did that was because the payoff pace was pretty brisk, and our cost of funds was getting into the mid-200s, with an advance rate of around 50% because the AAA portion of that CLO was paying off so rapidly. So that's more secured debt gone. And so we actually -- of the $500 million, we took $285 million into the '25s, and I think it was $130 million into the CLO. So, it was really just a refinance exercise mostly.

Great. Pamela and Brian, appreciate the answer. And then other one for me. Glad to hear the conduit loans come up for the second straight call. Just wanted to hear any more detail on the team, how you're all thinking about that as we get into the second half of the year and just that sort of being a composition of the team strategy.

You're welcome. I'd love to do a lot more in the conduit business. Right now, the curve is not terribly steep, but certainly steeper and way better than inverted. So, we're moving and leaning in that direction. It is a very profitable business. It is a little supply constrained. One of the reasons that we contributed a $64 million loan into the pool was the pool wasn't big enough without us. And so we put that loan in and ultimately, I think it was part of -- it was 10% of the actual deal. If a deal is $650 million in a conduit, that's a rather small deal. So again, I think that the mortgage-backed securities business is rather plagued by a lack of supply. And I think that will go on for a while here unless rates begin to fall as -- again, I'm a believer the Fed will start moving rates down toward the end of the year.

[Operator Instructions] The next question comes from Chris Muller with Citizens.

Congrats on a solid quarter here. So, it's nice to see you guys making new bridge loans, and it looks like that momentum is continuing into the third quarter. So, I wanted to ask, do you guys have any expectations for net portfolio growth in the back half of the year? And is there a target portfolio size that you guys are looking to grow to? And then, just one piggyback on that one is what do levered returns look like on new loans today versus historically?

I think when you set long-term volume goals, they should be prepared to be shredded at a moment's notice with the amount of volatility that's in these economies lately. But I think we'll probably write $1 billion in loans between here and the end of the year. But if we don't, we don't. And as I said, it isn't so much that there's not necessarily demand for products that we -- for loans. But if you think about it, the loans come from 2 places. One comes from the refinance world. That world is largely interrupted right now, because there's a lot of overleverage in the system from the near term last few years. And the second place is the acquisition business, which I actually think, acquisition loans today, I think they're always safer than refis, but the acquisition pipeline of transactions taking place is picking up, and I think that's why you're seeing our business pick up. And that should continue. And people are accepting the new prices at this point. We are seeing DPOs take place. We're seeing lenders help with seller financing. We're seeing equity being infused into the transaction, a cash in refi, if you will. So, it's a healthy market, but I think it's still a little bit over leveraged because of the post-pandemic world, and it will take a little time to work that out. And so the office sector is doing way better than it was. I wouldn't say it's doing great, but it's doing better certainly than it was. And the multifamily sector, I think we're starting to see some signs of plateaus on rents, not everywhere, but in some places, there's been a bit of overbuilding. So, we are seeing some rent reductions quarter-over-quarter in some properties. But I want to illustrate here, I want to make absolutely certain what I'm saying is right. I don't expect rents to fall dramatically. I do expect them to dip, but I don't think it's going to turn into anything like what happened in the office sector after the pandemic.

I would just close that by adding, we do expect portfolio growth. We have limited payoffs just given our vintage and the high, high volume of payoffs we've had over the last year. We have muted payoffs for the rest of the year. So, I do expect you'll see portfolio growth for sure.

Got it. And then just how do levered returns look like on new loans today versus historically?

9% unlevered -- versus probably, historically, tell me where LIBOR is or where SOFR is. They were much lower than that 5, 6 years ago. But these are healthy margins right now. Spreads are rather tight, but rates are rather high. So that's actually a comfortable spot for a lender. And so, I don't really expect volatility to continue. And if rates do fall, I think you could see spreads widen unless there is massive supply constraint, which I think in the beginning, we're going to see that in June, July and August. But I don't think we're going to see that through year-end. I think at some point, the equal balances on both sides will start to level out.

Got it. That's helpful. And then the other one for me. So, it's great to see you guys finally get that investment-grade bond rating. It's well deserved. And it sounds like, Brian, from your comments that the bond coupon had you not gotten that rating on the new issuance would have been somewhere around 6.5%. Is that the right way to think about the benefit on the cost of fund side?

Yes, I think so. Maybe a little more than that because I gave you one example, 12 months apart from 7% -- but of course, you've got treasury curve movement. But there's a couple of competitors of ours who sometimes borrow money, too, and we tend to trade in tandem with them. Oftentimes, I think we're about 25% tighter than where they issue. But in this case, I think we've now left that field, and we're now going to be sounding more like what the yields that property REITs that are investment grade pay. And it will take a little while. But -- so -- but it doesn't seem like it's going to be a hard conversion because the lower leverage is nice. And if you take a look at us against commercial mortgage REITs, our dividend seems rather low. But if you compare us to property REITs, our dividend appears astronomically high. And since I think we look more like property REITs that are investment grade that use little leverage, much more so than we look like commercial mortgage REITs, who use a lot of leverage, and are not investment grade.

I also think you see more tightening in that space quickly. We issued at 167 spread and quickly saw that tighten down into the low 150s. It was as low as 151. So, I think the potential for tightening in the investment-grade space as you become a more frequent issuer and they understand the credit story, and we redeploy into higher-yielding investments, you're going to see that momentum as well.

And as Pamela mentioned, I think in her script, I would not be surprised if we do fund this company entirely on unsecured corporate debt. And in fact, even though we just issued a $500 million transaction issuance, we paid off other debts with it. We could very well see another issuance come out of us before the end of the year because volatility is pretty calm right now and rates are attractive, and our spreads are tightening. We're still much wider than the property REITs. So, I'm kind of playing the waiting game to see if we can't drift down to where they are. And -- but I suspect you might very well see us issue another bond before year-end, and it will be longer than 5 years.

I just want to add one thing. One of the benchmarks that people were looking to for us when we were with investors is, if you look at our unsecured revolver from the banks at 125 over, that's sort of a benchmark of where we think we should trade to. And I know there's a little bit of a new issue tax for a new issuer in the space, but that is a benchmark that we're all looking at as we continue to issue.

Thank you. At this time, I would like to turn the call back over to Mr. Brian Harris for closing comments.

Closing comments, just to conclude, thank you for all who participated in getting us into the end zone on the investment-grade rating. And just as a quick aside, I just want to mention that there was a lot of ink spilled over the last 6 or 7 years about a couple of loans that we made to the Trump organization at Trump Tower, $100 million, and also 40 Wall for $160 million. I do want to point out that both of those loans paid off. And so, despite all of the media frenzy about how there was going to be imminent danger there, I did want to let you know since you won't find it on the front page of a newspaper that the Trump Organization paid off 40 Wall at the end of June. And so, this doesn't really impact us on this call because we don't own those loans. And -- but I did want to at least come back around and indicate to you, while office buildings of 9-figure loan sizes are very hard to refinance, we picked 2 that did refinance without any problem. And I think that's it. So thank you, and we'll see you next quarter.