Related Companies is investing in Ladder Capital, a debt-focused real estate investment trust, the New York-based companies said Tuesday.
Related bought $80 million of Ladder stock from pre-initial public offering shareholders, including private equity companies TowerBrook Capital Partners and GI Partners. As part of the deal, Related has a right of first offer for certain horizontal risk retention investments in which Ladder plans to keep its stake.
Ladder, which was founded in 2008 and went public in 2014, originates commercial real estate loans and invests in real estate equity. The company originated $2.1 billion of loans in 2016 and had $822 million in real estate assets as of December 31, according to its fourth-quarter earnings report. Ladder’s most recent publicly disclosed equity transaction was the purchase of a Crowne Plaza hotel in Pittsfield, Massachusetts earlier this month, according to data provider Real Capital Analytics. The REIT bought the 179-unit hotel for $4 million.
“Ladder’s core earnings have been positive each quarter since their inception and they have never had a credit loss,” Jeff Blau, Related’s chief executive (pictured), said in a statement Tuesday. “We saw a strategic investment opportunity because we believe that the company’s reported depreciated book value is a conservative representation of Ladder’s actual value.”
Capital for Related’s stock purchase came from its $1 billion value-added fund, Related Real Estate Fund II, which closed in December 2015. Investors in the fund include Indiana Public Retirement System, which earmarked $50 million; Texas County and District Retirement System, which allocated $40 million; and Teachers’ Retirement System of Louisiana and the University of Michigan, which each committed $35 million, according to PERE data.
Related is itself a real estate lender, launching a real estate debt platform in 2013, PERE reported at the time. The firm expanded its lending business to Europe in 2015.
Related is currently seeking to raise $2 billion for its second real estate debt fund, Related HPS Joint Venture II, launched in early 2016 in partnership with Highbridge Principal Strategies, a division of JPMorgan.
Ladder is known for bankrolling many of President Donald Trump’s US properties since 2008. The company has issued about $275 million of loans to the Trump Organization, according to Crain’s New York, a local business magazine. Blau, Related’s CEO, has publicly spoken about how the property entrepreneur-turned-president could boost the real estate industry, highlighting Trump’s promises to deregulate banks, increase infrastructure spending and reform the tax code.
“I think it’s good that we’re going to have someone who understands our industry in office,” he said on Bloomberg TV last month.
Ladder represents the latest corporate transaction for Related, and its first in the debt space. In February 2016, the firm acquired a 50 percent stake in Pocket, a UK affordable housing developer, for an undisclosed amount.