Ready Capital Corporation · NYSE:RC
Ready Capital — Investor Presentation (January 2024)
44 slides from Ready Capital's investor presentation, January 2024
Slide 1: Investor Presentation January 2024
INVESTOR PRESENTATION January 2024 STRICTLY PRIVATE AND CONFIDENTIAL
Slide 2: Disclaimer
CONFIDENTIAL Disclaimer These materials and any presentation of which they form a part are not intended as an offer to sell, or the solicitation of an offer to purchase, any security, the offer and/or sale of which can only be made by definitive offering documentation. Any offer or solicitation with
Slide 3: Executive Summary
CONFIDENTIAL Executive Summary ◼ Ready Capital (“RC” or the “Company”) is a non-bank lender to both investors in and owners of lower-to-middle-market commercial real estate (CRE) properties with book value of approximately $2.7bn¹ ◼ All-weather investment strategy as a direct lender and acquirer of
Slide 4: Business Overview
~ READY CAPITAL Business Overview
Slide 5: Company Overview
CONFIDENTIAL Company Overview Multi-strategy real estate finance company that originates, acquires and services lower-to-middle-market investor and owner occupied commercial real estate loans ▪ Acquires and originates LMM loans secured by stabilized or transitional investor properties using multiple
Slide 6: Company Overview (Cont'd)
CONFIDENTIAL Company Overview (Cont’d) PORTFOLIO BREAKDOWN (BY TOTAL ASSETS) CRE COLLATERAL TYPE (% UPB)¹ Other Retail Office Lodging 6% Industrial 5% 5% 2% Small Business 5% Other Lending 5% 11% Mixed Use 9% LMM CRE Lending & Acquisition 83% Multifamily 69% HISTORICAL PRE-TAX INCOME GROWTH ($MM) $3
Slide 7: A Successful and Proven Asset Manager
CONFIDENTIAL A Successful and Proven Asset Manager WATERFALL ASSETS UNDER MANAGEMENT BY STRATEGY¹ Private Equity 2% Loans 18 year 19% Investment record Asset-Backed Securities $12.6bn $12.6bn² Ready Capital AUM² 58% AUM 21% 170+ Employees WATERFALL OVERVIEW ◼ SEC-registered credit investment advisor
Slide 8: Proven Acquisition and Integration Track Record
CONFIDENTIAL Proven Acquisition and Integration Track Record Ready Capital is an active acquiror in the multi-strategy real estate finance sector, having completed eight transactions since 2014, including four public company mergers¹ Small Business Lending Anworth Mortgage Announceme November 8, Dec
Slide 9: Market Segment Overview
READY CAPITAL Market Segment Overview
Slide 10: Overview of Key Themes by Market Segment
CONFIDENTIAL Overview of Key Themes by Market Segment 1 ◼ $5.7tn¹ is the total commercial real estate market value estimate as of 3/31/2023 ◼ Retrenchment of Banks from LMM CRE market LMM CRE Lending ◼ Competition for LMM commercial real estate loan asset acquisitions has been limited due to the por
Slide 11: Full Project Life Cycle Lender With Diverse Set of Solutions
CONFIDENTIAL Full Project Life Cycle Lender With Diverse Set of Solutions GOVERNMENT-BACKED FULL PROJECT LIFE CYCLE LMM CRE LENDING SMALL BUSINESS LENDING Government-backed Small Product Construction¹ Bridge Fixed Rate/CMBS Freddie Mac Business loans Freddie Mac SBL Construction and pre- Short-term
Slide 12: Breakdown of Investment Strategy Economics
CONFIDENTIAL Breakdown of Investment Strategy Economics GOVERNMENT-BACKED FULL PROJECT LIFE CYCLE LMM CRE LENDING SMALL BUSINESS LENDING Government-backed Small Product Construction Bridge Fixed Rate/CMBS Freddie Mac Business loans WA coupon 12.00% 9.25% 8.75% 6.50% 11.00% Fees % 1.00% 1.00% 1.00% (
Slide 13: LMM CRE Lending & Acquisition Overview
CONFIDENTIAL 1 LMM CRE Lending & Acquisition Overview OVERVIEW ◼ All weather origination platform with ability to allocate capital across 4 products ◼ $17.6bn in originations since the Company’s formation in 2013 and a 22.2% 10-year CAGR ◼ Current 0.3% LMM commercial real estate loan market share wi
Slide 14: LMM Commercial Lending Case Studies
CONFIDENTIAL 1 LMM Commercial Lending Case Studies Construction Bridge Non-Agency Fixed Rate Freddie Mac SBL Name Cross-Kire East 159-161 West 54th Street Myrtle Avenue Portfolio Refinance The Valencia Location Escondido, CA 92025 New York, NY 10019 Ridgeway, NY 11385 Albuquerque, NM 87108 Loan Purp
Slide 15: Small Business Lending Overview
CONFIDENTIAL 2 Small Business Lending Overview OVERVIEW ◼ A leading provider of capital to small businesses through 7(a) loans, USDA loans and unsecured small business loans ◼ #1 non-bank and #4 overall 7(a) lender¹ ◼ 1 of 17 non-bank Small Business Administration 7(a) license holders²; acquired fro
Slide 16: Small Business Lending Case Study
CONFIDENTIAL 2 Small Business Lending Case Study LOAN AMOUNT: $3,750,000 PRICING BASIS: Variable RATE: 11.50% GUARANTEE: 75% SALE PREMIUM: 11.42% SECURITIZATION 71.70% ADVANCE RATE: SERVICING STRIP: 1.00% DEBT COST: 8.59% Name: Widow Fletchers, LLC LIEN: 1st and 2nd ORIGINATION DATE: December 2023 L
Slide 17: Key Credit Highlights
Key Credit Highlights
Slide 18: Key Credit Highlights
CONFIDENTIAL Key Credit Highlights ◼ Provides earnings stability through a combination of CRE Net Interest Margin and Gain on Sale from SBA and Freddie Mac businesses Differentiated Business Model ◼ Balance sheet stability provided by granular portfolio and focus on LMM portfolio 1 with Diversified
Slide 19: Diversified Sourcing Channel
CONFIDENTIAL 1 Diversified Sourcing Channel NATIONWIDE PRESENCE % UPB ALLOCATED TO CRE LENDING RELATIONSHIPS¹ 85% 85% 79% 77% 72% Ready Capital Commercial Operations Center Ready Capital Commercial Loan Officers Waterfall & Ready Capital BridgeOperations Strategic Partnerships Centers Ready Capital
Slide 20: Loan Portfolio Composition
CONFIDENTIAL 2 Loan Portfolio Composition PORTFOLIO BREAKDOWN (BY TOTAL ASSETS) REVENUE BREAKDOWN ($MM)¹ Other $66.6 6% Small Business Lending 11% $12.1 ($27.5) LMM CRE Lending & LMM CRE Lending & Small Business Lending Other Acquisition Acquisition 83% PORTFOLIO KEY METRICS LOAN TYPE ($K) SEGMENT W
Slide 21: Loan Portfolio Composition (Cont'd)
CONFIDENTIAL 2 Loan Portfolio Composition (Cont’d) As a percentage of UPB CRE GEOGRAPHIC LOCATION LIEN POSITION OF TOTAL PORTOLIO Subordinated lien 1.0% Texas Other 19% 29% California 11% Washington 4% Illinois Georgia 4% 7% North Carolina Senior lien Florida 4% 99.0% New York 7% Oregon Arizona 5% 6
Slide 22: Portfolio Performance
CONFIDENTIAL 2 Portfolio Performance HIGHLIGHTS ◼ Conservative approach to underwriting with goal of low losses even in times of market stress ◼ For example, underwriting of bridge loans to 0–3% rental growth to mitigate refinance risks ◼ Focus on GEO Tier 1 and 2 markets with avoidance of negative
Slide 23: Financial Flexibility
CONFIDENTIAL 3 Financial Flexibility HIGHLIGHTS CASH ON BALANCE SHEET ($MM) ◼ Diversified unencumbered asset pool of $1.8bn, including $182mm of unrestricted cash $230 ◼ 2.3x unencumbered assets to unsecured debt $182 $163 ◼ $4bn in available warehouse borrowing capacity across $139 19 counterpartie
Slide 24: Financial Flexibility (Cont'd)
CONFIDENTIAL 3 Financial Flexibility (Cont’d) LEVERAGE PROFILE OVERVIEW Debt balance Leverage ◼ Total leverage of 3.4x ratio PPPLF $76 <0.1x ◼ Recourse leverage ratio of 0.9x ◼ Majority of secured borrowings subject to non-recourse or limited recourse terms UNENCUMBERED ASSET POOL Securitized Debt $
Slide 25: Historical Balance Sheet
CONFIDENTIAL 4 Historical Balance Sheet ◼ Ready Capital has grown its balance sheet over the last five years, with its total assets grown at a 36% CAGR from 2017 to 2022 ◼ Total debt has largely grown in step with the size of the asset base, comprised of a well diversified mix of corporate borrowing
Slide 26: Historical Income Statement
CONFIDENTIAL 4 Historical Income Statement ◼ Distributable earnings have grown at a 36% CAGR between 2017 and 2022¹ ◼ The Company has been able to keep both its net income to assets and return on equity stable despite some challenging economic conditions NET INCOME NET INCOME TO ASSETS (%) $351 2.7%
Slide 27: Credit Philosophy
CONFIDENTIAL 5 Credit Philosophy GEOtier Real Estate Debt Structure Sponsor ◼ Tiers markets from 1 to 5 based on ◼ Primarily focused on less volatile ◼ Primary metrics considered: At Risk ◼ Strong sponsorship cannot mitigate zip code level; utilized for pricing, property types such as multifamily LT
Slide 28: Strong Credit Risk and Asset Management Culture
CONFIDENTIAL 5 Strong Credit Risk and Asset Management Culture EARLY INTERVENTION COMPREHENSIVE REPORTING ◼ Ready Capital communicates directly with sponsors to ascertain status for loans ◼ Asset-level assessments contained in the Watchlist report help drive over 30+ days delinquent communication wi
Slide 29: Experienced Management Team
CONFIDENTIAL 6 Experienced Management Team NAME & POSITION BACKGROUND Thomas Capasse Chairman of the Board, CEO & ◼ Manager and Co-Founder of Waterfall Asset Management Managing Partner and Co-Founder Chief Investment Officer ◼ 35+ years of structured credit experience globally Waterfall Asset Manag
Slide 30: Financial Summary
~ READY CAPITAL Financial Summary
Slide 31: Balance Sheet—9/30/2023
CONFIDENTIAL Balance Sheet—9/30/2023 (In Thousands) 9/30/2023 Assets Cash and cash equivalents $181,913 Restricted cash 36,576 Loans, net 4,151,923 Loans, held for sale, at fair value 184,989 Payment protection program loans, net 58,145 Mortgage backed securities, at fair value 33,339 Loans eligible
Slide 32: Balance Sheet—12/31/2022
CONFIDENTIAL Balance Sheet—12/31/2022 (In Thousands) 12/31/2022 Assets Cash and cash equivalents $163,041 Restricted cash 55,927 Loans, net 3,576,310 Loans, held for sale, at fair value 258,377 Payment protection program loans, net 186,985 Mortgage backed securities, at fair value 32,041 Loans eligi
Slide 33: Annual Balance Sheet—FY 2017 to FY 2022
CONFIDENTIAL Annual Balance Sheet—FY 2017 to FY 2022 (In Thousands) 2017 2018 2019 2020 2021 2022 Assets Cash and cash equivalents $63,425 $54,406 $67,928 $138,975 $229,531 $163,041 Restricted cash 11,666 28,921 51,728 47,697 51,569 55,927 Loans, net 1,017,920 1,193,392 1,727,984 1,625,555 2,915,446
Slide 34: Income Statement—TTM
CONFIDENTIAL Income Statement—TTM (In Thousands, except share data) 4Q2022 1Q2023 2Q2023 3Q2023 Interest income $207,068 $217,573 $232,884 $250,590 Interest expense (143,435) (160,394) (172,534) (191,612) Net interest income before (provision for) recovery of loan losses $63,633 $57,179 $60,350 $58,
Slide 35: Annual Income Statement—FY 2017 to FY 2022
CONFIDENTIAL Annual Income Statement—FY 2017 to FY 2022 (In Thousands, except share data) 2017 2018 2019 2020 2021 2022 Interest income $138,305 $169,499 $229,916 $258,636 $403,496 $671,170 Interest expense (74,646) (109,238) (151,880) (175,481) (213,561) (400,774) Net interest income before (provis
Slide 36: Distributable Earnings Reconciliation—TTM
CONFIDENTIAL Distributable Earnings Reconciliation—TTM (In Thousands, except share data) 4Q2022 1Q2023 2Q2023 3Q2023 Net Income $13,682 $36,978 $253,373 $47,179 Reconciling items: Unrealized (gain) loss on MSR $3,167 $6,093 $(8,188) $(2,563) Increase (decrease) in CECL reserve 30,735 (7,321) 19,410
Slide 37: Annual Distributable Earnings Reconciliation—FY 2017 to FY 2022
CONFIDENTIAL Annual Distributable Earnings Reconciliation—FY 2017 to FY 2022 (In Thousands, except share data) 2017 2018 2019 2020 2021 2022 Net Income $45,814 $61,457 $75,056 $46,069 $159,974 $203,163 Reconciling items: Unrealized (gain) loss on mortgage servicing rights (MSRs) 4,000 (4,206) 18,567
Slide 38: TTM Income Statement by Segment
CONFIDENTIAL TTM Income Statement by Segment Trailing Twelve Months Ended September 30, 2023 Government- LMM CRE backed Small Residential Lending and Business Mortgage Corporate– (In Thousands) Acquisitions Lending Banking Other Consolidated COMMENTARY 1 Interest income $816,737 $84,220 $7,158 $– $9
Slide 39: TTM Distributable Earnings Reconciliation by Segment
CONFIDENTIAL TTM Distributable Earnings Reconciliation by Segment Government- Backed Small Residential LMM CRE Business Mortgage (In Thousands) Lending Lending Lending Net Income¹ $240,555 $39,504 $10,514 Core adjustments: Less: Unrealized gain (loss) on mortgage servicing rights (MSRs) – – 1,591 Le
Slide 40: Appendix
~ READY CAPITAL Appendix
Slide 41: Recent Developments
CONFIDENTIAL Recent Developments ◼ Dividend ◼ On December 14, 2023, we declared a dividend of $0.30 per share of common stock and Operating Partnership unit (“OP unit”) with respect to the quarter ending December 31, 2023 ◼ This dividend is payable on January 31, 2024 to stockholders of record as of
Slide 42: LMM Commercial Lending Product Offerings
CONFIDENTIAL LMM Commercial Lending Product Offerings CONSTRUCTION BRIDGE FIXED RATE / CMBS FREDDIE Structured Fixed Product Construction Bridge Bridge-to-Term Bridge-to-Agency CMBS Direct Freddie Mac SBL Rate Multifamily, Multifamily, build-to-rent, industrial, office, Property type Multifamily All
Slide 43: Unencumbered Assets at Select Ready Capital Entities
CONFIDENTIAL Unencumbered Assets at Select Ready Capital Entities Carrying Carrying Weighted Avg (In Millions) value Description Entity value Coupon Consists of first lien Bridge, Construction BRMK Lending, LLC $222.8 First mortgage loans $306.9 11.1% and guaranteed loans Ready Capital Subsidiary RE
Slide 44: Key Entities Structure Chart
CONFIDENTIAL Key Entities Structure Chart External Manager Management Waterfall Asset Ready Capital Agreement Management, LLC Issuer of Existing Series of Notes Corporation (Delaware LLC; (Maryland REIT) external manager) GP Interest Sutherland Partners, LP (Delaware LP; operating partnership) Suthe