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CAPITAL STRUCTURE
 3 Months Ended
Mar. 31, 2014
CAPITAL STRUCTURE  
CAPITAL STRUCTURE

13.                     CAPITAL STRUCTURE

 

Please refer to the description of the IPO and the Reorganization Transactions as described in Note 1- Organization and Operations for further information regarding the current capital structure of Ladder Capital Corp.

 

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. Accordingly, the Continuing LCFH Limited Partners, as holders of Class B common stock, collectively have a number of votes in Ladder Capital Corp that is equal to the aggregate number of LP Units that they hold. 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

 

Pursuant to the LLLP Agreement, the Continuing LCFH Limited Partners may from time to time, beginning, 181 days after February 11, 2014 (subject to the conditions therein), exchange an equal number of LP Units and Class B common stock for shares of Class A common stock on a one-for-one basis, subject to equitable adjustments for stock splits, stock dividends and reclassifications.

 

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.  Immediately following the Reorganization Transactions, with the exception of the discussions regarding quarterly tax distributions, the provisions set forth below no longer apply.

 

Pursuant to the Limited Liability Limited Partnership Agreement (“LLLP Agreement”), the Company’s general partner has delegated all management powers to the Company’s Board of Directors, who, pursuant to the same LLLP Agreement, are appointed by certain significant investors and the Chief Executive Officer (“CEO”) of the Company.

 

Cash Distributions to 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 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 Company’s LLLP agreement) for each partner as the product of (x) the 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 federal, state and local income tax rate applicable to an individual residing in New York, NY, taking into account for federal income tax purposes, the deductibility of state and local taxes.

 

Allocation of Income and Loss

 

Income and losses 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.

 

Changes in Accumulated Other Comprehensive Income

 

 

 

Unrealized gain (loss) on
real estate securities,
available for sale

 

 

 

 

 

December 31, 2013

 

$

12,133,807

 

Other comprehensive income of predecessor

 

18,605,177

 

Amounts reclassified from accumulated other comprehensive income of predecessor(1)

 

(1,597,237

)

February 10, 2014

 

29,141,747

 

Less: Accumulated other comprehensive income of predecessor

 

(29,141,747

)

February 11, 2014

 

—

 

Other comprehensive income before reclassifications

 

(3,001,274

)

Amounts reclassified from accumulated other comprehensive income(1)

 

(211,578

)

Net current-period other comprehensive income

 

(3,212,852

)

Net current-period other comprehensive income attributable to noncontrolling interest in operating partnership

 

(1,573,048

)

Net current-period other comprehensive income attributable to Class A common shareholders

 

$

(1,639,804

)

 

 

(1) Amount of change reflects change in unrealized (gains)/losses related to investments in real estate securities, net of reclassification adjustments, and is included in gain on securities on the combined consolidated statements of income.