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Real Est.Cred Share Discussion Threads
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Real Estate Credit Investments (BUY, Mkt Cap £115m)
7.5% NAV return in 2016
RECI generated a NAV return of 1.1% in December 2016 bringing the NAV total return for 2016 to 7.5%. NAV performance in the month was driven by the loan portfolio and the third consecutive month of positive returns from the bond portfolio.
December was an active month for portfolio activity with the company acquiring £15.4m of a bond secured against a prominent office building in the City of London (8.3% expected yield). £2.0m of bonds were sold above the prior month-end carrying values.
In the loan portfolio, a new loan commitment was signed for a senior loan to fund the development of a site in Woolwich, London into 152 mid-market residential units. A €7.6m repayment on a loan secured on a Berlin shopping centre was received in the month.
2016 has been another positive period for RECI and the 7.5% NAV return has been achieved despite volatility in the underlying real estate market during the year and cash drag in H2 2016 following a large loan repayment in August. Cash as a percentage of NAV at the end of December was 15% and outstanding loan commitments account for the majority of this.
RECI's share price discount to NAV has widened to 3.2% which compares to an average 4.2% premium for peers. This is despite RECI's superior NAV total return track record and sector-leading dividend yield of 6.8% (6.0% for peer group).|
|Very good performance, so rather surprised it is trading well below NAV.|
|Fact sheet shows good performance in December:
# Ex div NAV up 1.7p per share to 163.8p per share, following the 2.7p per share ordinary dividend
# NAV increase driven by both the loan portfolio, which continues to generate strong interest income returns, as well as a third successive month of positive returns on the bond portfolio
# RECI purchased £15.4m of a new bond issuance with a strong cash pay coupon secured against a prominent office building located in the City of London
# RECI sold 2 bonds in December realising an amount of £2.0m, at prices above their values at the previous month end
# As at December month end, RECI’s bond portfolio is £47.3m (28.8% of GAV)
# RECI signed a new loan commitment of £7.3m to provide a senior loan to finance the development of a site in Woolwich, London into 152 mid-market residential units, 120 of which are to be private, with the remainder to be affordable units
# RECI received a substantial repayment of €7.6m on its senior loan secured by a dominant shopping centre in a residential suburb of Berlin, following the successful refinancing of a large part of the debt
# RECI’s total loan commitments are £111.7m (68.1% of GAV)
# As at December month end, RECI has a cash balance of £18m. Cheyne’s pipeline remains strong, and RECI remains well placed to take advantage of opportunities in both the loan and structured credit markets|
|Sudden turnaround in RECI. Up 4p to 160p Bid today. Has there been a New Year tip somewhere perhaps...
Well-timed top-up MRF.|
|Dropped from 165p to 156p in 2 weeks. That's 5.5%. 2.7p of that is the dividend. Any underlying reason or is this just another buying op before xmas?|
|Seems to have been a seller for the last few days , irritatingly paid 1.61 something , what the xd implications are ....
looks like just using pre divi to sell a few .|
|Dropped more today pre-XD tomorrow bizarrely. So bought more at 160.5p. Would be rude not to.|
|Thanks, I carried on trawling and came up with the same , connected with a court ruling . Selftrade never show with associated credit and Kenny explained that as well , trouble is you never know when somethings changed and what you have done previously no longer applies , with the new rules it will become an irrelevant question anyway .|
|HOLTS - there's some discussion on the RECP thread around message 182 (8 Sep 11, Kenny), which I assume also applies to RECI (?). I believe with RECP it boiled down to
|| "From 22 April 2009, to qualify for the 1/9 tax credit you must pass *ONE*
|| of the following tests. These are that:
|| 1) the company paying the dividend is not an offshore fund and you own
|| less than 10% of the issued share capital, or any class of share,
|| 2) ...
(my emphasis). This is assuming you own less than 10% of the share capital ;)|
|Well there have been no tax credits on my div. slips.|
|I know this has been discussed here before , but failed to find it so far .
I am correct in thinking RECI dividends are entitled to the tax credit ?|
|Exactly - so couldn't resist putting cash accrued to work on a 6.65% yield @ 162.45p|
|Juicy divi goes ex on 15th|
my retirement fund
|0.5% November NAV return
RECI's NAV rose 0.5% during November to 164.8p per share with returns in the month primarily driven by the loan portfolio (11.4% weighted average yield and 70.6% weighted average LTV). The bond portfolio generated a return of 0.7% in November.
£0.5m was invested in a bond secured against a German mixed-use portfolio which is expected to return c.10%.
RECI's NAV total return for 2016 to date is 6.5%. Monthly returns should improve further once the remaining cash (c.22% of NAV) has been deployed. RECI trades at a slight discount to NAV (-1.1%) and the shares offer a 6.6% prospective dividend yield (peer group average premium of 2.0% and dividend yield of 6.1%).|
RECI's NAV at 30 September 2016 was 162.8p which represents a NAV total return over the prior six months and 12 months of 3.6% and 7.3% respectively. Post period end, NAV rose a further 0.7% in October.
The drawn loan balance has fallen from £113m at March 2016 to £101m at September 2016 following the repayment of several loans at or above book value. This includes the repayment of a €21.3m whole loan secured against German multi-family properties. The average loan portfolio LTV at 30 September 2016 was 70% with a weighted average yield of 12%.
Two new loan commitments totalling £18m were completed in the period including a loan secured on a mixed-use development in Shoreditch, London. The residential element is entirely pre-sold and the office space is fully pre-let. Further loan transactions are expected to close in the coming months.
The company has generated consistently positive monthly returns in the period to September 2016 despite a volatile underlying market and a significant level of cash on the balance sheet during August and September. Cash as a percentage of NAV was c.22% at the end of the period and we expect an uptick in monthly returns once the remaining cash has been deployed.
RECI trades on a 0.6% premium to NAV and the shares offer a 6.5% prospective dividend yield (peer group average premium of 1.6% and dividend yield of 6.2%).|
|Half yearly's must be due soon|
|End of October fact sheet
NAV increased by 1.1p to 164.0p per share, driven by loan portfolio which continues to generate strong interest income returns|
RECI generated a NAV total return of 0.7% in September 2016. NAV per share at 30 September was 162.9p.
RECI made a new loan commitment on a 40 storey residential tower, 10 storey office and a retail building near Old St roundabout in Shoreditch, London. The residential element is substantially pre-sold and the office is entirely pre-let. The initial funding was for £9.1m.
The company also invested £0.8m in a bond backed by a portfolio of German and Swedish loans and committed a further €0.6m to an existing loan secured by leisure real estate property in the South of France. Four bonds were sold during the month, realising £0.6m.
The company has now made new commitments totaling £23m since the end of March 2016 bringing total funded investments in the loan portfolio to £198m. £133m of this has been realised to date and fully repaid deals have generated an IRR of 17%.
The company has generated a total return of 1.9% in the quarter to 30 September 2016 despite a volatile underlying market and a significant level of cash on the balance sheet during September. Cash as a percentage of NAV is c.22% compared to 35% at the end of August.
The discount to NAV at which the company trades have narrowed c.1% over the month to its current level of -2.1%; this compares to a peer group average of 1.1%. In terms of yield, RECI continues to lead the peer group, currently yielding 6.8%|
|Looks like Friday's volume was nothing more than some large purchases. Perhaps an income fund looking for yield.|
|Kenny, I have thought the same about Cheyne's stance towards RECI; I did look at RECI's fiancials and I saw in the year to 3.16 they paid Cheyne £2.2m in management and performance fees combined and in the year before when the performance fees were £1.4m the total was £3.4m ie even assuming modest performance fees going forward and reduction in the portfolio post RECP maturity there is enough fee income...and they can always do a new equity raise or borrowing.|
|Hope so. Someone suggested options expiring but I would be surprised if there were many options being traded on such a small company.|
|PROBABLY A FAT FINGER AS ITS KNOWN HAS CAUSED THE SPIKE
IT DID A FEW IN FRIDAY AUCTION|
|Cleary someone knows something and we private shareholders are left wondering what is going on whilst others are obviously dealing on inside information.
Here is my guess:
Strangely enough, exactly one year from today the preference class redeem at par. My guess is that the company is about to announce that they will wind up on or shortly after the 16.09.17 when the pref's redeem. It could be that Cheyne feel that RECI is just too small for them to bother about after the £40m of pref's redeem in a year's time - I think Cheyne have over $8bn under management so RECI really is tiny in comparison and probably involves more management time than is worthwhile to Cheyne in terms of their fees from RECI.
If that is the case, the question is what might ordinary shareholders expect to receive in the next 18-24 months or so. Current NAV is 161.8p and there are unrealised potential gains of 12.9p per share on the bond portfolio albeit I do not know how many of those bonds will redeem at par within the next 18-24 months. So those two items total 174.7p. Turning to the loan portfolio, that has a weighted average life of 1.7 years and I do not know if there are any back-end fees upon redemption of some of the loans.
Of course, leading up to the windup and over the life of the windup, ordinary shareholders can expect to continue to receive dividends – currently running at 2.7p per quarter. Also, once they announce a windup, the position for ordinary holders could be improved if they can buy-in some of the pref class at today's sort of prices (RECI currently has over £35m in cash because a number of loans/bonds have recently matured). They could also use some of the cash to buy in ordinary shares, if they slip back, as the company has authority to buy-in up to 14.99% of each class of shares.
The above is pure speculation because, unfortunately, I have no inside information! However, it does seem to rationalise why some people were willing to today pay 174p to buy the ordinary class.
Personally, I hope I am wrong because I would rather have the income for the next 10 plus years than a capital gain. A capital gain is nice but trying to re-invest to replace this level of income is currently near impossible.|