Share Name Share Symbol Market Type Share ISIN Share Description
Real Est.Cred LSE:RECI London Ordinary Share GB00B0HW5366 ORD NPV
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.125p +0.08% 162.50p 162.00p 163.00p 163.00p 161.75p 161.75p 21,566 16:35:25
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
General Financial 0.0 8.5 12.0 13.5 118.33

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Date Time Title Posts
05/10/201610:23Real Estate Credit Investments1,229

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Real Est.Cred Daily Update: Real Est.Cred is listed in the General Financial sector of the London Stock Exchange with ticker RECI. The last closing price for Real Est.Cred was 162.38p.
Real Est.Cred has a 4 week average price of 163.78p and a 12 week average price of 161.54p.
The 1 year high share price is 174p while the 1 year low share price is currently 140.25p.
There are currently 72,818,496 shares in issue and the average daily traded volume is 14,500 shares. The market capitalisation of Real Est.Cred is £118,330,056.
grahamburn: Why buy this close to the ex-dividend date? Unless the share price rises by more than the two dividend amounts, all that you will achieve is getting some of your own money back, whilst losing some "capital" value. Add to that the uncertainty surrounding the next few days and you might get a double whammy. Personally, I'm sitting on my hands until after the ex-dividend date when I might get a much better price to add to my holdings. I might not, of course, but at least any downside risk is covered!
deadly: Results this Friday. Will they give a boost to the depressed share price? Hope so.
kenny: MRF- I don't understand your comment about limited EU QE depressing the share price of RECI. I would have thought that lower interest rates for longer will mean that RECI is a good yield investment for people looking for a decent income. Please explain as I am perhaps overlooking something?
davebowler: Investec; NAV: NAV has risen from 157.5pps as at 31/12/14 to 162.4pps as at the end of January, a gain of 3.11% over the month. ¢ Underlying: The bond portfolio saw 5.56% gains during the month. Significantly, a MTM increase in the value of the controlling interest in the CMBS bonds owned in EURO 27X E issue (City Point Tower) which were a strategic purchase. These had been marked at 10p/£1, and have been marked up to 70p/£1 as a result of Brookfields recent cash purchase of a subordinated B Note, thus pointing to a par recovery for this Bond in time. ¢ Loan Portfolio: The weighted average yield is currently 13.5% and the LTV sits at 66.5%, which is attractive relative to what has been achieved in other investment vehicles in the Mezzanine space. Investec insight ¢ The fund has been our favoured pick in the mezzanine space for some time, having repeatedly pointed out the clear discrepancy in premium between RECI and Starwood European Real Estate Finance (SWEF), despite better performance. This differential has since narrowed, with both funds trading roughly in line after RECI’s share price rally of 7.2% year to date. This said, we still think there is value in RECI’s bond portfolio and the active management under Graham Emmett, backed by the wider Cheyne team, has delivered significant value since he took over management of the fund.
davebowler: Liberum RECI's NAV total return was +1.4% in September after adjusting for the dividend of 2.7p paid in the month. NAV per share at Sep-14 NAV was 158.7p. The bond portfolio delivered a 2.52% return in the month, with no purchases made, but £8.4m of disposals at an average sale price of 0.93. The average purchase price of these bonds was 0.62. A further drawdown of £2.7m of RECI's £6.1m commitment (highlighted in the August factsheet) to a new loan investment in UK distribution assets was made. We calculate £1.2m remains to be drawndown from this commitment. Secondly, RECI funded a €9m mezzanine loan towards the acquisition of a major German residential development company. Liberum view The number of loans in RECI's portfolio now sits at 14, with total loan commitments of £92.6m. Drawn loans to date stand at £69.9m, or 50% of the investment portfolio. The weighted average yield of the portfolio is 13.2%. NAV total return calendar YTD is +9.8% and RECI now trades on a 4.9% premium to the Sep-14 NAV, versus a sector average of 5.5%. September was a particularly active month for the company, and demonstrated RECI's unique proposition where shareholders capital can be transferred out of bonds and into loans on a relative value basis. Share price total return remains strong (+14.2% YTD), and RECI remains our top sector pick. Real Estate Debt
kenny: Erstwhile2 – I appreciate, from your previous postings, you are not a fan of RECI. You make a valid point about what happens if the company's bonds "crash" in value. I guess the answer depends on whether you are an investor or not. A negative movement, a correction, in bond prices could lead to RECI's share price going down. However, because RECI's historic bond portfolio is on a 21.3% discount to par, I would question how far the bonds will fall. Alternatively, let us assume a more serious "crash" occurs then I agree that RECI's share price will go down but so will all other shares. Unless one is an expert in market timing and happy to sit in cash for long periods, I guess one has to expect market crashes from time to time as a part of investing. Some experts say that over a lifetime of investing one should expect 3 market crashes (than means I have had my full quota!). In either of the above scenarios, bear in mind that RECI still maintains EPS of 17p per annum so the dividends of 2.2p per quarter are secure. Also, what about the resulting opportunity for the company to invest buying cheaper bonds or are you anticipating never-ending gloom? Also, bear in mind RECI only buy bonds/loans they anticipate will eventually redeem at par; having made their own valuation of the underlying property. In relation to CMBS and RMBS pricing, I found it useful to listen to the company's recent results presentation (available on the company's website). That highlights that although UK/European MBS has re-priced upwards since 2008, it has not done so nearly as much as high yield and other bonds. My research confirms this – a lot of high yield has re-priced to above par albeit for MBS it is a lot more difficult to research market pricing. It is for every investor in RECI to judge whether that provides an extra layer of protection in a crash type of event. I am comforted by the fact that high yield is above par - and currently going down from there - whereas RECI's bonds, whatever their future movement, are not starting from a position of being valued at par or above. Your posting also hints at an important issue which I would describe as "what is your plan in the event of a market crash". I have learn it is vital to have a plan, at all times, for a market crash even though they seem impossible to predict. My plan in a market crash is to sit it out with RECI and my other dividend paying investments and add to them when new funds are available. I am certainly not clever enough to use market timing to avoid a crash – as I have demonstrated by being "caught" in the 1987 crash, the 2000/01 crash and the 2007/08 crash. Experience (which has been expensive) has taught me not to use gearing in making investments and not to panic and sell. What is your plan for a market crash? I have no idea when the next market crash will occur, but if you are convinced a market crash will occur in the next 6-12 months, how are you positioning your portfolio?
kenny: Yieldsearch – everything you say seems soundly based and logical. Most journalists do not seem to understand RECI – it is too much hard work! My current view is that RECI will wind up because it is a very small fund compared to the other funds Cheyne are managing. There have also launched at least 3 new funds in the last 18 months which are all now a lot bigger. I do think that eventually RECI will move to trade much closer or above its NAV. These things sometimes take a lot longer than would appear logical – especially when compared to new funds, which seem to have a big marketing machine to draw in new investors e.g. the investors chronicle article. If RECI keeps adding a penny or three to its NAV every month, then it will eventually be noticed and, perhaps, all of a sudden it will move up. You heard it here first!! Another important point to bear in mind is that RECI has a pool of potential pull to par money of 64p per share – new entrants do not have this potential. That combined with the fact Cheyne seem to be able to source higher yield investments should ensure that, over the long term, RECI out performs the newer funds. Perhaps the RECI share price has to first consolidate its move up over the last 9 months, with all short termers being flushed out, before it makes its next move up. The US MBS market and US based MBS funds appear to have closed the gap to a much greater extent, so perhaps we will eventually follow the US market.
kenny: This is from Investec from 8 February and has not previously been posted: 08 February 2012 "Real Estate Credit Investments (RECI) Positive IMS" • Most gains stemmed from the bond portfolio thanks to spread compression as credit markets tightened. Many bonds in the portfolio have also benefited from positive re-rating having de-risked following announced re-financings. Among the strongest performers was the Eloc 26 bond which is secured against commercial properties in London. The bond's price rose substantially following the sale of the Devonshire Square office building located in the City of London and the subsequent de-risking. • In the quarter ending 31 December 2012, RECI made £28.1 million of new investments at an average yield of 12.6%. • RECI secured an allocation of the highly sought-after new bond issue from Annington Finance. This bond has strong defensive credit characteristics (62% Loan to Value and a portfolio leased to the UK government on a 184 year lease) and carries a 13% coupon. • The bond portfolio had nominal value of £107.4 million and a market value of £75.5 million as at 31 December 2012 • RECI's loan portfolio accounted for 20% of the investment portfolio as at 31 December 2012 following £15.7 million of investment during the quarter. The Company added two loan investments in the quarter ending 31 December. The first was a four-year term loan backed by a London office property with a 66% LTV and the second loan was backed by a London hotel property with a loan to value of 68%. The loans carry an average interest yield of 13.5%. • The Board has declared a dividend of 2.0p per share in respect of RECI Ordinary Shares for the quarter ended 31 December 2012 Investec Insight: RECI enjoyed another strong quarter in Q3 of its financial year and while the share price started to perform from the end of September, having been relatively flat during the first nine months of 2012, there is still significant value in the shares looking forward. The manager has been actively booking profits from some of the bond portfolio following repayments and opportunistic secondary market sales, redeploying proceeds in attractive investments across both bonds and loans. The risk profiles of these high yielding opportunities look particularly attractive and we note the UK government backed income stream on the Annington Finance bond issue in which RECI participated. The yields on the direct loans which RECI has extended are also attractive on a risk reward metric. We expect the loan portfolio to grow as the managers continue to find opportunities to lend on well collateralised properties. While secondary bond markets have seen spreads tighten, which has benefitted RECI during the quarter due to the mark to market valuation policy, there is further capital upside available for RECI's bond portfolio as its bond portfolio pulls to par. Currently the bond portfolio is marked at a 29.7% discount to nominal par value. The manager invests in property backed bonds with the expectation that RECI will get par back as and when the bonds mature. A key member of RECI's investment management team at Cheyne Capital is a RICS qualified valuer and emphasis is put on doing their own valuation work to ensure real LTVs within the portfolio are not stretched and par may be achieved. As such RECI shares offer investors a double discount opportunity (the shares themselves trade at a 12% discount to 31 January 2013 NAV) as well as offering a highly attractive dividend yield of 6.8%, based on the company's policy of paying 6% of NAV per annum. In the recently released January factsheet the manager commented that it is protecting NAV gains with a €40 million short position on the Itraxx Main and will look to add further hedges in the near term. This looks sensible considering the rapid increase in bond market prices. We like the real estate backed debt space and continue to consider RECI shares as highly attractive. RECI provides a differentiated investment approach to recently launched pure real estate loan funds as the managers can opportunistically buy and sell property backed bonds in the secondary markets and apply portfolio protection through hedges, as well as providing direct real estate backed loans.
davebowler: Real Estate Credit Investments (RECI) Factsheet published; NAV at 15 September 2012 was 128p/share (+4.1% in September to date) ¢ NAV increase driven largely by broad fair value gains across the bond portfolio. No material bond repayments in the period. Strong fair value gains recorded in Germany multi‐family and UK RMBS bonds ¢ RECI purchased a large number of senior bonds in early September prior to the policy announcements from the ECB and Federal Reserve in expectation of price increases. RECI purchased £6.2m of bonds during the month at an average purchase price of 0.79. ¢ The investment portfolio is now valued at £90.2m, with a further £8.0m in cash. Cash balances position the Company to take advantage of a sell‐off in the bond markets or to provide loan finance. ¢ The portfolio's weighted average purchase price was 0.69 of par and the market price of the portfolio was 0.76. Investec Insight: ¢ Very strong performance from RECI month to date. RECI's share price has not reflected the positive NAV growth of 28.0% year to date, the high dividend yield or the strength of the portfolio. The shares are up just 13.0% year to date and trade at a 29.0% discount to NAV. We view the shares as attractive and would point to the effective double discount opportunity as not only do the shares trade at a wide discount but NAV represents a discount to underlying par values. ¢ The NAV is at a discount to true par value of underlying debt: As RECI's NAV is based on mark to market valuations of its paper (which is readily tradable and traded on secondary debt markets) the NAV offers a discount opportunity in itself. RECI buys loans and bonds in the market at significant discounts to par, as demonstrated by the average purchase price of the portfolio of 69% of par. Bonds are always purchased with the expectation that RECI will get par back as and when the bonds mature. The weighted average marked to market price of the portfolio at the end of July was a 24% discount to par so there is still significant headroom for capital growth back to par. The effective gross yield to maturity of the portfolio is 11.3% with higher capital upside should bonds/loans repay early. ¢ The portfolio has been strongly cash positive and we expect this to continue, ensuring dividends on both the preference shares (ticker: RECP) and the ordinary shares remains covered. Earlier this year the ordinary shares introduced a dividend policy, paying 6% of NAV annually, payable quarterly. This represents an 8.4% dividend yield based on current NAV and share price. ¢ The shadow banking opportunity: We continue to like the loans and specialist debt space and view the real estate backed debt market as particularly attractive as opportunities to pick up quality paper at good value in secondary markets persist. Primary loans are also offering greater yields as well as better terms at lower LTVs, due to diminished demand from traditional market participants such as banks. We think this is an ongoing theme as there is little visibility that banks will resume lending in size for the foreseeable future. ¢ For investors less interested in capital growth and looking for a lower risk, higher income play on real estate backed debt, RECI's Preference shares (RECP) may be more attractive – they pay an 8% coupon and naturally rank above the ordinary shares in the company's capital structure. ¢ We currently prefer real estate debt to real estate equity due to the more senior position in the capital structure and high and consistent return profile of loans. We would note the weighted average current LTV of the underlying portfolio is 57.5% which is by no means stretched.
kenny: I think the positive attributes of RECI have been rightly described on this bulletin board as being a) the discount to NAV; at 88p RECI is trading at a discount of 26% to its last announced NAV of 119p, and b) the yield on the shares which is likely to be about 8% in the near future based on 119p. However, I think there is now a new and important factor; which might explain why an investment fund purchased 5m shares at 86p yesterday (12.5% of the share capital; which is a big investment in a small company like RECI). If Mario Draghi's plan comes to fruition and government bond prices improve by virtue of massive intervention then, I believe, subsequently the price of the type of property backed bonds that RECI invests in will also recover. In short, the hunt for yield will continue and likely expand into bonds backed by mortgages. Such high yields can only adjust lower in the market if and when Mario Draghi's plan is implemented – a case cannot be made that yields will increase. The effect upon RECI could be material. The latest valuation shows that the market price of the bonds is an average of 60.4% of face value. If over coming months the market price improves to, say, 70% of face value, I compute that adds 27p per share to NAV and takes it up to 146p per share. If we speculate further that the market price in fact moves to 75% of face value that would add 40p per share to NAV and take it up to 159p per share. This latter scenario may prove too optimistic; however, if we are facing an extended number of years during which interest rates are minimal, then mortgage backed securities are certainly going to improve in value - so longer term they could get there. Therefore, my view is that RECI should not be trading at the "double" discount its share price currently trades at. First, there is a discount in the market for the price of the bonds RECI invests in (40%) and, second there is a discount on the 119p that produces - of 26% down to 88p. It appears to me that the share price should be nearer to 119p because there is at least "hope" that the discount in its bond investments will narrow. I am not going to predict what RECI's share price should be on a "hope value" basis as I am useless at predicting share prices and in the short term the share price, as well as NAV, can fall as well as fall further!! Longer term I am fairly certain that mortgage backed securities will improve in value. What is the "insurance" should Mario Draghi's plan not be implemented or be watered down. It is a fact that interest rates are going to remain low for many years, perhaps the next decade, so the hunt for yield is going to continue for some time. Also, if Mario Draghi's plan is not implemented in the near future, the common view seems to be it is almost certain that eventually a plan will be implemented to buy government bonds in order to reduce yield and stabilize that market. And if nothing at all happens, the bonds RECI owns will eventually mature at par with very few defaulting. I started topping up my holding in RECI the day before the investment fund bought 5m shares and would speculate they would not take such a large and difficult to trade stake unless they were convinced of the longer term outlook for RECI.
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