Real Estate Credit Inves... Share Discussion Threads

[cwa1] 07/8/2012 07:49

Morning j

Glad you posted that! Something looked funny but I assumed it was my pre-caffeine brain that was at fault and was going to go back and look at it later ;-)

[jonwig] 07/8/2012 07:44

Yes, the rise on the asset side from £92.92m to £95.05m looks right, and fits the narrative.
It's the liabilities and net calculation they've screwed up somehow.
If no-one spots the error I'll e-mail them.

[skyship] 07/8/2012 07:37

j - haven't looked yet, but 119p - wow, quite a jump...

[jonwig] 07/8/2012 07:32

Is there a (serious) typo in their factsheet for 31/07?

95.05 - 47.66 isn't 44.73 (the net assets).

Also, 0.21 + 0.31 + 47.39 isn't 47.66 (the total liabilities).

It looks as though some numbers have been transposed but (to me) it's not obvious which ones.

We can probably assume the final NAV per share of 119p is correct.

[davebowler] 06/8/2012 13:40

Just spotted this;

FT - July 29, 2012:

UK yields on RMBS sink

Yields on UK residential mortgage-backed securities have been pushed to new lows by investors' increasingly desperate hunt for income.

The Co-operative Bank last week sold £650m of RMBS at a yield of 135 basis points over Libor, a lower yield than any similar deal this year. The offer was three times subscribed, with 46 per cent taken up by asset managers and half by banks.

The most recent comparable deal, from Santander UK, was issued at a yield of 145bp over Libor when it came to market in May.

"Generally when you look at the credit markets, they have been trading tighter on asset-backed securities," said Jonathan Trup, executive director in European securitisation at Morgan Stanley, one of the lead banks.

RMBS are bonds backed by the cash flows from the underlying book of mortgages.

Historically low yields on government bonds mean investors are looking elsewhere for yields on highly rated securities. Asset backed securities are seen similarly as a flight to quality and look very attractive on a relative basis, according to Mr Trup.

Prime UK RMBS is a tried and tested asset class, and this particular issue has a very simple structure with strong collateral, he said.

The Co-op Bank in particular, he explained, has issued RMBS with sufficient regularity and volume that the programme is recognised in the secondary markets and has liquidity.

As well as the search for yield, demand is being driven by expectations of low supply in the future, as financial institutions deleverage and do not want to take on extra debt. In addition, the UK government programme "Funding for Lending" is likely to increase demand for this type of asset.

While this particular deal was in sterling, there is equally strong demand for UK RMBS in other currencies, Mr Trup said, suggesting the demand is for the underlying assets, not particularly for the haven of the UK currency.

[skyship] 04/8/2012 14:34

nerja - sure, you pay stamp duty of 0.5% on REITs, but not on Guernsey registered RECI/RECP...also no 10% with-holding tax on divis...

[nerja] 04/8/2012 10:36

Can somebody help please, bought some of these yesterday and RECP noticed no stamp duty on either, is that a mistake or is there none on reits, TIA.

[skyship] 03/8/2012 17:44

Great price Tilts - obviously you standing on the bid.

96p provides a current yield of 8.33% and a GRY of 8.8%...

[tiltonboy] 03/8/2012 17:36

I picked up a few RECP at 96p today.

[skyship] 03/8/2012 17:02

No - certainly not - playing the upside momentum.

I meant only hold RECP; but no RECI at the moment. Added to my RECP today.

[kenny] 03/8/2012 15:33

Skyship - do you mean you have sold all your other holdings?

[skyship] 03/8/2012 12:28

dave - thnx for that - makes really good reading.

At the moment I only hold RECP. May be time to extend my exposure...

[davebowler] 03/8/2012 10:57

Investec;


Real Estate Credit Investments (RECI) Quality, value and further opportunities to come

We saw management yesterday and were once again impressed with the quality of the portfolio, the value of the company (a double discount opportunity) and the potential for further growth due to the dislocation of real estate loan markets and absence of bank lending.

¢ As its name suggests RECI invests in real estate debt, secured on commercial and residential properties. Much of the paper it invests in is readily tradable in secondary markets and the portfolio is marked to market which gives the NAV real credibility.

¢ RECI can invest in across Europe, however the manager focuses particularly on UK and German high quality and prime real estate assets. As at 15 May 2012 66.9% of the portfolio was in UK property backed loans, 28.1% was in German paper and 3.5% was in the Netherlands. The UK property tends to be high quality and prime London / South East.

¢ The quality of the portfolio is demonstrated by recent realisations which have seen RECI receive at par payments on underlying property sales and refinancings, such as the Four Seasons Healthcare care homes which were bought by Terra Firma in May. RECI held Titan 2006 Four Seasons bonds, which were the largest single position and cash from the repayment at par is expected in from these bonds in the next month.

¢ A key member of RECI's investment management team at Cheyne Capital is a RICS qualified valuer. Emphasis is put on doing their own valuation work to ensure real LTVs within the portfolio are not stretched. The quality of the paper and the underlying property assets and tenant base is therefore of great importance. Weighted average LTV of underlying property assets at 15 July 2012 was 60.8% which is by no means stretched. Furthermore as the debt that RECI holds is secured on the underlying physical property, it stands ahead of the equity.

¢ 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 with the expectation that it will get par back. As at 15 July 2012, the weighted average purchase price of the portfolio was a 30% discount to par. The weighted average marked to market price was a 26% discount so there is significant headroom for capital growth back to par, as and when the underlying portfolio matures or refinances. The weighted average effective yield on the portfolio is an attractive 12.8%, reflecting the significant discounts to par.

¢ A double discount opportunity: RECI shares themselves offer a further discount narrowing opportunity as they trade on a hefty 26.3% discount to the already discounted NAV – hence the double discount opportunity.

¢ 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 8.15% dividend yield based on current 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.

¢ RECI's share price has not reflected the positive NAV growth of 12.0% year to date, the high dividend yield or the strength of the portfolio. The shares are up just 2.5% year to date and trade at a 26.3% discount to NAV. As such we view the shares as highly attractive.

¢ 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 based on current price offer an effective yield of 8.25% and naturally rank above the ordinary shares in the company's capital structure.

[cwa1] 30/7/2012 13:33

Modest uptick so far today. Been flatlining for long enough now....

[skyship] 21/7/2012 17:50

Thnx again DB...

[rogerbridge] 20/7/2012 16:57

Thanks davebowler. Stronger performance than I thought.

[davebowler] 20/7/2012 10:15

Investec;

Real Estate Credit Investments (RECI) Factsheet published; NAV as at 15 July was 112p/share

¢ The manager comments on strong mark to market bond portfolio performance with gains of 1.13% since 1 July.

¢ The fund made sales worth £0.2m at an average sale price of 1.04 in the first half of the month. No new purchases were made.

¢ The investment portfolio is now valued at £87.5m. Cash and equivalents accounts for £1.5m and this will increase later this month as proceeds from the repayment at par of the Titian Four Seasons bonds are received.

¢ The portfolio's weighted average purchase price was 0.70 of par and the market price of the portfolio was 0.74.

Investec Insight:

¢ A good start to July continues a solid year of growth for RECI, with NAV up 12% in addition to having paid out 2.56p/share in dividends.

¢ The repayment at par on the Titian Four Seasons bonds has been an obvious contributor as it was RECI's largest position at the time Four Seasons was acquired by Terra Firma. The further capital upside potentially available for NAV is demonstrated by the 26% discount to par at which RECI continues to carries the portfolio. Interestingly, RECI was able to sell a small number of assets during the month at premiums to par.

¢ Earlier this year RECI introduced a new dividend policy effective from the quarter ended 31 March 2012. RECI is now paying out annualised 6% of NAV on a quarterly basis. The first dividend of 1.7p/share under this new policy went ex on 4 July and is payable on 27 July. At current share price this equates to an attractive 8.0% dividend yield.

¢ The share price has not reflected the positive NAV growth, the dividend yield or the strength of the portfolio. They are up just 4.97% year to date and trade at a 24.5% discount to NAV. As such we view the shares as attractive.

[zastas] 18/7/2012 15:35

Good news from Portugal. IMF happy with progress. Portugal able to borrow for less than Spain now. Should be good for that large Portuguese ERII holding of very mature and low-LTV mortgages.

[davebowler] 18/7/2012 15:18

Comment from Kenny on GLIF thread;

Kenny
18 Jul'12 - 15:04 - 386 of 386

Today there is very exciting news from the Investors Chronicle! They have issued a buy tip on an investment trust that invests in high yield BB and B bonds and is a high yielding share - so all similar to GLIF.

And the high yield is, drum roll, 5.1%?!?!?

The company is City Merchants High Yield Trust, trading on a discount to NAV of about 3%. I am not familiar with that company so have no comment either way. I would much rather be invested in GLIF at about double the yield and with no European loan investments albeit at or about current NAV.

I really do wonder what sort of "back scratching" takes place for such "tip" articles to be printed - obviously not enough that the author could even state the correct EPIC in the article; which in itself makes on wonder what actual research these "expert tipsters" undertake.

[flying pig] 11/7/2012 23:17

Value and buying opportunity - but may wait a tad longer to increase holding.

[hieronymous1] 11/7/2012 18:01

Most market movements in most stocks at the moment are over-reactions to news or even speculation. In thinly traded stocks movements are triggered by the smallest buying or selling. Generally speaking I am simply waiting for the markets to regain their nerves.

[skyship] 11/7/2012 16:29

Seems counter-intuitive, but RECI are certainly a weak market at the moment and could be heading back to the 79p/80p level:

[davebowler] 21/6/2012 10:47

Real Estate Credit Investments (RECI / BUY / 86.5p) – 15 June NAV / share 112p

Highlights:

n NAV per share at 15 June 2012 increased by one pence to 112 pence per share.

n The manager reports that bond performance was stable in June (the fair value change in the bond portfolio was +0.02%), despite difficult market conditions and the one pence gain in NAV is therefore likely to reflect interest on the portfolio of direct UK property loans.

n During June the fund was a net seller of bonds, having rotated out of high cash price bonds into good quality lower cash price bonds, leaving the cash balance at £4.59m (equivalent to 10.6% of NAV).



Liberum View:

n We expect that the resilient NAV performance will surprise investors given ongoing market volatility and serves to highlight the attraction of RECI's shares, which trade on a 22.8% discount and offer a very attractive 7.8% dividend yield.

[cerrito] 17/6/2012 11:28

erii is the ticker