Real Estate Credit Inves... Share Discussion Threads

[skyship] 23/4/2013 18:40

H - thnx for that. Of course I understand that for a shorter a move up would be a risk to be assessed. But for an investor a share price has both downside risk and upside potential.

Liberum should be talking the language of investment - not statistics.

[hieronymous1] 23/4/2013 16:02

Statisticians tend to talk of the possibility of a forecast being wrong in either direction in terms of risk percentage. It is correct usage even though the majority of the population understand risk as applying only to an adverse event.

People who use words well should not help debase the language further. An example might be the popular belief that defenestrate means castrate. In fact it refers to puritans smashing church windows that contained pictures - "Thou shalt not make unto thee any graven image". Exodus 20:4

NB I make a lexicographical point here, not a religious one :-)

[skyship] 23/4/2013 13:51

"There is considerable upside risk to our numbers from further credit spread tightening or early repayment of bonds."

Upside risk!!

Surely they should be saying Upside potential...

Semantics really - but hope they read this and amend next time.

[davebowler] 23/4/2013 09:19

Liberum;
Highlights:

n NAV of 149p: NAV remained unchanged at 149p as bond m-t-m gains (+0.64%) were offset by losses in the €10m short position in the Itraxx Main Index.

n New loan investment: RECI has completed a new €5.8m loan investment backed by German multi-family properties with an expected return of 15%+.

n Titan 2006-2 CMBS repayment expected: Two underlying loans in the Titan 2006-2 CMBS repaid in Q1 and 46% of the outstanding debt will be repaid at the next interest payment date.

n Portfolio activity: £0.39m of acquisitions at an average price of 0.36. £0.85m of sales at an average price of 0.97 (29% uplift over acquisition price).

Liberum View:

n Management had previously indicated the a further loan investment was expected in the short term. Loans now account for 23% of GAV and are forecast to deliver a weighted average yield of c14%.

n RECI is trading on a 3.0% discount to NAV with a prospective dividend yield of 6.2%. The discount looks attractive when compared to when compared to listed real estate debt funds (average premium of 2.1%) given RECI's NAV performance (+59% NAV TR since January 2012) and the manager's ability to source attractive new investments.

n RECI is our top pick in the listed debt space and our conservative price target of 157p implies 15% return over the next 12 months. There is considerable upside risk to our numbers from further credit spread tightening or early repayment of bonds.

[kenny] 22/4/2013 17:15

Thanks chaps. It is a small purchase but amazing they were able to pick up some bonds at 36p in the pound. I know the managers are really good at assessing mortgage debt/the underlying asset so let's hope they prove correct on that one albeit, in either event, it is only a £100k investment.

Onwards and upwards!

[skyship] 22/4/2013 11:53

Manager Commentary
• Two loans underlying the Titan 2006-2 CMBS transaction repaid in Q1. 46% of the debt outstanding will be repaid as at the next interest payment date.
• Bond mark to market gains partially offset by mark to market loss in the outstanding €10 million short position in the Itraxx Main.
• The Company has completed a €5.8 million loan backed by German multi-family properties with an expected return in excess of 15%.

Figures for RECI: 31 March 2013 & 15 April 2013

P/F Monthly RECI Core NAV (in £m) 31/03/13 15/04/13
Investment Portfolio............ 95.4.... 95.7
Cash and Cash Equivalents....... .8.5.... 9.2
Derivative Assets............... .1.6.... 0.9
Other Assets.................... -....... -
................................ 105.5... 105.8

Other Liabilities............... (0.9)... (1.0)
Preference Dividend............. -....... (0.1)
Ordinary Dividend............... -....... -
Preference Share Liability...... (45.0).. (45.0)
................................ (45.9).. (46.1)

Net Assets (estimate)........... 59.6.... 59.7
Shares outstanding.............. 39,966,985 39,966,985
Net Assets per Ordinary Share (est) 1.49.... 1.49

[gary1966] 22/4/2013 11:53

No change but nice new small loan.

Manager Commentary
• Two loans underlying the Titan 2006-2 CMBS transaction repaid in Q1. 46% of the debt outstanding will be repaid as at the next interest payment date.
• Bond mark to market gains partially offset by mark to market loss in the outstanding €10 million short position in the Itraxx Main.
• The Company has completed a €5.8 million loan backed by German multi-family properties with an expected return in excess of 15%.

Figures for RECI Core stated in GBP for 31 March 2013 & 15 April 2013

Pro Forma Monthly RECI Core NAV1 (in £ million) 31/03/20138 15/04/20138
Investment Portfolio2 95.4 95.7
Cash and Cash Equivalents 8.5 9.2
Derivative Assets 1.6 0.9
Other Assets 3,4 - -
105.5 105.8

Other Liabilities5 (0.9) (1.0)
Preference Dividend6 - (0.1)
Ordinary Dividend7 - -
Preference Share Liability (45.0) (45.0)
(45.9) (46.1)

Net Assets (estimate) 59.6 59.7
Shares outstanding 39,966,985 39,966,985
Net Assets per Ordinary Share (estimate) 1.49 1.49

[kenny] 18/4/2013 11:52

The big buyer continues to take out all the sellers. Interesting!

[davebowler] 15/4/2013 16:52

Info on LBOW - similar to this -

[pillion] 09/4/2013 11:01

Good post Kenny !!

[kenny] 09/4/2013 10:25

09 April 2013
"Real Estate Credit Investments (RECI / BUY / 144p) – March NAV unchanged"

•NAV broadly unchanged: NAV per share at the end of March 2013 was149p (15 March 2013: 149p)
•6.2m of sales: RECI completed sales of £6.2m in the month at an average price of 0.93 (vs. average acquisition price of 0.76 – 22% uplift on purchase price).
•Hedging gain: The Itraxx hedge produced a gain of £0.18m in the period and RECI has reduced its hedging position following the Cyprus bail-out resolution.

Liberum View:


RECI has crystallised a gain of 22% on acquisition on the bonds disposed in the period. We expect the majority of the £8.5m of cash to be recycled into loans in the near future.

RECI is trading on a 3.4% discount to NAV with a prospective dividend yield of 6.2%. The discount looks anomalous when compared to listed real estate debt funds (average premium of 1.8%) given RECI's NAV performance (+59% NAV TR since January 2012) and the attractive pipeline of new investments.

RECI is our top pick in the listed debt space and our conservative price target of 157p implies 15% return over the next 12 months. There is considerable upside risk to our numbers from further credit spread tightening or early repayment of bonds.

[skyship] 08/4/2013 11:14

Manager Commentary
• NAV supported by bond mark to market gains as well as interest from the loan portfolio
• RECI has been a net seller in the month, with total sales of £6.2 million. Sales were made ahead of expected investments in April
• Itraxx hedge posted a gain of £176k. The Company has reduced its hedging exposures following the resolution of the Cyprus bail-out

Figures for RECI for 15 March 2013 & 31 March 2013

P/f Monthly Core NAV (in £m) 15/03/13 31/03/13
Investment Portfolio............ 101.7... 95.4
Cash and Cash Equivalents....... 4.8..... 8.5
Derivative Assets............... 0.4..... 1.6
Other Assets.................... -....... -
................................ 106.9... 105.5

Other Liabilities............... (0.8)... (0.9)
Preference Dividend............. (0.7)... -
Ordinary Dividend................(0.8)... -
Preference Share Liability..... (45.0).. (45.0)
............................... (47.4) (45.9)

Net Assets (estimate)........... 59.5.... 59.6
Shares outstanding.............. 39,966,985 39,966,985
Net Assets per Ordinary Share (est) 1.49.... 1.49

[kenny] 04/4/2013 23:11

I managed to find the full version of the comment by John Dance, investment manager at Vertem Asset Management:

[kenny] 04/4/2013 16:58

I will take it as encouragement to celebrate our good fortune rather than the name of the analyst who recommended buying RECI!!

[davebowler] 04/4/2013 16:53

Kenny 'Whilst credit spreads have tightened at a sovereign level in Europe many, arguably more secure, commercial and residential mortgage backed securities remain dislocated in terms of their valuation, return and credit profile' (Dance)

........Dance -is that an instruction for us lucky investors??

[kenny] 04/4/2013 11:52

RECI tipped as a buy yesterday on citywire here:

[skyship] 04/4/2013 09:06

For pure yield RECP is the better bet.

At 106.75p the current yield = 7.49%; whereas the Gross Redemption Yield = 6.54%.

[kenny] 03/4/2013 20:39

Personally, I am waiting until the new tax year to buy more in my family's ISA's - so I welcome any selling in the interim. Even looking at RECI purely as a yield investment, a solid 6.1% yield is valuable and not so easy to find in this market where yield is being chased. Future capital growth is thrown in for free!

[gary1966] 28/3/2013 16:04

Possibility that this has something to do with the recent price weakness or is it just down to tax planning at this time of year.

[holts] 25/3/2013 16:14

May I suggest , and you may get the usual stonewall , contacting the company , I have always found them helpful , they may consider this strays into giving advice territory , not sure it does , but it has to be worth the question .

[badtime] 25/3/2013 10:25

personally i've welcomed the debate from different angles...its been a tad one sided before this recent discussion. imho

[owenski] 24/3/2013 09:01

Kenny, I've gained a lot from reading your notes here, thanks for your hard work :-)

[kenny] 24/3/2013 00:10

If you are unsure, I think you need to re-read the prospectus and other documents. Your statements are sweeping generalisations not based on facts;

1.The cover would increase not decrease because the test is on gross assets.
2.RECP have no votes or say about a new issue of prefs.
3.ERII would have a vote if an amendment was sought to the cover test.
4.People prefer to buy new issues irrespective of a higher yield available elsewhere - £150m subscribed for TFIF despite the fact RECI offers a higher yield and a double discount on net asset value.

For my part, I am going to bring my input on this particular topic to a halt as, with due respect, it has become totally sterile because you have not bothered to research the facts. I too could "shoot from the hip" but it makes for rather poor investment decisions. Good luck!