Real Estate Credit Inves... Share Discussion Threads

[skyship] 07/5/2013 09:48

May also be further upside from the Annington bond:

[davebowler] 07/5/2013 09:13

Investec;
The bond portfolio represents 76% of the investment portfolio and has been delivering consistent portfolio performance through regular coupon payments as well as the spread tightening resulting in capital value increases over the last year.



We see further capital upside available for RECI's bond portfolio as its bond portfolio pulls to par. The bonds purchased during April at a 48% discount to par are a stark example of the value still available in real estate asset backed markets. As previously mentioned Cheyne takes positions in bonds with the expectation of being paid back at par as and when the bonds mature or repay. 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. The weighted average LTV on the top 10 portfolio positions is 60.5% with an effective yield of 12.4%.



At the aggregate bond portfolio level, RECI has positions in 88 bonds with a total nominal face value at par of £102.3m. The fund marks all bonds to market and the current market price of the bond portfolio is £76.6m so there is potential for 33.5% capital upside if the all the bonds repay in due course at par.



Real estate backed loans

RECI has been growing its loan portfolio over the last six months, with direct property loans now accounting for 24% of the investment portfolio. RECI now has four loan positions, with a total fair value of £25m. The weighted average yield of the loan portfolio is an attractive 14.1% and the underlying properties are not overly geared, with a weighted average loan to value of 65.5%, ensuring an attractive risk/reward profile.



Much of the loan exposure was increased in the final quarter of 2012 when RECI added two loan investments. 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 prime hotel property with a loan to value of 68%. In April, RECI made a €5.8m loan backed by German multi-family properties with an expected return in excess of 15%. The other loan in the portfolio is backed by a portfolio of commercial properties in the Netherlands.



The manager comments that it is seeing a healthy pipeline of potential new loan investments and we would expect this part of the portfolio to grow over time.



In conclusion

We like the real estate and asset backed debt space and continue to consider RECI shares as highly attractive with good yield credentials as well potential for further NAV upside. RECI provides a differentiated investment approach to recently launched pure real estate loan funds as the managers 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.



RECI ordinary shares have a dividend policy to pay out 6% of NAV per annum. On that basis the shares currently yield 6.3%. The shares currently trade on a 4.3% discount to NAV. We view RECI shares as attractive and would be unsurprised to see the shares trade up to a premium to NAV considering the quality of the portfolio and income stream as well as the future capital growth potential.

[kenny] 03/5/2013 11:24

Today's announcement shows, once again, that Cheyne really seem to be able to access very good deals as well as make well timed sales of bonds.

I am guessing that the next quarterly dividend will be raised to 2.25p, putting the shares on a 6.25% yield - which is not available on loads of other investments.

With NAV at 151p and likely to continue to increase (by an average of 2p per month?), I am at a loss to understand why people are selling their shares at 143.5p. There is a large buyer(s) who has been soaking up all the sales over the last few weeks. I am sure they cannot believe their luck in being able to buy a 6.25% yield on a 5% NAV discount - with the added bonus that the discount to NAV is only likely to increase over time and, longer term, with the possibility of a wind up in late 2017.

[rogerbridge] 03/5/2013 10:02

Still holding RECI

[wirralowl] 03/5/2013 09:58

Thanks DB, skyship/Gary1966 - makes for good reading.

[davebowler] 03/5/2013 09:33

Liberum
Highlights:

n 0.8% NAV uplift: RECI's NAV per share at the end of April was 151p (+0.8% in the month) with growth driven by m-t-m gains in the bond portfolio.

n 1.75% bond portfolio growth: The bond portfolio benefitted from strong m-t-m gains in the Annington UK Housing bond and the Four Seasons Health Care bond.

Figure 1: Monthly bond portfolio performance (Jan-12 to date)

Source: Company data

n Loan investments to increase: Loans now account for 24% of GAV after a €5.8m loan investment backed by German multi-family properties. Further loan investments are expected in the short term.

n Capital rotation: Management continue to crystallise gains in the portfolio with €0.85m of sales (at 0.97 vs. a purchase price of 0.75) and €0.68m of acquisitions (at 0.48).

Liberum View:

n RECI's consistent NAV growth continues with the bond portfolio driving gains. The bond portfolio has delivered positive m-t-m performance in 15 of the last 16 months (see figure 1).

n We like the portfolio's growing exposure to loan investments and we believe RECI is benefitting from the manager's differentiated origination through their position as the largest dedicated manager of mortgage backed securities in Europe. The 4 loans now offer an average yield of 14.1% and the average LTV is 65.5% on high quality assets.

n We conservatively forecast 15% total shareholder return over the period to March 2014 and there is significant upside risk to our numbers from further spread compression.

[skyship] 03/5/2013 07:30

Manager Commentary
• NAV increase supported by strong mark to market gains in the bond portfolio led by the Annington UK housing bond, and the Four Seasons Health Care bond
• Healthy pipeline of loans materialising with further loan investments expected in coming months
• Continue to take profits on bonds that have increased in value and re-investing cash in higher yielding bonds. In April, sold bonds at an average price of 97% of par and purchased bonds at 48% of par.


P/F Monthly NAV (in £m).......15/04/2013.....30/04/2013
Investment Portfolio............ 95.7.... 101.6
Cash and Cash Equivalents....... 9.2..... 3.8
Derivative Assets............... 0.9..... 1.0
Other Assets.................... -....... -
................................ 105.8... 106.4

Other Liabilities............... (1.0)... (1.0)
Preference Dividend............. (0.1)... (0.3)
Ordinary Dividend............... -....... -
Preference Share Liability...... (45.0).. (45.0)
................................ (46.1).. (46.3)

Net Assets (estimate)........... 59.7.... 60.2
Shares outstanding.............. 39,966,985 39,966,985
Net Assets per Ordinary Share (est) 1.49.... 1.51

[gary1966] 03/5/2013 07:22

And this is why I continue to hold and think that there is quite a bit more to come:

Manager Commentary
• NAV increase supported by strong mark to market gains in the bond portfolio led by the Annington UK housing bond, and the Four Seasons Health Care bond
• Healthy pipeline of loans materialising with further loan investments expected in coming months
• Continue to take profits on bonds that have increased in value and re-investing cash in higher yielding bonds. In April, sold bonds at an average price of 97% of par and purchased bonds at 48% of par.

Figures for RECI Core stated in GBP for 15 April 2013 & 30 April 2013

Pro Forma Monthly RECI Core NAV1 (in £ million) 15/04/20138 30/04/20138
Investment Portfolio2 95.7 101.6
Cash and Cash Equivalents 9.2 3.8
Derivative Assets 0.9 1.0
Other Assets 3,4 - -
105.8 106.4

Other Liabilities5 (1.0) (1.0)
Preference Dividend6 (0.1) (0.3)
Ordinary Dividend7 - -
Preference Share Liability (45.0) (45.0)
(46.1) (46.3)

Net Assets (estimate) 59.7 60.2
Shares outstanding 39,966,985 39,966,985
Net Assets per Ordinary Share (estimate) 1.49 1.51

[skinny] 03/5/2013 07:13

The Board of Real Estate Credit Investments PCC Limited is pleased to announce the appointment of Investec Bank plc as joint broker alongside Liberum Capital Limited. The appointment is with immediate effect.

[hieronymous1] 02/5/2013 13:20

Sold RECI bought JIL and ACD.

[santar] 02/5/2013 09:49

Hold RECI - keeping for divi yield

[spittingbarrel] 02/5/2013 09:47

Sold RECI to buy DSC and ACD

[mangal] 01/5/2013 21:54

Hold both RECP & RECI, though halved RECI holding a month or so back.

[eeza] 01/5/2013 19:05

Sold the last of mine this morning, after a superb run.

[holts] 01/5/2013 18:50

In all three still .

[skyship] 01/5/2013 17:04

I'm out - switched half into a top-up in RECP and the other half into a top-up in ACD for further equity upside from the debt markets. This latter perhaps a more secure play for 14%pa as it liquidates over the next 21-23months.

[wirralowl] 01/5/2013 17:04

Still holding both, Kenny, in for the long haul too.

[pillion] 01/5/2013 16:52

Holding RECI for the long haul

[pyemckay] 01/5/2013 16:48

reduced substantially after reci climbed 60% for me. still have a smaller holding but the large discount to nav was the key for my original investment. hold a small amount of recp which intend to sell year or so before 2017 call

[owenski] 01/5/2013 16:39

Still hold RECI and RECP

[skinny] 01/5/2013 16:36

I still hold RECI & RECP.

[kenny] 01/5/2013 16:33

I get the impression that a lot of people have sold out of RECI and moved on. I am still invested - for the longer term - and would like to carry out a poll of who is still holding or has sold. Let's hear from you please?

[hieronymous1] 25/4/2013 12:50

Dave

You are quite correct. My history teacher misinformed me. Either that or my memory from fifty years back has deteriorated worse than I realised.

Apologies to all.

[davebowler] 25/4/2013 11:59

I thought defenestrate was to chuck someone out of a window!
A popular pasttime in old Czechoslovakia, I understand.