Real Estate Credit Inves... Share Discussion Threads

[davebowler] 08/7/2016 08:28

LiberumStable performance in June EventNAV per share at 30 June was 162.5p which equates to a 0.6% NAV return in the month after adjusting for dividends. During the month, RECI received a £0.9m partial repayment on its loan secured against retirement villages in London and the South-East. RECI has a cash balance of £13.7m (12% of NAV) and expects further repayments on a number of loans this year. RECI has provided additional market commentary following the referendum and expects the London City office market to be most affected given its exposure to the financial market. RECI has no exposure to the City office market and the portfolio does not contain any loans secured on assets held by open-ended retail funds. The largest loan in the portfolio is a senior mortgage loan secured on German multi-family assets (19% of NAV) and the largest MBS in the portfolio is a Class B bond secured by homes leased to the UK Ministry of Defence with a 45% LTV. Liberum viewRECI is now trading on a 9% discount to NAV (7.3% dividend yield) following a significant de-rating in recent weeks. The manager has a proven track record of outperforming during periods of market distress and recent volatility should present an opportunity to acquire assets at very attractive yields. We believe the 13% discount to the peer group is unwarranted and reiterate our BUY recommendation. 

[my retirement fund] 07/7/2016 14:23

Erswhile I disagree regards to pref holders. When 2017 comes theres a lot they could do. What ever happens they will be unlikely to be offered 8% again. However they could be offered a rollover into a fesh issue at say 6.5% with those in issue left over offered to in the open market at 6.2% etc.At the end of the day what happens to any pref restructuring largely depends on the largest holders of both the ords and the prefs who will clearly have a vested interest in both issues.

[skyship] 07/7/2016 13:36

Looks as though there has been too much scare-mongering:
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Manager Commentary

# Ex div NAV up by 1p per share in June, following Ordinary Dividends declared of 3.5p per share (which includes a 0.8p Special Ordinary Dividend)
# 30 June NAV of 162.50p per share, driven by loan portfolio which continues to generate strong interest income returns
# In June, RECI received a partial repayment of £0.9m on its loan secured against retirement villages in London and South-East


Market Commentary

# The recent referendum vote marginally in favour of the UK leaving the EU has led to an immediate period of uncertainty in the UK commercial real estate markets
# We expect this period of uncertainty to continue until a new prime minister is elected in the UK and some clarity around the proposed economic relationship with the EU begins to emerge
# Uncertainty in the real estate market translates into a pause in leasing and transactional activity, which leads to uncertainty around the value of the underlying asset. This uncertainty on value will eventually dissipate once leasing and transactional activity resumes and stabilises
# To date, the impact of the referendum has been acutely felt in the expected decline of valuations in the London City office market (by virtue of its focus on the financial sector which is expected to be most exposed to a decline in structural demand) and also in the gating of a number of open ended retail property funds (Retail funds)


The RECI portfolio has the following characteristics today:

# It is focused on the debt capital structure, secured by UK and German real estate. By being in the debt part of the capital structure, its investments have a natural buffer protection against a drop in the value of the underlying assets
# The underlying assets that secure its debt instruments are predominantly in core locations in the UK and Germany as opposed to assets located in secondary or tertiary cities and towns
# It has no exposure to the core City of London office market in its portfolio
# It has no exposure to any of the assets held by any of the open ended Retail Funds
# The largest loan in RECI’s portfolio (accounting for 19% of NAV) is a senior mortgage loan secured by stable multi-family assets in west Germany. This asset class has demonstrated resilience through many economic cycles and shocks and is unlikely to be impaired by the UK leaving the EU
# The largest mortgage backed security in the RECI portfolio is a Class B bond with a LTV of 45%, secured by homes leased to the UK Ministry of Defence on a very long lease
# Whilst the current period of uncertainty may delay the timing of repayment on some of its credits, the defensive nature of its underlying debt exposure, and the core locations of the assets provides comfort on the full recovery on its debt investments
# As a consequence of recent timely loan repayments RECI currently has a healthy cash balance of £13.7m, being 12% of NAV. RECI also expects further repayments on a number of loans this year, and is well placed now to take advantage of opportunistic debt investments as they arise. RECI has a proven track record of successfully taking advantage of the turmoil in credit markets. In 2009 and again in 2011/12 RECI was able to purchase defensive mortgage back securities at very accretive yields and will look to make similar opportunistic investments in the coming months

[holts] 06/7/2016 15:36

thank you for the info , just how do we value this ?

[my retirement fund] 06/7/2016 14:34

The point im making is we own the debt as weve not borrowed to buy it (other than what we owe the prefs) so we are not geared.The other point im trying to make is that we are not subject to being written off by some seniority as any mezzanine debt structure is merely part of a consortium of lenders who dont have a hierarchy of seniority in the event of outright default we are part owners in the assets.So what I'm saying is we dont end up worthless (assuming we can repay the prefs come 2017) In reality we could probably easily restructure them as well if it were a lucrative option.

[my retirement fund] 06/7/2016 12:10

They have net assets of £118.8M having deducted net liabilities.

Correct me if I'm wrong but in the event of say a 30% hit on the underlying does not produce the ramifications you state - i.e the ord shares worthless.

As I understand it, an "average" 30% hit across the entire portfolio would wipe out the underlying equity in the affected loan portfolio mezz debt upon each redemption due date expiring. This would have the effect of the mezz debt having to take on a market to market loss and a reduction in the underlying stated net assets (£118.8M).

However there is no reason to assume any of the underlying loans will default and so the income stream should continue, and in any case when those loans are due and for argument sake lets assume global fiscal meltdown worse than 2008 style and the loans defaulted - we lay relevant claim to the portion of the underlying assets.

Is that a fair or am I missing something stupid ?

[badtime] 05/7/2016 13:09

Sky if u r looking for income SLI might interest you :)

[skyship] 05/7/2016 12:34

I have absolutely no idea why we are seeing these major swings in the pricing of RECI. Can anyone enlighten me?

Seems to me as though MMs are over-reacting to very limited volumes.

Personally I've been lucky playing the swings; so sold again @ 156.5p yesterday. Now wondering whether to look for a cheap offer again; or perhps play safe and buy yet more RECP - the only secure listed play for a 5% return...

[deadly] 30/6/2016 09:24

Would have been nice to get more at 146p. But strong and rising so far today despite going XD for 3.5p

[badtime] 27/6/2016 12:28

Likewise only a nibble

[holts] 27/6/2016 11:32

looks like selftrade did me a good turn

[skyship] 25/6/2016 13:46

LOL...(whatever that means!) - though when I give this up I hope Tilts is still in the game and prepared to take on my small a/c for old times sake!

[eeza] 25/6/2016 08:24

Discretionary clients only.


High rollers like badtime & Sky.

[asmodeus] 25/6/2016 08:06

Is Tilts willing to take phone-calls?

[holts] 25/6/2016 07:49

Tried to make a small purchase but online broker entirely useless either got quotes so far removed from screen price or route to dealer , even then they failed to execute , whereas there were a number of ATs at the price I wanted . Should have rung Tilton I think !

[badtime] 24/6/2016 08:09

A lower sp

[holts] 24/6/2016 06:17

Ladies/gents , given big asset/loan base in Europe anyone care to speculate on implications of vote out

[skyship] 23/6/2016 09:57

BT exactly, you rightly bought as they were oversold and going cheap - RECI en Promo. Nice one. I too should have bought more; but no more cash.