Real Estate Credit Inves... Share Discussion Threads

[williamcooper104] 01/8/2022 14:40

The Telegraph was promoting a limited recourse Lend Invest bond at a 6.25 percent yield Higher risk for a lower return than we are getting here

[catch007] 01/8/2022 13:44

No defaults in the portfolio in the Q1 update - encouraging yet the share price languishes at the present time despite an 8%+ yield.

[my retirement fund] 27/7/2022 11:49

Would be an excellent time for them to fund raise, say issue redeemable preference shares and cash in on this as they did back in 2010. Problem with RECI is we have absolutely no idea how its being managed theses days, what direction they have, if indeed there actually is any direction, the execs all seem to be happy taking their easy lucrative pay cheques and sleeping.

[williamcooper104] 27/7/2022 11:22

From React News on European CRE bond market dislocations - good opportunities for RECI It's been a topsy turvy few months for the real estate bond market. Not only has the sector underperformed the wider corporate bond market, but there have been dramatic daily swings in pricing and some bonds have been hammered so hard they are now trading at a level that would suggest bond investors are fearful of default.And yet, at the same time, very few companies' bonds have ratings that would indicate this is a real threat. So what's going on?Part of the reason for real estate's underperformance is the sector's perceived vulnerability in the face of rising interest rates, which increase funding costs and threaten to push down property values. This helps explain why real estate equities have also underperformed this year.Bond boomBut there is more to the story than this. The bond market is suffering a degree of real estate indigestion after a busy year of new issuance last year that spilled into the first quarter of this year. This means many bond investors now find themselves overweight real estate and are therefore looking to rebalance their portfolios.Some have also become increasingly nervous about the sheer volume of issuance from UK and European property companies. Over the past decade, the size of the real estate sector in Europe's bond market has ballooned tenfold to €160bn and the proportion of debt issued by the sector in the ICE BofAML Euro Corporates Index has increased from less than 1% to 6%.Drawing comparison to the growth in issuance from the telecommunications industry in the late 1990s and banks before the financial crisis, Marc Rovers, head of euro credit at Legal & General Investment Management, warned last autumn that the growth in real estate issuance was "a warning sign".The boom partly reflects the increased popularity of bonds over bank financing, and therefore does not necessarily mean property companies have been gorging themselves on unsustainable levels of debt.However, the ease with which all comers were able to access the market has caused concern.Through its corporate bond purchases, the European Central Bank has developed very significant exposure to real estate, effectively providing "further stimulus to a sector that is already receiving a large boost from the ultra-low interest rate environment", Rovers says.He tells React News that over the past year, L&G, which has long had an overweight position in real estate bonds, has sought to reduce its exposure to the sector."We have managed to steer ourselves more or less in the right direction," he says, although lack of liquidity has been a barrier.Liquidity problemThis touches on another reason for volatility in the bond market. Particularly when it comes to bonds issued by smaller, less well known real estate companies, there is relatively little trading in the bonds. This can result in some large and unexpected pricing movements."You've got to be careful reading too much into pricing on illiquid bonds as it is not necessarily representative of actual trades," says John Hatton, head of EMEA real estate at Fitch Ratings.Some pricing shifts are certainly difficult to explain. One bond issued by Brussels-based logistics developer VGP with a maturity date of 2029 and coupon of 1.5% that was trading around par at the start of the year is now yielding 6.7% – and was trading at an even higher yield at the start of the month.

[my retirement fund] 26/7/2022 11:04

yes 12p corrected

[chucko1] 26/7/2022 10:57

12% ??

12pps on a share price of 143p is 8.4%. Still very good value for the current level of risk, I think.

[my retirement fund] 26/7/2022 10:27

who's buying for the dividend 12 p pa ?

[badtime] 20/7/2022 16:27

Bit more weakness

[catch007] 08/7/2022 15:32

Monthly update seemed sound and yet to hear of any loan impairment issues?

[chucko1] 08/7/2022 14:36

Yes. Lord only knows why it sold off like that. Perhaps someone did not understand the initial fall was owing to the ex-dividend and panicked.

Seems a lot of panicking going on in ITs recently, and it’s a sight to behold.

[williamcooper104] 07/7/2022 15:16

Aren't we up a little now on the day with the accrued divi

[chucko1] 07/7/2022 11:19

For several months post March 2020, it traded between 100p and 130p.

[my retirement fund] 07/7/2022 10:46

Now selling of to multi year lows.

[jong] 07/7/2022 09:18

XD today. 3p per share payable on 29th July.

[my retirement fund] 24/6/2022 12:22

lol I think I managed to get the equity at 7 pence at one stage, - everything was black box then, so we just had to take a safe discount to nav and on the prefs which were had multiples of cover at refinancing and were senior, but back in the queens walk days Cheyne used to give regular extensive presentations with open question and answer sessions to all at the end !

[williamcooper104] 24/6/2022 11:38

It's less of a black box than was when I first invested in 2010 Very solid management

[my retirement fund] 24/6/2022 11:25

Yes there is a big information hole here. Its still not clear why there was never a post covid revaluation closer to pre covid given most debt recovered and in many instances went to a premium. The future is very unclear to, you would imagine an opportunity to recycle maturing debt into higher yielding debt with an eventual dividend increase but without proper communication who knows where the land lays. I have used some of RECI's stability in the recent market turmoil to sell down my over weight position and recycle into attractive fixed income and real estate funds that have been heavily sold off. Only because RECI has become a bit of a bit of a black box to me.

[hpcg] 23/6/2022 20:36

When HL or similar appears on a register it means private investors. When I owned this I was primarily concerned with the potential for losses, so I looked at LTV, project progress and debt seniority. They always looked pretty good to me, and the latter was the most important. If I remember correctly ARTL went for mezzanine and 2nd lien? I only sold as I had more productive uses for the money, and very good gains. It would be nice to see it at an 8-10% yield once more to rinse and repeat :).

[cerrito] 23/6/2022 19:45

I have gone through the RECI AR released today as a RNS
I was interested to see about their bad debt experience. I hold ARTL and they do RECI type activities…albeit on a much smaller scale and they recently announced credit losses due to bankruptcy. I had gone through the last RECI AR for the FY20/21 and had found no reference to bad debt losses or indeed provisions…and there were none that I could find in the statements out today.
I had emailed RECI on the email provided but it bounced back.
I was also interested to see the change in the shareholder register over the last year. Big picture is that over the last two years we have had a pretty stable register. Over the last 12 months the biggest development is that Premier Miton ,who had at March 21, 7.84% sold down to at least sub 5% at March 22 and we said hello to Hargreaves Landsdowne AM with 5.85%.
Profit for 21/22 was down from the previous year as the revaluation gains were at £5.3m considerably lower than the £18.2m or 20/21, which figure reflected writing back of the write downs made when Covid first hit in March 20. No real change in interest earned, opex or dividends. The lower net profit at £24.5m was less than the dividends paid out at £27.5m.
While obviously we get very good monthly figures, for me it would be good if we had a bi annual investor presentation via webinar. We used to have very good ones in the QWIL days.
The other thig I note reading both the Chairman’s and the Manager’s statement that I got the impression it was very much business as usual and no reference to the financial turmoil we live in. Indeed in the Chairman’s report I was interested to see a refence to increasing leverage.
I would be interested in the thoughts of others

[rik shaw] 23/6/2022 16:23

Dividend announcement

[davebowler] 13/6/2022 09:52

Liberum;
Repayments drive LTV reduction

Mkt Cap £342m | Share price 149.0p | Prem/(disc) -2.1% | Div yield 8.1%

Event

Real Estate Credit Investments' NAV per share rose by 1.0% in May 2022 to 152.2p. The NAV uplift included the benefit of a 1.0p increase from the sale of the Vanderbilt housebuilder loan. There was a small negative impact of 0.2p from mark-to-market movement on the bond portfolio.

The Vanderbilt loan sale generated proceeds of £16.4m for RECI. The company has realised more than the investment made into the position. In addition, RECI received £17m from the repayment of a stretch senior core loan, resulting in an 8.5% IRR. A mezzanine loan secured on a value add/transitional asset in Paris has also repaid £11.6m over the last three months, generating 13.7% IRR and a 1.4x multiple.

Part of the proceeds have been reinvested with £22.8m deployed in the month:

Senior core+ hotel loan - £16.5m loan with an entry LTV of 67% and an expected exit date of April 2027. The expected IRR on the investment is 7.0%.
Residential development loan - £6.3m senior development loan to support the development of a residential scheme in London. The entry LTV is 55% and the expected return is 8.4%.
The manager reports a growing pipeline of potential investments to deploy the capital. RECI had £66.4m of cash at the month-end, resulting in gross and net LTV ratios of 31.4% and 12.3%, respectively.

Liberum view

We note the steady decline in the LTV ratio in recent months, aided by the mezzanine loan repayments in May. The exit of the housebuilder loan is important and will enable the company to recycle capital into the pipeline of senior loan investments. The manager took a prudent approach to loan valuations at the beginning of the crisis and this was reflected in the Vanderbilt loan which was written down to 42% of par in March 2020. The business has performed strongly since 2020, enabling a 1.0p per share value recovery in March 2021 in addition to the 1.0p NAV uplift in May 2022. The shares remain attractively valued at a 2.1% discount (8.1% prospective dividend yield).

[ga_dti] 09/6/2022 13:53

Hardman & Co interview discussing their latest report 'New faces, same resilience’ -

[davebowler] 07/6/2022 09:58

Liberum;
Small NAV uplift from exit of housebuilder loan

Mkt Cap £342m | Share price 149.0p | Prem/(disc) -1.7% (pro-forma) | Div yield 8.1%

Event

Real Estate Credit Investments has exited its investment in Elivia Homes, a UK housebuilder. RECI first invested in Elivia, formerly known as Vanderbilt Homes, in 2014. RECI will receive £16.4m of proceeds from the sale, adding c.1.0p per share or 0.7% to NAV.

Liberum view

We believe the position in Elivia Homes is the mezzanine loan to that was previously written down in March 2020. The manager took a prudent approach to loan valuations at the beginning of the crisis and this was reflected in the SME housebuilder loan which was written down to 42% of par in March 2020 (5.5p NAV impact). The business has performed strongly since 2020, enabling a 1.0p per share value recovery in March 2021 in addition to the 1.0p NAV uplift announced today. The £16.4m of proceeds to be received by RECI is equivalent to 76% of the value of the position at 29 February 2020.

[cerrito] 24/5/2022 15:09

Given all the dramas we have had in the last 2/3 months I have not focused very much on my exposure to RECI.
I have just gone through the fact sheets of the last 4 months.
Two things stand out.
The increase in the exposure in France-39% at 31.12.21 and 37% at 30.4.22, having climbed from the high teens in H2 2019.
Following the purchase of a £26m UK healthcare centre bond in January 2022 the increase in holdings of market bonds.

I intend to go back to sleep here but would be good if they were to go back to what they did 8/10 years ago and have investor calls/webinars.

[holts] 13/5/2022 08:47

You are not supposed to say that !