Real Estate Credit Inves... Share Discussion Threads

[cerrito] 15/1/2024 13:46

Barclays are a real pain and for a long time have been unable to buy corporate bonds and shares such as VTA, FAIR and PSDL. I can only recommend them to people who do the plainest of plain vanilla.
Too bad for me, they allowed me to buy more Reci a couple of weeks back.

[mcunliffe1] 15/1/2024 13:42

I'm in an Int. Inv. SIPP. I hold both TFIF and RECI. Both permitted drip re-investment until Nov 2023 when the TFIF divident payment could not be re-invested by ii as "TFIF has been removed from the DRIP program due to it's (sic) complexity".

RECI is however still in the DRIP.

Thought this imput may shed more light.

[chucko1] 15/1/2024 13:02

And yes, that was the one occasion (stale KIID) where I was not able to buy an IT on HL. I think it was EPIC, funnily enough, a few months back.

[wllmherk] 15/1/2024 12:53

thanks WC, I'll look into that,

wllm :)

[williamcooper104] 15/1/2024 12:42

Check that it's not because the broker doesn't have their KIDs - all of those trusts will have KIDs but I've been blocked from buying in the past on HL where they can't easily see the KIDsKIDs need to be annually renewed so could be that your broker can't easily see the renewal

[chucko1] 15/1/2024 12:32

HL is fairly liberal and I have had no major problems with ITs. Sorry to hear about Halifax, as though RECI is any more risky than, say, a company with purported future tech revenues!

It's all a pile of nonsense and you just have to work your way around it - possibly by having more than one brokerage account.

[wllmherk] 15/1/2024 12:28

I'm starting to get fed up with Halifax share dealing, they won't let me buy more of these, it's starting to become quite a list of stocks they won't let private investors buy, TORO, SMIF, TFIF, GABI are 4 others on their no buy list. Anyone else finding this an issue?

wllm :)

[wilwak] 12/1/2024 21:47

I’m a keen buyer at these levels.

Once general interest rates start to turn lower IMO the yield on these will drive the share price far higher.

As a long term shareholder that has stuck with RECI through the ups and downs I trust the skill of the manager.

[williamcooper104] 12/1/2024 20:24

They're mostly development loans Which means the LTV is the L assuming the development is successful If it doesn't go to plan then it can be a lot less Cheyne are a quality outfit and I've held RECI for nearly 15 years Else I would run a mile

[hindsight] 12/1/2024 20:13

Same here only small holding, as compared to others the discount to NAV has been too small. But getting there now
The announcement is two sided, one its good they are cautious and mark down loans even though they expect recovery, however find it bad they have had to mark down a senior loan, it clearly didnt have the low LTV I expect from senior loans

[mcunliffe1] 12/1/2024 17:20

I don't have a massive position in RECI - £5k. I invested that on 18 May 2023.
Since then I have received £118.77 on 3 Aug and £121.62 on 13 Oct.

I received £124.38 on 9th Jan 2024.

The rise results from re-investment. I started with 3959 at May 2023 having bought in at 126.122p

I now have 4242 shares worth £5,217. My SIPP shows I am losing £143 on my investmentand hence 2.67% down.

I mention all this by way of an explantion as to why I invested in RECI and why I am unconcerned. The price goes up, it goes down. But, the dividend keeps paying and as I'm not likely to ever sell this holding the price at any given moment is somewhat irrelevant to me.

If I was actively trading this investment I may have considered buying more today; but I'm not trading it.

[mwj1959] 12/1/2024 14:58

Writedowns, even if "unrealised", are not helpful for sentiment in the stock and I'm not surprised to see today's share price reaction to reflect that. Against this backdrop an above average discount (and potentially an even wider one) is, unfortunately, likely to be with us for the foreseeable future. Not a great end to the financial year! Let's hope that there aren't more from where that came from. February's more detailed Quarterly update will be key to understanding that.

[eagle eye] 12/1/2024 14:48

Some investors see it as an opportunity and others hide under the sofa.
All in the price at this level IMHO.

[davebowler] 12/1/2024 12:26

Liberum-
NAV -0.6% MoM, conservative mark down of French office development loan
Analyst: Bjorn Zietsman

Mkt Cap £288m | Share price 126.0p | Prem/(disc) -12.6% | Div yield 9.5%

Event
RECI’s NAV per share as at 31st December 2023 was 144.2p representing a -0.6% NAV total return MoM (+5.7% YTD). The change in the NAV for the month largely relates to 0.9p of interest income, 0.1p in FX, offset by an unrealised write down of -1.6p (see below), expenses of -0.3p and the impact of the dividend paid of -3p.

RECI has taken the decision to mark down a position which has had a slight negative impact on asset valuations. The French real estate market experienced a difficult year in 2023, with investment volume at its lowest since the Global Financial Crisis. Changes in working patterns since Covid has also reduced office demand. RECI has therefore conservatively taken an unrealised mark down of one of its positions, reporting (but not realising) a small loss equivalent to 1.6p per share against the NAV. The asset is a senior loan to a development of a prime Grade A Paris office.

The portfolio comprises 34 positions with an aggregate value of £318.7m. The weighted average LTV is reported at 60.7%. RECI had available cash of £12.1m at the month end. Cash held as collateral totalled £4.9m

RECI’s latest investor presentation showed: (i) Cash reserves are targeted at between 5 and 10% of the NAV (December’s total cash levels are c.5.1% of the NAV); (ii) The outlook is positive, guiding for a growing opportunity set as bank lending becomes more constrained. RECI stated they have a strong pipeline of floating rate senior loans. RECI announced a share re-purchase on the 25th October 2023, and has subsequently repurchased 500,000 shares at an average price of 129.5p.

Liberum view

December’s performance is in line with expectations. The opportunity set for new investments is very strong in this environment and the current 9.4% dividend yield represents attractive relative value, particularly given the focus on senior loans at low LTVs. Despite wider market challenges in December, RECI successfully realised £9.2m being fully repaid at par its position in a dully let, grade A office block. RECI continues to use its cash to invest in its existing commitments in accretive, wider opportunities in senior mortgage lending

[cc2014] 12/1/2024 11:41

November write down loans of 1.1p per share
December write down loans of 1.6p per share

It's not a good look. What we don't know if that's the end of them or whether there will be more to come.

[badtime] 12/1/2024 10:43

You can add at 125p now

[spangle93] 12/1/2024 07:44

NAV from 148p to 144p after payment of dividend and 1.6p write down (on paper) of a French office building.

[mcunliffe1] 12/12/2023 12:39

What a very good post mwj.

[mwj1959] 12/12/2023 12:04

RECI, under its previous iteration of Queen's Walk, unsurprisingly like everything related to RE, got mullered in the GFC when RE prices collapsed and defaults surged. Rates had been rising in the run up to the GFC, but not to the same degree or speed that we've seen this time around (Base Rate rose from 3.5% in 03 to 5.75% in 07). The problem then was too much leverage against fanciful valuations. Hopefully, the managers have learnt their lesson (lower LTVs, senior debt focus etc.), albeit we need to recognise that RE remains a leveraged and consequently a high risk investment when things go wrong. While RECI's LTV of 60% gives some wiggle room and comfort in times of crisis it doesn't take much of a downturn for stress in portfolios to manifest itself, particularly as there is nearly 30% of the portfolio with LTVs >65%. I think most of us invested here are cognisant of all this and do so on the basis that we won't see a GFC type scenario again. But we all need to accept that there remains plenty of risk here. Any increase in defaults and downward pressure on NAV will only result in a further widening of the discount and a fall in the share price well below recent lows. And, of course, that is almost certain to put pressure on the dividend, which has acted as a partial bulwark (on a TR basis we're in the red over the past two years) against disappointing share price performance on the back of the widening discount.

[chucko1] 11/12/2023 16:07

MWJ, I concur and would add that as well as the comfort of a 9% yield, there is the further comfort of the history of low credit losses experienced by the investment managers. The remaining question is whether or not the portfolio has experienced circumstances such as these, i.e. notably increased funding rates. Pandemic was not a problem, but is an entirely different beast - a significant stress, nonetheless.

[mwj1959] 11/12/2023 14:15

The key from a shareholder perspective is that this is a one-off rather than the start of a new write down cycle. But it is fear of the latter which I suspect is the main reason RECI is trading at this level of discount. I remain of the view that the share price, ex any material change in the NAV, is likely to continue to trade in a 120 - 140p range. To challenge the top of the range we'll probably need to see a sustained improvement in the UK / EZ growth / inflation / interest rate backdrop. That may be still some way off. In the meantime a decent 9%+ divi to compensate for the moribund share price.

[chucko1] 11/12/2023 11:40

You are always grumpy!

[cc2014] 11/12/2023 11:10

I disagree. Nothing in the RNS suggests that the loan is being written down by a considerable amount. My analysis suggests its of the order of a 67% impairment.

They choose to try and lose the value of this loss by comparing it with the value of the whole fund. It uses the words "reporting a small loss equivalent to 1.1p per share.

I think shareholders deserve better and I find it not unreasonable to be presented with the information rather than having to spend 15 minutes of my time trawling through annual accounts and factsheets. Or perhaps I am just feeling grumpy today.

[mcunliffe1] 11/12/2023 10:34

chucko1, that uptick puzzled me as well. But, lot's of things puzzle me.

I gather you and CC2014 know more about this company than I do. I am heartened to read that you consider the RECI management to be good. I have read the same belief posted by others on here - part of the reason I invested a modest amount.