Real Estate Credit Inves... Share Discussion Threads

[davebowler] 09/10/2020 11:01

Liberum; Significant bond upside potential Mkt Cap £282m | Prem/(disc) -16.6% | Div yield 9.8% Event Real Estate Credit Investments' NAV per share at 30 September 2020 was 147.5p, representing a NAV total return of 1.2% in the month. NAV performance was driven by a combination of interest income (0.9p) and a 1.0p mark-to-market uplift on two bonds in the portfolio. The mark-to-market movements relate to two bonds secured on Italian outlet malls owned by a global private equity sponsor. The manager remains confident of a full recovery of all of the exposure from the positions due to the quality of the asset and the low LTV. RECI funded £1.2m of a new £8.8m commitment to a senior development loan secured on a student accommodation scheme in Seville, Spain. The £347m portfolio is diversified across 53 positions. The portfolio has a weighted average LTV of 62.7% (loans 65.6%, bonds 51.4%) and the weighted average unlevered yield is 8.9% (11.3% levered). Cash on the balance sheet remains high at £49m and the net debt to equity ratio at 30 September was 6.8%. Liberum view The mark-to-market uplift on the Italian bonds represents a swift recovery as these bonds had been marked down by a similar amount in July. We believe the bond portfolio offers considerable re-rating potential as European real estate debt has lagged the wider rally in wider credit markets since March. The bond portfolio experienced 8.9p of mark-to-market losses in March and April and the mark-to-market gains since then have totalled 2.2p. The bonds are primarily senior secured with relatively conservative LTVs (51.4% LTV). The underlying collateral largely comprises income-producing core assets owned by large institutional borrowers with significant resources. We believe RECI holds bonds secured on UK Center Parcs assets and we note, for example, that Brookfield agreed to inject £185m of capital into Center Parcs to support the business during the pandemic. RECI's discount to NAV stands at 16.6%. In terms of downside protection implied by average LTVs and share price discount to NAV, we estimate the average headroom for reduction in collateral values before capital loss is 46%. Loan repayments have continued to come through in recent months and a further £40m of repayments are expected in the remainder of 2020. These will provide additional liquidity for RECI and the ability to recycle capital into new investments generating attractive returns. We believe the discount offers an attractive entry point given the manager's track record and the defensive positioning in senior loans.

[belgraviaboy] 09/10/2020 07:25

Nothing there to justify the current discount

[skyship] 09/10/2020 07:15

MONTHLY UPDATE: • NAV as at 30 September 2020 was £1.475p per share, representing an increase of 1.7p per share from the 31 August 2020 NAV of £1.458 per share. • The change in NAV per share was primarily due to: • 0.9p of interest income; and • 1.0p of positive mark-to-market (‘MTM’) adjustments on two bonds in the portfolio. • The two bonds subject to positive MTM adjustments were secured against Italian outlet malls owned by a large global private equity sponsor. We remain confident of a recovery of our exposure on these positions due to the quality of the assets, the low basis and strong underlying sponsor. • RECI funded £1.2m of its existing commitments in the month. The Company also funded £1.2m of a new £8.8m RECI commitment (€18.1m total deal commitment) to a senior development loan to support the development of a purpose-built student accommodation scheme located in Seville, Spain. • The Company had cash as at 30 September 2020 of £49m and gross leverage of £72m (representing 21% of NAV and 1.07x net/effective look through leverage). • The Company has an identified pipeline of potential deals on more favourable rates and with similar risk profiles than those available prior to COVID.

[davebowler] 02/10/2020 10:51

hTTps://www.investmentweek.co.uk/opinion/4020744/enter-golden-age-credit-yes?

[williamcooper104] 17/9/2020 12:26

Won't close any time soon But if in a year the mood music is much better and a vaccine is out and working then could see it going to a 5-10 premium to NAV

[skyship] 17/9/2020 07:49

Kenny - no way will they break pre-emption protocol and issue shares at a discount. also has to be viewed as highly unlikely that these will regain NAV anytime soon! I expect the discount to close, but to remain in the 5%-10% range.

[williamcooper104] 17/9/2020 00:20

Ultimately it comes down to is there likely to be a big write down on a hard brexit - it not then RECI is a steel If we have a super hard brexit then share price will fall 20-30% I hold reci with a lot of € and $ stock as a hedge

[kenny] 16/9/2020 17:44

The report from Hardman & Co is deceptive: - forecasts show a material increase in profits in each of 2021 and 2022 but the report fails to highlight that this is because they assume the company issues £50m of new shares in each of 2021 and 2022. - commentary only mentions raising "£10m in 1Q'21 and £50m through FY22", so does not seem to agree with the figures in the projected balance sheet. - there are no EPS figures stated in the report, for 2021 or 2022, therefore, it is not easy for a casual reader of the report to understand whether the issue of further shares is earnings enhancing or just maintains the status quo for EPS. Indeed, in leaving out EPS figures, the report seems deliberately deceptive. - the only comment about how the company will raise £100m in further share issues, is that the company is unlikely to make such issues "at a discount to NAV". - it is possible to work out the number of new shares to be issued to produce this material increase in profits for 2021 and 2022. Working back from the per share NAV figure, gives about 10m new shares in 2021 and 50m in 2022; which does not tally with the £50m raised in each year that is shown elsewhere: in the very same balance sheet! - referring to the comment immediately above: taking Hardman's figures at face value and assuming that the shares are issued, it looks like EPS would be 12.3p in 2022, therefore, no increase in EPS. In other words, the increase in net profits looks impressive until you understand that those profits have to be divided by many more shares in issue. Also, I can only assume, that you have to believe that a smaller number of shares will be issued at a material premium to NAV, in order to produce the projected EPS figures. -the "Cost of dividend" projections are showing very small increases in dividend costs for 2021 and 2022. This suggests £100m is going to be raised and it is going to increase profits materially but with hardly any increase in dividends. Alternatively, the 50m shares issued in 2022 are issued near the year end but produce profits throughout the 2022 accounting period. Quite a feat! Given the above, it's hard to understand the purpose of issuing such a report, which is, in my opinion, not worth the paper its written upon. Leaving out fundamental information - which you have used in calculating your estimates - makes the report highly misleading. I will leave people to make their own judgement whether the share price is likely to recover to NAV in 2021 or 2022, such that £100m of shares can be issued in that time period.

[skyship] 14/9/2020 07:52

https://www.hardmanandco.com/research/corporate-research/improving-returns-on- new-opportunities/

[skyship] 11/9/2020 14:14

No - no logical reason - just the slings and arrows of buyers & sellers with their own reasons, own stresses and own portfolio adjustments. Likely to regain 127p again next week; and extremely unlikely IMO to break down through support at 120p.

[yieldsearch] 11/9/2020 13:19

so any thoughts in relation to recent weakness?

[skyship] 11/9/2020 12:58

WC - agreed - no more politics

[skyship] 11/9/2020 12:57

WC & Owen - stop sucking at the teat of the media and social media. Learn the real position regarding the legality of what HMG has been forced to do because the EU has singularly failed to use "best endeavours": https://facts4eu.org/news/2020_jul_ditch_the_WA#

[williamcooper104] 11/9/2020 12:51

On a more serious point - I agree that politics and debating rights and wrongs of Brexit on this board is pointless But the form of Brexit and the form of our trading relations going forward with the EU and other trading partners is a huge Macro point for the U.K. so cannot be ignored (sadly)

[williamcooper104] 11/9/2020 12:30

There's no remainers left - we are leaving But there's a difference between leaving with a deal, without one, and without one but Amber Hurding the bed on the way out; and instagramming it for all your future potential lovers to see

[skyship] 11/9/2020 07:51

WC - If you want to burnish your Remoaning Remainer credentials might I recommend the SHA thread, where I know you will still find a few fellow defeated, vain glorious stragglers - here, I hope we would all wish to stay non-political...

[williamcooper104] 11/9/2020 00:18

It's still mainly U.K. focused And with a banana (without the sun) republic government - all £ assets will fall On a no deal brexit we will be back to March levels

[kenny] 10/9/2020 19:37

The selling continues; with lots of large lots today. Hard to understand - unless anyone would care to speculate?

[badtime] 09/9/2020 15:30

Yes ..surprised to see the share price soften on the update

[cwa1] 09/9/2020 09:40

Had a little nibble at 122 on the pullback, only a modest top up but it looks decent value hereabouts to me unless the world completely unravels(an entirely plausible scenario, I concede!)

[hpcg] 08/9/2020 12:40

The important thing about the cash level is the freedom of action in the current market. That means at the very least sidestepping duds, but I would hope also incremental basis points on attractive funding destinations. An immense margin of safety here.

[davebowler] 08/9/2020 08:51

Liberum; Event Real Estate Credit Investments' NAV per share at 31 August 2020 was 145.8p, reflecting a NAV total return of 0.8% in the month. Returns were predominantly driven by interest income, with a small uplift (0.3p) from mark-to-market gains on European CMBS bonds. RECI’s £343m portfolio is diversified across 49 positions. The portfolio has a weighted average LTV of 63% (loans 65.2%, bonds 53.5%) and the weighted average unlevered yield is 9.5% (10.8% levered). Cash on the balance sheet remains high at £50m following repayments related to two of the larger positions in the portfolio last month. The net debt to equity ratio at 31 August was 6.4%. Liberum view Last month's quarterly update provided additional information on portfolio activity and the expectation of four further loan repayments in H2 2020, providing in excess of £40m of cash for RECI. The repayments will provide additional liquidity and the capacity to recycle capital into loans offering attractive returns. Cash now accounts for 15% of NAV. We believe loan repayments could act as a catalyst for a further re-rating of the shares in the second half of the year. The manager remains confident in the credit quality of the portfolio and we note offers have been made on assets providing security for two of the loans in the portfolio, giving further comfort on valuations. The bond portfolio offers recovery potential as the European real estate debt market has lagged wider credit markets. The bonds are primarily senior secured with relatively conservative LTVs (53.5% LTV). The underlying collateral largely comprises income-producing core assets owned by large institutional borrowers. The company's confidence in the portfolio was illustrated by the commitment to an unchanged dividend policy over the next 12 months. RECI has a strong track record in distributing a consistent level of income to shareholders. We believe the shares still offer upside from current levels given the defensive positioning in senior loans. The average LTV across the portfolio offers substantial downside protection against weakness in valuations. The underlying borrowers are typically well-capitalised institutions with significant operational and financial resource.

[skyship] 08/9/2020 07:53

Adjusting for the 3p divi, a 0.8% NAV increase in August: http://recreditinvest.com/PDFs/2020/09/FactSheet08092020.pdf

[badtime] 01/9/2020 23:10

Aye it's management that is key