Real Estate Credit Inves... Share Discussion Threads

[skinny] 30/5/2014 10:49

Thanks Dave.

[davebowler] 30/5/2014 10:33

Previously mentioned P2P (with a prospective yield next year of 8%) is trading up by 5% this morning on its first day of dealing.

[davebowler] 28/5/2014 14:37

Here's an idea which may be of interest-its a new Peer to Peer Lending Investment Trust called P2P and floats on Friday.Its yield should be 8% in a year's time if all goes to plan.95% of its £200m raised will be lent via Funding Circle ,Zopa etc in the U.K.and other platforms in Europe and the U.S.


P2P will be taking minority stakes in their favoured Peer to Peer lenders-both by equity options (given in exchange for volume) and by purchases of stakes.They have earmarked 5% of the funds raised -i.e.about £10m of the £200m raised to do that.
I have heard that the issue was oversubscribed by about 15%.




Midas Stockbrokers view;

"retail banks are dinosaurs" Bill Gates

"Banking is very digitisable... Lending Club's peer to peer model is changing personal lending" Peter Sands, CEO of Standard Chartered.

P2P Global Investments ("P has announced its intention to apply for admission of its ordinary shares ("Shares") to the premium listing segment of the Official List of the UK Listing Authority and to trading on the main market for listed securities of the LoP")ndon Stock Exchange (together, "Admission").

I am sure you are all aware that banks are valued at multiples of book value (roe –g/coe-g). Most banks earn a return on equity of between 10 per cent and 15 per cent and trade on 1.2x to 1.8x book value. So imagine you were offered a peer to peer fund with a forecast return on equity of >10 per cent at 1x book... with a forecast dividend yield of over 8 per cent. Beyond the aforementioned, the fund is being managed by the blue chip house Marshall Wace.

We are pleased to announce that Midas Investment Management Limited have been appointed as an intermediary for the forthcoming of P2P Global Investments which we think is an attractive offer for the following reasons:

· Compelling economics - floating at ~1x book with a forecast ROE of ~10 per cent on modest leverage ratios.

· Structure - expected to be ISA & SIPP eligible, expected 0 per cent corporation tax, diversified by platform, geography and loan type.

· Attractive yield - potential dividend yield of ~8 per cent in 2015, superior to listed comparable debt investment funds (average of debt fund group ~5 per cent yield).

· Strong historical performance of P2P lending - historic low volatility of returns, strong risk/reward metrics (Sharpe ratio), average industry yields of >8 per cent net of loan losses.

· Potential for alpha generation - based on beneficial fee agreements with platforms and proprietary loan selection technology.

· Low volatility of loans - expected annual loans losses of ~3.2 per cent.

· Precedent - these type of funds have done very well in the USA especially the Eaglewood fund which returned 16.2 per cent last year.

· Access to Lending Club for non USA citizens - arguably Lending Club is the platform providing the best returns yet only USA citizens can access it.

Banking sector implications

The lending function of developed market retail banking is going to change and the peer to peer platforms and vehicles are the players that should benefit. Please re-read what Peter Sands has said above. We advise clients to consider selling all their banking shares (excluding Standard Chartered and HSBC) and repositioning into these industry changing catalyst. There are two reasons the banks are in trouble:

1. P2P platforms have a cost base ~60 per cent lower than banks; and

2. The interest spread banks charge is ~4.2 per cent whereas P2P's has a spread of ~2.0 per cent.

People will start to understand that depositing money with banks and borrowing from the banks is not the best value for money route. Liberum estimate that by 2024 US and UK P2P platforms will increase to £292bn which is roughly 20 per cent of all lending. How will the banks then cover their fixed costs?

Our conclusion

This is a game changing, sector smashing investment. We think this investment is a far superior, risk adjusted investment proposition to buying life insurance or bank shares and we also see it as a very compelling alternative to depositing your money at the bank. After all, how are the risks dissimilar? Yet the returns are stratospherically different.

[holts] 23/5/2014 13:57

Residual has been rising nicely over the last couple of months.

[kenny] 23/5/2014 10:04

Some fairly large buying over the last couple of weeks. I wonder if another of their bonds have redeemed at par? If so, we private investors will be the last to be told. I am speculating here but, as with previous redemptions, if that is the reason, it could provide a useful boost to NAV.

[kenny] 19/5/2014 15:16

Dividend is 7% of placing price of 152.2p - so about 10.65p in total (not 10.2p) paid in four quarterly instalments.

[the monkster] 19/5/2014 13:53

future growth i meant (obviously) - pity i cant invest retrospectively though.

[davebowler] 19/5/2014 13:43

Look at the graph then.
They are buying mortgage Backed securities below par so that has brought in the past and might in the future bring capital growth.

[the monkster] 19/5/2014 13:40

ok bd cheers. looks like they are paying about 10.2p a year which based on current prices amounts to c. 6.5%. not massive - suppose it depends on capital growth as well which i've got no idea on.

[davebowler] 19/5/2014 13:37

hxxp://www.drccap.com/wp-content/uploads/2014/05/2014-05-15-ERED-II-Final-Announcement.pdf

[davebowler] 19/5/2014 10:17

Best to read this www.recreditinvest.com/investmentmanagerreports and previous posts.

[the monkster] 16/5/2014 22:24

i'm in the prefs but looks more lucrative here. has this still got some meat on the bone can anyone advise in light of the performance over the last couple of years. also, whats the yield here ??

thanks.

[wirralowl] 09/5/2014 09:36

Thanks DB, a very good month for RECI it would seem.

Incidentally, anyone have a calendar of ex-divi and payment dates for RECI, or even know when the next ex-divi date is? TIA.

[kenny] 09/5/2014 08:01

Excellent performance by management, once again. Strange that RECI's consistent performance is not acknowledged, for example, by the shares trading at a premium. I am not complaining as it has enabled me to accumulate a large holding.

[skinny] 09/5/2014 07:15

Gary - here is

[gary1966] 09/5/2014 07:12

NAV now 157p. Couple of largish loan redemptions but £5m re-invested just after month end. Steady as she goes.

[davebowler] 28/4/2014 13:57

Liberum view on LBOW -note last sentence;


LBOW's NAV at 31 January 2014 was 98.79p per share which represents a NAV total return of 1.0% in the quarter (including 0.5p of dividends paid in the period) and 1.3% for the year. A second interim dividend of 1.25p per share has been declared for the quarter ending 31 January 2014, bringing total dividends for the year to 1.75p per share.

LBOW was 85% invested at 31 January 2014 which has risen to 98.3% post-period end following the completion of two further deals. The current portfolio has an average coupon and IRR of 7.39% and 8.41% respectively. The weighted average LTV is 62.2%.

Liberum view see last sentence;

Most of the newsflow in today's statement had already been reported in recent announcements. The key item for investors is that management have reiterated guidance that the company will be able to distribute 1.5p per share on a quarterly basis going forward.

The dividend payment for the year of 1.75p is slightly above our 1.5p expectation but we note that the company will be distributing from capital as EPS for the year was only 1.29p per share and operating cashflow was only 1.15p per share.

LBOW trades on a 4.5% premium to NAV which is at the upper end of the range for real estate debt funds (3.1% average premium). In our view the sector offers compelling risk-adjusted returns but we believe LBOW's relative rating is unwarranted and see better value elsewhere in the sector

[davebowler] 25/4/2014 17:00

See the second tip's idea- go for Euro Mortgage Debt;
hxxp://www.marketfolly.com/2014/04/chris-mayer-cherryhill-mortgage.html

[skyship] 16/4/2014 15:55

C&W: €30bn in both live European loan sales and completed YTD trades

European real estate loan portfolio sales over the year-to-date have virtually matched last year's €30bn annual tally with as much again in current live portfolio sale auctions, as the most frenetic period for de-leveraging legacy real estate debt continues to dominate market attention.

[skinny] 11/4/2014 12:35

About as rare as hen's teeth!

Liberum Capital Buy 150.50 150.25 - - Reiterates

[davebowler] 10/4/2014 10:04

Investec Insights

¢ Today's announcement is excellent news and takes LBOW to substantially fully-invested, and more-or-less within the time-frame set out at launch (12 months). This is in contrast with SWEF which has struggled to deploy the capital it raised at launch. We understand the property-lending space remains competitive – and we prefer the regional UK exposure the LBOW team offer, rather than a London-centric approach.

¢ The underlying loan metrics mean the company's target return of a 6% pa dividend should be more than fully met going forwards. Net of fees and expenses, we believe a run-to-maturity IRR of 7.2% pa looks achievable. We think ICG Longbow have now demonstrated they are amongst the market leaders in UK Commercial Property Senior Secured Lending.

¢ We continue to like the property debt space and think LBOW highlights the very attractive risk / reward profile experienced managers can offer to investors right at the top of the capital structure with low LTVs. (In all cases, LBOW's loans are given the senior secured position and the average portfolio LTV is 61%, with 160% interest coverage ratio.)

¢ We note the potential tenth investment opportunity and look forward to an announcement on it (in the near future. We also expect the company's maiden set of final results soon.

¢ Looking at the other funds within the property debt space – which, to reiterate, we main bullish on – LBOW offers the purest senior-loan exposure but we also believe RECI's more diverse strategy of bond and loan exposure offers investors excellent returns; a 12 month dividend yield of 6.1% with the shares trading around par. This is a much more attractive proposition, in our view, than SWEF which is currently 71% committed and trades at a premium of 3.4% and yields 3% (although this should increase when the fund becomes fully invested).

[skinny] 08/4/2014 13:59

Thanks for the update - it reads well!

[davebowler] 08/4/2014 13:36

Liberum;
March NAV rises 1%

Event

NAV per share grew 0.4% in the second half of March to 154.6p at the end of the month. The NAV rise over the month was +1.0% (28 February 2014: 153.1p).

There was a significant level of portfolio activity in the period with £12.1m of bond sales in the second half of the month. The average price achieved on sale was 0.98 compared to an average acquisition price of 0.92. £0.7m of bond purchases were completed in the period with an expected yield of 8.7%. As previously announced, RECI bought back over two million preference shares.

The company has also announced that it will no longer produce mid-monthly fact sheets going forward. Month-end fact sheets will continue to be published as normal.

Liberum view

RECI's steady NAV performance in 2014 has continued in March with a 1.0% return bringing the total return for Q1 2014 to +3.5%. This follows a strong year in 2013 when total returns were +18%.

We estimate the majority of bonds sold in the period were Class A bonds. The sales are further evidence of the company's focus on crystallising profits on bonds that have experienced significant price appreciation before rotating the capital into higher yielding assets which offer greater return potential and better relative value. The average discount on the bond portfolio has moved out to 21% from 19% at 15 March 2014.

RECI is our top pick in the real estate debt space due to the manager's excellent track record, strong NAV growth prospects, capital deployment abilities and valuation (-3.6% discount to NAV & 7.2% dividend yield vs. 1.4% average premium and 5.4% dividend yield for peers).

[envirovision] 04/4/2014 08:35

Excellent, looks like a safe fwd yield with further scope to increase again at some point.