Real Estate Credit Inves... Share Discussion Threads

[my retirement fund] 08/12/2016 13:13

Juicy divi goes ex on 15th

[davebowler] 07/12/2016 09:51

0.5% November NAV return

Event
RECI's NAV rose 0.5% during November to 164.8p per share with returns in the month primarily driven by the loan portfolio (11.4% weighted average yield and 70.6% weighted average LTV). The bond portfolio generated a return of 0.7% in November.

£0.5m was invested in a bond secured against a German mixed-use portfolio which is expected to return c.10%.

Liberum view
RECI's NAV total return for 2016 to date is 6.5%. Monthly returns should improve further once the remaining cash (c.22% of NAV) has been deployed. RECI trades at a slight discount to NAV (-1.1%) and the shares offer a 6.6% prospective dividend yield (peer group average premium of 2.0% and dividend yield of 6.1%).

[davebowler] 30/11/2016 10:10

Liberum;
Event
RECI's NAV at 30 September 2016 was 162.8p which represents a NAV total return over the prior six months and 12 months of 3.6% and 7.3% respectively. Post period end, NAV rose a further 0.7% in October.

The drawn loan balance has fallen from £113m at March 2016 to £101m at September 2016 following the repayment of several loans at or above book value. This includes the repayment of a €21.3m whole loan secured against German multi-family properties. The average loan portfolio LTV at 30 September 2016 was 70% with a weighted average yield of 12%.

Two new loan commitments totalling £18m were completed in the period including a loan secured on a mixed-use development in Shoreditch, London. The residential element is entirely pre-sold and the office space is fully pre-let. Further loan transactions are expected to close in the coming months.

Liberum view
The company has generated consistently positive monthly returns in the period to September 2016 despite a volatile underlying market and a significant level of cash on the balance sheet during August and September. Cash as a percentage of NAV was c.22% at the end of the period and we expect an uptick in monthly returns once the remaining cash has been deployed.

RECI trades on a 0.6% premium to NAV and the shares offer a 6.5% prospective dividend yield (peer group average premium of 1.6% and dividend yield of 6.2%).

[badtime] 24/11/2016 12:44

Half yearly's must be due soon

[johnroger] 04/11/2016 14:03

End of October fact sheet

NAV increased by 1.1p to 164.0p per share, driven by loan portfolio which continues to generate strong interest income returns

[davebowler] 05/10/2016 10:23

Liberum;
Event
RECI generated a NAV total return of 0.7% in September 2016. NAV per share at 30 September was 162.9p.

RECI made a new loan commitment on a 40 storey residential tower, 10 storey office and a retail building near Old St roundabout in Shoreditch, London. The residential element is substantially pre-sold and the office is entirely pre-let. The initial funding was for £9.1m.

The company also invested £0.8m in a bond backed by a portfolio of German and Swedish loans and committed a further €0.6m to an existing loan secured by leisure real estate property in the South of France. Four bonds were sold during the month, realising £0.6m.

The company has now made new commitments totaling £23m since the end of March 2016 bringing total funded investments in the loan portfolio to £198m. £133m of this has been realised to date and fully repaid deals have generated an IRR of 17%.

Liberum view
The company has generated a total return of 1.9% in the quarter to 30 September 2016 despite a volatile underlying market and a significant level of cash on the balance sheet during September. Cash as a percentage of NAV is c.22% compared to 35% at the end of August.

The discount to NAV at which the company trades have narrowed c.1% over the month to its current level of -2.1%; this compares to a peer group average of 1.1%. In terms of yield, RECI continues to lead the peer group, currently yielding 6.8%

[kenny] 19/9/2016 09:12

Looks like Friday's volume was nothing more than some large purchases. Perhaps an income fund looking for yield.

[cerrito] 18/9/2016 21:53

Kenny, I have thought the same about Cheyne's stance towards RECI; I did look at RECI's fiancials and I saw in the year to 3.16 they paid Cheyne £2.2m in management and performance fees combined and in the year before when the performance fees were £1.4m the total was £3.4m ie even assuming modest performance fees going forward and reduction in the portfolio post RECP maturity there is enough fee income...and they can always do a new equity raise or borrowing.

[kenny] 18/9/2016 17:25

Hope so. Someone suggested options expiring but I would be surprised if there were many options being traded on such a small company.

[ntv] 18/9/2016 16:53

PROBABLY A FAT FINGER AS ITS KNOWN HAS CAUSED THE SPIKE
IT DID A FEW IN FRIDAY AUCTION

[kenny] 17/9/2016 00:08

Cleary someone knows something and we private shareholders are left wondering what is going on whilst others are obviously dealing on inside information.

Here is my guess:

Strangely enough, exactly one year from today the preference class redeem at par. My guess is that the company is about to announce that they will wind up on or shortly after the 16.09.17 when the pref's redeem. It could be that Cheyne feel that RECI is just too small for them to bother about after the £40m of pref's redeem in a year's time - I think Cheyne have over $8bn under management so RECI really is tiny in comparison and probably involves more management time than is worthwhile to Cheyne in terms of their fees from RECI.

If that is the case, the question is what might ordinary shareholders expect to receive in the next 18-24 months or so. Current NAV is 161.8p and there are unrealised potential gains of 12.9p per share on the bond portfolio albeit I do not know how many of those bonds will redeem at par within the next 18-24 months. So those two items total 174.7p. Turning to the loan portfolio, that has a weighted average life of 1.7 years and I do not know if there are any back-end fees upon redemption of some of the loans.

Of course, leading up to the windup and over the life of the windup, ordinary shareholders can expect to continue to receive dividends – currently running at 2.7p per quarter. Also, once they announce a windup, the position for ordinary holders could be improved if they can buy-in some of the pref class at today's sort of prices (RECI currently has over £35m in cash because a number of loans/bonds have recently matured). They could also use some of the cash to buy in ordinary shares, if they slip back, as the company has authority to buy-in up to 14.99% of each class of shares.

The above is pure speculation because, unfortunately, I have no inside information! However, it does seem to rationalise why some people were willing to today pay 174p to buy the ordinary class.

Personally, I hope I am wrong because I would rather have the income for the next 10 plus years than a capital gain. A capital gain is nice but trying to re-invest to replace this level of income is currently near impossible.

[mozy123] 16/9/2016 22:03

Change in legal structure anything to do with it at the agm?

16:44 - 16/09 Buy 11005 174.00p £19,148.70
16:35 - 16/09 Buy 27456 174.00p £47,773.44

not sure what to make of these last trades....

[my retirement fund] 16/9/2016 18:19

Could be options change over date

[jerseymike] 16/9/2016 18:11

Surely a pricing error

[davebowler] 07/9/2016 08:12

EventRECI generated a NAV total return of 0.8% in August 2016 after adjusting for dividends. NAV per share at 31 August 2016 was 161.8p. The company's largest loan position (a whole loan secured against German multi-family properties) substantially repaid in August with €21.3m received by RECI. This loan returned a yield in excess of 15%. Furthermore, two bond positions repaid during the month which resulted in receipts of €9.6m. These bonds generated gains of 4.1% and 4.6%.  Cash as a percentage of NAV was 33% of NAV at the end of the month (after adjusting for the upcoming dividend payment). RECI invested £1m in a bond secured by a portfolio of 13 loans in Germany and Sweden post month-end. The bond has an unlevered yield to worst of 6.4% with a 1.5 year duration. A number of other bond opportunities are under consideration following re-pricing post-Brexit. Liberum viewRECI's has generated a NAV return of 1.8% in the three months since 31 May 2016 highlighting the robust nature of the portfolio cash flows during a volatile period for the underlying real estate market. There is now a significant level of cash to invest and we expect the majority will be deployed into loan opportunities alongside opportunistic investments in the bond market. The high level of repayments had been anticipated as the company's recent results statement indicated that potential inflows of £25m from loan repayments were expected in the near-term. Re-pricing in the bond market should offer potential for accretive investments as the manager has a proven track record of outperforming during periods of market weakness. RECI is now trading on a -3.0% discount to NAV compared to an average 2.3% premium for peers and pays a sector-leading 6.9% dividend yield (vs. 6.1% for peers).

[yieldhunter] 05/9/2016 22:06

Gents can anyone tell me when this goes XD for the 30/09 payment?

TIA

[badtime] 24/8/2016 20:27

Just having a gander at that myself

[my retirement fund] 24/8/2016 19:40

Some changes ahead.

Namely for RECI holders removal of the cell entity which amalgamates all investments, authorisation for expanding the companies equity value up to 15% including and removing the cover tests on the preference shares.

So effectively a closed-ended investment fund adding some fire power.

I suspect this move will be followed by more ambitious proposals next year since there will be a range of options open to them for cheaper funding when the preference share are up for redemption.

Prefs holders not allowed to vote in this. As ord hold looks ok to me

hxxp://www.recreditinvest.com/PDFs/AR16_NOM.pdf

[my retirement fund] 11/8/2016 02:03

Wow 6% for BBB 3 year paper.

Meanwhile another tasty (licks lips), dividend confirmed for this qtr

[skyship] 10/8/2016 17:29

DB - THNX FOR THAT - AN INTERESTING READ...

[davebowler] 10/8/2016 15:28

Viewpoint today from TwentyFour Asset Management on MBS value

Good Afternoon,

The most interesting discussions we have on the desks normally revolve around where we think the best value is, with the different strategies backing their favourite picks and trying to make each other understand the hidden value that the market isn’t appreciating.

Yields, and the corresponding value, are “not door numbers” as Gary is fond of reminding us, and have been driven by sentiment, fundamentals and direct central bank intervention amongst others.

The last of these – central bank action – took an interesting turn yesterday as the Bank of England, on the second day of buying more gilts, failed to buy their target amount in their reverse auction. Another sign of the technical squeeze in £ fixed income that we are experiencing at the moment.

Already since the announcement of the intention to buy £10bn of corporate bonds, spreads on eligible bonds have tightened significantly, and even ineligible bonds – banks and insurers – have seen the “portfolio effect” push prices up and yields down.

Has this value shift happened across the entire market? Definitely not, and a deal last week in the UK RMBS market emphasizes this.

Hawksmoor 2016-1 is a £2.25bn deal backed by vintage (2007) mortgages originated by GE Money. I’m not going to go into the detail of the trade, or our credit view, rather more interesting is the levels the deal priced at and the demand.

Rather unusually there were a couple of tranches issued with split ratings. The Class D bonds are A-/Baa2 and the Class Es are BBB/Ba2. Investors’ interest for these two tranches were between 2 and 5 times the amount of bonds issued, and they priced tighter than initially expected.

Even with that in mind, the yields these bonds were issued at were sterling LIBOR plus 4.75% and 6% respectively.

That’s an incredible yield for 3yr bonds, when compared to the yield on BBB sterling corporate bonds which is currently 1.85% over the same index.

Asset backed securities markets are not as mainstream as corporate bonds and prices do tend to lag, but I challenge any of my colleagues in our other strategies to find something more compelling.

Ben Hayward
Partner, Portfolio Manager

[davebowler] 09/8/2016 09:29

Liberum;
NAV per share at 31 July was 163.2p which equates to a 0.4% NAV return in the month as the loan portfolio continues to drive returns.

Portfolio activity was relatively low although the company did receive £1.6m of partial repayments on its loan secured against retirement villages in London and the South East. Cash on the balance sheet at the month-end was equivalent to 11% of NAV.

In terms of market outlook, assets demonstrating a stable cash flow profile are outperforming after Brexit in comparison to more cyclical asset classes such as London offices. RECI has no exposure to the City of London office market in its portfolio. In the MBS market, volatility is expected to continue but higher-grade CMBS should see some spread tightening following the reduced interest rates in the UK and the new corporate bond purchase programme.

Liberum view
RECI's has maintained a steady NAV performance during a volatile period for the underlying real estate market, with NAV return of 1% in the two months since the end of May. The manager has a proven track record of outperforming during periods of market distress. RECI is now trading on a small (-0.7%) discount to NAV compared to an average 3.6% premium for peers and pays a sector-leading 6.7% dividend yield (vs. 6.0% for peers) excluding any special dividends.