Real Estate Credit Inves... Share Discussion Threads

[davebowler] 12/1/2021 09:14

Liberum;
Strong end to 2020 on bond portfolio recovery

Mkt Cap £316m | Prem/(disc) -8.0% | Div yield 8.7%

Event

Real Estate Credit Investments' NAV per share at 31 December 2020 was 149.5p, representing a NAV total return of 1.8% in the month (+5.2% over six months).

NAV performance in December benefited from a 1.8p per share uplift related to mark-to-market movements on the bond portfolio. The company has deployed further cash in the month bringing the gross portfolio value to £387m (diversified across 59 positions). Gross leverage has remained broadly unchaged at 21.6% of NAV and net leverage has risen to 15.4% due to capital deployment. Investments in the month included:

£7.5m of a new £18.7m commitment to a senior development loan (67% LTV) to support the refurbishment of a 1,955 sqm prime mixed use scheme in Central Paris (9.7% expected yield);
£6.2m of a new £6.5m commitment to a senior development loan to fund the development of a 340-unit co-living scheme in Maida Vale, London. RECI's investment will also benefit from a profit participation in the overall success of the scheme;
£4m to a senior development loan (61% LTV) to fund a student accommodation scheme in Dortmund, Germany (expected return of 8.2%);
£3.5m to a mezzanine loan (52% LTV) to fund working capital requirements for a borrower to secure planning for a Central London redevelopment. RECI benefits from a share charge over the borrower and the loan has an expected return of 13.7%.
Liberum view

The new loan transactions form part of the pipeline identified by the manager in the recent company update. The manager outlined a pipeline of seven loans that are mainly in senior positions at lower LTVs and offering high returns (58% weighted average LTV and 9.7% IRR). RECI’s share of these loans is expected to be £52m. The deployment in December and the small increase in net leverage will enable the company to increase dividend cover. We regard the 8% discount to NAV and 8.7% dividend yield as highly compelling given the fund’s long-term track record, defensive positioning and the improved environment for new lending opportunities

We believe there is also the potential for considerable further re-rating in the bond portfolio as European real estate debt has lagged the wider credit rally. The bond portfolio experienced 8.9p of mark-to-market losses in March and April and we estimate the mark-to-market gains since then have totalled 4.6p. The bond portfolio is secured on core and core+ assets (weighted average LTV of 52%) owned by institutional borrowers. RECI has a track record of delivering strong returns in periods of dislocations in the CMBS markets (e.g. in 2009, 2011 and 2016)

[evaluate] 12/1/2021 07:42

Copy of above.

Decent rest of results again.

[skyship] 12/1/2021 07:41

MONTHLY UPDATE:

• NAV as at 31 December 2020 was £1.495 per share, representing a decrease of 0.4p per share from the 30 November 2020 NAV of £1.499 per share.

• The change in NAV per share was primarily due to:
----• the second interim dividend of 3.0p for the financial year ending 31 March 2021, which went ex dividend in December;
----• 1.0p of interest income; and
----• 1.8p of positive mark-to-market (‘MTM’) adjustments reported across several positions in the bond portfolio.

• In the month of December, RECI invested £3.0m to fund its existing loan commitments.

• The Company funded:
----• £6.2m of a new £6.5m RECI commitment (£28.5m total deal commitment) to a senior development loan to support the development of a purpose-built 340-unit co-living scheme in Maida Vale, London. This asset will also benefit from a profit participation in the overall success of the scheme; and
----• £7.5m of a new £18.7m RECI commitment (€34.9m total deal commitment) to a senior development loan, with an LTV of 67%, to support refurbishment of a 1,955 sqm mixed use prime Haussmanian triple fronted building located in Boulevard Malesherbes, Central Paris. The loan has an expected yield of 9.7%

• The Company also fully funded:
----• A new £4.0m RECI commitment (€30.0m total deal commitment) to a senior development loan, with an LTV of 61.3%, to support the development of a hybrid student accommodation building in the German city centre of Dortmund. The loan has an expected yield of 8.2%.
----• A new £3.5m RECI commitment (£8.0m total deal commitment) to a mezzanine loan, with a low LTV of 52%, to support the working capital requirements of a sponsor to secure planning for wider redevelopment plans in central London. This deal benefits from a share charge over the borrower and has an expected yield of 13.7%.

• The Company had cash as at 31 December 2020 of £21m and gross leverage of £74m (representing 22% of NAV and 1.15x net/effective look through leverage).

[badtime] 11/1/2021 21:03

Nice bounce back up

[cwa1] 08/1/2021 12:49

Well, well. That's a surprise. I'd left a few on the book at 132p a few days ago, more in hope than expectation. Lo and behold, after returning from the dog walk today, they had been taken. I THINK I'm happy with that...

[davebowler] 02/1/2021 21:58

...and from me.

[skyship] 31/12/2020 16:58

panshanger & encoma - thnx to both of you.

Just in case you didn't know, each year I start a new thread under the EPIC "JDT". Been doing so since 2005.

The link below is to my thread for 2021. The Header is a brief look back; a record of the indices; a record of my Tip&Spec for 2020; and my Tip&Spec for 2021. Apologies if you've posted there and I've forgotten!

[encoma16] 31/12/2020 12:45

Yes. From me as well,Sky. Also for the information you have provided.

[panshanger1] 31/12/2020 12:34

Same to you and thanks for your informative posting

[skyship] 31/12/2020 12:18

A happy New Year to all, even if a quiet start this time around!

[williamcooper104] 24/12/2020 23:37

I went for a little seasonal top up on HMSO - up 20 percent in last few days - rocky road ahead but thought good for a little short term trading gain

[badtime] 24/12/2020 21:37

Aye...tempting wasn't it...like u I sat on my hands...now I'm thinking hmm maybe I should not ofAll the best and have a good Xmas in the chateau:)

[skyship] 23/12/2020 10:51

Very surprised to see these retrace back to 132p.

At 132p the discount is up to 11.9% and the Yield up to 9.1%

Sorely tempted to add; but already have a 10% allocation. I do sometimes exceed that self-imposed limit...but not sure...


free stock charts from uk.advfn.com

[davebowler] 11/12/2020 09:08

Liberum;
Mkt Cap £313m | Prem/(disc) -7.1% | Div yield 8.8%

Event

Real Estate Credit Investments' NAV per share at 30 November 2020 was 149.9p, representing a NAV total return of 0.9% in the month (+4.7% over six months).

November's NAV performance benefited from a 0.6p per share uplift related to mark-to-market movements. The £360m portfolio is diversified across a total of 55 positions. Several repayments were received during November, maintaining the high level of cash generation in recent months. £100m in repayments, interest and coupon have been received since 31 March. November's payments included:

£11.5m partial repayment of the London office to residential loan. £2.7m was repaid in October and full repayment is expected by 31 December. The development is complete and the commercial space is fully let.
£2.3m full repayment of a loan to fund a student housing development in Bologna, Italy. The loan was initially funded in January and the realised return on the investment was 21%.
£17m was reinvested in November to fund existing loan commitments. Cash on the balance sheet at 30 November was £50.7m and the net debt to equity ratio was unchanged at 6.8%, leaving RECI well-capitalised to fund pipeline transactions

Liberum view

RECI’s portfolio has performed resiliently in the period, despite the challenges posed by Covid-19. Prudent loan structuring and the 64% LTV offer significant downside protection. We believe there is also the potential for considerable further re-rating in the bond portfolio as European real estate debt has lagged the wider credit rally. The bond portfolio is secured on core and core+ assets (weighted average LTV of 51%) owned by institutional borrowers. We regard the 7% discount to NAV and 8.8% dividend yield as highly compelling given the fund’s long-term track record, defensive positioning and the improved environment for new lending opportunities.

The dislocation in real estate debt funding markets is creating attractive opportunities for RECI. The recent uncertainty caused by the outbreak of Covid-19 has accelerated the withdrawal of traditional lenders. In the recent company update, the manager outlined a pipeline of seven loans that are mainly in senior positions at lower LTVs and offering high returns (58% weighted average LTV and 9.7% IRR). RECI’s share of these loans is expected to be £52m. The higher returns available and potential quick redeployment of cash should enable the company to grow dividend cover.

[skyship] 11/12/2020 07:53

MONTHLY UPDATE:

• NAV as at 30 November 2020 was £1.499 per share, representing an increase of 1.4p per share from the 31 Oct ober 2020 NAV of £1.485 per share
• The change in NAV per share w as primarily due t o1.0p of interest income; and 0.6p of positive MTM adjustments across several positions in the portfolio
• Following on from the £24.2m cash repayments received in October, RECI also received in November:
• full repayment of £2.3m for a loan to support the development of a student housing asset in Bologna. The realised IRR was approximately 21%
• another partial repayment of £11.5m on t he £20.0m commitment to the London
Office t o Residential senior loan (portfolio position 10) position. The development has completed and the commercial accommodation is fully let. Full repayment is expect ed before 31 December 2020; and
• approximately £2.7m in coupon and interest , with all loans structured to pay cash coupon continuing to pay in accordance with their terms
• Since 31 M arch 2020, RECI has received in over £100m in loan repayments, interest and coupon, including five loans that have fully or partially repaid
• RECI funded £17.1m of its existing commitments in the month of November
• The Company had cash as at 30 November 2020 of £50.7m and gross leverage of £74m
(representing 21.6% of NAV and 1.07x net /effective look through leverage)
• In November the Company declared a second interim dividend of 3.0 pence per share
for the financial year ending 31 M arch 2021
• RECI remains well placed to participat e in the healthy new pipeline of deals comprising predominantly loans that are senior risk, at lower LTVs, but for higher returns

[watchlist1] 02/12/2020 08:43

Ex divi date 10th Dec for 3p

[ramellous] 01/12/2020 21:02

Director buys 10k shares this afternoon

[badtime] 01/12/2020 20:48

Nice move up ...seems to have cleared the 130p hurdle now...capital growth a bonus to the nice div

[davebowler] 27/11/2020 10:15

Pleasure, tournesol.
Liberum -
Real Estate Credit Investments

Strong returns and attractive pipeline

Mkt Cap £302m | Prem/(disc) -11.4% | Div yield 9.1%

Event

RECI's NAV per share at 30 September 2020 was 148p (previously reported), reflecting a NAV total return of 4.7% for the 6 month period. This strong performance has been a result of both robust interest collection and a modest amount of mark-to-market gains on the bond portfolio.

The portfolio is diversified across 53 positions in loans and bonds. Senior loans and bonds make up the majority of the portfolio (77%) and 80% of the portfolio is self-originated bilateral loans and bonds, providing greater control and security. The underlying borrowers are typically well-capitalised institutions with significant operational and financial resources. The weighted average levered yield is 9.% and the average LTV is 62.7%. The portfolio remains focused on the UK and France.


The company's flexible gearing enabled the manager to reduce leverage swiftly in April and it has remained low throughout the period. Net gearing was 6.7% at 30 September (March 2020: 13.3%). The manager recently reported an increase in loan repayments with £41m received since the end of June. This includes £32m from the full repayment of a mixed use senior loan to a UK developer at an uplift to carrying value (10.5% IRR). The company is also expecting more than £15m of further repayments before the end of 2020, mostly from a London office/residential loan as the development is complete and the project is significantly de-risked. The manager has also reported a strong pipeline of potential transactions.

Liberum view

RECI’s portfolio has performed resiliently in the period, despite the challenges posed by Covid-19. Prudent loan structuring and the 63% LTV offer significant downside protection. We believe there is also the potential for considerable further re-rating in the bond portfolio as European real estate debt has lagged the wider credit rally. The bond portfolio is secured on core and core+ assets (weighted average LTV of 51%) owned by institutional borrowers.

The dislocation in real estate debt funding markets is creating attractive opportunities for RECI. The recent uncertainty caused by the outbreak of Covid-19 has accelerated the withdrawal of traditional lenders. In the recent company update, the manager outlined a pipeline of seven loans that are mainly in
senior positions at lower LTVs and offering high returns (58% weighted average LTV and 9.7% IRR). RECI’s share of these loans is expected to be £52m. The higher returns available and potential quick redeployment of cash should enable the company to grow dividend cover.


We regard the 11% discount to NAV and 9.1% dividend yield as highly compelling given the fund’s long-term track record, defensive positioning and the improved environment for new lending opportunities.

[tournesol] 23/11/2020 22:35

Davebowler

thanks for posting that link

T

[thewheeliedealer] 23/11/2020 21:28

Hi all,

My mate Peter @Conkers3 and myself did a ‘Twin Petes Investing’ Podcast a few days ago and part of our discussion includes RECI and our thoughts on the Commercial Property sector which is starting to look pretty interesting. We also chatted about loads of other Stocks and Ideas for research and did a particular bit about Luck vs Skill. We also discussed the outlook for Markets and as usual a fair bit of educational stuff with regards to Investing.

Anyway, if you use Apple, Audioboom, Overcast or Spotify you can find it under the 'Conkers Corner' Channel (you want Podcast TPI 36) and you can find it on Soundcloud at the link below. It is also now on Youtube.

I hope you enjoy it and find it useful,

Cheers, WD
@wheeliedealer

[skyship] 21/11/2020 17:35

Thnx again - all sounding very positive.

[davebowler] 20/11/2020 09:45

Encouraging Liberum note on CLO funds-

Ongoing NAV recovery

Event

All of the listed CLO funds have reported NAV figures for October, with the majority reporting mark-to-market revaluation gains. The funds have benefited from the loan market rally and an improving credit outlook. In the seven month period since the end of March, the US and European loan markets have returned 14.5% and 16.7%. Over the same period, the listed CLO funds with mark-to-market valuation policies have generated an average NAV total return of 49%.


The rise in defaults has been much lower than initial projections and many rating agencies and banks have revised downward their 2020 and 2021 default expectations to 4-5% (originally 10%). The outlook for loan defaults has benefited from the ability of companies to refinance debt and extend maturity dates. Less than 5% of outstanding loans now mature before 2023.


Across the listed CLO funds, cash distributions from the October quarterly payments were strong as none of the CLO equity or debt positions suffered from a diversion of payments to senior debt holders. Returns in October ranged from 1.6% for Volta Finance to +4.7% for Fair Oaks Income. Further loan market gains in November (US +1.7%, Europe +2.1%) indicates continued strong NAV performance ahead for the funds with mark to market valuation policies.