Real Estate Credit Inves... Share Discussion Threads

[holts] 19/9/2021 09:50

Given that the Cheyne funding for The Collective was only in March this year , it is concerning to say the least that six months later it is in administration , you would expect the signals to have been there at the due diligence stage . I would like to think RECI had rejected any request to participate , would be interesting to know . Cheyne were already lenders so it may have been a calculated gamble on their part , given that it would be surprising if RECI didn’t have exposure , or of course the calculation may be that the assets would be effectively picked up on the cheap as a result .

[williamcooper104] 14/9/2021 15:48

The Collective (co-living developer) looks like it's going into adminCheyne have exposure, not sure how much, if any, is in RECI. Doesn't look like it's in their top 10 positions

[jonathan49] 14/9/2021 14:27

Thanks,
so carry is not a factor in NAV performance at the moment.

[hpcg] 14/9/2021 13:43

It is covered in note 18 of the accounts. Extract of which:

On 1 October 2017, the Company entered a new Performance Period which is expected to run until the end date of the quarter in which the second continuation resolution, to be proposed at the AGM to be held on 16 September 2021, is passed. With the commencement of a new Performance Period, the NAV on which the Hurdle Assets will be determined in accordance with the above formula was reset to the NAV per share on 2 October 2017 (being the Starting Date of the new Performance Period).

During the year ended 31 March 2021, the Performance Fee totalled £Nil (31 March 2020: £(1.0) million) and the related aggregate Performance Fee payable at the year end date amounted to £Nil (31 March 2020: £Nil).

---------

So a reset up coming, but the NAV has basically recovered so no big deal.

[jonathan49] 13/9/2021 17:04

Doesn't the carry fee have a high watermark?
Most that I am familiar with do have that feature which means that they can't get paid
to recover from a crash otherwise they would be paid twice?

[williamcooper104] 13/9/2021 16:50

They've always kept their leverage pretty low Could make a lot more carry just by gearing at 50 percent

[loglorry1] 13/9/2021 16:20

It probably explains why we didn't get a full write back to pre-pandemic NAV.

If the start of the period was the depth of covid when NAV was very low and the end when it was high then we could see a NAV difference of say 30%. That means they would get a payment of 20% of 23% of NAV which is nearly a 5% drag on performance.

[williamcooper104] 13/9/2021 16:16

Yep - standard PE type arrangement - if the loan IRR is 10 then Cheyne will get 20 percent over 7 or 0.6 percent - such that the returns to investors will be c9.4 percent 7 is quite a low hurdle and would be better if the carry pot was 10 or 15

[loglorry1] 13/9/2021 16:04

The Manager will be entitled to a performance fee in relation to the adjusted performance NAV by reference to the following performance fee formula: ((Adjusted performance NAV - NAV per share at the beginning of the performance period increased by an annual rate of 7%) x 20%) x the time weighted average number of core shares in issue in the period since the starting date. Contract terminable on notice period of 24 months.

I've no idea exactly what that means but its probably good for management ;-) They should work for Burford ;-)

Do they get 20% of anything above 7% that they make for shareholders?

[williamcooper104] 13/9/2021 15:33

There's a performance fee on RECI - from memory it's 10 over 8

[loglorry1] 13/9/2021 13:54

The NAV has stopped recovering but I do accept your point.

[colonel a] 13/9/2021 12:47

FWIW: 6.8% is the NAV recovery.
The yield is running about 7.5%

[holts] 13/9/2021 12:43

Expensive lunches !

[loglorry1] 13/9/2021 09:43

I hold quite a few RECI but I do wonder why they can borrow cheaply and lend geared at at 10.1% but still only generate 6.8% for investors. Go figure!

[my retirement fund] 13/9/2021 09:30

Looking undervalued to me

[davebowler] 13/9/2021 09:05

Liberum;7.7%EventReal Estate Credit Investments' NAV per share at 31 August 2021 was 150.6p, representing a NAV total return of 0.7% in August. The NAV uplift was primarily driven by strong income generation in the month. In the period from March 2020 to August 2021, the manager's real estate debt platform has completed 24 deals with a total commitment of £1.1bn and a weighted average yield of 10.1%. RECI has participated in 10 of the transactions, committing over £130m. Four loans have been realised over that period at or above NAV. The cash returned to RECI has been in excess of £130m since March 2020. The manager also expects a further seven deals to repay in the coming months, returning c.£100m to RECI. The manager's pipeline of new investments comprises 12 potential deals in the UK, France and Spain. RECI had cash of £45m at the end of August which will be used to fund existing loan commitments (£108m of commitments). Gross and net leverage were 29.7% and 16.7% of NAV at the month-end. Liberum viewRECI has generated a 6.8% YTD NAV total return with robust interest collection augmented by mark-to-market gains. We expect continued strong NAV performance from RECI. The mark-to-market recovery in European real estate debt has lagged other credit markets and we believe there is potential for further NAV growth.The portfolio has generated a high level of cash repayments since mid-2020 and the expected repayments of £100m in the coming months represent approximately 25% of the portfolio value. It underlines the importance of the manager's differentiated origination capabilities. All of the bilateral loans and bonds are self-originated, providing greater control and security. The underlying borrowers are typically well-capitalised institutions with significant operational and financial resources. The accelerating repayments demonstrate the advantage of lending on transitional properties, given the potential for value creation and greater scope for exiting positions.  

[metis20] 31/8/2021 22:22

j49 - search with "RECI" using these filters -

"past week" "daily telegraph" "body of article"

The article was in the business part of the Daily Telegraph for 27th August.

[jonathan49] 31/8/2021 15:10

Ref Questor in telegraph. They quote the four funds mentioned as being in their "income portfolio". I am a subscriber but I cannot find the Questor portfolio listings? so are these portfolios real and available to review on the telegraph website? Thanks,

[grahamburn] 31/8/2021 14:44

Interesting - or not, maybe - that Premier Miton Group plc have effectively halved their holding.

It was a significant holder.

Now not quite ao aignificant.

[skyship] 28/8/2021 12:04

Came to the table rather late in the day!

[badtime] 28/8/2021 10:23

Buy rec in today's Questor

[catch007] 16/8/2021 15:51

jonathan49: Estimated Nav is 152 However if you see quarter update below there are no defaults in portfolio so I agree with your logic that NAV will be upgraded in due course as undisclosed impairments will be released. I added more shares last week in RECI.

Key Quarter Updates
• Portfolio
– No defaults in the portfolio.
– Successful and favourable completion on the last remaining hotel loan restructuring.
– Migration of portfolio to senior lending in keeping with the compelling opportunity set therein
– 9 new deals completed (£117m of commitments) since 31 March 2020, showing strength of opportunity post the
initial impact of Covid
• Cash
– Cash reserves remain robust at between 5% to 10% of NAV
• Dividend
– Dividends maintained at 3p per quarter, 8.2% yield, based on share price, as at 30 June 2021
– Dividend cover from net profits in the quarter of 1.09x
• Term matched financing
– Successful conclusion of 1st term matched financing on a senior loan deal
• Share Price Discount to NAV
– Reduction in the discount – which as at 26 July 2021 was 2.3%
• Opportunities
– Bank lending remains constrained across Europe and high barriers to entry secures a continued compelling
investment landscape, especially in senior lending.

[jonathan49] 16/8/2021 14:17

Thanks Catch007, I have looked at much of their reporting. From what I can see one loan was marked down by 5.5p, but has come back by 1p, so they are now 4.5p down on that one. The bond portfolio went down by 10p and if I add up all the reported recoveries in the factsheets since March 20, then 5.8p is recovered. So in total they are now 8.5p down according to that analysis compared to actually being 15p down. There is no information on the carrying (fair) value of all loans and bonds compared to the investment values. In my view, they ought to state the amount by which the bilateral loans and bond portfolio are impaired from the principal amount due to their "fair value" valuation. The 2021 report and accounts doesn't have it either which I would have expected. The 2021 report does have some information in the notes to accounts and the level 3 investment analysis, but this is not a complete picture. So I guess we are blind to just how much the portfolio is marked down vs the investment values of the loans/bonds.

[catch007] 16/8/2021 12:05

jonathon49: You may find the Q1 presentation helpful

[...]

[jonathan49] 16/8/2021 09:09

Hi, I cannot follow why the NAV (ignoring income) is still down at 155p compared to 170p before the virus crisis, can anyone explain it. The March 2020 factsheet broke down the 15p loss into a 10p loss on the market bond portfolio and a 5.4 markdown on the housebuilder loan which is at risk. Commentary implies that the housebuilder loan has been marked up a bit since then and that the market bonds loss is now recovered except for perhaps 1p. Therefore I would expect most of the original 15p loss to have been recovered but this is not the case. I thought that all the dividends had been covered, but perhaps not? Put another way, would the 15p loss be recovered if the market bonds recover to original values and the housebuilder loan was fully written back up? Can anyone explain this apparent capital loss? I can't get much out of the accounts because it is confused by the fact that there was a big increase in shares in issue during year to March 20 - from £153K shares to £229K shares. Thanks for any insights.