Real Estate Credit Inves... Share Discussion Threads

[badtime] 18/8/2022 18:29

Ex div day

[davebowler] 10/8/2022 09:53

Liberum
Attractive risk-adjusted returns

Mkt Cap £339m | Share price 148.0p | Prem/(disc) -1.3% | Div yield 8.1%

Event

Real Estate Credit Investments' NAV per share at 31 July 2022 was 149.9p, representing a 0.7% NAV total return in the month. RECI has generated a 6.4% total return over the last 12 months. The key drivers of the NAV movement in July included payment of the first interim dividend (-3.0p) and interest income generation (+1.0p). There was no impact from from mark-to-market movements across the bond portfolio.

During the month, RECI refinanced a senior loan by £18.7m to increase its total exposure to £26.2m. The loan is to a London co-living development and has an LTV of 75%, with completion expected in December 2025. Following the refinancing, the position is now the fifth largest single exposure in the portfolio. There were no full repayments in July.

At 31 July, RECI had £32.6m of cash and the manager an attractive pipeline of near-term commitments. The gross and net leverage ratios were 34% and 25% (including asset-level debt).

Liberum view

July was another solid month of performance for RECI, with NAV in line with expectations. The company continues to be prudent in the deployment of cash, but the manager is seeing a number of attractive opportunities presenting attractive risk-adjusted returns. The short duration portfolio generates a high level of cash repayments, allowing the manager to take advantage of rising interest rates. The opportunity set for new investments is very strong in this environment and the current 8.1% dividend yield represents attractive relative value, particularly given the relatively low LTVs and senior positions. We believe the shares remain attractive at a 1.3% discount to NAV.

[williamcooper104] 01/8/2022 23:05

Usually don't see performance fees on debt funds

[my retirement fund] 01/8/2022 21:42

Are the fees that out of kilter?

[williamcooper104] 01/8/2022 21:16

A mandatory redeemable pref is just a PIKable loan Suspect the cost of it - 8-10 percent not worth it unless you push the leverage up to uncomfortable levels RECI can't raise equity (when trading at a premium) because, I suspect, new equity won't put up with the performance fees

[williamcooper104] 01/8/2022 14:40

The Telegraph was promoting a limited recourse Lend Invest bond at a 6.25 percent yield Higher risk for a lower return than we are getting here

[catch007] 01/8/2022 13:44

No defaults in the portfolio in the Q1 update - encouraging yet the share price languishes at the present time despite an 8%+ yield.

[my retirement fund] 27/7/2022 11:49

Would be an excellent time for them to fund raise, say issue redeemable preference shares and cash in on this as they did back in 2010. Problem with RECI is we have absolutely no idea how its being managed theses days, what direction they have, if indeed there actually is any direction, the execs all seem to be happy taking their easy lucrative pay cheques and sleeping.

[williamcooper104] 27/7/2022 11:22

From React News on European CRE bond market dislocations - good opportunities for RECI It's been a topsy turvy few months for the real estate bond market. Not only has the sector underperformed the wider corporate bond market, but there have been dramatic daily swings in pricing and some bonds have been hammered so hard they are now trading at a level that would suggest bond investors are fearful of default.And yet, at the same time, very few companies' bonds have ratings that would indicate this is a real threat. So what's going on?Part of the reason for real estate's underperformance is the sector's perceived vulnerability in the face of rising interest rates, which increase funding costs and threaten to push down property values. This helps explain why real estate equities have also underperformed this year.Bond boomBut there is more to the story than this. The bond market is suffering a degree of real estate indigestion after a busy year of new issuance last year that spilled into the first quarter of this year. This means many bond investors now find themselves overweight real estate and are therefore looking to rebalance their portfolios.Some have also become increasingly nervous about the sheer volume of issuance from UK and European property companies. Over the past decade, the size of the real estate sector in Europe's bond market has ballooned tenfold to €160bn and the proportion of debt issued by the sector in the ICE BofAML Euro Corporates Index has increased from less than 1% to 6%.Drawing comparison to the growth in issuance from the telecommunications industry in the late 1990s and banks before the financial crisis, Marc Rovers, head of euro credit at Legal & General Investment Management, warned last autumn that the growth in real estate issuance was "a warning sign".The boom partly reflects the increased popularity of bonds over bank financing, and therefore does not necessarily mean property companies have been gorging themselves on unsustainable levels of debt.However, the ease with which all comers were able to access the market has caused concern.Through its corporate bond purchases, the European Central Bank has developed very significant exposure to real estate, effectively providing "further stimulus to a sector that is already receiving a large boost from the ultra-low interest rate environment", Rovers says.He tells React News that over the past year, L&G, which has long had an overweight position in real estate bonds, has sought to reduce its exposure to the sector."We have managed to steer ourselves more or less in the right direction," he says, although lack of liquidity has been a barrier.Liquidity problemThis touches on another reason for volatility in the bond market. Particularly when it comes to bonds issued by smaller, less well known real estate companies, there is relatively little trading in the bonds. This can result in some large and unexpected pricing movements."You've got to be careful reading too much into pricing on illiquid bonds as it is not necessarily representative of actual trades," says John Hatton, head of EMEA real estate at Fitch Ratings.Some pricing shifts are certainly difficult to explain. One bond issued by Brussels-based logistics developer VGP with a maturity date of 2029 and coupon of 1.5% that was trading around par at the start of the year is now yielding 6.7% – and was trading at an even higher yield at the start of the month.

[my retirement fund] 26/7/2022 11:04

yes 12p corrected

[chucko1] 26/7/2022 10:57

12% ??

12pps on a share price of 143p is 8.4%. Still very good value for the current level of risk, I think.

[my retirement fund] 26/7/2022 10:27

who's buying for the dividend 12 p pa ?

[badtime] 20/7/2022 16:27

Bit more weakness

[catch007] 08/7/2022 15:32

Monthly update seemed sound and yet to hear of any loan impairment issues?

[chucko1] 08/7/2022 14:36

Yes. Lord only knows why it sold off like that. Perhaps someone did not understand the initial fall was owing to the ex-dividend and panicked.

Seems a lot of panicking going on in ITs recently, and it’s a sight to behold.

[williamcooper104] 07/7/2022 15:16

Aren't we up a little now on the day with the accrued divi

[chucko1] 07/7/2022 11:19

For several months post March 2020, it traded between 100p and 130p.

[my retirement fund] 07/7/2022 10:46

Now selling of to multi year lows.

[jong] 07/7/2022 09:18

XD today. 3p per share payable on 29th July.

[my retirement fund] 24/6/2022 12:22

lol I think I managed to get the equity at 7 pence at one stage, - everything was black box then, so we just had to take a safe discount to nav and on the prefs which were had multiples of cover at refinancing and were senior, but back in the queens walk days Cheyne used to give regular extensive presentations with open question and answer sessions to all at the end !

[williamcooper104] 24/6/2022 11:38

It's less of a black box than was when I first invested in 2010 Very solid management

[my retirement fund] 24/6/2022 11:25

Yes there is a big information hole here. Its still not clear why there was never a post covid revaluation closer to pre covid given most debt recovered and in many instances went to a premium. The future is very unclear to, you would imagine an opportunity to recycle maturing debt into higher yielding debt with an eventual dividend increase but without proper communication who knows where the land lays. I have used some of RECI's stability in the recent market turmoil to sell down my over weight position and recycle into attractive fixed income and real estate funds that have been heavily sold off. Only because RECI has become a bit of a bit of a black box to me.

[hpcg] 23/6/2022 20:36

When HL or similar appears on a register it means private investors. When I owned this I was primarily concerned with the potential for losses, so I looked at LTV, project progress and debt seniority. They always looked pretty good to me, and the latter was the most important. If I remember correctly ARTL went for mezzanine and 2nd lien? I only sold as I had more productive uses for the money, and very good gains. It would be nice to see it at an 8-10% yield once more to rinse and repeat :).

[cerrito] 23/6/2022 19:45

I have gone through the RECI AR released today as a RNS
I was interested to see about their bad debt experience. I hold ARTL and they do RECI type activities…albeit on a much smaller scale and they recently announced credit losses due to bankruptcy. I had gone through the last RECI AR for the FY20/21 and had found no reference to bad debt losses or indeed provisions…and there were none that I could find in the statements out today.
I had emailed RECI on the email provided but it bounced back.
I was also interested to see the change in the shareholder register over the last year. Big picture is that over the last two years we have had a pretty stable register. Over the last 12 months the biggest development is that Premier Miton ,who had at March 21, 7.84% sold down to at least sub 5% at March 22 and we said hello to Hargreaves Landsdowne AM with 5.85%.
Profit for 21/22 was down from the previous year as the revaluation gains were at £5.3m considerably lower than the £18.2m or 20/21, which figure reflected writing back of the write downs made when Covid first hit in March 20. No real change in interest earned, opex or dividends. The lower net profit at £24.5m was less than the dividends paid out at £27.5m.
While obviously we get very good monthly figures, for me it would be good if we had a bi annual investor presentation via webinar. We used to have very good ones in the QWIL days.
The other thig I note reading both the Chairman’s and the Manager’s statement that I got the impression it was very much business as usual and no reference to the financial turmoil we live in. Indeed in the Chairman’s report I was interested to see a refence to increasing leverage.
I would be interested in the thoughts of others

[rik shaw] 23/6/2022 16:23

Dividend announcement