Real Estate Credit Inves... Share Discussion Threads

[kev0856153] 07/6/2023 13:44

Bottomed.

Buy.

[holts] 07/6/2023 11:43

Thanks all for replies about AJ Bell charges .

[wilwak] 07/6/2023 11:40

Chucko. Wise words thank you.

I feel the same about RECI and have gone in heavily.

I feel sure once base rates turn down the share price could rocket.

I also hold VSL which is starting a wind-up process and was looking at switching all those holdings into RECI. VSL will be sadly missed when it goes.

SUPR also looks interesting at the current price. Again it should turn around with a reversal of base rates.

Interesting times. It’s not often we get chance to lock in such high dividend yields with also good scope for capital growth.

[chucko1] 07/6/2023 10:56

I would agree that there has been a seller, looking at the price action the past days and weeks, but nothing extraordinary. But at the same time, it's easy to see a credible bear-case especially as we see the goings on at SBB and WHR and offices et al.

Except that ignores the pure maths of the portfolio which is compelling. Add to that the track record of the management and I see a risk/reward superior to that of most (if not all) REITs.

I have personally engaged in direct property lending before and was astonished at what I could get for the (development) risk, even in less volatile times. As noted above (rimau1 on First Property Group, the value tends to come from cherry-picking the gaps left by the banks, who are forced into things which they would prefer not to owing to balance sheet constraints and other micro/macro issues. The likes of RECI (Cheyne Capital) have the luxury of far greater flexibility and not constrained by the kind of daft targets banks often are subjected to. These targets can include lending certain amounts via a budget process, or being forced to cut risk wholesale. This market volatility leads to such occurrences frequently.

I am not a property expert by any means, but I can see that the diversity geographically and sectorially, as well as the lack of exposure to secondary offices and retail and on top of the track record of returns suggests our investment is in good hands. There are other reasons to think that as well, considering the background of the Cheyne staffers involved. The short maturities and reducing LTVs (and [thus] increasing seniority) as well as the increasing rates available as well as a now 17% NAV discount is a combination I cannot find anywhere else. The 17% discount alone would cover a terrible case loss on any loans they have above 70% LTV, and most likely down to 50% on a statistical basis. Its that level of comfort that has encouraged me to go in fairly hard, even though I am not taking a lot of risk now with rates of 5% available.

[wilwak] 07/6/2023 10:04

Chucko…… I totally agree with you on RECI. I’m topping up as much as I can and have been switching some other holdings in to it.

It seems that a big seller has created a unique opportunity to enter at a really good price.

[rimau1] 07/6/2023 07:54

Anyone nervous regarding the continued falls here should read the rns from First Property Group this morning, for me this further validates the investment case here, extract copied below;

“First Property Group plc (AIM: FPO), the property fund manager and investor, is pleased to announce the launch of a senior loan making platform for the financing and refinancing of commercial property. With interest rates increasing and banks retreating from the commercial property lending market, the returns available in making relatively safe loans are potentially more attractive than investing in the underlying property.

Some GBP24 billion of commercial property loans are reported as due to expire in the next 12-18 months.

The platform's focus will be on making loans of: up to GBP20 million in value; up to 65% of loan to value (LTV); and interest only. The Board of First Property believe that the higher LTV and interest only aspect of loans made via the platform make them close to unique in the current state of debt markets. The capital for making the loans via the platform will be sourced from First Property's own cash resources and third party investors.

The Group' expertise in the underlying real estate gives the platform a competitive advantage in making these loans.“

[chucko1] 06/6/2023 13:25

It may be, though who cares? You are very highly paid on this one for the trouble.

High volume yesterday and bids getting smacked from the off, even as other RE cos steady.

12% of LTVs above 80% and the remainder around 50%. At 17% discount, the maths look really good unless management make poor decisions. They appear to do the opposite, in my opinion.

As a debt fund, I enjoy the fact that its dynamics get confused by some investors with those of REITs. Additionally, being of fairly small market cap, it verges more towards the under-analysed.

[badtime] 06/6/2023 13:25

I hold mine in my ISA at AJ BELL ..the portfolio gets a £3.50 per month custody charge covering everything..no other charges

[williamcooper104] 06/6/2023 13:05

I hold some in my SIPP with HL and just pay the normal SIPP fixed fee I also hold some via IBKR and they pay me the borrow fee income - which last year came to 11bps (on whole portfolio) so I'm getting paid to be with them rather than pay a platform fee

[stemis] 06/6/2023 12:46

I've held some in my SIPP with AJ Bell since October and there have been no additional charges beyond the normal £10 a month for the whole SIPP.

[holts] 06/6/2023 12:33

Anyone else hold these in Aj Bell , have them in INteractive and there is no on going charge , trying to get Aj bell to confirm they have no ongoing charge is like wading through treacle .

[skyship] 06/6/2023 11:50

Got a very small top-up at 122p; and now looks to be on the turn.

[catch007] 05/6/2023 16:23

Given the monthly fact sheet hasn't shown any red flags or warning issues on positions I remain confused at the ongoing decline in the share price

[chucko1] 05/6/2023 12:11

At 2.9 year average maturity, the interest rate moves are easily manageable from a margining perspective.

[cc2014] 05/6/2023 12:09

So, invest £1m at 14.3% without borrowing gives £143k
To create £396k you have to invest £2.76m without borrowing or as far as I can see what they are doing is that they are borrowing £1.76m against the £1m capital.

Now, I don't really care if they are doing it with CFD's, repo's or swaps or whatever but that's still a bunch of margin unless you consider that the margin isn't on just the bond portfolio but on everything (which is a fair position to take). The tolerance for getting margined out as bond prices go against them as they have been as bonds are falling with interest rate rises is not neglible although of course they could put up more margin ultimately from elsewhere in the portfolio if required.


I do support the move away from these bonds to senior debt. That makes sense.
Perhaps I should be more concerned about the overall debt to equity ratio rather than the nuances of the smaller part of the bond portfolio which I do not like. That gives a debt to equity ratio of 30%.

[chucko1] 05/6/2023 11:46

It's a bond portfolio being financed perhaps around 75% (on REPO?). Nothing unusual in that at all.

Notable is that the have been steadily reducing the extent of the bond portfolio as the senior loans they have in the pipeline (and have had ...) are increasingly senior and juicy.

2 year average life on the loans with about 60% LTV. At 20% discount to NAV, which is really large for a loan portfolio absent obviously poor management (no evidence that is the case here - the opposite is far more likely), all sorts of bad luck is in the margin.

[cc2014] 05/6/2023 11:19

Can anyone help me understand this:

On page 2 near the bottom we have the market bond portfolio summary. 15 bonds comprising less than 10% of the gross assets.

Weighted average unlevered yield 14.3%. So that's quite juicy and higher than what I'm really looking for personally for the underlying investments but we all understand what it means and can take our own decisions.

However, weighted average leverged yield 39.6%. wtf??? 40% yield. This seems crazy high and I don't understand. I could come up with theories but in a sense it just looks wrong, unless it's some kind of crazy leveraged up thing. I do note from the presentation that these bonds aren't all bonds in the traditional sense but some are packaged that way presumably to make them more marketable.

Any thoughts anyone? What it appears to be saying to me that this part of the portfolio is using a huge amount of leverage???!!!???

[spittingbarrel] 05/6/2023 11:00

I've just bought more at 1.21445. It's either a real bargain or...

[cwa1] 05/6/2023 10:40

I struggling to make my mind up on this one whether "something awful this way comes"...but if it isn't that-and there's no sign other than the SP-then it surely must be good value hereabouts? Anyway, I've put some more money where my mouth is and had some at 121p but I have NO confidence that it won't fall further first if this seller isn't finished...

[return_of_the_apeman] 05/6/2023 10:13

I think if someone (IIs) knew something bad was coming, they'd be running for the door quicker than this

20 day average volume 250k
1yr average 220k

Not doubting though that there is/has been a tap here

Anyone have sight of the order book/L2?

[chucko1] 05/6/2023 09:54

This has just overtaken SUPR as my largest non-MM holding.

I am not fussed if it falls further. In fact, I welcome it.

[williamcooper104] 05/6/2023 09:40

All looking good Senior loans funded with low leverage Credit losses are of course possible; but catastrophic losses highly unlikely

[skinny] 05/6/2023 09:29

A reminder of the latest update:-

MONTHLY UPDATE
• NAV as at 30 April 2023 was £1.480 per share, representing an increase of 1.1p
per share from the 31 March 2023 NAV of £1.469 per share
• The change in NAV per share was primarily due to receipt of net interest income
• During the month the Company continued the rotation of the market bond
portfolio into the funding of existing strong senior loans with attractive returns
• At 30 April 2023, the Company’s balance sheet leverage net of cash was 9.7%
and net effective leverage, including contingent liabilities being the partial
recourse guarantees provided to certain asset level structured finance
counterparties, was 10.8%. The Company had £59.7m borrowings, £26.7m cash
and £3.6m contingent liabilities (representing 25% of asset level borrowings
subject to partial recourse)
• The Company expects to deploy its currently available cash resources in near
term commitments and continues to see a growing pipeline of senior loans at
attractive floating rates
• The Investment Manager has released its latest Company Update presentation
today (12 May), which is available on the Company’s website