Real Estate Credit Inves... Share Discussion Threads

[chucko1] 11/12/2023 10:28

But they did say so, in this just-out monthly! Not quite sure how else they could have said it.

Under IFRS9, loans are either held at cost or, if the decision is made that impairment is overwhelmingly likely, then the estimated recovery applied. These are NOT MTM assets and so they simply could not alter the value unless and until a decision was made to impair. There is no in-between. One might disagree with this, but this is entirely the issue (not) faced by SLFR/X leading to the mayhem over the past two-three years. By contrast, the RECI crew are a thousand times more professional.

More of a mystery is why the share price popped by 4p within a two minute period only to reverse by 75% of that thereafter.

[cc2014] 11/12/2023 10:16

According to the 2023 annual reports and accounts, net assets were £337m and the Berlin asset was likely worth 1.1% of the portfolio (page 5) = £3.7m

According to this mornings RNS, RECI have written off 1.1p of NAV. = 1.1/148.1 * 339.6 = £2.5m


Who knows what's happened to the valuation between the two time points but I do wish when these funds write down the value of the debt by over 50% they would say so rather than report it as a "small loss". I find it disrespectful and it always makes me wonder what other weasel words I should be on the look out for.

[davebowler] 11/12/2023 09:02

Liberum-: Bjorn ZietsmanMkt Cap £297m | Share price 127.0p | Prem/(disc) -14.2% | Div yield 9.4%EventRECI's NAV per share as at 30 November 2023 was 148.1p, representing a -0.2% NAV total return MoM (+5.7% YTD). The change in the NAV for the month largely relates to 1.0p of interest income, -1.1p decrease in asset valuations (see below), 0.1p in FX offset by expenses of -0.3p.RECI has taken the decision to mark down a position which has had a slight negative impact on asset valuations (-1.1p). Due to severe disruption in the German real estate and banking market from the collapse of Signa, RECI has reassessed the recovery valuation on a legacy mezzanine position exposed to a Berlin asset. RECI has therefore conservatively marked this asset down, reporting (but not realising) a small loss equivalent to 1.1p per share against the NAV.The portfolio comprises 35 positions with an aggregate value of £322.6m. The weighted average LTV is reported at 60.6%. RECI had cash of £16.9m at the month end.RECI's latest investor presentation showed: (i) Cash reserves are targeted at between 5 and 10% of the NAV (November's cash levels are c.5.7% of the NAV); (ii) The outlook is positive, guiding for a growing opportunity set as bank lending becomes more constrained. RECI stated they have a strong pipeline of floating rate senior loans. RECI announced a share re-purchase on the 25th October 2023, and has subsequently repurchased 500,000 shares at an average price of 129.5p.Liberum viewThe opportunity set for new investments is very strong in this environment and the current 9.4% dividend yield represents attractive relative value, particularly given the focus on senior loans at low LTVs. RECI's portfolio LTVs (60.1%) provide a comfortable cushion against asset write downs and has underpinned asset recoverability. We view the write-down of the mezzanine position exposed to the Berlin asset as conservative and note that RECI's impairment testing policy is asset specific. We expect the company to continue rotating its bond portfolio into senior loans as it views senior loans as offering better risk adjusted returns. The gross fair value of the bond portfolio is now £7.5m (1.9% of GAV).

[mcunliffe1] 11/12/2023 09:01

As ever, great info Skinny. Berlin investment caused a 1.1p per share against NAV unrealised loss it is stated.
I'm still very happy with this investment thus far.

[mcunliffe1] 08/12/2023 16:25

RECI isn't subject to the 0.5% stamp duty when purchasing. I do pay £5.99 for a purchase when I do so within my ii SIPP. A few pennies movement hardly seems worth it unless you're dealing with thousands of shares. £296 on 10,000 shares with a three pence movement upwards - not a huge amount.

I suppose, if that could be achieved a couple of times a week it's not a bad return on your £13k outlay. But it appears it can only be achieved four times a year given the quarterly div. regime.

[skyship] 08/12/2023 15:39

MRF - XD! Surely just a function of that. 126.5p today was 129.5p Wednesday.

[chucko1] 08/12/2023 15:26

Random! Bought prior to div, sold afterwards and now bought back what I sold only yesterday.

[my retirement fund] 08/12/2023 14:41

wow added at 126.5p didn't think i'd see that again.

[jong] 07/12/2023 10:33

Yep, 3p per share payable on Friday 5 January 2024.

[cerrito] 03/12/2023 23:41

I agree that the interim statement very well worth a read. 
I note per my 2334 that the dividend this half year was covered, thanks to a £5.2m fair value net gain net profit at £15.5m exceeded dividends announced at £13.8m.
It would be good if there were IMC type events. They had very good ones back in 2010/13 period and then they stopped, basically as no retail investors asked questions.
 I was interested to read the following. If there was an IMC type event I would have wanted clarification. Spooky that they made no new commitments given that the average loan is only 18 months. How do you folks read this?? 
Quote
During the half year, given the lack of incremental sources of capital, there were no commitments made to new deals, however the Company funded £50.7 million into existing deals during the period, and received £72.6 million in cash repayments and interest compared with £85.9 million in the half year ended 30 September 2022.
s part of its strategy to rotate out of the Market Bond Portfolio, the Company sold £15.6 million of market bonds in the half year, with a further £25.2 million sold in October 2023
Unquote
I was interested to see that finance expenses were £2.1m in this latest half year up from £1.3m in the half year to 9/22. Some of this increase is explained by the increase in the weighted average cost of debt to 6.8pc but suggests greater leverage, although Hardman talk about lower leverage. 
This caught my interest
 Quote
RECI's current exposure to subordinated positions is 11% of total commitment in six positions.
Unquote 

[my retirement fund] 01/12/2023 12:18

Added for ISA

[mcunliffe1] 30/11/2023 11:08

great explanation chuck - thankyou.

[aishah] 29/11/2023 23:09

What's the net yield after all the charges? No management charge?

[alter ego] 29/11/2023 22:54

Aisha, I hold in a HL ISA. platform charge is £3.45 per month for the entire ISA. There are no management charges for the stock.The yield is dividend/share price pure and simple.

[aishah] 29/11/2023 18:24

Just trying to work out the true net yield here on Hargreaves then. Is it north of 7% after mgmt and platform charges?

[mcunliffe1] 29/11/2023 18:19

welcome explanations from William and chuck - thanks guys. Never too clued-up on the charging mechanism but a tad wiser now.

This is one of my 2 out of 7 holdings that is showing positive value at the moment and it's one of my smaller blocks at just £5k invested 18 May at 126.122p

I am very tempted to put a further £5k into RECI in the next day or two.

[chucko1] 29/11/2023 17:59

Ignore charges as stated on REITs and other ITs by HL (and other platforms). Total nonsense. They make assumptions about ongoing costs which simply are one-off (not ongoing). For instance, SDLT is a payment that is made only once, clearly, and yet this cost is annualised even though the length of ownership likely averages many years.

Sensitivity analysis on funds as shown in the KIIDs is even more absurd - it comes (came) from certain EU directives which fail to deal properly with the individual nature of a given fund.

That's regulation for you - helps in certain respects but at the expense of a number of idiotic by-products. If regulators were smart, they would be in the fund management industry, earning at least double.

[aishah] 29/11/2023 17:48

Just had a look at the charges on Hargreaves. They quote avg yearly charge of 3.55%. Very steep!!

[chucko1] 29/11/2023 17:39

Read the investment manager's report and the Chairman's statement in the Half Year report. If ever a lesson or description of the current RE market were required, you can do little better than to take heed of these few pages.

Not only is RECI a quality asset, but it's fairly decent to trade. In fact, so is SOHO, so let's not totally knock Triple Point! (HOME, it is not).

RECI under a little market pressure today - good time to add. So I did, with more to follow.

[cwa1] 29/11/2023 16:11

Cheyne or Triple Point? Hmmm, let me think ;-)

[williamcooper104] 29/11/2023 16:09

Difference is DGI9 managed by a start up manager Cheyne are a proper outfit; around from before the GFC There's of course risk; you are taking some to get that yield, but we've not got muppet GPs here

[waterloo01] 29/11/2023 15:18

Also taken small 1st position. Have been watching this and a few others. Hopefully no need to dodge any bullets here. Watching dg19 as a warning on what appears safe!!

[williamcooper104] 29/11/2023 14:41

Indeed - alas UK alternative investment trusts are not filled with many examples of good external management Cheyne and Atrato come to mind; otherwise it's a pick from incompetent, to gross incompetent to potentially fraudulent

[skinny] 29/11/2023 11:24

Back to the hammock then - I see the 'downmarker' has taken a few hours off again!