Real Estate Credit Inves... Share Discussion Threads

[williamcooper104] 17/3/2024 10:00

They've been winding down their bond portfolio and putting money into senior secured loans Using higher rates to lower risk and keep the divi whole

[hpcg] 17/3/2024 09:57

If the assets are short duration then why have dividends not gone up? Loan repayments should be going into higher coupon loans, especially with a weighted average life on the loan book at 1.4 years. I'll admit, I didn't realise the duration was so short, and it makes the numbers more perplexing.

This time last year (Feb 23 fact sheet) the WA yield was 11.6% and now it is 10.2%. I has gone in the opposite direction to base rates. The unlevered yield shows no change. So the margin investors are getting over base rates has halved.

Anyway, it's your choice, but as I say, IMO there are better.

[rimau1] 17/3/2024 09:21

Hpcg, welcome your opinion and the debate is always really useful to have. I would just say comparing RECI to infrastructure trusts is not meaningful. RECI is a short duration senior debt lender to commercial real estate. The closest comparison in the infrastructure world would be GABI. Your point on flat dividends erodes capital also makes little sense applied here. As someone mentioned if you reinvest your dividend it compounds whilst 12p dividends when inflation and risk free is 4% does not erode my capital especially when i am investing at a discount to a short duration asset portfolio

[skinny] 17/3/2024 09:16

Price / NAV

[hpcg] 17/3/2024 09:14

Dope007 - some of the infrastructure trusts are starting to increase dividends, have buy backs. They share big discounts and a similar duration profile with RECI. It still looks a poor choice relatively speaking in my opinion.

[dope007] 17/3/2024 08:13

https://www.thisismoney.co.uk/money/markets/article-13204513/City-bosses-tell-Chancellor-investments-crippled-EUs-7bn-savings-bombshell.html?ico=mol_mobile_home-newtab&molReferrerUrl=https%3A%2F%2Fwww.dailymail.co.uk%2Fhome%2Findex.html

[dope007] 15/3/2024 21:47

That's why you reinvest it. It's called compounding.....

[hpcg] 15/3/2024 15:34

I might be tempted here if they ever raised the dividend. Payouts have to rise in a positive interest rate environment else it means capital is decaying. I'm not because there are still better buys out there.

[chucko1] 14/3/2024 16:50

Might just have been doubled up laughing.

[oniabsta] 14/3/2024 15:55

That was very funny :-) thanks for the chuckle

[glavey] 14/3/2024 14:33

Oh dear, hope you feel better soon.

[dope007] 14/3/2024 08:39

Doubled up just now

[ramellous] 13/3/2024 18:23

Sold BBY on today’s pop and put into here to double my holding for income.. Nice timing.

[dope007] 13/3/2024 14:40

Yes I looked and thought buy today and pick up the divi or wait and buy a few after it. Me being me I bought some today and if it falls more than the divi on Friday I'll double up :)

[chucko1] 13/3/2024 14:21

Dope, I approve of your timing for a first foray. Would have been better early yesterday, but I like this very much at the current price.

[dope007] 13/3/2024 11:57

Just made a first investment here today. A decent discount to NAV is very attractive for a long term hold with rates most likely to have peaked

[skinny] 13/3/2024 11:13

I think he is counting 5 dividend payments = 5 * 3 = 15p

[owenski] 13/3/2024 10:44

If bought today, equates to over 12% divi for the following 12 months.

[loglorry1] 13/3/2024 10:34

There's been a persistent seller in RECI around 120.5 but they seem to have cleared now. Goes Ex divi tomorrow for 3p. Looks very decent value now that they have largely exited the troublesome bond portfolio.

10%+ capital uplift as rates come down and 10% while you wait. Seems decent to me.

[badtime] 12/3/2024 16:14

Topped up first thing ..now factoring in div

[rcturner2] 11/3/2024 21:02

I bought back into this today. 120p seems like a low price to me.

[mwj1959] 11/3/2024 16:28

Interest rate cuts, which should help improve sentiment around both the UK and EU RE markets, are probably needed before this can move sustainably higher. But I agree that around current levels the risk / reward looks reasonable.

[skyship] 11/3/2024 11:13

Excellent Monthly Update. 2 redemptions and the perceived riskier bond portfolio now down to just 2.5%GAV.

Clearly great value on a 9.9% yield and 17.8% discount. Added a few this morning at 120.5p. If still c. this price I will add further should a portfolio sale present itself...

[davebowler] 11/3/2024 09:12

Liberum-
NAV +0.8% MoM
Analyst: Bjorn Zietsman

Mkt Cap £276m | Share price 121.0p | Prem/(disc) -16.8% | Div yield 9.9%

Event
RECI’s NAV per share as at 29th February 2023 was 146.6p representing a +0.8% NAV total return MoM. The change in the NAV for the month largely relates to 0.8p of interest income, 0.4p in asset valuation increases and 0.1p in FX, offset by expenses of -0.2p.

The portfolio comprises 32 positions with an aggregate value of £306.2m. The weighted average LTV is reported at 60.6%. RECI had available cash of £23.7m at the month end. Cash held as collateral totalled £4.2m

RECI’s investor presentation showed: (i) Cash reserves are targeted at between 5 and 10% of the NAV (February’s total cash levels are c.7.7% 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.

Liberum view

February’s performance is in line with expectations. The opportunity set for new investments is very strong in this environment and the current 9.9% dividend yield represents attractive relative value, particularly given the focus on senior loans at low LTVs. RECI’s portfolio LTVs (60.6%) provide a comfortable cushion against asset write downs and has underpinned asset recoverability. We view the recent write-downs of assets as conservative and note that RECI’s impairment testing policy is asset specific. We expect the company to continue rotating its bond portfolio (GAV of 7.8m remaining) into senior loans as it views senior loans as offering better risk adjusted returns. The gross fair value of the bond portfolio is now £7.8m (2.5% of GAV).