Real Estate Credit Investments: New faces, same resilience

In previous notes, we have repeatedly outlined why we believe Real Estate Credit Investments Ltd (LON:RECI) shows resilience against inflation, interest rate increases and inflation risk (inter alia, see Experience shows resilience of the model, Experience shows resilience of the model (2) and Why rising rates should not hurt RECI). In this note, we highlight how the recent deals have added to the portfolio, and, as outlined in RECI’s recent quarterly presentation, how they have re-confirmed this protection. We also detail the other key themes from this report, noting the sector and geographical diversity (important when considering exposure to UK rate rises), strong loan to value (LTV) metric, conservative leverage and good counterparty quality.

  • Other quarterly update key themes are: i) attractive returns from low LTV credit exposure to UK and European commercial real estate assets, ii) quarterly dividends delivering consistently since October 2013, iii) a highly granular book, iv) transparent and conservative leverage, and v) access to strong pipeline.
  • April Factsheet update: Recurring interest income added 1p to NAV. There was a modest 0.3p mark-to-market (MTM) loss on the bond portfolio, with the corporate yield widening. Real Estate Credit Investments had cash of £66m and gross leverage of £101m. The book has 63 positions (35 loans, 28 bonds), with a weighted average LTV of 62% and a yield of 9.9%.
  • Valuation: RECI trades at a small premium to NAV, a little below pre-pandemic, average levels. With a 2022E 12p dividend, the 7.9% dividend yield is the highest of its immediate peers, and is covered by income. RECI’s defensive qualities mean that the dividend has been held throughout the COVID-19 crisis.
  • Risks: Any lender is exposed to the credit cycle and individual loans going wrong. Security is currently hard to value and to crystallise. We believe RECI has appropriate policies to reduce the probability of default, and loss in the event of default. Some assets are illiquid, and repo financing has a short duration.
  • Investment summary: Real Estate Credit Investments generates an above-average dividend yield from well-managed credit assets. Bond pricing includes a slight discount, reflecting uncertainty, which should unwind when conditions normalise. Market-wide credit risk is currently above-average, but RECI’s strong liquidity and debt restructuring expertise should allow it time to manage problem accounts. Borrowers, to date, have injected further equity into deals.


Click to view all articles for the EPIC:
Or click to view the full company profile:
Share on facebook
Share on twitter
Share on linkedin
Hardman & Co

More articles like this

Average UK house prices hit a new record high in June

The average UK house price hit a new record high in June but there are “tentative signs of a slowdown”, according to an index. Prices were up by 10.7% in June, slowing from 11.2% in May, Nationwide Building

Booming housing market creates 36,000 millionaires in a year

Britain’s booming pandemic housing market created 36,000 new millionaires last year, as sellers cashed in on rocketing sale prices. The country now boasts 609,000 high-net-worth individuals, an increase of 6.3pc in 2021, according to consulting company Capgemini’s annual

RECI Investment Manager’s monthly fact sheet in full (LON: RECI)

Real Estate Credit Investments Limited (LON:RECI), a non-cellular company incorporated in Guernsey, has announced that its Investment Manager’s monthly Fact Sheet as at 31 May 2022 is now available below and on the Company’s website at: reci-fact-sheet_31-may-2022 Download The highlights

UK house prices register 11th consecutive rise

UK house prices rose 1% in May to hit a new record high as the property market continued to defy fears of a downturn caused by the cost of living crisis. The £2,857 increase from April was the

UK housing supply rising again 

Housing supply is at last starting to rise, with a 19.2% increase in the number of new listings in England and Wales between January and April, following a “vicious circle” of low supply affecting the UK residential market

UK housing market frenzy shows no signs of slowing

It took less than a week to sell a two-bedroom garden flat in north London, with a guide price of £950,000. Featuring a large patio, garden, oak floorboards and underfloor heating, it is in a mixed area on the

UK house prices rise by £24,000 a year 

The average UK house price jumped by £24,000 in the year to March, new figures have revealed. The typical property value was £278,000 in March 2022 – following a £24,000 annual increase, a report from the Office for National Statistics

France still holds strong demand for new developments

Market Overview France welcomed 89.4 million foreign tourists in 2018, which was 3% more than that of 2017. This resulted in the generation of USD 56.2 billion (EUR 49.3 billion) in revenue, for the same year. Visitors from

How Paris is betting on mixed-use development

At a time when many Parisians are choosing to relocate from the capital due to high housing costs, public authorities are turning to mixed-use developments to help boost the city’s appeal and improve the quality of life on

Largest rise in six months for UK house prices

The average house price rose for the ninth consecutive month as prices reach yet another record high. Monthly house prices grew at a rate of 1.4%, the biggest rise in sixth months, according to the Halifax House Price

London PBSA opportunity knocks

London has so much to offer students who choose to study in the capital. The appeal of studying at the city’s world-class institutions has significant international and domestic reach. Choice is also increasing, with a growing number of

No more posts to show