REAL ESTATE CREDIT INVESTMENTS LIMITED The Company's commercial and residential loan portfolio has continued to grow to £108 million drawn with
£120 million committed as at 30 September 2015, which is a 20% increase from the £87 million of drawn loans as at 31 March 2015. This reflects the continuing attractive opportunities Cheyne Capital Management (UK) LLP (the 'Investment Manager') is seeing in the loan markets
The Company's weighting of its portfolio towards higher yielding loans rather than bonds has proved beneficial
The loans also offer the superior characteristics of being comprehensively underwritten with focused primary due diligence, which allows the Investment Manager to use its ability and experience to structure them accordingly
Suitable loans originated by the Investment Manager continue to feed the investment pipeline; the Company has completed increases in the commitments of two existing loans since 30 September 2015
The directors of the Company are pleased to declare a dividend of 2.7p per share in respect of RECI Ordinary Shares for the quarter ended 30 September 2015
RECI Key Financial Data | H/E 30 Sept 2014 | Y/E 31 Mar 2015 | H/E 30 Sept 2015 |
Gross Assets | £159.4m | £162.9m | £165.7m |
Loan Portfolio (excludes accrued interest) | £66.8m | £87.1m | £108.3m |
Bond Portfolio (excludes accrued interest) | £69.7m | £59.4m | £43.9m |
Cash | £10.8m | £8.1m | £2.0m |
Operating Income | £7.2m | £15.8m | £9.0m |
Dividends declared/paid per Ordinary share | £0.054 | £0.108 | £0.054 |
Net / Profit* | £7.5m | £13.8m | £4.1m |
Net Asset Value per RECI Ordinary Share | £1.590 | £1.623 | £1.625 |
* Net profit takes hedging, operating and finance expenses into account.
RECI continues to pursue a flexible investment strategy allocating its assets to both the loan and bond markets, so that the portfolio is balanced to capture the opportunities in higher-yielding loans whilst taking advantage of the liquidity and ability to mitigate cash drag offered by the bond markets.
The drawn fair value of the loan portfolio has increased from £87 million at 31 March 2015 to £108 million as at 30 September 2015. During the half year, RECI made four new loans with commitments of £16 million. Since 30 September 2015 RECI has restructured its loans secured on UK logistics and industrial properties, and a German multi-family deal providing further net increases in its commitments of £12 million. The Investment Manager's new loan origination pipeline remains strong with further new loans in documentation.
While the Company had used its cash balances as at 30 September to fund increases in loans, it had simultaneously sold some bonds which settled just after the month end. It has also received further cash, as expected, from repayments on its bond and loan portfolios. At 31 October 2015, the Company has an available cash balance of
£3.1m.
1 RECI refers to the core segment of Real Estate Credit Investments PCC Limited
RECI delivered a positive financial performance in the half year ended 30 September 2015 with £9.0 million of operating income and £4.1 million of net profits. Bob Cowdell, Chairman of the Company said: 'RECI continues to benefit from the ability, through Cheyne and its transaction pipeline, to participate in the structuring and underwriting of relatively complex and specialised loans, in order to maximise risk-adjusted returns for its investors. The expectation of supportive market conditions for high-yielding loans across our core geographical target areas, to support the generation of positive returns on the growing loans portfolio, is balanced by a cautious outlook on the asset backed bond market. Accordingly, the Company will maintain its disciplined investment process in selecting loans and bonds that will combine to continue to deliver attractive returns for investors.'
Outlook
RECI's loan portfolio benefits from a number of attributes, with a focus on core Europe (UK and West Germany), combined with defensive capital characteristics and backed by well structured documentation. This has positioned the portfolio against recent volatility in European real estate markets, caused inter alia by the withdrawal, over the last few months, of monies from emerging economies and China, and as a result of growing concern on prime central London residential assets (where capital values have declined by around 15% or so and liquidity is thin) and the increasing concern expressed by some for yields in prime City office and retail assets in London.
The performance of the Company's bond portfolio remains supported by the amortisation and high coupon receipts, despite the relatively disappointing performance of the wider markets in the half year ended 30 September 2015.
Yield widening as a result of the wider pull back in global capital flows into the core European real estate markets has impacted the pricing and performance of the bond portfolio.
Ultimately, the long term performance of the bond portfolio will depend on the credit recovery from the underlying assets, and in this regard, the underlying asset performance backing the Company's bond portfolio remains resilient. The Investment Manager also remains well-placed to participate in new issue bonds at attractive yields, but will continue to rotate out of lower yielding liquid bonds to fund new loan opportunities where the risk/reward dynamics deem it appropriate.
The Investment Manager's real estate debt team remains well resourced across 13 professionals and plans to strengthen this further. Cheyne expects to continue to close more loan transactions in the coming months, following on from the growth in its overall loan book over the last 6 months, and based on the Investment Manager's strong reputation of delivering financial solutions across the capital stack in innovative structures at compelling pricing for both borrowers and investors.
Conference Call & Further Information10.30 am BST 27 November 2015.
+ 44 (0)20 3059 8125. Please reference Real Estate Credit Investments PCC Limited.
A results presentation will be available on the Company's website: www.recreditinvest.com/investmentmanager
A webcast of the conference call will also be available on a listen-only basis at: www.recreditinvest.com/investmentmanager
For further information please contact:
Public Relations: | James MacFarlane (CTF) | +44 (0)20 3540 6455 |
Investor Relations: | Nicole von Westenholz (Cheyne) | +44 (0)20 7968 7482 |
Broker: About the Company | Richard Crawley (Liberum Capital) | +44 (0)20 3100 2222 |
Real Estate Credit Investments PCC Limited is a protected cell company (the 'Company'), being a cellular company governed by the Companies (Guernsey) Law 2008, comprising a core segment (the 'Core' or 'RECI') and a cell segment (the 'Cell' or 'ERII') each of which has its own portfolio of assets, investment objective and sub-section of the Company's Investment Policy.
The RECI Ordinary Shares (ticker RECI LN) reflect the performance of the Company's Core real estate debt strategy. The RECI Ordinary Shares are currently listed on the premium segment of the Official List of the UK Listing Authority and trade on the Main Market of the London Stock Exchange plc. RECI Ordinary Shares offer investors a levered exposure to a portfolio of real estate credit investments and aim to pay a quarterly dividend. Such leverage is provided by the RECI Preference Shares (ticker RECP) which confer the right to a preferential cumulative dividend (which is an amount in Sterling equal to 8 per cent per annum of the Preference Share Notional Value) payable quarterly on each Payment Date. The RECI (RECP) Preference Shares are listed on the standard segment of the Official List of the UK Listing Authority and trade on the Main Market of the London Stock Exchange plc.
The real estate debt strategy focuses on secured residential and commercial debt in the UK and Western Europe, seeking to exploit opportunities in publicly traded securities and real estate loans. In making these investments the Company uses the expertise and knowledge of its investment manager, Cheyne Capital Management (UK) LLP. The Company has adopted a long term strategic approach to investing and focuses on identifying value.
The Cell within the Company is known as 'European Residual Income Investments Cell' or 'ERII'. The trading of the Cell Shares on the Specialist Funds Market of the London Stock Exchange (ticker ERII LN) was cancelled at the end of 2014 following the realization of ERII's substantive assets. There is one Residual Income Position remaining as at 30 September 2015. That position has been held at zero value since ERII was created.
This announcement includes statements that are, or may be deemed to be, 'forward-looking statements'. These forward- looking statements can be identified by the use of forward-looking terminology, including the terms 'believes', 'forecasts', 'estimates', 'anticipates', 'expects', 'intends', 'considers', 'may', 'will' or 'should'. By their nature, forward-looking statements involve risks and uncertainties and readers are cautioned that any such forward-looking statements are not guarantees of future performance. The Company's actual results and performance may differ materially from the impression created by the forward-looking statements and should not be relied upon. The Company undertakes no obligation to publicly update or revise forward-looking statements, except as may be required by applicable law and regulation (including the Listing Rules). Past performance of the Company cannot be relied on as a guide to future performance . In this section, unless otherwise defined, capitalised terms have the meaning given to them in the Company's prospectus dated 16 October 2013.
Real Estate Credit Investments (RECI)RECI Balance Sheet Summary as at 30 September 2015*
30/09/2014 (£ million) | 31/03/2015 (£ million) | 30/09/2015 (£ million) | |
Loan Portfolio | 66.8 | 87.1 | 108.3 |
Bond Portfolio | 69.7 | 59.4 | 43.9 |
Cash and Cash Equivalents | 10.8 | 8.1 | 2.0 |
Derivative Assets | 3.1 | 4.8 | 4.3 |
Receivable For Investments Sold | 3.7 | ||
Other Assets (includes accrued interest) | 9.0 | 3.5 | 3.5 |
159.4 | 162.9 | 165.7 | |
Other Liabilities Derivative Financial Liabilities | (2.0) - | (2.6) (0.5) | (2.4) (0.3) |
Cash Collateral due to Broker | (2.8) | ||
Preference Share Liability | (41.6) | (41.7) | (41.9) |
(43.6) | (44.8) | (47.4) | |
Net Assets | 115.8 | 118.1 | 118.3 |
Shares outstanding | 72,818,496 | 72,818,496 | 72,818,496 |
Net Asset Value per Ordinary Share | 1.590 | 1.623 | 1.625 |
*The values for each column may not sum to the total due to rounding differences | |||
Loan Portfolio as at 30 September 2015
RECI increased its real estate loan portfolio to £108 million from £87 million in the financial half year ending 30 September 2015. During the half year, the Company made £16 million of new commitments over four new deals, taking total loan commitments to £120 million as at 30 September 2015 (being 73% of GAV). This has since increased to £112 million drawn and £125 million committed as at 31 October 2015.
The average loan portfolio LTV exposure as at 30 September 2015 was 73% and the portfolio continues to provide attractive risk-adjusted returns with a weighted average yield of 13% per annum, before any back end fees or profit share contributions are taken into account.
Since the 30 September 2015, the Company has funded increases in its commitments to a loan secured against German multi-family properties, and its priority ranking shareholder loan against a portfolio of UK logistics and industrial properties; both these loans have been performing well and will contribute to increased operating income performance.
The Company is expecting several loan repayments from its portfolio, with potential cash inflows in excess of £13m in the coming months. As part of this, the Investment Manager is working with the borrower on one of its mezzanine loans to refinance the current position in the coming months.
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