Real Estate Credit Investments (LON:RECI) has announced its Q4 investor presentation prepared by the Company’s Investment Manager to provide investors with an update of the position of the Company as at 31 March 2023.
Key Quarter Updates
• Portfolio
– Total NAV Return for the quarter: +1.2%
– No defaults in the portfolio
– Rotation of market bond portfolio into strong senior loans with attractive returns
– During the quarter, four French loans fully repaid, realising net proceeds of £54.4m, and providing headroom to invest in new deals at enhanced IRRs
• Cash
– Cash reserves remain targeted at between 5% to 10% of NAV
– As at 31 March 2023, cash was £17.0m.
• Dividend
– Dividends maintained at 3p per quarter, 9.0% yield, based on share price, as at 31 March 2023
– Dividend predominantly covered by interest income
• Financing
– A mix of flexible, short-dated financing employed, alongside term-matched structured financing on selected high-quality senior loan deals
• Opportunities
– The present macroeconomic backdrop is set to continue through 2023, resulting in further constraints in bank lending and alternative sources of capital. The opportunity to provide senior loans at low risk points, for higher margins, is increasingly evident
– The Company expects to deploy its currently available cash resources to its near term commitments and towards a compelling emerging opportunity set in senior loans
> Attractive returns from defensive, senior, low LTV credit exposure to UK and European commercial real estate assets
• A focus on senior, 1st lien loans:
• Senior 1st lien loans now account for 82% of the total portfolio by commitment value
• Top 10 positions are 100% senior loans
• New origination is 100% senior loans
• Weighted Average LTV on total portfolio by commitment value of 58.6% as at 31 March 2023
• Predominantly large, well capitalised, and experienced institutional borrowers
• Minimal exposure to shopping centres (<2% of GAV), secondary offices (0% of GAV) and logistics (<3% of GAV)
• RECI retains absolute governance, covenants and control, afforded by senior ranking and bilateral singular lending relationships
• Portfolio has withstood COVID19 and other macro events, and is well placed to withstand the current revaluations in real estate
> Quarterly dividends delivered consistently since October 2013
• The Company has consistently sought to pay a stable quarterly dividend from its distributable profits
• This has led to a stable annualised dividend of around 7% of NAV
> Highly granular book
• 53 positions
> Transparent and conservative leverage
• Net leverage 20.0% (with £17m cash) as at 31 March 2023 versus a leverage limit of 40%
• Non-recourse and limited-recourse, term, structured finance provides returns optimisation and financial flexibility on senior loans
> Access to established real estate investment team at Cheyne, which manages c$5bn AUM
> Access to pipeline of enhanced return investment opportunities identified by Cheyne
• Cheyne’s immediate pipeline of deals stands at £2.0bn with a WA LTV of 59% and unlevered IRR of 11.7%
> Robust mitigation against a rising rates environment
• A high yielding portfolio, combined with a short weighted average life of 2 years, ensures minimal exposure to yield widening and the ability to redeploy quickly at higher rates
• Strong pipeline of floating rate senior loans
