RECI ‘soundly positioned for reliable long-term income’ says Chairman Bob Cowdell in annual report

Real Estate Credit Investments

The Board of Directors of Real Estate Credit Investments Limited (LON:RECI) has announced the release of the Company’s Annual Report and Audited Financial Statements for the year ended 31 March 2022.

An attractive sustainable dividend of 3 pence per quarter and return to trading around NAV

Chairman’s statement

I am writing to you about our financial year ended 31 March 2022, which continued to be impacted by Covid-19 and the various Government measures taken to manage it. There has been great progress made, with many countries returning to a degree of normality, driven mostly by vaccination programmes. Nevertheless, the potential for further mutations and the need for global vaccination success, means the pandemic remains a disruptive threat overshadowing us.

As the last financial year neared its close, the humanitarian disaster of Russia’s invasion of Ukraine began and continues as I write, with its attendant economic and geopolitical shockwaves. While our thoughts are first and foremost

with those affected, I can report that there has been no direct impact on RECI’s portfolio of investments, either because of location or the imposition of sanctions by Western governments.

Late 2021 and this year have seen the return of inflation and its adverse economic impacts on many households, something which most people in developed countries have not seen for over 40 years. Inflation has continued to rise year to date, fuelled by the war in Ukraine further exacerbating commodity price increases and continuing global supply chain constraints. The rise of inflation has led to central banks increasing interest rates, with the prospect of further rises to come. RECI’s portfolio composition and structure positions it well to withstand these challenges, as further described in the Investment Manager’s Report.

Despite this challenging environment, I am pleased to report that for the year ended 31 March 2022, RECI delivered for our Shareholders a total net profit of £24.6 million; maintained an unchanged dividend of 3 pence per quarter throughout the year; and saw RECI’s share price return to trade around NAV.

On 16 September 2021, the Company’s latest four-yearly continuation vote was passed by Shareholders at our AGM, with 99.9% of votes cast in favour. Your Board and Investment Manager are grateful for the support of our investors and remain committed to continue to deliver sustainable attractive returns for them going forward.

Financial Performance

RECI reported a total net profit for the financial year ended 31 March 2022 of £24.6 million on year end total assets of £447.0 million, compared with a £37.2 million net profit in the year ended 31 March 2021, on year end total assets of £426.2 million.

The NAV as at 31 March 2022 was £1.50 per share (£1.51 per share as at 31 March 2021) which, combined with the 12 pence per share of dividends payable in respect of the year ended 31 March 2022, represents an annualised total return for Shareholders of 6.9% for the year.

During the financial year ended 31 March 2022, the Company’s shares traded at an average premium to NAV of 0.7% (14.1% discount for the year ended 31 March 2021).

Total quarterly dividends declared in respect of the financial year ended 31 March 2022 were an unchanged 12 pence per share, returning £27.5 million to our Shareholders.

In the course of the last financial year, the Company utilised short-term leverage at an average cost of borrowing of 1.84%, with average gross leverage of £100.5 million or 1.29x NAV.

Throughout the financial year to 31 March 2022, the Company invested £113.1 million, of which £24.9 million was funded into real estate loan commitments, £56.7 million into self-originated real estate bonds, and £31.5 million into market real estate bonds. RECI also received cash repayments and interest of £132.2 million in this year.

Financial Year Review

During the financial year, while mindful of balancing prudent cash retention with utilisation, the Investment Manager continued to invest into an attractive pipeline of opportunities offering enhanced returns, which underpin RECI’s attractive current dividend pay-out of 12 pence per annum, improve dividend cover and provide the opportunity for NAV growth. The investment was funded by cash from realisations and repayments and deploying leverage.

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When the financial year began on 1 April 2021, Real Estate Credit Investments had gross leverage of 1.22x and leverage net of cash of 1.16x. The Board and Cheyne continued to consider the appropriate level of gearing for the Company while weighing up the market outlook and the emergence of new investment opportunities; and ended the financial year with gross leverage of 1.29x (1.14x net of cash). RECI introduced non-recourse lending on the loan portfolio during the last financial year and the Directors and Investment Manager continue to consider potential leverage options at the Company and portfolio level.

RECI’s share price at the start of the financial year was £1.37, representing a discount to NAV of 9.4%. Throughout the year, RECI maintained its 3 pence per share quarterly dividend; continued to receive realisation proceeds and repayments; and executed attractive investment opportunities. This progress was reflected in its share price which continued to strengthen. The share price had appreciated 10.2% by the financial year end and the discount was replaced by a premium of 0.4% as at 31 March 2022. Since 1 April 2022, the Company’s shares have traded at an average premium of 0.1%.

Throughout the last financial year, the Investment Manager continued to provide a detailed and comprehensive review of RECI’s portfolio as part of our programme of enhanced investor communication. A number of online events and meetings were held to maintain a regular dialogue with our Shareholders and potential new investors. In addition, the Board is working with its service providers to enhance the Company’s website with the aim of making Shareholder information more accessible.

The Directors and Cheyne are committed to providing detail and transparency regarding the Company’s portfolio and investment strategy, allowing all investors to focus upon RECI and its merits and opportunities, notwithstanding the broader market environment.

The Board remains grateful for the focus and expertise of Cheyne and our team of advisers who, despite ongoing Covid-19 disruption to working practices, continued to support RECI throughout the last financial year.

Board Update

As previously announced, Graham Harrison retired from the Board at the September 2021 AGM after many years of valued service.

Following his retirement and Colleen McHugh’s appointment in March 2021, the Board comprises an equal representation of male and female Directors.

Since the start of the last financial year, members of the Board have purchased an aggregate of 42,000 shares in the Company.

Environmental, Social and Governance Matters (“ESG”)

The Directors continue to recognise and support the growing focus on ESG considerations and the importance of ethical factors, including climate change, when pursuing the Company’s investment objective and in the selection of service providers and advisers to the Company.

Reflecting this, the Board has asked Colleen McHugh to take up the role of “ESG Lead” and work closely with Cheyne in developing and implementing RECI’s ESG approach.

Pages 19-20 of the Strategic Report and pages 26-28 of the Sustainability Report provide further information about the Company’s and the Manager’s approach to ESG matters.


Nobody can ignore or predict with certainty, the outcome and impact of the continuing Covid-19 pandemic; the human tragedy unfolding in Ukraine; the rise of inflation and interest rates; and the growing cost of living crisis.

Against this background, your Board and Investment Manager will continue to focus on that which we can exercise direct control over, namely: expert origination capability; highly disciplined investment selection; modest levels of flexible gearing; maintaining the payment of an attractive and consistent dividend; and positioning the portfolio to enhance NAV.

In these challenging times, the Directors believe that Real Estate Credit Investments remains soundly positioned to continue to deliver an attractive stable dividend to investors seeking a reliable long-term income stream.

Bob Cowdell


23 June 2022

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