TIDMRECI TIDMRECP TIDMERII
RNS Number : 2484Y
Real Estate Credit Inv. PCC Ltd
28 November 2014
Real Estate Credit Investments PCC Limited
Financial Results Announcement for the Half Year-Ended 30
September 2014
RECI(1) records half year net profit of GBP7.5 million
-- Net profits of GBP7.5 million include GBP4.3 million of fair
value gains on the investment portfolio.
-- Increase in NAV per share of 3.2% over the half year, to GBP1.590 as at 30 September 2014
-- The Company's commercial and residential funded loan
portfolio grew to GBP70.0 million (GBP92.6 million committed) as at
30 September 2014, which is a 37% increase from the GBP51.0 million
funded loan portfolio held at 31 March 2014, reflecting the more
attractive opportunity set RECI is seeing in the loan markets
-- Suitable loans originated by Cheyne Capital continue to feed
the investment pipeline; RECI has committed to make a further loan
post half year end
-- The directors of RECI intend to declare a dividend of 2.7p
per share in respect of RECI Ordinary Shares for the quarter ended
30 September 2014
RECI Key Financial Data H/E 30 Sept 2013 Y/E 31 Mar 2014 H/E 30 Sept 2014
---------------------------------------------------- ----------------- ---------------- -----------------
Gross Assets GBP108.5m GBP157.0m GBP159.4m
Investment Portfolio GBP99.2m GBP133.5m GBP136.5m
Cash GBP5.4m GBP18.3m GBP10.8m
Operating Income GBP6.8m GBP13.7m GBP7.2m
Fair Value (Losses) / Gains on Investment Portfolio GBP0.5m GBP1.0m GBP4.3m
Net / Profit* GBP3.9m GBP8.1m GBP7.5m
Net Asset Value per RECI Ordinary Share GBP1.556 GBP1.541 GBP1.590
---------------------------------------------------- ----------------- ---------------- -----------------
* Net profit takes hedging, operating and finance expenses into
account.
Over the half year RECI's investment strategy continued to
deliver on NAV growth and increased dividend yield
The drawn Loan Portfolio has increased from GBP51 million at 31
March 2014 to GBP70 million as at 30 September 2014. During the
half year, the Company made six new loans with commitments of GBP31
million, and also restructured its loans to a UK retail park and a
German multifamily deal providing a further net increase in its
commitments of GBP11 million. Since 30 September 2014 RECI has
completed a further loan, with two loans being repaid during the
same period. Cheyne Capital's (the "Manager") new loan origination
pipeline remains strong with GBP32 million new loans in
documentation. The Company is currently working to a maximum level
of loan commitments of 75% of GAV.
The Company recorded solid gains on the bond portfolio.
The overall portfolio strategy led to an increase in NAV per
share in the financial half year end to GBP1.590 as at 30 September
2014, up from GBP1.541 at 31 March 2014.
RECI delivered a positive financial performance in the half year
ended 30 September 2014 with GBP7.5 million of profits. Tom
Chandos, Chairman of RECI said: "The Board is confident that the
loan portfolio can show further growth in the second half of the
financial year, net of repayments of existing loans, thereby
enhancing the expected total return from the portfolio."
The Company has previously announced that, following the changes
to the Board last year, it would continue the process of rotating
long-serving members of the Board. Tom Chandos, Chairman, will
therefore not seek re-election at the next AGM and the Board will
now be undertaking a thorough search for his successor.
(1) RECI refers to the core segment of Real Estate Credit
Investments PCC Limited
Conference Call & Further Information
10.30 am BST Friday 28 November 2014.
+ 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: Henrietta Dehn +44 (0)20 3540 6455
Investor Relations: Nicole von Westenholz +44 (0)20 7968
7482
About the Company
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 preference 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 RECP Preference Shares are currently 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' (ticker ERII LN). The Cell
Shares trade on the Specialist Fund Market of the London Stock
Exchange plc. Seven Residual Income Positions are attributed to
ERII. Dividends or distributions will only be payable from ERII to
the extent that the asset cover ratio (the Preference Share Cover
Test) for the RECI Preference Shares is satisfied at the Company
level.
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 2014
30/09/2013 31/03/2014 30/09/2014
(GBP million) (GBP million) (GBP million)
------------------------------------ --- ---------------------- ----------------------- ---------------
Loan Portfolio (includes accrued
interest) 43.1 51.0 70.0
Bond Portfolio (includes accrued
interest) 58.3 85.8 70.3
Cash and Cash Equivalents 5.4 18.3 10.8
Derivative Assets 1.8 1.9 3.1
Other Assets - - 5.2
108.5 157.0 159.4
Other Liabilities (1.2) (2.7) (2.0)
Derivative Financial Liabilities (0.6) (0.5)
Dividend Payable - - -
Preference Share Liability (44.5) (41.6) (41.6)
(46.3) (44.8) (43.6)
Net Assets 62.2 112.2 115.8
Shares outstanding 39,966,985 72,818,496 72,818,496
Net Asset Value per Ordinary Share 1.556 1.541 1.590
----------------------------------------- ---------------------- ----------------------- ---------------
Loan Portfolio as at 30 September 2014
Significant loan portfolio growth
RECI significantly expanded its real estate loan portfolio to
GBP70 million from GBP51 million in the financial half year ending
30 September 2014. During the half year, the Company made GBP31
million new commitments over 6 new deals, taking total loan
commitments to GBP92.6 million as at 30 September 2014.
Additionally, in August 2014, the performing loan secured against a
multifamily residential portfolio across North Rhine Westphalia,
Germany was successfully restructured, and increased to fund
additional asset purchases on more favourable commercial terms.
This increased RECI's total funded loans to this sponsor from
GBP6.1 million to GBP12.5 million.
RECI made a GBP6.1 million commitment to a new investment loan
to a purchaser and developer of distribution assets in core UK
logistic locations. The Company also funded a new GBP7.2 million
mezzanine loan to assist in the acquisition of a major German
residential development company.
The average loan portfolio LTV exposure as at 30 September 2014
was 71.7% and the portfolio continues to provide attractive
risk-adjusted returns with a weighted average yield of 13.2% per
annum.
Loan realisations after 30 September 2014
A mezzanine loan secured against a new trading boutique hotel at
King's Cross was sold for par plus all accrued interest and fees.
This investment returned an annualised yield in excess of 15%.
Another position, previously an investment backed by German
multi-family properties which had received an in specie transfer of
shares, was successfully exited. This investment returned an
annualised yield in excess of 25%.
Focus on Europe's strongest markets
RECI's strong position in originating attractive new loans
enables the Company to focus investments on Europe's strongest
markets - the UK, Germany and also, potentially, Ireland. These
markets offer both strong deal flows and, crucially, a
lender-friendly legal framework. The Company will avoid lending in
more borrower-friendly jurisdictions such as Italy, Spain and
Portugal.
Loan Portfolio Summary as at 30 September 2014
Number of loans 14
Drawn Dirty Fair Value (GBP millions) 70.0
Total Loan Commitments (GBP millions) 92.6
Loans as % of GAV (drawn loan balance) 44%
Loans as a % of GAV (committed loan balance) 58%
Weighted average yield of loan portfolio 13.2%
Weighted average LTV of portfolio 71.7%
---------------------------------------------- -------
Top 10 Investment Portfolio Exposures(2) as at 30 September
2014
Market Value GBP75.9 million
WA Original LTV(3) 66.2%
WA Cheyne Current LTV(3) 67.7%
WA Effective Yield(4) 10.0%
Type Class Collateral Description
=========== ======== ===========================================================================================
Commercial B Bond - secured against government housing portfolio in the UK
Commercial Loan Whole loan secured against German multi-family properties
Commercial Loan Mezz loan secured on a fully let retail park in Essex
Commercial Loan Mezz loan to assist in the acquisition of major German residential development entity
Commercial E Portfolio of commercial loans secured by properties in Germany
Commercial Loan Mezz loan secured against a new operational hotel at King's Cross, London
Commercial A Portfolio of nursing homes operated by Four Seasons Health Care Group
Commercial Loan Mezz loan secured against a branded London hotel development in Shoreditch, London
Commercial Loan Priority ranking shareholder loan on a portfolio of UK logistics and industrial properties
Commercial Loan Mezz loan secured by residential land and homes under development in South East UK
============= ====== ===========================================================================================
Real estate bond portfolio records solid gains
As at 30 September 2014, the portfolio of 70 bonds was valued at
GBP70.3 million, with a nominal face value of GBP85.5 million(5) .
The total gross return of the bond portfolio in the half year ended
30 September 2014 was 9%. The weighted average effective yield to
maturity of the portfolio at market prices as at 30 September 2014
was 4.9%, with a weighted average life of 6.9 years (the weighted
average effective yield to maturity of the portfolio as at 31 March
2014, using market prices as at 31 March 2014, was 6.2%, with a
weighted average life of 6.8 years). As at 30 September 2014, the
average purchase price across the portfolio was 83% of par and
assets were purchased with a weighted average expected yield to
maturity of 9.9% (as at 31 March 2014, the average purchase price
across the portfolio was 81% of par and assets were purchased with
a weighted average expected yield to maturity of 9.9%). As at 31
October 2014, the portfolio consisted of 69 bonds with a fair value
of GBP68.3 million and a nominal face value of GBP83.8 million(6)
.
2 Based on fair value of bonds and loans.
(3) The weighted average original loan to value has been
calculated by reference to the original acquisition value of the
relevant collateral as disclosed at the time of issue of the
relevant bond or loan. The original LTV is weighted by the market
value of the bonds and loans. The weighted average Cheyne current
LTV has been calculated by the Investment Manager by reference to
the current value ascribed to the collateral by the Investment
Manager. In determining these values, the Investment Manager has
undertaken its own internal valuation of the underlying collateral.
Such valuations have not been subject to independent verification
or review. WA LTV figures are calculated with original notional
using pool factor and FX rate as at 30 September 2014.
(4) WA effective yield is based on the effective yield as at
most recent purchase and is based on Investment Manager's pricing
assumptions and actual returns may differ materially from those
expressed or implied herein. WA effective yield figures are
calculated with original notional using pool factor and FX rate as
at 30 September 2014.
5 Cost and nominal shown are calculated with original notional
using pool factor and FX rate as at 30 September 2014.
6 Cost and nominal shown are calculated with original notional
using pool factor and FX rate as at 31 October 2014.
Real Estate Bond Portfolio Breakdown
Breakdown of RECI's bond portfolio as at 30 September 2014 and
31 March 2014 by jurisdiction (by reference to underlying
assets)
31 March 2014
UK 69.8%
--------------- ----------
Germany 28.1%
--------------- ----------
Italy 1.3%
--------------- ----------
Holland 0.4%
--------------- ----------
Ireland 0.3%
--------------- ----------
Portugal 0.1%
--------------- ----------
Total (GBPmm) GBP85.8mm
--------------- ----------
30 September 2014
UK 70.5%
--------------- ----------
Germany 25.9%
--------------- ----------
Italy 1.5%
--------------- ----------
France 1.4%
--------------- ----------
Holland 0.5%
--------------- ----------
Ireland 0.2%
--------------- ----------
Total (GBPmm) GBP70.3mm
--------------- ----------
Values may not sum to 100% due to rounding differences
Monthly Bond Performance Summary as at 30 September 2014
May June July August September
--------------------- ------ ------ ------ ------- ----------
% Fair Value Change 1.03% 1.12% 1.25% -0.48% 2.52%
WA Purchase Price 1.00 - 0.98 0.98 -
WA Purchase Yield 2.59% - 3.81% 4.43% -
--------------------- ------ ------ ------ ------- ----------
Asset Class Distribution of Bond Portfolio by Fair Value as at
30 September 2014
Total as at
Bond Class UK CMBS UK RMBS Euro CMBS Euro RMBS Total 31 March 2014
----------------------------- -------- --------- ---------- ---------- ------- ---------------
A 8.7% 1.5% 0.3% 0.0% 10.4% 20.7%
B 31.2% 4.1% 3.0% 0.0% 38.3% 33.9%
C 2.1% 6.5% 5.5% 0.7% 14.9% 12.8%
D 1.8% 4.3% 7.4% 0.4% 13.9% 11.4%
E and Below 2.9% 8.1% 11.1% 0.5% 22.5% 21.2%
----------------------------- -------- --------- ---------- ---------- ------- ---------------
Total 46.8% 24.5% 27.2% 1.6% 100.0% 100%
----------------------------- -------- --------- ---------- ---------- ------- ---------------
Total as at 31 March 2014 44.5% 26.0% 29.1% 0.4%
Values may not sum to 100% due to rounding differences
Outlook - Investment of new capital
The investment team expects to close several loan transactions
in the coming months and has allocated upward of GBP32.1 million to
these deals, all of which are in advanced stages. The Company
expects the pipeline to continue growing, given the sector's
strength, which juxtaposed with the long term reduction in
commercial bank lending capacity, creates a compelling investment
opportunity.
The bond portfolio had a total gross return of approximately 9%
in the financial half year ended 30 September 2014 and strong bond
portfolio performance is expected to continue into 2015. The
Manager remains well-placed to participate in new issue bonds at
attractive yields, and will continue to rotate out of lower
yielding liquid bonds to fund new loan opportunities where the
risk/reward dynamics deem it appropriate.
European Residual Income Investments (ERII)
It is the Company's objective, to the extent practicable, to
realise the ERII portfolio and return cash to shareholders. The
table below shows figures as at 30 September 2014 compared to 31
March 2014.
ERII Key Quarter Financial Data Q/E 31 March 2014 Q/E 30 September 2014
------------------------------------------- ------------------ ----------------------
Cash and receivables (excluding expenses) EUR1.1m EUR18.1m
Residual Total Dirty Fair Value EUR9.4m -
Asset Coverage Ratio 3.95 4.17
Distribution/Dividend Declared 3.2c N/A
Net Asset Value per ERII Share 0.68 4.47
ERII Shares Outstanding 15.4m 4.0m
Investment Portfolio
Overview
On 7 October 2014 the Company announced the successful sale of
Alba 05, Alba 06 and Eirles 236B at above their aggregate value
assessed in previous valuations. Following these sales, there is
one position remaining in the ERII Cell. That position has been
held at zero value since the ERII Cell was created, and is expected
to have no value in the foreseeable future.
The Company announced the return of predominantly all of the
Cell's capital to ERII shareholders on 24 November. One remaining
asset currently held at zero valuation will be retained for the
time being.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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