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11 Feb 2011 07:00
Real Estate Credit Investments Limited (the "Company")
11 February 2011
This interim management statement relates to the period from 30 September 2010 to 11 February 2011 and has been prepared solely in order to comply with the requirement (pursuant to the EU Transparency Directive as implemented by the Disclosure and Transparency Rules) for an interim management statement to be made by the Company no earlier than 10 December 2010 and no later than 17 February 2011. The Company is currently in the process of preparing its quarterly report for the period ended 31 December 2010 which is expected to be released in March 2011. Unless otherwise noted herein, the financial information provided in this interim management statement (and the asset valuations underlying that financial information) are as at 30 September 2010 and such financial information (and underlying valuations) will be stated as at a more recent date in the Company's forthcoming quarterly report.
Capital Raising
On 17 September 2010 the Company raised €27 million in a placing and open offer of new ordinary shares in the capital of the Company and a bonus issue of preference shares (the "Capital Raising"). The proceeds of the Capital Raising have been invested as described below.
Performance Summary
The Company has successfully invested the net proceeds from the capital raising at yields in line with our target return. In the period from 30 September 2010 to 31 January 2011, the Company invested €26.2 million at a weighted average expected yield of 13.8%.
As at 31 January 2011, the Real Estate Debt Portfolio consisted of 85 bonds at a cost of €53.9 million and a nominal value of €97.7 million. Cash flows from the bond portfolio totalled €1.9 million in the December quarter up from the €0.8 million in the previous quarter. 63.3% of the bond investment (by cost value) was Commercial Mortgage Backed Securities ("CMBS") bonds and 36.7% were Residential Mortgage Backed Securities ("RMBS") bonds.
The Company's legacy portfolio of SME and mortgage portfolios recorded cash flows of €5.9 million in the December 2010 quarter up from €3.8 million in the previous quarter. €3.4 million was attributable to the European mortgage portfolio, €2.2 million to the UK mortgage portfolio and €0.3 million to the SME portfolio . On 25 January 2011, the Company sold its Eurosail 2006-1 UK mortgage portfolio at a level that was accretive to NAV.
The cash balance as at 31 January 2011 was €11.8 million, down from €29.1 million at 30 September 2011 due mainly to the investments made in real estate debt bonds.
Investment Portfolio
The two tables below summarise the Company's investment portfolio encompassing both the Real Estate Debt Portfolio and Residual Income Investment Portfolio as at 31 January 2011.
Portfolio Composition by Jurisdiction as at 31 January 2011*
* by reference to underlying asset originator. Figures stated as a percentage of the fair value of the Company's investment portfolio including accrued interest. Figures stated use Real Estate Debt Portfolio Fair Values as at 31 January 2011 and the Residual Income positions at Fair Value as at 30 September 2010.
Jurisdiction | % |
UK | 38.0% |
Portugal | 23.6% |
Germany | 20.1% |
Netherlands | 10.9% |
Italy | 5.4% |
Ireland | 1.6% |
France | 0.3% |
Switzerland | 0.1% |
Portfolio Composition by Asset Type as at 31 January 2011*
*by reference to underlying asset originator. Figures stated as a percentage of the fair value of the Company's investment portfolio including accrued interest. Figures stated use Real Estate Debt Portfolio Fair Values as at 31 Jan 2011 and the Residual Income positions at Fair Value as at 30 Sep 2010.
Portfolio Composition | % |
Real Estate Debt | 48.2% |
European Mortgages | 28.2% |
SME | 14.6% |
UK Mortgages
| 9.0% |
Real Estate Debt Portfolio as at 31 January 2011
Current Rating* | UK CMBS | UK RMBS | Euro CMBS | Euro RMBS | SME | Total |
AAA | 1.6% | 6.6% | 1.0% | 0.0% | 0.0% | 9.2% |
AA | 1.5% | 6.3% | 5.2% | 0.2% | 0.0% | 13.1% |
A | 2.6% | 6.1% | 8.5% | 2.9% | 0.0% | 20.2% |
BBB | 5.4% | 8.1% | 6.8% | 0.0% | 1.7% | 22.1% |
BB and Below | 7.1% | 9.1% | 19.0% | 0.2% | 0.0% | 35.5% |
Total | 18.2% | 36.2% | 40.5% | 3.3% | 1.7% | 100.0% |
*Ratings sourced from S&P or Fitch
\* Totals may not sum due to rounding differences
Residual Income Investment Portfolio at 31 January 2011
Issuer | Description of Underlying Assets |
Alba 2005-1 plc | UK non-conforming* and buy-to-let residential mortgages |
Alba 2006-1 plc | UK non-conforming* residential mortgages, primarily first-ranking |
Amstel Corporate Loan Offering BV 2006-1 | Middle market corporate loans |
Eirles Three Limited (Tranche 236B) | SME loans |
Lusitano Mortgages No. 1 plc | First-ranking, fully amortising Portuguese residential mortgages |
Lusitano Mortgages No. 2 plc | First-ranking, fully amortising Portuguese residential mortgages |
Lusitano Mortgages No. 3 plc | First-ranking, fully amortising Portuguese residential mortgages |
Magellan Mortgages No. 1 plc | First ranking, fully amortising Portuguese residential mortgages |
Newgate Funding plc | UK non-conforming* residential mortgages, primarily first-ranking |
RMAC 2004-NSP4 plc | UK non-conforming* residential mortgages, primarily first-ranking |
RMAC 2005 NS3 plc | UK non-conforming* residential mortgages, primarily first-ranking |
RMAC 2005 NS4 plc | UK non-conforming* residential mortgages, primarily first-ranking |
Sestante Finance S.R.L. | First-ranking prime Italian residential mortgages |
*Non-conforming relates to subprime and near prime residential mortgages.
Outlook
The Company continues to make progress in laying foundations for long-term growth. It has deployed capital raised in September 2010 to add to its Real Estate Debt Portfolio, putting it firmly on course to become RECI's flagship strategy.
The Company has maintained this approach in the fourth quarter of its financial year, with market conditions currently supporting our view that it can invest profitably in dislocated assets.
The Company believes that real estate debt investments, in particular residential and commercial mortgage-backed bonds, should deliver attractive returns and a favourable risk/reward profile. The shift towards publicly-traded securities by the Company is providing greater transparency of asset prices and more liquidity.
RECI will continue to manage the SME, European Mortgage and UK Mortgage Portfolios with a high degree of diligence. The priority remains to identify the right opportunities to sell such assets. At the same time we are closely monitoring any developments that affect asset values, unemployment levels in Portugal and the Euribor rate.
Investor Enquiries:
Public Relations:
James Wallis
M:Communications Tel: +44(0)20 7920 2329
Website:
www.recreditinvest.com
mail@recreditinvest.com
Investor Relations:
Natalie Withers / Hannah Attride
Cheyne Capital Tel: +44(0)20 7968 7450
About the Company
Real Estate Credit Investments Limited is a Guernsey-incorporated investment company listed on the London Stock Exchange. The Company's investment manger is Cheyne Capital Management (UK) LLP. The Company has adopted a long term strategic approach to investing and focuses on identifying value.
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).
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