REAL ESTATE CREDIT INVESTMENTS LIMITED Results Presentation November 2017 www.recreditinvest.com Ticker: RECI LN
Company Overview Real Estate Credit Investments (RECI) is a closed-ended investment company which originates and invests in real estate debt secured by commercial or residential properties in Western Europe, focusing primarily in the United Kingdom and Germany. The Company’s aim is to deliver a stable quarterly dividend with minimal volatility, through economic and credit cycles. Investments may take different forms but are mainly in the form of: – Loans : real estate loans (senior and mezzanine) – Bonds : listed real estate debt securities such as Commercial Mortgage Backed Securities (CMBS) bonds. 2
Summary as at 30 September 2017 RECI Cheyne Established Focused Compelling Risk Stable Adjusted Returns Dividend Innovative Expert $6.0 bn £0.03 $2.7bn 63.8% AUM Q2 Dividend of AUM in Real Estate Loan-to-Value Credit Funds 141 7.5% 1 7.5% Employees UK Dividend Yield Total NAV Return Domiciled Established in 2000 Investment Portfolio £203.1m Cheyne Capital (the Investment Manager) is one of the largest and most successful providers of European real estate debt. NAV £207.6m RECI continues to benefit from Cheyne’s significant expertise NAV per share £1.633 and platform in the origination and trading of real estate loans and liquid mortgage backed securities. The platform’s skill sets Market Cap £212.9m 2 include origination, execution, valuation, asset management, Share Price £1.675 risk management and workouts. 1 Based on share price of £1.675 as at 30 September 2017 2 Market cap as at 30 November 2017 was £221.2m For avoidance of doubt, “Q2” refers to the quarter ended 30 September 2017, to align with the Company’s financial year which ends 31 March. Information included in this presentation is as of or for the period ended 30 September 2017, unless otherwise indicated. 3 Past performance is not a guide to future results. Actual results and developments may differ materially from those expressed or implied herein.
Q2 Highlights (Quarter ended 30 September 2017) Q2 NAV Total Return of 3p per share (7.5% annualised) • Q2 dividend (second interim) of £0.03 per share equates to a 7.5% dividend yield • Earnings & Dividends NAV per share £1.633 • Q2 loan commitments of £43.4m; up from £34.9m in Q1 • £78.3 million of new commitments over four deals in the half year, taking total loan • Originations commitments to £178.5m as at 30 September 2017 68% weighted average loan portfolio LTV, with an unlevered IRR of 11.3% • £200.1m investment portfolio comprised of real estate loans and bonds with a weighted • average LTV of 63.8% Portfolio Composition UK and Germany focused • Leverage capacity of 40% of NAV equates to £83.0m based on NAV of £207.6m • Total borrowings of £31.2m at end of Q2 at a weighted average cost of 1.35% • Financing £28.4m of realisations in Q2 • 2 loans fully repaid / 2 loans partially repaid – Realisations Several full or partial bond repayments – All realisations achieved or exceeded expected returns • 4 Past performance is not a guide to future results. Actual results and developments may differ materially from those expressed or implied herein.
Earnings and Dividends Reconciliation Gross to Net reconciliation for the financial half year ended 30 September 2017 • Absolute £m Per Share % Perf Annualised Bond coupon income 2.21 0.02 2.7% Loan interest income 6.13 0.06 7.6% Other income (cash etc) 0.15 0.00 0.2% Gross interest income 8.49 0.09 10.5% Finance costs -1.58 -0.02 -1.9% Expenses (inc Management Fee) -1.73 -0.02 -2.1% -3.31 -0.03 -4.1% Fair Value Adjustments (inc realised and 0.87 0.01 1.1% unrealised profit and loss on investments) Net loss/profit 6.05 0.06 7.5% The values for each column may not sum to the total due to rounding differences. Percentage returns based on annualised figures (taking half year figures multiplied by two) over the NAV per share as at 31 March 2017 This represents the gross to net reconciliation for the first six months of financial year end 31 March 2018 – On 16 September 2017, the Company redeemed and cancelled all of its £45.0m Preference Shares (£3.0m of – which were held in treasury). RECI has replaced some of this Preference Share leverage, which carried a coupon of 8% per annum, with short term leverage at a significantly lower cost of borrowing (the weighted average cost being 1.35% per annum as at 30 September 2017). Dividend Coverage • Dividends of 3p per quarter covered by net profits – 5 Past performance is not a guide to future results. Actual results and developments may differ materially from those expressed or implied herein.
Portfolio Composition • RECI’s investment portfolio was valued at £200.1m as at 30 September 2017 • The loan portfolio of £109.8m comprises 19 loans, with an average LTV of 68.3%, an average yield of 11.3% and a weighted average life of 2.5 years • The bond portfolio, valued at £90.3m has the potential for strong defensive returns: Face value as at 30 September 2017 of £94.7m – The portfolio is characterised by a short duration and high coupon, providing resilience in turbulent markets – • Strong cash balance of £42.1m to invest in transaction pipeline, following receipt of £39.8m from the third placing under the current placing programme. Balance Sheet Geographic Breakdown 3 Portfolio by Investment Strategy 30 Sep 2017 31 Mar 2017 Core Loans £109.8m £109.3m Bonds £90.3m £49.8m Core+ Loans Financing £31.2m £41.9m Bonds Value Add / Transitional Cash, Cash Equivs & £42.1m £24.9m Cash held at Brokers Other Assets & Development £3.5m £2.2m Liabilities 0% 20% 40% 60% Net Assets £207.6m £144.3m 3 An additional 1.4% of the portfolio is Pan-European 6 Past performance is not a guide to future results. Actual results and developments may differ materially from those expressed or implied herein.
Top 10 Positions by Commitment 8.9% £151.7m £98.5m 58.6% WA Effective Total Commitment Fair Value Drawn 1 WA LTV 2 Yield 3 Commitment Description Fair Value LTV Sector Investment Strategy Loan Type 1 London Mixed Use Development £34.9m £3.4m 45% Mixed-Use Senior Loan Development 2 London Office to Residential £20.0m £3.3m 39% Residential Senior Loan Value Add / Transitional 3 London Mixed Use Development £15.4m £15.2m 58% Mixed-Use Mezzanine Loan Development 4 London Office Building £15.4m £15.4m 78% Office CMBS Core 5 Regional UK Housebuilder* £14.9m £4.4m 80% Residential Mezzanine Loan Development UK Leisure £11.6m £11.6m 67% Leisure CMBS Core 6 7 UK Logistics* £10.1m £11.8m 73% Logistics Mezzanine Loan Core+ 8 Regional UK Housebuilder* £10.0m £13.8m 41% Residential Mezzanine Loan Development 9 UK Leisure £9.8m £9.8m 67% Leisure CMBS Core 10 UK Student Housing £9.6m £9.6m 70% Student Housing CMBS Core *These are profit participating loans 1. Drawn total Fair Value amount (includes accrued interest). 2. The Weighted Average Loan to Value has been calculated by reference to the value of the relevant collateral of the relevant bond or loan. 3. WA based on commitment. WA effective yield is based on i) for the bonds the effective yield is based on the current expected yield on the bonds using prices as at 30 September 2017, including the uplift from the £31.2 million financing secured against the £90.3 million bond portfolio., ii) for the loans the yield stated is the effective accounting yield based on the funded loan balances, which includes interest and fees. 7 Past performance is not a guide to future results. Actual results and developments may differ materially from those expressed or implied herein.
Portfolio Composition - Bonds £94.7m 28 £90.3m 8.7% 3.0 yrs Nominal Face WA Life Bonds Fair Value 1 WA Yield 2 Value Portfolio comprises CMBS, RMBS and other fixed income securities, all collateralised by real estate in the UK and • Western Europe Bond purchases in quarter: £13.6m • Top 5 Bonds By Geography Current 4% 1% 3% Description Fair Value LTV Unlevered Sector Yield 8% UK Prominent office building in City of £15.4m 78% 8.1% Office London Pan-European 3% UK’s largest and foremost operator of France £11.6m 67% 4.4% Leisure holiday villages Germany UK’s largest and foremost operator of £9.8m 67% 3.7% Leisure holiday villages Italy Netherlands Student UK student housing £9.6m 70% 7.6% Housing 81% Prime retail assets and development French £7.4m 40% 10.5% sites in France Retail 1. Excludes accrued interest 2. WA effective yield is based on the current expected yield on the bonds using prices as at 30 September 2017 and is based on Cheyne’s pricing assumptions and actual returns may differ materially from those expressed or implied herein. This yield on the bonds includes the uplift from the £31.2m financing secured against the £90.3m bond portfolio 8 Past performance is not a guide to future results. Actual results and developments may differ materially from those expressed or implied herein.
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