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georgeschuylerfinance · 3 months ago

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Real Estate Credit Investments reports annual profit uplift and 10.4% dividend (LON:RECI)

Real Estate Credit Investments Limited (LON:RECI) has announced its Annual Report and Audited Financial Statements for the year ended 31 March 2024.

Outline of the Annual Report

1. Overview and Highlights

Introduction: Overview of Real Estate Credit Investments Limited (RECI) and its market positioning as a specialist investor in UK and Western European real estate markets.

Key Figures: Net assets, NAV per share, total assets, net profit, and share price performance as of 31 March 2024.

Dividend Stability: RECI’s consistent quarterly dividends and its stable income amidst changing interest rate environments.

2. At a Glance

Investment Strategy: Details about RECI’s approach to investing in real estate debt secured by commercial or residential properties in Western Europe.

Portfolio Composition: Breakdown of the investment portfolio, including the number of positions, types of assets, geographic distribution, and yield metrics.

3. Chairman’s Statement

Performance Overview: Commentary on the company’s performance, market conditions, and strategic decisions.

Future Outlook: Insights on expected market conditions, potential interest rate changes, and the company’s preparedness for future opportunities.

4. KPIs and Financial Highlights

Key Performance Indicators (KPIs): Detailed financial metrics including NAV per share, share price, discount, leverage, earnings per share, dividends, and total NAV return.

Financial Performance: Comparative financial performance for the years ending 31 March 2023 and 2024.

5. Business and Strategy Review

Strategic Framework: Objectives, performance highlights, and strategies to exploit market opportunities and deliver stable dividends.

Portfolio Management: Overview of investment activities, repayments, dividends paid, and the composition of the investment portfolio.

6. Investment Manager’s Report

Market Analysis: Macroeconomic backdrop and its implications for real estate assets.

Investment Strategy: Approach towards senior real estate lending and management of the investment portfolio.

Performance and Outlook: Insights into the performance of the investment portfolio and future strategy to maintain and enhance returns.

7. Stakeholder Engagement

Engagement Activities: Overview of how the company engages with its stakeholders, including shareholders, service providers, and the community.

Diversity and Inclusion: Details on the company’s approach to diversity and inclusion within its governance framework.

8. Sustainability Report

ESG Integration: Description of how environmental, social, and governance (ESG) considerations are integrated into the company’s investment process.

Sustainability Initiatives: Examples of sustainable investment projects and their impact.

Cheyne’s ESG Policies: Details on the investment manager’s ESG policies and partnerships to enhance sustainability.

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georgeschuylerfinance · 3 months ago

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Build to Rent (BTR) developments: Transforming the UK housing market

The Build to Rent (BTR) sector is rapidly expanding in the UK, introducing innovative solutions to meet the increasing demand for high-quality rental properties, writes Build Warranty

This growth is marked by new schemes and initiatives that aim to enhance the living experience for tenants and streamline property management for investors.

New schemes and innovations in the Build to Rent sector

One of the latest developments in the BTR sector is the launch of the UK’s first Single-Family Housing (SFH) BTR TV advert by Simple Life.

This advert is part of a broader brand awareness campaign designed to highlight the benefits of SFH BTR properties, which combine the privacy and space of a single-family home with the convenience of professionally managed rental services.

This initiative reflects the growing trend towards more flexible and family-friendly rental options, catering to the diverse needs of the modern renter.

In addition, Ascend has launched an industry-first online SFH BTR operational expenditure tool. This innovative tool provides investors with detailed insights into the operating costs associated with managing SFH BTR properties.

By offering a comprehensive view of expenses, the tool helps investors make informed decisions, optimise their investment strategies, and improve overall financial performance.

Enhancing property management

The Build to Rent sector is also witnessing advancements in property management practices.

For example, Touchstone has been appointed as the managing agent for Cheyne Impact Real Estate’s latest scheme in Acton Gardens. This appointment underscores the importance of professional management in ensuring the success of BTR developments.

Touchstone’s expertise in managing large-scale rental properties ensures that tenants receive high-quality services and that properties are maintained to the highest standards.

Furthermore, organisations like BW Build Warranty play a crucial role in the BTR sector by providing comprehensive insurance and warranty services.

BW Build Warranty offers structural warranties and latent defects insurance for new builds, which are essential for safeguarding investments and ensuring the long-term durability of properties.

Their services help reduce risks for developers and investors, fostering confidence and stability within the BTR market.

Government support and regulation

Government policies and regulations are also shaping the growth of the Build to Rent sector.

The upcoming Future Homes Standard, set to be implemented in 2025, will require new homes to produce significantly lower carbon emissions. This regulation is part of the UK’s broader strategy to reach net-zero carbon emissions and improve home energy efficiency.

Such policies not only promote sustainability but also make BTR properties more attractive to environmentally conscious tenants.

The government’s support extends to financial incentives as well.

The Affordable Homes Guarantee Scheme, which has been expanded to £6bn, provides low-cost loans to housing providers. This funding is instrumental in building new affordable homes and upgrading existing properties to modern standards.

By facilitating access to affordable financing, the scheme encourages the development of more Build to Rent properties, helping to alleviate the housing shortage and meet the rising demand for rental housing.

Impact on tenants and communities

The expansion of the BTR sector is significantly impacting tenants and communities. Build to Rent developments offer a range of amenities and services that enhance the living experience for residents.

These include on-site gyms, communal spaces, and professional management services that ensure properties are well-maintained and secure.

Such features make BTR properties particularly attractive to young professionals and families looking for flexible, high-quality rental options.

Moreover, Build to Rent developments contribute to the regeneration of urban areas.

By providing modern, well-designed rental properties, these developments help revitalise communities and stimulate local economies.

The focus on sustainability and energy efficiency also supports the UK’s environmental goals, promoting a greener and more sustainable future for housing.

For further advice or to obtain a quote, call Build Warranty’s experts at 02039665409 or complete a simple online form: https://buildwarranty.powerappsportals.com/ldi-application/

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georgeschuylerfinance · 3 months ago

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RECI Chairman pleased with robust NAV, quarterly dividends, future share and growth prospects

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 2024.

OVERVIEW

Chairman’s Statement

RECI continues to deliver a robust NAV and attractive quarterly dividends of 3 pence per share.

RECI Chairman Bob Cowdell states: I am pleased to report that for the year ended 31 March 2024, RECI delivered a total net profit of £21.9 million and maintained an unchanged dividend of 3 pence per quarter, despite challenging times for the listed investment company sector.

The last financial year saw the war in Ukraine continuing and the events of 7 October 2023 and Israel’s response in Gaza, have seen heightened tensions in the Middle East. Elsewhere, geopolitical tensions and concerns remain, in a year of record numbers of government elections worldwide.

While the rate of inflation has been reducing from its peak, strong labour markets and energy prices have caused Central Banks to delay in cutting interest rates for longer than was expected. The Bank of Canada and the European Central Bank have recently announced rate reductions and consensus remains that interest rates will reduce over the rest of 2024 and 2025 bringing benefits to households and corporate borrowers. The return to long-term lower interest rates, albeit not to the lows of the last decade, will see income seekers move away from cash and government bonds as they seek higher returns on their investment. A reduction in interest rates should also benefit and allay investor concerns about the credit and real estate markets.

The economic and geopolitical challenges of the last year, combined with discount, liquidity and some governance issues, have seen investor sentiment negatively impacted across the whole listed investment company sector. Concerns over credit and UK equity markets and real estate and private equity valuations have driven significant investor selling, allied to the need to sell investment company shares to provide liquidity to satisfy significant levels of redemptions in investors’ underlying funds. This combination has seen investment companies’ share price discounts widen to near record levels.

Against this challenging backdrop, the Board and Cheyne have continued to focus on RECI’s core strengths and seek to deliver for our Shareholders. The Company’s shares traded at an average discount to NAV of 14.7% during the financial year ended 31 March 2024. Reflecting market sentiment, the Real Estate Debt Sector traded at an average discount of 26.3% (excluding RECI) over the same 12 months1.

During the last financial year, the Company received interest and repayments on its portfolio to fund its existing investment commitments. Since the year end, the Company has received two further repayments totalling £16.7 million. The Board continues its practice of considering all options when assessing the levels of excess cash to be retained or deployed by the Company from time to time and how any such cash available for deployment should be allocated. Excess cash is regarded as the cash available following recognition of the obligation to ensure sufficient cash resources to pay, inter alia, the Company’s expenses, borrowings, dividends, and fund its ongoing contractual loan commitments, from time to time (“Available Cash”).

Mindful of the Company’s prevailing discount and Available Cash, the Board launched an initial buyback programme in August 2023 and a successor buyback programme in March 2024.

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

I am pleased to report that RECI won the Best Performance Award as the top performer over three years in the Specialist Debt Category at Citywire’s annual awards ceremony in November 2023.

Reflecting your Board’s and our Investment Manager’s confidence in RECI and its future, the Directors and employees of Cheyne have purchased an aggregate of 1.24 million shares in the Company since the start of the financial year on 1 April 2023.

1 Source: Liberum, company data

Financial Performance

RECI reported a total net profit for the financial year ended 31 March 2024 of £21.9 million on year-end total assets of £352.3 million, compared with a £20.6 million net profit in the year ended 31 March 2023, on year-end total assets of £419.0 million.

The NAV as at 31 March 2024 was £1.45 per share (£1.47 per share as at 31 March 2023) which, combined with the 12 pence per share of dividends payable in respect of the year ended 31 March 2024, represents an annualised total return for Shareholders of 7.0%.

During the financial year ended 31 March 2024, the Company’s shares traded at an average discount to NAV of 14.7%, (6.1% discount for the year ended 31 March 2023).

Total quarterly dividends declared in respect of the financial year ended 31 March 2024 were an unchanged 12 pence per share, returning £27.4 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 6.8%, with average gross leverage of £73.9 million or 0.22x NAV. RECI also had asset level structured leverage, totalling £33.9 million at year end, at an average borrowing cost of 7.5%.

When the financial year began on 1 April 2023, RECI had gross balance sheet leverage of £80.4 million (0.24x NAV) and leverage net of cash of £64.0 million (0.19x NAV). As at 31 March 2024, the Company’s gross balance sheet leverage was £23.8 million (0.07x NAV); its leverage net of cash was £1.0 million (0.00x NAV); and its net effective leverage, including contingent liabilities of £3.9 million (being the partial recourse commitment, representing 25% of asset level borrowings provided to certain asset level structured finance counterparties), was 0.02x NAV.

During the financial year to 31 March 2024, the Company funded £95.2 million into existing investments, compared with £158.6 million in the previous financial year. RECI received cash repayments and interest of £134.2 million in this year, compared with £159.0 million in the year ended 31 March 2023. The Company also received £9.3 million (net of repo financing) via the sale of market bonds in the year.

Financial Year Review

Despite the challenging real estate and credit markets, the Company’s robust portfolio ensured the NAV remained stable at an average of £1.47 per share during the financial year, notwithstanding the payment to Shareholders of four unchanged dividends, totalling 12 pence per share, during the period.

Cheyne maintained the strategy of focusing portfolio exposure upon lower risk senior loans, with 86% of the Company’s positions comprised of senior assets by the financial year end. RECI’s holding of market bonds had reduced to 2.2% of the portfolio by 31 March 2024. The weighted average life of the whole portfolio was 1.4 years for the financial year ended 31 March 2024; and the weighted average LTV of the Company’s portfolio was 64.9% (59.2% at 31 March 2023), maintaining significant defensive equity headroom.

The Board and Cheyne have continued to monitor RECI’s cash resources and repayments and to consider the appropriate level and blend of gearing for the Company, which saw a reduction in gross and net balance sheet leverage over the year to 31 March 2024.

The negative market sentiment during our last financial year inevitably impacted RECI’s share price and saw material discount widening across the investment company sector generally and the credit and real estate sectors, in particular. The Company’s shares traded at an average discount to NAV of 14.7% for the financial year ended 31 March 2024.

On 31 August 2023, the Company announced a share buyback programme (the “Initial Programme”), with a maximum aggregate purchase price of £5.0 million. Pursuant to that programme, a total of 4,095,000 shares were purchased for treasury for an aggregate amount of £5.0 million. Shares were repurchased under the Initial Programme at an average discount to net asset value per share of 16.6%, with the Company’s shares trading at an average discount of 14.2% from 31 August 2023 to 25 March 2024 (the date of the last share repurchase under the Initial Programme).

On 28 March 2024, the Company announced that it intended to undertake a further buyback programme (the “Successor Programme”) which will run to 30 September 2024. The maximum aggregate purchase price of all shares acquired under the Successor Programme will be £10.0 million and 1,812,643 shares have been repurchased to date.

The Company’s shares closed at £1.22 on 18 June 2024 (a discount of 16.38%), which would provide a yield of 9.84% on the basis of continuing to pay a quarterly 3 pence dividend per share for the rest of the current financial year.

The merits of RECI’s offering and, in particular, the yield at current share price levels, appear to have been overlooked amid the broader volatile market and negative sector background. Your Board continues to believe that RECI provides investors with a highly attractive and sustainable long-term income stream.

RECI is well positioned to deliver this attractive dividend stream alongside a robust NAV and provide investors with a substantial and liquid company (with total assets of £352.3 million and market capitalisation of £262.6 million at 31 March 2024) with the potential for the shares to re-rate and the Company to grow over time.

Board Update

Colleen McHugh was appointed on 15 September 2023 as Chair of the Board’s Management Engagement Committee, succeeding Susie Farnon who remains Chair of the Company’s Audit and Risk Committee.

In line with the Board’s succession planning and following the appointment of an independent recruitment firm and a comprehensive search process, the Company announced on 8 May 2024 that Andreas Tautscher had been appointed as an independent non-executive director of the Company. He will also serve as a member of the Company’s Audit and Risk, Nomination, Remuneration and Management Engagement Committees and will stand for election at the Annual General Meeting to be held in September 2024.

Andreas has over 30 years’ experience in the banking and financial services industry, including as CEO of Deutsche Bank International, and I am looking forward to the Company benefiting from the experience and complementary skills he will bring.

Having joined RECI and become Chair in 2015, in accordance with good governance practice I had agreed with the Board that it would not be appropriate for me to stand for re-election at the September 2024 AGM and that I should retire from the Board at the conclusion of that meeting. Accordingly, led by our senior independent director (“SID”), the Board carried out a process to recruit a successor Chair candidate earlier this year and a candidate was identified to join the Board and succeed me after a suitable handover period. Unfortunately, the candidate has now withdrawn due to a perceived conflict of interest that had arisen.

As announced on 12 June 2024, John Hallam, the SID and Chair of the Remuneration Committee, has advised the Board that reluctantly he wishes to retire from the Board at the September AGM for personal reasons. As a consequence of John stepping down, the Board has requested that I stand for re-election and continue as Chair beyond the September 2024 AGM for the requisite period needed to complete the process to identify a successor as Chair and achieve a smooth and successful handover. As announced, Susie Farnon was appointed as the new SID with immediate effect and will lead the process of recruiting my successor. I would like to record the Board’s appreciation of John’s highly valued contribution to RECI as a non-executive director, SID and committee chair during the course of his tenure.

Environmental, Social and Governance Matters (“ESG”)

Your Board continues 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.

In her role as “ESG Lead”, Colleen McHugh is working closely with Cheyne in developing and implementing RECI’s ESG approach.

Page 26 of the Stakeholder Engagement section and pages 28 to 33 of the Sustainability Report provide further information about the Company’s and the Investment Manager’s approach to ESG matters.

Outlook

The UK general election will be held on Thursday 4 July, with a change of government widely anticipated. 2024 will also see the greatest ever number of elections around the globe, with eyes focused on the outcome of November’s US elections as potentially being the most destabilising. A resolution to the conflicts in Ukraine and the Middle East appears as challenging as ever.

The reduction of inflation should allow Central Banks to move to reduce interest rates over time, albeit perhaps slower than anticipated. A return to a lower long-term interest rate environment, even if not returning to the recently experienced low levels, should benefit RECI as it continues to provide investors with a highly attractive and sustainable yield.

In considering all options when deciding on the appropriate allocation of the Company’s Available Cash resources, the Board is mindful of when opportunities present themselves to achieve attractive repeatable returns from new investments and thereby enhance the “investment case” for RECI. Encouragingly, Cheyne and its new deal pipeline ensure that RECI will continue to benefit from the opportunities to lend at attractive returns of over 10% to enhance portfolio returns and dividend cover. Scheduled portfolio repayments over the rest of the year will boost Available Cash to be deployed into new higher yielding opportunities alongside funding the current and potential future buyback programmes.

Notwithstanding the challenging market and sector background, the Directors believe that RECI remains soundly positioned to continue to deliver an attractive and stable dividend to investors seeking a reliable long-term income stream from a listed and liquid investment company, with a highly regarded specialist Investment Manager.

Bob Cowdell, Chairman

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georgeschuylerfinance · 4 months ago

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Andreas Tautscher strengthens RECI board in NED and committee roles

Real Estate Credit Investments Limited (LON:RECI) has announced that Andreas Tautscher has been appointed, with effect from 07 May 2024, as an independent non-executive director of the Company.

Andreas will also serve as a member of the Company’s Audit & Risk, Nomination, Remuneration and Management Engagement Committees and will stand for election at the Annual General Meeting to be held in September 2024.

Andreas, a Guernsey resident and Austrian national, has over 30 years’ experience in the banking and financial services industry including as CEO of Deutsche Bank International.

Andreas is currently a non-executive director of Doric Nimrod Air Two Limited and (Chair of) Doric Nimrod Air Three Limited, entities both listed on the London Stock Exchange. He is also a non-executive director of Globalworth Real Estate Investments Limited which is publicly quoted on the AIM market of the LSE.

Welcoming Andreas to the Board, Bob Cowdell, Real Estate Credit Investments Chairman, commented: “I am delighted that Andreas has agreed to join the RECI Board and look forward to the Company benefiting from the experience and complementary skills he will bring.”

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georgeschuylerfinance · 4 months ago

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Real Estate Credit Investments Investor Day at Cheyne Capital

Real Estate Credit Investments Ltd (LON:RECI), a non-cellular company incorporated in Guernsey, has announced that its Investment Manager Cheyne Capital LLP will hold a RECI investor day at their offices on Thursday 27th June 2024.

The day will comprise of the following agenda:

‒ Review of RECI 2024 Annual Report – Ravi Stickney will provide a detailed analysis of the current portfolio, macro-outlook, and forward-looking strategy for the fund

‒ Case study of a development senior loan

‒ Introduction to the wider Cheyne Real Estate team supporting Real Estate Credit Investments

‒ Lunch at Cheyne offices

Please email [email protected] to register your attendance. A detailed agenda will be provided prior to the day.

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georgeschuylerfinance · 4 months ago

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McAlpine appoints MD to grow ventures business

Sir Robert McAlpine has strengthened its Capital Ventures development business with the appointment of Owain Thomas as managing director of Land and Development.

SRMCV has a clear mandate from its shareholders to continue to grow after successful developments in the build to rent and healthcare sectors.

Thomas will have overall responsibility for the SRMCV development team as well as driving the growth strategy.

He joins SRMCV from Cortland where he was managing director of Investment & Development in Europe.

At Cortland, he had responsibility for the origination and build out of all new investment opportunities as well as managing Cortland’s construction team Cortland Build.

Having previously held the role of development director at Cheyne Capital Management, Thomas brings with him vast experience and knowledge of the real estate market with a particular focus on BTR and PBSA.

Robert Wotherspoon, CEO of Sir Robert McAlpine Capital Ventures, said: “Owain brings a wealth of experience and expertise that will be invaluable as we deliver our ambition to grow our development business.”

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georgeschuylerfinance · 4 months ago

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Build to Rent: Opportunities in a Growing Sector

The build to rent (BTR) sector is growing rapidly across the country, with soaring demand from both investors and residents for high-quality rental developments in cities as well as suburban areas.

This roundtable brought together developers, public sector representatives and property experts to discuss the opportunities and challenges for the sector in the North West.

The changing face of build to rent

Jessica Turner: We’ve seen a big rise in suburban build to rent schemes. We have a contract with Peel which is for their suburban build to rent arm Letta. We worked with them on a scheme of nearly 100 single family homes and that had 98.9 per cent let off plan and moved in on the day of practical completion. We’re seeing a big growth in single family schemes. Families want to live somewhere that is stable and secure where they can stay for the long term. Sometimes with private landlords, they can be worried about the property being sold and having to move out once they’re settled in the local area with children in school.

The incoming regulation is going to continue that professionalisation that we've already seen in the market. Landlords with small portfolios are already stepping back from it because they are seeing it as having more risk involved. From a tenants perspective, it will give more security knowing that their home is theirs, they are allowed to have pets and the landlord can't just issue a no fault eviction.

Michelle Brooks: It’s a conscious decision that the government is making to professionalise that service and we are seeing investors step in. That does make it difficult for smaller landlords and developers but that professionalisation of the industry is a trend that is going to continue. The offer is better, which is allowing rents to be pushed a little bit higher.

In Liverpool, there is still a ceiling to those rents in comparison to Manchester, but again the more investment we get, the more opportunities there will be for development. Salford is a great example, I worked there twenty years ago and there was very little there but the BBC moving in led to more investment and others following, so it's a question of how do we bring that to Liverpool.

Adam Ross: I believe we will see Liverpool rents heading in the same direction as Manchester, otherwise we wouldn't be building here. At the moment, we've got 530 apartments that we're actively building in Liverpool and another 500 in planning. It's about following the investment, Peel are doing the Liverpool Waters project and we're buying as many plots as we can in and around that development. We know once that completes, it will bring a lot to the area with commercial spaces as well as places to live, and it's going to positively impact the area around it. We're probably five or six years behind where Manchester is but if there are enough developers, we will catch up eventually.

Opportunities in the market

Sophie Bevan: There are lots of exciting things coming forward in Liverpool with a strong pipeline of residential projects. We’ve recently assembled a multi-disciplinary team to work on Festival Gardens, and we're now refining our objectives for the site. The likelihood is we'll be going out in the autumn to get a developer for that site. It's really exciting because this is traditionally a semi-suburban location but it's got the opportunity to reinvent what that edge of city centre living opportunity can be now with an emphasis on sustainability, waterside living and greater transport connectivity.

We're expecting to see some build-to-rent included in the offering, possibly more of the single family offering. We've also had interest from later living providers. We want to see a genuinely diverse mixed community there that is place-based and innovative from the developers coming forward, really capitalising on the opportunity it presents.

Ross: We launched a development of 62 units on Naylor Street in Liverpool recently which sold in two weeks so the demand on the investment front is there. We also handed over a scheme in Crosby in January this year. That is 27 build to rent apartments and they’re all rented out now. We know there is a housing shortage in Crosby and there is a need for that type of development in the area. The demand for tenants wanting to live somewhere that is slightly out of the city centre but easily commutable is there so we saw it as a great opportunity. As soon as we finished, it was fully rented out in 3 weeks.

The demographic has completely changed from a tenant perspective. We used to just be targeting young professionals living and working in the city but that's changed now. With planning requirements, we're having to add in a lot more three bedroom apartments and we can no longer get approval for studios in some of the developments. We're targeting different tenants depending on where the development is.

Our development at Crosby for example is very family-orientated and we have another development on Commercial Road in Liverpool where, due to the new space standards coming into place, we've had to build much larger apartments than we would've done previously to create space for families.

Michael Allison: At Roma Finance, we lend across the UK and a big trend we're seeing is people creating homes where there once weren’t homes in town centres. In the North West, you've got examples like St Helens and Huyton where there is investment going in and infrastructure and transport, but the high street is actually changing from being a place of retail to leisure and living. There are banks closing across the UK in really prominent positions on high streets. We've seen projects using the ground floor of those units for artisan coffee shops then creating residential space above. There is so much opportunity for residential in town centres, and it brings that footfall back onto the high street.

Residential has got to go hand in hand with other investment. If you think about Prescot, the opening of the Shakespeare North Playhouse has opened up opportunities for them. We're also doing transactions in Morecambe which isn't typically somewhere you would invest in because it's a seaside town but the plans for the Eden Project nearby are creating investment opportunities.

Sam Hyde: Crewe is a good example of that, I was going to invest in Crewe because there are lots of opportunities coming up for residential but people don't really want to live there because it hasn't had the investment into the commercial and leisure side, and since HS2 pulled out, it's been like a ghost town in terms of investment. As I'm fairly new to the game, the important bit for me is the exit, so I'm going for the safe bets, investing in places like Prestbury where there is a lot of wealth and if something comes on the market, it sells quickly. We've bought some land that has planning [in Prestbury] and we know the development should go quickly. We’ve worked with Roma to fund some of our developments. It can be daunting taking out property finance but Roma really worked with us from start to finish through the good and bad. We worked together on an Urmston development, where we completely stripped a property back to its bones and recreated it, turning it into something special. We exited with £100,000 surplus profit retained in the property.

Sustainability and social impact

Peter Reavey: On the Millers Quay scheme at Wirral Waters, we have roughly 75 per cent of our workforce that have come through some sort of work placement or local employment. We've worked very closely with the council, Wirral Met College and our client to make sure we're offering as much as we can within a very close radius of the site. We've worked with young people coming in to upskill them. The college is right on our doorstep so early on, we looked at all the different trades we would need and put the college in contact with the supply chain, and that has been very successful.

The M&E [mechanical and electrical services] will be very sustainable on the Millers Quay scheme with heat recovery and power systems. It's great to have sustainability elements but it's all driven by cost. Most of the apartments over there will be category B in relation to their energy rating. We've tried to work with designers to ensure we're as sustainable as we can be. We like to be involved early on in the process so we can focus the design team as to what's affordable. It's great having all these aspirations but they're not affordable in a challenging market, with hyperinflation in construction costs over the last four or five years.

People think the costs are going to take a nosedive but I don't see that. The industry has got used to paying a certain price. In Liverpool, the construction cost per square foot is the same as Manchester but if the rents aren't there and the funders don't see a return, it doesn't stack up. The cost of borrowing has also increased so all of those things have created a difficult market at the moment.

Turner: From a tenant perspective, electric charging is definitely higher on the agenda than it was five years ago. In more suburban schemes, if they come with EV charging, it's allowing rents to be inflated because people know the cost of their bills is going to be cheaper than if they were renting an older property. There was some recent research from Rightmove that said that people are now looking at the sustainability of a property when they're looking to rent, not just the cost, which is really interesting from an operational management perspective.

Allison: On new developments, sustainability elements like EV chargers and bike storage are included automatically now but the developer has to make it stack. The developers have got to manage the margin so if the incentive isn't there to do more, the question is will people do it?

Matt Floyd: We've taken the decision to be proactive with sustainability rather than waiting to be instructed by policy. We've derived a net zero strategy where we've cherry picked some key elements from different bodies that monitor building performance. We've got a fund level strategy that applies to a lot of our developments so we know what we can achieve and what we need to build into our models from day one.

It's the same thing in terms of social impact in terms of housing. We want to be earlier on in the cycle. If we're forward funding a development, we often find it's gone through planning and the plans are more fixed so it's harder to influence the design whereas if we pick up a land parcel, we can take it through the whole way.

One of the key investment metrics we look at is what that building is going to do for the community and what the community needs. That can include key worker allocation and lower rents, plus public-facing amenities that serve the local community.

If we develop ourselves, we can curate the design and the specification to enable us to voluntarily offer up some key worker accommodation. That isn't just a blanket 20 per cent off the market rent for 20 per cent of the units, there is a detailed model behind it that looks at your net income position and therefore we look at what truly affordable looks like. It's a unique assessment so we can start to play with the metrics to see what locally makes an impact.

We did that on a building we launched last summer in Manchester, Poplin, which has been hugely successful and filled up very quickly. Some of the key workers there are teachers down the road and they've been able to move back into the city and save a meaningful amount.

Creating communities

Turner: If there are different tenures within a new build development, such as rental, shared ownership and open market sale, it allows a family to stay in one location and move through, so it helps create a community feel.

Bevan: It’s important to have genuine diversity in the housing market for the city so we can offer something for everyone, whether it’s family homes in the rental sector or homes for key workers. I don't think [homes for key workers] was considered as a market area maybe five or ten years ago. We need to make sure we are more diverse than perhaps we have been in previous years.The rental market is evolving as the student accommodation market has. If you look at where that was ten years ago, it was completely different.

We have student housing around certain areas of the city where the neighbours aren't so keen on that so by creating more student accommodation in the right areas that is well-managed and well-provisioned, we can release housing for families, so it's a win-win.

The later living sector is really interesting. How do we provide the right facilities for an ageing population? We are going to struggle if we don't get it right with mixed communities. If your building is attracting tenants of an older age profile, there might need to be different services provided, which can be very discreet but provide a bit more support should they need it.

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georgeschuylerfinance · 4 months ago

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2024 Canadian Pension Risk Strategies Full Interview - Cheyne Capital Management

Watch interview with Cheyne Capital management Stuart Fiertz

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georgeschuylerfinance · 4 months ago

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McAlpine brings in new boss for development business

New arrival joins from BTR specialist

Sir Robert McAlpine’s capital ventures business has brought in a director from build-to-rent specialist Cortland to head up its land and development business.

Owain Thomas was managing director of investment and development in Europe at US firm Cortland where he was also in charge of the company’s construction team called Cortland Build.

McAlpine said: “Having previously held the role of development director at Cheyne Capital Management, Owain brings with him vast experience and knowledge of the real estate market with a particular focus on BTR and purpose built student accommodation.”

McAlpine’s capital ventures chief executive Robert Wotherspoon said: “Owain brings a wealth of experience and expertise that will be invaluable as we deliver our ambition to grow our development business.”

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georgeschuylerfinance · 4 months ago

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Dubai’s stock exchange launches platform to tap into private credit

Dubai’s stock exchange is tapping into the fast-growing private credit space with the launch of a new platform.

Dubai Financial Market said that the new venture, called Arena, will make it easier for local firms to obtain private credit. It will also allow venture capital firms to sell the shares of private companies they own on the new platform, according to a statement seen by Bloomberg.

“It enables investors to easily access private investments in the UAE’s most promising companies and brands,” said Dubai Financial Market’s chief executive Hamed Ali in the statement.

The Gulf’s sovereign wealth funds are increasingly tapping into the opportunities presented by the $1.7tn (£1.4tn) private credit market.

Apollo Global Management is launching a new private credit fund, backed by Abu Dhabi’s Mubadala Investment Company.

And the Abu Dhabi Investment Authority has increased its commitment to a European real estate credit strategy, run by Cheyne Capital.

Earlier this year, Goldman Sachs signed a $1bn partnership with Mubadala to invest in private credit across the Asia Pacific region.

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georgeschuylerfinance · 6 months ago

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Cheyne Hires Barclays Veteran for $2 billion Synthetic Risk Push

Cheyne Capital has hired Frank Benhamou, the former head of capital and structured funding solutions at Barclays Plc, as the alternative investment firm plans a $2 billion synthetic risk transfer strategy.

Benhamou, who was a managing director at Barclays, starts on Monday at London-based Cheyne Capital as portfolio manager for risk transfer strategy, according to a person familiar with the matter who asked not to be named because the details aren’t public. Benhamou joins after 17 years at Barclays, where he set up and led the bank’s Colonnade Programme, one of the world’s largest SRT platforms, according to his profile on Linkedin.

Cheyne Capital last week said it had re-entered the SRT market after a break of about six years. A portion of the $2 billion target has already been invested in several SRT transactions earlier in the month, according to the person. Founded in 2000, the firm has over $11 billion under management in asset classes including real estate, credit and equity.

Benhamou didn’t respond immediately to an emailed request for comment on Monday.

Read more: Hedge Fund Polar Taps BMO Credit-Risk Transfer Expert Leclerc

Significant risk transfer transactions — also known as synthetic risk transfers — allow banks to buy protection on their loan portfolios in order to release regulatory capital or manage risk. Last year, banks around the world sold $25 billion of SRTs, partially offloading the risk of $300 billion of loans, according to an estimate by Pemberton Asset Management.

While European banks have been the biggest users of such transactions in previous years, the largest increase in SRT volumes is likely to come from large Wall Street banks, though that could depend on how stringent US regulators decide the latest regulatory capital requirements, known as Basel III Endgame rules, should be.

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georgeschuylerfinance · 6 months ago

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ADIA earmarks USD 1 bn for Barclays, AGL private credit vehicle

The Abu Dhabi Investment Authority (ADIA) is pouring USD 1 bn into Barclays and AGL Credit Management’s new private credit fund, Bloomberg reports, citing a source familiar with the matter. With Adia’s backing, the fund now holds more than USD 2 bn of dry powder ready for deployment. The three firms declined to confirm the exact size of the investment.

ADIA and AGL go way back: Founded in 2019, AGL was launched with a USD 500 mn investment from Adia, making the sovereign wealth fund a shareholder in the credit investment firm.

ADIA is stepping up its private credit investments: ADIA recently said it is ramping up its commitment to London-based alternative asset manager Cheyne Capital’s capital solutions strategy to GBP 650 mn, as a “compelling investment proposition in a market that is looking to private credit lenders for capital,” Executive Director of ADIA’s real estate department Mohamed Al Qubaisi said. ADIA previously ventured into private credit in September, backing a USD 5 bn fund launched by Wells Fargo alongside asset manager Centerbridge and making a USD 932 mn investment in Australian real estate private credit company Qualitas Diversified Credit Investments.

About the vehicle: The private credit fund will operate as an independent manager with a primary focus on investments in senior secured debt and offering private credit financing to major corporate borrowers, Bloomberg reports, citing a statement it has seen. The fund will give AGM “complete control” over origination, asset selection, portfolio construction and portfolio management .

AGM will hold full control under an agreement with Barclays, which will give AGL access to all of Barclays’ entire private credit portfolio. The agreement will allow AGL to choose to participate in the credit financing transactions, which will help AGL “benefit from more information than other pure-play direct lenders and asset managers,” AGL Chief Executive Peter Gleysteen told Bloomberg.

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georgeschuylerfinance · 6 months ago

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Bearbull Portfolio: A new buy just for the Isa window

Last week, this column played host to a duel between two investment heavyweights. In the red corner, Jeremy Grantham’s GMO, which in atypical fashion had just stated its “excitement” at the opportunity set across equities, especially in the boxes marked value, small-cap, and non-US. To the oft-bearish asset manager, today’s conditions present the “best relative asset allocation” options since the collapse of the Soviet Union. Fundamentals? Back with a bang.

In the blue shorts, we had Jonathan Ruffer, pondering the end of the equity era and a sustained period of painful de-leveraging, corporate fire-fighting and disenchanting returns ahead. Ruffer’s long-held investing maxim – to not lose money, rather than maximise returns – echoed loudly. Those fundamentals? A second-order priority to a deteriorating macroeconomic backdrop.

With 5 April and the window on my use-it-or-lose-it individual savings account (Isa) allowance fast approaching, I was suddenly foggy with indecision. The goal of the Bearbull Income Portfolio, as I recall, has always been to use equities to simultaneously grow capital and draw on (an ideally also growing) stream of dividends as a modest prop to day-to-day expenditures. On one reading, this might be a bona fide moment to double down. On another, is a much grander rethink due?

The portfolio’s recent run has been fair. In the past two-and-a-bit months, accumulated dividends and capital growth has pushed up its total value by a handy 3.5 per cent. A few one-time deadweights (GSK (GSK), Anglo American (AAL), Johnson Matthey (JMAT)) are looking sprightlier, while the funds-led engine I built at the end of 2023 has been doing the job set for it.

Then again, given the likelihood of a trundling performance from the UK economy, we might need to temper any GMO-inspired hopes for domestic equities. In truth, however, what keeps me up at night as much if not more than the portfolio’s holdings are the prospective returns on fixed income. My internal debate is less to do with the dominant stocks-versus-bond narrative about relative value – given that this usually compares a pricey US equity market and high-yielding Treasuries – but a more humdrum British fretting around the various opportunities in gilts.

It is the thought of that sweet spot of modest income and capital growth (not winning exactly, but decidedly not losing money) that is so hard to ignore. More power to Ruffer.

Especially tempting are those five-year gilt issues, sold when interest rates were improbably low in 2020 and 2021, and still trading at a discount to par. Though their coupons are slight, this merely creates a cash flow timing issue, which is manageable; hold to maturity, and the eventual climb to redemption prices should offer a real return almost free of risk and entirely free of capital gains tax. I could be done with Isa fretting, and company monitoring, all in one go.

If I’m honest, becoming an amateur bond watcher would probably be my preference to investing with Ruffer. That’s not because I think I’d do a better job (though their fees would give me a head start). Rather – judging both by his comments and the rather flat performance of the Ruffer Total Return fund since a new market paradigm started to emerge three years ago – it’s not wholly clear whether the end-of-the-equities-era thesis makes obvious winners out of other asset classes. If inflation proves sticky, those real gilt returns might prove rather unreal.

So, I’m going to leave Ruffer’s warning semi-unheeded. Or rather, I’m going to take the middle way between his sticky inflation call and GMO’s rosy base-case return to lower interest rates.

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