A move last year to diversify away from mortgage bonds and introduce direct lending to property companies is paying off nicely for Real Estate Credit Investments (RECI). Net profits in the half-year to September rose from £3.9m to £7.5m, boosted by a £4.3m valuation uplift on the loan and bond portfolios, while net asset value per share rose 3.2 per cent to 159p.
The loan portfolio grew from £51m in March to £70m, thanks to six new loan commitments (not counting another made since the period-end). Crucially, the average loan-to-value on the portfolio, at 72 per cent, provides a significant cushion against a fall in valuations. The portfolio is delivering very high returns, with a weighted average yield exceeding 13 per cent on the loans issued.
Meanwhile, the £70m bond portfolio recorded a gross return of 9 per cent for the half year. It consists of 70 bonds bought for, on average, 83 per cent of their face value.
