On 28 April, we were delighted to host Ravi Stickney of Cheyne Capital, discussing Real Estate Credit Investments on Hardman Talks. He joined Hardman & Co’s property analyst Mike Foster for a live presentation and plentiful Q&A.
The audience heard how the business has enhanced its returns, buying bonds and indeed entering into new senior debt positions at stronger-than-previous rates. Having marked certain positions down through mark-to-market, these marks are reducing. In his presentation, Ravi outlined specific examples of how RECI had addressed its positions in its most COVID-exposed areas (i.e. hotels). The management is confident in the positions, which seem to be being readily worked through. On a broader basis, the model is intact. It uses modest gearing (the current balance sheet is 16% LTV geared) and low risk, with a high proportion of the book in senior loans and bonds. The visibility of the 7% returns being available on net assets remains high, if not higher than before.
Questions covered a range of issues, and it was interesting to hear on the broader market the view that tall offices with high seating densities were a totally different (and much less attractive) asset class than lower rise, lower density offices. Regarding RECI, there was good exposition of how the substantial Cheyne team is able to be very hands-on with difficult positions and customise responses. There are clear target markets and differentiated types of proposition (core, value-add, developer) but within these broad structures, it is the expertise of the team rather than proscriptive allocation models which allow RECI to add value, especially in the COVID-19 situation.
You can download the presentation here.