Hardman & Co Research
Hardman & Co Research on Real Estate Credit Investments (RECI): Looking at the current opportunities
Our recent notes have, in the main, focused on why RECI should prove resilient in uncertain times, given its credit processes, high-quality security, low exposure to high-risk sectors, diversity and management of problem accounts. In this note, we explore the upside opportunities such conditions present. In particular, we note i) improving yields on new business, helped by the relatively short contractual (and even shorter actual) duration of the loan book, and ii) improving covenants. As competitors with weaker balance sheets, less focused business models, higher capital requirements and worse historical loss experiences withdraw, so RECI can cherry-pick higher risk-return opportunities.
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1556441 09-Feb-2023