SWEF : Quarterly Factsheet Publication
20 October 2017 - 5:04PM
UK Regulatory
Dow Jones received a payment from EQS/DGAP to publish this press
release.
Starwood European Real Estate Finance Ltd (SWEF)
SWEF : Quarterly Factsheet Publication
20-Oct-2017 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
20 October 2017
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Starwood European Real Estate Finance Limited: Quarterly Factsheet
Publication
Starwood European Real Estate Finance Limited (the "Company") announces that
the factsheet for the third quarter ended on 30 September 2017 is available
at:
www.starwoodeuropeanfinance.com [1]
Extracted text of the commentary is set out below:
"Investment Portfolio at 30 September 2017
As at 30 September 2017, the Group had 13 investments and commitments of
GBP364.5 million as follows:
Transaction Sterling equivalent Sterling equivalent
balance (1) unfunded commitment
(1)
Centre Point, London GBP45.0m -
Industrial Portfolio, GBP25.5m -
UK
Hospitals, UK GBP25.0m -
Hotel, Channel Islands GBP26.9m -
Varde Partners mixed GBP12.0m -
portfolio, UK
Mixed use development, GBP9.8m GBP3.4m
South East UK
Regional Budget Hotel GBP75.0m -
Portfolio, UK
Total Sterling Loans GBP219.2m GBP3.4m
Residential Portfolio, GBP5.3m -
Cork, Ireland
Residential Portfolio, GBP6.8m -
Dublin, Ireland
Logistics, Dublin, GBP13.0m -
Ireland
Hotel, Barcelona, Spain GBP40.3m -
School, Dublin, Ireland GBP16.5m -
Industrial Portfolio, GBP60.0m -
Eastern Europe
Total Euro Loans GBP141.9m -
Total Portfolio GBP361.1m GBP3.4m
(1) Euro balances translated to sterling at period end exchange rates.
Dividend
On 19 October 2017 the Directors declared a dividend of 1.625 pence per
Ordinary Share (annualised 6.5 pence per Ordinary Share) in relation to the
third quarter of 2017.
Portfolio activity
As at 30 September 2017, the average maturity of the Group's GBP361.1 million
loan book was 3 years. The Group had GBP23.7 million of cash with GBP3.4 million
of commitments to fund. The gross annualised unlevered return of the
invested loan portfolio is 7.9 per cent.
The following portfolio activity occurred in the third quarter of 2017:
Office, Netherlands: On 18 July 2017 the Group received EUR13.8 million as
full repayment of the Office, Netherlands loan following a successful
refinancing of the property by the owner. The Group used the proceeds to
repay GBP7.5 million drawn on the revolving credit facility at that time.
Five Star Hotel, London: On 13 September 2017, the Group received full
repayment of GBP13 million of the 5 Star Hotel, London loan following a
successful refinancing of the property by the owner.
Following these repayments, the Group remains substantially fully invested
and the Investment Adviser is reviewing multiple lending opportunities to
deploy the Group's uncommitted resources.
Credit facilities available to the Group
The Group is expecting to enter into an additional GBP64 million five-year
loan facility in the coming weeks which falls under the 20 per cent
longer-term leverage approved by the shareholders at the 2016 Extraordinary
General Meeting (the "New Facility"). At present the Group uses its GBP50
million revolving credit facility with Lloyds to manage new investments,
loan repayments and equity raising. Whilst this facility continues to be
extremely useful, the New Facility will provide additional investment and
operational flexibility. The longer term nature of the New Facility will
allow the Group to flexibly apply longer-term leverage to enhance returns on
whole loans which would otherwise generate returns lower than the Group's
targets, without the cost and time requirements of syndicating an A-Note.
Alternatively, the facility could be used to provide a backstop financing to
an A-Note syndication where the Group is underwriting a whole loan with the
intention of syndicating an A-Note, thus de-risking the associated
syndication market risk. The New Facility may also be used in conjunction
with the Lloyds facility to manage liquidity to bridge to equity raise and
manage repayment risk.
The Group structure was re-organised on 6 October 2017 to enable the
arrangement of the New Facility and, as part of the reorganisation, the
Group also extended the maturity of its GBP50 million revolving credit
facility with Lloyds to 6 October 2018.
Outlook for fourth quarter
The Company held an Extraordinary General Meeting on 29 September, and we
are pleased to confirm that shareholders approved the special resolution to
permit the Company to allot new ordinary shares and to dis-apply pre-emption
rights in respect of up to 20 per cent of the issued share capital on the
date of the Extraordinary General Meeting. This takes advantage of the
recent implementation of the Prospectus Regulation which now enables issuers
such as the Company (subject to obtaining the requisite Shareholder
authorities) to issue up to 20 per cent of the securities already listed by
way of such issues over 12 months without any requirement to publish a
prospectus (the previous limit having been 10 per cent).
This enhanced equity raising ability, together with the cash and credit
facilities available to the Group, gives the Group considerable capacity of
approximately GBP210 million to underwrite loans in the typically busy fourth
quarter of the year. As is typical the summer period was relatively quiet
with the first weeks of September setting the tone for the fourth quarter
activity. The Group has developed a strong pipeline of deals in execution
over the last six months and have secured further new opportunities during
September meaning the Group expects a busy finish to the year. The pipeline
mirrors geographical and sector themes highlighted previously with the UK,
Spain and Ireland generating the bulk of the pipeline and with pipeline
loans across a variety of asset classes including office, retail,
residential and hospitality.
As indicated in the last few factsheets, we continue to expect 2017 to be a
strong year for repayments. We have received repayments and amortisation of
GBP115.6 million for the nine months to the end of September. We anticipate
further repayments in the final quarter of the year and in the first quarter
of 2018. We will therefore remain cautious with respect to equity issuance
in order to minimise cash drag from future repayments.
Market Commentary
Pricing in the European commercial real estate financing market continues to
be relatively stable. The De Montfort University lending survey mid-year
report is showing slightly higher margins for all UK lending types with
prime financing margins up a few basis points and secondary office up by
approximately 30 bps. The exception is in light industrial which is a sector
currently attracting significant investor interest, and is showing slightly
tighter margins than in the previous period. This contrasts starkly with the
European corporate high yield market. The Financial Times reports record
levels of new leveraged loan issuance of EUR85 billion in 2017 so far, being
the largest amount since the global financial crisis. While volumes have
increased, returns have fallen significantly. Bank of America Merrill
Lynch's euro high yield bond index has dropped to 2.3 per cent having
started 2016 at 6 per cent.
In the prime real estate lending space, there continues to be a supply and
demand imbalance with banks and insurance companies finding it difficult to
fulfil their lending volume ambitions. This is driven by a number of factors
both on the supply and demand side. There is a current trend for prime
assets bought by overseas investors to be financed with less or no leverage,
and there is a cheap and highly liquid bond market for corporate borrowers.
Examples in the bond sector this quarter include Segro and Land Securities
issuing new long dated bonds at attractive levels. Segro has launched and
priced a GBP350 million bond with a maturity of 12 years paying a coupon of
2.375 per cent and a GBP400 million bond with a maturity of 20 years paying a
coupon of 2.875 per cent being a spread of 107 bps over the reference gilt
rate. In September Land Securities issued a GBP500 million 20 year bond paying
a coupon of 2.625 per cent and a GBP500 million 40 year bond, paying a coupon
of 2.75 per cent.
At the same time, we are seeing increased appetite for prime lending from
existing and new players. AXA has raised EUR1.5 billion through its 10th
Senior Commercial real estate debt fund, taking its total debt book to EUR14
billion. Allianz's commercial loan book has surpassed EUR6 billion of total
loans, with EUR1.5 billion lent so far this year and a budget of EUR2
billion of new lending for 2017. We are also seeing banks looking
internationally to increase origination volumes, such as German bank
Deutsche Hypo, which is planning to return to lending in Spain after leaving
the market in 2013, where they expect to lend EUR200 million annually
focussing on prime offices in Madrid and Barcelona.
With a higher level of competition there are risks that the requirements to
deploy capital affect discipline on risk appetite. This has been seen in an
increase in covenant light deals in the leveraged finance market for
corporate borrowers, however for the most part we are not currently seeing a
deterioration in risk standards in the mainstream commercial real estate
lending market.
Political risk and its potential impact on the real estate market remains
one of the key areas for scrutiny with, for example, the ongoing Brexit
process, a German election and recent events in Catalonia. The Group is
maintaining particularly close scrutiny on Spain and the Catalan situation.
We have existing exposure through our EUR46 million Barcelona hotel whole
loan and we have two further loans totalling EUR61 million secured by retail
assets in Spain (outside Catalonia) in the late stages of execution. The
tensions around Catalan independence are not new, however there is a
significantly raised level of uncertainty following the independence
referendum on 1 October. After a relatively muted initial reaction the IBEX
(the main public equity market index in Spain) and Spanish 10 year
government bonds have quickly reverted to levels prior to the vote. Capital
Economics' view is that there will be limited impact economically,
predicting both that a negotiated outcome is likely and that even in a
prolonged period of uncertainty the economic impact would be 0.5 per cent on
Catalan GDP, which would have only a 0.1 per cent impact on Spanish GDP.
While the market has shrugged off recent events, the Group is more cautious
and will prioritise opportunities that are relatively insulated from the
ongoing uncertainty. During this time the Group will continue to track
political developments while closely monitoring the Spanish market for
particularly compelling risk adjusted opportunities that may arise.
Share Price / NAV at 30 September 2017
Share price (p) 110.50
NAV (p) 101.45
Premium/ (discount) 8.9%
Dividend yield 5.9%
Market cap GBP414.4 m
Key Portfolio Statistics at 30 September 2017
Number of investments 13
Percentage of currently invested portfolio in floating 74.6%
rate loans
Invested Loan Portfolio annualised total return (1) 7.9%
Weighted average portfolio LTV - to Group first GBP (2) 17.2%
Weighted average portfolio LTV - to Group last GBP (2) 62.6%
Average loan term (stated maturity at inception) 4.4 years
Average remaining loan term 3.0 years
Net Asset Value GBP380.5m
Amount drawn under Revolving Credit Facility GBP0.0m
(excluding accrued interest)
Portfolio value (including accrued income) GBP363.9m
Cash GBP23.7m
Other net assets/ (liabilities) (including hedges) -GBP7.1m
(1) Calculated on amounts outstanding at the reporting date, excluding
undrawn commitments, and assuming all drawn loans are outstanding for the
full contractual term. Eleven of the loans are floating rate (partially or
in whole and some with floors) and returns are based on an assumed profile
for future interbank rates but the actual rate received may be higher or
lower. Calculated only on amounts funded at the reporting date and excluding
committed amounts and cash un-invested. The calculation excludes the
origination fee payable to the Investment Manager.
(2) LTV to Group last GBP means the percentage which the total loan commitment
less any amortisation received to date (when aggregated with any other
indebtedness ranking alongside and/or senior to it) bears to the market
value determined by the last formal lender valuation received by the
reporting date. LTV to first Group GBP means the starting point of the loan to
value range of the loan commitments (when aggregated with any other
indebtedness ranking senior to it). For Centre Point, the Irish School,
Dublin and the mixed use development, south east UK, the calculation
includes the total facility available and is calculated against the assumed
market value on completion of the project.
Remaining years to Value of loans (GBPm) % of invested
contractual maturity* portfolio
0 to 1 years 45.0 12.5
1 to 2 years 47.3 13.1
2 to 3 years 88.6 24.5
3 to 5 years 155.2 43.0
5 to 10 years 25.0 6.9
*excludes any permitted extensions. Note that borrowers may elect to repay
loans before contractual maturity.
Country % of invested assets
UK - Regional England 40.8
UK - Central London 12.5
Hungary 13.6
Spain 11.2
Republic of Ireland 11.5
Channel Islands 7.4
Czech Republic 3.0
Sector % of invested assets
Hospitality 39.9
Light Industrial 24.2
Residential for sale 11.8
Healthcare 6.9
Retail 4.8
Education 4.6
Office 0.7
Logistics 3.6
Residential for rent 3.3
Other 0.1
Loan type % of invested assets
Whole loans 69.0
Mezzanine 31.0
Loan type % of invested assets*
Sterling 60.7
Euro 39.3
*the currency split refers to the underlying loan currency, however the
capital on all non-sterling exposure is hedged back to sterling.
"
For further information, please contact:
Duncan MacPherson
Starwood Capital
T +44 207 016 3655
Robert Peel
Fidante Capital
T: +44 20 7832 0900
Notes:
Starwood European Real Estate Finance Limited is an investment company
listed on the main market of the London Stock Exchange with an investment
objective to provide Shareholders with regular dividends and an attractive
total return while limiting downside risk, through the origination,
execution, acquisition and servicing of a diversified portfolio of real
estate debt investments in the UK and the wider European Union's internal
market. www.starwoodeuropeanfinance.com [1].
The Company is the largest London-listed vehicle to provide investors with
pure play exposure to real estate lending.
The Group's assets are managed by Starwood European Finance Partners
Limited, an indirect wholly-owned subsidiary of the Starwood Capital Group.
ISIN: GG00B79WC100
Category Code: MSCM
TIDM: SWEF
LEI Code: 5493004YMVUQ9Z7JGZ50
Sequence No.: 4761
End of Announcement EQS News Service
620641 20-Oct-2017
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