Eurocastle Announces Financial Results for the Nine Months Ended 30 September 2017
November 29 2017 - 2:00AM
EUROCASTLE INVESTMENT
LIMITED
FOR IMMEDIATE RELEASE
Contact:
International Administration Group (Guernsey) Limited
Company Administrator
Attn: Mark Woodall
Tel: +44 1481 723450
Eurocastle Announces Financial Results for the
Nine Months Ended 30 September 2017
Guernsey, 29 November 2017 -
Eurocastle Investment Limited (Euronext Amsterdam: ECT) today has
released its financial results for the nine months ended 30
September 2017.
-
Adjusted Net Asset Value
("Adjusted NAV") of €641.0 million[1], or €10.49
per share[2], in line
with the previous quarter after having paid a second quarter
dividend of €0.41 per share2 in
August.
-
Normalised FFO[3] of
€68.2 million, or €1.12 per share2, for the
third quarter of 2017. €103.3 million, or €1.71 per
share2, for the nine
months ended 30 September 2017.
-
Third Quarter 2017 Dividend
of €1.13 per share2 declared on
28 November 2017 and to be paid on 11 December 2017 to shareholders
of record at close of business on 5 December 2017, with an
ex-dividend date of 4 December 2017. This follows €59.9 million of
net NFFO received in cash in the quarter, in line with the
Company's distribution policy.
|
|
Q3 2017 |
|
Q2 2017 |
|
YTD Q3 2017 |
|
YTD Q3 2016 |
|
|
€
million |
€ per
share2 |
|
€
million |
€ per
share2 |
|
€
million |
€ per
share2 |
|
€
million |
€ per
share2 |
Adjusted
NAV1 |
|
641.0 |
10.49 |
|
630.6 |
10.49 |
|
641.0[4] |
10.494 |
|
463.5[5] |
7.715 |
Normalised
FFO3 |
|
68.2 |
1.12 |
|
9.1 |
0.15 |
|
103.3 |
1.71 |
|
33.5 |
0.49 |
Dividends2 |
|
59.6 |
1.13 |
|
25.1 |
0.41 |
|
102.1 |
1.83 |
|
24.1 |
0.375 |
BUSINESS
HIGHLIGHTS FOR THE THIRD QUARTER OF 2017
doBank
IPO
-
In July, doBank completed a €704 million IPO
(equivalent to approximately 2.5x Eurocastle's value for this
investment immediately following its acquisition net of
distributions received to date), the largest & highest rated
NPL servicing group in Italy.
-
Eurocastle held a 50% stake prior to the IPO -
sold 19.1 million shares (48.8% of its holding) for €9.00 per
doBank share generating net proceeds of €145.8 million[6] which were
partially distributed back to shareholders through the November
share tender with the remainder to be distributed through the Q3
dividend.
-
The Company, together with Fortress affiliates,
retained a joint 51.2%[7] interest in
doBank with Eurocastle's remaining 20.0 million shares valued at
€10.98 per doBank share as at 30 September 2017, subsequently
increasing to €13.16 per share on 28 November 2017.
doBank Financial Performance
-
Q3 YTD 2017 EBITDA of €42 million, up 4%
like-for-like[8] over the
same period last year (Q3 2016: €40 million).
-
Q3 YTD 2017 Net Income After Tax of €27 million,
up 16% like-for-like8 over the same
period last year (Q3 2016: €23 million).
-
Q3 YTD 2017 Gross collections of €1.2 billion,
up 18% over the same period 2016[9].
-
Subsequent to the third quarter, doBank reached
a preliminary agreement on a new servicing mandate on €8 billion
GBV of NPLs which form part of the portfolio originated by Monte
dei Paschi di Siena that is in the process of being securitised.
doBank estimates that the contract once in place and fully
stabilized would initially add ~€20 million EBITDA per year.
FINO NPL
Investment
-
In July, deployed €43.9 million to acquire,
alongside Fortress affiliates, a 50.1% interest in a significant
portion of a €16.2 billion GBV NPL portfolio from UniCredit S.p.A
("FINO")[10], via an
investment in two securitisations.
-
Portfolio collections received since the 30 June
2016 cutoff date up to the July closing were higher than
anticipated resulting in less equity to fund the acquisition than
originally expected.
-
A deferred purchase price of €64.7 million is
payable over the next few years and currently expected to be funded
through collections on the portfolio.
New
Investments
BUSINESS HIGHLIGHTS SUBSEQUENT TO 30 SEPTEMBER
2017
Share
Tender
-
In November 2017, Eurocastle announced the
repurchase of 8.4 million shares (representing 13.75% of the
Company's ordinary shares in issue) at a price of €10.00 per share,
returning €84 million of capital received following the Company's
partial sale of its stake in doBank through the IPO.
-
The completed repurchase was NAV and earnings
accretive, increasing pro forma NFFO per share by approximately 15%
and NAV per share by approximately 1%.
RE Fund
IV
-
In October 2017, sold the remaining properties
held in the Fund realising estimated net proceeds to Eurocastle of
€32 million, approximately €3 million (10%) higher than the
investment's Q3 2017 NAV of €29 million.
-
To date the Company has received €13.1 million,
with the remaining proceeds expected by year-end subject to final
agreement with the underlying fund on distribution timing. When
received in full, the proceeds will include €10 million of
undistributed NFFO realised in cash to be considered for the
quarterly dividend.
New
Investments
-
On 20 November 2017, Eurocastle announced a
commitment to invest €12 million for a shared interest in a new NPL
pool with a GBV of €293 million, expected to close by the end of
November.
-
On 24 November 2017, the Company announced that
it had committed €8.4 million to acquire, together with other
Fortress affiliates, additional interests in the junior notes of
both securitisations that collectively own the FINO NPL portfolio.
The transaction is expected to close by the end of January
2018.
NORMALISED FFO
Normalised FFO is a non-IFRS
financial measure that, with respect to all of the Company's
Italian Investments other than the doBank Group, recognises i)
income on an expected yield basis updated periodically, allowing
Eurocastle to report the run rate earnings from these investments
in line with their expected annualised returns and ii) any
additional gains or losses not previously recognised through NFFO
at the point investments are realised. Cash flow receipts are
therefore allocated by the Company between income and capital in
accordance with this expected yield methodology. With respect to
the doBank Group, following the recent IPO, the Company now
recognises Normalised FFO based on its share of doBank's reported
annual net income after tax together with any gains or losses
arising from the sale of its shares. The income cash flow profile
of each of the Company's investments may not exactly equal the NFFO
recognised by the Company each period but will do so over the life
of each investment.
Segmental Normalised FFO for the Nine Months Ended
30 September 2017 |
Average Net
Invested Capital[11] |
|
|
Italian Investments |
Legacy |
Total |
|
€ Thousands |
Yield |
|
€ Thousands |
€ Thousands |
€ Thousands |
doBank Group |
141,260 |
91% |
|
96,547 |
- |
96,547 |
Italian NPLs |
101,936 |
16% |
|
11,965 |
- |
11,965 |
Real Estate Fund
Investments |
45,008 |
65% |
|
22,027 |
- |
22,027 |
Other[12] |
n/a |
n/a |
|
7,247 |
- |
7,247 |
Italian Investments NFFO before expenses |
288,204 |
64% |
|
137,786 |
- |
137,786 |
Legacy Portfolios NFFO
before expenses |
|
|
|
- |
2,824 |
2,824 |
Manager Base &
Incentive Fees[13] |
|
|
|
(34,345) |
- |
(34,345) |
Other
operating expenses |
|
|
|
(2,970) |
- |
(2,970) |
Normalised FFO |
|
|
|
100,471 |
2,824 |
103,295 |
Per Share[14] |
|
|
|
1.67 |
0.04 |
1.71 |
Segmental Normalised FFO for the Three Months
Ended 30 September 2017 |
Average Net
Invested Capital1 |
|
|
Italian Investments |
Legacy |
Total |
|
€ Thousands |
Yield |
|
€ Thousands |
€ Thousands |
€ Thousands |
doBank Group |
106,912 |
317% |
|
84,655 |
- |
84,655 |
Italian NPLs |
97,162 |
15% |
|
3,752 |
- |
3,752 |
Real Estate Fund
Investments |
45,057 |
37% |
|
4,113 |
- |
4,113 |
Italian Investments NFFO before expenses |
249,130 |
149% |
|
92,520 |
- |
92,520 |
Legacy Portfolios NFFO
before expenses |
|
|
|
- |
28 |
28 |
Manager Base &
Incentive Fees3 |
|
|
|
(23,402) |
- |
(23,402) |
Other
operating expenses |
|
|
|
(950) |
- |
(950) |
Normalised FFO |
|
|
|
68,168 |
28 |
68,196 |
Per Share4 |
|
|
|
1.12 |
0.00 |
1.12 |
CHANGE IN ACCOUNTING
POLICY
The Board of Directors of the
Company has periodically assessed whether it met the definition of
an Investment Entity as set out under IFRS 10. With the
deconsolidation of the Legacy CDO V portfolio in Q2 2017, the Board
came to the conclusion that the Company, with effect from 1 July
2017, met the requirements to be classified as an Investment Entity
as set out under IFRS 10. The impact of this change is that all
investments, whether through subsidiaries, associates or joint
ventures, are to be fair valued through profit and loss. As a
result, amounts reported for the year ended 31 December 2016 have
been restated - Reported Adjusted NAV would have been higher by
€4.8 million due to this change as at 31 December 2016 and €4.9
million as at 30 June 2017.
In addition, as a result of this
change in policy, the Company is no longer required to prepare
consolidated financial statements. These separate financial
statements of the Company are therefore its only financial
statements.
Refer to page 8 and pages 20-22 of
the Q3 2017 Interim Report for further details.
Income Statement for the Nine Months
Ended 30 September 2017 |
Italian Investments € Thousands |
Legacy
€ Thousands |
Total € Thousands |
Fair
Value Movements |
|
|
|
doBank Group |
141,712 |
- |
141,712 |
Romeo NPLs |
3,927 |
- |
3,927 |
FINO NPLs |
1,588 |
- |
1,588 |
Other NPL Pools |
2,708 |
- |
2,708 |
Real Estate Fund Investment I |
(167) |
- |
(167) |
Real Estate Fund Investment II |
(1,035) |
- |
(1,035) |
Real Estate Fund Investment III |
1,446 |
- |
1,446 |
Real Estate Fund Investment IV |
4,833 |
- |
4,833 |
Real Estate Fund
Investment V |
310 |
- |
310 |
Fair value
movements on operating subsidiaries |
- |
445 |
445 |
|
|
|
|
Other
Income |
|
|
|
Gains on foreign currency contracts, translation and swaps |
7,216 |
- |
7,216 |
Other income |
- |
2,379 |
2,379 |
Total income |
162,538 |
2,824 |
165,362 |
|
|
|
|
Operating expenses |
|
|
|
Interest expense |
177 |
- |
177 |
Other operating expenses |
|
|
|
Transaction costs |
333 |
- |
333 |
Manager Base and Incentive fees |
34,345 |
- |
34,345 |
Remaining
operating expenses |
2,460 |
- |
2,460 |
Total expenses |
37,315 |
- |
37,315 |
|
|
|
|
Profit for the first nine months of 2017 |
125,223 |
2,824 |
128,047 |
Per Share[15] |
2.08 |
0.04 |
2.12 |
Balance Sheet and Adjusted NAV
Reconciliation as at 30 September 2017 |
|
Italian Investments € Thousands |
Corporate € Thousands |
Total € Thousands |
Assets |
|
|
|
|
Cash and cash
equivalents |
|
- |
264,646 |
264,646 |
Other assets |
|
- |
79 |
79 |
Investments: |
|
|
|
|
doBank
Group |
|
221,475 |
- |
221,475 |
Romeo
NPLs |
|
49,273 |
- |
49,273 |
FINO
NPLs |
|
45,502 |
- |
45,502 |
Other NPL
Pools |
|
27,391 |
- |
27,391 |
Real
Estate Fund Investment I |
|
9,340 |
- |
9,340 |
Real
Estate Fund Investment II |
|
14,592 |
- |
14,592 |
Real
Estate Fund Investment III |
|
- |
- |
- |
Real
Estate Fund Investment IV |
|
28,960 |
- |
28,960 |
Real
Estate Fund Investment V |
|
4,677 |
- |
4,677 |
Other Net
Assets |
|
- |
899 |
899 |
Total assets |
|
401,210 |
265,624 |
666,834 |
|
|
|
|
|
Liabilities |
|
|
|
|
Trade and other
payables |
|
- |
1,985 |
1,985 |
Manager Base and
Incentive Fees |
|
- |
23,873 |
23,873 |
Total liabilities |
|
- |
25,858 |
25,858 |
|
|
|
|
|
Net Asset Value |
|
401,210 |
239,766 |
640,976 |
|
|
|
|
|
FINO Deferred Purchase
Price Commitment |
|
64,680 |
(64,680) |
- |
FINO follow-on
Commitment |
|
8,440 |
(8,440) |
- |
New Performing /
Sub-performing Loan Pool Commitment[16] |
|
10,000 |
(10,000) |
- |
New NPL
Commitment |
|
12,188 |
(12,188) |
- |
RE Fund Investment V
remaining unfunded Commitment |
|
1,390 |
(1,390) |
- |
|
|
|
|
|
Adjusted NAV |
|
497,908 |
143,068 |
640,976 |
Adjusted NAV (€ per Share)[17] |
|
8.15 |
2.34 |
10.49 |
ADDITIONAL
INFORMATION
For additional information that
management believes to be useful for investors, please refer to the
latest presentation posted on the Investor Relations section of the
Company's website, www.eurocastleinv.com. For consolidated
investment portfolio information, please refer to the Company's
most recent Financial Report, which is available on the Company's
website (www.eurocastleinv.com).
EARNINGS CALL
INFORMATION
Eurocastle's management will host
an earnings conference call at 2:00 P.M. London time (9:00 A.M. New
York time) later today. All interested parties are welcome to
participate on the live call. You can access the conference call by
dialling first +1-800-215-5243 (from within the U.S.) or
+1-330-863-8154 (from outside of the U.S.) ten minutes prior to the
scheduled start of the call; please reference "Eurocastle Third
Quarter 2017 Earnings Call" or "conference ID number 4446821".
A webcast of the conference call
will be available to the public on a listen-only basis at
www.eurocastleinv.com. Please allow extra time prior to the call to
visit the site and download the necessary software required to
listen to the internet broadcast. A replay of the webcast will be
available for three months following the call.
For those who are not available to
listen to the live call, a replay will be available until 11:59
P.M. New York time on Friday, 5 January 2018 by dialing
+1-855-859-2056 (from within the U.S.) or +1-404- 537-3406 (from
outside of the U.S.); please reference access code "4446821"
ABOUT
EUROCASTLE
Eurocastle Investment Limited is a
publicly traded closed-ended investment company that focuses on
investing in performing and non-performing loans and other real
estate related assets primarily in Italy. The Company is Euro
denominated and is listed on Euronext Amsterdam under the symbol
"ECT". Eurocastle is managed by an affiliate of Fortress Investment
Group LLC, a leading global investment manager. For more
information regarding Eurocastle Investment Limited and to be added
to our email distribution list, please visit
www.eurocastleinv.com.
FORWARD LOOKING
STATEMENTS
This release contains statements
that constitute forward-looking statements. Such forward-looking
statements may relate to, among other things, future commitments to
sell real estate and achievement of disposal targets, availability
of investment and divestment opportunities, timing or certainty of
completion of acquisitions and disposals, the operating performance
of our investments and financing needs. Forward-looking statements
are generally identifiable by use of forward-looking terminology
such as "may", "will", "should", "potential", "intend", "expect",
"endeavour", "seek", "anticipate", "estimate", "overestimate",
"underestimate", "believe", "could", "project", "predict",
"project", "continue", "plan", "forecast" or other similar words or
expressions. Forward-looking statements are based on certain
assumptions, discuss future expectations, describe future plans and
strategies, contain projections of results of operations or of
financial condition or state other forward-looking information. The
Group's ability to predict results or the actual effect of future
plans or strategies is limited. Although the Group believes that
the expectations reflected in such forward-looking statements are
based on reasonable assumptions, its actual results and performance
may differ materially from those set forth in the forward-looking
statements. These forward-looking statements are subject to risks,
uncertainties and other factors that may cause the Group's actual
results in future periods to differ materially from forecasted
results or stated expectations including the risks regarding
Eurocastle's ability to declare dividends, amortise the Group's
debts, renegotiate the Group's credit facilities, make new
investments, or achieve its targets regarding asset disposals or
asset performance.
[1]Adjusted NAV
for Q3 is before deducting the third quarter dividend of €1.13 per
share declared in November 2017.
[2] Amounts per
share are calculated on the following basis: Q3 2017 Adjusted NAV -
61.1 million ordinary shares in issue; Q2 2017 Adjusted NAV - 60.1
million ordinary shares in issue; Q3 2016 Adjusted NAV - 60.1
million ordinary shares in issue; Q3 2017 NFFO - 60.7 million
weighted average shares; YTD Q3 2017 NFFO - 60.3 million weighted
average shares; YTD Q3 2016 NFFO - 68.1 million weighted average
shares and Q2 2017 NFFO - 60.1 million weighted average shares. Q3
2017 dividend paid on 52.7 million ordinary shares outstanding post
share tender; Q2 2017 dividends paid on 60.1 million ordinary
shares in issue; YTD Q3 2016 dividend per share represents the sum
of the first, second and third quarter 2016 dividends (€0.375 per
share); YTD Q3 2017 dividend per share represents the sum of the
first and second quarter 2017 dividends (€0.70 per share) and €1.13
per share dividend for the third quarter 2017 declared in
November.
[3] Normalised
FFO ("NFFO") is a non-IFRS measure used to explain the financial
performance of the Company, as outlined on page 9 of the Q3 2017
Interim Report.
[4] NAV as at
30 September 2017.
[5] NAV as at
30 September 2016.
[6] Net of €5.7
million estimated transaction costs and €20.3 million of incentive
fees to the Manager.
[7] All
percentage ownerships of doBank in this document exclude the 1.75
million of treasury shares doBank has retained as at 30 September
2017.
[8] 2016
numbers pro forma for the acquisition of 100% of the share capital
of Italfondiario S.p.A. and the derecognition of the Romeo
portfolio, as if these had been put in place on 1 January 2016.
[9] Assumes net
collections for Italfondiario for the nine months ending 30
September 2016. Alternatively, it would be an increase of 12% if
gross collections of Italfondiario for the same period were
applied.
[10] Reduced
from €17.7 billion following interim collections from the cut-off
date up to closing.
[11] Time
weighted average of invested capital (net of any capital returned)
over the relevant period.
[12] Fully
realised investments.
[13] Manager
base fees are equal to the sum of (i) 1.5% of the Company's Net
Asset Value excluding Net Corporate Cash and (ii) 0.75% of the
Company's Net Corporate Cash calculated and paid monthly in
arrears. Incentive fees are equal to 25% of the euro amount by
which the Company's NFFO derived from Italian Investments (net of
allocable fees and expenses) exceeds the net amount invested in
such investments multiplied by a simple interest rate of 8% per
annum (calculated on a cumulative but not compounding basis).
[14] Amounts
per share are calculated on the following basis: Q3 2017 NFFO -
60.7 million weighted average shares; YTD Q3 2017 NFFO - 60.3
million weighted average shares.
[15] Earnings
per share based on 60.3 million weighted average ordinary shares
for the nine months ended 30 September 2017.
[16] Represents
the expected net equity investment after financing.
[17] Adjusted
NAV per share based on 61.1 million ordinary shares in issue.
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Eurocastle Investment Limited via
Globenewswire
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