SWEF : Quarterly Fact Sheet Publication
April 17 2018 - 2:03AM
UK Regulatory
Dow Jones received a payment from EQS/DGAP to publish this press
release.
Starwood European Real Estate Finance Ltd (SWEF)
SWEF : Quarterly Fact Sheet Publication
17-Apr-2018 / 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.
17 April 2018
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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 first quarter ended on 31 March 2018 is available at:
www.starwoodeuropeanfinance.com [1]
Extracted text of the commentary is set out below:
Investment Portfolio at 31 March 2018
As at 31 March 2018, the Group had 19 investments and commitments of GBP486.2
million as follows:
Transaction Sterling equivalent Sterling equivalent
balance (1) unfunded commitment
(1)
Industrial Portfolio, GBP18.6m -
UK
Hospitals, UK GBP25.0m -
Hotel, Channel Islands GBP26.9m -
Varde Partners mixed GBP6.5m -
portfolio, UK
Mixed use development, GBP11.6m GBP1.6m
South East UK
Regional Hotel GBP45.9m -
Portfolio, UK
Credit Linked Notes, UK GBP21.8m -
real estate
Total Sterling Loans GBP156.3m GBP1.6m
Residential Portfolio, GBP6.7m -
Dublin, Ireland
Logistics, Dublin, GBP12.9m -
Ireland
Hotel, Barcelona, Spain GBP40.3m -
School, Dublin, Ireland GBP16.5m -
Industrial Portfolio, GBP56.6m -
Central and Eastern
Europe
Three Shopping Centres, GBP30.9m GBP8.2m
Spain
Shopping Centre, Spain GBP10.3m GBP4.6m
Hotel, Dublin, Ireland GBP52.5m -
Residential, Dublin, GBP3.3m GBP4.6m
Ireland
Office, Paris, France GBP22.8m -
Student Accommodation, GBP6.6m GBP3.3m
Dublin
Hotel, Spain GBP23.8m GBP24.4m
Total Euro Loans GBP283.2m GBP45.1m
Total Portfolio GBP439.5m GBP46.7m
(1) Euro balances translated to sterling at period end exchange rates.
Dividend
On 16 April 2018 the Directors declared a dividend of 1.625 pence per
Ordinary Share (equivalent to 6.5 pence per annum per Ordinary Share) in
relation to the first quarter of 2018.
Portfolio activity
As at 31 March 2018, the average remaining maturity of the Group's loan book
was 3.2 years. The gross annualised levered return of the invested loan
portfolio is 8.3 per cent.
The following portfolio activity occurred in the first quarter of 2018:
Repayment: Centre Point, London: The Group received full repayment of the
Centre Point loan on 16 February 2018 following successful completion of the
borrower's business plan.
Repayment: Residential, Cork: The Group received full repayment of the loan
on 13 March 2018 following successful completion of the borrower's business
plan.
The Group also received amortisation in the quarter on the Industrial
Portfolio, UK, the Varde partners mixed portolio and the Industrial
portfolio, Europe loans, totalling GBP12.9 million, all following asset sales
in line with borrowers' business plans.
New Loan: Student Accommodation, Dublin: On 5 February 2018 the Group
committed to a EUR11.25 million whole loan facility to finance a 127 bed
purpose built student development scheme in central Dublin. The Dublin
student market suffers from a severe structural undersupply of purpose built
student accommodation, and the borrower's aim is to deliver high quality
schemes in strong locations across Ireland in order to address this
shortage. The initial facility advance was made on 5 February 2018, with
remaining development costs for the scheme to be funded by the whole loan
proceeds until expected practical completion in summer 2018. The facility
has a term of two years.
New Loan: Residential, Dublin, Ireland : On 16 February 2018, the Group
committed to a EUR9 million floating rate whole loan to finance the
conversion of 84 apart hotels to residential use on a site adjacent to the
Hotel, Dublin (described below). The financing has been provided in the form
of an initial advance along with a capex facility to fund the refurbishment
works for a period of 18 months with a six month extension option.
New Loan: Hotel, Dublin, Ireland : On 21 February 2018, the Group closed a
EUR60 million floating rate whole loan to finance the acquisition of a 764
key hotel, 27 apart-hotel units and ancillary development land in Dublin.
The financing has been provided in the form of a single advance for a four
year term with a one year extension option.
New Loan: Shopping Centre, Spain: On 23 February 2018, the Group closed a
EUR17 million floating rate mezzanine loan secured by a shopping centre in
Spain. The property is well anchored, dominates its catchment and is
positioned to benefit from the sponsors' active asset management strategy.
The financing has been provided in the form of an initial advance along with
a capex facility to implement further value enhancing initiatives. The
Group's loan complements an existing senior facility provided by Spanish
banks, a structure that the Group sees potential to replicate further in
Spain. The loan term is 30 months with two one year extension options.
New Loan: Hotel, Spain: On 15 March 2018, the Group closed a EUR110 million
floating rate whole loan secured by a hotel in Spain with Starwood Property
Trust, Inc (through a wholly owned subsidiary) participating in 50 per cent
of the loan amount, providing the Company with a net commitment of EUR55
million. The financing has been provided in the form of an initial advance
along with a capex facility to support the sponsor's repositioning strategy.
The loan term is five years, and the Group expects to earn an attractive
risk-adjusted return in line with its stated investment strategy.
Following the new loan activity, and the GBP43.7 million of repayments
received in the first quarter, the Group remains fully invested with GBP46.7
million of commitments to fund. The Group had drawn GBP66.6 million on its
available credit facilities of GBP114 million and has cash of GBP9.6 million for
working capital purposes. The Investment Adviser is reviewing multiple
lending opportunities, with some opportunities currently in execution, and
will continue to focus on the use of credit facilities and equity issuance
when appropriate in order to grow the loan book whilst limiting the cash
drag impact of any future repayments.
Commentary
In February CBRE issued an update to their "Four Quadrants real estate
relative value" paper. This paper is compelling reading for the Group's
investors as its conclusion is that within the real estate investment
universe, the private debt strategy, which the Company invests in, continues
to be the best relative risk adjusted return when compared generically to
public real estate debt and both public and private real estate equity
investments.
CBRE also highlighted that 2017 European commercial real estate investment
volumes reached a record level of EUR285 billion which is up nine per cent
on 2016 and two per cent on the prior peak year in 2015. There have been
record volumes in Austria, Central and Eastern Europe, Denmark, Finland,
Italy and the Netherlands and near peak levels in the UK and Germany. France
was singled out as a market where, after a subdued start to the year prior
to the election, volume had picked up in the latter part of the year on the
expectation of Macron's economic reforms with EUR12 billion of the annual
EUR27 billion total volume being in quarter four alone. While the core loan
market in France has been very well covered by domestic and German banks we
are seeing some opportunities where the usual banks are not delivering for
borrowers and we have been able to provide solutions. Further to closing our
first investment in France at the end of last year we see potential
follow-on transactions in the French market.
Link Asset Services (previously Capita) have released their second
commercial real estate lender sentiment survey which presents some broad
conclusions around the market. We agree with many of the conclusions such as
the continued increase in appetite for longer dated paper from insurance
companies, a relatively stable environment around risk criteria from lenders
and the trend for slower closing processes in general. The Link Asset
Services survey data shows that the average deal took 53 days in 2017 versus
46 days in the previous year to move from agreed terms to drawdown. One
aspect we have not observed is that the survey sees an increase of 45 basis
points in mezzanine pricing between 2016 and 2017. We think this reflects a
diverse universe of mezzanine financing in the survey data including smaller
ticket, development mezzanine and higher loan-to value ("LTV") mezzanine
debt included. For the types of mezzanine loans that we typically look at,
we see pricing and risk point as being relatively stable with pricing in the
seven to nine per cent range. We have also seen a very small number of lower
priced mezzanine debt loans from international capital where margins have
been as low as mid 400s basis points spread over the Libor rate for trophy
asset financings.
In the capital markets we continue to see an ongoing theme in the market for
large stabilised senior investment loans secured by commercial real estate
becoming increasingly liquid and competitive across Europe. This is driven
by increasingly diverse sources of financing from an increased use of
corporate debt for the investment grade listed property companies, domestic
and international banks lending from their balance sheets, increased
appetite from insurance companies for real estate debt and increasingly new
commercial mortgage-backed securities ("CMBS") issues all competing for
similar deals.
Most notable is the increased competitiveness in the CMBS market over the
past quarter. Investment banks now favour this route as a base case exit
when underwriting certain large investment loans for distribution.
Previously investment banks would typically have looked to sell down similar
large loans in smaller tickets in a loan syndication to a group of balance
sheet bank lenders and insurance companies. This had previously been a
better execution due to a lower cost of capital from those sources, but we
have now seen an inflection point on demand and on pricing for CMBS where
CMBS can now deliver a cheaper execution. Morgan Stanley research notes that
at the end of the year in 2015 UK commercial real estate senior debt was
25-30 basis point tighter than what was available in the CMBS markets,
however with loan pricing relatively unchanged but blended CMBS pricing more
than 50 basis points tighter this relationship has now reversed. An example
of this is Bank of America Merrill Lynch's Taurus 2017-2 issuance of a UK
CMBS in November 2017. According to Debtwire, the facility supported the
acquisition of a GBP545.6 million UK logistics portfolio. The detachment point
of the most junior notes was c. 70 per cent LTV and the blended pricing on
the issuance was c.164 basis points, which reflects both a higher LTV and
pricing significantly inside what would have been achievable in the bank
financing market for a senior loan. Since the fourth quarter of 2017,
investment banks' underwrite to CMBS activity has increased significantly
with Morgan Stanley research having increased its expectations of new
issuance in 2018 from EUR1 billion to EUR3-4 billion. There are a number of
drivers for this change in pricing including a reduction of the amount of
outstanding CMBS in the market and the effect of quantitative easing on the
availability of investable debt in the overall bond market generally.
While the re-emergence of CMBS is a notable development in the commercial
real estate lending market, the overall trend for increased liquidity and
lower pricing in the vanilla senior lending space has been continuing for a
number of years. The Group has seen little impact on its ability to source
new investments as a result of this trend as there is a limited overlap with
the Group's more bespoke approach to lending and the Group has made good
origination progress during the first quarter of the year making a total of
GBP135 million of new commitments.
Share Price / NAV at 31 March 2018
Share price (p) 104.00
NAV (p) 101.69
Premium/ (discount) 2.0%
Dividend yield 6.25%
Market cap GBP390.0 m
Key Portfolio Statistics at 31 March 2018
Number of investments 19
Percentage of currently invested portfolio in floating 86.7%
rate loans
Invested Loan Portfolio unlevered annualised total 7.4%
return (1)
Invested Loan Portfolio levered annualised total 8.3%
return (2)
Weighted average portfolio LTV - to Group first GBP (3) 13.3%
Weighted average portfolio LTV - to Group last GBP (3) 65.4%
Average loan term (stated maturity at inception) 4.1 years
Average remaining loan term 3.2 years
Net Asset Value GBP381.4m
Amount drawn under Revolving Credit Facilities -GBP66.6m
(excluding accrued interest)
Loans advanced GBP421.0.m
Financial assets held at fair value GBP22.1m
Cash GBP9.6m
Other net assets/ (liabilities) (including hedges) -GBP4.7m
(1) The unlevered annualised total return is calculated on amounts
outstanding at the reporting date, excluding undrawn commitments, and
assuming all drawn loans are outstanding for the full contractual term. 15
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 (but including
commitment fees) and excluding cash un-invested. The calculation also
excludes the origination fee payable to the Investment Manager.
(2)The levered annualised total return is calculated as per the unlevered
return but takes into account the amount of net leverage in the Group and
the cost of that leverage at current LIBOR/EURIBOR.
(3) LTV to Group last GBP means the percentage which the total loan drawn 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 loans drawn (when aggregated with any other indebtedness
ranking senior to it). For the Irish School, Dublin and the mixed use
development, south east UK and Student Accommodation, Dublin 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 0.0 0.0
1 to 2 years 126.5 28.8
2 to 3 years 146.2 33.2
3 to 5 years 142.0 32.3
5 to 10 years 25.0 5.7
*excludes any permitted extensions. Note that borrowers may elect to repay
loans before contractual maturity.
Country % of invested assets
UK - Regional England 26.4%
Spain 24.0%
Republic of Ireland 22.4%
Hungary 10.4%
Channel Islands 6.1%
France 5.2%
UK - Central London 3.0%
Czech Republic 2.5%
Sector % of invested assets
Hospitality 42.3%
Light Industrial 17.3%
Retail 11.3%
Office 8.1%
Healthcare 5.7%
Education 3.8%
Logistics 3.2%
Residential for rent 3.0%
Residential for sale 2.6%
Student Accommodation 1.5%
Other 1.2%
Loan type % of invested assets
Whole loans 75.1%
Mezzanine 19.9%
Other debt instruments 5.0%
Loan type % of invested assets*
Sterling 32.2%
Euro 67.8%
*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:
Ipes (Guernsey) Limited as Company Secretary - 01481 755143
Lucy Brehaut
Starwood Capital - 020 7016 3655
Duncan MacPherson
Stifel Nicolaus Europe Limited - 020 7710 7600
Neil Winward
Mark Bloomfield
Gaudi Le Roux
Notes:
Starwood European Real Estate Finance Limited is an investment company
listed on the premium segment of 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: PFU
TIDM: SWEF
LEI Code: 5493004YMVUQ9Z7JGZ50
Sequence No.: 5414
End of Announcement EQS News Service
675029 17-Apr-2018
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