Starwood European Real Estate Finance Ltd (SWEF)
SWEF: June 2019 Fact Sheet
25-Jul-2019 / 07:00 GMT/BST
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25 July 2019
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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 second quarter ended on 30 June 2019 is available at:
www.starwoodeuropeanfinance.com [1]
Extracted text of the commentary is set out below:
Investment Portfolio at 30 June 2019
As at 30 June 2019, the Group had 17 investments and commitments of GBP478.9
million as follows:
Sterling equivalent Sterling equivalent
balance (1) unfunded commitment
(1)
Hospitals, UK GBP25.0m -
Mixed use development, GBP11.1m GBP1.2m
South East UK
Regional Hotel GBP45.9m -
Portfolio, UK
Credit Linked Notes, UK GBP21.8m -
real estate
Hotel & Residential, UK GBP39.9m -
Office, Scotland GBP4.3m GBP0.7m
Total Sterling Loans GBP148.0m GBP1.9m
Logistics, Dublin, GBP13.0m -
Ireland
Hotel, Barcelona, Spain GBP41.3m -
Industrial Portfolio, GBP37.0m -
Central and Eastern
Europe
Three Shopping Centres, GBP33.0m GBP6.7m
Spain
Shopping Centre, Spain GBP15.2m -
Hotel, Dublin, Ireland GBP53.8m -
Residential, Dublin, GBP2.0m -
Ireland
Office, Paris, France GBP14.3m -
Hotel, Spain GBP26.2m GBP22.4m
Office & Hotel, Madrid GBP16.6m GBP0.9m
Mixed Portfolio, Europe GBP46.6m
Total Euro Loans GBP299.0m GBP30.0m
Total Portfolio GBP447.0m GBP31.9m
1) Euro balances translated to sterling at period end exchange rates.
Dividend
On 24 July 2019 the Directors declared a dividend in respect of the second
quarter of 1.625 pence per Ordinary Share payable on 30 August 2019 to
shareholders on the register at 2 August 2019.
Placing
On 7 May 2019, the Company announced that it was seeking to issue up to
38,200,000 new ordinary shares of no par value at 104.75 pence per share. On
13 May 2019 the Company announced that the Placing was oversubscribed and a
scaling back exercise was undertaken such that the targeted gross proceeds
of GBP40.0 million were raised.
Second Quarter Portfolio Activity
The following portfolio activity occurred in the second quarter of 2019:
· New Loan - Office Scotland: On 24 April 2019 the Group committed to
provide a GBP5 million whole loan on an office in Scotland of which GBP4.3
million has been funded to date.
· New Loan - Diversified portfolio, Europe: On 10 May 2019 the Group
committed to participate in the funding of a EUR104 million mezzanine loan
secured by a diversified portfolio of assets located in the Netherlands,
Germany and Finland. Starwood Property Trust, Inc (through a wholly owned
subsidiary) is participating in 50 per cent of the mezzanine loan amount,
with the Group funding the balance amounting to a net commitment of EUR52
million. The portfolio is comprised of 165 assets and provides strong
diversification in terms of tenant base, location and asset class. The
loan has a term of 3 years with two, 1 year extension options and the
Group expects to earn an attractive risk-adjusted return in line with its
stated investment strategy.
· Final Repayment: Irish School: On 8 May 2019 the Group received full
repayment of EUR18.85 million on the loan to an Irish School following
completion of the borrower's business plan.
The Group also received GBP29.6 million of partial loan prepayments as a
result of asset sales within the respective property portfolios. The Group
used the proceeds of amortisation, the Irish School repayment and available
cash and further drawings on its revolving credit facility to fund the new
loans. The proceeds of the placing of new equity were used to partially
repay the Group's revolving credit facilities.
Following this portfolio activity, the Group remained substantially fully
invested at 30 June 2019 with drawings of GBP18.0 million (net of cash) on its
GBP114 million credit facilities and GBP31.9 million of unfunded commitments.
Review of first half investment activity
The table below summarises the new commitments made and repayments received
in the first six months of 2015 to 2019.
H1 2015 H1 2016 H1 2017 H1 2018 H1 2019
New Commitments GBP31.3 m GBP98.9m GBP115.5m GBP147.5m GBP49.9m
Repayments & -GBP21.9 m -GBP92.1m -GBP85.2m -GBP74.1m -GBP45.9m
Amortisation
Net Increase in GBP9.4m GBP6.8m GBP30.3m GBP73.4m GBP4.0m
Commitments
The net increase in commitments during the first half of 2019, whilst still
positive, has been lower than the last two years. The explanation for the
lower than previous years increase in net commitments is seen to be one of
timing of transactions rather than an overall reduction in activity for the
reasons explained below.
1) As we have reported in previous years, the first quarter is frequently
quiet in the real estate market and we have only tended to see high levels
of activity in the first quarter when deals which were in execution during
the previous year did not complete then. This year, no deals rolled over
from 2018 and the first quarter was relatively subdued as a result.
2) The Group has a number of transactions under review and two
transactions in execution which it hopes to close early in the third
quarter. If both transactions close, this would mean that the level of
commitments made would be similar to the first half of 2018.
The Group also received a relatively low amount of repayments in the first
half of 2019. However, since the end of the second quarter, the following
repayments have been received:
· Mixed Use Development, UK - GBP8.1 million amortization following the sale
of one of the properties in line with the business plan.
· Industrial Europe - EUR26.3 million amortization following the sale of
one of the properties.
· Hotel, Barcelona, Spain - full repayment of EUR46 million following the
sale of the hotel.
·
With these repayments factored in, the repayment percentage for the first
seven months of the year is approximately 27 per cent of the loan book at
the beginning of the year. In a normal year, we expect 30-40 per cent of the
portfolio to repay on average but some years may be materially higher or
lower than the average. It is difficult to accurately predict the repayment
intention of borrowers as they execute on their business plans but we will
continue to closely monitor this throughout the second half in order to try
to minimise any potential cash drag from repayments.
The Group continues to see strong opportunities to deploy capital in our
target markets. The Investment Adviser has a number of transactions under
review which present solid risk adjusted returns.
Reported Returns
Reported returns have fallen in the second quarter from 7.3 per cent to 7.2
per cent unlevered, and from 7.8 per cent to 7.4 per cent levered. We would
expect the levered returns to increase as the loans in execution are funded
and further leverage is used for the loan portfolio.
In addition to this and as previously explained, the simplified way in which
the annual return is presented does lead to the returns being a conservative
estimate at any point in time. The following items enhance the actual
returns achieved:
· In the quoted return, we amortise all one off fees (such as arrangement
and exit fees) over the contractual life of the loan which is currently
four years for the portfolio. However, it has been our experience that
loans tend to repay after approximately 2.5 years and as such these fees
are actually amortised over a shorter period.
· Many loans benefit from prepayment provisions which mean that if they
are repaid before the end of the protected period, additional interest or
fees become due. As we quote the return based on the contractual life of
the loan, these returns cannot be forecast in the return.
· The quoted return excludes the benefit of any foreign exchange gains on
Euro loans. We do not forecast this as the loans are often repaid early
and the gain may be lower than this once hedge positions are settled.
The above three upsides to quoted returns are not incorporated in the gross
levered yield of 7.4 per cent as they are not guaranteed to occur, are
difficult to forecast accurately and to incorporate them could overstate the
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