DJ SWEF: December 2019 Factsheet
Starwood European Real Estate Finance Ltd (SWEF)
SWEF: December 2019 Factsheet
24-Jan-2020 / 07:00 GMT/BST
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24 January 2020
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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 fourth quarter ended on 31 December 2019 is available
at:
www.starwoodeuropeanfinance.com [1]
Extracted text of the commentary is set out below:
Investment Portfolio at 31 December 2019
As at 31 December 2019, the Group had 18 investments and commitments of GBP489
million as follows:
Sterling equivalent Sterling equivalent
balance (1) unfunded commitment
(1)
Hospitals, UK GBP25.0m -
Mixed use development, GBP0.7m GBP1.1m
South East UK
Credit Linked Notes, UK GBP21.8m -
real estate
Hotel & Residential, UK GBP39.9m -
Office, Scotland GBP4.4m GBP0.6m
Office, London GBP12.6m GBP7.9m
Residential, London GBP49.0m GBP5.7m
Hotel, Oxford GBP16.7m GBP6.3m
Hotel, Scotland GBP25.9m GBP15.5m
Total Sterling Loans GBP196.0m GBP37.1m
Three Shopping Centres, GBP32.0m GBP5.5m
Spain
Shopping Centre, Spain GBP14.5m -
Hotel, Dublin, Ireland GBP51.2m -
Office, Paris, France GBP13.7m -
Hotel, Spain GBP25.8m GBP20.5m
Office & Hotel, Madrid GBP15.8m GBP0.9m
Mixed Portfolio, Europe GBP43.2m -
Mixed Use, Dublin GBP0.7m GBP11.9m
Office Portfolio, Spain GBP18.2m GBP2.3m
Total Euro Loans GBP215.1m GBP41.1m
Total Portfolio GBP411.1m GBP78.2m
1) Euro balances translated to sterling at period end exchange rates.
Fourth Quarter Portfolio Activity
The following portfolio activity occurred in the fourth quarter of 2019:
New Loans: Hotel Scotland and Hotel Oxford: on 18th November 2019 the Group
committed to fund two new hotel acquisition financings for a total
commitment of GBP64.3 million. Both investments are with the same sponsor and
a repeat borrower for Starwood Capital. Whilst the sponsor is the same on
each investment, the two loans are not cross-collateralised as the
investments sit in different fund vehicles. Each financing has been provided
in the form of a significant initial advance to finance an asset acquisition
along with a smaller capex facility to support the sponsor's capital
expenditure for improvements and rebranding of the hotels. The day one
advance amounts were GBP25.9 million and GBP16.7 million whilst the total
commitments are GBP41.35 million and GBP22.95 million respectively and expected
to be drawn over the next 1-2 years. Each loan is for a term of 5 years, and
the Group expects to earn an attractive risk-adjusted return in line with
its stated investment strategy.
New Loan: Office Portfolio, Spain: on 29th November 2019, the Group closed
an investment in a 4-year floating rate loan secured by a portfolio of
office assets Spain, with Starwood Property Trust, Inc (through a wholly
owned subsidiary) participating in 50 per cent of the mezzanine loan amount,
providing the Group with a net commitment of EUR 24 million. The financing
has been provided in the form of an initial advance along with a capex
facility to support the sponsors' business plan to make further investment
in the properties. The properties are well-located within the decentralised
submarkets of Madrid and Barcelona. The assets are positioned to benefit
from the sponsors' active asset management strategy. The Group expects to
earn an attractive risk-adjusted return in line with its stated investment
strategy.
Loan Repayments: the following loans repaid during the first half of
December:-
· Logistics, Dublin, Ireland - the remaining loan balance of EUR 14.1
million was repaid in full following a sale of the portfolio.
· Regional Hotel, Portfolio, UK - the loan of GBP45.9 million was repaid in
full following a sale of the portfolio.
· Residential, Dublin, Ireland- the remaining loan balance of EUR 2.2
million was repaid in full following completion of the borrowers' business
plan.
Q1 2020 New Loans: on 2 January 2020, the Group committed to an investment
in a c. 6 year floating rate loan secured by a portfolio of assets in
Ireland, together with Starwood Property Trust, Inc (through a wholly owned
subsidiary) participating in 50 per cent of the mezzanine loan amount,
providing the Group with a net commitment of EUR 35.15 million. The
portfolio consists of 12 properties in Central Dublin with primarily office
and some small amounts of retail and residential space totalling over
600,000 sqf in total. The Group expects to earn an attractive risk-adjusted
return in line with its stated investment strategy.
Overview of 2019 Activity
2019 was another successful origination year with GBP224.7 million of new
commitments, being 52.1 per cent of the loan book at the beginning of the
year. Repayments of GBP198.3 million represented 45.9 per cent of the loan
book at the start of the year, being marginally higher than the average of
41.9 per cent over the previous four years. Net commitments were therefore
GBP26.4 million during the year. The table below shows the Group's loan
origination and repayment profile over the last five years.
2015 2016 2017 2018 2019
New loans to GBP118.7m GBP175.9m GBP245.8m GBP208.0m GBP224.7m
borrowers
(commitment)
Loan repayments and -GBP49.0m -GBP129.3m -GBP213.1m -GBP137.2m -GBP198.3m
amortisation
Net Investment GBP69.7m GBP46.6m GBP32.7m GBP70.8m GBP26.4m
The dividend in the fourth quarter was fully covered by earnings. Total
comprehensive income for 2019 was GBP27.9 million (including GBP2.9m of
unrealised foreign exchange gains on income) and dividends of GBP25.6 million
were declared in relation to the year. The dividend was covered 0.98x when
excluding unrealised foreign exchange gains on income or 1.09x when
including unrealised foreign exchange gains.
Dividend
On 23 January 2020 the Directors declared a dividend in respect of the
fourth quarter of 1.625 pence per Ordinary Share payable on 21 February 2020
to shareholders on the register at 31 January 2020.
Market Commentary & Outlook
The fourth quarter is typically the busiest quarter for transaction activity
levels in the commercial real estate market with a drive to get deals
wrapped up before the holiday season often compounded by year end
considerations. In 2019 we saw this theme start early on with limited
additional resource capacity in the bank market in the fourth quarter. We
had discussions with banks as early as July where balance sheet lenders had
already earmarked the deals that were to be closed by the end of the year
and were unwilling to take on additional mandates. In discussions with other
market participants in December, all reported a high level of deals in
execution including acquisitions, loan financing, securitisation, corporate
acquisitions and refinancings.
For the UK specifically the underlying real estate market has been
predominantly robust in terms of operational and leasing performance but the
election and Brexit deadlines have impacted the financing market with
liquidity ebbing and flowing as events have unfolded. A number of borrowers
keen to secure refinancing price certainty ahead of the election for larger
transactions paid a premium to investment banks for underwritten pricing
levels contributing to the final quarter activity level mentioned above. The
Cass UK Commercial mortgage lending survey reported overall UK commercial
mortgage lending up 4 per cent for the first half of 2019 versus 2018 and
when numbers for the second half are reported we would expect that theme to
have continued.
The outcome of the general election with a decisive majority result creates
a more stable environment for markets. While there will continue to be
uncertainties about how the implementation of Brexit will unfold in detail,
the market does now have certainty about the short term direction for
withdrawal. In addition, compared to the parliamentary dynamics over the
last decade, the size of the government's majority will now allow it to
progress with parliamentary business more efficiently and we can also expect
an uninterrupted five year parliament. This reduction in political
uncertainties provides a more stable environment and we have seen the impact
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January 24, 2020 02:00 ET (07:00 GMT)
of this immediately for both the residential and commercial real estate
markets . On the day after the election the iShares UK Property UCITS ETF
which tracks the UK REIT sector increased by 4 per cent and at the beginning
of 2020 started 25 per cent higher than its 2019 low in August. On the high
end residential side Savills report that transactions over GBP5 million are up
a third in December compared to 2018.
The foreign exchange market has been more muted in its reaction to the
election result. GBP:USD had traded in the low $1.20s during the middle of
the year when the UK Parliament and Brexit seemed stuck. It rallied into the
high $1.20s low $1.30s range following Boris Johnson's agreement to changes
to the arrangements for leaving the EU. The pound rallied briefly as high as
$1.35 post the election result but has subsequently traded back into the low
$1.30s with a significant move backward as the government announced plans to
lock the timing of the next phase of Brexit into law. Overall for the year
the pound is up from $1.275 to $1.325.
EUR and GBP short interest rates are largely unchanged over the past year
however with some flattening versus 5 years. Both forward curves are very
flat with 3 month Euribor currently at -41bps versus 5 year swap of -23bps.
GBP 3 month Libor and the 5 year swap are both at 79 bps.
In this low interest rate environment we believe the performance of the
Company's portfolio versus other credit continues to present a particularly
compelling risk adjusted return. The Group's pipeline remains strong and
well diversified by sector, geography and investment type. While UK, Ireland
and Spain remain geographical focuses for new origination the pipeline also
includes a number of other Scandinavian and western European countries. We
continue to see a good mix of whole and mezzanine loan opportunities and
across the real estate asset classes.
Share Price / NAV at 31 December 2019
Share price (p) 104.50
NAV (p) 103.24
Premium 1.2%
Dividend yield 6.2%
Market cap GBP431.8 m
Key Portfolio Statistics at 31 December 2019
Number of investments 18
Percentage of currently invested portfolio in floating 80.2%
rate loans
Invested Loan Portfolio unlevered annualised total 7.1%
return (1)
Portfolio levered annualised total return (2) 7.0%
Weighted average portfolio LTV - to Group first GBP (3) 18.4%
Weighted average portfolio LTV - to Group last GBP (3) 63.0%
Average loan term (stated maturity at inception) 4.1 years
Average remaining loan term 2.8 years
Net Asset Value GBP426.6m
Amount drawn under Revolving Credit Facilities (GBP29.7m)
(excluding accrued interest)
Loans advanced GBP390.6m
Financial assets held at fair value (including accrued GBP30.5m
income)
Cash GBP36.8m
Other net assets/ (liabilities) (including hedges) (GBP1.6m)
Origination Fees - current quarter GBP0.7m
Origination Fees - last 12 months GBP1.7m
Management Fees - current quarter GBP0.8m
Management Fees - last 12 months GBP3.1m
(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. 13
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 development projects the calculation includes the
total facility available and is calculated against the assumed market value
on completion of the relevant project.
Remaining years to Value of loans % of invested
contractual maturity* (GBPm) portfolio
0 to 1 years 28.9 7.0%
1 to 2 years 93.3 22.7%
2 to 3 years 161.5 39.3%
3 to 5 years 102.4 24.9%
5 to 10 years 25.0 6.1%
*excludes any permitted extensions. Note that borrowers may elect to repay
loans before contractual maturity.
Country % of invested assets
UK - Central London 28.1%
Spain 25.9%
Republic of Ireland 12.6%
UK - Regional England 12.2%
UK - Scotland 7.4%
Netherlands 6.6%
France 3.3%
Germany 2.7%
Finland 1.2%
Sector % of invested assets
Hospitality 31.4%
Residential for sale 21.2%
Office 20.7%
Retail 13.9%
Healthcare 6.1%
Light Industrial 3.6%
Other 1.4%
Logistics 1.1%
Residential for rent 0.6%
Loan type % of invested assets
Whole loans 60.5%
Mezzanine 34.2%
Other debt instruments 5.3%
Currency % of invested assets*
Sterling 47.7%
Euro 52.3%
*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:
Apex Fund and Corporate Services (Guernsey) Limited as Company Secretary -
01481 735810
Dave Taylor
Starwood Capital - 020 7016 3655
Duncan MacPherson
Stifel Nicolaus Europe Limited - 020 7710 7600
Mark Bloomfield
Mark Young
Nick Donovan
Maarten Freeriks
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: MSCM
TIDM: SWEF
LEI Code: 5493004YMVUQ9Z7JGZ50
Sequence No.: 42370
EQS News ID: 959531
End of Announcement EQS News Service
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