Starwood European Real Estate Finance Ltd (SWEF)
SWEF: Portfolio update
19-Jun-2020 / 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.
19 June 2020
Starwood European Real Estate Finance Limited: Portfolio Update and
Appointment of Corporate Broker and Financial Adviser
New Investment
Starwood European Real Estate Finance Limited (the "Company" and, together
with its subsidiaries, the "Group") is pleased to announce that on 17 June
2020, the Group closed an investment in the funding of a EUR 71.9 million,
36 month floating rate senior loan secured by a portfolio of
industrial/logistics assets in the UK and Germany. The investment has been
made alongside Starwood Property Trust, Inc (through a wholly owned
subsidiary) with the Group participating in EUR 20 million (27.8 per cent)
of the senior loan amount. The Group expects the transaction to generate
attractive risk-adjusted returns, in line with its stated investment
strategy.
Portfolio Update
Following closing of the new investment noted above, the Group has
approximately GBP462 million of total loans advanced across 19 investments (as
of 18 June 2020) with approximately GBP68 million of unfunded commitments. The
average loan to value across the portfolio remains at approximately 62 per
cent representing a strong equity cushion. Following the funding of the new
loan the Group has approximately GBP34m of net debt (approximately 8 per cent
of Net Asset Value). All loan interest up to the date of this release has
been paid in full and on time and future interest payments are expected to
be paid in full based on the forecast gradual continued easing of lockdowns
across the UK and Europe.
The Group's largest exposure by asset class is hospitality at 33 per cent.
As previously announced, the Group's largest hospitality exposure (Hotel,
Dublin, Ireland) which equates to 29 per cent of the total hospitality
exposure has been significantly de-risked by the signing in March 2020 of a
licence with the Irish Health Service Executive (the Irish public health
service provider) to assist in delivering additional accommodation capacity
related to managing the Covid-19 outbreak.
Of the remaining hospitality exposure, 35 per cent represents three hotels
located in regional England and Scotland that are scheduled to re-open
during July 2020 in accordance with government guidelines. 85 per cent of
the UK's 2019 tourism spend was generated by domestic UK visitors (source:
STR, Tourism Economics, WTTC) and these hotels are attractively located and
are predominantly leisure-focused hotels. As such, the Group's Investment
Adviser expects that while operations may continue to be disrupted, they
will benefit from increased UK domestic demand for staycations this year.
These hotels will also benefit from a comprehensive planned refurbishment
programme during the coming winter months, meaning that they will re-open
during 2021 with a stronger offering and new branding which the Group's
Investment Adviser considers will place them in a robust position to recover
from Covid-19 related market disruption. Interest reserves are a standard
structural feature across all three of these loans and interest is expected
to be paid on time throughout the period through to completion of the
refurbishment projects and thereafter.
The majority of the remaining hospitality exposure represents a significant
refurbishment project (25 per cent) where interest capitalises until
approximately six months following project completion expected in late Q3
2020 and currently has no impact on the operating cash flows of the Group.
The Group's office exposure represents 23 per cent of total loans advanced.
The Group's exposure is well diversified across city centre and suburban
office markets but with a strong focus on two core markets. 51 per cent of
the Group's office exposure is located in London and Dublin with 49 per cent
spread across city centre and suburban office markets in Spain, Germany, the
Netherlands and Finland. So far rent collections have been robust with in
excess of 91 per cent of contracted rent collected year to date[1]. These
assets, where currently income producing, have robust stabilised income
profiles, displaying a weighted average interest cover ratio[2] in excess of
two times.
Loans on assets under construction or under renovation represent 22 per cent
of the Group's total loans advanced. All of the construction sites in the
portfolio are currently open and operating. While most European markets
experienced Covid-19 related government-mandated shutdowns, 62 per cent of
the Group's ground up construction / heavy refurbishment exposure is located
in England where construction sites were permitted to remain open, albeit
under strict social distancing measures and therefore these sites have been
less impacted than other markets. All construction projects being funded are
adequately capitalised with financially strong and committed sponsors
actively engaged in delivering underwritten business plans. Interest is
either capitalised or cash paid and there are no forecast unfunded cost
overruns related to development costs to complete projects. The Investment
Adviser remains confident in the construction loan business plans and
considers that a significant cushion to real estate collateral value exists
to protect the Group's position.
The Group's exposure to retail is limited to 13 per cent of total loans
advanced. The largest exposure in this asset class is represented by loans
secured against four Spanish shopping centres equating to 83 per cent of the
retail exposure. These assets are regionally dominant centres that have now
all re-opened following the lifting of lockdown regulations in Spain in late
May and early June. While this asset class is experiencing significant
headwinds, this has been particularly so in the US and UK where shopping
centre densities are significantly higher than that of Spain. Early
indications of post-Covid retail activity in Spain are positive with
footfall since re-opening tracking at approximately 69 per cent of 2019
levels. This is considered a strong performance given that key attractions
such as cinema anchors and leisure areas are yet to re-open. All interest
has been paid on time on these loans.
Appointment of Corporate Broker and Financial Adviser
The Board of Directors is pleased to announce the appointment of Jefferies
International Limited to act as the Company's sole broker and financial
adviser with immediate effect.
The Company looks forward to releasing its quarterly factsheet during July
2020.
For further information, please contact:
Apex Fund and Corporate Services (Guernsey)
Limited as Company Secretary
Vania Santos
01481 735878
Starwood Capital
Duncan MacPherson 020 7016 3655
Jefferies International Limited
Stuart Klein 020 7029 8000
Neil Winward
Gaudi Le Roux
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 Group 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.
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[1] Rent collections refer to only office exposures of loans advanced, with
the exception of the Mixed Portfolio Europe whose largest asset class is
office but the portfolio also includes some industrial and retail income.
[2] Interest cover ratio in excess of 2 times is based on loans whose
majority sector exposure is office and is based on current contracted rent.
ISIN: GG00B79WC100
Category Code: PFU
TIDM: SWEF
LEI Code: 5493004YMVUQ9Z7JGZ50
Sequence No.: 70740
EQS News ID: 1073955
End of Announcement EQS News Service
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(END) Dow Jones Newswires
June 19, 2020 02:00 ET (06:00 GMT)
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