Starwood European Real Estate Finance Ltd (SWEF)
SWEF June 2020 Fact Sheet
24-Jul-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.
24 July 2020
Starwood European Real Estate Finance Limited: Quarterly Factsheet
Publication
Starwood European Real Estate Finance Limited (the "Company") announces that
the factsheet for the quarter ended on 30 June 2020 is available at:
www.starwoodeuropeanfinance.com [1]
The Company will be hosting an investor call at 10.00am on Thursday 30 July
2020. Investors who wish to listen into the call can register their interest
by contacting Starwood on swef@starwood.com and dial in details will be
provided directly to the participants. Investors are also being invited to
submit questions to the Company in advance of the call through the same
email address. A transcript of the call will be made available on the
website. Please note the conference call is not open to the media or their
third party representatives.
Extracted text of the commentary is set out below:
Update Summary
· All of the loans in the investment portfolio are paying their interest
on time
· There are no required impairments in the investment portfolio
· The Group expects a favourable environment for future investments in the
long term
· The Group has strong liquidity with net debt of GBP15.1 million at 30 June
2020 and undrawn revolving credit facilities of GBP101.9 million to fund
existing commitments
· The average loan to value across the portfolio remained at approximately
63 per cent representing a strong equity cushion
· In light of the lower interest rate environment the Group has
re-evaluated its dividend policy to create a stable, sustainable and
covered dividend level for the long term
· The Group will continue to pay a dividend of 6.5 pence per share through
2020 and will target to pay 5.5 pence per share thereafter. More
information on the dividend can be found below and in the accompanying
investor update presentation, which is available on the Company's website
at: www.starwoodeuropeanfinance.com
Investment Portfolio at 30 June 2020
As at 30 June 2020, the Group had 18 investments and commitments of GBP514.7
million as follows:
Sterling equivalent Sterling equivalent
balance (1) unfunded commitment
(1)
Hospitals, UK GBP25.0m -
Hotel & Residential, UK GBP49.9m -
Office, Scotland GBP4.6m GBP0.4m
Office, London GBP13.0m GBP7.6m
Residential, London GBP37.0m GBP2.7m
Hotel, Oxford GBP16.7m GBP6.3m
Hotel, Scotland GBP25.9m GBP15.5m
Hotel, North Berwick GBP10.5m GBP4.5m
Logistics Portfolio, GBP12.0m -
UK(2)
Total Sterling Loans GBP194.6m GBP37.0m
Three Shopping Centres, GBP34.1m GBP5.9m
Spain
Shopping Centre, Spain GBP15.6m -
Hotel, Dublin, Ireland GBP55.0m -
Hotel, Spain GBP40.1m GBP9.5m
Office & Hotel, Madrid GBP17.0m GBP0.9m
Mixed Portfolio, Europe GBP31.3m -
Mixed Use, Dublin GBP2.0m GBP11.5m
Office Portfolio, Spain GBP19.6m GBP2.4m
Office Portfolio, GBP32.2m -
Dublin
Logistics Portfolio, GBP6.0m -
Germany(2)
Total Euro Loans GBP252.9m GBP30.2m
Total Portfolio GBP447.5m GBP67.2m
1) Euro balances translated to sterling at period end exchange rate.
2) Logistics Portfolio, UK and Logistics Portfolio, Germany is one single
loan agreement with sterling and Euro tranches.
Second Quarter Portfolio Activity
The following portfolio activity occurred in the quarter:
New Loan, Logistics, UK and Germany: 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.
Loan Repayments & Amortisation: the following loan repayments and material
amortisation was received during the quarter:-
· Credit Linked notes: a full and final repayment of the GBP21.8 million
loan;
· Mixed Portfolio, Europe: EUR 4.3 million of unscheduled amortisation
following asset sales; and
· Residential, London: GBP3.5 million of amortisation following the sale of
residential units.
Following the activity noted above, in addition to drawdowns on existing
commitments of GBP6.9 million, the Group had approximately GBP447.5 million of
total loans advanced across 18 investments with GBP67.2 million of unfunded
commitments. The average loan to value across the portfolio remained at
approximately 63 per cent representing a strong equity cushion.
Liquidity
The Group is very modestly levered with net debt of GBP15.1 million (3.5 per
cent of NAV) at 30 June 2020, has no repo facilities outstanding and
significant liquidity available with undrawn revolving credit facilities of
GBP101.9 million to fund existing commitments as summarised below.
As at 30 June 2020 GBP million
Drawn on Group debt facilities (24.1)
Cash at hand 9.0
Net Debt (15.1)
Undrawn Debt Facilities available to Group 101.9
Undrawn Commitments to Borrowers (67.2)
Available Capacity (cash + undrawn facilities - 43.7
commitments to borrowers)
As described in our last factsheet, the way in which the Group's borrowing
facilities are structured means that it does not need to fund mark to market
margin calls. The Group does have the obligation to post cash collateral
under its hedging facilities. However, cash would not need to be posted
until the hedges were more than GBP20 million out of the money. The mark to
market of the hedges at 30 June 2020 was just GBP4.5 million (out of the
money) and with the robust hedging structure employed by the Group, cash
collateral has never been required to be posted since inception.
Current and Future Dividend
On 23 July 2020, the Directors declared a dividend in respect of the second
quarter of 1.625 pence per Ordinary Share, equating to an annualised 6.5
pence per annum. This was covered 0.95x by earnings excluding unrealised FX
gains. We expect the dividend cover to reduce to approximately 0.87x during
the second half of the year following the repayment and amortisation
received in the second quarter.
The Board and Investment Adviser recognise the importance of stable and
predictable dividends for our shareholders. Accordingly, we hold a dividend
reserve built up over several years which we have been using to maintain the
annual dividend at 6.5 pence per share over the last eighteen months even
though the dividend has been uncovered by earnings more recently. As a
result of this reserve, dividends have not therefore been paid out of
capital reserves. The Company intends to continue to use the remaining
reserve to maintain the annual dividend at 6.5 pence per share for the rest
of 2020 which will leave a small reserve remaining.
In the period since the Group's inception, the Bank of England base rate has
reduced from 0.50 per cent to 0.10 per cent. The average 5 year GBP swap
rate from inception to year end 2019 was 1.16 per cent, compared to 0.13 per
cent at 30 June 2020 representing a fall of over 1 per cent on the average.
At inception LIBOR / EURIBOR might have contributed up to 10 per cent of the
company's underlying return profile, today it makes up less than 1 per cent.
In light of the declining interest rate environment, from 1 January 2021 the
Group intends to reduce the dividend target to 5.5 pence per annum (payable
quarterly) which, in the Board and the Investment Adviser's view, is a more
sustainable level of dividend which should be fully covered by earnings
whilst ensuring we maintain our strong credit discipline whilst managing
risk. On the share price at 30 June 2020, a dividend of 5.5 pence per annum
represents an attractive 6.4 per cent dividend yield.
Portfolio Overview in Light of Covid-19
All loan interest up to the date of this factsheet 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.
On 19 June 2020 the Group published an update on the performance of the
(MORE TO FOLLOW) Dow Jones Newswires
July 24, 2020 02:00 ET (06:00 GMT)
