TIDMSWEF
RNS Number : 0184F
Starwood European Real Estate Finan
17 May 2013
17 May 2013
Starwood European Real Estate Finance Limited
Unaudited Interim Management Statement for the First Half of the
Financial Year ending 31 December 2013
Starwood European Real Estate Finance Limited (the "Company") is
publishing this Interim Management Statement in accordance with DTR
4.3 of the FCA Handbook.
This interim management statement relates to the period from 17
December 2012 to 17 May 2013, and has been prepared solely to
comply with the requirement of the Company to provide additional
information to Shareholders as a body in an interim management
statement, no earlier than 12 March 2013 and no later than 19 May
2013. It should not be relied upon by any other party or for any
other purpose.
Unless otherwise noted herein, the financial information
provided in this interim management statement, and the asset
valuations underlying that financial information, are as at 30
April 2013 and are unaudited. Terms used but not defined in this
interim management statement shall have the same meaning as those
defined in the Company's prospectus dated 28 November 2012.
References to the "Group" below refer to the Company, Starfin
Public LP and its wholly-owned Luxembourg subsidiary, Starfin Lux
Sarl.
Background information
The Company is a Guernsey closed-ended investment company listed
on the main market of the London Stock Exchange, and has been
registered with the Guernsey Financial Services Commission as a
closed-ended collective investment scheme. The Company is managed
by the Guernsey incorporated Starwood European Finance Partners
Limited, which has delegated certain functions to the Investment
Adviser Starwood Capital Europe Advisers, LLP. Both the manager and
the adviser are indirectly wholly-owned subsidiaries of Starwood
Capital Group Global, L.P..
The Company's share capital consists of Ordinary Shares
denominated in Sterling.
Investment Policy & Objective
The investment objective of the Company is to provide
Shareholders with regular dividends and an attractive total return
whilst limiting downside risk, through the origination, execution,
acquisition and servicing of a diversified portfolio of real estate
debt investments in the UK and Continental European markets.
As per the prospectus, the Company will target a net total
return on invested capital of 8-9% per annum and a dividend yield
of 3.5 pence per Ordinary Share in respect of the period from the
date of Admission, of 17 December 2012, to the first financial year
end, of 31 December 2013. In subsequent financial periods, this
target will increase to 7.0 pence per Ordinary Share.
Market Summary & Outlook
The start of the year has highlighted a much greater degree of
optimism within the property markets, still cautious but certainly
greater than in recent years. A time delay always exists in
transferring optimism on property into the financing markets and,
after August, the first quarter remains the most muted months of
the year for business. That said, on the demand side, the
Investment Adviser senses that property investors are cautiously
seeking to take steps to broaden the range and extent of investment
plays that will require debt.
On the supply side, many European banks continue to focus on
their withdrawal or reduction of exposure to the sector. Individual
events, such as the recent nationalization of SNS by the Dutch
government, also underscore continued regulatory concerns over the
carrying value of many loans on bank balance sheets. The recent
recommendation from the Bank of England that the UK banks should
seek to raise additional capital is also reflective of this
carrying value concern. Quiet capital relief programs rather than
high profile non-performing loan portfolio trades are likely to be
a dominant theme. Certainly given the short term nature of
outstanding loan maturities, loan prolongations are now a very high
level agenda item for most European banks.
In contrast, other aspects of the financial sector show greater
life. The UK government's "Funding for Lending" program has clearly
stimulated property lending. Funding for Lending is ostensibly
focused on encouraging SME lending but to qualify requires
participating lenders to grow their UK facing balance sheets. Hence
as a by-product, the scheme is notable in apparently creating a
renewed interest in property lending albeit based on rather
conservative lending metrics. The alternative lending space
continues to develop and is summarily defined by investment funds
(such as the Company) raising third party capital for higher return
lending strategies and insurance companies taking an interest in
the more traditional senior lending area that the banks themselves
still occupy.
The Investment Adviser believes that continued demand for
alternative finance will come from a hardening attitude of banks to
delever as well as continuing new deal optimism. Such demand
growth, however, will also highlight that the restricted scale of
available capital remains well below that necessary to meet such
demand. Tempering this is the reality that the Company is not the
only one to identify the opportunity.
Portfolio Summary as at 30 April 2013- Key Statistics
Number of issuers 1
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Number of investments 1
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Number of industries 1
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Percentage of invested portfolio in floating
rate investments 100%
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Portfolio current yield N/A (1)
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Weighted average coupon N/A (1)
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Blended portfolio LTV N/A (1)
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Average loan term 5 years
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Percentage of assets invested in cash 91.9%
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Percentage of assets invested in senior
loans 0%
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Percentage of assets invested in second
lien and mezzanine loans 8.1%
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Percentage invested in GBP 100%
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Percentage invested in Euro 0%
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(1) Unable to disclose until the fund has greater than one
investment due to confidentiality undertakings.
Portfolio News
On 27 December 2012 the Group participated as one of three
partners in the GBP147m mezzanine component of the GBP547m
refinancing ("Refinancing") of the Maybourne Hotel Group
("Maybourne"). The five-year Refinancing is secured on three
five-star luxury London hotels, being Claridge's, the Connaught and
the Berkeley, and consists of a GBP400m senior loan and GBP147m of
mezzanine, to which the Group committed GBP19m. This investment has
been undertaken on an attractive loan-to-value of the low fifties
percent, and the Group will earn a double digit yield in line with
its investment criteria.
Origination Process & Pipeline
The Investment Adviser seeks to originate opportunities in three
principal ways:
(1) Direct Client Origination - Utilising its broad global and
local relationships to source primary business opportunities.
(2) Bank Interaction - The Investment Adviser and its affiliates
have strong banking relationships given the Starwood Capital
Group's wider market position. With the growing awareness of the
Company and its capabilities, the Investment Adviser is being
actively approached by banking partners to work together.
(3) Equity Business Referral - As a result of Starwood Capital
Group's involvement in equity investments, the Investment Adviser
often sees opportunities where the pricing or risk level is
inappropriate from an equity perspective but where the opportunity
to invest in the debt aspect of the investment is more
compelling.
All three approaches are sourcing opportunities. Interestingly,
secondary market transactions rarely show value, either because of
structural terms or pricing. The Investment Adviser has reviewed
numerous capital relief trades where banks seek to sell existing
performing loan positions - this is not the Company's core business
focus and in any case the bid/offer spread remains challenging to
bridge.
Implementing these origination approaches means that the
Investment Adviser has agreed indicative terms on five other
investments, transitional and development opportunities in the UK
and Continental Europe. These opportunities remain subject to final
due diligence, documentation and final Investment Manager Board
approval. In addition, the Investment Adviser is in advanced
discussions on a number of other transactions. These opportunities
are a mixture of senior, mezzanine and whole loans that reflect the
Company's desire to deliver a blended approach to risk and return
and represent transactions which are expected to make an effective
contribution to the achievement of the investment objectives in the
second quarter of 2013. The Investment Adviser is also working on
an extensive pipeline of other opportunities at various stages of
due diligence and negotiation which are anticipated to achieve the
strategic intention to be fully invested within 12 months.
Material Events and Transactions
In order to meet market demand, principally following the
Company's inclusion in the FTSE UK Index Series and to manage the
current share price premium over the net asset value per share, the
Company has issued additional shares within the limits imposed by
the Prospectus Rules.
The following tap issues were made during the period:
-- 21 March 2013: An additional eight million ordinary shares at
a price of 104.25 pence per Ordinary Share.
-- 09 April 2013: An additional one million ordinary shares at a
price of 104.50 pence per Ordinary Share.
-- 12 April 2013: An additional six hundred thousand shares at a
price of 104 pence per Ordinary Share.
Following these issues, the Company currently has issued share
capital consisting of 238,100,000 Ordinary Shares.
Financial Highlights
As described in the Company's prospectus, the net asset value
("NAV") and the NAV per share are both calculated monthly by the
Company's administrator based on the latest published NAV for each
underlying fund.
31 December 31 January 28 February 31 March 30 April
2012 2013 2013 2013 2013
----------------------- ------------ ----------- ------------ ---------- ----------
Estimated NAV
per Ordinary share 97.99 98.07 98.14 98.39 98.49
----------------------- ------------ ----------- ------------ ---------- ----------
Share price 102.00 104.38 105.63 104.75 106.25
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Premium / (discount) 4.1% 6.4% 7.6% 6.5% 7.9%
----------------------- ------------ ----------- ------------ ---------- ----------
Market Capitalisation GBP233.1m GBP238.5m GBP241.4m GBP247.7m GBP253.0m
----------------------- ------------ ----------- ------------ ---------- ----------
Unaudited Consolidated Statement of Financial Position
As at 30 April 2013
30 April 2013 (unaudited)
GBPm GBPm
--------------------------------- ----------- ---------------
Non-Current Assets
Financial assets at fair value
through profit or loss 19.1
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Current Assets 0.1
Trade and other receivables 215.5
Cash and cash equivalents
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215.6
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Current Liabilities
Trade and other payables 0.2
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Net Current Assets 215.4
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Net Assets 234.5
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Capital and reserves 233.8
Called up share capital and 0.7
share premium
Retained Earnings
--------------------------------------- ----------- ---------------
Total Equity 234.5
--------------------------------------- ----------- ---------------
Number of shares 238,100,000
NAV per share (p) 98.49
Dividends
Subject to market conditions, the financial position of the
Company and the investment outlook, it is the Director's intention
to pay quarterly dividends to Shareholders. Whilst not forming part
of its investment objective or policy and assuming that the Net
Issue Proceeds are invested in accordance with the intended
timetable, the Company will seek to target the following dividend
payments.
-- Dividends totalling at least 3.5 pence per Ordinary Share in
respect of the period from Admission to the first financial year
end;
-- Dividends totalling 7.0 pence per Ordinary Share per annum in
respect of subsequent financial periods.
The Directors will declare and pay dividends in compliance with
the solvency test prescribed by Guernsey law.
Reports and Accounts
The Company's first interim report and accounts will be for the
period ending 30 June 2013 and will be made public within two
months following the period end.
The Company's first annual report and accounts will be for the
financial year ending 31 December 2013 and will be made public
within four months following the period end.
The Board is not aware of any other significant events or
transactions that have occurred since Admission on 17 December 2012
and the publication date of this interim management statement which
would have a material impact on the financial position of the
Company.
Starwood European Real Estate Finance Limited
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR
INDIRECTLY, TO U.S. PERSONS OR INTO THE UNITED STATES, AUSTRALIA,
CANADA OR JAPAN.
This document is only directed at persons in the United Kingdom
who are investment professionals as defined in Article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order
2005, high net worth companies, unincorporated associations and
other persons as defined in Article 49 of that Order or others to
whom this document can lawfully be distributed or given, inside the
United Kingdom, without approval of an authorised person. Any other
person should not rely on it or act on it and any investment or
investment activity to which it relates will not be engaged in with
them.
This document is not for release, publication, or distribution,
directly or indirectly, in whole or in part, to US Persons (as
defined in Regulation S under the Securities Act of 1933, as
amended) or into or within the United States (including its
territories and possessions, any state of the United States and the
District of Columbia), Australia, Canada, Japan, or any other
jurisdiction where to do so would constitute a violation of the
relevant laws or regulations of such jurisdiction.
Past performance is no guide to the future. The value of
investments and the income from them may go down as well as up and
investors may not get back the full amount they originally
invested. The target return and target dividend yield should not be
taken as an indication of the Company's expected future performance
or results. The target return and target dividend yield are targets
only and there is no guarantee that they can or will be achieved
and they should not be seen as an indication of the Company's
actual or expected return. Statements contained herein, including
statements about market conditions and the economic environment,
are based on current expectations, estimates, projections, opinions
and/or beliefs of the Company and its investment manager. Such
statements involve known and unknown risks, uncertainties and other
factors, and undue reliance should not be placed thereon. Such
statements are necessarily speculative in nature, as they are based
on certain assumptions. It can be expected that some or all of the
assumptions underlying such statements will not reflect actual
conditions. Accordingly, there can be no assurance that any
projections, forecast or estimates will be realised. The
information presented has been obtained from sources believed to be
reliable but no representation or warranty is given or may be
implied that it is accurate or complete.
The information presented on this interim management statement
is solely for information purposes and is not intended to be, and
should not be construed as, an offer or recommendation to buy and
sell investments. If you are in any doubt as to the appropriate
course of action, we would recommend that you consult your own
independent financial adviser, stockbroker, solicitor, accountant
or other professional adviser.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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