Starwood European Real Estate Finan Quarterly Factsheet Publication (1821D)
23 Octobre 2015 - 8:00AM
UK Regulatory
TIDMSWEF
RNS Number : 1821D
Starwood European Real Estate Finan
23 October 2015
23 October 2015
Starwood European Real Estate Finance Limited: Quarterly
Factsheet Publication
Starwood European Real Estate Finance Limited (the "Company")
announces that the factsheet for the third quarter ended on 30
September 2015 is available at:
www.starwoodeuropeanfinance.com
Extracted text of the commentary is set out below:
"Investment Portfolio at 30 September 2015
As at 30 September 2015, the Group had investments and
commitments of GBP299.0m as follows:
Transaction Sterling Sterling
equivalent equivalent
balance unfunded
(1) commitment
(1)
----------------------- ------------ ------------
Maybourne Hotel Group, GBP11.2m -
London
----------------------- ------------ ------------
West End Development, GBP10.0m -
London
----------------------- ------------ ------------
Lifecare Residences, GBP13.9m -
London
----------------------- ------------ ------------
Salesforce Tower, GBP12.5m -
London
----------------------- ------------ ------------
Centre Point, London GBP45.0m -
----------------------- ------------ ------------
5 Star Hotel, London GBP13.0m -
----------------------- ------------ ------------
Aldgate Tower, London GBP39.8m GBP5.2m
----------------------- ------------ ------------
Center Parcs Bonds, GBP8.0m -
UK
----------------------- ------------ ------------
Industrial Portfolio, GBP32.5m -
UK
----------------------- ------------ ------------
Total Sterling Loans GBP185.9m GBP5.8m
----------------------- ------------ ------------
Retail Portfolio, GBP24.3m -
Finland
----------------------- ------------ ------------
Industrial Portfolio, GBP14.8m -
Netherlands
----------------------- ------------ ------------
Office, Netherlands GBP10.5m -
----------------------- ------------ ------------
W Hotel, Netherlands GBP14.3m GBP4.2m
----------------------- ------------ ------------
Retail & Residential GBP4.5m -
Portfolio, Ireland
----------------------- ------------ ------------
Total Euro Loans GBP68.3m GBP4.2m
----------------------- ------------ ------------
Industrial Portfolio, GBP32.4m GBP2.3m
Denmark,
----------------------- ------------ ------------
Total Danish Krona GBP32.4m GBP2.3m
Loans
----------------------- ------------ ------------
Total Portfolio GBP286.6m GBP12.3m
----------------------- ------------ ------------
(1) Euro and Danish Krona balances translated to sterling at 30 September 2015 exchange rates.
Portfolio Activity
The following significant activity occurred since the
publication of the last factsheet on 28 July 2015.
Industrial Portfolio, UK: on 5 August 2015 the Group provided a
GBP32.5 million whole loan to refinance a portfolio of industrial
properties in the UK. The facility has a term of 4 years, and the
interest rate is floating over 3 month LIBOR. The Group expects to
earn an attractive risk-adjusted return commensurate with its
stated investment policy.
Center Parcs, UK: On 30 July 2015, the Group purchased GBP8.0
million of the GBP560 million Class B2 Fixed Rate Secured Notes
issued by CPUK Finance Limited following the acquisition of the
Center Parcs group by a Brookfield managed fund.
Center Parcs, UK: On 1 October 2015, the Group purchased an
additional GBP1.5 million of the Center Parcs Class B2 Fixed Rate
Secured Notes.
Investment Philosophy
It is worth reiterating that the Group adopts a relative risk
return strategy. Whilst the Group seeks to achieve an absolute
portfolio return that is interesting for investors, the relative
risk return approach focuses on the blended risk that is entered
into to achieve that return. The scale of the issues that impacted
the real estate sector in the crisis, and the resulting structural
changes, have arguably created a longer term ability to extract
good returns through financing outside the somewhat narrower
confines that the traditional bank lenders now inhabit. The Group
leverages Starwood's wider relationships and skills to underwrite
real estate business plans that fundamentally should create value.
Whilst any loan underwritten should not be dependent on achieving
such a business plan, understanding the business plan does
generally allow for such a loan to attract a day one premium
pricing and naturally de-risks the position. Further benefits come
from a sector and geographical nimbleness that has allowed the
Group to continue to source deals that fit the investment criteria
and deliver proper diversification. For an equity focussed
investor, the Group is attractive because it offers a very high
relative dividend whilst having substantial protection of its NAV
against underlying property value decline. For a credit focussed
investor, the Group is attractive because the portfolio, having
such a high proportion of whole loans and relatively modest LTV,
offers meaningful exposure to investment grade risk and a coupon
substantially higher than comparable fixed income style
products.
Placing Programme
On 7 September 2015 the Company published a prospectus for the
issue of New Ordinary Shares and/ or C Shares. On 24 September 2015
the Company announced that it had issued 42,300,000 New Ordinary
Shares for Gross Issue Proceeds (before expenses) of GBP43.5
million.
The size of this Initial Placing was principally looking to
match the amount raised to the near term pipeline of investment
opportunities expected to have a high probability of execution.
Pending the finalisation of these opportunities, the Company has
used GBP35.25 million of the proceeds of the Initial Placing to
repay the outstanding loans on the working capital facility.
It is intended that the Company will seek to raise further
equity under the Placing Programme, as required by investment
needs.
Dividend
On 22 October 2015 the Directors declared a dividend of 1.75
pence per Ordinary Share (annualised 7.0 pence per Ordinary Share)
in relation to the second quarter of 2015.
Market Commentary
In our last factsheet we described key conclusions arising from
recent research on property credit. For performing debt we
indicated that the credit markets were indeed showing improving
robustness in availability of loans. This was, however, manifesting
itself far more in the mainly prime markets, sectors and projects
with any competition generally coming from pricing tension and
little visible appetite for increased risk. Some pockets of the
market were very competitive not least large prime London office
financings. Widely marketed pure mezzanine had also seen a pricing
squeeze as there is a deep pool of funds that can buy mezzanine
loans but who rely on investment banks to originate, structure and
sell them.
The Group predominately focuses on primary originated whole loan
business that the banks have less capacity to address and where
alternative structures meet the borrower's needs beyond just the
cost of the loan. We are still seeing value for the Group in the
same strategies that have always been identified. Any lending
opportunity that involves moderately higher leverage, assets in
"transition" that require more active management, certain sectors
or geographical locations, cross-border and smaller tickets may
find debt harder to obtain in the general market. This is
irrespective of how attractive the underlying risk/return metrics
might be. The Group has always sought to exploit these particular
niches to earn outsize returns for the risks taken. As a
consequence, it has managed to steer clear of a lot of the return
compression many have seen in the primary flow market and foresees
it will be able to maintain the same consistency of risk/return in
the future as observed till now.
Over the last two months the global macroeconomic volatility has
unquestionably filtered through to the real estate credit market.
This has manifested itself in a modest improvement in achievable
returns and a more noticeable retrenchment of a number of lenders.
The securitisation market has again become a challenging and
unpredictable exit method for underwritten investment loans, and
increased syndication caution has also been visible. The Group
typically benefits from such a market change provided it balances
enhanced opportunity with appropriate caution. We watch unfolding
dynamics with interest and optimism as it further strengthens the
Group's investment philosophy.
Pipeline
The Group is an opportunistic lender looking to source the right
risk/return mix. It is already sectorally diversified and will look
to maintain this with a desire to see some new sectors added such
as Student Accommodation or Healthcare.
At over 70% of the portfolio, the Group is attractively exposed
to whole loans. The split between whole loan and mezzanine seems to
be broadly sustainable at present given the continued pipeline of
whole loans the Group is seeing.
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