TIDMSWEF
RNS Number : 1477N
Starwood European Real Estate Finan
28 January 2016
28 January 2016
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 2015 is available at:
www.starwoodeuropeanfinance.com
Extracted text of the commentary is set out below:
"Investment Portfolio at 31 December 2015
As at 31 December 2015, the Group had 15 investments and
commitments of GBP309.1m as follows:
Transaction Sterling Sterling
equivalent equivalent
balance unfunded
(1) commitment
(1)
----------------------- ------------ ------------
Lifecare Residences, GBP14.0m GBP0.4m
London
----------------------- ------------ ------------
Salesforce Tower, GBP11.6m -
London
----------------------- ------------ ------------
Centre Point, London GBP45.0m -
----------------------- ------------ ------------
5 Star Hotel, London GBP13.0m -
----------------------- ------------ ------------
Aldgate Tower, London GBP40.6m GBP4.4m
----------------------- ------------ ------------
Center Parcs Bonds, GBP9.5m -
UK
----------------------- ------------ ------------
Industrial Portfolio, GBP31.8m -
UK
----------------------- ------------ ------------
Hospitals, UK GBP25.0m -
----------------------- ------------ ------------
Total Sterling Loans GBP190.5m GBP4.8m
----------------------- ------------ ------------
Retail Portfolio, GBP23.7m -
Finland
----------------------- ------------ ------------
Industrial Portfolio, GBP20.3m -
Netherlands
----------------------- ------------ ------------
Office, Netherlands GBP10.3m -
----------------------- ------------ ------------
W Hotel, Netherlands GBP15.6m GBP2.7m
----------------------- ------------ ------------
Retail & Residential GBP4.5m -
Portfolio, Ireland
----------------------- ------------ ------------
Residential Portfolio, GBP4.6m -
Cork, Ireland
----------------------- ------------ ------------
Total Euro Loans GBP79.0m GBP2.7m
----------------------- ------------ ------------
Industrial Portfolio, GBP32.1m -
Denmark,
----------------------- ------------ ------------
Total Danish Krona GBP32.1m -
Loans
----------------------- ------------ ------------
Total Portfolio GBP301.6m GBP7.5m
----------------------- ------------ ------------
(1) Euro and Danish Krona balances translated to sterling at 31
December 2015 exchange rates.
Portfolio Activity
The following significant activity occurred since the
publication of the last factsheet on 23 October 2015.
Industrial Portfolio, Netherlands: On 10 December 2015 the Group
entered into an agreement with an existing borrower to refinance
and enlarge upon the previous facility. The Group initially
increased its commitment by EUR20.4 million to EUR40.3 million and
subsequently syndicated EUR12.7 million of this increased
commitment, resulting in a net investment of EUR27.6 million. The
decision to increase the commitment reflects the positive asset
management being achieved in an improving occupational and
investment market and by amending this agreement the Group
mitigated one of the larger and more imminent repayment risks as
well as deploying further funds into an attractive loan
position.
Residential Portfolio, Ireland: On 30 November 2015 the Group
funded a EUR6.2 million 4 year floating whole loan relating to the
acquisition of 47 apartments in Cork to a strong and highly
regarded local sponsor.
Hospitals, UK: On 22 December 2015 the Group advanced a GBP25
million mezzanine loan in relation to a portfolio of UK hospitals
subject to long term leases to a strong underlying tenant. The UK
healthcare sector is demonstrating solid growth potential and the
Group has sought to take advantage of a very interesting investment
opportunity which also gives greater diversity to the
portfolio.
Repayments: During the quarter the Maybourne Hotel Group loan of
GBP11.2 million and the West End Development loan of GBP10.0
million were both repaid. This cash has been reinvested and at the
end of the quarter the revolving credit facility was GBP8.2 million
drawn.
Investment Philosophy
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 financial 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 focused 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 focused 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.
Capital Market Activities
In September 2015 the Company issued 42.3 million New Ordinary
Shares for Gross Issue Proceeds (before expenses) of GBP43.5
million. In the subsequent period to 31 December 2015 not only were
these proceeds invested without material cash drag, but also the
proceeds from the two loan repayments were deployed, with the
liquidity line drawn GBP8.2 million at the year end. The liquidity
line has also now been upsized from GBP50 million to GBP60 million
overall capacity.
The Company remains focussed on managing repayment risk. It is
however intended that the Company will seek to raise further equity
under the Placing Programme, as required by net investment
needs.
Dividend
On 26 January 2016 the Directors declared a dividend of 1.75
pence per Ordinary Share (annualised 7.0 pence per Ordinary Share)
in relation to the fourth quarter of 2015.
Market Commentary
In the last few factsheets we have written about global
macroeconomic volatility modestly filtering through to the real
estate credit market which leads to optimism that the investment
opportunities for the Group could further widen.
Clearly the events in equity, fixed income and commodity markets
of recent weeks may have more far reaching consequences for the
European economy, real estate markets and the specifics of the
Group's own strategy.
We are coming out of a commodity supercycle and the current
Chinese economic situation and the impact of demand / supply
imbalances for oil are well documented by others. A slowdown in
China might well impact European economies and real estate markets
but it remains unclear by how much. Many resources groups have been
recently downgraded on the back of liquidity and solvency concerns.
Should bankruptcies start to occur it would clearly be negative to
the wider economy. Banks and credit funds have been largescale
lenders to the commodities sector and the effects of the turbulence
are already visible in the high yield market. At the very least,
higher medium term funding costs look to be the likely consequence
of this market uncertainty, and higher funding costs could spill
into the real estate sector.
Whilst equities have seen price declines, credit markets have
widened and hedge funds face withdrawals, it does indeed remain
unclear what the direct impact on real estate could be. For example
whilst Chinese investors have been prolific real estate investors
in recent times, some state related entities may now look to
re-orientate capital back domestically whilst others may look to
deploy further capital in perceived safe havens such as London, New
York, Munich and Paris.
However, the largest aspect is the rebalancing of risk and
yield. In the 2008 crash, investors moved money into cash that, at
that time, had at least had some positive yield. In a world of low
or negative interest rates this is a different decision and an
attraction of real estate is the potential for income flows,
certainly on longer term or diversified tenant bases, such that it
may be seen as a positive investment alternative to the larger,
more traditional asset classes and cash.
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