SWEF: December 2018 Factsheet (768915)
24 Janvier 2019 - 8:01AM
UK Regulatory
Dow Jones received a payment from EQS/DGAP to publish this press
release.
Starwood European Real Estate Finance Ltd (SWEF)
SWEF: December 2018 Factsheet
24-Jan-2019 / 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 January 2019
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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 2018 is available
at:
www.starwoodeuropeanfinance.com [1]
Extracted text of the commentary is set out below:
Investment Portfolio at 31 December 2018
As at 31 December 2018, the Group had 18 investments and commitments of
GBP477.2 million as follows:
Sterling equivalent Sterling equivalent
balance (1) unfunded commitment
(1)
Hospitals, UK GBP25.0m -
Varde Partners mixed GBP1.0m -
portfolio, UK
Mixed use development, GBP13.8m GBP1.6m
South East UK
Regional Hotel GBP45.9m -
Portfolio, UK
Credit Linked Notes, UK GBP21.8m -
real estate
Hotel & Residential, UK GBP34.5m GBP6.7m
Total Sterling Loans GBP142.0m GBP8.3m
Logistics, Dublin, GBP13.2m -
Ireland
Hotel, Barcelona, Spain GBP41.5m -
School, Dublin, Ireland GBP17.0m -
Industrial Portfolio, GBP45.7m -
Central and Eastern
Europe
Three Shopping Centres, GBP31.8m GBP8.4m
Spain
Shopping Centre, Spain GBP15.3m GBP0.1m
Hotel, Dublin, Ireland GBP54.1m -
Residential, Dublin, GBP6.8m GBP1.3 m
Ireland
Office, Paris, France GBP14.4m -
Student Accommodation, GBP9.5m GBP0.6m
Dublin
Hotel, Spain GBP23.7m GBP25.9m
Office & Hotel, Madrid GBP16.7m GBP0.9m
Total Euro Loans GBP289.7m GBP37.2m
Total Portfolio GBP431.7m GBP45.5m
(1) Euro balances translated to sterling at period end exchange rates.
Dividend
On 23 January 2019 the Directors declared a dividend in respect of the
fourth quarter of 1.625 pence per Ordinary Share payable on 22 February 2019
to shareholders on the register at 1 February 2019. The total amount of
dividends paid in respect of 2018 will total 6.5 pence.
Share Price and NAV performance
The share price was at a small discount to NAV at the year end. The Company
has typically traded at around a 4 to 8 per cent premium in the last few
years. We believe this recent movement is due to general market sentiment,
particularly towards the end of the year, and we note that the share price
has moved back to a premium during early 2019. The Company's NAV has
remained stable during the year, moving from 102.17 pence at the end of 2017
to 102.68 pence as at 31 December 2018, not accounting for dividends of 6.5
pence declared in respect of 2018.
Overview of the Portfolio
2018 was another successful origination year with GBP208 million of new
commitments made to borrowers and with repayments and amortisation at a more
typical level than in 2017 (which was unusually high due to the repayment of
one large loan), net commitments increased by GBP70.8 million during the year.
The table below shows the Group's loan origination and repayment profile
over the last five years.
2014 2015 2016 2017 2018
New loans to GBP143.2m GBP118.7m GBP175.9m GBP245.8m GBP208.0m
borrowers
(commitment)
Loan repayments and -GBP48.8m -GBP49.0m -GBP129.3m -GBP213.1m -GBP137.2m
amortisation
Net Investment GBP94.4m GBP69.7m GBP46.6m GBP32.7m GBP70.8m
As at 31 December 2018, the average remaining maturity of the Group's loan
book was 2.8 years. The gross levered return of the invested loan portfolio
is 8.0 per cent per annum which has increased from 7.8 per cent at the end
of the third quarter. It is worth noting that the calculation of annualised
returns quoted in these factsheets excludes a number of potential upsides
that are not incorporated in the returns figures quoted.
· In the quoted return we amortise all one off fees (such as arrangement
and exit fees) over the contractual life of the loan which is currently
four years for the portfolio. However, it has been our experience that
loans tend to repay after approximately 2.5 years and as such these fees
are actually amortised over a shorter period.
· Many loans benefit from prepayment provisions which means that if they
are repaid before the end of the protected period, additional interest or
fees become due. As we quote the return based on the contractual life of
the loan these returns cannot be forecast in the return.
· The quoted return excludes the benefit of any foreign exchange gains on
Euro loans. We do not forecast this as the loans are often repaid early
and the gain may be lower than this once hedge positions are settled.
The above three upsides to quoted returns are not incorporated in the gross
levered yield of 8.0 per cent as they are not guaranteed to occur, are
difficult to forecast accurately and to incorporate them could overstate the
expected return. However, we expect these to continue to provide an
enhancement to the quoted levels of return going forward although the levels
of this enhancement may vary depending on when the loans repay versus
contractual maturity and prepayment protection, as well as the shape of the
sterling-euro forward curve. Over the life of the Company to date, we have
experienced on average an enhancement of 0.66 percentage points from
prepayments and one off fees when loans repay and for the most recent Euro
loan originated we are forecasting a pick up of 1.3 percentage points if
held to maturity.
Fourth Quarter Portfolio Activity
The following portfolio activity occurred in the fourth quarter of 2018:
New Loan: Mixed Use, Madrid: On 12 November 2018 the Group closed a EUR19.5
million fixed rate whole loan secured by a mixed-use office and hotel
property located in Madrid, Spain. The financing was primarily provided in
the form of an initial advance along with a smaller capex facility to
support the borrower's value-enhancing, light capex initiatives. The loan
term is 5 years, and the Group expects to earn an attractive risk-adjusted
return in line with its stated investment strategy.
New Loan: Mixed Use, London: On 18th December 2018 the Group committed to
fund a GBP62.5 million fixed rate mezzanine loan to support the development of
a prime mixed-use scheme in Central London with Starwood Property Trust, Inc
(through a wholly owned subsidiary), participating in 66 per cent of the
loan amount, providing the Company with a net commitment of GBP41.25 million.
The loan term is 3 years with a 1 year extension option, and the Group
expects to earn an attractive risk-adjusted return in line with its stated
investment strategy. The loan partially funded on 21 December 2018 with the
remaining balance expected to be funded in early 2019.
Repayments: The Group also received the following three final repayments
totalling approximately GBP37 million:
On 29 November 2018, the Group received full repayment of EUR7.5 million in
relation to the loan advanced on the Residential Portfolio in Dublin as a
result of a sale of the portfolio.
On 20 December 2018, the Group received full repayment of GBP17.6 million in
relation to the loan advanced on the Industrial Portfolio in the UK as a
result of a refinance of the portfolio.
On 21 December 2018, the Group received full repayment of EUR14.8 million in
relation to the loan advanced on the Industrial asset in Paris as a result
of the sale of the portfolio.
A number of loans in the portfolio benefit from prepayment protection
providing a level of income protection should the loan repay whilst in that
protected period. Two of the repaid loans benefit from such provisions.
The Group also received material repayments on other loans that remain in
the portfolio in the amount of approximately GBP12 million, the most
significant being a EUR10 million repayment on the loan advanced on an
office in Paris.
Following the portfolio activity in the last quarter the Group remains
substantially fully invested with drawings on its GBP114 million credit
facilities (net of cash) of GBP40.6 million and GBP45.5 million of unfunded
commitments. The Group continues to see strong opportunities to deploy
capital in the target markets. The origination pipeline is healthy with a
number of transactions under review, which present solid risk adjusted
returns.
As previously explained, the Group is cautious about raising equity until it
has a good level of certainty in respect of the likelihood of transactions
to close and has to balance this with the typical repayments of 35-40 per
cent of the loan book during any year. Both new loan closings and repayments
tend to be "lumpy" and difficult to predict in terms of timing as these are
often dependent on factors outside the Group's control, although there is
certainly a trend of concentrations of activity pre-Easter, summer and
Christmas. The Group continues to see an attractive and healthy pipeline of
suitable investment opportunities and will continue to monitor the
appropriate capital structure to finance these.
Market Commentary
2018 numbers from Cushman and Wakefield show that the real estate market in
London has been resilient despite the uncertainties of Brexit. Preliminary
figures revealed a total office take-up of 12.1 million square feet which
was 3 per cent higher than 2017 and 18 per cent higher than 2016. From an
investment point of view, total spend reached GBP19.7 billion, slightly down
on the GBP20 billion from 2017 but above the GBP16 billion of 2016. The latest
INREV investment intentions survey shows that the UK is still high up on
investors' targets with 64.6 per cent of investors in the survey looking to
invest in the UK which is behind only Germany at 66.7 per cent. Overall the
commercial real estate lending market still has a high level of liquidity,
however, we have seen a repricing for UK loans by some German lenders who
are affected by the uncertainties around how UK loans with be treated for
Pfandbrief (covered bond financing) purposes when the UK leaves the EU. In
addition, there has been a slight pullback for financing more transitional
business plans in London which may present opportunities for lending on good
risk adjusted returns.
UK retail continues to fare less well and this is clearly reflected in
investment volumes and a lack of appetite from investors and lenders to take
on new retail exposure. In Q4 2018, according to data from CBRE Research and
Property Data, year-to-date shopping centre transaction volumes stood at
GBP878.1 million, significantly down from a peak of GBP5.5 billion in 2014. We
expect to see a larger number of shopping centres in distress as a result of
loan maturities coming due where lenders are keen to be repaid but the
owners will find it difficult to find replacement debt or liquidity to sell
the property. The retail occupational market will continue to be tough in
many places and it still appears to be too early to judge where the new
equilibrium will settle for retail income.
In the wider credit markets we have seen widening of spreads during 2018
which accelerated toward the end of the year. In CMBS EUR AAA and BBB
pricing reached a low in Q2 2018 of 70bps and 230bps respectively but ended
the year around 40 bps wider on each. While that has added to blended
pricing of CMBS financing during the year this is not a huge move and BBB
spreads were higher than this as recently as Q3 2017. There has been a
larger move in the high yield market with the Markit iTraxx Europe Crossover
index, which is made up of the 75 most liquid sub-investment grade entities,
having started the year at 233 bps and ending at 353bps. After similar
volumes to 2017 for the first three quarters of the year there was a sharply
subdued level of new issuance of leveraged loans and high yield bonds in Q4
2018 with only EUR18 billion of new issuance versus EUR65 billion in Q4
2017. One big contrast between the commercial real estate and corporate
credit markets is the growth in size of the markets since the global
financial crisis. The volume of outstanding non-financial BBB corporate debt
has grown by 181 per cent since 2007 whereas according to the Cass business
school the total outstanding CRE debt in the UK is 35 per cent lower than
the 2007 peak.
In the Group's other key markets of Spain and Ireland growth remains
significantly ahead of the rest of Europe. In Dublin there is low vacancy in
prime office, hotels are running at the top occupancy of all cities in
Europe and there is a shortage of residential and student stock. This year
the Group has financed the development of new student accommodation in
central Dublin, residential housing in commuter areas and one of the largest
investments of the year for the Group was a loan made to support the
acquisition of an Irish hotel. In Spain unemployment has continued falling
and GDP growth remains strong. In the Madrid market we are seeing a similar
pattern in the real estate metrics with a decreasing vacancy rate and rents
increasing from a low base as a result. At this stage we are able to lend
against capital values per square metre which are significantly below the
previous peak and which represent a discount to replacement cost.
Across the eight new loans the Group made in 2018, seven were in our key
target markets of the UK, Ireland and Spain. We see these dynamics
continuing into 2019 and a similar mix of geographical split going forward.
Share Price / NAV at 31 December 2018
Share price (p) 102.00
NAV (p) 102.68
Premium/ (discount) (0.7%)
Dividend yield 6.4%
Market cap GBP382.5 m
Key Portfolio Statistics at 31 December 2018
Number of investments 18
Percentage of currently invested portfolio in floating 80.1%
rate loans
Invested Loan Portfolio unlevered annualised total 7.4%
return (1)
Invested Loan Portfolio levered annualised total 8.0%
return (2)
Weighted average portfolio LTV - to Group first GBP (3) 16.7%
Weighted average portfolio LTV - to Group last GBP (3) 64.1%
Average loan term (stated maturity at inception) 4.0 years
Average remaining loan term 2.8 years
Net Asset Value GBP385.1m
Amount drawn under Revolving Credit Facilities -GBP68.8m
(excluding accrued interest)
Loans advanced GBP413.4m
Financial assets held at fair value (including accrued GBP21.9m
income)
Cash GBP28.2m
Other net assets/ (liabilities) (including hedges) -GBP9.6m
Origination Fees - current quarter GBP0.4m
Origination Fees - last 12 months GBP1.5m
Management Fees - current quarter GBP0.7m
Management Fees - last 12 months GBP2.9m
(1) The unlevered annualised total return is calculated on amounts
outstanding at the reporting date, excluding undrawn commitments, and
assuming all drawn loans are outstanding for the full contractual term. 14
of the loans are floating rate (partially or in whole and some with floors)
and returns are based on an assumed profile for future interbank rates but
the actual rate received may be higher or lower. Calculated only on amounts
funded at the reporting date and excluding committed amounts (but including
commitment fees) and excluding cash un-invested. The calculation also
excludes the origination fee payable to the Investment Manager.
(2)The levered annualised total return is calculated as per the unlevered
return but takes into account the amount of net leverage in the Group and
the cost of that leverage at current LIBOR/EURIBOR.
(3) LTV to Group last GBP means the percentage which the total loan drawn less
any amortisation received to date (when aggregated with any other
indebtedness ranking alongside and/or senior to it) bears to the market
value determined by the last formal lender valuation received by the
reporting date. LTV to first Group GBP means the starting point of the loan to
value range of the loans drawn (when aggregated with any other indebtedness
ranking senior to it). For development projects the calculation includes the
total facility available and is calculated against the assumed market value
on completion of the relevant project.
Remaining years to Value of loans (GBPm) % of invested
contractual maturity* portfolio
0 to 1 years 21.6 5.0
1 to 2 years 101.9 23.6
2 to 3 years 135.1 31.3
3 to 5 years 148.0 34.3
5 to 10 years 25.0 5.8
*excludes any permitted extensions. Note that borrowers may elect to repay
loans before contractual maturity.
Country % of invested assets
Spain 29.9
Republic of Ireland 23.3
UK - Regional England 22.4
UK - Central London 10.5
Hungary 10.3
France 3.3
Czech Republic 0.3
Sector % of invested assets
Hospitality 40.9
Retail 12.8
Light Industrial 10.6
Residential for sale 9.0
Office 8.2
Healthcare 5.8
Education 3.9
Logistics 3.6
Residential for rent 2.3
Student Accommodation 2.2
Other 0.7
Loan type % of invested assets
Whole loans 66.8%
Mezzanine 28.2%
Other debt instruments 5.0%
Loan type % of invested assets*
Sterling 32.9%
Euro 67.1%
*the currency split refers to the underlying loan currency, however the
capital on all non-sterling exposure is hedged back to sterling.
For further information, please contact:
Ipes (Guernsey) Limited as Company Secretary - 01481 735879
Dave Taylor
Starwood Capital - 020 7016 3655
Duncan MacPherson
Stifel Nicolaus Europe Limited - 020 7710 7600
Neil Winward
Mark Bloomfield
Gaudi Le Roux
Notes:
Starwood European Real Estate Finance Limited is an investment company
listed on the premium segment of 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 Company 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.
ISIN: GG00B79WC100
Category Code: MSCM
TIDM: SWEF
LEI Code: 5493004YMVUQ9Z7JGZ50
Sequence No.: 7234
EQS News ID: 768915
End of Announcement EQS News Service
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