SWEF: September 2019 Factsheet (894243)
23 Octobre 2019 - 8:00AM
UK Regulatory
Starwood European Real Estate Finance Ltd (SWEF)
SWEF: September 2019 Factsheet
23-Oct-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.
23 October 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 third quarter ended on 30 September 2019 is available
at:
www.starwoodeuropeanfinance.com [1]
Extracted text of the commentary is set out below:
Investment Portfolio at 30 September 2019
As at 30 September 2019, the Group had 18 investments and commitments of
GBP479.1 million as follows:
Sterling equivalent Sterling equivalent
balance (1) unfunded commitment
(1)
Hospitals, UK GBP25.0m -
Mixed use development, GBP2.4m GBP1.1m
South East UK
Regional Hotel GBP45.9m -
Portfolio, UK
Credit Linked Notes, UK GBP21.8m -
real estate
Hotel & Residential, UK GBP39.9m -
Office, Scotland GBP4.4m GBP0.6m
Office, London GBP12.5m GBP8.1m
Residential, London GBP45.2m GBP11,6m
Total Sterling Loans GBP197.1m GBP21.4m
Logistics, Dublin, GBP12.6m -
Ireland
Three Shopping Centres, GBP33.5m GBP5.7m
Spain
Shopping Centre, Spain GBP15.1m -
Hotel, Dublin, Ireland GBP53.3m -
Residential, Dublin, GBP1.9m -
Ireland
Office, Paris, France GBP14.2m -
Hotel, Spain GBP26.4m GBP21.7m
Office & Hotel, Madrid GBP16.4m GBP0.9m
Mixed Portfolio, Europe GBP45.8m -
Mixed Use, Dublin - GBP13.1m
Total Euro Loans GBP219.2m GBP41.4m
Total Portfolio GBP416.3m GBP62.8m
1) Euro balances translated to sterling at period end exchange rates.
Third Quarter Portfolio Activity
The following portfolio activity occurred in the third quarter of 2019:
Loan repayment: Mixed Use Development UK: The Group received GBP8.1 million
amortization following the sale of one of the properties in line with the
business plan. GBP2.4 million remains on the loan.
Loan repayment: Industrial Europe: The Group received EUR26.3 million
amortization following the sale of some properties in July 2019 and final
repayment of EUR15.0 million in September 2019 as the borrower completed the
execution of their business plan.
Loan repayment: Hotel, Barcelona, Spain - the Group received full repayment
of EUR46 million following the sale of the hotel.
New Loan: Office, London: In July 2019 the Group committed to fund a GBP20.5
million floating rate whole loan to support an office redevelopment in
London. GBP12.5 million was drawn on 26th July and the balance will be drawn
over the life of the development. The term of the loan is approximately 3
years.
New Loan: Residential, London: On 19th September 2019 the Group committed to
fund a GBP56.8 million floating rate whole loan to support a residential
scheme in London. The financing has been primarily provided in the form of
an initial advance along with a smaller capex facility to support the
sponsor's completion of the scheme. The loan term is 2 years.
New Loan: Mixed use Dublin: On 30th September 2019 the Group committed to
fund a EUR14.7 million fixed rate whole loan to support a mixed use
development in Dublin. The loan is currently undrawn and is expected to draw
down gradually over the next 2.5 years.
Third Quarter Portfolio Activity - commentary
During the quarter we had a large volume of unexpected repayments in July,
most of which was due to an unsolicited offer on a property which concluded
and resulted in repayment very quickly. Additionally, as noted above,
significant new loan drawdowns occurred towards the end of the quarter in
late September 2019. Following this portfolio activity, the Group remained
substantially fully invested at 30 September 2019 with net cash of
approximately GBP7 million and GBP62.8 million of unfunded commitments.
In light of the unexpected repayments, and drawdowns towards the end of the
quarter, the Group has experienced some cash drag during the quarter. Taken
together these events have resulted in the portfolio's income generation
being below expectations in the quarter. The Investment Adviser has a number
of transactions under review and, absent any material unexpected repayments,
should these transactions all occur we would expect the income run rate to
normalise in early 2020. The Company has sufficient dividend reserves
available to maintain the dividend during periods where cash drag continues
for longer than anticipated.
The Group's pipeline continues to be of a consistent geography and asset
class, with a further loan in Spain currently under exclusivity and Irish
and UK investments also featuring in the fourth quarter potential pipeline.
The main concentration of new loans in the pipeline is currently in the
office and hospitality sectors.
Dividend
On 22 October 2019 the Directors declared a dividend in respect of the third
quarter of 1.625 pence per Ordinary Share payable on 22 November 2019 to
shareholders on the register at 1 November 2019.
Market Commentary
Interest rates, especially in Europe continue to be at very low levels, with
negative yields on fixed income becoming increasingly pervasive. The global
stock of negative yielding bonds hit $17 trillion at its peak earlier this
year. In the corporate bond space Siemens has issued at negative rates and
in October even Greece issued 3 month paper at a negative rate. On the real
estate corporate bond side we have seen corporate bonds trading tighter,
with Vonovia's 2022 maturity bond trading at a 0% yield. In Europe the
interest rate curve continues to be flat with 3 month Libor at negative 42
bps and 5 year swaps at negative 40 bps as at October 14th. For bank
lending, Libor / Euribor has historically typically been floored at zero
however, depending on the source of funding, some lenders are now able to
take the floor out. By way of example some Pfandbrief (covered bond) issuers
have issued bonds at negative rates and hence are able to pass the benefits
of below zero funding rates to borrowers.
UK commercial real estate financing activity has remained active through
continued Brexit uncertainties. We have seen a number of significantly sized
financings close since the end of the summer break, including bank,
insurance and CMBS loans. Notable transactions include two of the largest
financings of the year to refinance Brookfield's 100 Bishopsgate and
Blackstone and Telereal's Arches portfolio. AIG, Royal Bank of Canada and
Rothesay Life provided GBP850 million of debt to refinance the Arches
portfolio with a 50% loan to value and a 12 year maturity and, according to
Debtwire, the c. GBP900 million 100 Bishopsgate financing was provided by a
club of banks that includes ING, Bank of China and Standard Chartered Bank.
This loan replaces a GBP500 million construction financing with a significant
excess and has a reported to loan-to-value ratio of 65%. The strength of
appetite for this financing is supported by brand new high quality space in
a top city location, with a blue chip tenant profile.
We have also seen a good level of UK CMBS issuance. Bank of America Merrill
Lynch executed the first post summer CMBS which was an equity out refi for
Blackstone's existing "Sunflower" CMBS which priced at the wider end of
indicative range with AAAs at 120bps and BBBs at 295bps over Libor
respectively. Subsequently, Deutsche Bank brought a two tranche CMBS to the
market backed by the Intu Derby shopping centre which they had financed with
a low 40s% loan to value as part of a 50% interest sale by Intu to Cale
Street. The AAAs priced at 190bps over Libor reflecting a significantly
higher coupon required to other CMBS reflecting investors' attitudes to
retail collateral. Most recently Bank of America Merrill Lynch priced a
GBP232.2 million CMBS backed by UK student housing for Brookfield. Despite
pricing in October amongst a high point for Brexit uncertainty, the AAA
tranche came in at the tight end of expectations at Libor + 110bps and the
BBBs at Libor + 255bps, both ahead of the Sunflower CMBS pricing.
The real estate corporate bond market has been very active across Europe
since the summer with new records regularly getting set. Some examples
include Logicor's inaugural UK bond. This GBP900 million 7 year bond issued in
October is the largest ever single tranche sterling real estate corporate
bond offering and was the second largest in all sterling corporate bonds
this year pricing at 7 year mid swaps plus 160bps. Vonovia issued EUR1.5
billion of new bonds. The 3.5, 8 and 20 year bonds were sold at a reoffer
yield of 0.16%, 0.76% and 1.74% respectively. As part of a EUR1.8 billion
triple tranche transaction Prologis have printed the second-ever 30-year
Euro tranche in the real estate sector, at a 1.604% yield (mid swaps
+150bps). There have been numerous other issuers accessing the market
including Digital Realty Trust, WP Carey and Blackstone and many others from
Sweden, Germany and France.
The conclusions from the above are that there is a clear trend of new
financing being provided by a diverse set of lenders, with UK domestic banks
less active and an increasing market share for international banks, insurers
and capital markets lending.
With respect to the underlying real estate market, there are mixed
indicators in the residential sector. Brexit continues to provide headwinds,
however, according to Savills data the prime London residential market which
the Company has most exposure to has shown positive sales growth in the 12
months ending Q2 2019, up 9% since the previous quarter and with both
completions and new starts also falling in this segment. The improvement was
more pronounced at the higher end with sales of homes costing more than GBP5
million rising 12% in the three months compared with a year earlier,
according to the data group LonRes. From our experience we continue to see
international investors choosing London for investment given its enduring
status as a place of social, financial and legal security with a
particularly strong interest from Hong Kong based investors at the moment.
The Savills City office market reports that the market is starved of stock
for sale resulting in lower turnover, more given a shortage of supply than
demand. August saw 13 sales taking investment for the year to GBP4.58 billion,
which is 44% below 2018 and 33% below the five year average for turnover up
to August. On the occupational side, take-up was 421,000 square foot across
26 lettings, which is down 13% on 2018 and in line with the 10 year average
but there are also 2.8 million square foot under offer, which is up on the
long term average by 116%, indicating a very active final quarter can be
expected.
There are also elements of distress in selected areas of the market. We have
previously highlighted some of the issues in the UK retail space and we have
continued to see reports of loan defaults particularly in relation to higher
levered acquisitions from the past five years. We have also seen a lender
step in on one loan where DRC took control of the mezzanine borrower of the
Maroon loan in the Elizabeth Finance 2018 CMBS and appointed APAM as asset
manager.
There has been significant news in the past quarter in the flexible office
space. In particular the industry is continuing to try and understand the
impact of WeWork's pulled IPO following investors' feedback on both concerns
on corporate governance and on valuation. The fallout has led to the
co-founder, Adam Neuman, agreeing to step down as CEO. There will clearly be
further news and implications of the IPO having been withdrawn and the
related issues for the company and the market over the coming months. We
have also seen some other asset specific distress in the UK serviced office
space with press reports of some special purpose vehicles being put into
administration or renegotiating leases with landlords. These recent events
are a reminder that when looking at the flexible office space there are many
business models, lease structures and asset specific considerations that
landlords, lenders and operators all need to consider when evaluating this
type of asset which has been a rapidly growing part of the office market.
Share Price / NAV at 30 September 2019
Share price (p) 100.50
NAV (p) 102.87
Discount 2.3%
Dividend yield 6.5%
Market cap GBP415.3 m
Key Portfolio Statistics at 30 September 2019
Number of investments 18
Percentage of currently invested portfolio in floating 80.5%
rate loans
Invested Loan Portfolio unlevered annualised total 7.2%
return (1)
Portfolio levered annualised total return (2) 7.1%
Weighted average portfolio LTV - to Group first GBP (3) 23.5%
Weighted average portfolio LTV - to Group last GBP (3) 63.2%
Average loan term (stated maturity at inception) 3.9 years
Average remaining loan term 2.5 years
Net Asset Value GBP425.1m
Amount drawn under Revolving Credit Facilities (GBP25.1m)
(excluding accrued interest)
Loans advanced GBP397.2m
Financial assets held at fair value (including accrued GBP21.9m
income)
Cash GBP32.2m
Other net assets/ (liabilities) (including hedges) (GBP0.4m)
Origination Fees - current quarter GBP0.6m
Origination Fees - last 12 months GBP1.0m
Management Fees - current quarter GBP0.8m
Management Fees - last 12 months GBP3.0m
(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 % of invested
contractual maturity* (GBPm) portfolio
0 to 1 years 19.4 4.7%
1 to 2 years 122.3 29.4%
2 to 3 years 173.3 41.6%
3 to 5 years 76.3 18.3%
5 to 10 years 25.0 6.0%
*excludes any permitted extensions. Note that borrowers may elect to repay
loans before contractual maturity.
Country % of invested assets
UK - Central London 26.8%
Spain 22.0%
UK - Regional England 19.5%
Republic of Ireland 16.3%
Netherlands 6.9%
France 3.4%
Germany 2.8%
Finland 1.3%
UK - Scotland 1.0%
Sector % of invested assets
Hospitality 33.8%
Residential for sale 19.0%
Office 16.5%
Retail 14.2%
Healthcare 6.0%
Logistics 4.1%
Light Industrial 3.8%
Other 1.4%
Residential for rent 1.2%
Loan type % of invested assets
Whole loans 53.5%
Mezzanine 41.3%
Other debt instruments 5.2%
Currency % of invested assets*
Sterling 47.3%
Euro 52.7%
*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:
Apex Fund and Corporate Services (Guernsey) Limited as Company Secretary -
01481 735878
Vânia Santos
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.: 24288
EQS News ID: 894243
End of Announcement EQS News Service
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