Eurocastle Releases Fourth Quarter And Year End 2021 Financial Results

 
TIDMECT 
 

EUROCASTLE INVESTMENT LIMITED

Contact:

Oak Fund Services (Guernsey) Limited

Company Administrator

Attn: Tracy Lewis

Tel: [phone]

Eurocastle Releases Fourth Quarter and Year End 2021 Financial Results

Guernsey, 29 April 2022 -- Eurocastle Investment Limited (Euronext Amsterdam: ECT) today https://www.globenewswire.com/Tracker?data=8bqY6m5qgjYkuTPOonU3PQlxxG2SroZ55NfqOepgXiGklTAbVqt_GblH1jxPpepe has released its annual report for the year ended 31 December 2021.

   -- Adjusted Net Asset Value ("NAV") of EUR18.2 million1, or EUR9.79 per 
      share2, up EUR0.03 per share vs. EUR9.76 per share at Q3 2021 (up EUR1.33 
      per share vs. EUR8.46 per share at YE 2020, after payment of 2020 
      distribution of EUR0.54 per share in Q1 2021) due to: 
   1. Valuation movements: 
 
          -- EUR0.03 per share, or 1%, increase in Q4 2021 (EUR1.11 per share 
             increase for the FY 2021) on the real estate fund investments. 
 
          -- EUR0.03 per share, or 4%, increase in Q4 2021 (EUR0.32 per share 
             increase for the FY 2021) on the remaining three NPL and other 
             loan interests. 
 
   2. Reserve and legacy movements of EUR(0.03) per share in Q4 2021 (EUR0.10 
      per share decrease for the FY 2021). 
   -- IFRS NAV of EUR32.9 million, or EUR17.73 per share 

The tables below summarise the Adjusted NAV by segment:

 
 
                         YE 2021 NAV          Q3 2021 NAV        YE 2020 NAV 
                     -------------------  -------------------  --------------- 
                                    EUR                  EUR             EUR 
                                    per                  per     EUR     per 
                     EUR million   share  EUR million   share  million  share 
Real Estate 
 Funds(3)                     2.8   1.49           5.4   2.91      7.4    4.01 
Italian NPLs & 
 Other Loans                  1.3   0.72           1.3   0.70      1.2    0.67 
Net Corporate 
 Cash(3,) (4)                14.1   7.57          11.4   6.15      8.0    4.32 
                     ------------  -----                       -------  ------ 
Adjusted NAV                 18.2   9.79          18.1   9.76     16.7    9.00 
===================  ============  =====  ============  =====  =======  ====== 
2020 Capital 
 Distribution (paid 
 in Q1 2021)                    -      -             -      -    (1.0)  (0.54) 
-------------------  ------------  -----  ------------  -----  -------  ------ 
Adjusted NAV after 
 2020 Capital 
 Distribution                18.2   9.79          18.1   9.76     15.7    8.46 
===================  ============  =====  ============  =====  =======  ====== 
 
 

As at 31 December 2021, the Company's remaining assets comprise:

   1. Interests in two fully developed, luxury residential real estate 
      redevelopment funds in Rome where the apartments in Real Estate Fund 
      Investment II ("REFI II") are now all sold or under contract to be sold 
      and 4% of the units in Real Estate Fund Investment V ("REFI V") remain to 
      be sold. 
 
   2. Residual minority interests in two predominantly secured NPL pools where 
      the underlying assets are under contract to be sold once the underlying 
      portfolio level financing of each is repaid. 
 
   3. Net corporate cash of EUR14.1 million3, comprising corporate cash net of 
      liabilities and additional reserves. 

2021 BUSINESS HIGHLIGHTS

FY 2021 Overview

During the year the Company continued to make significant progress on realising its remaining assets as part of its Realisation Plan with 72% of its YE 2020 NAV relating to investments realised in the period. In particular, sales of residential units across both of its real estate redevelopment funds have proved resilient despite the ongoing challenges from COVID-19. This positive activity in the RE Funds, where results were achieved above and ahead of what was anticipated, after being adjusted in 2020 for the projected impact of COVID-19, has been the primary driver for a 31% valuation increase in the period on all investments.

In addition, Eurocastle received its last material distribution from its publicly listed fund investment and sold all underlying assets in one of the three remaining loan pools the Company has an interest in. The Company is now left with two RE Fund Investments and two NPL pools with an NAV of EUR5.1 million, or 28% of the Company's NAV. In Q1 2022, the Company received a further EUR2.0 million from its RE Fund investments. Taking into account these distributions, Eurocastle's remaining NAV for all of its investments would be EUR3.1 million, or 17% of the Company's Adjusted NAV, which is expected to be realised within the next 18 months.

The board is currently in intensive discussions with the Manager to analyse potential investment opportunities and expects to announce the conclusion of the strategic review in conjunction with the release of the Company's interim management statement for the first quarter of 2022 on 1 June 2022.

Investment Realisations & Highlights

   -- During 2021, the Company realised EUR6.3 million from its investments, of 
      which EUR5.8 million came from its Real Estate Funds (78% of their YE 
      2020 NAV) and EUR0.5 million from its minority NPL and Other Loan 
      holdings (41% of their YE 2020 NAV). 
   -- RE Redevelopment Funds - REFI II & REFI V: 
 
   -- In REFI II, all units have been sold and the fund is now in liquidation. 
      In REFI V, assuming all units currently under contract successfully close, 
      only 4% of units will remain to be sold. 
 
   -- Eurocastle received EUR5.3 million during the year comprising (i) EUR0.8 
      million from REFI II (32% of its YE 2020 NAV) and (ii) EUR4.6 million 
      from REFI V (96% of its YE 2020 NAV). A further EUR2.0 million was 
      distributed from the investments in Q1 2022; EUR1.0 million from REFI II 
      in January 2022 and EUR1.0 million from REFI V in March 2022. 
   -- REFI I: Following the sale of all the assets in Real Estate Fund 
      Investment I in 2019, in Q1 2021 the Company received its last expected 
      material distribution of EUR0.4 million, or 143% of its YE 2020 NAV. 
 
   -- Italian NPLs & Other Loans: During the year the pools generated and 
      distributed EUR0.5 million, or 41% of their YE 2020 NAV. The Company 
      also disposed of all of the underlying assets of one of these 3 pools 
      which generated  EUR0.4 million to the Company (31% of its YE 2020 
      NAV). 
   -- Additional Reserves: The Company reduced these reserves from EUR16.2 
      million to EUR14.8 million during the year. The reduction of EUR1.4 
      million reflects EUR1.6 million of reserves being utilised, in line with 
      anticipated costs, and an increase of EUR0.2 million in the existing 
      reserves in 2021. 

SUBSEQUENT EVENTS TO 31 DECEMBER 2021

The Company is exposed to a potential tax risk of up to EUR7.2 million associated with the disposal of a legacy property subsidiary in prior years. In February 2022, the Company received revised tax assessments related to this risk covering the period 2008 - 2012 determining a liability of EUR4.6 million, or EUR2.50 per share. In respect of the same legacy property subsidiary, the years 2013 - 2015 remain subject to ongoing tax audits, the timings of which are uncertain. The Company estimates that the remaining financial impact for all these audits, including interest accruals, is between EUR1.8 million - EUR2.5 million. The Company intends to appeal the current and any future assessments through the German tax system and, having taken independent advice, considers it probable that the matter will finally be determined in the Company's favour. In light of this, the Company will recognise a tax asset of EUR4.6m following payment of this amount in March 2022. The Company has been advised that, based on average court timings for both the German fiscal and federal court systems, this matter can be expected to be resolved in approximately four years, but notes that it can take considerably longer and, in rare cases, up to ten years in total. The total potential liability arising from this matter had already been fully reflected in the Adjusted NAV since implementation of the Realisation Plan (see page 5 of the 2021 Annual Report) and remains the case at 31 December 2021.

In early January 2022, the Company received a distribution of EUR1.0 million from Real Estate Fund Investment II. This represents 70% of its Q4 2021 NAV, leaving a residual value of EUR0.4 million for this investment and is already reflected in the Company's Q4 2021 Adjusted NAV.

In March 2022, the Company received a distribution of EUR1.0 million from Real Estate Fund Investment V. This represents 42% of its Q4 2021 NAV and leaves a residual value of EUR1.4 million for this investment.

 
Income Statement for the Full Year and Fourth Quarter 
 2021                                                    FY 2021     Q4 2021 
                                                           EUR         EUR 
                                                        Thousands   Thousands 
------------------------------------------------------  ----------  ---------- 
Portfolio Returns 
------------------------------------------------------ 
  Italian NPLs & Other Loans                                   602          58 
  Real Estate Funds                                          2,061          49 
------------------------------------------------------  ----------  ---------- 
Fair value movement on Italian investments                   2,663         107 
Fair value movements on residual Legacy entities               275         247 
Loss on foreign currency translation                           (5)         (3) 
                                                                    ---------- 
Total gain                                                   2,933         351 
------------------------------------------------------  ----------  ---------- 
 
Operating Expenses 

------------------------------------------------------ 
Interest expense                                                 7           7 
Manager base and incentive fees                                175          33 
Remaining operating expenses                                 1,687         462 
------------------------------------------------------  ----------  ---------- 
Other Operating expenses                                     1,862         495 
------------------------------------------------------  ----------  ---------- 
Total expenses                                               1,869         502 
------------------------------------------------------  ----------  ---------- 
 
Net profit / (loss) for the period                           1,064       (151) 
EUR per share                                                 0.57      (0.08) 
------------------------------------------------------  ----------  ---------- 
 
 
 
 Balance Sheet and Adjusted NAV Reconciliation as at    Italian Investments     Corporate        Total 
 31 December 2021                                          EUR Thousands      EUR Thousands   EUR Thousands 
-----------------------------------------------------   -------------------  --------------  -------------- 
Assets 
Cash and cash equivalents                                                 -          28,356          28,356 
Other assets                                                              -             115             115 
Investments: 
Italian NPLs & Other Loans                                            1,337               -           1,337 
Real Estate Funds                                                     3,725               -           3,725 
Total assets                                                          5,062          28,471          33,533 
 
Liabilities 
Trade and other payables                                                  -             564             564 
Manager base and incentive fees                                           -              37              37 
Total liabilities                                                         -             601             601 
 
IFRS NAV                                                              5,062          27,870          32,932 
------------------------------------------------------  -------------------  --------------  -------------- 
 
Additional Reserves(5)                                                    -        (14,752)        (14,752) 
RE Fund II distribution(6)                                            (950)             950               - 
------------------------------------------------------  -------------------  --------------  -------------- 
Adjusted NAV                                                          4,112          14,068          18,180 
Adjusted NAV (EUR per share)(7)                                        2.21            7.57            9.79 
------------------------------------------------------  -------------------  --------------  -------------- 
 

NOTICE:

This announcement contains inside information for the purposes of the Market Abuse Regulation 596/2014.

ADDITIONAL INFORMATION

For investment portfolio information, please refer to the Company's most recent Financial Report, which is available on the Company's website (www.eurocastleinv.com).

ABOUT EUROCASTLE

Eurocastle Investment Limited ("Eurocastle" or the "Company") is a publicly traded closed-ended investment company, focused on Italian performing and non-performing loans, Italian loan servicing platforms and other real estate related assets in Italy. On 18 November 2019, the Company announced a plan to realise the majority of its assets with the aim of accelerating the return of value to shareholders. The Company will not currently seek material new investments from the proceeds of the realisation but will continue to support its existing investments to the extent required in order to optimise returns and distribute cash to shareholders when available (the "Realisation Plan"). For more information regarding Eurocastle Investment Limited and to be added to our email distribution list, please visit www.eurocastleinv.com.

FORWARD LOOKING STATEMENTS

This release contains statements that constitute forward-looking statements. Such forward-looking statements may relate to, among other things, future commitments to sell real estate and achievement of disposal targets, availability of investment and divestment opportunities, timing or certainty of completion of acquisitions and disposals, the operating performance of our investments and financing needs. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may", "will", "should", "potential", "intend", "expect", "endeavor", "seek", "anticipate", "estimate", "overestimate", "underestimate", "believe", "could", "project", "predict", "project", "continue", "plan", "forecast" or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. The Company's ability to predict results or the actual effect of future plans or strategies is limited. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, its actual results and performance may differ materially from those set forth in the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that may cause the Company's actual results in future periods to differ materially from forecasted results or stated expectations including the risks regarding Eurocastle's ability to declare dividends or achieve its targets regarding asset disposals or asset performance.

(1) In light of the Realisation Plan announced in November 2019, the Adjusted NAV as at 31 December 2021 reflects additional reserves for future costs and potential liabilities, which have not been accounted for under the IFRS NAV. No commitments for these future costs and potential liabilities existed as at 31 December 2021.

(2) Per share calculations for Eurocastle throughout this document are based on 1.9 million shares.

(3) In early January 2022, the Company received EUR1.0 million of cash from RE Fund II. This amount has been reallocated from Real Estate Funds to Net Corporate Cash.

(4) Reflects corporate cash net of liabilities and additional reserves.

(5) In light of the Realisation Plan, the Adjusted NAV as at 31 December 2021 reflects the additional reserves for future costs and potential liabilities of EUR14.8 million which have not been accounted for under the IFRS NAV.

(6) In early January 2022, the Company received EUR1.0 million of cash from RE Fund II. This amount has been reallocated from Real Estate Funds to Net Corporate Cash.

(7) Amounts per share calculated on 1.9 million outstanding ordinary shares.

(END) Dow Jones Newswires

April 29, 2022 02:00 ET (06:00 GMT)

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