Starwood European Real E... Share Discussion Threads

[scburbs] 31/7/2014 07:54

7p dividend close, but not clear whether they will start paying the quarterly equivalent thereof in Q4 2014 or Q1 2015. I assume they will pay a smaller dividend (perhaps 1.5p) in Q3 2014.

"As noted above, the Group will be delivering a net portfolio yield of 6.9 per cent once the W hotel loan is substantially drawn. Based on the current syndication plans and deals in the pipeline to re-invest those proceeds the Company remains comfortable that it will be able to pay an annualised 7.0 pence dividend upon completion of the syndication and re-investment, expected to be
completed in the second half of 2014."

hxxp://www.starwoodeuropeanfinance.com/images/documents/June_2014_Factsheet.pdf

[scburbs] 01/7/2014 07:55

Fully invested now. Confirmation expected in 1 month as to whether they intend to pay a 7p annual dividend.

[m1das_touch] 06/6/2014 11:42

Yes, they're getting there, albeit painfully slowly! Happy to keep holding though and hopefully start collecting the full 7ish% yield on opening NAV before too long. Good portfolio diversifier in my view - seems to hold steady whatever the wider market is doing.

[scburbs] 06/6/2014 09:15

Excellent news as getting close to 90% committed. Running yield hopefully set to jump to around 6.25-6.5%.

"Starwood European Real Estate Finance Limited (the "Company") announces that it has committed to provide a £27 million financing facility for an office building in Park Royal, West London.

...

£22m of the available facility is expected to be drawn in early June. The Company has now made or committed to nine investments representing approximately 89% of net IPO Proceeds."

[scburbs] 19/5/2014 12:43

Running yield up to 5.5% on 77% invested.

"Following the closure of these loans, the Group has made investments representing approximately 77% of net IPO Proceeds and the Company is capable of delivering an annualised net portfolio yield of approximately 5.5 per cent on deals funded to date (after scheduled amortisation but prior to any other prepayments)."

Expected to reach close to 100% invested by 30 June (seems rather ambitious based on recent pace).

"A number of whole loan opportunities are currently in execution with several others at advance term sheet stage and based on these facts the Company remains confident of being substantially fully invested on the basis of completing two to three additional transactions within the second quarter of 2014."

Good to see that the deal that took the fund to 77% invested is not being used by the manager to take extra fees, especially given the slow deployment.

"Under the terms of the Investment Management Agreement, the calculation of the management fee is based on an adjusted Net Asset Value to exclude any cash balances until the date that 75% of the net IPO proceeds are invested. The Company has now invested 77% of net IPO proceeds and the Investment Manager is therefore entitled to charge a fee on the unadjusted Net Asset Value. However, it has been proposed by the Investment Manager that, notwithstanding the provisions detailed above, the percentage above which cash balances will be included in the calculation of Adjusted Net Asset Value shall be increased from 75% to 90%. The Board has accepted this proposal."

[jonwig] 16/4/2014 06:01

Yes, I've both.

A similar company, DREF, had a duff loan which led to underperformance of NAV and SP, so some diversification is maybe prudent.

[hugepants] 15/4/2014 22:30

Ive some SWEF but is LBOW better? This is from the LBOW thread (mentions SWEF).

davebowler 10 Apr'14 - 10:03 - 7 of 8 0 0

Investec Insights

¢ Today's announcement is excellent news and takes LBOW to substantially fully-invested, and more-or-less within the time-frame set out at launch (12 months). This is in contrast with SWEF which has struggled to deploy the capital it raised at launch. We understand the property-lending space remains competitive – and we prefer the regional UK exposure the LBOW team offer, rather than a London-centric approach.

¢ The underlying loan metrics mean the company's target return of a 6% pa dividend should be more than fully met going forwards. Net of fees and expenses, we believe a run-to-maturity IRR of 7.2% pa looks achievable. We think ICG Longbow have now demonstrated they are amongst the market leaders in UK Commercial Property Senior Secured Lending.

¢ We continue to like the property debt space and think LBOW highlights the very attractive risk / reward profile experienced managers can offer to investors right at the top of the capital structure with low LTVs. (In all cases, LBOW's loans are given the senior secured position and the average portfolio LTV is 61%, with 160% interest coverage ratio.)

¢ We note the potential tenth investment opportunity and look forward to an announcement on it (in the near future. We also expect the company's maiden set of final results soon.

¢ Looking at the other funds within the property debt space – which, to reiterate, we main bullish on – LBOW offers the purest senior-loan exposure but we also believe RECI's more diverse strategy of bond and loan exposure offers investors excellent returns; a 12 month dividend yield of 6.1% with the shares trading around par. This is a much more attractive proposition, in our view, than SWEF which is currently 71% committed and trades at a premium of 3.4% and yields 3% (although this should increase when the fund becomes fully invested).

[jonwig] 02/4/2014 16:29

FT:

International investors pile into eurozone real estate

But the positive outlook is not being driven by an improvement in the continent's economic fundamentals. Very few property markets across the eurozone have yet seen an increase in occupier demand or rents. Instead the sudden good mood is being fuelled by international investors, who have piled into the region's property market in recent months.



After yesterday's ...

The Board of Starwood European Real Estate Finance Limited (the "Company") announces that it has today published a circular (the "Circular") to Shareholders setting out and recommending its proposal to amend the Company's investment policy in order to:
[...]
· allow the Company the flexibility to make investments in Spain and Italy,

A slight concern there?

[stemis] 30/3/2014 22:44

Yes, I missed that. Obviously they are taking a prudent view. So if they achieve 7-8%+ in the 2nd half then maybe 6-6.5% for the year.

[scburbs] 30/3/2014 20:10

SteMiS,

They disclosed the current estimated earnings yield, its 5.3%.

"The Group is today capable of delivering a net portfolio yield of approximately 5.3% (prior to any prepayments and taking reasonable estimates of Group costs) and expects to be substantially fully invested on the basis of completing two to three additional transactions as soon as practicable within the second quarter of 2014."

[stemis] 30/3/2014 19:01

At the moment they have 70.3% loaned out at 9.1%. That's the equivalent of 6.4%. Investment management fee will be 70.3% of 0.75% and other expenses should come to around 0.3%. All in all that's about 5.6%. So 5-6%. If they can get it all loaned out then 8% is possible without debt, maybe 9% with.

[scburbs] 28/3/2014 18:41

I think this is someway off yielding 7%. My guess is 5-6% for 2014, perhaps 7% in 2015.

I would be happy with 6-7% return p.a. as holding this as a cash substitute.

If they can generate more than 8% off a relatively low risk debt portfolio then they have probably earned an incentive fee. They will probably need some form of financial engineering to get a decent incentive fee, this will involve taking on greater risk (but returning funds to shareholders reducing their exposure).

The two main routes would be taking on cheap debt and returning the cash to shareholders, but loans at capped at 25% of NAV. The other route is to sell off senior portions at a profit and take a turn as described below. Clearly neither route is appropriate at the moment as they are struggling to invest the cash they have! This cash drag will be making it even harder to hit the hurdle.

"The Group may seek to enhance the returns of selected loan investments through the economic transfer of the most senior portion of such loan investments which may be by way of syndication, sale, assignment, sub-participation or other financing (including true sale securitisation) to the same maturity as the original loan (i.e. "matched funding") while retaining a significant proportion as a subordinate investment. It is anticipated that where this is undertaken it would generate a positive net interest rate spread and enhance returns for the Group."

[jonwig] 28/3/2014 16:34

SteMiS - I have something on page 59 of the prospectus, which I read before investing.
At the time, it didn't cause me particular worry, as I was seeking income and limited capital growth:

The Special Limited Partner shall be
entitled to receive carried interest
from the Partnership, calculated by
reference to the annualised total return
to Shareholders over the period to the
fifth financial year of the
Company following Admission (the "Fifth
Year End") and each five year period
thereafter.

In relation to the period to the
Fifth Year End, the amount of
the carried interest shall be
20 per cent. of the
excess (if any) of the returns
generated by the Company over the
Hurdle Total Return. The Hurdle Total
Return will be achieved when the
NAV of the Company, plus the total
of all dividends declared and paid to
Ordinary Shareholders, is equal to the
NAV of the Company as at Admission as
increased by 8 per cent.
per annum, on a simple interest basis
(but excluding actual carried interest
accrued and deemed as a
creditor on the balance sheet).

I can see this as dear in a capital growth situation, of course - it's hedge fund stuff.

[stemis] 28/3/2014 15:38

Looks like a nice solid 7% yield with maybe a slight (0-2%) capital appreciation. However am I right in thinking that once the return exceeds 8%, 20% of the excess goes to an outfit called Starfin Carry LP. Is this some sort of management incentive?

[scburbs] 22/3/2014 16:24

Looks solid and at the low risk end of the spectrum (14-57% LTV), earnings yield of 5.3% (net) with cash drag and 9.2% (gross) on lent portfolio. I like this as a cash substitute (or low risk ISA/SIPP investment).

[m1das_touch] 22/3/2014 16:01

Hopefully the investment manager's cautious and conservative approach will provide some protection in the event of another commercial property crash. I like the fact that they're building a well-diversified portfolio, both by property type and geography.

[jonwig] 22/3/2014 09:18

I don't see any surprises in yesterday's results. On track to meet targets on investment and dividend payments.

No gearing at holding company level is important, given up to 50% of loans are subordinated.

If there were to be another commercial property crash this would dent the NAV and payout significantly, but I'm unsure of the position regarding senior loans: would a sale be forced or a repossession and debt/equity swap be feasible? The latter would provide better opportunities!
(I imagine the answer will depend on each individual loan.)

I'm likely to add with my next ISA funds.

[m1das_touch] 24/1/2014 08:47

I'm sure you're right - somehow I can't imagine Claridges being repossessed, for example!!

[jonwig] 24/1/2014 06:59

I'm not looking for a re-rating, since this won't really gain benefit from rising property values, as it provides debt.

However, the loans will be more secure if values rise, and there seem to be mezzanine elements in some, which will no doubt be tied to property values.

The loan rates to date seem to be fixed rather than floating with LIBOR or base rates. That's a bit of downside risk if rates rise, but not as bad as property equities would be!

Senior status of the loans to date will mean the borrowers won't be keen to default and lose their prime assets!

[m1das_touch] 23/1/2014 12:56

Recently increased my own holding jonwig - very little financial press coverage and the company seems to be under the radar of many investors.

With so many REITS and other property funds trading at well above NAV and looking expensive, I think this could re-rate as the remaining cash is invested and the forward 7% yield comes to investors' attention.

[jonwig] 23/1/2014 12:30

Yes, in my ISA. Agree with your header summary, and may increase my present small holding in April.

[m1das_touch] 23/1/2014 12:03

Holding these in my SIPP for long-term growth and dividends. Any other holders?

[m1das_touch] 23/1/2014 12:02

Guernsey domiciled closed-end investment company that originates, executes and services a diversified portfolio of commercial real estate debt investments in liquid markets (office, retail, logistics, light industrial, hospitality and residential) in the UK and Continental Europe.

I see this as an interesting and relatively low-risk property play, different to a mainstream REIT in that it focuses on providing commercial loans (usually syndicated) of between 3-7 years, secured on high quality property assets.

Current loanees include the Maybourne Hotel Group in London (loans secured against luxury hotels Claridges, The Connaught and The Berkeley), Almacantar (Centre Point Tower, London), Tristan Capital Partners (retail portfolio, Finland) and Lifecare Residences Group (loan to develop a retirement village in London).

Management seem to have a very conservative approach and it's taken longer than originally anticipated to find appropriate investment opportunities, but SWEF is now around 90% invested and is committed to paying a 7% yield on original NAV once fully invested.

The managers of the fund, Starwood European Finance Partners Ltd, are an indirectly wholly-owned subsidiary of the well-respected USA-based Starwood Capital Group, which has an established history of financing these types of commercial property loans.