Share Name Share Symbol Market Type Share ISIN Share Description
Starwood European Real Estate Finance Limited LSE:SWEF London Ordinary Share GG00B79WC100 ORD NPV
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.40 -0.42% 95.00 93.60 95.00 94.60 94.60 94.60 667,241 16:35:25
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Equity Investment Instruments 0.0 28.0 7.0 13.6 393

SWEF: Quarterly Portfolio Update

22/10/2021 10:16am

UK Regulatory (RNS & others)

Starwood European Real E... (LSE:SWEF)
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Starwood European Real Estate Finance Ltd (SWEF) SWEF: Quarterly Portfolio Update 22-Oct-2021 / 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.


22 October 2021

Starwood European Real Estate Finance Limited

Quarterly Portfolio Update

5.8 per cent Share Price Total Return During Q3; Resilient Performance from Robust Portfolio

Annual dividend yield of 5.6 per cent, paid quarterly

Starwood European Real Estate Finance Limited ("SWEF" or "the Group"), a leading investor originating, executing and managing a diverse portfolio of high quality senior and mezzanine real estate debt in the UK and Europe, is pleased to announce a portfolio update for the quarter ended on 30 September 2021.


-- Income stability - all loan interest and scheduled amortisation payments paid in full and on time

-- Strong cash generation - the portfolio as a whole continues to support annual dividend payments of 5.5pence, paid quarterly, and generates an annual dividend yield of 5.6 per cent on the share price as at 30 September2021

-- Portfolio robust - despite pandemic-related disruption, the portfolio continues to perform in line withexpectations

-- Borrowers remain adequately capitalised and are expected to continue to pay loan interest and capitalrepayments in line with contractual obligations

-- On 21 July 2021 the Group announced that it had closed a GBP13.5 million floating rate whole loan securedby a mixed use hotel and office property in Northern Ireland

-- In August 2021 the Group announced that during July 2021 it received the full and final repayment of itsEUR54.2 million loan on a resort hotel in Spain

-- 5.8 per cent - Share price total return during quarter ended 30 September 2021

-- 54.9 per cent - Share price total return since inception in December 2012

-- The Investment Manager believes the current investment pipeline is the strongest since the Company wasestablished

Quote from the Chair, Stephen Smith

"We are pleased with the Company's performance during the quarter which remains in line with expectations and is derived from an exceptionally robust portfolio of real estate loans that continue to deliver attractive income for our shareholders. Notably, the outlook for new loans origination remains very strong as the investment manager has seen significant activity across the hospitality and retail sectors and in office spaces as the UK and Europe starts to return to pre-pandemic activity levels. While the Board is encouraged with the progress achieved in narrowing the share price discount to NAV since the Company's last quarterly update, the Board remains of the opinion that the current discount does not reflect the outstanding risk adjusted income represented by the quality of the portfolio which has not experienced any payment defaults, including since the onset of Covid-19."

The factsheet for the period is available at:


Share Price / NAV at 30 September 2021

Share price (p)  98.0 
NAV (p)          103.5 
Discount         5.4% 
Dividend yield   5.6% 
Market cap       GBP401m 

Key Portfolio Statistics at 30 September 2021

Number of investments                                                       18 
Percentage of currently invested portfolio in floating rate loans           76.7% 
Invested Loan Portfolio unlevered annualised total return (1)               6.7% 
Portfolio levered annualised total return (2)                               6.7% 
Weighted average portfolio LTV - to Group first GBP (3)                       18.7% 
Weighted average portfolio LTV - to Group last GBP (3)                        64.2% 
Average loan term (based on current contractual maturity)                   4.6 years 
Average remaining loan term                                                 2.0 years 
Net Asset Value                                                             GBP423.4m 
Amount drawn under Revolving Credit Facilities (including accrued interest) GBP0.0m 
Loans advanced (including accrued interest)                                 GBP393.5m 
Cash                                                                        GBP20.2m 
Other net assets (including hedges)                                         GBP9.7m 
Remaining years to contractual maturity* Value of loans (GBPm) % of invested portfolio 
0 to 1 years                             112.0               28.7% 
1 to 2 years                             88.5                22.6% 
2 to 3 years                             42.9                11.0% 
3 to 5 years                             147.5               37.7% 

*excludes any permitted extensions. Note that borrowers may elect to repay loans before contractual maturity.

Country             % of invested assets 
UK                  51.8% 
Republic of Ireland 21.4% 
Spain               19.3% 
Netherlands         3.6% 
Germany             2.8% 
Finland             1.1% 
Sector           % of invested assets 
Hospitality      35.1% 
Office           24.9% 
Retail           13.5% 
Residential      12.0% 
Healthcare       6.4% 
Life Sciences    5.0% 
Light Industrial 1.4% 
Logistics        1.4% 
Other            0.3% 
Loan type     % of invested assets 
Whole loans   60.5% 
Mezzanine     39.5% 
Currency      % of invested assets* 
Sterling      51.9% 
Euro          48.1% 

*the currency split refers to the underlying loan currency, however the capital on all non-sterling exposure is hedged back to sterling.

(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. 15 of the loans are floating rate (partially or in whole and all 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 uninvested. 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 deductible lender controlled cash reserves and 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.

Portfolio changes during the quarter ended 30 September 2021

In July 2021 the Group announced that it had closed a GBP13.5 million floating rate whole loan secured by a mixed use hotel and office property. The financing has been provided in the form of an acquisition loan. The loan term is 3 years, and the Group expects to earn an attractive risk-adjusted return in line with its stated investment strategy.

In August 2021 the Group announced that during July 2021 it received the full and final repayment of its EUR54.2 million loan on a resort hotel in Spain.


On 22 October 2021, the Directors declared a dividend in respect of the third quarter of 1.375 pence per Ordinary Share, equating to an annualised 5.5 pence per annum. The Board is targeting a dividend of 5.5 pence per annum (payable quarterly) which it considers to be a sustainable level of dividend. As a result of the early repayment of the Company's large position in the Hotel, Spain it is anticipated that current year earnings will not fully cover the target dividend (the per cent shortfall is forecast to be in single digits) but the Group has a modest dividend reserve for this purpose which will be utilised to ensure that the target dividend is met. Given the extremely attractive environment for the Group's investment strategy it is anticipated that the dividend will swiftly return to full coverage from earnings during the course of 2022 with any excess cash generated being used to replenish dividend reserves.

Portfolio Update

All loan interest and scheduled amortisation payments up to the date of this factsheet have been paid in full and on time in line with expectations. The pandemic impacted sectors such as hospitality and retail assets are now back open and trading, with positive initial recovery indicators in relation to average rate on hotel bookings and retail footfall. Additionally, office pre-leasing activity for portfolio assets under construction or heavy refurbishment is also showing positive indicators. The Group is monitoring supply chain dynamics in relation to building supplies and inflationary pressures particularly in relation to utilities, food and staff costs. We note that all loan positions remain well capitalised and typically sponsor's underwritten business models include hedging of key contracts such as gas, electricity and food, which are therefore expected to reduce the impact of the current price trends on margins.

Key updates in relation to pandemic impacted sectors are outlined below:

Hospitality (35 per cent of funded investment portfolio)

-- As announced in August 2021, the Group's exposure to hospitality reduced to 35.1 per cent of theinvestment portfolio as a result of the repayment of the largest hotel exposure, the "Hotel, Spain". This followedthe very successful execution of the Sponsor's business plan of refurbishing the hotel to a high standard and thenrefinancing the Group's capex loan.

-- Of the remaining hospitality exposure, 69 per cent is located in the UK, with the majority of thiscomprising three hotels (Hotel Oxford, Hotel Scotland and Hotel North Berwick). These assets have been undergoingcomprehensive refurbishment projects, with all three hotels now open and trading under new brands. In line with theGroup's underwritten expectations, the average room rates being achieved for the repositioned hotels issignificantly higher than the pre-refurbished product and all three hotels are expected to trade very well in thefuture given the high quality of the new product and strong domestic demand for leisure breaks.

-- The Hotel Dublin comprises the majority of the remaining hospitality exposure accounting for 31 per cent.This asset is planning to re-open fully during Q1 2022 following the expected conclusion of a very successfulcontract in place throughout the pandemic with the Irish health service. The position remains well capitalised andis expected to benefit from pent up demand for conference, events and leisure breaks once re-opened.

Retail (14 per cent of funded investment portfolio)

-- The Group's exposure to retail is predominantly comprised of the "Three Shopping Centres, Spain" and"Shopping Centre, Spain" loans. These are the only stand-alone retail loans in the portfolio and comprise 12 percent of the Group's total funded investment portfolio and 87 per cent of total retail exposure. All other retailexposure is contained in a limited number of mixed use portfolios.

-- As previously reported, with restrictions being eased over the second and third quarters of 2021 inEurope, along with high vaccination rates, retail footfall traffic has continued to recover to over 70 per cent ofthe comparable period in 2019. This is expected to continue to increase over the coming months particularly oncecinemas recover further. Cinemas have suffered to a greater extent with a slower recovery than other retailoutlets, however autumn 2021 new blockbuster releases are expected to drive greater footfalls.

-- The sponsor continues active asset management of the centres, with occupancy remaining robust and thepositions adequately capitalised.

Construction & heavy refurbishment (18 per cent of funded investment portfolio)

-- The Group's construction and heavy refurbishment exposure has reduced down to 18 per cent from 25 percent following the completion of the Hotel Scotland heavy refurbishment project in the third quarter of 2021. Over90 per cent of the Group's construction and heavy refurbishment funded loans are located in the UK. Despite supplychain headwinds, all projects are progressing satisfactorily and no unfunded cost overruns have occurred. Ground upconstruction and heavy refurbishment projects underwritten by the Group typically have fixed price design and buildconstruction contracts in place with established contracting firms who have managed their supply chain andsub-contractors well.

Market commentary and outlook

Stock markets have moved mostly sideways over the last quarter but have been increasingly concerned around the risk of persistent inflation. As economies have opened up and the world moves back towards a normal level of activity we can see inflation everywhere in our everyday lives. There is clear inflation when eating and drinking out, buying groceries, paying utility bills and filling up at the petrol pump. Commodities, global shipping costs and some labour costs are increasing at rates significantly higher than the headline inflation rates. The general market opinion had been that this inflation is a short term effect connected to the rapid changes from reopening economies and is likely to normalise as a new equilibrium is reached. However, the trend has been continuing, the reported inflation numbers keep on rising and the markets have become jittery on concerns as to whether inflation will continue at elevated levels for the longer term. The FTSE All-Share and the iShares UK Property ETF have moved by 1.10 per cent and 4.28 per cent over the quarter respectively. This in line with the markets generally exhibiting some volatility but not much over all movement over the quarter. In addition to these choppier market conditions we have now begun to see some impact with meaningful moves in the UK ten year Gilt and US ten year treasury which are now yielding 1.02 per cent and 1.49 per cent at the end of September versus 0.58 per cent and 1.28 per cent at the end of August 2021 respectively. So far this has not made a material impact on 3 month Euribor or Sterling Libor which are relatively steady at their historical low levels (as at September 2021) of negative 0.55 per cent and positive 0.082 per cent respectively. If inflationary pressures do drive central banks to take action to increase base rates and Libor and Euribor rates follow, then the portfolio will benefit as 76.7 per cent of the portfolio has floating interest rates. In the case of Sterling loans the impact will be immediate, for Euro loans which have floors at zero, Euribor would have to exceed zero for the benefit to start.

As the world continues progress back to more conventional work patterns we are also seeing the early signs of business travel picking up. The Investment Advisor's teams have already been travelling extensively for international investment and lending opportunities but over the last few weeks they have seen other firms and banks doing more travel as well. The Advisor has also started to see non-essential travel picking up with relationship managers on trips for client meetings to re-kindle connections and relationships and to try to develop new ones. In the last week of September we saw a huge increase in bankers traveling from the United States. Networking drinks and dinners are back and last week there was an invite for one for every night including three separate events on the Monday. The Americans we met all noticed how far ahead London was in returning to normal compared to US cities. We can see from our offices that the West End of London is buzzing with activity. Pubs and restaurants are full, the streets are busy and at lunchtime there are regular queues at sandwich shops. The Bloomberg Pret Index backs our experience up with data from Pret sales. The index reports the West End is now right back where it was pre-pandemic. Consistent with the anecdotes from the Americans, Bloomberg comment that compared with New York, London's bankers have been much faster to return to trading floors in the City of London and Canary Wharf financial districts with these areas at 80 per cent of pre-pandemic sales versus 50 per cent for Wall Street.

In the office transaction market the most recent London office investment volume statistics from CBRE are already available for the third quarter. The third quarter figures brought year-to-date investment to GBP6.4 billion which is a 95 per cent increase on the same period last year, when only GBP3.3 billion of investment was recorded. Core transactions dominated the London investment market, accounting for 60 per cent of total volumes. It is particularly notable that Asian investment, which usually comprises a significant portion of London investment volume only accounted for 15 per cent of year-to-date investment volumes as many Asian investors are unable to travel and that when those Asian investors return and can freely deploy capital, we are likely to see increased competition and volume. Buyers are focused on the best buildings with superior ESG credentials which will be essential for buildings to appeal to investors, tenants and lenders. New ESG regulations will also require significant investment over the coming years. Colliers report one tenth of London offices could become unusable in two years unless landlords invest heavily to bring them up to new environmental standards. They estimate 20 million square feet of London workspace falls short of minimum energy efficiency standards that will be introduced in England and Wales in 2023. Under the new standards it will be an offence to lease an office with an energy performance certificate rated lower than E. In addition, Colliers report that almost two-thirds of London's stock is rated D to G and that the government is consulting on legislation that will mean only A or B rated commercial buildings can be leased by 2030.

In addition to most market participants being firmly back in the office, we are beginning to see conference activity pick up in our industry. This October a small group from the Starwood team will be in Munich for Expo Real, the largest real estate industry event in Europe. In 2019 prior to COVID Expo Real drew 46,747 participants from 76 countries. We expect there to be far smaller numbers this year and with many restrictions still in place. However, the ability to see many contacts that the Investment Advisor has not met in person for almost two years and from many countries in one place will be incredibly valuable.

The steady recovery of the hotel operational markets continues. The Group's largest exposure to hotels is in regional UK markets where occupancy has continued to trend stronger since domestic restrictions lifted in May, with many tourists choosing to travel domestically whilst restrictions remained in place on international travel, particularly in Europe. For UK and Europe as a whole, while occupancies still need to catch up, the average rate paid per room per night across the industry as a whole achieved in August 2021 has now recovered to pre-pandemic levels.

On the hotel transactions side we mentioned in previous factsheets that we expected numerous hotel transactions to come through later in the year. Since this time last year Starwood's own equity funds in Europe have acquired or committed to four new hotel purchases in the UK, Spain and Denmark including two in the third quarter of 2021. In the US at the beginning of the summer funds managed by Starwood and Blackstone completed the acquisition of Extended Stay America in a transaction valued at approximately USD6 billion. We had previously commented that markets tended to open first with smaller single asset transactions and then migrate to larger transactions and portfolios as markets settled. We are now seeing that trend in the market with larger portfolios transacting which boost the overall transaction volume. One example this month in the UK is Henderson Park have acquired a portfolio of twelve Hilton hotels with more than 2,400 rooms in a transaction reported to be worth GBP555 million. We are aware of a number of similar sized transactions in the market now that will likely close late 2021 or early in 2022. The investment market is very healthy and liquid for hotel assets across Europe.

Looking forward to the fourth quarter and beyond we anticipate a strong level of transactional activity to continue. The strength and potential of "beds, meds and sheds" have been strong themes and we continue to see interesting value add lending opportunities in these sectors and others for the Company.

Expected Credit Losses

All loans within the portfolio are classified and measured at amortised cost less impairment. The Group closely monitors the loans in the portfolio for deterioration in credit risk. There are some loans for which credit risk has increased since initial recognition. However, we have considered a number of scenarios and do not currently expect to realise a loss in the event of a default. Therefore, no credit losses have been recognised.

This assessment has been made, despite the continued pressure on the hospitality and retail markets from Covid-19, on the basis of information in our possession at the date of reporting, our assessment of the risks of each loan and certain estimates and judgements around future performance of the assets. The position on any potential ECLs on the Spanish retail assets in particular continues to be closely monitored and analysed, and we have sought input, analysis and commentary from Spanish market advisers in this regard, to supplement our own information. We have received independent, external valuations of the underlying assets secured against the Spanish loans during the current year. This information did not change our analysis on the Spanish loans and we note that valuation headroom remains on these loans. The updated valuations are reflected in the sector and portfolio LTV tables presented in this factsheet.

Investment Portfolio at 30 September 2021

As at 30 September 2021, the Group had 18 investments and commitments of GBP419.1 million as follows:

                             Sterling equivalent       Sterling equivalent unfunded        Sterling Total (Drawn and 
                             balance (1)               commitment (1)                      Unfunded) 
Hospitals, UK                GBP25.0 m                                                       GBP25.0 m 
Hotel & Residential, UK      GBP49.9 m                                                       GBP49.9 m 
Office, Scotland             GBP5.0 m                                                        GBP5.0 m 
Office, London               GBP13.7 m                   GBP6.8 m                              GBP20.5 m 
Hotel, Oxford                GBP20.1 m                   GBP2.9 m                              GBP23.0 m 
Hotel, Scotland              GBP41.4 m                   GBP1.2 m                              GBP42.6 m 
Hotel, Berwick               GBP14.1 m                   GBP0.9 m                              GBP15.0 m 
Life Science, UK             GBP19.5 m                   GBP7.1 m                              GBP26.6 m 
Hotel and Office, Northern   GBP13.5 m                                                       GBP13.5 m 
Logistics Portfolio, UK (2)  GBP0.6 m                                                        GBP0.6 m 
Total Sterling Loans         GBP202.8 m                  GBP18.9 m                             GBP221.7 m 
Three Shopping Centres,      GBP31.0 m                                                       GBP31.0 m 
Shopping Centre , Spain      GBP14.7 m                                                       GBP14.7 m 
Hotel, Dublin                GBP51.8 m                                                       GBP51.8 m 
Office, Madrid, Spain        GBP16.0 m                   GBP0.9 m                              GBP16.9 m 
Mixed Portfolio, Europe      GBP24.1 m                                                       GBP24.1 m 
Mixed Use, Dublin            GBP4.6 m                    GBP8.2 m                              GBP12.8 m 
Office Portfolio, Spain      GBP13.4 m                   GBP0.2 m                              GBP13.6 m 
Office Portfolio, Ireland    GBP27.4 m                                                       GBP27.4 m 
Logistics Portfolio, Germany GBP5.1 m                                                        GBP5.1 m 
Total Euro Loans             GBP188.1 m                  GBP9.3 m                              GBP197.4 m 
Total Portfolio              GBP390.9 m                  GBP28.2 m                             GBP419.1 m 1. Euro balances translated to sterling at period end exchange rate. 2. Logistics Portfolio, UK and Logistics Portfolio, Germany is one single loan agreement with sterling andEuro tranches. 

Loan to Value

On the basis of the methodology and valuation processes previously disclosed (see 30 June 2020 factsheet) and including new valuations received, at 30 September 2021 the Group has an average last GBP LTV of 64.2 per cent (30 June 2021: 63.5 per cent).

The table below shows the sensitivity of the loan to value calculation for movements in the underlying property valuation and demonstrates that the Group has considerable headroom within the currently reported last LTVs.

Change in Valuation  Hospitality Retail Residential Other Total 
-25%                 84.2%       100.5% 79.5%       79.3% 84.1% 
-20%                 78.9%       94.2%  74.6%       78.3% 80.2% 
-15%                 74.3%       88.6%  70.2%       73.7% 75.5% 
-10%                 70.1%       83.7%  66.3%       69.6% 71.3% 
-5%                  66.4%       79.3%  62.8%       65.9% 67.6% 
0%                   63.1%       75.3%  59.7%       62.6% 64.2% 
5%                   60.1%       71.8%  56.8%       59.7% 61.1% 
10%                  57.4%       68.5%  54.2%       57.0% 58.3% 
15%                  54.9%       65.5%  51.9%       54.5% 55.8% 

Share Price performance

During the third quarter of 2021, the Company's shares performed well, returning 5.8 per cent on a total return basis with the share price trading between 92.8 pence and 99.4 pence and ending the quarter at 98.0 pence. As at 30 September 2021, the discount to NAV stood at 5.4% per cent, with an average discount to NAV of 7.0% per cent over the quarter, a significant improvement from the discount to NAV of 12.1 % per cent on average in the previous quarter. The Board, the Investment Manager and Adviser continue to believe that the shares represent attractive value at this level.

Note: the 30 September 2021 discount to NAV is based off the current 30 September NAV as reported in this factsheet. All average discounts to NAV are calculated as the latest cum-dividend NAV available in the market on a given day, adjusted for any dividend payments from the ex-dividend date onwards

For further information, please contact:

Apex Fund and Corporate Services (Guernsey) Limited as Company Secretary

                                  +44 (0) 203 5303 661 
Magdala Mullegadoo 
Starwood Capital 
Duncan MacPherson                +44 (0) 20 7016 3655 
Jefferies International Limited 
Stuart Klein 
Neil Winward 
                                 +44 (0) 20 7029 8000 
Gaudi Le Roux 

Buchanan +44 (0) 20 7466 5000

Helen Tarbet +44 (0) 07788 528143

Henry Wilson

Hannah Ratcliff


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.

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.:  124950 
EQS News ID:   1242678 
End of Announcement  EQS News Service 

Image link: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=show_t_gif&application_id=1242678&application_name=news


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