SWEF : Quarterly Fact Sheet Publication

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 Starwood European Real Estate Finance Ltd (SWEF) 
SWEF : Quarterly Fact Sheet Publication 
 
17-Apr-2018 / 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. 
 
17 April 2018 
 
 NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, DIRECTLY 
       OR INDIRECTLY, TO U.S. PERSONS OR IN, INTO OR FROM THE UNITED STATES, 
     AUSTRALIA, CANADA, SOUTH AFRICA, JAPAN, NEW ZEALAND OR ANY JURISDICTION 
         WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR 
           REGULATIONS OF SUCH JURISDICTION 
 
Starwood European Real Estate Finance Limited: Quarterly Factsheet 
Publication 
 
Starwood European Real Estate Finance Limited (the "Company") announces that 
 the factsheet for the first quarter ended on 31 March 2018 is available at: 
 
           www.starwoodeuropeanfinance.com [1] 
 
           Extracted text of the commentary is set out below: 
 
           Investment Portfolio at 31 March 2018 
 
 As at 31 March 2018, the Group had 19 investments and commitments of GBP486.2 
           million as follows: 
 
            Transaction Sterling equivalent Sterling equivalent 
                                balance (1) unfunded commitment 
                                                            (1) 
  Industrial Portfolio,              GBP18.6m                   - 
                     UK 
          Hospitals, UK              GBP25.0m                   - 
 Hotel, Channel Islands              GBP26.9m                   - 
   Varde Partners mixed               GBP6.5m                   - 
          portfolio, UK 
 Mixed use development,              GBP11.6m               GBP1.6m 
          South East UK 
         Regional Hotel              GBP45.9m                   - 
          Portfolio, UK 
Credit Linked Notes, UK              GBP21.8m                   - 
            real estate 
   Total Sterling Loans             GBP156.3m               GBP1.6m 
 Residential Portfolio,               GBP6.7m                   - 
        Dublin, Ireland 
     Logistics, Dublin,              GBP12.9m                   - 
                Ireland 
Hotel, Barcelona, Spain              GBP40.3m                   - 
School, Dublin, Ireland              GBP16.5m                   - 
  Industrial Portfolio,              GBP56.6m                   - 
    Central and Eastern 
                 Europe 
Three Shopping Centres,              GBP30.9m               GBP8.2m 
                  Spain 
 Shopping Centre, Spain              GBP10.3m               GBP4.6m 
 Hotel, Dublin, Ireland              GBP52.5m                   - 
   Residential, Dublin,               GBP3.3m               GBP4.6m 
                Ireland 
  Office, Paris, France              GBP22.8m                   - 
 Student Accommodation,               GBP6.6m               GBP3.3m 
                 Dublin 
           Hotel, Spain              GBP23.8m              GBP24.4m 
       Total Euro Loans             GBP283.2m              GBP45.1m 
        Total Portfolio             GBP439.5m              GBP46.7m 
 
(1) Euro balances translated to sterling at period end exchange rates. 
 
           Dividend 
 
       On 16 April 2018 the Directors declared a dividend of 1.625 pence per 
    Ordinary Share (equivalent to 6.5 pence per annum per Ordinary Share) in 
           relation to the first quarter of 2018. 
 
           Portfolio activity 
 
As at 31 March 2018, the average remaining maturity of the Group's loan book 
     was 3.2 years. The gross annualised levered return of the invested loan 
           portfolio is 8.3 per cent. 
 
     The following portfolio activity occurred in the first quarter of 2018: 
 
   Repayment: Centre Point, London: The Group received full repayment of the 
Centre Point loan on 16 February 2018 following successful completion of the 
           borrower's business plan. 
 
 Repayment: Residential, Cork: The Group received full repayment of the loan 
 on 13 March 2018 following successful completion of the borrower's business 
           plan. 
 
       The Group also received amortisation in the quarter on the Industrial 
         Portfolio, UK, the Varde partners mixed portolio and the Industrial 
 portfolio, Europe loans, totalling GBP12.9 million, all following asset sales 
           in line with borrowers' business plans. 
 
       New Loan: Student Accommodation, Dublin: On 5 February 2018 the Group 
    committed to a EUR11.25 million whole loan facility to finance a 127 bed 
      purpose built student development scheme in central Dublin. The Dublin 
student market suffers from a severe structural undersupply of purpose built 
    student accommodation, and the borrower's aim is to deliver high quality 
         schemes in strong locations across Ireland in order to address this 
    shortage. The initial facility advance was made on 5 February 2018, with 
   remaining development costs for the scheme to be funded by the whole loan 
   proceeds until expected practical completion in summer 2018. The facility 
           has a term of two years. 
 
     New Loan: Residential, Dublin, Ireland : On 16 February 2018, the Group 
         committed to a EUR9 million floating rate whole loan to finance the 
  conversion of 84 apart hotels to residential use on a site adjacent to the 
Hotel, Dublin (described below). The financing has been provided in the form 
 of an initial advance along with a capex facility to fund the refurbishment 
          works for a period of 18 months with a six month extension option. 
 
  New Loan: Hotel, Dublin, Ireland : On 21 February 2018, the Group closed a 
  EUR60 million floating rate whole loan to finance the acquisition of a 764 
   key hotel, 27 apart-hotel units and ancillary development land in Dublin. 
  The financing has been provided in the form of a single advance for a four 
           year term with a one year extension option. 
 
   New Loan: Shopping Centre, Spain: On 23 February 2018, the Group closed a 
  EUR17 million floating rate mezzanine loan secured by a shopping centre in 
        Spain. The property is well anchored, dominates its catchment and is 
  positioned to benefit from the sponsors' active asset management strategy. 
The financing has been provided in the form of an initial advance along with 
      a capex facility to implement further value enhancing initiatives. The 
    Group's loan complements an existing senior facility provided by Spanish 
    banks, a structure that the Group sees potential to replicate further in 
      Spain. The loan term is 30 months with two one year extension options. 
 
 New Loan: Hotel, Spain: On 15 March 2018, the Group closed a EUR110 million 
 floating rate whole loan secured by a hotel in Spain with Starwood Property 
 Trust, Inc (through a wholly owned subsidiary) participating in 50 per cent 
    of the loan amount, providing the Company with a net commitment of EUR55 
  million. The financing has been provided in the form of an initial advance 
along with a capex facility to support the sponsor's repositioning strategy. 
    The loan term is five years, and the Group expects to earn an attractive 
           risk-adjusted return in line with its stated investment strategy. 
 
        Following the new loan activity, and the GBP43.7 million of repayments 
  received in the first quarter, the Group remains fully invested with GBP46.7 
    million of commitments to fund. The Group had drawn GBP66.6 million on its 
available credit facilities of GBP114 million and has cash of GBP9.6 million for 
      working capital purposes. The Investment Adviser is reviewing multiple 
  lending opportunities, with some opportunities currently in execution, and 
  will continue to focus on the use of credit facilities and equity issuance 
    when appropriate in order to grow the loan book whilst limiting the cash 
           drag impact of any future repayments. 
 
           Commentary 
 
      In February CBRE issued an update to their "Four Quadrants real estate 
     relative value" paper. This paper is compelling reading for the Group's 
       investors as its conclusion is that within the real estate investment 
universe, the private debt strategy, which the Company invests in, continues 
   to be the best relative risk adjusted return when compared generically to 
      public real estate debt and both public and private real estate equity 
           investments. 
 
  CBRE also highlighted that 2017 European commercial real estate investment 
  volumes reached a record level of EUR285 billion which is up nine per cent 
    on 2016 and two per cent on the prior peak year in 2015. There have been 
    record volumes in Austria, Central and Eastern Europe, Denmark, Finland, 
Italy and the Netherlands and near peak levels in the UK and Germany. France 
  was singled out as a market where, after a subdued start to the year prior 
 to the election, volume had picked up in the latter part of the year on the 
   expectation of Macron's economic reforms with EUR12 billion of the annual 
 EUR27 billion total volume being in quarter four alone. While the core loan 
 market in France has been very well covered by domestic and German banks we 
  are seeing some opportunities where the usual banks are not delivering for 
borrowers and we have been able to provide solutions. Further to closing our 
         first investment in France at the end of last year we see potential 
           follow-on transactions in the French market. 
 
          Link Asset Services (previously Capita) have released their second 
    commercial real estate lender sentiment survey which presents some broad 
conclusions around the market. We agree with many of the conclusions such as 
    the continued increase in appetite for longer dated paper from insurance 
companies, a relatively stable environment around risk criteria from lenders 

       and the trend for slower closing processes in general. The Link Asset 
Services survey data shows that the average deal took 53 days in 2017 versus 
     46 days in the previous year to move from agreed terms to drawdown. One 
 aspect we have not observed is that the survey sees an increase of 45 basis 
 points in mezzanine pricing between 2016 and 2017. We think this reflects a 
diverse universe of mezzanine financing in the survey data including smaller 
    ticket, development mezzanine and higher loan-to value ("LTV") mezzanine 
  debt included. For the types of mezzanine loans that we typically look at, 
we see pricing and risk point as being relatively stable with pricing in the 
seven to nine per cent range. We have also seen a very small number of lower 
   priced mezzanine debt loans from international capital where margins have 
  been as low as mid 400s basis points spread over the Libor rate for trophy 
           asset financings. 
 
In the capital markets we continue to see an ongoing theme in the market for 
  large stabilised senior investment loans secured by commercial real estate 
  becoming increasingly liquid and competitive across Europe. This is driven 
       by increasingly diverse sources of financing from an increased use of 
 corporate debt for the investment grade listed property companies, domestic 
        and international banks lending from their balance sheets, increased 
 appetite from insurance companies for real estate debt and increasingly new 
     commercial mortgage-backed securities ("CMBS") issues all competing for 
           similar deals. 
 
   Most notable is the increased competitiveness in the CMBS market over the 
    past quarter. Investment banks now favour this route as a base case exit 
          when underwriting certain large investment loans for distribution. 
Previously investment banks would typically have looked to sell down similar 
  large loans in smaller tickets in a loan syndication to a group of balance 
      sheet bank lenders and insurance companies. This had previously been a 
  better execution due to a lower cost of capital from those sources, but we 
   have now seen an inflection point on demand and on pricing for CMBS where 
CMBS can now deliver a cheaper execution. Morgan Stanley research notes that 
    at the end of the year in 2015 UK commercial real estate senior debt was 
      25-30 basis point tighter than what was available in the CMBS markets, 
however with loan pricing relatively unchanged but blended CMBS pricing more 
 than 50 basis points tighter this relationship has now reversed. An example 
   of this is Bank of America Merrill Lynch's Taurus 2017-2 issuance of a UK 
    CMBS in November 2017. According to Debtwire, the facility supported the 
acquisition of a GBP545.6 million UK logistics portfolio. The detachment point 
  of the most junior notes was c. 70 per cent LTV and the blended pricing on 
   the issuance was c.164 basis points, which reflects both a higher LTV and 
    pricing significantly inside what would have been achievable in the bank 
       financing market for a senior loan. Since the fourth quarter of 2017, 
   investment banks' underwrite to CMBS activity has increased significantly 
       with Morgan Stanley research having increased its expectations of new 
 issuance in 2018 from EUR1 billion to EUR3-4 billion. There are a number of 
   drivers for this change in pricing including a reduction of the amount of 
 outstanding CMBS in the market and the effect of quantitative easing on the 
       availability of investable debt in the overall bond market generally. 
 
   While the re-emergence of CMBS is a notable development in the commercial 
   real estate lending market, the overall trend for increased liquidity and 
 lower pricing in the vanilla senior lending space has been continuing for a 
  number of years. The Group has seen little impact on its ability to source 
new investments as a result of this trend as there is a limited overlap with 
    the Group's more bespoke approach to lending and the Group has made good 
 origination progress during the first quarter of the year making a total of 
            GBP135 million of new commitments. 
 
Share Price / NAV at 31 March 2018 
 
Share price (p)     104.00 
NAV (p)             101.69 
Premium/ (discount) 2.0% 
Dividend yield      6.25% 
Market cap          GBP390.0 m 
 
Key Portfolio Statistics at 31 March 2018 
 
Number of investments                                         19 
Percentage of currently invested portfolio in floating     86.7% 
rate loans 
Invested Loan Portfolio unlevered annualised total          7.4% 
return (1) 
Invested Loan Portfolio levered annualised total            8.3% 
return (2) 
Weighted average portfolio LTV - to Group first GBP (3)      13.3% 
Weighted average portfolio LTV - to Group last GBP (3)       65.4% 
Average loan term (stated maturity at inception)       4.1 years 
Average remaining loan term                            3.2 years 
Net Asset Value                                          GBP381.4m 
Amount drawn under Revolving Credit Facilities           -GBP66.6m 
(excluding accrued interest) 
Loans advanced                                          GBP421.0.m 
Financial assets held at fair value                       GBP22.1m 
Cash                                                       GBP9.6m 
Other net assets/ (liabilities) (including hedges)        -GBP4.7m 
 
          (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 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 the Irish School, Dublin and the mixed use 
development, south east UK and Student Accommodation, Dublin the calculation 
 includes the total facility available and is calculated against the assumed 
           market value on completion of the project. 
 
      Remaining years to Value of loans (GBPm)       % of invested 
   contractual maturity*                               portfolio 
            0 to 1 years                 0.0                 0.0 
            1 to 2 years               126.5                28.8 
            2 to 3 years               146.2                33.2 
            3 to 5 years               142.0                32.3 
           5 to 10 years                25.0                 5.7 
 
  *excludes any permitted extensions. Note that borrowers may elect to repay 
           loans before contractual maturity. 
 
              Country % of invested assets 
UK - Regional England                26.4% 
                Spain                24.0% 
  Republic of Ireland                22.4% 
              Hungary                10.4% 
      Channel Islands                 6.1% 
               France                 5.2% 
  UK - Central London                 3.0% 
       Czech Republic                 2.5% 
 
               Sector % of invested assets 
          Hospitality                42.3% 
     Light Industrial                17.3% 
               Retail                11.3% 
               Office                 8.1% 
           Healthcare                 5.7% 
            Education                 3.8% 
            Logistics                 3.2% 
 Residential for rent                 3.0% 
 Residential for sale                 2.6% 
Student Accommodation                 1.5% 
                Other                 1.2% 
 
             Loan type % of invested assets 
           Whole loans                75.1% 
             Mezzanine                19.9% 
Other debt instruments                 5.0% 
 
Loan type % of invested assets* 
 Sterling                 32.2% 
     Euro                 67.8% 
 
*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 755143 
 
           Lucy Brehaut 
 
           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: PFU 
TIDM:          SWEF 
LEI Code:      5493004YMVUQ9Z7JGZ50 
Sequence No.:  5414 
 
End of Announcement EQS News Service 
 
675029 17-Apr-2018 
 
 
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April 17, 2018 02:03 ET (06:03 GMT)