SWEF : Quarterly Factsheet Publication

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 Starwood European Real Estate Finance Ltd (SWEF) 
SWEF : Quarterly Factsheet Publication 
 
20-Oct-2017 / 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. 
 
20 October 2017 
 
 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 third quarter ended on 30 September 2017 is available 
           at: 
 
           www.starwoodeuropeanfinance.com [1] 
 
           Extracted text of the commentary is set out below: 
 
           "Investment Portfolio at 30 September 2017 
 
    As at 30 September 2017, the Group had 13 investments and commitments of 
            GBP364.5 million as follows: 
 
            Transaction Sterling equivalent Sterling equivalent 
                                balance (1) unfunded commitment 
                                                            (1) 
   Centre Point, London              GBP45.0m                   - 
  Industrial Portfolio,              GBP25.5m                   - 
                     UK 
          Hospitals, UK              GBP25.0m                   - 
 Hotel, Channel Islands              GBP26.9m                   - 
   Varde Partners mixed              GBP12.0m                   - 
          portfolio, UK 
 Mixed use development,               GBP9.8m               GBP3.4m 
          South East UK 
  Regional Budget Hotel              GBP75.0m                   - 
          Portfolio, UK 
   Total Sterling Loans             GBP219.2m               GBP3.4m 
 Residential Portfolio,               GBP5.3m                   - 
          Cork, Ireland 
 Residential Portfolio,               GBP6.8m                   - 
        Dublin, Ireland 
     Logistics, Dublin,              GBP13.0m                   - 
                Ireland 
Hotel, Barcelona, Spain              GBP40.3m                   - 
School, Dublin, Ireland              GBP16.5m                   - 
  Industrial Portfolio,              GBP60.0m                   - 
         Eastern Europe 
       Total Euro Loans             GBP141.9m                   - 
        Total Portfolio             GBP361.1m               GBP3.4m 
 
(1) Euro balances translated to sterling at period end exchange rates. 
 
           Dividend 
 
     On 19 October 2017 the Directors declared a dividend of 1.625 pence per 
 Ordinary Share (annualised 6.5 pence per Ordinary Share) in relation to the 
           third quarter of 2017. 
 
           Portfolio activity 
 
 As at 30 September 2017, the average maturity of the Group's GBP361.1 million 
loan book was 3 years. The Group had GBP23.7 million of cash with GBP3.4 million 
        of commitments to fund. The gross annualised unlevered return of the 
           invested loan portfolio is 7.9 per cent. 
 
     The following portfolio activity occurred in the third quarter of 2017: 
 
  Office, Netherlands: On 18 July 2017 the Group received EUR13.8 million as 
       full repayment of the Office, Netherlands loan following a successful 
    refinancing of the property by the owner. The Group used the proceeds to 
     repay GBP7.5 million drawn on the revolving credit facility at that time. 
 
      Five Star Hotel, London: On 13 September 2017, the Group received full 
       repayment of GBP13 million of the 5 Star Hotel, London loan following a 
           successful refinancing of the property by the owner. 
 
  Following these repayments, the Group remains substantially fully invested 
   and the Investment Adviser is reviewing multiple lending opportunities to 
           deploy the Group's uncommitted resources. 
 
           Credit facilities available to the Group 
 
    The Group is expecting to enter into an additional GBP64 million five-year 
         loan facility in the coming weeks which falls under the 20 per cent 
 longer-term leverage approved by the shareholders at the 2016 Extraordinary 
     General Meeting (the "New Facility"). At present the Group uses its GBP50 
    million revolving credit facility with Lloyds to manage new investments, 
    loan repayments and equity raising. Whilst this facility continues to be 
   extremely useful, the New Facility will provide additional investment and 
    operational flexibility. The longer term nature of the New Facility will 
allow the Group to flexibly apply longer-term leverage to enhance returns on 
   whole loans which would otherwise generate returns lower than the Group's 
   targets, without the cost and time requirements of syndicating an A-Note. 
Alternatively, the facility could be used to provide a backstop financing to 
 an A-Note syndication where the Group is underwriting a whole loan with the 
          intention of syndicating an A-Note, thus de-risking the associated 
   syndication market risk. The New Facility may also be used in conjunction 
  with the Lloyds facility to manage liquidity to bridge to equity raise and 
           manage repayment risk. 
 
        The Group structure was re-organised on 6 October 2017 to enable the 
     arrangement of the New Facility and, as part of the reorganisation, the 
        Group also extended the maturity of its GBP50 million revolving credit 
           facility with Lloyds to 6 October 2018. 
 
           Outlook for fourth quarter 
 
   The Company held an Extraordinary General Meeting on 29 September, and we 
 are pleased to confirm that shareholders approved the special resolution to 
permit the Company to allot new ordinary shares and to dis-apply pre-emption 
   rights in respect of up to 20 per cent of the issued share capital on the 
      date of the Extraordinary General Meeting. This takes advantage of the 
recent implementation of the Prospectus Regulation which now enables issuers 
         such as the Company (subject to obtaining the requisite Shareholder 
 authorities) to issue up to 20 per cent of the securities already listed by 
      way of such issues over 12 months without any requirement to publish a 
           prospectus (the previous limit having been 10 per cent). 
 
     This enhanced equity raising ability, together with the cash and credit 
 facilities available to the Group, gives the Group considerable capacity of 
 approximately GBP210 million to underwrite loans in the typically busy fourth 
   quarter of the year. As is typical the summer period was relatively quiet 
   with the first weeks of September setting the tone for the fourth quarter 
   activity. The Group has developed a strong pipeline of deals in execution 
  over the last six months and have secured further new opportunities during 
 September meaning the Group expects a busy finish to the year. The pipeline 
  mirrors geographical and sector themes highlighted previously with the UK, 
     Spain and Ireland generating the bulk of the pipeline and with pipeline 
           loans across a variety of asset classes including office, retail, 
           residential and hospitality. 
 
 As indicated in the last few factsheets, we continue to expect 2017 to be a 
 strong year for repayments. We have received repayments and amortisation of 
   GBP115.6 million for the nine months to the end of September. We anticipate 
further repayments in the final quarter of the year and in the first quarter 
  of 2018. We will therefore remain cautious with respect to equity issuance 
           in order to minimise cash drag from future repayments. 
 
           Market Commentary 
 
Pricing in the European commercial real estate financing market continues to 
    be relatively stable. The De Montfort University lending survey mid-year 
     report is showing slightly higher margins for all UK lending types with 
    prime financing margins up a few basis points and secondary office up by 
approximately 30 bps. The exception is in light industrial which is a sector 
 currently attracting significant investor interest, and is showing slightly 
tighter margins than in the previous period. This contrasts starkly with the 
    European corporate high yield market. The Financial Times reports record 
levels of new leveraged loan issuance of EUR85 billion in 2017 so far, being 
    the largest amount since the global financial crisis. While volumes have 
       increased, returns have fallen significantly. Bank of America Merrill 
       Lynch's euro high yield bond index has dropped to 2.3 per cent having 
           started 2016 at 6 per cent. 
 
  In the prime real estate lending space, there continues to be a supply and 
 demand imbalance with banks and insurance companies finding it difficult to 
fulfil their lending volume ambitions. This is driven by a number of factors 
      both on the supply and demand side. There is a current trend for prime 
assets bought by overseas investors to be financed with less or no leverage, 
 and there is a cheap and highly liquid bond market for corporate borrowers. 
  Examples in the bond sector this quarter include Segro and Land Securities 
   issuing new long dated bonds at attractive levels. Segro has launched and 
   priced a GBP350 million bond with a maturity of 12 years paying a coupon of 
 2.375 per cent and a GBP400 million bond with a maturity of 20 years paying a 
  coupon of 2.875 per cent being a spread of 107 bps over the reference gilt 
rate. In September Land Securities issued a GBP500 million 20 year bond paying 
 a coupon of 2.625 per cent and a GBP500 million 40 year bond, paying a coupon 
           of 2.75 per cent. 
 

   At the same time, we are seeing increased appetite for prime lending from 
    existing and new players. AXA has raised EUR1.5 billion through its 10th 
Senior Commercial real estate debt fund, taking its total debt book to EUR14 
 billion. Allianz's commercial loan book has surpassed EUR6 billion of total 
       loans, with EUR1.5 billion lent so far this year and a budget of EUR2 
           billion of new lending for 2017. We are also seeing banks looking 
        internationally to increase origination volumes, such as German bank 
Deutsche Hypo, which is planning to return to lending in Spain after leaving 
       the market in 2013, where they expect to lend EUR200 million annually 
           focussing on prime offices in Madrid and Barcelona. 
 
 With a higher level of competition there are risks that the requirements to 
 deploy capital affect discipline on risk appetite. This has been seen in an 
        increase in covenant light deals in the leveraged finance market for 
corporate borrowers, however for the most part we are not currently seeing a 
    deterioration in risk standards in the mainstream commercial real estate 
           lending market. 
 
   Political risk and its potential impact on the real estate market remains 
     one of the key areas for scrutiny with, for example, the ongoing Brexit 
     process, a German election and recent events in Catalonia. The Group is 
 maintaining particularly close scrutiny on Spain and the Catalan situation. 
   We have existing exposure through our EUR46 million Barcelona hotel whole 
loan and we have two further loans totalling EUR61 million secured by retail 
    assets in Spain (outside Catalonia) in the late stages of execution. The 
        tensions around Catalan independence are not new, however there is a 
        significantly raised level of uncertainty following the independence 
 referendum on 1 October. After a relatively muted initial reaction the IBEX 
          (the main public equity market index in Spain) and Spanish 10 year 
 government bonds have quickly reverted to levels prior to the vote. Capital 
          Economics' view is that there will be limited impact economically, 
      predicting both that a negotiated outcome is likely and that even in a 
prolonged period of uncertainty the economic impact would be 0.5 per cent on 
    Catalan GDP, which would have only a 0.1 per cent impact on Spanish GDP. 
 While the market has shrugged off recent events, the Group is more cautious 
    and will prioritise opportunities that are relatively insulated from the 
      ongoing uncertainty. During this time the Group will continue to track 
      political developments while closely monitoring the Spanish market for 
         particularly compelling risk adjusted opportunities that may arise. 
 
Share Price / NAV at 30 September 2017 
 
Share price (p)     110.50 
NAV (p)             101.45 
Premium/ (discount) 8.9% 
Dividend yield      5.9% 
Market cap          GBP414.4 m 
 
Key Portfolio Statistics at 30 September 2017 
 
Number of investments                                         13 
Percentage of currently invested portfolio in floating     74.6% 
rate loans 
Invested Loan Portfolio annualised total return (1)         7.9% 
Weighted average portfolio LTV - to Group first GBP (2)      17.2% 
Weighted average portfolio LTV - to Group last GBP (2)       62.6% 
Average loan term (stated maturity at inception)       4.4 years 
Average remaining loan term                            3.0 years 
Net Asset Value                                          GBP380.5m 
Amount drawn under Revolving Credit Facility               GBP0.0m 
(excluding accrued interest) 
Portfolio value (including accrued income)               GBP363.9m 
Cash                                                      GBP23.7m 
Other net assets/ (liabilities) (including hedges)        -GBP7.1m 
 
      (1) Calculated on amounts outstanding at the reporting date, excluding 
   undrawn commitments, and assuming all drawn loans are outstanding for the 
  full contractual term. Eleven 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 and cash un-invested. The calculation excludes the 
           origination fee payable to the Investment Manager. 
 
(2) LTV to Group last GBP means the percentage which the total loan commitment 
      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 loan commitments (when aggregated with any other 
     indebtedness ranking senior to it). For Centre Point, the Irish School, 
        Dublin and the mixed use development, south east UK, 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                45.0                12.5 
            1 to 2 years                47.3                13.1 
            2 to 3 years                88.6                24.5 
            3 to 5 years               155.2                43.0 
           5 to 10 years                25.0                 6.9 
 
  *excludes any permitted extensions. Note that borrowers may elect to repay 
           loans before contractual maturity. 
 
              Country % of invested assets 
UK - Regional England                 40.8 
  UK - Central London                 12.5 
              Hungary                 13.6 
                Spain                 11.2 
  Republic of Ireland                 11.5 
      Channel Islands                  7.4 
       Czech Republic                  3.0 
 
              Sector % of invested assets 
         Hospitality                 39.9 
    Light Industrial                 24.2 
Residential for sale                 11.8 
          Healthcare                  6.9 
              Retail                  4.8 
           Education                  4.6 
              Office                  0.7 
           Logistics                  3.6 
Residential for rent                  3.3 
               Other                  0.1 
 
  Loan type % of invested assets 
Whole loans                 69.0 
  Mezzanine                 31.0 
 
Loan type % of invested assets* 
 Sterling                  60.7 
     Euro                  39.3 
 
*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: 
 
Duncan MacPherson 
 
Starwood Capital 
 
T [phone] 
 
Robert Peel 
 
Fidante Capital 
 
T: [phone] 
 
Notes: 
 
      Starwood European Real Estate Finance Limited is an investment company 
   listed on 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.:  4761 
 
End of Announcement EQS News Service 
 
620641 20-Oct-2017 
 
 
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October 20, 2017 02:04 ET (06:04 GMT)