SWEF: September 2018 Factsheet (736603)

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 Starwood European Real Estate Finance Ltd (SWEF) 
SWEF: September 2018 Factsheet 
 
24-Oct-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. 
 
24 October 2018 
 
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       OR INDIRECTLY, TO U.S. PERSONS OR IN, INTO OR FROM THE UNITED STATES, 
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           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 second quarter ended on 30 September 2018 is available 
           at: 
 
           www.starwoodeuropeanfinance.com [1] 
 
           Extracted text of the commentary is set out below: 
 
           Investment Portfolio at 30 September 2018 
 
    As at 30 September 2018, the Group had 19 investments and commitments of 
            GBP460.8 million as follows: 
 
                        Sterling equivalent Sterling equivalent 
                                balance (1) unfunded commitment 
                                                            (1) 
  Industrial Portfolio,              GBP17.6m                   - 
                     UK 
          Hospitals, UK              GBP25.0m                   - 
   Varde Partners mixed               GBP2.2m                   - 
          portfolio, UK 
 Mixed use development,              GBP12.6m               GBP0.6m 
          South East UK 
         Regional Hotel              GBP45.9m                   - 
          Portfolio, UK 
Credit Linked Notes, UK              GBP21.8m                   - 
            real estate 
   Total Sterling Loans             GBP125.1m               GBP0.6m 
 Residential Portfolio,               GBP6.7m                   - 
        Dublin, Ireland 
     Logistics, Dublin,              GBP13.0m                   - 
                Ireland 
Hotel, Barcelona, Spain              GBP41.0m                   - 
School, Dublin, Ireland              GBP16.8m                   - 
  Industrial Portfolio,              GBP45.9m                   - 
    Central and Eastern 
                 Europe 
Three Shopping Centres,              GBP31.4m               GBP8.3m 
                  Spain 
 Shopping Centre, Spain              GBP12.9m               GBP2.3m 
 Hotel, Dublin, Ireland              GBP53.4m                   - 
   Residential, Dublin,               GBP4.7m               GBP3.3m 
                Ireland 
  Office, Paris, France              GBP23.2m                   - 
     Industrial, Paris,              GBP13.2m                   - 
                 France 
 Student Accommodation,               GBP9.4m               GBP0.6m 
                 Dublin 
           Hotel, Spain              GBP24.2m              GBP24.8m 
       Total Euro Loans             GBP295.8m              GBP39.3m 
        Total Portfolio             GBP420.9m              GBP39.9m 
 
(1) Euro balances translated to sterling at period end exchange rates. 
 
           Dividend 
 
On 23 October 2018 the Directors declared a dividend in respect of the third 
quarter of 1.625 pence per Ordinary Share (equivalent to 6.5 pence per annum 
      per Ordinary Share) payable on 16 November 2018 to shareholders on the 
           register at 2 November 2018. 
 
           Portfolio activity 
 
 As at 30 September 2018, the average remaining maturity of the Group's loan 
 book was 2.9 years. The gross levered return of the invested loan portfolio 
  is 7.8 per cent per annum which has fallen from 8.2 per cent at the end of 
 the second quarter. However, the unlevered return has only moved marginally 
down quarter on quarter (from 7.4 per cent to 7.3 per cent). The fall in the 
         levered return is primarily due to the repayment of GBP9.9 million of 
 revolving credit facilities in the quarter due to amortisation received and 
we would expect the levered return to increase when funds are redrawn on the 
           Group's credit facilities in the future. 
 
  The Group's revolving credit facilities are an important tool in liquidity 
management, providing flexibility to finance new investments and manage loan 
          repayments which enables the Group to efficiently manage its cash, 
     investment portfolio and fundraising needs. The GBP64 million longer term 
Morgan Stanley facility (to December 2022) allows for long term financing of 
whole loans instead of pursuing a syndication strategy (although it can also 
 be used as a bridge to syndication) and a temporary drop in levered returns 
  is anticipated when repayments to revolving credit facilities are made due 
           to this longer term financing strategy. 
 
     The shorter term GBP50 million revolving credit facility is in place with 
   Lloyds Bank plc. The facility was due to expire on 8 October 2018 and has 
           been successfully extended to 8 May 2020. 
 
        During the quarter the Group received GBP13.5 million of amortisation, 
    primarily following asset sales on the Industrial Portfolio, Central and 
      Eastern Europe. This represents approximately 3.5 per cent of the 2017 
  year-end book value and brings the year to date repayment and amortisation 
  to approximately 22 per cent of the 2017 year-end book value of the loans. 
   The Group also advanced GBP2.5 million of proceeds to borrowers to which it 
           has existing outstanding commitments during the quarter. 
 
The Group remained fully invested at 30 September 2018 with GBP39.9 million of 
      commitments to fund over the next two years. The Group had drawn GBP44.7 
  million on its available credit facilities of GBP114 million and had cash of 
            GBP10.0 million for working capital purposes. 
 
           Outlook for fourth quarter 
 
          The Group has uncommitted capacity of approximately GBP79 million to 
   underwrite loans in the typically busy fourth quarter of the year and the 
Investment Adviser is reviewing multiple lending opportunities to deploy the 
 Group's uncommitted resources. 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. 
 
  The Group has received GBP87.6 million of repayments and amortisation to the 
    end of the third quarter (approximately 22 per cent of the 2017 year end 
 loan book as noted above). With an average loan term to repayment of around 
      2.5 years the Group expects the long term average repayment rate to be 
 around 40 per cent per annum and expects the fourth quarter to be active in 
        terms of repayments and originations. Whilst at this stage we do not 
envisage 2018 being significantly higher than the expected long term average 
    repayment rate it is always possible that one of the larger loans repays 
    earlier than expected if the borrower executes or changes their business 
  plan and this could lead to a higher repayment rate (as was experienced in 
  2017). When this occurs, loans will often (but not always) have an element 
   of prepayment protection, which gives the Group time to redeploy the cash 
           without experiencing cash drag. 
 
           Market Commentary 
 
Expo Real is one of the two big pan European commercial real estate 
conferences taking place in Munich at the beginning of October each year. 
Our takeaways from the conference include that it seemed even busier than 
usual this year and that the banks we interviewed were already reporting 
that they were expecting a very busy fourth quarter with limited capacity to 
take on new mandates for 2018. This year-end congestion has historically led 
to opportunities for more nimble lenders. 
 
The markets are trying to price in a number of macro considerations 
including risks relating to global political situations, a rising interest 
rate environment, trade tensions and Brexit. As a result we have seen 
increased volatility in the public markets. Of particular note is the rise 
in the Cboe Volatility Index which measures implied volatility in the 
Standard &Poor's 500 index and which has almost doubled the first two weeks 
of October. We are also keenly following how European government bond yields 
react as quantitative easing is pulled back from the market and the market 
reprices the relative sovereign risk. Italian bonds broke away from the pack 
of other European sovereign bonds in the second quarter of this year and the 
trend higher has continued with the spread to German 10 year bond having 
doubled from its average over the last couple of years to over 3 per cent. 
 
Focusing on the UK, while Brexit dominates political and journalistic debate 
and there are clearly risks around Brexit for commercial real estate, the 
City office market statistics show investor and tenant appetite have not 
reflected this. According to the Savills City Office Market Watch report 
City Office metrics are healthy across all the board. Total take-up for 2018 
year to date to the end of August is 4.3 million square feet, which is 12 
per cent up on the 10-year average. The average grade A rent in the City is 
up on last year by 1.5 per cent and the vacancy rate of 5.4 per cent, is 
down on this point last year by 0.4 per cent, and down on the long term 
average by 1.2 per cent. Demand is diverse with Insurance and Financial 
Services contributing only 19 per cent of the total, with Tech & Media 
accounting for 16 per cent and public sector 15 per cent. The trend for 
growth in serviced office continues with 12 per cent of total take-up, and 

with a number of further large serviced office deals currently under-offer. 
Savills are expecting to see a very active last quarter as total space 
under-offer rose to 2.9 million square feet, which is up on the long-term 
average by 123 per cent, and the highest amount under-offer at the end of a 
month since their records began and that total demand rose at the end of 
August reaching 10 million square feet of known requirements for the City 
and Central London, which is up on the long-term average by 14 per cent, and 
the highest amount since August 2016. 
 
The investment market and financing markets are also continuing to see large 
transactions including Korea's National Pension Service's GBP1.16 billion 
purchase of Plumtree Court and China's CK Asset Holdings' GBP1 billion 
acquisition of UBS's UK headquarters. According to Knight Frank in the first 
half of 2018, GBP5.6 billion of international capital was invested in the 
London commercial real estate market. Hong Kong was second with GBP5 billion 
and Paris third with GBP1.9 billion. On the lending side we see diverse 
sources of financings by both type and geography of lender with some notable 
large financings that illustrate this diversity of lenders including the 
GBP650 million refinancing of the Citi Tower at Canary Wharf by Société 
Général, St Katherine's Docks being refinanced with GBP270 million of senior 
debt by Allianz and First Abu Dhabi Bank refinancing the 4 Seasons on Park 
Lane and Hampshire. 
 
In other areas of the UK market we have seen some areas of distress, mostly 
notably in the retail sector where both equity and debt liquidity has dried 
up in recent months as investors and lenders try to evaluate where rental 
levels and demand will stabilise and with secondary assets hit particularly 
hard. Urban logistics have been the beneficiary on the other side of this 
coin as investors bid to increasingly low yields in the hope of rental 
growth as a result of increased demand. We have also seen some thinly 
capitalised developers where cost and time overruns are causing distress. 
 
The Company's approach remains unchanged with the goal to target areas where 
we can provide lending solutions to borrowers to facilitate their business 
plans while finding a good risk adjusted returns. We focus on evaluating and 
mitigating risk through robust structures and a detailed real estate 
underwriting with an emphasis on the stabilised debt yield of the collateral 
we lend against. As we have highlighted earlier in the year, we continue to 
expect to originate our highest proportion of new loans in the UK, Ireland 
and Spain with an opportunistic approach to other geographies. 
 
Share Price / NAV at 30 September 2018 
 
Share price (p)     110.0 
NAV (p)             102.0 
Premium/ (discount) 7.0% 
Dividend yield      5.9% 
Market cap          GBP412.5 m 
 
Key Portfolio Statistics at 30 September 2018 
 
Number of investments                                         19 
Percentage of currently invested portfolio in floating     91.8% 
rate loans 
Invested Loan Portfolio unlevered annualised total          7.3% 
return (1) 
Invested Loan Portfolio levered annualised total            7.8% 
return (2) 
Weighted average portfolio LTV - to Group first GBP (3)      13.7% 
Weighted average portfolio LTV - to Group last GBP (3)       64.0% 
Average loan term (stated maturity at inception)       4.1 years 
Average remaining loan term                            2.9 years 
Net Asset Value                                          GBP382.7m 
Amount drawn under Revolving Credit Facilities           -GBP44.7m 
(excluding accrued interest) 
Loans advanced                                           GBP403.0m 
Financial assets held at fair value (including accrued    GBP21.9m 
income) 
Cash                                                      GBP10.0m 
Other net assets/ (liabilities) (including hedges)        -GBP7.5m 
Origination Fees - current quarter                         GBP0.0m 
Origination Fees - last 12 months                          GBP2.2m 
Management Fees - current quarter                          GBP0.7m 
Management Fees - last 12 months                           GBP2.8m 
 
          (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. 17 
 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                37.1                 8.8 
            1 to 2 years                91.7                21.8 
            2 to 3 years               123.1                29.2 
            3 to 5 years               144.0                34.2 
           5 to 10 years                25.0                 5.9 
 
  *excludes any permitted extensions. Note that borrowers may elect to repay 
           loans before contractual maturity. 
 
              Country % of invested assets 
UK - Regional England                26.7% 
                Spain                26.0% 
  Republic of Ireland                24.7% 
              Hungary                 8.9% 
               France                 8.6% 
  UK - Central London                 3.0% 
       Czech Republic                 2.1% 
 
               Sector % of invested assets 
          Hospitality                38.3% 
     Light Industrial                18.3% 
               Retail                12.0% 
               Office                 8.1% 
           Healthcare                 5.9% 
            Education                 4.0% 
 Residential for rent                 3.5% 
            Logistics                 3.4% 
 Residential for sale                 2.9% 
Student Accommodation                 2.2% 
                Other                 1.4% 
 
             Loan type % of invested assets 
           Whole loans                74.4% 
             Mezzanine                20.4% 
Other debt instruments                 5.2% 
 
Loan type % of invested assets* 
 Sterling                 29.7% 
     Euro                 70.3% 
 
*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: 
 
Ipes (Guernsey) Limited as Company Secretary - 01481 735810 
 
           Sarah Newton 
 
           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: MSCM 
TIDM:          SWEF 
LEI Code:      5493004YMVUQ9Z7JGZ50 
Sequence No.:  6292 
EQS News ID:   736603 
 
End of Announcement EQS News Service 
 
 
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October 24, 2018 02:07 ET (06:07 GMT)