SWEF: June 2018 Factsheet (708591)
July 30 2018 - 1:01AM
UK Regulatory
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release.
Starwood European Real Estate Finance Ltd (SWEF)
SWEF: June 2018 Factsheet
30-Jul-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.
30 July 2018
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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 June 2018 is available at:
www.starwoodeuropeanfinance.com [1]
Extracted text of the commentary is set out below:
Investment Portfolio at 30 June 2018
As at 30 June 2018, the Group had 19 investments and commitments of GBP472.1
million as follows:
Sterling equivalent Sterling equivalent
balance (1) unfunded commitment
(1)
Industrial Portfolio, GBP18.6m -
UK
Hospitals, UK GBP25.0m -
Varde Partners mixed GBP3.0 m -
portfolio, UK
Mixed use development, GBP12.3m GBP0.9m
South East UK
Regional Hotel GBP45.9m -
Portfolio, UK
Credit Linked Notes, UK GBP21.8m -
real estate
Total Sterling Loans GBP126.6m GBP0.9m
Residential Portfolio, GBP6.7m -
Dublin, Ireland
Logistics, Dublin, GBP13.0m -
Ireland
Hotel, Barcelona, Spain GBP40.7m -
School, Dublin, Ireland GBP16.7m -
Industrial Portfolio, GBP57.2m -
Central and Eastern
Europe
Three Shopping Centres, GBP31.2m GBP8.3m
Spain
Shopping Centre, Spain GBP11.1m GBP3.9m
Hotel, Dublin, Ireland GBP53.1m -
Residential, Dublin, GBP4.1m GBP3.9m
Ireland
Office, Paris, France GBP23.0m -
Industrial, Paris, GBP13.1m -
France
Student Accommodation, GBP9.4m GBP0.6m
Dublin
Hotel, Spain GBP24.0m GBP24.6m
Total Euro Loans GBP303.3m GBP41.3m
Total Portfolio GBP429.9m GBP42.2m
(1) Euro balances translated to sterling at period end exchange rates.
Dividend
On 27 July 2018 the Directors declared a dividend in respect of the second
quarter of 1.625 pence per Ordinary Share (equivalent to 6.5 pence per annum
per Ordinary Share) payable on 31 August 2018 to shareholders on the
register at 10 August 2018.
Portfolio activity
As at 30 June 2018, the average remaining maturity of the Group's loan book
was 3.1 years. The gross levered return of the invested loan portfolio is
8.2 per cent per annum.
The following portfolio activity occurred in the second quarter of 2018:
Repayment: Hotel, Channel Islands: The Group received full repayment of the
loan advanced to a Channel Islands Hotel company on 18 May 2018.
The Group also received amortisation in the quarter on other loans totalling
GBP3.5 million, some of these payments relate to scheduled amortisation but
the majority related to asset sales in line with borrowers' business plans.
New Loan: Industrial, Paris: On 4 May 2018 the Group arranged and subscribed
to a EUR14.77 million note issuance, the proceeds of which were used to
finance the acquisition of a light industrial asset in the Parisian region
of France.
The Group also advanced GBP2.2 million of proceeds to borrowers to which it
has existing outstanding commitments.
Following the new loan activity, and the GBP30.4 million of repayments and
amortisation received in the second quarter, the Group remained fully
invested at 30 June 2018 with GBP42.2 million of commitments to fund. The
Group had drawn GBP54 million on its available credit facilities of GBP114
million and had cash of GBP8.7 million for working capital purposes.
The Group made a record level of new commitments in the first half of 2018
with GBP147.5 million of new commitments made (of which GBP114.4 million was
funded in the first half of the year). Repayments were slightly below the
same period in prior years and as a result, the Group's net commitments
increased by GBP73.4 million in the first half of the year.
The table below summarises the new commitments made and repayments received
in the first six months of 2015 to 2018 and demonstrates the growth of the
portfolio.
New Commitments Repayments & Net Increase
Amortisation in
Commitments
H1 2015 GBP31.3 m GBP21.9 m GBP9.4 m
H1 2016 GBP98.9 m GBP92.1 m GBP6.8 m
H1 2017 GBP115.5 m GBP85.2 m GBP30.3 m
H1 2018 GBP147.5 m GBP74.1m GBP73.4m
In the last two financial years, new commitments have been broadly equal
between the first and second half of the year and the Group remains
optimistic that this trend is likely to continue, although the upcoming
summer months are often the most quiet in the market with more activity
likely to be seen towards the end of the year (in the normal course).
Repayments in the first half of the year were approximately 18 per cent of
loans advanced at the end of 2017. We consider this to be the normalised
level we anticipate and whilst it is always difficult to forecast potential
repayments, and some years may be significantly higher or lower (as seen in
2017), we anticipate that the second half of 2018 may see repayments at a
similar level to the first half of the year. The Group will continue to seek
to minimise cash drag from potential repayments by utilising the revolving
credit facilities available to it.
Commentary
Whilst the agreement of the terms of Brexit between the UK and the European
Union are making slow progress, the elongated uncertainties of Brexit are
less evident in the real estate markets. Appetite for London office
investment is unabated and while Chinese investors have pulled back from new
acquisitions, there are many other sources of capital attracted to the
London investment market illustrated through recent transactions such as Ho
Bee Land, a Singaporean listed company buying Ropemaker Place for GBP650
million, CK Holdings' purchase of 5 Broadgate for GBP1 billion and Korean
investors buying 20 Old Bailey and Cannon Street House. The occupational
market has also been strong with Savills reporting this month that the
City's 12 month rolling take-up hit its highest level since September 2015
at 7.6 m square feet, which is also 25 per cent up on this point last year.
Student accommodation, residential private rented sector, light industrial,
logistics and hospitality markets all remain robust with good levels of
investor interest. The outlier in the UK is retail where there are a number
of headwinds and since the beginning of the year there has been a constant
stream of bad news on retail occupiers scaling back, Creditor Voluntary
Arrangements and tenant insolvencies. While some areas of retail will do
better than others from a leasing point of view, it is likely that the
negative sentiment will still affect the values of UK retail assets across
the board. As a result we are seeing increased interest from borrowers who
had been looking to sell last year but are now considering refinancing as an
alternative or a necessity as they begin to come up against financing
maturities. We are cautious around this trend and are likely to watch and
wait before considering new UK retail investments. Our overall retail
exposure in the UK is 1.5 per cent which is derived from smaller
contributions of mixed use assets or portfolios.
In the debt market there has been a resurgence in European CMBS issuance.
With a small number of exceptions, over the past few years CMBS pricing had
been at a level where bank and insurance companies generally would beat the
CMBS market on pricing. However, since the end of 2017 CMBS pricing has
lowered in line with other forms of fixed income. European fixed income
yields have been driven lower by ECB bond buying and as a result CMBS
pricing has come into lower levels which makes it competitive. A good
example of the pricing arbitrage is the GBP427 million Ribbon hotel portfolio
CMBS which priced at a blended margin of around 160bps at 65 per cent LTV.
This represents pricing about 100bps
inside of where the bank market would typically be for this loan. New CMBS
issuance has created a lot of interest and headlines but to put it in
context volumes at less than EUR2 billion in only five issuances so far this
year are still quite small compared to the overall EUR1 trillion sized
European commercial real estate loan market.
While these CMBS financings have been in sectors that the company has been
active in such as hospitality and light industrial, we do not believe that
CMBS is currently changing the competitive landscape for the investments the
Group is making. In order to be considered for a CMBS structure, the key
elements are for the loan to have sufficient scale, to spread the cost of
issuance and create sufficiently large note sizes, and for the underlying
collateral to have sufficient in place yield and granularity of income to
obtain the required ratings analysis. When looking at whether CMBS would
have been suitable as an alternative for previous investments made by the
Group we concluded that CMBS would have had limited success for a variety of
reasons. For example, on the light industrial side for our Danish and CEE
loans both the size of the loan and the jurisdictions resulted in a CMBS
structure not being feasible. For our Dutch portfolio both the loan size and
the multiple closings required for the borrowers needs would have not been
suitable for CMBS issuance.
In the subordinated debt space, we continue to see that widely marketed
mezzanine debt on income producing assets is being priced lower than our
return requirements. According to Debtwire recent examples include a Libor+
550bps mezzanine for the Enigma student housing portfolio and Libor+625bps
for the Ribbon hotel portfolio. We continue to see investment opportunities
in mezzanine financings however we will have to work hard to successfully
originate this type of debt by finding ways of adding value for borrowers
that creates an acceptable risk / reward return profile for the Group which
is in line with the Group's stated return targets.
Share Price / NAV at 30 June 2018
Share price (p) 108.0
NAV (p) 102.0
Premium/ (discount) 5.0%
Dividend yield 6.00%
Market cap GBP405.0 m
Key Portfolio Statistics at 30 June 2018
Number of investments 19
Percentage of currently invested portfolio in floating 92.0%
rate loans
Invested Loan Portfolio unlevered annualised total 7.4%
return (1)
Invested Loan Portfolio levered annualised total 8.2%
return (2)
Weighted average portfolio LTV - to Group first GBP (3) 13.3%
Weighted average portfolio LTV - to Group last GBP (3) 64.9%
Average loan term (stated maturity at inception) 4.1 years
Average remaining loan term 3.1 years
Net Asset Value GBP382.5m
Amount drawn under Revolving Credit Facilities -GBP54.0m
(excluding accrued interest)
Loans advanced GBP412.1m
Financial assets held at fair value (including accrued GBP21.9m
income)
Cash GBP8.7m
Other net assets/ (liabilities) (including hedges) -GBP6.2m
Origination Fees - current quarter GBP0.1m
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 15.3 3.6
1 to 2 years 112.7 26.2
2 to 3 years 133.7 31.1
3 to 5 years 143.2 33.3
5 to 10 years 25.0 5.8
*excludes any permitted extensions. Note that borrowers may elect to repay
loans before contractual maturity.
Country % of invested assets
UK - Regional England 26.6%
Spain 24.9%
Republic of Ireland 23.9%
Hungary 10.8%
France 8.4%
UK - Central London 2.9%
Czech Republic 2.5%
Sector % of invested assets
Hospitality 37.3%
Light Industrial 20.8%
Retail 11.4%
Office 7.9%
Healthcare 5.8%
Education 3.9%
Logistics 3.4%
Residential for rent 3.2%
Residential for sale 2.8%
Student Accommodation 2.2%
Other 1.3%
Loan type % of invested assets
Whole loans 75.1%
Mezzanine 19.8%
Other debt instruments 5.1%
Loan type % of invested assets*
Sterling 29.5%
Euro 70.5%
*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.: 5794
EQS News ID: 708591
End of Announcement EQS News Service
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