Starwood European Real Estate Finance Ltd (SWEF) SWEF: Quarterly Portfolio Update 23-Jul-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. =---------------------------------------------------------------------------------------------------------------------- 23 July 2021 Starwood European Real Estate Finance Limited Quarterly Portfolio Update 12.8 per cent Share Price Total Return During Q2; Resilient Performance from Robust Portfolio Annual dividend yield of 5.9 per cent, paid quarterly and expected to be fully covered by earnings Starwood European Real Estate Finance Limited ("SEREF" 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 June 2021. Highlights ? Income stability - all loan interest and scheduled amortisation payments paid in full and on time ? Strong cash generation - the portfolio continues to support annual dividend payments of 5.5 pence, paid quarterly, and generates an annual dividend yield of 5.9 per cent on the share price as at 30 June 2021 ? Portfolio robust - despite pandemic-related disruption, the portfolio continues to perform in line with expectations ? Borrowers remain adequately capitalised and are expected to continue to pay loan interest and capital repayments in line with contractual obligations ? On 22 April 2021 the Group announced that it had closed a GBP26.6 million floating rate whole loan secured by a portfolio of four UK life science properties ? On 21 July 2021 the Group announced that it had closed a GBP13.5 million floating rate whole loan secured by a portfolio of a hotel and office complex in Northern Ireland ? 12.8 per cent - Share price total return during quarter ended 30 June 2021 ? 46.5 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 was established Quote from the Chair, Stephen Smith "We are pleased to see that, as expected, the portfolio has continued to perform strongly and in line with expectations, with no disruption to loan interests and capital repayments despite the turmoil caused by Covid-19. This performance reflects the high quality of our portfolio assets and the counterparties to which we lend. Our Investment Manager's expertise in originating, executing and managing a diverse portfolio of high quality real estate debt, backed by the scale and networks of Starwood Capital Group means that we can maintain an active pipeline of highly attractive opportunities to choose from. We are delighted to reiterate the annual dividend target of 5.5 pence, a yield of 5.9 per cent on the quarter closing share price. While the discount has narrowed in recent weeks the Board, the Investment Manager and Investment Adviser continue to believe that the shares represent very attractive value at the current share price." The factsheet for the period is available at: www.starwoodeuropeanfinance.com Share Price / NAV at 30 June 2021 Share price (p) 94.0 NAV (p) 103.6 Discount 9.3% Dividend yield 5.9% Market cap GBP384m
Key Portfolio Statistics at 30 June 2021
Number of investments 18 Percentage of currently invested portfolio in floating rate loans 78.3% Invested Loan Portfolio unlevered annualised total return (1) 6.6% Portfolio levered annualised total return (2) 6.8% Weighted average portfolio LTV - to Group first GBP (3) 18.0% Weighted average portfolio LTV - to Group last GBP (3) 63.5% Average loan term (based on current contractual maturity) 4.7 years Average remaining loan term 2.2 years Net Asset Value GBP423.7m Amount drawn under Revolving Credit Facilities (including accrued interest) (GBP11.0m) Loans advanced (including accrued interest) GBP420.8m Cash GBP1.4m Other net assets (including hedges) GBP12.5m Remaining years to contractual maturity* Value of loans (GBPm) % of invested portfolio 0 to 1 years 83.5 20.0% 1 to 2 years 163.3 39.0% 2 to 3 years 29.1 7.0% 3 to 5 years 142.6 34.1%
*excludes any permitted extensions. Note that borrowers may elect to repay loans before contractual maturity.
Country % of invested assets UK 43.3% Spain 29.1% Republic of Ireland 20.5% Netherlands 3.4% Germany 2.7% Finland 1.0% Sector % of invested assets Hospitality 40.4% Office 22.2% Retail 12.7% Residential 11.2% Healthcare 6.0% Life Sciences 4.7% Light Industrial 1.3% Logistics 1.3% Other 0.2% Loan type % of invested assets Whole loans 62.3% Mezzanine 37.7% Currency % of invested assets* Sterling 43.3% Euro 56.7%
*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.
New Loans
On 22 April 2021 the Group announced that it had closed a GBP26.6 million floating rate whole loan secured by a portfolio of four properties. The properties consist of laboratory and office spaces let to a diverse range of life science occupiers in the UK. The financing has been provided in the form of an initial advance along with a smaller capex facility to support the borrower's value-enhancing capex initiatives. The loan term is 4 years, and the Group expects to earn an attractive risk-adjusted return in line with its stated investment strategy.
On 21 July 2021 the Group announced that it had closed a GBP13.5 million floating rate whole loan secured by a portfolio of 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.
Dividend
On 23 July 2021, the Directors declared a dividend in respect of the first 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 which should be fully covered by earnings over the year whilst ensuring the Group maintains strong credit discipline. The Company maintains a modest dividend reserve which can be utilised if required.
Portfolio Update
Interest & Amortisation Payments
All loan interest and scheduled amortisation payments up to the date of this factsheet have been paid in full and on time. This includes loans in sectors that have been most impacted by the pandemic, namely, hospitality and retail assets, where borrowers continue to remain adequately capitalised as previously reported.
Loan to Value
The Group's weighted average current loan to value is 63.5 per cent. This is measured against RICS red book standard valuation reports instructed independently of borrowers and are carried out by leading global property consultancy firms such as Savills, CBRE, JLL and Colliers. The weighted average aging of the date of these formal valuation reports is under one year (at 0.8 years). This means that on average across the portfolio, the loan to values are being marked against values that have been updated recently and since the onset of the pandemic. This gives further comfort around the robustness of the Group's position, with very significant equity cushions against the average loan basis.
Key updates are outlined below:
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