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OFFON

STARWOOD EUROPEAN REAL ESTATE FINANCE LTD.

(SWEF)
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SWEF : Quarterly Portfolio Update -3-

10/22/2021 | 05:17am EST

On the hotel transactions side we mentioned in previous factsheets that we expected numerous hotel transactions to come through later in the year. Since this time last year Starwood's own equity funds in Europe have acquired or committed to four new hotel purchases in the UK, Spain and Denmark including two in the third quarter of 2021. In the US at the beginning of the summer funds managed by Starwood and Blackstone completed the acquisition of Extended Stay America in a transaction valued at approximately USD6 billion. We had previously commented that markets tended to open first with smaller single asset transactions and then migrate to larger transactions and portfolios as markets settled. We are now seeing that trend in the market with larger portfolios transacting which boost the overall transaction volume. One example this month in the UK is Henderson Park have acquired a portfolio of twelve Hilton hotels with more than 2,400 rooms in a transaction reported to be worth GBP555 million. We are aware of a number of similar sized transactions in the market now that will likely close late 2021 or early in 2022. The investment market is very healthy and liquid for hotel assets across Europe.

Looking forward to the fourth quarter and beyond we anticipate a strong level of transactional activity to continue. The strength and potential of "beds, meds and sheds" have been strong themes and we continue to see interesting value add lending opportunities in these sectors and others for the Company.

Expected Credit Losses

All loans within the portfolio are classified and measured at amortised cost less impairment. The Group closely monitors the loans in the portfolio for deterioration in credit risk. There are some loans for which credit risk has increased since initial recognition. However, we have considered a number of scenarios and do not currently expect to realise a loss in the event of a default. Therefore, no credit losses have been recognised.

This assessment has been made, despite the continued pressure on the hospitality and retail markets from Covid-19, on the basis of information in our possession at the date of reporting, our assessment of the risks of each loan and certain estimates and judgements around future performance of the assets. The position on any potential ECLs on the Spanish retail assets in particular continues to be closely monitored and analysed, and we have sought input, analysis and commentary from Spanish market advisers in this regard, to supplement our own information. We have received independent, external valuations of the underlying assets secured against the Spanish loans during the current year. This information did not change our analysis on the Spanish loans and we note that valuation headroom remains on these loans. The updated valuations are reflected in the sector and portfolio LTV tables presented in this factsheet.

Investment Portfolio at 30 September 2021

As at 30 September 2021, the Group had 18 investments and commitments of GBP419.1 million as follows:

                             Sterling equivalent       Sterling equivalent unfunded        Sterling Total (Drawn and 
                             balance (1)               commitment (1)                      Unfunded) 
Hospitals, UK                GBP25.0 m                                                       GBP25.0 m 
Hotel & Residential, UK      GBP49.9 m                                                       GBP49.9 m 
Office, Scotland             GBP5.0 m                                                        GBP5.0 m 
Office, London               GBP13.7 m                   GBP6.8 m                              GBP20.5 m 
Hotel, Oxford                GBP20.1 m                   GBP2.9 m                              GBP23.0 m 
Hotel, Scotland              GBP41.4 m                   GBP1.2 m                              GBP42.6 m 
Hotel, Berwick               GBP14.1 m                   GBP0.9 m                              GBP15.0 m 
Life Science, UK             GBP19.5 m                   GBP7.1 m                              GBP26.6 m 
Hotel and Office, Northern   GBP13.5 m                                                       GBP13.5 m 
Ireland 
Logistics Portfolio, UK (2)  GBP0.6 m                                                        GBP0.6 m 
Total Sterling Loans         GBP202.8 m                  GBP18.9 m                             GBP221.7 m 
Three Shopping Centres,      GBP31.0 m                                                       GBP31.0 m 
Spain 
Shopping Centre , Spain      GBP14.7 m                                                       GBP14.7 m 
Hotel, Dublin                GBP51.8 m                                                       GBP51.8 m 
Office, Madrid, Spain        GBP16.0 m                   GBP0.9 m                              GBP16.9 m 
Mixed Portfolio, Europe      GBP24.1 m                                                       GBP24.1 m 
Mixed Use, Dublin            GBP4.6 m                    GBP8.2 m                              GBP12.8 m 
Office Portfolio, Spain      GBP13.4 m                   GBP0.2 m                              GBP13.6 m 
Office Portfolio, Ireland    GBP27.4 m                                                       GBP27.4 m 
Logistics Portfolio, Germany GBP5.1 m                                                        GBP5.1 m 
(2) 
Total Euro Loans             GBP188.1 m                  GBP9.3 m                              GBP197.4 m 
Total Portfolio              GBP390.9 m                  GBP28.2 m                             GBP419.1 m 1. Euro balances translated to sterling at period end exchange rate. 2. Logistics Portfolio, UK and Logistics Portfolio, Germany is one single loan agreement with sterling andEuro tranches. 

Loan to Value

On the basis of the methodology and valuation processes previously disclosed (see 30 June 2020 factsheet) and including new valuations received, at 30 September 2021 the Group has an average last GBP LTV of 64.2 per cent (30 June 2021: 63.5 per cent).

The table below shows the sensitivity of the loan to value calculation for movements in the underlying property valuation and demonstrates that the Group has considerable headroom within the currently reported last LTVs.

Change in Valuation  Hospitality Retail Residential Other Total 
-25%                 84.2%       100.5% 79.5%       79.3% 84.1% 
-20%                 78.9%       94.2%  74.6%       78.3% 80.2% 
-15%                 74.3%       88.6%  70.2%       73.7% 75.5% 
-10%                 70.1%       83.7%  66.3%       69.6% 71.3% 
-5%                  66.4%       79.3%  62.8%       65.9% 67.6% 
0%                   63.1%       75.3%  59.7%       62.6% 64.2% 
5%                   60.1%       71.8%  56.8%       59.7% 61.1% 
10%                  57.4%       68.5%  54.2%       57.0% 58.3% 
15%                  54.9%       65.5%  51.9%       54.5% 55.8% 

Share Price performance

During the third quarter of 2021, the Company's shares performed well, returning 5.8 per cent on a total return basis with the share price trading between 92.8 pence and 99.4 pence and ending the quarter at 98.0 pence. As at 30 September 2021, the discount to NAV stood at 5.4% per cent, with an average discount to NAV of 7.0% per cent over the quarter, a significant improvement from the discount to NAV of 12.1 % per cent on average in the previous quarter. The Board, the Investment Manager and Adviser continue to believe that the shares represent attractive value at this level.

Note: the 30 September 2021 discount to NAV is based off the current 30 September NAV as reported in this factsheet. All average discounts to NAV are calculated as the latest cum-dividend NAV available in the market on a given day, adjusted for any dividend payments from the ex-dividend date onwards

For further information, please contact:

Apex Fund and Corporate Services (Guernsey) Limited as Company Secretary

                                  +44 (0) 203 5303 661 
Magdala Mullegadoo 
 
 
 
Starwood Capital 
Duncan MacPherson                +44 (0) 20 7016 3655 
 
Jefferies International Limited 
 
Stuart Klein 
 
Neil Winward 
                                 +44 (0) 20 7029 8000 
Gaudi Le Roux 
 

Buchanan +44 (0) 20 7466 5000

Helen Tarbet +44 (0) 07788 528143

Henry Wilson

Hannah Ratcliff

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.

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.

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ISIN:          GG00B79WC100 
Category Code: MSCM 
TIDM:          SWEF 
LEI Code:      5493004YMVUQ9Z7JGZ50 
Sequence No.:  124950 
EQS News ID:   1242678 
 
End of Announcement  EQS News Service 
=------------------------------------------------------------------------------------
 

Image link: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=show_t_gif&application_id=1242678&application_name=news

(END) Dow Jones Newswires

October 22, 2021 05:16 ET (09:16 GMT)

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Managers and Directors
Stephen Paul Smith Non-Executive Chairman
Andrew Whittaker Investment Manager
John Richard Whittle Independent Non-Executive Director
Shelagh Yvonne Mason Non Executive Director
Charlotte Denton Non Executive Director