par Starwood European Real Estate Finance Ltd (isin : GG00B79WC100)
SWEF: Half Yearly Report 30 June 2024
Starwood European Real Estate Finance Ltd (SWEF) Starwood European Real Estate Finance Limited Half Year Results for the Period Ended 30 June 2024 Orderly Realisation Process On Track Starwood European Real Estate Finance Limited (the “Company”) and its subsidiaries (“SEREF” or the “Group”), a leading investor originating, executing and managing a diverse portfolio of high quality real estate debt investments in the UK and Europe, announces Half Year Results for the six months ended 30 June 2024. Following the approval of the Company’s new investment objective and policy as recommended to shareholders by the Board at the Company’s EGM on 27 January 2023, the Company is pursuing a strategy of orderly realisation and the return of capital to shareholders. Highlights for the period, six months ended 30 June 2024 • Positive realisation progress - during the half year:
• All assets are carefully monitored for changes in their risk profile - during the half year:
• The average remaining loan term of the portfolio is 1.5 years. • Strong cash generation - the portfolio continues to support annual dividend payments of 5.5 pence per Ordinary Share, paid quarterly, and generates an annual dividend yield of 5.9 per cent on the share price as at 30 June 2024. • Regular and consistent dividend - the Company continues to pay regular and consistent dividends, in line with its prevailing target. • Inflation protection - 85 per cent of the portfolio is contracted at floating interest rates (with floors). • Robust portfolio - the loan book is performing broadly in line with expectations with its defensive qualities reflected in the Group’s continued NAV stability. • Significant equity cushion - the weighted average Loan to Value for the portfolio as at 30 June 2024 is 58 per cent. • NAV per share of 104.92p – as at 30 June 2024 – representing a discount of 11.4 per cent, with an average discount to NAV of 10.5 per cent over the half year. The Board, the Investment Manager and Adviser continue to believe that the shares represent attractive value at this level.
In line with the new strategic direction of the Group (i.e. the orderly realisation and return of capital to shareholders) there have been no new commitments made in the six months to 30 June 2024. During the six months to 30 June 2024, the Group funded £8.8 million in relation to cash loan commitments made in prior years which were unfunded. In addition the Group capitalised £0.6 million of interest on one loan in line with the facility agreement. As anticipated the Group’s NAV has once again remained stable over the first half of the year demonstrating the highly resilient credentials of the asset class that contributes to its success as a reliable source of alternative income. We do not expect to see significant movements in NAV as the Group’s loans are held at amortised cost, Euro exposures are hedged and credit risk is proactively managed. The Group continues to closely monitor its loan exposures, underlying collateral performance and repayments.
John Whittle, Chairman of the Company commented: “We are pleased to report a robust performance during the half year. “Following approval of the Company’s new investment objective and policy in early 2023, SEREF is pursuing a strategy of orderly realisation. During the half year to 30 June 2024, a total of £102.1 million, 38.9 per cent of the Group’s 31 December 2023 total funded loan portfolio, has been repaid across five investments. “In 2024 to date the Company has returned £125.0 million to Shareholders through the compulsory redemption of shares. “The focus of the Group for the rest of 2024 continues to be the continued robust asset management of the existing loan portfolio; the orderly realisation of the portfolio; and the timely return of capital to shareholders. We look forward to providing further updates towards meeting these objectives and would like to thank shareholders for their continued commitment and support.” For further information, please contact:
Apex Fund and Corporate Services (Guernsey) Limited as Company Secretary +44 203 5303 630 Duke Le Prevost
Starwood Capital +44 (0) 20 7016 3655 Duncan MacPherson
Jefferies International Limited +44 (0) 20 7029 8000 Gaudi Le Roux Stuart Klein Harry Randall
Buchanan +44 (0) 20 7466 5000 Helen Tarbet +44 (0) 07788 528143 Henry Wilson
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 conduct an orderly realisation of the assets of the Group. www.starwoodeuropeanfinance.com.
The Group's assets are managed by Starwood European Finance Partners Limited, an indirect wholly owned subsidiary of the Starwood Capital Group.
Interim Financial Report and Unaudited Condensed Consolidated Financial Statements for the six-month period from 1 January 2024 to 30 June 2024 Overview Corporate SummaryPRINCIPAL ACTIVITIES AND INVESTMENT OBJECTIVE Starwood European Real Estate Finance Limited (the “Company”) was established in November 2012 to provide its 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 European Union’s internal market. The Company made its investments through Starfin Lux S.à.r.l (indirectly wholly-owned via a 100 per cent shareholding in Starfin Public Holdco 1 Limited), Starfin Lux 3 S.à.r.l and Starfin Lux 4 S.à.r.l (both indirectly wholly-owned via a 100 per cent shareholding in Starfin Public Holdco 2 Limited) (collectively the “Group”). Following the Company’s Extraordinary General Meeting (“EGM”) on 27 January 2023, the Company’s objective changed and is now to conduct an orderly realisation of the assets of the Group and the return of capital to Shareholders. In line with this objective the Board is endeavouring to realise all of the Group’s investments in a manner that achieves a balance between maximising the net value received from those investments and making timely returns to Shareholders. It is anticipated that it will take three to four years to complete this objective. The Group will not make any new investments going forward save that investments may be made to honour commitments under existing contractual arrangements or to preserve the value of any underlying security. Cash held by the Group pending distribution will be held in either cash or cash equivalents for the purposes of cash management. Subject to the above restrictions, the Company retains the ability to seek to enhance the returns of selected loan investments through the economic transfer of the most senior portion of such loan investments. It is anticipated that where this is undertaken it would generate a positive net interest rate spread and enhance returns for the Company. Full details of the investment objectives and policy post the EGM on 27 January 2023 are set out in the 2023 Annual Report which can be found on the company’s website https://starwoodeuropeanfinance.com. The Investment Objective and Policy which applied prior to the EGM on 27 January 2023 are set out in the 2021 Annual Report which can also be found on the company’s website https://starwoodeuropeanfinance.com. The Investment Objective applied prior to the EGM on 27 January 2023 was to provide its 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 European Union’s internal market. The Investment Policy applied prior to the EGM on 27 January 2023 was to invest in a diversified portfolio of real estate debt investments in the UK and the European Union’s internal market as the Group had done since its initial public offering (“IPO”) in December 2012. STRUCTURE The Company was incorporated with limited liability in Guernsey under the Companies (Guernsey) Law, 2008, as amended, on 9 November 2012 with registered number 55836, and registered with the Guernsey Financial Services Commission (“GFSC”) as a closed-ended collective investment scheme. The Company’s ordinary shares were first admitted to the premium segment of the UK’s Financial Conduct Authority’s Official List and to trading on the Main Market of the London Stock Exchange as part of its IPO which completed on 17 December 2012. Further issues took place in March 2013, April 2013, July 2015, September 2015, August 2016 and May 2019. The issued capital during the period comprises the Company’s Ordinary Shares denominated in Sterling. The Company received authority at the 2020 Annual General Meeting (“AGM”), to purchase up to 14.99 per cent of the Ordinary Shares in issue. This authority was renewed at the 2021, 2022, 2023 and 2024 AGMs. Between 2020 and 2023 the Company bought back 17,626,702 Ordinary Shares. Shares bought back (which had been held in treasury) were cancelled in June 2023. During 2023 the Company compulsorily redeemed 81,901,754 Ordinary Shares from Shareholders at an average price of 103.79 pence per share. During the six months to 30 June 2024 the Company compulsorily redeemed a further 43,512,736 Ordinary Shares from Shareholders at an average price of 103.42 pence per share. In July 2024 the Company compulsorily redeemed a further 76,248,573 Ordinary Shares at a price of 104.92 pence per share. As at the date of the issuance of this report the Company had 193,929,633 shares in issue and the total number of voting rights was 193,929,633. The Investment Manager is Starwood European Finance Partners Limited (the “Investment Manager”), a company incorporated in Guernsey with registered number 55819 and regulated by the GFSC. The Investment Manager has appointed Starwood Capital Europe Advisers, LLP (the “Investment Adviser”), an English limited liability partnership authorised and regulated by the Financial Conduct Authority, to provide investment advice, pursuant to an Investment Advisory Agreement. Chairman’s Statement Dear Shareholder, On behalf of the Board I present the Interim Financial Report and Unaudited Condensed Consolidated Financial Statements of Starwood European Real Estate Finance Limited (the “Group”) for the period from 1 January 2024 to 30 June 2024. Since I presented the Annual Report and Audited Consolidated Financial Statement of the Group for the year end 31 December 2023 to you in March it seems like a lot has changed while a lot has stayed the same. Around half the world’s population lives in more than 60 countries holding national elections in 2024, and with roughly two billion eligible voters, this is being described as the largest election year in history. As a result of elections held so far in 2024 there is a new governing party in the UK but the same governing parties in both Russia and India. We await to see the outcome of the forthcoming United States of America Presidential election. At the same time global economies appear to be recovering slowly from the systemic shocks over the last four years with interest rates seeming to be on a downward trajectory. Once again the Group’s performance has remained consistent demonstrating its unique portfolio resilience through the strength and consistency of its results. All contractual loan interest and scheduled amortisation payments have been received on time and underlying valuations continue to provide reassuring headroom. As I reported in March the loan asset categorised as Stage 3 as at 31 December 2023 was settled in full in March and since then one of the four assets categorised as Stage 2 as at 31 December 2023 has been fully repaid. As a result there are three assets currently categorised as Stage 2 indicating an increase in their credit risk since origination but with no impairments anticipated and no assets categorised as Stage 3. The Group will continue to exercise caution in these challenging times and work closely with borrowers to effect the best results for the Company and the Group. The Group’s NAV has also remained stable over the last six months. This stability demonstrates the positive fundamentals of the Group’s portfolio as an attractive risk-adjusted source of alternative income. Against market volatility, the Group has maintained a relatively stable market valuation, met or exceeded its dividend targets (an annualised 5.5 pence per share to shareholders) and continued the orderly realisation of the Group’s assets started in 2023 and the return of capital to Shareholders. The capital redemptions announced and implemented in 2023 returned £85.0 million in total to shareholders. During the first half of 2024, the Company announced and implemented its fourth and fifth capital redemptions, returning, in total, £45.0 million to shareholders. Following the fifth redemption, and as at 30 June 2024 the Company had 270,178,206 shares in issue and the total number of voting rights was 270,178,206. Since 30 June 2024 the Company has announced it's sixth capital redemption, which returned, in July 2024, a further £80.0 million to shareholders through the compulsory redemption of shares. As at the date of the issuance of this report the Company had 193,929,633 shares in issue and the total number of voting rights was 193,929,633. This means that, in total, the Company has returned £210 million to shareholders since January 2023 when the strategy of orderly realisation and return of capital was approved by shareholders. JOHN WHITTLE Chairman 6 September 2024 HIGHLIGHTS OVER THE SIX MONTHS TO 30 JUNE 2024 Positive realisation progress - during the half year: A total of £102.1 million, 38.9 per cent of the Group’s 31 December 2023 total funded loan portfolio, has been repaid across five investments This included the full settlement of four loans (totalling £101.2 million or 38.5 per cent of the Group’s 31 December 2023 total funded loan portfolio); and The proceeds of these realisations and some of the cash balances held as at 31 December 2023 were used to fund the return of capital to shareholders of £125.0 million paid in 2024 up to the date of this report All assets are carefully monitored for changes in their risk profile - during the half year: One Stage 2 asset was fully repaid, leaving three assets categorised as Stage 2. This categorisation indicates a change in credit risk of these loans since origination but no impairments anticipated; and The only asset categorised as Stage 3 as at 31 December 2023 was settled in full and €0.2 million of a €4.0 million impairment provision which had been accounted for against this loan was released The average remaining loan term of the portfolio is 1.5 years Strong cash generation - the portfolio continues to support annual dividend payments of 5.5 pence per Ordinary Share, paid quarterly, and generates an annual dividend yield of 5.9 per cent on the share price as at 30 June 2024 Regular and consistent dividend - the Company continues to pay regular and consistent dividend, in line with its prevailing target Inflation protection - 85 per cent of the portfolio is contracted at floating interest rates (with floors) Robust portfolio - the loan book is performing broadly in line with expectations with its defensive qualities reflected in the Group’s continued NAV stability Significant equity cushion - the weighted average Loan to Value for the portfolio as at 30 June 2024 is 58 per cent INVESTMENT MOMENTUM In line with the new strategic direction of the Group (i.e. the orderly realisation and return of capital to shareholders) there has been no new commitments made in the six months to 30 June 2024. Repayments received in the six months to 30 June 2024 are summarised in the highlights section above and detailed in the Investment Managers report. During the six months to 30 June 2024, the Group funded £8.8 million in relation to cash loan commitments made in prior years which were unfunded. In addition the Group capitalised £0.6 million of interest on one loan in line with the facility agreement.
NAV PERFORMANCE The table below shows the NAV per share movements over the 6 months to 30 June 2024.
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