On the hotel transaction side, we mentioned in previous files that we expected many hotel transactions to materialize later in the year. Since that time last year, Starwood Equity in Europe has 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 In early summer, funds managed by Starwood and Blackstone finalized the acquisition of Extended Stay America in a transaction valued at approximately $ 6 billion. We previously reported that markets tended to open up with smaller single asset trades first, and then migrate to larger trades and portfolios as markets settle. We are now seeing this trend in the market with larger trading portfolios increasing the overall trading volume. One example this month in the UK is Henderson Park has acquired a portfolio of twelve Hilton hotels with more than 2,400 rooms in a transaction valued at an estimated £ 555 million. We are aware of a number of similar sized transactions in the market which will likely close in late 2021 or early 2022. The investment market is very healthy and liquid for hotel assets across Europe.
Looking forward to the fourth quarter and beyond, we expect a high level of transactional activity to continue. The strength and potential of “beds, medications and remittances” have been strong themes and we continue to see attractive value-added lending opportunities in these and other sectors for the Company.
Expected credit losses
All loans in the portfolio are classified and measured at amortized cost less impairment. The Group closely monitors the loans in the portfolio to detect a deterioration in credit risk. There are certain loans for which the credit risk has increased since initial recognition. However, we have considered a number of scenarios and currently do not anticipate a loss given default. Therefore, no credit loss has been recognized.
This assessment was made, despite continued pressure in the hospitality and retail markets from Covid-19, based on the information in our possession as of the date of the report, our risk assessment of each loan and certain estimates and judgments regarding the future performance of the assets. The position on possible ECL on Spanish retail assets in particular continues to be closely monitored and analyzed, and we have sought input, analysis and comments from Spanish market advisers in this regard, in order to supplement our own information. We have received independent external assessments of the underlying assets secured by the Spanish loans during the current year. This information has not changed our analysis of Spanish bonds and we note that a valuation margin remains on these borrowings. The updated valuations are reflected in the sector and portfolio LTV tables presented in this sheet.
Investment portfolio as of September 30, 2021
As of September 30, 2021, the Group had 18 investments and commitments of £ 419.1 million broken down 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.
Ready to value
Based on the previously disclosed valuation methodology and processes (see information sheet of June 30, 2020) and including new valuations received, as of September 30, 2021, the Group has an average last GBP LTV of 64.2 for percent (June 30, 2021: 63.5 percent).
The table below shows the sensitivity of the debt-to-value calculation to variations in the underlying real estate valuation and shows that the Group has considerable leeway within the latest LTVs currently published.
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
In the third quarter of 2021, the Company’s shares performed well, returning 5.8% on a total return basis, with the share price trading between 92.8 pence and 99.4 pence. pence and closing the quarter at 98.0 pence. As of September 30, 2021, the discount to NAV was 5.4% percent, with an average discount to NAV of 7.0% percent for the quarter, a significant improvement over the discount to NAV of 12.1% per cent on average during the previous quarter. The Board of Directors, Investment Manager and Adviser continue to believe that equities represent attractive value at this level.
Note: The September 30, 2021 discount to the NAV is based on the current September 30 NAV as shown in this fact sheet. All average net asset value discounts are calculated as the last cumulative net asset value available in the market on any given day, adjusted for any dividend payment from the ex-dividend date.
For more 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
Hélène Tarbet +44 (0) 07788 528143
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 of providing Shareholders with regular dividends and an attractive total return while limiting downside risk. , through the origination, execution, acquisition and service of a diversified portfolio of real estate debt investments in the United Kingdom and in the internal market of the European Union at large. www.starwoodeuropeanfinance.com.
The Company is the largest publicly traded vehicle in London offering investors outright exposure to mortgage loans.
The Group’s assets are managed by Starwood European Finance Partners Limited, an indirect wholly-owned subsidiary of Starwood Capital Group.
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(END) Dow Jones Newswires
October 22, 2021 05:16 ET (09:16 GMT)