SWEF: Full Year Results for the Year Ended 31 December 2023

Starwood European Real Estate Finance Limited

Full Year Results for the Year Ended 31 December 2023

Starwood European Real Estate Finance Limited (the “Company”) and its subsidiaries (“SEREF” or the “Group”), a leading investor managing a diverse portfolio of high-quality real estate debt investments in the UK and Europe and now pursuing an orderly realisation and return of capital to shareholders, is pleased to announce Full Year Results for the year ended 31 December 2023.

Highlights for the period, 12 months ended 31 December 2023

• Strong cash generation – the portfolio is expected to continue to support annual dividend payments of 5.5 pence per Ordinary Share, paid quarterly.
• £166.9m (39.2%) of the Group’s 31 December 2022 total funded loan portfolio has been repaid, including the full repayment of eight loans.
• Dividends paid of 6.0 pence per Ordinary Share in relation to 2023, compared to a target dividend rate of 5.5 pence per share.
• Income stability – all contractual loan interest and scheduled amortisation payments have once again been paid in full.
• 90.5% of the portfolio is contracted at floating interest rates (with floors), which continues to benefit the Group in the current interest rate environment. 
• All assets are constantly monitored for changes in their risk profile – the investment risk classification of the investments as at 31 December 2023 is as follows:
  • Seven loan investments equivalent to 64% of the funded portfolio were classified as the lowest risk profile, Stage 1.
  • Four loan investments equivalent to 31% of the funded portfolio were classified as Stage 2. Since year end, one Stage 2 asset has had a significant repayment of loan principal made.
  • One loan equivalent to 5% of the funded portfolio was classified at Stage 3. During the year, the Group accounted for an impairment provision on this loan of €4 million/£3.5 million, equivalent to 1.3% of the funded portfolio as at 31 December 2023. Since year end this loan has been repaid and €0.2 million of the impairment provision has been released.

• Portfolio remains robust – the loan book is performing broadly in line with expectations, with its defensive qualities reflected in the Group’s continued NAV per share stability in a challenging macro environment.

• Significant equity cushion – the weighted average Loan to Value portfolio is 61.8%.

Post period-end Highlights

• Substantial further progress in receiving repayments from investments has considerably de-risked the remaining portfolio including,
  • Full repayment of Shopping Centre, Spain, of c. €12.4 million.  This loan was classified as Stage 3 as at 31 December 2023. €0.2 million of the €4 million impairment provision made in relation to this asset in 2023 has been released.
  • Significant partial repayment of Three Shopping Centres, Spain, of c. €19.2 million.  This loan was classified as Stage 2 at the year end.
  • Repayment from Hotel, Dublin, of c. €8.5 million.

Portfolio Statistics

As at 31 December 2023, the portfolio was invested in line with the Group’s investment policy. The key portfolio statistics are summarised below:

*Alternative performance measure

John Whittle, Chairman of the Company commented:

“During a highly successful year for our strategy of realising the portfolio, 39.2 per cent of the of the Group’s 31 December 2022 portfolio was repaid during the year, including eight investments in full. Further post-period end, this positive momentum has been maintained with over £34 million repaid.
 

These most recent repayments have significantly de-risked the remaining portfolio substantially reducing our Spanish retail exposure. Whilst the €4 million impairment recognised against one of the Spanish retail assets in 2023 is naturally disappointing, we consider the successful execution of the sale of this asset and subsequent repayment of our related loan in a difficult market a positive result. Accordingly, we are therefore pleased to announce the Company’s fifth capital distribution of £25.0 million today. This follows the Company’s fourth capital distribution of £20.0 million in February 2024. “
 

“Looking ahead, we are pleased to note the weighted average remaining loan term of the portfolio is 1.4 years and as such anticipate further sustained momentum in capital redemptions, whilst continuing to proactively manage our high-quality portfolio and deliver a stable source of income to shareholders.”

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

Harry Randall

Ollie Nott

Buchanan  +44 (0) 20 7466 5000

Helen Tarbet  +44 (0) 07788 528143

Henry Wilson

Sam Adams

 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 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.

Starwood European Real Estate Finance

Annual Report and Audited Consolidated Financial Statements

for the year ended 31 December 2023

Overview

Financial Highlights

(1) Further explanation and definitions of the calculation is contained in the section “Alternative Performance Measures” at the end of this financial report.

(2) Source: Morningstar. The Morningstar calculations include dividends in the year in which the payments are made to shareholders. This differs to the approach taken by the Company in this table which is to show dividends in the year in relation to which they are declared (see footnotes (3) and (4) below).

The differences between dividends paid and declared are shown below:

(3) During 2023 the Company declared a dividend of 1.375 pence per Ordinary Share in relation to each of the first three quarters.  The Company also declared a dividend of 1.875 pence per Ordinary Share in January 2024. These four dividends declared all related to income earned in 2023 and are therefore included within the 6.0 pence per Ordinary Share dividend shown in the table above for the year ended 31 December 2023.

(4) During 2022 the Company declared a dividend of 1.375 pence per Ordinary Share in relation to each of the first three quarters of 2022 with the fourth quarter dividend declaration being made in January 2023. The Company then declared a final dividend in March 2023 of 2.0 pence per Ordinary Share which related to income earned in the year ended 31 December 2022. These five dividends declared all related to income earned in 2022 and are therefore included within the 7.5 pence per Ordinary Share dividend shown in the table above for the year ended 31 December 2022.

SHARE PRICE PERFORMANCE

As at 31 December 2023, the NAV was 104.35 pence per Ordinary Share (2022: 105.20 pence) and the share price was 90.4 pence (2022: 89.0 pence).

The Company’s share price has been volatile since the market turbulence caused by Covid-19 in March 2020. The volatility has been driven by market conditions and trading flows rather than a change in the Company’s performance.

Objective and Investment Policy

INTRODUCTION

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, together with its subsidiaries Starfin Public Holdco 1 Limited, Starfin Public Holdco 2 Limited, Starfin Lux S.à.r.l, Starfin Lux 3 S.à.r.l, and Starfin Lux 4 S.à.r.l, (collectively the “Group”), has provided a regular dividend to shareholders whilst preserving capital by limiting downside risk.

On 31 October 2022, the Company announced, that following a review of the Company’s strategy and advice sought from its advisers, the Board intended to recommend to shareholders that the investment objective and policy of the Company were amended such that the Board can pursue a strategy of orderly realisation and the return of capital over time to shareholders (the “Proposed Orderly Realisation”). If approved by the shareholders, the Company would seek to return cash to shareholders in an orderly manner as soon as reasonably practicable following the repayment of loans, while retaining sufficient working capital for ongoing operations and the funding of committed but currently unfunded loan commitments.

On 28 December 2022, a Circular relating to the Proposed Orderly Realisation and containing a Notice of Extraordinary General Meeting (EGM) was published. The Circular set out details of, and sought shareholder approval for, certain proposals (the “Proposals”). The Proposals were:

(a) a change to the Company’s Investment Policy to reflect the fact that the Company will cease making any new investments and will pursue a realisation strategy of the remaining assets in the Company’s portfolio; and

(b) adoption of new articles which provide for the periodic Compulsory Redemption of the Company