Starwood European Real Estate Finance Ltd (SWEF) SWEF: Half
Yearly Report 30 June 2021 07-Sep-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.
-----------------------------------------------------------------------------------------------------------------------
7 September 2021
Starwood European Real Estate Finance Limited
Half Yearly Report 30 June 2021
Another Period of Robust Income Generation
Fully Covered Quarterly Dividend Totalling 5.5 Pence Annually; 8
per cent Share Price Total Return in the Period
Starwood European Real Estate Finance Limited and its
subsidiaries ("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 its Half
Year Results for the six month period ended 30 June 2021.
Highlights over the six months to 30 June 2021
-- Income stability - all loan interest and scheduled
amortisation payments received in full and on time
-- Strong cash generation - the portfolio continues to support
annual dividend payments of 5.5 pence pershare, paid quarterly, and
generates an annual dividend yield of 5.9 per cent on the share
price as at 30 June 2021
-- Robust portfolio - despite pandemic-related disruption, the
portfolio continues to perform in line withexpectations? Borrowers
remain adequately capitalised and are expected to continue to pay
loan interest and capitalrepayments in line with contractual
obligations ? Entry into life sciences sector - On 22 April 2021
the Group announced that it has closed a GBP26.6mfloating 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 GBP13.5m floating rate whole loan secured by aportfolio of a
hotel and office complex in Northern Ireland
-- 8 per cent - Share price total return during the six months
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 wasestablished
Portfolio Statistics - diverse, 78.3% floating rate, LTV
maintained
As at 30 June 2021, the portfolio was invested in line with the
Group's investment policy. The key portfolio statistics are
summarised below.
30 June 2021 30 June 2020
Number of investments 18 18
Percentage of currently invested portfolio in floating rate loans 78.3% 79.5%
Invested Loan Portfolio unlevered annualised total return* 6.6% 6.7%
Portfolio levered annualised total return* 6.8% 7.0%
Weighted average portfolio LTV - to Group first GBP* 18.0% 18.4%
Weighted average portfolio LTV - to Group last GBP* 63.5% 62.9%
Average loan term (stated maturity at inception) 4.7 years 4.4 years
Average remaining loan term 2.2 years 2.8 years
Net Asset Value GBP423.7m GBP430.1m
Amount drawn under Revolving Credit Facilities (excluding accrued interest) (GBP11.0m) (GBP24.1m)
Loans advanced GBP420.8m GBP448.9m
Cash GBP1.4m GBP9.0m
Other net assets (including hedges) GBP12.5m GBP3.8m
*Alternative performance measure
NAV Performance - as anticipated and stable demonstrating
resilience of portfolio
The table below shows the NAV per share achieved over the 6
months to 30 June 2021:
January February March April May June
Cum-dividend NAV per share (pence) 103.91 104.42 103.56 103.59 104.25 103.63
Stephen Smith, Chairman of the Company commented:
"During the past six months the Company has yet again proven its
credentials as a highly stable source of robust dividends for
shareholders. In contrast to many equity REITs, there has not been
a single missed payment across the portfolio for the entire
duration of the Covid-19 pandemic. This has ensured total
continuity of income supporting the annual 5.5 pence dividend yield
paid quarterly to shareholders, which remains fully covered.
Further, the underlying risk of the portfolio has not shifted with
LTVs maintained in the low 60% historical range that the manager
has skilfully maintained since the Company's inception in 2012
across even the most volatile recent environment.
"At the outset of the Covid-19 period, in a time of famously
turbulent equity market volatility, the Company's share price fell
to a persistent discount to NAV for the first time since inception,
albeit this has been gradually reducing over the past six-month
period under review. Given the extremely robust performance of the
portfolio through even the most hostile of market tests and the
ongoing uncertainty around many traditional forms of dividend
income, it is our belief that the Company's current share price
discount to NAV represents compelling risk adjusted value."
Analyst Call
A conference call for analysts will be held remotely at 9:30am,
to receive details please contact henryw@buchanan.uk.com
For further information, please contact:
Apex Fund and Corporate Services (Guernsey) Limited as Company
Secretary
01481 735814
Magdala Mullegadoo
Starwood Capital +44 (0) 20 7016 3655
Duncan MacPherson
Jefferies International Limited +44 (0) 20 7029 8000
Stuart Klein
Neil Winward
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 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 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.
Interim Financial Report and Unaudited Condensed
Consolidated Financial Statements
for the six-month period from 1 January 2021 to 30 June 2021
CONTENTS
Overview
Corporate Summary
Chairman's Statement
Investment Manager's Report
Principal Risks
Governance
Board of Directors
Statement of Directors' Responsibilities
Interim Financial Statements
Independent Review Report
Unaudited Condensed Consolidated Statement of Comprehensive Income
Unaudited Condensed Consolidated Statement of Financial Position
Unaudited Condensed Consolidated Statement of Changes in Equity
Unaudited Condensed Consolidated Statement of Cash Flows
Notes to the Unaudited Condensed Consolidated Financial Statements
Further Information
Alternative Performance Measures
Corporate Information
Overview
Corporate Summary
PRINCIPAL ACTIVITIES AND INVESTMENT OBJECTIVE
The investment objective of Starwood European Real Estate
Finance Limited (the "Company"), together with its wholly owned
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"), is 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 seeks to limit downside risk by focusing on secured
debt with both quality collateral and contractual protection.
The Company anticipates that the typical loan term will be
between three and seven years. Whilst the Company retains absolute
discretion to make investments for either shorter or longer
periods, at least 75 per cent of total loans by value will be for a
term of seven years or less.
The Group aims to be appropriately diversified by geography,
real estate sector, loan type and counterparty. The Group pursues
investments across the commercial real estate debt asset class
through senior loans, subordinated loans and mezzanine loans,
bridge loans, selected loan-on-loan financings and other debt
instruments.
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 has been authorised by the
Guernsey Financial Services Commission ("GFSC") as a registered
closed-ended investment company. 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 initial public offering 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 on 8 June 2020 and since then, in August 2020, the
Board engaged Jefferies International Limited as buy-back agent to
effect share buy backs on behalf of the Company. During the third
and fourth quarters of 2020 the Company bought back 3,648,125
shares at an average cost per share of 86.9 pence per share and
these shares are held in treasury. During January 2021 the Company
bought back 660,000 Ordinary Shares at an average price of 89.54
pence per share. Ordinary shares bought back are held in treasury.
Share buy backs are subject to sufficient cash being available.
This authority was renewed at the 2021 AGM with the Company
receiving authority to purchase up to 14.99 per cent of Ordinary
Shares in issue on 15th June 2021 (which was 408,911,273 Ordinary
Shares), as 4,308,125 Ordinary Shares have already been bought back
as described above and are being held in treasury.
The Company makes its investments through Starfin Lux S.à.r.l
(indirectly wholly-owned via a 100% 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% shareholding in Starfin
Public Holdco 2 Limited).
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,
I am delighted to present the Interim Financial Report and
Unaudited Condensed Consolidated Financial Statements of Starwood
European Real Estate Finance Limited (the "Group") for the period
from I January 2021 to 30 June 2021.
This half year has been a period of consolidation following a
turbulent period in the market and for the share price of the
Company, although not, it must be said, a turbulent time for the
Group's NAV which has once again remained stable throughout.
Ultimately, the period under discussion demonstrated the positive
fundamentals of the Group's portfolio as an exceptionally
attractive risk-adjusted source of alternative income tested in the
harshest of market environments. Against these market challenges,
the Group not only maintained a stable NAV but also met its
dividend targets, delivering an annualised 5.5 pence per share to
shareholders. The Board continues to monitor share price moves and
has been pleased recently with the reaction to the "back to work"
agenda. In the earlier part of the period however, share buybacks
had been used on occasion to correct shorter term demand and supply
imbalances. Investors now have more clarity that economies are
working their way out of Covid-19, and they are gradually
recognising the value in the portfolio currently. At the same time,
the Investment Manager is seeing the strongest pipeline of
available transactions since the Group's inception (partially as a
result of post Covid-19 opportunities) providing compelling
opportunities for value creation.HIGHLIGHTS OVER THE SIX MONTHS TO
30 JUNE 2021
-- Income stability - all loan interest and scheduled
amortisation payments received in full and on time
-- Strong cash generation - the portfolio continues to support
annual dividend payments of 5.5 pence pershare, paid quarterly, and
generates an annual dividend yield of 5.9 per cent on the share
price as at 30 June 2021
-- Robust portfolio - despite pandemic-related disruption, the
portfolio continues to perform in line withexpectations
-- Borrowers remain adequately capitalised and are expected to
continue to pay loan interest and capitalrepayments in line with
contractual obligations
-- On 22 April 2021 the Group announced that it had closed a
GBP26.6 million floating rate whole loan securedby a portfolio of
four UK life science properties
-- 8 per cent - Share price total return during the six months
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 wasestablished
Post 30 June 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.
INVESTMENT PERFORMANCE
INTEREST & AMORTISATION PAYMENTS
All loan interest and scheduled amortisation payments to date
have been received 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.
STRONG CASH GENERATION
The portfolio performance continues to support the targeted
annual dividend payments of 5.5 pence per share, paid
quarterly.
INVESTMENT MOMENTUM
The table below summarises the new commitments made and
repayments received in the first six months of each year from 2017
to 2021.
H1 2017 H1 2018 H1 2019 H1 2020 H1 2021
New Commitments GBP115.5m GBP147.5m GBP49.9m GBP72.7m GBP26.6m
Repayments & Amortisation (GBP85.2m) (GBP74.1m) (GBP45.9m) (GBP65.3m) (GBP45.8m)
Net Increase / (Decrease) in Commitments GBP30.3m GBP73.4m GBP4.0m GBP7.4m (GBP19.2m)
The net change in commitments during the first half of 2021 have
fallen for the first time. This is not surprising as activity in
the Company's investment markets dropped during the Covid-19
pandemic and is only now recovering. Repayments in 2020 in total
were significantly lower than in most previous years as it took
borrowers longer to sell or execute their business plans and the
opportunities to refinance following completion of business plans
were much more limited and continue to be a little subdued as shown
above. Importantly, the Group remains close to fully invested, with
an outstanding pipeline of new loans, all of which supports the
Company's income generation going forward.
As at 30 June 2017 to 2021 the Group had commitments as shown in
the table below.
June 2017 June 2018 June 2019 June 2020 June 2021
Funded loans GBP390.7m GBP429.9m GBP447.0m GBP447.5m GBP418.5m
Unfunded Commitments GBP5.4m GBP42.2m GBP31.9m GBP67.2m GBP36.8m
Total Commitments GBP396.1m GBP472.1m GBP478.9m GBP514.7m GBP455.3m
Subsequent to 30 June 2021 to the date of these Interim
Financial Statements the following two significant changes to the
portfolio were made:
NEW LOAN: OFFICE AND HOTEL, NORTHERN IRELAND
On 21 July 2021 the Group announced that it had closed a GBP13.5
million floating rate whole acquisition loan secured by a portfolio
of a mixed use hotel and office property.
REPAYMENT OF LOAN: HOTEL, SPAIN
On 11th August 2021 the Group announced that during July 2021 it
received the full and final repayment of its EUR54.2m loan on a
resort hotel in Spain.
NAV PERFORMANCE
The table below shows the NAV per share achieved over the 6
months to 30 June 2021.
January February March April May June
Cum-dividend NAV per share (pence) 103.91 104.42 103.56 103.59 104.25 103.63
As anticipated, as shown above and as in the past, we are
pleased to report that 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 and Euro exposures are hedged.
The NAV would be materially impacted if an impairment in the
value of a loan was required but, despite the disruption to markets
in general caused by the Covid-19 pandemic, no such impairment has
been needed. Please refer to the Investment Manager's report for
detailed sector performance reporting, information on the
accounting for our loans and the current loan to value position for
the portfolio as a whole and for each sector.
SHARE PRICE PERFORMANCE
During the first half of 2021, the Company's shares returned 8.0
per cent on a total return basis with the share price trading
between 84.2 pence and 94.0 pence and ending the half year at 94.0
pence, a 12-month high for the Company. Despite the Company having
bought back 4,308,125 shares in the last twelve months to 30 June
2021, and the Board's regular deliberations about the use and
appropriateness of share buybacks, it was decided that the general
improvement in market sentiment and "return to work" theme was
driving more positive investor sentiment resulting in no share
buybacks since January 2021. Notwithstanding this, the Company
renewed its authority to purchase up to 14.99 per cent of the
Ordinary Shares in issue and may use this authority to address the
imbalance in the demand and supply for shares where appropriate
going forward.
As at 30 June 2021, the share price discount to the cum-dividend
NAV was 9.3 per cent with an average discount to the cum-dividend
NAV of 13.2 per cent over the half year. The Board and the
Investment Manager and Adviser continue to believe that the shares
represent very attractive value at this level as demonstrated by
the previously disclosed personal purchases of shares by one of the
Directors of the Company and by two senior employees of the
Investment Adviser during the period.
DIVIDS
The Directors declared dividends in respect of the first two
quarters of 2021 of 1.375 pence per Ordinary Share, equating to an
annualised 5.5 pence per annum. This was covered by earnings
excluding unrealised foreign exchange movements. With the current
portfolio and pipeline, and based on current forecasts, we expect
the dividend to continue to be covered by earnings over the 12
months to 31 December 2021.
The Board and Investment Manager and Adviser recognise the
importance of stable and predictable dividends for our
shareholders. Accordingly, we hold a small dividend reserve (within
retained earnings) of circa GBP2.9 million built up over several
years which, if necessary, we will use to maintain the annual
dividend at 5.5 pence per share for the foreseeable future. As a
result of this, dividends have not been, and are not anticipated to
be, paid out of capital reserves.
On the share price at 30 June 2021, a dividend of 5.5 pence per
annum represents a 5.9 per cent dividend yield.
BOARD COMPOSITION AND DIVERSITY
In the full year financial statements to 31 December 2020
published in March the Board set out the next steps in the
succession plans which I am pleased to report are now concluded
with the appointment today of Gary Yardley (see note 16). In March
we outlined that we envisaged a new director being appointed during
the second half of 2021, my retirement from the Board in December
2021 and, having allowed for a period of handover to the new Board
members, John Whittle's retirement from Board in December 2023. We
sought independent recommendations on the best candidates.
The Board believes in the value and importance of diversity in
the boardroom and it continues to consider the recommendations of
the Davies, Hampton Alexander and Parker Reports and these
recommendations were taken into account in its recruitment process
for the appointment of a new director.
Having recently appointed Shelagh Mason and Charlotte Denton to
the Board, secured John Whittle's involvement until December 2023
and with Gary Yardley now joining the Board the Company believes
that the Board is, and will continue to be, fully equipped with the
necessary skills, experience, knowledge and diversity to facilitate
the Board's succession process over the coming years.
GOING CONCERN
Under the UK Corporate Governance Code and applicable
regulations, the Directors are required to satisfy themselves that
it is reasonable to assume that the Group is a going concern.
The Directors have undertaken a comprehensive review of the
Group's ability to continue as a going concern including assessing
the possible impact of the COVID-19 pandemic on the Group's
portfolio, reviewing the ongoing cash flows and the level of cash
balances and available liquidity facilities as of the reporting
date as well as taking forecasts of future cash flows into
consideration. After making enquiries of the Investment Manager and
the Administrator, reviewing the going concern analysis prepared by
the Investment Adviser and having reassessed the principal risks,
the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for at
least one year from the date the unaudited condensed consolidated
financial statements were signed. A range of scenarios have been
evaluated as part of this analysis. The worst case scenario
evaluated was an interest payment default on all hotel and retail
loans. In this scenario the Company was still able to meet its
liabilities as they fall due although the dividend would need to be
reduced to reflect the reduced cash received. Accordingly, the
Directors continue to adopt a going concern basis in preparing
these Unaudited Condensed Consolidated Financial Statements.
COVID-19 AND OUTLOOK
The Board is pleased that the diligent underwriting, loan
structuring and active asset management of the Investment Manager
and Adviser during this last turbulent 18 months has led to very
robust performance of the loans during the period, meaning that all
interest has been received in full and on time and no impairments
have been required. Importantly, future interest payments continue
to be expected to be received in full based on the forecast gradual
continued easing of lockdowns across the UK and Europe. For further
information on the performance of the various components of the
portfolio during the last six months please refer to the Investment
Manager's report.
The Investment Adviser is seeing a strong pipeline of
opportunities as the markets continue to stabilise and will
continue to apply its rigorous approach to the selection of
appropriate opportunities as it re-invests capital into new
opportunities. At 30 June 2021, the Group was very modestly levered
with net debt of GBP9.6 million (2.3 per cent of NAV) and undrawn
revolving credit facilities (see note 3.g) of the 2020 Annual
Report for further information) of GBP115.0 million to fund
existing commitments of circa GBP37 million. If the Group does not
receive any further repayments this year, it means the Group has
approximately GBP70 million of capacity for new loans.
The Board believes that the Company is well placed and that its
portfolio and investment pipeline should, over the long term,
continue to deliver an attractive risk-adjusted return led by a
high level of income supported by a resilient asset class with a
relatively low correlation to the broader financial markets. I
would like to close by thanking you for your commitment and
support.
Stephen Smith
Chairman
6 September 2021
Investment Manager's Report
MARKET SUMMARY AND INVESTMENT OUTLOOK
The largest vaccination campaign in history is underway.
According to Bloomberg more than 4.95 billion doses have been
administered across 183 countries as at 22 August 2021. The UK had
been one of the clear leaders in vaccinations and for the reopening
of the economy and society. As of 21st August 2021, in the UK 132
doses have been administered per 100 people, with 70 per cent of
people having received a first dose, putting the UK ahead of the
US, France and Germany. Ireland and Spain, however, are ahead of
the UK. Ireland is at 134 doses per 100 people with 73 per cent
having received a first dose and Spain is at 135 doses per 100
people with 76 per cent having received a first dose. The current
pace of vaccination in Ireland is also ahead of the other European
nations at 0.70 doses per 100 people per day compared with 0.66 for
Spain, 0.64 for France, 0.33 for Germany, 0.31 for UK and only 0.27
for the US.
The UK reopening plan post pandemic restrictions that was set
out in February has remained almost entirely on schedule. Earlier
in the year we expected crowds of 10,000 people at mass events and
the opening of short-haul travel later in the year. In sports we
have seen progress to more than 60,000 people attending football's
Euros final and a capacity crowd of 15,000 for the final weekend on
centre court at Wimbledon. This has been enabled by checks on
negative test results or vaccination status. In the hotel market we
have seen the anticipated performance for UK leisure driven markets
coming through as hotels were able to more fully open over the last
weeks. One example of a strong leisure performance is the Bath
market, where occupancy rates had been running lower than 30 per
cent all year to May, which achieved occupancy percentage rates in
the 80s during the half term week. While there will be some bumps
in the road the general pace of opening for international travel is
likely to be similarly facilitated by high levels of vaccination
and advances in the tracking of testing and vaccination status.
Previously we commented on a change in sentiment back toward
working from the office with a reduction from 69 per cent of CEOs
of major companies to 17 per cent expecting to reduce office space
between the third quarter of 2020 and the first quarter of 2021.
Property Week now reports that the amount of office space available
for sub-leasing in London has turned a corner as occupiers begin to
U-turn on "knee-jerk" decisions made during the pandemic to sublet
space. Savills' data shows that May saw the largest monthly decline
in the total amount of tenant-controlled space on the market since
March 2020, falling 7 per cent to 5.88 million square feet,
although this figure is still 45 per cent higher than the long-term
average. Savills' July data also shows West End investment market
cumulative annual turnover of GBP2.1 billion is 38 per cent down on
the five year average but comments that with over GBP2.5 billion of
assets under offer it bodes well for a busy second half of the
year. In the West End occupier market, while leasing pace is still
off historical averages, the available supply in May dropped for
the first time since August 2020 and Savills report that leasing
activity is picking up. Following on from May, total available
supply decreased further in June, reaching 7.8m sq ft, equating to
a vacancy rate of 6.8 per cent.
We also commented previously on the leading indicators we were
seeing in the hotel investment market in the last few months. Early
indications for European second quarter hotel investment volumes
are more than a 70 per cent increase quarter on quarter to over
EUR3 billion. This is also over 70 per cent higher than the second
quarter of 2020. There is still further to go to get back to the
pre-pandemic level of EUR6 billion in the second quarter of 2019.
Other positive indications are the number of large transactions in
the market agreed in the second quarter which are likely to close
in the third quarter, and, as with many other real estate markets,
there is currently very strong demand and relatively low supply of
product for sale.
We are also now seeing the beginning of investment market
activity on the retail side. We expect to see a more positive
sentiment on the retail investment market spread with increased
data on post pandemic spending habits, followed by tenant activity
then following through to the relevant investment markets. The
British Retail Consortium reported retail sales were 6.4 per cent
higher in July than in the same month one year ago. This is below
the 3-month average growth of 14.7 per cent. UK retail warehouses
are leading the way in the sector with Savills reporting the
pandemic-related pause in transactional activity to be short-lived,
with the investment market off to a good start to 2021 with GBP476
million of transactions in the first quarter. This is the largest
volume of first quarter transactions since 2017 and is up 47 per
cent on the same period in 2019. Yields have been moving rapidly
and are tighter by as much as 75 basis points for prime assets
since last year. The many different types of retail in Europe will
move at differing paces and it will be interesting to see how
momentum builds in this space.
Inflation has become a concern for markets with uncertainty
about whether high short term readings will translate into longer
term inflation. The markets are currently signalling that this is a
short term effect with continued low long term bond yields.
Evercore note the last time US short term inflation was this high,
the ten year US treasury bond yielded 7.7 per cent whereas it is
only 1.3 per cent today. If expectations changed on long term
inflation then we would expect to see interest rate policy
responses and in this case the Group's portfolio would benefit as
78 per cent of the portfolio is floating rate debt which would
benefit from higher short term interest rates. While the income
from floating rate loans would benefit from increases in rates,
these loans all feature interest rate floors which protect income
against very low interest rates. This results in an asymmetrically
better upside to an increasing interest rate environment versus the
downside of a decreasing interest rate environment from here.
Capital markets generally have continued a positive trajectory. The
FTSE 100, FTSE 250 and the iShares UK Property ETF are up 8.9 per
cent, 9.2 per cent and 9.5 per cent respectively during the first
half of 2021.
The trend in non-bank lending to the real estate market
continues to be highlighted by data coming through from the Cass
business school survey which is the most comprehensive survey of UK
commercial real estate lending. The statistics provide a clear
picture of the scale of the migration from domestic balance sheet
lenders to other sources of capital in commercial real estate
lending. In 2008 GBP170 billion of UK commercial real estate debt
was held by UK banks and building societies. By the end of 2020
this had reduced to GBP77 billion. That corresponds to a reduction
of market share from 66 per cent to 40 per cent. This trend is
clearly being seen in the Group's pipeline which includes a diverse
set of opportunities and is at the strongest level since the Group
was established.
All of the above factors combined give us confidence of positive
momentum in our markets and activity amongst our counterparties; we
therefore expect our portfolio to continue to perform robustly and
we expect to see further opportunities for loan origination.
PORTFOLIO STATISTICS
As at 30 June 2021, the portfolio was invested in line with the
Group's investment policy. The key portfolio statistics are as
summarised below.
30 June 30 June
2021 2020
Number of investments 18 18
Percentage of currently invested portfolio in floating rate loans 78.3% 79.5%
Invested Loan Portfolio unlevered annualised total return (1) 6.6% 6.7%
Portfolio levered annualised total return (1) 6.8% 7.0%
Weighted average portfolio LTV - to Group first GBP (1) 18.0% 18.4%
Weighted average portfolio LTV - to Group last GBP (1) 63.5% 62.9%
Average loan term (stated maturity at inception) 4.7 years 4.4 years
Average remaining loan term 2.2 years 2.8 years
Net Asset Value GBP423.7m GBP430.1m
Amount drawn under Revolving Credit Facilities (excluding accrued interest) (GBP11.0m) (GBP24.1m)
Loans advanced GBP420.8m GBP448.9m
Cash GBP1.4m GBP9.0m
Other net assets (including hedges) GBP12.5m GBP3.8m 1. Alternative performance measure - refer to Alternative performance Measures for definitions andcalculation methodology.
The maturity profile of investments as at 30 June 2021 is shown
below.
Remaining years to contractual maturity (1) Principal value of loans % of
GBPm invested portfolio
0 to 1 years 83.5 20%
1 to 2 years 163.3 39%
2 to 3 years 29.1 7%
3 to 5 years 142.6 34% 1. Excludes any permitted extensions. Note that borrowers may elect to repay loans before contractualmaturity.
The Group continues to achieve good portfolio diversification as
shown in the below:
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-sterlingexposure is hedged back to
sterling.
The Board considers that the Group is engaged in a single
segment of business, being the provision of a diversified portfolio
of real estate backed loans. The analysis presented in this report
is presented to demonstrate the level of diversification achieved
within that single segment. The Board does not believe that the
Group's investments constitute separate operating segments.
SHARE PRICE PERFORMANCE
As at 30 June 2021 the NAV was 103.62 pence per Ordinary Share
(31 December 2020: 104.18 pence) and the share price was 94 pence
(31 December 2020: 90 pence).
Source: Morningstar
The Company's share price has been volatile since March 2020.
This volatility has been driven by market conditions and trading
cash flows rather than a change in the Company's NAV.
INVESTMENT DEPLOYMENT
As at 30 June 2021, the Group had 18 investments and commitments
of GBP455.3 million as follows:
Sterling equivalent Sterling equivalent unfunded Sterling Total (Drawn and
balance (1) commitment (1) Unfunded)
Hospitals, UK GBP25.0m - GBP25.0m
Hotel & Residential, UK GBP49.9m - GBP49.9m
Office, Scotland GBP4.9m GBP0.1m GBP5.0m
Office, London GBP13.6m GBP7.0m GBP20.6m
Hotel, Oxford GBP16.7m GBP6.3m GBP23.0m
Hotel, Scotland GBP38.1m GBP4.5m GBP42.6m
Hotel, North Berwick GBP13.1m GBP1.9m GBP15.0m
Life Science, UK GBP19.5m GBP7.1m GBP26.6m
Logistics Portfolio, UK(2) GBP0.6m - GBP0.6m
Total Sterling Loans GBP181.4m GBP26.9m GBP208.3m
Three Shopping Centres, GBP31.2m - GBP31.2m
Spain
Shopping Centre, Spain GBP14.6m - GBP14.6m
Hotel, Dublin GBP51.6m - GBP51.6m
Hotel, Spain GBP46.6m - GBP46.6m
Office, Madrid, Spain GBP15.9m GBP0.9m GBP16.8m
Mixed Portfolio, Europe GBP24.8m - GBP24.8m
Mixed Use, Dublin GBP3.9m GBP8.7m GBP12.6m
Office Portfolio, Spain GBP13.2m GBP0.3m GBP13.5m
Office Portfolio, Ireland GBP30.2m - GBP30.2m
Logistics Portfolio, GBP5.1m - GBP5.1m
Germany(2)
Total Euro Loans GBP237.1m GBP9.9m GBP247.0m
Total Portfolio GBP418.5m GBP36.8m GBP455.3m 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.
Between 1 January 2021 and 30 June 2021, the following
significant investment activity occurred (included in the table
above):
NEW LOAN: LIFE SCIENCE, UK:
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.
LOAN REPAYMENTS & AMORTISATION:
The following material loan repayments and amortisation were
received during the first half of the year:
-- a full and final repayment of the Residential, London loan
which had had a balance outstanding of GBP25.1million on 31
December 2020;
-- EUR3.4 million of unscheduled amortisation on the loan on the
mixed portfolio in Europe, following aportfolio of asset sales
which was in line with the borrower's business plan;
-- GBP11.5 million of unscheduled amortisation on Logistics
Portfolio, UK, following a portfolio of assetsales which was in
line with the borrower's business plan;
-- EUR0.6 million of unscheduled amortisation on Logistics
Portfolio, Germany, following a portfolio of assetsales which was
in line with the borrower's business plan;
-- EUR0.6 million of unscheduled amortisation on Office
Portfolio, Spain, following an asset sale; and
-- EUR5.7 million partial repayment of Office Portfolio, Spain,
following the successful refinancing of thatloan.
The Group also advanced GBP16.5 million to borrowers to which it
has outstanding commitments during the six months to 30 June
2021.
Subsequent to 30 June 2021
Subsequent to 30 June 2021 the following significant changes
were made to the portfolio:
REPAYMENT OF LOAN: HOTEL, SPAIN:
On 11th August 2021 the Group announced that during July 2021 it
received the full and final repayment of its EUR54.2m loan on a
resort hotel in Spain.
NEW LOAN: HOTEL & OFFICE, NORTHERN IRELAND:
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.
PORTFOLIO OVERVIEW
Interest & Amortisation Payments
All loan interest and scheduled amortisation payments to date of
these financial statements have been received 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 comfort around the
robustness of the Group's position, with very significant equity
cushions against the average loan basis.
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% 82.0% 101.1% 79.6% 83.3% 84.6%
-20% 76.9% 94.8% 74.6% 78.1% 79.3%
-15% 72.3% 89.2% 70.2% 73.5% 74.7%
-10% 68.3% 84.3% 66.3% 69.4% 70.5%
-5% 64.7% 79.8% 62.9% 65.7% 66.8%
0% 61.5% 75.8% 59.7% 62.5% 63.5%
5% 58.6% 72.2% 56.9% 59.5% 60.4%
10% 55.9% 69.0% 54.3% 56.8% 57.7%
15% 53.5% 66.0% 51.9% 54.3% 55.2%
Key updates by portfolio sector are outlined below.
Hospitality (40.4 per cent of funded investment portfolio)
-- The largest hotel exposure included in the portfolio as at 30
June 2021 was Hotel, Spain (accounting for27.6 per cent of current
hospitality exposure and 11.1 per cent of the total funded
investment portfolio). Thiscoastal resort hotel completed a heavy
refurbishment programme in 2020 and the hotel re-opened during May
2021 as aluxury destination 5-star property. The property has
achieved very high guest ratings since opening and forwardbookings
for the remainder of the season are excellent, with average room
rates ahead of business plan. Thisdemonstrates the strength of
pent-up demand for leisure travel, particularly to resort
locations. Subsequent to 30June 2021 the Group was pleased to
announce that during July 2021 it received the full and final
repayment of thisloan. Following repayment of this loan, the
Group's exposure to the hospitality sector reduced to 33 per cent
ofthe investment portfolio as at 30 June 2021.
-- The next most significant hotel exposure is Hotel, Dublin
which accounted for 25.0 per cent of the 30June 2021 hospitality
exposure. As previously reported this property has, to a
significant extent, mitigated thenegative impacts of reduced
conference and leisure business caused by the pandemic, by leasing
the property to theIrish government's Health Service Executive
("HSE"). This contract is expected to be in place for most of 2021.
Thesponsor has continued to work on value accretive asset
management initiatives across the wider estate which issubject to
the loan's security and this has been verified such that following
a recently updated formal valuation,the loan has been further
de-risked with the loan to value ratio decreasing by approximately
2.6 per cent.
-- The UK hotel exposures predominately comprise of three hotels
(Hotel, Oxford, Hotel, Scotland and Hotel,North Berwick, accounting
for 40.2 per cent of hotels in the portfolio as at 30 June 2021).
These hotels have beenundergoing comprehensive refurbishments in
line with the underwritten business plan. Hotel, Oxford and
Hotel,Scotland partially reopened over summer 2021 with full
opening of all three hotels anticipated by the end ofSeptember.
They re-open with the benefit of attractive new branding and a
fully refurbished offering which isexpected to be well placed to
benefit from pent-up UK domestic leisure travel demand,
particularly with two ofthese assets being located directly
adjacent to well-known landmark Scottish golf courses.
-- Remaining UK hotel exposure as at 30 June 2021 comprises a
50-key hotel ground up development within theHotel and Residential,
UK loan. Construction is progressing well, with completion forecast
in 2022. This loan isresidential-led and the value of pre-sold
residential units is higher than the total loan commitment
(inclusive ofthe hotel), which very significantly reduces
hospitality exposure on this loan.
All hospitality loans have adequate resources to meet their cash
needs in the medium term.
Retail (12.7 per cent of funded investment portfolio)
-- The Group's exposure to retail is predominantly comprised of
the "Three Shopping Centres, Spain" and"Shopping Centre, Spain"
loans. These are the only stand-alone retail loans in the portfolio
and comprise 11 percent of the Group's total funded investment
portfolio. All other retail exposure is contained in a limited
numberof mixed use portfolios where the retail sector represents
less than 25 per cent of the total loan balance.
-- With pandemic related restrictions beginning to be eased,
along with vaccine progress in Spain being oneof the strongest in
Continental Europe, retail footfall traffic is beginning to
increase. Footfall in May 2021 hadrecovered, on average, to over 70
per cent of the same period, pre-pandemic, in 2019. This is
expected to continueto increase over the coming months. Occupancy
on average in the centres has remained robust with limited
tenantfailures in contrast to the level of retailer insolvencies in
the UK and US. The sponsor's asset manager has beensuccessful in
leasing up some vacant space to gym operators and sports brands in
particular, amongst others. Thishas involved the sponsor injecting
new equity into the deals in order to assist with capital
expenditure for newstore fit outs and they continue to be very
actively engaged in the assets.
-- Across the investment portfolio, loans with retail exposure
continue to have adequate cash reserves andunderlying income
generation to pay interest.
Construction & heavy refurbishment (25.2 per cent of funded
investment portfolio)
-- Over 95 per cent of the Group's construction and heavy
refurbishment loans are located in the UK. Theseprojects have
continued to operate on site throughout the period since the
outbreak of the pandemic, albeit attimes, on-site capacity was
reduced for safety reasons. Notwithstanding this, all projects are
progressingsatisfactorily and no unfunded cost overruns have
occurred.
-- Non-essential construction sites in the Republic of Ireland
were mandated by the government to close from8 January 2021 through
to early May 2021; however we note that the Group's exposure to
Irish construction loans islimited to under one per cent of total
loans funded as of 30 June 2021. In any event this project has
remainedadequately capitalised with no unfunded cost overruns
projected, and we do not consider that the delay in timing offinal
completion to adversely impact asset value or the loan.
-- Please note that the construction & heavy refurbishment
exposure noted above will include assets alsoincluded in
hospitality and in office, industrial, logistics &
residential.
Office, industrial, logistics, healthcare, life science &
residential (46.9 per cent of funded investment portfolio)
-- These sectors continue to display resilient characteristics
in terms of overall performance with highrent collection and robust
rental and investment yields. Sponsors with asset sell down
strategies are succeeding inachieving above underwrite pricing,
particularly on the disposals that we have witnessed within the
industrial andresidential sectors.
-- The Group's exposure to office is 22.2 per cent of the funded
investment portfolio. Within this sector,the exposures are well
diversified across Europe. The largest exposure within this sector
represents 31 per cent oftotal office and just 7 per cent of the
total investment portfolio. This loan has a high occupancy of
institutionaltenants in prime city centre locations. While
generally new lease tenant incentives have increased slightly as
aresult of a slower take up related to pandemic disruption, rental
levels and investment yields based on actualtransactions have
remained fairly robust. The Group's weighted average loan to value
of the loans with a greaterthan 50 per cent office weighting is 64
per cent which reflects a modest position.
-- The Group's exposure to residential is under construction
product, of which a large proportion has beenpre-sold. The level of
legally exchanged unit pre-sales has now reached a level that
exceeds the total loancommitment, which has therefore significantly
de-risked the loan.
LIQUIDITY AND HEDGING
The Group is very modestly levered with net debt of GBP9.6
million (2.3 per cent of NAV) at 30 June 2021 and has significant
liquidity available with undrawn revolving credit facilities (see
note 3.g) of the 2020 Annual Report for further information) of
GBP115.0 million to fund existing commitments as summarised
below.
As at 30 June 2021 GBP million
Drawn on Group debt facilities (11.0)
Cash at hand 1.4
Net Debt (9.6)
Undrawn Debt Facilities available to Group 115.0
Undrawn Commitments to Borrowers (36.8)
Available Capacity 78.2
The way in which the Group's borrowing facilities are structured
means that it does not need to fund mark to market margin calls.
The Group does have the obligation to post cash collateral under
its hedging facilities. However, cash would not need to be posted
until the hedges were more than GBP20 million out of the money. The
mark to market of the hedges at 30 June 2021 was GBP11.0 million
(in the money) and with the robust hedging structure employed by
the Group, cash collateral has never been required to be posted
since inception.
The Group has the majority of its investments currently
denominated in Euros (although this can change over time) and is a
sterling denominated group. The Group is therefore subject to the
risk that exchange rates move unfavourably and that a) foreign
exchange losses on the loan principal are incurred and b) that
interest payments received are lower than anticipated when
converted back to Sterling and therefore returns are lower than the
underwritten returns.
The Group manages this risk by entering into forward contracts
to hedge the currency risk. All non-Sterling loan principal is
hedged back to Sterling to the maturity date of the loan (unless it
was funded using the revolving credit facilities in which case it
will have a natural hedge). Interest payments are generally hedged
for the period for which prepayment protection is in place.
However, the risk remains that loans are repaid earlier than
anticipated and forward contracts need to be broken early. In these
circumstances the forward curve may have moved since the forward
contracts were placed which can impact the rate received. In
addition, if the loan repays after the prepayment protection,
interest after the prepayment protected period may be received at a
lower rate than anticipated leading to lower returns for that
period. Conversely the rate could have improved and returns may
increase.
TRANSITION TO SONIA AND LIBOR
The Investment Manager is overseeing the transition from LIBOR
to SONIA for each of the loans impacted on behalf of the Group. The
Group has ensured that loan agreements for the current portfolio
are in a form which accommodates the flexibilities required to
manage the transition. In addition, the two new Sterling loans
entered into during 2021 (and referred to elsewhere) have interest
charges linked to SONIA rather than LIBOR.
EXPECTED CREDIT LOSSES (IMPAIRMENT)
All loans within the portfolio are classified and measured at
amortised cost less impairment.
Under IFRS 9 a three stage approach for recognition of
impairment is used, based on whether there has been a significant
deterioration in the credit risk of a financial asset since initial
recognition. These three stages then determine the amount of
impairment provision recognised.
At initial
recognition Recognise a loss allowance equal to 12 months expected credit losses resulting from default
(if asset is not events that are possible within 12 months.
credit impaired)
After initial
recognition:
Credit risk has not increased significantly since initial recognition. Recognise 12 months
expected credit losses.
Stage 1
Interest income is recognised by applying the effective interest rate to the gross carrying
amount of financial assets.
Credit risk has increased significantly since initial recognition. Recognise lifetime expected
losses.
Stage 2
Interest income is recognised by applying the effective interest rate to the gross carrying
amount of financial assets.
Credit impaired financial asset. Recognise lifetime expected losses.
Stage 3
Interest income is recognised by applying the effective interest rate to the amortised cost (that
is net of the expected loss provision) of financial assets.
The Group has not recognised expected credit losses at initial
recognition on any of its loans due to the detailed and
conservative underwriting undertaken, robust loan structures in
place and a strong equity cushion with an average LTV of 63.5 per
cent (based on the latest available valuation for each asset).
A detailed description of how the Group determines on what basis
loans are classified as stage 1, stage 2 and stage 3 post initial
recognition is provided in page 65 to the full year accounts.
Six loans with a carrying value as at 30 June 2021 of
GBP160,620,492 (31 December 2020: GBP150,331,450) have been
classified as stage 2 since 30 June 2020. No loans have been moved
to Stage 2 or to Stage 3 during 2021. Subsequent to 30 June 2021
one of the loans classified as stage 2 (with a 30 June 2021
carrying value of GBP46.6 million) was repaid by the borrower.
FAIR VALUE OF THE PORTFOLIO COMPARED TO AMORTISED COST
The table below represents the fair value of the loans based on
a discounted cash flow basis using a range of potential discount
rates.
Discount Rate Value Calculated % of book value
4.7% GBP 439.3m 104.4%
5.02% GBP 436.3m = fair value 103.8%
5.2% GBP 434.6m 103.3%
5.7% GBP 429.9m 102.2%
6.2% GBP 425.3m 101.1%
6.7% GBP 420.8m = book value 100.0%
7.2% GBP 416.4m 98.9%
7.7% GBP 412.0m 97.9%
8.2% GBP 407.8m 96.9%
8.7% GBP 403.6m 95.9%
The effective interest rate ("EIR") - i.e. the discount rate at
which future cash flows equal the amortised cost, is 6.7 per cent.
We have sensitised the cash flows at EIR intervals of 0.5 per cent
up to +/- 2.0 per cent. The table reflects how a change in market
interest rates or credit risk premiums may impact the fair value of
the portfolio versus the amortised cost. Further, the Group
considers the EIR of 6.7 per cent to be conservative as many of
these loans were part of a business plan which involved
transformation and many of these business plans are advanced in the
execution and therefore significantly de-risked from the original
underwriting and pricing (for example the Hotel, Spain). The
volatility of the fair value to movements in discount rates is low
due to the low remaining duration of most loans.
RELATED PARTY TRANSACTIONS
Related party disclosures are given in note 15 to the Unaudited
Condensed Consolidated Financial Statements.
FORWARD LOOKING STATEMENTS
Certain statements in this interim report are forward-looking.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements.
The Group undertakes no obligation to update any forward-looking
statements whether as a result of new information, future events or
otherwise.
Starwood European Finance Partners Limited
Investment Manager
6 September 2021
Principal Risks
PRINCIPAL RISKS FOR THE REMAINING SIX MONTHS OF THE YEAR TO 31
DECEMBER 2021
The principal risks assessed by the Board relating to the Group
were disclosed in the Annual Report and Audited Consolidated
Financial Statements for the year to 31 December 2020 on pages 12
to 15. The Board and Investment Manager have reassessed the
principal risks and do not consider these risks to have changed.
Therefore, the following are the principal risks assessed by the
Board and the Investment Manager as relating to the Group for the
remaining six months of the year to 31 December 2021:
CYBERCRIME
The Group is subject to the risk of unauthorised access into
systems, identification of passwords or deleting data, which could
result in loss of sensitive data, breach of data physical and
electronic, amongst other potential consequences.
LONG TERM STRATEGIC RISK
The Group's targeted returns are based on estimates and
assumptions that are inherently subject to significant business and
economic uncertainties and contingencies and, consequently, the
actual rate of return may be materially lower than the targeted
returns. In addition, the pace of investment has in the past and
may in the future be slower than expected or the principal on loans
may be repaid earlier than anticipated, causing the return on
affected investments to be less than expected. Furthermore, if
repayments are not promptly re-invested this may result in cash
drag, which may lower portfolio returns. As a result, the level of
dividends to be paid by the Company may fluctuate and there is no
guarantee that any such dividends will be paid. Since the Covid-19
pandemic the shares have traded at a discount to NAV per share and
shareholders may be unable to realise their investments through the
secondary market at NAV per share.
INTEREST RATE RISK
The Group is subject to the risk that the loan income and income
from the cash and cash equivalents will fluctuate due to movements
in interbank rates.
FOREIGN EXCHANGE RISK
The majority of the Group's investments are Euro denominated
(circa 56.7 per cent as at 30 June 2021). The Group is subject to
the risk that the exchange rates move unfavourably and that a)
foreign exchange losses on the loan principal are incurred and b)
that interest payments received are lower than anticipated when
converted back to Sterling and therefore returns are lower than the
underwritten returns.
Forward contracts used to manage the above risk could be broken
early and in these circumstances, the forward curve may have moved
since the forward contracts were placed which can impact the rate
received. The Group is subject to the risk that it will need to
post cash collateral against the mark to market on the forward
contracts which could lead to liquidity issues or leave the Group
unable to hedge new non-Sterling investments.
MARKET DETERIORATION RISK
The Group's investments are comprised principally of debt
investments in the UK, and the European Union's internal market and
it is therefore exposed to economic movements and changes in these
markets. Any deterioration in the global, UK or European economy
could have a significant adverse effect on the activities of the
Group and may result in significant loan defaults or
impairments.
The Covid-19 pandemic has had a material impact on global
economies and on the operations of the Group's borrowers during
2020 and this has continued in 2021. The Covid-19 pandemic presents
a major risk to growth and the full impact of the consequences for
the world economy is unclear.
The UK's departure from the European Union represents a
potential threat to its economy as well as wider Europe. On a
cyclical view, national economies across Europe appear to be
heading at best towards lower growth and alongside the economic
impact of Covid-19, towards recession.
In the event of a loan default in the portfolio, the Group is
generally entitled to accelerate the loan and enforce security, but
the process may be expensive and lengthy, and the outcome is
dependent on sufficient recoveries being made to repay the
borrower's obligations and associated costs. Some of the
investments held would rank behind senior debt tranches for
repayment in the event that a borrower defaults, with the
consequence of greater risk of partial or total loss. In addition,
repayment of loans by the borrower at maturity could be subject to
the availability of refinancing options, including the availability
of senior and subordinated debt and is also subject to the
underlying value of the real estate collateral at the date of
maturity.
RISK OF DEFAULT UNDER THE REVOLVING CREDIT FACILITIES
The Group is subject to the risk that a borrower could be unable
or unwilling to meet a commitment that it has entered into with the
Group as outlined above under market deterioration risk. As a
consequence of this, the Group could breach the covenants of its
revolving credit facilities and fall into default itself.
Governance
Board of Directors
STEPHEN SMITH | Non-executive Chairman - Chairman of the
Board
Stephen is Chairman of The PRS REIT which currently trades on
the Main Market, and a non-executive director of Sancus Lending
Group Limited (appointed on 11 May 2021) which trades on the AIM of
the London Stock Exchange. He was (resigned 1 May 2021) also
Chairman of AEW UK Long Lease REIT plc which trades on the Main
Market of the London Stock Exchange. Previously, he was the Chief
Investment Officer of British Land Company PLC, the FTSE 100 real
estate investment trust from January 2010 to March 2013 with
responsibility for the group's property and investment strategy. He
was formerly Global Head of Asset Management and Transactions at
AXA Real Estate Investment Managers, where he was responsible for
the asset management of a portfolio of more than EUR40 billion on
behalf of life funds, listed property vehicles, unit linked and
closed end funds. Prior to joining AXA in 1999 he was Managing
Director at Sun Life Properties for five years. Stephen is a UK
resident.
JOHN WHITTLE | Non-executive Director -
Audit Committee Chairman and Senior Independent Director
John is a Fellow of the Institute of Chartered Accountants in
England and Wales and holds the Institute of Directors Diploma in
Company Direction. He is a non-executive Director of Globalworth
Real Estate Investments Limited, Sancus Lending Group Limited
(formerly GLI Finance Limited) (both listed on AIM), Chenavari Toro
Limited Income Fund Limited (listed on the SFS segment of the Main
Market of the London Stock Exchange), and The Renewable
Infrastructure Group Limited, a FTSE 250 company. He was previously
Finance Director of Close Fund Services, a large independent fund
administrator, where he successfully initiated a restructuring of
client financial reporting services and was a key member of the
business transition team. Prior to moving to Guernsey, he was at
PriceWaterhouse in London before embarking on a career in business
services, predominantly telecoms. He co-led the business turnaround
of Talkland International (which became Vodafone Retail) and was
directly responsible for the strategic shift into retail
distribution and its subsequent implementation; he subsequently
worked on the private equity acquisition of Ora Telecom. John is a
resident of Guernsey.
SHELAGH MASON | Non-executive Director
Shelagh Mason is a solicitor specialising in English commercial
property who retired as a consultant with Collas Crill LLP on 31st
October 2020. She is the non-executive Chairman of the Channel
Islands Property Fund Limited listed on the International Stock
Exchange and is also non-executive Chairman of Riverside Capital
PCC, sits on the board of Skipton International Limited, a Guernsey
Licensed bank, and is a non-executive Director of The Renewable
Infrastructure Group Limited, a FTSE 250 company, and Ruffer
Investment Company Limited. Previously Shelagh was a member of the
board of directors of Standard Life Investments Property Income
Trust, a property fund listed on the London Stock Exchange for 10
years until December 2014. She retired from the board of Medicx
Fund Limited, a main market listed investment company investing in
primary healthcare facilities, in 2017 after 10 years on the board.
She is a past Chairman of the Guernsey Branch of the Institute of
Directors and a member of the Chamber of Commerce, the Guernsey
International Legal Association and she also holds the IOD Company
Direction Certificate and Diploma with distinction. Shelagh is a
resident of Guernsey.
CHARLOTTE DENTON | Non-executive Director (appointed 1 January
2021)
During Charlotte's executive career she worked in various
locations through roles in diverse organisations, including KPMG,
Rothschild, Northern Trust, a property development start up and a
privately held financial services group. She has served on boards
for over fourteen years and is currently a non-executive Director
of various entities including Butterfield Bank (Guernsey) Limited,
the GP boards of private equity groups Cinven and Hitec and the
Investment Manager for Next Energy. Charlotte is a Fellow of the
Institute of Chartered Accountants in England and Wales and holds a
degree in politics from Durham University. She is also a member of
the Society of Trust and Estate Practitioners, a Chartered Director
and a fellow of the Institute of Directors. Charlotte is a resident
of Guernsey.
Statement of Directors' Responsibilities
To the best of their knowledge, the Directors of Starwood
European Real Estate Finance Limited confirm that: 1. The Unaudited
Condensed Consolidated Financial Statements have been prepared in
accordance with IAS 34,"Interim Financial Reporting" as adopted by
the European Union as required by DTR 4.2.4 R; and 2. The Interim
Financial Report, comprising of the Chairman's Statement, the
Investment Manager's Report andthe Principal Risks, meets the
requirements of an interim management report and includes a fair
review ofinformation required by:i. DTR 4.2.7R of the UK Disclosure
and Transparency Rules, being an indication of important events
thathave occurred during the first six months and their impact on
the Unaudited Condensed Consolidated FinancialStatements, and a
description of the principal risks and uncertainties for the
remaining six months; and ii. DTR 4.2.8R of the UK Disclosure and
Transparency Rules, being related party transactions that havetaken
place in the first six months and that have materially affected the
financial position or performance ofthe Company during that period,
and any material changes in the related party transactions
disclosed in thelast Annual Report.
By order of the Board
For Starwood European Real Estate Finance Limited
Stephen Smith John Whittle
Chairman Director
6 September 2021 6 September 2021
Interim Financial Statements
Independent Review Report to Starwood European Real Estate
Finance Limited
Report on the unaudited condensed consolidated financial
statements
OUR CONCLUSION
We have reviewed Starwood European Real Estate Finance Limited's
unaudited condensed consolidated financial statements (the "interim
financial statements") in the Interim Financial Report and
Unaudited Condensed Consolidated Financial Statements (the "Interim
Report") of Starwood European Real Estate Finance Limited for the
6-month period ended 30 June 2021. Based on our review, nothing has
come to our attention that causes us to believe that the interim
financial statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
WHAT WE HAVE REVIEWED
The interim financial statements comprise:
-- the unaudited condensed consolidated statement of financial
position as at 30 June 2021;
-- the unaudited condensed consolidated statement of
comprehensive income for the period then ended;
-- the unaudited condensed consolidated statement of cash flows
for the period then ended;
-- the unaudited condensed consolidated statement of changes in
equity for the period then ended; and
-- the explanatory notes to the interim financial
statements.
The interim financial statements included in the Interim Report
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
The Companies (Guernsey) Law, 2008 and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
RESPONSIBILITIES FOR THE INTERIM FINANCIAL STATEMENTS AND THE
REVIEW
OUR RESPONSIBILITIES AND THOSE OF THE DIRECTORS
The Interim Report, including the interim financial statements,
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the Interim Report in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim Report based on our review.
This report, including the conclusion, has been prepared for and
only for the Company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
WHAT A REVIEW OF INTERIM FINANCIAL STATEMENTS INVOLVES
We conducted our review in accordance with International
Standard on Review Engagements 2410, 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity'
issued by the International Auditing and Assurance Standards Board.
A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim
Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants,
Guernsey, Channel Islands
6 September 2021 a. The maintenance and integrity of the
Starwood European Real Estate Finance Limited website is
theresponsibility of the directors; the work carried out by the
auditors does not involve consideration of thesematters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to thefinancial statements since they were
initially presented on the website. b. Legislation in Guernsey
governing the preparation and dissemination of financial statements
may differfrom legislation in other jurisdictions.
Unaudited Condensed Consolidated Statement of Comprehensive
Income
for the period ended 30 June 2021
1 January 2021 to 1 January 2020 to 1 January 2020 to 31
30 June 2021 30 June 2020 December 2020
Notes
GBP GBP GBP
(unaudited) (unaudited) (audited)
Income
Income from loans advanced 7 14,472,491 14,433,090 29,052,521
Net foreign exchange (losses) / gains 3 (1,279,202) 4,281,241 5,993,767
Net changes in fair value of financial assets at 13 - 1,097,722 1,097,722
fair value through profit or loss
Total income 13,193,289 19,812,053 36,144,010
Expenses
Investment management fees 15 1,561,503 1,584,891 3,186,943
Credit facility commitment fees 414,060 376,430 762,074
Credit facility interest 380,607 508,194 945,771
Legal and professional fees 174,184 155,133 288,111
Administration fees 172,485 154,606 331,591
Other expenses 127,943 94,259 198,350
Audit and non-audit fees 117,763 127,885 227,386
Directors' fees and expenses 15 89,500 69,991 152,564
Broker's fees and expenses 25,000 - 50,000
Agency fees - 10,781 10,781
Total operating expenses 3,054,645 3,082,170 6,153,571
Operating profit for the period / year before tax 10,138,644 16,729,883 29,990,439
Taxation 14 58,388 59,808 81,953
Operating profit for the period / year 10,080,256 16,670,075 29,908,486
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign (190,056) 292,900 232,417
operations
Other comprehensive (loss) / income for the period (190,056) 292,900 232,417
/ year
Total comprehensive income for the period / year 9,890,200 16,962,975 30,140,903
Weighted average number of shares in issue 4 408,968,207 413,219,398 412,469,890
Basic and diluted earnings per Ordinary Share 4 2.46 4.03 7.25
(pence)
The accompanying notes form an integral part of these Unaudited
Condensed Consolidated Financial Statements.
Unaudited Condensed Consolidated Statement of Financial
Position
as at 30 June 2021
As at As at As at
30 June 2021 30 June 2020 31 December 2020
Notes
GBP GBP GBP
(unaudited) (unaudited) (audited)
Assets
Cash and cash equivalents 5 1,359,957 9,024,042 2,939,408
Other receivables and prepayments 6 1,129,774 1,107,701 17,094
Financial assets at fair value through profit or loss 8 11,975,731 - 918,259
Loans advanced 7 420,807,466 448,891,684 442,659,649
Total assets 435,272,928 459,023,427 446,534,410
Liabilities
Financial liabilities at fair value through profit or loss 8 - 4,536,384 -
Credit facilities 10 10,215,635 22,931,943 18,626,837
Trade and other payables 9 1,328,457 1,466,674 1,210,066
Total liabilities 11,544,092 28,935,001 19,836,903
Net assets 423,728,836 430,088,426 426,697,507
Capital and reserves
Share capital 407,440,011 411,205,161 408,031,544
Retained earnings 16,182,789 18,526,690 18,369,871
Translation reserve 106,036 356,575 296,092
Total equity 423,728,836 430,088,426 426,697,507
Number of Ordinary Shares in issue 408,911,273 413,219,398 409,571,273
Net asset value per Ordinary Share (pence) 103.62 104.08 104.18
These Unaudited Condensed Consolidated Financial Statements were
approved and authorised for issue by the Board of Directors on 6
September 2021, and signed on its behalf by:
Stephen Smith John Whittle
Chairman Director
The accompanying notes form an integral part of these Unaudited
Condensed Consolidated Financial Statements.
Unaudited Condensed Consolidated Statement of Changes in
Equity
for the period ended 30 June 2021
Share Retained earnings Translation reserve Total equity
Period ended 30 June 2021 capital
GBP GBP GBP
GBP
(unaudited) (unaudited) (unaudited)
(unaudited)
Balance at 1 January 2021 408,031,544 18,369,871 296,092 426,697,507
Share buy backs (591,533) - - (591,533)
Dividends paid - (12,267,338) - (12,267,338)
Operating profit for the period - 10,080,256 - 10,080,256
Other comprehensive income:
Other comprehensive loss for the period - - (190,056) (190,056)
Balance at 30 June 2021 407,440,011 16,182,789 106,036 423,728,836
Share Retained Translation Total
Period ended 30 June 2020 capital earnings reserve equity
GBP GBP GBP GBP
(unaudited) (unaudited) (unaudited) (unaudited)
Balance at 1 January 2020 411,205,161 15,286,245 63,675 426,555,081
Dividends paid - (13,429,630) - (13,429,630)
Operating profit for the period - 16,670,075 - 16,670,075
Other comprehensive income:
Other comprehensive income for the period - - 292,900 292,900
Balance at 30 June 2020 411,205,161 18,526,690 356,575 430,088,426
Share Retained Translation Total
Year ended 31 December 2020 capital earnings reserve equity
GBP GBP GBP GBP
(audited) (audited) (audited) (audited)
Balance at 1 January 2020 411,205,161 15,286,245 63,675 426,555,081
Share buy backs (3,173,617) - - (3,173,617)
Dividends paid - (26,824,860) - (26,824,860)
Operating profit for the year - 29,908,486 - 29,908,486
Other comprehensive income:
Other comprehensive income for the year - - 232,417 232,417
Balance at 31 December 2020 408,031,544 18,369,871 296,092 426,697,507
The accompanying notes form an integral part of these Unaudited
Condensed Consolidated Financial Statements.
Unaudited Condensed Consolidated Statement of Cash Flows
for the period ended 30 June 2021
1 January 1 January 1 January
2021 to 2020 to 2020 to
30 June 2021 30 June 2020 31 December
2020
GBP GBP
GBP
(unaudited) (unaudited)
(audited)
Operating activities:
Operating profit for the period / year 10,138,644 16,670,075 29,990,439
Adjustments
Net interest income (14,472,491) (14,433,090) (29,052,521)
Net changes in fair value of financial assets at fair value through profit or - (1,097,722) (1,097,722)
loss - Credit Linked Notes
Decrease / (increase) in prepayments and receivables 5,535 (1,078,766) 11,841
Increase / (decrease) in trade and other payables 221,199 188,944 (159,467)
Net unrealised (gains) / losses on foreign exchange derivatives (11,057,472) 13,131,462 7,676,819
Net foreign exchange losses / (gains) 12,187,021 (17,346,174) (12,848,644)
Credit facility interest 380,607 508,194 945,771
Credit facility commitment fees 414,060 376,430 762,074
Currency translation difference 180,885 (404,293) (463,709)
Corporate taxes paid (87,724) (82,766) (151,052)
(2,089,736) (3,567,706) (4,386,171)
Loans advanced1 (35,607,633) (85,689,578) (98,731,281)
Loan repayments and amortisation 45,824,727 43,513,026 59,619,767
Credit Linked Notes repayments - 21,773,000 21,773,000
Origination fees paid (199,206) (576,287) (577,233)
Interest, commitment and exit fee income from loans advanced 12,885,675 14,020,648 28,256,205
Interest received on Credit Linked Notes - 1,210,333 1,210,333
Net cash inflow / (outflow) from operating activities 20,813,827 (9,316,564) 7,164,620
Cash flows from investing activities
Shares buy backs (677,120) - (3,088,030)
Dividends paid (12,267,338) (13,429,630) (26,824,860)
Proceeds under credit facility 29,400,000 44,952,688 41,985,860
Repayments under credit facility (37,900,000) (50,472,045) (52,067,717)
Credit facility interest paid (191,809) (293,798) (492,331)
Credit facility commitment fees paid (417,751) (339,296) (616,146)
Credit facility arrangement fees and expenses paid (100,000) - -
Net cash outflow from financing activities (22,154,018) (19,582,081) (41,103,224)
Net decrease in cash and cash equivalents (1,340,191) (28,898,645) (33,938,604)
Cash and cash equivalents at the start of the period / year 2,939,408 36,793,674 36,793,674
Net foreign exchange (losses) / gains on cash and cash equivalents (239,260) 1,129,013 84,338
Cash and cash equivalents at the end of the period / year 1,359,957 9,024,042 2,939,408
1 Net of arrangement fees of GBP357,009 (period ended 30 June
2020: GBP778,691, year ended 31 December 2020: GBP780,584)
withheld.
The accompanying notes form an integral part of these Unaudited
Condensed Consolidated Financial Statements.
Notes to the Unaudited Condensed Consolidated Financial
Statements
for the period ended 30 June 2021
1. GENERAL INFORMATION
Starwood European Real Estate Finance Limited (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 has been authorised by the Guernsey
Financial Services Commission as a registered closed-ended
investment scheme.
On 12 December 2012, the Company announced the results of its
IPO, which raised net proceeds of GBP223.9 million. The Company's
Ordinary Shares were 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. On 10 August 2020 the Company announced the appointment of
Jefferies International Limited as buy-back agent to effect share
buy backs on behalf of the Company. During the period ended 30 June
2021, the Company had repurchased 660,000 (year ended 31 December
2020: 3,648,125) Ordinary Shares at an average price of 89.54 (year
ended 31 December 2020: 86.9) pence per share respectively. These
Ordinary Shares are held in treasury.
The Unaudited Condensed Consolidated Financial Statements
comprise the financial statements of the Company, Starfin Public
Holdco 1 Limited (the "Holdco 1"), Starfin Public Holdco 2 Limited
(the "Holdco 2"), Starfin Lux S.à.r.l ("Luxco"), Starfin Lux 3
S.à.r.l ("Luxco 3") and Starfin Lux 4 S.à.r.l ("Luxco 4") (together
the "Group") as at 30 June 2021.
The Company's investment objective is 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 (including debt instruments) in the UK and wider
European Union's internal market. To pursue its investment
objective, the Company, through the Holdco 1 and Holdco 2 (the
"Holdcos"), invests in the Luxco, Luxco 3 and Luxco 4 (the
"Luxcos") through both equity and profit participation instruments
or other funding instruments. The Luxcos then grant or acquire
loans (or other debt instruments) to borrowers in accordance with
the Group's investment policy.
The Group expects all of its investments to be debt obligations
of corporate entities domiciled or with significant operations in
the UK and the European Union's internal market.
The Company has appointed Starwood European Finance Partners
Limited as the Investment Manager (the "Investment Manager"), a
company incorporated in Guernsey 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. The administration of the Company is delegated
to Apex Fund and Corporate Services (Guernsey) Limited (the
"Administrator").
2. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES
The Company has prepared these Unaudited Condensed Consolidated
Financial Statements on a going concern basis in accordance with
International Accounting Standard 34, "Interim Financial
Reporting", as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. This Interim Financial Report does not
comprise statutory Financial Statements within the meaning of the
Companies (Guernsey) Law, 2008, and should be read in conjunction
with the Consolidated Financial Statements of the Group as at and
for the year ended 31 December 2020, which have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union and the Companies (Guernsey) Law,
2008. The statutory Consolidated Financial Statements for the year
ended 31 December 2020 were approved by the Board of Directors on
25 March 2021. The opinion of the Auditor on those Financial
Statements was unqualified and did not contain an emphasis of
matter. This Interim Financial Report and Unaudited Condensed
Consolidated Financial Statements for the period ended 30 June 2021
has been reviewed by the Auditor but not audited.
There are a number of new and amended accounting standards and
interpretations that became applicable for annual reporting periods
commencing on or after 1 January 2021.
These amendments have not had a significant impact on these
Unaudited Condensed Consolidated Financial Statements and therefore
the additional disclosures associated with first time adoption have
not been made.
The preparation of the Unaudited Condensed Consolidated
Financial Statements requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income
and expenses. Actual results may differ from these estimates.
In preparing these Unaudited Condensed Consolidated Financial
Statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
Annual Consolidated Financial Statements for the year ended 31
December 2020.
3. NET FOREIGN EXCHANGE GAINS / (LOSSES)
30 June 2021 30 June 2020 31 December
2020
GBP GBP GBP
Loans advanced - realised gains 124,994 249,626 647,000
Loans advanced - realised losses (65,004) (1,128,198) (1,134,619)
Forward contracts held at fair value through profit or loss - realised gains 147,710 1,117,973 1,131,404
Forward contracts held at fair value through profit or loss - realised losses (296,355) (75,586) (328,698)
Other - realised gains 189,031 3,460 1,229
Other - realised losses (51,454) (468,567) (422,347)
Loans advanced - unrealised gains - 17,713,996 13,776,618
Loans advanced - unrealised losses (12,385,596) - -
Forward contracts held at fair value through profit or loss - unrealised 11,817,856 319,915 397,778
gains
Forward contracts held at fair value through profit or loss - unrealised (760,384) (13,451,378) (8,074,598)
losses
(1,279,202) 4,281,241 5,993,767
4. EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
The calculation of basic earnings per Ordinary Share is based on
the operating profit of GBP10,080,256 (30 June 2020: GBP16,670,075
and 31 December 2020: GBP29,908,486) and on the weighted average
number of Ordinary Shares in issue at 30 June 2021 of 408,968,207
(30 June 2020: 413,219,398 and 31 December 2020: 412,469,890).
The calculation of NAV per Ordinary Share is based on a NAV of
GBP423,728,836 (30 June 2020: GBP430,088,426 and 31 December 2020:
GBP426,697,507) and the actual number of Ordinary Shares in issue
at 30 June 2021 of 408,911,273 (30 June 2020: 413,219,398 and 31
December 2020: 409,571,273).
5. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise the following:
30 June 2021 30 June 2020 31 December 2020
GBP GBP GBP
Cash at bank 1,359,957 9,024,042 2,939,408
Cash and cash equivalents comprises cash and short-term deposits
held with various banking institutions with original maturities of
three months or less.
6. OTHER RECEIVABLES AND REPAYMENTS
30 June 2021 30 June 2020 31 December 2020
GBP GBP GBP
Prepayments 11,559 12,198 17,094
Taxation prepayments 22,712 - -
Investment interest receivable 1,095,5031 1,095,5031 -
1,129,774 1,107,701 17,094
1 Investment interest receivables are related to Hotel &
Residential, UK and were received on 1 July 2021 and 1 July 2020
respectively.
7. LOANS ADVANCED
30 June 2021 30 June 2020 31 December 2020
GBP GBP GBP
UK
Hotel & Residential 49,918,080 49,918,078 49,914,595
Hospitals 25,357,713 25,355,368 25,362,367
Residential, London - 37,450,724 25,124,499
Hotel, North Berwick 13,127,256 10,522,972 10,497,593
Hotel, Scotland 37,910,554 25,841,675 26,727,408
Hotel, Oxford 16,744,853 16,727,400 16,705,485
Life Science, UK 19,594,589 - -
Office, London 13,764,463 12,964,026 13,368,457
Office, Scotland 5,017,965 4,688,936 4,894,738
Logistics Portfolio 552,699 11,905,419 11,981,154
Ireland
Hotel, Dublin 52,119,113 55,484,069 54,730,169
Office Portfolio, Dublin 30,233,451 32,217,021 31,753,439
Mixed use, Dublin 3,843,782 1,870,185 3,112,893
Spain
Three Shopping Centres 31,273,245 34,097,509 33,367,582
Hotel 46,564,064 39,590,856 47,379,721
Office, Madrid 15,991,232 17,015,583 16,792,398
Shopping Centre 15,000,520 15,792,369 15,653,661
Office Portfolio 13,474,355 19,669,822 19,375,687
Germany
Logistics Portfolio 5,078,596 5,957,035 5,909,892
Europe
Mixed Portfolio 25,240,936 31,822,637 30,007,911
420,807,466 448,891,684 442,659,649
No element of loans advanced are past due or impaired. For
further information and the associated risks see the Investment
Manager's Report.
The table below reconciles the movement of the carrying value of
loans advanced in the period / year:
30 June 2021 30 June 2020 31 December 2020
GBP GBP GBP
Loans advanced at the start of the period / year 442,659,649 390,647,516 390,647,516
Loans advanced 35,964,642 84,751,266 97,794,862
Loan repayments and amortisation (45,824,727) (43,513,026) (59,619,767)
Arrangement fees earned (357,009) (778,691) (780,584)
Commitment fees earned (365,634) (683,762) (1,215,996)
Exit fees earned (485,435) (243,680) (250,772)
Origination fees paid 199,206 545,248 546,194
Effective interest earned 14,472,491 14,433,090 29,052,521
Interest payments received (13,130,109) (13,093,206) (26,789,437)
Foreign exchange (losses) / gains (12,325,608) 16,826,929 13,275,112
Loans advanced at the end of the period / year 420,807,466 448,891,684 442,659,649
Loans advanced at fair value 436,334,012 462,295,383 459,549,015
For further information on the fair value of loans advanced,
refer to note 13.
8. FINANCIAL ASSETS AND FINANCIAL LIABILITIES AT FAIR VALUE
THROUGH PROFIT OR LOSS
Financial assets at fair value through profit or loss comprise
currency forward contracts which represent contractual obligations
to purchase domestic currency and sell foreign currency on a future
date at a specified price.
The underlying instruments of currency forwards become
favourable (assets) or unfavourable (liabilities) as a result of
fluctuations of foreign exchange rates relative to their terms. The
aggregate contractual or notional amount of derivative financial
instruments, the extent to which instruments are favourable or
unfavourable, and thus the aggregate fair values of derivative
financial assets and liabilities, can fluctuate significantly from
time to time. The foreign exchange derivatives are subject to
offsetting, enforceable master netting agreements for each
counterparty.
The gains and losses relating to the currency forwards are
included within "Net foreign exchange (losses) / gains" in the
Unaudited Condensed Consolidated Statement of Comprehensive
Income.
The fair value of financial assets and liabilities at fair value
through profit or loss are set out below:
Notional contract Fair values
30 June 2021 amount1 Assets Liabilities Total
GBP
GBP GBP GBP
Foreign exchange derivatives
Currency forwards:
Lloyds Bank plc 248,024,170 12,724,121 (748,391) 11,975,731
Total 248,024,170 12,724,121 (748,391) 11,975,731
Notional contract Fair values
30 June 2020 amount1 Assets Liabilities Total
GBP GBP GBP GBP
Foreign exchange derivatives
Currency forwards:
Lloyds Bank plc 303,343,342 1,142,927 (5,679,311) (4,536,384)
Total 303,343,342 1,142,927 (5,679,311) (4,536,384)
Notional contract Fair values
31 December 2020 amount1 Assets Liabilities Total
GBP GBP GBP GBP
Foreign exchange derivatives
Currency forwards:
Lloyds Bank plc 273,442,149 3,897,550 (2,979,291) 918,259
Total 273,442,149 3,897,550 (2,979,291) 918,259
1 Euro amounts are translated at the period / year end exchange
rate
9. TRADE AND OTHER PAYABLES
30 June 2021 30 June 2020 31 December 2020
GBP GBP GBP
Investment management fees payable 785,134 795,148 799,584
Audit fees payable 188,315 182,996 98,902
Commitment fees payable 156,340 144,124 161,430
Accrued expenses 89,444 - 17,079
Administration fees payable 24,137 79,167 7,771
Legal and professional fees payable 58,087 - 5,000
Directors' fees payable 2,000 - -
Broker fees payable 25,000 - 25,000
Refinancing and restructuring fees payable - 208,558 -
Share buyback payable - - 85,587
Tax provision - 56,681 9,713
1,328,457 1,466,674 1,210,066
10. CREDIT FACILITIES
Under its investment policy, the Group is limited to borrowing
an amount equivalent to a maximum of 30 per cent of its NAV at the
time of drawdown, of which a maximum of 20 per cent can be longer
term borrowings. In calculating the Group's borrowings for this
purpose, any liabilities incurred under the Group's foreign
exchange hedging arrangements shall be disregarded.
As at 30 June 2021 an amount of GBP11,000,000 (30 June 2020:
GBP24,062,500 and 31 December 2020: GBP19,500,000) was drawn and
interest of GBP17,667 (30 June 2020: GBP23,144 and 31 December
2020: GBP69,585) was payable.
The revolving credit facility capitalised costs are directly
attributable costs incurred in relation to the establishment of the
credit loan facilities and an amount of GBP802,032 (30 June 2020:
GBP1,153,701 and 31 December 2020: GBP942,748) was netted off
against the loan facilities outstanding.
The Group has maintained sufficient headroom against the
measures under, and is full compliance with, all loan
covenants.
The changes in liabilities arising from financing activities are
shown in the table below.
30 June 2021 30 June 2020 31 December 2020
GBP GBP GBP
Borrowings at the start of the period /year 18,626,837 28,359,047 28,359,047
Proceeds during the period / year 29,400,000 44,952,688 41,985,860
Repayments during the period / year (37,900,000) (50,472,045) (52,067,717)
Interest expense recognised for the period / year 139,892 301,993 558,323
Interest paid during the period / year (191,809) (293,798) (492,331)
Credit facility fees incurred (100,000) - -
Credit facility amortisation of fees 240,715 206,201 387,448
Foreign exchange and translation difference - (122,143) (103,793)
Borrowings at the end of the period/year 10,215,635 22,931,943 18,626,837
11. DIVIDS
Dividends will be declared by the Directors and paid in
compliance with the solvency test prescribed by Guernsey law. Under
Guernsey law, companies can pay dividends in excess of accounting
profit provided they satisfy the solvency test prescribed by the
Companies (Guernsey) Law, 2008. The solvency test considers whether
a company is able to pay its debts when they fall due, and whether
the value of a company's assets is greater than its liabilities.
The Company passed the solvency test for each dividend paid.
Subject to market conditions, the financial position of the
Company and the investment outlook, it is the Directors' intention
to continue to pay quarterly dividends to Shareholders (for more
information see Chairman's Statement).
The Company paid the following dividends in respect of the
period to 30 June 2021:
Dividend rate per Share (pence) Net dividend Payment date
paid (GBP)
Period to:
31 March 2021 1.375 5,622,530 04 June 2021
After the end of the period, the Directors declared a dividend
in respect of the financial period ended 30 June 2021 of 1.375
pence per share which was paid on 3 September 2021 to Shareholders
on the register on 6 August 2021.
The Company paid the following dividends in respect of the year
to 31 December 2020:
Dividend rate per Share (pence) Net dividend Payment date
paid (GBP)
Period to:
31 March 2020 1.625 6,714,815 20 May 2020
30 June 2020 1.625 6,714,815 28 August 2020
30 September 2020 1.625 6,680,414 20 November 2020
31 December 2020 1.625 6,644,808 05 March 2021
12. RISK MANAGEMENT POLICIES AND PROCEDURES
The COVID-19 outbreak is an ongoing situation that is evolving
and changing on a weekly basis. There has been a negative impact on
global economies and the future impact and outcome is still largely
unknown. While the outbreak has had a significant negative impact
on a lot of businesses worldwide, it has also created opportunities
in other sectors. The Directors continue to monitor the impact on
the Group and its investments.
The Group through its investment in whole loans, subordinated
loans, mezzanine loans, bridge loans, loan-on-loan financings and
other debt instruments is exposed to a variety of financial risks,
including market risk (including currency risk and interest rate
risk), credit risk and liquidity risk. The Group's overall risk
management programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the
Group's financial performance.
The Directors monitor and measure the overall risk bearing
capacity in relation to the aggregate risk exposure across all risk
types and activities. Even though the risks detailed in the Annual
Report and Financial Statements for the year ended 31 December 2020
still remain appropriate, further information regarding these risk
policies are outlined below:
(i) Market risk
If a borrower defaults on a loan and the real estate market
enters a downturn it could materially and adversely affect the
value of the collateral over which loans are secured. However, this
risk is considered by the Board to constitute credit risk as it
relates to the borrower defaulting on the loan and not directly to
any movements in the real estate market. The Group's exposure to
market price risk arose from Credit Linked Notes held by the Group
and classified as assets at fair value through profit or loss. The
Investment Manager regularly monitored the fair value of credit
linked notes (repaid in 2020 and no longer outstanding) and no
specific hedging activities were undertaken in relation to this
investment.
The Investment Manager moderates market risk through a careful
selection of loans within specified limits. The Group's overall
market position is monitored by the Investment Manager and is
reviewed by the Board of Directors on an ongoing basis.
a) Currency risk
The Group, via the subsidiaries, operates across Europe and
invests in loans that are denominated in currencies other than the
functional currency of the Company.
Consequently, the Group is exposed to risks arising from foreign
exchange rate fluctuations in respect of these loans and other
assets and liabilities which relate to currency flows from revenues
and expenses. Exposure to foreign currency risk is hedged and
monitored by the Investment Manager on an ongoing basis and is
reported to the Board accordingly.
b) Interest rate risk
Interest rate risk is the risk that the value of financial
instruments and related income from loans advanced and cash and
cash equivalents will fluctuate due to changes in market interest
rates.
The majority of the Group's financial assets are loans advanced
at amortised cost, credit linked notes (repaid in 2020 and no
longer outstanding), receivables, receivables and cash and cash
equivalents. The Group's investments have some exposure to interest
rate risk which is limited to interest earned on cash deposits and
floating interbank rate exposure for investments designated as
loans advanced. Loans advanced have been structured to include a
combination of fixed and floating interest rates to reduce the
overall impact of interest rate movements. Further protection is
provided by including interbank rate floors and preventing interest
rates from falling below certain levels.
The Investment Adviser is monitoring the transition from LIBOR
to SONIA and will manage any transition required on behalf of the
Group. The Group has ensured that loan agreements for the current
portfolio are in a form which accommodates the flexibilities
required to manage the transition.
(ii) Credit risk
Credit risk is the risk that a counterparty will be unable to
pay amounts in full when due. The Group's main credit risk exposure
is in the investment portfolio, shown as loans advanced at
amortised cost and credit linked notes (repaid in 2020 and no
longer outstanding) designated at fair value through profit or
loss, where the Group invests in whole loans and also subordinated
and mezzanine debt which rank behind senior debt for repayment in
the event that a borrower defaults. There is a spread concentration
of risk as at 30 June 2021 due to several loans being advanced
since inception. There is also credit risk in respect of other
financial assets as a portion of the Group's assets are cash and
cash equivalents or accrued interest. The banks used to hold cash
and cash equivalents have been diversified to spread the credit
risk to which the Group is exposed. The Group also has credit risk
exposure in its derivative financial instruments which is
diversified between hedge providers in order to spread credit risk
to which the Group is exposed. At period end our derivative
exposures were with one counterparty.
With respect to the credit linked notes designated at fair value
through profit or loss, the Group held junior notes linked to the
performance of a portfolio of high-quality UK real estate loans
owned by a major commercial bank. The credit linked notes were
repaid in June 2020. The transaction was structured as a synthetic
securitisation with risk transfer from the bank to the Group
achieved via the purchase of credit protection by the bank on the
most junior tranches. The credit risk to the Group was the risk
that one of the underlying borrowers defaulted on their loan and
the Group being required to make a payment under the credit
protection agreement.
The total exposure to credit risk arises from default of the
counterparty and the carrying amounts of financial assets best
represent the maximum credit risk exposure at the end of the
reporting period. As at 30 June 2021, the maximum credit risk
exposure was GBP435,238,657 (30 June 2020: GBP459,011,229 and 31
December 2020: GBP446,517,316).
The Investment Manager has adopted procedures to reduce credit
risk exposure by conducting credit analysis of the counterparties,
their business and reputation which is monitored on an ongoing
basis. After the advancing of a loan a dedicated debt asset manager
employed by the Investment Adviser monitors ongoing credit risk and
reports to the Investment Manager, with quarterly updates also
provided to the Board. The debt asset manager routinely stresses
and analyses the profile of the Group's underlying risk in terms of
exposure to significant tenants, performance of asset management
teams and property managers against specific milestones that are
typically agreed at the time of the original loan underwriting,
forecasting headroom against covenants, reviewing market data and
forecast economic trends to benchmark borrower performance and to
assist in identifying potential future stress points. Periodic
physical inspections of assets that form part of the Group's
security are also completed in addition to monitoring the
identified capital expenditure requirements against actual borrower
investment.
The Group measures credit risk and expected credit losses using
probability of default, exposure at default and loss given default.
The Directors consider both historical analysis and forward looking
information in determining any expected credit loss. The Directors
consider the loss given default to be close to zero as all loans
are the subject of very detailed underwriting, including the
testing of resilience to aggressive downside scenarios with respect
to the loan specifics, the market and general macro changes. In
addition to this, all loans have very robust covenants in place,
strong security packages and significant loan-to-value headroom.
Despite the fact that six loans with a carrying value of
GBP160,620,492 (31 December 2020: the same six loans amounting to
GBP150,331,450) have been classified as Stage 2 since 30 June 2020
(refer to the Investment Manager's Report), no loss allowance has
been recognised based on 12-month and lifetime expected credit
losses for Stage 1 and Stage 2 loans advanced respectively, as
based on the information available there is no reason to believe
that there has been any impairment in the value of the loans held
by the Group. No loans have been moved to Stage 2 or to Stage 3
during 2021. Subsequent to 30 June 2021 one of the loans classified
as Stage 2 (with a 30 June 2021 carrying value of GBP46,564,064)
was repaid by the borrower.
(iii) Liquidity risk
Liquidity risk is the risk that the Group will not have
sufficient resources available to meet its liabilities as they fall
due. The Group's loans advanced are illiquid and may be difficult
or impossible to realise for cash at short notice.
The Group manages its liquidity risk through short term and
long-term cash flow forecasts to ensure it is able to meet its
obligations. In addition, the Company is permitted to borrow up to
30 per cent of NAV and has entered into revolving credit facilities
totalling GBP126,000,000 (30 June 2020: GBP126,000,000 and 31
December 2020: GBP126,000,000) of which GBP11,000,000 was drawn on
30 June 2021 (30 June 2020: GBP24,062,500 and 31 December 2020:
GBP19,500,000).
As at 30 June 2021, the Group had GBP1,359,957 (30 June 2020:
GBP9,024,042 and 31 December 2020: GBP2,939,408) available in cash
and GBP1,328,457 (30 June 2020: GBP1,466,674 and 31 December 2020:
GBP1,210,066) trade payables. The Directors considered this to be
sufficient cash available, together with the undrawn facilities on
the credit facilities, to meet the Group's liabilities.
13. FAIR VALUE MEASUREMENT
IFRS 13 requires the Company to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
has the following levels: i. Quoted prices (unadjusted) in active
markets for identical assets or liabilities (level 1); ii. Inputs
other than quoted prices included within level 1 that are
observable for the asset or liability,either directly (that is, as
prices) or indirectly (that is, derived from prices including
interest rates, yieldcurves, volatilities, prepayment rates, credit
risks and default rates) or other market corroborated inputs
(level2); and iii. Inputs for the asset or liability that are not
based on observable market data (that is, unobservableinputs)
(level 3).
The following table analyses within the fair value hierarchy the
Group's financial assets and liabilities (by class) measured at
fair value:
30 June 2021 Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Assets
Derivative assets - 11,975,731 - 11,975,731
Total - 11,975,731 - 11,975,731
30 June 2020 Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Liabilities
Derivative liabilities - (4,536,384) - (4,536,384)
Total - (4,536,384) - (4,536,384)
31 December 2020 Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Assets
Derivative assets - 918,259 - 918,259
Total - 918,259 - 918,259
There have been no transfers between levels for the period ended
30 June 2021 (30 June 2020: GBPnil and 31 December 2020:
GBPnil).
The Directors are responsible for considering the methodology
and assumptions used by the Investment Adviser and for approving
the fair values reported at the financial period end.
The movement in level 3 instruments, the Credit Linked Notes
(which were repaid in June 2020), are presented in the table
below.
30 31 December
June 30 June 2020 2020
2021
GBP GBP GBP
Balance at the start of the period / year - 21,885,611 21,885,611
Cash interest received - (1,210,333) (1,210,333)
Net gains recognised in profit or loss(1) - 1,097,722 1,097,722
Loan repayments - (21,773,000) (21,773,000)
Balance at the end of the period / year - - -
Changes in unrealised gains or losses for Level 3 assets held at period/ year end and
included in net changes in fair value of financial assets at fair value through profit - - -
or loss
1 The net gains for the period ended 30 June 2021 comprise of
GBPnil interest income on CLNs (period ended 30 June 2020:
GBP1,097,722, year ended 31 December 2020: GBP1,097,722).
The following table summarises within the fair value hierarchy
the Group's assets and liabilities (by class) not measured at fair
value but for which fair value is disclosed:
30 June 2021 Level 1 Level 2 Level 3 Total Total carrying amount
fair values
GBP GBP GBP GBP GBP
Assets
Loans advanced - - 436,334,012 436,334,012 420,807,466
Total - - 436,334,012 436,334,012 420,807,466
Liabilities
Credit facilities - 10,215,635 - 10,215,635 10,215,635
Total - 10,215,635 - 10,215,635 10,215,635
30 June 2020 Level 1 Level 2 Level 3 Total Total carrying amount
fair values
GBP GBP GBP GBP GBP
Assets
Loans advanced - - 462,295,383 462,295,383 448,891,684
Total - - 462,295,383 462,295,383 448,891,684
Liabilities
Credit facilities - 22,931,943 - 22,931,943 22,931,943
Total - 22,931,943 - 22,931,943 22,931,943
31 December 2020 Level 1 Level 2 Level 3 Total Total carrying amount
fair values
GBP GBP GBP GBP GBP
Assets
Loans advanced - - 459,549,015 459,549,015 442,659,649
Total - - 459,549,015 459,549,015 442,659,649
Liabilities
Credit facilities - 18,626,837 - 18,626,837 18,626,837
Total - 18,626,837 - 18,626,837 18,626,837
For cash and cash equivalents, other receivables and trade and
other payables the carrying amount is a reasonable approximation of
the fair value, hence they have not been included in the tables
above.
The carrying values of the revolving credit facilities included
in the above tables are considered to approximate its fair values.
The fair value of loans advanced has been determined by discounting
the expected cash flows using a discounted cash flow model. For the
avoidance of doubt, the Group carries its loans advanced at
amortised cost in the Unaudited Condensed Consolidated Financial
Statements, consistent with the requirement of IFRS 9 as the
Group's intention and business model is to collect both interest
and the capital repayments thereof.
Cash and cash equivalents include cash at hand and fixed
deposits held with banks. Other receivables and prepayments include
the contractual amounts and obligations due to the Group and
consideration for advance payments made by the Group. Credit
facilities and trade and other payables represent the contractual
amounts and obligations due by the Group for contractual
payments.
14. TAXATION
The Company is exempt from Guernsey taxation under the Income
Tax (Exempt Bodies) (Guernsey) Ordinance 1989 for which it pays an
annual fee of GBP1,200. The Luxembourg indirect subsidiaries of the
Company are subject to the applicable tax regulations in
Luxembourg.
The Luxco had no operating gains on ordinary activities before
taxation and is therefore subject to the Luxembourg minimum
corporate income taxation at EUR4,815 per annum (year ended 31
December 2020: EUR4,815). The Luxco 3 and Luxco 4 are subject to
Corporate Income Tax and Municipal Business Tax based on a margin
calculated on an arm's-length principle. The effective tax rate in
Luxembourg during the reporting period was 24.94% (year ended 31
December 2020: 24.94%).
15. RELATED PARTY TRANSACTIONS
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party in making financial or operational
decisions.
The tables below summarise the outstanding balances and
transactions which occurred with related parties.
Outstanding at Outstanding at Outstanding at
30 June 2021 30 June 2020 31 December 2020
GBP GBP GBP
Investment Manager
Investment management fees payable 785,134 795,148 799,584
For the period ended For the period ended For the year ended
30 June 2021 30 June 2020 31 December 2020
GBP GBP GBP
Directors' fees and expenses paid
Stephen Smith 25,000 25,000 50,000
John Whittle 22,500 22,500 45,000
Jonathan Bridel (resigned 31 December 2020) - 21,250 42,500
Shelagh Mason (appointed 1 September 2020) 20,000 - 13,333
Charlotte Denton (appointed 1 January 2021) 20,000 - -
Expenses paid 2,000 1,241 1,731
Investment Manager
Investment management fees earned 1,561,503 1,584,891 3,186,943
Origination fees 199,206 545,248 546,194
Expenses 59,984 43,413 68,279
The tables below summarise the dividends paid to and number of
Company's shares held by related parties.
Dividends paid for Dividends paid for Dividends paid for
the period ended the period ended the year ended
30 June 2021 30 June 2020 31 December 2020
GBP GBP GBP
Starwood Property Trust Inc. 274,200 297,050 594,100
SCG Starfin Investor LP 68,550 74,262 148,525
Stephen Smith 2,368 2,565 5,130
John Whittle 716 581 1,356
Jonathan Bridel (resigned 31 December 2020) - 386 771
Shelagh Mason (appointed 1 September 2020) 1,839 - 287
Charlotte Denton (appointed 1 January 2021) - - -
Duncan MacPherson* 5,896 - 8,333
Lorcain Egan* 2,200 - 3,818
As at As at As at
30 June 2021 30 June 2020 31 December 2020
Number of shares Number of shares Number of shares
Starwood Property Trust Inc. 9,140,000 9,140,000 9,140,000
SCG Starfin Investor LP 2,285,000 2,285,000 2,285,000
Stephen Smith 78,929 78,929 78,929
John Whittle 23,866 23,866 23,866
Jonathan Bridel (resigned 31 December 2020) - 11,866 11,866
Shelagh Mason (appointed 1 September 2020) 112,819 - 17,688
Charlotte Denton (appointed 1 January 2021) - - -
Duncan MacPherson* 250,000 133,333 133,333
Lorcain Egan* 83,678 61,093 61,093
* Employees at the Investment Adviser
Other
The Group continues to participate in a number of loans in which
Starwood Property Trust, Inc. ("STWD") acted as a co-lender. The
details of these loans are shown in the table below.
Loan
Hotel and Residential, UK
Hotel, Spain
Mixed Portfolio, Europe
Office Portfolio, Spain
Office Portfolio, Ireland
16. EVENTS AFTER THE REPORTING PERIOD
The following significant cash amounts have been funded since
the period end, up to the date of publication of this report:
Local Currency
Hotel, Scotland GBP3,330,083
Hotel, Oxford GBP3,032,825
Mixed Use, Dublin EUR406,374
Office Portfolio, Spain EUR109,893
Office, Scotland GBP56,922
The following loan amortisation (both scheduled and unscheduled)
has been received since the period end, up to the date of
publication of this report:
Local Currency
Office Portfolio, Ireland EUR2,989,706
Mixed Portfolio, Europe EUR480,682
Three Shopping Centres, Spain EUR317,344
On 21 July 2021 the Group announced that it had closed a 13.5
million floating rate whole acquisition loan secured by a portfolio
of a mixed use hotel and office property.
On 23 July 2021, the Company declared a dividend of 1.375 pence
per Ordinary share payable to shareholders on the register on 6
August 2021.
On 11th August 2021 the Group announced that during July 2021 it
received the full and final repayment of its 54.2m loan on a resort
hotel in Spain.
On 6 September 2021 the Board appointed Gary Yardley as a
non-executive Director.
Alternative Performance Measures
In accordance with ESMA Guidelines on Alternative Performance
Measures ("APMs") the Board has considered what APMs are included
in the Interim Financial Report and Unaudited Condensed
Consolidated Financial Statements which require further
clarification. An APM is defined as a financial measure of
historical or future financial performance, financial position, or
cash flows, other than a financial measure defined or specified in
the applicable financial reporting framework. APMs included in the
financial statements, which are unaudited and outside the scope of
IFRS, are deemed to be as follows:
NAV PER ORDINARY SHARE
The NAV per Ordinary Share represents the net assets
attributable to equity shareholders divided by the number of
Ordinary Shares in issue, excluding any shares held in treasury.
The NAV per Ordinary Share is published monthly. This APM relates
to past performance and is used as a comparison to the share price
per Ordinary Share to assess performance. There are no reconciling
items between this calculation and the Net Asset Value shown on the
balance sheet (other than to calculate by Ordinary Share).
NAV TOTAL RETURN
The NAV total return measures the combined effect of any
dividends paid, together with the rise or fall in the NAV per
Ordinary Share. This APM relates to past performance and takes into
account both capital returns and dividends paid to shareholders.
Any dividends received by a shareholder are assumed to have been
reinvested in the assets of the Company at its NAV per Ordinary
Share.
SHARE PRICE TOTAL RETURN
The share price total return measures the combined effects of
any dividends paid, together with the rise or fall in the share
price. This APM relates to past performance and assesses the impact
of movements in the share price on total returns to investors. Any
dividends received by a shareholder are assumed to have been
reinvested in additional shares of the Company at the time the
shares were quoted ex-dividend.
NAV TO MARKET PRICE DISCOUNT / PREMIUM
The discount / premium is the amount by which the share price of
the Company is lower (discount) or higher (premium) than the NAV
per Ordinary Share at the date of reporting and relates to past
performance. The discount or premium is normally expressed as a
percentage of the NAV per Ordinary Share.
INVESTED LOAN PORTFOLIO UNLEVERED ANNUALISED TOTAL RETURN
The unlevered annualised return is a calculation at the
reporting date of the estimated annual return on the portfolio at
that point in time. It is calculated individually for each loan by
summing the one-off fees earned (such as up-front arrangement or
exit fees charged on repayment) and dividing these over the full
contractual term of the loan, and adding this to the annual
returns. Where a loan is floating rate (partially or in whole or
with floors), the returns are based on an assumed profile for
future interbank rates, but the actual rate received may be higher
or lower. The return is calculated only on amounts funded at the
reporting date and excludes committed but undrawn loans and
excludes cash un- invested. The calculation also excludes
origination fees paid to the Investment Manager, which are
accounted for within the interest line in the financial
statements.
An average, weighted by loan amount, is then calculated for the
portfolio.
This APM gives an indication of the future performance of the
portfolio (as constituted at the reporting date). The calculation,
if the portfolio remained unchanged, could be used to estimate
"income from loans advanced" in the Consolidated Statement of
Comprehensive Income if adjusted for the origination fee of 0.75
basis points amortised over the average life of the loan. The
figure actually realised may be different due to the following
reasons:
? In the quoted return, we amortise all one-off fees (such as
arrangement and exit fees) over the contractual life of the loan,
which is currently four years for the portfolio. However, it has
been our experience that loans tend to repay after approximately
2.5 years and as such, these fees are actually amortised over a
shorter period.
? Many loans benefit from prepayment provisions, which means
that if they are repaid before the end of the protected period,
additional interest or fees become due. As we quote the return
based on the contractual life of the loan these returns cannot be
forecast in the return.
? The quoted return excludes the impact of any foreign exchange
gains/losses on Euro loans. We did not forecast this as the loans
are often repaid early and the gains/losses may be different than
this once hedge positions are settled.
Generally speaking, the actual annualised total return is likely
to be higher than the reported return for these reasons, but this
is not incorporated in the reported figure, as the benefit of these
items cannot be assumed.
PORTFOLIO LEVERED ANNUALISED TOTAL RETURN
The levered annualised total return is calculated on the same
basis as the unlevered annual return but takes into account the
amount of leverage in the Group and the cost of that leverage at
current LIBOR/EURIBOR rates.
ONGOING CHARGES PERCENTAGE
Ongoing charges represents the management fee and all other
operating expenses excluding finance costs and transactions costs,
expressed as a percentage of the average monthly net asset values
during the year and allows users to assess the running costs of the
Group. This is calculated in accordance with AIC guidance and
relates to past performance. The charges include the following
lines items within the Consolidated Statement of Comprehensive
Income:
-- Investment management fees
-- Administration fees
-- Audit and non-audit fees
-- Other expenses
-- Legal and professional fees
-- Directors' fees and expenses
-- Broker's fees and expenses
-- Agency fees
The calculation adds back any expenses unlikely to occur absent
any loan originations or repayments and as such, the costs
associated with hedging Euro loans back to sterling have been added
back. The calculation does not include origination fees paid to the
Investment Manager; these are recognised through "Income from loans
advanced".
WEIGHTED AVERAGE PORTFOLIO LTV TO GROUP FIRST AND LAST GBP
These are calculations made as at the quarterly reporting date
of the loan to value ("LTV") on each loan at the lowest and highest
point in the capital stack in which the Group participates. LTV to
"Group last GBP" means the percentage which the total loan
commitment 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 quarterly reporting date. LTV to "first
Group GBP" means the starting point of the loan to value range of
the loan commitments (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 project.
An average, weighted by the loan amount, is then calculated for
the portfolio.
This APM provides an assessment of future credit risk within the
portfolio and does not directly relate to any financial statement
line items.
PERCENTAGE OF INVESTED PORTFOLIO IN FLOATING RATE LOANS
This is a calculation made as at the quarterly reporting date,
which calculates the value of loans, which have an element of
floating rate in part, in whole and including loans with floors, as
a percentage of the total value of loans. This APM provides an
assessment of potential future volatility of the income on loans,
as a large percentage of floating rate loans would mean that income
would move up or down with changes in EURIBOR or LIBOR.
AVERAGE LOAN TERM AND AVERAGE REMAINING LOAN TERM
The average loan term is calculated at the quarterly reporting
date by calculating the average length of each loan from initial
advance to the contractual termination date. An average, weighted
by the loan amount, is then calculated for the portfolio.
The average remaining loan term is calculated at the quarterly
reporting date by calculating the average length of each loan from
the quarterly reporting date to the contractual termination date.
An average, weighted by the loan amount, is then calculated for the
portfolio.
This APM provides an assessment of the likely level of
repayments occurring in future years (absent any early repayments)
which will need to be reinvested. In the past, the actual term of
loans has been shorter than the average contractual loan term due
to early repayments and so the level of repayments is likely to be
higher than this APM would suggest. However, this shorter actual
loan term cannot be assumed as it may not occur and therefore it is
not reported as part of this APM.
NET CASH / DEBT
Net cash is the result of the Group's total cash and cash
equivalents minus total credit facility utilised as reported on its
consolidated financial statements.
UNUSED LIQUID FACILITIES
Unused liquid facilities is the result of the Group's total cash
and cash equivalents plus the available balance to withdraw under
existing credit facilities at the reporting date.
PORTFOLIO DIVERSIFICATION
The portfolio diversification statistics are calculated by
allocating each loan to the relevant sectors and countries based on
the value of the underlying assets. This is then summed for the
entire portfolio and a percentage calculated for each sector /
country.
This APM provides an assessment of future risk within the
portfolio due to exposure to specific sectors or countries and does
not directly relate to any financial statement line items.
Further Information
Corporate Information
Registered Office
Directors 1 Royal Plaza
Stephen Smith (non-executive Chairman)
John Whittle (non-executive Director) Royal Avenue
Shelagh Mason (non-executive Director)
Charlotte Denton (non-executive Director) St Peter Port
(all care of the registered office)
Guernsey
Investment Manager
Starwood European Finance Partners Limited GY1 2HL
1 Royal Plaza Investment Adviser
Royal Avenue Starwood Capital Europe Advisers, LLP
2nd Floor
St Peter Port
One Eagle Place
Guernsey St. James's London
GY1 2HL SW1Y 6AF
United Kingdom
Solicitors to the Company (as to English law and U.S. securities law)
Norton Rose LLP
Advocates to the Company (as to Guernsey law)
3 More London Riverside
London Carey Olsen
SE1 2AQ PO Box 98
United Kingdom
Carey House, Les Banques St Peter Port
Registrar
Guernsey
Computershare Investor Services (Guernsey) Limited
GY1 4HP
3rd Floor
Natwest House Independent Auditor
Le Truchot
PricewaterhouseCoopers CI LLP
St Peter Port
Guernsey Royal Bank Place
GY1 1WD
1 Glategny Esplanade
Sole Broker
St Peter Port
Jefferies Group LLC
Guernsey
100 Bishopsgate
GY1 4ND
London, EC2N 4JL
Principal Bankers
United Kingdom
Barclays Private Clients International Limited
Administrator, Designated Manager and Company Secretary
PO Box 41
Apex Fund and Corporate Services (Guernsey) Limited
Le Marchant House
1 Royal Plaza
St Peter Port
Royal Avenue
Guernsey
St Peter Port
GY1 3BE
Guernsey
Website:
GY1 2HL
www.starwoodeuropeanfinance.com
-----------------------------------------------------------------------------------------------------------------------
ISIN: GG00B79WC100
Category Code: IR
TIDM: SWEF
LEI Code: 5493004YMVUQ9Z7JGZ50
Sequence No.: 121582
EQS News ID: 1231583
End of Announcement EQS News Service
=------------------------------------------------------------------------------------
Image link:
https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=show_t_gif&application_id=1231583&application_name=news
(END) Dow Jones Newswires
September 07, 2021 02:01 ET (06:01 GMT)
Starwood European Real E... (LSE:SWEF)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Starwood European Real E... (LSE:SWEF)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024
