27 January 2015

Starwood European Real Estate Finance Limited: Quarterly Factsheet Publication

Starwood European Real Estate Finance Limited (the "Company") announces that the factsheet for the fourth quarter ended on 31 December 2014 is available at:

www.starwoodeuropeanfinance.com

Extracted text of the commentary is set out below:

"The last quarter of 2014 saw the Company effectively mature through the implementation of a number of highly orchestrated actions. 

Three actions were undertaken so that the Company could commit to two new loans amounting to £51.9 million and commit a further £5 million to the Centre Point financing, whilst also ensuring coverage of future commitments and minimising current and future potential cash drag.

Firstly the €35.9 million syndication of the Industrial Portfolio in the Netherlands was achieved in early December at slightly better terms than originally underwritten. The timing was deliberately set to match the likely new investment needs that occurred a few weeks later.

Secondly the directors carefully set portfolio diversification and loan exposure levels on larger new investments working closely with Starwood Property Trust (NYSE: STWD).

Thirdly the board felt it was now appropriate to introduce a liquidity facility given all available liquidity was broadly committed, with additional investment needs now crystallising. A facility was signed in December giving the Company enhanced flexibility. Further detail is set out in the factsheet, but in summary the facility provides immediate coverage to existing unfunded commitments and, being multi-currency, helps mitigate FX risks on new non-sterling commitments (where  a syndication is envisaged) and allows cash drag to be mitigated through the short term warehousing of new investments prior to refinancing with loan repayment receipts or additional equity.

As 2015 starts the Company is well positioned, with a diversified high quality loan portfolio where the last £ LTV averages 62.5 per cent, nearly 62 per cent of the loan book is in senior or whole loan positions and the invested annualised gross total return is 9.6 per cent.  The primary focus is to continue to minimise cash drag risk whilst not looking to deviate from the current prudent approach to credit risk.   The last two years have demonstrated the Company's careful approach to investing and this is expected to continue.

The board feels that some of the Company's investment policy should now be marginally revised as some of the initial constraints may be no longer appropriate, and occasionally over-restrictive, e.g. the cap on investments in the UK. Consequently the board is proposing an amendment of the Company's investment policy in order to allow the Company the flexibility to make investments in any state that is a member of the European Economic Area and to remove the limitation of 75 per cent on investments in the United Kingdom.  The geographical change in no way suggests a change to the Company's core focus; it merely provides the flexibility for the Company to react to quality risk adjusted one-off opportunities.  Prudence will apply, for example, it is almost inconceivable any investment would be made in Greece in the short to medium term if ever.

The Company intends to hold an EGM shortly to consider this proposal.  The Company will also seek approval for an equity placement programme as a matter of good housekeeping to avoid the need for a further EGM. In line with strategy any equity raising will be highly focussed on mitigating cash drag risk and ideally matching deal pipeline.

Reflecting the Company's desire for strong distribution of free cash on 27 January 2015 it declared a dividend for the period from 1 October 2014 to 31 December 2014 of 1.7 pence per Ordinary Share (annualised 6.8 pence), representing a total dividend for 2014 of 5.8 pence per Ordinary Share. 

The directors place primary importance now on maintaining a consistent dividend and ensuring, as much as possible, that cash drag does not materially impact this aim.  Any future plans to raise additional equity will be considered against this objective and, as previously mentioned, it is intended that the liquidity facility will assist with this. 

Given the Company's investment position and continued pipeline of investment opportunities, it is likely that the board will give consideration to the raising of additional equity in 2015.  The investment environment for the Company has changed somewhat over the last two years and the Company has to date sourced attractive business consistent with risk/return metrics set out at IPO. Going forward, should any material equity issuance be envisaged, the Company will look to take account of shareholders' current views on the relative balance between risk, returns and scalability."

For further information, please contact:

Gary Gould / Stuart Klein

Jefferies International Limited

T: +44 20 7029 8000

Ravi Anand / Robert Peel

Dexion Capital plc

T: +44 20 7832 0900

Ipes (Guernsey) Limited

Gillian Newton

T: +44 1481 735869       

Notes:

Starwood European Real Estate Finance 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 Continental European markets. www.starwoodeuropeanfinance.com