28 July 2015

Starwood European Real Estate Finance Limited: Quarterly Factsheet Publication

Starwood European Real Estate Finance Limited (the "Company") announces that the factsheet for the first quarter ended on 30 June 2015 is available at:

www.starwoodeuropeanfinance.com

Extracted text of the commentary is set out below:

"Investment portfolio

As at 30 June 2015 the Group had investments and commitments of £247.3 million (sterling equivalent at quarter end exchange rates) as follows: 

Portfolio Activity

The following significant activity occurred in the second quarter of 2015.

FC200 Repayment:  On 11 June 2015 the FC200 loan of £10.1  million was repaid following a sale of the property.

Danish Industrial Portfolio:  On 26 June 2015, the Company committed to provide two facilities for a total of  DKK 350.3 million (c. £33.5 million) for a portfolio of light industrial assets throughout Denmark.  The first facility is a mezzanine facility to refinance a portfolio already owned by the sponsor.  The second facility is a whole loan to support the acquisition of a new portfolio. The facilities were partially drawn on 26 June 2015, with a further drawdown made on 15 July 2015 and the loan is expected to be fully drawn during August. 

The Company had £2.6 million of cash at 30 June 2015 with £8 million drawn on the revolving credit facility.

The following activity occurred after 30 June 2015 and up to the date of publication of this fact sheet on 28 July 2015.

Irish Portfolio:  On 21 July 2015, the Company committed to provide a €6.1 million loan on a portfolio of retail and residential rental properties in the Republic of Ireland.  The loan is expected to be drawn before the end of July 2015.

5 Star Hotel, London:  On 24 July 2015, the Company committed to increase its existing loan to the 5 Star London Hotel by £6.2 million. The loan is expected to be drawn before the end of July 2015.

All of the loans closed over the last month reflect the Company's typical risk/return approach and meet its stated investment strategy.  The drawn amount on the credit facility also provides a good level of investment cover for repayment risks.

In order to raise funds to meet this pipeline, on 20 July 2015 the Company announced it would be making a tap issue for an amount up to £15 million. The tap was subsequently extended and the Company issued 23,780,000 Ordinary Shares at a price of 103 pence, raising gross proceeds of £24.49 million. The issue was oversubscribed at this level and represented the entire amount that the Company could issue without first publishing a prospectus.

Pipeline

It is expected that some of the loans originated early in the life of the Company may repay over the coming year and the Company is continuously focussed on the need to promptly re-invest any repayment proceeds to avoid material cash drag.

The Company has a strong pipeline and currently has £44.8 million of loans in execution which it expects to close in the coming weeks.

Going into the second half of the year the Company's investment pipeline remains robust.  We continue to see a variety of opportunities which will allow the Company to achieve good risk adjusted returns from whole loans as well as mezzanine loans.  

In the past quarter we have closed loans in Denmark and Ireland which are two new jurisdictions for the Company.  There has been a significant investment of origination effort in Ireland in particular, which, as a result, features strongly in the current pipeline.  

There has also continued to be a significant investment of time in Spain and Italy and we would expect to close our first loan in the region in the second half of the year.  

Another growing theme for the Company has been assisting borrowers whose loans are with lenders that have exited the lending market or lenders who have sold loan portfolios to private equity or hedge funds.   Examples include a number of borrowers in Scandinavia with performing loans from international lenders who are unable to roll those loans due to these lenders pulling out of the region to their home markets.   There are also many opportunities arising from non-performing loan (NPL) books that banks have sold.  The owners of these NPLs have often bought the NPL at a price that allows them to offer a significant discount to the borrower that allows the borrower to refinance at an appropriate new level with a new lender.  These situations are often complex and therefore can create opportunities for the Company to achieve good risk adjusted returns.    Initially many of the NPL opportunities have been in the UK and Ireland, however we would expect that to widen if banks continue to divest loan portfolios in other jurisdictions.

Placing Program

The Company's policy is only to raise equity capital for immediate or imminent deployment, in order to minimise cash drag.

As outlined above, the Company's pipeline of investments under review is of a size that the Board is also considering publishing a prospectus in order to implement a 12 month placing programme. This would allow the Company to raise additional equity capital as needed for making further investments.

Dividend and Future Policy

On 24 July 2015 the Directors declared a dividend of 1.75 pence per Ordinary Share (annualised 7.0 pence per Ordinary Share) in relation to the second quarter of 2015.

The Company is encouraged to note that market activity is growing, but is alert to the increased competition amongst lenders that improving conditions has stimulated. In the medium term the increased competition amongst lenders will lead to a choice of assuming greater risk or accepting slightly lower returns; the Company would always weight more to lower return than higher risk, with a resulting impact on dividends. In the short term, and on the basis of the current portfolio, the Company continues to target a dividend at an annualised rate of 7.0 pence per Ordinary Share. Whilst it is difficult to predict the timing of any changes in the returns from new investments, the Company considers that the previous targeted dividend rate may not be sustainable in the longer term without increasing the risk profile of the portfolio and, accordingly, the Company believes the 2016 onwards dividend target should be set 0.5 pence lower at 6.5 pence per Ordinary Share.

The above target dividend payments should not be taken as a forecast of the Company's future performance, profits or results. The target dividend payments are targets only and there is no guarantee whatsoever that they can or will be achieved and they should not be seen as an indication of the Company's actual return. Target dividend payments are dependent on a number of factors, including in particular: interest rate movements, the pace of unscheduled amortisation or prepayment, the pace of drawdowns by borrowers of unfunded commitments, and the pace of reinvestment of cash receipts and the level of return on such reinvestment together with general economic and market conditions and exchange rate movements. Accordingly, investors should not place any reliance on the target dividend payments in deciding whether to subscribe for Placing Shares or invest in the Ordinary Shares. Cash receipts may be applied to the payment of dividends before they are fully recognised in the Company's income statement.

Key Portfolio Statistics at 30 June 2015

(1) Calculated on loans currently drawn (as shown on page 1) using the exchange rates applicable when the loans were funded.

(2) Calculated on amounts currently outstanding, excluding undrawn commitments, and assuming all currently drawn loans are outstanding for the full contractual term.  Eight of the loans are floating rate (partially or in whole and some with floors) and returns are based on an assumed profile for future LIBOR, EURIBOR or CIBOR but the actual rate received may be higher or lower.  Calculated only on amounts funded to date and excluding committed amounts and cash uninvested.  The calculation excludes the origination fee payable to the Investment Manager.

(3) LTV to Group last £ 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 date of publication of this factsheet.  LTV to first Group £ 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 Lifecare, W Hotel and Centre Point the calculation includes the total facility available and is calculated against the market value on completion of the project.   For Aldgate, the calculation includes the total facility available against the stabilised value of the property.  "

For further information, please contact:

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