SWEF: Update on Office Portfolio, Ireland

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION EU 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, TO US PERSONS OR INTO OR WITHIN THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN, OR ANY OTHER JURISDICTION WHERE, OR TO ANY OTHER PERSON TO WHOM, TO DO SO WOULD BE UNLAWFUL. THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER TO SELL OR ISSUE, OR ANY SOLICITATION OF ANY OFFER TO PURCHASE, SUBSCRIBE FOR OR OTHERWISE ACQUIRE, ANY INVESTMENTS IN ANY JURISDICTION.

Starwood European Real Estate Finance Limited

Portfolio Update

Update on Office Portfolio, Ireland

Starwood European Real Estate Finance Limited (the “Company” or “SWEF”) provides an update on the loan investment called Office Portfolio, Ireland.

On 2 January 2020 SWEF committed to a €35.2 million mezzanine loan secured on a portfolio of 12 properties in Central Dublin, an investment which equated to 7.0 per cent of NAV as of 31 December 2019.  The successful sale of some assets in 2021 and 2022 reduced the balance of the loan and as of 30 September 2024 the remaining balance (including accrued interest) is €25.9 million secured against a remaining portfolio of seven properties. As of 31 August 2024, the loan represents approximately 10.6 per cent of the Company’s Net Asset Value (“NAV”).  The loan has remained in compliance with its covenants but was re-classified as a Stage-2 loan (significant increase in credit risk since initial recognition) in the first half of 2023. 

In the Q2 2024 Quarterly Portfolio Update, released on 24 July 2024, the Company provided the following update on the loan:

“The underlying assets comprise seven well located European city centre CBD buildings and are well tenanted, albeit certain assets are expected to require capital expenditure to upgrade to Grade-A quality to retain existing tenants upon future lease expiry events. The loan remains in compliance of its third-party senior loan facility and the Group’s mezzanine loan facility, however given the persisting challenging market dynamics, the Group is working closely with the sponsor, a very large institutional asset manager, and a leading global valuation and advisory firm to identify future capital expenditure needs, funding sources, exit values and the business plan to exit”.

Since then, the sponsor of the loan has provided new operational updates and the Board has evaluated various business plan scenarios and the uncertainty related to these scenarios. As a consequence of this new information, combined with the challenging local office market dynamics, the Board has determined to provide for a 50 per cent impairment of the Company’s loan, equivalent to €12.9 million. Nevertheless, the Board and the Investment Adviser consider that there are a wide range of possible outcomes whereby the loan may have a lesser or greater degree of recovery due to the ongoing uncertainty related to the various business plan scenarios. The Investment Adviser will be actively managing the position to maximise the opportunity for value recovery. The Company looks forward to providing further updates as appropriate and when practically available.

As of 31 August 2024, the Company’s NAV was £203.7 million and NAV per share was 105.02 pence. After adjusting for the impairment of the Office Portfolio, Ireland loan, the adjusted NAV is £192.8 million and adjusted NAV per share is 99.43 pence as of 31 August 2024.

The Company is currently finalising its third quarter Quarterly Portfolio Update, which is expected to be published later this month. To date, the Company has returned £210 million to shareholders in Compulsory Redemptions in accordance with its orderly realisation strategy adopted on 27 January 2023. This is equivalent to 50.8 per cent of NAV as of 31 January 2023.

For further information, please contact: 

Apex Fund and Corporate Services (Guernsey) Limited as Company Secretary

Duke Le Prevost

T: +44 (0) 203 5303 630

E: Starwood@apexgroup.com

Jefferies International Limited

Gaudi Le Roux

Harry Randall

Ollie Nott

T: +44 (0) 20 7029 8000

The person responsible for arranging the release of this information on behalf of the Company is Duke Le Prevost.

A copy of this announcement can be found on the Company’s webiste: www.starwoodeuropeanfinance.com.

Notes: 

Starwood European Real Estate Finance Limited is an investment company listed on the main market of the London Stock Exchange with an investment objective to conduct an orderly realisation of the assets of the Company. www.starwoodeuropeanfinance.com.

The Group's assets are managed by Starwood European Finance Partners Limited, an indirect wholly-owned subsidiary of the Starwood Capital Group.

Information regarding forward-looking statements

This announcement contains (or may contain) statements that are, or may be deemed to be, ‘‘forward-looking statements’’. Forward-looking statements are based on current expectations and projections about future events and other matters that are not historical fact. These forward-looking statements are sometimes identified by the use of a date in the future or forward-looking terminology, including, but not limited to, the words “consider” ‘‘aim’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘intend’’, ‘‘plan’’, ‘‘estimate’’, ‘‘expect’’, ‘‘may’’, ‘‘target’’, ‘‘project’’, ‘‘will’’, ‘‘could’’ or ‘‘should’’ or, in each case, their negative or other variations or words of similar meaning. These forward-looking statements include matters that are not historical facts and include statements that reflect intentions, beliefs and current expectations. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future or are beyond the Company’s control. They are not guarantees of future value or performance and are based on one or more assumptions.

Forward-looking statements contained in this announcement apply only as at the date of this announcement. Subject to any obligations under the UK Listing Rules and FCA’s Disclosure Guidance and Transparency Rules, the UK version of the Market Abuse Regulation or any other applicable law or regulation, the Company undertakes no obligation publicly to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.