Starwood European Real Estate Finance progresses wind-down, books impairment

(Sharecast News) - Starwood European Real Estate Finance reported further progress in winding down its portfolio and returning cash to investors on Monday, though it booked an additional impairment against its troubled Irish office loan. Half-year results to 30 June showed £46m was returned to shareholders during the period, taking total distributions since January 2023 to £256m, equivalent to 61% of net asset value at that time.

One loan, a £47.3m facility to a UK hotel, was repaid in full during the half year, while after the reporting date a further £29.1m was recovered from loans secured against a North Berwick hotel and a UK life sciences property.

The London-listed company now had just four loan assets remaining, down from 12 at the start of 2023.

Three were classed as Stage 1, the lowest risk category, while one investment, secured on an office portfolio in central Dublin had been written down further.

Following non-binding talks with a potential buyer, the board said it had reduced the carrying value of the Irish loan to €4.8m, taking a €2.2m impairment that equates to about 1.3p per share.

An independent portfolio report had been commissioned to support any transaction.

As of 31 July, before accounting for the impairment, net asset value stood at £145m, or 97.92p per share.

The company said its portfolio continued to generate sufficient cash to support a dividend of 5.5p per share annually, equivalent to a 6.3% yield at the end of June.

"We are pleased with the good progress we are making in returning capital to shareholders, with a further £46m returned in the first half of this year," said chairman John Whittle.

"The company's loan portfolio now consists of just four investments, compared with 12 at the beginning of January 2023."

He added that while three of the remaining loans carry low risk, the board is closely monitoring the impaired Irish position and the adviser continues to "actively manage the position to maximise the opportunity for value recovery."

Starwood confirmed it expected to provide a further update shortly with the publication of its August net asset value.

At 1152 BST, shares in Starwood European Real Estate Finance were down 2.01% at 85.5p.

Reporting by Josh White for Sharecast.com.