Starwood European Real Estate Finance (SWEF) invests in the property – debt sector. It said the following in an update statement this morning:
“SWEF notes the recent negative price movements in the company’s shares and provides an update in light of the current disruption to markets as a result of COVID-19.
The company currently has no impairments, is very modestly levered with net debt of just £16.5m at 28 February (equal to 3.9 per cent of NAV), has no repo facilities outstanding and significant available but undrawn revolving credit facilities of £98.5m . As such, the company considers that the recent share price movements have been driven by market conditions and flows as opposed to a significant change in the company’s fundamental value or outlook.
In the current market, the company is particularly focused on its exposure to hospitality, which was 31.4 per cent of invested assets as at 31st December 2019, and expects to see a negative impact in operational performance generally across the hospitality sector. In common with similar crises of the past such as the 9/11 terror attacks and during the SARS virus scare, the market will see a particularly difficult hospitality trading period.
Whilst this negative impact is expected across the hospitality sector in the near term, the company’s manager is confident in the fundamentals of the markets in which the assets are located and the borrower’s business plans for the assets over the medium to long term. The Company’s hospitality exposure has been structured defensively by the Investment Manager by conducting thorough due diligence, working with strong sponsors and implementing robust loan structures combined with significant diversification by jurisdiction and asset type. Each investment has a significant cushion to real estate collateral value protecting the lender’s position.
The Company has always looked to limit downside risk by focusing on secured debt with quality collateral and contractual protections. The company’s loans have modest senior LTVs which provide substantial headroom and strong loan structures in line with the company’s investment policy.
As reported in the most recent Quarterly Investment Update, as at 31 December 2019 the company’s weighted average portfolio LTV to group first £ was 18.4 per cent and the weighted average portfolio LTV to group last £ was 63.0 per cent. The corresponding metrics for the hotel portfolio on its own were a weighted average first £ LTV of 4.4 per cent and a weighted average last £ LTV of 60.7 per cent.”
SWEF: Starwood European Real Estate Finance says its fundamentals are in order