(Alliance News) - Starwood European Real Estate Finance Ltd on Friday said it will invest EUR20.0 million of an agreed EUR71.9 million loan secured on a portfolio of industrial and logistics assets.
The investment in the funding of the 36-month floating rate senior loan, secured on assets in the UK and Germany, closed on Wednesday and was made alongside Starwood Property Trust Inc.
"The group expects the transaction to generate attractive risk-adjusted returns, in line with its stated investment strategy," said Starwood European.
Having closed this new investment, Starwood European now has around GBP462 million of loans advanced across 19 investments as well as GBP68 million of unfunded commitments. The current average loan to value over the company's portfolio is around 62%, which it said represents "a strong equity cushion".
With this new loan, Starwood European has net debt of GBP34 million - about 8% of its net asset value - with all loan interest to this point paid in full and on time. Moreover, future interest payments are also on track for payment in full given a forecast for "gradual continued easing of lockdowns across the UK and Europe".
By class, Starwood European is most exposed in hospitality, with exposure at 33%. Its largest hospitality exposure, a hotel in Dublin, Ireland was substantially de-risked in March 2020 upon signing of a licence with the Irish Health Service Executive.
This hotel amounts to 29% of Starwood European's hospitality exposure and under the licence will "assist in delivering additional accommodation capacity related to managing the Covid-19 outbreak."
Of remaining hospitality exposure, 35% consists of three hotels in England and Scotland which are set to re-open in July. The rest of its hospitality exposure consists of a significant refurbishment project where interest will capitalise until six months after the project completes, likely in the third quarter of 2020, with no impact on the firm's operating cash flows.
Office exposure, 23% of loans advanced, has seen rent collections exceeding 91% of contracted rent collected year-to-date.
For loans on assets under construction, 22% of total loans advanced, all construction sites are open and in operation. For retail, 13% of total loans, the four Spanish shopping centres making up 83% of retail exposure have all reopened after lockdown restrictions were lifted in Spain.
"While this asset class is experiencing significant headwinds, this has been particularly so in the US and UK where shopping centre densities are significantly higher than that of Spain. Early indications of post-Covid retail activity in Spain are positive with footfall since re-opening tracking at approximately 69% of 2019 levels. This is considered a strong performance given that key attractions such as cinema anchors and leisure areas are yet to re-open. All interest has been paid on time on these loans," said Starwood European.
Shares in Starwood European were up 2.5% at 82.00 pence in London on Friday.
By Anna Farley; annafarley@alliancenews.com
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