LONDON (Alliance News) - Starwood European Real Estate Finance Ltd, which originates direct primary real estate debt investments in the UK and Europe, on Thursday said it is set to lower it dividend target for 2016 as its current aim may not be sustainable without making riskier investment decisions.
"Whilst it is difficult to predict the timing of any changes in the returns from new investment, the company considers that the 7.0 pence targeted dividend rate may not be sustainable in the longer term without increasing the risk profile of the portfolio and, accordingly the company believes for 2016 onwards the dividend target should be set 0.50 pence lower per ordinary share at 6.5 pence per annum," Chairman Stephen Smith said in a statement.
The chairman said that growing market activity is encouraging, and that the company is "alert" to more intense competition among lenders that has arisen due to better conditions.
"In the medium term the increased competition amongst lenders will lead to a choice of greater risk or an acceptance of slightly lower returns; the company would always favour a transaction with a slightly lower return than a higher risk, with a resulting impact on dividends," Smith said.
Starwood European Real Estate Finance said it was fully invested at the end of June, when it had investments and commitments of GBP247.3 million. The investments were partly funded by GBP8 million drawn on its revolving credit financing facility.
The company said it has advanced GBP38.2 million in loans since that time. It made a tap issue of share on July 23 for GBP24 million to fund future investments.
Pretax profit amounted to GBP7.9 million in the six months to June 30, compared with GBP7.9 million in the corresponding half the prior year, as income from investment grew.
Shares in the company were down 0.8% at 101.45 pence on Thursday morning.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
Copyright 2015 Alliance News Limited. All Rights Reserved.
Starwood Eur (SWEF)