Last checked at 
7 Sep 2021 07:14
Starwood European Real Estate Finance (SWEF)
07/09/2021
Results analysis from Kepler Trust Intelligence
SWEF has reported a stable NAV in the half year to the end of June and met all its scheduled dividend payments, despite the challenges of the pandemic. The board and manager expect future interest payments from the portfolio to continue to be paid in full, and report signs of recovery in the underlying markets.
SWEF's manager reports, "the strongest pipeline of available opportunities since the group's inception". They highlight recovering investment volumes and an improving pricing environment. SWEF has approximately £70m available to invest.
Kepler View
Possibly the most positive news in SWEF's latest results is that the trust has still not recorded any missed interest payments or any impairments to the value of its loans, over a year into the pandemic. With the recovery now clearly underway in the UK and Western Europe, it looks increasingly like the portfolio with emerge materially unscathed, despite the significant exposure to the hotel and retail sectors. This supports what has always been the manager's contention: that their stock selection, conservative underwriting and management meant the risks to NAV and to the income account were limited.
The board has reported positive news in the underlying portfolio too, with the repayment of a major loan in the European hotel sector and a positive revaluation of another hotel asset being lent against which improved the LTV. We think the positive news is particularly notable given the hospitality sector was likely the focus of investor concern.
SWEF yields 5.8% as of 03/08/2021. The low interest rate environment has made achieving a yield more difficult across markets. In particular, SWEF's yield looks attractive compared to what is on offer from property equity trusts and from the infrastructure sector, while it is in line with the sort of yield on offer in the renewables sector. As such we think the trust could be an attractive diversifier for income investors while potentially boosting the yield too.
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