RCS - Starwood Euro Real - Results analysis from Kepler Trust Intelligence

Starwood European Real Estate Finance

22/09/2022 07:00

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RNS Number : 2008A  Starwood European Real Estate Finan  22 September 2022

Starwood European Real Estate Finance (SWEF)

22/09/2022

 

Results analysis from Kepler Trust Intelligence

Starwood European Real Estate Finance (SWEF) has delivered strong performance
through a volatile economic environment, and paid two quarterly dividends in
the half in line with its 5.5p target. These dividends were covered by net
income (with some adjustments made for currency movements which are not
expected to persist). They amount to an annualised yield of 5.6% on the share
price at the time of writing.

Despite the strong performance, the discount widened over the period, moving
from 8.8% to 11.4% as of 30/06/2022. The board has reinitiated a buyback
programme since the period end, and this has helped bring the discount in to
4.2% at the time of writing.

In the event that the discount is 5% or wider in the six months to 31/12/2022,
the board, "May put forward a realisation offer to Shareholders ('Realisation
Offer'). The terms of such Realisation Offer would provide, broadly, that
Shareholders may request for up to 75% of the Ordinary Shares in issue to be
realised for cash. If this mechanism is not activated, the Directors shall
exercise the discretion afforded to them under the Articles to put forward a
realisation vote (as an ordinary resolution) ("Realisation Vote") to
Shareholders by no later than 28 February 2023. The Board is actively
investigating and considering the options available to them in the best
interests of Shareholders. This process is ongoing and the outcome uncertain
at the current time."

Kepler View

This is another set of strong results for Starwood European Real Estate
Finance (SWEF). The loans have performed well and income has been boosted by
rising base rates feeding through into the coupons received. Given market
expectations of further rate rises to come, this should improve the income
cover situation further and in due time, if sustained, maybe lead the board to
consider an increased payout. We think the discount narrowing is likely to
reflect the market recognising the uncertainty stemming from the pandemic is
now in the past, as well as the active buyback programme. With the discount
window now open for triggering a tender offer or continuation vote, this
should provide strong support for the share price adding to the attractions of
the shares in a troubled market…

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