REG-Starwood European Real Estate Finance Ltd SWEF: Half Yearly Report 30 June 2025
08/09/2025 07:05
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Starwood European Real Estate Finance Ltd (SWEF)
SWEF: Half Yearly Report 30 June 2025
08-Sep-2025 / 07:02 GMT/BST
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Starwood European Real Estate Finance Limited
Half Year Results for the Period Ended 30 June 2025
Return of capital to shareholders now well advanced
Starwood European Real Estate Finance Limited (the “Company”) and its
subsidiaries (“SEREF” or the “Group”), a leading investor originating,
executing and managing a diverse portfolio of high quality real estate
debt investments in the UK and Europe, announces Half Year Results for the
six months ended 30 June 2025.
Following the approval of the Company’s new investment objective and
policy as recommended to shareholders by the Board at the Company’s EGM on
27 January 2023, the Company is pursuing a strategy of orderly realisation
and the return of capital to shareholders over time and in an orderly
fashion.
Highlights for the period, six months ended 30 June 2025
• Positive realisation progress:
• £256.0 million now returned to shareholders, equating to 61.0% of the
Company’s NAV as of 31 January 2023
• During the first half of 2025, £46.0 million was returned to
shareholders
• In the six-month period, one loan asset (Hotels, UK) repaid it’s
outstanding £47.3 million loan in full
• After period end two loans assets (Hotel, North Berwick and Life
Science, UK) repaid their combined outstanding £29.1 million loans in
full.
• All assets are carefully monitored for changes in their risk profile:
• As at the date of issuance of this announcement, four loan assets
remain in the portfolio, three of these are characterised as Stage 1
and one asset (the Office Portfolio, Ireland loan investment) is
classified as Stage 3
• Based on non-binding discussions in connection with the sale of the
Office Portfolio loan investment, Ireland, the Board has decided to
write down the recoverable value of this loan to €4.8 million by means
of providing a further €2.2 million impairment provision against it.
• Average remaining loan term of the portfolio as of 30 June 2025 is 0.5
years. The final loan is due to repay in Q3 2026.
• Strong cash generation - the portfolio continues to support annual
dividend payments of 5.5 pence per Ordinary Share, paid quarterly, and
generates an annual dividend yield of 6.3 per cent on the share price as
at 30 June 2025.
• Regular and consistent dividend - the Company continues to pay regular
and consistent dividends, in line with its prevailing target.
• Inflation protection – 77.7 per cent of the portfolio is contracted at
floating interest rates (with floors).
• Significant equity cushion - the weighted average Loan to Value for the
portfolio, as at 30 June 2025, is 69.9 per cent. The average weighted Loan
to Value for the portfolio excluding the asset classed as Stage 3 is 57.7
per cent as of 30 June 2025.
In line with the Group’s orderly realisation strategy, there have been no
new commitments made in the six months to 30 June 2025. Repayments
received in the six months to 30 June 2025 are summarised in the
highlights above and in the Investment Managers report.
During the six months to 30 June 2025, the Group funded £nil in relation
to cash loan commitments made in prior years which were unfunded and all
unfunded cash loan commitments were cancelled. The Group capitalised £0.6
million of interest on one loan in line with the facility agreement during
the period under review.
John Whittle, Chairman of the Company commented:
“We are pleased with the good progress we are making in returning capital
to shareholders, with a further £46.0 million returned in the first half
of this year. The Company’s loan portfolio now consists of just four
investments, compared with twelve at the beginning of January 2023.
“While three of the remaining loans are classified as Stage 1, the lowest
risk profile used by the Company, one loan investment known as Office
Portfolio, Ireland has been impaired during the period and post-period
end. The Investment Adviser will continue to actively manage the position
to maximise the opportunity for value recovery and the Board continues to
closely monitor the position and ongoing developments.”
For further information, please contact:
Apex Fund and Corporate Services (Guernsey) Limited as Company
Secretary +44 203 5303 630
Duke Le Prevost
Starwood Capital +44 (0) 20 7016 3655
Duncan MacPherson
Jefferies International Limited +44 (0) 20 7029 8000
Gaudi Le Roux
Harry Randall
Ollie Nott
Notes:
Starwood European Real Estate Finance Limited is an investment company
listed on the main market of the London Stock Exchange with an investment
objective to conduct an orderly realisation of the assets of the
Group. 1 www.starwoodeuropeanfinance.com.
The Group's assets are managed by Starwood European Finance Partners
Limited, an indirect wholly owned subsidiary of the Starwood Capital
Group.
Starwood European Real Estate Finance
Interim Financial Report and Unaudited Condensed Consolidated Financial
Statements
for the six-month period from 1 January 2025 to 30 June 2025
Overview
Corporate Summary
PRINCIPAL ACTIVITIES AND INVESTMENT OBJECTIVE
Starwood European Real Estate Finance Limited (the “Company”) was
established in November 2012 to provide its shareholders with regular
dividends and an attractive total return while limiting downside risk,
through the origination, execution, acquisition and servicing of a
diversified portfolio of real estate debt investments in the UK and the
European Union’s internal market.
The Company made its investments through Starfin Lux S.à.r.l (indirectly
wholly-owned via a 100 per cent shareholding in Starfin Public Holdco 1
Limited), Starfin Lux 3 S.à.r.l and Starfin Lux 4 S.à.r.l (both indirectly
wholly-owned via a 100 per cent shareholding in Starfin Public Holdco 2
Limited) (collectively the “Group”).
Following the Company’s Extraordinary General Meeting (“EGM”) on 27
January 2023, the Company’s objective changed and is now to conduct an
orderly realisation of the assets of the Group and the return of capital
to Shareholders. In line with this objective the Board is endeavouring to
realise all of the Group’s investments in a manner that achieves a balance
between maximising the net value received from those investments and
making timely returns to Shareholders. At the time of the change in
objective it was anticipated that it would take three to four years to
complete this objective. As at the date of issuance of this report the
Company is still on track to complete this objective within that time
scale.
The Group will not make any new investments going forward save that
investments may be made to honour commitments under existing contractual
arrangements or to preserve the value of any underlying security.
Cash held by the Group pending distribution will be held in either cash or
cash equivalents for the purposes of cash management.
Subject to the above restrictions, the Company retains the ability to seek
to enhance the returns of selected loan investments through the economic
transfer of the most senior portion of such loan investments. It is
anticipated that where this is undertaken it would generate a positive net
interest rate spread and enhance returns for the Company.
Full details of the investment objectives and policy post the EGM on 27
January 2023 are set out in the 2023 Annual Report which can be found on
the company’s website https://starwoodeuropeanfinance.com.
The Investment Objective and Policy which applied prior to the EGM on 27
January 2023 are set out in the 2021 Annual Report which can also be found
on the company’s website https://starwoodeuropeanfinance.com. The
Investment Objective applied prior to the EGM on 27 January 2023 was to
provide its shareholders with regular dividends and an attractive total
return while limiting downside risk, through the origination, execution,
acquisition and servicing of a diversified portfolio of real estate debt
investments in the UK and the European Union’s internal market. The
Investment Policy applied prior to the EGM on 27 January 2023 was to
invest in a diversified portfolio of real estate debt investments in the
UK and the European Union’s internal market as the Group had done since
its initial public offering (“IPO”) in December 2012.
STRUCTURE
The Company was incorporated with limited liability in Guernsey under the
Companies (Guernsey) Law, 2008, as amended, on 9 November 2012 with
registered number 55836, and registered with the Guernsey Financial
Services Commission (“GFSC”) as a closed-ended collective investment
scheme. The Company’s ordinary shares were first admitted to the premium
segment of the UK’s Financial Conduct Authority’s Official List and to
trading on the Main Market of the London Stock Exchange as part of its IPO
which completed on 17 December 2012. Further issues took place in March
2013, April 2013, July 2015, September 2015, August 2016 and May 2019. The
issued capital during the period comprises the Company’s Ordinary Shares
denominated in Sterling.
The Company received authority at the 2020 Annual General Meeting (“AGM”),
to purchase up to 14.99 per cent of the Ordinary Shares in issue. This
authority was renewed at the 2021, 2022, 2023, 2024 and 2025 AGMs. Between
2020 and 2023 the Company bought back 17,626,702 Ordinary Shares. Shares
bought back (which had been held in treasury) were cancelled in June 2023.
During 2023 and 2024 the Company compulsorily redeemed 201,663,063
Ordinary Shares from Shareholders at an average price of 104.14 pence per
share.
During the six months to 30 June 2025 the Company compulsorily redeemed a
further 45,889,830 Ordinary Shares from Shareholders at an average price
of 100.24 pence per share. As at 30 June 2025 and the date of issuance of
this report, the Company had 148,039,803 shares in issue and the total
number of voting rights was 148,039,803.
The Investment Manager is Starwood European Finance Partners Limited (the
“Investment Manager”), a company incorporated in Guernsey with registered
number 55819 and regulated by the GFSC. The Investment Manager has
appointed Starwood Capital Europe Advisers, LLP (the “Investment
Adviser”), an English limited liability partnership authorised and
regulated by the Financial Conduct Authority, to provide investment
advice, pursuant to an Investment Advisory Agreement.
Chairman’s Statement
JOHN WHITTLE | Chairman
5 September 2025
Dear Shareholder,
On behalf of the Board, I present the Interim Financial Report and
Unaudited Condensed Consolidated Financial Statements of Starwood European
Real Estate Finance Limited (the “Group”) for the period from 1 January
2025 to 30 June 2025.
In the six months ended 30 June 2025 one loan asset has repaid in full and
two loan assets have been repaid subsequent to 30 June 2025. This leaves
the Group, as of the date of the issuance of this report, with four
remaining loan assets. Three of those assets are classified as Stage 1 and
one asset (Office Portfolio, Ireland) is classified as Stage 3.
As announced on 1 August 2025, since announcing a £10.8 million (€12.9
million) impairment provision against Office Portfolio, Ireland in October
2024, the Board has continued to evaluate the alternative business plan
scenarios available to the Company in relation to this loan investment.
Based on that evaluation, and the continuing challenging Dublin office
market dynamics, the Board announced their decision to write down the
carrying value of the loan investment as of 30 June 2025 to £5.8 million
(€6.75 million) by means of providing a further £6.2 million (€7.3
million) impairment provision against it (which equates to a circa 4.2
pence per share impairment as of 30 June 2025).
Further to the announcement made on 1 August 2025 and referred to above,
the Board has further announced that it is in discussions with an
investment vehicle advised by Starwood Capital Group in connection with
the sale of the Office Portfolio, Ireland loan investment. If such
transaction is consummated, it is expected that the value of the transfer
will be significantly below the current carrying value of the investment
announced on 1 August 2025. Based on these non-binding discussions, the
Board decided to write down the recoverable value of the loan
investment to €4.8 million by means of providing a further £1.9 million
(€2.2 million) impairment provision against it (which equates to a circa
1.3 pence per share impairment). This impairment will be reflected in the
31 August NAV when announced. To support any such transaction, the
Board has commissioned an independent report on the above portfolio.
The Investment Adviser will continue to actively manage the position to
maximise the opportunity for value recovery and the Board will continue to
closely monitor the position and ongoing developments. The Company looks
forward to providing further updates as appropriate. This loan,
along with the other remaining loans, remains under frequent review.
Other than the impact of the additional impairment provision referred to
above, the Group’s NAV has remained stable over the last six months as is
demonstrated by the NAV reconciliation table below. Against market
volatility, the Group has maintained a relatively stable market valuation,
met its dividend targets (an annualised 5.5 pence per share to
shareholders) and continued the orderly realisation of the Group’s assets
started in 2023 and the return of capital to Shareholders. All contractual
loan interest have been received on time and underlying valuations
continue to provide reassuring headroom (except in the case of Office
Portfolio, Ireland as referred to above and as outlined in the Investment
Managers Report).
Since the decision was taken to follow a strategy of orderly realisation
of the portfolio and return of capital to Shareholders in January 2023, by
30 June 2025 the Company had returned circa £256.0 million to Shareholders
(including £46.0 million in the first half of 2025), equating to 61.9 per
cent of the Company’s NAV as of 31 January 2023. As of 30 June 2025 and
the date of issuance of this report, the Company had 148,039,803 shares in
issue and the total number of voting rights was 148,039,803.
HIGHLIGHTS OVER THE SIX MONTHS TO 30 JUNE 2025
• Return of capital to Shareholders is progressing at pace – to date the
Company has returned £256.0 million to Shareholders, including £46.0
million in the six months ended 30 June 2025, equating to 61.9 per
cent of the Company’s NAV as of 31 January 2023.
• Orderly Realisation of the portfolio is also progressing at pace – in
the six months ended 30 June 2025, one loan asset (Hotels, UK) repaid
it’s outstanding £47.3 million loan in full and another (Life Science,
UK) made a partially repayment of £1.4 million. In addition,
subsequent to 30 June 2025, two loan assets (Hotel, North Berwick and
Life Science, UK) repaid their combined outstanding £29.1 million
loans in full.
• All assets are constantly monitored for changes in their risk profile
– the risk status of the investments held as of 30 June 2025 is listed
below:
◦ Three loan investments equivalent to 53 per cent of the funded
portfolio as of 30 June 2025 are classified in the lowest risk
profile, Stage 1.
◦ Two loan investments equivalent to 26 per cent of the funded
portfolio as of 30 June 2025 are classified as Stage 2. Both of
these loans have repaid since 30 June 2025.
◦ One loan investment equivalent to 21 per cent of the funded
portfolio (before impairment) as of 30 June 2025 is classified as
Stage 3. As of 30 June 2025, an additional impairment provision
of £6.2 million (€7.3 million) was made, bringing the total
impairment provision against this loan to £17.0 million (€20.2
million) (equivalent to 75 per cent of the total loan value as of
30 June 2025 before impairment). Post this impairment the
carrying value of this loan asset as of 30 June 2025 equated to
4.0 per cent of the Net Asset Value of the Group on the same
date. Subsequent to 30 June 2025 a further impairment provision
of £1.9 million (€2.2 million) was made, bringing the total
impairment provision against this loan as of 31 August 2025 to
£19.4 million (€22.4 million) and bringing the carrying value of
this loan asset as of 31 August 2025 to £4.1 million (€4.7
million).
• Impaired loan investment – as announced on 1 August 2025, since
announcing a £10.8 million (€12.9 million) impairment provision
against one loan (Office Portfolio, Ireland) in October 2024, the
Board has continued to evaluate the alternative business plan
scenarios available to the Company in relation to this loan
investment. Based on that evaluation, and the continuing challenging
Dublin office market dynamics, the Board announced their decision to
write down the carrying value of the loan investment as of 30 June
2025 to £5.8 million (€6.75 million) by means of providing a further
£6.2 million (€7.3 million) impairment provision against it (which
equates to a circa 4.2 pence per share impairment as of 30 June 2025).
Subsequent to 30 June 2025 a further impairment provision of £1.9
million (€2.2 million) was made, bringing the total impairment
provision against this loan as of 31 August 2025 to £19.4 million
(€22.4 million) and bringing the carrying value of this loan asset as
of 31 August 2025 to £4.1 million (€4.7 million). The Investment
Adviser will continue to actively manage the position to maximise the
opportunity for value recovery and the Board will continue to closely
monitor the position and ongoing developments. The Company will
provide further updates as appropriate.
• Cash balances – as of 30 June 2025 the Group held cash balances of
circa £48.6 million and had no unfunded cash loan commitments as any
remaining cash loan commitments had been cancelled by that date.
• Strong cash generation – the portfolio continues to support an annual
dividend payment of 5.5 pence per Ordinary Share, paid quarterly, and
generates an annual dividend yield of 6.3 per cent on the share price
as of 30 June 2025.
• The weighted average remaining loan term of the portfolio as of 30
June 2025 is 0.5 years - albeit the final loan is not due to repay
until Q3 2026.
• Inflation protection – as of 30 June 2025, 77.7 per cent of the
portfolio is contracted at floating interest rates (with floors).
• Significant equity cushion – the weighted average Loan to Value for
the portfolio as of 30 June 2025 is 69.9 per cent. The average
weighted Loan to Value for the portfolio excluding the asset classed
as Stage 3 (Office Portfolio, Ireland) is 57.7 per cent as of
30 June 2025.
INVESTMENT MOMENTUM
In line with the new strategic direction of the Group (i.e. the orderly
realisation and return of capital to shareholders) there has been no new
commitments made in the six months to 30 June 2025.
Repayments received in the six months to 30 June 2025 are summarised in
the highlights section above and in the Investment Managers report.
During the six months to 30 June 2025, the Group funded £nil in relation
to cash loan commitments made in prior years which were unfunded and all
unfunded cash loan commitments were cancelled. The Group capitalised £0.6
million of interest on one loan in line with the facility agreement during
the period under review.
The table below shows the funded and unfunded cash commitments of the
Group at the end of each month shown.
June 2021 June 2022 June 2023 June 2024 June 2025
Funded loans £418.5m £429.1m £379.2m £165.1m £112.0m
Unfunded Cash £36.8m £36.8m £47.3m £24.1m £0.0m
Commitments
Total Portfolio £455.3m £465.9m £426.5m £189.2m £112.0m
NAV PERFORMANCE
The table below shows the NAV per share movements over the 6 months to 30
June 2025 (in pence).
Jan 25 Feb 25 Mar 25 Apr 25 May 25 Jun 25
NAV per share at beginning of 100.49 100.24 100.71 101.34 100.59 101.09
month
Monthly Movements
Operating Income available to
distribute before impairment 1.02 0.56 0.49 0.49 0.54 0.55
provision(1)
Impairment provision on asset 0.00 0.00 0.00 0.00 0.00 (4.22)
classified as Stage 3(2)
Unrealised FX gains/(losses)(3) 0.11 (0.09) 0.14 0.14 (0.04) (0.01)
Dividends declared (1.38) 0.00 0.00 (1.38) 0.00 0.00
NAV per share as end of month 100.24 100.71 101.34 100.59 101.09 97.41
(1) Operating Income available to distribute comprises loan income
recognised in the period less operating costs incurred and before any
impairment is taken into account. The Operating Income available to
distribute also includes realised foreign exchange gains and losses that
are available to distribute except where the realised gains and losses
relate to the settlement of hedges that were previously rolled forward and
the gain or loss on that roll forward was classified as unavailable to
distribute.
(2) In June 2025 a loan classified as Stage 3 had a €7.3 million
impairment provision recognised against it.
(3) Unrealised foreign exchange gains/losses relate to the net impact of
changes in the valuation of foreign exchange hedges and the sterling
equivalent value of Euro loan investments (using the applicable month end
rate). Mismatches between the hedge valuations and the loan investments
may occur depending on the shape of the forward FX curve and this may
cause some movement in the NAV. These unrealised FX gains / losses are not
considered part of distributable reserves.
As anticipated, as shown above and as in the past, we are pleased to
report that, other than the additional impairment provided against the
asset classified as Stage 3, the Group’s NAV has once again remained
stable over the first half of the year demonstrating the highly resilient
credentials of the asset class that contributes to its success as a
reliable source of alternative income. We do not expect to see significant
movements in NAV, except the rare events when an impairment is required,
as the Group’s loans are held at amortised cost, Euro exposures are hedged
and credit risk is proactively managed.
As noted, the NAV can be materially impacted if a significant impairment
in the value of a loan is required (as was shown in October 2024 when the
Office Portfolio, Ireland loan asset was initially impaired and as is
shown above when an additional impairment was made against Office
Portfolio, Ireland).
Please refer to the Investment Manager’s report for detailed sector
performance reporting, information on the accounting for our loans and the
current loan to value position for the portfolio as a whole and for each
sector.
The Group continues to closely monitor its loan exposures, underlying
collateral performance and repayments.
CAPITAL REDEMPTIONS AND SHARE PRICE PERFORMANCE
During the half year to 30 June 2025, the Company redeemed a total of
45,889,830 shares for a total of £46.0 million. As of 30 June 2025 and the
date of issuance of this report, the Company had 148,039,803 shares in
issue and the total number of voting rights was 148,039,803.
During the first half of 2025, the Company’s share price has been
relatively volatile, in line with volatile markets. In the six-month
period to 30 June 2025, the share price has been trading between 92.0
pence and 83.0 pence per share and ended the half year at 87.5 pence per
share. It should be noted that the volumes of the Company's shares being
traded are relatively low and will decrease as the company reduces in size
so even small transactions can have a significant impact on daily share
prices recorded.
As of 30 June 2025, the discount to NAV stood at 10.2 per cent, with an
average discount to NAV of 14.3 per cent over the half year. The Board,
the Investment Manager and Adviser continue to believe that the shares
represent attractive value at this level.
DIVIDENDS
The Directors have declared dividends in respect of the first two quarters
of 2025 of 1.375 pence per Ordinary Share, equating to an annualised 5.5
pence per annum. This was covered by earnings (excluding impairment
provisions, unrealised FX gains and realised FX gains expected to
reverse).
With the current portfolio and based on current forecasts (including
forecasts of capital redemptions), we expect the target dividend of 5.5
pence per share to be paid over the 12 months to 31 December 2025.
Based on the share price at 30 June 2025, a dividend of 5.5 pence per
annum represents a 6.3 per cent dividend yield.
BOARD COMPOSITION AND DIVERSITY
The Board believes in the value and importance of diversity in the
boardroom, and it continues to consider the recommendations of the Davies,
Hampton Alexander and Parker Reports and these recommendations will be
taken into account should the appointment of a new Director be required.
As of 30 June 2025, the Company met the targets specified in UK LR 6.6.6.
(R) (9) (i) and (ii) with the Board comprising 50 per cent women, one of
whom is the Senior Independent Director. However, the Company has not met
the target under UK LR 6.6.6. (R) (9) (iii)
of having one Director from a minority ethnic background. Please refer to
the Corporate Governance Statement in the Company's Annual Report and
Audited Consolidated Financial Statements for the year ended 31 December
2024 for the Board’s diversity statement.
I am very pleased with the composition of the Board and I believe we have
a very relevant diversity of skills and expertise which places us well for
executing the strategy the shareholders have tasked us with.
GOING CONCERN
Under the UK Corporate Governance Code and applicable regulations, the
Directors are required to satisfy themselves that it is reasonable to
assume that the Group is a going concern.
The Directors have undertaken a comprehensive review of the Group’s
ability to continue as a going concern including a review of the ongoing
cash flows and the level of cash balances as of the reporting date as well
as forecasts of future cash flows. After making enquiries of the
Investment Manager, Investment Adviser and the Administrator and having
reassessed the principal risks considering the investment objective and
strategy, the Directors considered it appropriate to adopt the going
concern basis of accounting in preparing the Interim Financial Report and
Unaudited Condensed Consolidated Financial Statements.
Notwithstanding the above, and as disclosed in these financial statements,
the strategy of orderly realisation and return of capital to shareholders
over time does in the long term create uncertainty as to the longer-term
future of the Company and the Group and its longer-term ability to
continue as a going concern. The financial statements have not been
modified in respect of this matter.
OUTLOOK
The Board is pleased that the diligent underwriting, loan structuring and
active asset management of the Investment Manager and Adviser has led to
very robust performance of the loans during the period.
The focus of the Group for the rest of 2025 continues to be:
(i) the continued robust asset management of the existing loan portfolio;
and
(ii) the orderly realisation of the portfolio; and
(iii) the timely return of capital to shareholders
I would like to close by thanking you for your continued commitment and
support.
John Whittle
Chairman
5 September 2025
Investment Manager’s Report
MARKET COMMENTARY
Following a steady first quarter, the second quarter of 2025 kicked off
with a bang for markets with Trump’s “Liberation Day” tariff
announcements. After the initial shock and sell-off, markets regained
composure and have been balanced between a fairly stable performance in
economic data and the backdrop of multiple geopolitical pressures.
In equity markets the S&P 500 and Nasdaq both reached new all-time highs
in late June, buoyed by better-than-expected corporate earnings, the
prospect of rate cuts later in the year, and the prospect of a cooling of
trade-related tensions. In the United Kingdom the FTSE 100 also hit a new
all-time high topping 9,000 for the first time.
In the first half of the year interest rates across developed markets
moved broadly in line with expectations with the faster pace of Euro rate
cuts versus the United States continuing. In the United States, the
Federal Reserve has left the interest rate unchanged to date during 2025
while, in Europe, the ECB made two cuts of 25 basis points to its deposit
rate in each of the first 2 quarters resulting in a rate of 2 per cent
reflecting eight 25 basis points cuts since its peak, and in the United
Kingdom, the Bank of England cut its base rate by 25 basis points in each
of the first and second quarters with a further cut in August taking total
cuts since its peak to five with three of those cuts in 2025. One of the
considerations that has been holding back further rate movement in the
United States is balancing the potentially inflationary impacts of a
dynamically changing tariff policy. This is a particularly difficult task
given the Federal Reserve’s dual mandate on employment and price
stability. President Trump has declared he would only appoint a Federal
Reserve Chair committed to cutting rates creating an extra variable into
how markets can expect the Federal Reserve to work once Jerome Powell’s
term is up in 2026.
While there was some volatility during the first half of the year,
government bond yields have seen relatively small changes during the first
half of the year with benchmark 10-year bond yields as of 30 June 2025
standing at 4.23 per cent, 4.48 per cent and 2.60 per cent versus 4.57 per
cent, 4.58 per cent and 2.37 per cent at the beginning of the year for the
United States, the United Kingdom and Europe respectively. UK gilt yields
have remained elevated compared to other developed markets with stubborn
inflation and growth concerns compounded by a series of economic policy
issues, including a backbench rebellion over benefit reforms and the
high-profile reversal on the winter fuel allowance. Higher rates are
likely one of the contributing factors in why real estate volume growth in
the United Kingdom is lagging the rest of Europe. In the latest CBRE data
we saw United Kingdom transaction volumes down in Q1 2025 compared to Q1
2024 whereas Europe as a whole showed a slight increase. Lower interest
rates in Eurozone countries are reducing overall debt costs and allowing
for positive leverage meaning that the all in cost of financing real
estate is lower than the going in investment yield now in many markets.
Credit markets also recovered well after Liberation Day. Primary issuance
across corporate credit and structured finance almost completely stopped
for a couple of weeks at the beginning of the quarter. However, the
recovery has been swift. In the US, the CMBS market rebounded to strong
volumes by late H1, as investor appetite for structured credit remained
robust. Year to date non-agency CMBS issuance through June was $74.4
billion reflecting a 56 per cent increase over the same period in 2024. In
Europe there are signs that CMBS issuance is maintaining some of the
momentum it added over the past few quarters with a number of deals in the
market and the first deal launched since Liberation Day having priced in
June. The deal attracted healthy demand, with spreads tightening from
initial to final pricing, reflecting the market’s confidence in the
underlying high-quality, income-generating real estate and the credibility
of the sponsor.
In terms of sector dynamics for real estate, defence has emerged as a
notable beneficiary of the increased recognition of geopolitical risk and
the resultant pledges to expand defence spending. Germany’s Rheinmetall’s
potential plan to convert Volkswagen’s Osnabrück production plant into a
defence manufacturing facility is one example of this shift in strategic
industrial policy having an impact on this specific type of production
facility real estate. We are seeing other signs of the early stages of a
knock-on effect for real estate beginning to materialise, with increased
discussion of the demand for manufacturing space, logistics infrastructure
and defence research and development facilities.
While there is a general concern from some market participants that low
volumes are creating too few lending opportunities, real estate credit
remains an attractive risk-reward proposition. As capitalisation rates
have increased, debt yields have too and are higher than during much of
the post-GFC period. At the same time lending spreads still look
favourable versus historical levels despite improved liquidity conditions.
Since the end of the first half of the year markets have remained in good
shape over the summer period, although there has been some commentary that
the strong movements in stock prices and low credit spreads could lead to
a pullback. Geopolitically, several sources of potential instability still
loom large. The ongoing conflicts involving Ukraine, Russia, Israel, and
Gaza continue, and there is still significant risk in US trade dynamics.
While the summer is almost over we are also mindful of seasonal
illiquidity, as lighter trading desks and reduced volumes during peak
holiday weeks can amplify sharp moves.
PORTFOLIO STATISTICS
As at 30 June 2025, the portfolio was invested in line with the Group’s
investment policy.
The key portfolio statistics are as summarized below.
30 June 30 June
2025 2024
Number of investments 6 8
Percentage of currently funded portfolio in floating 77.7% 84.8%
rate loans
Funded Loan Portfolio unlevered annualised total 8.7% 9.1%
return(1)
Weighted average portfolio LTV – to Group first £(1) 31.3% 16.7%
Weighted average portfolio LTV – to Group last £(1) 69.9% 58.0%
Average remaining loan term 0.5 years 1.5 years
Net Asset Value £144.2m £283.5m
Loans advanced at amortised cost (including accrued £96.1m £166.9m
income and net of impairment provisions)
Cash and cash equivalents £48.6m £117.1m
Other liabilities (including financial assets held at (£0.5m) (£0.5m)
fair value through the profit or loss)
(1) Alternative performance measure
The maturity profile of investments as at 30 June 2025 is shown below.
Value of funded % of funded
Remaining years to contractual maturity* portfolio £m portfolio
0 to 1 years £84.8 75.7%
1 to 2 years £27.2 24.3%
* Remaining loan term to current contractual loan maturity excluding any
permitted extensions. Note that borrowers may elect to repay loans before
contractual maturity or may elect to exercise legal extension options,
which are typically one year of additional term subject to satisfaction of
credit related extension conditions. The Group, in limited circumstances,
may also elect to extend loans beyond current legal maturity dates if that
is deemed to be required to affect an orderly realisation of the loan.
The Group continues to achieve good portfolio diversification as shown in
below:
% of funded
Country
Portfolio1
UK 72.5%
Republic of Ireland 20.7%
Spain 6.8%
% of funded
Sector
portfolio
Office 26.3%
Light Industrial 24.3%
Healthcare 22.3%
Hospitality 13.4%
Life Sciences 12.6%
Residential 1.1%
% of funded
Loan type
portfolio
Whole loans 50.2%
Junior & Mezzanine 49.8%
% of funded
Currency2
portfolio
Sterling 72.5%
Euro 27.5%
1 Funded portfolio is before taking account of any impairment provisions
recognised.
2 The currency split refers to the underlying loan currency, however the
capital on all non-sterling exposure is hedged back to sterling.
The Board considers that the Group is engaged in a single segment of
business, being the provision of a diversified portfolio of real estate
backed loans. The analysis presented in this report is presented to
demonstrate the level of diversification achieved within that single
segment. The Board does not believe that the Group’s investments
constitute separate operating segments.
SHARE PRICE PERFORMANCE
As at 30 June 2025, the NAV was 97.41 pence per Ordinary Share (31
December 2024: 100.49 pence; 30 June 2024: 104.92 pence) and the share
price was 87.5 pence (31 December 2024: 91.8 pence; 30 June 2024: 93.0
pence).
The Company’s share price volatility has been driven by market conditions
and trading cash flows rather than a change in the Company’s NAV.
INVESTMENT DEPLOYMENT
As at 30 June 2025, the Group had 6 investments and commitments of £112.0
million as follows:
Sterling Sterling
Sterling
equivalent Total
equivalent
unfunded (Drawn and
balance (1), (2)
commitment (3) Unfunded)
Hospitals, UK £25.0 m £25.0 m
Hotel, North Berwick £15.0 m £15.0 m
Life Science, UK £14.1 m £14.1 m
Industrial Estate, UK £27.2 m £27.2 m
Total Sterling Loans £81.3 m £0.0 m £81.3 m
Office Portfolio, Spain £7.6 m £7.6 m
Office Portfolio, Ireland £23.1 m £23.1 m
Total Euro Loans £30.7 m £0.0 m £30.7 m
Total Portfolio £112.0 m £0.0 m £112.0 m
(1) Euro balances translated to sterling at period end exchange rate.
(2) These amounts are shown before any impairment provisions recognised.
(3) Unfunded commitments as of 31 December 2024 of £23.0 million were
cancelled during the six months to 30 June 2025.
Between 1 January 2025 and 30 June 2025, the following significant
investment activity occurred (reflected in the table overleaf):
REPAYMENTS:
During the half year, borrowers repaid the following loan obligations:
• £47.3 million, Hotels, UK (full repayment of loan)
• £1.4 million, Life Science, UK (partial repayment of loan)
These repayments were used to return £46.0 million of capital to
shareholders during the six month period ended 30 June 2025.
Subsequent to 30 June 2025, to the date of this report, the following loan
repayments occurred:
• £15 million, Hotel, North Berwick (full repayment of loan)
• £14.1 million, Life Science, UK (full repayment of loan)
ADDITIONAL FUNDING:
During the half year, interest of £0.6 million was capitalised. No new
loans were entered into during the half year in line with the orderly
realisation and the return of capital strategy as outlined in the
Chairman's Statement.
PORTFOLIO OVERVIEW
The Group continues to closely monitor and manage the credit quality of
its loan exposures and repayments.
The Group’s exposure as of 30 June 2025 is spread across six investments.
99 per cent of the total funded loan portfolio as of 30 June 2025 is
spread across five asset classes; Office (26 per cent), Light Industrial
(24 per cent), Healthcare (22 per cent), Hospitality (13 per cent), and
Life Sciences (13 per cent). The Investment Manager and the Investment
Advisor continue to monitor potential impacts of US tariff and trade
negotiations on the portfolio. No material adverse impact has been
identified at this time.
Progress of the realisation of the remaining investments is being closely
monitored. Five of the six remaining investments generally have an
identified exit processes (two of which have repaid in full subsequent to
30 June 2025 and prior to the issuance of this report). Sponsors of these
loans are either progressing asset disposals or targeting a refinance in
line with each loan’s respective legal maturity. The exit plan and
realisation timing for the sixth investment, the Stage 3 loan, remains
under review.
The Group’s office exposure (26 per cent) comprises two loan investments.
The weighted average Loan to Value of loans with office exposure is 99 per
cent. The elevated level of the office exposure Loan to Value is driven by
Office Portfolio, Ireland loan which is a risk rated Stage 3 loan. The
value used to calculate the Loan to Value for the Stage 1 office loan uses
the latest independent lender instructed valuation. The value used for the
Stage 3 office loan (which was downgraded from a Stage 2 asset in October
2024) is the marked down value as per the loan impairments recognised in
October 2024 and June 2025. The higher Loan to Value of this sector
exposure reflects the wider decline in market sentiment driven by post
pandemic trends, higher interest rates and high costs attached to
upgrading older office stock.
The largest office investment is a mezzanine loan which represents 74 per
cent of this exposure and is classified as a Stage 3 risk rated loan. The
underlying assets comprise seven well located Dublin city centre CBD
buildings and have historically been well tenanted, albeit certain assets
are expected to require capital expenditure to upgrade to Grade-A quality
to retain existing tenants upon future lease expiry events. A total
impairment provision of £17 million (€20.2 million) has been provided as
of 30 June 2025 related to this investment (equivalent to 75 per cent of
the total loan value as of 30 June 2025 before impairment). Subsequent to
30 June 2025 a further impairment provision of £1.9 million (€2.2 million)
was made, bringing the total impairment provision against this loan as of
31 August 2025 to £19.4 million (€22.4 million) and bringing the carrying
value of this loan asset as of 31 August 2025 to £4.1 million (€4.7
million).The Investment Adviser will continue to actively manage the
position to maximise the opportunity for value recovery and the Board will
continue to closely monitor the position and ongoing developments. The
Company will provide further updates as appropriate.
The remaining total funded portfolio (excluding Residential (1 per cent))
is split across Light Industrial (24 per cent), Healthcare (22 per cent),
Hospitality (13 per cent), and Life Sciences (13 per cent). These sectors
provide good diversification. The weighted average Loan to Value of these
exposures is 59 per cent.
LOAN TO VALUE
All assets securing the loans undergo third party valuations before each
investment closes and periodically thereafter at a time considered
appropriate by the lenders. The Loan to Values shown below are based on
independent third party appraisals for loans classified as Stage 1 and
Stage 2 and on the marked down value as per the announced loan impairments
for the loan classified as Stage 3 in October 2024. The weighted average
age of the dates of these valuations for the whole portfolio is just under
a year.
As of 30 June 2025, the portfolio had an average weighted last £ Loan to
Value of 69.9 per cent (30 June 2024: 58 per cent). The average weighted
last £ Loan to Value of the portfolio excluding the asset classed as Stage
3 (Office Portfolio, Ireland) was 57.7 per cent as at 30 June 2025.
The Group’s last £ Loan to Value means the percentage which the total loan
drawn less any deductible lender controlled cash reserves and less any
amortisation received to date (when aggregated with any other indebtedness
ranking alongside and/or senior to it) bears to the market value
determined by the last formal lender valuation received, reviewed in
detail and approved by the reporting date or, in the case of the Stage 3
asset classified as Stage 3 in October 2024, the marked down value per the
recently announced loan impairments. Loan to Value to first Group £ means
the starting point of the Loan to Value range of the loans drawn (when
aggregated with any other indebtedness ranking senior to it). For
development projects the calculation includes the total facility available
and is calculated against the assumed market value on weighted completion
of the relevant project.
The table below shows the sensitivity of the Loan to Value calculation for
movements in the underlying property valuation and demonstrates that the
Group has considerable headroom within the currently reported last £ Loan
to Values.
Change in Valuation Office Light Industrial Healthcare Other Total
-15% 116.3% 76.5% 62.4% 70.5% 82.2%
-10% 109.8% 72.3% 59.0% 66.5% 77.6%
-5% 104.0% 68.4% 55.9% 63.0% 73.6%
0% 98.8% 65.0% 53.1% 59.9% 69.9%
5% 94.1% 61.9% 50.5% 57.0% 66.6%
10% 89.9% 59.1% 48.2% 54.4% 63.5%
15% 85.9% 56.5% 46.1% 52.1% 60.8%
LIQUIDITY AND HEDGING
The Group had no available credit facilities as at 30 June 2025 (30 June
2024: £nil) as the Group had terminated all of its credit facilities by
early 2024 as it considered that it has sufficient resources to meet its
liabilities as they fall due.
The table below summarises the available liquidity as at 30 June 2025.
30 June 2025
£ million
Cash and Cash Equivalents 48.6
Undrawn Commitments to Borrowers (0.0)
Available Capacity 48.6
The Group had a proportion (27.5%) of its investments denominated in Euros
as at 30 June 2025 (this proportion can change over time) and is a
sterling denominated group. The Group is therefore subject to the risk
that exchange rates move unfavourably and that a) foreign exchange losses
on the loan principal are incurred and b) that interest payments received
are lower than anticipated when converted back to Sterling and therefore
returns are lower than the underwritten returns.
The Group manages this risk by entering into forward contracts to hedge
the currency risk. All non-Sterling loan principal is hedged back to
Sterling to the maturity date of the loan.
The risk remains that loans are repaid earlier than anticipated and
forward contracts need to be broken early. In these circumstances the
forward curve may have moved since the forward contracts were placed which
can impact the rate received.
The Group does have the obligation to post cash collateral under its
hedging facilities. However, cash would not need to be posted until the
hedges were more than £15.0 million out of the money. This situation is
closely monitored as a result. The mark to market of the hedges at 30 June
2025 was £0.5 million (in the money) and with the robust hedging structure
employed by the Group, cash collateral has never been required to be
posted since inception.
CREDIT RISK ANALYSIS
All loans within the portfolio are classified and measured at amortised
cost less impairment.
The Group follows a three-stage model for impairment based on changes in
credit quality since initial recognition as summarised below:
• A financial instrument that is not credit-impaired on initial
recognition is classified as Stage 1 and has its credit risk
continuously monitored by the Group. The expected credit loss (“ECL”)
is measured over a 12-month period of time.
• If a significant increase in credit risk since initial recognition is
identified, the financial instrument is moved to Stage 2 but is not
yet deemed to be credit-impaired. The ECL is measured on a lifetime
basis.
• If the financial instrument is credit-impaired it is then moved to
Stage 3. The ECL is measured on a lifetime basis.
The Group closely monitors all loans in the portfolio for any
deterioration in credit risk. As of 30 June 2025, assigned classifications
are:
• Stage 1 loans – three loan investments totalling £60 million,
equivalent to 53 per cent of the funded portfolio as of 30 June 2025
were classified in the lowest risk profile, Stage 1.
• Stage 2 loans – two loan investments totalling £29 million, equivalent
to 26 per cent of the funded portfolio as of 30 June 2025 were
classified as Stage 2. The average Loan to Value of these exposures is
58 per cent. The weighted average age of valuation report dates used
in the Loan to Value calculation is just under one year. While these
loans are higher risk than at initial recognition, no loss has been
recognised on a twelve-month and lifetime expected credit losses
basis. Therefore, no impairment in the value of these loans has been
recognised and, indeed, both these loans have repaid in full
subsequent to 30 June 2025 and prior to the issuance of this report.
The drivers for classifying these deals as Stage 2 are typically
either one or a combination of the below factors:
• lower underlying property values following receipt of updated formal
appraisals by independent valuers or agreed and in exclusivity sale
values;
• sponsor business plans progressing more slowly than originally
underwritten meaning that trading performance has lagged expectations
and operating financial covenants under the facility agreements have
been breached; and
• additional equity support is required to cover interest or operating
shortfalls as a result of slower lease up or operations taking longer
to ramp up.
The Stage 2 loans continue to benefit from headroom to the Group’s
investment basis. The Group has a strategy for each of these deals which
targets full loan repayment over a defined period of time. Since 30 June
2025 both of these loans have fully repaid.
• Stage 3 loans – during October 2024, one loan (with a funded balance
amounting to £23 million/€27 million as of 30 June 2025) was
reclassified as Stage 3. As of 30 June 2025, the balance of this loan
represented 21 per cent of the total funded portfolio. As outlined
above, an impairment of £17 million/€20 million has been provided for
related to this asset as of 30 June 2025. Subsequent to 30 June 2025 a
further impairment provision of £1.9 million (€2.2 million) was made,
bringing the total impairment provision against this loan as
of 31 August 2025 to £19.4 million (€22.4 million) and bringing the
carrying value of this loan asset as of 31 August 2025 to £4.1 million
(€4.7 million). The Investment Adviser will continue to actively manage
the position to maximise the opportunity for value recovery
and the Board will continue to closely monitor the position and ongoing
developments. The Company will provide further updates as appropriate.
This assessment has been made based on information in our possession at
the date of publishing this report, our assessment of the risks of each
loan and certain estimates and judgements around future performance of the
assets.
A detailed description of how the Group determines on what basis loans are
classified as Stage 1, Stage 2 and Stage 3 post initial recognition is
provided in page 21 to the Annual Report and Audited Consolidated
Financial Statements for the year to 31 December 2024.
FAIR VALUE OF THE PORTFOLIO COMPARED TO AMORTISED COST
The table below represents the fair value of the loans based on a
discounted cash flow basis using a range of potential discount rates.
Discount Rate Value Calculated % of book value
7.4% £ 97.0 m 100.9%
7.9% £ 96.8 m 100.7%
8.4% £ 96.5 m 100.4%
8.9% £ 96.3 m 100.2%
9.4% £ 96.1 m = book value 100.0%
9.9% £ 95.9 m 99.8%
10.4% £ 95.7 m 99.6%
10.9% £ 95.5 m 99.4%
11.4% £ 95.3 m 99.2%
The effective interest rate (“EIR”) – i.e. the discount rate at which
future cash flows equal the amortised cost is 9.4 per cent. We have
sensitised the cash flows at EIR intervals of 0.5 per cent up to +/- 2.0
per cent. The table reflects how a change in market interest rates or
credit risk premiums may impact the fair value of the portfolio versus the
amortised cost. The volatility of the fair value to movements in discount
rates is low due to the short duration remaining of most loans.
RELATED PARTY TRANSACTIONS
Related party disclosures are given in note 16 to the Unaudited Condensed
Consolidated Financial Statements.
FORWARD LOOKING STATEMENTS
Certain statements in this interim report are forward-looking. Although
the Group believes that the expectations reflected in these
forward-looking statements are reasonable, it can give no assurance that
these expectations will prove to have been correct. Because these
statements involve risks and uncertainties, actual results may differ
materially from those expressed or implied by these forward-looking
statements.
The Group undertakes no obligation to update any forward-looking
statements whether as a result of new information, future events or
otherwise.
Starwood European Finance Partners Limited
Investment Manager
5 September 2025
Principal Risks
PRINCIPAL RISKS FOR THE REMAINING SIX MONTHS OF THE YEAR TO 31 DECEMBER
2025
The principal risks assessed by the Board relating to the Group were
disclosed in the Strategic Report set out in the Annual Report and Audited
Consolidated Financial Statements for the year to 31 December 2024 on
pages 12 to 16. The Board and Investment Manager have reassessed the
principal risks and do not consider these risks to have changed.
Therefore, the following are the principal risks assessed by the Board and
the Investment Manager as relating to the Group for the remaining six
months of the year to 31 December 2025:
FINANCIAL MARKET VOLATILITY (RISK THAT DIVIDENDS DO NOT MEET THE TARGETED
LEVELS AND THAT THE SHARE PRICE DISCOUNT PERSISTS AND WIDENS)
Subsequent to the EGM held on 27 January 2023 the Group’s strategy is for
an orderly realisation of its assets and the return of capital to
shareholders. During the realisation period the Company intends to target
a similar per share level of dividends as previously for as long as this
is feasible and to return capital to shareholders subject to maintaining
sufficient cash to fund as yet unfunded cash commitments on loans and
ongoing operating costs.
The Group’s targeted returns are based on estimates and assumptions that
are inherently subject to significant business and economic uncertainties
and contingencies and, consequently, the actual rate of return may be
materially lower than the targeted returns.
As a result, the level of dividends to be paid by the Company may
fluctuate and there is no guarantee that any such dividends will be paid.
Since March 2020 the shares have traded at a discount to NAV per share and
shareholders may be unable to realise their investments through the
secondary market at NAV per share.
The Board, along with the Investment Manager and the Investment Adviser,
monitor, review and consider the estimates and assumptions that underpin
the targeted returns of the business and, where necessary, communicate any
changes in those estimates and assumptions to the market.
The Board monitors the level of premium or discount of the share price to
NAV per share and deployed a share buyback programme during 2020, 2021 and
2022 in order to support the share price. No shares have been bought back
since 2022. The current strategy of the orderly realisation of assets and
the return of capital to shareholders over time should mean that, subject
to no further unforeseen negative impacts on the value of investments,
shareholders will receive a return of capital invested over time. During
2023 and 2024 the Company returned £210 million to shareholders. During
the first six months of 2025 the Company returned £46.0 million to
shareholders.
LONG-TERM STRATEGIC RISK (RISK THAT THE BUSINESS MODEL IS NO LONGER
ATTRACTIVE)
Subsequent to the EGM held on 27 January 2023, the Group’s strategy is for
an orderly realisation and return of capital to shareholders. At the time
of the change in strategy it was anticipated that it would take three to
four years to complete the return of capital to shareholders. As at the
date of issuance of this report the Company is still on track to complete
the return of capital to shareholders within that time scale.
The Group’s targeted returns are based on estimates and assumptions that
are inherently subject to significant business and economic uncertainties
and contingencies and, consequently, the actual rate of return may be
materially lower than the targeted returns.
The Directors regularly receive information on the performance of the
existing loans, including the performance of underlying assets versus
underwritten business plan and the likelihood of any early repayments, or
the need for any loan amendments.
The Board continues to monitor the revised investment strategy and
performance on an ongoing basis.
MARKET DETERIORATION RISK (RISK OF THE ECONOMIES IN WHICH THE GROUP
OPERATES EITHER STAGNATE OR GO INTO RECESSION)
The Group’s investments are comprised of debt investments in the United
Kingdom (‘UK’) and the European Union’s internal market and it is
therefore exposed to economic movements and changes in these markets. Any
deterioration in the global, UK or European economy could have
a significant adverse effect on the activities of the Group and may result
in loan defaults or impairments.
The Covid-19 pandemic has had a material long term impact on global
economies and on the operations of the Group’s borrowers since 2020. The
situation in Ukraine, following the February 2022 incursion into Ukraine
by Russia and in the Middle East, following the October 2023 Hamas attacks
in Israel, also presents a significant risk to European and global
economies. While the Group has no direct or known indirect involvement
with Ukraine, Russia or the Middle East it may be impacted by the
consequences of the instability caused by the ongoing conflict.
The impact of the UK’s departure from the European Union in 2020 still
represents a potential threat to the UK economy as well as wider Europe
particularly due to the impact on trade and labour mobility. The overall
results for growth rates for both the UK and Europe have been a modest
level of growth and the expectation is this will continue with OECD
forecasts for 2026 being only 1.3 per cent and 1.2 per cent for the UK and
the Eurozone respectively meaning relatively small changes in growth rates
could result in a recessionary period.
The impact of the start of President Trump's second term in office (which
started in January 2025) has also led to increased global economic and
political uncertainty particularly in his approach to the use of tariffs.
In addition there is the impact of the ongoing high inflationary
environment to consider. While rates have generally been falling this
inflation environment has held rates higher longer than markets have
expected and could make it harder for borrowers to meet their interest
obligations to the Group and to ultimately repay the loans advanced to
them.
The Board have considered the impact of market deterioration on the
current and future operations of the Group and its portfolio of loans
advanced. As a result of the cash held in reserve by the Group and the
underlying quality of the portfolio of loans advanced, both the Investment
Manager and the Board still believe the fundamentals of the portfolio
remain optimistic and that the Group can adequately support the portfolio
of loans advanced despite current market conditions.
In the event of a loan default in the portfolio, the Group is generally
entitled to accelerate the loan and enforce security, but the process may
be expensive and lengthy, and the outcome is dependent on sufficient
recoveries being made to repay the borrower’s obligations and associated
costs. Some of the investments held would rank behind senior debt tranches
for repayment in the event that a borrower defaults, with the consequence
of greater risk of partial or total loss. In addition, repayment of loans
by the borrower at maturity could be subject to the availability of
refinancing options, including the availability of senior and subordinated
debt and is also subject to the underlying value of the real estate
collateral at the date of maturity. The Group has mitigated against this
with an average weighted loan to value of the portfolio of 69.9 per cent
as at 30 June 2025. The average weighted Loan to Value of the portfolio
excluding the asset classed as Stage 3 (Office Portfolio, Ireland) was
57.7 per cent as of 30 June 2025. Therefore, the portfolio should be able
to withstand a significant level of deterioration before credit losses are
incurred.
The Investment Adviser and Manager has also mitigated the risk of credit
losses by undertaking detailed due diligence prior to the signing of each
loan. Whilst the precise scope of due diligence will have depended on the
proposed investment, such diligence will typically have included
independent valuations, building, measurement and environmental surveys,
legal reviews of property title, assessment of the strength of the
borrower’s management team and key leases and, where necessary, mechanical
and engineering surveys, accounting and tax reviews and know your customer
checks.
The Investment Adviser, Investment Manager and Board have also managed
these risks in the past by ensuring a diversification of investments in
terms of geography, market and type of loan. Such diversification will be
harder to achieve as the company pursues a strategy of orderly realisation
and does not enter into any new investments. The Investment Manager and
Investment Adviser operate in accordance with the guidelines, investment
limits and restrictions as determined by the Board. The Directors review
the portfolio against these guidelines on a regular basis.
The Investment Adviser obtains regular performance reporting from all
borrowers and meets with all borrowers on a regular basis to monitor
developments in respect of each loan and reports to the Investment Manager
and the Board periodically and on an ad hoc basis where considered
necessary.
The Group’s loans are held at amortised cost. The performance of each loan
is reviewed quarterly by the Investment Adviser for any indicators of
significant increase in credit risk, impaired or defaulted loans. The
Investment Adviser also provides their assessment of any expected credit
loss for each loan advanced. The results of the performance review and
allowance for expected credit losses are discussed with the Investment
Manager and the Board.
The Group has prudently assessed key risk indicators impacting all
investments. One loan is classified as Stage 3 (credit impaired) and 2
loans within the portfolio are classified as Stage 2 (increased risk of
default) as at 30 June 2025. These 3 loans in total account for 47 per
cent of the portfolio funded by the Group as at 30 June 2025. The two
Stage 2 assets were repaid in full subsequent to 30 June 2025 and before
the issuance of this report. An impairment provision of £10.8 million
(€12.9 million) was provided for the loan classified as Stage 3 in the
accounts to 31 December 2024 and an additional provision of £6.2 million
(€7.3 million) has been provided in the accounts for the six months to
30 June 2025. These two provisions accounts for 75% of the funded value of
the loan asset as of 30 June 2025. The net carrying value of the Stage 3
asset equates to a circa 4 per cent of the total NAV of the Group as of 30
June 2025. No expected credit losses were recognised as of 30 June 2025
against any of the loans classified as Stage 2 (which are now fully
repaid), because of the strong LTVs across the loan portfolio and strong
contractual agreements with borrowers, including these Stage 2 loans.
This is further outlined in detail under the Credit Risk Analysis section
of the Investment Manager report. Despite increased risk around higher
interest rates and lower transaction volumes, the remaining portfolio has
continued to perform well. The reasons, estimates and judgements
supporting this assessment are described in the Investment Manager’s
report.
INTEREST RATE RISK
The Group is subject to the risk that the loan income and income from the
cash and cash equivalents will fluctuate due to movements in interbank
rates.
The loans in place at 30 June 2025 are structured so that 78 per cent are
floating rate and all of these floating rate loans are subject to
interbank rate floors such that the interest cannot drop below a certain
level, which offers some protection against downward interest rate risk.
The remaining 22 per cent by value of the loans are fixed rate, which
provides protection from downward interest rate movements to the overall
portfolio (but also prevents the Group from benefiting from any interbank
rate rises on these positions).
FOREIGN EXCHANGE RISK
The majority of the Group’s investments are Sterling denominated (72.5 per
cent as at 30 June 2025) with the remainder being Euro denominated. The
Group is subject to the risk that the exchange rates move unfavourably and
that a) foreign exchange losses on the Euro loan principals are incurred
and b) that Euro interest payments received are lower than anticipated
when converted back to Sterling and therefore returns are lower than the
underwritten returns.
The Group manages this risk by entering into forward contracts to hedge
the currency risk. All non-Sterling loan principal is hedged back to
Sterling to the maturity date of the loan. However, the risk remains that
loans are repaid earlier than anticipated and forward contracts need to
be broken early. In these circumstances, the forward curve may have moved
since the forward contracts were placed which can impact the rate
received.
As a consequence of the hedging strategy employed as outlined above, the
Group is subject to the risk that it will need to post cash collateral
against the mark to market on foreign exchange hedges which could lead to
liquidity issues.
The Company had approximately £20.1 million (€23.5 million) of net hedged
notional exposure with Lloyds Bank plc at 30 June 2025 (converted at 30
June 2025 FX rates).
As at 30 June 2025, the hedges were in the money. If the hedges move out
of the money and this mark to market exceeds £15.0 million the Company is
required to post collateral, subject to a minimum transfer amount of £1
million. This situation is monitored closely, however, and as at 30 June
2025, the Company had sufficient liquidity to meet substantial cash
collateral requirements.
CYBERCRIME
The Group is subject to the risk of unauthorised access into systems,
identification of passwords or deleting data, which could result in loss
of sensitive data, breach of data physical and electronic, amongst other
potential consequences. This risk is managed and mitigated by regular
reviews of the Group’s operational and financial control environment. The
matter is also contained within service providers surveys which are
completed by the Group’s service providers and are regularly reviewed by
the Board. No adverse findings in connection with the service provider
surveys have been found. The Company and its service providers have
policies and procedures in place to mitigate this risk, the cybercrime
risk continues to be closely monitored.
REGULATORY RISK
The Group is also subject to regulatory risk as a result of any changes in
regulations or legislation. Constant monitoring by the Investment Adviser,
Investment Manager and the Board is in place to ensure the Group keeps up
to date with any regulatory changes and compliance with them.
OPERATIONAL RISK
The Group has no employees and is reliant on the performance of
third-party service providers. Failure by the Investment Manager,
Investment Adviser, Administrator or any other third-party service
provider to perform in accordance with the terms of its appointment could
have a material detrimental impact on the operation of the Group.
The Board maintains close contact with all service providers to ensure
that the operational risks are minimised.
EMERGING RISKS
Emerging risks to the Group are considered by the Board to be trends,
innovations and potential rule changes relevant to the real estate
mortgage and financial sector. The challenge to the Group is that emerging
risks are known to some extent but are not likely to materialise or have
an impact in the near term. The Board regularly reviews and discusses the
risk matrix and has identified climate change as an emerging risk.
CLIMATE CHANGE
The consequences that climate change could have are potentially severe but
highly uncertain. The potential high impact of possible losses has done a
lot to raise the awareness of this risk in investment circles. The Board,
in conjunction with the Investment Manager and Investment Adviser,
considers the possible physical and transitional impact of climate change
on properties secured on loans provided by the Group and includes the
consideration of such factors in valuation instructions of the collateral
properties and in considering any potential expected credit losses on
loans. The Investment Adviser considers the possible physical and
transitional impact of climate change as part of the origination process.
In addition, the Board, in conjunction with the Investment Adviser, is
monitoring closely the regulation and any developments in this area.
Governance
Board of Directors
JOHN WHITTLE | Non-executive Director – Chairman of the Board
John is a Fellow of the Institute of Chartered Accountants in England and
Wales and holds the Institute of Directors Diploma in Company Direction.
He is a Non-Executive Director of BH Macro Limited and is the Audit
Committee Chairman of both The Renewable Infrastructure Group Ltd (FTSE
250) and Sancus Lending Group Ltd (listed on AIM). He was previously
Finance Director of Close Fund Services, a large independent fund
administrator, where he successfully initiated a restructuring of client
financial reporting services and was a key member of the business
transition team. Prior to moving to Guernsey, he was at Pricewaterhouse in
London before embarking on a career in business services, predominantly
telecoms. He co-led the business turnaround of Talkland International
(which became Vodafone Retail) and was directly responsible for the
strategic shift into retail distribution and its subsequent
implementation; he subsequently worked on the private equity acquisition
of Ora Telecom. John is a resident of Guernsey.
GARY YARDLEY | Non-executive Director
Gary is a Fellow of the Royal Institution of Chartered Surveyors and holds
a degree in estate management from Southbank University and an MBA. He has
been a senior deal maker in the UK and European real estate market for
over 25 years. Gary was formally Managing Director & Chief Investment
Officer of Capital & Counties Property PLC (“Capco”) and led Capco’s real
estate investment and development activities. Leading Capco’s team on the
redevelopment of Earls Court, Gary was responsible for acquiring and
subsequently securing planning consent for over 11m sq. ft. at this
strategic opportunity area capable of providing over 7,500 new homes for
London. Gary was also heavily involved in the curation and growth of the
Covent Garden estate for Capco, now an established premier London
landmark. Gary is a Chartered Surveyor with over 30 years’ experience in
UK & European real estate. He is a former CIO of Liberty International and
former equity partner of King Sturge and led PwC’s real estate team in
Prague and Central Europe in the early 1990s. Gary returned to Prague in
August 2023, leading a major development opportunity on the D5 Highway
adjacent to the German border. Gary now resides in the Czech Republic.
SHELAGH MASON | Non-executive Director - Management Engagement Committee
Chairman and Senior Independent Director
Shelagh Mason is a solicitor specialising in English commercial property
who retired as a consultant with Collas Crill LLP in 2020. She is the
Non-Executive Chairman of the Channel Islands Property Fund Limited listed
on the International Stock Exchange and is also Non-Executive Chairman of
Riverside Capital PCC, previously sat on the board of Skipton
International Limited, a Guernsey Licensed bank, and until 28 February
2022, she was a Non-Executive Director of the Renewables Infrastructure
Fund, a FTSE 250 company, standing down after nine years on the board. In
addition to the Company, she has, a non-executive position with Ruffer
Investment Company Limited, a FTSE 250 company. Previously Shelagh was a
member of the board of directors of Standard Life Investments Property
Income Trust, a property fund listed on the London Stock Exchange for 10
years until December 2014. She retired from the board of Medicx Fund
Limited, a main market listed investment company investing in primary
healthcare facilities in 2017 after 10 years on the board. She is a past
Chairman of the Guernsey Branch of the Institute of Directors and she also
holds the IOD Company Direction Certificate and Diploma with distinction.
Shelagh is a resident of Guernsey.
CHARLOTTE DENTON | Non-executive Director - Audit Committee Chairman
Charlotte is a Fellow of the Institute of Chartered Accountants in England
and Wales and a Chartered Director and a fellow of the Institute of
Directors. She holds a degree in politics from Durham University. During
Charlotte’s executive career she worked in various locations through roles
in diverse organisations, including KPMG, Rothschild, Northern Trust, a
property development startup and a privately held financial services
group. She has served on boards for nearly twenty years and is currently a
Non-Executive Director of various entities including private equity - the
GP boards of Hitec and on the Investment Manager board for NextEnergy. She
is also on the board of Pershing Square Holdings Limited, a FTSE 100
company. and is the non-executive chairman of Achilles Investment Company
Limited, which is listed on the Specialist Fund Segment of the Main Market
of the London Stock Exchange. Charlotte is a resident of Guernsey.
Statement of Directors’ Responsibilities
To the best of their knowledge, the Directors of Starwood European Real
Estate Finance Limited confirm that:
1. The Unaudited Condensed Consolidated Financial Statements have been
prepared in accordance with IAS 34, “Interim Financial Reporting” as
adopted by the European Union as required by DTR 4.2.4 R; and
2. The Interim Financial Report, comprising of the Chairman’s Statement,
the Investment Manager’s Report and the Principal Risks, meets the
requirements of an interim management report and includes a fair review of
information required by:
(i) DTR 4.2.7R of the UK Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six
months and their impact on the Unaudited Condensed Consolidated Financial
Statements, and a description of the principal risks and uncertainties for
the remaining six months of the year; and
(ii) DTR 4.2.8R of the UK Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months and that
have materially affected the financial position or performance of the
Company during that period, and any material changes in the related party
transactions disclosed in the last Annual Report.
By order of the Board
For Starwood European Real Estate Finance Limited
John Whittle Charlotte Denton
Chairman Director
5 September 2025 5 September 2025
Interim Financial Statements
Independent Review Report to Starwood European Real Estate Finance Limited
Report on the unaudited condensed consolidated financial statements
OUR CONCLUSION
We have reviewed Starwood European Real Estate Finance Limited's unaudited
condensed consolidated financial statements (the "interim financial
statements") in the Interim Financial Report and Unaudited Condensed
Consolidated Financial Statements of Starwood European Real Estate Finance
Limited for the 6-month period ended 30 June 2025 (the “period”).
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with International Accounting Standard
34, ‘Interim Financial Reporting’, as adopted by the European Union and
the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom’s Financial Conduct Authority.
The interim financial statements comprise:
• the unaudited condensed consolidated statement of financial position
as at 30 June 2025;
• the unaudited condensed consolidated statement of comprehensive income
for the period then ended;
• the unaudited condensed consolidated statement of cash flows for the
period then ended;
• the unaudited condensed consolidated statement of changes in equity
for the period then ended; and
• the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Financial Report
and Unaudited Condensed Consolidated Financial Statements have been
prepared in accordance with International Accounting Standard 34, ‘Interim
Financial Reporting’, as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom’s
Financial Conduct Authority.
BASIS FOR CONCLUSION
We conducted our review in accordance with International Standard on
Review Engagements 2410, ‘Review of Interim Financial Information
Performed by the Independent Auditor of the Entity’ issued by the
International Auditing and Assurance Standards Board. A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical
and other review procedures.
A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing and, consequently,
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
We have read the other information contained in the Interim Financial
Report and Unaudited Condensed Consolidated Financial Statements and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
RESPONSIBILITIES FOR THE INTERIM FINANCIAL STATEMENTS AND THE REVIEW
OUR RESPONSIBILITIES AND THOSE OF THE DIRECTORS
The Interim Financial Report and Unaudited Condensed Consolidated
Financial Statements, including the interim financial statements, is the
responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the Interim Financial Report and Unaudited
Condensed Consolidated Financial Statements in accordance with
International Accounting Standard 34, ‘Interim Financial Reporting’, as
adopted by the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom’s Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the Interim Financial Report and Unaudited Condensed
Consolidated Financial Statements based on our review. This report,
including the conclusion, has been prepared for and only for the company
for the purpose of complying with the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom’s Financial Conduct Authority and
for no other purpose. We do not, in giving this conclusion, accept or
assume responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
PricewaterhouseCoopers CI LLP
Chartered Accountants,
Guernsey, Channel Islands
7 September 2025
(a) The maintenance and integrity of the Starwood European Real Estate
Finance Limited website is the responsibility of the directors; the work
carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the interim financial statements since
they were initially presented on the website.
(b) Legislation in Guernsey governing the preparation and dissemination of
interim financial statements may differ from legislation in other
jurisdictions.
Unaudited Condensed Consolidated Statement of Comprehensive Income
for the period ended 30 June 2025
1 January 2025 1 January 2024 1 January 2024
to to to
30 June 2025 30 June 2024 31 December
2024
£ £ £
Notes (unaudited) (unaudited) (audited)
Income
Income from loans 7 6,004,173 10,792,003 18,522,158
advanced
Short term deposits 1,158,125 1,443,065 2,656,832
interest income
Net foreign exchange 3 383,365 452,917 531,720
gains
Total income 7,545,663 12,687,985 21,710,710
Expenses
Impairment loss on 7 6,234,676 - 10,849,579
loans advanced
Impairment reversal on 7 - (143,478) (143,478)
loans advanced
Investment management 16 580,750 1,092,092 1,840,831
fees
Credit facility - 56,610 56,610
commitment fees
Credit facility
interest and - 8,333 8,333
amortisation of fees
Other expenses 122,967 143,903 161,138
Audit and non-audit 72,331 143,460 420,683
fees
Administration fees 174,315 193,737 322,424
Legal and professional 91,769 117,523 231,590
fees
Directors' fees and 16 100,030 99,002 199,279
expenses
Broker's fees 25,000 25,000 50,000
Total operating 7,401,838 1,736,182 13,996,989
expenses
Operating profit for
the period / year 143,825 10,951,803 7,713,721
before tax
Taxation 15 100,917 130,100 96,985
Operating profit for 42,908 10,821,703 7,616,736
the period / year
Other comprehensive
income
Items that may be
reclassified to profit
or loss
Exchange differences on
translation of foreign (22,262) (74,037) (137,024)
operations
Other comprehensive
loss for the period / (22,262) (74,037) (137,024)
year
Total comprehensive
income for the period / 20,646 10,747,666 7,479,712
year
Weighted average number 4 160,970,087 286,319,699 244,872,140
of shares in issue
Basic and diluted
earnings per Ordinary 4 0.03 3.78 3.11
Share (pence)
The accompanying notes form an integral part of these Unaudited Condensed
Consolidated Financial Statements.
Unaudited Condensed Consolidated Statement of Financial Position
as at 30 June 2025
As at As at As at
30 June 2025 30 June 2024 31 December 2024
£ £ £
Notes (unaudited) (unaudited) (audited)
Assets
Cash and cash equivalents 5 48,570,741 117,143,316 45,686,362
Prepayments 6 28,317 33,568 22,822
Financial assets at fair
value through profit or 8 546,899 947,729 1,012,805
loss
Loans advanced 7 96,121,053 166,864,999 149,508,470
Total assets 145,267,010 284,989,612 196,230,459
Current liabilities
Trade and other payables 9 1,066,712 1,506,891 1,348,763
Total current liabilities 1,066,712 1,506,891 1,348,763
Net assets 144,200,298 283,482,721 194,881,696
Capital and reserves
Share capital 10 147,846,278 269,825,015 193,676,118
Retained (deficit) / (3,280,213) 13,938,224 1,549,089
earnings
Translation reserve (365,767) (280,518) (343,511)
Total equity 144,200,298 283,482,721 194,881,696
Number of Ordinary Shares 10 148,039,803 270,178,206 193,929,633
in issue
Net asset value per 97.41 104.92 100.49
Ordinary Share (pence)
These Unaudited Condensed Consolidated Financial Statements were approved
and authorised for issue by the Board of Directors on 5 September 2025,
and signed on its behalf by:
John Whittle Charlotte Denton
Chairman Director
The accompanying notes form an integral part of these Unaudited Condensed
Consolidated Financial Statements.
Unaudited Condensed Consolidated Statement of Changes in Equity
for the period ended 30 June 2025
Period ended 30 June
2025
Share Retained Translation Total
capital (deficit) / reserve equity
earnings
£ £ £ £
(unaudited) (unaudited) (unaudited) (unaudited)
Balance at 1 January 193,676,118 1,549,083 (343,505) 194,881,696
2025
Shares redeemed (45,829,840) (170,125) - (45,999,965)
Dividends paid - (4,702,079) - (4,702,079)
Operating profit for - 42,908 - 42,908
the period
Other comprehensive
income:
Other comprehensive - - (22,262) (22,262)
loss for the period
Balance at 30 June 147,846,278 (3,280,213) (365,767) 144,200,298
2025
Period ended 30 June
2024
Share Retained Translation Total
capital earnings reserve equity
£ £ £ £
(unaudited) (unaudited) (unaudited) (unaudited)
Balance at 1 January 313,280,868 14,257,318 (206,481) 327,331,705
2024
Shares redeemed (43,455,853) (1,544,142) - (44,999,995)
Dividends paid - (9,596,655) - (9,596,655)
Operating profit for - 10,821,703 - 10,821,703
the period
Other comprehensive
income:
Other comprehensive - - (74,037) (74,037)
loss for the period
Balance at 30 June 269,825,015 13,938,224 (280,518) 283,482,721
2024
Year ended 31
December 2024
Share Retained Translation Total
capital earnings reserve equity
£ £ £ £
(audited) (audited) (audited) (audited)
Balance at 1 January 313,280,868 14,257,318 (206,481) 327,331,705
2024
Shares redeemed (119,604,750) (5,395,251) - (125,000,001)
Dividends paid - (14,929,720) - (14,929,720)
Operating profit for - 7,616,736 - 7,616,736
the year
Other comprehensive
income:
Other comprehensive - - (137,024) (137,024)
loss for the year
Balance at 31 193,676,118 1,549,083 (343,505) 194,881,696
December 2024
The accompanying notes form an integral part of these Unaudited Condensed
Consolidated Financial Statements.
Unaudited Condensed Consolidated Statement of Cash Flows
for the period ended 30 June 2025
1 January 2025 1 January 2024 1 January 2024 to
to to
30 June 2025 30 June 2024 31 December 2024
£ £ £
(unaudited) (unaudited) (audited)
Operating activities:
Operating profit for the 143,825 10,951,803 7,713,721
period / year before tax
Adjustments before tax
Income from loans advanced (6,004,173) (10,792,003) (18,522,158)
Short term deposits (1,158,125) (1,443,065) (2,656,832)
interest income
Impairment loss on loans 6,234,676 - 10,849,579
advanced
(Increase) / decrease in (5,495) (9,150) 1,403
prepayments
Decrease in trade and (109,918) (65,135) (117,686)
other payables
Net unrealised losses /
(gains) on foreign 465,906 45,475 (19,601)
exchange derivatives
Net foreign exchange (833,125) (498,392) (527,878)
(gains) / losses
Net foreign exchange
losses / (gains) on (2,981) 2,142,687 2,737,627
foreign exchange
derivatives
Currency translation (1,410) 977,980 864,010
difference
Impairment reversal on - (143,478) (143,478)
loans advanced
Credit facility interest - 8,333 8,333
and amortisation of fees
Credit facility commitment - 56,610 56,610
fees
(1,270,820) 1,231,665 243,650
Loans advanced - (8,828,699) (9,883,286)
Loan repayments and 48,764,280 102,077,030 109,362,030
amortisation
Interest, commitment and
exit fee income from loans 5,243,424 13,255,599 20,573,183
advanced
Corporate taxes paid (289,196) (131,405) (188,237)
Net cash inflow from 52,447,688 107,604,190 120,107,340
operating activities
Cash flows from investing
activities
Short term deposits 1,158,125 1,443,065 2,656,832
interest income
Net cash inflow from 1,158,125 1,443,065 2,656,832
investing activities
Cash flows from financing
activities
Share redemptions (45,999,965) (44,999,995) (125,000,001)
Dividends paid (4,702,079) (9,596,655) (14,929,720)
Credit facility commitment - (111,267) (111,267)
fees paid
Net cash outflow from (50,702,044) (54,707,917) (140,040,988)
financing activities
Net increase / (decrease)
in cash and cash 2,903,769 54,339,338 (17,276,816)
equivalents
Cash and cash equivalents
at the start of the period 45,686,362 63,837,644 63,837,644
/ year
Net foreign exchange
losses on cash and cash (19,390) (1,033,666) (874,466)
equivalents
Cash and cash equivalents
at the end of the period / 48,570,741 117,143,316 45,686,362
year
The accompanying notes form an integral part of these Unaudited Condensed
Consolidated Financial Statements.
Notes to the Unaudited Condensed Consolidated Financial Statements
for the period ended 30 June 2025
1. GENERAL INFORMATION
Starwood European Real Estate Finance Limited (the “Company”) was
incorporated with limited liability in Guernsey under the Companies
(Guernsey) Law, 2008, as amended, on 9 November 2012 with registered
number 55836, and has been authorised by the Guernsey Financial Services
Commission (the “GFSC”) as a registered closed-ended investment scheme.
The registered office and principal place of business of the Company is 1,
Royal Plaza, Royal Avenue, St Peter Port, Guernsey, Channel Islands, GY1
2HL.
The Company has appointed Starwood European Finance Partners Limited as
the Investment Manager (the “Investment Manager”), a company incorporated
in Guernsey and regulated by the GFSC. The Investment Manager has
appointed Starwood Capital Europe Advisers, LLP (the “Investment
Adviser”), an English limited liability partnership authorised and
regulated by the FCA, to provide investment advice pursuant to an
Investment Advisory Agreement. The administration of the Company is
delegated to Apex Fund and Corporate Services (Guernsey) Limited (the
“Administrator”).
On 12 December 2012, the Company announced the results of its IPO, which
raised net proceeds of £223.9 million. The Company’s Ordinary Shares were
admitted to the premium segment of the UK FCA’s Official List and to
trading on the Main Market of the London Stock Exchange as part of its IPO
which completed on 17 December 2012. Further issues took place in March
2013, April 2013, July 2015, September 2015, August 2016 and May 2019. On
10 August 2020, the Company announced the appointment of Jefferies
International Limited as buy-back agent to effect share buybacks on behalf
of the Company. During the years ended 2020, 2021 and 2022 the Company
bought back a total of 17,626,702 Ordinary Shares at an average cost of
91.51 pence per share. These Ordinary Shares were held in treasury until
they were cancelled in June 2023.
Following the Company’s Extraordinary General Meeting (“EGM”) on 27
January 2023, the Company’s objective changed and is now to conduct an
orderly realisation of the assets of the Group and the return of capital
to Shareholders. In line with this objective the Board is endeavouring to
realise all of the Group’s investments in a manner that achieves a balance
between maximising the net value received from those investments and
making timely returns to Shareholders. By 31 December 2024 this had
resulted in a redemption of a total of 201,663,063 shares for an aggregate
of £210,002,624. As at 31 December 2024 the Company had 193,929,633 shares
(2023: 313,690,942 shares) in issue. During February 2025 the Company
redeemed a total of 45,889,830 Ordinary Shares at an average of 100.24
pence per share for an aggregate of £45,999,965. As of 30 June 2025 and
the date of issuance of this report, the Company had 148,039,803 shares in
issue and the total number of voting rights was 148,039,803.
The Unaudited Condensed Consolidated Financial Statements comprise the
financial statements of the Company, Starfin Public Holdco 1 Limited
(“Holdco 1”), Starfin Public Holdco 2 Limited (“Holdco 2”), Starfin Lux
S.à.r.l (“Luxco”), Starfin Lux 3 S.à.r.l (“Luxco 3”) and Starfin Lux 4
S.à.r.l (“Luxco 4”) (together, the “Group”) as at 30 June 2025.
2. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES
The Company has prepared these Unaudited Condensed Consolidated Financial
Statements on a going concern basis in accordance with International
Accounting Standard 34, “Interim Financial Reporting”, as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom’s Financial Conduct Authority. This
Interim Financial Report does not comprise statutory Financial Statements
within the meaning of the Companies (Guernsey) Law, 2008, and should be
read in conjunction with the Consolidated Financial Statements of the
Group as at and for the year ended 31 December 2024, which have been
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union and the Companies (Guernsey) Law, 2008. The
statutory Financial Statements for the year ended 31 December 2024 were
approved by the Board of Directors on 2 April 2025. The opinion of the
Auditor on those Financial Statements was unqualified. This Interim
Financial Report and Unaudited Condensed Consolidated Financial Statements
for the period ended 30 June 2025 has been reviewed by the Auditor but
not audited.
In line with the considerations noted in Note 1 above, the Directors have
undertaken a comprehensive review and considered it appropriate to adopt
the going concern basis of accounting in preparing the Interim Financial
Report and Unaudited Condensed Consolidated Financial Statements.
There are a number of new and amended accounting standards and
interpretations that became applicable for annual reporting periods
commencing on or after 1 January 2025.
These amendments have not had a significant impact on these Unaudited
Condensed Consolidated Financial Statements and therefore the additional
disclosures associated with first time adoption have not been made.
The preparation of the Unaudited Condensed Consolidated Financial
Statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the
reported amounts of assets and liabilities, income and expenses. Actual
results may differ from these estimates.
In preparing these Unaudited Condensed Consolidated Financial Statements,
the significant judgements made by management in applying the Group’s
accounting policies and the key sources of estimation uncertainty were the
same as those that applied to the Annual Consolidated Financial Statements
for the year ended 31 December 2024.
3. NET FOREIGN EXCHANGE GAINS / (LOSSES)
30 June 2025 30 June 2024 31 December 2024
£ £ £
Loans advanced gains - realised - 449,103 449,103
Loans advanced losses - (11,600) (2,294,092) (2,310,327)
realised
Forward contracts gains - - 2,255,012 2,829,114
realised
Forward contracts losses - (2,981) (8,500) (8,500)
realised
Other gains / (losses) - 1,461 (85,477) 43,448
realised
Total realised (losses) / gains (13,120) 316,046 1,002,838
Loans advanced gains - 862,391 1,305,216 1,305,217
unrealised
Loans advanced losses - - (1,122,870) (1,795,936)
unrealised
Forward contracts gains - 666,849 4,039,911 4,636,868
unrealised
Forward contracts losses - (1,132,755) (4,085,386) (4,617,267)
unrealised
Total unrealised gains / 396,485 136,871 (471,118)
(losses)
Net gains 383,365 452,917 531,720
On occasion, the Group may realise a gain or loss on the roll forward of a
hedge if it becomes necessary to extend a capital hedge beyond the initial
anticipated loan term. If this situation arises the Group will separate
the realised FX gain or loss from other realised FX gains or losses and
not consider it available to distribute (or as a reduction in
distributable profits). The FX gain or loss will only be considered part
of distributable reserves when the rolled hedge matures or is settled and
the final net gain or loss on the capital hedges can be determined.
4. EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
The calculation of basic earnings per Ordinary Share is based on the
operating profit of £42,908 (30 June 2024: £10,821,703 and 31 December
2024: £7,616,736) and on the weighted average number of Ordinary Shares in
issue at 30 June 2025 of 160,970,087 (30 June 2024: 286,319,699 and 31
December 2024: 244,872,140).
The calculation of NAV per Ordinary Share is based on a NAV of
£144,200,298 (30 June 2024: £283,482,721 and 31 December 2024:
£194,881,696) and the actual number of Ordinary Shares in issue at 30 June
2025 of 148,039,803 (30 June 2024: 270,178,206 and 31 December 2024:
193,929,633).
5. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprises bank balances and short term bank
deposits held by the Group. The carrying amount of these represents their
fair value.
30 June 2025 30 June 2024 31 December 2024
£ £ £
Cash at bank 230,908 18,661,380 506,395
Short term deposit 48,339,833 98,481,936 45,179,967
48,570,741 117,143,316 45,686,362
Cash and cash equivalents comprises cash and short-term deposits held with
various banking institutions with original maturities of three months or
less.
6. PREPAYMENTS
30 June 2025 30 June 2024 31 December 2024
£ £ £
Prepayments 28,317 33,568 22,822
28,317 33,568 22,822
7. LOANS ADVANCED
30 June 2025 30 June 2024 31 December 2024
£ £ £
UK
Industrial Estate, UK 27,045,087 27,261,756 27,109,384
Hospitals, UK 25,363,672 25,354,632 25,367,849
Hotel, North Berwick 15,152,806 15,189,791 15,144,986
Life Science, UK 14,723,529 16,021,354 16,087,880
Hotels, United Kingdom - 46,046,030 47,083,091
Hotel and Office, Northern - 7,579,367 -
Ireland
Spain
Office Portfolio, Spain 8,042,772 8,019,380 7,790,072
Ireland
Office Portfolio, Ireland 5,793,187 21,392,689 10,925,208
96,121,053 166,864,999 149,508,470
The Group accounted for an impairment provision on the Office Portfolio,
Ireland loan of £6.2 million (€7.3 million) as at 30 June 2025
(31 December 2024: £10.8 million equivalent to €12.9 million), bring the
total impairment provision against this loan to £17.0 million (€20.2
million). The amounts above are shown net of these provisions as at 31
December 2024 and 30 June 2025.
The table below reconciles the movement of the carrying value of loans
advanced in the period / year.
30 June 2025 30 June 2024 31 December 2024
£ £ £
Loans advanced at the start of 149,508,470 264,096,284 264,096,284
the period / year
Loan repayments (48,764,280) (102,077,030) (109,362,030)
Impairment loss on loans (6,234,676) - (10,849,579)
advanced
Interest income received1 (5,377,594) (12,366,928) (20,338,875)
Exit fees received (236,671) (1,163,650) (1,298,650)
Commitment fees received (182,941) (307,042) (514,116)
Loans advanced1 553,782 9,410,527 11,461,744
Foreign exchange gains / 850,790 (1,662,643) (2,351,944)
(losses)
Income from loans advanced 6,004,173 10,792,003 18,522,158
Impairment reversal on loans - 143,478 143,478
advanced
Loans advanced at the end of 96,121,053 166,864,999 149,508,470
the period / year
Loans advanced at fair value 97,432,261 178,250,750 155,403,126
1 These items include interest capitalised of £553,782 (period ended 30
June 2024: £581,828, year ended 31 December 2024: £1,578,458).
8. FINANCIAL ASSETS AND FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT
OR LOSS
Financial assets at fair value through profit or loss comprise currency
forward contracts which represent contractual obligations to purchase
domestic currency and sell foreign currency on a future date at a
specified price.
The underlying instruments of currency forwards become favourable (assets)
or unfavourable (liabilities) as a result of fluctuations of foreign
exchange rates relative to their terms. The aggregate contractual or
notional amount of derivative financial instruments, the extent to which
instruments are favourable or unfavourable, and thus the aggregate fair
values of derivative financial assets and liabilities, can fluctuate
significantly from time to time. The foreign exchange derivatives are
subject to offsetting, enforceable master netting agreements for each
counterparty.
The gains and losses relating to the currency forwards are included within
“Net foreign exchange gains / (losses)” in the Unaudited Condensed
Consolidated Statement of Comprehensive Income.
Fair value estimation
The fair value of financial assets, which comprise derivatives not
designated as hedges, are valued based on the difference between the
agreed price of selling or buying the financial instruments on a future
date and the price quoted on the year end date for selling or buying the
same or similar financial instruments.
The fair value of financial assets and liabilities at fair value through
profit or loss are set out below:
Fair values
Notional contract
amount1 Assets Liabilities Total
30 June 2025 £ £ £ £
Foreign exchange
derivatives
Currency forwards:
Lloyds Bank plc 39,678,725 883,599 (336,700) 546,899
Total 39,678,725 883,599 (336,700) 546,899
Fair values
Notional contract
amount1 Assets Liabilities Total
30 June 2024 £ £ £ £
Foreign exchange
derivatives
Currency forwards:
Lloyds Bank plc 72,153,271 1,419,030 (471,301) 947,729
Total 72,153,271 1,419,030 (471,301) 947,729
Fair values
Notional contract
amount1 Assets Liabilities Total
31 December 2024 £ £ £ £
Foreign exchange
derivatives
Currency forwards:
Lloyds Bank plc 49,537,976 1,996,273 (983,468) 1,012,805
Total 49,537,976 1,996,273 (983,468) 1,012,805
1 Euro amounts are translated at the period / year end exchange rate
9. TRADE AND OTHER PAYABLES
30 June 2025 30 June 2024 31 December 2024
£ £ £
Audit fees payable 326,975 223,569 383,513
Investment management fees 275,431 525,743 364,757
payable
Administration fees payable 240,434 141,865 196,087
Accrued expenses 160,340 273,745 168,741
Tax provision 63,532 341,242 235,665
Directors' fees and expenses - 727 -
payable
1,066,712 1,506,891 1,348,763
10. SHARE CAPITAL
The authorised share capital of the Company consists of an unlimited
number of redeemable Ordinary Shares of no par value which upon issue the
Directors may classify into such classes as they may determine. The
Ordinary Shares are redeemable at the discretion of the Board.
At the period end, the Company had issued and fully paid up share capital
as follows:
Six months to Six months to Year to
30 June 2025 30 June 2024 31 December 2024
£ £ £
Period to:
Ordinary Shares of no par
value Issued and fully paid 193,929,633 313,690,942 313,690,942
at beginning of period
Shares redeemed during period (45,889,830) (43,512,736) (119,761,309)
Total Ordinary Shares at end 148,039,803 270,178,206 193,929,633
of period
The Company’s share capital is denominated in Sterling. At any general
meeting of the Company each ordinary share carries one vote. The Ordinary
Shares also carry the right to receive all income of the Company
attributable to the Ordinary Shares, and to participate in any
distribution of such income made by the Company, such income shall be
divided pari passu among the holders of Ordinary Shares in proportion to
the number of Ordinary Shares held by them.
Significant share movements
1 January 2025 to 30 June 2025:
Number £
Balance at the start of the period 193,929,633 201,966,107
Shares redeemed in six months to June 2025 (45,889,830) (45,829,840)
Balance at the end of the period 148,039,803 156,136,267
Issue costs since inception (8,289,989)
Net proceeds 147,846,278
1 January 2024 to 30 June 2024:
Number £
Balance at the start of the period 313,690,942 321,570,857
Shares redeemed in six months to June 2024 (43,512,736) (43,455,853)
Balance at the end of the period 270,178,206 278,115,004
Issue costs since inception (8,289,989)
Net proceeds 269,825,015
1 January 2024 to 31 December 2024:
Number £
Balance at the start of the period 313,690,942 321,570,857
Shares redeemed in 2024 (119,761,309) (119,604,750)
Balance at the end of the year 193,929,633 201,966,107
Issue costs since inception (8,289,989)
Net proceeds 193,676,118
11. DIVIDENDS
Dividends will be declared by the Directors and paid in compliance with
the solvency test prescribed by Guernsey law. Under Companies (Guernsey)
Law, 2008, companies can pay dividends in excess of accounting profit
provided they satisfy the solvency test prescribed by the Companies
(Guernsey) Law, 2008. The solvency test considers whether a company is
able to pay its debts when they fall due, and whether the value of a
company’s assets is greater than its liabilities. The Company passed the
solvency test for each dividend paid.
Subject to market conditions, the financial position of the Group and the
investment outlook, it is the Directors’ intention to continue to pay
quarterly dividends to shareholders (for more information see Chairman’s
Statement).
The Group paid the following dividends in respect of the period to 30 June
2025:
Dividend rate per Net dividend
Share (pence) paid (£) Payment date
Period to:
31 March 2025(1) 1.375 2,035,547 23 May 2025
30 June 2025(2) 1.375 2,035,547 5 September 2025
(1) Declared on 23 Apr 2025 and paid on 23 May 2025 to shareholders on the
register as at 2 May 2025.
(2) Declared on 5 August 2025 and to be paid on 5 September 2025 to
shareholders on the register as at 15 August 2025.
As this was declared after period end it was not accrued at period end.
The Company paid the following dividends in respect of the year to 31
December 2024:
Dividend rate per Net dividend
Share (pence) paid (£) Payment date
Period to:
31 March 2024 1.375 3,714,950 24 May 2024
30 June 2024 1.375 2,666,532 23 August 2024
30 September 2024 1.375 2,666,532 22 November 2024
31 December 2024(1) 1.375 2,666,532 28 February 2025
(1) Declared on 24 January 2025 and paid on 28 February 2025 to
shareholders on the register as at 7 February 2025.
As this was declared after year end it was not accrued at year end.
12. RISK MANAGEMENT POLICIES AND PROCEDURES
The Group through its investment in whole loans, mezzanine loans and
junior loans is exposed to a variety of financial risks, including market
risk (including market price risk, currency risk and interest rate risk),
credit risk and liquidity risk. The Group’s overall risk management
programme focuses on the unpredictability of financial markets and seeks
to minimise potential adverse effects on the Group’s financial
performance.
It is the role of the Board to review and manage all risks associated with
the Group, mitigating these either directly or through the delegation of
certain responsibilities to the Audit Committee, Investment Manager and
Investment Adviser.
The Board of Directors has established procedures for monitoring and
controlling risk. The Group has investment guidelines that set out its
overall business strategies, its tolerance for risk and its general risk
management philosophy.
In addition, the Investment Manager monitors and measures the overall risk
bearing capacity in relation to the aggregate risk exposure across all
risk types and activities. Further details regarding these policies are
set out below:
(i) Market risk
Market risk includes market price risk, currency risk and interest rate
risk.
a) Market price risk
If a borrower defaults on a loan and the real estate market enters a
downturn it could materially and adversely affect the value of the
collateral over which loans are secured. However, this risk is considered
by the Board to constitute credit risk as it relates to the borrower
defaulting on the loan and not directly to any movements in the real
estate market.
The Investment Manager moderates market risk through a careful selection
of loans within specified limits. The Group’s overall market position is
monitored by the Investment Manager and is reviewed by the Board of
Directors on an ongoing basis.
b) Currency risk
The Group, via the subsidiaries, operates across Europe and invests in
loans that are denominated in currencies other than the functional
currency of the Company. Consequently, the Group is exposed to risks
arising from foreign exchange rate fluctuations in respect of these loans
and other assets and liabilities which relate to currency flows from
revenues and expenses. Exposure to foreign currency risk is hedged and
monitored by the Investment Manager on an ongoing basis and is reported to
the Board accordingly.
The Group and Lloyds Bank plc entered into an international forward
exchange master agreement dated 5 April 2013 and on 7 February 2014 the
Group entered into a Professional Client Agreement with Goldman Sachs,
pursuant to which the parties can enter into foreign exchange transactions
with the intention of hedging against fluctuations in the exchange rate
between Sterling and other currencies. The Group does not trade in
derivatives but holds them to hedge specific exposures and have maturities
designed to match the exposures they are hedging. The derivatives are held
at fair value which represents the replacement cost of the instruments at
the reporting date and movements in the fair value are included in the
Unaudited Condensed Consolidated Statement of Comprehensive Income under
net foreign exchange losses/(gains). The Group does not adopt hedge
accounting in the Unaudited Condensed Consolidated Statement of Financial
Statements. At the end of the reporting period the Group had 9 (June 2024:
19 and December 2024: 9) open forward contracts.
c) Interest rate risk
Interest rate risk is the risk that the value of financial instruments and
related income from loans advanced and cash and cash equivalents will
fluctuate due to changes in market interest rates.
The majority of the Group’s financial assets are loans advanced at
amortised cost, prepayments and cash and cash equivalents. The Group’s
investments have some exposure to interest rate risk but this is limited
to interest earned on cash deposits and floating interbank rate exposure
for investments designated as loans advanced. Loans advanced have been
structured to include a combination of fixed and floating interest rates
to reduce the overall impact of interest rate movements. Further
protection is provided by including interbank rate floors and preventing
interest rates from falling below certain levels.
The loans in place at 30 June 2025 are structured so that 77.7 per cent
(30 June 2024: 84.8 per cent, 31 December 2024: 84.3 per cent) are
floating rate and all of these floating rate loans are subject to
interbank rate floors such that the interest rate cannot drop below a
certain level, which offers some protection against downward interest rate
risk. The remaining 22.3 per cent by value of the loans are fixed rate,
which provides protection from downward interest rate movements to the
overall portfolio (but also prevents the Group from benefiting from any
interbank rate rises on these positions).
(ii) Credit risk
Credit risk is the risk that a counterparty will be unable to pay amounts
in full when due. The Group’s main credit risk exposure is in the
investment portfolio, shown as loans advanced at amortised cost, where the
Group invests in whole loans and also subordinated and mezzanine debt
which rank behind senior debt for repayment in the event that a borrower
defaults. As at 30 June 2025, the Group spread the credit risk by
diversifying the loans being advanced to different geographic locations
and different sectors. There is also credit risk in respect of other
financial assets as a portion of the Group’s assets are cash and cash
equivalents or accrued interest. The banks used to hold cash and cash
equivalents have been diversified to spread the credit risk to which the
Group is exposed. For banks and financial institutions, only independently
rated parties with a minimum rating of ‘A’ are accepted. The Group also
has credit risk exposure in its financial assets classified as financial
assets through profit or loss which can be diversified between hedge
providers in order to spread credit risk to which the Group is exposed. At
the period end the derivative exposures were with one counterparty.
The total exposure to credit risk arises from default of the counterparty
and the carrying amounts of financial assets best represent the maximum
credit risk exposure at the end of the reporting period. As at 30 June
2025, the maximum credit risk exposure was £145,238,693 (30 June 2024:
£284,956,044 and 31 December 2024: £196,207,637).
The Investment Manager has adopted procedures to reduce credit risk
exposure by conducting credit analysis of the counterparties, their
business and reputation which is monitored on an ongoing basis. After the
advancing of a loan, a dedicated debt asset manager employed by the
Investment Adviser monitors ongoing credit risk and reports to the
Investment Manager, with quarterly updates also provided to the Board. The
debt asset manager routinely stresses and analyses the profile of the
Group’s underlying risk in terms of exposure to significant tenants,
performance of asset management teams and property managers against
specific milestones that are typically agreed at the time of the original
loan underwriting, forecasting headroom against covenants, reviewing
market data and forecast economic trends to benchmark borrower performance
and to assist in identifying potential future stress points. Periodic
physical inspections of assets that form part of the Group’s security are
also completed in addition to monitoring the identified capital
expenditure requirements against actual borrower investment.
The Group measures credit risk and expected credit losses using
probability of default, exposure at default and loss given default. The
Directors consider both historical analysis and forward looking
information in determining any expected credit loss. The Directors
consider the loss given default to be close to zero as all loans are the
subject of very detailed underwriting, including the testing of resilience
to aggressive downside scenarios with respect to the loan specifics, the
market and general macro changes. In addition to this, all loans have very
robust covenants in place, strong security packages and significant
loan-to-value headroom.
During the period, one asset which is classified as Stage 1 made a
significant repayment decreasing the Group's exposure to loss. The Group
accounted for an impairment provision on loans to Office Portfolio,
Ireland of £6,234,676 as at 30 June 2025 (2024: impairment provision on
its loan to Office Portfolio, Ireland of £10,849,579). The £10.8 million
(€12.9 million) loan impairment provision related to Office Portfolio,
Ireland loan was announced on 21 October 2024 and an additional impairment
provision of £6.2 million (€7.3 million) was announced on 1 August 2025
respectively.
(iii) Liquidity risk
Liquidity risk is the risk that the Group will not have sufficient
resources available to meet its liabilities as they fall due. The Group’s
loans advanced are illiquid and may be difficult or impossible to realise
for cash at short notice.
The Group manages its liquidity risk through short term and long term cash
flow forecasts to ensure it is able to meet its obligations. Ongoing costs
are covered by interest receipts. Dividends are paid from available cash.
The Company is permitted to borrow up to 30 per cent of NAV. However, as
at 30 June 2025, 30 June 2024 and 31 December 2024 the Company had no
credit facilities as it had not pursed the extension of the facilities it
had held up to March 2024 (amounting to £25.0 million) as it held
sufficient cash reserves.
As at 30 June 2025, the Group had £48,570,741 (30 June 2024: £117,143,316
and 31 December 2024: £45,686,362) available in cash and £1,066,712 (30
June 2024: £1,506,891 and 31 December 2024: £1,348,763) in trade payables
outstanding. There were no outstanding loan cash commitments as of 30 June
2025 (30 June 2024: £24.1 million and 31 December 2024: £23.0 million).
The Directors consider the Group holds sufficient cash to meet the Group's
liabilities.
Between 3 and
Up to 3 months 12 months Over 12 Total
months
30 June 2025 £ £ £ £
Assets
Loans advanced 29,876,335 39,199,631 27,045,087 96,121,053
Cash and cash 48,570,741 - - 48,570,741
equivalents
Liabilities and
commitments
Loan commitments(1) - - - -
Trade and other (1,066,712) - - (1,066,712)
payables
77,380,364 39,199,631 27,045,087 143,625,082
(1) Loan commitments are estimated forecasted drawdowns at year end.
Between 3 and
Up to 3 months 12 months Over 12 Total
months
31 December 2024 £ £ £ £
Assets
Loans advanced 15,144,986 60,171,009 74,192,475 149,508,470
Cash and cash 45,686,362 - - 45,686,362
equivalents
Liabilities and
commitments
Loan commitments(1) (6,159,251) (10,902,785) (5,974,547) (23,036,583)
Trade and other (1,348,763) - - (1,348,763)
payables
53,323,334 49,268,224 68,217,928 170,809,486
(1) Loan commitments are estimated forecasted drawdowns at year end.
Capital management policies and procedures
The Group’s capital management objectives are:
• To ensure that the Group will be able to continue as a going concern;
and
• To maximise the income and capital return to equity shareholders
through an appropriate balance of equity capital and cash reserves.
The capital of the Company is represented by the net assets attributable
to the holders of the Company’s shares.
In accordance with the Group’s current investment policy, the Group’s
principal use of cash is to fund ongoing operational expenses and payment
of dividends in accordance with the Company’s dividend policy and the
return of capital to shareholders.
The Board, with the assistance of the Investment Manager, monitors and
reviews the broad structure of the Company’s capital on an ongoing basis.
The Company has no imposed capital requirements.
The Company’s capital at the end of the reporting period comprises:
Six months to Six months to Year to
30 June 2025 30 June 2024 31 December 2024
£ £ £
Equity
Equity share capital 147,846,278 269,825,015 193,676,118
Retained (deficit) / earnings (3,645,980) 13,657,706 1,205,578
and translation reserve
Total capital 144,200,298 283,482,721 194,881,696
13. FAIR VALUE MEASUREMENT
IFRS 13 requires the Group to classify fair value measurements using a
fair value hierarchy that reflects the significance of the inputs used in
making the measurements. The fair value hierarchy has the following
levels:
(i) Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1);
(ii) Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices including interest
rates, yield curves, volatilities, prepayment rates, credit risks and
default rates) or other market corroborated inputs (level 2); and
(iii) Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs) (level 3).
The following table analyses within the fair value hierarchy the Group’s
financial assets and liabilities (by class) measured at fair value:
30 June 2025
Level 1 Level 2 Level 3 Total
£ £ £ £
Assets
Financial assets at fair value - 883,599 - 883,599
through profit or loss
Short term deposit1 48,339,833 - - 48,339,833
Total 48,339,833 883,599 - 49,223,432
Liabilities
Financial liabilities at fair - (336,700) - (336,700)
value through profit or loss
Total - (336,700) - (336,700)
1 Presented under cash and cash equivalents in Statement of Financial
Position.
30 June 2024
Level 1 Level 2 Level 3 Total
£ £ £ £
Assets
Financial assets at fair value - 1,419,030 - 1,419,030
through profit or loss
Short term deposit1 98,481,936 - - 98,481,936
Total 98,481,936 1,419,030 - 99,900,966
Liabilities
Financial liabilities at fair - (471,301) - (471,301)
value through profit or loss
Total - (471,301) - (471,301)
1 Presented under cash and cash equivalents in Statement of Financial
Position.
31 December 2024
Level 1 Level 2 Level 3 Total
£ £ £ £
Assets
Financial assets at fair value - 1,996,273 - 1,996,273
through profit or loss
Short term deposit1 45,179,967 - - 45,179,967
Total 45,179,967 1,996,273 - 47,176,240
Liabilities
Financial liabilities at fair - (983,468) - (983,468)
value through profit or loss
Total - (983,468) - (983,468)
1 Presented under cash and cash equivalents in Statement of Financial
Position.
The Directors are responsible for considering the methodology and
assumptions used by the Investment Adviser and for approving the fair
values reported at the financial period end.
The following table summarises within the fair value hierarchy the Group’s
assets and liabilities (by class) not measured at fair value but for which
fair value is disclosed:
30 June 2025
Level 1 Level 2 Level 3 Total fair Total carrying amount
values
£ £ £ £ £
Assets
Loans advanced - - 97,432,261 97,432,261 96,121,053
Total - - 97,432,261 97,432,261 96,121,053
30 June 2024
Level 1 Level 2 Level 3 Total fair Total carrying
values amount
£ £ £ £ £
Assets
Loans - - 178,250,750 178,250,750 166,864,999
advanced
Total - - 178,250,750 178,250,750 166,864,999
31 December 2024
Level 1 Level 2 Level 3 Total fair Total carrying
values amount
£ £ £ £ £
Assets
Loans - - 155,403,126 155,403,126 149,508,470
advanced
Total - - 155,403,126 155,403,126 149,508,470
For cash and cash equivalents, other receivables and trade and other
payables the carrying amount is a reasonable approximation of the fair
value.
The fair value of loans advanced have been determined by discounting the
expected cash flows using a discounted cash flow model. For avoidance of
doubt, the Group carries its loans advanced at amortised cost.
Cash and cash equivalents include cash at hand and fixed deposits held
with banks. Prepayments include the contractual amounts and obligations
due to the Group and consideration for advance payments made by the Group.
Trade and other payables represent the contractual amounts and obligations
due by the Group for contractual payments.
14. CONTROLLING PARTY
In the opinion of the Directors, on the basis of shareholdings advised to
them, the Company has no immediate or ultimate controlling party.
15. TAXATION
The Company is exempt from Guernsey taxation under the Income Tax (Exempt
Bodies) (Guernsey) Ordinance 1989 for which it pays an annual fee of
£1,600 as of 2024 (previously £1,200). The Luxembourg indirect
subsidiaries of the Company are subject to the applicable tax regulations
in Luxembourg.
The Luxco had no operating gains on ordinary activities before taxation
and was therefore subject to the Luxembourg minimum corporate income
taxation at €4,815 (year ended 31 December 2024: €4,815). The Luxco 3 and
Luxco 4 are subject to Corporate Income Tax and Municipal Business Tax
based on a margin calculated on an arm's-length principle. The effective
annual tax rate in Luxembourg during the reporting period was 24.94 per
cent (year ended 31 December 2024: 24.94 per cent).
16. RELATED PARTY TRANSACTIONS
Parties are considered to be related if one party has the ability to
control the other party or exercise significant influence over the other
party in making financial or operational decisions.
The tables below summarise the outstanding balances and transactions which
occurred with related parties.
Outstanding at Outstanding at Outstanding at
30 June 2025 30 June 2024 31 December 2024
£ £ £
Investment Manager
Investment management fees 275,431 525,743 364,757
payable
For the period For the period For the year
ended ended ended
30 June 2025 30 June 2024 31 December 2024
£ £ £
Directors’ fees and
expenses
John Whittle 30,000 30,000 60,000
Shelagh Mason 22,500 22,500 45,000
Charlotte Denton 25,000 25,000 50,000
Gary Yardley 21,000 21,000 42,000
Expenses 1,530 502 2,279
Investment Manager
Investment management fees 580,750 1,092,092 1,840,831
earned
Expenses 29,670 49,197 71,490
The tables below summarise the dividends paid to and number of Company’s
shares held by related parties.
Dividends paid Dividends paid Dividends paid
during during during
the period ended the period ended the year ended
30 June 2025 30 June 2024 31 December 2024
£ £ £
Starwood Property Trust 108,639 221,727 344,944
Inc.
SCG Starfin Investor LP 27,160 55,432 86,236
John Whittle 403 822 1,278
Charlotte Denton 528 1,078 1,677
Shelagh Mason 1,341 2,737 4,258
Duncan MacPherson* 2,972 6,011 9,435
Lorcain Egan* 995 2,030 3,158
As at As at As at
30 June 2025 30 June 2024 31 December 2024
Number of shares Number of shares Number of shares
Starwood Property Trust 3,420,384 6,242,339 4,480,649
Inc.
SCG Starfin Investor LP 855,098 1,560,587 1,120,164
John Whittle 12,677 23,133 16,602
Charlotte Denton 16,633 30,355 21,788
Shelagh Mason 42,218 77,051 55,305
Duncan MacPherson* 93,557 170,743 122,559
Lorcain Egan* 31,315 57,149 41,022
* Employees at the Investment Adviser
RELATED PARTIES’ INTEREST IN SHARES
The related parties' interests in the Ordinary Shares of the Company are
shown on the table above. Changes in shareholdings between 30 June 2024,
31 December 2024 and 30 June 2025 are as a result of the compulsory share
redemptions which took place during those periods.
Other
The Group continues to participate in a number of loans in which Starwood
Property Trust, Inc. (“STWD”) acted as a co‐lender. The details of these
loans are shown in the table below.
Loan Related party co-lenders
Office Portfolio, Spain STWD
Office Portfolio, Ireland STWD
17. EVENTS AFTER THE REPORTING PERIOD
Subsequent to 30 June 2025, the following loans have been repaid in full
up to the date of publication of this report:
Local Currency
Hotel, North Berwick £15,000,000
Life Science, UK £14,070,000
On 5 August 2025, the Directors declared a dividend in respect of the
second quarter of 2025 of 1.375 pence per Ordinary share payable on
5 September 2025 to shareholders on the register at 15 August 2025.
On the 5 September 2025 the Board met, considered and ultimately approved
a further impairment provision of £1.9 million (€2.2 million), bringing
the recoverable value of the Office Portfolio, Ireland loan investment to
€4.8 million. An announcement providing further information in respect of
the Board's consideration of the above will follow the morning of 8
September 2025, the same day as the release of these Interim Financial
Statements.
Alternative Performance Measures
In accordance with ESMA Guidelines on Alternative Performance Measures
(“APMs”) the Board has considered what APMs are included in the Interim
Financial Report and Unaudited Condensed Consolidated Financial Statements
which require further clarification. An APM is defined as a financial
measure of historical or future financial performance, financial position,
or cash flows, other than a financial measure defined or specified in the
applicable financial reporting framework. As stated by FRC, where an APM
cannot be reconciled directly to the financial statements (e.g. financial
ratios), they expect companies to provide calculations (unless not
practical). APMs included in the financial statements, which are unaudited
and outside the scope of IFRS and it is not practical to provide
calculations. We have set out the calculation mechanism as below:
NAV PER ORDINARY SHARE
The NAV per Ordinary Share represents the net assets attributable to
equity shareholders divided by the number of Ordinary Shares in issue,
excluding any shares held in treasury. The NAV per Ordinary Share is
published monthly. This APM relates to past performance and is used as a
comparison to the share price per Ordinary Share to assess performance.
There are no reconciling items between this calculation and the Net Asset
Value shown on the balance sheet (other than to calculate by Ordinary
Share).
NAV TOTAL RETURN
The NAV total return measures the combined effect of any dividends paid,
together with the rise or fall in the NAV per Ordinary Share. This APM
relates to past performance and takes into account both capital returns
and dividends paid to shareholders. Any dividends received by a
shareholder are assumed to have been reinvested in the assets of the
Company at its NAV per Ordinary Share.
SHARE PRICE TOTAL RETURN
The share price total return measures the combined effects of any
dividends paid, together with the rise or fall in the share price. This
APM relates to past performance and assesses the impact of movements in
the share price on total returns to investors. Any dividends received by a
shareholder are assumed to have been reinvested in additional shares of
the Company at the time the shares were quoted ex-dividend.
NAV TO MARKET PRICE DISCOUNT / PREMIUM
The discount / premium is the amount by which the share price of the
Company is lower (discount) or higher (premium) than the NAV per Ordinary
Share at the date of reporting and relates to past performance. The
discount or premium is normally expressed as a percentage of the NAV per
Ordinary Share.
FUNDED LOAN PORTFOLIO UNLEVERED ANNUALISED TOTAL RETURN
The unlevered annualised return is a calculation at the quarterly
reporting date of the estimated annual return on the portfolio at that
point in time. It is calculated individually for each loan by summing the
one-off fees earned (such as up-front arrangement or exit fees charged on
repayment) and dividing these over the full contractual term of the loan,
and adding this to the annual returns. Where a loan is floating rate
(partially or in whole or with floors), the returns are based on an
assumed profile for future interbank rates, but the actual rate received
may be higher or lower. The return is calculated only on amounts funded at
the quarterly reporting date and excludes committed but undrawn loans and
excludes cash not invested. The calculation also excludes origination fees
paid to the Investment Manager, which are accounted for within the
interest line in the financial statements.
An average, weighted by loan amount, is then calculated for the portfolio.
This APM gives an indication of the future performance of the portfolio
(as constituted at the reporting date). The calculation, if the portfolio
remained unchanged, could be used to estimate “income from loans advanced”
in the Unaudited Condensed Consolidated Statement of Comprehensive Income
if adjusted for the origination fee of 0.75 basis points amortised over
the average life of the loan. As discussed earlier in this report the
figure actually realised may be different due to the following reasons:
• In the quoted return, we amortise all one-off fees (such as
arrangement and exit fees) over the contractual life of the loan.
However, it has been our general experience that loans tend to repay
sooner and as such, these fees are generally amortised over a shorter
period
• Many loans benefit from prepayment provisions, which means that if
they are repaid before the end of the protected period, additional
interest or fees become due. As we quote the return based on the
contractual life of the loan these returns cannot be forecast in the
return
• The quoted return excludes the benefit of any foreign exchange gains
on Euro loans. We do not forecast this as the loans are often repaid
early and the gain may be lower than this once hedge positions are
settled
Generally speaking, the actual annualised total return is likely to be
higher than the reported return for these reasons, but this is not
incorporated in the reported figure, as the benefit of these items cannot
be assumed.
ONGOING CHARGES PERCENTAGE
Ongoing charges represents the management fee and all other operating
expenses excluding finance costs and transactions costs, expressed as a
percentage of the average monthly net asset values during the year and
allows users to assess the running costs of the Group. This is calculated
in accordance with AIC guidance and relates to past performance. The
charges include the following lines items within the Consolidated
Statement of Comprehensive Income:
• Investment management fees
• Administration fees
• Audit and non-audit fees
• Other expenses
• Legal and professional fees
• Directors’ fees and expenses
• Broker’s fees and expenses
• Agency fees
The calculation adds back any expenses unlikely to occur absent any loan
originations or repayments and as such, the costs associated with hedging
Euro loans back to sterling have been added back. The calculation does not
include origination fees paid to the Investment Manager; these are
recognised through “Income from loans advanced”.
WEIGHTED AVERAGE PORTFOLIO LTV TO GROUP FIRST AND LAST £
These are calculations made as at the quarterly reporting date of the loan
to value (“LTV”) on each loan at the lowest and highest point in the
capital stack in which the Group participates. LTV to “Group last £” means
the percentage which the total loan commitment less any amortisation
received to date (when aggregated with any other indebtedness ranking
alongside and/or senior to it) bears to the market value determined by the
last formal lender valuation received by the quarterly reporting date. LTV
to “first Group £” means the starting point of the loan to value range of
the loan commitments (when aggregated with any other indebtedness ranking
senior to it). For development projects, the calculation includes the
total facility available and is calculated against the assumed market
value on completion of the project.
An average, weighted by the loan amount, is then calculated for the
portfolio.
This APM provides an assessment of future credit risk within the portfolio
and does not directly relate to any financial statement line items.
PERCENTAGE OF FUNDED PORTFOLIO IN FLOATING RATE LOANS
This is a calculation made as at the quarterly reporting date, which
calculates the value of loans, which have an element of floating rate in
part, in whole and including loans with floors, as a percentage of the
total value of loans. This APM provides an assessment of potential future
volatility of the income on loans, as a large percentage of floating rate
loans would mean that income would move up or down with changes in SONIA.
AVERAGE LOAN TERM AND AVERAGE REMAINING LOAN TERM
The average loan term is calculated at the quarterly reporting date by
calculating the average length of each loan from initial advance to the
contractual termination date. An average, weighted by the loan amount, is
then calculated for the portfolio.
The average remaining loan term is calculated at the quarterly reporting
date by calculating the average length of each loan from the quarterly
reporting date to the contractual termination date. An average, weighted
by the loan amount, is then calculated for the portfolio.
This APM provides an assessment of the likely level of repayments
occurring in future years (absent any early repayments or loan
extensions).
UNUSED LIQUID FACILITIES
Unused liquid facilities is the result of the Group’s total cash and cash
equivalents plus the available balance to withdraw under existing credit
facilities at the reporting date.
PORTFOLIO DIVERSIFICATION
The portfolio diversification statistics are calculated by allocating each
loan to the relevant sectors and countries based on the value of the
underlying assets. This is then summed for the entire portfolio and a
percentage calculated for each sector / country.
This APM provides an assessment of future risk within the portfolio due to
exposure to specific sectors or countries and does not directly relate to
any financial statement line items.
Corporate Information
Directors
John Whittle, Chairman
Shelagh Mason
Charlotte Denton
Gary Yardley
(all Non-Executive, Independent and care of the registered office)
Investment Manager
Starwood European Finance
Partners Limited
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey
GY1 2HL
Solicitors to the Company (as to English law and U.S. securities law)
Norton Rose Fullbright LLP
3 More London Riverside
London
SE1 2AQ
United Kingdom
Registrar
Computershare Investor Services (Guernsey) Limited
2nd Floor
Lefebvre Place
Lefebvre Street
St Peter Port
GY1 2JP
Guernsey
Sole Broker
Jefferies Group LLC
100 Bishopsgate
London, EC2N 4JL
United Kingdom
Administrator, Designated Manager and Company Secretary
Apex Fund and Corporate Services
(Guernsey) Limited
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey
GY1 2HL
Registered Office
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey
GY1 2HL
Investment Adviser
Starwood Capital Europe Advisers, LLP
1 Berkeley Street
London
W1J 8DJ
United Kingdom
Advocates to the Company (as to Guernsey law)
Carey Olsen
PO Box 98
Carey House, Les Banques
St Peter Port
Guernsey
GY1 4BZ
Independent Auditor
PricewaterhouseCoopers CI LLP
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey
GY1 4ND
Principal Bankers
Barclays Private Clients International Limited
PO Box 41
St Julian’s Court
St Julian’s Avenue
St Peter Port
Guernsey
GY1 1WA
Website:
www.starwoodeuropeanfinance.com
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Dissemination of a Regulatory Announcement that contains inside
information in accordance with the Market Abuse Regulation (MAR),
transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
══════════════════════════════════════════════════════════════════════════
ISIN: GG00BTZJM644
Category Code: IR
TIDM: SWEF
LEI Code: 5493004YMVUQ9Z7JGZ50
OAM Categories: 1.2. Half yearly financial reports and audit
reports/limited reviews
3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 401009
EQS News ID: 2193928
End of Announcement EQS News Service
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