REG-Starwood European Real Estate Finance Ltd SWEF: Portfolio Update
23/10/2025 07:05
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Starwood European Real Estate Finance Ltd (SWEF)
SWEF: Portfolio Update
23-Oct-2025 / 07:03 GMT/BST
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Starwood European Real Estate Finance Limited
Quarterly Portfolio Update
Starwood European Real Estate Finance Limited (“SEREF”, the “Company” or
the “Group”), a leading investor managing and realising a diverse
portfolio of senior, junior and mezzanine real estate debt in the UK and
Europe, presents its performance for the quarter ended 30 September 2025.
Highlights
• Orderly realisation of the portfolio progressing well – during the
quarter to 30 September 2025 two loan investments (amounting to £29.1
million) repaid in full and after the end of the quarter another loan
investment (amounting to £25.0 million) has repaid in full.
• Continuing the orderly and timely return of capital to Shareholders –
during the quarter to 30 September 2025 the Company returned £65.0
million to Shareholders. To 30 September 2025 the Company has returned
£321.0 million to Shareholders, equating to 77.6 per cent of the
Company’s NAV as of 31 January 2023. In addition, on 23 October 2025,
the Company announced a further return of £25.0 million to
Shareholders which will be paid to Shareholders by the end of October
2025.
• All assets constantly monitored for changes in risk profile – the
current risk status of the investments is listed below:
◦ Three loan investments equivalent to 72 per cent of the funded
portfolio as of 30 September 2025 are classified in the lowest
risk profile, Stage 1. After 30 September 2025 one of these loans
(with a funded value of £25.0 million) has repaid in full.
◦ One loan investment equivalent to 28 per cent of the funded
portfolio (before impairment) as of 30 September 2025 is
classified as Stage 3. As of 30 September 2025, the total
impairment provision against this loan was €22.4 million. Post
impairment provisions, the carrying value of this loan asset as
of 30 September 2025 equated to 5.3 per cent of the Net Asset
Value of the Group as of the same date. The Board continues to
consider that there are a wide range of possible outcomes whereby
the loan asset may have varying degrees of recoverability due to
the various business plan scenarios being evaluated (including
the possible sale to an investment vehicle advised by Starwood
Capital Group). 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. Further details are provided
below and the Company looks forward to providing further updates
as appropriate.
• Cash balances – as of 30 September 2025, following the return of £65.0
million of capital to Shareholders in September 2025, the Group held
cash balances of circa £13.0 million and had no unfunded cash loan
commitments.
• Dividend – on 23 October 2025, the Directors announced a dividend, to
be paid in November 2025, in respect of the third quarter of 2025 of
1.375 pence per share in line with the 2025 full year dividend target
of 5.5 pence per share.
• The weighted average remaining contractual loan term of the funded
portfolio is 0.3 years – although one loan has a contractual loan term
to Q3 2026 but is expected to repay earlier.
• Inflation protection – as of 30 September 2025, 70 per cent of the
portfolio is contracted at floating interest rates (with floors).
• Equity cushion – the weighted average Loan to Value for the portfolio
is 75.1 per cent.
John Whittle, Chairman of SEREF, said:
“We are pleased that further strong progress has been made in respect of
the realisation of the loan portfolio with two loan investments repaying
in full during the quarter and a further investment repaying in full post
period end, an aggregate £54.1 million of repayments. Going forward, just
three loan investments remain, two of which are classified at the lowest
risk level. As for the third, the Board and Manager continue to closely
monitor the investment with a view to maximising the opportunity for value
recovery.”
The factsheet for the period is available at:
1 www.starwoodeuropeanfinance.com
Share Price / NAV as of 30 September 2025
Share price (p) 87.0
NAV (p) * 96.38
Discount 9.7%
6.3%
Dividend yield (on share price)
Market cap £70m
*The 30 September 2025 NAV shown here has been calculated before taking
into account the dividend of 1.375 pence per Share announced by the
Company on 23 October 2025.
Key Portfolio Statistics as of 30 September 2025
Number of investments 4
Percentage of currently invested portfolio in floating rate 70.1%
loans
Invested Loan Portfolio unlevered annualised total return (1) 8.9%
Weighted average portfolio LTV – to Group first £ (2) 43.0%
Weighted average portfolio LTV – to Group last £ (2) 75.1%
Average remaining loan term 0.3 years
Net Asset Value £77.3m
Loans advanced (including accrued interest and net of impairment £64.8m
provision)
Cash £13.0m
Other net liabilities (including hedges) £0.5m
(1) The unlevered annualised total return is calculated on amounts
outstanding at the reporting date, excluding undrawn commitments, and
assuming all drawn loans are outstanding for the full contractual term.
Three of the loans are floating rate (partially or in whole and all with
floors) and returns are based on an assumed profile for future interbank
rates, but the actual rate received may be higher or lower. Calculated
only on amounts funded at the reporting date and excluding committed
amounts (but including commitment fees) and excluding cash uninvested.
The calculation also excludes the origination fee paid to the Investment
Manager.
(2) LTV (Loan to Value) to Group last £ 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 its value
determined by the last independent third party appraisals for loans
classified as Stage 1 and on the marked down value per the recently
announced loan impairments for the loan classified as Stage 3 in October
2024. 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).
Remaining years to contractual Funded loan balance % of funded portfolio
maturity* (£m)
0 to 1 years £83.6 100%
*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.
Country % of funded portfolio
UK 62.4%
Republic of Ireland 28.4%
Spain 9.2%
Sector % of funded portfolio
Office 36.1%
Light Industrial 32.5%
Healthcare 29.9%
Residential 1.5%
Loan type % of funded portfolio
Whole loans 32.5%
Junior & Mezzanine 67.5%
Currency * % of funded portfolio
Sterling 62.4%
Euro 37.6%
*The currency split refers to the underlying loan currency, however the
capital on all non-sterling exposure is hedged back to sterling.
Orderly Realisation and Return of Capital
On 31 October 2022, the Board announced the Company’s Proposed Orderly
Realisation and Return of Capital to Shareholders. A Circular relating to
the Proposed Orderly Realisation, containing a Notice of an Extraordinary
General Meeting (the “EGM”) was published on 28 December 2022. The
proposals were approved by Shareholders at the EGM in January 2023 and the
Company is seeking to return cash to Shareholders in an orderly manner as
soon as reasonably practicable following the repayment of loans, while
retaining sufficient working capital for ongoing operations and the
funding of committed but currently unfunded loan commitments.
Since then, the Company has returned circa £321.0 million to Shareholders
(including £65.0 million in the third quarter of 2025), equating to 77.6
per cent of the Company’s NAV as of 31 January 2023. As of the date of
the issuance of this factsheet the Company had 80,154,686 shares in issue
and the total number of voting rights was 80,154,686.
In addition, on 23 October 2025 the Company announced a further return of
£25.0 million to Shareholders which will be paid to Shareholders by the
end of October 2025.
Liquidity and credit facilities
The Company held £13.0 million of cash as of 30 September 2025 and no
longer has any unfunded loan related cash commitments.
The Company is confident that it holds sufficient cash to meet its ongoing
operational commitments.
Dividend
On 23 October 2025, the Directors announced a dividend, to be paid in
November 2025, in respect of the third quarter of 2025 of 1.375 pence per
Ordinary Share in line with the 2025 dividend target of 5.5 pence per
Ordinary Share. The dividend will be paid on Ordinary Shares in issue as
of 31 October 2025.
The unaudited 30 September 2025 financial statements of the Company show
negative income reserves. Dividend payments can continue to be made by the
Company (as a Guernsey registered limited company) as long as it passes
the solvency test (i.e. it is able to pay its debts as they come due).
Portfolio Update
The Group continues to closely monitor and manage the credit quality of
its loan exposures and repayments.
The Group’s exposure as of 30 September 2025 is spread across four
investments. 99 per cent of the total funded loan portfolio as of 30
September 2025 is spread across three asset classes: Office (36 per cent),
Light Industrial (33 per cent) and Healthcare (30 per cent).
Progress of the realisation of the remaining investments is being closely
monitored. Of the four remaining investments as of 30 September 2025, one
investment, Hospitals UK, £25 million, repaid in full post quarter end.
Two of the three remaining loans have identified exit processes involving
sales to third parties or refinancing with banks. Subject to these
processes completing as expected by the loan Sponsors, both of these loans
are forecast to repay in line or ahead of each loan’s respective final
legal maturity dates. The exit plan and realisation timing for the third
investment, the Stage 3 loan, remains under review.
The Group’s office exposure (36 per cent) comprises two loan investments.
The weighted average Loan to Value of loans with office exposure is 101
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 to date. 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 75 per
cent of this exposure and is classified as a Stage 3 risk rated loan. As
outlined in previous announcements, 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 €22.4 million
has been provided as of 30 September 2025 related to this investment
(equivalent to 82 per cent of the total loan value as of 30 September 2025
before impairment). The Board continues to evaluate various business plan
scenarios. The Board considers that there are a wide range of possible
outcomes whereby the loan may have varying degrees of recoverability
according to the various business plan scenarios being evaluated. 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.
The remaining total funded portfolio as of 30 September 2025 (excluding
Residential (1 per cent)) is split across Light Industrial (33 per cent)
and Healthcare (30 per cent). The Healthcare loan repaid in full during
October 2025. The weighted average Loan to Value of these exposures was
59 per cent as of 30 September 2025.
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 the date of this factsheet, assigned
classifications are:
• Stage 1 loans – three loan investments totalling £60 million,
equivalent to 72 per cent of the funded portfolio as of 30 September
2025 are classified in the lowest risk profile, Stage 1.
• Stage 2 loans – as of 30 September 2025, following the repayment of
the two Stage 2 loan investments held as of 30 June 2025, there are no
loan investments classified as Stage 2. 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.
• Stage 3 loans – during October 2024, one loan (with a funded balance
amounting to £24 million/€27 million as of 30 September 2025) was
reclassified as Stage 3. As of 30 September 2025, the balance of this
loan represented 28 per cent of the total funded portfolio. As
outlined above, an aggregate impairment provision of £19.5
million/€22.4 million has been provided for related to this asset. The
Board considers that there are a wide range of possible outcomes
whereby the loan asset may have varying degrees of recoverability due
to the various business plan scenarios being evaluated. 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 factsheet, our assessment of the risks of each
loan and certain estimates and judgements around future performance of the
assets.
Market commentary and outlook
Positive market momentum has continued in the third quarter. Markets have
extended gains despite lingering geopolitical and policy uncertainty.
Drivers of the rally have included expectations around the economic
potential from technology especially from AI, a pro-business
administration in the US and expectations of further interest rate cuts in
the US. The Federal Reserve’s long-anticipated September rate cut has
reset a dovish tone globally with a further cut anticipated in October and
a market implied policy rate of circa 3 per cent this time next year.
Equity markets have continued to reach new highs. The S&P 500 gained 7.8
per cent on the quarter and the FTSE 100 gained 6.7 per cent in the
quarter. Gold and Crypto have also had strong rallies as investors
diversify the currency they hold and look for inflation hedges.
In fixed income, long-term yields eased modestly in the US with the
10-year treasury yield dropping from 4.28 percent to 4.15 percent in the
quarter. By contrast UK and European 10-year yields are up on the quarter
with the UK 10-year Gilt up from 4.48 per cent to 4.70 per cent, a total
rise of 70 basis points since this time last year. German yields are
similarly up from 2.6 per cent to 2.71 per cent. France’s political
issues have also driven its debt wider with French 10-year sovereign debt
now trading wider than Spain and Italy. The increase in yields for longer
debt is in contrast with the cuts in short term interest rates which are
down 1 per cent and 1.50 per cent since the same time last year
respectively.
After a period of valuation resets, European real estate values have
generally stabilised. Valuation yields have been steady for most assets
for the past year and brokers report that the bid-ask gap between buyers
and sellers has narrowed. While individual markets vary, general healthy
rental growth has supported prime assets across most real estate sectors.
A key missing component of the market has been the formation of new core
capital. There are signs that this is now likely to feed through into the
transaction market with one broker reporting that there was €58 billion of
new core capital raised to invest in European core real estate in 2025.
While this has not yet resulted in a significant increase in transaction
volumes the data on fund raising is likely to be a leading indicator of a
higher level of activity to come.
Conditions in the European commercial real estate borrowing market remain
robust. Activity has been dominated by refinancing rather than new
acquisitions and as a result lenders are competing for a limited pool of
opportunities. Falling financing costs from both base rates and margins
combined with good liquidity mean debt availability is supportive of the
transaction market.
In the US the CMBS market is projected to have a very strong year with
volumes potentially breaking $150 billion dollars, approaching the 2021
peak. In Europe the CMBS Market is much smaller but has also had a busier
year with several issuances totalling over €5 billion. There were a
couple of pauses in market activity following Liberation Day and during
the summer holiday period, but investment banks are telling us that a
number of further CMBS deals are lined up to come to market.
Investment Portfolio as of 30 September 2025
As of 30 September 2025, the Group had four investments with total cash
commitments (funded and unfunded) of £83.6 million as shown below.
Sterling Sterling equivalent Sterling Total
equivalent balance unfunded commitment (Drawn and
(1), (2) (3) Unfunded)
Hospitals, UK £25.0 m £25.0 m
Industrial £27.2 m £27.2 m
Estate, UK
Total Sterling £52.2 m £0.0 m £52.2 m
Loans
Office Portfolio, £7.7 m £7.7 m
Spain
Office Portfolio, £23.7 m £23.7 m
Ireland
Total Euro Loans £31.4 m £0.0 m £31.4 m
Total Portfolio £83.6 m £0.0 m £83.6 m
1. Euro balances translated to sterling at period end exchange rate.
2. These amounts are shown before any impairment provisions recognised.
3. These amounts exclude interest which may be capitalised.
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 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 under a year.
As of 30 September 2025, the Group has an average last £ Loan to Value of
75.1 per cent (30 June 2025: 69.9 per cent).
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 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 Total
-15% 119.1% 76.9% 62.3% 88.4%
-10% 112.5% 72.6% 58.8% 83.5%
-5% 106.6% 68.8% 55.7% 79.1%
0% 101.3% 65.4% 52.9% 75.1%
5% 96.5% 62.3% 50.4% 71.6%
10% 92.1% 59.4% 48.1% 68.3%
15% 88.1% 56.8% 46.0% 65.3%
*Office figures in this table include the residential holding which
accounts for 1.5 per cent of the funded portfolio as this is included in
the Office Portfolio, Ireland, Stage 3 loan portfolio
Share Price performance
The Company's shares closed on 30 September 2025 at 87.0 pence, resulting
in a share price total return for the third quarter of 2025 of 1.0 per
cent. As of 30 September 2025, the discount to NAV stood at 9.7 per cent,
with an average discount to NAV of 14.3 per cent over the quarter.
Note: the 30 September 2025 discount to NAV is based off the 30 September
2025 NAV as reported in this factsheet. All average discounts to NAV are
calculated as the latest cum-dividend NAV available in the market on a
given day, adjusted for any dividend payments from the ex-dividend date
onwards.
For further information, please contact:
Apex Fund and Corporate Services (Guernsey) Limited
as Company Secretary
Duke Le Prevost
+44 (0)20 3530 3630
Starwood Capital
Duncan MacPherson +44 (0) 20 7016 3655
Jefferies International Limited
Gaudi Le Roux
Harry Randall
+44 (0) 20 7029 8000
Ollie Nott
Burson Buchanan
Helen Tarbet
+44 (0) 20 7466 5000
Henry Wilson
+44 (0) 7788 528 143
Nick Croysdill
Notes:
Starwood European Real Estate Finance Limited is an investment company
listed on the premium segment of the main market of the London Stock
Exchange with an investment objective to conduct an orderly realisation of
the assets of the Company. 2 www.starwoodeuropeanfinance.com.
The Group's assets are managed by Starwood European Finance Partners
Limited, an indirect wholly owned subsidiary of Starwood Capital Group.
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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.
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ISIN: GG00BT8PBR31
Category Code: PFU
TIDM: SWEF
LEI Code: 5493004YMVUQ9Z7JGZ50
OAM Categories: 3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 405913
EQS News ID: 2216934
End of Announcement EQS News Service
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