Starwood Euro Real - Annual Financial Report year ended 31 Dec 2015 - Part 5
18/03/2016 15:25
- Part 5: For the preceding part double click ID:nRSR6304Sd
arising from the
advancement of loans by remaining contractual maturities at the date of the Consolidated Statement of Financial Position.
The amounts disclosed under assets are contractual, undiscounted cash flows and may differ from the actual cash flows
received in the future as a result of early repayments:
31 December 2015 Up to 3 months Between 3 and 12 months Over 1 year Total
£ £ £ £
Assets
Loans advanced - 97,019,298 210,675,529 307,694,827
Liabilities and commitments
Loan commitments 1 (1,274,852) (189,944) - (1,464,796)
(1,274,852) 96,829,354 210,675,529 306,230,031
1 Loan commitments are estimated forecasted drawdowns at year end.
31 December 2014 Up to 3 months Between 3 and 12 months Over 1 year Total
£ £ £ £
Assets
Loans advanced - - 220,954,400 220,954,400
Liabilities and commitments
Loan commitments (8,423,603) (7,347,710) (4,478,306) (20,249,619)
(8,423,603) (7,347,710) 216,476,094 200,704,781
The table below analyses the Group's derivative financial instruments that will be settled on a gross basis into relevant
maturity groupings based on the remaining period at the date of the Consolidated Statement of Financial Position. The
amounts disclosed are the contractual undiscounted cash flows:
Goldman Sachs:
31 December 2015 Up to 3 months Between 3 and 12 months More than 1 year Total as at
31 December 2015
Derivatives held for trading £ £ £ £
Foreign exchange derivatives
- Outflow1 235,356 693,914 21,622,233 22,551,503
- Inflow 236,275 700,151 22,450,710 23,387,137
Lloyds Bank plc:
31 December 2015 Up to 3 months Between 3 and 12 months More than 1 year Total as at
31 December 2015
Derivatives held for trading £ £ £ £
Foreign exchange derivatives
- Outflow1 1,044,176 34,851,191 60,400,510 96,295,877
- Inflow 1,051,121 35,245,356 63,529,702 99,826,179
Goldman Sachs:
31 December 2014 Up to 3 months Between 3 and 12 months More than 1 year Total as at
31 December 2015
Derivatives held for trading £ £ £ £
Foreign exchange derivatives
- Outflow1 215,073 636,308 20,101,525 20,952,906
- Inflow 213,851 634,869 20,808,632 21,657,352
Lloyds Bank plc:
31 December 2014 Up to 3 months Between 3 and 12 months More than 1 year Total as at
31 December 2014
Derivatives held for trading £ £ £ £
Foreign exchange derivatives
- Outflow1 610,240 11,212,834 40,968,897 52,791,971
- Inflow 606,854 11,207,872 41,930,826 53,745,552
1 Euro and Danish Krone amounts translated at year end exchange rate.
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
long-term debt.
The capital of the Company is represented by the net assets attribute to the holders of the Company's shares.
In accordance with the Group's investment policy, the Group's principal use of cash (including the proceeds of the IPO and
subsequent tap issues and placings) has been to fund investments in the form of loans sourced by the Investment Adviser and
the Investment Manager, as well as initial expenses related to the issue, on going operational expenses and payment of
dividends and other distributions to shareholders in accordance with the Company's dividend policy.
The Board with the assistance of the Investment Manager monitors and reviews the broad structure of the Company's capital
on an on-going basis.
The Company has no imposed capital requirements. The Company's capital at year end comprises:
31 December 2015 31 December 2014
£ £
Equity
Equity share capital 300,397,205 233,843,162
Retained earnings and other reserves 5,075,839 4,441,254
Total capital 305,473,044 238,284,416
19. Fair Value Measurement
FRS 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 speeds, credit risks and default rates) or other market corroborated inputs (level 2).
(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:
31 December 2015 Level 1 Level 2 Level 3 Total
£ £ £ £
Assets
Derivative assets - 5,918,115 - 5,918,115
Total - 5,918,115 - 5,918,115
31 December 2014 Level 1 Level 2 Level 3 Total
£ £ £ £
Assets
Derivative assets - 5,023,584 - 5,023,584
Total - 5,023,584 - 5,023,584
There have been no transfers between levels for the year ended 31 December 2015 (31 December 2014:
nil).
The following table summarises within the fair value hierarchy the Group's assets and liabilities (by class) not measured
at fair value at 31 December 2015 but for which fair value is disclosed:
Level 1 Level 2 Level 3 Total fair values Total carrying amount
£ £ £ £ £
Assets
Cash and cash equivalents - 520,558 - 520,558 520,558
Other receivables and prepayments - 95,684 - 95,684 95,684
Loans advanced - - 320,752,322 320,752,322 307,694,827
Total - 616,242 320,752,322 321,368,564 308,311,069
Level 1 Level 2 Level 3 Total fair values Total carrying amount
£ £ £ £ £
Liabilities
Trade and other payables - 806,083 - 806,083 806,083
Total - 806,083 - 806,083 806,083
The following table summarises within the fair value hierarchy the Group's assets and liabilities (by class) not measured
at fair value at 31 December 2014 but for which fair value is disclosed:
Level 1 Level 2 Level 3 Total fair values Total carrying amount
£ £ £ £ £
Assets
Cash and cash equivalents - 13,172,978 - 13,172,978 13,172,978
Other receivables and prepayments - 31,962 - 31,962 31,962
Loans advanced - - 231,280,183 231,280,183 220,954,400
Total - 13,204,940 231,280,183 244,485,123 234,159,340
Level 1 Level 2 Level 3 Total fair values Total carrying amount
£ £ £ £ £
Liabilities
Trade and other payables - 1,341,518 - 1,341,518 1,341,518
Total - 1,341,518 - 1,341,518 1,341,518
The carrying values of the assets and liabilities included in the above table are considered to approximate their fair
values, except for loans advanced. The fair value of loans advanced has been determined by discounting the expected cash
flows using a discounted cash flow model. For the avoidance of doubt, the Group carries its loans advanced at amortised
cost in the consolidated financial statements.
Cash and cash equivalents include cash at hand and fixed deposits held with banks. Other receivables and 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.
20. 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.
21. 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 £1200.
The Luxembourg indirect subsidiary of the Company is subject to the applicable tax regulations in Luxembourg. The table
below analyses the tax charges incurred at Luxembourg level:
31 December 2015 31 December 2014
£ £
Current tax
Current tax on profit for the year 2,439 2,662
Total current tax 2,439 2,662
The Luxco had no operating gain on ordinary activities before taxation and was therefore for the year ended 31 December
2015 subject to the Luxembourg minimum corporate income taxation at E3,210 (2014: E3,210).
22. Reconciliation of IFRS to US GAAP
To meet the requirements of Rule 206(4)-2 under the Investment Advisors Act 1940 (the "Custody Rule") the consolidated
financial statements of the Company have also been audited in accordance with Generally Accepted Auditing Standards
applicable in the United States ("US GAAS"). As such two independent Auditors' reports are included, one under
International Standards on Auditing as required by the Crown Dependencies Audit Rules and the other under US GAAS.
Compliance with the Custody Rule also requires a reconciliation of the operating profit and net assets under IFRS to US
GAAP.
The principal differences between IFRS and US GAAP relate to accounting for financial assets that are carried at amortised
cost. Under US GAAP the calculation of the effective interest rate is based on contractual cash flows over the asset's
contractual life. International Financial Reporting Standards, however, base the effective interest rate calculation on the
estimated cash flows over the expected life of the asset.
The Directors have assessed the operating profit and NAV of the Company and Group under both IFRS and US GAAP and have
concluded that no material differences were identified and therefore no reconciliation has been presented in these
financial statements.
23. 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. Details on the Investment Manager and other
related party transactions are included in note 3 to the consolidated financial statements.
Fees, expenses and other payments
Outstanding at For the year ended
31 December 2015 31 December 2015
£ £
Directors' fees and expenses paid
Stephen Smith - 46,250
John Whittle - 37,500
Jonathan Bridel - 33,750
Placing programme fees - 15,000
Expenses paid - 6,341
Investment Manager
Investment management fees earned 575,154 1,976,640
Origination fees earned - 946,069
Expenses 18,012 41,754
Hatfield Phillips International 1
Origination expenses - 50,000
Outstanding at For the year ended
31 December 2014 31 December 2014
£ £
Directors' fees and expenses paid
Stephen Smith - 45,000
John Whittle - 35,000
Jonathan Bridel - 32,500
Expenses paid - 2,783
Investment Manager
Investment management fees earned 446,949 1,528,333
Origination fees earned 426,375 1,072,949
Expenses 5,216 16,010
StarConsult S.à.r.l 2
Administrative services - 8,369
1 Hatfield Phillips International is a subsidiary of Starwood Property Trust.
2 StarConsult S.à.r.l is a Company managed by Thierry Drinka, who is also a Director of Luxco.
Shareholdings and dividends paid
Dividends paid for the year ended As at
31 December 2015 31 December 2015
£ Number of shares
Starwood Property Trust Inc 639,331 9,180,000
SCG Starfin Investor LP 158,808 2,285,000
Stephen Smith 7,566 78,929
John Whittle 572 11,866
Jonathan Bridel 572 11,866
Dividends paid for the year ended As at
31 December 2014 31 December 2014
£ Number of shares
Starwood Property Trust Inc 475,280 9,140,000
SCG Starfin Investor LP 118,820 2,285,000
Stephen Smith 2,080 40,000
John Whittle 364 7,000
Jonathan Bridel 364 7,000
Other
The Group continues to participate in a number of loans in which Starwood Property Trust, Inc. ("STWD") and Starfin
European Debt TC, L.P. ("Starfin TC") acted as a co-lender. The details of these loans are shown in the table below.
Loan Related party co-lenders
Lifecare Residences, London STWD
Salesforce Tower, London STWD
Centre Point, London STWD, Starfin TC
Aldgate Tower, London STWD, Starfin TC
5 Star Hotel, London Starfin TC
W Hotel, Netherlands STWD, Starfin TC
Retail Portfolio, Finland STWD
Starwood Capital Europe Advisers, LLP acts as Investment Adviser to Starwood European Finance Partners, the Investment
Manager of the Group and Starfin GP Limited, the General Partner of Starfin TC. On 10 December 2015 Starfin TC transferred
its rights and obligations under the Industrial Portfolio, Netherlands loan agreement to the Group in consideration for a
payment equal to the principal balance and accrued interest of Starfin TC's proportion of the existing loan, being the
amount, E5,609,131, that it would receive if the existing loan were repaid in full by the borrower. A fairness opinion was
received from Dexion in relation to this transaction.
24. Events After the Reporting Period
The following new investments have closed since the year end, up to the date of publication of this report:
Sterling
equivalent
Hotel, Channel Islands £27.0 million
Residential Portfolio, Dublin £6.2 million
Amounts also continue to be drawn under the outstanding commitments on the W Hotel, Amsterdam and Aldgate Tower
facilities.
The Company has drawn additional funds on the revolving credit facility in order to fund the new investments shown above.
At 17 March 2016 £42 million is outstanding on the revolving credit facility.
The following loan amortisation (both scheduled and unscheduled) has been received since the year end up to the date of
publication of this report:
Sterling
equivalent
Salesforce Tower, London £867,607
Retail Portfolio, Finland £354,374
Office, Amsterdam £26,948
5 Star Hotel, London £13,173
Retail & Residential Portfolio, Ireland £52,275
Residential Portfolio, Cork £27,241
Industrial Portfolio, Denmark £1,083,456
Corporate Information
DirectorsStephen Smith (Non-executive Chairman)Jonathan Bridel (Non-executive Director)John Whittle (Non-executive Director) (all care of the registered office) Investment ManagerStarwood European Finance Partners Limited1, Royal Plaza, Royal AvenueSt Registered Office1, Royal Plaza, Royal AvenueSt Peter Port, Guernsey, GY1 2HL Investment AdviserStarwood Capital Europe Advisers, LLP2nd Floor, One Eagle PlaceSt. James`sLondon, SW1Y 6AFUnited Kingdom Advocates to the Company (as to Guernsey law)Mourant Ozannes1 Le Marchant StreetSt Peter PortGuernsey, GY1 4HP Independent AuditorsPricewaterhouseCoopers CI LLPRoyal Bank Place1 Glategny EsplanadeSt Peter PortGuernsey, GY1 4ND Principal BankersBarclays Private Clients International LimitedPO Box 41Le Marchant HouseSt Peter PortGuernsey, GY1 3BE Website: www.starwoodeuropeanfinance.com
Peter Port, Guernsey, GY1 2HL Solicitors to the Company (as to English law and U.S. securities law)Norton Rose LLP3 More London RiversideLondon, SE1 2AQUnited Kingdom RegistrarComputershare Investor Services (Guernsey) Limited3rd FloorNatwest HouseLe
TruchotSt Peter PortGuernsey, GY1 1WD BrokerDexion Capital plc1 Tudor StreetLondon, EC4Y 0AHUnited Kingdom Administrator, Designated Manager and Company SecretaryIpes (Guernsey) Limited1, Royal Plaza, Royal AvenueSt Peter Port, Guernsey, GY1 2HL
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