Proposal to amend investment policy

RNS Number : 8009D

Starwood European Real Estate Finan

01 April 2014

 



1 April 2014

Starwood European Real Estate Finance Limited

Recommended proposal to amend investment policy

The Board of Starwood European Real Estate Finance Limited (the "Company") announces that it has today published a circular (the "Circular") to Shareholders setting out and recommending its proposal to amend the Company's investment policy in order to:

·      allow the Company the flexibility to make investments in Spain and Italy,

·      to increase the maximum allocation to "residential for sale" properties from 20 per cent. to 30 per cent. and

·      to amend the section on corporate borrowings (together "the Proposal").

Background to and reasons for the Proposal

The Board regularly reviews the development and strategic direction of the Company and believes that the investment policy remains broadly effective. However, as the Company approaches full investment, the Board believes that now is an opportune moment to extend the geographic scope of the investment policy and to increase the maximum allocation that can be made to the residential for sale sector.

The Board believes that this is justified in light of improving market conditions, the fact that opportunities have arisen in which the Company has been unable to participate, notwithstanding that the transaction would have been acceptable on a risk/reward basis and the increased liquidity in the market which offers greater likelihood of a successful realisation.

The occupational real estate markets in Spain and Italy have shown tentative signs of recovery and investment demand has also significantly increased as both opportunistic and core investors have sought exposure. Whilst any investment in Spain or Italy would be approached with caution, the Board believes that the Company should have the ability on a selective basis to identify balanced risk return opportunities in these countries if and when they arise. The Company's focus in these countries is expected to be the commercial property sector as opposed to the residential market.

The Company has gained attractive exposure to residential for sale within London through its investments in Centre Point and Battersea. The current limits would currently prohibit the Company from taking advantage of opportunities observable in other geographies, not just in the rest of the UK but also Ireland, Sweden, Holland and Germany. These are markets that all demonstrate an opportunity to benefit from continued population growth and/or sector recovery strategies and hence a moderate increase of the current investment limit is being sought.

The Company will not use these extended investment powers until the net proceeds of the IPO are substantially fully invested. As such, the changes contain an element of "future proofing" for investing the proceeds of potential additional capital raises or loan repayments. With these adjustments, the Board believes the Company would be better placed to raise and deploy additional capital.

Alongside these changes, the Board believes it is necessary to clarify the scope and intent of the restrictions on the Company's corporate borrowings. 

The current investment policy includes foreign exchange hedging facilities within the scope of "corporate borrowings". From an accounting perspective, these types of facilities (and any mark-to-market liabilities that may arise from time to time) are not treated as borrowings.  On this basis, the Board does not believe it is appropriate to include foreign exchange hedging facilities within the definition of borrowings for the purposes of the restriction on corporate borrowings and recommends the clarification of the investment policy accordingly.

Whilst not forming part of the investment policy, it is intended that potential liabilities under foreign exchange hedging facilities continue to be carefully and regularly monitored.  It is expected that, under normal market conditions, those liabilities will be no more than 10 per cent. of Net Asset Value.

As set out in the current investment policy, Company-level recourse borrowings may be used for short term bridging purposes, amongst other things. Whilst not forming part of the investment policy, it is anticipated that bridging loans would be used to reduce cash drag and repaid using, inter alia, the proceeds of one or more of the following:

·      issues of new Shares for cash;

·      syndication, sale, assignment sub-participation or other financing (including true sale securitisation) of a loan or loans held in the portfolio, as set out in the investment policy; and/or

·      repayment of principal of loans held in the portfolio.

Such repayment of bridging loans and the time taken to achieve it may be dependent on prevailing or developing market conditions at the relevant time which cannot always be determined in advance. The Board therefore believes that it is appropriate to remove the reference to "short term" in the investment policy.

The full texts of the Company's current investment policy and the proposed amended investment policy are set out in the circular, which can be accessed on the Company's website at http://starwoodeuropeanfinance.com/index.php/documents and which has been submitted to the National Storage Mechanism and will be available in due course for inspection at  http://morningstar.co.uk/uk/NSM. 

Extraordinary General Meeting

The Proposal will constitute a material change to the investment policy under the Listing Rules and, as a result, requires the approval of Shareholders. The Proposal is therefore conditional on the passing of the Resolution, which will be proposed at the Extraordinary General Meeting as an ordinary resolution.

The Extraordinary General Meeting is to be held at 1 Royal Plaza, Royal Avenue, St Peter Port, Guernsey GY1 2HL on 2 May 2014 at 12:15 p.m. (or, if later, as soon as reasonably practicable following the conclusion or adjournment of the Annual General Meeting of the Company convened for the same date and place). Notice of the Extraordinary General Meeting is set out in the Circular.

Definitions

Capitalised terms used but not defined in this announcement bear the meanings ascribed to them in the Circular.

Further information

For further information, please contact:

Ipes (Guernsey) Limited

John Ellman-Brown

T: [phone]

Dexion Capital plc

Robert Peel

T: [phone]

Jefferies International Limited

Stuart Klein

T: [phone]

Notes:

Starwood European Real Estate Finance is an investment company listed on the main market of the London Stock Exchange with an investment objective to provide 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 Continental European markets. www.starwoodeuropeanfinance.com 

 

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