Starwood’s debt fund writes largest annual loan volume

Starwood Capital’s listed European real estate debt fund wrote £170.8 million of new lending during 2016, its highest annual volume since it was launched in 2012.

In its latest quarterly factsheet, Starwood European Real Estate Finance Limited (SEREFL), which is run by investment manager Duncan MacPherson (pictured), said that it had 16 investments and commitments, totalling £363.4 million by the end of last year. Whole loans account for 47.6 percent of the book, with mezzanine accounting for the remainder.

The volume of origination was up from £146.9 million in 2015 and £117.3 million in 2014. However, loan repayments were also up, with £129.3 million paid off, compared with £63.5 million in 2015 and £48.8 million the year before.

“As was to be expected, 2016 was also a big year for repayments by the group’s borrowers, and so the net position showed relatively modest growth in the overall loan book,” the firm said.

By the close of 2016, the average maturity of the group’s book was 3.3 years, with £31 million of cash and £60 million of liquidity lines available to be lent. The gross annualised total return of the invested loan portfolio was 8.5 percent, Starwood said.

“Since the launch of the group at the end of 2012, origination activity has always been more challenging during the first few months of any given year. Having said this, the transaction pipeline continues to evolve and we are seeing a variety of opportunities which will allow the group to achieve good risk adjusted returns from whole and mezzanine loans,” the firm said.

The firm is particularly focussing on Ireland and Spain, as well as central and eastern Europe. By sector, it reported seeing increased investor demand for alternative assets including hospitality, education, healthcare and data centres.

SEREFL said that its strategy is to grow the company by equity issuance and to grow the loan book, with a view to minimising cash drag from any potential repayments. “This was successfully managed during 2016 when notwithstanding that £129.3 million of the group’s loan book was repaid, these repayments were substantially reinvested alongside the £71.5 million of net proceeds raised in the same period.”