Starwood European Real Estate impairs Ireland office portfolio loan

Starwood European Real Estate Finance (SWEF) updated the market on its loan investment in its Ireland office portfolio on Monday, reporting a remaining balance including accrued interest of €25.9m as at 30 September.

The London-listed firm said that balance was secured against a portfolio of seven properties in central Dublin, and represented 10.6% of its net asset value (NAV).

It said the loan, originally issued in 2020 for €35.2m, had remained in compliance with its covenants, but was reclassified as a stage-2 loan in 2023, indicating a significant increase in credit risk.

Due to challenging market conditions and recent operational updates from the loan’s sponsor, SWEF's board said it had decided to impose a 50% impairment on the loan, totalling €12.9m.

It said the decision reflected uncertainty surrounding future capital expenditure needs and potential recovery outcomes.

Despite the impairment, SWEF said its investment adviser was working to maximise value recovery.

Following the adjustment, the company’s net asset value as of 31 August stood at £192.8m, with an adjusted net asset value per share of 99.43p.

SWEF noted that it had returned £210m to shareholders as part of its orderly realisation strategy, representing 50.8% of its net asset value as of January 2023.

Further updates on the company's portfolio performance would be provided in the firm’s upcoming third quarter portfolio update.

At 1002 BST, shares in Starwood European Real Estate Finance were down 5.26% at 90p.

Reporting by Josh White for Sharecast.com.