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Wednesday, 29 November 2017

Eurocastle Announces Financial Results for the Nine Months Ended 30 September 2017

     

Published: 08:00 CET 29-11-2017 /GlobeNewswire /Source: Eurocastle Investment Limited / : ECT /ISIN: GB00B94QM994

Eurocastle Announces Financial Results for the Nine Months Ended 30 September 2017

EUROCASTLE INVESTMENT LIMITED

 

                                                                                                                        FOR IMMEDIATE RELEASE

Contact:

International Administration Group (Guernsey) Limited

Company Administrator
Attn: 
Mark Woodall

Tel:  +44 1481 723450

                                                                                                  

Eurocastle Announces Financial Results for the Nine Months Ended 30 September 2017

 


Guernsey, 29 November 2017 - Eurocastle Investment Limited (Euronext Amsterdam: ECT) today has released its financial results for the nine months ended 30 September 2017. 

 

  • Adjusted Net Asset Value ("Adjusted NAV") of €641.0 million[1], or €10.49 per share[2], in line with the previous quarter after having paid a second quarter dividend of  €0.41 per share2 in August.
     
  • Normalised FFO[3] of €68.2 million, or €1.12 per share2, for the third quarter of 2017. €103.3 million, or €1.71 per share2, for the nine months ended 30 September 2017.
     
  • Third Quarter 2017 Dividend of €1.13 per share2 declared on 28 November 2017 and to be paid on 11 December 2017 to shareholders of record at close of business on 5 December 2017, with an ex-dividend date of 4 December 2017. This follows €59.9 million of net NFFO received in cash in the quarter, in line with the Company's distribution policy.

 

 

 

Q3 2017

 

Q2 2017

 

YTD Q3 2017

 

YTD Q3 2016

 

 

€ million

€ per share2

 

€ million

€ per share2

 

€ million

€ per share2

 

€ million

€ per share2

Adjusted NAV1

 

641.0

10.49

 

630.6

10.49

 

641.0[4]

10.494

 

463.5[5]

7.715

Normalised FFO3

 

68.2

1.12

 

9.1

0.15

 

103.3

1.71

 

33.5

0.49

Dividends2

 

59.6

1.13

 

25.1

0.41

 

102.1

1.83

 

24.1

0.375

 

 

BUSINESS HIGHLIGHTS FOR THE THIRD QUARTER OF 2017

 

doBank IPO

  • In July, doBank completed a €704 million IPO (equivalent to approximately 2.5x Eurocastle's value for this investment immediately following its acquisition net of distributions received to date), the largest & highest rated NPL servicing group in Italy.
  • Eurocastle held a 50% stake prior to the IPO - sold 19.1 million shares (48.8% of its holding) for €9.00 per doBank share generating net proceeds of €145.8 million[6] which were partially distributed back to shareholders through the November share tender with the remainder to be distributed through the Q3 dividend.
  • The Company, together with Fortress affiliates, retained a joint 51.2%[7] interest in doBank with Eurocastle's remaining 20.0 million shares valued at €10.98 per doBank share as at 30 September 2017, subsequently increasing to €13.16 per share on 28 November 2017.

 

doBank Financial Performance

  • Q3 YTD 2017 EBITDA of €42 million, up 4% like-for-like[8] over the same period last year (Q3 2016: €40 million).
  • Q3 YTD 2017 Net Income After Tax of €27 million, up 16% like-for-like8 over the same period last year (Q3 2016: €23 million).
  • Q3 YTD 2017 Gross collections of €1.2 billion, up 18% over the same period 2016[9].
  • Subsequent to the third quarter, doBank reached a preliminary agreement on a new servicing mandate on €8 billion GBV of NPLs which form part of the portfolio originated by Monte dei Paschi di Siena that is in the process of being securitised. doBank estimates that the contract once in place and fully stabilized would initially add ~€20 million EBITDA per year.

 


 

FINO NPL Investment

  • In July, deployed €43.9 million to acquire, alongside Fortress affiliates, a 50.1% interest in a significant portion of a €16.2 billion GBV NPL portfolio from UniCredit S.p.A ("FINO")[10], via an investment in two securitisations.
  • Portfolio collections received since the 30 June 2016 cutoff date up to the July closing were higher than anticipated resulting in less equity to fund the acquisition than originally expected.
  • A deferred purchase price of €64.7 million is payable over the next few years and currently expected to be funded through collections on the portfolio.

 

New Investments

  • Committed approximately €10 million to acquire a share of a leveraged interest in a performing and sub-performing ("PL/SPL") loan portfolio of €234 million GBV, expected to close in Q4'17.

 

BUSINESS HIGHLIGHTS SUBSEQUENT TO 30 SEPTEMBER 2017

Share Tender

  • In November 2017, Eurocastle announced the repurchase of 8.4 million shares (representing 13.75% of the Company's ordinary shares in issue) at a price of €10.00 per share, returning €84 million of capital received following the Company's partial sale of its stake in doBank through the IPO.
  • The completed repurchase was NAV and earnings accretive, increasing pro forma NFFO per share by approximately 15% and NAV per share by approximately 1%.

 

RE Fund IV

  • In October 2017, sold the remaining properties held in the Fund realising estimated net proceeds to Eurocastle of €32 million, approximately €3 million (10%) higher than the investment's Q3 2017 NAV of €29 million.
  • To date the Company has received €13.1 million, with the remaining proceeds expected by year-end subject to final agreement with the underlying fund on distribution timing. When received in full, the proceeds will include €10 million of undistributed NFFO realised in cash to be considered for the quarterly dividend.

 

New Investments

  • On 20 November 2017, Eurocastle announced a commitment to invest €12 million for a shared interest in a new NPL pool with a GBV of €293 million, expected to close by the end of November.
  • On 24 November 2017, the Company announced that it had committed €8.4 million to acquire, together with other Fortress affiliates, additional interests in the junior notes of both securitisations that collectively own the FINO NPL portfolio. The transaction is expected to close by the end of January 2018.

 


 

NORMALISED FFO

Normalised FFO is a non-IFRS financial measure that, with respect to all of the Company's Italian Investments other than the doBank Group, recognises i) income on an expected yield basis updated periodically, allowing Eurocastle to report the run rate earnings from these investments in line with their expected annualised returns and ii) any additional gains or losses not previously recognised through NFFO at the point investments are realised. Cash flow receipts are therefore allocated by the Company between income and capital in accordance with this expected yield methodology. With respect to the doBank Group, following the recent IPO, the Company now recognises Normalised FFO based on its share of doBank's reported annual net income after tax together with any gains or losses arising from the sale of its shares. The income cash flow profile of each of the Company's investments may not exactly equal the NFFO recognised by the Company each period but will do so over the life of each investment.

 

Segmental Normalised FFO for the Nine Months Ended 30 September 2017

Average Net

Invested Capital[11]

 

 

Italian Investments

Legacy

Total

 

€ Thousands

Yield

 

€ Thousands

€ Thousands

€ Thousands

doBank Group

141,260

91%

96,547

-

96,547

Italian NPLs

101,936

16%

11,965

-

11,965

Real Estate Fund Investments

45,008

65%

22,027

-

22,027

Other[12]

n/a

n/a

7,247

-

7,247

Italian Investments NFFO before expenses

288,204

64%

137,786

-

137,786

Legacy Portfolios NFFO before expenses

-

2,824

2,824

Manager Base & Incentive Fees[13]

(34,345)

-

(34,345)

Other operating expenses

(2,970)

-

(2,970)

Normalised FFO

100,471

2,824

103,295

Per Share[14]

1.67

0.04

1.71

 

 

 


Segmental Normalised FFO for the Three Months Ended 30 September 2017

Average Net

Invested Capital1

 

 

Italian Investments

Legacy

Total

 

€ Thousands

Yield

 

€ Thousands

€ Thousands

€ Thousands

doBank Group

106,912

317%

84,655

-

84,655

Italian NPLs

97,162

15%

3,752

-

3,752

Real Estate Fund Investments

45,057

37%

4,113

-

4,113

Italian Investments NFFO before expenses

249,130

149%

92,520

-

92,520

Legacy Portfolios NFFO before expenses

-

28

28

Manager Base & Incentive Fees3

(23,402)

-

(23,402)

Other operating expenses

(950)

-

(950)

Normalised FFO

68,168

28

68,196

Per Share4

1.12

0.00

1.12

 

 


 

CHANGE IN ACCOUNTING POLICY

The Board of Directors of the Company has periodically assessed whether it met the definition of an Investment Entity as set out under IFRS 10. With the deconsolidation of the Legacy CDO V portfolio in Q2 2017, the Board came to the conclusion that the Company, with effect from 1 July 2017, met the requirements to be classified as an Investment Entity as set out under IFRS 10. The impact of this change is that all investments, whether through subsidiaries, associates or joint ventures, are to be fair valued through profit and loss. As a result, amounts reported for the year ended 31 December 2016 have been restated - Reported Adjusted NAV would have been higher by €4.8 million due to this change as at 31 December 2016 and €4.9 million as at 30 June 2017.

In addition, as a result of this change in policy, the Company is no longer required to prepare consolidated financial statements. These separate financial statements of the Company are therefore its only financial statements.

Refer to page 8 and pages 20-22 of the Q3 2017 Interim Report for further details.

 

Income Statement for the Nine Months Ended 30 September 2017

Italian Investments
€ Thousands

Legacy

€ Thousands

Total
€ Thousands

Fair Value Movements

    doBank Group

141,712

-

141,712

    Romeo NPLs

3,927

-

3,927

    FINO NPLs

1,588

-

1,588

    Other NPL Pools

2,708

-

2,708

    Real Estate Fund Investment I

(167)

-

(167)

    Real Estate Fund Investment II

(1,035)

-

(1,035)

    Real Estate Fund Investment III

1,446

-

1,446

    Real Estate Fund Investment IV

4,833

-

4,833

 Real Estate Fund Investment V

310

-

310

 Fair value movements on operating subsidiaries

-

445

445

 

 

 

 

 Other Income

 

 

 

    Gains on foreign currency contracts, translation and swaps

7,216

-

7,216

    Other income

-

2,379

2,379

Total income

162,538

2,824

165,362

 

 

 

Operating expenses

 

 

 

    Interest expense

177

177

    Other operating expenses

 

 

 

              Transaction costs

333

 -

333

              Manager Base and Incentive fees

34,345

 -

34,345

              Remaining operating expenses

2,460

 -

2,460

Total expenses

37,315

-

37,315

 

 

 

Profit for the first nine months of 2017

125,223

2,824

128,047

Per Share[15]

2.08

0.04

2.12

 


 

Balance Sheet and Adjusted NAV Reconciliation as at 30 September 2017

 

Italian Investments
€ Thousands

 

Corporate
€ Thousands

Total
€ Thousands

Assets

 

 

Cash and cash equivalents

 

-

264,646

264,646

Other assets

 

-

79

79

Investments:

 

 

 

   doBank Group

 

221,475

-

221,475

   Romeo NPLs

 

49,273

-

49,273

   FINO NPLs

 

45,502

-

45,502

   Other NPL Pools

 

27,391

-

27,391

   Real Estate Fund Investment I

 

9,340

-

9,340

   Real Estate Fund Investment II

 

14,592

-

14,592

   Real Estate Fund Investment III

 

-

-

-

   Real Estate Fund Investment IV

28,960

-

28,960

   Real Estate Fund Investment V

 

4,677

-

4,677

   Other Net Assets

 

-

899

899

Total assets

 

401,210

265,624

666,834

Liabilities

Trade and other payables

 

-

1,985

1,985

Manager Base and Incentive Fees

 

-

23,873

23,873

Total liabilities

 

-

25,858

25,858

Net Asset Value

 

401,210

239,766

640,976

 

 

 

FINO Deferred Purchase Price Commitment

 

64,680

(64,680)

-

FINO follow-on Commitment

 

8,440

(8,440)

-

New Performing / Sub-performing Loan Pool Commitment[16]

 

10,000

(10,000)

-

New NPL Commitment

 

12,188

(12,188)

-

RE Fund Investment V remaining unfunded Commitment

 

1,390

(1,390)

-

 

 

 

Adjusted NAV

 

497,908

143,068

640,976

Adjusted NAV (€ per Share)[17]

 

8.15

2.34

10.49

 

 

 


 

ADDITIONAL INFORMATION

 

 

For additional information that management believes to be useful for investors, please refer to the latest presentation posted on the Investor Relations section of the Company's website, www.eurocastleinv.com. For consolidated investment portfolio information, please refer to the Company's most recent Financial Report, which is available on the Company's website (www.eurocastleinv.com).

 

 

EARNINGS CALL INFORMATION

 

 

Eurocastle's management will host an earnings conference call at 2:00 P.M. London time (9:00 A.M. New York time) later today. All interested parties are welcome to participate on the live call. You can access the conference call by dialling first +1-800-215-5243 (from within the U.S.) or +1-330-863-8154 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference "Eurocastle Third Quarter 2017 Earnings Call" or "conference ID number 4446821".

 

A webcast of the conference call will be available to the public on a listen-only basis at www.eurocastleinv.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast. A replay of the webcast will be available for three months following the call.

 

For those who are not available to listen to the live call, a replay will be available until 11:59 P.M. New York time on Friday, 5 January 2018 by dialing +1-855-859-2056 (from within the U.S.) or +1-404- 537-3406 (from outside of the U.S.); please reference access code "4446821"

 

 

ABOUT EUROCASTLE

 

 

Eurocastle Investment Limited is a publicly traded closed-ended investment company that focuses on investing in performing and non-performing loans and other real estate related assets primarily in Italy. The Company is Euro denominated and is listed on Euronext Amsterdam under the symbol "ECT". Eurocastle is managed by an affiliate of Fortress Investment Group LLC, a leading global investment manager. For more information regarding Eurocastle Investment Limited and to be added to our email distribution list, please visit www.eurocastleinv.com.

 

 

FORWARD LOOKING STATEMENTS

 

 

This release contains statements that constitute forward-looking statements. Such forward-looking statements may relate to, among other things, future commitments to sell real estate and achievement of disposal targets, availability of investment and divestment opportunities, timing or certainty of completion of acquisitions and disposals, the operating performance of our investments and financing needs. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may", "will", "should", "potential", "intend", "expect", "endeavour", "seek", "anticipate", "estimate", "overestimate", "underestimate", "believe", "could", "project", "predict", "project", "continue", "plan", "forecast" or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. The Group's ability to predict results or the actual effect of future plans or strategies is limited. Although the Group believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, its actual results and performance may differ materially from those set forth in the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that may cause the Group's actual results in future periods to differ materially from forecasted results or stated expectations including the risks regarding Eurocastle's ability to declare dividends, amortise the Group's debts, renegotiate the Group's credit facilities, make new investments, or achieve its targets regarding asset disposals or asset performance.



[1]Adjusted NAV for Q3 is before deducting the third quarter dividend of €1.13 per share declared in November 2017. 

[2] Amounts per share are calculated on the following basis: Q3 2017 Adjusted NAV - 61.1 million ordinary shares in issue; Q2 2017 Adjusted NAV - 60.1 million ordinary shares in issue; Q3 2016 Adjusted NAV - 60.1 million ordinary shares in issue; Q3 2017 NFFO - 60.7 million weighted average shares; YTD Q3 2017 NFFO - 60.3 million weighted average shares; YTD Q3 2016 NFFO - 68.1 million weighted average shares and Q2 2017 NFFO - 60.1 million weighted average shares. Q3 2017 dividend paid on 52.7 million ordinary shares outstanding post share tender; Q2 2017 dividends paid on 60.1 million ordinary shares in issue; YTD Q3 2016 dividend per share represents the sum of the first, second and third quarter 2016 dividends (€0.375 per share); YTD Q3 2017 dividend per share represents the sum of the first and second quarter 2017 dividends (€0.70 per share) and €1.13 per share dividend for the third quarter 2017 declared in November.

[3] Normalised FFO ("NFFO") is a non-IFRS measure used to explain the financial performance of the Company, as outlined on page 9 of the Q3 2017 Interim Report.

[4] NAV as at 30 September 2017.

[5] NAV as at 30 September 2016.

[6] Net of €5.7 million estimated transaction costs and €20.3 million of incentive fees to the Manager.

[7] All percentage ownerships of doBank in this document exclude the 1.75 million of treasury shares doBank has retained as at 30 September 2017.

[8] 2016 numbers pro forma for the acquisition of 100% of the share capital of Italfondiario S.p.A. and the derecognition of the Romeo portfolio, as if these had been put in place on 1 January 2016.

[9] Assumes net collections for Italfondiario for the nine months ending 30 September 2016. Alternatively, it would be an increase of 12% if gross collections of Italfondiario for the same period were applied.

[10] Reduced from €17.7 billion following interim collections from the cut-off date up to closing.

[11] Time weighted average of invested capital (net of any capital returned) over the relevant period. 

[12] Fully realised investments.

[13] Manager base fees are equal to the sum of (i) 1.5% of the Company's Net Asset Value excluding Net Corporate Cash and (ii) 0.75% of the Company's Net Corporate Cash calculated and paid monthly in arrears. Incentive fees are equal to 25% of the euro amount by which the Company's NFFO derived from Italian Investments (net of allocable fees and expenses) exceeds the net amount invested in such investments multiplied by a simple interest rate of 8% per annum (calculated on a cumulative but not compounding basis).

[14] Amounts per share are calculated on the following basis: Q3 2017 NFFO - 60.7 million weighted average shares; YTD Q3 2017 NFFO - 60.3 million weighted average shares.

[15] Earnings per share based on 60.3 million weighted average ordinary shares for the nine months ended 30 September 2017.

[16] Represents the expected net equity investment after financing.

[17] Adjusted NAV per share based on 61.1 million ordinary shares in issue.

 





This announcement is distributed by Nasdaq Corporate Solutions (One Liberty Plaza, 165 Broadway, New York, NY 10006. Tel: +1 212 401 8700. www.nasdaqomx.com) on behalf of Nasdaq Corporate Solutions clients. Source: Eurocastle Investment Limited, Regency Court, Glategny Esplanade, St Peter Port GY1 1WW GBR, Guernsey
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