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.

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.

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.

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.