Eurocastle Investment Limited: Eurocastle Releases Fourth Quarter and Year End 2017 Financial Results Announces Fourth Quarter Dividend of €0.27 per share

Guernsey, 21 March 2018 - Eurocastle Investment Limited (Euronext Amsterdam: ECT) today has released its annual report for the year ended 31 December 2017. 

• Adjusted Net Asset Value ("Adjusted NAV") of €556.5 million^[1], or €10.56 per share^[2], an increase of €0.07 per share over the quarter after paying the third quarter dividend of €1.13 per share in December. Total increase for the year of €1.40 per share. Including dividends declared and paid in 2017 this represents a total return on NAV of 35% for the year.
   
• Normalised FFO^[3]of €111.1 million, or €1.86 per share², for the full year, of which €7.8 million, or €0.14 per share, relates to the fourth quarter.
   
• Fourth Quarter 2017 Dividend of €0.27 per share² declared on 20 March 2018 and to be paid on 5 April 2018 to shareholders of record at close of business on 27 March 2018, with an ex-dividend date of 26 March 2017. This follows €14.7 million of net NFFO received in cash in the quarter, in line with the Company's distribution policy.

FULL YEAR 2017 BUSINESS HIGHLIGHTS

Successful doBank IPO
In July 2017, doBank completed a €704 million IPO at €9.00 per doBank share, (equivalent to approximately 2.5x Eurocastle's original investment, net of distributions received up to the IPO). doBank is the largest & highest rated third party NPL servicing group in Italy. 

• Eurocastle's holding of 20 million shares, representing 25.6% of doBank's outstanding shares, was valued at €13.55 per doBank share as at 31 December 2017, up from €10.98 per doBank share as at 30 September 2017. This followed the announcement of over €9 billion GBV of new servicing contracts in the fourth quarter. Subsequent to year-end, doBank announced a further €2.4 billion GBV of new contracts.

    
doBank Financial Performance

• The doBank Group reported EBITDA for the full year of 2017 of €70.1 million, up 9% like-for-like^[4] over the same period last year (FY 2016: €64.3 million) driven by collections of €1.8 billion, up 8% over last year^[5].
• Net profit for the same period was €45.0 million, up 11% like-for-like¹ over the same period last year (FY 2016: €40.4 million).
• In March 2018, the board of doBank approved, subject to shareholder approval, a dividend of €31.5 million expected to be paid in May 2018 (of which Eurocastle's share is approximately €8 million).

Strong Capital Deployment
During 2017, invested or committed over €144 million of capital including €117 million relating to FINO, one of the largest NPL transactions in Italy since the financial crisis.

• In the first half of the year deployed €1.3 million in RE Fund IV and €4.1 million of previously committed equity in RE Fund V with an additional €0.6 million deployed in November. Expect to fund remaining investment, estimated to be €0.8 million, during 2018.
• In July, deployed €43.9 million to acquire an interest in a €14.4 billion GBV NPL portfolio from UniCredit S.p.A ("FINO")^[6]. The portfolio was subsequently split into two securitisation vehicles. A deferred purchase price of €64.7 million is payable over the next few years. In the fourth quarter 2017, committed an additional €8.4 million investment in the mezzanine and junior notes of the two securitisations.
• In November, invested €12.2 million for a shared interest in a new NPL pool with a GBV of €293 million.
• In December, deployed €9.0 million to acquire a share of a leveraged interest in a performing and sub-performing ("PL/SPL") loan portfolio of €234 million GBV.

Significant Distributions to Shareholders

• In 2017 established a new distribution policy and declared total dividends related to the period of €116.3 million representing 100% of NFFO realised in cash. This includes a €14.2 million, or €0.27 per share Q4 dividend declared by the Board on 20 March 2018 and payable on 5 April 2018.
• In November 2017, Eurocastle repurchased 8.4 million shares (representing 13.75% of the Company's voting 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 Q3 NAV per share by approximately 1%.

Other Significant Realisations

• In addition to the €166 million of proceeds received from the doBank IPO, the Company also received approximately €26 million relating to doBank's 2016 dividend.
• In February 2017, Eurocastle sold its remaining interest in the units of Real Estate Fund Investment III. The sale resulted in total proceeds of €20.9 million and a total lifetime gross profit of €18.0 million, an IRR of 137% and a 2.7x multiple on equity invested.
• In May 2017, the Company announced the successful completion on the financing of the secured portion of its Romeo NPL portfolio. As a result, it received approximately €36 million or 50% of the net proceeds after costs and reserves.
• In October 2017, the remaining properties held in Real Estate Fund Investment IV were sold, realising gross proceeds to Eurocastle of €33.6 million and €4.6 million ahead of ECT's Q3 carrying value. Taking into account previous distributions, the sale resulted in a total lifetime gross profit of €21.6 million, an IRR of 95% and 2.6x multiple on equity invested.
• During 2017, the Company unwound its interest in the last remaining Legacy portfolio^[7] (CDO V) and as such has now fully disposed of all Legacy investments.

BUSINESS HIGHLIGHTS SUBSEQUENT TO 31 DECEMBER 2017

Sale of Senior Notes of FINO 1 Securitisation

• Raised approximately €48 million of net proceeds through the sale of its share of the senior notes of FINO 1 Securitisation S.r.l., one of the two securitisations that collectively own the FINO NPL portfolio acquired from UniCredit S.p.A. The senior notes are guaranteed by the Italian state under the "GACS" program and are therefore seen as an extremely attractive form of financing.

Follow on Investment in FINO NPL Portfolio

• Closed on a €8.4 million follow-on investment to acquire, together with other Fortress affiliates, additional interests in the mezzanine and junior notes of the two securitisations that collectively own the FINO NPL portfolio.

NORMALISED FFO

Normalised FFO ("NFFO") 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 IPO, the Company now recognises NFFO 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.

Following the change in classification to an investment entity^[12] as defined under IFRS 10, all investments are to be fair valued through profit and loss prospectively from 1 July 2017 onwards. The Company's income statement as reported under IFRS therefore presents six months of consolidated results for the first half of 2017 and six months of Company stand-alone results from 1 July 2017. To aid understanding of performance, the table below also reflects the profit and loss under the retrospective application, i.e. as if the Company had always been classified as an investment entity, which is consistent with how the information was presented in the Company's Q3 2017 interim report.

The impact of the change to accounting method on the 2017 income statement as reported under IFRS is €6.4 million and relates to Real Estate Fund Investment II which was previously accounted for under the equity method at cost. The equivalent impact under the retrospective method would have been recognised in the previous year. In addition, the retrospective approach does not recognise €40.5 million of income arising from the deconsolidation of the CDO V portfolio, as the equivalent impact would have been recognised in the prior year given the investment would have been carried at a fair value of nil by virtue of its negative NAV and non-recourse liabilities. Outside of these timing related effects, all other differences reflect the reallocation of profit and loss items.

For the year ended 31 December 2017, the total net profit as reported under IFRS was €233.5 million, or €3.92 per share. Applying the accounting change on a retrospective basis results in net profit of €186.3 million, or €3.13 per share, of which €58.2 million, or €1.01 per share relates to the fourth quarter.

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 1:00 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 Fourth Quarter 2017 Earnings Call" or "conference ID number 6277238".

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 Saturday, 21 April 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 "6277238"

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", "endeavor", "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 Company's ability to predict results or the actual effect of future plans or strategies is limited. Although the Company 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 Company'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 Company's debts, renegotiate the Company's credit facilities, make new investments, or achieve its targets regarding asset disposals or asset performance.