Eurocastle Releases Fourth Quarter and Year End 2015 Financial Results Announces Quarterly Dividend of €0.125 per share

Guernsey. 10 March 2016 - Eurocastle Investment Limited (Euronext Amsterdam: ECT) today released the annual report for the twelve months ended 31 December 2015.  

FINANCIAL HIGHLIGHTS

• Normalised FFO^[1]
  • Q4 2015: €8.1 million, or €0.11 per share (Q3 2015: €2.4 million, or €0.03 per share).
  • Full Year 2015: €17.1 million or €0.29 per share (FY 2014: €9.4 million, or €0.29 per share).
  • Before costs, New Investments^[2] alone generated €21.4 million of Normalised FFO in 2015, resulting in a return on average net invested capital^[3] of 22%.
• Adjusted Net Asset Value^[4]
  •  €532.5 million, or €7.35 per share
    • An increase of €4.2 million or €0.05 per share, in the fourth quarter of 2015 after having paid a dividend of €0.125 per share following revaluation gains from the Company's New Investments.
• Annual Dividend
  • €31.2 million, or €0.50 per share.
  • In addition, the Board of Directors has declared a first quarter 2016 dividend of €0.125 per share payable on 29 April 2016 to shareholders of record at close of business on 18 March 2016, with an ex-dividend date of 17 March 2016.

FULL YEAR & FOURTH QUARTER 2015 BUSINESS HIGHLIGHTS

• Capital Structure - On 29 April 2015 Eurocastle successfully completed an equity offering raising gross proceeds of €312.1 million through the issuance of 39.8 million shares at a price of €7.85 per share, more than doubling the size of the Company. Net proceeds of the offer were approximately €304.4 million or €7.65 per share providing the Company with additional funds to pursue new investment opportunities in the Italian debt and real estate markets. As at 31 December 2015, after having invested 88% of the net equity raised in April, Eurocastle had net corporate cash of €192 million.
   
• New Investments - In 2015, the Company invested €266.4 million in line with its targeted returns across seven transactions including:
  • A €246.0 million investment¹ to acquire a 50% share in doBank (formerly UniCredit Credit Management Bank S.p.A. ("UCCMB")), now the largest 3rd party loan servicer in Italy with over €45 billion Gross Book Value ("GBV") under management and a €3.3 billion GBV portfolio of non-performing loans ("NPLs").
  • An investment of €10.7 million to acquire 27% of the units of an unlisted Italian real estate fund at a discount of 56% to the fund's NAV².
  • A 25% share of four NPL portfolios with a total GBV of approximately €160 million for €5.6 million.
  • A further €1.9 million investment in a distressed bond.
     
• New Investment Performance - During the year Eurocastle collected €32.5 million, or €0.55 per share, €10.1 million ahead of underwriting expectations. €6.6 million was generated in the fourth quarter, predominantly from its NPL portfolios.
   
• Legacy Business - The Company made significant progress towards its goal of fully disposing of these assets, collecting €77.8 million over the year, of which €17.3 million was received in the fourth quarter primarily from the sale of the remaining assets in the Mars Fixed II and Floating portfolios. In December the Company agreed to sell the Zama portfolio generating a further €3.6 million expected to be received by the end of March 2016.  As at 31 December 2015, the legacy business has a remaining NAV of €13.5 million, or €0.19 per share representing just 3% of the Group's Adjusted NAV.

HIGHLIGHTS SUBSEQUENT TO 2015

On 8 March 2016, Eurocastle entered into a structured transaction which, on completion (anticipated in the second quarter of 2016), would see the Group acquire substantially all of the units of Fondo Virgilio, a newly established unlisted Italian real estate fund set up to restructure and monetize real estate properties owned by an overlevered real estate fund. The transaction has been made cooperatively with the lenders. The portfolio owned by the fund consists of a retail portfolio in Northern Italy and 3 office assets together valued at €132 million. This transaction will represent a new capital investment of up to €7 million. On completion of the transaction, Eurocastle's share of the implied net asset value of this fund is expected to be approximately €14 million assuming the full €7 million investment is made.

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 4:00 P.M. London time (11:00 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 dialing 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 2015 Earnings Call or conference ID number 63936024."

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 Sunday, 10 April 2016 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 "63936024"

NORMALISED FFO

Normalised FFO is a non-IFRS financial measure that, with respect to the Company's New Investments, recognises income on an expected yield basis allowing Eurocastle to report the run rate earnings from these investments in line with their projected annualised returns. On Eurocastle's Legacy Business the measure excludes realised gains and losses, sales related costs (including realised swap losses), impairment losses and foreign exchange movements.

Eurocastle believes that, given the strategy of seeking to monetise the existing value of the Legacy Business, focusing on the Normalised FFO of the Company's New Investments will further enable investors to understand current and future earnings given annualised returns achieved and the average net invested capital over the relevant period.

In 2015 Eurocastle generated Normalised FFO of €17.1 million, or €0.29 per share, with €21.4 million (€0.36 per share) related to New Investments before corporate costs. Given the average net invested capital in 2015 was approximately €98 million, this equates to a yield of 22%.

FY 2015 INCOME STATEMENT

For the 12 months ended 2015, the total net loss after taxation and non-controlling interests as reported under IFRS was €43.4 million, driven by a €58.3 million loss on the Group's legacy investments. Within the Group's New Investments, where the majority of these assets are accounted for at fair value under a discounted cash flow approach, net income after taxation and non-controlling interest for the twelve months ended 2015 was €14.9 million, or €0.25 per share. Of this amount, €11.7 million, or €0.16 per share³, was generated in the fourth quarter of 2015 alone, following €14.7 million of revaluation gains on its NPL investments and doBank. These gains resulted from a reduction in the market-based discount rate applied on the valuation of these assets, together with additional fair value movements arising from the first two months ownership of doBank.

Excluding losses arising within those legacy portfolios that have a negative NAV, the Group generated net profit after taxation of €7.9 million, which reflects a €7.0 million loss arising primarily as a result of revaluations and realised losses on the Company's legacy assets. The impact of further potential losses in 2016 is limited given the remaining adjusted NAV of this segment as at 31 December 2015 was €13.5 million, or €0.19 per share.

 BALANCE SHEET AND ADJUSTED NAV RECONCILIATION

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, and actively managing its legacy business-commercial  real estate assets in Germany and European real estate related debt. 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.