Q2 2017 Eurocastle Investment Ltd Earnings Call

Aug 04, 2017 AM EDT
ECT.AS - Eurocastle Investment Ltd
Q2 2017 Eurocastle Investment Ltd Earnings Call
Aug 04, 2017 / 12:00PM GMT 

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Corporate Participants
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   *  Francesco Colasanti
      Torre SGR SpA - CEO, MD, IR Manager, and Director
   *  Olga Wilson
   *  Oliver Goodrich
      Eurocastle Investment Limited - CFO

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Conference Call Participants
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   *  Edmond M. Safra
      EMS Capital LP - Founder and President
   *  Hammad Khan
   *  Manus Fleskens
   *  Thomas Mills
      Crédit Suisse AG, Research Division - Equity Research Analyst

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Presentation
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Operator   [1]
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 Good day. My name is Jack, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Eurocastle Second Quarter 2017 Earnings Call. (Operator Instructions)

 Olga Wilson, Investor Relations, you may begin your conference.

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 Olga Wilson,    [2]
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 Thank you, Jack, and good afternoon, everyone. I would like to welcome you to Eurocastle Second Quarter 2017 Earnings Call. Joining us today are Francesco Colasanti, Managing Director at Fortress; and Eurocastle's CFO, Oliver Goodrich.

 For the duration of this call, we will be referencing a presentation that we posted on our website under the Investor Relations section, which we hope you will find helpful. We would like to remind everyone that this call is being recorded, and the replay number is on our website. This call is also available on our website via webcast.

 I would like to point out that statements, opinions and beliefs communicated today which are not certainly historical facts may, in fact, be forward-looking statements. We encourage you to read the forward-looking statement in the risk factor disclaimer in front of our presentation.

 With that, let me hand off to Francesco.

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [3]
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 Thanks, Olga, and I welcome everyone to Eurocastle's Second Quarter 2017 Earnings Call.

 So before we turn to the presentation that Olga mentioned to you, I'd like to make a few remarks. First of all, Eurocastle had a terrific second quarter and an excellent start of the second half of the year, marked primarily by 2 very important events: the doBank IPO and the closing of the FINO portfolio acquisition, which were both completed in July. Both events are a result of our disciplined investment approach and are accretive to Eurocastle's earnings.

 As you will see in the presentation, the NAV increased since last quarter by 14.9%, and this morning, we announced a dividend of EUR 0.41 per share as a result of the great performance of our investments and the new distribution policy. We're also in the process of signing another acquisition of an Italian loan portfolio as early as next week, for which we expect to deploy EUR 10 million to EUR 20 million of equity investment in the fourth quarter, and this is in line with our target investment returns.

 So let's start on Slide 2 with an overview of our business. Eurocastle remains one of the largest pure-play investors in Italy, which is the largest NPL market in Europe today. So far, we've invested approximately EUR 405 million, which is placed among 3 segments: doBank Group, which is the largest third-party Italian servicer; the Italian NPL portfolios with a combined gross book value of approximately EUR 25 billion, including the recently closed FINO portfolio acquisition; and the last segment, Italian real estate funds.

 Eurocastle a dividend-paying company with 100% payout ratio. In Q2, the company declared a record total dividend of EUR 0.41 per share, which will be paid at the end of August and represents the NFFO received in cash in the quarter for 100%.

 The major recent events are highlighted in more detail on Slide 3. As I just mentioned, doBank completed its IPO in July at EUR 9 per share. Eurocastle sold 19.1 million shares, generating approximately EUR 146 million of net proceeds. And post IPO, we retain 20 million shares. I'll give you more detail on that in a minute.

 The second exciting news is that we closed on the FINO portfolio last week. Eurocastle invested EUR 44 million to acquire, together with Fortress affiliates, a 50.1% interest in a significant portion of a EUR 16 billion -- EUR 16.2 billion NPL portfolio from UniCredit. I think this is a terrific win for Eurocastle and Fortress as FINO is considered the largest NPL deal to trade since the financial crisis in Italy, with the second largest being the Romeo portfolio, which we acquired as part of the doBank transaction.

 And last but not least, in line with our recently implemented distribution policy, Eurocastle board declared a record dividend of EUR 0.41 per share, of which EUR 0.15 per share is a regular dividend and EUR 0.26 per share is supplemental dividend. This brings the total dividend for the first half of the year to EUR 0.70 per share.

 On Slide 4, we prepared a summary of the doBank IPO results and how they translate to Eurocastle earnings. In July, as I said before, our largest investment, doBank, completed its IPO at EUR 704 million, a 30% premium to our Q1 NAV for this investment. DoBank is now trading on the Milan Stock Exchange under the ticker DOB. We sold approximately 48.8% of our shares, generating EUR 146 million of net proceeds less than 2 years after acquiring the business in partnership with other Fortress affiliates. Together, we continue to hold controlling interest in doBank. Of the EUR 146 million realized, EUR 62 million is cash NFFO to be distributed as part of the Q3 dividend, and the remaining EUR 84 million represents a capital return by the investment.

 So if you look at the table on the right, you can see that based on the original NAV of EUR 157.8 million and taking into consideration the dividends received so far plus the IPO proceeds, the investment has already returned EUR 172 million to date. And taking into account the value of all the remaining 20 million shares of EUR 219 million at the average closing price of doBank, the total value of the investment today is worth EUR 392 million, a 2.5x multiple of the original NAV. This, I think, is a terrific result for Eurocastle and its shareholders.

 Since going public, doBank's shares have performed extremely well, rising from EUR 9 per share at the IPO to an average closing price of EUR 10.85 per share since the IPO. On a pro forma basis, doBank price would add EUR 0.45 per share to Eurocastle's Q2 2017 NAV of EUR 10.49 per share. We think there is a lot of embedded value in doBank and believe the company has positioned itself for ongoing success. We retain a controlling interest in doBank and looking forward to being part of its future success. Once again, an outstanding result, and we're very excited about this investment.

 So now let's talk about the Q2 financial performance on Slide 5. Our second quarter results were very strong. We recorded an NAV of EUR 630.6 million or EUR 10.49 per share, up EUR 1.36 per share or 14.9% on the quarter, after having paid the Q1 dividend of EUR 0.29 per share. Our normalized FFO in Q2 was EUR 9.1 million or EUR 0.15 per share, and as I mentioned earlier, our board declared a record dividend of EUR 0.41 per share. The Q2 dividend represents 100% of the cash NFFO and is completely in line with our newly introduced distribution policy.

 So looking on Slide 6 where, as usual, we lay out the 3 main segments of our business. You can see that as of Q2 NAV of our largest investment, doBank, was EUR 338 million or EUR 5.62 per share. As of Q2, we own 40 million shares marked at EUR 8.59 per share. NAV of our Italian NPLs was EUR 119 million or EUR 1.98 per share. Italian real estate funds accounted for EUR 54 million or EUR 0.90 per share. And prior to receiving IPO proceeds in July, our cash balance as of Q2 was EUR 120 million or EUR 1.99 per share.

 Turning to Slide 7, where we outline the performance of our investments to date. We will say that, so far, we've invested approximately EUR 404.7 million, primarily across our Italian investments. Realization to date now total EUR 188 million and include EUR 86 million received in Q2, mainly following the dividend from the doBank and the financing raised on the Romeo portfolio. Taking into account their current NAV of EUR 510.7 million, these investments have generated unlevered IRR of 42% to date, well ahead of our targeted lifetime range of 15% to 20% IRR. Based on this outstanding performance to date, we are currently anticipating that these investments could potentially exceed our target range of returns.

 It's also worth to highlight that the figures are as of Q2 and, therefore, do not reflect the EUR 146 million net proceeds received from the doBank IPO that happened in the third quarter. I'd like to highlight that these returns are primarily achieved through very active asset management from both Eurocastle team and our Italian partners in close collaboration as well as through our proven disciplined investment approach.

 Let me take you through the performance of each business segment in more detail, starting with doBank on Slide 8. doBank has a very strong first half 2017. Group EBITDA of EUR 30.3 million was up 13% compared to H1 '16, mostly driven by collections of EUR 888 million, up 37% over same period last year. Net income for the period was EUR 19.7 million, up 34% from last period.

 We continue to view doBank as an important strategic investment for Eurocastle. doBank plays a key role in our NPL investment strategy, both as a servicer of our NPL portfolio and as a potential partner in sourcing and helping underwrite, diligence and evaluate future NPL investments. We have a lot of confidence in the management of doBank to successfully execute its strategy and expect to see further growth at doBank. As dominant independent servicer of NPLs in Italy, we believe doBank is ideally positioned to capitalize on significant servicing opportunities on the horizon.

 On Slide 9, we've outlined the performance of the Romeo NPL portfolio. This portfolio is outperforming our regional underwriting projections, generating EUR 30.6 million of proceeds since closing in October '15. The actual pace of collection is 126% of underwriting, and profitability on fully realized loans is at 102% -- 122% of underwriting. We expect that this initial performance will, over time, align to underwriting assumptions, with potential upside on some assets.

 Our Italian and other NPL pools are also showing great performance and are outlined on Slide 10. Excluding the Romeo NPLs and the recently acquired FINO pool, we own an interest in 18 pools of performing and nonperforming loans with a combined gross book value of EUR 6.4 billion. The loans continue to outperform original underwriting projections, with the actual pace of collections at 117% of our underwriting and the profitability on fully realized loans at 231% of underwriting expectations. These pools have recorded cash flow to date of EUR 40.4 million, which represents 93% of our original total investment. We're very, very pleased with the results of our NPL investments and they -- what they continue to deliver to us.

 Turning to the next slide. So let's now talk about our investments in Italian real estate fund units. So far, we have invested or committed to invest approximately EUR 67 million in 5 Italian real estate funds, 1 public and 4 private, which were acquired at a significant discount to their underlying asset values. Our strategy is to cooperate with the fund managers and, where relevant, to simplify the capital structure and enhance property values. The goal is then to realize profits from asset sales as the funds reach their upcoming termination dates.

 These investments are showing great performance, generating EUR 49 million of proceeds to date. And I'd like to note that these investments are carried at an average discount of 25% to underlying asset value. These investments require very active asset management by Eurocastle team, who have done an excellent job of extracting value for the company from this asset class.

 And with that, let's look at Slide 11 and 12 for a brief market update. The NPL market in Italy remains the largest in Europe, with over EUR 320 billion GBV of troubled loans, of which EUR 200 billion are currently nonperforming. Italian banks, under the weight of poor financial performance and mounting pressure from the ECB, appear to have entered into a major restructuring phase, with over EUR 87 billion of target NPL sales announced by the top Italian banks. We're working on an active pipeline of approximately EUR 6.8 billion GBV of current NPL opportunities, and we'll act on those that we believe can deliver attractive returns to our investors, in line with our proven disciplined investment approach. In my opinion, the most interesting opportunities are likely to include stand-alone NPL portfolios as well as more complex transactions combining NPL portfolio with the servicing platforms. We view doBank as a valuable potential partner in such transactions.

 In conclusion, I'd like to say that we are very pleased with the terrific results that Eurocastle delivered in the second quarter and remain very excited about the opportunities ahead and look forward to updating you on the progress throughout the year. And with that, let me turn it to Oliver Goodrich, our CFO.

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 Oliver Goodrich,  Eurocastle Investment Limited - CFO   [4]
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 Thanks, Francesco, and welcome, everyone. Focusing back on the financial highlights outlined on Slide 5. The adjusted NAV as of Q2 stands at EUR 631 million or EUR 10.49 per share, which, if you include all dividends declared, equates to a 16% increase on the quarter and 44% over the last 12 months.

 As Francesco highlighted earlier, the NAV increase has been driven by the revaluation of our interest in doBank in the lead up to the IPO and, as of end of Q2, reflects a company value for doBank of EUR 672 million, a slight discount to its IPO valuation of EUR 704 million. However, if you adjust for the net proceeds of the IPO and revalue our remaining 20 million shares at its average closing price of EUR 10.85, our NAV increases by a further EUR 0.45 per share. In terms of normalized FFO, this amounted to EUR 9.1 million or EUR 0.15 per share and is in line with our Q1 NFFO when you strip out the impact of the one-off sales and legacy realizations that took place in the first quarter.

 From a dividend perspective, the board has declared a total dividend for the second quarter of EUR 0.41 per share, which reflects the net NFFO received in cash in the quarter and includes a significant portion of NFFO recognized from previous quarters that have not yet been distributed but been received in the period. Since the beginning of 2016, we have reported total NFFO of EUR 81.1 million, of which we have now declared EUR 75.2 million. That leaves EUR 5.9 million or EUR 0.10 per share of undistributed NFFO, most of which relates to that in Q2.

 I look forward to updating you on our progress in future quarters. And with that, I'd like to hand over to the operator. Operator?

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Questions and Answers
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Operator   [1]
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 (Operator Instructions) Your first question comes from the line of [Jordan Celeste] with EMS.

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 Edmond M. Safra,  EMS Capital LP - Founder and President   [2]
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 This is Edmond Safra. Can you please go through in detail how you think the distribution policy works, specifically for principal return? Because you have EUR 4 a share of cash that should be distributed to shareholders, and they're just sitting there for a EUR 10 million NPL investment. So if you can walk in detail how you perceive that, that should happen and be specific on when it will actually happen according to what you think you agreed with your shareholders.

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [3]
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 That's fine, Edmond. I'll -- thanks for your question, and let me give you the details on that, on how the distribution policy works. So we make it -- I thought it was clear, but I will go through again, and then Oli will go through what's the expectations on the numbers. In terms of the distribution policy, it is made of 3 components. The first component is regular dividend, a stable regular dividend. That is declared by the board, and this has been set for the period at EUR 0.15 per share. Then the second component is a supplemental dividend that basically takes the overall distribution -- makes up for distributing 100% of the cash NFFO generated in the period. Then the third component is the capital because we said that we didn't want to sit on capital that we're not able to use. So starting to look at December last year, we do the calculation every 6 months. Every amount of capital that is not designated for investment or working capital reserve, 50% of it will be returned at the closing of the semiannual period.

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 Oliver Goodrich,  Eurocastle Investment Limited - CFO   [4]
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 So if you look at...

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 Edmond M. Safra,  EMS Capital LP - Founder and President   [5]
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 So how much of that is being returned now?

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [6]
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 Oli?

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 Oliver Goodrich,  Eurocastle Investment Limited - CFO   [7]
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 For the Q2 distribution, it's based on the December 31 balance because, obviously, you have -- you look at the cash you have at December 31.

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 Edmond M. Safra,  EMS Capital LP - Founder and President   [8]
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 Sorry, what about the -- I thought the idea was to return 50% of it at the close of the period. And then if you have investment opportunities, you hold to the other half, and then you distribute it in the following period. So at least half of what the capital return should have been for the first half, I expected to receive right now.

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [9]
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 Well, the way the policy works, it looks at the cash in December. You deduct all the cash that is designated for investments and working capital reserve and...

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 Edmond M. Safra,  EMS Capital LP - Founder and President   [10]
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 Why wait 6 months to distribute the cash for a period that ended 6 months ago, half of it?

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [11]
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 This is the current distribution policy.

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 Edmond M. Safra,  EMS Capital LP - Founder and President   [12]
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 Okay. So maybe we should call a shareholder meeting and see how many people will ask the board to change the distribution policy. This is something that is actually sensible given all the requests that were made over the past 1.5 years to you.

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [13]
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 I think we made excellent results. We've proven that we deploy the capital in...

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 Edmond M. Safra,  EMS Capital LP - Founder and President   [14]
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 The money is just sitting there. There's EUR 4 of cash that's sitting there and just being delayed to be distributed while nothing is going on. I mean, what's the other motive? How much does Eurocastle collect on management fees on cash on the balance sheet? Is that enough for Fortress to just drag this on forever?

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [15]
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 How much money you generated in this -- in the investment in this company? I mean, I think we're doing...

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 Edmond M. Safra,  EMS Capital LP - Founder and President   [16]
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 It doesn't matter, Francesco. It doesn't matter. It's just it's not what investors want. I'm telling you, it's an illiquid share class that the only way to get your return is through distributions, and there's been a cash drag ever since you raised money 4 years ago. And I'm not disputing that whatever you were able to invest was fine, but there's just way too much money sitting around for no reason. And nothing's changed over a year. I might have to wait until beginning of 2018 to start to see some principal returns. That's really, really not correct.

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [17]
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 I just would like to give some numbers. We raised in the capital raise in 2013 EUR 725 -- shares at EUR 7.25. We've distributed EUR 2.5. The basis is around EUR 4.78, and the share price today is EUR 9.33, and the NAV is EUR 10.49. We...

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 Edmond M. Safra,  EMS Capital LP - Founder and President   [18]
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 Yes. But we still have cash that ought to be returned that's just going to drag forever because -- I don't know why. I really don't understand why a company of your size where the desires of the shareholders are clear and you guys are just choosing to stretch it out like that.

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [19]
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 Well, we're trying to use the cash that we have in a prudent way. And in case, we are not able to invest with the returns, we think, are appropriate for this asset class, we put out a distribution policy to return every 6 months the capital -- 50% of the capital that was not deployed. If investors are not...

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 Edmond M. Safra,  EMS Capital LP - Founder and President   [20]
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 Every -- yes, okay. Yes, go ahead. If investors what?

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [21]
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 If investors are not happy -- this is the current distribution policy.

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Operator   [22]
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 Your next question comes from the line of Tom Mills with Crédit Suisse.

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 Thomas Mills,  Crédit Suisse AG, Research Division - Equity Research Analyst   [23]
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 Obviously, congratulations for a very strong quarter and successful IPO of doBank and closing of FINO. I mean, to me, it seems like there's really some momentum beholding -- behind NPL transactions in the market, and I guess, there's a reasonably big one that went through this morning [by capacity size]. I guess I was just wondering, are you expecting to see a good volume of transactions coming through in the second half? I mean, obviously, you're pointing to one that could happen very imminently, but do you feel like there are further transactions that you could sort of win out in the second half? And then also, I guess, could you also provide a bit of detail or maybe on the breakout of the FINO NPL portfolio that's now been closed? What GBV of NPLs will you actually get for Eurocastle? That would be very helpful.

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [24]
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 Thanks, Tom. In terms of the transactions that we're working on, as I said before, we are in the process of closing a transaction that would require minimum EUR 10 million to EUR 20 million, so that is something that I consider in the process of closing. There are other transactions that we've been shortlisted for that are very interesting, and I think there is a momentum where like banks are starting to sell more assets. Once again, the secret, I would say, of the great result we have is the discipline in our investment approach. So we'll make these investments as long as they make sense and they are accretive to Eurocastle shares. We are not in the business of making investments at all costs but just the ones that make sense. But we are looking at a few deals that are very, very, very interesting. In terms of the breakout to the FINO NPL portfolio, unfortunately, we are restricted with confidentiality with UniCredit, and we are not -- it's not possible for us for the time being to disclose this information with the public. We will do when we'll be allowed to do so, and we'll do it immediately.

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 Thomas Mills,  Crédit Suisse AG, Research Division - Equity Research Analyst   [25]
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 Sorry, can I maybe just ask a couple of follow-ups as well? Are you seeing many transactions coming through on the GACS side of things? And is that still a very interesting potential opportunity for you in particular? And I guess, probably associated with comments before. How are you seeing the sort of competitive environment evolve? Are you seeing a lot more competitors coming into the market sort of year-to-date? I guess there's a lot of noise around this opportunity set at the moment, and I just wanted to get a feel for how you're actually seeing that on the ground.

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [26]
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 Yes. Sure, Tom. So in terms of the transaction, the GACS is definitely an alternative to finance portfolios in an efficient way. But it is a financing, and it basically on -- the way it works is that on the bonds rated above investment-grade level, you basically can access to a government guarantee scheme, so the cost of that portion of the capital structure is lower compared to a market transaction, a bank financing. So I do think that they've done -- they've closed 3 GACS at the moment, and I think that we could see additional transaction assisted by the GACS scheme in the coming futures. And especially, I see larger transaction to be assisted by this scheme in the coming future. So the number and the size of the transaction will, in my opinion, increase unless the banks' financing will become cheaper and so they will be more competitive and so investor -- banks and investors will decide to finance in alternative way with the banks' financing that, in general, gives more flexibility. So that's what I see in the market. In terms of competitors, well, more people have tried to acquire portfolios in the market. If you look at our track record, we represent approximately 60% of whatever traded in the market so far, and we closed the largest and the second-largest transaction. The -- what could happen is that more people will come in, but more people will be able to invest the capital only if the deal flow increases. So what I have seen so far is more people interested in the market but not more people making actual investments.

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Operator   [27]
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 Your next question comes from the line of Manus Fleskens with ProBeleggen.

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 Manus Fleskens,    [28]
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 My name is Manus Fleskens. I have one remark about the dividend discussion earlier in the call. Looking at the results, what you have made, and the expectation, what you think you can make in the future, actually paying out some dividend is not a wise thing to do. But I heard that it was agreed upon with the majority of shareholders, but I don't see any point in complaining about getting less dividends because you make normally a lot of money with the money you retain. But that's my point of view. I have one question about the FINO acquisition. I hope you can tell that at least. You mentioned that you have put EUR 44 million for a stake together with Fortress. Up until now you always split your investments 50%-50%. So could I assume that you own 25% stake in FINO?

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [29]
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 We cannot -- what we have agreed with our counterparty is that we will not disclose the price of this investment. So we cannot -- we are bound by confidentiality agreements, so we cannot give the percentage that we invested. Otherwise, the market could arrive at the price we paid for it given the fact that we acquired 50.1%. So unfortunately, I would love to be explicit with you and open, but, unfortunately, we are bound by confidentiality agreement.

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 Manus Fleskens,    [30]
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 Okay. And the same -- this question was asked in the Fortress conference call yesterday. Well, numbers were given. So I shouldn't bother to relisten to that conference call to get this number because Fortress also said they have invested EUR 44 million, and it's clear.

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [31]
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 Yes. I'm really sorry about that.

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Operator   [32]
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 Your next question comes from Hammad Khan with EJF Capital.

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 Hammad Khan,    [33]
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 A few questions for you. Just on the business -- on the distribution policy as we're still on it. On the EUR 0.41 declared for Q2, can you just help me reconcile the number? Because I thought that we were expecting EUR 26.2 million of doBank special dividend to be paid out this quarter as it was stated in Q1 presentation, which equates to EUR 0.43. So I just can't get to that EUR 0.41. I thought it would be closer to EUR 0.50, EUR 0.55 for the quarter.

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 Oliver Goodrich,  Eurocastle Investment Limited - CFO   [34]
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 Yes. It's -- the distribution policy, Hammad, works on the total amount that we've reported of -- all FFOs we've reported since the beginning of 2016 and -- versus, obviously, the amount that we've distributed to date. And it's based on the cash flows that we received. The EUR 24.6 that we have is effectively driven by EUR 29 million of income cash or NFFO cash flows from the investments. EUR 12 of that comes from the doBank dividend rather than the full EUR 26. And the reason for that is before we established the policy, which we're obviously adopting retrospectively back to 2016 in order to ensure we pay out all those 2016 undistributed amount, we hadn't received some of the doBank -- any cash flows from doBank during that year. So we were actually paying out part of the doBank dividend in advance last year. So we've retained a portion of that amount in order to ensure that where we are to date is predominantly having distributed all reported NFFO since Jan 1 up to now.

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 Hammad Khan,    [35]
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 So moving forward, can I assume that NFFO is cash realized rather than approved? I'm just thinking moving forward especially regarding doBank's dividend.

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 Oliver Goodrich,  Eurocastle Investment Limited - CFO   [36]
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 No, I think, we've had a big catch-up in the first couple of quarters because of the adoption of the policy and that retrospective look back. But I mean, if you look at the amount -- I think I mentioned on the script, we've reported EUR 81 million normalized FFO since Jan 1 '16, and we've distributed EUR 75 million in nominal terms . So there's EUR 6 million that we haven't yet paid out in relation to NFFO recognized up to now. So I guess the way you should think about it is we'll continue to pay out the current earnings, provided that we receive it in cash, and there's a small catch-up left of EUR 5.9 million or EUR 6 million.

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 Hammad Khan,    [37]
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 Okay. And then just on the principal, just following up from Edmond's conversation. So the 50% of the principal outstanding, as of second half this year, which is EUR 120 million of cash, I don't know how much of that is principal, is it fair to assume that we could expect 50% of that to be paid out before year-end since the cutoff is H2? If it's not -- assuming it's not...

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 Oliver Goodrich,  Eurocastle Investment Limited - CFO   [38]
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 Yes. So we have EUR 120 million of net corporate cash as of June 30. That number is obviously subject to reserves that are set by the board. And the balance -- 50% of that net balance after reserves, if there's nothing invested, would be distributed. But obviously, if an amount is invested, it will be reduced by that amount or anything that's designated or committed.

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 Hammad Khan,    [39]
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 And so whatever is remaining -- because I'm just a little confused because -- is it whatever is invested up to H2 cutoff or whatever is invested from now until the end of the year?

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 Oliver Goodrich,  Eurocastle Investment Limited - CFO   [40]
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 So there's 2 balance...

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 Hammad Khan,    [41]
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 Does it mean that you hold on to cash -- you could hold on to cash for 12 months before distributing any principal? I'm just trying to see how the mechanics work, especially given the distribution policy is so big.

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 Oliver Goodrich,  Eurocastle Investment Limited - CFO   [42]
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 Right. So we've got EUR 120 million of net corporate cash reported as of June 30, yes? So 50% of that -- so after deducting reserves that the board choose, 50% of that would be returned in the event that there were no investments made within 6 months following June 30. So effectively, that would mean the board would meet to decide a distribution in the first quarter of 2018 looking at the result of those 6 months up to December 31.

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 Hammad Khan,    [43]
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 Okay. And just the last one for me. On doBank valuation for Eurocastle's NAV, I'm just a little confused. Moving forward, is the whole position valued at the current stock price?

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 Oliver Goodrich,  Eurocastle Investment Limited - CFO   [44]
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 Well, you've got -- effectively, we're left with 20 million shares. So we also got net proceeds of EUR 146 million, and the remaining 20 million shares will be marked to market at the current listed price -- or the listed price at each cutoff day.

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 Hammad Khan,    [45]
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 Whatever the price of the stock is as of closing. Is that correct?

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 Oliver Goodrich,  Eurocastle Investment Limited - CFO   [46]
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 Exactly, yes, closing price at each quarter end.

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Operator   [47]
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 I would now like to turn the call back over to management for closing remarks.

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 Francesco Colasanti,  Torre SGR SpA - CEO, MD, IR Manager, and Director   [48]
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 Great. Thanks for all your questions. We remain very focused to make Eurocastle a successful company. We will manage your money prudently and efficiently. And we thank you for your support, and I look forward to updating you again in November.

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Operator   [49]
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 This concludes today's conference call. All participants may now disconnect.




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Definitions
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PRELIMINARY TRANSCRIPT: "Preliminary Transcript" indicates that the 
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