ANNUAL REPORT
2021
EUROCASTLE INVESTMENT LIMITED is a publicly traded closed-
ended investment company with investments focused on Italian
performing and non-performing loans and other real estate related assets
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.
2021
SEE PAGE 16 FOR ALL END NOTES EUROCASTLE INVESTMENT LIMITED | 2021 ANNUAL REPORT 1
BUSINESS REVIEW
FINANCIAL HIGHLIGHTS AT A GLANCE
1
STRATEGIC REVIEW
Eurocastle Investment Limited (the “Company” or “Eurocastle”) is a publicly traded closed-ended investment company with investments focused
on Italian performing and non-performing loans (“NPLs”) and other real estate related assets in Italy. On 18 November 2019, the Company
announced a plan to realise the majority of its assets with the aim of accelerating the return of value to shareholders and in March 2021 launched a
strategic review of the Company’s options. The board is currently in intensive discussions with the Manager to analyse potential investment
opportunities.
PORTFOLIO OVERVIEW
Following implementation of the Realisation Plan in December 2019, Eurocastle’s remaining portfolio of Italian Investments is made up of Real
Estate Funds and residual interests in Italian NPLs & Other Loans, with the balance comprising Net Corporate Cash (after taking into account
reserves for future costs and potential liabilities considered by the Board in light of the Realisation Plan). The chart below shows a breakdown of
Eurocastle’s net assets as at
31 December 2021.
3
Adjusted YE 2021 NAV:
€18.2mm
(YE 2020: €16.7mm)
(Q3 2021: €18.1mm)
YE 2021 IFRS NAV of €32.9mm
Adjusted YE 2021 NAV per share
2
:
€9.79ps
(YE 2020: €9.00ps)
(Q3 2021: €9.76ps)
YE 2021 IFRS NAV of €17.73ps
A
€14.8m
Additional
Reserves
€7.94ps
45%
€1.3m
Italian NPLs &
Other Loans
€0.72ps
4%
€2.8m
Real Estate Funds
€1.49ps
8%
€14.1m
Net Corporate Cash
€7.57ps
43%
IFRS NAV
€17.73 ps / €32.9mm
Adjusted NAV
€9.79 ps / €18.2mm
3
3
Italian NPLs & Other Loans: Residual minority interest in 2 loan pools, which are under
contract to be sold once the underlying portfolio level financing of each is repaid.
FY 2021 NAV Bridge
In € per share
Additional Reserves: Reserves required for the Company to continue in operation and fund
its future costs and potential liabilities in light of the Realisation Plan. These reserves are not
accounted for under IFRS. No commitments for these future costs and potential liabilities
existed as at 31 December 2021.
Net Corporate Cash: Corporate cash net of liabilities and additional reserves.
€9.00
€8.46
€9.79
€17.73
(€0.54)
(€0.10)
€0.32
€1.11
€7.94
Q4 2020
Adjusted
NAV
Capital
distribution
Q4 2020
Adjusted NAV
after Capital
Distribution
Italian
NPLs
Fair Value
Movement
RE Fund
Investments
Fair Value
Movement
Reserves
& Other
Movement
Q4 2021
Adjusted
NAV
Additional
Reserves
Q4 2021
IFRS
NAV
Real Estate Funds: Interests in:
• Two private Italian real estate development funds:
RE Fund II: Both buildings completed and fully sold
RE Fund V: Construction completed on budget, with 96% of units sold or under
contract.
SEE PAGE 16 FOR ALL END NOTES EUROCASTLE INVESTMENT LIMITED | 2021 ANNUAL REPORT 2
BUSINESS REVIEW
2021 BUSINESS HIGHLIGHTS
SUBSEQUENT EVENT TO 31 DECEMBER 2021
FY 2021 Overview
During the year the Company continued to make significant progress on realising its remaining assets as part of its Realisation Plan with
72% of its YE 2020 NAV relating to investments realised in the period. In particular, sales of residential units across both of its real estate
redevelopment funds have proved resilient despite the ongoing challenges from COVID-19. This positive activity in the RE Funds, where
results were achieved above and ahead of what was anticipated, after being adjusted in 2020 for the projected impact of COVID-19, has
been the primary driver for a 31% valuation increase in the period on all investments.
In addition, Eurocastle received its last material distribution from its publicly listed fund investment and sold all underlying assets in one
of the three remaining loan pools the Company has an interest in. The Company is now left with two RE Fund Investments and two NPL
pools with an NAV of €5.1 million, or 28% of the Company’s NAV. In Q1 2022, the Company received a further €2.0 million from its RE
Fund investments. Taking into account these distributions, Eurocastle’s remaining NAV for all of its investments would be €3.1 million,
or 17% of the Company’s Adjusted NAV, which is expected to be realised within the next 18 months.
Investment Realisations & Highlights
During 2021, the Company realised €6.3 million from its investments, of which €5.8 million came from its Real Estate Funds (~78% of
their YE 2020 NAV) and €0.5 million from its minority NPL and Other Loan holdings (~41% of their YE 2020 NAV).
RE Redevelopment Funds – REFI II & REFI V:
In REFI II, all units have been sold and the fund is now in liquidation. In REFI V, assuming all units currently under contract
successfully close, only 4% of units will remain to be sold.
Eurocastle received €5.3 million during the year comprising (i) €0.8 million from REFI II (~32% of its YE 2020 NAV) and (ii) €4.6 million
from REFI V (~96% of its YE 2020 NAV). A further €2.0 million was distributed from the investments in Q1 2022; €1.0 million from REFI
II in January 2022 and €1.0 million from REFI V in March 2022.
REFI I: Following the sale of all the assets in Real Estate Fund Investment I in 2019, in Q1 2021 the Company received its last expected
material distribution of €0.4 million, or 143% of its YE 2020 NAV.
Italian NPLs & Other Loans: During the year the pools generated and distributed €0.5 million, or ~41% of their YE 2020 NAV. The
Company also disposed of all of the underlying assets of one of these 3 pools which generated ~ €0.4 million to the Company (~31% of
its YE 2020 NAV).
Additional Reserves: The Company reduced these reserves from €16.2 million to €14.8 million during the year. The reduction of €1.4
million reflects €1.6 million of reserves being utilised, in line with anticipated costs, and an increase of €0.2 million in the existing
reserves in 2021.
The Company is exposed to a potential tax risk of up to €7.2 million associated with the disposal of a legacy property subsidiary in prior
years. In February 2022, the Company received revised tax assessments related to this risk covering the period 2008 - 2012 determining a
liability of €4.6 million, or €2.50 per share. In respect of the same legacy property subsidiary, the years 2013 - 2015 remain subject to
ongoing tax audits, the timings of which are uncertain. The Company estimates that the remaining financial impact for all these audits,
including interest accruals, is between €1.8 million - €2.5 million. The Company intends to appeal the current and any future assessments
through the German tax system and, having taken independent advice, considers it probable that the matter will finally be determined in
the Company’s favour. In light of this, the Company will recognise a tax asset of €4.6m following payment of this amount in March 2022.
The Company has been advised that, based on average court timings for both the German fiscal and federal court systems, this matter can
be expected to be resolved in approximately four years, but notes that it can take considerably longer and, in rare cases, up to ten years in
total. The total potential liability arising from this matter had already been fully reflected in the Adjusted NAV since implementation of
the Realisation Plan (see page 5) and remains the case at 31 December 2021.
In early January 2022, the Company received a distribution of €1.0 million from Real Estate Fund Investment II. This represents 70% of its
Q4 2021 NAV leaving a residual value of ~€0.4 million for this investment and is already reflected in the Company’s Q4 2021 Adjusted
NAV.
In March 2022, the Company received a distribution of €1.0 million from Real Estate Fund Investment V. This represents 42% of its Q4
2021 NAV and leaves a residual value of ~€1.4 million for this investment.
SEE PAGE 16 FOR ALL END NOTES EUROCASTLE INVESTMENT LIMITED | 2021 ANNUAL REPORT 3
BUSINESS REVIEW
ITALIAN REAL ESTATE FUNDS
Further details of all remaining real estate fund investments as at 31 December 2021 can be found in the table below:
Fund
In
vestment II
Fund
Investment V
Investment Date Jul-14 Q2-17
Eurocastle Ownership 49.7% 49.6%
Fund Type Private Private
Collateral Type
2 luxury residential
redevelopments
1 luxury residential
redevelopment
Collateral Location Rome Rome
Eurocastle YE 2021 Adjusted NAV per
share
€0.22
3
€1.27
Fund Leverage 0% 0%
4
L
egal Fund Maturity
I
n liquidation Q4 2022
RE Fund
Investments
Equity Invested
€ million
Total
Cash flows
Distributed
to Eurocastle
€ million
Of which
Received in
2021
€ million
Adjusted
NAV
€ million
Adjusted
NAV
€ per share
Total Return
(Cash flows
Distributed
+Adj. NAV)
€ million
I (fully realised Mar ’21)
22.2
26.8
0.4
-
-
26.8
II
3
15.4
15.1
3
0.8
0.4
3
0.22
15.5
V
5.6
5.0
4.6
2.4
1.27
7.4
TOTAL
43.2
46.9
5.8
2.8
1.49
49.7
Since 2014, Eurocastle has made several investments in this asset
class, investing €67.2 million in five separate real estate funds; of
which three have been fully realised.
The Company opportunistically targeted either public or private
funds that could be acquired at a significant discount to the
value of their underlying assets.
Following adoption of the Realisation Plan, the Company plans
to continue to hold and realise these assets in accordance with
existing business plans. It will support these investments to the
extent required to optimise r
eturns and distribute cash to
shareholders when available.
RE Funds Update
During 2021, the Company’s RE Fund interests comprised one publicly listed fund, which was fully realised in March 2021 and in two private
Italian real estate redevelopment funds.
• RE Fund I (publicly listed fund) –The investment was fully realised in March 2021, with a final material distribution of €0.4 million being
received in Q1 2021,