Eurocastle Announces 2016 AGM Results and First Quarter 2016 Financial Results

Guernsey, 19 May 2016 - Eurocastle Investment Limited (Euronext Amsterdam: ECT) today announces the results of its 2016 Annual General Meeting held yesterday, 18 May 2016. All ordinary and extraordinary business tabled before the meeting in accordance with the Notice of Annual General Meeting circulated to shareholders on 28 April 2016 was approved. This includes the approval of the standing share buyback authority. Under this program, the Company may repurchase a maximum of 18,100,374 shares at the minimum price of €0.01 per share and the maximum price equal to 97.5% of the Company's most recently published net asset value per share as at the date of the acquisition. The definition of net asset value for these purposes was clarified by an amendment to resolution 5 to refer to 'adjusted net asset value' as reported by the Company. A copy of the Notice of Meeting is available on Eurocastle's website at www.eurocastleinv.com .

In addition, the Company today released its financial results for the first quarter ended 31 March 2016.  

FINANCIAL HIGHLIGHTS

• Normalised FFO ¹
  • €10.5 million, or €0.15 per share, for the first quarter of 2016 reflecting the first full quarter ownership of doBank and including €0.02 per share one-off impacts from the Legacy Business ^2,6 (Q4 2015: €8.1 million, or €0.11 per share).
  • Before costs, Italian Investments ³ alone generated €12.0 million, or €0.17 per share of Normalised FFO, resulting in a return on average net invested capital ⁴ of 15% (Q4 2015: €9.7 million, or €0.13 per share).
• Adjusted Net Asset Value ⁵
  • €532.2 million, or €7.35 per share, in line with previous quarter after paying €9.1 million of quarterly dividend (Q4 2015: €532.5 million, or €7.35 per share).
• First Quarter 2016 Dividend
  • €9.1 million or €0.125 per share paid in April.

	Q1 2016					Q4 2015
		€ million	€ per share				€ million	€ per share
Normalised FFO 1		10.5	0.15				8.1	0.11
Legacy Business 6 Cash Flow Received		4.7	0.06				17.3	0.24
Adjusted NAV 5 [1] 5		532.2	7.35				532.5	7.35

BUSINESS HIGHLIGHTS
  
  Italian Investments - On 8 March 2016, Eurocastle entered into a structured transaction ("Fund Investment IV") investing €1.0 million out of an anticipated €7.0 million to acquire substantially all of the units of a newly established unlisted Italian real estate fund set up to restructure and monetise real estate properties owned by an over-levered real estate fund. The portfolio owned by the fund consists of a retail portfolio in Northern Italy and 3 office assets with a combined value of €132 million.
  
  Italian Investment Performance - During the first quarter, these investments in aggregate generated €10.9 million, or €0.15 per share, of cash flow. This includes €2.0 million from the NPLs within doBank and €5.5 million from doBank's servicing business.
  
  Legacy Business - The Company continued making progress towards its goal of fully disposing of these assets, collecting €4.7 million over the period including €3.6 million from the sale of the Zama portfolio. As at 31 March 2016, the Legacy Business has a remaining NAV of €13.0 million, or €0.18 per share, representing only 2% of the Group's Adjusted NAV.Since January 2015 the gacy Business has generated €82.5 million of cash flow.

HIGHLIGHTS SUBSEQUENT TO 31 MARCH 2016

• At its Annual General Meeting, amongst other items, the Company received approval to buy back up to 25% of outstanding shares at a price not exceeding 97.5% of its most recently published Adjusted Net Asset Value per share.
   
• On 10 May 2016, Eurocastle invested an additional €6.0 million into the Fund Investment IV transaction bringing the Company's total equity investment to €7.0 million. On completion, Eurocastle's share of the implied net asset value of this fund was €14.2 million indicating an acquisition at approximately a 50% discount to the implied NAV.
   
• In May 2016, Eurocastle received €6.8 million, or 63% of its original investment in Fund Investment III. The distribution followed the sale of an asset which represented 26% of the fund's total assets, with the sale price representing a 5% premium to reported market value. The units in this fund were acquired by the Company at a 56% discount to the fund's reported NAV at acquisition.
   
• In May 2016, the Company invested €5.0 million to acquire an interest in mezzanine tranches of a securitisation of senior Italian real estate fund debt at a significant discount to expected recovery.

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 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 First Quarter 2016 Earnings Call" or "conference ID number 1385711."

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 19 August 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 "1385711"

NORMALISED FFO

Normalised FFO is a non-IFRS financial measure that, with respect to the Company's Italian 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 movementsand any movements on portfolios with a negative NAV other than sales or asset management fees realised.

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 Italian 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.

Q1 2016 NORMALISED FFO

	Italian Investments € Thousands	Legacy € Thousands	Total € Thousands		Average Net Invested Capital [2]		Yield
Italian Investments	11,959	-	11,959		309,874		15%
Legacy Portfolios	-	3,507	3,507
Operating expenses	(3,481)	(1,443)	(4,924)
Normalised FFO	8,478	2,064	10,542
Per Share	0.12	0.03	0.15

In the first quarter of 2016, Eurocastle generated Normalised FFO of €10.5 million, or €0.15 per share compared to a dividend of €9.1 million, or €0.125 per share. Before corporate costs, Italian Investments generated €12.0 million, or €0.17 per share. Given the average net invested capital in the period was approximately €310 million, this equates to a yield of 15%.

Q1 2016 INCOME STATEMENT

	Italian Investments € Thousands	Legacy € Thousands	Total € Thousands
Operating income
Italian Investments
Fair value movements on Italian Investments
doBank (Servicer & NPL)	7,933	-	7,933
NPLs [3]	781	-	781
Real estate fund units (Fund Investment I)	632	-	632
Share of post-tax profits from associate investment in RE fund units (Fund Investment III)	4,225	-	4,225
Share of post-tax loss from JV investment in RE fund units (Fund Investment II)	(1,595)	-	(1,595)
Legacy Debt Investments
Interest income	74	268	342
Losses on foreign currency contracts, translation and swaps	-	(935)	(935)
Impairment losses	-	(798)	(798)
Gain on pay-downs of loans and receivables	-	1,325	1,325
Total operating income	12,050	(140)	11,910
Operating expenses
Interest expense	-	761	761
Other operating expenses - transaction costs	88	-	88
Other operating expenses - group running costs	3,375	186	3,561
Total operating expenses	3,463	947	4,410
Net operating profit / (loss) before taxation	8,587	(1,087)	7,500
Total tax expense	7	1	8
Net profit / (loss) after taxation from continuing operations	8,580	(1,088)	7,492
Net profit after taxation from discontinued operations	-	710	710
Profit / (loss) after taxation for the year	8,580	(378)	8,202
Per Share 3	0.12	(0.01)	0.11
Attributable to:
Ordinary equity holders of the Company	8,552	(378)	8,174
Non-controlling interest	28	-	28

For the first three months of 2016, the total net gain after taxation and non-controlling interests as reported under IFRS was €8.2 million. Within the Group's Italian 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 first quarter of 2016 was €8.6 million, or €0.12 per share.

		Italian Investments € Thousands	Legacy € Thousands	Total € Thousands
Net profit / ( loss) attributable to ordinary shareholders after taxation		8,552	(378)	8,174
Reversal of Net loss attributed to negative NAV portfolios 2		-	1,337	1,337
Adjusted net profit		8,552	959	9,511
Per Share 3		0.12	0.01	0.13

Excluding losses arising within those legacy portfolios that have a negative NAV, the Group generated a net profit after taxation of €9.5 million or €0.13 per share. As at 31 March 2016, the remaining adjusted NAV of the legacy portfolios was €13.0 million, or €0.18 per share which represents just 2.0% of the Company's Adjusted NAV.

  Q1 2016 BALANCE SHEET AND ADJUSTED NAV RECONCILIATION

	Italian Investments € Thousands	Corporate € Thousands	Legacy € Thousands	Total € Thousands
Assets
Cash and cash equivalents	4,605	200,585	30,833	236,023
Investment properties held for sale	-	-	359,758	359,758
Italian investments at Fair Value
doBank (Servicer)	162,600	-	-	162,600
doBank (NPL)	101,052	-	-	101,052
NPLs	26,211	-	-	26,211
Real estate fund units (Fund Investment I)	13,480	-	-	13,480
Associate investment in real estate fund units (Fund Investment III)	19,194	-	-	19,194
Joint venture investment in real estate fund units (Fund Investment II)	10,565	-	-	10,565
Loans and receivables	-	-	55,498	55,498
Derivative assets	-	-	4,272	4,272
Other assets	1,447	59	17,386	18,892
Intangible assets	-	-	2	2
Total assets	339,154	200,644	467,749	1,007,547
Total liabilities
Trade and other payables	3,896	12,693	80,302	96,891
Current taxation payable	10	-	9,527	9,537
CDO bonds payable	-	-	76,453	76,453
Bank borrowings	-	-	368,747	368,747
Finance lease payable	-	-	16,924	16,924
Deferred taxation liability	-	-	751	751
Total liabilities	3,906	12,693	552,704	569,303
Net Asset Value	335,248	187,951	(84,955)	438,244
Non-controlling interest	(970)	-	-	(970)
Net Asset Value after Non-controlling interest	334,278	187,951	(84,955)	437,274
Negative NAV Addbacks [4]	-	-	94,955	94,955
NAV Reallocation following Committed Investments [5]	6,032	(6,032)	-	-
NAV Reallocation following Legacy Portfolio Sales [6]	-	(2,990)	2,990	-
Adjusted NAV	340,310	178,929	12,990	532,229
Adjusted NAV (€ per Share) [7]	4.70	2.47	0.18	7.35

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