Eurocastle Announces Financial Results for the Nine Months Ended 30 September 2016

Guernsey, 10 November 2016 - Eurocastle Investment Limited (Euronext Amsterdam: ECT) today has released its financial results for the nine months ended 30 September 2016. 

 Normalised FFO^[1] of €11.9 million, or €0.20 per share^[2] for the third quarter of 2016. €33.5 million or €0.49 per share for the nine months ended 30 September 2016.
         
         
 Adjusted Net Asset Value^[3] of €463.5 million, or €7.71 per share, an increase of €0.01 per share on the quarter (Q2 2016: €462.7 million, or €7.70 per share) reflecting €0.20 per share of valuation movements before Q3 dividend of €0.125 per share and corporate expenses.

 Third Quarter 2016 Dividend of €7.5 million, or €0.125 per share paid in October.
         

BUSINESS HIGHLIGHTS SINCE 30 JUNE 2016

  doBank - In October, following approval from the Bank of Italy, doBank (50% owned by Eurocastle) successfully completed the acquisition of Italfondiario S.p.A. ("Italfondiario"), the second largest independent non-performing loan servicer in Italy. Together, doBank and Italfondiario will represent the largest independent banking group in Italy, specialising in the credit management and collection of performing and non-performing loans with over €83 billion gross book value ("GBV") of loans under management, and over 4,000 employees and external consultants across 24 offices in Italy. This acquisition is a major milestone in doBank's expansion in the Italian market which significantly strengthens its position as a leading partner to the Italian banking system.
         
    New Italian Investments - Eurocastle acquired a 25% interest in two portfolios of Italian non-performing loans ("NPLs") with an aggregate GBV of approximately €70 million. The first investment of €1.1 million was made on 23 September 2016, while the second acquisition where the Company invested a further €1.0 million closed on 9 November 2016. The two portfolios are predominantly secured by residential real estate.
         
  Italian Investments5 Performance - During the third quarter, Italian Investments reported strong performance generating in aggregate €9.0 million of gross cash flow. Total cash flow generated for the nine months ended 30 September 2016 amounted to €40.3 million⁶ of which €26.6 million related to doBank's NPL portfolio and servicing business. Since acquisition, Italian Investments have generated €93.7 million, or €7.0 million more than underwriting expectations.

  Legacy Business - In line with its strategy to accelerate recoveries from its legacy real estate assets in Germany, the Company agreed to sell Belfry and Truss, the two remaining Retail portfolios. The sale is expected to generate €2.3 million of net proceeds compared to a reported Adjusted NAV of zero. The majority of the assets sold are expected to close by year-end.
             
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 Third Quarter 2016 Earnings Call" or conference ID number "3334554".

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, 10 December 2016 by dialling +1-855-859-2056 (from within the U.S.) or +1-404- 537-3406 (from outside of the U.S.); please reference access code "3334554".

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, foreign exchange movements and 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 residual value of the Legacy Business, focusing on the Normalised FFO of the Company's Italian Investments will enhance investor's understanding of current and future earnings given annualised returns achieved and the average net invested capital^[4] over the relevant period.

Segmental Normalised FFO for the Nine Months Ended 30 September 2016	Average Net Invested Capital	Yield		Italian Investments	Legacy	Total
				€ Thousands	€ Thousands	€ Thousands
NPLs	22,462	20%		3,399	-	3,399
RE Fund Units	43,873	34%		11,335	-	11,335
doBank (Servicer & NPL)	246,031	14%		25,630	-	25,630
Italian Investments NFFO before expenses	312,366	17%		40,364	-	40,364
Legacy Portfolios NFFO before expenses				-	7,785	7,785
Manager Base & Incentive Fees				(8,621)	(99)	(8,720)
Other operating expenses				(3,125)	(2,849)	(5,974)
Normalised FFO				28,618	4,837	33,455
Per Share				0.42	0.07	0.49

Segmental Normalised FFO for the Third Quarter 2016	Average Net Invested Capital	Yield		Italian Investments	Legacy	Total
				€ Thousands	€ Thousands	€ Thousands
NPLs	21,863	19%		1,053	-	1,053
RE Fund Units	47,737	45%		5,412	-	5,412
doBank (Servicer & NPL)	246,031	14%		8,560	-	8,560
Italian Investments NFFO before expenses	315,631	19%		15,025	-	15,025
Legacy Portfolios NFFO before expenses				-	1,638	1,638
Manager Base & Incentive Fees				(3,080)	(30)	(3,110)
Other operating expenses				(1,395)	(259)	(1,654)
Normalised FFO				10,550	1,349	11,899
Per Share				0.18	0.02	0.20

In the first nine months of 2016, Eurocastle generated Normalised FFO of €33.5 million, or €0.49 per share compared to a dividend of €24.1 million, or €0.375 per share. Before corporate costs Italian Investments generated €40.4 million, or €0.59 per share. Given the average net invested capital in the period was approximately €312 million, this equates to a yield of 17%.

In the third quarter of 2016, Eurocastle generated Normalised FFO of €11.9 million, or €0.20 per share. Before corporate costs Italian Investments generated €15.0 million, or €0.25 per share. Given the average net invested capital in the period was approximately €316 million, this equates to a yield of 19%.

Income Statement for the Nine Months Ended 30 September 2016	Italian Investments € Thousands	Legacy € Thousands	Total € Thousands
Operating income
Italian Investments
Fair value movements on Italian Investments
doBank (Servicer & NPL)	24,745	-	24,745
NPLs[5]	4,626	-	4,626
Real estate fund units (Fund Investment I)	1,921	-	1,921
Share of post-tax profits from associate investment in RE fund units (Fund Investments III, IV)	15,993	2,136	18,129
Share of post-tax loss from JV investment in RE fund units (Fund Investment II)	(1,813)	-	(1,813)
Interest Income	180	-	180
Legacy Debt Investments
Interest income	-	1,107	1,107
Losses on foreign currency contracts, translation and swaps	-	(2,023)	(2,023)
Impairment losses	-	(1,565)	(1,565)
Gain on pay-downs of loans and receivables	-	2,604	2,604
Total operating income	45,652	2,259	47,911
Operating expenses
Interest expense	-	2,192	2,192
Other operating expenses - transaction costs	538	-	538
Other operating expenses - group running costs	11,009	434	11,443
Total operating expenses	11,547	2,626	14,173
Net operating profit / (loss) before taxation	34,105	(367)	33,738
Total tax expense	230	3	233
Net profit / (loss) after taxation from continuing operations	33,875	(370)	33,505
Net loss after taxation from discontinued operations	-	(72,979)	(72,979)
Profit / (loss) after taxation for the period	33,875	(73,349)	(39,474)
Per Share	0.50	(1.08)	(0.58)
Attributable to:
Ordinary equity holders of the Company	33,598	(73,349)	(39,751)
Non-controlling interest	277	-	277

For the first nine months of 2016, the total net loss after taxation and non-controlling interests as reported under IFRS was €39.8 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 nine months of 2016 was €33.6 million, or €0.49 per share.

	Italian Investments € Thousands	Legacy € Thousands	Total € Thousands
Net profit / ( loss) attributable to ordinary shareholders after taxation	33,598	(73,349)	(39,751)
Reversal of Net loss attributed to negative NAV portfolios2	-	71,304	71,304
Adjusted net profit / (loss)	33,598	(2,045)	31,553
Per Share	0.49	(0.03)	0.46

Excluding losses arising within those legacy portfolios that have a negative NAV, the Group generated a net profit after taxation of €31.6 million or €0.46 per share. As at 30 September 2016, the remaining Adjusted NAV of the legacy portfolios was €8.1 million, or €0.14 per share which represents under 2% of the Company's Adjusted NAV.

Balance Sheet and Adjusted NAV Reconciliation as at 30 September 2016	Italian Investments € Thousands	Corporate € Thousands	Legacy € Thousands	Total € Thousands
Assets
Cash and cash equivalents	4,112	119,933	23,440	147,485
Investment properties held for sale	-	-	222,688	222,688
Italian investments at Fair Value
doBank (Servicer)	173,494	-	-	173,494
doBank (NPL)	98,910	-	-	98,910
NPLs	28,376	-	-	28,376
Real estate fund units (Fund Investment I)	14,768	-	-	14,768
Associate investment in real estate fund units (Fund Investments III, IV)	30,745	-	2,136	32,881
Joint venture investment in real estate fund units (Fund Investment II)	10,347	-	-	10,347
Loans and receivables	-	-	40,987	40,987
Available-for-sale securities[6]	5,481	-	-	5,481
Derivative assets	-	-	6,144	6,144
Other assets	584	1,925	9,442	11,951
Intangible assets	-	-	1	1
Total assets	366,817	121,858	304,838	793,513
Total liabilities
Trade and other payables	4,065	19,632	67,794	91,491
Current taxation payable	16	8,495	957	9,468
CDO bonds payable	-	-	63,047	63,047
Bank borrowings	-	-	314,864	314,864
Finance lease payable	-	-	12,476	12,476
Total liabilities	4,081	28,127	459,138	491,346
Net Asset Value	362,736	93,731	(154,300)	302,167
Non-controlling interest	(1,022)	-	-	(1,022)
Net Asset Value after Non-controlling interest	361,714	93,731	(154,300)	301,145
Negative NAV Addbacks[7]	-	-	162,313	162,313
Committed Investments	1,000	(1,000)	-	-
Adjusted NAV	362,714	92,731	8,013	463,458
Adjusted NAV (€ per Share)	6.03	1.54	0.14	7.71

ABOUT EUROCASTLE

Eurocastle Investment Limited is a publicly traded closed-ended investment company that focuses on investing in Italian performing and non-performing loans, Italian NPL servicing platforms 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", "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 di

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