Eurocastle Investment Ltd (EUIVF)

[Enterprising Investor]

Eurocastle Announces First Half 2016 Financial Results (8/03/16)

Guernsey, 3 August 2016 - Eurocastle Investment Limited (Euronext Amsterdam: ECT) today has released its financial results for the first half year ended 30 June 2016.

Normalised FFO[1] of €11.0 million, or €0.15 per share for the second quarter of 2016 (€0.18 per share pro forma for the recent share repurchase that closed in June) (H1 2016: €21.5 million, or €0.30 per share)[2].

Adjusted Net Asset Value[3] of €462.7 million, or €7.70 per share, an increase of €0.35 per share on the quarter (Q1 2016: €532.2 million, or €7.35 per share) reflecting:

€0.25 per share NAV accretion following the €75.1 million share repurchase.

€0.10 per share of valuation movements net of corporate expenses and Q2 dividend of €0.125 per share.

Second Quarter 2016 Dividend of €7.5 million, or €0.125 per share paid in July.

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BUSINESS HIGHLIGHTS

Share Tender - On 23 May 2016, the Board announced a tender offer of up to €75 million to return excess cash that had been received from the sale of the Company's Legacy assets. The Company repurchased shares to provide existing investors with liquidity and to take advantage of the discount the Company's shares were trading at relative to the Company's then existing Adjusted Net Asset Value. On 20 June 2016, Eurocastle repurchased 12.3 million, or 17.0%, of ordinary shares in issue at a price of €6.10 per share for a total cost of €75.1 million. The repurchase has been accretive both to earnings as well as the balance sheet, increasing Normalised FFO by 20%, or €0.03 per share, and NAV by 3%, or €0.25 per share.

New Italian Investments - On 10 May 2016, Eurocastle invested a further €6.0 million into the real estate Fund Investment IV transaction bringing total equity invested to €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 three office assets with a combined value of €132.3 million. Additionally, on 16 and 25 May 2016, the Company invested an aggregate of €5.0 million to acquire an interest in two mezzanine tranches of the fund's debt at a 20% discount to expected recovery.

Italian RE Fund Asset Sales - In May 2016, Eurocastle received €6.8 million, or 63% of its original investment, from real estate Fund Investment III. The distribution followed the sale of an asset which represented 26% of the fund's total assets at a 5% premium to its previously 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 addition, in June 2016, one asset comprising approximately 33% of real estate Fund Investment IV was sold at a €7.0 million premium to the fund's valuation with the proceeds being applied towards amortising the fund's debt. The sale significantly improves the investment's anticipated return and profitability once all fund assets are sold.

Italian Investment[5] Performance - During the second quarter, Italian Investments in aggregate reported strong performance generating €20.4 million of gross cash flow compared to €12.8 million expected at underwriting. This includes €6.8 million from the RE funds, €1.5 million from the non-performing loans ("NPLs"), €3.8 million from the NPLs within doBank and €8.3 million from doBank's servicing business[6]. Total cash flow generated in the first half of 2016 amounted to €31.3 million of which €19.6 million related to doBank alone[7].

HIGHLIGHTS SUBSEQUENT TO 30 JUNE 2016

On 14 July 2016, the Company announced that doBank, 50% owned by Eurocastle, has agreed to acquire Italfondiario, the second largest independent credit management company in Italy specialising in servicing NPLs for approximately €27 million from Fortress-managed funds and a third party. The acquisition is part of doBank's broader plan to expand and streamline operations in Italy and secure a leading position in the integrated credit management sector. On completion of the acquisition (which is subject to Bank of Italy approval), doBank and Italfondiario will form the largest independent group in the sector and will benefit from significant synergies and economies of scale, thereby making their operations even more efficient and effective, and further enhancing the profile of the group as the major independent servicer of the banking system.


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 [phone] (from within the U.S.) or [phone] (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference "Eurocastle First Half 2016 Earnings Call or conference ID number 56353642"

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, 3 September 2016 by dialing [phone] (from within the U.S.) or [phone] (from outside of the U.S.); please reference access code "56353642"

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 existing value of the Legacy Business, focusing on the Normalised FFO of the Company's Italian Investments[8] will further enable investors to understand current and future earnings given annualised returns achieved and the average net invested capital2 over the relevant period.

In the first half of 2016, Eurocastle generated Normalised FFO of €21.6 million, or €0.30 per share compared to a dividend of €16.6 million, or €0.25 per share. Before corporate costs Italian Investments generated €25.3 million, or €0.35 per share. Given the average net invested capital in the period was approximately €311 million, this equates to a yield of 16%.

In the second quarter of 2016, Eurocastle generated Normalised FFO of €11.0 million, or €0.15 per share (or €0.18 per share calculated on the lower share count of 60.1 million following the share repurchase completed in June 2016). Before corporate costs Italian Investments generated €13.4 million, or €0.19 per share. Given the average net invested capital in the period was approximately €312 million, this equates to a yield of 17%.

For the first six months of 2016, the total net loss after taxation and non-controlling interests as reported under IFRS was €8.1 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 half of 2016 was €26.5 million, or €0.37 per share.

Excluding losses arising within those legacy portfolios that have a negative NAV, the Group generated a net profit after taxation of €22.8 million or €0.32 per share. As at 30 June 2016, the remaining adjusted NAV of the legacy portfolios was €8.4 million, or €0.14 per share which represents under 2% of the Company's Adjusted NAV.

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.

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