Starwood cuts dividend expectations

So far it has made three loans. The first, worth £19.1m, was part of the mezzanine component in the £547m refinancing of the Maybourne Hotel Group, and is secured against three five-star hotels. The second is a three-year loan to an unnamed "opportunistic property investor" that wants to refurbish a building near Tottenham Court Road. Finally, the fund has lent £12.8m for the development of a new London retirement village.

The problem is that these mortgages have only used 18 per cent of the company's cash. Management initially aimed to pay 3.5p in dividends in its first year, based on the assumption it would have lent out £120m at the half-year mark, but the payout is now likely to be lower.

How much lower depends on the current pipeline. The company has agreed terms for five loans worth £117m, which would bring the company to 68 per cent invested by the end of September, if they all complete. The portfolio would then support dividends of 2.4p for the year.

The investment trust's manager, Starwood, says lending has been slow partly because it was outbid on one huge portfolio deal in the second quarter. It worries that recovery sentiment is running ahead of market fundamentals, leading to some "questionable" deals.