abrdn European Logistics Income plc Portfolio Update and Unaudited Q3 2022 NAV (1525I)

TIDMASLI

RNS Number : 1525I

abrdn European Logistics Income plc

01 December 2022

LEI: 213800I9IYIKKNRT3G50

abrdn European Logistics Income plc

Portfolio Update and Unaudited Net Asset Value as at 30 September 2022

Further diversification and portfolio indexation characteristics underpinning valuation resilience

1 December 2022 - abrdn European Logistics Income plc (LSE: ASLI), the Company which invests in high quality European logistics real estate, announces its unaudited quarterly Net Asset Value ("NAV") for the quarter ended 30 September 2022.

Highlights

-- The portfolio valuation increased to EUR807.4 million; excluding new acquisitions during the period, the portfolio like-for-like valuation fell marginally by 1.0%

-- NAV per Ordinary share decreased by 1.3% to 129.2c (GBp - 114.1p 1 ) (30 June 2022: 130.9c (GBp - 112.4p 1 )), reflecting a NAV total return of 6.5% (in Euro terms) for the 12 months to 30 September 2022

-- EPRA Net Tangible Assets 2 decreased by 0.9% to 137.4c per Ordinary share (30 June 2022 - 138.7c)

-- Third interim dividend for 2022 of 1.41c (GBp - 1.20p) declared, payable on 30 December 2022

-- Four acquisitions completed for a total net consideration of EUR44.6 million, taking the portfolio to 27 assets across five countries:

o Three freehold French properties, leased to Dachser Logistics, for an aggregate EUR32.5 million (excl acquisition costs)

o 6,900 sqm warehouse (including office space) in Horst, the Netherlands, for EUR12.1 million

-- EUR100 million of new debt agreed with ING Bank, via two facilities, secured against the portfolio's Spanish assets, at a blended all-in interest rate of 2.88%. The Company's Loan to Value remains within the stated target range at 35%

-- Further improvement in the Company's Global Real Estate Sustainability Benchmark ('GRESB') score to 86/100, whilst maintaining its high Green Star rating with 4 out of a maximum 5 stars

   --      In October, Troels Andersen was appointed as Lead Fund Manager, replacing Evert Castelein 

Troels Andersen, Fund Manager, abrdn, commented:

"The European logistics market continues to be characterised by record low supply and robust demand from a breadth of businesses, allowing landlords to capture strong rental growth . This limited supply of good quality buildings with increasing construction costs and higher interest rates, together with strong occupier demand for urban locations together with long indexed linked leases underpins our strategy.

"Whilst forecasters are expecting outward yield movement over the coming quarters, the Company's focus on tenant critical, quality, sustainable buildings, means it is well placed to withstand the impact of wider market volatility. Despite the well documented headwinds in relation to inflation and policy rates, the diverse nature of our well-located portfolio, spread across 27 assets over 5 countries, together with indexed long income should ameliorate any valuation softening we witness over the next twelve months.

"With rent remaining a smaller percentage of tenant's overall operating costs and vacancy rates at historical lows, we are already seeing, and are confident moving forward, that the CPI indexation applied to leases will be accepted by tenants even through periods of high inflation. The portfolio's attractive indexation characteristics are a clear and appealing differentiator for investors and will be a key driver for future earnings growth."

Performance

The unaudited portfolio valuation decreased by EUR6.8 million in the quarter, or 1.0%, on a like-for-like basis excluding new purchases in the quarter. The valuations of acquisitions in the quarter bolstered by the Waddinxveen extension were c.EUR4 million or 3% ahead of net purchase prices, bringing the net impact on capital values over the quarter for the whole portfolio down to -0.35%.

For the 12 month period to 30 September 2022, the Company's net asset value total return was 6.5% in Euro terms (4.5% in sterling terms). The Company has delivered 7.1% per annum since launch in Euro terms.

As at 30 September 2022, the Company's share price was 88.4p.

Dividend

The Directors have declared a third interim distribution for the year ending 31 December 2022 of 1.41 euro cents (equivalent to 1.20 pence) per Ordinary share. This third interim dividend will be paid in sterling on 30 December 2022 to Ordinary shareholders on the register on 2 December 2022 (ex-dividend date of 1 December 2022).

Rent collection & Asset management

100% of the expected rental income for the quarter ended 30 September 2022 has been collected.

During the quarter the Company delivered on a number of asset management initiatives. Highlights included:

-- In August, the 7,375 sqm vacant unit at Phase II Gavilanes was leased to ADER on a 5-year term. ADER provides distribution services to companies in the freight and logistics sector and has consolidated its operations in the Gavilanes area. The letting is fully CPI indexed and accretive to performance having completed well in advance of the guarantee timing assumptions and at a rental level ahead of underwriting.

-- In Lodz, Poland, Tabiplast recently signed an 8-year lease across 1,600 sqm ahead of expectations and the previous tenant's 3 year option.

-- In Krakow, a recently vacant unit has been let on a new 3-year term to Gebrüder Weiss ahead of previous rent and ERV, whilst packaging company DS Smith has extended its lease by four years at the same asset.

After staged incentives, these leases will generate c. EUR778,000 of additional annual income in aggregate.

French acquisitions

During the quarter the Company completed the purchase of three well-located freehold logistics properties in Bordeaux, Dijon and Niort, France. The aggregate net purchase price of EUR32.5 million reflects a net initial yield of 4.0% with Q3 valuations currently 9% ahead of negotiated prices.

All three buildings are leased to the same German-owned global third-party logistics provider, operating as Dachser France. This long standing 3PL operator has a strong financial covenant and the leases provide for annual indexation. Site coverage is also very low, providing excellent opportunities for expansion in the future.

Dutch sale and leaseback

The Company also completed the purchase of a small unit in Horst, the Netherlands, totalling c. 6,900 sqm, including office space of 1,831 sqm, for EUR12.1 million as part of a sale and leaseback deal with Limax, a producer, packager and distributor of soft fruits and mushrooms. Serving as its headquarters, the tenant critical asset with cold storage lies between Venlo and Venray, an area which is well known for its agrifood and agricultural businesses.

The freehold property, which covers a total land plot of c. 40,500 sqm, provides ample scope for future expansion and benefits from a ten-year lease term subject to annual CPI capped indexation, with the price reflecting a net initial yield of 3.8%. The property features rooftop solar panels which enhance the portfolio's sustainability credentials, in line with the Company's strategy.

Waddinxveen extension completion

In August the Company also completed the acquisition of the warehouse extension at Waddinxveen, the Netherlands, for a total net purchase price of EUR4.9 million. This provides an essential c. 2,400 sqm of cooled warehouse space and 157 sqm of office space, allowing Combilo to service its growing client base, including a Swedish supermarket chain. The lease runs concurrent with the original, with over 11 years remaining, and generates additional rent of c. EUR250,000 per annum, reflecting a yield of 5%. The Q3 valuation sits 5% ahead of the agreed price. The extension complies with the latest energy neutrality standards in the Netherlands and includes 16 rooftop solar panels, resulting in an A+++ energy rating.

This initiative is value accretive and enhances the income producing qualities of this modern, well-located asset.

GRESB 2022 Survey results

During the period, the Company received the results of the 2022 GRESB (the 'Global Real Estate Sustainability Benchmark') survey achieving a score of 86/100, representing continued improvement and an uplift on its 2021 GRESB survey score of 84/100. It also compares favourably versus the 79/100 average peer score and 74/100 overall average 2022 GRESB score.

The Company has maintained its high Green Star rating with 4 out of a maximum 5 stars and outperformed the benchmark average score in most categories. The latest GRESB scoring recognises the fundamental importance the Investment Manager places on sustainability when acquiring and subsequently enhancing the Company's portfolio. The Investment Manager continues to actively implement green leases and work closely with tenants, bolstered by an annual tenant satisfaction survey, and collects energy usage data on all of the portfolio assets and regularly reviews this to identify potential areas for improvement. The improved GRESB scoring also recognises the strong energy efficiency credentials across the portfolio.

Debt Financing

In July 2022 the Company secured a new EUR40m debt facility against Phases I to III of its Spanish Madrid portfolio. A three-year term was agreed with ING Bank at an all-in fixed interest rate of 2.57%, effected using an interest rate swap. In September, the planned EUR60 million financing with ING Spain secured against further Spanish assets was completed at an all-in fixed interest rate of 3.09%.

At the end of the quarter, the Company's fixed debt facilities totalled EUR261.6 million at an average all-in interest rate of 2.0% and with a loan to value of 35%.

Breakdown of NAV movement

Set out below is a breakdown of the change to the unaudited net asset value per Ordinary Share over the period from 1 July 2022 to 30 September 2022. The unaudited net asset value has been prepared under International Financial Reporting Standards ("IFRS").

 
                            Per Share     Attributable    Comment 
                            (EURcents)    Assets (EURm) 
 
 Net assets as at 
  30 June 2022                130.9          539.6 
                          ------------  ---------------  ----------------------------- 
 Unrealised change                                        Portfolio of 27 assets. 
  in valuation of                                          Capital values decreased 
  property portfolio          (0.7)          (2.9)         by a net 0.35% or EUR2.9m 
                          ------------  ---------------  ----------------------------- 
 Acquisition and 
  capital expenditure 
  costs during the 
  period                      (1.0)          (4.0) 
                          ------------  ---------------  ----------------------------- 
                                                          Income from the property 
 Income earned during                                      portfolio and associated 
  the period                   1.9            7.9          running costs 
                          ------------  ---------------  ----------------------------- 
 Expenses for the 
  period                      (1.1)          (4.5) 
                          ------------  ---------------  ----------------------------- 
                                                          Net deferred tax liability 
                                                           on the difference between 
                                                           book cost and fair value 
 Deferred tax liability        0.0            0.2          of the portfolio 
                          ------------  ---------------  ----------------------------- 
                                                          Movement in the mark 
                                                           to market value of a 
                                                           dividend hedge in Q3 
                                                           2022 to fix the EUR:GBP 
 FX hedge mark to                                          conversion of the 2022 
  market revaluation          (0.0)          (0.2)         dividend 
                          ------------  ---------------  ----------------------------- 
                                                          Movement in the mark 
                                                           to market value of a 
                                                           swap interest rate hedge 
                                                           maturing in 2025 to 
 Interest rate swaps                                       fix interest rates of 
  mark to market                                           bank loans drawn by 
  Revaluation                  0.7            2.7          Spanish SPV's 
                          ------------  ---------------  ----------------------------- 
                                                          Second interim dividend 
 Distribution paid                                         2022 of 1.20 pence (1.41 
  on 23 September                                          euro cents) per 
  2022                        (1.4)          (5.8)         Ordinary Share . 
                          ------------  ---------------  ----------------------------- 
 Foreign currency                                         Foreign currency loss 
  loss                        (0.2)          (0.8)         in the period 
                          ------------  ---------------  ----------------------------- 
 Other movement                                           Movement in lease incentives 
  in reserves                  0.1            0.3          in the quarter 
                          ------------  ---------------  ----------------------------- 
 Net assets as at 
  30 September 2022           129.2          532.5 
                          ------------  ---------------  ----------------------------- 
 

EPRA Net Tangible Assets per share is 137.4 Euro cents, which excludes deferred tax liability.

Net Asset Value analysis as at 30 September 2022 (unaudited)

 
                                     EURm     % of net assets 
 Property Portfolio                   807.4             151.6 
                                   --------  ---------------- 
 Adjustment for lease incentives      (4.5)             (0.8) 
                                   --------  ---------------- 
 Fair value of property 
  portfolio                           802.9             150.8 
                                   --------  ---------------- 
 Cash                                  60.7              11.4 
                                   --------  ---------------- 
 Other Assets                          22.0               4.1 
                                   --------  ---------------- 
 Total Assets                         885.6             166.3 
                                   --------  ---------------- 
 Bank Loans                         (307.0)            (57.6) 
                                   --------  ---------------- 
 Other Liabilities                   (14.2)             (2.7) 
                                   --------  ---------------- 
 Deferred Tax Liability              (31.9)             (6.0) 
                                   --------  ---------------- 
 Total Net Assets                     532.5             100.0 
                                   --------  ---------------- 
 

The property portfolio valuation is based on the independent external valuation of the Company's direct property portfolio now undertaken wholly by Savills (UK) Limited.

The NAV per share at 30 September 2022 is based on 412,174,356 shares of 1 pence each, being the total number of Ordinary shares in issue at that time. As at the date of this announcement, the Company's share capital consists of 412,174,356 Ordinary shares with voting rights.

The Board is not aware of any other significant events or transactions which have occurred between 30 September 2022 and the date of publication of this statement which would have a material impact on the financial position of the Company.

Details of the Company and its property portfolio may be found on the Company's website at: http://www.eurologisticsincome.co.uk

For further information please contact:

   abrdn Fund Managers Limited                                          [phone] 

Luke Mason

Gary Jones

Investec Bank plc [phone]

David Yovichic

Denis Flanagan

FTI Consulting [phone]

Dido Laurimore

Richard Gotla

James McEwan

The above information is unaudited

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December 01, 2022 02:00 ET (07:00 GMT)