abrdn Euro Logistics - Portfolio Update and Unaudited Q3 2022 NAV

abrdn European Logistics Income

01/12/2022 07:00

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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 €807.4 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 -
114.1p1) (30 June 2022: 130.9c (GBp - 112.4p1)), reflecting a NAV total return
of 6.5% (in Euro terms) for the 12 months to 30 September 2022

 

·      EPRA Net Tangible Assets2 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
€44.6 million, taking the portfolio to 27 assets across five countries:

o  Three freehold French properties, leased to Dachser Logistics, for an
aggregate €32.5 million (excl acquisition costs)

o  6,900 sqm warehouse (including office space) in Horst, the Netherlands,
for €12.1 million

 

·      €100 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 €6.8 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.€4 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. €778,000 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 €32.5 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
€12.1 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
€4.9 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. €250,000 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 €40m 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 €60 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
€261.6 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 (€cents)     Attributable Assets (€m)    Comment

 Net assets as at 30 June 2022                                130.9                  539.6
 Unrealised change in valuation of property portfolio         (0.7)                  (2.9)                       Portfolio of 27 assets. Capital values decreased by a net 0.35% or €2.9m
 Acquisition and capital expenditure costs during the period  (1.0)                  (4.0)
 Income earned during the period                              1.9                    7.9                         Income from the property portfolio and associated running costs
 Expenses for the period                                      (1.1)                  (4.5)
 Deferred tax liability                                       0.0                    0.2                         Net deferred tax liability on the difference between book cost and fair value
                                                                                                                 of the portfolio
 FX hedge mark to market revaluation                          (0.0)                  (0.2)                       Movement in the mark to market value of a dividend hedge in Q3 2022 to fix the
                                                                                                                 EUR:GBP conversion of the 2022 dividend
 Interest rate swaps mark to market                           0.7                    2.7                         Movement in the mark to market value of a swap interest rate hedge maturing in

                                                                                                               2025 to fix interest rates of bank loans drawn by Spanish SPV's
 Revaluation
 Distribution paid on 23 September 2022                       (1.4)                  (5.8)                       Second interim dividend 2022 of 1.20 pence (1.41 euro cents) per

                                                                                                                 Ordinary Share.
 Foreign currency loss                                        (0.2)                  (0.8)                       Foreign currency loss in the period
 Other movement in reserves                                   0.1                    0.3                         Movement in lease incentives 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)

                                   €m       % 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
                +44 (0) 20 7463 6000

Luke Mason

Gary Jones

 

Investec Bank
plc
                +44 (0) 20 7597 4000

David Yovichic

Denis Flanagan

 

FTI
Consulting
+44 (0) 20 3727 1000

Dido Laurimore

Richard Gotla

James McEwan

 

The above information is unaudited

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