Company Update

RNS Number : 1047L

Aberdeen Standard Eur Lgstc Inc PLC

20 December 2018

 

Aberdeen Standard European Logistics Income PLC (LSE: ASLI) (the "Company")

LEI: 213800I9IYIKKNRT3G50

Company Update

Introduction

As announced on 19 November 2018, with the exchange of contracts on the assets in Zeewolde and Waddinxveen in the Netherlands, the Company has invested, or committed to invest, the whole of the net equity proceeds raised at the time of the Company's initial public offering in December 2017. The most recent addition to the portfolio (a warehouse in Meung-Sur-Loire in France) was announced on 23 November 2018 and the Company is in the final stages of due diligence to acquire an asset in Poland. The addition of the Polish asset would see the portfolio increase to ten freehold assets, five of which are brand new high-quality warehouses, located across five countries with a total purchase value of over €265 million, an average net initial yield of 5.1% and a weighted average unexpired lease term (WAULT) in excess of ten years. As previously highlighted, the pipeline of investment opportunities for the Company remains strong.

With the Manager at an advanced stage of due diligence on a number of potential acquisitions, the Company is close to concluding the process of putting in place debt facilities, secured on certain properties within the portfolio, to provide financing for an additional asset and to fund stage payments that are required for forward funded projects expected to complete in mid-2019 in Spain and the Netherlands. The Board and the Manager are convinced of the high quality of the assets purchased to date, and are confident that the durable income streams that these properties provide under their long index-linked leases will benefit the Company and its shareholders. Europe maintains a clear advantage over UK logistics assets in terms of yields and low financing costs, with the strong underlying fundamentals expected to drive further growth in logistics demand, ultimately supporting rental and capital growth.

Shareholder update

The Board has closely monitored the development of the European logistics market over the past twelve months and, as noted in the Company's announcement of 19 November, is conscious of the very strong market demand for logistics assets across much of developed Europe. This has resulted in a material degree of yield compression. At the same time, ongoing demand for assets of the high quality seen in the Company's portfolio is expected to result in a marked uplift in their capital value over time, adding to the total return. The breadth and depth of the Manager's real estate operations across Europe has enabled it to build the high quality portfolio of assets now held by the Company and which the Board has been closely involved with through regular reporting and meetings. During the Manager's recent series of investor updates with leading shareholders, discussion focused on the Company's total return characteristics and distribution targets, and, in particular, whether the current level of gearing and/or target return should be reviewed given the market conditions referred to above. Following shareholder feedback, the Board has determined that it would be in the best interests of shareholders as a whole to maintain gearing at or around 35 per cent. of gross assets, rather than implementing a higher gearing strategy at this stage of the market cycle in an effort to counteract the effects of falling yields.  The Board will keep the level of borrowings under review and the aggregate borrowings will always be subject to the absolute maximum set at the time of the Company's launch, calculated at the time of drawdown for a property purchase, of 50 per cent. of Gross Assets.

As a corollary, the Board has concluded that the Company's current distribution target should be amended. This will ensure that the Company can achieve a sustainable and fully covered dividend over the long term and maintain sufficient cash reserves, without compromising on the very high quality of the Company's portfolio as and when further logistics assets are acquired. The Company will therefore seek to target for an investor at launch an annual yield of 5.0 per cent. per Ordinary Share and a total shareholder return of 7.5 per cent. per annum (each in Euro terms). For the avoidance of doubt, the Board still expects to pay, in aggregate, distributions of no less than 3.0 pence per Ordinary Share in respect of the period from initial admission to 31 December 2018.

Future growth

The Board and the Manager remain confident that the market for European logistics assets will continue to offer many attractive investment opportunities in the future, and the intention remains to seek to grow the Company through further equity issuance in the coming months, alongside the deployment of the associated debt in accordance with the Company's prevailing gearing guidelines. The European logistics market is sizeable and growing, with the sector benefiting from rapid take-up of facilities and long inflation-linked leases to quality tenants.

Management fee

As the Company seeks to grow into the fast-moving sector of European real estate, the Board and the Manager have agreed that the annual management fee applied to the first €500 million of assets will be reduced from 0.95 per cent. to 0.75 per cent. of the net asset value as calculated under the management agreement.

For further information:

Aberdeen Fund Managers Limited

0207 463 6000

William Hemmings

Gary Jones

Canaccord Genuity Limited

0207 523 8000

David Yovichic

Will Barnett

Neil Brierley

Dominic Waters

 

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