Portfolio Update/Unaudited NAV at 31 December 2023

abrdn European Logistics Income plc

22 February 2024

 

22 February 2024

LEI: 213800I9IYIKKNRT3G50

abrdn European Logistics Income plc

Portfolio Update and Unaudited Net Asset Value as at 31 December 2023

22 February 2024 - abrdn European Logistics Income plc (the "Company" or "ASLI"), the Company which invests in a diversified portfolio of European logistics real estate, announces its unaudited quarterly Net Asset Value ("NAV") for the quarter ended 31 December 2023.

Summary

-	The portfolio value declined 3.9% to €633.81 million (30 September 2023: €659.75 million), driven by continued outward yield movement but with key medium-term economic indicators improving
-	NAV per Ordinary share decreased by 6.4% to 93.4c (GBp - 81.2p) (30 September 2023: 99.8c (GBp - 86.3p)), reflecting a NAV total return, with quarterly distributions reinvested, of -17.1% in Euro terms (-19.0% in sterling) for the 12 months to 31 December 2023
-	EPRA Net Tangible Assets decreased by 7.4% to 96.6c per Ordinary share (30 September 2023 - 104.3c)
-	Portfolio WAULT of 7.0 years to break and 8.4 years to expiry
-	Terms agreed for the disposal of the Company's vacant French asset with completion targeted before the end of March with the proceeds used to further strengthen the Company's balance sheet
-	38.7% Loan to Value ('LTV'), with the Investec €70 million facility undrawn at the quarter end. The Company's fixed debt facilities totalled €259.5 million at an average all-in interest rate of 2.0%, with no re-financings until mid-2025
-	As previously announced, the Strategic Review is ongoing, with the Company's advisers actively engaging with a select number of parties to satisfy their due diligence requirements

Troels Andersen, Lead Fund Manager, abrdn, commented:

"December saw the end of seven consecutive months of falling Eurozone inflation figures, resulting in the money markets adjusting their expectations and now anticipating fewer rate cuts from the European Central Bank in 2024. With the deposit rate held at 4%, real estate valuations continue to come under pressure.  However, we are encouraged by the ongoing resilience in the occupational market. With the most significant value correction behind us, we believe the negative pressure on yields, which has lagged the UK, is close to plateauing.

"Our conviction in the key long-term structural drivers underpinning the logistics sector's rental and capital growth prospects - namely e-commerce penetration, near-shoring and supply chain modernisation - remains strong. With a portfolio of future-fit logistics properties in strategic pan-European locations, our near-term focus is firmly on reducing the portfolio vacancy."

Performance

The independent unaudited external valuation of the Company's property portfolio undertaken by Savills (UK) Limited decreased by €25.9 million, or 3.9%, in the quarter. The Spanish assets witnessed the biggest decline (-6.5%), followed by Germany (-4.7%), France (-3.7%) and the Netherlands (-3.0%). The Polish portfolio valuation was broadly flat.

For the year ended 31 December 2023, the Company's net asset value total return with quarterly distributions reinvested was -17.1% in Euro terms (-19.0% in sterling terms). As at 31 December 2023, the Company's share price was 61.6p, and as at the date of this announcement the share price was 63.2p.

Rent Collection & Portfolio Update

As at the date of this announcement, 94% of the expected rental income for the quarter ended 31 December 2023 has been collected. The outstanding balance predominantly comprises monies owed from electric vehicle manufacturer Arrival. The Company has noted the placing into administration of Arrival's UK-based operations.

Despite the continued efforts of the Investment Manager to secure both a surrender premium, which had previously been agreed, and the outstanding rental payments for 2023, the Company has as yet been unable to reach a satisfactory conclusion with Arrival. The Company previously noted Arrival's announcement and SEC filing regarding bridge financing and in the continued absence of a satisfactory conclusion, legal proceedings to recoup monies owed continued during the quarter. With strong levels of interest being shown in both the LEED Gold accredited units, currently leased to Arrival and the smaller LEED Silver-rated unit, previously occupied by Amazon, in Getafe, the Company is advancing discussions for the cancellation of the lease agreement with Arrival to take full possession of the units.

The Company is also progressing the sale of its vacant French asset and is targeting completion towards the end of March, at a price representing a modest discount to the 30 September 2023 independent valuation. Further details will be provided on completion of the disposal. The proceeds of any disposal would be used to further strengthen the Company's balance sheet, with other accretive measures including any share buyback under consideration on completion of the Strategic review.

At its multi-tenant warehouse in Lodz, Poland,  the Company has completed a three-year lease extension to EGT, the freight operator, which has agreed to remain in the 1,633 sq m unit until March 2027, at a rent of €85,000 per annum.

The weighted average unexpired lease term (to break) now stands at 7.0 years with the weighted average lease term (to expiry) now 8.4 years.

Debt Financing

At the end of the quarter, the Company's fixed debt facilities totalled €259.5 million at an average all-in interest rate of 2%, the earliest re-financing of debt required in mid-2025. The current loan-to-value of 38.7% is marginally above the Company's target of c.35%.

Fourth Interim Dividend

In light of the initial response to the previously announced Strategic Review, the Board and its advisers are keen to ensure that the Company is optimally positioned, and that it maintains the maximum flexibility, to allow it to advance any particular proposal. As a result, the Board has taken the decision to forgo declaring a fourth interim distribution for the quarter ended 31 December 2023, which has historically been declared in February and paid in March each year.

Subject to the outcome of the Strategic Review, the Board intends to recommence dividend payments in line with the Company's standard dividend timetable.  

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 October 2023 to 31 December 2023. The unaudited net asset value has been prepared under International Financial Reporting Standards ("IFRS").

EPRA Net Tangible Assets per share is 96.6 euro cents, which excludes deferred tax liability.

	Per Share (€cents)	Attributable Assets (€m)	Comment
Net assets as at 30 September 2023	99.8	411.3
Unrealised decrease in valuation of property portfolio	(6.3)	(25.9)	Portfolio of 26 assets - capital values decreased by 3.9% over the quarter
Income earned for the period	2.1	8.6	Income from the property portfolio and associated running costs
Expenses for the period	(1.4)	(5.6)
Deferred tax asset	1.1	4.4	Net deferred tax asset on the difference between book cost and fair value of the portfolio
Interest rate swaps and caps/floors mark to market revaluation	(0.4)	(1.8)	Movement in the mark-to-market value of interest rate swap and options hedge maturing in 2025 to fix interest rates of bank loans drawn by Spanish SPV's
Dividend declared 23 November 2023 and paid on 29 December 2023	(1.4)	(5.8)	Distribution of 1.41 euro cents per Ordinary share
Other movements in reserves	(0.1)	(0.3)	Movement in lease incentives in the quarter
Net assets as at 31 December 2023	93.4	384.9

Net Asset Value analysis as at 31 December 2023 (unaudited)

	€m	% of net assets
Fair value of Property Portfolio*	629.3	163.5%
Cash	18.1	4.7%
Other Assets	22.2	5.8%
Total Assets	669.6	174.0%
External Debt (net of unamortised financing cost)	(256.5)	(66.6)%
Other Liabilities	(16.3)	(4.2)%
Deferred tax liability	(11.9)	(3.2)%
Total Net Assets	384.9	100.0%

*After lease incentive adjustment

The NAV per share at 31 December 2023 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 31 December 2023 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]

Ben Heatley

Gary Jones

Investec Bank plc                                                                 [phone]

David Yovichic

Denis Flanagan

FTI Consulting                                                                       [phone]

Dido Laurimore

Richard Gotla

James McEwan

 

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