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Europe’s ‘big box’ prospects good, says Aberdeen trust in 5% yield share offer

10 July 2019

Aberdeen Standard European Logistics Income offering £99 million of new shares at a price below its launch price in December 2017.

Aberdeen Standard European Logistics Income (ASLI), the 5% yielding investor in 'big box' warehouses on the Continent, is aiming to raise up to £99 million in its first share issue since floating two-and-a-half years ago.

ASLI raised £187.5 million in its initial public offer (IPO) in December 2017 and deployed the money and some debt into a portfolio of 11 big box warehouse and last-mile delivery properties across five countries.

Having complained in December about the fierce competition for high quality, long-lease distribution assets that forced it to trim its dividend target, ASLI says it now has a pipeline of investment opportunities and is in exclusive discussions on two acquisitions worth €58 million.

In an announcement to the stock market, the trust said the logistics sector was ‘benefiting from rapid take-up of facilities and long, inflation-linked leases to quality tenants’ linked to the rapid growth in online shopping in Europe.

Fund manager Evert Castelein ‘We are seeking more funds now because the opportunity is still there,’ he said.

‘We have a strong pipeline with potential assets that we can buy and we would like to diversify further into new markets, new buildings, and more tenants,’ he said.

While there was no guarantee the two transactions being negotiated would go through, Castelein was ‘confident that the market for European logistics assets will continue to offer many attractive investment opportunities in the near future’

ASLI is offering up to 100 million new shares at 98.75p in a placing, open offer and offer for subscription aimed at private and professional investors.

The placing price is below the original launch price of 100p and represents a premium of 3.86% over the net asset value per share of €1.06 (95p) at 31 March. It is also a 1.74% discount below the closing price of 100.5p on 4 July before the share issue was announced.

Existing shareholders can apply for two new shares for every five ordinary shares they currently hold. The closing date for the offer, which is being co-ordinated by broker Investec Bank, is 11am on 25 July.

The large fund-raising requires shareholder approval at a general meeting on 24 July at which the company will also seek authorisation to issue up to a further 200 millioni shares in the next 12 months.

Growing the company would improve liquidity, or tradeability, of its shares and and lower charges currently set at 1.2% a year, according to the Association of Investment Companies. 

Castelein said the real estate investment had an ‘income driven strategy’ aimed at generating ‘durable income streams’.

The company paid 3p of dividends per share last year while it was investing but this year is aiming to pay quarterly dividends equivalent to a 5% a yield in euro terms for an investor who bought its shares for 100p at launch.

To this end last month it declared a first interim dividend of €1.41 cents (1.27p).

The yield target was cut from an original target of 5.5% in December due to rising property prices depressing rental returns.   

At 99.8p today, ASLI shares remain just below their launch price which in part reflects the cost of investment that has depressed their net asset value (NAV) by about 4%. 

Liberum analyst Conor Finn said he expected short-term NAV performance to be further hindered by the transaction costs associated with the fund raise.

Although costs of buying properties have held back the NAV, Numis Securities analyst Ewan Lovett-Turner said investors ‘remain attracted to the investment proposition, reflected by the premium rating the shares continue to trade on’.

‘This is in stark contrast to its more diversified peer Schroders European Real Estate (SERE) with shares trading on a c.10% discount to the NAV.’

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