abrdn European Logistics Income (ASLI) reported a big hit to its NAV in full year results for the year to 31 December 2023, as the impact of higher interest rates weighed on portfolio values.

IFRS NAV decreased by 21.4% to 93.4 cents (31 December 2022: 118.9 cents), while the EPRA net tangible assets metric was down 22.6% to 95.7 cents (31 December 2022: 123.7 cents).

Its portfolio value was €634m (31 December 2022: €759m) , representing a like-for-like valuation decrease of 14.4%, largely driven by continued outward yield movement.

The company sold one asset during the year – a warehouse in Leon, Northern Spain, for €18.5m reflecting a small premium to the 31 December 2022 valuation – and post year-end, completed the disposal of a vacant French warehouse, in Meung sur Loire, for €17.5m, reflecting a small discount to the 30 September 2023 valuation and in line with the 31 December 2023 valuation.

Annualised passing rent grew to €32.2m from €30.6m, with like-for-like growth of 5% on held assets. This followed the completion of six lease events across 81,175 sqm, totalling €4.8m of annualised rent.

The group’s loan to value (LTV) increased to 38.7% (2022: 34.0%) due to the drop in value. The debt has a low all-in fixed cost of 2.0%, with a major refinancing due in mid-2025.

A strategic review into the future of the company, launched by the board in November 2023, is ongoing with the company receiving several indicative non-binding proposals. All options remain on the table including continuing with the current investment objective, selling the entire issued share capital of the company or a managed wind-down of the company’s portfolio and returning monies to shareholders.

The company expects the result of the strategic review will be known before its AGM and continuation vote to be held on 24 June.

Tony Roper, chairman, commented: “While the market looks set to improve in the second half of 2024 and into 2025, and the post period transactions and letting activity achieved by the Investment Manager supports this, challenges will remain for the real estate sector, primarily as a result of higher for longer interest rates.

“The board is continuing with its Strategic Review, as it considers all options available that offer maximum value for shareholders, and expects to issue a further update in May.

“The logistics market remains well-positioned in terms of its fundamentals. While vacancy rose across the sector in Europe in the last year, we believe that the worst of these increases has passed, with speculative development pipelines contracting. In addition, the portfolio remains well diversified by property, tenant and geography and our tenants’ businesses are generally well positioned in areas which remain essential to the everyday operation of the modern economy.”