Abrdn European Logistics (ASLI ) has enjoyed an easing in the macroeconomic pressures that have plagued the real estate investment trust (Reit) and its peers, but with an uncovered dividend and a tenant in Madrid withholding rent, its worries are far from over.

In a quarterly update, the €723m (£616m) portfolio of European warehouses including debt, reported that net asset value (NAV) declined 2.6% in euro terms to 108.3 cents (92.9p) per share in the three months to 30 June.

While the valuation has declined for another quarter, it is a sharp slowdown from the 8.7% drop in the fourth quarter of 2022 and the 7.3% fall in the first three months of this year.

The drop in NAV reflects the 1.5% like-for-like fall in the portfolio valuation but fund manager Troels Andersen, who replaced Evert Castelein last year, said there was a slow down in the pressure on property prices caused by rising interest rates and government bond yields as economic indicators improved.

The shares added 2.2% to 69p, putting them on a 25% discount to the 30 June NAV.

The pressure on capital values was also slightly offset by the sale of a warehouse in Leon, northern Spain, for €18.5m, which was a small premium to the 31 March valuation and crystallised a 20% gross profit for the Reit which bought the asset in 2018 for €15.3m.

‘Encouragingly, the continental European logistic sector, and the ASLI portfolio valuation, has held up relatively well despite these headwinds,’ Andersen said.

‘The slowing capital value decline across the portfolio this quarter reflects improving investor sentiment, the underlying fundamentals of our portfolio and attractive inflation-linked income profits, as well as the successful asset management leasing results.’

The latter refers to a five-year lease extension at a single-tenant warehouse in the Netherlands and a three-year lease extension on a Polish warehouse.

The update was not entirely positive as consolidation by electric vehicles (EV) group Arrival in the US has affected how much space it rents from ASLI in Madrid.

Andersen said negotiations with the EV manufacturer ‘remain ongoing regarding the two units it leases’ but it is withholding rent payments until the discussions are concluded.

While the board of the 7%-yielder declared an unchanged dividend of 1.41 cents – equivalent to 1.22p – it remains seriously uncovered with earnings at half the payout’s level.

Andersen said: ‘Indicators suggest that some regions may be starting to see the early stages of this reversal in sentiment with buying interest returning for well-placed logistics portfolios and the hoped-for early stages of recovery in values.’

Numis Securities investment companies analyst Andrew Rees said it was ‘positive to note the tentative signs of recovery in values as investors demand returns for well-located industrial assets’.

‘This was evidence by the disposal in Leon, as well as rival Tritax Eurobox’s (EBOX ) sale of an asset in Hammersback, Germany, both achieved broadly in line with book value,’ he said.

Rees added that indexation of leases should ‘continue to drive top-line rental growth’ although he expected the manager to focus on ‘additional income accretive initiatives to extract value from the existing portfolio’.

‘We would advocate for greater disclosure on income, [EPRA] earnings, and dividend cover progress in ASLI’s quarterly reporting,’ commented Peel Hunt analyst Thomas Pocock.

Over the past three years NAV has risen 10.7%, reflecting the Covid pandemic and the impact of last year’s interest rate hikes. Over one year the shares have fallen 31% but the shares have shed 26% over the same period, leaving them trading at a 29.1% discount to NAV.