Aberdeen Standard European Logistics Income PLC
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Aberdeen Standard European Logistics Income PLC Capturing long-term income potential from logistics real estate in Europe Annual Report 31 December 2020 121044168_ASELI_ANNUAL_REPORT.indd 1 29/04/2021 10:28 DHL, Warsaw, Poland 121044168_ASELI_ANNUAL_REPORT.indd 2 29/04/2021 10:28 Contents Overview THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR Company Overview 2 IMMEDIATE ATTENTION. If you are in any doubt about Chairman’s Statement 3 the action you should take, you are recommended to seek your own independent financial advice from your Strategic Report stockbroker, bank manager, solicitor, accountant or Overview of Strategy 9 other financial adviser authorised under the Financial Results 18 Services and Markets Act 2000 if you are in the United Performance 19 Kingdom or, if not, from another appropriately Our Unique Selling Points 20 authorised financial adviser. 2020 Accomplishments 22 If you have sold or otherwise transferred all your Investment Manager’s Review 23 Ordinary shares in Aberdeen Standard European Portfolio Logistics Income PLC, please forward this document, together with the accompanying documents Property Portfolio 28 immediately to the purchaser or transferee, or to the Group Structure 36 stockbroker, bank or agent through whom the sale or Sustainability transfer was effected for transmission to the purchaser Environment, Social and Governance (ESG) 38 or transferee. ESG Embedded In the Investment Philosophy 39 Materiality Indicators 42 Governance Your Board of Directors 46 Directors’ Report 48 Directors’ Remuneration Report 55 Statement of Directors’ Responsibilities 58 Report of the Audit Committee 59 Financial Statements Independent Auditor’s Report to the Members of Aberdeen Standard European Logistics Income PLC 62 Consolidated Statement of Comprehensive Income 69 Consolidated Balance Sheet 70 Consolidated Statement of Changes in Equity 71 Consolidated Statement of Cash Flows 72 Notes to the Financial Statements 73 Parent Company Balance Sheet 95 Parent Company Statement of Changes in Equity 96 Parent Company Notes to the Financial Statements 97 Corporate Information Information about the Investment Manager 106 Investor Information 108 Visit our Website EPRA Financial Reporting (Unaudited) 111 To find out more about Aberdeen Standard European Alternative Investment Fund Managers Directive Logistics Income PLC, please visit: Disclosures (Unaudited) 114 eurologisticsincome.co.uk Glossary and Alternative Performance Measures 115 Any Questions? Notice If you should have any questions in relation to this Annual Notice of Annual General Meeting 119 Report and financial statements please send them by Contact Addresses 123 email to: [email protected] 121044168_ASELI_ANNUAL_REPORT.indd 1 29/04/2021 10:28 Overview Company Overview Aberdeen Standard European Logistics Income PLC (the “Company” or “ASELI”) is an investment trust investing in high quality European logistics real estate to achieve its objective of providing its shareholders with a regular and attractive level of income and capital growth. The Company invests in a portfolio of assets diversified by both geography and tenant throughout Europe, targeting well located assets in established distribution hubs and within population centres. In addition to its performance objective, the Company is characterised by: A diverse portfolio of assets across A strengthening focus on ESG and five countries green performance Investment predominantly in the more liquid mid-box segment of Modest gearing parameters the logistics market Local ASI asset managers Durable indexed income returns across Europe Financial Highlights as at 31 December 2020 Net asset value total return1 Net Asset Value (€‘000) Net Asset Value per share (€) 13.6% 293,596 1.20 2019: 8.6% 2019: 260,277 2019: 1.11 Share price total return1 Premium/(Discount) to Net Asset Value1 Ordinary dividend per share 26.6% 0.5% 5.64¢ 2019: (7.0)% 2019: (4.0)% 2019: 5.75¢3 Ongoing Charges1 IFRS Earnings Per Share Portfolio valuation (€‘000)2 1.3% 14.8¢ 425,248 2019: 1.5% 2019: 9.6¢ 2019: 348,519 Number of assets Average lease length in years (excl breaks) Loan-To-Value (%) 14 11.0 31.4% 2019: 13 2019: 9.7 2019:28.4% Average building size (sqm) 27,710 1 Alternative Performance Measure - see glossary on page 115. 2 Excluding IFRS 16 lease liabilities and rent incentive debtor. 3 Included irregular dividend pattern following launch. 2 Annual Report 2020 121044168_ASELI_ANNUAL_REPORT.indd 2 29/04/2021 10:28 Overview Chairman’s Statement for the Year ended 31 December 2020 increasingly diverse range of occupiers, continues to strengthen. When combined with the buoyant investment market witnessed, this has driven tighter pricing in transactions, accelerating yield compression and increasing valuations. In January 2020, the Company completed the acquisition of an urban logistics warehouse in Den Hoorn, the Netherlands, for a net purchase price of €49.9 million. Tony Roper The newly built warehouse is well located between the Chairman cities of the Hague and Rotterdam and already benefits from internal LED lighting and new solar roof panels will Dear Shareholder, add further sustainable credentials to the investment in It is a pleasure to present to you the Company’s the course of 2021. This purchase meant that we were third Annual Report in respect of the year ended fully invested. 31 December 2020. In Q4 2020, the Company announced that it had signed a As I sat down to write my text this time last year with the Letter of Intent for the purchase of a new warehouse in whole world in the grip of COVID-19, little did I or my Lodz, Poland, valued at approximately €28 million. The colleagues on the Board realise how long this terrible Investment Manager entered into advanced due diligence pandemic would last. Finally, with vaccine discovery and and closed the transaction on 15 April 2021. This 34,000 rollout, there is some light at the end of, what has been square metre warehouse, which is located in one of the for many, a very long tunnel. Our thoughts are with all CEE region’s most strategically important manufacturing those who have been impacted by this virus which has and logistics hubs, provides an attractive net initial yield had a far-reaching impact on so many people and of 5.6%, is well located and is 100% leased to six tenants businesses as well as the global economy. As I relayed with an average WAULT of 6.7 years. last year, many of our tenants, but not all, are involved in Our Investment Manager, which has a clear advantage of the logistics of delivery across the important food supply being able to draw on the relationships and market chain, pharmaceuticals or the rapidly increasing direct to knowledge of local teams across Europe, has consistently home delivery services. These are parts of the market invested with the aim of creating a portfolio of assets which have seen extraordinarily fast growth, with little to diversified by both geography and tenant throughout suggest this is not a permanent shift. Europe, targeting well-located assets in established Our Investment Manager’s on-the-ground European distribution hubs and within close proximity of cities that based teams remain in regular contact with all our have substantial labour pools and excellent transport tenants seeking to understand their current and future links. Further details on the composition of the portfolio requirements at this time. are provided in the Investment Manager’s Report. Overview The Company continues with its objective of seeking As at 31 December 2020, the Company’s property to target for an investor at launch an annual yield of 5.0 portfolio was independently valued at €430.2 million per cent. per Ordinary Share and a total Shareholder (£386.7 million) and consisted of 14 assets located return (NAV total return) of 7.5 per cent. per annum across five European countries. This latest valuation (each in Euro terms). The longer-term nature and CPI included a strong 6.0% uplift of €24.5 million for Q4 2020. indexation of the leases that we have signed with tenants The Company’s net asset value total return for the year provides for a durability of income that should support was 13.6%. The valuation increase was predominantly the our targets. result of yield compression across the entire portfolio, Results driven by a combination of the strength of the European The audited Net Asset Value (“NAV”) per Share as at logistics real estate market alongside the high-quality 31 December 2020 was €1.20 (GBp - 107.9p), compared nature of the Company’s portfolio. This was best with the NAV per Share of €1.11 (GBp - 94.2p) at the end demonstrated through consistently high levels of rent of 2019, reflecting, with the interim dividends declared, a collection during 2020 and this compares favourably with NAV total return of 13.6% for the year in euro terms other real estate sectors which have been less resilient (+20.0% in sterling). through COVID-19. The closing Ordinary Share price at 31 December 2020 The latter part of 2020 saw a significant increase in the was 108.5p (31 December 2019 – 90.4p), representing a value of prime European logistics real estate assets small premium to NAV per Share of 0.5%. With dividends let to high calibre tenants on long leases. Supply remains reinvested this represented a strong share price total constrained and occupier demand for mid-size logistics return over the year of 26.6%. At the date of this report buildings, which have the benefit of being suitable for an Aberdeen Standard European Logistics Income PLC 3 121044168_ASELI_ANNUAL_REPORT.indd 3 29/04/2021 10:28 the latest closing price was 115.0p, predominantly should be made in respect of the period from the date of reflecting the strong underlying performance of the its appointment. The warehouse is an important part of Company’s NAV and the continued demand from the company’s French distribution network.