eurologisticsincome.co.uk
Capturing long-term income potential from logistics real estate in Europe
Annual Report 31 December 2022
02 Annual Report 2022
DHL, Warsaw, Poland
Contents
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR
IMMEDIATE ATTENTION. If you are in any doubt about the
action you should take, you are recommended to seek your
own independent financial advice from your stockbroker,
bank manager, solicitor, accountant or other financial
adviser authorised under the Financial Services and
Markets Act 2000 if you are in the United Kingdom or, if not,
from another appropriately authorised financial adviser.
If you have sold or otherwise transferred all your Ordinary
shares in abrdn European Logistics Income plc, please
forward this document, together with the accompanying
documents immediately to the purchaser or transferee,
or to the stockbroker, bank or agent through whom the sale
or transfer was effected for transmission to the purchaser
or transferee.
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Income plc, please visit: eurologisticsincome.co.uk
Any Questions?
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Annual Report and financial statements please send
them by email to: European.Logistics@abrdn.com
Overview
Company Overview 04
Chairman’s Statement 05
Strategic Report
Overview of Strategy 10
Results 21
Performance 22
Our Unique Selling Points 23
2022 Accomplishments 25
Investment Manager’s Review 28
Property Portfolio 37
Group Structure 52
Sustainability, Impact and Futureproofing –
company approach 55
ESG Performance Data (EPRA) 64
Governance
Your Board of Directors 72
Directors’ Report 74
Directors’ Remuneration Report 82
Statement of Directors’ Responsibilities in Respect
of the Annual Report and the Financial Statements 85
Report of the Audit Committee 86
Financial Statements
Independent Auditor’s Report to the Members of
abrdn European Logistics Income plc 89
Consolidated Statement of Comprehensive Income 95
Consolidated Balance Sheet 96
Consolidated Statement of Changes in Equity 97
Consolidated Statement of Cash Flows 98
Notes to the Financial Statements 99
Parent Company Balance Sheet 127
Parent Company Statement of Changes in Equity 128
Parent Company Notes to the Financial Statements 129
Corporate Information
Information about the Investment Manager 139
Investor Information 142
EPRA Financial Reporting (Unaudited) 145
Alternative Investment Fund Managers Directive
Disclosures (Unaudited) 149
Glossary of Terms and Definitions and Alternative
Performance Measures 150
Disclosure Concerning Sustainable Investment
(Article 8) (Unaudited) 155
Notice of Annual General Meeting 169
Contact Addresses 173
03Annual Report 2022
Overview
Company Overview
abrdn European Logistics Income plc (the “Company” or “ASLI”) 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
mid-box and urban logistics warehouses 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 five countries
A strong focus on ESG and
green performance
Investment predominantly in
the more liquid mid-box and
urban logistics segment of
the real estate market
Modest gearing
parameters
Durable inflation-linked
rental income
Local abrdn asset managers
across European offices
Highlights as at 31 December 2022
Net asset value total return
1
2021: 12.4%
(3.8%)
IFRS Net Asset Value (€‘000)
2021: 487,505
489,977
IFRS Net Asset Value per share (€)
1
2021: 1.29
1.19
Share price
total return
1
2021: 12.4%
(38.3%)
(Discount)/Premium to
Net Asset Value Per Share
1
2021: 7.8%
(35.0%)
Ordinary dividend
per share
2021: 5.64¢
5.64¢
Ongoing Charges
1
2021: 1.3%
1.3%
IFRS Earnings Per Share
2021: 15.43¢
(4.51¢)
Portfolio valuation (€‘000)
1
2021: 666,008
758,719
Number of
assets
2021: 23
27
Average lease length in years
(excl breaks)
2021: 8.0
8.9
Loan-To-Value
1
(%)
2021: 25.1%
34.0%
Average building size (sqm)
2021: 23,403
21,374
All-in fixed interest rate
2021: 1.43%
2.01%
EPRA Net Tangible Assets per share (€)
1
2021: 1.36
1.25
1
Alternative Performance Measurements - see glossary on pages 150 to 154.
04 Annual Report 2022
Overview
Chairman’s Statement
Dear Shareholder,
I am pleased to present to you the Company’s fifth
Annual Report in respect of the year ended 31 December
2022. I should also like to take this opportunity to formally
welcome our new lead manager, Troels Andersen,
who joined us back in October. With the support of
the wider European team, there has been a seamless
transition with Troels, who is based in Copenhagen,
picking up the reins and quickly getting up to speed with
our diversified European property portfolio.
Following on from the Company’s strong financial
and operational performance delivered in 2021, as key
structural drivers boosted the logistics sector and helped
to deliver a double digit net asset value (“NAV”) total return,
2022 was characterised by unpredictable political events,
an economic slowdown and surging inflation.
As the COVID pandemic eased, focus quickly turned to a
global cost of living crisis driven by high inflation. The war
in Ukraine also had a significant impact as central banks
and governments tried to react to the conflicting pressures
of high inflation, rising interest rates, slowing economies
and the escalating cost of living. A risk-off theme led to
valuations initially being trimmed and then falling more
materially as investors stood back to take stock and bank
base rates rose.
The impact on debt costs led to a declining flow of capital
into real estate generally and softening yields. We have
not been immune to negative sentiment despite robust
occupier demand as our discount to net asset value
widened in a relatively short period of time.
With Eurozone inflation peaking in October 2022 at 10.6%,
a final interest rate hike in December from the European
Central Bank marked a year of disruption for financial
markets and real estate investors. However, recent data
indicates that headline inflation has peaked as energy-
driven increases are beginning to slow. According to
Capital Economics, core interest rates are expected to
rise throughout H1 2023 to peak at 3.5% by mid-year,
providing more certainty for investors to manage cash
flows, before falling again into 2024.
We are highly aware of the broader economic challenges
ahead for the remainder of 2023 that could have a negative
impact on valuations. However, we believe that we are
well placed in terms of the resilience of our increasingly
diversified portfolio, our fixed rate debt and the future
earnings growth driven by predominantly long-term
indexed leases.
The 8.9 year portfolio WAULT and CPI indexation of the
majority of our tenant leases provides for this durability of
income and a strong degree of inflation protection which
should partly ameliorate any decline in valuations.
65% of our annual income is subject to uncapped CPI
indexation and the majority of the remainder subject to
capped indexation. Rent remains a small element of our
occupiers’ overheads which can make it easier for them
to absorb increased lease costs.
Occupational demand has remained resilient for
industrial property, as companies continued to adapt
to changes in retail habits, as well as a growing need to
strengthen supply chains given the previous three years
of disruptions. Supply levels of new logistics warehousing
remain constrained with limited new development due
to increased interest rates and construction costs,
planning challenges and competition from alternative
uses, so further rental growth is likely even as economies
have weakened.
Prime logistics in Germany, Netherlands, France and
Spain is seeing historically low vacancy rates and,
with speculative development expected to decline,
we believe that vacancy rates will remain tight, which will
keep upward pressure on rents.
The segment of the market that we operate in has
seen particularly fast growth, which many believe is a
permanent shift considering underlying fundamentals.
The acquisitions made during the year helped to further
diversify the portfolio and to reinforce a roster of high-
quality tenants, including Amazon. The Company’s
portfolio is 51% weighted by value to the high-growth,
urban logistics sector, the part of the market forecast
to see the greatest capital and rental growth over the
medium to long-term.
Tony Roper
Chairman
05Annual Report 2022
Overview
As at 31 December 2022, the Company’s property portfolio
consisted of 27 assets located across five European
countries and was independently valued at €759 million
(£666 million). The like-for-like portfolio valuation was
resilient throughout most of the year when compared to
other parts of the commercial real estate market, with a 6%
decrease witnessed in Q4, as a result of the market-wide
outward yield movements caused by rising interest rates
as mentioned above.
In August, the Company announced the acquisition of
two urban logistics properties, in Bordeaux and Niort,
France. The aggregate purchase price of €23 million
reflected a net initial yield (‘NIY’) of 4.0%. Both are
leased to logistics operator Dachser Intelligent Logistics,
the German-owned global third party logistics provider,
operating as Dachser France.
In October, the Company announced the €9.3 million
acquisition of an urban logistics warehouse in Dijon,
France, also leased to Dachser, representing a 4.2% NIY.
In October, the Company also acquired a warehouse
in Horst, the Netherlands, for €12.2 million via a sale and
leaseback deal with Limax, a producer, packager and
distributor of soft fruits and mushrooms. The tenant
critical asset with cold storage lies in an area known for
its agrifood and agricultural businesses.
During the year, the Investment Manager undertook
a number of asset management initiatives in Lodz
and Warsaw as it continues to capture the portfolio’s
indexation characteristics. We agreed a new 5 year lease
with ADER at Unit 3, part of Phase II of the Gavilanes site in
Madrid. ADER provides distribution services to companies
in the freight and logistics sector. The annual contracted
rent of almost €470,000 per annum is fully CPI indexed and
was in line with expectations. We also completed the 2,500
sqm extension with our tenant Combilo in Waddinxveen.
The lease runs concurrent with the original, with 11 years
remaining, and generates additional rent of c. €250,000
per annum, reflecting a yield of 5%. The extension
complies with the latest energy neutrality standards in
the Netherlands and includes 16 rooftop solar panels,
resulting in an A+++ energy rating.
Post the year end, the Company agreed a new 9.5
year lease with Dachser France at its La Creche, Niort,
property, 3% ahead of previous annual rent payable and
significantly ahead of ERV, with full French ILAT indexation.
Negotiations are in train in relation to Avignon and Ede
re-gears and further information will be released shortly.
The Company’s Meung-sur-Loire asset remained vacant
at year end with the Investment Manager continuing to
work hard with its locally based transaction managers
and brokers to find a suitable tenant. Discussions are
currently underway around potential short-term interest
which would boost income. The Board has also noted
the intentions of electric van manufacturer Arrival to
consolidate operations in the US. Negotiations have
commenced around the two units that Arrival leases in
Madrid. We are optimistic that a suitable agreement will be
reached allowing the Company to re-let these very well
located buildings and reduce any potential for a decrease
in income.
In addition to the above, the Investment Manager is in
negotiations over the potential sale of one of our assets,
at or around current valuation. The Company will announce
further details on this when, and if, such sale concludes.
As I have previously stated, our investment case is
enhanced by the competitive advantage provided
through the Investment Manager’s relationships and
market knowledge with its local teams based in key
markets in Europe, enabling it to originate and then
execute on attractive acquisitions, as well as leveraging
this insight to improve the portfolio performance.
The Investment Manager has built a portfolio of assets
diversified by both geography and tenant in established
distribution hubs and within close proximity of cities with
substantial labour pools and excellent transport links.
These critical factors should ensure that the Company’s
assets will remain attractive to tenants, underpinning
longer term valuations. Further details on the composition
of the portfolio and lease renewals are provided in the
Investment Manager’s Report that follows.
Results
As at 31 December 2022 the audited Net Asset Value
(“NAV”) per Share was €1.19 (GBp – 105.4p), a decrease
of 7.75% compared with the NAV per Share of €1.29
(GBp - 108.5p) at 31 December 2021. With the interim
dividends declared, this reflected a NAV total return
of –3.8% for the year in euro terms (+1.7% in sterling
calculated on a quarterly basis).
The closing Ordinary Share price at 31 December 2022
was 68.5p (31 December 2021 – 117.0p), representing a
discount to NAV per Share of 35.0%. The Board monitors the
share price discount regularly and whilst share buybacks
may not be a panacea for the impact of underlying
economic issues that have afflicted the wider real estate
sector, the Board is aware that shareholders approved their
use at the most recent AGM in 2022. Available cash could
be used for this where deemed appropriate.
06 Annual Report 2022
Dividends
First, second and third interim dividends in respect of
the year ended 31 December 2022 of 1.41 euro cents
per Ordinary Share were paid to Shareholders on
24 June 2022, 23 September 2022 and 30 December
2022. These equated to 1.19 pence, 1.20 pence and 1.20
pence respectively.
On 17 February 2023, the Board declared a fourth interim
dividend of 1.41 euro cents per Ordinary Share (equivalent
to 1.20p), which was paid to Shareholders on 24 March
2023, making a total of 5.64 euro cents paid in respect of
the financial year under review. The equivalent sterling
rate paid was 4.79p per Share (2021 – 4.84p per Share).
The Company continues to pay quarterly interim dividends
in line with its policy with dividends declared in respect of
the quarters ending on 31 March, 30 June, 30 September
and 31 December. Shareholders may elect through the
registrar to receive dividend payments in Euros instead
of Sterling. Once a Shareholder has elected to receive
dividends in Euros, then all future dividends will be paid
in Euros unless the Shareholder elects to switch back to
Sterling payments. The dividend target and any dividend
payment may be made up of both dividend income and
income which is designated as an interest distribution
for UK tax purposes and therefore subject to the interest
streaming regime applicable to investment trusts.
Further details on this breakdown can be found on
page 21 and are reflected within the Company’s
dividend announcements.
Financing
Having witnessed the recent material interest rate
fluctuations across the continent, I am pleased to say
that the Company’s debt, provided by our European
partner banks, remains fixed in nature and secured on
certain assets or groups of assets within the portfolio.
These non-recourse loans range in maturities between
2.5 and 7.0 years with all-in interest rates ranging between
1.1% and 3.0% per annum. Our earliest re-financings are
not scheduled until June 2025.
During the year fixed term loans totalling €108.6 million
were arranged and drawn with ING Spain, secured against
the assets in Gavilanes, Madrid.
The Company maintains an uncommitted master
loan facility (“Facility”) with Investec Bank plc for
€70 million, which is currently undrawn. Under this Facility,
the Company may make requests for drawdowns at
selected short-duration tenors, as and when required,
to fund acquisitions or for other liquidity requirements
and this was used to good effect during the purchase of
the Gavilanes assets. Within the Facility, Investec also
makes available a £3.3 million committed revolving credit
facility which is carved out of the total €70 million limit of
the Facility.
The year-end gearing level was 34.0% (2021 – 25.1%) with
an average all-in interest rate of 2.06% on the total fixed
term debt arrangements of €270.3 million.
ESG and Asset Management
The Investment Manager continues to seek to improve the
sustainability credentials of the portfolio and the results
of the 2022 GRESB (‘Global Real Estate Sustainability
Benchmark’) survey saw the Company’s portfolio achieve
a score of 86/100, representing continued improvement
and an uplift on its 2021 GRESB survey score of 84/100.
It also compares favourably versus the 79/100 average
peer score and 74/100 overall average 2022 GRESB score.
The Company has maintained its high rating with 4 out of
a maximum 5 stars and outperformed the benchmark
average score in most categories. The latest GRESB scoring
recognises the fundamental importance the Investment
Manager places on sustainability when acquiring and
subsequently enhancing the Company’s portfolio. The
improved performance score rewards the progress made
with regards to environmental, social and governance
(“ESG”) factors. These include solar panel project initiatives,
the tenant satisfaction survey, light sustainability audits
and nearly 100% data collection across the portfolio linked
to Envizi sustainable reporting software which is used to
analyse energy consumption. The Investment Manager
obtains volumetric usage data on energy use, waste
disposal and water consumption for reporting and possible
cost savings. This data collection is useful for tenants
enabling them to analyse areas where they may be able to
reduce emissions, become more efficient and pare costs. In
addition, all buildings have LED lighting and the Investment
Manager continues with plans to further enhance ESG
credentials going forward where possible.
Fuelled by increasing regulation, ESG matters will continue
to dominate the public and political sphere as stakeholders’
concerns for transparency and disclosure are enhanced.
This includes our tenants, for whom ESG obligations are an
increasing priority. Considering environmental compliance,
resource use, social impact and governance is an integral
part of a property acquisition and management approach.
The tightening of ESG regulation across Europe and the
current hikes in interest rates make the transformation
into higher rated assets important but, with increased
legislation and mandatory disclosures increasing,
the risk associated with ‘stranded assets’ within real estate
portfolios will grow. We are more likely to see investors
seeking to avoid assets at risk of stranding and even
incurring penalties for failing to comply with tightening
legislation. Our portfolio of relatively newer assets stands us
in good stead in this regard.
07Annual Report 2022
ESG is embedded within the Investment Manager’s
investment process and although many of our assets are
recently built, a programme continues to identify areas
where improvements can be made.
Sustainability is fundamental to our ability to create long-
term value for all stakeholders and the Investment Manager
has defined and continues to implement a strategy to
support our sustainability targets for positive environmental
and socio-economic impacts. The ESG section provides
further clarity on our processes, including our further
thoughts on establishing a net zero carbon pathway.
Governance
The Company is a member of the Association of
Investment Companies and seeks to follow best practice
regarding appropriate disclosure.
In accordance with good governance, the Directors
offered to meet with a number of our larger shareholders
during the year to hear their views on the Company and its
performance. Directors are available to meet with investors
to discuss the Company in more detail at the AGM and
may be contacted through the Company Secretary at all
other times.
The Board looks to undertake short annual site visits to
view the properties owned, meet with tenants where
possible and members of local staff and advisers of the
Investment Manager. During the year the Board was
pleased to visit the Gavilanes and Coslada, Madrid, assets
helping to better understand the in-demand location,
site layouts and meeting with abrdn’s local Madrid-based
real estate team which has a focus on managing these
assets for us.
Following best practice, the whole Board is standing for
re-election at the forthcoming AGM and further details
on each Director may be found on pages 72 and 73 of the
Annual Report and financial statements for the year ended
31 December 2022.
Annual General Meeting
The Company’s Annual General Meeting will be held
in London on Monday, 12 June 2023 at 11:30am at
Wallacespace, 15 Artillery Lane. London, E1 7HA.
The formal Notice of AGM may be found on page 169 of
the Annual Report and financial statements for the year
ended 31 December 2022.
Outlook
The portfolio is well diversified by property, tenant and
geography, and following the acquisitions completed
in the year is 51% weighted towards urban logistics
warehouses. 18 of the 27 assets have been constructed
since 2018. Our tenant base is diversified across 51
tenants, consisting predominantly of third-party logistics
providers, e-commerce related businesses and grocery-
focused vendors. Our tenants’ businesses are generally
well positioned in areas which remain essential to the
everyday operation of the modern economy.
Rising construction and financing costs and an uncertain
economic landscape will likely exacerbate an already
delayed construction pipeline as we expect construction
activity to continue to weaken this year, with inflationary
pressures being felt throughout the supply chain.
This lack of new development, which is typically more
sustainable, energy-efficient buildings, and the delay
in refurbishment projects transforming older stock will
put further pressure on occupiers who are increasingly
seeking best-in-class space, especially as corporate ESG
strategies increasingly restrict the leasing of buildings that
are not green certified.
A strong commitment to sustainability, demonstrated by
the Company’s improved GRESB score, together with the
inflation linked nature of the portfolio’s leases which are
increasingly flowing through improving income, provides
a strong counterbalance to the yield expansion being
witnessed. The Board is mindful that continued yield
expansion across the wider commercial real estate sector
in general could see bank loan covenants become more
of a focus, particularly if we see occupiers under increased
pressure from the current economic uncertainties and
cost inflation. The Investment Manager maintains a
dialogue with banks and we retain assets that may be
used for collateral in such instances.
However, if the indicators suggesting inflation is nearing its
peak across the eurozone are borne out, there is likely to
be a recovery in values in 2024, especially if interest rates
follow consensus forecasts in heading back down towards
2%. Certainly there is evidence that investors are already
looking at opportunities once again in the market, and this
should offer more positive momentum later in the year.
Whilst we will continue to screen for new acquisitions,
our core focus for the coming year will be on optimising
the current portfolio in terms of both occupancy and
earnings growth. We retain a strong conviction in our
investment strategy and during this period of inflationary
pressure, the Company’s indexation characteristics
should provide a level of inflation protection alongside our
attractive dividend yield.
Tony Roper
Chairman
20 April 2023
08 Annual Report 2022
Strategic Report
The Company is a UK investment trust with a premium listing on the Main Market of the
London Stock Exchange. The Company invests in European logistics real estate to
achieve its objective of providing its shareholders with a regular and attractive level of
income return together with the potential for long-term income and capital growth.
The Company invests in a portfolio of mid-box and urban logistics warehouses
diversified by both geography and tenant throughout Europe, predominantly targeting
well-located assets at established distribution hubs and within population centres.
The Company was launched on the London Stock Exchange in December 2017.
09Annual Report 2022
Strategic Report
Overview of Strategy
The Company
The Company was incorporated in England and Wales on
25 October 2017 with registered number 11032222 and
launched on 15 December 2017.
Change of Company name
Investment Objective
The Company aims to provide a regular and attractive
level of income return together with the potential for
long-term income and capital growth from investing in
high quality European logistics real estate.
Investment Policy
The Company aims to deliver the investment objective
through investment in, and active asset management of, a
diversified portfolio of logistics real estate assets in Europe.
The Company will invest in a portfolio of single and
multi-let assets diversified by both geography and
tenant throughout Europe, predominantly targeting
well-located assets at established distribution hubs and
within population centres. In particular, the Investment
Manager will seek to identify assets benefiting from long-
term, index-linked, leases as well as those which may
benefit from structural change, and will take into account
several factors, including but not limited to:
.
the property characteristics and whether they are
appropriate for the location (such as technical quality,
ESG credentials, scale, configuration, layout, transportation
links, power supply, data connectivity, manoeuvrability,
layout flexibility, and overall operational efficiencies);
.
the location and its role within European logistics
(city, regional, national or international distribution),
key fundamentals supporting logistics activity within
the micro location such as proximity to airport, port,
transport nodes, multimodal transport infrastructure,
established warehousing hubs, transport corridors,
population centres, labour availability and market
dynamics such as supply (of both land and existing stock),
vacancy rate and planned infrastructure upgrades;
.
the terms of the lease(s) focusing on duration, inflation-
linked terms, ESG criteria, level of passing rent relative to
market rent, the basis for rent reviews, and the potential
for capturing growth in market rental income;
.
the strength of the tenant’s financial covenant;
.
the business model of the tenant and their commitment
to the asset both in terms of capital expenditure and the
role it plays in their operations; and
.
the potential to implement active asset management
initiatives to add value over the holding period.
The Company will invest either directly or through
holdings in special purpose vehicles, partnerships, or
other structures. The Company may invest in forward
commitments when the Investment Manager believes
that to do so would enhance risk adjusted returns for
Shareholders and/or secure an asset at an attractive yield.
The Company’s active asset management activities are
expected to focus on adding value through:
.
negotiating or renegotiating leases to increase/secure
rental income: managing vacancies;
.
undertaking refurbishments to maintain liquidity;
.
managing redevelopments as assets
approach obsolescence;
.
adding solar panels to reduce carbon emissions and
generate additional income streams;
.
where appropriate, extending existing on-site buildings
or developing adjacent plots;
.
refurbishment and redevelopment activity will,
amongst other things, focus on: enhancing occupier
wellbeing; operational efficiencies; energy efficiency;
.
reducing carbon emissions; and elevating technological
provision as well as increasing lettable area.
The Company’s active management of debt will
effectively manage costs and risk to enhance
investment returns.
10 Annual Report 2022
Diversification of Risk
The Company will at all times invest and manage its
assets in a manner which is consistent with the spreading
of investment risk. The following investment limits and
restrictions will apply to the Company and its business
which, where appropriate, will be measured at the time
of investment:
.
the Company will only invest in assets located in Europe;
.
no more than 50 per cent. of Gross Assets will be
concentrated in a single country;
.
no single asset may represent more than 20 per cent.
of Gross Assets;
.
forward commitments will be wholly or predominantly
pre-let and/or have the benefit of a rental guarantee
and the Company’s overall exposure to forward
commitments and development activity will be limited
to 20 per cent. of Gross Assets;
.
the Company’s maximum exposure to any single
developer will be limited to 20 per cent. of Gross Assets;
.
the Company will not invest in other closed-ended
investment companies;
.
the Company will predominantly invest in assets with
tenants which have been classified by the Investment
Manager’s investment process, as having strong
financial covenants. However, the Company may, on an
exceptional basis, invest in an asset with a tenant with a
lower financial covenant strength (and/or with a short
lease term) where the Investment Manager believes
that the asset can be leased on a longer term tenancy
to a tenant with strong financial covenants within a
reasonable time period; and
.
no single tenant will represent more than 20 per
cent. of the Company’s annual gross income
measured annually.
The Company will not be required to dispose of any asset
or to rebalance the Portfolio as a result of a change in the
respective valuations of its assets.
The Company intends to conduct its affairs so as to
continue to qualify as an investment trust for the purposes
of section 1158 and 1159 (and regulations made
thereunder) of the Corporation Tax Act 2010.
Borrowing and Gearing
The Company uses gearing with the objective of
improving shareholder returns. Debt is typically non-
recourse and secured against individual assets or groups
of assets with or without a charge over these assets,
depending on the optimal structure for the Company
and having consideration to key metrics including lender
diversity, cost of debt, debt type and maturity profiles.
The aggregate borrowings are always subject to an
absolute maximum, calculated at the time of drawdown
for a property purchase, of 50 per cent. of Gross Assets.
Where borrowings are secured against a group of assets,
such group of assets will not exceed 25 per cent. of Gross
Assets in order to ensure that investment risk remains
suitably spread.
The Board has established gearing guidelines for the
Alternative Investment Fund Manager (“AIFM”) in
order to maintain an appropriate level and structure
of gearing within the parameters set out above. Under
these guidelines, aggregate asset level gearing will sit,
as determined by the Board, at or around 35 per cent of
Gross Assets. This level may fluctuate as and when new
assets are acquired until longer term funding has been
established or whilst short-term asset management
initiatives are being undertaken.
The Board will keep the level of borrowings under
review. In the event of a breach of the investment
guidelines and restrictions set out above, the AIFM will
inform the Board upon becoming aware of the same,
and if the Board considers the breach to be material,
notification will be made to a Regulatory Information
Service and the AIFM will look to resolve the breach with
the agreement of the Board. The Directors may require
that the Company’s assets are managed with the
objective of bringing borrowings within the appropriate
limit while taking due account of the interests of
shareholders. Accordingly, corrective measures may not
have to be taken immediately if this would be detrimental
to shareholders’ interests.
Any material change to the Company’s investment policy
set out above will require the approval of shareholders by
way of an ordinary resolution at a general meeting and the
approval of the Financial Conduct Authority. Non-material
changes to the investment policy may be approved by
theBoard.
Comparative Index
The Company does not have a benchmark.
Duration
Although the Company does not have a fixed life,
underthe Company’s articles of association the
Directorsare required to propose an ordinary resolution
for the continuation of the Company at the Annual
GeneralMeeting to be held in 2024 and then every
third year thereafter.
11Annual Report 2022
Key Performance Indicators (KPIs)
The Board uses a number of financial performance measures to assess the Company’s success in achieving its objective
and to determine the progress of the Company in pursuing its Investment Policy. The main KPIs identified by the Board in
relation to the Company, which are considered at each Board meeting, are as follows:
KPI Description
NAV Total Return
1
The Board considers the NAV total return to be the best indicator of performance over time
and is therefore the main indicator of performance used by the Board. Performance for the
year and since inception is set out on page 21.
The Company is targeting, for an investor in the Company at launch, a total NAV return of
7.5per cent. per annum (in € terms).
Share Price
(on a total
return basis)
1
The Board also monitors the price at which the Company’s shares trade on a total return
basis over time. A graph showing the share price performance is shown on page 22.
Premium/
(Discount)
1
The premium/(discount) relative to the NAV per share represented by the share price is
monitored by the Board. A graph showing the share price (discount)/premium relative to
the NAV is shown on page 22.
Dividends
per Share
The Board’s aim is to pay a regular quarterly dividend enabling shareholders to rely on
a consistent stream of income. Dividends paid are set out on page 21. The Company is
targeting, for an investor in the Company at launch, an annual dividend yield of 5.0 per cent.
per Ordinary Share (in € terms).
Ongoing Charges
Ratio (“OCR”)
1
The OCR is the ratio of expenses as a percentage of average daily shareholders’ funds
calculated in accordance with the industry standard. The Board reviews the OCR regularly
as part of its review of all expenses. The aim is to ensure that the Company remains
competitive and is able to deliver on its yield target to Shareholders. The Company’s OCR is
disclosed on page 21.
1
Alternative Performance Measure - see glossary on pages 150 to 154.
Manager
Under the terms of the Management Agreement, the
Company has appointed abrdn Fund Managers Limited
as the Company’s alternative investment fund manager
(“AIFM”) for the purposes of the AIFM Rules. The AIFM has
delegated portfolio management to the Danish Branch
of abrdn Investments Ireland Limited which acts as
Investment Manager.
Pursuant to the terms of the Management Agreement,
the AIFM is responsible for portfolio and risk management
on behalf of the Company and will carry out the on-
going oversight functions and supervision and ensure
compliance with the applicable requirements of the AIFM
Rules. The AIFM and the Investment Manager are both
legally and operationally independent of the Company.
Dividend Policy
Subject to compliance with all legal requirements
the Company pays interim dividends on a quarterly
basis. The Company declares dividends in Euros,
but shareholders will receive dividend payments in
Sterling unless electing to receive payments in Euros
through the Equiniti Shareview Portfolio website or via
CRESTPay. If applicable, the date on which the Euro/
Sterling exchange rate is set will be announced at the
time the dividend is declared. Distributions made by the
Company may take the form of either dividend income or
‘‘qualifying interest income’’ which may be designated as
interest distributions for UK tax purposes.
12 Annual Report 2022
Principal Risks and Uncertainties
There are a number of risks which, if realised, could have
a material adverse effect on the Company and its financial
condition, performance and prospects. The Board has
carried out a robust assessment of the principal risks as
set out below, ordered by category of risk, together with a
description of the mitigating actions taken by the Board.
The Board confirms that it has a process inplace for
regularly reviewing emerging risks that mayaffect the
Company in the future. The Board collectively discusses
with the Manager areas where there may be emerging
risk themes and maintains a register of these. Such risks
may include, but are not limited to, future pandemics,
cybercrime, and longer term climate change. In the event
that an emerging risk has gained significant weight or
importance, that risk is categorised and added to the
Company’s risk register and is monitored accordingly.
The principal risksassociated with an investment in the
Company’s shares can be found in the Company’s latest
Prospectus dated 8 September 2021, published on the
Company’s website.
The Board is very mindful of ongoing events involving
Russia and Ukraine which have caused significant market
volatility across Europe and the World. There has been
no discernible impact to date on our tenants located in
Poland and across the wider region. The indicators
below show how the Board’s views on the stated risks
have evolved over the last year. Inallother respects,
the Company’s principal risks and uncertainties have not
changed materially since the dateof the Annual Report
and are not expected to changematerially for the current
financial year.
Description Mitigating Action ↗ Increasing, ↘ Decreasing, → Stable Risk
Strategic Risk: Strategic Objectives
andPerformance - The Company’s strategic
objectives and performance, both absolute
and relative, become unattractive to investors
leading to a widening of the discount, potential
hostile shareholder actions and the Board
fails to adapt the strategy and/or respond to
investor demand.
.
The Company’s strategy and objectives are regularly
reviewed by the Board to ensure they remain appropriate
and effective.
.
The Board receives regular presentations on the economy
and also the property market to identify structural shifts and
threats so that the strategy can be adapted if necessary.
.
There is regular contact with shareholders both through the
Investment Manager and the broker with additional direct
meetings undertaken by the Chairman and other Directors.
.
Board reports are prepared by the Investment Manager
detailing performance, NAV return and share price analysis
versus peers.
.
Cash flow projections are prepared by the Investment
Manager and reviewed quarterly by the Board.
.
Shareholder/market reaction to Company
announcements is monitored.
↗
Investment and Asset Management Risk:
Investment Strategy - Poorly judged investment
strategy, regional allocation, use of gearing,
inability to deploy capital and the mis-timing
of disposals and acquisitions, resulting in poor
investment returns.
.
abrdn has real estate research and strategy teams which
provide performance forecasts for different sectors
and regions.
.
There is a team of experienced portfolio managers
who have detailed knowledge of the markets in which
they operate.
.
abrdn has a detailed investment process for both
acquisitions and disposals that require to be signed off
internally before the Board reviews any final decision.
.
The Board is very experienced with Directors having a
knowledge of property markets.
↘
13Annual Report 2022
Description Mitigating Action ↗ Increasing, ↘ Decreasing, → Stable Risk
Investment and Asset Management Risk:
Developing and refurbishing property -
Increased construction costs, construction
defects, delays, contractor failure, lack of
development permits, environmental and third
party damage can all impact the resulting
capital value and income
from investments.
.
abrdn has experienced investment managers with
extensive development knowledge with in-depth research
undertaken on each acquisition/development.
.
Development contracts are negotiated by experienced
teams supported by approved lawyers.
.
Due diligence is undertaken on developers including credit
checks and current pipelines.
.
Construction and risk insurance checked.
.
Post completion the developer is responsible for defects
and monies are held in escrow for a period of time
after handover.
→
Investment and Asset Management Risk: Health
and Safety - Failure to identify and mitigate
major health & safety issues or to react
effectively to an event leading to injury, loss of
life, litigation and any ensuing financial and
reputational impact.
.
For new properties health and safety is included as a key
part of due diligence.
.
Asset managers visit buildings on a regular basis.
.
Property managers are appointed by abrdn to monitor
health & safety in each building and reports are made to
the asset managers on a monthly basis.
.
Asset managers visit each building at least twice a year.
.
Tenants are responsible for day to day operations
of the properties.
→
Investment and Asset Management
Risk: Environment - Properties could
be negatively impacted by hazardous
materials (for example asbestos or other
ground contamination) or an extreme
environmental event (e.g. flooding) or the
tenants’ own operating activities could create
environmental damage. Failure to achieve
environmental targets could adversely affect
the Company’s reputation and result in
penalties and increased costs and reduced
investor demand. Legislative changes relating
to sustainability could affect the viability of
asset management initiatives.
.
The Investment Manager undertakes in depth research
on each property acquisition with environmental surveys
and considers its impact on the environment and
local communities.
.
The Investment Manager has adopted a thorough
environmental policy which is applied to all properties
in the portfolio.
.
Experienced advisers on environmental, social and
governance mattersare consulted both internally (within the
Investment Manager) and externallywhere required.
.
The Investment Manager in conjunction with specialist
advisers continues to work on a net zero emissions roadmap
for the Company
→
14 Annual Report 2022
Description Mitigating Action ↗ Increasing, ↘ Decreasing, → Stable Risk
Financial Risks: Macroeconomic -
Macroeconomic changes (e.g. levels of GDP,
employment, inflation, interest rate and FX
movements), political changes (e.g. new
legislation) or structural changes (e.g. new
technology or demographics) negatively
impact commercial property values and the
underlying businesses of tenants (market risk
and credit risk). Falls in the value of investments
could result in breaches of loan covenants
and solvency issues. Interest rate increases
from historical lows will impact strategy if
unchanged when re-financings are required.
Pressure on overall net revenue returns.
.
abrdn research teams take into account macroeconomic
conditions when collating forecasts. This research is fed into
Investment Manager decisions on purchases/sales and
regional allocations.
.
The portfolio is EU based and diversified across a number
of different countries and also has a diverse tenant base
seeking to minimise risk concentration.
.
There is a wide range of lease expiry dates within the
portfolio in order to minimise re-letting risk.
.
The Company has no exposure to speculative development
and forward funding is only undertaken where the
development is predominantly pre-let.
.
Rigorous portfolio reviews are undertaken by the
Investment Manager and presented to the Board on a
regular basis.
.
Annual asset management plans are developed for each
property and individual investment decisions are subject to
robust risk versus return evaluation and approval.
.
Most leases are indexed to provide increases in line with
movements in inflation and leverage is fixed to reduce the
impact of interest rate rises.
↗
Financial Risks: Gearing - Gearing risk - an
inappropriate level of gearing, magnifying
investment losses in a declining market,
could result in breaches of loan covenants
and threaten the Company’s liquidity and
solvency. An inability to secure adequate
borrowing with appropriate tenor and
competitive rates could also negatively impact
the Company. Earliest Company re-financing
required in 2025 but current conditions
expected to impact banks’ willingness to
lend or seek tighter covenants.
.
Regular covenant reporting to banks is undertaken
as required.
.
The gearing target is set at an indicative 35% asset level
limit and an absolute Company limit of 50%.
.
The Company’s diversified European logistics portfolio,
underpinned by its tenant base, should provide sufficient
value and income in a challenging market to meet the
Company’s future liabilities.
.
The portfolio attracted competitive terms and interest rates
from lenders for the Company’s fixed term loan facilities.
.
The Investment Manager has relationships with multiple
funders and wide access to different sources of funding on
both a fixed and variable basis.
.
Financial modelling is undertaken and stress tested
annually as part of the Company’s viability assessment and
whenever new debt facilities are being considered.
.
Loan covenants are continually monitored and reported to
the Board on a quarterly basis and would also be reviewed
as part of the disposal process of any secured property.
→
Financial Risks: Liquidity Risk and FX Risk -
The inability to dispose of property assets in
order to meet financial commitments of the
Company or obtain funds when required for
asset acquisition or payment of expenses or
dividends. Movements in foreign exchange
and interest rates or other external events
could affect the ability of the Company to
pay its dividends. Yield expansion witnessed
as valuations impacted by global
economic concerns.
.
The diversified portfolio is geared towards an attractive sector.
.
A cash buffer is maintained and an overdraft facility is
currently in place.
.
Investment is focused on mid-sized properties which is
considered the more liquid part of the sector.
.
The assets of the Company are denominated in a non-
sterling currency, predominantly the Euro. No currency
hedging is planned for the capital, but the Board periodically
reviews the hedging of dividend payments having regard to
availability and cost.
↗
15Annual Report 2022
Description Mitigating Action ↗ Increasing, ↘ Decreasing, → Stable Risk
Financial Risks: Credit Risk - Credit Risk – the
risk that the counterparty will be unable or
unwilling to meet a commitment entered into
by the Group: failure of a tenant to pay rent
or failure of a deposit taker, future lender or a
current exchange rate swap counterparty.
.
The property portfolio has a balanced mix of investment
grade tenants and reflects diversity across business sectors.
.
Rigorous due diligence is performed on all prospective
tenants and their financial performance continues to be
monitored during their lease.
.
Rent collection from tenants is closely monitored so that
early warning signs might be detected.
.
Deposits are spread across various abrdn approved banks
and AAA rated liquidity funds.
→
Financial Risks: Insufficient Income
Generation - Insufficient income generation
due to macro-economic factors, and/or due
to inadequate asset management resulting in
long voids or rent arrears or insufficient return
on cash; dividend cover falls to a level whereby
the dividend needs to be cut and/or the
Company becomes unattractive to investors.
Level of ongoing charges becomes excessive.
.
The Investment Manager seeks a good mix of tenants in
properties. A review of tenant risk and profile is undertaken
using, for example, the Dun & Bradstreet Failure Scoring
method and tenant covenants are thoroughly considered
before a lease is granted.
.
The abrdn team consists of asset managers on the
ground who undertake asset management reviews and
implementation and there is a detailed approval process
within abrdn for lettings.
.
At regular Board meetings forecast dividend cover is
considered. There is regular contact with the broker
and shareholders to ascertain, where possible, views on
dividendcover.
↗
Regulatory Risks: Compliance - The regulatory,
legal and tax environment in which the
Company’s assets are located is subject to
change and could lead to a sub-optimal
corporate structure and result in increased tax
charges or penalties. Failure to comply with
existing or new regulation.
.
The Company has an experienced Company Secretary and
engages lawyers who will advise on changes once any new
proposals are published. There is regular contact with tax
advisers in relation to tax computations and transfer pricing.
.
Directors have access to updates on relevant regulatory
changes through the Company’s professional advisers.
.
The highest corporate governance standards are required
from all key service providers and their performance is
reviewed annually by the Management Engagement
Committee.
→
Operational Risks: Service Providers - Poor
performance/inadequate procedures at
service providers leads to error, fraud, non-
compliance with contractual agreements
and/or with relevant legislation or the
production of inaccurate or insufficient
information for the Company (NAV, Board
Reports, Regulatory Reporting) or loss of
regulatory authorisation. Key service providers
include the AIFM, Company Secretary,
the Depositary, the Custodian, the managing
agents, lending banks and the
Company’s Registrar.
.
abrdn has an experienced Investment Manager and Asset
Management Team.
.
The Company has engaged an experienced registrar:
Equiniti is a reputable worldwide organisation.
.
All service providers have a strong control culture that is
regularly monitored.
.
abrdn aims to meet all service providers once a year and
the Management Engagement Committee reviews all
major service providers annually.
.
The Company has the ability to terminate contracts.
→
16 Annual Report 2022
Description Mitigating Action ↗ Increasing, ↘ Decreasing, → Stable Risk
Operational Risks: Business continuity -
Business continuity risk to any of the
Company’s service providers or properties,
following a catastrophic event e.g. pandemic,
terrorist attack, cyber attack, power disruptions
or civil unrest, leading to disruption of service,
loss of data etc.
.
abrdn has a detailed business continuity plan in place with
a separate alternative working office if required and the
ability for the majority of its workforce to work from home.
.
abrdn has a dedicated Chief Information Security Officer
who leads the Chief Information Security Office covering
the following functions: Security Operations & Delivery,
Security Strategy, Architecture & Engineering,
Data Governance & Privacy, Business Resilience,
Governance & Risk, Security & IT.
.
Properties within the portfolio are all insured.
.
The IT environment of service providers is reviewed as part
of the initial appointment and on an ongoing basis.
→
Promoting the Company
The Board recognises the importance of promoting the
Company to prospective investors both for improving
liquidity and enhancing the value and rating of the
Company’s shares. The Board believes an effective way
to achieve this is through subscription to, and participation
in, the promotional programme run by abrdn on behalf of
a number of investment trusts under its management.
The Company’s financial contribution to the programme
is matched by abrdn. abrdn’s marketing team reports
quarterly to the Board giving analysis of the promotional
activities as well as updates on the shareholder register
and any changes in the make up of that register.
The purpose of the programme is both to communicate
effectively with existing shareholders and to gain new
shareholders with the aim of improving liquidity and
enhancing the value and rating of the Company’s
shares. Communicating the long-term attractions of
the Company is key and therefore the Company also
supports abrdn’s investor relations programme which
involves regional roadshows, promotional and public
relations campaigns.
Board Diversity
The Board recognises the importance of having a
range of skilled, experienced individuals with the right
knowledge represented on the Board in order to allow
the Board to fulfil its obligations. The Board also recognises
the benefits and is supportive of the principle of diversity
in its recruitment of new Board members. The Board
will not display any bias for age, gender, race, sexual
orientation, religion, ethnic or national origins, or disability
in considering the appointment of its Directors. The Board
will continue to ensure that any future appointments
are made on the basis of merit against the specification
prepared for each appointment and, therefore,
the Company does not consider it appropriate to set
diversity targets. At 31 December 2022, there were two
male Directors and two female Directors on the Board.
Sustainable and Responsible Investment
Policy and Approach
Further details on abrdn’s Sustainable and Responsible
Investment Policy and Approach for Direct Real Estate are
available at abrdn.com.
Environmental, Social and Human
Rights Issues
The Company has no employees as the Board has
delegated day to day management and administrative
functions to abrdn Fund Managers Limited. There are
therefore no disclosures to be made in respect of
employees. The Company’s socially responsible investment
policy is outlined in the Investment Manager’s Review.
Due to the nature of the Company’s business, being a
Company that does not offer goods and services to
customers, the Board considers that it is not within
the scope of the Modern Slavery Act 2015 (“MSA”).
The Company is not required to make a slavery and
human trafficking statement. The Board considers the
Company’s supply chains, dealing predominantly with
professional advisers and service providers in the financial
services industry, to be low risk in relation to this matter.
A copy of the Manager’s statement in compliance
with the Modern Slavery Act is available for download
at abrdn.com
17Annual Report 2022
The bulk of emissions relating to properties owned by
the Company are the responsibility of the tenants and
any emissions relating to the Company’s registered
office are the responsibility of abrdn plc. The Company
has no direct greenhouse gas emissions to report from
the operations of its business, although it is responsible
for low emissions generated at certain properties within
its portfolio reportable under the Companies Act 2006
(Strategic Report and Directors’ Reports) Regulations 2013,
see page 58.
Viability Statement
The Company does not have a formal fixed period
strategic plan but the Board formally considers risks
and strategy at least annually. The Board considers the
Company, with no fixed life, to be a long-term investment
vehicle, but for the purposes of this viability statement has
decided that a period of three years is an appropriate
period over which to report. The Board considers that
this period reflects a balance between looking out over
a long-term horizon and the inherent uncertainties of
looking out further than three years.
In assessing the viability of the Company over the review
period the Directors have conducted a robust review of
the principal risks focussing upon the following factors:
.
The principal risks detailed in the Strategic Report;
.
The ongoing relevance of the Company’s investment
objective in the current environment;
.
The demand for the Company’s shares evidenced by
the historical level of premium or discount;
.
The level of income generated by the Company and
the stability of tenants;
.
The level of gearing including the requirement to meet
lending covenants, negotiate new facilities and repay or
refinance future facilities;
.
The continuation vote required to be put to shareholders
at the AGM to be held in 2024; and
.
The flexibility of the Company’s bank facilities
and putting these facilities in place in time to
meet commitments.
The Directors have reviewed summaries from the portfolio
models prepared by the Investment Manager which
have been stress tested to highlight the performance
of the portfolio in a number of varying economic
conditions coupled with potential opportunities for
mitigation. The Directors have also stress tested the
financial position of the Company with attention on
upcoming funding for acquisitions, and particularly the loss
of a tenant in a French asset.
The Company has prepared cash flow forecasts which
reflect the potential impact of reductions in rental income
including reasonably possible downside scenarios.
The impact of reductions in rental income could be
mitigated through a reduction in dividends to shareholders
if considered necessary by the Board.
The Company has modelled severe but plausible
downside scenarios, taking into account specific tenant
risks. These scenarios modelled reduced rental income
through to 2025 and the worst case model equates to an
overall 40% reduction of rental income per annum over
that period.
Accordingly, taking into account the Company’s current
position and the potential impact of its principal risks and
uncertainties, the Directors have a reasonable expectation
that the Company will be able to continue in operation
and meet its liabilities as they fall due for a period of three
years from the date of this Report subject to shareholders’
approval of the continuation vote required under the
articles to be put to the AGM to be held in 2024, noting
that the Directors are unaware at this early stage of any
shareholder intentions to vote against such a resolution.
In making this assessment, the Board has considered that
matters such as significant economic uncertainty, stock
market volatility and changes in investor sentiment could
have an impact on its assessment of the Company’s
prospects and viability in the future.
s172 Statement
The Board is required to describe to the Company’s
shareholders how the Directors have discharged their
duties and responsibilities over the course of the financial
year under section 172 (1) of the Companies Act 2006
(the “s172 Statement”). This s172 Statement requires the
Directors to explain how they have promoted the success
of the Company for the benefit of its members as a whole,
taking into account the likely long-term consequences
of decisions, the need to foster relationships with all
stakeholders and the impact of the Company’s operations
on the environment.
The Board’s philosophy is that the Company should
operate in a transparent culture where all parties are
treated with respect and provided with the opportunity
tooffer practical challenge and participate in positive
debate which is focused on the aim of achieving the
expectations of shareholders and other stakeholders alike.
The Board reviews the culture and manner in which the
Investment Manager operates at its regular meetings and
receives regular reporting and feedback from the other
key service providers.
Investment trusts are long-term investment vehicles,
with no employees. The Company’s Board of Directors
sets the investment mandate as published in the most
recent prospectus, monitors the performance of all service
providers and is responsible for reviewing strategy on a
regular basis.
18 Annual Report 2022
Key Stakeholders
The key stakeholder and service provider for the Company
is the Alternative Investment Fund Manager (the “Manager”)
and this relationship is reviewed at each Board meeting
and relationships with other service providers are reviewed
at least annually.
Shareholders are seen as key stakeholders in the Company.
The Board seeks to meet at least annually with shareholders
at the Annual General Meeting. This is seen as a very
useful opportunity to understand the needs and views
of the shareholders. In between AGMs the Directors and
Investment Manager also conduct programmes of investor
meetings with larger institutional, private wealth and other
shareholders to ensure that the Company is meeting their
needs. Such regular meetings may take the form of joint
presentations with the Investment Manager or meetings
solely with a Director where any matters of concern may
be raised directly.
Our European partner lending banks are also key
stakeholders. We leverage off the Investment Manager’s
key relationships with a wide range of lending banks and
the Investment Manager has regular contact with these
banks updating on the portfolio and valuations and also
on plans for new acquisitions or disposals.
The other key stakeholder group is that of the underlying
tenants that occupy space in the properties that the
Company owns. The Board aims to conduct a site visit
at least annually with the aim of meeting tenants locally
and discussing their businesses and needs and assessing
where improvements may be made or expectations
managed. The Investment Manager’s asset managers are
tasked with conducting meetings with building managers
and tenant representatives in order to ensure the smooth
running of the day to day management of the properties.
The Board receives reports on the tenants’ activities at its
regular Board meetings.
The Board via the Management Engagement Committee
also ensures that the views of its service providers are
heard and at least annually reviews these relationships in
detail. The aim is to ensure that contractual arrangements
remain in line with best practice, services being offered
meet the requirements and needs of the Company
and performance is in line with the expectations of the
Board, Manager, Investment Manager and other relevant
stakeholders. Reviews will include those of the Company
depositary, custodian, share registrar, broker, legal adviser,
lenders and auditor.
The Investment Manager’s Report on page 28 details
the key investment decisions taken during the year and
subsequently. The Investment Manager has continued
to invest the Company’s assets in accordance with the
mandate provided by shareholders at launch, under the
oversight of the Board. In line with the increased equity
base, further gearing was introduced into the portfolio
with the aim of maintaining gearing at asset level at or
around 35% over the longer term. abrdn’s dedicated
treasury team was successful in negotiating the debt
facilities at competitive market rates, resulting in the
Company’s blended all-in interest rate across all its debt
being 2.01% which is to the benefit of all shareholders.
The Company has an uncommitted four year €70 million
master facilities loan agreement with Investec Bank plc
to provide additional flexibility. This facility increases the
Company’s ability to acquire new assets prior to any fresh
equity raise and will reduce the impact of cash drag on
investment returns.
Details of how the Board and Investment Manager have
sought to address environmental, socialand governance
matters across the portfolio aredisclosed from page
55 onwards.
The Company is just over five years old having been
launched at the end of 2017. However, it is a long-term
investor and the Board has established the necessary
procedures and processes to promote the long-term
success of the Company. The Board will continue to
monitor, evaluate and seek to improve these processes
as the Company grows, to ensure that the investment
proposition is delivered to shareholders and other
stakeholders in line with their expectations.
Future
Many of the non-performance related matters likely to
affect the Company in the future are common across
all closed ended investment companies, such as the
attractiveness of investment companies as investment
vehicles, geopolitical tensions and the impact of regulatory
changes. These factors need to be viewed alongside the
outlook for the Company, both generally and specifically,
in relation to the portfolio. The Board’s view on the general
outlook for the Company can be found in my Chairman’s
Statement on page 8 whilst the Investment Manager’s
views on the outlook for the portfolio are included on
page 36.
Tony Roper
Chairman
20 April 2023
19Annual Report 2022
Annual General Meeting (AGM)
The AGM normally provides an
opportunity for Directors to engage
with shareholders, answer their
questions and meet them informally.
The 2023 AGM isscheduled to take
placeon12 June 2023 in London.
The Board is looking forward to
meeting as many shareholders as
possible at the AGM.
Annual Report
We publish a full annual report
each year that contains a strategic
report, governance section, financial
statements and additional information.
The report is available online and in
paper format.
Company Announcements
We issue announcements for all
substantive news relating to the
Company, including the purchase and
sale of properties. You can find these
announcements on the website.
Results Announcements
We release a full set of financial and
operational results at the interim and
full year stage. Updated net asset value
figures are announced on a quarterly
basis in line with our valuation policy.
Website
Our website contains a range of
information on the Company and
includes details of our property
investments. Details of financial results,
the investment process and Manager
and Investment Manager together
with Company announcements and
contact details can be found here:
eurologisticsincome.co.uk.
The ways we engage with our shareholders include:
20 Annual Report 2022
Strategic Report
Results
Financial Highlights
31 December 2022 31 December 2021
Total assets (€’000) 817,783 728,386
Total equity shareholders’ funds (net assets) (€’000) 489,977 487,505
Net asset value per share (euros)
1
1.19 1.29
Net asset value per share (pence)
1
105.43 108.50
Share price (mid market) (pence) 68.50 117.00
Market capitalisation (£’000) 282,339 438,050
Share price (discount)/premium to sterling net asset value
1
(35.0%) 7.8%
Dividends and earnings
Net asset value total return (€)
1
(3.8%) 12.4%
Dividends paid per share 5.64c (4.80p) 5.64c (4.84p)
Revenue reserves (€’000) 20,083 15,939
Total comprehensive return for year (€’000) (18,442) 44,443
Operating costs
Ongoing charges ratio (Group only expenses)
1
1.3% 1.3%
Ongoing charges ratio (Group and property expenses)
1
1.7% 1.8%
Performance (total return)
Year ended
31 December 2022
Year ended
31 December 2021
Since Launch
% return
Share price
1
(38.3%) 12.4% (15.1%)
Net Asset Value (EUR)
1
(3.8%) 12.4% 29.2%
1
Considered to be an Alternative Performance Measure (see Glossary on pages 150 to 154 for more information).
Dividends declared in respect of the Financial Year to 31 December 2022
Dividend
Distribution
GBP pence
Dividend
Distribution
EURO cents
Equivalent
2
Qualifying
Interest
GBP pence
Qualifying
Interest
EURO cents
Equivalent
2
Ex-dividend
Date
Record
Date
Pay
Date
First Interim 0.86 1.02 0.33 0.39 01/06/2022 06/06/2022 24/06/2022
Second Interim 0.95 1.11 0.25 0.30 01/09/2022 02/09/2022 23/09/2022
Third Interim 1.01 1.19 0.19 0.22 01/12/2022 02/12/2022 30/12/2022
Fourth Interim 1.00 1.18 0.20 0.23 02/03/2023 03/03/2023 24/03/2023
Total 3.82 4.50 0.97 1.14
2
The interim distributions are paid in GBP to shareholders on the register. However, shareholders are able to make an election to receive distributions in euros.
21Annual Report 2022
Strategic Report
Performance
Share Price Premium/(Discount) to Net Asset Value
Launch to 31 December 2022
1
Premium/(Discount)
-50
-40
-30
-20
-10
0
10
20
Dec 22Dec 21Dec 20Dec 19Dec 18Dec 17
Source: abrdn, Factset.
1
Using the daily share prices together with the quarterly NAVs as announced by the Company at data points.
Share Price Total Return
Launch to 31 December 2022 (rebased to 100 at launch)
70
80
90
100
110
120
130
140
150
160
Dec 22Dec 21Dec 20Dec 19Dec 18Dec 17
Source: abrdn, Factset.
22 Annual Report 2022
Strategic Report
Our Unique Selling Points
abrdn European Logistics Income plc was launched in December 2017 and has built a strategic position in the real estate
market that the Board and Investment Manager believe will deliver the investment objective to shareholders over the
longer term.
Our main USPs are listed below:
1
The Investment Manager has local teams on the ground that
know the market
The property business is a local business. You have to speak the local language
and have a network withbrokers, developers, investors and owner-occupiers
to not only find the best opportunities at the right price but also manage
properties and keep in close contact with tenants. abrdn is one of the largest
real estate investors in Europe with over £53 billion of real estate under
management. abrdn has local boots on the ground with eight offices across
Europe - London, Edinburgh, Frankfurt, Amsterdam, Madrid, Paris, Brussels
and Copenhagen - with 290 real estate professionals with expertise in fund
management, research, transactions, asset management, financing and other
specialist property activities.
2
Investing in the most liquid mid-box and strong growth
segment of urban logistics
Durability of income stream is key for an income driven strategy.
The Investment Manager looks beyond the length of the initial lease contract
to see if a warehouse has a second life after the lease matures. The mid-box
section of the market, with building sizes reaching up to a maximum of
50,000 square metres, is where most of the leasing activity takes place
providing us with options in the future. We believe we operate in a more liquid
area of the sector than the ultra ‘big-box’ part of the market where leasing
options may be more limited. Our portfolio is weighted towards urban logistics
and this is where we have highest growth expectations. The urbanisation trend
across Europe and the competition for shorter deliverytimes amongst parcel
delivery specialists has created a higher demand for land in dense population
areas resulting in higher land prices and stronger rental growth. The Manager
has strong real estate research and strategy capabilities which help formulate
an annual review of strategy for the Company.
3
A diversified, high quality portfolio with long indexed leases
to tenants
Durability of income streams will be achieved by acquiring the right warehouses
in the right locations. The Company now has 27 buildings in the portfolio,
of which 18 were new builds when acquired, across five European countries
with 51 tenants providing good risk diversification. All buildings in the portfolio
are either located alongside main transport corridors or within a short distance
to dense population urban locations. Our buildings have modern specifications
in terms of free height, floor load capacity, number of loading doors and yard
depth, all features that are particularly important for e-commerce focused
logistics operators. Average lease length is 8.9 years (excluding breaks) and all
leases are index-linked, the majority with indexation uncapped.
23Annual Report 2022
4
A clear focus on the European Continent
This is a European strategy with a very clear focus on the European Continent
and not the UK. There are several reasons for this. Firstly, e-commerce
penetration has been materially behind that seen in the UK with higher growth
expected. Secondly, CPI-linked leases give a level of protection against inflation.
Thirdly, the European market has seen lower long-term debt costs and finally,
the region provides diversification options with 75% of the investable European
market in continental Europe.
5
ESG is embedded in the investment philosophy resulting in an
improving GRESB score
abrdn, as a global asset manager, has the ambition to become net zero by
2050. As an investment company, the Company has a clear focus on improving
the green performance of its buildings with the asset and property managers
working closely with our tenants. One of the key focuses is the implementation
of solar panels on the roofs of our buildings which are now on nine of our
warehouses. The Company, through abrdn, continues to develop the path to
zero carbon emission.
6
Modest gearing with attractive all-in costs
The Company has a modest long-term target Loan-To-Value ratio (LTV) of
c. 35%, with a current LTV of 34% (as at 31 December 2022). The maximum
LTV is 50% at the time of drawdown but the level of LTV may fluctuate through
the use of shorter term loan facilities and in advance of cash raises allowing the
Company to commit to further opportunities as they arise. All-in costs of the
current loanportfolio are 2.01%.
7
Low investment management fees
The investment management fee is set at a competitive rate of 75 basis points
of NAV up to €1.25 billion which will drop to 60 basis points above this.
24 Annual Report 2022
Strategic Report
2022 Accomplishments
2022 was another active year.
Despite the considerable volatility affecting global markets,
the Company further diversified it’s asset base with
selective acquisitions in Spain, France and the Netherlands,
whilst continuing to grow the income profile through new
lettings in Spain and Poland.
The acquisitions were funded by a capital raise in February
which generated £38 million (€44.9 million) together with
temporary use of the €70 million RCF. Simultaneously,
the Company secured two debt facilities across the
Spanish portfolio totalling €108.6 million.
Once again, the Company improved it’s GRESB rating
year-on-year.
Our local teams on the ground are crucial in managing
our diverse logistics portolio and a key factor in abrdn’s
real estate offer. With highly experienced teams based
around Europe, the Investment Manager is able to
source excellent assets, work directly with tenants in
implementing long-term value improvement strategies
and maintain a future-fit portfolio.
FUNDING
February 2022: the Company issued 34,545,455 new
Ordinary shares, raising gross proceeds of £38 million
(€44.9 million) at the issue price of 110.0 pence per share.
July 2022: the Company drew €50 million from the
available €70 million RCF to complete the various
acquisitions.
July 2022: €44 million loan Facility 1 in Spain completed
with ING.
September 2022: the Company completed Spain Facility 2
loan with ING for €64.6 million.
October 2022: €25 million RCF repaid.
December 2022: €25 million RCF repaid.
Modest long-term gearing at attractive all-in fixed cost
34%
Loan to Value
2.01%
Asset level cost of debt
3.5yrs
Average term to maturity
Dachser France, Bordeaux
25Annual Report 2022
ACQUISITIONS / CAPITAL
PROJECTS
€130m invested into 6 assets across 3 core geographies.
Three cross-docked parcel hubs in Bordeaux, Niort & Dijon
France all leased to Dachser, France. Good specification,
well-located with very low site cover. Future expansion
potential for tenant and/or second life. €32.5m investment.
State of the art Amazon hub in Gavilanes, Madrid acquired
for €80.3m. 16,500 sq m last-mile parcel hub, 20,000 sq m
EV van hub secured on a 25-year lease.
Established agri-warehouse facility in the Horst, the
Netherlands acquired for €12.2m. Let to Limax Group
for 10 years. Good specification, low site cover,
exciting agri-location.
Stand-alone warehouse extension, Waddinxveen
project completed for €4.5m. Highly sustainable asset
management initiative added 2,500 sq m of distribution
space and ancillary offices to Combilo’s existing
FMCG operation.
ESG
February 2022: the Investment Manager completed a
tenant satisfaction survey undertaken by Keepfactor.
The results of these surveys inform discussions with
tenants and provides a better understanding of areas
where improvements can be made.
March and May 2022: the Company conducted further
reviews of the solar potential of the portfolio with external
consultants. Ongoing discussions across the portfolio are
exploring PV opportunities.
November 2022: the Company continued to improve its
GRESB score year on year, scoring 86 points out of 100.
The portfolio maintained its 4 out of 5 Stars to rank second
in the peer group.
December 2022: second analysis of carbon impact is
instructed with an ambition to set a Net Zero Carbon target.
Gavilanes Amazon Hub, Phase IV – Madrid
Lodz, PolandKrakow, PolandExtension project, Waddinxveen, Netherlands
26 Annual Report 2022
ASSET MANAGEMENT
Four new lettings in Spain & Poland: our local asset
management teams continue to add value across
the portfolio.
March 2022: the Company secured a 4 year lease
extension with DS Smith and a 3 year extension with BRB in
Krakow.
June 2022: at Gavilanes, Madrid Phase II the company
welcomed a new tenant, ADER, to the portfolio adding a
further €469,000 per annum in income.
August 2022: the Company signed a new 8 year lease with
Tabiplast in Lodz, Poland.
October 2022: in Krakow, the Company completed
a new 3 year lease adding Gebrüder Weiss to
the portfolio.
February 2023: new 9.5 year lease renewal to Dachser
France, at Niort. ESG improvements with a new BMS
(building management system) and external LED lighting.
An excellent tenant, secured
for longer, which boosts WAULT and improves
capital value.
Meung sur Loire; Dachser France, Niort; Arrival, Gavilanes, Madrid
27Annual Report 2022
Strategic Report
Investment Manager’s Review
Having joined the investment management team
responsible for managing the Company’s portfolio
in October 2022, it is my pleasure to present my first
Manager’s Review.
2022 Market Overview
The European logistics sector experienced another
strong year in terms of occupier fundamentals and
leasing activity, whilst on the capital markets side the
picture was more mixed. Q4 2022 brought a steep
investment slowdown due to the rapid adjustment to
the macro financial climate with rising interest rates and
bond yield expansion. The speed of the impact has been
unprecedented but, with prime logistics values impacted
the quickest and hardest, this has also led to investors
returning to the market faster than in previous cycles as
they see opportunities, albeit transactions are still relatively
low in number.
Supply chains continue to move through a period of
exceptional structural change, backed by three key
demand drivers. First, the Covid pandemic accelerated
many aspects of de-globalisation, stress-tested existing
distribution networks, and increased the need for
companies to diversify their supply chains. Second, we
believe e-commerce remains an incremental demand
driver for the long-term, despite a slowdown in the growth
rate; some pull back in growth was naturally due after
the e-commerce boom during the pandemic where
online sales penetration rates were artificially boosted by
lockdowns. Lastly, ESG and “net zero” considerations are
beginning to play a clearer role in logistics performance
where tighter regulations from the European Union’s
Energy Efficiency Directive combined with valuation
guidance from the RICS, will push tenants and investors to
upgrade buildings to deliver more efficient performance.
This will further widen the gap between future-fit
assets and those facing obsolescence. When markets
are undergoing a transformation, such as in logistics,
the choice of asset quality in the right location and the
future relevance of the building are increasingly
critical factors.
Overall logistics leasing demand has been strong in
recent years. Take up across the 13 largest logistics
markets exceeded an estimated 37.5 million square
metres in 2022, a 6% decrease on 2021 but 18% above
the five-year average. Germany, Poland, Netherlands,
the UK and France saw the lion’s share of take up in
2022, accounting for around 78% of all leasing activity
across the 13 countries covered by Savills. While the
share broadly reflects the size of the economy, the rise of
Poland and the relative importance of the Netherlands in
terms of logistics demand, represents the strategic roles
these markets play in the pan-European supply chain.
In the context of continued strong demand, the logistics
supply outlook remains constrained in 2023. The average
European logistics vacancy rate fell by 50 basis points from
3.6% at the end of 2021 to just 3.1% at the end of 2022,
the lowest level on record. In many markets the supply of
high-quality space is negligible and most leasing activity
is driven by pre-lets or through the development process.
The undersupply of modern logistics space in good
locations across the supply chain means that cashflows
should be increasingly resilient and strong income growth
should persist. For European logistics, the milder recession
expectation is supportive given the link between economic
growth and logistics activity.
Troels Andersen
Fund Manager
28 Annual Report 2022
A large proportion of European stock is no longer
appropriate for today’s logistics requirements and
requires modernisation, especially as regulatory deadlines
around energy efficiency approach. Current total supply
growth of c.8% for 2022 is expected to slow to c.7%
p.a. in 2023 and likely level off towards 4% in the longer
term, according to Green Street. Two of the key drivers
of the expected limitations of new supply are increased
financing and development costs. 2022 has seen
development economics deteriorate, with estimated profit
margins halving to c.15%, driven by higher construction
input costs (up 25% in 2022). The ESG factor cannot
be underestimated as a further constraining factor on
future-fit logistics supply. In preparation for the net zero
transition, the Research and Energy Committee of the
European Parliament is finalising its position on the Energy
Performance of Buildings Directive which seeks to make
the EU building sector climate neutral by 2050. However,
we are seeing more significant retrofitting and energy
improvement costs factored into cash flows and this is
being accounted for in purchase prices or valuations.
Polarisation between prime and secondary assets will
amplify as limited new supply in most sectors becomes
evident, while secondary and tertiary properties begin to
be penalised.
Industrial rents have experienced strong growth over the
last two years, an aspect of Europe that has lagged the UK
and US markets. While yields have come under pressure
from higher debt costs, some of the yield impact is being
offset by rental growth or rent indexation built into many
European lease contracts. Open market prime logistics
rents increased by an unweighted average of 10.1% over
the 12 months to the fourth quarter of 2022. Rents have
been rising consistently across geographies and we
expect growth to continue over the medium to long-term,
as the vacancy rate is only around 3% in most countries.
Cash flows should become more resilient given this under
supply and the favorable growth drivers, with stronger
growth potential in the more urban areas where pressures
on supply are more acute.
Investment values have declined as interest rates increased
by 350 basis points in the second half of 2022. Prime logistics
yields had tightened to 3% or below in the most sought-
after locations. This was no longer supportable as debt
costs spiked and relative pricing against bonds weakened.
However, given the fundamentals and strength of investor
sentiment towards long-term structural demand drivers,
when interest rates stabilise and commercial real estate
begins to attract increased investment again, we believe
that the logistics sector is well placed to recover lost
performance over the short to medium term.
Capital flows into European logistics real estate have
increased to now regularly reach 20% of total investment,
up from 10% in 2013. The volume of transactions closed
in 2022 was unsurprisingly down from the record set in
2021, yet still 24% up on the five year average, despite
the sharp fall in investment in the latter stages of the
year as buyer and seller pricing expectations widened.
The largest markets continue to be Germany, France,
The Netherlands and Spain.
New stacking system at Zeewolde, Netherlands
29Annual Report 2022
Well diversified portfolio with strong urban profile well
positioned for future rental growth
Informed by the Manager’s research and strategy teams,
the Company continues to pursue its high conviction
strategy focusing on the most ‘liquid’ and in-demand part
of the European logistics market where both capital and
rental growth expectations are highest. Urban logistics
and mid-sized (‘mid-box’) warehouses are the areas of
the market where supply / demand dynamics are the
strongest and the potential tenant base the largest.
A typical mid-box warehouse sits between 20,000 – 50,000
square metres in size and for urban logistics, often called
the ‘final touch in the supply chain’, building sizes are
generally smaller and located in close proximity to dense
population centres for speedier deliveries.
In July, the Company completed the well-flagged
acquisition of Phase IV of the Gavilanes portfolio, which
has been developed as an exclusive hub for Amazon with
its own parking deck including supply for its electric vans
and benefits from a 25 year lease.
In August, the Company announced the acquisition of
two urban logistics properties, in Bordeaux and Niort,
France for €23 million, reflecting a net initial yield of 4.0%
and leased to Dachser France with annual indexation.
Both offer medium term expansion opportunities.
Built in 2005, the Bordeaux asset totals 6,504 sqm on a
total plot size of c. 29,000 sqm (22% site cover) and is
located only 8 km from the centre of Bordeaux, one of
France’s most populated cities with fast access to the
area’s major arterial routes. The Niort property, built in
2014, totals 3,939 sqm sitting on 44,000 sqm of land
and benefits from its proximity to the A10 motorway
connecting to Paris and Bordeaux.
In October, the Company announced the €9.3 million
acquisition of an urban logistics warehouse in Dijon,
France, also leased to Dachser and representing a 4.2%
net initial yield. The 5,069 sqm Dijon property sits on a total
plot size of c.27,000 sqm on the main logistics ‘backbone’
in the area with excellent arterial connectivity. Our Horst,
Netherlands, property was also acquired in October for
€12.2 million as part of a sale and leaseback deal with
Limax, a producer, packager and distributor of soft fruits
and mushrooms. The freehold property, which covers
a total land plot of c.40,500 sqm, also provides ample
scope for future extensions and benefited from a ten year
lease term at purchase subject to annual CPI capped
indexation, with the price reflecting a net initial yield of
3.8%. The property features rooftop solar panels which
enhance the portfolio’s sustainability credentials, in line
with the Company’s strategy.
With our focus on long-term, sustainable income,
the future-proofing or ‘second life’ of our warehouses
is an important consideration when acquiring any new
assets. Building specifications we consider important,
amongst others, are the eaves’ height, floor-load capacity,
number of loading doors, manoeuvrability around the
building, power supply and increasingly important,
a building’s sustainability credentials.
Buildings positioned alongside main transport corridors,
close to seaports, infrastructural nodes, or in the
case of urban logistics, close to large population
concentrations, are important criteria in analysing
new acquisition opportunities.
The Company’s focus is solely on Continental Europe,
where 75% of the investable European logistics market
can be found, providing a deep pool of potential
acquisition targets and strong diversification options,
limiting single market risk. A standard lease agreement
on the Continent often includes full annual CPI indexation
of rents, thereby providing a strong hedge against
inflation which has become particularly relevant in
today’s inflationary environment. Despite recent upward
pressure, our investment strategy continues to benefit
from lower financing costs fixed with European banks.
Finally, e-commerce penetration is still at an early stage
on the Continent with strong forecast growth, creating
an attractive investment backdrop. Savills reported that
Statista estimates an additional 13.2 million shoppers will
adopt e-commerce in Germany, UK, France, Italy and
Spain by 2025, having grown by 47 million since 2017.
Statista also forecast strong growth in online sales in the
food sector as more tech conscious generations become
earners and consumers.
Growth is expected to be strongest in the urban logistics
sub sector, especially assets in dominant cities that
have warehousing supply constraints and demand from
different land uses, resulting in higher land costs and
ultimately underpinning higher rents. Parcel delivery
specialists are continuing to improve their services by
reducing delivery times and thereby transportation costs.
Operating a logistics warehouse in close proximity to their
ultimate customer base is the best way to reduce their
cost base with rental and building costs materially less
impactful than transportation costs.
30 Annual Report 2022
Approximately 51% of the Company’s portfolio
by value comprises urban logistics warehouses in
locations such as Madrid, Frankfurt, Warsaw, Barcelona
and Den Hoorn located in the Netherlands between
the cities of The Hague and Rotterdam.
As at the Company’s year-end, 18 out of the 27
warehouses held in the portfolio were newly developed
at the point of purchase and have been constructed
since 2018. The portfolio specifications are therefore
very modern and in line with tenant requirements.
The portfolio is well diversified with 27 assets spread
across five different countries. As at 31 December
2022, Spain represented the largest geographic
exposure in the portfolio by value (35%), followed by
the Netherlands (30%), France (14%), Poland (12%)
and Germany (9%).
Country allocation 31 December 2022
(by % of portfolio value)
Spain
Netherlands
Germany
France
Poland
35%
30%
14%
12%
9%
31Annual Report 2022
Property Portfolio as at 31 December 2022
Country Location Built
WAULT incl
breaks
(years)
WAULT excl
breaks
(years)
Q4 22
% of
Portfolio
France Avignon 2018 4.6 7.4 6.8
France Meung sur Loire 2004 - - 2.9
France Bordeaux 2005 6.1 9.1 1.6
France Dijon 2004 8.0 11.0 1.3
France Niort 2014 0.7 0.7 1.5
Germany Erlensee 2018 5.1 10.9 5.5
Germany Florsheim 2015 5.3 5.7 3.5
Netherlands Den Hoorn 2020 7.6 7.6 7.4
Netherlands Ede 1999/ 2005 5.2 5.2 4.1
Netherlands Horst 2005 9.7 9.7 1.4
Netherlands Oss 2019 11.5 11.5 2.3
Netherlands ‘s Heerenberg 2009/ 2011 9.0 9.0 4.2
Netherlands Waddinxveen 1983/ 1994/ 2002/ 2018 10.9 10.9 5.9
Netherlands Zeewolde 2019 11.5 11.5 4.6
Poland Krakow 2018 2.8 2.8 4.1
Poland Lodz 2020 5.4 5.4 4.1
Poland Warsaw 2019 4.9 4.9 4.1
Spain Barcelona 2019 3.5 6.5 2.5
Spain Leon 2019 6.2 6.2 2.4
Spain Madrid - Coslada 1999 4.0 7.0 1.5
Spain Madrid - Gavilanes 1.1 2019 7.1 7.1 4.7
Spain Madrid - Gavilanes 1.2 2019 0.6 7.6 2.4
Spain Madrid - Gavilanes 2.1 2020 3.6 13.6 2.0
Spain Madrid - Gavilanes 2.2 2020 1.5 3.5 1.7
Spain Madrid - Gavilanes 2.3 2020 2.5 4.5 1.6
Spain Madrid - Gavilanes 3 2019 4.4 8.4 5.9
Spain Madrid - Gavilanes 4 2022 14.3 24.3 10.0
TOTAL - Q4 22 6.7 8.9 100.0
32 Annual Report 2022
A strong tenant base with inflation
linked income
Our key objective is generating long-term sustainable
income streams in order to pay an attractive quarterly
dividend. 2022 saw the Company collect 100% of total
expected rent. With more than 60 lease agreements,
the portfolio has a diversified tenant base across different
sectors. In addition to the regular interaction of our asset
and property managers with our tenants, their covenant
strength is monitored on a regular basis using a variety of
data sources including Dun & Bradstreet.
In terms of exposure by sector, third party logistics
providers (“3PLs”) represent the largest segment at 35%
of total portfolio rent. The 3PL market continues to be
buoyant, particularly those businesses specialising in parcel
deliveries; our exposure comprises DHL, which occupies
our assets in Madrid and Warsaw and Dachser occupying
three assets in Niort, Dijon and Bordeaux, France.
Both DHL and Dachser France each account for 4.2% of
rental income in aggregate. Manufacturers (19%) and
companies related to the food industry (19%) complete
the top three. Food related companies often have a long
history and are of a scale that makes them stable income
producers with supermarkets like Biocoop or Carrefour
and traders in food such as Combilo all performing well
during the pandemic. The retail exposure (13% of total
rent), is largely related to Netherlands based drugstore
Kruidvat (part of the A.S Watson group) operating its
e-commerce platform and Decathlon, the global discount
sports retailer, whose products have been in high demand
since the pandemic. The direct exposure to e-commerce
(10% of total rent) has increased from 3% last year due
to the addition of the state-of-the-art, last mile Amazon
facility at Gavilanes, Madrid. This is the largest asset in the
portfolio by value.
A standard lease agreement on the Continent typically
has annual CPI indexation of rent which is not the standard
in the UK. Having this annual inflation protection has proved
beneficial with rising energy prices and supply chain issues
driving inflation towards double digits in the Eurozone
towards the end of the year. 65% of the portfolio’s current
income has full CPI or ILAT1 indexation, 27% has a cap at
a level between 2-3%, 7% is German threshold indexation
and 1% other. 2022 inflation figures will flow through and
help to grow our 2023 income on existing leases which
have an average length of 6.7 years including break
options and 8.9 years excluding breaks.
Strong rent collection and a low cost loan portfolio
underpins the Company’s stated distribution policy.
The loan portfolio is still young with asset level loan
facilities effected immediately after full deployment of
capital. Stress testing on the existing financial covenants
such as Interest Cover Ratios and Loan-To-Value (LTV)
is conducted on a regular basis. In order to diversify risk,
the loan facilities have also been cross-collateralised with
groups of single-tenanted buildings or have diversified risk
thanks to multi-tenanted leasing structures.
Exposure by sector (% of total rent) as at 31 December 2022
Transport/Logistics
Manufacturing
E-commerce
Food
Retail
Other
35%
19%
19%
10%
13%
4%
Indexation of rental income ( % of total rent) as at
31 December 2022
100% CPI/ILAT
CPI/ILAT with a cap
Threshold indexation
Other
65%
27%
7%
<1%
1
French indexation which is a blend between CPI, GDP and construction cost index.
33Annual Report 2022
Lease expiry profile (% of total rent)
0
2
4
6
8
10
12
14
16
20412037203420332032203120302029202820272026202520242023
5%
11%
5%
1%
6%
0%
6%
9%
8%
14% 14%
6%
9%
6%
Top 10 tenants based on current rents
Tenant Property
Contracted
rent
(€000 p.a.)
Contracted
rent
(%)
WAULT incl.
breaks
(years)
WAULT excl.
breaks
(years)
1 Amazon Madrid - Gavilanes x 2 3,299 10% 11.3 19.1
2 A.G. van der Helm Den Hoorn 3,005 8% 7.4 7.4
3 Biocoop Avignon 2,450 7% 4.6 7.4
4 Combilo International B.V. Waddinxveen 2,173 6% 10.9 10.9
5 A.S. Watson B.V. Ede 1,663 5% 4.9 4.9
7 VSH Fittings B.V. Zeewolde 1,644 5% 11.5 11.5
6 Arrival Madrid - Gavilanes 1,614 5% 4.4 8.4
8 JCL Logistics 's Heerenberg 1,524 5% 9.0 9.0
9 DHL Madrid - Coslada; Warsaw 1,467 4% 4.7 5.4
10 DACHSER France Bordeaux; Niort; Dijon 1,455 4% 4.6 6.4
Subtotal 20,294 59% 7.9 8.4
Other tenants 14,388 41% 6.0 7.4
Portfolio as at 31 December 2022 34,682 100% 6.7 8.9
34 Annual Report 2022
Loan portfolio 31 December 2022
Country Property Bank
Existing loan
(€million)
End date
Loan
Duration
in Years
Interest
(incl margin)
Germany Erlensee DZ HYP 17.8 January 2029 10 1.62%
Germany Flörsheim DZ HYP 12.4 January 2026 7 1.54%
France Avignon + Meung Sur Loire BAYERN LB 33.0 February 2026 7 1.57%
Netherlands Ede/Waddinxveen + Oss BERLIN HYP 44.2 June 2025 6 1.37%
Netherlands ‘s Heerenberg BERLIN HYP 11.0 June 2025 6 1.13%
Netherlands Zeewolde + Den Hoorn BERLIN HYP 43.2 January 2028 8 1.40%
Spain Coslada + Leon + Girona ING Bank 25.4 September 2025 3 3.01%
Spain Gavilanes Phase I + II + III ING Bank 44.0 July 2025 3 2.61%
Spain Gavilanes Phase IV ING Bank 39.3 September 2025 3 3.01%
Total 270.3 6 2.01%
Lease re-gears and additions
During the year there were a number of asset management
initiatives delivered on.
In August the Company agreed a new 5 year lease with
ADER at the previously vacant Unit 3, within Phase II at
its Gavilanes site, Madrid. ADER provides distribution
services to companies in the freight and logistics sector
and is consolidating its operations in the Gavilanes area
with the leasing of this second, 7,375 sqm building.
The letting is fully CPI indexed and accretive to performance
having completed well in advance of the guarantee timing
assumptions and at a rental level ahead of underwriting.
In Lodz, Poland, Tabiplast signed an 8-year lease over 1,600
sqm of space ahead of expectations and the previous
tenant’s 3 year option.
In Krakow, a vacated unit was let on a new 3-year term to
Gebrüder Weiss ahead of previous rent and ERV. Also at
the same asset, packaging company DS Smith extended
its lease by a further four years.
After staged incentives, these leases generate c. €778,000
of additional annual income in aggregate.
Meanwhile, we are in the final stages of agreeing new
arrangements at Ede and Avignon which will be reported
when signed.
2022 – Robust financial and operational per-
formance impacted by increasing
market volatility
The NAV total return for 2022 was -3.8% (in euro terms)
with the Company delivering a solid 29.2% since launch.
Despite Q4’s portfolio valuation decline of 6%, the end of
year portfolio valuation stood at €759 million. This is an
increase from the 2021 year end portfolio valuation of
€666 million following our additional purchases through
the year and we have seen total contracted rent grow to
€34.7 million per annum from €29.4 million at the end of
2021. With inflation remaining elevated across Europe,
our indexed linked leases will further grow our rental
income and partly mitigate any further outward yield
movements. Despite continued macroeconomic
uncertainty, we are forecasting a stronger market later
in the year and into 2024.
In terms of future growth, the portfolio continues to be
positioned with a focus on mid-boxes and urban logistics,
the segment of the market which the Investment Manager
believes has continued potential, especially with respect
to rental growth. There are several options within the
portfolio where value may be added and where tenants
may require additional space. One such example from
2022 is the 2,500 sqm extension project completed in
Waddinxveen in the Netherlands on an adjacent piece
of land owned by the tenant and all three of the recent
purchases in France have low site coverage and offer
good expansion potential.
35Annual Report 2022
Well diversified debt portfolio
At the end of 2022, the Company´s fixed debt facilities
totaled €270.3 million at an average all-in rate of 2.01%
and with a loan to value of 34%, below the long-term
target of 35%. The Company´s secured fixed rate debt
supports its investment objective with the earliest
re-financing of debt required in mid-2025.
The Company arranged asset level fixed rate bank debt
financings in those local markets where all-in loan costs
were the lowest, such as Germany, the Netherlands,
France and Spain with dedicated real estate banks that
are active in this lending space.
The Company also benefits from its revolving credit facility
agreement with Investec Bank in the amount of €70 million
which provides further flexibility for the acquisition of
new properties and / or for the implementation of asset
management initiatives. At the end of 2022 the revolving
credit facility agreement with Investec Bank was undrawn.
Outlook
We believe Continental European logistics real estate
is well placed to navigate the current high inflationary
environment due to its CPI indexation characteristics
and robust market fundamentals. Backed by the tailwinds
of record-low vacancies and structural demand drivers,
rental growth is expected to retain momentum in most
European logistics hotspots. While lingering economic,
political, and financial markets uncertainties may disrupt
investment trends in the short-term, the favourable
underlying trends including ongoing e-commerce
penetration, onshoring and supply chain reconfiguration/
modernisation should remain important drivers for
the sector.
We continue to prefer fringe city locations where land
supply is more constrained, and where tenant and investor
demand is active. Good quality assets in these locations
are hard to source for tenants due to low levels of new
completions over the last ten years. The development
pipeline is also constrained by rapidly rising debt finance
costs, together with high construction and labour costs,
planning difficulties and more stringent controls over
sustainability and efficiency ratings of new schemes.
abrdn’s large and established local network and
reputation provides a competitive advantage when
sourcing deals. abrdn is one of Europe’s largest real
estate investors, managing approximately €53 billion
of real estate, with €21 billion of logistics assets across
12 countries. Its eight offices across Europe - London,
Edinburgh, Frankfurt, Amsterdam, Madrid, Paris,
Brussels and Copenhagen – employ a total of 290 abrdn
real estate colleagues including portfolio managers, local
transaction and asset managers and researchers.
Indeed, we are already seeing signs of interest returning
to the sector with increased investment activity in those
markets that have already seen strong pricing correction,
such as in the Netherlands. Various successful capital
raises targeting the sector exclusively, or as part of
multi-sector strategies, have recently been announced
providing ongoing evidence in the longer-term conviction
for the sector.
Troels Andersen
Fund Manager, abrdn
20 April 2023
36 Annual Report 2022
Strategic Report
Property Portfolio
1
7
6
2
8
10
13
11
27
24
22
26
25
21
9
3
4
5
17 18
19 20
14
16
15
12
23
Property Portfolio as at 31 December 2022
Property Tenure Principal Tenant 2022 valuation (€m)
1 France, Avignon (Noves) Freehold Biocoop 51.5
2 France, Meung sur Loire Freehold Vacant 22.1
3 France, Gevrey, Dijon Freehold Dachser 9.8
4 France, La Creche, Niort Freehold Dachser 11.5
5 France, Bruges, Bordeaux Freehold Dachser 12.5
6 Germany, Erlensee Freehold Bergler 41.7
7 Germany, Flörsheim Freehold Ernst Schmitz 26.5
8 Poland, Krakow Freehold Lynka 31.0
9 Poland, Lodz Freehold Compal 31.3
10 Poland, Warsaw Freehold DHL 31.3
11 Spain, Barcelona Freehold Mediapost 19.0
12 Spain, Madrid (Coslada) Freehold DHL 11.4
13 Spain, Leon Freehold Decathlon 18.0
14 Spain, Madrid 1.1 Freehold Talentum 35.6
15 Spain, Madrid 1.2 Freehold Amazon 18.0
16 Spain, Madrid 2.1 Freehold Carrefour 15.2
17 Spain, Madrid 2.2 Freehold MCR 12.6
18 Spain, Madrid 2.3 Freehold Servicios Empresariales Ader 12.1
19 Spain, Madrid 3 (2 buildings) Freehold Arrival 44.5
20 Spain, Madrid 4 (2 buildings) Freehold Amazon 75.3
21 the Netherlands, Den Hoorn Leasehold Van der Helm 56.3
22 the Netherlands, Ede Freehold AS Watson (Kruidvat) 31.4
23 the Netherlands, Horst Freehold Limax 11.0
24 the Netherlands, Oss Freehold Orangeworks 17.7
25 the Netherlands, 's Heerenberg Freehold JCL Logistics 31.6
26 the Netherlands, Waddinxveen Freehold Combilo International 44.8
27 the Netherlands, Zeewolde Freehold VSH Fittings 35.0
Market Value as at 31 December 2022 758.7
Less Lease Incentives (4.7)
Total Market Value Less Lease Incentive Debtor 754.0
Add IFRS 16 Leasehold Asset
1
22.6
Total per Balance Sheet 776.6
1
Ground lease on warehouse in Den Horn detailed in Note 12.
37Annual Report 2022
FRANCE
AVIGNON
.
Avignon (92,000 inhabitants) is located in the heart of the Provence
close to larger cities Montpellier (280,000) and Marseille (978,000).
The Provence is the #1 region for the production of fruit and
vegetables in France explaining why tenant Biocoop (organic food
retailer) and other supermarkets (Carrefour, Aldi, Systeme U) and food
specialists have located distribution centres here
.
Sustainable warehouse with modern specifications and solar panels
.
Property consists of 4 cells, 2 of which are treated as cold storage
(1/3 of floor space)
SPA signed/ closing Jul 18 / Oct 18
On-/ off-market Off-market
Year of construction 2018
Net leasable area 28,469 sqm
Main tenants Biocoop
Indexation 100% ILAT (annual)
WAULT (incl/ excl breaks) 4.6 / 7.4 years
Property specifications Free height of 10.5m, floor load capacity of 5 t/sqm, 24 loading doors,
sprinklers, HQE Excellent certificate, 11% office space, LED,solar panels
MEUNG SUR LOIRE
.
The property is located in the centre of France 27km southwest of
Orleans (115,000 inhabitants). The unit serves Paris, Central and the
South of France for both national and international distribution
.
Established and growing logistics location, for DHL, ID Logistics,
XPO and Rexel. Former tenant Office Depot went into liquidation,
paying rent until Summer 2022. Former tenant installations have
been removed, with new LED lighting installed
.
Good specification and low site cover of 29% allowing expansion
SPA signed/ closing Nov 18 / Feb 19
On-/ off-market On-market
Year of construction 2004
Net leasable area 30,180 sqm
Main tenants Vacant - actively marketed with an agreed campaign with local asset
managers supported by BNP and CBRE in France
Indexation n/a
WAULT (incl/ excl breaks) n/a
Property specifications Free height of 12-17m, 28 loading doors, floor load capacity of 5-7 t/sqm,
sprinklers, site cover of 29%, 6% office space, LED (partial)
38 Annual Report 2022
BORDEAUX
.
Bordeaux (260,000 inhabitants) is located in the Gironde department
at the heart of the Nouvelle-Aquitaine region of south-west France.
The A10 motorway connects Bordeaux to Paris, Orleans and Niort to
the north. The A62 and A63 motorways to the south connect Toulouse
and Spain respectively
.
Cross-docked parcel hub facility built in 2005
.
Low site density of c22%
.
Acquired as part of portfolio of three assets let to Dachser France
SPA signed/ closing Dec 21 / Jul 22
On-/ off-market Off-market
Year of construction 2005
Net leasable area 6,504 sqm
Main tenants Dachser France
Indexation 100% ILAT (annual)
WAULT (incl/ excl breaks) 6.1 / 9.1 years
Property specifications Purpose built, lower-eaves, cross-docked facility. 89 loading bays,
low site cover. Full circulation
DIJON
.
Dijon (160,000 inhabitants) is located in the Cote d’Or department
of the Bourgogne – Franche-Comte region of France. Well located
to connect the east of France and its trade routes with Switzerland,
Germany and Luxemburg and central France using the A31, A38, A39
and E17 routes
.
Cross-docked parcel hub facility built in 2004
.
Low site density of c17%
.
Acquired as part of portfolio of three assets let to Dachser France
SPA signed/ closing Dec 21 / Sep 22
On-/ off-market Off-market
Year of construction 2004
Net leasable area 5,069 sqm
Main tenants Dachser France
Indexation 100% ILAT (annual)
WAULT (incl/ excl breaks) 7.0 / 10.0 years
Property specifications Purpose built, lower-eaves, cross-docked facility. 80 loading bays,
low site cover. Full circulation
39Annual Report 2022
NIORT
.
Niort (177,000 inhabitants) is located in the Deux-Sevres department
of the Nouvelle Aquitaine region of France. The A10, A83 routes link
Niort to Paris, Bordeaux, Orleans and Nantes
.
Cross-docked parcel hub facility built in 2014
.
Very low site density of c9%
.
Acquired as part of portfolio of three assets let to Dachser France
SPA signed/ closing Dec 21 / Jul 22
On-/ off-market Off-market
Year of construction 2014
Net leasable area 3,939 sqm
Main tenants Dachser France
Indexation 100% ILAT (annual)
WAULT
1
(incl/ excl breaks) 0.7 / 0.7 years
Property specifications Purpose built, lower-eaves, cross-docked facility. 34 loading bays,
low site cover. Full circulation
1
New 9.5 year lease with effect from 1 January 2023 signed in Q1 2023.
GERMANY
ERLENSEE
.
Two logistics buildings on a new logistics hub to the West of the
Frankfurt Rhine-Main region (6m inhabitants) with other companies
like Dachser and Wilhelm Brandenburg Group located close by.
Acquired off-market via forward funding
.
The project comprises two modern multi-let logistics buildings
.
Limited logistics supply in Rhine-Main region offers platform for strong
rental growth prospects
SPA signed/ closing Jun 18 / Feb 19
On-/ off-market Off-market
Year of construction 2018
Net leasable area 26,700 sqm
Main tenants Bergler, DS Smith
Indexation Threshold indexations with combination of 5%/80% and 10%/80%
WAULT (incl/ excl breaks) 5.1 / 10.9 years
Property specifications Free height of 10.5m, 50 loading doors, sprinklers, floor load capacity of
5 t/sqm, 10% office space, LED
40 Annual Report 2022
FLÖRSHEIM
.
Prime multi-let logistics park built in 2015 and located to the East of the
Frankfurt Rhine-Main region (6m inhabitants), just 15 kilometres from
Frankfurt airport. Acquired via forward funding
.
Project comprises two modern multi-let logistics buildings of 10,762
and 7,047 sqm
.
Limited logistics supply in Rhine-Main region creating space for future
growth
SPA signed/ closing Dec 17 / Feb 18
On-/ off-market On-market
Year of construction 2015
Net leasable area 17,809 sqm
Main tenants Ernst Schmitz, Maintrans
Indexation 100% CPI (annual) and 1 lease with threshold indexation (5%/80%)
WAULT (incl/ excl breaks) 5.3 / 5.7 years
Property specifications Free height of 10m, 22 loading doors, floor load capacity of 5 t/sqm,
sprinklers, 11% office space, LED (partial)
THE NETHERLANDS
EDE
.
Ede (112,000 inhabitants) very centrally located in the Netherlands
and well positioned for national distribution
.
One part of the building (30% of total) was fully renewed in 2018 with a
new floor and installations
.
Kruidvat is part of the AS Watson Group with this location supporting
their growing e-commerce business
SPA signed/ closing Aug 18 / Aug 18
On-/ off-market On-market
Year of construction 1999 / 2005
Net leasable area 39,840 sqm
Main tenants Kruidvat
Indexation 100% CPI (annual)
WAULT (incl/ excl breaks) 5.2 / 5.2 years
Property specifications Free height of 12.2m, 23 loading doors, floor load capacity of 2.5-10.0 t/sqm,
sprinklers, 8% office space, LED
41Annual Report 2022
DEN HOORN
.
Den Hoorn is located in the most densely populated area in the
Netherlands in the Rotterdam/ the Hague metropolitan area (2.7
million inhabitants) and easily accessible by motorway
.
Modern, flexible warehouse with excellent specifications and full solar
PV coverage
SPA signed/ closing Dec 19 / Jan 20
On-/ off-market On-market
Year of construction 2020
Net leasable area 42,577 sqm
Main tenants Van der Helm
Indexation 100% CPI (annual)
WAULT (incl/ excl breaks) 7.6 / 7.6 years
Property specifications Free height of 12.2 meters, 36 loading doors, floor load capacity of 5t/
sqm, 11% office space, LED, sprinklers, solar panels
OSS
.
Oss (86,000 inhabitants) is strategically located between port of
Rotterdam and Ruhr area and ranked as number 7 logistics hotspot in
the Netherlands
.
Established logistics location with large companies such as Montea
Logistics, Vos Logistics, Heineken, Vetipak, Movianto and Mediq
.
Forward funded project
SPA signed/ closing Oct 18 / Jul 19
On-/ off-market Off-market
Year of construction 2019
Net leasable area 12,433 sqm
Main tenants Orangeworks
Indexation 100% CPI (annual)
WAULT (incl/ excl breaks) 11.5 / 11.5 years
Property specifications Free height of 10m, 5 loading doors with option to create 10 more,
floor load capacity of 5 t/sqm, sprinklers, 14% office space, LED
42 Annual Report 2022
‘S HEERENBERG
.
Located in an exciting logistics hub close to A12 highway and
Emmerich barge terminal in Germany. 3PL providers keen to locate
close to NL-GER border with advantages in customs and
employment flexibility
.
Grade A warehouse and cross-dock with offices. Total site is
45,000 sq metres
SPA signed/ closing Jun 19 / Jul 19
On-/ off-market Off-market
Year of construction 2009/ 2011
Net leasable area 23,031 sqm
Main tenants JCL Logistics
Indexation 100% CPI (annual)
WAULT (incl/ excl breaks) 9.0 / 9.0 years
Property specifications Warehouse free height 12m, cross-dock 5.5m. 40 loading doors,
floor-load capacity 3.0-4.0 t/sqm, LED (partial), sprinklers
WADDINXVEEN
.
Waddinxveen is centrally located in the Randstad conurbation
(8 million consumers within 1 hour’s driving distance) and ranked as
number 5 logistics hotspot in the Netherlands
.
Established, strategic location due to large concentration of
greenhouses. Combilo is a specialist in the import and export and
packaging of fruit/vegetables for supermarkets/wholesale
.
Cross-dock warehouse of with ample loading doors on both sides
.
New freestanding warehouse c2,500 sqm added to holding on same
lease terms. Completed Sept 2022
SPA signed/ closing Nov 18 / Nov 18
On-/ off-market Off-market
Year of construction 1983/ 1994/ 2002/ 2018 / 2022
Net leasable area 31,631 sqm
Main tenants Combilo International
Indexation 100% CPI (annual)
WAULT (incl/ excl breaks) 10.9 / 10.9 years
Property specifications Cross-dock with 51 loading doors, free height 7-11m, sprinklers, floor load
capacity 1.0 - 3.5 t/sqm, 6% office space, LED (partial), solar panels (partial)
43Annual Report 2022
ZEEWOLDE
.
Zeewolde is a town with 23,000 inhabitants located in the heart of the
Netherlands in the province of Flevoland and close to Almere, the fastest
growing municipality in the Netherlands (197,000 inhabitants, forecast:
350,000) and Lelystad (96,000 inhabitants)
.
Region is ranked as number 6 logistics hotspot in the Netherlands and
benefits from the expansion of Lelystad airport and further critical mass
in the logistics supply
SPA signed/ closing Nov 18 / Jun 19
On-/ off-market Off-market
Year of construction 2019
Net leasable area 35,898 sqm
Main tenants VSH Fittings
Indexation 100% CPI (annual)
WAULT (incl/ excl breaks) 11.5 / 11.5 years
Property specifications Free height of 12.2m, 37 loading doors, floor load capacity of 5 t/sqm,
BREAAM Very Good, sprinklers, 4% office space, LED
HORST
.
Horst is a town and municipality with 43,000 inhabitants located in the
south of the Netherlands in the province of Limburg. The property is
well located between Venlo 8km south and Venray 7km north on
the A73
.
The area is famed for its support of the agrifood and agriculture
economies
.
Well-specified unit with 12 loading docks and ancillary offices. Low site
cover on a 40,593 sqm plot
SPA signed/ closing Sep 22 / Sep 22
On-/ off-market On-market
Year of construction 2005
Net leasable area 6,904 sqm
Main tenants Limax
Indexation 100% CPI (annual, cap 100% to 2%, and 50% at 2-3%)
WAULT (incl/ excl breaks) 9.7 / 9.7 years
Property specifications Free height of 9m, 12 loading doors, floor load capacity of 30 kN/sqm
44 Annual Report 2022
POLAND
KRAKOW
.
Krakow is the 2nd largest city in Poland with 760,000 inhabitants and
characterised by a relatively affluent population, the dominance of
added value industries, a strong education infrastructure and business
friendly policy
.
The Polish logistics market is strong benefiting from being the largest
economy within the Central and Eastern European block with a lower
cost labour force
.
Modern, multi-tenant building with excellent specifications
SPA signed/ closing Feb 19 / Feb 19
On-/ off-market On-market
Year of construction 2018
Net leasable area 34,934 sqm
Main tenants Lynka, Max Fliz, DS Smith, Gebruder Weiss
Indexation 100% CPI (annual)
WAULT (incl/ excl breaks) 2.8 / 2.8 years
Property specifications Free height of 12m, 70 loading doors, floor load capacity of 5 t/sqm,
sprinklers, 11% office space, LED
WARSAW
.
Warsaw is the wealthiest and largest, most urbanised area in Poland
with a population size of 1.8 million making it attractive for parcel
delivery specialists such as DHL
.
The Polish logistics market is strong benefiting from being the largest
economy within the Central and Eastern European block with a lower
cost labour force
.
Modern, logistics scheme consisting of two Grade A logistics buildings.
One building is a cross-docking warehouse for the e-commerce
activities of DHL (over 50% of total rent), the other is a traditional
warehouse sub-divided to form 3 units
SPA signed/ closing Oct 19
On-/ off-market Off-market
Year of construction 2019
Net leasable area 24,690 sqm
Main tenants DHL, ICS, DBK, Spedimex
Indexation 100% Euro CPI (annual)
WAULT (incl/ excl breaks) 4.9 / 4.9 years
Property specifications Free height of 10m in warehouse and 7.5m in cross-dock, 60 loading doors,
floor load capacity of 5 t/sqm, LED, 9% office space, solar panels (partial)
45Annual Report 2022
LODZ
.
Lodz is the 3rd largest logistics city in Poland (with 750,000 inhabitants)
and centrally located alongside main motorways and Europe’s key
railway link to China
.
Multi-tenanted building with several occupiers having a direct link with
the Bosch/ Siemens Campus and Dell factory creating a stable
tenant base
.
Lodz is one of the core markets in Poland with a low vacancy rate
SPA signed/ closing April 2021
On-/ off-market On-market
Year of construction 2021
Net leasable area 31,500
Main tenants Bilplast, Compal, EGT, Kan, Mecalit, Tabiplast, Alfa Laval
Indexation 100% EU CPI (annual)
WAULT (incl/ excl breaks) 5.6 / 5.6 years
Property specifications 10.0m clear height, 5t/sqm floor load, LEDs, sprinklers, 56 loading doors,
yard depth of 35m, 6% office space, solar panels
SPAIN
BARCELONA
.
Barcelona is the 2nd most populous city in Spain with the fastest
growing seaport in Europe
.
Asset located 20 minutes from the city centre
.
Undersupplied market practically zero vacancy in the 1st ring.
Physical supply constraints with sea/ mountains surrounding
.
Asset is highly reversionary
SPA signed/ closing July 2021
On-/ off-market On-market
Year of construction 2019
Net leasable area 13,907 sqm
Main tenants Mediapost
Indexation 100% CPI (annual)
WAULT (incl/ excl breaks) 3.5 / 6.5 years
Property specifications 11.0m clear height, 5t/sqm floor load, LEDs, sprinklers, 10 loading doors,
yard depth of 35m, 6% office space, solar panels
46 Annual Report 2022
LEON
.
Leon (126,000 inhabitants) is a strategic logistics location for
distribution in the North West of Spain (supermarket chain Mercadona
and Inditex have warehouses here). Decathlon has closed its business
in Pamplona and moved here to supply 40 shops in this part of Spain
.
Modern logistics warehouse developed to Grade A logistics standards
in April 2019. Asset consists of 3 different modules totalling 32,645 sqm
allowing for flexibility to accommodate multiple tenants in future.
.
Decathlon has a 5-year option to expand the building by 10,000 sqm
if required
SPA signed/ closing Jul 18 / Apr 19
On-/ off-market On-market
Year of construction 2019
Net leasable area 32,645 sqm
Main tenants Decathlon
Indexation 100% CPI (annual)
WAULT (incl/ excl breaks) 6.2 / 6.2 years
Property specifications Free height of 10.7m, 29 loading doors, floor load capacity of
5 t/sqm, sprinklers, 2% office space, LED, solar panels (partial)
MADRID - COSLADA
.
Madrid, the third largest city in Europe with a metropolitan population of
almost seven million people
.
Coslada is perfectly located for last-mile logistics with its location between
the city centre and adjacent to the airport
.
Cross-dock warehouse with loading doors at both sides
.
Leased out to DHL who have occupied this building since it was constructed
SPA signed/ closing Dec 2021
On-/ off-market On-market
Year of construction 1999
Net leasable area 6,805 sqm
Main tenants DHL
Indexation 100% CPI (annual)
WAULT (incl/ excl breaks) 4.0 / 7.0 years
Property specifications Free height of 10.5m, cross-dock with 12 loading bays at the front and
25 doors at the back, floor load capacity of 5 t/sqm, 20% office space
47Annual Report 2022
MADRID – GAVILANES 1.1
.
Urban logistics hub located in southern Madrid, the third largest city in
Europe with a metropolitan population of almost seven million people
.
Property is located in Gavilanes, just 17km south of the city centre,
alongside the M-50 motorway (Madrid ring road) intersecting the A-4
motorway (Spain’s main north-south motorway)
SPA signed/ closing Dec 2021
On-/ off-market On-market
Year of construction 2019
Net leasable area 21,713 sqm
Main tenants Talentum
Indexation 100% CPI (annual, capped at 3%)
WAULT (incl/ excl breaks) 7.1 / 7.1 years
Property specifications 11.2m clear height, LEDs, sprinklers, 5t/sqm floor load, yard depth >33m
and 9% office space, LEED Silver rating
MADRID – GAVILANES 1.2
.
Urban logistics hub located in southern Madrid, the third largest city in
Europe with a metropolitan population of almost seven million people
.
Property is located in Gavilanes, just 17km south of the city centre,
alongside the M-50 motorway (Madrid ring road) intersecting the A-4
motorway (Spain’s main north-south motorway)
SPA signed/ closing Dec 2021
On-/ off-market On-market
Year of construction 2019
Net leasable area 11,264 sqm
Main tenants Amazon
Indexation 100% CPI (annual, capped at 3%)
WAULT (incl/ excl breaks) 0.6 / 7.6 years
Property specifications 11.2m clear height, LEDs, sprinklers, 5t/sqm floor load, yard depth >33m
and 8% office space, LEED Silver rating
48 Annual Report 2022
MADRID – GAVILANES 2.1
.
Urban logistics hub located in southern Madrid, the third largest city in
Europe with a metropolitan population of almost seven million people
.
Property is located in Gavilanes, just 17km south of the city centre,
alongside the M-50 motorway (Madrid ring road) intersecting the A-4
motorway (Spain’s main north-south motorway)
SPA signed/ closing Dec 2021
On-/ off-market On-market
Year of construction 2019
Net leasable area 9,512 sqm
Main tenants Carrefour
Indexation 100% CPI (annual, capped at 2%)
WAULT (incl/ excl breaks) 3.6 / 13.6 years
Property specifications 11.2m clear height, 5t/sqm floor load, LEDs, sprinklers, yard depth of 55m
and 13.6% office space, LEED silver rating
MADRID – GAVILANES 2.2
.
Urban logistics hub located in southern Madrid, the third largest city in
Europe with a metropolitan population of almost seven million people
.
Property is located in Gavilanes, just 17km south of the city centre,
alongside the M-50 motorway (Madrid ring road) intersecting the A-4
motorway (Spain’s main north-south motorway)
SPA signed/ closing Dec 2021
On-/ off-market On-market
Year of construction 2019
Net leasable area 7,718 sqm
Main tenants MCR
Indexation 100% CPI (annual, capped at 2%)
WAULT (incl/ excl breaks) 1.5 / 3.5 years
Property specifications 11.2m clear height, 5t/sqm floor load, LEDs, sprinklers, yard depth of 55m
and 13.6% office space, LEED silver rated
49Annual Report 2022
MADRID – GAVILANES 2.3
.
Urban logistics hub located in southern Madrid, the third largest city
in Europe with a metropolitan population of almost seven
million people
.
Property is located in Gavilanes, just 17km south of the city centre,
alongside the M-50 motorway (Madrid ring road) intersecting the A-4
motorway (Spain’s main north-south motorway)
SPA signed/ closing Dec 2021
On-/ off-market On-market
Year of construction 2019
Net leasable area 7,375 sqm
Main tenants ADER
Indexation 100% CPI (annual, uncapped)
WAULT (incl/ excl breaks) N/A
Property specifications 11.2m clear height, 5t/sqm floor load, LEDS, sprinklers, yard depth of 55m
and 13.6% office space, LEED silver rated
MADRID – GAVILANES 3.1
.
Urban logistics hub located in southern Madrid, the third largest city in
Europe with a metropolitan population of almost seven million people
.
Property is located in Gavilanes, just 17km south of the city centre,
alongside the M-50 motorway (Madrid ring road) intersecting the A-4
motorway (Spain’s main north-south motorway)
.
Property comprises two adjacent warehouse buildings of 16,500 sqm
and 10,665 sqm
SPA signed/ closing Dec 2021
On-/ off-market On-market
Year of construction 2019
Net leasable area 27,165 sqm
Main tenants Arrival
Indexation 100% CPI (annual, uncapped)
WAULT (incl/ excl breaks) 4.4/ 8.4 years
Property specifications 11.2m clear height, 5t/sqm floor load, LEDs, sprinklers, yard depth of
31 - 45m and 11% office space, LEED gold rated
50 Annual Report 2022
MADRID – GAVILANES 4
.
Urban logistics hub located in southern Madrid, the third largest city in
Europe with a metropolitan population of almost seven million people
.
Property is located in Gavilanes, just 17km south of the city centre,
alongside the M-50 motorway (Madrid ring road) intersecting the A-4
motorway (Spain’s main north-south motorway)
.
Amazon parcel delivery hub, optimised for last mile deliveries, including
multi-level van parking deck fully prepared for electric charging
capability and canopy with numerous van loading areas
SPA signed/ closing Dec 2021
On-/ off-market On-market
Year of construction Delivery Q2 2022
Net leasable area 16,467 sqm + 20,748 sqm parking deck
Main tenants Amazon
Indexation 100% CPI (annual, capped at 3%)
WAULT (incl/ excl breaks) 14.3 / 24.3 years
Property specifications 11.0m clear height, 7.5t/sqm floor load, LEDs, sprinklers, yard depth of
41m and 19% office space, BREEAM Very Good rating
51Annual Report 2022
Strategic Report
Group Structure
100%
100%
100%
100%
100%
100%
Leon
Coslada
Barcelona
Waddinxveen
ASELI
Waddinxveen B.V
Flörsheim
ASELI
Flörsheim B.V
ASELI
Leon B.V
Erlensee
ASELI
Erlensee B.V
Ede
Oss
ASELI
Netherlands I B.V
Holding 100%
less 1 share
ASELI
Meung SCI
Meung Sur Loire
Avignon
ASELI
Avignon SCI
abrdn European Logistics Income plc
(UK Investment Trust)
Poland
France
The Netherlands England & Wales Spain
ASELI France
Holding SAS
100%
Zeewolde
ASELI
Netherlands II B.V
100%
's Heerenberg
ASELI
‘s Heerenberg B.V
100%
100%
PDC Industrial
Centre 92
Sp. z o.o
Warsaw West VII
100%
Circulus
Investments SP
z.o.o.
Lodz
PDC Industrial
Centre 72
Sp. z o.o
Krakow Warehouse
Den Hoom
ASELI
Netherlands
Holdings B.V
100%
100%
ASELI
Den Hoorn BV
ASELI Madrid
Holding S.L
Phase I
100%
aELI madrid
Logistics 1 S.L.U
Phase II
Phase III
Holding 1 share
Holding 1 share
aELI
Immobilier SCI
Gevrey
aELI
Messageries SCI
La Creche
Bruges
Holding 1 share
Holding 1 share
aELI Madrid
Holdings 2 S.L
Phase IV
aELI Madrid
Logistics 2 S.L.U
100% 100%
100%
Entity country of domiciliation
52 Annual Report 2022
100%
100%
100%
100%
100%
100%
Leon
Coslada
Barcelona
Waddinxveen
ASELI
Waddinxveen B.V
Flörsheim
ASELI
Flörsheim B.V
ASELI
Leon B.V
Erlensee
ASELI
Erlensee B.V
Ede
Oss
ASELI
Netherlands I B.V
Holding 100%
less 1 share
ASELI
Meung SCI
Meung Sur Loire Avignon
ASELI
Avignon SCI
abrdn European Logistics Income plc
(UK Investment Trust)
Poland
France
The Netherlands England & Wales Spain
ASELI France
Holding SAS
100%
Zeewolde
ASELI
Netherlands II B.V
100%
's Heerenberg
ASELI
‘s Heerenberg B.V
100%
100%
PDC Industrial
Centre 92
Sp. z o.o
Warsaw West VII
100%
Circulus
Investments SP
z.o.o.
Lodz
PDC Industrial
Centre 72
Sp. z o.o
Krakow Warehouse
Den Hoom
ASELI
Netherlands
Holdings B.V
100%
100%
ASELI
Den Hoorn BV
ASELI Madrid
Holding S.L
Phase I
100%
aELI madrid
Logistics 1 S.L.U
Phase II
Phase III
Holding 1 share
Holding 1 share
aELI
Immobilier SCI
Gevrey
aELI
Messageries SCI
La Creche
Bruges
Holding 1 share
Holding 1 share
aELI Madrid
Holdings 2 S.L
Phase IV
aELI Madrid
Logistics 2 S.L.U
100% 100%
100%
Entity country of domiciliation
53Annual Report 2022
Environment, Social and
Governance (ESG)
The management of Environmental, Social and Governance issues is a fundamental
part of our business.
54 Annual Report 2022
Strategic Report
Sustainability, Impact and Futureproofing –
company approach
The Company believes that comprehensive assessment
of ESG factors leads to better outcomes for shareholders
and adopts the Investment Manager’s policy and
approach to integrating ESG which has been used as
the basis for establishing the Company’s ESG objectives.
The Investment Manager views ESG as a fundamental
part of its business. Whilst real estate investment provides
valuable economic benefits and returns for investors it has
– by its nature – the potential to affect environmental and
social outcomes, both positively and negatively.
The Investment Manager’s approach is underpinned by
the following three over-arching principles:
.
Transparency, Integrity and Reporting: being transparent
in the ways in which it communicates and discusses its
strategy, approach and performance with investors
and stakeholders.
.
Capability and Collaboration: drawing together
and harnessing the capabilities and insights of the
Investment Manager’s platforms, with those of its
investment, supply chain and industry partners.
.
Investment Process and Asset Management: integrating
ESG into decision making, governance, underwriting
decisions and asset management approach.
This includes the identification and management of
material ESG risks and opportunities across the portfolio.
The Investment Manager’s ESG approach groups
material sustainability indicators into four main categories:
(i) Environment & Climate; (ii) Demographics; (iii)
Governance & Engagement; and (iv) Technology &
Infrastructure. The Investment Manager has identified
21 different ESG ‘indicators’ that sit beneath these four
main categories. These 21 ESG indicators are considered
by the Investment Manager with a focus on those most
material to the Company. The risk and opportunities of
those most material indicators are assessed as part of the
Company’s investment decisions. This approach allows
the identification and promotion (where relevant) of
material ESG risks and opportunities relevant to a fund’s
investment strategy, sector and geography. These guide
the Company’s prioritisation and integration of ESG
factors at the asset level, whilst providing a structure for
engagement with, and reporting to, stakeholders.
The Investment Manager makes use of the expertise
within its ESG Real Estate team and is actively engaged
with the European Union, national governments and
industry working groups, including GRESB, the UK Better
Building Partnership and the UN Principles for Responsible
Investment (UN PRI). This ensures that it can help to
formulate government policies and that its management
teams are well informed of future government intent and
market direction.
Planet
Environment & Climate
Change
Biodiversity Vulnerability and Inclusion Diversity and Labour Rights Digital Connectivity
Outdoor Air Quality Accessibility and Experience Occupier Quality Smart Connectivity
Public Realm and Cultural Value Occupier
Waste and Circularity
Land and Water Contamination Affordability Occupier Engagement Physcial Connectivity
Noise Pollution Employment, Skills and Enterprise Patnerships
Water Efficiency
Climate Resilience
People
Demograpics
Process
Governance and
Engagement
Progress
Technology and
Infrastructure
Carbon and Energy
55Annual Report 2022
Of particular focus to the Company is climate change,
which represents one of the most material ESG issues,
both in terms of physical climate risk, and reducing the
emissions from the Company’s activities (i.e. addressing
transition risks).
In 2021, COP26 served to reinforce the need for the rapid
decarbonisation of the global economy. Conversely,
the outcomes of COP27 in November 2022 centred more
around the important issues of climate justice and climate
adaptation, rather than carbon reduction. As a result,
the world remains on trajectory towards 2.3 degrees
1
of warming.
The Investment Manager has an active approach to
reducing emissions across the portfolio through
assessment of energy performance prior to acquisition
and working with occupiers on solar PV projects, as well
as undertaking energy efficient refurbishments. In 2021
work was undertaken to establish the operational carbon
footprint baseline of the portfolio and begin to model a
pathway to net zero. This involved benchmarking the
performance of each asset, modelling the future
footprint, including embodied and operational carbon,
and identifying the types of measures necessary and
costs to fully decarbonise the portfolio over time.
Operational Performance Summary
The Investment Manager has processes in place to ensure
operational sustainability performance is monitored and
actions are implemented to drive continual improvement.
Due to the nature of the portfolio, comprised largely
of single-let assets, occupiers have direct control over
day-to-day operations. As a landlord, the Company can
influence ESG performance as assets are developed and
refurbished and when the Investment Manager engages
with occupiers on fit-outs, leases and during the course
of their occupation. However, the Company does not
have direct operational control day-to-day. Therefore the
approach is to engage with occupiers and encourage
data sharing as well as further collaboration projects such
as smart metering upgrades, satisfaction surveys and
sustainability audits on assets.
A large solar panel project in the Netherlands was
completed in 2022. Further PV projects in Spain, France
and Germany are under review.
Good progress has also been made with the collection
of the Company’s volumetric data on energy and water
consumption. In the future, we will look to automate this
process through the roll-out of smart meters and inclusion
of green lease clauses in agreements with portfolio
tenants, making it easier to analyse on a daily basis.
Such leases provide for the accurate reporting and
collation of usage data, enabling analysis to be undertaken
to help tenants to understand their outputs and to work
with the Company in seeking to reduce costs and impact.
The annual independently produced tenant
satisfaction survey helps inform the Investment Manager
and its local teams and ensures close contact with
tenants. Other initiatives include the re-tendering of
energy contracts in Poland and Germany resulting in
the Company signing renewable energy contracts.
Three assets in the Netherlands obtained BREEAM-In-
Use certificates. The results of these assessments will
help guide potential to improve building efficiency and
ultimately reduce environmental impact through energy
savings, biodiversity and community engagement.
ESG Disclosure
EPRA Sustainability Best Practice Recommendations
The Company has adopted the 2017 EPRA Sustainability
Best Practice Recommendations Guidelines (sBPR) to
inform the scope of indicators reported against.
The Company has reported against all EPRA sBPR
indicators that are material to it. The Company also
reports additional data not required by the EPRA sBPR
where it believes this to be relevant (e.g. like-for-like
greenhouse gas emissions).
A full outline of the scope of reporting and materiality
review in relation to EPRA sBPR indicators is included below.
The portfolio comprises predominantly tenant-controlled
assets, where the vast majority is outwith the Company’s
direct control. Where we do have control, we have full
coverage of data, which is disclosed in the EPRA
tables below.
The ESG dataset (including energy, GHG and water
data) disclosed in this report has been subject to limited
assurance by an external third-party in accordance with
the International Standard on Assurance Engagements
(UK) 3000.
Sustainable Finance Disclosure Regulation (SFDR)
The Company falls in-scope of the EU’s Sustainable
Finance Disclosure Regulation, and is classed as an Article
8 Fund which does not have a sustainable investment
objective, but promotes environmental and social
characteristics as part of its investment process.
1
2.3 degrees of warming is based on a probability weighted mean climate scenario. Read more on our Investment Manager’s website at:
www.abrdn.com/en-gb/institutional/sustainable-investing/climate-change/climate-scenario-analysis
56 Annual Report 2022
The Company’s periodic disclosure documentation
required as part of its SFDR obligations is shown within the
Corporate Information section of this document.
2022 GRESB Assessment
The GRESB Assessment is the leading global sustainability
benchmark for real estate vehicles. The Company was
reviewed by GRESB in 2022 and achieved a score of 86 out
of 100 points and placed 2nd out of 6 within its peer group
(achieving a 4-star rating). The Company is in a strong
position to further build on this performance in 2023.
Our Approach to Climate Change
Transition Risks: Pathway to Net Zero
Transition risks are those that relate to an asset, portfolio
or company’s ability to decarbonise. An entity can be
exposed to risks as a result of carbon pricing, regulation,
technological change and shifts in demand related to the
transition.
The Company’s net zero principles
Although a pathway may seem clear, definitions and
standards on net zero and the policy mix to support it
remain immature. In this context, several key principles
need to be established that underpin the strategy to
ensure it has integrity, robustness and delivers value:
.
Practical:
.
Asset-level action: focusing on energy efficiency and
renewables is a priority to ensure compliance with
energy performance regulations. This improves the
quality of assets for occupiers and reduces exposure
to regulatory and market risk.
.
Timing: the Company aims to align improvements
and planned refurbishment activities wherever
possible. This ensures that functional equipment is not
replaced well ahead of end-of-life unless necessary,
which reduces cost and embodied carbon.
.
Realistic:
.
Target s: long-term targets must be stretching but
deliverable and complemented by near-term targets
and actions.
.
Policy support: it is important to recognise that to
fully decarbonise the real estate sector requires a
supportive policy mix to incentivise action and level
the playing field.
.
Collaborative:
.
Occupiers: net zero cannot be achieved in isolation.
The Company will work closely with tenants, many of
whom have their own decarbonisation strategies
covering their leased space. Many of the portfolio
tenants have their own decarbonisation commitments
and the Company’s interests are aligned on this issue.
.
Suppliers: the Company will work with suppliers,
including property managers and consultants,
in order that all stakeholders are clear on their role
in the pathway to net zero.
.
Measurable:
.
Clear key performance indicators at the asset and
portfolio level.
57Annual Report 2022
Company baseline
The Company’s operational carbon footprint for 2020 is
shown opposite and is used as the Company’s baseline.
This represents a total operational footprint of 12,159 tonnes
of carbon dioxide equivalent (CO2e).
Of this, 7% is associated with Scope 2
1
emissions that are
in the direct control of the Company which it seeks to
minimise and 93% are Scope 3 emissions from tenant-
procured energy and purchased goods and services.
Note that the approach to apportionment of Scope 1,
2 and 3 emissions for the purposes of net zero analysis
differ somewhat to the approach taken for the disclosure
of the EPRA sBPR indicators.
For 2020, actual energy consumption data for 72% of the
portfolio by floor area was available with representative
industry standard benchmarks used to estimate
the balance.
The Company is in the process of completing an annual
update towards a net zero pathway, using Scope 1, 2 and 3
data obtained for the calendar year 2021. However,
the time-lag associated with collection of Scope 3 data
(from our tenants) and completion of the subsequent net
zero analysis means that this analysis is not yet complete.
The Company expects to complete this analysis in the first
half of 2023, the outputs of which will enable us to measure
progress against the 2020 baseline and identify key next
steps to maximise the Company’s net zero performance,
and to facilitate clear net zero target setting. Note that
the Company has also commenced the data collection
process for the calendar year of 2022; the Scope 1 and
2 elements of which are disclosed in full in the EPRA
sBPR indicators sections below. The collection of Scope
3 (tenant) data for the calendar year is also in progress
and this data will be used in future net zero analysis of the
portfolio. This analysis will enable us to measure progress
against our 2020 baseline and identify key next steps to
maximise the Company’s net zero performance, and to
facilitate clear net zero target setting.
1
a. Scope 1 and 2 – These are emissions that directly result from the landlord’s
activities where there is operational control, either through the purchase and
consumption of energy or refrigerant losses.
b. Scope 3 – These are emissions that occur in supply chains and downstream
leased assets (i.e. tenant spaces) over which the Company has a degree of
influence but limited control.
Tenant Energy Consumption
(Scope 3)
Landlord Electricity
(Scope 2)
Purchased Goods and Services
(Scope 3)
89%
7%
4%
12,159 tonnes CO2e
58 Annual Report 2022
Our delivery strategy
Near-term Long-term
Target s Improve emissions intensity across all scopes by
50% in the near-term from a 2020 baseline.
Net zero across all emissions scopes over the
long-term.
Context Setting an intermediate target is a sensible
stepping-stone towards long-term
decarbonisation. In the near-term activities
are focused on occupier engagement and
compliance with energy performance
regulations which will mean investment in energy
efficiency, heat decarbonisation and renewable
energy when undertaking refurbishment works.
The Company recognises that it cannot deliver
in isolation and this requires both co-operation
from property occupiers and a supportive
policy mix to drive decarbonisation in the real
estate sector.
To meet the European Commission’s net zero
commitments the buildings sector will have
to substantially decarbonise by 2050 through
energy efficiency and the decarbonisation of
heat and electricity. The Company will aim
to reach a long-term target through these
measures with as little use of offsets as possible.
When set, the long-term target will be kept
under review in the context of the policy-mix and
market dynamics affecting the decarbonisation
of real estate.
Near-term
delivery actions
Standing portfolio:
.
Improve ability to obtain tenant energy data through improved engagement, lease agreements and
smart meters.
.
Build improved understanding of tenant decarbonisation strategies and extent of tenant renewable
energy procurement.
.
Implement low-carbon refurbishments to ensure regulatory compliance focusing on energy
efficiency and heat decarbonisation and start to quantify and reduce embodied carbon.
.
Continue to implement solar PV projects and establish power purchase agreements with tenants.
Acquisitions and developments:
.
In line with the Investment Manager’s policies:
.
benchmark assets pre-acquisition, understand costs and build decarbonisation into the asset
management plan from the start of ownership.
.
direct development to be designed to whole life net zero principles.
Measurement
indicators
Standing portfolio:
.
%age of tenants data coverage.
.
Absolute portfolio emissions (tCO2e).
.
Energy and emissions intensity (kwh/m2,year; kg CO2e/m2/year).
.
Installed solar capacity (MWp).
.
Embodied carbon of development projects.
59Annual Report 2022
Physical Climate Risk
Company Approach to Physical Climate Risks
Physical risks are those that relate to an asset’s
vulnerability to factors such as increasing temperatures
and extreme weather events as a result of climate change.
Exposure to physical risks may result in, for example,
direct damage to assets, rising insurance costs or supply
chain disruption. The costs of adaptation (i.e. the
infrastructure required to protect from physical damage)
should also be considered. To date, the Company has
engaged in 3 rounds of analysis to evaluate the acute and
chronic physical risks associated with the buildings owned
by the Company. The results of this assessment include
(but are not limited to) an overview of how asset value at
risk may change over time, as a result of chronic and acute
physical risks.
Results of Analysis
In the first two rounds of analysis (concluded in 2021 and
2022 respectively), the Company’s assets were modelled
under a “worst-case” climate change scenario (an increase
of around 4 degrees Celsius, above pre-industrial levels)
to identify any relevant physical risks. This round of
analysis completed in 2022 showed a marginal increase
in operational costs until 2050, driven by the increase in
cooling costs, due to the climate change related increase
in average temperatures. Decreasing heating costs offset
most of the cost increase due to cooling costs and water
stress so, until 2050, cost changes are not significant.
From 2050 to 2080, operational costs increase further,
as the cooling, water stress and wildfire costs intensify
across some assets, exceeding the savings from the
reduced need to heat the assets.
It should be noted that data quality and methodologies
in the physical climate risk space are continually evolving,
and the Company continues to work with an external
third-party data provider to analyse such risks, and their
materiality. It should also be noted that no significant
risks to the Company’s assets have been identified at this
stage. In the event significant risks are identified by any
subsequent physical climate risk analysis, the Company will
take appropriate action to limit its exposure to such risks.
Next Steps
Physical climate risk assessment remains a fundamental
part of the Investment Manager’s investment process,
and are considered in detail during acquisition, asset-
management and development/refurbishment.
The next phase of physical climate risk assessment
against an increased number of scenarios is currently
being finalised; and the results of such analysis will be used
to inform any subsequent required measures to limit our
exposure to such risks. The intention of the third round of
physical climate risk analysis is to obtain a more holistic
view of the physical risks associated with the Company’s
assets, under a broader range of climate scenarios.
Taskforce for Climate-Related Financial
Disclosures (TCFD)
TCFD was established to provide a standardised
way to disclose and assess climate-related risks and
opportunities. Recommendations are structured around
four key topics: Governance, Strategy, Risk Management
and Metrics & Targets. Whilst the Company as a closed
ended investment company is exempt from providing
a TCFD statement under LR9.8.6(8), it is committed to
implementing the recommendations of the TCFD to
provide investors with information on climate risks and
opportunities that are relevant to the business. This is the
second year that the Company is voluntarily reporting
certain disclosures in reference to TCFD recommendations
and it expects such disclosures to evolve over time as
methodologies improve and work develops further.
TCFD covers risks and opportunities associated with the
two overarching categories of climate risk, transition and
physical as described above.
The table below provides a brief overview of the Company’s
approach to 10 of the 11 TCFD recommendations.
Investors should note that this disclosure against the TCFD
recommendations is entirely voluntary and the Company
will work towards a more comprehensive TCFD disclosure
in the coming years and towards being consistent against
all 11 TCFD recommendations. It is expected that this
reporting against TCFD recommendations will continue to
evolve over time as industry methodologies improve and
the Investment Manager’s work develops further.
60 Annual Report 2022
TCFD Recommendation Company Approach
Governance
Board oversight of climate-related
risks and opportunities
The Board will consider climate-related risks and opportunities alongside all other Company
risks which fall under its remit. In addition, the Board, alongside the Investment Manager,
will consider climate-related issues as part of the investment process, such as for investment
decisions involving acquisitions, disposals and strategic planning.
Investment Manager’s role in
assessing and managing climate-
related risks and opportunities
At an operational level, the Investment Manager is responsible for integrating consideration of
climate risks and opportunities into the investment and asset management process. In the first
instance this is undertaken by adopting abrdn real estate’s internal processes and policies,
and reporting to the Board.
The Company adopts the Investment Manager’s approach to integrating ESG in the investment
process, and climate related risks and opportunities are considered the most material
ESG topic relating to the Company. As such, climate risk and opportunities are considered
throughout the investment process, including for acquisitions, asset/property management,
refurbishment, development and strategic planning.
Strategy
Climate-related risks and
opportunities the Company has
identified over the short, medium,
and long-term
As part of the investment and asset management process climate-related risks and
opportunities will be considered over a range of timescales. A summary of an initial assessment
over the short, medium and long-term is as follows.
In the short term (0–5 years) it is anticipated that regulations affecting the energy performance
and emissions of buildings will tighten to align more closely with Government targets for
economy-wide decarbonisation. Whilst this will provide clarity of direction, it is likely to increase
development and refurbishment costs and will start to affect valuations. These trends, however,
should also create opportunities to benefit from expected occupier and investor demand for
low-carbon, future-fit assets.
Over the medium term (5–15 years) these trends should continue and it is expected that
regulations and market sentiment will further drive energy efficiency and decarbonisation.
Significant technological change is expected, particularly in relation to heat pump solutions
which should improve the technical and financial feasibility of decarbonising heat in buildings.
Over the long-term (15+ years) climate-related extreme weather events are likely to increase
in frequency and severity which may impact built environment assets depending on their
location and characteristics. The Investment Manager has started assessing physical climate
risks and opportunities based on the geographical location of assets.
The impact of climate-related
risks and opportunities on the
businesses, strategy, and financial
planning, where material
The Board recognises that climate change will affect the built environment, both through
decarbonisation and increased physical risks. The trends summarised above are therefore
expected to affect the Company’s strategy and operations in the coming years. In recognition
of the importance of decarbonisation, together with the Investment Manager, the Company
has set a carbon baseline for 2020 and is currently completing a net zero pathway analysis
using data collected for the 2021 calendar year. This will enable the Company to review
progress against its baseline.
In 2022, appointed advisers completed an assessment of ‘value at risk’ as a result of physical
climate risks under the RCP8.5 climate scenario which implies a 4.3° C temperature rise by
2100 (described above in Physical Climate Risk). The next phase of the climate scenario
analysis is being finalised, which includes the assessment of climate risks under a broader
range of climate scenarios.
Meaningful analysis will allow the Investment Manager to estimate the costs associated
with transition or physical climate risks and account for these within its investment
return calculations.
61Annual Report 2022
TCFD Recommendation Company Approach
The resilience of the strategy,
taking into consideration different
climate-related scenarios,
including a 2°C or lower scenario
Progress against long-term aims will be tracked against a net zero carbon baseline using
interim energy and emissions intensity targets at the portfolio and asset levels.
The work is informed by industry benchmarks including the Carbon Risk Real Estate Monitor
(CRREM) 1.5°C Paris-aligned emissions trajectories. As part of this work high-level cost
estimates for transitioning assets to net zero may be calculated.
The Investment Manager will continue to engage with industry bodies, such as the Better
Building Partnership, to standardise net zero definitions across the industry. It is recognised
that achieving this level of decarbonisation will require supportive climate policy and the
cooperation of tenants and suppliers.
Recent work on understanding ‘value at risk’ as a result of physical climate risk has highlighted
the importance of considering changes in wind speeds and flood risk over time together
with the implications of rising temperatures on the demand for cooling within buildings. An
initial assessment of these results is that, in general under the RCP8.5 high emissions scenario,
physical climate risks generally result in a valuation impact to assets of below 1% by 2080 and
there are no meaningful effects until after 2040. Most of the impact is associated with additional
cooling demand due to rising temperatures. The existing portfolio and Company strategy is
expected to be resilient to physical climate risks in the short to medium term. Regular review will
be required as methodologies for physical risk assessment improve.
Risk Management
The processes for identifying and
assessing climate-related risks
Climate-related risks and opportunities are considered and assessed by the Board as a whole
as advised by the Investment Manager and appointed consultants.
The Company employs the Investment Manager’s approach to addressing climate risks and
opportunities as part of the investment process. This includes assessment of transition and
physical climate risks during acquisition due diligence, asset management, refurbishment,
development and portfolio-level strategic planning.
Transition climate risks will be considered through net zero carbon analysis, to determine the
extent to which the portfolio aligns with defined net zero targets, and to define indicative high-
level capital expenditure figures for any decarbonisation of the portfolio in line with a net zero
pathway. A third-party data provider is used to assess ‘value at risk’ (amongst other indicators)
associated with several climate hazards, over multiple time horizons and climate scenarios.
62 Annual Report 2022
TCFD Recommendation Company Approach
The processes for managing
climate-related risks
A high-level overview of the Investment Manager’s processes for assessing and managing
climate risks for ‘acquisitions’ and ‘standing investments’ is included below:
On acquisition:
Transition Risks: the current ESG due diligence process involves the assessment of transition
risks at both the pre-bid and post-bid stage, with the aim of reducing exposure to transitional
climate risks going forward. At the pre-bid stage, all available information about the asset
is used, including its context and regulatory backdrop (including the use of EPC ratings and
comparing against current and emerging legislation), alongside the Investment Manager’s
in-house decarbonisation guidance and ESG priorities, to form a view of anticipated
decarbonisation costs over the next 10-year period. Where appropriate, such decarbonisation
capital expenditure is captured as part of the pre-bid screen and meeting; which subsequently
feeds into review papers. When detailed due diligence is completed, the assumptions around
decarbonisation for compliance and net zero alignment (using a 1.5C CRREM pathway) are
refined by an external consultant. This allows for a better understanding of the potential costs
that could be incurred in the future for decarbonisation. Such findings are included in a pre-
signing checklist prior to deal completion.
Physical Risks: As part of any pre-bid ESG screen/meeting, a mapping tool is used to screen
assets (based on their geographical location) against up to 8 different physical climate risks
across different time horizons (current, 2030, 2050, 2100) under different climate scenarios
including Low (RCP2.6), Intermediate (RCP4.5) and High (RCP8.5) scenarios. This tool can be
used alongside available online mapping provided by environmental regulators/authorities in
the given country (where and if available). Such risks are considered at pre-bid stage in a “go/
no-go” context. Flood risk will be assessed in further detail by an external third-party, alongside
any other physical climate risks identified during the pre-bid screen.
Standing Investments:
Transition Risks: The Company has completed initial net zero analysis with the support of a
third-party consultant, to establish a carbon baseline for 2020 and to complete a net zero
pathway update using data collected during the 2021 calendar year. Such analysis will allow
the Company to review progress against any net zero targets it vsets and flag any high risk
assets.
Physical Risks: An exercise has been undertaken with an external consultant to assess the
assets within the portfolio against 7 hazards which are expected to impact real estate due to
climate change out to 2080. These have been modelled in a worst-case scenario (RCP8.5).
Results of further analysis under a greater number of scenarios will be finalised in due course.
Metrics and Targets
The metrics used to assess climate
related risks and opportunities
in line with strategy and risk
management process
The Company discloses below greenhouse gas emissions (alongside other related ESG
performance metrics on energy and water consumption, waste generation and disposal
routes) in line with EPRA Sustainability Best Practices Recommendations. As part of a
decarbonisation strategy progress will be tracked against the long-term aim using interim
energy and emissions intensity targets at the portfolio and asset levels.
Scope 1, Scope 2 and, if
appropriate, Scope 3 greenhouse
gas (GHG) emissions and the
related risks
The Company discloses below its emissions in line with EPRA Sustainability Best Practices
Recommendations. This covers Scope 1 and 2 emissions associated with landlord-procured
energy as well as Scope 3 emissions from energy procured by occupiers. 2020 data is used as
a baseline for measurements as this is prior to any disruption to measurement caused by the
COVID-19 pandemic.
The targets used to manage
climate related risks and
opportunities and performance
against targets
The Company will in due course set long-term and short-term decarbonisation targets and
define a practical strategy with KPIs. The Company also looks to improve its GRESB score
year-on-year.
63Annual Report 2022
Sustainability Performance
This section details the Company’s sustainability
performance using the EPRA Sustainability Best Practice
Recommendations Guidelines (sBPR). It also meets
the requirements for Streamlined Energy and Carbon
Reporting (SECR) under the Companies (Directors’
Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018.
Explanatory notes on methodology
Reporting period
This is a relatively new investment vehicle created to
specifically invest in logistics assets and as a result,
the Company is in a position where it can only report on
some of the indicators as determined in the materiality
assessment. The Company was launched in December
2017 with the first asset acquired in February 2018.
Sustainability data in this report covers the calendar
years of 2021 and 2022.
Changes to disclosure methodology vs last year
In previous Company annual reports, EPRA ESG
disclosures have included both landlord ESG data
(e.g. Scope 1 and 2 GHG emissions) and tenant ESG
data (e.g. Scope 3 GHG emissions) for the reporting
year. However, collecting a complete, accurate and
meaningful ESG dataset from tenants which is directly
comparable/consistent with the previous year, within the
annual reporting timescales, is challenging. This results
in the collection of incomplete data, which is not possible
to disclose in a meaningful way, especially in terms of
year-on-year comparisons. This also results in a need for
additional tenant ESG data collection following annual
report publishing, which results in subsequent inconsistent
ESG data disclosures throughout the year (e.g. when
GRESB data is compared with annual reporting data).
As a result, for the EPRA disclosures in this year’s annual
report, the focus has been on collecting and reporting
landlord ESG data only, given that this data is within the
Company’s direct control, and therefore fully complete;
resulting in more meaningful disclosures and year-on-year
comparisons. It should be noted that landlord ESG data for
the portfolio is relatively limited, given the tenant-controlled
nature of the assets.
Note that regardless of the above, the Company will
continue to focus on collecting tenant ESG data (e.g.
Scope 3 emissions) for the purposes of its GRESB
submission (to be finalised in June 2023) and for it’s own
net zero modeling; which in turn will be disclosed as part
of future Company annual reports.
Organisational boundary and data coverage
The Company defines its organisational boundary
as where it has direct operational control of activities.
The Company’s disclosures in this report are therefore
confined to where it has direct control over a given ESG
indicator; for example where the Company procures its
own utilities for its assets under management. Given the
nature of the Company’s assets (predominantly single-let,
occupier-controlled assets with occupier-managed utility
supplies), there is naturally a relatively limited selection
of ESG indicators to report which are directly under
Company’s control. However, where such ESG indicators
do fall within the Company’s organisational boundary,
these have been disclosed in full in this report. Note that
the Investment Manager undertakes extensive work
throughout the first half of each year to collect ESG data
points beyond its direct control/organisational boundary
(e.g. occupier procured utility data), which are disclosed
as part of the Company’s GRESB submission, the reporting
for which is issued later in the year.
The data reported below differs from the baseline carbon
footprint reported. This is because:
.
The baseline carbon footprint relates to the reporting
year of 2020 (whereas the data disclosed in this section
relates to 2021 and 2022); and,
.
The baseline carbon footprint includes estimates in to
fill gaps in occupier data, to allow us to obtain a fuller
understanding of the Company carbon footprint across
all emissions scopes.
The like-for-like portfolio is determined on the basis of
assets that were held for two full reporting years and were
not subject to major refurbishment or development during
that time.
The Company does not manage any of the waste
generated from any of its assets; rather the occupiers
manage this directly (and therefore such waste
performance data falls beyond the Company’s
organisational boundary, and is therefore not disclosed
in this report). The Company does not employ any staff
and does not have its own premises; these corporate
aspects fall within the scope of the Investment Manager.
Normalisation
The floor areas used for normalisation are those used for
independent valuation purposes. Measurement practices
deviate marginally from jurisdiction to jurisdiction but cover
the internal lettable area. This is the most appropriate
choice for the Company’s portfolio as it is the most widely
available metric. It enables year-on-year comparisons
within the portfolio to be made.
Strategic Report
ESG Performance Data (EPRA)
64 Annual Report 2022
Auditing and assurance
An increasing proportion of landlord utility data contracts are owned by the Company’s Utilities Bureau/data consultant,
who also validate this data (which feeds into the Company’s sustainability reporting). The ESG dataset (including energy,
GHG and water data) disclosed in this report has been subject to limited assurance by an external third-party in
accordance with the International Standard on Assurance Engagements (UK) 3000.
Materiality
The Company has undertaken a review of materiality against each of the EPRA sBPR indicators. The table below
indicates the outcome of the review.
Code Performance measure Review outcome
Environmental
Elec-Abs Total electricity consumption Material (for the electricity procured for
the assets by the landlord only)
Elec-LfL Like-for-like total electricity consumption Material (for the electricity procured for
the assets by the landlord only)
DH&C-Abs Total district heating & cooling consumption Not material – none of the Company’s
assets are connected to district energy
supplies
DH&C-LfL Like-for-like total district heating & cooling consumption
Fuels-Abs Total fuel consumption Material (for the fuel (e.g. gas) procured
for the assets by the landlord only)
Fuels-LfL Like-for-like total fuel consumption Material (for the fuel (e.g. gas) procured
for the assets by the landlord only)
Energy-Int Building energy intensity Material (for the energy procured for
the assets by the landlord only)
GHG-Dir-Abs Total direct greenhouse gas (GHG) emissions Material (for Scope 1 and 2 GHGs only,
associated with utility consumption
under landlord control/procurement)
GHG-Indir-Abs Total indirect greenhouse gas (GHG) emissions Material (for Scope 1 and 2 GHGs only,
associated with utility consumption
under landlord control/procurement)
GHG-Int Greenhouse gas (GHG) emissions intensity from
building energy consumption
Material (for Scope 1 and 2 GHGs only,
associated with utility consumption
under landlord control/procurement)
Water-Abs Total water consumption Material (for the water procured for the
assets by the landlord only)
Water-LfL Like-for-like total water consumption Material (for the water procured for the
assets by the landlord only)
Water-Int Building water intensity Material (for the water procured for the
assets by the landlord only)
Waste-Abs Total weight of waste by disposal route Not material – all waste management is
under the direct control of the building
occupiers, and there are no landlord-
managed waste contracts.
Waste-LfL Like-for-like total weight of waste by disposal route Not material – all waste management is
under the direct control of the building
occupiers, and there are no landlord-
managed waste contracts.
Cert-Tot Type and number of sustainably certified assets Material
65Annual Report 2022
Code Performance measure Review outcome
Social
Diversity-Emp Employee gender diversity Not material – the Company has
no employees. There are 2 male and 2
female directors on the board
Diversity-Pay Gender pay ratio Material - the gender pay ratio is 53/47
male to female. Of the two male and
two female board members, one male
is the company Chair with greater
responsibilities and consequently higher
remuneration.
Emp-Training Employee training and development Not material
(there are no company employees)
Emp-Dev Employee performance appraisals Not material
(there are no company employees)
Emp-Turnover New hires and turnover Not material
(there are no company employees)
H&S-Emp Employee health and safety Not material
(there are no company employees)
H&S-Asset Asset health and safety assessments Material
H&S-Comp Asset health and safety compliance Material
Comty-Eng Community engagement, impact assessments and
development programs
Not Material
Governance
Gov-Board Composition of the highest governance body
Material – see main body of
report (page 71 onwards for content
related to Governance)
Gov-Selec Process for nominating and selecting the highest
governance body
Gov-CoI Process for managing conflicts of interest
66 Annual Report 2022
Absolute Energy Consumption
Due to the nature of the portfolio, the landlord energy data disclosed in this table is typically associated with common parts
at multi-let assets (except for Poland where the landlord procures energy for the whole asset). The energy consumption
tables do not include any tenant procured energy, due to the challenges outlined in section “Changes to disclosure
methodology vs last year” above. Absolute landlord electricity consumption increased by 23% year-on-year, primarily driven
by significant increases at Getafe, Madrid Phase 2 (due to a ramp up of operations in 2022), alongside modest increases
at Lodz ul. Jędrzejowska, and Panattoni Park West VII Warsaw. These increases were offset by reductions in electricity
consumption at Florsheim, Erlensee, Panattoni Park IV Krakow and Gavilanes, Madrid Phase 1. Landlord gas consumption
decreased by 12% due to decreases in consumption at all assets except Lodz ul. Jędrzejowska. Absolute energy intensity
increased by 6% year-on-year. There is no landlord energy procurement across any of the 5 assets acquired in 2022,
hence why data coverage is confined to 10 assets in both 2021 and 2022.
Landlord Electricity
(kWh)
Landlord-obtained Gas
(kWh)
Total Energy
(kWh)
Energy Intensity
(kWh/ sqm)
Indicator references Elec-Abs Fuels-Abs Fuels-Abs Energy-Int
Sector
Coverage
2021
(assets)
Coverage
2022
(assets) 2021 2022
%
Change 2021 2022
%
Change 2021 2022
%
Change 2021 2022
%
Change
Industrial, Distribution
warehouse 10 of 23 10 of 28 8,180,375 10,094,774 23% 7,911,280 6,928,164 -12% 16,091,655 17,022,938 6% 83 88 6%
Absolute Greenhouse Gas Emissions
Scope 1 emissions reduced by 13% year-on-year, driven by the reductions in gas consumption outlined above.
Scope 2 emissions increased by 8% year-on-year, as a result of increased electricity consumption at Gavilanes,
Madrid Phase 2, Lodz ul. Jędrzejowska and Panattoni Park West VII Warsaw. Absolute emissions intensity increased
by 6% between 2021 and 2022.
Scope 1 Emissions
(tCO
2
)
Scope 2 Emissions
(tCO
2
)
Total Emissions
(tCO
2
)
Emissions Intensity -
Scopes 1 & 2
(kgCO
2
/m
2
)
Indicator references GHG-Dir-Abs GHG-Indir-Abs GHG-Abs GHG-Int
Sector
Coverage
2021
(assets)
Coverage
2022
(assets) 2021 2022
%
Change 2021 2022
%
Change 2021 2022
%
Change 2021 2022
%
Change
Industrial, Business
Parks 10 of 23 10 of 28 1449 1265 -13% 5361 5808 8% 6810 7073 4% 35 37 6%
For the purposes of Streamlined Energy and Carbon Reporting (SECR) Scope 1 and 2 emissions are reported separately
below along with an intensity metric and total landlord energy consumption. Energy consumption used to calculate these
emissions is include in the Absolute Energy Consumption table above.
SECR table - GHGs
Data Type 2021 2022 % Change 2022 vs 2021
Total Scope 1/2 GHG Emissions (tCO2e) 6810 7073 4%
Emissions Intensity (kgCO2e/m2 NLA) 35.2 36.6 4%
Total Landlord Energy Consumption (kWh) 16,091,655 17,022,938 6%
Strategic Report
Environmental Indicators
67Annual Report 2022
Like-for-like Energy Consumption
On a like-for-like basis, landlord electricity and gas consumption decreased by 1% and 16% respectively, with an overall
like-for-like energy intensity decrease of 10%. These reductions were driven by reduced consumption across all like-for-
like assets across all utility types, except for a slight increase in electricity consumption at Panattoni Park West VII Warsaw.
Landlord Electricity
(kWh)
Landlord-obtained Gas
(kWh)
Total Energy
(kWh)
Energy Intensity
(kWh/ sqm)
Indicator references Elec-Like for Like Fuels-Like for Like Fuels-Like for Like Energy-Int Like for Like
Sector
Coverage
(assets) 2021 2022
%
Change 2021 2022
%
Change 2021 2022
%
Change 2021 2022
%
Change
Industrial, Distribution
warehouse 4 of 14 4,216,761 4,193,690 -1% 6,875,029 5,809,195 -16% 11,091,790 10,002,885 -10% 107 96 -10%
Like-for-like GHG Emissions
Scope 1 GHG emissions decreased by 16% as a result of decreased gas consumption at like-for-like assets.
Scope 2 emissions increased by 1%.
Scope 1 Emissions
(tCO
2
)
Scope 2 Emissions
(tCO
2
)
Total Emissions
(tCO
2
)
Emissions Intensity -
Scopes 1 & 2
(kgCO
2
/m
2
)
Indicator references GHG-Dir-Like for Like GHG-Indir-Like for Like GHG-Like for Like GHG-Int-Like for Like
Sector
Coverage
(assets) 2021 2022
%
Change 2021 2022
%
Change 2021 2022
%
Change 2021 2022
%
Change
Industrial, Business Parks 4 of 14 1259 1060 -16% 2777 2794 1% 4036 3854 -5% 39 37 -5%
Absolute Water Consumption
As with other ESG data-points disclosed above, the nature of the portfolio is such that the landlord water data disclosed
in this table is typically just that associated with common parts at multi-let assets. The water consumption tables do
not include any tenant procured water, due to the challenges outlined in section “Changes to disclosure methodology
vs last year” above. Absolute water consumption intensity (litres/m2) increased by 39% year-on-year, primarily driven
by a significant increase in water consumption at Erlensee, Panattoni Park West VII Warsaw, Lodz ul. Jędrzejowska and
Gavilanes, Madrid Phase 2 (due to a ramp up of operations in 2022). Water consumption also increased as a result of a
greater number of assets with landlord water consumption in 2022 (11 assets), compared with 2021 (10 assets).
Absolute Water Consumption (m
3
)
Indicator reference Water-Abs; Water-Int
Sector
Coverage 2021
(assets)
Coverage 2022
(assets)
2021
(m
3
)
2021 intensity
(litres/m
2
)
2022
(m
3
)
2022 intensity
(litres/m
2
)
%
Change
Industrial, Distribution warehouse 10 of 23 11 of 28 19,642 102 29,802 142 39%
Like-for-like Water Consumption
Like-for-like water consumption intensity increased by 54% year-on-year, as a result of increases in water consumption
at Erlensee and Panattoni Park West VII Warsaw.
Like-for-like Water Consumption (m
3
)
Indicator reference Water-Lfl; Water-Int
Sector
Coverage
(assets)
2021
(m
3
)
2021 intensity
(litres/m
2
)
2022
(m
3
)
2022 intensity
(litres/m
2
)
% Change
(Intensity)
Industrial, Distribution warehouse 4 of 14 13,106 126 20,175 194 54%
68 Annual Report 2022
Absolute and Like-for-Like Waste Generation
There are no landlord managed waste contracts in the portfolio. All waste is managed directly by occupiers, and
therefore is not considered within the Company’s organisational boundary. As a result, waste metrics have not been
reported on.
Renewable energy
Solar PV is installed at nine properties within the portfolio, please see below:
Property Country Comment
Avignon France Fully optimised
Barcelona Spain Minimal coverage but scope to optimise
Den Hoorn Netherlands Fully optimised
Ede Netherlands Fully optimised
Leon Spain Minimal coverage
Oss Netherlands Minimal coverage but scope to optimise
Waddinxveen Netherlands Fully optimised
Warsaw Poland Minimal coverage but scope to optimise
Zeewolde Netherlands Minimal coverage but scope to optimise
Sustainability Certifications
The below metric measures the percentage Gross Asset Value (GAV) of all properties held that have achieved a Green
Building rating/certificate on completion compared to the percentage GAV for the whole portfolio during the reporting
year. This includes stock recently acquired, held for the long-term and those refurbished, developed or forward funded.
2018 2019 2020 2021 2022
% assets under management 17 39 40 55 69
Certified properties
Property Unit Certificate type Rating
Flörsheim Whole DGNB Gold
León Whole BREEAM Good
Avignon Whole HQE Excellent
Oss Whole BREEAM Very Good
Ede Whole BREEAM Good
Zeewolde Whole BREEAM Very Good
Waddinxveen Whole BREEAM Pass
Den Hoorn Whole BREEAM Good
Lodz Whole BREEAM Good
Madrid 3 S.L Gavilanes A Whole LEED Silver
Madrid 3 S.L Gavilanes B Whole LEED Silver
Madrid 4 S.L Gavilanes 1 Whole LEED Silver
69Annual Report 2022
Property Unit Certificate type Rating
Madrid 4 S.L Gavilanes 2 Whole LEED Silver
Madrid 4 S.L Gavilanes 3 Whole LEED Silver
Madrid 1 S.L Gavilanes 1 Whole LEED Gold
Madrid 1 S.L Gavilanes 2 Whole LEED Gold
Madrid 1 S.L Gavilanes IV Whole BREEAM Very Good
Energy Performance Certificate (EPC) ratings for assets owned by the Company are shown below:
Energy Performance Certificate (EPC) rating % Net Lettable Area (NLA)
A+++++ 9%
A 49%
B 30%
C 1%
D 0%
E 0%
F 2%
G 1%
German Rating 8%
Social Indicators
Diversity
The Board is diverse on a gender basis, comprising two males and two females. The gender pay ratio is 53/47 male to
female. Of the two male and two female board members, one male is the Company Chair with greater responsibilities
and consequently higher remuneration which skews the remuneration figures.
Health & Safety
All tenants occupying assets in the portfolio (i.e. 100% coverage) are contractually required, through lease agreements,
to comply with all relevant local and national legislation relating to Health & Safety. This includes Health and Safety
assessments relating to the asset itself and the health and safety of the tenants’ employees together with visiting
customers/clients/third parties.
70 Annual Report 2022
Governance
The Directors, all of whom are non-executive and independent of the AIFM and
Investment Manager, oversee the management of the Company and represent the
interests of shareholders.
The Company is registered as a public limited company in England and Wales and
is an investment company as defined by Section 833 of the Companies Act 2006.
The Company is also a member of the Association of Investment Companies.
71Annual Report 2022
Governance
Your Board of Directors
Details of the current Directors, all of whom are non-executive and independent of the AIFM and Investment Manager,
are set out below. The Directors oversee the management of the Company and represent the interests of shareholders.
Anthony Roper Caroline Gulliver
Status: Independent Non-Executive Chairman.
Length of service: Five years, appointed a Director on
8 November 2017 and Chairman on 11 June 2019.
Experience: Tony started his career as a structural
engineer with Ove Arup and Partners in 1983. In 1994
he joined John Laing plc to review and make equity
investments in infrastructure projects both in the UK
and abroad and then in 2006 he joined HSBC Specialist
Investments (‘HSIL’) to be the fund manager for HICL
Infrastructure Company Limited. In 2011, Tony was part
of the senior management team that bought HSIL from
HSBC, renaming it InfraRed Capital Partners.
Tony was a Managing Partner and a senior member of
the infrastructure management team at InfraRed Capital
Partners until June 2018. He holds a MA in Engineering
from Cambridge University and is an ACMA.
Last re-elected to the Board: 6 June 2022.
Contribution: The Nomination Committee has reviewed
the contribution of Mr Roper in light of his forthcoming
re-election at the AGM to be held in June 2023 and
concluded that Mr Roper has continued to skilfully chair
the Company through a turbulent yet successful year
for the Company. Mr Roper’s real estate and investment
trust experience is deeply valued by his fellow Directors.
Committee membership: Management Engagement
Committee and Nomination Committee.
Remuneration: £54,000 per annum from 1 January 2023
(2022: £50,000).
All other public company directorships: SDCL Energy
Efficiency Income Trust plc.
Connections with Trust or Investment Manager: None.
Shared Directorships with any other Trust Directors: None.
Shareholding in Company: 102,812 Ordinary shares.
Status: Senior Independent Non-Executive Director.
Length of service: Five years, appointed a Director on
8 November 2017.
Experience: Caroline is a chartered accountant with
over 25 years’ experience at Ernst & Young LLP, latterly as
an executive director before leaving in 2012. During that
time, she specialised in the asset management sector
and developed an extensive experience of investment
trusts. She is a director of a number of other
investment companies.
Last re-elected to the Board: 6 June 2022.
Contribution: The Nomination Committee has reviewed
the contribution of Ms Gulliver in light of her forthcoming
re-election at the AGM to be held in June 2023 and
concluded that Ms Gulliver has continued to expertly chair
the Audit Committee through the year drawing on her
significant wealth of financial and accounting experience.
Committee membership: Audit Committee
(Chairman), Nomination Committee and Management
Engagement Committee.
Remuneration: £42,000 per annum from 1 January 2023
(2022: £40,000).
All other public company directorships: JP Morgan Global
Emerging Markets Income Trust plc, International
Biotechnology Trust plc and Civitas Social Housing PLC.
Connections with Trust or Investment Manager: None.
Shared Directorships with any other Trust Directors: None.
Shareholding in Company: 72,500 Ordinary shares.
72 Annual Report 2022
John Heawood Diane Wilde
Status: Independent Non-Executive Director.
Length of service: Five years, appointed a Director on
8 November 2017.
Experience: John has 40 years’ experience as a Chartered
Surveyor advising a broad range of investors, developers
and occupiers. He was a partner, and subsequently a
director, of DTZ responsible for the London-based team
dealing with industrial, logistics and business park projects
across the UK. In 1996 he was appointed to the board of
SEGRO plc and was responsible for its UK business for the
next 12 years. From 2009-2013 he was managing director
of the Ashtenne Industrial Fund, a £500 million multi-let
industrial and logistics portfolio managed by Aviva on
behalf of 13 institutional investors. John is currently a
member of Council and member of the finance and
general purposes committee of the Royal Veterinary
College and a trustee of Marshalls Charity.
Last re-elected to the Board: 6 June 2022.
Contribution: The Nomination Committee has reviewed
the contribution of Mr Heawood in light of his forthcoming
re-election at the AGM to be held in June 2023 and
concluded that Mr Heawood has continued to provide
significant real estate experience and insight to the
Board as well as expertly chairing the Management
Engagement Committee.
Committee membership: Management Engagement
Committee (Chairman), Audit Committee and
Nomination Committee.
Remuneration: £36,000 per annum from 1 January 2023
(2022: £35,000).
All other public company directorships: None
Connections with Trust or Investment Manager: None.
Shared Directorships with any other Trust Directors: None.
Shareholding in Company: 60,000 Ordinary shares.
Status: Independent Non-Executive Director.
Length of service: Five years, appointed a Director on
8 November 2017.
Experience: Diane was managing director at Gartmore
Scotland Ltd, managing investment trust assets from 1993
– 2000. Following a period of managing similar assets at
Aberdeen Asset Managers between 2000 and 2003,
she joined Barclays Wealth as Head of Endowment
Funds in Scotland, managing clients in the multi asset
space until 2014. She was an adviser at Allenbridge,
an investment consulting firm until May 2018. She is also
a board member of the Social Growth Fund, managed
by Social Investment Scotland (SIS), a leading social
enterprise and impact investor in Scotland and the
United Kingdom.
Last re-elected to the Board: 6 June 2022.
Contribution: The Nomination Committee has reviewed
the contribution of Ms Wilde in light of her forthcoming
re-election at the AGM to be held in June 2023 and
concluded that Ms Wilde has provided useful insight
and experience to the Board’s deliberations.
Committee membership: Audit Committee, Management
Engagement Committee and Nomination Committee.
Remuneration: £36,000 per annum from 1 January 2023
(2022: £35,000).
All other public company directorships: None.
Connections with Trust or Investment Manager: None.
Shared Directorships with any other Trust Directors: None.
Shareholding in Company: 74,375 Ordinary shares.
73Annual Report 2022
Governance
Directors’ Report
The Directors present their Report and the audited financial
statements for the year ended 31 December 2022.
Results and Dividends
Details of the Company’s results and dividends are shown
on page 21 of this Annual Report. The dividend policy is
disclosed in the Strategic Report on page 12.
Investment Trust Status
The Company was incorporated on 25 October 2017
(registered in England & Wales No. 11032222) and
has been accepted by HM Revenue & Customs as an
investment trust subject to the Company continuing
to meet the relevant eligibility conditions of Section
1158 of the Corporation Tax Act 2010 and the ongoing
requirements of Part 2 Chapter 3 Statutory Instrument
2011/2999 for all financial periods commencing on or
after 15 December 2017. The Directors are of the opinion
that the Company has conducted its affairs for the year
ended 31 December 2022 so as to enable it to comply with
the ongoing requirements for investment trust status.
Individual Savings Accounts
The Company has conducted its affairs so as to satisfy
the requirements as a qualifying security for Individual
Savings Accounts. The Directors intend that the Company
will continue to conduct its affairs in this manner.
Share Capital
The Company’s capital structure is summarised in
note 16 to the financial statements. At 31 December 2022,
there were 412,174,356 fully paid Ordinary shares of 1p
each in issue. During the year no Ordinary shares were
purchased in the market for treasury or cancellation. On
4 February 2022, 34,545,455 new Ordinary shares were
issued at 110.0p per share at a premium to the prevailing
unaudited NAV.
Voting Rights, Share Restrictions and
Amendments to Articles of Association
Ordinary shareholders are entitled to vote on all resolutions
which are proposed at general meetings of the Company.
The Ordinary shares carry a right to receive dividends.
On a winding up, after meeting the liabilities of the
Company, the surplus assets will be paid to Ordinary
shareholders in proportion to their shareholdings.
There are no restrictions concerning the transfer of
securities in the Company; no special rights with regard
to control attached to securities; no agreements between
holders of securities regarding their transfer known to the
Company; and no agreements which the Company is party
to that might affect its control following a takeover bid.
In accordance with the Companies Act, amendments to
the Company’s Articles of Association may only be made by
shareholders passing a special resolution in general meeting.
Borrowings
A full breakdown of the Company’s loan facilities is
provided in note 14 to the financial statements.
Management Agreement
Under the terms of a Management Agreement dated
17 November 2017 between the Company and the
AIFM, abrdn Fund Managers Limited (and amended
by way of side letters dated 25 May 2018, 22 February
2019 and 24 January 2023), the AIFM was appointed
to act as alternative investment fund manager of the
Company with responsibility for portfolio management
and risk management of the Company’s investments.
Under the terms of the Management Agreement,
the AIFM may delegate portfolio management functions
to the Investment Manager and is entitled to an annual
management fee together with reimbursement of all
reasonable costs and expenses incurred by it and the
Investment Manager in the performance of its duties.
Pursuant to the terms of the Management Agreement,
the AIFM is entitled to receive a tiered annual management
fee (the ‘‘Annual Management Fee’’) calculated by
reference to the Net Asset Value (as calculated under
IFRS) on the following basis:
.
On such part of the Net Asset Value that is less than or
equal to €1.25 billion, 0.75 per cent. per annum.
.
On such part of the Net Asset Value that is more than
€1.25 billion, 0.60 per cent. per annum.
The Annual Management Fee is payable in Euros quarterly
in arrears,save for any period which is less than a full
calendar quarter.
The Company or the AIFM may terminate the Management
Agreement by giving not less than 12 months’ prior
written notice.
The AIFM has also been appointed by the Company under
the terms of the Management Agreement to provide
day-to-day administration services to the Company
and provide the general company secretarial functions
required by the Companies Act. In this role, the AIFM will
provide certain administrative services to the Company
which includes reporting the Net Asset Value, bookkeeping
and accounts preparation. Effective from March 2020
accounting and administration services undertaken on
behalf of the Company have been delegated to Brown
Brothers Harriman.
The AIFM has also delegated the provision of the general
company secretarial services to abrdn Holdings Limited.
74 Annual Report 2022
Risk Management
Details of the financial risk management policies and
objectives relative to the use of financial instruments by the
Company are set out in note 22 to the financial statements.
The Board
The current Directors, Ms Gulliver, Mr Heawood, Mr Roper
and Ms Wilde were the only Directors who served during
the year. In accordance with the Articles of Association,
each Director will retire from the Board at the Annual
General Meeting convened for 12 June 2023 and,
being eligible, will offer himself or herself for re-election to
the Board. In accordance with Principle 23 of the AIC’s 2019
Code of Corporate Governance, each Director will retire
annually and submit themselves for re-election at theAGM.
The Board considers that there is a balance of skills and
experience within the Board relevant to the leadership
and direction of the Company and that all the Directors
contribute effectively.
In common with most investment trusts, the Company
has no employees. Directors’ & Officers’ liability insurance
cover has been maintained throughout the year at the
expense of the Company.
The Role of the Chairman and Senior
Independent Director
The Chairman is responsible for providing effective
leadership to the Board, by setting the tone of the
Company, demonstrating objective judgement
and promoting a culture of openness and debate.
The Chairman facilitates the effective contribution,
and encourages active engagement, by each Director.
In conjunction with the Company Secretary, the Chairman
ensures that Directors receive accurate, timely and
clear information to assist them with effective decision-
making. The Chairman leads the evaluation of the Board
and individual Directors, and acts upon the results of
the evaluation process by recognising strengths and
addressing any weaknesses. TheChairman also
engages with major shareholders offering annual review
meetings and ensures that all Directors understand
shareholder views.
The Senior Independent Director acts as a sounding
board for the Chairman and as an intermediary for other
directors, when necessary. The Senior Independent
Director takes responsibility for an orderly succession
process for the Chairman, and leads the annual appraisal
of the Chairman’s performance and is also available to
shareholders to discuss any concerns they may have.
Corporate Governance
The Company is committed to high standards of
corporate governance. The Board is accountable to the
Company’s shareholders for good governance and this
statement describes how the Company has applied the
principles identified in the UK Corporate Governance
Code as published in July 2018 (the “UK Code”), which is
available on the Financial Reporting Council’s (the “FRC”)
website: frc.org.uk.
The Board has also considered the principles and provisions
of the AIC Code of Corporate Governance as published in
February 2019 (the “AIC Code”). The AIC Code addresses
the principles and provisions set out in the UK Code, as
well as setting out additional provisions on issues that are
of specific relevance to the Company. The AIC Code is
available on the AIC’s website: theaic.co.uk.
The Board considers that reporting against the
principles and provisions of the AIC Code, which has been
endorsed by the FRC, provides more relevant information
to shareholders. The full text of the Company’s Corporate
Governance Statement can be found on the Company’s
website: eurologisticsincome.co.uk.
The Board confirms that, during the year, the Company
complied with the principles and provisions of the AIC
Code and the relevant provisions of the UK Code,
except as set out below.
The UK Code includes provisions relating to:
.
interaction with the workforce (provisions 2, 5 and 6);
.
the need for an internal audit function (provision 26);
.
the role and responsibility of the chief executive
(provisions 9 and 14);
.
previous experience of the chairman of a remuneration
committee (provision 32); and
.
executive directors’ remuneration (provisions 33 and
36 to 40).
The Board considers that these provisions are not relevant
to the position of the Company, being an externally
managed investment company. In particular, all of the
Company’s day-to-day management and administrative
functions are outsourced to third parties. As a result,
the Company has no executive directors, employees
or internal operations. The Company has therefore not
reported further in respect of these provisions.
During the year ended 31 December 2022, the Board had
four scheduled meetings and a further 16 ad hoc Board
meetings as well as numerous update calls. In addition,
theAudit Committee met three times and there was one
meeting of the Management Engagement Committee
and one meeting of the Nomination Committee. Between
75Annual Report 2022
meetings the Board maintains regular contact with the
Investment Manager. The Directors have attended the
following scheduled Board meetings and Committee
meetings during the year ended 31December 2022 (with
their eligibility to attend therelevant meeting in brackets):
Director Board
Audit
Committee MEC Nomination
T Roper
1
4 (4) N/A 1 (1) 1 (1)
C Gulliver 4 (4) 3 (3) 1 (1) 1 (1)
D Wilde 4 (4) 3 (3) 1 (1) 1 (1)
J Heawood 4 (4) 3 (3) 1 (1) 1 (1)
1
Mr Roper is not a member of the Audit Committee but attended all meetings by
invitation.
Policy on Tenure
The Board’s policy on tenure is that Directors need not
serve on the Board for a limited period of time only.
The Board does not consider that the length of service
of a Director is as important as the contribution he or
she has to make, and therefore the length of service will
be determined on a case-by-case basis. However, in
accordance with corporate governance best practice
and the future need to refresh the Board over time, it is
currently expected that Directors will not typically serve on
the Board beyond the Annual General Meeting following
the ninth anniversary of their appointment.
Board Committees
Audit Committee
The Audit Committee Report is on pages 86 to 87 of this
Annual Report.
Nomination Committee
All appointments to the Board of Directors are considered
by the Nomination Committee which, due to the relatively
small size of the Board, comprises all of the Directors
and is chaired by the Chairman of the Company.
The Nomination Committee advises the Board on
succession planning, bearing in mind the balance of
skills, knowledge and experience existing on the Board,
and will make recommendations to the Board in this
regard. The Nomination Committee also advises the
Board on its balance of relevant skills, experience and
length of service of the Directors serving on the Board. The
Board’s overriding priority when appointing new Directors
in the future will be to identify the candidate with the best
range of skills and experience to complement existing
Directors. The Board recognises the benefits of diversity
and its policy on diversity is disclosed in the Strategic
Report on page 17.
The Committee has put in place the necessary
procedures to conduct, on an annual basis, an appraisal
of the Chairman of the Board, Directors’ individual self
evaluation and a performance evaluation of the Board
as a whole and its Committees. In 2021 a thorough
external evaluation was conducted by Lintstock Limited,
an independent third party evaluation service provider.
In 2022 the Board conducted an evaluation based upon
completed questionnaires covering the Board, individual
Directors, the Chairman and the Audit Committee
Chairman. The Chairman then met each Director
individually to review their responses whilst the Senior
Independent Director met with the Chairman to review
his performance.
In accordance with Principle 23 of the AIC’s Code of
Corporate Governance which recommends that all
directors of investment companies should be subject to
annual re-election by shareholders, all the members of
the Board will retire at the forthcoming Annual General
Meeting and will offer themselves for re-election.
In conjunction with the evaluation feedback, the Committee
has reviewed each of the proposed reappointments and
concluded that each of the Directors has the requisite high
level and range of business and financial experience and
recommends their re-election at the forthcoming AGM.
Details of the contributions provided by each Director
during the year are disclosed on pages 72 and 73.
Management Engagement Committee
The Management Engagement Committee comprises
all of the Directors and is chaired by Mr Heawood.
The Committee reviews the performance of the
Manager and Investment Manager and its compliance
with the terms of the management and secretarial
agreement. Theterms and conditions of the Manager’s
appointment, including an evaluation of fees, are reviewed
by the Committee on an annual basis. Based upon the
competitive management fee and expertise of the
Manager, the Committee believes that the continuing
appointment of the Manager on the terms agreed is in
theinterests of shareholders as a whole. The Committee
also at least annually reviews the Company’s relationships
with its other service providers. These reviews aim to
ensure that services being offered meet the requirements
and needs of the Company, provide value for money
and performance is in line with the expectations
of stakeholders.
Remuneration Committee
Under the FCA Listing Rules, where an investment trust has
only non-executive directors, the Code principles relating
to directors’ remuneration do not apply. Accordingly,
matters relating to remuneration are dealt with by the full
Board, which acts as the Remuneration Committee.
76 Annual Report 2022
The Company’s remuneration policy is to set
remuneration at a level to attract individuals of a calibre
appropriate to the Company’s future development.
Further information on remuneration is disclosed in the
Directors’ Remuneration Report on pages 82 to 84.
Terms of Reference
The terms of reference of all the Board Committees
may be found on the Company’s website
eurologisticsincome.co.uk and copies are available from
the Company Secretary upon request. The terms of
reference are reviewed and re-assessed by the relevant
Board Committee for their adequacy on an annual basis.
Going Concern
In accordance with the Financial Reporting Council’s
guidance the Directors have undertaken a rigorous review
of the Company’s ability to continue as a going concern.
The Board has set limits for borrowing and regularly
reviews the level of any gearing, cash flow projections and
compliance with banking covenants.
The Directors are mindful of the principal risks and
uncertainties disclosed on pages 13 to 17 and the Viability
Statement on page 18 and have reviewed forecasts
detailing revenue and liabilities and they believe that the
Company has adequate financial resources to continue
its operational existence for the foreseeable future and
at least 12 months from the date of this Annual Report.
While the Company is obliged under its articles to hold a
continuation vote at the 2024 AGM, the Directors do not
believe this should automatically trigger the adoption
of a basis other than going concern in line with the
Association of Investment Companies (“AIC”) Statement
of Recommended Practice (“SORP”) which states that it is
usually more appropriate to prepare financial statements
on a going concern basis unless a continuation vote has
already been triggered and shareholders have voted
against continuation. Accordingly, the Directors believe
that it is appropriate to continue to adopt the going
concern basis in preparing the financial statements.
In coming to this conclusion, the Board has also
considered the impact, where feasible, of the COVID-19
pandemic and other geopolitical economic turbulence.
The Investment Manager is in contact with tenants and
third party suppliers and continues to have a constructive
dialogue with all parties. A range of scenarios have been
modelled looking at possible impact to cash flows in the
short to medium term and this is kept under regular review.
Additional details about going concern are disclosed in
Note 28.
Management of Conflicts of Interest
The Board has a procedure in place to deal with a situation
where a Director has a conflict of interest. As part of this
process, the Directors prepare a list of other positions
held and all other conflict situations that may need to be
authorised either in relation to the Director concerned
or his/her connected persons. The Board considers
each Director’s situation and decides on any course of
action required to be taken if there is a conflict, taking into
consideration what is in the best interests of the Company
and whether the Director’s ability to act in accordance
with his or her wider duties is affected. Each Director is
required to notify the Company Secretary of any potential,
or actual, conflict situations that will need authorising by
the Board. Authorisations given by the Board are reviewed
at each Board meeting.
No Director has a service contract with the Company
although Directors are issued with letters of appointment
upon appointment. No Director had any interest in contracts
with the Company during the year or subsequently.
The Board has adopted appropriate procedures designed
to prevent bribery. The Company receives periodic reports
from its service providers on the anti-bribery policies of
these third parties. It also receives regular compliance
reports from the Manager.
The Criminal Finances Act 2017 introduced the corporate
criminal offence of “failing to take reasonable steps to
prevent the facilitation of tax evasion”. The Board has
confirmed that it is the Company’s policy to conduct all of
its business in an honest and ethical manner. The Board
takes a zero-tolerance approach to the facilitation of tax
evasion, whether under UK law or under the law of any
foreign country.
Accountability and Audit
The respective responsibilities of the Directors and the
auditor in connection with the financial statements are
set out on pages 85 and 94 respectively.
Each Director confirms that:
.
so far as he or she is aware, there is no relevant audit
information of which the Company’s auditor is
unaware; and,
.
each Director has taken all the steps that they ought to
have taken as a Director in order to make themselves
aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.
77Annual Report 2022
Additionally there have been no important events since
the year end that impact this Annual Report.
The Directors have reviewed the level of non-audit
services provided by the independent auditor during the
year amounting to £20,000 in respect of the production of
a Supplementary Prospectus (2021: £45,000 in connection
with the issue of a Prospectus in September 2021)
and remain satisfied that the auditor’s objectivity and
independence is being safeguarded.
Independent Auditor
The auditor, KPMG LLP, has indicated its willingness to
remain in office. The Directors will place a resolution before
the Annual General Meeting to re-appoint KPMG LLP as
auditor for the ensuing year, and to authorise the Directors
to determine its remuneration.
Internal Control
The Board is ultimately responsible for the Company’s
system of internal control and for reviewing its
effectiveness and confirms that there is an ongoing
process for identifying, evaluating and managing the
significant risks faced by the Company. This process has
been in place for the year under review and up to the date
of approval of this Annual Report and financial statements.
It is regularly reviewed by the Board and accords with the
FRC Guidance.
The Board has reviewed the effectiveness of the system of
internal control. In particular, it has reviewed and updated
the process for identifying and evaluating the significant
risks affecting the Company and policies by which these
risks are managed.
The Directors have delegated the investment management
of the Company’s assets to members of the abrdn
Group within overall guidelines, and this embraces
implementation of the system of internal control,
including financial, operational and compliance controls
and risk management. Internal control systems are
monitored and supported by the abrdn Group’s internal
audit function which undertakes periodic examination
of business processes, including compliance with the
terms of the management agreement, and ensures that
recommendations to improve controls
are implemented.
Risks are identified and documented through a risk
management framework by each function within
the abrdn Group’s activities. Risk includes financial,
regulatory, market, operational and reputational risk.
This helps the internal audit risk assessment model
identify those functions for review. Any weaknesses
identified are reported to the Board, and timetables are
agreed for implementing improvements to systems.
The implementation of any remedial action required is
monitored and feedback provided to the Board.
The significant risks faced by the Company have been
identified as being strategic; investment and asset
management; financial; regulatory; and operational.
The key components of the process designed by the
Directors to provide effective internal control are
outlined below:
.
the AIFM prepares forecasts and management
accounts which allows the Board to assess the
Company’s activities and review its performance;
.
the Board and AIFM have agreed clearly defined
investment criteria, specified levels of authority and
exposure limits. Reports on these issues, including
performance statistics and investment valuations,
are regularly submitted to the Board and there are
meetings with the AIFM and Investment Manager
as appropriate;
.
as a matter of course the AIFM’s compliance
department continually reviews abrdn’s operations and
reports to the Board on a six monthly basis;
.
written agreements are in place which specifically
define the roles and responsibilities of the AIFM and
other third party service providers and, where relevant,
ISAE3402 Reports, a global assurance standard for
reporting on internal controls for service organisations,
or their equivalents are reviewed;
.
the Board has considered the need for an internal audit
function but, because of the compliance and internal
control systems in place within abrdn, has decided to
place reliance on the Manager’s systems and internal
audit procedures. At its March 2023 meeting, the Audit
Committee carried out an annual assessment of
internal controls for the year ended 31 December 2022
by considering documentation from the AIFM and the
Depositary, including the internal audit and compliance
functions and taking account of events since
31 December 2022. The results of the assessment,
that internal controls are satisfactory, were then
reported to the Board at the subsequent Board meeting.
Internal control systems are designed to meet the
Company’s particular needs and the risks to which it is
exposed. Accordingly, the internal control systems are
designed to manage rather than eliminate the risk of
failure to achieve business objectives and by their nature
can only provide reasonable and not absolute assurance
against mis-statement and loss.
78 Annual Report 2022
Substantial Interests
The Board has been advised that the following
shareholders owned 3% or more of the issued Ordinary
share capital of the Company at 31 December 2022
(based upon 412,174,356 shares in issue):
Shareholder
No. of
Ordinary
shares held
%
held
East Riding of Yorkshire 33,000,000 8.0
Brewin Dolphin Ireland 25,134,996 6.1
Quilter Cheviot Investment Management 23,062,880 5.6
BlackRock 20,587,907 5.0
Investec Wealth & Investment 17,880,116 4.3
Brewin Dolphin, stockbrokers 16,713,524 4.1
Hargreaves Lansdown (EO) 16,516,569 4.0
Canaccord Genuity Wealth Management 16,502,020 4.0
CCLA Investment Management 16,197,976 3.9
Nottinghamshire County Council 12,324,013 3.0
Save as disclosed, there have been no significant changes
notified in respect of the above holdings between
31 December 2022 and 20 April 2023.
Relations with Shareholders
The Directors place a great deal of importance on
communication with shareholders. The Annual Report
will be widely distributed to other parties who have an
interest in the Company’s performance. Shareholders
and investors may obtain up to date information on the
Company through the freephone information service
shown under Investor Information and on the Company’s
website eurologisticsincome.co.uk.
abrdn Holdings Limited (aHL) has been appointed
Company Secretary to the Company. Whilst aHL is a
wholly owned subsidiary of the abrdn Group, there is
a clear separation of roles between the Manager and
Company Secretary with different board compositions
and different reporting lines in place. The Board notes that,
in accordance with Market Abuse Regulations, procedures
are in place to control the dissemination of information
within the abrdn plc group of companies when necessary.
Where correspondence addressed to the Board is
received there is full disclosure to the Board. This is kept
confidential if the subject matter of the correspondence
requires confidentiality.
The Board’s policy is to communicate directly with
shareholders and their representative bodies without
the involvement of representatives of the Manager
(including the Company Secretary and Investment
Manager) in situations where direct communication is
required and usually a representative from the Board is
available to meet with major shareholders on an annual
basis in order to gauge their views.
The Notice of the Annual General Meeting, included within
the Annual Report and financial statements, is sent out
at least 20 working days in advance of the meeting.
Innormal circumstances, all Shareholders have the
opportunity to put questions to the Board or the
Investment Manager, either formally at the Company’s
Annual General Meeting or at the subsequent buffet
luncheon for Shareholders. Shareholders are, however,
invited to send any questions for the Board and/or the
Investment Manager on the Annual Report by email to
European.Logistics@abrdn.com. The Company Secretary
is available to answer general shareholder queries at any
time throughout the year.
Annual General Meeting
The Annual General Meeting will be held on 12 June 2023
at 11:30 a.m. at Wallacespace, 15 Artillery Lane, London,
E1 7HA. In addition to the usual resolutions the following
matters will be proposed at the AGM:
Special Business Directors’ Authority to Allot
Relevant Securities
Approval is sought in Resolution 10, an ordinary resolution,
to renew the Directors’ existing general power to allot
shares but will also provide a further authority (subject
to certain limits) to grant rights to subscribe for or to
convert any security into shares under a fully pre-emptive
rights issue. The effect of Resolution 10 is to authorise the
Directors to allot up to a maximum of 272,035,075 shares
in total (representing approximately 66% (as at the latest
practicable date before publication of this Annual Report)
of the existing issued share capital of the Company),
of which a maximum of 136,017,537 shares (approximately
33% (as at the latest practicable date before publication
of this Annual Report) of the existing issued share capital
of the Company) may only be applied other than to fully
pre-emptive rights issues. This authority is renewable
annually and will expire at the conclusion of the next
Annual General Meeting in 2024, or 30 June 2024,
whichever is earlier. The Directors do not have any
immediate intention to utilise this authority.
Special Business Disapplication of Pre-emption Rights
Resolution 11 is a special resolution that seeks to renew
the Directors’ existing authority until the conclusion of the
next Annual General Meeting to make limited allotments of
shares for cash of up to a maximum of 41,217,435 shares
representing 10% of the issued share capital (as at the
latest practicable date before publication of this Annual
Report) other than according to the statutory pre-emption
rights which require all shares issued for cash to be offered
first to all existing shareholders.
79Annual Report 2022
This authority includes the ability to sell shares that have
been held in treasury (if any), having previously been
bought back by the Company. The Board has established
guidelines for treasury shares and will only consider buying
in shares for treasury at a discount to their prevailing
NAV and selling them from treasury at or above the then
prevailing NAV.
New shares issued in accordance with the authority sought
in Resolution 11 will always be issued at a premium to the
NAV per Ordinary share at the time of issue. The Board
will issue new Ordinary shares or sell Ordinary shares
from treasury for cash when it is appropriate to do so, in
accordance with its current policy. It is therefore possible
that the issued share capital of the Company may change
between the date of this document and the Annual General
Meeting and therefore the authority sought will be in
respect of 10% of the issued share capital as at the date
of the Annual General Meeting rather than the date of this
document. This authority is renewable annually and will
expire at the conclusion of the Annual General Meeting in
2024 or 30 June 2024, whichever is earlier.
Special Business Purchase of the Company’s Shares
Resolution 12 is a special resolution proposing to renew
the Directors’ authority to make market purchases of
the Company’s shares in accordance with the provisions
contained in the Companies Act 2006 and the Listing Rules
of the Financial Conduct Authority. The minimum price to
be paid per Ordinary share by the Company will not be
less than £0.01 per share (being the nominal value) and
the maximum price should not be more than the higher of
(i) an amount equal to 5% above the average of the
middle market quotations for an Ordinary share taken
from the London Stock Exchange Daily Official List for the
five business days immediately preceding the date on
which the Ordinary share is contracted to be purchased;
and (ii) the higher of the price of the last independent
trade and the current highest independent bid on the
trading venue where the purchase is carried out.
The Directors do not intend to use this authority to
purchase the Company’s Ordinary shares unless to do so
would result in an increase in NAV per share and would be
in the interests of Shareholders generally. The authority
sought will be in respect of 14.99% of the issued share
capital as at the date of the Annual General Meeting
rather than the date of this document.
The Company’s shares have traded at a premium to NAV
per share for the majority of the life of the Company since
its launch, and therefore the Company has not bought
back any shares for treasury or cancellation. However,
the Board is very aware of the current wide share price
discount to NAV and regularly monitors this. The Directors
view buybacks as a very useful tool for seeking to assist in
the management of the liquidity of the Company shares
which could be used in the future as one of a number of
methods to address imbalances of supply and demand
which, arithmetically, can cause discounts to NAV per share.
Shares bought back would be purchased at a discount
to the prevailing NAV per share and the result would be
accretive to the NAV for all on-going shareholders.
The authority being sought will expire at the conclusion
of the Annual General Meeting in 2024 or 30 June 2024,
whichever is earlier unless it is renewed before that date.
Any Ordinary shares purchased in this way will either be
cancelled and the number of Ordinary shares will be
reduced accordingly or under the authority granted in
Resolution 11 above, may be held in treasury.
If Resolutions 10 to 12 are passed then an announcement
will be made on the date of the Annual General Meeting
which will detail the exact number of Ordinary shares to
which each of these authorities relates.
These powers will give the Directors additional flexibility
going forward and the Board considers that it will be in the
interests of the Company that such powers be available.
Such powers will only be implemented when, in the view
of the Directors, to do so will be to the benefit of
Shareholders as a whole.
Special Business Notice of Meetings
Resolution 13 is a special resolution seeking to authorise
the Directors to call general meetings of the Company
(other than Annual General Meetings) on 14 days’
clear notice. This approval will be effective until the
Company’s Annual General Meeting in 2024 or 30 June
2024 whichever is earlier. In order to utilise this shorter
notice period, the Company is required to ensure that
Shareholders are able to vote electronically at the general
meeting called on such short notice. The Directors confirm
that, in the event that a general meeting is called, they
will give as much notice as practicable and will only utilise
the authority granted by Resolution 13 in limited and time
sensitive circumstances.
Dividend Policy
As a result of the timing of the payment of the Company’s
quarterly dividends, the Company’s Shareholders are
unable to approve a final dividend each year. In line
with good corporate governance, theBoard therefore
proposes to put the Company’s dividend policy to
Shareholders for approval at the Annual General Meeting
and on an annual basis.
Resolution 3 is an ordinary resolution to approve the
Company’s dividend policy. The Company’s dividend
policy shall be that dividends on the Ordinary shares are
payable quarterly in relation to periods ending March,
June, September and December and the last dividend
referable to a financial year end will not be categorised as
80 Annual Report 2022
a final dividend that is subject to Shareholder approval.
It is intended that the Company will pay quarterly
dividends consistent with the expected annual underlying
portfolio yield. The Company has the flexibility in
accordance with its Articles to make distributions
from capital.
Shareholders should note that references to ‘‘dividends’’
are intended to cover both dividend income and income
which is designated as an interest distribution for UK tax
purposes and therefore subject to the interest streaming
regime applicable to investment trusts.
Recommendation
Your Board considers Resolutions 10 to 13 to be in
the best interests of the Company and its members as
a whole and most likely to promote the success of the
Company for the benefit of its members as a whole.
Accordingly, your Board unanimously recommends that
Shareholders should vote in favour of all Resolutions to be
proposed at the AGM, as they intend to do in respect of
their own beneficial shareholdings amounting to 309,687
Ordinary shares.
By order of the Board
abrdn Holdings Limited - Company Secretary
280 Bishopsgate
London EC2M 4AG
20 April 2023
81Annual Report 2022
Governance
Directors’ Remuneration Report
The Board has prepared this report in accordance with
the regulations governing the disclosure and approval
of Directors’ remuneration. This Directors’ Remuneration
Report comprises three parts:
1. Remuneration Policy
Which is subject to a binding shareholder vote every three
years (or sooner if varied during this interval) – approved
by Shareholders at the AGM held on 6 June 2022;
2. Implementation Report
Which provides information on how the Remuneration
Policy has been applied during the year and which is
subject to an advisory vote on the level of remuneration
paid during the year; and
3. Annual Statement
The law requires the Company’s Auditor to audit certain
of the disclosures provided. Where disclosures have been
audited, they are indicated as such. The auditor’s opinion is
included in the report on page 93.
Remuneration Policy
The Directors’ remuneration policy takes into consideration
the principles of UK Corporate Governance and there
have been no changes to the policy during the year nor
are there any changes proposed for the foreseeable
future. No shareholder views were sought in setting the
remuneration policy although any comments received
from shareholders are considered by the Board.
As the Company has no employees and the Board is
comprised wholly of non-executive Directors and,
given the size and nature of the Company, the Board has
not established a separate Remuneration Committee.
Directors’ remuneration is determined by the Board as
a whole.
The Directors are non-executive and the Company’s
Articles of Association limit the annual aggregate fees
payable to the Board of Directors to £300,000 per annum.
This cap may be increased by shareholder resolution from
time to time.
Fees payable to Directors in respect of the year ended
31 December 2022 were:
£
Chairman 50,000
Chairman of Audit Committee 40,000
Director 35,000
Subject to this overall limit, the Board’s policy is that the
remuneration of non-executive Directors should reflect the
nature of their duties, responsibilities and the value of their
time spent and be fair and comparable to that of other
investment trusts that are similar in size, have a similar
capital structure and have a similar investment objective.
Appointment
.
The Company only appoints non-executive Directors.
.
Directors must retire and be subject to election at the
first AGM after their appointment, and voluntarily submit
themselves for annual election.
.
New appointments to the Board will be placed on the
fee applicable to all Directors at the time of appointment.
.
No incentive or introductory fees will be paid to
encourage a Directorship.
.
The Directors are not eligible for bonuses, pension
benefits, share options, long-term incentive schemes or
other benefits.
.
Directors are entitled to re-imbursement of out-of-
pocket expenses incurred in connection with the
performance of their duties, including travel expenses.
.
The Company indemnifies its Directors for all costs,
charges, losses, expenses and liabilities which may be
incurred in the discharge of duties, as a Director of
the Company.
Performance, Service Contracts, Compensation and
Loss of Office
.
The Directors’ remuneration is not subject to any
performance-related fee.
.
No Director has a service contract.
.
No Director has an interest in any contracts with the
Company during the year or subsequently.
.
The terms of appointment provide that a Director may
be removed upon three months’ notice.
.
Compensation will not be due upon leaving office.
.
No Director is entitled to any other monetary payment or
to any assets of the Company.
Directors’ and Officers’ liability insurance cover is
maintained by the Company on behalf of the Directors.
Under the Articles, the Company indemnifies each of
the Directors out of the assets of the Company against
any liability incurred by them as a Director in defending
proceedings or in connection with any application to the
Court in which relief is granted and separate deeds of
indemnity exist in this regard between the Company and
each Director.
The Remuneration Policy was approved at the AGM held
on 6 June 2022 and became effective for the three year
period commencing from the conclusion of that AGM.
82 Annual Report 2022
Implementation Report
Directors’ Fees
The Board has carried out an annual review of the level
of fees payable to Directors using the services of Fletcher
Jones, an independent consultant. The review comprised
a detailed analysis of fees paid by comparable investment
companies. The Board concluded that, with effect from
1 January 2023 the annual fees payable toDirectors
should be increased to: Chairman £54,000, Audit
Committee Chairman £42,000, Directors £36,000.
This increase ensures that fees remain competitive
enough to attract the required calibre of experienced non
executive Director when required. There are no further
fees to disclose as the Company has no employees, chief
executive or executive directors.
Company Performance
The following chart illustrates the total shareholder return
(including reinvested dividends) for a holding in the
Company’s shares as compared to the FTSE All Share
Index for the period from launch to 31 December 2022
(rebased to 100 at launch). Given the absence of any
meaningful index with which to compare performance,
the FTSE All Share index is deemed to be the most
appropriate one against which to measure the
Company’s performance.
Inception to 31 December 2022
Share Price Total Return FTSE All Share Total Return
70
80
90
100
110
120
130
140
150
160
Dec 22Dec 21Dec 20Dec 19Dec 18Dec 17
Source: abrdn, Factset.
Statement of Voting at Annual
General Meeting
At the Company’s AGM held on 6 June 2022, Shareholders
approved the Directors’ Remuneration Report in respect
of the year ended 31 December 2021 and the Directors’
Remuneration Policy for the three years ending
31 December 2024 and the following proxy votes were
received on the resolutions:
Resolution For
*
Against Withheld
(2) Receive and
Adopt Directors’
Remuneration Report
195.9m
(99.9%)
0.2m
(0.1%)
0.05m
(3) Approve Directors’
Remuneration Policy
195.9m
(99.9%)
0.3m
(0.1%)
0.05m
* Including discretionary votes.
Spend on Pay (Audited)
Fees Payable
The Directors received the following fees which exclude
employers’ NI and any VAT payable for the year ended
31 December 2022 and the year ended 31 December 2021.
Fees are pro-rated where a change takes place during a
financial year.
Director
2022
£
2021
£
T Roper 50,000 49,000
C Gulliver 40,000 39,000
J Heawood 35,000 34,000
D Wilde 35,000 34,000
Total 160,000 156,000
In euro terms the Directors were paid €186,000
(2021: €182,000).
83Annual Report 2022
The table below shows the actual expenditure in the year in
relation to Directors’ remuneration and shareholder dividends.
2022
€
2021
€
Directors’ Fees paid 186,000 182,000
Dividends paid 23,248,000 16,188,000
Sums Paid to Third Parties
None of the fees disclosed above were payable to third
parties in respect of making available the services of
the Directors.
Annual Percentage Change in Directors’ Remuneration
The table below sets out the annual percentage change in
Directors’ fees for the past three years. The 2020 increases
reflected the lower level of fees paid from the initial public
offering and were the first increases implemented.
Year ended
31 Dec 2022
%
Year ended
31 Dec 2021
%
Year ended
31 Dec 2020
%
T Roper
1
2.0 4.3 32.2
C Gulliver 2.6 2.6 8.6
J Heawood 2.9 3.0 10.0
D Wilde 2.9 3.0 10.0
1
Tony Roper was appointed Chairman on 11 June 2019.
Directors’ Interests in the Company
The Directors are not required to have a shareholding
in the Company. The Directors’ interests in contractual
arrangements with the Company are as shown in
note 23 to the financial statements. The Directors
(including connected persons) at 31 December 2022
had no interest in the share capital of the Company other
thanthose interests, all of which are beneficial interests,
shownin the table below.
31 Dec 2022
Ordinary shares
31 Dec 2021
Ordinary shares
T Roper 102,812 92,812
C Gulliver 72,500 62,500
J Heawood 60,000 50,000
D Wilde 74,375 64,375
These interests were unchanged at 20 April 2023,
being the nearest practicable date prior to the signing of
this Report.
Annual Statement
On behalf of the Board and in accordance with Part 2 of
Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment)
Regulations 2013, I confirm that the above Report on
Remuneration Policy and Remuneration Implementation
summarises, as applicable, for the year ended
31December 2022:
.
the major decisions on Directors’ remuneration;
.
any substantial changes relating to Directors’
remuneration made during the year; and
.
the context in which the changes occurred and
in which decisions have been taken.
Tony Roper
Chairman
20 April 2023
84 Annual Report 2022
Governance
Statement of Directors’ Responsibilities in Respect of the
Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual
Report and the Group and parent Company financial
statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Group
and parent Company financial statements for each
financial year. Under that law they are required to prepare
the Group financial statements in accordance with
UK-adopted international accounting standards and
applicable law and have elected to prepare the parent
Company financial statements in accordance with UK
accounting standards and applicable law, including FRS
101 Reduced Disclosure Framework.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group
and parent Company and of the Group’s profit or loss for
that period. In preparing each of the Group and parent
Company financial statements, the Directors are
required to:
.
select suitable accounting policies and then apply
them consistently;
.
make judgements and estimates that are reasonable,
relevant, reliable and prudent;
.
for the Group financial statements, state whether they
have been prepared in accordance with UK-adopted
international accounting standards;
.
for the parent Company financial statements,
state whether applicable UK accounting standards
have been followed, subject to any material departures
disclosed and explained in the parent Company
financial statements;
.
assess the Group and parent Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern; and
.
use the going concern basis of accounting unless
they either intend to liquidate the Group or the parent
Company or to cease operations, or have no realistic
alternative but to do so.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the parent Company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the parent Company and enable them to
ensure that its financial statements comply with the
Companies Act 2006. They are responsible for such
internal control as they determine is necessary to enable
the preparation of financial statements that are free from
material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of
the Group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors
are also responsible for preparing a Strategic Report,
Directors’ Report, Directors’ Remuneration Report and
Corporate Governance Statement that complies with
that law and those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website. Legislation in the UK
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
In accordance with Disclosure Guidance and
Transparency Rule 4.1.14R, the financial statements will
form part of the annual financial report prepared using
the single electronic reporting format under the TD
ESEF Regulation. The auditor’s report on these financial
statements provides no assurance over the ESEF format.
Responsibility statement of the Directors in
respect of the annual financial report
We confirm that to the best of our knowledge:
.
the financial statements, prepared in accordance with
the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position
and profit or loss of the company and the undertakings
included in the consolidation taken as a whole; and
.
the Strategic Report/Directors’ Report includes a
fair review of the development and performance of
the business and the position of the issuer and the
undertakings included in the consolidation taken as a
whole, together with a description of the principal risks
and uncertainties that they face.
We consider the Annual Report and financial statements,
taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders
to assess the Group’s position and performance,
business model and strategy.
By order of the Board
Tony Roper
20 April 2023
85Annual Report 2022
Governance
Report of the Audit Committee
I am pleased to present the report of the Audit Committee
(the ‘Committee’) for the year ended 31 December 2022
which has been prepared in compliance with
applicable legislation.
Committee Composition
The Audit Committee comprises three independent
Directors: Mr Heawood, Ms Wilde and myself (Ms Gulliver)
as Chairman. The Directors have satisfied themselves
that at least one of the Committee’s members has recent
and relevant financial experience. Iam a member of the
Institute of Chartered Accountants of Scotland (ICAS)
and I confirm that the Audit Committee as a whole has
competence relevant to the investment trust sector and
that at least one member has competence in accounting.
Functions of the Committee
The principal function of the Committee is to assist the
Board in relation to the reporting of financial information,
the review of financial controls and the management
of risk. The Committee has defined terms of reference
which are reviewed and re-assessed for their adequacy
on an annual basis. Copies of the terms of reference are
published on the Company’s website.
The Committee’s main audit review functions are
listedbelow:
.
to review and monitor the internal control systems and
risk management systems (including review of non-
financial and emerging risks) on which the Company
is reliant;
.
to develop and implement policy on the engagement
of the Auditor to supply non-audit services. Non-audit
fees of £20,000 were paid in 2022 in respect of the
production of a Supplementary Prospectus (2021:
£45,000 for reporting accountant services in connection
with the issue of a Prospectus). The Audit Committee
reviews and approves the provision of all non-audit
services in the light of the potential for such services to
impair the Auditor’s independence;
.
to consider annually whether there is a need for the
Company to have its own internal audit function;
.
to review and challenge the investment valuation
process employed by the Investment Manager;
.
to monitor the integrity of the half-yearly and annual
financial statements of the Company by reviewing,
and challenging where necessary, the actions and
judgements of the Investment Manager;
.
to review, and report to the Board on, the significant
financial reporting issues and judgements made in
connection with the preparation of the Company’s
financial statements, interim reports, announcements
and related formal statements;
.
to review the content of the Half Yearly Report and
Annual Report and Financial Statements and advise the
Board on whether, taken as a whole, it is fair, balanced
and understandable and provides the information
necessary for Shareholders to assess the Company’s
performance, business model and strategy;
.
to meet with the auditor to review their proposed audit
programme of work and the findings of the Auditor.
The Committee shall also use this as an opportunity
to assess the effectiveness of the audit process;
.
to review a statement from the Manager detailing the
arrangements in place within the AIFM whereby the
AIFM staff may, in confidence, escalate concerns about
possible improprieties in matters of financial reporting or
other matters (“whistleblowing”);
.
to make recommendations in relation to the
appointment of the auditor and to approve the
remuneration and terms of engagement of the Auditor;
.
to review the Company’s audit arrangements and
consider the requirement for an audit tender in line with
best practice;
.
to monitor and review annually the Auditor’s
independence, objectivity, effectiveness, resources and
qualification; and
.
to investigate, when an auditor resigns, the reasons
giving rise to such resignation and consider whether any
action is required.
Performance Evaluation of the Committee
In 2022 an evaluation of the Audit Committee was
conducted by the Board. The evaluation, which concluded
that the Committee operated effectively, was based upon
questionnaires and the results allowed the Committee
members to agree priorities for future consideration.
Activities During the Year
The Audit Committee met four times during the year
when it considered the Half Yearly Report in detail,
reviewed the Auditor’s audit planning report and reviewed
the Annual Report and financial statements. The reviews of
the Half Yearly Report and Annual Report included detailed
work in relation to the Going Concern status and viability
of the Company together with significant oversight of the
preparation of the financial statements. Representatives of
the AIFM’s internal audit, risk and compliance departments
reported to the Committee at these meetings on matters
such as internal control systems, risk and the conduct of
the business in the context of its regulatory environment.
The Audit Committee continues to believe that the
Company does not require an internal audit function of
its own as it delegates its day to day operations to third
parties from whom it receives internal controls reports.
Review of Internal Control Systems and Risk
The Committee considers the internal control systems
and a matrix of risks at each of its meetings. There is more
detail on the process of these reviews in the Directors’
Report. In addition, details of the principal risks faced by the
Company can be found within the Strategic Report on
pages 13 to 17.
86 Annual Report 2022
Financial Statements and Significant Issues
During its review of the Company’s financial statements for
the year ended 31 December 2022, the Audit Committee
considered the following significant issues, including,
in particular, those communicated by the Auditor as
key areas of audit emphasis during their planning and
reporting of the year end audit.
Valuation of Investment Property – The valuation of
the Group’s investment properties is performed by an
independent external valuer in accordance with the RICS
Red Book. The valuation of investment property requires
significant judgement and estimates by the independent
valuer. The Committee is responsible for reviewing and
challenging the investment valuation process employed.
The independent valuer is appointed by the Manager
and its direct property pricing committee is responsible
for ensuring that the valuation is independent, fair and
compliant with the abrdn valuation policies. Portfolio
managers are responsible for correcting any matters of
factual inaccuracy during the valuation process but are
not permitted to express any opinion in relation to the
valuation itself.
Fair Value of Group Loans Receivable – The carrying amount
of the group loan balance represents 59% of the parent
Company’s total assets. Their measurement is not at a high
risk of significant misstatement or subject to significant
judgement. In structuring the group loan arrangements the
Manager has received specialist advice and is therefore
confident of the recoverability of these loans.
Review of Financial Statements
The Committee is responsible for the preparation of the
Company’s Annual Report. The process is extensive,
requiring input from a number of different third party
service providers. The Committee reports to the Board on
whether, taken as a whole, the Annual Report and financial
statements are fair, balanced and understandable.
In so doing, the Committee has considered the
following matters:
.
the existence of a comprehensive control framework
surrounding the production of the Annual Report and
Financial Statements which includes a number of
different checking processes;
.
the existence of extensive levels of reviews as part
of the production process involving the depositary,
the AIFM, the Company Secretary and the Auditor
as well as the Committee’s own expertise;
.
the controls in place within the various third party service
providers to ensure the completeness and accuracy of
the financial records and the security
of the Company’s assets;
.
the externally audited internal control reports of
abrdn plc, and related service providers.
The Committee has reviewed the Annual Report and the
work undertaken by the third party service providers and
is satisfied that, taken as a whole, the Annual Report and
Financial Statements is fair, balanced and understandable.
The Committee has reported its findings to the Board
which in turn has made its own statement in this regard in
the Directors’ Responsibility Statement on page 85.
Review of Auditor
The Audit Committee has reviewed the effectiveness of
the Auditor including:
.
Independence: the Auditor discusses with the Audit
Committee, at least annually, the steps it takes to
ensure its independence and objectivity and makes the
Committee aware of any potential issues, explaining all
relevant safeguards;
.
Quality of audit work: (i) the ability to resolve issues
in a timely manner – the Audit Committee is confident
that identified issues are satisfactorily and promptly
resolved; (ii) its communications/presentation of outputs
– the Audit Committee is satisfied that the explanation of
the audit plan, any deviations from it and the subsequent
audit findings are comprehensible; and (iii) working
relationship with management – the Audit Committee
is satisfied that the Auditor has a constructive working
relationship with the Manager; and,
.
Quality of people and service including continuity and
succession plans: the Audit Committee is satisfied
that the audit team is made up of sufficient, suitably
experienced staff.
The Audit Committee therefore supports the
recommendation to the Board that the reappointment of
the Auditor be put to Shareholders for approval at the AGM.
Tenure of the Auditor
KPMG has held office as Auditor since the incorporation
of the Company in 2017. In accordance with present
professional guidelines the audit director will be rotated
after no more than five years and the year ended
31 December 2022 is the third year for which the present
director has served. The Committee considers KPMG,
the Company’s auditor, to be independent of the Company.
Companies Act legislation requires listed companies to
tender the audit every 10 years and rotate after a maximum
of 20 years. The Committee therefore expects to conduct a
tender for audit services by 2027 at the latest.
Caroline Gulliver
Audit Committee Chairman
20 April 2023
87Annual Report 2022
Financial Statements
The audited Net Asset Value (“NAV”) per Share as at 31 December 2022 was
€1.19 (GBp 105.43p), compared with the NAV per Share of €1.29 (GBp 108.5p)
at the end of 2021, reflecting, with the interim dividends paid, a NAV total return
of (3.8%) for the year in euro terms.
88 Annual Report 2022
Financial Statements
Independent Auditor’s Report to the Members of
abrdn European Logistics Income plc
[UPDATED AUDIT REPORT
TO BE SUPPLIED]
1. Ouropinionisunmodified
Wehaveauditedthefinancialstatementsofabrdn
EuropeanLogisticsIncomeplc(“theCompany”or“the
ParentCompany”)anditssubsidiaries(together“the
Group”)fortheyearended31December2022which
comprisetheConsolidatedStatementofComprehensive
Income,ConsolidatedBalanceSheet,Consolidated
StatementofChangesinEquity,ConsolidatedStatement
ofCashFlows,ParentCompanyBalanceSheet,Parent
CompanyStatementofChangesinEquity,andthe
relatednotes,includingtheaccountingpoliciesinnote
1.
Inouropinion:
— thefinancialstatementsgiveatrueandfairviewof
thestateoftheGroup’sandoftheParent
Company’saffairsasat31December2022andof
theGroup’snetreturnfortheyearthenended;
— theGroupfinancialstatementshavebeenproperly
preparedinaccordancewithUK‐adopted
internationalaccountingstandards;
— theParentCompanyfinancialstatementshavebeen
properlypreparedinaccordancewithUKaccounting
standards,includingFRS101ReducedDisclosure
Framework;and
— thefinancialstatementshavebeenpreparedin
accordancewiththerequirementsoftheCompanies
Act2006.
Basisforopinion
Weconductedourauditinaccordancewith
InternationalStandardsonAuditing(UK)(“ISAs(UK)”)
andapplicablelaw.Ourresponsibilitiesaredescribed
below.Webelievethatthe
auditevidencewehave
obtainedisasufficientandappropriatebasisforour
opinion.Ourauditopinionisconsistentwithourreport
totheauditcommittee.
Wewerefirstappointedasauditorbytheshareholderson
14November2017.Theperiodoftotaluninterrupted
engagementisforthefivefinancialyearsended31
December2022.Wehavefulfilledourethical
responsibilitiesunder,andweremainindependentofthe
Groupinaccordancewith,UKethicalrequirementsincluding
theFRCEthicalStandardasappliedtolistedpublicinterest
entities.Nonon‐auditservicesprohibitedbythatstandard
wereprovided.
Independent
auditor’sreport
tothemembersofabrdnEuropeanLogisticsIncomeplc
Overview
Materiality:
groupfinancial
statementsasa
whole
€7.6m(2021:€7.2m)
0.94%(2021:1.00%)ofTotalAssets
Coverage 100% (2021:100%)ofgrouptotal
assets
Keyauditmattersvs2021
Recurringrisks Valuationofinvestment
properties
MeasurementofParent
Company’sloansdue
fromGroupentities.
◄►
89Annual Report 2022
2. Keyauditmatters: ourassessmentofrisksofmaterialmisstatement
Keyauditmattersarethosemattersthat,inourprofessionaljudgment,wereofmostsignificanceintheauditofthefinancialstatements
andincludethemostsignificantassessedrisksofmaterialmisstatement(whetherornotduetofraud)identifiedbyus,includingthose
whichhadthegreatesteffecton:th eoverallauditstrategy;theallocationofresourcesintheaudit;anddirectingtheeffortsofthe
engagementteam.Wesummarisebelowthekeyauditmatters(unchangedfrom2021),indecreasingorderofauditsignificance,in
arrivingatourauditopinionabove,togetherwithourkeyauditprocedurestoaddressthosemattersand,asrequiredforpublic interest
entities,ourresultsfromthoseprocedures.Thesematterswereaddressed,andourresultsarebasedonproceduresundertaken,inthe
contextof,andsolelyforthepurposeof,ourauditofthefinancialstatementsasawhole,andinformingouropinionthereon, and
consequentlyareincidentaltothatopinion,andwedonotprovideaseparateopiniononthesematters.
[Wecontinuetoperformproceduresover[identifykeyauditmatter].However,following[explainwhyriskislesssignificant thisyear],we
havenotassessedthisas
oneofthemostsignificantrisksinourcurrentyearauditand,therefore,itisnotseparatelyidentifiedinourreport
thisyear.]
Therisk Ourresponse
Valuationofinvestmentproperties
(€776.6million;2021:€683.9m)
Refertopage86(ReportoftheAudit
Committee),page101(accounting
policy)andpage108(financial
disclosures).
Subjectivevaluation
ThecarryingamountoftheGroup’s
propertyportfoliomakesup95%(2021:
94%)oftheGroup’stotalassetsbyvalue.
ValuationoftheGroup’sinvestment
propertiesareperformedbyexternal
valuationadvisors.
Thevaluationofinvestmentproperty
requiressignificantjudgementand
estimatesbymanagementandtheexternal
valuationadvisors.Asaresultthereisan
inherentriskthatthesubjective
assumptionsusedinthecalculationsoffair
valueareinappropriate.Incertainperiods,
suchastheperiodaround31December
2022,realestatetransactionsaresubdued
andthejudgementofthevaluationadvisors
ismagnifiedinthatcontext.
Theeffectofthesemattersisthat,aspartof
ourriskassessment,wehavedetermined
thatthevaluationofinvestmentproperties
hasahighdegreeofestimationuncertainty,
withapotentialrangeofreasonable
outcomesgreaterthanourmaterialityfor
thefinancialstatementsawhole,and
possiblymanytimesthatamount.The
financialstatementsdisclosethesensitivity
oftheestimatetochangesinthe
capitalisation/discountrate/equivalentyield
andEstimatedRentalValue(ERV).
Weperformedthe
detailedtestsbelowratherthan
seekingtorelyoncontrols,becausethenatureof
thebalanceissuchthatwewouldexpecttoobtain
auditevidenceprimarilythroughthedetailed
proceduresdescribed:
1. Assessing valuation advisors’ credentials:
Criticallyassessingtheindependence,
professionalqualifications,competenceand
experienceoftheexternalvaluationadvisors
usedbytheGrouptodeterminewhetherthere
wereanymattersthatmighthaveaffected
theirobjectivityormayhaveimposedscope
limitationsupontheirwork.
2. Methodology choice:
Criticallyassessingthemethodologyusedby
theexternalvaluationadvisorsbyconsidering
whethertheirvaluationswerepreparedin
accordancewithmarketpracticeforthe
estimationoffairvalueandrelevant
accountingstandards.
3. Benchmarking assumptions:
Forasampleofproperties,selectedusinga
riskbasedapproach,challengingthekey
assumptionsuponwhichthevaluationswere
based,includingthoserelatingtoEstimated
RentalValue(‘ERV’)anddiscountratesby
makingacomparisontoourownassumptions
independentlyderivedfrommarketdata.
4. Input assessment:
Agreeingobservableinputsusedinthe
valuations,suchasrentalincome,lease
incentives,breakclausesandleaselengths
backtoleaseagreementsforasampleof
leases.
5. Disclosure assessment:
Criticallyassessingtheadequacyofthe
Group’sdisclosuresinrelationtothe
accountingestimate.Werecognisedthe
significanceofprovidingappropriate
sensitivityanalysisdisclosure
toreflectthe
limitedtransactionalevidencethatunderpins
keyassumptionsandthatthedirectorshave
increasedtherangethisyearaccordingly.
Ourresults
WefoundtheGroup’svaluationofinvestment
propertiestobeacceptable(2021:acceptable).
90 Annual Report 2022
3. Ourapplicationofmaterialityandanoverviewofthe
scopeofouraudit
MaterialityfortheGroupfinancialstatementsasawholewas
setat€7.6m(2021:€7.2m),determinedwithreferencetoa
benchmarkoftotalassets,ofwhichitrepresents0.94%(2021:
1.00%).
MaterialityfortheParentCompanyfinancialstatementsasa
wholewassetat€4.2m(2021:€4.2m),determinedwith
referencetoabenchmarkoftotalassets,ofwhichitrepresents
0.98%(2021:1.00%).
Inlinewithourauditmethodology,ourproceduresonindividual
accountbalancesanddisclosureswereperformedtoalower
threshold,performancemateriality,soastoreduceto an
acceptableleveltheriskthatindividuallyimmaterial
misstatementsinindividualaccountbalancesadduptoa
materialamountacrossthefinancialstatementsasawhole.
GroupandParentCompanyperformancematerialitywassetat
75%(2021:75%)ofmaterialityforthefinancialstatementsasa
whole,whichequatesto€5.7m(2021:€5.4m),(ParentCompany
€3.1m(2021:€3.1m)).Weappliedthispercentageinour
determinationofperformancematerialitybecausewedidnot
identifyanyfactorsindicatinganelevatedlevelofrisk.
Inaddition,weappliedamaterialityof€753k(2021:€680k)to
therentalincomeandrentalreceivablesforwhich
webelieve
misstatementsofalesseramountsthanmaterialityforthe
financialstatementsasawholecouldreasonablybeexpectedto
influencethemembers’assessmentofthefinancial
performanceoftheGroup.Performancematerialityoverrental
incomeandrentalreceivableswassetat65%(2021:75%)of
rentalincomemateriality,whichequatesto€489k(2021:
€510k).Weappliedthispercentageinourdeterminationof
performancematerialityforthesebalancesbasedonthelevelof
identifiedmisstatementsduringthepriorperiodinrelationto
thesebalances.
WeagreedtoreporttotheAuditCommitteeanycorrectedor
uncorrectedidentifiedmisstatementsexceeding€384k(2021:
€364k),inadditiontootheridentifie dmisstatementsthat
warrantedreportingonqualitativegrounds.
GroupTotalAssets
€817.8m(2021:€728.4m)
Materiality
€7.6m(2021:€7.2m)
TotalAssets
Groupmateriality
€7.6m
Wholefinancial
statements materiality(2021:
€7.2m)
€5.7m
Wholefinancial
statementsperformance
materiality(2021:€5.4m)
€753k
Materialityoverrentalincome
andrentalreceivables
(2021:€680K)
€384k
Misstatements reported tothe
auditcommittee(2021:€364K)
TheGroupteamperformedtheauditoftheGroupasif itwasasingl e
aggregatedsetoffinancialinformation.Theauditwasperformedusingthe
materialitylevels setoutaboveandwasperformedbyourteambasedinthe
UnitedKingdom.
Thescopeoftheauditworkperformedwasfullysubstantiveaswedidnotrely
upontheGroup’sinternalcontrolsoverfinancialreporting.
Therisk Ourresponse
MeasurementoftheParent
Company’sloansduefromGroup
entities(ParentCompanyKeyAudit
Matter)
(€254.3m;2021:€322.5m)
Refertopage86(ReportoftheAudit
Committee),page130(accounting
policy)andpage133(financial
disclosures).
Lowrisk,high value
Thecarryingamountoftheparentloan
balancerepresents58.6%(2021:75.6%)of
theParentCompany’stotalassets.The
parentloansaremeasuredatfairvalue,
whichissubjecttomanagement
Judgement.Theloansarerepayable
ondemandandhavenoaccesstoupside
valuefromtheborrowers,thekeyriskto
measurementisiftheborrowercouldnot
repaythem.
Duetotheirmaterialityinthecontextof
theParentCompanyfinancialstatements,
thisisconsideredtobetheareathat
requiresthegreatesteffortintheParent
CompanyauditandishenceaKeyAudit
Matter.
Weperformedthedetailedtestsbelowratherthan
seekingtorelyoncontrols,becausethenatureofthe
balanceissuchthatwewouldexpecttoobtainaudit
evidenceprimarilythroughthedetailedprocedures
described:
Testofdetails:
• Comparingthecarryingamountoftheparentloan
balanceswiththerelevantsubsidiaries’draft
balancesheetstoidentifywhethertheirnet
assets,beinganapproximationoftheirminimum
recoverableamount,werein
excessoftheir
carryingamountandassessingwhetherthose
subsidiariesareprofit‐making.
• Inspectingthedocumentationoftheloansto
confirmtheyarerepayableondemand.
Ourresults
WefoundthemeasurementoftheParentCompany
loanstobeacceptable(2021:acceptable).
91Annual Report 2022
4. Goingconcern
Thedirectorshavepreparedthefinancialstatementsonthe
goingconcernbasisastheydonotintendtoliquidatetheGroup
ortheCompanyortoceasetheiroperations,andastheyhave
concludedthattheGroup’sandtheCompany’sfinancialposition
meansthatthisisrealistic.Theyhavealsoconcludedthatthere
arenomaterialuncertaintiesthatcouldhavecastsignificant
doubtovertheirabilitytocontinueasagoingconcernforatleast
ayearfromthedateofapprovalofthefinancialstatements(“the
goingconcernperiod”).
WeusedourknowledgeoftheGroupandCompany,itsindustry,
andthegeneraleconomicenvironmenttoidentifytheinherent
riskstoitsbusinessmodelandanalysedhowthoserisksmight
affecttheGrouportheCompany’sfinancialresourcesorability
tocontinueoperationsoverthegoingconcernperiod.Therisks
thatweconsideredmostlikelytoadverselyaffecttheGroup’s
andCompany’savailablefinancialresourcesanditsabilityto
operateoverthisperiodwere:
— Theimpactofasignificantreductioninth evaluationof
investmentpropertyandtheimplicationsfortheGroup’sloan
covenants;and
— Theriskoffuturenon‐paymentofrentbytenantsthereby
impactingtheliquidity
positionoftheGroupandCompany,as
wellastheresultingeffectofnoncompliancewithinterest cover
covenants.
Weconsideredwhethertheseriskscouldplausiblyaffectthe
liquidityinthegoingconcernperiodbyassessingthedegreeof
downsideassumptionthat,individuallyandcollectively,could
resultinaliquidityissue,takingintoaccounttheGroup’scurrent
andprojectedcashpositionandloancovenantheadroom.
Ourproceduresalsoincluded:
Weconsideredwhetherthegoingconcerndisclosureinnote28
tothefinancialstatementsgivesafullandaccuratedescription
oftheDirectors’assessmentofgoingconcern,includingthe
identifiedrisksandrelatedsensitivities.
Ourconclusionsbasedonthiswork:
—weconsiderthatthedirectors’useofthegoingconcernbasis
ofaccountinginthepreparationofthefinancialstatementsis
appropriate;
—wehavenotidentified,andconcurwiththedirectors’
assessmentthatthereisnot,amaterialuncertaintyrelatedto
eventsorconditionsthat,individuallyorcollectively,maycast
significantdoubtontheGroup’sorCompany'sabilitytocontinue
asagoingconcernforthegoingconcernperiod;
—wehavenothingmaterialtoaddordrawattentiontoin
relationtothedirectors’statementinnote28tothefinancial
statementson
theuseofthegoingconcernbasisofaccounting
withnomaterialuncertaintiesthatmaycastsignificantdoubt
overtheGroupandCompany’suseofthatbasisforthegoing
concernperiod,andwefoundthegoingconcerndisclosurein
note28tobeacceptable;and
—therelatedstatementundertheListingRulessetoutonpage
77ismateriallyconsistentwiththefinancialstatementsandour
auditknowledge.
However,aswecannotpredictallfutureeventsorconditions
andassubsequenteventsmayresultinoutcomesthatare
inconsistentwithjudgementsthatwerereasonableatthetime
theyweremade,theaboveconclusionsarenotaguaranteethat
theGrouportheCompanywillcontinueinoperation.
5. Fraudandbreachesoflawsandregulations– abilityto
detect
Identifyingandrespondingtorisksofmaterialmisstatement
duetofraud
Toidentifyrisksofmaterialmisstatementduetofraud(“fraud
risks”)weassessedeventsorconditionsthatcouldindicatean
incentiveorpressuretocommitfraudorprovideanopportunity
tocommitfraud.Ourriskassessmentproceduresincluded:
—Enquiringofthedirectorsofwhethertheyareawareoffraud
andoftheGroup’shigh‐levelpoliciesandprocedurestoprevent
anddetectfraud;
— ReadingBoardandAuditCommitteeminutes;and
— Assessingthesegregationofdutiesinplacebetweenthe
directors,theadministratorsandtheGroup’sandParent
Company’sInvestmentManager.
Asrequiredbyauditingstandards,weperformproceduresto
addresstheriskofmanagementoverrideofcontrols,in
particulartotheriskthatmanagementmaybeinapositionto
makeinappropriateaccountingentries.
Onthisauditwedonotbelievethereisafraudriskrelatedto
revenuerecognitionbecausetheGroup’sincomeprimarilyarises
fromoperatingleasecontractswithfixed,orhighlypredictable,
periodicpayments.
Wedidnotidentifyanysignificantunusualtransactionsor
additionalfraudrisks.
Weperformedproceduresincluding:
— evaluatingthedesignandimplementationofthecontrolsover
journalentriesandotheradjustmentsandmadeinquiriesofthe
Administratorsaboutinappropriateorunusualactivityrelatingto
theprocessingofjournalentriesandotheradjustments;and
— identifyingandselectingcertainjournalentriesmadeatthe
endofthereportingperiodandpost‐closingentriesfortesting
andcomparingtheidentifiedentriestosupporting
documentation.
Identifyingandrespondingtorisksofmaterialmisstatement
relatedtocompliancewithlawsandregulations
Weidentifiedareasoflawsandregulationsthatcouldreasonably
beexpectedtohavea
materialeffectonthefinancialstatements
fromourgeneralcommercialandsectorexperienceandthrough
discussionwiththeDirectors,theInvestmentManagerandthe
Administrators(asrequiredbyauditingstandards)anddiscussed
withtheDirectorsthepoliciesandproceduresregarding
compliancewithlawsandregulations.
AstheGroupisregulated,ourassessmentofrisksinvolved
gaininganunderstandingofthecontrolenvironmentincluding
theentity’sproceduresforcomplyingwithregulatory
requirements.
92 Annual Report 2022
Identifyingandrespondingtorisksofmaterialmisstatementdue
tonon‐compliancewithlawsandregulations(continued)
Thepotentialeffectoftheselawsandregulationsonthefinancial
statementsvariesconsiderably.
Firstly,theGroupissubjecttolawsandregulationsthatdirectly
affectthefinancialstatementsincludingfinancialreporting
legislation(includingrelatedcompanieslegislation),distributable
profitslegislation,overseastaxationlegislation,andits
qualificationasanInvestmentTrustunderUKtaxation
legislation,anybreachofwhichcouldleadtotheCompanylosing
variousdeductionsandexemptionsfromUKcorporationtax,and
weassessedtheextentofcompliancewiththeselawsand
regulationsaspartofourproceduresontherelatedfinancial
statementitems.
WeassessedthelegalityofthedistributionsmadebytheGroup
intheperiodbasedoncomparingthedividendspaidwiththe
distributablereservespriortoeachdistribution,including
considerationofinterimaccountsfiledduringtheyear.
Secondly,theGroupissubjecttomanyotherlawsand
regulationswheretheconsequencesofnon‐compliancecould
haveamaterialeffectonamountsordisclosuresinthefinancial
statements,forinstancethroughtheimpositionoffinesor
litigation.Weidentifiedthefollowingareasasthosemostlikely
tohavesuchaneffect:
GDPRcompliance,healthandsafety
legislation,moneylaundering,briberyandcorruptionlegislation,
environmentalprotectionlegislation,landlordandtenant
legislation,buildingregulations,andcertainaspectsofcompany
legislationrecognisingthefinancialandregulatednatureofthe
Group’sandCompany’sactivitiesanditslegalform.
Auditingstandardslimittherequiredauditprocedurestoidentify
non‐compliancewiththeselawsandregulationstoenquiryof
theDirectorsandtheAdministratorandinspectionofregulatory
andlegalcorrespondence,ifany.Thereforeifabreachof
operationalregulationsisnotdisclosedtousorevidentfrom
relevantcorrespondence,anauditwillnotdetectthatbreach.
Contextoftheabilityoftheaudittodetect fraudorbreaches
oflaworregulation
Owingtotheinherentlimitationsofanaudit,thereisan
unavoidableriskthatwemaynothavedetectedsomematerial
misstatementsinthefinancialstatements,eventhoughwehave
properlyplannedandperformedourauditinaccordancewith
auditingstandards.Forexample,thefurtherremovednon‐
compliancewithlawsandregulationsisfromtheeventsand
transactionsreflectedinthefinancialstatements,thelesslikely
theinherentlylimitedproceduresrequiredbyauditingstandards
wouldidentifyit.
Inaddition,aswithanyaudit,thereremaineda
higherriskof
non‐detectionoffraud,asthesemayinvolvecollusion,forgery,
intentionalomissions,misrepresentations,ortheoverrideof
internalcontrols.Ourauditproceduresaredesignedtodetect
materialmisstatement.Wearenotresponsibleforpreventing
non‐complianceorfraudandcannotbeexpectedtodetectnon‐
compliancewithalllawsandregulations.
6.Wehavenothingtoreportontheotherinformationinthe
AnnualReport
Thedirectorsareresponsiblefortheotherinformation
presentedintheAnnualReporttogetherwiththefinancial
statements.Ouropiniononthefinancialstatementsdoesnot
covertheotherinformationand,accordingly,wedonotexpress
anauditopinionor,exceptasexplicitlystatedbelow,anyformof
assuranceconclusionthereon.
Ourresponsibilityistoreadtheotherinformationand,indoing
so,considerwhether,basedonourfinancialstatementsaudit
work,theinformationthereinismateriallymisstatedor
inconsistentwiththefinancialstatementsorouraudit
knowledge.Basedsolelyonthatworkwehavenotidentified
materialmisstatementsintheotherinformation.
Strategicreportanddirectors’report
Basedsolelyonourworkontheotherinformation:
— wehavenotidentifiedmaterialmisstatementsinthe
strategicreportandthedirectors’report;
— inouropinion
theinformationgiveninthosereportsforthe
financialyearisconsistentwiththefinancialstatements;and
— inouropinionthosereportshavebeenpreparedin
accordancewiththeCompaniesAct2006.
Directors’remunerationreport
InouropinionthepartoftheDirectors’RemunerationReportto
beauditedhasbeenproperlypreparedinaccordancewiththe
CompaniesAct2006.
Disclosuresofemergingandprincipalrisksandlonger‐term
viability
Wearerequiredtoperformprocedurestoidentifywhether
thereisamaterialinconsistencybetweenthedirectors’
disclosuresinrespectofemergingandprincipalrisksandthe
viabilitystatement,andthefinancialstatementsandouraudit
knowledge.
Basedonthoseprocedures,wehavenothingmaterialtoaddor
drawattentiontoinrelationto:
— thedirectors’confirmationwithintheViabilityStatementon
page18thattheyhavecarriedoutarobustassessmentof
theemergingandprincipalrisksfacingtheGroup,including
thosethatwouldthreatenitsbusinessmodel,future
performance,solvencyandliquidity;
— theEmergingandPrincipalRisksdisclosuresdescribingthese
risks andhowemergingrisksareidentified, andexplaining
howtheyarebeingmanagedandmitigated;and
— thedirectors’explanationintheViabilitystatementofhow
theyhaveassessedtheprospectsof
theGroup,overwhat
periodtheyhavedonesoandwhytheyconsideredthat
periodtobeappropriate,andtheirstatementastowhether
theyhaveareasonableexpectationthattheGroup willbe
abletocontinueinoperationandmeetitsliabilitiesasthey
falldueovertheperiodoftheirassessment,includingany
relateddisclosuresdrawingattentiontoanynecessary
qualificationsorassumptions.
93Annual Report 2022
WearealsorequiredtoreviewtheViabilitystatement,setout
onpage18undertheListingRules.Basedontheabove
procedures,wehaveconcludedthattheabovedisclosuresare
materiallyconsistentwiththe financialstatementsandouraudit
knowledge.
Ourworkislimitedtoassessingthesemattersinthecontextof
onlytheknowledgeacquireddurin gourfinancialstatements
audit.Aswecannotpredictallfutureeventsorconditionsandas
subsequenteventsmayresultinoutcomesthatareinconsistent
withjudgementsthatwerereasonableatthetimetheywere
made,theabsenceofanythingtoreportonthesestatementsis
notaguaranteeastotheGroup’sandCompany’slonger‐term
viability.
Corporategovernancedisclosures
Wearerequiredtoperformprocedurestoidentifywhether
thereisamaterialinconsistencybetweenthedirectors’
corporategovernancedisclosuresandthefinancialstatements
andourauditknowledge.
Basedonthoseprocedures,wehaveconcludedthateachofthe
followingismate rially consistentwiththefinancialstatements
andourauditknowledge:
— thedirectors’statementthattheyconsiderthattheannual
reportandfinancialstatementstakenasawholeisfair,
balancedandunderstandable,andprovidestheinformation
necessaryforshareholderstoassesstheGroup’s
positionand
performance,businessmodelandstrategy;
— thesectionoftheannualreportdescribingtheworkofthe
AuditCommittee,includingthesignificantissuesthatthe
auditcommitteeconsideredinrelationtothefinancial
statements,andhowtheseissueswereaddressed;and
— thesectionoftheannualreportthatdescribesth ereviewof
theeffectivenessoftheGroup’sriskmanagementand
internalcontrolsystems.
WearerequiredtoreviewthepartoftheCorporateGovernance
StatementrelatingtotheGroup’scompliancewiththeprovisions
oftheUKCorporateGovernanceCodespecifiedbytheListing
Rulesforourreview.Wehavenothingtoreportinthisrespect.
7. Wehavenothingtoreportontheothermattersonwhich
wearerequiredtoreportbyexception
UndertheCompaniesAct2006,wearerequiredtoreporttoyou
if,inouropinion:
— adequateaccountingrecordshavenotbeenkeptbythe
ParentCompany,orreturnsadequateforouraudithavenot
beenreceivedfrombranchesnotvisitedbyus;or
— theParentCompanyfinancialstatementsandthepartofthe
Directors’RemunerationReporttobeauditedarenotin
agreementwiththeaccountingrecordsandreturns;or
— certaindisclosuresofdirectors’remunerationspecified
by
lawarenotmade;or
— wehavenotreceivedalltheinformationandexplanations
werequireforouraudit.
Wehavenothingtoreportintheserespects.
8.
Respectiveresponsibilities
Directors’responsibilities
Asexplainedmorefullyintheirstatementsetoutonpage85,the
directorsareresponsiblefor:thepreparationofthefinancial
statementsincludingbeingsatisfiedthattheygiveatrueandfair
view;suchinternalcontrolastheydetermineisnecessaryto
enablethepreparationoffinancialstatementsthatarefreefrom
materialmisstatement,whetherduetofraudorerror;assessing
theGroupandParentCompany’sabilitytocontinueasagoing
concern,disclosing,asapplicable,mattersrelatedtogoing
concern;andusingthegoingconcernbasisofaccountingunless
theyeitherintendtoliquidatetheGrouportheParentCompany
ortoceaseoperations,orhavenorealisticalternativebuttodo
so.
Auditor’sresponsibilities
Ourobjectivesaretoobtainreasonableassuranceaboutwhether
thefinancialstatementsasawholearefreefrommaterial
misstatement,whetherduetofraudorerror,andtoissueour
opinioninanauditor’sreport. Reasonableassuranceisahigh
levelofassurance,butdoesnotguaranteethatanaudit
conductedin
accordancewithISAs(UK)willalwaysdetecta
materialmisstatementwhenitexists. Misstatementscanarise
fromfraudorerrorandareconsideredmaterialif,individuallyor
inaggregate,theycouldreasonablybeexpectedtoinfluencethe
economicdecisionsofuserstakenonthebasisofthefinancial
statements.
Afullerdescriptionofourresponsibilitiesisprovidedonthe
FRC’swebsiteatwww.frc.org.uk/auditorsresponsibilities.
TheCompanyisrequiredtoincludethese financialstatementsin
anannualfinancialreportpreparedusingthesingleelectronic
reportingformatspecifiedintheTDESEFRegulation.This
auditor’sreportprovidesnoassuranceoverwhethertheannual
financialreporthasbeenpreparedinaccordancewiththat
format.
9.Thepurposeofourauditworkandtowhomweoweour
responsibilities
ThisreportismadesolelytotheCompany’smembers,asabody,
inaccordancewithChapter3ofPart16oftheCompaniesAct
2006.Ourauditworkhasbeenundertakensothatwemight
statetotheCompany’smembersthosematterswearerequired
tostatetotheminanauditor’sreportandfornootherpurpose.
Tothefullestextentpermittedbylaw,wedonotacceptor
assumeresponsibilitytoanyoneotherthantheCompanyandthe
Company’smembers,asabody,forourauditwork,forthis
report,orfortheopinionswehaveformed.
MatthewWilliams(SeniorStatutoryAuditor)
forandonbehalfofKPMGLLP,StatutoryAuditor
CharteredAccountants
15CanadaSquare
CanaryWharf
London
E145GL
20April2023
94 Annual Report 2022
Financial Statements
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
Notes
Year ended 31 December 2022 Year ended 31 December 2021
Revenue
€'000
Capital
€'000
Total
€’000
Revenue
€'000
Capital
€'000
Total
€’000
REVENUE
Rental income 2 29,686 - 29,686 23,283 - 23,283
Property service charge income 6,237 - 6,237 3,435 - 3,435
Other operating income 676 - 676 219 - 219
Total Revenue 36,599 - 36,599 26,937 - 26,937
GAINS ON INVESTMENTS
(Losses)/Gains on revaluation of investment properties 9 - (40,432 ) (40,432 ) - 41,031 41,031
Total Income and (losses)/gains on investments 36,599 (40,432 ) (3,833 ) 26,937 41,031 67,968
EXPENDITURE
Investment management fee (3,953 ) - (3,953 ) (2,756 ) - (2,756 )
Direct property expenses (2,501 ) - (2,501 ) (1,851 ) - (1,851 )
Property service charge expenditure (6,237 ) - (6,237 ) (3,435 ) - (3,435 )
SPV property management fees (255 ) - (255 ) (371 ) - (371 )
Other expenses 3 (2,797 ) - (2,797 ) (1,735 ) - (1,735 )
Total expenditure (15,743 ) - (15,743 ) (10,148 ) - (10,148 )
Net operating return before finance costs 20,856 (40,432 ) (19,576 ) 16,789 41,031 57,820
FINANCE COSTS
Finance costs 4 (5,676 ) - (5,676 ) (3,449 ) - (3,449 )
Effect of fair value adjustments on derivative financial
instruments
Effect of foreign exchange differences (115 ) 461 346 264 753 1,017
Net return before taxation 15,065 (36,371 ) (21,306 ) 13,604 41,784 55,388
Taxation 5 (1,029 ) 3,893 2,864 (651 ) (10,294 ) (10,945 )
Net return for the year 14,036 (32,478 ) (18,442 ) 12,953 31,490 44,443
Total comprehensive return for the year 14,036 (32,478 ) (18,442 ) 12,953 31,490 44,443
Basic and diluted earnings per share 7 3.43 7.94 4.51 4.50 10.93 15.43
The accompanying notes are an integral part of the financial statements.
The total column of the Consolidated Statement of Comprehensive Income is the profit and loss account of the Group.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or
discontinued during the year.
95Annual Report 2022
Financial Statements
Consolidated Balance Sheet
For the year ended 31 December 2022
Notes
As at 31 December 2022
Total
€’000
As at 31 December 2021
Total
€’000
NON-CURRENT ASSETS
Investment properties 9 776,616 683,878
Deferred tax asset 5 3,754 2,978
Total non-current assets 780,370 686,856
CURRENT ASSETS
Trade and other receivables 10 12,570 11,175
Cash and cash equivalents 11 20,262 23,280
Other assets 687 6,966
Derivative financial instruments 15 3,894 109
Total current assets 37,413 41,530
Total assets 817,783 728,386
CURRENT LIABILITIES
Bank loans 14 - 15,500
Lease liability 12 550 550
Trade and other payables 13 15,006 14,466
Derivative financial instruments 15 185 -
Total current liabilities 15,741 30,516
NON-CURRENT LIABILITIES
Bank loans 14 265,532 160,447
Lease liability 12 22,087 22,355
Deferred tax liability 5 24,446 27,563
Total non-current liabilities 312,065 210,365
Total liabilities 327,806 240,881
Net assets 489,977 487,505
SHARE CAPITAL AND RESERVES
Share capital 16 4,717 4,309
Share premium 17 269,546 225,792
Special distributable reserve 18 164,851 178,207
Capital reserve 19 30,780 63,258
Revenue reserve 20,083 15,939
Equity shareholders' funds 489,977 487,505
Net asset value per share 8 € 1.19 € 1.29
The Financial Statements on pages 95 to 137 were approved and authorised for issue by the Board of Directors on
20 April 2023 and signed on its behalf by:
Caroline Gulliver
Independent Non-Executive Director
Company number: 11032222.
The accompanying notes are an integral part of the financial statements.
96 Annual Report 2022
Financial Statements
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Notes
Share capital
€'000
Share
premium
€'000
Special
distributable
reserve
€'000
Capital
reserve
€'000
Revenue
reserve
€'000
Total
€'000
Balance at 31 December 2021 4,309 225,792 178,207 63,258 15,939 487,505
Share Issue 16/17 408 44,513 - - - 44,921
Share Issue costs 17 - (759 ) - - - (759 )
Total Comprehensive return for the year - - - (32,478 ) 14,036 (18,442 )
Dividends paid 6 - - (13,356 ) - (9,892 ) (23,248 )
Balance at 31 December 2022 4,717 269,546 164,851 30,780 20,083 489,977
For the year ended 31 December 2021
Notes
Share capital
€'000
Share
premium
€'000
Special
distributable
reserve
€'000
Capital
reserve
€'000
Revenue
reserve
€'000
Total
€'000
Balance at 31 December 2020 2,756 61,691 185,661 31,768 11,720 293,596
Share Issue 16/17 1,553 166,924 - - - 168,477
Share Issue costs 17 - (2,823 ) - - - (2,823 )
Total Comprehensive return for the year - - - 31,490 12,953 44,443
Dividends paid 6 - - (7,454 ) - (8,734 ) (16,188 )
Balance at 31 December 2021 4,309 225,792 178,207 63,258 15,939 487,505
The accompanying notes are an integral part of the financial statements.
97Annual Report 2022
Financial Statements
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
Notes
Year ended
31 December 2022
€’000
Year ended
31 December 2021
€’000
CASH FLOWS FROM OPERATING ACTIVITIES
Net return for the year before taxation (21,306 ) 55,388
Adjustments for:
(Losses)/Gains on investment properties 40,432 (41,031 )
Land Leasehold Liability decreases 267 265
Decrease/(Increase) in operating trade and other receivables 4,964 (9,089 )
(Decrease)/Increase in operating trade and other payables (1,554 ) 2,939
Change in fair value of derivative financial instruments (3,600 ) -
Finance costs 4 5,676 3,449
Tax paid (1,070 ) (472 )
Cash generated by operations 23,809 11,449
Net cash inflow from operating activities 23,809 11,449
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment properties (133,523 ) (193,475 )
Derivative financial instruments - (83 )
Net cash outflow from investing activities (133,523 ) (193,558 )
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid 6 (23,248 ) (16,188 )
Bank loans interest paid (3,050 ) (1,311 )
Bank loans drawn 154,547 68,860
Bank loans repaid (65,692 ) (36,500 )
Proceeds from share issue 16/17 44,898 168,477
Issue costs relating to share issue 17 (759 ) (2,823 )
Net cash inflow from financing activities 106,696 180,515
Net decrease in cash and cash equivalents (3,018 ) (1,594 )
Opening balance 23,280 24,874
Closing cash and cash equivalents 20,262 23,280
REPRESENTED BY
Cash at bank 11 20,262 23,280
The accompanying notes are an integral part of the financial statements.
98 Annual Report 2022
Financial Statements
Notes to the Financial Statements
99Annual Report 2022
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Parent Company Balance Sheet
As at 31 December 2022
Notes
2022
€’000
2021
€’000
Non-current assets
Investment in subsidiaries 2 173,862 101,406
Group loans receivable 4 238,894 321,592
412,756 422,998
Current assets
Cash and cash equivalents 3 1,696 906
Group loan interest receivable 4 3,150 1,226
Group loans receivable 4 15,407 921
Other receivables 819 402
Derivative financial instruments - 109
21,072 3,564
Total assets 433,828 426,562
Current liabilities
Bank loans - 15,500
Derivative financial instruments 185 -
Trade and other payables 5 2,353 1,457
2,538 16,957
Non-current liabilities
Bank loans 6 (92) (144)
Total liabilities 2,446 16,813
Net assets 431,382 409,749
Represented by:
Share capital 7 4,717 4,309
Share premium 7 269,546 225,792
Special Distributable Reserve 164,851 178,207
Revenue reserve - 1,529
Capital reserve (7,732) (88)
431,382 409,749
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006 and not
presented an income statement or a statement of comprehensive income for the Company alone.
The profit made by the Parent Company in the year was €719,000 (2021: €9,538,000).
The financial statements on pages 127 to 137 were approved and authorised for issue by the Board of Directors on
20 April 2023 and signed on its behalf by:
Caroline Gulliver
Independent Non-Executive Director
Company number: 11032222.
The accompanying notes are an integral part of the financial statements.
127Annual Report 2022
Parent Company Statement of Changes in Equity
For the year ended 31 December 2022
Notes
Share
Capital
€'000
Share
Premium
€'000
Special
Distributable
Reserve
€'000
Revenue
Reserve
€'000
Capital
Reserve
€'000
Total
€'000
As at 31 December 2021 4,309 225,792 178,207 1,529 (88) 409,749
Issue of shares 7 408 44,513 - - - 44,921
Share issue costs 7 - (759) - - - (759)
Total comprehensive income - - - 8,363 (7,644) 719
Dividends paid - - (13,356) (9,892) - (23,248)
As at 31 December 2022 4,717 269,546 164,851 - (7,732) 431,382
For the year ended 31 December 2021
Notes
Share
Capital
€'000
Share
Premium
€'000
Special
Distributable
Reserve
€'000
Revenue
Reserve
€'000
Capital
Reserve
€'000
Total
€'000
As at 31 December 2020 2,756 61,691 185,661 1,552 (915) 250,745
Issue of shares 7 1,553 166,924 - - - 168,477
Share issue costs 7 - (2,823) - - - (2,823)
Total comprehensive income - - - 8,711 827 9,538
Dividends paid - - (7,454) (8,734) - (16,188)
As at 31 December 2021 4,309 225,792 178,207 1,529 (88) 409,749
The accompanying notes are an integral part of the financial statements.
128 Annual Report 2022
Parent Company Notes to the Financial Statements
1. Accounting Policies
The principal accounting policies, all of which have been applied consistently throughout the year, are set out below.
(a) Basis of Accounting
Basis of preparation of financial statements
The Parent Company financial statements have been prepared in accordance with FRS 101 Reduced Disclosure
Framework and the Companies Act 2006 (the Act). FRS 101 sets out a reduced disclosure framework for a
‘qualifying entity’ as defined in the standard which addresses the financial reporting requirements and disclosure
exemptions in the individual financial statements of qualifying entities that otherwise apply the recognition,
measurement and disclosure requirements of UK-adopted IFRS.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under
that standard in relation to business combinations, financial instruments, capital management, presentation of
comparative information in respect of certain assets, presentation of a cash flow statement, the effect of new
but not yet effective IFRS’s, impairment of assets, share-based payments and related party transactions.
Where required, equivalent disclosures are given in the consolidated financial statements.
The Parent Company financial statements are prepared on a going concern basis as set out in Note 28 of the
consolidated financial statements.
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006
and not presented an income statement or a statement of comprehensive income for the Company alone.
The profit made by the Parent Company in the year was €719,000 (2021: €9,538,000).
A summary of the Company’s significant accounting policies is set out below.
(b) Significant accounting judgements, estimates and assumptions
The preparation of the Company’s financial statements requires Directors to make judgements, estimates and
assumptions that affect the amounts recognised in the financial statements. However, uncertainty about these
judgements, assumptions and estimates could result in outcomes that could require a material adjustment to the
carrying amount of the asset or liability affected in future periods.
Key estimation uncertainties
Investments in subsidiaries are recognised at cost less any provision for impairment. The determination of
impairment requires the use of estimates such as future cash flows and fair value of investment properties.
Group loans are recognised at fair value. Each group loan is assessed individually in order to determine the fair
value, and any gain or loss to be taken through the statement of comprehensive income. Where the Company
is expected to receive all contractual payments on the loan in full, the fair value of the loan equals the face
value and as such no gain or loss arises. The net asset value of each borrower is reviewed to consider if there
is sufficient value within the subsidiary to meet the contractual cash flows. Fundamental to the net asset value
of the borrower is the fair value of the investment properties owned. The valuation uncertainty of investment
properties is detailed within the consolidated group financial statement notes. Where there are expected cash
shortfalls, these are reduced from the face value of the group loans to get to their fair value, discounted at the
interest rate of the loan, which is benchmarked to ensure is on an arms length market rate.
(c) Functional and Presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary
economic environment in which the Company operates (“the functional currency”) which in the judgement of
the directors is Euro. The financial statements are also presented in Euro. All figures in the financial statements
are rounded to the nearest thousand unless otherwise stated.
(d) Foreign Currency
Transactions denominated in foreign currencies are converted at the exchange rates ruling at the date of the
transaction. Monetary and non-monetary assets and liabilities denominated in foreign currencies held at the
financial year end are translated using London closing foreign exchange rates at the financial year end.
Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included
as an exchange gain or loss to capital or revenue in the Statement of Comprehensive Income as appropriate.
129Annual Report 2022
Foreign exchange movements on investments are included in the Statement of Comprehensive Income within
gains on investments.
(e) Revenue Recognition
Interest income is accounted for on an effective interest rate basis and included in finance income.
(f) Expenses
Expenses are accounted for on an accruals basis. The Company’s investment management and administration
fees, finance costs and all other expenses are charged through the Statement of Comprehensive Income.
(g) Taxation
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid
to taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted by the reporting date. Current income tax relating to items recognised directly in equity
is recognised in equity and not in profit or loss. Positions taken in tax returns with respect to situations in which
applicable tax regulations are subject to interpretation are periodically evaluated and provisions established
where appropriate.
(h) Distributions
Interim distributions payable to the holders of equity shares are recognised in the Statement of Changes in Equity
in the year in which they are paid. An annual shareholder resolution is voted upon to approve the Company’s
distribution policy.
(i) Share Issue Expenses
Incremental external costs directly attributable to the issue of shares that would otherwise have been avoided
are written off to share premium.
(j) Cash and Cash Equivalents
Cash and cash equivalents are defined as cash in hand, demand deposits, and other short-term highly liquid
investments readily convertible within three months or less to known amounts of cash and subject to insignificant
risk of changes in value.
(k) Trade and Other Receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are
measured at amortised cost using the effective interest rate method less any impairment losses.
(l) Trade and Other Payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are
measured at amortised cost using the effective interest method.
(m) Reserves
Share Capital – This represents the proceeds from issuing Ordinary shares and is non-distributable.
Share Premium – Share premium represents the excess consideration received over the par value of Ordinary
shares issued and is classified as equity. Incremental costs directly attributable to the issue of Ordinary shares are
recognised as a deduction from share premium. This reserve is non-distributable.
Special Distributable Reserve – The special reserve is a distributable reserve to be used for all purposes permitted,
including the buyback of shares and the payment of dividends.
Capital Reserve – Is a distributable reserve subject to applicable legislation and practice and realised gains and
losses on currency settlements and disposals are accounted for in this reserve.
Revenue Reserve – The revenue reserve is a distributable reserve and reflects any surplus arising from the net
return on ordinary activities after taxation.
(n) Investments in subsidiaries
Investments in subsidiaries are initially recognised at cost, then at the cost less any provision for impairment.
(o) Intercompany Loans
Group loans are recognised and subsequently measured at fair value.
130 Annual Report 2022
2. Investments in Subsidiaries
Additional details of each subsidiary are noted below, all subsidiary shares are the same class:
Subsidiary Address
Share Capital
& Premium
(€’000)
% Shares
Owned Activity
ASELI Florsheim BV
Naritaweg 165,
1043 BW Amsterdam,
The Netherlands
5,171
100 Property Investment
ASELI Erlensee BV
Naritaweg 165,
1043 BW Amsterdam,
The Netherlands
8,373 100 Property Investment
ASELI Leon BV
Naritaweg 165,
1043 BW Amsterdam,
The Netherlands
15,665 100 Property Investment
ASELI Netherlands I BV
Naritaweg 165,
1043 BW Amsterdam,
The Netherlands
6,132 100 Property Investment
ASELI Netherlands II BV
Naritaweg 165,
1043 BW Amsterdam,
The Netherlands
2,957 100 Property Investment
ASELI Waddinxveen BV
Naritaweg 165,
1043 BW Amsterdam,
The Netherlands
5,170 100 Property Investment
ASELI France Holding SAS
8 Avenue Hoche,
75008 Paris,
France
15,760 100 Property Investment
ASELI sHeerenberg BV
Naritaweg 165,
1043 BW Amsterdam,
The Netherlands
8,811 100 Property Investment
PDC Industrial 92 Sp. zo.o
Piekna 18,
00-549 Warsaw,
Poland
4,658 100 Property Investment
PDC Industrial 72 Sp. zo.o
Piekna 18,
00-549 Warsaw,
Poland
3,707 100 Property Investment
Circulus Investments Sp. z o.o.
Piekna 18,
00-549 Warsaw,
Poland
2,867 100 Property Investment
ASELI Madrid Holding S.L. Pinar 7 - 5 Izq,
28006 Madrid,
Spain
48,068 100 Property Investment
AELI Madrid Holding 2 S.L. Pinar 7 - 5 Izq,
28006 Madrid,
Spain
39,984 100 Property Investment
ASELI Netherlands
Holdings BV
Naritaweg 165,
1043 BW Amsterdam,
The Netherlands
6,537 100 Property Investment
131Annual Report 2022
Additional details relating to the cost of shares, share premium and net asset value of each subsidiary is noted below.
31 December 2022 31 December 2021
€’000
Share
Capital
€’000
Share
premium
€’000
Net asset
value
€’000
Share
Capital
€’000
Share
premium
€’000
Net asset
value
Direct Subsidiaries
ASELI Florsheim BV 1 5,170 9,535 1 5,170 9,798
ASELI Erlensee BV 1 8,372 15,549 1 8,372 16,158
ASELI Leon BV 1 15,664 19,590 1 15,664 19,660
ASELI Netherlands I BV 1 6,132 10,861 1 6,132 13,721
ASELI Netherlands II BV 1 2,956 7,464 1 2,956 10,092
ASELI Waddinxveen BV 1 5,169 9,721 1 5,169 17,378
ASELI France Holding SAS 15,760 - 21,101 10,078 - 17,234
ASELI sHeerenberg BV 1 8,810 11,675 1 3,966 10,284
ASELI Netherlands Holdings BV 1 6,536 14,172 1 6,536 16,831
PDC Industrial 92 Sp. zo.o 1 4,657 9,887 1 4,657 7,578
PDC Industrial 72 Sp. zo.o 88 3,619 9,485 88 3,619 7,264
Circulus Investments Sp. z o.o. 3 2,864 5,232 3 2,864 1,273
ASELI Madrid Holding S.L. 3 48,065 48,068 26,123 - 27,594
AELI Madrid Holding 2 S.L. 3 39,982 39,985 - - -
Indirect Subsidiaries
ASELI France Holding
ASELI Meung SCI 7,030 - 3,583 7,030 - 4,330
ASELI Avignon SCI 18,174 - 28,487 18,174 - 30,148
AELI Messageries SCI 14,215 - 12,588 - - -
AELI Immobiler SCI 10 - (26) - - -
ASELI Netherlands Holdings BV - - - - - -
ASELI Caprev Den Hoorn BV 12 13,424 42,784 12 13,424 45,570
ASELI Madrid Holding S.L. - - - - - -
AELI Madrid Logistics 1 SLU. 62 49,227 47,755 - - -
ASELI Madrid Holding 2 S.L. - - - - - -
AELI Madrid Logistics 2 SLU. 3 43,376 39,988 - - -
132 Annual Report 2022
Impairment Analysis
Where subsidiaries have a lower net asset value than carrying amount of investment, an impairment is recognised.
Due to a decrease in the value of the investment, the Company recognised an impairment of €4,632,000 (2021: € nil)
on ASELI Madrid Holding S.L. and €3,424,000 (2021: € nil) on AELI Madrid Holding 2 SL investments.
The company’s share price was a discount to NAV as at 31 December 2022 (31 December 2021: Premium). This is
not considered to have any impact on the value of the Company’s subsidiaries, and no impairment is recognised.
A reconciliation of opening to closing investments in subsidiaries is noted below.
2022
€’000
2021
€’000
Opening carrying value as at 1 January 101,406 80,915
Additions 81,727 32,356
Loan to equity conversions 144,500 2,864
Capital reductions by way of investment repayment (145,715) (14,729)
Impairment (8,056) -
Total carrying value as at 31 December 173,862 101,406
3. Cash and Cash Equivalents
2022
€’000
2021
€’000
Cash 1,696 906
1,696 906
4. Group Loans
2022
€’000
2021
€’000
Accrued interest on Group loan receivable in less than one year 3,150 1,226
3,150 1,226
Group loan receivable in greater than one year 238,894 321,592
Group loan expected to be received in less than one year 15,407 921
254,301 322,513
133Annual Report 2022
A summary of the various group loans is provided in the following table:
Borrower
Limit
€’000
Balance Drawn €’000
Final
Maturity
Date yrs Loan Type
Interest
Rate
Outstanding Interest €’000
As at
31 Dec 2022
As at
31 Dec 2021
As at
31 Dec 2022
As at
31 Dec 2021
ASELI Florsheim BV 6,125 3,425 3,725 Jan 28 Interest Bearing Loan 3.50% 33 11
ASELI Erlensee BV 16,500 1,678 1,678 May 28 Interest Bearing Loan 2.50% - -
ASELI Erlensee BV 10,300 5,485 5,636 May 28 Interest Bearing Loan 3.50% 62 21
ASELI Leon BV 9,650 - 9,650 Jan 28 Interest Bearing Loan 2.80% - 68
ASELI Leon BV (Coslada) 6,398 - 6,398 Dec 29 Interest Bearing Loan 4.00% - 65
ASELI Leon BV (Polinya) 13,370 5,470 13,221 Jun 31 Interest Bearing Loan 4.00% 7 133
ASELI Netherlands I BV (Ede) 35,584 11,808 11,808 Aug 28 Interest Bearing Loan 4.80% 145 52
ASELI Netherlands II BV
(Zeewolde)
23,760 9,173 9,173 Sep 28 Interest Bearing Loan 4.60% 109 36
ASELI Den Hoorn BV 16,000 15,136 15,136 Jan 23 Interest Bearing Loan 6.50% 253 248
ASELI France Holding SAS
(Avignon)
10,905 9,394 10,905 Oct 28 Interest Bearing Loan 3.13% 83 29
ASELI France Holding SAS
(Meung)
6,096 4,212 4,212 Feb 29 Interest Bearing Loan 3.13% 36 11
ASELI France Holding SAS 8,523 8,523 - May 32 Interest Bearing Loan 1.30% 86 -
ASELI Avignon SCI 27,264 2,209 2,454 Oct 28 Interest Bearing Loan 3.13% 19 6
AELI Messageries SCI 21,465 21,465 - May 32 Interest Bearing Loan 1.30% 231 -
ASELI Waddinxveen BV 29,200 8,075 9,075 Nov 28 Interest Bearing Loan 4.50% 103 35
ASELI Waddinxveen BV 5,180 5,180 - Jul 32 Interest Bearing Loan 4.00% 68 -
ASELI Meung SCI 15,240 8,580 8,580 Nov 28 Interest Bearing Loan 3.13% 69 23
PDC Industrial 72 Sp. z o.o. 2,000 2,000 2,000 Feb 29 Interest Free Loan 0.00% - -
PDC Industrial 72 Sp. z o.o. 18,807 17,407 18,807 Feb 29 Interest Bearing Loan 4.20% 386 65
ASELI sHeerenberg BV 11,300 2,776 2,776 Jun 29 Interest Bearing Loan 5.29% 40 13
ASELI sHeerenberg BV 8,000 8,000 8,000 Jun 29 Interest Bearing Loan 5.29% 107 36
ASELI sHeerenberg BV 8,470 8,040 - Sep 29 Interest Bearing Loan 3.50% 73 -
ASELI Madrid Holding S.L. 71,017 - 71,017 Dec 23 Interest Bearing Loan 3.00% 29 140
ASELI Madrid Holding S.L. 60,928 - 60,928 Dec 23 Interest Bearing Loan 2.10% 18 84
AELI Madrid Logistics 1 58,545 50,381 - Jun 24 Interest Bearing Loan 3.75% 219 -
Circulus Investments Sp. z o.o. 25,780 25,073 25,073 Apr 31 Interest Bearing Loan 4.10% 507 73
Circulus Investments Sp. z o.o. 6,460 271 921 *Dec 22 Interest Bearing Loan 4.10% 28 3
PDC Industrial 92 Sp. z o.o. 21,340 20,540 21,340 Oct 29 Interest Bearing Loan 4.10% 439 74
554,207 254,301 322,513 3,150 1,226
Fair value of group loans 254,301 322,513 3,150 1,226
* The loan was used by the Parent Company for the purposes of acquiring real estate for the purposes of the
Group’s property rental business and in particular to cover the amount of the Polish value added tax imposed
on the sale of the real estate and connected assets and the transfer of rights connected with the real estate.
The loan is treated as a short-term one and will be repaid immediately after receiving refund of aforementioned
Polish value added tax.
134 Annual Report 2022
5. Trade and Other Payables
2022
€’000
2021
€’000
Investment Management fee payable 1,937 931
Accruals and other payables 416 526
2,353 1,457
6. Bank loans
In September 2021 the company increased its new uncommitted four year €40 million master facilities loan
agreement with Investec Bank plc to €70 million. Under the facility, the company may make requests for drawdowns
at selected short-duration tenors as and when needed to fund acquisitions or for other liquidity requirements.
Within the facility, a £3.3 million committed revolving credit facility is carved out of the total €70 million. As at
31 December 2022 the Company had no drawings against the facility (2021: €15.5 million drawn).
In prior years the Company incurred €207,000 of capitalised financing fees, which are being spread over the four
year term of the facility until October 2024. As at 31 December 2022 the remaining amortised cost of these financing
fees is €92,000 (2021: €144,000)
7. Share Capital and Share Premium
Share Capital
2022
€’000
2021
€’000
Opening balance 4,309 2,756
Ordinary shares issued 408 1,553
As at 31 December 4,717 4,309
Ordinary shareholders participate in all general meetings of the Company on the basis of one vote for each share held.
Each Ordinary share has equal rights to dividends and equal rights to participate in a distribution arising from a
winding up of the Company. The Ordinary shares are not redeemable.
At the beginning of the year the Group had 377,628,901 Ordinary shares in issue. On 2 February 2022, the Group
increased its share capital by the issue of 34,545,455 new Ordinary Shares at 110p (€1.18) per share. The number of
Ordinary Shares authorised, issued and fully paid at 31 December 2022 was 412,174,356 (2021: 377,628,901).
The nominal value of each share is £0.01.
Share Premium
2022
€’000
2021
€’000
Opening balance 225,792 61,691
Premium arising on issue of new shares 44,513 166,924
Share issue costs deducted (759) (2,823)
Balance at 31 December 269,546 225,792
The share premium arising in the year was converted to EUR using the issue date exchange rate on 4 February 2022
of 1.18213091.
135Annual Report 2022
8. Dividends
To maintain status as an approved Investment Trust Company, the Company must comply with the eligibility
conditions set out in section 1158 of the Corporation Tax Act 2010 as well as additional requirements outlined in
The Investment Trust (Approved Company) (Tax) Regulations 2011. Regulation 19 provides that the Company must
comply with an income distribution requirement and, specifically, cannot retain more than the higher of 15% of its
income for the accounting year or any brought forward revenue reserve deficit. Any dividend that the Company
must pay in order to satisfy this requirement must be paid within 12 months of the end of the accounting year.
Dividends paid in the year have therefore been split between the Special Distributable Reserve and Revenue Reserve
as follows:
Special
Distributable
Reserve
€’000
Revenue
Reserve
€’000
Total
€’000
Accounting
Year Applied
to for Income
Retention Test
2021 Fourth Interim dividend of 1.41c
(1.21p) per Share paid 25 March 2022
3,259 2,553 5,812 2021
2022 First Interim dividend of 1.41c (1.19p)
per Share paid 24 June 2022
- 5,812 5,812 2022
2022 Second Interim dividend of 1.41c
(1.20p) per Share paid 23 September 2022
4,285 1,527 5,812 2022
2022 Third Interim dividend of 1.41c (1.20p)
per Share paid 30 December 2022
5,812 - 5,812 2022
Total Dividends Paid 13,356 9,892 23,248
9. Capital Commitments
As at 31 December 2022 the Company had capital commitments of €107.4 million (2021: €129.6 million) relating to
undrawn intercompany loans.
10. Ultimate Parent Company
In the opinion of the Directors on the basis of shareholdings reviewed by them, the Company has no immediate or
ultimate controlling party.
11. Fair Value of Financial Instruments
The Company measures fair values using the following fair value hierarchy, which reflects the significance of the
inputs used in making the measurements.
Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments.
Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or
indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active
markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less
than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from
market data.
Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique
includes inputs that are not observable and the unobservable inputs have a significant effect on the
instrument’s valuation.
136 Annual Report 2022
Fair value hierarchy
The Company’s financial instruments measured at fair value relate to group loans due from group entities,
disclosed in Note 4. The group loans are classified as level 3 (2021: level 3) in the fair value hierarchy.
Level 3 fair value measurements
Reconciliation
The following table shows a reconciliation from the beginning balances to the ending balances for fair value
measurements in Level 3 of the fair value hierarchy.
2022
€’000
2021
€’000
Opening balance 322,513 153,800
Issued 114,306 179,563
Repayments (38,019) (7,986)
Conversions to investments in subsidiaries (144,499) (2,864)
Closing balance 254,301 322,513
As the loans are repayable on demand, fair value is considered the same as the nominal amount, except where
the net asset valuer of the borrower is negative, in which case the fair value is considered to be nominal amount
less the amount of negative net asset value. The net asset value of the borrower is primarily driven by the
valuation of investment property, refer to the unobservable inputs into that valuation in Note 9 of the Group
consolidated accounts.
The Company held one derivative financial instrument being a forward exchange contract. Details are disclosed in
the group consolidated accounts, Note 21.
137Annual Report 2022
Corporate Information
The Company’s Investment Manager is abrdn Investments Ireland Limited, a wholly
owned subsidiary of abrdn pc whose group companies as at 31 December 2022 had
approximately £500 billion under management and administration.
138 Annual Report 2022
Corporate Information
Information about the Investment Manager
abrdn Fund Managers Limited
abrdn Fund Managers Limited (“aFML”), authorised and
regulated by the Financial Conduct Authority, has been
appointed as alternative investment fund manager
to the Company. aFML has in turn delegated portfolio
management to the Danish branch of abrdn Investments
Ireland Limited (“aIIL”).
abrdn
Worldwide, abrdn plc group companies had
approximately £500 billion under management and
administration (as at 31 December 2022) in assets for
a range of clients, including individuals and institutions,
through mutual and segregated funds.
abrdn operates a fully integrated property investment
management platform and has an extensive regional
presence across the UK and Continental Europe.
Its eight offices across Europe - London, Edinburgh,
Frankfurt, Amsterdam, Madrid, Paris, Brussels and
Copenhagen - employ a total of 290 abrdn real estate
professionals in fund management, research, transactions,
asset management, financing and other specialist
property activities.
The real estate teams within these offices are responsible
for sourcing and managing all the assets acquired across
the region. Having teams in the key target markets in
which the Company invests provides, in the Investment
Manager’s view, a significant competitive advantage,
with improved local market knowledge, better access to
potential deals, closer implementation of asset business
plans and improved ability to manage and mitigate risk.
The Investment Team Senior Managers
Troels Andersen
Fund Manager, Real Estate
Investment Management
On 11 October 2022 Troels Andersen, who joined abrdn
in April 2011 and is based in Copenhagen, assumed the
role of lead fund manager for the Company. Prior to his
involvement with the Company, Troels had been Fund
Manager of abrdn’s €150 million multi-sector European
Long Income Real Estate Fund, having successfully
overseen its launch in 2019. Prior to that he was Fund
Manager of abrdn’s €500 million gross asset value
Aberdeen Property Nordic I Fund, together with a further
segregated value-add mandate. He was previously a
member of abrdn´s Nordic and European Investment
Committees, which approves all major decisions for
investments in the region. Troels brings 25 years of real
estate investment experience, including logistics asset
transactions, together with knowledge of debt facility
management, having spent the first part of his career
working for German banks in both Germany and the UK.
139Annual Report 2022
Geoff Hepburn
Deputy Fund Manager, Real
Estate Investment Management
Geoff Hepburn is Deputy Fund Manager of the Company
based in Edinburgh. Responsibilities include developing
and implementing Company strategy, client reporting,
managing transactions and ensuring the delivery of the
ESG strategy. Since joining abrdn in January 2012 he has
had responsibility as Investment Manager and Deputy
Fund Manager for several balanced UK institutional funds.
He joined abrdn from a London property company as
Development & Investment Manager responsible for two
large Central London office projects as well as a mixed
use regional investment and development portfolio.
Previously, Geoff worked for Ediston Properties having
begun his client-side career at Standard Life Investments
as Portfolio Manager on the Pooled Pension Fund in 2001.
In a varied career spanning more than 20 years, Geoff has
transacted and developed over £1bn of real estate.
Geoff graduated LLB Bachelor of Scots Law, followed
by a Postgraduate Diploma in Land Economy (with
commendation) in 1999. Both degrees were awarded by
the University of Aberdeen. Geoff qualified as a Chartered
Surveyor (MRICS) with DTZ in 2001. He speaks English
and French.
Attila Molnar
Deputy Fund Manager, Real
Estate Investment Management
Attila is a Fund Manager based in Frankfurt. Attila joined
Dresdner Bank’s property fund management business
(DEGI) in 2006, shortly before the business was acquired
by abrdn. Attila has been involved in the planning and
establishment of new product lines for institutional clients
and joined the fund management teams of those funds.
At present, in addition to his responsibilities for the Company,
he is responsible for two institutional funds. Prior to joining
DEGI Attila worked for PricewaterhouseCoopers where
he was responsible for a diverse range of audit and
due diligence projects in the property funds sector.
Attila graduated with a MSc in Accounting and Finance
from Budapest University of Economics and speaks English,
German and Hungarian.
The Investment Process
The Investment Manager is responsible for sourcing and
managing the transaction process for new acquisitions.
The Investment Manager sources potential acquisitions
through its property teams based in Europe. The teams
based in the target markets have an in-depth knowledge
of the local markets and a wide network of relationships
for identifying and selecting the best investment
opportunities. Having local teams on the ground provides
for in-depth local insight and, in turn, is a significant
competitive advantage that should enable the Investment
Manager to implement the Company’s investment policy
in the key cities and regions.
Furthermore, focusing on income durability, location and
propensity for rental growth, combined with the ability
to carry out active asset management, enables the
Investment Manager to invest in properties where the
competition from other investors is weaker than for the
big, long-leased properties with no asset management
requirements, where competition among potential buyers
is very high.
Each transaction is assessed against individual fund
criteria and, if considered potentially suitable, a detailed
financial and economic analysis and review is undertaken
of the property, the location, quality of construction,
the existing leases, the rents being paid versus market
level, the tenants and the market prospects. This process
is informed by a significant database of proprietary
information held by the Investment Manager, experienced
investment professionals, including people on the ground
in the relevant markets and a dedicated research function
that assists in identifying rental and capital growth
prospects at country, regional, city, sub-market and
sector level.
The Investment Manager operates a pan-European
Investment Committee which approves all investment
plans, transactions, financing decisions and material
asset management activity. The Investment Committee
includes senior members of the real estate team.
If, following analysis, property inspections and negotiations
with the owner of the property, the fund managers wish
to proceed with an acquisition, Investment Committee
approval is required.
An active asset management strategy (i.e. defining,
implementing and regularly reviewing business plans for
each property in the Portfolio) is an important element in
helping to deliver investment performance. An important
part of this is that the properties are managed by local
asset managers in the countries where the properties are
located who have better access to tenants, advisers and
consultants to help generate outperformance.
140 Annual Report 2022
Active asset management means the individual asset
manager involved in acquiring the property is also
responsible for implementing the business plan once
acquired, resulting in carefully researched and robust
assumptions and a focus on long-term performance
from purchase through to any potential sale. The types of
active asset management initiatives which the Investment
Manager may utilise are:
.
renegotiating leases to capture market rental
growth and/or extend lease duration;
.
managing any vacancies to maximise
rental performance;
.
exploiting ancillary development opportunities on or
around the properties;
.
assessing and effecting changes of use where this would
add value;
.
undertaking refurbishments to increase rents; and
.
changing unit size and configuration to maximise the
potential income from a property.
The majority of the Portfolio comprises properties where
the main asset management activities are likely to be
renegotiating leases, managing vacancies, growing rental
income and undertaking light refurbishments.
Approach to ESG
The Investment Manager views ESG as a fundamental
part of its business. Whilst real estate investment provides
valuable economic benefits and returns for investors it has
– by its nature – the potential to affect environmental and
social outcomes, both positively and negatively.
The Investment Manager’s approach is underpinned by
the following three over-arching principles:
.
Transparency, Integrity and Reporting: being transparent
in the ways in which it communicates and discusses
strategy, approach and performance with investors and
stakeholders.
.
Capability and Collaboration: drawing together and
harnessing the capabilities and insights of its platforms,
with those of its investment, supply chain and industry
partners.
.
Investment Process and Asset Management: integrating
ESG into decision making, governance, underwriting
decisions and asset management approach. This
includes the identification and management of material
ESG risks and opportunities across the Portfolio.
141Annual Report 2022
Corporate Information
Investor Information
Keeping You Informed
For internet users, detailed data on the Company,
including price, performance information and a monthly
fact sheet is available from the Company’s website
(eurologisticsincome.co.uk) and the TrustNet website
(trustnet.com). Alternatively you can call 0808 500 0040
(free when dialling from a UK landline) for investment
company information.
Twitter:
@abrdn Trusts
LinkedIn:
abrdn Investment Trusts
Investor Warning
The Board has been made aware by the Manager that
some investors have received telephone calls from
people purporting to work for the Manager, or third
parties, who have offered to buy their investment trust
shares. These may be scams which attempt to gain
personal information with which to commit identity fraud
or could be ‘boiler room’ scams where a payment from
an investor is required to release the supposed payment
for their shares. These callers do not work for the Manager
and any third party making such offers has no link with
the Manager. The Manager never makes these types
of offers and does not ‘cold-call’ investors in this way. If
investors have any doubt over the veracity of a caller, they
should not offer any personal information, end the call and
contact the Manager’s investor services centre using the
details provided below.
Dividend Tax Allowance
The annual tax-free personal allowance on dividend
income is £1,000 for the 2023/2024 year. Above this
amount, individuals will pay tax on their dividend income
at a rate dependent on their income tax bracket and
personal circumstances. The Company will provide
registered shareholders with a confirmation of dividends
paid by the Company and this should be included with
any other dividend income received when calculating and
reporting to HMRC total dividend income received. It is the
shareholder’s responsibility to include all dividend income
when calculating any tax liability.
Direct
Investors can buy and sell shares in the Company directly
through a stockbroker or indirectly through a lawyer,
accountant or other professional adviser. Alternatively,
for retail clients, shares can be bought directly through
the abrdn Investment Plan for Children, abrdn Investment
Trusts Share Plan and abrdn Investment Trusts ISA.
abrdn Investment Plan for Children
abrdn runs an Investment Plan for Children (the “Children’s
Plan”) which covers a number of investment companies
under its management including the Company. Anyone
can invest in the Children’s Plan, including parents,
grandparents and family friends (subject to the eligibility
criteria as stated within the terms and conditions). All
investments are free of dealing charges on the initial
purchase of shares, although investors will suffer the
bid-offer spread, which can, on some occasions, be a
significant amount. Lump sum investments start at £150
per trust, while regular savers may invest from £30 per
month. Investors simply pay Government Stamp Duty
(currently 0.5%) on all purchases. Selling costs are £10 +
VAT. There is no restriction on how long an investor need
invest in the Children’s Plan, and regular savers can stop
or suspend participation by instructing abrdn in writing at
any time. In common with other schemes of this type, all
investments are held in nominee accounts. Investors have
full voting and other rights of share ownership.
abrdn Investment Trusts Share Plan
abrdn runs a Share Plan (the “Plan”) through which
shares in the Company can be purchased. There are no
dealing charges on the initial purchase of shares, although
investors will suffer the bid-offer spread, which can,
on some occasions, be a significant amount. Lump sum
investments start at £250, while regular savers may invest
from £100 per month. Investors simply pay Government
Stamp Duty (currently 0.5%). Selling costs are £10 + VAT.
There is no restriction on how long an investor need
invest in a Plan, and regular savers can stop or suspend
participation by instructing abrdn in writing at any time.
In common with other schemes of this type, all investments
are held in nominee accounts. Investors have full voting
and other rights of share ownership.
abrdn Investment Trusts ISA
An investment of up to £20,000 can be made in the tax
year 2023/2024. The annual ISA administration charge is
£24 + VAT, calculated annually and applied on 31 March
(or the last business day in March) and collected soon
thereafter either by direct debit or, if there is no valid direct
debit mandate in place, from the available cash in the Plan
prior to the distribution or reinvestment of any income, or,
where there is insufficient cash in the Plan, from the sale of
investments held in the Plan. Investors have full voting and
other rights of share ownership. Under current legislation,
investments in ISAs can grow free of capital gains tax.
142 Annual Report 2022
ISA Transfer to abrdn
You can choose to transfer previous tax year investments
to us which can be invested in the Company while
retaining your ISA wrapper. The minimum lump sum for
an ISA transfer is £1,000, subject to a minimum per trust
of £250.
Shareholder Enquiries
In the event of queries regarding their holdings of shares,
lost certificates, dividend payments, registered details, etc
shareholders holding their shares in the Company directly
should contact the registrars, Equiniti Limited, Aspect
House, Spencer road, Lancing West Sussex or Tel: 0371
384 2416 Lines are open 8.30 a.m. to 5.30 p.m. (UK Time)
Monday to Friday (excluding public holidays in England &
Wales). Calls may be recorded and monitored randomly
for security and training purposes. Changes of address
must be notified to the registrars in writing.
Any general enquiries about the Company should be
directed to the Company Secretary, abrdn European
Logistics Income plc, 280 Bishopsgate, London EC2M 4AG
or by email at CEF.CoSec@abrdn.com.
If you have any questions about an investment held
through the abrdn Investment Trusts Share Plan, abrdn
Investment Trusts ISA or abrdn Investment Plan for
Children, please telephone the Manager’s Customer
Services Department on 0808 500 0040. Alternatively,
email inv.trusts@abrdn.com or write to abrdn Investment
Trusts, PO Box 11020, Chelmsford, Essex CM99 2DB.
Literature Request Service
For literature and application forms for the Company
and the abrdn range of investment trust products,
please telephone: 0808 500 4000. For information on the
abrdn Investment Plan for Children, abrdn Investment
Trusts Share Plan, abrdn Investment Trusts ISA or
ISA Transfer to abrdn please write to abrdn Investment
Trust Administration, PO Box 11020, Chelmsford, Essex,
CM99 2DB or telephone the Manager’s Customer Services
Department on 0808 500 00 40 (free from a UK landline).
Terms and conditions for the abrdn managed savings
products can be found under the literature section of
invtrusts.co.uk.
Key Information Document (“KID”)
The KID relating to the Company and published by the
Manager can be found on the Manager’s website:
www.invtrusts.co.uk/en/fund-centre/
literature-order-form.
Online Dealing
There are a number of online dealing platforms for
private investors that offer share dealing, ISAs and
other means to invest in the Company. Real-time
execution-only stockbroking services allow you to trade
online, manage your portfolio and buy UK listed shares.
These sites do not give advice. Some comparison websites
also look at dealing rates and terms. Some well-known
online providers, which can be found through internet
search engines, include:
AJ Bell YouInvest; Barclays Smart Investor; Charles Stanley
Direct; Fidelity; Halifax; Hargreaves Lansdown; Interactive
Investor (an abrdn Group company); Novia; Transact;
and Standard Life.
Discretionary Private Client Stockbrokers
If you have a large sum to invest, you may wish to contact a
discretionary private client stockbroker. They can manage
your entire portfolio of shares and will advise you on your
investments. To find a private client stockbroker visit The
Personal Investment Management and Financial Advice
Association at pimfa.co.uk.
Independent Financial Advisers
To find an adviser who recommends on investment trusts,
visit unbiased.co.uk.
Regulation of Stockbrokers
Before approaching a stockbroker, always check that they
are regulated by the Financial Conduct Authority:
Tel: 0800 111 6768
https://register.fca.org.uk/
register@fca.org.uk
AIFMD
The Company has appointed abrdn Fund Managers
Limited as its alternative investment fund manager
and Citibank UK Limited as its depositary under the
AIFMD. Details of the leverage and risk policies which the
Company is required to have in place under the AIFMD
are published in the Company’s PIDD which can be found
on the website eurologisticsincome.co.uk. The periodic
disclosures required to be made by the AIFM under the
AIFMD are set out on page 149.
143Annual Report 2022
Suitable for Retail/NMPI Status
The Company’s securities are intended for investors
primarily in the UK (including retail investors), professionally
advised private clients and institutional investors who
are seeking exposure to European logistical real estate
and who understand and are willing to accept the
risks of exposure to this asset class. Investors should
consider consulting a financial adviser who specialises in
advising on the acquisition of shares and other securities
before acquiring shares. Investors should be capable of
evaluating the risks and merits of such an investment and
should have sufficient resources to bear any loss that
may result.
The Company currently conducts its affairs so that its
securities can be recommended by a financial adviser
to ordinary retail investors in accordance with the
Financial Conduct Authority’s (FCA) rules in relation to
non-mainstream pooled investments (NMPIs) and
intends to continue to do so for the foreseeable future.
The Company’s shares are excluded from the FCA’s
restrictions which apply to non-mainstream investment
products because they are shares in an investment trust.
Note
Please remember that past performance is not a guide to
the future. Stock market and currency movements may
cause the value of shares and the income from them to fall
as well as rise and investors may not get back the amount
they originally invested.
As with all equity investments, the value of investment
trusts purchased will immediately be reduced by the
difference between the buying and selling prices of the
shares, the market maker’s spread.
Investors should further bear in mind that the value of
any tax relief will depend on the individual circumstances
of the investor and that tax rates and reliefs, as well as
the tax treatment of ISAs may be changed by
future legislation.
The information on pages 142 to 144 has been approved
for the purposes of Section 21 of the Financial Services
and Markets Act 2000 (as amended by the Financial
Services Act 2012) by abrdn Fund Managers Limited
which is authorised and regulated by the Financial
Conduct Authority.
144 Annual Report 2022
Corporate Information
EPRA Financial Reporting (Unaudited)
Prepared in accordance with EPRA best practice recommendations (BPR) February 2022.
EPRA Performance Measures
31 December 2022
Total
31 December 2021
Total
A. EPRA earnings (€'000) 14,497 15,176
A. EPRA earnings per share (cents) 3.54 5.27
B. EPRA Net Tangible Assets (“NTA”) (€'000) 517,159 515,177
B. EPRA NTA per share (cents) 125.47 136.40
C. EPRA Net Reinstatement Value ("NRV") (€'000) 553,744 551,283
C. EPRA NRV per share (cents) 134.35 145.99
D. EPRA Net Disposal Value (“NDV”)(€'000) 498,060 491,894
D. EPRA NDV per share (cents) 120.84 130.26
E. EPRA Net Initial Yield 3.96% 3.93%
E. EPRA topped-up Net Initial Yield 4.06% 4.02%
F. EPRA Vacancy Rate 3.61% 0.00%
G. EPRA Cost Ratios - including direct vacancy costs 32.02% 29.00%
G. EPRA Cost Ratios - excluding direct vacancy costs 30.96% 29.00%
H. EPRA Capital Expenditure (€m) 133,170 194,429
I. EPRA Like for Like Rental Growth 4.99% 1.30%
I. EPRA LTV 34.57% 24.80%
A. EPRA Earnings (€000)
Earnings per IFRS income statement (18,442) 44,443
Adjustments to calculate EPRA Earnings, exclude: - -
Net changes in value of investment properties 40,432 (41,031)
Deferred tax (3,893) 11,847
Changes in fair value of financial instruments (3,600) (83)
EPRA Earnings 14,497 15,176
Weighted average basic number of shares (‘000) 408,956 288,115
EPRA Earnings per share (cents per share) 3.54 5.27
145Annual Report 2022
31 December 2022
Total
31 December 2021
Total
B. EPRA Net Tangible Assets (“NTA”) (€’000)
IFRS NAV 489,977 487,505
Exclude:
Fair value of financial instruments 3,709 109
Deferred tax in relation to fair value gains of
Investment Property
23,473 27,563
517,159 515,177
Shares in issue at end of year (‘000) 412,174 377,629
EPRA NAV per share (cents per share) 125.47 136.40
C. EPRA Net Reinstatement Value (“NRV”) (€’000)
EPRA NTA 517,159 515,177
Real Estate Transfer Tax and other purchasers’ costs 36,585 36,106
EPRA NRV 553,744 551,283
EPRA NRV per share (cents per share) 134.35 145.99
D. EPRA Net Disposal Value (“NDV”) (€’000)
IFRS NAV 489,977 487,505
Fair Value adjustment for Fixed Interest Debt 8,083 4,389
EPRA NDV 498,060 491,894
EPRA NDV per share (cents per share) 120.84 130.26
E. EPRA Net Initial Yield and ‘topped up’ NIY disclosure (€’000)
Investment property - wholly owned 758,719 666,008
Less developments - -
Completed property portfolio 758,719 666,008
Allowance for estimated purchasers' costs 36,585 36,106
Gross up completed property portfolio valuation 795,304 702,114
Annualised cash passing rental income 33,994 29,445
Property outgoings (2,501) (1,851)
Annualised net rents 31,493 27,594
Add: notional rent expiration of rent free periods or other
lease incentives
778 600
Topped-up net annualised rent 32,271 28,194
EPRA NIY 3.96% 3.93%
EPRA "topped-up" NIY 4.06% 4.02%
146 Annual Report 2022
31 December 2022
Total
31 December 2021
Total
F. EPRA Vacancy Rate
Estimated rental value of vacant space 1,270 -
Estimated rental value of whole portfolio 35,176 29,908
EPRA Vacancy Rate 3.61% 0%
G. EPRA Cost Ratios (€’000)
Administrative / property operating expense line per
IFRS income statement
15,743 10,148
Net service charge costs / fees (6,237) (3,435)
EPRA Costs (including direct vacancy costs) 9,506 6,713
Direct vacancy costs (315) -
EPRA Costs (excluding direct vacancy costs) 9,191 6,713
Gross Rental income - per IFRS 29,686 23,283
EPRA Cost Ratio (including direct vacancy costs) 32.02% 29.00%
EPRA Cost Ratio (excluding direct vacancy costs) 30.96% 29.00%
Overhead and operating expenses capitalised - -
H. Property-related CapEx for the Group
Acquisitions 132,754 194,104
Investment Properties:
Non incremental Lettable Space 416 -
Incremental Lettable Space - 325
Total CapEx 133,170 194,429
Conversion from accrual to cash basis 353 (954)
Total CapEx on cash basis 133,523 193,475
I. Like For Like Rental Growth
Rental income growth:
Germany 10.25% (1.50%)
Poland 7.55% 2.20%
France 4.86% 0.00%
Spain 2.40% 0.30%
Netherlands 4.16% 2.30%
4.99% 1.30%
147Annual Report 2022
31 December 2022
Total
31 December 2021
Total
Rental income total* (€’000):
Germany 3,239 2,938
Poland 5,434 5,052
France 2,612 2,491
Spain 7,597 7,419
Netherlands 10,973 10,536
29,855 28,436
* Calculated based on lease agreements as at the reporting date.
Total portfolio value on which the like-for-like rental
growth is based** (€’000):
Germany 68,170 70,000
Poland 93,600 90,000
France 73,600 74,500
Spain 186,430 196,708
Netherlands 216,800 234,800
638,600 666,008
** Excludes investment properties acquired during the year with 31 December 2022
valuation of €120,119,000.
J. EPRA LTV (€’000)
Borrowings from Financial Institutions 270,270 177,100
Net payables 15,006 14,466
Exclude:
Cash and cash Equivalents (20,262) (23,280)
Net Debt (a) 265,014 168,286
Investment properties at fair value 758,719 666,008
Net receivables (excluding lease incentives) 7,829 13,106
Total Property Value (b) 766,548 679,114
LTV (a/b) 34.57% 24.80%
148 Annual Report 2022
Corporate Information
Alternative Investment Fund Managers Directive
Disclosures (Unaudited)
abrdn Fund Managers Limited and the Company are
required to make certain disclosures available to investors
in accordance with the Alternative Investment Fund
Managers Directive (‘AIFMD’). Those disclosures that are
required to be made pre-investment are included within a
pre-investment disclosure document (‘PIDD’) which can be
found on the Company’s website eurologisticsincome.co.uk.
There have been no material changes to the disclosures
contained within the PIDD since its last publication in
November 2022.
The periodic disclosures as required under the AIFMD to
investors are made below:
.
Information on the investment strategy, geographic and
sector investment focus and principal stock exposures
are included in the Strategic Report.
.
None of the Company’s assets are subject to special
arrangements arising from their illiquid nature.
.
The Strategic Report, note 22 to the Financial Statements
and the PIDD together set out the risk profile and risk
management systems in place. There have been no
changes to the risk management systems in place in
the period under review and no breaches of any of the
risk limits set, with no breach expected.
.
There are no new arrangements for managing the
liquidity of the Company or any material changes to
the liquidity management systems and procedures
employed by aFML.
.
All authorised Alternative Investment Fund Managers
are required to comply with the AIFMD Remuneration
Code. In accordance with the Remuneration Code,
the Company’s AIFM remuneration policy is available
from the Company Secretaries, abrdn Holdings Limited
on request (see contact details on page 143) and the
numerical remuneration in the disclosures in respect
of the AIFM’s reporting period for the year ended
31 December 2022 are available on the
Company’s website.
Leverage
The table below sets out the current maximum permitted
limit and actual level of leverage for the Company:
Gross
method
Commitment
method
Maximum level of leverage 365.0% 185.0%
Actual level at
31 December 2022
154.8% 154.8%
There have been no breaches of the maximum level
during the period and no changes to the maximum level
of leverage employed by the Company. There is no right
of re-use of collateral or any guarantees granted under
the leveraging arrangement. Changes to the information
contained either within this Annual Report or the PIDD
in relation to any special arrangements in place, the
maximum level of leverage which aFML may employ on
behalf of the Company; the right of use of collateral or any
guarantee granted under any leveraging arrangement; or
any change to the position in relation to any discharge of
liability by the Depositary will be notified via a regulatory
news service without undue delay in accordance with
the AIFMD.
The information above has been approved for the
purposes of Section 21 of the Financial Services and
Markets Act 2000 (as amended by the Financial Services
Act 2012) by abrdn Fund Managers Limited which
is authorised and regulated by the Financial
Conduct Authority.
149Annual Report 2022
Corporate Information
Glossary of Terms and Definitions and Alternative
Performance Measures
abrdn abrdn plc
abrdn Group the abrdn plc group of companies
AIC Association of Investment Companies
AIFMD The Alternative Investment Fund Managers Directive
AIFM the alternative investment fund manager, being aFML
Alternative Performance Measures Alternative performance measures are numerical measures of the
Company’s current, historical or future performance, financial position or cash
flows, other than financial measures defined or specified in the applicable
financial framework. The alternative performance measures that have been
adopted by the Company are in line with general comparable measures
used widely across the investment trust industry such as the level of discount/
premium, NAV/Share price total return and ongoing charges which are each
explained more fully below. The Company’s applicable financial framework
includes IFRS
Annual Rental Income Rental income passing at the Balance Sheet date
aFML or AIFM or Manager abrdn Fund Managers Limited
aIIL or the Investment Manager abrdn Investments Ireland Limited is a wholly owned subsidiary of abrdn plc and
acts as the Company’s investment manager
Asset Cover The value of a company’s net assets available to repay a certain security.
Asset cover is usually expressed as a multiple and calculated by dividing the
net assets available by the amount required to repay the specific security
Contracted Rent The contracted gross rent receivable which becomes payable after all the
occupier incentives in the letting have expired
Covenant Strength This refers to the quality of a tenant’s financial status and its ability to perform
the covenants in a lease
Dividend Cover
1
The ratio of the Company’s net profit after tax (excluding the below items) to
the dividends paid.
As at
31 December 2022
€’000
As at
31 December 2021
€’000
Earnings per IFRS income
statement
(18,442) 44,443
Adjustments to calculate dividend
cover:
Net changes in the value of
investment property
40,432 (41,031)
Deferred Taxation (3,893) 10,294
Effect of fair value adjustments on
derivative financial instruments
(3,600) -
Effects of foreign exchange
differences
(346) (1,017)
Profits (A) 14,151 12,689
Dividend (B) 23,248 16,188
Dividend Cover (A)/(B) 60.9% 78.4%
1
Defined as an Alternative Performance Measure.
150 Annual Report 2022
Discount
1
The amount by which the market price per share of an investment trust is
lower than the net asset value per share. The discount is normally expressed
as a percentage of the NAV per share
As at
31 December 2022
As at
31 December 2021
Share price (A) 68.50p 117.00p
NAV (B) 105.43p 108.50p
(Discount)/premium (A-B)/B (35.0%) 7.8%
Earnings Per Share Profit for the year attributable to shareholders divided by the weighted
average number of shares in issue during the year
EPRA European Public Real Estate Association
Europe The member states of the European Union, the European Economic Area
(“EEA”) and the members of the European Free Trade Association (“EFTA”)
(and including always the United Kingdom, whether or not it is a member state
of the European Union, the EEA or a member of EFTA)
ERV The estimated rental value of a property, provided by the property valuers
Gearing
1
Calculated as gross external bank borrowings divided by total assets
As at
31 December 2022
As at
31 December 2021
Bank loans €270.3m €177.1m
Adjusted gross assets €795.1m €705.5m
Gearing 34.0% 25.1%
Group The Company and its subsidiaries
Adjusted Gross Assets and Gross
Asset Value (GAV)
The aggregate value of the total assets of the Company as determined in
accordance with the accounting principles adopted by the Company from
time to time
As at
31 December 2022
€’000
As at
31 December 2021
€’000
Gross Asset Value per
Balance Sheet
817,783 728,386
Exclude IFRS 16 right of
use asset
(22,637) (22,905)
Adjusted gross assets 795,146 705,481
FRC Financial Reporting Council
IFRS International Financial Reporting Standards
Index Linked The practice of linking the review of a tenant’s payments under a lease to
a published index, most commonly the Retail Price Index (RPI) but also the
Consumer Price Index (CPI), French Tertiary Activities Rent Index (ILAT)
151Annual Report 2022
Key Information Document or KID The Packaged Retail and Insurance-based Investment Products (PRIIPS)
Regulation requires the Manager, as the Company’s PRIIP “manufacturer,”
to prepare a key information document (“KID”) in respect of the Company.
This KID must be made available by the AIFM to retail investors prior to them
making any investment decision and is available via the Company’s website.
The Company is not responsible for the information contained in the KID and
investors should note that the procedures for calculating the risks, costs and
potential returns are prescribed by law. The figures in the KID may not reflect
the expected returns for the Company and anticipated performance returns
cannot be guaranteed
Lease incentive A payment used to encourage a tenant to take on a new lease, for example
by a landlord paying a tenant a sum of money to contribute to the cost of a
tenant’s fit-out of a property or by allowing a rent free period
Leverage For the purposes of the Alternative Investment Fund Managers Directive,
leverage is any method which increases the Company’s exposure, including
the borrowing of cash and the use of derivatives. It is expressed as a ratio
between the Company’s exposure and its net asset value and can be
calculated on a gross and a commitment method. Under the gross method,
exposure represents the sum of the Company’s positions after the deduction
of sterling cash balances, without taking into account any hedging and netting
arrangements. Under the commitment method, exposure is calculated
without the deduction of sterling cash balances and after certain hedging and
netting positions are offset against each other. At year end the loan to value
was 34.0% (2021: 25.1%)
NAV total return
1
The return to shareholders, expressed as a percentage of opening NAV,
calculated on a per share basis by adding dividends paid in the year to the
increase or decrease in NAV. Dividends are assumed to have been reinvested
in the quarter they are paid, excluding transaction costs
Year ended
31December 2022
Year ended
31December 2021
Opening NAV 129.1¢ 120.1c
Movement in NAV (10.2¢) 9.0c
Closing NAV 118.9¢ 129.1c
% increase in NAV (7.9%) 7.5%
Impact of reinvested dividends 4.1% 4.9%
NAV total return (3.8%) 12.4%
Net Asset Value or NAV The value of total assets less liabilities. Liabilities for this purpose include
current and long-term liabilities. The net asset value divided by the number of
shares in issue produces the net asset value per share
152 Annual Report 2022
Ongoing Charges
1
Ratio of expenses as a percentage of average daily shareholders’ funds
calculated as per the industry standard. A reconciliation of ongoing charges
is below:
Year ended
31 December 2022
€’000
Year ended
31 December 2021
€’000
Expenditure per Statement of
comprehensive income 15,743 10,148
Less Property service charge
expense and bad debt provision (6,871) (3,435)
Less restructuring costs (58) -
Group operating costs including
property costs (A) 8,814 6,713
Less Direct property expenses
and property management fees
excluding bad debt provision (1,867) (1,851)
Group operating costs
(excluding property costs) (B) 6,947 4,862
Average net asset value (C) 526,085 366,359
Ongoing charges
(excluding property costs) (B/C) 1.3% 1.3%
Ongoing charges
(including property costs) (A/C) 1.7% 1.8%
Passing Rent The rent payable at a particular point in time
PIDD The pre-investment disclosure document made available by the AIFM in
relation to the Company
Premium
1
The amount by which the market price per share of an investment trust
exceeds the net asset value per share. The premium is normally expressed as
a percentage of the net asset value per share
Prior Charges The name given to all borrowings including long and short-term loans and
overdrafts that are to be used for investment purposes, reciprocal foreign
currency loans, currency facilities to the extent that they are drawn down,
index-linked securities, and all types of preference or preferred capital,
irrespective of the time until repayment
Portfolio valuation The market value of the company’s property portfolio, which is based on the
external valuations provided by Savills
The Royal Institution of
Chartered Surveyors (RICS)
The global professional body promoting and enforcing the highest
international standards in the valuation, management and development of
land, real estate, construction and infrastructure
153Annual Report 2022
Share price total return
1
The return to shareholders, expressed as a percentage of opening share
price, calculated on a per share basis by adding dividends paid in the year to
the increase or decrease in share price. Dividends are assumed to have been
reinvested in the quarter they are paid, excluding transaction costs
Year ended
31 December 2022
Year ended
31 December 2021
Opening Share Price 117.0p 108.5p
Movement in share price (48.5p) 8.5p
Closing share price 68.5p 117.0p
% (decrease)/increase
in share price
(41.5%) 7.8%
Impact of reinvested dividends 3.2% 4.6%
Share price total return (38.3%) 12.4%
SPA Sale and purchase agreement
SPV Special purpose vehicle
Total Assets Total assets less current liabilities (before deducting prior charges as
defined above)
WAULT Weighted Average Unexpired Lease Term. The average time remaining until
the next lease expiry or break date
154 Annual Report 2022
Corporate Information
Disclosure Concerning Sustainable Investment
(Article 8) (Unaudited)
Periodic disclosure for the financial products referred to in Article 8, paragraphs 1, 2 and 2a, of Regulation (EU) 2019/2088
and Article 6, first paragraph, of Regulation (EU)2020/852
Sustainable investment
means an investment
in an economic activity
that contributes to an
environmental or social
objective, provided that
the investment does
not significantly harm
any environmental
or social objective
and that the investee
companies follow good
governance practices.
The EU Taxonomy
is a classification
system laid down
in Regulation (EU)
2020/852, establishing
a list of environmentally
sustainable economic
activities. That
Regulation does not lay
down a list of socially
sustainable economic
activities. Sustainable
investments with
an environmental
objective might be
aligned with the
Taxonomy or not.
Product Name: abrdn European Logistics Income plc
Legal entity identifier: 213800I9IYIKKNRT3G50
Environmental and/or social characteristics
Did this financial product have a sustainable investment objective?
Yes No
It made sustainable investments with an
environmental objective: ___%
It promoted Environmental/Social (E/S)
characteristics and while it did not have as its
objective a sustainable investment, it had a
proportion of ___% of sustainable investments
in economic activities that qualify as
environmentally sustainable under the EU
Taxonomy
in economic activities that do not qualify
as environmentally sustainable under the
EU Taxonomy
with an environmental objective in
economic activities that qualify as
environmentally sustainable under the
EU Taxonomy
with an environmental objective in
economic activities that do not qualify as
environmentally sustainable under the
EU Taxonomy
with a social objective
It made sustainable investments with a social
objective: ___%
It promoted E/S characteristics, but will not make
any sustainable investments
155Annual Report 2022
Sustainability indicators
measure how the
environmental or
social characteristics
promoted by the
financial product are
attained.
To what extent were the environmental and/or social characteristics
promoted by this financial product met?
The fund promotes environmental and social characteristics that are relevant to the real
estate assets it invests in with the principal objective of supporting the fund’s investment
objective. Given the nature of direct investments in the physical built environment this
can capture a wide range of topics depending on the characteristics of the asset and
its location.
In particular, environmental and social characteristics of assets promoted by the fund
include:
.
Reductions in greenhouse gas emissions to support the decarbonization of the built
environment.
.
Energy efficiency and on-site renewable energy generation
.
Water efficiency
.
Resource efficiency and best practice waste management including recycling and
recovery
.
Social factors such as respect for human rights and anti-corruption and anti-bribery
matters in relation to major suppliers and tenants.
.
The mitigation and management of flood risk and future physical climate risk
.
The mitigation and management of contamination risk
.
When undertaking development and refurbishment works principles of sustainable
design and construction are promoted
Environmental and social characteristics such as these are promoted for new
investments, relevant development projects and as part of asset management activities
for standing assets. No reference benchmark has been designated for the purpose of
attaining the environmental or social characteristics promoted by the Fund.
The binding elements of the implementation of the investment strategy that ensure E/S
characteristics are considered include:
.
Confirmation that abrdn approach to ESG in due diligence has been followed in order
to identify material ESG risks and opportunities prior to acquisition. The due diligence
approach includes ensuring E/S characteristics are considered in the pre-bid checklist,
acquisition checklist and Investment Committee paper.
.
Formal input required from specialist ESG team prior to approval of acquisition by the
Investment Committee.
.
Confirmation that tenants or other applicable parties do not fall on our exclusion list. The
exclusion list for Real Estate is based on the sanctions list.
.
Continual review, on an annual basis, that the ongoing investment process is informed
by E/S characteristics as outlined above.
156 Annual Report 2022
How did the sustainability indicators perform?
Environmental, Social and Governance (ESG) characteristics of assets are considered
by the fund in its investment and asset management process. The indicators used to
measure attainment and inform decisions vary depending on the nature of the asset,
information availability and stage in the investment lifecycle (i.e. pre-acquisition, due
diligence, operation, development etc.). However, indicators are linked to the E/S
characteristics noted above and include metrics against the below. Fund value used is at
31 December 2022 and cash is excluded but the ESG data sets vary depending on the
year the data was collected and is referenced in the last column.
To fully understand the performance of the sustainability indicators 1 (related to energy),
3 (related to water) and 4 (related to waste) with regards to real estate, it is preferable
to have data related to the whole building. However the whole building data can be
comprised from two sources depending on the party that procures the energy/water/
waste services. These two sources are:
1. The landlord. This is where the investment manager procures the services and directly
has access to the data, on behalf of the fund and the tenant which occupies the
building.
2. The tenant.This is where the tenant who occupies the building procures the services
and has direct access to the data.
Due to the complexity and availability of data from the tenant, whole building data is
not always available. Therefore metrics on data coverage as listed for the sustainability
indicators 1, 3 and 4 are an important measure of performance.
Sustainability indicator Sustainability indicator metric
Fund
performance
Date/period of
ESG data
#1 Operational energy
performance
% fund value where landlord
energy data collected where
applicable
100% 31 Dec 2022
% fund value with partial or full
tenant energy data collected
where applicable
78% 31 Dec 2021
% fund value with whole building
energy data collected
78% 31 Dec 2021
% fund value with energy
performance ratings of A-B
94% 31 Dec 2022
#2 Operational greenhouse gas
emissions and alignment with
appropriate decarbonisation
benchmarks and costs to
decarbonize the asset over time
% fund value which equals or is
below the current year Carbon Risk
Real Estate Monitor (CRREM) 1.5
degree target
63%
31 Dec 2020
CRREM 2021
% fund value which equals or
is below the 5 year 1.5 degree
CRREM target
63%
31 Dec 2020
CRREM 2026
#3 Operational water
consumption
% fund value where landlord water
data collected where applicable
100% 31 Dec 2022
% fund value where partial or full
tenant water data collected where
applicable
75% 31 Dec 2021
% fund value with whole building
water data
75% 31 Dec 2021
% fund value where water
consumption has decreased year
on year where applicable
20% 2020 vs 2021
157Annual Report 2022
Sustainability indicator Sustainability indicator metric
Fund
performance
Date/period of
ESG data
#4 Waste management indicators
including generation and
treatment method
% fund value where landlord waste
data is collected where applicable
Not
applicable
(no landlord-
managed
waste)
n/a
% fund value where recycling rate
has increase year on year where
applicable
Not
applicable
(no landlord-
managed
waste)
n/a
#5 Future physical climate risk
exposure including flood risk
% fund value with a current flood
risk rating of medium or above
28% 31 Dec 2022
% fund value with an acute
extreme weather event risk rating
of medium or above in an RCP8.5
1
scenario out to 2050
19% 31 Dec 2022
#6 Contamination risk level
% fund value with contamination
risk of medium or above
0% 31 Dec 2022
#7 Building certifications including
alignment with known future
energy performance legislation
and compliance costs
% fund value with energy
performance ratings of A and B
94% 31 Dec 2022
% fund value with green building
certification
69% 31 Dec 2022
158 Annual Report 2022
Sustainability indicator Sustainability indicator metric
#8 Implementation of procedures
on anti-corruption and human
rights
Qualitative description as at 31st December 2022
New investments
The Investment Manager applies a risk-based approach in order to
ensure that it focuses on the actual risks of money laundering or terrorist
financing within any transaction; the type of entity and country of
incorporation and operations are key criterions in assessing the risk profile.
Certain types of counterparts can be classed as lower risk, such as those
regulated or listed in equivalent jurisdictions; conversely, other types
of entities can be classed as higher risk such as Trusts or unregulated
entities. For moderate and higher risk entities the ownership structure
of the seller involved must be traced back through different layers to
identify the ultimate beneficial owners. In order to aid in this task,
the Investment Manager uses a Client Due Diligence (CDD) Matrix which
lists the common types of legal structures to which the firm is exposed
and shows what information and verification documentations is required,
with increasing due diligence requirements for the higher the risk types.
When a Direct Real Estate transaction is agreed with a counterparty
following the agreement of Heads of Terms or LOI, the process for the
Anti Money Laundering (AML) Screening and Sanction Check on the
counterparty and Legal Advisor is triggered. Only once the Credit and
Risk Team have confirmed they are satisfied with their checks and
returned the signed form to confirm this, can a Transaction be signed.
Existing investments
Checks on suppliers:
The Investment Manager has protective measures to ensure that it is
not appointing suppliers and service providers that do not clear AML,
sanctions and PEPs (Politically Exposed Persons) screening. In order to
comply with abrdn’s regulatory obligations and meet its own internal
minimum standards of compliance, it is obligated to screen all parties
it wishes to enter a relationship with before the service is taken. It is part
of the process to screen all relationships at the time of onboarding to
check for PEP, Relative and Close Associates (RCA), or Sanctions.
This is mandated at the time of onboarding, and the establishment of
a new business relationship. Doing so is vital in order to both protect our
business and evidence that appropriate business controls are in place to
identify any PEPs or Sanctions applied to the service provider.
In addition, property management suppliers contractually confirm that
they have protective measures in place and ensure to
.
comply with all applicable statutes, laws, secondary legislation,
regulations and codes pertaining to anti-bribery;
.
not offer or accept any bribe, advantage or commit any corrupt act;
.
not engage in any Modern Slavery Practice;
.
ensure that the above are not taking place in their supply chain.
Checks on tenants:
On any new commercial lease, tenants are screened to check for PEPs
and sanctions. AML are also undertaken checks for new tenants who
have annual rent of over 10,000 EUR.
1
RCP8.5 is the climate scenario which assumes worse case with no cut in greenhouse gas emissions.
159Annual Report 2022
How did this financial product consider principal adverse impacts on
sustainability factors?
The fund committed to consider the following indicators: Exposure to fossil fuels through
real estate assets and Exposure to energy-inefficient real estate assets in line with the
Principle Adverse Impacts (PAI) indicators (the data on the indicators is included in the
table below).
The PAI indicators are considered throughout the real estate investment process for the
fund in both due diligence and asset management.
During acquisition due diligence, the PAIs (alongside a broader selection of ESG criteria)
are considered at both pre-bid stage, and during post-bid detailed due diligence. During
such acquisition due diligence, information (where available) relating to the asset and
mandatory PAIs (including construction date, EPC rating/NZEB status and site use in the
context of fossil fuel extraction, storage, transport and manufacture) is reviewed and
included in pre-bid ESG screening checklist and investment committee (IC) paper. Such
elements are assessed in more detail where relevant using an external consultant. The
PAIs are considered with the aim of minimising the Fund’s exposure to energy-inefficient
real estate assets and fossil fuels through real estate assets. Data on the PAIs obtained at
acquisition due diligence stage is used post-acquisition to support with ongoing reporting
against the PAIs, and to support with asset management.
…and compared to previous periods?
Not applicable as this is the first report.
What were the objectives of the sustainable investments that the financial
product partially made and how did the sustainable investment contribute to such
objectives?
Not applicable no minimum commitment of sustainable investments.
How did the sustainable investments that the financial product partially made not cause
significant harm to any environmental or social sustainable investment objective?
Not applicable in line with precontractual document with no minimum commitment of
sustainable investments.
How were the indicators for adverse impacts on sustainability factors taken
into account?
Not applicable in line with precontractual document with no minimum
commitment of sustainable investments.
Were sustainable investments aligned with the OECD Guidelines for Multinational
Enterprises and the UN Guiding Principles on Business and Human Rights? Details:
Not applicable in line with precontractual document with no minimum
commitment of sustainable investments.
Principal adverse
impacts are the
most significant
negative impacts of
investment decisions
on sustainability
factors relating to
environmental, social
and employee matters,
respect for human
rights, anti-corruption
and anti-bribery
matters.
160 Annual Report 2022
From an asset management perspective, data relating to the PAIs (including construction
date, EPC rating/NZEB status and site use in the context of fossil fuel extraction, storage,
transport and manufacture) is held in a central database to support with ongoing
reporting. The data on PAIs is also used as part of asset management and fund strategic
planning decisions; to inform asset-level ESG action plans and investment decisions
(e.g. disposal, refurbishment/redevelopment). This process aims to minimise the Fund’s
exposure to energy-inefficient real estate assets and fossil fuels through real estate assets.
PAI Sub-group Indicator
Share in % of fund value
(exc. cash)
#17: Climate and other
environment-related
indicators
Fossil fuels
Exposure to fossil fuels
through real estate
assets (extraction,
storage, transport or
manufacture of fossil
fuels)
18%
#18: Climate and other
environment-related
indicators
Energy efficiency
Exposure to energy-
inefficient real estate
assets
Energy-inefficient
means: built before
31/12/2020: EPC is
C or below built after
31/12/2020: PED is
below NZEB in Directive
2010/31/EU
16%
PAIs are reported as at 31 December 2022.
161Annual Report 2022
What were the top investments of this financial product?
Date as at 31 December 2022
Largest investments Sector % Assets (exc. Cash) Country
Madrid - Gavilanes 4 Real Estate 10.0% Spain
Den Hoorn Real Estate 7.4% Netherlamds
Avignon Real Estate 6.8% France
Waddinxveen Real Estate 5.9% Netherlands
Madrid - Gavilanes 3 Real Estate 5.9% Spain
Erlensee Real Estate 5.5% Germany
Madrid - Gavilanes 1.1 Real Estate 4.7% Spain
Zeewolde Real Estate 4.6% Netherlands
‘s Heerenberg Real Estate 4.2% Netherlands
Ede Real Estate 4.1% Netherlands
Lodz Real Estate 4.1% Poland
Warsaw Real Estate 4.1% Poland
Krakow Real Estate 4.1% Poland
Flörsheim Real Estate 3.5% Germany
Meung sur Loire Real Estate 2.9% France
Date as at 30 September 2022
Largest investments Sector % Assets (exc. Cash) Country
Madrid - Gavilanes 4 Real Estate 10.0% Spain
Den Hoorn Real Estate 7.4% Netherlamds
Avignon Real Estate 6.6% France
Waddinxveen Real Estate 6.6% Netherlands
Madrid - Gavilanes 3 Real Estate 5.8% Spain
Erlensee Real Estate 5.4% Germany
Zeewolde Real Estate 4.7% Spain
Madrid - Gavilanes 1.1 Real Estate 4.6% Netherlands
Ede Real Estate 4.2% Netherlands
‘s Heerenberg Real Estate 4.2% Netherlands
Warsaw Real Estate 4.0% Poland
Lodz Real Estate 3.9% Poland
Krakow Real Estate 3.9% Poland
Flörsheim Real Estate 3.5% Germany
Meung sur Loire Real Estate 2.8% France
The list includes
the investments
constituting the
greatest proportion
of investments of the
financial product
during the reference
period which is:
162 Annual Report 2022
Date as at 30 June 2022
Largest investments Sector % Assets (exc. Cash) Country
Den Hoorn Real Estate 8.9% Netherlamds
Avignon Real Estate 8.0% France
Waddinxveen Real Estate 7.3% Netherlands
Madrid - Gavilanes 3 Real Estate 7.0% Spain
Erlensee Real Estate 6.6% Germany
Zeewolde Real Estate 5.7% Netherlands
Madrid - Gavilanes 1.1 Real Estate 5.6% Spain
Ede Real Estate 5.0% Netherlands
‘s Heerenberg Real Estate 5.0% Netherlands
Warsaw Real Estate 4.7% Poland
Lodz Real Estate 4.7% Poland
Krakow Real Estate 4.6% Poland
Flörsheim Real Estate 4.1% Germany
Meung sur Loire Real Estate 3.3% France
Madrid - Gavilanes 1.2 Real Estate 3.1% Spain
Date as at 31 March 2022
Largest investments Sector % Assets (exc. Cash) Country
Den Hoorn Real Estate 9.2% Netherlamds
Avignon Real Estate 7.8% France
Waddinxveen Real Estate 7.6% Netherlands
Madrid - Gavilanes 3 Real Estate 6.9% Spain
Erlensee Real Estate 6.5% Germany
Zeewolde Real Estate 5.9% Netherlands
Madrid - Gavilanes 1.1 Real Estate 5.5% Spain
‘s Heerenberg Real Estate 5.1% Netherlands
Ede Real Estate 5.0% Netherlands
Warsaw Real Estate 4.6% Poland
Lodz Real Estate 4.5% Poland
Krakow Real Estate 4.5% Poland
Flörsheim Real Estate 4.1% Germany
Meung sur Loire Real Estate 3.3% France
Madrid - Gavilanes 1.2 Real Estate 3.0% Spain
163Annual Report 2022
What was the proportion of sustainability-related investments?
The investment strategy of the fund applies to and captures all assets it holds. Applicable
environmental and social characteristics are considered and promoted for all assets and
the intention is that all assets contribute to the attainment of characteristics promoted by
the fund (1B in the below chart).
No sustainable investments, including EU Taxonomy aligned investments, were made
during the reporting period.
The percentage figure in the box below only includes the underlying investments and
excludes cash within the fund.
What was the asset allocation?
Investments
#2 Other
#1 Aligned
with E/S
characteristics
100%*
#1B Other E/S
characteristics
100%
#1 Aligned with E/S characteristics includes the investments of the financial product used
to attain the environmental or social characteristics promoted by the financial product.
#2 Other includes the remaining investments of the financial product which are neither
aligned with the environmental or social characteristics, nor are qualified as sustainable
investments.
The category #1 Aligned with E/S characteristics covers:
.
The sub-category #1B Other E/S characteristics covers investments aligned with the
environmental or social characteristics that do not qualify as sustainable investments.
Asset allocation
describes the share of
investments in specific
assets.
164 Annual Report 2022
In which economic sectors were the investments made?
Real estate
To what extent were the sustainable investments with an
environmental objective aligned with the EU Taxonomy?
The investment adviser managing the fund has not adopted a sustainable
investments methodology and the fund has not set a minimum sustainability
investments threshold. Therefore the percentage of sustainable investments
aligned with EU Taxonomy is 0% as at 31 December 2022. All assets, excluding
cash, are considered to promote E or S characteristics.
Did the financial product invest in fossil gas an/or nuclear energy related activities
complying with the EU Taxonomy
1
?
Yes
In fossil gas In nuclear energy
No
To comply with the EU
Taxonomy, the criteria
for fossil gas include
limitations on emissions
and switching to fully
renewable power
or low-crabon fuels
by the end of 2035.
For nuclear energy,
the criteria include
comprehensive
safety and waste
management rules.
Enabling activities
directly enable
other activities to
make a substancial
contribution to
an environmental
objective.
Transitional activities
are activities for
which low-carbon
alternatives are
not yet available
and among others
have greenhouse
gas emission levels
corresponding to the
best performance.
165Annual Report 2022
The graphs below show in blue the percentage of investments that were aligned with the EU
Taxonomy. As there is no appropriate methodology to determine the taxonomy-alignment
of sovereign bonds*, the first graph shows the Taxonomy alignment in relation to all the
investments of the financial product including sovereign bonds, while the second graph
shows the Taxonomy alignment only in relation to the investments of the financial product
other than sovereign bonds.
Taxonomy - alignment of investments including sovereign bonds
1
%
Taxonomy alignment investments
Other investments
0 20 40 60 80
100
Turnover
CapEx
OpEx
1
For the purpose of these graphs, ‘sovereign bonds’ consist of all sovereign exposures.
Taxonomy - alignment of investments excluding sovereign bonds
1
%
Taxonomy alignment investments
Other investments
0 20 40 60 80
100
Turnover
CapEx
OpEx
1
For the purpose of these graphs, ‘sovereign bonds’ consist of all sovereign exposures
Taxonomy-aligned
activities are expressed
as a share of:
.
turnover reflecting
the share of
revenue from green
activities of investee
companies
.
capital expenditure
(CapEx) showing the
green investments
made by investee
companies, e.g. for a
transition to a green
economy.
.
operational
expenditure
(OpEx) reflecting
green operational
activities of investee
companies.
166 Annual Report 2022
What was the share of investments made in transitional and enabling activities?
0%.
How did the percentage of investments that were aligned with the EU Taxonomy compare
with previous reference periods?
Not applicable as this is the first report.
What was the share of sustainable investments with an environmental objective
not aligned with the EU Taxonomy?
0%
What was the share of socially sustainable investments?
0%
What investments were included under “other”, what was their purpose and
were there any minimum environmental or social safeguards?
Not applicable to this fund. Applicable environmental and social
characteristics are considered and promoted for all assets and the intention
is that all assets contribute to the attainment of characteristics promoted by
the fund.
are sustainable
investments with
an environmental
objective that do not
take into account
the criteria for
environmentally
sustainable economic
activities under
Regulation (EU)
2020/852.
167Annual Report 2022
What actions have been taken to meet the environmental and/or
social characteristics during the reference period?
ESG action
ESG data collection supporting all E/S characteristics: In order to improve ESG data collection and understand
performance, property and asset managers have increased efforts to engage with tenants and increase tenant
data collection resulting in a higher data collection rate compared to previous years.
Energy efficiency,greenhouse gas emissions reductions:
.
Installation of LED lighting at Meung sur Loire, France
.
Use of green energy for landlord controlled electricity supply in Germany and Poland
.
New Green leases implemented through tenant engagement Leon/Avignon
.
Smart metering project underway with implementation in Avignon and Waddinxveen
.
Exploring PV installation at Erlensee, Florsheim, Zeewolde, Oss, s’Heerenberg, Meung sur Loire
.
Build and progress net zero carbon strategy at Fund and asset level
In addition to measures taken for existing buildings, the Fund has focussed on acquiring assets with either strong
existing ESG credentials (e.g. Phase IV at Gavilanes, Madrid, rated EPC A and BREEAM Very Good), or those
with potential to improve (e.g. La Creche, Niort, by working with tenants to improve via initiatives such as LED
installation).
All E/S characteristics:
.
Three properties in the Dutch portfolio have been (re)certified with BREEAM In-Use during the reference period
– Den Hoorn, Ede, Waddinxveen. Asset managers are considering the implementation of findings from these
assessments, with a view to improving ratings in the future.
.
The Fund achieved a 4-star GRESB rating in 2022, and is aiming for continued improvement year on year.
How did this financial product perform compared to the reference
benchmark?
How does the reference benchmark differ from a broad market index?
Not applicable to this fund.
How did this financial product perform with regard to the sustainability indicators to
determine the alignment of the reference benchmark with the environmental or social
characteristics promoted?
Not applicable to this fund.
How did this financial product perform compared with the reference benchmark?
Not applicable to this fund.
How did this financial product perform compared with the broad market index?
Not applicable to this fund.
Reference benchmarks
are indexes to measure
whether the financial
product attains the
environmental or social
characteristics that
they promote.
168 Annual Report 2022
Corporate Information
Notice of Annual General Meeting
Notice is hereby given that the fifth annual general meeting (the “Annual General Meeting”) of abrdn European Logistics
Income plc (the “Company”) will be held at Wallacespace, 15 Artillery Lane, London, E1 7HA on 12 June 2023 at 11:30
a.m. for the following purposes:
To consider and if thought fit, pass the following resolutions of which Resolutions 1 to 10 will be proposed as ordinary
resolutions and Resolutions 11 to 13 as special resolutions:
Ordinary Business
1. To receive and adopt the Company’s financial statements for the year ended 31 December 2022, together with the
Directors’ Report and the auditor’s report thereon.
2. To receive and approve the Directors’ Remuneration Report as set out in the Company’s Annual Report and financial
statements for the year ended 31 December 2022 (other than the Directors’ Remuneration Policy as set out on
page 82 of the Directors’ Remuneration Report).
3. To authorise the Directors of the Company to declare and pay all dividends of the Company as interim dividends
and for the last dividend referable to a financial year not to be categorised as a final dividend that is subject to
shareholder approval.
4. To re-elect Ms C. Gulliver as a Director.
5. To re-elect Mr J. Heawood as a Director.
6. To re-elect Mr T. Roper as a Director.
7. To re-elect Ms D. Wilde as a Director.
8. To re-appoint KPMG LLP as the Company’s auditor to hold office from the conclusion of this Annual General Meeting
until the conclusion of the next annual general meeting at which accounts are laid before the Company.
9. To authorise the Directors to determine the auditor’s remuneration.
Special Business
10. THAT in substitution for all existing powers the Directors be generally and unconditionally authorised for the purposes
of section 551 of the Companies Act 2006 (the “Act”) to exercise all powers of the Company:
a. to allot shares in the Company up to an aggregate nominal amount of £1,360,175 (such amount to be reduced
by the nominal amount of any equity securities allotted pursuant to the authority in sub-paragraph (b) below in
excess of £1,360,175); and
b. to grant rights (“Relevant Rights”) to subscribe for, or to convert any security into, shares in the Company up to
an aggregate nominal amount of £2,720,350 (such amount to be reduced by the nominal amount of any shares
allotted pursuant to the authority in sub-paragraph (a) above) in connection with an offer made by means of a
negotiable document to (i) all holders of ordinary shares of £0.01 each in the capital of the Company (“Ordinary
Shares”) in proportion (as nearly as may be practicable) to the respective numbers of such Ordinary Shares
held by them and (ii) to holders of other equity securities as required by the rights of those securities (but subject
in either case to such exclusions, limits or restrictions or other arrangements as the Directors may consider
necessary or appropriate to deal with treasury shares, fractional entitlements, record dates or legal, regulatory or
practical problems in or under the laws of any territory, or the requirements of any regulatory body or any stock
exchange in any territory or otherwise howsoever);
such authorisation to expire on 30 June 2024 or, if earlier, at the conclusion of the next annual general meeting
of the Company to be held in 2024 unless previously renewed, revoked or varied by the Company in general
meeting, save that the Company may at any time before the expiry of this authorisation make an offer or enter
into an agreement which would or might require shares to be allotted or Relevant Rights to be granted after the
expiry of this authorisation and the Directors may allot shares or grant Relevant Rights in pursuance of any such
offer or agreement as if the authorisation conferred hereby had not expired.
169Annual Report 2022
11. THAT subject to the passing of Resolution numbered 10 above and in substitution for all existing powers the Directors
be empowered pursuant to sections 570 and 573 of the Act to allot equity securities (within the meaning of section
560 (1), (2) and (3) of the Act) for cash either pursuant to the authorisation under section 551 of the Act as conferred
by Resolution 10 above or by way of a sale of treasury shares, in each case for cash as if section 561(1) of the Act did
not apply to such allotment or sale, provided that this power shall be limited to:
a. the allotment of equity securities or sale of treasury shares (otherwise than pursuant to sub-paragraph (b)
below) to any person up to an aggregate nominal amount of £412,174 which are, or are to be, wholly paid up
in cash, at a price representing a premium to the net asset value per share at allotment, as determined by the
Directors, and do not exceed up to 10% of the issued share capital (as at the date of the Annual General Meeting
convened by this notice); and
b. the allotment of equity securities in connection with an offer (but, in the case of the authority granted under
Resolution 10 (b) above, by way of a rights issue only) to (i) all holders of Ordinary Shares in proportion (as nearly
as may be practicable) to the respective numbers of Ordinary Shares held by them and (ii) to holders of other
equity securities as required by the rights of those securities (but subject in either case to such exclusions, limits or
restrictions or other arrangements as the Directors may consider necessary or appropriate to deal with treasury
shares, fractional entitlements, record dates or legal, regulatory or practical problems in or under the laws of
any territory, or the requirements of any regulatory body or any stock exchange in any territory or otherwise
howsoever) at a price representing a premium to the net asset value per share at allotment, as determined by the
Directors, and such power shall expire on 30 June 2024, or, if earlier, at the conclusion of the next annual general
meeting of the Company to be held in 2024 unless previously renewed, revoked or varied by the Company in
general meeting, save that the Company may at any time before the expiry of this power make an offer or enter
into an agreement which would or might require equity securities to be allotted or treasury shares to be sold after
the expiry of this power and the Directors may allot securities or sell treasury shares in pursuance of any such
offer or agreement as if the power conferred hereby had not expired.
12. THAT, the Company be generally and unconditionally authorised in accordance with section 701 of the Act to make
market purchases (within the meaning of section 693(4) of the Act) of Ordinary Shares and to cancel or hold in
treasury such shares provided that:
a. the maximum aggregate number of Ordinary Shares hereby authorised to be purchased is 14.99% of the
Ordinary Shares in issue as at the date of the passing of this Resolution;
b. the minimum price which may be paid for an Ordinary Share is £0.01;
c. the maximum price (exclusive of expenses) which may be paid for an Ordinary Share shall not be more than the
higher of (i) an amount equal to 5% above the average of the middle market quotations for an Ordinary Share
taken from the London Stock Exchange Daily Official List for the five business days immediately preceding the date
on which the Ordinary Share is contracted to be purchased; and (ii) the higher of the price of the last independent
trade and the current highest independent bid on the trading venue where the purchase is carried out;
d. the authority hereby conferred shall expire on 30 June 2024, or, if earlier, at the conclusion of the annual general
meeting of the Company to be held in 2024 unless such authority is renewed, revoked or varied prior to such time
by the Company in general meeting; and
e. the Company may make a contract to purchase Ordinary Shares under the authority hereby conferred prior to
the expiry of such authority which will or may be executed wholly or partly after the expiration of such authority
and may make a purchase of Ordinary Shares pursuant to any such contract.
13. THAT a general meeting of the Company other than an annual general meeting may be called on not less than
14 clear days’ notice.
By order of the Board
abrdn Holdings Limited
Secretaries
280 Bishopsgate
London EC2M 4AG
20 April 2023
170 Annual Report 2022
Notes:
1. In accordance with section 311A of the Companies
Act 2006, the contents of this Notice of Meeting,
details of the total number of shares in respect of
which members are entitled to exercise voting rights
at the Annual General Meeting and, if applicable,
any members’ statements, members’ resolutions
or members’ matters of business received by the
Company after the date of this notice will be available
on the Company’s website eurologisticsincome.co.uk.
2. As a member, you are entitled to appoint a proxy or
proxies to exercise all or any of your rights to attend,
speak and vote at the Annual General Meeting.
A proxy need not be a member of the Company.
You may appoint more than one proxy provided each
proxy is appointed to exercise rights attached to
different shares. You may not appoint more than one
proxy to exercise the rights attached to any one share.
A form of proxy is enclosed.
3. To be valid, any form of proxy or other instrument of
proxy and any power of attorney or other authority,
if any, under which they are signed or a notarially
certified copy of that power of attorney or authority
should be sent to the Company’s registrars so as to
arrive not less than 48 hours before the time fixed for
the meeting (excluding non working days). The return
of a completed form of proxy or other instrument
of proxy will not prevent you attending the Annual
General Meeting and voting in person if you wish to
do so.
4. The right to vote at the meeting is determined by
reference to the Company’s register of members
as at 6.30 p.m. on 8 June 2023 or, if this meeting is
adjourned, at 6.30 p.m. on the day two business
days prior to the adjourned meeting. Changes to the
entries on that register of members after that time
shall be disregarded in determining the rights of any
member to attend and vote at the meeting.
5. As a member you have the right to put questions at
the meeting relating to the business being dealt with
at the meeting.
6. CREST members who wish to appoint a proxy
or proxies by utilising the CREST electronic proxy
appointment service may do so for the Annual
General Meeting and any adjournment(s) thereof
by utilising the procedures described in the CREST
Manual. CREST Personal Members or other CREST
sponsored members, and those CREST members
who have appointed a voting service provider(s),
should refer to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate
action on their behalf.
7. In order for a proxy appointment made by means of
CREST to be valid, the appropriate CREST message
(a“CREST Proxy Instruction”) must be properly
authenticated in accordance with Euroclear UK
& Ireland Limited’s (“EUI”) specifications and must
contain the information required for such instructions,
as described in the CREST Manual which can be
viewed at www.euroclear.com. The message must
be transmitted so as to be received by the issuer’s
agent (ID RA19) by the latest time(s) for receipt of
proxy appointments specified in the notice of Annual
General Meeting. For this purpose, the time of receipt
will be taken to be the time (as determined by the
timestamp applied to the message by the CREST
Applications Host) from which the issuer’s agent is
able to retrieve the message by enquiry to CREST in
the manner prescribed by CREST.
8. CREST members and, where applicable, their CREST
sponsors or voting service providers should note that
EUI does not make available special procedures in
CREST for any particular messages. Normal system
timings and limitations will therefore apply in relation
to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to
take (or, if the CREST member is a CREST personal
member or sponsored member or has appointed a
voting service provider(s), to procure that his CREST
sponsor or voting service provider(s) take(s)) such
action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any
particular time. In this connection, CREST members
and, where applicable, their CREST sponsors or voting
service providers are referred, in particular, to those
sections of the CREST Manual concerning practical
limitations of the CREST system and timings.
9. You may also submit your proxy votes via the internet.
You can do so by visiting www.sharevote.co.uk.
Youwill require your voting ID, task ID and Shareholder
Reference Number. This information can be found
under your name on your form of proxy. Alternatively,
shareholders who have already registered with
Equiniti Registrars’ online portfolio service, Shareview,
can appoint their proxy electronically by logging on
to their portfolio at www.shareview.co.uk using their
user ID and password. Once logged in, click “view” on
the “MyInvestments” page. Click on the link to vote and
follow the on screen instructions.
10. The Company may treat as invalid a CREST
Proxy Instruction in the circumstances set out in
Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
171Annual Report 2022
11. In the case of joint holders, where more than one
of the joint holders completes a proxy appointment,
only the appointment submitted by the most senior
holder will be accepted. Seniority is determined by the
order in which the names of the joint holders appear in
the Company’s register of members in respect of the
joint holding (the first-named being the most senior).
12. A corporation which is a shareholder can appoint one
or more corporate representatives who may exercise,
on its behalf, all its powers as a shareholder provided
that no more than one corporate representative
exercises powers over the same share. A Director,
the company secretary, or some person authorised
for the purpose by the company secretary,
may require any representative to produce a certified
copy of the resolution so authorising him or such other
evidence of his authority reasonably satisfactory to
such Director, company secretary or other person
before permitting him to exercise his powers.
13. Any person to whom this notice is sent who is a person
nominated under section 146 of the Companies
Act 2006 to enjoy information rights (a “Nominated
Person”) may, under an agreement between them
and the member by whom they were nominated,
have a right to be appointed (or to have someone
else appointed) as a proxy for the Annual General
Meeting. If a Nominated Person has no such proxy
appointment right or does not wish to exercise it,
they may, under any such agreement, have a right to
give instructions to the member as to the exercise of
voting rights. Anyperson holding 3% of the total voting
rights in the Company who appoints a person other
than the Chairman as his or her proxy(ies) will need to
ensure that both he or she and such proxy(ies) comply
with their respective disclosure obligations under the
UK Disclosure Guidance and Transparency Rules.
14. The statement of the rights of members in relation
tothe appointment of proxies in paragraphs 2 and
3above does not apply to Nominated Persons.
Therights described in these paragraphs can
only be exercised by members of the Company.
15. As at close of business on 20 April 2023 (being the
latest practicable date prior to publication of this
document), the Company’s issued share capital
comprised 412,174,356 Ordinary Shares and there
were no shares held in treasury. Each Ordinary Share
carries the right to one vote at a general meeting of
the Company and therefore the total number of voting
rights in the Company as at close of business on
20 April 2023 is 412,174,356.
16. No Director has a service contract with the Company,
however, copies of Directors’ letters of appointment
will be available for inspection for at least 15 minutes
prior to the meeting and during the meeting.
17. Under section 338 of the Companies Act 2006,
members may require the Company to give,
to members of the Company entitled to receive this
Notice of Meeting, notice of a resolution which may
properly be moved and is intended to be moved at the
Annual General Meeting. Under section 338A of that
Act, members may request the Company to include
in the business to be dealt with at the Annual General
Meeting any matter (other than a proposed resolution)
which may be properly included in the business.
18. Members should note that it is possible that, pursuant
to requests made by the members of the Company
under section 527 of the Companies Act 2006,
the Company may be required to publish on a website
a statement setting out any matter relating to: (i)
the audit of the Company’s accounts (including the
auditor’s report and the conduct of the audit) that are
to be laid out before the Annual General Meeting;
or (ii) any circumstances connected with an auditor of
the Company ceasing to hold office since the previous
meeting at which annual accounts and reports were
laid in accordance with section 437 of the Companies
Act 2006. The Company may not require the members
requesting any such website publication to pay its
expenses in complying with sections 527 or 528 of the
Companies Act 2006. Where the Company is required
to place a statement on a website under section
527 of the Companies Act 2006, it must forward the
statement to the Company’s auditor not later than the
time when it makes the statement available on the
website. The business which may be dealt with at the
Annual General Meeting includes any statement that
the Company has been required under section 527 of
the Companies Act 2006 to publish on the website.
19. Pursuant to section 319A of the Companies Act
2006, the Company must cause to be answered at
the Annual General Meeting any question relating to
the business being dealt with at the Annual General
Meeting which is put by a member attending the
meeting, except in certain circumstances, including if
it is undesirable in the interests of the Company or
the good order of the meeting that the question be
answered or if to do so would involve the disclosure of
confidential information.
20. You may not use any electronic address provided
either in this Notice of Meeting or any related
documents (including the Form of Proxy) to
communicate with the Company for any purposes
other than those expressly stated.
21. There are special arrangements for holders of shares
through abrdn Investment Plan for Children, abrdn
Investment Trusts Share Plan and abrdn Investment
Trust ISA (“Plan Participants”). These are explained
in the separate ‘Letter of Direction’ which Plan
Participants will have received with this Annual Report.
172 Annual Report 2022
Contact Addresses
Directors
Anthony Roper, (Chairman)
Caroline Gulliver
John Heawood
Diane Wilde
Secretaries and Registered Office
abrdn Holdings Limited
Alternative Investment Fund Manager
abrdn Fund Managers Limited
280 Bishopsgate
London
EC2M 4AG
Investment Manager
abrdn Investments Ireland Limited
2nd Floor
2-4 Merrion Row
Dublin 2
Stockbroker
Investec PLC
30 Gresham Street
London EC2V 7QP
Solicitor
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Registrar
Equiniti Limited
Aspect House Spencer Road
Lancing
West Sussex BN99 6DA
Tel: UK and Overseas +44 (0) 371 384 2030
Lines open 8:30am to 5:30pm (UK time), Monday to
Friday, (excluding public holidays in England and Wales)
shareview.co.uk
Depositary
Citibank UK Limited
Citigroup Centre
Canada Square
Canary Wharf
London
E14 5LB
Independent Auditor
KPMG LLP
15 Canada Square
Canary Wharf
London
E14 5GL
Website
eurologisticsincome.co.uk
Foreign Account Tax Compliance Act
(“FATCA”)IRS Registration Number (‘‘GIIN’’)
DF2TVL.99999.SL.826
Legal Entity Identifier (LEI)
213800I9IYIKKNRT3G50
Registered Number
Incorporated in England & Wales with number 11032222
173Annual Report 2022
0001681230
abrdn.com
For more information visit eurologisticsincome.co.uk