A new vehicle is launching on the London Stock Exchange which will enable investors to gain access to the pan-European logistics market for the first time.

The £250m IPO (initial public offering) offer for Aberdeen Standard European Logistics Income is open to retail investors until 11 December. We are enthused by its proposition and rate the shares as a ‘buy’.

The shares are expected to commence trading on 15 December. The investment trust will target an annual total return of 7.5% including a dividend yield of 5.5%.

According to Aberdeen Standard’s global head of real estate investment research Andrew Allen, the logistics market in continental Europe is, for the most part, less developed than the UK.

This is linked to the penetration of e-commerce with Allen noting that in the UK online sales account for 15% of all retail sales but just 8% in continental Europe.

The yields on European logistics assets tend to be higher than the UK as the market is less mature. In comparison, there is strong competition for UK logistics assets, making them expensive to buy.

‘You can get prime yields of perhaps 4% in the UK compared with 5% or 6% in Europe and the cost of finance is cheaper,’ Allen says.

He adds that unlike the UK, rents in continental Europe tend to be automatically linked to inflation. That should give the investment trust a smoother income profile and help support the dividend.

The company has a large pipeline of assets to target and already has exclusivity on a €20m multi-let logistics facility in Germany. Allen reckons the fund will be fully invested within six to nine months.

The float of Aberdeen Standard European Logistics follows the cancellation of another property-linked IPO, although the two funds are sufficiently different for us not to worry about the former’s imminent stock market float.

M7 Multi-Let REIT was set to be the largest REIT IPO in 2017, planning to raise £300m to invest in UK commercial property. Following a delay to its flotation, it subsequently said some prospective investors were interested in buying its seed portfolio privately. It also cited the high volume of recent IPOs focused on UK real estate for not pursuing its listing.

Recent real estate-linked IPOs include UK-focused logistics play Warehouse REIT (WHR), social housing specialist Triple Point Social Housing (SOHO) and supermarket investor Supermarket Income REIT (SUPR). (TS)

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