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Aberdeen Standard targets logistics growth with new fund

Aberdeen Standard targets logistics growth with new fund

The 'Amazon effect' has prompted Aberdeen Standard Investments to launch a fund targeting the growth in demand for commercial property led by changes in the logistics sector.

Aberdeen Standard European Logistics Income investment trust is planned to launch in December 2017.

The fund house said it plans to tap into the rapid growth of e-commerce across Europe by investing in European logistic properties such as large ‘big box’ ultra-modern warehouses and local ‘last mile’ distribution centres.

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The target equity issue is £250m, and the proceeds are expected to be fully invested within 12 months.

The company will target a distribution yield of 5.5 per cent per year, predominantly in the form of dividends, and a total return for investors of 7.5 per cent per year.

Andrew Allen, global head of real estate investment research, said: “As the retail market changes, it forces goods to be stored in very different ways and that logistic framework has to modernise.

“The sophistication of those units and speed of delivery required by the consumer has completely changed the market. It is not just forcing retailers, but also manufacturers to modernise what they doing.”

In Aberdeen's view, the continued growth of the logistics market in the UK is already attractive to investors and the potential for growth in the rest of Europe is set to fuel more interest.

Currently, 14 per cent of all retail sales in the UK are online, while the European average is 8 per cent.

However, over the last year e-commerce in the rest of Europe grew faster than the UK. This is because of the increased use of credit card, broadband and digital services in those countries.

Space is also a premium, as the level of growth in the logistics sector surpasses the amount of space available to house large industrial units.

Mr Allen added: “Since 2010, the level of take-up of logistics is higher than supply or space. If that has happened every year, the vacancy rate is dropping and has dropped to its lowest ever level so we are seeing investors keen to get into this market.

“The new trust will exploit this supply-demand imbalance in the sector, as we believe this will support rental income and fuel growth.”

These properties also benefit from long-term continuous leases which are annually inflation linked, thereby providing solid rental income alongside the potential for capital growth.

While the Aberdeen Standard Investments will invest directly in property, it will qualify as a closed-ended investment trust listed on the London Stock Exchange. This is intended to offer investors liquidity through the secondary market.

The lead manager of the new trust will be Evert Castelein, based in Aberdeen Standard Investments’ Amsterdam office. He will be supported by two assistant fund managers, Ross Braithwaite and Attila Molnar, and by Mr Allen.

The company plans to raise through an IPO  for subscription, with admission to the premium segment of the Official List of the UKLA and to dealings on the London Stock Exchange.