The board of the £234 million Abrdn European Logistics Income trust has recommended a managed wind-down. This decision follows a strategic review initiated in December, underscoring the trust’s difficulties in attracting sufficient investor interest. This decline in interest is attributed to the trust’s small size and low share liquidity, which deter potential investors.

The trust’s share price has seen a steep decline, falling by 40% over the past two years. It is currently trading at a 26.7% discount to its net asset value. This drop highlights deeper issues within the trust, including a “materially uncovered” dividend, which indicates that the dividend payments are not adequately supported by earnings. This has contributed to the board’s decision to wind down, aiming to secure the best possible outcome for shareholders.

Abrdn’s Broad Challenges

Abrdn, the managing company of the trust, has witnessed several of its trusts either shut down or merge over recent months, reflecting a broader trend of consolidation and closure within the sector. Despite efforts to bolster its investment trust lineup—evidenced by a substantial £30 million investment into its UK trust range—the company has struggled to maintain investor confidence. Additionally, the failed takeover attempt of the Abrdn Property Income earlier this year has added to the firm’s challenges, leading to more trusts opting for a wind-down.

Dividend and Asset Disposal Plans

While the trust is winding down, it will continue to pay dividends, although these are expected to decrease as assets are sold off. The board anticipates that the majority of the trust’s assets will be sold by the middle of next year. Interestingly, there appears to be a significant interest from buyers preferring to purchase individual assets rather than the entire portfolio, potentially speeding up the wind-down process.

The Bigger Picture in the Sector

All four UK-listed European-focused property trusts have been underperforming, with an average decline of 31% since 2019. Among these, the Abrdn trust has the smallest discount, signaling less severe issues compared to others like Phoenix’s Spree Deutschland, which faces a nearly 50% discount.

Upcoming Shareholder Vote

Shareholders of the trust will have a chance to voice their opinions on the recommended closure during the annual general meeting scheduled for June 24. This vote will be crucial in determining the next steps for the trust and its management strategy.

Sector Impact

The outcome of the Abrdn trust’s strategic review and its decision to wind down are seen as significant indicators for the sector’s health. Analysts like Andrew Rees from Numis have pointed out that these developments are key to understanding investor sentiment across similar trusts, including major players like the £1.3 billion Tritax Eurobox.

Tony Roper, chair of the Abrdn trust, remarked on the difficult decision, noting that despite a strong belief in the logistics asset class and the investment strategy, the challenges facing the company and the broader sector made a timely wind-down the most prudent course of action. This approach aims to maximise shareholder value in the short to medium term, reflecting a strategic pivot in response to ongoing market pressures.