Aberdeen's Global Premier Properties Fund (AWP) - June 2025

Listen to Mike Taggart, Aberdeen's Head of Closed-End Fund Investor Relations, discuss the current marketplace with Bill Pekowitz, Portfolio Manager for AWP.

Transcript

Aberdeen Global Premier Properties Transcript

Mike Taggart

June 2025

Mike Taggart: Welcome to the latest podcast for the Aberdeen Global Premier Properties Fund, ticker symbol AWP. I'm Mike Taggart, Aberdeen's Had of Closed-End Fund investor relations with me is Bill Pekowitz a portfolio manager for AWP. Thank you for joining us. 

Bill Pekowitz: Hi, Mike. Great to be here and have the chance to talk again. 

Mike Taggart: Yeah, absolutely.  So Bill, for the past several years, US real estate fundamentals had been better than the rest of the world. Is that still the case or are you seeing a shift given the uncertainty in the US economy in the US markets? 

Bill Pekowitz: Yeah. You know, Mike, you're 100% correct to point out that the US market has had the best underlying operating fundamentals, earnings results and stock performance in the real estate sector over the last several years. You know, this was driven by stronger economic growth in the US, low levels of new supply in real estate markets, and just better balance sheets, highlighted by significantly lower debt levels that limited the need for US companies to recapitalize. And also lessen the impact of higher interest rates on cash flow generation within the real estate market in the US. 

Also, US listed real estate market has had the benefit and the tailwind from having greater exposure to some sectors that are more tied to the digitization of the global economy and aging demographics than we see in other portions of the of the globe. And so therefore, that all led to this outperform ES that we saw in the US. And it also kind of has festered that belief of American exceptionalism that was driving this outperformance and was going to continue to drive outperformance. And really, our fund has benefited from that over the last several years. We had a large overweight allocation to the US market. And so the fund benefited both on an absolute and a relative basis. 

Mike Taggart: During that time period relative to the benchmark? 

Bill Pekowitz:  Yes. Yeah. Well, relative to the benchmark, looking ahead and what's gone on this year, you know, I think one thing that investors have to always think about, is, you know, the one thing that the market hates more than anything else is uncertainty.

 Unfortunately, due to the ever-changing policies, that are changing and coming out of Washington on a seemingly a daily basis, that uncertainty has just crept into the view around US markets this year. And it's really putting a risk at changing that long term narrative that we've seen for the US. You know, tariffs are having an impact on global trade.

They have the potential to hurt the US economic growth in the near term. And they're stoking fears of higher inflation coming into play. The policy you know, itself isn't necessarily the problem. You know, the bigger problem is just that inability to know exact where these tariffs will come out, which is just causing companies to sit on their hands and not make final decisions which is just going to weigh on economic growth in the near term.

Also, you know, some of the policies that we've had around immigration, you know, we think these can lead to higher labor costs, which can also slow economic growth activity in the US. You know, so all of this just raising questions around the US leadership, you know, is weighing on that market a little bit. And at the same time, we're seeing shifts in Europe that are making it more attractive as an investable market.

You know, one of the key things we're seeing is fiscal policy is getting more accommodative for economic growth, particularly in Germany. Also, we've now gone through what was a painful process of delevering of balance sheets by European real estate companies, which are now putting them into a much better financial shape today. And because of that, not only will they benefit from seeing improving internal growth, but they can once again, participate in external growth activity, which can boost longer term shareholder value creation.

Because of all of this, within the fund, we have been reducing our exposure to the, to the Americas and increasing exposures to where we see some attractive opportunities in Europe and the UK. 

Mike Taggart: You know, you mentioned US tariffs are a concern. How companies in the US are kind of holding back on making decisions. Has the threat of US tariffs affected warehousing or logistics related real estate in other parts of the world, or is it kind of still too early to see such effects?

Bill Pekowitz: Yeah. So I'd say, you know, the prospect of tariffs has just clearly raised concerns about global trade for all markets. But you know, a few things I think we should highlight. First off, the tariffs in themselves have no direct impact on real estate landlords. And actually we think we'll have tangential impacts. That could be a positive for many property types.

By raising the cost of steel, timber and other building materials in the US. The cost of construction will also rise. And this is going to help to keep supply at lower levels, which will benefit existing landlords. You know, like you said, the one spot where this isn't the case, it's going to be in the logistics and warehouse sector. You know, whose tenants rely on importing and exporting goods in global trade for much of their business. 

So because of that, it's markets where, like Southern California that rely more heavily on that trade, particularly from Asian markets, we're seeing already, decline in demand and leasing times start to slow, as people struggle to make decisions. That said, you know, outside of the US, we are actually seeing, some benefits and continued strength in logistics markets. You know, so markets like central Europe, Mexico that are benefiting from the near shoring trends that kind of started in the post-Covid world. Well, those trends are continuing today, and we're continuing to see strong demand from those tenants into those markets. And so while logistics in the US is a sector that we're more concerned about, we still think some of these global markets can continue to benefit in the coming years.

Mike Taggart:  And so then turning it back to the US domestically, I heard you say recently, the US healthcare still has some nice tailwinds, right? So it doesn't seem like everything's bad in the US. Can you discuss the US healthcare sector for our listeners? 

Bill Pekowitz:  Yeah, sure. You know, I'd say that senior housing is probably one of the segments of real estate that we are most excited about right now. These facilities, which typically cater to residents that are 80 years and older, and provide housing, provide some medical care and provide, you know, just a place to live and a community, really are well positioned to benefit from, you know, what we call the, silver tsunami, which is this aging population that is about to come through and, you know, the leading edge of the baby boom will turn 80 in 2026.

So because of that, this is going to make that over 80 age demographic the fastest growing segment of the US population over the next five years. So this is going to create just tremendous amount of demand for space over the next few years. So we we're seeing a positive demand. And then because of higher construction costs, regulations in the market that were put in place, and then, you know, the impacts of Covid that are still kind of working their way through this space.

There's been virtually no development of new senior housing facilities over the last five years. And currently we're seeing a record low level of new starts for senior housing facilities.

Mike Taggart: Just small supply and high demand. 

Bill Pekowitz: Exactly. And so when that's the case, you know, we think we're going to see tremendous upside in occupancy levels. And landlords are going to be able to increase rents.

Unfortunately if you're somebody who has a parent who you're going to be looking to put into these facilities, it means that the cost is going to go higher. But for our investors, we will benefit from this and see, we think double digit net operating income growth over the next 2 to 3 years. And this should support continued strong stock price appreciation and it's going to increase dividends to our shareholders as well. 

Mike Taggart:  That's what you're expecting. 

Bill Pekowitz: Yes. 

Mike Taggart: And then finally when many investors think about real estate they think office buildings but AWP is a Premier Properties fund. 

So can you just talk a little bit about you know, how you go about investing in office real estate and then kind of big picture, what's Aberdeen's outlook for the overall real estate market moving forward?

Bill Pekowitz: So you know Mike you're you're again you're right. You know the office sector certainly gets a lot of the headlines when people think about the real estate sector. But it has increasingly become a smaller and smaller part of the investment universe that we're looking at. Currently, less than 5% of our fund is invested in the office sector globally. And the investments that we do have, you know, are focused on specific markets where we're seeing favorable demand characteristics like Midtown Manhattan. You know, this is a market where if you're on Park Avenue and you're a landlord, they're close to Grand Central, you're seeing new tenants look to come to that space, come to newer buildings, new, better amenities, buildings. And so those properties can benefit. And while other portions of the city are losing, those markets will continue to win. So we are invested specifically in that submarket. 

And then the other area within the office sector that we're seeing is we are investing in specific companies that have company specific, near-term catalysts that we think are going to allow them to benefit and close a valuation gap between where their stock is and where we think their underlying real estate assets are worth.

And so, you know, we think this is how we're investing in the office sector right now and how we're going to continue to probably invest for the longer term. You know, we think the office market is stabilizing. It's a slow process. You know, we went through something similar in the retail sector, you know, with malls. If we were having this discussion ten years ago, we would have had the same talk of our malls dead?

So we're going through that right now. And what we think is there will be a place for office, but you have to invest with the best properties and the best management teams and the best landlords who are going to be equipped to adapt with the market as it evolves into its next generation. 

As far as real estate overall, you know, we continue to see several areas of positive opportunities where investors will be able to, make attractive returns. We've already talked about the senior housing sector. We think the data centers continue to be an attractive area to invest, as we're seeing increased investment into the space due to demand from the digitization of the economy from AI investments. This is all leading to greater demand for that sector. We think that continues, and we think there's even parts of retail, that are going to benefit here. And so there's specific companies, and opportunities that we are looking for. 

You know, I think the big thing to think about with AWP is, you know, this fund we invest globally, and we also utilize the ability to kind of pivot between property types as things evolve. And so, you know, being nimble and, you know, attuned to these ever-changing dynamics are how we can get returns for our investors.

We're going to continue our focus on the best companies, the best properties, and, you know, best in class management teams. And we think those are the key drivers that will lead to the best possible returns. 

Mike Taggart: Well, thank you both for that informative update. 

Bill Pekowitz: No problem Mike, thanks for having me. 

Mike Taggart: There are three convenient ways to learn more about AWP. 

Visit our website Aberdeeninvestments.com. Second, you can email us at InvestorRelations@aberdeenplc.com or give us a call at 1-800-522-5465. I'm Mike Taggart of Aberdeen. Thank you for listening.

This podcast is provided for general information only and assumes a certain level of knowledge of financial markets. It is provided for informational purposes only, but should not be considered as an offer, investment, recommendation or solicitation to deal in any of the investments or products mentioned herein and does not constitute investment research. The views in this podcast are those of the contributors at the time of publication, and do not necessarily reflect those of Aberdeen.

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The companies discussed in this podcast have been selected for illustrative purposes only, or to demonstrate our investment management style, and not as an investment, recommendation or indication of their future performance. The value of investments in the income from them can go down as well as up, and investors make it back less than the amount invested. Past performance is not a guide to future returns, return projections or estimates, and provide no guarantee of future results.