AWP Update, featuring Portfolio Manager Bill Pekowitz

Mike Taggart, Aberdeen's Head of Closed-End Fund Investor Relations discusses the driving factors influencing the global real estate sector and the outlook for 2026 in this ever-changing industry with Bill Pekowitz, a Portfolio Manager for AWP. 
 

Transcript

Aberdeen Global Premier Properties Fund (AWP)

Podcast Transcript

Mike Taggart: Welcome to the latest podcast for the Aberdeen Global Premier Properties Fund, ticker symbol AWP. I'm Mike Taggart, Aberdeen's Head of Closed-End Fund Investor Relations. With me is Bill Pekowitz, a Portfolio Manager for AWP. Bill, thank you for joining us.

Bill Pekowitz: Thanks, Mike. Always a pleasure to speak with you and get a chance to discuss the fund.

Mike Taggart: So, Bill, let's start big picture. What macro indicators most influence your real estate positioning in the fund? Is it interest rates, inflation, credit spreads, or something else? That’s the first part, and then, as this is a global investing fund, what factors drive your allocation between the US, European, and Asia-Pacific regions?

Bill Pekowitz: So Mike, if I start off and just say all of the above to your first question, I'm guessing that probably isn't the answer that's going to be the most helpful for everybody. When we look at real estate, at the end of the day, it's a reflection of the economic health of the overall country or market, and then individual sub-market and property-level differences that lead to performance. As I look to the coming year, we see a world where, while there are plenty of uncertainties that can impact our outlook, there are a lot of things that could shape up in real estate's favor. Business profitability appears pretty healthy. Consumers have money and appear willing to spend it and if looking at the recent holiday sales estimates is true, appear willing to spend it. This supports modest economic growth both in the U.S. and around the globe. In a world where the economy is growing and one where we see little new supply for most property types, this should support rental growth and modest earnings growth for real estate landlords.

Thus, we think we're set up for a world where we can see low to mid-single-digit earnings growth coupled with the dividend yields in the 4% to 5% range that the listed real estate sector is providing today. We think that can combine to drive high single-digit to low double-digit total returns, assuming constant multiples. Add to this outlook, we're seeing a scenario where inflation pressures have abated. This should allow central banks to be more accommodative on the rate front, which alleviates some of the rate pressures that have weighed on the sector in recent years, providing the potential for maybe some further upside. With that, I say there are still a lot of risks. If job losses accelerate in any market, if the consumer starts to weaken or we see inflation return, this outlook would prove overly optimistic. But in general, heading into 2026, we're feeling a bit more confident than we've been maybe in the last couple of years about the outlook for the sector.

Now that I've laid that out, how we're thinking about geographic allocations in the fund comes down to our outlook for economic growth in each market. Looking out to the year ahead, unlike the 2021 to 2024 time period, where we had that period of American exceptionalism and there was a reason to have a very large position in the US relative to the benchmark and to the rest of the globe, or last year, where some of the geopolitical uncertainties from tariff policies and things like that led to a rebound in the rest of the world versus the US, we think we're entering 2026 in a more balanced environment. I don't think this year we're looking for any one region to materially outperform or underperform the rest of the globe. While I say that, we also have to always remember that real estate is very much a local business where individual characteristics of a sub-market or even a property can overwhelm to both the positive or negative side. That on-the-ground knowledge that our team has and utilizes, and experience, is probably the biggest driver of those investment decisions.

Mike Taggart: Excellent. And so then, kind of to drill down maybe a little, you invest in several property sub-sectors for this fund, obviously. So which sub-sectors offer the strongest fundamentals today? Because that's, you know, you're talking about earnings growth and your outlook.

Bill Pekowitz: Yeah. Look, I'd say the strongest fundamentals we're seeing today are in the senior housing sector, particularly in the US, but starting to spread into Europe as well. These facilities can range from individual independent living properties that are similar to age-restricted apartments on the low end of the care continuum, and then moving higher from there into assisted living, memory care, and skilled nursing, depending on the acuity needs of the resident. This, you know, we kind of are looking at it, this sector, we say, you know, people are living longer and they're healthier in general. That said, unfortunate facts about aging are impossible to escape, and with that comes the need for additional medical care as you age. That is driving demand for this property type. Senior housing fills this need, providing both a space to live, meals, and care for those in the later years of life.
 
Right now, the fastest growing demographic group in the United States is the 80 and older age cohort. This group currently is about 14.7 million people, but the leading edge of the baby boom turns 80 in 2026. That's going to lead to rapid growth in this sector over the next decade. In fact, if we use projections from the Census Bureau, we're looking at this group growing to roughly 23 million people by 2035—a 55% increase from current levels. This population is not only growing, but unlike prior generations, it's wealthier, healthier, and living longer. That means more money to spend on their care and a longer time period to spend these dollars.
 
Like all things in real estate, demand on its own does not make the fundamental story—supply is equally, if not more, important. 

Heading into the COVID pandemic, we actually had seen a period of oversupply in senior housing as developers’ kind of saw this coming in the future and built properties, but the population wasn't there yet, who needed those facilities. And then with the pandemic, we both had regulatory issues that made it difficult to move into properties and just people being scared led to a big drop in occupancy. And that led to just a complete shutdown of new construction in space. As such, just as we're hitting this leading edge of increase in demand, we have really no new supply hitting.

Right now in 2025, net absorption in the space was 2 ½ to 1 relative to new supply. This is allowing occupancies to exceed pre-COVID levels and driving double-digit rental rate increases. What's more, not only are the current situation really good, we start looking forward from here, we've had 16 straight quarters now where new supply and new starts have dropped. We are at near record lows in terms of new starts. It's going to take time to restart building. So we think that we're in a situation where we could see this very strong fundamental outlook for the next three to five years at a minimum, driving well above average top-line growth. As occupancies move into the over 90%, we will start to see efficiencies and economies of scale at the property level drive margin expansion as well.
 
 Mike Taggart: Yes, sounds like some fantastic underlying dynamics there. Are there any other long-term secular themes you're building into the portfolio?

Bill Pekowitz: 

Yeah, so obviously, senior housing is one as we went into. Another theme that we have been focused on, and these have been themes that, we've looked at for a number of years, it is global trade and how, geopolitical risks and now the tariff policies are impacting supply chain construction.

We believe these factors will lead to an increase in nearshoring and potentially shift manufacturing activities from low-cost markets in Southeast Asia into either domestic markets and other low-cost markets that are closer to the end consumer. We think this can lead to winners and losers within the logistics space, but overall it's an attractive opportunity. We think that it will help other low labor cost markets like Central Europe and Mexico see some growth. And we think that this can lead to some of these markets really exceeding the growth that we'll see just for warehouses in general around the globe.

 You know, longer-term theme, another longer-term theme that we are considering and we're investing for is just housing affordability. Limited new supply and high mortgage rates around the globe are pushing home prices higher and higher. In my opinion, the only real solution is increasing construction and building out housing stock. We're seeing some work toward this, but many markets are plagued with nimbyism and beliefs that limit growth. Because of that, we think people will stay in rental housing longer, and the types of rental housing supplied will change. So single family rentals, manufactured homes, things that can be a little bit bigger and a little bit more personal space, we think are going to be more attractive as families kind of are in rental housing longer. So we think that that's another thing that we can invest for.

 Lastly, it's impossible these days to talk about investment themes without mentioning AI and digitization of the economy. The growth potential there is expected to be a formidable driver of economic growth globally over the next several years. If that is the case, it's going to require a lot of data centers because the computing happens inside these data centers. They house immense computing and power-generating needs. We think this will drive strong demand for data center space going forward. There's also a lot of supply coming into this space in several markets, but as this market evolves from large language learning models into more consumer-facing products and inference computing, the types and locations of data centers and their network speed will become much more important. And therefore, identifying who can be the potential longer-term winners is going to be much more important than just you own a data center kind of going forward.

And that's, you know, so that's, those are some of the things that we are thinking about today.
 
 Mike Taggart: Right. A lot of themes going on and a lot of good things. So, kind of finally, how do you see AWP's positioning evolving over the next three to five years with these themes?

 Bill Pekowitz: The thing to remember about the real estate sector is that it evolves and changes constantly with the economy over time. Not that long ago, when we spoke about real estate, we focused on traditional sectors—office, retail, warehouses, and apartments. That was commercial real estate. Now, while those sectors are still important, we've seen new categories emerge as how and where we live, work, and play has changed. Things like data centers, cell towers, biotech labs, single-family rentals—these were either non-existent or very small a decade ago and now are major factors in real estate. We have to keep the portfolio and our view of real estate evolving with these economic changes and remain focused on that for the success of the fund. While we'll do that, the other thing that's always important to remember is when we're investing, we're focused on identifying the best management teams, the best located properties, and the premier assets in the market. We think that investing in those will drive the best performance over time and allow us to achieve attractive real estate returns in the long term.
 
 

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

Bill Pekowitz: No problem. Thank you for having us.

Mike Taggart: Thank you for listening. There are three convenient ways to learn more about AWP: visit the fund's website at abrdnawp.com, email us at investor.relations@aberdeenplc.com, or call 1-800-522-5465.

 
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