Life Science REIT | Winterflood Research

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Background: Life Science REIT (LABS) was launched in November 2021, when it raised £350m in its oversubscribed IPO. Its investment objective is to provide an attractive total return by investing in a diversified portfolio of properties that are leased, or intended to be leased, to occupiers in the life science sector. The fund is managed by Ironstone Asset Management, whose sole mandate is LABS. The team is led by Simon Farnsworth, who has 30 years of real estate experience. In December 2022, the fund migrated from AIM to the Main Market of the LSE.

Annual Results: In its inaugural annual results for the year to 31 December 2022, LABS’ EPRA NTA per share fell by 10.2% from 100.2p to 90.0p. The total return was -9.1%, which compares with the fund’s target return of in excess of +10% p.a. The fall in EPRA NTA per share was driven by property valuation declines over the year, in particular at assets acquired during 2022 as a result of acquisition costs. Like-for-like ERV growth was +4.7% over the year, driven by asset management initiatives. 97% of rent was collected. Adjusted earnings per share were 0.7p. Dividends totalling 4.0p per share have been declared in respect of the financial year, in line with the IPO target. The target dividend for FY23 remains at 4.0p per share.

Portfolio: As at 31 December 2022, LABS’ portfolio contained six assets and was valued at £388m, comprising standing properties (£310m), development property (£41m) and land (£36m). All assets are located in the ‘Golden Triangle’ of Oxford, Cambridge and London. Including deals signed post year-end and deals under offer, the pro forma exposure to life science occupiers is 42% of total rent.

Financing: The fund’s net LTV ratio as at 31 December was 16.8%, compared to the target LTV ratio of 30% to 40%. Following a debt repayment post year-end, LABS is now over-hedged, with pro forma SONIA hedging covering 104% of facilities until June 2023.

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