This is a large amount for a new AIM admission to raise and it will be interesting to see how much demand there is from investors. Life Science REIT will be the first REIT on the London market that is focused on life science properties.
Increasing R&D by healthcare companies and spin-offs from universities mean that there will be demand for suitable space and there is a lack of supply. Many new properties that come onto the market find tenants before they are even completed. It is estimated that up to 20 million square feet of additional office and laboratory space will be required over the next two decades.
Life Science REIT will invest in properties that already have tenants, which will provide an immediate income, and other purpose-built properties in development, which can help to increase medium-term NAV.
A 4% yield is being targeted, based on the issue price, with annual growth of 5%. This is an attractive investment for anyone seeking a good, growing yield combined with share price growth.
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Life Science REIT (LON: LABS)
Life science-focused property investment
Market: AIM
Offer for subscription, placing and intermediaries offer
Flotation date: 19 November 2021
Issue price: 100p
Amount raised: up to £300m
Expenses: up to £6m
Market capitalisation: up to £300m
Nominated adviser: Panmure Gordon
Broker: Panmure Gordon
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What does it do?
Life Science REIT was incorporated in July 2021 to invest in properties in Oxford, Cambridge and London that have life science businesses and organisations as tenants. The properties are near to universities, hospitals and pharma companies and there is a lack of supply of good quality space.
The types of properties will include laboratories, manufacturing facilities, offices and data centres. Most of the properties will be a combination of offices and laboratories. Rents in Oxford have been catching up with rents in Cambridge and they continue to increase.
Newly set up Ironstone Asset Management is the investment adviser of Life Science REIT. The annual advisory fee is 1.1% of NAV up to £500m.
There is a potential pipeline of investments with a total value of £445m and there are exclusive or advanced negotiations with £305m of these investments. That latter figure includes £220m of properties yielding 5% and £85m of development opportunities. The cash raised should be invested within six months.
Financials
Life Science REIT has the ability to raise up to £350m through the offers and placing, although £300m is the target. Based on £300m, the company wants to achieve a total return of 10% a year over the medium term.
Given the properties that the investment manager is negotiating to buy, it is likely that the top ten tenants will contribute 54% of revenues. Generally, tenants are good quality and there should not be any problems getting the rent paid.
The estimated NAV will be 98p a share after expenses. Ongoing annual expenses could be around £4.2m. Borrowing will be used to buy more properties. Loan to value will be between 30% and 40%.
The initial dividend will cover the period from admission to June 2022. There will then be two dividends each year.
Directors
Claire Boyle (Chair)
Annual fee: na
Dr Sally Forsyth
Annual fee: na
Michael Taylor
Annual fee: na
Shareholders
The firms involved in the intermediaries offer are Interactive Investor, AJ Bell, Equiniti, Jarvis Investment Management and Redmayne Bentley.
Claire Boyle will subscribe for 30,000 shares, Dr Sally Forsyth 20,000 shares and Michael Taylor 20,000 shares. The management team of the investment adviser will invest £3m.