Life sciences REIT looks to raise £300m in IPO

A new real estate investment trust (REIT) focused on the life science laboratories is looking to raise £300m in an initial public offering (IPO).

Life Science REIT has announced its intention to launch on the Alternative Investment Market (AIM) of the London Stock Exchange through a placing, offer for subscription and intermediaries offer targeting the issue of 300 million ordinary shares at an issue price of 100 pence.

If it gets away, this would be the first London listed REIT focused on UK life science properties, which is a rapidly growing real estate sector.

It will focus on the life sciences ‘golden triangle’ between London’s St Pancras, Cambridge and Oxford, where life science companies in the UK are mainly located due to innovation clusters in these areas where four of the world’s top 10 universities for life science and global life science innovation, world leading research and teaching hospitals are located.

The company will invest in a diversified portfolio of properties which are typically leased or intended to be leased to tenants operating in, or providing a benefit to, the life sciences sector. Examples of life science properties include wet and dry laboratories, offices and co-working space, manufacturing and testing facilities, and data centres. The company said there is a supply and demand imbalance for specialist properties, which “should ensure strong potential for rental growth over the coming years”.

The company has identified a £445m pipeline of projects of which around £305m is under exclusivity or in an advanced negotiations.

The company hopes to provide shareholders with an attractive level of total return with a focus on capital growth whilst also providing a growing level of income. It is targeting a net asset value (NAV) total return in excess of 10% per annum and an initial dividend yield of 4% per annum, with an intention to grow to 5% in the early years. The company will seek to achieve these return targets with a conservative approach to leverage, targeting a loan to value ratio (LTV) of between 30-40%.

Ironstone Asset Management Limited will be its investment adviser. Ironstone has a management team with long standing UK real estate sector experience, led by Simon Farnsworth. Certain individuals of the management team have committed to invest £3m in the issue, which will be on pari passu terms with all other investors.

The pipeline

The £445m pipeline, of which £305m is under exclusivity or in advanced negotiations, includes:

  • £220m of income producing assets providing an initial yield of 5% with strong reversionary potential and average rents of £29 per square foot; and
  • £85m of forward funding/development opportunities.

The company hopes to substantially invest or commit the net proceeds of the issue within a six month-period following admission.

The life science sector

The life science property sector is characterised by increasing research and development (R&D) spend by healthcare and technology companies, the emergence of more life science companies, particularly ‘spin-outs’ from leading universities, ongoing advancement of the healthcare sector driving innovation, Covid-19 impact driving reshoring of R&D, testing and manufacturing; and a relocation of companies to key locations and clusters.

There is limited supply of life science properties in the sector, with many buildings being unsuitable for life science requirements and planning restrictions around key life science cluster restricting development.

The management team

Initial alignment from management team of the investment adviser with £3m of investment in the issue and further ongoing alignment in the form of 15% of advisory fees being paid in shares. A tiered advisory fee starts at 1.1% of NAV and falls to 0.75% of NAV.

The senior management team includes several members who have experience in building, operating and growing companies, including a listed REIT backed by strong sectoral trends in the UK.

Stephen Barrow (Non-Executive Director)

Stephen has over 30 years’ experience setting up and managing funds. Starting as an investment analyst at Morgan Grenfell, Stephen managed the £5bn UK Equity Exempt Fund in the 1990’s combined with the role of Head of Global Research. Stephen then set up the successful Global Equity Select strategy at Morgan Grenfell in 2002. Leaving Morgan Grenfell in 2005, Stephen built a successful team at IronBridge International and as founding CIO, ultimately managed over $7bn for a range of UK and overseas clients. Since 2012, Stephen has been investing in a range of property vehicles alongside colleague Simon Hope, notably Warehouse REIT. Stephen has an MA in Economic History from the University of St Andrews.

Simon Hope (Non-Executive Director)

Simon Hope is Chairman of Global Capital Markets at Savills plc with over 35 years’ at the company. The vast majority of these years he has specialised in portfolio investment construction, acquisitions and disposals. He was a founding director of the Charities Property Fund which is now £1.5bn in size. He chaired Grosvenor Hill Ventures until 2007 which was Savills’ proprietary trading and investment arm for property. In 2013 he became chairman of Tilstone Partners Limited which is the investment adviser to Warehouse REIT plc, and is a director of Warehouse REIT plc, an AIM quoted real estate investment trust which was launched in 2017 and which today has a market cap of GBP650 million. Simon is the executive sponsor of Savills Life Science practice which incorporates a multi-disciplinary team of over 18 professionals. He studied Estate Management at the Royal Agricultural College, Cirencester and is a RICS Fellow. He also holds an MBA from Reading University.

Simon Farnsworth – Managing Director

Simon Farnsworth is an experienced fund manager and chartered surveyor with over 30 years of experience in the UK real estate market. Previously he was a Managing Director of the UK Funds business of CBRE Global Investors and a member of their UK Executive Committee and Investment Committee. Prior to that he was a Business Development Director at GE Capital Real Estate. He has a BSc in land management from the University of Reading. Latterly he was a founding director of Westmount Real Estate, a boutique real estate investment advisory and asset management business advising on acquisitions, asset management and financing across all UK sectors. He has considerable experience in sourcing, managing, and financing across many real estate asset classes along with developments, forward fundings and corporate transactions.

Andrew Pinto – Finance Director

Andrew Pinto has over 19 years’ experience in property finance and was previously Group Finance Director of Langmead Group. Prior to that he was Finance Director of db Symmetry and before that was Director of Treasury and Financial Analysis at Urban&Civic plc (formerly Terrace Hill Group plc). Andrew is a qualified corporate treasurer and accountant. He has a degree in microbiology from Warwick University.

Pippa Stacey – Sustainability Director

Pippa Stacey is a chartered accountant with a broad range of skills more recently focused on sustainability, governance and compliance. Recently she has supported listed entities, Warehouse REIT plc and Unilever plc, as a consultant, and prior to this she spent 11 years with PwC in their Audit and Forensic Department working on financial/non-financial investigations, regulatory remediation, and auditing. She has a degree in civil engineering from Nottingham University.

The Board of Directors

Claire Boyle (née Barnes) (Chair)

Claire is a non-executive director and chair of the audit committees of Fidelity Special Values Plc and Aberdeen Japan Investment Trust PLC, and a non-executive director of The Monks Investment Trust. She has over 20 years’ experience working in financial services and investment management, having qualified as a chartered accountant with Coopers and Lybrand, where she specialised in litigation support and forensic accounting. Claire then spent 13 years working in equity investment management for Robert Fleming Investment Management, American Express Asset Management and latterly Oxburgh Partners, where she was a partner with responsibility for their European Hedge Fund. Claire has a degree in Natural Sciences from Durham University.

Dr Sally Ann Forsyth OBE

Sally Ann is CEO of the Stevenage Bioscience Catalyst and is a pioneer of the Life Science Real Estate industry, having been responsible for Colworth Science Park from 2005. She was the Science Park director at Goodman, responsible for the Harwell campus and then became CEO of Norwich Research Park. Sally Ann has a doctorate in molecular biology from Cambridge University and is a qualified management accountant with a certification from LSE in Real Estate Economics and Finance. She was awarded an OBE for services to Business and Science.

Michael Taylor

Mike is Commercial Director for the British Heart Foundation (the “BHF”), where he is responsible for their commercial revenues across 720 retail outlets, online channels and commercial health ventures, with annual revenues of over GBP200m. The BHF funds life-science research into heart and circulatory diseases. Prior to this he was MD at a number of national retailers, including Budgens, Londis and Whittard. Mike has a degree in Economics from UEA.

It is expected that a fourth non-executive director will be appointed in the first six months following admission.

Life sciences REIT looks to raise £300m in IPO

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