Life Science REIT has launched a strategic review into the future of the company that will explore a potential sale or managed wind down.
The board said in the announcement: “As set out in its interim results announcement on 26 September 2024, the board acknowledges the challenges and significant headwinds that the company has faced since IPO, in common with the wider REIT sector, including higher inflation and elevated interest rates which have driven a fundamental slowdown in leasing activity and negatively impacted investor sentiment.
“These factors, coupled with the company’s size and low levels of liquidity have led to an underperformance of the share price, which has, as a result, traded at a significant discount to net asset value for a prolonged period of time.”
The board added that it had set key milestones for Ironstone (the company’s manager) around forecast leasing activity, occupancy levels and completion of development assets, which it said “have proved difficult to achieve”.
It has held a number of discussions with potential acquirors in recent months, which it said gives it confidence that the business should be attractive to multiple parties if the outcome of the strategic review leads to the sale of the business.
As well as a potential sale or managed wind-down, the strategic review will also consider undertaking some form of consolidation, combination, merger or comparable corporate action or changing the company’s investment strategy and/or management arrangements.
The board added that it was not currently in discussions with, or in receipt of an approach from, any potential offeror relating to an acquisition of the company and that there can be no certainty that any offers will be made as a result of the formal sale process.
[QD comment: It comes as no surprise that Life Science REIT’s board is undertaking a review into the future of the company. Having launched at the end of 2021, it could be said that the timing was very unfortunate with only a few months of trading before interest rates ratcheted up. It has been one of the worst performing listed REITs and the erosion of shareholder value has been drastic with its IPO price of 100p fall to 38.8p. Its strategy of turning offices into higher value laboratory space seemed like a winning formula, but a slowing of the life science sector from its post-Covid highs has hindered its progress.]
Revision to the Investment Advisory Agreement
The company is also in the final stages of negotiation with Ironstone to agree a significant reduction in the fees payable under the investment advisory agreement. This will include a reduction to the investment advisory fee, as well as a change to the metric upon which it is calculated. The board said that it anticipates being able to announce the revised fees shortly.
