Life Science REIT (LABS:AIM) 61.5p
Loss to date: 14.6%
The trust, which specialises in owning properties leased to companies in the life science sector, raised £350 million when it launched in November 2021 and at the end of last year its portfolio was valued at £388 million.
Its properties range from offices to labs and production facilities in the ‘Golden Triangle’, which stretches from Oxford and Cambridge to the Knowledge Quarter of north London and is attracting a high level of investment from life sciences firms.
WHAT HAS HAPPENED SINCE WE SAID TO BUY?
We hoped the drubbing for real estate companies had run its course since our call last October, but a combination of lower property valuations and investor aversion to ‘alternative’ assets has seen the share price fall 15% in the interim.
The managers have stuck to their brief, investing only in high-quality assets, but the portfolio suffered a £31 million revaluation loss at the end of last year.
The contracted rent roll at the end of 2022 was close to £14 million, while the estimated rental value of the portfolio was £17.2 million leaving plenty of room for upward revisions to rents.
The estimated rental value was lifted by active management of the assets including lab conversions at Rolling Stock Yard in north London and the refurbishment of The Merrifield Centre in Cambridge.
Including deals signed since the year-end and those under offer, life science tenants account for just over 40% of the occupiers and this proportion will keep rising as the development portfolio - which includes the 20-acre Oxford Technology Park - becomes available.
WHAT SHOULD INVESTORS DO NOW?
The trust is still a work in progress with significant potential to raise rents as more of the portfolio is converted into lab space, so investors who want long-term exposure to life science assets should sit tight as the shares are at a 33% discount to its last net asset value. Hopefully this gap should narrow over time.
In the meantime, income investors should be attracted by the 4p target dividend for this year which puts the shares on a 6.5% yield.
