- Board exploring various options
- In talks with potential buyers
- Dividend axed after leasing delay
In news which caught most but maybe not all investors by surprise, Life Science REIT (LABS), which rents space to biotech and medtech companies, announced it was starting a strategic review ‘to explore all strategic options available to maximise value for shareholders, which may include a potential sale or managed wind down of the company’.
The firm also announced that due to delays in leasing activity and the associated impact on cash flow, it would suspend any future dividends until the review is completed.
The shares, which had crept up more than 10% this week including a gain of nearly 6% yesterday, added another 9% to 42.2p on the news, although that still leaves them trading at less than half the IPO price.
‘ATTRACTIVE TO ACQUIRERS’
Since the company floated in November 2021, it has fully invested the IPO proceeds in a high-quality portfolio of properties in the so-called Golden Triangle spanning Oxford, Cambridge and London’s ‘Knowledge Quarter’.
However, like the rest of the REIT (real estate investment trust) sector, the firm has faced headwinds in the form of higher inflation and interest rates, which have driven a slowdown in leasing activity, and a drop in investor sentiment, which together have meant the shares have traded at a wide discount to NAV (net asset value) for some time.
Despite saying in its half-year report, published last September, it was ‘encouraged’ that its current leasing was at its highest level of the year, reinforcing the company’s fundamental strengths, the board set key milestones which its advisor Ironstone has found ‘difficult to achieve’.
Having consulted with shareholders and held discussions with a number of potential acquirers in recent months, the board believes the company ‘should be attractive to multiple parties if the outcome of the strategic review leads to the sale of the business’.
The decision to pass the final dividend was triggered by a delay in negotiating rental contracts worth £3.2 million, which impacted cash flow, even though the firm announced just last week that Carl Zeiss – the largest tenant on its Cambourne Park site – had agreed to extend its lease by five years from 2028 to 2033 suggesting longer-term demand was still positive.
