TIDMLABS
RNS Number : 1307N
Life Science REIT PLC
21 September 2023
21 September 2023
LEI: 213800RG7JNX7K8F7525
Life Science REIT plc
("Life Science REIT", the "Company" or, together with its
subsidiaries, the "Group")
Results for the six months ended 30 June 2023
Further solid operational progress - well placed to deliver on
strategy
Life Science REIT (LSE: LABS), the real estate investment trust
focused on UK life science properties, today announces its
unaudited results for the six months ended 30 June 2023.
Financial highlights(1)
Six months Six months
ended ended
30 June 30 June
2023 2022
Gross property income GBP7.6m GBP5.6m
----------- -------------
IFRS profit before tax GBP5.4m GBP6.9m
----------- -------------
IFRS earnings per share 1.5p 2.0p
----------- -------------
EPRA earnings per share 0.7p 0.2p
----------- -------------
Adjusted earnings per share 0.9p 0.2p
----------- -------------
Dividends per share(2) 1.0p 1.0p
----------- -------------
As at As at
30 June 31 December
2023 2022
----------- -------------
Portfolio valuation GBP402.9m GBP387.6m
----------- -------------
IFRS net asset value GBP314.3m GBP319.5m
----------- -------------
IFRS net asset value per share 89.8p 91.3p
----------- -------------
EPRA net tangible assets GBP306.0m GBP315.1m
----------- -------------
EPRA net tangible assets per share 87.4p 90.0p
----------- -------------
Loan to value ratio(3) 20.3% 16.8%
----------- -------------
-- Portfolio valuation up GBP15.3 million to GBP402.9 million
(31 December 2022: GBP387.6 million), a 0.8% increase on a book
value basis, reflecting development progress, 1.0% like -- for-like
ERV growth and stabilisation of yields in the period
-- EPRA net tangible assets ("NTA") of GBP306.0 million or 87.4
pence per share (31 December 2022: GBP315.1 million or 90.0 pence
per share), with movement largely reflecting the 2022 dividend
payment in May 2023, partially offset by adjusted earnings and a
revaluation gain on the portfolio
-- Repaid the GBP36.5 million Fairfield debt facility in
February 2023 by drawing down GBP26.3 million from the Group's HSBC
facility and utilising existing cash resources
-- Refinanced the GBP150.0 million HSBC facility in June 2023,
adding Bank of Ireland to the Group's lenders and extending the
term to March 2026 (plus two one-year extension options); 100%
hedged at 4.5% interest payable
-- Well financed with loan to value ("LTV") of 20.3% at the
period end (31 December 2022: 16.8%) and significant liquidity,
with cash resources of GBP19.3 million and GBP48.7 million of
available headroom within the revolving credit facility ("RCF")
Operational highlights(1, 4)
As at As at
30 June 31 December
2023 2022
Contracted rent roll GBP14.2m GBP13.8m
---------- -------------
Estimated rental value GBP17.3m GBP17.2m
---------- -------------
Occupancy 89.1% 82.0%
---------- -------------
WAULT to expiry 6.2 years 6.2 years
---------- -------------
WAULT to first break 3.9 years 4.5 years
---------- -------------
Net reversionary yield 5.3% 5.2%
---------- -------------
-- Good progress with asset management and development programmes:
-- At Oxford Technology Park ("OTP") achieved two new lettings
to Oxford Ionics and Arcturis Data at GBP28.5 and GBP28.7 per sq ft
respectively
-- Received detailed planning consent on final phase of OTP development (Buildings 8 to 11)
-- Completed rebranding of Cambourne asset to Cambourne Park
Science & Technology Campus ("Cambourne") and secured first
life science letting at the park to Rakon (GBP25.0 per sq ft)
-- Refit completed at Rolling Stock Yard ("RSY") and let at
GBP110.0 sq ft to Beacon Therapeutics, a record rent for life
science space
-- Contracted rent roll of GBP14.2 million (31 December 2022:
GBP13.8 million), with GBP0.4 million of rent added in the period,
increasing occupancy to 89.1% (31 December 2022: 82.0%)
-- Significant reversionary potential in the investment
portfolio, with the ERV of GBP17.3 million reflecting a
reversionary percentage of 9.0% on let space
-- WAULT to expiry remains stable at 6.2 years (31 December 2022: 6.2 years)
ESG
-- Sustainability Committee approved the Group's sustainability strategy and policy
-- New standards for refurbishments and developments rolled out
-- Green leases introduced for all new lettings
-- Obtained the Group's first green financing with GBP40.0
million of the term loan defined as a Green Loan.
Post balance sheet events
-- 69,700 sq ft has reached practical completion at OTP
-- New letting to Oxford Gene Technology (Operations) Limited at
OTP taking 11,040 sq ft in the Innovation Quarter ("IQ") for
GBP19.9 per sq ft
-- The Board has declared an unchanged first interim dividend of
1.0 pence per share in respect of 2023 and this will be paid
entirely as an ordinary dividend. Payment date is 31 October 2023,
with an ex-dividend date of 28 September 2023
1. The Group presents EPRA Best Practices Recommendations as
Alternative Performance Measures ("APMs") to assist stakeholders in
assessing performance alongside the Group's statutory results
reported under IFRS. APMs are among the key performance indicators
used by the Board to assess the Group's performance and are used by
research analysts covering the Group. EPRA Best Practices
Recommendations have been disclosed to facilitate comparison with
the Group's peers through consistent reporting of key real estate
specific performance measures. However, these are not intended as a
substitute for IFRS measures. Please see unaudited supplementary
notes for further details on APMs.
2. Dividends paid and declared in respect of the six months to
30 June 2023, including the first interim dividend of 1.0 pence per
share declared on 21 September 2023. Dividends paid during the six
months to 30 June 2023 totalled GBP10.5 million (six months to 30
June 2022: GBPnil) or 3.0 pence per share as a second interim
dividend in respect of the year to 31 December 2022. Please refer
to note 9 of the consolidated financial statements.
3. Gross debt less cash, short-term deposits and liquid
investments, divided by the aggregate value of properties and
investments.
4. Investment properties only. Development properties and land
have been excluded from the above metrics.
Claire Boyle, Chair of Life Science REIT, commented:
"We have continued to position our portfolio to benefit from the
positive trends in our markets. We have progressed planning at our
flagship OTP development and are pleased to have welcomed four new
life sciences occupiers across the portfolio, significantly
increasing occupancy as well as our life sciences exposure. Perhaps
most notably, our refit of Rolling Stock Yard has delivered record
rents for life sciences space in London. While occupiers are taking
longer to make commitments to new space, the enquiries we are
seeing are firm and the prices we are achieving are ahead of our
own, and valuer's, assumptions. Importantly, our successful
refinancing means that 100% of our debt is hedged and with a period
end LTV of just 20.3% meaning we are well placed to deliver on our
strategy."
Simon Farnsworth, Managing Director of the Investment Adviser,
Ironstone Asset Management Limited, added:
"While the macro-economic backdrop has been challenging for real
estate, the REIT's operational performance reinforces our
conviction in its markets which are characterised by tight supply,
resilient demand and as a result, growing rents. We recognise the
importance of actively de-risking developments through pre-letting,
and of responding quickly to the changing needs of our occupiers by
evolving our offer. This approach puts us on an exciting
trajectory, supporting the REIT as it is building a best-in-class
portfolio which we believe will deliver value for shareholders over
the long term."
Analyst meeting
An in-person meeting for analysts will be held at 9.30amam this
morning, 21 September 2023. The meeting will be hosted by Simon
Farnsworth, Managing Director, David Lewis, Finance Director, and
Ian Harris, Director of Asset Management at Ironstone Asset
Management, the Company's Investment Adviser. For further details,
please contact LifeSciencereit@buchanan.uk.com .
A live audiocast of the meeting will be available via at the
following link:
https://stream.buchanan.uk.com/broadcast/64c7882fa1eaa5d77603f246
Following the meeting, a recording of the audiocast will be made
available for replay at the Company's website,
https://lifesciencereit.co.uk
FOR FURTHER INFORMATION, PLEASE CONTACT:
Ironstone Asset Management - Investment via Buchanan
Adviser below
Simon Farnsworth / Joanna Waddingham
Panmure Gordon - Joint Corporate Broker +44 20 7886
Alex Collins / Tom Scrivens 2500
Jefferies International Limited -
Joint Corporate Broker
Tom Yeadon / Andrew Morris / Oliver +44 20 7029
Nott 8000
G10 Capital Limited - AIFM +44 20 7397
Maria Baldwin / Paul Cowland 5450
Buchanan -- Financial PR
Mark Court / Henry Wilson / Verity
Parker + 44 20 7466
LifeSciencereit@buchanan.uk.com 5000
Notes to editors
Life Science REIT plc is the UK's only listed property business
focused on the growing life science sector. It targets
opportunities in the 'Golden Triangle' research and development
hubs of Oxford, Cambridge and London's Knowledge Quarter. By
investing in properties that are leased, or intended to be leased,
to occupiers in the life science sector, the Group aims to generate
capital growth, while also delivering growing income.
The Company's shares are traded on the Main Market of the London
Stock Exchange, under the ticker LABS.
Further information is available at
https://lifesciencereit.co.uk
CHAIR'S STATEMENT
We made good progress over the six months as we focused on
executing our business plan and successfully refinancing the
Group's debt, extending the term and ensuring we have the
flexibility to continue delivering on the strategy we set at
IPO.
Market remains robust
The UK life sciences market, which is underpinned by some
compelling long-term structural drivers, remains robust despite the
ongoing macro uncertainty. In particular, our focus on the Golden
Triangle of Oxford, Cambridge and London's Knowledge Quarter, where
demand is strongest and supply is highly constrained, positions us
well, and is why we have delivered a valuation uplift over the
period, outperforming much of the property sector.
However, with five interest rate rises since the start of the
year, the economic environment continues to be challenging.
Occupiers are being more thoughtful about taking space, and we have
seen the pace of decision-making slowing. Nevertheless, we are
encouraged by the level of enquiries and, as a result, we are
continuing to let at rents ahead of our own and the valuers'
expectations.
The wider environment continues to be supportive for life
science operators, with the funding pool diversifying to include
sovereign wealth as well as venture capital funds, in addition to
large pharmaceutical companies increasingly looking to invest in
smaller businesses to supplement research and development. The UK
Government also remains supportive of the sector, and we were
delighted to see that the UK will rejoin Europe's Horizon programme
under a bespoke deal. This provides UK scientists with access to
the world's largest research collaboration programme.
Ultimately, having the right space is fundamental to the
business model for life sciences companies. To support them, we
have developed a deliberately differentiated offer, which even in
the current environment appeals to a range of occupiers across the
life science spectrum.
At OTP and Cambourne, our space is more affordable and more
flexible than competing schemes but provides the same high-quality
workspace and proximity to the institutions in and around Oxford
and Cambridge. At RSY, we are one of the only schemes in London
offering plug and play lab space and our location within the
Knowledge Quarter makes this uniquely attractive. These factors
give us an important competitive advantage as interest in the
sector builds. While we are aware that there are development
schemes in the pipeline across the Golden Triangle, timing,
particularly in the current environment, is less certain and in
London, few offices have the potential for conversion or are in the
right location.
In the second half of last year, we saw outward yield shift
across commercial real estate sectors, as the investment market
responded to high inflation, rising interest rates and geopolitical
uncertainty. Our portfolio has not been immune to these pressures,
but the impact has been far more limited than in other sub-sectors
of real estate. We have seen yields stabilise in the first half of
2023, which is reflected in our period-end portfolio valuation (see
below).
Successfully executing our plans
The Group has made good progress with its strategy in the
period. Our developments at OTP are progressing to plan, with
69,700 sq ft reaching practical completion since the period end. We
also received detailed planning consent for the final four
buildings (8 to 11), with Buildings 8 and 9 having now started on
site. In addition, we announced two new life science occupiers at
OTP in the period and one further new letting since 30 June
2023.
We completed the rebranding of Cambourne to reflect its focus on
life science and technology occupiers and welcomed our first life
science letting there since acquisition.
At RSY, we achieved what we believe is a record rent per sq ft
for a lab in London at GBP110.0 per sq ft following its refit as
plug and play lab space.
However, we are very aware that the wider environment remains
uncertain and are managing our development plans accordingly. In
particular, we are evolving our offer to where we see the strongest
demand. So, at OTP, we are refining the planning consent we
achieved in order to deliver more flexible and affordable space,
following the success of the IQ model delivered on Building 4; and
at Cambourne, we will be delivering more plug and play space after
seeing positive results with this approach at RSY.
Financial performance and dividends
The portfolio was independently valued at GBP402.9 million at
the period end (31 December 2022: GBP387.6 million), up 3.9% on an
absolute basis, reflecting the stabilisation of yields noted above
and progress with developments and lettings.
The EPRA NTA per share as at 30 June 2023 was 87.4 pence per
share, 2.6 pence lower than the year ended 31 December 2022, with
the movement primarily resulting from the 3.0 pence second interim
dividend paid in May 2023. Adjusted EPS for the period was 0.9
pence with rental income from the May 2022 acquisitions driving the
0.7 pence increase versus the same period last year.
The Board has declared an interim dividend of 1.0 pence per
share in respect of the period, unchanged from the same period last
year. This will be paid entirely as an ordinary dividend. The
payment date is 31 October 2023, with an ex-dividend date of 28
September 2023.
Operationally, the Group continues to perform strongly and the
Board believes that the best route for generating shareholder
returns is to continue to successfully implement the strategy and
extract the inherent value from the portfolio.
A well-financed business
The business has maintained its robust financial position, with
low leverage, significant cash and headroom in our facilities,
providing the resources we need to implement our asset management
plans.
During the period, we repaid the more expensive debt we acquired
with OTP and refinanced our existing HSBC term loan and RCF. We
were delighted to add Bank of Ireland to our lenders in the
process, demonstrating the continued attraction of our sector and
business to finance providers. We were also pleased to define
GBP40.0 million of the term loan as a Green Loan, representing the
Group's first green financing.
At the period end, our LTV ratio was 20.3% (31 December 2022:
16.8%) and we continue to believe that a range of 30 -- 40% is
optimal in the longer term. At the same date, we had available
liquidity of GBP68.0 million, split between cash of GBP19.3 million
and a further GBP48.7 million available on the RCF, which we will
draw down to fund our development programme at OTP, with a further
GBP51.0 million of costs expected to complete the project.
Sustainability matters
We continue to progress our sustainability agenda. At the start
of the year, we established a Sustainability Committee to oversee
and review our sustainability strategy. The Committee is chaired by
the Board's sustainability lead, Dr Sally Ann Forsyth, and is made
up of all members of the Board. The Committee met twice in the
period and approved the sustainability strategy and policy, as well
as its own terms of reference.
Our other sustainability workstreams include enhancing the
quality of the data we collect across the portfolio, to establish a
baseline against which we can set a target for the reduction of our
carbon emissions, which is planned for the end of the year. We have
also drawn up standards for refurbishments and developments, which
we are using to progress the plans for the refit of space at
Cambourne. Our developments at OTP are being delivered to good
sustainability standards, including EPC A and BREEAM Excellent
ratings. Across the portfolio, we have set individual
sustainability asset plans to identify opportunities for on-site
renewable energy, energy performance improvements and occupier
wellbeing.
Looking forward
While we recognise that the economic environment continues to be
challenging, our conviction in the longer-term prospects for our
business remains strong. Occupier demand in our key markets is
encouraging and is underpinned by powerful long-term trends, while
supply is low, supporting rental growth. We are seeing good
interest in our vacant space, which we expect to convert to
lettings in the second half of the year at attractive rents. We
will continue to actively manage our balance sheet to provide
additional flexibility to progress our strategy of delivering space
for life science use. The Board therefore looks forward to the
remainder of 2023 with confidence.
Claire Boyle
Chair
20 September 2023
INVESTMENT ADVISER'S REPORT
Market update
While the life science real estate sector has demonstrated
resilience so far in 2023, it was not immune from the broader
challenges facing UK property.
The occupational market is highly dependent on the funding
environment, which has seen a shift in dynamics over the period.
While venture capital activity has slowed, there has been an uptick
in other sources of funding, notably sovereign wealth, private
equity ("PE") and Big Pharma companies' mergers and acquisitions
("M&A"). GBP3.6 billion was invested in UK life sciences
through M&A in the first six months of the year compared to
GBP1.5 billion in the previous six months and PE investment
totalled GBP4.7 billion with activity driven by some large deals.
This underscores a broader and enduring confidence in the market,
reflecting advances in science, technology and medicine that could
revolutionise life sciences globally..
While the structural themes remain strong, the sector has not
been immune to the cyclical headwinds which continue to dominate.
Occupiers are postponing or taking longer to make decisions on new
space, but that has tended to mean that enquiries are more
realistic and well considered.
In Oxford, during the six months to 30 June 2023, take-up was
ahead of the same period last year, although requirements have
fallen year on year. However, in Cambridge, momentum has continued,
with take-up 25% ahead of last year. In both locations there is a
significant gap between supply and demand, totalling nearly 0.5
million sq ft in Oxford and 1.2 million sq ft in Cambridge.
Interest in London is also building, with an estimated 700,000
sq ft of requirements as at 30 June 2023, most of which originate
from large pharmaceutical companies looking for fully fitted lab
space, and focused on areas of under 20,000 sq ft. Quoted rents in
this market are high, ranging from GBP85.0 to GBP130.0 per sq ft,
reflecting the specialist nature of the fit out and the strength of
demand.
Investment activity was lower in the first half of 2023, partly
due to a lack of available stock rather than a lack of available
capital as owners have preferred not to sell into a potentially
weaker market. Volumes totalled GBP381 million, down on the first
half of 2022, but as at 30 June 2023, there was approximately
GBP600 million worth of properties under offer, which bodes well
for the rest of the year.
UK Government support for the life science sector remains
robust
UK Government support for the life science sector remains
robust. The decision to rejoin Horizon Europe, announced this
month, is hugely positive for the UK industry. This agreement
supports new technologies and research projects in a range of
sectors and opens up co-operation beyond the EU. Other initiatives
announced in the period included:
-- incentives for investment in research and development, IT
equipment, plant and machinery, announced as part of the 2023
Spring budget;
-- increasing the budget for the Medicines and Healthcare
products Regulatory Agency, potentially accelerating the approval
process for medical products;
-- launching the International Technology Strategy, a GBP3.5
billion investment to make the UK a science and technology
superpower by 2030;
-- creating a new Department for Science, Innovation and
Technology ("DSIT"), with the Secretary of State given a Cabinet
seat;
-- establishing the Advanced Research and Invention Agency,
backed by GBP800 million of funding, to support high-risk
scientific research; and
-- since the period end, the UK Government has announced
transformational plans in Cambridge, including the construction of
a new residential area, commercial developments and laboratory
space for life sciences.
Implementing the investment strategy
There were no changes to the portfolio during the period, as we
focused on implementing our asset management and development plans
for the Group's existing assets, as described below.
The portfolio
The Group's portfolio at 30 June 2023 comprised its investment
assets and the ongoing development at OTP, which comprises
buildings under construction and the remaining development
land.
Valuation WAULT WAULT
GBP per Area Occupancy to break to expiry Contracted NIY NRY
rent
----------------
Asset GBPm sq ft sq ft % Years Years GBPm GBP PSF % %
p.a.
------------------- ----- ------- ---------- --------- -------- --------- ------- ------- --- ------
Cambourne 87.4 377 231,700 82.0 1.8 5.1 4.2 22.2 4.5 6.0
Rolling Stock
Yard 85.3 1,583 53,900 86.4 3.2 7.1 3.5 72.3 3.9 4.5
7-11 Herbrand
Street 76.7 1,118 68,600 100.0 - 3.3 4.0 58.5 4.9 5.2
OTP - Investments 43.5 419 103,800 86.1 10.8 13.2 1.7 19.2 3.7 5.0
Lumen House 7.5 426 17,600 100.0 - - 0.4 24.5 5.4 7.5
The Merrifield
Centre 7.5 595 12,600 100.0 3.5 8.5 0.3 23.1 3.6 5.5
Investment assets 307.9 631 488,200 89.1 3.9 6.2 14.2 33.3 4.3 5.3
------------------- ----- ------- ---------- --------- -------- --------- ------- ------- --- ------
OTP - Developments 95.0 240 395,400(1) - - - - - - 5.1(2)
Development assets 95.0 240 395,400 - - - - - - 5.1
------------------- ----- ------- ---------- --------- -------- --------- ------- ------- --- ------
Total 402.9 456 883,600 89.1 3.9 6.2 14.2 33.3 4.3 5.3
------------------- ----- ------- ---------- --------- -------- --------- ------- ------- --- ------
1. Full build-out area.
1. Development property only, excludes development land.
The contracted rent roll for the investment assets at the period
end was GBP14.2 million (31 December 2022: GBP13.8 million), up
2.9%. This compares to an ERV of GBP17.3 million, 21.8% ahead of
the existing contracted rent. The let space is already 9.0%
reversionary, demonstrating significant rental growth in the
sector. Our asset management programme aims to unlock this
potential income growth over time.
Overall occupancy at the period end was 89.1% (31 December 2022:
82.0%), with the movement reflecting the new life science lettings
at RSY and Cambourne in the period.
All of the assets are located within the Golden Triangle. The
portfolio primarily comprises hybrid and laboratory ("labs") and
office space. The charts below show the split of assets by location
and type, based on their valuation, as well as by life science
occupier at 30 June 2023.
Asset location by valuation
London 40.2%
Oxford 36.2%
Cambridge 23.6%
Asset type by valuation(1)
Hybrid & labs 73.3%
Office 26.7%
Life science occupier area by floor type(2)
Office 61.9%
Labs 33.3%
M&P(3) 4.8%
1. Includes full OTP scheme.
2. 51.8% of portfolio area (inc. vacant space) currently let to life science occupiers.
3. Manufacturing and prototyping.
The Group's occupiers
As we successfully implement our asset management strategy, the
proportion of the Group's assets leased to life science occupiers
continues to grow, with 51.8% of our portfolio area leased to life
science occupiers as at 30 June 2023 (31 December 2022: 41.0%
restated to include technology occupiers). At the period end, our
three largest life science occupiers by rent were:
-- Gyroscope Therapeutics , a clinical-stage company owned by
Novartis, developing gene therapies to treat diseases of the eye
that cause vision loss and blindness. The company occupies three
floors in Rolling Stock Yard, which provides a collaborative
environment to explore innovative medical research and operate its
global organisation.
-- Carl Zeiss , a leading technology enterprise, operating in
the optics and optoelectronics industries. Its UK headquarters for
its life science businesses of microscopy, medical technology and
consumer optics are in Building 1030 at Cambourne, providing it
with space to consolidate research, production and other
operations.
-- Beacon Therapeutics , a Syncona-backed gene therapy company
focusing on developing therapies and treating diseases of the eye.
Beacon Therapeutics took occupation of the second floor of Rolling
Stock Yard in March 2023.
Other life science occupiers that signed leases in the six
months ended 30 June 2023 include:
-- Rakon , a leading global precision timing designer and
manufacturer, headquartered in New Zealand, which has been a major
player in enabling positioning for agritech for over a decade.
Rakon leased space in Building 2020 at Cambourne in April 2023,
giving it access to the world's leading engineers and bringing it
closer to its customers.
-- Arcturis Data , which uses their high-quality, real world
data platform to provide statistical analysis and advanced insights
to support the discovery and development of new medicines.
-- Oxford Ionics , which is a high-performance quantum computing
company. Quantum computing has the potential to revolutionise life
sciences, for example accelerating drug discovery by simulating the
performance of new drugs on computers. Oxford Ionics became a new
occupier in Building 1 at OTP in January 2023 and will be actively
targeting life science sector customers.
The table below shows the Group's top ten occupiers at the
period end.
Contracted
rent p.a.
Occupier Asset(1) (GBPm) % of total
------------------------------- --------- ---------- ----------
1. Thought Machine(2) HS 4.0 28.3%
2. Gyroscope Therapeutics RSY 1.5 10.8%
3. Carl Zeiss CP 1.0 6.7%
4. Beacon Therapeutics RSY 0.8 5.7%
5. Xero RSY 0.7 5.0%
6. Regus CP 0.7 4.8%
7. MTK Wireless CP 0.7 4.8%
8. Premier Inn OTP 0.7 4.7%
9. The Native Antigen Company OTP 0.5 3.8%
10. Pacific Biosciences RSY 0.5 3.3%
------------------------------- --------- ---------- ----------
Subtotal - top ten 11.1 77.9%
------------------------------- --------- ---------- ----------
Remaining 3.1 22.1%
------------------------------- --------- ---------- ----------
Total 14.2 100.0%
------------------------------- --------- ---------- ----------
1. HS - Herbrand Street; RSY - Rolling Stock Yard; CP -
Cambourne Park Science & Technology Campus; OTP - Oxford
Technology Park; LH - Lumen House.
2. The Group's investment policy targets a portfolio with no one
occupier accounting for more than 20% (but subject to a maximum of
30%) of the higher of either (i) gross contracted rents or (ii) the
valuer's ERV of the Group's portfolio including developments under
forward-funding agreements, as calculated at the time of investing
or leasing. As we build out and lease up OTP, the rent roll will
continue to diversify and reduce the proportion of total rents
coming from individual occupiers.
Implementing the asset management strategy
The portfolio presents a range of different opportunities to
grow capital values and income, while positioning the assets to
meet occupier needs and enhancing their ESG credentials.
Cambourne Park Science & Technology Campus ("Cambourne")
Cambourne, located just seven miles from Cambridge University,
was acquired in 2021 with the intention of transitioning this
business park to a dedicated life science and technology hub. We
made significant progress on this during the period with the
rebranding of the park to better appeal to these sectors.
The branding was developed following engagement with existing
and potential occupiers, local residents and other stakeholders, to
determine how best to reposition the asset and has been well
received.
Plans are currently being worked up to repurpose 10,000 sq ft of
vacant office space in Building 2020 into four suites of fully
fitted plug-and-play laboratories, following a successful
conversion of space at Rolling Stock Yard. The suites will each be
approximately 2,000 sq ft and will be suitable for early-stage life
science companies. Equally, they can be combined to accommodate a
larger occupier.
In April 2023, the Group achieved its first life science letting
at Cambourne, with Rakon taking 4,877 sq ft in Building 2020. The
lease is at a rent of GBP25.0 per sq ft for ten years, with a break
clause and rent review at the end of the fifth year. Rakon is
fitting out the space to create dry labs. As a result, occupancy at
Cambourne was up 1.9% to 82.0% at the period end (31 December 2022:
80.1%).
Our longer-term aim is to deliver a highly sustainable campus,
building on the existing renewable power provision (PV panels) and
targeting a minimum of BREEAM Very Good for refurbishments. As part
of the masterplan, we are also evaluating opportunities for a range
of amenities benefiting occupiers and the local community. This
includes a high-quality café, flexible workspace, publicly
accessible green spaces and organised events. We are also looking
to improve the park's transport connectivity with shuttle buses to
central Cambridge and the local railway station.
Rolling Stock Yard
Well located in London's Knowledge Quarter, Rolling Stock Yard
is our first office-to-laboratory conversion with the refit of the
first and second floors completed in the period. The building now
offers a combination of office and plug-and-play laboratory space,
as well as a newly designed reception area, creating an attractive
and convenient place for occupiers to meet and collaborate.
Sustainability was integral to the design, for example by
incorporating LED lighting throughout and ensuring we repurposed or
reused existing furniture and sourced new furniture sustainably.
The capital cost for the lab refit was around GBP2.0 million or
GBP158.7 per sq ft.
This project has proved highly successful. The 7,322 sq ft
second floor has been leased to Beacon Therapeutics, a
Syncona-backed company, at GBP110.0 per sq ft, compared to GBP65.0
per sq ft before the refit. The lease is for five years with an
occupier's break at year three. We have also had interest from
potential occupiers for the first floor at the period end. The
upgraded reception area is proving popular and we are receiving
requests from occupiers to use it for after -- work events.
Occupancy at the period end was 86.4% (31 December 2022:
66.7%).
Lumen House
The occupier's lease at Lumen House expired at the end of May
2023. The occupier is currently holding over and intends to vacate
the building, which we expect to happen towards the end of the
year.
The building is located on Oxford's Harwell Campus, a highly
attractive location for life sciences occupiers. Working with
CBRE's Life Science team, we are currently reviewing options for
this asset, which include a range of possible opportunities, from
repurposing the existing 17,600 sq ft building to life science use,
through to a full redevelopment and construction of a
state-of-the-art life science facility.
Oxford Technology Park
At OTP we are delivering 499,200 sq ft in a key location in
Oxford next to Begbroke Science Park, providing traditional office,
laboratory and hybrid space. We have also developed smaller, more
flexible units in our IQ which will accommodate fast-growing life
science occupiers.
We have continued to make progress at OTP, with over 10,000 sq
ft of lettings in the period and a further 11,040 sq ft post period
end.
During the period, we agreed two leases to life science
occupiers in Building 1 at OTP:
-- in January 2023, Oxford Ionics leased 4,887 sq ft for two
years at GBP28.5 per sq ft, with a break clause at the end of the
first year. This provides Oxford Ionics with initial accommodation
at OTP, while it prepares to occupy larger long-term space in
Building 6 (see below); and
-- in February 2023, Arcturis Data leased 5,509 sq ft of office
space at GBP28.7 per sq ft for ten years, with a break clause and
rent review at the end of the fifth year.
The new leases resulted in occupancy of the completed buildings
at OTP increasing from 72.5% at 31 December 2022 to 86.1% at 30
June 2023.
Buildings 4A and 4B were nearly complete at the end of the
period and both reached practical completion in August 2023.
Together, these buildings make up an 11-unit IQ, providing smaller,
more flexible space targeting life science SMEs. At 30 June 2023,
we had a number of lettings for units in these buildings in
solicitors' hands. We are also planning to convert unit 7 in
Building 4B to a plug-and-play laboratory as a proof of concept for
this type of space at OTP, which we expect will achieve a rental
uplift from around GBP25.0 per sq ft to GBP50.0-60.0 per sq ft. Our
occupier surveys have demonstrated that amenity space is important,
therefore we are also currently exploring options to convert unit 6
at the IQ into a café and co-working space.
As previously announced, in 2022 we agreed a pre-let on 56,500
sq ft in Building 5 to Williams Advanced Engineering. The building
was substantially complete at 30 June 2023 and is due to reach
practical completion in the second half of the year. The lease will
be granted upon practical completion, with the initial rent of
GBP18.8 per sq ft rising to GBP20.3 per sq ft after 18 months.
Building 7 and Building 6 are also expected to complete in the
second half of 2023.
During the period, we also received detailed planning consent
for the remaining phase of OTP in Buildings 8 to 11, which together
will comprise 179,000 sq ft of hybrid space, fitted to shell on the
ground floor and offices on the first floor. Construction on
Buildings 8 and 9 began in June 2023. Post period end, we are
looking to revise the consent we have on Buildings 10 and 11 to
deliver more affordable, flexible space following the success of
the IQ.
Following the above completions since the period end, 267,600 sq
ft is now classified as investment property with 231,600 sq ft
still being developed. This equates to 53.6% of the development now
being practically complete.
The buildings at OTP have strong sustainability credentials,
including EPC A on Buildings 1 and 2, and all existing life science
buildings and developments are tracking a BREEAM Excellent rating.
The Premier Inn hotel is BREEAM Very Good. We are conducting a
feasibility study on the remaining developments to look at options
for retrofitting photovoltaic ("PV") panels across the park.
Sustainability
Environmental
Our net zero carbon pathway is a key environmental goal. To
progress this, we are focusing on improving the quality of our
energy consumption data to provide a firm baseline for setting
carbon emission reduction targets at the end of the year. We have
already begun engaging with occupiers to share their data. To
support this approach, our template lease for all new lettings
incorporates green lease clauses, which stipulate the sharing of
energy data.
We have rolled out Sustainability Standards for developments,
refurbishments and acquisitions, setting our minimum standards in
areas including building certifications, energy and carbon,
building materials and waste, biodiversity and construction
methodology. These standards are being used to support the
repurposing of space in Building 2020 at Cambourne. New
developments will also target an EPC A rating and a minimum of
BREEAM Excellent and we will maximise on-site renewables through PV
panels and prioritise the use of recycled and locally sourced
materials.
Since the year end, the percentage of assets with an EPC rating
of A to C by area has increased from 83.4% to 97.4% following a
reassessment of 7-11 Herbrand Street ("Herbrand").
Social value
Engaging with our occupiers provides valuable insights, helping
us to continue delivering space which meets their needs. To do
this, we are holding a series of ESG meetings with key occupiers
and have provided a number of them with surveys to send to their
own staff to obtain more granular feedback.
The importance of sustainable travel has emerged from our
occupier engagement and to deliver on this we are targeting EV
charging points of 20.0% of spaces for refurbishments and 50.0% for
new builds going forward. Our plans include a shuttle bus to key
local locations, and the promotion of active travel via cycle
shelters and cycle routes which connect to the local cycle
network.
As part of our commitment to occupier wellbeing, our newly
developed Sustainability Standards include the use of the healthy
building criteria such as Fitwel for any refurbishments and
developments.
Governance
The Company established a Sustainability Committee at the start
of 2023, chaired by the Board's sustainability lead, Dr Sally Ann
Forsyth, with all Board Directors being members of the Committee.
The Committee's remit is to oversee and review the implementation
and effectiveness of the Sustainability Strategy. It met twice in
the period and approved the Group's Sustainability Strategy and
Policy and the Committee's terms of reference. The Committee
produces an ESG report that is submitted to the Board and has
prepared key policies for release on the website in due course. To
support the delivery of our Sustainability Strategy, all employees
at Ironstone Asset Management Limited ("Ironstone") have a minimum
of one sustainability objective, which will be assessed as part of
the annual appraisal process.
Financial review
Financial performance
The financial results for the Group are summarised below:
Six months Six months Year ended
ended 30 ended 30 31 December
June June
2023 2022 2022
GBPm GBPm GBPm
Gross property income 7.6 5.6 13.1
Property operating expenses (1.0) (1.5) (2.2)
---------------------------------------- ------------ ---------- -----------
Net rental income 6.6 4.1 10.9
Adjusted administration costs (2.4) (2.6) (5.6)
---------------------------------------- ------------ ---------- -----------
Adjusted operating profit 4.2 1.5 5.3
Adjusted net finance costs (0.9) (0.8) (2.7)
Tax (0.1) - (0.1)
---------------------------------------- ------------ ---------- -----------
Adjusted earnings 3.2 0.7 2.5
---------------------------------------- ------------ ---------- -----------
Exceptional finance costs (1.4) - -
Exceptional administration costs - 0.4 (1.0)
Fair value gains on derivatives and
deferred premium 0.5 0.4 2.2
Fair value gains/(losses) on investment
properties 3.0 5.8 (31.3)
---------------------------------------- ------------ ---------- -----------
IFRS profit/(loss) after tax 5.3 6.9 (27.6)
---------------------------------------- ------------ ---------- -----------
Total gross property income in the year was 35.7% higher at
GBP7.6 million (six months ended 30 June 2022: GBP5.6 million),
with the growth reflecting a full period of ownership of OTP and
7-11 Herbrand Street, both of which the Group acquired in May 2022,
as well as the benefits of our leasing activity.
Property operating expenses, reflecting primarily void costs on
vacant units and a small provision in the period for doubtful
debts, were GBP1.0 million (six months ended 30 June 2022: GBP1.5
million), resulting in net rental income of GBP6.6 million (six
months ended 30 June 2022: GBP4.1 million).
Administration costs comprise the Investment Adviser's fee of
GBP1.7 million (six months ended 30 June 2022: GBP1.9 million), and
other professional fees of GBP0.7 million (six months ended 30 June
2022: GBP0.7 million) including audit and valuation, the Directors'
fees, and a range of other corporate costs.
The above results in a total cost ratio (including direct
vacancy costs) for the period of 44.3% (six months ended 30 June
2022: 73.6%). The improvement reflects the Group's income growth
and reduction of costs in the period and we expect the ratio to
further reduce as we continue to complete and lease up the
buildings at OTP and realise the reversionary potential elsewhere
in the portfolio, by repurposing assets to laboratory space.
Adjusted net finance costs for the period were GBP0.9 million
(six months to 30 June 2022: GBP0.8 million) comprising loan
interest, expenses and arrangement fees of GBP4.4 million, offset
by capitalised finance costs of GBP1.8 million, and adjusted
finance income of GBP1.7 million.
As a REIT, the Group is not subject to corporation tax on its
property rental business, however it is estimated to incur tax on
its residual business of GBP0.1 million (six months ended 30 June
2022: GBPnil). Following this tax charge, adjusted earnings of
GBP3.2 million (six months ended 30 June 2022: GBP0.7 million) were
reflected in the period.
Exceptional finance costs include one-off costs of GBP1.4
million (six months ended 30 June 2022: GBPnil) with GBP0.7 million
relating to the write-off of unamortised arrangement fees on the
Group's debt facility, which was refinanced in June 2023 (see
below) and an early repayment fee of GBP0.7 million on the
Fairfield facility, which was repaid in February 2023 in advance of
the expiry date.
Fair value gains on derivatives and deferred premium in the
period of GBP0.5 million (six months ended 30 June 2022: GBP0.4
million) relate to the existing interest rate caps that were in
place at the start of the period and the new cap that was entered
into following the refinancing in June 2023. The prior period gain
of GBP0.4 million relates to an interest rate cap acquired with OTP
which expired in June 2023.
The fair value gain on investment properties was GBP3.0 million
(six months ended 30 June 2022: GBP5.8 million). See the valuation
and net asset value section in this report for more
information.
IFRS profit after tax for the period was therefore GBP5.3
million (six months ended 30 June 2022: GBP6.9 million). This
resulted in IFRS earnings per share of 1.5 pence (six months ended
30 June 2022: 2.0 pence) and EPRA EPS of 0.7 pence (six months
ended 30 June 2022: 0.2 pence). Adjusted EPS, which is EPRA EPS
excluding the impact of certain one-off costs, was 0.9 pence (six
months ended 30 June 2022: 0.2 pence).
Dividends
In May 2023, the Company paid the second interim dividend of 3.0
pence per share, in respect of the year to 31 December 2022.
Since the period end, the Board has declared a first interim
dividend of 1.0 pence per share in respect of the period (six
months ended 30 June 2022: 1.0 pence). This will be paid entirely
as an ordinary dividend. The payment date is 31 October 2023, with
an ex-dividend date of 28 September 2023.
The cash cost of this first interim dividend is GBP3.5 million.
At 30 June 2023, the Group had distributable reserves of GBP328.3
million (31 December 2022: GBP337.1 million), the majority being in
the Company.
Valuation and net asset value
The portfolio was independently valued by CBRE as at 30 June
2023, in accordance with the internationally accepted RICS
Valuation - Professional Standards (the "Red Book").
The portfolio valuation increased by GBP15.3 million to GBP402.9
million (31 December 2022: GBP387.6 million) in the period. The
increase was primarily driven by ongoing development and
repurposing capital expenditure of GBP10.5 million, finance costs
capitalised of GBP1.8 million, and a revaluation gain of GBP3.0
million, resulting in a 0.8% increase on a book value basis. GBP7.1
million of this gain is attributable to the development at OTP as
it continues to progress, offset by a GBP4.1 million revaluation
loss on the investment portfolio following a 1.0% like-for-like ERV
growth and small outward yield shift of 9 basis points as the
market began to stabilise (a 1.3% reduction on a like -- for --
like basis).
As a result of the dividend paid in the period offset by the
revaluation gain and positive adjusted earnings, the EPRA NTA per
share ("NTAPS") at 30 June 2023 was down 2.6 pence to 87.4 pence
(31 December 2022: 90.0 pence).
The IFRS NAV per share at 30 June 2023 was 89.8 pence (31
December 2022: 91.3 pence), with the key contributors to the
movement being in line with those noted above for the EPRA
NTAPS.
Debt financing
During the period, the Group undertook two debt refinancings. In
February 2023, the Group refinanced the GBP36.5 million Fairfield
debt facility acquired with OTP, by utilising GBP26.3 million of
the Group's HSBC facility and existing cash resources. This will
reduce the Group's cost of debt, reflecting the higher interest
rate on the Fairfield facility, and has enabled OTP to be used as
security for other debt financing.
In June 2023, the Group refinanced the GBP150.0 million HSBC
term loan and RCF, with Bank of Ireland joining HSBC in providing
the new facility. This includes a GBP100.0 million term loan,
increased from GBP75.0 million, and a GBP50.0 million RCF, both of
which have had their terms extended to March 2026, with two
one-year extension options. The Group also has a GBP35.0 million
accordion facility option available on the RCF. The facilities are
secured on all of the Group's assets, including OTP.
The new facility carries a cost of SONIA plus a 2.50% margin.
The SONIA reference rate has been capped at 2.00% per annum until
March 2025, for a premium of GBP3.6 million predicated on a
forecast debt draw down schedule, resulting in 100% SONIA hedging
at the period end. The facility also includes a ratchet clause that
reduces the margin to 2.35% if the gross LTV is 30% or lower, based
on the lenders' annual valuation of the portfolio.
The Group has also defined GBP40.0 million of the term loan as a
Green Loan in accordance with the LMA Green Loan Principles. This
is secured on Rolling Stock Yard and completed OTP buildings, which
are rated either BREEAM Excellent or EPC A.
At 30 June 2023, the term loan was fully drawn and the Group had
drawn GBP1.3 million against the RCF. The Group also had cash and
cash equivalents of GBP19.3 million (31 December 2022: GBP45.6
million). The LTV was therefore 20.3% at the period end (31
December 2022: 16.8%). On a gross basis this has reduced to 25.1%
(31 December 2022: 28.6%) since the year end, following the use of
existing cash resources to partly repay the Fairfield facility. We
continue to believe that a range of 30.0-40.0% is optimal in the
longer term.
The Group had GBP48.7 million available within the RCF at the
period end, resulting in total liquidity of GBP68.0 million to fund
the ongoing development at OTP, which had GBP51.0 million costs to
complete as at 30 June 2023. The RCF will be drawn on a quarterly
basis to meet development funding requirements and minimise
interest costs throughout the remaining development period.
Principal risks and uncertainties
The Group's principal risks are presented on pages 65 to 69 of
the 2022 Annual Report and are summarised below. The Board has
regularly reviewed existing and emerging risks during the period,
including detailed consideration of the principal risks, which are
those most material to the Group. The Board considers that there
has been no material change to the Group's principal risks during
the period.
Business risks
-- Poor returns on the portfolio
-- Inability to identify or secure assets or sites for acquisition
-- Poor performance of the Investment Adviser or other significant third-party provider
-- Inappropriate acquisition or breach of investment strategy
Financial risks
-- Interest rate changes
-- Inability to attract investment, either equity or debt funding
-- Breach of loan covenants or prospectus borrowing policy
Compliance risks
-- Loss of REIT status
Climate-related risks
-- Impact of climate change
Going concern
In preparing the financial statements, we and the Board are
required to assess whether the Group remains a going concern.
During the period to 30 June 2023, the Group recognised gross
property income of GBP7.6 million and adjusted earnings of GBP3.2
million. Gross property income would need to fall by approximately
42.1% before the Group became loss -- making. This is considered
unlikely given that rent collections in respect of the period to 29
September 2023 are 99.0%, the let portfolio currently reflects a
reversionary percentage of 9.0%, and there is strong occupier
demand for existing and new space being built.
The Group currently has a strong balance sheet with significant
LTV headroom on the new debt facility of 40.0% and substantial
liquidity of GBP68.0 million, including cash at the period end of
GBP19.3 million. Taking the above into consideration, we and the
Board have a reasonable expectation that the Group has adequate
resources to complete its capital obligations over the next 12
months (including uncommitted expenditure) and continue in business
for a period of at least 12 months from the date of this Interim
Report. Therefore, it has been concluded that the Group remains a
going concern.
Post period end events
Since the period end:
-- 69,700 sq ft have reached practical completion at OTP;
-- new letting to Oxford Gene Technology (Operations) Limited at
OTP, taking 11,040 sq ft in the IQ for GBP19.9 per sq ft; and
-- the Board has declared a first interim dividend of 1.0 pence
per share in respect of 2023 (six months ended 30 June 2022: 1.0
pence). This will be paid entirely as an ordinary dividend. The
payment date is 31 October 2023, with an ex-dividend date of 28
September 2023.
Alternative Investment Fund Manager ("AIFM")
G10 Capital Limited ("G10") is the Company's AIFM for the
purposes of the UK AIFM Regime, with Ironstone providing investment
advisory services to both G10 and the Company.
Investment Adviser
Ironstone Asset Management Limited is the Investment Adviser to
the Company and the AIFM.
Ironstone Asset Management Limited
Investment Adviser
20 September 2023
DIRECTORS' RESPONSIBILITIES STATEMENT
The Directors confirm to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting and gives a
true and fair view of the assets, liabilities, financial position,
and profit of the Group, as required by DTR 4.2.4R;
-- the Interim Report includes a fair review of the information
required by DTR 4.2.7R (indication of the important events during
the first six months and description of principal risks and
uncertainties for the remaining six months of the financial year);
and
-- the Interim Report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related party transactions
and changes therein).
The Directors of Life Science REIT plc are listed on the Company
website www.lifesciencereit.co.uk
By order of the Board
Claire Boyle
Director
20 September 2023
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHSED 30 JUNE 2023
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Continuing operations Notes GBP'000 GBP'000 GBP'000
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Gross property income 3 7,605 5,552 13,124
Service charge income 3 2,252 710 2,582
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Revenue 9,857 6,262 15,706
Recoverable service charges 4 (2,252) (710) (2,582)
Property operating expenses 4 (950) (1,508) (2,187)
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Gross profit 6,655 4,044 10,937
Administration expenses 4 (2,455) (2,602) (6,565)
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Operating profit before gains on investment properties 4,200 1,442 4,372
Fair value gains/(losses) on investment properties 11 3,041 5,763 (31,312)
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Operating profit/(loss) 7,241 7,205 (26,940)
Finance income 5 2,248 714 3,255
Finance expense 6 (4,071) (1,022) (3,782)
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Profit/(loss) before tax 5,418 6,897 (27,467)
Taxation 7 (99) - (146)
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Profit/(loss) after tax for the period and total comprehensive income
attributable to equity
holders 5,319 6,897 (27,613)
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Profit per share (basic and diluted) (pence) 10 1.5 2.0 (7.9)
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
All items in the above statement derive from continuing
operations. No operations were discontinued during the period.
There is no other comprehensive income and as such a separate
statement is not present. The profit after tax is therefore also
the total comprehensive profit.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
AS AT 30 JUNE 2023
30 June 31 December
2023 2022
Notes GBP'000 GBP'000
------------------------------------------------------ ----- --------- -----------
Assets
Non-current assets
Investment property 11 402,900 387,550
Interest rate derivatives 14 8,231 3,871
Trade and other receivables 12 3,478 2,701
------------------------------------------------------ ----- --------- -----------
414,609 394,122
------------------------------------------------------ ----- --------- -----------
Current assets
Trade and other receivables 12 4,334 7,665
Cash and cash equivalents 13 19,348 45,606
Interest rate derivatives 14 -- 432
------------------------------------------------------ ----- --------- -----------
23,682 53,703
------------------------------------------------------ ----- --------- -----------
Total assets 438,291 447,825
------------------------------------------------------ ----- --------- -----------
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 15 (100,284) (74,088)
Other payables and accrued expenses 16 (6,230) (3,844)
------------------------------------------------------ ----- --------- -----------
(106,514) (77,932)
------------------------------------------------------ ----- --------- -----------
Current liabilities
Interest-bearing loans and borrowings 15 - (35,743)
Other payables and accrued expenses 16 (17,507) (14,699)
------------------------------------------------------ ----- --------- -----------
(17,507) (50,442)
------------------------------------------------------ ----- --------- -----------
Total liabilities (124,021) (128,374)
------------------------------------------------------ ----- --------- -----------
Net assets 314,270 319,451
------------------------------------------------------ ----- --------- -----------
Equity
Share capital 17 3,500 3,500
Share premium 18 - -
Capital reduction reserve 325,323 335,823
Retained loss (14,553) (19,872)
------------------------------------------------------ ----- --------- -----------
Total equity 314,270 319,451
------------------------------------------------------ ----- --------- -----------
Number of shares in issue (thousands) 350,000 350,000
------------------------------------------------------ ----- --------- -----------
Net asset value per share (basic and diluted) (pence) 19 89.8 91.3
------------------------------------------------------ ----- --------- -----------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
FOR THE SIX MONTHSED 30 JUNE 2023
Capital
Share Share reduction Retained
capital premium reserve loss Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- ----- ------- ------- --------- -------- --------
Balance at 1 January 2023 3,500 - 335,823 (19,872) 319,451
Profit for the period and total comprehensive profit - - - 5,319 5,319
Dividends paid 9 - - (10,500) - (10,500)
----------------------------------------------------- ----- ------- ------- --------- -------- --------
Balance at 30 June 2023 3,500 - 325,323 (14,553) 314,270
----------------------------------------------------- ----- ------- ------- --------- -------- --------
Capital
Share Share reduction Retained
capital premium reserve earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ----- ------- --------- --------- -------- -------
Balance at 1 January 2022 3,500 339,339 - 7,741 350,580
Profit for the period
and total comprehensive profit - - - 6,897 6,897
Share issue costs 18 - (16) - - (16)
Cancellation of share premium 18 - (339,323) 339,323 - -
------------------------------- ----- ------- --------- --------- -------- -------
Balance at 30 June 2022 3,500 - 339,323 14,638 357,461
------------------------------- ----- ------- --------- --------- -------- -------
Capital
Share Share reduction Retained
capital premium reserve loss Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------- ------- --------- -------- --------
Balance at 1 July 2022 3,500 - 339,323 14,638 357,461
Loss for the period
and total comprehensive loss - - - (34,510) (34,510)
Dividends paid - - (3,500) - (3,500)
----------------------------- ------- ------- --------- -------- --------
Balance at 31 December 2022 3,500 - 335,823 (19,872) 319,451
----------------------------- ------- ------- --------- -------- --------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHSED 30 JUNE 2023
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Notes GBP'000 GBP'000 GBP'000
------------------------------------------------------------------ ----- ---------- ---------- -----------
Cash flows from operating activities
Operating profit/(loss) 7,241 7,205 (26,940)
Adjustments to reconcile profit for the period to net cash flows:
Changes in fair value of investment properties 11 (3,041) (5,763) 31,312
Adjustment for non-cash items - (675) -
------------------------------------------------------------------ ----- ---------- ---------- -----------
Operating cash flows before movements in working capital 4,200 767 4,372
Decrease/(increase) in other receivables and prepayments 1,028 (7,317) (8,144)
(Decrease)/increase in other payables and accrued expenses (802) 2,637 2,684
------------------------------------------------------------------ ----- ---------- ---------- -----------
Net cash flow generated from/(used in) operating activities 4,426 (3,913) (1,088)
------------------------------------------------------------------ ----- ---------- ---------- -----------
Cash flows from investing activities
Acquisition of investment properties 1,807 (165,101) (179,414)
Capital expenditure (8,803) (20) (7,641)
Interest received 1,680 226 677
------------------------------------------------------------------ ----- ---------- ---------- -----------
Net cash used in investing activities (5,316) (164,895) (186,378)
------------------------------------------------------------------ ----- ---------- ---------- -----------
Cash flows from financing activities
Share issuance costs paid - (1,124) (1,118)
Bank loans drawn down 15 127,520 64,080 101,260
Bank loans repaid 15 (137,770) - (26,260)
Loan interest and other finance expenses paid (2,810) (1,380) (2,069)
Loan issue costs paid (1,808) - (1,203)
Dividends paid in the period (10,500) - (3,500)
------------------------------------------------------------------ ----- ---------- ---------- -----------
Net cash flow (used in)/generated from financing activities (25,368) 61,576 67,110
------------------------------------------------------------------ ----- ---------- ---------- -----------
Net decrease in cash and cash equivalents (26,258) (107,232) (120,356)
Cash and cash equivalents at start of the period 45,606 165,962 165,962
------------------------------------------------------------------ ----- ---------- ---------- -----------
Cash and cash equivalents at end of the period 13 19,348 58,730 45,606
------------------------------------------------------------------ ----- ---------- ---------- -----------
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE SIX MONTHSED 30 JUNE 2023
1. General information
Life Science REIT plc (the "Company") is a closed-ended Real
Estate Investment Trust ("REIT") incorporated in England and Wales
on 27 July 2021. The Company began trading on 19 November 2021 when
the Company's shares were admitted to trading on AIM, a market
operated by the London Stock Exchange. On 1 December 2022, the
Company moved to the Main Market of the London Stock Exchange. The
registered office of the Company is located at 65 Gresham Street,
London EC2V 7NQ.
The Group's interim condensed consolidated unaudited financial
statements for the six months ended 30 June 2023 comprise the
results of the Company and its subsidiaries (together constituting
the "Group") and were approved by the Board and authorised for
issue on 20 September 2023.
2. Basis of preparation
These interim condensed consolidated unaudited financial
statements have been prepared in accordance with IAS 34 Interim
Financial Reporting and United Kingdom adopted international
accounting standards and International Financial Reporting
Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB").
These interim condensed consolidated unaudited financial
statements should be read in conjunction with the Company's last
financial statements for the year ended 31 December 2022. These
interim condensed consolidated unaudited financial statements do
not include all of the information required for a complete set of
annual financial statements prepared in accordance with IFRS;
however, they have been prepared using the accounting policies
adopted in the audited financial statements for the year ended 31
December 2022 and selected explanatory notes have been included to
explain events and transactions that are significant in
understanding changes in the Company's financial position and
performance since the last financial statements.
The financial statements have been prepared under the historical
cost convention, except for the revaluation of investment
properties and financial instruments that are measured at revalued
amounts or fair values at the end of each reporting period, as
explained in the accounting policies below. Historical cost is
generally based on the fair value of the consideration given in
exchange for goods and services.
IAS 34 requires that comparative figures are presented for the
comparable interim period in the preceding year, therefore the
six-month period ended 30 June 2022 has been presented.
The financial information contained within these interim results
does not constitute full statutory accounts as defined in section
434 of the Companies Act 2006.
The financial statements for the six months ended 30 June 2023
and for the six-month period ended 30 June 2022 have been neither
audited nor reviewed by the Company's Auditor. The information for
the year ended 31 December 2022 has been extracted from the latest
published Annual Report and Financial Statements, which has been
filed with the Registrar of Companies. The Auditor reported on
those accounts; its report was unqualified and did not contain a
statement under sections 498(2) or (3) of the Companies Act
2006.
The Directors have made an assessment of the Group's ability to
continue as a going concern. The Directors are satisfied that the
Group has the resources to continue in business for the foreseeable
future, for a period of not less than 12 months from the date of
this report. Furthermore, the Directors are not aware of any
material uncertainties that may cast significant doubt upon the
Group's ability to continue as a going concern. Therefore, the
financial statements have been prepared on the going concern
basis.
2.1 New standards and interpretations effective in the current
period
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the period ended 31 December
2022, except for the adoption of new standards effective as of 1
January 2023. The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet
effective.
2.2 New and revised accounting standards not yet effective
There are a number of new standards and amendments to existing
standards which have been published and are mandatory for the
Group's accounting periods beginning on or after 1 January 2023 or
later. The Group is not adopting these standards early. The
following are the most relevant to the Group:
-- amendments to IAS 1 Presentation of Financial Statements; and
-- amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
2.3 Significant accounting judgements and estimates
The preparation of these financial statements in accordance with
IFRS requires the Directors of the Company to make judgements,
estimates and assumptions that affect the reported amounts
recognised in the financial statements. However, uncertainty about
these assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of the asset
or liability in the future.
Judgements
In the course of preparing the financial statements, the
Directors have made the following judgements in the process of
applying the Group's accounting policies which have had a
significant effect on the amounts recognised in the financial
statements.
Business combinations
The Group acquires subsidiaries that own investment properties.
At the time of acquisition, the Group considers whether each
acquisition represents the acquisition of a business or the
acquisition of an asset. Management considers the substance of the
assets and activities of the acquired entity in determining whether
the acquisition represents the acquisition of a business.
The Group accounts for an acquisition as a business combination
where an integrated set of activities is acquired in addition to
the property. Where such acquisitions are not judged to be the
acquisition of a business, they are not treated as business
combinations. Rather, the cost to acquire the corporate entity is
allocated between the identifiable assets and liabilities of the
entity based upon their relative fair values at the acquisition
date. Accordingly, no goodwill or additional deferred tax
arises.
All corporate acquisitions made during the period have been
treated as asset purchases rather than business combinations
because no integrated set of activities was acquired.
Estimates
In the process of applying the Group's accounting policies, the
Investment Adviser has made the following estimates which have the
most significant risk of material change to the carrying value of
assets recognised in the condensed consolidated financial
statements:
Valuation of property
The valuations of the Group's investment property are at fair
value as determined by the external valuer on the basis of market
value in accordance with the internationally accepted RICS
Valuation - Professional Standards January 2022 (incorporating the
International Valuation Standards) and in accordance with IFRS
13.
The key estimates made by the valuer are the ERV and equivalent
yields of each investment property.
On-site developments are valued by applying the 'residual
method' of valuation, which is the investment method described
above with a deduction for all costs necessary to complete the
development, with a further allowance for remaining risk and
developers' profit. Properties and land held for future development
are valued using the highest and best use method, by adopting the
residual method allowing for all associated risks, the investment
method, or a value per acre methodology.
See notes 11 and 20 for further details.
2.4 Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are stated in the notes to the financial
statements.
a) Basis of consolidation
The Company does not meet the definition of an investment entity
and therefore does not qualify for the consolidation exemption
under IFRS 10. The interim condensed consolidated unaudited
financial statements comprise the financial statements of the Group
and its subsidiaries as at 30 June 2023. Subsidiaries are
consolidated from the date of acquisition, being the date on which
the Group obtained control, and will continue to be consolidated
until the date that such control ceases. An investor controls an
investee when the investor is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee. In
preparing these financial statements, intra-group balances,
transactions and unrealised gains or losses have been eliminated in
full. Uniform accounting policies are adopted in the financial
statements for like transactions and events in similar
circumstances.
b) Functional and presentation currency
The overall objective of the Group is to generate returns in
Pound Sterling and the Group's performance is evaluated in Pound
Sterling. Therefore, the Directors consider Pound Sterling as the
currency that most faithfully represents the economic effects of
the underlying transactions, events and conditions and have
therefore adopted it as the functional and presentation
currency.
All values are rounded to the nearest thousand pounds (GBP'000),
except when otherwise stated.
c) Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being the investment and management of
premises relating to the life science sector.
d) Derivative financial instruments
Derivative financial instruments, comprising interest rate
derivatives for mitigating interest rate risks, are initially
recognised at fair value and are subsequently measured at fair
value, being the estimated amount that the Group would receive or
pay to terminate the agreement at the period end date, taking into
account current interest rate expectations and the current credit
rating of the Group and its counterparties. Premiums payable under
such arrangements are initially capitalised into the statement of
financial position.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs significant to the fair
value measurement as a whole. Changes in fair value of interest
rate derivatives are recognised within finance expenses in profit
or loss in the period in which they occur.
e) Exceptional costs
Items are classified as exceptional by virtue of their size,
nature or incidence, where their inclusion would otherwise distort
the underlying recurring earnings of the Group. Examples include,
but are not limited to, business transformation costs, early
redemption costs of financial instruments and tax charges specific
to disposals. Exceptional costs are excluded from the Group's
adjusted earnings.
3. Revenue
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
--------------------------------------- ---------- ---------- -----------
Rental income 6,831 4,793 11,007
Other income 522 - 722
Rental income straight-line adjustment 162 675 1,240
Insurance recharged 90 84 155
--------------------------------------- ---------- ---------- -----------
Gross property income 7,605 5,552 13,124
--------------------------------------- ---------- ---------- -----------
Service charge income 2,252 710 2,582
--------------------------------------- ---------- ---------- -----------
Total 9,857 6,262 15,706
--------------------------------------- ---------- ---------- -----------
4. Property operating and administration expenses
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
-------------------------------------------- ---------- ---------- -----------
Recoverable service charges 2,252 710 2,582
-------------------------------------------- ---------- ---------- -----------
Service charge void costs 383 370 571
Rates 247 599 526
Premises expenses 228 443 928
Insurance expense 92 96 162
-------------------------------------------- ---------- ---------- -----------
Property operating expenses 950 1,508 2,187
-------------------------------------------- ---------- ---------- -----------
Investment Adviser fees 1,732 1,908 3,787
Other administration expenses 542 530 1,458
Directors' remuneration 98 84 186
Audit fees 95 80 177
Costs associated with moving to Main Market (12) - 957
-------------------------------------------- ---------- ---------- -----------
Administration expenses 2,455 2,602 6,565
-------------------------------------------- ---------- ---------- -----------
Total 5,657 4,820 11,334
-------------------------------------------- ---------- ---------- -----------
5. Finance income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
---------------------------------------------------------------------------- ---------- ---------- -----------
Interest receivable from interest rate derivatives 1,272 - 329
Income from cash and short-term deposits 451 248 771
Change in fair value of interest rate derivatives 297 466 2,047
Change in fair value of deferred consideration on interest rate derivatives 228 - 108
---------------------------------------------------------------------------- ---------- ---------- -----------
Total 2,248 714 3,255
---------------------------------------------------------------------------- ---------- ---------- -----------
6. Finance expense
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
Loan interest 3,882 1,073 4,961
Break fees 751 - -
Loan arrangement fees written off 716 - -
Loan arrangement fees amortised 289 122 416
Loan expenses 183 60 201
---------------------------------- ---------- ---------- -----------
Gross interest costs 5,821 1,255 5,578
Capitalised finance costs (1,750) (233) (1,796)
---------------------------------- ---------- ---------- -----------
Total 4,071 1,022 3,782
---------------------------------- ---------- ---------- -----------
7. Taxation
Corporation tax has arisen as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
----------------------------------- ---------- ---------- -----------
Corporation tax on residual income 99 - 146
----------------------------------- ---------- ---------- -----------
Total 99 - 146
----------------------------------- ---------- ---------- -----------
Reconciliation of tax charge to profit/(loss) before tax:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
-------------------------------------------------------------------- ---------- ---------- -----------
Profit/(loss) before tax 5,418 6,897 (27,467)
Corporation tax at 22.0% (30 June 2022 and 31 December 2022: 19.0%) 1,192 1,310 (5,219)
Change in value of investment properties (669) (1,095) 5,949
Change in value of interest rate derivatives (115) - (389)
Adjustment for disallowable costs (3) - -
Tax-exempt property rental business (306) (215) (195)
-------------------------------------------------------------------- ---------- ---------- -----------
Total 99 - 146
-------------------------------------------------------------------- ---------- ---------- -----------
8. Operating leases
Operating lease commitments - as lessor
The Group has entered into commercial property leases on its
investment property portfolio. These non-cancellable leases have a
remaining term of up to 22 years (31 December 2022: 22 years).
Future minimum rentals receivable under non-cancellable
operating leases as at 30 June 2023 are as follows:
30 June 31 December
2023 2022
GBP'000 GBP'000
--------------------------- ------- -----------
Within one year 13,699 12,602
Between one and five years 42,981 41,784
More than five years 28,174 30,044
--------------------------- ------- -----------
Total 84,854 84,430
--------------------------- ------- -----------
9. Dividends
Pence
For the period ended 30 June 2023 per share GBP'000
--------------------------------------------------------------------------------- --------- -------
Second interim dividend for the year ended 31 December 2022, paid on 15 May 2023 3.0 10,500
--------------------------------------------------------------------------------- --------- -------
Total 3.0 10,500
--------------------------------------------------------------------------------- --------- -------
Paid as:
Property income distribution - -
Non-property income distribution 3.0 10,500
--------------------------------------------------------------------------------- --------- -------
Total 3.0 10,500
--------------------------------------------------------------------------------- --------- -------
The Company did not declare a dividend for the comparative
period to 30 June 2022 and, as such, no comparative information is
disclosed for this period.
Pence
For the six months ended 31 December 2022 per share GBP'000
------------------------------------------------------------------------------------ --------- -------
First interim dividend for the year ended 31 December 2022, paid on 31 October 2022 1.0 3,500
------------------------------------------------------------------------------------ --------- -------
Total 1.0 3,500
------------------------------------------------------------------------------------ --------- -------
Paid as:
Property income distribution - -
Non-property income distribution 1.0 3,500
------------------------------------------------------------------------------------ --------- -------
Total 1.0 3,500
------------------------------------------------------------------------------------ --------- -------
As a REIT, the Company is required to pay PIDs equal to at least
90% of the property rental business profits of the Group.
The Company declared a first interim dividend for the year
ending 31 December 2023 of 1.0 pence per share on 21 September 2023
and this will be paid entirely as an ordinary dividend. Payment
date is 31 October 2023 with an ex-dividend date of 28 September
2023.
10. Earnings per share
Basic EPS is calculated by dividing profit for the period
attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares during the period. As
there are no dilutive instruments in issue, basic and diluted EPS
are identical.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------------------- ---------- ---------- -----------
IFRS earnings 5,319 6,897 (27,613)
--------------------------------------------------------------------------------- ---------- ---------- -----------
EPRA earnings adjustments:
Fair value gains/(losses) on investment properties (3,041) (5,763) 31,312
Exceptional finance costs 716 - -
Changes in fair value of interest rate derivatives (297) (466) (2,047)
Changes in fair value of deferred consideration payable on interest rate
derivatives (228) - (108)
--------------------------------------------------------------------------------- ---------- ---------- -----------
EPRA earnings 2,469 668 1,544
--------------------------------------------------------------------------------- ---------- ---------- -----------
Group-specific earnings adjustments:
Exceptional finance costs less than one year 751 - -
Costs associated with moving to Main Market (12) - 957
--------------------------------------------------------------------------------- ---------- ---------- -----------
Adjusted earnings 3,208 668 2,501
--------------------------------------------------------------------------------- ---------- ---------- -----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
----------------- ---------- ---------- -----------
Basic IFRS EPS 1.5 2.0 (7.9)
----------------- ---------- ---------- -----------
Diluted IFRS EPS 1.5 2.0 (7.9)
----------------- ---------- ---------- -----------
EPRA EPS 0.7 0.2 0.4
----------------- ---------- ---------- -----------
Adjusted EPS 0.9 0.2 0.7
----------------- ---------- ---------- -----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Number Number Number
of shares of shares of shares
------------------------------------------------------- ---------- ---------- -----------
Weighted average number of shares in issue (thousands) 350,000 350,000 350,000
------------------------------------------------------- ---------- ---------- -----------
11. UK investment property
Completed Development Total
investment property investment
property and land property
GBP'000 GBP'000 GBP'000
------------------------------------------------------------------- ---------- ----------- ----------
Investment property valuation brought forward as at 1 January 2023 309,969 77,581 387,550
Acquisitions (56) 11 (45)
Capital expenditure 1,968 8,503 10,471
Finance costs capitalised - 1,750 1,750
Fair value gain/(loss) on investment property (4,138) 7,179 3,041
Movement in rent incentives 133 - 133
------------------------------------------------------------------- ---------- ----------- ----------
Fair value at 30 June 2023 307,876 95,024 402,900
------------------------------------------------------------------- ---------- ----------- ----------
Completed Development Total
investment property investment
property and land property
GBP'000 GBP'000 GBP'000
------------------------------------------------------------------- ---------- ----------- ----------
Investment property valuation brought forward as at 1 January 2022 192,170 - 192,170
Acquisitions 130,971 82,440 213,411
Capital expenditure 641 9,565 10,206
Finance costs capitalised - 1,796 1,796
Fair value loss on investment property (15,060) (16,252) (31,312)
Movement in rent incentives 1,247 32 1,279
------------------------------------------------------------------- ---------- ----------- ----------
Fair value at 31 December 2022 309,969 77,581 387,550
------------------------------------------------------------------- ---------- ----------- ----------
12. Trade and other receivables
30 June 31 December
2023 2022
GBP'000 GBP'000
---------------------------------------- ------- -----------
Prepayments and other receivables 1,900 3,531
Rent and insurance receivables 1,807 1,133
Interest receivable 373 331
Amounts due from property manager 254 2,200
Escrow account - 470
---------------------------------------- ------- -----------
Current trade and other receivables 4,334 7,665
---------------------------------------- ------- -----------
Tenant deposits 3,478 2,701
---------------------------------------- ------- -----------
Non-current trade and other receivables 3,478 2,701
---------------------------------------- ------- -----------
Total trade and other receivables 7,812 10,366
---------------------------------------- ------- -----------
13. Cash and cash equivalents
30 June 31 December
2023 2022
GBP'000 GBP'000
----------------- ------- -----------
Cash 9,348 10,606
Cash equivalents 10,000 35,000
----------------- ------- -----------
Total 19,348 45,606
----------------- ------- -----------
Cash equivalents includes GBP10.0 million (31 December 2022:
GBP35.0 million) of cash held by various banks on short-term
deposits.
14. Interest rate derivatives
30 June 31 December
2023 2022
GBP'000 GBP'000
--------------------------------------------------- ------- -----------
At the start of the period 4,303 -
Additional premiums paid and accrued 3,631 2,256
Changes in fair value of interest rate derivatives 297 2,047
--------------------------------------------------- ------- -----------
Balance at the end of the period 8,231 4,303
--------------------------------------------------- ------- -----------
Current - 432
Non-current 8,231 3,871
--------------------------------------------------- ------- -----------
Total 8,231 4,303
--------------------------------------------------- ------- -----------
To mitigate the interest rate risk that arises as a result of
entering into variable rate linked loans, the Group entered into
interest rate derivatives.
During the six months to 30 June 2023, the SONIA interest rate
cap that was acquired on 13 May 2022 as part of the acquisition of
Oxford Technology Park Holdings Limited and its two subsidiaries
expired. A number of forward starting interest rate caps have been
entered into as at 26 June 2023 for a total deferred premium of
GBP3.6 million to align with the expected debt draw down of the new
debt facility. This caps SONIA at 2.00% until March 2025 (aligned
with the existing cap that was entered into during 2022).
15. Interest-bearing loans and borrowings
30 June 31 December
2023 2022
Non-current GBP'000 GBP'000
---------------------------------------------------- --------- -----------
At the beginning of the period 75,000 -
Drawn in the period 127,520 101,260
Repaid in the period (101,260) (26,260)
---------------------------------------------------- --------- -----------
Interest-bearing loans and borrowings 101,260 75,000
Unamortised fees at the beginning of the period (912) -
Loan arrangement fees paid in the period (978) (1,203)
Unamortised fees written off 716 -
Amortisation charge for the period 198 291
---------------------------------------------------- --------- -----------
Unamortised loan arrangement fees (976) (912)
---------------------------------------------------- --------- -----------
Loan balance less unamortised loan arrangement fees 100,284 74,088
---------------------------------------------------- --------- -----------
30 June 31 December
2023 2022
Current GBP'000 GBP'000
At the beginning of the period 35,833 -
Acquired in the period - 33,582
Interest and commitment fees incurred in the period 677 2,251
Repaid in the period (36,510) -
---------------------------------------------------- -------- -----------
Interest-bearing loans and borrowings - 35,833
Unamortised fees at the beginning of the period (90) -
Loan arrangement fees paid in the period - (215)
Amortisation charge for the period 90 125
---------------------------------------------------- -------- -----------
Unamortised loan arrangement fees - (90)
---------------------------------------------------- -------- -----------
Loan balance less unamortised loan arrangement fees - 35,743
---------------------------------------------------- -------- -----------
In February 2023, the Fairfield debt facility that was due to
expire in June 2023 and carried a high interest rate was repaid
early by drawing GBP26.3 million from the existing HSBC debt
facility as well as utilising existing cash resources.
On 23 June 2023, the existing HSBC debt facility was refinanced
with HSBC and Bank of Ireland ("BOI") split 60% and 40%
respectively (the "new debt facility"). The new debt facility
comprises a GBP100.0 million term loan and GBP50.0 million
revolving credit facility ("RCF") with an expiry date of 31 March
2026. It has an interest rate in respect of drawn amounts of 250
basis points over SONIA and is secured on all of the assets of the
Group including Oxford Technology Park ("OTP"). The new debt
facility borrowers are Ironstone Life Science Holdings Limited and
Oxford Technology Park Holdings Limited, both direct subsidiaries
of the Company. The GBP100.0 million term loan was fully drawn on
the date the new facility was entered into and GBP1.3 million was
drawn on the RCF at 30 June 2023. The RCF will continue to be drawn
as the development at Oxford Technology Park progresses and at 30
June 2023 GBP48.7 million was available to draw. The Group also has
a GBP35.0 million accordion facility available on the RCF which has
not been utilised as at 30 June 2023.
The new debt facility includes LTV and interest cover covenants.
The Group is in full compliance with all loan covenants as at 30
June 2023. The facility also includes a ratchet clause that reduces
the margin to 2.35% if the gross LTV decreases to 30%, based on the
lenders' annual valuation of the portfolio.
The Group has also defined GBP40.0 million of the term loan as a
Green Loan in accordance with the LMA Green Loan Principles. This
is secured on Rolling Stock Yard and completed OTP buildings, which
are rated either BREEAM Excellent or EPC A.
16. Other liabilities - other payables and accrued expenses,
provisions and deferred income
30 June 31 December
2023 2022
GBP'000 GBP'000
------------------------------------------------ ------- -----------
Capital expenses payable 6,686 5,481
Deferred income 3,611 3,692
Deferred consideration on interest rate caps 2,554 820
Administration and other expenses payable 2,069 2,588
Loan interest payable 1,422 1,027
Property operating expenses payable 632 332
Loan expenses payable 513 -
VAT payable 20 759
------------------------------------------------ ------- -----------
Current other payables and accrued expenses 17,507 14,699
------------------------------------------------ ------- -----------
Capital expenses payable 310 -
Tenant deposits payable to tenant 3,478 2,701
Deferred consideration on interest rate caps 2,442 1,143
------------------------------------------------ ------- -----------
Non-current other payables and accrued expenses 6,230 3,844
------------------------------------------------ ------- -----------
Total other payables and accrued expenses 23,737 18,543
------------------------------------------------ ------- -----------
17. Share capital
Share capital is the nominal amount of the Company's ordinary
shares in issue.
30 June 31 December
2023 2022
Ordinary shares of GBP0.01 each Number GBP'000 Number GBP'000
----------------------------------- ----------- ------- ----------- -----------
Authorised, issued and fully paid:
Shares issued 350,000,000 3,500 350,000,000 3,500
----------------------------------- ----------- ------- ----------- -----------
Balance at the end of the period 350,000,000 3,500 350,000,000 3,500
----------------------------------- ----------- ------- ----------- -----------
The share capital comprises one class of ordinary shares. At
general meetings of the Company, ordinary shareholders are entitled
to one vote on a show of hands and on a poll, to one vote for every
share held. There are no restrictions on the size of a shareholding
or the transfer of shares, except for the UK REIT restrictions.
18. Share premium
Share premium comprises the following amounts:
30 June 31 December
2023 2022
GBP'000 GBP'000
-------------------------------------- -------- -----------
Opening balance - 1 January 2023 - 339,339
Shares issued - -
Share issue costs - (16)
Transfer to capital reduction reserve - (339,323)
-------------------------------------- -------- -----------
Share premium - -
-------------------------------------- -------- -----------
19. Net asset value per share
Basic NAV per share amounts are calculated by dividing net
assets attributable to ordinary equity holders of the Company in
the statement of financial position by the number of ordinary
shares outstanding at the end of the period. As there are no
dilutive instruments in issue, basic and diluted NAV per share are
identical.
30 June 31 December
2023 2022
GBP'000 GBP'000
------------------------------------------------------ ------- -----------
IFRS net assets attributable to ordinary shareholders 314,270 319,451
IFRS net assets for calculation of NAV 314,270 319,451
------------------------------------------------------ ------- -----------
Adjustment to net assets:
Fair value of interest rate derivatives (8,231) (4,303)
------------------------------------------------------ ------- -----------
EPRA NTA 306,039 315,148
------------------------------------------------------ ------- -----------
30 June 31 December
2023 2022
Pence Pence
------------------------------------- ------- -----------
IFRS basic and diluted NAV per share 89.8 91.3
EPRA NTA per share 87.4 90.0
------------------------------------- ------- -----------
30 June 31 December
2023 2022
Number Number
of shares of shares
-------------------------------------- --------- -----------
Number of shares in issue (thousands) 350,000 350,000
-------------------------------------- --------- -----------
20. Fair value
IFRS 13 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The following methods and assumptions were used to estimate the
fair values.
The fair value of cash and short-term deposits, trade
receivables, trade payables and other current liabilities
approximate their carrying amounts due to the short-term maturities
of these instruments.
Interest-bearing loans and borrowings are disclosed at amortised
cost. The carrying values of the loans and borrowings approximate
their fair value due to the contractual terms and conditions of the
loan. The new HSBC and BOI debt facility has an interest rate of
250 basis points over SONIA in respect of drawn amounts. The old
HSBC debt facility had an interest rate of 225 basis points over
SONIA in respect of drawn amounts. The Fairfield debt facility that
was repaid in February 2023 had an interest rate in respect of
drawn amounts of 712 basis points over SONIA.
The fair values of the interest rate contracts are recorded in
the statement of financial position and are determined by forming
an expectation that interest rates will exceed strike rates and
discounting these future cash flows at the prevailing market rates
as at the year end.
Six-monthly valuations of investment property are performed by
CBRE, accredited external valuers with recognised and relevant
professional qualifications and recent experience of the location
and category of the investment property being valued, on a fixed
fee basis. The valuations are the ultimate responsibility of the
Directors however, who appraise these every six months.
The valuation of the Group's investment property at fair value
is determined by the external valuer on the basis of market value
in accordance with the internationally accepted RICS Valuation -
Professional Standards January 2022 (incorporating the
International Valuation Standards).
Completed investment properties are valued by adopting the
'income capitalisation' method of valuation. This approach involves
applying capitalisation yields to current and future rental
streams, net of income voids arising from vacancies or rent-free
periods and associated running costs. These capitalisation yields
and future rental values are based on comparable property and
leasing transactions in the market using the valuer's professional
judgement and market observations. Other factors taken into account
in the valuations include the tenure of the property, tenancy
details and ground and structural conditions.
On-site developments are valued by applying the 'residual
method' of valuation, which is the investment method described
above with a deduction for all costs necessary to complete the
development, with a further allowance for remaining risk and
developers' profit. Properties and land held for future development
are valued using the highest and best use method, by adopting the
residual method allowing for all associated risks, the investment
method, or a value per acre methodology.
The following table shows an analysis of the fair values of
investment properties recognised in the statement of financial
position by level of the fair value hierarchy(1) :
30 June 2023
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- ------- ------- -------
Investment properties - - 402,900 402,900
Interest rate derivatives - 8,231 - 8,231
Deferred consideration on interest rate caps - (4,996) - (4,996)
---------------------------------------------- -------- ------- ------- -------
Total - 3,235 402,900 406,135
---------------------------------------------- -------- ------- ------- -------
31 December 2022
Level 1 Level 2 Level 3 Total
---------------------------------------------- ------- ------- ------- -------
Assets and liabilities measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
Investment properties - - 387,550 387,550
Interest rate derivatives - 4,303 - 4,303
Deferred consideration on interest rate caps - (1,963) - (1,963)
---------------------------------------------- ------- ------- ------- -------
Total - 2,340 387,550 389,890
---------------------------------------------- ------- ------- ------- -------
1. Explanation of the fair value hierarchy:
-- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
-- Level 2 - use of a model with inputs (other than quoted
prices included in Level 1) that are directly or indirectly
observable market data; and
-- Level 3 - use of a model with inputs that are not based on observable market data.
There have been no transfers between Level 1 and Level 2 during
either period, nor have there been any transfers in or out of Level
3.
Sensitivity analysis to significant changes in unobservable
inputs within the valuation of investment properties
The following table analyses:
-- the fair value measurements at the end of the reporting period;
-- a description of the valuation techniques applied;
-- the inputs used in the fair value measurement, including the
ranges of rent charged to different units within the same
-- building; and
-- for Level 3 fair value measurements, quantitative information
about significant unobservable inputs used in the fair value
measurement.
Key
Fair value Valuation unobservable
30 June 2023 GBP'000 technique inputs Range
----------------------------- ---------- ------------------------------------- ---------------- ------------------
Completed investment property GBP307,876 Income capitalisation ERV GBP18.9 - GBP110.0
per sq ft
Equivalent yield 4.25% - 7.25%
----------------------------- ---------- ------------------------------------- ---------------- ------------------
Development property GBP68,725 Income capitalisation/ residual ERV GBP16.0 - GBP65.0
method per sq ft
Equivalent yield 4.80% - 5.05%
----------------------------- ---------- ------------------------------------- ---------------- ------------------
Development land GBP26,299 Comparable method/ residual method Sales rate GBP146.7
per sq ft
Total GBP402,900
----------------------------- ---------- ------------------------------------- ---------------- ------------------
Key
Fair value Valuation unobservable
31 December 2022 GBP'000 technique inputs Range
----------------------------- ---------- ------------------------------------- ---------------- ------------------
Completed investment property GBP309,969 Income capitalisation ERV GBP18.9 - GBP110.0
per sq ft
Equivalent yield 4.25% - 7.00%
Development property GBP41,241 Income capitalisation/ residual ERV GBP20.0 - GBP25.0
method per sq ft
Equivalent yield 5.00% - 5.05%
----------------------------- ---------- ------------------------------------- ---------------- ------------------
Development land GBP36,340 Comparable method/ residual method Sales rate GBP138.6
per sq ft
Total GBP387,550
----------------------------- ---------- ------------------------------------- ---------------- ------------------
Significant increases/decreases in the ERV (per sq ft per annum)
and rental growth per annum in isolation would result in a
significantly higher/lower fair value measurement. Significant
increases/decreases in the long-term vacancy rate and discount rate
(and exit yield) in isolation would result in a significantly
higher/lower fair value measurement.
Generally, a change in the assumption made for the ERV (per sq
ft per annum) is accompanied by:
-- a similar change in the rent growth per annum and discount rate (and exit yield); and
-- an opposite change in the long-term vacancy rate.
Gains and losses recorded in profit or loss for recurring fair
value measurements categorised within Level 3 of the fair value
hierarchy amount to a gain of GBP3.0 million (31 December 2022:
GBP31.3 million loss) and are presented in the consolidated
statement of comprehensive income in line item 'fair value
gains/(losses) on investment properties'.
All gains and losses recorded in profit or loss for recurring
fair value measurements categorised within Level 3 of the fair
value hierarchy are attributable to changes in unrealised gains or
losses relating to investment property held at the end of the
reporting period.
The carrying amount of the Group's other assets and liabilities
is considered to be the same as their fair value.
21. Capital commitments
At 30 June 2023, the Group had contracted capital expenditure of
GBP51.0 million (31 December 2022: GBP24.4 million).
22. Related party transactions
Directors
The Directors (all Non-Executive Directors) of the Company and
its subsidiaries are considered to be the key management personnel
of the Group. Directors' remuneration for the period totalled
GBP98,395 (six months to 30 June 2022: GBP84,299) and at 30 June
2023, a balance of GBPnil (31 December 2022: GBPnil) was
outstanding.
Investment Adviser
The Company is party to an Investment Advisory Agreement with
the AIFM and the Investment Adviser, pursuant to which the
Investment Adviser has been appointed to provide investment
advisory services relating to the respective assets on a day -- to
-- day basis in accordance with their respective investment
objectives and policies, subject to the overall supervision and
direction by the AIFM and the Board of Directors.
For its services to the Company, the Investment Adviser is
entitled to a fee payable quarterly in arrears calculated at the
rate of one quarter of 1.1% per quarter on that part of the NAV up
to and including GBP500 million; one quarter of 0.9% per quarter on
that part of the NAV in excess of GBP500 million and up to GBP1
billion; and one quarter of 0.75% per quarter on NAV in excess of
GBP1 billion.
During the period, the Group incurred GBP1,731,525 (six months
to 30 June 2022: GBP1,908,143) in respect of investment advisory
fees. As at 30 June 2023, GBP864,587 (31 December 2022: GBP888,174)
was outstanding.
During the period, the Investment Adviser acquired 600,000
ordinary shares in the Company at a weighted average price of 66.2
pence per share for a total cost of GBP399,207 which represents
0.2% of the Company's issued ordinary shares.
23. Ultimate controlling party
It is the view of the Directors that there is no ultimate
controlling party.
24. Post balance sheet events
A first interim dividend in respect of the period ended 30 June
2023 of 1.0 pence per share will be payable on 31 October 2023. The
ex-dividend date will be 28 September 2023 and this will be paid
entirely as an ordinary dividend.
UNAUDITED SUPPLEMENTARY NOTES NOT PART OF THE CONSOLIDATED
FINANCIAL INFORMATION
FOR THE SIX MONTHSED 30 JUNE 2023
The Group is a member of the European Public Real Estate
Association ("EPRA") and was awarded an EPRA Gold award for
compliance with EPRA Best Practice Recommendations ("BPR") for the
2022 Annual Report. EPRA has developed and defined the following
performance measures to give transparency, comparability and
relevance of financial reporting across entities which may use
different accounting standards. The following measures are
calculated in accordance with EPRA guidance. These are not intended
as a substitute for IFRS measures.
Table 1: EPRA performance measures summary
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Notes GBP'000 GBP'000 GBP'000
------------------------------------------------ -------- ---------- ---------- -----------
EPRA earnings (GBP'000) Table 2 2,469 668 1,544
EPRA EPS (pence) Table 2 0.7 0.2 0.4
EPRA cost ratio (including direct vacancy cost) Table 6 44.1% 73.6% 66.3%
EPRA cost ratio (excluding direct vacancy cost) Table 6 35.7% 55.7% 57.8%
------------------------------------------------ -------- ---------- ---------- -----------
30 June 31 December
Notes 2023 2022
----------------------------------- --------- ------- -----------
EPRA NDV per share (pence) Table 3 89.8 91.3
EPRA NRV per share (pence) Table 3 93.3 95.9
EPRA NTA per share (pence) Table 3 87.4 90.0
EPRA net initial yield Table 4 3.6% 3.4%
EPRA 'topped-up' net initial yield Table 4 3.9% 3.6%
EPRA vacancy rate Table 5 10.9% 18.0%
EPRA LTV Table 10 24.3% 18.9%
----------------------------------- --------- ------- -----------
Table 2: EPRA income statement
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Notes GBP'000 GBP'000 GBP'000
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Revenue 3 9,857 6,262 15,706
Less: insurance recharged 3 (90) (84) (155)
Less: service charge income 3 (2,252) (710) (2,582)
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Rental income 7,515 5,468 12,969
Property operating expenses (including recoverable service charges) 4 (3,202) (2,218) (4,769)
Add: insurance recharged 3 90 84 155
Add: service charge income 3 2,252 710 2,582
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Gross profit 6,655 4,044 10,937
Administration expenses 4 (2,455) (2,602) (6,565)
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Operating profit before interest and tax 4,200 1,442 4,372
Finance income 5 2,248 714 3,255
Finance expenses 6 (4,071) (1,022) (3,782)
Less: change in fair value of interest rate derivatives and deferred
consideration 5 (525) (466) (2,155)
Less: costs of early refinancing with greater than 12 months to expiry 6 716 - -
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Adjusted profit before tax 2,568 668 1,690
Tax on adjusted profit/(loss) 7 (99) - (146)
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
EPRA earnings 2,469 668 1,544
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Company-specific adjustments:
Costs associated with moving to Main Market 10 (12) - 957
Costs of early refinancing with less than 12 months to expiry 6 751 - -
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Adjusted earnings 3,208 668 2,501
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Weighted average number of shares in issue (thousands) 17 350,000 350,000 350,000
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
EPRA EPS (pence) 10 0.7 0.2 0.4
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Adjusted EPS (pence) 10 0.9 0.2 0.7
-------------------------------------------------------------------------- ----- ---------- ---------- -----------
Adjusted earnings represents earnings from operational
activities. It is a key measure of the Group's underlying
operational results and an indication of the extent to which
dividend payments are supported by earnings.
Table 3: EPRA balance sheet and net asset value performance
measures
EPRA net disposal value ("NDV"), EPRA net reinstatement value
("NRV") and EPRA net tangible assets ("NTA"). A reconciliation of
the three EPRA NAV metrics from IFRS NAV is shown in the table
below. Total accounting return will be calculated based on EPRA
NTA.
EPRA NDV EPRA NRV EPRA NTA
As at 30 June 2023 Notes GBP'000 GBP'000 GBP'000
------------------------------------------------- ----- -------- -------- --------
Total properties(1) 11 402,900 402,900 402,900
Net cash/(borrowings)(2) 13,15 (81,912) (81,912) (81,912)
Other net liabilities (6,718) (6,718) (6,718)
------------------------------------------------- ----- -------- -------- --------
IFRS NAV 19 314,270 314,270 314,270
------------------------------------------------- ----- -------- -------- --------
Include: real estate transfer tax(3) - 20,446 -
Exclude: fair value of interest rate derivatives 14 - (8,231) (8,231)
------------------------------------------------- ----- -------- -------- --------
NAV used in per share calculations 314,270 326,485 306,039
------------------------------------------------- ----- -------- -------- --------
Number of shares in issue (thousands) 17 350,000 350,000 350,000
------------------------------------------------- ----- -------- -------- --------
NAV per share (pence) 89.8 93.3 87.4
------------------------------------------------- ----- -------- -------- --------
EPRA NDV EPRA NRV EPRA NTA
As at 31 December 2022 Notes GBP'000 GBP'000 GBP'000
------------------------------------------------- ----- -------- -------- --------
Total properties(1) 11 387,550 387,550 387,550
Net cash/(borrowings)(2) 13,15 (65,227) (65,227) (65,227)
Other net liabilities (2,872) (2,872) (2,872)
------------------------------------------------- ----- -------- -------- --------
IFRS NAV 19 319,451 319,451 319,451
------------------------------------------------- ----- -------- -------- --------
Include: real estate transfer tax(3) - 20,621 -
Exclude: fair value of interest rate derivatives - (4,303) (4,303)
------------------------------------------------- ----- -------- -------- --------
NAV used in per share calculations 319,451 335,769 315,148
------------------------------------------------- ----- -------- -------- --------
Number of shares in issue (thousands) 17 350,000 350,000 350,000
------------------------------------------------- ----- -------- -------- --------
NAV per share (pence) 91.3 95.9 90.0
------------------------------------------------- ----- -------- -------- --------
1. Professional valuation of investment property.
2. Comprising interest-bearing loans and borrowings (excluding
unamortised loan arrangement fees) of GBP101,260,000 (31 December
2022: GBP110,833,000) net of cash of GBP19,348,000 (31 December
2022: GBP45,609,000).
3. EPRA NTA and EPRA NDV reflect IFRS values which are net of
real estate transfer tax. Real estate transfer tax is added back
when calculating EPRA NRV.
EPRA NDV details the full extent of liabilities and resulting
shareholder value if Company assets are sold and/or if liabilities
are not held until maturity. Deferred tax and financial instruments
are calculated as to the full extent of their liability, including
tax exposure not reflected in the statement of financial position,
net of any resulting tax.
EPRA NTA assumes entities buy and sell assets, thereby
crystallising certain levels of deferred tax liability and adjusts
for the fair values of certain financial derivatives.
EPRA NRV highlights the value of net assets on a long-term basis
and reflects what would be needed to recreate the Company through
the investment markets based on its current capital and financing
structure. Assets and liabilities that are not expected to
crystallise in normal circumstances, such as the fair value
movements on financial derivatives and deferred taxes on property
valuation surpluses, are excluded. Costs such as real estate
transfer taxes are included.
Table 4: EPRA net initial yield
30 June 31 December
2023 2022
Notes GBP'000 GBP'000
---------------------------------------------------------------------------------- ----- -------- -----------
Total properties per external valuer's report 11 402,900 387,550
Less development property and land 11 (95,024) (77,581)
---------------------------------------------------------------------------------- ----- -------- -----------
Net valuation of completed properties 307,876 309,969
Add estimated purchasers' costs(1) 20,446 20,621
---------------------------------------------------------------------------------- ----- -------- -----------
Gross valuation of completed properties including estimated purchasers' costs (A) 328,322 330,590
---------------------------------------------------------------------------------- ----- -------- -----------
Gross passing rents(2) (annualised) 13,102 12,423
Less irrecoverable property costs(2) (1,264) (1,104)
---------------------------------------------------------------------------------- ----- -------- -----------
Net annualised rents (B) 11,838 11,319
---------------------------------------------------------------------------------- ----- -------- -----------
Add notional rent on expiry of rent-free periods or other lease incentives(3) 1,085 540
---------------------------------------------------------------------------------- ----- -------- -----------
'Topped-up' net annualised rents (C) 12,923 11,859
---------------------------------------------------------------------------------- ----- -------- -----------
EPRA NIY (B/A) 3.6% 3.4%
---------------------------------------------------------------------------------- ----- -------- -----------
EPRA 'topped-up' net initial yield (C/A) 3.9% 3.6%
---------------------------------------------------------------------------------- ----- -------- -----------
1. Estimated purchasers' costs at 6.6% (31 December 2022: 6.7%).
2. Gross passing rents and irrecoverable property costs assessed
as at the balance sheet date for completed investment properties
excluding development property and land.
3. Adjustment for unexpired lease incentives such as rent-free
periods, discounted rent period and step rents. The adjustment
includes the annualised cash rent that will apply at the expiry of
the lease incentive. Rent-frees expire over a weighted average
period of five months (31 December 2022: 12 months).
EPRA NIY represents annualised rental income based on the cash
rents passing at the balance sheet date, less non-recoverable
property operating expenses, divided by the market value of the
property, increased with (estimated) purchasers' costs. It is a
comparable measure for portfolio valuations designed to make it
easier for investors to judge themselves how the valuation of
portfolio X compares with portfolio Y.
EPRA 'topped-up' NIY incorporates an adjustment to the EPRA NIY
in respect of the expiration of rent-free periods (or other
unexpired lease incentives such as discounted rent periods and step
rents).
NIY as stated in the Investment Adviser's report calculates net
initial yield on topped-up annualised rents but does not deduct
non-recoverable property costs.
Table 5: EPRA vacancy rate
30 June 31 December
2023 2022
GBP'000 GBP'000
------------------------------------------------ ------- -----------
Annualised ERV of vacant premises (D) 1,891 3,094
Annualised ERV for the investment portfolio (E) 17,350 17,181
------------------------------------------------ ------- -----------
EPRA vacancy rate (D/E) 10.9% 18.0%
------------------------------------------------ ------- -----------
EPRA vacancy rate represents ERV of vacant space divided by ERV
of the completed investment portfolio, excluding development
property and land. It is a pure measure of investment property
space that is vacant, based on ERV.
Table 6: Total cost ratio/EPRA cost ratio
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Notes GBP'000 GBP'000 GBP'000
---------------------------------------------------------------- ----- ---------- ---------- -----------
Property operating expenses (excluding service charge expenses) 4 567 1,138 1,616
Service charge expenses 4 2,635 1,080 3,153
Add back: service charge income 3 (2,252) (710) (2,582)
Add back: insurance recharged 3 (90) (84) (155)
---------------------------------------------------------------- ----- ---------- ---------- -----------
Net property operating expenses 860 1,424 2,032
Administration expenses 4 2,455 2,602 6,565
Deduct: costs associated with move to Main Market 10 12 - (957)
---------------------------------------------------------------- ----- ---------- ---------- -----------
Total cost including direct vacancy cost (F) 3,327 4,026 7,640
---------------------------------------------------------------- ----- ---------- ---------- -----------
Direct vacancy cost (632) (981) (1,104)
Total cost excluding direct vacancy cost (G) 2,695 3,045 6,536
---------------------------------------------------------------- ----- ---------- ---------- -----------
Rental income(1) 3 7,515 5,468 12,969
---------------------------------------------------------------- ----- ---------- ---------- -----------
Gross rental income (H) 3 7,515 5,468 12,969
---------------------------------------------------------------- ----- ---------- ---------- -----------
Less direct vacancy cost (632) (981) (1,104)
---------------------------------------------------------------- ----- ---------- ---------- -----------
Net rental income 6,883 4,487 11,865
---------------------------------------------------------------- ----- ---------- ---------- -----------
Total cost ratio including direct vacancy cost (F/H) 44.3% 73.6% 58.9%
---------------------------------------------------------------- ----- ---------- ---------- -----------
Total cost ratio excluding direct vacancy cost (G/H) 35.9% 55.7% 50.4%
---------------------------------------------------------------- ----- ---------- ---------- -----------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Notes GBP'000 GBP'000 GBP'000
------------------------------------- ----- ---------- ---------- -----------
Total cost including direct vacancy
cost (F) 3,327 4,206 7,640
Add back: costs associated with move
to Main Market 4 (12) - 957
------------------------------------- ----- ---------- ---------- -----------
EPRA total cost (I) 3,315 4,206 8,597
Direct vacancy cost (632) (981) (1,104)
------------------------------------- ----- ---------- ---------- -----------
EPRA total cost excluding direct
vacancy cost (J) 2,683 3,045 7,493
------------------------------------- ----- ---------- ---------- -----------
EPRA cost ratio including direct
vacancy cost (I/H) 44.1% 73.6% 66.3%
EPRA cost ratio excluding direct
vacancy cost (J/H) 35.7% 55.7% 57.8%
------------------------------------- ----- ---------- ---------- -----------
1. Includes rental income, rental income straight-line
adjustment and other income as per note 3.
EPRA cost ratios represent administrative and operating costs
(including and excluding costs of direct vacancy) divided by gross
rental income. They are a key measure to enable meaningful
measurement of the changes in the Group's operating costs.
It is the Group's policy not to capitalise overheads or
operating expenses and no such costs were capitalised in the six
months ended 30 June 2023 or the six months ended 30 June 2022.
Table 7: Lease data
Year 1 Year 2 Years 3-5 Year 5+ Total
As at 30 June 2023 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------- ------- --------- ------- -------
Passing rent of leases expiring in: 524 - 6,233 6,345 13,102
ERV of leases expiring in: 823 - 7,459 7,177 15,459
Passing rent subject to review in: 1,481 - 11,621 - 13,102
ERV subject to review in: 1,841 - 13,496 122 15,459
------------------------------------ ------- ------- --------- ------- -------
Year 1 Year 2 Years 3-5 Year 5+ Total
------------------------------------ ------- ------- --------- ------- -------
As at 31 December 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Passing rent of leases expiring in: 524 - 6,007 5,892 12,423
ERV of leases expiring in: 809 - 6,352 6,925 14,086
Passing rent subject to review in: 1,481 - 10,855 87 12,423
ERV subject to review in: 1,827 - 12,158 101 14,086
------------------------------------ ------- ------- --------- ------- -------
WAULT to expiry is 6.0 years (31 December 2022: 6.2 years) and
to break is 4.1 years (31 December 2022: 4.7 years).
Table 8: EPRA capital expenditure
Six months Year
ended ended
30 June 31 December
2023 2022
Notes GBP'000 GBP'000
-------------------------------------------------------- ----- ---------- ------------
Acquisitions(1) 11 (45) 213,411
Development spend(2) 11 8,503 9,565
-------------------------------------------------------- ----- ---------- ------------
Completed investment properties:(3)
No incremental lettable space - like-for-like portfolio 11 1,968 641
No incremental lettable space - other - -
Tenant incentives 11 133 1,279
-------------------------------------------------------- ----- ---------- ------------
Total capital expenditure 10,559 224,896
Debt acquired - OTP(4) 15 - (33,582)
Conversion from accruals to cash basis (3,563) (4,259)
-------------------------------------------------------- ----- ---------- ------------
Total capital expenditure on a cash basis 6,996 187,055
-------------------------------------------------------- ----- ---------- ------------
1. Acquisitions include GBPnil (31 December 2022: GBP131.0
million) completed investment property and GBPnil (31 December
2022: GBP82.4 million) development property and land.
2. Expenditure on development property and land.
3. Expenditure on completed investment properties.
4. On acquisition of OTP in May 2022, GBP33.6 million of debt
was acquired. See note 15 for further details.
Table 9: EPRA like-for-like rental income
Six months Six months
ended ended
30 June 30 June
2023 2022
Notes GBP'000 GBP'000 % Change
------------------------------------- ----- ---------- ---------- --------
EPRA like-for-like rental income 4,205 4,222 (0.4)%
Other(1) - 411
------------------------------------- ----- ---------- ---------- --------
Adjusted like-for-like rental income 4,205 4,633
Development lettings - -
Properties acquired 3,310 835
------------------------------------- ----- ---------- ---------- --------
Rental income 3 7,515 5,468
Service charge income 3 2,252 710
Insurance recharge 3 90 84
------------------------------------- ----- ---------- ---------- --------
Revenue 3 9,857 6,262
------------------------------------- ----- ---------- ---------- --------
1. Includes back rent and other items.
Table 10: Loan to value ("LTV") and EPRA LTV
Gross debt less cash, short-term deposits and liquid
investments, divided by the aggregate value of properties and
investments. The Group also presents the EPRA LTV which is defined
as net borrowings divided by total property market value.
30 June 31 December
2023 2022
Notes GBP'000 GBP'000
----------------------------------------- ----- -------- ------------
Interest-bearing loans and borrowings(1) 15 101,260 110,833
Cash 13 (19,348) (45,606)
----------------------------------------- ----- -------- ------------
Net borrowings (A) 81,912 65,227
Investment property at fair value (B) 11 402,900 387,550
LTV (A/B) 20.3% 16.8%
----------------------------------------- ----- -------- ------------
EPRA LTV
30 June 31 December
2023 2022
Notes GBP'000 GBP'000
----------------------------------------- ----- -------- -----------
Interest-bearing loans and borrowings(1) 15 101,260 110,833
Net payables(2) 15,925 8,177
Cash 13 (19,348) (45,606)
----------------------------------------- ----- -------- -----------
Net borrowings (A) 97,837 73,404
Investment properties at fair value 11 402,900 387,550
----------------------------------------- ----- -------- -----------
Total property value (B) 402,900 387,550
----------------------------------------- ----- -------- -----------
EPRA LTV (A/B) 24.3% 18.9%
----------------------------------------- ----- -------- -----------
1. Excludes unamortised loan arrangement fees asset (see note
15) of GBP1.0 million (31 December 2022: GBP1.0 million).
2. Net payables include trade and other receivables, other
payables and accrued expenses. See notes 12 and 16 for a full
breakdown.
Table 11: Total accounting return
The movement in EPRA NTA over a period plus dividends paid in
the period, expressed as a percentage of the EPRA NTA at the start
of the period.
Six months Year
ended ended
30 June 31 December
2023 2022
Pence per Pence per
Notes share share
-------------------------------- ----- ---------- ------------
Opening EPRA NTA (A) 19 90.0 100.2
Movement (B) (2.6) (10.2)
Closing EPRA NTA 19 87.4 90.0
Dividend per share (C) 9 3.0 1.0
-------------------------------- ----- ---------- ------------
Total accounting return (B+C)/A 0.4% (9.1)%
-------------------------------- ----- ---------- ------------
Table 12: Interest cover
Adjusted operating profit before gains on investment properties,
interest and tax divided by the underlying adjusted
net interest expense.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Notes GBP'000 GBP'000 GBP'000
---------------------------------------- ----- ---------- ---------- -----------
Adjusted operating profit/(loss)
before gains on investment properties
(A)(1) 4,188 1,442 5,329
---------------------------------------- ----- ---------- ---------- -----------
Finance expenses 6 4,071 1,022 3,782
Add back: capitalised finance costs 6 1,750 233 1,796
Less: exceptional finance costs 6 (1,467) - -
Less: finance income 5 (2,248) (714) (3,255)
Add back: change in fair value of
interest rate derivatives and deferred
consideration 5 525 466 2,155
---------------------------------------- ----- ---------- ---------- -----------
Loan interest (B) 2,631 1,007 4,478
Interest cover (A/B) 159.2% 143.2% 119.0%
---------------------------------------- ----- ---------- ---------- -----------
1. Adjusted for move to Main Market costs.
Table 13: Ongoing charges ratio
Ongoing charges ratio represents the costs of running the REIT
as a percentage of NAV as prescribed by the Association of
Investment Companies.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Notes GBP'000 GBP'000 GBP'000
------------------------------------------------ ----- ---------- ---------- -----------
Administration expenses 4 2,455 2,602 6,565
------------------------------------------------ ----- ---------- ---------- -----------
Less: costs associated with move to Main Market 10 12 - (957)
------------------------------------------------ ----- ---------- ---------- -----------
Ongoing charges 2,467 2,602 5,608
------------------------------------------------ ----- ---------- ---------- -----------
Annualised ongoing charges (A) 4,934 5,204 5,608
------------------------------------------------ ----- ---------- ---------- -----------
Opening NAV as at start of period 319,451 350,580 350,580
NAV as at 30 June 2022 - - 357,461
Closing NAV as at end of period 314,270 357,461 319,451
Average undiluted NAV during the period (B) 316,861 354,021 342,497
------------------------------------------------ ----- ---------- ---------- -----------
Ongoing charges ratio (A/B)(1) 1.6% 1.5% 1.6%
------------------------------------------------ ----- ---------- ---------- -----------
2. Prior period restated as annualised
GLOSSARY
Adjusted earnings per share ("Adjusted EPS")
EPRA EPS adjusted to exclude one-off costs, divided by the
weighted average number of shares in issue during the period
AGM
Annual General Meeting
AIC
The Association of Investment Companies
AIFM
Alternative Investment Fund Manager
AIM
A market operated by the London Stock Exchange
BREEAM
Building Research Establishment Environmental Assessment
Method
Carbon neutrality
Purchasing carbon reduction credits equivalent to emissions
released without the need for emission reductions to have taken
place
Company
Life Science REIT plc
Contracted rent
Gross annual rental income currently receivable on a property
plus rent contracted from expiry of rent-free periods and uplifts
agreed at the balance sheet date less any ground rents payable
under head leases
Development property and land
Whole or a material part of an estate identified as having
potential for development. Such assets are classified as
development property and land until development is completed and
they have the potential to be fully income generating
EPC
Energy Performance Certificate
EPRA
The European Public Real Estate Association, the industry body
for European REITs
EPRA cost ratio
The sum of property expenses and administration expenses as a
percentage of gross rental income calculated both including and
excluding direct vacancy cost
EPRA earnings
IFRS profit after tax excluding movements relating to changes in
fair value of investment properties, gains/losses on property
disposals, changes in fair value of financial instruments and the
related tax effects
EPRA earnings per share ("EPRA EPS")
A measure of EPS on EPRA earnings designed to present underlying
earnings from core operating activities based on the weighted
average number of shares in issue during the period
EPRA guidelines
The EPRA Best Practice Recommendations Guidelines February
2022
EPRA like-for-like rental income
The increase/decrease in rental income on properties owned
throughout the current and previous year under review. This growth
rate includes revenue recognition and lease accounting adjustments
but excludes development property and land in either year and
properties acquired or disposed of in either year
EPRA NDV/EPRA NRV/EPRA NTA per share
The EPRA net asset value measures divided by the number of
shares outstanding at the balance sheet date
EPRA net disposal value ("EPRA NDV")
An EPRA net asset value measure detailing the full extent of
liabilities and resulting shareholder value if company assets are
sold and/or if liabilities are not held until maturity. Deferred
tax and financial instruments are calculated as to the full extent
of their liability, including tax exposure not reflected in the
statement of financial position, net of any resulting tax
EPRA net initial yield ("EPRA NIY")
The annualised passing rent generated by the portfolio, less
estimated non-recoverable property operating expenses, expressed as
a percentage of the portfolio valuation (adding notional
purchasers' costs), excluding development property and land
EPRA net reinstatement value ("EPRA NRV")
An EPRA net asset value measure to highlight the value of net
assets on a long-term basis and reflect what would be needed to
recreate the Company through the investment markets based on its
current capital and financing structure. Assets and liabilities
that are not expected to crystallise in normal circumstances, such
as the fair value movements on financial derivatives and deferred
taxes on property valuation surpluses, are excluded. Costs such as
real estate transfer taxes are included
EPRA net tangible assets ("EPRA NTA")
An EPRA net asset value measure with adjustments made for the
fair values of certain financial derivatives and assuming entities
buy and sell assets, thereby crystallising certain levels of
deferred tax liability
EPRA sBPR
European Public Real Estate Association Sustainable Best
Practice Recommendations
EPRA 'topped-up' net initial yield
The annualised passing rent generated by the portfolio, topped
up for contracted uplifts, less estimated non -- recoverable
property operating expenses, expressed as a percentage of the
portfolio valuation (adding notional purchasers' costs), excluding
development property and land
EPRA vacancy rate
Total open market rental value of vacant units divided by total
open market rental value of the portfolio excluding development
property and land
EPS
Earnings per share
Equivalent yield
The weighted average rental income return expressed as a
percentage of the investment property valuation, plus purchasers'
costs, excluding development property and land
ERV
The estimated annual open market rental value of lettable space
as assessed by the external valuer
EU taxonomy
A classification system that aims to provide a clear definition
of what should be considered as 'sustainable' economic activity
FCA
Financial Conduct Authority
Fitwel
A real estate certification that measures a building against
seven health impact categories
GAV
Gross asset value
GHG
Greenhouse gas
GRESB
Global Real Estate Sustainability Benchmark
Group
Life Science REIT plc and its subsidiaries
IASB
International Accounting Standards Board
IFRS
International Financial Reporting Standards
IFRS earnings per share ("EPS")
IFRS earnings after tax for the year divided by the weighted
average number of shares in issue during the year
IFRS NAV per share
IFRS net asset value divided by the number of shares outstanding
at the balance sheet date
Interest cover
Adjusted operating profit before gains on investment properties,
interest and tax divided by the underlying net interest expense
Investment assets
Completed buildings excluding development property and land
Like-for-like rental income movement
The increase/decrease in contracted rent of properties owned
throughout the period under review, expressed as a percentage of
the contracted rent at the start of the period, excluding
development property and land and units undergoing
refurbishment
Like-for-like valuation movement
The increase/decrease in the valuation of properties owned
throughout the period under review, expressed as a percentage of
the valuation at the start of the period, net of capital
expenditure
Loan to value ratio ("LTV")
Gross debt less cash, short-term deposits and liquid
investments, divided by the aggregate value of properties and
investments
Main Market
The premium segment of the London Stock Exchange's Main
Market
NAV
Net asset value
Net initial yield ("NIY")
Contracted rent at the balance sheet date, expressed as a
percentage of the investment property valuation, plus purchasers'
costs, excluding development property and land
Net rental income
Gross annual rental income receivable after deduction of ground
rents and other net property outgoings including void costs and net
service charge expenses
Net reversionary yield ("NRY")
The anticipated yield to which the net initial yield will rise
(or fall) once the rent reaches the ERV
Net zero carbon
The overall balance between emitting and absorbing carbon in the
atmosphere
Occupancy
Total open market rental value of the units leased divided by
total open market rental value excluding development property and
land, equivalent to one minus the EPRA vacancy rate
Ongoing charges ratio
Ongoing charges ratio represents the costs of running the Group
as a percentage of IFRS NAV as prescribed by the Association of
Investment Companies
Passing rent
Gross annual rental income currently receivable on a property as
at the balance sheet date less any ground rents payable under head
leases
Property income distribution ("PID")
Profits distributed to shareholders which are subject to tax in
the hands of the shareholders as property income. PIDs are usually
paid net of withholding tax (except for certain types of tax-exempt
shareholders). REITs also pay out normal dividends called
non-PIDs
RCF
Revolving credit facility
Real Estate Investment Trust ("REIT")
A listed property company which qualifies for, and has elected
into, a tax regime which is exempt from corporation tax on profits
from property rental income and UK capital gains on the sale of
investment properties
Scope 1 and 2 emissions
GHGs released directly and indirectly from the Group e.g.
company offices, company vehicles and energy purchased by the
Group
Scope 3 emissions
All other GHGs released indirectly by the Group, upstream and
downstream of the Group's business
SECR
Streamlined Energy and Carbon Reporting
SFDR
Sustainable Finance Disclosure Regulation
SONIA
Sterling Overnight Index Average
Task Force on Climate-related Financial Disclosures ("TCFD")
An organisation established with the goal of developing a set of
voluntary climate-related financial risk disclosures to be adopted
by companies to inform investors and the public about the risks
they face relating to climate change
Total accounting return
The movement in EPRA NTA over a period plus dividends paid in
the period, expressed as a percentage of the EPRA NTA at the start
of the period
Total cost ratio
EPRA cost ratio excluding one-off costs calculated both
including and excluding vacant property costs
UK AIFM Regime
The Alternative Investment Fund Managers Regulations 2013 (as
amended by The Alternative Investment Fund Managers (Amendment
etc.) (EU Exit) Regulations 2019) and the Investment Funds
Sourcebook forming part of the FCA Handbook
Weighted average unexpired lease term ("WAULT")
Average unexpired lease term to first break or expiry weighted
by contracted rent across the portfolio, excluding development
property and land
ENDS
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END
IR FLFITAVIIFIV
(END) Dow Jones Newswires
September 21, 2023 02:00 ET (06:00 GMT)
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