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

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

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

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

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

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

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

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

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

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

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