Annual Report and
Financial Statements 2023
Creating space
for science
a
Find us online
www.lifesciencereit.co.uk
Our vision:
To become the property provider of choice for life
science companies in the UK, giving shareholders
exposure to this attractive growth sector.
• Open and collegiate
• Purpose driven
• Appropriately challenging
• Combining experience and innovation
• Investment: acquire well‑located assets where we
can add value
• Asset management: drive value and rents through
active management
• Financial: optimise returns through
appropriatefinancing
• Sustainability: targeting the early adoption of ESG
best practice
Our culture:
Our strategy:
Front cover image
Asset: Oxford Technology
Park, Oxford
Lab: Rolling Stock Yard,
London Knowledge Quarter
a
CONTENTS
STRATEGIC
REPORT
Pages 2 to 74
Financial highlights 2
Operational highlights 3
At a glance 4
Investment case 6
Chair’s statement 7
Market overview 10
Business model 14
Objectives and strategy 16
Key performance indicators 18
Strategy in action: 20
Oxford Technology Park 20
Cambourne Park, Science &
Technology Campus 24
Occupier insight 26
Investment Adviser’s report 28
Sustainability 38
TCFD 46
EPRA sBPR Reporting 54
Our stakeholders 60
Section 172(1) statement 62
Principal risks and uncertainties 63
Going concern and 73
viability statement
CORPORATE
GOVERNANCE
Pages 75 to 105
Chair’s introduction 75
to governance
Board of Directors 76
Corporate governance 78
statement
Nomination 88
Committee report
Audit and Risk 91
Committee report
Management Engagement 94
Committeereport
Sustainability Committee report 96
Directors’ remuneration report 98
Directors’ report 102
FINANCIAL
STATEMENTS
Pages 106 to 146
Statement of Directors’ 106
responsibilities
Independent Auditor’s report 107
Consolidated statement 114
of profit or loss and other
comprehensive income
Consolidated statement 115
of financial position
Consolidated statement 116
of changes in equity
Consolidated statement 117
of cash flows
Notes to the consolidated 118
financial statements
Company statement 142
of financial position
Company statement 143
of changes inequity
Notes to the Company 144
financial statements
ADDITIONAL
INFORMATION
Pages 147 to IBC
Unaudited supplementary 147
notes not part of
the consolidated
financial information
Property portfolio 155
Shareholder information 156
Glossary 159
Contact details of the advisers IBC
7
Chair’s statement
20
Strategy in action
26
38
Sustainability
report
76
Board of Directors
Occupier insight
Life Science REIT plc Annual Report and Financial Statements 2023
1
Strategic report
Corporate governanceFinancial statementsAdditional information
FINANCIAL HIGHLIGHTS
Strong earnings growth driven by 2022 acquisitions and
further development and leasing progress:
• Adjusted earnings up £4.2 million (1.2 pence per share) to
£6.7million (1.9 pence per share)
• Contracted rent roll of £14.0 million (31 December 2022:
£13.8million), with £1.6 million of new rent offset by disposals
and the expiry of rental guarantees
• On an IFRS basis, a loss of £21.9 million has been reflected
with the positive adjusted earnings primarily being offset by
arevaluation loss in the year of £22.8 million
EPRA net tangible asset per share down 10.1 pence to
79.9pence (31 December 2022: 90.0 pence per share):
• Movement reflects portfolio revaluation loss and dividend
payments in the year, partially offset by adjusted earnings
Sound balance sheet and disciplined approach to capital
allocation:
• Sale of Lumen House for £7.7 million, 2.0% above June 2023
book value (slight loss versus December 2022 book value)
• £150.0 million refinancing of our HSBC facility, extending
the term to June 2026 and adding Bank of Ireland to the
Group’slenders
• Debt fully hedged at 4.5% interest payable
Portfolio valuation down £5.3 million to £382.3 million,
drivenby market movements on offices, with laboratory
spacemore resilient:
• Overall like-for-like valuation reduction of 7.1% reflecting
outward yield shift of 58bps partially offset by like-for-like ERV
growth of 5.0%. Space defined as laboratories was marginally
down 1.6%, with space defined as offices being the primary
driver down 9.8%, in line with the market
• Further development progress and the disposal of Lumen
House drove the remaining movement
Year ended 31 December 2023
1
Gross property income
£15.5m
2022: £13.1m
IFRS loss before tax
£(21.9)m
2022: £(27.5)m
IFRS loss per share
(6.2)p
2022: (7.9)p
EPRA earnings per share
1.7p
2022: 0.4p
Adjusted earnings pershare
1.9p
2022: 0.7p
Dividends per share
2
2.0p
2022: 4.0p
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 the unaudited supplementary notes on pages 147 to 154 for further details on APMs.
2. This is the total of dividends paid and declared in respect of the year to 31 December 2023, including the second interim dividend of 1.0 pence per share
declared on 26 March 2024, and due for payment on 13 May 2024. Dividends paid in 2023 totalled 4.0 pence per share, comprising the 3.0 pence per
share second interim dividend for 2022 and the 1.0 pence per share interim dividend for 2023. Dividends paid in 2022 totalled 1.0 pence pershare.
As at 31 December 2023
1
Portfolio valuation
£382.3m
As at 31 December 2022: £387.6m
IFRS net asset value
£283.7m
As at 31 December 2022: £319.5m
IFRS NAV per share
81.1p
As at 31 December 2022: 91.3p
EPRA net tangible assets
£279.7m
As at 31 December 2022: £315.1m
EPRA NTA per share
79.9p
As at 31 December 2022: 90.0p
Loan to value
24.7%
As at 31 December 2022: 16.8%
Life Science REIT plc Annual Report and Financial Statements 2023
2
OPERATIONAL HIGHLIGHTS
Adding value through our asset management and
developmentprogrammes:
• 69,700 sq ft space delivered at Oxford Technology Park
(“OTP”), with four new occupiers adding £0.6 million to
contracted rents and a further pre-let providing an additional
£0.6million
• Rebranded the Cambourne asset to Cambourne Park Science
& Technology Campus (“Cambourne”); secured the first life
science letting to Rakon (£25.0 per sq ft) and are due to
commence a repurposing project to convert vacant space in
Building 2020 to fully fitted laboratories
• Completed refit at Rolling Stock Yard (“RSY”) and let 7,322 sq
ft at £110.0 sq ft to Beacon Therapeutics, a record rent for life
science space
Further upside through development and reversion:
• Occupancy reduced to 79.0% (31 December 2022: 82.0%)
reflecting recent completions and disposal of Lumen House;
like-for-like occupancy increased to 86.6% (31 December
2022: 81.4%)
• Strong potential for rental growth on the let space of the
investment portfolio with embedded reversion of 10.3%,
equating to £1.5 million of additional rent; £4.1 million to come
from completed development buildings and repurposing
activities; resulting in estimated rental value (“ERV”) of
£19.6million
• Further £5.5 million rent expected from on-site developments
with an additional £1.1 million recognised in 2023, taking total
target ERV to £26.2 million
Commitment to developing sustainable buildings:
• Net zero target set for scopes 1 and 2 by 2040 and by 2045
for scope 3
• 87% of properties now EPC A-C rated (31 December 2022: 83%)
• Received EPRA sBPR silver and most-improved award for
sustainability reporting
• Obtained the Group’s first green financing, with £40.0 million
of the term loan defined as a Green Loan
Post year end highlights
New lease signed:
• Lease finalised with WAE Technologies Ltd in February
2024 following the practical completion of Building 5 at an
initial rent of £18.6 per sq ft, increasing to £20.1 per sq ft in
January2025
Development completions:
• Reached practical completion on Building 5 at OTP,
comprising 58,100 sq ft of space
Full year dividend rebased to 2.0 pence per share:
• With macroeconomic uncertainty continuing and interest
rates now expected to remain elevated for some time, the
Board has taken the decision to rebase the dividend to a level
that is sustainable and substantially covered by adjusted
earnings over time. The additional financial flexibility will
enable the Group to effectively progress its strategy to deliver
on the value accretive opportunities it has created. The
Board has therefore declared a second interim dividend of
1.0pence per share, bringing the total dividend for the year to
2.0 pence per share. This will be paid as an ordinary dividend
on 13May2024, with an ex-dividend date of 4 April 2024.
The Board will look to maintain a sustainable dividend going
forward, with the intention that future dividends reflect the
progression in underlying earnings.
As at 31 December 2023
1,2
Contracted rent roll
£14.0m
As at 31 December 2022: £13.8m
Estimated rental value
£19.6m
As at 31 December 2022: £17.2m
Occupancy
79.0%
As at 31 December 2022: 82.0%
Weighted average unexpired
lease term (“WAULT”)
toexpiry
5.8 years
As at 31 December 2022: 6.2 years
WAULT to first break
3.8 years
As at 31 December 2022: 4.5 years
Net reversionary yield
5.8%
As at 31 December 2022: 5.2%
1. Investment properties only. Development properties and land have been excluded from the above metrics.
2. Please see the unaudited supplementary notes on pages 147 to 154 for further details on APMs.
Life Science REIT plc Annual Report and Financial Statements 2023
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London
Cambridge
Oxford
1
2
3
4
5
We own a portfolio of five assets, in key
locations within the GoldenTriangle.
AT A GLANCE
1b
Oxford Technology
Park – Development
Oxford
1a
Oxford Technology
Park – Investment
Oxford
Area: 173,400 sq ft
Type: Hybrid
Contracted rent: £2.0 million
Contracted rent from
life science occupiers: 57.9%
Valuation: £72.1 million
Acquisition date: May 2022
Area: 324,200 sq ft
Type: Hybrid
Contracted rent: £1.1 million
Contracted rent from
life science occupiers: 100.0%
Valuation: £67.4 million
Acquisition date: May 2022
Asset location by valuation
Cambridge
23.3%
London
40.2%
Oxford
36.5%
Life Science REIT plc Annual Report and Financial Statements 2023
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London
Cambridge
Oxford
1
2
3
4
5
5
7‑11 Herbrand Street
London Knowledge
Quarter
3
The Merrifield Centre
Cambridge
Area: 53,900 sq ft
Type: Hybrid
Contracted rent: £3.5 million
Contracted rent from
life science occupiers: 79.7%
Valuation: £83.2 million
Acquisition date: December 2021
4
Rolling Stock Yard
London Knowledge
Quarter
2
Cambourne Park
Science
& Technology
Campus
Cambridge
Area: 230,400 sq ft
Type: Hybrid
Contracted rent: £4.1 million
Contracted rent from
life science occupiers: 65.6%
Valuation: £81.6 million
Acquisition date: December 2021
Area: 68,600 sq ft
Type: Office
Contracted rent: £4.0 million
Contracted rent from
life science occupiers: n/a
Valuation: £70.5 million
Acquisition date: May 2022
Area: 12,600 sq ft
Type: Laboratory
Contracted rent: £0.3 million
Contracted rent from
life science occupiers: 100.0%
Valuation: £7.5 million
Acquisition date: November 2021
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As the first UK-listed REIT specialising in life science real estate, we
provide investors with a unique opportunity to gain exposure to this
exciting subsector. We believe the following factors make our business
a compelling proposition.
INVESTMENT CASE
Strong and growing demand for life sciencespace
Long-term demand for life science space is underpinned by powerful structural
drivers including an ageing population and growing demand for digital
health; atthe same time AI is accelerating the pace of discovery, creating
new businesses across the life science spectrum. With two of the top three
universities globally and a supportive regulatory environment, the UK is
increasingly a preferred destination for life science businesses. Seepages
10to13.
Constrained supply driving rental growth andvalues
‘Genius Loci’ – the need to cluster, to create successful life science ecosystems
around centres of academic excellence means that supply is focused in
the Golden Triangle of London, Oxford and Cambridge. Astrict planning
environment prevents a rapid supply adjustment, creating a demand-supply
imbalance which drives rental growth and supports values over the mid to
long-term. Seepages 10 to 13.
Highly experienced management with a proven track record
Our Investment Adviser, Ironstone Asset Management Limited (“Ironstone”),
has assembled a highly experienced team of senior professionals, who have
built, operated and grown companies in the UK real estate market for more than
three decades. The Investment Adviser’s excellent relationships with potential
occupiers, agents, banks, financial institutions and others gives us the ability to
source investment opportunities off-market and provide life science companies
with space suited to their requirements. See pages 28 and29.
Sustainability integral to our strategy and aligned to
occupiers’needs
Our strategy is to deliver sustainable space for life science use, primarily through
development and repurposing of existing buildings. Best practice sustainability
initiatives are integral to our approach and support our commitment to be net
zero across our business by 2045. We also aim to provide workplaces that
support the wellbeing of our occupiers and helps them to meet the challenge
ofattracting and retaining top talent. See pages 38 to 59.
A strategy for valuecreation
We have assembled a portfolio focused on a market with strong, long-term
fundamentals and inbuilt opportunities to create value for shareholders. We
measure our progress by long-term capital and income growth, supporting our
total accounting return target. See pages 14 and15.
6
Life Science REIT plc Annual Report and Financial Statements 2023
CHAIR’S STATEMENT
Our assets are in the
right locations, our offer
is attractively priced and
tailored to the growing parts
of the UK life science market
and our financial position is
sound.
Claire Boyle
Chair
The highly favourable demand-supply dynamics which
underpin our ability to deliver capital and income growth
over the long-term have not changed. However the
operating environment we faced this year is very different
to the one at IPO. In that context our focus has been on
allocating our capital towards opportunities with the
most attractive returns. That is why this year, we took the
decision to sell Lumen House and it is also why we are
rebasing our dividend, to better align the current payout
with our earnings whilst still offering an attractive return to
investors.
Market context
With five interest rate rises over the year, occupiers have
been more cautious about taking new space. The life
sciences sector, where fit-out is relatively more expensive
and businesses move less frequently, has not been immune.
As a result, take-up in Oxford was down slightly on last
year’s peak, although was stronger in Cambridge where
availability is critically low at under 3%.
However, confidence built towards the end of the year,
withgreater certainty that we are at or close to peak
interest rates, even if the consensus is that they will remain
higher for longer. Venture capital (“VC”) funding in the
sector looks to be stabilising following the post pandemic
peak in 2021 and has proved more resilient than other areas
of the market, down 6% year on year, compared with a fall
of 43% for total UK VC investment.
The second half of the year also saw a string of key policy
announcements in support of our sector, most notably
the Government’s decision to rejoin Horizon Europe in
September. The £520 million funding package announced
in the Autumn Statement and positive response to the
review of university spin-outs also supports an ecosystem
where young life sciences businesses can be successful.
This backdrop is helpful for our occupiers, many of whom
are emerging businesses, looking for affordable space close
to their roots in the academic institutions of the Golden
Triangle.
Progressing our strategy
This year, we developed or refurbished 82,100 sq ft of
high-quality, affordable life science space. Our leasing
activity covered 39,200 sq ft, taking occupancy across our
investment assets to 86.6% on a like-for-like basis (79.0%
absolute) and contracted rent to £14.0 million. In addition,
a further £1.7 million of rent is currently let or pre-let in the
development portfolio.
We are proactively evolving our product to reflect patterns
of demand we are seeing across our markets; at OTP we
are seeking revised planning consent for Buildings 10 and
11 to deliver smaller units of between 10,000 and 20,000
sq ft. This is a market not currently catered for and where
we see strong demand. Similarly, at Cambourne, we are
progressing the repurposing of the ground floor at Building
2020 to deliver fully fitted lab space.
Life Science REIT plc Annual Report and Financial Statements 2023
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Life Science REIT plc Annual Report and Financial Statements 2023
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Combined, our asset management activities, including
repurposing and development, will add £9.6 million to the
contracted rent roll with the main contributor being the
development at OTP, scheduled to complete H1 2025. In
addition, the portfolio has the potential for strong rental
growth, with embedded reversion of 10.3% in the existing
investment assets.
To make progress on these key initiatives, in the second
half, we took the decision to extract value from Lumen
House which was sold for £7.7 million in November.
Theprice represented a premium of 2.0% to June 2023
book value and 8.5% to the December 2021 acquisition
price. This decision demonstrates our ability to adapt
quickly and effectively, to allocate our capital and our
efforts towards opportunities with the highest returns
(see page 24 for further details). It represents a positive
outcome for shareholderstoday.
Financial performance
The value of the portfolio was £382.3 million as at
31December 2023, reflecting a net reversionary yield of
5.8% for the investment portfolio. The revaluation loss
of £22.8million was primarily driven by a like-for-like
decline of 7.1% as yields shifted outwards 58 bps, partially
offset by like-for-like ERV growth of 5.0%. Space defined
as laboratories from a valuation perspective was much
more resilient, down just 1.6% on a like-for-like basis. ERV
growth here was also stronger at 10.4% and yield expansion
less pronounced at 52bps. Space defined as offices saw
a valuation decline of 9.8% on a like-for-like basis. This
discrepancy represents a clear opportunity as we repurpose
more of our space.
EPRA NTA per share as at 31December 2023 was
79.9pence, 11.2% below the prior year, driven by the overall
valuation decline and dividend payments in the year totalling
4.0 pence pershare.
Adjusted EPS was 1.9 pence, with rental income from the
May 2022 acquisitions being the key driver of the increase
of 1.2 pence (or 171.4%) compared to last year. Thedisposal
of Lumen House had a minimal impact on earnings, given its
11-month contribution to earnings.
Dividend policy
Operationally, the Group continues to make good progress
with its strategy. Our assets are leasing well, we are
successfully driving rental growth and there is considerable
reversionary potential to capture.
However, with macroeconomic uncertainty continuing and
interest rates now expected to remain elevated for some
time the Board has taken the decision to rebase the dividend
to a level that is sustainable and substantially covered by
adjusted earnings over time. The additional financial flexibility
this provides will enable the Group to effectively progress its
strategy and to deliver on the value accretive opportunities
it has created. The Board fully recognises the need to
maintain an appropriate balance between providing income
to shareholders and reinvesting capital in the business: our
aim is to achieve an attractive total return for shareholders,
with both income and capital growth driven by our asset
management and development activities.
Accordingly, the Board has declared a second interim
dividend of 1.0 pence per share for 2023, bringing the total
dividend for the year to 2.0 pence per share. The Board will
look to maintain a sustainable dividend going forward, with
the intention that future dividends reflect the progression in
underlying earnings.
Balance sheet resilience
The business continues to benefit from a robust financial
position; our leverage is low, our debt is fully hedged and
we have significant cash and headroom in our facilities.
Wehave also demonstrated a readiness to realise capital
from investments where we see better uses for it.
The key event in the period was the £150.0 million
refinancing of our term loan and revolving credit facility
(“RCF”), which repaid the expensive debt acquired with
OTP. We were pleased to welcome Bank of Ireland to
the syndicate alongside our existing lender HSBC and to
achieve our first green financing, with £40.0 million of the
term loan facility defined as a Green Loan.
Our loan to value (“LTV”) ratio was 24.7% as at 31December
2023 (31December 2022: 16.8%), comfortably below
our target range of 30-40%, which we continue to
believe is optimal in the longer term. Available liquidity of
£55.6million was split between cash of £14.3 million and
£41.3 million available through the RCF. These funds will be
utilised to fund our development programme at OTP (where
costs to complete were £46.2 million at the year end) and
planned capital expenditure at Cambourne.
Environmental, Social and Governance
Sustainability is integral to our business model. Our
strategyis to deliver sustainable space for life science use,
primarily by repurposing existing buildings. That means
delivering space which is low-carbon, energy-efficient and
supports occupiers on their own sustainability journey.
CHAIR’S STATEMENT CONTINUED
Life Science REIT plc Annual Report and Financial Statements 2023
9
We are on track to achieve BREEAM Excellent at all OTP
buildings currently on-site and 87.3% of the portfolio is also
EPC A-C rated.
Building on the progress made this year, we have now
committed to be net zero carbon on scope 1 and 2
emissions by 2040 and for scope 3 emissions by 2045
(see pages 42 to 43). Phasing out gas and converting our
buildings to electricity, as well as increasing our renewable
capacity through the installation of PV panels where
possible, are the key interventions in our plan and go hand
in hand with our strategy.
Learning from the embodied carbon assessment we
performed this year on the Innovation Quarter (“IQ”)
at OTP, as well as the refurbishment and development
standards we introduced at the start of the year, we have
a comprehensive approach to sustainable development
which we can apply going forward.
Our net zero pathway was approved by the Sustainability
Committee, which was established at the start of the year
and is led by Dr Sally Ann Forsyth.
We have continued to progress our social programme
by supporting charitable organisations local to us. This
year that has included Science Oxford, where we are
helping fund its community outreach programme, and
Wintercomfort, an organisation in Cambridge which
provides help and support for homeless people. We have
joined Pathways to Property, which aims to widen access to
the real estate industry to a broader range of young people
and will be supporting their events in the current year.
Looking forward
The fundamentals of our sector are among the strongest
in UK real estate, with demand supported by powerful
long-term trends and supply constrained by the need to
be located in centres of academic excellence, notably the
Golden Triangle.
This is highly positive for long-term rents, so we are
confident that we will continue to see attractive rental
growth across our portfolio. We are encouraged by the
conversations we are having about the available space
but are also mindful of the time it takes for leases to
be negotiated in our sector. A more certain economic
environment is supportive for our business, but in any
event, we will maintain our disciplined approach to capital
deployment to ensure we progress the flagship projects
that sit at the heart of our business.
In summary, our assets are in the right locations, our offer
is priced attractively and tailored to growing parts of the
UK life science market and our financial position is sound,
with low leverage and a fully hedged debt book, so we have
every confidence in our ability to deliver on our long-term
strategy.
Claire Boyle
Chair
25 March 2024
Rolling Stock Yard, London Knowledge Quarter
Strategic reportCorporate governanceFinancial statementsAdditional information
aPTTsdsmnmP
MARKET OVERVIEW
Long‑term demand supported by powerful structural drivers
Ageing
population
World‑leading academic
institutions
Increasing
Governmentsupport
Life sciences
fieldexpanding
Demand for
digital health
AI accelerating
discovery
London
Cambridge
Oxford
Supply and demand focused onthe Golden Triangle
‘Genius Loci’ – the need to co-locate around centres of academic
excellence, focuses activity on the Golden Triangle of
London, Oxford and Cambridge.
Key attractions of
theGolden Triangle:
• Presence of top ten global
universities
• Well-established
scienceparks
• Leading teaching hospitals
• Available talent pool
• Connectivity to London
10
Life Science REIT plc Annual Report and Financial Statements 2023
aPTTsdsmnmP
Strategic manufacturing
November 2023
Proposed
£0bn
£5bn
£4bn
£3bn
£2bn
£1bn
2018 20222020
OxfordLondon
20232019 2021
OtherCambridge
Life science funding
VC funding into UK life sciences has been a key engine
of growth since the Covid-19 pandemic, with £4.3 billion
invested in 2021. Since then, investment has normalised
with £2.1 billion invested in 2023. While down on the prior
year, life science investment has proved resilient compared
to other sectors with total VC funding into UK companies
down 43% compared to a reduction of just 6% in life
sciences.
Early stage VC funding has been particularly strong, with
£896 million invested in 2023, the second highest on record
after 2021 and 22% ahead of the five-year average. Later
stage investment has been slower, reflecting a weaker IPO
market which is often a preferred exit route.
The UK is consistently the preferred destination for life
sciences investment across Europe, accounting for 34%
since 2019. However, UK life science investment lags the
US which has received €152 billion in VC funding between
2019 and 2023 compared to €12.2 billion in the UK. With
two of the top three universities globally, there is a clear
opportunity for the UK to access this pool of funding.
Government support – key policy announcements
The UK Government has identified life sciences as a key opportunity to drive economic growth and has unveiled a range
of initiatives and funding packages to unlock investment, grow talent and support infrastructure in UK life sciences.
Keyinitiatives include:
£650 million funding package to
support UK life sciences, including
manufacturing, skills and infrastructure
The UK re-joined Horizon, the EU’s €95.5
billion research programme in January
2024, enabling UK researchers to apply
for grants and collaborate in global
research projects
£520 million investment into life sciences
manufacturing
Life Science for growth
May 2023
Proposed
Horizon Europe
January 2024
Actioned
Per the Autumn 2023 statement, the
R&D intensity thresholds to qualify as
an R&D intensive SME has been reduced
from 40% to 30% of total expenditure
for accounting periods beginning on or
after April 2024
Accepted in full the recommendations
of the independent spin-out review,
bringing the UK more in line with the US
on university equity participation and
committing to £20 million investment to
support proof-of-concept funding for
spin-outs
Formally established the £800 million
UK Advanced Research and Invention
Agency (“ARIA”), an independent
research agency to fund high-risk,
high-reward projects
R&D tax relief
November 2023
Proposed
Spin‑out review
November 2023
Actioned
ARIA
January 2023
Actioned
VC funding in UK life science companies
Source: Cushman & Wakefield Q4 2023 research
Life Science REIT plc Annual Report and Financial Statements 2023
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Corporate governanceFinancial statementsAdditional information Strategic report
MARKET OVERVIEW CONTINUED
0
700
500
200
‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 ‘22
Grade BGrade A
‘23
Grade C
400
600
300
100
10yr Avg
0
160
80
2018 2024F2022
OxfordLondon
2025F2020 2023
Cambridge
120
40
20212019
Occupational market
2023 saw the strongest take-up of science and innovation space in the Golden Triangle since 2015, with 925,000 sq ft of
leasing transactions. Demand was focused on grade A space, where supply is very low, restricting volumes, particularly in
Cambridge where availability is just 2.8%.
The activity has driven rents to record levels with Oxford and Cambridge achieving fully fitted rents of £76.5 and £71.5 per
sq ft respectively. In Cambridge, this equates to 22.2% rental growth in just 12 months. Further growth is expected over the
next five years, albeit at more modest levels as supply responds to the weight of demand: 3.5% rental growth per annum
is forecast for Cambridge and 2.5% for Oxford. In London, prime rents for lab space have hit £150.0 per sq ft, and lab
requirements currently stand at 974,000 sq ft compared to supply of 180,000 sq ft.
Tech boxes are an emerging subsector and in Oxford, the pipeline of 763,000 sq ft comprises just five schemes with OTP
accounting for one-third of all space coming to market.
0.0
0.4
0.8
1.4
1.6
2024 2026
0.2
0.6
1.0
1.2
2025
Under construction
2027
Planning approved
Cambridge
Oxford
London
Cambridge
Oxford
London
Cambridge
Oxford
London
Cambridge
Oxford
London
Golden Triangle lab development pipeline,
millions sq ft
Source: Cushman & Wakefield Q4 2023 Golden Triangle
LabReport
Development pipeline
With demand for life science focused on existing life
science clusters, over 90% of all planned construction
is in London, Oxford or Cambridge. Supply is weighted
towards London, where there is greater flexibility for large
scale office conversion, albeit not all proposed conversions
benefit from the very close proximity to academic
establishment that occupiers typically look for.
Beyond 2024, much of the pipeline is still at the planning
stage, but with interest rates expected to remain elevated
for some time and development costs still high, a significant
proportion of the pipeline could be delayed or paused
indefinitely.
Fitted labs rent,
£ per sq ft
Oxford & Cambridge Arc lab take-up,
000’ssq ft
Source: CBRE Q4 2023 Intelligence Source: Bidwells Q4 2023 webinar
12
Life Science REIT plc Annual Report and Financial Statements 2023
Technology diversifying the field Small/spin-out occupier demand
Traditionally, life sciences has been dominated by the
pharmaceutical industry but today the sector covers
a much wider spectrum, including advanced robotics,
data analytics and AI.
Knight Frank estimate the UK AI sector has received
£25 billion of funding and employment in the sector
is growing at an annual rate of 9.6%. TheUK ‘Omics’
(e.g. genomics) and quantum computing sectors are
also growing rapidly and are expected to transform
the wider sector’s future real estate requirements.
Our response
Technology is driving this diversification and we
are actively targeting businesses in these sectors.
We consider their likely requirements, such as more
write-up space and greater access to power when
repurposing our space and this year successfully
attracted occupiers in quantum computing
(Oxford Ionics and Quantum Advanced Solutions),
biomedicine (Beacon Therapeutics), data and AI
(Arcturis Data), and agri-tech (Rakon).
Fully fitted space
Demand for both flexible and landlord-fitted, life
sciences space is growing, driven by the need to be
operational quickly, as well as minimising occupier
exposure to rising costs and development delays.
With a scarcity of suitable space in the Golden
Triangle, these factors drive rental premiums of c.70%
for fitted space compared to traditional office space,
according to research conducted by Savills.
Our response
To address this demand, we are repurposing office
space at our assets into fully fitted laboratories.
At RSY, we delivered two floors of ‘plug and play’
laboratory space in 2023 with the second floor let to
Beacon Therapeutics at £110.0 per sq ft. At Cambourne,
we are planning to repurpose 10,100 sq ft of offices into
laboratories and write-up space and expect to achieve
a doubling of the rents (see page 24).
Sustainability trends in life sciences
Sustainability is high on the agenda for many life
science businesses with 46% of the global sector
committed to the UN Race to Zero. Energy and
water usage on life science space can be up to five
times greater than an average office. This means that
occupiers are increasingly selective about the space
that they take.
The need to attract and retain talent is also
particularly challenging in this sector, making quality
of workspace and amenities of growing importance.
Our response
This year, we provided energy usage profiles to a
major occupier, enabling them to reduce their energy
consumption and costs. We are working with other
occupiers to identify options for renewable energy
and our sustainable standards for development and
repurposing to ensure the space we are delivering meets
the highest standards. Amenity space is also a priority;
this has been delivered at RSY and is planned at OTP.
Universities are a key source of life sciences innovation
and entrepreneurship. Equity investment in university
spin-outs increased from £405 million to £2.5 billion in
the decade to 2021, and universities are also investing
to incubate these businesses. The UK Government
believes spin-outs will have a key role in establishing
the UK as a science and technology superpower and in
2023 agreed to the recommendations of the spin-out
review (see page 11).
Our response
We have established an Innovation Quarter (“IQ”) at
Oxford Technology Park, comprising 12 units, ranging
from 3,200 sq ft to 7,800 sq ft, just a five-minute
drive from Begbroke Science Park. The IQ completed
in August 2023 and several Oxford spin-outs,
including Oxford Gene Technology have already
taken space. Ironstone is also an investor into Oxford
Science Enterprises providing us with access to a
network of growing life sciences businesses.
Key trends and our responses
13
Life Science REIT plc Annual Report and Financial Statements 2023
Corporate governanceFinancial statementsAdditional information Strategic report
Our purpose is to own and manage life sciences real estate, providing
space for our occupiers to thrive. We have designed our business
model to achieve this purpose, creating long-term value for our
shareholders and other key stakeholders.
BUSINESS MODEL
Our value creation model
We can invest in a wide range of
building types suitable for life science
occupiers or businesses supporting
them. See page 16 for more.
When developing assets, we may
mitigate risk through forward funding.
For speculative development, we use
best-in-class advisers, fixed-price
construction contracts, and seek
pre-lets where practical.
Ironstone’s in-house and external
sustainability experts help us to
embed ESG considerations throughout
the asset lifecycle.
The Investment Adviser carries out
thorough due diligence, including
value creation opportunities, the
asset’s environmental performance
and climate-related risks, and
negotiates terms with the vendor.
Any transaction requires approval by
the Investment Adviser’s Investment
Committee, the AIFM and, for
transactions greater than 20% of gross
asset value, the Board.
The Investment Adviser builds close
relationships with our occupiers
to understand their businesses
and property requirements, which
supports our asset management
programme.
We invest in our assets to make them
more attractive to occupiers and
look to improve their environmental
performance.
See page 16 for our asset management
strategy and page 38 to59 for more
on sustainability.
Identity
investment
opportunities
Complete due
diligence and
acquisitions
Add value through
assetmanagement
Oxford Technology Park, Oxford
Life Science REIT plc Annual Report and Financial Statements 2023
14
Our value creation model
The Investment Adviser reviews each
property at least monthly, focusing
on occupancy, rental values and rent
collection, and visits each asset a
number of times a year depending on
requirements.
Monitoring the market and building
internal databases position us to take
advantage of investment and occupier
opportunities.
Our advisers provide regular updates
on ESG regulations and stakeholder
expectations. The Sustainability
Committee ensures accountability for
progress on our sustainability targets.
Holding assets for the long-term
makes us attractive to life science
occupiers, who often have high
barriers to exiting a building, given
the cost of the fit-out, their complex
equipment and the length of their
projects.
We may sell selected assets, where we
can reinvest the proceeds into more
attractive investment opportunities.
We may choose to sell assets if
the need to decarbonise, meet
environmental regulations and
climate-related issues mean they
nolonger meet our standards.
The value we create
Economic value
We finance the business using
shareholders’ equity and a prudent
level of bank debt, maintaining a LTV
target of 30-40%. We use this funding
to invest in carefully selected assets and
to implement our asset management
plans. This enables us to grow rents and
support the capital values of our assets,
which will lead to attractive total returns
for shareholders.
As a REIT, we do not pay corporation
tax on profits and capital gains from
our qualifying property rental business,
which supports our ability to pay
dividends in line with the REIT regime.
Social value
We provide real estate that supports
life science research into globally
significant problems and opportunities.
We seek to minimise the environmental
impact of our buildings while providing
places which enhance the wellbeing of
the people who work in them and we
support local organisations making a
positive difference in our communities.
Hold or divestActive investment
monitoring
Rolling Stock Yard, London Knowledge Quarter
Life Science REIT plc Annual Report and Financial Statements 2023
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15
02
01
Asset
management
strategy
Our current focus for capital expenditure includes:
• completing the development programme at OTP;
• converting space in existing buildings to fitted
laboratories, enabling us to attract significantly higher
rents;
• improving amenities for occupiers, to support
collaboration and help them to attract and retain
employees; and
• enhancing our assets’ sustainability performance.
Investment
strategy
Progress
• Capital market conditions prevented the raising of new
equity in 2023. We therefore focused on driving value
from the existing portfolio through our development and
asset management programmes and did not make any
asset acquisitions
Progress
• Reached practical completion on 69,700 sq ft of space at
OTP, with a further 388,100 sq ft in development at the
year end
• Repurposed the first and second floors at Rolling Stock
Yard and achieved a record rent of £110.0 per sq ft on the
second floor
• Rebranded Cambourne to reflect the focus on life science
occupiers and progressed plans to repurpose vacant
space in Building 2020 as fully fitted labs
• Increased contracted rents by £1.6 million through the
signing of six new life science occupiers
Our investment objective is to generate an attractive total return for
shareholders, with a focus on capital growth.
OBJECTIVES AND STRATEGY
Our strategy
While we can invest around the UK, we have chosen to
concentrate on the Golden Triangle, where we currently
see the strongest demand-supply imbalance and the best
prospects for rental growth.
Our focus on growing capital values means we favour
assets where we can increase rents and valuations through
active asset management.
Our investment policy (see page 156) requires us to
primarily buy income-producing assets. However, we can
choose to forward fund developments or buy development
land, provided our total exposure to developments is no
more than 15% of gross asset value.
Oxford Technology Park, Oxford Rolling Stock Yard, London Knowledge Quarter
Life Science REIT plc Annual Report and Financial Statements 2023
16
03
04
Sustainability
strategy
We look to minimise the environmental impact of our
buildings by responsibly repurposing and developing space
for life science use. Our key focus areas are:
• progressing our net zero carbon pathway;
• achieving best in-class building certifications;
• providing healthy buildings;
• partnering with occupiers on their sustainability
objectives;
• maintaining best practice governance;
• addressing climate-related risks and opportunities; and
• transparent disclosure.
Progress
• Committed to be net zero by 2040 for scopes 1 and 2 and
scope 3 by 2045
• Improved data quality, establishing 2023 as the baseline
• BREEAM Excellent and Interim Excellent certifications at
RSY and OTP
• 87.3% of properties now EPC A-C rated (2022: 83.4%)
• Delivered collaborative space at RSY
• Green lease clauses, including data sharing clauses in all
new leases
• Developed separate ESG and climate-related risk register
• Received EPRA sBPR silver award
Financing
strategy
Using an appropriate level of debt finance allows us to
invest more in the portfolio and generate higher returns.
Our strategy is to:
• manage risk by keeping debt at prudent levels, with a
target LTV of 30-40% in the longer term;
• use hedging to protect against rising interest rates; and
• access Green financing, which could lead to lower
financing costs in the future.
We may also dispose of assets from time to time, which will
generate funds for reinvestment.
Progress
• Refinanced the £150.0 million HSBC facility, extending
the term to June 2026 (with extension options) and
adding Bank of Ireland to the Group’s lenders
• Refinanced the £36.5 million Fairfield debt facility, which
was the Group’s most-expensive debt
• Disposed of Lumen House for £7.7 million, to enable
the capital to be allocated to growth opportunities, in
particular the fully fitted labs project at Cambourne
• Purchased an interest rate cap on the new debt facility,
capping SONIA at 2.0% per annum until March 2025
• Designated £40.0 million of the new term loan as a
GreenLoan
Our objectives
Total accounting return(“TAR”)
We target a TAR of at least 10% per annum.
In 2023, the TAR was (6.8)% (see page 154) with the
key contributor being the revaluation loss recognised in
theyear.
Dividends
The 2023 dividend has been rebased to 2.0 pence per
share. The Board will look to maintain a sustainable
dividend going forward, aligned with earnings progression
in the future.
Our strategy
Cambourne Park, Science & Technology Campus, CambridgeLumen House, Oxford
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17
KEY PERFORMANCE INDICATORS
Operational KPIs
Description
Total open market rental
value of the units leased
divided by total open market
rental value, excluding
development property
and land, and equivalent
to one minus theEPRA
vacancyrate.
Occupancy (%) Like‑for‑like
rentalincome
movement (%)
Like‑for‑like
valuation
movement (%)
Like‑for‑like energy
intensity (%)
2023 2023 20232023
2022
2021
79.0
2022
15
Description
The change in contracted
rent of properties owned
throughout the period under
review, as a percentage of
the contracted rent at the
start of the period, excluding
acquisitions, disposals,
development property
andland.
Description
The change in the valuation
of properties owned
throughout the period
under review, expressed
as a percentage of the
valuation at the start of the
period, and net of capital
expenditure.
Description
The like-for-like change
in landlord procured and
generated energy intensity,
measured in MWh/m
2
.
Relevance to
ourstrategy
Shows our ability to retain
occupiers at renewal and to
let vacant space, balanced
with the need for vacancy to
carry out asset management
initiatives.
Relevance to
ourstrategy
Shows our ability to develop
and repurpose space, and
grow rents over time.
Relevance to
ourstrategy
A high-quality portfolio and
an active asset management
programme will help improve
asset values and provide
future resilience.
Relevance to
ourstrategy
Our decarbonisation targets
were set in 2023 with the
Group committing to being
net zero in scope 1 & 2 by
2040 and in scope 3 by
2045. This measure helps
monitor progress.
Performance
The change in occupancy
reflects the net impact of
new leases in the year and
the practical completion of
new space at OTP, some of
which was unlet at the year
end. On a like-for-like basis,
occupancy has increased 5.2
percentage points to 86.6%
at the year end.
Performance
At 31 December 2023,
like-for-like rental income
had increased by 2.4%
compared to the prior
period. Life science lettings
at Cambourne and OTP
Building 1 drove this
increase.
Performance
The portfolio valuation
decreased by 7.1% on a
like-for-like basis, with
laboratory space proving
more resilient at a 1.6%
decline (see page 34).
Performance
Energy intensity increased
as a result of higher physical
occupancy of Herbrand
Street, Rolling Stock Yard
and OTP (Building 1).
Link to strategy Link to strategy Link to strategy
Link to strategy
82.0
80.9
1.2
n/a
(7.1)
(1.8)
n/a
n/a
n/a
2.4
2021
2022
2021
2022
2021
Link to strategy key:
Investment
strategy
Asset management
strategy
Financing
strategy
Sustainability
strategy
79% 2.4% (7.1)% 15%
Life Science REIT plc Annual Report and Financial Statements 2023
18
Financial KPIs
Total cost ratio(%) EPR A NTA
per share (p)
Loan to value
ratio (%)
Total accounting
return
1
(%)
2023 2023 2023 2023
2022
2021
2022
2021
79.9
2022
24.7
2022
Description
EPRA cost ratio including
direct vacancy costs but
excluding one-off costs. The
EPRA cost ratio is the sum
of property expenses and
administration expenses, as
a percentage of gross rental
income.
Description
This net asset value measure
includes adjustments for the
fair values of certain financial
derivatives and assumes
entities buy and sell assets,
thereby crystallising certain
levels ofdeferred tax liability.
Description
Gross debt less cash and
short-term deposits, divided
by the aggregate value of
properties and investments.
Description
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.
Relevance to
ourstrategy
Shows our ability to
effectively manage our cost
base, which in turn supports
dividend payments and
shareholder returns.
Relevance to
ourstrategy
Reflects our ability to add
value by acquiring well and
through asset management,
which in turn increases our
resilience during market
downturns.
Relevance to
ourstrategy
Shows our ability to balance
the additional portfolio
diversification and returns
that come from using debt,
with the need to manage risk
through prudent financing.
Relevance to
ourstrategy
Shows our ability to
construct a portfolio
that delivers a secure
and growing return to
shareholders. Our target is in
excess of 10.0% per annum,
through a combination of
dividends and growth in
NAV.
Performance
The increase in net rental
income and decrease in
costs reduced the total
cost ratio by 14.7%. This will
continue to reduce as we
complete and let new space
at OTP and repurpose space
at our other assets to labs.
Performance
The decline was primarily the
result of dividends paid and
the loss on revaluation of the
portfolio, partially offset by
positive earnings in the year.
Performance
The LTV remains at a
prudent level of 24.7%,
below our 30-40% target.
The increase in the year
is driven by the ongoing
development at OTP and
other asset management
initiatives including
repurposing space to labs
at RSY.
Performance
We paid dividends of
4.0 pence per share and
delivered adjusted earnings
of £6.7 million (2022:
£2.5million). Despite this,
a decline in NAV driven by
revaluation losses in both
the current year and prior
year has resulted in negative
total accounting returns.
There is however a 2.3%
improvement year on year.
Link to strategy Link to strategy
Link to strategy
Link to strategy
1. Replaces the dividend per share KPI reported in 2022. Total accounting return is considered a more relevant KPI that aligns with the Group’s objectives
and strategy, in part driven by the Board determined dividend.
163.5
58.9 90.0
100.2
16.8
n/a
(6.8)
(9.1)
n/a2021 2021
44.2% 79.9p 24.7% (6.8)%
44.2
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19
STRATEGY IN ACTION
CREATING SPACE
FOR SCIENCE AND
TECHNOLOGY
Oxford Technology Park
Key statistics:
Valuation
£139.5m
31 December 2022: £121.4m
Occupancy of completed
buildings
50.0%
31 December 2022: 72.5%
Number of occupiers
8
31 December 2022: 4
Target contracted rent
£11.0m
31 December 2022: £10.0m
% completed by area
34.8%
31 December 2022: 21.2%
Costs to complete
£46.2m
31 December 2022: £58.9m
Estimated completion
H1 2025
31 December 2022: H1 2024
Total area on completion
497,600 sq ft
31 December 2022: 492,400 sq ft
OTP is a 20-acre science and
technology park in a key location in
the Golden Triangle. It is less than two
miles from the University of Oxford’s
Begbroke Science Park campus, seven
miles north of Oxford city centre and
adjacent to Oxford Airport.
When we acquired OTP in May 2022,
three of the planned 12 buildings
were complete, including a fully
let hotel. These three buildings
totalled 104,300 sq ft or 21.0% of
the planned space at OTP, giving
us the potential to significantly
grow the asset’s capital value and
contracted rents by completing the
developmentprogramme and letting
the new space.
20
Life Science REIT plc Annual Report and Financial Statements 2023
This signifies a pivotal moment for Quantum Advanced Solutions, as we embark on a significant expansion of our
R&D and manufacturing efforts to bring our sensor and materials products to an increasingly global customer
base. The modern facilities at OTP, coupled with their flexible fit-out capabilities, provide an ideal setting for the
establishment of our unique and innovative operations. Weare honoured to be in close proximity to the University of
Oxford and its vibrant ecosystem.
Marat Lutfullin
Chief Executive Officer
Quantum Advanced Solutions
Comment from our IQ occupier
21
Life Science REIT plc Annual Report and Financial Statements 2023
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STRATEGY IN ACTION CONTINUED
We continued to make good progress with the development
programme during 2023 and secured a number of lettings.
Progressing the development programme
During 2023, Buildings 4A and 4B, known as The
Innovation Quarter (“IQ”), reached practical completion,
and Building 5 has also reached practical completion since
the year end. Total completed space stood at 173,400
sq ft at 31 December 2023. By the date of this report,
this had increased to 231,500 sq ft, making OTP 46.5%
complete. Timing has moved out over the last year due to
development delays and revision of planning on Buildings
10 and 11.
The IQ consists of 12 units, which can accommodate wet
and dry labs, offices and light production. These units are
smaller, more flexible and more affordable than elsewhere
in Oxford, making them ideal for emerging life science
businesses. We are seeing strong interest from potential
occupiers for us to finance fitting out these units as lab
space, which we expect will achieve a rental uplift from
around £25.0 per sq ft to £45.0 per sq ft.
Our occupier surveys have demonstrated that amenity
space is important. We have received planning permission
to convert unit 6 at the IQ into a café and event space, and
we are continuing to explore the potential for carrying out
this work, including holding discussions with an operator.
During the year, we also received detailed planning consent
for the remaining phase of OTP in Buildings 8 to 11, fitted
to shell on the ground floor and offices on the first floor.
Construction of Buildings 8 and 9 is in progress and
they are expected to reach practical completion in the
second half of 2024. However, we are working with the
developer to revise our plans for Buildings 10 and 11, as our
engagement with potential occupiers has shown demand
for units that fall between the largest in the IQ (circa 7,800
sq ft) and the smallest of the current hybrid buildings,
which is around 24,000sq ft. Our intention is to create four
smaller, subdivisible buildings rather than two larger ones,
which will improve OTP’s overall offer and attract higher
rents. Subject to receiving planning consent for these
revisions, we now expect to complete Buildings 10 and 11 in
H1 2025.
The buildings at OTP have strong sustainability credentials,
including EPC A on Buildings 1, 2, 4A, 4B and electric
vehicle chargers in each car park other than the hotel.
Allthe existing life science buildings and developments are
tracking a BREEAM Excellent rating, and the Premier Inn
hotel is rated BREEAM VeryGood.
Attracting new occupiers
OTP continues to attract good interest from potential
occupiers and we agreed the following new leases during
2023:
• In January 2023, Oxford Ionics leased 4,887 sq ft in
Building 1 for two years at £28.5 per sq ft, with a break
clause at the end of the first year. This provided it with
initial accommodation at OTP, ahead of occupying larger
long-term space. In December 2023, we announced that
we had agreed a lease with Oxford Ionics to take unit A
in Building 6, which has flexible internal space allowing
the office, laboratory and production content to vary
from 25% to 50%, to suit the occupier’s requirements.
Theten-year lease has a break clause and rent review at
year five and an initial rent of £593,220 or £20.0 per sq ft.
• In February 2023, Arcturis Data leased 5,509 sq ft of
office space in Building 1 at £28.7 per sq ft for ten years,
with a break clause and rent review at the end of the
fifthyear.
• In August 2023, we announced the letting of 11,042 sq
ft across two units in the IQ, for use as hybrid office
and laboratory space. The occupier is Oxford Gene
Technology IP Limited. The annual rent of £220,000
equates to £19.9 per sq ft for a ten-year term, with a
break clause and rent review at the end of the fifth year.
• Since the year end, we announced the letting of 5,551 sq
ft in the IQ to Quantum Advanced Solutions Limited who
took occupation in December 2023. It will pay an annual
rent of £122,122, equating to £22.0 per sq ft for ten years,
with a break clause and rent review at the end of the fifth
year.
In addition, we agreed a pre-let in 2022 for the whole of
Building 5 to WAE Technologies Limited. With the building
reaching practical completion in February 2024, the lease
has now been granted, with the initial rent of £18.6 per sq ft
rising to £20.1 per sq ft in January 2025.
Life Science REIT plc Annual Report and Financial Statements 2023
22
Building a community
As more occupiers move into OTP, we are increasingly
focused on creating a community. The planned café and
event space in the IQ would support this and we are
beginning to plan a range of events for occupiers. We have
also launched an app to help people make the most of
working at OTP, for example by booking exercise classes,
cycle repairs, and receiving notifications of that week’s food
truck offering. Going forward, we also expect the app to be
used to order from the café and for marketing, surveys and
event organising.
Our priorities for 2024
In the year ahead, we will continue to lease the available
space, complete the construction of Buildings 8 and 9,
and secure revised planning on the final two plots. We
are targeting headline rents for the remaining and future
space at a minimum of £22.5 per sq ft for hybrid lettings.
This compares with expectations of £15.0 per sq ft for
hybrid lettings at the time we acquired OTP, reflecting
strong rental growth in the Oxford market and the quality
of the assets we are delivering. Even at these higher rents,
OTP remains very competitive against similar locations in
Oxford, giving us further scope for rental growth.
We are also reviewing ways to enhance OTP’s sustainability
performance. This includes the potential for retrofitting
photovoltaic panels across the park.
oxfordtechnologypark.com
Development progress as at 25 March 2024
Complete:
1
2
3
4A
4B
5
Under construction:
6
7
8
9
Land:
10
11
11
10
9
8
7
6
5
4B
4A
3
2
1
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23
STRATEGY IN ACTION CONTINUED
ALLOCATING
CAPITAL TONEW
OPPORTUNITIES
When we make acquisitions, our strategy is to add value through asset
management and then to monitor the investment, with a view to holding or
divesting. In most cases, we expect to hold for the long-term. This reflects
the dynamics of our market (see page 12), where we expect increased rents
and capital values over time. Being a long-term holder also takes account
of our occupiers’ needs. Life science companies often spend large amounts
fitting out the buildings and their research projects can last for many years.
This can make it difficult and expensive for them tochange locations.
However, we will consider selling assets when we can allocate the capital
to more transformational opportunities. In November 2023 we sold Lumen
House for gross proceeds of £7.7 million. This represented a 5.6% net initial
yield and was 2.0% ahead of 30 June 2023 book value and 8.5% above the
acquisition price.
This asset was 1.9% of the portfolio by value (as at 30 June 2023) and we
had to balance the impact to our NAV of the potential upgrade of the asset
versus other projects in our portfolio. Realising its value now enables us to
focus our efforts and capital on these opportunities, where the returns are
more attractive.
The fully fitted laboratory initiative at Cambourne is a key example of that
approach. Our discussions with emerging life science companies have
revealed that many would prefer to pay higher rent for a fitted laboratory,
rather than investing their limited capital to fit the space out themselves.
We have the product and the expertise to deliver this.
Key statistics:
Lab area created
8,800 sq ft
Completion target
Q4 2024
Target rent
£50.0 per sq ft
Costs to complete
£3.0m
Cambourne Park, Science &
Technology Campus
24
Life Science REIT plc Annual Report and Financial Statements 2023
Following the success of the ‘plug and play’ lab concept at Rolling Stock Yard where we increased rents from £65.0 per
sq ft to £110.0 per sq ft, we are repurposing 10,100 sq ft of vacant office space in the ground floor of Building 2020 at
Cambourne into four suites of fully fitted laboratories at a total project cost of £3.0 million with a further £0.5 million of
enabling costs for future conversion of the first and second floors.
Each suite will be approximately 2,200 sq ft, making them suitable for early-stage life science companies, and they
can also be combined for a larger occupier. Work will begin on-site Q2 2024 and we expect the units to reach practical
completion in Q4 2024. There is very little fitted space in this size range available in Cambridge and we are optimistic of
achieving rents at a minimum of £50.0 per sq ft, compared with £25.0 per sq ft for unfitted space.
Repurposing space, break out area designRepurposing space, write up area design
Building 2020, Cambourne Park, Science & Technology Campus, Cambridge
25
Life Science REIT plc Annual Report and Financial Statements 2023
Corporate governanceFinancial statementsAdditional information Strategic report
OCCUPIER INSIGHT
Ben Rigby
Vice President
BusinessOperations
Company overview
Beacon Therapeutics is a Syncona-backed gene therapy
company focusing on developing therapies and treating
eye diseases. It took occupation of the second floor of RSY
in March 2023.
Why did you choose RSY for your business?
There’s a real shortage of life science space in London.
We looked at White City, but it wasn’t convenient
whereas Kings Cross stood out for us as an attractive,
central London destination. The vibrancy of the local
area is absolutely key in terms of attracting and retaining
talent – people want to be in London and they want to be
somewhere surrounded by great bars and restaurants, so
our location helps us attract the best candidates.
The ability to configure the building to our own
specification was also really important because the nature
of our business means we need bespoke space. Ironstone
were doing a basic fit-out, but they were very flexible and
could adapt their plans to suit our needs.
Why does the building work well for you?
One of the key swing factors was having a landlord that was
experienced in life sciences. For example, as an approved
Biosafety Level 2 lab we have biological reagents and
chemicals coming in and out of our space on a regular basis
– having a building management team who understand
the special handling requirements provides peace of mind
for our business. It helps that there are other occupiers in
the building with similar needs, so it’s business as usual
forthem.
The amenity space that has been added on the ground
floor is also really valuable – we use it as overflow meeting
space for our team but we also use it to welcome external
guests.
For us, there’s also the added bonus of having another
Syncona business in the building.
Why was being in the Knowledge Quarter
important?
The Knowledge Quarter is gaining real traction as a life
sciences hub in the UK and it’s important for our business
to be part of that scene. Many of the UK’s leading academic
and research institutions are based just around the corner.
But for us the real value is in the accessibility of the location
– it’s very central but also has great access to Cambridge
from Kings Cross.
Beacon
Therapeutics
Rolling Stock Yard
26
Life Science REIT plc Annual Report and Financial Statements 2023
Company overview
LGC is a global life science tools company, working with
diverse customers to drive science forward and find
solutions that diagnose, treat, feed and protect the growing
population.
As part of LGC, the Native Antigen Company develops and
manufactures premium-quality antigens and antibodies,
and was one of the first companies to start production of
the Covid-19 antigen. LGC took occupation of Building 3 in
March2022.
Why did you choose OTP for yourbusiness?
Location was the most important driver for us. Most of our
colleagues are based in the Oxfordshire area and we wanted
a location that was convenient for our talented team.
Secondly, we wanted a blank canvas that we could fit out to
suit us and give us the flexibility to expand. Ultimately, this
led us to a new building and OTP was completing just as our
existing lease came up, so the timing worked well.
Sustainability credentials were also important. LGC is a global
business with a net zero carbon commitment. We’re planning
to install PV panels which will supply c.50% of our needs,
there is no gas and plenty of EV chargers so it’s one of our
most sustainable buildings globally.
Why does the building work so well for you?
In each of our labs, about one third of the space is unused
and we have additional floors we haven’t fitted out yet which
gives us capacity to grow. As the team and LGC continues to
expand, the option of additional space was very appealing.
Fitting out laboratory buildings is a lengthy and complicated
process so it’s not something you want to do too often.
Has being on a campus been beneficial?
Yes, the additional facilities are really important. There’s
a hotel on-site which is very convenient as we often have
overseas visitors, including our senior leaders who are
based in the US. They frequently come and stay for a week
and the ability to walk to the office is very valuable.
A conference facility at the IQ is also coming soon and
when it’s available, I have no doubt we’ll put it to good use.
What are you excited about for the long‑term?
We’re really keen to meet the neighbours. There are some
fascinating and innovative companies moving in here, WAE
Technologies and Oxford Gene Therapy for example. We
were the first company to be based at OTP and with a few
more, there will be a real sense of community.
We’re also excited about the planned amenities. A café, so
people can have their lunch within walking distance, will be
a great addition.
We are excited about our long-term future at OTP and look
forward to growing into the space we have so we don’t
expect to be moving any time soon.
Michael Neale
Director, Manufacturing
& Site Lead
LGC
Group
Oxford Technology Park
27
Life Science REIT plc Annual Report and Financial Statements 2023
Corporate governanceFinancial statementsAdditional information Strategic report
Ironstone Asset Management Limited provide day-to-day investment
advisory and asset management services to the Group.
INVESTMENT ADVISER’S REPORT
Stephen Barrow
Chair (Non-Executive Director)
Simon Farnsworth
Managing Director
Ian Harris
Director of Asset Management
Stephen has over 30 years’ experience
setting up and managing funds.
Starting as an investment analyst at
Morgan Grenfell, Stephen managed
the £5 billion UK Equity Exempt
Fund in the 1990s combined with
the role of Head of Global Research.
Stephen then set up the successful
Global Equity Select strategy at
Morgan Grenfell in 2002. Leaving
Morgan Grenfell in 2005, Stephen
built a successful team at IronBridge
International and, as founding CIO,
ultimately managed over $7 billion for
a range of UK and overseas clients.
Since 2012, Stephen has been investing
in a range of property vehicles
alongside colleague Simon Hope,
notably Warehouse REIT. Stephen has
an MA in Economic History from the
University of St Andrews.
Simon is an experienced fund
manager and chartered surveyor
with over 30 years of experience in
the UK real estate market. Previously
he was a Managing Director of the
UK Funds business of CBRE Global
Investors and a member of their UK
Executive Committee and Investment
Committee. Prior to that he was a
Business Development Director at GE
Capital Real Estate. Latterly, Simon
was a founding director of Westmount
Real Estate, a boutique real estate
investment advisory and asset
management business advising on
acquisitions, asset management and
financing across all UK sectors. He has
considerable experience in sourcing,
managing and financing across many
real estate asset classes along with
developments, forward fundings
and corporate transactions. He has
a BSc in Land Management from the
University of Reading.
Ian is a qualified chartered surveyor
with over 30 years’ experience in
the UK real estate market. His asset
management career began at Imry
Holdings where he was responsible
for the £200 million Halogic Portfolio
in joint venture with GE Real Estate.
He moved on to become Director of
Frame Investments Limited, a privately
owned property investment and asset
management company specialising in
multi-let value-add portfolios in the
UK with financial partners including
PRICOA and Portfolio Holdings
Limited. He was then appointed
Director of Asset Management for the
Strategic Partners series of UK value-
add funds at CBRE Global Investors
with assets under management of
£1 billion. Subsequently, he went on
to co-found Westmount Real Estate
Ltd, a boutique investment advisory
and asset management business
acting for a wide range of domestic
and international investors. Ian has a
BSc in Land Management from the
University of Reading and is a Member
of the Royal Institution of Chartered
Surveyors.
Life Science REIT plc Annual Report and Financial Statements 2023
28
Simon Hope
Vice-Chair (Executive Director)
David Lewis
Finance Director
Simon has over 35 years’ experience
in the real estate sector, gained
during his career at Savills, one of
the world’s leading property agents.
From 2004 to 2021 he was Global
Head of Capital Markets specialising
in portfolio investment construction,
acquisitions and disposals. He was
a founding director of the Charities
Property Fund which he chaired
between 2002 to 2007. In addition,
he chaired Savills’ proprietary trading
and investment arm, Grosvenor Hill
Ventures until 2007. Simon was also
the executive sponsor of Savills’ Life
Science practice which incorporates
a multi-disciplinary team of over 18
professionals. In 2013 he became
chairman of Tilstone Partners Limited,
the investment adviser to Warehouse
REIT plc, a FTSE listed real estate
investment trust. He also sits on the
Warehouse REIT plc Board as a non-
executive director. He studied Estate
Management at the Royal Agricultural
College, Cirencester and is a RICS
Fellow. He also holds an MBA from
Reading University.
David has over 30 years’ commercial
and financial global experience, most
recently with Round Hill Capital, a
real estate private equity firm. He
has held senior executive positions
with Campus Living Villages,
Balfour Beatty Investments and
Lend Lease Infrastructure and was
the European CFO of Babcock &
Brown, the investment manager
who established the now FTSE 250
listed company International Public
Partnerships. Previously David was a
Technical Director with Ernst & Young
in Australia and is a Fellow of the
Institute of Chartered Accountants,
England & Wales. David has a BSc in
Fuel and Energy and Management
Studies from the University of Leeds.
The Ironstone team
Gender:
Ethnicity:
Age profile:
Male 36%
Female 64%
20-29 18%
30-39 18%
40-49 27%
50-59 37%
White British 64%
Other 36%
The wider Ironstone team as at
31December 2023:
See more at https://lifesciencereit.co.uk/about‑
us/investment‑advisers‑management‑team/
Life Science REIT plc Annual Report and Financial Statements 2023
Strategic reportCorporate governanceFinancial statementsAdditional information
29
Implementing the investment strategy
There was one change to the portfolio during the year, following the disposal of Lumen House in November 2023. The
proceeds of £7.7 million represented a 5.6% net initial yield and were 2.0% ahead of 30 June 2023 book value and 8.5%
above the acquisition price. The proceeds will be reinvested into repurposing projects at other assets (see pages 24 and 25)
and in the short-term have been used to repay the RCF, reducing interest costs.
The portfolio
The Group’s portfolio at 31 December 2023 was as follows:
Valuation Contracted rent
Asset £m
£ per
sq ft
Area
sq ft
Occupancy
%
WAULT
to break
years
WAULT to
expiry
years £m
£ per
sq ft
NIY
%
NRY
%
Cambourne
81.6
354
230,400
77. 5
2.3
4.7
4.1
22.2
4.7
6.7
Rolling Stock Yard
83.2
1,544
53,900
87.3
2.7
6.6
3.5
72.3
4.0
5.1
7-11 Herbrand Street
70.5
1,028
68,600
100.0
—
2.8
4.0
58.5
5.3
5.7
OTP – Investments
72.1
416
173,400
50.0
9.0
12.2
2.1
19.4
2.7
5.7
The Merrifield Centre 7.5 595 12,600 100.0 3.0 8.0 0.3 23.1 3.6 5.5
Investment assets 314.9 584 538,900 79.0 3.8 5.8 14.0 33.3 4.2 5.8
OTP – Developments 67.4 208 324,200
1
— — — — — — —
Development assets 67.4 208 324,200 — — — — — — —
Total portfolio 382.3 443 863,100 — — — — — — —
1. Full build-out area.
Development assets consist of OTP buildings under construction and the remaining development land. As the buildings
practically complete, they are transferred into investment properties. The IQ, totalling 69,700 sq ft, was transferred in the
year. The 324,200 sq ft area shown in the table above is the expected area of the remaining development assets, once
practically complete.
INVESTMENT ADVISER’S REPORT CONTINUED
This was a year of good
progress with the Group’s
strategy. The long-term trends
in the occupational market
remain favourable and we are
confident that the strategy will
deliver for shareholders in the
years ahead.
Simon Farnsworth
Managing Director
Life Science REIT plc Annual Report and Financial Statements 2023
30
Strong income growth potential
The contracted rent roll for the investment assets at the year end was £14.0 million (31 December 2022: £13.8 million), up
1.4% year-on-year, reflecting new leases signed, partially offset by the disposal of Lumen House and the expiry of £0.8
million of rental guarantees at Rolling Stock Yard. In addition, a further £1.1 million of pre-let contracted rent was agreed on
the development assets as at 31 December 2023.
The estimated rental value (“ERV”) of the investment assets at 31 December 2023 was £19.6 million (31 December 2022:
£17.2 million). This is 40.0% above the contracted rent for the investment assets, with the let area having a reversionary
percentage of 10.3%. Like-for-like ERV growth in 2023 was 5.0%.
Occupancy at the year end decreased by 3.0 percentage points to 79.0% (31 December 2022: 82.0%). The movement was
the net result of letting vacant space and the practical completion of space at OTP that remained unlet at the year end. On
a like-for-like basis the occupancy increased 5.2 percentage points to 86.6%.
Well‑located assets offering hybrid and officespace
The portfolio is in strong locations within the Golden Triangle and primarily comprises office and hybrid (office and
laboratory) space. The charts below show the split of assets by location and type, as at 31 December 2023.
Asset location
byvaluation
Life science exposure
bycontracted rent
1
Life science occupier
areaby floor type
2
1. Includes £1.1 million of contracted rent within development assets; life science occupiers make up 49.9% of the investment portfolio.
2. 54.4% of portfolio area (including vacant space) currently let to life science occupiers.
3. Manufacturing and prototyping.
The Group’s occupiers
The table on the next page shows the Group’s top ten occupiers at the year end. The proportion of the investment
portfolio (by contracted rent) let to life science occupiers continues to increase and stood at 49.9% at 31 December 2023.
For more information on why life science occupiers choose our assets, see the occupier insight section on pages 26 to 27.
Under the Group’s investment policy, no occupier should account for more than 30.0% of the higher of gross contracted
rents or the valuer’s ERV of the portfolio, including developments under forward-funding agreements. We remain within
this limit, with the largest occupier accounting for 28.7% of gross contracted rents and 21.9% of the ERV at the year end.
Aswe build out and lease up OTP, the rent roll will continue to diversify and reduce the proportion of total rents coming
from individual occupiers.
London 40.2%
Oxford 36.5%
Cambridge 23.3%
Life science 53.5%
Non-life science 46.5%
Office 56.2%
Labs 30.9%
M&P
3
12.9%
Life Science REIT plc Annual Report and Financial Statements 2023
Strategic reportCorporate governanceFinancial statementsAdditional information
31
The portfolio continued
The Group’s occupiers continued
Occupier Asset
1
Occupier
type
3
Annual
contracted
rent
(£m) % of total
Thought Machine Group Ltd
HS
Non-LS
4.0
28.7%
Gyroscope Therapeutics Ltd
RSY
LS
1.5
11.0%
Carl Zeiss Ltd
CP
LS
1.0
6.8%
Beacon Therapeutics Ltd
RSY
LS
0.8
5.8%
Xero (UK) Ltd
RSY
Non-LS
0.7
5.1%
Regus
CP
Non-LS
0.7
4.9%
MTK Wireless Ltd
CP
LS
0.7
4.8%
Premier Inn Ltd
OTP
Non-LS
0.7
4.7%
Native Antigen Company Ltd (LGC)
OTP
LS
0.5
3.9%
Pacific Biosciences UK Ltd RSY LS 0.5 3.4%
Subtotal – top ten 11.1 79.1%
Remaining 2.9 19.9%
Total
2
14.0 100.0%
1. HS – Herbrand Street; RSY – Rolling Stock Yard; CP – Cambourne Park; OTP – Oxford Technology Park.
2. Investment portfolio only. In addition, £1.1 million of contracted rent has also been agreed within development assets.
3. LS – life science occupier; Non-LS – non life science (hotel and offices).
INVESTMENT ADVISER’S REPORT CONTINUED
Implementing the asset
management strategy
Cambourne Park Science &
TechnologyCampus
The Group acquired Cambourne in 2021, with the
intention of repositioning it as a dedicated life science and
technology hub. We made good progress in 2023, including
rebranding the park to target these sectors and starting to
repurpose 10,100 sq ft of vacant office space in Building
2020 into fully fitted laboratories (see pages 24 to 25).
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 £25.0 per sq ft for ten years,
with a break clause and rent review at the end of the fifth
year. Rakon has fitted out the space to create dry labs.
Occupancy at Cambourne was 77.5% at the year end
(31December 2022: 80.1%). Completing the fitted
laboratories will be a key step in establishing Cambourne’s
credentials in our target market and supporting future
lettings in other buildings.
Our longer-term aim is to deliver a highly sustainable
campus, building on the existing renewable power provision
(photovoltaic panels) and targeting a minimum of BREEAM
Very Good for refurbishments. We are also evaluating
opportunities for amenities benefiting occupiers and
the local community, and working to launch an app for
occupiers at Cambourne, as we have done at OTP (see
page 23).
Oxford Technology Park
Information on our asset management activities at OTP can
be found in the case study on pages 20 to 23.
Rolling Stock Yard
Following the refit of the first and second floors, Rolling
Stock Yard offers office and fully fitted laboratory space,
with the refreshed reception area providing an attractive
place for occupiers to meet and collaborate.
The capital cost for the lab refit was around £2.0 million or
£158.7 per sq ft, and has delivered significantly increased
rental levels. The 7,322 sq ft second floor has been leased
to Beacon Therapeutics at £110.0 per sq ft, a leading rent
for life science space, compared to £65.0per sq ft before
the refit. The lease is for five years with an occupier’s
break at year three. We are tracking a number of occupier
enquiries for the remaining vacant first floor. Occupancy at
the year end was 87.3% (31 December 2022: 66.7%).
7‑11 Herbrand Street (“Herbrand”)
The present occupier’s lease at Herbrand runs until
Q42026. Wecontinue to engage with the occupier and
while our base case is that it will stay until expiry, we are
working up our plans for repositioning the building for life
science use.
The Merrifield Centre (“Merrifield”)
As previously reported, the occupier has completed
a comprehensive refurbishment, demonstrating its
commitment to the asset. This contributed to a significant
improvement in the EPC rating, which increased from
DtoB.
Life Science REIT plc Annual Report and Financial Statements 2023
32
Financial review
Financial performance
The Group’s financial results are summarised below:
2023
£m
2022
£m
Change
%
Gross property income
15.5
13.1
18.3
Property operating expenses (1.7) (2.2) 22.7
Net rental income
13.8
10.9
26.6
Adjusted administration costs (5.2) (5.6) 7.1
Adjusted operating profit
8.6
5.3
62.3
Adjusted net finance costs
(2.0)
(2.7)
25.9
Tax 0.1 (0.1) 100.0
Adjusted earnings
6.7
2.5
168.0
Exceptional finance costs
(1.5)
—
n/a
Exceptional administration costs
—
(1.0)
n/a
Fair value (losses)/gains on derivatives
and deferred premium
(3.8)
2.2
(272.7)
Fair value losses on investment properties
(22.8)
(31.3)
(27. 2)
Loss on disposal of investment properties (0.3) — n/a
IFRS loss after tax (21.7) (27.6) (21.4)
Total gross property income in the year was £15.5 million (2022: £13.1 million), with the growth of 18.3% due to a full year of
ownership of OTP and Herbrand, which the Group acquired in May 2022, and the benefits of new leases agreed in the year.
Property operating expenses were £1.7 million (2022: £2.2 million), resulting in net rental income of £13.8 million. Property
operating expenses are primarily void costs on vacant units, less the release of a £0.7 million provision for doubtful debts,
which were provided for in the prior year and are now fully collected.
Administration costs comprise the Investment Adviser’s fee, professional fees, including audit and valuation, the Directors’
fees, and a range of other costs such as insurance. These costs totalled £5.2 million in the year (2022: £5.6 million
excluding exceptional one-off costs). In the prior year, the Company incurred one-off costs of £1.0 million, in relation to its
move from trading on AIM to the Main Market of the London Stock Exchange.
The above results in a total cost ratio of 44.2% (2022: 58.9%). The improvement reflects the Group’s income growth and
cost reduction 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.
Rolling Stock Yard, London Knowledge Quarter
Life Science REIT plc Annual Report and Financial Statements 2023
Strategic reportCorporate governanceFinancial statementsAdditional information
33
INVESTMENT ADVISER’S REPORT CONTINUED
Financial review continued
Financial performance continued
Adjusted net finance costs for the year were £2.0 million
(2022: £2.7 million), comprising loan interest, expenses
and arrangement fees of £8.9 million, partially offset by
capitalised finance costs of £3.3 million and adjusted
finance income of £3.6 million. The Group incurred
exceptional one-off finance costs of £1.5 million (2022: £nil),
with £0.7 million relating to the write-off of unamortised
arrangement fees on the Group’s debt facility, which was
refinanced in June 2023, and an early repayment fee of
£0.8 million on the Fairfield facility (see next page).
Fair value losses on derivatives and deferred premiums
were £3.8 million (2022: £2.2 million gain), relating to the
interest rate caps that were in place at the start of the year
and the new cap entered into following the refinancing in
June 2023. An interest rate cap acquired with OTP expired
in June 2023.
The unrealised loss on revaluation of investment properties
was £22.8 million (2022: £31.3 million loss). See the
valuation and net asset value section in this report for more
information.
As a REIT, the Group is not subject to corporation tax on
its property rental business and the tax charge relating to
2023 was therefore £nil (2022: £0.1 million), with a further
£0.1 million release of the prior year provision that was no
longer required.
The IFRS loss after tax for the year was £21.7 million
(2022:£27.6 million). This resulted in IFRS loss per share
of 6.2 pence (2022: 7.9 pence) and EPRA EPS of 1.7 pence
(2022: 0.4 pence). Adjusted EPS, which is EPRA EPS
excluding the impact of exceptional one-off costs, was
1.9pence (2022: 0.7 pence).
Dividends
The Company paid two dividends during 2023. These were:
• the second interim dividend of 3.0 pence per share, in
respect of the year to 31 December 2022, which was paid
in May 2023; and
• a first interim dividend of 1.0 pence per share in respect
of 2023, paid in October 2023.
Since the end of the year, the Board has declared a second
interim dividend of 1.0 pence per share in respect of 2023
(see post period end events on page 36).
The cash cost of the dividends paid and declared in respect
of 2023 is £7.0 million. At 31 December 2023, the Group had
distributable reserves of £328.0 million (31 December 2022:
£337.1 million), with the majority being in the Company
following the cancellation of the share premium account
in2022.
Valuation and net asset value
The portfolio was independently valued by CBRE as at
31December 2023, in accordance with the internationally
accepted RICS Valuation – Professional Standards (the
”Red Book”).
The table below analyses the movement in valuation during
the year:
£m
Portfolio valuation at 31 December 2022
387.6
Acquisitions
1
(0.8)
Capital expenditure
22.7
Finance costs capitalised
3.3
Movement in rent incentives
0.1
Fair value losses on investment properties
(22.8)
Disposals (7. 8)
Portfolio valuation at 31 December 2023 382.3
1. This balance relates to the finalisation of prior-year acquisitions. There
were no acquisitions of new assets in 2023.
The unrealised loss on revaluation of investment properties
of £22.8 million is mainly driven by a like-for-like reduction
in value of 7.1%. This resulted from an outward yield shift
of 58 basis points, partially offset by 5.0% like-for-like ERV
growth in the year. Space defined as offices saw a valuation
fall of 9.8% on a like-for-like basis; this was in line with the
wider office market and reflected an outward yield shift of
66 basis points. Space defined as laboratories for valuation
purposes was more resilient posting a like-for-like valuation
decline of 1.6%; a 52 basis points outward yield shift was
almost fully offset by ERV growth of 10.4%. At the year end,
this space represented 31.7% of the like-for-like portfolio.
As per the 31 December 2023 valuations, there is up to a 60
basis points yield variance in the vacant development space
versus let completed space. As we continue to complete
and let up the space at OTP over the next 12 months, we
expect the like-for-like and absolute position to significantly
improve.
IFRS NAV was 81.1 pence per share (31 December 2021:
91.3pence per share). The EPRA NTA at the year end was
79.9 pence per share (31 December 2022: 90.0 pence per
share). The reduction in EPRA NTA per share (see chart on
next page) was primarily the result of dividends paid and
the revaluation loss, partially offset by adjusted earnings.
Life Science REIT plc Annual Report and Financial Statements 2023
34
Debt financing
The Group undertook two debt refinancings in 2023. In
February, the Group refinanced the £36.5 million Fairfield
debt facility acquired with OTP, by utilising £26.3 million of
the Group’s HSBC facility and existing cash resources. This
has reduced the Group’s cost of debt, reflecting the higher
interest rate on the Fairfield facility, and enabled OTP to be
used as security for other debt financing.
In June 2023, the Group refinanced the £150.0 million HSBC
term loan and RCF, with Bank of Ireland joining HSBC in
providing the new facility. This includes a £100.0 million
term loan, increased from £75.0 million, and a £50.0 million
RCF, both of which have had their terms extended to June
2026, with two one-year extension options. The Group also
has a £35.0 million accordion facility option available on the
RCF. The facilities are secured on all of the Group’s assets.
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
£3.6million predicated on a forecast debt draw down
schedule. At the year end, the Group was slightly over
hedged against SONIA at 106.9%. 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 £40.0 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 some
of the completed OTP buildings, which are rated either
BREEAM Excellent or EPC A.
At 31 December 2023, the £100.0 million term loan was
fully drawn and the Group had drawn £8.7 million against
the RCF. The Group also had cash and cash equivalents of
£14.3 million (31 December 2022: £45.6 million). The LTV
was therefore 24.7% at the year end (31 December 2022:
16.8%). We continue to believe that a range of 30.0-40.0%
is optimal in the longer term.
The Group had £41.3 million available within the RCF at the
year end, resulting in total liquidity of £55.6 million to fund
the ongoing development at OTP, which had £46.2 million
costs to complete as at 31 December 2023. The RCF will be
drawn on a quarterly basis to meet development funding
requirements and minimise interest costs throughout the
remaining development period.
75.0
79.0
83.0
87.0
93.0
95.0
Dec 22 Adjusted
earnings
Loss on
disposal
Revaluation
decline on
development
non-LFL
portfolio
Exceptional
costs
SONIA cap
premium
Dividends Dec 23
90.0
1.9
(0.1)
(0.4)
(0.4)
(1.0)
(4.0)
(6.1)
79.9
Pence per share
77.0
81.0
85.0
89.0
91.0
Revaluation
decline on
LFL portfolio
decline
Movement in EPRA NTA per share
Life Science REIT plc Annual Report and Financial Statements 2023
Strategic reportCorporate governanceFinancial statementsAdditional information
35
Financial review continued
Resourcing for growth – Ironstone
As the Investment Adviser, our team plays a crucial role in
the Group’s success. Our people have a range of relevant
skills, including real estate investment, asset management,
finance and sustainability. While everyone who joins us has
the experience and qualifications they need for their role,
we are committed to supporting professional and personal
development and training, to help our people progress
their careers within Ironstone. We therefore run an annual
appraisal process and provide both statutory and individual
training, according to each person’s job or personal
requirements. In December 2023 we also conducted our
first employee survey and are currently evaluating the
feedback.
Diversity and inclusion are important to us, as we recognise
the benefits of diverse viewpoints and life experiences.
At the year end, our gender diversity was 36% male, 64%
female, with 64% of the team identifying as white British
and 36% as other backgrounds. We also consider the age
profile of our team with 18% aged 20-29, 18% aged 30-39,
27% aged 40-49 and 37% aged 50-59.
Our employee turnover was low in 2023, with one person
leaving and one new hire, resulting in a turnover rate of 8%.
Post year end events
• Lease finalised with WAE Technologies Ltd in February
2024 following the practical completion of Building 5 at
an initial rent of £18.6 per sq ft, increasing to £20.1 per sq
ft in January 2025.
• Reached practical completion on Building 5 at OTP
comprising 58,100 sq ft of space.
• With macroeconomic uncertainty continuing and interest
rates now expected to remain elevated for some time,
the Board has taken the decision to rebase the dividend
to a level that is sustainable and substantially covered
by adjusted earnings over time. The additional financial
flexibility will enable the Group to effectively progress its
strategy to deliver on the value accretive opportunities it
has created. The Board has therefore declared a second
interim dividend of 1.0 pence per share, bringing the total
dividend for the year to 2.0 pence per share. This will
be paid as an ordinary dividend on 13 May 2024, with an
ex-dividend date of 4 April 2024. The Board will look to
maintain a sustainable dividend going forward, with the
intention that future dividends reflect the progression in
underlying earnings.
INVESTMENT ADVISER’S REPORT CONTINUED
Oxford Technology Park, Oxford
Life Science REIT plc Annual Report and Financial Statements 2023
36
Compliance with the investment policy
The Group’s investment policy is set out in full on pages 156 to 158. The key elements of the policy are summarised below.
We complied with the policy throughout the year:
Policy element Compliance in the period
Invest in a diversified portfolio of properties across the UK which are
typically leased or intended to be leased to occupiers operating in, or
providing a benefit to, the life science sector (“life science properties”).
Yes. All the properties are in the Golden
Triangle and are either leased or intended to
be leased to life science organisations.
Examples of the assets the Group can acquire: wet and dry laboratories,
offices, incubators and co-working space, manufacturing and testing
facilities, and data centres.
Yes. All the Group’s assets are a mix of
laboratory and office space.
The Group can acquire individual buildings, a group of buildings across
a single science park or the entirety of a science park. This may include
purchasing or developing buildings that are leased or intended to be
leased to occupiers providing ancillary services to employees of companies
operating in, or providing a benefit to, the life science sector.
Yes. The Group owns both individual assets
and a science park.
The Group will typically invest in income-producing assets, consistent with
providing capital growth and growing income.
Yes. All the assets are income producing
(other than the development at OTP) and
offer potential for capital growth and rising
income through asset management.
Any asset management or development opportunities will minimise
any development risk, typically through forward funding or similar
arrangements.
Yes. We are forward funding the
development programme at OTP and have
a fixed-price contract for each building with
the developer.
The maximum exposure to developments or land without a
forwardfunding arrangement is 15% of gross asset value (“GAV”).
Yes. There are no developments or land
without a forward-funding arrangement.
No individual building will represent more than 25% of GAV at
31December2023.
Yes. No building exceeds the threshold.
The Group 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.
One occupier exceeds 20% of contracted
rent but remains below the 30% threshold.
This percentage is expected to fall as OTP
continues to be developed and leased up.
The aggregate maximum exposure to assets under development, including
forward fundings, will not exceed 30% of GAV at 31December 2023.
Yes. 17.6% of assets are currently in
development.
No more than 10% of GAV will be invested in properties that are not life
science properties.
Yes, more than 90% of assets are currently
classified as life science properties.
The Group will not invest more than 10% of GAV in other alternative
investment funds or closed-ended investment companies.
Yes. The Company has no investments of
thistype.
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
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
25 March 2024
Life Science REIT plc Annual Report and Financial Statements 2023
Strategic reportCorporate governanceFinancial statementsAdditional information
37
SUSTAINABILITY
Delivering sustainable
buildings sits at the heart
of our strategy so we are
confident of making good
progress on our net zero
commitments.
Sally Ann Forsyth
Chair of the Sustainability
Committee
I became the Board’s sustainability lead in May 2022 and in
that time have seen the enormous strides the Company has
taken to progress its sustainability agenda. The highlight
this year is our commitment to be net zero carbon by
2040 for scopes 1 and 2 and by 2045 for scope 3. This is
an ambitious goal, particularly as our focus on laboratories
means our occupiers typically have higher energy
requirements, but delivering sustainable buildings sits at
the heart of our strategy so we are confident of making
good progress.
Our business model is primarily focused on converting
existing buildings to life science use. This typically means
retaining the substructure and superstructure of buildings,
thereby avoiding the upfront embodied carbon emissions
which contribute an estimated 50% of a building’s GHG
emissions over its lifetime. Examples of that are at
Cambourne and RSY where we have or are looking to
repurpose existing space.
OTP is our only significant development project, and here
we have undertaken an assessment of the embodied
carbon emissions in one of our buildings which we
are learning from to make future development and
refurbishment more sustainable.
ESG is also central to our overall aim of ‘creating space
for science’ which with all its possible applications from
green technology to medical advances has the capacity to
improve the welfare of millions of people. Given their life
science focus, we are fortunate that many of our occupiers
have their own sustainability goals and are keen to work
with us to achieve them. Data sharing is often the starting
point and here we have made good progress; we now
collect energy consumption data for 91% of investment
assets (by sq ft), including occupier procured energy
covering over 140,000 sq ft. We are actively engaging with
our occupiers; this year we have prioritised the single-let
units and have held one-to-one sustainability meetings with
45% of those.
Life Science REIT plc Annual Report and Financial Statements 2023
38
Environmental
Social Governance
• Progressing our net zero
pathway
• Achieving best-in-class
building certifications
• Sustainable development and
repurposing
• Supporting biodiversity
• Providing healthy buildings
• Partnering with our occupiers
on their sustainability
objectives
• Providing collaborative space
• Encouraging active travel
• Supporting local charitable
organisations
• Maintaining best practice
governance
• Addressing ESG related risks
and opportunities
• Transparent disclosure and
participation in industry
benchmarks
Our approach to Sustainability
The urgency to make real progress on sustainability
initiatives is increasing. 2023 was the warmest year on
record and the built environment is responsible for 40%
of greenhouse gas emissions globally, so in our sector,
the need to act is particularly acute. We have seen the
volume of ESG-related legislation grow including the work
the International Sustainability Standards Board (“ISSB”)
has done to harmonise sustainability reporting standards
and the EU’s Corporate Sustainability Reporting Directive
(“CSRD”). Noteworthy for 2024 is the forthcoming
Taskforce for Nature-related Financial Disclosure (“TNFD”).
The direction of travel is clear, and as Chair of the
Sustainability Committee, ensuring we continue to align
with best practice is a priority. To this end, the Investment
Adviser has created a separate ESG risk register and
established an ESG Taskforce (see page 52) to help inform
on forthcoming issues, risks and opportunities and to shape
decision making and long-term strategy.
We set ESG targets on an annual basis with progress against
those targets regularly monitored by the ESG Taskforce.
You can find more information about our strategy, how it
is evolving and the progress we are making towards our
targets on the following pages.
Disclosure frameworks we are currently aligned to are set
out below:
Framework Status Pages
Taskforce on
Climate-related
Financial Disclosures
(“TCFD”)
Voluntary disclosure
(not mandatory
for closed-ended
investment companies)
46 to 53
Streamlined Energy
& Carbon Reporting
(“SECR”)
Mandatory disclosure 54 to 59
The Companies
(Directors’ Report)
and LLPs (Energy
and Carbon Report)
Regulations 2018
Mandatory disclosure 54 to 59
EPRA – European
Real Estate
Association
Voluntary disclosure
(not mandatory
reporting, best practice
adopted)
54 to 59
Life Science REIT plc Annual Report and Financial Statements 2023
Strategic reportCorporate governanceFinancial statementsAdditional information
39
Sustainability highlights
Highlights of our sustainability performance for 2023 are set out below with a full update on pages 44 to 45.
SUSTAINABILITY CONTINUED
Environmental
324.5 tonnes CO
2
e scope 1 & 2 emissions
LFL (2022: 206.6 tonnes CO
2
e)
15% increase in LFL energy intensity
8 buildings (including on-site
developments) with full or interim BREEAM
Excellent or Very Good certifications
87% A-C EPC by area (2022: 83%)
127,000KW generated from on-site photo
voltaic (“PV”) panels
91% of investment asset energy
consumption data collected (2022: 57%)
100% of landlord controlled waste diverted
from landfill (2022:100%)
Social
Face-to-face ESG engagement with 45% of
single let occupiers by sq ft
OTPortal app developed, enabling regular
communication with occupiers
£10,000 donated to charities local to our
assets or provided through match funding
Governance
Net zero carbon commitment: 2040 for
scopes 1 & 2 and 2045 for scope 3
Maintaining Board gender diversity 50%
female representation, including the Chair
ESG and climate-related risk framework
implemented
Awarded sBPR Silver Award and sBPR
Most Improved Award by EPRA for 2022
BREEAM
EPC ratings byarea
Very good
Excellent
Interim Excellent
20%
60%
0%
40%
80%
100%
2022 2023
87.3% Rated A-C
83.4% Rated A-C
25.0%
7.4%
51.0%
16.6%
35.5%
9.0%
42.8%
12.7%
A B C D
8 BREEAM interim or final
certificates across 44% of
thetotal portfolio area
9%
14%
76%
40
Life Science REIT plc Annual Report and Financial Statements 2023
2021
Rolling Stock Yard, Lumen House, Merrifield and
Cambourne purchased
2022
Oxford Technology Park and Herbrand Street purchased
Sustainability Committee formed and Sally Ann Forsyth
appointed Chair
ESG stakeholder mapping and engagement
Climate change scenario analysis and voluntary TCFD
disclosure
2023
Completed first embodied carbon assessment atOTP
Disposal of Lumen House
Integrated climate and ESG risks into corporate risk register
Group sustainability strategy and policy approved
2024
Launch net zero carbon pathway (see pages 42 to 43)
Deliver first fully electric laboratory atCambourne
Conduct embodied carbon assessment for Cambourne
repurposing project
2025+
Publish formal Net Zero TransitionPlan
Publish and report against TNFD
2030+
50% reduction in scope 1 and 2 emissions in line with the
Company’s Net Zero Pathway
2040
Target to achieve net zero for scope 1 & 2 carbon emissions
2045
Target to achieve net zero for scope 3 carbon emissions
NHS commitment to be net zero across its supply chain
2050
UK Government net zero target
Sustainability timeline
41
Life Science REIT plc Annual Report and Financial Statements 2023
Corporate governanceFinancial statementsAdditional information Strategic report
Net zero pathway (“pathway”)
SUSTAINABILITY CONTINUED
Pathway ambitions
We recognise that we have a clear responsibility to
support the transition to a net zero carbon economy.
For a building, net zero carbon is achieved when all the
carbon emissions associated with it, from production
and operation through to deconstruction and end of life
are zero or negative. The Group has an ambition to be
net zero carbon across our scope 1, 2 and 3 emissions
on the following basis and this commitment has been
approved by the Board:
• to be net zero in scopes 1 and 2 carbon emissions by
2040;and
• to be net zero in scope 3 emissions by 2045.
These targets are ahead of the UK Government’s target
of 2050 and are aligned with industry best practice.
Reductions will be achieved through a combination of
energy efficiency, electrification and renewable energy.
ThePathway has considered the Group’s material carbon
emissions associated with the energy consumption set
outbelow.
Pathway scope
Scope 1
Landlord gas fuelled
heatingsupplies
1
Scope 2
Landlord electricity
supplies
1
Scope 3
Occupier controlled energyusage
2
Existing portfolio (electricity & heat)
Yes Yes Yes
Occupier controlled energyusage
2
Developments & repurposing (embodied carbon)
N/A N/A Yes
Embodied carbon of construction
materials
2
Overview of aims
• Reduce usage
• Phase out gas fuelled supplies
• Improve data capture
• Reduce usage
• Repurpose in line with sustainability
standards
• Purchase renewable backed
electricity for all supplies
• Maximise on-site renewable energy
generation
• Encourage occupiers to reduce
usage and adopt renewable
energy sources
• Phase out gas fuelled supplies
• Repurpose and develop in line
with Sustainability Standards
• Maximise on-site renewable
generation
1. Includes some occupier energy usage due to absence of sub metering.
2. Approach to other scope 3 emissions categories will be investigated further in 2024.
Pathway approach
During 2023 we collated robust data for all the Group’s
scope 1 & 2 (direct) carbon emissions. We have increased
our coverage of occupier energy use to 91% of the
investment portfolio, providing real visibility over our
scope 3 emissions. This data has enabled us to use 2023
as our baseline year for operational carbon.
The Pathway itself is generated by analysing the current
lease terms and opportunities for repurposing on an
asset-by-asset basis. This approach means the Group’s
decarbonisation solution is aligned to its long-term
strategy.
The diagram shows our high-level pathway to net zero
and the mechanisms we will use to achieve our goal. Our
pathway is expected to deliver a reduction in absolute,
operational carbon emissions of over 90%.
Our interim target for scopes 1 & 2 is a reduction in
carbon emissions of 50% by 2030..
42
Life Science REIT plc Annual Report and Financial Statements 2023
Development is also a key driver of carbon emissions
and repurposing buildings for life science use poses
a unique challenge, as labs can consume around five
times more energy than the equivalent offices floor
area. Therefore, the design, build and operation of lab
spaces needs careful consideration to ensure space
is both configured appropriately for the occupier and
that the impact on the environment is minimised. These
factors mean that the Group’s carbon emission profile
could potentially fluctuate depending on the timing of
development and repurposing across the business.
Our OTP development in Oxford is a flagship asset
for the Group, but because we acquired it once the
development plans were fixed and delivery was
underway, we have been unable to materially influence
the choice of construction materials or techniques and
the embodied carbon from this development is therefore
out of scope for the Pathway.
However, the core strategy is to repurpose existing
buildings and no other major developments are currently
forecast and any future developments would be in
scope. This year we conducted an embodied carbon
assessment on the IQ at OTP and now have a much
better understanding of how material choices and
building techniques drive embodied carbon which we
will apply to future projects.
More generally, our focus across the portfolio will be
on improving our understanding of energy usage on
an asset basis; by tracking emissions against targets on
an annual basis and at a granular level we gain insights
which will help us to minimise carbon emissions for our
occupiers, supporting them on their journeys to net zero.
Indicative net zero pathway – operational carbon emissions
Achieved by 2040 Achieved by 2045
Energy
efficiency
measures and
electrification
Scope 1
Energy
efficiency
measures
and grid
decarbonisation
Scope 2
Energy
efficiency
measures and
electrification
Scope 3
Energy
efficiency
measures
and
grid
decarbonisation
Scope 3
Required
carbon
offsetting
Indicative
Baseline
Energy efficient interventions we will be
delivering though our strategy include:
• Insulation and window replacement
• LED lighting
• Heat pump installation
• Heating system replacement
• PV installations and battery storage
• AI assisted building controls
• Full system commissioning
Increase Decrease
100%
18%
28%
45%
5%
4%
43
Life Science REIT plc Annual Report and Financial Statements 2023
Corporate governanceFinancial statementsAdditional information Strategic report
Sustainability strategy
Our sustainability strategy comprises high-level objectives at the corporate level and is supported by more granular
initiatives and targets for our assets, as well as the minimum standards we need to meet for developments and
acquisitions. A key achievement of our programme this year has been to agree a net zero carbon pathway and to embed
that in the Group’s business plan but progress has been slower in some areas and these will be a focus for this year.
SUSTAINABILITY CONTINUED
Environment
Reducing our impact on the environment, reducing carbon emissions and waste,
and enhancing biodiversity.
Focus area 2023 Achievements Targets for 2024 Status
Progressing net
zero
• Net zero pathway commitments set and approved by
the Board (see pages 42 to 43)
• 2023 established as baseline year
• 100% of scope 1 & 2 carbon emissions reported
• 91% of investment asset energy consumption data
captured (2022: 57%) including 75% of occupier
procured energy (2022: n/a)
• 383 tCO
2
e absolute scope 1 & 2 carbon emissions,
a 72% increase on prior year due to increased
occupancy at RSY and OTP buildings completing
• Progress towards net zero by 2040 for
direct (scope 1 & 2) carbon emissions
(CO
2
e)
• Progress towards net zero by 2045 for
indirect (scope 3) carbon emissions (CO
2
e)
• 52% of landlord procured energy Renewable Energy
Guarantees of Origin (“REGO”) backed
• 100% of landlord renewable energy
procured
• PV feasibility study undertaken at OTP and
energy audit undertaken at Cambourne including
renewables options. PV on two sites currently
• Identify and progress opportunities for
on-site renewables across portfolio
Achieving best-
in-class building
certifications
• Interim BREEAM ‘Excellent’ in design for buildings
3,5, 6, 7 and the IQ (4A and 4B) at OTP. See BREEAM
table on page 56
• Achieve BREEAM Excellent rating for
ground-up construction projects and Very
Good rating for repurposing projects
• 87% of properties now EPC A-C rated (2022: 83%).
100% excluding Herbrand Street which is listed. See
EPC ratings table on page 56
• Target minimum EPC rating B across the
portfolio
Sustainable
development &
repurposing
• Cambourne repurposing adopted sustainability
standards on a comply or explain basis. Supplier
appointment requirements included Considerate
Contractor registration and Modern Slavery Act
alignment
• Embodied carbon calculated for the IQ at OTP
• 100% of non-hazardous waste diverted from landfill
• Track and report on adherence to
sustainable standards for repurposing and
development
• Zero non-hazardous waste to landfill
Supporting
biodiversity
• Landscaping plan implemented at OTP, including dry
and wet meadow areas, native shrubs and over 140 trees
• Biodiversity net gain on all developments
• Biodiversity strategy for all assets
In setting our sustainability strategy,
we have aligned our approach to the
following of the UN's Sustainability
Development Goals where we can
have the biggest impact:
Key:
Ahead of target On target Behind target
Life Science REIT plc Annual Report and Financial Statements 2023
44
Social
Providing buildings that enhance wellbeing, encourage collaboration and enable a healthy
workforce for our occupiers.
Governance
Setting the highest standards ofcorporate governance.
Focus area 2023 Achievements Targets for 2024 Status
Providing healthy
buildings
• The Fitwel healthy building checklist used for the
Cambourne repurposing project
• Developments to achieve Fitwel
certification with a minimum 2-star rating
• Repurposing projects and existing
portfolio to be assessed against Fitwel
criteria
Partnering with
our occupiers
on their
sustainability
objectives
• ESG stakeholder engagement with our staff,
occupiers, investors and Board to identify areas of
importance
• One-to-one engagement with 45% of single unit
occupiers
• Opportunity to collaborate on ESG matters
offered to all occupiers by the end of2024
Providing
collaborative
space
• Collaborative space delivered at the reception of RSY
• Plans for collaborative space progressing at the IQ
at OTP
• OTPortal app developed and launched in 2024
• All multi-tenanted assets to have
collaborative space on-site by 2025
Encouraging
active travel
• Undertaken occupier travel survey at RSY
• Progressing sustainable travel initiatives at OTP
• Green and active travel plans in place
across portfolio including cycling facilities
Supporting
local charitable
organisations
• £9,000 donated to charities close to our assets
including Science Oxford, Wintercomfort in
Cambridge and Refugee Action
• Additional £1,000 donated, matching Investment
Adviser’s employees’ fundraising
• Annual corporate charitable plan
Focus area 2023 Achievements Targets for 2024 Status
Maintaining
best practice
governance and
oversight of
ESGrisks
• Sustainability Committee operational in 2023, see
page 96. ESG Taskforce established
• Separate ESG and climate-related risk register
developed and framework established
• Anti-corruption and whistleblowing policies
approved by Board
• Provided additional disclosure on Board and
Investment Adviser employment
• Evolve best practice governance in line
with GRESB, the Global Real Estate
Sustainability Benchmark and TCFD
recommendations demonstrating
incremental improvement each year
• 100% of new leases include energy data collection
and collaboration on building performance; 87%
include preservation of EPC rating
• 100% of leases contain green clauses
aligned to principles
Transparent
disclosure and
participation
in industry
benchmarks
• Awarded EPRA sBPR silver award and EPRA sBPR
most improved award for the 2022 Annual Report
• Achieve Gold standard EPRA sBPR
reporting for year ending 2023
• 2023 MCSI rating of ‘B’ • Achieve incremental rating improvement
for indices
Life Science REIT plc Annual Report and Financial Statements 2023
Strategic reportCorporate governanceFinancial statementsAdditional information
45
A summary of the Group’s climate-related financial
disclosures is set out below. This aligns to the TCFD’s
four pillars – Governance, Strategy, Risk Management
and Metrics and Targets and to the 11 specific TCFD
recommendations. Progress against each recommendation
is set out below.
TCFD
Compliance Statement
Although the Group is exempt from the TCFD
disclosure requirement as Listing Rule 9.8.6R(8)
explicitly excludes closed-ended investment
companies, the Group fully supports the
recommendations and voluntarily discloses its
alignment.
Pillar TCFD recommendation Compliance
Governance
a. Describe the Board’s oversight of climate-related
risks and opportunities
Consistent
b. Describe management’s role in assessing and
managing climate-related risks and opportunities
Consistent
Strategy
a. Describe the climate-related risks and opportunities
the organisation has identified over the short,
medium and long-term
Consistent
b. Describe the impact of climate-related risks and
opportunities on the organisation’s business
strategy and financial planning
Developing: Climate-related risks
and opportunities have been
identified and materiality assessed
and incorporated within business
plan. Developing a quantitative
approach over the medium-term.
c. Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C or lower
scenario
Consistent
Risk
Management
a. Describe the organisation’s processes for
identifying and assessing climate-related risks
Consistent
b. Describe the organisation’s processes for managing
climate-related risks
Consistent
c. Describe how processes for identifying and
managing climate-related risks are integrated into
the organisation’s overall risk management
Consistent
Metrics and
Targets
a. Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in line
with its strategy and risk management process
Consistent, and developing further
metrics including energy intensity
measures over the medium-term.
b. Disclose scope 1, scope 2, and, if appropriate, scope
3 greenhouse gas (“GHG”) emissions, and the
related risks
Consistent regarding scopes 1 & 2.
Improving visibility over scope 3
emissions with visibility over 91% of
investment assets energy data.
c. Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets
Consistent
Life Science REIT plc Annual Report and Financial Statements 2023
46
Governance
Describe the Board’s oversight of climate‑related risks and opportunities
The Board, which is advised by Ironstone, the Investment Adviser, is responsible for setting the strategic direction of the
Group, which includes delivery of the sustainability strategy. The Board has full oversight of climate-related risks and
opportunities via the Audit and Risk Committee and the Sustainability Committee, as all Board Directors are members of both
committees. At each Sustainability Committee the Investment Adviser provides the ESG risk register for review and comment,
with attention drawn to any changes in risk rating, new or emerging risks. TheSustainability Committee recommends to
AuditR Ltd (“AuditR”) (the Group’s independent risk management consultant) any key risks to be included in the corporate
risk register which is subsequently presented to the Audit and Risk Committee by AuditR.
The Sustainability Committee is chaired by Sally Ann Forsyth and meets biannually to monitor progress against sustainability
strategy targets, including climate-related risk mitigation.
The Investment Adviser provides quarterly updates at Board meetings on progress against the sustainability strategy goals
and updates on ESG considerations more broadly to enable the Board to fully consider climate-related risks and opportunities
in their decision making.
The Investment Adviser’s Investment Committee meets to review and appraise investment advisory decisions for the Group
including acquiring and disposing of assets.
Governance of climate‑related risks and opportunities
The Board – Sets the sustainability strategy of the Group,
monitors and has oversight of performance against targets
Audit and Risk Committee – Monitors and reviews risks and
opportunities of the Group, including those that are key
climate-related
Investment Adviser Investment Committee – Ensures
expenditure is in line with the sustainability standards and targets
Investment Adviser – Responsible for preparing and
implementing the sustainability strategy, including identifying,
assessing and managing climate-related risk mitigation
BOARD
Audit and Risk Committee
Sustainability Committee
Risk
Management
Consultant
ESG
Consultant
Investment
Adviser
• Investment
Committee
• ESG Taskforce
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Sustainability Committee – Monitors and reviews climate-
related risks and opportunities, makes recommendations to
the Audit and Risk Committee for additions/deletions to the
corporate risk register via AuditR
Risk Management Consultant – AuditR prepares, provides
expertise and manages the Group’s Risk Management Framework
ESG Taskforce – A group of internal (Ironstone) and external
expertise reviewing emerging climate-related risks and providing
expert industry advice
ESG Consultant – Square Gain provides support on operational
aspects of ESG, the regulatory landscape, and climate-related
risks and opportunities
Roles in governing climate‑related risks andopportunities
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47
Governance continued
Describe management’s role in assessing
and managing climate‑related risks and
opportunities
The Investment Adviser prepares and integrates the
sustainability strategy within the day-to-day management
of the Group’s assets. The Investment Adviser works with
the independent risk management consultant, AuditR,
and the independent ESG Consultant, Square Gain, to
undertake regular assessments of the Group’s climate-
related risks and opportunities. These assessments are
undertaken alongside broader ESG topics and results in an
updated ESG risk register including controls and mitigations
which is provided to the Sustainability Committee for
review biannually.
In 2023, the Investment Adviser introduced sustainability
standards for acquisitions, development and repurposing.
In line with which, the Investment Adviser undertakes
environmental due diligence focused on the asset’s
vulnerability and resilience to key climate-related risks
including flooding, subsidence, overheating and Minimum
Energy Efficiency Standards (“MEES”) compliance.
For detail on the climate scenario analysis see below.
TheInvestment Adviser has established an ESG Taskforce,
which comprises the Head of ESG, Director of Asset
Management, Head of Investor Relations and Corporate
Affairs and Square Gain. They meet monthly to prepare,
manage and prioritise the sustainability strategy including
climate-related risks at asset level. The ESG Taskforce
is also consulted as appropriate on material investment
decisions.
The Investment Adviser has been closely involved in the
climate change scenario analysis set out below with the
output discussed at the Investment Adviser risk review
meeting and integrated into both the ESG risk register and
the corporate risk register.
For full details of our Risk Management Framework see
page 63.
TCFD CONTINUED
Strategy
Describe the climate‑related risks and
opportunities the organisation has identified
over the short, medium and long‑term
Over the last year, under the stewardship of our Board,
we continue to implement our sustainability strategy, to
update, manage and mitigate the climate-related risks and
opportunities across our portfolio. As part of our business
strategy, a climate change scenario analysis was undertaken
in 2022 and reviewed in 2023 to identify the short, medium
and long-term physical risks to the business. The time
horizons adopted were based on real estate lifecycles; as
buildings have long design lifespans, climate-related issues
often manifest themselves over the medium and longer term,
therefore the following applies:
• short-term is considered up to 2025, aligned with the
current period;
• medium-term is from 2025 to 2030, aligned with the period
used for the Group’s planning, forecasting and performance
analysis; and
• long-term is from 2030 to 2050, beyond the current
forecasting period, informing the longer-term
investmentplan.
Through the climate change scenario analysis and our broader
risk management process we assessed both the physical
climate risks posed by climate change, and also the risks that
arise as we transition towards a net zero carbon economy.
This year, the Group introduced a separate ESG register which
includes the consideration and mitigation of both physical and
transitional climate-related risks and we will continue to evolve
our approach to measuring the impact of these.
The methodology applied to the climate change scenario
analysis is set out below.
Climate change scenario analysis methodology
To take account of the diverse range of climate futures,
we incorporate three of the Intergovernmental Panel on
Climate Change’s representative concentration pathways
(“RCPs”) measuring average global warming:
• RCP 2.6: 0.9-2.3°C
• RCP 4.5: 1.7-3.2°C
• RCP 6.0: 2.0-3.7°C
The pathways describe different climate futures, all of which
are considered possible depending on the volume of GHGs
emitted in the years to come. Using location data for each
site, our analysis demonstrates how the severity of a broad
range of climate impacts will change over time, at different
levels of global warming, which depend on how rapidly
GHG emissions are reduced.
A broader range of risks are constantly monitored by
the Group. For the purpose of reporting the Group
uses the impact and likelihood thresholds of our Risk
Management Framework to define climate-related risks and
opportunities (see pages 49 to 51). The potential impact of
climate change is one of our principal risks, as we seek to
reduce both our impact on the environment and the impact
that climate change has on our business. Refer to page 72
in the risk section.
Life Science REIT plc Annual Report and Financial Statements 2023
48
Ref Risk Time horizon and
risk description
Impact on strategy
and planning
Impact on
financial planning
Residual
exposure
Acute Physical Risk (P)
P1
Flooding • Medium to long-term
• Damage due to
surface water and/or
river discharge
• Flood risk modelling
undertaken on all
assets
• Cost of flood risk
assessments
• Cost of repairing/
maintaining buildings
• Increased insurance
costs
• Loss of value of
impacted buildings
Medium
P2
Extreme
weather events
• Short-term
− Damage from
storm, extreme
heat, wind
• Medium and
long-term
− Subsidence,
damage to
structure of
building
• Climate change
scenario analysis
undertaken
• Introduced
refurbishment and
acquisition protocols
which take account of
climate risk factors
• Comprehensive repair
and maintenance
programmes
• Increased insurance
costs
• Cost of cooling
facilities
• Increased cost
of repair and
maintenance
Low
Transition Risk (T)
T1
Market
− occupier
demand
• Short to medium-term
− Demand for
sustainable space
could result in a
‘brown discount’
on valuation or
structural voids
− Occupiers
require additional
amenities to
support wellbeing
• Targeting minimum
BREEAM Very Good
rating and EPC B
• Assessing opportunities
for Fitwel certification
• Comprehensive
programme of occupier
engagement to
understand their needs
• Cost of delivering
more sustainable
buildings (low
carbon materials,
low carbon plant and
equipment)
• Cost of building
certifications
• Cost of delivering
amenity space and
renewable energy
solutions
Medium
T2
Policy & legal
− regulatory
compliance
• Short to medium-term
− Increasing volume
of disclosure
requirements
− Complexity of data
collection
• Elevated risk of
incorrect disclosures
• External advisers
engaged to support on
disclosure requirements
and advise on
regulatory landscape
• Improving the
robustness of our data
through automated
systems
• Occupier engagement
to support data
collection
• Acquisition and asset
management protocols
incorporating climate
considerations
• Cost of external
advice
• Cost of improved
data systems
Medium
Climate-related risks and opportunities
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49
Ref Risk Time horizon and
risk description
Impact on strategy
and planning
Impact on
financial planning
Residual
exposure
Transition Risk (T) continued
T3
Market
− stranded
assets
• Medium to long-term
− Buildings become
unlettable and cost
of upgrades are not
financially viable
− Insufficient
electrical capacity
• Acquisition and asset
management protocols
include climate risk
analysis to identify
how we can enhance
climate resilience of our
buildings
• External advisers
engaged to advise on
regulatory landscape
• Regular power usage
audits undertaken and
monitored
• Cost of more regular
upgrades and
improvements
• Cost of external
advice and third-
party analysis
• Occupier
engagement
to understand
a building’s
performance
Medium
T4
Market
− cost of
decarbonisation
plans
• Short-term
− Cost of low carbon
materials and
processes rises,
lack of green skills
• Long-term
− Cost of carbon
offsets increases
• Business model
focused on
repurposing,
incorporating
sustainability
considerations
• Net zero pathway
reduces carbon
emissions prior to
commitment date,
minimising cost of
offsetting
• Higher capital
expenditure to
deliver business plan
• Loss of value
for assets where
business plan not
delivered
Medium
T5
Market
− cost of capital
• Medium-term
− Higher cost of
finance for less
sustainable assets
− Inability to access
financing
• Business model
focused on
repurposing,
incorporating
sustainability
considerations
• Higher cost of
finance/inability to
access financing
Medium
TCFD CONTINUED
Strategy continued
Climate-related risks and opportunities continued
Rolling Stock Yard, London Knowledge Quarter
Life Science REIT plc Annual Report and Financial Statements 2023
50
Ref
Opportunity
Time horizon and risk
description
Impact on strategy and
planning
Impact on
financial planning
Opportunities (O)
O1
Market
− occupier
demand
• Short to medium-term
− Occupier demand for
sustainable space could
result in a “green” rental
premium’
• Business model focused on
repurposing, incorporating
sustainability considerations
• Potential to drive
rental growth
O2
Market
− stranded
assets
• Short to medium-term
− opportunity to acquire
discounted ‘brown’ assets
and re-purpose
• Acquisition targeting • Potential to deliver
enhanced returns
O3
Market
− cost of capital
• Long-term
− Access to green finance
• Continue to explore green
financing opportunities
• Lower cost of finance
O4
Energy source • Short to medium-term
− Increasing on-site
renewables
• Renewables feasibility studies
• Collaboration with occupiers
• Regularly review EV charging
provision
• Potential for
additional income
streams
• Initial capital outlay
Describe the impact of climate‑related risks
and opportunities on the organisation’s
businesses, strategy and financial planning
The Group believes climate change is a critical risk for real
estate and has approved targets to achieve net zero carbon
for scope 1, 2 and 3 emissions. Our adopted sustainability
standards include guidance for acquisitions, ground-up
construction and repurposing works which focuses on using
energy more efficiently, making our assets more resilient and
reducing operating costs for our customers. Pages 44 to 45
sets out the progress made on our sustainability strategy in
more detail in addition to our metrics and targets.
A key part of our strategy is engagement with occupiers, and
with the market trending towards more sustainable spaces, it is
important we understand their evolving needs and aspirations
so occupier engagement is key to our approach.
This year, the Group has also taken steps to improve the
quality of asset energy data reported which now covers 91%
of the investment asset area, an increase of 34% compared to
last year.
This year the Group has taken several steps towards
supporting the net zero pathway, completing a PV feasibility
study at two of our sites and is looking to increase capacity
for renewable energy generation across our sites in the
short-term.
The Group has committed to a robust plan for transitioning
to a low carbon economy, which is aligned with our plan
to decarbonise assets when repurposing and refurbishing.
As detailed in our sustainability standards, our approach
incorporates electrification, energy efficiency and renewable
energy.
The operational and financial impacts and additional
considerations the Group is reviewing due to climate-related
risks are set out on page 72.
Reflecting the importance it attributes to climate-related
issues, the Board undertakes at least annual training on
climate-related matters to better assess their impact on
strategy. The ESG Taskforce updates the Sustainability
Committee on market trends and asset-specific climate-
related issues. The Group closely monitors UK climate-related
regulation so the financial and operational impacts are
identified early and incorporated into the business plan.
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51
Strategy continued
Describe the resilience of the organisation’s
strategy, taking into consideration different
climate‑related scenarios, including a 2°C or
lower (above pre‑industrial levels) scenario
The Group’s sustainability strategy takes into consideration
different climate-related scenarios, including a 2°C or
lower scenario, and uses RCP 2.6, RCP 4.5 and RCP 6.0, to
ensure our individual assets and business operations have
resilience in each of these scenarios.
Based on this analysis, our vulnerability to all physical
climate risks is low up to 2030. In the RCP 6.0 post-2050
scenario, the risks assessed as material are from flooding
and building inoperability due to overheating. However,
these risks do not take account of existing mitigation or
adaptation measures at a site level.
We manage, minimise and mitigate our climate risks
and ensure resilience through implementing a range
of measures; this includes flood risk assessments on
acquisition, as well as targeting BREEAM certifications,
andEPC A or B ratings.
In addition, when acquiring new buildings, we will
undertake an environmental assessment and climate risk
analysis as part of the due diligence process. This helps to
ensure that we can enhance the asset’s climate resilience
when works are undertaken to refurbish and repurpose the
asset to life science use.
New leases include clauses designed to assist with
delivering our climate change ambitions, for example
requiring any building alterations to be of a type and
quality that does not adversely impact the EPC rating
and the provision of energy consumption data to enable
measurement of the portfolio’s decarbonisation towards
our net zero pathway targets.
Risk management
Describe the organisation’s processes for
identifying and assessing climate‑related risks
We have an ESG risk register, with the significant climate-
related risks being included in our corporate risk register.
The climate-related risks are reviewed and assessed in line
with all other types of risks, applying the same principals
and terminology and identifying and implementing
mitigations accordingly.
Our risk assessment process for prioritising climate-related
risks incorporates an assessment of existing and emerging
regulatory requirements, and the potential materiality of
the impact on operations. This considers both the acute
and chronic physical risks, and the transition risks as we
move to a net zero carbon and climate resilient economy
(in line with TCFD recommendations). Our assessment has
shown that our portfolio is resilient and that these risks are
adequately mitigated at the present time.
Prior to each Sustainability Committee, the ESG Taskforce
(supported by AuditR and Square Gain) reviews the ESG
risk register, updating it as appropriate and discussing
any emerging climate-related risks. The Sustainability
Committee, reviews the climate-related risks and any
proposed changes to the corporate risk register are
recommended to the Audit and Risk Committee.
For full details of the Risk Management Framework and
consideration of emerging risks see pages 63 to 65 and for
detailed description of the roles and responsibilities of the
Sustainability Committee see page 96.
Describe the organisation’s processes for
managing climate‑related risks
The Investment Adviser regularly reviews and updates the
corporate risk register, which is reported to each Audit and
Risk Committee meeting, highlighting any emerging risks,
and any changes to existing risks; the controls in place; and
our exposure to that risk. The Audit and Risk Committee
reviews the risk register, with particular focus on the
principal risks and any emerging risks (including climate-
related risks), and provides updates to the Board.
The Audit and Risk Committee also monitors our risk
management processes and approves relevant disclosures.
It is responsible for monitoring financial reporting and
external audit plans and outputs, as well as providing
assurance to the Board in relation to financial, operational
and compliance controls, all of which are designed to
manage our exposure to risk.
Describe how processes for identifying,
assessing and managing climate‑related risks
are integrated into the organisation’s overall
risk management
We have established the climate-related risk identification,
assessment and management into our core risk
management framework. For full details of our Risk
Management Framework see page 63.
TCFD CONTINUED
Life Science REIT plc Annual Report and Financial Statements 2023
52
Metrics and targets
Disclose the metrics used by the organisation
to assess climate‑related risks and
opportunities in line with its strategy and risk
management process
The metrics used by the Group to assess climate-related risks
and opportunities are aligned with TCFD recommendations
and detailed in the sustainability strategy and risk
management process. Metrics on climate-related risks
associated with water, energy, land use and waste
management, are included and considered to be the most
appropriate for the Group at present. These metrics are
reviewed on an annual basis to ensure they are consistent
with sector-wide disclosure. As data develops, the Group is
committed to providing historical data to aid trend analysis;
further details on our metrics and targets can be seen in the
table below and in the EPRA sBPR report on pages 54 to 59.
Disclose Scope 1, Scope 2 and Scope 3 GHG
emissions, and related risks
In prior years, the Group has focused on measuring scope 1
and 2 GHG emissions; these are consistent with cross-industry
climate-related metric categories and the GHG Protocol (see
the EPRA sBPR report on pages 54 to 59). This year, given the
significant contribution of occupier emissions to our scope 3
performance, we have also focused on improving our visibility
over occupier energy usage.
We have engaged with occupiers over 2023 and are making
significant progress to collect, collate and measure robust
scope 3 data, and to develop plans to enhance energy
efficiency and achieve carbon savings. These activities also
support our occupiers’ own sustainability ambitions.
Currently, the Group is responsible for the majority of
its occupiers’ energy procurement; 79% of the landlord-
procured energy was consumed by occupiers, with the
remainder being used in common areas and voids.
The most significant opportunity to minimise carbon and
improve energy efficiency across the portfolio, is at the
time when buildings are repurposed to laboratory space.
These key intervention points have been mapped on every
asset and form the basis for our decarbonisation pathway
as we transition to net zero emissions by 2040 for scope
1 and 2 GHG emissions, and by 2045 for scope 3 GHG
emissions. See pages 42 to 43 for further detail on our net
zero carbon pathway.
Disclose the targets used by the organisation
to manage climate‑related risks and
opportunities and performance against targets
The Group uses a suite of targets to manage climate-related
risks and opportunities. For reporting purposes we have
set out the Group’s targets in the table below. See the full
report on progress against our sustainability strategy on
pages 44 to 45 forfurtherdetails.
Risk/
opportunity
Metric
Page
Key target
P2, T3,
T4,O2
• % repurposing projects to meet internal
sustainability standards
See Achievements,
p44
100% comply or explain
T2
• Absolute scope 1 & 2 carbon emissions
and scope 3 emissions
See EPRA sBPR, p57 Net zero by 2040 for scope 1 & 2
2045 for scope 3
T2
• Energy intensity See EPRA sBPR, p57 Target to be set this year
T1, O2
• Portfolio EPC performance See Highlights, p40 B rating for all buildings
T1, O2
• Number of assets with Excellent or Very
Good BREEAM certifications
See Highlights, p40 Minimum BREEAM Excellent for
ground-up construction projects and
Very Good for refurbishments
O4
• Number of assets with on-site
renewables
See EPRA sBPR, p56 Identify and progress opportunities
for on-site renewables across
portfolio, targeting OTP for 2024
O4
• % electricity purchased from renewable
sources
See EPRA sBPR, p56 100%
Environmental
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To maintain a high level of ESG related transparency
and disclosure, the Group reports against relevant
ESG indicators in accordance with the third edition of
the European Public Real Estate Association (“EPRA”)
Sustainability Best Practice Recommendations (“sBPR”)
and the Streamlined Energy and Carbon Reporting
(“SECR”) requirements. Greenhouse gas (“GHG”) emissions
are calculated in line with the GHG Protocol Corporate
Accounting and Reporting Standard and the corresponding
scope 1, scope 2 and scope 3 guidance.
For the progress on implementing the Group’s sustainability
strategy and the detailed management approach of
different material sustainability topics, please refer to the
sustainability section of this Annual Report, starting on
page38.
The Group’s EPRA sBPR response has been split into the
following four sections:
• Reporting methodology
• Environmental performance measures
• Social performance measures
• Governance performance measures
Reporting methodology
Organisational and operational boundaries
As at 31 December 2023, the Group’s total investment
in real estate represented five assets (the Group’s
organisational boundary) which excludes the assets under
development at OTP. The Group’s EPRA sBPR reporting
boundary is based on the principle of operational control,
meaning that assets are included where the Group has
the operational control, via its property managers. The
Group has operational control over some of the units at
four assets but the remaining units and the fifth asset are
single occupancy assets with no utilities purchased by the
landlord. Unless otherwise stated, all absolute performance
measures relating to electricity, fuels and associated GHG
emissions relate to space where the Group procures utilities
including common areas, shared services and lettable areas
(including vacant units).
The Group’s scope 3 carbon emissions for landlord
procured occupier consumption and occupier procured
consumption are reported on page 57.
Coverage
EPRA sBPR coverage in this report represents 63% of the
investment assets by floor area (sq ft).
Merrifield, 46% of Cambourne, and 47% of OTP investment
assets by floor area are let as single occupancy assets with
no operational control, therefore the Group has no authority
to introduce or implement its operating policies and
procedures.
The Group reports on these assets, where possible, via
occupier procured scope 3 reporting in the table on
page 57. Coverage of the occupier controlled units is
75%. Therefore, the Group has 91% coverage of the total
organisational boundary.
The Group does not have any partially owned entities.
Like-for-like performance indicators include properties
within this scope for which the Group collected data
for two consecutive years and excludes units sold, or
under development during 2022 and 2023. The Group’s
like-for-like portfolio includes two assets, the multi-let
units at Cambourne and RSY, together 63% of the EPRA
reporting boundary.
Disclosure on own offices
The Group is externally managed and does not occupy
any offices for its business activities, nor does it own or
lease any vehicles. The Investment Adviser oversees all the
management and administrative duties, are not covered
by this report because it is a separate legal entity from the
Group.
Segmental analysis
Segmental analysis is not applicable by geography or
property type as the five assets owned by the Group as of
31 December 2023 are all located in the United Kingdom
within the same climatic zone and are all life science real
estate within the offices sector. For this reason, additional
analysis by geography and property type is not applicable.
Reporting period
Performance measures of absolute and intensity metrics
are reported for the year ending 31 December 2023.
Performance measures for like-for-like metrics are reported
where sufficient data for the prior year ended 31 December
2022 is available. OTP and Herbrand were acquired in 2022,
and Lumen House was sold in 2023, therefore data for two
consecutive years is not available and they are excluded
from the like-for-like metrics.
Data estimation
The Group aims to report as complete and accurate data
as feasible and practicable. All actual data is based on
invoices and meter readings; estimations have been applied
where invoices were not available at the time of publication.
Where data was only partially available within the reporting
period, the Group has adopted the following approach for
data estimation:
1. estimate consumption/generation data based on the
most recent three months of available actual data; or
2. estimate consumption/generation data based on
available actual data from the same period in the
previous reporting year.
EPRA sBPR REPORTING
Life Science REIT plc Annual Report and Financial Statements 2023
54
Following this rule of data estimation, the proportions of
estimated data for energy and water for 2023 were 1.5%,
and 4% with less than 1% of waste data estimated.
Employee related Social Performance Measures are
normalised using full-time equivalent numbers of
employees.
GHG emissions calculation
Scope 1, 2 and 3 GHG emissions were calculated using the
UK Government GHG Conversion Factors for Company
Reporting for the respective reporting periods. The Group
reports scope 2 and available scope 3 GHG emissions
using location and market-based methods. Location-based
emissions reflect the average emissions intensity for energy
production in a defined local or national region.
Market-based scope 2 and 3 GHG emissions were
calculated using the European residual mixes factors
(version 2022), which are default emission factors
representing the untracked or unclaimed energy and
emissions, and the zero emissions factor for both REGO
backed electricity supplies and on-site renewable energy
generation from PV. The proportion from renewable
sources is based on renewable energy purchases plus
renewable electricity generated from on-site PVs and
directly consumed. PVs are installed at two of the Group’s
five assets (Cambourne and Rolling Stock Yard).
The intensity ratios for energy, water and GHG emissions
are expressed as landlord procured utility per floor area
m². All assets within the EPRA reporting boundaries, which
were owned and managed during the full 2023 reporting
year, were included in the calculation of intensity.
Data verification and assurance
All underlying data for the environmental measures was
provided by Savills UK Sustainability Team and externally
checked by Square Gain. All social performance measures
were externally checked by Square Gain.
Occupier procured utilities are provided by the occupiers
and have not been third-party verified. Subsequent
calculations have been provided by Square Gain.
Materiality
In accordance with the Group’s materiality assessment,
the following performance measures are excluded from
reporting: DH&C-Abs and DH&C-LfL as no district heating
or cooling is procured across the portfolio.
Social performance measures have been included for the
Investment Adviser, a separate legal entity which handles
all administrative duties related to the asset management
of the Group. Emp-Training, Emp-Dev, Emp-Turnover and
H&S-Emp have been excluded for theGroup reporting as it
has no employees.
Environmental performance measures
In 2023, the Group procured 9,267MWh of energy for
use across the landlord controlled utilities of its assets, of
which 58% were electricity consumption and 42% were
gas consumption. The Company is responsible for the
majority of its occupiers’ energy procurement and 79% of
the landlord-procured energy was consumed by occupiers.
During the reporting year, 127 MWh of electricity was also
generated from the solar PV panels installed and consumed
on-site. The year on year like-for like figures demonstrate an
increase of 16% for total landlord procured energy. Analysis
suggest that this is due to increased occupation of Rolling
Stock Yard, and Cambourne phase 1 and 2 as occupiers
reduced working from home post-covid.
Reported total water consumption of the portfolio in 2023
was 2,974m
3
. Water consumption data was available for
three units where we have operational control and does
not fully reflect the actual consumption of the landlord
controlled units. No obvious trend can be observed in water
consumption across the portfolio, with the reduction of
13% on a like-for-like basis attributed to natural fluctuation,
primarily at Rolling Stock Yard.
Total scopes 1 & 2 (location based) GHG emissions for the
reporting year was 383 tonnes CO
2
e, split 28% scope 1 and
72% scope 2. Renewable electricity accounted for 59% of
the total electricity purchased and generated during the
year, resulting in a scope 2 (market based) GHG emissions
of 79 tonnes CO
2
e.
Procured and generated renewable energy increased by
43% as REGO backed tariffs have been secured on new
contracts in 2023. REGO-backed tariffs are in place for 63%
of investment assets by floor area.
In 2023, total managed and reported waste was 95 tonnes.
All waste was diverted from landfill, of which 50% was
reused or recycled and 50% incinerated with energy
recovery. On a like-for-like basis the total weight of waste
has reduced, by 15%.
All of the Group’s assets are in full compliance with the
latest MEES requirements. 87% of the total portfolio floor
area has an EPC rating of A to C. Rolling Stock Yard has a
BREEAM Excellent certificate; Building 2 at OTP is rated
BREEAM Very Good and Buildings 1, 3 and 4 (which are
completed) and 5, 6 and 7 (which are developments) have
Interim BREEAM Excellent certificates.
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55
Environmental performance measures continued
EPRA
indicator
Certificate 2022 2023
Number of
certificates
% of
Organisational
boundary by
floor area
Number of
certificates
% of
Organisational
boundary
floorarea
Building certifications
Cer t-Tot
BREEAM Certificates within Organisational Boundary
BREEAM Excellent 1 11.0% 1 10.0%
BREEAM Interim Excellent 1 6.7% 3 25.7%
BREEAM Very Good 1 6.8% 1 6.5%
Total with Certification 3 24.6% 5 42.2%
BREEAM Certificates – Development projects (outside Organisational Boundary)
BREEAM Interim Excellent — — 3 n/a
EPC ratings within Organisational Boundary
EPC A 3 25.0% 14 35.5%
EPC B 1 7.4% 2 9.0%
EPC C 7 51.0% 6 42.8%
EPC D 2 16.6% 1 12.7%
EPC E or below — — — —
Total 13 100.0% 23 100.0%
EPRA Code Measure Managed portfolio Like‑for‑like
2022 2023 % change 2022 2023 % change
Energy consumption, MWh
Elec-Abs,
Elec-LfL
Landlord procured electricity 3,882 5,371 38% 2,962 3,550 20%
Landlord procured, controlled
byoccupier 3,272 4,037 23% 2,436 2,499 3%
Total on-site renewable
electricitygeneration 155 127 (18)% 155 127 (18)%
Proportion of procured and
generated electricity from
renewable sources 16% 59% 43% 20% 76% 55%
Occupier procured electricity n/a 2,761 n/a n/a n/a n/a
DH&C-Abs,
DH&C-LfL
Landlord controlled areas
None of our assets are connected to or benefit from district heating
and cooling.
Fuels-Abs,
Fuels-LfL
Landlord procured fuels 2,824 3,896 38% 2,492 2,758 11%
Landlord procured, controlled
byoccupier 2,249 3,311 47% 1,918 2,173 13%
Occupier procured fuels n/a 2,432 n/a n/a n/a n/a
Total
energy*
Total landlord procured 6,705 9,267 38% 5,454 6,308 16%
Landlord procured, controlled by
occupier 5,522 7,348 33% 4,353 4,672 7%
EPRA sBPR REPORTING CONTINUED
Life Science REIT plc Annual Report and Financial Statements 2023
56
EPRA Code Measure Managed portfolio Like‑for‑like
2022 2023 % change 2022 2023 % change
Total energy
1
Landlord procured and
generated 6,860 9,394 37% 5,608 6,435 15%
Proportion estimated 0.3% 1.5% 1.2% 0.3% 0.0% (0.3)%
Disclosure coverage / EPRA
reporting boundary 100% 100% — 64% 53% (11)%
Energy intensity MWh/m
2
Energy-Int
Landlord procured and
generated 0.34 0.36 6% 0.34 0.39 15%
Occupier procured n/a 0.28 n/a n/a n/a n/a
Greenhouse gas emissions, tCO
2
e
GHG-Dir-Abs,
GHG-Dir-LfL
Total direct GHG emissions,
scope1 105 107 2% 105 107 2%
GHG-Indir-
Abs, GHG-
Indir-LfL
Total indirect GHG emissions,
scope 2 – location based 118 276 134% 102 218 114%
Total indirect GHG emissions,
scope 2 – market based 89 79 (11)% 60 1 (98)%
Total indirect GHG emissions
scope 3 (landlord procured
occupier consumption) 1,043 1,442 38% 821 915 11%
Total direct
and indirect Scope 1 and 2 (location based)
1
223 383 72% 207 325 57%
GHG-Int
2
GHG emissions intensity, scope 1
and 2, tonnes CO
2
e/ m
2
0.01 0.01 10% 0.01 0.02 57%
Water consumption, m
3
Water-Abs,
Water-LfL
Total landlord procured 3,430 2,974 (13)% 3,430 2,974 (13)%
Proportion estimated 12% 4% (8)% 12% 4% (8)%
Disclosure coverage / EPRA
reporting boundary 54% 45% (9)% 54% 45% (9)%
Water-Int
Water intensity, landlord
procured, m
3
/m
2
0.24 0.21 (13)% 0.24 0.21 (13)%
Landlord waste management, tonnes and proportion of waste disposal route, %
Waste-Abs,
Waste-LfL
Recycled or re-used 75 48 (36)% 14 12 (12)%
Incineration with energy recovery 86 47 (45)% 22 18 (16)%
Sent to landfill — — — — — —
TOTAL 161 95 (41)% 36 30.4 (15)%
Proportion estimated 51% 0.4% (51)% 11.5% 0.0% (12)%
Disclosure coverage / EPRA
reporting boundary 90% 75% 16% 64% 53% (11)%
Recycled or re-used 46% 50% 4% 38% 39% 1%
Incineration with energy recovery 54% 50% (4)% 62% 61% (1)%
1. Scope 2 location based emissions used for reporting total emissions and GHG emissions intensity.
2. Only assets with full year data are considered for the calculation of GHG emissions intensity.
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Social performance measures
The Group reports on all applicable EPRA sBPR social performance metrics. Being an externally managed company with
no employees, disclosure is focused on the Board. There are some limits to the measures that can be reported regarding
the Board. Social performance measures for the Investment Adviser are included, where indicated below, as whilst a
separate legal entity, they handle all administrative duties related to the asset management of the portfolio.
EPRA Code Measure 2023 2022
Diversity-
Emp
Board gender diversity %
Female 50%
Male 50%
Female 50%
Male 50%
Investment Adviser gender diversity %
Female 64%
Male 36%
Not reported in
2022
Diversity-
Pay
Board salary ratio of men to women, reported by median
basicsalary (2.7)%
Investment Adviser ratio of men to women, reported by median
basic salary 46.1%
Investment Adviser
Emp-
Training
Employee training and development, average hours/year/
employee 12
Not reported in
2022
Emp-Dev Proportion of employees with performance appraisals 100%
Emp-
Turnover
New hires and rate of new employee hire 1 and 8%
Total number of employee turnover and rate 1 and 8%
H&S-Emp
Absentee rate (per days scheduled) 0.1%
Injury rate (per 100 hours worked) —
Lost day rate —
Number of work related fatalities —
Health and safety metrics (Group)
H&S-Asset
Proportion of asset health and safety assessments 100% 100%
H&S-Comp
Asset health and safety compliance, number of incidents
unresolved within the required timeframe — —
Comty-Eng
Community engagement, impact assessments and development
programmes, proportion of assets — —
EPRA sBPR REPORTING CONTINUED
Oxford Technology Park, Oxford
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58
Governance performance measures
Governance performance measures relate to the Board. For full background information on the Group’s governance
performance measures, including a profile of the Board, a description of nomination procedures, and processes for
managing potential conflicts of interest, please see pages 78 to 87.
Non-Executive Director Sally Ann Forsyth has significant experience relating to developing and implementing strategies to
improve social and environmental impacts in the life science industry.
Richard Howell leads the ESG strategy at Primary Health Properties PLC including the development of a net zero carbon
strategy focusing on five key steps to achieve this across the group’s operational, development and asset management
activities by 2030 and to help its occupiers achieve net zero carbon by 2040.
Michael Taylor as Director of the British Heart Foundation has significant experience relating to developing and
implementing strategies to improve social and environmental impacts of funders in the life science sector.
EPRA Code Measure 2023 2022
Composition of the highest governance body
Gov-Board
Number of executive Board members 4 4
Number of non-executive Board members 4 4
Average tenure on the governance body (months) 25 13
Number of non-executive Board members with competencies
relating to ESG topics 3
1
Gov-Select
Process for nominating and selecting the highest
governancebody
See corporate governance section,
pages 78 to 87
Gov-CoI
Process for managing conflicts of interest
Rolling Stock Yard, London Knowledge Quarter
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OUR STAKEHOLDERS
ShareholdersOccupiers
How we engage
• The Investment Adviser builds relationships with current and
potential occupiers, and reports to the Board on occupier
issues
• The Investment Adviser’s asset management team visits site
and meets occupiers’ key decision makers, to learn about their
businesses and space requirements
• The property managers also engage with occupiers at an
operational level
• The Investment Adviser’s Head of ESG and specialist
consultants engage with occupiers, to identify mutual ESG
targets
Stakeholder interests
• The suitability and location of our assets for life science
occupiers, and their attractiveness as a workplace
• Rental levels, lease lengths and terms
• Our knowledge and understanding of their businesses
• Our asset management plans
• Our financial strength
• Our intentions to hold or dispose of the asset they lease
fromus
• Our sustainability strategy and existing sustainability
credentials of our assets
Meeting the needs of our occupiers is
fundamental to our business. They rely on us to
provide the space in which they can operate and
we in turn rely on them for timely rental payments.
Outcomes
• Engagement with potential occupiers revealed growing
demand for landlords to fund fit-out, which we are responding
to at Cambourne and OTP by creating fully fitted laboratories
• Occupier engagement was an important input for developing
the new branding at Cambourne (see page32)
• Energy audit at Herbrand Street identified cost savings for the
occupier
• See our occupier insight section on pages 26 to 27 for details
on why two occupiers have chosen our assets
How we engage
• The Investment Adviser leads our investor relations
programme, meeting major shareholders and potential
investors throughout the year, and, along with our corporate
broker, provides feedback to the Board
• We offer regular asset tours
• In April 2023 we held our first capital markets day, with a
number of guest speakers from the life sciences sector and 45
attendees
• We also engage through a number of other channels including
regular news flow, the Group’s website, the Annual Report and
the Annual General Meeting
• If requested, we hold separate ESG conversations
Stakeholder interests
• Our ability to source accretive investments and add value
through asset management, to drive our total return
• Our financial and operational performance
• The security of our future dividends
• Our approach to ESG
• The Board’s skills and experience
• The Investment Adviser’s skills, experience and recruitment
tosupport our growth
To continue to grow our business, we
need supportive shareholders. We look to
communicate with them regularly and openly,
and to provide high-quality corporate reporting.
Outcomes
• Rebased dividend to 2.0 pence per share (paid and declared)
for 2023 in order to effectively progress the Group’s strategy
and to deliver on the value accretive opportunities the Group
has created whilst maintaining a dividend which is sustainable
and substantially covered by adjusted earnings over time.
• Net zero carbon commitment, aligned to sector best practice
and reflecting the importance of net zero to our investors
• Improving the scope and quality of our ESG data
Life Science REIT plc Annual Report and Financial Statements 2023
60
LendersService providers
How we engage
• The Board regularly engages formally and informally with the
Investment Adviser, with representatives of the Investment
Adviser attending Board and Committee meetings by
invitation
• The Investment Adviser is primarily responsible for day-to-day
interaction with our other service providers and keeps the
Board informed as necessary
• The Management Engagement Committee oversees and
reviews service provider performance on the Board’s behalf
(see pages 94 and 95)
Stakeholder interests
• The terms of their engagement
• Clarity of fees
• Open and two-way communication
• Prompt payment
As an externally managed business we depend
on our service providers, particularly the
Investment Adviser.
Outcomes
• The Investment Adviser has regular meetings with external
service providers at least on a quarterly basis and more
frequently if required
• Commitment to prompt payment
• Service providers deliver regular reporting to the Investment
Adviser either on a monthly or quarterly basis
How we engage
• The Investment Adviser is primarily responsible for engaging
with lenders and keeps the Board informed as necessary
Stakeholder interests
• The quality of the security we provide for our loans
• Our ability to meet our interest payments
• The strength and diversification of our income streams
• Hedging of interest rates where appropriate
• The suitability of our projects for Green Finance
We look to build strong relationships with
lenders, who provide the debt facilities needed
to support our business growth.
Outcomes
• Engagement with lenders during the year enabled usto:
• extend the term of our bank facilities;
• add Bank of Ireland to our banking syndicate;
• define £40 million of the term loan as a Green Loan; and
• cap the SONIA reference rate on the facilities.
See note 17 on pages 129 to 130 for more information.
Our other stakeholders
In addition to the key stakeholders listed above, we have
other stakeholders that are important to us. For example,
local councils may be significant stakeholders in relation to
individual assets, where we may need planning permission
for our asset management or development plans.
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61
SECTION 172(1) STATEMENT
Under section 172(1) (a)-(f) of the Companies Act 2006, the Directors are required to take into account the matters set
out in the table below, and to promote the success of the Company for the benefit ofits members as a whole. In doing so,
the Directors must also consider the interests of key stakeholders and the environment in their discussions and decision
making. Set out below are the matters the Board is required to take into account under section 172(1).
a) The likely
consequence of
any decision in the
long‑term.
b) The interests of
the Company’s
employees.
c) The need to foster the
Company’s business
relationships with
suppliers, customers
and others.
d) The impact of the
Company’s operations
on the community and
environment.
e) The desirability of the
Company maintaining
a reputation for high
standards of business
conduct.
f) The need to act fairly
between members of
the Company.
Matter
During the year, the Board approved the repurposing of the ground floor of Building 2020 at
Cambourne into fully fitted labs (see pages 24 to 25). The long-term benefits of the investment
include a material uplift in the rental levels for this space, as well as helping to establish Cambourne
as a life science hub, which in turn should assist with letting other vacant space on the park. While
the Board was not required to approve the Lumen House disposal, which has helped to fund the
repurposing at Cambourne, it was supportive of the transaction, which balanced the short-term loss
of rental income from Lumen House with the longer-term benefits at Cambourne.
As an externally managed company, we do not have any employees, so this matter is not applicable.
For the Investment Adviser, we conducted our first employee survey this year and are responding to
feedback.
The Board’s approval of the Cambourne repurposing project took into account the needs of
potential occupiers for the space.
During the year the Management Engagement Committee tendered the Company Secretarial
function, which was provided by Link Company Matters Limited (“Link”). Three service providers
were shortlisted, with the Committee ultimately agreeing to re-appointLink.
The Management Engagement Committee recommended the continuing appointment of all other
key service providers, which the Board subsequently approved.
The Board and Sustainability Committee have continued to develop the sustainability strategy,
including setting a net zero carbon commitment and implementing an ESG and climate-related risk
framework. We have a landscaping plan in place at OTP and commitments to biodiversity net gain
on all developments and a biodiversity strategy for all assets. In addition, we donated £10,000 in the
year to charities local to our assets or in match funding for Ironstone employees.
During the year, the Board approved anti-money laundering, anti-bribery and corruption and
whistleblowing policies, ensuring the Company maintains high governance standards. These
policies can be found on the Company’s website https://lifesciencereit.co.uk/about‑us/corporate‑
governance/.
The Company Board is fully independent and no shareholder or group of shareholders has direct
influence over the Board’s decisions. At 31 December 2023 the Investment Adviser and its principals
owned 3.8 million shares in the Company valued at c. £2.4 million (4.3 million shares valued at
£1.8 million as at the date of this report), aligning their interests with those of shareholders.
Response
Information on stakeholder engagement, including how the
Board is kept informed about stakeholder views, can be
found on pages 60 to 61. This engagement is an important
input into the Board’s decision making. The Directors keep
the methods for engaging with stakeholders under review,
to ensure they remain effective.
The Board’s key decisions during the year included:
• determining the second interim dividend in respect of the
prior year and first interim dividend in respect of the current
year, totalling 4.0 pence per share;
• approving the two refinancings of the Group’s debt facilities;
• approving the annual budget for 2024; and
• approving the sustainability strategy and policy, including
the proposed timeframe for achieving a transition to
netzero.
Taking account of
stakeholderviews
Key Board decisions
Life Science REIT plc Annual Report and Financial Statements 2023
62
Effective management of risk underpins the delivery of our
strategy and the successful performance of the business.
A clear understanding of business risks and opportunities,
assessed against our appetite for those risks, guides our
decision making at all levels.
Overall risk culture
Our financial and operational performance and reputation
are subject to several risks and uncertainties. These risks
could, either separately or in combination, have a material
impact on our performance, occupiers, third-party service
providers, the environment and shareholder returns.
The Board supported by its advisers, is responsible for
identifying, understanding, considering and acting on
the Group’s current and future risks. Our risk culture is
designed to enable to decisions to be made within agreed
parameters and recognised accountabilities to support the
delivery of our objectives.
Responsibilities
The Board has overall responsibility for managing risk,
identifying principal risks that may affect the Group’s
objectives and determining the nature and extent of risk
exposure that the business is willing to take in pursuit of
its strategy. The Audit and Risk Committee, on behalf
of the Board, oversees the Group’s framework for risk
management.
Our framework for risk management is approved by the
Board. It sets out how we identify, evaluate and report
on our current and emerging risks, and incorporates the
assessment of the controls and mitigation strategies
we have in place for each documented risk. We apply a
consistent evaluation framework to the assessment of
risks, providing a clear basis for considering threats and
opportunities across our activities.
Our approach
The Investment Adviser regularly reviews and updates the
corporate risk register, which is reported to each Audit
and Risk Committee meeting, highlighting any emerging
risks, and any changes to existing risks; the controls in
place; and our exposure to that risk. The Audit and Risk
Committee reviews the risk register, with particular focus
on the principal risks and any emerging risks, and provides
updates to the Board.
The Audit and Risk Committee also monitors our risk
management processes and approves relevant disclosures.
It is responsible for monitoring financial reporting and
external audit plans and outputs, as well as providing
assurance to the Board in relation to financial, operational
and compliance controls, all of which are designed to
manage our exposure to risk.
PRINCIPAL RISKS AND UNCERTAINTIES
Risk Management Framework
BOARD
Audit and Risk Committee
Management Engagement Committee
Sustainability Committee
Remuneration Committee
Nomination Committee
AIFM
Valuers
Auditors
Depositary
Other external
assurance
Investment
Adviser
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63
The Board has approved the delegated authority matrix
and key policies, which ensure that responsibility for
making key decisions such as asset acquisitions and
disposals is clearly defined and understood. The authority
matrix ensures that significant decisions are taken at
the appropriate level, taking into account the size and
complexity of the transaction, and its significance to
ourplans.
Risk appetite and awareness
Risk awareness exists through our decision-making
processes and is embedded in our systems, policies,
leadership, governance and behaviours. We have a primarily
outsourced model, so we are reliant on service providers,
particularly the Investment Adviser, to make decisions
within agreed parameters the Board has approved.
The Investment Adviser has a clear understanding of our
appetite for risk, which is determined by the Board and
incorporated within the risk framework.
Risk appetite
Our risk appetite was reassessed during the year,
as part of the annual review of the risk framework,
and it remains unchanged. We have no appetite
for risks relating to compliance with regulatory and
environmental requirements, or the safety and welfare
our occupiers, those working on our behalf, and the
wider community in which we work.
Our appetite for risks relating to climate change is low,
and we are, through the Sustainability Committee,
working to identify and mitigate physical and
transitional risks for the portfolio and the Group.
We will accept a reasonable level of risk in relation to
business activities focused on enhancing revenues,
portfolio values and increasing financial returns for
investors.
We seek to balance our risk position between:
• a strong focus on compliance, with our expectations
of service providers incorporated within contract
documents, and monitored through performance reviews
by the Management Engagement Committee;
• the acquisition and management of a balanced asset
portfolio, being selective in our acquisition decisions, and
following a clear investment appraisal process;
• a focus on mitigating climate-related risks and
opportunities through our portfolio acquisition decisions,
refurbishment and repurposing approach, and our work
with and support to occupiers; and
• generating profit and funds through the effective asset
management of our portfolio.
Environmental, Social and Governance
(“ESG”)risk
We consider the active management of ESG related risk
to be a key element of our business operations. We have
invested resource in understanding these risks, in particular
climate-related risk, and how we can best mitigate these.
ESG and climate-related risks are included within
the corporate risk register, and we have a separate
climate-related risk register, covering both physical and
transitional risks. This is reviewed by the Investment Adviser
and reported to the Sustainability Committee. There is a
biannual formal review of the risks in the climate related risk
register, considering whether there are any risks rated high
that should be escalated to the corporate risk register. For
more details on these risks, see pages 46 to 53 in the TCFD
section of this report.
Emerging risks
A key element of our approach to the management of risk
is the regular identification and consideration of potential
emerging risks for the Group. These emerging risk reviews
are carried out regularly with the Investment Adviser, and
it is part of the regular risk report to the Audit and Risk
Committee.
During the year, the two main emerging risks related to
electrical capacity and reinforced autoclaved aerated
concrete (“RAAC”):
• electrical capacity relates to whether capacity available
for our portfolio is sufficient for current and future
needs. The Investment Adviser is leading investigations,
including the introduction of detailed power analysis to
better understand requirements, and the commissioning
of external advice on potential options for increasing
capacity if necessary; and
• RAAC relates to the use of a particular type of concrete
in buildings in previous decades, which has now become
a significant problem. We are aware of the issue and
the Investment Adviser has reviewed our assets and
concluded it does not apply to our portfolio. They will
continue to monitor the issue and ensure it is part of any
due diligence process for future acquisitions.
Neither risk is considered to currently be a principal risk for
the business.
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Life Science REIT plc Annual Report and Financial Statements 2023
64
Principal risks
The Board confirms that it has performed a robust
assessment of the Group’s principal and emerging risks
and considered both the short and longer-term impacts.
The Investment Adviser and the Audit and Risk Committee
regularly review the corporate risk register in detail.
The Board considers its overarching risk to be that
investment objectives and performance become
unattractive to investors, leading to a widening share price
discount to net asset value, which hinders the ability to
raise funds and grow.
The Board has identified its principal risks based on that,
and those are summarised here, along with the current risk
management strategy, the assessment of exposure to each
risk, and any change in assessment since our last report.
Changes in risk, emerging risk
There are no additional principal risks, and we have
not removed any risks previously considered to be
principal. Where the evaluation of the risk has changed,
an explanation has been provided in the detailed section
below.
Business risks
1
Poor returns on the portfolio
2
Inability to identify or secure
assets/sites for acquisition
3
Poor performance of the
Investment Adviser or other
significant third‑party provider
4
Inappropriate acquisition, or
breach of investment strategy
Financial risks
5
Interest rate changes
6
Inability to attract investment,
eitherequity or debt funding
7
Breach of loan covenants,
orprospectus borrowing policy
Compliance risks
8
Loss of REIT status
Climate-related risks
9
Impact of climate change
The heat map summarises the Group’s current principal risk exposure
1
Impact
Likelihood
High risk
Low risk
2
3
4 5
6
7
8
9
Key:
Increase since
previous year
Decrease since
previous year
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65
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Business risks
1
Poor returns on the portfolio
Change
Increase
Whilst we have no problems with our current portfolio of occupiers, general economic uncertainty,
linked to high interest rates and inflation during 2023 has slowed the market for potential new
occupiers. We have therefore considered it prudent to reflect a slightly higher exposure to this risk.
Risk
Achieving the targeted level of return on our property portfolio over time is fundamental to the
success of the business. The risk of a reduced return on the portfolio could be caused by a number
of factors, including:
• reduced property valuations;
• reduced rent levels;
• an inappropriate balance of property types within the portfolio;
• cost of capital increases, particularly as interest rates rise;
• higher than anticipated void rates, and bad debts; and
• increasing new tenancy costs (e.g. shorter leases or significant works to attract occupiers).
In addition, external macroeconomic challenges may reduce investment in the life sciences sector,
subsequently reducing property values and rent incomes, and in the medium to longer term this
could also impact on the number of potential occupiers looking for property.
Mitigation
Portfolio risk mitigation is based around:
• Asset value – a robust acquisition and investment process, including detailed financial modelling.
Our investment protocol reflects our delegated authority matrix, ensuring that decisions are
made at the right level, with particularly significant decisions referred to the Board.
We aim to have a balance between sites developed with occupiers, and the development of
sites, particularly with specialist facilities such as lab space, in advance. This enables us to meet
specific occupier requirements, and also to attract potential occupiers who are looking for
reduced fit-out cost and time, which helps to drive rents and reduces void lengths.
• Occupier quality – our occupier take on process ensures we understand occupier requirements
and are confident that we can deliver the asset functionality and quality required. It also includes
evaluation of the potential occupiers, to ensure that they have a business model and financial
plans which cover property costs.
• Property management – the property managers (Savills) work closely with the Investment
Adviser’s asset management team, and together they provide regular performance reviews and
report to the Board. Savills are responsible for rent collection performance and monitoring of
arrears. Link as fund administrators ensure the Group correctly accounts for rent and arrears.
Link to strategy
Inherent to residual risk
Low Medium High
20
12
Link to strategy key:
Investment
strategy
Asset management
strategy
Financing
strategy
Sustainability
strategy
Life Science REIT plc Annual Report and Financial Statements 2023
66
Business risks
2
Inability to identify or secure assets/sites for acquisition
Change
No change
Risk
There is a risk that we may lose investment opportunities and/or potential occupiers to
competitors. This could be driven by aggressive competitors, the overall level of competition in the
market, insufficient suitable available assets in the market, or acquisition prices that would make it
difficult for us to generate sufficient returns.
Mitigation
There is limited space suitable for the life sciences market, and this is a focus area for growth and
government initiatives, which gives us confidence that occupiers’ need for appropriate space will
continue. Our strategy includes acquiring existing facilities, sites planned for new development,
and the repurposing of buildings which can be converted to meet the specialist requirements of
the sector.
Our Investment Adviser has an experienced management team and is supported by external
property management specialists, who have extensive expertise in the life sciences market.
Link to strategy Inherent to residual risk
Low Medium High
16
9
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PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Business risks
3
Poor performance of the Investment Adviser or other significant third‑party provider
Change
No change
Risk
We operate an outsourced model and depend on the performance of our third-party service
providers, particularly the Investment Adviser, AIFM, Property Manager and Fund Administrator.
Poor service delivery from any of these key providers could result in poor decisions, reduced
portfolio returns or regulatory compliance failures, and could have a financial impact on investors.
We rely on receiving high-quality and accurate information from our service providers, and
inaccurate or incomplete information could damage our finances, properties, occupiers and
reputation. In particular, inaccurate information could increase our revenue risk, as we depend on
third parties to invoice, collect, bank and record revenues.
Mitigation
Our governance framework is designed to ensure that the Board is involved with decisions that are
material to the success of the Group. There is an approved delegated authority matrix, including
the matters reserved for the Board.
Our service providers are recognised experts in their fields, and we have contracts in place, with
clear terms of service and our expectations clarified.
The principal third-party providers oversee and review our activities, with the AIFM reviewing
and approving key transactions proposed by the Investment Adviser, and the Investment Adviser
monitoring the performance of the property managers. Financial reports and information are
prepared by Link and checked by the Investment Adviser’s Finance team, prior to reporting to the
Board.
Our Board members are experienced individuals, appointed for their knowledge and their business
and commercial acumen. In addition to their performance reviews and variance analysis as part
of the normal quarterly Board meetings, they formally review the performance of key third-party
service providers through the Management Engagement Committee.
The valuation of the portfolio is a key risk area for the Group. The valuation is undertaken by an
independent valuer, which provides additional assurance for the Board on the accuracy of key
metrics reported by the Investment Adviser.
Link to strategy
Inherent to residual risk
Low Medium High
15
8
Link to strategy key:
Investment
strategy
Asset management
strategy
Financing
strategy
Sustainability
strategy
Life Science REIT plc Annual Report and Financial Statements 2023
68
Business risks
4
Inappropriate acquisition, or breach of investment strategy
Change
No change
Risk
Acquiring assets or taking on occupiers which are not in line with our investment policy and
objectives could have a detrimental effect on our portfolio values, finances or reputation, and
could also increase risk for occupiers, particularly in multi-tenanted properties.
Mitigation
Our investment policy is supported by processes designed to ensure that acquisitions meet our
requirements, and any capital expenditure will deliver enhanced returns.
In particular we have a strong acquisition protocol which includes robust due diligence processes
and assessment against clear investment criteria, including portfolio mix, property type and
quality, legal issues, environmental requirements, sector and quality of occupier.
Acquisition and investment approvals follow our delegated authority matrix, with particularly
material decisions reserved for the Board. All acquisitions and disposals are also approved by
theAIFM.
The Investment Adviser and the Property Manager provide us with expert knowledge of the
properties and geographical locations which are best suited to the life science market, ensuring
that our property portfolio is best suited to the needs of our target occupiers.
Our procedures also require a full assessment of potential occupiers, ensuring that they are linked
to the life science sector and are of suitable financial stability and strength for the lease concerned.
Link to strategy
Inherent to residual risk
Low Medium High
8
3
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PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Financial risks
5
Interest rate changes
Change
Decrease
The refinancing and SONIA hedging completed during the year has reduced our exposure in
relation to interest rate risk.
Risk
Interest rate rises present a number of different potential risks to the Group. They may impact on
our ability to utilise funding to execute the strategy; may have an impact on the overall value of
the portfolio, as the cost of lending impacts on asset valuations; potential occupiers may decide to
delay expansion plans, and current occupiers may have reduced willingness or ability to payrents.
Mitigation
The potential for interest rate rises is not a risk within our control, and we therefore focus on
managing and mitigating the consequences. We have a financing strategy agreed with the
Investment Adviser. During the year we have completed a refinancing to cover the next three years,
with two plus one-year extension options. This provides sufficient headroom to complete current
planned developments. We have also hedged the risk to rising SONIA rates by entering into a number
of forward starting interest rate caps based on the budgeted draw down of debt to complete the
planned development and capital expenditure projects. This targets 100% hedging at all times. We
also manage our cash flows carefully, along with the timing of debt drawdowns for significant outlays.
Link to strategy Inherent to residual risk
Low Medium High
20
12
6
Unable to attract investment, equity or debt funding
Change
Decrease
The refinancing completed during the year demonstrates our ability to obtain financing at
reasonable rates/terms.
Risk
There is a risk that we may be unable to raise funding, either through equity from new
investors/ increased investment from existing shareholders or via debt funding. This would affect
our ability to grow and deliver on agreed strategic objectives.
Mitigation
Our performance to date, creating a portfolio of quality, well-managed and suitable assets in the
right locations, is key to the mitigation of this risk.
We have an experienced Investment Adviser, with a good reputation and excellent market
knowledge. The Investment Adviser Finance Director maintains relationships with current and
potential funding partners, and any significant funding agreements are reviewed and approved by
the Board, in line with our delegated authority matrix.
Some of our Board members have extensive experience working within and for the life sciences
sector, and have excellent reputations in the market, through their knowledge of the requirements
and needs of potential occupiers.
Link to strategy
Inherent to residual risk
Low Medium High
16
9
Link to strategy key:
Investment
strategy
Asset management
strategy
Financing
strategy
Sustainability
strategy
Life Science REIT plc Annual Report and Financial Statements 2023
70
Financial risks
7
Breach of loan covenants or borrowing policy
Change
No change
Risk
We set out our expected and maximum LTV ratios in the prospectus, and separately have a
LTV ratio agreed within our financing facilities. Breach of any of these ratios, or the terms and
conditions of the funding facility, could have a serious impact on the delivery of our objectives,
through cash shortages or damage to our reputation.
Mitigation
The Investment Adviser is responsible for monitoring operations, financial transactions and
performance, and reviews the financial position continuously to ensure that neither the LTV ratio
nor any specific requirements of our financing facility are breached.
The Investment Adviser applies comprehensive financial models to plan cash flows and
funding requirements. Cash availability is built into the investment decision-making process.
Allacquisitions are approved by the AIFM and the Depositary, and significant acquisitions and
capital expenditure plans are approved by the Board.
The cash position is reconciled monthly to the records produced by Link and thebank statements,
by the Investment Adviser’s Finance team.
Link to strategy Inherent to residual risk
Low Medium High
20
6
Compliance risks
8
Loss of REIT status
Change
No change
Risk
Failing to comply with the REIT framework could put our status as a REIT at risk, resulting in a
potentially significant impact on our shareholders.
Mitigation
We have a documented governance framework, with clearly allocated responsibilities set out in
the matters reserved for the Board, the delegated authority matrix, and in our contracts with the
Investment Adviser and other keyservice providers.
We obtain advice as needed from the AIFM, our brokers and external legal support in relation to
governance compliance, FCA and listing rules.
Our position against the key requirements of the REIT legislation is reviewed by the Investment
Adviser each month, by Link quarterly, and is reported to the Board. Cash and earnings cover for
dividends is monitored through the comprehensive cash flow forecasting process.
Link to strategy Inherent to residual risk
Low Medium High
15
5
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PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Climate‑related risks
9
Impact of climate change
Change
No change
Risk
The potential impact of climate change is one of our principal risks, and we are investing time
and resource to better understand and reduce our impact on the environment, and to ensure the
Group is well placed to mitigate the inevitable impacts on our activities, portfolio and finances.
We have developed a separate climate risk register, to help us identify, consider and mitigate both
physical and transitional risks in more detail.
Key risks documented in that register include:
• change in occupiers’ requirements, as they seek more sustainable property options; and
• the complexities and cost of compliance with relevant legislation and reporting requirements,
and the impact of changes to business practices going forward.
Mitigation
The global impact of climate change is already noticeable, and we recognise our responsibility to
develop a portfolio and business/operational practices which reduce our environmental impact,
while enabling us to deliver results for our investors.
Further details are included in the Sustainability reporting (see pages 38 to 59), buta summary of
the actions we have taken and planned are:
• new developments to be BREEAM ‘Excellent’ or ‘Very Good’ rated;
• environmental assessment of all potential acquisitions, as part of the acquisition process;
• EPC+ reports are part of our standard process for acquisitions;
• capital expenditure planning includes consideration of climate-related risk, with appropriate
building standards being applied, such as energy efficient lighting and heating, and a reduction
in greenhouse gas emissions;
• external specialists have been appointed to assist us with developing our sustainability roadmap
and pathway to net zero;
• a Sustainability Committee was established in the year, meeting twice to discuss the strategy
and policies in addition to the above; and
• our standard quarterly Board report pack includes ESG and climate-related risk information,
toensure that Board members are fully informed.
Link to strategy
Inherent to residual risk
Low Medium High
16
9
Link to strategy key:
Investment
strategy
Asset management
strategy
Financing
strategy
Sustainability
strategy
Life Science REIT plc Annual Report and Financial Statements 2023
72
Going concern
The Board monitors the Group’s ability to continue as a
going concern. Specifically, at quarterly Board meetings,
the Board reviews summaries of the Group’s liquidity
position and compliance with loan covenants, as well as
forecast financial performance and cash flows. Throughout
the period, the Board met frequently, in conjunction with
the Investment Adviser, to review cash resources and
acquisitions of investment properties.
The Group ended the year with £14.3 million of unrestricted
cash and £41.3 million of headroom readily available under
its debt facilities. The Group is operating significantly
within its covenants and a sensitivity analysis has been
performed to identify the decrease in valuations and rental
income that would result in a breach of the LTV, or interest
cover covenants. For the HSBC and Bank of Ireland facility,
valuations would need to fall by 34.2% or rents by 13.7%,
when compared with 31 December 2023, before these
covenants would be breached, which, based on available
market data, is considered highly unlikely.
As at 25 March 2024, 100.0% of rents invoiced in December
2023 in relation to the quarter to 24 March 2024 were
received.
As part of the going concern assessment, and taking the
above into consideration, the Directors reviewed a number
of scenarios which included extreme downside sensitivities
in relation to rental cash collection, making no acquisitions
or discretionary capital expenditure, and minimum dividend
distributions under the REIT rules.
Based on this information, and in light of mitigating actions
available, the Directors have a reasonable expectation that
the Group and the Company have adequate resources
to continue in business for a period of at least 12 months
from the date of approval of the Annual Report and
Financial Statements. The Directors are also not aware of
any material uncertainties that may cast significant doubt
upon the Group’s ability to continue as a going concern.
They therefore have adopted the going concern basis in the
preparation of the Annual Report and Financial Statements.
Assessment of viability
In accordance with the AIC Code of Corporate Governance,
the Directors have assessed the Group’s prospects over a
period greater than the 12 months considered by the going
concern provision. The Directors have conducted their
assessment over a three-year period to 31 December 2026,
allowing a reasonable level of accuracy given typical lease
terms and the cyclical nature of the UK property market.
The principal risks detailed on pages 63 to 72 summarise
the matters that could prevent the Group from delivering
its strategy. The Board seeks to ensure that risks are
kept to a minimum at all times and, where appropriate,
the potential impact of such risks is modelled within its
viability assessment. The Group’s investment portfolio
acquired to date delivers the intended investment strategy
of a diversified portfolio located within the Golden
Triangle of Oxford, Cambridge and London located near
major universities, hospitals and public and commercial
organisations, where there is a shortage of high-quality real
estate space to support expanding life science businesses.
This is expected to lead to low vacancy rates and further
rental and capital growth.
The Directors’ assessment takes into account forecast
cash flows, debt availability, forecast covenant compliance,
dividend cover and REIT compliance. The model is then
stress tested for severe but plausible scenarios, individually
and in aggregate, along with consideration of potential
mitigating factors. The key sensitivities applied to the
model are a downturn in economic outlook and restricted
availability of finance, specifically:
• increased occupier turnover;
• increased void costs; and
• increased interest rates.
Taking into account mitigating actions, the results of the
sensitivity analysis and stress testing demonstrated that the
Group would have sufficient liquidity to meet its ongoing
liabilities as they fall due, maintain compliance with banking
covenants and maintain compliance with the REIT regime
over the period of the assessment.
GOING CONCERN AND VIABILITY STATEMENT
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73
Furthermore, the Board, in conjunction with the Audit
and Risk Committee, carried out a robust assessment of
the principal risks and uncertainties facing the Group,
including those that would threaten its business model,
strategy, future performance, solvency or liquidity over the
three-year period. The risk review process provided the
Board with assurance that the mitigations and management
systems are operating as intended. The Board believes
that the Group is well positioned to manage its principal
risks and uncertainties and the economic and political
environment.
The Board’s expectation is further supported by regular
briefings provided by the Investment Adviser. These
briefings consider market conditions, opportunities,
changes in the regulatory landscape and the current
economic and political risks and uncertainties. These risks,
and other potential risks which may arise, continue to be
closely monitored by the Board.
Viability statement
The period over which the Directors consider it is feasible
and appropriate to report on the Group’s viability is a
three-year period to December 2026. This period has been
selected because it is the period that is used for the Group’s
medium-term business plan. Underpinning the plan is an
assessment of each unit, driving the letting and capital
expenditure assumptions. These in turn drive the financing
assumptions and other forecast cash flows.
Having considered the forecast cash flows, covenant
compliance and the impact of sensitivities in combination,
the Directors confirm that, taking account of the Group’s
current position and the principal risks set out in the
strategic report, they have a reasonable expectation that
the Group will be able to continue in operation and meet its
liabilities as they fall due over the three-year period of their
assessment.
On behalf of the Board
Claire Boyle
Chair
25 March 2024
GOING CONCERN AND VIABILITY STATEMENT
CONTINUED
Cambourne Park, Science & Technology Campus, Cambridge
Life Science REIT plc Annual Report and Financial Statements 2023
74
CHAIR’S INTRODUCTION TO GOVERNANCE
We continued to build our
Governance framework
during 2023, ensuring robust
policies and procedures are
in place, contributing to the
long-term success of the
Company.
Claire Boyle
Chair and
Non-ExecutiveDirector
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On behalf of the Board, I am pleased to present the
report setting out the Company’s corporate governance
arrangements, which demonstrates the importance of
governance to the Directors and how it contributes to
the Company’s long-term success. A key part of the
Company’s corporate governance arrangements is that
Board decision making takes into consideration the impact
on the Company’s stakeholders and performance over the
longer term. This is supported by having a clear strategy,
investment policy and schedule of matters reserved for the
Board (see section 172 (1) statement on page 62).
As a Company with a premium listing, Life Science REIT
plc is required to comply with the UK Code of Corporate
Governance (the “UK Code”) issued by the Financial
Reporting Council. However, as an externally managed
investment company it is recognised that some of the
provisions of the UK Code are not relevant, and the Board
therefore considers reporting against the principles and
provisions of the Association of Investment Companies
Code of Corporate Governance (“AIC Code”) provides
more relevant information to shareholders. The AIC Code is
aligned with the UK Code, as well as setting out additional
provisions on issues that are of specific relevance to listed
investment companies (see page 78).
The Board continued to make good progress with its
governance agenda during 2023, with highlights including
regular Committee meetings, approving Board and
Company policies, review of the skills and diversity of
the Board, approving the sustainability strategy, holding
a separate strategy day, and continued review of the life
science and real estate sectors.
The Board welcomes the revised UK Code published in
January 2024 (“2024 Code”) which in particular addresses
the importance of evidencing the effectiveness of internal
controls. The 2024 Code applies to accounting periods
beginning on or after 1 January 2025 with the exception
of provision 29 (internal controls) which will apply for
reporting periods on or after 1 January 2026. The Board
understands that the AIC Code is expected to be amended
to reflect the relevant changes of the 2024 Code and looks
forward to reporting against the updated AIC Code in
subsequent Annual Reports. The Board’s priorities in 2024
include supporting and overseeing the Investment Adviser
in the continued successful implementation of the strategy
with the aid of the strategy day held in February2024.
Wewill continue to embed and evolve the Group’s
corporate governance framework in line with any legislative
and statutory changes.
Claire Boyle
Chair
25 March 2024
The Board consists solely of independent Non-Executive Directors.
During the year under review, there were no changesto the Directors.
BOARD OF DIRECTORS
Claire Boyle
Chair of the Board ofDirectors
Michael Taylor
Non-Executive Director; Chair of
the Management Engagement and
Remuneration Committees
Richard Howell
Senior Independent Director; Chair of the
Audit and Risk Committee
External appointments
Claire is a non-executive director
and chair of the audit committee
of Fidelity Special Values plc and a
non-executive director of The Monks
Investment Trust and Nippon Active
Value Fundplc.
Experience and contribution
Claire has over 20 years’ experience
working in financial services and
investment management; qualifying
as a chartered accountant with
Coopers and Lybrand, where she
specialised in litigation support and
forensic accounting. Claire then spent
13 years working in equity investment
management for Robert Fleming
Investment Management, American
Express Asset Management and
latterly Oxburgh Partners, where she
was a partner with responsibility for
their European Hedge Fund. Claire
has a degree in Natural Sciences from
Durham University and is a Fellow of
the Institute of Chartered Accountants
in England andWales.
External appointments
Mike is a Director for the British Heart
Foundation shops Ltd and the British
Heart Foundation Ventures Ltd.
Experience and contribution
Mike is the Commercial Director for
the British Heart Foundation (“BHF”)
which is the largest funder of life
science research into heart and cardio-
vascular disease in the UK. Since
joining the BHF in 2012 he has overseen
significant growth and diversification
of their commercial revenues across
the extensive retail estate of over 700
retail shops, new online channels and
commercial health ventures.
Prior to joining BHF he spent over 20
years working in senior roles in a wide
range of major retailers with significant
retail, logistic and office property
portfolios, and has been managing
director of a number of national
retailers including Budgens, Londis
and Whittard. Mike has a degree in
Economics from the University of East
Anglia.
External appointments
Richard is the Chief Financial Officer
(“CFO”) of Primary Health Properties
plc.
Experience and contribution
Richard is CFO of Primary Health
Properties plc, the FTSE 250 REIT and
leading investor in flexible, modern
primary healthcare accommodation
across the UK and Ireland.
Richard is a Chartered Accountant
and has over 20 years’ experience
working with London-listed
commercial property companies,
gained principally with LondonMetric
Property plc and Brixton plc. Richard
was part of the senior management
team that led the merger of Metric
Property Investments plc and London
& Stamford Property Plc in 2013 to
create LondonMetric Property plc
with a combined property portfolio of
£1.4billion.
Appointed: 14 October 2021
Last re‑elected: 2023
Remuneration: £55,000
Shareholding: 30,000
Appointed: 14 October 2021
Last re‑elected: 2023
Remuneration: £40,000
Shareholding: 20,000
Appointed: 3 May 2022
Last re‑elected: 2023
Remuneration: £45,000
Shareholding: 30,000
76
Life Science REIT plc Annual Report and Financial Statements 2023
Dr Sally Ann Forsyth OBE
Non-Executive Director; Chair of the
Nomination and SustainabilityCommittees
External appointments
Sally Ann is the Chief Executive Officer
(“CEO”) at Stevenage Bioscience
Catalyst Ltd and a Director of Local
Enterprise Partnership Hertfordshire.
Experience and contribution
Sally Ann is CEO of the Stevenage
Bioscience Catalyst and is a pioneer
of the life science real estate industry
with 16 years of experience in the
delivery of outstanding science parks.
She has been responsible for the
strategy, growth and development of
four internationally recognised clusters
including Harwell Oxford, Colworth
Science Park, Norwich Research
Park andmost recently Stevenage
Bioscience Catalyst, whereshe is CEO.
She began her career with Unilever
and gained her property experience
through Goodman International where
she was Director of Science Parks.
She was awarded anOBE for services
to Business and Science in 2021.
Skills and experience:
Risk management
Strategic thinking
Stakeholder engagement
Independence
Corporate finance
Financial regulation
Audit/accounting
Environmental, Social and Governance
Investment trust/REIT
Listed company
Investor relations
Number of Directors 0 1 2 3 4
Key Board statistics
Nomination Committee
Audit and Risk Committee
Management Engagement Committee
Sustainability Committee
Remuneration Committee
Committee key:
Balance of Directors:
(as at the date of this report)
Female
50%
Male
50%
Read the full Board of Director bios online at:
https://lifesciencereit.co.uk/about‑us/board‑of‑directors/
Appointed: 14 October 2021
Last re‑elected: 2023
Remuneration: £40,000
Shareholding: 20,342
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Statement of compliance
The Board has considered the principles and provisions of
the AIC Code of Corporate Governance published by the
Association of Investment Companies (the “AIC Code”).
The AIC Code addresses the provisions set out in the UK
Corporate Governance Code as published by the Financial
Reporting Council (the “UK Corporate Governance Code”),
as well as setting out additional provisions on issues that
are of specific relevance to listed investment companies.
The Board considers that reporting against the principles
and recommendations of the AIC Code will provide more
relevant information to its shareholders.
Throughout the year ended 31 December 2023,
theCompany has complied with the principles and
provisions of the relevant provisions of the UK Code,
exceptas set outbelow.
The UK Code includes provisions relating to the role of
the chief executive, executive directors’ remuneration and
the need for an internal audit function. As an externally
managed investment company with no executive directors,
employees or internal operations, all of the Group’s ongoing
management and administration functions are delegated to
the Investment Adviser and other service providers, and as
such the Board does not consider that the above provisions
are relevant. We have therefore not reported further on
these provisions.
In accordance with the AIC Code, the Board established an
Audit and Risk Committee and a Management Engagement
Committee on incorporation. Following the migration of
the Company’s ordinary shares to the premium segment of
the London Stock Exchange in December 2022 the Board
agreed to establish separate Nomination and Remuneration
Committees under the chairship of Sally Ann Forsyth and
Michael Taylor respectively.
CORPORATE GOVERNANCE STATEMENT
The Board undertakes an annual review of its compliance
with the principles and recommendations of the AIC
Code. Acopy of the AIC Code, which was last updated
in 2019, can be obtained via the AIC website,
https://www.theaic.co.uk/. Thebelow table details a
summary of the AIC Code Principles and where they are
reviewed in this Corporate Governance Statement.
AIC Code Principle Page
1: Board leadership
and purpose
A: 79
B: 79
C: 80
D: 81
2: Division of
responsibilities
F: 82
G: 82
H: 83
I: 84
3: Composition,
succession
and evaluation
J: 85
K: 85
L: 85
4: Audit, risk and
internalcontrol
M: 86
N: 86
O: 86
5: Remuneration
P: 87
Q: 87
R: 87
This report explains the key features of the Group’s
governance structure.
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Life Science REIT plc Annual Report and Financial Statements 2023
Effectiveness of Board
A key focus for the Board has been the delivery of the
Group’s strategy whilst continuing to seek opportunities for
growth in order to provide shareholders with an attractive
level of return. The Board ensures that the necessary
resources are in place for the Group to meet its objectives
and fulfil its obligations to shareholders within a framework
of high standards of corporate governance and effective
internal controls. The Directors are responsible for the
determination of the Company’s investment policy and
strategy and have the overall responsibility for the Group’s
activities, including the control and supervision of the AIFM
and Investment Adviser.
The Chair leads the Board and is responsible for its overall
effectiveness in directing the Group in delivering on its
strategy. By demonstrating objective judgement, the
Chair promotes a culture of openness and debate, and
facilitates effective contributions from all Directors. In
liaison with the Company Secretary, the Chair ensures that
the Directors receive accurate, timely and clear information.
TheDirectors are required to act with integrity, lead by
example and promote this culture within the Group.
Purpose, values and strategy
The Group’s purpose is to own and manage life sciences
real estate across the UK, providing the space its occupiers
need for their businesses to thrive. Further information
about the purpose and strategy of the Group can be found
in the strategic report at page 16. The Board regularly
reviews the strategy of the Company through reporting
from relevant advisers at Board and Committee meetings
and engagement with stakeholders to ensure it remains
appropriate and in the best interests of the shareholders.
The Board seeks to ensure the alignment of the Group’s
purpose, values and strategy with the culture of openness,
debate and integrity through ongoing dialogue and
engagement with the AIFM, Investment Adviser and the
Group’s other service providers.
The culture of the Board will be considered as part of
the annual performance evaluation process which is
undertaken by each Director. The culture of the Group’s
service providers is also considered by the Board
during the annual review of their performance and while
considering their continuing appointment. This includes
assessing their approach to significant ethical issues
such as modern slavery. The Company’s Modern Slavery
Statement, reviewed by the Board each year, is available at
www. lifesciencereit.co.uk.
As noted above, the approval of the strategy and
overseeing its implementation is one of the Board’s core
responsibilities. The table on the next page details the
Board’s activities in respect of each element of the Group’s
strategy (see pages 16 to 17).
Section 1: Board leadership andpurpose
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Section 1: Board leadership andpurpose continued
CORPORATE GOVERNANCE STATEMENT CONTINUED
Strategy Board governance role
Board key activities during the year
1. Investment
strategy
• Overseeing the selection of acquisitions,
against the backdrop of current market
and economic conditions
• Approving acquisitions which are within
the investment policy but have a value of
20% or more of the Group’sGAV
• Approving any acquisitions outside the
investmentpolicy
• Reviewed acquisition pipeline tracker
ateach quarterly meeting
2. Asset
management
strategy
• Overseeing the portfolio
• Overseeing the Investment Adviser’s asset
management activities
• Reviewed quarterly portfolio updates from
the Investment Adviser, including lease
events, capital expenditure works and
development updates
• Approved the annual budget for the year
ended 31December 2024
• Read more about asset management
during the year in the Investment Adviser’s
report on page 32
3. Financing
strategy
• Approving any changes to the Group’s
capital structure
• Approving the Group’s gearing policy,
dividend policy and treasury policy
• Approving disposals of 20% or more of the
GAV oftheGroup’s portfolio
• Approving any disposals outside the
investmentpolicy
• Approved the refinancing of its existing
external debt facility with HSBC and the
Bank of Ireland as an additional lender in
H1 2023
• Monitored the Group’s debt levels and
interest rate hedging. Read more about
financing activity during the year in the
Investment Adviser’s report on page35
4. Sustainability
strategy
• Approving the sustainability policy and
strategy
• Monitoring progress in delivering the
sustainability strategy
• Approved the sustainability strategy and
policy including the proposed timeframe
for achieving atransition to net zero
carbon emissions
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Life Science REIT plc Annual Report and Financial Statements 2023
Conflicts of interest
The Articles of Association permit the Board to consider
and, if it deems fit, to authorise situations where a Director
has an interest that conflicts, or may possibly conflict, with
the Group’s interests. The Board has a formal system to
consider such conflicts, with the Directors who have no
interest in the matter deciding whether to authorise the
conflict and any conditions to attach to such authorisation.
Any such conflicted Director would not be present during
Board discussions regarding the conflicting matter to
ensure that the debate remains unbiased and objective.
Aregister of potential conflicts of interests is maintained by
the Company Secretary and presented to the meeting for
information at each Board meeting. As at 25 March 2024,
being the latest practicable date of this report, no such
conflicts were identified.
Performance review
The Board and the Management Engagement Committee
regularly review the performance of the Company and the
performance and resources of the Investment Adviser and
other service providers to ensure that the Company can
continue to meet its investment objective. The Audit and
Risk Committee is responsible for assessing and managing
risks and the Company has engaged a third-party internal
audit function. Further information about how this is done
can be found in the Audit and Risk Committee Report on
pages 91 to 94.
Shareholders and stakeholders
Communication with shareholders is a high priority for both
the Board and the Investment Adviser, and the Directors are
available to discuss the Group’s progress and performance
with shareholders. The Investment Adviser, in conjunction
with its joint Corporate Brokers, Panmure Gordon and
Jeffries International, are in regular contact with the major
institutional investors and regularly report the results of
meetings and the views of those shareholders to the Board.
The Chair and the other Directors are available to attend
these meetings with shareholders if required.
All shareholders are encouraged to attend and vote at
the AGM, during which the Chair of the Board, the Chair
of each respective Committee, the Board as a whole and
representatives of the Investment Adviser will be available
to discuss issues affecting the Group and answer any
questions.
Shareholders wishing to communicate directly with the
Board or to lodge a question in advance of the AGM should
contact the Company Secretary at the address on the inner
back cover. The Company makes sure to always respond to
correspondence from its shareholders.
For more information on the Group’s approach to
stakeholder engagement please see pages 60 to 61 of
thestrategicreport.
The Board and its advisers will prepare the Group’s Annual
and Half-yearly Reports to present a full and readily
understandable review of the Group’s performance.
Copies will be released through a Regulatory News
Service, dispatched to shareholders depending on their
communication preference and made available from
the Company Secretary or by downloading from the
Company’s website at www.lifesciencereit.co.uk.
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Governance structure
As an externally managed investment trust, the Company has no employees, and the Board relies on third parties to
administer the Company and provide investment management services. The below diagram demonstrates the Company’s
governance structure and how responsibilities are divided.
CORPORATE GOVERNANCE STATEMENT CONTINUED
Section 2: Division of responsibilities
Shareholders
Other Third‑Party
Service Providers
Investment Adviser
and AIFM
The Committees’ terms of reference are available on the Company’s website at www. lifesciencereit.co.uk.
Members: all Non-Executive Directors
Board composition
The Chair, Claire Boyle, and the Senior Independent
Director, Richard Howell, were deemed by their fellow
independent Board members to have been independent on
appointment and to have no conflicting relationships.
The role and responsibilities of the Chair are outlined on
page 79 and are clearly defined and set out in writing,
a copy of which is available on the Group’s website at
www. lifesciencereit.co.uk. The Senior Independent
Director acts as a sounding board for the Chair and as an
intermediary for other Directors when necessary. He leads
the annual appraisal of the Chair’s performance, takes
responsibility for an orderly succession process and is also
available to shareholders to discuss any concerns they
mayhave.
All of the Directors are non-executive and are independent
of the Investment Adviser and the other service providers.
The Chair was independent of the Investment Adviser
at the time of her appointment and remains so. The
Nomination Committee met twice during the year and
considered the composition and mix of skills of the Board.
The Board evaluation concluded that each Director
provides a valuable contribution to Board meeting
discussions and exercises appropriate levels of challenge
and debate.
As part of the Board evaluation process, the contributions
of each Director, as well as the time commitments made
by each Board member are considered and reviewed.
Directors’ other commitments are regularly reviewed
and any new appointments are considered by the other
Directors to ensure there is no conflict of interest or risk
of‘over boarding’.
Audit
and Risk
Chair:
Richard Howell
Pages 91 to 93
Nomination
Chair:
Sally Ann Forsyth
Pages 88 to 90
Management
Engagement
Chair:
Mike Taylor
Pages 94 to 95
Sustainability
Chair:
Sally Ann Forsyth
Pages 96 to 97
Remuneration
Chair:
Mike Taylor
Pages 98 to 101
Board
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Life Science REIT plc Annual Report and Financial Statements 2023
• Strategy Day
• Updates from
Management Engagement
Committee and Audit and
Risk Committee Chairs
• Approval of Annual
Report and Financial
Statements for the year
ended 31 December 2023
• Approval of second
interim dividend
• Approval of publication
of supplementary
prospectus
Q1 2023
Board operation
The Directors meet at regular Board meetings including one
strategy day, held at least four times a year, with additional
meetings arranged as necessary. The Directors are given a
week to review papers before each Board and Committee
meeting. Board members are notified between meetings of
any material events including, but not limited to, significant
transactions, litigation, mergers and acquisitions, and
changes in capital structure.
There is regular contact between Board members and
the Investment Adviser, in addition to the formal Board
meetings.
The table below sets out the Directors’ attendance at both
regular and ad hoc Board and Committee meetings during
the year ended 31 December 2023, against the number of
meetings each Board member was eligible to attend:
Board
Audit and Risk
Committee
Management
Engagement
Committee
Nomination
Committee
Remuneration
Committee
Sustainability
Committee
Claire Boyle
4/4
3/3
1/1
2/2
1/1
2/2
Sally Ann Forsyth
4/4
3/3
1/1
2/2
1/1
2/2
Michael Taylor
4/4
3/3
1/1
2/2
1/1
2/2
Richard Howell 4/4 3/3 1/1 2/2 1/1 2/2
The Board has formal arrangements for the Directors, in the furtherance of their duties, to take independent professional
advice at the Company’s expense. The Company has also taken out a Directors’ and Officers’ liability insurance policy
which is referred to on page 104.
Key Board activities during the year
At each quarterly Board meeting a report from both
the AIFM and the Investment Adviser is reviewed. The
AIFM report includes updates on regulation, portfolio
management and risk management, fund reporting
and general compliance. TheAIFM provides a separate
quarterly Money Laundering and Reporting Officer report.
The Investment Adviser’s report includes details of portfolio
activity, the pipeline, occupiers, strategic activity and
health and safety matters. Updates from finance, investor
relations, and Square Gain, the ESG Consultant to Life
Science REIT, are also provided.
The Board receives and reviews a quarterly share register
analysis, as well as a report from the Company Secretary
including regulatory and governance updates.
• Update from the
Sustainability
CommitteeChair
• Approval of the
sustainability policy and
Sustainability Committee
terms of reference
• Update from the
Depository
• Annual General Meeting
• Approval of 2023
InterimReport
• Approval of interim 2023
dividend
• Approval of Directors’ and
Officers’ liability insurance
• Update from
the Nomination
CommitteeChair
• Approval of Board
Diversity Policy
• Financial year 2024
budget approval
• Sale of Lumen House
• Updates from the Audit
and Risk Committee,
Nomination Committee,
Remuneration Committee
and Sustainability
Committee
• Update from the
Depository
• Approval of the
Anti-Money Laundering,
Anti-Bribery and
Corruption and
Whistleblowing policies
Q2 2023 Q3 2023 Q4 2023
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Board responsibilities and relationship with the
Investment Adviser
The Board’s main roles are to lead the Group and ensure
its long-term sustainable success, generating value for
shareholders and contributing to wider society, and
to approve the Group’s purpose, values and strategic
objectives and satisfy itself that these and its culture are
aligned.
The Board annually maintains and reviews its schedule of
matters reserved for the Board of Directors which details its
specific responsibilities. Its responsibilities include:
• approving the Group’s investment and business strategy;
• approving the gearing policy;
• overseeing cash management;
• approving the Annual and Half-yearly Reports
and Financial Statements and accounting policies,
prospectuses, circulars and other shareholder
communications;
• approving acquisitions and disposals which are within
the investment policy but have a value of 20% or more of
the GAV of the Group’s portfolio, and any acquisitions or
disposals outside the investment policy;
• raising new capital and approving major financing
facilities;
• approving the valuation of the Group’s portfolio;
• approving and recommending dividends;
• approving Board appointments and removals;
• appointing or removing the Group’s external Auditor
following the recommendation of the Audit and Risk
Committee;
• appointing or removing the AIFM, Investment Adviser,
Depositary, Auditor, Company Secretary and other
service providers following the recommendation of the
Management Engagement Committee; and
• ensuring a satisfactory dialogue with shareholders and
other key stakeholders.
A copy of the schedule of matters reserved for the Board
of Directors is available on the Company’s website at
www. lifesciencereit.co.uk.
The Board has delegated its day-to-day functions to a
number of service providers, each engaged under separate
legal agreements. In particular, portfolio management
and risk management of the Group’s assets has been
delegated to the AIFM. The Management Engagement
Committee reviews the performance and cost of the
Company’s third-party service providers on an annual basis.
More information regarding the work of the Management
Engagement Committee can be found on pages 94 to 95.
The Investment Adviser provides recommendations to the
AIFM’s investment committee. These recommendations
cover acquisitions and sales of Group assets (where this
would be in line with the Group’s objectives and investment
policy), and recommendations on where the Group should
incur borrowings and give guarantees and securities
(subject to certain investment restrictions imposed by the
Board and the Board’s overall control and supervision).
TheBoard, the AIFM and the Investment Adviser operate
afully supportive, co-operative and open environment.
At each Board meeting, the Directors follow a formal
agenda, which is circulated in advance by the Company
Secretary following its approval by the Chair. The Company
Secretary and Investment Adviser regularly provide
financial information, together with briefing notes and
papers in relation to changes in the Group’s economic and
financial environment, statutory and regulatory changes
and corporate governance best practice to the Board.
Representatives from the Investment Adviser and the AIFM
attend each Board meeting and communicate with the
Board between formal meetings.
Election/re‑election of Directors
Under the Company’s Articles of Association, Directors are
required to stand for election at the first AGM after their
appointment and each AGM thereafter for re-election.
Asstated above and in accordance with the AIC Code
therefore, each Director will stand for re-election at the
forthcoming AGM. The Board considers that both during
the year ended 31December 2023 and from the end of the
period to 25March 2024, being the latest practicable date
of this report, each Director has performed effectively and
demonstrated excellent commitment to their role at this
early and important stage of the Company’s development.
It therefore believes that it is in the best interests of
shareholders that each Director is elected at the AGM.
Company Secretary
The Board has direct access to the advice and services of
the Company Secretary, Link Company Matters Limited,
which is responsible for ensuring that the Board and
Committee procedures are followed and that applicable
rules regulations are complied with. The Company
Secretary is also responsible to the Board for ensuring
timely delivery of information and reports and for ensuring
that the Company meets its statutory obligations.
CORPORATE GOVERNANCE STATEMENT CONTINUED
Section 2: Division of responsibilities continued
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Life Science REIT plc Annual Report and Financial Statements 2023
Board appointments
The Board has established a Nomination Committee,
comprising all the independent Directors. This Committee
will lead the appointment process of new Directors as and
when vacancies arise and as part of the Directors’ ongoing
succession plans. See pages 88 to 90 for more information
regarding the work of the Nomination Committee.
The Board has adopted a diversity policy, which
acknowledges the benefits of greater diversity and remains
committed to ensuring that the Company’s Directors bring
a wide range of skills, knowledge, experience, backgrounds
and perspectives to the Board.
None of the Directors has a service contract. Letters
of appointment set out the terms of their appointment
and copies are available on request from the Company
Secretary at LABS_CoSec@Linkgroup.co.uk and will be
available at the AGM. The Directors are not entitled to any
compensation for loss of office.
Board skills, experience and knowledge
The Directors’ biographical details are set out on pages 76
to 77 of this Report. These demonstrate the wide range
of skills and experience that they bring to the Board. The
Nomination Committee is responsible for identifying and
recommending to the Board the appointment of new
Directors and considering long-term succession plans.
Board skills matrix
For more details of the Board’s composition and skills,
please see page 77.
Annual evaluation of the Board
The Directors consider the evaluation of the Board, its
committees, the Chair and themselves to be an integral part
of the Company’s governance framework and evaluations
are undertaken annually.
For the year under review this was carried out by way of
a questionnaire. The Chair of the Nomination Committee
led the assessment, which covered the functioning of the
Board as a whole, the effectiveness of each the Board
Committees and the independence and contribution
made by each Director and the Chair. The Nomination
Committee reported the results from the evaluations to
the Board. Following this review, the Board is satisfied
that the structure, mix of skills and operation of the Board
is effective and relevant for the Company. Further detail
on the outcomes of the Board and Board Committees
evaluation can be found in the Nomination Committee
report on pages 88 to 90.
The individual performance of each Director standing for
election has been evaluated and it is recommended that
shareholders vote in favour of their election at the AGM.
Directors are subject to annual re-election by shareholders
and accordingly, all Directors will submit themselves for
re-election by shareholders at the forthcoming Annual
General Meeting. More information regarding the proposed
election of each Director can be found on page 84.
Section 3: Composition, succession and evaluation
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Life Science REIT plc Annual Report and Financial Statements 2023
Strategic reportCorporate governanceFinancial statementsAdditional information
CORPORATE GOVERNANCE STATEMENT CONTINUED
Section 4: Audit, risk and internal control
External audit
The Group is subject to an annual audit of its consolidated
financial statements and its component entities by its
external Auditor, Deloitte LLP. The Group produces its
consolidated financial statements in accordance with IFRS.
The Audit and Risk Committee supports the Board by
reviewing the performance of the external Auditor, audit
quality and the Auditor’s objectivity and independence.
In addition, the Audit and Risk Committee reviews the
integrity and content of these financial statements, the half
year financial statements and the ongoing viability of the
Company.
Fair, balanced and understandable assessment
The Audit and Risk Committee has considered the 2023
Annual Report and Accounts as a whole and believes that
the document presents a fair, balanced and understandable
assessment of the Company’s position and prospects.
In particular, the Committee has considered the language
used in the document to ensure technical terminology is
avoided to the extent possible, or where used it is suitably
explained. For further details, see pages 91 to 93.
Risk management
The Group has a Risk Management Framework, which is
approved by the Board and subject to annual review (as
a minimum) by the Audit and Risk Committee. A detailed
risk register has been compiled, identifying key risks and
mitigations, and evaluating the exposure for each risk, using
a standardised evaluation matrix. The Investment Adviser
regularly reviews the risk register, and it is provided to the
Audit and Risk Committee for discussion at each meeting.
The framework is included on page 63 of the strategic
report.
Principal and emerging risks
The principal and emerging risks that the Board has
identified are set out on pages 63 to 72.
Internal controls
The Directors are responsible for the Group’s system of
internal control and for reviewing its effectiveness.
Internal control systems are designed to manage, but not
to eliminate, the risk of failure of the Group to meet its
business objectives, and as such, only provide reasonable
but not absolute assurance against material misstatement
or loss.
The key components designed to provide effective internal
control are outlined below:
• the Group has a clearly defined organisational structure;
• the Group has policies and procedures for internal
controls of key matters including a Whistleblowing policy
and Anti-Bribery and Corruption policy which were
approved by the Board in December 2023;
• an annual budgeting process is in place;
• detailed quarterly reporting occurs;
• at least annually the Board conducts a review of the
effectiveness of the Group’s internal controls, covering all
material controls;
• the Directors actively respond to any external audit
recommendations on internal control deficiencies and
demonstrate how they are actioned. A follow-up process
is in place for actions arising from audits and the risk
management process, which ensures that actions are
implemented effectively;
• a delegated authority matrix has been developed to
cover key commercial and financial activities, investment
and disposal transactions, and management of disputes
or legal challenges; and
• the Directors have documented key controls which
mitigate risk of inaccurate reporting.
The Audit and Risk Committee undertakes the annual
review of the effectiveness of internal controls and reports
the results of this to the Board for consideration. The
Audit and Risk Committee also receives reports from
the Investment Adviser, AIFM and the external Auditor
concerning the system of internal control and any material
control weaknesses. It may also seek external reviews and
advice. Any significant issues identified are to be referred
to the Board for consideration. Where any material control
deficiencies are identified, remedial actions are agreed and
implemented, and the Board updated on its progress.
Segregation of duties and authorisation limits
As occurs with other organisations of its size and which
have a similar business, the Group faces challenges in
implementing segregation of duties. The Group operates
an outsourced model of suppliers and has no direct
employees.
The Group has considered the risk around segregation of
duties within the processing of payments and transactions
and has identified and put in place a delegated authority
matrix for acquisitions, disposals, property and occupier
related activities and capital expenditure.
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Life Science REIT plc Annual Report and Financial Statements 2023
Section 5: Remuneration
The Company has no employees other than its Directors,
who are all non-executive and independent of the
Investment Adviser. The remuneration of the Directors is
determined within the limits set out within the Company’s
Articles of Association and the total aggregate annual fees
payable to the Directors in respect of any financial period
shall not exceed £400,000.
The Company Secretary provides a comparison of the
Directors’ remuneration with other investment trusts of
similar size and/or mandate.
This comparison, together with consideration of any
change in Non-Executive Directors’ responsibilities, is used
to review annually whether any change in remuneration is
appropriate.
More information regarding the work of the Remuneration
Committee can be found in the Directors’ Remuneration
Report on pages 98 to 101.
In addition, the following authorisation controls are in place
for the processing of payments:
• the payments themselves are made by the Administrator
of the Group, based upon the approvals received from
the Investment Adviser, with a primary authorised
signatory and secondary authorised signatories;
• each payment or transaction is signed off by one
signatory, up to a total of £100,000. Payments or
transactions above this figure require authorisation
by two signatories and to be in line with the Group’s
delegated authority matrix and acquisition/disposal
protocols (as applicable) as approved by the Board; and
• the Administrator has a clearly defined set of processes
in place to manage payment risks. It produces an ISAE
3402 controls report to the Investment Adviser, providing
assurance over the adequacy and operation of key
controls.
Internal audit
The Group is not considered sufficient in size or complexity
to warrant the establishment of an internal audit function.
The Audit and Risk Committee reviews the requirement for
an internal audit function at least annually. If that threshold
has been attained, the Audit and Risk Committee will
approach the Board of Directors to request approval for the
establishment or outsource of an internal audit function.
Equally, if the Group’s Investment Adviser or AIFM
determines that it is appropriate to establish an internal
audit function, they will approach the Board of Directors
for approval to establish, or outsource, an internal audit
function.
To gain assurance over the control environment of the
Group without an internal audit function, the Group has
regular informal contact with the Investment Adviser,
in conjunction with a third-party risk and internal audit
adviser, will review Board papers which are received
in a timely manner, seek information from the external
Auditor, review the risk register and progress with any
actionsarising.
The Audit and Risk Committee reviews reports from the
principal service providers on compliance and the internal
and financial control systems in operation and relevant
independent audit reports thereon.
The Audit and Risk Committee regularly reviews the
Company’s internal controls through regular reporting
including reviewing the Group’s risk register, risk appetite
statement and internal audits undertaken during the
quarter.
Further information regarding the work of the Audit and
Risk Committee can be found on pages 91 to 93.
Whistleblowing
The Group has no employees, being wholly supported
by third-party service providers. However, it has a
Whistleblowing policy setting out the procedures that any
third party could follow to raise any concerns. Third-party
service providers are expected to comply with all the
relevant laws and regulations as a contractual requirement,
and adequate whistleblowing procedures are included
within that expectation. In particular, the Investment
Adviser Whistleblowing policy offers staff, or others raising
concerns, the opportunity to raise them direct with the
Chair of theGroup.
Insider information and Market
AbuseRegulation
The Company has an Insider Dealing Policy and a Share
Dealing Protocol. The Board and the Investment Adviser
are responsible for ensuring that information is properly
assessed to ascertain whether it is market sensitive, and
advice is sought in complex areas.
The Company Secretary is responsible for ensuring that
open and closed periods are recognised and communicated
to all PDMRs and insiders of the Company. In accordance
with the Share Dealing Protocol, all share dealings for both
Directors of the Company and employees of the Investment
Adviser deemed to be persons discharging managerial
responsibilities must be approved in advance.
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Life Science REIT plc Annual Report and Financial Statements 2023
NOMINATION COMMITTEE REPORT
The Nomination C ommittee
is essential to ensure the
Board has the necessary
composition of skills,
experience and perspective
to drive the Group’sstrategy.
Sally Ann Forsyth
Chair of the Nomination
Committee
Committee members
Name Attendance
Sally Ann Forsyth (Chair)
Claire Boyle
Michael Taylor
Richard Howell
Introduction and composition
oftheCommittee
Following the Company’s admission to the premium
segment of the London Stock Exchange the Board
established a Nomination Committee. The Committee is
comprised of all the Directors of the Company and chaired
by Sally Ann Forsyth. The Committee met twice during the
year with the Committee’s key responsibilities to assist the
Board in reviewing the skills, diversity and composition of
the Board and its Committees, taking into consideration the
guiding principles from the AIC Code and Listing Rules.
Role of the Nomination Committee
The Committee’s primary responsibilities include:
• regular review of the Board’s structure and composition;
• preparing policies for the tenure of the Chair and the
Board, succession planning for Directors;
• staying informed about strategic issues and market
changes;
• identifying and nominating candidates for Board
vacancies;
• ensuring diversity on the Board;
• maintaining the Company’s diversity policy; and
• facilitating various evaluation processes.
Furthermore, the Committee is responsible for making
recommendations to the Board on succession planning
for Non-Executive Directors, the role of the Senior
Independent Director, Directors’ re-election, committee
memberships, and the re-appointment of Non-Executive
Directors.
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Tenure
In accordance with the AIC Code, the Directors were
required to retire at the first AGM following their
appointment. Thereafter, at each AGM, all Directors,
including the Chair of the Board, will seek annual
re-election. The Board has not stipulated a maximum
term of any directorship, except that subject to ensuring
business continuity, all Non-Executive Directors will
remain on the Board for a maximum period of nine years in
accordance with the AIC Code. At the 25 May 2023 AGM,
all Directors were re-elected. The next AGM is scheduled
for 23 May 2024.
Diversity, inclusion and succession planning
In accordance with the AIC Code, the Board is comprised of
a group of individuals who have an appropriate balance of
skills and experience to meet the future opportunities and
challenges facing the Group. Appointments are made first
and foremost on the basis of merit and taking into account
the recognised benefits of all types of diversity. TheBoard
ensures that diversity is an important consideration and
part of the selection criteria used to assess candidates to
achieve abalanced Board.
The FCA has introduced ‘comply or explain’ targets that at
least 40% of the Board should be women, that at least one
of the senior Board positions should be held by a woman,
and that at least one member of the Board should be from
a minority ethnic background.
At the year end, 50% of the Board were women and Claire
Boyle was the Chair and therefore the Company meets the
first two of these targets.
The Company’s non-compliance with the third is explained
in more detail below. In accordance with Listing Rule 9.8.6R
(9), (10) and (11) the Board has provided the following
information in relation to its diversity. This information
has been collected by self-disclosure directly from the
individuals concerned who were asked to confirm their
gender and ethnicity. There have been no changes to the
composition of the Board since 31December 2023.
As the Company is an investment company with no
executive directors and a small Board relative to that
which would be expected for a trading company of
equivalent size, it has not managed to comply with the
newly introduced diversity targets as none of the current
Directors come from anethnic minority background.
Gender identity
Number of
Board members
Percentage
on the Board, %
Number of
senior positions
on the Board
1
Men
2
50
1
Women
2
50
1
Not specified/prefer not to say 0 0 0
Ethnic background
Number of
Board members
Percentage
on the Board, %
Number of
senior positions
on the Board
1
White British or other white
(including minority white groups)
4
100
4
Mixed/multiple ethnic groups
0
0
0
Asian/Asian British
0
0
0
Asian
0
0
0
Other ethnic group, including Arab
0
0
0
Not specified/prefer not to say 0 0 0
1. Listing Rule 9.8.6(9) includes only the positions of chair, chief executive, senior independent director and chief financial officer in this category. As an
externally managed investment company with no executive directors, the Company does not have either a chief executive or a chief financial officer.
TheCompany considers the position of the Chairs of the Audit and Risk Committee and Sustainability Committee as senior positions in addition to those
reported above. Ofthese four senior roles, two are performed by women and two by men.
Diversity, inclusion and succession planning
continued
The Board will continue to take all matters of diversity into
account as part of its succession planning and the benefits
of diversity will continue to be considered as an important
factor in all future appointments.
The Committee operates within defined terms of reference,
which are regularly reviewed and updated as necessary.
Theterms of reference are available on the Company’s
website.
Activities
The Committee met two times during the year under
review. At the meetings, the Committee has:
• considered the Board evaluation process including
succession planning;
• reviewed results of Directors’ performance/evaluation
that relate to the composition of the Board;
• reviewed membership of the Board’s committees;
• considered Directors standing for re-election/election
attheAGM and recommendations to shareholders;
• reviewed the terms of reference; and
• reviewed internal evaluations.
Board and Committee evaluation
Towards the end of 2023, the Committee conducted
an internal evaluation of the effectiveness of the Board,
itsCommittees, the Chair and the Directors.
The 2023 evaluation was an internal performance
evaluation by way of questionnaires completed by the
Directors. Theresults were collated and a report detailing
the responses was considered by the Committee along with
considering areas of focus and improvement for 2024.
This process was facilitated by the Company Secretary.
The scope of the questionnaire was designed to cover
all aspects of the Board’s operation, including the
management of meetings, the strengths and independence
of the Board and the Chair, individual Directors and the
performance of its Committees, each Director’s perspective
on the Board’s future priorities, training requirements, and
the way the Board works as ateam.
The Committee concluded that the evaluation
demonstrated that the composition of the Board and its
Committees continued to be appropriate and it provided
adequate supervision, oversight and challenge. The areas
identified for the Board to focus on in 2024 are summarised
below:
NOMINATION COMMITTEE REPORT CONTINUED
Area of assessment Agreed action
Role of the Board, strategy
and governance
The Board agreed that more time outside of quarterly meetings should be
spent on discussing the Group’s strategy against current market conditions
and to undertake more site visits to provide a greater understanding of assets
in conjunction with developing the Group’s strategy.
Stakeholder engagement
The levels of engagement between the Investment Adviser, Brokers
and shareholders are good with feedback regularly provided by the
Board. TheBoard will continue to increase its undertaking of stakeholder
engagement in2024.
Composition and
independence
The Board will continue to monitor its composition against diversity targets
and recommendations.
Looking ahead
Priorities for 2024 include keeping under review the
succession plan and composition of the Board and its
Committees.
Sally Ann Forsyth
Chair of the Nomination Committee
25 March 2024
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Life Science REIT plc Annual Report and Financial Statements 2023
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Life Science REIT plc Annual Report and Financial Statements 2023
AUDIT AND RISK COMMITTEE REPORT
The Audit and R isk Committee
(“C ommittee”) plays a key
role in the Group’s corporate
governance framework,
ensuring key controls are in
place, risks are mitigated and
reported figures are accurate.
Richard Howell
Chair of the Audit
andRiskCommittee
Committee members
Name Attendance
Richard Howell (Chair)
Claire Boyle
Michael Taylor
Sally Ann Forsyth
Introduction and composition
oftheCommittee
The Committee is chaired by Richard Howell, who is a
qualified chartered accountant, has a degree in Accounting
and Finance from Kingston University, as well as having
recent and relevant financial experience. Given the size of the
Board, it is considered both proportionate and practical for
all Directors to be members. The Chair of the Board is also
a member of the Audit and Risk Committee, as permitted
by the AIC Code. This is considered appropriate given Claire
Boyle is a Fellow of the ICAEW, has a diverse background
in equity investment, and her recent and relevant financial
experience, having chaired audit committees herself. All
members of the Committee are considered independent
Non-Executive Directors by the Board on appointment.
The Committee as a whole has competence relevant to the
sector in which the Group operates. For more information
on the individual background of each Committee member,
please see pages 76 and 77 toview their biographies.
Strategic reportCorporate governanceFinancial statementsAdditional information
Role and activities of the Committee
The Audit and Risk Committee is responsible for the
effectiveness of internal control, risk management and
auditing processes.
The Committee’s primary responsibilities are to:
• consider the appointment, compensation, terms
of engagement of, independence and objectivity,
resignation or dismissal of the external Auditor;
• meet with the external Auditor and discuss the nature
and scope of the audit, the findings from the audit,
including accounting and internal controls;
• review the independence of the Auditor and provide
recommendations to the Board with regard to audit
engagement terms;
• review the Group’s financial statements, annual accounts
and accompanying reports to shareholders and
announcements relating to financial information;
• review the Group’s internal financial controls, the policies
and overall process for identifying and assessing business
risks;
• review the Group’s risk register, in particular with regard
to the potential impact of principal and emerging risks;
• review, on an annual basis, whether there should be an
internal audit function;
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Life Science REIT plc Annual Report and Financial Statements 2023
AUDIT AND RISK COMMITTEE REPORT CONTINUED
Role and activities of the Committee continued
• review the procedures for whistleblowing, detecting
fraud and prevention of bribery of the outsourced service
providers; and
• produce an annual report of the Committee’s activities to
be included in the Annual Report.
The Committee has direct access to the Group’s Auditor,
Deloitte LLP, and provides a forum through which the
Auditor reports to the Board. Representatives of the
Auditor attend Committee meetings at least annually.
The Committee operates within defined terms of reference,
which are regularly reviewed and updated as necessary.
The terms of reference are available on the Company’s
website at www. lifesciencereit.co.uk.
The Committee met three times during the year under
review. At the meetings, the Committee:
• reviewed the internal controls and risk management
systems of the Group and its third-party service
providers;
• reviewed the internal audits undertaken, monitored the
progress of the internal audit plan;
• agreed the audit plan with the Auditor, including the
principal areas of focus, and agreed the audit fee;
• received and discussed with the Auditor its report on the
results of the audit;
• reviewed the Group’s interim and annual financial
statements and discussed the appropriateness of the
accounting policies adopted;
• reviewed the valuation of the Group’s investment
properties and recommended this to the Board;
• reviewed the performance of the Group’s Auditors; and
• reviewed the Company’s compliance with the AIC Code.
During the year, the Committee has reviewed and updated,
where appropriate, the corporate risk register. This will
be completed at least half-yearly, in conjunction with the
Investment Adviser and AIFM. During the year, the addition
of new risks to the register and, more recently, minor
changes to the principal risks which demonstrated the
strength of the business, are described on pages 63 to 72.
The Committee reviewed the requirement for an internal
audit function following the year end and concluded that
this would provide minimal added comfort at considerable
extra cost to the Group.
The Committee receives reports on internal controls and
compliance from the Investment Adviser in conjunction
with a third-party risk and internal audit adviser and
discusses these with the Investment Adviser. This report
also covers the internal controls of the Group’s other key
service providers. No significant matters of concern were
identified.
Effectiveness of external auditprocess
The Committee monitors and reviews the effectiveness of
the external audit process for the Annual Report, including
a detailed review of the audit plan and the audit results
report. This review takes into account the experience and
tenure of the audit partner and team, the nature and level
of services provided, and confirmation that the Auditor has
complied with independence standards. During the year
under review, the Committee had closed sessions with the
Auditor without the presence of the Investment Adviser.
Audit fees and non‑audit services
An audit fee of £172,000 has been agreed in respect of the
audit for the year ended 31 December 2023 (period ended
31December 2022: £177,000) for auditing the Annual
Report and consolidated financial statements. No fees for
non-audit services were incurred in the current or prior
year. Further information on the fees paid to the Auditor is
set out in note 6 to the Financial Statements on page 122.
Auditor independence and objectivity
The Committee has considered the Auditor’s independence
and objectivity and reviewed the non-audit services which
the Auditor provided during the year. The Committee is
required to pre-approve all non-audit services prior to any
work commencing and considers the safeguards in place
to maintain their independence, such as the use of separate
teams to mitigate the risk of any self-review, are effective.
The Committee also receives an annual assurance from the
Auditor that its independence is not compromised by the
provision of such non-audit services. In the year, there were
no non-audit services provided by the Auditor. As such, the
Committee is satisfied that the Auditor’s objectivity and
independence has not been impaired and that the Auditor
has fulfilled its obligations to the Group and the Company’s
shareholders.
Deloitte LLP has been the Auditor since the Company’s
launch in November 2021. The Committee will regularly
consider the need to put the audit out to tender, the
Auditor’s fees and independence, and the matters raised
during each audit. James Wright, the current audit partner,
was appointed as audit lead during the year under review
and will step down asaudit partner after he has served for
five years.
Re‑appointment of the Auditor
The Committee has recommended to the Board the
re-appointment of Deloitte LLP as Auditor to the Group.
The approval of Deloitte LLP as the Group’s Auditor will
be put to shareholders as an ordinary resolution at the
forthcomingAGM.
AIC statement of compliance
For the audit of the Financial Statements in this Annual Report, the Company complied with the mandatory audit
processes, including The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit Committee Responsibilities) Order 2014 (“CMA Order”), and the Committee
complied with the responsibility provisions set out in the CMA Order relating to: (a) putting the audit services engagement
on tender every ten years; and (b) strengthening the accountability of the external auditors to the Committee, including:
that only the Committee can agree to the external auditors’ fees and scope of services including authorisation of any
non-audit services; and make recommendations regarding the appointment of auditors and audit engagement partner.
Fair, balanced and understandable reporting
The Committee reviewed drafts of this Annual Report and Financial Statements to consider whether it is fair, balanced
and understandable and provides the information necessary for shareholders to assess the Group’s performance, business
model and strategy. The Committee also gained assurance that there is a robust process of review and challenge at
different levels within the Group to ensure balance and consistency.
Following the consideration of the above matters and its detailed review, the Committee was of the opinion that the
Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s position and performance, business model andstrategy.
Significant issues
The Committee considered the following key issues in relation to the Group’s financial statements during the year:
Valuation of
investment
property
The Committee considered and discussed the valuation of the Group’s investment properties as at
31December2023. The valuer attended the Committee meeting in March 2023, September 2023, and
March 2024 to enable a full discussion of the valuation and underlying assumptions and to enable the
Directors to challenge as appropriate.
Maintenance of
REIT status
The UK REIT regime affords the Group a beneficial tax treatment for income and capital gains, provided
certain criteria are met. There is a risk that these REIT conditions may not be met and additional tax
becomes payable by the Group. The Committee therefore monitored the Group’s compliance status and
considered each of the requirements for the maintenance of the REIT status throughout the year ended
31December 2023.
Going concern
and long-term
viability
The Committee considered the Group’s financial requirements for the next 12 months and concluded that it
has sufficient resources to meet its commitments and any outstanding financing covenants. Consequently, the
Financial Statements have been prepared on a going concern basis.
The Committee also considered the long-term viability statement within the Annual Report, for the three-year
period to 31December 2026, and the underlying factors and assumptions which contributed to the Committee
concluding that three years was an appropriate length of time to consider the Group’s long-term viability.
The Group’s going concern and viability statement can be found on pages 73 and 74.
Internal controls
Please see page 86 for an overview of the internal controls
of the Group.
Committee evaluation
The Committee undertook a self-performance evaluation
during the year under review. Further details on the
evaluation process can be found in the Nomination
Committee report on pages 88 to 90.
Look ahead to 2024
The Committee has agreed several areas of focus,
including:
• ensuring continued integrity and balance in the Group’s
financial reporting;
• ensuring continued review of the documentation and
evidence around key procedures and processes;
• actioning any required changes following the publication
of the revised UK Corporate Governance;
• monitoring the Minimum Standard for Audit Committees
and consider appropriate processes;
• consideration of new and emerging risks; and
• looking at specific implications of the current UK
economic downturn on the Group’s portfolio value
including macro and life science industry specific impacts
and assessing resulting financial impacts.
Richard Howell
Chair of the Audit and Risk Committee
25 March 2024
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Life Science REIT plc Annual Report and Financial Statements 2023
MANAGEMENT ENGAGEMENT
COMMITTEEREPORT
The Management Engagement
Committee reviews the
performance and ongoing
appointment of third-party
service providers to ensure
they are operating in the
shareholders best interests.
Michael Taylor
Chair of the Management
Engagement Committee
Committee members
Name Attendance
Michael Taylor (Chair)
Claire Boyle
Sally Ann Forsyth
Richard Howell
Introduction and composition
oftheCommittee
The Committee is comprised of all the Directors of the
Company and chaired by Michael Taylor. The Committee
met on one occasion during the year under review,
inaccordance with its terms of reference.
The Committee is responsible for evaluating the
performance of the Group’s key service providers and
satisfying itself that the continuation of such service
provider appointments are in the best interests of
shareholders as a whole.
The Committee reviews the Investment Adviser and AIFM’s
agreements including the methodology used for calculating
fees, to ensure that the terms remain fair and in the best
interests of shareholders.
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Life Science REIT plc Annual Report and Financial Statements 2023
Role and activities of the Management
Engagement Committee
The Committee operates within defined terms of reference,
which are regularly reviewed and at least on an annual
basis, to ensure they remain fit for purpose. The terms
of reference are available on the Company’s website at
https://lifesciencereit.co.uk/.
The Committee’s primary responsibilities areto:
• keep under review the performance of all service
providers with the exception of the Auditor;
• reasonably satisfy itself that the Investment Management
Agreement is fair and that the terms remain competitive;
• satisfy itself that the systems put in place by the AIFM,
Investment Adviser, Administrator and Depositary meet
legal and regulatory requirements;
• satisfy itself that matters of compliance are under proper
review, including access to the Company’s AIFM;
• consider whether continued employment of the
Investment Adviser is in the interests of shareholders as
awhole; and
• produce an annual report of the Committee’s activities
tobe included in the Annual Report.
Investment Adviser and AIFM
Two of the key service providers of the Group are the
Investment Adviser and AIFM. During the year, the
Committee considered their performance against
their obligations under the Investment Advisory and
AIFM Agreements, and whether it was appropriate to
recommend the continuing appointments of the Investment
Adviser and AIFM to theBoard.
In reaching its recommendation to the Board, the
Committee’s deliberations included consideration of:
• the investment advisory and AIFM fees as detailed on
page103;
• whether the terms of the agreements remained fair,
complied with all regulatory requirements, conformed
with market and industry practice and were in the best
interests of shareholders; and
• the execution of the Group’s investment strategy (see
pages 16 to 17) by the Investment Adviser during theyear.
Following the review, the Committee agreed that the
Investment Adviser and AIFM had performed their duties
to a high standard and recommended to the Board that the
continuing appointments of the Investment Adviser and
AIFM were in the best interests of the shareholders.
During the year, the Committee also reviewed the amended
Investment Adviser agreement giving consideration to the
terms of the agreement that had changed and whether the
level and structure of the fees were impacted. On review,
the Committee recommended the revised agreement to the
Board for approval.
Other key service providers
The Committee reviewed the ongoing performance and the
continuing appointment of the Group’s other key service
providers, including the Administrator, Auditor, Corporate
Broker, Financial PR & Investor Relations Adviser, Legal
Adviser, Property Manager, Registrar, Company Secretary,
Depositary, and Valuer. The Committee recognises that
ensuring excellent support and performance by service
providers is critical for the Group’s continuing operation
asan externally managed Real Estate Investment Trust.
Committee evaluation
The Committee undertook a self-performance evaluation
during the year under review. Further details on the
evaluation process can be found in the Nomination
Committee report on pages 88 to 90.
Michael Taylor
Chair of the Management Engagement Committee
25 March 2024
Strategic reportCorporate governanceFinancial statementsAdditional information
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Life Science REIT plc Annual Report and Financial Statements 2023
SUSTAINABILITY COMMITTEE REPORT
Sustainability is a key focus
of the Group, with the
Sustainability Committee
established in the year
to navigate this rapidly
changinglandscape.
Sally Ann Forsyth
Chair of the Sustainability
Committee
Committee members
Name Attendance
Sally Ann Forsyth (Chair)
Claire Boyle
Michael Taylor
Richard Howell
Science Oxford, local charitable organisation
The Committee is comprised of all the Directors of
the Company and chaired by Sally Ann Forsyth. the
Sustainability Lead. The Committee was established in
January 2023 and has met twice during the year under
review. The Committee assists the Board in overseeing the
implementation of the Group’s sustainability strategy and
the Company’s contribution to society and the environment
in line with its obligations under section 172.
Role and activities of the
SustainabilityCommittee
The Committee operates within defined terms of reference,
which are regularly reviewed at least on an annual basis, to
ensure they remain fit for purpose. The terms of reference
are available on the Company’s website at
https://lifesciencereit.co.uk/.
The Sustainability Committee complements our Audit and
Risk Committee. Sustainability risks are incorporated into
our corporate risk register which is reviewed and updated
on a regular basis.
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Life Science REIT plc Annual Report and Financial Statements 2023
Oxford Technology Park, Oxford
Strategic reportCorporate governanceFinancial statementsAdditional information
The Committee’s primary responsibilities
areto:
• oversee the formulation and implementation of the
Group’s sustainability strategy, review updates on any
regulatory changes affecting the strategy and make
recommendations to the Board regarding changes to
strategy;
• review any updates on regulatory changes which could
impact the implementation of the sustainability strategy;
• oversee service providers’ own sustainability policies and
procedures; and
• review the Group’s efficacy in relation to its sustainability
reporting.
The Committee met twice during the year under review.
Atthe meetings the Committee reviewed:
• and approved the sustainability strategy;
• the timeframe for achieving a transition to net zero
carbon emissions within the Company’s portfolio;
• and recommended to the Board for approval the
Committee terms of reference the sustainability policy.
Committee evaluation
The Committee undertook a self-performance evaluation
during the year under review and considered areas of focus
for 2024. Overall it was concluded that the Committee
operated effectively.
Looking ahead
The Committee’s priority for 2024 is to continue to oversee
and embed the sustainability strategy, focusing on the
decarbonisation journey of the Group’s assets and the
net zero pathway (see pages 42 to 43 in the Sustainability
report for further details).
Sally Ann Forsyth
Chair of the Nomination Committee
25 March 2024
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Life Science REIT plc Annual Report and Financial Statements 2023
DIRECTORS’ REMUNERATION REPORT
The Remuneration
Committee’smain function
isapproving the remuneration
policy of the Directors.
Michael Taylor
Chair of the Remuneration
Committee
Committee members
Name Attendance
Michael Taylor (Chair)
Claire Boyle
Sally Ann Forsyth
Richard Howell
The Board has prepared this report in accordance with the
requirements of the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment)
Regulations 2013. The law requires the Auditor to audit
certain disclosures contained within this Report and
these are indicated accordingly. An ordinary resolution to
approve the Directors’ remuneration report will be put to
shareholders at the forthcoming AGM.
Statement from the Chair
Following the migration of the Company’s ordinary shares
from AIM to premium listing of the London Stock Exchange
in December 2022, the Board established a Remuneration
Committee chaired by Michael Taylor and comprising all
Directors on the Board. The Board consists entirely of
Non-Executive Directors and the Group has no employees.
We have not, therefore, reported on those aspects of
remuneration that relate toExecutive Directors.
During the year under review the Remuneration Committee
met once to review the levels of remuneration for its
Non-Executive Directors, including the Chair. Remuneration
for all Non-Executive Directors does not include share
options or any other performance-related or variable
elements. No Director, including myself in my role as Chair
of the Remuneration Committee, is involved in setting their
own levels of remuneration.
Directors’ fees are set at a level of £55,000 per annum for the Chair and £40,000 per annum for the independent
Non-Executive Directors. The Chair of the Audit and Risk Committee will receive an additional £5,000 per annum.
TheRemuneration Committee reviewed the Directors’ fees during the year and does not recommend any increase for
the year ended 31 December 2024. The Directors are also entitled to out-of-pocket expenses incurred in the proper
performance of their duties.
Directors are not eligible for bonuses, share options or long-term incentive schemes or other performance-related
benefits, as the Board does not believe that this is appropriate for Non-Executive Directors. There are no pension
arrangements in place for the Directors.
Directors’ Remuneration Policy
The Directors’ Remuneration Policy (the “Policy”), detailed below, is put to shareholders’ vote at least once every three
years and in any year if there is to be a change in Policy. In determining the Policy, the Board takes into account all factors
which it deems necessary including relevant legal and regulatory requirements and the provisions and recommendations
of the AIC Code. The appropriateness and relevancy of the Policy is reviewed annually, particularly to ensure that the
Policy supports the long-term success of theGroup. As a binding vote on the Policy is necessary every three years, an
ordinary resolution to approve the Policy will next be put to shareholders at the 2025 AGM. The Board does not propose
to make any changes to the existing Policy, which is set out below.
The Company has no employees other than its Directors, who are all non-executive and independent of Ironstone Asset
Management Limited.
The remuneration of the Directors is determined within the limits set out within the Company’s Articles of Association
and the total aggregate annual fees payable to the Directors in respect of any financial period shall not exceed £400,000,
subject to shareholders’ approval at the next AGM.
Statement of implementation of Remuneration Policy in respect of the financial year ended
31December 2023
The Remuneration Committee reviewed the fees during the year under review, including the time required to be
committed to the business of the Company, and will consider whether any further changes to remuneration are required
over the next financial year.
Statement of voting at General Meeting
Voting results from 2023 Annual General Meeting:
For Against
Resolution
No. of
shares %
No. of
shares %
Votes withheld
(No. of shares)
1. To receive and approve the Directors’
remuneration report 236,497,636 99.68 761,688 0.32 77,734
For more information see the results on the Company’s website at www.lifesciencereit.co.uk.
Voting results from 2022 Annual General Meeting:
For Against
Resolution
No. of
shares %
No. of
shares %
Votes withheld
(No. of shares)
1. To receive and approve the Directors’
remuneration report
170,713,974
99.99
16,614
0.01
78,186
2. To receive and approve the Directors’
remuneration policy 170,710,974 99.99 16,614 0.01 81,186
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Life Science REIT plc Annual Report and Financial Statements 2023
Strategic reportCorporate governanceFinancial statementsAdditional information
Remuneration report
Directors’ fees received for the year
The Directors who served in the year to 31 December 2023 received the following emoluments (gross of any tax or
National Insurance contributions):
Fees
£’000
Year ended
31 December 2023
Total
£’000
Fees
£’000
Period ended
31 December 2022
Total
£’000
Claire Boyle
55
55
55
55
Sally Ann Forsyth
40
40
42
42
1
Michael Taylor
40
40
40
40
Richard Howell 45 45 29 29
2
Total 180 180 166 166
1. Sally Ann was Chair of the Audit and Risk Committee until 23 June 2022, receiving a pro rata share of the £5,000 per annum fee.
2. Richard joined the Board as a Director on 3 May 2022, receiving his pro rata share of the £40,000 per annum fee. In addition he became Chair of the Audit and
Risk Committee on 24 June 2022, receiving his pro rata share of the £5,000 per annum fee.
The information in the above table has been audited.
The Directors’ remuneration is determined as per the limits set out within the Company’s Articles of Association and
the Remuneration Policy – with the Directors not eligible for benefits, bonuses, share options or long-term performance
incentives.
Annual percentage change in remuneration of Directors
Directors’ pay has increased over the last three years as set out in the table below. The Company does not have any
employees and therefore no comparisons are given in respect of Directors’ and employee’s pay increases.
2021
£’000
2021 to 2022
% change
2022
£’000
2022 to 2023
% change
2023
£’000
Claire Boyle
1
12
358
55
0
55
Sally Ann Forsyth
2
10
320
42
(5)
40
Michael Taylor
3
8
400
40
0
40
Richard Howell
4
n/a n/a 29 55 45
1. Claire Boyle joined the Board as a Director on 14 October 2021, receiving her pro rata share of the £55,000 per annum fee.
2. Sally Ann joined the Board as a Director on 14 October 2021 receiving her pro rata share of the £40,000 per annum fee and was Chair of the Audit and Risk
Committee until 23 June 2022, receiving a pro rata share of the £5,000 per annum fee.
3. Michael Taylor was appointed to the Board on 14 October 2021, receiving his pro rata share of the £40,000 per annum fee.
4. Richard joined the Board as a Director on 3 May 2022, receiving his pro rata share of the £40,000 per annum fee. In addition he became Chair of the Audit and
Risk Committee on 24 June 2022, receiving his pro rata share of the £5,000 per annum fee.
Total shareholder return
The graph below shows the total shareholder return of the Company’s ordinary shares relative to a return on a
hypothetical holding over the same period in the FTSE All-Share REIT index.
DIRECTORS’ REMUNERATION REPORT CONTINUED
Graph to be
created
Nov
‘21
FTSE All Share
FTSE EPRA NAREIT UK
0
25
50
125
Life Science REIT plc
Dec
‘21
Jan
‘22
Feb
‘22
Mar
‘22
Apr
‘22
May
22
Jun
‘22
Jul
‘22
Aug
‘22
Sep
‘22
Oct
‘22
Nov
‘22
Dec
‘22
Jan
‘23
Feb
‘23
Mar
‘23
Apr
‘23
May
‘23
Jun
‘23
Jul
‘23
Aug
‘23
Sep
‘23
Oct
‘23
Nov
‘23
Dec
‘23
100
Total shareholder return index (18 November 2021=100)
Source: Morningstar
Past performance is not a reliable indicator of future results
100
Life Science REIT plc Annual Report and Financial Statements 2023
Relative importance of spend on pay
The table below sets out significant use of profit and cash in respect of the years ended 31 December 2022 and
31December2023.
2023
£’000
2022
£’000
Change
%
Total Directors’ remuneration
180.0
166.0
8.4
Investment Adviser fees
3,389.0
3,787.0
(10.5)
Total dividend paid or declared 7.0 14.0 (50.0)
Directors’ beneficial and family interests
There is no requirement under the Company’s Articles of Association for Directors to hold shares in the Company.
Theinterests of the Directors and any connected persons in the ordinary shares of the Company are set out below:
31 December 2023
Number of shares
31 December 2022
Number of shares
Claire Boyle
30,000
30,000
Sally Ann Forsyth
20,342
20,342
Michael Taylor
20,000
20,000
Richard Howell 30,000 30,000
The above information has been audited.
There have been no changes to these holdings between 31 December 2023 and the date of this report.
On behalf of the Board
Michael Taylor
Chair of the Remuneration Committee
25 March 2024
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Life Science REIT plc Annual Report and Financial Statements 2023
Strategic reportCorporate governanceFinancial statementsAdditional information
The Directors present the Annual Report and Financial
Statements of Life Science REIT plc (the “Company”)
(registered number 13532483) for the year ended
31December2023.
In accordance with the Companies Act 2006 (as amended),
the Listing Rules and the Disclosure Guidance and
Transparency Rules, the Corporate Governance Statement,
Directors’ remuneration report, report from the Audit and Risk
Committee and the statement of Directors’ responsibilities
should be read in conjunction with one another and the
strategic report. As permitted by legislation, some of the
matters normally included in the Directors’ report have instead
been included in the strategic report, as the Board considers
them to be of strategic importance.
The corporate governance report forms part of this Directors’
report and can be found at pages 75 to 105. Please refer to
the Chair’s statement on pages 7 to 9 and the Investment
Adviser’s report on pages 28 to 37 for information about
future developments and important events that have occurred
since the year end. For further information on the going
concern and longer-term viability of the Group please see
pages 73 and 74.
Status of Life Science REIT plc
The Company is an investment company, as defined in section
833 of the Companies Act 2006, and qualifies as a UK Real
Estate Investment Trust (“REIT”) as defined under section
527(2) of the Corporation Tax Act 2010.
Investment portfolio
A comprehensive analysis of the property portfolio can be
found at page 32 and a summary of the valuation of the
property portfolio can be found in note 13 on page 126.
Theinvestment policy can be found at page 156.
Directors
Biographies of each Director appointed to the Company can
be found at pages 76 and 77.
The following information is disclosed in accordance with The
Large and Medium sized Companies and Groups (Accounts
and Reports) (Amendment) Regulations 2013 and DTR 7.2.6
of the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules.
Directors’ authority to purchase own shares
The Company did not purchase any of its own shares during
the year.
The Company will seek the authority to make market
purchases of up to 14.99% of the issued ordinary share capital
at the 2024 AGM via resolution 13 as included in the Notice of
Meeting.
Authority to allot shares
A general authority to allot new shares (or to grant rights over
shares) was given to the Directors at the Company’s AGM
in2023.
The authority gives the Directors, for the period until the
conclusion of the AGM in 2024, the necessary authority to allot
securities up to a maximum nominal amount of £2,333,333.33.
The Directors are proposing to renew the general authority
to allot shares at the 2024 AGM. This power will be exercised
only if, in the opinion of the Directors, it would be in the best
interests of shareholders as a whole.
Disapplication of pre‑emption rights
A general power to disapply the pre-emption rights set out
in section 561 of the Companies Act 2006 was granted to the
Directors at the AGM in 2023. The Directors are proposing
a resolution to renew and extend, subject to the passing of
the resolution to allot shares, the Directors’ authority to allot
equity securities for cash without pre-emption rights applying
in certain circumstances.
This resolution will authorise the Directors, until the date falling
15 months after the date of the passing of the resolution or,
if earlier, the conclusion of the next Annual General Meeting
of the Company, to issue ordinary shares for cash, without
pre-emption rights applying, of up to an aggregate nominal
value of £350,000, representing approximately 10% of the
issued ordinary share capital as atthe date of the Notice.
This power will be exercised only if, in the opinion of the
Directors, it would be in the best interests of shareholders
asawhole.
Current share capital
As at 31 December 2023 and the date of the report, there
were 350,000,000 ordinary shares of £0.01 in issue, none of
which were held in treasury. The share capital comprises one
class of ordinary shares. Each ordinary share carries the right
to receive profits of the Company available for distribution
and determined to be distributed by way of interim or final
dividends at such times as the Directors may determine in
accordance with these Articles.
Results and dividends
A summary of the Group’s performance during the year and
the outlook for the coming year is set out in the strategic
report on pages 16 and 17.
In respect of the year ended 31 December 2023, a second
interim dividend of 1.0 pence (year ended 31 December
2022: 3.0 pence) per ordinary share has been declared,
with a payment date of 13 May 2024. This is in line with
the Group’s obligation as a REIT to distribute 90.0% of the
Group’s aggregate UK property rental business profits as
calculated for tax purposes that the Group receives during
the year. The Company paid a first interim dividend of 1.0
pence per ordinary share in respect of the six-month period
to30June2023 on 31 October 2023.
The Group’s dividend policy can be found at page 17 of the
strategic report.
DIRECTORS’ REPORT
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Life Science REIT plc Annual Report and Financial Statements 2023
Substantial shareholdings
As at 31 December 2023, the following shareholders had notified the Company of their shareholdings under their DTR 5
obligations:
Shareholder
Ordinary shares
held
1
Percentage of
voting rights
(%)
Rathbones Investment Management Ltd
2
63,026,057
18.0
Sarasin & Partners LLP
17,452,282
5.0
Hazelview Investments Inc.
17,300,631
4.9
Legal & General Group Plc (Group) 10,905,907 3.1
1. As at date of notification to the Company.
2. Includes Investec Wealth & Investment Limited shareholding following their acquisition by Rathbones Investment Management Limited during 2023.
It should be noted that these holdings may have changed since notified to the Company and may not therefore be wholly
accurate statements of actual holdings as at 31 December 2023. However, notification of any change is not required
until the next applicable threshold is crossed. Interests disclosed to the Company occurring between the year end and
25March 2024, being the latest practicable date:
Shareholder
Ordinary shares
held
1
Percentage of
voting rights
(%)
Rathbones Investment Management Ltd 62,959,063 18.0
Hazelview Investments Inc. 3,784,262 1.1
1. As at date of notification to the Company.
Powers of the Board of Directors
The powers of the Directors are set out in the Articles of
Association of the Company at section 104. This section
states that the business of the Group shall be managed by
the Board, which may exercise all the powers of the Group,
whether relating to the management of the business or
not, subject to any limitations imposed by legislation, the
Articles and/or any directions given by special resolution of
the shareholders of the Company.
Management arrangements
The Company and the AIFM have appointed Ironstone
Asset Management Limited as Investment Adviser to the
Group.
The Company is an alternative investment fund for the
purposes of the UK AIFM Regime and, as such, is required
to have an AIFM who is duly authorised to undertake that
role. Pursuant to an agreement dated 21 October 2021 (the
“Alternative Investment Fund Management Agreement”),
theCompany appointed G10 Capital Limited as its AIFM.
G10Capital Limited is authorised and regulated by the
Financial Conduct Authority with firm reference number
648953.
The AIFM is responsible for overall portfolio management,
risk management and compliance with the Group’s
investment policy and the requirements of the UK AIFM
Regime that apply to the Group. The Investment Adviser is
an Appointed Representative of the AIFM. As an Appointed
Representative, the Investment Adviser is responsible
for working with and advising the Group and the AIFM in
respect of sourcing investment opportunities which meet
the Group’s investmentpolicy.
As an Appointed Representative, Ironstone is exempt
from the requirement to be authorised by the FCA as a
pre-requisite to giving investment advice and arranging
deals in investments. Ironstone is also responsible for
managing the underlying real estate assets within the
Group’s investment portfolio, which does not constitute a
regulated activity.
The AIFM has, and shall maintain, the necessary expertise
and resource to supervise the delegated tasks effectively.
Under the terms of the Investment Advisory Agreement,
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 £500
million; one quarter of 0.9% per quarter on that part of the
NAV in excess of £500 million and up to £1 billion; and one
quarter of 0.75% per quarter on NAV in excess of £1 billion.
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Management arrangements continued
The Investment Advisory Agreement is terminable on 24
months’ notice in writing by either party and also by the
AIFM, with the consent of the Company; such notice not to
be given prior to the four-year anniversary of the date of
Admission.
The Alternative Investment Fund Management Agreement
may be terminated by the Company or the AIFM giving
not less than six months’ written notice. In addition, it is
terminable on 30 days’ notice by either party in writing in
the event that the other party is found liable for material
breach of duty, negligence, wilful default, fraud or a
material breach of applicable requirements in connection
with the performance of its duties under this Agreement or
a material or persistent breach of this Agreement, which is
either irremediable or, if capable of remedy, not remedied
within 30 days of receipt by the defaulting party of a notice
signed on behalf of the non-defaulting party requiring such
breach to be rectified.
The Company is also entitled to terminate the agreement
with immediate effect in the event that the AIFM ceases
to maintain its permission to act as the AIFM or such
permission is suspended.
The Group pays to the AIFM, exclusive of VAT, a fixed
monthly fee of £3,000 in respect of risk management
and portfolio management services, a fixed quarterly fee
of £4,000 for the provision of Annex IV AIFM Directive
regulatory reporting and other fees for the provision
of additional ad hoc services and maintaining the Key
Information Documents (“KIDs”). TheGroup will also
reimburse the AIFM for costs and expenses properly
incurred by the AIFM in the performance ofits obligations
under the AIFM Agreement.
Continuing appointment of the
InvestmentAdviser
The Board keeps the performance of the Investment
Adviser under continual review. The Management
Engagement Committee conducts an annual appraisal
of the Investment Adviser’s performance and makes
a recommendation to the Board about the continuing
appointment of the Investment Adviser. It is the opinion
of the Directors that the continuing appointment of the
Investment Adviser is in the interests of shareholders as a
whole. The reasons for this view are that the Investment
Adviser executed the investment strategy, at this early
stage of the Group’s development, according to the Board’s
expectations and on terms which, in the view of theBoard,
continue to remain commercial and reasonable.
NMPI
On 1 January 2014, certain changes to the FCA rules
regarding the restrictions on the retail distribution of
unregulated collective investment schemes and close
substitutes (“non-mainstream pooled investments”,
or“NMPIs”) cameintoeffect.
Since the Company obtained approval as a UK REIT, with
effect from Admission to AIM on 19 November 2021, its
ordinary shares of nominal value of 0.01 pence each (the
“shares”) are excluded from these rules and therefore the
restrictions relating to NMPIs do not apply to its shares.
It is the Board’s intention that the Group will continue to
conduct its affairs in such a manner that it maintains its
approved REIT company status and that, accordingly, the
Company’s shares will continue to be excluded from the
FCA’s rules relating to NMPIs and can be recommended by
financial advisers to retail investors in accordance with the
FCA’s rules in relation to NMPI products.
Related party transactions
No related party transactions have been entered into
during the year ended 31 December 2023 or in the prior
year ended 31 December 2022.
Change of control
There are no agreements to which the Company is party
that might be affected by a change of control of the
Company except for the agreement in relation to the
Company’s credit facility. The Company entered into a
£150.0 million Facility Agreement with HSBC and Bank of
Ireland in June 2023, expiring in June 2026. Any loan drawn
under this facility agreement could require repayment upon
the change of control of the Company.
Post balance sheet events
Disclosures relating to post balance sheet events can be
found in note 31 to the financial statements on page 141.
Directors’ indemnities and Directors’ and
Officers’ liability insurance
The Company’s agreement to indemnify each Director
against any liability incurred in the course of their tenure,
tothe extent permitted by law, remains in place. In addition,
under the Company’s Articles of Association, the Directors
are provided, subject to the provisions of UK legislation and
at the discretion of the Board, with an indemnity in respect
of liabilities owed to third parties which they may sustain or
incur in connection with their appointment.
The Directors were covered throughout the year
underreview.
Greenhouse gas emissions
During the year under review, the Group met the criteria for
reporting greenhouse gas emissions as per SECR disclosure
requirements (see table on page 57). Under the leadership
of the Sustainability Committee, the Group has developed a
sustainability strategy and an action plan. Please see pages
44 to 45 for our approach and page 57 for greenhouse gas
emissions disclosure in our EPRA sBPR reporting.
DIRECTORS’ REPORT CONTINUED
104
Life Science REIT plc Annual Report and Financial Statements 2023
Information to be disclosed in accordance with
the Listing Rule 9.8.4R
Listing Rule 9.8.4 requires the Company to include certain
information in a single identifiable section of the Annual
Report or a cross-reference table indicating where the
information is set out. The following information required to
be disclosed in accordance with Listing Rule 9.8.4R is not
applicable unless stated otherwise:
• a statement of the amount of interest capitalised by the
Group during the period under review with an indication
of the amount and treatment of any related tax relief
(seenote 9);
• information in relation to the publication of unaudited
financial information;
• details of any long-term incentive schemes;
• any arrangements under which a Director has waived
emoluments, or agreed to waive any future emoluments,
from the Group;
• details of any non-pre-emptive issues of equity for cash
by the Group;
• any non-pre-emptive issues of equity for cash by the
Group or by any unlisted major subsidiary undertaking;
• parent participation in a placing by a listed subsidiary;
• any contract of significance in which a Director of the
Company is or was materially interested; and
• any waiver of dividends by a shareholder.
Auditor
The Directors holding office at the date of this Annual
Report confirm that, so far as they are each aware, there is
no relevant audit information of which the Group’s Auditor
is unaware. Each Director has taken all the steps that they
ought to have taken as a Director to make themselves
aware of any relevant audit information and to establish
that the Group’s Auditor is aware of that information.
Deloitte LLP has expressed its willingness to be appointed
as Auditor of the Group and resolutions for its appointment
and to authorise the Audit and Risk Committee to
determine its remuneration will be proposed at the
forthcoming AGM.
Financial risk management
Please see note 24 to the financial statements on pages
136 to 139 for information on financial risk management
objectives and policies in relation to the Group’s market
risk, interest risk, credit risk and liquidity risk.
The Group’s approach to hedging is included in the
investment policy on page 157.
Research and development activities
The Company and its subsidiaries did not carry out any
activities in the field of research and development over
theyear.
Donations
The Company and its subsidiaries made £10,000 (year
ended 31 December 2022: £17,095) of charitable donations
during the year to organisations either within or outside
of the UK. No political donations were made in either the
current or prior year.
Annual General Meeting
The Company’s AGM will be held on 23 May 2024.
TheNotice of the AGM will be circulated to shareholders
separately.
The Board is of the opinion that the passing of all
resolutions being put to the AGM would be in the
best interests of the Company and its shareholders.
TheDirectors therefore recommend that shareholders
vote in favour of all resolutions as set out in the Notice
of Meeting as they intend to do in respect of their own
shareholdings.
For and on behalf of the Board
Link Company Matters Limited
Company Secretary
25 March 2024
Company number: 13532483
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Strategic reportCorporate governanceFinancial statementsAdditional information
The Directors are responsible for preparing the Annual
Report and United Kingdom adopted Financial Statements
in accordance with applicable UK law and in compliance
with the requirements of the Companies Act 2006.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors are required to prepare the Group financial
statements in accordance with United Kingdom adopted
international accounting standards and International
Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”).
TheDirectors have chosen to prepare the parent company
financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law), including FRS
101 “Reduced Disclosure Framework”.
Under company law, the Directors must not approve the
financial statements unless they are satisfied that they
present fairly the financial position, financial performance
and cash flows of the Group for that year. In preparing the
financial statements, the Directors are required to:
• select suitable accounting policies in accordance with IAS
8 Accounting Policies, Changes in Accounting Estimates
and Errors and apply them consistently;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with
specific requirements in IFRS is insufficient to enable
users to understand the impact of particular transactions,
other events and conditions on the Group’s financial
position and financial performance;
• state that the Group has complied with IFRS, subject to
any material departures disclosed and explained in the
financial statements;
• state whether the Company financial statements have
been prepared in accordance with Financial Reporting
Standard 101 Reduced Disclosure Framework (“FRS
101”) subject to any material departures disclosed and
explained in the Company financial statements; and
• make judgements and estimates that are reasonable and
prudent.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group
and enable them to ensure that the financial statements
comply with the Companies Act 2006 and Article 4 of the
IAS Regulation.
They are also responsible for safeguarding the assets of
the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are
also responsible for preparing a strategic report, Directors’
report, Directors’ remuneration report and corporate
governance statement that comply with that law and
those regulations, and for ensuring that the Annual Report
includes information, where applicable, for the Disclosure
Guidance and Transparency Rules of the FCA.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. The work carried out by the
Auditor does not involve consideration of the maintenance
and integrity of this website and, accordingly, the Auditor
accepts no responsibility for any changes that have
occurred to the financial statements since they were initially
presented on the website. Visitors to the website need to
be aware that legislation in the UK covering the preparation
and dissemination of the financial statements may differ
from legislation in their jurisdiction.
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with
IFRS and in conformity with the requirements of the
Companies Act 2006, give a true and fair view of the
assets, liabilities, financial position and profit of the
Company (and Group as a whole); and
• this Annual Report includes a fair review of the
development and performance of the business and
the position of the Company (and Group as a whole),
together with a description of the principal risks and
uncertainties that it faces.
The Directors consider that the Annual Report and
Financial Statements, taken as a whole, are fair, balanced
and understandable and provide the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy.
For and on behalf of the Board
Claire Boyle
Chair
25 March 2024
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
In respect of the Annual Report and Financial Statements
Life Science REIT plc Annual Report and Financial Statements 2023
106
Life Science REIT plc Annual Report and Financial Statements 2023
Report on the audit of the
financial statements
1. Opinion
In our opinion:
• the financial statements of Life Science REIT Plc (the
‘Parent Company’) and its subsidiaries (the ‘Group’) give
a true and fair view of the state of the Group’s and of the
Parent Company’s affairs as at 31 December 2023 and of
the Group’s loss for the year then ended;
• the Group financial statements have been properly
prepared in accordance with United Kingdom adopted
international accounting standards and International
Financial Reporting Standards (IFRSs) as issued by the
International Accounting Standards Board (IASB);
• the Parent Company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice, including
Financial Reporting Standard 101 ”Reduced Disclosure
Framework”; and
• the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006.
We have audited the financial statements which comprise:
• the consolidated statement of profit or loss and other
comprehensive income;
• the consolidated and Parent Company statements of
financial position;
• the consolidated and Parent Company statements of
changes in equity;
• the consolidated statement of cash flows;
• the material accounting policy information; and
• the related notes 1 to 37.
The financial reporting framework that has been applied
in the preparation of the Group financial statements is
applicable law, United Kingdom adopted international
accounting standards and IFRSs as issued by the IASB. The
financial reporting framework that has been applied in the
preparation of the Parent Company financial statements is
applicable law and United Kingdom Accounting Standards,
including FRS 101 “Reduced Disclosure Framework” (United
Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the auditor’s responsibilities for the audit of
the financial statements section of our report.
We are independent of the Group and Parent Company in
accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the Financial Reporting Council’s (the ‘FRC’s’) Ethical
Standard as applied to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements. We confirm that we have not
provided any non-audit services prohibited by the FRC’s
Ethical Standard to the Group and Parent Company.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit
matters
The key audit matter that we identified in the current year was:
• Valuation of investment properties measured at Fair Value through Profit or Loss (“FVTPL”)
Within this report, key audit matters are identified as follows:
Similar level of risk
Materiality
The materiality that we used for the Group financial statements was £5,674,000 which was determined on the
basis of 2% of net asset value. We have also used a lower threshold for items impacting EPRA earnings of £297,000
which was determined on the basis of 5% of EPRA earnings.
Scoping
We have performed full scope audit procedures on the Group’s consolidated balances in relation to the statement
of profit or loss and other comprehensive income as well as the statement of financial position.
Significant
changes in our
approach
Our overall group materiality is based on 2% of net assets. In the previous year, this was determined at 1% of net
assets. The year ended 31 December 2022 included the move from AIM to Main market and a continued growth
in scale and assets. 2023 has been a stable year of trading and therefore we have considered it appropriate to
increase materiality for FY23. On the same basis we have increased the Parent Company materiality from 1%
of net assets in the previous year to 1.5% of net assets in the current year. This has been determined on a lower
percentage than the Group in order for the Parent Company materiality to not exceed that of the Group.
There have been no other significant changes in our approach in the current year.
INDEPENDENT AUDITOR’S REPORT
To the members of Life Science REIT plc
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4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going
concern basis of accounting included:
• challenging the directors’ approved going concern assessment by assessing this against our knowledge of the business,
results of our audit testing as well as prevailing macro-economic conditions;
• assessing a forecast budget for 12 months from the date of approval of the financial statements including consideration
of the Group’s financing arrangements and evaluating management’s stress testing and mitigating actions ;
• assessing the integrity and accuracy of the forecast budget along with the historical forecasting accuracy of the model;
• reviewing the HSBC and Bank of Ireland facility agreement to consider whether all key terms and covenants are
appropriately included in the forecast;
• assessing compliance with both current and forecasted loan covenants; and
• assessing the appropriateness of going concern disclosures included in the Financial Statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s and Parent Company’s ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
5.1. Valuation of investment properties measured at FVTPL
Key audit
matter
description
The Group’s investment properties totalled £382.3million (31 December 2022: £387.6million). The Group measures
the investment properties at FVTPL in accordance with IAS 40 Investment Property and are classified as Level 3 in
the fair value hierarchy in accordance with IFRS 13 Fair Value Measurement. The Group’s accounting policy for the
investment properties is specified in Note 13 of the financial statements and also referenced as part of the audit and
risk committee report per page93.
The valuation of the Group’s investment properties as explained in Note 23 of the financial statements involves
significant estimates and assumptions which include applying capitalisation yields to current and future rental
streams that could materially affect the financial statements. Therefore, we identified the valuation of investment
properties as a key audit matter.
Management appoints an external valuer CBRE Limited, chartered surveyors to perform the valuations in
accordance with the appropriate sections of the RICS Red Book and in line with the requirements of IFRS 13 Fair
Value Measurement. The valuer has issued a valuation report on the entire property portfolio as at the year-end.
The property portfolio is valued on the basis of up-to-date tenancy information supplied by management and
publicly available market information.
In determining the fair value, the external valuers make a number of key estimates and assumptions, inparticular
assumptions in relation to market comparable yields and estimates in relation to increases or decreases in future
rental income. These estimates and assumptions require input from management, whilst others are subject to
market forces and will change over time. Manipulation of these accounting estimates could result in material
misstatements, and therefore we identified a potential fraud risk in this key audit matter.
INDEPENDENT AUDITOR’S REPORT CONTINUED
To the members of Life Science REIT plc
108
Life Science REIT plc Annual Report and Financial Statements 2023
How the scope
of our audit
responded to
the key audit
matter
In response to the above key audit matter, we:
• obtained an understanding of the relevant controls over investment property valuations;
• obtained and assessed the final valuation reports prepared by the Group’s valuer;
• involved our real estate valuation specialists to assist us in independently evaluating the appropriateness of the
inputs and assumptions used in the valuation methodology (including yield and estimated rental values) for the
properties;
• benchmarked valuation assumptions to relevant market evidence including specific property transactions and
other external data;
• assessed the accuracy and completeness of data provided by management to the Group’s valuer;
• assessed the independence, competence, capabilities and objectivity of the Group’s valuer by assessing
whether the valuers are RICS approved and that there are no conditions or specific assumptions in the letter of
engagement;
• assessed the adequacy and completeness of disclosures presented in the financial statements.
• reconciled the external valuation reports to underlying financial records to test for completeness and accuracy
within the Group’s financial statements; and
• assessed the cost to complete in relation to development property.
Key
observations
Based on the work performed we concluded that the valuation of investment properties measured at FVTPL is
appropriate.
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements Company financial statements
Materiality
£5,674,000 (2022: £3,195,000) £4,515,000 (2022: £3,172,000).
Basis for
determining
materiality
2% (31 December 2022: 1%) of the Group’s net asset
value.
1.5% (31 December 2022: 1%) of the Parent Company’s
net asset value.
Rationale
for the
benchmark
applied
We determined materiality based on net assets value,
which is deemed appropriate due to the nature of the
Group’s business being owners of investment property
with a modest level of gearing. Investors are most likely
to focus on the performance of the properties and the
returns on these, and this is represented by the net
assets value of the Group.
We determined materiality based on total net assets
value, which is deemed appropriate due to the nature
of the Parent Company’s business. Further, it does not
generate any revenue in its own capacity, as this is done
through the investee companies that are owned by it.
Investors are most likely to focus on the carrying value
of the investments and this is represented by the net
assets value of the Company.
A lower threshold of £297,000 (31 December 2022: £74,000) based upon 5% of EPRA earnings has also been used for
items impacting EPRA earnings. We consider EPRA Earnings as a critical performance measure for the Group and a
measure which is widely used within the Real Estate industry. This has been applied for testing all balances impacting that
measure. Refer to pages 147– 154 for the Group’s EPRA performance measures.
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6. Our application of materiality continued
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected
and undetected misstatements exceed the materiality for the financial statements as a whole.
Group financial statements Company financial statements
Performance
materiality
70% (2022: 70%) of Group materiality. 70% (2022: 70%) of Company materiality.
Basis and
rationale for
determining
performance
materiality
In determining performance materiality, we considered the following factors:
a. the quality of the control environment; we were able to rely on controls on investment property valuation; and
b. low level of corrected and uncorrected misstatements identified in the prior year.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £283,700
(2022: £160,000) for the overall Group financial statements and £14,850 for items impacting EPRA earnings, as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
7. An overview of the scope of our audit
7.1. Scoping
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide
controls, and assessing the risks of material misstatement at the Group level. Audit work to respond to the risks of material
misstatement was performed directly by Group audit engagement team. We have performed full scope audit procedures on
the Group’s consolidated balances in relation the statement of profit or loss and other comprehensive income as well as the
statement of financial position.
7.2. Our consideration of the control environment
We did not take a controls reliance approach on the general IT controls during the audit for the Group due to the simple control
environment and financial reporting system. We obtained an understanding and tested the relevant manual controls over the key
business processes. These include revenue, valuation of property and the financial reporting process.
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of climate change on the Group’s business and its financial
statements.
As a part of our audit, we have obtained management’s climate-related risk assessment and held discussions with
management to understand the process of identifying climate-related risks, the determination of mitigating actions and
the impact on the Group’s financial statements. Management has assessed that there is currently no material impact
arising from climate change on the judgements and estimates determining the valuations within the financial statements.
INDEPENDENT AUDITOR’S REPORT CONTINUED
To the members of Life Science REIT plc
NAV
£283,745,000
Group materiality
£5,674,000
Audit and Risk Committee
reporting threshold
£283,700
NAV
Group
materiality
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We performed our own assessment of the potential impact
of climate change on the Group’s account balances and
classes of transaction and did not identify any reasonably
possible risks of material misstatement.
In the current year the Group has voluntarily disclosed
its alignment with the Task Force on Climate-related
Financial Disclosures (“TCFD”). Our procedures included
use of our ESG specialist to review the disclosure in the
financial statements to ensure it is in line with the disclosure
requirements, despite the Group being exempt from
disclosure as a closed-end investment fund.
Our procedures also included reviewing all further
disclosures included in the Strategic Report, set out on
pages 38 to 59, to consider whether they are materially
consistent with the financial statements and our knowledge
obtained in the audit.
8. Other information
The other information comprises the information included
in the annual report, other than the financial statements
and our auditor’s report thereon. The directors are
responsible for the other information contained within the
annual report.
Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated.
If we identify such material inconsistencies or apparent
material misstatements, we are required to determine
whether this gives rise to a material misstatement in the
financial statements themselves. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they
give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors
are responsible for assessing the Group’s and Parent
Company’s ability to continue as a going concern,
disclosing as applicable, matters related to going concern
and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or Parent
Company or to cease operations, or have no realistic
alternative but to do so.
10. Auditor’s responsibilities for the audit
ofthe financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
11. Extent to which the audit was considered
capable of detecting irregularities, including
fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks
related to irregularities
In identifying and assessing risks of material misstatement in
respect of irregularities, including fraud and non-compliance
with laws and regulations, we considered the following:
• the nature of the industry and sector, control
environment and business performance including the
design of the Group’s remuneration policies, key drivers
for directors’ remuneration, investment manager fees and
performance targets;
• results of our enquiries of the investment managers,
the directors and the Audit and Risk Committee about
their own identification and assessment of the risks of
irregularities, including those that are specific to the
Group’s sector;
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11. Extent to which the audit was considered
capable of detecting irregularities, including
fraud continued
11.1. Identifying and assessing potential risks
related to irregularities continued
• any matters we identified having obtained and reviewed
the Group’s documentation of their policies and
procedures relating to:
• identifying, evaluating and complying with laws and
regulations and whether they were aware of any
instances of non-compliance;
• detecting and responding to the risks of fraud and
whether they have knowledge of any actual, suspected
or alleged fraud;
• the internal controls established to mitigate risks of
fraud or non-compliance with laws and regulations;
• the matters discussed among the audit engagement
team and relevant internal specialists, including
valuations regarding how and where fraud might occur
in the financial statements and any potential indicators of
fraud.
As a result of these procedures, we considered the
opportunities and incentives that may exist within the
organisation for fraud and identified the greatest potential
for fraud in the valuation of investment properties
measured at FVTPL.
In common with all audits under ISAs (UK), we are also
required to perform specific procedures to respond to the
risk of management override.
We also obtained an understanding of the legal and
regulatory framework that the Group operates in, focusing
on provisions of those laws and regulations that had a
direct effect on the determination of material amounts
and disclosures in the financial statements. The key laws
and regulations we considered in this context included the
UK Companies Act, Listing Rules, REIT conditions and tax
legislation.
In addition, we considered provisions of other laws and
regulations that do not have a direct effect on the financial
statements but compliance with which may be fundamental
to the Group’s ability to operate or to avoid a material
penalty. These included the Group’s compliance with health
and safety matters, including fire safety and fire cladding.
11.2. Audit response to risks identified
As a result of performing the above, we identified valuation
of investment properties measured at FVTPL as a key
audit matter related to the potential risk of fraud. The key
audit matters section of our report explains the matter in
more detail and also describes the specific procedures we
performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks
identified included the following:
• reviewing the financial statement disclosures and testing
to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as
having a direct effect on the financial statements;
• enquiring of the Investment managers the Audit and Risk
Committee and external legal counsel concerning actual
and potential litigation and claims;
• performing analytical procedures to identify any unusual
or unexpected relationships that may indicate risks of
material misstatement due to fraud;
• reading minutes of meetings of those charged with
governance; and
• in addressing the risk of fraud through management
override of controls, testing the appropriateness of
journal entries and other adjustments; assessing whether
the judgements made in making accounting estimates are
indicative of a potential bias; and evaluating the business
rationale of any significant transactions that are unusual
or outside the normal course of business.
We also communicated relevant identified laws and
regulations and potential fraud risks to all engagement
team members including internal specialists, and remained
alert to any indications of fraud or non-compliance with
laws and regulations throughout the audit.
Report on other legal and
regulatory requirements
12. Opinions on other matters prescribed
bythe Companies Act 2006
In our opinion the part of the directors’ remuneration report
to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course
of the audit:
• the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
• the strategic report and the directors’ report have
been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of
the Group and Parent Company and their environment
obtained in the course of the audit, we have not identified
any material misstatements in the strategic report or the
directors’ report.
INDEPENDENT AUDITOR’S REPORT CONTINUED
To the members of Life Science REIT plc
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13. Corporate Governance Statement
The Listing Rules require us to review the directors’
statement in relation to going concern, longer-term viability
and that part of the Corporate Governance Statement
relating to the Group’s compliance with the provisions of the
UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
with the financial statements and our knowledge obtained
during the audit:
• the directors’ statement with regards to the
appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set
out on page 73;
• the directors’ explanation as to its assessment of the
Group’s prospects, the period this assessment covers and
why the period is appropriate set out on pages 73 and 74;
• the directors’ statement on fair, balanced and
understandable set out on page 93;
• the board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on
page 86;
• the section of the annual report that describes the review
of effectiveness of risk management and internal control
systems set out on page 86; and
• the section describing the work of the audit and risk
committee set out on pages 91 to 93.
14. Matters on which we are required to
reportby exception
14.1. Adequacy of explanations received and
accounting records
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
• we have not received all the information and explanations
we require for our audit; or
• adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the Parent Company financial statements are not in
agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to
report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the
directors’ remuneration report to be audited is not in
agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
15. Other matters which we are required
toaddress
15.1. Auditor tenure
Following the recommendation of the Audit and Risk
Committee, we were appointed by the board on 11 February
2022 to audit the financial statements for the period ended
31 December 2021 and subsequent financial periods.
The period of total uninterrupted engagement including
previous renewals and reappointments of the firm is three
years, covering the periods ended 31 December 2021 to
31December 2023.
15.2. Consistency of the audit report with the
additional report to the audit committee
Our audit opinion is consistent with the additional report
to the audit committee we are required to provide in
accordance with ISAs (UK).
16. Use of our report
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the company’s members
those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA)
Disclosure Guidance and Transparency Rule (DTR) 4.1.15R
– DTR 4.1.18R, these financial statements form part of the
Electronic Format Annual Financial Report filed on the
National Storage Mechanism of the FCA in accordance with
DTR 4.1.15R – DTR 4.1.18R. This auditor’s report provides
no assurance over whether the Electronic Format Annual
Financial Report has been prepared in compliance with DTR
4.1.15R – DTR 4.1.18R.
James Wright FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, UK
25 March 2024
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CONSOLIDATED STATEMENT OF PROFIT OR LOSS
ANDOTHERCOMPREHENSIVE INCOME
For the year ended 31 December 2023
| Year ended | Year ended | ||
| 31 December | 31 December | ||
| 2023 | 2022 | ||
Continuing operations | Notes | £’000 | £’000 |
Gross property income | 3 | ||
Service charge income | 3 | ||
Revenue | |||
Recoverable service charges | 4 | ( | ( |
Property operating expenses | 4 | ( | ( |
Gross profit | |||
Administration expenses | 4 | ( | ( |
Operating gains before losses on investment properties | |||
Fair value losses on investment properties | 13 | ( | ( |
Loss on disposal of investment properties | 13 | ( | |
Operating loss | ( | ( | |
Finance income | 7 | ||
Finance expenses | 8 | ( | ( |
Loss before tax | ( | ( | |
Taxation | 9 | ( | |
| Loss after tax for the period and total comprehensive loss | |||
attributable to equity holders | ( | ( | |
Loss per share (basic and diluted) (pence) | 12 | ( | ( |
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 loss after tax is therefore
also the total comprehensive loss.
The accompanying notes on pages 118 to 141 form an integral part of these Financial Statements.
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2023
| 31 December | 31 December | ||
| 2023 | 2022 | ||
| Notes | £’000 | £’000 | |
Assets | |||
Non‑current assets | |||
Investment property | 13 | ||
Interest rate derivatives | 16 | ||
Trade and other receivables | 14 | ||
Current assets | |||
Trade and other receivables | 14 | ||
Cash and cash equivalents | 15 | ||
Interest rate derivatives | 16 | ||
Total assets | |||
Liabilities | |||
Non‑current liabilities | |||
Interest-bearing loans and borrowings | 17 | ( | ( |
Other payables and accrued expenses | 18 | ( | ( |
( | ( | ||
Current liabilities | |||
Interest-bearing loans and borrowings | 17 | ( | |
Other payables and accrued expenses | 18 | ( | ( |
( | ( | ||
Total liabilities | ( | ( | |
Net assets | |||
Equity | |||
Share capital | 19 | ||
Share premium | 20 | ||
Capital reduction reserve | |||
Retained earnings | 21 | ( | ( |
Total equity | |||
Number of shares in issue (thousands) | |||
Net asset value per share (basic and diluted) (pence) | 22 |
These Financial Statements were approved by the Board of Directors of Life Science REIT plc on 25 March 2024 and
signed on its behalf by:
Claire Boyle
Company number: 13532483
The accompanying notes on pages 118 to 141 form an integral part of these Financial Statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
| Capital | ||||||
| Share | Share | reduction | Retained | |||
| Notes | £’000 | £’000 | £’000 | £’000 | £’000 | |
Balance at 1 January 2023 | ( | |||||
Loss for the year and total | ||||||
comprehensive loss | ( | ( | ||||
Dividends paid | 11 | ( | ( | |||
Balance at 31December2023 | ( | |||||
| Capital | ||||||
| Share | Share | reduction | Retained | |||
| capital | premium | reserve | earnings | Total equity | ||
| Notes | £’000 | £’000 | £’000 | £’000 | £’000 | |
Balance at 1 January 2022 | ||||||
Loss for the year and total | ||||||
comprehensive loss | ( | ( | ||||
Cancellation of share premium | 20 | ( | ||||
Share issue costs | 20 | ( | ( | |||
Dividends paid | 11 | ( | ( | |||
Balance at 31 December2022 | ( |
The accompanying notes on pages 118 to 141 form an integral part of these Financial Statements.
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CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2023
| Year ended | Year ended | ||
| 31 December | 31 December | ||
| 2023 | 2022 | ||
| Notes | £’000 | £’000 | |
Cash flows from operating activities | |||
Operating loss | ( | ( | |
Adjustments to reconcile profit for the year to net cash flows: | |||
Changes in fair value of investment properties | 13 | ||
Adjustment for non-cash items | |||
Operating cash flows before movements in working capital | |||
Increase in other receivables and prepayments | ( | ( | |
Increase in other payables and accrued expenses | |||
Net cash flow generated from/(used in) operating activities | ( | ||
Cash flows from investing activities | |||
Acquisition of investment properties | ( | ||
Capital expenditure | ( | ( | |
Disposal of investment properties | |||
Interest received | |||
Net cash used in investing activities | ( | ( | |
Cash flows from financing activities | |||
Share issuance costs paid | ( | ||
Bank loans drawn down | 17 | ||
Bank loans repaid | 17 | ( | ( |
Loan interest and other finance expenses paid | ( | ( | |
Loan issue costs paid | 29 | ( | ( |
Dividends paid in the year | ( | ( | |
Net cash flow (used in)/generated from financing activities | ( | ||
Net decrease in cash and cash equivalents | ( | ( | |
Cash and cash equivalents at start of the year | |||
Cash and cash equivalents at end of the year | 15 |
The accompanying notes on pages 118 to 141 form an integral part of these Financial Statements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2023
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
2. Basis of preparation continued
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| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Rental income | 14,584 | 11,007 |
Rental income straight-line adjustment | 233 | 1,240 |
Other income | 521 | 722 |
Insurance recharged | 143 | 155 |
Gross property income | 15,481 | 13,124 |
Service charge income | 4,461 | 2,582 |
Total | 19,942 | 15,706 |
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Recoverable service charges | 4,461 | 2,582 |
Rates | 457 | 526 |
Premises expenses | 591 | 263 |
Service charge void costs | 1,120 | 571 |
Insurance expense | 153 | 162 |
Bad debt charge | (665) | 665 |
Property operating expenses | 1,656 | 2,187 |
Investment Adviser fees | 3,389 | 3,787 |
Other administration expenses | 1,500 | 1,458 |
Cost associated with moving to Main Market | (12) | 957 |
Directors’ remuneration (see note 5) | 200 | 186 |
Audit fees (see note 6) | 172 | 177 |
Administration expenses | 5,249 | 6,565 |
Total | 11,366 | 11,334 |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
4. Property operating and administration expenses continued
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Claire Boyle | 55 | 55 |
Sally Ann Forsyth | 40 | 42 |
Michael Taylor | 40 | 40 |
Richard Howell | 45 | 29 |
Employers’ National Insurance contributions | 20 | 20 |
Total | 200 | 186 |
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Audit fee | 172 | 177 |
Total | 172 | 177 |
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Group Annual Report and Financial Statements | 172 | 177 |
Total | 172 | 177 |
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7. Finance income
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Interest receivable from interest rate derivatives | 3,019 | 329 |
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Loan interest | 8,209 | 4,961 |
Change in fair value of interest rate derivatives | 3,936 | — |
Break fees | 751 | — |
Loan arrangement fees written off | 716 | — |
Loan arrangement fees amortised | 458 | 416 |
Loan expenses | 261 | 201 |
Gross interest costs | 14,331 | 5,578 |
Capitalisation of finance costs | (3,261) | (1,796) |
Total | 11,070 | 3,782 |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Corporation tax on residual income | (146) | 146 |
Total | (146) | 146 |
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Loss before tax | (21,852) | (27,467) |
Corporation tax at 23.5% (2022: 19.0%) | (5,135) | (5,219) |
Change in value of investment properties | 5,369 | 5,949 |
Change in value of interest rate derivatives | (888) | (389) |
Adjustment for disallowable costs | (3) | — |
Tax-exempt property rental business | 657 | (195) |
Current year tax charge | — | 146 |
Prior year accrual reversal | (146) | — |
Total | (146) | 146 |
10. 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 21 years (31 December 2022: 22 years).
Future minimum rentals receivable under non-cancellable operating leases as at 31 December 2023 are as follows:
| As at | As at | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Within one year | 15,008 | 12,602 |
Between one and five years | 44,625 | 41,784 |
More than five years | 31,771 | 30,044 |
Total | 91,404 | 84,430 |
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| Pence | ||
| For the year ended 31 December 2023 | per share | £’000 |
Second interim dividend for year ended 31 December 2022, paid on 15 May 2023 | 3.0 | 10,500 |
First interim dividend for year ended 31 December 2023, paid on 31 October 2023 | 1.0 | 3,500 |
Total | 4.0 | 14,000 |
Paid as: | ||
Property income distribution | — | — |
Non-property income distribution | 4.0 | 14,000 |
Total | 14,000 |
| Pence | ||
| For the year ended 31 December 2022 | per share | £’000 |
First interim dividend for 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 | 3,500 |
12. Earnings per share (“EPS”)
Basic EPS is calculated by dividing profit for the year attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares during the year. As there are no dilutive instruments in issue, basic and
diluted EPS are identical.
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
IFRS earnings | (21,706) | (27,613) |
EPRA earnings adjustments: | ||
Fair value losses on investment properties | 22,848 | 31,312 |
Realised losses on disposal of investment properties | 317 | — |
Exceptional finance costs greater than one year | 716 | — |
Changes in fair value of interest rate derivatives | 3,936 | (2,047) |
Changes in fair value of deferred consideration payable on interest rate derivatives | (152) | (108) |
EPRA earnings | 5,959 | 1,544 |
Group-specific earnings adjustments: | ||
Exceptional finance costs less than one year | 751 | — |
Cost associated with moving to Main Market | (12) | 957 |
Adjusted earnings | 6,698 | 2,501 |
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12. Earnings per share continued
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| Pence | Pence | |
Basic IFRS EPS | (6.2) | (7.9) |
Diluted IFRS EPS | (6.2) | (7.9) |
EPRA EPS | 1.7 | 0.4 |
Adjusted EPS | 1.9 | 0.7 |
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| Number | Number | |
| of shares | of shares | |
Weighted average number of shares in issue (thousands) | 350,000 | 350,000 |
13. Investment property
| Completed | Development | Total | |
| investment | property | investment | |
| property | and land | property | |
| £’000 | £’000 | £’000 | |
Investment property valuation brought forward as at 1 January 2023 | 309,969 | 77, 581 | 387, 550 |
Acquisitions 1 | (759) | (21) | (780) |
Disposals in the year 2 | (7,833) | — | (7,833) |
Capital expenditure | 2,410 | 20,373 | 22,783 |
Finance costs capitalised | — | 3,261 | 3,261 |
Fair value losses on investment property | (18,182) | (4,666) | (22,848) |
Movement in rent incentives and amortisation | 167 | — | 167 |
| Transfer from development to investment | 29,086 | (29,086) | — |
Fair value at 31 December 2023 | 314,858 | 67,442 | 382,300 |
3
| Completed | Development | Total | |
| investment | property | investment | |
| property | and land | property | |
| £’000 | £’000 | £’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 losses on investment property | (15,060) | (16,252) | (31,312) |
Movement in rent incentives and amortisation | 1,247 | 32 | 1,279 |
Fair value at 31 December 2022 | 309,969 | 77,581 | 387, 550 |
1. During 2023 there were no acquisitions of new assets, the movement reflected relates to the finalisation of prior year acquisition balances.
2. During the year ended 31 December 2023 Lumen House was disposed of for gross consideration of £7.7 million, £7.5 million net of transaction fees.
After writing off the disposal value in the year of £7.8 million, a loss of £0.3 million was recognised in the consolidated statement of profit or loss and
other comprehensive income.
3. Following practical completion of the IQ (Buildings 4A and 4B) at Oxford Technology Park during the year ended 31 December 2023, the properties
became income-producing, resulting in a transfer from development property and land to completed investment property.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
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| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Prepayments and other receivables | 2,230 | 3,531 |
Rent and insurance receivable | 2,065 | 1,133 |
Amounts due from property manager | 991 | 2,200 |
Interest receivable | 763 | 331 |
VAT receivable | 434 | — |
Occupier deposits | 173 | — |
Escrow account | — | 470 |
Current trade and other receivables | 6,656 | 7,665 |
Occupier deposits | 3,409 | 2,701 |
Non‑current trade and other receivables | 3,409 | 2,701 |
Total trade and other receivables | 10,065 | 10,366 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
14. Trade and other receivables continued
Accounting policy continued
The Group considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the
receivables other than occupier deposits were due within three months of the year ended 31 December 2023.
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Cash | 4,341 | 10,606 |
Cash equivalents | 10,000 | 35,000 |
Total | 14,341 | 45,606 |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
At the start of the year | 4,303 | — |
Additional premiums paid and accrued | 3,631 | 2,256 |
Changes in fair value of interest rate derivatives | (3,936) | 2,047 |
Balance at the end of the year | 3,998 | 4,303 |
Current | — | 432 |
Non-current | 3,998 | 3,871 |
Balance at the end of the year | 3,998 | 4,303 |
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17. Interest‑bearing loans and borrowings
| 31 December | 31 December | |
| 2023 | 2022 | |
| Non‑current | £’000 | £’000 |
At the beginning of the year | 75,000 | — |
Drawn in the year | ||
| 31 December | 31 December | |
| 2023 | 2022 | |
| Current | £’000 | £’000 |
At the beginning of the year | 35,833 | — |
Acquired in the year | — | 33,582 |
Drawn in the year | — | — |
Repaid in the year | (36,510) | — |
Interest and commitment fees incurred in the year | 677 | 2,251 |
Interest‑bearing loans and borrowings | — | 35,833 |
Unamortised fees at the beginning of the year | (90) | — |
Loan arrangement fees paid in the year | — | (215) |
Amortisation charge for the year | 90 | 125 |
Unamortised loan arrangement fees | — | (90) |
Loan balance less unamortised loan arrangement fees | — | 35,743 |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
17. Interest‑bearing loans and borrowings continued
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Capital expenses payable | 4,046 | 5,481 |
Deferred income | 3,686 | 3,692 |
Administration and other expenses payable | 1,753 | 2,588 |
Deferred consideration on interest rate caps | 2,636 | 820 |
Loan interest payable | 1,823 | 1,027 |
Property operating expenses payable | 320 | 332 |
Occupier deposits payable to occupier | 173 | — |
VAT payable | — | 759 |
Current other payables and accrued expenses | 14,437 | 14,699 |
Capital expenses payable | — | — |
Occupier deposits payable to occupier | 3,409 | 2,701 |
Deferred consideration on interest rate caps | 1,195 | 1,143 |
Non‑current other payables and accrued expenses | 4,604 | 3,844 |
Total other payables and accrued expenses | 19,041 | 18,543 |
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19. Share capital
Share capital is the nominal amount of the Company’s ordinary shares in issue.
31 December 2023 | 31 December 2022 | |||
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
At the start of the year | — | 339,339 |
Shares issued | — | — |
Share issue costs | — | (16) |
Transfer to capital reduction reserve | — | (339,323) |
Share premium | — | — |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Total unrealised loss on investment properties | (46,124) | (23,276) |
Total unrealised (loss)/gain on interest rate derivatives and deferred consideration | (1,629) | 2,155 |
Total realised gains | 6,175 | 1,249 |
Retained earnings | (41,578) | (19,872) |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
22. 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 year. As there are no
dilutive instruments in issue, basic and diluted NAV per share are identical.
EPRA net tangible assets (“EPRA NTA”) is calculated using property values in line with IFRS, where values are net of real
estate transfer tax (“RETT”) and other purchasers’ costs. EPRA NTA is considered to be the most relevant measure for the
Group’s operating activities.
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
IFRS net assets attributable to ordinary shareholders | 283,745 | 319,451 |
IFRS net assets for calculation of NAV | 283,745 | 319,451 |
Adjustment to net assets: | ||
Fair value of interest rate derivatives | (3,998) | (4,303) |
EPRA NTA | 279,747 | 315,148 |
| 31 December | 31 December | |
| 2023 | 2022 | |
| Pence | Pence | |
IFRS basic and diluted NAV per share (pence) | 81.1 | 91.3 |
EPRA NTA per share (pence) | 79.9 | 90.0 |
| 31 December | 31 December | |
| 2023 | 2022 | |
| Number | Number | |
| of shares | of shares | |
Number of shares in issue (thousands) | 350,000 | 350,000 |
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| 31 December 2023 | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| Assets and liabilities measured at fair value | £’000 | £’000 | £’000 | £’000 |
Investment properties | — | — | 382,300 | 382,300 |
Interest rate derivatives | — | 3,998 | — | 3,998 |
Deferred consideration on interest rate caps | — | (3,831) | — | (3,831) |
Total | — | 167 | 382,300 | 382,467 |
| 31 December 2022 | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| Assets and liabilities measured at fair value | £’000 | £’000 | £’000 | £’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 |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
23. Fair value continued
| Key | ||||
| Fair value | Valuation | unobservable | ||
| 31 December 2023 | £’000 | technique | inputs | Range |
Completed investment property | £314,858 | Income | ERV | £16.0‑£115.0 |
| Capitalisation | per sq ft | |||
| Equivalent | 4.75%‑7.25% | |||
| yield | ||||
Development property | £58,930 | Income | ERV | £20.0 |
| capitalisation/ | per sq ft | |||
| residual method | ||||
| Equivalent | 5.25%‑5.70% | |||
| yield | ||||
Development land | £8,512 | Comparable method/ | Sales rate | £102.4 |
| residual method | per sq ft | per sq ft | ||
Total | £382,300 |
| Key | ||||
| Fair value | Valuation | unobservable | ||
| 31 December 2022 | £’000 | technique | inputs | Range |
Completed investment property | £309,969 | Income | ERV | £18.9-£110.0 |
| capitalisation | per sq ft | |||
| Equivalent | 4. 25% -7.00% | |||
| yield | ||||
Development property | £41,241 | Income | ERV | £20.0-£25.0 |
| capitalisation | per sq ft | |||
| /residual method | ||||
| Equivalent | 5.00%-5.05% | |||
| yield | ||||
Development land | £36,340 | Comparable method/ | Sales rate | £138.6 |
| residual method | per sq ft | per sq ft | ||
Total | £387, 550 |
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Generally, a change in the assumption made for the ERV (per sq ft per annum) is accompanied by:
| As at 31 December 2023 | Increase in | Decrease in |
| sensitivity | sensitivity | |
| Completed investment property | £’000 | £’000 |
Change in ERV of 10% | 31,486 | (31,486) |
Change in net equivalent yields of 50 basis points | (29,733) | 35,987 |
| Increase in | Decrease in | |
| sensitivity | sensitivity | |
| Development property | £’000 | £’000 |
Change in ERV of 10% | 5,893 | (5,893) |
Change in net equivalent yields of 50 basis points | (6,829) | 8,190 |
| Increase in | Decrease in | |
| sensitivity | sensitivity | |
| Development land | £’000 | £’000 |
Change in sales rate per sq ft of 10% | 851 | (851) |
| As at 31 December 2022 | Increase in | Decrease in |
| sensitivity | sensitivity | |
| Completed investment property | £’000 | £’000 |
Change in ERV of 10% | 30,997 | (30,997) |
Change in net equivalent yields of 50 basis points | (31,177) | 38,491 |
| Increase in | Decrease in | |
| sensitivity | sensitivity | |
| Development property | £’000 | £’000 |
Change in ERV of 10% | 4,124 | (4 ,124) |
Change in net equivalent yields of 50 basis points | (4,632) | 5,654 |
| Increase in | Decrease in | |
| sensitivity | sensitivity | |
| Development land | £’000 | £’000 |
Change in sales rate per sq ft of 10% | 3,634 | (3,634) |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
24. Financial risk management objectives and policies
The Group has trade and other receivables, trade and other payables and cash and short-term deposits that arise directly
from its operations.
The Group is exposed to market risk, interest rate risk, credit risk and liquidity risk. The Board of Directors reviews and
agrees policies for managing each of these risks, which are summarised below.
| 31 December | 31 December | |
| 2023 | 2022 | |
| £’000 | £’000 | |
Cash and cash equivalents | 14,341 | 45,606 |
| Trade and other receivables | 5,300 | 7,326 |
Total | 19,641 | 52,932 |
Interest rate risk
2023 | 2022 | |||
| Increase in | Decrease in | Increase in | Decrease in | |
| interest rates | interest rates | interest rates | interest rates | |
| by 1% | by 1% | by 1% | by 1% | |
| Effect on profit before tax | £’000 | £’000 | £’000 | £’000 |
(Decrease)/increase | (1,475) | 1,446 | (1,554) | 1,545 |
2023 | 2022 | |||||
| Fair | Carrying | Fair | Fair | Carrying | Fair | |
| value | value | value | value | value | value | |
| hierarchy | £’000 | £’000 | hierarchy | £’000 | £’000 | |
Held at amortised cost | ||||||
Cash and cash equivalents | n/a | 14,341 | 14,341 | n/a | 45,606 | 45,606 |
Trade and other receivables 1 | n/a | 9,316 | 9,316 | n/a | 10,027 | 10,027 |
Other payables and accrued expenses 2 | n/a | (15,355) | (15,355) | n/a | (14,851) | (14,851) |
Interest-bearing loans and borrowings | n/a | (107,918) | (107,918) | n/a | (109,831) | (109,831) |
Held at fair value | ||||||
Interest rate derivatives | n/a | 3,998 | 3,998 | n/a | 4,303 | 4,303 |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
24. Financial risk management objectives and policies continued
Liquidity risk continued
| Less | Three | |||||
| than three | to 12 | One to | Two to | More than | Total | |
| months | months | two years | five years | five years | ||
Year ended 31 December 2023 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Other payables and accrued | ||||||
expenses 1 | 7,976 | 2,775 | 1,318 | 2,355 | 1,054 | 15,478 |
Interest-bearing loans and borrowings | 1,336 | 4,036 | 5,357 | 110,017 | — | 120,746 |
Total | 9,312 | 6,811 | 6,675 | 112,372 | 1,054 | 136,224 |
| Less | Three | |||||
| than three | to 12 | One to | Two to | More than | Total | |
| months | months | two years | five years | five years | ||
Year ended 31 December 2022 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Other payables and accrued | ||||||
expenses 1 | 10,874 | 2,753 | 739 | 485 | — | 14,851 |
Interest-bearing loans and borrowings | 973 | 40,475 | 3,947 | 150,951 | — | 196,346 |
Total | 11,847 | 43,228 | 4,686 | 151,436 | — | 211,197 |
| Country of | Company | ||||
| incorporation | Registration | Number and class of | Group | ||
| Company | and operation | Number | share held by the Group | holding | |
Ironstone Life Science Holdings Limited 2 | UK | 13390321 | 1,000 ordinary shares | 100% | |
Ironstone Life Science Cambourne Two | UK | 13779806 | 1 ordinary share | 100% | |
Limited 1, 2 | |||||
Ironstone Life Science Cambourne Limited 1, 2 | UK | 13763082 | 1 ordinary share | 100% | |
Ironstone Life Science Oxford Limited 1, 2 | UK | 13467718 | 1 ordinary share | 100% | |
Ironstone Life Science RSY Limited 1, 2 | UK | 13763039 | 1 ordinary share | 100% | |
Ironstone Life Science Merrifield Limited 1, 2 | UK | 13763037 | 1 ordinary share | 100% | |
Deepdale Investment Holdings Limited 1, 3 | BVI | 1824411 | 400 | A ordinary shares | 100% |
100 | B ordinary shares | 100% | |||
Merrifield Centre Limited 1, 2 | UK | 11118349 | 21,786,493 ordinary shares | 100% | |
Ironstone Life Science Herbrand Limited 1, 2 | UK | 14044299 | 1 ordinary share | 100% | |
Herbrand Properties Limited 1, 4 | BVI | 1908435 | 6,000 ordinary shares | 100% | |
Oxford Technology Park Holdings Limited 2 | UK | 12434159 | 92 ordinary shares | 100% | |
Oxford Technology Park Limited 1, 2 | UK | 08483449 | 100 ordinary shares | 100% | |
| Oxford Technology Park Investments | UK | 12442240 | 1 ordinary share | 100% | |
| Limited |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
140
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| Interest‑bearing loans | Interest‑bearing loans | ||
| and borrowings | and borrowings | ||
| current | non‑current | Total | |
| £’000 | £’000 | £’000 | |
Balance as at 1 January 2023 | 35,743 | 74,088 | 109,831 |
Changes from financing cash flows: | |||
Bank loans drawn down | — | 142,520 | 142,520 |
Bank loans repaid | (36,510) | (108,794) | (145,304) |
Loan arrangement fees paid in the year | — | (980) | (980) |
Total changes from financing cash flows | (36,510) | 32,746 | (3,764) |
Additional loan arrangement fees in year capitalised | — | — | — |
Additional interest and commitment fees capitalised | 677 | — | 677 |
Unamortised fees written off | — | 716 | 716 |
Amortisation charge for the year | 90 | 368 | 458 |
Balance as at 31 December 2023 | — | 107,918 | 107,918 |
| Interest-bearing loans | Interest-bearing loans | ||
| and borrowings | and borrowings | ||
| current | non-current | Total | |
| £’000 | £’000 | £’000 | |
Balance as at 1 January 2022 | — | — | — |
Changes from financing cash flows: | |||
Bank loans drawn down | — | 101,260 | 101,260 |
Bank loans repaid | — | (26,260) | (26,260) |
Loan arrangement fees paid in the year | — | (1,203) | (1,203) |
Total changes from financing cash flows | — | 73,797 | 73,797 |
Loans acquired 1 | 33,582 | — | 33,582 |
Additional loan arrangement fees in year capitalised | (215) | — | (215) |
Additional interest and commitment fees capitalised | 2,251 | — | 2,251 |
Amortisation charge for the year | 125 | 291 | 416 |
Balance as at 31 December 2022 | 35,743 | 74,088 | 109,831 |
1. Acquired as part of the OTP acquisition in the year.
30. Ultimate controlling party
It is the view of the Directors that there is no ultimate controlling party.
31. Post balance sheet events
Dividend
A second interim dividend of 1.0 pence per share in respect of the year ended 31 December 2023 will be paid on 13 May
2024. This will be paid as an ordinary dividend with an ex-dividend date of 4 April 2024.
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Notes
31 December
2023
£’000
31 December
2022
£’000
Assets
Non‑current assets
Investment in subsidiary companies
34
73,767
65,138
Trade and other receivables 36 240,336 214,505
314,103 279,643
Current assets
Cash and cash equivalents
35 10,051 39,614
Trade and other receivables 36 1,338 1,421
11,389 41,035
Total assets 325,492 320,678
Liabilities
Current liabilities
Other payables and accrued expenses 37 (3,151) (5,004)
Total liabilities (3,151) (5,004)
Net assets 322,341 315,674
Equity
Share capital
3,500 3,500
Share premium
— —
Capital reduction reserve
321,823 335,823
Retained earnings (2,982) (23,649)
Total equity 322,341 315,674
Number of shares in issue (thousands) 350,000 350,000
Net asset value per share (basic and diluted) (pence) 92.1 90.2
The Company reported a profit for the year ended 31 December 2023 of £20,667,000 (year ended 31 December 2022:
£22,886,000 loss).
These Financial Statements were approved by the Board of Directors of Life Science REIT plc on 25 March 2024 and
signed on its behalf by:
Claire Boyle
Company number: 13532483
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2023
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Life Science REIT plc Annual Report and Financial Statements 2023
Share
capital
£’000
Share
premium
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total equity
£’000
Balance at 1 January 2023
3,500 — 335,823
(23,649)
315,674
Profit for the year and total comprehensive profit
— — — 20,667 20,667
Dividends paid — — (14,000) — (14,000)
Balance at 31 December 2023 3,500 — 321,823 (2,982) 322,341
Share
capital
£’000
Share
premium
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total equity
£’000
Balance at 1 January 2022
3,500 339,339 — (763) 342,076
Loss for the year and total comprehensive loss
— — — (22,886) (22,886)
Share issue costs
— (16) — — (16)
Cancellation of share premium
— (339,323) 339,323 — —
Dividends paid — — (3,500) — (3,500)
Balance at 31 December 2022 3,500 — 335,823 (23,649) 315,674
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
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32. General information
trading on 19 November 2021 and its shares are admitted to trading on the Premium Listing Segment of the Main Market
of the London Stock Exchange. The registered office of the Company is located at 6
th
Floor, 65 Gresham Street, London,
EC2V 7NQ.
33. Basis of preparation
These Financial Statements are prepared in accordance with United Kingdom Generally Accepted Accounting Practice
including Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”) and in conformity with the
requirements of the Companies Act 2006. The Financial Statements have been prepared under the historical cost
convention. The audited Financial Statements are presented in Pound Sterling and all values are rounded to the nearest
thousand pounds (£’000), except when otherwise indicated.
In preparing these Financial Statements the Company has taken advantage of all disclosure exemptions conferred by
FRS101. Therefore, these Financial Statements do not include:
• certain disclosures regarding the Company’s capital;
• a statement of cash flows;
• the effect of future accounting standards not yet adopted;
• the disclosure of the remuneration of key management personnel; and
• disclosure of related party transactions with other wholly owned members of Life Science REIT plc.
In addition, and in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent
disclosures are included in the Company’s consolidated Financial Statements. These Financial Statements do not include
certain disclosures in respect of:
• share-based payments;
• financial instruments; and
• fair value measurement.
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its own
statement of comprehensive income.
The Financial Statements of the Company follow the accounting policies laid out on pages 118 to 120.
The key source of estimation uncertainty relates to the Company’s investment in Group companies and is stated in the
Company’s separate financial statements at cost less impairment losses, if any. Impairment losses are determined with
reference to the investment’s fair value less estimated selling costs. Fair value is derived from the subsidiaries’, and their
subsidiaries’, net assets at the balance sheet date. Investment properties held by the subsidiary companies are supported
by independent valuation. Judgements and assumptions associated with the property values of the investments held by
the subsidiary companies are detailed in the Group financial statements.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2023
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34. Investment in subsidiary companies
31 December
2023
£’000
31 December
2022
£’000
Investment in subsidiary companies
Balance at the beginning of the year
65,138 1
Increase in investments
— 70,778
Cost of investment
(12,682)
15,670
Provision for impairment 21,311 (21,311)
Total 73,767 65,138
31 December
2023
£’000
31 December
2022
£’000
Investment in subsidiary companies
Ironstone Life Science Holdings Limited
1 1
Oxford Technology Park Holdings Limited 73,766 65,137
Total 73,767 65,138
Following a review comparing cost of investments to the underlying net assets of subsidiary companies, the prior year
provision for impairment has been reversed (2022: £21.3 million).
Negative costs associated with the acquisition of new subsidiary companies of £12,682,000 (2022: £15,670,000) resulting
from a reallocation of a prior period tax charge within the subsidiary company.
Accounting policy
Investments in subsidiary companies are included in the statement of financial position at cost less impairment. For a list of
subsidiary companies, see note 25.
35. Cash and cash equivalents
31 December
2023
£’000
31 December
2022
£’000
Cash equivalents
10,000 35,000
Cash 51 4,614
Total 10,051 39,614
Accounting policy
Cash equivalents include cash at bank and short-term deposits with banks and other financial institutions, with an initial
maturity of three months or less.
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36. Trade and other receivables
A. Receivables: non-current assets
31 December
2023
£’000
31 December
2022
£’000
Amounts due from subsidiary companies 240,336 214,505
Total 240,336 214,505
Loans due from subsidiary companies are unsecured, interest free and repayable on demand. However these loans are not
expected to be recovered within 12 months and therefore are classified as non-current assets.
B. Receivables current assets
31 December
2023
£’000
31 December
2022
£’000
Prepayments and other receivables 1,338 1,421
Total 1,338 1,421
37. Other payables and accrued expenses
31 December
2023
£’000
31 December
2022
£’000
Capital expenses payable
1,647 2,837
Administration expenses payable
1,345 1,243
Other expenses payable
159 778
Provision for corporation tax — 146
Total 3,151 5,004
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
For the year ended 31 December 2023
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Life Science REIT plc Annual Report and Financial Statements 2023
The Group is a member of the European Public Real Estate Association (“EPRA”). 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
Notes
Year to
31 December
2023
Year to
31 December
2022
EPRA earnings (£’000)
Table 2 5,959 1,544
EPRA EPS (pence)
Table 2 1.7 0.4
EPRA cost ratio (including direct vacancy cost)
Table 6 44.1% 66.3%
EPRA cost ratio (excluding direct vacancy cost) Table 6 33.7% 57.8%
Notes
31 December
2023
31 December
2022
EPRA NDV per share (pence)
Table 3 81.1 91.3
EPRA NRV per share (pence)
Table 3 87. 2 95.9
EPRA NTA per share (pence)
Table 3 79.9 90.0
EPRA NIY
Table 4 3.6% 3.4%
EPRA ‘topped-up’ net initial yield
Table 4 3.7% 3.6%
EPRA vacancy rate
Table 5 21.0% 18.0%
EPRA loan to value Table 10 27.0% 18.9%
UNAUDITED SUPPLEMENTARY NOTES NOT PART OF THE
CONSOLIDATED FINANCIAL INFORMATION
For the year ended 31 December 2023
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UNAUDITED SUPPLEMENTARY NOTES NOT PART OF THE
CONSOLIDATED FINANCIAL INFORMATION CONTINUED
For the year ended 31 December 2023
Table 2: EPRA income statement
Notes
Year to
31 December
2023
£’000
Year to
31 December
2022
£’000
Revenue
3 19,942 15,706
Less: insurance recharged
3
(143)
(155)
Less: service charge income 3 (4,461) (2,582)
Rental income (A)
15,338 12,969
Property operating expenses (including recoverable service charges)
4
(6,117)
(4,769)
Add: insurance recharged
3 143 155
Add: service charge income 4 4,461 2,582
Gross profit (B)
13,825 10,937
Administration expenses 4 (5,249) (6,565)
Operating profit before interest and tax
8,576 4,372
Finance income
7 3,807 3,255
Finance expenses
8
(11,070)
(3,782)
Less change in fair value of interest rate derivatives and deferred
consideration
7, 8 3,784 (2,155)
Less costs of early refinancing with greater than 12 months to expiry 8 716 —
Adjusted profit before tax
5,813 1,690
Taxation 9 146 (146)
EPRA earnings 5,959 1,544
Company-specific adjustments:
EPRA earnings
5,959 1,544
Cost associated with moving to Main Market
4
(12)
957
Cost of early refinancing with less than 12 months to expiry 8 751 —
Adjusted earnings 6,698 2,501
Weighted average number of shares in issue (thousands)
19 350,000 350,000
EPRA EPS (pence) 12 1.7 0.4
Adjusted EPS (pence) 12 1.9 0.7
Gross to net rental income ratio (B/A) 90.1% 82.6%
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.
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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 new EPRA NAV metrics from IFRS NAV is shown in the table below. Total accounting return will
now be calculated based on EPRA NTA.
As at 31 December 2023 Notes
EPRA NDV
£’000
EPRA NRV
£’000
EPRA NTA
£’000
Total properties
1
13 382,300 382,300 382,300
Net cash/(borrowings)
2
15, 17 (94,385)
(94,385)
(94,385)
Other net liabilities (4,170) (4,170) (4,170)
IFRS NAV 22 283,745 283,745 283,745
Include: real estate transfer tax
3
— 25,357 —
Exclude: fair value of interest rate derivatives 16 — (3,998) (3,998)
NAV used in per share calculations 283,745 305,104 279,747
Number of shares in issue (thousands) 19 350,000 350,000 350,000
NAV per share (pence) 22 81.1 87. 2 79.9
As at 31 December 2022 Notes
EPRA NDV
£’000
EPRA NRV
£’000
EPRA NTA
£’000
Total properties
1
13 387, 550 387, 550 387,550
Net cash/(borrowings)
2
15, 17 (65,227) (65,227) (65,227)
Other net liabilities (2,872) (2,872) (2,872)
IFRS NAV 22 319,451 319,451 319,451
Include: real estate transfer tax
3
— 20,621 —
Exclude: fair value of interest rate derivatives 16 — (4,303) (4, 303)
NAV used in per share calculations 319,451 335,769 315,148
Number of shares in issue (thousands) 19 350,000 350,000 350,000
NAV per share (pence) 22 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 £108.7 million net of cash of £14.3 million
(31December2022: £110.8 million net of cash of £45.6 million).
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.
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.
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UNAUDITED SUPPLEMENTARY NOTES NOT PART OF THE
CONSOLIDATED FINANCIAL INFORMATION
CONTINUED
For the year ended 31 December 2023
Table 4: EPRA net initial yield
Notes
31 December
2023
£’000
31 December
2022
£’000
Total properties per external valuers’ report
13 382,300 387, 550
Less development property and land 13 (67,4 42) (77,581)
Net valuation of completed properties
314,858 309,969
Add estimated purchasers’ costs
1
20,884 20,621
Gross valuation of completed properties including
estimated purchasers’ costs (A) 335,742 330,590
Gross passing rents
2
(annualised) 13,663 12,423
Less irrecoverable property costs
2
(1,586) (1,104)
Net annualised rents (B) 12,077 11,319
Add notional rent on expiry of rent-free periods or other lease incentives
3
342 540
‘Topped‑up’ net annualised rents (C) 12,419 11,859
EPRA NIY (B/A)
3.6% 3.4%
EPRA ‘topped‑up’ net initial yield (C/A) 3.7% 3.6%
1. Estimated purchasers’ costs estimated 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 7 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
(orother 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
31 December
2023
£’000
31 December
2022
£’000
Annualised ERV of vacant premises (D)
4,113 3,094
Annualised ERV for the investment portfolio (E) 19,556 17,181
EPRA vacancy rate (D/E) 21.0% 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.
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Table 6: Total cost ratio/EPRA cost ratio
Notes
Year to
31 December
2023
£’000
Year to
31 December
2022
£’000
Property operating expenses (excluding service charge expenses)
4 536 1,616
Service charge expenses
4 5,581 3,153
Add back: service charge income
3
(4,461)
(2,582)
Add back: insurance recharged 3 (143) (155)
Net property operating expenses
1,513 2,032
Administration expenses
4 5,249 6,565
Deduct: costs associated with move to Main Market 4 12 (957)
Total cost including direct vacancy cost (F) 6,774 7,640
Direct vacancy cost 3, 4 (1,587) (1,104)
Total cost excluding direct vacancy cost (G) 5,187 6,536
Rental income
1
3 15,338 12,969
Gross rental income (H) 3 15,338 12,969
Less direct vacancy cost (1,587) (1,104)
Net rental income 13,751 11,865
Total cost ratio including direct vacancy cost (F/H) 44.2% 58.9%
Total cost ratio excluding direct vacancy cost (G/H) 33.8% 50.4%
1. Includes rental income, rental income straight-line adjustment and other income as per note 3.
Notes
Year to
31 December
2023
£’000
Year to
31 December
2022
£’000
Total cost including direct vacancy cost (F)
6,774 7,640
Add back: costs associated with move to Main Market 4 (12) 957
EPRA total cost (I)
6,762 8,597
Direct vacancy cost (1,587) (1,104)
EPRA total cost excluding direct vacancy cost (J) 5,175 7,493
EPRA cost ratio including direct vacancy cost (I/H) 44.1% 66.3%
EPRA cost ratio excluding direct vacancy cost (J/H) 33.7% 57. 8%
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 year
ended 31 December 2023 or the year ended 31 December 2022.
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UNAUDITED SUPPLEMENTARY NOTES NOT PART OF THE
CONSOLIDATED FINANCIAL INFORMATION
CONTINUED
For the year ended 31 December 2023
Table 7: Lease data
As at 31 December 2023
Year 1
£’000
Year 2
£’000
Years 3‑5
£’000
Year 5+
£’000
Total
£’000
Passing rent of leases expiring in: 139 857 6,999 5,668 13,663
ERV of leases expiring in: 139 933 7,811 6,559 15,442
Passing rent subject to review in: 139 2,628 10,896 — 13,663
ERV subject to review in: 139 2,773 12,408 122 15,442
As at 31 December 2022
Year 1
£’000
Year 2
£’000
Years 3-5
£’000
Year 5+
£’000
Total
£’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 5.8 years (31 December 2022: 6.2 years) and to break is 3.8 years (31 December 2022: 4.7 years).
Table 8: Capital expenditure
Notes
Year to
31 December
2023
£’000
Year to
31 December
2022
£’000
Acquisitions
1
13
(780)
213,411
Development spend
2
13 20,373 9,565
Completed investment properties:
3
No incremental lettable space – like-for-like portfolio
13 2,410 641
No incremental lettable space – other
— —
Occupier incentives 13 167 1,279
Total capital expenditure 22,170 224,896
Debt acquired – OTP
4
17 — (33,582)
Conversion from accruals to cash basis 211 (4 ,259)
Total capital expenditure on a cash basis Page 117 22,381 187,055
1. During 2023 there were no acquisitions of new assets, the balance reflected relates to the finalisation of prior year balances. At 31 December 2022,
acquisitions include £131.0 million completed investment property and £82.4 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. £33.6 million of debt was acquired. See note 17 for further details.
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Table 9: EPRA like‑for‑like rental income
Notes
Year to
31 December
2023
£’000
Year to
31 December
2022
£’000 % Change
EPRA like‑for‑like rental income
8,291 8,539 (2.9)%
Other
1
— —
Adjusted like‑for‑like rental income
8,291 8,539
Development lettings
— —
Properties disposed in current and prior year
367 340
Properties acquired in current and prior year 6,680 4,090
Rental income
15,338 12,969
Service charge income
3 4,461 2,582
Insurance recharge 3 143 155
Revenue 19,942 15,706
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 has also opted to present the EPRA LTV which is defined as net borrowings divided by total
property market value.
Notes
31 December
2023
£’000
31 December
2022
£’000
Interest-bearing loans and borrowings
1
17 108,726 110,833
Cash 15 (14,341) (45,606)
Net borrowings (A) 94,385 65,227
Investment property at fair value (B) 13 382,300 387, 550
LTV (A/B) 24.7% 16.8%
EPRA LTV
Notes
31 December
2023
£’000
31 December
2022
£’000
Interest-bearing loans and borrowings
1
17 108,726 110,833
Net payables
2
8,976 8,177
Cash 15 (14,341) (45,606)
Net borrowings (A) 103,361 73,404
Investment properties at fair value 13 382,300 387, 550
Total property value (B) 382,300 387,550
EPRA LTV (A/B) 27.0% 18.9%
1. Excludes unamortised loan arrangement fees asset of £0.8 million (31 December 2022: £1.0 million) (see note 17).
2. Net payables includes trade and other receivables, other payables and accrued expenses. See page 115 for a full breakdown.
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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.
Notes
Year ended
31 December
2023
Pence
per share
Year ended
31 December
2022
Pence
per share
Opening EPRA NTA (A)
22 90.0 100.2
Movement (B)
(10.1)
(10.2)
Closing EPRA NTA
22 79.9 90.0
Dividend per share (C) 11 4.0 1.0
Total accounting return (B+C)/A (6.8)% (9.1)%
Table 12: Interest cover
Adjusted operating profit before gains on investment properties, interest and tax, divided by the underlying net
interestexpense.
Notes
Year to
31 December
2023
£’000
Year to
31 December
2022
£’000
Adjusted operating profit/(loss) before gains on investment properties (A)
1
8,564 5,329
Finance expenses
8 11,070 3,782
Add back: capitalised finance costs
8 3,261 1,796
Less: exceptional finance costs
8
(1,467)
—
Less: finance income
7
(3,807)
(3,255)
Add back: change in fair value of interest rate derivatives
and deferred consideration 7, 8 (3,784) 2,155
Loan interest (B) 5,273 4,478
Interest cover (A/B) 162.4% 119.0%
1. Adjusted for move to Main Market costs £(12,000) (31 December 2022: £1.0 million).
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.
Notes
Year to
31 December
2023
£’000
Year to
31 December
2022
£’000
Administration expenses
4 5,249 6,565
Less: cost associated with moving to Main Market 4 12 (957)
Annualised ongoing charges (A) 5,261 5,608
Opening NAV as at start of year
319,451 350,580
NAV as at 30 June
314,270 357,461
Closing NAV as at 31 December 283,745 319,451
Average undiluted NAV during the year (B) 305,822 342,497
Ongoing charges ratio (A/B) 1.7% 1.6%
UNAUDITED SUPPLEMENTARY NOTES NOT PART OF THE
CONSOLIDATED FINANCIAL INFORMATION
CONTINUED
For the year ended 31 December 2023
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Property Town Postcode Area (sq ft)
The Merrifield Centre
Cambridge CB1 3LQ 12,600
Rolling Stock Yard
London N7 9AS 53,900
Cambourne Park, Science & Technology Campus
Cambridge CB23 6DW 230,400
7-11 Herbrand Street
London WC1N 1EX 68,600
Oxford Technology Park
1
Oxford OX5 1GN 497,600
1. Full build-out area. Area practically complete as at 31 December 2023 was 173,400 (31 December 2022: 104,300 sq ft).
PROPERTY PORTFOLIO
As at 31 December 2023
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The Company was incorporated on 27 July 2021. This
Annual Report and Financial Statements covers the
periodfrom 1 January 2023 to 31 December 2023.
The Company’s ordinary shares were admitted to trading
on AIM on 19 November 2021 following IPO and the Group’s
operations therefore commenced on this date. Following
the Company’s migration to the Premium Listing Segment
of the Main Market of the London Stock Exchange (“LSE”),
its shares were cancelled from AIM on 1 December 2022
and admitted to trading on the Main Market of the LSE.
Capital structure
The Company’s share capital consists of ordinary shares
of £0.01 each. At shareholder meetings, members present
in person or by proxy have one vote on a show of hands
and on a poll have one vote for each ordinary share held.
Shareholders are entitled to receive such dividends as the
Directors resolve to pay out of the assets attributable to
ordinary shares. Holders of ordinary shares are entitled
to participate in the assets of the Company attributable
to the ordinary shares in a winding up of the Company.
Theordinary shares are not redeemable. As at the date
of this report, there were 350,000,000 ordinary shares
inissue, none of which are held in treasury.
Investment objective
The Company’s investment objective is to provide
shareholders with an attractive level of total return.
Thefocus will be capital growth whilst also providing
a growing level of income by investing primarily in a
diversified portfolio of UK properties that are leased or
intended to be leased to occupiers operating in the life
science sector.
Investment policy
The Company seeks to achieve its investment objective by
investing in a diversified portfolio of properties across the
UK which are typically leased or intended to be leased to
occupiers operating in, or providing a benefit to, the life
science sector (“life science properties”). Life science is the
branch of sciences concerned with all processes affecting
living organisms. This encompasses servicing and the
study of the breadth of life systems, and the structure and
behaviour of living things.
Companies operating in the life science sector include,
but are not limited to, those involved in the innovation,
development and/or production of assets directly or
indirectly for human health purposes. These assets include
compounds, products and devices derived and designed
for application in numerous fields.
The Company does not limit itself in relation to the types
of properties it acquires or develops, but examples may
include wet and dry laboratories, offices, incubators and
co-working space, manufacturing and testing facilities and
data centres. The Company retains flexibility to acquire
individual buildings, a group of buildings across a single
science park or the entirety of a science park.
This may include purchasing or developing buildings that
are leased or intended to be leased to occupiers providing
ancillary services to employees of companies operating in,
or providing a benefit to, the life science sector.
The Company typically invests in income-producing assets.
The Company focuses on investing where it believes that
the underlying property is consistent with the overarching
objective of providing shareholders with capital growth
whilst also providing a growing level of income. Investment
decisions are based on analysis and due diligence,
including, but not limited to, location, occupier profile and
demand, rental growth prospects, lease terms and/or asset
management/enhancement opportunities.
The Company may acquire properties either directly or
through corporate structures (whether onshore or offshore)
and also through joint venture or other shared ownership or
co-investment arrangements. In circumstances where the
Company does not hold a controlling interest in the relevant
investment, the Company will seek, through contractual
and other arrangements to, inter alia, ensure that each
investment is operated and managed in a manner that
isconsistent with the Company’s investment policy.
Any asset management or development opportunities
that the Company pursues are conducted in such a way
as to minimise any development risk, typically through
the use of forward funding or similar arrangements. Asset
management opportunities may include, but are not limited
to, refurbishing or extending existing assets or where the
Company may seek to maximise or change alternative use
values of existing operational assets. The Company may
from time to time invest in development opportunities
without a forward-funding arrangement including
pre-developed land or land where planning permission
may be required, subject to a restriction that maximum
exposure to these developments will not exceed 15% of
gross assetvalue.
It is anticipated that properties will be held for the
long-term. However, the Company may undertake
opportunistic disposals of properties considered to be
inthe best interests of shareholders.
SHAREHOLDER INFORMATION
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Life Science REIT plc Annual Report and Financial Statements 2023
The Company invests in and actively manages its assets
with the objective of reducing and diversifying risk and, in
doing so, maintains the following investment restrictions:
• no individual building will represent more than 35% of
gross asset value, reducing to 25% of gross asset value by
31 December 2023;
• the Company 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 Company’s
portfolio including developments under forward-funding
agreements, as calculated at the time of investing or
leasing;
• the aggregate maximum exposure to assets under
development, including forward fundings, will not exceed
50% of gross asset value, reducing to 30% of gross
asset value by 31 December 2023. Within this limit, the
maximum exposure to developments, as measured by the
expected gross development cost, which are not under
forward-funded arrangements, will not exceed 15% of
gross asset value at the commencement of the relevant
development; and
• no more than 10% of gross asset value will be invested in
properties that are not life science properties.
In addition, the Company will not invest more than 10% of
gross asset value in other alternative investment funds or
closed-ended investment companies.
Compliance with the above restrictions is calculated
immediately following investment and non-compliance
resulting from changes in the price or value of assets
following investment is not considered as a breach of the
investment restriction.
The Company defines: (i) “gross asset value” as “the value
of the assets of the Company and its subsidiaries from time
to time, determined in accordance with the accounting
policies adopted by the Company”; (ii) “gross contracted
rents” as “the total rent receivable on a property plus rent
contracted from expiry of rent-free periods and uplifts
agreed under the leases contracted on the Company’s
portfolio of properties”; and (iii) “ERV” as “the estimated
annual open market rental value of lettable space”.
Gearing
The level of gearing will be on a prudent basis for the
asset class, and seek to achieve a low cost of funds,
whilst maintaining flexibility in the underlying security
requirements and the structure of the Company. It
is envisaged that an LTV ratio of between 30% and
40% would be the optimal capital structure for the
Company over the longer term. However, in order to
finance value-enhancing opportunities, the Company
may temporarily incur additional gearing, subject to a
maximumLTV ratio of 55%, at the time of an arrangement.
Debt is secured at asset level and potentially at Company
or special purpose vehicle level, depending on the optimal
structure for the Company and having consideration to
key metrics including lender diversity, debt type and
maturityprofiles.
Use of derivatives
The Company may utilise derivatives for efficient portfolio
management only. In particular, the Company may engage
in full or partial interest rate hedging or otherwise seek to
mitigate the risk of interest rate increases on borrowings
incurred in accordance with the gearing limits as part of the
Company’s portfolio management.
Cash management policy
The Company may hold cash on deposit and may invest in
cash equivalent investments, which may include short-term
investments in money market type funds (“cash and cash
equivalents”).
There is no restriction on the amount of cash and cash
equivalents that the Company may hold and there may be
times when it is appropriate for the Company to have a
significant cash and cash equivalents position.
REIT status
The Company intends to continue conducting its affairs
so as to enable it to remain qualified as the principal
company of a REIT group for the purpose of Part 12 of
the Corporation Tax Act 2010 (and the regulations made
thereunder).
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Investment policy continued
Changes to, and breach of,
theinvestmentpolicy
Any material change to the Company’s investment policy
set out above will require the prior approval of shareholders
by way of an ordinary resolution at a general meeting.
In the event of a breach of the investment guidelines and
the investment restrictions set out above, the AIFM shall
inform the Board upon becoming aware of the same and if
the Board considers the breach to be material, notification
will be made to a Regulatory Information Service.
Share dealing and share prices
Shares can be traded through your usual stockbroker. The
Company’s shares are admitted to trading on the LSE.
Share register enquiries
The register for the ordinary shares is maintained by Link
Group. In the event of queries regarding your holding,
please contact the Registrar on 0371 664 0300. You can
also email enquiries@linkgroup.co.uk. Changes of address
and mandate details can be made over the telephone,
but all other changes to the register must be notified in
writing to the Registrar: Link Group, Shareholder Services,
10thFloor, Central Square, 29 Wellington Street, Leeds
LS14DL.
Electronic communications from the Company
Shareholders have the opportunity to be notified by email
when the Company’s Annual Report, Half-yearly Report
and other formal communications are available on the
Company’s website, instead of receiving printed copies by
post. This has environmental benefits in the reduction of
paper, printing, energy and water usage, as well as reducing
costs to the Company. If you have not already elected to
receive electronic communications from the Company and
wish to do so, please contact the Registrar using the details
shown on the inner back cover. Please have your investor
code to hand.
Share capital and net asset value information
Ordinary 1p shares
350,000,000
SEDOL Number
BP5X4Q2
ISIN GB00BP5X4Q29
Sources of further information
Copies of the Company’s Annual and Half-yearly Reports
are available from the Company Secretary, who can
be contacted at LABS_CoSec@Linkgroup.co.uk and,
together with stock exchange announcements and further
information on the Company, are also available on the
Company’s website, www.lifesciencereit.co.uk.
Financial calendar
26 March 2024
Announcement of final results
13 May 2024
Proposed payment of second interim 2023 dividend
23 May 2024
Annual General Meeting
30 June 2024
Half-year end
September 2024
Announcement of half-yearly results
31 December 2024
Year end
SHAREHOLDER INFORMATION CONTINUED
158
Life Science REIT plc Annual Report and Financial Statements 2023
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 theperiod
AGM
Annual General Meeting
AIC
The Association of Investment Companies
AIFM
Alternative Investment Fund Manager
AIM
A market operated by the London Stock
Exchange
Association of Investment
Companies
The Company is a member of the AIC
BREEAM
Building research establishment
environmental assessmentmethod
BREEAM Interim Excellent
Interim BREEAM certifications indicate the
performance of the building at the design
stage of assessment
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 headleases
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
EuropeanREITs
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 onthe
weighted average number of shares in issue
during the period
EPRA guidelines
The EPRA Best Practices Recommendations
Guidelines October 2019
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 NAV/EPRA NDV/EPRA
NRV/EPRA NTAper share
The EPRA net asset value measures
figures divided by the number of shares
outstanding at the balance sheet date
EPRA net disposal value
(“EPRANDV”)
The 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 value or liability, net of any
resultingtax
EPRA net initial yield (“EPRANIY”)
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”)
The 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
(“EPRANTA”)
An EPRA net asset value measure with
adjustments made for the fair values of certain
financial derivatives and assumes 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 andland
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 andland
ERV
The estimated annual open market rental
value of lettable space as assessed by the
external valuer
GLOSSARY
159
Life Science REIT plc Annual Report and Financial Statements 2023
Strategic reportCorporate governanceFinancial statementsAdditional information
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
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 period
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 property
Completed buildings excluding
development property and land, also
referred to as investment assets
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 acquisitions, disposals,
development property and land
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 and short-term
deposits, 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 andland
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 rentspayable
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
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
GLOSSARY CONTINUED
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Life Science REIT plc Annual Report and Financial Statements 2023
Strategic reportCorporate governanceFinancial statementsAdditional information
Alternative Investment Fund Manager
G10 Capital Limited
(part of IQ-EQ)
4th Floor
3 More London Riverside
London SE1 2AQ
Investment Adviser
Ironstone Asset Management Limited
Registered office
First Floor Radius House
51 Clarendon Road Watford
Hertfordshire WD17 1HP
London office
55 Wells Street
London W1T 3PT
Investor enquiries: investments@lifesciencereit.co.uk
Company website
www.lifesciencereit.co.uk
Administrator
Link Alternative Fund Administrators Limited
(A Waystone Group company)
Broadwalk House
Southernhay West
Exeter EX1 1TS
Auditor
Deloitte LLP
2 New Street Square
London EC4A 3BZ
Joint Corporate Broker and Financial Adviser
Panmure Gordon (UK) Limited
40 Gracechurch Street
London EC3V 0BT
Joint Corporate Broker and Financial Adviser
Jefferies International Limited
100 Bishopsgate
London EC2N 4JL
Financial PR and IR Adviser
Buchanan Communications Limited
107 Cheapside
London EC2V 6DN
Legal Adviser
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
Property Manager
Savills plc
33 Margaret Street
London W1G 0JD
Registrar
Link Group
Shareholder Services Department
Central Square
29 Wellington Street
Leeds LS1 4DL
Email: enquiries@linkgroup.co.uk
Website: www.linkgroup.com
Company Secretary and registered office
Link Company Matters Limited
6th Floor
65 Gresham Street
London EC2V 7NQ
Email: LABS_CoSec@Linkgroup.co.uk
Depositary
Crestbridge Property Partnerships Limited
8 Sackville Street
London W1S 3DG
Valuer
CBRE Limited
Henrietta House
Henrietta Place
London W1G 0NB
CONTACT DETAILS OF THE ADVISERS
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Life Science REIT plc
investments@lifesciencereit.co.uk
contact@lifesciencereit.co.uk
020 3102 9465
www.lifesciencereit.co.uk