Life Science Reit Share Discussion Threads

[chrisdgb] 23/9/2024 08:30

Thursday looms.........

[wshak] 17/9/2024 11:29

Thanks for the article, Paul.

leads to the question, why wouldn't a bigger player just snap up LABS if they don't start delivering?

[ghhghh] 17/9/2024 10:51

This is the link to the article I mentioned yesterday

[ghhghh] 17/9/2024 07:13

LABS told me that they were outbid on Herbrand Street by BL. Aside from the lack of parking it looks a quality, well located asset. I think they paid £90m and last accounts valued it at £80m.

About 2 years left on the lease and LABS now appear unable to pursue Plan A (refurb for life sciences) so Plan B screams sell it!

[hpcg] 17/9/2024 06:53

riverman - IMO conventional metrics are under-utilised in the analysis of REITs and other asset situations. There is an assumption that in the very worst case the asset just retains its value from now until the end of time and thus discount calculations can just ignore the cost of creating the asset in the first place.

[spectoacc] 17/9/2024 05:51

"N"AV. Eg halve the stated NAV, and ask yourself if it still looks cheap.

(Something similar just happened at DGI9).

As a holder of LABS, hoping for some good lettings news this month. But NAVs are frequently a nonsense. Eg Knight Frank's valuation at HOME was more than 100% too high, probably closer to 200%.

[riverman77] 16/9/2024 21:06

Looks cheap on a discount basis, but less so on an earnings or dividend yield basis, currently yielding only 6.3% despite the massive discount. Not looked into detail so perhaps some hidden value - hope to do a bit of work on it when I get a chance.

[hugepants] 16/9/2024 20:11

Still the discount looks extreme? A 60% discount to NAV would imply to me something structural re the debt, like covenants under threat? But LABS claim they have substantial covenant headroom. RGL traded on a similar discount (before the discounted fundraising) but it was a complete basket case! CLS is on a similar discount but it has 50% LTV and is family owned. LABS LTV is currently only 25%. So with reits recovering in price now , albeit slowly, LABS is continuing to fall which feels anomalous.

[riverman77] 16/9/2024 15:33

Briefly looked at this a few months ago and was surprised that a large part of their exposure is actually offices, not labs. That was enough to keep me away, thankfully. Looks like some of these could be converted to labs, but the costs would be high.

[wshak] 16/9/2024 15:28

Herbrand St looks like a vanity project to me.

if it's the prime asset they claim, they should sell it before someone else takes over the company and does it for them. The only case for not doing so is if the market has it wrong, and OTP is close to securing some decent lease deals.

The market won't react well to another divi cut.

[cousinit] 16/9/2024 15:24

I've topped up this afternoon. I do have reservations on the delays with Cambourne and now OTP, also Herbrand St looks too much of a stretch for the balance sheet.

The dire sentiments expressed might, just might, be a contra indicator.

[wshak] 16/9/2024 15:14

The 2 dogs in my IT and REIT portfolio are DGI9 and LABS.

With DGI9, I averaged down heavily at a blended 21p, but have bought none since the latest NAV "re-valuation". Risks have risen there, given the latest update.

LABS is giving me similar vibes, but at least it is property based, which is easier to understand.

Shares are very illiquid at the moment, so any kind of serious buying or selling will affect the price disproportionately. If LABS don't start letting out OTP soon, there will be significant pressure on the Board to look for strategic options - ie. put themselves up for sale.

One REIT I'd been keeping my eye on (but never bought) was PRSR. A real dog, much like LABS, it has soared purely due to activist investors calling an EGM and getting their men on the Board.

LABS is an interesting case. Their debt isn't very high so I'd have thought that management must be very conscious of the share price and existing discount to NAV.

The size of the company is such that there will be a whole load of rapacious types who could take a longer term view and look to take them private with an opportunistic bid.

LABS have to start delivering soon - by achieving decent rents, not by panic discounting - or they will be toast.

[ghhghh] 16/9/2024 14:16

They let the first part of OTP reasonably quickly but agree that the market may have changed. Hence their conversion of Unit 4 into smaller IQ units (4 out of 9 let) and they are revisiting the planning on Units 10 and 11 which are due mid 2025.

By my very rough calcs, OTP is 498,000 ft fully developed of which Units 10 and 11 total 83,000 sq ft.

So currently 425,000 sq ft (but incl hotel) of which 210,000 sq ft is currently/imminently available.

Most of this vacant space is fairly recent so possibly too soon to panic in view of summer holidays/GE/forthcoming budget. However LABS will need to reassure markets on the 26th that these units are generating lots of interest... And not cut the divi!

Worst case, the portfolio looks decent quality and well located in the golden triangle, it should have sufficient value to more than cover the current share price. Especially as REIT sentiment is improving with falling interest rates and LABS is now lagging well behind the sector rally.

[spectoacc] 16/9/2024 13:14

I'm with @hpcg, the inference is that LABS' kit isn't what the market's after.

Could also be that the price they want, to cover debt/return on equity, is holding back lettings too.

Difficult to see a favourable endgame in absence of some lettings being reported this month, & any that are reported will need checking carefully for length of rent-frees etc.

"N"AV.

[riskvsreward] 16/9/2024 13:07

Exactly, if the fundamentals and macros for the sector segment, that is science labs, is good, it makes the management of this company even more incompetent!

[hpcg] 16/9/2024 12:40

Is that research realistic? If so it means none of the existing space is appropriate, or what's coming into availability is superior in some way, which amounts to the same thing. I sold a week or 2 back, no place for slow coaches in this market.

[cousinit] 16/9/2024 12:33

Appreciate that this is not industrials/logistics, but I do take some heart that offers have been coming in for trusts in those sectors.

It feels like we are at the cusp of the headline interest rate cycle turning and bidders picking off discounted assets before that feeds into market pricing and valuations.

That at least should provide some support if LABS looks to execute some self help (at least one sale) or if someone else appears on the doorstep...

[ghhghh] 16/9/2024 12:29

Article in The Times today about the shortage of Lab space and how this is hindering growth in life sciences.

Quote a Knight Frank survey from last year which calculated that businesses were looking for 2.2 million sq ft in the golden triangle in the three months April - June yet only 385,000 sq ft of available space.

Fair bit of new space in the pipeline but a few years out.


The lack of new lettings at OTP is a bit surreal in view of this positive macro position. Maybe it will be waiting for a bus...

[spectoacc] 16/9/2024 11:51

Other than the outright disasters (HOME, DGI9), there can't be many doing as badly as LABS. Difficult to see what a strategic review would achieve - wouldn't be a swift wind-up I'd imagine.

[hugepants] 16/9/2024 08:51

This has "strategic review" written all over it.

[cousinit] 30/8/2024 10:24

ghhghh, agree that the underlying asset performance is key here.

At least the interest rate outlook is supportive of asset values and a lower interest charge when the rate caps expire early next year.

This is one trust that I hope doesn't try to fix borrowings for any meaningful period.

[ghhghh] 30/8/2024 08:55

Jefferies's Mike Prew has downgraded LABS to 36p from 45p, citing slow letting progress at OTP due to economic and political uncertainties and limited VC funding.

He expects activity to pick up into 2025.

No surprises here as per my previous post. LABs have until 26th Sept to finalise a couple of OTP lettings....

July/August always quiet thanks to holidays but hopefully September will see deal activity increasing. However the imminent Budget may keep some on the sidelines.

[chrisdgb] 20/8/2024 08:31

Never moves............

[ghhghh] 12/8/2024 06:19

LABS have until 26th Sept to announce some OTP lettings!

I'm surprised and a bit worried that it has been a few months since last letting. We've had the election and holiday season as possible hold ups. The Autumn Statement might have some waiting on the fence.

OTP looks a decent asset (versus Begbroke) in a market with a reasonably supply demand balance.

[spectoacc] 02/8/2024 05:57

There's laggards, then there's LABS :)

But yes, must come a point eventually when it's worth eg rotating out of the winners, into the laggards. Another @ghhghh favourite, DGI9, springs to mind.

Should add this isn't all Schadenfreude - I hold both, & both are my worst-performing holdings.