Well, good morning, everyone. I'm pleased to be presenting the first full-year results for Life Science REIT and to provide you with an update on the excellent progress that we're making. My name's Simon Farnsworth, I'm the managing director of Ironstone Asset Management, the REIT's investment advisor. I'm joined by David Lewis, our finance director, and Ian Harris, our head of asset management. I'll start by setting the scene and providing a market update. David will walk you through the financial results, Ian will dive into some of the detail on key portfolio activity and our ongoing asset management initiatives. Just before we kick off, I'd like to mention two things. Firstly, that this presentation is being recorded and will be available on the website later.
Secondly, there will be an opportunity for everyone to ask questions at the end of the presentation. 2022 was a year in which we delivered strong operational performance despite macroeconomic headwinds impacting our NAV in the second half of the year. We've quickly built an experienced team able to hit the ground running and deliver immediate results across the real estate portfolio and across our finances as well. Some of the key takeaways for the last 12 months, well, most importantly, was acquiring Oxford Technology Park, the largest asset in the pipeline portfolio, which secured off market in the months in the run-up to our IPO. Along with Herbrand Street in London's Knowledge Quarter, this added nearly four and a half million pounds of additional rent to our income stream.
Key was putting in place a GBP 150 million debt facility with HSBC. Finally, at the end of the year, we moved to the main market on the 2nd of December. We've carefully managed the balance sheet to support our strategy, and this is delivering, as you will see from today's results. The investment market weakened in the second half of 2022 but is now showing some signs of stabilization. By contrast, the occupational market has remained strong throughout the year, in life sciences, particularly supported by long-term structural drivers, which I'll come onto in a minute. Most importantly, I'd like to focus on the look forward and specifically what we're doing on the asset management side that will drive NAV and earnings over the next 12 months.
For Life Science REIT, 2023 will be a year of sticking to the fundamentals of delivering high-quality space for occupiers and retaining a robust level of discipline around capital deployment and execution of business plans. This process should result in us driving up rental income and earnings as we develop, reposition, lease up, and capture the embedded reversion within the portfolio. I'd like to highlight briefly some of the key themes that we'll be discussing today, including the key drivers behind our financial results now that we've had our first full year of operations. We have seen a modest like-for-like fall in headline valuations but have increased earnings as rental income was enhanced both through acquisitions and organic growth. Key portfolio activity includes leasing successes in our flagship Oxford and London assets, driving rents to new levels.
Of equal importance is our debt strategy, and David will be discussing this, our recent progress, future plans, and our hedging framework in due course. I'd briefly like to give you an update on what's happening in the life science industry and in the U.K. real estate market. The U.K ., continues to power ahead as a global leader in the world of science and technology, with the sector continuing to see high levels of investment and employment growth. This is an occupier base well-insulated from major cyclical factors such as consumer spending and house prices, and this continues to feed through into the real estate market, which has significant supply-demand imbalance, resulting in strong levels of rental growth. The broad church that is the life science sector is ever-changing and developing as new technological advances open up and brand-new subsectors develop.
The pace of innovation and the morphing of bio and tech is producing rapid advances in areas such as gene therapy, drug discovery, agritech, and the personalization of medicine. The increased application of artificial intelligence, quantum computing, and robotics is further enhancing the pace and scale of progress and further driving growth across the sector. One of the big positives for the sector over the last few months has actually been the increased focus of this government on encouraging both public and private sector investment into the science and technology universe. Putting science and technology at the forefront of its economic growth strategy has seen the creation of a new department with a seat at the Cabinet table and a variety of specific policies, both direct investment, new tax incentives to encourage investment and growth across the sector.
A little bit more detail on what's happening in the life science investment world and the real estate market, particularly. Positive inflows of capital into UK life science companies continued in 2022, but they did tail off a little after a record year in 2021. However, 2022 was still the second highest year ever for investment into life sciences in the U.K., there was significant interest from investors with major pharma and tech companies looking for opportunities in the growing sector. The most recent M&A activity you'll have seen by both Pfizer and Sanofi underpin the appetite for ongoing investment and expansion. All the real estate market dynamics we saw in the run-up to our IPO continued last year, and actually in our key markets, suppliers reduced further as demand has increased.
Only one cluster in Europe, the Golden Triangle, is globally recognized as advanced, a world-leading, top-tier life science cluster with large world-class hospitals and universities, strong corporate links, a mature funding market, and deep, affordable talent pools. Syncona located yet another gene therapy business, the third from their portfolio, into our Rolling Stock Yard asset in King's Cross. Proximity to the Francis Crick, DeepMind, UCL, the Alan Turing Institute, and most recently, Merck's new GBP one billion flagship R&D headquarters in King's Cross are just a few of the reasons. We call this genius loci. We've remained focused on these key locations with their unique characteristics and supply-demand dynamics. Occupational markets continue to be characterized by a lack of quality space, especially laboratories in all key locations.
There is currently nearly two million sq ft of demand for labs in Oxford and Cambridge alone, with availability rates now down to 0 in Cambridge and 2.5% in Oxford. For the first time, we've seen active laboratory requirements in these markets actually exceed traditional office requirements. Just as an interesting benchmark for the growth that we're seeing, Cambridge laboratory requirements now stand at four times the level they were pre-pandemic just over three years ago. In terms of the capital markets, there remains strong investor and developer demand. 2022 saw nearly GBP 2.5 billion invested into the U.K. life science sector, with about two-thirds of this in the Cambridge Oxford arc. Major transactions saw the likes of Cadillac Fairview and Railpen committing to significant investments in Cambridge assets.
The year also saw major global investors such as PSP and Norges Bank Investment Management entering the sector with acquisitions in the Golden Triangle. 2023 has started with similar levels of investor demand, including GIC making a significant investment in the Knowledge Quarter development in London. Competitive bidding on all these transactions was strong with investors from North America, the U.K., and Asia, all seeking exposure to the U.K. life science market. I'm now gonna hand you over to David Lewis, who will talk you through our financial results and our debt strategy.
Thanks, Simon. I'm also delighted to present our first full year annual results, which reflect the bedding in of the assets acquired in 2021 and also the first half of 2022. Just to reemphasize, we've had strong operational performance with a focus on delivering development activity and asset management initiatives, as well as ongoing new lettings. This will significantly benefit our earnings performance in 2023. Headline numbers are an NTA of GBP 315.1 million and an NTA pence per share of GBP 0.90 , with positive adjusted earnings of GBP 2.5 million. Net borrowings are GBP 65.2 million on a property valuation of GBP 387.6 million, which gives a net and LTV of 16.8%. Turning first to adjusted earnings.
For our first full year of trading, we end the year at GBP 2.5 million. That's a GBP 2.8 million increase on the six weeks of trading in 2021. The full year of rental income from our 2020 acquisitions plus circa seven months of income from the 2022 acquisitions results in net income of GBP 13.1 million, a GBP 12.6 million increase on the prior period. Operationally, we've collected 97% of rent for 2022, and we are currently at 98% for Q1, 2023. Property operating expenses of GBP 2.2 million consist of primarily acquired voids at Camden, Cambourne and Rolling Stock Yard, and we expect to reduce it in the near- term as we progress our asset management initiatives, which Ian will discuss further later.
We are also pleased to declare a GBP 0.03 per share second interim dividend, which meets our IPO target of GBP 0.04 per share for the year. On the next slide, the movement in NTA per share, sorry, shows a bridge from the December 21 NTA pence per share to the December 22 position. The GBP 0.102 reduction to GBP 0.90 is primarily driven on the right-hand side of the slide by the 2022 acquisition revaluation decline of GBP 0.077 per share and a like-for-like portfolio revaluation decrease of GBP 0.013 per share. Looking at those more specifically, the acquisitions decline was due to acquisition costs, including a GBP 30 million tax liability that only crystallized on acquisition of OTP and also recognizing full purchase of costs for the 2022 acquisitions.
For the like-for-like decline, this was clearly driven by the macroeconomic environment in the second half of 2022, resulting in an outward yield shift, which is partially offset by like-for-like ERV growth of 4.7%. Moving on to the next slide and discussing the liquidity and debt position. December 2022, available liquidity was GBP 138.2 million. In February 2023, we repaid the OTP debt with Fairfield after the expiry of some punitive restrictive covenants. This was done through drawing down GBP 26.3 million on the HSBC RCF portion of the facility and utilizing existing cash funds. Current pro forma liquidity is GBP 73.6 million, which is sufficient to meet our current CapEx and asset management requirements. At year-end, debt was hedged at 94.1% of gross debt.
Post the February debt repayment, we are currently in an overhedged position of 104.3%. Gross LTV at year-end was 28.6%, which continues to be below our IPO range of 30%-40%. Our pro forma LTV is now at, sorry, 26.1%. That's right. Finally, we are currently in discussions with HSBC to expand and extend the existing facility by additional year to March 2026, and we will update the market once finalized in the near future. Finally, I'll pass back to Simon. Thank you.
Thanks, David.
Thanks very much, David.
We're now gonna move into a more detailed look at key portfolio activity over the last 12 months. Our strategy, as you're aware, has been to acquire assets in the Golden Triangle and either reposition or develop to provide high-quality space for life science occupiers. The transformation of space to capture high rental tones in the sector has been key. Ian will be demonstrating our progress in just a moment. We are even more confident today in our strategy and have seen good uplift both in the ERV of our existing income producing assets, as well as significant rental uplift through our development and repositioning pipeline. Without further ado, I'll hand over to Ian, who will add some color and detail to the progress that we've been making across our portfolio.
Thank you, Simon, good morning, everybody. Just before I get into the detail of the activity that's going on across the portfolio, I wanted to say a few words about the importance of ESG and how that figures in pretty much all of the asset management initiatives that we are currently working on. We're a new business, we've been busy for most of our first year understanding and calibrating the environmental performance of the existing portfolio and the climate change risk to it on a go-forward basis. This has effectively enabled us to set a benchmark, to produce the mandatory reporting and to identify where we can get the most bang for our buck in terms of spend on driving towards net zero carbon as we go forward.
We've had a great start with Oxford Technology Park and Rolling Stock Yard, both achieving BREEAM Excellent certification, and by increasing the proportion of A to C EPC ratings from 31% up to 83%. Going forward, we'll be working with a third-party consultant who will support us in implementing asset by asset initiatives, and engaging with occupiers on their ESG agendas because if we can work jointly with them, what's good for them is good for us. Generally, repurposing sustainably, all of which should leave us well-placed to take advantage of any future green rent premiums that come down the line. Just looking at the makeup of the portfolio.
Over the course of the last 12 months, we've increased our investment stock with the addition of four income-producing assets, three of them at Oxford Technology Park and one of them at Herbrand Street in London's Knowledge Quarter. Collectively, these have added another four and a half million GBP to our rent roll. On the development side of things, the acquisition of OTP has given us an exciting opportunity which will play out between now and 2024 as we build out the remainder of the 450,000 sq ft scheme, I'll come onto this in more detail a little later. Looking at ERV growth, we've continued to see positive rental growth across each of our core locations.
I think as a result of both market dynamics and the supply-demand imbalance that we talk about, and also a result of the repositioning initiatives that we are undertaking in Oxford, Cambridge, and King's Cross. The like-for-like ERV growth across the portfolio is strong, and it's forecast to continue on a similar trajectory for the foreseeable future. As we implement our thesis and we repurpose space from offices to labs and deliver more life science space to the market at OTP, then the proportion of our rental income derived from life science tenants is increasing significantly. As of December 2022, that proportion stood at 28%. Post-year end, this has increased to 37% with lettings to Williams, Oxford Ionics, and Arcturis Data at Oxford Technology Park and to Syncona at Rolling Stock Yard.
Taking into account deals currently under offer or where terms are agreed, the figure rises again to 42% of total income. Looking quickly at our year-end valuation. The benefit of the supply-demand imbalance that I've talked about and our income growth repositioning strategy can clearly be seen feeding through into the valuation at year end. Our like-for-like portfolio value reduction of only 6.3% is modest when compared with other main U.K. real estate sectors. It's been a tough year, capitalization rates have definitely moved out over the year. In the case of the life science sector and our portfolio in particular, this has been offset to an extent by positive rental growth, and that has mitigated the impact on the portfolio.
Let's look at some of the real estate and the activities that we have going on at the moment. Starting with Rolling Stock Yard, I mean, essentially, this is our thesis in action. Repurposing space from offices to labs to capture that significant rental upside premium available, in this case, in the London laboratory market. We bought this building with two vacant floors, both of which have now been repurposed as fully fitted plug-and-play laboratories in a supply-constrained market. It's cost us GBP 1.9 million to get there, and the upgrades have been to full CL2 wet lab specification. That includes M&E upgrades to deal with the air handling that we need, mobile benching, vinyl lab flooring, gas storage and piping, water purification. On the right upside, effectively the office, this has also been fully fitted to Cat B.
Carpet, partitionings, we've created meeting rooms, all the desking and all the chairs. The idea being that a life science business can move into Rolling Stock Yard and start trading with almost immediate effect. That's paid off because, as a result, we've been able to pre-let the majority of the space to a Syncona-owned business, and we've seen rental levels in the building increase from GBP 65 a square foot to GBP 110 as a result of what we've done. Practical completion of the works occurred last week, and we're in advanced discussions with a number of occupiers about the remaining space on the first floor, which is refurbished to the same standard. What's that done for our valuation?
Well, if you strip out the valuation for the first and second floors as of December year-end, it's increased by nearly GBP eight million for that 1.9 CapEx spend. The yield on cost, the incremental yield on cost is about 30%. So pretty good results for the expenditure. Moving to Oxford Technology Park. As you can see from the slide, progress remains very much on track. We've got three completed buildings. Three more will reach PC within the next two weeks. Demand for the space from occupiers remains strong across the board. We've completed three new lettings at the office building in the last three months, and pushed our quoting rents up to GBP 30 per sq ft for that building. Elsewhere on the park, 41% of the space under construction at year-end is now pre-let.
Terms are agreed on a further 20% of space under construction. What that's done for rental values, if we look at the ERVs for the larger hybrid units, they've risen from GBP 16 per sq ft, which was the tone established from the initial letting of unit three to Native Antigen back in March 2022, so a year ago. They've moved on to GBP 18.50, and then to GBP 20 as a result of the letting to Williams at building five. We've now got further deals under offer as well at unit six at GBP 20 a sq ft plus. If you look at those hybrid buildings over the last 12 months, we've seen rental growth of 25%.
The planning application for the final phase of the development, which is the land at the back, labeled in green, comprising units 8 to 11, is now approved for submission. That'll go in in the next week or two. The aim is to have the park fully built by half to 2024. The next slide shows some photographs of progress on site, and I just wanna highlight some of these for you. Top left is the completed office building, which is now two-thirds let. The bottom one at the middle is an important one. That is the location of the proposed cafe and amenity hub, which is so critical to the success of Oxford Technology Park.
We need to provide these amenities for our tenants, for them to be able to recruit and retain the talented young scientists that we want to be working from these buildings here at OTP, we can't do that without the amenities. That's really important for us. Bottom right shows Native Antigen's headquarters building. They'd previously operated from four separate, rather dated buildings just down the road in Kidlington. They've been able to consolidate the entire business under one roof at OTP in a purpose-built office and laboratory building with room for growth. They couldn't be happier. Lastly, I want to look at Cambourne, which is another of our sizable assets where there is a repositioning strategy in process.
Over the last 12 months, we've taken the initial feasibility study that we carried out at acquisition onto the next level of detail. We're currently repurposing 10,000 sq ft of offices in building 2020. I should point out the numbers on the white buildings here are building identifiers rather than dates. 2020 is a building, not a date. We're repurposing 10,000 sq ft in that building in suites of 2,500 sq ft as what we call grow-on laboratory space, which is one step up from an incubator. You go from incubator to grow-on and so on through the life cycle of the business.
We think that's where the market is at Cambourne, at least initially for us. This space will be available for occupation in Q4 this year on a fully fitted basis similar to what we've done at Rolling Stock Yard. The image on the slide gives you an indication as to how the massing at the park can be significantly increased over time as well. We can create more square footage, but we can also create more of a sort of science park feel with the buildings facing inwards onto landscaped green courtyards or looking out over the lakeside views the other side. It's not just a question of physically repurposing these buildings. They need to be repositioned in people's minds as well, both for Cambourne as a location and for the business park as a location for life science occupiers.
The rebranding exercise to point the park more in the direction of these life science occupiers is now complete. It'll be launched in the next couple of weeks, and it includes a whole raft of measures. It's a new name, logos, all the marketing materials, website, social media campaign, all the stuff you'd expect. We aim to launch it around the letting of 5,500 sq ft in Building 2020 to a life science occupier, a deal that's currently in solicitor's hands. The lease is agreed. We're putting the final touches to the license for alterations, and when that completes, that is the good news event around which we want to launch the branding and the repositioning of Cambourne as a whole going forward.
Finally, one of our largest current life science occupiers on the park is very much in expansionary mode. We've had a number of meetings and dialogues with them about how we can help them in that growth process. That involves sharing with them our pipeline, what space is gonna be available and when. I don't think it'll be too long before we're able to take the first step along the road of helping them grow at Cambourne. That's all from me.
Go ahead.
Back to Simon.
Thanks very much, Ian. As you can see, there's been an awful lot of progress. What does this activity actually mean for the company as we look forward and seek to grow our rental income and earnings? As you can see from this income bridge, there is significant rental income upside to come over the next 24 months, largely through lease-up of existing vacancy, conversion of offices to labs, and the development of new space at Oxford Technology Park. We've broken this down into easily identifiable buckets in order to analyze this further. I would stress that we're basing all this analysis off our value as ERVs, and we're not factoring any growth in beyond today's rents. Firstly, as you can see, we have GBP 1.1 million of inbuilt reversion.
By this, I mean mark to market existing income. That will largely be captured by upward-only rent reviews over the next 24-36 months. We have GBP 3.1 million of income to come through lease up of vacant space at Rolling Stock, Oxford Technology Park and Cambourne. To date, we've already contractually secured 37% of this with a further 4% currently in legals. We have a further GBP 2.7 million to be realized through the letting of the soon-to-be-completed buildings at Oxford Technology Park. 41% of this is already secured, with a further 20% currently in legals. Finally, we have the remaining buildings at OTP, which are forecast to contribute another GBP 5.2 million of income over the next 24 months.
We already have 9% of this under offer, well before any significant construction has even commenced on those buildings. To summarize those numbers, of the 11 million total uplift identified as being achievable over the next two years, we have already contractually secured 20% through pre-lets at Oxford Tech Park and Rolling Stock Yard, and we have a further 11% under offer and in legals. This is significant progress and ahead of our original business plan targets, we aren't resting on our laurels and remain completely focused on the execution and capturing of this growth. To conclude, as I discussed at the beginning, we're a young company. This is only our first annual report.
Having acquired assets in the key dynamic markets across the UK life sciences spectrum, the focus now is delivering on the asset management initiatives, driving rental and capital growth, and providing much needed space for a sector at the heart of the U.K. economy. We strongly believe the strategy remains robust, both in terms of occupational demand and investor appetite. We're looking forward to continuing on this exciting trajectory, building a best-in-class portfolio with a range of opportunities to enhance value for our shareholders. With that concludes the sort of formal part of the presentation. We're now very happy to open the floor up to questions.
Miranda Cockburn for Panmure. Just on Cambourne, you were talking about obviously repurposing that space. Can you give an indication of where you see the rents going from and to as that happens?
The prevailing level of rent at Cambourne at the moment is GBP 23.50 as business park offices. If we go down the fully fitted route at our Rolling Stock Yard model, those rents will rise to somewhere in the high 40s, early 50s, probably. Still at a discount to other locations around Cambridge because we have to prove ourselves at Cambourne initially and generate some momentum. I do see them pushing on from that on a go-forward basis as we start to gain a reputation for life sciences on the business park.
The other question, just in terms of, I mean, I know you're not necessarily looking to buy anything else at the moment, but, I think there is a report, one of the Cast Jonas report, talking about Birmingham and about that scene, the life science area there seeing strong growth. Would you look outside of the sort of Oxford, Cambridge, London focus?
Not at the moment, Miranda. I think where we see the demand supply tension is in the Golden Triangle. There's a lot of good stuff happening in Birmingham, in Manchester, Leeds and Edinburgh. What we're not seeing is that rental growth kicking through from that demand supply imbalance. Edinburgh, for instance, has been doing a lot of work around the BioQuarter, but, you know, they're not fully leasing up the space yet, and we're not seeing rents growing. We're sticking to our guns on the Knowledge Quarter in London, Oxford and Cambridge.
Hi there. Thanks. What is the, what has been the impact on the sort of funding market for the sort of life science companies, especially in the last sort of six months or so? Has there been much impact?
I think it's fair to say there's probably been a slowdown. What we've seen talking to existing and potential occupiers is that decision-making has become slower. A number of companies we're talking to at ATP, for instance, that have got a really strong team, a good idea and a track record, funding is still readily available. I think what's happening is some of the sources of that funding are changing from private equity venture capital to big pharma and big tech. You're seeing Alphabet and Microsoft and others now investing directly into life sciences, Meta as well.
I would say the dynamics of that are changing, but we're not seeing, we're not seeing a sort of slowdown and the impact of, you know, just the last few weeks with Silicon Valley Bank and everything that went with that. We actually, because we're a relatively small portfolio, we actually contacted all our occupiers directly to discuss if there are any issues. We only had, I think Syncona who declared they had 0.4% of their deposits, I think, with Silicon Valley Bank in London. We're very sort of focused on what's happening in the funding markets. At the moment, we're still seeing good strong levels of demand.
Just to back that up, I think that's entirely right. At the monthly leasing meetings at Oxford Technology Park, I'm still seeing five pages of requirements, and I'm only aware of two instances where prospective tenants have backed away from negotiations due to lack of visibility on their own funding. There's plenty of others to step up and take their place.
Thank you.
Just a reminder, if you're online, you'd like to ask a question, please use the facility available, and we'll come to you shortly. Any further questions from the room?
You've answered it all.
Yeah.
We attempted to anyway.
Yeah.
No further questions online. So we'll pass back to you, Simon, for any closing remarks.
Okay. No, I think that's, we've covered off everything we wanted to talk about today. The team are always available for follow-up meetings, follow-up calls, if anyone wants to go through anything in more detail. We will be having a capital markets day shortly, which will be announced, as well as site visits to Oxford and Rolling Stock Yard over the next few weeks as well. We'll make sure that that's fully communicated to everybody in due course. Thanks very much for your time, and we look forward to seeing you soon.