IPSX Group has gained consent from the Financial Conduct Authority to launch a ground-breaking regulated securities exchange for companies owning single commercial real estate assets.
IPSX, which will allow companies to list individual assets, will be the first and only regulated exchange dedicated to commercial real estate.
Based on discussions with potential issuers – some of which are international – and subject to market conditions, the group anticipates that the first initial public offerings will debut from the beginning of Q2 2019.
Anthony Gahan, founder and chairman of IPSX Group, told EG: “We have a pretty substantial pipeline of IPO candidates. These are a mix of every vertical in terms of the buildings.”
He added that a number of these assets are valued “in the hundreds of millions of pounds, as opposed to tens of millions”, and have tended to be much larger than initially expected.
“A lot of the buildings have hugely grown in value,” said Gahan. “But the level of liquidity [required by investors] is not something that is automatically available, particularly in the economic context or even the real estate cycle at the moment.
“As these buildings get bigger, even some of the largest investors in the world are not necessarily all that able to respond to that.”
Gahan said that opening up the “universe” of international investors to the rest of the world, not just to specialist real estate investors, but to different categories of generalist investors such as large institutions, is “very important” at a time when some assets are so valuable that few institutions are able to buy alone, and private sale processes result in only one bidder submitting an offer.
It could also enable the “man on the street” to “buy shares in a company owning the building he works in – or even the Premiership football stadium where he watches his favourite team play”.
According to Gahan, the exchange offers investors “direct sight” of the specific underlying property asset relating to their investment, as well as clarity over the revenues and associated costs, and tax efficiencies typically conferred by REIT status.
Meanwhile, institutional property owners can gain an alternative public market option to a traditional private sale, along with flexibility to retain an interest in the asset through a shareholding in the company owning the building.
For owner occupiers it would mean that, for the first time, value can be released from strategic freehold assets without entering into a traditional sale-and-leaseback deal or procuring a joint venture partner.
Looking ahead, the group aims to add further exchange-based products to its offering, including a professional market for closely-held REITs as well as new real estate indices and data products. It is also advancing plans to open additional IPSX exchanges in continental Europe, the US and Asia.
“This is an international proposition,” said Gahan. “Some of the potential issuers so far are not UK-domiciled real estate assets.
“This is a specific market created for a huge international asset class. Ultimately, we would like to see IPSX exchanges in the major financial markets around the world, and really deliver on this reimagination of the real estate investment world to democratise access to this asset class, for every type of investor.”
In July M7 Real Estate, an early investor in IPSX, upped its investment in the group. Chief executive Richard Croft was also made a non-executive director and board member.