Anthony Gahan, founder and chairman of IPSX, the first securities market for commercial real estate, due to begin IPOs in London in the next few months, says the pipeline of properties lining up to list totals billions of pounds.
Gahan, who has a background in financial services, has been tracking the on-off discussion around securitisation of property for many years. After five years of planning, IPSX last week cleared the final hurdle to trading; recognition from the UK Financial Conduct Authority to become London’s seventh stock exchange, opening the way for the sale of securities in single property assets.
“There are buildings valued at hundreds of millions in the pipeline, and the total in the pipeline is pretty substantial, certainly in the billions. The size of the UK commercial real estate market is £900bn, of which roughly £50bn to £60bn is sold privately each year. Ownership is roughly 50:50 split between institutional and owner-occupier,” Gahan explains.
Property is unique, says Gahan, in being such a large asset class but out of reach for most people, dominated by institutional funds and only the wealthiest families.
“To get a lick of the spoon you have to be in their funds,” he explains. “We asked ‘what are the pain points to property?’ Liquidity was one pain point.” Selling shares through a stock exchange will allow the sale of part of a building while the owner retains the remainder.
Speed was another pain point. The average sale for a large asset – IPSX will typically trade shares in buildings valued at £50m-plus – is 190 days in the private market. Computerised dealing will reduce this to almost instantaneous execution of share transactions.
Gahan describes the exchange he has created as “gold plated on every basis” and he now has the power to run a regulated market. He expects the fund managers running passive equity traded funds that track indexes such as FTSE 100 or S&P 500 to start following the IPSX real estate index as it emerges.
The first IPO is expected to be at the end of Q1 or start of Q2 2019. Gahan refused to be drawn on who is in the process of listing their assets.
IPSX opens up the possibility of members of the general public buying shares in their local football stadium, shopping centre or workplace if it lists.
“We want to see greater plurality of investors” says Gahan, and the “democratisation of access” promising a “fantastic customer experience” which allows dealing in a “frictionless way,” including an app to track share prices and other information. Trading will be carried out by stockbrokers and retail platforms such as Hargreaves Lansdown or AJ Bell.
Funding for IPSX has come from Tritax, Moorfield, British Land, M7 and other major property players who believe in the concept, a crossover of fintech and proptech.
The London-based exchange will be open to overseas assets. In due course, Gahan intends to open further exchanges in continental Europe and around the world’s main financial centres.
IPSX will generate fees from selling data to banks and fund managers as well as the annual listing subscription for the buildings on IPSX, which will be constituted as companies.
Agents will have a role to play in providing valuations and advising on IPOs if they meet certain regulatory credential checks.