Nothing worthwhile comes easily: genesis of a stock exchange for real estate
COMMENT Is it time for an index that allows units – or shares – in individual properties to be traded? A stock exchange for real estate? This head of a leading agent believes so.
“We cannot continue demanding our place at the high table and declaring that property is a major investment for funds, while not providing the sort of depth and speed of response to client demands which is offered by competing markets.
“I see a market which is similar in concept to the existing stock market… in which investment property is broken down into relatively small units.”
COMMENT Is it time for an index that allows units – or shares – in individual properties to be traded? A stock exchange for real estate? This head of a leading agent believes so.
“We cannot continue demanding our place at the high table and declaring that property is a major investment for funds, while not providing the sort of depth and speed of response to client demands which is offered by competing markets.
“I see a market which is similar in concept to the existing stock market… in which investment property is broken down into relatively small units.”
That was Christopher Jonas, then managing partner of Drivers Jonas, now part of Deloitte, talking to EG – in June 1985. Chair of the RICS policy review committee, he was an early advocate of an idea that moved closer to fruition this week.
The Financial Conduct Authority has authorised IPSX Group to launch a regulated securities exchange for companies owning single commercial real estate assets. Allowing companies to list individual assets, it will be the first and only regulated exchange dedicated to commercial real estate.
This, you will already have gathered, has been no overnight success.
Three years after Jonas spoke to EG, the Investment Property Forum was born. And like the RICS before it, and others since, the IPF has devoted many, many research hours to deliberating how single assets on a public market could be securitised.
IPSX itself launched five years ago and has been building interest, investment and regulatory approval since.
After this week’s green light from the FCA, the first IPO should land in Q2. Assets on the exchange will be in the “hundreds of millions”, according to founder and chairman Anthony Gahan.
Huge potential
Of course it would be ludicrous to describe an idea which has been more than three decades in the making as radical, but its impact could be. It has the potential to revolutionise the real estate sector. That would take time, but given that the real estate sector is worth $30tn globally, even gaining a small slice would be hugely impactful.
Gahan asks us to imagine “the ‘man on the street’ buying shares in the building he works in – or even the Premiership football stadium where he watches his favourite team play”. Others are already picturing the hostile takeover of individual assets, the overhaul of conventional valuation models by real-time price movements and the floating of single-asset SPVs as investors and landlords seek to inject equity without losing control.
It begs questions too. What does it mean for space as a service? Will owner occupiers rein back on traditional sale-and-leaseback models and capitalise on value of their buildings while retaining an ongoing interest in the security of their own covenant? And will it strengthen London’s credentials at a time when uncertainty looks set to ramp up?
International issuers are already talking to IPSX and the group itself is eyeing additional exchanges in continental Europe, the US and Asia. Should a stock exchange for real estate succeed – and there are plenty of reasons it might – there will be value in London having succeeded first.
To send feedback, e-mail damian.wild@egi.co.uk or tweet @DamianWild or @estatesgazette
