Proptech meets proptrad at the IPSX portal

Each week EG brings news of proptech entrepreneurs desiring to disrupt the commercial property market. Some will, most won’t. Either way, what we’ll label the “proptrad” tribes need to keep an open mind to ventures such as the one explored below. But first a declaration of interest – a proptech is soliciting my advice. Fortunately, the International Property Securities Exchange is managing just fine without my limited wisdom. What I can glean from my close-up experience of a proptech and taking a look at IPSX is this: a second, more serious, wave of disruptors is approaching proptrad. Wave one was all about funnelling information from others, via charging portals. EG glued a CD on the front of 30,000 magazines one week in 2000, offering readers entry to an EG portal. This second wave is higher, more powerful and will not leave the sector unchanged. A backer of the Hightower start-up, which was featured in EG last week, elsewhere likened commercial real estate to “a lost tribe up the Amazon”. The subtext of the words of Ethan Kurzweil of Bessemer Venture Partners is this: “We will canoe into your world, bringing you civilising software. You suspicious savages will then be able to communicate and trade with a far wider world – with our help.” There is about enough truth in this assertion to sting. Proptrad is tentatively shaking hands with proptech. British Land has chipped a “modest sum” into IPSX. Proptrad exemplar Rob Bould is a non-executive director of IPSX. Bould, the ex-boss of Bilfinger GVA, explained his initial scepticism and growing enthusiasm over lunch a couple of weeks ago. The more you listen, he said, the more you begin to see the possibilities. But the more you reflect, the more you see how the proptrad tribes may baulk at the idea. The model explained in EG (9 July, p35) is simple. Properties are bundled into a special-purpose vehicle, sized between £40m and £1bn. The SPV is ground through the disclosure mill required of any initial public offering. Some or all of the shares are floated to trade. The model beats the pants off the Property Derivatives Trading Forum, set up in 2006 by Hermes to suit the bespoke specifications of proptrad. IPSX hopes to start trading in January, if regulatory approval is granted. This will not please the tribes who police today’s more circuitous entry and exit routes to property, extracting tithes at each gate. Imagine if the £227bn of UK commercial property held by funds and REITs was traded within a couple of thousand SPVs on IPSX. No, it won’t happen. But the danger of a 10% switch and loss of fees may have affected proptrad tribes, closing minds and ranks. Valuers also need open minds. A tribe clutching a brick-thick Red Book of rules looks vulnerable to the opinions of those holding shares in IPSX-listed SPVs. Imagine BL floating 50% of its half-stake in Broadgate, EC2, on IPSX at 100p share, based on a book value, set by a valuer. Then the shares fall to 50p and stay there. How much is the whole of Broadgate then worth? Ask your nearest valuer. Apple mystery On Monday CBRE reported London office take-up had “rebounded” in Q3. The bounce was driven by Apple leasing 467,300 sq ft at Battersea Power Station, SW8, for just 1,400 staff. An explanation as to how Apple staff need about three times as much space to work as non-Apple office employees would be welcome from their employer. A brown paper envelope containing the terms of Apple’s lease would be welcomed by me. Tough targets ahead It’s budgeting time for agents with calendar-year accounts. This time last year gung-ho budgets were set for 2016.  Anticipating rises of 10% was common, says one former chief executive. After all, 2015 was ending well – what could go wrong in 2016? Nothing terrible. But enough to make reaching the 2016 targets a struggle. Next year? Underlings struggling to meet bonus-triggering targets will be hoping for a 10% drop in their 2017 goals. They’ll be lucky.