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Nov. 23, 2018

IPSX real estate exchange to launch in London next month, Germany soon | Business Immo Europe

After some regulatory delays, IPSX, a stock exchange dedicated to real estate, is set to launch next month in London and will come soon to Germany, Chairman and Founder Anthony Gahan says.

Gahan, who co-founded IPSX in 2014, told the Frankfurt Finance Day this week that IPSX will for the first time provide a platform to securitise single assets, mainly in the form of REITs. This will broaden and deepen possibilities for both property owners and investors. The first exchange of its kind to offer flotation and listing of single-asset properties located in the UK or across Europe, IPSX will appeal to global investors, he said.

It has financial backing from UK REIT British Land, industrial real estate firm M7 Real Estate, private equity group Henley Investment Management, and the Daily Mail & General Trust publishing group.

“IPSX is an operator of regulated stock exchanges, designed and dedicated specifically to real estate,” Gahan told the conference organised by Targa Communications and the Frankfurt School of Finance on Wednesday. “We are starting in London in December, and Germany is a key global market and an investor market so the plan is to roll out into Germany quickly after London.”

He added: “This is a stock exchange; it is a market infrastructure and data products business comparable to other stock exchanges - designed to reimagine real estate investments… The trading and ecosystem is ready and tested and ready to go.”

The exchange has been conceived with five main elements in mind: first, to provide liquidity to an asset class that lacks it. “The absence of liquidity is main problem preventing real estate from turning into major asset class,” Gahan said. Second is transaction speed: flotations will be achieved fast and efficiently. Third is to provide validated data on the asset and the manager in order to provide investor security and transparency. Fourth is to provide choice to asset owners who will have the flexibility to offer partial or full flotations of assets on IPSX. Fifth is to cater to younger people wishing to invest in real assets for the long term, but starting with a relatively low amount of disposable investment funds.

For the asset owner, Gahan said: “An IPSX IPO is different. You dont have to sell 100% of your asset immediately, you can sell, say, 25% on the exchange and in a year or so buy it back or sell more. You have the option to retain control or just have a management contract for the asset.”

IPSX will be a public investment market appealing to every single kind of investor. For this reason it had to be fully submitted for approval by the UK Financial Services Authority – which caused substantial delays while preparing the exchange for launch.

The exchange can be used in many ways by owners, Gahan said. “If you are for example a very large pharmaceutical company you have, for example, the entire asset of your headquarters offices on your balance sheet. You can do a sale-leaseback or a joint venture to monetise some of it, but this is difficult. But now, with IPSX, you can sell, say, 49%, releasing that equity for better uses. For an asset owner you have a public market that has never been there before.

“You can keep the asset management, or you can change the investor pool, and by doing this you can get market price information. The value of the asset is really the free cash-flow that it generates on a risk-adjusted basis. This is game changing.”

For investors, the launch of IPSX taps into the rise of robo-investors and the shift from active to passive investments, for example, via exchange traded funds. It fulfils the need for greater returns via 'alternative' investments, and caters to tech-savvy millennials. The exchange will use Big Data to foster improved decision-making and help achieve better investment outcomes. It will enhance the investor experience and allow individuals to access investments normally open only to institutions, he said.

Gahan cited a UK Investment Association survey 2017-18, which noted that pension firms and others are increasingly seeking real assets for their portfolios. “The greatest challenge is the origination of the assets that are going to interest those clients,” the survey said. “You are not just wandering onto the stock exchange to buy these assets. You've got to go an actively look for them. So that's probably the both the greatest challenge and the greatest opportunity.”

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