London Real Estate Exchange Limited confirms that it is progressing plans to launch the world’s first fully regulated securities exchange dedicated to the admission and trading of companies owning single commercial real estate assets.
The proposed exchange will seek authorisation as a Recognised Investment Exchange from the Financial Conduct Authority (“FCA”) and, subject to this being achieved, will trade as IPSX (the “International Property Securities Exchange”).
IPSX seeks to provide institutional and private investors alike, irrespective of size of investment, with a proxy for direct ownership of commercial real estate in a regulated environment with full transparency and liquidity. Investors will be able to buy and sell shares in companies owning single commercial real estate assets admitted to IPSX in the same way and at a comparable cost to shares in companies traded on existing equity stock exchanges.
The aggregate value of the global institutional commercial real estate market is estimated to be in excess of $30 trillion. Institutional investor asset allocation to the market varies by country but is typically low single digit despite the strong yield and capital characteristics of the asset class. In the UK 3% of institutional assets under management are allocated to real estate (Source: Investment Association). Retail investor direct exposure to commercial real estate is negligible.
Commercial real estate owners (institutional, private and corporate) will have access to a new capital markets solution to complement existing private market sale options. An admission on IPSX will provide owners with flexibility to retain a majority economic share in a company owning the commercial real estate asset as opposed to binary “own” or “sell” options as well as greater flexibility as to when to sell.
The flexibility to sell a minority share in a company admitted to IPSX has already generated interest from commercial real estate owners including owner occupiers with strategically important real estate assets held on balance sheet which could offer a release of cash to the core business and improve return on capital.
IPSX will be open to both domestic and international commercial real estate owners, subject to satisfying the admission criteria and rules for the exchange and the FCA.
Subject to regulatory approval being granted, IPSX plans to launch commercially in mid-2016.