IPSX is the first and only regulated securities exchange – anywhere in the world – dedicated entirely to real estate. It will be the venue for investors to trade shares in single-asset-owning real estate companies, or multi-asset real estate companies where there is commonality in the assets. For simplicity, we refer in this document to single-asset real estate companies as SARCs. The unique benefits of SARCs are increased transparency and cost efficiency, in contrast to wider-ranging REITs (Real Estate Investment Trusts). IPSX has explicit and robust requirements of issuers as regards initial and ongoing disclosure, as well as transparency and board governance. Investors and issuers will be excited by the new opportunity that IPSX will provide. In short, IPSX reimagines real estate investing.
- The reassurance of a Recognised Investment Exchange: The Financial Conduct Authority (FCA) approved IPSX in January 2019 after a long process that included examination of IPSX’s infrastructure, trading and settlement processes, and outsourced partners.
- Wide appeal: The fractional ownership of ‘quasi-direct property’ through IPSX will attract the widest range of investors, e.g. retail investors will be able to access what is effectively a new asset class. Family offices have a clear preference for direct property ownership. Institutional investors will value the chance not just to consider a wider pool of assets, but also to use SARCS as part of a strategy to improve liquidity in Open Ended Investment Companies (OEICs).
- Secure assets: IPSX quoted companies will own completed, fully-let, long-lease real estate developments, providing a secure income, as well as an opportunity, for capital growth. A minimum of 25% of the shares will be available to new investors, and gearing will be capped at 40% on listing.
- Low operating costs: By focusing on single assets or multiple assets with commonality, SARCs should have very low running costs.
- Low transaction costs and faster completions: Deals in the direct property market can take six months to complete and incur substantial costs (Stamp Duty Land Tax alone can be 5%). IPSX offers investors exposure to proxies for direct property at a fraction of the cost and with completion in a matter of days.
- Investors appreciate focused real estate: While even well-regarded generalist REITs can trade at wide discounts to Net Asset Value (NAV), market appetite for specialist REITs means that their share prices currently trade at a small premium, on average. SARCs will enable investors to take this focus even further.
- Liquidity and low correlation: By bringing to the table investors with differing strategies and time horizons, IPSX should see strong levels of liquidity. We argue that, given the nature of some likely investors on IPSX, SARCs may have even lower correlations to other assets than existing property – another attraction for some investors.
- An attractive venue for issuers: IPSX will generate wide interest among issuers. Just one example illustrates this: we might see generalist REITs ‘spin off’ part ownership of an asset to demonstrate to the market that they deserve a smaller discount to NAV.