The ability for mid-weight individual investors to own a share in individual buildings is now much more accessible thanks to the International Property Stock Exchange (IPSX).
But what exactly is it and how will it affect investment into real estate in the UK?
What is the International Property Stock Exchange (IPSX)?
Devised and launched by David Delaney, an ex-banker who has worked at Barclays and Credit Suisse, the IPSX is a new property exchange that lists individual buildings for investors to buy shares directly.
One of the first buildings listed was Birmingham’s iconic The Mailbox, which is a much-loved property housing 46 tenants including the BBC. Owners of The Mailbox raised £25 million from floating on the IPSX after the building was valued at £180 million. Individuals must invest at least £1,000 and to do so can go through a number of recognised stockbrokers.
So, what’s the difference for people who want to invest in commercial property? Until recently, investors would need to buy shares in a Real Estate Investment Trust (REIT) or British Land to invest in commercial property in the UK.
The IPSX instead allows individuals to build up their own selected portfolio of building investments that can be visited in person if they wish. It’s a tangible and immediate way to invest in commercial property.
The potential deals available via the IPSX include 38 properties, including some in the centre of London and a number of sports stadiums.
Linking up the possibilities of commercial real estate with a new pool of investors
Currently, inflation is rising fast in the UK and extremely low interest rates making it less appealing to save money. Property investment is ideal for individuals who would like to maximise their stake, rather than leave it to languish in a savings account.
Delaney told The Evening Standard in an interview that investing in property using the ISPX is ideal for medium risk investors. He also argues that it gives individuals an opportunity to balance their investment portfolios.
The typical client for the ISPX is any individual investor who is interested in commercial property. It essentially opens up a completely different world for investors who have typically only been exposed to residential property. The companies listed on the exchange hold a minimum £50 million value, which is an entirely different ballgame than investing in residential property.
Providing the City of London with a much-needed boost
London as a financial sector is not faring well due to the combination of Brexit and COVID-19. There is no doubt that we need to see changes in the investment sector to ensure that it starts to move again in a positive direction.
Residential property outside of London is currently on an upswing, thanks to the lengthy stamp duty holiday that will end completely in September 2021, low interest rates and consumer demand for bigger properties away from urban centres.
All of these factors are directly due to COVID-19, and while residential property appears to be remarkably resilient, it’s likely to be a bubble that will burst pretty soon. Commercial property, on the other hand, is soaring in some areas with logistics and the industrial sector clamouring for more developments and has been struggling immensely in others.
Extended lockdown measures and an amnesty on landlord payments will level out at some point, and this will see more businesses fold when they can’t make the rent. The upside to this is that there are plenty of developments in the pipeline that plan to utilise city centre space in a different way.
We’ll see more mixed-use commercial and residential properties in urban centres. And now that restrictions in the UK have been lifted (albeit with the Government urging caution), people will begin to flock back to offices in the city centres and move away from remote working as a model.
Investors have access to a huge alternative asset class
A new exchange like IPSX could help to boost London’s financial sector at a time when it’s needed most. The concept of giving investors access to such a huge market that can provide a decent return is going to attract a lot of interest.
Rather than leaving their money languishing in an ISA with little interest, it will absolutely make more sense for many to invest in commercial real estate in this way. It opens commercial property to a totally new wave of investors and gives an opportunity for them to make a steady income.
It works by essentially floating single high-profile properties on the exchange for people to directly invest into. The asset’s owners (and the asset could be a brownfield site that is building a hospital for example, or a commercial office building with a steady rental income), form a holding company. They then float the single asset on the IPSX.
Interested investors then buy shares in that single asset, knowing that they will have access to full transparent reporting on said asset.
The IPSX represents an innovative new exchange for the UK
As the newest regulated exchange in the UK, the IPSX is a transformative opportunity to change the way that assets are held. It could allow private investors a way into an asset class through their pension, dealing account or ISA and allow them a new way to make an income.
As a new source funding and liquidity, it’s no surprise to see that the IPSX is supported by the British Property Federation and many other leading industry players.
There is also an ESG investing focus to IPSX. Right now, the real estate systems around the world generate 40% of the total of CO2 emissions. IPSX is working with Carbon Intelligence to ensure that investors get all of the relevant ESG stats and info for each individual property that is listed on the exchange. The idea is that if each asset isn’t addressing ESG concerns, then shareholders will skip over them, therefore prompting positive change.
Innovative new ways to bridge gaps between investors and alternative asset classes will help London and the UK to recover from the impact of the pandemic.
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