EUROPE NEWS: Private equity’s IPSX appeal

Property’s first dedicated trading exchange won backing from private equity real estate firm Moorfield Group, last month. Here are four takeaways.

1. How it will work

The International Property Securities Exchange will enable firms to list UK assets and trade shares in the same way as equities and other listed securities. In order to generate revenue, firms that list assets on IPSX will be asked to pay a fee with each individual IPO, followed by a subsequent annual ‘membership fee.’ Once this revenue starts to rack up, IPSX will be in a position to provide returns to its original backers.

2. Benefits for buyers and sellers

For the sellers, there is the choice of a minority sale rather than a binary ownership decision; a market-formed valuation; direct access to the a spectrum of previously inaccessible retail investors; and the offer of ongoing liquidity. For the buyers, there is the opportunity to have a proxy for investing directly in previously inaccessible real estate, and at yields that are greater than those offered by bank savings accounts.

3. Value for firms like Moorfield

Part of the appeal for firms like Moorfield is that private equity real estate businesses have long been searching for new and innovative ways to provide liquidity and the IPSX seems like another answer. Beyond another exit possibility, Moorfield expects a direct return from the investment, albeit one that would not fit the requirements of its funds, hence its outlay came from its balance sheet.

4. Why it is relevant

According to IPSX co-founder Anthony Gahan, real estate as an alternative asset class is reaching a tipping point and deserves its own marketplace. Investor sophistication has also grown dramatically as they increasingly become more comfortable with technology and different methods of investing. Last summer’s run on the UK’s open-ended funds also highlighted the liquidity mismatch in these types of investment vehicles.