When Clear Point Gardens, a 604-unit apartment complex in Columbus, Ohio, recently changed hands, it produced a nearly 43% gain in 16 months, an amazing windfall for investors in the deal. All 68 of them. The sale of Clear Point, financed with help from investors on CrowdStreet’s online platform, is the latest example of how online syndication is revolutionizing the way deals are financed in the $6 trillion commercial real estate market. Online syndication is opening up potentially lucrative investment opportunities once the province of a privileged few. And deal choice has expanded beyond what even the wealthiest could have only dreamed back when real estate investing was solely a word-of-mouth game confined to the country-club elite. These days, the average investor can explore dozens of deals, from the ground-up development of new office buildings to the acquisition of apartment complexes. Click to read more at www.thestreet.com.
International Property Securities Exchange (IPSX), the first stock exchange dedicated to companies owning and managing commercial real estate (CRE), is set to revolutionise the way CRE is valued, securitised and owned – according to in-depth research by Hardman & Co. IPSX gained regulatory approval from the Financial Conduct Authority to operate as a ‘Recognised Investment Exchange’ in January 2019 and is set to formally launch later this year. A ground-breaking platform, IPSX provides a regulated market for trading shares in management companies which own single buildings or homogeneous discrete portfolios of real estate with commonality – through Single Asset Real-estate Companies (SARCs).
IPSX gained regulatory approval from the Financial Conduct Authority to operate as a ‘Recognised Investment Exchange’ in January 2019 and is set to formally launch later this year. A ground-breaking platform, IPSX provides a regulated market for trading shares in management companies that own single buildings or homogeneous discrete portfolios of real estate with commonality – through Single Asset Real-estate Companies (SARCs).
Hardman & Co analyst Mike Foster argues IPSX will bring numerous improvements to commercial property markets. By focusing on companies holding single assets or multiple assets with commonality, SARCs will have lower operating costs than Real Estate Investment Trusts (REITs). Meanwhile, the SARC itself will own and manage the asset, enabling investors to invest in property quicker than buying the underlying asset directly, as well as at a lower transaction cost. Commonality covers single estates with homogeneous planning use, such as an office park, or a single type of asset – for example hotels – across a broad geography.
Hardman & Co research expects SARCs to attract investors with diverse strategies and time horizons, which means IPSX liquidity is likely to be high. Hardman anticipates a typical IPSX SARC of £300m may trade £230,000 per day on average. Moreover, as these investors will likely run pools of assets dedicated to property, and not comparing against other sectors, this should minimise volatility and lower correlations.
According to the research, the fractional ownership of ‘quasi-direct property’ should attract a wide range of investors – retail investors able to access a new asset class, family offices with a preference for direct property, and institutional investors seeking additional liquidity. It will also benefit landlords and drive cost efficiencies for asset management companies. Investment companies specialising in real estate can also reduce cash drag when raising new equity by temporarily investing in SARCs, while they wait for appropriate direct investments to complete.
The IPSX trading platform will give capital markets real-time share prices for SARCs, which will increase transparency around company valuations. The ability to use SARCs should avoid the marked divergence between share price and net asset value (NAV) that REITs can otherwise experience. This can occur due to lack of transparency around the value of the active management, as well as the fact REITs often conduct operational activities, such as real estate development. However, single asset companies, where valuations are updated in real time, should see minimal discrepancies between share price and NAV.
Mike Foster, analyst at Hardman & Co, says:
“IPSX truly reimagines real estate investing. By increasing transparency and enabling issuers to focus on cost-efficiency, it will appeal to investors and issuers alike. The number of narrowly focused specialist REITs has grown considerably in recent years and IPSX caters to this demand for tightly defined asset-class investing.”
IPSX head of capital markets Roger Clarke adds:
“IPSX will usher in the democratisation of real assets. As a regulated exchange, investors will have the comfort of duly mandated processes for publication of information. This transparency around valuation and risk will provide more focused data than is the case for the wide range of assets in traditional REITs.
“IPSX encourages the broadest possible investor universe to participate in the real estate sector. IPSX companies are structured to provide a more direct connection between owners and assets, while providing liquidity and protections on a regulated exchange.”
What is an UPREIT? – A common operating structure for publicly traded equity REITs is the umbrella partnership real estate investment trust (“UPREIT”) structure. In a typical UPREIT structure, the REIT holds substantially all of its assets, and conducts substantially all of its operations, through a single operating partnership subsidiary (the “Operating Partnership”). In most cases, the REIT or a wholly owned subsidiary of the REIT serves as the sole general partner of the Operating Partnership and, as a result, the REIT has the exclusive power and authority to manage the Operating Partnership’s business, subject to certain limited rights maintained by holders of units of limited partnership interest (“OP Units”) in the Operating Partnership pursuant to the partnership agreement of the Operating Partnership (the “Partnership Agreement”). Click to read more at www.jdsupra.com.
The buzz in the commercial real estate industry for the past 18 months has centered around the coworking space occupancy model. Coworking companies are leasing space at a fast pace, and coworking services are providing tenants with alternatives to offer space to employees. While coworking occupancy only represents a small portion of the combined office inventory across leading markets (1 to 2 percent), according to a recent report by Colliers International, flexible workspace accounted for 52.9 percent of inventory growth in Manhattan and 28.3 percent in other major U.S. markets from 2016 through 2Q2018. Still, nearly all coworking activity revolves around urban centers. Outside large urban markets – which notably have a high concentration of technology companies – will coworking be a factor? Click to read more at www.ccim.com.
According to a new report from CBRE, the growth of online grocery sales has the U.S. market for cold-storage warehouses poised for strong growth, potentially creating demand for up to 100 million sq. ft. of industrial cold-storage space over the next five years. That forecast stems from a projection by the Food Marketing Institute and Nielsen that groceries ordered online will account for 13% of total grocery sales by 2022, up from 3 percent in 2018. Such growth would amount to an additional $100 billion in annual grocery sales conducted online. This outlook portends significant changes for the industrial cold-storage industry, which at 3.6 billion cubic feet (an estimated 214 million sq. ft.) currently accounts for a tiny portion of U.S. industrial-and-logistics real estate overall. Click to read more at www.worldpropertyjournal.com.
River frontage. Incredible access. Dynamic area. Unlimited opportunity. It’s rare to find those attributes in a single property, but 530 Steves Ave. in San Antonio boasts all of them. “It is a ready-to-go development site that will
accommodate any number of uses, depending on what the developer wants to do,” says Steves Rosser, senior vice president at DH Realty Partners, the largest locally owned commercial real estate firm in the city. But, wait. Steves Rosser is representing a property on Steves Ave.? “It’s not my road, no, I don’t own it,” Rosser laughs. “I do have family ties that date well back in San Antonio’s history and that street is named for them. The Steves homestead can be found in the King William neighborhood. It was built by my great-great-grandparents and is now a living history museum.” Click to read more at www.rednews.com.