The first IPO on IPSX
The International Property Exchange (IPSX) is regulated by the Financial Conduct Authority (FCA) as a recognised investment exchange. It is the world’s first regulated stock exchange dedicated to the initial public offering and secondary market trading of companies owning single institutional grade real estate assets and multiple assets with commonality.
IPSX operates two markets. IPSX Prime, admits to trading issuers owning underlying single commercial real estate assets or multiple assets which are, or proposed to be, securitised and traded on the exchange. The second market, IPSX Wholesale, is exclusively for professional commercial real estate investors and has been designed to provide real estate owners with a UK market that is capable of accepting a variety of different corporate structures within a flexible regulatory environment, including JV REITs.
On 14 May 2021 Mailbox REIT plc (Mailbox) became the first company to carry out an Initial Public Offering (IPO) on IPSX. Mailbox raised £25.85 million and its shares were admitted to trading on IPSX Wholesale on 14 May with an initial market capitalisation of £84.85 million. Mailbox is the ultimate holding company of a group which owns an office-led mixed-use asset located in central Birmingham which has several uses including office, car parking, leisure and retail.
The requirements for floating
IPSX Prime enables prospective issuers to bring to market an IPO of shares in companies which own underlying property assets. For example, a commercial office block that occupies a single geographic location or postal address; or comprises a single building or a group of co-located buildings.
The key elements of an IPSX Prime listing are as follows:
- IPSX expects that an underlying property asset should be of institutional grade (i.e. each property will generally have a market value in excess of £50 million)
- The company will have to appoint: an IPSX lead adviser to support and manage the IPO process; an IPSX approved valuer; and an IPSX market maker
- The company will have to sell down a minimum 25% of the underlying company’s shares at the point of admission
- The company will have to limit the leverage in the listed entity to 40%
- The company will have to have audited accounts
- The company will have to issue a prospectus which will need to be approved by the FCA
IPSX Wholesale has been designed for real estate owners holding commercial real estate in structures which may be more complex than the structures employed by issuers which are suitable for admission to IPSX Prime, and therefore investment in IPSX Wholesale companies will be available to institutional investors only. There is no prescribed minimum “free float” on IPSX Wholesale, in contrast to IPSX Prime. The types of issuer could include more complex ownership structures, more complex legal arrangements, different leverage ratios (potentially impacting on returns), more unusual tenancy arrangements or tenancy covenants, and potentially issuers of commercial real estate companies where the assets are under development rather than fully established operating companies, i.e. property companies and investment companies.
IPSX Wholesale is not a regulated market but is what is known as a “multilateral trading facility”. It is therefore expected that IPSX Wholesale will provide a platform for newly established issuers, or companies new to UK public markets, to trade on a public market in a controlled way. Issuers can become accustomed to public market disciplines, such as the initial and ongoing disclosure regime and the Market Abuse regime and build their confidence in being admitted to a public market. Issuers can also build their public market ‘track record’ which will make them more attractive to third party investors. Whilst not required, it is envisaged that once such issuers become comfortable with their obligations as a publicly traded company, they will look to expand their shareholder base and increase their free float. They may do this through IPSX Wholesale or may look to migrate to a regulated market, such as IPSX Prime.
Fladgate is recognised for its extensive expertise in both the capital market and real estate sectors. We have acted for companies on the Official List, AIM and Aquis. We have advised on both the capital markets aspects of REITs and the day to day property and other operational issues of REITs. Our clients comment on both our experience and the practical way in which we apply our experience to help our clients to achieve their commercial objectives.
If you have any comments about IPSX and its relevance to you, please contact Nigel Gordon, Matt Williams or your usual contact at Fladgate.