Shaken & stirred: the investment management market
“Start to imagine how real estate investment management would work in a perfect world. We now have the technology to facilitate this perfect world for everyone,” said Anthony Gahan, Founder of IPSX, the first regulated stock exchange dedicated to trading shares in real estate.
Gahan was speaking at the panel session on Investment & Innovation at MIPIM earlier this year. Also on the panel were: Iri Amirav, CRO & Co-Founder, Skyline AI; Guillaume Fiastre, Managing Director – France, Altus Group; Steve Sillam, CEO & Founder, Leaseum Services; and moderator Simon Hughes, Chief Strategy Officer, Liquid Real Estate Innovation.
How is technology turning the world of real estate investment upside down?
Globalisation and disintermediation
“The first big wave in the world of real estate is the globalisation of every client we work with, and every single activity,” said Guillaume Fiastre of Altus Group, the Canadian-headquartered software, data and technology-enabled services group. “There is a race for size, and this profoundly changes the way the industry is being operated.”
“Technology is leading to the disintermediation of the industry, which in turn is bringing more liquidity and more transparency … Big, big change is coming up” – Guillaume Fiastre, Altus Group
“Technology is the second wave. This is leading to the disintermediation of the industry, which in turn is bringing more liquidity, more transparency, as well as changing the structure of the real estate industry – the relationship between landlord and tenant, tenant and occupier, and landlord and investor. Big, big change is coming up,” said Fiastre of Altus Group, which released its latest Altus Group CRE Innovation Report in September.
IPSX: opening the channel for a new type of investor
“IPSX is about reaching new investors, and making them feel comfortable,” said Gahan about the London-based real estate stock exchange, which expects to carry out its first IPOs in early 2020. “We have looked to solve the issue of trust by providing a regulated market, like Deutsche Börse or Nasdaq.”
“The benefits of IPSX for owners and investors are flexibility, liquidity, speed of execution and real-time valuation” – Anthony Gahan, IPSX
Together with transparency, the benefits of IPSX for owners and investors are flexibility, liquidity, speed of execution and real-time valuation. With an estimated £30bn of commercial real estate transactions over £50m each year in the UK, IPSX has its sights on a 20% market share.
“This creates a new real estate product, and extends the world of real estate into a new investor group” – Gahan
“Historically real estate has been a binary option: ownership or no ownership. This is now changing,” said Gahan. “Institutions are wanting a bit of that building and this building, and to mix this up with some of that building; all on a global basis and they want to execute the transaction instantaneously with data available to help them do that. This creates a new real estate product, and extends the world of real estate into a new investor group.”
This December, MIPIM World Blog caught up with David Delaney, Group Chief Executive, IPSX, following the announcement by M&G Property Portfolio that it was closing the door on investor withdrawals.
“IPSX will provide investors the opportunity to gain access to the attractive income characteristics of real estate” – David Delaney, IPSX
“Shares issued by companies on IPSX are fundamentally different to units issued by open-ended funds,” said Delaney.
“Investors will be able to buy or sell shares though market makers quoting two-way prices during every trading day that the exchange is open. IPSX will provide investors with the opportunity to gain access to the attractive income characteristics of real estate without gating ever applying to the trading of equity shares on IPSX’s regulated market.”
The power of AI for investment management
At the MIPIM panel session on Investment & Innovation, Iri Amirav of Skyline AI said: “In the last 10 years, all you needed to do to make money in real estate, especially in the US, was to invest. But the next ten years are going to be very different; they are going to be highly competitive. What we’re seeing is that data will drive the edge, and the larger you are, the more edge you will need.
“Data will drive the edge, and the larger you are, the more edge you will need” – Iri Amirav, Skyline AI
Skyline AI has built a platform to track multifamily asset-class properties in the US using over 10,000 unique data points from over 200 unique data sources. The company then applies AI modelling to solve business ‘applications’ for partners, who include DWS asset managers and JLL.
“We are moving away from being a technology company to become a full-blown real estate technology company … the new generation of real estate company” – Amirav
“We see licensing the data as a capped opportunity. Instead, we are partnering with some of the world’s top global real estate players to establish investment vehicles augmented by AI,” said Amirav. “We are moving away from being a technology company to become a full-blown real estate technology company … the new generation of real estate company.”
“I can provide a partner with a list of properties with a one-in-three possibility that their acquisition team can knock on the door and acquire the asset off-market, and at a better price. That is valuable” – Amirav
These applications include Skyline AI models that list properties likely to be put on the market over the next 12 months, often before the seller has even decided to sell. “I can provide a partner with a list of properties with a one-in-three possibility that their acquisition team can knock on the door and acquire the asset off-market, and at a better price. That is valuable,” adds Amirav.
The challenge of data for investment management
“Data is a huge challenge, as there are so many data sources; and on a granular level these sources can be conflicting and confusing,” continues Amirav, whose company has offices in New York City and Tel Aviv.
“Once you have the data, if you can validate it, then that’s gold” – Amirav
“We take data from five or six sources. Many of the R&D people at Skyline are ex-intelligence officers from the Israel Defence Forces, who are experts at obtaining extremely difficult to obtain information. “Once you have that data, if you can validate it, then that’s gold.”
Facing up to the data risk
“When we talk about risk management,” said Guillaume Fiastre of Altus Group, the Canadian-headquartered software, data and technology-enabled services group. “It’s not only operational risk or capital risk, it’s also data risk. We are starting to see a ramp-up of the cloudification of data, but there still are many institutions where the cloud is scary, and a security issue is still there.”
“We are starting to see a ramp-up of the cloudification of data, but there still are many institutions where the cloud is scary, and a security issue is still there” – Fiastre
Catching up with Fiastre following Google’s launch of Anthos this summer, he added: “Public clouds invest massive amounts of money in security. Google’s Anthos will go even further in reducing risk by allowing clients to move data seamlessly from one operator to another, or between geographies when potentially damaging events occur or new threats appear.
“All these functions help the cloudification of data, by improving centralisation and accessibility to information, and finally by improving liquidity.”
Finding the right applications for blockchain
Blockchain may not be the panacea it was once thought to be, but in certain areas the benefits are multifarious. “You can’t mix any type of activity with blockchain and it instantly becomes amazing,” said Steve Sillam of London-based Leaseum Services, which offers a platform that digitises investments on the blockchain.
“You can’t mix any type of activity with blockchain and it instantly becomes amazing” – Steve Sillam, Leaseum Services
Leaseum Services works with New Chetrit’s venture Leaseum Partners, which is launching one of the world’s first tokenised REITs, raising US$250m to invest in offices and multifamily in New York City.
“Our platform allows fund managers and property owners who have tokenised their assets to not only reduce paperwork and admin costs, but to track the full ownership of their assets,” said Sillam.
“Blockchain brings more transparency, but more than anything it brings greater efficiency” – Sillam
“Blockchain brings more transparency, but more than anything it brings greater efficiency,” said Sillam. Not only does blockchain lower the cost of raising funds; it also bypasses the need for intermediaries, especially in regard to fundraising and compliant secondary trading.
About how to approach the adoption of blockchain, Sillam explained: “You need to find an application that’s relevant and then to start educating people. It’s going to take a few years for everyone to understand the right applications for blockchain technology.”
Technology brings liquidity
Fiastre of Altus Group said: “The more institutional money is flowing into real estate; the more investors are seeking liquidity. Historically, the world of real estate has been hampered by trying to have liquid capital and equity, when by definition it is an illiquid asset.”
“The more institutional money in real estate; the more investors are seeking liquidity” – Fiastre
Altus Group is looking to improve the liquidity of assets through more transparent, standardised and globalised information about the asset and its value. IPSX, meanwhile, is changing the asset into a share, so the share can be traded and bought by any type of investor.
“You want to broaden the universe of people who can hold shares, and then be able to sell quickly” – Gahan
Gahan adds: “That’s the important thing: you want to broaden the universe of people who can hold shares, and then be able to sell quickly, and for us that is what operating in a regulated market brings.”
TOP PHOTO: Skyline AI – Founders