PROPERTY FINANCERS SEEK NEW AVENUES
Britain's 35 billion commercial property investment market is suffering from financial indigestion. But illiquidity breeds innovation. Bankers, investing institutions and property development companies are working to create alternative forms of financing for what has until now been a cosily exclusive market.
Unitization, corporatization, and securitization are the three main avenues for the funding prospectors. Each one would lead to a radical change in the pace and scale of UK property investment trading.
The first envisages a property stockmarket in units of multi-owned buildings and potential turnover there could comfortably dwarf that of the London equity market. Apart from creating an entirely new, world-scale trading market, this approach would break the traditional build-buy-hold equation that has locked all but the larger institutional investors out of the commercial property market, and stuck them with increasingly frustrating, near static, portfolio management policies.
Incorporation enthusiasts see the tax authorities as the main barrier to the subdivision and marketing of high value buildings to broader investment market. And tax lawyers on both sides of the Atlantic will be unveiling their schemes before this summer is out.
But it is the international bond market that looks like achieving the fastest turnround from problem to solution.