US - International Real Estate Securities Exchange Inc. (IRESE) has launched what it describes as the first online real estate-only securities and derivatives exchange.
The exchange launched by the North American firm is designed to offer institutional investors short-term liquidity, real-time pricing, tax efficiency and discretion for making transactions, according to Vlad Krutik, chief executive officer of IRESE.
"With the current economic climate, we all recognise the need for innovation, liquidity and diversification," said Krutik.
"The bottom line is that there are tremendous financial advantages to mortgage bankers and investors that participate in real estate securities exchange through a standardised buy/sell environment, which is regulated by federal and state agencies," he argued.
IRESE is seeking to promote global diversification through its Real Estate Note and Real Estate Contract products, raise liquidity for mortgages in commercial and residential properties and provide insurance for property price declines.
Rossen Valkanov, an associate professor at the Rady School of Management, said: "To date, there is no straightforward way to insure against property price declines and leverage property equity debt-free. But one can construct a position which allows property owners and investors to benefit from changes in the value of the underlying asset, a real estate property."
The system allows investors to apply option contracts to individual real estate properties. Property owners create option listings and set the maximum price per share they will accept from an investor.
IRESE investors can then bid up or down the price per share during the auction. Once the auction has closed, IRESE takes the bids with the highest share and puts them into one contract for the owner and issues Real Estate Option shares to its registered investors.
Harry Markowitz, a US economist, added his endorsement to the development by adding: "IRESE helps property owners insure their properties against the risk of price declines and raise debt-free cash. Investors will have the opportunity to hold a diversified portfolio of real estate investments when they project an opportunity for this asset class."
The Commodity Futures Trading Commission (CFTC) and the Securities Exchange Commission (SEC) are the regulators in charge of overseeing IRESE's marketplace.
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