Real Property Securitisation is a phrase that is widely used to describe the process of transforming direct ownership of real property, such as land and buildings, into indirect ownership through the investment in marketable securities, while preserving for the investor the benefits of income and revenues generated from the operation and sale of such real property.
Real property securitisation, compared to direct investment in real property, has the following characteristics:
- Liquidity (conversion to cash) is enhanced, since the interest which investors hold is in the form of negotiable securities;
- Securitisation is a structure under which a series of small funds can be collected from multiple investors resulting in a large overall investment;
- Since management of the subject properties is delegated to experts, investors do not have to be involved in property management;
- By delegating property management to experts and by making use of financial techniques to structure the securitisation, risks should be decreased to some degree;
- Some of the above benefits are off-set by the costs, expenses and fees associated with the establishment of real-property-securitised products.