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Thursday, 06 April 2017

Synthetic Securities Launched to Provide Hedge for Property Price Changes

Global Index Group, which creates index-based synthetic financial products, has developed a pair of securities that would allow institutional investors to take a long or short position on changes in commercial property values. While they're not the first attempt to provide the industry with a synthetic way of getting access to the sector, they're unique in that they eliminate the counterparty risk all previous efforts faced.

Commercial Real Estate Direct Staff Report

Global Index Group, which creates index-based synthetic financial products, has developed a pair of securities that would allow institutional investors to take a long or short position on changes in commercial property values.

The securities, Down/Up Equity Trust Securities, or more simply duETS, will be issued in pairs and sold exclusively through CBRE Capital Advisors, the investment-banking arm of brokerage giant CBRE Group.

They track changes in the capital-appreciation component of the NCREIF Property Index, or NPI. The index, widely used among institutional investors, tracks both changes in income, as well as value in a basket of some 7,400 properties with a market value of more than $525 billion.

The duETS strip out the income component of the index, so investors can make bets solely on which direction they expect property prices will move.  As their names imply, the Up securities track upward movements and the Down, downward movements. The first series will track prices over a two-year period starting at the end of 2016 and running through 2018, when the securities would be valued based on the index' performance. Gains on one would be offset by losses on the other. Later series would track values over subsequent two-year periods.

During their life, the securities would trade like other securities, with their values fluctuating based on changes in the underlying index and demand. CBRE, which will handle such trades, providing liquidity and pricing, has specialized in arranging secondary market trades of interests in...





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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2016
Investment Bank #Deals Vol$mln MktShr%
JPMorgan Securities 14.94 10,350.16 15.14
Deutsche Bank 14.21 9,926.60 14.52
Wells Fargo Securities 13.36 9,513.96 13.92
Citigroup 10.87 8,061.79 11.80
Goldman Sachs 10.05 7,563.72 11.07

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2016
Lender #Loans Vol$mln MktShr%
JPMorgan Chase Bank 133.67 8,670.33 13.34
Goldman Sachs 156.20 7,418.37 11.41
Deutsche Bank 178.17 6,510.75 10.02
Citigroup 184.41 5,512.20 8.48
Morgan Stanley 113.18 4,130.53 6.35

 

 

 

REITCafe

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