Grosvenor, the Duke of Westminster's private property company, has carried out the first Italian property derivative transaction based on the IPD Italian Property Index. The two-year test trade was executed with BNP Paribas and brokered by ICAP.
Grosvenor, the Duke of Westminster's private property company, has carried out the first Italian property derivative transaction based on the IPD Italian Property Index. The two-year test trade was executed with BNP Paribas and brokered by ICAP.
The Italian property total return swap follows Grosvenor's trades in Japan on 26 July and in Australia on 21 May 2007. Both were market-firsts which followed trades in the US and UK. 'It is another milestone for the fledgling but rapidly expanding global property derivatives market,' the company said in a statement.
Property derivatives allow investors to rapidly buy or sell synthetic exposure to the real estate market. They also offer an inexpensive way of obtaining the underlying exposure to property, because participants avoid high transaction costs involved in buying and selling property, such as agents' and legal fees. The UK was the first country to achieve a successful property derivatives market, there have been several deals in the US, Germany, France, Australia and Hong Kong.
Nick Scarles, group finance director at Grosvenor Group, said: 'This test trade is another step towards our using property derivatives as a tool to meet our strategic objectives and adjust our economic exposure to real estate between markets. Derivatives allow us to do this quickly, pending adjustment of our underlying physical portfolio. Through our new Milan office we are building our property business in Italy. We will be keeping a close eye on the Italian market, where we believe the potential impact of derivatives could be significant.'
Grosvenor is a privately-owned group of international property development, investment and fund management businesses with total assets under management of £11bn (EUR 15.7 bn) as of 31 December 2006.
