The first property derivative transaction using the Investment Property Databank index could be completed in the next two to three weeks, according to market officials. The structure of the trade could not be determined by press time, but it would likely be a swap on the IPD index, with counterparties exchanging a LIBOR spread and the returns of the index, explained the officials. The IPD index covers 75% of the total property assets of U.K. institutions and listed property companies. The trade is expected to be completed after changes to property derivative tax guidelines, due this month, are published by the Inland Revenue, the U.K. tax authority.
Paul McNamara, director and head of research at Prudential Property Investment Managers, and also chairman of the Property Derivatives Users Association, declined comment on the reported trade, but noted that the publication of the tax guidelines could spur counterparty interest. "It's clear that there are parties waiting to see the published form of the Inland Revenue tax regulations," he said.
Officials suggested Deutsche Bank, working with Eurohypo Real Estate Investment Banking, could be involved in the trade. Ed Stacey, managing director at Eurohypo in London, declined comment.