Lutnick: Three large banks backing BGC’s real estate derivatives platform

At Shack conference, brokerage announces it will unveil new product in 2013

Howard Lutnick
Howard Lutnick

BGC Partners plans to roll out its real estate derivative platform next year with the backing of three large banks, the firm’s CEO Howard Lutnick said at a real estate panel this morning in Midtown.

BGC owns the Midtown-based real estate brokerage Newmark Grubb Knight Frank, and Lutnick first suggested in 2011 that the company would offer a hedge against office leases in the form of a derivative.

Real estate derivates provide tenants or landlords a type of insurance against rising or falling rents, but have proven difficult to implement. Many real estate brokers are skeptical about the idea, but other industry insiders believe it will eventually take hold.

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Today, at New York University Schack Institute of Real Estate’s conference on capital markets in real estate, Lutnick provided additional specifics about the plan’s timing, as well as saying he had the necessary financial support from large banks. “We are going to roll it out… in 2013,” Lutnick said, adding, “three banks have agreed to back us.”

He would not say in which quarter he expected the first derivatives to be rolled into a lease, and would not identify which banks BCG was working with.

The derivatives will not be easily tradable financials contracts, he said, but instead will be custom negotiations tied to individual leases with a landlord or tenant on one side of the deal, and a bank taking the other side.

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