Profile: Radar Logic

Startup launches real estate index




Manhattan-based startup Radar Logic has licensed its real estate data
to three Wall Street firms that will allow investors to bet on which
way residential real estate markets are headed.

Lehman
Brothers Holdings Inc., Merrill Lynch & Co. Inc. and Morgan Stanley
are Radar Logic’s first real estate index customers. They plan to begin
offering derivatives based on Radar Logic’s data in September, says
Radar Logic Chief Executive Officer Michael Michael Feder. Other Wall
Street broker-dealers are expected to sign up shortly, allowing for the
creation of uniform derivatives that can be traded among clients of
different firms.
The derivatives initially will likely take the
form of over-the-counter traded futures contracts and swaps. The swaps
would allow an investor to trade floating-rate interest payments, for
example, to another investor in exchange for cash payments based on a
real estate indices of home prices in 25 metropolitan areas.

Contracts
will likely cover extended periods lasting up to seven years. While
Radar Logic’s indices are not the first on the market — the
S&P/Case Shiller Home Price Indices are used to create a futures
contract tradable on the Chicago Mercantile Exchange — Radar Logic’s
data gets updated every day, as opposed to monthly with Case Shiller,
according to Mr. Feder. Home sale prices are reflected in the index 63
days after sales are closed.

While the derivatives are designed
for institutional investors, the broker-dealers are expected to
eventually create ways for retail investors to play the real estate
market.

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