'These products are designed to diversify property risk or completely hedge it,' says Lyons spokesman Ian Visser.

Index Swap allows property owners to swap their property exposure for a more diversified portfolio. Lyons will pay the owner the returns emanating from a property unit trust or property unit trust index, while the owner pays Lyons returns emanating from the specific property, alienating risk attached to ownership in exchange for an index that owns property across all commercial property types.

The Mortgage Swap product serves companies that need to raise capital to develop property, but are not keen on the exposure that comes with it. Lyons will assume responsibility for servicing the mortgage, interest rate exposure and capital value volatility, while the owner pays a known market-related notional lease, says Visser.

Business Day