Company: Real Estate Analytics LLC
Time in current role: 1 year
Currently reading: “The Power Broker: Robert Moses and the Fall of New York” by Robert A. Caro
Neal Elkin has a track record of enabling investors to protect and expand investments with derivatives trading. The president of Real Estate Analytics LLC (REAL), Elkin recently oversaw the creation of the Moody's/REAL Commercial Property Price Indices, a set of 29 market indicators that track property sale prices.
Moody's Investors Service publishes the indexes monthly using data from New York research firm Real Capital Analytics Inc. Engineered by the MIT Center for Real Estate, the indexes track repeat sales, or how much a sold property has changed in value since the last time it traded.
The Moody's/REAL Indices reflect a collaboration of companies and individuals, but it was Elkin who brought most of them together. “Certainly Neal is central to the whole process and was integral in putting together the team of Real Capital Analytics, MIT and Moody's,” says Tad Philipps, managing director of the CMBS group at Moody's.
The indexes are benchmarks for derivatives, or contracts for payments between investors based on index performance. An investor with a geographic concentration in New York offices, for example, might diversify by swapping returns on a $50 million investment with an investor in the Southeast who is attempting to gain a $50 million exposure to the New York market. Alternatively, an owner of distribution centers worried about a potential dip in the market can sell short against the index so that market-wide losses will be offset by the increased value of the derivative contract.
Options are many, each with inherent risks, so Elkin spends a lot of time educating potential clients. “Our goal is to make sure the real estate principals understand how these indices can help them,” he says. In essence, Elkin is cultivating a clientele for his company, which plans to help investors trade derivatives based on the Moody's/REAL benchmarks and other indices. State Street Bank holds a majority interest in REAL and will provide its clearing platform, intermediation services and other support for the transactions.
Elkin's background is rooted in finance, not real estate. After earning his degree in finance from the University of Virginia in 1987, he spent the next decade immersed in currency trading at JP Morgan, ultimately running that firm's Asia-Pacific currency derivatives team from its Singapore office.
In New York for his remaining seven years at the company, Elkin created fixed-income and currency derivatives based on emerging Asian markets and marketed them to U.S. and Latin American hedge fund investors. He also led the JP Morgan team that created TRAC-X EM, an index based on emerging market credit default swaps.
In 2000, Elkin became the sole outside investor in startup Real Capital Analytics, the brainchild of his college roommate, Bob White. Elkin joined the firm as CFO in 2004 and began developing products using the company's data. Establishing a platform that would enable investors to hedge real estate investments through derivatives became a priority.
“One of the main purposes in bringing in Neal was to bring some of those Wall Street skills to the real estate finance market, in particular indexing and hedging capabilities,” recalls White. “The mission was to create products that would bridge Wall Street and real estate.”
Property derivatives will be an important tool in the commercial real estate investor's repertoire for managing credit risk, says Philipps of Moody's. “Neal is the leader of a cutting-edge firm with a product whose time has come,” he adds. “He's in a very good spot.”