JPMorgan Chase & Co. is marketing $1.1 billion of bonds backed by commercial mortgages in the largest sale of the debt this year, according to a person familiar with the offering.
The securities are tied to 30 loans secured by 47 properties, said the person, who declined to be identified because terms aren’t public. The offering marks the seventh sale of newly issued commercial-mortgage backed bonds this year, according to data compiled by Bloomberg.
Wall Street is restarting the market for bonds backed by commercial property loans after issuance plummeted 95 percent to $11.2 billion in 2008 from a record $234 billion in 2007, according to data compiled by Bloomberg. Issuance fell to $3.4 billion of the securities last year, choking off funding to borrowers with maturing debt.
Bankers have responded to investors in the $700 billion market by tweaking the structure and writing more conservative loans. Almost 95 percent of the loans packaged in JPMorgan’s sale will pay principal throughout the loan terms, the person said. In 2007, 87 percent of mortgages sold as securities allowed borrowers to delay principal payments for all or part of the term, according to Morgan Stanley data.
Delinquencies on commercial mortgages bundled and sold as bonds were at 8.28 percent in August, compared with 3.78 percent a year earlier, according to a Sept. 22 report from Morgan Stanley.
In the most recent sale to pool loans from multiple borrowers, a $788.5 million offering from Goldman Sachs Group Inc. last month, holders of top-rated debt were granted power to direct soured loans in a switch from older deals. That right to appoint a specialist to oversee troubled mortgages is retained by the buyer of the riskiest portion in JPMorgan’s offering, the person said.
JPMorgan’s transaction comprises 67 percent retail properties, 15.1 percent in office loans and 10.3 percent industrial loans, said the person. Arizona, Florida and California account for about 44 percent of the pool.
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