JPMorgan Said to Sell CMBS Backed by 7 World Trade Center Debt

Larry Silverstein
Larry Silverstein, president and chief executive officer of Silverstein Properties Inc. Photographer: Peter Foley/Bloomberg

March 22 (Bloomberg) -- JPMorgan Chase & Co. sold $125 million of securities linked to developer Larry Silverstein’s 7 World Trade Center in New York, refinancing debt against the building.

The commercial-mortgage bonds rated Baa3 by Moody’s Investors Service and BBB- by Fitch Ratings, the lowest investment-grade rankings, priced to yield 310 basis points more than the benchmark swap rate, according to a person familiar with the offering, who declined to be identified because terms aren’t public. The refinancing also includes $452.8 million of senior tax-exempt Liberty bonds that were not offered with today’s transaction, the person said.

The CMBS deal comprises debt against the 52-story tower in downtown Manhattan constructed in 2006, according to Moody’s. The property is 95.2 percent leased to 28 tenants, the rating company said in a report. The largest tenant is Moody’s, accounting for 38.7 of the available space, according to Fitch.

The tower was built to replace a building destroyed in the Sept. 11, 2001, terrorist attacks.

The offering is different from more common commercial-mortgage backed securities deals in that it is less diversified than those that bundle loans from multiple borrowers on as many as 100 properties.

Bank forecasts for commercial-mortgage bond sales in 2012 range from Wells Fargo & Co.’s $25 billion to Credit Suisse Group AG’s projection of as much as $45 billion. About $4 billion has been issued this year, according to data compiled by Bloomberg.

CMBS Sales

Wall Street banks arranged about $28 billion of commercial-mortgage backed securities last year, compared with $11.5 billion in 2010. Rising sales are a boon for property owners with loans coming due. Borrowers have $51 billion of mortgages packed into bonds maturing this year, according to Bank of America Merrill Lynch data.

Relative yields on top-ranked commercial-mortgage bonds have plunged to 181 basis points more than Treasuries, the lowest since May, according to the Barclays Capital CMBS Aaa Super Duper Index. That’s down from a high of 323 basis points on Oct. 4, at the height of the European sovereign-debt crisis. A basis point is 0.01 percentage point.

To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net