Bloomberg News
NEW YORK - Chase Manhattan Corp. is marketing a $700 million sale of commercial mortgage securities over the World Wide Web, a first in the $250 billion market, investors and analysts said.
Investors will be able to access information about the bonds' collateral and structure over the Internet, though they won't be able to place orders or buy them on-line; that will come later for the commercial mortgage market.
Firms, agencies, and municipalities, such as the World Bank, mortgage giant Fannie Mae, Ford Motor Co., and the city of Pittsburgh, have sold bonds over the Web. Information on asset-backed securities has also been available on-line.
Though the on-line marketing effort would be a first in the commercial mortgage sector, the real estate industry is increasingly turning to the Web as a means of speeding and streamlining the slow, paper-intensive lending process.
A multitude of multi-lender Web sites such as Redbricks, Looplender, and Capitalthinking have sprouted in the past year, and many conventional lenders, such as KeyCorp, have set up their own sites to take applications.
The issues in the Chase sale are backed by 91 fixed-rate commercial mortgage loans. GE Capital Corp. and Chase each contributed about half of the loans backing the sale, according to a pre-sale report by Standard & Poor's.
In preliminary pricing information circulated to investors, Chase is aiming to sell $392 million of AAA-rated securities with a maturity of about 10 years at 38 to 41 basis points above the London interbank offered rate, said people familiar with the sale.
The high-end of that range would be 1 basis point below where GMAC Commercial Mortgage Corp. sold similar bonds last week.
The sale's 5-year, $125 million AAA-rated class could be sold at 28 to 31 basis points over Libor, they said.
The bonds are expected to sell Wednesday or Thursday.
Goldman, Sachs & Co. and Salomon Smith Barney Inc. are helping to sell the securities.
Some investors are concerned about the credit quality of the largest borrower in the sale, Cleveland-based Associates Estates Realty Corp., a real estate investment trust. Its loans represent 14% of the pool.
S&P cut Associates' credit rating twice last year, citing the company's rising level of debt.
In June, S&P downgraded $197.5 million of Associates' unsecured notes to BB-minus from BB-plus and $56.3 million of preferred stock to B-minus from B-plus, noting a decision by the company to raise $280 million by taking out mortgages on 23 of its better-performing properties.
In the lower-rated parts of the sale, a $36 million AA-rated part could be sold for 153 to 156 basis points over Treasuries with comparable maturities, and a $33 million A-rated issue could go for 165 to 168 basis points over Treasuries.
In addition, a $10 million A-minus-rated segment could be sold for 175 basis points over Treasuries, a BBB-rated $24 million segment for 210 basis points over Treasuries, and a BBB-minus-rated $10 million class for 255 basis points over Treasuries.
