JPMorgan Chase & Co. on Thursday sold the largest offering of commercial mortgage-backed securities this year as Wall Street seeks to chip away at property debt financed before real estate values plummeted.
The top-ranked 10-year portion yielded 150 basis points, or 1.5 percentage points, more than the benchmark swaps rate, according to a person familiar with the transaction.
That compares with a spread of about 305 basis points on comparable bonds issued before 2008, when underwriting standards were more lenient, JPMorgan Chase data shows.
The market for bonds that bundle commercial property loans is reviving after shutting down two years ago during the financial crisis. JPMorgan Chase's $1.1 billion offering, the seventh sale this year, signals bank willingness to lend to stronger borrowers and investor confidence that landlords can meet monthly payments as the economy recovers, said James Grady, a managing director at Deutsche Asset Management, which has $240 billion of assets under management. "The recent deals have been well received by investors," Grady said. "Ten months ago, the comeback seemed highly unlikely."
JPMorgan Chase estimates $335 billion of property loans packaged into bonds will come due through 2015.
Borrowers are struggling to pay off maturing loans with property values down 41% from October 2007, according to the Moody's/REAL Commercial Property Price index. Delinquencies on commercial mortgages bundled and sold as bonds reached 8.28% in August, compared with 3.78% a year earlier, according to a Sept. 22 report from Morgan Stanley.
