Redemptions seen for 2 housing issues tied to Mutual Benefit.

WASHINGTON - Two multi-family housing bond issues that were thrown into technical default with the failure of Mutual Benefit Life Insurance Co. are expected to be redeemed late this month when the projects funded by the bonds are due to be sold to a real estate investment trust.

The developer of the projects, Dallas-based Trammell Crow Residential Properties, has informed the Maryland Community Development Administration that it intends to sell the projects to the investment trust, Avalon Properties Inc.

The trust is being formed by the Trammell Crow Residential Northeast Group and the Trammell Crow Residential Mid-Atlantic Group to acquire the properties at a price sufficient to pay off bondholders. The purchase would also allow the developer to refinance at a lower interest rate.

The revenue bonds backing the projects were issued by the Maryland Community Development Administration on Dec. 13, 1985, carrying an interest rate of 71/4%.

The administration has consented to the proposal, on the condition that bondholders receive all outstanding and unpaid principal and interest owed on the bonds. That is expected to occur by Nov. 30. Bondholders are expected to receive more specific guidance from the bond trustee, Maryland National Bank, before the end of the month.

In an advisory released, by the administration, officials warn that they are "unable to provide any assurances as to when or whether the transfer of the project to the [trust] will occur or when or whether the bonds will be paid as a consequence of such transfer."

The bonds were issued as $26.815 million of Issue A Chase Ridge revenue bonds and as $18.835 million of Issue B Chase Lea revenue bonds. They were to mature Nov. 1, 2007.

The Chase Ridge bonds were used to make a loan to the developer to acquire and construct the Chase Ridge Apartments in Montgomery County, Md. The Chase Lea bonds funded acquisition and construction of the Chase Lea Apartments in Baltimore County, Md.

The bonds had been guaranteed by Mutual Benefit but fell into technical default when Mutual Benefit was seized by New Jersey regulators in 1991. The bond trustee called the bonds for mandatory redemption on Dec. 13, 1991. But the bonds were never redeemed because the developer was unable to find an alternative credit enhancer. However, the projects financed by the bonds are viable, and bondholders have continued to be paid interest at the original 71/4% rate.

The most recent interest payment was made Monday.

The development administration and project developer had been working on a possible refunding of the bonds. Because the developer is creating the real estate investment trust, those plans have been shelved.

A refunding had been complicated by the fact that Mutual Benefit and a wholly owned subsidiary of the insurer were part owners of the apartment projects.

The insurer currently is undergoing court-supervised liquidation.

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