JPMorgan Chase & Co. is marketing commercial mortgage bonds worth $716.3 million.
The bond, which will be the second highest commercial-mortgage backed bonds to be sold in 2010, comprises 36 loans on 96 properties, according to a source familiar with the transaction, but who declined to be identified.
The sales of commercial-mortgage backed securities stopped in 2008 because of the credit markets crash, freezing out funding to property borrowers. According to a compiled data, only $3.04 billion of the debt was issued in 2009 even with the government’s help, compared with $11.2 billion in 2008 and $232.4 billion in 2007. The Royal Bank of Scotland sold bonds in April worth $309.7 million, and during the peak, sales grew to as much as $7.6 billion.
The declining values of property made it hard for borrowers to secure enough fund to retire maturing debt, with prices dropping 42 percent from the October 2007 boom, according to Moody’s Investors Service. About 7.02 percent of the total borrowers were behind in payment, compared with only 1.87 percent in the previous year.
The offering of JPMorgan consists of loans equal to 61.5 percent of the average values of the properties. Borrowers were able to take out loans equal to a property value of about 69.1 percent in 2007, according to data compiled by Jefferies Group Inc.
Currently, the ratio “doesn’t seem all that much lower, but the difference is today’s valuations,” said Lisa Pendergast, an analyst from Jefferies Group in Connecticut. “Property values are no longer being driven by overly optimistic expectations on cash flow and cheap and plentiful sources of capital.”