UPDATE: Pricing Of $2.2 Billion CMBS Expected Next Week -Source

The first commercial mortgage-backed security of the year, a $2.2 billion deal, is being offered by Deutsche Bank and UBS, according to a person familiar with the matter.

The bond has seven tranches, of which three are AAA-rated. Fitch Ratings and Moody's Investor's Service have rated the bond, which is backed by 47 loans on 83 properties.

The top five property types are retail at 43.7%, office at 39.5%, hospitality at 6.8%, mixed use at 5.9% and multifamily at 1.8%. The top few states represented are Illinois at 16.2%, New York at 16.1%, Ohio at 15.9% and Arizona at 14.2%.

Investor group meetings are being held Monday and Tuesday.

The bond is expected to price early next week.

"The loans look okay," said Paul Norris, head of structured products at Dwight Asset Management Co. LLC in Burlington, Vt., who is looking to buy a part of the deal if the pricing is attractive. "They don't look as good as some previous deals done in 2010, but they are certainly much better than the underwriting we saw in 2007."

Norris said he was concerned more than 20% of the deal is backed by loans from General Growth Properties (GGP) and Tishman Speyer. "The loans from Tishman and GGP seem fine but what makes us nervous is if these guys were to have problems again, how will they react? If the economy were to hit a bump in the road, how will they react?" Norris said.

New commercial mortgage-backed securities deals will be "more prevalent in the coming year and occupy a much greater portion of investors' decision-making time," Citigroup analysts wrote in a recent note.

The firm expects between $30 billion and $40 billion of new issue fixed-rate CMBS in 2011. That is much higher than the 12 deals valued at $9.8 billion that were sold last year. Last year's figures excluded some resecuritizations and the Hilton transaction, the analysts noted.

The new issuance pipeline is "robust" with $11.6 billion of volume projected for the first quarter, the Citigroup analysts wrote.

-By Anusha Shrivastava, Dow Jones Newswires; 212-416-2227; anusha.shrivastava@dowjones.com.

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