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BEIJING-Macquarie Bank and Chinese real estate company Dalian Wanda Group plan to sell the first dollar-denominated Chinese commercial property bond in a move that would give investors indirect access to China’s booming real estate sector. The $145-million CMBS will be sold through a joint venture dubbed Dynasty Assets.

The Chinese government was historically reluctant to encourage securitization. But last year China Construction Bank sold the country’s first residential MBS. With that door now open, the Macquarie-Dalian CMBS may provide an alternative means of financing for the Chinese banks at a time when the government is trying to reduce exposure to property.

The advantage of CMBS, says one industry commentator, is that it would take property loans off the balance sheets of the banks. It also gives investors access to property investment without the need to own the assets while offering property owners lower financing costs than in the loan market.

Rents usually make up the bond repayments in a CMBS, so the credit quality of tenants is often more important to CMBS investors than that of the property owners. The nine retail premises involved in the bond sale are located in the mainland Chinese cities of Changsa, Dalian, Harbin, Shenyang, Nanjing, Nanning, Jinan, Tianjin and Wuhan. Tenants are understood to include retailers Wal-Mart and Parkson.

The bond sale will offer investors notes expected to mature in under three years and with ratings of A2 from Moody’s Investors Service and A- from Standard & Poor’s. The spread will be indicated over three-month Libor. Citigroup is the sole book-runner.

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