Mortgage bonds continue to punish investors

New York

A PROPERTY in New York City that investors were told would be the home of an iconic Apple store has instead wound up stuck in a mortgage bond facing hundreds of millions of dollars in unpaid debt.

Apple never built a store on the 34th Street site and, like much of the bond's remaining US$1.7 billion collateral, not one penny of the principal on its US$100 million mortgage has been repaid.

Wachovia Securities, which sold the commercial mortgage- backed bond (CMBS), long ago went out of business.

A majority of loans left in the deal come due by December, including on 34th Street, and investors are facing potentially big losses if the underlying mortgages default.

The saga of the deal - broken promises and a mountain of debt - is a reminder of how pre-crash securitisations are still punishing many CMBS inve…