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Mortgages on offices, shopping malls and hotels that were based on projections of soaring income during the real estate boom are roiling the bond market.

A $209 million loan made by JPMorgan Chase & Co. to finance the Westin La Paloma Resort & Spa in Tucson and the Westin Hilton Head Island Resort & Spa in South Carolina is near default after cancellations sapped revenue, according to Standard & Poor's. In Southern California, the owner of the Promenade Shops at Dos Lagos missed two payments, according to analysts at Deutsche Bank AG.

Both loans were given to borrowers based on estimates that rents and hotel revenue would rise, and then were packaged with similar debt into a $1.16 billion bond sold by JPMorgan to investors. So-called pro-forma loans outstanding total more than $40 billion, all of which were put into securities, according to Barclays Capital.

Concern that the Westin Portfolio and Promenade debt may be the first of many of those loans to default sent yields on commercial-mortgage-backed securities to record highs relative to benchmark interest rates.

"These kinds of loans written during the height of the real estate boom could be the first to have problems," said Christopher Sullivan, who oversees $1.3 billion as chief investment officer at United Nations Federal Credit Union in New York. "They were underwritten with outlandish expectations on rents and property appreciation that will turn out to be fiction."

In the case of Westin Portfolio, revenue was estimated to increase 13 percent. That never materialized.

Pro-forma loans became a "common phenomenon" in late 2006 through the end of 2007 as property values soared and rents skyrocketed, New York-based Deutsche Bank analysts said in a Nov. 18 report.

The loans allow borrowers to take on more debt on the assumption that they will have higher incomes to pay the interest and principal. Cash reserves are set aside to cover the difference until the income rises to the anticipated level.

"Overly optimistic assumptions were used in connection with a number of property types," said Michael Haas, a partner at law firm Jones Day in Cleveland, who specializes in commercial real estate. "The optimism was consistent with the times. Everybody believed in their numbers."

The stumbles in the commercial-mortgage market echo those seen in residential debt, where loans were made to borrowers based on unrealistic expectations of soaring home prices. The housing market is now going through its worst contraction since the Great Depression as defaults on subprime borrowings reach 35 percent.

Yields on top-rated bonds backed by loans for commercial debt are at a record 15.2 percentage points more than benchmark interest rates, compared with 8.5 percentage points on Nov. 17 and 0.8 percentage points in January, according to Bank of America Corp. data.

The Westin Portfolio and Promenade loans are reflected in indexes linked to commercial debt, causing the cost of buying protection against default on the debt to rise. Credit-default swaps on AAA securities rose 133.5 basis points to 847.5 basis points based on the latest Markit CMBX index contracts, according to administrator Markit Group Ltd. That means it would cost $847,500 in annual premiums to protect $10 million of the debt, or about $619,000 more than on Oct. 31.

The Westin Portfolio and the Promenade Shops loans were among the largest in a commercial-mortgage-bond offering sold by JPMorgan on April 30, Bloomberg data show. Both have missed payments and are being transferred to a so-called special servicer, which takes over a loan when it misses payments, Bloomberg data show.

The Promenade shops, a 345,847-square-foot retail center built in Corona, Calif., with tenants including Banana Republic and Trader Joe's, is suffering from a slump in the surrounding real estate market, Fitch Ratings, the New York-based credit-ratings unit of Fimalac SA, said in a report last week.

Home prices in Southern California fell 33 percent in October from a year earlier, MDA Dataquick said last week.

Cash flow has declined and the borrower, Poag & McEwen, is no longer able to meet monthly debt payments, Fitch said.

"The project is struggling, and it stems from its location, which is the bull's-eye for the mortgage crisis," said Joshua Poag, chief operating officer of Memphis, Tenn.-based Poag & McEwen. "During the past 90 days, sales have gotten worse, and our retailers are struggling. We went back to the lender and are trying to discuss solutions…."

Brian Marchiony, a spokesman for JPMorgan, didn't return calls.

The Westin Portfolio loan, taken out in December by Tucson-based Transwest Partners/NCH Corp., forecast revenue from the resorts would rise to $23.6 million, compared with $20.9 million in 2006 and 2007. The properties were built in the mid-1980s and have 899 rooms combined.

A number of groups canceled reservations, sparking concern the borrowers wouldn't earn enough to make payments, S&P analysts said in a report.

Starwood Hotels & Resorts Worldwide Inc., based in White Plains, N.Y., owns the Westin Hotels and Resorts brand. Representatives of Starwood, Westin and Transwest didn't return calls seeking comment.