<PAGE> 1

                 SECURITIES AND EXCHANGE COMMISSION
                                  
                       WASHINGTON, D.C. 20549
                                  
                              FORM 10-K
                                  
          Annual Report Pursuant to Section 13 or 15(d) of
                                  
                 The Securities Exchange Act of 1934
                                  
 For the fiscal year ended                     Commission file
     December 31, 1996                           number 1-12151

                 CHASE PREFERRED CAPITAL CORPORATION
       (Exact name of registrant as specified in its charter)

                DELAWARE                            13-3899576
     (State or other jurisdiction of              (I.R.S. Employer
     incorporation or organization)            Identification No.)

     270 Park Avenue, New York, N.Y.                       10017
(Address of principal executive offices)               (Zip Code)

   Registrant's telephone number, including area code: (212) 270-6000

          Securities registered pursuant to Section 12(b) of the Act:


                                            Name of Each Exchange on
           Title of Each Class               which Registered
           -------------------------         ------------------------

8.10% Cumulative Preferred Stock,
 Series A (Par Value --$25 Per Share)   New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act: None

Number of Shares of Common Stock outstanding on December 31, 1996:
572,500

         Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes   [X]    No [  ]

         Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

All shares of Common Stock were held by The Chase Manhattan Bank at 
December 31, 1996; therefore, no Common Stock is held by non-affiliates.


     Documents incorporated by reference          Part of Form 10-K
          in this Form 10-K                      which incorporated
------------------------------------------------- -------------------
     None                                               -



<PAGE> 2
FORM 10-K
<TABLE>
<CAPTION>
<S>                                               <C>
PART I                                            PAGE
----------                                   ----------
Item 1    Business............................      1
Item 2    Properties..........................      3
Item 3    Legal Proceedings...................      3
Item 4    Submission of Matters to a Vote
of Security Holders...........................      3

Part II
---------
Item 5    Market for Registrant's Common
Equity and Related Stockholder Matters........      3
Item 6    Selected Financial Data.............      5
Item 7    Management's Discussion and Analysis of
Financial Condition and Results of
Operations....................................      6

Item 8    Financial Statements and Supplementary
Data..........................................     11
Item 9    Changes in and Disagreements with
 Accountants on Accounting and Financial
Disclosure....................................     20

Part III
----------
Item 10   Directors and Executive Officers
 of the Corporation...........................     20
Item 11   Executive Compensation..............     21
Item 12   Security Ownership of Certain
Beneficial Owners and Management..............     21
Item 13   Certain Relationships and Related
Transactions..................................     21

Part IV
----------
Item 14   Exhibits, Financial Statement Schedules
 and Reports on Form 8-K......................     22
</TABLE>
<PAGE> 3
ITEM 1: BUSINESS

Chase Preferred Capital Corporation (the "Company") is a Delaware
corporation incorporated on June 28, 1996 and created for the purpose
of  acquiring, holding and managing mortgage assets. The Company is
a wholly-owned subsidiary of The Chase Manhattan Bank (the "Bank"), a
banking  corporation organized under the laws of  the  State  of  New
York.

On  September  18,  1996, the Company commenced its  operations  upon
consummation  of an initial public offering of 22,000,000  shares  of
the  Company's 8.10% Cumulative Preferred Stock, Series A ,  $25  par
value  per share (the "Series A Preferred Shares"), and the  sale  to
the  Bank  of 572,500 shares of the Company's Common Stock, $300  par
value  per share ("Common Stock"). These offerings raised net  capital
of  $1,103,386,000. All shares of Common Stock are held by the
Bank.  The Series A Preferred Shares are traded on the New York Stock
Exchange.
     
The  Company used the proceeds raised from the public offering of the
Series A Preferred Shares and the sale of Common Stock to the Bank to
pay  expenses incurred during the offering and the formation  of  the
Company  and  to  purchase from the Bank the Company's  portfolio  of
residential and commercial mortgage loans ("Mortgage Loans") at their
estimated  fair  values.  The Mortgage Loans  were  recorded  in  the
accompanying financial statements at the Bank's historical cost basis
which approximates their estimated fair values.

The  Company's principal business objective is to acquire,  hold  and
manage   mortgage  loans  that  will  generate   net   income   for
distribution to stockholders. The Company currently  anticipates
that   it  will  maintain  approximately 90% of its mortgage loan  
portfolio  in residential mortgage loans  and approximately 10% of 
its portfolio in commercial mortgage loans.  Residential mortgage loans 
consist of Six-Month  Prime Rate Adjustable Rate Mortgages ("ARMs"); 
Six-Month Treasury ARMs; One-Year ARMs; Three-Year, Five-Year, Seven-Year 
and Ten-Year Fixed Rate Loans with an automatic conversion to One-Year ARMs; 
and Fixed Rate Loans.   The commercial mortgage loans consist of Fixed and  
Variable Rate  loans, a majority of which have balloon payments.  The
Company  currently anticipates that it will continue to  acquire  all
its Mortgage Loans from the Bank, or affiliates of the Bank, as whole
loans  secured  by first mortgages or deeds of trust on single-family
(one   to  four-unit)  residential  real  estate  properties  or   on
commercial  real  estate properties on terms that  are  substantially
identical  to  those that could be obtained by the  Company  if  such
additional   mortgage  loans  were  purchased  from   third   parties
unaffiliated  with the Company. The Company may also  from  time  to
time  acquire  securities that qualify as real  estate  assets  under
Section  856(c)(6)(B)  of  the Internal Revenue  Code  of  1986  (the
"Code") that are rated by at least one nationally independent  rating
organization and that represent interests in or obligations backed by
pools  of  mortgage  loans ("Mortgage-Backed  Securities").  Mortgage
loans  underlying the Mortgaged-Backed Securities will be secured  by
single-family  residential, multifamily  or  commercial  real  estate
properties located in the United States.

In  order  to  preserve its status as a real estate investment  trust
("REIT")  under  the  Code, the Company must distribute  annually  at
least  95% of its "REIT taxable income" (excluding capital gains)  to
stockholders  and  meet certain capital ownership and  administrative
tests as defined by the Code.  The Company must also annually satisfy
three gross income requirements. First, at least 75% of the Company's
gross  income  (excluding gross income from prohibited  transactions)
for  each  taxable year must be derived directly or  indirectly  from
investments  relating to real property or mortgages on real  property
(as  interest  on obligations secured by mortgages on real  property,
certain "rents from real property" or as gain on the sale or exchange
of  such property and certain fees with respect to agreements to make
or   acquire  mortgage  loans),  from  certain  types  of   temporary
investments or certain other types of gross income. Second, at  least
95%  of  the  Company's  gross income (excluding  gross  income  from
prohibited  transactions) for each taxable year must be derived  from
such  real  property  investments as aforesaid  and  from  dividends,
interest,  and gain from the sale or other disposition  of  stock  or
securities  and  certain other types of gross  income  (or  from  any
combination of the foregoing). Third, short-term gain from  the  sale
or  other  disposition of stock or securities, gain  from  prohibited
transactions,  and  gain  on the sale or other  disposition  of  real
property  held  for  less   than four years (apart  from  involuntary
conversions  and  sales of foreclosure property)  from  the  date  of
acquisition  must  represent less than 30%  of  the  Company's  gross
income (including gross income from prohibited transactions) for each
taxable  year. The Company must also satisfy three tests relating  to
the  nature of its assets at the close of each quarter of its taxable
year.  First, at least 75% of the value of the Company's total assets
must  be  represented by real estate assets (including stock or debt
instruments held for not more than one year that were purchased with the


                                 -1-

<PAGE> 4
proceeds of a stock offering or long-term (at least five years)  debt
offering   of   the  Company),  cash,  cash  items,  and   government
securities.  Second, not more than 25% of the Company's total  assets
may  be  represented by securities other than those in the 75%  asset
class. Third, of the investments included in the 25% asset class, the
value  of  any one issuer's securities owned by the Company  may  not
exceed  5% of the value of the Company's total assets and the Company
may  not  own  more  than 10% of any one issuer's outstanding  voting
securities.

The  Company does not anticipate that it will engage in the  business
of  originating Mortgages Loans and does not expect to  compete  with
mortgage conduit programs, investment banking firms, savings and loan
associations, banks, thrift and loan associations, finance companies,
mortgage  bankers  or insurance companies in acquiring  its  Mortgage
Loans.   As  noted above, the Company anticipates that  all  Mortgage
Loans purchased by it, in addition to those in the initial Portfolio,
will be purchased from the Bank or affiliates of the Bank.

The  Company  has entered into an Advisory Agreement  (the  "Advisory
Agreement")  with  the  Bank (the "Advisor").  In  administering  the
Company's  Mortgage Loans, the Advisor has a high degree of autonomy.
The  Board  of  Directors, however, has adopted certain  policies  to
guide  the administration of the Company and the Advisor with respect
to  the  acquisition and disposition of assets, use  of  capital  and
leverage, credit risk management and certain other activities.  These
policies  may  be  amended  or revised  from  time  to  time  at  the
discretion  of  the  Board  of Directors  (in  certain  circumstances
subject  to the approval of a  majority of the Independent Directors)
without  a  vote of the Company's stockholders, including holders  of
the Series A Preferred Shares.

The  Mortgage Loans have been sold to the Company by the  Bank  on  a
servicing  retained  basis.  The Bank  services  the  Mortgage  Loans
pursuant  to the terms of the servicing agreements that  have  been
entered  into  as of September 18, 1996 between the Company  and  the
Bank.  (The  Bank  in its role as servicer under the  terms  of  the
servicing agreements is herein referred to as the "Servicer").  The
Servicer  receives  an  annual servicing fee  with  respect  to  each
Mortgage  Loan  serviced  for  the  Company  which  (i)  equals   the
outstanding   principal   balance  of  residential   mortgage   loans
multiplied by a fee of .25% and (ii) equals the outstanding principal
balance of commercial mortgage loans multiplied by a fee ranging from
 .08% to .30%, depending upon the outstanding principal amount of such
commercial mortgage loan.

The  Company intends to operate in a manner that will not subject  it
to  regulation under the Investment Company Act of 1940.  The Company
does not intend to (i) invest in the securities of other issuers  for
the  purpose of exercising control over such issuers, (ii) underwrite
securities of other issuers, (iii) actively trade in loans  or  other
investments,  (iv) offer securities in exchange for property  or  (v)
make loans to third parties, including, without limitation, officers,
directors or other affiliates of the Company.  The Company may, under
certain  circumstances, purchase the Series A  Preferred  Shares  and
other  shares  of its capital stock in the open market or  otherwise,
provided, however, that the Company will not redeem or repurchase any
shares  of  its  Common Stock for so long as any Series  A  Preferred
Shares are outstanding without the approval of a majority

                                 -2-

<PAGE> 5
of  the  Independent  Directors (as defined  in  the  Certificate  of
Designation relating to the Series A Preferred Shares).  The  Company
has  no  present  intention of causing the Company to repurchase  any
shares of its capital stock, and any such action would be taken  only
in  conformity with applicable federal and state laws and regulations
and the requirements for qualifying as a REIT.

The Company has no foreign operations.


ITEM 2: PROPERTIES

The Company, a subsidiary of The Chase Manhattan Bank, utilizes space
located in New York  City  at  270 Park  Avenue, which is a 50-story bank 
and office building  owned  by the Bank.


ITEM 3: LEGAL PROCEEDINGS

The  Company is not the subject of any material litigation.  None  of
the  Company,  the  Advisor, the Bank or any  of  its  affiliates  is
currently  involved  in  nor, to the Company's  knowledge,  currently
threatened with any material litigation with respect to the  Mortgage
Loans  included  in  the  portfolio, which litigation would have a material 
adverse effect on the business or operations of the Company.


ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None


ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The  Company is authorized to issue up to 5,000,000 shares of  Common
Stock and 50,000,000 shares of Preferred Stock, $25 par value per share 
("Preferred Stock"), of which 22,000,000 shares have been  issued  as
the  Series A Preferred Shares.  The Bank owns 100% of the  Company's
572,500 shares of Common Stock outstanding at December 31, 1996  and,
accordingly,  there  is no trading market for  the  Company's  Common
Stock.   In addition, The Chase Manhattan Corporation ("CMC") intends
that,  as  long as any Series A Preferred Shares are outstanding,  it
will  maintain direct or indirect ownership of at least  80%  of  the
outstanding Common Stock of the Company.  Subject to the  rights,  if
any,  of  the holders of Series A Preferred Stock, all voting  rights
are  vested  in  the Common Stock. The holders of  Common  Stock  are
entitled to one vote per share.

Holders  of Common Stock are entitled to receive dividends  when,  as
and if declared by the Board of Directors of the Company out of funds
legally  available therefor, provided that, so long as any shares  of
Preferred  Stock  (including  the  Series  A  Preferred  Shares)  are
outstanding,   no   dividends  or  other   distributions   (including
redemptions  and purchases) may be made with respect  to  the  Common
Stock  unless full dividends on the shares of  the Preferred
Stock,  including  accumulations in the case of cumulative  Preferred
Stock,    have  been  paid. The Company must distribute  annually  at
least  95% of its annual "REIT taxable income" (not including capital
gains) to stockholders. 

In  the  event of the liquidation, dissolution or winding up  of  the
Company, whether voluntary or involuntary, after there have been paid
or  set  aside for the holders of all series of Preferred  Stock  the
full  preferential  amounts to which such holders are  entitled,  the
holders of Common Stock will be entitled to share equally and ratably
in   any  assets  remaining  after  the  payment  of  all  debts  and
liabilities.

Restrictions on Ownership and Transfer:

The   Company's   Certificate  of  Incorporation   contains   certain
restrictions  on the number  of shares of Common Stock and  Preferred
Stock  that  individual stockholders may own.   For  the  Company  to
qualify as a REIT under the Code, no more than 50% in number or value
of  its outstanding shares of capital stock may be owned, directly or
indirectly, by five or fewer individuals (as defined in the  Code  to
include  certain  entities) during the last half of  a  taxable  year
(other  than  the  first year) or during a proportionate  part  of  a
shorter taxable year (the

                                 -3-
<PAGE> 6

"Five or Fewer Test").  The capital stock of the Company must also be
beneficially owned by 100 or more persons during at least 335 days of
a  taxable  year or during a proportionate part of a shorter  taxable
year (the "One Hundred Persons Test").  The ownership by the Bank  of
100%  of  the  shares of Common Stock of the REIT will not  adversely
affect  the Company's REIT qualification because each stockholder  of
CMC  (the  sole  stockholder  of  the  Bank)  counts  as  a  separate
beneficial  owner  for purposes of the Five or  Fewer  Test  and  the
capital  stock  of CMC is widely held.  Further, the  Certificate  of
Incorporation of the Company contains restrictions on the acquisition
of Preferred Stock intended to ensure compliance with the One Hundred
Persons  Test.   Such provisions include a restriction  that  if  any
transfer  of shares of capital stock of the Company would  cause  the
Company  to  be  beneficially owned by fewer than 100  persons,  such
transfer  shall  be  null and void and the intended  transferee  will
acquire no rights to the stock.

Subject  to certain exceptions specified in the Company's Certificate
of  Incorporation, no holder of Preferred Stock is permitted  to  own
(including  shares  deemed to be owned by virtue of  the  attribution
provisions of the Code) more than 9.9% (the "Ownership Limit") of any
issued and outstanding class or series of Preferred Stock.  The Board
of  Directors may (but in no event will be required to), upon receipt
of a ruling from the IRS or an opinion of counsel satisfactory to it,
waive  the Ownership Limit with respect to a holder if such  holder's
ownership  will  not then or in the future jeopardize  the  Company's
status as a REIT.

The Certificate of Incorporation provides that shares of any class or
series  of  Preferred  Stock owned, or deemed  to  be  owned,  by  or
transferred  to a stockholder in excess of the Ownership  Limit  (the
"Excess  Shares") will automatically be transferred, by operation  of
law,  to  a trustee as a trustee of a trust for the exclusive benefit
of  a  charity to be named by the Company as of the day prior to  the
day the prohibited transfer took place.  Any distributions paid prior
to  the discovery of the prohibited transfer are to be repaid by  the
original transferee to the Company and by the Company to the trustee;
any  vote  of  the shares while the shares were held by the  original
transferee prior to the Company's discovery thereof shall be void  ab
initio and the original transferee shall be deemed to have given  its
proxy  to the trustee.  Any unpaid distributions with respect to  the
original  transferee  will  be  rescinded  as  void  ab  initio.   In
liquidation, the original transferee stockholder's ratable  share  of
the  Company's  assets  would be limited to the  price  paid  by  the
original transferee for the Excess Shares or, if no value was  given,
the price per share equal to the closing market price on the date  of
the purported transfer.  The trustee of the trust shall promptly sell
the shares to any person whose ownership is not prohibited, whereupon
the  interest  of the trust shall terminate.  Proceeds  of  the  sale
shall  be  paid  to the original transferee up to its purchase  price
(or,  if  the  original transferee did not purchase the  shares,  the
value  on  its date of acquisition) and any remaining proceeds  shall
be paid to a charity to be named by the Company.

The  constructive  ownership rules of the Code are  complex  and  may
cause  Preferred Stock owned, directly or indirectly, by a  group  of
related individuals and/or entities to be deemed to be constructively
owned  by one individual or entity.  As a result, the acquisition  of
less  than  9.9%  of  a  class or series of  issued  and  outstanding
Preferred Stock (or the acquisition of an interest in an entity  that
owns  shares  of such series of Preferred Stock) by an individual  or
entity  could cause that individual or entity (or another  individual
or  entity) to own constructively in excess of 9.9% of such class  or
series  of  Preferred  Stock, and thus  subject  such  stock  to  the
Ownership Limit.  Direct or constructive ownership in excess  of  the
Ownership Limit would cause ownership of the shares in excess of  the
limit to be transferred to the trustee.

All  certificates  representing shares of Preferred Stock,  including
the Series A Preferred Shares, do or will bear a legend referring  to
the restrictions described above. The Ownership Limit provisions will
not  be automatically removed even if sections 856 through 860 of the
Code  and  the applicable Treasury regulations are changed so  as  to
eliminate  any ownership concentration limitation or if the ownership
concentration   limitation   is  increased.    The   Certificate   of
Incorporation  may not be amended to alter, change, repeal  or  amend
any of the Ownership Limit provisions without the prior approval of a
majority of the Independent Directors.

The  Certificate  of  Incorporation  requires  that  any  person  who
beneficially owns 1% (or such lower percentage as may be required  by
the  Code  or the Treasury Regulations) of the outstanding shares  of
any  class  or series of Preferred Stock of the Company must  provide
certain  information to the Company within 30 days  of  June  30  and
December  31 of each year.  In addition, each stockholder shall  upon
demand  be  required  to  disclose to the  Company  in  writing  such
information  as  the Company may request in order  to  determine  the
effect,  if  any,  of  such  stockholder's  actual  and  constructive
ownership  on the Company's status as a REIT and to ensure compliance
with the Ownership Limit.
                               -4-
                                    

<PAGE> 7

ITEM 6: SELECTED FINANCIAL DATA


                           FINANCIAL DATA
As of December 31, 1996 and for the Period from Inception (September
                              18, 1996)
                      through December 31, 1996
           (in thousands, except per share and yield data)

<TABLE>
<CAPTION>
INCOME STATEMENT:
<S>                                                     <C>         
Interest income                                              $22,830

Net interest income                                           22,156

Net income                                                    22,085

Average number of common shares outstanding                  572,500 

Net income applicable to common shares                         9,339

Income per common share                                        16.31

BALANCE SHEET:

Mortgage loans                                            $1,059,981

Total assets                                               1,113,398

Preferred shares outstanding                             550,000,000

Total stockholder's equity                                 1,112,726

OTHER DATA:

Dividends paid on preferred shares                        12,746,360

Number of preferred shares outstanding                    22,000,000

Number of common shares outstanding                          572,500

Average yield on mortgage loans                                 7.4%













                                 -5-

<PAGE> 8
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


OVERVIEW


The principal business of the Company  is to acquire, hold and manage 
residential and commercial mortgage loans ("Mortgage Loans") that will 
generate net income for distribution  to stockholders.  The  Company 
currently intends  to continue  to acquire  all  its Mortgage Loans from 
the Bank or affiliates  of  the Bank as whole loans secured by first 
mortgages or deeds of trust on single-family (one to four-unit) residential 
real estate properties or on commercial real estate properties. The Company 
may also from time to time acquire securities that qualify as real estate  
assets under Section 856(c)(6)(B) of the Internal Revenue Code of 1986 (the
"Code")  that  are  rated  by at least one  nationally  independent
rating  organization and that represent interests in  or  obligations
backed  by  pools  of mortgage loans ("Mortgage-Backed  Securities").
Mortgage  loans  underlying the Mortgaged-Backed Securities  will  be
secured by single-family residential, multifamily or commercial  real
estate properties located in the United States.

On  September 18, 1996, the Company commenced its operations upon the
initial  public offering of 22,000,000 shares of the Company's  8.10%
Cumulative  Preferred  Stock,  Series  A  (the  "Series  A  Preferred
Shares"), and the sale to the Bank of 572,500 shares of the Company's
Common  Stock, $300  par value "Common Stock". These offerings raised
net capital of $1,103,386,000. All shares of Common Stock are held by
the  Bank.  The Series A Preferred Shares are traded on the New  York
Stock Exchange.

The Bank and its affiliates are involved in virtually every aspect of
the  Company's existence. The Bank is the sole holder of  the  Common
Stock of the Company and administers the day-to-day activities of the
Company in its role as Advisor under the Advisory Agreement. The Bank
also  services the Company's Mortgage Loans in its role  as  Servicer
under each of the Servicing Agreements.

The Bank and its affiliates may have interests that are not identical
to  those  of  the Company. Consequently, conflicts of  interest  may
arise  with  respect  to transactions, including without  limitation,
future   acquisitions  of  Mortgage  Loans  from  the  Bank  or   its
affiliates; servicing of Mortgage Loans, particularly with respect to
Mortgage Loans that become classified or placed in nonaccrual  status
or  which  have  been,  more than once during  the  preceding  twelve
months,  more  than 30 days past due in the payment of principal  and
interest;  future  dispositions  of  Mortgage  Loans  to  The   Chase
Manhattan Corporation ("CMC") or any of its nonbank subsidiaries; and
the   modification  of  the  Advisory  Agreement  or  the   Servicing
Agreement.

It  is  the  intention  of the Company, CMC and  the  Bank  that  any
agreements and transactions between the Company, on the one hand, and
CMC, the Bank or their affiliates, on the other hand, are fair to all
parties  and consistent with market terms, including the  price  paid
and  received  for  Mortgage Loans, including those  in  the  initial
portfolio, on their acquisition or disposition by the Company  or  in
connection with the servicing of such Mortgage Loans. The requirement
in the Certificate of Designation establishing the Series A Preferred
Shares  that certain actions of the Company be approved by a majority
of  the  Independent  Directors (as defined  in  the  Certificate  of
Designation)  is  also intended to ensure fair  dealing  between  the
Company  and CMC, the Bank and their respective affiliates.  However,
there  can be no assurance that such agreements or transactions  will
be on terms as favorable to the Company as those that could have been
obtained from unaffiliated third parties.

RESULTS OF OPERATIONS

The   Company   reported   net  interest  income   of   approximately
$22,156,000. Interest income from residential and commercial mortgage
loans  was  $19,337,000 and $2,782,000, respectively, representing  a
total  average  yield of 7.4%. After deduction of approximately
$71,000  in  advisory  fees,  the  Company  reported  net  income  of
approximately $22,085,000.

The  Company  paid  $12,746,360  in  Preferred  Stock  dividends  and
reported  net income per common share of $16.31 for the  period  from
inception (September 18, 1996) through December 31, 1996.


                                 -6-

<PAGE> 9
MORTGAGE LOANS

As  of December 31, 1996, the Company had $1,059,981,000 invested  in
Mortgage  Loans. This amount represents (i) the principal amount  of
mortgage  loans purchased on September 18, 1996; (ii)  the  principal
amount  of  mortgage loans purchased on November 18,  1996  with  the
remaining proceeds received from the initial public offering  of  the
Series A Preferred Shares, less (iii) collections of the principal amount of
loans  in  the  portfolio. All Mortgage Loans were  purchased  from  the
Bank  or  its  affiliates.

The  following  table  reflects the composition  of  interest-earning
assets  as  a  percentage  of  total interest-earning  assets  as  of
December 31, 1996 (in thousands):

</TABLE>
<TABLE>
<CAPTION>
Interest-Earning Asset Mix
  (in thousands)
                                                 Amount      Percent
<S>                                              <C>         <C>
Residential mortgage loans                         $958,411   90%
Commercial mortgage loans                           101,570   10%

Total interest-earning assets                    $1,059,981  100%

</TABLE>
At December 31, 1996, there were $236,012 of nonaccruing residential
mortgage loans and no nonaccruing commercial loans. Nonaccruing loans
represent .02% of the total loan portfolio.

There have been no sales of past due loans to any affliliate or
unrelated third parties.

The Company expects that each Mortgage Loan acquired from the Bank or
one  of  its  affiliates in the future will be  a  whole  loan,  will
represent a first lien position and will be originated by the Bank or
such  affiliate  in  the ordinary course of its real  estate  lending
activities based on the underwriting standards generally applied  (at
the  time  of  origination) for its own account by the  Bank  or  the
affiliate of the Bank which originated the Mortgage Loan. The Company
also  expects  that all Mortgage Loans held by the  Company  will  be
serviced   pursuant  to  the  Servicing  Agreements,  which   require
servicing  in  conformity with accepted secondary  market  standards,
with any servicing guidelines promulgated by the Company and, in  the
case  of  residential mortgage loans, with FNMA and FHLMC  guidelines
and procedures.

Currently,  the  Company has a policy not to acquire  any  commercial
mortgage  loan that constitutes more than 5% of the total book  value
of the mortgage assets of the Company at the time of its acquisition.
In  addition, the Company's current policy prohibits the  acquisition
of  any mortgage loan or any interest in a mortgage loan (other  than
an   interest  resulting  from  the  acquisition  of  Mortgage-Backed
Securities) which mortgage loan (i) is delinquent in the  payment  of
principal or interest at the time of proposed acquisition;   (ii)  is
or was at any time during the preceding 12 months (a) classified, (b)
in   nonaccrual  status,  or  (c)  renegotiated  due   to   financial
deterioration  of  the borrower; or (iii) has been,  more  than  once
during  the  preceding 12 months, more than 30 days past due  in  the
payment of principal or interest.

The Company may choose, at any time subsequent to its acquisition  of
any  mortgage loan, to require the Servicer of the mortgage  loan  to
dispose  of any mortgage loan, for any reason, including as a  result
of  such  mortgage  loan  becoming  classified  or  being  placed  in
nonaccrual status or having been, more than once during the preceding
12  months, more than 30 days past due in the payment of principal or
interest.   The Bank has indicated to the Company that  it  will  not
purchase any mortgage loan of the Company that the Company chooses to
dispose  of  for  the  foregoing reasons;  accordingly,  the  Company
currently  anticipates that any such mortgage loan would be  sold  at
its  then  current fair value by the Company only to CMC,  a  nonbank
subsidiary of CMC or an unrelated third party.

ALLOWANCE FOR CREDIT LOSSES

The  allowance  for  credit losses is available to  absorb  potential
credit  losses from the entire Mortgage Loan portfolio.  The  Company
deems  its allowance for credit losses as of December 31, 1996 to  be
adequate.

                                 -7-

<PAGE> 10
Although  the  Company considers that it has sufficient  reserves  to
absorb losses that currently may exist in the portfolio, but are  not
yet  identifiable, the precise loss content is subject to  continuing
review   based   on  quality  indicators,  industry  and   geographic
concentrations,  changes in business conditions, and  other  external
factors  such as competition, legal and regulatory requirements.  The
Company  will continue to reassess the adequacy of the allowance  for
credit losses.
                                  
The  accompanying  table  reflects  the  activity  in  the  Company's
allowance  for credit losses for the period from inception (September
18, 1996) through December 31, 1996.

<TABLE>
<CAPTION>
Allowance for loan losses
    (in thousands)
<S>                                                         <C>
Total allowance at beginning of period                      $    -
Acquired allowance                                           3,150
Provision for losses                                             -
Charge-offs                                                      -
Recoveries                                                       -

 Total allowance at end of year                              $3,150


</TABLE>
At December 31, 1996, the Company's  allowance for credit losses as a
percentage of total loans was .30%.


INTEREST RATE RISK

The  Company's  income  consists primarily of  interest  payments  on
Mortgage  Loans. Currently, the Company does not use  any  derivative
products  to manage its interest rate risk. If there is a decline  in
interest  rates (as measured by the indices upon which  the  interest
rates  of  the  Mortgage  Loans are based),  then  the  Company  will
experience  a decrease in income available to be distributed  to  its
shareholders.  There  can  be  no assurance  that  an  interest  rate
environment in which there is a significant decline in interest rates
over an extended period of time would  not  adversely  affect  the
Company's ability to pay dividends on the Series A Preferred Shares.


SIGNIFICANT CONCENTRATION OF CREDIT RISK

Concentration of credit risk arises when a number of customers engage
in   similar   business  activities,  or  activities  in   the   same
geographical  region, or have similar economic  features  that  would
cause  their ability to meet contractual obligations to be  similarly
affected by changes in economic conditions.  Concentration of  credit
risk  indicates the relative sensitivity of the Company's performance
to  both  positive and negative developments affecting  a  particular
industry.













                                 -8-

<PAGE> 11
The  Company's  balance  sheet exposure to geographic  concentrations
directly  affects  the credit risk of the Mortgage Loans  within  the
portfolio.  The following table shows the Mortgage Loan portfolio  by
geographical area as of December 31, 1996:

<TABLE>
<CAPTION>
Loans
 (in thousands)                              Amount     Percent
<S>                                        <C>          <C>
Residential Mortgage Loans:

California                                   $507,552    47.88%
Florida                                        60,462     5.70%
Other States (no State has more than 4%)      390,397    36.83%

       Total Residential Mortgage Loans       958,411    90.41%

Commercial Mortgage Loans:

New York Metropolitan Tri-State Area           97,159     9.17%
Other States (no State has more than 3%)        4,411      .42%

       Total Commercial Mortgage Loans        101,570     9.59%

Total                                      $1,059,981    100.00%

</TABLE>
Approximately  47.88% of the Company's total Mortgage Loan  portfolio
are  loans  secured by residential real estate properties located  in
California.  Consequently, these residential mortgage  loans  may  be
subject   to   a  greater  risk  of  default  than  other  comparable
residential  mortgage  loans  in  the  event  of  adverse   economic,
political  or business developments and natural hazards (earthquakes,
for example) in California that may affect the ability of residential
property  owners  in  California to make payments  of  principal  and
interest on the underlying mortgages.

In  addition,  the  majority  of the commercial  mortgage  properties
underlying the Company's commercial mortgage loans are located in the
New  York  metropolitan tri-state area. Substantially  all  of  these
mortgaged properties were, at the time of their origination, at least
70%  occupied  by  the  borrowers or their affiliates.  Consequently,
these  commercial mortgage loans may be subject to  greater  risk  of
default than other comparable commercial mortgage loans in the  event
of  adverse economic, political or business developments in  the  New
York  metropolitan  tri-state area that may  affect  the  ability  of
businesses in that area to make payments of principal and interest on
the underlying mortgages.

LIQUIDITY RISK MANAGEMENT

The  objective of liquidity management is to ensure the  availability
of  sufficient  cash  flows to meet all of  the  Company's  financial
commitments  and  to capitalize on opportunities  for  the  Company's
business  expansion.  In managing liquidity, the Company  takes  into
account various legal limitations placed on a REIT as discussed below
in Other Matters.

The  Company's principal liquidity needs are to maintain the  current
portfolio  size through the acquisition of additional Mortgage  Loans
as  Mortgage Loans currently in the portfolio mature or prepay and to
pay  dividends  on the Series A Preferred Shares. The acquisition  of
additional  Mortgage  Loans is intended to be  funded  with  the
proceeds  obtained from repayment of principal balances by individual
mortgagees. The Company does not have and does not anticipate  having
any material capital expenditures.




                                 -9-

<PAGE> 12
To  the extent that the Board of Directors determines that additional
funding  is  required,  the  Company may  raise  such  funds  through
additional equity offerings, debt financing or retention of cash flow
(after  consideration  of  provisions  of  the  Code  requiring   the
distribution  by a REIT of at least 95% of its "REIT taxable  income"
and  taking into account taxes that would be imposed on undistributed
income), or a combination of these methods. The  organizational  documents 
of the  Company  do  not  contain  any limitation  on the amount or 
percentage of debt, funded or otherwise, the  Company might incur.  
Notwithstanding the foregoing, the Company may  not,  without  the  
approval of a majority  of  the  Independent Directors,  incur  debt 
for borrowed money other than debt not in excess  of  20% of the 
aggregate amount of net proceeds received in connection with the 
issuance of all outstanding Preferred Stock and Common  Stock  of  
the Company.  Any such debt incurred may include intercompany advances 
made by the Bank to the Company.

The  Company  may  also issue additional series of  Preferred  Stock.
However,  the  Company may not issue additional shares  of  Preferred
Stock senior to the Series A Preferred Shares without the consent  of
holders  of  at  least  66  2/3% of the  shares  of  Preferred  Stock
outstanding  at  that time, including the Series A Preferred  Shares,
and the Company may not issue additional shares of Preferred Stock on
a parity with the Series A Preferred Shares without the approval of a
majority of the Company's Independent Directors.

OTHER MATTERS

As  of  December 31, 1996, the Company believed that it was  in  full
compliance  with  the  REIT tax rules and that it  will  continue  to
qualify  as  a  REIT  under the provisions of the Code.  The  Company
calculates:

o    its Qualified REIT Assets, as defined in the Code, to be 100% of
  its total assets, as compared to the federal tax requirements that at
  least 75% of its total assets must be Qualified REIT assets.
o     that  97% of its revenues qualify for the 75% source of  income
  test  and 100% of its revenues qualify for the 95% source of income
  test under the REIT rules.
o     none  of the revenues were subject to the 30% income limitation
  under the REIT rules.

The Company also met all REIT requirements regarding the ownership of
its  common  and  preferred stocks and anticipates meeting  the  1996
annual distribution and administrative requirements.




















                                  
                                  
                                -10-
<PAGE> 13

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                  
                  Report of Independent Accountants



To the Board of Directors and
Stockholders of Chase Preferred Capital Corporation

In  our  opinion,  the  accompanying balance sheet  and  the  related
statements of income, of changes in stockholders' equity and of  cash
flows  present  fairly,  in  all  material  respects,  the  financial
position  of  Chase Preferred Capital Corporation (the "Company")  at
December  31,  1996, and the results of its operations and  its  cash
flows  for  the  period from inception (September 18,  1996)  through
December  31, 1996, in conformity with generally accepted  accounting
principles.  These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion  on
these  financial  statements based on our audit.   We  conducted  our
audit  of  these  statements in accordance  with  generally  accepted
auditing  standards which require that we plan and perform the  audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on  a
test  basis, evidence supporting the amounts and disclosures  in  the
financial  statements, assessing the accounting principles  used  and
significant estimates made by management, and evaluating the  overall
financial statement presentation.  We believe that our audit provides
a reasonable basis for the opinion expressed above.


Price Waterhouse LLP

New York, New York
March 24, 1997

                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                -11-
<PAGE> 14
                                  


                                  
                 CHASE PREFERRED CAPITAL CORPORATION
                            BALANCE SHEET
                        at December 31, 1996
                  (in thousands, except share data)
                                                                     
<TABLE>
<CAPTION>
ASSETS:
<S>                                              <C>
Residential Mortgage Loans                       $  958,411

Commercial Mortgage Loans                           101,570
                                                  ----------
                                                  1,059,981

Less: allowance for loan losses                      (3,150)
                                                  -----------
                                                   1,056,831

Cash                                                  31,091

Due from affiliates
                                                      18,743

Accrued interest receivable                            6,733
                                                  -----------
    TOTAL ASSETS                                  $1,113,398

LIABILITIES:

Accounts payable                                  $      430
Due to affiliates                                        242
                                                  -----------
TOTAL LIABILITIES                                        672

STOCKHOLDERS' EQUITY:

Preferred stock, par value $25 per share;
 50,000,000 shares authorized, 22,000,000 shares
 issued and outstanding                              550,000

Common stock, par value $300 per share;
 5,000,000 shares authorized, 572,500 shares
 issued and outstanding                              171,750
Additional paid in capital                           381,637
Retained earnings *                                    9,339
                                                  ------------
    TOTAL STOCKHOLDERS' EQUITY                     1,112,726
                                                  ------------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $1,113,398
</TABLE>
* No retained earnings related to property sales.



   The Notes to Financial Statements are an integral part of these
                             Statements.

                                -12-
<PAGE> 15


                 CHASE PREFERRED CAPITAL CORPORATION
                         STATEMENT OF INCOME
         For the Period from Inception (September 18, 1996)
                      through December 31, 1996
                (in thousands, except per share data)

<TABLE>
<CAPTION>
INTEREST INCOME:

<S>                                                  <C>

Residential mortgage loans                           $19,337
Commercial mortgage loans                              2,782
Interest on overnight deposits                           711
                                                     --------
                                                      22,830
          Less: servicing fees                          (674)
                                                     ---------
   Net Interest Income                                22,156

NONINTEREST EXPENSE:
                                                                     

Advisory Fees                                             71
                                                     ---------
 NET INCOME                                          $22,085
                                                     ---------
NET INCOME APPLICABLE TO COMMON SHARES               $ 9,339
                                                     ---------
NET INCOME PER COMMON SHARE                          $16.31
                                                                     
</TABLE>
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
   The Notes to Financial Statements are an integral part of these
                             Statements.

                               - 13 -
<PAGE> 16
                                  
                                  
                 CHASE PREFERRED CAPITAL CORPORATION
            STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
         For the Period from Inception (September 18, 1996)
                      through December 31, 1996
                           (in thousands)

<TABLE>
<CAPTION>
PREFERRED STOCK:
<S>                                                      <C>
Initial public offering on September 18, 1996            $   550,000
                                                         -----------
Balance at end of year                                   $   550,000

COMMON STOCK:
Shares issued at incorporation (June 28, 1996)           $         1
Issuance of common stock on September 18, 1996               171,749
                                                          -----------
Balance at end of year                                   $   171,750

ADDITIONAL PAID IN CAPITAL:
Shares issued at incorporation (June 28, 1996)           $         -
Issuance of common stock on September 18, 1996               381,637
                                                          -----------
Balance at end of year                                   $   381,637

RETAINED EARNINGS:
Net Income                                               $    22,085
Preferred dividends                                          (12,746)
                                                           -----------
Balance at end of year                                   $     9,339
                                                           -----------
TOTAL STOCKHOLDERS' EQUITY                               $ 1,112,726


</TABLE>
















                                  
                                  
                                  
   The Notes to Financial Statements are an integral part of these
                             Statements.
                                  
                                -14-

<PAGE> 17
                                  
                 CHASE PREFERRED CAPITAL CORPORATION
                       STATEMENT OF CASH FLOWS
         For the Period from Inception (September 18, 1996)
                      through December 31, 1996
                           (in thousands)

<TABLE>
<CAPTION>
OPERATING ACTIVITIES:
<C>                                                    <C>
Net income                                                 $22,085

Adjustments to reconcile net income to net cash 
provided by operating activities:
   Net change in:
          Due from affiliates                              (18,743)
          Accrued interest receivable                       (2,741)
          Accounts payable                                     430
          Due to affiliates                                    242
                                                           --------
Net cash provided by operating activities                    1,273

INVESTING ACTIVITIES:


Purchase of mortgage loans                              (1,119,254)
Principal payments received                                 62,423
Purchase of accrued interest receivable                     (3,992)
                                                         ----------
Net cash used by investing activities                   (1,060,823)

FINANCING ACTIVITIES:

Proceeds from common stock issued                          572,499
Proceeds from preferred stock issued                       550,000
Offering costs                                             (19,113)
Dividends paid                                             (12,746)
                                                          ---------
Net cash provided by financing activities                1,090,640

NET INCREASE IN CASH                                        31,090
CASH AT BEGINNING OF PERIOD                                      1
                                                           --------
CASH AT END OF YEAR                                   $     31,091







</TABLE>
   The Notes to Financial Statements are an integral part of these
                             Statements.
                                  
                                -15-
<PAGE> 18
                                  
                      NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Chase  Preferred Capital Corporation (the "Company")  is  a  Delaware
corporation incorporated on June 28, 1996 and created for the purpose
of acquiring, holding and managing real estate assets. The Company is
a wholly-owned subsidiary of The Chase Manhattan Bank (the "Bank"), a
banking  corporation organized under the laws of  the  State  of  New
York.

On  September  18,  1996, the Company commenced its  operations  upon
consummation  of an initial public offering of 22,000,000  shares  of
the  Company's 8.10% Cumulative Preferred Stock, Series  A,  $25  par
value per share (the "Series A Preferred Shares"), and
the sale to the Bank of 572,500 shares of the Company's Common Stock,
$300 par value per share ("Common Stock"). These offerings raised net
capital of $1,103,386,000. All shares of Common Stock are held by the
Bank.  The Series A Preferred Shares are traded on the New York Stock
Exchange.

The Company used the proceeds raised from the public offering
of  the Series A Preferred Shares and the sale of Common Stock to the
Bank  to  pay expenses incurred during the offering and the formation
of  the  Company and to purchase from the Bank the Company's 
portfolio  of  residential and commercial mortgage  loans  ("Mortgage
Loans")  at  their estimated fair values. The  Mortgage Loans  were 
recorded in the accompanying financial statements at  the Bank's 
historical cost basis which approximates their estimated  fair
values.

The  accounting  and  financial reporting  policies  of  the  Company
conform  to  generally accepted accounting principles and  prevailing
industry  practices.  The  preparation  of  financial  statements  in
conformity  with  generally accepted accounting  principles  requires
management to make estimates and assumptions that affect the reported
amounts  of  assets  and  liabilities at the date  of  the  financial
statements  and the reported amounts of revenues and expenses  during
the reporting period.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Mortgage Loans:

Mortgage  loans are carried at the principal amount outstanding,  net
of  deferred loan fees and direct origination costs. Loans  held  for
sale  are  carried  at  the lower of aggregate cost  or  fair  value.
Interest income is recognized using the interest method or on a basis
approximating  a  level rate of return over the  term  of  the  loan.
Mortgage  loans acquired from the Bank or its affiliates are recorded
at  the  Bank's  historical  cost basis in the  accompanying  balance
sheet.  Any  difference  between  the  amount  paid  and  the  Bank's
historical cost basis is treated as an adjustment to additional  paid
in capital.

Nonaccrual loans are those loans on which the accrual of interest has
ceased. Loans are placed on nonaccrual status immediately if, in  the
opinion of management, principal or interest is not likely to be paid
in accordance with the terms of the loan agreement, or when principal
or  interest  is  past  due  90  days  or  more  and  collateral   is
insufficient  to cover principal and interest. Interest  accrued  but
not collected at the date a loan is placed on a nonaccrual status  is
reversed  against interest income. In addition, the  amortization  of
net  deferred loan fees and costs are suspended when a loan is placed
on   nonaccrual  status.  Interest  income  on  nonaccrual  loans  is
recognized only to the extent of cash receipts. However, where  there
is doubt regarding the ultimate collectibility of the loan principal,
cash  receipts,  whether  designated as principal  or  interest,  are
thereafter  applied to reduce the carrying value of the  loan.  Loans
are  restored  to  accrual status only when  interest  and  principal
payments  are  brought  current and future  payments  are  reasonably
assured.

Statement  of  Financial  Accounting  Standards  No.  114,   entitled
"Accounting  by  Creditors for Impairment of a  Loan"  ("SFAS  114"),
requires that the carrying value of an impaired loan be based on  the
present value of expected future cash flows discounted at the  loan's
effective  interest rate or, as a practical expedient, at the  loan's
observable market price, or the fair value or the collateral, if  the
loan  is  collateral dependent. Under SFAS 114, a loan is  considered
impaired when, based on current information, it is probable that  the
borrower
                                  
                                -16-

<PAGE> 19

will  be unable to pay contractual interest or principal payments  as
scheduled in the loan agreement. SFAS 114 applies to all loans except
smaller-balance  homogeneous consumer loans, loans  carried  at  fair
value or the lower of cost or fair value, debt securities and leases.
The Company applies SFAS 114 to nonaccrual commercial mortgage loans.
In  addition,  SFAS  114  modifies the  accounting  for  in-substance
foreclosures ("ISF"). A collateralized loan is considered an ISF  and
is  reclassified to Assets Acquired as Loan Satisfactions  only  when
the   Company  has  taken  physical  possession  of  the   collateral
regardless  of   whether  formal foreclosure proceedings  have  taken
place.

Statement  of  Financial  Accounting  Standards  No.  118,   entitled
"Accounting  by  Creditors  for  Impairment  of  a  Loan   -   Income
Recognition and Disclosure" ("SFAS 118"), permits a creditor  to  use
existing methods for recognizing interest revenue on impaired  loans.
The Company recognizes interest income on impaired loans pursuant  to
the discussion above for nonaccrual loans.

Allowance for loan losses:

The allowance for loan losses provides for risk of losses inherent in
the  credit  extension process. The allowance is a general  allowance
and  is  based  on a periodic review and analysis of  the  portfolio,
which is comprised of residential and commercial mortgage loans.  The
periodic analysis includes consideration of such factors as the  risk
rating  of  individual  credits,  the  size  and  diversity  of   the
portfolio,  economic  conditions and market  conditions,  prior  loss
experience  and results of periodic credit reviews of the  portfolio.
The  allowance for loan losses is increased by provisions for  losses
charged  against  income  and  is  reduced  by  charge-offs,  net  of
recoveries.  Charge-offs  are  recorded  when,  in  the  judgment  of
management, an extension of credit is deemed uncollectible, in  whole
or in part.

Cash and Cash Equivalents:

The  Company considers all short-term, highly liquid investments that
are both readily convertible to cash and have a maturity of generally
three  months or less at the time of purchase to be cash equivalents.
At  December  31,  1996,   the Company's  cash  and  cash  equivalent
(overnight deposits) were  held in custody at the Bank.

Offering Costs:

Costs incurred in connection with the raising of capital through  the
sale  of  preferred  stock were charged against shareholders'  equity
upon the issuance of shares to shareholders.

Dividends:

Preferred  Stock.  Dividends on the Series  A  Preferred  Shares  are
cumulative  from  issuance  (September  18,  1996)  and  are  payable
quarterly on the last day of March, June, September and December at a
rate of 8.10% per annum of the initial liquidation preference ($25.00
per share).

Common Stock. Shareholders are entitled to receive dividends when, as
and  if  declared  by  the Board of Directors out  of  funds  legally
available after all preferred dividends have been paid.

Net Income Per Common Share:
     
Net  income  per  share  is  computed by dividing  net  income  after
preferred  dividends by the weighted average number of common  shares
outstanding.









                                -17-

<PAGE> 20
Income Taxes:
     
The  Company  has  elected to be treated as a Real Estate  Investment
Trust ("REIT") pursuant to provisions of the Internal Revenue Code of
1986,  as amended (the "Code"). As a result, the Company will not  be
subject to  federal income tax on its taxable income to the extent it
distributes  at least 95% of its taxable income to its shareholders
and  it meets certain other requirements as defined in the Code.  The
Company  intends to maintain  its qualification as a REIT for federal
income tax purposes. The Company intends to make qualifying dividends
(for  federal  income tax purposes) of all of its taxable  income to 
its Common and Preferred Stock shareholders, a portion  of  which  may 
be  in the form of "consent"  dividends,  as defined under the Code. 
As a result, the Company  has  made  no  provision  for  income  taxes
in the accompanying financial statements.


NOTE 3 - MORTGAGE LOANS

Mortgage  loans  consist of both residential and commercial  mortgage
loans.    Residential mortgage loans consist of Six-Month Prime  Rate
Adjustable Rate Mortgages ("ARMs"); Six-Month Treasury ARMs; One-Year
ARMs; Three-Year, Five-Year, Seven-Year and Ten-Year Fixed Rate Loans
with  an automatic conversion to One-Year ARMs; and Fixed Rate Loans.
The  commercial  mortgage loans consist of Fixed  and  Variable  Rate
loans, a majority of which have balloon payments.

The following represents the Mortgage Loan portfolio before allowance
for credit losses as of December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
<S>                                     <C>
    Residential mortgage loans          $   958,411
    Commercial mortgage loans               101,570

     Total portfolio                    $ 1,059,981
</TABLE>
Each  of the Mortgage Loans are secured by a mortgage, deed of  trust
or  other  security  instrument which created a  first  lien  on  the
residential  dwellings and/or commercial property  located  in  their
respective jurisdictions.
                                  
NOTE 4 - DIVIDENDS

For  the  period from inception (September 18, 1996) through December
31, 1996, the Company paid dividends on the Series A Preferred Shares
in the amount of $12,746,360.

NOTE 5 - RELATED PARTY TRANSACTIONS

The  Company  has entered into an Advisory Agreement  (the  "Advisory
Agreement") with the Bank (the "Advisor") requiring an annual payment
of  $250,000.  The Advisor provides advice to the Board of  Directors
and  manages  the  operations  of  the  Company  as  defined  in  the
Agreement. The Agreement has an initial term of five years commencing
on September 18, 1996 and automatically renews for an additional five
years  unless  the  Company delivers a notice of  nonrenewal  to  the
Advisor as defined in the Advisory Agreement.

The  Company also entered into two servicing agreements with the Bank
for  the servicing of the commercial and residential mortgage  loans.
Pursuant  to  each  servicing agreement, the  servicer  performs  the
actual  servicing  of  the Mortgage Loans held  by  the  Company,  in
accordance  with  normal industry practice. The Servicing  Agreements
can  be terminated without cause with at least thirty days notice  to
the servicer. The servicing fee is 0.25% of the outstanding principal
balance  for the residential mortgage loans and ranges from  0.08%  -
0.30%  of  the  outstanding  principal balances  for  the  commercial
mortgage loans depending upon the outstanding principal amount.

The Bank has entered into sub-servicing agreements ("Sub-Agreements")
with  Chase  Manhattan Mortgage Corporation ("CMMC"), a  wholly-owned
subsidiary  of  Chase Manhattan Bank USA, N.A., an  indirect  wholly-
owned subsidiary of The Chase Manhattan Corporation.


                                -18-

<PAGE> 21
Advisory  fees  and  servicing  fees incurred  for  the  period  from
inception  (September  18, 1996) through December  31,  1996  totaled
approximately $745,000.

In  its  capacity as sub-servicer, CMMC owes the Company $18,743,000,
primarily consisting of mortgage loan payments received on behalf  of
the  Company. Pursuant to the terms of the servicing and subservicing
agreements, the Company receives mortgage loan payments collected  by
the  servicer  (and sub-servicer) in the month immediately  following
its collection.

The  Company maintains its cash in an overnight deposit account  with
the  Bank  and  earns a market rate of interest. Interest  income  on
these deposits amounted to approximately $711,000 for the period from
inception (September 18, 1996) through December 31, 1996.


NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, entitled "Disclo-
sures  About  Fair  Value  of  Financial Instruments"  ("SFAS  107"),
requires  the  Company  to  disclose  fair  value  information  about
financial  instruments for which it is practicable  to  estimate  the
value,  whether or not such financial instruments are  recognized  on
the  balance sheet.  Fair value is defined as the amount at  which  a
financial  instrument  could be exchanged in  a  current  transaction
between  willing parties, other than in a forced sale or liquidation,
and  is  best evidenced by a quoted market price, if one exists.  The
calculation of estimated fair value is based on market conditions  at
a  specific  point in time and may not be reflective of  future  fair
values.

Certain  financial instruments and all nonfinancial  instruments  are
excluded  from  the scope of SFAS 107.  Accordingly, the  fair  value
disclosures  required by SFAS 107 provide only a partial estimate  of
the  fair  value  of the Company.  Fair values among  REITs  are  not
comparable due to the wide-range of limited valuation techniques  and
numerous  estimates  which  must be made.   This  lack  of  objective
valuation standard introduces a great degree of subjectivity to these
derived  or estimated fair values.  Therefore, readers are  cautioned
in  using  this information for purposes of evaluating the  financial
condition of the Company compared with other REITs.

Loans:

Loans  were  valued using methodologies suitable for each loan  type.
Certain  of  these  methodologies and the key  assumptions  made  are
discussed below.

The  fair  value of the Company's commercial loans was  estimated  by
assessing  the  two main risk components: credit and  interest.   The
estimated  cash  flows were adjusted to reflect the  inherent  credit
risk  and  then discounted, using rates appropriate for each maturity
that incorporates the effects of interest rate changes.

For  residential mortgage loans for which market rates for comparable
loans  are  readily  available,  the  fair  value  was  estimated  by
discounting cash flows, adjusted for prepayments. The discount  rates
used  for  residential  mortgages were secondary  market  yields  for
comparable  mortgage-backed  securities,  adjusted  for  risk.    The
discount rates used incorporated the effects of interest rate changes
only, since the estimated cash flows were adjusted for credit risk.

The  book value and fair value of Mortgage Loans at December 31, 1996
are as follows (in thousands):
<TABLE>
<CAPTION>
                                        Book Value     Fair Value
<S>                                       <C>          <C>
Residential Mortgage Loans                $958,411     $954,186
Commercial Mortgage Loans                  101,570      101,433
</TABLE>

Assets  and  liabilities  in which fair value  approximates  carrying
value:

The  fair values of certain financial assets and liabilities  carried
at  cost,  including  cash,  due  from affiliates,  accrued  interest
receivable,  accounts  payable,  due  to  affiliates  and   dividends
payable,  are  considered  to approximate their  respective  carrying
value due to their short-term nature and negligible credit losses.

                                -19-
<PAGE> 21
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

None.


ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION


Richard J. Boyle         53   Director. Retired as Vice Chairman of
the Board of The Chase Manhattan Corporation ("Old Chase") and The
Chase Manhattan Bank, N.A. upon consummation of the merger of Old
Chase into Chemical Banking Corporation on March 31, 1996.  Mr. Boyle
served in such positions since 1987.

Deborah L. Duncan        41   President and Director. An Executive
Vice President of CMC and the Bank, treasurer of CMC and a member of
CMC's Policy Council.  Prior to the merger of Old Chase into Chemical
Banking Corporation, Ms. Duncan was co-head of Old Chase's Global
Markets business, with responsibility for trading activities
worldwide.  Ms. Duncan joined Old Chase's Corporate Controllers unit
in 1979 and served in various positions at Old Chase, including
Corporate treasurer, Western Hemisphere treasurer, treasurer of
Individual Banking,treasurer of Chase Tokyo, manager of Derivative
Products-Asia, Asian treasury coordinator and financial analyst for
the Europe area and the Asia area.

Thomas Jacob        58   Director.  The Chairman and Chief Executive
Officer of Chase Manhattan Mortgage Corporation, the mortgage
subsidiary of CMC.  Mr. Jacob is also the Chairman of Chase Manhattan
Bank USA, N.A., and a director of Chase Insurance Agency, Inc. For
the six years prior to the merger of Old Chase and Chemical Banking
Corporation, Mr. Jacob was the executive responsible for the
residential retail mortgage business of Chemical Banking Corporation.

William C. Langley       58   Director.  Retired as an Executive Vice
President and Chief Credit and Risk Policy Officer of Chemical
Banking Corporation and Chemical Bank, effective July 31, 1996.
Prior to becoming an Executive Vice President of Chemical Banking
Corporation and Chemical Bank in 1991, Mr. Langley had served as an
Executive Vice President since 1983, and the Chief Credit Officer
since 1990 of Manufacturers Hanover Corporation. Mr. Langley is a
director of Robert Morris Associates, Morrison Knudsen Corp. and
Seven-Up/RC Bottling Company of Southern California, Inc.

Neila B. Radin      43   Secretary.  A Senior Vice President and
Associate General Counsel of the Bank.  Ms. Radin joined the Bank in
1987 and has been a member of its legal department since 1988.







                                -20-

<PAGE> 23
Robert S. Strong         47   Chairman and Director.  An Executive
Vice President and the Chief Credit Officer of CMC and the Bank and a
member of CMC's policy council.  Mr. Strong joined Old Chase in 1971
and served in various positions at Old Chase, including as executive
in charge of the Global Portfolio Management Group, the Real Estate
Finance Group, the Transportation and Defense Group, the Diversified
Industries Group and the Public Utilities Group.

Don B. Taggart      49   Treasurer and Director.  A Senior Vice
President of CMC and the Bank.  Mr. Taggart joined Old Chase in 1989.
Immediately prior to the merger of Old Chase into Chemical Banking
Corporation, Mr. Taggart was responsible for funding/liquidity, short-
term interest rate risk management and world-wide Treasury
relationships and products at Old Chase.

Peter J. Tobin      52   Director.  Chief Financial Officer of CMC
and the Bank.  As a member of CMC's Policy Council, Mr. Tobin has
responsibility for corporate treasury, controllership, corporate
taxes, financial management information systems, insurance, planning
and investor relations.  Prior to the merger of Old Chase into
Chemical Banking Corporation, Mr. Tobin held the same positions at
Chemical Banking Corporation and Chemical Bank, and had similar
responsibilities at Manufacturers Hanover Corporation before its
merger with Chemical Banking Corporation on December 31, 1991. Mr.
Tobin is a director of The CIT Group Holdings, Inc.

ITEM 11:  EXECUTIVE COMPENSATION

The  Company  does  not  pay  any compensation  to  its  officers  or
employees  or  to  directors who are not Independent  Directors.  The
Company  intends  to  pay the Independent Directors  of  the  Company
(Messrs. Boyle and Langley) fees for their services as directors. The
Independent  Directors  will receive annual compensation  of  $10,000
plus   a   fee   of   $750   for  attendance   (in   person   or   by
telephone) at each meeting of the Board of Directors.


ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

None.


ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.













                                -21-

<PAGE> 24
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K

No Current Reports on Form 8-K were filed during the fourth quarter
of 1996.
                                  
                          INDEX TO EXHIBITS
                                  

EXHIBIT NO.         EXHIBITS

3(a) (i)          Form of Amended and Restated Certificate of
Incorporation of the Company (Incorporated by reference to Exhibit
3(a) (iii) to the Registration Statement on Form S-11 (File No. 333-
08001) of Chase Preferred Capital Corporation).

3(a) (ii)         Form of Certificate of Designation establishing the
Series A Preferred Shares (Incorporated by reference to Exhibit 3(a)
(ii) to the Registration Statement on Form S-11 (File No. 333-08001)
of Chase Preferred Capital Corporation).

3(b)              Form of Amended and Restated By-laws of the Company
(Incorporated by reference to Exhibit 3(b)(ii) to the Registration
Statement on Form S-11 (File No. 333-08001) of Chase Preferred
Capital Corporation).

4                 Specimen of certificate representing Series A
Preferred Shares (Incorporated by reference to Exhibit 4 to the
Registration Statement on Form S-11 (File No. 333-08001 of Chase
Preferred Capital Corporation).

10(a)             Form of Residential Mortgage Loan Purchase and
Warranties Agreement between the Company and The Chase Manhattan Bank
(Incorporated by reference to Exhibit 10(a) to the Registration
Statement on Form S-11 (File No. 333-08001) of Chase Preferred
Capital Corporation).

10(b)             Form of Commercial Mortgage Loan Purchase and
Warranties Agreement between the Company and The Chase Manhattan Bank
(Incorporated by reference to Exhibit 10(b) to the Registration
Statement on Form S-11 (File No. 333-08001) of Chase Preferred
Capital Corporation).

10(c)             Form of Residential Mortgage Loan Servicing
Agreement between the Company and The Chase Manhattan Bank
(Incorporated by reference to Exhibit 10(c) to the Registration
Statement on Form S-11 (File No. 333-08001) of Chase Preferred
Capital Corporation).

10(d)             Form of Commercial Mortgage Loan Servicing
Agreement between the Company and The Chase Manhattan Bank
(Incorporated by reference to Exhibit 10(d) to the Registration
Statement on Form S-11 (File No. 333-08001) of Chase Preferred
Capital Corporation).

10(e)             Form of Advisory Agreement between the Company and
The Chase Manhattan Bank (Incorporated by reference to Exhibit 10(e)
to The Registration Statement on Form S-11 (File No. 333-08001) of
Chase Preferred Capital Corporation).

11               Computation of net income per share

12(a)            Computation of ratio of earnings to fixed charges



                                -22-

<PAGE> 25
12(b)             Computation of ratio of earnings to fixed charges
                  and preferred stock dividend requirements

27                             Financial Data Schedule

                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  

















                                -23-
<PAGE> 27
                             SIGNATURES
  
  
  
  Pursuant to the requirements of the section 13 and 15 (d) of the
  Securities Exchange Act of 1934, the Registrant has duly  caused
  this  report  to  be  signed on its behalf  by  the  undersigned
  thereunto duly authorized.
  

  
  CHASE PREFERRED CAPITAL CORPORATION
  (Registrant)
  
  
  
  Date: March 27, 1997                 By   /s/ Deborah L. Duncan
                                            ----------------------
                                            Deborah L. Duncan
                                           President and Director




  Pursuant to the requirements of the Securities Exchange  Act  of
  1934, this Report has been signed below by the following persons
  on  behalf  of the Registrant and in the capacities and  on  the
  dates indicated.



       Signatuture            Title                     Date

/s/ Robert S. Strong     Chairman and Director       March 27, 1997
------------------------
Robert S. Strong        (Principal Executive Officer)

/s/ Deborah L. Duncan    President and Director      March 27, 1997
------------------------
Deborah L. Duncan


/s/ Don B. Taggart       Treasurer and Director      March 27, 1997
-------------------------
Don B. Taggart          (Principal financial and accounting officer)

/s/ Richard J. Boyle       Director                  March 27, 1997
-------------------------
Richard J. Boyle

/s/ Thomas Jacob           Director                  March 27, 1997
-------------------------
Thomas Jacob

/s/ William C. Langley     Director                  March 27, 1997
-------------------------
William C. Langley

/s/ Peter J. Tobin         Director                  March 27, 1997
------------------------
Peter J. Tobin


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