<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-40939
[GRANDE LOAN II LOGO]
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 1, 1998
$1,317,558,000 (APPROXIMATE)
GS MORTGAGE SECURITIES CORPORATION II
AS SELLER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-GL II
The Commercial Mortgage Pass-Through Certificates, Series 1998-GL II (the
"Certificates") will represent beneficial ownership interests in a trust fund
(the "Trust Fund") to be created by GS Mortgage Securities Corporation II
(the "Seller"). The Trust Fund will consist primarily of a pool (the
"Mortgage Pool") of 10 mortgage loans, with original terms to maturity of not
more than 30 years (the "Mortgage Loans"), secured by first liens on 249
commercial properties (the "Mortgaged Properties"). The Mortgaged Properties
include hotel properties, refrigerated distribution/warehouse facilities,
retail properties and office buildings. The Mortgage Loans were originated by
Goldman Sachs Mortgage Company ("GSMC") and by GMAC Commercial Mortgage
Corporation ("GMACCM") on behalf of GSMC. See "Mortgage Pool
Characteristics--General."
(cover page continued on page S-3)
<TABLE>
<CAPTION>
INITIAL CERTIFICATE INITIAL RATED FINAL
PRINCIPAL OR NOTIONAL PASS-THROUGH EXPECTED RATINGS DISTRIBUTION
CLASS AMOUNT (1) RATE (2) DESCRIPTION (3) MOODY'S/FITCH DATE
- ------------- --------------------- -------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Class A-1 .... $ 278,000,000 6.312000% Fixed Aaa/AAA April 13, 2031
Class A-2 .... $ 694,315,000 6.562000% Fixed Aaa/AAA April 13, 2031
Class X(4) .. $1,148,459,000 0.640415% WAC/IO Aaa/AAA April 13, 2031
Class B ...... $ 91,595,000 6.798461% WAC less 0.392% Aa2/AA April 13, 2031
Class C ...... $ 84,549,000 6.965461% WAC less 0.225% A2/A April 13, 2031
Class D ...... $ 98,641,000 7.190461% WAC Baa2/BBB April 13, 2031
Class E ...... $ 70,458,000 7.190461% WAC Baa3/BBB- April 13, 2031
</TABLE>
- ------------
(1) Approximate, subject to adjustment as described herein.
(2) The Class X, Class B, Class C, Class D and Class E Certificates bear
interest at variable rates. The Pass-Through Rates shown in the table
above for such Certificates are the rates for the Distribution Date
occurring in June 1998. The Pass-Through Rates for such Certificates
for each subsequent Distribution Date will be calculated as provided
herein. See "Description of the Offered
Certificates--Distributions--Payment Priorities" herein.
(3) "WAC" means weighted average coupon, "Fixed" means fixed rate coupon,
and "IO" means interest only. "WAC" and "Fixed" are descriptions of the
type of Pass-Through Rates borne by the related Classes and "IO"
designates that the related Class is entitled only to distributions of
interest.
(4) The Class X Certificates will not have Certificate Principal Amounts
and will not be entitled to receive distributions of principal.
Interest will accrue on such Classes of Certificates at the
Pass-Through Rates thereof on the Notional Amounts thereof. The
Notional Amount of the Class X Certificates is initially
$1,148,459,000, which is equal to the aggregate initial Certificate
Principal Amount of the Class A-1, Class A-2, Class B and Class C
Certificates. See "Description of the Offered Certificates--General"
herein.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" HEREIN COMMENCING ON PAGE S-40 AND "RISK FACTORS" IN
THE PROSPECTUS COMMENCING ON PAGE 4.
The Offered Certificates will be purchased by Goldman, Sachs & Co. (the
"Underwriter") from the Seller and will be offered by the Underwriter from
time to time for sale in negotiated transactions or otherwise at varying
prices to be determined at the time of each sale. Proceeds to the Seller from
the sale of the Offered Certificates will be $1,362,632,592 plus accrued
interest, if any, from May 1, 1998 before deducting expenses payable by the
Seller.
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE SELLER,
THE ORIGINATORS, THE MASTER SERVICER, THE SPECIAL SERVICER, THE TRUSTEE, THE
UNDERWRITER, THE FISCAL AGENT OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER
THE CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR GUARANTEED
BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Offered Certificates are offered by the Underwriter subject to prior
sale, when, as and if issued, delivered to and accepted by the Underwriter.
It is expected that delivery of the Offered Certificates will be made through
the facilities of DTC in the United States and Cedel and Euroclear in Europe,
on or about May 21, 1998 against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO.
The date of this Prospectus Supplement is May 14, 1998.
<PAGE>
$1,317,558,000 (APPROXIMATE)
GS MORTGAGE SECURITIES CORPORATION II (SELLER)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-GL II
<PAGE>
GRANDE LOAN (1M/SM) II
GS MORTGAGE SECURITIES CORPORATION II
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES SERIES 1998 -GL II
Graphic Omitted: Map of United States which highlights the states where
Mortgage Properties are located and provides for the following information
with respect to each such State:
IDAHO
2 properties
$15,831,252
1.1% of total
MONTANA
6 properties
$10,799,944
0.7% of total
WYOMING
1 property
$1,549,051
0.1% of total
MISSOURI
3 properties
$12,748,346
0.9% of total
IOWA
17 properties
$27,914,192
1.9% of total
NORTH DAKOTA
10 properties
$13,639,483
0.9% of total
SOUTH DAKOTA
2 properties
$3,440,886
0.2% of total
MINNESOTA
10 properties
$23,594,690
1.6% of total
WISCONSIN
12 properties
$41,789,888
2.9% of total
ILLINOIS
38 properties
$83,332,567
5.9% of total
KENTUCKY
4 properties
$8,606,071
0.6% of total
MICHIGAN
4 properties
$7,230,879
0.5% of total
INDIANA
14 properties
$45,785,325
3.3% of total
<PAGE>
OHIO
25 properties
$57,382,234
4.0% of total
PENNSYLVANIA
3 properties
$145,346,040
10.3% of total
MAINE
1 property
$3,345,691
0.2% of total
MASSACHUSETTS
5 properties
$12,693,526
0.9% of total
NEW YORK
2 properties
$182,523,713
12.9% of total
VIRGINIA
4 properties
$81,447,781
5.7% of total
NORTH CAROLINA
3 properties
$17,547,098
1.2% of total
SOUTH CAROLINA
1 property
$3,345,691
0.2% of total
TENNESSEE
3 properties
$20,313,127
1.4% of total
GEORGIA
6 properties
$69,150,599
4.9% of total
FLORIDA
2 properties
$812,956
0.1% of total
ALABAMA
4 properties
$24,465,369
1.7% of total
ARKANSAS
4 properties
$16,756,988
1.1% of total
KANSAS
7 properties
$15,520,600
1.1% of total
<PAGE>
TEXAS
25 properties
$55,488,925
3.9% of total
OKLAHOMA
8 properties
$17,391,825
1.2% of total
COLORADO
4 properties
$7,892,116
0.5% of total
CALIFORNIA
6 properties
$235,948,181
16.7% of total
UTAH
1 property
$7,929,888
0.5% of total
NEVADA
1 property
$78,998,166
5.6% of total
NEBRASKA
2 properties
$4,592,436
0.3% of total
OREGON
4 properties
$28,410,679
2.0% of total
WASHINGTON
5 properties
$25,586,726
1.8% of total
[ ] (less than) 1.0%
of Initial Pool Balance
[ ] 1.1 -5.0%
of Initial Pool Balance
[ ] 5.1 -10.0%
of Initial Pool Balance
[ ] 10.1 -20.0%
of Initial Pool Balance
Graphic omitted: Photographs of Showcase, Green Acres, Marriott Desert Springs,
the Americold property located in Plover, Wisconsin, the URS property located
in Atlanta, Georgia, One Commerce Square, the Tharaldson Pool A property
located in Peoria, Illinois, the Tharaldson Pool B property located in
Lubbock, Texas, Pier 39, and the following Crystal City Pool properties: Crystal
Gateway North and 1919 South Eads, both located in Crystal City, Virginia.
<PAGE>
(continuation of cover page)
The Certificates will consist of fourteen classes (each a "Class"),
designated as the Class A-1 Certificates, Class A-2 Certificates, Class X
Certificates, Class B Certificates, Class C Certificates, Class D
Certificates, Class E Certificates, Class F Certificates, Class G
Certificates, Class M Certificates, Class MX Certificates, Class Q
Certificates, Class R Certificates and Class LR Certificates. Only the Class
A-1, Class A-2, Class X, Class B, Class C, Class D and Class E Certificates
(collectively, the "Offered Certificates") are offered hereby; the Class F,
Class G, Class M, Class MX, Class Q, Class R and Class LR Certificates
(collectively, the "Private Certificates") are not offered hereby.
The Mortgage Pool consists of the Mortgage Loans. The characteristics of
the Mortgage Loans and the Mortgaged Properties are more fully described
herein under "Mortgage Pool Characteristics" and "Description of the
Mortgaged Properties and the Mortgage Loans."
Distributions on the Offered Certificates will be made, to the extent of
Available Funds, on the second Business Day immediately following the 11th
day of each month, beginning on June 15, 1998 (each, a "Distribution Date").
As more fully described herein, distributions allocable to interest on the
Certificates on each Distribution Date will be based on the pass-through rate
for the respective Class (the "Pass-Through Rate") and the aggregate
principal balance (the "Certificate Principal Amount") or notional balance
(the "Notional Amount"), as applicable, of such Class outstanding immediately
prior to such Distribution Date. Distributions in respect of principal of the
Offered Certificates will be made as described herein under "Description of
the Offered Certificates--Distributions--Payment Priorities."
THE YIELD TO MATURITY ON EACH CLASS OF THE OFFERED CERTIFICATES WILL BE
SENSITIVE TO, AND THE YIELD TO MATURITY ON THE CLASS X CERTIFICATES WILL BE
EXTREMELY SENSITIVE TO, THE RATE AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING
BOTH VOLUNTARY AND INVOLUNTARY PREPAYMENTS, DELINQUENCIES, DEFAULTS AND
LIQUIDATIONS) ON THE MORTGAGE LOANS AND PAYMENTS WITH RESPECT TO REPURCHASES
THEREOF THAT HAVE THE EFFECT OF REDUCING THE CERTIFICATE PRINCIPAL AMOUNT OR
THE NOTIONAL AMOUNT, AS THE CASE MAY BE, OF SUCH CLASS. THE YIELD TO
INVESTORS, IN PARTICULAR THE INVESTORS IN SUBORDINATE CLASSES, WILL BE
SENSITIVE TO THE TIMING AND MAGNITUDE OF DELINQUENCIES AND LOSSES ON THE
MORTGAGE LOANS. THE RIGHTS OF THE HOLDERS OF THE CLASS B, CLASS C, CLASS D,
AND CLASS E CERTIFICATES TO RECEIVE DISTRIBUTIONS OF PRINCIPAL AND INTEREST
WILL BE SUBORDINATED TO SUCH RIGHTS OF THE HOLDERS OF CERTIFICATES WITH AN
EARLIER SEQUENTIAL DESIGNATION AND THE CLASS X CERTIFICATES. IN ADDITION,
WITH RESPECT TO ANY CLASS OF CERTIFICATES ENTITLED TO PRINCIPAL
DISTRIBUTIONS, TO THE EXTENT LOSSES ON THE MORTGAGE LOANS EXCEED THE
PRINCIPAL AMOUNT OF ALL CLASSES OF CERTIFICATES SUBORDINATE TO SUCH CLASS,
SUCH CLASS WILL GENERALLY BEAR A LOSS EQUAL TO THE AMOUNT OF SUCH EXCESS UP
TO AN AMOUNT EQUAL TO THE REMAINING PRINCIPAL AMOUNT THEREOF. NO
REPRESENTATION IS MADE AS TO THE RATE, TIMING OR MAGNITUDE OF ANY SUCH EVENT
WITH RESPECT TO ANY OF THE MORTGAGE LOANS OR AS TO THE ANTICIPATED YIELD TO
MATURITY OF ANY OFFERED CERTIFICATE.
GMACCM will act as master servicer of the Mortgage Loans (in such
capacity, the "Master Servicer"). The obligations of the Master Servicer with
respect to the Certificates will be limited to its contractual servicing
obligations and the obligation under certain circumstances to make Advances
in respect of the Mortgage Loans. See "The Pooling Agreement--Advances"
herein. The Master Servicer will not act as an insurer or credit enhancer of
the Mortgage Pool. If the Master Servicer fails to make a required Advance,
LaSalle National Bank (the "Trustee"), as acting or successor Master
Servicer, acting in accordance with the servicing standard set forth in the
Pooling Agreement, will be required to make such Advance. If the Trustee
fails to make a required Advance, ABN AMRO Bank N.V., as the fiscal agent of
the Trustee (the "Fiscal Agent"), acting in accordance with the servicing
standard set forth in the Pooling Agreement, will be required to make such
Advance.
Elections will be made to treat designated portions of the Trust Fund,
exclusive of the Excess Interest, the Default Interest, the Excess Interest
Distribution Account, the Class Q Distribution Account, the Marriott Desert
Springs Parent Loan, the Class M Collection Account and the Class M
Distribution Account (such portions of the Trust Fund, the "Trust REMICs"),
as two separate "real estate mortgage investment conduits" (each, a "REMIC")
for federal income tax purposes, and, in the opinion of counsel, the Trust
REMICs will qualify as such. The Class A-1, Class A-2, Class X, Class B,
Class C, Class D, Class E, Class F and Class G Certificates will represent
"regular interests" in a REMIC. In addition, the Class A-2, Class B, Class C,
Class D, Class E, Class F and Class G Certificates will also represent
undivided beneficial interests in designated portions of the Excess Interest,
which portion of the Trust Fund will be treated as part of a grantor trust
for federal income tax purposes. See "Federal Income Tax Consequences" herein
and "Federal Income Tax Consequences" in the Prospectus.
S-3
<PAGE>
If and to the extent required by applicable law, this Prospectus
Supplement and the accompanying Prospectus may be used by Goldman, Sachs &
Co. in connection with offers and sales of the Offered Certificates related
to certain market-making transactions, at prices related to prevailing market
prices at the time of sale. The Seller will not receive any proceeds from
such transactions. Goldman, Sachs & Co. may act as principal or as agent in
such transactions. See "Underwriting" herein and "Plan of Distribution" in
the Prospectus.
THE OFFERED CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE
PART OF A SEPARATE SERIES OF THE SELLER'S CERTIFICATES AND ARE BEING OFFERED
PURSUANT TO ITS PROSPECTUS DATED MAY 1, 1998, OF WHICH THIS PROSPECTUS
SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE
PROSPECTUS CONTAINS IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS
NOT CONTAINED HEREIN, AND PROSPECTIVE INVESTORS ARE URGED TO READ THE
PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE OFFERED
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES, INCLUDING
SHORT-COVERING TRANSACTIONS IN SUCH CERTIFICATES, AND THE IMPOSITION OF A
PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING" HEREIN AND "PLAN OF DISTRIBUTION" IN THE
PROSPECTUS.
There is currently no secondary market for the Offered Certificates. The
Underwriter currently expects to make a secondary market in the Offered
Certificates, but has no obligation to do so. There can be no assurance that
such a market will develop or, if it does develop, that it will continue. See
"Underwriting" herein.
The distribution of this Prospectus Supplement dated May 14, 1998 and the
Prospectus dated May 1, 1998, and the offer or sale of Certificates may be
restricted by law in certain jurisdictions. Persons into whose possession
this Prospectus Supplement and the Prospectus or any Certificates come must
inform themselves about, and observe, any such restrictions. In particular,
there are restrictions on the distribution of this Prospectus Supplement and
the Prospectus and the offer or sale of Certificates in the United Kingdom
(see "Underwriting" herein).
FORWARD-LOOKING STATEMENTS
IF AND WHEN INCLUDED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS OR IN DOCUMENTS INCORPORATED HEREIN OR THEREIN BY REFERENCE, THE
WORDS "EXPECTS," "INTENDS," "ANTICIPATES," "ESTIMATES" AND ANALOGOUS
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. ANY SUCH
STATEMENTS, WHICH MAY INCLUDE STATEMENTS CONTAINED IN "RISK FACTORS,"
INHERENTLY ARE SUBJECT TO A VARIETY OF RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. SUCH RISKS
AND UNCERTAINTIES INCLUDE, AMONG OTHERS, GENERAL ECONOMIC AND BUSINESS
CONDITIONS, COMPETITION, CHANGES IN FOREIGN POLITICAL, SOCIAL AND ECONOMIC
CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL
REGULATIONS, CUSTOMER PREFERENCES AND VARIOUS OTHER MATTERS, MANY OF WHICH
ARE BEYOND THE SELLER'S CONTROL. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY
AS OF THE DATE OF THIS PROSPECTUS SUPPLEMENT. THE SELLER EXPRESSLY DISCLAIMS
ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR REVISIONS TO
ANY FORWARD-LOOKING STATEMENT CONTAINED HEREIN TO REFLECT ANY CHANGE IN THE
SELLER'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS
OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED.
S-4
<PAGE>
EXECUTIVE SUMMARY
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and the Prospectus relating to the Offered Certificates in making
their investment decision. The following Executive Summary does not include
all relevant information relating to the securities and collateral described
herein, particularly with respect to the risks and special considerations
involved with an investment in such securities, and is qualified in its
entirety by reference to the detailed information appearing elsewhere in this
Prospectus Supplement and the Prospectus. Prior to making any investment
decision, a prospective investor should carefully review this Prospectus
Supplement and the Prospectus. Capitalized terms used and not otherwise
defined herein have the respective meanings assigned to them in this
Prospectus Supplement and the Prospectus.
CERTIFICATE SUMMARY
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENT OF
CREDIT TOTAL
SUPPORT CERTIFICATES
----------- -------------- --------------- --------------
INITIAL
CERTIFICATE
PRINCIPAL RATINGS
CLASS AMOUNT (MOODY'S/FITCH)
----------------- ----------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
CLASS X CLASS A-1 $278,000,000 (Aaa/AAA) 19.7%
$1,148,459,000 ----------- -------------- --------------- --------------
31.0%* (Notional Amount) CLASS A-2 $694,315,000 (Aaa/AAA) 49.3%
(Aaa/AAA) ----------- -------------- --------------- --------------
24.5% CLASS B $ 91,595,000 (Aa2/AA) 6.5%
----------- -------------- --------------- --------------
18.5% CLASS C $ 84,549,000 (A2/A) 6.0%
----------- -------------- --------------- --------------
11.5% CLASS D $ 98,641,000 (Baa2/BBB) 7.0%
----------- -------------- --------------- --------------
6.5% CLASS E $ 70,458,000 (Baa3/BBB-) 5.0%
----------- -------------- --------------- --------------
2.0% CLASS F** $ 63,411,000 (Ba2/BB) 4.5%
----------- -------------- --------------- --------------
N/A CLASS G** $ 28,183,997 (B2/B) 2.0%
----------- -------------- --------------- --------------
</TABLE>
* Represents the approximate credit support for the Class A-1
and Class A-2 Certificates in the aggregate.
** Not offered hereby.
The Class M, Class MX, Class Q, Class R and Class LR
Certificates are not offered hereby or represented in this
table.
S-5
<PAGE>
CERTIFICATE SUMMARY
<TABLE>
<CAPTION>
INITIAL
CERTIFICATE WTD.
PRINCIPAL OR INITIAL AVG.
RATINGS NOTIONAL % OF PASS-THROUGH LIFE PRINCIPAL
CLASS (MOODY'S/FITCH) AMOUNT TOTAL DESCRIPTION RATE (YRS.)* WINDOW*
- ------- --------------- -------------- --------- ---------------- -------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Grade Certificates
- -------------------------------------------------------------------------------------------- ------------
A-1 Aaa/AAA $ 278,000,000 19.7% Fixed Rate 6.312000% 5.0 6/98-11/07
- ------- --------------- -------------- --------- ---------------- -------------- ------- ------------
A-2 Aaa/AAA $ 694,315,000 49.3% Fixed Rate 6.562000% 9.7 11/07-4/08
- ------- --------------- -------------- --------- ---------------- -------------- ------- ------------
Interest Only:
Weighted Average
X Aaa/AAA $1,148,459,000 N/A Coupon 0.640415% N/A N/A
- ------- --------------- -------------- --------- ---------------- -------------- ------- ------------
B Aa2/AA $ 91,595,000 6.5% WAC less 0.392% 6.798461% 9.9 4/08-5/08
- ------- --------------- -------------- --------- ---------------- -------------- ------- ------------
C A2/A $ 84,549,000 6.0% WAC less 0.225% 6.965461% 10.0 5/08
- ------- --------------- -------------- --------- ---------------- -------------- ------- ------------
D Baa2/BBB $ 98,641,000 7.0% WAC 7.190461% 10.0 5/08
- ------- --------------- -------------- --------- ---------------- -------------- ------- ------------
E Baa3/BBB- $ 70,458,000 5.0% WAC 7.190461% 10.0 5/08
- ------- --------------- -------------- --------- ---------------- -------------- ------- ------------
Non-Offered Certificates
- -------------------------------------------------------------------------------------------- ------------
F** Ba2/BB $ 63,411,000 4.5% WAC 7.190461% 11.6 5/08-6/10
- ------- --------------- -------------- --------- ---------------- -------------- ------- ------------
G** B2/B $ 28,183,997 2.0% WAC 7.190461% 12.1 6/10
- ------- --------------- -------------- --------- ---------------- -------------- ------- ------------
</TABLE>
The Class M, Class MX, Class Q, Class R and Class LR Certificates are not
represented in this table.
* The weighted average life ("Weighted Average Life") and period during
which distributions of principal would be received (the "Principal
Window") set forth in the foregoing table with respect to each Class of
Certificates are based on the assumptions that there are no losses on
the Mortgage Loans, that Mortgage Loans prepay in full on Anticipated
Repayment Dates, and otherwise are based on the assumptions for
Scenario 1 set forth under "Yield, Prepayment and Maturity
Considerations--Weighted Average Life of Offered Certificates."
** Not offered hereby.
MORTGAGE LOAN SUMMARY
<TABLE>
<CAPTION>
ANTICIPATED
CUT-OFF DATE REPAYMENT FINAL
NO. PRINCIPAL DATE MATURITY
MORTGAGE LOAN PROPERTIES BALANCE ("ARD") DATE
- ----------------------- ------------ -------------- ------------- ----------
<S> <C> <C> <C> <C>
URS Pool Loan 29 $ 253,000,000 5/11/08 5/11/23
- ----------------------- ------------ -------------- ------------- ----------
Tharaldson Pool B Loan 93 $ 183,352,232 2/11/08 2/11/23
- ----------------------- ------------ -------------- ------------- ----------
Tharaldson Pool A Loan 90 $ 178,671,275 2/11/08 2/11/23
- ----------------------- ------------ -------------- ------------- ----------
Green Acres Loan 1 $ 159,523,713 2/11/08 2/11/28
- ----------------------- ------------ -------------- ------------- ----------
Americold Pool Loan** 29 $ 148,500,000 5/11/08 5/11/23
- ----------------------- ------------ -------------- ------------- ----------
Pier 39 Loan 1 $ 116,669,545 4/11/08 2/11/28
- ----------------------- ------------ -------------- ------------- ----------
One Commerce Square
Loan 1 N/A N/A N/A
- ----------------------- ------------ -------------- ------------- ----------
Tranche A N/A $ 79,929,131 4/11/08 4/11/28
- ----------------------- ------------ -------------- ------------- ----------
Tranche B N/A $ 31,481,501 N/A 9/11/02
- ----------------------- ------------ -------------- ------------- ----------
Marriott Desert Springs
Loan 1 $ 102,418,958 6/11/10 12/11/22
- ----------------------- ------------ -------------- ------------- ----------
Showcase Loan 1 $ 78,998,166 11/11/07 11/11/25
- ----------------------- ------------ -------------- ------------- ----------
Crystal City Pool Loan 3 $ 76,608,478 11/11/07 11/11/27
- ----------------------- ------------ -------------- ------------- ----------
Total/Weighted Average 249 $1,409,152,997 N/A N/A
- ----------------------- ------------ -------------- ------------- ----------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ORIGINAL
AMORTIZATION CUT-OFF
TERM MORTGAGE DATE ARD
MORTGAGE LOAN (MONTHS) RATE DSCR* LTV LTV
- ----------------------- -------------- ----------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
URS Pool Loan 300 6.894% 1.88x 59.7% 47.0%
- ----------------------- -------------- ----------- ------- --------- -------
Tharaldson Pool B Loan 300 6.876% 2.35x 55.4% 43.7%
- ----------------------- -------------- ----------- ------- --------- -------
Tharaldson Pool A Loan 300 6.876% 2.35x 53.7% 42.3%
- ----------------------- -------------- ----------- ------- --------- -------
Green Acres Loan 360 6.750% 1.54x 63.0% 54.0%
- ----------------------- -------------- ----------- ------- --------- -------
Americold Pool Loan** 300 6.894% 1.94x 57.0% 44.9%
- ----------------------- -------------- ----------- ------- --------- -------
Pier 39 Loan 360 7.107% 1.38x 73.8% 63.6%
- ----------------------- -------------- ----------- ------- --------- -------
One Commerce Square
Loan N/A N/A 1.18x 82.5% N/A
- ----------------------- -------------- ----------- ------- --------- -------
Tranche A 360 6.995% 1.33x N/A 51.0%
- ----------------------- -------------- ----------- ------- --------- -------
Tranche B 53 6.995% 1.07x N/A N/A
- ----------------------- -------------- ----------- ------- --------- -------
Marriott Desert Springs
Loan 300 7.800% 2.27x 43.2% 31.7%
- ----------------------- -------------- ----------- ------- --------- -------
Showcase Loan 337 7.523% 1.44x 67.2% 57.2%
- ----------------------- -------------- ----------- ------- --------- -------
Crystal City Pool Loan 360 6.904% 1.61x 66.6% 57.3%
- ----------------------- -------------- ----------- ------- --------- -------
Total/Weighted Average 322 7.000% 1.86x 61.0% 48.3%
- ----------------------- -------------- ----------- ------- --------- -------
- ----------------------- -------------- ----------- ------- --------- -------
</TABLE>
The terms "Anticipated Repayment Date," "DSCR," "ARD LTV" and "Cut-Off Date
LTV" are defined in this Prospectus Supplement in the explanatory notes set
forth prior to the tables under "Mortgage Pool Characteristics." The Marriott
Desert Springs Parent Loan is not represented in this table.
* Based on Underwritten Net Cash Flow.
** For DSCR and LTV purposes, the principal balance of the Total Americold
Pool Loan is utilized, The Americold Pool Loan is evidenced by a note
representing 50% of the Total Americold Pool Loan with a Cut-Off Date
Principal Balance of $297,000,000; the note is cross-collateralized and
cross-defaulted with a pari passu note in the amount of $148,500,000
which does not form part of the Mortgage Pool.
S-6
<PAGE>
PROSPECTUS SUPPLEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
EXECUTIVE SUMMARY..................................................................... S-5
SUMMARY OF PROSPECTUS SUPPLEMENT...................................................... S-9
RISK FACTORS.......................................................................... S-40
The Mortgage Loans................................................................... S-40
Conflicts of Interest................................................................ S-60
The Offered Certificates............................................................. S-61
MORTGAGE POOL CHARACTERISTICS......................................................... S-65
General.............................................................................. S-65
Security for the Mortgage Loans...................................................... S-66
Certain Characteristics of the Mortgage Loans........................................ S-66
Underwriting Standards............................................................... S-75
Additional Information............................................................... S-76
DESCRIPTION OF THE MORTGAGED PROPERTIES AND THE MORTGAGE LOANS........................ S-77
URS Pool............................................................................. S-77
Tharaldson Pool B.................................................................... S-98
Tharaldson Pool A.................................................................... S-115
Green Acres.......................................................................... S-131
Americold Pool....................................................................... S-146
Pier 39.............................................................................. S-167
One Commerce Square.................................................................. S-180
Marriott Desert Springs.............................................................. S-198
Showcase............................................................................. S-216
Crystal City Pool.................................................................... S-229
DESCRIPTION OF THE OFFERED CERTIFICATES............................................... S-243
General.............................................................................. S-243
Distributions........................................................................ S-244
Subordination........................................................................ S-252
Appraisal Reductions................................................................. S-252
Delivery, Form and Denomination...................................................... S-253
Book-Entry Registration.............................................................. S-254
Definitive Certificates.............................................................. S-256
Transfer Restrictions................................................................ S-256
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS......................................... S-257
Yield................................................................................ S-257
Yield on the Offered Certificates.................................................... S-259
Rated Final Distribution Date........................................................ S-265
Weighted Average Life of Offered Certificates........................................ S-265
THE POOLING AGREEMENT................................................................. S-272
General.............................................................................. S-272
Assignment of the Mortgage Loans..................................................... S-272
Representations and Warranties; Repurchase........................................... S-272
Servicing of the Mortgage Loans; Collection of Payments.............................. S-273
Advances............................................................................. S-275
Accounts............................................................................. S-277
Withdrawals From the Collection Account.............................................. S-279
Successor Manager.................................................................... S-279
Enforcement of "Due-on-Sale" and "Due-on-Encumbrance" Clauses........................ S-280
S-7
<PAGE>
PAGE
---------
Inspections.......................................................................... S-281
Evidence as to Compliance............................................................ S-281
Certain Matters Regarding the Seller, the Master Servicer and the Special Servicer .. S-281
Events of Default.................................................................... S-283
Rights Upon Event of Default......................................................... S-283
Amendment............................................................................ S-284
Realization Upon Mortgage Loans; Modifications....................................... S-285
Standards for Conduct Generally in Effecting Foreclosure or the Sale of Defaulted
Loans .............................................................................. S-286
Modification ........................................................................ S-288
Optional Termination; Optional Mortgage Loan Purchase................................ S-290
The Trustee.......................................................................... S-290
Duties of the Trustee................................................................ S-291
The Fiscal Agent..................................................................... S-292
Duties of the Fiscal Agent........................................................... S-292
The Master Servicer.................................................................. S-293
Servicing Compensation and Payment of Expenses....................................... S-293
Special Servicers.................................................................... S-294
Master Servicer and Special Servicer Permitted to Buy Certificates................... S-295
Reports to Certificateholders........................................................ S-295
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS........................................... S-296
USE OF PROCEEDS....................................................................... S-298
FEDERAL INCOME TAX CONSEQUENCES....................................................... S-298
ERISA CONSIDERATIONS.................................................................. S-300
LEGAL INVESTMENT...................................................................... S-302
UNDERWRITING.......................................................................... S-302
EXPERTS............................................................................... S-303
VALIDITY OF OFFERED CERTIFICATES...................................................... S-303
RATINGS............................................................................... S-303
INDEX OF SIGNIFICANT DEFINITIONS...................................................... S-305
Representations and Warranties ....................................................... Exhibit A
WAC Rates ............................................................................ Exhibit B
Form of Reports to Certificateholders ................................................ Exhibit C
Mortgaged Properties Characteristics ................................................. Annex A
</TABLE>
S-8
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary
are defined elsewhere in this Prospectus Supplement or in the Prospectus. An
Index of Significant Definitions included at the end of this Prospectus
Supplement sets forth the pages on which the definitions of certain principal
terms appear.
Title of Certificates ......... GS Mortgage Securities Corporation II
Commercial Mortgage Pass-Through
Certificates, Series 1998-GL II (the
"Certificates").
Certificate Principal Amount
and Notional Amount .......... Each Class of Offered Certificates has the
approximate aggregate initial Certificate
Principal Amount or Notional Amount set
forth on the cover page of this Prospectus
Supplement, subject to a variance of plus
or minus 5%. The Offered Certificates,
together with the Private Certificates,
will be issued pursuant to a Pooling and
Servicing Agreement to be dated as of the
Cut-Off Date (the "Pooling Agreement")
among the Seller, the Master Servicer, the
Special Servicer, the Trustee and the
Fiscal Agent.
Seller ........................ GS Mortgage Securities Corporation II, a
Delaware corporation (the "Seller"), an
affiliate of Goldman Sachs Mortgage
Company, a New York limited partnership
("GSMC"), and Goldman, Sachs & Co. (the
"Underwriter"). See "The Seller" in the
Prospectus.
Master Servicer ............... GMAC Commercial Mortgage Corporation, a
California corporation ("GMACCM" and, in
its capacity as master servicer, the
"Master Servicer"), will serve as the
master servicer of the Mortgage Loans. See
"The Pooling Agreement--The Master
Servicer" herein and "Servicing of the
Mortgage Loans" in the Prospectus.
Special Servicer .............. The initial special servicer (in such
capacity, the "Special Servicer") will be
GMACCM. See "The Pooling
Agreement--Special Servicers" herein.
Trustee ....................... LaSalle National Bank, a national banking
association (the "Trustee"). See "The
Pooling Agreement--The Trustee" herein.
Fiscal Agent .................. ABN AMRO Bank N.V., a Netherlands banking
corporation (the "Fiscal Agent"), and the
indirect corporate parent of the Trustee.
Cut-Off Date .................. May 11, 1998.
Closing Date .................. On or about May 21, 1998.
Distribution Date ............. The second Business Day immediately
following the 11th day of each month,
commencing on June 15, 1998.
S-9
<PAGE>
"Business Day" means any day other than a
Saturday, a Sunday or any day on which
banking institutions in the City of New
York, New York, the cities in which the
principal servicing offices of the Master
Servicer or the Special Servicer are
located, or the city in which the
corporate trust office of the Trustee is
located, are authorized or obligated by
law, executive order or governmental
decree to be closed.
Record Date ................... With respect to each Distribution Date and
each Class of Offered Certificates, the
close of business on the last day of the
month immediately preceding the month in
which such Distribution Date occurs, or if
such day is not a Business Day, the
immediately preceding Business Day.
Interest Accrual Period ....... With respect to any Distribution Date and
with respect to each Class of
Certificates, the calendar month preceding
the month in which such Distribution Date
occurs.
Rated Final Distribution Date . As to each Class of Offered Certificates,
the Distribution Date in April 2031, which
is the Distribution Date occurring three
years after the latest maturity date of
any Mortgage Loan.
Due Date ...................... With respect to any Mortgage Loan, the day
each month set forth in the related Note
on which the Monthly Payment is due and
payable, and with respect to any
Distribution Date, the Due Date occurring
in the month in which such Distribution
Date occurs. All of the Mortgage Loans
have Due Dates that occur on the 11th day
of each month, or, if such day is not a
business day, the immediately preceding
business day.
Collection Period ............. With respect to a Distribution Date and each
Mortgage Loan, the period beginning on the
day after the Due Date in the month
preceding the month in which such
Distribution Date occurs (or, with respect
to the first Distribution Date, the day
after the Cut-Off Date) and ending at the
close of business on the Due Date in the
month in which such Distribution Date
occurs.
Denominations ................. The Offered Certificates (other than the
Class X Certificates) will be issuable in
registered form in minimum denominations
of $10,000 initial Certificate Principal
Amount and multiples of $1 in excess
thereof and the Class X Certificates will
be issuable in registered form in minimum
denominations of $1,000,000 initial
Notional Amount and multiples of $1 in
excess thereof.
Clearance and Settlement ...... Holders of Offered Certificates may hold
their Certificates through any of The
Depository Trust Company ("DTC") (in the
United States) and Cedel Bank, S.A.
("CEDEL") and The Euroclear System
("Euroclear") (in Europe). Transfers
within DTC, CEDEL or Euroclear, as the
case may be, will be in
S-10
<PAGE>
accordance with the usual rules and
operating procedures of the relevant
system. Transfers between persons holding
directly or indirectly through DTC, CEDEL
or Euroclear will be effected in DTC
through the relevant Depositories of CEDEL
or Euroclear. The Seller may elect to
terminate the book-entry system through
DTC with respect to all or any portion of
any Class of the Offered Certificates. See
"Description of the Offered
Certificates--Delivery, Form and
Denomination," "--Book-Entry Registration"
and "--Definitive Certificates" herein and
"Description of the Certificates--General"
in the Prospectus.
The Mortgage Pool ............. The "Mortgage Pool" will consist of 10
Mortgage Loans, each evidenced by one or
more promissory notes (each, a "Note")
secured by first mortgages, deeds of trust
or similar security instruments
("Mortgages") on commercial properties
(the "Mortgaged Properties"). See
"Description of the Mortgaged Properties
and the Mortgage Loans" herein. The
Mortgage Loans will be acquired by the
Seller on or before the Closing Date. In
connection with its acquisition of the
Mortgage Loans, the Seller will be the
beneficiary of or will be assigned (and
will in turn assign to the Trustee for the
benefit of the holders of the
Certificates) certain rights in respect of
certain representations and warranties
described herein. See "Mortgage Pool
Characteristics--General" and "The Pooling
Agreement--Representations and Warranties;
Repurchase."
As of the Cut-Off Date, the Mortgage Loans
will have the following approximate
characteristics:
<TABLE>
<CAPTION>
<S> <C>
Aggregate Principal Balance .......... $1,409,152,997
Lowest Mortgage Loan Principal
Balance ............................. $76,608,478
Highest Mortgage Loan Principal
Balance ............................. $253,000,000
Average Mortgage Loan Principal
Balance ............................. $140,915,300
Range of Remaining Terms to
Anticipated Repayment Date .......... 114 to 145 months
Weighted Average Remaining Term to
Anticipated Repayment Date .......... 120 months
Range of Mortgage Rates .............. 6.75% to 7.80%
Weighted Average Mortgage Rate ...... 7.00%
Range of Cut-Off Date LTV Ratios .... 43.2% to 82.5%
Weighted Average Cut-Off Date LTV
Ratio ............................... 61.0%
Range of Debt Service Coverage Ratios 1.18x to 2.35x
Weighted Average Debt Service
Coverage Ratio ...................... 1.86x
</TABLE>
S-11
<PAGE>
Description of the Mortgage
Loans and
Properties
A. The URS Pool Loan and
Mortgaged Properties ...... The "URS Pool Loan" had a principal balance
as of the Cut-Off Date of approximately
$253,000,000 and is evidenced by a single
note issued by URS Real Estate, L.P., a
Delaware limited partnership (the "URS
Pool Borrower") formed for the sole
purpose of acquiring, owning, operating,
mortgaging and performing other related
activities with respect to the URS Pool
Properties. The URS Pool Loan is secured
by first priority mortgage and/or deed of
trust liens encumbering the URS Pool
Borrower's interest in 29 cold storage
warehouses located throughout the United
States (the "URS Pool Properties"). The
URS Pool Borrower is owned indirectly by
entities controlled by individuals who are
also directors and officers of Vornado
Realty Trust and Crescent Real Estate
Equities, Inc., respectively, and
substantially all of the economic
interests in which are held by Vornado
Realty Trust and Crescent Real Estate
Equities, Inc., respectively. Vornado
Realty Trust and Crescent Real Estate
Equities, Inc., are both publicly traded
real estate investment trusts whose
beneficial interests are listed on the New
York Stock Exchange. The URS Pool Borrower
owns fee title to 26 and leasehold title
to 3 of the URS Pool Properties.
The URS Pool Loan bears interest at a fixed
rate per annum equal to 6.894% (the "URS
Pool Initial Interest Rate") through and
including May 10, 2008, calculated for any
period based on the actual number of days
elapsed and a 360-day year. From and after
May 10, 2008 (the "URS Pool Anticipated
Repayment Date"), the URS Pool Loan
accrues interest at a fixed rate per annum
equal to 8.894% (the "URS Pool Revised
Interest Rate"). All interest accrued at
the excess of the URS Pool Revised
Interest Rate over the URS Pool Initial
Interest Rate (the "URS Pool Excess
Interest"), together with interest
thereon, will be deferred and will not be
paid until after the principal balance of
the URS Pool Loan has been reduced to
zero. Amounts so deferred will, to the
extent permitted by applicable law, accrue
interest at the URS Pool Revised Interest
Rate. The URS Pool Loan is scheduled to
mature on May 11, 2023, but may be prepaid
without payment of a yield maintenance
charge or prepayment premium on any URS
Pool Due Date from and after April 11,
2008. The URS Pool Loan requires monthly
payments of principal and interest of
approximately $1,786,497 (based on a
25-year amortization schedule and the URS
Pool Initial Interest Rate). Additionally,
commencing with the URS Pool Due Date
occurring on the URS Pool Anticipated
Repayment Date and on each URS Pool Due
Date thereafter, the URS Pool Loan
requires that all URS Pool Excess Cash
Flow be applied toward the reduction of
the principal balance of the URS Pool
Loan. The scheduled principal balance of
the URS Pool Loan on the URS Pool
Anticipated Repayment Date will be
approximately $199,116,531.
The URS Pool Properties consist of 29 dry
and cold storage warehouses located
throughout the United States and pre-
S-12
<PAGE>
dominantly in the Southeast region. The
URS Pool Properties contain approximately
114 million cubic feet of refrigerated
space. Appraisals dated as of March 1,
1998 determined an aggregate value for the
URS Pool Properties of approximately
$423,450,000, resulting in a Cut-Off Date
LTV of approximately 59.7%. The DSCR for
the URS Pool Properties as of the Cut-Off
Date is approximately 1.88x.
B. The Tharaldson Pool B Loan
and Mortgaged Properties . The "Tharaldson Pool B Loan" had a principal
balance as of the Cut-Off Date of
approximately $183,352,232 and is
evidenced by a single note issued by 79
corporations, 14 limited partnerships and
one holding company (the "Tharaldson Pool
B Borrowers") formed for the purpose of
acquiring, owning, operating, mortgaging
and performing other related activities
with respect to the Tharaldson Pool B
Properties. The Tharaldson Pool B Loan is
secured by first priority mortgage and/or
deed of trust liens encumbering the
Tharaldson Pool B Borrowers' interests in
93 limited service hotels located in
Colorado, Iowa, Illinois, Indiana, Kansas,
Kentucky, Michigan, Minnesota, Missouri,
Montana, North Dakota, Nebraska, Ohio,
Oklahoma, Texas, Wisconsin and Wyoming
(the "Tharaldson Pool B Properties"). The
Tharaldson Pool B Borrowers are indirectly
owned by Tharaldson Motels, Inc., which is
controlled by Gary Tharaldson and certain
Tharaldson family members. The Tharaldson
Pool B Borrowers own fee title to 91 and
leasehold title to 2 of the Tharaldson
Pool B Properties.
The Tharaldson Pool B Loan bears interest at
a fixed rate per annum equal to 6.876%
(the "Tharaldson Pool B Initial Interest
Rate") through and including February 10,
2008, calculated for any period based on
the actual number of days elapsed and a
360-day year. From and after February 11,
2008 (the "Tharaldson Pool B Anticipated
Repayment Date"), the Tharaldson Pool B
Loan accrues interest at a fixed rate per
annum equal to 8.876% (the "Tharaldson
Pool B Revised Interest Rate"). All
interest accrued at the excess of the
Tharaldson Pool B Revised Interest Rate
over the Tharaldson Pool B Initial
Interest Rate (the "Tharaldson Pool B
Excess Interest"), together with interest
thereon, will be deferred and will not be
paid until after the principal balance of
the Tharaldson Pool B Loan has been
reduced to zero. Amounts so deferred will,
to the extent permitted by applicable law,
accrue interest at the Tharaldson Pool B
Revised Interest Rate. The Tharaldson Pool
B Loan is scheduled to mature on February
11, 2023, but may be prepaid without
payment of a yield maintenance charge or
prepayment premium on any Tharaldson Pool
B Due Date from and after the Tharaldson
Pool B Anticipated Repayment Date. The
Tharaldson Pool B Loan requires monthly
payments of principal and interest of
approximately $1,299,196 (based on a
25-year amortization schedule and
S-13
<PAGE>
the Tharaldson Pool B Initial Interest
Rate). Additionally, commencing with the
Tharaldson Pool B Due Date occurring on
the Tharaldson Pool B Anticipated
Repayment Date and on each Tharaldson Pool
B Due Date thereafter, the Tharaldson Pool
B Loan requires that all Tharaldson Pool B
Excess Cash Flow be applied toward the
reduction of the principal balance of the
Tharaldson Pool B Loan. The scheduled
principal balance of the Tharaldson Pool B
Loan on the Tharaldson Pool B Anticipated
Repayment Date will be approximately
$144,503,224.
The Tharaldson Pool B Loan is neither
cross-collateralized nor cross-defaulted
with the Tharaldson Pool A Loan.
The Tharaldson Pool B Properties consist of
93 limited service hotels containing an
aggregate of approximately 5,858 rooms.
The Tharaldson Pool B Properties include
franchises of Fairfield Inn, Comfort Inn,
Hampton Inn, Residence Inn, Comfort
Suites, Super 8, Holiday Inn Express,
Courtyard, Country Inn & Suites and Days
Inn. The weighted average occupancy for
the year ended December 31, 1997 was
approximately 76%, the ADR for such year
was approximately $56.07 and the RevPAR
for such year was approximately $42.67.
Appraisals dated as of January 1, 1998
determined an aggregate value for the
Tharaldson Pool B Properties of
approximately $331,000,000, resulting in a
Cut-Off Date LTV of approximately 55.4%.
The DSCR for the Tharaldson Pool B
Properties as of the Cut-Off Date is
approximately 2.35x.
C. The Tharaldson Pool A Loan
and Mortgaged Properties . The "Tharaldson Pool A Loan" had a principal
balance as of the Cut-Off Date of
approximately $178,671,275 and is
evidenced by a single note issued by 79
corporations, 11 limited partnerships and
two holding companies (the "Tharaldson
Pool A Borrowers") formed for the purpose
of acquiring, owning, operating,
mortgaging and performing other related
activities with respect to the Tharaldson
Pool A Properties and related activities.
The Tharaldson Pool A Loan is secured by
first priority mortgage and/or deed of
trust liens encumbering the Tharaldson
Pool A Borrowers' interests in 90 limited
service hotels located in Arkansas, Iowa,
Illinois, Indiana, Kentucky, Michigan,
Minnesota, Montana, North Dakota, Ohio,
Oklahoma, South Dakota, Texas and
Wisconsin (the "Tharaldson Pool A
Properties"). The Tharaldson Pool A
Borrowers are indirectly owned by
Tharaldson Motels, Inc., which is
controlled by Gary Tharaldson and certain
Tharaldson family members. The Tharaldson
Pool A Borrowers own fee title to the
Tharaldson Pool A Properties.
The Tharaldson Pool A Loan bears interest at
a fixed rate per annum equal to 6.876%
(the "Tharaldson Pool A Initial
S-14
<PAGE>
Interest Rate") through and including
February 10, 2008, calculated for any
period based on the actual number of days
elapsed and a 360-day year. From and after
February 11, 2008 (the "Tharaldson Pool A
Anticipated Repayment Date"), the
Tharaldson Pool A Loan accrues interest at
a fixed rate per annum equal to 8.876%
(the "Tharaldson Pool A Revised Interest
Rate"). All interest accrued at the excess
of the Tharaldson Pool A Revised Interest
Rate over the Tharaldson Pool A Initial
Interest Rate (the "Tharaldson Pool A
Excess Interest"), together with interest
thereon, will be deferred and will not be
paid until after the principal balance of
the Tharaldson Pool A Loan has been
reduced to zero. Amounts so deferred will,
to the extent permitted by applicable law,
accrue interest at the Tharaldson Pool A
Revised Interest Rate. The Tharaldson Pool
A Loan is scheduled to mature on February
11, 2023, but may be prepaid without
payment of a yield maintenance charge or
prepayment premium on any Tharaldson Pool
A Due Date from and after the Tharaldson
Pool A Anticipated Repayment Date. The
Tharaldson Pool A Loan requires monthly
payments of principal and interest of
approximately $1,265,463 (based on a
25-year amortization schedule and the
Tharaldson Pool A Initial Interest Rate).
Additionally, commencing with the
Tharaldson Pool A Due Date occurring on
the Tharaldson Pool A Anticipated
Repayment Date and on each Tharaldson Pool
A Due Date thereafter, the Tharaldson Pool
A Loan requires that all Tharaldson Pool A
Excess Cash Flow be applied toward the
reduction of the principal balance of the
Tharaldson Pool A Loan. The scheduled
principal balance of the Tharaldson Pool A
Loan on the Tharaldson Pool A Anticipated
Repayment Date will be approximately
$140,908,257.
The Tharaldson Pool A Loan is neither
cross-collateralized nor cross-defaulted
with the Tharaldson Pool B Loan.
The Tharaldson Pool A Properties consist of
90 limited service hotels containing an
aggregate of approximately 5,848 rooms.
The Tharaldson Pool A Properties include
franchises of Fairfield Inn, Comfort Inn,
Hampton Inn, Residence Inn, Comfort
Suites, Country Inn & Suites, Courtyard,
Sleep Inn, Homewood Suites, Super 8 and
Tharaldson Inn & Suites. The weighted
average occupancy for the year ended
December 31, 1997 was approximately 76%,
the ADR for such year was approximately
$55.76 and the RevPAR for such year was
approximately $42.41. Appraisals dated as
of January 1, 1998 determined an aggregate
value for the Tharaldson Pool A Properties
of approximately $333,000,000, resulting
in a Cut-Off Date LTV of approximately
53.7%. The DSCR for the Tharaldson Pool A
Properties as of the Cut-Off Date is
approximately 2.35x.
D. The Green Acres Loan and
Mortgaged Property ....... The "Green Acres Loan" had a principal
balance as of the Cut-Off Date of
approximately $159,523,713 and is evi-
S-15
<PAGE>
denced by a single consolidated note
issued by Green Acres Mall, L.L.C., a
Delaware limited liability company (the
"Green Acres Borrower") with a purpose
limited solely to acquiring, owning,
operating, mortgaging and performing other
related activities with respect to the
Green Acres Property. The Green Acres Loan
is secured by a first priority
consolidated mortgage lien encumbering the
retail shopping center known as Green
Acres Mall and the adjacent convenience
shopping center known as The Plaza at
Green Acres located in Valley Stream, New
York (the "Green Acres Property"). The
Green Acres Borrower is owned indirectly
by Vornado Realty Trust and Vornado Realty
L.P. Vornado Realty Trust is the sole
general partner of Vornado Realty L.P. and
is a publicly traded real estate
investment trust whose beneficial
interests are listed on the New York Stock
Exchange. The Green Acres Borrower owns
fee title to the Green Acres Mall and a
ground lease interest in The Plaza at
Green Acres.
The Green Acres Loan bears interest at a
fixed rate per annum equal to 6.750% (the
"Green Acres Initial Interest Rate")
through and including February 10, 2008,
calculated based on the actual number of
days elapsed and a 360-day year. From and
after February 11, 2008 (the "Green Acres
Anticipated Repayment Date"), the Green
Acres Loan accrues interest at a fixed
rate per annum equal to 8.750% (the "Green
Acres Revised Interest Rate"). All
interest accrued at the excess of the
Green Acres Revised Interest Rate over the
Green Acres Initial Interest Rate (the
"Green Acres Excess Interest"), together
with interest thereon, will be deferred
and will not be paid until after the
principal balance of the Green Acres Loan
has been reduced to zero. Amounts so
deferred will, to the extent permitted by
applicable law, accrue interest at the
Green Acres Revised Interest Rate. The
Green Acres Loan is scheduled to mature on
February 11, 2028, but may be prepaid
without payment of a yield maintenance
charge or prepayment premium on any Green
Acres Due Date from and after January 11,
2008. The Green Acres Loan requires
monthly payments of principal and interest
of approximately $1,047,747 (based on a
30-year amortization schedule and the
Green Acres Initial Interest Rate).
Additionally, commencing with the Green
Acres Due Date occurring on the Green
Acres Anticipated Repayment Date and on
each Green Acres Due Date thereafter, the
Green Acres Loan requires that all Green
Acres Excess Cash Flow be applied toward
the reduction of the principal balance of
the Green Acres Loan. The scheduled
principal balance of the Green Acres Loan
on the Green Acres Anticipated Repayment
Date will be approximately $136,830,761.
The Green Acres Property consists of
approximately 1,828,882 square feet of GLA
(including anchors), of which
approximately 505,725 square feet is
enclosed shopping mall GLA.
S-16
<PAGE>
The Green Acres Property also contains 13
free-standing out parcel buildings. The
anchor tenants of the enclosed shopping
mall include Macy's, Sears, J.C. Penney
and Stern's. Sears owns two improvements
to the Green Acres Property. The major out
parcel tenants include The Dime Savings
Bank, Red Lobster, Seaman's Furniture and
Green Acres Cinema, a 6-screen movie
theater. The Green Acres Property was
approximately 91% leased (excluding anchor
and storage space) as of March 25, 1998.
An appraisal dated as of March 1, 1998
determined a value for the Green Acres
Property of approximately $253,200,000,
resulting in a Cut-Off Date LTV of
approximately 63.0%. The DSCR for the
Green Acres Property as of the Cut-Off
Date is approximately 1.54x.
E. The Americold Pool Loan and
Mortgaged Properties ..... The "Americold Pool Loan" had a principal
balance as of the Cut-Off Date of
approximately $148,500,000 and is
evidenced by a note (the "Americold Pool
Note A") issued by Americold Real Estate,
L.P., a Delaware limited partnership (the
"Americold Pool Borrower") formed for the
sole purpose of acquiring, owning,
operating, mortgaging and performing other
related activities with respect to the
Americold Pool Properties. The Americold
Pool Note A is cross-collateralized and
cross-defaulted with a pari passu note
(the "Americold Pool Note B") issued by
the Americold Pool Borrower in the amount
of $148,500,000 (the aggregate
indebtedness represented by such notes
being referred to herein as the "Total
Americold Pool Loan"). The Total Americold
Pool Loan had a principal balance as of
the Cut-Off Date of approximately
$297,000,000. The portion of the Total
Americold Pool Loan evidenced by the
Americold Pool Note B will not be included
in the Trust Fund. The Americold Pool Loan
is secured by first priority mortgage
and/or deed of trust liens encumbering the
Americold Pool Borrower's interest in 29
cold storage warehouses located throughout
the United States (the "Americold Pool
Properties"). The Americold Pool Borrower
is owned indirectly by entities controlled
by individuals who are also directors and
officers of Vornado Realty Trust and
Crescent Real Estate Equities, Inc.,
respectively, and substantially all of the
economic interests in which are held by
Vornado Realty Trust and Crescent Real
Estate Equities, Inc., respectively.
Vornado Realty Trust and Crescent Real
Estate Equities, Inc., are both publicly
traded real estate investment trusts whose
beneficial interests are listed on the New
York Stock Exchange. The Americold Pool
Borrower owns fee title to 26 and
leasehold title to 3 of the Americold Pool
Properties.
The Americold Pool Loan bears interest at a
fixed rate per annum equal to 6.894% (the
"Americold Pool Initial Interest Rate")
through and including May 10, 2008,
calculated for
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any period based on the actual number of
days elapsed and a 360-day year. From and
after May 11, 2008 (the "Americold Pool
Anticipated Repayment Date"), the
Americold Pool Loan accrues interest at a
fixed rate per annum equal to 8.894% (the
"Americold Pool Revised Interest Rate").
All interest accrued at the excess of the
Americold Pool Revised Interest Rate over
the Americold Pool Initial Interest Rate
(the "Americold Pool Excess Interest"),
together with interest thereon, will be
deferred and will not be paid until after
the principal balance of the Americold
Pool Loan has been reduced to zero.
Amounts so deferred will, to the extent
permitted by applicable law, accrue
interest at the Americold Pool Revised
Interest Rate. The Americold Pool Loan is
scheduled to mature on May 11, 2023, but
may be prepaid without payment of a yield
maintenance charge or prepayment premium
on any Americold Pool Due Date from and
after April 11, 2008. The Americold Pool
Loan requires monthly payments of
principal and interest of approximately
$1,048,597 (based on a 25-year
amortization schedule and the Americold
Pool Initial Interest Rate). Additionally,
commencing with the Americold Pool Due
Date occurring on the Americold Pool
Anticipated Repayment Date and on each
Americold Pool Due Date thereafter, the
Americold Pool Loan requires that all
Americold Pool Excess Cash Flow be applied
toward the reduction of the principal
balance of the Americold Pool Loan. The
scheduled principal balance of the
Americold Pool Loan on the Americold Pool
Anticipated Repayment Date will be
approximately $116,872,746.
The Americold Pool Properties consist of 29
dry and cold storage warehouses located
throughout the United States and
predominantly in the West, Pacific
Northwest, and Northeast regions. The
Americold Pool Properties contain
approximately 156 million cubic feet of
refrigerated space. Appraisals dated as of
March 1, 1998 determined an aggregate
value for the Americold Pool Properties of
approximately $520,600,000, resulting in a
Cut-Off Date LTV (based on the Total
Americold Pool Loan) of approximately
57.0%. The DSCR (based on the Total
Americold Pool Loan) for the Americold
Pool Properties as of the Cut-Off Date is
approximately 1.94x.
F. The Pier 39 Loan and
Mortgaged Property ....... The "Pier 39 Loan" had a principal balance
as of the Cut-Off Date of approximately
$116,669,545 and is evidenced by a single
note issued by Pier 39 Limited
Partnership, a California limited
partnership (the "Pier 39 Borrower") the
sole purpose of which is to own and
operate the Pier 39 Property. The Pier 39
Loan is secured by a first priority deed
of trust lien encumbering the ground lease
interest of the Pier 39 Borrower in a
retail property known as Pier 39 located
in San Francisco, California (the "Pier 39
Property"). The sole
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general partner in the Pier 39 Borrower
is Pier 39 GP, LLC ("Pier 39 GP"), a
Delaware limited liability company. The
sole beneficial owner of Pier 39 GP is
Pier 39 GP, Inc. ("Pier 39 Inc."), a
Delaware corporation. The Pier 39 Borrower
owns leasehold title to the Pier 39
Property.
The Pier 39 Loan bears interest at a fixed
rate per annum equal to 7.107% (the "Pier
39 Initial Interest Rate") through and
including April 10, 2008, calculated for
any period based on a 360-day year and the
actual number of days elapsed in such
period. From and after April 11, 2008 (the
"Pier 39 Anticipated Repayment Date"), the
Pier 39 Loan will bear interest at a fixed
rate per annum equal to 9.107% (the "Pier
39 Revised Interest Rate"). All interest
accrued at the excess of the Pier 39
Revised Interest Rate over the Pier 39
Initial Interest Rate (the "Pier 39 Excess
Interest"), together with interest
thereon, will be deferred and will not be
paid until after the principal balance of
the Pier 39 Loan has been reduced to zero.
Amounts so deferred will, to the extent
permitted by applicable law, accrue
interest at the Pier 39 Revised Interest
Rate. The Pier 39 Loan is scheduled to
mature on February 11, 2028, but may be
prepaid without payment of a yield
maintenance charge or prepayment premium
on any Due Date from and after January 11,
2008. The Pier 39 Loan requires monthly
payments of principal and interest of
approximately $794,634 (based on a 30-year
amortization schedule and the Pier 39
Initial Interest Rate). Additionally,
commencing with the Pier 39 Due Date
occurring on the Pier 39 Anticipated
Repayment Date and on each Pier 39 Due
Date thereafter, the Pier 39 Loan requires
that all Pier 39 Excess Cash Flow be
applied toward the reduction of the
principal balance of the Pier 39 Loan. The
scheduled principal balance of the Pier 39
Loan on the Pier 39 Anticipated Repayment
Date will be approximately $100,515,980.
The Pier 39 Property is improved with 16
two-story retail buildings, two
three-story retail buildings, an
approximately 980 space parking garage,
Pier 39 itself, an adjacent walking pier
and an improved waterfront parkway. The
Pier 39 Property contains approximately
239,011 square feet of GLA. As of April 1,
1998, the Pier 39 Property was
approximately 98% leased. An appraisal
dated as of December 29, 1997 determined a
value for the Pier 39 Property of
approximately $158,000,000, resulting in a
Cut-Off Date LTV of approximately 73.8%.
The DSCR for the Pier 39 Property as of
the Cut-Off Date is approximately 1.38x.
G. The One Commerce Square
Loan and Mortgaged
Property ................. The "One Commerce Square Loan" had a
principal balance as of the Cut-Off Date
of approximately $111,410,632 and is
evidenced by two tranches of notes (the
"One Commerce
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Square Tranche A Note" and the "One
Commerce Square Tranche B Note," each a
"One Commerce Square Note") issued by
Commerce Square Partners-Philadelphia
Plaza, L.P., a Delaware limited
partnership (the "One Commerce Square
Borrower") formed solely for the purpose
of acquiring, owning, operating,
mortgaging and performing other related
activities with respect to the One
Commerce Square Property. The One Commerce
Square Loan is secured by a first priority
mortgage encumbering an office building
known as One Commerce Square located in
Philadelphia, Pennsylvania (the "One
Commerce Square Property"). The One
Commerce Square Borrower has two general
partners, TDP-Commerce Square Gen-Par, LLC
("TDP Commerce Square") and Prometheus
Investment Holdings, LLC ("PIHLLC"). The
One Commerce Square Borrower owns fee
title to the One Commerce Square Property.
The One Commerce Square Loan bears interest
at a fixed rate per annum equal to 6.995%
(the "One Commerce Square Initial Interest
Rate"), through and including April 10,
2008, calculated for any period based on a
360-day year and the actual number of days
elapsed in such period. From and after
April 11, 2008 (the "One Commerce Square
Anticipated Repayment Date"), the One
Commerce Square Loan accrues interest at a
fixed rate per annum equal to 8.995% (the
"One Commerce Square Revised Interest
Rate"). All interest accrued at the excess
of the One Commerce Square Revised
Interest Rate over the One Commerce Square
Initial Interest Rate (the "One Commerce
Square Excess Interest"), together with
interest thereon, will be deferred and
added to the outstanding indebtedness
under the One Commerce Square Loan, and
will, to the extent permitted by
applicable law, earn interest at the One
Commerce Square Revised Interest Rate. The
One Commerce Square Tranche B Note is
scheduled to mature on September 11, 2002
(the "One Commerce Square Tranche B Note
Maturity Date") and fully amortizes over
its term. The One Commerce Square Tranche
A Note is scheduled to mature on April 11,
2028 (the "One Commerce Square Tranche A
Note Maturity Date"), but may be prepaid
without payment of a yield maintenance
charge or prepayment premium on any One
Commerce Square Due Date from and after
the One Commerce Square Due Date
immediately prior to the One Commerce
Square Anticipated Repayment Date. The One
Commerce Square Loan requires monthly
payments (the "One Commerce Square Monthly
Debt Service Payment Amount") of principal
and interest (based on the applicable
amortization schedule for each One
Commerce Square Note and the One Commerce
Square Initial Interest Rate) of (i)
approximately $1,242,235 until the payment
date immediately prior to the One Commerce
Square Tranche B Note Maturity Date, and
(ii) approximately $537,202 commencing
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on October 11, 2002 and until the payment
date immediately prior to the One Commerce
Square Tranche A Note Maturity Date.
Additionally, commencing on the One
Commerce Square Anticipated Repayment Date
and on each One Commerce Square Due Date
thereafter, the One Commerce Square Loan
requires that all One Commerce Square
Excess Cash Flow for the month preceding
the month in which the One Commerce Square
Due Date occurs be applied toward the
reduction of the principal balance of the
One Commerce Square Tranche A Note. The
scheduled principal balance of the One
Commerce Square Loan on the One Commerce
Square Anticipated Repayment Date will be
approximately $68,865,873.
The One Commerce Square Property is
comprised of the One Commerce Square
Borrower's fee interest in approximately
1.5 acres of land improved with a 41-story
Class A office building, one-half of a
two-level subterranean below-grade parking
facility containing approximately 490
parking spaces and one-half of an open-air
plaza containing a fountain and certain
other improvements. The One Commerce
Square Property was built in 1987 and
contains approximately 942,866 square feet
of rentable space. The open-air plaza is
located between the One Commerce Square
Property and an adjacent similar Class A
office building (the "Two Commerce Square
Property"). The One Commerce Square
Property's largest tenant is International
Business Machines Corporation ("IBM"),
which leases approximately 504,112 square
feet, approximately 75% of which is
subleased by IBM to more than ten
different tenants. As of March 12, 1998,
the One Commerce Square Property was
approximately 91.4% leased with an
annualized base rent of approximately
$23,176,233. An appraisal dated as of
February 1, 1998 determined a value for
the One Commerce Square Property of
approximately $135,000,000, resulting in a
Cut-Off Date LTV of approximately 82.5%.
The DSCR for the One Commerce Square
Property as of the Cut-Off Date is
approximately 1.33x for the One Commerce
Square Tranche A Note and 1.07x for the
One Commerce Square Tranche B Note.
H. The Marriott Desert Springs
Loan and Mortgaged
Property ................. The "Marriott Desert Springs Loan" had a
principal balance as of the Cut-Off Date
of approximately $102,418,958 and is
evidenced by a single note issued by DS
Hotel LLC, a Delaware limited liability
company (the "Marriott Desert Springs
Borrower") formed for the purpose of
owning and operating the Marriott Desert
Springs Property. The Marriott Desert
Springs Loan is secured by a first
priority deed of trust lien encumbering a
full service resort hotel (with golf
courses) located in Palm Desert,
California (the "Marriott Desert Springs
Property"). The sole equity owner of the
Marriott Desert Springs Borrower is
Marriott DSM LLC
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<PAGE>
("Marriott DSM"), a Delaware limited
liability company. The sole equity owner
of Marriott DSM is Desert Springs Marriott
Limited Partnership ("DSMLP"), a Delaware
limited partnership. The Marriott Desert
Springs Borrower owns fee and leasehold
title to the Marriott Desert Springs
Property.
The Marriott Desert Springs Loan bears
interest at a fixed rate per annum equal
to 7.800% (the "Marriott Desert Springs
Initial Interest Rate") through and
including June 10, 2010, calculated for
any period based on a 360-day year and the
actual number of days elapsed in such
period. From and after June 11, 2010 (the
"Marriott Desert Springs Anticipated
Repayment Date"), the Marriott Desert
Springs Loan will bear interest at a fixed
rate per annum equal to 9.800% (the
"Marriott Desert Springs Revised Interest
Rate"). All interest accrued at the excess
of the Marriott Desert Springs Revised
Interest Rate over the Marriott Desert
Springs Initial Interest Rate (the
"Marriott Desert Springs Excess
Interest"), together with interest
thereon, will be deferred and will not be
paid until after the principal balance of
the Marriott Desert Springs Loan has been
reduced to zero. Amounts so deferred will,
to the extent permitted by applicable law,
accrue interest at the Marriott Desert
Springs Revised Interest Rate. The
Marriott Desert Springs Loan is scheduled
to mature on December 11, 2022, but may be
prepaid without payment of a yield
maintenance charge or prepayment premium
on any Marriott Desert Springs Due Date
from and after the Marriott Desert Springs
Anticipated Repayment Date. The Marriott
Desert Springs Loan requires monthly
payments of principal and interest of
approximately $788,726 (based on a 25-year
amortization schedule and the Marriott
Desert Springs Initial Interest Rate).
Additionally, commencing with the Marriott
Desert Springs Due Date occurring on the
Marriott Desert Springs Anticipated
Repayment Date and on each Marriott Desert
Springs Due Date thereafter, the Marriott
Desert Springs Loan requires that all
Marriott Desert Springs Excess Cash Flow
be applied toward the reduction of the
principal balance of the Marriott Desert
Springs Loan. The scheduled principal
balance of the Marriott Desert Springs
Loan on the Marriott Desert Springs
Anticipated Repayment Date will be
approximately $75,085,499.
The Marriott Desert Springs Property is
improved with an 884-room luxury-class
resort hotel, two golf courses, five
full-service restaurants, two snack shops,
an atrium lounge, a night club, several
retail shops, an approximately 30,000
square foot spa, over 49,000 square feet
of meeting space, five swimming pools, 20
tennis courts, approximately 1,482 parking
spaces and other resort-oriented
facilities. For the year ended December
31, 1997, average occupancy at the
Marriott Desert Springs Property was
approximately 73%, the ADR was
approximately $169 and the RevPAR was
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<PAGE>
approximately $123. An appraisal dated as
of November 14, 1997 determined a value
for the Marriott Desert Springs Property
of approximately $237,000,000, resulting
in a Cut-Off Date LTV of approximately
43.2%. The DSCR for the Marriott Desert
Springs Property as of the Cut-Off Date is
approximately 2.27x.
Simultaneously with the origination of the
Marriott Desert Springs Loan, GSMC made a
loan (the "Marriott Desert Springs Parent
Loan") to Marriott DSM LLC ("Marriott
DSM") having an aggregate principal
balance as of the Cut-Off Date of
approximately $19,733,165. See
"Description of the Mortgaged Properties
and the Mortgage Loans--Marriott Desert
Springs: The Loan--The Marriott Desert
Springs Parent Loan". Payments of
principal and interest on, and any other
proceeds with respect to, the Marriott
Desert Springs Parent Loan will be
deposited into the Class M Distribution
Account and will be allocated exclusively
to the Class M Certificates and will not
serve as credit support for any other
Class of Certificates. The Marriott Desert
Springs Parent Loan will not be part of
the Mortgage Pool and references in this
Prospectus Supplement to the term
"Mortgage Loan" do not include the
Marriott Desert Springs Parent Loan.
I. The Showcase Loan and
Mortgaged Property ....... The "Showcase Loan" had a principal balance
as of the Cut-Off Date of approximately
$78,998,166 and is evidenced by a single
note issued by Showcase Mall Joint
Venture, a special purpose Nevada general
partnership (the "Showcase Borrower")
formed for the purpose of acquiring,
owning, operating, mortgaging and
performing other related activities with
respect to the Showcase Property. The
Showcase Loan is secured by a first
priority deed of trust lien encumbering an
entertainment/retail center, which is
comprised of two buildings on
non-adjoining parcels connected via a
skywalk located on Las Vegas Boulevard in
Las Vegas, Nevada (the "Showcase
Property"). The general partners of the
Showcase Borrower are Forest City Galaxy,
Inc. ("Showcase GP I"), a Nevada
corporation, and Island Plaza Partners III
LLC ("Showcase GP II"), a Nevada limited
liability company. The Showcase Borrower
owns fee title to the Showcase Property.
The Showcase Loan bears interest at a fixed
rate per annum equal to 7.523% (the
"Showcase Initial Interest Rate") through
and including November 10, 2007,
calculated for any period based on the
actual number of days elapsed and a
360-day year. From and after November 11,
2007 (the "Showcase Anticipated Repayment
Date"), the Showcase Loan accrues interest
at a fixed rate per annum equal to 9.523%
(the "Showcase Revised Interest Rate").
All interest accrued at the excess of the
Showcase Revised Interest Rate over the
Showcase Initial Interest Rate (the
"Showcase
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Excess Interest"), together with interest
thereon, will be deferred and will not be
paid until after the principal balance of
the Showcase Loan has been reduced to
zero. Amounts so deferred will, to the
extent permitted by applicable law, accrue
interest at the Showcase Revised Interest
Rate. The Showcase Loan is scheduled to
mature on November 11, 2025, but may be
prepaid without payment of a yield
maintenance charge or prepayment premium
on any Showcase Due Date from and after
October 11, 2007. The Showcase Loan
requires monthly payments of principal and
interest of approximately $573,553 (based
on a 337 month amortization schedule and
the Showcase Initial Interest Rate).
Additionally, commencing with the Showcase
Due Date occurring on the Showcase
Anticipated Repayment Date and on each
Showcase Due Date thereafter, the Showcase
Loan requires that all Showcase Excess
Cash Flow be applied toward the reduction
of the principal balance of the Showcase
Loan. The scheduled principal balance of
the Showcase Loan on the Showcase
Anticipated Repayment Date will be
approximately $67,183,709.
The Showcase Property is improved with a
four-floor entertainment and retail
center, and an approximately 1,532 space
parking garage and multi-screen movie
theater on a non-adjacent parcel which is
connected via a skywalk. The Showcase
Property contains approximately 189,970
square feet of GLA occupied by six
tenants. The five largest tenants by GLA
are Sega Gameworks (approximately 47,161
square feet), United Artists Theatre
(approximately 41,108 square feet), All
Star Cafe (approximately 36,172 square
feet), World of Coke (approximately 34,641
square feet), and Ethel M. Chocolates
(approximately 28,601 square feet). The
other tenant occupies approximately 105
square feet of GLA. As of March 16, 1998,
the Showcase Property was approximately
99% leased. An appraisal dated as of
August 11, 1997 determined a value for the
Showcase Property of approximately
$117,500,000, resulting in a Cut-Off Date
LTV of approximately 67.2%. The DSCR for
the Showcase Property as of the Cut-Off
Date is approximately 1.44x.
J. The Crystal City Pool Loan
and Mortgaged Properties . The "Crystal City Pool Loan" had a principal
balance as of the Cut-Off Date of
approximately $76,608,478 and is evidenced
by a single note issued by CESC
Crystal/Rosslyn L.L.C., a Delaware limited
liability company (the "Crystal City Pool
Borrower") formed for the purpose of
acquiring, owning, operating, mortgaging
and performing other related activities
with respect to the Crystal City Pool
Properties. The Crystal City Pool Loan is
secured by a first priority deed of trust
lien encumbering three office buildings
located in Arlington, Virginia, known as
Crystal Gateway North ("Crystal Gateway"),
1919 South Eads Street ("South Eads
Street"), and Arlington Plaza ("Arlington
Plaza," and collectively, the
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"Crystal City Pool Properties," or
individually, each a "Crystal City Pool
Property"). The sole beneficial owner of
the Crystal City Pool Borrower is Charles
E. Smith Commercial Realty, L.P. ("CES
Commercial Realty"). The Crystal City Pool
Borrower owns fee title to the Crystal
City Pool Properties.
The Crystal City Pool Loan bears interest at
a fixed rate per annum equal to 6.904%
(the "Crystal City Pool Initial Interest
Rate") through and including November 10,
2007, calculated for any period based on a
360-day year consisting of twelve 30-day
months from and after November 11, 2007
(the "Crystal City Pool Anticipated
Repayment Date"), the Crystal City Pool
Loan accrues interest at a fixed rate per
annum equal to 8.904% (the "Crystal City
Pool Revised Interest Rate"). All interest
accrued at the excess of the Crystal City
Pool Revised Interest Rate over the
Crystal City Pool Initial Interest Rate
(the "Crystal City Pool Excess Interest"),
together with interest thereon, will be
deferred and added to the outstanding
indebtedness under the Crystal City Pool
Loan, and will, to the extent permitted by
applicable law, earn interest at the
Crystal City Pool Revised Interest Rate.
The Crystal City Pool Loan is scheduled to
mature on November 11, 2027, but may be
prepaid without payment of a yield
maintenance charge or prepayment premium
on any Crystal City Pool Due Date from and
after the Crystal City Pool Anticipated
Repayment Date. The Crystal City Pool Loan
requires monthly payments of principal and
interest of approximately $507,328 (based
on a 30-year amortization schedule and the
Crystal City Pool Initial Interest Rate).
Additionally, commencing on the Crystal
City Pool Anticipated Repayment Date and
on each Crystal City Pool Due Date
thereafter, the Crystal City Pool Loan
requires that all Crystal City Pool Excess
Cash Flow for the month preceding the
month in which the Crystal City Pool Due
Date occurs be applied toward the
reduction of the principal balance of the
Crystal City Pool Loan. The scheduled
principal balance of the Crystal City Pool
Loan on the Crystal City Pool Anticipated
Repayment Date will be approximately
$65,925,554.
Crystal Gateway is improved with an
eight-story Class A office building and a
four-level subterranean parking facility
containing approximately 919 parking
spaces. Crystal Gateway was built in 1987
and contains approximately 307,716 square
feet of net rentable office space and
approximately 4,287 square feet of storage
space. South Eads Street is improved with
a four-story Class A office building and a
three-level subterranean parking facility
containing approximately 351 parking
spaces. South Eads Street was built in
1990 and contains approximately 93,330
square feet of net rentable office space.
Arlington Plaza is improved with an
11-story triangular shaped office building
and a four-level
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subterranean parking facility containing
approximately 332 parking spaces.
Arlington Plaza was built in 1985 and
contains approximately 174,083 square feet
of net rentable office space. The U.S.
Government leases approximately 245,200
square feet (or approximately 42.3% of
GLA) of the Crystal City Pool Properties.
As of March 1, 1998, the Crystal City Pool
Properties were approximately 97.0% leased
with an annualized base rent of
approximately $14,713,344. Appraisals
dated as of October 2, 1997 and October
10, 1997 determined an aggregate value for
the Crystal City Pool Properties of
approximately $115,100,000, resulting in a
Cut-Off Date LTV of approximately 66.6%.
The DSCR for the Crystal City Pool
Properties as of the Cut-Off Date is
approximately 1.61x.
K. Originators ............... GSMC originated the Americold Pool Loan, the
URS Pool Loan, the Green Acres Loan, the
One Commerce Square Loan, the Pier 39
Loan, the Tharaldson Pool A Loan and the
Tharaldson Pool B Loan. To facilitate loan
closings, GSMC engaged GMACCM to originate
the Crystal City Pool Loan, the Marriott
Desert Springs Loan and the Showcase Loan
on GSMC's behalf, and concurrently with
the origination, GSMC acquired a 100%
participation interest in each such
Mortgage Loan. GSMC and GMACCM are
collectively referred to herein as the
"Originators." GMACCM will make certain
representations and warranties with
respect to the Mortgage Loans it
originated and GSMC will make certain
representations and warranties (a) with
respect to the Mortgage Loans it
originated, and (b) with respect to the
Mortgage Loans GMACCM originated, but only
to the extent that GMACCM did not make
such representations and warranties (GSMC
and GMACCM in the capacity of making
representations and warranties, being each
referred to as a "Responsible Party").
L. General ................... For a further description of the Mortgage
Loans and Mortgaged Properties, see
"Description of the Mortgaged Properties
and the Mortgage Loans" and "Mortgage Pool
Characteristics" herein.
Payment, Sale, Substitution and
Release Provisions ........... The Mortgage Loans generally prohibit the
transfer or sale of the Mortgaged
Properties (except (a) to certain
permitted transferees and (b) in
connection with a release and related
permitted defeasance or prepayment and
except that the Tharaldson Pool A Loan,
the Tharaldson Pool B Loan, the URS Pool
Loan and the Americold Pool Loan permit
substitution of Mortgaged Properties if
certain conditions are met) unless the
Master Servicer has consented thereto and
there shall have been received written
confirmation from each Rating Agency that
such transfer or sale will not, in and of
itself, cause a downgrade, qualification
or withdrawal of any of the then current
ratings assigned to the Certificates.
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All of the Mortgage Loans provide that
after a specified period (a "Defeasance
Lockout Period") and prior to the related
Anticipated Repayment Date (or in the case
of the Pier 39 Loan, until 90 days prior
to the Pier 39 Anticipated Repayment
Date), the applicable borrower may obtain
the release of one or more of the
Mortgaged Properties from the lien of the
related Mortgage upon the pledge to the
Trustee of noncallable U.S. Treasury
obligations, which generally provide for
payments on or prior to all successive
scheduled dates upon which interest and
principal payments are due under the
related Note (each such date, a "Due
Date") through and including the
respective Anticipated Repayment Date, in
amounts equal to the portion of the
scheduled payments due on such dates (or,
in the case of an Anticipated Repayment
Date, an amount determined as if the
related Mortgage Loans were to mature on
such Anticipated Repayment Date) that are
attributable to a portion of the Mortgage
Loan equal to the release amount required
to be paid with respect to the Mortgaged
Property or Properties to be released. In
the event of a release in connection with
a partial defeasance, the Mortgage Loans
secured by multiple Mortgaged Properties
generally require that the principal
amount defeased equal at least a specified
amount which is greater than the Allocated
Loan Amount of the Mortgaged Property so
released with certain exceptions (such as
in the event of a partial prepayment in
connection with a casualty or
condemnation). Such Mortgage Loans also
generally require that the debt service
coverage ratio (as such term is defined in
the related loan agreements) of the
remaining Mortgaged Property or
Properties, after giving effect to such
release, be greater than both the debt
service coverage ratio at origination of
the related Mortgage Loan and the debt
service coverage ratio immediately prior
to such release. The terms of the
Americold Pool Loan, the URS Pool Loan and
the Crystal City Pool Loan permit the
respective Borrowers to partially prepay
the related Mortgage Loan during its
Defeasance Lockout Period to cause the
release of one or more Mortgaged
Properties necessary to cure a property
level non-payment default with respect to
such Mortgaged Property or Mortgaged
Properties.
All of the Mortgage Loans secured by
multiple Mortgaged Properties provide that
on and after the related first permitted
prepayment date, in connection with a
prepayment, the related borrower may
obtain the release of one or more of the
related Mortgaged Properties from the lien
of the related Mortgage. Each Mortgage
Loan secured by multiple Mortgaged
Properties generally requires that the
related borrower prepay a specified amount
which is greater than the Allocated Loan
Amount of any Mortgaged Property released
in connection with a partial prepayment,
with certain exceptions such as in the
event of a partial prepayment in
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<PAGE>
connection with a casualty or
condemnation. Such Mortgage Loans
generally also require that the debt
service coverage ratio (as that term is
defined in the respective loan agreements)
of the remaining Mortgaged Properties,
after giving effect to such release, be at
least equal to the greater of each of the
debt service coverage ratio at origination
and the debt service coverage ratio
immediately prior to the release.
The Offered Certificates ...... The Class A-1 Certificates will have an
initial Certificate Principal Amount of
$278,000,000.
The Class A-2 Certificates will have an
initial Certificate Principal Amount of
$694,315,000.
The Class B Certificates will have an
initial Certificate Principal Amount of
$91,595,000.
The Class C Certificates will have an
initial Certificate Principal Amount of
$84,549,000.
The Class D Certificates will have an
initial Certificate Principal Amount of
$98,641,000.
The Class E Certificates will have an
initial Certificate Principal Amount of
$70,458,000.
The Class A-1, Class A-2, Class B, Class C,
Class D, Class E, Class F and Class G
Certificates are collectively referred to
herein as the "Sequential Pay
Certificates."
The Class X Certificates will have an
initial Notional Amount of approximately
$1,148,459,000. The Notional Amount of the
Class X Certificates will generally be
equal to the sum of the Certificate
Principal Amounts of the Class A-1, Class
A-2, Class B and Class C Certificates. The
Class X Certificates are sometimes
referred to herein collectively as the
"Coupon Strip Certificates".
The Private Certificates ...... The Class F Certificates will have an
initial Certificate Principal Amount of
$63,411,000.
The Class G Certificates will have an
initial Certificate Principal Amount of
$28,183,997.
The Class M Certificates will have an
Initial Certificate Principal Amount of
$19,733,165.
The Class MX Certificates will have an
initial Notional Amount of $19,733,165.
The Class Q, Class R and Class LR
Certificates will not have Certificate
Principal Amounts or Notional Amounts.
The Class F, Class G, Class M, Class MX,
Class Q, Class R and Class LR Certificates
are not offered hereby.
Pass-Through Rates ............ The per annum rate at which interest accrues
(the "Pass-Through Rate") on each Class of
Offered Certificates during any Interest
Accrual Period will be as follows:
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<PAGE>
The Pass-Through Rate on the Class A-1 and
Class A-2 Certificates is a per annum rate
equal to 6.312000% and 6.562000%,
respectively.
The Pass-Through Rate on the Class X
Certificates is a per annum rate equal to
the excess of (i) the WAC Rate over (ii)
the weighted average of the Pass-Through
Rates on the Class A-1 Certificates, the
Class A-2 Certificates, the Class B
Certificates and the Class C Certificates,
weighted on the basis of their respective
Certificate Principal Amounts.
The Pass-Through Rate on the Class B
Certificates is a per annum rate equal to
the WAC Rate less 0.392%.
The Pass-Through Rate on the Class C
Certificates is a per annum rate equal to
the WAC Rate less 0.225%.
The Pass-Through Rate on the Class D and
Class E Certificates is a per annum rate
equal to the WAC Rate.
The initial Pass-Through Rate for each Class
of Offered Certificates is set forth on
the cover page of this Prospectus
Supplement.
The "WAC Rate" with respect to any
Distribution Date is a per annum rate
equal to the product of the weighted
average of the Net Mortgage Rates in
effect for the Mortgage Loans as of their
respective Due Dates in the month
preceding the month in which such
Distribution Date occurs, weighted on the
basis of their respective Stated Principal
Balances on such Due Dates.
The "Net Mortgage Rate" with respect to any
Mortgage Loan is a per annum rate equal to
the related Mortgage Rate in effect from
time to time, minus the related Servicing
Fee Rate. However, for purposes of
calculating Pass-Through Rates, the Net
Mortgage Rate of such Mortgage Loan for
any Mortgage Loan shall be determined
without regard to any modification, waiver
or amendment of the terms of such Mortgage
Loan, whether agreed to by the Special
Servicer or resulting from a bankruptcy,
insolvency or similar proceeding involving
the related borrower.
The "Mortgage Rate" with respect to any
Mortgage Loan is the per annum rate in
effect from time to time at which interest
accrues on such Mortgage Loan as stated in
the related Note, in each case without
giving effect to the Excess Rate or the
Default Rate. Notwithstanding the
foregoing, if any Mortgage Loan does not
accrue interest on the basis of a 360-day
year consisting of twelve 30-day months,
then, for purposes of calculating
Pass-Through Rates, the Mortgage Rate of
such Mortgage Loan for any one-month
period preceding a related Due Date will
be the annualized rate at which interest
would have to accrue in respect of such
Mortgage Loan on the basis of a 360-day
year consisting of twelve 30-day months in
order to produce the aggregate
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<PAGE>
amount of interest actually accrued in
respect of such Mortgage Loan during such
one-month period at the related Mortgage
Rate; provided, however, that with respect
to all the Mortgage Loans other than the
Crystal City Pool Loan, (i) the Mortgage
Rate for the one-month period preceding
the Due Dates in January and February in
any year which is not a leap year or in
February in any year which is a leap year
will be determined net of the Withheld
Amount, and (ii) the Mortgage Rate for the
one-month period preceding the Due Date in
March will be determined taking into
account the addition of any such Withheld
Amounts.
Calculations of interest on the Offered
Certificates will be made on the basis of
a 360-day year consisting of twelve 30-day
months.
Distributions ................. On each Distribution Date, each Class of
Offered Certificates will be entitled to
receive distributions of interest in an
amount equal to the Interest Distribution
Amount for such Class and Distribution
Date, to the extent of Available Funds, if
any, remaining after distributions to each
other Class of Certificates that is senior
to such Class of interest and principal to
which each such senior Class is then
entitled and of amounts to reimburse each
such senior Class for Realized Losses
(including interest compounded monthly
thereon) previously allocated to such
senior Classes, as further described under
"Description of the Offered
Certificates--Distributions" herein. The
seniority of a Class relative to other
Classes will be determined in accordance
with the subordination provisions
described under "--Subordination" below.
The "Interest Distribution Amount" with
respect to any Distribution Date and each
Class of Regular Certificates will equal
(A) the sum of (i) the Interest Accrual
Amount for such Distribution Date and (ii)
the Interest Shortfall, if any, for such
Distribution Date, less (B) the amount of
any Excess Prepayment Interest Shortfall
allocated to such Class as described under
"--Subordination" below. The "Interest
Accrual Amount" with respect to any
Distribution Date and any Class of
Sequential Pay Certificates is equal to
interest for the related Interest Accrual
Period at the Pass-Through Rate for such
Class on the related Certificate Principal
Amount; and with respect to any
Distribution Date and the Class X
Certificates is equal to interest for the
related Interest Accrual Period at the
Pass-Through Rate for such Class for such
Interest Accrual Period on the Notional
Amount of such Class.
An "Interest Shortfall" with respect to any
Distribution Date for any Class of Regular
Certificates is the sum of (a) the excess,
if any, of (i) the Interest Distribution
Amount for such Class for the immediately
preceding Distribution Date, over
S-30
<PAGE>
(ii) all distributions of interest (other
than any Excess Interest) made with
respect to such Class of Certificates on
the immediately preceding Distribution
Date, and (b) to the extent permitted by
applicable law, (i) other than in the case
of the Class X Certificates, one month's
interest on any such excess at the
Pass-Through Rate applicable to such Class
of Certificates for the current
Distribution Date and (ii) in the case of
the Class X Certificates, one month's
interest on any such excess at the WAC
Rate for such Distribution Date.
For purposes of calculating the Interest
Accrual Amount for any Class of Regular
Certificates and any Distribution Date,
any reduction of Certificate Principal
Amount or Notional Amount, as applicable,
as a result of distributions to such Class
or any related Class, respectively, and
reductions in Certificate Principal Amount
or Notional Amount, as applicable, as a
result of the occurrence and allocations
of Realized Losses on the Distribution
Date occurring in the related Interest
Accrual Period, shall be deemed to have
been made on the first day of such
Interest Accrual Period.
On each Distribution Date prior to the
Cross-over Date, an amount equal to the
Principal Distribution Amount will be
distributed, to the extent of available
funds therefor:
first, to the Class A Certificates, in
reduction of their respective Certificate
Principal Amounts in the following order:
first, to the Class A-1 Certificates and
second, to the Class A-2 Certificates, in
each case up to an amount equal to the
lesser of (i) the Certificate Principal
Amount thereof and (ii) the Principal
Distribution Amount for such Distribution
Date;
second, to the Class B Certificates, in
reduction of the Certificate Principal
Amount thereof, until the Certificate
Principal Amount of such Class is reduced
to zero;
third, to the Class B Certificates, for
unreimbursed amounts of Realized Losses
previously allocated to such Class, plus
interest thereon at the Pass-Through Rate
for such Class compounded monthly from the
date the related Realized Loss was
allocated to such Class;
fourth, to the Class C Certificates, in
reduction of the Certificate Principal
Amount thereof, until the Certificate
Principal Amount of such Class is reduced
to zero;
fifth, to the Class C Certificates, for
unreimbursed amounts of Realized Losses
previously allocated to such Class, plus
interest thereon at the Pass-Through Rate
for such Class compounded monthly from the
date the related Realized Loss was
allocated to such Class;
sixth, to the Class D Certificates, in
reduction of the Certificate Principal
Amount thereof, until the Certificate
Principal Amount thereof is reduced to
zero;
S-31
<PAGE>
seventh, to the Class D Certificates, for
unreimbursed amounts of Realized Losses
previously allocated to such Class, plus
interest thereon at the Pass-Through Rate
compounded monthly from the date the
related Realized Loss was allocated to
such Class;
eighth, to the Class E Certificates, in
reduction of the Certificate Principal
Amount thereof, until the Certificate
Principal Amount thereof is reduced to
zero;
ninth, to the Class E Certificates, for
unreimbursed amounts of Realized Losses
previously allocated to such Class, plus
interest thereon at the Pass-Through Rate
compounded monthly from the date the
related Realized Loss was allocated to
such Class;
tenth, to the Class F Certificates, in
reduction of the Certificate Principal
Amount thereof, until the Certificate
Principal Amount thereof is reduced to
zero;
eleventh, to the Class F Certificates, for
the unreimbursed amounts of Realized
Losses previously allocated to such Class,
plus interest thereon at the Pass-Through
Rate compounded monthly from the date the
related Realized Loss was allocated to
such Class;
twelfth, to the Class G Certificates, in
reduction of the Certificate Principal
Amount thereof, until the Certificate
Principal Amount thereof is reduced to
zero; and
thirteenth, to the Class G Certificates, for
the unreimbursed amounts of Realized
Losses previously allocated to such Class,
plus interest thereon at the Pass-Through
Rate compounded monthly from the date the
related Realized Loss was allocated to
such Class;
in each case to the extent of Available
Funds remaining after required
distributions to all more senior Classes
of Certificates and of interest to such
Class.
On each Distribution Date occurring on and
after the Cross-over Date, regardless of
the allocation of principal payments
described in priority first in the
preceding sentence, an amount equal to the
Principal Distribution Amount will be
distributed, first, to the Class A-1
Certificates and Class A-2 Certificates,
pro rata, based on their respective
Certificate Principal Amounts, in
reduction of their respective Certificate
Principal Amounts until the Certificate
Principal Amount of each such Class is
reduced to zero; and second, to the Class
A-1 Certificates and Class A-2
Certificates, for unreimbursed amounts of
Realized Losses previously allocated to
such Classes, pro rata, in accordance with
the amount of such unreimbursed Realized
Losses previously allocated to each such
Class, plus interest thereon at their
respective Pass-Through Rates compounded
monthly from the date the related Realized
Loss was allocated to such Classes.
S-32
<PAGE>
The "Cross-over Date" is the Distribution
Date on which the Certificate Principal
Amount of each Class of Certificates
entitled to distributions of principal
other than the Class A-1 and Class A-2
Certificates has been reduced to zero. The
Class X Certificates will not be entitled
to any distributions of principal.
The "Principal Distribution Amount" for any
Distribution Date is equal to the sum for
all Mortgage Loans, without duplication of
(i) the principal component of all Monthly
Payments due on the Due Date immediately
preceding such Distribution Date (if
received, or advanced by the Master
Servicer, Trustee or Fiscal Agent, in
respect of such Distribution Date) with
respect to the Mortgage Loans, (ii) the
principal component of all Extended
Monthly Payments due on the related Due
Date (if received, or advanced by the
Master Servicer, Trustee or Fiscal Agent,
in respect of such Distribution Date) with
respect to the Mortgage Loans, (iii) the
principal component of any payment on any
Mortgage Loan received or applied on or
after the maturity date thereof in the
related Collection Period, net of the
principal portion of any unreimbursed P&I
Advances related to such Mortgage Loan,
(iv) the portion of Unscheduled Payments
allocable to principal of any Mortgage
Loan received or applied during the
related Collection Period, net of the
principal portion of any unreimbursed P&I
Advances related to such Mortgage Loan,
and (v) the Principal Shortfall, if any,
for such Distribution Date.
For purposes of the foregoing definition of
Principal Distribution Amount, the term
"Principal Shortfall" for any Distribution
Date means the amount, if any, by which
(i) the Principal Distribution Amount for
the preceding Distribution Date exceeds
(ii) the aggregate amount actually
distributed with respect to principal on
such preceding Distribution Date in
respect of such Principal Distribution
Amount.
Any Prepayment Premiums received (which are
generally payable only in connection with
Mortgage Loan events of default) will be
distributed to the holders of the Class X,
Class A-1, Class A-2, Class B, Class C,
Class D, Class E, Class F and Class G
Certificates in the manner and priority
described in "Description of the Offered
Certificates--Distributions--Prepayment
Premiums."
Any Excess Interest received, other than
with respect to the Marriott Desert
Springs Loan, will be distributed to
holders of the Class A-2, Class B, Class
C, Class D, Class E, Class F and Class G
Certificates, pro rata, based on their
initial Certificate Principal Amounts. Any
Excess Interest received with respect to
the Marriott Desert Springs Loan will be
distributed to holders of the Class F and
Class G Certificates, pro rata, based on
their initial Certificate Principal
Amounts.
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<PAGE>
Except as described in this paragraph, the
holders of the Class M, Class MX, Class Q,
Class R and Class LR Certificates will not
be entitled to distributions of interest
or principal. The holders of the Class Q
Certificates will be entitled to
distributions of Net Default Interest and
the holders of the Class M and Class MX
Certificates will be entitled to
distributions from payments on the
Marriott Desert Springs Parent Loan, in
each case, to the extent set forth in the
Pooling Agreement. The holders of the
Class R Certificates will be entitled to
receive any Available Funds remaining in
the Upper-Tier Distribution Account on any
Distribution Date after all distributions
with respect to the Regular Certificates
on such Distribution Date have been made.
The Class LR Certificateholders will be
entitled to receive any funds remaining in
the Lower-Tier Distribution Account on any
Distribution Date after all distributions
with respect to the regular interests in
the Lower-Tier REMIC on such Distribution
Date have been made. The Class LR
Certificateholders will also be entitled
to receive the proceeds of the remaining
assets in the Lower-Tier REMIC, if any,
after the Certificate Principal Amounts of
the Regular Certificates have been reduced
to zero and the holders of the Regular
Certificates have received all other
distributions to which they are entitled.
It is not anticipated that there will be
any assets remaining in the Lower-Tier
REMIC on such date.
See "Description of the Offered
Certificates--Distributions."
P&I Advances .................. The Master Servicer is required to make an
advance (each, a "P&I Advance") in respect
of delinquent Monthly Payments on the
Mortgage Loans, subject to a determination
of recoverability and the limitations
described herein. P&I Advances will
generally equal the delinquent portion of
the Monthly Payment as specified in the
related Note (with interest calculated at
the Net Mortgage Rate plus the Trustee Fee
Rate). The Master Servicer will not be
required to advance Default Interest,
Excess Interest or Prepayment Premiums.
The amount required to be advanced in
respect of any Distribution Date and any
delinquent Monthly Payments on a Mortgage
Loan that has been subject to an Appraisal
Reduction Event will equal (i) the amount
required to be advanced by the Master
Servicer without giving effect to the
related Appraisal Reduction Amount, less
(ii) the product of (a) the amount
required to be advanced by the Master
Servicer in respect of delinquent payments
of interest without giving effect to the
related Appraisal Reduction Amount and (b)
a fraction, the numerator of which is the
Appraisal Reduction Amount and the
denominator of which is the Stated
Principal Balance of such Mortgage Loan as
of the last day of the related Collection
Period. If the Master Servicer fails to
make a required P&I Advance, the Trustee,
as acting or successor Master Servicer,
acting in accor-
S-34
<PAGE>
dance with the Servicing Standard, will be
required to make the P&I Advance, and if
the Trustee fails to make a required P&I
Advance, the Fiscal Agent will be required
to make such P&I Advance, each subject to
a determination of recoverability. See
"The Pooling Agreement--Advances" herein.
Subordination ................. Except as described below, as a means of
providing a certain amount of protection
to the holders of the Class A-1, Class A-2
and Class X Certificates against losses
associated with delinquent and defaulted
Mortgage Loans, the rights of the holders
of the Class B, Class C, Class D, Class E,
Class F and Class G Certificates to
receive distributions of interest (other
than Excess Interest) and principal, as
applicable, will be subordinated to such
rights of the holders of the Class A-1,
Class A-2 and Class X Certificates. The
Class B Certificates will likewise be
protected by the subordination of the
Class C, Class D, Class E, Class F and
Class G Certificates. The Class C
Certificates will be likewise protected by
the subordination of the Class D, Class E,
Class F and Class G Certificates. The
Class D Certificates will be likewise
protected by the subordination of the
Class E, Class F and Class G Certificates.
The Class E Certificates will likewise be
protected by the subordination of the
Class F and Class G Certificates. This
subordination will be effected in two
ways: (i) by the preferential right of
holders of a Class of Certificates to
receive on any Distribution Date the
amounts of interest (other than Excess
Interest) and principal distributable in
respect of such Certificates on such date
prior to any distribution being made on
such Distribution Date in respect of any
Classes of Certificates subordinate
thereto and (ii) by the allocation of
Realized Losses, first, to the Class G
Certificates; second, to the Class F
Certificates; third, to the Class E
Certificates; fourth, to the Class D
Certificates; fifth to the Class C
Certificates; sixth, to the Class B
Certificates; and finally, to the Class
A-1 and Class A-2 Certificates, pro rata,
based on their respective outstanding
Certificate Principal Amounts. No other
form of credit enhancement, including any
payments on, or proceeds with respect to,
the Marriott Desert Springs Parent Loan
will be available for the benefit of the
holders of the Offered Certificates. See
"Description of the Offered Certificates"
herein.
Shortfalls in Available Funds resulting from
Servicing Compensation other than the
Servicing Fee, interest on Advances (to
the extent not covered by Default
Interest), extraordinary expenses of the
Trust Fund, a reduction of the interest
rate of a Mortgage Loan by a bankruptcy
court or other unanticipated or
default-related expenses (not constituting
Realized Losses) will be allocated to
interest due on each Class of Certificates
in the same order as Realized Losses are
applied to the principal balance thereof.
Shortfalls in Avail-
S-35
<PAGE>
able Funds resulting from Excess
Prepayment Interest Shortfalls will be
allocated to reduce the interest
entitlement of each Class of Certificates,
pro rata, based upon the amount of
interest which would otherwise be
distributable to each Class. See
"Description of the Offered
Certificates--Distributions--Payment
Priorities" herein.
Optional Termination; Optional
Mortgage Loan Purchase ....... The Seller, and if the Seller does not
exercise the option, the Master Servicer
and, if neither the Master Servicer nor
the Seller exercises the option, the
holders of the Class LR Certificates
representing greater than a 50% Percentage
Interest of the Class LR Certificates,
will have the option to purchase, at the
purchase price specified herein, all of
the Mortgage Loans and the Marriott Desert
Springs Parent Loan, and all property
acquired through exercise of remedies in
respect of any Mortgage Loan or the
Marriott Desert Springs Parent Loan,
remaining in the Trust Fund, and thereby
effect the termination of the Trust Fund
and early retirement of the then
outstanding Certificates, on any
Distribution Date on which the aggregate
Stated Principal Balance of the Mortgage
Loans remaining in the Trust Fund is less
than 1% of the aggregate Stated Principal
Balance of the Mortgage Loans as of the
Cut-Off Date.
See "The Pooling Agreement--Optional
Termination; Optional Mortgage Loan
Purchase."
Certain Federal Income Tax
Consequences ................. The Trust Fund will include two separate
real estate mortgage investment conduits
(each, a "REMIC"). One REMIC (the
"Lower-Tier REMIC") will hold the Mortgage
Loans and any related property.
Collections in the Lower-Tier REMIC will
be used to make payments of principal and
interest on regular interests in the
Lower-Tier REMIC held by the second REMIC
(the "Upper-Tier REMIC"), and which in
turn are used to make distributions on the
Certificates (other than the Class LR,
Class M, Class MX and Class Q
Certificates), which represent interests
in the Upper-Tier REMIC. For ease of
presentation, distributions will generally
be described herein as if made directly
from collections on the Mortgage Loans to
the holders of the Certificates.
Elections will be made to treat each of the
Lower-Tier REMIC and the Upper-Tier REMIC
as REMICs and, in the opinion of counsel,
each will qualify as a REMIC for federal
income tax purposes. The Class A-1, Class
A-2, Class X, Class B, Class C, Class D,
Class E, Class F and Class G Certificates
(collectively, the "Regular Certificates")
will represent "regular interests" in the
Upper-Tier REMIC, and the Class R and
Class LR Certificates (collectively, the
"Residual Certificates") will be
designated as the sole Classes of
"residual interests" in the Upper-Tier
REMIC and Lower-Tier REMIC,
S-36
<PAGE>
respectively. In addition, the Class A-2,
Class B, Class C, Class D, Class E, Class
F and Class G Certificates also represent
undivided beneficial interests in portions
of the Excess Interest, which portions of
the Trust Fund will be treated as part of
a grantor trust for federal income tax
purposes. Furthermore, the Class Q
Certificates will represent the right to
receive Net Default Interest and the Class
M and Class MX Certificates will represent
undivided beneficial interests in the
Marriott Desert Springs Parent Loan, which
portions of the Trust Fund will be treated
as part of the grantor trust for federal
income tax purposes.
The regular interests represented by the
Offered Certificates will be treated as
newly originated debt instruments for
federal income tax purposes. Beneficial
owners will be required to report income
thereon in accordance with the accrual
method of accounting. Although not free
from doubt, it is anticipated that the
Class X Certificates will be treated as
issued with original issue discount for
federal income tax purposes in an amount
equal to the excess of all distributions
of interest expected to be received
thereon over their issue price, including
accrued interest. It is anticipated that
the regular interests represented by the
Class A-1, Class A-2, Class B, Class C and
Class D Certificates will be issued at a
premium and that the regular interest
represented by the Class E Certificates
will be issued with de minimis original
issue discount for federal income tax
purposes. See "Federal Income Tax
Consequences" herein and "Federal Income
Tax Consequences--REMIC
Certificates--Income from Regular
Certificates" in the Prospectus. Although
not free from doubt, it is anticipated
that any Prepayment Premiums allocable to
the Offered Certificates will be ordinary
income to a Certificateholder as such
amounts accrue. See "Federal Income Tax
Consequences" herein.
ERISA Considerations .......... The United States Department of Labor has
issued to the Underwriter an individual
prohibited transaction exemption,
Prohibited Transaction Exemption 89-88
(the "Exemption"), which generally exempts
from the application of certain of the
prohibited transaction provisions of
Sections 406 and 407 of the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), and the excise taxes
imposed by Sections 4975(a) and (b) of the
Internal Revenue Code of 1986, as amended
(the "Code"), and the civil penalties
imposed by 502(i) of ERISA, transactions
relating to the purchase, sale and holding
of pass-through certificates such as the
Class A-1, Class A-2 and Class X
Certificates by employee benefit plans and
certain other retirement arrangements,
including individual retirement accounts
and Keogh plans, which are subject to
Title I of ERISA and/or Section 4975 of
the Code (each of which is hereinafter
referred to as a "Plan"), collective
investment funds in which such Plans
S-37
<PAGE>
are invested, and insurance companies
using assets of separate accounts or
general accounts which include assets of
Plans (or which are deemed pursuant to
ERISA to include assets of Plans) and the
servicing and operation of mortgage pools
such as the Mortgage Pool, provided that
certain conditions are satisfied. See
"ERISA Considerations" herein and in the
Prospectus.
The Underwriter believes that the conditions
to the applicability of the Exemption will
generally be met with respect to the Class
A-1, Class A-2 and Class X Certificates
(the "Senior Offered Certificates"), other
than possibly those conditions which are
dependent on facts unknown to the
Underwriter or which it cannot control,
such as those relating to the
circumstances of the Plan purchaser or the
Plan fiduciary making the decision to
purchase any such Class of Certificates.
However, before purchasing a Senior
Offered Certificate, a fiduciary of a Plan
should make its own determination as to
the availability of the exemptive relief
provided by the Exemption or the
availability of any other exemption and
whether the conditions of any such
exemption will be applicable to the Senior
Offered Certificates.
The Exemption does not apply to the purchase
or holding of Certificates by Plans
sponsored by the Seller, the Underwriter,
the Trustee, the Master Servicer, any
obligor with respect to Mortgage Loans
included in the Trust Fund constituting
more than five percent of the aggregate
unamortized principal balance of the
assets in the Trust Fund, or any affiliate
of such parties (the "Restricted Group").
Borrowers who are acting on behalf of
Plans or who are investing assets of
Plans, and any affiliates of any such
borrowers, should not purchase any of the
Certificates.
THE CLASS B, CLASS C, CLASS D AND CLASS E
CERTIFICATES ARE SUBORDINATE TO ONE OR
MORE OTHER CLASSES OF CERTIFICATES AND,
ACCORDINGLY, SUCH CERTIFICATES MAY NOT BE
PURCHASED BY OR TRANSFERRED TO A PLAN OR
ANY PERSON ACTING ON BEHALF OF OR
INVESTING THE ASSETS OF ANY SUCH PLAN,
UNLESS SUCH PERSON IS AN INSURANCE COMPANY
INVESTING THE ASSETS OF ITS GENERAL
ACCOUNT UNDER CIRCUMSTANCES WHEREBY THE
PURCHASE AND HOLDING OF ANY SUCH
CERTIFICATE WOULD BE EXEMPT FROM THE
PROHIBITED TRANSACTION PROVISIONS OF ERISA
AND THE CODE UNDER PROHIBITED TRANSACTION
CLASS EXEMPTION 95-60.
Ratings ....................... It is a condition to the issuance of the
Offered Certificates that (i) each of the
Class A-1, Class A-2 and Class X
Certificates be rated "AAA" by Fitch IBCA,
Inc. ("Fitch"), and "Aaa" by Moody's
Investor Service ("Moody's" and,
collectively with
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<PAGE>
Fitch, the "Rating Agencies"); (ii) the
Class B Certificates be rated "AA" by
Fitch and "Aa2" by Moody's; (iii) the
Class C Certificates be rated "A" by Fitch
and "A2" by Moody's; (iv) the Class D
Certificates be rated "BBB" by Fitch and
"Baa2" by Moody's; and (v) the Class E
Certificates be rated "BBB-" by Fitch and
"Baa3" by Moody's. The ratings on the
Offered Certificates address the
likelihood of the timely receipt by
holders thereof of all distributions of
interest to which they are entitled and,
except in the case of the Class X
Certificates, distributions of principal
by the Rated Final Distribution Date. A
security rating is not a recommendation to
buy, sell or hold securities and may be
subject to revision or withdrawal at any
time by the assigning rating organization.
A security rating does not address the
frequency of prepayments (both voluntary
and involuntary) or the possibility that
Certificateholders might suffer a lower
than anticipated yield, nor does a
security rating address the likelihood of
receipt of Prepayment Premiums, Excess
Interest or Default Interest or the tax
treatment of the Certificates. A security
rating does not represent any assessment
of the yield to maturity that investors
may experience or the possibility that the
holders of the Class X Certificates might
not fully recover their initial investment
in the event of delinquencies or defaults,
rapid prepayments (both voluntary and
involuntary), or the application of
Realized Losses. As described herein, the
amounts payable with respect to the Class
X Certificates consist only of interest.
If all of the Mortgage Loans were to
prepay in the initial month, with the
result that the Class X Certificateholders
receive only a single month's interest and
thus suffer a nearly complete loss of
their investment, all amounts "due" to
such holders will nevertheless have been
paid, and such result is consistent with
the rating received on each of the Class X
Certificates. The ratings do not address
the fact that the Pass-Through Rates of
the Offered Certificates, to the extent
that they are based on the WAC Rate, will
be affected by changes therein. See
"Ratings" herein and "Yield
Considerations" in the Prospectus.
Legal Investment .............. The Certificates offered hereby do not
constitute "mortgage related securities"
for purposes of the Secondary Mortgage
Market Enhancement Act of 1984, as amended
("SMMEA"). As a result, the appropriate
characterization of the Offered
Certificates under various legal
investment restrictions, and thus the
ability of investors subject to these
restrictions to purchase the Offered
Certificates of any Class, may be subject
to significant interpretative
uncertainties. In addition, institutions
whose investment activities are subject to
review by federal or state regulatory
authorities may be or may become subject
to restrictions on the investment by such
institutions in certain forms of mortgage
backed securities. Investors should
consult their own legal advisors to
determine the extent to which the Offered
Certificates may be purchased by such
investors. See "Legal Investment" herein
and in the Prospectus.
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<PAGE>
RISK FACTORS
Prospective holders of Offered Certificates should consider, among other
things, the following factors in connection with the purchase of the Offered
Certificates.
THE MORTGAGE LOANS
BORROWER DEFAULT; NONRECOURSE MORTGAGE LOANS. The Mortgage Loans are not
insured or guaranteed, in whole or in part, by any governmental entity, by
any private mortgage or other insurer, or by the Seller, the Originators, the
Master Servicer, the Trustee, the Underwriter, the Fiscal Agent or any of
their respective subsidiaries, shareholders, partners, directors, officers,
employees or other affiliates.
Each Mortgage Loan is a nonrecourse loan as to which, in the event of a
default under such Mortgage Loan, recourse generally may be had only against
the specific properties and other assets that have been pledged to secure the
Mortgage Loan. See "Description of the Mortgaged Properties and the Mortgage
Loans" herein. Consequently, payment on each Mortgage Loan prior to maturity
is dependent primarily on the sufficiency of the net operating income of the
related Mortgaged Property, and at maturity (whether at scheduled maturity,
if applicable, or, in the event of a default under the related Mortgage Loan,
upon the acceleration of such maturity) upon the then market value of the
related Mortgaged Property or the ability of the related borrower to
refinance the Mortgaged Property.
All of the Mortgage Loans were originated within seven months of the
Cut-Off Date. Consequently, the Mortgage Loans do not have a long standing
payment history. In the case of the Americold Pool Loan and the URS Pool Loan
(both of which were originated in April 1998), the first regular scheduled
payment will not occur under the terms of such Mortgage Loans until June 11,
1998. See "Description of the Mortgaged Properties and the Mortgage
Loans--Americold Pool: The Loan--Payment Terms" and "--URS Pool: The
Loan--Payment Terms" herein.
INCREASED RISK OF LOSS ASSOCIATED WITH CONCENTRATION OF BORROWERS. The
Green Acres Loan, the Americold Pool Loan and the URS Pool Loan have
borrowers related to each other and such Mortgage Loans represent, in the
aggregate, approximately 39.8% of the Initial Pool Balance. The Tharaldson
Pool A Loan and the Tharaldson Pool B Loan have borrowers related to each
other and such Mortgage Loans represent, in the aggregate, approximately
25.7% of the Initial Pool Balance. Concentration of related borrowers in a
mortgage pool can pose increased risks. Mortgaged Properties that are owned
by a group of related borrowers are likely to have common management. If a
mortgage pool has a concentration of mortgage loans secured by properties
owned by a group of related borrowers having common property management,
financial or other difficulties experienced by the property manager would
have a greater impact on the mortgage pool than would be the case if the
properties did not have common management. In addition, a financial failure
or bankruptcy filing involving an affiliate of a group of affiliated
borrowers, such as a common general partner or the owner of a common general
partner, would have a greater impact on the Mortgage Pool than a financial
failure or bankruptcy filing involving only one borrower. Nonetheless, the
filing of a bankruptcy petition should not invalidate the first lien position
held by the Trustee on the related Mortgaged Property, and the Master
Servicer is required to make Advances through liquidation unless the Master
Servicer determines that such Advances will not be recoverable. See
"Description of the Certificates--Advances" herein. In addition, the terms of
the Mortgage Loans require that the related borrowers be special purpose
entities and such borrowers' organizational documents or the terms of the
Mortgage Loans limit their activities to the ownership of only the related
Mortgaged Property or Mortaged Properties and limit the borrowers' ability to
incur additional indebtedness. However, there can be no assurance that such
borrowers will comply with such requirements. Further, in certain cases such
borrowers are not required to observe all covenants and conditions which
often are required in order for such borrowers to be viewed under standard
rating agency criteria as "special purpose entities". See "Certain Legal
Aspects of The Mortgage Loans--Anti-Deficiency Legislation; Bankruptcy Laws"
in the Prospectus.
LIMITATIONS WITH RESPECT TO REPRESENTATIONS AND WARRANTIES. Each
Responsible Party will make certain limited representations and warranties
regarding the Mortgage Loans for which it is acting as a Responsible Party,
and such representations and warranties will be assigned by the Seller to the
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<PAGE>
Trustee for the benefit of the Certificateholders. See "The Pooling
Agreement--Representations and Warranties; Repurchase" herein and Exhibit A
hereto for a summary of such representations and warranties. A material
breach of such representations and warranties that is not cured within a
specified time period may, under certain circumstances described herein,
obligate the applicable Responsible Party to repurchase the defective
Mortgage Loan.
It is possible that one or more Mortgage Loans may contain defects without
giving rise to an obligation to repurchase on the part of the applicable
Responsible Party. If the applicable Responsible Party is required to but
does not cure or remedy a breach of a representation or warranty, payments on
the Offered Certificates may be substantially less than such payments would
be if the applicable Responsible Party had cured or remedied such a breach.
In addition, in the event that a Responsible Party repurchases a Mortgage
Loan, the Repurchase Price will be passed through to the holders of certain
Classes of Certificates with the same effect as if such Mortgage Loan had
been prepaid in full (but without any prepayment premium or yield maintenance
charge), which may adversely affect the yield to maturity on such
Certificates. See "--The Offered Certificates--Special Prepayment, Yield and
Loss Considerations" below.
The obligation of the applicable Responsible Party to repurchase a
Mortgage Loan may constitute the sole remedy available to holders of
Certificates or the Trustee for a breach of a representation or warranty by
the applicable Responsible Party. None of the Seller, the Master Servicer,
the Special Servicer, the Trustee, the Underwriter or the Fiscal Agent will
be obligated to purchase a Mortgage Loan if the applicable Responsible Party
defaults on its obligation to repurchase or cure, and no assurance can be
given that the applicable Responsible Party will fulfill such obligations. If
such obligation is not met with respect to a breach that would cause a
Mortgage Loan not to be a "qualified mortgage" under the REMIC provisions of
the Code, the Upper-Tier REMIC and Lower-Tier REMIC may be disqualified as
REMICs. See "The Pooling Agreement--Representations and Warranties;
Repurchase" herein.
COMMERCIAL LENDING GENERALLY. The Mortgage Loans are secured by hotels,
refrigerated distribution/warehouse facilities, retail properties and office
buildings. Commercial lending is generally viewed as exposing a lender to a
greater risk of loss than residential one-to-four family lending since it
typically involves larger loans to a single obligor than residential
one-to-four family lending. Lenders typically look to the debt service
coverage ratio of a loan secured by income-producing property as an important
measure of the risk of default on such a loan. See "--Concentration of
Mortgage Loans and Mortgaged Property Types."
Commercial property values and net operating income are subject to
volatility, and net operating income may be sufficient or insufficient to
cover debt service on the related Mortgage Loan at any given time. The
repayment of loans secured by income-producing properties is typically
dependent upon the successful operation of the related real estate project,
the business operated by the tenants and the creditworthiness of such tenants
(i.e., the ability of the applicable property to produce net operating
income), rather than upon the liquidation value of the underlying real
estate. The volatility of property values and net operating income depends
upon a number of factors, including, but not limited to (i) the volatility of
property revenue, determined primarily by (a) the length of tenant lease
commitments, (b) the creditworthiness of tenants, (c) in the case of retail
properties characterized by rentals based all or in part on tenant sales, the
volume of those sales and (d) the variability of other property revenue
sources; and (ii) the property's "operating leverage," which generally refers
to (a) the percentage of total property operating expenses in relation to
property revenue, (b) the breakdown of property operating expenses between
those that are fixed and those that vary with revenue and (c) the level of
capital expenditures required to maintain the property and retain or replace
tenants. Even when the current net operating income is sufficient to cover
debt service, there can be no assurance that this will continue to be the
case in the future. The net operating income and value of the Mortgaged
Properties may be adversely affected by a number of factors, including, but
not limited to, national, regional and local economic conditions (which may
be adversely impacted by plant closings, industry slowdowns and other
factors); weather; local real estate conditions (such as an oversupply of
retail space, office space, industrial space or housing); changes or
continued weakness in specific industry segments; perceptions by prospective
tenants and, in the case of retail properties, retailers and shoppers, of the
safety, convenience, condition,
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<PAGE>
services and attractiveness of the property; the proximity and availability
of competing alternatives to the Mortgaged Property; the willingness and
ability of the property's owner to provide capable management and adequate
maintenance; demographic factors; consumer confidence, unemployment rates,
customer tastes and preferences; retroactive changes to building or similar
codes; and increases in operating expenses (such as energy costs).
Net operating income from a real estate project may be reduced, and the
borrower's ability to repay the loan impaired, as a result of, among other
things, an increase in vacancy rates for the project, a decline in rental
rates as leases are renewed or entered into with new tenants, an increase in
operating expenses of the project and/or an increase in capital expenditures
needed to maintain the project and make improvements required by tenants. In
the case of Mortgage Loans that are secured by Mortgaged Properties leased to
a single tenant, a deterioration in the financial condition of such tenant,
resulting in a failure to pay rent, may have a disproportionately greater
effect on the net operating income from such Mortgaged Properties than would
be the case with respect to Mortgaged Properties with multiple tenants.
Mortgage Loans secured by Mortgaged Properties leased to a single tenant or
to a small number of tenants are also more susceptible to interruptions of
cash flow if such tenants decide not to renew their leases, since the impact
of such a decision is proportionately greater, the time required to re-lease
the space may be longer and greater capital costs may be incurred in making
the space appropriate for replacement tenants than would be the case with
Mortgaged Properties having a larger number of relatively smaller tenants.
For example, approximately 53.5% of the GLA of the One Commerce Square
Property is leased to IBM under a lease that is scheduled to expire in the
year 2002. In addition, the Showcase Property is leased to only five major
tenants. In the case of Mortgage Loans secured by Mortgaged Properties having
multiple tenants, expenditures for re-leasing may be more frequent than would
be the case with respect to Mortgaged Properties with single tenants, thereby
reducing cash flow available for debt service payments. In addition,
multi-tenanted Mortgaged Properties may experience higher continuing vacancy
rates and greater volatility in rental income and expenses than
single-tenanted Mortgaged Properties.
The age, construction quality and design of a particular property may
affect the occupancy level as well as the rents that may be charged for
individual leases. The effects of poor construction quality will increase
over time in the form of increased maintenance and capital improvements
needed to maintain the property. Even good construction will deteriorate over
time if the property managers do not schedule and perform adequate
maintenance in a timely fashion. For example, an engineering report for the
Green Acres Property has indicated that approximately $1,659,000 of
maintenance and repairs should be performed on the Green Acres Property. If,
during the terms of the Mortgage Loans, competing properties of a similar
type are built in the areas where the Mortgaged Properties are located or
similar properties in the vicinity of the Mortgaged Properties are
substantially updated and refurbished, the value and net operating income of
such Mortgaged Properties could be reduced.
Additionally, some of the Mortgaged Properties (for example, certain of
the URS Pool Properties and Americold Pool Properties) may not readily be
convertible to alternative uses if such Mortgaged Properties were to become
unprofitable due to competition, age of the improvements, decreased demand,
regulatory changes or other factors. The conversion of commercial properties
(particularly industrial properties) to alternate uses generally requires
substantial capital expenditures. Thus, if the operation of any such
Mortgaged Properties becomes unprofitable such that the borrower becomes
unable to meet its obligations on the related Mortgage Loan, the liquidation
value of any such Mortgaged Property may be substantially less, relative to
the amount owing on the related Mortgage Loan, than would be the case if such
Mortgaged Property were readily adaptable to other uses.
A decline in the real estate market, a decline in the financial condition
of a major tenant or a general decline in the local, regional or national
economy will tend to have a more immediate effect on the net operating income
of properties with short-term revenue sources and may lead to higher rates of
delinquency or defaults. Historical operating results for the Mortgaged
Properties may not be comparable to future operating results. (See
"--Borrowers' Recent Acquisitions of the Mortgaged Properties.") In addition,
other factors may adversely affect the Mortgaged Properties' value without
affecting their current net operating income, including changes in
governmental regulations, fiscal policy and zoning or
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<PAGE>
tax laws; potential environmental legislation or liabilities or other legal
liabilities; the availability of refinancing; and changes in interest rate
levels. There is no assurance that the value of any Mortgaged Property during
the term of the related Mortgage Loan will equal or exceed the appraised
value used in connection with the origination of such Mortgage Loan.
Other commercial properties located in the areas of the Mortgaged
Properties compete with the Mortgaged Properties of such types to attract
retailers, customers and tenants. Increased competition could adversely
affect the income from and market value of the Mortgaged Properties.
The availability of credit for obligors to refinance the Mortgage Loans or
sell Mortgaged Properties will be significantly dependent upon economic
conditions in the markets where the Mortgaged Properties are located, as well
as upon the willingness and ability of lenders to make such loans. Such
lenders typically include banks, insurance companies, finance companies and
real estate investment trusts. The availability of funds in the credit
markets changes over time and there can be no assurance that the availability
of such funds will increase above, or will not contract below, current
levels. In addition, the availability of assets similar to the Mortgaged
Properties, and the competition for available credit, may affect the ability
of potential purchasers to obtain financing for the acquisition of the
Mortgaged Properties. The ability of the Trust Fund to make distributions to
the Certificateholders will depend significantly on the ability of the
obligors to refinance the Mortgage Loans or sell the Mortgaged Properties.
CONCENTRATION OF MORTGAGE LOANS AND MORTGAGED PROPERTY TYPES. The average
principal balance of the Mortgage Loans as of the Cut-Off Date was
approximately $140,915,300. The URS Pool Loan, the Tharaldson Pool B Loan,
the Tharaldson Pool A Loan, the Green Acres Loan, the Americold Pool Loan,
the Pier 39 Loan, the One Commerce Square Loan, the Marriott Desert Springs
Loan, the Showcase Loan and the Crystal City Pool Loan represent
approximately 18.0%, 13.0%, 12.7%, 11.3%, 10.5%, 8.3%, 7.9%, 7.3%, 5.6% and
5.4%, respectively, of the aggregate principal balance of the Mortgage Pool
as of the Cut-Off Date. Hotel properties, refrigerated distribution/warehouse
facilities, retail properties and office properties represent approximately
33.0%, 28.5%, 25.2% and 13.3%, respectively, of the aggregate principal
balance of the Mortgage Pool as of the Cut-Off Date.
A mortgage pool consisting of fewer loans, each having a relatively higher
outstanding principal balance, may result in losses that are more severe,
relative to the size of the pool, than would be the case if the pool
consisted of a greater number of mortgage loans each having a relatively
smaller outstanding principal balance. In addition, the concentration of any
mortgage pool in one or more loans that have outstanding principal balances
that are substantially larger than the other mortgage loans in such pool can
result in losses that are substantially more severe, relative to the size of
the pool, than would be the case if the aggregate balance of the pool were
more evenly distributed among the mortgage loans in such pool. Because there
are only ten Mortgage Loans, losses on any one Mortgage Loan may have a
substantial negative effect on the Offered Certificates.
GEOGRAPHIC CONCENTRATION. Repayments by borrowers and the market value of
the Mortgaged Properties could be adversely affected by economic conditions
generally or in regions where the Mortgaged Properties are located,
conditions in the real estate markets where the Mortgaged Properties are
located, changes in governmental rules and fiscal policies, acts of nature,
including earthquakes, floods and hurricanes (which may result in uninsured
losses), and other factors which are beyond the control of the borrowers. The
Mortgaged Properties are located in 36 states. The economy of any state or
region in which a Mortgaged Property is located may be adversely affected to
a greater degree than that of other areas of the country by certain
developments affecting industries concentrated in such state or region.
Moreover, in recent periods, several regions of the United States have
experienced significant downturns in the market value of real estate. In
addition, improvements on Mortgaged Properties located in California may be
more susceptible to certain types of special hazards not covered by insurance
(such as earthquakes) than properties located in other parts of the country.
A decline in the general economic condition in regions in which Mortgaged
Properties securing a significant portion of the Mortgage Loans are located
could result in a decrease in commercial property, housing or consumer demand
in the region and the income from and market value of the Mortgaged
Properties may be adversely affected. See the
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table entitled "Mortgaged Properties by Location" for a description of the
geographic location of the Mortgaged Properties. All of the Mortgaged
Properties securing the Crystal City Pool Loan are located in the
metropolitan Washington D.C. region, particularly Arlington, Virginia. The
vast majority of the Mortgaged Properties securing the Tharaldson Pool A Loan
and the Tharaldson Pool B Loan are located in the Midwest. The table below
sets forth the states in which a significant percentage of the Mortgaged
Properties are located and, except as set forth in the table below, no state
contains more than 5% (by Cut-Off Date Allocated Loan Amount) of the
Mortgaged Properties.
SIGNIFICANT GEOGRAPHIC CONCENTRATION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
WEIGHTED
CUT-OFF DATE PERCENT OF CUT-OFF AVERAGE
ALLOCATED DATE ALLOCATED NUMBER OF CUT-OFF DATE
STATE LOAN AMOUNT LOAN AMOUNT PROPERTIES LTV
- --------------- -------------- ------------------ ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
California ..... $235,948 16.7% 6 59.4%
New York ....... $182,524 13.0% 2 63.0%
Pennsylvania .. $145,346 10.3% 3 76.9%
Illinois........ $ 83,333 5.9% 38 57.0%
Virginia........ $ 81,448 5.8% 4 66.3%
Nevada.......... $ 78,998 5.6% 1 67.2%
</TABLE>
The aggregate principal balance of the Mortgage Loans secured by Mortgaged
Properties in each state was calculated based on the Cut-Off Date Allocated
Loan Amount of each Mortgaged Property, as described below under "Mortgage
Pool Characteristics--Certain Characteristics of the Mortgage Loans."
RISKS ASSOCIATED WITH HOTELS. The Tharaldson Pool A Loan and the
Tharaldson Pool B Loan are secured by 90 limited service hotels and 93
limited service hotels, respectively. The Marriott Desert Springs Loan is
secured by one full-service resort hotel. Various factors, including
location, quality and franchise or hotel management company affiliation
affect the economic performance of a hotel. Adverse economic and social
conditions, either local, regional or national, may limit the amount that can
be charged for a room and may result in a reduction in occupancy levels. The
construction of competing hotels or resorts can have similar effects. Limited
service hotels are generally subject to greater competition than full-service
hotels as the barriers to entry in the former market are weaker. To meet
competition in the industry and to maintain economic values, continuing
expenditures must be made for modernizing, refurbishing and maintaining
existing facilities prior to the expiration of their anticipated useful
lives. Because hotel rooms generally are rented for short periods of time,
hotels tend to respond more quickly to adverse economic conditions and
competition than do other commercial properties. Furthermore, the financial
strength and capabilities of the owner and operator of a hotel may have an
impact on such hotel's quality of service and economic performance.
Additionally, the hotel and lodging industry is generally seasonal in nature,
and this seasonality can be expected to cause periodic fluctuations in a
hotel property's room and other hotel revenues, occupancy levels, room rates
and operating expenses. The demand for particular accommodations may also be
affected by changes in travel patterns caused by changes in access, energy
prices, strikes, relocation of highways, the construction of additional
highways and other factors.
The Mortgaged Properties securing the Tharaldson Pool A Loan and the
Tharaldson Pool B Loan are managed by Tharaldson Property Management, Inc. 35
of the Mortgaged Properties securing the Tharaldson Pool A Loan are
franchises of Fairfield Inn, 22 are franchises of Comfort Inn, 12 are
franchises of Hampton Inn, 5 are franchises of Residence Inn, 4 are
franchises of Comfort Suites, 3 are franchises of Country Inn & Suites, 3 are
franchises of Courtyard, 2 are franchises of Sleep Inns, 1 is a franchise of
Homewood Suites, 1 is a franchise of Super 8, and 1 is a Tharaldson Inn &
Suites. 39 of the Mortgaged Properties securing the Tharaldson Pool B Loan
are franchises of Fairfield Inn, 19 are franchises of Comfort Inn, 10 are
franchises of Hampton Inn, 6 are franchises of Residence Inn, 5 are
franchises of Comfort Suites, 4 are franchises of Super 8, 4 are franchises
of Holiday Inn Express, 3 are franchises of Courtyard, 2 are franchises of
Country Inn & Suites, and 1 is a franchise of Days Inn. The
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Mortgaged Property securing the Marriott Desert Springs Loan is a hotel that
is operated as a Marriott hotel under management by Marriott Hotel Services,
Inc. The performance of any hotel property which is affiliated with a
franchise or hotel management company depends in part on the continued
existence, reputation and financial strength of the franchisor or hotel
management company, the public perception of the franchise or hotel chain
service mark and the duration of the franchise licensing or management
agreements. 35 and 22 of the Tharaldson Pool A Properties, representing
approximately 41% and 20%, respectively, of the Tharaldson Pool A Loan are
franchises of Fairfield Inn and Comfort Inn, respectively, and 39 and 19 of
the Tharaldson Pool B Properties, representing approximately 42% and 16%,
respectively, of the Tharaldson Pool B Loan are franchises of Fairfield Inn
and Comfort Inn, respectively. Accordingly, the Tharaldson Pool A Loan and
Tharaldson Pool B Loan may be affected by an economic decline or a decline in
the public's perception of the Fairfield Inn and Comfort Inn franchises.
Franchise licensing agreements may impose certain affirmative obligations
on the owners or operators of the Mortgaged Properties with respect to the
operation of such properties. The franchise agreement for one of the
Tharaldson Pool A Properties terminates prior to the Tharaldson Pool A
Anticipated Repayment Date, the franchise agreements for four of the
Tharaldson Pool B Properties terminate prior to the Tharaldson Pool B
Anticipated Repayment Date, and all the franchise agreements for the
Tharaldson Pool A Properties and the Tharaldson Pool B Properties terminate
prior to the maturity dates of the Tharaldson Pool A Loan and Tharaldson Pool
B Loan, respectively. Upon a termination of the franchise for a hotel, it is
possible that a replacement franchise would require significantly higher
fees. The transferability of franchise license agreements is restricted and,
in the event of a foreclosure on any Mortgaged Property, the mortgagee or its
agent as operator of the Mortgaged Property would not have the right to use
the franchise license without the franchisor's consent. Conversely, a
mortgagee, in the case of certain Mortgage Loans, may be unable to remove a
franchisor or a hotel management company that it desires to replace following
a foreclosure. Moreover, any provision in a franchise agreement or management
agreement providing for termination because of a bankruptcy of a franchisor
or manager will generally not be enforceable. No assurance can be given that
the Trust Fund could renew a franchise or management agreement or obtain a
new franchise or management contract following a foreclosure. Further, in the
event of a foreclosure on a Mortgaged Property, it is unlikely that the
Trustee on behalf of the Trust Fund or a purchaser of such Mortgaged Property
would be entitled to the rights under any liquor license for such Mortgaged
Property, and such party would be required to apply in its own right for such
license or licenses. There can be no assurance that a new license could be
obtained. See "--Liquor License Considerations" below.
LIQUOR LICENSE CONSIDERATIONS. Certain of the Mortgaged Properties which
are hotel properties have liquor licenses. The liquor licenses for such
Mortgaged Properties may be held by the property manager or operator, as the
case may be (or an affiliate thereof), rather than by the related borrower.
In addition, some states do not permit liquor licenses to be held other than
by a natural person and, consequently, liquor licenses for hotel properties
located in such jurisdictions are held by an individual affiliated with the
related borrower or manager. Furthermore, the applicable laws and regulations
relating to such licenses generally prohibit the transfer of such licenses to
any person. In the event of a foreclosure of a hotel property, it is unlikely
that the Trustee (or Master Servicer) or purchaser in any such sale would be
entitled to the rights under the liquor license for such hotel property and
such party would be required to apply in its own right for such a license.
There can be no assurance that a new liquor license could be obtained.
RISKS ASSOCIATED WITH REFRIGERATED DISTRIBUTION/WAREHOUSE FACILITIES. The
URS Pool Loan and the Americold Pool Loan are secured by refrigerated
distribution/warehouse facilities ("cold storage facilities"). Significant
factors determining the value of such cold storage facilities are the quality
and mix of tenants, building design and the location of the property. Since
tenants frequently incur transportation costs which are significantly greater
than warehousing costs, location is a major factor. A cold storage facility
requires the availability of labor sources, proximity to supply sources and
customers and accessibility to rail lines, major roadways and other
distribution channels. In certain locations, tenants depend upon shipping
products in pooled shipments with products of other tenants going to the same
markets. In these cases, the mix of tenants in a cold storage facility can
significantly influence the cost of delivering products to markets.
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Cold storage facilities are often located near or adjacent to tenants'
processing facilities and in such cases, a majority of and, in some cases,
the entire property is devoted to the use of a single tenant or a small
number of major tenants or commodities. An interruption or reduction in the
business received by such properties from such tenants or a reduction in
demand for such commodities could result in a decrease in the sales and
overall profitability at cold storage facilities. Approximately 47% of the
Americold Pool Properties Underwritten Net Cash Flow and 19% of the URS Pool
Properties Underwritten Net Cash Flow is derived from Captive Production
facilities that principally rely upon a single tenant. The income produced by
such Captive Production facilities may be adversely affected by a
deterioration in the financial health of such tenants. Cold storage
facilities may be adversely affected by reduced demand for cold storage space
occasioned by a decline in a particular industry segment, and a particular
facility that suited the needs of its original tenant may be difficult to
relet to another tenant or may become functionally obsolete relative to newer
properties. Approximately 35% of the Americold Pool Properties Underwritten
Net Cash Flow and approximately 34% of the URS Pool Properties Underwritten
Net Cash Flow is derived from Regional Distribution and Regional Production
warehouses. Regional Distribution and Regional Production facilities may be
adversely affected by a decline in the general economic condition in the
regions in which such facilities are located.
Aspects of building site design and adaptability affect the value of a
cold storage facility. Site characteristics which are valuable to such a
property include high clear heights, wide column spacing, a large number of
bays and large bay depths, divisibility, large minimum truck turning radii
and overall functionality and accessibility.
Access to two Americold Pool Properties located in Bettendorf, Iowa and
Plover, Wisconsin; and one URS Pool Property located in Oklahoma City,
Oklahoma (Oklahoma 2) is dependent, at least in part, on certain easements
and/or licenses which have not been recorded. Such access could be adversely
affected by a sale of the adjoining properties providing such access.
Warehousing sales can be seasonal, depending on the timing and
availability of crops grown for frozen food production and the seasonal
build-up of certain products for holiday consumption, and this seasonality
can be expected to cause periodic fluctuations in a cold storage facility's
revenues and operating expenses.
RISKS ASSOCIATED WITH RETAIL PROPERTIES. The Green Acres Property, the
Pier 39 Property and the Showcase Property are all retail properties. The
value of retail properties is significantly affected by the quality of the
tenants as well as fundamental aspects of real estate, such as location and
market demographics. The correlation between the success of tenant businesses
and property value may be more direct with respect to retail properties than
other types of commercial property because a significant component of the
total rent paid by retail tenants is often tied to a percentage of gross
sales. Whether a retail property is "anchored" or "unanchored" is also an
important distinction. Anchor tenants in shopping centers traditionally have
been a major factor in the public's perception of a shopping center. The
anchors at a shopping center play an important part in generating customer
traffic and making a center a desirable location for other tenants of the
center. The failure of an anchor tenant to renew its lease, the termination
of an anchor tenant's lease, the bankruptcy or economic decline of an anchor
tenant, or the cessation of the business of an anchor tenant (notwithstanding
its continued payment of rent) can have a material negative effect on the
economic performance of a retail property. There can be no assurance that if
an anchor store in the Mortgaged Properties were to close, the related
borrower would be able to replace such anchor in a timely manner or without
incurring additional costs and adverse economic effects. See "--Risks
Relating to Tenants; Reserves" below. Furthermore, the correlation between
the success of tenant businesses and property value is increased when the
property is a single tenant property.
Two of the four anchors at the Green Acres Mall are subject to operating
covenants which require such anchors to operate as retail department stores
and, in the case of one such anchor, to maintain a specific name for its
store. The remaining anchors are not subject to any operating covenants and
may discontinue their operations at the Green Acres Mall. See "Description of
the Mortgaged Properties and the Mortgage Loans--Green Acres: The Borrower;
The Property--Operating Covenants" herein. In
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addition, the leases of certain Major Tenants at the Showcase Property have
rent abatement or termination provisions generally related to the continued
operation of the other Major Tenants. See "Description of the Mortgaged
Properties and the Mortgage Loans--Showcase: The Borrower: The
Property--Certain Showcase Major Tenant Lease Provisions" herein.
Unlike office or industrial properties, retail properties also face
competition from sources outside a given real estate market. Factory-outlet
centers, discount shopping centers and clubs, video shopping networks,
catalogue retailers, home shopping networks, direct mail and telemarketing
all compete with more traditional retail properties for consumer dollars.
Continued growth of these alternative retail business (which are often
characterized by lower operating costs) could adversely affect the rents
collectible at the retail properties included in the Mortgage Pool. Increased
competition could adversely affect income from and market value of the
Mortgaged Properties. For example, the Green Acres Property must compete for
retail customers with two nearby shopping malls, Queens Center, which lies
approximately nine miles to the west and Roosevelt Field Mall, which lies
approximately seven miles to the east. The Showcase Property is adjacent to a
proposed "Showcase II" Property which is currently in the planning stages by
an affiliate of the Showcase Borrower. The Showcase Property and the
"Showcase II" property will be competing for the same retail and
entertainment customers.
RISKS ASSOCIATED WITH SPECIALTY RETAIL PROPERTIES. The Pier 39 Property
and the Showcase Property are specialty retail properties. Unlike typical
retail properties, each of the Pier 39 Property and the Showcase Property is
a tourist attraction and the value of each property is substantially
dependent on tourist customer traffic. The travel patterns of tourists may be
affected by changes in access, energy prices, strikes, relocation of
highways, the construction of additional highways, the weather and other
factors. The business of the Pier 39 Property and the Showcase Property is
generally seasonal in nature and such seasonality can be expected to cause
periodic fluctuations in the revenues and expenses at such properties. In
addition, the goods and services offered at the Pier 39 Property and the
Showcase Property are typically of a non-essential nature. Accordingly, a
general decline in the economy may limit the amount that shoppers are willing
to spend on non-essential, leisure goods and services.
RISKS ASSOCIATED WITH OFFICE PROPERTIES. The One Commerce Square Loan and
the Crystal City Pool Loan are each secured by office properties. Significant
factors determining the value of office properties are the quality of the
tenants in the building, the physical attributes of the building in relation
to competing buildings and the strength and stability of the market area as a
desirable business location. Office properties may be adversely affected if
there is an economic decline in the business operated by the tenants. The
risk of such an adverse effect is increased if revenue is dependent on a
single tenant or if there is a significant concentration of tenants in a
particular business or industry. See "--Commercial Lending Generally" above.
For example, IBM leases approximately 53.5% of the One Commerce Square
Property GLA under a lease that is scheduled to expire in the year 2002. The
One Commerce Square Borrower has established a reserve with a letter of
credit in the amount of approximately $2,978,272 for unpaid tenant
improvements and leasing. In addition, it is required to escrow funds in a
leasing reserve account to defer costs associated with releasing the space
under such lease, which reserve is required to be in excess of $12,000,000 by
the year 2002. However, there can be no assurance that such reserve will be
sufficient to cover the costs in connection with re-leasing such space.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a property's age,
condition, design (e.g., floor sizes and layout), access to transportation
and ability to offer certain amenities to its tenants, including
sophisticated building systems (such as fiber-optic cables, satellite
communications or other base building technological features). The success of
an office property also depends on the local economy. A company's decision to
locate office headquarters in a given area, for example, may be affected by
such factors as labor cost and quality, tax environment and quality of life
issues such as those relating to schools and cultural amenities. The local
economy will impact on an office property's ability to attract stable tenants
on a consistent basis. In addition, the cost of refitting office space for a
new tenant is often more costly than for other property types. It is
anticipated that the Two Commerce Square Property, which is adjacent to the
One Commerce Square Property, will experience significant vacancies as a
result of a lease expiration of a major tenant
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occupying approximately 750,000 square feet of the GLA of the Two Commerce
Square Property. This is expected to result in an increased supply of office
space in the vicinity of the One Commerce Square Property, which may lead to
increased competition and lower prices.
RISKS RELATING TO TENANTS; RESERVES. Income from, and the market value of,
the Mortgaged Properties would be adversely affected if space in the
Mortgaged Properties could not be leased or re-leased, if tenants were unable
to meet their lease obligations, if a significant tenant were to become a
debtor in a bankruptcy case under Title 11 of the United States Code (the
"Bankruptcy Code"), or if for any other reason rental payments could not be
collected. Any tenant may, from time to time, experience a downturn in its
business, which may weaken its financial condition and result in a reduction
of or failure to make rental payments when due. For example, with respect to
Mortgaged Properties that contain retail space, if tenants' sales were to
decline, percentage rents may decline and tenants may be unable to pay their
rent or other occupancy costs. If a tenant defaults on its obligations to a
borrower, the borrower may experience delays in enforcing its rights as
lessor and may incur substantial costs and experience significant delays
associated with protecting its investment, including costs incurred in
renovating and reletting the property.
The URS Pool Master Lessee and the Americold Pool Master Lessee provide
the sole rental payments to the URS Pool Borrower and Americold Pool
Borrower, with respect to the URS Pool Properties and Americold Pool
Properties, respectively. The URS Pool Master Lessee and Americold Pool
Master Lessee are currently engaged solely in maintaining such properties and
a limited number of other similar properties, contracting with multiple
customers for storage on such facilities and providing related services, but
they are not restricted from engaging in other businesses which could
adversely affect their profitability. Income from, and the market value of,
such Mortgaged Properties would be adversely affected if such lessees default
in their obligations to pay rent.
The bankruptcy or insolvency of a major tenant or a number of smaller
tenants in retail, office and industrial properties may have an adverse
impact on the Mortgaged Properties affected and the income produced by such
Mortgaged Properties. Under the Bankruptcy Code, a tenant has the option of
assuming or rejecting or, subject to certain conditions, assuming and
assigning to a third party, any unexpired lease. If the tenant assumes its
lease, the tenant must cure all defaults under the lease and provide the
landlord with adequate assurance of its future performance under the lease.
If the tenant rejects the lease, the landlord's claim for breach of the lease
would (absent collateral securing the claim) be treated as a general
unsecured claim against the tenant. The amount of the claim would be limited
to the amount owed for the unpaid rent reserved under the lease for the
periods prior to the bankruptcy petition (or earlier surrender of the leased
premises) which are unrelated to the rejection, plus the greater of one
year's rent or 15% of the remaining rent reserved under the lease (but not to
exceed three years' rent). If the tenant assigns its lease, the tenant must
cure all defaults under the lease and the proposed assignee must demonstrate
adequate assurance of future performance under the lease.
For example, a tenant of the Pier 39 Property, Namco Cyber Station,
representing approximately 4.2% of the aggregate GLA in the Pier 39 Property,
has filed for protection from creditors under the Bankruptcy Code. A mall
shop tenant of the Green Acres Property, G&G Shops, representing
approximately 0.2% of the aggregate GLA in the Green Acres Property, has
filed for protection from creditors under the Bankruptcy Code. A tenant of
the One Commerce Square Property, Penn Encore, Inc., representing
approximately 0.2% of the aggregate GLA in the One Commerce Square Property,
has filed for protection from creditors under the Bankruptcy Code and may
close its store. There can be no assurance that these, or any other, tenants
will meet their rent payment obligations under their related space leases.
Furthermore, there can be no assurance that these stores will effect a
successful reorganization or generate the customer traffic they contributed
to prior to filing for bankruptcy.
No assurance can be given that tenants in the Mortgaged Properties will
continue making payments under their leases or that other tenants will not
file for bankruptcy protection in the future or, if any tenants so file, that
they will continue to make rental payments in a timely manner.
Repayment of the Mortgage Loans secured by retail, industrial and office
properties will be affected by the expiration of space leases and by the
ability of the respective borrowers to renew their leases or
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relet their space on comparable terms. Tables containing information
regarding the expiration dates of certain leases are set forth under
"Mortgage Pool Characteristics--Certain Characteristics of the Mortgage
Loans" herein. Even if vacated space is successfully relet, the costs
associated with reletting, including tenant improvements and leasing
commissions, could be substantial and could reduce cash flow from the
Mortgaged Properties.
Most of the Mortgage Loans required that reserves be established upon the
closing of the loan to fund identified capital expenditure items and certain
leasing costs. Most of the Mortgage Loans also require that reserves be
funded on a monthly basis from cash flow of the applicable Mortgaged Property
or Properties which may be used by the applicable borrower to fund ongoing
capital improvements and leasing costs. There can be no assurance that the
reserve amounts established at the closing of a loan will be sufficient to
offset the actual costs of the items for which the reserves were established,
that cash flow from the properties will be sufficient in the future to fully
fund the ongoing monthly reserve requirements, or that such ongoing monthly
reserves will be sufficient to offset the future capital expenditure and
leasing costs of the properties. See "Description of the Mortgaged Properties
and the Mortgage Loans" herein for a discussion of the reserve accounts for
each Mortgage Loan.
The Showcase Property opened within the prior 12 months. Consequently,
there is no significant rent payment history with respect to the Showcase
Major Tenants, and there can be no assurance that they will not seek to
renegotiate their leases or default in their obligations to pay rent.
BORROWERS' RECENT ACQUISITIONS OF THE MORTGAGED PROPERTIES. The borrowers
under the URS Pool Loan, the Americold Pool Loan, the Green Acres Loan and
the Showcase Loan acquired or constructed their related Mortgaged Properties
contemporaneously with, or within 12 months prior to, the origination of the
related Mortgage Loan. Accordingly, these borrowers may have limited
experience operating the particular Mortgaged Properties, and, therefore
there is a risk that the net operating income and cash flow of such Mortgaged
Properties that were recently acquired or constructed may vary significantly
from the operations, net operating income and cash flow generated by the
Mortgaged Properties under prior ownership and management.
ENVIRONMENTAL LAW CONSIDERATIONS. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner
or operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under, adjacent to, or in
such property. Such laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The cost of any required remediation and the owner's
liability therefor generally are not limited under such circumstances and
could exceed the value of the property and/or the aggregate assets of the
owner. In addition, the presence of hazardous or toxic substances, or the
failure to properly remediate such property, may adversely affect the owner's
or operator's ability to refinance using such property as collateral. Persons
who arrange for the disposal or treatment of hazardous or toxic substances
may also be liable for the costs of removal or remediation of such substances
at the disposal or treatment facility. Certain laws impose liability for
release of asbestos-containing materials ("ACMs") into the air or require the
removal or containment of ACMs, and third parties may seek recovery from
owners or operators of real properties for personal injury associated with
ACMs or other exposure to chemicals or other hazardous substances. For all of
these reasons, the presence of, or strong potential for contamination by,
hazardous substances at, on, under, adjacent to, or in a property can
materially adversely affect the value of the property and a borrower's
ability to repay its Mortgage Loan.
Under some environmental laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), as well as certain state laws, a secured lender (such as the
Trust Fund) may be liable, as an "owner" or "operator," for the costs of
responding to a release or threat of a release of hazardous substances on or
from a borrower's property if (i) agents or employees of a lender are deemed
to have participated in the management of the borrower or (ii) the lender
actually takes possession of a borrower's property or control of its
day-to-day operations as, for example, through the appointment of a receiver.
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Although recently enacted legislation clarifies the activities in which a
lender may engage without becoming subject to liability under CERCLA and
similar federal laws, such legislation has no applicability to state
environmental law. See "Certain Legal Aspects of Mortgage
Loans--Environmental Risks" in the Prospectus.
All of the Mortgaged Properties have been subject to either Phase I site
assessments or updates of previously performed Phase I site assessments (and
in several cases, Phase II site assessments) within twelve months preceding
the date of the closing of the related Mortgage Loan. Such assessments were
intended to evaluate the environmental condition of and potential
environmental liabilities associated with the Mortgaged Properties, and
included a visual observation of the Mortgaged Properties during a site
visit, a review of certain records concerning the Mortgaged Properties and
publicly available information concerning known conditions at the Mortgaged
Properties or in the vicinity of the Mortgaged Properties, consideration of
the likely presence of ACMs or radon gas in the buildings on the Mortgaged
Properties and of polychlorinated biphenyls ("PCBs") in the electrical
transformers, a discussion of the presence of underground or above-ground
storage tanks, and the preparation of a written report. The Phase I
assessments did not include sampling or analysis of soil, groundwater or
other environmental media or subsurface investigations. There can be no
assurance that all environmental conditions and risks have been identified in
such environmental assessments.
Certain of the site assessments identified environmental conditions
impacting some of the Mortgaged Properties, including the presence of ACMs,
leaks from underground storage tanks (each, a "UST") and on-site spills. The
Mortgaged Properties, including the Pier 39 Property, the Showcase Property,
the Marriott Desert Springs Property, the One Commerce Square Property, the
Green Acres Property, and the Crystal City Pool Properties, presently have or
formerly had laboratories, gasoline stations, vehicle maintenance and repair
operations, photochemical operations, leach fields, an airport, and/or
industrial activities located on the premises. In addition, friable and/or
non-friable ACMs were found on several Mortgaged Properties, including the
Pier 39 Property, the Green Acres Property, and the Crystal City Pool
Properties; and a number of other properties were not sampled for asbestos
due to their recent construction. In most cases, corrective action, including
the implementation of operations and maintenance programs and/or abatement,
has been recommended by the environmental consultant, and in no case is it
anticipated that any asbestos related costs would have a material adverse
effect on the related Mortgaged Properties. However, there can be no
assurance that the reserve amounts in the reserve accounts funded at the
closing of certain Mortgage Loans will be sufficient to remediate the
environmental conditions described above or that all such environmental
conditions have been identified.
Certain of the Mortgaged Properties are in the vicinity of sites
containing leaking underground storage tanks (each, a "LUST") or other
potential sources of groundwater contamination. The environmental assessments
generally do not anticipate that the borrower will have to undertake remedial
investigations or actions at these sites. Furthermore, CERCLA and many state
environmental laws provide for a third-party defense that generally would
preclude liability for a party whose property is contaminated by off-site
sources. In addition, in its final "Policy Toward Owners of Property
Containing Contaminated Aquifers," dated May 24, 1995, the United States
Environmental Protection Agency (the "EPA") stated its position that, with
respect to federal enforcement actions and subject to certain conditions
specified therein, where hazardous substances have come to be located on or
in a property solely as a result of subsurface migration in an aquifer from a
source or sources outside the property, the EPA will not take enforcement
actions against the owner of such property to require the performance of
response actions or the payment of response costs. However, though the owners
of such Mortgaged Properties and the Trust Fund may not be liable for such
contamination, enforcement of the related borrower's or the Trust Fund's
rights against third parties may result in additional transaction costs and
the presence of such contamination or potential contamination may affect the
related borrower's ability to refinance using such property as collateral or
to sell the property to a third party.
The Pier 39 Property is built on a seawall constructed in 1878, using
unidentified fill. The original Pier 39 structure was built in the 1920s. A
railroad spur ran down Pier 39, for loading and unloading goods. Historical
uses of the area in the vicinity of the Pier 39 Property included, among
others, shipping, lumber yards, creosote plants, lead smelting and coal
gasification plants. Wastes may have been disposed of
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in nearby bay waters. The possibility of groundwater contamination in the
general area of the Pier 39 Property exists due to the use of unidentified
fill and historical uses and past releases of hazardous materials. However,
with the exception of a neighboring municipal bus site, environmental records
searches did not identify any areas of concern at the Pier 39 Property. The
San Francisco Department of Public Health was contacted by the environmental
auditors and indicated it does not consider the Pier 39 Property to be of
environmental concern.
The environmental report for the Marriott Desert Springs Property
recommended that certain USTs be replaced or upgraded, including some soil
removal, that certain operational procedures be improved, that certain
physical arrangements be changed, and that the Marriott Desert Springs
Borrower determine whether it needs to have a hazardous waste permit under
the Solid Waste Disposal Act, as amended, 42 U.S.C. Section 6901 et. seq.
A limited investigation was conducted to eliminate the possibility that
any significant contamination might have occurred in regard to a diesel fuel
UST in the underground garage at the One Commerce Square Property.
The environmental report for the Green Acres Property recommended certain
improvements with an estimated cost of between $730,000 and $1,130,000, and
possibly additional costs. The Green Acres Property previously was an
airport. A number of concerns have been raised, especially concerning
possible onsite and offsite sources of actual and potential subsurface
contamination, including USTs and hydraulic vehicle lifts. Some areas are
recommended to have soil and/or groundwater remediation. The environmental
report also recommended that a limited amount of asbestos-containing
materials be subject to removal or operations and maintenance, the costs for
which were not estimated.
The environmental reports for the Americold Pool Properties recommended
additional investigation, removal and the possible remediation of petroleum
contamination in the soil and ground water as a result of USTs at three
Americold Pool Properties, and the remediation of lead-contaminated soil and
transformer fluid at two Americold Pool Properties. The environmental reports
for the URS Pool Properties recommended resampling for contamination around
the site of a former UST, remedial action to clear up petroleum hydrocarbons
at two URS Pool Properties and an investigation to determine whether one URS
Pool Property may have had a former UST.
The majority of the URS Pool Properties and Americold Pool Properties were
observed to contain some building materials with ACM. In most cases, the ACM
was non-friable and in good condition, and can be kept in place with an O&M
program. In some cases, friable or non-friable ACM is in less than good
condition and is recommended to be removed, at cost estimates that would not
be material.
Several Mortgaged Properties, especially office buildings, were not
sampled for radon, because they are in known low radon geographic areas, and
radon test results were not available for a few Mortgaged Properties. At four
of the Tharaldson Pool B Properties (Findlay Fairfield Inn, Waterloo Super 8,
Lexington Fairfield Inn and Grand Forks Comfort Inn) and one of the
Tharaldson Pool A Properties (Bozeman Fairfield Inn), radon readings were
above the EPA's recommended action level. Depending on the readings, the
environmental auditors recommended further testing and/or radon control
measures ranging in cost from de minimis amounts to one estimate of $22,000.
For several Mortgaged Properties, the environmental assessments also
recommend limited further investigations, minor repairs, changes in waste
handling practices, or obtaining certain permits that may be required
pursuant to federal, state or local laws; however, based on the information
currently available to the Seller and a review performed by the related
Originator's environmental consultants, the Seller does not believe any of
such other issues would have a material adverse effect on the related
Mortgaged Properties.
The Pooling Agreement requires that the Special Servicer obtain an
environmental site assessment of a Mortgaged Property prior to acquiring
title thereto on behalf of the Trust Fund or assuming its operation. Such
requirement may effectively preclude enforcement of the security for the
related Note until a satisfactory environmental site assessment is obtained
(or until any required remedial action is thereafter taken), but will
decrease the likelihood that the Trust Fund will become liable under any
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environmental law. However, there can be no assurance that the requirements
of the Pooling Agreement will effectively insulate the Trust Fund from
potential liability under environmental laws. See "The Pooling
Agreement--Realization Upon Mortgage Loans; Modifications--Standards for
Conduct Generally in Effecting Foreclosure or the Sale of Defaulted Loans"
herein and "Certain Legal Aspects of the Mortgage Loans--Environmental Risks"
in the Prospectus.
LIMITATIONS OF APPRAISALS. Appraisals were obtained with respect to each
of the Mortgaged Properties prior to the origination of the applicable
Mortgage Loan. In general, appraisals represent the analysis and opinion of
qualified appraisers and are not guarantees of present or future value. One
appraiser may reach a different conclusion than the conclusion that would be
reached if a different appraiser were appraising such property. Moreover,
appraisals seek to establish the amount a typically motivated buyer would pay
a typically motivated seller and, in certain cases, may have taken into
consideration the purchase price paid by the borrower. Such amount could be
significantly higher than the amount obtained from the sale of a Mortgaged
Property under a distress or liquidation sale. Information regarding the
appraised values of the Mortgaged Properties presented under "Mortgage Pool
Characteristics" herein is not intended to be a representation as to the
past, present or future market values of the Mortgaged Properties.
RISK OF DIFFERENT TIMING OF MORTGAGE LOAN AMORTIZATION. If and as
principal payments or prepayments are made on a Mortgage Loan, the remaining
Mortgage Pool will be subject to more concentrated risk with respect to the
diversity of Mortgaged Properties, types of Mortgaged Properties and
Mortgaged Property characteristics, and with respect to the number of
borrowers. Because principal on the Offered Certificates is generally payable
in sequential order, and generally no Class entitled to distributions of
principal receives principal until the Certificate Principal Amount of the
preceding Class or Classes so entitled has been reduced to zero, Classes that
have a later sequential designation are more likely to be exposed to the risk
of concentration discussed in the preceding sentence than Classes with higher
priority.
The Marriott Desert Springs Anticipated Repayment Date is at least two
years after the Anticipated Repayment Date of each other Mortgage Loan, and
in the event that each Mortgage Loan is repaid on its Anticipated Repayment
Date, the Marriott Desert Springs Loan will be the only Mortgage Loan
outstanding during such two-year period. Consequently, the payment of
interest on and principal in respect of any Offered Certificates remaining
outstanding at such time (which are likely to be the Class E Certificates)
will be highly sensitive to the performance of the Marriott Desert Springs
Loan. See "Description of the Mortgaged Properties and the Mortgage
Loans--Marriott Desert Springs: The Loan--Payment Terms" herein.
REPAYMENT DATE PRINCIPAL BALANCES. All of the Mortgage Loans are expected
to have substantial remaining principal balances as of their respective
Anticipated Repayment Dates. See "Mortgage Pool Characteristics--Certain
Characteristics of the Mortgage Loans" and "Description of the Mortgaged
Properties and the Mortgage Loans" herein. No representation or warranty is
made by the Seller as to the ability of any of the related borrowers to make
required Mortgage Loan payments on a full and timely basis or as to whether a
borrower will repay or have the ability to repay the remaining principal at
the relevant Anticipated Repayment Date. The ability of a borrower to repay a
loan on its Anticipated Repayment Date typically will depend upon its ability
either to refinance the loan or to sell the related Mortgaged Property at a
price sufficient to permit the borrower to repay the loan on the Anticipated
Repayment Date. The ability of a borrower to accomplish either of these goals
will be affected by a number of factors at the time of attempted refinancing
or sale, including the level of available mortgage credit, the prevailing
interest rates, the fair market value of the related properties, the
borrower's equity in the related properties, the financial condition of the
borrower and operating history of the properties, the occupancy level of the
Mortgaged Property, tax laws, prevailing general and regional economic
conditions and the availability of credit for commercial real estate
projects.
OTHER FINANCING. The existence of indebtedness incurred by borrowers other
than the Mortgage Loans could adversely affect the financial viability of
such borrowers. Additional debt increases the likelihood that a borrower
would lack the resources to perform on its Mortgage Loan and would seek the
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protection of a bankruptcy court. In a bankruptcy proceeding, the Mortgage
Loan lender would face certain limitations (see "--Bankruptcy Limitations on
Lenders" below), and the holders of such additional debt would likely contest
the Mortgage Loan lender's attempt to foreclose on the related Mortgaged
Properties.
Simultaneously with the making of the Marriott Desert Springs Loan, GSMC
made a loan to Marriott DSM (the "Marriott Desert Springs Parent Loan")
having a principal balance as of May 11, 1998 of approximately $19,733,165.
The Marriott Desert Springs Parent Loan is secured by all of the limited
liability company interests in the Marriott Desert Springs Borrower. Upon a
default under the Marriott Desert Springs Parent Loan (which includes, among
others, certain defaults under the Marriott Desert Springs Loan), the
Marriott Desert Springs Parent Lender has the right to accelerate the
Marriott Desert Springs Parent Loan and to foreclose on the collateral
securing the Marriott Desert Springs Parent Loan. See "Description of the
Mortgaged Properties and the Mortgage Loans--Marriott Desert Springs: The
Loan--The Marriott Desert Springs Parent Loan" herein.
Simultaneously with the making of the Marriott Desert Springs Loan and the
Marriott Desert Springs Parent Loan, MDSM Finance made a loan to DSMLP (the
"MDSM-DSMLP Loan") having a principal balance as of May 11, 1998 of
approximately $59,727,272. The MDSM-DSMLP Loan is secured by a pledge of all
the membership interests in Marriott DSM. The MDSM-DSMLP is subordinate and
junior in right of payment to the Marriott Desert Springs Loan and the
Marriott Desert Springs Parent Loan and MDSM Finance cannot institute any
judicial or other remedial proceeding against DSMLP until one year and one
day after the Marriott Desert Springs Loan and the Marriott Desert Springs
Parent Loan have been paid in full. See "Description of the Mortgaged
Properties and the Mortgage Loans--Marriott Desert Springs: The Loan--The
MDSM-DSMLP Loan" herein.
Simultaneously with the making of the One Commerce Square Loan, Prometheus
Mid-Atlantic Holding L.P. made a loan to the limited partners of the One
Commerce Square Borrower (the "One Commerce Square Partner Loan") having a
principal balance as of March 16, 1998 of approximately $9,250,000. The One
Commerce Square Partner Loan is secured by all of the partnership interests
in the One Commerce Square Borrower and certain other pledged collateral.
Upon a default under the One Commerce Square Partner Loan (which includes,
among others, certain defaults under the One Commerce Square Loan), the One
Commerce Square Partner Lender has the right to accelerate the One Commerce
Square Partner Loan and to foreclose on the collateral securing the One
Commerce Square Partner Loan. See "Description of the Mortgaged Properties
and the Mortgage Loans--One Commerce Square: The Loan--The One Commerce
Square Partner Loan" herein.
PIHLP (the "One Commerce Square Series B Preferred Equity Holder") has
acquired a 100% Series B preferred equity interest in the One Commerce Square
Borrower. The One Commerce Square Series B Preferred Equity Holder is
entitled to receive certain preferred distributions by the One Commerce
Square Borrower. If the One Commerce Square Borrower fails to pay such
preferred distributions, the One Commerce Square Series B Preferred Equity
Holder will have the right, in its sole discretion, to terminate the One
Commerce Square Management Agreement, select a new manager and cause PIHLLC
to become the managing general partner. See "Description of the Mortgaged
Properties and the Mortgage Loan--One Commerce Square: The Loan--Preferred
Equity Investments by PIHLP and PPA".
The Green Acres Loan permits Arbor Property, L.P., a member of the Green
Acres Borrower, to incur additional debt up to an aggregate amount of
$8,000,000 (the "Green Acres Additional Debt") for the financing of
alterations and improvements to the Green Acres Property provided that
certain conditions specified in the loan agreement are satisfied, including
obtaining a confirmation from the Rating Agencies that the incurrence of such
indebtedness would not result, in and of itself, in a downgrade,
qualification or withdrawal of the then current ratings of the Certificates.
Even though the borrowers are not parties to or obligors under the various
partner and parent loans described above, the existence of such partner and
parent loans could adversely affect the financial viability of the related
borrowers, result in the equity ownership of the related borrower being
transferred to the holders of such partner or parent loans or disrupt the
operations of the related borrower upon the occurrence of any default
thereunder.
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Where the borrower under a Mortgage Loan or its constituent members also
has one or more other loans (even if subordinated or parent or partner
loans), the Trust Fund is subjected to additional risk. The borrower may have
difficulty servicing and repaying multiple loans. The existence of another
loan (even if a subordinated loan or a parent or partner loan) generally will
also make it more difficult for the borrower to obtain refinancing of the
Mortgage Loan, and thereby may jeopardize repayment of the Mortgage Loan.
Further, the need to service additional debt may reduce the cash flow
available to the borrower to operate and maintain the Mortgaged Property.
If the borrower or its constituent members defaults on the Mortgage Loan
and/or any other loan or loans, the existence of such other loans and actions
taken by other lenders could impair the security available to the Trust Fund
and could interfere with or delay the taking of action by the Trust Fund. If
a junior lender files an involuntary petition for bankruptcy against the
borrower or the borrower files a voluntary petition to stay enforcement by a
junior lender, the ability of the Trust Fund to take certain actions such as
foreclosure would be automatically stayed and principal and interest payments
might not be made during the course of a bankruptcy case. The bankruptcy of
another lender may also operate to stay foreclosure or similar proceedings by
the Trust Fund.
Additionally, substantially all of the Mortgage Loans generally permit the
related borrower to incur limited indebtedness incurred in the ordinary
course of business. The existence of such other indebtedness could adversely
affect the financial viability of the related borrowers. See also "Certain
Legal Aspects of the Mortgage Loans--Secondary Financing; Due on-Encumbrance
Provisions" in the Prospectus.
LIMITATIONS ON LOCKBOXES. The Crystal City Pool Loan, the Marriott Desert
Springs Loan and the Showcase Loan do not require the related borrower to
cause rent and other payments to be made directly into a lockbox account
maintained on behalf of the mortgagee but instead allow the borrower or
property manager to collect these payments directly until certain events have
occurred. The URS Pool Loan, the Tharaldson Pool A Loan and the Tharaldson
Pool B Loan permit rent and other payments to be made to accounts to which
the borrower has access, but either require the borrower to pay such funds
into a lockbox account within a day of receipt or permit the mortgagee to
sweep such account into a lockbox account at its discretion. If rental
payments are not required to be made directly into a lockbox account, there
is a risk that the borrower will divert such funds. See "Description of the
Mortgaged Properties and the Mortgage Loans--Showcase: The Loan--Cash
Management; Lockbox," "--Crystal City Pool: The Loan--Cash Management;
Lockbox," "--Tharaldson Pool A: The Loan--Cash Management; Lockbox,"
"--Tharaldson Pool B: The Loan--Cash Management; Lockbox," "--URS Pool: The
Loan--Cash Management; Lockbox," "--Americold Pool Loan: The Loan--Cash
Management; Lockbox" and "--Marriott Desert Springs: The Loan--Cash
Management; Lockbox" herein.
BANKRUPTCY LIMITATIONS ON LENDERS. Under the Bankruptcy Code, the filing
of a petition in bankruptcy by or against an obligor will stay the exercise
of a power of sale and the commencement or continuation of a foreclosure
action against the real property owned by that obligor. The resulting delay
may be significant. In addition, a court which determines the value of a
mortgaged property to be less than the principal balance of the loan it
secures may (subject to certain protections available to the lender) stop a
lender from foreclosing on the mortgaged property and, as a part of a
restructuring plan, reduce the amount of secured indebtedness to the value of
the mortgaged property as it exists at the time of the proceeding (leaving
the lender as a general unsecured creditor for the difference between that
value and the amount of its outstanding mortgage indebtedness). A bankruptcy
court may also grant a debtor a reasonable time to cure a payment default,
reduce monthly payments due under a mortgage loan, change the rate of
interest due on a mortgage loan or otherwise alter the mortgage loan's
repayment schedule.
Creditors of obligors in bankruptcy are also generally prohibited from
taking any action to obtain repayment of a loan while the bankruptcy case is
pending. Also, under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a junior lienholder may stay the senior
lienholder from taking action to foreclose on such junior lien. In addition,
the obligor's trustee or the obligor, as debtor-in-possession, has certain
special powers to avoid, subordinate or disallow debts. Even if a claim
against
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a debtor is not avoided or subordinated, the Trustee's recovery with respect
to obligors in bankruptcy proceedings may be significantly delayed, and the
aggregate amount ultimately collected on such Mortgage Loans may be
substantially less than the amount owed. In certain circumstances, the claims
of the Trustee may be subordinated to financing obtained by a
debtor-in-possession subsequent to its bankruptcy.
The Bankruptcy Code may also interfere with or affect the ability of the
Trustee to enforce an assignment by an obligor of rents and leases related to
the mortgaged property if the related obligor is in a bankruptcy proceeding.
Under Section 362 of the Bankruptcy Code, the mortgagee will be stayed from
enforcing the assignment, and the legal proceedings necessary to resolve the
issue can be time consuming and may result in significant delays in the
receipt of the rents. Rents may also escape an assignment thereof (i) to the
extent such rents are used by the obligor to maintain the mortgaged property
or for other court authorized expenses or (ii) to the extent other collateral
may be substituted for the rents.
The ability of the obligors to repay the Mortgage Loans is, in many cases,
dependent on leases of the Mortgaged Properties. To the extent an obligor's
ability to make payment on a Mortgage Loan is dependent upon a lease of the
related Mortgaged Property, such ability may be impaired by the commencement
of a bankruptcy proceeding relating to a lessee under such lease, including,
in particular, the Americold Pool Master Lessee and URS Pool Master Lessee.
See "--Risks Relating to Tenants; Reserves."
As a result of the foregoing factors, the amount and timing of receipts
with respect to the Mortgage Loans may be materially adversely affected.
TAX CONSIDERATIONS RELATED TO FORECLOSURE. If the Trust Fund were to
acquire a Mortgaged Property subsequent to a default on the related Mortgage
Loan pursuant to a foreclosure or deed in lieu of foreclosure, the Special
Servicer would be required to retain an independent contractor to operate and
manage the Mortgaged Property. Any net income from such operation and
management, other than qualifying "rents from real property," or any rental
income based on the net profits of a tenant or sub-tenant or allocable to a
service that is non-customary in the area and for the type of property
involved, will subject the Lower-Tier REMIC to federal (and possibly state or
local) tax on such income at the highest marginal corporate tax rate
(currently 35%), thereby reducing net proceeds available for distribution to
Certificateholders. It is likely that hotel properties that are operated by
an independent contractor on behalf of the Trust Fund would generate taxable
"net income from foreclosure property." The Pooling Agreement provides that
the Special Servicer will be permitted to cause the Lower-Tier REMIC to earn
"net income from foreclosure property" that is subject to tax if it
determines that the net after-tax benefit to Certificateholders is greater
than another method of operating or net leasing the Mortgaged Property. See
"Federal Income Tax Consequences--REMIC Certificates--Income from Residual
Certificates--Prohibited Transactions; Special Taxes" in the Prospectus.
MANAGEMENT. The successful operation of a real estate project is dependent
on the performance and viability of the property manager of such project.
Different property types vary as to the extent a property manager is involved
in property marketing and operations on a daily basis. Properties deriving
revenues primarily from short-term sources are generally more management
intensive than properties leased to creditworthy tenants under long-term
leases. The property manager is responsible for responding to changes in the
local market, planning and implementing the rental structure, including
establishing levels of rent payments, and advising the borrowers so that
maintenance and capital improvements can be carried out in a timely fashion.
There is no assurance regarding the performance of any operators and/or
managers or persons who may become operators and/or managers upon the
expiration or termination of management agreements or following any default
or foreclosure under a Mortgage Loan. In addition, third party property
managers are typically operating companies and, unlike limited-purpose
entities, may not be restricted from incurring debt and other liabilities in
the ordinary course of business or otherwise. Consequently, there can be no
assurance that the property managers will at all times be in a financial
condition to continue to fulfill their management responsibilities under the
related management agreements throughout the terms thereof. See "--Conflicts
of Interest--Conflicts Between Managers and the Borrowers."
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ENFORCEABILITY. All of the Mortgages include debt-acceleration clauses,
which permit the lender to accelerate the debt upon a monetary or nonmonetary
default of the borrower. The courts of all states will enforce clauses
providing for acceleration in the event of a material payment default after
the giving of appropriate notices. The equity courts of any jurisdiction,
however, may refuse to permit the foreclosure of a mortgage or deed of trust
when an acceleration of the indebtedness would be inequitable or unjust or
the circumstances would render the acceleration unconscionable.
All of the Mortgage Loans on Mortgaged Properties that have tenants are
secured by an assignment of leases and rents pursuant to which the borrower
typically assigns its right, title and interest as landlord under the leases
on the related Mortgaged Property and the income derived therefrom to the
lender as further security for the related Mortgage Loan, while retaining a
license to collect rents for so long as there is no default. In the event the
borrower defaults, upon the election of, and following notice from, the
lender, the license terminates and the lender is entitled to collect rents.
In certain jurisdictions, such assignments may not be enforceable unless the
lender complies with applicable state law for taking actual possession of the
property or the cash by the lender until the lender secures the appointment
of a receiver before achieving a priority relative to other persons with
interests in the rents related to the Mortgaged Property. In addition, if
bankruptcy or similar proceedings are commenced by or in respect of the
borrower, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of the Mortgage Loans" in the
Prospectus.
STATE LAW LIMITATIONS ON REMEDIES. Several jurisdictions (including
California) have laws that prohibit more than one "judicial action" to
enforce a mortgage obligation, and some courts have construed the term
"judicial action" broadly. Accordingly, the Pooling Agreement will require
the Master Servicer or Special Servicer, as applicable, to obtain advice of
counsel prior to enforcing any of the Trust Fund's rights under any of the
Mortgage Loans that include properties where the rule could be applicable. In
addition, with respect to any Mortgage Loan, the Master Servicer, or Special
Servicer, as applicable, may be required to foreclose first on the Mortgaged
Properties securing such Mortgage Loan located in states where such "one
action" rules apply (and where non-judicial foreclosure is permitted) before
foreclosing on properties located in states where judicial foreclosure is the
only permitted method of foreclosure. See "Certain Legal Aspects of Mortgage
Loans--Foreclosure" and "--State Law Limitations on Lenders" in the
Prospectus.
As a result of the foregoing considerations, among others, the ability of
the Master Servicer or the Special Servicer, as applicable, to realize upon
the Mortgage Loans, may be limited by the application of state laws. Such
actions may also, in certain circumstances, subject the Trust Fund to
liability as a "mortgagee-in-possession" or result in the equitable
subordination of the claims of the Trustee to the claims of other creditors
of the borrower. Under the terms of the Agreement, the Master Servicer or the
Special Servicer, as applicable, may take these state laws into consideration
in deciding which remedy to choose following a default by a borrower.
LEASEHOLD INTERESTS. The interest of the Pier 39 Borrower in the land
underlying the Pier 39 Property is a ground leasehold interest (the "Pier 39
Ground Lease"). See "Description of the Mortgaged Properties and the Mortgage
Loans--Pier 39: The Borrower; The Property" herein. The Green Acres Loan is
secured by, among other things, a ground leasehold interest in the land
underlying an approximately 9.8 acre portion of the Green Acres Property
(consisting of a total of 93 acres) (the "Green Acres Ground Lease"). See
"Description of the Mortgaged Properties and the Mortgage Loans--Green Acres:
The Borrower; The Property" herein. The Marriott Desert Springs Loan is
secured by, among other things, a ground leasehold interest in the land
underlying an approximately 96.75 acre portion of the Marriott Desert Springs
Property (consisting of approximately 280.70 acres) (the "Marriott Desert
Springs Ground Lease"). See "Description of the Mortgaged Properties and the
Mortgage Loans--Marriott Desert Springs: The Borrower; The Property" herein.
The Tharaldson Pool B Loan is secured by, among other things, ground
leasehold interests in the land underlying 2 of the Tharaldson Pool B
Properties (the "Tharaldson Pool B Ground Leases"). See "Description of the
Mortgaged Properties and the Mortgage Loans--Tharaldson Pool B: The
Borrowers; The Properties" herein. The Americold Pool Loan is secured by,
among other things, ground leasehold interests in the land underlying 3 of
the Americold Pool Properties (the "Americold Pool Ground Leases"). The URS
Pool Loan is secured by,
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among other things, ground leasehold interests in the land underlying 3 of
the URS Pool Properties (the "URS Pool Ground Leases"). See "Description of
the Mortgaged Properties and the Mortgage Loans--Americold Pool: The
Borrower; The Properties," and "--URS Pool: The Borrower; The Properties"
herein.
On the bankruptcy of a lessor or a lessee under a ground lease, the debtor
entity has the right to assume or reject the lease. Pursuant to Section
365(h) of the Bankruptcy Code, a lessee whose lease is rejected by a debtor
lessor has the right to remain in possession of its leased premises under the
rent reserved in the lease for the term of the lease (including renewals). In
the event of a lessee/borrower bankruptcy in which such debtor rejects any or
all of its leases, the leasehold mortgagee would have the right to succeed to
the lessee/borrower's position under the lease only if the lessor had
specifically granted the mortgagee such right. In the event of concurrent
bankruptcy proceedings involving the lessor and the lessee/borrower, the
Trustee may be unable to enforce the bankrupt lessee/borrower's obligation to
refuse to treat a ground lease rejected by a bankrupt lessor as terminated.
In such circumstances, a lease could be terminated notwithstanding lender
protection provisions contained therein or in the mortgage. A mortgagee could
lose its security unless the mortgagee holds a fee mortgage or the bankruptcy
court, as a court of equity, allows the mortgagee to assume the ground
lessee's obligations under the ground lease and succeed to the ground
lessee's position. Although not directly covered by the 1994 Amendment to the
Bankruptcy Code, such a result would be consistent with the purposes of the
1994 Amendment to the Bankruptcy Code granting leasehold mortgagees the right
to succeed to the position of a leasehold mortgagor. Although consistent with
the Bankruptcy Code, such position may not be adopted by a bankruptcy court.
INSPECTIONS. Inspections of the Mortgaged Properties were conducted in
connection with the origination of the Mortgage Loans by licensed engineers
to assess the structure, exterior walls, roofing, interior construction,
mechanical and electrical systems and general condition of the site,
buildings and other improvements located on the Mortgaged Properties. There
can be no assurance that all conditions requiring repair or replacement were
identified in such inspections. See "Mortgage Pool
Characteristics--Underwriting Standards--Property Condition Assessments"
herein for further information regarding the inspections on the Mortgaged
Properties.
AVAILABILITY OF EARTHQUAKE, FLOOD AND OTHER INSURANCE. Although the
Mortgaged Properties are required to be insured against certain risks, there
is a possibility of casualty loss with respect to each Mortgaged Property for
which insurance proceeds may not be adequate (such as floods or earthquakes)
or which may result from risks not covered by insurance (such as supplemental
hurricane insurance). In addition, certain of the Mortgaged Properties are
located in California, Florida and Texas, which are states that have been
historically at greater risk to acts of nature (such as hurricanes, floods
and earthquakes) than properties located in other states. There can be no
assurance borrowers have complied or will in the future be able to comply
with requirements to maintain adequate insurance with respect to the
Mortgaged Properties. As with all real estate, if reconstruction (for
example, following fire or other casualty) or any major repair or improvement
is required to the property, changes in laws and governmental regulations may
be applicable and may materially affect the cost to, or ability of, the
borrower to effect such reconstruction, major repair or improvement. As a
result of the occurrence of any of these events, the amount realized with
respect to the Mortgage Loans, and the amount available to make distributions
on the Certificates, could be reduced.
The Pier 39 Property located in San Francisco, California is located in an
earthquake zone and the Pier 39 Borrower has obtained earthquake insurance
for such property in the amount of the difference of one times the probable
maximum loss for the Pier 39 Property due to an earthquake event, less a
deductible no greater than 10% of the replacement value of the Pier 39
Property. The probable maximum loss has been determined by a seismic engineer
retained by the Pier 39 Borrower in connection with the origination of the
Pier 39 Loan. The Pier 39 Borrower is not required to pledge any collateral
or provide any form of credit support with respect to such 10% deductible.
The Marriott Desert Springs Property located in Palm Desert, California is
located in an earthquake zone and the Marriott Desert Springs Borrower has
obtained earthquake insurance for such property based on the probable maximum
loss for hotels located in the region, as determined by a seismic engineering
report completed in March 1996,
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subject to a deductible no greater than 5% of the replacement value of such
property. Such coverage, however, is provided through a blanket policy, so
that if one or more earthquakes affected two or more Mortgaged Properties or
other properties within the same policy period, there may be insufficient
coverage under such policy. See "--Risks Associated with Blanket Insurance
Policies." One of the URS Pool Properties located in Turlock, California is
located in an earthquake zone and the URS Pool Borrower has obtained
earthquake insurance for such property in the full amount of the probable
maximum loss, as determined by a seismic engineering report completed in
March 1998, subject to a deductible equal to 5% of the replacement value of
such property. Three of the Americold Pool Properties located in Los Angeles,
Turlock and Watsonville, California are each located in an earthquake zone
and the Americold Pool Borrower has obtained earthquake insurance that covers
each property in an amount at least equal to the probable maximum loss for
such property as determined by a seismic engineering report completed in
March 1998, subject to a deductible equal to 5% of the respective replacement
values of such properties. Such coverage, however, is provided through a
blanket policy. See "Description of the Mortgaged Properties and the Mortgage
Loans--Americold Pool: The Borrower; The Properties--Seismic Report" herein.
Certain of the Mortgaged Properties are located in a "100 year flood
plain" according to the Federal Emergency Management Agency. These Mortgaged
Properties include the One Commerce Square Property and three of the URS Pool
Properties (Murfreesboro, Tennessee, Fort Smith, Arkansas, and Montgomery,
Alabama). Each of these Mortgaged Properties is required to be covered by
flood insurance. See "Description of the Mortgaged Properties and the
Mortgage Loans--One Commerce Square: The Loan--Insurance," and "Description
of the Mortgaged Properties and the Mortgage Loans--URS Pool: The
Loan--Insurance" herein.
There can be no assurance that the amount of earthquake or flood insurance
currently required or provided would be sufficient to cover damages caused by
an earthquake or flood, or that such insurance will be commercially available
in the future. In addition, earthquake insurance coverage is often not
obtainable from "AA-" or higher-rated insurers and the loan documents permit
such insurance to be obtained from such lower rated insurance companies.
COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. To the extent the Mortgaged Properties do
not comply with the ADA, the borrowers are likely to incur costs of complying
with the ADA. In addition, noncompliance could result in the imposition of
fines by the federal government or an award of damages to private litigants.
In connection with the origination of the related loan, property inspection
reports were obtained which included limited information regarding compliance
with the ADA. A portion of funds in the capital reserve escrow accounts
established by certain borrowers are required to be used for costs associated
with complying with the ADA. There can be no assurance that the related
Mortgaged Properties will comply with the ADA in all respects once the
related conditions are remedied, that such property-inspection reports
identified all risks or conditions relating to the ADA or that amounts
reserved (if any) are sufficient to pay such costs.
LIMITED CROSS-COLLATERALIZATION; LIMITATIONS ON ENFORCEABILITY OF
CROSS-COLLATERALIZATION. The Tharaldson Pool A Loan and the Tharaldson Pool B
Loan are comprised of the joint and several obligation of each of the
Tharaldson Pool A Borrowers and the Tharaldson Pool B Borrowers,
respectively, each of which is the holder of a different fee or leasehold
interest in a portion of the Tharaldson Pool A Properties and Tharaldson Pool
B Properties. The interest of the Tharaldson Pool A Borrowers and Tharaldson
Pool B Borrowers in the Tharaldson Pool A Properties and Tharaldson Pool B
Properties, respectively, will provide security for the entire indebtedness
represented by the Tharaldson Pool A Loan and the Tharaldson Pool B Loan, as
the case may be. These arrangements are designed primarily to ensure that all
of the collateral pledged to secure the Tharaldson Pool A Loan and Tharaldson
Pool B Loan and the cash flow and rental income generated thereby,
respectively, are available to support debt service on, and ultimate
repayment of, all of the aggregate indebtedness evidenced by the Tharaldson
Pool A Loan and Tharaldson Pool B Loan, as the case may be. These
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arrangements seek to reduce the risk that a single Mortgaged Property
securing a loan might become incapable of generating income sufficient to pay
debt service, which could result in defaults and ultimate losses. The
Tharaldson Pool A Loan and the Tharaldson Pool B Loan are not cross-defaulted
or cross-collateralized with each other.
The Seller makes no representation that any such cross-collateralization
or cross-default arrangements are enforceable. Such arrangements could be
challenged as fraudulent conveyances by creditors of the related borrower in
an action brought outside a bankruptcy case, or, if such borrower were to
become a debtor in a bankruptcy case, by such borrower. Generally, under
federal and most state fraudulent conveyance statutes, the incurring of an
obligation or the transfer of property or an interest in property (including
the granting of a lien) by a person will be subject to avoidance under
certain circumstances if the person did not receive fair consideration or
reasonably equivalent value in exchange for such obligation or transfer and
(a) was insolvent or was rendered insolvent by such obligation or transfer,
(b) was engaged in business or a transaction, or was about to engage in
business or a transaction, for which any property remaining with the person
was an unreasonably small capital, or (c) intended to incur, or believed that
it would incur, debts that would be beyond the person's ability to pay as
such debts matured. Accordingly, a lien (or right to receive credit support)
granted by a Tharaldson Pool A Borrower or a Tharaldson Pool B Borrower to
secure repayment of the Tharaldson Pool A Loan or the Tharaldson Pool B Loan,
respectively, could be avoided if a court were to determine that (a) such
borrower was insolvent at the time of granting the lien or right, was
rendered insolvent by the granting of the lien or right or was left with
inadequate capital, or was not able to pay its debts as they matured and (b)
such borrower did not, when it allowed its Mortgaged Property or Properties
to be encumbered by a lien securing the entire indebtedness represented by
the Tharaldson Pool A Loan or the Tharaldson Pool B Loan, as the case may be
(or granted a right to credit support from revenues from its properties),
receive fair consideration or reasonably equivalent value for pledging its
Mortgaged Property or Properties for the benefit of the other Tharaldson Pool
A Borrowers or Tharaldson Pool B Borrowers, as the case may be (or granting
such interest in its cash flow). Among other things, a legal challenge to the
granting of the liens and/or the incurring of the obligation by a Tharaldson
Pool A Borrower or a Tharaldson Pool B Borrower may focus on the benefits
realized by such Tharaldson Pool A Borrower or Tharaldson Pool B Borrower
from the respective Mortgage Loan proceeds, as well as the overall
cross-collateralization. If a court were to find or conclude that the
granting of the liens or the incurring of the obligations associated with the
Tharaldson Pool A Loan or the Tharaldson Pool B Loan was an avoidable
fraudulent conveyance with respect to a particular borrower, that court could
subordinate all or part of the Tharaldson Pool A Loan or the Tharaldson Pool
B Loan, as the case may be, to existing or future indebtedness of that
borrower, recover payments made under the respective Mortgage Loan, or take
other actions detrimental to the holders of the Certificates, including under
certain circumstances, invalidating the Tharaldson Pool A Loan or the
Tharaldson Pool B Loan or the Mortgages securing such loans.
RISKS ASSOCIATED WITH BLANKET INSURANCE POLICIES. Certain of the Mortgaged
Properties are covered by blanket insurance policies which also cover other
properties of the related borrower or its affiliates. In the event that such
policies are drawn upon to cover losses on such other properties, the amount
of insurance coverage available under such policies would thereby be reduced
and could be insufficient to cover each Mortgaged Property's insurable risks.
ATTORNMENT CONSIDERATIONS. Some of the operating leases and tenant leases,
including the anchor tenant leases, contain provisions that require the
tenant to attorn to (that is, recognize as landlord under the lease) a
successor owner of the Mortgaged Property following foreclosure. Some of the
leases may be either subordinate to the liens created by the Mortgages or
contain a provision that requires the tenant to subordinate the lease if the
mortgagee agrees to enter into a non-disturbance agreement. Not all leases
were reviewed to ascertain the existence of attornment or subordination
provisions. In some jurisdictions, if tenant leases are subordinate to the
liens created by the mortgage and such leases do not contain attornment
provisions, such leases may terminate upon the transfer of the property to a
foreclosing lender or purchaser at foreclosure. Accordingly, in the case of
the foreclosure of a Mortgaged Property located in such a jurisdiction and
leased to one or more desirable tenants under leases that do
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not contain attornment provisions, such Mortgaged Property could experience
a further decline in value if such tenants' leases were terminated (e.g.,
particularly if such tenants were paying above-market rents or could not be
replaced). If a Mortgage is subordinate to a lease, the Trust Fund will not
(unless it has otherwise agreed with the tenant) possess the right to
dispossess the tenant upon foreclosure of the property, and if the lease
contains provisions inconsistent with the Mortgage (e.g., provisions relating
to application of insurance proceeds or condemnation awards), the provisions
of the lease will take precedence over the provisions of the Mortgage.
THARALDSON MOTELS, INC. TAX AUDIT. Tharaldson Motels, Inc., the ultimate
parent corporation of the Tharaldson Pool A Borrowers and the Tharaldson Pool
B Borrowers, is under audit by the Internal Revenue Service for its 1993 and
1994 calendar year income tax returns. A reserve fund has been established
for potential liabilities arising from such audit and in connection with a
possible audit of its 1995, 1996 and 1997 calendar year income tax returns.
There can be no assurance that such reserve fund will be adequate to cover
any such potential liabilities.
LITIGATION. There may be pending or threatened legal proceedings against
the borrowers and managers of the Mortgaged Properties and their respective
affiliates arising out of the ordinary business of the borrowers, managers
and affiliates. There can be no assurance that such litigation may not have a
material adverse effect on distribution to Certificateholders.
CONFLICTS OF INTEREST
GENERAL. The potential for various conflicts of interest exists with
respect to the offering of the Certificates, including conflicts of interest
among certain of the borrowers, the property or asset managers, the Seller
and Goldman, Sachs & Co., in its capacity as the Underwriter.
CONFLICTS BETWEEN AFFILIATES OF GOLDMAN, SACHS & CO. AND THE TRUST
FUND. Conflicts of interest between affiliates of the Seller, Goldman, Sachs
& Co. and GSMC that engage in the acquisition, development, operation,
financing and disposition of real estate, on the one hand, and the Trust
Fund, on the other hand, may arise because such affiliates will not be
prohibited in any way from engaging in business activities similar to or
competitive with those of the borrowers.
Affiliates of the Seller, Goldman, Sachs & Co. and GSMC intend to continue
to actively acquire, develop, operate, finance and dispose of real
estate-related assets in the ordinary course of their business. During the
course of their business activities, affiliates of the Seller, Goldman, Sachs
& Co. and GSMC may acquire, own or sell properties or finance mortgage loans
secured by properties which are in the same markets as the Mortgaged
Properties. In such a case, the interests of such affiliates may differ from
and compete with the interests of the Trust Fund, and decisions made with
respect to such assets may adversely affect the amount and timing of
distributions with respect to the Certificates. In addition, Goldman, Sachs &
Co. and its affiliates may have business, lending or other relationships
with, or equity investments in, obligors under loans or tenants and conflicts
of interest could arise between the interests of the Trust Fund and the
interests of Goldman, Sachs & Co. and such affiliates arising from such
business relationships.
CONFLICTS BETWEEN THE MASTER SERVICER AND THE TRUST FUND. The Trust Fund
has been advised by the Master Servicer that it and its affiliates intend to
continue to service existing and new loans for third parties, including
portfolios of loans similar to the Mortgage Loans, in the ordinary course of
their business. These mortgage loans will be in the same markets or have
common owners, obligors and/or property managers as certain of the Mortgage
Loans and Mortgaged Properties securing the Loans. Certain personnel of the
Master Servicer and its affiliates may, on behalf of the Master Servicer,
perform services with respect to the Mortgage Loans at the same time as they
are performing services, on behalf of other persons, with respect to other
mortgage loans in the same markets as the Mortgaged Properties securing the
Mortgage Loans. In such a case, the interests of the Master Servicer and its
affiliates and their other clients may differ from and compete with the
interests of the Trust Fund and such activities may adversely affect the
amount and timing of collections on the Mortgage Loans.
CONFLICTS BETWEEN MANAGERS AND THE BORROWERS. Substantially all of the
third-party and borrower-affiliated property managers for the Mortgaged
Properties (or their affiliates) manage additional
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properties, including properties that may compete with the Mortgaged
Properties. Moreover, affiliates of the managers, and certain of the managers
themselves, may also own or manage other properties, including competing
properties. For example, the One Commerce Square Manager is also the manager
of Two Commerce Square, an adjacent office building, and an affiliate of the
One Commerce Square Manager has an ownership interest in Two Commerce Square.
Certain of the Tharaldson Pool A Properties and Tharaldson Pool B Properties
are located in the vicinity of other properties (which do not secure Mortgage
Loans included in the Trust Fund) managed by the Tharaldson Pool Manager and
owned by the principals of the Tharaldson Pool A Borrowers and the Tharaldson
Pool B Borrowers. In addition, certain of the URS Pool Properties and
Americold Pool Properties are or may be located in the vicinity of other
properties (which are not part of the Mortgage Pool) managed by the URS Pool
Master Lessee and the Americold Pool Master Lessee (or affiliates thereof),
respectively, and owned by affiliates of the URS Pool Borrower and the
Americold Pool Borrower, respectively. Accordingly, the managers of the
Mortgaged Properties may experience conflicts of interest in the management
of such Mortgaged Properties.
THE OFFERED CERTIFICATES
SPECIAL PREPAYMENT, YIELD AND LOSS CONSIDERATIONS. The yield to maturity
on the Offered Certificates will depend, among other things, on the rate and
timing of principal payments (including both voluntary prepayments, in the
case of the Mortgage Loans that permit voluntary prepayment, and involuntary
prepayments, such as prepayments resulting from casualty or condemnation,
defaults and liquidations) on the Mortgage Loans and the allocation thereof
to reduce the Certificate Balances of the Certificates entitled to
distributions of principal. In addition, in the event of any repurchase of
all or a portion of a Mortgage Loan by the applicable Responsible Party from
the Trust Fund under the circumstances described under "The Pooling
Agreement--Representations and Warranties; Repurchase" herein, the Repurchase
Price paid would be passed through to the holders of the Certificates with
the same effect as if such Mortgage Loan had been prepaid in part or in full
(except that no prepayment premium or yield maintenance charge would be
payable with respect to any such repurchase). In addition, with respect to
any Class of Offered Certificates, to the extent losses on the Mortgage Loans
exceed the aggregate Certificate Principal Amount of the Classes of
Certificates subordinated to such Class, such Class will generally bear a
loss equal to the amount of such excess up to an amount equal to the
outstanding Certificate Principal Amount thereof. No representation is made
as to the anticipated rate of prepayments (voluntary or involuntary) or rate
or amount of liquidations or losses on the Mortgage Loans or as to the
anticipated yield to maturity of any Offered Certificate. See "Yield,
Prepayment and Maturity Considerations--Yield" herein.
The Notional Amount of the Class X Certificates is based upon the
Certificate Principal Amounts of the Class A-1, Class A-2, Class B and Class
C Certificates. Therefore, the yield to maturity on the Class X Certificates
will be extremely sensitive to the rate and timing of prepayments of
principal (including both voluntary and involuntary prepayments,
delinquencies, defaults and liquidations) on the Mortgage Loans and any
repurchase with respect to breaches of representations and warranties with
respect to the Mortgage Loans to the extent such payments of principal are
allocated to each such Class in reduction of the Certificate Principal Amount
thereof.
No Mortgage Loan (other than the Pier 39 Loan) permits voluntary
prepayment earlier than the second Due Date prior to the related Anticipated
Repayment Date. See "Description of the Mortgaged Properties and the Mortgage
Loans." However, there is no assurance that involuntary prepayments will not
occur or that the restrictions contained in the related Mortgage Loans would
ultimately be enforceable in legal proceedings. Voluntary prepayments are
permitted with respect to the Americold Pool Loan, the URS Pool Loan and the
Crystal City Pool Loan to partially prepay such Mortgage Loans during their
respective Defeasance Lockout Periods to cause the release of one or more
Mortgaged Properties necessary to cure a property level non-payment default
with respect to such Mortgaged Property or Mortgaged Properties. The rate at
which voluntary prepayments occur on the Mortgage Loans will be affected by a
variety of factors, including, without limitation, the terms of the Mortgage
Loans (including the length of time during which the Mortgage Loans may not
be voluntarily prepaid (each a "Prepayment Lockout Period"), Defeasance
Lockout Periods and yield maintenance charges and/or prepayment
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premiums applicable to the Mortgage Loans and by the extent to which the
Master Servicer or Special Servicer, as the case may be, is able to enforce
such provisions), the level of prevailing interest rates, the availability of
mortgage credit, the occurrence of casualties or natural disasters and
economic, demographic, tax, legal and other factors.
The Mortgage Loans may be prepaid, in whole or in part, without payment of
a yield maintenance charge and/or prepayment premium, on any Due Date on or
after the dates set forth in the following table:
<TABLE>
<CAPTION>
FIRST PERMITTED* ANTICIPATED
MORTGAGE LOAN PREPAYMENT DATE REPAYMENT DATE
- --------------------------------- --------------------- ---------------------
<S> <C> <C>
URS Pool Loan .................... April 11, 2008 May 11, 2008
Tharaldson Pool B Loan ........... February 11, 2008 February 11, 2008
Tharaldson Pool A Loan ........... February 11, 2008 February 11, 2008
Green Acres Loan ................. January 11, 2008 February 11, 2008
Americold Pool Loan .............. April 11, 2008 May 11, 2008
Pier 39 Loan ..................... January 11, 2008 April 11, 2008
One Commerce Square Loan
Tranche A ....................... March 11, 2008 April 11, 2008
Tranche B ....................... N/A N/A
Marriott Desert Springs Loan .... June 11, 2010 June 11, 2010
Showcase Loan .................... October 11, 2007 November 11, 2007
Crystal City Pool Loan ........... October 11, 2007 November 11, 2007
</TABLE>
- ------------
* Under the URS Pool Loan, the Americold Pool Loan and the Crystal City
Pool Loan, a prepayment may be made prior to the end of the applicable
Defeasance Lock-Out Period to cause the release of one or more of the
related Mortgaged Properties necessary to cure a property level
non-payment default with respect to such Mortgaged Property or
Properties.
No yield maintenance charge and/or prepayment premium will be required
under the Mortgage Loans for prepayments in connection with a casualty or
condemnation unless, in the case of most of the Mortgage Loans, an event of
default has occurred and is continuing.
Provisions requiring yield maintenance charges and/or prepayment premiums
may not be enforceable in some states and under federal bankruptcy law, and
may constitute interest for usury purposes. Accordingly, no assurance can be
given that the obligation to pay a yield maintenance charge and/or prepayment
premium will be enforceable under applicable state or federal law or, if
enforceable, that the foreclosure process will be sufficient to pay such
yield maintenance charge and/or prepayment premium. Additionally, although
the collateral substitution provisions related to defeasance are not intended
to, and do not, have the same effect on the Certificateholders as prepayment,
there can be no assurance that a court would not interpret such provisions as
requiring a yield maintenance charge and/or prepayment premium and thus not
enforceable under applicable law or as being usurious. See "Certain Legal
Aspects of the Mortgage Loans--Applicability of Usury Laws" in the
Prospectus.
In general, if an Offered Certificate (such as a Class X Certificate) is
purchased by an investor at a premium and principal distributions thereon
occur at a rate faster than anticipated at the time of purchase, to the
extent that the required yield maintenance charge and/or prepayment premium,
if any, are not received by such investor, such investor's actual yield to
maturity may be lower than that assumed at the time of purchase. Conversely,
if an Offered Certificate is purchased at a discount and principal
distributions thereon occur at a rate slower than that assumed at the time of
purchase, the investor's actual yield to maturity may be lower than that
assumed at the time of purchase.
Each Mortgage Loan requires that commencing on the first Due Date after
the related Anticipated Repayment Date, certain cash flow in excess of that
required for debt service and other items with respect to the related
Mortgaged Properties (as described more fully herein "Excess Cash Flow") will
be applied toward the payment of principal until the principal balance of the
related Mortgage Loan has been reduced to zero. Each Mortgage Loan also
provides that principal outstanding after the related Anticipated Repayment
Date will bear interest at a revised rate (the "Revised Interest Rate") which
will be higher than previously in effect (the "Initial Interest Rate"). While
interest at the Initial Interest Rate accrues and is payable on a current
basis under the Mortgage Loans, interest at the excess of the Revised
Interest Rate over the Initial Interest Rate for such Mortgage Loans ("Excess
Interest"), together
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with interest thereon, will be deferred and will be paid only after the
outstanding principal balance of the related Mortgage Loan has been paid in
full. The foregoing features, to the extent applicable, are designed to
increase the likelihood that a Mortgage Loan will be prepaid by the borrower
on the applicable Anticipated Repayment Dates; however no assurance can be
given that any Mortgage Loan will be repaid on its applicable Anticipated
Repayment Date.
EFFECT OF MORTGAGOR DEFAULTS. The aggregate amount of distributions on the
Offered Certificates, the yield to maturity of the Offered Certificates, the
rate of principal payments on the Offered Certificates and the weighted
average life of the Offered Certificates will be affected by the rate and the
timing of delinquencies and defaults on the Mortgage Loans. If a purchaser of
an Offered Certificate of any Class calculates its anticipated yield based on
an assumed rate of default and amount of losses on the Mortgage Loans that is
lower than the default rate and amount of losses actually experienced and
such losses are allocable to such Class of Certificates, such purchaser's
actual yield to maturity will be lower than that so calculated and could,
under certain extreme scenarios, be negative. The timing of any loss on a
liquidated Mortgage Loan will also affect the actual yield to maturity of the
Offered Certificates to which all or a portion of such loss is allocable,
even if the rate of defaults and severity of losses are consistent with an
investor's expectations. In general, the earlier a loss borne by an investor
occurs, the greater is the effect on such investor's yield to maturity.
As and to the extent described herein, the Master Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, will be entitled to
receive interest on unreimbursed Advances and unreimbursed servicing
expenses. Such interest will accrue from (and including) the date on which
the related Advance is made or the related expense is incurred through the
date of reimbursement, less any amount of interest previously paid in respect
thereof. The Master Servicer's, the Special Servicer's, the Trustee's or the
Fiscal Agent's right, as applicable, to receive such payments of interest is
prior to the rights of Certificateholders to receive distributions on the
Offered Certificates and, consequently, may result in losses being allocated
to the Offered Certificates that would not otherwise have resulted absent the
accrual of such interest. In addition, certain circumstances, including
delinquencies in the payment of principal and interest, will result in a
Mortgage Loan being specially serviced. The Special Servicer is entitled to
compensation for special servicing activities which may result in losses
being allocated to the Offered Certificates that would not otherwise have
resulted. See "The Pooling Agreement--Special Servicers" herein.
Even if losses on the Mortgage Loans are not borne by an investor in a
particular Class of Offered Certificates, such losses may affect the weighted
average life and yield to maturity of such Certificates. Losses on the
Mortgage Loans, to the extent not allocated to such Class of Offered
Certificates, may result in a higher percentage ownership interest evidenced
by such Certificates than would otherwise have resulted absent such loss. The
consequent effect on the weighted average life and yield to maturity of the
Offered Certificates will depend upon the characteristics of the remaining
Mortgage Loans.
Delinquencies and defaults on the Mortgage Loans may significantly delay
the receipt of payments by the holder of an Offered Certificate, to the
extent that Advances or the subordination of another Class of Certificates do
not fully offset the effects of any such delinquency or default.
RISKS RELATING TO UNDERWRITTEN NET CASH FLOW. As described under "Mortgage
Pool Characteristics--Certain Characteristics of the Mortgage Loans,"
Underwritten Net Cash Flow means cash flow, as adjusted based on a number of
assumptions used by the Seller. No representation is made that the
Underwritten Net Cash Flow set forth herein represents future net cash flows.
Each investor should review these assumptions and make its own determination
of the appropriate assumptions to be used in determining Underwritten Net
Cash Flow.
Underwritten Net Cash Flow reflects calculations and assumptions used by
the Seller and should not be used as a substitute for cash flow as determined
in accordance with GAAP as a measure of the results of a Mortgaged Property's
operation or as a substitute for cash flows from operating activities
determined in accordance with GAAP as a measure of liquidity. For example,
the DSCRs set forth herein for the Mortgage Loans and the Mortgaged
Properties vary, and may vary substantially, from the debt
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<PAGE>
service coverage ratios for the Mortgage Loans and the Mortgaged Properties
as calculated pursuant to the definition of such ratios as set forth in the
related loan documents. See "Mortgage Pool Characteristics--Certain
Characteristics of the Mortgage Loans" for a discussion of the assumptions
used in determining Underwritten Net Cash Flow.
RELATED PARTIES MAY PURCHASE CERTIFICATES. Related parties, including the
Master Servicer, the Special Servicer or affiliates of the borrowers, may
purchase all or part of one or more Classes of Certificates. A purchase by
the Master Servicer or Special Servicer, as the case may be, could cause a
conflict between such entity's duties pursuant to the Pooling Agreement and
its interest as a holder of a Certificate, especially to the extent that
certain actions or events have a disproportionate effect on one or more
Classes of Certificates. The Pooling Agreement provides that the Mortgage
Loans shall be administered in accordance with the Servicing Standard without
regard to ownership of any Certificate by the Master Servicer, the Special
Servicer or any affiliate thereof.
BOOK-ENTRY REGISTRATION. Each Class of Offered Certificates will be
initially represented by one or more certificates registered in the name of
Cede & Co., as the nominee for DTC, and will not be registered in the names
of the related holders of Certificates or their nominees. As a result,
holders of Offered Certificates will not be recognized as
"Certificateholders" for certain purposes. Hence, those beneficial owners
will be able to exercise the rights of holders of Certificates only
indirectly through DTC, Cedel Bank, S.A. ("CEDEL") and The Euroclear System
("Euroclear") and their participating organizations. See "Description of the
Offered Certificates--Delivery, Form and Denomination" and "--Book-Entry
Registration" herein. A beneficial owner holding a Certificate through the
book-entry system will be entitled to receive the reports and notices
described under the Pooling Agreement (to the extent that its name and
address has been provided to the Certificate Registrar) only through the
facilities of DTC, CEDEL and Euroclear and their respective participants
(except that the reports will be made available directly from the Trustee
upon request). Additionally, certain information made available on the
monthly reports to Certificateholders can be retrieved via facsimile through
LaSalle National Bank's ASAP System by calling (312) 904-2200, and requesting
statement number 334.
LIMITED LIQUIDITY AND MARKET VALUE. There is currently no secondary market
for the Offered Certificates. While the Underwriter has advised the Seller
that it currently intends to make a secondary market in the Offered
Certificates, it is under no obligation to do so. Accordingly, there can be
no assurance that a secondary market for the Offered Certificates will
develop. Moreover, if a secondary market does develop, there can be no
assurance that it will provide holders of Offered Certificates with liquidity
of investment or that it will continue for the life of the Offered
Certificates. The Offered Certificates will not be listed on any securities
exchange. Lack of liquidity could result in a substantial decrease in the
market value of the Offered Certificates. In addition, the market value of
the Offered Certificates at any time may be affected by many factors,
including then prevailing interest rates, and no representation is made by
any person or entity as to the market value of any Offered Certificate at any
time.
PASS-THROUGH RATE CONSIDERATIONS. The Pass-Through Rates on the Class B,
Class C, Class D, Class E, Class F and Class G Certificates are based on the
WAC Rate of the Mortgage Loans and the Pass-Through Rate on the Class X
Certificates will be partially based upon the WAC Rate of the Mortgage Loans,
and all of such Classes will be affected by disproportionate principal
payments on the Mortgage Loans. Because certain Mortgage Loans will amortize
their principal more quickly than others, such rate will fluctuate over the
life of such Classes of Certificates. The WAC Rate for each Distribution
Date, assuming that each Mortgage Loan prepays on its Anticipated Repayment
Date (and that all scheduled monthly payments are timely made and that no
other prepayments occur), is set forth in Exhibit B hereto. See "Yield,
Prepayment and Maturity Considerations--Yield" herein.
RISK OF YEAR 2000. The transition from the year 1999 to the year 2000 may
disrupt the ability of computerized systems to process information. If the
Master Servicer, the Special Servicer or the Trustee are unable to modify
their computer systems and applications such that they will be year 2000
compliant by the year 2000, the ability of the Master Servicer or the Special
Servicer to service the Mortgage Loans (in the case of the Master Servicer
and the Special Servicer) and make distributions to the Certificateholders
(in the case of the Trustee) may be materially and adversely affected.
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<PAGE>
MORTGAGE POOL CHARACTERISTICS
GENERAL
The Trust Fund will consist primarily of 10 Mortgage Loans with an
aggregate principal balance as of the Cut-Off Date, after deducting payments
of principal due on such date, of $1,409,152,997 (the "Initial Pool
Balance"). In addition, the Trust Fund will also include the Marriott Desert
Springs Parent Loan. See "Description of the Mortgaged Properties and the
Mortgage Loans--Marriott Desert Springs: The Marriott Desert Springs
Loan--The Marriott Desert Springs Parent Loan" herein. The Marriott Desert
Springs Parent Loan will not be a part of the Mortgage Pool and references to
"Mortgage Loans" herein do not include the Marriott Desert Springs Parent
Loan. All of the numerical information provided herein with respect to the
Mortgage Loans is provided on an approximate basis. The Mortgage Loans are
evidenced by one or more promissory notes (each, a "Note") and secured by one
or more mortgages, deeds of trust or other similar security instruments
(each, a "Mortgage") creating a first lien on the interests of the related
borrower's fee and/or leasehold estate in one or more commercial properties
(each, a "Mortgaged Property") as set forth on the following table:
<TABLE>
<CAPTION>
NUMBER OF
INTEREST IN PROPERTY ENCUMBERED* MORTGAGED PROPERTIES
- ------------------------------------------ ------------------------
<S> <C>
Fee Estate ................................ 238
Leasehold Estate .......................... 9
Borrower's Fee and Leasehold Estate** .... 2
</TABLE>
- ------------
* For any Mortgage Loan where the borrower holds a leasehold estate, but
the Mortgage Loan is secured by a Mortgage signed by the ground lessor
which permits the mortgagee to liquidate the fee interest on
foreclosure, the interest in the Mortgaged Property encumbered was not
categorized as a leasehold estate.
** "Borrower's Fee and Leasehold Estate" means that the borrower's
interest in the Mortgaged Property consists of a fee interest in a
portion of the property and a leasehold interest in the remaining
portion.
The Mortgaged Properties consist of hotel properties, refrigerated
distribution/warehouse facilities, retail properties and office buildings.
All of the Mortgage Loans are non-recourse loans so that, in the event of a
borrower default on any Mortgage Loan, recourse is limited to the Mortgaged
Property or Mortgaged Properties securing such Mortgage Loan, as well as such
limited other assets as may have been specifically pledged to secure such
Mortgage Loan, and not against the borrower's other assets or any assets of
the borrower's affiliates. GSMC originated the Americold Pool Loan, the URS
Pool Loan, the Tharaldson Pool B Loan, the Tharaldson Pool A Loan, the Green
Acres Loan, the Pier 39 Loan and the One Commerce Square Loan. To facilitate
loan closings, GSMC engaged GMACCM to originate the Marriott Desert Springs
Loan, the Showcase Loan and the Crystal City Pool Loan on GSMC's behalf, and
concurrently with the origination, GSMC acquired a 100% participation
interest in each such Mortgage Loan. GSMC and GMACCM are collectively
referred to herein as the "Originators." All of the Mortgage Loans were
underwritten by the Originators in accordance with the underwriting criteria
described herein. Legal title to the Mortgage Loans originated by GMACCM will
have been acquired by GSMC before the Closing Date and the Seller will
purchase the Mortgage Loans on or before the Closing Date from GSMC pursuant
to the Loan Sale Agreement (the "Loan Sale Agreement") between GSMC and the
Seller. The Seller will cause the Mortgage Loans in the Mortgage Pool to be
assigned to LaSalle National Bank, as Trustee (the "Trustee"), pursuant to
the Pooling Agreement. GMACCM, in its capacity as Master Servicer, will
service the Mortgage Loans pursuant to the Pooling Agreement.
Pursuant to an agreement between GMACCM and GSMC (the "GMACCM Responsible
Party Agreement") with respect to the Marriott Desert Springs Loan, the
Showcase Loan and the Crystal City Pool Loan, GMACCM will make certain
representations, warranties and covenants relating to such Mortgage Loans and
may be obligated to repurchase any of such Mortgage Loans in the event of a
material breach of such representations or warranties. In addition, pursuant
to the Loan Sale Agreement, GSMC will make certain limited representations
and warranties to the Seller with respect to the Mortgage Loans it
originated, and GSMC may be obligated to repurchase such Mortgage Loan in the
event of a material breach of a representation or warranty. See "The Pooling
Agreement--Representations and Warranties; Repurchase" herein and Exhibit A
hereto. Under the Loan Sale Agreement, GSMC will assign to the Seller its
rights with
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respect to the representations, warranties and remedies under the GMACCM
Responsible Party Agreement, and under the Pooling Agreement the Seller will
assign its rights with respect to (i) certain of the representations,
warranties and remedies in the GMACCM Responsible Party Agreement and (ii)
the representations, warranties and remedies in the Loan Sale Agreement, to
the Trustee for the benefit of the Trust Fund. Except as described herein
under "The Pooling Agreement--Representations and Warranties; Repurchase,"
the Seller will make no representations or warranties with respect to the
Mortgage Loans and will have no obligation to repurchase or substitute for
Mortgage Loans with deficient documentation or which are otherwise defective.
The Responsible Parties will have no obligations with respect to the
Certificates other than pursuant to the limited representations, warranties
and covenants made by them pursuant to the GMACCM Responsible Party Agreement
or the Loan Sale Agreement, as applicable, to the extent assigned by the
Seller to the Trustee. See "The Pooling Agreement--Representations and
Warranties; Repurchase" herein and "The Mortgage Pools--Representations and
Warranties" in the Prospectus.
SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is generally non-recourse and is secured by a Mortgage
or Mortgages encumbering the related borrower's or borrowers' interest in the
related Mortgaged Property or Properties. Each Mortgage Loan is also secured
by an assignment of the related borrower's or borrowers' interest in the
leases, rents and profits of the related Mortgaged Properties. In certain
instances, additional collateral exists in the nature of one or more reserve
or escrow accounts or letters of credit for necessary repairs, replacements
and environmental remediation, real estate taxes and insurance premiums,
tenant improvements, leasing commissions, deferred maintenance and/or
scheduled capital improvements (such accounts, "Reserve Accounts"). All of
the Mortgage Loans provide for the indemnification of the related mortgagee
by the related borrower(s) for the presence of any hazardous substances
affecting the Mortgaged Property.
Each Mortgage constitutes a first lien on the related Mortgaged
Properties, subject generally only to (i) liens for real estate and other
taxes and special assessments and (ii) covenants, conditions, restrictions,
rights of way, easements and other encumbrances, whether or not of public
record as of the date of recording of the related Mortgage, all of which were
determined to have been acceptable to the related Originator in connection
with the origination of the related Mortgage Loan.
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
All of the Mortgage Loans have Due Dates that occur on the 11th day of
each month, or, if such day is not a business day, the preceding business
day. As of the Cut-Off Date, the Mortgage Loans had the following approximate
characteristics:
<TABLE>
<CAPTION>
<S> <C>
Aggregate Principal Balance ...................................... $1,409,152,997
Lowest Mortgage Loan Principal Balance ........................... $76,608,478
Highest Mortgage Loan Principal Balance .......................... $253,000,000
Average Mortgage Loan Principal Balance .......................... $140,915,300
Range of Remaining Terms to Anticipated Repayment Date .......... 114 to 145 months
Weighted Average Remaining Term to Anticipated Repayment Date ... 120 months
Range of Mortgage Rates per annum ................................ 6.750% to 7.800%
Weighted Average Mortgage Rate ................................... 7.000%
Range of Cut-Off Date Loan-to-Appraised Value ("LTV") Ratios ..... 43.2% to 82.5%
Weighted Average Cut-Off Date LTV Ratio .......................... 61.0%
Range of Debt Service Coverage Ratios ............................ 1.18x to 2.35x
Weighted Average Debt Service Coverage Ratio ..................... 1.86x
</TABLE>
All of the Mortgage Loans amortize substantially all of their principal
over their respective terms. Each Mortgage Loan requires that after a
specified date (each, an "Anticipated Repayment Date"), Excess Cash Flow will
be applied towards the reduction of principal, as more fully described under
"Description of the Mortgaged Properties and the Mortgage Loans." The
following chart lists the Anticipated Repayment Date for each Mortgage Loan:
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<PAGE>
<TABLE>
<CAPTION>
FIRST PERMITTED
MORTGAGE LOAN PREPAYMENT DATE* ANTICIPATED REPAYMENT DATE
- -------------------------------- --------------------- ------------------------------
<S> <C> <C>
URS Pool Loan.................... April 11, 2008 May 11, 2008
Tharaldson B Loan................ February 11, 2008 February 11, 2008
Tharaldson A Loan................ February 11, 2008 February 11, 2008
Green Acres Loan................. January 11, 2008 February 11, 2008
Americold Pool Loan.............. April 11, 2008 May 11, 2008
Pier 39 Loan..................... January 11, 2008 April 11, 2008
One Commerce Square Loan.........
Tranche A....................... March 11, 2008 April 11, 2008
Tranche B....................... N/A N/A
Marriott Desert Springs Loan .... June 11, 2010 June 11, 2010
Showcase Loan.................... October 11, 2007 November 11, 2007
Crystal City Pool Loan........... October 11, 2007 November 11, 2007
</TABLE>
- ------------
* Under the URS Pool Loan, the Americold Pool Loan and the Crystal City
Pool Loan, a prepayment may be made prior to the end of the applicable
Defeasance Lock-Out Period to cause the release of one or more of the
related Mortgaged Properties necessary to cure a property level
non-payment default with respect to such Mortgaged Property or
Properties.
No yield maintenance premium is required for any voluntary prepayments on
the Mortgage Loans after their respective Prepayment Lockout Periods. No
yield maintenance premium will be required under the Mortgage Loans for
prepayments in connection with a casualty or condemnation unless, in the case
of most of the Mortgage Loans, an event of default has occurred and is
continuing.
All of the Mortgage Loans provide that after the applicable Defeasance
Lockout Period and prior to the related Anticipated Repayment Date (or in the
case of the Pier 39 Loan, until 90 days prior to the Pier 39 Anticipated
Repayment Date), the borrower may obtain the release of one or more of the
related Mortgaged Properties from the lien of the related Mortgage upon,
among other things, a pledge to the Trustee of noncallable U.S. Treasury
obligations. Such U.S. Treasury obligations will provide payments, on or
prior to all successive scheduled Due Dates upon which interest and principal
payments are due under the related note through and including the applicable
Anticipated Repayment Date, in amounts due on such dates under the related
Note or, in the case of an Anticipated Repayment Date, an amount determined
as if the related Mortgage Loan were to mature on such Anticipated Repayment
Date. In addition, certain Mortgage Loans permit release of less than all of
the related Mortgaged Properties in connection with a partial defeasance upon
the satisfaction of certain debt service coverage ratio tests. All of the
Mortgage Loans secured by multiple Mortgaged Properties permit the release of
the lien of the Mortgage on less than all of the Mortgaged Properties by
pledging U.S. Treasury obligations providing for payment of principal and
interest with respect to a portion of the Mortgage Loan allocable to the
Mortgaged Properties to be released from the Mortgage lien. The Mortgage
Loans also permit (or provide that the Master Servicer may require) the
related borrower, under certain circumstances, to transfer the pledged U.S.
Treasury obligations together with the related Note or the portion of the
related Note secured by such U.S. Treasury obligations to a successor
mortgagor. See "Description of the Mortgaged Properties and the Mortgage
Loans" herein.
The following tables set forth certain information with respect to the
Mortgage Loans and Mortgaged Properties. The statistics in the following
tables were primarily derived from information provided to the Originators by
the respective borrowers. Some of the calculations of the statistics in the
tables were not made with adjustments which would be required under generally
accepted accounting principles ("GAAP"). For purposes of this Prospectus
Supplement, including the tables and Annex A, the defined terms have the
meanings described below:
(1) "Total Revenue" as used herein with respect to any Mortgaged Property
or group of Mortgaged Properties generally means, for the year stated,
total revenue generated at such Mortgaged Property or Properties during
the twelve calendar months ended on December 31, 1997, December 31, 1996
or December 31, 1995 unless otherwise stated. For certain of the URS Pool
Properties and the Americold Pool Properties during periods where less
than 12 full months of operating history is available (as a result of a
change in fiscal year end from February to December), partial years have
been annualized.
(2) "NOI" or "Net Operating Income" as used herein with respect to any
Mortgaged Property or group of Mortgaged Properties means, for the year
stated, the excess of the Total Revenue for such Mortgaged Property or
S-67
<PAGE>
Properties for the period referenced in item (1) above less the total
operating expenses of such Mortgaged Property or Properties incurred
during such period, without giving effect to any deductions for debt
service, depreciation, amortization, capital expenditures, tenant
improvements, leasing commissions or reserves therefor. For certain of the
URS Pool Properties and the Americold Pool Properties during periods where
less than 12 full months of operating history is available (as a result of
a change in fiscal year end from February to December), partial years have
been annualized.
NOI and the revenues and expenses used to determine NOI for each
Mortgaged Property are derived from information furnished by the related
borrowers. There can be no assurance that the components of net operating
income for any Mortgaged Property (i.e., revenues and expenses) as
determined under GAAP would be the same as those used in computing the
stated NOI for such Mortgaged Property. Moreover, NOI is not a substitute
for net income as determined in accordance with GAAP as a measure of the
results of a Mortgaged Property's operations or a substitute for cash
flows from operating activities determined in accordance with GAAP as a
measure of liquidity.
(3) "Underwritten Net Cash Flow" or "UWNCF" as used herein with respect
to any Mortgaged Property or group of Mortgaged Properties generally means
cash flow (as determined by the Seller) for a twelve month period based
upon the following assumptions:
a. Leases in Place: In calculating Underwritten Net Cash Flow, base
rent was generally determined by using Annualized Base Rent and
percentage rent was generally determined by using the percentage rent
that was actually collected during the most recent 12 month time
period.
b. Ancillary Income: In calculating Underwritten Net Cash Flow,
ancillary income from items such as parking, food and beverage and
telephone revenues were generally determined by using historical
and/or projected figures.
c. Management Fees: Management fees used in the calculation of
Underwritten Net Cash Flow, which in all cases equal or exceed the
contractual base rate under the management agreements currently in
effect, are as follows: URS Pool Properties and the Americold Pool
Properties: 6% of Total Revenues; Tharaldson Pool A Properties,
Tharaldson Pool B Properties, Pier 39 Property and Marriott Desert
Springs Property: 3% of Total Revenues; One Commerce Square Property:
3.5% of Total Revenues; Green Acres Property: 4.0% of rental income;
Crystal City Pool Properties: 4% of Total Revenues; and Showcase
Property: 2.25% of rental income.
d. Capital Reserves: Annual reserves assumed in calculating
Underwritten Net Cash Flow are as follows: URS Pool Properties:
$5,722,543 per year; Americold Pool Properties: $6,534,838 per year;
Tharaldson Pool A Properties and Tharaldson Pool B Properties: 4% of
Total Revenues; Green Acres Property: $0.15/sf retail and $0.10/sf for
garage; Pier 39 Property: $0.20/sf retail and $0.35/sf garage; One
Commerce Square Property: $0.20/sf; Marriott Desert Springs Property:
5.5% of Total Revenues; Showcase Property: $0.15/sf; Crystal City Pool
Properties: $0.20/sf.
e. Rollover Expenses: Assumptions relating to annual expenses of
tenant rollover (i.e., tenant improvements ("TI") and leasing
commissions ("LC")) used in calculating Underwritten Net Cash Flow are
generally as follows: Pier 39 Property: TI (new tenant) -- $2.00, TI
(renewal tenant) -- $1.00, LC (new tenant) -- 4%, LC (renewal tenant)
-- 2%, and renewal probability -- 60%; One Commerce Square Property:
TI (new tenant) $28, TI (renewal tenant) -- $14, LC (new tenant) --
4%, LC (renewal tenant) --3%, and renewal probability -- 60%; Crystal
City Pool Properties: TI (new tenant) -- $6.00, TI (renewal tenant) --
$3.00, LC (new tenant) -- 4%, LC (renewal tenant) -- 2%, and renewal
probability -- 60%.
f. Occupancy: In calculating Underwritten Net Cash Flow, adjustments
were made to Total Revenues or Annualized Base Rent to reflect maximum
occupancies of the lower of actual, market or 95% for retail and
office properties. For the Showcase Property and the Green Acres
Property, leased anchor spaces were excluded from the determination of
maximum occupancy.
g. Expenses: In calculating expenses, adjustments were made to actual
1997 expenses as provided by applicable borrowers.
The management fees and reserves used in calculating Underwritten Net Cash
Flow differ in many cases from the management fees and reserves provided for
under the loan documents for the Mortgage Loans. Further, actual conditions
at the Mortgaged Properties will differ, and may differ substantially, from
the assumed conditions used in
S-68
<PAGE>
calculating Underwritten Net Cash Flow. In particular, the assumptions
regarding tenant vacancies, renewal rates, tenant improvements and leasing
commissions and other conditions used in calculating Underwritten Net Cash
Flow for the retail and office properties may differ substantially from
actual conditions. Such assumptions may also differ from those used by the
Rating Agencies or by investors. Each investor should make its own
determination of the appropriate assumptions to be used in determining
Underwritten Net Cash Flow.
Underwritten Net Cash Flow reflects the calculations and assumptions used
by the Seller and may or may not reflect the amounts calculated and adjusted
by the Rating Agencies for their own analysis. Underwritten Net Cash Flow and
the Debt Service Coverage Ratios derived therefrom are not a substitute for
net income as determined in accordance with GAAP as a measure of the results
of the Mortgaged Property's operations or a substitute for cash flows from
operating activities determined in accordance with GAAP as a measure of
liquidity.
Reletting costs and capital expenditures are crucial to the operation of
commercial properties. Each investor should make its own assessment of the
level of reletting costs and capital expenditures of the Mortgaged
Properties, and the consequent effect of such costs and expenditures on the
actual net operating income and debt service coverage ratios of the Mortgage
Loans.
No representation is made as to the future net cash flow of the
properties, nor is Underwritten Net Cash Flow set forth herein intended to
represent such future net cash flow.
(4) "Value" means, for each of the Mortgaged Properties, the appraised
value of such Mortgaged Property as determined by the appraisal thereof
reviewed in connection with the origination of the related Mortgage Loan.
"Total Value" is the aggregate Value for all of the Mortgaged Properties.
(5) "Allocated Loan Amount" means, for each Mortgaged Property, the
portion of the principal amount of the related Mortgage Loan allocated to
such Mortgaged Property for certain purposes (including, without
limitation, determining the release prices of properties, if the Mortgage
Loan permits such releases) under such Mortgage Loan. The Allocated Loan
Amount for each Mortgaged Property securing a Mortgage Loan was determined
generally based on the ratio of the Underwritten Net Cash Flow or net
operating income (calculated as provided in the related Mortgage Loan) or
appraised value, or some combination thereof, of such Mortgaged Property
to the aggregate Underwritten Net Cash Flow, net operating income or
appraised value, or some combination thereof, of all the Mortgaged
Properties securing such Mortgage Loan. The Allocated Loan Amount for each
Mortgaged Property may be adjusted upon the payment of principal of the
related Mortgage Loan, whether upon amortization, prepayment, defeasance
or otherwise. "Cut-Off Date Allocated Loan Amount" means for each
Mortgaged Property the Allocated Loan Amount of such Mortgaged Property as
of the Cut-Off Date.
(6) "Annual Debt Service" means on any Mortgage Loan, the annual debt
service (interest, including interest allocable to payment of the
Servicing Fee and, if applicable, principal on such Mortgage Loan for the
twelve month period commencing on the Cut-Off Date.
(7) "Anticipated Repayment Date" for each Mortgage Loan is the date on
which (i) such Mortgage Loan commences to accrue interest at the Revised
Interest Rate for such Mortgage Loan, and (ii) all Excess Cash Flow for
such Mortgage Loan is required to be applied to payment of principal of
such Mortgage Loan. There can be no assurance that any Mortgage Loan will
be repaid on its Anticipated Repayment Date.
(8) "DSCR" or "Debt Service Coverage Ratio" means (i) the aggregate
Underwritten Net Cash Flow for all of the related Mortgaged Properties
divided by (ii) Annual Debt Service.
The DSCRs set forth herein for the Mortgage Loans and Mortgaged Properties
vary (and may vary substantially) from the debt service coverage ratios for
such Mortgage Loans and Mortgaged Properties as calculated pursuant to the
definition of such ratio as set forth in the related loan documents. The debt
service calculation for each Mortgage Loan as set forth in its related loan
documents is set forth in the description of such Mortgage Loan herein under
the heading "Description of the Mortgaged Properties and the Mortgage Loans"
herein.
(9) "Loan-to-Value Ratio" or "LTV" or "Cut-Off Date LTV" means, with
respect to any Mortgage Loan, the principal balance of such Mortgage Loan
as of the Cut-Off Date divided by the aggregate Value of the Mortgaged
Properties securing such Mortgage Loan.
(10) "Anticipated Repayment Date Balance," for each of the Mortgage
Loans, is equal to the outstanding principal amount of such Mortgage Loan
as of its Anticipated Repayment Date, taking into account scheduled
amortization, assuming no prepayments or defaults.
S-69
<PAGE>
(11) "Anticipated Repayment Date LTV" or "ARD LTV" means, with respect
to any Mortgage Loan, the Anticipated Repayment Date Balance for such
Mortgage Loan divided by the aggregate Value of the Mortgaged Properties
securing such Mortgage Loan. Such calculation thus assumes that the
appraised value of the Mortgaged Property or Mortgaged Properties securing
a Mortgage Loan on the Anticipated Repayment Date is the same as the Value
or Values thereof as of the Cut-Off Date. There can be no assurance that
the value of any particular Mortgaged Property will not have declined or
increased from its Value as of the Cut-Off Date.
(12) "SF/Units" means, in the case of office, industrial or retail
properties, total square footage or GLA (as provided by the borrower).
(13) "GLA" means the square footage of the gross leaseable area.
(14) "Occupancy" or "OCC" means the percentage of SF/Units of the
property that are leased as of the date indicated in the column with the
heading "As of Date."
(15) "Annualized Base Rent" is calculated by multiplying by twelve the
contractual monthly base rent, as of the point in time for which
"Occupancy" was calculated for the related property, as reflected in the
rent rolls provided by the related borrower.
(16) "Average Base Rent Per Square Foot" is calculated by dividing
Annualized Base Rent by total GLA as of the same date as of which the
Annualized Base Rent was calculated.
(17) "First P&I Date" means the first Due Date on which the borrower is
required to pay both principal and interest.
(18) "Original Principal Balance" means the principal balance of the
Mortgage Loan at origination.
(19) "Anticipated Term" means the term of the Mortgage Loan in months
from the date of the first full monthly payment thereon to the related
Anticipated Repayment Date.
(20) "Sales Per SF" means sales per square foot, based on the most recent
sales data provided by the applicable borrower to the related Originator,
for the previous applicable 12 month period, or if 12 months of sales data
was not available, such sales data as was available, was either annualized
or excluded.
(21) The term "psf" means per square foot.
(22) "RevPAR" means revenues per available room.
(23) "ADR" means average daily room rate.
S-70
<PAGE>
In addition to the tables set forth below, investors should review the
accompanying notes in the prior section when reading the following
information. A table of Mortgaged Property characteristics is attached as
Annex A to this Prospectus Supplement.
MORTGAGE LOAN CHARACTERISTICS
<TABLE>
<CAPTION>
REMAINING
TERM TO
NUMBER ORIGINAL ANTICIPATED
OF MORTGAGE AMORTIZATION REPAYMENT
LOAN PROPERTIES RATE (MOS.) DATE (MOS.)
- ----------------------- ------------ ---------- -------------- -------------
<S> <C> <C> <C> <C>
URS Pool Loan........... 29 6.894% 300 120
Tharaldson Pool B Loan . 93 6.876% 300 117
Tharaldson Pool A Loan . 90 6.876% 300 117
Green Acres Loan........ 1 6.750% 360 117
Americold Pool Loan .... 29 6.894% 300 120
Pier 39 Loan............ 1 7.107% 360 119
One Commerce Square
Loan................... 1
Tranche A.............. N/A 6.995% 360 119
Tranche B.............. N/A 6.995% 53 N/A
Marriott Desert Springs
Loan................... 1 7.800% 300 145
Showcase Loan........... 1 7.523% 337 114
Crystal City Pool Loan . 3 6.904% 360 114
------------
Total/Weighted
Average................ 249 7.000% 322 120
============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ANTICIPATED
FIRST P&I ANTICIPATED ORIGINAL
PAYMENT REPAYMENT STATED PRINCIPAL
LOAN DATE DATE MATURITY BALANCE
- ----------------------- ------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C>
URS Pool Loan........... 6/11/98 05/11/08 05/11/23 $ 253,000,000
Tharaldson Pool B Loan . 3/11/98 02/11/08 02/11/23 184,293,000
Tharaldson Pool A Loan . 3/11/98 02/11/08 02/11/23 179,508,000
Green Acres Loan........ 3/11/98 02/11/08 02/11/28 160,000,000
Americold Pool Loan .... 6/11/98 05/11/08 05/11/23 148,500,000
Pier 39 Loan............ 3/11/98 04/11/08 02/11/28 117,000,000
One Commerce Square
Loan ..................
Tranche A.............. 5/11/98 04/11/08 04/11/28 80,000,000
Tranche B.............. 5/11/98 N/A 09/11/02 32,000,000
Marriott Desert Springs
Loan................... 1/11/98 06/11/10 12/11/22 103,000,000
Showcase Loan........... 11/11/97 11/11/07 11/11/25 79,500,000
Crystal City Pool Loan . 12/11/97 11/11/07 11/11/27 77,000,000
------------- ---------------
Total/Weighted
Average................ $1,413,801,000
===============
</TABLE>
PRINCIPAL BALANCES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
PERCENT OF PRINCIPAL
CUT-OFF DATE CUT-OFF DATE BALANCE AT
PRINCIPAL PRINCIPAL ANTICIPATED
LOAN BALANCE BALANCE REPAYMENT DATE APPRAISED VALUE
- ----------------------- -------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C>
URS Pool Loan........... $ 253,000,000 18.0% $ 199,116,531 $ 423,450,000
Tharaldson Pool B Loan . 183,352,232 13.0 144,503,224 331,000,000
Tharaldson Pool A Loan . 178,671,275 12.7 140,908,257 333,000,000
Green Acres Loan........ 159,523,713 11.3 136,830,761 253,200,000
Americold Pool Loan** .. 148,500,000 10.5 116,872,746 520,600,000
Pier 39 Loan............ 116,669,545 8.3 100,515,980 158,000,000
One Commerce Square
Loan...................
Tranche A.............. 79,929,131 N/A 68,865,873 N/A
Tranche B.............. 31,481,501 N/A N/A N/A
-------------- -------------- ---------------
111,410,632 7.9 68,865,873 135,000,000
Marriott Desert Springs
Loan................... 102,418,958 7.3 75,085,499 237,000,000
Showcase Loan........... 78,998,166 5.6 67,183,709 117,500,000
Crystal City Pool Loan . 76,608,478 5.4 65,925,554 115,100,000
-------------- ------------ -------------- ---------------
Total/Weighted
Average................ $1,409,152,997 100.0% $1,115,808,134 $2,623,850,000
============== ============ ============== ===============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE ANTICIPATED
ANNUAL DEBT UNDERWRITTEN CUT-OFF REPAYMENT
LOAN SERVICE NET CASH FLOW DSCR* DATE LTV DATE LTV
- ----------------------- ------------ ------------- ----- -------- -----------
<S> <C> <C> <C> <C> <C>
URS Pool Loan........... $21,437,969 $40,349,956 1.88x 59.7% 47.0%
Tharaldson Pool B Loan . 15,590,351 36,701,015 2.35 55.4 43.7
Tharaldson Pool A Loan . 15,185,561 35,628,415 2.35 53.7 42.3
Green Acres Loan........ 12,572,968 19,322,925 1.54 63.0 54.0
Americold Pool Loan** .. 12,583,156 48,889,852 1.94 57.0 44.9
Pier 39 Loan............ 9,535,613 13,153,909 1.38 73.8 63.6
One Commerce Square
Loan...................
Tranche A.............. 6,446,428 8,552,522 1.33 N/A 51.0
Tranche B.............. 8,460,387 9,021,744 1.07 N/A N/A
------------ -------------
14,906,815 17,574,266 1.18 82.5 51.0
Marriott Desert Springs
Loan................... 9,464,715 21,500,000 2.27 43.2 31.7
Showcase Loan........... 6,882,635 9,902,261 1.44 67.2 57.2
Crystal City Pool Loan . 6,087,938 9,774,441 1.61 66.6 57.3
------------ ------------- ----- -------- -----------
Total/Weighted
Average................ $124,247,721 $252,797,042 1.86x 61.0% 48.3%
============ ============= ===== ======== ===========
</TABLE>
- ------------
* Based on Underwritten Net Cash Flow.
** For DSCR and LTV purposes, the Principal Balance of the Total Americold
Pool Loan is utilized. The Americold Pool Loan is evidenced by a note
representing 50% of the Total Americold Pool Loan with a Cut-Off Date
Principal Balance of $297,000,000; the note is cross-collateralized and
cross-defaulted with a pari passu note in the amount of $148,500,000,
which is not included in the Mortgage Pool.
S-71
<PAGE>
Graphic Omitted: Pie Chart depicting Loan Amount Allocation
Graphic Omitted: Pie Chart depicting Primary Property Type by
Allocated Loan Amount
S-72
<PAGE>
MORTGAGED PROPERTIES BY LOCATION
<TABLE>
<CAPTION>
PERCENTAGE
OF
CUT-OFF
DATE
CUT-OFF DATE ALLOCATED
NUMBER OF ALLOCATED LOAN UNDERWRITTEN
STATE PROPERTIES LOAN AMOUNT AMOUNT NET CASH FLOW*
- --------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Alabama......... 4 $ 24,465,369 1.74% $ 3,186,670
Arizona......... 4 16,756,989 1.19 2,965,310
California...... 6 235,948,181 16.74 39,675,910
Colorado........ 4 7,892,117 0.56 1,643,386
Florida......... 2 812,956 0.06 254,137
Georgia......... 6 69,150,600 4.91 11,657,213
Iowa............ 17 27,914,192 1.98 6,186,207
Idaho........... 2 15,831,252 1.12 5,334,017
Illinois........ 38 83,332,568 5.91 17,300,214
Indiana......... 14 45,785,325 3.25 7,594,960
Kansas.......... 7 15,520,601 1.10 3,042,517
Kentucky........ 4 8,606,072 0.61 1,750,184
Massachusetts .. 5 12,693,527 0.90 3,872,042
Maine........... 1 3,345,692 0.24 487,851
Michigan........ 4 7,230,879 0.51 1,696,139
Minnesota....... 10 23,594,691 1.67 5,115,613
Missouri........ 3 12,748,347 0.90 2,299,074
Montana......... 6 10,799,994 0.77 2,216,861
North Carolina . 3 17,547,099 1.25 3,114,477
North Dakota ... 10 13,639,483 0.97 2,958,858
Nebraska........ 2 4,592,437 0.33 957,467
Nevada.......... 1 78,998,166 5.61 9,902,261
New York........ 2 182,523,713 12.95 22,623,152
Ohio............ 25 57,382,234 4.07 10,423,799
Oklahoma........ 8 17,391,825 1.23 3,638,525
Oregon.......... 4 28,410,680 2.02 10,973,575
Pennsylvania ... 3 145,346,041 10.31 22,254,896
South Carolina . 1 3,345,692 0.24 469,088
South Dakota ... 2 3,440,886 0.24 694,620
Tennessee....... 3 20,313,127 1.44 2,964,133
Texas........... 25 55,488,926 3.94 11,386,232
Utah............ 1 7,929,889 0.56 3,016,924
Virginia........ 4 81,447,781 5.78 10,549,723
Washington...... 5 25,586,727 1.82 9,521,776
Wisconsin....... 12 41,789,888 2.97 10,734,255
Wyoming......... 1 1,549,052 0.11 334,974
------------ -------------- ------------ --------------
Total/Weighted
Average....... 249 $1,409,152,997 100.00% $252,797,042
============ ============== ============ ==============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PERCENT OF PERCENT WEIGHTED
TOTAL UNDER- OF AVERAGE WEIGHTED
WRITTEN CASH APPRAISED TOTAL CUT-OFF AVERAGE
STATE FLOW VALUE* VALUE DATE LTV DSCR
- --------------- -------------- -------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Alabama......... 1.26% $ 40,950,000 1.56% 59.7% 1.54x
Arizona......... 1.17 28,200,000 1.08 59.5 2.09
California...... 15.69 441,300,000 16.82 59.4 1.83
Colorado........ 0.65 17,700,000 0.68 54.8 2.11
Florida......... 0.10 2,850,000 0.11 57.1 1.85
Georgia......... 4.61 116,800,000 4.45 62.2 1.96
Iowa............ 2.45 65,250,000 2.49 51.2 2.31
Idaho........... 2.11 55,500,000 2.12 57.1 1.99
Illinois........ 6.84 160,000,000 6.10 57.0 2.24
Indiana......... 3.00 77,900,000 2.97 60.2 1.96
Kansas.......... 1.20 25,400,000 0.97 62.2 2.31
Kentucky........ 0.69 14,800,000 0.56 58.3 2.39
Massachusetts .. 1.53 44,500,000 1.70 57.1 1.80
Maine........... 0.19 5,600,000 0.21 59.7 1.72
Michigan........ 0.67 14,000,000 0.53 51.8 2.76
Minnesota....... 2.02 47,300,000 1.80 52.3 2.55
Missouri........ 0.91 22,100,000 0.84 57.9 2.13
Montana......... 0.88 19,400,000 0.74 56.2 2.41
North Carolina . 1.23 39,000,000 1.49 49.9 2.09
North Dakota ... 1.17 27,900,000 1.06 49.4 2.55
Nebraska........ 0.38 8,400,000 0.32 54.8 2.45
Nevada.......... 3.92 117,500,000 4.48 67.2 1.44
New York........ 8.95 289,700,000 11.04 63.0 1.56
Ohio............ 4.12 97,700,000 3.72 59.7 2.14
Oklahoma........ 1.44 32,000,000 1.22 54.8 2.46
Oregon.......... 4.34 99,600,000 3.80 57.0 2.28
Pennsylvania ... 8.80 221,900,000 8.46 76.9 1.26
South Carolina . 0.19 5,600,000 0.21 59.7 1.65
South Dakota ... 0.27 7,200,000 0.27 48.4 2.38
Tennessee....... 1.17 34,000,000 1.30 59.7 1.72
Texas........... 4.50 103,000,000 3.93 54.5 2.41
Utah............ 1.19 27,800,000 1.06 57.1 2.25
Virginia........ 4.17 123,200,000 4.70 66.3 1.57
Washington...... 3.77 89,700,000 3.42 57.1 2.20
Wisconsin....... 4.24 96,900,000 3.69 57.5 2.32
Wyoming......... 0.13 3,200,000 0.12 48.4 2.54
-------------- -------------- ---------
Total/Weighted
Average....... 100.00% $2,623,850,000 100.00% 61.0% 1.86x
============== ============== =========
</TABLE>
- ------------
* Underwritten Net Cash Flow and Appraised Value reflects the Total
Americold Pool Loan. For DSCR and LTV purposes, 50% of the Underwritten
Net Cash Flow and Appraised Value is utilized.
S-73
<PAGE>
RANGE OF LOAN-TO-VALUE RATIOS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF CUT-OFF DATE WEIGHTED
MORTGAGE CUT-OFF DATE PRINCIPAL AVERAGE WEIGHTED WEIGHTED
LOAN-TO-VALUE RATIO LOANS PRINCIPAL BALANCE BALANCE MORTGAGE RATE AVERAGE DSCR AVERAGE LTV
- ----------------------- ----------- ----------------- --------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
40.00-45.00%............ 1 $ 102,418,958 7.27% 7.800% 2.27x 43.2%
50.00-55.00%............ 1 178,671,275 12.68 6.876 2.35 53.7
55.00-60.00%............ 3 584,852,232 41.50 6.888 2.04 57.7
60.00-65.00%............ 1 159,523,713 11.32 6.750 1.54 63.0
65.00-70.00%............ 2 155,606,644 11.04 7.218 1.52 66.9
70.00-75.00%............ 1 116,669,545 8.28 7.107 1.38 73.8
80.00-85.00%............ 1 111,410,632 7.91 6.995 1.18 82.5
----------- ----------------- ---------------
Total/Weighted
Average................ 10 $1,409,152,997 100.00% 7.000% 1.86x 61.0%
=========== ================= ===============
</TABLE>
RANGE OF LOAN-TO-VALUE RATIOS AS OF THE ANTICIPATED REPAYMENT DATE
<TABLE>
<CAPTION>
PERCENTAGE OF WEIGHTED
ANTICIPATED REPAYMENT NUMBER OF CUT-OFF DATE AVERAGE WEIGHTED
DATE LOAN-TO-VALUE MORTGAGE CUT-OFF DATE PRINCIPAL MORTGAGE AVERAGE WEIGHTED
RATIO LOANS PRINCIPAL BALANCE BALANCE RATE DSCR AVERAGE LTV
- ----------------------- ----------- ----------------- --------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
30.00-40.00%............ 1 $ 102,418,958 7.27% 7.800% 2.27x 43.2%
40.00-45.00%............ 3 510,523,507 36.23 6.881 2.23 55.3
45.00-50.00%............ 1 253,000,000 17.95 6.894 1.88 59.8
50.00-55.00%............ 2 270,934,345 19.23 6.851 1.39 71.0
55.00-60.00%............ 2 155,606,644 11.04 7.218 1.52 66.9
60.00-65.00%............ 1 116,669,545 8.28 7.107 1.38 73.8
----------- ----------------- ---------------
Total/Weighted
Average................ 10 $1,409,152,997 100.00% 7.000% 1.86x 61.0%
=========== ================= ===============
</TABLE>
REMAINING TERM TO ANTICIPATED REPAYMENT DATE AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
REMAINING TERM TO WEIGHTED
ANTICIPATED REPAYMENT NUMBER OF PERCENTAGE OF AVERAGE WEIGHTED
DATE AS OF THE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE AVERAGE WEIGHTED
CUT-OFF DATE (MOS.) LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE RATE DSCR AVERAGE LTV
- ---------------------- ----------- ----------------- ----------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
114.................... 2 $ 155,606,644 11.04% 7.218% 1.52% 66.9%
117.................... 3 521,547,219 37.01 6.837 2.10 57.1
119.................... 2 228,080,177 16.19 7.052 1.28 78.1
120.................... 2 401,500,000 28.49 6.894 1.90 58.8
145.................... 1 102,418,958 7.27 7.800 2.27 43.2
----------- ----------------- -----------------
Total/Weighted
Average............... 10 $1,409,152,997 100.00% 7.000% 1.86% 61.0%
=========== ================= =================
</TABLE>
The following table sets forth certain characteristics of the Mortgaged
Properties by primary property type.
MORTGAGED PROPERTIES BY PRIMARY PROPERTY TYPE
<TABLE>
<CAPTION>
PERCENTAGE OF
CUT-OFF DATE CUT-OFF DATE
NUMBER OF PERCENTAGE OF ALLOCATED ALLOCATED APPRAISED
PROPERTY TYPE PROPERTIES PROPERTIES LOAN AMOUNT LOAN AMOUNT VALUE
- ----------------------------------- ------------ --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Hotel............................... 184 73.60% $ 464,442,464 32.96% $ 901,000,000
Refrigerated
Distribution/Warehouse............. 58 23.20 401,500,000 28.49 944,050,000
Office.............................. 4 2.00 188,019,110 13.34 250,100,000
Retail.............................. 3 1.20 355,191,424 25.21 528,700,000
------------ --------------- -------------- --------------- ---------------
Total/Weighted Average.............. 249 100.00% $1,409,152,997 100.00% $2,623,850,000
============ =============== ============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF WEIGHTED
UNDERWRITTEN UNDERWRITTEN AVERAGE WEIGHTED
PROPERTY TYPE NET CASH FLOW CASH FLOW DSCR AVERAGE LTV
- ----------------------------------- --------------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
Hotel............................... $ 93,829,430 37.12% 2.33x 52.8%
Refrigerated
Distribution/Warehouse............. 89,239,810 35.30 1.90 59.2
Office.............................. 27,348,707 10.82 1.37 76.0
Retail ............................. 42,379,095 16.76 1.47 67.5
--------------- --------------
Total/Weighted Average.............. $252,797,042 100.00% 1.86x 61.0%
=============== ==============
</TABLE>
S-74
<PAGE>
UNDERWRITING STANDARDS
GENERAL. The underwriting standards utilized in connection with the
origination of the Mortgage Loans addressed, with respect to each Mortgaged
Property, property valuations and property financial performance,
environmental conditions and physical conditions, as described below.
APPRAISALS. An appraisal of each of the Mortgaged Properties was
performed. The appraisals were performed by independent appraisers certified
as Members of the Appraisal Institute ("MAI") and determined that, with
respect to each Mortgage Loan, at the time of the appraisal the aggregate
value of the related Mortgaged Properties exceeded the original principal
amount of such Mortgage Loan. In general, appraisals represent the analysis
and opinion of qualified experts and are not guarantees of present or future
value. Moreover, appraisals seek to establish the amount a typically
motivated buyer would pay a typically motivated seller. Such amount could be
significantly higher than the amount obtained from the sale of a Mortgaged
Property under a distress or liquidation sale. See "Risk Factors--The
Mortgage Loans--Limitations of Appraisals" herein. Information regarding the
value of each Mortgaged Property as of the Cut-Off Date presented under
"--Certain Characteristics of the Mortgage Loans" above is not intended to be
a representation as to the past, present or future market values of the
Mortgaged Properties.
OPERATING STATEMENTS, FINANCIAL DATA, OCCUPANCY STATEMENTS. In connection
with the origination of the Mortgage Loans, the related Originator reviewed
operating statements, financial data, rent rolls and related information or
statements of occupancy rates provided by borrowers and, with respect to the
Mortgage Loans secured by office properties and retail properties, certain
major tenant leases.
ENVIRONMENTAL ASSESSMENTS. As part of the origination, all of the
Mortgaged Properties have been subject to either Phase I site assessments,
updates of previously performed Phase I site assessments, or other site
assessments which were updated and upgraded to comply with Phase I standards
through follow up investigations, within the last eighteen months.
Additionally, all borrowers were required to provide certain environmental
representations, warranties, covenants and indemnities relating to the
existence and use of hazardous substances on the Mortgaged Properties. For a
discussion of environmental issues identified in connection with the
Mortgaged Properties, see "Risk Factors--The Mortgage Loans--Environmental
Law Considerations" herein.
PROPERTY CONDITION ASSESSMENTS. Inspections of the Mortgaged Properties
were conducted by licensed engineers prior to origination of the Mortgage
Loans. Such inspections were generally commissioned to assess the structure,
exterior walls, roofing, interior construction, mechanical and electrical
systems and general conditions of the site, buildings and other improvements
located at each Mortgaged Property. The resulting reports of the inspecting
engineers (the "Property Condition Reports") indicated, where appropriate, a
variety of deferred maintenance items and recommended capital improvements
with respect to each Mortgaged Property, as well as the estimated cost of
such items and improvements. In each instance, the related Originator either
determined that such items and improvements were being addressed by the
related borrowers in a satisfactory manner, or required that they be
addressed post-closing and, in some instances, that reserves be established
to cover the related costs. See "Description of the Mortgaged Properties and
the Mortgage Loans" herein for descriptions of the reserves or other security
provided for deferred maintenance and capital improvements related to each
Mortgaged Property.
There are violations of the ADA at some of the Mortgaged Properties that
are not expected to have a material impact on the value of or earnings from
such properties.
ZONING AND BUILDING CODE COMPLIANCE. Each of the borrowers has, under its
related Mortgage or loan agreement, generally represented as of the date on
which the Mortgage Loan was originated and/or provided a legal opinion, a
title insurance policy endorsement and/or other evidence, to the effect that
the use and operation of the related Mortgaged Properties are in compliance
in all material respects with applicable zoning, land-use, environmental,
building, fire and health ordinances, rules, regulations and orders
applicable to the related Mortgaged Properties.
S-75
<PAGE>
PROPERTY MANAGEMENT. The manager for each Mortgaged Property was approved
by GSMC in connection with the origination of the related Mortgage Loan.
Generally, a manager is responsible for responding to changes in the local
market, planning and implementing the rental rate or operating structure,
which may include establishing levels of rent payments or rates, and insuring
that maintenance and capital improvements are carried out in a timely
fashion. Upon the occurrence of certain events specified in each Mortgage
Loan, the related management agreement is terminable by the Master Servicer
or terminates unless the Master Servicer otherwise elects. For a discussion
of the management contracts and the Master Servicer's rights thereunder, see
"Description of the Mortgaged Properties and the Mortgage Loans" herein.
Neither the Master Servicer nor the Special Servicer manages any of the
Mortgaged Properties and they are not expected to manage any REO Properties.
ADDITIONAL INFORMATION
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the close of business on the Cut-Off Date, as adjusted for the
scheduled principal payments due on the Mortgage Loans on or before the
Cut-Off Date. The Seller believes that the information set forth herein will
be representative of the characteristics of the Mortgage Pool as it will be
constituted at the time the certificates are issued.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates and will be filed by the Seller,
together with the Pooling Agreement, with the Securities and Exchange
Commission within fifteen days after the initial issuance of the Offered
Certificates.
S-76
<PAGE>
Graphics Omitted: Photographs of URS Pool properties in
Indianapolis, Indiana, Syracuse, New York and
Atlanta, Georgia.
[Grande Loan II Logo]
<PAGE>
DESCRIPTION OF THE MORTGAGED PROPERTIES AND THE MORTGAGE LOANS
URS POOL: THE BORROWER; THE PROPERTIES
THE LOAN. The URS Pool Loan had a principal balance as of the Cut-Off Date
of approximately $253,000,000. It is secured by first priority mortgage liens
encumbering the fee and leasehold interests in 29 cold storage warehouses
located throughout the United States (the "URS Pool Properties"). The URS
Pool Borrower owns fee title to 26 and leasehold title to 3 of the URS Pool
Properties. The mortgages encumbering the URS Pool Properties are
cross-collateralized and cross-defaulted. The URS Pool Loan was originated by
GSMC on April 22, 1998.
THE BORROWER. URS Real Estate, L.P. (the "URS Pool Borrower"), is a
Delaware limited partnership, formed solely for the purpose of acquiring,
owning, and operating the URS Pool Properties. URS Logistics, Inc. ("URS"),
an affiliate of the URS Pool Borrower, is required to operate and manage the
URS Pool Properties pursuant to the URS Pool Master Lease as described in
"--Property Management; Master Lease" below. A joint venture between Vornado
Realty Trust and Crescent Real Estate Equities Company (the "Joint Venture")
acquired Americold Corporation ("Americold") and URS from Kelso Partners,
L.P. on October 31, 1997. Since the acquisition, Americold and URS have been
combined operationally as Americold Logistics with one management team under
the umbrella of the Joint Venture. The URS Pool Borrower is owned indirectly
by entities controlled by individuals who are also directors and officers of
Vornado Realty Trust and Crescent Real Estate Equities, Inc., respectively,
and substantially all of the economic interests in which are held by Vornado
Realty Trust and Crescent Real Estate Equities, Inc., respectively. Vornado
Realty Trust and Crescent Real Estate Equities, Inc. are both publicly traded
real estate investment trusts whose beneficial interests are listed on the
New York Stock Exchange.
SECURITY. The URS Pool Loan is a non-recourse loan, secured only by the
fee and leasehold interests of the URS Pool Borrower in the URS Pool
Properties and certain related collateral (including assignments of leases
and rents and the funds in certain accounts). Subject to certain limited
exceptions, neither the URS Pool Borrower nor any of its affiliates is
personally liable for payment of the URS Pool Loan. The URS Pool Borrower has
represented that it owns good and indefeasible fee simple or leasehold title,
as applicable, to the URS Pool Properties, free and clear of all liens other
than encumbrances described in the applicable title insurance policies and
other encumbrances permitted by the mortgagee under the URS Pool Loan
documents (the "URS Pool Permitted Encumbrances"). The title insurance
policies issued upon the origination of the URS Pool Loan insure that each of
the mortgages securing the URS Pool Loan constitutes a valid and enforceable
first lien on the URS Pool Properties encumbered by it, subject to certain
exceptions and exclusions from coverage set forth in the policies.
THE INDUSTRY. Climate controlled or refrigerated warehouses are industrial
facilities designed to maintain desired levels of temperature and humidity on
a continuous basis. Refrigerated warehouses provide storage space for
vegetables, fish, poultry, prepared foods and fruits. Approximately 77% of
all commercial freezer space is provided by public suppliers, such as
Americold and URS, with the balance owned by food processors for their
private use. Since 1979, the amount of public versus private freezer space
has increased due to the economies of scale and resultant cost efficiencies
provided by public suppliers. Ancillary services provided at these warehouses
include sorting/consolidating, loading/ unloading, labeling, and
transportation and warehouse management systems.
S-77
<PAGE>
Americold and URS together represent approximately 25% of the
refrigerated warehouse space available in the United States.
U.S. PUBLIC FREEZER SPACE
[GRAPHIC OMITTED]
Source: USDA, IARW October, 1997
(a) Includes owned and leased warehouse.
(b) On March 26, 1998, the Joint Venture announced the acquisition of nine
cold storage warehouses in the central United States from Freezer
Services for $134 million. The figures in this chart do not reflect such
acquisition.
URS's top ten customers by revenue (in alphabetical order) for 1997 were
Con Agra, Daymark, Kraft, Pillsbury, Tyson Foods, JR Simplot, Gold Kist, HJ
Heinz, Kroger and Sara Lee.
S-78
<PAGE>
Cold storage warehouses can be categorized into four classifications.
These classifications are National Distribution, Regional Distribution,
Regional Production and Captive Production and are defined as follows:
<TABLE>
<CAPTION>
<S> <C>
National Distribution: Generally large facilities located near key national distribution hubs such as Atlanta,
Georgia, Los Angeles, California, Chicago, Illinois, and eastern Pennsylvania. Their
primary function is to consolidate or sort loads and move product with high turnover.
Regional Distribution: Facilities located at key regional distribution hubs such as Boston, Massachusetts,
Tampa, Florida, and Charlotte, North Carolina. Their primary function is to consolidate
or palletize loads and move product with high turnover.
Regional Production: Facilities located in areas where customers produce large volumes of product, such as
Gloucester, Massachusetts (servicing the seafood industry) and the West Coast
(servicing the fruit and vegetable industry). These facilities function as climate
controlled storage space for customers in the production process and consolidate loads
for shipment to various points along the distribution channel. In essence, they are
storage facilities located at the source of the distribution channel.
Captive Production: Facilities located in close proximity to a single or small group of customers in the
same industry. Customers are highly dependent on these facilities for
climate-controlled storage and distribution. Similar to Regional Production facilities,
Captive Production facilities are storage facilities located at the source of the
distribution channel and consolidate, palletize and ship loads to points further along
the channel.
</TABLE>
THE PROPERTIES. The URS Pool Properties are comprised of the URS Pool
Borrower's fee simple and leasehold interest in 29 cold storage warehouses.
The URS Pool Properties are located throughout the United States with a
particular concentration in the Southeast region, and contain a total of
approximately 114 million cubic feet of refrigerated space. The URS Pool
Properties are comprised of six National Distribution, nine Regional
Distribution, eight Regional Production, and six Captive Production
facilities.
URS POOL PROPERTIES
BUSINESS SEGMENTATION BY UNDERWRITTEN NET CASH FLOW
[GRAPHIC OMITTED]
S-79
<PAGE>
URS POOL PROPERTIES SUMMARY
<TABLE>
<CAPTION>
YEAR BUILT/ SQUARE CUBIC
PROPERTY LOCATION PROPERTY TYPE RENOVATED FOOTAGE FOOTAGE
- ----------------- ----------------- --------------------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Albertville Albertville, AL Regional Production 1993 64,490 2,192,660
Augusta Augusta, GA Regional Distribution 1971/1984 42,284 1,111,663
Birmingham Birmingham, AL Regional Distribution 1962/1992 85,893 2,015,990
Charlotte Central Charlotte, NC Regional Distribution 1928/1969 65,308 1,028,482
Charlotte North Charlotte, NC Regional Distribution 1964/1992 164,820 4,135,790
Chelsea Memphis Memphis, TN Captive Production 1928/1972 35,750 585,687
Columbia Columbia, SC Regional Distribution 1971/1992 63,742 1,609,950
Ft. Smith Ft. Smith, AR Regional Production 1960/1989 78,249 1,403,467
Gadsden Gadsden, AL Regional Production 1991/1994 118,953 3,970,232
Gateway Atlanta, GA National Distribution 1972/1986 475,532 11,120,249
Indianapolis Indianapolis, IN National Distribution 1979/1990 311,671 9,110,009
Lakewood Atlanta, GA National Distribution 1962/1968 157,092 2,852,540
Leesport Leesport, PA National Distribution 1993/1994 168,872 5,753,042
Marshall Marshall, MO Captive Production 1985/1992 150,618 4,828,460
Memphis Parkway Memphis, TN Regional Distribution 1962/1967 246,169 5,603,013
Montezuma Montezuma, GA Captive Production 1965/1990 177,693 4,236,747
Montgomery New Montgomery, AL Regional Distribution 1989/1991 58,074 1,247,856
Murfreesboro Murfreesboro, TN Captive Production 1982/1988 106,500 2,934,000
Norfolk Norfolk, VA Regional Distribution 1971/1975 82,984 1,924,376
Oklahoma 1 Oklahoma City, OK Regional Production 1928/1961 64,891 721,281
Oklahoma 2 Oklahoma City, OK Regional Production 1968/1971 74,126 1,374,001
Portland Portland, ME Regional Production 1952/1963 151,649 1,834,971
Syracuse Syracuse, NY National Distribution 1960/1987 447,204 11,832,633
Tarboro Tarboro, NC Captive Production 1987 104,047 3,433,536
Tomah Tomah, WA Captive Production 1989/1994 161,947 4,569,800
Turlock 1 Turlock, CA Regional Production 1953/1968 141,287 2,500,236
Westgate Atlanta, GA National Distribution 1990/1993 334,862 11,454,919
West Memphis West Memphis, AR Regional Distribution 1985/1995 166,376 5,339,012
Wichita Wichita, KS Regional Production 1974/1979 126,312 2,808,825
--------- -----------
Total/Average 4,427,395 113,533,427
========= ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CUT-OFF DATE
UNDERWRITTEN NET ALLOCATED LOAN CUT-OFF
PROPERTY CASH FLOW AMOUNT APPRAISED VALUE DATE LTV DSCR
- ----------------- ---------------- -------------- --------------- -------- -----
<S> <C> <C> <C> <C> <C>
Albertville $ 1,234,730 $ 5,584,960 $ 9,800,000 59.7% 2.49x
Augusta 390,388 2,688,502 4,500,000 59.7 1.71
Birmingham 509,776 3,076,841 5,150,000 59.7 1.96
Charlotte Central 325,639 1,792,335 3,000,000 59.7 2.15
Charlotte North 1,808,272 9,977,330 16,700,000 59.7 2.14
Chelsea Memphis 465,972 2,569,013 4,300,000 59.7 2.14
Columbia 469,088 3,345,692 5,600,000 59.7 1.66
Ft. Smith 419,964 2,031,313 3,400,000 59.7 2.44
Gadsden 1,248,273 11,650,176 19,500,000 59.7 1.27
Gateway 6,229,915 33,000,000 50,700,000 65.1 2.23
Indianapolis 3,328,027 23,000,000 35,400,000 65.0 1.71
Lakewood 466,188 3,704,159 6,200,000 59.7 1.49
Leesport 2,540,676 17,505,136 29,300,000 59.7 1.71
Marshall 1,544,491 9,081,163 15,200,000 59.7 2.01
Memphis Parkway 1,178,457 8,543,462 14,300,000 59.7 1.63
Montezuma 1,206,608 6,392,661 10,700,000 59.7 2.23
Montgomery New 193,891 3,883,392 6,500,000 59.7 0.59
Murfreesboro 1,319,704 9,200,652 15,400,000 59.7 1.69
Norfolk 775,282 4,839,304 8,100,000 59.7 1.89
Oklahoma 1 327,958 1,684,795 2,800,000 59.7 2.30
Oklahoma 2 345,495 2,210,546 3,700,000 59.7 1.85
Portland 487,851 3,345,692 5,600,000 59.7 1.72
Syracuse 3,300,227 23,000,000 36,500,000 63.0 1.69
Tarboro 980,566 5,777,434 19,300,000 29.9 2.00
Tomah 2,327,549 11,172,220 18,700,000 59.7 2.46
Turlock 1 1,392,268 6,990,106 11,700,000 59.7 2.35
Westgate 3,011,833 20,313,127 34,000,000 59.7 1.75
West Memphis 1,817,016 11,411,198 19,100,000 59.7 1.88
Wichita 703,853 4,958,793 8,300,000 59.7 1.68
---------------- -------------- ---------------
Total/Average $40,349,956 $253,000,000 $423,450,000 59.7% 1.88x
================ ============== ===============
</TABLE>
S-80
<PAGE>
GRAPHIC OMITTED: Map of United States which highlights the states where URS
Pool Properties are located and provides for the following information with
respect to each state:
Kansas
Wichita
Missouri
Marshall
Wisconsin
Tomah
Indiana
Indianapolis
Pennsylvania
Leesport
New York
Syracuse
Maine
Portland
Virginia
Norfolk
California
Turlock 1
North Carolina
North
Central
Tarboro
Oklahoma
Oklahoma City 1
Oklahoma City 2
Arkansas
West Memphis
Fort Smith
Tennessee
Memphis Parkway
Chelsea Memphis
Murfreesboro
Alabama
Montgomery (new)
Gadsden
Albertville
Georgia
Westgate
Lakewood
Gateway
Augusta
Montezuma
South Carolina
Columbia
S-81
<PAGE>
OPERATING HISTORY. The following table shows certain information
regarding the operating history of the URS Pool Properties:
<TABLE>
<CAPTION>
UNDERWRITTEN
1995 (A) 1996 (A) 1997 (B) NET CASH FLOW
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
REVENUES..................... $131,047,000 $135,648,000 $142,038,800 $140,041,224
EXPENSES
Personnel .................. 45,911,000 47,006,000 50,844,400 50,956,280
Utilities .................. 10,686,000 10,635,000 10,613,800 10,699,775
Operating Leases ........... 4,520,000 4,662,000 4,713,400 4,977,357
Repairs and Maintenance ... 2,739,000 2,741,000 3,043,000 5,821,190
Other Direct Expenses ..... 18,621,000 17,361,000 17,535,600 13,111,656
TOTAL EXPENSES .............. 82,477,000 82,405,000 86,750,200 85,566,258
NET OPERATING INCOME......... 48,570,000 53,243,000 55,288,600 54,474,966
Capital Expenditure Reserve -- -- 5,722,540
Master Lease Adjustment
(c)........................ -- -- 8,402,473
-------------- -------------- -------------- ---------------
NET CASH FLOW ............... $ 48,570,000 $ 53,243,000 $ 55,288,600 $ 40,349,953
============== ============== ============== ===============
</TABLE>
- ------------
(a) The 1995 and 1996 figures represent a compilation of revenues and
certain expenses of 25 URS Pool Properties with a December 31 fiscal
year-end and 4 URS Pool Properties with a February 28 fiscal year-end.
(b) The 1997 financial statements include annualizing 10 months of revenues
and certain expenses for 4 of the URS Pool Properties.
(c) It is assumed that the URS Pool Master Lessee will receive
approximately 6% of the URS Pool Properties' Total Revenues pursuant to
the URS Pool Master Lease.
GROUND LEASES. At 3 of the URS Pool Properties, all of the underlying land
is leased to the URS Pool Borrower pursuant to a ground lease.
The interest of the URS Pool Borrower in the Gadsden, Alabama property
consists of a ground leasehold interest created under a lease dated as of
April 16, 1998, between Vero Industries, L.P. as lessor and URS as lessee.
URS assigned its interest in the lease to the URS Pool Borrower in connection
with the closing of the URS Pool Loan. The initial term of the lease
commenced on April 16, 1998, expires on December 30, 2010, and contains two
consecutive 5 year renewal options. The current annual rent under the lease
is equal to the sum of (i) $872,949, (ii) an additional annual rent of
$8,550, and (iii) monthly installments (not to exceed $238,077 in any lease
year ), equal to 50% of the lessee's net revenues less the cost of goods and
services and certain interest, depreciation and taxes payable with respect to
the property.
The interest of the URS Pool Borrower in the Montgomery, Alabama property,
consists of a ground leasehold interest created under a lease dated as of
April 5, 1993, between Unifridge Holding Corporation as lessor and United
Refrigerated Services, Inc., now known as URS, as lessee. URS assigned its
interest in the lease to the URS Pool Borrower in connection with the closing
of the URS Pool Loan. The term of the lease commenced on April 5, 1993 and
expires 20 years thereafter. The current annual rent under the lease is
$550,000 and any additional rent due to the lessor for amounts paid by the
lessor that are attributable to the lessee's failure to make a payment or
perform in accordance with the lease.
The interest of the URS Pool Borrower in the Tarboro, North Carolina
property, consists of a ground leasehold interest created under a lease dated
as of April 5, 1993, between Refrigerated Warehouse Investments Holding
Corporation as lessor and United Refrigerated Services, Inc., now known as
URS, as lessee. URS assigned its interest in the lease to the URS Pool
Borrower in connection with the closing of the URS Pool Loan. The term of the
lease commenced on April 5, 1993 and expires 20 years thereafter. The current
annual rent under the lease is $1,100,000 and any additional rent due to the
lessor for amounts paid by the lessor that are attributable to the lessee's
failure to make a payment or perform in accordance with the lease.
APPRAISALS. Appraisals prepared by Landauer Associates, Inc., dated as of
March 1, 1998, determined an aggregate value for the URS Pool Properties of
approximately $423,450,000, resulting in a Cut-Off Date LTV of approximately
59.7%. The appraisals were prepared in accordance with the Uniform Standards
of Professional Appraisal Practice. See "Risk Factors--The Mortgage
Loans--Limitations on Appraisals" herein.
S-82
<PAGE>
SEISMIC REPORT. A structural and seismic risk assessment of one of the
URS Pool Properties (Turlock 1) was performed in March 1998 by a third party
structural firm. The seismic report indicated a probable maximum loss ("PML")
for Turlock 1 of $1,232,000 to $1,792,000. The PML is commonly defined as the
potential loss with a 90% confidence level given the occurrence of an
earthquake within fifty years. The URS Pool Borrower has obtained earthquake
insurance coverage in the full amount of such PML. See "Risk Factors--The
Mortgage Loans--Availability of Earthquake, Flood and Other Insurance"
herein.
ENGINEERING REPORT. Property Condition Reports on the URS Pool Properties
were completed prior to origination of the URS Pool Loan. The Property
Condition Reports concluded that the URS Pool Properties were generally in
good physical condition (except for the Charlotte Central property and the
Oklahoma 1 property, which were in "fair to poor" condition), but noted
certain items of deferred maintenance for which approximately $400,019 in
reserves was funded by the URS Pool Borrower at the closing of the URS Pool
Loan.
ENVIRONMENTAL ASSESSMENTS. Phase I environmental site assessments dated
January/ February 1998, and Phase II environmental site assessments dated
March 1998 were completed by a third party environmental consulting firm. The
reports recommended that the Birmingham property requires resampling around
the site of a former UST and drum storage area to confirm the presence or
absence of contamination, and the Memphis Property requires further sampling
in the area of a former gas station where some soil petroleum contamination
has been detected but considered to not appear significant. The reports
recommended that the Oklahoma 2 and Portland properties require remedial
action to clean up petroleum hydrocarbons found in soil and/or groundwater,
and that the Oklahoma 1 property be investigated to determine whether there
may have been a UST at the site in the 1920s, and if so, whether it might
have resulted in any significant contamination. The URS Pool Borrower funded
$788,875 at the closing of the URS Pool Loan for additional investigation and
potential remediation requirements. The reports did not reveal any
environmental liabilities, beyond those for which funds have been reserved,
that the Seller believes would have a material adverse impact on the URS Pool
Borrower's business, assets or results of operations taken as a whole.
Nevertheless, there can be no assurance that all environmental conditions and
risks were identified in such reports. See "Risk Factors--The Mortgage
Loans--Environmental Law Considerations" herein.
PROPERTY MANAGEMENT; MASTER LEASE. The URS Pool Loan agreement provides
that the URS Pool Borrower may not, without the mortgagee's prior consent,
surrender or terminate any property management agreement entered into by the
URS Pool Borrower and a property manager (the "URS Pool Property Management
Agreement"), pursuant to which the property manager is to provide property
management and other services with respect to the URS Pool Property, or
permit or suffer any significant delegation or contracting of the property
manager's duties, unless (i) the property manager is in material default and
the termination of such agreement would be commercially reasonable, (ii) the
property manager is being replaced with a URS Pool Acceptable Property
Manager pursuant to a commercially reasonable property management agreement,
or (iii) the URS Pool Property Management Agreement is being replaced by a
URS Pool Master Lease (in which event the URS Pool Borrower may terminate the
URS Pool Property Management Agreement at such time as the URS Pool Master
Lease becomes effective). Unless otherwise waived by the mortgagee or cured
within five days, the URS Pool Property Management Agreement will terminate
five days after the occurrence and continuance of an event of default under
the URS Pool Loan and the mortgagee's notice thereof to the URS Pool Master
Lessee and the URS Pool Borrower. The URS Pool Borrower will have the right
to modify, change, supplement, alter and amend, and to waive and release any
of its rights and remedies under the URS Pool Master Lease; provided, in each
instance, that, among other things such action is not reasonably likely to
cause the URS Pool Borrower's net cash flow to be less than what it would be
if the URS Pool Master Lease were terminated and replaced with a URS Pool
Property Management Agreement under which the URS Pool Borrower was required
to pay a property management fee of 5% of gross receipts, and, provided
further that, except to the extent that the mortgagee may consent to or
approve such action in writing, the same will not be enforceable by, or
claimed as a defense by, the URS Pool Master Lessee against the mortgagee. To
the extent that any URS Pool Property is not subject to the URS Pool Master
Lease,
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such URS Pool Property is required to be managed by a URS Pool Acceptable
Property Manager pursuant to a property management agreement in form and
substance satisfactory to the mortgagee in its reasonable discretion (and
collaterally assigned to the mortgagee), provided that if such property
manager is affiliated with the URS Pool Borrower, Vornado Realty L.P.,
Vornado Realty Trust or Crescent Real Estate Equities Limited, its fee may
not exceed then current market rates.
"URS Pool Acceptable Property Manager" means (i) URS; (ii) Americold;
(iii) any person or entity with or into which URS and/or Americold is merged
or consolidated or to which either of them transfer all or substantially all
of its or their assets or which succeeds to all or substantially all of the
business of URS and/or Americold; (iv) any person or entity 51% or more
owned, directly or indirectly, and controlled by one or more of the persons
or entities identified in clauses (i) through (iii) above; (v) any person or
entity in which one or more persons or entities described in clauses (i)
through (iv) above are sole operating partners or managing members; and (vi)
any other person or entity as to which the URS Pool Borrower has obtained a
written confirmation from the Rating Agencies that there will be no
reduction, qualification or withdrawal of the then current ratings of the
Certificates with respect thereto.
"Cold Storage Qualified Master Lessee" means (i) any URS Pool Acceptable
Property Manager and (ii) any institutional lender that acquires the URS Pool
Master Lessee's interest in the URS Pool Master Lease by foreclosure or any
action in lieu thereof.
The URS Pool Properties are subject to a triple net lease (the "URS Pool
Master Lease") between the URS Pool Borrower, as landlord (the "URS Pool
Master Lessor"), and URS, as tenant (the "URS Pool Master Lessee"). The URS
Pool Master Lease commenced as of April 22, 1998 (the "URS Pool Master Lease
Commencement Date") and expires on April 30, 2013, with two successive 5 year
renewal options at the option of the URS Pool Master Lessee, provided that
the term of the lease with respect to any ground lease property will expire 5
years prior to the expiration of the term (including renewals) of such ground
lease. Under the URS Pool Master Lease, the URS Pool Master Lessee is
required to pay a fixed rental (the "URS Pool Minimum Rent") of (i)
$37,315,000 per annum for the period commencing on the URS Pool Master Lease
Commencement Date through December 31, 2002, (ii) $39,180,750 per annum for
the period commencing on January 1, 2003 through December 31, 2007, and (iii)
the greater of (a) $41,139,787 per annum and (b) the fair market rental of
the leased property, for the period commencing on January 1, 2008 through
April 30, 2013. In addition, the URS Pool Master Lessee is required to pay
percentage rent for each lease year (the "URS Pool Percentage Rent") equal to
the product of (i) 29.75% and (ii) revenues for the lease year in question in
excess of the URS Pool Breakpoint. The "URS Pool Breakpoint" for any lease
year is an amount equal to the URS Pool Minimum Rent for such lease year
divided by 29.75%. The annual URS Pool Minimum Rent during any renewal term
will be the greater of (i) the then current fair market rental of the leased
property and (ii) the URS Pool Minimum Rent for the lease year immediately
preceding the renewal term, plus 5%. For so long as the URS Pool Loan is
outstanding and the URS Pool Master Lessor is the borrower thereunder, the
URS Pool Minimum Rent and the URS Pool Percentage Rent will be paid as
described in "URS Pool: The Loan--Cash Management; Lockbox" below.
The URS Pool Master Lease provides that the URS Pool Properties are to be
used exclusively as cold and dry storage facilities and any uses incidental
thereto. In addition, the URS Pool Master Lessee, at its expense, is required
to maintain the URS Pool Properties, and all improvements, fixtures and
equipment therein (including the personal property subject to the URS Pool
Master Lease); except that the URS Pool Master Lessor will be responsible for
the repair to the leased property (other than repairs caused by the
negligence or willful misconduct of the URS Pool Master Lessee or as a result
of casualty or condemnation), the expenditure of which would be depreciated
on a 39-year basis, provided that the URS Pool Master Lessee will pay such
expenditures to the extent they exceed, on a cumulative basis, $1,000,000 per
annum, increased by 5% as of January 1, 2003 and January 1, 2008. The URS
Pool Master Lease also provides, among other things, that (i) personal
property replaced by the URS Pool Master Lessee will remain the property of
the URS Pool Master Lessee, (ii) the URS Pool Master Lessee will maintain, at
its sole cost and expense, the insurance coverage required under the URS Pool
Loan agreement, (iii) the URS Pool Master Lessee will make alterations to the
URS Pool Properties in accordance with the provisions relating to alterations
set forth in the URS Pool Loan agreement, (iv) the
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URS Pool Master Lessee will restore any property damaged as a result of a
fire or other casualty, or taken by eminent domain or condemnation
proceedings, in accordance with the provisions relating to casualties and
condemnations set forth in the URS Pool Loan agreement, (v) the URS Pool
Master Lessee is required to indemnify the URS Pool Master Lessor for all
environmental liabilities in respect of the URS Pool Properties, including
those existing prior to the URS Pool Master Lease Commencement Date, and (vi)
the URS Pool Master Lessee is required to establish and maintain all reserve
accounts and implement the cash management procedures required pursuant to
the URS Pool Loan agreement, but the amounts to be funded into the URS Pool
Building Improvements Reserve Account and the URS Pool Low Debt Service
Reserve Account are required to be from amounts otherwise payable to the URS
Pool Borrower as rent. The costs of establishing and maintaining such reserve
accounts will be equitably allocated between the URS Pool Master Lessor and
the URS Pool Master Lessee.
The URS Pool Master Lessor has the right to encumber its fee interest in
the URS Pool Properties pursuant to the terms of the URS Pool Master Lease.
The URS Pool Master Lease and the URS Pool Master Lessee's rights thereunder
are subject to and subordinate to the related mortgages, but the mortgagee is
required to grant non-disturbance rights to the URS Pool Master Lessee and
its subtenants. As security for the performance of the URS Pool Master
Lessee's obligations under the URS Pool Master Lease, the URS Pool Master
Lessee has pledged its interest in all leases, subleases, license or
occupancy agreements, warehousing, logistics and services agreements,
handling, and other similar agreements relating to the URS Pool Properties
(collectively, the "URS Pool Operating Agreements") and the revenues
therefrom to the URS Pool Master Lessor, to the extent permitted by law and
by contract, with the understanding and agreement that such pledge may in
turn be collaterally assigned by the URS Pool Master Lessor to the mortgagee.
Such collateral assignment will be expressly subject to the rights of any
secured lender to the URS Pool Master Lessee, provided, such secured lender
performs, after applicable notice and grace periods, the obligations of the
URS Pool Master Lessee under the URS Pool Master Lease. The URS Pool Master
Lessee has agreed to use reasonable efforts to ensure that each future URS
Pool Operating Agreement expressly permits the collateral assignment of such
URS Pool Operating Agreement to the URS Pool Master Lessor and the mortgagee.
The URS Pool Master Lease further provides that if and when the URS Pool
Master Lessor or an affiliate has elected to qualify as a real estate
investment trust ("REIT"), the URS Pool Master Lessee agrees to use
reasonable efforts to ensure that (i) the average of the adjusted tax bases
of all of the URS Pool Master Lessor's personal property leased to the URS
Pool Master Lessee under a lease at the beginning and end of a calendar year
will not exceed 15% of the average of the aggregate adjusted tax bases of all
of the URS Pool Master Lessor's property that is leased to the URS Pool
Master Lessee under such lease at the beginning and end of such calendar
year, (ii) the URS Pool Master Lessee will not sublet the property leased to
it by the URS Pool Master Lessor, or enter into any other arrangement, if
such sublet or other arrangement would cause all or a portion of the amounts
paid by the URS Pool Master Lessee to the URS Pool Master Lessor under the
URS Pool Master Lease to fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, (iii) the URS Pool Master Lessee
will not sublease the property leased to it by the URS Pool Master Lessor, or
enter into any similar arrangement with, any person in which the URS Pool
Master Lessor owns, directly or indirectly, a 10% or more interest, within
the meaning of Section 856(d)(2)(B) of the Code, and (iv) the URS Pool Master
Lessor will not own, directly or indirectly, a 10% or more interest in the
URS Pool Master Lessee, within the meaning of Section 856(d)(2)(B) of the
Code. Furthermore, in connection with the qualification of the URS Pool
Master Lessor or its affiliate as a REIT, to the extent deemed necessary by
the URS Pool Master Lessor (in its sole discretion), upon 30 days notice to
the URS Pool Master Lessee, the URS Pool Master Lessee will purchase from the
URS Pool Master Lessor such portions of the property leased to it by the URS
Pool Master Lessor as may be considered by the URS Pool Master Lessor (in its
sole discretion) as personalty at a purchase price equal to the fair market
value of such personalty to be payable by the URS Pool Master Lessee in equal
monthly installments over 48 months, together with interest thereon of 8% per
annum. The URS Pool Minimum Rent will be decreased by such monthly
installment, exclusive of the interest thereon.
URS POOL: THE LOAN
PAYMENT TERMS. The URS Pool Loan bears interest at a fixed rate per annum
equal to 6.894% (the "URS Pool Initial Interest Rate") through and including
May 10, 2008. From and after May 11, 2008
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(the "URS Pool Anticipated Repayment Date") the URS Pool Loan accrues
interest at a fixed rate per annum equal to 8.894% (the "URS Pool Revised
Interest Rate"). The URS Pool Loan matures on May 11, 2023 (the "URS Pool
Maturity Date"). As described below, if the URS Pool Borrower does not prepay
the URS Pool Loan on the URS Pool Anticipated Repayment Date, the URS Pool
Borrower will be required to pay interest at the URS Pool Initial Interest
Rate (together with principal, as described below), and interest accrued,
equal to the excess of the URS Pool Revised Interest Rate over the URS Pool
Initial Interest Rate, will be deferred and added to the outstanding
indebtedness under the URS Pool Loan and will, to the extent permitted by
applicable law, earn interest at the URS Pool Revised Interest Rate (such
accrued and deferred interest and interest thereon (which will be deferred),
the "URS Pool Excess Interest"). Interest on the URS Pool Loan is calculated
based on the actual number of days elapsed and a 360-day year.
The URS Pool Loan requires monthly payments (the "URS Pool Monthly Debt
Service Payment Amount") of principal and interest of approximately
$1,786,497 (based on a 25-year amortization schedule and the URS Pool Initial
Interest Rate). Payment of the balance of the principal, if any, together
with all accrued and unpaid interest is required on the URS Pool Maturity
Date. Each URS Pool Monthly Debt Service Payment Amount is due and payable on
the 11th day of each calendar month or, if such day is not a business day,
then the immediately preceding business day (a "URS Pool Due Date").
Commencing on the URS Pool Anticipated Repayment Date and on each URS Pool
Due Date thereafter, the URS Pool Borrower is required to apply 100% of the
URS Pool Excess Cash Flow for the month preceding the month in which the URS
Pool Due Date occurs in the following order of priority: (a) to the
outstanding principal balance until the URS Pool Loan has been paid in full,
(b) to the payment of interest, if any, accrued and unpaid on the URS Pool
Loan at the excess of the default rate over the URS Pool Revised Interest
Rate, and (c) to the URS Pool Excess Interest. "URS Pool Excess Cash Flow"
means the amounts held as collected funds in the URS Pool Deposit Account
after the application of funds: (a) to the amounts required to be paid into
the URS Pool Tax and Insurance Reserve Account described in "--Reserves"
below, (b) to the URS Pool Operating Account (for payment of budgeted
operating expenses) described in "--Reserves" below, (c) to the URS Pool
Monthly Debt Service Payment Amount, (d) to the amounts required to be paid
into the URS Pool Ongoing Maintenance Reserve Account described in
"--Reserves" below, and (e) to the amounts required to be paid into the URS
Pool Building Improvements Reserve Account described in "--Reserves" below.
The scheduled principal balance of the URS Pool Loan as of the URS Pool
Anticipated Repayment Date will be approximately $199,116,531.
After the occurrence and during the continuance of an event of default
under the URS Pool Loan, to the extent permitted by applicable law, the
entire outstanding principal balance of the URS Pool Loan along with due and
unpaid interest thereon will bear interest at a per annum default rate equal
to the lesser of (i) the maximum rate permitted by applicable law, and (ii)
2% in excess of the URS Pool Initial Interest Rate or the URS Pool Revised
Interest Rate, as applicable, but in no event less than 1% above the "prime
rate" as published from time to time in The Wall Street Journal (the "URS
Pool Default Interest").
PREPAYMENT. Voluntary prepayment is prohibited under the URS Pool Loan
prior to April 11, 2008 (subject to defeasance rights afforded the URS Pool
Borrower), except in connection with certain casualty or condemnation events,
permitted partial prepayments to cure an event of default or upon the
occurrence of a URS Pool Low Debt Reserve Application Event, as described
below. From and after April 11, 2008, the URS Pool Loan may be voluntarily
prepaid in whole or in part on any URS Pool Due Date without payment of a
yield maintenance charge or prepayment premium.
If all or any part of the principal amount of the URS Pool Loan is prepaid
upon an acceleration of the URS Pool Loan following the occurrence of an
event of default under the URS Pool Loan at any time prior to April 11, 2008,
the URS Pool Borrower will be required to make a yield maintenance payment in
an amount equal to the excess, if any, of (i) the sum of (A) the aggregate
respective present values of all scheduled interest payments in respect of
the URS Pool Loan (or the portion of all such interest payments corresponding
to the portion of the principal of the URS Pool Loan to be prepaid upon
acceleration) for the period from the date of such prepayment through and
including the URS Pool
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Anticipated Repayment Date, discounted monthly at a rate equal to a
specified treasury constant yield and based on a 360-day year of twelve
30-day months and (B) the aggregate respective present values of all
scheduled principal payments in respect of the URS Pool Loan (or the then
unpaid portion thereof to be prepaid upon acceleration), assuming for these
purposes that the entire outstanding scheduled principal amount of the URS
Pool Loan as of the URS Pool Anticipated Repayment Date were to be paid in
full on such URS Pool Due Date, discounted monthly at a rate equal to the
specified treasury constant yield and based on a 360-day year of twelve
30-day months over (ii) the then current outstanding principal amount of the
URS Pool Loan (or the then unpaid portion thereof to be prepaid upon
acceleration).
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of a URS Pool Property under the
URS Pool Loan, the mortgagee will be entitled, at its sole option, to apply
such proceeds to prepay the URS Pool Loan, as described in "--Casualty and
Condemnation" below. No yield maintenance payment or prepayment premium or
penalty will be payable upon any mandatory prepayment of the URS Pool Loan in
connection with a casualty or condemnation unless an event of default under
the URS Pool Loan has occurred and is continuing, in which case the URS Pool
Borrower will be required to pay a yield maintenance payment calculated in
the manner described above. No yield maintenance payments will be required in
connection with a prepayment of the URS Pool Loan upon the occurrence of a
URS Pool Low Debt Service Reserve Application Event as described in "--Cash
Management; Lockbox" below.
Prior to the second anniversary of the Closing Date, after the occurrence
and during the continuance of an event of default as a result of a default
with respect to a particular URS Pool Property, if the elimination of such
URS Pool Property from the URS Pool Properties would fully cure such event of
default, the URS Pool Borrower will be permitted to prepay the URS Pool Loan
in a principal amount equal to the URS Pool Release Amount for such URS Pool
Property, together with all accrued and unpaid interest on the principal
amount being so repaid, and the yield maintenance payment owing as a result
of such prepayment; provided that (i) such prepayment is made prior to the
earlier of (a) any acceleration of the URS Pool Loan by the mortgagee and (b)
the 30th day after such event of default; (ii) no other event of default
exists as of such prepayment; and (iii) the URS Pool Borrower pays all other
amounts then due and owing to the mortgagee as of such prepayment, including
any costs and expenses of the mortgagee payable under the URS Pool Loan
documents in connection with such event of default.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL--DEFEASANCE. The URS Pool
Borrower is permitted on any date on or after the second anniversary of the
Closing Date to defease all or a portion of the URS Pool Loan with U.S.
Treasury obligations, provided that, among other conditions, the URS Pool
Borrower gives the mortgagee at least 30 days' prior written notice of the
date of such defeasance (the "URS Pool Defeasance Date"), no event of default
will exist on the URS Pool Defeasance Date, and provided further that the URS
Pool Borrower pays on the URS Pool Defeasance Date (i) all accrued and unpaid
interest on the URS Pool Loan to but not including the URS Pool Defeasance
Date, except (prior to an acceleration of the URS Pool Loan) for an event of
default related solely to a default at a specific URS Pool Property that will
be released from the lien thereon by prepayment of the URS Pool Release
Amount with respect to such URS Pool Property as described above, (ii) all
other sums (not including scheduled interest or principal payments) then due
under the URS Pool Loan and the related loan documents, (iii) the URS Pool
Defeasance Deposit and (iv) all reasonable costs and expenses of the
mortgagee incurred in connection with the defeasance. In addition, the URS
Pool Borrower will be required to deliver to the mortgagee, among other
things: (a) a security/control agreement granting the mortgagee a first
priority lien on the URS Pool Defeasance Deposit and the U.S. Treasury
obligations purchased with the URS Pool Defeasance Deposit, (b) an opinion of
counsel to the URS Pool Borrower in form satisfactory to the mortgagee, in
its reasonable discretion, stating, among other things, that the mortgagee
has a perfected security interest in the U.S. Treasury obligations purchased
with the URS Pool Defeasance Deposit, (c) a confirmation, in form and
substance reasonably satisfactory to the mortgagee, from a "Big Six"
independent certified accounting firm, that the URS Pool Defeasance Deposit
is sufficient to pay all scheduled payments due from the URS Pool Borrower
under the URS Pool
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Loan in connection with the proposed defeasance, (d) an officer's
certificate certifying that all the requirements for defeasance set forth in
the URS Pool Loan Agreement have been met, (e) if required by the Rating
Agencies, a non-consolidation opinion with respect to the successor borrower,
if any, in form and substance satisfactory to the mortgagee and the Rating
Agencies, and (f) a written confirmation from the Rating Agencies that such
defeasance will not result, in and of itself, in a downgrade, qualification
or withdrawal of the then current ratings of the Certificates, if required by
such Rating Agencies as a condition to defeasance that such conditions have
been met. In addition, if only a portion of the URS Pool Loan is being
defeased, the URS Pool Borrower will be required to execute and deliver all
necessary documents to amend and restate the URS Pool Loan note by issuing
two substitute notes, one having a principal balance equal to the defeased
portion of the original note and the other note having a principal balance
equal to the undefeased portion of the original note.
"URS Pool Defeasance Deposit" means a cash amount equal to the sum of (i)
the remaining principal amount of the URS Pool Loan (in the case of a total
defeasance) or the principal amount of the defeased note (in the case of a
partial defeasance), as applicable, with interest thereon, (ii) without
duplication, any costs and expenses incurred or to be incurred in the
purchase of U.S. Treasury obligations providing payments on or prior to, but
as close as possible to, all successive URS Pool Due Dates after the URS Pool
Defeasance Date, in the case of a defeasance for the entire outstanding
principal balance of the note, or the defeased note, in the case of a
defeasance for only a portion of the outstanding principal balance of the URS
Pool Loan, as applicable, and in amounts equal to the scheduled interest and
principal payments due under the URS Pool Loan or the defeased note, as
applicable, assuming for these purposes that the principal portion of such
payments include the entire scheduled outstanding principal of the URS Pool
Loan as of the URS Pool Anticipated Repayment Date, and (iii) any revenue,
documentary stamp or intangible taxes or any other tax or charge due in
connection with the transfer of the note, the creation of the defeased note
and the undefeased note, if applicable, any transfer of the defeased note or
otherwise required to accomplish the defeasance.
Upon receipt of the URS Pool Defeasance Deposit, the mortgagee, using the
URS Pool Defeasance Deposit, is required to purchase noncallable U.S.
Treasury obligations on behalf of the URS Pool Borrower and such U.S.
Treasury obligations will serve as the sole collateral for the payments of
the amounts due under the URS Pool Loan, or the defeased portion of the URS
Pool Loan in the case of a partial defeasance. Upon a deposit of such U.S.
Treasury obligations, the URS Pool Borrower will have the right to assign the
obligation to make payments under the URS Pool Loan with respect to the
principal amount of the URS Pool Loan that has been defeased to a special
purpose entity established or designated by the mortgagee.
In connection with the total defeasance of the URS Pool Loan, the URS Pool
Borrower will be permitted to obtain the release of the mortgage encumbering
all of the URS Pool Properties and related collateral. In connection with a
partial defeasance, the URS Pool Borrower will be permitted to obtain the
release of the applicable mortgage encumbering one or more of the URS Pool
Properties and related collateral upon the satisfaction of the following
conditions, among others: (a) the principal balance of the defeased note will
equal or exceed the URS Pool Release Amount for such URS Pool Property being
released (or in connection with a repayment by reason of a casualty or
condemnation or in connection with curing a property level event of default,
in an amount equal to the net proceeds to which the URS Pool Borrower is
entitled (such amount not to exceed the applicable URS Pool Release Amount or
to be less than the applicable URS Pool Allocated Loan Amount) and all
accrued and unpaid interest in respect of the defeased note) and the
requirements for defeasance described above must have been satisfied, (b) the
URS Pool Borrower will provide the mortgagee with all release documents
accompanied by an officer's certificate certifying that such documentation
(i) is in compliance with all legal requirements in all material respects,
(ii) will effect such release in accordance with the terms of the URS Pool
Loan agreement, and (iii) will not affect the liens, security interests and
other rights of the mortgagee under the remaining URS Pool Properties not
being released, (c) after giving effect to such release, the URS Pool Debt
Service Coverage Ratio for (i) the URS Pool Properties that have not been
released (unless a written confirmation from the Rating Agencies is obtained
that there will be no reduction, qualification or withdrawal of the then
current ratings of the Certificates with respect thereto) is not permitted to
be less
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than the URS Pool Debt Service Coverage Ratio as of the closing date of the
URS Pool Loan and (ii) the URS Pool Properties that have not been released
(other than the URS Pool Properties in (A) Tarboro, North Carolina, (B)
Montgomery, Alabama and (C) Gadsden, Alabama (in each case, unless the URS
Pool Borrower acquires fee title to such URS Pool Property or the term of the
applicable ground lease (inclusive of any additional extension and/or renewal
options) is extended to a date that is beyond the tenth anniversary of the
URS Pool Maturity Date) is not permitted to be less than 1.60x, unless
written confirmation from the Rating Agencies is obtained that such release
will not result, in and of itself, in a reduction, qualification or
withdrawal of the then current ratings of the Certificates with respect
thereto; provided, however, that this clause (c) will not be applicable in
connection with a partial prepayment in connection with a property level
event of default as described above or a partial prepayment required in
connection with a casualty or condemnation as described in "--Casualty and
Condemnation" below.
"URS Pool Allocated Loan Amount" means, with respect to each URS Pool
Property, the portion of the principal amount of the URS Pool Loan allocated
to each such URS Pool Property as specified in the URS Pool Loan agreement
and determined as described under the definition of "Allocated Loan Amount"
set forth above under the "Mortgage Pool Characteristics--Certain
Characteristics of the Mortgage Loans".
"URS Pool Release Amount" means, with respect to a specified URS Pool
Property, an amount equal to 125% of the URS Pool Allocated Loan Amount with
respect to such URS Pool Property (or, with respect to the URS Pool Property
located at 6150 Xavier Drive SW, Atlanta, Georgia and commonly known as the
URS Pool Borrower's "Gateway" facility, 150% of the URS Pool Allocated Loan
Amount with respect to such URS Pool Property), provided that in no event
will the URS Pool Release Amount be greater than the then outstanding
principal balance of the URS Pool Loan.
The URS Pool Borrower may also, without the consent of the mortgagee,
transfer, or grant interests in respect of, all or any part of URS Pool
Unimproved Portions of any one or more URS Pool Properties (by sale, ground
lease, subordination of fee interest to a leasehold mortgage, sublease or
other conveyance of any interest) to any person, including affiliates of the
URS Pool Borrower, and tenants and the URS Pool Master Lessee and their
respective affiliates as well as grant in connection therewith in respect of
the retained portion of the applicable URS Pool Property reasonable
easements, restrictions, covenants, reservations and rights of way for, among
other things, traffic circulation, ingress, egress, parking, access, water
and sewer lines, telephone and telegraph lines, electric lines or other
utilities or for other similar purposes, provided, in each such case, (x)
such URS Pool Unimproved Portion is required to be either for the purpose of
erecting, maintaining and operating cold or dry storage structures or for
other structures and improvements not inconsistent with the use of the
related URS Pool Property, and (y) neither such release nor the granting of
such rights with respect to the retained portion of the URS Pool Property
will materially adversely affect the value of the retained portion (as
distinguished from the entire URS Pool Properties), or the net operating
income of the retained portion of such URS Pool Property (taking into
account, to the extent applicable, any potential loss of revenue resulting if
the transfer and development of the URS Pool Unimproved Portion were not to
occur), as supported by an officer's certificate delivered to the mortgagee
by the URS Pool Borrower. "URS Pool Unimproved Portion" means, with respect
to any URS Pool Property, one or more land areas comprising such URS Pool
Property on which no improvements for which the URS Pool Borrower has
received or accrued income in connection with the operation of such URS Pool
Properties, or materially required for the receipt or accrual of income in
connection with the operation of the URS Pool Properties, are situate.
Notwithstanding the foregoing, the URS Pool Borrower may assign to any
person, including an affiliate, any purchase options it may have under any
ground lease to acquire fee title to a URS Pool Property, such assignment to
be free and clear of any lien in favor of the mortgagee.
SUBSTITUTION OF INDIVIDUAL PROPERTIES. The URS Pool Borrower is permitted
to substitute for any URS Pool Property owned by it, a property (a "URS Pool
Substitute Property") of like kind and quality, subject to the terms and
conditions set forth in the URS Pool Loan agreement, and provided that, among
other things, (i) no event of default will have occurred and be continuing,
(ii) a written confirmation has been obtained from the Rating Agencies that
such substitution will not result, in and of itself, in a
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reduction, qualification or withdrawal of the then current ratings of the
Certificates with respect thereto (iii) the URS Pool Debt Service Coverage
Ratio for all the URS Pool Properties as of such date, assuming the proposed
substitution of the URS Pool Substitute Property, is not permitted to be less
than the URS Pool Debt Service Coverage Ratio for all of the URS Pool
Properties as of such date, assuming no proposed substitution, (iv) the
mortgagee will have received an opinion of counsel reasonably acceptable to
mortgagee, to the effect that (A) a "significant modification" of the URS
Pool Loan within the meaning of Treasury Regulations Section 1.860G-2 will
not occur by reason of the proposed substitution and (B) the proposed
substitution will not adversely affect the status of the entity holding the
URS Pool note as a REMIC (assuming for such purposes that such entity
otherwise qualifies as a REMIC), and (v) in no event will the URS Pool
Borrower be permitted to substitute more than six URS Pool Properties over
the term of the URS Pool Loan.
OTHER FINANCING. The URS Pool Borrower is not permitted to incur or assume
any additional indebtedness, or issue any class of preferred equity
securities, other than: (a) unsecured trade payables incurred in the ordinary
course of the URS Pool Borrower's business and customarily paid within 60
days of incurrence and in fact not more than 60 days outstanding, (b) capital
and operating lease obligations in respect of equipment used at the URS Pool
Properties, with an annual rent obligation not greater than $7,500,000 (as
increased by a specified consumer price index), and (c) such other unsecured
indebtedness approved by the mortgagee in its sole discretion.
ALTERATIONS. Except upon compliance with certain conditions set forth in
the URS Pool Loan documents (which do not include the approval of the
mortgagee), the URS Pool Borrower is prohibited from making or permitting any
demolitions, alterations, installations, improvements, expansions, reductions
or decorations of or to any URS Pool Property or any part thereof.
RESERVES. Pursuant to the terms of the URS Pool Loan, the URS Pool
Borrower has established: (i) an ongoing maintenance reserve account, for the
payment of routine capital repairs, replacements and improvements, and repair
and replacement of personalty (excluding capital improvements referred to in
clause (ii) below) made by the URS Pool Borrower or the URS Pool Master
Lessee with respect to any URS Pool Property (the "URS Pool Ongoing
Maintenance Reserve Account"), to be funded in an amount equal to $4,722,543
per year (as such amount may be reduced in connection with the release of a
URS Pool Property) payable in equal monthly installments or, with a written
confirmation from the Rating Agencies that such substitution will not result,
in and of itself, in a reduction, qualification or withdrawal of the then
current ratings of the Certificates with respect thereto, such lesser amount
as the URS Pool Borrower or the URS Pool Master Lessee may request to be so
funded; (ii) a building improvements reserve account, for the payment of
capital expenditures relating to any URS Pool Property that are required to
be depreciated over a period of 39 years (or any successor depreciation
period for buildings) (the "URS Pool Building Improvements Reserve Account"),
is to be funded in an amount equal to $1,000,000 per year (as such amount may
be reduced in connection with the release of a URS Pool Property) payable in
equal monthly installments or, with a written confirmation from the Rating
Agencies that such substitution will not result, in and of itself, in a
reduction, qualification or withdrawal of the then current ratings of the
Certificates with respect thereto, such lesser amount as the URS Pool
Borrower or the URS Pool Master Lessee may request to be so funded; (iii) a
deferred maintenance reserve account, for the payment of the cost of
remediating, or securing the remediation of, and establishing reserves with
respect to, certain deferred maintenance conditions set forth in the URS Pool
Loan documents (the "URS Pool Deferred Maintenance Reserve Account"), funded
at the initial closing of the URS Pool Loan in the amount of $1,188,894 and
disbursed by the mortgagee as described below; (iv) a low debt service
reserve account (the "URS Pool Low Debt Service Reserve Account"), funded
from and after the occurrence of a URS Pool Low Debt Service Reserve Trigger
Event until a URS Pool Low Debt Service Return Event in an amount equal to
all remaining funds in the URS Pool Deposit Account after the application of
funds under clauses (i) through (v) described in the first part of the second
paragraph in "--Cash Management; Lockbox" below; and (v) a tax and insurance
reserve account (the "URS Pool Insurance and Tax Reserve Account") to be
funded in monthly installments of one-twelfth of the taxes and insurance
premiums that will be payable during the next ensuing 12 months, provided
that such monthly deposit of taxes with respect to any URS Pool Property that
is ground leased
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by the URS Pool Borrower is required to be waived if the URS Pool Borrower
provides the mortgagee with (a) satisfactory evidence that a mortgage of the
ground lessor's fee interest in such URS Pool Property to an institutional
lender provides for the monthly escrow of taxes with respect thereto, and (b)
annual proof of payment of such taxes, and provided further that, if no event
of default has occurred and is continuing, and the URS Pool Borrower has
provided evidence that a tenant or subtenant has made the required payments
of taxes, then the escrow requirement with respect to such tenant's or
subtenant's share of taxes for a particular tax parcel will be conditionally
waived.
"URS Pool Low Debt Service Application Event" means that, as of the first
day of any calendar quarter, the URS Pool Debt Service Coverage Ratio for the
trailing 12-month period will be less than 1.15x. "URS Pool Low Debt Service
Return Event" means that, as of the first day of any calendar quarter
following a URS Pool Low Debt Service Trigger Event (a) the URS Pool Debt
Service Coverage Ratio for the trailing 12-month period on the first day of
each of two consecutive calendar quarters will be greater than 1.25x, and (b)
no event of default will have occurred and be continuing. "URS Pool Low Debt
Service Trigger Event" means that, as of the first day of any calendar
quarter, the URS Pool Debt Service Coverage Ratio for the trailing 12-month
period, will be less than 1.25x.
"URS Pool Debt Service Coverage Ratio" means, as to any date, the quotient
obtained by dividing (i) the URS Pool Borrower's URS Pool Net Cash Flow for
the 12-month period immediately preceding such date by (ii) the aggregate
interest and principal payments actually due and payable on the URS Pool Loan
(other than any defeased portion thereof) during such period. "URS Pool Net
Cash Flow" means, (a) for any period in which the URS Pool Master Lease is in
effect, net operating income from the URS Pool Properties less the amount
that the URS Pool Borrower is required to deposit in the URS Pool Building
Improvements Reserve Account during the applicable period and (b) for any
period in which the URS Pool Master Lease is not in effect, net operating
income less the amount that the URS Pool Borrower is required to deposit in
the URS Pool Ongoing Maintenance Reserve Account and the URS Pool Building
Improvement Reserve Account during the applicable period.
CASH MANAGEMENT; LOCKBOX. The URS Pool Borrower has established and is
required to maintain a deposit account (the "URS Pool Deposit Account") in
the name of and under the sole dominion and control of the mortgagee, and all
income received or accrued in connection with the operation of the URS Pool
Properties (the "URS Pool Receipts") by the URS Pool Borrower and the URS
Pool Master Lessee are required to be transferred to the URS Pool Deposit
Account as described below.
Within one business day after the URS Pool Master Lessee's receipt of URS
Pool Receipts, the URS Pool Master Lessee is required to deposit such URS
Pool Receipts in one or more a segregated "sweep" bank accounts (each, a "URS
Pool Local Account") in the name of the URS Pool Master Lessee at a financial
institution located near one or more of the URS Pool Properties or, if the
URS Pool Master Lessee does not elect to use URS Pool Local Accounts, in the
URS Pool Deposit Account. The URS Pool Master Lessee is permitted to maintain
URS Pool Local Accounts for the purpose of depositing URS Pool Receipts from
one or more URS Pool Properties in the ordinary course of the URS Pool Master
Lessee's business. The URS Pool Master Lessee is not permitted to commingle
funds on deposit in a URS Pool Local Account with funds related to any other
properties (other than one or more URS Pool Properties) owned or managed by
the URS Pool Master Lessee or by any other person. All funds deposited in URS
Pool Local Accounts are to be swept to the URS Pool Deposit Account on a
daily basis. If the URS Pool Borrower (or, at any time a master lease in not
in effect with respect to the URS Pool Properties, the person or entity
retained by the URS Pool Borrower to manage the URS Pool Properties) receives
any URS Pool Receipts, the URS Pool Borrower is required to deposit upon
receipt, and will direct such manager to deposit upon receipt, such URS Pool
Receipts in the URS Pool Deposit Account, on the day the payment is received.
Prior to the URS Pool Anticipated Repayment Date, during each period
commencing on the day immediately following a URS Pool Due Date and ending on
the following URS Pool Due Date (each such period, a "URS Pool Collection
Period"), provided that no event of default has occurred and is continuing,
the mortgagee is required to transfer funds from the URS Pool Deposit Account
in the following order of priority: (i) to fund the URS Pool Tax and
Insurance Reserve Account, (ii) to pay the URS Pool Monthly
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Debt Service Payment Amount, (iii) to fund the URS Pool Ongoing Maintenance
Reserve Account, (iv) to fund the URS Pool Building Improvements Reserve
Account, (v) from and after the occurrence of a URS Pool Low Debt Service
Reserve Trigger Event until the occurrence of a corresponding URS Pool Low
Debt Service Reserve Return Event, (a) if a URS Pool Master Lease is in
effect, (A) to fund an operating account (the "URS Pool Operating Account")
in an amount equal to the budgeted operating expenses with respect to the
calendar month ending within the URS Pool Collection Period in question, as
set forth in the annual budget approved by the URS Pool Borrower as lessor
under the URS Pool Master Lease and, if required under the URS Pool Loan
agreement, by the mortgagee (subject to adjustment for deviations between the
actual amount of actual operating expenses with respect to the URS Pool
Properties for the preceding month and the amount disbursed from the URS Pool
Deposit Account for budgeted operating expenses during such month), (B) to
the mortgagee to pay any URS Pool Default Interest due and owing, up to an
amount equal to the sum of the installments of URS Pool Minimum Rent, URS
Pool Percentage Rent and the purchase price payable, if any, for personalty
in connection with the qualification of the URS Pool Master Lessor or an
affiliate as a REIT (collectively, the "URS Pool Master Lease Installment"),
less the sum of the URS Pool Monthly Debt Service Payment Amount and the
amounts disbursed pursuant to clause (iv) above, (C) to the URS Pool Low Debt
Service Reserve Account, in an amount up to the URS Pool Master Lease
Installment, less the sum of the URS Pool Monthly Debt Service Payment Amount
previously disbursed as described in clause (ii) above, the amount disbursed
to the URS Pool Building Improvements Reserve Account as described in clause
(iv) above and the amount disbursed in respect of URS Pool Default Interest
as described in clause (v) above, and (D) the balance to the URS Pool Master
Lessee, or (b) if a URS Pool Master Lease is not in effect, (1) to fund the
URS Pool Operating Account in an amount equal to the budgeted operating
expenses for the calendar month ending within the URS Pool Collection Period
in question, and (2) to the mortgagee for the payment of any URS Pool Default
Interest due and owing and (3) the balance to the URS Pool Low Debt Service
Reserve Account, (vi) if no URS Pool Low Debt Service Trigger Event has
occurred, or if a URS Pool Low Debt Service Reserve Trigger Event and a
corresponding URS Pool Low Debt Service Reserve Return Event have occurred,
(a) if a URS Pool Master Lease is in effect, (A) to the URS Pool Operating
Account in an amount equal to the budgeted operating expenses, (B) to the
mortgagee to pay URS Pool Default Interest then due and owing, up to an
amount no greater than the excess of the URS Pool Master Lease Installment
over the sum of the URS Pool Monthly Debt Service Payment Amount disbursed
pursuant to clause (ii) and (iv) above, (C) to the URS Pool Borrower, in an
amount equal to the excess of the URS Pool Master Lease Installment over the
sum of the URS Pool Monthly Debt Service Payment Amount, the amounts required
to be disbursed on account of the URS Pool Building Improvements Reserve
Account and URS Pool Default Interest (such excess, the "URS Pool Master
Lease Installment Balance"), and (D) the balance to the URS Pool Master
Lessee, or (b) if a URS Pool Master Lease is not in effect, (A) to the URS
Pool Operating Account in an amount equal to the budgeted operating expenses,
(B) to the mortgagee for payment of any URS Pool Default Interest due and
owing, and (C) the balance to the URS Pool Borrower. The failure of the URS
Pool Borrower to have funds available in the URS Pool Deposit Account
sufficient to make all payments required under clauses (i) through (iv) above
prior to the URS Pool Anticipated Repayment Date will constitute an event of
default under the URS Pool Loan.
From and after the URS Pool Anticipated Repayment Date, during each URS
Pool Collection Period, provided that no event of default has occurred and is
continuing, the mortgagee is required to transfer funds from the URS Pool
Deposit Account in the following order of priority: (i) to fund the URS Pool
Tax and Insurance Reserve Account, (ii) to the URS Pool Operating Account, up
to an amount equal to the budgeted operating expenses, (iii) to pay the URS
Pool Monthly Debt Service Payment Amount, (iv) to fund the URS Pool Ongoing
Maintenance Reserve Account, (v) to fund the URS Pool Building Improvements
Reserve Account, (vi) to the mortgagee, up to an amount equal to the URS Pool
Master Lease Installment Balance, to be applied (a) first, to repayment of
the principal amount of the URS Pool Loan, until the principal thereof has
been paid in full, (b) second, to the mortgagee for payment of any URS Pool
Default Interest due and owing, and (c) third, to the payment of URS Pool
Excess Interest, and (vii) to the URS Pool Master Lessee (or, if a URS Pool
Master Lease or replacement thereof is not then in effect with respect to the
URS Pool Properties, to the mortgagee, to be applied in the manner
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described in clause (vi) above, and thereafter, to the URS Pool Borrower).
The failure of the URS Pool Borrower to have funds available in the URS Pool
Deposit Account sufficient to make all payments required under clauses (i)
through (v) above from and after the URS Pool Anticipated Repayment Date will
constitute an event of default under the URS Pool Loan.
To the extent that funds are available in the URS Pool Deposit Account,
the mortgagee is required to make all of the foregoing transfers not less
frequently than once every two business days and, in any event, on each and
every URS Pool Due Date.
Upon the completion (to the mortgagee's reasonable satisfaction) of the
remediation of all of the deferred physical maintenance conditions or all of
the environmental conditions, as applicable, with respect to a particular URS
Pool Property for which funds have been deposited in the URS Pool Deferred
Maintenance Account, the mortgagee is required to disburse to the URS Pool
Borrower from the URS Pool Deferred Maintenance Reserve Account an amount
equal to (i) 125% of the deferred maintenance amount (with respect to
deferred physical maintenance) or environmental reserve amount (with respect
to environmental conditions), as applicable, with respect to such URS Pool
Property, less (ii) the amount previously disbursed from the URS Pool
Deferred Maintenance Reserve Account in respect of the applicable deferred
physical maintenance conditions or environmental conditions, as applicable,
with respect to such URS Pool Property.
Upon the occurrence of a URS Pool Low Debt Service Application Event, all
amounts in the URS Pool Low Debt Service Reserve Account will be applied by
the mortgagee to reduce the principal balance of the URS Pool Loan; provided,
however, upon the occurrence of a URS Pool Low Debt Service Return Event and
prior to the URS Pool Anticipated Repayment Date, all amounts then remaining
in the URS Pool Low Debt Service Reserve Account are required to be disbursed
to the URS Pool Borrower. No yield maintenance payments will be required in
connection with the application of the URS Pool Low Debt Service Reserve
Account to the reduction of the principal balance of the URS Pool Loan.
The mortgagee's rights in and to the URS Pool Deposit Account and certain
of the related reserve accounts are subject to the rights of the URS Pool
Master Lessee. Accordingly, upon the acceleration of the maturity of the URS
Pool Loan, if a URS Pool Master Lease is in effect with respect to the URS
Pool Properties, subject to the rights of the URS Pool Master Lessee under
the URS Pool Master Lease, the mortgagee will be entitled to apply the funds
held in the URS Pool Tax and Insurance Reserve Account, the URS Pool Ongoing
Maintenance Reserve Account and any other reserve account funded by the URS
Pool Master Lessee with funds other than URS Pool Minimum Rent and URS Pool
Percentage Rent solely for the purposes for which each such reserve account
was established.
TRANSFER OF URS POOL PROPERTIES AND INTEREST IN THE URS POOL BORROWER;
ENCUMBRANCES. Unless permitted by the URS Pool Loan documents as described
below, and with the exception of leases entered into in accordance therewith,
URS Pool Permitted Encumbrances and the sale of certain personal property to
the extent necessary in connection with the URS Pool Borrower's qualification
as a REIT, the URS Pool Borrower is not permitted, without the mortgagee's
consent and a written confirmation from the Rating Agencies that such action
will not result, in and of itself, in a reduction, withdrawal or
qualification of the then current ratings of the Certificates with respect
thereto, to (a) sell, assign, convey, transfer or otherwise dispose of or
encumber legal, beneficial or equitable interests in all the URS Pool
Properties or any part thereof, (b) permit or suffer any owner, directly or
indirectly, of a beneficial interest in all the URS Pool Properties (or any
of them) to transfer such interest, whether by transfer of stock or other
beneficial interest in any entity or otherwise, (c) mortgage, hypothecate or
otherwise encumber or grant a security interest in all the URS Pool
Properties or any part thereof or (d) file a declaration of condominium with
respect to any URS Pool Property.
Except as described below, the URS Pool Borrower may only sell, assign,
convey, transfer or otherwise dispose of legal or equitable title to or any
interest in the URS Pool Properties (or any of them) if: (A) after giving
effect to the proposed transaction: (i) either (x) the transfer is of all but
not less than all of the URS Pool Properties to one person and the mortgagee
has (a) received a written confirmation from the Rating Agencies that such
action will not result, in and of itself, in a reduction, qualification or
withdrawal of the then current ratings of the Certificates with respect
thereto; (b) reviewed and approved
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the transferee's organizational documents; (c) reviewed and approved legal
opinions (including non-consolidation opinions) with respect to such
transferee; and (d) reviewed and approved all loan documents required by the
mortgagee to effectuate such transfer (including, without limitation, the
assumption of the URS Pool Loan by such transferee); or (y) the transferee
will be at least 51% owned and controlled (directly or indirectly) by a URS
Pool Pre-Approved Party and the URS Pool Properties will be subject to a URS
Pool Master Lease with a URS Pool Qualified Master Lessee or a URS Pool
Acceptable Property Manager pursuant to a URS Pool Property Management
Agreement; (ii) the URS Pool Properties will be owned by one or more single
purpose entities, each of which will be in compliance with certain single
purpose bankruptcy-remote representations, warranties and covenants set forth
in the URS Pool Loan agreement and which have assumed and agreed to comply
with the terms of the URS Pool Loan documents; (iii) if the proposed
transaction permits the mortgagee of any ground lessor's fee interest to
accelerate its loan to such ground lessor, then either (x) the URS Pool
Borrower will provide the mortgagee with a written agreement or
acknowledgment from the fee mortgagee that it will not accelerate its loan to
the ground lessor or (y) the proposed transaction will provide for the
payment in full of such fee mortgage loan; and (iv) no event of default will
occur and be continuing; and (B) prior to any such transaction, the proposed
transferee delivers to mortgagee an officer's certificate giving certain
assurances to the general effect that the transferee is not an employee
benefit plan, or, in any event, the transfer will not give rise to
"prohibited transactions" under ERISA, or similar laws.
A "URS Pool Pre-Approved Party" means any one or more of (a) Vornado
Realty Trust, (b) Vornado Realty, L.P., (c) Vornado Operating, Inc., (d) any
one or more of the current common shareholders of Atlanta Parent, Inc.,
provided that such shareholder is an officer, director and/or trustee of
Vornado Realty Trust, Vornado Realty, L.P. and/or Vornado Operating, Inc.,
(e) Atlanta Parent, Inc., (f) Crescent Real Estate Equities Company, (g)
Crescent Real Estate Equities Limited Partnership, (h) Crescent Operating,
Inc., (i) any one or more of the current common shareholders of Crescent CS
Holdings Corp. or Crescent CS Holdings II Corp., provided that such
shareholder is an officer, director and/or trustee of Crescent Real Estate
Equities Company, Crescent Real Estate Equities Limited Partnership and/or
Crescent Operating, Inc., (j) Crescent CS Holdings Corp. or Crescent CS
Holdings II Corp., (k) Americold Corporation, (l) URS Logistics, Inc., (m)
any person or entity with or into which any one or more other URS Pool
Pre-Approved Parties is merged on consolidated or to which any one or more of
such URS Pool Pre-Approved Parties transfer all or substantially all of its
or their assets, (n) any person or entity that is 51% or more owned, directly
or indirectly, and controlled by one or more other URS Pool Pre-Approved
Parties, and (o) any person or entity in which one or more URS Pool
Pre-Approved Parties described in (a) through (n) above are operating
partners or managing members.
Notwithstanding the foregoing, transfers of direct and indirect beneficial
interests in the URS Pool Borrower will be permitted if, after giving effect
to such transfer, (x) the URS Pool Borrower will be at least 51% owned and
controlled directly by a URS Pool Pre-Approved Party and the URS Pool
Properties will be subject to a URS Pool Master Lease with a URS Pool
Qualified Master Lessee or managed by a URS Pool Acceptable Property Manager
pursuant to a URS Pool Property Management Agreement, and (y) if there is
either (1) a transfer of 25% or more of the direct partnership, stock or
other direct equity interests in the URS Pool Borrower or a transfer of a
general partnership interest in the URS Pool Borrower or managing member's
interest in the URS Pool Borrower or (2) a transfer of any direct interest in
a member or general partner of the URS Pool Borrower that is the required
single purpose member, in each case the URS Pool Borrower is required to
deliver to the mortgagee (i) an officer's certificate describing the proposed
transaction and stating that such transaction is permitted by the URS Pool
Loan documents, together with any documents upon which such officer's
certificate is based, and (ii) a legal opinion of counsel to the URS Pool
Borrower or the transferee selected by either of them (unless reasonably
disapproved by mortgagee or the Rating Agencies), in form and substance
consistent with similar opinions then being required by the Rating Agencies,
confirming, among other things, that the assets of the URS Pool Borrower and
of its general partner or managing member will not be substantively
consolidated with the assets of certain owners or controlling persons of the
URS Pool Borrower in a bankruptcy or similar proceeding.
Notwithstanding the foregoing, the transfer of interests in any direct or
indirect owner of the URS Pool Borrower is permitted, so long as (i) the URS
Pool Borrower is required at all times to be owned
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(directly or indirectly) by one or more URS Pool Pre-Approved Parties
described in items (a) through (d), (f) through (i), and (k) through (o) of
the definition of URS Pool Pre-Approved Parties set forth above and (ii) the
URS Pool Properties are subject to a URS Pool Master Lease with a URS Pool
Qualified Master Lessee or managed by a URS Pool Acceptable Property Manager
pursuant to a URS Pool Property Management Agreement.
INSURANCE. The URS Pool Borrower is required to maintain, at its sole cost
and expense the following insurance: (a) policies of insurance against loss
or damage by standard perils included within the classification "All Risks of
Physical Loss", which policies are required to cover (by endorsement or
otherwise) warehouse legal liability, maintained in an aggregate amount equal
to the then full replacement cost of the URS Pool Property and related
equipment (without deduction for physical depreciation), and with deductibles
no greater than $100,000, as increased proportionately with the increase of a
specified consumer price index, (b) flood insurance (if any part of the URS
Pool Property is located in an area identified by the Federal Emergency
Management Agency as an area federally designated a "100 year flood plain"
and flood insurance is generally available at reasonable premiums and in such
amounts as generally are required by institutional lenders for similar
properties (or, if not so available from a private carrier, from the federal
government at commercially reasonable premiums to the extent available)), (c)
commercial general liability insurance, including broad form property damage,
blanket contractual and personal injuries coverages and containing minimum
limits per occurrence of $1,000,000 for any policy year as well as at least
$25,000,000 excess and/or umbrella liability insurance (and at all times at
least $10,000,000 against which no claim has been asserted); (d) rental loss
and/or business interruption insurance in an amount sufficient to avoid any
co-insurance penalty, and equal to the greater of (i) estimated gross
revenues from the operation of the URS Pool Properties less operating
expenses which were incurred in connection with the ownership, operation
and/or maintenance of the URS Pool Property prior to the insured event, but
which are not incurred during the period covered by the afore-mentioned
insurance requirement for a period of up to the next 18 months or (ii)
projected operating expenses (including interest and principal payments on
the URS Pool Loan) needed to maintain and operate the URS Pool Properties for
a period of up to the next 18 months; (e) insurance against loss or damage
from leakage of sprinkler systems and explosion of steam boilers, air
conditioning equipment, high pressure piping, machinery and equipment,
pressure vessels or similar apparatus and against loss of occupancy or use
arising from any such breakdown, in such amounts as are generally available
at reasonable premiums and are generally required by institutional lenders
for property comparable to the URS Pool Properties; (f) worker's compensation
insurance with respect to all employees of URS Pool Borrower, as and to the
extent required by applicable law or governmental authority; (g) during any
period of repair or restoration costing in excess of $5,000,000, builder's
"all risk" insurance in an amount not less than full insurable value of the
applicable URS Pool Property; (h) coverage to compensate for the cost of
demolition and the increased cost of construction for the URS Pool Properties
in an amount satisfactory to the mortgagee (not to exceed $10,000,000); (i)
earthquake insurance (if any URS Pool Property is located in a federal
earthquake zone) in an amount equal to the probable maximum loss with respect
to such URS Pool Property, with a maximum deductible of 5% of the replacement
cost of such URS Pool Property; and (j) such other insurance as may from time
to time be reasonably required by the mortgagee, provided that such insurance
is generally available at commercially reasonable rates. The URS Pool Loan
requires insurers for all risk coverage to have claims paying abilities rated
"AA-" (or its equivalent) or better by S&P and Moody's and "A-X" or better by
Best's and insurers providing all other forms of coverage to have claims
paying abilities rated "A" or better by S&P and Moody's and "A-X" or better
by Best's.
CASUALTY AND CONDEMNATION. Following the occurrence of a casualty or
condemnation affecting a URS Pool Property, the URS Pool Borrower, regardless
of whether proceeds are available, is required promptly to proceed to
restore, repair, replace or rebuild the affected URS Pool Property, to the
extent practicable, to be of at least equal value and of substantially the
same character and quality as prior to such casualty or condemnation, all to
be effected in accordance with the terms of the URS Pool Loan documents
applicable to alterations.
In the event of a casualty at a URS Pool Property that involves a loss of
less than 30% of the original URS Pool Release Amount with respect to the
affected URS Pool Property or a condemnation at a URS
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Pool Property that involves a loss of less than 20% of the original URS Pool
Release Amount with respect to the affected URS Pool Property, the mortgagee
is required to permit the application of the proceeds resulting therefrom
(after reimbursement of any expenses incurred by the mortgagee) to reimburse
the URS Pool Borrower for the cost of restoring, repairing, replacing or
rebuilding the affected URS Pool Property, in the manner described below,
provided that no event of default has occurred and is then continuing and, in
the reasonable judgment of the mortgagee: (i) the URS Pool Properties (taken
as a whole), after such restoration, will adequately secure the outstanding
principal balance of the URS Pool Loan, (ii) the restoration can be completed
by the earliest to occur of: (a) the 365th day following the receipt of the
proceeds or, with a written confirmation from the Rating Agencies that there
will be no reduction, qualification or withdrawal of the then current ratings
of the Certificates with respect thereto, such longer period as may
reasonably be required, (b) the URS Pool Maturity Date, and (c) with respect
to a casualty, the expiration of the payment period on the rental-loss
insurance or business interruption insurance coverage in respect of such
casualty; and (iii) during the period of the restoration, the sum of (y)
income derived from the URS Pool Properties (taken as a whole), plus (z)
proceeds of rental-loss insurance or business interruption insurance, if any,
payable will equal or exceed the sum of operating expenses and payments of
principal and interest on the URS Pool Loan.
If any of the conditions set forth in the foregoing proviso is not
satisfied, then, unless the mortgagee elects otherwise, at its sole option,
the proceeds are required to be applied to the prepayment of the URS Pool
Loan without the payment of a prepayment premium or penalty, other than a
yield maintenance charge if an event of default has occurred and is
continuing, and the URS Pool Borrower will be entitled to receive a release
of the mortgage lien encumbering the URS Pool Property in accordance with and
subject to the terms described in "--Release in Exchange for Substitute
Collateral--Defeasance" above in connection with a release due to defeasance,
unless (a) a reciprocal easement and/or operating agreement, and similar
agreements affecting the URS Pool Property, (b) warehousing agreements,
logistics and services agreements, and other similar agreements with all or
substantially all of a URS Pool Property, or (c) a lease with a tenant
occupying all or substantially all of the URS Pool Property, requires that
such proceeds be applied to a restoration of the affected URS Pool Property
and no event of default has occurred and is continuing, in which event the
mortgagee is required to make the proceeds available for a restoration.
In the event of a casualty that involves a loss of 30% or more of the
original URS Pool Release Amount with respect to the affected URS Pool
Property, or a condemnation that involves a loss of 20% or more of the
original URS Pool Release Amount with respect to the affected URS Pool
Property, then the mortgagee will have the option (to be exercised by notice
to the URS Pool Borrower within 30 days after receipt of the proceeds) to
apply the net proceeds to the prepayment of the URS Pool Loan (and the URS
Pool Borrower will be entitled to receive a release of the mortgage lien
affecting the URS Pool Property) or, provided the conditions set forth in the
proviso in the second preceding paragraph above are complied with, to have
such proceeds applied to reimburse the URS Pool Borrower for the cost of any
restoration in the manner described below (and the mortgagee will be deemed
to have elected restoration if it fails to give such notice within 30 days
after receipt of the proceeds), unless an operating agreement or a lease with
a tenant occupying all or substantially all of the URS Pool Property requires
that such proceeds be applied to a restoration and no event of default has
occurred and is continuing, in which event the mortgagee is required to make
the proceeds available for a restoration. Any application of proceeds to the
repayment of the URS Pool Loan as described above will be without any
prepayment premium or penalty, except that if an event of default has
occurred and is continuing, the URS Pool Borrower will be required to pay the
yield maintenance payment, if any, as described herein.
If the URS Pool Borrower is entitled to reimbursement out of proceeds,
such proceeds will be disbursed on a monthly basis upon the mortgagee being
furnished with (i) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats of
survey and such other evidences of cost, payment and performance as the
mortgagee may reasonably require and approve, and (ii) all plans and
specifications for such restoration, such plans and specifications to be
approved by the mortgagee prior to commencement of any work (such approval
not to be unreasonably withheld or delayed). In addition, no payment made
prior to the final completion of the restoration is
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<PAGE>
permitted to exceed 95% of the value of the work performed from time to
time; funds other than proceeds are required to be disbursed prior to
disbursement of such proceeds; and at all times, the undisbursed balance of
such proceeds remaining in the hands of the mortgagee, together with funds
deposited for that purpose or irrevocably committed to the satisfaction of
the mortgagee by or on behalf of the URS Pool Borrower for that purpose, will
be at least sufficient in the reasonable judgment of the mortgagee to pay for
the cost of completion of the restoration, free and clear of all liens or
claims for liens. Prior to any disbursement, the mortgagee is required to
have received evidence reasonably satisfactory to it of the estimated cost of
completion of the restoration, and the URS Pool Borrower is required to have
deposited with the mortgagee eligible collateral in an amount equal to the
excess (if any) of such estimated cost of completion over the net proceeds.
Any surplus which may remain out of proceeds received pursuant to a casualty
is required to be paid to the URS Pool Borrower after payment of such costs
of restoration. Any surplus which may remain out of proceeds received
pursuant to a condemnation is required to be escrowed with mortgagee as
security for the URS Pool Loan after payment of such costs of restoration.
FINANCIAL REPORTING. The URS Pool Borrower is required to furnish to the
mortgagee not later than 90 days following the end of each fiscal year, a
complete copy of its annual financial statements, audited by a nationally
recognized accounting firm reasonably acceptable to the mortgagee, in
accordance with GAAP, including balance sheets and statements of profit and
loss, together with an officer's certificate certifying that such items
present fairly, in all material respects, the financial condition of the URS
Pool Properties and have been prepared in accordance with GAAP, except that
for 1998, the URS Pool Borrower will have the right to deliver a statement
pursuant to Rule 3-14 of the Commission promulgated under the Securities Act
of 1933, as amended. Together with its annual financial statements, the URS
Pool Borrower is required to furnish to the mortgagee (i) an officer's
certificate certifying as of the date thereof whether, to the URS Pool
Borrower's knowledge, there exists a default or an event of default, and if
such default or event of default exists, the nature thereof, the period of
time it has existed and the action then being taken to remedy the same; (ii)
an annual report for the most recently completed fiscal year, containing (x)
a summary of the URS Pool Borrower's (or, for so long as a URS Pool Master
Lease is in place, the URS Pool Master Lessee's) revenues from its ten
largest tenants or customers, (y) a summary of capital expenditures made by
or on behalf of the URS Pool Borrower or the URS Pool Master Lessee with
respect to each URS Pool Property during such fiscal year, and (z) a
description of anticipated capital expenditures during the subsequent fiscal
year.
In addition, the URS Pool Borrower is required to furnish, or cause to be
furnished, to the mortgagee on or before the 30th day after the end of each
calendar month a monthly operating statement, including a comparison of the
actual income, expense and net cash flow to the annual budget. The URS Pool
Borrower is also required to furnish, or cause to be furnished, to the
mortgagee on or before the 45th day after the end of each calendar quarter
(together with an officer's certificate certifying such items as true,
correct, accurate and complete): (i) quarterly and year-to-date operating
statements with respect to the URS Pool Borrower, including a comparison of
the actual income, expense and net cash flow to the annual budget, together
with a balance sheet for the quarter; and (ii) a summary of capital
expenditures made by or on behalf of the URS Pool Borrower or the URS Pool
Master Lessee with respect to each URS Pool Property during such calendar
quarter. Reports with respect to the operations of a particular URS Pool
Property that are delivered to the mortgagee pursuant to the URS Pool Loan
agreement or any other URS Pool Loan document, are required to be kept
confidential, and may not be disclosed in any SEC or similar filing.
S-97
<PAGE>
Graphics omitted: Tharaldson Pool B properties in Lubbock, Texas, Greeley,
Colorado and Oklahoma City, Oklahoma.
[Grande Loan II Logo]
<PAGE>
THARALDSON POOL B: THE BORROWERS; THE PROPERTIES
THE LOAN. The Tharaldson Pool B Loan had a principal balance as of the
Cut-Off Date of approximately $183,352,232 and is secured by first priority
mortgage and/or deed of trust liens encumbering the Tharaldson Pool B
Borrowers' interests in 93 limited service hotels located in Colorado, Iowa,
Illinois, Indiana, Kansas, Kentucky, Michigan, Minnesota, Missouri, Montana,
North Dakota, Nebraska, Ohio, Oklahoma, Texas, Wisconsin and Wyoming (the
"Tharaldson Pool B Properties"). The Tharaldson Pool B Borrowers own fee
title to 91 of the Tharaldson Pool B Properties and leasehold title to 2 of
the Tharaldson Pool B Properties. The mortgages encumbering the Tharaldson
Pool B Properties are cross-defaulted and cross-collateralized with each
other. The Tharaldson Pool B Loan is neither cross-collateralized nor
cross-defaulted with the Tharaldson Pool A Loan. The Tharaldson Pool B Loan
was originated by GSMC on January 20, 1998.
THE BORROWERS. The Tharaldson Pool B Borrowers consist of 79 corporations,
14 limited partnerships and one holding company (the "Tharaldson Pool B
Borrowers"). The holding company is Tharaldson Lodging I-A, Inc. ("Tharaldson
I-A"), a North Dakota corporation. Tharaldson I-A is a wholly-owned
subsidiary of Tharaldson Motels, Inc., which is controlled by Gary Tharaldson
and certain family members. The Tharaldson Pool B Borrowers have no material
assets other than their respective interests in the Tharaldson Pool B
Properties and related interests. The Tharaldson Pool B Borrowers are
indirectly owned by Tharaldson Motels, Inc., which is controlled by Gary
Tharaldson and certain Tharaldson family members. Tharaldson Property
Management, Inc., which is the property manager for the Tharaldson Pool B
Properties (the "Tharaldson Pool Manager"), is an affiliate of Tharaldson
Motels, Inc.
SECURITY. The Tharaldson Pool B Loan is a non-recourse loan, secured only
by the fee and leasehold interests of the Tharaldson Pool B Borrowers in the
Tharaldson Pool B Properties and certain related collateral (including
assignments of leases and rents and the funds in certain accounts). Subject
to certain limited exceptions, neither the Tharaldson Pool B Borrowers nor
any of their affiliates are personally liable for payment of the Tharaldson
Pool B Loan. The Tharaldson Pool B Borrowers have represented that they own
good and indefeasible fee simple or leasehold title, as applicable, to the
Tharaldson Pool B Properties, free and clear of all liens other than
encumbrances described in the applicable title insurance policies and other
encumbrances permitted by the mortgagee under the Tharaldson Pool B Loan
documents (the "Tharaldson Pool B Permitted Encumbrances"). The title
insurance policies issued upon the origination of the Tharaldson Pool B Loan
insure that each of the mortgages securing the Tharaldson Pool B Loan
constitutes a valid and enforceable first lien on the Tharaldson Pool B
Properties encumbered by it, subject to certain exceptions and exclusions
from coverage set forth in the policies.
THE PROPERTIES. The Tharaldson Pool B Properties were built between 1988
and 1996 and consist of 93 limited service hotels containing approximately
5,858 rooms and are located in 17 states. The Tharaldson Pool B Properties
consist of 39 Fairfield Inns, 19 Comfort Inns, ten Hampton Inns, six
Residence Inns, five Comfort Suites, four Super 8s, four Holiday Inn
Expresses, three Courtyards, two County Inn & Suites, and one Days Inn.
GROUND LEASES. At 2 of the Tharaldson Pool B Properties, all of the
underlying land is leased to the applicable Tharaldson Pool B Borrower
pursuant to a ground lease.
The interest of the applicable Tharaldson Pool B Borrower in the
Champaign, Illinois Fairfield Inn consists of a ground leasehold interest
created under a sublease dated December 30, 1993, as amended (the "Champaign
Fairfield Inn Ground Sublease"), between William C. Dallenbach III, William
M. Kuhne, and James A. Sullivan, d/b/a Seventy-Four Centre Associates, as
sublessor (the "Champaign Sublessor") and Midwest Heritage Inn of Champaign,
Inc., the applicable Tharaldson Pool B Borrower, as sublessee (the "Champaign
Borrower"). The Champaign Fairfield Inn Ground Sublease expires on September
30, 2049 and the Champaign Borrower has one renewal option of 20 years. The
annual rent under the Champaign Fairfield Inn Ground Sublease consists of a
base rent of $14,136 and a cost of living adjustment based upon a specified
consumer price index, provided that the annual rent will not exceed $19,573.
The Champaign Borrower is also responsible for payment of all real estate
taxes,
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<PAGE>
assessments and similar charges relating to the property leased thereunder.
Pursuant to a Joinder and Non-Disturbance Agreement, dated as of February 28,
1998, by and among the Champaign Borrower, the Champaign Sublessor, Champaign
National Bank, as fee owner (the "Champaign Fee Owner") and GSMC, the
Champaign Fee Owner has agreed (i) to grant GSMC a security interest in its
fee interest in the leased property, (ii) not to disturb the Champaign
Borrower's possession of the leased property for the duration of the
Tharaldson Pool B Loan, and (iii) to substitute itself as sublessor under the
Champaign Fairfield Inn Ground Sublease in the event the ground lease between
the Champaign Fee Owner and the Champaign Sublessor is terminated for any
reason.
The interest of the applicable Tharaldson Pool B Borrower in the
Champaign, Illinois Courtyard consists of a ground leasehold interest created
under a sublease dated December 30, 1993, as amended (the "Champaign
Courtyard Ground Sublease") between the Champaign Sublessor, as sublessor and
the Champaign Borrower, as sublessee. The Champaign Courtyard Ground Sublease
expires on September 30, 2049 and the Champaign Borrower has one renewal
option of 20 years. The annual rent under the Champaign Courtyard Ground
Sublease consists of a base rent of $19,521 and a cost of living adjustment
based upon a specified consumer price index, provided that the annual rent
will not exceed $27,029. The Champaign Borrower is also responsible for
payment of all real estate taxes, assessments and similar charges relating to
the property leased thereunder. Pursuant to a Joinder and Non-Disturbance
Agreement, dated as of February 28, 1998, by and among the Champaign
Borrower, the Champaign Sublessor, the Champaign Fee Owner and GSMC, the
Champaign Fee Owner has agreed (i) to grant GSMC a security interest in its
fee interest in the leased property, (ii) not to disturb the Champaign
Borrower's possession of the leased property for the duration of the
Tharaldson Pool B Loan, and (iii) to substitute itself as sublessor under the
Champaign Courtyard Ground Sublease in the event the ground lease between the
Champaign Fee Owner and the Champaign Sublessor is terminated for any reason.
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<PAGE>
FRANCHISE AFFILIATIONS. The following table summarizes the franchise
affiliations of the Tharaldson Pool B Properties:
<TABLE>
<CAPTION>
WEIGHTED
CUT-OFF DATE AVERAGE UNDERWRITTEN
TOTAL ALLOCATED APPRAISED CUT-OFF NET CASH
FRANCHISE HOTELS ROOMS LOAN AMOUNT VALUE DATE LTV FLOW
- -------------------- -------- ------- -------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Comfort Inn.......... 19 1,097 $ 29,579,231 $ 53,900,000 56.0% $ 5,819,260
Comfort Suites....... 5 306 10,271,299 18,400,000 56.3 1,912,947
Country Inn &
Suites.............. 2 126 4,803,050 8,000,000 51.1 996,749
Courtyard............ 3 234 8,800,843 15,600,000 57.6 1,796,479
Days Inn............. 1 62 1,480,404 2,200,000 67.3 227,774
Fairfield Inn........ 39 2,427 76,423,874 135,200,000 57.4 15,320,481
Hampton Inn.......... 10 682 17,987,706 35,700,000 50.9 3,930,139
Holiday Inn Express . 4 256 9,265,460 16,300,000 57.4 1,775,518
Residence Inn........ 6 442 20,821,168 36,400,000 57.8 3,974,502
Super 8.............. 4 226 4,639,197 9,300,000 51.0 947,166
-------- ------- -------------- -------------- --------------
Totals/Weighted
Average............ 93 5,858 $183,352,232 $331,000,000 56.3% $36,701,015
======== ======= ============== ============== ==============
</TABLE>
THARALDSON POOL B
FRANCHIE AFFILIATIONS BY ALLOCATED LOAN AMOUNT
[GRAPHIC OMITTED]
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<PAGE>
GEOGRAPHIC LOCATION. The following table summarizes the geographic
location of the Tharaldson Pool B Properties:
<TABLE>
<CAPTION>
WEIGHTED
CUT-OFF DATE AVERAGE UNDERWRITTEN
TOTAL ALLOCATED APPRAISED CUT-OFF NET CASH
STATE PROPERTIES ROOMS LOAN AMOUNT VALUE DATE LTV FLOW
- --------------- ------------ ------- -------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Colorado........ 3 193 $ 6,123,580 $ 11,500,000 54.1% $ 1,180,537
Iowa............ 8 453 11,521,882 23,300,000 49.8 2,357,253
Illinois........ 14 909 31,569,021 55,500,000 57.6 5,807,846
Indiana......... 5 308 8,863,522 15,200,000 60.5 1,609,658
Kansas.......... 6 396 10,561,808 17,100,000 63.3 2,338,664
Kentucky........ 3 178 5,861,923 9,900,000 59.3 1,172,558
Michigan........ 3 192 5,042,129 10,000,000 50.6 1,197,666
Minnesota....... 5 299 8,516,303 14,800,000 58.3 1,841,923
Missouri........ 2 109 3,667,184 6,900,000 50.6 754,583
Montana......... 3 179 5,423,174 9,500,000 53.2 1,085,999
North Dakota ... 7 443 10,364,819 20,500,000 50.8 2,160,030
Nebraska........ 2 123 4,592,437 8,400,000 54.8 957,467
Ohio............ 10 627 24,654,499 40,500,000 61.5 4,499,531
Oklahoma........ 4 267 9,625,612 18,100,000 53.8 2,109,717
Texas........... 14 960 31,743,128 59,800,000 53.5 6,564,814
Wisconsin....... 3 166 3,672,158 6,800,000 54.2 727,795
Wyoming......... 1 56 1,549,052 3,200,000 48.4 334,974
------------ ------- -------------- -------------- ---------- --------------
Totals/Weighted
Average....... 93 5,858 $183,352,232 $331,000,000 56.3% $36,701,015
============ ======= ============== ============== ========== ==============
</TABLE>
GRAPHIC OMITTED: Map of United States which highlights the states where
Tharaldson Pool B Properties are located and provides for the following
information with respect to each state:
Montana
3 Properties
North Dakota
7 Properties
Iowa
8 Properties
Minnesota
5 Properties
Wisconsin
3 Properties
Michigan
3 Properties
Wyoming
1 Property
Nebraska
2 Properties
Indiana
5 Properties
Ohio
10 Properties
Illinois
14 Properties
Kentucky
3 Properties
Colorado
3 Properties
Kansas
6 Properties
Texas
14 Properties
Oklahoma
4 Properties
Missouri
2 Properties
PROPERTY SUMMARY. The following table sets forth certain information, on a
comparative basis, concerning, among other things, the Cut-Off Date Allocated
Loan Amount, number of rooms, occupancy rates, Underwritten Net Cash Flow,
Cut-Off Date LTV and DSCR at the Tharaldson Pool B Properties:
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<PAGE>
THARALDSON POOL B PROPERTIES SUMMARY
<TABLE>
<CAPTION>
UNDER-
1997 WRITTEN
OCCU- OCCU-
HOTEL CITY STATE ROOMS PANCY PANCY
-------------------- ---------------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 Fairfield Inn........Colorado Springs CO 67 74% 74%
2 Fairfield Inn........Greeley CO 62 75 75
3 Holiday Inn Express Greeley CO 64 66 66
4 Comfort Inn..........Cedar Rapids IA 59 78 78
5 Fairfield Inn........Council Bluffs IA 62 87 85
6 Comfort Inn..........Des Moines IA 55 81 81
7 Comfort Inn..........Dubuque IA 52 63 63
8 Fairfield Inn........Dubuque IA 56 69 69
9 Fairfield Inn........Muscatine IA 51 84 80
10 Comfort Inn..........Waterloo IA 56 77 77
11 Super 8..............Waterloo IA 62 76 76
12 Comfort Suites.......Bloomington IL 60 74 74
13 Courtyard............Bloomington IL 78 74 74
14 Courtyard............Champaign IL 78 71 71
15 Fairfield Inn........Champaign IL 62 74 74
16 Fairfield Inn........Danville IL 55 81 80
17 Super 8..............Danville IL 50 77 77
18 Comfort Inn..........Forsyth IL 56 72 72
19 Fairfield Inn........Forsyth IL 62 76 76
20 Comfort Inn..........Gurnee IL 63 71 71
21 Fairfield Inn........Kankakee IL 57 84 84
22 Residence Inn........Peoria IL 66 89 85
23 Fairfield Inn........Peru IL 64 76 76
24 Residence Inn........Rockford IL 94 78 78
25 Fairfield Inn........Tinley Park IL 64 65 65
26 Super 8..............Evansville IN 62 74 74
27 Fairfield Inn........Mishawaka IN 62 76 76
28 Hampton Inn..........Mishawaka IN 62 70 70
29 Comfort Suites.......Terre Haute IN 60 78 78
30 Fairfield Inn........Terre Haute IN 62 75 75
31 Comfort Inn..........Topeka KS 67 81 80
32 Days Inn.............Topeka KS 62 75 75
33 Fairfield Inn........Topeka KS 62 80 80
34 Residence Inn........Topeka KS 66 79 77
35 Comfort Inn..........Wichita KS 58 80 80
36 Hampton Inn..........Wichita KS 81 75 75
37 Fairfield Inn........Ashland KY 63 70 70
38 Fairfield Inn........Lexington KY 63 91 85
39 Super 8..............Owensboro KY 52 72 72
40 Hampton Inn..........Battle Creek MI 64 80 80
41 Fairfield Inn........Holland MI 64 67 67
42 Hampton Inn..........Kalamazoo MI 64 77 77
43 Comfort Inn..........Brooklyn Center MN 60 83 80
44 Comfort Inn..........Mankato MN 56 81 81
Country Inn &
45 Suites............. Rochester MN 62 89 85
46 Fairfield Inn........St. Cloud MN 57 68 68
47 Hampton Inn..........Woodbury MN 64 77 77
48 Comfort Inn..........Lee's Summit MO 52 77 77
49 Fairfield Inn........Lee's Summit MO 57 82 82
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CUT-OFF DATE
OPENING ALLOCATED LOAN APPRAISED CUT-OFF
DATE UWNCF AMOUNT VALUE DATE LTV DSCR
--------- ------------- -------------- -------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
1 Nov-95.... $ 531,425 $2,764,814 $4,500,000 61.4% 2.26x
2 Sep-94.... 348,912 1,738,082 3,500,000 49.7 2.36
3 Mar-96.... 300,200 1,620,684 3,500,000 46.3 2.18
4 Apr-89.... 315,090 1,721,169 3,000,000 57.4 2.15
5 Mar-95.... 414,268 1,978,847 4,300,000 46.0 2.46
6 Sep-90.... 268,321 1,308,287 2,500,000 52.3 2.41
7 Nov-90.... 191,931 1,212,777 2,300,000 52.7 1.86
8 Apr-92.... 341,743 1,730,123 3,500,000 49.4 2.32
9 Jul-94.... 282,839 1,246,604 2,700,000 46.2 2.67
10 Feb-90.... 267,915 1,234,665 2,600,000 47.5 2.55
11 Sep-88.... 275,146 1,089,410 2,400,000 45.4 2.97
12 Jun-95.... 291,450 1,982,826 3,600,000 55.1 1.73
13 Sep-95.... 537,509 2,994,635 4,300,000 69.6 2.11
14 Aug-95.... 552,973 2,868,283 5,500,000 52.2 2.27
15 Dec-94.... 373,565 1,752,011 3,200,000 54.8 2.51
16 Nov-93.... 306,053 1,448,568 2,500,000 57.9 2.48
17 Aug-89.... 188,409 1,179,946 2,200,000 53.6 1.88
18 Sep-89.... 237,536 1,648,541 2,600,000 63.4 1.69
19 Jun-91.... 351,209 2,188,770 3,900,000 56.1 1.89
20 Dec-92.... 405,813 1,918,158 4,400,000 43.6 2.49
21 May-94.... 435,698 2,038,540 3,900,000 52.3 2.51
22 Jul-93.... 661,027 3,998,484 6,400,000 62.5 1.94
23 Mar-96.... 507,298 2,594,687 4,100,000 63.3 2.30
24 Apr-93.... 769,411 3,761,699 6,500,000 57.9 2.41
25 Jul-96.... 189,895 1,193,874 2,400,000 49.7 1.87
26 Feb-89.... 249,946 1,032,701 2,500,000 41.3 2.85
27 Aug-95.... 358,633 2,167,877 3,400,000 63.8 1.95
28 Sep-95.... 244,669 1,604,766 3,400,000 47.2 1.79
29 Feb-95.... 390,621 2,059,433 3,100,000 66.4 2.23
30 Jan-95.... 365,789 1,998,745 2,800,000 71.4 2.15
31 Nov-89.... 382,022 2,084,306 3,500,000 59.6 2.16
32 Dec-89.... 227,774 1,480,404 2,200,000 67.3 1.81
33 Nov-91.... 371,788 1,951,985 2,900,000 67.3 2.24
34 Apr-95.... 481,029 2,368,846 3,400,000 69.7 2.39
35 May-96.... 359,632 1,191,885 1,700,000 70.1 3.55
36 Jun-96.... 516,419 1,484,384 3,400,000 43.7 4.09
37 Aug-94.... 373,234 2,109,178 3,400,000 62.0 2.08
38 Jul-94.... 565,659 2,415,606 4,300,000 56.2 2.75
39 Aug-91.... 233,665 1,337,139 2,200,000 60.8 2.06
40 Apr-95.... 452,263 1,941,041 4,100,000 47.3 2.74
41 May-95.... 398,907 1,657,496 3,200,000 51.8 2.83
42 Jun-95.... 346,496 1,443,593 2,700,000 53.5 2.82
43 Sep-95.... 332,122 1,801,755 3,600,000 50.0 2.17
44 Jul-94.... 338,254 1,915,173 3,000,000 63.8 2.08
45 Apr-95.... 528,218 1,944,025 3,700,000 52.5 3.20
46 Apr-92.... 203,553 1,308,287 1,900,000 68.9 1.83
47 Jan-96.... 439,776 1,547,062 2,600,000 59.5 3.34
48 Mar-92.... 271,296 1,376,935 2,700,000 51.0 2.32
49 Aug-94.... 483,287 2,290,249 4,200,000 54.5 2.48
</TABLE>
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<PAGE>
THARALDSON POOL B PROPERTIES SUMMARY
<TABLE>
<CAPTION>
UNDER-
1997 WRITTEN
OCCU- OCCU-
HOTEL CITY STATE ROOMS PANCY PANCY
-------------------- ----------------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
50 Comfort Inn..........Billings MT 60 75 75
51 Fairfield Inn........Billings MT 63 81 80
52 Comfort Inn..........Helena MT 56 76 76
53 Fairfield Inn........Bismarck ND 63 70 70
54 Fairfield Inn........Bismarck ND 63 74 74
55 Comfort Inn..........Fargo ND 66 73 73
56 Comfort Suites.......Fargo ND 66 76 76
57 Fairfield Inn........Fargo ND 63 78 78
58 Comfort Inn..........Fargo ND 56 76 76
59 Comfort Inn..........Grand Forks ND 66 79 79
60 Comfort Suites.......Lincoln NE 60 84 80
61 Fairfield Inn........Lincoln NE 63 82 80
62 Fairfield Inn........Canton OH 62 76 76
63 Residence Inn........Canton OH 66 80 80
64 Comfort Inn..........Dayton OH 56 85 80
65 Fairfield Inn........Findlay OH 57 88 85
66 Hampton Inn..........Findlay OH 62 82 80
67 Fairfield Inn........Mansfield/Ontario OH 62 76 76
68 Fairfield Inn........Middletown OH 57 75 75
69 Holiday Inn Express .Middletown OH 64 72 72
70 Fairfield Inn........Springfield, OH 63 90 85
71 Residence Inn........Youngstown OH 78 76 76
72 Fairfield Inn........Norman OK 76 70 70
73 Hampton Inn..........Oklahoma City OK 63 78 78
74 Holiday Inn Express .Oklahoma City OK 64 71 71
75 Holiday Inn Express .Tulsa OK 64 74 74
76 Fairfield Inn........Abilene TX 73 66 66
77 Hampton Inn..........Abilene TX 64 73 73
78 Hampton Inn..........Ft. Worth TX 77 66 66
79 Comfort Suites.......Lewisville TX 60 79 79
Country Inn &
80 Suites...............Lewisville TX 64 74 74
81 Residence Inn........Lewisville TX 72 80 80
82 Courtyard............Lubbock TX 78 77 77
83 Fairfield Inn........Lubbock TX 64 71 71
84 Hampton Inn..........Lubbock TX 81 67 67
85 Fairfield Inn........Midland TX 71 86 80
86 Fairfield Inn........Tyler TX 64 77 77
87 Fairfield Inn........Victoria TX 64 72 72
88 Fairfield Inn........Waco TX 64 84 84
89 Fairfield Inn........Wichita Falls TX 64 81 81
90 Comfort Inn..........Manitowoc WI 47 67 67
91 Fairfield Inn........Oshkosh WI 57 63 63
92 Fairfield Inn........Stevens Point WI 62 66 66
93 Comfort Inn..........Casper WY 56 71 71
------- ------- ---------
Total/Average........ 5,858 76% 76%
======= ======= =========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CUT-OFF DATE
OPENING ALLOCATED LOAN APPRAISED CUT-OFF
DATE UWNCF AMOUNT VALUE DATE LTV DSCR
--------- ------------- -------------- -------------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
50 Jul-92.... 358,050 1,835,582 2,900,000 63.3 2.29
51 Mar-93.... 402,362 2,025,607 3,400,000 59.6 2.34
52 Dec-91.... 325,587 1,561,986 3,200,000 48.8 2.45
53 Apr-92.... 268,731 1,347,088 2,600,000 51.8 2.35
54 Sep-92.... 313,168 1,358,032 2,600,000 52.2 2.71
55 Feb-88.... 239,449 1,320,226 2,300,000 57.4 2.13
56 Feb-89.... 324,736 1,649,536 3,300,000 50.0 2.32
57 Feb-92.... 358,018 1,665,455 3,700,000 45.0 2.53
58 Jun-90.... 247,692 1,176,961 2,200,000 53.5 2.48
59 Sep-88.... 408,236 1,847,520 3,800,000 48.6 2.60
60 Jul-94.... 453,649 2,335,019 4,100,000 57.0 2.28
61 Aug-94.... 503,818 2,257,417 4,300,000 52.5 2.62
62 Apr-95.... 377,356 2,302,188 3,400,000 67.7 1.93
63 Sep-95.... 613,153 3,123,971 5,400,000 57.9 2.31
64 Sep-93.... 268,006 1,629,638 2,200,000 74.1 1.93
65 Jan-93.... 464,400 2,288,259 3,800,000 60.2 2.39
66 Apr-95.... 369,756 2,148,974 3,700,000 58.1 2.02
67 Nov-94.... 451,115 2,418,590 3,300,000 73.3 2.19
68 Jul-94.... 442,242 2,175,836 3,500,000 62.2 2.39
69 Dec-95.... 409,099 2,351,932 3,800,000 61.9 2.05
70 Oct-94.... 498,046 2,604,636 4,700,000 55.4 2.25
71 Sep-96.... 606,358 3,610,475 6,700,000 53.9 1.98
72 Sep-95.... 514,754 2,232,545 4,500,000 49.6 2.71
73 Nov-96.... 528,744 2,100,224 4,600,000 45.7 2.96
74 Oct-96.... 586,860 2,885,196 4,900,000 58.9 2.39
75 Apr-96.... 479,359 2,407,647 4,100,000 58.7 2.34
76 Oct-95.... 329,827 1,597,802 3,000,000 53.3 2.43
77 Nov-95.... 243,805 1,353,058 2,300,000 58.8 2.12
78 Oct-96.... 416,400 2,420,580 4,800,000 50.4 2.02
79 Mar-96.... 452,491 2,244,484 4,300,000 52.2 2.37
80 Apr-96.... 468,531 2,139,025 4,300,000 49.7 2.58
81 Jul-96.... 843,524 3,957,693 8,000,000 49.5 2.51
82 Apr-96.... 705,997 2,937,926 5,800,000 50.7 2.83
83 Dec-95.... 362,693 1,699,281 3,300,000 51.5 2.51
84 Apr-96.... 371,811 1,944,025 4,100,000 47.4 2.25
85 Dec-96.... 510,795 2,647,416 4,400,000 60.2 2.27
86 Jun-95.... 441,483 2,184,790 3,600,000 60.7 2.38
87 Dec-95.... 294,920 1,377,930 2,100,000 65.6 2.52
88 May-95.... 625,205 3,013,538 5,400,000 55.8 2.44
89 Nov-95.... 497,332 2,225,581 4,400,000 50.6 2.63
90 Nov-92.... 267,334 1,244,614 2,200,000 56.6 2.53
91 Oct-92.... 199,343 1,087,421 2,200,000 49.4 2.16
92 Nov-94.... 261,118 1,340,124 2,400,000 55.8 2.29
93 Sep-94.... 334,974 1,549,052 3,200,000 48.4 2.54
----------- ------------- --------------
$36,701,015 $183,352,232 $331,000,000 56.3% 2.35x
=========== ============= ==============
</TABLE>
S-103
<PAGE>
OPERATING AND OCCUPANCY HISTORY. The following table shows certain
unaudited information regarding the operating history, historical average
occupancy, ADR and RevPAR for the Tharaldson Pool B Properties on an
aggregate basis:
<TABLE>
<CAPTION>
UNDERWRITTEN
1995 1996 1997 NET CASH FLOW
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
REVENUES
Room Revenue............... $49,168,461 $76,663,636 $89,472,062 $90,601,340
Room Rebates............... -- (1,129,678) -- --
Food & Beverage Revenue ... 37,018 176,278 209,416 217,392
Telephone Revenue.......... 1,338,712 1,772,803 1,834,936 1,836,383
Other Revenue.............. 544,589 572,771 696,719 701,458
------------- ------------- ------------- ---------------
TOTAL REVENUES.............. $51,088,781 $78,055,810 $92,213,132 $93,356,574
Departmental Expenses
Room Expense............... $ 4,934,243 $ 5,776,711 $ 6,316,475 $ 6,298,424
Food & Beverage Expense ... 81,785 157,548 118,159 118,159
Telephone Expense.......... 880,774 1,256,492 1,255,522 1,252,549
Other Expenses............. 92,498 114,956 168,074 168,925
------------- ------------- ------------- ---------------
Total Departmental
Expenses................... $ 5,989,301 $ 7,305,707 $ 7,858,231 $ 7,838,058
DEPARTMENTAL PROFIT......... $45,099,480 $70,750,103 $84,354,901 $85,518,516
Unallocated Expenses
General & Administrative .. $ 1,696,860 $ 3,510,558 $ 5,025,184 $ 4,993,880
Marketing Expenses......... 1,501,868 410,838 438,159 437,236
Franchise Fee/Percent ..... 1,933,243 6,374,374 8,291,320 6,762,488
Utilities.................. 2,488,562 4,146,317 4,613,623 4,620,838
Operation & Maintenance ... 1,644,849 2,428,215 3,153,515 3,137,354
Payroll.................... 10,376,497 14,790,192 17,020,851 17,012,479
Management Fees............ 3,416,339 5,286,965 6,262,343 3,282,214
------------- ------------- ------------- ---------------
Total Unallocated Expenses . $23,058,218 $36,947,461 $44,804,996 $40,246,489
GROSS OPERATING PROFIT ..... $22,041,262 $33,802,642 $39,549,905 $45,272,027
Fixed Expenses
Real Estate Tax............ $ 1,977,020 $ 3,301,278 $ 4,234,555 $ 4,273,873
Insurance.................. 271,771 552,904 588,131 588,131
Replacement Reserves....... -- -- -- 3,709,008
Ground Lease............... 325,210 36,465 30,855 --
------------- ------------- ------------- ---------------
Total Fixed Expenses........ $ 2,574,001 $ 3,890,647 $ 4,853,541 $ 8,571,013
NET OPERATING INCOME........ $19,467,261 $29,911,995 $34,696,364 $36,701,015
============= ============= ============= ===============
Number of Rooms............. 4,663 5,858 5,858 5,858
Occupancy................... 74% 73% 76% 76%
ADR......................... $ 50.47 $ 53.81 $ 56.07 $ 56.08
RevPAR...................... $ 37.17 $ 39.39 $ 42.67 $ 42.37
</TABLE>
APPRAISAL. An appraisal, dated as of January 1, 1998, prepared by
Hospitality Valuation Services, Inc., determined an aggregate value for the
Tharaldson Pool B Properties of approximately $331,000,000,
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<PAGE>
resulting in a Cut-Off Date LTV of approximately 55.4%. The Tharaldson Pool
B Properties appraisal was prepared in accordance with the Uniform Standards
of Professional Appraisal Practice. See "Risk Factors--The Mortgage
Loans--Limitations on Appraisals" herein.
ENGINEERING REPORT. Property Condition Reports on the Tharaldson Pool B
Properties were completed between November 1997 and January 1998. The
Property Condition Reports concluded that the Tharaldson Pool B Properties
were generally in good physical condition but noted certain items of deferred
maintenance for which approximately $221,009 in reserves was funded at the
closing of the Tharaldson Pool B Loan.
ENVIRONMENTAL ASSESSMENT. The Tharaldson Pool B Properties were subject to
Phase I environmental site assessments which were performed by a third-party
environmental firm between November 1997 and January 1998. The reports
recommended that reserves in the amount of $40,750 be set aside at closing
for environmental concerns relating to (i) former USTs located at the two
Terre Haute, Indiana properties and (ii) radon test results at various
locations. As a result, an environmental reserve in the amount of $50,937 was
established at the closing of the Tharaldson Pool B Loan. There can be no
assurance, however, that all environmental conditions and risks were
identified in such reports. See "Risk Factors--The Mortgage
Loans--Environmental Law Considerations" herein.
PROPERTY MANAGEMENT. All of the Tharaldson Pool B Properties are managed
by the Tharaldson Pool Manager pursuant to a management agreement (the
"Tharaldson Pool B Management Agreement"). The Tharaldson Pool Manager
manages more than 240 limited service hotels containing more than 16,000
rooms, including the Tharaldson Pool B Properties and the Tharaldson Pool A
Properties, and employs over 6,500 persons in limited service property
management. The Tharaldson Pool Manager is responsible for the management and
operation of the Tharaldson Pool B Properties in the same manner as is
customary and usual in the operation of first-class hotels in each respective
Tharaldson Pool B Property's community. Under the Tharaldson Pool B
Management Agreement, the Tharaldson Pool Manager is entitled to a base
management fee equal to 7% of gross revenues of each Tharaldson Pool B
Property, and an incentive management fee (the "Tharaldson Pool B Incentive
Management Fee") equal to 3% of the gross revenues of the Tharaldson Pool B
Properties held by Tharaldson I-A for each year in which the aggregate net
revenues of all Tharaldson Pool B Properties exceed $42,000,000. The term of
the Tharaldson Pool B Management Agreement expires on December 31, 1998, and
is automatically renewed for successive periods of one fiscal year each,
unless terminated by notice from one party to another.
Pursuant to an agreement among the mortgagee, the Tharaldson Pool B
Borrowers and the Tharaldson Pool Manager (the "Tharaldson Pool B Consent of
Manager"), the Tharaldson Pool Manager has agreed that, among other things
(i) it will not terminate the Tharaldson Pool B Management Agreement, without
the written consent of the mortgagor, except for a default relating to
non-payment of the management fee due under the Tharaldson Pool B Management
Agreement by the Tharaldson Pool B Borrowers and which default is not cured
by the mortgagee within 30 days' after giving the mortgagee written notice of
such default, (ii) upon the occurrence of an event of default under and
acceleration of the Tharaldson Pool B Loan, the mortgagee or the Tharaldson
Pool B Borrowers at the mortgagee's direction, will have the right to
terminate the Tharaldson Pool B Management Agreement (without penalty or the
payment of any termination fee) by giving the Tharaldson Pool Manager 30
days' prior written notice of such termination, (iii) all liens, rights and
interests owned or held by the Tharaldson Pool Manager in and to the
Tharaldson Pool B Properties are subordinate to the liens of the mortgagee,
and (iv) it will not amend the Tharaldson Pool B Management Agreement, in any
material respect, without the prior written consent of the mortgagee (which
consent will not be unreasonably withheld or delayed).
Pursuant to the Tharaldson Pool B Loan agreement, the Tharaldson Pool B
Property is required at all times to be managed by a Tharaldson Pool
Acceptable Manager. A "Tharaldson Pool Acceptable Manager" means (i) the
Tharaldson Pool Manager or any affiliate which owns 100% of, is owned 100%
by, or is under 100% common ownership with, such Tharaldson Pool Manager (so
long as such company continues to be controlled by substantially the same
individuals controlling such company as of the
S-105
<PAGE>
closing date of the Tharaldson Pool B Loan), or (ii) any other property
management company as to which the Tharaldson Pool B Borrowers will have
received a written confirmation from the Rating Agencies that such action
will not result in the withdrawal, qualification or reduction of the then
existing ratings of the Certificates.
THARALDSON POOL B: THE LOAN
PAYMENT TERMS. The Tharaldson Pool B Loan bears interest at a fixed rate
per annum equal to 6.876% (the "Tharaldson Pool B Initial Interest Rate")
through and including February 10, 2008. From and after February 11, 2008,
(the "Tharaldson Pool B Anticipated Repayment Date") the Tharaldson Pool B
Loan accrues interest at a fixed rate per annum equal to 8.876% (the
"Tharaldson Pool B Revised Interest Rate"). The Tharaldson Pool B Loan
matures on February 11, 2023 (the "Tharaldson Pool B Maturity Date"). As
described below, if the Tharaldson Pool B Borrowers do not prepay the
Tharaldson Pool B Loan on the Tharaldson Pool B Anticipated Repayment Date,
the Tharaldson Pool B Borrowers will be required to pay interest at the
Tharaldson Pool B Initial Interest Rate (together with principal, as
described below), and interest accrued equal to the excess of the Tharaldson
Pool B Revised Interest Rate over the Tharaldson Pool B Initial Interest Rate
will be deferred and added to the outstanding indebtedness under the
Tharaldson Pool B Loan, and will, to the extent permitted by applicable law,
earn interest at the Tharaldson Pool B Revised Interest Rate (such accrued
and deferred interest and interest thereon (which will be deferred), the
"Tharaldson Pool B Excess Interest"). Interest on the Tharaldson Pool B Loan
is calculated based on the actual number of days elapsed and a 360-day year.
The Tharaldson Pool B Loan requires monthly payments (the "Tharaldson Pool
B Monthly Debt Service Payment Amount") of principal and interest of
approximately $1,299,195 (based on a 25-year amortization schedule and the
Tharaldson Pool B Initial Interest Rate). Payment of the balance of the
principal, if any, together with all accrued and unpaid interest is required
on the Tharaldson Pool B Maturity Date. Each Tharaldson Pool B Monthly Debt
Service Payment Amount is due and payable on the 11th day of each calendar
month or, if such day is not a business day, then the immediately prior
business day (the "Tharaldson Pool B Due Date"). Commencing on the Tharaldson
Pool B Anticipated Repayment Date and on each Tharaldson Pool B Due Date
thereafter, in addition to the Tharaldson Pool B Monthly Debt Service Payment
Amount, the Tharaldson Pool B Borrowers are required to apply 100% of the
Tharaldson Pool B Excess Cash Flow for the month preceding the month in which
the Tharaldson Pool B Due Date occurs in the following order of priority (a)
to the outstanding principal balance until the Tharaldson Pool B Loan has
been paid in full and (b) to the Tharaldson Pool B Excess Interest.
"Tharaldson Pool B Excess Cash Flow" means the amounts held as collected
funds in the Tharaldson Pool B Deposit Account after the application of funds
(a) to fund the Tharaldson Pool B Tax And Insurance Escrow Account as
described in "--Reserves" below, (b) to pay the Tharaldson Pool B Monthly
Debt Service Payment Amount, (c) to fund the Tharaldson Pool B FF&E Reserve
Account as described in "--Reserves" below, (d) to fund the Tharaldson Pool B
Seasonality Reserve Account as described in "--Reserves" below, (e) to pay
the Tharaldson Pool B Borrowers' budgeted operating expenses approved by the
mortgagee, and (f) to pay extraordinary capital expenditures approved by the
mortgagee in writing. The scheduled principal balance of the Tharaldson Pool
B Loan as of the Tharaldson Pool B Anticipated Repayment Date will be
approximately $144,503,224.
After the occurrence and during the continuance of an event of default
under the Tharaldson Pool B Loan, to the extent permitted by applicable law,
the entire outstanding principal balance of the Tharaldson Pool B Loan along
with due and unpaid interest thereon will bear interest at a per annum
default rate equal to the lesser of (a) the maximum rate permitted by
applicable law and (b) the greater of (i) 5% above the Tharaldson Pool B
Initial Interest Rate or the Tharaldson Pool B Revised Interest Rate, as
applicable, and (ii) the "prime rate" from time to time as set forth in The
Wall Street Journal, plus 1%.
PREPAYMENT. Voluntary prepayment is prohibited under the Tharaldson Pool B
Loan prior to the Tharaldson Pool B Anticipated Repayment Date (subject to
defeasance rights afforded the Tharaldson
S-106
<PAGE>
Pool B Borrowers), except in connection with certain casualty or
condemnation events. From and after the Tharaldson Pool B Anticipated
Repayment Date, the Tharaldson Pool B Loan may be voluntarily prepaid in
whole or in part on any Tharaldson Pool B Due Date without payment of a yield
maintenance charge or prepayment premium.
If all or any part of the principal amount of the Tharaldson Pool B Loan
is prepaid upon an acceleration of the Tharaldson Pool B Loan following the
occurrence of an event of default under the Tharaldson Pool B Loan prior to
the Tharaldson Pool B Anticipated Repayment Date, the Tharaldson Pool B
Borrowers will be required to make a yield maintenance payment in an amount
equal to the greater of (a) the excess, if any, of (i) the sum of (A) the
aggregate respective present values of all remaining scheduled interest
payments in respect of the Tharaldson Pool B Loan (or the portion of all such
interest payments corresponding to the portion of the principal of the
Tharaldson Pool B Loan to be prepaid upon acceleration) for the period from
the date of such prepayment to (and including) the Tharaldson Pool B
Anticipated Repayment Date, discounted monthly at a rate equal to a specified
treasury constant yield and based on a 360-day year of twelve 30-day months
and (B) the aggregate respective present values of all scheduled principal
payments in respect of the Tharaldson Pool B Loan (or the then unpaid portion
thereof to be prepaid upon acceleration), assuming that the entire
outstanding scheduled principal amount of the Tharaldson Pool B Loan is paid
in full on the Tharaldson Pool B Anticipated Repayment Date, discounted
monthly at a rate equal to the specified treasury constant yield and based on
a 360-day year of twelve 30-day months over (ii) the then current outstanding
principal amount of the Tharaldson Pool B Loan (or the then unpaid portion
thereof to be prepaid upon acceleration), and (b) 1% of the aggregate
principal amount of the Tharaldson Pool B Loan on the date of such prepayment
after giving effect to any payment of scheduled amortization on such date of
prepayment.
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of a Tharaldson Pool B Property
under the Tharaldson Pool B Loan, the mortgagee will be entitled, at its sole
option, to apply such proceeds to prepay the Tharaldson Pool B Loan, as
described in "--Casualty and Condemnation" below. No yield maintenance
payment or prepayment premium or penalty will be payable upon any mandatory
prepayment of the Tharaldson Pool B Loan in connection with a casualty or
condemnation unless an event of default has occurred and is continuing, in
which case the Tharaldson Pool B Borrowers will be required to pay a yield
maintenance payment calculated in the manner described above.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL--DEFEASANCE. The Tharaldson
Pool B Borrowers are permitted, prior to the Tharaldson Pool B Anticipated
Repayment Date, on any date after the second anniversary of the Closing Date,
to defease all or any portion of the Tharaldson Pool B Loan, provided that,
among other conditions, the Tharaldson Pool B Borrowers give the mortgagee at
least 30 days' prior written notice of the date of such defeasance (the
"Tharaldson Pool B Defeasance Date"), no event of default exists on the
Tharaldson Pool B Defeasance Date, and provided further that the Tharaldson
Pool B Borrowers pay on the Tharaldson Pool B Defeasance Date (i) all accrued
and unpaid interest on the Tharaldson Pool B Loan to but not including the
Tharaldson Pool B Defeasance Date (and if the Tharaldson Pool B Defeasance
Date is not a Tharaldson Pool B Due Date, the Tharaldson Pool B Defeasance
Deposit will take into account the interest that would have accrued on the
Tharaldson Pool B Loan to but not including the next Tharaldson Pool B Due
Date), (ii) all other sums then due under the Tharaldson Pool B Loan, (iii)
the Tharaldson Pool B Defeasance Deposit, and (iv) all reasonable costs and
expenses of the mortgagee incurred in connection with the defeasance. In
addition, the Tharaldson Pool B Borrowers will be required to deliver to the
mortgagee, among other things, (a) a security agreement granting the Trustee
a first priority lien on the Tharaldson Pool B Defeasance Deposit and the
U.S. Treasury obligations purchased with the Tharaldson Pool B Defeasance
Deposit, (b) an opinion of counsel for the Tharaldson Pool B Borrowers in
form and substance satisfactory to the mortgagee stating, among other things,
that the mortgagee has a perfected security interest in the noncallable U.S.
Treasury obligations purchased with the Tharaldson Pool B Defeasance Deposit,
(c) a confirmation, in form and substance reasonably satisfactory to the
mortgagee, from a "Big Six" independent certified public accounting firm or a
successor thereto, that the Tharaldson Pool B Defeasance Deposit is
S-107
<PAGE>
sufficient to pay all scheduled payments due from the Tharaldson Pool B
Borrowers under the Tharaldson Pool B Loan in connection with the proposed
defeasance, (d) an officer's certificate certifying that the requirements for
defeasance set forth in the Tharaldson Pool B Loan agreement have been met,
(e) written confirmation from the Rating Agencies that there will be no
reduction, qualification or withdrawal of the then current ratings of the
Certificates as a result of such defeasance, and (f) such other certificates,
documents or instruments as the mortgagee may reasonably request.
"Tharaldson Pool B Defeasance Deposit" means an amount equal to the sum of
(i) with respect to a total defeasance, all costs and expenses (including the
purchase price) incurred or to be incurred in the purchase of noncallable
U.S. Treasury obligations necessary to provide payments on or prior to, but
as close as possible to, all successive Tharaldson Pool B Due Dates after the
Tharaldson Pool B Defeasance Date and through and including the Tharaldson
Pool B Anticipated Repayment Date for the entire outstanding aggregate
principal amount of the Tharaldson Pool B Loan (assuming the outstanding
principal balance of the Tharaldson Pool B Loan is repaid on the Tharaldson
Pool B Anticipated Repayment Date), and in amounts equal to the debt service
due on such dates; (ii) with respect to a partial defeasance and the release
of an individual Tharaldson Pool B Property, the sum of (A) the Tharaldson
Pool B Release Amount for such Tharaldson Pool B Property plus (B) without
duplication all costs and expenses (including the purchase price) incurred or
to be incurred in the purchase of noncallable U.S. Treasury obligations
necessary to provide payments on or prior to, but as close as possible to,
all successive Tharaldson Pool B Due Dates after the Tharaldson Pool B
Defeasance Date and through and including the Tharaldson Pool B Anticipated
Repayment Date, for the portion of the outstanding aggregate principal
balance of the Tharaldson Pool B Loan being defeased (assuming the
outstanding principal balance of such defeased portion is repaid on the
Tharaldson Pool B Anticipated Repayment Date) and in amounts equal to the
debt service due on such dates with respect to such defeased portion of the
Tharaldson Pool B Loan; (iii) with respect to a partial defeasance without
the release of an individual Tharaldson Pool B Property, the sum of (A) a
portion of the outstanding principal amount of the Tharaldson Pool B Loan
equal to the amount to be partially defeased plus (B) without duplication all
costs and expenses (including the purchase price) incurred or to be incurred
in the purchase of noncallable U.S. Treasury obligations necessary to provide
payments on or prior to, but as close as possible to, all successive
Tharaldson Pool B Due Dates after the Tharaldson Pool B Defeasance Date and
through and including the Tharaldson Pool B Anticipated Repayment Date, for
the portion of the outstanding aggregate principal balance of the Tharaldson
Pool B Loan being defeased (assuming the outstanding principal balance of
such defeased portion is repaid on the Tharaldson Pool B Anticipated
Repayment Date) and in amounts equal to the debt service due on such dates
with respect to such defeased portion of the Tharaldson Pool B Loan; and (iv)
in all cases, any revenue, documentary stamp or intangible taxes or any other
tax or charge due in connection with the transfer of a portion of the note,
the creation of one or more defeased notes and undefeased notes, if
applicable, any transfer of one or more defeased notes, or otherwise required
to satisfy the terms of the Tharaldson Pool B Loan.
Upon receipt of the Tharaldson Pool B Defeasance Deposit, the mortgagee,
using the Tharaldson Pool B Defeasance Deposit, will be required to purchase
noncallable U.S. Treasury obligations on behalf of the applicable Tharaldson
Pool B Borrower and such U.S. Treasury obligations will serve as the sole
collateral for the payments of the amounts due under the Tharaldson Pool B
Loan or, in the case of a partial defeasance, the defeased note. Upon a
deposit of such U.S. Treasury obligations, the applicable Tharaldson Pool B
Borrower will have the right to assign the obligation to make payments under
the Tharaldson Pool B Loan with respect to the principal amount of the
Tharaldson Pool B Loan that has been defeased to an entity designated by the
mortgagee. If the Tharaldson Pool B Borrower does assign such obligations,
the Master Servicer will be required in the Pooling Agreement to cause such
obligations to be assumed by a special-purpose bankruptcy-remote entity.
In connection with the defeasance of the Tharaldson Pool B Loan in
accordance with the Tharaldson Pool B Loan documents, the applicable
Tharaldson Pool B Borrower will be permitted to obtain the release of one or
more of the Tharaldson Pool B Properties from the lien of the related
mortgage, subject to the conditions that (a) if the defeasance is in
connection with a release of less than all of the Tharaldson Pool B
Properties, the Tharaldson Pool B Borrower provides (i) evidence satisfactory
to the
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mortgagee that following such release the Tharaldson Pool B Debt Service
Coverage Ratio with respect to the remaining Tharaldson Pool B Properties
will not be less than the greater of (A) the Tharaldson Pool B Debt Service
Coverage Ratio for the 12 months immediately preceding the proposed release
and (B) 2.35x, and (b) the Tharaldson Pool B Borrower defeases a principal
portion of the Tharaldson Pool B Loan equal to (i) the Tharaldson Pool B
Release Amounts for the Tharaldson Pool B Properties being released in the
case of a partial defeasance or (ii) the entire principal balance of the
Tharaldson Pool B Loan in the case of a full defeasance.
"Tharaldson Pool B Debt Service Coverage Ratio" means, as of any date, the
quotient obtained by dividing net operating income of the applicable
Tharaldson Pool B Property or Properties for the 12-month period immediately
preceding, or following, as applicable, such date by the greater of (x)
aggregate interest and principal payments actually due and payable on the
Tharaldson Pool B Loan during such 12-month period and (y) interest and
principal payments on the Tharaldson Pool B Loan during such period assuming
a loan constant (comprised of interest and principal) of 10.48%.
"Tharaldson Pool B Release Amount" means, with respect to a specified
individual Tharaldson Pool B Property, an amount equal to the excess of (i)
150% of the Tharaldson Pool B Allocated Loan Amount as of the closing of the
Tharaldson Pool B Loan, in the case of nine of the Tharaldson Pool B
Properties and 125% of the Tharaldson Pool B Allocated Loan Amount in the
case of the other 84 Tharaldson Pool B Properties (as specified in the
Tharaldson Pool B Loan Agreement) over (ii) the scheduled payments of
principal made under the Tharaldson Pool B Loan in respect of the Tharaldson
Pool B Loan allocated to such individual Tharaldson Pool B Property (based on
the relative Tharaldson Pool B Allocated Loan Amounts for all of the
individual Tharaldson Pool B Properties); provided that in no event will the
Tharaldson Pool B Release Amount be greater than the then outstanding
principal amount of the Tharaldson Pool B Loan.
"Tharaldson Pool B Allocated Loan Amount" means, with respect to each
Tharaldson Pool B Property, the portion of the principal amount of the
Tharaldson Pool B Loan allocated to each such Tharaldson Pool B Property as
specified in the Tharaldson Pool B Loan agreement and determined as described
under the definition of "Allocated Loan Amount" set forth above under
"Mortgage Pool Characteristics--Certain Characteristics of the Mortgage
Loans".
OTHER FINANCING. The Tharaldson Pool B Borrowers are not permitted to
incur any additional indebtedness other than: (i) unsecured trade payables
debt incurred in the ordinary course of the Tharaldson Pool B Borrowers'
business, customarily paid within 60 days of incurrence and in fact not more
than 60 days outstanding, (ii) capital lease obligations in respect of
equipment used at the Tharaldson Pool B Properties, outstanding amounts of
which at any one time may not exceed $25,000 for any one Tharaldson Pool B
Property and $700,000 for all Tharaldson Pool B Properties, and (iii) such
other unsecured indebtedness which is required to be approved by the
mortgagee in its sole discretion and for which the Tharaldson Pool B
Borrowers have received confirmation from the Rating Agencies that such
indebtedness will not cause the reduction, qualification or withdrawal of the
then current ratings of the Certificates.
ALTERATIONS. Except upon compliance with certain conditions set forth in
the Tharaldson Pool B Loan documents (which do not include the approval of
the mortgagee), the Tharaldson Pool B Borrowers are prohibited from making or
permitting any demolition, alteration, installation, improvement or
decoration to any individual Tharaldson Pool B Property or any part thereof
or expanding or reducing any such property or the improvements thereon.
RESERVES. Pursuant to the terms of the Tharaldson Pool B Loan, the
mortgagee has established (i) a furniture, fixtures and equipment reserve
account (the "Tharaldson Pool B FF&E Reserve Account") to cover the cost of
renewals and replacements of furniture, fixtures and equipment incurred by
the Tharaldson Pool B Borrowers, which is to be funded on each Tharaldson
Pool B Due Date from funds available in the Tharaldson Pool B Deposit Account
in the amount of 5% of operating income for the prior month, (ii) a
seasonality reserve account (the "Tharaldson Pool B Seasonality Reserve
Account") to cover the cost of fluctuations in net operating income which was
funded on the closing of the Tharaldson Pool B Loan in the amount of the
Tharaldson Pool B Monthly Debt Service Payment Amount, and to be
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funded on each Tharaldson Pool B Due Date from funds available in the
Tharaldson Pool B Deposit Account if the amount then available in the
Tharaldson Pool B Seasonality Reserve Account is less than the Tharaldson
Pool B Monthly Debt Service Payment Amount, in an amount equal to the amount
of such deficiency, (iii) a tax and insurance account (the "Tharaldson Pool B
Tax and Insurance Escrow Account") to be funded on each Tharaldson Pool B Due
Date from funds available in the Tharaldson Pool B Deposit Account in an
amount equal to one-twelfth of the aggregate insurance premiums, certain
taxes, ground lease payments, if any, and certain other charges that the
mortgagee reasonably estimates will be payable in the next ensuing 12 months,
(iv) a deferred maintenance reserve account, funded at the closing of the
Tharaldson Pool B Loan in the amount of $221,009, to cover the cost of
certain deferred maintenance conditions existing at that time, (v) an
environmental reserve account, funded at the closing of the Tharaldson Pool B
Loan in the amount of $50,938, to cover the cost of remediating certain
environmental conditions existing at that time, and (vi) a tax reserve
account for the payment of potential tax liabilities of the Tharaldson Pool B
Borrowers and certain of their affiliates, funded at the closing of the
Tharaldson Pool B Loan in the amount of $1,243,143.
CASH MANAGEMENT; LOCKBOX. The Tharaldson Pool B Borrowers have established
and are required to maintain a deposit account (the "Tharaldson Pool B
Deposit Account") and are permitted to establish a property level sweep
account for each Tharaldson Pool B Property (each, a "Tharaldson Pool B
Property Sweep Account"). The Tharaldson Pool B Deposit Account and each
Tharaldson Pool B Property Sweep Account are required to be under the sole
dominion and control of the mortgagee. The Tharaldson Pool B Borrowers are
required to direct all third parties from whom the Tharaldson Pool B
Borrowers have accounts receivable, including credit card companies, to make
their payments in respect of sums due to the Tharaldson Pool B Borrowers
directly to the Tharaldson Pool B Deposit Account. The Tharaldson Pool B
Borrowers are required to instruct the Tharaldson Pool Manager to deposit all
checks and payments into the Tharaldson Pool B Deposit Account or the
applicable Tharaldson Pool B Property Sweep Account within one business day
after receipt thereof. Funds on deposit in the Tharaldson Pool B Property
Sweep Account are withdrawn approximately once per week and deposited into
the Tharaldson Pool B Deposit Account.
On each Tharaldson Pool B Due Date, provided no default or event of
default under the Tharaldson Pool B Loan has occurred and is continuing, the
mortgagee is required to distribute funds from the Tharaldson Pool B Deposit
Account in the following order of priority: (a) to fund the Tharaldson Pool B
Tax and Insurance Escrow Account, (b) to pay the Tharaldson Pool B Monthly
Debt Service Payment Amount, (c) to fund the Tharaldson Pool B FF&E Reserve
Account, (d) if required, to fund the Tharaldson Pool B Seasonality Reserve
Account, (e) from and after the Tharaldson Pool B Anticipated Repayment Date,
or during the continuance of an event of default, to the Tharaldson Pool B
Borrowers in an amount equal to the budgeted operating expenses (or if any
Tharaldson Pool B Borrower timely requests additional amounts to pay
operating expenses, up to an additional 105% of the budgeted amount on a
cumulative year-to-date basis (less any amounts previously received by the
Tharaldson Pool B Borrowers pursuant to this parenthetical) for the
Tharaldson Pool B Properties, but in no event more than 15% of such month's
budgeted amount for operating expenses) for the month immediately prior to
the month in which such Tharaldson Pool B Due Date occurs (provided that each
Tharaldson Pool B Borrower has delivered to the mortgagee an officer's
certificate certifying that there is not outstanding for more than 60 days
any amounts claimed by any creditor to be due and owing from such Tharaldson
Pool B Borrower (except for claims such Tharaldson Pool B Borrower is in good
faith contesting and the payment for which it has escrowed with the
mortgagee), and that the amounts disbursed to the Tharaldson Pool B Borrowers
pursuant to this clause (e) must be used solely to pay their creditors for
costs and expenses incurred to date), (f) from and after the Tharaldson Pool
B Anticipated Repayment Date, to pay the costs of extraordinary capital
expenditures approved in writing by the mortgagee, (g) from and after the
Tharaldson Pool B Anticipated Repayment Date, to prepay the principal due
under the Tharaldson Pool B Loan until the principal balance of the
Tharaldson Pool B Loan is paid in full, (h) from and after the Tharaldson
Pool B Anticipated Repayment Date, to pay the Tharaldson Pool B Excess
Interest, (i) to the extent payable following an event of default under the
Tharaldson Pool B Loan, to pay interest accrued and unpaid at the excess of
the default rate over the Tharaldson Pool B Initial Interest Rate or the
Tharaldson Pool B Revised Interest Rate, as applicable, and (j) provided no
event of default
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exists, to the Tharaldson Pool B Borrowers or their designees, any funds
remaining in the Tharaldson Pool B Deposit Account; provided that the
mortgagee, in its sole discretion, may permit a distribution under this
clause (j) notwithstanding the occurrence of an event of default under the
Tharaldson Pool B Loan.
Prior to the Tharaldson Pool B Anticipated Repayment Date and so long as
no default or event of default under the Tharaldson Pool B Loan documents has
occurred and is continuing, if at any time immediately available funds in the
Tharaldson Pool B Deposit Account are sufficient to pay in full, on the next
Tharaldson Pool B Due Date, the amounts payable pursuant to clauses (a)
through (d) and clause (i) above (if applicable), then on each Friday (or if
such day is not a business day, the next business day) during the period from
such time to such next Tharaldson Pool B Due Date, the mortgagee is required
to transfer from the Tharaldson Pool B Deposit Account (or authorize such
transfer) any immediately available funds in excess of the aggregate of such
amounts to the Tharaldson Pool B Borrowers or their designees.
TRANSFER OF THE THARALDSON POOL B PROPERTIES AND INTERESTS IN THE
THARALDSON POOL B BORROWERS; ENCUMBRANCES. Unless permitted by the Tharaldson
Pool B Loan documents as described below, and with the exception of
Tharaldson Pool B Permitted Encumbrances, the Tharaldson Pool B Borrowers are
not permitted without the mortgagee's consent, not to be unreasonably
withheld or delayed, and a written confirmation from the Rating Agencies that
such action will not, in and of itself, result in a downgrade, withdrawal or
qualification of any rating then assigned to any outstanding Certificates, to
(A) sell, assign, convey, transfer or otherwise dispose of or encumber legal,
beneficial or equitable interests in all or any part of the Tharaldson Pool B
Properties, (B) permit or suffer any owner, directly or indirectly, of a
beneficial interest in the Tharaldson Pool B Properties to transfer such
interest, whether by transfer of stock or other beneficial interest in any
entity or otherwise, (c) mortgage, hypothecate or otherwise encumber or grant
a security interest in all or any part of the Tharaldson Pool B Properties,
or (D) file a declaration of condominium with respect to any such Tharaldson
Pool B Property.
In addition to the above described conditions with respect to a transfer
of the Tharaldson Pool B Properties, the Tharaldson Pool B Borrower may only
sell, assign, convey, transfer or otherwise dispose of legal or equitable
title to or any interest in the Tharaldson Pool B Properties if: (A) after
giving effect to the proposed transfer, (i) the Tharaldson Pool B Properties
will be owned by one or more special purpose entities each of which will be
in compliance with certain single purpose bankruptcy-remote representations,
warranties and covenants set forth in the Tharaldson Pool B Loan documents,
which have assumed in writing and agreed to comply with the terms of the
Tharaldson Pool B Loan documents, (ii) the transferee will be owned and
controlled (directly or indirectly) by a person or persons satisfactory to
the mortgagee in its sole discretion, (iii) the Tharaldson Pool B Properties
will be managed by a Tharaldson Pool Acceptable Manager, and (iv) no event of
default will have occurred and be continuing, and (B) prior to any such
transaction, the proposed transferee delivers to mortgagee an officer's
certificate giving certain assurances to the general effect that the
transferee is not an employee benefit plan, or, in any event, the transfer
will not give rise to "prohibited transactions" under ERISA or similar laws.
SUBSTITUTION OF INDIVIDUAL PROPERTIES. A Tharaldson Pool B Borrower is
permitted to substitute for any Tharaldson Pool B Property owned by such
Tharaldson Pool B Borrower a property (a "Tharaldson Pool B Substitute
Property") of like kind and quality, provided, among other things, (i) no
event of default under the Tharaldson Pool B Loan documents has occurred and
is continuing, (ii) written confirmation has been obtained from the Rating
Agencies that such action will not, in and of itself, result in a downgrade,
withdrawal or qualification of any rating then assigned to any outstanding
Certificates, (iii) the Tharaldson Pool B Debt Service Coverage Ratio for all
the Tharaldson Pool B Properties as of such date (assuming the proposed
substitution of the Tharaldson Pool B Substitute Property), will be at least
equal to the greater of (A) the Tharaldson Pool B Debt Service Coverage Ratio
for all of the Tharaldson Pool B Properties as of such date (including the
applicable Tharaldson Pool B Property to be substituted) and (B) 2.35x, and
(iv) the mortgagee will have received an opinion of counsel reasonably
acceptable to it, to the effect that (A) a "significant modification" of the
Tharaldson Pool B Loan within the
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meaning of Treasury Regulations Section 1.860G-2 will not occur by reason of
the proposed substitution and (B) the proposed substitution will not
adversely affect the status of the entity that holds the Tharaldson Pool B
note as a REMIC (assuming for such purposes that such entity otherwise
qualifies as a REMIC).
INSURANCE. Each Tharaldson Pool B Borrower is required to maintain, at its
sole cost and expense, the following insurance: (a) policies of insurance
against loss or damage from standard perils included within the
classification "All Risks of Physical Loss", including earthquake damage,
maintained in an aggregate amount equal to the then full replacement cost of
the applicable Tharaldson Pool B Property and related assets (without
deduction for physical depreciation), with deductibles no greater than
$50,000 (as escalated by a specified consumer price index increase) with
higher deductibles for wind and earthquake insurance as the applicable issuer
may require; (b) flood insurance (if any part of a Tharaldson Pool B Property
is located in an area identified by the Federal Emergency Management Agency
as an area federally designated a "100 year flood plain" and flood insurance
is generally available at reasonable premiums and in such amounts as
generally are required by institutional lenders for similar properties (or if
not so available from a private carrier, from the federal government at
commercially reasonable premiums to the extent available)), in either case,
in an amount at least equal to the lesser of the applicable Tharaldson Pool B
Allocated Loan Amount or the maximum limit of coverage available under said
program with respect to such Tharaldson Pool B Property; (c) comprehensive
general liability insurance, including broad form property damage, blanket
contractual, liquor liability (where applicable) and personal injuries
coverages and containing minimum limits per occurrence of $2,000,000 for any
policy year as well as at least $23,000,000 excess and/or umbrella liability
insurance; (d) rental loss and/or business interruption insurance in an
amount sufficient to avoid any coinsurance penalty and equal to the greater
of (i) estimated gross revenues from operations from such Tharaldson Pool B
Property net of nonrecurring expenses and (ii) projected operating expenses
(including debt service) needed to maintain and operate such Tharaldson Pool
B Property, in each case for up to 18 months; (e) insurance against loss or
damage from leakage of sprinkler systems and explosion of steam boilers, air
conditioning equipment, high pressure piping, machinery and equipment,
pressure vessels or similar apparatus and against loss of occupancy or use
arising from any such breakdown, in such amounts as are generally available
at reasonable premiums and are generally required by institutional lenders
for property comparable to the Tharaldson Pool B Property; (f) worker's
compensation insurance with respect to all employees of such Tharaldson Pool
B Borrower, as and to the extent required by applicable law or governmental
authority; (g) during any period of repair or restoration, builder's "all
risk" insurance in an amount not less than the full insurable value of the
applicable Tharaldson Pool B Property as mortgagee may request, in form and
substance acceptable to mortgagee; (h) coverage to compensate for the cost of
demolition and the increased cost of demolition and the increased cost of
construction for any applicable Tharaldson Pool B Property in an amount
satisfactory to mortgagee; and (i) such other insurance as may from time to
time be reasonably required by the mortgagee in order to protect its
interests.
The Tharaldson Pool B Loan generally requires the Tharaldson Pool B
Borrowers to obtain the insurance described above from insurers approved by
the mortgagee and licensed to do business in the state where the applicable
Tharaldson Pool B Property is located and, unless otherwise approved by the
mortgagee and the Rating Agencies, having claims paying ability ratings of
"AA" or better by S&P and if mortgagee so requires, by the Rating Agencies.
CASUALTY AND CONDEMNATION. Following the occurrence of a casualty or
condemnation affecting a Tharaldson Pool B Property, the applicable
Tharaldson Pool B Borrower, regardless of whether proceeds are available, is
required to proceed reasonably promptly to restore, repair, replace or
rebuild the affected Tharaldson Pool B Property to the extent practicable to
be of at least equal value and of substantially the same character as prior
to such casualty or condemnation, all to be effected in accordance with the
terms of the Tharaldson Pool B Loan documents applicable to alterations.
In the event of a casualty at a Tharaldson Pool B Property that involves a
loss of less than 40% of the outstanding principal balance of the Tharaldson
Pool B Allocated Loan Amount for the applicable Tharaldson Pool B Property or
a condemnation that that involves a loss of less than 20% of the outstanding
principal balance of the Tharaldson Pool B Allocated Loan Amount for the
applicable
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Tharaldson Pool B Property, the mortgagee is required to permit the
application of the proceeds resulting therefrom (after reimbursement of any
expenses incurred by the mortgagee in collecting the insurance proceeds) to
pay or reimburse the applicable Tharaldson Pool B Borrower, for the cost of
restoring, repairing, replacing or rebuilding the affected Tharaldson Pool B
Property, in the manner described below, provided that no default or event of
default under the Tharaldson Pool B Loan has occurred and is then continuing
and, in the reasonable judgment of the mortgagee: (i) the Tharaldson Pool B
Property can be restored to an economical unit not less valuable (taking into
account the effect of the termination of any material agreements and the
proceeds of any rental loss or business interruption insurance which the
Tharaldson Pool B Borrower receives or is entitled to receive, in each case,
due to such casualty or condemnation) and not less useful than the same was
prior to the casualty or condemnation, (ii) the Tharaldson Pool B Property
after such restoration will adequately secure the outstanding balance of the
applicable Tharaldson Pool B Allocated Loan Amount, (iii) the restoration can
be completed by the earliest to occur of: (A) the 180th day following the
receipt of the proceeds, (or if earlier, the 365th day after such casualty or
condemnation) or with a written confirmation from the Rating Agencies that
there will be no downgrade, qualification or withdrawal of the then current
ratings of the Certificates with respect thereto, such longer period as may
reasonably be required, (B) the 180th day prior to the Tharaldson Pool B
Maturity Date, and (C) with respect to a casualty, the expiration of the
payment period on the rental loss insurance coverage in respect of such
casualty; and (iv) during the period of the restoration, the sum of (A)
income derived from the Tharaldson Pool B Property plus (B) proceeds of rent
loss insurance or business interruption insurance, if any, payable, together
with such other monies as the Tharaldson Pool B Borrower may irrevocably make
available for the restoration, will equal or exceed 105% of the sum of (1)
expenses in connection with the operation of such Tharaldson Pool B Property
and (2) the debt service in respect of the Tharaldson Pool B Allocated Loan
Amount for such Tharaldson Pool B Property.
If any of the conditions set forth in the foregoing proviso is not
satisfied, then, unless the mortgagee elects otherwise at its sole option,
the proceeds are required to be applied to the prepayment of the Tharaldson
Pool B Loan. If a casualty at a Tharaldson Pool B Property involves a loss of
40% or more of the outstanding principal balance of the Tharaldson Pool B
Allocated Loan Amount for the affected Tharaldson Pool B Property or a
condemnation involves a loss of 20% or more of the outstanding principal
balance of the Tharaldson Pool B Allocated Loan Amount for the affected
Tharaldson Pool B Property, then the mortgagee may at its option (to be
exercised by notice to the Tharaldson Pool B Borrower which must be given
within 30 days after the receipt of the proceeds) apply the net proceeds to
the prepayment of the Tharaldson Pool B Loan or to reimburse the Tharaldson
Pool B Borrower for the cost of any restoration in the manner set forth
below. Any such prepayment will be without the payment of a yield maintenance
or prepayment premium or penalty except that if an event of default under the
Tharaldson Pool B Loan has occurred and is continuing, then the Tharaldson
Pool B Borrower will be required to pay the yield maintenance payment, if
any, as described herein.
If the Tharaldson Pool B Borrower is entitled to reimbursement out of
proceeds, such proceeds are required to be disbursed on a monthly basis upon
the mortgagee being furnished with: (i) such architect's certificates,
waivers of lien, contractor's sworn statements, title insurance endorsements,
bonds, plats of survey and such other evidences of cost, payment and
performance as the mortgagee may reasonably require and approve, and (ii) all
plans and specifications for such restoration, such plans and specifications
to be approved by the mortgagee prior to commencement of any work (such
approval not to be unreasonably withheld or delayed). In addition, no payment
made prior to the final completion of the restoration is permitted to exceed
95% of the value of the work performed from time to time; and at all times,
the undisbursed balance of such proceeds remaining in the hands of the
mortgagee, together with the funds deposited for that purpose or irrevocably
committed to the satisfaction of the mortgagee by or on behalf of such
Tharaldson Pool B Borrower for that purpose, is required to be at least
sufficient in the reasonable judgment of the mortgagee to pay for the cost of
completion of the restoration, free and clear of all liens. Prior to any
disbursement, the mortgagee must have received evidence reasonably
satisfactory to it of the estimated cost of completion of the restoration,
and the Tharaldson Pool B Borrower must have deposited with the mortgagee
eligible collateral in an amount equal to the excess (if any) of such
estimated cost of completion over net proceeds. Any surplus which may remain
out of proceeds received pursuant to a casualty will be paid to the
Tharaldson Pool B Borrower after payment
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of such costs of restoration. Any surplus which may remain out of proceeds
received pursuant to a condemnation after payment of such costs of
restoration will be escrowed with and pledged to the mortgagee as security
for the Tharaldson Pool B Loan.
FINANCIAL REPORTING. The Tharaldson Pool B Borrowers are required to use
their best efforts to furnish to the mortgagee, within 80 days following the
end of each fiscal year, but in no event later than 120 days following the
end of each fiscal year, a complete copy of their annual financial
statements, audited by a nationally recognized accounting firm reasonably
acceptable to the mortgagee, in accordance with GAAP, covering the Tharaldson
Pool B Properties on a combined basis, including combined balance sheets and
statements of profit and loss, all in such detail as the mortgagee may
reasonably request. Together with such annual financial statements, the
Tharaldson Pool B Borrowers are also required to furnish to the mortgagee (A)
an officer's certificate certifying as of the date thereof whether, to the
Tharaldson Pool B Borrowers' knowledge, there exists a default or an event of
default, and if such default or event of default exists, the nature thereof,
the period of time it has existed and the action then being taken to remedy
the same, and (B) an annual report for the most recently completed fiscal
year, containing (i) capital expenditures for each Tharaldson Pool B Property
stated separately with respect to any project costing in excess of $25,000
for (x) maintenance and (y) renovations, expansions and enhancements, and
(ii) occupancy levels, ADRs and RevPAR for each Tharaldson Pool B Property
for such period.
In addition, the Tharaldson Pool B Borrowers are required to use their
best efforts to furnish to the mortgagee on or before the 30th day after the
end of each calendar month, but in no event later than the 40th day after the
end of each calendar month, among other items, (i) monthly and year-to-date
operating statements prepared for each calendar month (on an aggregate and on
a property-by-property basis), (ii) a statement of the actual capital
expenditures made in respect of each Tharaldson Pool B Property, and (iii)
occupancy levels, ADRs and RevPAR for each Tharaldson Pool B Property for
such period. The Tharaldson Pool B Borrowers are also required to furnish to
the mortgagee on or before the 40th day after the end of each fiscal quarter,
among other items, (i) quarterly and year-to-date statements prepared for
such fiscal quarter with respect to each Tharaldson Pool B Borrower, with a
balance sheet for such quarter, (ii) from and after the Tharaldson Pool B
Anticipated Repayment Date or during the continuance of an event of default,
a comparison of the budgeted income and expenses and the actual income and
expenses for such quarter and year to date for the Tharaldson Pool B
Properties on an aggregate and per-property basis, and (iii) occupancy
levels, ADRs and RevPAR for each Tharaldson Pool B Property for such period.
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Graphics omitted: photographs of Tharaldson Pool A properties located in
Davenport, Iowa, Peoria, Illinois, Fairview Heights, Illinois and
Davenport, Iowa.
[Grande Loan II Logo]
<PAGE>
THARALDSON POOL A: THE BORROWERS; THE PROPERTIES
THE LOAN. The Tharaldson Pool A Loan had a principal balance as of the
Cut-Off Date of approximately $178,671,275 and is secured by first priority
mortgage and/or deed of trust liens encumbering the Tharaldson Pool A
Borrowers' interests in 90 limited service hotels located in Arkansas, Iowa,
Illinois, Indiana, Kentucky, Michigan, Minnesota, Montana, North Dakota,
Ohio, Oklahoma, South Dakota, Texas and Wisconsin (the "Tharaldson Pool A
Properties"). The Tharaldson Pool A Borrowers own fee title to the Tharaldson
Pool A Properties. The mortgages encumbering the Tharaldson Pool A Properties
are cross-defaulted and cross-collateralized with each other. The Tharaldson
Pool A Loan is neither cross-collateralized nor cross-defaulted with the
Tharaldson Pool B Loan. The Tharaldson Pool A Loan was originated by GSMC on
January 20, 1998.
THE BORROWERS. The Tharaldson Pool A Borrowers consist of 79 corporations,
11 limited partnerships and two holding companies (the "Tharaldson Pool A
Borrowers"). The holding companies are Tharaldson Lodging I, Inc., and
Tharaldson Lodging II, Inc., both North Dakota corporations. Both holding
companies are wholly-owned subsidiaries of Tharaldson Motels, Inc., which is
controlled by Gary Tharaldson and certain Tharaldson family members. The
Tharaldson Pool A Borrowers have no material assets other than their
respective interests in the Tharaldson Pool A Properties and related
interests. The Tharaldson Pool Manager, which is the property manager for the
Tharaldson Pool A Properties, is an affiliate of Tharaldson Motels, Inc.
SECURITY. The Tharaldson Pool A Loan is a non-recourse loan, secured only
by the fee and leasehold interests of the Tharaldson Pool A Borrowers in the
Tharaldson Pool A Properties and certain related collateral (including
assignments of leases and rents and the funds in certain accounts). Subject
to certain limited exceptions, neither the Tharaldson Pool A Borrowers nor
any of its affiliates is personally liable for payment of the Tharaldson Pool
A Loan. The Tharaldson Pool A Borrowers have represented that they own good
and indefeasible fee simple or leasehold title, as applicable, to the
Tharaldson Pool A Properties, free and clear of all liens other than
encumbrances described in the applicable title insurance policies and other
encumbrances permitted by the mortgagee under the Tharaldson Pool A Loan
documents (the "Tharaldson Pool A Permitted Encumbrances"). The title
insurance policies issued upon the origination of the Tharaldson Pool A Loan
insure that each of the mortgages securing the Tharaldson Pool A Loan
constitutes a valid and enforceable first lien on the Tharaldson Pool A
Properties encumbered by it, subject to certain exceptions and exclusions
from coverage set forth in the policies.
THE PROPERTIES. The Tharaldson Pool A Properties were built between 1988
and 1997 and consist of 90 limited service hotels containing 5,848 rooms and
are located in 14 states. The Tharaldson Pool A Properties consist of 35
Fairfield Inns, 22 Comfort Inns, 12 Hampton Inns, five Residence Inns, four
Comfort Suites, three County Inn & Suites, three Courtyards, two Sleep Inns,
one Homewood Suite, one Super 8, one Tharaldson Inn & Suites and one
non-flagged property which is currently 100% leased to a third party.
S-115
<PAGE>
FRANCHISE AFFILIATIONS. The following table summarizes the franchise
affiliations of the Tharaldson Pool A Properties:
<TABLE>
<CAPTION>
WEIGHTED
CUT-OFF DATE AVERAGE UNDERWRITTEN
TOTAL ALLOCATED APPRAISED CUT-OFF NET CASH
FRANCHISE HOTELS ROOMS LOAN AMOUNT VALUE DATE LTV FLOW
- ----------------------- -------- ------- -------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Comfort Inn............. 22 1,311 $ 35,315,615 $ 64,300,000 56.2% $ 6,606,045
Comfort Suites.......... 4 247 8,880,413 17,000,000 52.4 1,739,979
Country Inn & Suites ... 3 178 4,246,115 8,500,000 51.3 901,401
Courtyard............... 3 232 8,760,972 15,400,000 57.9 1,637,061
Fairfield Inn........... 35 2,302 72,911,552 132,000,000 55.8 15,272,264
Hampton Inn............. 12 789 24,071,273 43,500,000 56.0 4,457,368
Homewood Suites......... 1 66 2,660,541 4,900,000 54.3 530,757
Independent............. 1 121 2,986,016 9,700,000 30.8 596,736
Residence Inn........... 5 354 13,262,889 26,900,000 50.9 2,845,856
Sleep Inn............... 2 123 3,071,616 5,500,000 56.5 619,281
Super 8................. 1 61 1,075,961 2,000,000 53.8 185,907
Tharaldson Inn &
Suites................. 1 64 1,428,311 3,300,000 43.3 235,760
-------- ------- -------------- -------------- ---------- --------------
Totals/Weighted
Average................ 90 5,848 $178,671,275 $333,000,000 54.8% $35,628,415
======== ======= ============== ============== ==============
</TABLE>
THRALDSON POOL A
FRANCHISE AFFILIATIONS BY ALLOCATED LOAN AMOUNT
[GRAPHIC OMITTED]
S-116
<PAGE>
GEOGRAPHIC LOCATION. The following table summarizes the geographic
location of the Tharaldson Pool A Properties:
<TABLE>
<CAPTION>
WEIGHTED
CUT-OFF DATE AVERAGE UNDERWRITTEN
TOTAL ALLOCATED APPRAISED CUT-OFF NET CASH
STATE PROPERTIES ROOMS LOAN AMOUNT VALUE DATE LTV FLOW
- --------------- ------------ ------- -------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Arkansas........ 2 122 $ 3,314,478 $ 5,700,000 58.4% $ 728,330
Iowa............ 7 446 10,929,815 22,800,000 49.7 2,393,825
Illinois........ 23 1,445 44,746,450 79,900,000 56.5 8,619,687
Indiana......... 8 511 13,921,804 27,300,000 52.0 2,657,275
Kentucky........ 1 68 2,744,149 4,900,000 56.0 577,626
Michigan........ 1 57 2,188,750 4,000,000 54.7 498,473
Minnesota....... 5 458 15,078,387 32,500,000 48.9 3,273,690
Montana......... 3 184 5,376,820 9,900,000 54.6 1,130,862
North Dakota ... 3 176 3,274,665 7,400,000 45.1 798,828
Ohio............ 15 950 32,727,735 57,200,000 58.3 5,924,268
Oklahoma........ 2 128 3,870,873 7,400,000 52.3 855,355
South Dakota ... 2 128 3,440,886 7,200,000 48.4 694,620
Texas........... 11 726 23,745,797 43,200,000 55.8 4,821,418
Wisconsin....... 7 449 13,310,666 23,600,000 57.0 2,654,158
------------ ------- -------------- -------------- ---------- --------------
Totals/Weighted
Average........ 90 5,848 $178,671,275 $333,000,000 54.8% $35,628,415
============ ======= ============== ============== ==============
</TABLE>
GRAPHIC OMITTED: Map of United States which highlights the states where
Tharaldson Pool A Properties are located and provides for the following
information with respect to each state:
Montana
3 properties
North Dakota
3 Properties
Minnesota
5 Properties
Wisconsin
7 Properties
Indiana
8 Properties
Michigan
1 Property
Ohio
15 Properties
Kentucky
1 Property
South Dakota
2 Properties
Iowa
7 Properties
Oklahoma
2 Properties
Texas
11 Properties
Arkansas
2 Properties
Illinois
23 Properties
PROPERTY SUMMARY. The following table sets forth certain information, on a
comparative basis, concerning, among other things, the Cut-Off Date Allocated
Loan Amount, number of rooms, occupancy rates, Underwritten Net Cash Flow,
Cut-Off Date LTV and DSCR for the Tharaldson Pool A Properties:
S-117
<PAGE>
THARALDSON POOL A PROPERTIES SUMMARY
<TABLE>
<CAPTION>
1997 UNDERWRITTEN
HOTEL CITY STATE ROOMS OCCUPANCY OCCUPANCY
-------------------- -------------- ------- ------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 Fairfield Inn........Fayetteville AR 61 72% 72%
2 Sleep Inn............Fayetteville AR 61 75 75
3 Comfort Inn..........Cedar Rapids IA 60 68 68
4 Fairfield Inn........Coralville IA 63 78 78
5 Country Inn & Suites.Davenport IA 64 65 65
6 Fairfield Inn........Davenport IA 62 75 75
7 Residence Inn........Davenport IA 78 68 68
8 Fairfield Inn........Sioux City IA 62 75 75
9 Fairfield Inn........Waterloo IA 57 82 80
10 Comfort Inn..........Champaign IL 67 68 65
11 Comfort Inn..........Danville IL 56 82 82
12 Fairfield Inn........Fairview IL 63 80 80
Heights
13 Hampton Inn..........Fairview IL 63 75 75
Heights
14 Hampton Inn..........Forsyth IL 61 73 73
15 Comfort Inn..........Galesburg IL 46 82 82
16 Fairfield Inn........Galesburg IL 56 83 83
17 Comfort Inn..........Joliet IL 64 80 80
18 Comfort Inn..........Joliet IL 67 74 74
19 Fairfield Inn........Joliet IL 64 77 77
20 Comfort Inn..........Moline IL 63 79 79
21 Fairfield Inn........Moline IL 63 71 71
22 Comfort Inn..........Morris IL 50 81 81
23 Comfort Suites.......Peoria IL 66 79 79
24 Courtyard............Peoria IL 78 77 77
25 Comfort Inn..........Quincy IL 58 77 77
26 Fairfield Inn........Quincy IL 63 82 82
27 Comfort Inn..........Rockford IL 64 73 73
28 Comfort Inn..........Springfield IL 66 83 80
29 Courtyard............Springfield IL 78 80 80
30 Fairfield Inn........Springfield IL 63 78 78
31 Sleep Inn............Springfield IL 62 72 72
32 Hampton Inn..........Tinley Park IL 64 63 63
33 Comfort Inn..........Anderson IN 56 72 72
34 Comfort Inn..........Evansville IN 52 77 77
35 Hampton Inn..........Ft. Wayne IN 90 67 67
36 Comfort Inn..........Indianapolis IN 58 67 67
37 Comfort Inn..........Kokomo IN 63 74 74
38 Fairfield Inn........Kokomo IN 61 73 73
39 Fairfield Inn........Lafayette IN 79 76 76
40 Comfort Inn..........Richmond IN 52 68 68
41 Hampton Inn..........Lexington KY 68 88 85
42 Fairfield Inn........Jackson MI 57 84 84
43 Fairfield Inn........Bloomington, MN 134 82 82
44 Fairfield Inn........Coon Rapids MN 59 72 72
45 Fairfield Inn........Eden Prairie MN 94 76 76
46 Independent..........Mendota Heights MN 121 100 100
47 Country Inn & Suites.Owatonna MN 50 80 80
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CUT-OFF DATE
OPENING ALLOCATED APPRAISED CUT-OFF
DATE UWNCF LOAN AMOUNT VALUE DATE LTV DSCR
--------- ------------ -------------- -------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
1 Aug-95 $430,830 $1,803,554 $ 3,300,000 54.7% 2.81x
2 Nov-95 297,500 1,510,924 2,400,000 63.0 2.32
3 Apr-88 174,472 1,022,213 2,000,000 51.1 2.01
4 Apr-92 380,628 1,846,353 3,000,000 61.5 2.43
5 Jul-96 332,036 1,596,523 3,200,000 49.9 2.45
6 Sep-91 253,793 1,073,971 2,200,000 48.8 2.78
7 Nov-96 585,342 2,280,321 6,400,000 35.6 3.02
8 Jul-91 353,384 1,521,873 3,300,000 46.1 2.73
9 Jul-92 314,170 1,588,561 2,700,000 58.8 2.33
10 Nov-89 187,774 1,327,782 2,300,000 57.7 1.66
11 Jun-90 213,988 1,281,996 2,000,000 64.1 1.96
12 Jul-93 502,015 2,696,373 4,600,000 58.6 2.19
13 Jul-93 374,047 2,181,783 3,500,000 62.3 2.02
14 May-93 386,153 1,903,088 3,500,000 54.4 2.39
15 Jul-89 262,235 1,392,479 2,300,000 60.5 2.22
16 Feb-95 401,414 2,031,486 3,500,000 58.0 2.32
17 Apr-91 415,298 2,409,715 3,800,000 63.4 2.03
18 Sep-90 425,981 1,592,542 3,600,000 44.2 3.15
19 Feb-96 393,447 2,089,216 3,600,000 58.0 2.22
20 Apr-89 303,110 1,717,955 3,200,000 53.7 2.08
21 Aug-92 363,687 1,694,067 3,000,000 56.5 2.53
22 Jan-90 264,352 1,393,474 2,600,000 53.6 2.23
23 May-91 424,576 1,989,682 3,600,000 55.3 2.51
24 Dec-93 642,621 2,900,417 5,500,000 52.7 2.61
25 Oct-91 295,769 1,935,934 3,300,000 58.7 1.80
26 Feb-95 459,584 2,454,505 4,000,000 61.4 2.20
27 May-92 319,995 1,721,936 2,900,000 59.4 2.19
28 Mar-92 456,275 2,248,470 4,200,000 53.5 2.39
29 Jan-94 615,549 2,769,033 5,400,000 51.3 2.62
30 Feb-92 386,606 2,087,225 3,400,000 61.4 2.18
31 Feb-94 321,781 1,560,691 3,100,000 50.3 2.43
32 Jun-96 203,430 1,366,600 3,000,000 45.6 1.75
33 Nov-90 162,406 1,196,397 2,100,000 57.0 1.60
34 Oct-91 261,838 1,320,815 2,800,000 47.2 2.33
35 Oct-96 501,882 2,488,347 5,400,000 46.1 2.37
36 Jan-91 235,081 1,150,612 2,600,000 44.3 2.40
37 Apr-90 333,844 1,441,251 3,500,000 41.2 2.73
38 Jan-92 396,230 2,012,575 3,600,000 55.9 2.32
39 Apr-95 585,009 2,984,026 5,300,000 56.3 2.31
40 Feb-92 180,985 1,327,782 2,000,000 66.4 1.60
41 Jun-94 577,626 2,744,149 4,900,000 56.0 2.48
42 May-93 498,473 2,188,750 4,000,000 54.7 2.68
43 Mar-95 1,361,940 6,064,599 11,600,000 52.3 2.64
44 Aug-96 338,817 1,359,633 3,000,000 45.3 2.93
45 Jan-97 676,653 3,403,063 6,200,000 54.9 2.34
46 Oct-94 596,736 2,986,016 9,700,000 30.8 2.35
47 May-95 299,544 1,265,076 2,000,000 63.3 2.79
</TABLE>
S-118
<PAGE>
THARALDSON POOL A PROPERTIES SUMMARY
<TABLE>
<CAPTION>
1997 UNDERWRITTEN
HOTEL CITY STATE ROOMS OCCUPANCY OCCUPANCY
-------------------- ----------------- ----- ----- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
48 Fairfield Inn........Bozeman MT 57 72 72
49 Comfort Inn..........Great Falls MT 64 74 74
50 Fairfield Inn........Great Falls MT 63 79 79
51 Fairfield Inn........Grand Forks ND 62 86 80
52 Comfort Inn..........Jamestown ND 52 79 79
53 Fairfield Inn........Minot ND 62 60 60
54 Courtyard............Akron OH 76 73 73
55 Hampton Inn..........Akron OH 64 64 64
56 Comfort Suites.......Columbus OH 60 83 80
57 Homewood Suites......Columbus OH 66 85 85
58 Fairfield Inn........Fairborn (Dayton) OH 63 83 83
59 Hampton Inn..........Fairborn (Dayton) OH 63 80 80
60 Fairfield Inn........Lima OH 64 87 80
61 Comfort Inn..........Marion OH 56 83 80
62 Fairfield Inn........Marion OH 57 87 87
63 Hampton Inn..........Mansfield/Ontario OH 62 70 70
64 Country Inn & Suites.Toledo OH 64 62 62
65 Tharaldson Inn & Maumee OH 64 55 55
Suites...............
66 Fairfield Inn........Youngstown OH 64 70 70
67 Hampton Inn..........Youngstown OH 64 74 74
68 Fairfield Inn........Zanesville OH 63 78 78
69 Fairfield Inn........Stillwater OK 64 73 73
70 Fairfield Inn........Tulsa OK 64 81 80
71 Comfort Inn..........Sioux Falls SD 67 76 76
72 Comfort Suites.......Sioux Falls SD 61 77 77
73 Fairfield Inn........Amarillo TX 76 75 75
74 Residence Inn........Amarillo TX 78 83 80
75 Fairfield Inn........Bryan TX 62 74 74
76 Fairfield Inn........Corpus Christi TX 68 71 71
77 Hampton Inn..........Corpus Christi TX 64 86 85
78 Residence Inn........Corpus Christi TX 66 84 80
79 Comfort Suites.......Longview TX 60 84 80
80 Fairfield Inn........Longview TX 64 83 80
81 Hampton Inn..........San Angelo TX 64 65 65
82 Fairfield Inn........Temple TX 62 76 76
83 Hampton Inn..........Temple TX 62 77 77
84 Fairfield Inn........Appleton WI 63 69 69
85 Residence Inn........Appleton WI 66 76 76
86 Comfort Inn..........Green Bay WI 60 67 67
87 Fairfield Inn........Hudson WI 63 70 70
88 Residence Inn........Madison WI 66 79 79
89 Comfort Inn..........Onalaska/La Crosse WI 70 76 76
90 Super 8..............Racine WI 61 59 59
-----
Total/Average ....... 5,848 76% 76%
=====
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CUT-OFF DATE
OPENING ALLOCATED APPRAISED CUT-OFF
DATE UWNCF LOAN AMOUNT VALUE DATE LTV DSCR
------- ----------- ------------ ------------ -------- ----
<S> <C> <C> <C> <C> <C> <C>
48 Apr-92 305,184 1,195,402 2,400,000 49.8 3.00
49 Sep-92 426,209 2,144,955 4,100,000 52.3 2.34
50 Nov-92 399,469 2,036,463 3,400,000 59.9 2.31
51 Jun-91 341,684 1,071,980 2,900,000 37.0 3.75
52 Aug-91 284,914 1,354,656 2,700,000 50.2 2.47
53 Aug-91 172,230 848,029 1,800,000 47.1 2.39
54 Aug-96 378,891 3,091,522 4,500,000 68.7 1.44
55 May-96 125,153 1,259,104 2,100,000 60.0 1.17
56 May-95 450,507 2,267,382 4,700,000 48.2 2.34
57 Dec-95 530,757 2,660,541 4,900,000 54.3 2.35
58 Apr-94 617,086 2,935,254 4,900,000 59.9 2.47
59 Jan-94 547,146 2,444,552 4,700,000 52.0 2.63
60 Oct-95 431,692 2,706,326 4,500,000 60.1 1.88
61 Apr-94 357,249 2,026,510 2,900,000 69.9 2.07
62 Jul-92 416,361 1,991,673 3,200,000 62.2 2.46
63 Mar-95 381,428 2,077,272 3,500,000 59.4 2.16
64 Aug-96 269,821 1,384,516 3,300,000 42.0 2.29
65 Apr-96 235,760 1,428,311 3,300,000 43.3 1.94
66 Feb-96 335,963 2,012,575 3,200,000 62.9 1.96
67 Dec-95 317,136 1,877,209 3,400,000 55.2 1.99
68 Jun-92 529,318 2,564,988 4,100,000 62.6 2.43
69 Nov-95 403,290 1,861,284 3,600,000 51.7 2.55
70 Feb-96 452,065 2,009,589 3,800,000 52.9 2.65
71 Nov-88 333,442 1,471,111 3,500,000 42.0 2.67
72 Feb-91 361,178 1,969,775 3,700,000 53.2 2.16
73 Feb-96 368,490 1,388,498 3,300,000 42.1 3.12
74 Aug-96 636,583 2,900,417 6,000,000 48.3 2.58
75 Jul-94 399,884 1,852,325 2,900,000 63.9 2.54
76 Jan-95 462,087 2,138,983 3,900,000 54.8 2.54
77 Feb-95 431,992 2,213,633 3,500,000 63.2 2.30
78 Apr-95 539,407 2,986,016 4,900,000 60.9 2.13
79 Oct-95 503,718 2,653,573 5,000,000 53.1 2.23
80 Nov-95 501,016 2,421,659 4,600,000 52.6 2.43
81 Dec-96 310,454 1,847,349 3,500,000 52.8 1.98
82 Oct-94 366,866 1,675,155 3,100,000 54.0 2.58
83 Sep-94 300,921 1,668,188 2,500,000 66.7 2.12
84 Aug-92 381,635 1,773,694 3,300,000 53.7 2.53
85 Nov-92 514,649 2,685,424 4,700,000 57.1 2.25
86 Feb-91 295,712 1,494,004 2,200,000 67.9 2.33
87 Aug-91 291,264 1,527,845 2,800,000 54.6 2.24
88 Dec-93 569,875 2,410,711 4,900,000 49.2 2.78
89 Jan-91 415,116 2,343,028 3,700,000 63.3 2.08
90 Jun-94 185,907 1,075,961 2,000,000 53.8 2.03
----------- ------------ ------------
$35,628,415 $178,671,275 $333,000,000 54.8% 2.35x
============ ============ ============
</TABLE>
S-119
<PAGE>
OPERATING AND OCCUPANCY HISTORY. The following table shows certain
unaudited information regarding the operating history, historical average
occupancy, ADR and RevPAR for the Tharaldson Pool A Properties on an
aggregate basis:
<TABLE>
<CAPTION>
UNDERWRITTEN
1995 1996 1997 NET CASH FLOW
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
REVENUES
Room Revenue ............. $58,150,396 $76,742,450 $88,327,300 $89,869,672
Room Rebates.............. -- (1,159,751) -- --
Food & Beverage Revenue .. 143,782 127,930 225,001 225,001
Telephone Revenue......... 1,523,006 1,740,666 1,795,766 1,795,766
Other Revenue............. 739,841 823,249 961,033 975,182
------------- ------------- ------------- ---------------
TOTAL REVENUES............. $60,557,025 $78,274,544 $91,309,099 $92,865,620
Departmental Expenses
Room Expense.............. $ 5,584,992 $ 5,939,629 $ 6,702,164 $ 6,702,164
Food & Beverage Expense .. 101,699 102,235 126,949 126,949
Telephone Expense......... 888,479 1,186,682 1,216,308 1,216,308
Other Expenses............ 115,223 114,855 147,420 147,420
------------- ------------- ------------- ---------------
Total Departmental
Expenses.................. $ 6,690,393 $ 7,343,401 $ 8,192,841 $ 8,192,841
DEPARTMENTAL PROFIT........ 53,866,632 70,931,144 83,116,258 84,672,779
Unallocated Expenses
General & Administrative . $ 2,104,555 $ 3,468,345 $ 4,970,783 $ 4,970,783
Marketing Expenses........ 1,764,747 406,432 450,818 450,818
Franchise Fee/Percent .... 2,174,620 6,200,753 7,903,206 6,498,226
Utilities................. 2,916,473 4,027,010 4,727,722 4,727,722
Operations & Maintenance . 1,927,967 2,728,725 3,685,415 3,685,415
Payroll................... 11,838,311 14,897,574 17,435,939 17,435,939
Management Fees........... 3,629,955 4,956,037 5,814,824 3,250,297
------------- ------------- ------------- ---------------
Total Unallocated
Expenses................... $26,356,629 $36,684,876 $44,988,707 $41,019,199
GROSS OPERATING PROFIT .... $27,510,003 $34,246,268 $38,127,551 $43,653,580
Fixed Expenses
Real Estate Tax........... $ 2,502,466 $ 3,182,314 $ 3,676,608 $ 3,676,608
Insurance................. 290,501 556,449 581,931 581,931
Replacement Reserves ..... -- -- -- 3,714,625
Ground Lease.............. 1,957 2,450 52,000 52,000
------------- ------------- ------------- ---------------
Total Fixed Expenses....... $ 2,794,924 $ 3,741,213 $ 4,310,539 $ 8,025,163
NET OPERATING INCOME....... $24,715,079 $30,505,055 $33,817,012 $35,628,417
============= ============= ============= ===============
Number of Rooms............ 4,785 5,784 5,848 5,848
Occupancy.................. 74% 74% 76% 76%
ADR........................ $ 50.72 $ 53.69 $ 55.76 $ 55.70
RevPAR..................... $ 38.76 $ 39.97 $ 42.41 $ 42.10
</TABLE>
S-120
<PAGE>
APPRAISAL. An appraisal, dated as of January 1, 1998, prepared by
Hospitality Valuation Services, Inc., determined an aggregate value for the
Tharaldson Pool A Properties of approximately $333,000,000, resulting in a
Cut-Off Date LTV of approximately 53.7%. The Tharaldson Pool A Properties
appraisal was prepared in accordance with the Uniform Standards of
Professional Appraisal Practice. See "Risk Factors--The Mortgage
Loans--Limitations on Appraisals" herein.
ENGINEERING REPORT. Property Condition Reports on the Tharaldson Pool A
Properties were completed between November 1997 and January 1998. The
Property Condition Reports concluded that the Tharaldson Pool A Properties
were generally in good physical condition but noted certain items of deferred
maintenance for which approximately $267,469 in reserves was funded at the
closing of the Tharaldson Pool A Loan.
ENVIRONMENTAL ASSESSMENT. The Tharaldson Pool A Properties were subject to
Phase I environmental site assessments which were performed by a third-party
environmental firm between November 1997 and January 1998. The reports
recommended that reserves in the amount of $49,000 be set aside at closing
for environmental concerns relating to (i) a UST located at the Fairfield Inn
in Bloomington, Minnesota and (ii) radon test results at various locations.
As a result, an environmental reserve in the amount of $61,250 was
established at the closing of the Tharaldson Pool A Loan. There can be no
assurance, however, that all environmental conditions and risks were
identified in such reports. See "Risk Factors--The Mortgage
Loans--Environmental Law Considerations" herein.
PROPERTY MANAGEMENT. All of the Tharaldson Pool A Properties are managed
by the Tharaldson Pool Manager pursuant to two separate management agreements
(collectively the "Tharaldson Pool A Management Agreement"). The Tharaldson
Pool Manager manages more than 240 limited service hotels containing more
than 16,000 rooms, including the Tharaldson Pool A Properties and the
Tharaldson Pool B Properties, and employs over 6,500 persons in limited
service property management. The Tharaldson Pool Manager is responsible for
the management and operation of the Tharaldson Pool A Properties in the same
manner as is customary and usual in the operation of first-class hotels in
each respective Tharaldson Pool A Property's community. Under the Tharaldson
Pool A Management Agreement, the Tharaldson Pool Manager is entitled to a
base management fee equal to 7% of gross revenues of each Tharaldson Pool A
Property, and an incentive management fee (the "Tharaldson Pool A Incentive
Management Fee") equal to the sum of (i) 3% of the gross revenues for each
year in which the aggregate net revenues of all the Tharaldson Pool A
Properties held by Tharaldson Lodging I, Inc. exceeds $10,455,500, and (ii)
3% of the gross revenues for each year in which the aggregate net revenues of
all the Tharaldson Pool A Properties held by Tharaldson Lodging II, Inc.
exceeds $29,300,000. The term of the Tharaldson Pool A Management Agreement
expires on December 31, 1998, and is automatically renewed for successive
periods of one fiscal year each, unless terminated by notice from one party
to another.
Pursuant to an agreement among the mortgagee, the Tharaldson Pool A
Borrowers and the Tharaldson Pool Manager (the "Tharaldson Pool A Consent of
Manager"), the Tharaldson Pool Manager has agreed that, among other things
(i) it will not terminate the Tharaldson Pool A Management Agreement, without
the written consent of the mortgagor, except for a default relating to
non-payment of the management fee due under the Tharaldson Pool A Management
Agreement by the Tharaldson Pool A Borrowers and which default is not cured
by the mortgagee within 30 days' after giving the mortgagee written notice of
such default, (ii) upon the occurrence of an event of default under and
acceleration of the Tharaldson Pool A Loan, the mortgagee or the Tharaldson
Pool A Borrowers at the mortgagee's direction, will have the right to
terminate the Tharaldson Pool A Management Agreement (without penalty or the
payment of any termination fee) by giving the Tharaldson Pool Manager 30
days' prior written notice of such termination, (iii) all liens, rights and
interests owned or held by the Tharaldson Pool Manager in and to the
Tharaldson Pool A Properties are subordinate to the liens of the mortgagee,
and (iv) it will not amend the Tharaldson Pool A Management Agreement, in any
material respect, without the prior written consent of the mortgagee (which
consent will not be unreasonably withheld or delayed). Pursuant to the
Tharaldson Pool A Loan agreement, the Tharaldson Pool A Property must at all
times be managed by a Tharaldson Pool Acceptable Manager.
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THARALDSON POOL A: THE LOAN
PAYMENT TERMS. The Tharaldson Pool A Loan bears interest at a fixed rate
per annum equal to 6.876% (the "Tharaldson Pool A Initial Interest Rate")
through and including February 10, 2008. From and after February 11, 2008,
(the "Tharaldson Pool A Anticipated Repayment Date") the Tharaldson Pool A
Loan accrues interest at a fixed rate per annum equal to 8.876% (the
"Tharaldson Pool A Revised Interest Rate"). The Tharaldson Pool A Loan
matures on February 11, 2023 (the "Tharaldson Pool A Maturity Date"). As
described below, if the Tharaldson Pool A Borrowers do not prepay the
Tharaldson Pool A Loan on the Tharaldson Pool A Anticipated Repayment Date,
the Tharaldson Pool A Borrowers will be required to pay interest at the
Tharaldson Pool A Initial Interest Rate (together with principal, as
described below), and interest accrued equal to the excess of the Tharaldson
Pool A Revised Interest Rate over the Tharaldson Pool A Initial Interest Rate
will be deferred and added to the outstanding indebtedness under the
Tharaldson Pool A Loan, and will, to the extent permitted by applicable law,
earn interest at the Tharaldson Pool A Revised Interest Rate (such accrued
and deferred interest and interest thereon (which will be deferred), the
"Tharaldson Pool A Excess Interest"). Interest on the Tharaldson Pool A Loan
is calculated based on the actual number of days elapsed and a 360-day year.
The Tharaldson Pool A Loan requires monthly payments (the "Tharaldson Pool
A Monthly Debt Service Payment Amount") of principal and interest of
approximately $1,265,463 (based on a 25-year amortization schedule and the
Tharaldson Pool A Initial Interest Rate). Payment of the balance of the
principal, if any, together with all accrued and unpaid interest is required
on the Tharaldson Pool A Maturity Date. Each Tharaldson Pool A Monthly Debt
Service Payment Amount is due and payable on the 11th day of each calendar
month or, if such day is not a business day, then the immediately prior
business day (the "Tharaldson Pool A Due Date"). Commencing on the Tharaldson
Pool A Anticipated Repayment Date and on each Tharaldson Pool A Due Date
thereafter, in addition to the Tharaldson Pool A Monthly Debt Service Payment
Amount, the Tharaldson Pool A Borrowers are required to apply 100% of the
Tharaldson Pool A Excess Cash Flow for the month preceding the month in which
the Tharaldson Pool A Due Date occurs in the following order of priority (a)
to the outstanding principal balance until the Tharaldson Pool A Loan has
been paid in full and (b) to the Tharaldson Pool A Excess Interest.
"Tharaldson Pool A Excess Cash Flow" means the amounts held as collected
funds in the Tharaldson Pool A Deposit Account after the application of funds
(a) to fund the Tharaldson Pool A Tax And Insurance Escrow Account as
described in "--Reserves" below, (b) to pay the Tharaldson Pool A Monthly
Debt Service Payment Amount, (c) to fund the Tharaldson Pool A FF&E Reserve
Account as described in "--Reserves" below, (d) to fund the Tharaldson Pool A
Seasonality Reserve Account as described in "--Reserves" below, (e) to pay
the Tharaldson Pool A Borrowers' budgeted operating expenses approved by the
mortgagee, and (f) to pay extraordinary capital expenditures approved by the
mortgagee in writing. The scheduled principal balance of the Tharaldson Pool
A Loan as of the Tharaldson Pool A Anticipated Repayment Date will be
approximately $140,908,257.
After the occurrence and during the continuance of an event of default
under the Tharaldson Pool A Loan, to the extent permitted by applicable law,
the entire outstanding principal balance of the Tharaldson Pool A Loan along
with due and unpaid interest thereon will bear interest at a per annum
default rate equal to the lesser of (a) the maximum rate permitted by
applicable law and (b) the greater of (i) 5% above the Tharaldson Pool A
Initial Interest Rate or the Tharaldson Pool A Revised Interest Rate, as
applicable, and (ii) the "prime rate" from time to time as set forth in The
Wall Street Journal, plus 1%.
PREPAYMENT. Voluntary prepayment is prohibited under the Tharaldson Pool A
Loan prior to the Tharaldson Pool A Anticipated Repayment Date (subject to
defeasance rights afforded the Tharaldson Pool A Borrowers), except in
connection with certain casualty or condemnation events. From and after the
Tharaldson Pool A Anticipated Repayment Date, the Tharaldson Pool A Loan may
be voluntarily prepaid in whole or in part on any Tharaldson Pool A Due Date
without payment of a yield maintenance charge or prepayment premium.
If all or any part of the principal amount of the Tharaldson Pool A Loan
is prepaid upon an acceleration of the Tharaldson Pool A Loan following the
occurrence of an event of default under the
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Tharaldson Pool A Loan prior to the Tharaldson Pool A Anticipated Repayment
Date, the Tharaldson Pool A Borrowers will be required to make a yield
maintenance payment in an amount equal to the greater of (a) the excess, if
any, of (i) the sum of (A) the aggregate respective present values of all
remaining scheduled interest payments in respect of the Tharaldson Pool A
Loan (or the portion of all such interest payments corresponding to the
portion of the principal of the Tharaldson Pool A Loan to be prepaid upon
acceleration) for the period from the date of such prepayment to (and
including) the Tharaldson Pool A Anticipated Repayment Date, discounted
monthly at a rate equal to a specified treasury constant yield and based on a
360-day year of twelve 30-day months and (B) the aggregate respective present
values of all scheduled principal payments in respect of the Tharaldson Pool
A Loan (or the then unpaid portion thereof to be prepaid upon acceleration),
assuming that the entire outstanding scheduled principal amount of the
Tharaldson Pool A Loan is paid in full on the Tharaldson Pool A Anticipated
Repayment Date, discounted monthly at a rate equal to the specified treasury
constant yield and based on a 360-day year of twelve 30-day months over (ii)
the then current outstanding principal amount of the Tharaldson Pool A Loan
(or the then unpaid portion thereof to be prepaid upon acceleration), and (b)
1% of the aggregate principal amount of the Tharaldson Pool A Loan on the
date of such prepayment after giving effect to any payment of scheduled
amortization on such date of prepayment.
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of a Tharaldson Pool A Property
under the Tharaldson Pool A Loan, the mortgagee will be entitled, at its sole
option, to apply such proceeds to prepay the Tharaldson Pool A Loan, as
described in "--Casualty and Condemnation" below. No yield maintenance
payment or prepayment premium or penalty will be payable upon any mandatory
prepayment of the Tharaldson Pool A Loan in connection with a casualty or
condemnation unless an event of default has occurred and is continuing, in
which case the Tharaldson Pool A Borrowers will be required to pay a yield
maintenance payment calculated in the manner described above.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL--DEFEASANCE. The Tharaldson
Pool A Borrowers are permitted, prior to the Tharaldson Pool A Anticipated
Repayment Date, on any date after the second anniversary of the Closing Date,
to defease all or any portion of the Tharaldson Pool A Loan, provided that,
among other conditions, the Tharaldson Pool A Borrowers give the mortgagee at
least 30 days' prior written notice of the date of such defeasance (the
"Tharaldson Pool A Defeasance Date"), no event of default exists on the
Tharaldson Pool A Defeasance Date, and provided further that the Tharaldson
Pool A Borrowers pay on the Tharaldson Pool A Defeasance Date (i) all accrued
and unpaid interest on the Tharaldson Pool A Loan to but not including the
Tharaldson Pool A Defeasance Date (and if the Tharaldson Pool A Defeasance
Date is not a Tharaldson Pool A Due Date, the Tharaldson Pool A Defeasance
Deposit will take into account the interest that would have accrued on the
Tharaldson Pool A Loan to but not including the next Tharaldson Pool A Due
Date), (ii) all other sums, not including scheduled interest or principal
payments, then due under the Tharaldson Pool A Loan, (iii) the Tharaldson
Pool A Defeasance Deposit, and (iv) all reasonable costs and expenses of the
mortgagee incurred in connection with the defeasance. In addition, the
Tharaldson Pool A Borrowers will be required to deliver to the mortgagee,
among other things, (a) a security agreement granting the Trustee a first
priority lien on the Tharaldson Pool A Defeasance Deposit and the U.S.
Treasury obligations purchased with the Tharaldson Pool A Defeasance Deposit,
(b) an opinion of counsel for the Tharaldson Pool A Borrowers in form and
substance satisfactory to the mortgagee stating, among other things, that the
mortgagee has a perfected security interest in the noncallable U.S. Treasury
obligations purchased with the Tharaldson Pool A Defeasance Deposit, (c) a
confirmation, in form and substance reasonably satisfactory to the mortgagee,
from a "Big Six" independent certified public accounting firm or a successor
thereto, that the Tharaldson Pool A Defeasance Deposit is sufficient to pay
all scheduled payments due from the Tharaldson Pool A Borrowers under the
Tharaldson Pool A Loan in connection with the proposed defeasance, (d) an
officer's certificate certifying that the requirements for defeasance set
forth in the Tharaldson Pool A Loan agreement have been met, (e) written
confirmation from the Rating Agencies that such defeasance will not result,
in and of itself, in a reduction, qualification or withdrawal of the then
current ratings of the Certificates, and (f) such other certificates,
documents or instruments as the mortgagee may reasonably request.
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"Tharaldson Pool A Defeasance Deposit" means an amount equal to the sum
of (i) with respect to a total defeasance, all costs and expenses (including
the purchase price) incurred or to be incurred in the purchase of noncallable
U.S. Treasury obligations necessary to provide payments on or prior to, but
as close as possible to, all successive Tharaldson Pool A Due Dates after the
Tharaldson Pool A Defeasance Date and through and including the Tharaldson
Pool A Anticipated Repayment Date for the entire outstanding aggregate
principal amount of the Tharaldson Pool A Loan (assuming the outstanding
principal balance of the Tharaldson Pool A Loan is repaid on the Tharaldson
Pool A Anticipated Repayment Date), and in amounts equal to the debt service
due on such dates; (ii) with respect to a partial defeasance and the release
of an individual Tharaldson Pool A Property, the sum of (A) the Tharaldson
Pool A Release Amount for such Tharaldson Pool A Property plus (B) without
duplication all costs and expenses (including the purchase price) incurred or
to be incurred in the purchase of noncallable U.S. Treasury obligations
necessary to provide payments on or prior to, but as close as possible to,
all successive Tharaldson Pool A Due Dates after the Tharaldson Pool A
Defeasance Date and through and including the Tharaldson Pool A Anticipated
Repayment Date, for the portion of the outstanding aggregate principal
balance of the Tharaldson Pool A Loan being defeased (assuming the
outstanding principal balance of such defeased portion is repaid on the
Tharaldson Pool A Anticipated Repayment Date) and in amounts equal to the
debt service due on such dates with respect to such defeased portion of the
Tharaldson Pool A Loan; (iii) with respect to a partial defeasance without
the release of an individual Tharaldson Pool A Property, the sum of (A) a
portion of the outstanding principal amount of the Tharaldson Pool A Loan
equal to the amount to be partially defeased plus (B) without duplication all
costs and expenses (including the purchase price) incurred or to be incurred
in the purchase of noncallable U.S. Treasury obligations necessary to provide
payments on or prior to, but as close as possible to, all successive
Tharaldson Pool A Due Dates after the Tharaldson Pool A Defeasance Date and
through and including the Tharaldson Pool A Anticipated Repayment Date, for
the portion of the outstanding aggregate principal balance of the Tharaldson
Pool A Loan being defeased (assuming the outstanding principal balance of
such defeased portion is repaid on the Tharaldson Pool A Anticipated
Repayment Date) and in amounts equal to the debt service due on such dates
with respect to such defeased portion of the Tharaldson Pool A Loan; and (iv)
in all cases, any revenue, documentary stamp or intangible taxes or any other
tax or charge due in connection with the transfer of a portion of the note,
the creation of one or more defeased notes and undefeased notes, if
applicable, any transfer of one or more defeased notes, or otherwise required
to satisfy the terms of the Tharaldson Pool A Loan.
Upon receipt of the Tharaldson Pool A Defeasance Deposit, the mortgagee,
using the Tharaldson Pool A Defeasance Deposit, will be required to purchase
noncallable U.S. Treasury obligations on behalf of the applicable Tharaldson
Pool A Borrower and such U.S. Treasury obligations will serve as the sole
collateral for the payments of the amounts due under the Tharaldson Pool A
Loan or, in the case of a partial defeasance, the defeased note. Upon a
deposit of such U.S. Treasury obligations, the applicable Tharaldson Pool A
Borrower will have the right to assign the obligation to make payments under
the Tharaldson Pool A Loan with respect to the principal amount of the
Tharaldson Pool A Loan that has been defeased to an entity designated by the
mortgagee. If the Tharaldson Pool A Borrower does assign such obligations,
the Master Servicer will be required in the Pooling Agreement to cause such
obligations to be assumed by a special-purpose bankruptcy-remote entity.
In connection with the defeasance of the Tharaldson Pool A Loan in
accordance with the Tharaldson Pool A Loan documents, the applicable
Tharaldson Pool A Borrower will be permitted to obtain the release of one or
more of the Tharaldson Pool A Properties from the lien of the related
mortgage, subject to the conditions that (a) if the defeasance is in
connection with a release of less than all of the Tharaldson Pool A
Properties, the Tharaldson Pool A Borrower provides (i) evidence satisfactory
to the mortgagee that following such release the Tharaldson Pool A Debt
Service Coverage Ratio with respect to the remaining Tharaldson Pool A
Properties will not be less than the greater of (A) the Tharaldson Pool A
Debt Service Coverage Ratio for the 12 months immediately preceding the
proposed release and (B) 2.35x, and (b) the Tharaldson Pool A Borrower
defeases a principal portion of the Tharaldson Pool A Loan equal to (i) the
Tharaldson Pool A Release Amounts for the Tharaldson Pool A Properties being
released in the case of a partial defeasance or (ii) the entire principal
balance of the Tharaldson Pool A Loan in the case of a full defeasance.
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"Tharaldson Pool A Debt Service Coverage Ratio" means, as of any date,
the quotient obtained by dividing net operating income of the applicable
Tharaldson Pool A Property or Properties for the 12-month period immediately
preceding, or following, as applicable, such date by the greater of (x)
aggregate interest and principal payments actually due and payable on the
Tharaldson Pool A Loan during such 12-month period and (y) interest and
principal payments on the Tharaldson Pool A Loan during such period assuming
a loan constant (comprised of interest and principal) of 10.48%.
"Tharaldson Pool A Release Amount" means, with respect to a specified
individual Tharaldson Pool A Property, an amount equal to the excess of (i)
150% of the Tharaldson Pool A Allocated Loan Amount as of the closing of the
Tharaldson Pool A Loan, in the case of eight of the Tharaldson Pool A
Properties and 125% of the Tharaldson Pool A Allocated Loan Amount in the
case of the other 82 Tharaldson Pool A Properties (as specified in the
Tharaldson Pool A Agreement) over (ii) the scheduled payments of principal
made under the Tharaldson Pool A Loan in respect of the Tharaldson Pool A
Loan allocated to such individual Tharaldson Pool A Property (based on the
relative Tharaldson Pool A Allocated Loan Amounts for all of the individual
Tharaldson Pool A Properties); provided that in no event will the Tharaldson
Pool A Release Amount be greater than the then outstanding principal amount
of the Tharaldson Pool A Loan.
"Tharaldson Pool A Allocated Loan Amount" means, with respect to each
Tharaldson Pool A Property, the portion of the principal amount of the
Tharaldson Pool A Loan allocated to each such Tharaldson Pool A Property as
specified in the Tharaldson Pool A Loan agreement and determined as described
under the definition of "Allocated Loan Amount" set forth above under
"Mortgage Pool Characteristics--Certain Characteristics of the Mortgage
Loans".
OTHER FINANCING. The Tharaldson Pool A Borrowers are not permitted to
incur any additional indebtedness other than: (i) unsecured trade payables
debt incurred in the ordinary course of the Tharaldson Pool A Borrowers'
business, customarily paid within 60 days of incurrence and in fact not more
than 60 days outstanding, (ii) capital lease obligations in respect of
equipment used at the Tharaldson Pool A Properties, outstanding amounts of
which at any one time may not exceed $25,000 for any one Tharaldson Pool A
Property and $700,000 for all Tharaldson Pool A Properties, and (iii) such
other unsecured indebtedness which must be approved by the mortgagee in its
sole discretion and for which the Tharaldson Pool A Borrowers have received
confirmation from the Rating Agencies that such indebtedness will not cause
the reduction, qualification or withdrawal of the then current ratings of the
Certificates.
ALTERATIONS. Except upon compliance with certain conditions set forth in
the Tharaldson Pool A Loan documents (which do not include the approval of
the mortgagee), the Tharaldson Pool A Borrowers are prohibited from making or
permitting any demolition, alteration, installation, improvement or
decoration to any individual Tharaldson Pool A Property or any part thereof
or expanding or reducing any such property or the improvements thereon.
RESERVES. Pursuant to the terms of the Tharaldson Pool A Loan, the
mortgagee has established (i) a furniture, fixtures and equipment reserve
account (the "Tharaldson Pool A FF&E Reserve Account") to cover the cost of
renewals and replacements of furniture, fixtures and equipment incurred by
the Tharaldson Pool A Borrowers, which is to be funded on each Tharaldson
Pool A Due Date from funds available in the Tharaldson Pool A Deposit Account
in the amount of 5% of operating income for the prior month, (ii) a
seasonality reserve account (the "Tharaldson Pool A Seasonality Reserve
Account") to cover the cost of fluctuations in net operating income which was
funded on the closing of the Tharaldson Pool A Loan in the amount of the
Tharaldson Pool A Monthly Debt Service Payment Amount, and be funded on each
Tharaldson Pool A Due Date from funds available in the Tharaldson Pool A
Deposit Account if the amount then available in the Tharaldson Pool A
Seasonality Reserve Account is less than the Tharaldson Pool A Monthly Debt
Service Payment Amount, in an amount equal to the amount of such deficiency,
(iii) a tax and insurance account (the "Tharaldson Pool A Tax and Insurance
Escrow Account") to be funded on each Tharaldson Pool A Due Date from funds
available in the Tharaldson Pool A Deposit Account in an amount equal to
one-twelfth of the aggregate insurance premiums, certain taxes, ground lease
payments, if any, and certain other charges that the mortgagee reasonably
estimates will be
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payable in the next ensuing 12 months, (iv) a deferred maintenance reserve
account, funded at the closing of the Tharaldson Pool A Loan in the amount of
approximately $267,468, to cover the cost of certain deferred maintenance
conditions existing at that time, (v) an environmental reserve account,
funded at the closing of the Tharaldson Pool A Loan in the amount of $61,250,
to cover the cost of remediating certain environmental conditions existing at
that time, and (vi) a tax reserve account for the payment of potential tax
liabilities of the Tharaldson Pool A Borrowers and certain of their
affiliates, funded at the closing of the Tharaldson Pool A Loan in the amount
of $1,276,281.
CASH MANAGEMENT; LOCKBOX. The Tharaldson Pool A Borrowers have established
and are required to maintain a deposit account (the "Tharaldson Pool A
Deposit Account") and are permitted to establish a property level sweep
account for each Tharaldson Pool A Property (each a "Tharaldson Pool A
Property Sweep Account"). The Tharaldson Pool A Deposit Account and each
Tharaldson Pool A Property Sweep Account are required to be under the sole
dominion and control of the mortgagee. The Tharaldson Pool A Borrowers are
required to direct all third parties from whom the Tharaldson Pool A
Borrowers have accounts receivable, including credit card companies, to make
their payments in respect of sums due to the Tharaldson Pool A Borrowers
directly to the Tharaldson Pool A Deposit Account. The Tharaldson Pool A
Borrowers are required to instruct the Tharaldson Pool Manager to deposit all
checks and payments into the Tharaldson Pool A Deposit Account or the
applicable Tharaldson Pool A Property Sweep Account within one business day
after receipt thereof. Funds on deposit in the Tharaldson Pool A Property
Sweep Account are withdrawn approximately once per week and deposited into
the Tharaldson Pool A Deposit Account.
On each Tharaldson Pool A Due Date, provided no default or event of
default under the Tharaldson Pool A Loan has occurred and is continuing, the
mortgagee is required to distribute funds from the Tharaldson Pool A Deposit
Account in the following order of priority: (a) to fund the Tharaldson Pool A
Tax and Insurance Escrow Account, (b) to pay the Tharaldson Pool A Monthly
Debt Service Payment Amount, (c) to fund the Tharaldson Pool A FF&E Reserve
Account, (d) if required, to fund the Tharaldson Pool A Seasonality Reserve
Account, (e) from and after the Tharaldson Pool A Anticipated Repayment Date,
or during the continuance of an event of default, to the Tharaldson Pool A
Borrowers in an amount equal to the budgeted operating expenses (or if any
Tharaldson Pool A Borrower timely requests additional amounts to pay
operating expenses, up to an additional 105% of the budgeted amount on a
cumulative year-to-date basis (less any amounts previously received by the
Tharaldson Pool A Borrowers pursuant to this parenthetical) for the
Tharaldson Pool A Properties, but in no event more than 15% of such month's
budgeted amount for operating expenses) for the month immediately prior to
the month in which such Tharaldson Pool A Due Date occurs (provided that each
Tharaldson Pool A Borrower has delivered to the mortgagee an officer's
certificate certifying that there is not outstanding for more than 60 days
any amounts claimed by any creditor to be due and owing from such Tharaldson
Pool A Borrower (except for claims such Tharaldson Pool A Borrower is in good
faith contesting and the payment for which it has escrowed with the
mortgagee), and that the amounts disbursed to the Tharaldson Pool A Borrowers
pursuant to this clause (e) must be used solely to pay their creditors for
costs and expenses incurred to date), (f) from and after the Tharaldson Pool
A Anticipated Repayment Date, to pay the costs of extraordinary capital
expenditures approved in writing by the mortgagee, (g) from and after the
Tharaldson Pool A Anticipated Repayment Date, to prepay the principal due
under the Tharaldson Pool A Loan until the principal balance of the
Tharaldson Pool A Loan is paid in full, (h) from and after the Tharaldson
Pool A Anticipated Repayment Date, to pay the Tharaldson Pool A Excess
Interest, (i) to the extent payable following an event of default under the
Tharaldson Pool A Loan, to pay interest accrued and unpaid at the excess of
the default rate over the Tharaldson Pool A Initial Interest Rate or the
Tharaldson Pool A Revised Interest Rate, as applicable, and (j) provided no
event of default exists, to the Tharaldson Pool A Borrowers or their
designees, any funds remaining in the Tharaldson Pool A Deposit Account;
provided that the mortgagee, in its sole discretion, may permit a
distribution under this clause (j) notwithstanding the occurrence of an event
of default under the Tharaldson Pool A Loan.
Prior to the Tharaldson Pool A Anticipated Repayment Date and so long as
no default or event of default under the Tharaldson Pool A Loan documents has
occurred and is continuing, if at any time
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immediately available funds in the Tharaldson Pool A Deposit Account are
sufficient to pay in full, on the next Tharaldson Pool A Due Date, the
amounts payable pursuant to clauses (a) through (d) and clause (i) above (if
applicable), then on each Friday (or if such day is not a business day, the
next business day) during the period from such time to such next Tharaldson
Pool A Due Date, the mortgagee is required to transfer from the Tharaldson
Pool A Deposit Account (or authorize such transfer) any immediately available
funds in excess of the aggregate of such amounts to the Tharaldson Pool A
Borrowers or their designees.
TRANSFER OF THE THARALDSON POOL A PROPERTIES AND INTERESTS IN THE
THARALDSON POOL A BORROWERS; ENCUMBRANCES. Unless permitted by the Tharaldson
Pool A Loan documents as described below, and with the exception of
Tharaldson Pool A Permitted Encumbrances, the Tharaldson Pool A Borrowers are
not permitted without the mortgagee's consent, not to be unreasonably
withheld or delayed, and a written confirmation from the Rating Agencies that
such action will not, in and of itself, result in a downgrade, withdrawal or
qualification of any rating then assigned to any outstanding Certificates, to
(A) sell, assign, convey, transfer or otherwise dispose of or encumber legal,
beneficial or equitable interests in all or any part of the Tharaldson Pool A
Properties, (B) permit or suffer any owner, directly or indirectly, of a
beneficial interest in the Tharaldson Pool A Properties to transfer such
interest, whether by transfer of stock or other beneficial interest in any
entity or otherwise, (c) mortgage, hypothecate or otherwise encumber or grant
a security interest in all or any part of the Tharaldson Pool A Properties,
or (D) file a declaration of condominium with respect to any such Tharaldson
Pool A Property.
In addition to the above described conditions with respect to a transfer
of the Tharaldson Pool A Properties, the Tharaldson Pool A Borrower may only
sell, assign, convey, transfer or otherwise dispose of legal or equitable
title to or any interest in the Tharaldson Pool A Properties if: (A) after
giving effect to the proposed transfer, (i) the Tharaldson Pool A Properties
will be owned by one or more special purpose entities each of which will be
in compliance with certain single purpose bankruptcy-remote representations,
warranties and covenants set forth in the Tharaldson Pool A Loan documents,
which have assumed in writing and agreed to comply with the terms of the
Tharaldson Pool A Loan documents, (ii) the transferee will be owned and
controlled (directly or indirectly) by a person or persons satisfactory to
the mortgagee in its sole discretion, (iii) the Tharaldson Pool A Properties
will be managed by a Tharaldson Pool Acceptable Manager, and (iv) no event of
default will have occurred and be continuing, and (B) prior to any such
transaction, the proposed transferee delivers to mortgagee an officer's
certificate giving certain assurances to the general effect that the
transferee is not an employee benefit plan, or, in any event, the transfer
will not give rise to "prohibited transactions" under ERISA or similar laws.
SUBSTITUTION OF INDIVIDUAL PROPERTIES. A Tharaldson Pool A Borrower is
permitted to substitute for any Tharaldson Pool A Property owned by such
Tharaldson Pool A Borrower a property (a "Tharaldson Pool A Substitute
Property") of like kind and quality, provided, among other things, (i) no
event of default under the Tharaldson Pool A Loan documents has occurred and
is continuing, (ii) written confirmation has been obtained from the Rating
Agencies that such action will not, in and of itself, result in a downgrade,
withdrawal or qualification of any rating then assigned to any outstanding
Certificates, (iii) the Tharaldson Pool A Debt Service Coverage Ratio for all
the Tharaldson Pool A Properties as of such date (assuming the proposed
substitution of the Tharaldson Pool A Substitute Property), will be at least
equal to the greater of (A) the Tharaldson Pool A Debt Service Coverage Ratio
for all of the Tharaldson Pool A Properties as of such date (including the
applicable Tharaldson Pool A Property to be substituted) and (B) 2.35x, and
(iv) the mortgagee will have received an opinion of counsel reasonably
acceptable to it, to the effect that (A) a "significant modification" of the
Tharaldson Pool A Loan within the meaning of Treasury Regulations Section
1.860G-2 will not occur by reason of the proposed substitution and (B) the
proposed substitution will not adversely affect the status of the entity that
holds the Tharaldson Pool A note as a REMIC (assuming for such purposes that
such entity otherwise qualifies as a REMIC).
INSURANCE. Each Tharaldson Pool A Borrower is required to maintain, at its
sole cost and expense, the following insurance: (a) policies of insurance
against loss or damage from standard perils included within the
classification "All Risks of Physical Loss", including earthquake damage,
maintained in an
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<PAGE>
aggregate amount equal to the then full replacement cost of the applicable
Tharaldson Pool A Property and related assets (without deduction for physical
depreciation), with deductibles no greater than $50,000 (as escalated by a
specified consumer price index increase) with higher deductibles for wind and
earthquake insurance as the applicable issuer may require; (b) flood
insurance (if any part of a Tharaldson Pool A Property is located in an area
identified by the Federal Emergency Management Agency as an area federally
designated a "100 year flood plain" and flood insurance is generally
available at reasonable premiums and in such amounts as generally are
required by institutional lenders for similar properties (or if not so
available from a private carrier, from the federal government at commercially
reasonable premiums to the extent available)), in either case, in an amount
at least equal to the lesser of the applicable Tharaldson Pool A Allocated
Loan Amount or the maximum limit of coverage available under said program
with respect to such Tharaldson Pool A Property; (c) comprehensive general
liability insurance, including broad form property damage, blanket
contractual, liquor liability (where applicable) and personal injuries
coverages and containing minimum limits per occurrence of $2,000,000 for any
policy year as well as at least $23,000,000 excess and/or umbrella liability
insurance; (d) rental loss and/or business interruption insurance in an
amount sufficient to avoid any coinsurance penalty and equal to the greater
of (i) estimated gross revenues from operations from such Tharaldson Pool A
Property net of nonrecurring expenses and (ii) projected operating expenses
(including debt service) needed to maintain and operate such Tharaldson Pool
A Property, in each case for up to 18 months; (e) insurance against loss or
damage from leakage of sprinkler systems and explosion of steam boilers, air
conditioning equipment, high pressure piping, machinery and equipment,
pressure vessels or similar apparatus and against loss of occupancy or use
arising from any such breakdown, in such amounts as are generally available
at reasonable premiums and are generally required by institutional lenders
for property comparable to the Tharaldson Pool A Property; (f) worker's
compensation insurance with respect to all employees of such Tharaldson Pool
A Borrower, as and to the extent required by applicable law or governmental
authority; (g) during any period of repair or restoration, builder's "all
risk" insurance in an amount not less than the full insurable value of the
applicable Tharaldson Pool A Property as mortgagee may request, in form and
substance acceptable to mortgagee; (h) coverage to compensate for the cost of
demolition and the increased cost of construction for any applicable
Tharaldson Pool A Property in an amount satisfactory to mortgagee; and (i)
such other insurance as may from time to time be reasonably required by the
mortgagee in order to protect its interests.
The Tharaldson Pool A Loan generally requires the Tharaldson Pool A
Borrowers to obtain the insurance described above from insurers approved by
the mortgagee and licensed to do business in the state where the applicable
Tharaldson Pool A Property is located and, unless otherwise approved by the
mortgagee and the Rating Agencies, having claims paying ability ratings of
"AA" or better by S&P, and if the mortgagee so requires, by the Rating
Agencies.
CASUALTY AND CONDEMNATION. Following the occurrence of a casualty or
condemnation affecting a Tharaldson Pool A Property, the applicable
Tharaldson Pool A Borrower, regardless of whether proceeds are available, is
required to proceed reasonably promptly to restore, repair, replace or
rebuild the affected Tharaldson Pool A Property to the extent practicable to
be of at least equal value and of substantially the same character as prior
to such casualty or condemnation, all to be effected in accordance with the
terms of the Tharaldson Pool A Loan documents applicable to alterations.
In the event of a casualty at a Tharaldson Pool A Property that involves a
loss of less than 40% of the outstanding principal balance of the Tharaldson
Pool A Allocated Loan Amount for the applicable Tharaldson Pool A Property or
a condemnation that that involves a loss of less than 20% of the outstanding
principal balance of the Tharaldson Pool A Allocated Loan Amount for the
applicable Tharaldson Pool A Property, the mortgagee is required to permit
the application of the proceeds resulting therefrom (after reimbursement of
any expenses incurred by the mortgagee in collecting the insurance proceeds)
to pay or reimburse the applicable Tharaldson Pool A Borrower, for the cost
of restoring, repairing, replacing or rebuilding the affected Tharaldson Pool
A Property, in the manner described below, provided that no default or event
of default under the Tharaldson Pool A Loan has occurred and is then
continuing and, in the reasonable judgment of the mortgagee: (i) the
Tharaldson Pool A Property
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<PAGE>
can be restored to an economical unit not less valuable (taking into account
the effect of the termination of any material agreements and the proceeds of
any rental loss or business interruption insurance which the Tharaldson Pool
A Borrower receives or is entitled to receive, in each case, due to such
casualty or condemnation) and not less useful than the same was prior to the
casualty or condemnation, (ii) the Tharaldson Pool A Property after such
restoration will adequately secure the outstanding balance of the applicable
Tharaldson Pool A Allocated Loan Amount, (iii) the restoration can be
completed by the earliest to occur of: (A) the 180th day following the
receipt of the proceeds, (or if earlier, the 365th day after such casualty or
condemnation) or with a written confirmation from the Rating Agencies that
there will be no downgrade, qualification or withdrawal of the then current
ratings of the Certificates with respect thereto, such longer period as may
reasonably be required, (B) the 180th day prior to the Tharaldson Pool A
Maturity Date, and (C) with respect to a casualty, the expiration of the
payment period on the rental loss insurance coverage in respect of such
casualty; and (iv) during the period of the restoration, the sum of (A)
income derived from the Tharaldson Pool A Property plus (B) proceeds of rent
loss insurance or business interruption insurance, if any, payable, together
with such other monies as the Tharaldson Pool A Borrower may irrevocably make
available for the restoration, will equal or exceed 105% of the sum of (1)
expenses in connection with the operation of such Tharaldson Pool A Property
and (2) the debt service in respect of the Tharaldson Pool A Allocated Loan
Amount for such Tharaldson Pool A Property.
If any of the conditions set forth in the foregoing proviso is not
satisfied, then, unless the mortgagee elects otherwise at its sole option,
the proceeds are required to be applied to the prepayment of the Tharaldson
Pool A Loan. If a casualty at a Tharaldson Pool A Property involves a loss of
40% or more of the outstanding principal balance of the Tharaldson Pool A
Allocated Loan Amount for the affected Tharaldson Pool A Property or a
condemnation involves a loss of 20% or more of the outstanding principal
balance of the Tharaldson Pool A Allocated Loan Amount for the affected
Tharaldson Pool A Property, then the mortgagee may at its option (to be
exercised by notice to the Tharaldson Pool A Borrower which must be given
within 30 days after the receipt of the proceeds) apply the net proceeds to
the prepayment of the Tharaldson Pool A Loan or to reimburse the Tharaldson
Pool A Borrower for the cost of any restoration in the manner set forth
below. Any such prepayment will be without the payment of a yield maintenance
or prepayment premium or penalty except that if an event of default under the
Tharaldson Pool A Loan has occurred and is continuing, then the Tharaldson
Pool A Borrower will be required to pay the yield maintenance payment, if
any, specified herein.
If the Tharaldson Pool A Borrower is entitled to reimbursement out of
proceeds, such proceeds are required to be disbursed on a monthly basis upon
the mortgagee being furnished with: (i) such architect's certificates,
waivers of lien, contractor's sworn statements, title insurance endorsements,
bonds, plats of survey and such other evidences of cost, payment and
performance as the mortgagee may reasonably require and approve, and (ii) all
plans and specifications for such restoration, such plans and specifications
to be approved by the mortgagee prior to commencement of any work (such
approval not to be unreasonably withheld or delayed). In addition, no payment
made prior to the final completion of the restoration is permitted to exceed
95% of the value of the work performed from time to time; and at all times,
the undisbursed balance of such proceeds remaining in the hands of the
mortgagee, together with the funds deposited for that purpose or irrevocably
committed to the satisfaction of the mortgagee by or on behalf of such
Tharaldson Pool A Borrower for that purpose, is required to be at least
sufficient in the reasonable judgment of the mortgagee to pay for the cost of
completion of the restoration, free and clear of all liens. Prior to any
disbursement, the mortgagee must have received evidence reasonably
satisfactory to it of the estimated cost of completion of the restoration,
and the Tharaldson Pool A Borrower must have deposited with the mortgagee
eligible collateral in an amount equal to the excess (if any) of such
estimated cost of completion over net proceeds. Any surplus which may remain
out of proceeds received pursuant to a casualty will be paid to the
Tharaldson Pool A Borrower after payment of such costs of restoration. Any
surplus which may remain out of proceeds received pursuant to a condemnation
after payment of such costs of restoration will be escrowed with and pledged
to the mortgagee as security for the Tharaldson Pool A Loan.
FINANCIAL REPORTING. The Tharaldson Pool A Borrowers are required to use
their best efforts to furnish to the mortgagee, within 80 days following the
end of each fiscal year, but in no event later than
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<PAGE>
120 days following the end of each fiscal year, a complete copy of their
annual financial statements, audited by a nationally recognized accounting
firm reasonably acceptable to the mortgagee, in accordance with GAAP,
covering the Tharaldson Pool A Properties on a combined basis, including
combined balance sheets and statements of profit and loss, all in such detail
as the mortgagee may reasonably request. Together with such annual financial
statements, the Tharaldson Pool A Borrowers are also required to furnish to
the mortgagee (A) an officer's certificate certifying as of the date thereof
whether, to the Tharaldson Pool A Borrowers' knowledge, there exists a
default or an event of default, and if such default or event of default
exists, the nature thereof, the period of time it has existed and the action
then being taken to remedy the same, and (B) an annual report for the most
recently completed fiscal year, containing (i) capital expenditures for each
Tharaldson Pool A Property stated separately with respect to any project
costing in excess of $25,000 for (x) maintenance and (y) renovations,
expansions and enhancements, and (ii) occupancy levels, ADRs and RevPAR for
each Tharaldson Pool A Property for such period.
In addition, the Tharaldson Pool A Borrowers are required to use their
best efforts to furnish to the mortgagee on or before the 30th day after the
end of each calendar month, but in no event later than the 40th day after the
end of each calendar month, among other items, (i) monthly and year-to-date
operating statements prepared for each calendar month (on an aggregate and on
a property-by-property basis), (ii) a statement of the actual capital
expenditures made in respect of each Tharaldson Pool A Property, and (iii)
occupancy levels, ADRs and RevPAR for each Tharaldson Pool A Property for
such period. The Tharaldson Pool A Borrowers are also required to furnish to
the mortgagee on or before the 40th day after the end of each fiscal quarter,
among other items, (i) quarterly and year-to-date statements prepared for
such fiscal quarter with respect to each Tharaldson Pool A Borrower, with a
balance sheet for such quarter, (ii) from and after the Tharaldson Pool A
Anticipated Repayment Date or during the continuance of an event of default,
a comparison of the budgeted income and expenses and the actual income and
expenses for such quarter and year to date for the Tharaldson Pool A
Properties on an aggregate and per-property basis, and (iii) occupancy
levels, ADRs and RevPAR for each Tharaldson Pool A Property for such period.
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<PAGE>
Graphic Omitted: Photographs of Green Acres
[Grande Loan II Logo]
<PAGE>
GREEN ACRES: THE BORROWER; THE PROPERTY
THE LOAN. The Green Acres Loan had a principal balance as of the Cut-Off
Date of approximately $159,523,713. It is secured by a first priority
consolidated mortgage lien encumbering the fee interest in the regional
shopping center known as Green Acres Mall (the "Green Acres Mall") and the
leasehold interest in the adjacent convenience shopping center known as The
Plaza at Green Acres ("The Plaza at Green Acres," and collectively, the
"Green Acres Property"). The Green Acres Loan was originated by GSMC on
February 11, 1998.
THE BORROWER. Green Acres Mall, L.L.C. (the "Green Acres Borrower") is a
Delaware limited liability company, with a purpose limited solely to
acquiring, owning, operating, managing and selling the Green Acres Property.
The Green Acres Borrower has no material assets other than the Green Acres
Property and related interests. The sole managing member of the Green Acres
Borrower is Vornado Green Acres SPE Managing Member, Inc., a Delaware
corporation formed solely for the purpose of serving as the managing member
of the Green Acres Borrower and taking all necessary actions on behalf of the
Green Acres Borrower in connection with the Green Acres Loan. The two
non-managing members of the Green Acres Borrower are Vornado Green Acres
Acquisition L.L.C. ("Vornado GAA") and Arbor Property, L.P. ("Arbor
Property"). Vornado GAA, a Delaware limited liability company, is a
subsidiary of Vornado Green Acres Holding L.L.C. ("Vornado GAH"), a Delaware
limited liability company and a wholly-owned subsidiary of Vornado Realty
L.P., a Delaware limited partnership and the property manager for the Green
Acres Property (the "Green Acres Manager"). The general partner of the Green
Acres Manager is Vornado Realty Trust, a publicly traded Maryland real estate
investment trust whose beneficial interests are traded on the New York Stock
Exchange. Vornado GAH is the sole limited partner, and Vornado GAA is the
sole general partner, of Arbor Property, a Delaware limited partnership.
SECURITY. The Green Acres Loan is a non-recourse loan, secured only by the
fee and leasehold interests of the Green Acres Borrower in the Green Acres
Property and certain other collateral related thereto (including assignments
of leases and rents, an assignment of the Green Acres Property Management
Agreement, an assignment of agreements, licenses, permits and contracts, and
the funds in certain reserve accounts). Subject to certain limited
exceptions, neither the Green Acres Borrower nor any of its affiliates is
personally liable for payment of the Green Acres Loan. The Green Acres
Borrower has represented that it owns good, marketable and indefeasible fee
simple title to or a good and marketable leasehold interest in, as
applicable, the Green Acres Property free and clear of all liens other than
encumbrances described in the applicable title insurance policy and other
encumbrances permitted by the mortgagee under the loan documents (the "Green
Acres Permitted Encumbrances"). The title policy issued upon the origination
of the Green Acres Loan constitutes a valid and enforceable first lien on the
Green Acres Property, subject to certain exceptions and exclusions from
coverage set forth in the policy.
THE PROPERTY. The Green Acres Property is comprised of the Green Acres
Borrower's (i) fee simple interest in Green Acres Mall, an approximately 93
acre parcel of land improved with a two-story enclosed shopping mall and 13
free-standing out parcel buildings and (ii) leasehold interest in The Plaza
at Green Acres, an adjacent approximately 9.8 acre parcel improved with a
convenience shopping center. As of March 25, 1998, approximately 86% of the
total GLA of approximately 1,828,882 square feet at the Green Acres Property
was leased. Excluding anchor tenants and storage space, the enclosed shopping
mall space was approximately 91% leased as of March 25, 1998. The anchor
tenants of the enclosed shopping mall include Macy's, Sears, JC Penney and
Stern's department stores and the major out parcel tenants include The Dime
Savings Bank, Red Lobster, Seaman's Furniture and Green Acres Cinema. The
convenience shopping center is anchored by a Kmart retail center and
Waldbaums, a grocery store owned by The Great Atlantic and Pacific Tea
Company, Inc. The Green Acres Property contains approximately 8,369 parking
spaces.
The interest of the Green Acres Borrower in The Plaza at Green Acres
consists of a leasehold interest created under a lease dated February 22,
1989, between The Blumfold Corporation, as lessor, and EQK Green Acres, L.P.,
("EQK") as lessee (the "Green Acres Ground Lease"). The Green Acres Borrower
is the successor in interest to EQK under the Green Acres Ground Lease. The
initial term of
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<PAGE>
the Green Acres Ground Lease expires on August 31, 2020, and the Green Acres
Borrower has three renewal options of six years each. The annual rent under
the Green Acres Ground Lease is the minimum rent of $1,500,000 (plus or minus
an adjustment equal to the difference between $576,000 and the interest
charged on the first mortgage loan that encumbers the fee interest in the
property), and percentage rent based upon tenant revenue in the applicable
lease year (the "Green Acres Percentage Rent"). The Green Acres Borrower is
also responsible for payment of all real estate taxes, assessments and
similar charges relating to the property leased thereunder.
The interest of the Green Acres Borrower in the Green Acres Ground Lease
is subordinate to a mortgage on the fee estate, and pursuant to a
non-disturbance and attornment agreement the fee mortgagee has agreed that it
will not terminate or disturb the Green Acres Borrower's interest in the
Green Acres Ground Lease so long as the Green Acres Borrower remains in good
standing under the Green Acres Ground Lease.
"Green Acres Percentage Rent" means 20% of the amount by which space
tenant revenue exceeds the greater of (a) the sum of (i) $1,500,000
(representing the rent payable during the first year of the Green Acres
Ground Lease), (ii) $400,000 (representing the ground lessee's return on
investment), and (iii) 11% of the ground lessee's capital expenditures prior
to the commencement of the second ground lease year, or (b) annualized
minimum rents payable and percentage rents paid by space tenants during the
first ground lease year less 4% of such rents. The formula to compute
percentage rent may be altered if capital expenditures exceed $200,000 in a
given lease year.
ANCHOR TENANTS AT GREEN ACRES
<TABLE>
<CAPTION>
CREDIT
RATING OF
PARENT COLLATERAL LEASE COVENANT
ANCHOR PARENT COMPANY COMPANY* GLA (SF)** INTEREST EXPIRATION EXPIRATION****
- ---------------- ----------------- ----------- ---------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Macy's........... Federated Baa2 266,676 Collateral 8/18/06 N/A
JC Penney........ JC Penney A2 97,213 Collateral 6/1/12 N/A
Sears............ Sears A2 144,537 Ground Only*** 10/31/23 10/31/98
Sterns........... Federated Baa2 186,922 Collateral 1/31/07 N/A
Kmart............ Kmart Corporation Ba2 131,433 Collateral 8/12/10 N/A
----------
Total Anchor GLA. 826,781
==========
</TABLE>
- ------------
* Reflects Moody's senior unsecured long-term debt rating of the parent
company as of April 15, 1998. Generally, where the parent company is
not the named anchor, the parent company is not the obligor under the
applicable lease or operating covenant.
** Excludes storage space.
*** Subject to the Green Acres Ground Lease.
**** Based on covenant to operate under anchor's trade name.
OPERATING COVENANTS. Each of Sears and Macy's is party to a lease
containing certain operating covenants with the Green Acres Borrower. The
Sears lease contains an operating covenant, which expires on October 31, 1998
and (i) requires Sears to operate under the name Sears (or another trade
name), (ii) prohibits Sears from ceasing operations and allowing the leased
property to go vacant, and (iii) prohibits Sears from assigning or subletting
the lease to a non-affiliate, provided that upon expiration of the operating
covenant, Sears (a) is required to operate under the name Sears (or another
trade name) provided that Macy's and Stern's maintain their respective trade
names, (b) is required to utilize the leased premises for retail,
professional or recreational purposes for the remainder of the lease,
provided that Macy's is operating as a retail department store, and (c) is
permitted to assign the lease or sublet the premises, provided that if Macy's
is operating as a retail department store, such premises are required to be
utilized for retail, professional or recreational purposes. Under the terms
of the Macy's lease, Macy's (i) is required to operate as a retail department
store provided that at least two other stores in operation at the Green Acres
Mall are retail department stores and (ii) may terminate the lease if 40%
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<PAGE>
or more of the tenants at the Green Acres Mall (excluding anchor tenants)
cease to operate for a period of one year. J.C. Penney is not subject to any
operating covenant and its lease provides that it may discontinue use of the
premises and pay rent for the remainder of the lease term then in effect, or
assign the lease or sublet the premises without the consent of the Green
Acres Borrower, provided that the premises be maintained as a retail
department store. Stern's is not subject to any operating covenant and it may
discontinue use of the premises and pay rent for the remainder of the lease
term then in effect. Under the terms of the Waldbaum's lease, Waldbaum's may
discontinue use of the premises as a food supermarket and pay base rent for
the remainder of the lease term then in effect, or assign the lease or sublet
the premises without the consent of the Green Acres Borrower, provided that
the Green Acres Borrower has the option to terminate the lease if the
premises are not maintained as a food supermarket. Under the terms of the
Kmart lease, Kmart may discontinue use of the premises at any time and pay
base rent for the remainder of the lease term then in effect, or assign the
lease or sublet the premises without the consent of the Green Acres Borrower.
SALES OPERATING HISTORY -- GREEN ACRES LOAN*
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Total In-Line Tenants $137,531,048 $131,364,340
Anchors (excluding Sears and Kmart) $114,442,559 $115,179,725
</TABLE>
- ------------
* Sales figures are based solely upon information provided by tenants who
were in occupancy during the applicable 12-month period.
OCCUPANCY HISTORY. The following tables show the lease expiration schedule
and GLA and rent data regarding the ten largest tenants for the Green Acres
Property:
LEASE EXPIRATION SCHEDULE--GREEN ACRES LOAN
<TABLE>
<CAPTION>
PERCENT OF ANNUALIZED
YEAR ENDING EXPIRING TOTAL SQUARE ANNUALIZED PERCENT OF BASE RENT PER
DEC. 31 SQUARE FEET FEET BASE RENT BASE RENT SQUARE FOOT*
- -------------- ------------- -------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Month-to-Month 27,711 1.5% $ 393,716 2.1% $14.21
1998 .......... 8,261 0.5 310,490 1.7 37.59
1999 .......... 63,088 3.4 1,025,285 5.5 16.25
2000 .......... 92,357 5.0 1,447,817 7.8 15.68
2001 .......... 61,451 3.4 1,326,099 7.1 21.58
2002 .......... 56,005 3.1 1,399,830 7.5 24.99
2003 .......... 54,043 3.0 1,268,170 6.8 23.47
2004 .......... 41,088 2.2 1,293,224 6.9 31.47
2005 .......... 77,334 4.2 1,871,844 10.1 24.20
2006 .......... 323,016 17.7 2,157,966 11.6 6.68
2007 .......... 245,448 13.4 1,887,319 10.1 7.69
Thereafter .... 527,378 28.8 4,234,427 22.7 8.03
Vacant ........ 251,702 13.8 0 0.0 --
------------- -------------- ------------- ------------
Total/Average 1,828,882 100.0% $18,616,187 100.0% $10.18
============= ============== ============= ============
</TABLE>
- ------------
* Expiring square feet and annualized base rent per square foot excludes
square feet and annualized base rent attributable to storage spaces.
S-133
<PAGE>
TEN LARGEST TENANTS BASED ON ANNUALIZED BASE RENT--GREEN ACRES LOAN
<TABLE>
<CAPTION>
APPROXIMATE
TENANT APPROXIMATE % OF TOTAL ANNUALIZED
TENANT PARENT GLA % OF TOTAL ANNUALIZED ANNUALIZED BASE RENT
STORE NAME COMPANY* (SF) GLA BASE RENT BASE RENT PER SF
- -------------------- ----------------- ----------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Kmart ............... Kmart Corporation 131,433 7.2% $ 1,630,488 8.8% $12.41
Waldbaums............ A&P 54,225 3.0 770,775 4.1 14.21
Macy's............... Federated 266,676 14.6 550,000 3.0 2.06
Sterns............... Federated 186,922 10.2 475,000 2.6 2.54
GAP/Gap Kids......... The Gap 15,777 0.9 441,756 2.4 28.00
Nobody Beats
the Wiz ........... 21,823 1.2 411,535 2.2 18.86
Dime Bank............ 62,200 3.4 394,600 2.1 6.34
Kids R Us............ Toys R Us 20,000 1.1 382,500 2.1 19.13
Sunrise Professional
Offices............ 17,500 1.0 366,000 2.0 20.91
Dime Bank
Computer Center** . N/A N/A 337,488 1.8 N/A
----------- ------------- ------------- -------------
Total/Average
(10 Largest)....... 776,556 42.5% $ 5,760,142 30.9% $ 7.42
Remaining............ 1,052,326 57.5 12,856,045 69.1 12.22
----------- ------------- ------------- -------------
Total/Average....... 1,828,882 100.0% $18,616,187 100.0% $10.18
=========== ============= ============= =============
</TABLE>
- ------------
* Generally, where the parent company is not the named anchor, the parent
company is not the obligor under the lease.
** Ground lease only.
S-134
<PAGE>
OPERATING HISTORY. The following table shows certain information (audited
for 1997 only) regarding the operating history of the Green Acres Property:
<TABLE>
<CAPTION>
UNDERWRITTEN
1995 1996 1997 NET CASH FLOW
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
REVENUES
Minimum and percentage rents .. $20,243,766 $19,204,426 $20,478,000 $19,783,305
Operating expense
reimbursement................. 15,358,429 15,707,274 16,072,000 16,265,987
Other income................... 1,606,378 1,733,650 2,185,000 1,912,656
------------- ------------- ------------- ---------------
TOTAL REVENUES.................. 37,208,573 36,645,350 38,735,000 37,961,948
CERTAIN EXPENSES
Maintenance, Payroll and Other
Operating Expenses............ 7,926,913 8,136,503 6,292,000 8,048,770
Utilities...................... 936,694 987,504 1,648,000 948,674
Real Estate Taxes.............. 8,449,867 8,768,354 9,210,000 9,249,307
Provision for Doubtful
Accounts...................... -- -- 1,315,000 --
------------- ------------- ------------- ---------------
TOTAL CERTAIN EXPENSES.......... 17,313,474 17,892,361 18,465,000 18,246,751
REVENUE IN EXCESS OF CERTAIN
EXPENSES BEFORE UNUSUAL ITEMS .. 19,895,099 18,752,989 20,270,000 19,715,197
UNUSUAL ITEMS................... -- -- 584,000 --
RESERVES
Building Replacement Reserves . -- -- -- 126,659
Garage Replacement Reserve .... -- -- -- 12,750
Tenant Improvements/Leasing
Commissions................... -- -- -- 252,863
------------- ------------- ------------- ---------------
NET CASH FLOW................... $19,895,099 $18,752,989 $20,854,000 $19,322,925
============= ============= ============= ===============
</TABLE>
APPRAISAL. An appraisal prepared by Landauer Associates, Inc., dated March
13, 1998, determined a value for the Green Acres Mall of approximately
$242,100,000 and for The Plaza at Green Acres of approximately $11,100,000,
resulting in a Cut-Off Date LTV for the Green Acres Property of approximately
63.0%. The Green Acres Property appraisal was prepared in accordance with the
Uniform Standards of Professional Appraisal Practice. See "Risk Factors--The
Mortgage Loans--Limitations on Appraisals" herein.
ENGINEERING REPORT. A Property Condition Report on the Green Acres
Property was completed in September of 1997 and was reviewed by an
independent third-party contractor in February of 1998. The Property
Condition Report concluded that the Green Acres Property was generally in
good physical condition and cited no immediate physical needs other than the
recommendation of a roof replacement program over the next five years for
which the report determined that $1,659,000 should be budgeted for such
repairs as well as other deficiencies.
ENVIRONMENTAL ASSESSMENT. Phase I and Phase II investigations and reports
with respect to the Green Acres Property were prepared between May 1992 and
September 1997 and were reviewed by an independent third-party contractor in
March 1998. The reports recommended, among other things, that (i) the on-site
Woolworth UST, which may have leaked, and any contaminated soil, be removed;
(ii) an additional investigation be done of an onsite leach field; (iii) it
should be determined whether the Dime Savings Bank cooling system water is
injected to an aquifer or discharged to a sanitary sewer; (iv) progress of
UST remediations at the neighboring Amoco and Mobil sites be tracked; (v)
soil and groundwater remediation be conducted at the on-site G.A. Tire
facility, where prior leaky hydraulic lifts may have contributed to
contamination; (vi) friable ACM pipe insulation be removed or subject to an
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operations and maintenance program in the mall basement chemical storage
area; and (vii) a comprehensive ACM survey be conducted. Nevertheless, there
can be no assurance that all environmental conditions and risks were
identified in such reports. See "Risk Factors--The Mortgage
Loans--Environmental Law Considerations" herein.
PROPERTY MANAGEMENT. The Green Acres Property is managed by the Green
Acres Manager pursuant to a management agreement (the "Green Acres Management
Agreement"). The Green Acres Manager is responsible for the operation,
management, maintenance, promotion and leasing of the Green Acres Property.
Under the Green Acres Management Agreement, the Green Acres Manager is
entitled to a management and leasing fee equal to 4% of gross revenues,
defined as total revenues less monies received from tenants for reimbursement
of expenses, from the Green Acres Property. The term of the Green Acres
Management Agreement expires on February 11, 2003, and is automatically
renewed on a year to year basis unless terminated by 60 days' written notice
given by either of the parties to the Green Acres Management Agreement prior
to the end of any such year.
Pursuant to an agreement among the mortgagee, the Green Acres Borrower and
the Green Acres Manager (the "Green Acres Consent of Manager"), the Green
Acres Manager has agreed that, among other things, (i) at any time and
without cause after the commencement of foreclosure proceedings relative to
the Green Acres Property, the mortgagee will have the right to terminate the
Green Acres Management Agreement on five days' notice, without any penalty or
payment of any termination fee, and (ii) it will not amend or modify the
Green Acres Management Agreement until the Green Acres Loan has been repaid
in full, without the prior written consent of the mortgagee (which consent
will not be unreasonably withheld, delayed or conditioned). If the Green
Acres Manager is terminated by the Mortgagee, the Green Acres Borrower is
required to replace the Green Acres Manager with a Green Acres Acceptable
Manager, on commercially reasonable terms and conditions.
It is an event of default under the Green Acres Loan (subject to certain
notice and cure periods) if, without the mortgagee's prior consent, the Green
Acres Borrower (i) surrenders or terminates the Green Acres Management
Agreement, or permits or suffers any significant delegation or contracting of
the Green Acres Manager's duties (unless the Green Acres Manager is in
material default thereof and the termination of the Green Acres Management
Agreement would be commercially reasonable) or otherwise replaces the Green
Acres Manager (unless the Green Acres Manager is replaced with a Green Acres
Acceptable Manager pursuant to a commercially reasonable property management
agreement), (ii) increases or consents to any increase of the amount of any
charges under the Green Acres Management Agreement except as provided therein
or on an arm's-length basis and upon commercially reasonable terms, or (iii)
otherwise modifies, waives or releases any of its rights and remedies under
the Green Acres Management Agreement except on an arm's-length basis and upon
commercially reasonable terms.
"Green Acres Acceptable Manager" means (i) Vornado Realty Trust or any
affiliate thereof, or (ii) any other management company as to which the Green
Acres Borrower has obtained a written confirmation from the Rating Agencies
that the retention of such other management company will not cause any
reduction, qualification or withdrawal of any rating then assigned to any
outstanding Certificates.
GREEN ACRES: THE LOAN
PAYMENT TERMS. The Green Acres Loan bears interest at a fixed rate per
annum equal to 6.750% (the "Green Acres Initial Interest Rate") through and
including February 10, 2008. From and after February 11, 2008 (the "Green
Acres Anticipated Repayment Date") the Green Acres Loan accrues interest at a
fixed rate per annum equal to 8.750% (the "Green Acres Revised Interest
Rate"). The Green Acres Loan matures on February 11, 2028 (the "Green Acres
Maturity Date"). As described below, if the Green Acres Borrower does not
prepay the Green Acres Loan on the Green Acres Anticipated Repayment Date,
the Green Acres Borrower will be required to pay interest at the Green Acres
Initial Interest Rate (together with principal, as described below), and
interest accrued equal to the excess of the Green Acres Revised Interest Rate
over the Green Acres Initial Interest Rate will be deferred and added to the
outstanding indebtedness under the Green Acres Loan, and will, to the extent
permitted by
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applicable law, accrue interest at the Green Acres Revised Interest Rate
(such accrued and deferred interest and interest thereon (which will be
deferred), the "Green Acres Excess Interest"). Interest on the Green Acres
Loan is calculated based on the actual number of days elapsed and a 360-day
year.
The Green Acres Loan requires monthly payments (the "Green Acres Monthly
Debt Service Payment Amount") of principal and interest of approximately
$1,047,747 (based on a 30-year amortization schedule and the Green Acres
Initial Interest Rate). Payment of the balance of the principal, if any,
together with all accrued and unpaid interest is required on the Green Acres
Maturity Date. Each Green Acres Monthly Debt Service Payment Amount is due
and payable on the 11th day of each calendar month or, if such day is not a
business day, then the immediately preceding business day (a "Green Acres Due
Date"). Commencing on the Green Acres Anticipated Repayment Date and on each
Green Acres Due Date thereafter, in addition to the Green Acres Monthly Debt
Service Payment Amount, the Green Acres Borrower is required to apply 100% of
the Green Acres Excess Cash Flow for the month preceding the month in which
the Green Acres Due Date occurs in the following order of priority (a) to the
outstanding principal balance until the Green Acres Loan has been paid in
full, (b) to the payment of interest, if any, accrued and unpaid on the Green
Acres Loan at the excess of the default rate over the Green Acres Revised
Interest Rate, and (c) to the Green Acres Excess Interest. "Green Acres
Excess Cash Flow" means the amounts held as collected funds in the Green
Acres Lockbox Account after the application of funds: (a) to the amounts
required to be paid into the Green Acres Tax and Insurance Escrow Account as
described in "--Reserves" below, (b) to the Green Acres Monthly Debt Service
Payment Amount, (c) to the payment of the Green Acres Borrower's approved
operating expenses, (d) to the amounts required to be paid into the Green
Acres Tenant Improvement Reserve Account as described in "--Reserves" below,
(e) to the amounts required to be paid into the Green Acres Capital Reserve
Account as described in "--Reserves" below, and (f) to pay extraordinary
capital expenditures approved by the mortgagee. The scheduled principal
balance of the Green Acres Loan as of the Green Acres Anticipated Repayment
Date will be approximately $136,830,761.
After the occurrence and during the continuance of an event of default
under the Green Acres Loan, to the extent permitted by applicable law, the
entire outstanding principal balance of the Green Acres Loan along with due
and unpaid interest thereon will bear interest at a per annum default rate
equal to the lesser of (i) the maximum rate permitted by applicable law, and
(ii) 2% in excess of the Green Acres Initial Interest Rate or the Green Acres
Revised Interest Rate, as applicable, but in no event less than 1% above the
"prime rate" as published from time to time in The Wall Street Journal.
PREPAYMENT. Voluntary prepayment is prohibited under the Green Acres Loan
prior to January 11, 2008 (subject to defeasance rights afforded the Green
Acres Borrower), except in connection with certain casualty or condemnation
events. From and after January 11, 2008, the Green Acres Loan may be
voluntarily prepaid in whole or in part on any Green Acres Due Date without
payment of a yield maintenance charge or prepayment premium.
If all or any part of the principal amount of the Green Acres Loan is
prepaid upon an acceleration of the Green Acres Loan following the occurrence
of an event of default under the Green Acres Loan at any time prior to
January 11, 2008, the Green Acres Borrower will be required to make a yield
maintenance payment in an amount equal to the excess, if any, of (i) the sum
of (A) the aggregate respective present values of all scheduled interest
payments in respect of the Green Acres Loan (or the portion of all such
interest payments corresponding to the portion of the principal of the Green
Acres Loan to be prepaid upon acceleration) for the period from the date of
such prepayment through and including the Green Acres Anticipated Repayment
Date, discounted monthly at a rate equal to a specified treasury constant
yield and based on a 360-day year of twelve 30-day months and (B) the
aggregate respective present values of all scheduled principal payments in
respect of the Green Acres Loan (or the then unpaid portion thereof to be
prepaid upon acceleration) were such amount paid in full on the Green Acres
Anticipated Repayment Date (rather than over the period ending on the Green
Acres Maturity Date), discounted monthly at a rate equal to the specified
treasury constant yield and based on a 360-day year of twelve 30-day months
over (ii) the then current outstanding principal amount of the Green Acres
Loan (or the then unpaid portion thereof to be prepaid upon acceleration).
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To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of the Green Acres Property under
the Green Acres Loan, the mortgagee will be entitled, at its sole option, to
apply such proceeds to prepay the Green Acres Loan, as described in " --
Casualty and Condemnation" below. No yield maintenance payment or prepayment
premium or penalty will be payable upon any mandatory prepayment of the Green
Acres Loan in connection with a casualty or condemnation unless an event of
default under the Green Acres Loan has occurred and is continuing, in which
case the Green Acres Borrower will be required to pay a yield maintenance
payment calculated in the manner described above. No yield maintenance
payments will be required in connection with a prepayment of the Green Acres
Loan upon the occurrence of a Green Acres Low Debt Service Application Event
as described in "--Cash Management; Lockbox" below.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL--DEFEASANCE. The Green Acres
Borrower is permitted on any date on or after the second anniversary of the
Closing Date to defease all or a portion of the Green Acres Loan with U.S.
Treasury obligations provided that, among other conditions, the Green Acres
Borrower gives the mortgagee at least 30 days' prior written notice of the
date of such defeasance (the "Green Acres Defeasance Date"), no event of
default will exist on the Green Acres Defeasance Date, and provided further
that the Green Acres Borrower pays on the Green Acres Defeasance Date (i) all
accrued and unpaid interest on the Green Acres Loan to but not including the
Green Acres Defeasance Date, (ii) all other sums, not including scheduled
interest or principal payments, then due under the Green Acres Loan and the
related loan documents, (iii) the Green Acres Defeasance Deposit and (iv) all
reasonable costs and expenses of the mortgagee incurred in connection with
the defeasance. In addition, the Green Acres Borrower will be required to
deliver to the mortgagee among other things: (a) a security/control agreement
granting the mortgagee a first priority lien on the Green Acres Defeasance
Deposit and the U.S. Treasury obligations purchased with the Green Acres
Defeasance Deposit, (b) an opinion of counsel to the Green Acres Borrower in
form satisfactory to the mortgagee stating, among other things, that the
mortgagee has a perfected security interest in the U.S. Treasury obligations
purchased with the Green Acres Defeasance Deposit, (c) a confirmation, in
form and substance reasonably satisfactory to the mortgagee, from a "Big Six"
accounting firm, that the Green Acres Defeasance Deposit is sufficient to pay
all scheduled payments due from the Green Acres Borrower under the Green
Acres Loan in connection with the proposed defeasance, (d) a confirmation, in
form and substance reasonably satisfactory to the mortgagee, that all
requirements for defeasance set forth in the Green Acres Loan agreement have
been met, (e) if required by the Rating Agencies, a non-consolidation opinion
with respect to the successor borrower, if any, in form and substance
satisfactory to the mortgagee and the Rating Agencies, and (f) confirmation
that all conditions to defeasance have been met from any Rating Agency that
has required as a condition to defeasance that such conditions have been met.
In addition, if only a portion of the Green Acres Loan is being defeased, the
Green Acres Borrower will be required to execute and deliver all necessary
documents to amend and restate the Green Acres note by issuing two substitute
notes, one having a principal balance equal to the defeased portion of the
original note and the other note having a principal balance equal to the
undefeased portion of the original note.
"Green Acres Defeasance Deposit" means a cash amount equal to the sum of
(i) the remaining principal amount of the Green Acres Loan (in the case of a
total defeasance) or the principal amount of the defeased note (in the case
of a partial defeasance), as applicable, with interest thereon, (ii) without
duplication, any costs and expenses incurred or to be incurred in the
purchase of U.S. Treasury obligations providing payments on or prior to, but
as close as possible to, all successive Green Acres Due Dates after the Green
Acres Defeasance Date, for the entire outstanding principal balance of the
Green Acres Loan, or the defeased note, in the case of a partial defeasance
as applicable, and in amounts equal to the scheduled interest and principal
payments under the Green Acres Loan or the defeased note, as applicable
(assuming for this purpose that the entire unpaid principal balance of the
Green Acres Loan is due and payable on the Green Acres Anticipated Repayment
Date), and (iii) any revenue, documentary stamp or intangible taxes or any
other tax or charge due in connection with the transfer of the note, the
defeased note or the undefeased note, if applicable, any transfer of the
defeased note or otherwise required to accomplish the defeasance.
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Upon receipt of the Green Acres Defeasance Deposit, the mortgagee, using
the Green Acres Defeasance Deposit, will be required to purchase noncallable
U.S. Treasury obligations on behalf of the Green Acres Borrower and such U.S.
Treasury obligations will serve as the sole collateral for the payments of
the amounts due under the Green Acres Loan, or the defeased portion of the
Green Acres Loan in the case of a partial defeasance. Upon a deposit of such
U.S. Treasury obligations, the Green Acres Borrower will have the right, in
connection with a defeasance, to assign the obligation to make payments under
the Green Acres Loan or the defeased portion thereof, as applicable to an
entity designated by the Green Acres Borrower.
In connection with the defeasance of the Green Acres Loan, the Green Acres
Borrower will be permitted to obtain the release of the mortgage encumbering
the Green Acres Property and related collateral or a portion thereof with
respect to a partial defeasance. The Green Acres Borrower may obtain the
release of one or more Green Acres Outparcels from the lien of the mortgage
encumbering the Green Acres Property upon the satisfaction of the following
conditions, among others: (a) in connection with a partial defeasance of the
Green Acres Loan, the principal balance of the defeased note is required to
equal or exceed the release amount (specified in the Green Acres Loan
agreement) for such Green Acres Outparcel(s) being released and the
requirements for defeasance described above must have been satisfied, (b) the
Green Acres Borrower will provide the mortgagee with an officer's certificate
certifying that no event of default has occurred and is continuing, (c) the
Green Acres Borrower will provide the mortgagee with evidence that such
release will not adversely affect access to or the zoning, use and operation
of the remaining Green Acres Property, (d) the Green Acres Borrower will
procure from the title company issuing the title insurance policy an
endorsement to the mortgagee's title policy which will provide, among other
things, that the lien and priority of the mortgage on the remaining Green
Acres Property will be unaffected as a result of the release and will contain
such other terms at the mortgagee's reasonable request, (e) the Green Acres
Borrower will deliver such information and documents, as required and
satisfactory in all respects to the mortgagee, evidencing an agreement
prohibiting any future owner or tenant of the Green Acres Outparcel from
violating the terms of any lease in effect on the remaining Green Acres
Property with respect to competing with the tenant under such lease, and (f)
after giving effect to such release, the Green Acres Debt Service Coverage
Ratio for all of the Green Acres Property then remaining and subject to the
lien of the mortgage will be not less than the Green Acres Debt Service
Coverage Ratio as of the initial closing of the Green Acres Loan, unless a
confirmation from the Rating Agencies that there will be no downgrade,
qualification or withdrawal of the then current ratings of the Certificates
is obtained in connection with such release.
A "Green Acres Outparcel" means either (i) a parcel (with an allocated
release amount) designated by the Green Acres Borrower and the mortgagee
prior to the closing of the Green Acres Loan or (ii) a parcel designated by
the Green Acres Borrower at least 30 days prior to the Green Acres Defeasance
Date with a release amount reasonably determined by the mortgagee.
The tenant of an office building on the Green Acres Property known as the
Sunrise Executive Center has an option under its lease to purchase the
portion of the Green Acres Property improved by the Sunrise Executive Center
(the "Green Acres Sunrise Outparcel"). The Green Acres Borrower may obtain
the release of the Green Acres Sunrise Outparcel from the lien of the
mortgage prior to the second anniversary of the Closing Date by: (i)
depositing in escrow with the mortgagee cash in the amount of $2,878,700,
(ii) providing evidence satisfactory to the mortgagee that such tenant has
exercised its option to purchase the Green Acres Sunrise Outparcel and (iii)
complying with all release requirements (which include clauses (b) through
(e) in the preceding paragraph) for such release set forth in the Green Acres
Loan documents. The Green Acres Borrower is required to comply with the
requirements described above for defeasance and to cause, on or before 60
days following the second anniversary of the Closing Date, a partial
defeasance of the Green Acres Loan in the amount to be determined in
accordance with the Green Acres Loan documents, and the amount on deposit in
escrow will be applied by the mortgagee to the Green Acres Defeasance Deposit
for such partial defeasance. After payment of the Green Acres Defeasance
Deposit, the mortgagee will pay any amounts remaining in escrow to the Green
Acres Borrower.
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"Green Acres Debt Service Coverage Ratio" means, as to any date, the
quotient obtained by dividing the net operating income for the Green Acres
Property for the 12 month period immediately preceding such date by the
greater of (i) aggregate interest and principal payments actually due and
payable on the Green Acres Loan during such period and (ii) interest and
principal payments on the Green Acres Loan during such period assuming a loan
constant (comprised of interest and amortization) of 8.81% per annum.
OTHER FINANCING. The Green Acres Borrower is not permitted to incur any
additional indebtedness other than: (a) unsecured trade payables incurred in
the ordinary course of the Green Acres Borrower's business and customarily
paid within 60 days of incurrence and in fact not more than 60 days
outstanding, (b) capital lease obligations in respect of equipment used at
the Green Acres Property, and (c) such other unsecured indebtedness approved
by the mortgagee in its sole discretion.
Pursuant to the Green Acres Loan documents, Arbor Property, a non-managing
member of the Green Acres Borrower, may obtain from the mortgagee an
additional loan of up to $8,000,000 (the "Green Acres Approved Additional
Loan") secured solely by both (i) pledges of beneficial interests of all
members of the Green Acres Borrower other than the managing member of the
Green Acres Borrower and (ii) a pledge of the beneficial interests of the
owners of the beneficial interests in the managing member of the Green Acres
Borrower, and obtained solely for the purpose of financing the alteration or
expansion of the Green Acres Property. The Green Acres Approved Additional
Loan is also conditioned upon (i) the mortgagee having received written
confirmation from the Rating Agencies that the Green Acres Approved
Additional Loan will not, in and of itself, result in the downgrade,
qualification or withdrawal of the then current ratings of the Certificates,
(ii) the LTV, after taking into account the Green Acres Loan plus the Green
Acres Approved Additional Loan and the value of the Green Acres Property
after the proposed alteration or expansion, not exceeding 65%, and (iii) the
mortgagee having determined that the Green Acres Debt Service Coverage Ratio,
based upon the total debt service required under both the Green Acres Loan
and the Green Acres Approved Additional Loan, after giving effect to the
alteration or expansion, not being less than the Green Acres Debt Service
Coverage Ratio immediately prior to the making of the Green Acres Approved
Additional Loan.
ALTERATIONS. Except upon compliance with certain conditions set forth in
the Green Acres Loan documents (which does not include the approval of the
mortgagee) and except as described in "--Other Financing" above, the Green
Acres Borrower is prohibited from making or permitting any demolition,
alteration, installation, improvement or decoration to the Green Acres
Property or any part thereof.
RESERVES. Pursuant to the terms of the Green Acres Loan, the Green Acres
Borrower has established: (i) a capital expenditure reserve account, for the
payment of certain routine capital improvements (the "Green Acres Capital
Reserve Account"), to be funded on each Green Acres Due Date in an amount
equal to $0.15 per year per rentable square feet (based on 1,652,607 rentable
square feet) or, with written approval from the Rating Agencies, such lesser
amount as the Green Acres Borrower may request to be funded for the payment
of routine capital improvements; (ii) a tenant improvement reserve account,
for the payment of certain tenant improvement expenses and leasing
commissions (the "Green Acres Tenant Improvement Reserve Account"), to be
funded on each Green Acres Due Date in the amount of approximately $42,000;
(iii) a deferred maintenance reserve account, for the payment of the cost of
remediating certain deferred maintenance conditions set forth in the Green
Acres Loan documents (the "Green Acres Deferred Maintenance Reserve
Account"), funded at the initial closing of the Green Acres Loan in the
amount of approximately $69,375; (iv) a low debt service reserve account (the
"Green Acres Low Debt Service Reserve Account"), funded from and after the
occurrence of a Green Acres Low Debt Service Reserve Trigger Event until a
Green Acres Low Debt Service Return Event in an amount equal to all remaining
funds in the Green Acres Deposit Account after the application of funds under
clauses (i) through (viii) described in the second paragraph in "--Lockbox"
below; and (v) a tax and insurance escrow account (the "Green Acres Insurance
and Tax Reserve Account") to be funded in monthly installments of one-twelfth
of the taxes and insurance premiums that will be payable during the next
ensuing 12 months, provided that, such monthly deposit of taxes with respect
to The Plaza at Green Acres will be waived if the Green Acres Borrower
provides the mortgagee with (i) satisfactory evidence that a mortgage of the
ground lessor's fee interest in The Plaza at Green Acres to
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an institutional lender provides for the monthly escrow of taxes with
respect thereto, and (ii) annual proof of payment of such taxes, and provided
further that, if no event of default has occurred and is continuing, and the
Green Acres Borrower has provided evidence that a space tenant has made the
required payments of taxes, then the escrow requirement with respect to such
space tenant's share of taxes for a particular tax parcel will be
conditionally waived.
"Green Acres Low Debt Service Application Event" means that, as of the
first day of any calendar quarter, the Green Acres Actual Debt Service
Coverage Ratio for the prior 12 month period, will be less than 1.20x. "Green
Acres Actual Debt Service Coverage Ratio" means, as to any date, the quotient
obtained by dividing the net operating income for the Green Acres Property
for the 12 month period immediately preceding such date, by the aggregate
principal and interest payments actually due and payable on the Green Acres
Loan for such period. "Green Acres Low Debt Service Trigger Event" means
that, as of the first day of any calendar quarter, the Green Acres Actual
Debt Service Coverage Ratio for the prior 12 month period, will be less than
1.25x. "Green Acres Low Debt Service Return Event" means that, as of the
first day of any calendar quarter following a Green Acres Low Debt Service
Trigger Event (a) the Green Acres Actual Debt Service Coverage Ratio for the
prior 12 month period with respect to two quarters will be greater than
1.25x, and (b) no event of default then exists and is continuing.
CASH MANAGEMENT; LOCKBOX. The Green Acres Borrower has established and is
required to maintain a deposit account (the "Green Acres Lockbox Account")
under the sole dominion and control of the mortgagee. The Green Acres
Borrower is required to notify all tenants to make all payments due under the
leases to the Green Acres Borrower payable directly to the mortgagee or its
agent and to deliver such payments directly to the Green Acres Lockbox
Account, and to deliver such payments to the mortgagee or its agent. If the
Green Acres Borrower or the Green Acres Manager receives any payments, the
Green Acres Borrower is required to deposit upon receipt, and will direct the
Green Acres Manager to deposit upon receipt, such payments in the Green Acres
Lockbox Account, not later than the close of business on the day the payment
is received.
On each Green Acres Due Date, provided no default or event of default has
occurred and is continuing, the mortgagee is required to distribute funds
from the Green Acres Lockbox Account in the following order of priority: (i)
to fund the Green Acres Insurance and Tax Reserve Account, (ii) to pay the
Green Acres Monthly Debt Service Payment Amount, (iii) to the Green Acres
Borrower, an amount equal to the budgeted operating expenses plus an
additional amount for operating expenses in excess of the budgeted amount, up
to 105% of the budgeted amount on a cumulative year-to-date basis, but in no
event to exceed more than 15% of such month's budgeted amount for operating
expenses provided that, prior to such disbursement the Green Acres Borrower
provides the mortgagee with an officer's certificate certifying that, among
other things, the Green Acres Borrower does not have any unpaid claims of
creditors more than 60 days past due and that the amount disbursed is
required to pay operating expenses, (iv) to fund the Green Acres Tenant
Improvement Reserve Account, (v) to fund the Green Acres Capital Reserve
Account, (vi) to fund extraordinary capital expenditures, if any, approved in
writing by the mortgagee, (vii) prior to the Green Acres Anticipated
Repayment Date, to the mortgagee in an amount equal to interest, if any,
accrued and unpaid under the Green Acres Loan at the excess of the default
rate over the Green Acres Initial Interest Rate, (viii) from and after the
Green Acres Anticipated Repayment Date, to the mortgagee to prepay the
outstanding principal of the Green Acres Loan until such principal amount is
paid in full, (ix) prior to the Green Acres Anticipated Repayment Date, and
from and after a Green Acres Low Debt Service Trigger Event until a Green
Acres Low Debt Service Return Event, to the mortgagee, on behalf of the Green
Acres Borrower, an amount equal to all remaining funds not previously
disbursed pursuant to clauses (i) through (vii) above, to be held in the
Green Acres Low Debt Service Reserve Account and disbursed as described
below, (x) from and after the Green Acres Anticipated Repayment Date, to the
mortgagee, in an amount equal to interest, if any accrued and unpaid on the
Green Acres Loan at the excess of the default rate over the Green Acres
Revised Interest Rate, (xi) prior to the Green Acres Anticipated Repayment
Date, provided no Green Acres Low Debt Service Trigger Event has occurred and
is continuing and provided no event of default exists, to the Green Acres
Borrower or its designee, provided that the mortgagee may, in its sole
discretion, permit a distribution under this clause (xi) notwithstanding the
occurrence of an event of default and (xii) from and
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after the Green Acres Anticipated Repayment Date, to the mortgagee to be
applied to the payment of accrued and unpaid Green Acres Excess Interest. The
failure of the Green Acres Borrower to have funds available in the Green
Acres Lockbox Account sufficient to make all payments required under clauses
(i) through (v) above from and after the Green Acres Anticipated Repayment
Date will constitute an event of default under the Green Acres Loan.
Upon the occurrence of a Green Acres Low Debt Service Application Event,
all amounts in the Green Acres Low Debt Service Reserve Account are required
to be applied by the mortgagee to reduce the principal balance of the Green
Acres Loan; provided, however, upon the occurrence of a Green Acres Loan Debt
Service Return Event and prior to the Green Acres Anticipated Repayment Date,
all amounts then remaining in the Green Acres Low Debt Service Reserve
Account are required to be disbursed to the Green Acres Borrower. No yield
maintenance payments will be required in connection with the application of
the Green Acres Low Debt Service Reserve Account to the reduction of the
Green Acres Loan.
TRANSFER OF GREEN ACRES PROPERTY AND INTEREST IN THE GREEN ACRES BORROWER;
ENCUMBRANCES. Unless permitted by the Green Acres Loan documents as described
below, and with the exception of leases entered into in accordance therewith
and Green Acres Permitted Encumbrances, the Green Acres Borrower is not
permitted to (A) sell, assign, convey, transfer or otherwise dispose of or
encumber legal, beneficial or equitable interests in the Green Acres Property
or any part thereof, (B) permit or suffer any owner, directly or indirectly,
of a beneficial interest in the Green Acres Property to transfer such
interest, whether by transfer of stock or other beneficial interest in any
entity or otherwise, (C) mortgage, hypothecate or otherwise encumber or grant
a security interest in the Green Acres Property or any part thereof or (D)
file a declaration of condominium with respect to the Green Acres Property;
provided, however, that a member of the Green Acres Borrower other than the
managing member and an owner of a beneficial interest in the managing member
of the Green Acres Borrower may pledge its beneficial interest as security
for a Green Acres Approved Additional Loan.
Except as described below, the Green Acres Borrower may only sell, assign,
convey, transfer or otherwise dispose of legal or equitable title to or any
interest in the Green Acres Property if: (A) after giving effect to the
proposed transaction: (i) either (x) the mortgagee has (a) received a written
confirmation from the Rating Agencies that there will be no downgrade,
qualification or withdrawal of the then current ratings of the Certificates
with respect thereto; (b) approved the transferee's organizational documents;
(c) received and approved legal opinions (including non-consolidation
opinions) with respect to such transferee; and (d) approved all loan
documents required by it to effectuate such transfer (including, without
limitation, the assumption of the Green Acres Loan or a portion thereof by
such transferee); or (y) the transferee will be at least 51% owned and
controlled (directly or indirectly) by (a) Vornado Realty Trust or Vornado
Realty L.P., (b) any entity with which Vornado Realty Trust or Vornado Realty
L.P. is merged or consolidated or to which Vornado Realty Trust or Vornado
Realty L.P. sells all or substantially all of its assets, or (c) an entity in
which Vornado Realty Trust is the sole operating partner; (ii) the Green
Acres Property will be owned by a single purpose entity, which will be in
compliance with certain single purpose bankruptcy-remote representations,
warranties and covenants set forth in the Green Acres Loan agreement; (iii)
the Green Acres Property will be managed by a Green Acres Acceptable Manager;
(iv) if the proposed transaction permits the mortgagee of the ground lessor's
fee interest to accelerate its loan to the ground lessor, then either (x) the
Green Acres Borrower will provide the mortgagee with a written agreement or
acknowledgment from the fee mortgagee that it will not accelerate its loan to
the ground lessor or (y) the proposed transaction will provide for the
payment in full of such fee mortgage loan; and (v) no event of default will
occur and be continuing; and (B) prior to any such transaction, the proposed
transferee delivers to mortgagee an officer's certificate giving certain
assurances to the general effect that the transferee is not an employee
benefit plan, or, in any event, the transfer will not give rise to
"prohibited transactions" under ERISA or similar laws.
Notwithstanding the foregoing, transfers of direct and indirect beneficial
interests in the Green Acres Borrower will be permitted if (a) the transferee
will be at least 51% owned and controlled directly or indirectly by Vornado
Realty Trust, Vornado Realty L.P., any entity with which Vornado Realty Trust
or Vornado Realty L.P. is merged or consolidated or to which Vornado Realty
Trust or Vornado Realty L.P.
S-142
<PAGE>
sells all or substantially all of its assets, or an entity in which Vornado
Realty Trust is the sole operating partner, and (b) if there is either (1) a
transfer of 25% or more of direct membership, stock or other equity interests
in the Green Acres Borrower or a transfer of the managing member's interest
in the Green Acres Borrower or (2) a transfer of any direct interest in a
member of the Green Acres Borrower that is the required single purpose
member, the Green Acres Borrower is required to deliver to the mortgagee (i)
an officer's certificate describing the proposed transaction and stating that
such transaction is permitted by the Green Acres Loan documents, together
with any documents upon which such officer's certificate is based, and (ii) a
legal opinion of counsel to the Green Acres Borrower or the transferee
selected by either of them (unless reasonably disapproved by mortgagee or the
Rating Agencies), in form and substance consistent with similar opinions then
being required by the Rating Agencies, confirming, among other things, that
the assets of the Green Acres Borrower and of its managing member (as
constituted after such transfer) will not be substantively consolidated with
the assets of certain owners or controlling persons of the Green Acres
Borrower in a bankruptcy or similar proceeding.
INSURANCE. The Green Acres Borrower is required to maintain, at its sole
cost and expense the following insurance: (a) policies of insurance against
loss or damage by standard perils included within the classification "All
Risks of Physical Loss", maintained in an aggregate amount equal to the then
full replacement cost of the Green Acres Property and related assets (without
deduction for physical depreciation), with deductibles no greater than
$50,000, as increased proportionately with the increase in the Consumer Price
Index, (b) flood insurance (if any part of the Green Acres Property is
located in an area identified by the Federal Emergency Management Agency as
an area federally designated a "100 year flood plain" and flood insurance is
generally available at reasonable premiums and in such amounts as generally
are required by institutional lenders for similar properties (or, if not so
available from a private carrier, from the federal government at commercially
reasonable premiums to the extent available)), (c) commercial general
liability insurance, including broad form property damage, blanket
contractual and personal injuries coverages and containing minimum limits per
occurrence of $1,000,000 for any policy year as well as at least $50,000,000
excess and/or umbrella liability insurance; (d) rental loss and/or business
interruption insurance in an amount sufficient to avoid any co-insurance
penalty, and equal to the greater of (i) estimated gross revenues from the
operation of the Green Acres Property and (ii) projected operating expenses
(including interest and principal payments on the Green Acres Loan) needed to
maintain and operate the Green Acres Property for a period of up to the next
18 months; (e) insurance against loss or damage from leakage of sprinkler
systems and explosion of steam boilers, air conditioning equipment, high
pressure piping, machinery and equipment, pressure vessels or similar
apparatus and against loss of occupancy or use arising from any such
breakdown, in such amounts as are generally available at reasonable premiums
and are generally required by institutional lenders for property comparable
to the Green Acres Property; (f) worker's compensation insurance with respect
to all employees of Green Acres Borrower, as and to the extent required by
applicable law or regulation; (g) during any period of repair or restoration
costing in excess of $5,000,000, builder's "all risk" insurance in an amount
not less than full insurable value of the Green Acres Property; (h) coverage
to compensate for the cost of demolition and the increased cost of
construction for any Green Acres Property in an amount satisfactory to the
mortgagee; and (i) such other insurance as may from time to time be
reasonably required by the mortgagee. The Green Acres Loan requires insurers
for all-risk coverage to have claims paying abilities rated "AA" or better by
S&P and Moody's and "A-X1" or better by Best's, and insurers for all other
coverage to have claims paying abilities rated "A" or better by S&P and
Moody's and "A-X1" or better by Best's.
CASUALTY AND CONDEMNATION. Following the occurrence of a casualty or
condemnation affecting the Green Acres Property, the Borrower, regardless of
whether proceeds are available, is required to promptly proceed to restore,
repair, replace or rebuild the affected Green Acres Property, to the extent
practicable, to be of at least equal value and of substantially the same
character as prior to such casualty or condemnation, all to be effected in
accordance with the terms of the Green Acres Loan documents applicable to
alterations.
In the event of a casualty at the Green Acres Property that involves a
loss of less than 30% of the outstanding principal balance of the Green Acres
Loan or a condemnation at the Green Acres Property
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<PAGE>
that involves a loss of less than 20% of the outstanding principal balance
of the Green Acres Loan, the mortgagee will permit the application of the
proceeds resulting therefrom (after reimbursement of any expenses incurred by
the mortgagee) to reimburse the Green Acres Borrower for the cost of
restoring, repairing, replacing or rebuilding the Green Acres Property, in
the manner described below, provided that no default or event of default has
occurred and is then continuing and, in the reasonable judgment of the
mortgagee: (i) the Green Acres Property, after such restoration, will
adequately secure the outstanding principal balance of the Green Acres Loan,
(ii) the restoration can be completed by the earliest to occur of: (A) the
183rd day following the receipt of the proceeds or, with a written
confirmation from the Rating Agencies that there will be no downgrade,
qualification or withdrawal of the then current ratings of the Certificates
with respect thereto, such longer period as may reasonably be required, (B)
the Green Acres Maturity Date, and (C) with respect to a casualty, the
expiration of the payment period on the rental-loss insurance coverage in
respect of such casualty; and (iii) during the period of the restoration, the
sum of (A) the net operating income for the Green Acres Property, plus (B)
proceeds of rent loss insurance or business interruption insurance, if any,
payable together with such other monies as the Green Acres Borrower makes
irrevocably available for restorations, will equal or exceed the sum of
operating expenses and payments of principal and interest on the Green Acres
Loan.
If any of the conditions set forth in the foregoing proviso is not
satisfied, then, unless the mortgagee elects otherwise, in its sole
discretion, the proceeds are required to be applied to the prepayment of the
Green Acres Loan without the payment of a prepayment premium or penalty,
other than a yield maintenance charge if an event of default has occurred and
is continuing, and the Green Acres Borrower will be entitled to receive a
release of the mortgage lien encumbering the Green Acres Property in
accordance with and subject to the terms described in "--Release in Exchange
for Substitute Collateral--Defeasance" above in connection with a release due
to defeasance, unless a reciprocal easement and/or operating agreement or a
tenant lease requires that such proceeds be applied to a restoration and no
event of default has occurred and is continuing, in which event the mortgagee
is required to make the proceeds available for a restoration.
In the event of a casualty that involves a loss of 30% or more of the
outstanding principal balance of the Green Acres Loan, or a condemnation that
involves a loss of 20% or more of the outstanding principal balance of the
Green Acres Loan, then the mortgagee will have the option (to be exercised by
notice to the Green Acres Borrower within 30 days after receipt of the
proceeds) to apply the net proceeds to the prepayment of the Green Acres Loan
(and the Green Acres Borrower will be entitled to receive a release of the
mortgage lien affecting the Green Acres Property or, in the event that the
entire Green Acres Loan is prepaid by application of such proceeds, at the
request of the Green Acres Borrower, an assignment of the Note and Morgage
and termination of the other Green Acres Loan documents) or, provided the
conditions set forth in the proviso above are complied with, to have such
proceeds applied to reimburse the Green Acres Borrower for the cost of any
restoration (and the mortgagee will be deemed to have elected prepayment if
it fails to give such notice within 30 days after receipt of the proceeds),
unless a reciprocal easement and/or operating agreement or a tenant lease
requires that such proceeds be applied to a restoration and no event of
default has occurred and is continuing, in which event the mortgagee is
required to make the proceeds available for a restoration. Any application of
proceeds to the repayment of the Green Acres Loan as described above will be
without any prepayment premium or penalty except that if an event of default
has occurred and is continuing, the Green Acres Borrower will be required to
pay the yield maintenance payment, if any, as described herein.
If the Green Acres Borrower is entitled to reimbursement out of proceeds,
such proceeds are required to be disbursed on a monthly basis upon the
mortgagee being furnished with (i) such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements, bonds,
plats of survey and such other evidences of cost, payment and performance as
the mortgagee may reasonably require and approve, and (ii) all plans and
specifications for such restoration, such plans and specifications to be
approved by the mortgagee prior to commencement of any work (such approval
not to be unreasonably withheld or delayed). In addition, no payment made
prior to the final completion of the restoration is permitted to exceed 95%
of the value of the work performed from time to time; funds
S-144
<PAGE>
other than proceeds will be disbursed prior to disbursement of such
proceeds; and at all times, the undisbursed balance of such proceeds
remaining in the hands of the mortgagee, together with funds deposited for
that purpose or irrevocably committed to the satisfaction of the mortgagee by
or on behalf of the Green Acres Borrower for that purpose, is required to be
at least sufficient in the reasonable judgment of the mortgagee to pay for
the cost of completion of the restoration, free and clear of all liens or
claims for liens. Prior to any disbursement, the mortgagee must have received
evidence reasonably satisfactory to it of the estimated cost of completion of
the restoration, and the Green Acres Borrower must have deposited with the
mortgagee eligible collateral in an amount equal to the excess (if any) of
such estimated cost of completion over the net proceeds. Any surplus which
may remain out of proceeds received pursuant to a casualty will be paid to
the Green Acres Borrower after payment of such costs of restoration. Any
surplus which may remain out of proceeds received pursuant to a condemnation
will be escrowed with mortgagee as security for the Green Acres Loan after
payment of such costs of restoration.
FINANCIAL REPORTING. The Green Acres Borrower is required to furnish to
the mortgagee within 90 days following the end of each fiscal year, a
complete copy of its annual financial statements, audited by a "Big Six"
accounting firm or another independent-certified public accounting firm
reasonably acceptable to the mortgagee, in accordance with GAAP, including
balance sheets and statements of profit and loss. Together with its annual
financial statements, the Green Acres Borrower is required to furnish to the
mortgagee (i) an officer's certificate certifying as of the date thereof
whether, to the Green Acres Borrower's knowledge, there exists a default or
an event of default, and if such default or event of default exists, the
nature thereof, the period of time it has existed and the action then being
taken to remedy the same; (ii) the then current rent rolls and a current
occupancy statement; and (iii) an annual report, for the most recently
completed fiscal year, containing, to the extent the Green Acres Borrower
receives such information from its tenants in such retail space and is
entitled to disclose such information to the Mortgagee, reported tenant sales
per square foot and tenant rent per square foot by general merchandise
categories.
In addition, the Green Acres Borrower is required to furnish, or cause to
be furnished, to the mortgagee on or before the 30th day after the end of
each calendar month the monthly operating statement generated by the Green
Acres Manager's accounting system. The Green Acres Borrower is also required
to furnish, or cause to be furnished, to the mortgagee on or before the 45th
day after the end of each calendar quarter: (i) quarterly and year-to-date
operating statements with respect to the Green Acres Borrower, with a balance
sheet for the quarter; (ii) a current rent roll; and (iii) an occupancy
report on the Green Acres Property, together with an officer's certificate
certifying such items as true, correct, accurate and complete.
S-145
<PAGE>
Graphics Omitted: Photographs of Americold Pool properties in Gloucester
Massachusetts, Milwaukie, Oregon and Plover, Wisconsin.
[Grande Loan II Logo]
<PAGE>
AMERICOLD POOL: THE BORROWER; THE PROPERTIES
THE LOAN. The Americold Pool Loan had a principal balance as of the
Cut-Off Date of approximately $148,500,000 and is evidenced by a note (the
"Americold Pool Note A") issued by Americold Real Estate, L.P. (the
"Americold Pool Borrower") formed for the sole purpose of acquiring, owning,
operating and performing other related activities with respect to the
Americold Pool Properties. The Americold Pool Note A is cross-collateralized
and cross-defaulted with a pari passu note (the "Americold Pool Note B")
issued by the Americold Pool Borrower in the amount of $148,500,000 (the
aggregate indebtedness represented by such notes being referred to herein as
the "Total Americold Pool Loan"). The Total Americold Pool Loan had a
principal balance as of the Cut-Off Date of approximately $297,000,000. The
portion of the Total Americold Pool Loan evidenced by the Americold Pool Note
B is not included in the Mortgage Pool. The Americold Pool Loan is secured by
first priority mortgage and/or deed of trust liens encumbering the fee and
leasehold interests in 29 cold storage warehouses located throughout the
United States (the "Americold Pool Properties"). The Americold Pool Borrower
owns fee title to 26 and leasehold title to 3 of the Americold Pool
Properties. The mortgages encumbering the Americold Pool Properties are
cross-collateralized and cross-defaulted. The Americold Pool Loan was
originated by GSMC on April 22, 1998.
The Americold Pool Note B is being held by GSMC and it is anticipated such
note will be included in a mortgage securitization of an affiliate of the
Seller in the future. The Total Americold Pool Loan will be serviced by the
Master Servicer and specially serviced by the Special Servicer and, in the
event servicing is transferred to another servicer, the servicing for the
Total Americold Pool Loan will be transferred.
THE BORROWER. The Americold Pool Borrower is a special purpose Delaware
limited partnership, formed solely for the purpose of acquiring, owning, and
operating the Americold Pool Properties. Americold Corporation ("Americold"),
an affiliate of the Americold Pool Borrower, will operate and manage the
Americold Pool Properties pursuant to the Americold Master Lease as described
in "--Property Management; Master Lease" below. A joint venture between
Vornado Realty Trust and Crescent Real Estate Equities Company (the "Joint
Venture") acquired Americold and URS Logistics, Inc. ("URS") from Kelso
Partners, L.P. on October 31, 1997. Since the acquisition, Americold and URS
have been combined operationally as Americold Logistics with one management
team under the umbrella of the Joint Venture. The Americold Pool Borrower is
owned indirectly by entities controlled by individuals who are also directors
and officers of Vornado Realty Trust and Crescent Real Estate Equities, Inc.,
respectively, and substantially all of the economic interests in which are
held by Vornado Realty Trust and Crescent Real Estate Equities, Inc.,
respectively. Vornado Realty Trust and Crescent Real Estate Equities, Inc.
are both publicly traded real estate investment trusts whose beneficial
interests are listed on the New York Stock Exchange.
SECURITY. The Americold Pool Loan is a non-recourse loan, secured only by
the fee and leasehold interests of the Americold Pool Borrower in the
Americold Pool Properties and certain related collateral (including
assignments of leases and rents and the funds in certain accounts). Subject
to certain limited exceptions, neither the Americold Pool Borrower nor any of
its affiliates are personally liable for payment of the Americold Pool Loan.
The Americold Pool Borrower has represented that it owns good and
indefeasible fee simple or leasehold title, as applicable, to the Americold
Pool Properties, free and clear of all liens other than encumbrances
described in the applicable title insurance policies and other encumbrances
permitted by the mortgagee under the Americold Pool Loan documents (the
"Americold Pool Permitted Encumbrances"). The title insurance policies issued
upon the origination of the Americold Pool Loan insure that each of the
mortgages securing the Americold Pool Loan constitutes a valid and
enforceable first lien on the Americold Pool Properties encumbered by it,
subject to certain exceptions and exclusions from coverage set forth in the
policies.
THE INDUSTRY. For a description of the industry, see "--URS Pool: The
Borrower; The Properties--The Industry" above. Americold's top ten customers
by revenue (in alphabetical order) for 1997 were Con Agra, Grandonet, HJ
Heinz, JR Simplot, McCain, Norpac Foods, Dean Foods, Nestle USA, New West
Foods, and Unilever.
S-146
<PAGE>
THE PROPERTIES. The Americold Pool Properties are comprised of the
Americold Pool Borrower's fee simple and leasehold interest in 29 cold
storage warehouses. The Americold Pool Properties are located throughout the
United States with a particular focus in the West, Pacific Northwest, and
Northeast regions, and contain a total of approximately 155 million cubic
feet of refrigerated space. The Americold Pool Properties are comprised of
five National Distribution, six Regional Distribution, ten Regional
Production, and eight Captive Production facilities.
AMERICOLD POOL PROPERTIES
BUSINESS SEGMENTATION BY UNDERWRITTEN NET CASH FLOW
[GRAPHIC OMITTED]
S-147
<PAGE>
AMERICOLD POOL PROPERTIES SUMMARY
<TABLE>
<CAPTION>
YEAR BUILT/ SQUARE CUBIC
PROPERTY LOCATION PROPERTY TYPE RENOVATED FOOTAGE FOOTAGE
- -------------- --------------- --------------------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Ash Street..... Denver, CO Regional Distribution 1976/1980 114,222 2,750,000
Bettendorf..... Bettendorf, IA Regional Distribution 1973/1977 336,000 8,848,000
Boston......... Boston, MA Regional Distribution 1969 188,007 3,067,994
Burley......... Burley, ID Captive Production 1959/1996 277,626 10,722,101
Burlington..... Burlington, WA Captive Production 1965/1968 194,000 4,655,000
Clearfield..... Clearfield UT National Distribution 1973/1978 358,400 8,601,600
Connell........ Connell, WA Captive Production 1969/1971 235,200 5,644,800
E. Main
Street........ Gloucester MA Regional Production 1961/1973 63,952 1,862,768
Fogelsville.... Fogelsville, PA National Distribution 1976/1997 683,914 21,623,336
Ft. Dodge...... Ft. Dodge, IA Regional Distribution 1979/1980 155,811 3,739,464
Hermiston...... Hermiston, OR Captive Production 1975 168,000 4,032,000
Jesse St....... Los Angeles, CA National Distribution 1954/1980 141,600 2,682,400
Lois Avenue.... Tampa, FL Regional Distribution 1953 21,820 400,000
Milwaukie...... Milwaukie, OR Regional Distribution 1958/1988 163,026 4,688,624
Moses Lake..... Moses Lake, WA Captive Production 1967/1979 302,400 7,257,600
Nampa.......... Nampa, ID Regional Production 1946/1974 364,000 7,981,000
Plant City..... Plant City, FL Regional Production 1956 33,600 750,000
Plover......... Plover, WI Captive Production 1978/1981 384,400 9,363,200
Rail Road Ave . Gloucester, MA Regional Production 1964 11,923 270,480
Rochelle....... Rochelle, IL National Distribution 1995 179,712 6,020,352
Rodgers St..... Gloucester, MA Regional Production 1967 96,666 2,823,256
Rowe Square.... Gloucester, MA Regional Production 1955/1969 74,773 2,387,465
Salem.......... Salem, OR Regional Production 1963/1981 498,400 12,487,600
Southgate...... Atlanta, GA National Distribution 1996 100,714 3,726,418
Turlock 2...... Turlock, CA Regional Production 1985 106,400 3,024,000
Walla Walla.... Walla Walla, WA Regional Production 1960/1968 140,000 3,136,000
Wallula........ Wallula, WA Captive Production 1981 40,000 1,200,000
Watsonville.... Watsonville, CA Captive Production 1985 185,980 5,448,500
Woodburn....... Woodburn, OR Regional Production 1952/1979 277,440 6,313,372
--------- -----------
Total/Average . 5,897,986 155,507,330
========= ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CUT-OFF DATE CUT-OFF
UNDERWRITTEN ALLOCATED APPRAISED DATE
PROPERTY NET CASH FLOW* LOAN AMOUNT VALUE* LTV* DSCR*
- -------------- -------------- ------------- ------------ ------- -----
<S> <C> <C> <C> <C> <C>
Ash Street..... $ 462,849 $ 1,768,536 $ 6,200,000 57.0% 1.54x
Bettendorf..... 1,088,267 4,107,568 14,400,000 57.0 1.56
Boston......... 606,267 2,110,834 7,400,000 57.0 1.70
Burley......... 4,653,746 10,012,197 35,100,000 57.0 2.74
Burlington..... 1,783,553 4,506,915 15,800,000 57.0 2.34
Clearfield..... 3,016,924 7,929,889 27,800,000 57.0 2.25
Connell........ 2,368,940 6,532,174 22,900,000 57.0 2.14
E. Main
Street........ 714,605 2,367,557 8,300,000 57.0 1.78
Fogelsville.... 2,139,954 16,430,273 57,600,000 57.0 0.77
Ft. Dodge...... 346,861 1,354,927 4,750,000 57.0 1.51
Hermiston...... 2,739,870 6,703,323 23,500,000 57.0 2.41
Jesse St....... 685,951 2,082,309 7,300,000 57.0 1.94
Lois Avenue.... 67,936 128,362 450,000 57.0 3.12
Milwaukie...... 2,131,188 5,391,183 18,900,000 57.0 2.33
Moses Lake..... 3,561,526 9,755,474 34,200,000 57.0 2.16
Nampa.......... 680,270 5,819,055 20,400,000 57.0 0.69
Plant City..... 186,202 684,595 2,400,000 57.0 1.61
Plover......... 5,024,753 13,634,844 47,800,000 57.0 2.18
Rail Road Ave . 164,781 656,070 2,300,000 57.0 1.48
Rochelle....... 2,872,681 7,017,096 24,600,000 57.0 2.42
Rodgers St..... 1,064,918 3,480,023 12,200,000 57.0 1.81
Rowe Square.... 1,321,472 4,079,043 14,300,000 57.0 1.91
Salem.......... 3,364,696 9,299,078 32,600,000 57.0 2.14
Southgate...... 352,282 3,052,151 10,700,000 57.0 0.68
Turlock 2...... 942,005 2,595,755 9,100,000 57.0 2.14
Walla Walla.... 973,992 2,852,478 10,000,000 57.0 2.02
Wallula........ 833,766 1,939,685 6,800,000 57.0 2.54
Watsonville.... 2,001,777 5,191,510 18,200,000 57.0 2.28
Woodburn....... 2,737,821 7,017,096 24,600,000 57.0 2.30
-------------- ------------- ------------
Total/Average . $48,889,852 $148,500,000 $520,600,000 57.0% 1.94x
============== ============= ============
</TABLE>
- ------------
* Underwritten Net Cash Flow and Appraised Value reflects the Total Americold
Pool Loan. For DSCR and LTV purposes, 50% of the Underwritten Net Cash Flow
and Appraised Value is utilized.
S-148
<PAGE>
AMERICOLD POOL PROPERTIES
Graphic Omitted: Map of United States which highlights the states where
Americold Pool Properties are located and provides for the following information
with respect to each state:
Washington
Connell
Walla Walla
Wallula
Moses Lake
Burlington
Idaho
Burley
Nampa
Iowa
Fort Dodge
Bettendorf
Wisconsin
Plover
Illinois
Rochelle
Pennsylvania
Fogelsville
Oregon
Milwaukie
Salem
Woodburn
Hermiston
Massachusetts
Rogers Street
Rowe Square
East Main
Railroad Ave.
Boston
California
Turlock II
Watsonville
Jesse Street
Utah
Clearfield
Colorado
Ash Street
Georgia
Southgale
Florida
Plant City
Lois Avenue
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<PAGE>
OPERATING HISTORY. The following table shows certain information regarding
the operating history of the Americold Pool Properties:
<TABLE>
<CAPTION>
UNDERWRITTEN
1995 (A) 1996 (A) 1997 (B) NET CASH FLOW
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
REVENUES .................... $130,219,000 $130,111,000 $140,999,400 $138,572,978
EXPENSES
Personnel .................. 43,132,000 45,989,000 51,060,000 51,673,477
Utilities .................. 7,603,000 7,934,000 8,681,000 8,708,933
Facilities ................. 6,372,000 6,314,000 7,399,000 6,806,470
Repairs and Maintenance ... 2,856,000 2,886,000 3,181,800 4,970,912
Other Direct Expenses ..... 4,754,000 5,688,000 7,600,000 2,674,118
-------------- -------------- -------------- ---------------
Total Expenses ............. 64,717,000 68,811,000 77,921,800 74,833,910
NET OPERATING INCOME......... 65,502,000 61,300,000 63,077,600 63,739,068
Capital Expenditure Reserve 6,534,838
Master Lease Adjustment(c) 8,314,379
-------------- -------------- -------------- ---------------
NET CASH FLOW................ $ 65,502,000 $ 61,300,000 $ 63,077,600 $ 48,889,851
============== ============== ============== ===============
</TABLE>
- ------------
(a) The 1995 and 1996 figures represent a compilation of revenues and
certain expenses of 28 Americold Pool Properties with a February 28
fiscal year-end and one Americold Pool Property with a December 31
fiscal year-end.
(b) The 1997 financial statements includes annualizing 10-month revenues
and certain expenses for 28 of the Americold Pool Properties.
(c) It is assumed that the Americold Pool Master Lessee will receive
approximately 6% of the Americold Pool Properties' Total Revenues
pursuant to the Americold Pool Master Lease.
GROUND LEASES. At 3 of the Americold Pool Properties, all or a portion of
the underlying land is leased to the Americold Pool Borrower pursuant to a
ground lease.
The interest of the Americold Pool Borrower in the Watsonville, California
property consists of a ground leasehold interest created under a lease dated
February 1, 1984, between Richard A. Shaw, Inc., as lessor and Termicold
Corporation, now known as Americold, as lessee. Americold assigned its
interest in the lease to the Americold Pool Borrower in connection with the
closing of the Americold Pool Loan. The term of the lease expires on December
31, 2024 and contains three successive 10 year renewal options. The current
annual rent under the lease is $193,536 which amount is subject to adjustment
in accordance with the lease.
The interest of the Americold Pool Borrower in the Burley, Idaho property
consists of a ground leasehold interest created under a lease dated as of
January 23, 1993, between Ore-Ida Foods, Inc. as lessor and Americold as
lessee. Americold assigned its interest in the lease to the Americold Pool
Borrower in connection with the closing of the Americold Pool Loan. The term
of the lease commenced on January 23, 1993, expires 20 years thereafter and
contains eight additional 10 year renewal options. The current annual rent
under the lease is $1,000, which is increased or decreased by the percentage
increase or decrease in the property tax on the land.
The interest of the Americold Pool Borrower in the Ash Street Denver,
Colorado property consists of a ground leasehold interest created under a
lease dated April 6, 1976, between Country Life Insurance Company as lessor
and Beatrice Public Refrigerated Services, Inc., now known as Americold
(pursuant to an assignment by Beatrice Foods Co.) as lessee. Americold
assigned its interest in the lease to the Americold Pool Borrower in
connection with the closing of the Americold Pool Loan. The term of the lease
commenced on July 1, 1976, expires 25 years thereafter and contains four
consecutive 5 year renewal options. The current annual rent under the lease
is $232,260.
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APPRAISALS. Appraisals, prepared by Landauer Associates, Inc., dated as
of March 1, 1998 determined values for the Americold Pool Properties of
approximately $520,600,000, resulting in a Cut-Off Date LTV of approximately
57.0%. The appraisals were prepared in accordance with the Uniform Standards
of Professional Appraisal Practice. See "Risk Factors--The Mortgage
Loans--Limitations on Appraisals" herein.
SEISMIC REPORT. Structural and seismic risk assessments of certain of the
Americold Pool Properties were performed in March 1998 by a third party
structural firm. Those properties included Jesse Street, Turlock 2, and
Watsonville. The seismic reports indicated a PML for each of the three
facilities as follows: Jesse Street, $1,460,000 to $1,825,000, Turlock 2,
$425,000 to $1,105,000, and Watsonville, $1,400,000 to $3,500,000. The
Americold Pool Borrower has obtained blanket earthquake insurance coverage in
the full amount of such PMLs. See "Risk Factors--The Mortgage
Loans--Availability of Earthquake, Flood and Other Insurance" herein.
ENGINEERING REPORT. Property Condition Reports on the Americold Pool
Properties were completed prior to origination of the Americold Pool Loan.
The Property Condition Reports concluded that the Americold Pool Properties
were generally in good physical condition but noted certain items of deferred
maintenance for which approximately $543,006 in reserves was funded by the
Americold Pool Borrower at the closing of the Americold Pool Loan.
ENVIRONMENTAL ASSESSMENTS. Phase I environmental site assessments dated
January/ March 1998, and Phase II environmental site assessments dated March
1998, were completed by a third party environmental consulting firm. The
reports recommended additional investigation, removal, and the possible
remediation of petroleum contamination in the soil and groundwater as a
result of USTs at the Ash Street, East Main, and Rogers Street properties,
and additional investigation as the result of a heating system leak at the
Portland property. In addition, the reports recommended remediation of lead
contaminated soil and transformer fluid (PCB) contaminated soil at the
Railroad Avenue and East Main properties, respectively. The Americold Pool
Borrower funded $1,405,171 at the closing of the Americold Pool Loan for
additional investigation and potential remediation requirements. The reports
did not reveal any environmental liability, beyond which funds have been
reserved, that the Seller believes would have a material adverse impact on
the Americold Pool Borrower's business, assets or results of operations taken
as a whole. Nevertheless, there can be no assurance that all environmental
conditions and risks were identified in such reports. See "Risk Factors--The
Mortgage Loans-Environmental Law Considerations" herein.
PROPERTY MANAGEMENT; MASTER LEASE. The Americold Pool Loan agreement
provides that the Americold Pool Borrower may not, without the mortgagee's
prior consent, surrender or terminate any property management agreement
entered into by the Americold Pool Borrower and a property manager (the
"Americold Pool Property Management Agreement"), pursuant to which the
property manager is to provide property management and other services with
respect to the Americold Pool Property, or permit or suffer any significant
delegation or contracting of the property manager's duties, unless (i) the
property manager is in material default and the termination of such agreement
would be commercially reasonable, (ii) the property manager is being replaced
with an Americold Pool Acceptable Property Manager pursuant to a commercially
reasonable property management agreement, or (iii) the Americold Pool
Property Management Agreement is being replaced by an Americold Pool Master
Lease (in which event the Americold Pool Borrower may terminate the Americold
Pool Property Management Agreement at such time as the Americold Pool Master
Lease becomes effective). Unless otherwise waived by the mortgagee or cured
within five days, the Americold Pool Property Management Agreement will
terminate five days after the occurrence and continuance of an event of
default under the Americold Pool Loan and the mortgagee's notice thereof to
the Americold Pool Master Lessee and the Americold Pool Borrower. The
Americold Pool Borrower will have the right to modify, change, supplement,
alter and amend, and to waive and release any of its rights and remedies
under the Americold Pool Master Lease; provided, in each instance, that,
among other things such action is not reasonably likely to cause the
Americold Pool Borrower's net cash flow to be less than what it would be if
the Americold Pool Master Lease were terminated and replaced with a Americold
Pool Property Management Agreement under which the Americold Pool Borrower
was required to pay a property management fee of 5% of gross receipts, and,
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provided further that, except to the extent that the mortgagee may consent
to or approve such action in writing, the same will not be enforceable by, or
claimed as a defense by, the Americold Pool Master Lessee against the
mortgagee. To the extent that any Americold Pool Property is not subject to
the Americold Pool Master Lease, such Americold Pool Property is required to
be managed by a Americold Pool Acceptable Property Manager pursuant to a
property management agreement in form and substance satisfactory to the
mortgagee in its reasonable discretion (and collaterally assigned to the
mortgagee), provided that if such property manager is affiliated with the
Americold Pool Borrower, Vornado Realty L.P., Vornado Realty Trust or
Crescent Real Estate Equities Limited, its fee may not exceed then current
market rates.
"Americold Pool Acceptable Property Manager" means (i) URS; (ii)
Americold; (iii) any person or entity with or into which URS and/or Americold
is merged or consolidated or to which either of them transfer all or
substantially all of its or their assets or which succeeds to all or
substantially all of the business of URS and/or Americold; (iv) any person or
entity 51% or more owned, directly or indirectly, and controlled by one or
more of the persons or entities identified in clauses (i) through (iii)
above; (v) any person or entity in which one or more persons or entities
described in clauses (i) through (iv) above are sole operating partners or
managing members; and (vi) any other person or entity as to which the
Americold Pool Borrower has obtained a written confirmation from the Rating
Agencies that there will be no reduction, qualification or withdrawal of the
then current ratings of the Certificates with respect thereto.
"Cold Storage Qualified Master Lessee" means (i) any Americold Pool
Acceptable Property Manager and (ii) any institutional lender that acquires
the Americold Pool Master Lessee's interest in the Americold Pool Master
Lease by foreclosure or any action in lieu thereof.
The Americold Pool Properties are subject to a triple net lease (the
"Americold Pool Master Lease") between the Americold Pool Borrower, as
landlord (the "Americold Pool Master Lessor"), and Americold, as tenant (the
"Americold Pool Master Lessee"). The Americold Master Lease commenced as of
April 22, 1998 (the "Americold Pool Master Lease Commencement Date") and
expires on April 30, 2013, with two successive 5 year renewal options at the
option of the Americold Pool Master Lessee provided that the term of the
lease with respect to any ground lease property will expire 5 years prior to
the expiration of the term (including renewals) of such ground lease. Under
the Americold Pool Master Lease, the Americold Pool Master Lessee is required
to pay fixed rent (the "Americold Pool Minimum Rent") of (i) $48,164,000 per
annum for the period commencing on the Americold Pool Master Lease
Commencement Date through December 31, 2002, (ii) $50,572,000 per annum for
the period commencing on January 1, 2003 through December 31, 2007, and (iii)
the greater of (a) $53,100,810 per annum and (b) the fair market rental of
the leased property, for the period commencing on January 1, 2008 through
April 30, 2013. In addition, the Americold Pool Master Lessee is required to
pay percentage rent for each lease year (the "Americold Pool Percentage
Rent") equal to the product of (i) 37.50% and (ii) revenues for the lease
year in question in excess of the Americold Pool Breakpoint. The "Americold
Pool Breakpoint" for any lease year is an amount equal to the Americold Pool
Minimum Rent for such lease year divided by 37.50%. The annual Americold Pool
Minimum Rent during any renewal term will be the greater of (i) the then
current fair market rental of the leased property and (ii) the Americold Pool
Minimum Rent for the lease year immediately preceding the renewal term, plus
5%. For so long as the Americold Pool Loan is outstanding and the Americold
Pool Master Lessor is the borrower thereunder, the Americold Pool Minimum
Rent and the Americold Pool Percentage Rent will be paid as described in
"Americold Pool: The Loan--Cash Management; Lockbox" below.
The Americold Pool Master Lease provides that the Americold Pool
Properties are to be used exclusively as cold and dry storage facilities and
any uses incidental thereto. In addition, the Americold Pool Master Lessee,
at its expense, is required to maintain the Americold Pool Properties, and
all improvements, fixtures and equipment therein (including the personal
property subject to the Americold Pool Master Lease); except that the
Americold Pool Master Lessor will be responsible for the repair to the leased
property (other than repairs caused by the negligence or willful misconduct
of the Americold Pool Master Lessee or as a result of casualty or
condemnation), the expenditure of which would be depreciated on a 39-year
basis, provided that the Americold Pool Master Lessee will pay such
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expenditures to the extent they exceed, on a cumulative basis, $3,000,000
per annum, increased by 5% as of January 1, 2003 and January 1, 2008. The
Americold Pool Master Lease also provides, among other things, that (i)
personal property replaced by the Americold Pool Master Lessee will remain
the property of the Americold Pool Master Lessee, (ii) the Americold Pool
Master Lessee will maintain, at its sole cost and expense, the insurance
coverage required under the Americold Pool Loan agreement, (iii) the
Americold Pool Master Lessee will make alterations to the Americold Pool
Properties in accordance with the provisions relating to alterations set
forth in the Americold Pool Loan agreement, (iv) the Americold Pool Master
Lessee will restore any property damaged as a result of a fire or other
casualty, or taken by eminent domain or condemnation proceedings, in
accordance with the provisions relating to casualties and condemnations set
forth in the Americold Pool Loan agreement, (v) the Americold Pool Master
Lessee is required to indemnify the Americold Pool Master Lessor for all
environmental liabilities in respect of the Americold Pool Properties,
including those existing prior to the Americold Pool Master Lease
Commencement Date, and (vi) the Americold Pool Master Lessee is required to
establish and maintain all reserve accounts and implement the cash management
procedures required pursuant to the Americold Pool Loan agreement, but the
amounts to be funded into the Americold Pool Building Improvements Reserve
Account and the Americold Pool Low Debt Service Reserve Account are required
to be from amounts otherwise payable to the Americold Pool Borrower as rent.
The costs of establishing and maintaining such reserve accounts will be
equitably allocated between the Americold Pool Master Lessor and the
Americold Pool Master Lessee.
The Americold Pool Master Lessor has the right to encumber its fee
interest in the Americold Pool Properties pursuant to the terms of the
Americold Pool Master Lease. The Americold Pool Master Lease and the
Americold Pool Master Lessee's rights thereunder are subject to and
subordinate to the related mortgages, but the mortgagee is required to grant
non-disturbance rights to the Americold Pool Master Lessee and its
subtenants. As security for the performance of the Americold Pool Master
Lessee's obligations under the Americold Pool Master Lease, the Americold
Pool Master Lessee has pledged its interest in all leases, subleases, license
or occupancy agreements, warehousing, logistics and services agreements,
handling, and other similar agreements relating to the Americold Pool
Properties (collectively, the "Americold Pool Operating Agreements") and the
revenues therefrom to the Americold Pool Master Lessor, to the extent
permitted by law and by contract, with the understanding and agreement that
such pledge may in turn be collaterally assigned by the Americold Pool Master
Lessor to the mortgagee. Such collateral assignment will be expressly subject
to the rights of any secured lender to the Americold Pool Master Lessee,
provided, such secured lender performs after applicable notice and grace
periods, the obligations of the Americold Pool Master Lessee under the
Americold Pool Master Lease. The Americold Pool Master Lessee has agreed to
use reasonable efforts to ensure that each future Americold Pool Operating
Agreement expressly permits the collateral assignment of such Americold Pool
Operating Agreement to the Americold Pool Master Lessor and the mortgagee.
The Americold Pool Master Lease further provides that if and when the
Americold Pool Master Lessor or an affiliate has elected to qualify as a
REIT, the Americold Pool Master Lessee agrees to use reasonable efforts to
ensure that (i) the average of the adjusted tax bases of all of the Americold
Pool Master Lessor's personal property leased to the Americold Pool Master
Lessee under a lease at the beginning and end of a calendar year will not
exceed 15% of the average of the aggregate adjusted tax bases of all of the
Americold Pool Master Lessor's property that is leased to the Americold Pool
Master Lessee under such lease at the beginning and end of such calendar
year, (ii) the Americold Pool Master Lessee will not sublet the property
leased to it by the Americold Pool Master Lessor, or enter into any other
arrangement, if such sublet or other arrangement would cause all or a portion
of the amounts paid by the Americold Pool Master Lessee to the Americold Pool
Master Lessor under the Americold Pool Master Lease to fail to qualify as
"rents from real property" within the meaning of Section 856(d) of the Code,
(iii) the Americold Pool Master Lessee will not sublease the property leased
to it by the Americold Pool Master Lessor, or enter into any similar
arrangement with, any person in which the Americold Pool Master Lessor owns,
directly or indirectly, a 10% or more interest, within the meaning of Section
856(d)(2)(B) of the Code, and (iv) the Americold Pool Master Lessor will not
own, directly or indirectly, a 10% or more interest in the Americold Pool
Master Lessee, within the meaning of Section 856(d)(2)(B) of the Code.
Furthermore, in connection with the qualification of the Americold Pool
Master Lessor or its
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affiliate as a REIT, to the extent deemed necessary by the Americold Pool
Master Lessor (in its sole discretion), upon 30 days notice to the Americold
Pool Master Lessee, the Americold Pool Master Lessee will purchase from the
Americold Pool Master Lessor such portions of the property leased to it by
the Americold Pool Master Lessor as may be considered by the Americold Pool
Master Lessor (in its sole discretion) as personalty at a purchase price
equal to the fair market value of such personalty to be payable by the
Americold Pool Master Lessee in equal monthly installments over 48 months,
together with interest thereon of 8% per annum. The Americold Pool Minimum
Rent will be decreased by such monthly installment, exclusive of the interest
thereon.
AMERICOLD POOL: THE LOAN
PAYMENT TERMS. The Americold Pool Loan bears interest at a fixed rate per
annum equal to 6.894% (the "Americold Pool Initial Interest Rate") through
and including May 10, 2008. From and after May 11, 2008 (the "Americold Pool
Anticipated Repayment Date") the Americold Pool Loan accrues interest at a
fixed rate per annum equal to 8.894% (the "Americold Pool Revised Interest
Rate"). The Americold Pool Loan matures on May 11, 2023 (the "Americold Pool
Maturity Date"). As described below, if the Americold Pool Borrower does not
prepay the Americold Pool Loan on the Americold Pool Anticipated Repayment
Date, the Americold Pool Borrower will be required to pay interest at the
Americold Pool Initial Interest Rate (together with principal, as described
below), and interest accrued equal to the excess of the Americold Pool
Revised Interest Rate over the Americold Pool Initial Interest Rate will be
deferred and added to the outstanding indebtedness under the Americold Pool
Loan, and will, to the extent permitted by applicable law, earn interest at
the Americold Pool Revised Interest Rate (such accrued and deferred interest
and interest thereon (which will be deferred), the "Americold Pool Excess
Interest"). Interest on the Americold Pool Loan is calculated based on the
actual number of days elapsed and a 360-day year.
The Americold Pool Loan requires monthly payments (the "Americold Pool
Monthly Debt Service Payment Amount") of principal and interest of
approximately $1,048,596 (based on a 25-year amortization schedule and the
Americold Pool Initial Interest Rate). Payment of the balance of the
principal, if any, together with all accrued and unpaid interest is required
on the Americold Pool Maturity Date. Each Americold Pool Monthly Debt Service
Payment Amount is due and payable on the 11th day of each calendar month or,
if such day is not a business day, then the immediately preceding business
day (an "Americold Pool Due Date"). Commencing on the Americold Pool
Anticipated Repayment Date and on each Americold Pool Due Date thereafter,
the Americold Pool Borrower is required to apply 100% of the Americold Pool
Excess Cash Flow for the month preceding the month in which the Americold
Pool Due Date occurs in the following order of priority: (a) to the
outstanding principal balance until the Americold Pool Loan has been paid in
full, (b) to the payment of interest, if any, accrued and unpaid on the
Americold Pool Loan at the excess of the default rate over the Americold Pool
Revised Interest Rate, and (c) to the Americold Pool Excess Interest.
"Americold Pool Excess Cash Flow" means the amounts held as collected funds
in the Americold Pool Deposit Account after the application of funds: (a) to
the amounts required to be paid into the Americold Pool Tax and Insurance
Reserve Account described in "--Reserves" below, (b) to the Americold Pool
Operating Account (for payment of budgeted operating expenses) described in
"--Reserves" below, (c) to the Americold Pool Monthly Debt Service Payment
Amount, (d) to the amounts required to be paid into the Americold Pool
Ongoing Maintenance Reserve Account described in "--Reserves" below, and (e)
to the amounts required to be paid into the Americold Pool Building
Improvements Reserve Account described in "--Reserves" below. The scheduled
principal balance of the Americold Pool Loan as of the Americold Pool
Anticipated Repayment Date will be approximately $116,872,748.
After the occurrence and during the continuance of an event of default
under the Americold Pool Loan, to the extent permitted by applicable law, the
entire outstanding principal balance of the Americold Pool Loan along with
due and unpaid interest thereon will bear interest at a per annum default
rate equal to the lesser of (i) the maximum rate permitted by applicable law,
and (ii) 2% in excess of the Americold Pool Initial Interest Rate or the
Americold Pool Revised Interest Rate, as applicable, but in no event less
than 1% above the "prime rate" as published from time to time in The Wall
Street Journal (the "Americold Pool Default Interest").
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PREPAYMENT. Voluntary prepayment is prohibited under the Americold Pool
Loan prior to April 11, 2008 (subject to defeasance rights afforded the
Americold Pool Borrower), except in connection with certain casualty or
condemnation events, permitted partial prepayments to cure an event of
default or upon the occurrence of an Americold Pool Low Debt Reserve
Application Event, as described below. From and after April 11, 2008, the
Americold Pool Loan may be voluntarily prepaid in whole or in part on any
Americold Pool Due Date without payment of a yield maintenance charge or
prepayment premium.
If all or any part of the principal amount of the Americold Pool Loan is
prepaid upon an acceleration of the Americold Pool Loan following the
occurrence of an event of default under the Americold Pool Loan at any time
prior to April 11, 2008, the Americold Pool Borrower will be required to make
a yield maintenance payment in an amount equal to the excess, if any, of (i)
the sum of (A) the aggregate respective present values of all scheduled
interest payments in respect of the Americold Pool Loan (or the portion of
all such interest payments corresponding to the portion of the principal of
the Americold Pool Loan to be prepaid upon acceleration) for the period from
the date of such prepayment through and including the Americold Pool
Anticipated Repayment Date, discounted monthly at a rate equal to a specified
treasury constant yield and based on a 360-day year of twelve 30-day months
and (B) the aggregate respective present values of all scheduled principal
payments in respect of the Americold Pool Loan (or the then unpaid portion
thereof to be prepaid upon acceleration), assuming for these purposes that
the entire outstanding scheduled principal amount of the Americold Pool Loan
as of the Americold Pool Anticipated Repayment Date were to be paid in full
on such Americold Pool Due Date, discounted monthly at a rate equal to the
specified treasury constant yield and based on a 360-day year of twelve
30-day months over (ii) the then current outstanding principal amount of the
Americold Pool Loan (or the then unpaid portion thereof to be prepaid upon
acceleration).
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of an Americold Pool Property under
the Americold Pool Loan, the mortgagee will be entitled, at its sole option,
to apply such proceeds to prepay the Americold Pool Loan, as described in
"--Casualty and Condemnation" below. No yield maintenance payment or
prepayment premium or penalty will be payable upon any mandatory prepayment
of the Americold Pool Loan in connection with a casualty or condemnation
unless an event of default under the Americold Pool Loan has occurred and is
continuing, in which case the Americold Pool Borrower will be required to pay
a yield maintenance payment calculated in the manner described above. No
yield maintenance payments will be required in connection with a prepayment
of the Americold Pool Loan upon the occurrence of an Americold Pool Low Debt
Service Reserve Application Event as described in "--Cash Management;
Lockbox" below.
Prior to the second anniversary of the Closing Date after the occurrence
and during the continuance of an event of default as a result of a default
with respect to a particular Americold Pool Property, if the elimination of
such Americold Pool Property from the Americold Pool Properties would fully
cure such event of default, the Americold Pool Borrower will be permitted to
prepay the Americold Pool Loan in a principal amount equal to the Americold
Pool Release Amount for such Americold Pool Property, together with all
accrued and unpaid interest on the principal amount being so repaid, and the
yield maintenance payment owing as a result of such prepayment; provided that
(i) such prepayment is made prior to the earlier of (a) any acceleration of
the Americold Pool Loan by the mortgagee and (b) the 30th day after such
event of default; (ii) no other event of default exists as of such
prepayment; and (iii) the Americold Pool Borrower pays all other amounts then
due and owing to the mortgagee as of such prepayment, including any costs and
expenses of the mortgagee payable under the Americold Pool Loan documents in
connection with such event of default.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL--DEFEASANCE. The Americold
Pool Borrower is permitted on any date on or after the second anniversary of
the Closing Date to defease all or a portion of the Americold Pool Loan with
U.S. Treasury obligations, provided that, among other conditions, the
Americold Pool Borrower gives the mortgagee at least 30 days' prior written
notice of the date of such defeasance (the "Americold Pool Defeasance Date"),
no event of default will exist on the Americold Pool Defeasance Date, and
provided further that the Americold Pool Borrower pays on the Americold Pool
Defeasance Date (i) all accrued and unpaid interest on the Americold Pool
Loan to but not including the Americold Pool Defeasance Date, except (prior
to an acceleration of the Americold Pool Loan) for an
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event of default related solely to a default at a specific Americold Pool
Property that will be released from the lien thereon by prepayment of the
Americold Pool Release Amount with respect to such Americold Pool Property as
described above, (ii) all other sums (not including scheduled interest or
principal payments) then due under the Americold Pool Loan and the related
loan documents, (iii) the Americold Pool Defeasance Deposit and (iv) all
reasonable costs and expenses of the mortgagee incurred in connection with
the defeasance. In addition, the Americold Pool Borrower will be required to
deliver to the mortgagee, among other things: (a) a security/control
agreement granting the mortgagee a first priority lien on the Americold Pool
Defeasance Deposit and the U.S. Treasury obligations purchased with the
Americold Pool Defeasance Deposit, (b) an opinion of counsel to the Americold
Pool Borrower in form satisfactory to the mortgagee, in its reasonable
discretion, stating, among other things, that the mortgagee has a perfected
security interest in the U.S. Treasury obligations purchased with the
Americold Pool Defeasance Deposit, (c) a confirmation, in form and substance
reasonably satisfactory to the mortgagee, from a "Big Six" independent
certified accounting firm, that the Americold Pool Defeasance Deposit is
sufficient to pay all scheduled payments due from the Americold Pool Borrower
under the Americold Pool Loan in connection with the proposed defeasance, (d)
an officer's certificate certifying that all the requirements for defeasance
set forth in the Americold Pool Loan Agreement have been met, (e) if required
by the Rating Agencies, a non-consolidation opinion with respect to the
successor borrower, if any, in form and substance satisfactory to the
mortgagee and the Rating Agencies, and (f) a written confirmation from the
Rating Agencies that such defeasance will not result, in and of itself, in a
downgrade, qualification or withdrawal of the then current ratings of the
Certificates, if required by such Rating Agencies as a condition to
defeasance that such conditions have been met. In addition, if only a portion
of the Americold Pool Loan is being defeased, the Americold Pool Borrower
will be required to execute and deliver all necessary documents to amend and
restate the Americold Pool Loan note by issuing two substitute notes, one
having a principal balance equal to the defeased portion of the original note
and the other note having a principal balance equal to the undefeased portion
of the original note.
"Americold Pool Defeasance Deposit" means a cash amount equal to the sum
of (i) the remaining principal amount of the Americold Pool Loan (in the case
of a total defeasance) or the principal amount of the defeased note (in the
case of a partial defeasance), as applicable, with interest thereon, (ii)
without duplication, any costs and expenses incurred or to be incurred in the
purchase of U.S. Treasury obligations providing payments on or prior to, but
as close as possible to, all successive Americold Pool Due Dates after the
Americold Pool Defeasance Date, in the case of a defeasance for the entire
outstanding principal balance of the note, or the defeased note, in the case
of a defeasance for only a portion of the outstanding principal balance of
the Americold Pool Loan, as applicable, and in amounts equal to the scheduled
interest and principal payments due under the Americold Pool Loan or the
defeased note, as applicable, assuming for these purposes that the principal
portion of such payments include the entire scheduled outstanding principal
of the Americold Pool Loan as of the Americold Pool Anticipated Repayment
Date, and (iii) any revenue, documentary stamp or intangible taxes or any
other tax or charge due in connection with the transfer of the note, the
creation of the defeased note and the undefeased note, if applicable, any
transfer of the defeased note or otherwise required to accomplish the
defeasance.
Upon receipt of the Americold Pool Defeasance Deposit, the mortgagee,
using the Americold Pool Defeasance Deposit, is required to purchase
noncallable U.S. Treasury obligations on behalf of the Americold Pool
Borrower and such U.S. Treasury obligations will serve as the sole collateral
for the payments of the amounts due under the Americold Pool Loan, or the
defeased portion of the Americold Pool Loan in the case of a partial
defeasance. Upon a deposit of such U.S. Treasury obligations, the Americold
Pool Borrower will have the right to assign the obligation to make payments
under the Americold Pool Loan with respect to the principal amount of the
Americold Pool Loan that has been defeased to a special purpose entity
established or designated by the mortgagee.
In connection with the total defeasance of the Americold Pool Loan, the
Americold Pool Borrower will be permitted to obtain the release of the
mortgage encumbering all of the Americold Pool Properties and related
collateral. In connection with a partial defeasance, the Americold Pool
Borrower will be permitted
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to obtain the release of the applicable mortgage encumbering one or more of
the Americold Pool Properties and related collateral upon the satisfaction of
the following conditions, among others: (a) the principal balance of the
defeased note will equal or exceed the Americold Pool Release Amount for such
Americold Pool Property being released (or in connection with a repayment by
reason of a casualty or condemnation or in connection with curing a property
level event of default, in an amount equal to the net proceeds to which the
Americold Pool Borrower is entitled (such amount not to exceed the applicable
Americold Pool Release Amount or to be less than the applicable Americold
Pool Allocated Loan Amount) and all accrued and unpaid interest in respect of
the defeased note) and the requirements for defeasance described above must
have been satisfied, (b) the Americold Pool Borrower will provide the
mortgagee with all release documents accompanied by an officer's certificate
certifying that such documentation (i) is in compliance with all legal
requirements in all material respects, (ii) will effect such release in
accordance with the terms of the Americold Pool Loan agreement, and (iii)
will not affect the liens, security interests and other rights of the
mortgagee under the remaining Americold Pool Properties not being released,
(c) after giving effect to such release, the Americold Pool Debt Service
Coverage Ratio for (i) the Americold Pool Properties that have not been
released (unless a written confirmation from the Rating Agencies is obtained
that there will be no reduction, qualification or withdrawal of the then
current ratings of the Certificates with respect thereto) is not permitted to
be less than the Americold Pool Debt Service Coverage Ratio as of the closing
date of the Americold Pool Loan and (ii) the Americold Pool Properties that
have not been released (other than the Americold Pool Property in Denver,
Colorado (unless the Americold Pool Borrower acquires fee title to such
Americold Pool Property or the term of the applicable ground lease (inclusive
of any additional extension and/or renewal options) is extended to a date
that is beyond the tenth anniversary of the Americold Pool Maturity Date) is
not permitted to be less than 1.60x, unless written confirmation from the
Rating Agencies is obtained that such release will not result, in and of
itself, in a reduction, qualification or withdrawal of the then current
ratings of the Certificates with respect thereto; provided, however, that
this clause (c) will not be applicable in connection with a partial
prepayment in connection with a property level event of default as described
above or a partial prepayment required in connection with a casualty or
condemnation as described in "--Casualty and Condemnation" below.
"Americold Pool Allocated Loan Amount" means, with respect to each
Americold Pool Property, the portion of the principal amount of the Americold
Pool Loan allocated to each such Americold Pool Property as specified in the
Americold Pool Loan agreement and determined as described under the
definition of "Allocated Loan Amount" set forth above under the "Mortgage
Pool Characteristics--Certain Characteristics of the Mortgage Loans".
"Americold Pool Release Amount" means, with respect to a specified
Americold Pool Property, an amount equal to 125% of the Americold Pool
Allocated Loan Amount with respect to such Americold Pool Property (or, with
respect to the Americold Pool Properties located at 280 W. Highway 30 and
Burley, Idaho, 150% of the Americold Pool Allocated Loan Amount with respect
to such Americold Pool Property), provided that in no event will the
Americold Pool Release Amount be greater than the then outstanding principal
balance of the Americold Pool Loan.
The Americold Pool Borrower may also, without the consent of the
mortgagee, transfer, or grant interests in respect of, all or any part of
Americold Pool Unimproved Portions of any one or more Americold Pool
Properties (by sale, ground lease, subordination of fee interest to a
leasehold mortgage, sublease or other conveyance of any interest) to any
person, including affiliates of the Americold Pool Borrower, and tenants and
the Americold Pool Master Lessee and their respective affiliates as well as
grant in connection therewith in respect of the retained portion of the
applicable Americold Pool Property reasonable easements, restrictions,
covenants, reservations and rights of way for, among other things, traffic
circulation, ingress, egress, parking, access, water and sewer lines,
telephone and telegraph lines, electric lines or other utilities or for other
similar purposes, provided, in each such case, (x) such Americold Pool
Unimproved Portion is required to be either for the purpose of erecting,
maintaining and operating cold or dry storage structures or for other
structures and improvements not inconsistent with the use of the related
Americold Pool Property, and (y) neither such release nor the granting of
such rights with respect to the retained portion of the Americold Pool
Property will materially adversely affect
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the value of the retained portion (as distinguished from the entire
Americold Pool Properties), or the net operating income of the retained
portion of such Americold Pool Property (taking into account, to the extent
applicable, any potential loss of revenue resulting if the transfer and
development of the Americold Pool Unimproved Portion were not to occur), as
supported by an officer's certificate delivered to the mortgagee by the
Americold Pool Borrower. "Americold Pool Unimproved Portion" means, with
respect to any Americold Pool Property, one or more land areas comprising
such Americold Pool Property on which no improvements for which the Americold
Pool Borrower has received or accrued income in connection with the operation
of such Americold Pool Properties, or materially required for the receipt or
accrual of income in connection with the operation of the Americold Pool
Properties, are situate.
Notwithstanding the foregoing, the Americold Pool Borrower may assign to
any person, including an affiliate, any purchase options it may have under
any ground lease to acquire fee title to an Americold Pool Property, such
assignment to be free and clear of any lien in favor of the mortgagee.
SUBSTITUTION OF INDIVIDUAL PROPERTIES. The Americold Pool Borrower is
permitted to substitute for any Americold Pool Property owned by it, a
property (an "Americold Pool Substitute Property") of like kind and quality,
subject to the terms and conditions set forth in the Americold Pool Loan
agreement, and provided that, among other things, (i) no event of default
will have occurred and be continuing, (ii) a written confirmation has been
obtained from the Rating Agencies that such substitution will not result, in
and of itself, in a reduction, qualification or withdrawal of the then
current ratings of the Certificates with respect thereto, (iii) the Americold
Pool Debt Service Coverage Ratio for all the Americold Pool Properties as of
such date, assuming the proposed substitution of the Americold Pool
Substitute Property, is not permitted to be less than the Americold Pool Debt
Service Coverage Ratio for all of the Americold Pool Properties as of such
date, assuming no proposed substitution, (iv) the mortgagee will have
received an opinion of counsel reasonably acceptable to mortgagee, to the
effect that (A) a "significant modification" of the Americold Pool Loan
within the meaning of Treasury Regulations Section 1.860G-2 will not occur by
reason of the proposed substitution and (B) the proposed substitution will
not adversely affect the status of the entity holding the Americold Pool note
as a REMIC (assuming for such purposes that such entity otherwise qualifies
as a REMIC), and (v) in no event will the Americold Pool Borrower be
permitted to substitute more than six Americold Pool Properties over the term
of the Americold Pool Loan.
OTHER FINANCING. The Americold Pool Borrower is not permitted to incur or
assume any additional indebtedness, or issue any class of preferred equity
securities, other than: (a) unsecured trade payables incurred in the ordinary
course of the Americold Pool Borrower's business and customarily paid within
60 days of incurrence and in fact not more than 60 days outstanding, (b)
capital and operating lease obligations in respect of equipment used at the
Americold Pool Properties, with an annual rent obligation not greater than
$2,250,000 (as increased by a specified consumer price index), and (c) such
other unsecured indebtedness approved by the mortgagee in its sole
discretion.
ALTERATIONS. Except upon compliance with certain conditions set forth in
the Americold Pool Loan documents (which do not include the approval of the
mortgagee), the Americold Pool Borrower is prohibited from making or
permitting any demolitions, alterations, installations, improvements,
expansions, reductions or decorations of or to any Americold Pool Property or
any part thereof.
RESERVES. Pursuant to the terms of the Americold Pool Loan, the Americold
Pool Borrower has established: (i) an ongoing maintenance reserve account,
for the payment of routine capital repairs, replacements and improvements,
and repair and replacement of personalty (excluding capital improvements
referred to in clause (ii) below) made by the Americold Pool Borrower or the
Americold Pool Master Lessee with respect to any Americold Pool Property (the
"Americold Pool Ongoing Maintenance Reserve Account"), to be funded in an
amount equal to $3,534,841 per year (as such amount may be reduced in
connection with the release of an Americold Pool Property) payable in equal
monthly installments or, with a written confirmation from the Rating Agencies
that such substitution will not result, in and of itself, in a reduction,
qualification or withdrawal of the then current ratings of the Certificates
with respect thereto, such lesser amount as the Americold Pool Borrower or
the Americold Pool Master Lessee may request to be so funded; (ii) a building
improvements reserve account, for the payment of
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capital expenditures relating to any Americold Pool Property that are
required to be depreciated over a period of 39 years (or any successor
depreciation period for buildings) (the "Americold Pool Building Improvements
Reserve Account"), is to be funded in an amount equal to $3,000,000 per year
(as such amount may be reduced in connection with the release of an Americold
Pool Property) payable in equal monthly installments or, with a written
confirmation from the Rating Agencies that such substitution will not result,
in and of itself, in a reduction, qualification or withdrawal of the then
current ratings of the Certificates with respect thereto, such lesser amount
as the Americold Pool Borrower or the Americold Pool Master Lessee may
request to be so funded; (iii) a deferred maintenance reserve account, for
the payment of the cost of remediating, or securing the remediation of, and
establishing reserves with respect to, certain deferred maintenance
conditions set forth in the Americold Pool Loan documents (the "Americold
Pool Deferred Maintenance Reserve Account"), funded at the initial closing of
the Americold Pool Loan in the amount of $1,948,178 and disbursed by the
mortgagee as described below; (iv) a low debt service reserve account (the
"Americold Pool Low Debt Service Reserve Account"), funded from and after the
occurrence of an Americold Pool Low Debt Service Reserve Trigger Event until
an Americold Pool Low Debt Service Return Event in an amount equal to all
remaining funds in the Americold Pool Deposit Account after the application
of funds under clauses (i) through (v) described in the first part of the
second paragraph in "--Cash Management; Lockbox" below; and (v) a tax and
insurance reserve account (the "Americold Pool Insurance and Tax Reserve
Account") to be funded in monthly installments of one-twelfth of the taxes
and insurance premiums that will be payable during the next ensuing 12
months, provided that such monthly deposit of taxes with respect to any
Americold Pool Property that is ground leased by the Americold Pool Borrower
is required to be waived if the Americold Pool Borrower provides the
mortgagee with (a) satisfactory evidence that a mortgage of the ground
lessor's fee interest in such Americold Pool Property to an institutional
lender provides for the monthly escrow of taxes with respect thereto, and (b)
annual proof of payment of such taxes, and provided further that, if no event
of default has occurred and is continuing, and the Americold Pool Borrower
has provided evidence that a tenant or subtenant has made the required
payments of taxes, then the escrow requirement with respect to such tenant's
or subtenant's share of taxes for a particular tax parcel will be
conditionally waived.
"Americold Pool Low Debt Service Application Event" means that, as of the
first day of any calendar quarter, the Americold Pool Debt Service Coverage
Ratio for the trailing 12-month period will be less than 1.15x. "Americold
Pool Low Debt Service Return Event" means that, as of the first day of any
calendar quarter following an Americold Pool Low Debt Service Trigger Event
(a) the Americold Pool Debt Service Coverage Ratio for the trailing 12-month
period on the first day of each of two consecutive calendar quarters will be
greater than 1.25x, and (b) no event of default will have occurred and be
continuing. "Americold Pool Low Debt Service Trigger Event" means that, as of
the first day of any calendar quarter, the Americold Pool Debt Service
Coverage Ratio for the trailing 12-month period, will be less than 1.25x.
"Americold Pool Debt Service Coverage Ratio" means, as to any date, the
quotient obtained by dividing (i) the Americold Pool Borrower's Americold
Pool Net Cash Flow for the 12-month period immediately preceding such date by
(ii) the aggregate interest and principal payments actually due and payable
on the Americold Pool Loan (other than any defeased portion thereof) during
such period. "Americold Pool Net Cash Flow" means, (a) for any period in
which the Americold Pool Master Lease is in effect, net operating income from
the Americold Pool Properties less the amount that the Americold Pool
Borrower is required to deposit in the Americold Pool Building Improvements
Reserve Account during the applicable period and (b) for any period in which
the Americold Pool Master Lease is not in effect, net operating income less
the amount that the Americold Pool Borrower is required to deposit in the
Americold Pool Ongoing Maintenance Reserve Account and the Americold Pool
Building Improvement Reserve Account during the applicable period.
CASH MANAGEMENT; LOCKBOX. The Americold Pool Borrower has established and
is required to maintain a deposit account (the "Americold Pool Deposit
Account") in the name of and under the sole dominion and control of the
mortgagee, and all income received or accrued in connection with the
operation of the Americold Pool Properties (the "Americold Pool Receipts") by
the Americold Pool Borrower and the Americold Pool Master Lessee are required
to be transferred to the Americold Pool Deposit Account as described below.
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Within one business day after the Americold Pool Master Lessee's receipt
of Americold Pool Receipts, the Americold Pool Master Lessee is required to
deposit such Americold Pool Receipts in one or more a segregated "sweep" bank
accounts (each, an "Americold Pool Local Account") in the name of the
Americold Pool Master Lessee at a financial institution located near one or
more of the Americold Pool Properties or, if the Americold Pool Master Lessee
does not elect to use Americold Pool Local Accounts, in the Americold Pool
Deposit Account. The Americold Pool Master Lessee is permitted to maintain
Americold Pool Local Accounts for the purpose of depositing Americold Pool
Receipts from one or more Americold Pool Properties in the ordinary course of
the Americold Pool Master Lessee's business. The Americold Pool Master Lessee
is not permitted to commingle funds on deposit in an Americold Pool Local
Account with funds related to any other properties (other than one or more
Americold Pool Properties) owned or managed by the Americold Pool Master
Lessee or by any other person. All funds deposited in Americold Pool Local
Accounts are to be swept to the Americold Pool Deposit Account on a daily
basis. If the Americold Pool Borrower (or, at any time a master lease in not
in effect with respect to the Americold Pool Properties, the person or entity
retained by the Americold Pool Borrower to manage the Americold Pool
Properties) receives any Americold Pool Receipts, the Americold Pool Borrower
is required to deposit upon receipt, and will direct such manager to deposit
upon receipt, such Americold Pool Receipts in the Americold Pool Deposit
Account, on the day the payment is received.
Prior to the Americold Pool Anticipated Repayment Date, during each period
commencing on the day immediately following an Americold Pool Due Date and
ending on the following Americold Pool Due Date (each such period, a
"Americold Pool Collection Period"), provided that no event of default has
occurred and is continuing, the mortgagee is required to transfer funds from
the Americold Pool Deposit Account in the following order of priority: (i) to
fund the Americold Pool Tax and Insurance Reserve Account, (ii) to pay the
Americold Pool Monthly Debt Service Payment Amount, (iii) to fund the
Americold Pool Ongoing Maintenance Reserve Account, (iv) to fund the
Americold Pool Building Improvements Reserve Account, (v) from and after the
occurrence of an Americold Pool Low Debt Service Reserve Trigger Event until
the occurrence of a corresponding Americold Pool Low Debt Service Reserve
Return Event, (a) if an Americold Pool Master Lease is in effect, (A) to fund
an operating account (the "Americold Pool Operating Account") in an amount
equal to the budgeted operating expenses with respect to the calendar month
ending within the Americold Pool Collection Period in question, as set forth
in the annual budget approved by the Americold Pool Borrower as lessor under
the Americold Pool Master Lease and, if required under the Americold Pool
Loan agreement, by the mortgagee (subject to adjustment for deviations
between the actual amount of actual operating expenses with respect to the
Americold Pool Properties for the preceding month and the amount disbursed
from the Americold Pool Deposit Account for budgeted operating expenses
during such month), (B) to the mortgagee to pay any Americold Pool Default
Interest due and owing, up to an amount equal to the sum of the installments
of Americold Pool Minimum Rent, Americold Pool Percentage Rent and the
purchase price payable, if any, for personalty in connection with the
qualification of the Americold Pool Master Lessor or an affiliate as a REIT
(collectively, the "Americold Pool Master Lease Installment"), less the sum
of the Americold Pool Monthly Debt Service Payment Amount and the amounts
disbursed pursuant to clause (iv) above, (C) to the Americold Pool Low Debt
Service Reserve Account, in an amount up to the Americold Pool Master Lease
Installment, less the sum of the Americold Pool Monthly Debt Service Payment
Amount previously disbursed as described in clause (ii) above, the amount
disbursed to the Americold Pool Building Improvements Reserve Account as
described in clause (iv) above and the amount disbursed in respect of
Americold Pool Default Interest as described in clause (v) above, and (D) the
balance to the Americold Pool Master Lessee, or (b) if an Americold Pool
Master Lease is not in effect, (1) to fund the Americold Pool Operating
Account in an amount equal to the budgeted operating expenses for the
calendar month ending within the Americold Pool Collection Period in
question, and (2) to the mortgagee for the payment of any Americold Pool
Default Interest due and owing and (3) the balance to the Americold Pool Low
Debt Service Reserve Account, (vi) if no Americold Pool Low Debt Service
Trigger Event has occurred, or if an Americold Pool Low Debt Service Reserve
Trigger Event and a corresponding Americold Pool Low Debt Service Reserve
Return Event have occurred, (a) if an Americold Pool Master Lease is in
effect, (A) to the Americold Pool Operating Account in an amount equal to the
budgeted operating expenses,
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(B) to the mortgagee to pay Americold Pool Default Interest then due and
owing, up to an amount no greater than the excess of the Americold Pool
Master Lease Installment over the sum of the Americold Pool Monthly Debt
Service Payment Amount disbursed pursuant to clause (ii) and (iv) above, (C)
to the Americold Pool Borrower, in an amount equal to the excess of the
Americold Pool Master Lease Installment over the sum of the Americold Pool
Monthly Debt Service Payment Amount, the amounts required to be disbursed on
account of the Americold Pool Building Improvements Reserve Account and
Americold Pool Default Interest (such excess, the "Americold Pool Master
Lease Installment Balance"), and (D) the balance to the Americold Pool Master
Lessee, or (b) if an Americold Pool Master Lease is not in effect, (A) to the
URS Pool Operating Account in an amount equal to the budgeted operating
expenses, (B) to the mortgagee for payment of any Americold Pool Default
Interest due and owing, and (C) the balance to the Americold Pool Borrower.
The failure of the Americold Pool Borrower to have funds available in the
Americold Pool Deposit Account sufficient to make all payments required under
clauses (i) through (iv) above prior to the Americold Pool Anticipated
Repayment Date will constitute an event of default under the Americold Pool
Loan.
From and after the Americold Pool Anticipated Repayment Date, during each
Americold Pool Collection Period, provided that no event of default has
occurred and is continuing, the mortgagee is required to transfer funds from
the Americold Pool Deposit Account in the following order of priority: (i) to
fund the Americold Pool Tax and Insurance Reserve Account, (ii) to the
Americold Pool Operating Account, up to an amount equal to the budgeted
operating expenses, (iii) to pay the Americold Pool Monthly Debt Service
Payment Amount, (iv) to fund the Americold Pool Ongoing Maintenance Reserve
Account, (v) to fund the Americold Pool Building Improvements Reserve
Account, (vi) to the mortgagee, up to an amount equal to the Americold Pool
Master Lease Installment Balance, to be applied (a) first, to repayment of
the principal amount of the Americold Pool Loan, until the principal thereof
has been paid in full, (b) second, to the mortgagee for payment of any
Americold Pool Default Interest due and owing, and (c) third, to the payment
of Americold Pool Excess Interest, and (vii) to the Americold Pool Master
Lessee (or, if an Americold Pool Master Lease or replacement thereof is not
then in effect with respect to the Americold Pool Properties, to the
mortgagee, to be applied in the manner described in clause (vi) above and
thereafter, to the Americold Pool Borrower). The failure of the Americold
Pool Borrower to have funds available in the Americold Pool Deposit Account
sufficient to make all payments required under clauses (i) through (v) above
from and after the Americold Pool Anticipated Repayment Date will constitute
an event of default under the Americold Pool Loan.
To the extent that funds are available in the Americold Pool Deposit
Account, the mortgagee is required to make all of the foregoing transfers not
less frequently than once every two business days and, in any event, on each
and every Americold Pool Due Date.
Upon the completion (to the mortgagee's reasonable satisfaction) of the
remediation of all of the deferred physical maintenance conditions or all of
the environmental conditions, as applicable, with respect to a particular
Americold Pool Property for which funds have been deposited in the Americold
Pool Deferred Maintenance Account, the mortgagee is required to disburse to
the Americold Pool Borrower from the Americold Pool Deferred Maintenance
Reserve Account an amount equal to (i) 125% of the deferred maintenance
amount (with respect to deferred physical maintenance) or environmental
reserve amount (with respect to environmental conditions), as applicable,
with respect to such Americold Pool Property, less (ii) the amount previously
disbursed from the Americold Pool Deferred Maintenance Reserve Account in
respect of the applicable deferred physical maintenance conditions or
environmental conditions, as applicable, with respect to such Americold Pool
Property.
Upon the occurrence of an Americold Pool Low Debt Service Application
Event, all amounts in the Americold Pool Low Debt Service Reserve Account
will be applied by the mortgagee to reduce the principal balance of the
Americold Pool Loan; provided, however, upon the occurrence of an Americold
Pool Low Debt Service Return Event and prior to the Americold Pool
Anticipated Repayment Date, all amounts then remaining in the Americold Pool
Low Debt Service Reserve Account are required to be disbursed to the
Americold Pool Borrower. No yield maintenance payments will be required in
connection with the application of the Americold Pool Low Debt Service
Reserve Account to the reduction of the principal balance of the Americold
Pool Loan.
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The mortgagee's rights in and to the Americold Pool Deposit Account and
certain of the related reserve accounts are subject to the rights of the
Americold Pool Master Lessee. Accordingly, upon the acceleration of the
maturity of the Americold Pool Loan, if an Americold Pool Master Lease is in
effect with respect to the Americold Pool Properties, subject to the rights
of the Americold Pool Master Lessee under the Americold Pool Master Lease,
the mortgagee will be entitled to apply the funds held in the Americold Pool
Tax and Insurance Reserve Account, the Americold Pool Ongoing Maintenance
Reserve Account and any other reserve account funded by the Americold Pool
Master Lessee with funds other than Americold Pool Minimum Rent and Americold
Pool Percentage Rent solely for the purposes for which each such reserve
account was established.
TRANSFER OF AMERICOLD POOL PROPERTIES AND INTEREST IN THE AMERICOLD POOL
BORROWER; ENCUMBRANCES. Unless permitted by the Americold Pool Loan documents
as described below, and with the exception of leases entered into in
accordance therewith, Americold Pool Permitted Encumbrances and the sale of
certain personal property to the extent necessary in connection with the
Americold Pool Borrower's qualification as a REIT, the Americold Pool
Borrower is not permitted, without the mortgagee's consent and a written
confirmation from the Rating Agencies that such action will not result, in
and of itself, in a reduction, withdrawal or qualification of the then
current ratings of the Certificates with respect thereto, to (a) sell,
assign, convey, transfer or otherwise dispose of or encumber legal,
beneficial or equitable interests in all the Americold Pool Properties or any
part thereof, (b) permit or suffer any owner, directly or indirectly, of a
beneficial interest in all the Americold Pool Properties (or any of them) to
transfer such interest, whether by transfer of stock or other beneficial
interest in any entity or otherwise, (c) mortgage, hypothecate or otherwise
encumber or grant a security interest in all the Americold Pool Properties or
any part thereof or (d) file a declaration of condominium with respect to any
Americold Pool Property.
Except as described below, the Americold Pool Borrower may only sell,
assign, convey, transfer or otherwise dispose of legal or equitable title to
or any interest in the Americold Pool Properties (or any of them) if: (A)
after giving effect to the proposed transaction: (i) either (x) the transfer
is all but not less than all of the Americold Pool Properties to one person
and the mortgagee has (a) received a written confirmation from the Rating
Agencies that such action will not result, in and of itself, in a reduction,
qualification or withdrawal of the then current ratings of the Certificates
with respect thereto; (b) reviewed and approved the transferee's
organizational documents; (c) reviewed and approved legal opinions (including
non-consolidation opinions) with respect to such transferee; and (d) reviewed
and approved all loan documents required by the mortgagee to effectuate such
transfer (including, without limitation, the assumption of the Americold Pool
Loan by such transferee); or (y) the transferee will be at least 51% owned
and controlled (directly or indirectly) by an Americold Pool Pre-Approved
Party and the Americold Pool Properties will be subject to an Americold Pool
Master Lease with an Americold Pool Qualified Master Lessee or an Americold
Pool Acceptable Property Manager pursuant to an Americold Pool Property
Management Agreement; (ii) the Americold Pool Properties will be owned by one
or more single purpose entities, each of which will be in compliance with
certain single purpose bankruptcy-remote representations, warranties and
covenants set forth in the Americold Pool Loan agreement and which have
assumed and agreed to comply with the terms of the Americold Pool Loan
documents; (iii) if the proposed transaction permits the mortgagee of any
ground lessor's fee interest to accelerate its loan to such ground lessor,
then either (x) the Americold Pool Borrower will provide the mortgagee with a
written agreement or acknowledgment from the fee mortgagee that it will not
accelerate its loan to the ground lessor or (y) the proposed transaction will
provide for the payment in full of such fee mortgage loan; and (iv) no event
of default will occur and be continuing; and (B) prior to any such
transaction, the proposed transferee delivers to mortgagee an officer's
certificate giving certain assurances to the general effect that the
transferee is not an employee benefit plan, or, in any event, the transfer
will not give rise to "prohibited transactions" under ERISA, or similar laws.
An "Americold Pool Pre-Approved Party" means any one or more of (a)
Vornado Realty Trust, (b) Vornado Realty, L.P., (c) Vornado Operating, Inc.,
(d) any one or more of the current common shareholders of Atlanta Parent,
Inc., provided that such shareholder is an officer, director and/or trustee
of Vornado Realty Trust, Vornado Realty, L.P. and/or Vornado Operating, Inc.,
(e) Atlanta Parent, Inc.,
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(f) Crescent Real Estate Equities Company, (g) Crescent Real Estate Equities
Limited Partnership, (h) Crescent Operating, Inc., (i) any one or more of the
current common shareholders of Crescent CS Holdings Corp. or Crescent CS
Holdings II Corp., provided that such shareholder is an officer, director
and/or trustee of Crescent Real Estate Equities Company, Crescent Real Estate
Equities Limited Partnership and/or Crescent Operating, Inc., (j) Crescent CS
Holdings Corp. or Crescent CS Holdings II Corp., (k) Americold Corporation,
(l) URS Logistics, Inc., (m) any person or entity with or into which any one
or more other Americold Pool Pre-Approved Parties is merged on consolidated
or to which any one or more of such Americold Pool Pre-Approved Parties
transfer all or substantially all of its or their assets, (n) any person or
entity that is 51% or more owned, directly or indirectly, and controlled by
one or more other Americold Pool Pre-Approved Parties, and (o) any person or
entity in which one or more Americold Pool Pre-Approved Parties described in
(a) through (n) above are operating partners or managing members.
Notwithstanding the foregoing, transfers of direct and indirect beneficial
interests in the Americold Pool Borrower will be permitted if, after giving
effect to such transfer (x) the Americold Pool Borrower will be at least 51%
owned and controlled directly by an Americold Pool Pre-Approved Party and the
Americold Pool Properties will be subject to an Americold Pool Master Lease
with an Americold Pool Qualified Master Lessee or managed by an Americold
Pool Acceptable Property Manager pursuant to an Americold Pool Property
Management Agreement, and (y) if there is either (1) a transfer of 25% or
more of the direct partnership, stock or other direct equity interests in the
Americold Pool Borrower or a transfer of a general partnership interest in
the Americold Pool Borrower or managing member's interest in the Americold
Pool Borrower or (2) a transfer of any direct interest in a member or general
partner of the Americold Pool Borrower that is the required single purpose
member, in each case the Americold Pool Borrower is required to deliver to
the mortgagee (i) an officer's certificate describing the proposed
transaction and stating that such transaction is permitted by the Americold
Pool Loan documents, together with any documents upon which such officer's
certificate is based, and (ii) a legal opinion of counsel to the Americold
Pool Borrower or the transferee selected by either of them (unless reasonably
disapproved by mortgagee or the Rating Agencies), in form and substance
consistent with similar opinions then being required by the Rating Agencies,
confirming, among other things, that the assets of the Americold Pool
Borrower and of its general partner or managing member will not be
substantively consolidated with the assets of certain owners or controlling
persons of the Americold Pool Borrower in a bankruptcy or similar proceeding.
Notwithstanding the foregoing, the transfer of interests in any direct or
indirect owner of the Americold Pool Borrower is permitted, so long as (i)
the Americold Pool Borrower is required at all times to be owned (directly or
indirectly) by one or more Americold Pool Pre-Approved Parties described in
items (a) through (d), (f) through (i), and (k) through (o) of the definition
of Americold Pool Pre-Approved Parties set forth below and (ii) the Americold
Pool Properties are subject to an Americold Pool Master Lease with an
Americold Pool Qualified Master Lessee or managed by an Americold Pool
Acceptable Property Manager pursuant to an Americold Pool Property Management
Agreement.
INSURANCE. The Americold Pool Borrower is required to maintain, at its
sole cost and expense the following insurance: (a) policies of insurance
against loss or damage by standard perils included within the classification
"All Risks of Physical Loss", which policies are required to cover (by
endorsement or otherwise) warehouse legal liability, maintained in an
aggregate amount of not less than the lesser of (y) the then full replacement
cost of the Americold Pool Properties and the related equipment (without
deduction for physical depreciation) and (z) $150,000,000 and with
deductibles no greater than $150,000, as increased proportionately with the
increase of a specified consumer price index, (b) flood insurance (if any
part of the Americold Pool Property is located in an area identified by the
Federal Emergency Management Agency as an area federally designated a "100
year flood plain" and flood insurance is generally available at reasonable
premiums and in such amounts as generally are required by institutional
lenders for similar properties (or, if not so available from a private
carrier, from the federal government at commercially reasonable premiums to
the extent available)), (c) commercial general liability insurance, including
broad form property damage, blanket contractual and personal injuries
coverages and containing minimum limits per occurrence of $1,000,000 for any
policy year as well as at
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<PAGE>
least $25,000,000 excess and/or umbrella liability insurance (and at all
times at least $10,000,000 against which no claim has been asserted); (d)
rental loss and/or business interruption insurance in an amount sufficient to
avoid any co-insurance penalty, and equal to the greater of (i) estimated
gross revenues from the operation of the Americold Pool Properties less
operating expenses which were incurred in connection with the ownership,
operation and/or maintenance of the Americold Pool Property prior to the
insured event, but which are not incurred during the period covered by the
afore-mentioned insurance requirement for a period of up to the next 18
months or (ii) projected operating expenses (including interest and principal
payments on the Americold Pool Loan) needed to maintain and operate the
Americold Pool Properties for a period of up to the next 18 months; (e)
insurance against loss or damage from leakage of sprinkler systems and
explosion of steam boilers, air conditioning equipment, high pressure piping,
machinery and equipment, pressure vessels or similar apparatus and against
loss of occupancy or use arising from any such breakdown, in such amounts as
are generally available at reasonable premiums and are generally required by
institutional lenders for property comparable to the Americold Pool
Properties; (f) worker's compensation insurance with respect to all employees
of Americold Pool Borrower, as and to the extent required by applicable law
or governmental authority; (g) during any period of repair or restoration
costing in excess of $5,000,000, builder's "all risk" insurance in an amount
not less than full insurable value of the applicable Americold Pool Property;
(h) coverage to compensate for the cost of demolition and the increased cost
of construction for the Americold Pool Properties in an amount satisfactory
to the mortgagee (not to exceed $10,000,000); (i) earthquake insurance (if
any Americold Pool Property is located in a federal earthquake zone) in an
amount equal to the probable maximum loss with respect to such Americold Pool
Property, with a maximum deductible of 5% of the replacement cost of such
Americold Pool Property; and (j) such other insurance as may from time to
time be reasonably required by the mortgagee, provided that such insurance is
generally available at commercially reasonable rates. The Americold Pool Loan
requires insurers for all risk coverage to have claims paying abilities rated
"AA-" (or its equivalent) or better by S&P and Moody's and "A-X" or better by
Best's and insurers providing all other forms of coverage to have claims
paying abilities rated "A" or better by S&P and Moody's and "A-X" or better
by Best's. Notwithstanding anything to the contrary herein, the coverage
maintained by the Americold Pool Master Lessee in respect of the Americold
Pool Properties as of the closing of the Americold Pool Loan, including the
insurance carriers that provide such coverage, are deemed acceptable through
December 31, 1998.
CASUALTY AND CONDEMNATION. Following the occurrence of a casualty or
condemnation affecting an Americold Pool Property, the Americold Pool
Borrower, regardless of whether proceeds are available, is required promptly
to proceed to restore, repair, replace or rebuild the affected Americold Pool
Property, to the extent practicable, to be of at least equal value and of
substantially the same character and quality as prior to such casualty or
condemnation, all to be effected in accordance with the terms of the
Americold Pool Loan documents applicable to alterations.
In the event of a casualty at an Americold Pool Property that involves a
loss of less than 30% of the original Americold Pool Release Amount with
respect to the affected Americold Pool Property or a condemnation at an
Americold Pool Property that involves a loss of less than 20% of the original
Americold Pool Release Amount with respect to the affected Americold Pool
Property, the mortgagee is required to permit the application of the proceeds
resulting therefrom (after reimbursement of any expenses incurred by the
mortgagee) to reimburse the Americold Pool Borrower for the cost of
restoring, repairing, replacing or rebuilding the affected Americold Pool
Property, in the manner described below, provided that no event of default
has occurred and is then continuing and, in the reasonable judgment of the
mortgagee: (i) the Americold Pool Properties (taken as a whole), after such
restoration, will adequately secure the outstanding principal balance of the
Americold Pool Loan, (ii) the restoration can be completed by the earliest to
occur of: (a) the 365th day following the receipt of the proceeds or, with a
written confirmation from the Rating Agencies that there will be no
reduction, qualification or withdrawal of the then current ratings of the
Certificates with respect thereto, such longer period as may reasonably be
required, (b) the Americold Pool Maturity Date, and (c) with respect to a
casualty, the expiration of the payment period on the rental-loss insurance
or business interruption insurance coverage in respect of such casualty; and
(iii) during the period of the restoration, the sum of (y) income derived
from the
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Americold Pool Properties (taken as a whole), plus (z) proceeds of
rental-loss insurance or business interruption insurance, if any, payable
will equal or exceed the sum of operating expenses and payments of principal
and interest on the Americold Pool Loan.
If any of the conditions set forth in the foregoing proviso is not
satisfied, then, unless the mortgagee elects otherwise, at its sole option,
the proceeds are required to be applied to the prepayment of the Americold
Pool Loan without the payment of a prepayment premium or penalty, other than
a yield maintenance charge if an event of default has occurred and is
continuing, and the Americold Pool Borrower will be entitled to receive a
release of the mortgage lien encumbering the Americold Pool Property in
accordance with and subject to the terms described in "--Release in Exchange
for Substitute Collateral--Defeasance" above in connection with a release due
to defeasance, unless (a) a reciprocal easement and/or operating agreement,
and similar agreements affecting the Americold Pool Property, (b) warehousing
agreements, logistics and services agreements, and other similar agreements
with all or substantially all of an Americold Pool Property, or (c) a lease
with a tenant occupying all or substantially all of the Americold Pool
Property, requires that such proceeds be applied to a restoration of the
affected Americold Pool Property and no event of default has occurred and is
continuing, in which event the mortgagee is required to make the proceeds
available for a restoration.
In the event of a casualty that involves a loss of 30% or more of the
original Americold Pool Release Amount with respect to the affected Americold
Pool Property, or a condemnation that involves a loss of 20% or more of the
original Americold Pool Release Amount with respect to the affected Americold
Pool Property, then the mortgagee will have the option (to be exercised by
notice to the Americold Pool Borrower within 30 days after receipt of the
proceeds) to apply the net proceeds to the prepayment of the Americold Pool
Loan (and the Americold Pool Borrower will be entitled to receive a release
of the mortgage lien affecting the Americold Pool Property) or, provided the
conditions set forth in the proviso in the second preceding paragraph above
are complied with, to have such proceeds applied to reimburse the Americold
Pool Borrower for the cost of any restoration in the manner described below
(and the mortgagee will be deemed to have elected restoration if it fails to
give such notice within 30 days after receipt of the proceeds), unless an
operating agreement or a lease with a tenant occupying all or substantially
all of the Americold Pool Property requires that such proceeds be applied to
a restoration and no event of default has occurred and is continuing, in
which event the mortgagee is required to make the proceeds available for a
restoration. Any application of proceeds to the repayment of the Americold
Pool Loan as described above will be without any prepayment premium or
penalty, except that if an event of default has occurred and is continuing,
the Americold Pool Borrower will be required to pay the yield maintenance
payment, if any, as described herein.
If the Americold Pool Borrower is entitled to reimbursement out of
proceeds, such proceeds will be disbursed on a monthly basis upon the
mortgagee being furnished with (i) such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements, bonds,
plats of survey and such other evidences of cost, payment and performance as
the mortgagee may reasonably require and approve, and (ii) all plans and
specifications for such restoration, such plans and specifications to be
approved by the mortgagee prior to commencement of any work (such approval
not to be unreasonably withheld or delayed). In addition, no payment made
prior to the final completion of the restoration is permitted to exceed 95%
of the value of the work performed from time to time; funds other than
proceeds are required to be disbursed prior to disbursement of such proceeds;
and at all times, the undisbursed balance of such proceeds remaining in the
hands of the mortgagee, together with funds deposited for that purpose or
irrevocably committed to the satisfaction of the mortgagee by or on behalf of
the Americold Pool Borrower for that purpose, will be at least sufficient in
the reasonable judgment of the mortgagee to pay for the cost of completion of
the restoration, free and clear of all liens or claims for liens. Prior to
any disbursement, the mortgagee is required to have received evidence
reasonably satisfactory to it of the estimated cost of completion of the
restoration, and the Americold Pool Borrower is required to have deposited
with the mortgagee eligible collateral in an amount equal to the excess (if
any) of such estimated cost of completion over the net proceeds. Any surplus
which may remain out of proceeds received pursuant to a casualty is required
to be paid to the Americold Pool Borrower after payment of such costs of
restoration. Any surplus which may remain out of proceeds received pursuant
to a condemnation is required to be escrowed with mortgagee as security for
the Americold Pool Loan after payment of such costs of restoration.
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<PAGE>
FINANCIAL REPORTING. The Americold Pool Borrower is required to furnish
to the mortgagee not later than 90 days following the end of each fiscal
year, a complete copy of its annual financial statements, audited by a
nationally recognized accounting firm reasonably acceptable to the mortgagee,
in accordance with GAAP, including balance sheets and statements of profit
and loss, together with an officer's certificate certifying that such items
present fairly, in all material respects, the financial condition of the
Americold Pool Properties and have been prepared in accordance with GAAP,
except that for 1998, the Americold Pool Borrower will have the right to
deliver a statement pursuant to Rule 3-14 of the Commission promulgated under
the Securities Act of 1933, as amended. Together with its annual financial
statements, the Americold Pool Borrower is required to furnish to the
mortgagee (i) an officer's certificate certifying as of the date thereof
whether, to the Americold Pool Borrower's knowledge, there exists a default
or an event of default, and if such default or event of default exists, the
nature thereof, the period of time it has existed and the action then being
taken to remedy the same; (ii) an annual report for the most recently
completed fiscal year, containing (x) a summary of the Americold Pool
Borrower's (or, for so long as an Americold Pool Master Lease is in place,
the Americold Pool Master Lessee's) revenues from its ten largest tenants or
customers, (y) a summary of capital expenditures made by or on behalf of the
Americold Pool Borrower or the Americold Pool Master Lessee with respect to
each Americold Pool Property during such fiscal year, and (z) a description
of anticipated capital expenditures during the subsequent fiscal year.
In addition, the Americold Pool Borrower is required to furnish, or cause
to be furnished, to the mortgagee on or before the 30th day after the end of
each calendar month a monthly operating statement, including a comparison of
the actual income, expense and net cash flow to the annual budget. The
Americold Pool Borrower is also required to furnish, or cause to be
furnished, to the mortgagee on or before the 45th day after the end of each
calendar quarter (together with an officer's certificate certifying such
items as true, correct, accurate and complete): (i) quarterly and
year-to-date operating statements with respect to the Americold Pool
Borrower, including a comparison of the actual income, expense and net cash
flow to the annual budget, together with a balance sheet for the quarter; and
(ii) a summary of capital expenditures made by or on behalf of the Americold
Pool Borrower or the Americold Pool Master Lessee with respect to each
Americold Pool Property during such calendar quarter. Reports with respect to
the operations of a particular Americold Pool Property that are delivered to
the mortgagee pursuant to the Americold Pool Loan agreement or any other
Americold Pool Loan document, are required to be kept confidential, and may
not be disclosed in any SEC or similar filing.
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<PAGE>
Graphics Omitted: Photographs of Pier 39
[Grande Loan II Logo]
<PAGE>
PIER 39: THE BORROWER; THE PROPERTY
THE LOAN. The Pier 39 Loan had a principal balance as of the Cut-Off Date
of approximately $116,669,545. It is secured by a first priority deed of
trust lien encumbering the leasehold interests in the shopping center and
entertainment complex located in the heart of the Fisherman's Wharf area of
San Francisco, known as Pier 39 (the "Pier 39 Property"). The Pier 39 Loan
was originated by GSMC on January 27, 1998.
THE BORROWER. Pier 39 Limited Partnership (the "Pier 39 Borrower") is a
California limited partnership, the sole purpose of which is to own and
operate the Pier 39 Property. The Pier 39 Borrower has no material assets
other than the Pier 39 Property and related interests. The sole general
partner in the Pier 39 Borrower is Pier 39 GP, LLC ("Pier 39 GP"), a Delaware
limited liability company. The sole beneficial owner of Pier 39 GP is Pier 39
GP, Inc. ("Pier 39 Inc."), a Delaware corporation. Moor + South, an Illinois
general partnership, which is the property manager for the Pier 39 Property
(the "Pier 39 Manager"), is an affiliate of the Pier 39 Borrower.
SECURITY. The Pier 39 Loan is a non-recourse loan, secured by the
leasehold interests of the Pier 39 Borrower in the Pier 39 Property and
certain other collateral relating thereto (including assignments of leases
and rents, an assignment of agreements, licenses, permits, contracts, and
funds in certain accounts). Subject to certain limited exceptions, neither
the Pier 39 Borrower nor any of its affiliates is personally liable for
payment of the Pier 39 Loan. The Pier 39 Borrower has represented that it
owns good and marketable leasehold title to the real property comprising the
Pier 39 Property free and clear of all liens other than encumbrances
described in the applicable title insurance policy and other encumbrances
permitted by the mortgagee under the Pier 39 Loan documents (the "Pier 39
Permitted Encumbrances"). The title insurance policy issued upon the
origination of the Pier 39 Loan insures that the deed of trust securing the
Pier 39 Loan constitutes a valid and enforceable first lien on the Pier 39
Borrower's interest in the Pier 39 Property, subject to certain exceptions
and exclusions from coverage set forth in the policy.
THE PROPERTY. The Pier 39 Property is comprised of the Pier 39 Borrower's
leasehold interest in approximately 14.7 acres of land and pier area and
approximately 30.7 acres of submerged land improved with a festival shopping
center located in the heart of the Fisherman's Wharf area of San Francisco,
California. The shopping center was built in 1978 and includes 16 two-story
retail buildings, 2 three-story retail buildings, a parking garage containing
approximately 980 parking spaces (5 spaces per 1,000 square feet of GLA),
Pier 39 itself, an adjacent walking pier (Pier 41) and an improved waterfront
parkway. The Pier 39 Property consists of approximately 239,011 square feet
of GLA. The Pier 39 Property incorporates ten restaurants, 106 specialty
shops and fast food outlets and nine entertainment venues. Activities of
tenants and others at the Pier 39 Property include a 307-slip marina, a
waterfront park, a custom-built Italian double deck carousel, a Turbo-Ride
motion simulator, a minor portion of the departures and dockings of boats
(the vast majority of which are docked in the adjacent Pier 41, which is not
a part of the Pier 39 Property), Citibank Cinemax Theater, Namco Cyberstation
Family Amusement Center and UnderWater World, a 700,000 gallon aquarium
attraction featuring species of aquatic life indigenous to northern
California. The rentals due to the Pier 39 Borrower for the UnderWater World
attraction have been in default since before the closing of the Pier 39 Loan.
As of April 1, 1998, approximately 98% of the retail store, restaurant and
amusement was leased.
GROUND LEASE. The interest of the Pier 39 Borrower in the Pier 39 Property
consists of a ground leasehold interest created under a ground lease dated
August 3, 1977 (as subsequently amended and supplemented, the "Pier 39 Ground
Lease"), between the City and County of San Francisco, acting by and through
the San Francisco Port Commission (the "Pier 39 Ground Lessor") and North
Point Center, Inc. North Point Center, Inc. merged with and into Pier 39,
Inc., a California corporation ("Pier 39 CA"), on August 11, 1981. Pier 39 CA
assigned its interest in the Pier 39 Ground Lease to the Pier 39 Borrower
pursuant to an Assignment and Assumption of Ground Lease dated August 11,
1981. The current term of the Pier 39 Ground Lease is for a period of 65
years and five months terminating on December 31, 2042. The Pier 39 Borrower
does not have any right to extend such term.
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The current annual rent due under the Pier 39 Ground Lease is equal to
the sum of (a) the greater of: (i) $500,000 and (ii) the sum of percentage
rents payable on (A) rental income received by the Pier 39 Borrower, (B)
gross receipts with respect to certain activities at the Pier 39 Property in
which the Pier 39 Borrower has a 10% or more interest, (C) tour boat
revenues, (D) aquarium rent, (E) seaplane rent, (F) marina slips rent, (G)
sponsorship activities rent, and (H) wireless telecommunication services
rent.
The annual rent paid on the Pier 39 Ground Lease in 1992, 1993, 1994,
1995, 1996 and 1997 was approximately $1,153,673, $1,155,671, $1,220,423,
$1,365,537, $1,598,185 and $1,908,177, respectively and over the last six
years, the aggregate annual rent paid on the Pier 39 Ground Lease has
averaged approximately $1,400,278. Subject to certain exceptions set forth
therein, the Pier 39 Borrower may not mortgage, encumber, assign or
hypothecate its interest in the Pier 39 Ground Lease without the prior
written consent of the Pier 39 Ground Lessor. The Pier 39 Ground Lease
together with the estoppel certificate delivered in connection with the Pier
39 Loan provides notice and cure rights to a mortgagee. Pursuant to the terms
of a consent and estoppel certificate, the Pier 39 Ground Lessor has agreed
to recognize the Pier 39 Loan as a permitted mortgage of the tenant's
interest in the property. See "Risk Factors--The Mortgage Loans--Leasehold
Interests" above for a discussion of certain issues related to ground leases.
SALES OPERATING HISTORY--PIER 39 LOAN
<TABLE>
<CAPTION>
1995 STORE SALES PER SF 1996 STORE SALES PER SF 1997 STORE SALES PER SF
- ----------------------- ----------------------- -----------------------
<S> <C> <C>
$506 $522 $520
</TABLE>
TEN LARGEST TENANTS BASED ON ANNUALIZED BASE RENT--PIER 39 LOAN
<TABLE>
<CAPTION>
% OF
ANNUALIZED TOTAL ANNUALIZED
TENANT % OF MINIMUM ANNUALIZED TENANT BASE
STORE NAME GLA (SF) TOTAL GLA RENT BASE RENT RENT PER SF
- -------------------------- --------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Namco Cyber Station*....... 10,000 4.2% $ 750,000 7.9% $75.00
Warner Bros. Studio Store . 6,800 2.8 458,864 4.8 67.48
NFL Shop................... 6,810 2.8 389,878 4.1 57.25
Neptune's Palace** ........ 12,360 5.2 296,640 3.1 24.00
Only in San Francisco*** .. 3,362 1.4 204,929 2.2 60.95
Bubba Gump Shrimp Co. ..... 9,500 4.0 188,100 2.0 19.80
Shirtique.................. 2,114 0.9 189,840 2.0 89.80
Dante's Italian Seafood** . 7,568 3.2 180,000 1.9 23.78
Chocolate Heaven........... 2,100 0.9 176,400 1.9 84.00
Burger Cafe ............... 3,000 1.3 172,654 1.8 57.55
--------- ----------- ------------ ------------ -------------
Total/Average (10
largest).................. 63,614 26.6% $3,007,305 31.7% $47.27
Remaining ................. 175,397 73.4 6,492,957 68.3 37.02
--------- ----------- ------------ ------------ -------------
Total/Average ............. 239,011 100.0% $9,500,262 100.0% $39.75
========= =========== ============ ============ =============
</TABLE>
- ------------
* This tenant filed for bankruptcy protection under the Bankruptcy Code.
** Owned by parties affiliated with the Pier 39 Borrower.
*** Includes two separate stores.
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<PAGE>
LEASE EXPIRATION SCHEDULE--PIER 39 LOAN
<TABLE>
<CAPTION>
ANNUALIZED
PERCENT OF BASE RENT
EXPIRING TOTAL ANNUALIZED PERCENT OF PER
YEAR ENDING DEC. 31 SQUARE FEET SQUARE FEET BASE RENT BASE RENT SQUARE FOOT
- ------------------- ------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
MO/MO............... 9,862 4.1% $ 333,570 3.5% $ 33.82
1998 ............... 7,889 3.3 $ 884,358 9.3% 112.10
1999 ............... 10,668 4.5 273,066 2.9 25.60
2000 ............... 25,055 10.5 1,540,624 16.2 61.49
2001 ............... 12,848 5.4 876,507 9.2 68.22
2002 ............... 18,804 7.9 1,113,539 11.7 59.22
2003 ............... 6,228 2.6 560,868 5.9 90.06
2004 ............... 15,401 6.4 911,172 9.6 59.16
2005 ............... 11,350 4.7 444,885 4.7 39.20
2006 ............... 15,578 6.5 815,845 8.6 52.37
2007 ............... 5,890 2.5 281,538 3.0 47.80
Thereafter ......... 95,339 39.9 1,464,291 15.4 15.36
Vacant ............. 4,099 1.7 -- 0.0 --
------------- ------------- ------------ ------------ -------------
Total............... 239,011 100.0% $9,500,262 100.0% $ 39.75
============= ============= ============ ============ =============
</TABLE>
OPERATING HISTORY. The following table shows certain unaudited information
regarding the operating history of the Pier 39 Property:
<TABLE>
<CAPTION>
UNDERWRITTEN
1995 1996 1997 NET CASH FLOW
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
REVENUE
Gross Potential Income .. $22,967,129 $25,165,945 $27,363,907 $27,495,227
Vacancy................... N/A N/A N/A 397,016
------------- ------------- ------------- ---------------
TOTAL REVENUE.............. 22,967,129 25,165,945 27,363,907 27,098,211
EXPENSES
Management Fee............ 656,654 719,742 716,338 779,903
SG&A...................... 599,575 1,292,498 1,122,042 1,149,800
CAM....................... 3,108,604 3,311,568 3,445,337 3,432,345
Market Development
Expense.................. 695,609 826,397
Promotional............... 1,409,508 1,576,039 1,522,515 1,642,123
Ground Rent............... 1,118,515 1,307,864 1,372,277 1,372,914
Marina.................... 861,660 978,671 925,947 966,260
Garage.................... 2,098,893 2,423,743 2,515,095 2,458,466
Equipment Financing....... 301,806 436,380 492,036 --
Fixed Expenses............ 553,346 667,417 823,491 1,253,249
------------- ------------- ------------- ---------------
TOTAL EXPENSES............. 10,708,561 12,713,922 13,630,687 13,881,457
NET OPERATING INCOME....... 12,258,568 12,452,023 13,733,220 13,216,754
CAPITAL EXPENDITURES
Tenant Finish............. -- -- -- 34,382
Leasing Commission........ -- -- -- 28,463
------------- ------------- ------------- ---------------
NET CASH FLOW.............. $12,258,568 $12,452,023 $13,733,220 $13,153,909
============= ============= ============= ===============
</TABLE>
APPRAISAL. The Pier 39 appraisal prepared by Koeppel Tenner Real Estate
Services, Inc., dated as of December 29, 1997, determined a value for the
Pier 39 Property of approximately $158,000,000, resulting in a Cut-Off Date
LTV of approximately 73.8%. The Pier 39 appraisal was prepared in accordance
with the Uniform Standards of Professional Appraisal Practice. See "Risk
Factors--The Mortgage Loans--Limitations on Appraisals" herein.
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<PAGE>
SEISMIC REPORT. A structural and seismic risk assessment of the Pier 39
Property was performed on January 8, 1998 by a third-party structural firm.
The seismic report indicated a PML for the 18 retail buildings, the parking
garage and Pier 39 itself, which collectively comprise the Pier 39 Property.
The PML for the Pier 39 Property is $17,400,000. The Pier 39 Borrower has
obtained earthquake insurance coverage in the full amount of such PML less a
deductible of 10% of the replacement value. See "Risk Factors--The Mortgage
Loans--Availability of Earthquake, Flood and Other Insurance" herein.
ENGINEERING REPORT. A Property Condition Report dated December 18, 1997
was completed by a third-party engineering firm. The Property Condition
Report concluded that the Pier 39 Property was generally in good physical
condition but noted certain items of deferred maintenance in the aggregate
amount of approximately $874,319. At the origination of the Loan, a reserve
of $1,092,899 was established to cover the cost of repairing the identified
physical needs.
ENVIRONMENTAL ASSESSMENT. A Phase I environmental site assessment dated
December 19, 1997 was completed by a third-party environmental firm. The
report did not reveal any environmental liability that the Seller believes
would have a material adverse impact on the Pier 39 Borrower's business,
assets or results of operations taken as a whole. Nevertheless, there can be
no assurance that all environmental conditions and risks were identified in
such reports. See "Risk Factors--The Mortgage Loans--Environmental Law
Considerations" herein.
PROPERTY MANAGEMENT. The Pier 39 Property is managed by the Pier 39
Manager pursuant to a management agreement (the "Pier 39 Property Management
Agreement"). The Pier 39 Manager is responsible for the operation,
management, maintenance, promotion and leasing of the Pier 39 Property. Under
the terms of the Pier 39 Management Agreement, the Pier 39 Manager is
entitled to an annual management fee equal to 3.0% of all revenues of the
Pier 39 Borrower derived from its ownership of the Pier 39 Property,
including, without limitation, percentage and all other rents and all prices
or fees charged for merchandise, food, services, concessions or licenses sold
or rendered at or with respect to the Pier 39 Property, but excluding the
proceeds of any sale or refinancing of the Pier 39 Property, or the portion
of revenues allocable to any parking tax. The term of the Pier 39 Property
Management Agreement expires on January 27, 2004 and is automatically renewed
for successive one year terms, unless either party elects not to renew.
The Pier 39 Borrower has the right to terminate the Pier 39 Property
Management Agreement, without any penalty or fee (other than accrued and
unpaid fees thereunder) on 30 days' notice, following the occurrence of an
event of default which is continuing under the Pier 39 Loan, the acceleration
thereof and the affirmative subsequent act of the mortgagee to enforce the
Pier 39 Loan documents. Thereafter, unless otherwise waived by mortgagee, the
Pier 39 Borrower is required, within five business days after mortgagee's
written request, to issue a notice of termination to terminate the Pier 39
Property Management Agreement and replace the Pier 39 Manager with (i) the
Pier 39 Borrower or an affiliate of the Pier 39 Manager, (ii) a property
management company having at least ten retail centers under its management
which contain at least 100,000 rentable square feet individually and at least
1.25 million square feet in the aggregate, and at least three of which will
be in tourist locations, or (iii) any other property management company as to
which the Pier 39 Borrower will have received written confirmation from the
Rating Agencies to the effect that the engagement of such property manager
will not result in a downgrade, withdrawal or qualification of the then
current ratings on the Certificates.
Certain administrative functions, including without limitation, treasury
services, accounting administration, billing and collection services,
advertising and coordinated marketing services and personnel services
administration are being performed on behalf of the Pier 39 Borrower by Moor
+ South/Pier Management Company, Limited Partnership, a California limited
partnership (the "Pier 39 Administrator"), an affiliate of the Pier 39
Manager, pursuant to a G&A Administrative Services Agreement (the "Pier 39
G&A Administrative Services Agreement"). Pursuant to the Pier 39 G&A
Administrative Services Agreement, the Pier 39 Administrator is entitled to
an administration fee, payable monthly, equal to $500,000 per annum to be
adjusted annually based on a specified consumer price index.
The parking garage at the Pier 39 Property is operated by Ampco System
Parking, a California corporation (the "Pier 39 Parking Operator"), on behalf
of the Pier 39 Borrower pursuant to a Parking
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<PAGE>
Service Agreement (the "Pier 39 Parking Service Agreement") with a stated
terminate date of July 19, 2009 and which will be automatically renewed
thereafter on a month-to-month basis unless terminated by either party on 30
days notice. Pursuant to the Pier 39 Parking Service Agreement, the Pier 39
Parking Operator is entitled to a monthly service fee equal to 3.8% of the
net operating income from the parking garage at the Pier 39 Property for such
month.
ZONING. The Pier 39 Property is located in an area that is zoned C-2
Community Business and Northern Waterfront Special Use District No. 2 as
designated by the City of San Francisco Zoning Department. Such zoning
provides for a wide range of uses including development of San Francisco Port
Commission properties, such as the Pier 39 Property. Development within these
districts requires approval from the city prior to development.
PIER 39: THE LOAN
PAYMENT TERMS. The Pier 39 Loan bears interest at a fixed rate per annum
equal to 7.107% (the "Pier 39 Initial Interest Rate") through and including
April 10, 2008. From and after April 11, 2008 (the "Pier 39 Anticipated
Repayment Date"), the Pier 39 Loan accrues interest at a fixed rate per annum
equal to 9.107% (the "Pier 39 Revised Interest Rate"). The Pier 39 Loan
matures on February 11, 2028 (the "Pier 39 Maturity Date"). As described
below, in the event the Pier 39 Borrower does not prepay the Pier 39 Loan on
or before the Pier 39 Anticipated Repayment Date, the Pier 39 Borrower will
be required to pay interest at the Pier 39 Initial Interest Rate (together
with principal, as described below), and interest accrued equal to the excess
of the Pier 39 Revised Interest Rate over the Pier 39 Initial Interest Rate
will be deferred and added to the outstanding indebtedness under the Pier 39
Loan, and will, to the extent permitted by applicable law, earn interest at
the Pier 39 Revised Interest Rate (such accrued and deferred interest and
interest thereon (which will be deferred), the "Pier 39 Excess Interest").
Interest on the Pier 39 Loan is calculated for any period on the basis of
360-day year and the actual number of days elapsed in such period.
The Pier 39 Loan requires monthly payments (the "Pier 39 Monthly Debt
Service Payment Amount") of principal and interest of approximately $794,634
(based on a 30-year amortization schedule and the Pier 39 Initial Interest
Rate). Payment of the balance of the principal, if any, together with all
accrued and unpaid interest, is required on the Pier 39 Maturity Date. Each
Pier 39 Monthly Debt Service Payment Amount is due and payable on the 11th
day of each calendar month or, if such day is not a business day, then the
immediately preceding business day (a "Pier 39 Due Date"). Commencing with
the Pier 39 Anticipated Repayment Date and on each Pier 39 Due Date
thereafter, in addition to the Pier 39 Monthly Debt Service Payment Amount,
the Pier 39 Borrower is required to apply 100% of the Pier 39 Excess Cash
Flow for the month preceding the month in which the Pier 39 Due Date occurs
in the following order of priority (a) to the outstanding principal balance
until the Pier 39 Loan has been paid in full and, (b) to the Pier 39 Excess
Interest. "Pier 39 Excess Cash Flow" means the amounts held as collected
funds in the Pier 39 Deposit Account after the application of funds (a) if
required, to fund the Pier 39 Tax and Insurance Escrow Account as described
in "--Reserves" below, (b) to pay the Pier 39 Monthly Debt Service Payment
Amount and any other debt due, (c) if required, to fund the Pier 39 Capital
Reserve Account as described in "--Reserves" below, (d) to fund the budgeted
operating expenses approved by the mortgagee as described in "--Cash
Management; Lockbox" below, (e) to fund the budgeted capital expenditures
approved by the mortgagee, (f) to fund the extraordinary capital expenditures
approved by the mortgagee, and (g) to the Pier 39 Borrower in an amount equal
to any current payments under any unsecured line of credit or purchase money
note or equipment lease obligations permitted pursuant to the Pier 39 Loan.
The scheduled principal balance of the Pier 39 Loan as of the Pier 39
Anticipated Repayment Date will be approximately $100,515,979.
After the occurrence and during the continuance of an event of default
under the Pier 39 Loan, to the extent permitted by applicable law, the entire
outstanding principal balance of the Pier 39 Loan along with due and unpaid
interest thereon will bear interest at a per annum default rate equal to the
lesser of (a) the maximum rate permitted by applicable law and (b) the
greater of (i) 5% in excess of the Pier 39 Initial Interest Rate or the Pier
39 Revised Interest Rate, as applicable, but in no event less than 1% in
excess of the "prime rate" as published from time to time in The Wall Street
Journal.
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PREPAYMENT. Voluntary prepayment is prohibited under the Pier 39 Loan
until 90 days prior to the Pier 39 Anticipated Repayment Date (subject to
defeasance rights afforded to the Pier 39 Borrower), except in connection
with certain casualty and condemnation events. From and after 90 days prior
to the Pier 39 Anticipated Repayment Date, the Pier 39 Loan may be
voluntarily prepaid in whole or in part on any Pier 39 Due Date without
payment of a yield maintenance charge or prepayment premium.
If all or any part of the principal amount of the Pier 39 Loan is prepaid
upon an acceleration of the Pier 39 Loan following the occurrence of an event
of default under the Pier 39 Loan prior to the Pier 39 Anticipated Repayment
Date, the Pier 39 Borrower will be required to make a yield maintenance
payment in an amount equal to the excess, if any, of (i) the sum of (A) the
aggregate respective present values of all scheduled interest payments in
respect of the Pier 39 Loan (or the portion of all such interest payments
corresponding to the portion of the principal of the Pier 39 Loan to be
prepaid upon acceleration) for the period from the date of such prepayment to
(and including) the Pier 39 Anticipated Repayment Date, discounted monthly at
a rate equal to a specified treasury constant yield and based on a 360-day
year of twelve 30-day months and (B) the aggregate respective present values
of all scheduled principal payments in respect of the Pier 39 Loan (or the
then unpaid portion thereof to be prepaid upon acceleration) assuming that
the entire outstanding scheduled principal amount of the Pier 39 Loan is paid
in full on the Pier 39 Anticipated Repayment Date, discounted monthly at a
rate equal to the specified treasury constant yield and based on a 360-day
year of twelve 30-day months over (ii) the then current outstanding principal
amount of the Pier 39 Loan (or the then unpaid portion thereof to be prepaid
upon acceleration).
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of the Pier 39 Property under the
Pier 39 Loan or the Pier 39 Ground Lease, the mortgagee will be entitled, at
its option, to apply such proceeds to prepay the Pier 39 Loan as described in
"--Casualty and Condemnation" below. No yield maintenance payment or
prepayment premium or penalty will be payable upon any mandatory prepayment
of the Pier 39 Loan in connection with a casualty or condemnation unless an
event of default under the Pier 39 Loan has occurred and is continuing, in
which case the Pier 39 Borrower will be required to pay a yield maintenance
payment calculated in the manner described above.
If the Pier 39 Debt Service Coverage Ratio for any 12 month period during
the term of the Pier 39 Loan is less than 1.10x or while an event of default
remains uncured, all amounts on deposit on the Pier 39 Low Debt Service Cash
Escrow Account and Pier 39 Low Debt Service Reserve Account are required to
be used to prepay the Pier 39 Loan as described in "--Reserves" below.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL-DEFEASANCE. The Pier 39
Borrower is permitted on any date on or after the second anniversary of the
Closing Date until 90 days prior to the Pier 39 Anticipated Repayment Date,
to defease all (but not a portion) of the Pier 39 Loan with U.S. Treasury
obligations, provided that, among other conditions, the Pier 39 Borrower
gives the mortgagee at least 30 days' prior written notice of the date of
such defeasance (the "Pier 39 Defeasance Date"), no event of default will
exist on the Pier 39 Defeasance Date, and provided, further, that the Pier 39
Borrower pays on the Pier 39 Defeasance Date (i) all accrued and unpaid
interest on the Pier 39 Loan to but not including the Pier 39 Defeasance Date
(and if such Pier 39 Defeasance Date is not a Pier 39 Due Date, the Pier 39
Defeasance Deposit is required to take into account the interest that would
have accrued on the Pier 39 Loan to but not including the next Pier 39 Due
Date), (ii) all other sums, not including scheduled interest or principal
payments, then due under the Pier 39 Loan and the related loan documents,
(iii) the Pier 39 Defeasance Deposit, and (iv) all reasonable costs and
expenses of the mortgagee incurred in connection with the defeasance. In
addition, the Pier 39 Borrower will be required to deliver to the mortgagee,
among other things: (a) a security agreement granting the mortgagee a first
priority lien on the Pier 39 Defeasance Deposit and the U.S. Treasury
obligations purchased with the Pier 39 Defeasance Deposit, (b) an opinion of
counsel for the Pier 39 Borrower in form reasonably satisfactory to the
mortgagee stating, among other things, that the Trustee has a first priority
perfected security interest in the Pier 39 Deposit and the U.S. Treasury
obligations purchased with the Pier 39 Defeasance Deposit, (c) a
confirmation, in form and substance reasonably satisfactory to the mortgagee,
from an independent certified public accounting firm, that the Pier 39
Defeasance Deposit is sufficient to
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pay all scheduled payments due from the Pier 39 Borrower under the Pier 39
Loan documents in connection with the proposed defeasance, (d) an officer's
certificate certifying that the requirements for defeasance in the Pier 39
Loan agreement have been met, and (e) written confirmation from the Rating
Agencies that such defeasance will not result, in and of itself, in a
downgrade, qualification or withdrawal of the then current ratings of the
Certificates.
"Pier 39 Defeasance Deposit" means an amount equal to the sum of (i) any
costs and expenses incurred or to be incurred in the purchase of noncallable
U.S. Treasury obligations (including, without limitation, the purchase price
thereof) providing payments on or prior to, but as close as possible to, all
successive Pier 39 Due Dates after the Pier 39 Defeasance Date and in amounts
equal to the scheduled interest and principal payments under the Pier 39 Loan
due on such dates (assuming that the principal portion of such payment on the
Pier 39 Anticipated Repayment Date will be deemed to include the entire
scheduled outstanding principal of the Pier 39 Loan as of such date), and
(ii) any revenue, documentary stamp or intangible taxes or any other tax or
charge due in connection with any transfer of the defeased note or otherwise
required to accomplish the defeasance.
Upon receipt of the Pier 39 Defeasance Deposit, the mortgagee, using the
Pier 39 Defeasance Deposit, will be required to purchase noncallable U.S.
Treasury obligations on behalf of the Pier 39 Borrower, and such U.S.
Treasury obligations will serve as the sole collateral for the payments of
the amounts due under the Pier 39 Loan. Upon a deposit of such U.S. Treasury
obligations, the Pier 39 Borrower, if requested by the mortgagee, will assign
the obligation to make payments under the Pier 39 Loan to an entity
designated by the mortgagee. If the Pier 39 Borrower does assign such
obligations, the Master Servicer will be required in the Pooling Agreement to
cause such obligations to be assumed by a special purpose bankruptcy-remote
entity.
In connection with the defeasance of the Pier 39 Loan, the Pier 39
Borrower will be permitted to obtain the release of the deed of trust lien
encumbering the Pier 39 Property and all related collateral.
OTHER FINANCING. The Pier 39 Borrower is not permitted to incur any
additional indebtedness other than: (a) unsecured trade payables incurred in
the ordinary course of business customarily paid by the Pier 39 Borrower
within 60 days of incurrence and in fact not more than 60 days outstanding,
(b) capital lease or note obligations incurred after the date of the closing
of the Pier 39 Loan in respect of equipment used at the Pier 39 Property in
an aggregate principal amount not exceeding $2,000,000 at any time (provided,
however, net cash flow for the four fiscal quarters preceding the incurring
of such obligations, including purchase money security interests permitted by
the Pier 39 Loan agreement, are required to be such that the Pier 39 Debt
Service Coverage Ratio is not less than 1.30x assuming (i) debt service for
such period using a loan constant (comprised of interest and amortization)
equal to 8.66% per annum, and (ii) debt payments on such obligations are
equal to the actual anticipated annual payments), and (c) such other
unsecured indebtedness approved by the mortgagee in its sole discretion and
as to which the Pier 39 Borrower has received written confirmation from the
Rating Agencies that there will be no downgrade, qualification or withdrawal
of the then current ratings of the Certificates as a result of the incurrence
of such additional indebtedness.
ALTERATIONS. Except upon compliance with certain conditions set forth in
the Pier 39 Loan documents (which does not include the approval of the
mortgagee), the Pier 39 Borrower is prohibited from making or permitting any
demolition, alteration, installation, improvement, expansion or reduction of
or to the Pier 39 Property or any part thereof.
RESERVES. Pursuant to the terms of the Pier 39 Loan, the Pier 39 Borrower
is required to fund the following reserves: (i) an account (the "Pier 39 Debt
Service Account") to be funded on each Pier 39 Due Date in an amount equal to
the Pier 39 Monthly Debt Service Payment Amount, (ii) a tax and insurance
escrow account (the "Pier 39 Tax and Insurance Escrow Account") to be funded
on each Pier 39 Due Date in an amount equal to the sum of (a) one-twelfth of
the real estate taxes and assessments that the mortgagee reasonably estimates
will be due and payable during the next ensuing 12 months, and (b)
one-twelfth of the insurance premiums that the mortgagee estimates will be
payable for the renewal of the coverage required under the Pier 39 Loan
documents for the succeeding 12 months, (iii) an account for the payment of
the costs of remediating certain deferred maintenance conditions affecting
the Pier 39
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Property (the "Pier 39 Deferred Maintenance Reserve Account") funded at the
closing of the Pier 39 Loan in the amount of approximately $1,092,898, (iv)
an account for the payment of certain unfunded obligations (the "Pier 39
Unfunded Obligations Reserve Account") funded at the closing of Pier 39 Loan
in the amount of approximately $400,000, (v) an account for the payment of
certain routine capital improvements in the retail and garage space at the
Pier 39 Property (the "Pier 39 Capital Reserve Account") to be funded on each
Pier 39 Due Date in the amount of approximately $10,564, (vi) an account for
the payment of the cost of new escalators at the Pier 39 Property (the "Pier
39 Escalator Reserve Account") funded at the closing of the Pier 39 Loan in
the amount of approximately $500,000, and (vii) if, at the end of fiscal year
1998, or at the end of any fiscal quarter thereafter, the Pier 39 Debt
Service Coverage Ratio for any trailing four fiscal quarters period during
the term of the Pier 39 Loan after December 31, 1998 is less than 1.20x, (A)
all receipts from the Pier 39 Property, after payment of the items specified
in clauses (a) through (f) below under "--Cash Management; Lockbox", are
required to be deposited into a low debt service reserve account (the "Pier
39 Low Debt Service Reserve Account") or (B) the Pier 39 Borrower will
deposit cash into an escrow account in the name of and under the sole
dominion and control of the mortgagee (the "Pier 39 Low Debt Service Cash
Escrow Account") in an amount equal to the positive difference between actual
net operating income for the related period and the amount of net operating
income that would be necessary to maintain a Pier 39 Debt Service Coverage
Ratio of 1.20x, in either case commencing with the month in which the Pier 39
Debt Service Coverage Ratio has been calculated, and continuing until such
time as the Pier 39 Debt Service Coverage Ratio has equaled or exceeded 1.20x
for two consecutive fiscal quarters.
If the Pier 39 Debt Service Coverage Ratio for any 12 month period during
the term of the Pier 39 Loan is less than 1.10x, or while any event of
default remains uncured, all amounts deposited into the Pier 39 Low Debt
Service Cash Escrow Account and Pier 39 Low Debt Service Reserve Account are
required to be used to pay down the outstanding principal balance of the Pier
39 Loan. If, after establishment of the Pier 39 Low Debt Service Reserve
Account or the Pier 39 Low Debt Service Cash Escrow Account, the trailing
four fiscal quarter Pier 39 Debt Service Coverage Ratio has equaled or
exceeded 1.20x for two consecutive fiscal quarters and no event of default
would remain uncured at the time of release and application of amounts in the
Pier 39 Low Debt Service Cash Escrow Account and Pier 39 Low Debt Service
Reserve Account, any amounts deposited into the Pier 39 Low Debt Service Cash
Escrow Account and the Pier 39 Low Debt Service Reserve Account are required
to be released to the Pier 39 Borrower and the related Pier 39 Cash Trap
Event will be terminated.
"Pier 39 Debt Service Coverage Ratio" means, as of any date, a ratio in
which (a) the numerator is the net operating income from the Pier 39 Property
for the four fiscal quarter period ending on the last day of the fiscal
quarter immediately preceding such date, and (b) the denominator is
approximately $9,535,612.
CASH MANAGEMENT; LOCKBOX. The Pier 39 Borrower is required to direct all
tenants at the Pier 39 Property to make payable and deliver all checks and
payments in respect of sums due to the Pier 39 Borrower under the leases at
the Pier 39 Property directly to an account with a depository institution
selected by the mortgagee, which account is required to be maintained in the
name of and under the sole dominion and control of, the mortgagee (the "Pier
39 Deposit Account"). The mortgagee is required to deposit such checks and
payments into the Pier 39 Deposit Account on the same business day such
checks are received. On each date the mortgagee receives such receipts, and
provided no Pier 39 Cash Trap Event has occurred, the mortgagee is required
to transfer from the Pier 39 Deposit Account, funds to the extent available
therein, in the following order of priority: (i) to the Pier 39 Tax and
Insurance Escrow Account until funded in the required monthly amount, (ii) to
the Pier 39 Debt Service Account until funded in the required monthly amount,
(iii) to the Pier 39 Capital Reserve Account until funded in the required
monthly amount, and (iv) to the Pier 39 Borrower or its designee.
Following the occurrence and during the continuance of a Pier 39 Cash Trap
Event, on each date the mortgagee receives receipts from the Pier 39
Property, it is required to transfer from the Pier 39 Deposit Account, funds
to the extent available therein, in the following order of priority: (a) to
the Pier 39 Tax and Insurance Escrow Account until funded in the required
monthly amount, (b) to the Pier 39 Debt Service Account until funded in an
amount equal to the Pier 39 Monthly Debt Service Payment Amount,
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(c) to the Pier 39 Capital Reserve Account until funded in the required
monthly amount, (d) to the Pier 39 Borrower in an amount equal to the
operating expenses approved by the mortgagee in the annual budget, and in all
events, management fees not exceeding 3% of gross revenues, amounts payable
pursuant to the Pier 39 G&A Administrative Services Agreement, and payments
to unrelated third parties or overhead allocations consistent with historic
levels and trends of three years or more for the Pier 39 Property; provided,
however, that the Pier 39 Borrower has delivered to the mortgagee an
officer's certificate certifying that there is not outstanding for more than
60 days any amounts claimed by any creditor to be due and owing (except for
claims the Pier 39 Borrower is in good faith contesting and for which payment
has been escrowed with the mortgagee), and that the amounts so disbursed to
the Pier 39 Borrower will be used solely to pay its creditors; provided,
further, that the Pier 39 Borrower may request an additional amount to pay
operating expenses in excess of the budgeted amount, up to 105% of the
budgeted amount on a cumulative year-to-date basis (less any such amounts
previously received by the Pier 39 Borrower in any prior month during such
year), but in no event to exceed more than 15% of such month's budgeted
amount for operating expenses, (e) to the Pier 39 Borrower in an amount equal
to the approved capital expenditures set forth in the annual operating and
capital budget, (f) to the Pier 39 Borrower in an amount equal to
unanticipated capital expenditures approved in writing by the mortgagee, (g)
to the Pier 39 Borrower in an amount equal to any payments under any
unsecured line of credit or purchase money note or equipment lease
obligations permitted pursuant to the Pier 39 Loan documents, (h) from and
after the Pier 39 Anticipated Repayment Date, to the mortgagee to prepay the
outstanding principal of the Pier 39 Loan until such principal amount is paid
in full, (i) from and after the Pier 39 Anticipated Repayment Date, to the
mortgagee to be applied to the payment of accrued and unpaid Pier 39 Excess
Interest, (j) to the mortgagee in an amount equal to interest accrued and
unpaid under the Pier 39 Loan at the excess of the default rate over the Pier
39 Initial Interest Rate or the Pier 39 Revised Interest Rate, as applicable,
and (k) to the Pier 39 Borrower or its designee.
If, during the continuance of a Pier 39 Cash Trap Event, the amount in the
Pier 39 Deposit Account on any Pier 39 Due Date is insufficient to make all
of the transfers described in clauses (a) through (f) in the immediately
preceding paragraph, the Pier 39 Borrower is required to deposit into the
Pier 39 Deposit Account on such Pier 39 Due Date the amount of such
deficiency, and if the Pier 39 Borrower fails to make such deposit, the same
will be an event of default and the depository institution may apply the
amounts in the Pier 39 Deposit Account in such order as the mortgagee may
determine. Notwithstanding the foregoing, the Pier 39 Borrower will not be
obligated to deposit such deficiency to the extent that (i) it has paid
directly any amount included within the budgeted amounts for which such
disbursement would otherwise be made for the month in question in accordance
with clauses (a) through (f) in the immediately preceding paragraph, (ii) it
has demonstrated to the mortgagee that the actual amount of the transfers
then required and described in clauses (a) through (f) in the immediately
preceding paragraph will be less than actual budgeted expenses and reserves
for such items, or (iii) the payment of management fees to the Pier 39
Borrower is subordinated to the transfers described in clauses (a) through
(f) in the immediately preceding paragraph.
"Pier 39 Cash Trap Event" means the earliest to occur of (i) the Pier 39
Anticipated Repayment Date, (ii) any circumstances requiring deposits into
the Low Debt Service Reserve Account described in "--Reserves" above, or
(iii) an event of default under the Pier 39 Loan documents.
TRANSFER OF PIER 39 PROPERTY AND INTERESTS IN THE PIER 39 BORROWER;
ENCUMBRANCES. Unless permitted by the Pier 39 Loan documents as described
below, and with the exception of leases entered into in accordance therewith,
the sale or other disposition of certain equipment, and Pier 39 Permitted
Encumbrances, the Pier 39 Borrower is not permitted without the mortgagee's
consent and a written confirmation from the Rating Agencies that such action
will not, in and of itself, result in a downgrade, withdrawal or
qualification of any rating then assigned to any outstanding Certificates, to
(A) sell, assign, convey, transfer or otherwise dispose of or encumber
(except as otherwise provided below) more than 49% of the Pier 39 Borrower's
aggregate legal, beneficial or equitable interests in all or any part of the
Pier 39 Property to any person or entity who is not an existing direct or
indirect owner of a beneficial interest in the Pier 39 Borrower as of the
date of the closing of the Pier 39 Loan or a Pier 39 Affiliate of such
person, (B) permit or suffer any owner, directly or indirectly, of a
beneficial interest in the Pier 39
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Property to transfer such interest, whether by transfer of stock or other
beneficial interest in any entity or otherwise to any person who is not an
existing direct or indirect owner of a beneficial interest in the Pier 39
Borrower as of the date of the closing of the Pier 39 Loan or a Pier 39
Affiliate of such person or entity, if, after giving effect to the proposed
transaction, more than 49% of the beneficial interests in the Pier 39
Property would be transferred over the term of the Pier 39 Loan, (C)
mortgage, hypothecate or otherwise encumber or grant a security interest in
all or any part of the Pier 39 Property, or (D) file a declaration of
condominium with respect to the Pier 39 Property.
Notwithstanding the foregoing, the holder of any direct or indirect
interest in the Pier 39 Borrower will be permitted to transfer such interest,
and the Pier 39 Borrower may sell, assign, convey, transfer or otherwise
dispose of legal or equitable title to or any interest in the Pier 39
Property, to an institutional investor (subject to a written confirmation
from the Rating Agencies that there will be no downgrade, qualification or
withdrawal of the then current ratings of the Certificates as a result of
such transfer), or to a Pier 39 Qualified Transferee. In addition,
notwithstanding the foregoing, the holders of any direct or indirect
beneficial interests in the Pier 39 Borrower will be permitted to
collaterally assign or otherwise pledge their respective interests in the
Pier 39 Borrower as security for a seasonal line of credit to be obtained by
a Pier 39 Affiliate of the Pier 39 Borrower in connection with an arrangement
pursuant to which such affiliate will distribute funds which will enable
various persons to contribute capital to the Pier 39 Borrower.
No transfer specified in the immediately preceding two paragraphs will be
effective unless the Pier 39 Borrower has delivered to the mortgagee prior to
such transfer (i) an officer's certificate describing the proposed
transaction and stating that such transaction is permitted by the Pier 39
Loan documents, and (ii) a legal opinion of counsel to the Pier 39 Borrower
or the transferee, in form and substance consistent with similar opinions
then being required by the Rating Agencies, confirming that the new Pier 39
Borrower's assets will not be substantively consolidated with the assets of
certain owners or controlling persons of such Pier 39 Borrower in a
bankruptcy or similar proceeding.
As used herein, a "Pier 39 Qualified Transferee" means one or more persons
satisfying the criteria in (a) and (b) as follows: (a)(i) any person or a
Pier 39 Close Affiliate of a person with a current net worth of $500 million
or more and who controls retail property real estate equity assets of $1
billion or more, (ii) any pension fund, pension trust or pension account that
has total assets of $500 million or more, managed by a person that controls
at least $1 billion or more in retail property real estate equity assets or
(iii) any other person having a lesser net worth and/or lessor retail real
estate equity assets than as required under clause (i) above, subject to
written confirmation from the Rating Agencies that no downgrade,
qualification or withdrawal of the ratings then assigned by such Rating
Agencies to the Certificates will occur as a result of such transfer, and
(b)(i) any pension fund, pension trust or pension account, (ii) any insurance
company, (iii) any national money-center bank, or (iv) any person with a
long-term unsecured debt rating from the Rating Agencies of at least
investment grade. As used herein, a "Pier 39 Affiliate" means a person or
persons directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with the person or persons
in question, or as used with respect to permitted transfers of the Pier 39
Property and interests in the Pier 39 Borrower, such term includes (without
regard to the prior concept of "control") any family member, corporation,
partnership, limited liability company, trust or other entity substantially
all of the shareholders, partners, members, beneficiaries or owners of which
are family members of such person. The term "family members" as used herein
means such person; the spouse or former spouse of such person; any child,
natural or adopted, of such person; any trust or custodianship for the
primary benefit of or any estate of one or more of the aforementioned
individuals; and the beneficiary or beneficiaries of any such trust,
custodianship or estate. The term "control", as used herein, means, with
respect to a person that is a corporation, the right to exercise, directly or
indirectly, more than 50% of the voting rights attributable to the shares of
the controlled corporation and, with respect to a person that is not a
corporation, the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of the controlled
person. As used herein, a "Pier 39 Close Affiliate" of a person means a
person that (i) satisfies the definition of "Pier 39 Affiliate" with respect
to the other person in question and (ii) owns at least 80%, is owned at least
80% by, or is under at least 80% common ownership with, the other person in
question.
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INSURANCE. The Pier 39 Borrower is required to maintain, at its sole cost
and expense, the following insurance: (a) policies of insurance against loss
or damage by standard perils included within the classification "All Risks of
Physical Loss", maintained in an aggregate amount equal to the then full
replacement cost of the Pier 39 Property and certain equipment (without
deduction for physical depreciation), with deductibles no greater than
$50,000 (as increased proportionally with increases in a specified consumer
price index) (with such higher deductibles for wind coverage as the
applicable issuer may require); (b) flood insurance (if any part of the Pier
39 Property is located in an area identified by the Federal Emergency
Management Agency as an area federally designated a "100 year flood plain"
and flood insurance is generally available at reasonable premiums and in such
amounts as generally are required by institutional lenders for similar
properties (or if not so available from a private carrier, from the federal
government at commercially reasonable premiums to the extent available), in
either case, in an amount at least equal to the lesser of the principal
amount of the Pier 39 Loan or the maximum limit of coverage available with
respect to the Pier 39 Property under said program); (c) comprehensive
general liability insurance, including broad form property damage, blanket
contractual and personal injuries coverages and containing minimum limits per
occurrence of $500,000 for any policy year, as well as at least $500,000
excess and/or umbrella liability insurance for any and all claims; (d) rental
loss and/or business interruption insurance applicable to time periods
following the occurrence of both casualties and earthquakes in an amount
sufficient to avoid any co-insurance penalty and equal to the projected
operating expenses (including debt service) for the maintenance and operation
of the Pier 39 Property for a period of up to the next succeeding 18 months
as the same may be reduced or increased from time to time due to changes in
such operating expenses; (e) insurance against loss or damage from leakage of
sprinkler systems and explosion of steam boilers, air conditioning equipment,
high pressure piping, machinery and equipment, pressure vessels or similar
apparatus (without exclusion for explosions) and against loss of occupancy or
use arising from any breakdown, in such amounts as are generally available at
reasonable premiums and are generally required by institutional lenders for
properties comparable to the Pier 39 Property; (f) worker's compensation
insurance with respect to all employees of the Pier 39 Borrower to the extent
required by applicable law, regulation or governmental authority; (g) during
any period of repair or restoration, builder's "all risk" insurance in an
amount equal to not less than the full insurable value of the Pier 39
Property against such risks (including fire and extended coverage and
collapse of the improvements on the Pier 39 Property to agreed limits) as
mortgagee may request, in form and substance acceptable to mortgagee; (h)
coverage to compensate for the cost of demolition and the increased cost of
construction for the Pier 39 Property in an amount satisfactory to mortgagee;
and (i) earthquake insurance against damage or destruction due to earthquakes
from an issuer(s) having a claims paying ability rating of "A-" or better by
S&P (or if not available from an "A-" or better rated issuer, from such
highest investment grade issuer as may then be available) and in a minimum
amount equal to the difference of one times the probable maximum loss for the
Pier 39 Property due to an earthquake event less deductibles no greater than
10% of the replacement value of the Pier 39 Property; provided, however, the
Pier 39 Borrower's maximum annual premium for earthquake insurance coverage
during the term of the Pier 39 Loan is not required to exceed 250% of the
rate charged to the Pier 39 Borrower at the time of the closing of the Pier
39 Loan, subject to adjustment during the term of the Pier 39 Loan by the
amount of any increase in the specified consumer price index, provided,
further, however, in the event such premium for earthquake coverage exceeds
250% of the initial rate, subject to adjustment during the term of the Pier
39 Loan by the amount of any increase in the specified consumer price index,
the Pier 39 Borrower is required to maintain the maximum amount of earthquake
insurance coverage as such amount will buy, if such insurance is available;
and (i) such other insurance as may from time to time be reasonably required
by the mortgagee in order to protect its interests.
The issuer(s) of the insurance policies described above (other than the
earthquake insurance) must have a claims paying ability rating of "AA-" or
better by S&P and if the mortgagee so requires, by any of the Rating
Agencies; provided, however, that the Firemen's Fund Insurance Company with
respect to worker's compensation insurance and USF&G with respect to umbrella
general liability insurance are deemed to be acceptable to the mortgagee on
condition that each carrier's credit rating is not reduced below its rating
as of the closing of the Pier 39 Loan.
S-177
<PAGE>
CASUALTY AND CONDEMNATION. Following the occurrence of a casualty or
condemnation affecting the Pier 39 Property, the Pier 39 Borrower, regardless
of whether proceeds are available, is required to proceed promptly to
restore, repair, replace or rebuild the affected Pier 39 Property if and to
the extent permitted under the Pier 39 Ground Lease and to the extent
practicable to be of at least equal value and of substantially the same
character as prior to such casualty or condemnation, all to be effected in
accordance with the terms of the Pier 39 Loan documents applicable to
alterations.
Following the occurrence of a casualty or condemnation, the Pier 39 Loan
agreement provides that the rights and obligations of the Pier 39 Borrower
and the mortgagee are subject in all events to the provisions of the Pier 39
Ground Lease. The Pier 39 Ground Lease provides that upon the occurrence of a
casualty that is a partial or total destruction of the Pier 39 Property, the
Pier 39 Borrower is required to restore the property as nearly as possible to
the value, condition and character of the property immediately prior to such
casualty, whether or not insurance proceeds are available for such
restoration; provided, however, in the event of a total destruction and if
available insurance proceeds exceed the amount outstanding on the Pier 39
Loan, the Pier 39 Borrower will have the option to terminate the Pier 39
Ground Lease, with the prior written consent of the mortgagee, if such
insurance proceeds necessary to fully pay the outstanding amount of the Pier
39 Loan are paid to the mortgagee. The Pier 39 Ground Lease provides that in
the event of a condemnation of a nonsubstantial portion of the Pier 39
Property, the Pier 39 Borrower is required to reconstruct the improvements
that were taken and any proceeds resulting from such taking will be payable
to the mortgagee. In the event of a condemnation of a substantial portion of
the Pier 39 Property, the Pier 39 Borrower will have the option to terminate
the Pier 39 Ground Lease and any proceeds resulting from such condemnation
will be payable with respect to the improvement, betterments or structures
placed upon the Pier 39 Property during the term of the Pier 39 Ground Lease,
including replacements and additions thereto, will be paid to the mortgagee
to the extent necessary to pay in full the amount outstanding under the Pier
39 Loan. As used in this paragraph "substantial portion" means such portion
of the Pier 39 Property so that the balance thereof cannot be used
economically by the Pier 39 Borrower for the general purposes for which it
was using such property prior to such condemnation.
FINANCIAL REPORTING. The Pier 39 Borrower is required to furnish to the
mortgagee, within 85 days following the end of each fiscal year, a complete
copy of its annual financial statements, audited by a national independent
certified public accounting firm reasonably acceptable to the mortgagee, in
accordance with generally accepted auditing standards for such fiscal year,
including balance sheets and statements of profit and loss. Together with its
annual financial statements, the Pier 39 Borrower is also required to furnish
to the mortgagee (i) an officer's certificate certifying as of the date
thereof whether, to the Pier 39 Borrower's knowledge, there exists a default
or event of default, and if such default or event of default exists, the
nature thereof, the period of time it has existed and the action then being
taken to remedy the same; (ii) then current rent rolls; (iii) an itemized
operating budget; (iv) an itemized capital expenditure budget; and (v) an
annual report, for the most recently completed fiscal year, containing (a) to
the extent the Pier 39 Borrower receives such information from its tenants
and is entitled to disclose such information to the mortgagee, reported
tenant sales per square foot and tenant rent per square foot by general
merchandise categories, (b) capital expenditures for maintenance, tenant
improvements and leasing commissions, and renovations, expansions and
enhancements, and (c) occupancy levels for such period.
In addition, the Pier 39 Borrower is required to furnish, or cause to be
furnished, to the mortgagee within 40 days after the end of each calendar
month, the following items, accompanied by an officer's certificate,
certifying that such items are true, correct and accurate: (i) any notice
from a tenant under a lease affecting 7,500 or more GLA, threatening default,
alleging a default by landlord, requesting a lease termination or any other
modification or any other material correspondence received by the Pier 39
Borrower during the subject month, (ii) monthly and year-to-date operating
statements, (iii) a statement of the actual capital expenditures, leasing
commissions and tenant improvements made in respect of the Pier 39 Property
during the subject month and (iv) a list of any tenant under a lease
affecting 7,500 or more GLA that went dark during the subject month.
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<PAGE>
The Pier 39 Borrower is also required to furnish, or cause to be
furnished, to the mortgagee within 40 days after the end of each fiscal
quarter (i) quarterly and year-to-date financial statements prepared for such
fiscal quarter with respect to the Pier 39 Borrower, with a balance sheet for
such quarter; (ii) a comparison of the budgeted income and expenses and the
actual income and expenses for such fiscal quarter and fiscal year to date
for the Pier 39 Property, (iii) an occupancy report; (iv) calculations
reflecting the Pier 39 Debt Service Coverage Ratio, as of the last day of
such fiscal quarter, for such fiscal quarter and the last four fiscal
quarters (or such fewer fiscal quarters as the Pier 39 Loan has been
outstanding), (v) a current rent roll for the Pier 39 Property and such other
reports setting forth the term of, and any termination or cancellation rights
set forth in, each lease; (vi) a statement certifying that certain specified
representations and warranties of the Pier 39 Borrower contained in the Pier
39 Loan documents are true and correct as of the date of the certification;
(vii) to the extent the Pier 39 Borrower receives such information from its
tenants and is entitled to disclose such information to the mortgagee,
reported tenant sales per square foot and tenant rent per square foot by
general merchandise categories; and (viii) a list of tenants that went
bankrupt during such fiscal quarter and of leases which expired and were not
renewed during such quarter.
S-179
<PAGE>
Graphics Omitted: Photographs of One Commerce Square
[Grande Loan II Logo]
<PAGE>
ONE COMMERCE SQUARE: THE BORROWER; THE PROPERTY
THE LOAN. The One Commerce Square Loan had a principal balance as of the
Cut-Off Date of approximately $111,410,632. It is secured by a first priority
mortgage encumbering the fee interest in an office building known as "One
Commerce Square," located in Philadelphia, Pennsylvania (the "One Commerce
Square Property"). The One Commerce Square Loan was originated by GSMC on
March 16, 1998.
THE BORROWER. Commerce Square Partners-Philadelphia Plaza, L.P. (the "One
Commerce Square Borrower") is a Delaware limited partnership formed solely
for the purpose of acquiring, owning and operating the One Commerce Square
Property. The One Commerce Square Borrower has no material assets other than
the One Commerce Square Property and related interests. The One Commerce
Square Borrower has two general partners, TDP-Commerce Square Gen-Par, LLC
("TDP-Commerce Square"), a special purpose Delaware limited liability company
formed solely for the purpose of acting as the managing general partner of
the One Commerce Square Borrower and obtaining the One Commerce Square
Partner Loan and Prometheus Investment Holding, LLC ("PIHLLC"), a special
purpose Delaware limited liability company formed solely for the purpose of
acting as the co-general partner of the One Commerce Square Borrower. PIHLLC
is indirectly controlled by Lazard Fr|f4res Real Estate Investors, L.L.C.
("Lazard"). Philadelphia Plaza Associates ("PPA"), a 48.9% limited partner of
the One Commerce Square Borrower and the former owner of the One Commerce
Square Property, was reorganized pursuant to a plan of reorganization under
Chapter 11 of the Bankruptcy Code which was confirmed by an order of the
Bankruptcy Court for the Eastern District of Pennsylvania on January 13,
1998. The One Commerce Square Property was transferred to the One Commerce
Square Borrower pursuant to such plan of reorganization. Thomas Development
Partners, LLC, which is the property manager for the One Commerce Square
Property (the "One Commerce Square Manager"), is an affiliate of TDP-Commerce
Square and of PPA.
SECURITY. The One Commerce Square Loan is a non-recourse loan, secured by
the fee interest of the One Commerce Square Borrower in the One Commerce
Square Property and certain related collateral (including an assignment of
leases and rents, assignment of the One Commerce Square Management Agreement,
assignment of agreements, licenses, permits and contracts, assignment of the
One Commerce Square REA and funds in certain accounts (or letters of credit
in lieu thereof)). Subject to certain limited exceptions, none of the One
Commerce Square Borrower, TDP-Commerce-Square, PIHLLC or any of their
respective affiliates is personally liable for payment of the One Commerce
Square Loan. The One Commerce Square Borrower has represented that it owns
good and marketable fee simple title to the One Commerce Square Property free
and clear of all liens other than encumbrances described in the applicable
title insurance policies and other encumbrances permitted under the One
Commerce Square Loan documents (the "One Commerce Square Permitted
Encumbrances"). The title insurance policy issued upon the origination of the
One Commerce Square Loan insures that the mortgage for the One Commerce
Square Loan constitutes a valid and enforceable first lien on the One
Commerce Square Property, subject to certain exceptions and exclusions from
coverage set forth in the policy.
THE PROPERTY. The One Commerce Square Property is comprised of the One
Commerce Square Borrower's fee interest in approximately 1.5 acres of land
improved with a 41-story Class A office building, one half of a two-level
subterranean below-grade parking facility containing approximately 490
parking spaces and one-half of an open-air plaza containing a fountain and
certain other improvements (the "One Commerce Square Common Improvements")
located between the One Commerce Square Property and an adjacent similar
Class A office building known as Two Commerce Square (the "Two Commerce
Square Property"). The Two Commerce Square Property is owned by an affiliate
of TDP-Commerce Square (the "One Commerce Square Affiliated Owner"). The One
Commerce Square Property was built in 1987 and contains approximately 942,866
square feet of rentable office, retail and storage space. The subterranean
parking garage services both the One Commerce Square Property and the Two
Commerce Square Property and is located partially on each such property.
The operation, management and maintenance of the One Commerce Square
Common Improvements and the parking garage are governed by a reciprocal
easement and operating agreement (the
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<PAGE>
"One Commerce Square REA"), dated as of September 15, 1990, entered into by
Maguire/Thomas Partners-Philadelphia Plaza Associates, a predecessor of the
One Commerce Square Borrower, and the One Commerce Square Affiliated Owner.
Under the One Commerce Square REA, the One Commerce Square Borrower and the
One Commerce Square Affiliated Owner are each required to operate, maintain
and repair at their own expense all of the One Commerce Square Common
Improvements located on their respective properties.
OCCUPANCY AND MAJOR TENANTS. As of March 12, 1998, the One Commerce Square
Property was approximately 91% leased with an annualized base rent of
approximately $23,176,233. The ten largest tenants based upon annualized base
rent are shown below:
TEN LARGEST TENANTS BASED ON ANNUALIZED BASE RENT--ONE COMMERCE SQUARE LOAN
<TABLE>
<CAPTION>
% OF ANNUALIZED
TENANT APPROXIMATE TOTAL TENANT
GLA % OF ANNUALIZED ANNUALIZED BASE RENT LEASE
TENANT (SF) TOTAL GLA BASE RENT ($) BASE RENT PER SF EXPIRATION
- --------------------------- --------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
IBM......................... 504,112 53.5% $16,696,189 72.0% $33.12 09/30/02
Stradley Ronon.............. 77,778 8.2 2,372,232 10.2 30.50 12/31/10
Delaware Management......... 58,532 6.2 1,093,963 4.7 18.69 04/30/02
Kvaerner, Inc............... 29,278 3.1 552,180 2.4 18.86 10/31/13
Harkins Cunningham.......... 22,961 2.4 332,934 1.4 14.50 09/30/09
Guardian Life Insurance .... 9,695 1.0 319,932 1.4 33.00 05/31/99
Spencer Stuart.............. 7,724 0.8 262,616 1.1 34.00 01/29/99
Dolchin, Slotkin and Todd .. 11,687 1.2 186,996 0.8 16.00 03/31/06
Panitch, Schwarze........... 26,229 2.8 146,880 0.6 5.60 10/31/08
Thomas Development
Partners................... 7,670 0.8 118,884 0.5 15.50 12/20/02
--------- ------------- ------------- ------------
Total/Average (10 largest) . 755,666 80.1% $22,082,807 95.3% $29.22
Remaining................... 187,200 19.9 1,093,426 4.7 5.84
--------- ------------- ------------- ------------
Total/Average .............. 942,866 100.0% $23,176,233 100.0% $24.58
========= ============= ============= ============
</TABLE>
LEASE EXPIRATION SCHEDULE. The following table shows scheduled lease
expirations (assuming no renewal options) for tenants under leases as of
March 12, 1998 at the One Commerce Square Property:
LEASE EXPIRATION SCHEDULE--ONE COMMERCE SQUARE
<TABLE>
<CAPTION>
PERCENT ANNUALIZED
YEAR ENDING EXPIRING OF TOTAL ANNUALIZED PERCENT BASE RENT PER
DECEMBER 31 SQUARE FEET SQUARE FEET BASE RENT OF BASE RENT SQUARE FOOT
- --------------- ------------- ------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Month to Month 200 0.0% $ 4,000 0.0% $20.00
1998 ........... -- 0.0 500 0.0 --
1999 ........... 34,611 3.7 853,597 3.7 24.66
2000 ........... 8,319 0.9 70,712 0.3 8.50
2001 ........... 10,280 1.1 149,112 0.6 14.51
2002 ........... 591,881 62.8 18,205,240 78.6 30.76
2003 ........... 6,475 0.7 67,988 0.3 10.50
2004 ........... -- 0.0 -- 0.0 --
2005 ........... 14,293 1.5 92,905 0.4 6.50
2006 ........... 34,190 3.6 348,195 1.5 10.18
2007 ........... 4,466 0.5 58,058 0.3 13.00
Thereafter ..... 157,289 16.7 3,325,929 14.4 21.15
Vacant ......... 80,862 8.6 -- 0.0 --
------------- ------------- ------------- --------------
Total/Average . 942,866 100.0% $23,176,233 100.0% $24.58
============= ============= ============= ==============
</TABLE>
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<PAGE>
OPERATING HISTORY. The following table shows certain unaudited information
regarding the operating history of the One Commerce Square Property:
<TABLE>
<CAPTION>
UNDERWRITTEN
1995 1996 1997 NET CASH FLOW
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
REVENUE
Effective Gross
Income............... $34,572,183 $33,701,620 $30,927,646 $20,301,786
IBM Above Market Rent N/A N/A N/A 9,021,744*
------------- ------------- ------------- ---------------
TOTAL REVENUE.......... 34,572,183 33,701,620 30,927,646 29,323,530
EXPENSES
Utilities............. 1,299,733 1,243,366 1,237,923 1,260,341
Repairs &
Maintenance.......... 1,609,448 1,625,534 1,680,823 1,638,602
Janitorial............ 1,943,682 1,878,187 1,959,944 1,927,271
General
Administrative....... 346,529 365,668 402,009 402,009
Taxes................. 3,328,367 3,343,720 3,054,116 3,000,518
Insurance............. 234,513 277,160 204,085 194,021
Management Fee........ 1,142,326 1,112,909 1,014,587 710,563
Nonrecoverable........ 400,496 427,675 399,241 409,137
------------- ------------- ------------- ---------------
TOTAL EXPENSES......... 9,162,768 9,161,311 8,938,141 9,542,461
NET OPERATING INCOME .. 25,094,416 24,540,309 21,989,505 19,781,069
CAPITAL EXPENDITURES
Leasing Commissions .. 226,546 75,684 87,531 629,598
Tenant Improvements . -- -- -- 1,388,632
Capital Reserve....... -- -- -- 188,573
------------- ------------- ------------- ---------------
NET CASH FLOW.......... $24,867,870 $24,464,625 $21,901,974 $17,574,266
============= ============= ============= ===============
</TABLE>
- ------------
* This represents a portion of the rent under the IBM Lease which is above
current market rents, and which is an amount needed to pay interest on and
fully amortize the One Commerce Square Tranche B Note. The Above Market IBM
Rent Component set forth in the One Commerce Square Loan agreement is based
upon a DSCR of 1.05x. The IBM Above Market Rent is based upon the
underwritten market rents.
CERTAIN IBM LEASE PROVISIONS. The One Commerce Square Borrower's lease
with IBM (the "IBM Lease") expires on September 30, 2002 and provides for
three five-year extensions with respect to approximately 435,960 square feet.
The rentable square footage of the IBM Lease is approximately 504,112 which
represents approximately 53.5% of the total rentable square footage of the
One Commerce Square Property. IBM has subleased approximately 75% of its
space to various subtenants. Under the IBM Lease, IBM has various options and
a right of first offer with respect to vacant full floors, and is required to
lease 225 parking spaces. As of February 6, 1998, the base rent under the IBM
Lease was approximately $1,391,349 per month. The One Commerce Square
Borrower has informed the Seller that it is highly unlikely that IBM will
exercise its renewal options or its rights to lease additional space in the
building.
APPRAISAL. An appraisal prepared by Landauer Associates, Inc., dated as of
February 1, 1998, determined a value for the One Commerce Square Property of
approximately $135,000,000, resulting in a Cut-Off Date LTV of approximately
82.5%. The One Commerce Square Property appraisal was prepared in accordance
with the Uniform Standards of Professional Appraisal Practice. See "Risk
Factors--The Mortgage Loans--Limitations on Appraisals" herein.
ENGINEERING REPORT. A Property Condition Report on the One Commerce Square
Property was completed in November 1997 and was reviewed by an independent
third-party consultant in February 1998. The review concluded that the One
Commerce Square Property was generally in good physical condition but
recommended certain immediate physical needs for which a reserve of $352,000
was established.
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<PAGE>
ENVIRONMENTAL ASSESSMENT. An environmental report was completed in
October 1997 and was supplemented by an independent third party review in
January 1998 and by a soil and groundwater investigation in February 1998.
Slightly elevated hydrocarbon concentrations were detected in soil and
groundwater in the vicinity of a diesel UST under the underground parking
garage. The report concluded that it is not expected that further action will
be required, but recommended that the UST be upgraded and registered and that
any suspect ACM be sampled for asbestos before any renovation or demolition.
Nevertheless, there can be no assurance that all environmental conditions and
risks were identified in such report. See "Risk Factors--The Mortgage
Loans--Environmental Law Considerations" herein.
PROPERTY MANAGEMENT. The One Commerce Square Property is managed by the
One Commerce Square Manager pursuant to a real estate management and leasing
agreement (the "One Commerce Square Management Agreement"). Under the terms
of the One Commerce Square Management Agreement, the One Commerce Square
Manager is entitled to (i) a management fee equal to 3% of the monthly gross
income (excluding interest income) collected from the operation of the One
Commerce Square Property, (ii) a tenant improvement fee for the cost of
tenant improvements following the initial leasing of the One Commerce Square
Property (or with respect to any tenant premises, after the initial
occupancy), equal to 5% of the cost of such tenant improvements and charged
to the tenant as part of the tenant improvement work cost, and (iii) a
leasing commission for each lease of available space it obtained, equal to
the sum of 4% of the rent payable under such lease for the first ten years of
the original lease term and 3% of such rent for the 11th through the 15th
year of the original lease term. The term of the One Commerce Square
Management Agreement expires on March 16, 2003 and will be automatically
renewed for successive two year periods, until March 16, 2013.
Pursuant to an agreement among the mortgagee, the One Commerce Square
Borrower and the One Commerce Square Manager (the "One Commerce Square
Consent of Manager"), the One Commerce Square Manager has agreed that, among
other things (i) it will not terminate the One Commerce Square Management
Agreement, as a result of a default of the One Commerce Square Borrower
thereunder, without giving the mortgagee ten days' prior written notice (in
the case of non-payment of the management fee) or 30 days' prior written
notice (in the case of any other material default) and the right to cure such
default, (ii) upon the occurrence of an event of default under the One
Commerce Square Loan, the mortgagee, may at its option, terminate the One
Commerce Square Management Agreement on 30 days' written notice without any
penalty or fee; provided, however, if any time after the occurrence of an
event of default under the One Commerce Square Loan but prior to the
acceleration of the One Commerce Square Loan, the One Commerce Square
Borrower cures such event of default to the mortgagee's satisfaction and no
other event of default then exists, the mortgagee will, upon the request of
PIHLLC (and provided that at such time such entity is directly or indirectly
controlled by Lazard), reinstate the One Commerce Square Management Agreement
and the One Commerce Square Manager, (iii) all liens, rights and interests
owned or held by the One Commerce Square Manager in and to the One Commerce
Square Property are subordinate to the liens of the mortgagee, and (iv) it
will not amend the One Commerce Square Management Agreement without the prior
written consent of the mortgagee (which consent will not be unreasonably
withheld or delayed).
Pursuant to the One Commerce Square Loan agreement, the One Commerce
Square Property is required at all times to be managed by a One Commerce
Square Acceptable Manager. A "One Commerce Square Acceptable Manager" means
(i) the One Commerce Square Manager or any affiliate thereof or of the One
Commerce Square Borrower, (ii) a reputable and experienced professional
management company or an in-house property management department which, at
the time of its engagement, will have under its management (A) at least
3,000,000 rentable square feet of Class A office space including at least one
building in a central business district which must contain not less than
500,000 rental square feet (excluding the One Commerce Square Property), or
(B) at least five office buildings (excluding the One Commerce Square
Property), each of which must be Class A office buildings located in central
business district locations and each of which must contain not less than
500,000 rentable square feet, or (iii) any other management company which is
acceptable to the mortgagee and the Rating Agencies in their sole discretion.
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<PAGE>
ONE COMMERCE SQUARE: THE LOAN
PAYMENT TERMS. The One Commerce Square Loan bears interest at a fixed rate
per annum equal to 6.995% (the "One Commerce Square Initial Interest Rate")
through and including April 10, 2008. From and after April 11, 2008 (the "One
Commerce Square Anticipated Repayment Date"), the One Commerce Square Loan
accrues interest at a fixed rate per annum equal to 8.995% (the "One Commerce
Square Revised Interest Rate"). The One Commerce Square Loan consists of two
tranches of notes. One tranche, in the original principal balance of
$80,000,000 (the "One Commerce Square Tranche A Note"), matures on April 11,
2028 (the "One Commerce Square Tranche A Note Maturity Date"). The second
tranche, in the original principal balance of $32,000,000 (the "One Commerce
Square Tranche B Note" and, together with the One Commerce Square Tranche A
Note, each a "One Commerce Square Note"), matures on September 11, 2002 (the
"One Commerce Square Tranche B Note Maturity Date" and, together with the One
Commerce Square Tranche A Note Maturity Date, the applicable "One Commerce
Square Maturity Date"). The One Commerce Square Tranche B Note fully
amortizes over its term. As described below, if the One Commerce Square
Borrower does not prepay the One Commerce Square Tranche A Note on the One
Commerce Square Anticipated Repayment Date, the One Commerce Square Borrower
will be required to pay interest at the One Commerce Square Initial Interest
Rate (together with principal, as described below), and interest accrued
equal to the excess of the One Commerce Square Revised Interest Rate over the
One Commerce Square Initial Interest Rate will be deferred and added to the
outstanding indebtedness under the One Commerce Square Tranche A Note and
will, to the extent permitted by applicable law, earn interest at the One
Commerce Square Revised Interest Rate (such accrued and deferred interest and
interest thereon (which is deferred), the "One Commerce Square Excess
Interest"). Interest on the One Commerce Square Loan is calculated for any
period based on the actual number of days in the period in question and a
360-day year.
The One Commerce Square Loan requires monthly payments (the "One Commerce
Square Monthly Debt Service Payment Amount") of principal and interest (based
on the applicable amortization schedule for each One Commerce Square Note and
the One Commerce Square Initial Interest Rate) of (i) approximately
$1,242,234 until the payment date immediately prior to the One Commerce
Square Tranche B Note Maturity Date, and (ii) approximately $537,202
commencing on October 11, 2002 and until the payment date immediately prior
to the One Commerce Square Tranche A Note Maturity Date. Payment of the
balance of the principal of the One Commerce Square Tranche A Note, if any,
together with all accrued and unpaid interest, is required on the One
Commerce Square Tranche A Note Maturity Date. Each One Commerce Square
Monthly Debt Service Payment Amount is due and payable on the 11th day of
each calendar month or, if such day is not a business day, then the
immediately preceding business day (a "One Commerce Square Due Date").
Commencing on the One Commerce Square Anticipated Repayment Date and on each
One Commerce Square Due Date thereafter, in addition to the One Commerce
Square Monthly Debt Service Payment Amount, the One Commerce Square Borrower
is required to apply 100% of the One Commerce Square Excess Cash Flow for the
month preceding the month in which the One Commerce Square Due Date occurs in
the following order of priority (a) to the outstanding principal balance of
the One Commerce Square Tranche A Note until the One Commerce Square Tranche
A Note has been paid in full, and (b) to the One Commerce Square Excess
Interest. "One Commerce Square Excess Cash Flow" means the amounts held as
collected funds in the One Commerce Square Deposit Account after the
application of funds (a) to fund the One Commerce Square Tax and Insurance
Reserve Account as described in "--Reserves" below; (b) to pay the One
Commerce Square Monthly Debt Service Payment Amount; (c) to the payment of
the One Commerce Square Borrower's approved budgeted operating expenses; (d)
to fund the One Commerce Square Leasing Reserve Account as described in
"--Reserves" below; (e) to fund the One Commerce Square Capital Reserve
Account as described in "--Reserves" below; (f) to pay the One Commerce
Square Borrower's budgeted capital expenditures as described in "--Cash
Management; Lockbox" below; and (g) to pay the extraordinary capital
expenditures as described in "--Cash Management; Lockbox" below. The
scheduled principal balance of the One Commerce Square Loan as of the One
Commerce Square Anticipated Repayment Date will be approximately $68,865,873.
After the occurrence and during the continuance of an event of default
under the One Commerce Square Loan, to the extent permitted by applicable
law, the entire outstanding principal balance of the
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<PAGE>
One Commerce Square Loan along with due and unpaid interest thereon will
bear interest at a per annum default rate equal to the lesser of (a) the
maximum rate permitted by applicable law, or (b) the greater of (x) 5% in
excess of the One Commerce Square Initial Interest Rate or the One Commerce
Square Revised Interest Rate, as applicable, or (y) the rate from time to
time publicly announced by Citibank, N.A. (or any successor thereto) as its
base rate on corporate loans.
PREPAYMENT. Voluntary prepayment is prohibited under the One Commerce
Square Loan prior to March 11, 2008 (subject to defeasance rights afforded to
the One Commerce Square Borrower), except in connection with certain casualty
or condemnation events. From and after March 11, 2008, the One Commerce
Square Loan may be voluntarily prepaid in whole or in part on any One
Commerce Square Due Date without payment of a yield maintenance charge or
prepayment premium.
If all or any part of the principal amount of the One Commerce Square Loan
is prepaid upon acceleration of the One Commerce Square Loan following the
occurrence of an event of default prior to the One Commerce Square
Anticipated Repayment Date, the One Commerce Square Borrower will be required
to make a yield maintenance payment in an amount equal to the excess, if any,
of (i) the sum of (A) the aggregate respective present values of all
scheduled interest payments payable under each One Commerce Square Note (or
the portion of all such interest payments corresponding to the portion of the
principal of each One Commerce Square Note to be prepaid upon acceleration)
for the period from the date of such prepayment to the applicable One
Commerce Square Maturity Date for each One Commerce Square Note, discounted
monthly at a rate equal to a specified treasury constant yield with respect
to each One Commerce Square Note and based on a 360-day year of twelve 30-day
months and (B) the aggregate respective present values of all scheduled
principal payments payable under each One Commerce Square Note (or the then
unpaid portion thereof to be prepaid upon acceleration) assuming the then
outstanding principal balance of the One Commerce Square Loan is paid in full
on the applicable One Commerce Square Maturity Date with respect to each One
Commerce Square Note, discounted monthly at a rate equal to the specified
treasury constant yield with respect to each One Commerce Square Note and
based on a 360-day year of twelve 30-day months over (ii) the then-current
outstanding principal amount of the One Commerce Square Loan (or the then
unpaid portion thereof to be prepaid upon acceleration).
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of the One Commerce Square Property
under the One Commerce Square Loan, the mortgagee will be entitled, at its
option, to apply such proceeds to prepay the One Commerce Square Loan, as
described in "--Casualty and Condemnation" below. No yield maintenance
payment or prepayment premium will be payable upon any mandatory prepayment
of the One Commerce Square Loan in connection with a casualty or condemnation
unless an event of default under the One Commerce Square Loan has occurred
and is continuing, in which case the One Commerce Square Borrower will be
required to pay a yield maintenance payment calculated in the manner
described above.
If a One Commerce Square Low Debt Service Trigger Event or an event of
default has occurred and is continuing, all amounts on deposit in the One
Commerce Square Low Debt Service Reserve Account are required to be applied
during such period to prepay principal due under the One Commerce Square Loan
until the principal amount thereof is paid in full as described in
"--Reserves" below.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL--DEFEASANCE. The One
Commerce Square Borrower is permitted on any date on or after the second
anniversary from the Closing Date and prior to the One Commerce Square
Anticipated Repayment Date to defease all or a portion of the One Commerce
Square Loan with U.S. Treasury obligations, provided that, among other
conditions, the mortgagee receives a written confirmation from the Rating
Agencies that there will be no downgrade, qualification or withdrawal of the
then current ratings of the Certificates as a result of such defeasance, the
One Commerce Square Borrower gives the mortgagee at least 30 days prior
written notice of the date of such defeasance (the "One Commerce Square
Defeasance Date"), no event of default will exist on the One Commerce Square
Defeasance Date (except if such defeasance will cure the event of default and
such defeasance is a total defeasance), and provided further that the One
Commerce Square Borrower pays on the One Commerce Square Defeasance Date (i)
all accrued and unpaid interest on
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the principal balance of each One Commerce Square Note to be defeased to but
not including the One Commerce Square Defeasance Date (and if the One
Commerce Square Defeasance Date is not a One Commerce Square Due Date, the
One Commerce Square Defeasance Deposit will take into account the interest
that would have accrued on such One Commerce Square Loan to but not including
the next One Commerce Square Due Date), (ii) all other sums, not including
scheduled interest or principal payments, then due under the One Commerce
Square Loan and the related loan documents, (iii) the One Commerce Square
Defeasance Deposit, and (iv) all reasonable costs and expenses of the
mortgagee incurred in connection with the defeasance. In addition, the One
Commerce Square Borrower will be required to deliver to the mortgagee, among
other things: (a) a security agreement, in form and substance reasonably
satisfactory to mortgagee, granting the mortgagee a first priority lien on
the One Commerce Square Defeasance Deposit and the U.S. Treasury obligations
purchased with the One Commerce Square Defeasance Deposit, (b) an opinion of
counsel for the One Commerce Square Borrower in form reasonably satisfactory
to the mortgagee stating, among other things, that the Trustee has a
perfected security interest in the U.S. Treasury obligations purchased with
the One Commerce Square Defeasance Deposit, (c) an agreed upon procedures
report or a certification acceptable to the mortgagee and the Rating
Agencies, from a Big Five independent certified public accounting firm, that
the One Commerce Square Defeasance Deposit is sufficient to pay all scheduled
payments due from the One Commerce Square Borrower under the One Commerce
Square Loan in connection with the proposed defeasance, (d) if required by
the Rating Agencies, a non-consolidation opinion with respect to the
successor borrower, if any, in form and substance satisfactory to the
mortgagee and the Rating Agencies, and (e) an officer's certificate
certifying that the requirements for defeasance set forth in the One Commerce
Square Loan Agreement have been met. In addition, if only a portion of either
One Commerce Square Note is being defeased, the One Commerce Square Borrower
will be required to execute and deliver all necessary documents to amend and
restate such One Commerce Square Note including two substitute notes for each
such One Commerce Square Note, one having a principal balance equal to the
defeased portion of such One Commerce Square Note and the other having a
principal balance equal to the undefeased portion of such One Commerce Square
Note.
"One Commerce Square Defeasance Deposit" means an amount equal to the sum
of (i) with respect to a total defeasance, all costs and expenses (including
the purchase price) incurred or to be incurred in the purchase of U.S.
Treasury obligations providing payments on or prior to, but as close as
possible to, all successive One Commerce Square Due Dates after the One
Commerce Square Defeasance Date for the entire outstanding principal balance
of the One Commerce Square Loan (including the outstanding principal balance
of the One Commerce Square Loan on the One Commerce Square Anticipated
Repayment Date), and in amounts equal to the scheduled interest and principal
payments under each One Commerce Square Note, (ii) with respect to a partial
defeasance, (A) the principal amount of the One Commerce Square Note to be
defeased plus (B) without duplication, all costs and expenses (including the
purchase price) incurred or to be incurred in the purchase of U.S. Treasury
obligations providing payments on or prior to, but as close as possible to,
all successive One Commerce Square Due Dates after the One Commerce Square
Defeasance Date (including the outstanding principal balance of the defeased
note on the One Commerce Square Anticipated Repayment Date), and in amounts
equal to the scheduled interest and principal payments under the defeased
note, and (iii) in either case, any revenue, documentary stamp or intangible
taxes in connection with the transfer of the defeased note, the creation of
one or more defeased notes and undefeased notes, if applicable, any transfer
of one or more defeased notes or otherwise required to satisfy the defeasance
requirements.
Upon receipt of the One Commerce Square Defeasance Deposit, the mortgagee,
using the One Commerce Square Defeasance Deposit, will be required to
purchase U.S. Treasury obligations on behalf of the One Commerce Square
Borrower, and, in the case of a total defeasance, such U.S. Treasury
obligations will serve as the sole collateral for the payments of the amounts
due under the One Commerce Square Loan. Upon a deposit of such U.S. Treasury
obligations in connection with a total defeasance, the mortgagee is required
to establish or designate one or more successor entities and the One Commerce
Square Borrower is required to assign all obligations, rights and duties
under and to the
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One Commerce Square Loan, together with the pledged U.S. Treasury
obligations, to such successor entity or entities. The Master Servicer will
be required in the Pooling Agreement to cause such obligations to be assumed
by a special purpose bankruptcy remote entity.
In connection with the total defeasance of the One Commerce Square Loan,
the One Commerce Square Borrower will be permitted to obtain the release of
the mortgage lien encumbering the One Commerce Square Property and all
related collateral.
OTHER FINANCING. The One Commerce Square Borrower is not permitted to
incur any additional indebtedness other than: (a) any unsecured One Commerce
Square Credit Facilities delivered to the mortgagee in accordance with the
terms of the One Commerce Square Loan, and the One Commerce Square Borrower's
reimbursement obligations arising therefrom, (b) unsecured trade payables
incurred in the ordinary course of the One Commerce Square Borrower's
business, customarily paid by the One Commerce Square Borrower within 60 days
of incurrence and in fact not more than 60 days outstanding unless the One
Commerce Square Borrower is, in good faith and in accordance with customary
and prudent practices, contesting the payment of the same, (c) any loan to
the One Commerce Square Partner Borrowers secured, in whole or in part, by
(i) a pledge of their partnership interests in the One Commerce Square
Borrower, (ii) a pledge of stock of the corporations which are the managing
members of the general partners of the One Commerce Square Borrower, and/or
(iii) a pledge of the membership interests held by the non-managing members
of the general partners of the One Commerce Square Borrower, which loan and
pledges are subordinate to the One Commerce Square Partner Loan and which in
all respects (including, without limitation, the amount thereof, the interest
rate and the holder thereof) has been approved by the Rating Agencies in
their sole discretion and as to which the Rating Agencies will issue a
written confirmation that there will be no downgrade, qualification, or
withdrawal of the then current ratings of the Certificates with respect
thereto, and (d) non-delinquent taxes and other impositions. As described in
"--The One Commerce Square Partner Loan" below, a loan was made in the
original principal balance amount of $9,250,000 to the One Commerce Square
Partner Borrowers by the One Commerce Square Partner Lender.
A "One Commerce Square Credit Facility" is a letter of credit issued by a
domestic bank, the U.S. agency or branch of a foreign bank the long-term
unsecured debt rating of which at the time and throughout the term thereof is
not less than the higher of (a) the highest rating then assigned by the
Rating Agencies to any of the outstanding Certificates or (b) "A" (or its
equivalent) by S&P and Moody's, or, if there are no domestic banks, U.S.
agencies or branches of a foreign bank having such rating then issuing
letters of credit, then by a domestic bank the long-term unsecured debt
rating of which is not lower than "AA" (or its equivalent) by the Rating
Agencies.
ALTERATIONS. Except upon compliance with certain conditions set forth in
the One Commerce Square Loan documents (which does not include the approval
of the mortgagee), the One Commerce Square Borrower is prohibited from making
or permitting any demolition, alteration, installation, improvement,
expansion or reduction of or to the One Commerce Square Property or any part
thereof.
RESERVES. Pursuant to the terms of the One Commerce Square Loan, the One
Commerce Square Borrower has established the following reserves: (i) a tax
and insurance escrow account (the "One Commerce Square Tax and Insurance
Reserve Account"), partially funded at the closing of the One Commerce Square
Loan and to be funded on each One Commerce Square Due Date in an amount equal
to one-twelfth of the taxes and insurance premiums that will be payable
during the next ensuing 12 months; (ii) a leasing reserve account, for the
payment of tenant improvements and leasing commissions (the "One Commerce
Square Leasing Reserve Account"), funded at the closing of the One Commerce
Square Loan with a One Commerce Square Credit Facility in the amount of
$4,497,025, and thereafter, except to the extent the One Commerce Square
Credit Facility remains undrawn, to be funded on each One Commerce Square Due
Date occurring in July through and including December of each year in an
amount equal to one-sixth of the amount required to cause the amount in the
One Commerce Square Leasing Reserve Account to equal the following balances
specified for such year (1998: $4,497,025; 1999: $6,915,887; 2000:
$9,334,748; 2001: $11,753,610, 2002: $14,555,110; 2003: $4,295,390; 2004
through 2008: $2,078,164) (which balance will be reduced by the IBM Space
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Reduction Amount), provided that prior to March 17, 2007, the One Commerce
Square Borrower may present a One Commerce Square Credit Facility in lieu
thereof, and provided further that, after September 20, 2002 the One Commerce
Square Borrower will have the right (without the consent of the mortgagee) to
modify the One Commerce Square Leasing Reserve Account balances if the Rating
Agencies agree in their sole discretion to any such modification and issue a
written confirmation that there will be no downgrade, qualification, or
withdrawal of the then current ratings of the Certificates with respect
thereto; (iii) a capital expenditure reserve account, for the payment of
certain routine capital improvements (the "One Commerce Square Capital
Reserve Account"), to be funded on each One Commerce Square Due Date in an
amount equal to $15,714; (iv) a deferred maintenance reserve account, for the
payment of the cost of certain identified deferred maintenance items (the
"One Commerce Square Deferred Maintenance Reserve Account"), funded at the
closing of the One Commerce Square Loan with a One Commerce Square Credit
Facility in the amount of $352,000; (v) an unpaid tenant improvements and
leasing commissions account, for the payment of unpaid tenant improvement and
leasing commission costs related to specified leases (the "One Commerce
Square Unpaid TI/Leasing Commission Reserve Account"), funded at the closing
of the One Commerce Square Loan in the amount of $2,978,272; and (vi) a low
debt service reserve account (the "One Commerce Square Low Debt Service
Reserve Account"), to be funded on each One Commerce Square Due Date prior to
the One Commerce Square Anticipated Repayment Date, upon the occurrence of a
One Commerce Square Low Debt Service Application Event, in an amount equal to
all remaining funds in the One Commerce Square Deposit Account after the
application of funds under clauses (i) through (vi) described in the second
paragraph in "--Cash Management; Lockbox" below, provided, however, if at
such time, either (a) the aggregate net operating income for the One Commerce
Square Property (exclusive of the Above Market IBM Rent Component) for the
preceding six-month period plus the net operating income for the One Commerce
Square Property (exclusive of the Above Market IBM Rent Component) as
projected in good faith by the One Commerce Square Borrower (taking into
account only leases which are then in place) and reasonably agreed to by the
mortgagee for the six-month period immediately following such trailing
six-month period, equals or exceeds $8,000,000, or (b) if the time in
question occurs during the year 2003, the net operating income for the One
Commerce Square Property (exclusive of the Above Market IBM Rent Component)
as projected in good faith by the One Commerce Square Borrower (taking into
account only leases which are then in place) and reasonably agreed to by the
mortgagee for the succeeding 12 month period equals or exceeds $8,000,000,
then, in either case the One Commerce Square Low Debt Service Reserve Account
will not be funded in the amount of such remaining funds.
"Above Market IBM Rent Component" means an amount equal to $740,284 each
month in which the IBM Lease remains in effect.
"IBM Space Reduction Amount" means an amount equal to the aggregate amount
of all tenant improvement costs and leasing commissions either disbursed to
the One Commerce Square Borrower pursuant to the One Commerce Square Loan
agreement or otherwise expended by it out of other funds (provided that the
mortgagee has been provided with evidence reasonably satisfactory to it that
such funds have been so expended) with respect to new leases (or lease
extensions) relating to the initial reletting of the space currently leased
to IBM, which leases or lease extensions have an initial term which expires
after September 20, 2006.
If at any time a One Commerce Square Low Debt Service Trigger Event or an
event of default has occurred and is continuing, all amounts on deposit in
the One Commerce Square Low Debt Service Reserve Account are required to be
applied on each One Commerce Square Due Date occurring during such period to
prepay principal due under the One Commerce Square Loan until the principal
amount thereunder is paid in full, provided, however, that provided no event
of default has occurred and is continuing, if either of the events set forth
in either clause (a) or (b) in the preceding paragraph (except that the
$8,000,000 referred to therein for this purpose is $7,000,000) occurs, then
notwithstanding the foregoing, the amounts on deposit in the One Commerce
Square Low Debt Service Reserve Account are not required to be applied to
prepay the One Commerce Square Loan; and provided further that if after the
establishment of such account, any such trailing 12-month net operating
income for the One
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Commerce Square Property (exclusive of the then applicable Above Market IBM
Rent Component) exceeds $8,000,000 for four consecutive quarters and no event
of default has occurred and is continuing, all amounts on deposit in the One
Commerce Square Low Debt Service Reserve Account are required to be released
to the One Commerce Square Borrower.
A "One Commerce Square Low Debt Service Application Event" means that as
of any day, the net operating income of the One Commerce Square Property
(exclusive of the Above Market IBM Rent Component) for the trailing 12-month
period is less than $8,000,000. A "One Commerce Square Low Debt Service
Trigger Event" means that as of any day, the net operating income of the One
Commerce Square Property (exclusive of the Above Market IBM Rent Component)
for the trailing 12-month period is less than $7,000,000.
CASH MANAGEMENT; LOCKBOX. The mortgagee has established a segregated bank
account in the name of the One Commerce Square Borrower but under the sole
dominion and control of the mortgagee (the "One Commerce Square Deposit
Account"). The One Commerce Square Borrower is required to notify, and has
notified, all tenants to make all payments due under the leases to the
mortgagee, payable and deliverable directly to the One Commerce Square
Deposit Account. The One Commerce Square Borrower and the One Commerce Square
Manager will be required to deposit all payments received by them with
respect to sums due under any leases of the One Commerce Square Property into
the One Commerce Square Deposit Account no later than the close of business
on the next business day following receipt, provided, however, that any
amounts which constitute security deposits will be deposited in an escrow
account in the name of the mortgagee and any termination fees paid by a
tenant will be deposited into the One Commerce Square Deposit Account within
two business days of receipt thereof.
On each One Commerce Square Due Date, provided no default or event of
default has occurred and is continuing, the mortgagee is required to
distribute funds from the One Commerce Square Deposit Account in the
following order of priority: (i) to fund the One Commerce Square Tax and
Insurance Reserve Account, (ii) to pay the One Commerce Square Monthly Debt
Service Payment Amount, (iii) to the One Commerce Square Borrower, an amount
equal to the budgeted operating expenses, approved by the mortgagee for the
month immediately prior to the month in which such One Commerce Square Due
Date occurs provided that the One Commerce Square Borrower will have
delivered to the mortgagee an officer's certificate certifying that the One
Commerce Square Borrower does not have any unpaid claims of creditors more
than 60 days past due (except for claims the One Commerce Square Borrower is
in good faith contesting), and that the amounts disbursed will be used solely
to pay its creditors for costs and expenses incurred to date and provided
further that the One Commerce Square Borrower may request an additional
amount to pay operating expenses in excess of the budgeted amount, up to 5%
for such line item (except that up to three line items totalling no more than
$100,000 may be aggregated for such variance), but in no event to exceed more
than 5% of such month's budgeted amount for operating expenses, (iv) on each
One Commerce Square Due Date occurring in July through and including
December, to fund the One Commerce Square Leasing Reserve Account to the
extent necessary to bring the balance thereof to the applicable One Commerce
Square Leasing Reserve Account balance for such year (as the same may have
been reduced by the IBM Space Reduction Amount), except to the extent a One
Commerce Square Credit Facility delivered in lieu thereof remains undrawn;
(v) to fund the One Commerce Square Capital Reserve Account, (vi) to the One
Commerce Square Borrower, an amount equal to the budgeted capital expenses
for the month immediately prior to the month in which such One Commerce
Square Due Date occurs provided that the One Commerce Square Borrower will
have delivered to the mortgagee an officer's certificate certifying that the
One Commerce Square Borrower does not have any unpaid claims of creditors
more than 60 days past due (other than de minimis amounts) for prior capital
improvements (except for claims that the One Commerce Square Borrower is in
good faith contesting and the payment for which the One Commerce Square
Borrower has escrowed with the mortgagee), and that the amounts disbursed to
the One Commerce Square Borrower pursuant to this clause (vi) will be used by
the One Commerce Square Borrower within the next 60 days solely to pay for
capital expenditures, (vii) to the One Commerce Square Low Debt Service
Reserve Account, if required, as described in "--Reserves" above, (viii) to
the
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One Commerce Square Borrower to pay the costs of extraordinary capital
expenditures approved in writing by the mortgagee to the extent such approval
is required, (ix) from and after the One Commerce Square Anticipated
Repayment Date, to prepay the principal amount outstanding under the One
Commerce Square Tranche A Note until it is paid in full and then to pay the
One Commerce Square Excess Interest, (x) if the One Commerce Square Partner
Loan is outstanding, to the One Commerce Square Parent Lender in an amount
equal to all amounts then due and payable to it (provided that the mortgagee
will be notified of such amount at least six business days prior to such One
Commerce Square Due Date), (xi) to the One Commerce Square Series B Preferred
Equity Holder, an amount equal to all amounts then due and payable to it
(provided that the mortgagee will have been notified of such amount at least
six business days prior to such One Commerce Square Due Date), and (xii) the
remaining balance to the One Commerce Square Borrower.
In the event that on any One Commerce Square Due Date the amount in the
One Commerce Square Deposit Account is insufficient to make all of the
transfers described in clauses (i) through (vi) of the immediately preceding
paragraph, the One Commerce Square Borrower is required to deposit into the
One Commerce Square Deposit Account on such One Commerce Square Due Date the
amount of such deficiency. Failure to make such deposit will be an event of
default under the One Commerce Square Loan and the mortgagee in such case may
apply the amounts in the One Commerce Square Deposit Account in such order as
the mortgagee may determine.
TRANSFER OF THE ONE COMMERCE SQUARE PROPERTY AND INTERESTS IN THE ONE
COMMERCE SQUARE BORROWER; ENCUMBRANCES. Unless permitted by the One Commerce
Square Loan documents as described below, and with the exception of leases
entered into in accordance therewith and the One Commerce Square Permitted
Encumbrances, the One Commerce Square Borrower is not permitted without the
approval of the Rating Agencies and the mortgagee, in their sole discretion,
and a written confirmation from the Rating Agencies that such action will
not, in and of itself, result in a downgrade, withdrawal or qualification of
any rating then assigned to any outstanding Certificates, to (A) sell,
assign, convey, transfer or otherwise dispose of or encumber legal,
beneficial or equitable interests in the One Commerce Square Property or any
part thereof, (B) permit or suffer any owner, directly or indirectly, of a
beneficial interest in the One Commerce Square Property to transfer such
interest, whether by transfer of stock or other beneficial interest in any
entity or otherwise, (C) mortgage, hypothecate or otherwise encumber or grant
a security interest in the One Commerce Square Property or any part thereof,
or (D) file a declaration of condominium with respect to the One Commerce
Square Property.
So long as no event of default will have occurred and be continuing and
the One Commerce Square Partner Loan has been paid in full, and subject to
the other requirements and conditions set forth herein which are not contrary
to the rights afforded by this paragraph, the One Commerce Square Borrower
may sell, assign, convey, transfer or otherwise dispose of legal or equitable
title to all (but not less than all) of the One Commerce Square Property or
the partners of the One Commerce Square Borrower may sell, assign, transfer
or otherwise dispose of all (but not less than all) of their partnership
interests in the One Commerce Square Borrower, in a single transaction if,
after giving effect to the proposed transaction: (i) the transferee assumes
in writing all of the obligations of the One Commerce Square Borrower under
the One Commerce Square Loan (in the case of a transfer of the One Commerce
Square Property), and the mortgagee has received written confirmation from
the Rating Agencies that there will be no downgrade, qualification, or
withdrawal of the then current ratings of the Certificates with respect
thereto (in the case of either a transfer of the One Commerce Square Property
or such partnership interests), except that no such written confirmation from
the Rating Agencies is necessary if the transfer is to certain One Commerce
Square Permitted Owners listed in the One Commerce Square Loan agreement (or
a direct or indirect wholly-owned subsidiary thereof) and such transfer is
made prior to the date which is 36 months after the closing of the One
Commerce Square Loan; provided, however, that if any such transfer is made on
or after the date which is 24 months after the closing of the One Commerce
Square Loan, the Rating Agencies or the mortgagee may, in their sole
discretion, prohibit such transfer if the proposed One Commerce Square
Permitted Owner will have suffered a material adverse change since such
closing in its business operations, economic performance, assets or condition
(financial or otherwise), (ii) the One Commerce Square Property will be owned
directly by a special purpose entity, which at the time
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of such transfer will be in compliance with the single-purpose
bankruptcy-remote representations, warranties and covenants contained in the
One Commerce Square Loan agreement and which will have assumed in writing and
agreed to comply with the terms of the One Commerce Square Loan documents,
(iii) the transferee will be a One Commerce Square Permitted Owner or be
wholly owned, directly or indirectly, by a One Commerce Square Permitted
Owner, (iv) if the One Commerce Square Property will be managed by an
unaffiliated third-party property manager that is not a One Commerce Square
Acceptable Manager, the mortgagee is required to have approved such manager
and received a written confirmation from the Rating Agencies that there will
be no downgrade, qualification, or withdrawal of the then current ratings of
the Certificates with respect thereto, and (v) no event of default will occur
as a result of such transaction.
So long as no event of default will have occurred and be continuing, and
subject to the other requirements and conditions set forth herein which are
not contrary to the rights afforded by this paragraph, the One Commerce
Square Borrower may sell, assign, convey, transfer or otherwise dispose of
legal or equitable title to all (but not less than all) of the One Commerce
Square Property to an affiliate of the One Commerce Square Borrower in a
single transaction if, after giving effect to the proposed transaction: (a)
the transferee assumes in writing all of the obligations of the One Commerce
Square Borrower under the One Commerce Square Loan and the mortgagee has
received a written confirmation from the Rating Agencies that there will be
no downgrade, qualification, or withdrawal of the then current ratings of the
Certificates in respect thereof; (b) the requirements of clauses (ii), (iv)
and (v) of the immediately preceding paragraph will have been fulfilled; and
(c) 50% of the partnership interests in such transferee will be controlled by
either Lazard or by a person or persons which control or are under common
control with Lazard and 50% of such partnership interests will be controlled
by James A. Thomas ("Thomas").
A "One Commerce Square Permitted Owner" means either (i) a One Commerce
Square Listed Permitted Owner, provided that the transfer to such person is
closed within 36 months after the closing of the One Commerce Square Loan;
provided, however, that if any such transfer is closed on or after the date
which is 24 months after the closing of the One Commerce Square Loan, the
Rating Agencies or the mortgagee may, in their sole discretion, prohibit such
transfer if the proposed One Commerce Square Listed Permitted Owner will have
suffered a material adverse change since the closing of the One Commerce
Square Loan in its business operations, economic performance, assets or
condition (financial or otherwise), or (ii) any person which (a) has a
long-term unsecured debt rating not lower than "BBB" (or its equivalent) by
the Rating Agencies, (b) has a current net worth of at least $500 million and
controls office building real estate equity assets of at least $1 billion, in
each case exclusive of the One Commerce Square Property (or, in the case of a
pension fund adviser, controls at least $1 billion of office building real
estate equity assets, exclusive of the One Commerce Square Property) or is a
pension fund, pension trust or pension account that has total assets of at
least $500 million (exclusive of the One Commerce Square Property), and
managed by a person who controls at least $1 billion of office building real
estate equity assets (exclusive of the One Commerce Square Property), (c) is,
or is controlled by, either a pension fund, a pension trust or pension
account, an insurance company, a national money-center bank or a person who
has a long-term unsecured debt rating not lower than "BBB" (or its
equivalent) by the Rating Agencies, and (d) has a corporate or entity
structure approved by the mortgagee (such approval not to be unreasonably
withheld, conditioned or delayed).
A "One Commerce Square Listed Permitted Owner" means Vornado Realty Trust,
Boston Properties, Inc., Mack-Cali Realty Corporation, Liberty Property
Trust, CarrAmerica Realty Corporation, Cornerstone Properties, Inc., Crescent
Real Estate Equities, Inc., Equity Office Properties Trust, Cousins
Properties, Inc., Reckson Associates Realty Corporation or Brandywine Realty
Trust.
So long as no event of default will have occurred and be continuing, and
subject to the other requirements and conditions set forth herein which are
not contrary to the rights afforded by this paragraph, (i) either of the two
partners of the One Commerce Square Borrower which are indirectly owned by
Lazard, may, in accordance with the One Commerce Square Partnership
Agreement, purchase the partnership interests in the One Commerce Square
Borrower which are indirectly controlled by Thomas, and (ii) either of the
two partners of the One Commerce Square Borrower which
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are indirectly controlled by Thomas may, in accordance with the One Commerce
Square Partnership Agreement, purchase the partnership interests in the One
Commerce Square Borrower which are indirectly owned by Lazard, provided that
either such purchase referred to in clauses (i) and (ii) will have been
approved by the Rating Agencies, in their sole discretion, and the mortgagee
will have received a written confirmation from the Rating Agencies that there
will be no downgrade, qualification, or withdrawal of the then current
ratings of the Certificates in respect thereof.
So long as no event of default will have occurred and be continuing, and
subject to the other requirements and conditions set forth herein which are
not contrary to the rights afforded by this paragraph, each of the partners
of the One Commerce Square Borrower may assign their respective partnership
interests in the One Commerce Square Borrower to any person which controls or
is under common control with such partner, and each of the other indirect
owners of interests in the One Commerce Square Borrower may assign their
respective ownership interests in the One Commerce Square Borrower if, after
giving effect to the proposed transaction: (i) the One Commerce Square
Property will be owned directly by a single purpose entity, which at the time
of such transfer will be in compliance with the single purpose covenants
contained in the One Commerce Square Loan agreement, (ii) 50% of the
partnership interests in the One Commerce Square Borrower will be controlled
by either Lazard or by a person or persons which control or are under common
control with Lazard and 50% of such partnership interests will be controlled
by Thomas, and (iii) no event of default will occur as a result of such
transaction.
Notwithstanding anything to the contrary contained in the foregoing, in
the event of the death of Thomas, the interests in the One Commerce Square
Borrower then controlled by him may be controlled by a trust for the benefit
of his immediate family members, if the trustee thereof has been approved by
PIHLLC in accordance with the provisions of an equityholders agreement
entered into among the partners of the One Commerce Square Borrower and
certain other entities. Prior to the defeasance in full of the One Commerce
Square Loan, such equity holders agreement may not be modified without the
prior approval of the mortgagee.
Prior to any transfer as described in each of the preceding paragraphs
above, the proposed transferee is required to deliver to the mortgagee an
officer's certificate giving certain assurances to the general effect that
the transferee is not an employee benefit plan, or, in any event, the
transfer will not give rise to "prohibited transactions" under ERISA or
similar laws. In addition, prior to the closing of any transaction described
above, the One Commerce Square Borrower is required to deliver to the
mortgagee (i) an officer's certificate describing the proposed transaction
and stating that such transaction is permitted by the One Commerce Square
Loan documents, together with any documents upon which such officer's
certificate is based, and (ii) a legal opinion of counsel to the One Commerce
Square Borrower or the transferee selected by either of them (unless
reasonably disapproved by mortgagee), in form and substance consistent with
similar opinions then being required by the Rating Agencies, confirming,
among other things, that the assets of the One Commerce Square Borrower or
the transferee will not be substantively consolidated with the assets of
certain owners or controlling persons of the One Commerce Square Borrower in
a bankruptcy or similar proceeding.
So long as no event of default will have occurred and be continuing, and
subject to the other requirements and conditions set forth herein which are
not contrary to the rights afforded by this paragraph, transfers of limited
partnership interests in each of the limited partners of the One Commerce
Square Borrower which in the aggregate during the term of the One Commerce
Square Loan do not exceed 49% of the total limited partnership interests in
any such limited partner will be permitted without the consent of the
mortgagee; provided, however, that all rights to receive distributions with
respect to the Series B preferred capital contributions is required to be
held by, and the One Commerce Square Series B Preferred Equity Holder is
required to be, or must be wholly-owned, directly or indirectly by, a person
meeting the requirements of clause (ii) of the definition of One Commerce
Square Permitted Owner and not violating certain provisions relating to ERISA
and similar laws set forth in the One Commerce Square Loan agreement;
provided, however, that (i) clause (b) of the definition of One Commerce
Square Permitted Owner will be deemed to include a person (x) which has a
current net worth of at least $500 million and controls mortgages on office
buildings, which mortgages have a then
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current outstanding principal balance of at least $600 million and which
office buildings have a fair market value of at least $1 billion, and (y)
which is a One Commerce Square Listed Partner Loan Holder, and (ii) clause
(c) of the definition of One Commerce Square Permitted Owner will be deemed
to include any person which is a One Commerce Square Listed Partner Loan
Holder.
A "One Commerce Square Listed Partner Loan Holder" means any of Goldman
Sachs & Co., Lehman Brothers, Morgan Stanley/Dean Witter, Prudential
Securities, Donaldson, Lufkin & Jenrette, J.P. Morgan, Starwood Financial,
Capital Trust and the One Commerce Square Parent Lender.
Notwithstanding the foregoing, pledges of partnership interests by the
limited partners of the One Commerce Square Borrower, pledges of the stock of
the corporations which are the managing members of the general partners of
the One Commerce Square Borrower and pledges of the membership interests held
by the non-managing members of the general partners of the One Commerce
Square Borrower, to the One Commerce Square Partner Lender, or to the lender
of any subordinate mezzanine loan made to the limited partners of the One
Commerce Square Borrower which has been approved by the Rating Agencies, in
their sole discretion, and as to which a written confirmation from the Rating
Agencies has been obtained that there will be no downgrade, qualification, or
withdrawal of the then current ratings of the Certificates with respect
thereto, and any transfer of such partnership interests, stock or membership
interests upon or in lieu of foreclosure in respect of any such pledge, and
any subsequent transfer by such pledgee, will not be a default under the One
Commerce Square Loan, provided that at all times the lender's and agent's
interest in the One Commerce Square Partner Loan or any subordinate mezzanine
loan, or such partnership interests, stock and membership interests, will be
held directly by a person meeting the requirements of clause (ii) of the
definition of One Commerce Square Permitted Owner and not violating certain
provisions relating to ERISA and similar laws set forth in the One Commerce
Square Loan agreement; provided, however, that the proviso set forth in the
second preceding paragraph will also apply to this paragraph.
INSURANCE. The One Commerce Square Borrower is required to maintain, at
its sole cost and expense, the following insurance: (a) policies of insurance
against loss or damage by standard perils included within the classification
"All Risks of Physical Loss", including earthquake damage to the extent
commercially available at reasonable rates if it is customarily obtained for
similar properties in the vicinity, maintained in an amount equal to the then
full replacement cost of the improvements and equipment (without deduction
for physical depreciation), with deductibles no more than the greater of (x)
5% of the net operating income for the One Commerce Square Property
(inclusive of the Above Market IBM Rent Component) for the 12-month period
immediately preceding the closing date of the One Commerce Square Loan and
(y) $100,000; (b) flood insurance (if any part of the One Commerce Square
Property is located in an area identified by the Federal Emergency Management
Agency as an area federally designated a "100 year flood plain" and flood
insurance is generally available at commercially reasonable premiums and in
such amounts as generally are required by institutional lenders for similar
properties (or, if not so available from a private carrier, from the federal
government at commercially reasonable premiums to the extent available)); (c)
comprehensive general liability insurance, including broad form property
damage, blanket contractual and personal injuries coverages and containing
minimum limits per occurrence of $1,000,000 and in the aggregate of
$2,000,000 for any policy year as well as at least $20,000,000 excess and/or
umbrella liability insurance, and, at all times, at least $10,000,000 excess
and/or umbrella liability insurance will be available (such that, at all
times, such coverage will be maintained against which no claim will have been
asserted) and maintained for any and all claims; (d) rental loss and/or
business interruption insurance in an amount sufficient to avoid any co
insurance penalty, and equal to the greater of (i) estimated gross revenues
from the One Commerce Square Property for a period of at least two succeeding
years, and (ii) the projected operating expenses (including debt service)
needed to maintain and operate the One Commerce Square Property for a period
of at least the next two succeeding years; (e) insurance against loss or
damage from leakage of sprinkler systems and explosion of steam boilers, air
conditioning equipment and high pressure piping, machinery and equipment,
pressure vessels or similar apparatus (without exclusion for explosions) and
against loss of occupancy or use arising from any such breakdown, in such
amounts as are generally available at commercially reasonable premiums and
are generally required by institutional lenders for
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properties comparable to the One Commerce Square Property; (f) worker's
compensation insurance with respect to any employees of the One Commerce
Square Borrower, as and to the extent required by any governmental authority
or applicable law; (g) during any period of repair or restoration, builder's
"all risk" insurance in an amount not less than the full insurable value of
the One Commerce Square Property against such risks (including fire and
extended coverage and collapse of the improvements to agreed limits) as are
customarily obtained for such work by prudent owners in the locality where
the One Commerce Square Property is located; (h) coverage to compensate for
the cost of demolition and the increased cost of construction for the One
Commerce Square Property in an amount reasonably satisfactory to the
mortgagee; and (i) such other insurance as may from time to time be
reasonably required by the mortgagee. The One Commerce Square Loan requires
insurers to have claims paying abilities rated "AA" (or its equivalent) or
better by the Rating Agencies; provided that for so long as United States
Fidelity and Guaranty Corp., American Protection Insurance Company or The
Travellers Indemnity Company has a claims paying ability rating of not less
than its rating as of the closing of the One Commerce Square Loan, each such
company will be deemed an approved insurer.
CASUALTY AND CONDEMNATION. Following the occurrence of a casualty or
condemnation affecting the One Commerce Square Property, the One Commerce
Square Borrower, regardless of whether proceeds are available, is required in
a reasonably prompt manner to proceed to restore, repair, replace or rebuild
the affected One Commerce Square Property, to the extent practicable, to be
of at least equal value and of substantially the same character as prior to
such casualty or condemnation, all to be effected in accordance with the
terms of the One Commerce Square Loan documents applicable to alterations.
In the event of a casualty or condemnation at the One Commerce Square
Property that involves a loss of less than 30% of the original principal
amount of the One Commerce Square Loan, where access to the improvements is
not materially adversely affected by such casualty or condemnation and where
the mortgagee has received evidence satisfactory to it that no individual
lease affecting 150,000 rentable square feet or more, and no leases in the
aggregate affecting 150,000 rentable square feet or more, will be terminated
or canceled as a result of such casualty or condemnation (a "One Commerce
Square Minor Loss"), the mortgagee is required to permit the application of
the proceeds resulting therefrom to pay or to reimburse the One Commerce
Square Borrower for the cost of restoring, repairing, replacing or rebuilding
the One Commerce Square Property, in the manner described below, provided
that, no default or event of default has occurred and is then continuing and,
in the reasonable judgment of the mortgagee exercised in good faith: (i) the
One Commerce Square Property can be restored to an economic unit not less
valuable and not less useful than it was prior to such casualty or
condemnation, (ii) the restoration can be completed by the earliest to occur
of: (A) the 365th day following such casualty or condemnation, or, with a
written confirmation from the Rating Agencies that there will be no
downgrade, qualification, or withdrawal of the then current ratings of the
Certificates with respect thereto, such longer period as may reasonably be
required, (B) the 180th day prior to the One Commerce Square Tranche A Note
Maturity Date, and (C) with respect to a casualty only, the expiration of the
payment period on the rental loss insurance coverage in respect of such
casualty, and (iii) during the period of the restoration, the sum of (A)
income derived from the One Commerce Square Property, plus (B) proceeds of
rent loss insurance or business interruption insurance, if any, payable, plus
(C) any cash deposited with, or any One Commerce Square Credit Facility made
available to, the mortgagee, will equal or exceed 105% of the sum of (1)
operating expenses for the One Commerce Square Property and (2) the debt
service on the One Commerce Square Loan.
If any of the conditions set forth in the foregoing proviso is not
satisfied, then, unless the mortgagee elects otherwise, at its sole option,
the proceeds are required to be applied to the prepayment of the One Commerce
Square Loan without any prepayment premium or penalty (other than a yield
maintenance charge if an event of default has occurred and is continuing). In
the event of a casualty or condemnation which is not a One Commerce Square
Minor Loss, then the mortgagee will have the option, to be exercised by
notice to the One Commerce Square Borrower within 30 days after receipt of
the proceeds, to apply the net proceeds to the prepayment of the One Commerce
Square Loan without any prepayment premium or penalty (other than a yield
maintenance charge if an event of default has occurred and is continuing) or,
to reimburse the One Commerce Square Borrower for the cost of any restoration
in the manner set forth below.
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If the One Commerce Square Borrower is entitled to reimbursement out of
proceeds, such proceeds are required to be disbursed from time to time upon
the mortgagee being furnished with (i) such architect's certificates, waivers
of lien, contractor's sworn statements, title insurance endorsements, bonds,
plats of survey and such other evidences of cost, payment and performance as
are customary and reasonably obtainable by prudent property owners in the
locality in which the One Commerce Square Property is located and as the
mortgagee may reasonably require and approve, and (ii) all plans and
specifications for such restoration, such plans and specifications to be
approved by the mortgagee prior to commencement of any work (such approval
not to be unreasonably withheld or delayed). In addition, no payment made
prior to the final completion of the restoration is permitted to exceed 95%
of the value of the work performed from time to time; funds deposited by the
One Commerce Square Borrower with the mortgagee for any deficiency are
required to be disbursed prior to disbursement of such proceeds, and at all
times, the undisbursed balance of such proceeds remaining in the hands of the
mortgagee, together with funds deposited for that purpose or irrevocably
committed to the satisfaction of the mortgagee by or on behalf of the One
Commerce Square Borrower for that purpose, are required to be at least
sufficient in the reasonable judgment of the mortgagee exercised in good
faith to pay for the cost of completion of the restoration, free and clear of
all liens or claims for liens. Prior to any disbursement, the mortgagee is
required to receive evidence reasonably satisfactory to it of the estimated
cost of completion of the restoration, and the One Commerce Square Borrower
is required to deposit with the mortgagee eligible collateral in an amount
equal to the excess (if any) of such estimated cost of completion over the
net proceeds. Any surplus which may remain out of proceeds received pursuant
to a casualty is required to be paid to the One Commerce Square Borrower
after payment of such costs of restoration. Any surplus which may remain out
of proceeds received pursuant to a condemnation is required to be escrowed
with the mortgagee as security for the One Commerce Square Loan after payment
of such costs of restoration.
FINANCIAL REPORTING. The One Commerce Square Borrower is required to
furnish to the mortgagee within 85 days following the end of each fiscal
year, a complete copy of its annual financial statements, prepared in
accordance with GAAP, audited by a "Big Five" accounting firm or another
independent certified public accounting firm reasonably acceptable to the
mortgagee, including a balance sheet and statements of operations, all in
such form and such detail as the mortgagee may reasonably request; provided,
however, that the mortgagee has agreed that the form of the financial
statements supplied to the mortgagee by the prior owner of the One Commerce
Square Property is acceptable. Together with its annual financial statements,
the One Commerce Square Borrower is also required to furnish to the mortgagee
(A) an officer's certificate certifying as of the date thereof (i) whether,
to the One Commerce Square Borrower's knowledge, there exists a default or an
event of default, and if such default or event of default exists, the nature
thereof, the period of time it has existed and the action then being taken to
remedy the same, and (ii) that the rent roll attached thereto is true,
correct and complete in all material respects, and (B) an annual report, for
the most recently completed fiscal year, containing certain prescribed
information relating to occupancy levels, capital expenditures, leasing
commissions and tenant improvements.
In addition, the One Commerce Square Borrower is required to furnish to
the mortgagee on or before the 30th day after the end of each calendar month,
(i) monthly and year to date operating statements for such month, (ii) copies
of any notice from a tenant affecting 25,000 or more rentable square feet,
threatening default, alleging a default by landlord, requesting the
termination or modification of a lease or sublease or notifying the One
Commerce Square Borrower of the exercise or non-exercise of any option
provided for in such lease or sublease, or otherwise material with respect to
such One Commerce Square Property, (iii) certain prescribed information
relating to capital expenditures, leasing commissions and tenant
improvements, and (iv) a report setting forth the material terms of (x) any
new lease or lease renewal or new sublease or sublease renewal of which the
One Commerce Square Borrower has knowledge, and (y) any lease termination or
modification or sublease termination or modification of which the One
Commerce Square Borrower has knowledge, in each case affecting 25,000 or more
rentable square feet.
The One Commerce Square Borrower is also required to furnish to the
mortgagee, on or before the 40th day after the end of each fiscal quarter:
(i) quarterly and year-to-date financial statements prepared
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for such fiscal quarter, with a balance sheet and operating statement for
such quarter, (ii) a comparison of the budgeted income and expenses and the
actual income and expenses for such quarter and year-to-date for the One
Commerce Square Property, with an explanation of certain variances, (iii) an
occupancy report for such period, (iv) a current rent roll for the One
Commerce Square Property, and (v) a statement certifying that certain
representations and warranties contained in the One Commerce Square Loan
documents are true and complete as of the date of the certification.
ONE COMMERCE SQUARE PARTNER LOAN. Simultaneously with making the One
Commerce Square Loan by GSMC to the One Commerce Square Borrower, Prometheus
Mid-Atlantic Holding L.P. (the "One Commerce Square Partner Lender") made a
loan (the "One Commerce Square Partner Loan") to PPA and Prometheus
Investment Holding, L.P., ("PIHLP"; and together with PPA, the "One Commerce
Square Partner Borrowers"), having a principal balance as of the Cut-Off Date
of $9,250,000 and evidenced by a note issued by the One Commerce Square
Partner Borrowers. Each of the One Commerce Square Partner Borrowers is a
limited partner of the One Commerce Square Borrower. The One Commerce Square
Partner Loan is secured by a pledge of all of the partnership interests in
the One Commerce Square Borrower and certain other pledged collateral.
Any of (i) a default in the payment of principal, interest or any other
fees when due and such default continues for more than ten days (which period
is required to be extended to 45 days in certain circumstances including the
One Commerce Square Partner Lender being a party thereto) after notice of
such default, (ii) a bankruptcy or insolvency event that is not discharged,
stayed or dismissed within 60 days, or (iii) an event of default occurring
under the One Commerce Square Loan, constitutes a default under the One
Commerce Square Partner Loan and the One Commerce Square Partner Lender has
the right to accelerate the One Commerce Square Partner Loan and to foreclose
on the collateral securing the One Commerce Square Partner Loan.
The One Commerce Square Partner Loan bears interest at a rate per annum
equal to 17.50%, calculated for any period based on the actual number of days
elapsed and a 360-day year; provided, however, that the One Commerce Square
Partner Loan agreement permits the One Commerce Square Partner Borrowers to
defer payment of all interest in excess of a pay rate of 10% per annum. Such
deferred interest will accrue interest at the rate per annum of 17.50%. The
One Commerce Square Partner Loan is scheduled to mature on March 16, 2011.
The One Commerce Square Partner Loan can be prepaid in whole or in part on
any payment date without a yield maintenance charge or prepayment premium on
or after the seventh anniversary of the closing of the One Commerce Square
Partner Loan.
PREFERRED EQUITY INVESTMENTS BY PIHLP AND PPA. PIHLP and PPA (the "One
Commerce Square Series A Preferred Equity Holders") have each acquired a 50%
Series A preferred equity interest in the One Commerce Square Borrower upon
their capital contribution of $4,625,000 each. In addition, PIHLP (the "One
Commerce Square Series B Preferred Equity Holder", and together with the One
Commerce Square Series A Preferred Equity Holders, the "One Commerce Square
Preferred Equity Holders") has acquired a 100% Series B preferred equity
interest in the One Commerce Square Borrower upon its capital contribution of
$6,750,000.
The One Commerce Square Preferred Equity Holders are entitled to receive
certain preferred distributions with respect to distributions by the One
Commerce Square Borrower. As described in "--Cash Management; Lockbox" above,
no monthly distribution to PIHLP is permitted to be made until certain
required payments under the One Commerce Loan agreement have been made. After
payment of such amounts, the One Commerce Square Series A Preferred Equity
Holders are entitled to receive pro rata distributions equal to a cumulative
and compounded annualized return of 10% on each of their Series A preferred
capital contribution. After payment to the One Commerce Square Series A
Preferred Equity Holders, the One Commerce Square Series B Preferred Equity
Holder is entitled to receive an amount equal to a cumulative and compounded
annualized return of 10% on its Series B preferred capital contribution.
Under the One Commerce Square Borrower's Agreement of Limited Partnership
(the "One Commerce Square Partnership Agreement"), in the event the One
Commerce Square Borrower fails to pay the One Commerce Square Series B
Preferred Equity Holder the return described in the preceding
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sentence within ten days following such payment date, the One Commerce
Square Series B Preferred Equity Holder will have the right, in its sole
discretion, subject to the One Commerce Square Loan agreement, to (i)
terminate the One Commerce Square Management Agreement and select a new
manager (provided that such right will only be exercisable after March 16,
2003), and (ii) cause PIHLLC to become the managing general partner of the
One Commerce Square Borrower. For so long as the One Commerce Square Loan is
in effect, the rights of the One Commerce Square Series B Preferred Equity
Holder described in clause (i) and (ii) will not be amended in any way
without the prior consent of mortgagee and the Rating Agencies, which consent
may be withheld in their sole discretion. Other than the increase in the
percentage of the cash flow used to calculate the monthly return of capital
and the right to terminate the manager as described above, the One Commerce
Square Preferred Equity Holders have no further remedies under the One
Commerce Square Partnership Agreement in the event of nonpayment of their
monthly preferred yield and return of capital.
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Graphics Omitted: Photographs of Marriott Desert Springs
[Grande Loan II Logo]
<PAGE>
MARRIOTT DESERT SPRINGS: THE BORROWER; THE PROPERTY
THE LOAN. The Marriott Desert Springs Loan had a principal balance as of
the Cut-Off Date of approximately $102,418,958. It is secured by a first
priority deed of trust lien encumbering the fee and leasehold interests in
the full service resort hotel located in Palm Desert, California, known as
Marriott's Desert Springs Resort and Spa (the "Marriott Desert Springs
Property"). The Marriott Desert Springs Loan was originated by GMACCM, on
behalf of GSMC, on November 25, 1997.
THE BORROWER. DS Hotel LLC (the "Marriott Desert Springs Borrower") is a
special purpose Delaware limited liability company, formed solely for the
purpose of owning, developing, encumbering, operating, encumbering and
managing the Marriott Desert Springs Property. The Marriott Desert Springs
Borrower has no material assets other than the Marriott Desert Springs
Property and related interests. The sole equity owner of the Marriott Desert
Springs Borrower is Marriott DSM LLC ("Marriott DSM"), a special purpose
Delaware limited liability company formed solely for the purpose of serving
as a member of the Marriott Desert Springs Borrower and obtaining the
Marriott Desert Springs Parent Loan. The sole beneficial owner of Marriott
DSM is Desert Springs Marriott Limited Partnership ("DSMLP"), a Delaware
limited partnership. The sole general partner in DSMLP is Marriott Desert
Springs Corporation ("MDSC"), a Delaware corporation, the sole purpose of
which is serving as the general partner in DSMLP and serving as a member of
MDSM Finance LLC ("MDSM Finance"), a special purpose Delaware limited
liability company formed solely for the purpose of making the MDSM-DSMLP
Loan. MDSC is an indirect wholly-owned subsidiary of Host Marriott
Corporation, a Delaware corporation ("Host Marriott"). Marriott Hotel
Services, Inc., which is the property manager for the Marriott Desert Springs
Property (the "Marriott Desert Springs Manager"), is a wholly-owned
subsidiary of Marriott International, Inc. ("MII") and is not affiliated with
Host Marriott, the Marriott Desert Springs Borrower DSMLP, MDSC or MDSM
Finance.
SECURITY. The Marriott Desert Springs Loan is a non-recourse loan, secured
only by the fee and leasehold interests of the Marriott Desert Springs
Borrower in the Marriott Desert Springs Property and certain other collateral
relating thereto (including assignments of leases and rents, an assignment of
the Marriott Desert Springs Management Agreement, and an assignment of the
funds in certain accounts). Subject to certain limited exceptions, neither
the Marriott Desert Springs Borrower nor any of its affiliates is personally
liable for payment of the Marriott Desert Springs Loan. The Marriott Desert
Springs Borrower has represented that it owns good and marketable fee simple
or leasehold title, as applicable, to the Marriott Desert Springs Property
free and clear of all liens other than encumbrances described in the
applicable title insurance policy and other encumbrances permitted by the
mortgagee under the Marriott Desert Springs Loan documents (the "Marriott
Desert Springs Permitted Encumbrances"). The title insurance policy issued
upon the origination of the Marriott Desert Springs Loan insures that the
deed of trust securing the Marriott Desert Springs Loan constitutes a valid
and enforceable first lien on the Marriott Desert Springs Property, subject
to certain exceptions and exclusions from coverage set forth in the policy.
THE PROPERTY. The Marriott Desert Springs Property is comprised of the
Marriott Desert Spring Borrower's fee simple interest in approximately 183
acres of land improved with an 884-room luxury-class resort hotel and golf
course and leasehold interest in an adjacent approximately 96 acre parcel
improved with a second 18-hole golf course (the "Valley Golf Course"). The
Marriott Desert Springs Property was completed in 1987 and contains two golf
courses, five full-service restaurants, two snack shops, an atrium lounge, a
night club, several retail shops, an approximately 30,000 square foot spa,
over 49,000 square feet of meeting space, five swimming pools, 20 tennis
courts, approximately 1,482 parking spaces and other resort-oriented
facilities.
The interest of the Marriott Desert Springs Borrower in the Valley Golf
Course consists of a ground leasehold interest created under a lease dated
April 24, 1987, between Marriott Desert Springs Development Corporation, as
lessor, and DSMLP, as lessee (as such lease has been amended, the "Marriott
Desert Springs Ground Lease"). DSMLP assigned its interest in the Marriott
Desert Springs Ground Lease to Marriott DSM, which assigned its interest
therein to the Marriott Desert Springs Borrower. The initial term of the
Marriott Desert Springs Ground Lease expires on December 31, 2011,
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and the lessee has five renewal options of ten years each. The annual rent
under the Marriott Desert Springs Ground Lease is $100,000 and the Marriott
Desert Springs Borrower is also responsible for payment of all real estate
taxes, assessments and similar charges relating to the property leased
thereunder.
OPERATING AND OCCUPANCY HISTORY. The following table shows certain
information regarding the operating history, historical average occupancy,
ADR and RevPAR for the Marriott Desert Springs Property:
<TABLE>
<CAPTION>
UNDERWRITTEN
1995 1996 1997 NET CASH FLOW
------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
GROSS REVENUE........... $85,397,807 $97,898,761 $103,321,476 $103,319,904
TOTAL EXPENSES.......... 67,037,075 76,854,233 81,623,284 81,819,904
------------- ------------- -------------- ---------------
NET CASH FLOW........... $18,360,732 $21,044,528 $ 21,698,192 $ 21,500,000
============= ============= ============== ===============
Percentage of
Occupancy.............. 68.9% 71.4% 73.0% 73.0%
ADR per Occupied Room .. $150.34 $158.15 $169.55 $169.07
RevPAR.................. $103.58 $112.92 $123.77 $123.42
</TABLE>
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APPRAISAL. An updated appraisal prepared by Hospitality Valuation
Services, Inc., dated as of November 14, 1997, determined a value for the
Marriott Desert Springs Property of approximately $237,000,000, resulting in
a Cut-Off Date LTV of approximately 43.2%. The Marriott Desert Springs
Property appraisal was prepared in accordance with the Uniform Standards of
Professional Appraisal Practice. See "Risk Factors--The Mortgage
Loans--Limitations on Appraisals" herein.
SEISMIC REPORT. A structural and seismic risk assessment of the Marriott
Desert Springs Property was performed in March 1996 by a third-party
structural firm. The seismic report indicated a PML rating and risk rating
for each of the nine buildings that comprise the Marriott Desert Springs
Property. For one of the ten buildings, the PML is 15% and the risk rating is
"Moderately Low." For six of the ten buildings, the PML is 20% and the risk
rating is "Moderately Low." For the other three buildings, the PML is 25% and
the risk rating is "Moderate." The Marriott Desert Springs Borrower has
obtained earthquake insurance coverage based on the PML for hotels located in
the region. See "Risk Factors--The Mortgage Loans--Availability of
Earthquake, Flood and Other Insurance" herein.
ENGINEERING REPORT. A Property Condition Report on the Marriott Desert
Springs Property was completed prior to origination of the Marriott Desert
Springs Loan. The Property Condition Report concluded that the Marriott
Desert Springs Property was generally in good physical condition but noted
certain items of deferred maintenance in the aggregate amount of $96,850
which are included in the Marriott Desert Springs Borrower's 1998 budget. In
addition, based on the engineering recommendation, a backup water chiller
system will be installed, to be funded from the Chiller Work Reserve.
ENVIRONMENTAL ASSESSMENT. A Phase I environmental site assessment dated
November 22, 1996, and an update report dated November 5, 1997, were
completed by a third-party environmental firm. The reports did not reveal any
environmental liability that the Seller believes would have a material
adverse impact on the Marriott Desert Springs Borrower's business, assets or
results of operations taken as a whole. Nevertheless, there can be no
assurance that all environmental conditions and risks were identified in such
reports. See "Risk Factors--The Mortgage Loans--Environmental Law
Considerations" herein.
PROPERTY MANAGEMENT. The Marriott Desert Springs Property is managed by
the Marriott Desert Springs Manager pursuant to a management agreement (the
"Marriott Desert Springs Management Agreement"). The Marriott Desert Springs
Manager manages or franchises more than 300 full-service hotels containing
more than 120,000 rooms, including the Marriott Desert Springs Property, and
employs over 200,000 persons in full-service and limited-service property
management. The Marriott Desert Springs Manager is responsible for the
management and operation of the Marriott Desert Springs Property in
accordance with standards comparable to those of full-service hotels in the
Marriott hotel system. The Marriott Desert Springs Borrower is responsible
for payment of the hotel's allocable share of the Marriott Desert Springs
Manager's costs for certain services provided to full-service hotels in the
Marriott chain, including national sales office services, the national
reservations system, and central advertising and promotion. Under the
Marriott Desert Springs Management Agreement, the Marriott Desert Springs
Manager is entitled to a base management fee equal to 3% of gross revenues of
the Marriott Desert Springs Property, and an incentive management fee (the
"Incentive Management Fee") equal to the sum of (i) the first $1,800,000 of
Marriott Desert Springs Operating Profit in excess of the Marriott Desert
Springs Owner's Priority, and (ii) 25% of the Marriott Desert Springs
Operating Profit in excess of the Marriott Desert Springs Owner's Priority
plus the amount described in clause (i). The term of the Marriott Desert
Springs Management Agreement expires on December 31, 2022, and is
automatically renewed for four successive periods of ten fiscal years each,
unless the Marriott Desert Springs Manager elects not to renew.
Pursuant to an agreement among the mortgagee, the Marriott Desert Springs
Borrower and the Marriott Desert Springs Manager (the "Marriott Desert
Springs Consent of Manager"), the Marriott Desert Springs Manager has agreed,
among other things, that (i) the Marriott Desert Springs Borrower may
terminate the Marriott Desert Springs Management Agreement, whether or not a
default has occurred under the Marriott Desert Springs Loan, if the Marriott
Desert Springs Operating Profit during any two of three consecutive fiscal
years is less than $15,000,000, subject to the right of the Marriott
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Desert Springs Manager to avoid such termination and pay an amount equal to
the difference between $15,000,000 and the Marriott Desert Springs Operating
Profit for each of such two fiscal years into a special reserve account (the
"Manager Deficit Contribution Account"); (ii) upon the occurrence and
continuation of an event of default under the Marriott Desert Springs Loan,
the mortgagee may exercise all rights of the Marriott Desert Springs Borrower
to enforce, compromise, extend or modify the Marriott Desert Springs
Management Agreement, and following foreclosure of the Marriott Desert
Springs Property, the mortgagee may terminate the Marriott Desert Springs
Management Agreement, (iii) it may not assign the Marriott Desert Springs
Management Agreement without the mortgagee's consent, which may not be
withheld if the assignment is to (x) MII or a wholly-owned direct or indirect
subsidiary of MII, or (y) another entity with respect to which, among other
things, written confirmation has been received from the Rating Agencies that
such assignment will not result in the withdrawal, qualification or reduction
of the then existing ratings of the Certificates, (iv) it will not terminate
(except in accordance with its terms), or modify in any material respect so
as to have a material adverse effect, the Marriott Desert Springs Management
Agreement, without the consent of the mortgagee and written confirmation from
the Rating Agencies that such action will not result in the withdrawal,
qualification or reduction of the then existing ratings of the Certificates,
(v) it will not terminate the Marriott Desert Springs Management Agreement as
a result of a default thereunder without giving the mortgagee prior notice
and the right to cure such default, (vi) its liens, security interests and
rights to environmental indemnity (other than with respect to the base
management fees) under the Marriott Desert Springs Management Agreement are
subordinate to the liens created by the Marriott Desert Springs Loan, (vii)
all Incentive Management Fees are subordinated to all payments of Marriott
Desert Springs Monthly Debt Service Payments under the Marriott Desert
Springs Loan, provided that the Marriott Desert Springs Manager is entitled
to receive payment thereof from the Excess Cash Flow Escrow Account as
described in "--Marriott Desert Springs: The Loan--Reserves" below until (and
in certain circumstances following) an event of default under the Marriott
Desert Springs Loan, and (viii) in certain circumstances, if, after an event
of default, the Marriott Desert Springs Property is conveyed to the mortgagee
or a third party, such person will have the right to terminate the Marriott
Desert Springs Management Agreement. The Marriott Desert Springs Manager will
have the option to purchase the Marriott Desert Springs Loan upon notice from
the mortgagee of its intention to initiate foreclosure proceedings.
It is an event of default under the Marriott Desert Springs Loan (subject
to certain notice and cure periods) if, except as permitted as described
above, (a) the Marriott Desert Springs Borrower cancels, releases, terminates
or surrenders the Marriott Desert Springs Management Agreement or permits any
material adverse changes thereto without the mortgagee's prior written
consent, or (b) certain insolvency events affecting the Marriott Desert
Springs Manager occur, except in each case, if before the date the Marriott
Desert Springs Manager ceases to be the manager of the Marriott Desert
Springs Property the Marriott Desert Springs Borrower causes the Marriott
Desert Springs Property to come under management by (i) MII or a wholly-owned
subsidiary of MII, or (ii) a nationally recognized hotel operator acceptable
to the mortgagee, in the exercise of its reasonable discretion, operating the
Marriott Desert Springs Property as part of a comparable nationally
recognized hotel system acceptable to the mortgagee and as to which the
Marriott Desert Springs Borrower must have received written confirmation from
the Rating Agencies that such replacement manager, in and of itself, will not
result in the withdrawal, qualification or reduction of any rating then
assigned to any outstanding Certificates (a "Marriott Desert Springs
Acceptable Manager").
MARRIOTT DESERT SPRINGS: THE LOAN
PAYMENT TERMS. The Marriott Desert Springs Loan bears interest at a fixed
rate per annum equal to 7.80% (the "Marriott Desert Springs Initial Interest
Rate") through and including June 10, 2010. From and after June 11, 2010 (the
"Marriott Desert Springs Anticipated Repayment Date"), the Marriott Desert
Springs Loan accrues interest at a fixed rate per annum equal to 9.80% (the
"Marriott Desert Springs Revised Interest Rate"). The Marriott Desert Springs
Loan matures on December 11, 2022 (the "Marriott Desert Springs Maturity
Date"). As described below, if the Marriott Desert Springs Borrower does not
prepay the Marriott Desert Springs Loan on the Marriott Desert Springs
Anticipated Repayment Date, the Marriott Desert Springs Borrower will be
required to pay interest at the Marriott Desert Springs Initial
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Interest Rate (together with principal, as described below), and interest
accrued equal to the excess of the Marriott Desert Springs Revised Interest
Rate over the Marriott Desert Springs Initial Interest Rate will be deferred
and added to the outstanding indebtedness under the Marriott Desert Springs
Loan, and will, to the extent permitted by applicable law, earn interest at
the Marriott Desert Springs Revised Interest Rate (such accrued and deferred
interest and interest thereon (which is deferred), the "Marriott Desert
Springs Excess Interest"). Interest on the Marriott Desert Springs Loan is
calculated based on the actual number of days elapsed and a 360-day year.
The Marriott Desert Springs Loan requires monthly payments (the "Marriott
Desert Springs Monthly Debt Service Payment Amount") of principal and
interest of approximately $788,726 (based on a 25-year amortization schedule
and the Marriott Desert Springs Initial Interest Rate). Payment of the
balance of the principal, if any, together with all accrued and unpaid
interest, is required on the Marriott Desert Springs Maturity Date. Each
Marriott Desert Springs Monthly Debt Service Payment Amount is due and
payable on the 11th day of each calendar month or, if such day is not a
business day, then the immediately preceding business day (a "Marriott Desert
Springs Due Date"). Commencing on the first Marriott Desert Springs Due Date
following the Marriott Desert Springs Anticipated Repayment Date and on each
Marriott Desert Springs Due Date thereafter, in addition to the Marriott
Desert Springs Monthly Debt Service Payment Amount, the Marriott Desert
Springs Borrower is required to apply 100% of the Marriott Desert Springs
Excess Cash Flow for the month preceding the month in which the Marriott
Desert Springs Due Date occurs in the following order of priority (a) to the
outstanding principal balance until the Marriott Desert Springs Loan has been
paid in full and (b) to the Marriott Desert Springs Excess Interest.
"Marriott Desert Springs Excess Cash Flow" means the amounts held as
collected funds in the Marriott Desert Springs Cash Collateral Account after
the application of funds (a) if required, to fund the Marriott Desert Springs
Tax and Insurance Reserve Account as described in "--Cash Management;
Lockbox" below, (b) if required, to fund the Marriott Desert Springs FF&E
Reserve Account as described in "--Cash Management; Lockbox" below, (c) to
pay the Marriott Desert Springs Monthly Debt Service Payment Amount and any
other debt due, (d) to fund necessary capital expenditures approved by the
mortgagee, (e) to fund the Marriott Desert Springs Debt Service Reserve
Account as described in "--Reserves" below, (f) to fund discretionary capital
expenditures approved by the mortgagee, (g) to pay to the Marriott Desert
Springs Borrower its administrative expenses (including reasonable
allocations of internal costs) approved by the mortgagee, (h) to pay to the
Marriott Desert Springs Borrower, for distribution to Marriott DSM,
administrative expenses of Marriott DSM (including reasonable allocations of
internal costs) approved by the mortgagee, (i) to pay to the Marriott Desert
Springs Borrower, for distribution to Marriott DSM for further distribution
to DSMLP, administrative expenses of DSMLP (including reasonable allocations
of internal costs) approved by the mortgagee, (j) to fund the Marriott Desert
Springs Debt Service Reserve Account, until such account contains funds equal
to 600% of the Marriott Desert Springs Monthly Debt Service Payment Amount,
and (k) if Marriott Desert Springs Operating Profit for such fiscal year
exceeds the Marriott Desert Springs Owner's Priority for such fiscal year, to
fund the Management Incentive Reserve Account as described in "--Reserves"
below. The scheduled principal balance of the Marriott Desert Springs Loan as
of the Marriott Desert Springs Anticipated Repayment Date will be
approximately $75,085,499.
After the occurrence and during the continuance of an event of default
under the Marriott Desert Springs Loan, to the extent permitted by applicable
law, the entire outstanding principal balance of the Marriott Desert Springs
Loan along with due and unpaid interest thereon will bear interest at a per
annum default rate equal to the lesser of (a) the maximum rate permitted by
applicable law and (b) 2% in excess of the Marriott Desert Springs Initial
Interest Rate or the Marriott Desert Springs Revised Interest Rate, as
applicable, but in no event less than the "prime rate" as published from time
to time in The Wall Street Journal.
PREPAYMENT. Voluntary prepayment is prohibited under the Marriott Desert
Springs Loan prior to the Marriott Desert Springs Anticipated Repayment Date
(subject to defeasance rights afforded to the Marriott Desert Springs
Borrower), except in connection with certain casualty or condemnation events.
From and after the Marriott Desert Springs Anticipated Repayment Date, the
Marriott Desert Springs Loan may be voluntarily prepaid in whole or in part
on any Marriott Desert Springs Due Date without defeasance and without
payment of a yield maintenance charge or prepayment premium.
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If all or any part of the principal amount of the Marriott Desert Springs
Loan is prepaid upon an acceleration of the Marriott Desert Springs Loan
following the occurrence of an event of default under the Marriott Desert
Springs Loan prior to the Marriott Desert Springs Anticipated Repayment Date,
the Marriott Desert Springs Borrower will be required to make a yield
maintenance payment in an amount equal to the excess, if any, of (i) the sum
of (A) the aggregate respective present values of all remaining scheduled
interest payments in respect of the Marriott Desert Springs Loan (or the
portion of all such interest payments corresponding to the portion of the
principal of the Marriott Desert Springs Loan to be prepaid upon
acceleration) for the period from the date of such prepayment to (and
including) the Marriott Desert Springs Anticipated Repayment Date, discounted
monthly at a rate equal to a specified treasury constant yield and based on a
360-day year of twelve 30-day months and (B) the aggregate respective present
values of all scheduled principal payments in respect of the Marriott Desert
Springs Loan (or the then unpaid portion thereof to be prepaid upon
acceleration) assuming that the entire outstanding scheduled principal amount
of the Marriott Desert Springs Loan is paid in full on the Marriott Desert
Springs Anticipated Repayment Date, discounted monthly at a rate equal to the
specified treasury constant yield and based on a 360-day year of twelve
30-day months over (ii) the then current outstanding principal balance of the
Marriott Desert Springs Loan (or the then unpaid portion thereof to be
prepaid upon acceleration).
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of the Marriott Desert Springs
Property under the Marriott Desert Springs Loan, the mortgagee will be
entitled, at its sole option, to apply such proceeds to prepay the Marriott
Desert Springs Loan, as described in "--Casualty and Condemnation" below. No
yield maintenance payment or prepayment premium or penalty will be payable
upon any mandatory prepayment of the Marriott Desert Springs Loan in
connection with a casualty or condemnation unless an event of default under
the Marriott Desert Springs Loan has occurred and is continuing (other than
an event of default caused solely by the casualty or condemnation in
question), in which case the Marriott Desert Springs Borrower will be
required to pay a yield maintenance payment calculated in the manner
described above.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL--DEFEASANCE. The Marriott
Desert Springs Borrower is permitted on any date on or after the second
anniversary of the Closing Date to defease all (but not a portion) of the
Marriott Desert Springs Loan with U.S. Treasury obligations, provided that,
among other conditions, the Marriott Desert Springs Borrower gives the
mortgagee at least thirty days' prior written notice of the date of such
defeasance (the "Marriott Desert Springs Defeasance Date"), no event of
default will exist on the Marriott Desert Springs Defeasance Date or on the
date notice is given (and if such Marriott Desert Springs Defeasance Date is
not a Marriott Desert Springs Due Date, the Marriott Desert Springs
Defeasance Deposit is required to take into account the interest that would
have accrued on the Marriott Desert Springs Loan to but not including the
next Marriott Desert Springs Due Date), and provided further that the
Marriott Desert Springs Borrower pays on the Marriott Desert Springs
Defeasance Date (i) all accrued and unpaid interest on the Marriott Desert
Springs Loan to but not including the Marriott Desert Springs Defeasance
Date, (ii) all other sums, not including scheduled interest or principal
payments, then due under the Marriott Desert Springs Loan and the related
loan documents, (iii) the Marriott Desert Springs Defeasance Deposit and (iv)
all reasonable costs and expenses of the mortgagee incurred in connection
with the defeasance. In addition, the Marriott Desert Springs Borrower will
be required to deliver to the mortgagee, among other things: (a) a security
agreement granting the mortgagee a first priority lien on the Marriott Desert
Springs Defeasance Deposit and the U.S. Treasury obligations purchased with
the Marriott Desert Springs Defeasance Deposit, (b) an opinion of counsel for
the Marriott Desert Springs Borrower in form and substance satisfactory to
the mortgagee stating, among other things, that the Trustee has a first
priority perfected security interest in the Marriott Desert Springs
Defeasance Deposit and the U.S. Treasury obligations purchased with the
Marriott Desert Springs Defeasance Deposit, (c) a confirmation, in form and
substance reasonably satisfactory to the mortgagee, from a "Big Six"
independent certified public accounting firm, that the Marriott Desert
Springs Defeasance Deposit is sufficient to pay all scheduled payments due
from the Marriott Desert Springs Borrower under the Marriott Desert Springs
Loan in connection with the proposed defeasance in a timely manner, (d) an
officer's certificate certifying that the requirements for
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defeasance set forth in the Marriott Desert Springs Loan agreement have been
met, and (e) written confirmation from the Rating Agencies that such
defeasance will not result, in and of itself, in a downgrade, qualification
or withdrawal of the then current ratings of the Certificates.
"Marriott Desert Springs Defeasance Deposit" means an amount in cash equal
to the sum of (i) all costs and expenses (including, without limitation, the
purchase price) incurred or to be incurred in the purchase of noncallable
U.S. Treasury obligations providing payments on or prior to, but as close as
possible to, all successive Marriott Desert Springs Due Dates after the
Marriott Desert Springs Defeasance Date and in amounts equal to the scheduled
interest and principal payments under the Marriott Desert Springs Loan due on
such dates (assuming that the principal portion of such payment on the
Marriott Desert Springs Anticipated Repayment Date will be deemed to include
the entire unpaid principal balance of the Marriott Desert Springs Loan as of
such date), and (ii) any revenue, documentary stamp or intangible taxes in
connection with the transfer of the note.
Upon receipt of the Marriott Desert Springs Defeasance Deposit, the
mortgagee, using the Marriott Desert Springs Defeasance Deposit, will be
required to purchase noncallable U.S. Treasury obligations in accordance with
the Marriott Desert Springs Borrower's express instructions and such U.S.
Treasury obligations will serve as the sole collateral for the payments of
the amounts due under the Marriott Desert Springs Loan. Upon a deposit of
such U.S. Treasury obligations, the Marriott Desert Springs Borrower is
required to assign all obligations, rights and duties under the Marriott
Desert Springs Loan and the pledged U.S. Treasury obligations to an entity
designated by the mortgagee, which will assume the obligations under the
Marriott Desert Springs Loan, and the Marriott Desert Springs Borrower will
be relieved of all obligations thereunder.
In connection with the defeasance of the Marriott Desert Springs Loan, the
Marriott Desert Springs Borrower will be permitted to obtain the release of
the deed of trust lien encumbering the Marriott Desert Springs Property and
all related collateral.
OTHER FINANCING. The Marriott Desert Springs Borrower is not permitted to
incur any additional indebtedness other than: (a) non-capital equipment
leases entered into in the ordinary course of business, not to exceed
required annual payments of $1,100,000 in the aggregate during any calendar
year, of which no more than $600,000 in the aggregate during any calendar
year may come from sources other than the Marriott Desert Springs FF&E
Reserve Account, (b) loans made by MII, an affiliate thereof or an affiliate
of the Marriott Desert Springs Borrower for the purchase of FF&E upgrades,
not exceeding $5,000,000, provided that (i) the lender thereunder will not be
permitted to assert any remedies with respect thereto so long as the Marriott
Desert Springs Loan is outstanding, (ii) no amounts will be paid under such
loans if there is a default under the Marriott Desert Springs Loan or the
Marriott Desert Springs Parent Loan, and (iii) such loans will only be
repayable from the Marriott Desert Springs FF&E Reserve Account and amounts
thereunder will accrue and not be currently payable to the extent that
revenues from the Marriott Desert Springs Property are insufficient to pay
amounts owed to third parties from the Marriott Desert Springs FF&E Reserve
Account, and (c) unsecured trade payables incurred in the ordinary course of
business customarily paid by the Marriott Desert Springs Borrower within 60
days of incurrence and in fact not more than 60 days outstanding. As
described in "--The Marriott Desert Springs Parent Loan" below, a loan was
made in the original principal amount of $20,000,000 to Marriott DSM;
Marriott DSM is entitled to borrow up to an additional $2,000,000 in
subordinated unsecured debt incurred in the ordinary course of business for
purposes related to the Marriott Desert Springs Property, provided that
certain conditions set forth in the Marriott Desert Springs Loan documents
are met. In addition, as described in "--The Marriott Desert Springs Parent
Loan" below, a loan was made in the original principal amount of $59,727,272
by MDSM Finance to DSMLP (the "MDSM-DSMLP Loan"), which is subordinate to the
Marriott Desert Springs Loan and the Marriott Desert Springs Parent Loan and
is subject to certain limitations on the exercise of remedies.
ALTERATIONS. Except upon compliance with certain conditions set forth in
the Marriott Desert Springs Loan documents, the Marriott Desert Springs
Borrower is prohibited from making or permitting any demolition, alteration,
installation, improvement, expansion or reduction of or to the Marriott
Desert Springs Property or any part thereof.
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RESERVES. Pursuant to the terms of the Marriott Desert Springs Loan, the
following reserves are required to be established: (i) a reserve relating to
the installation of a backup chilled water system for the Marriott Desert
Springs Property (the "Chiller Work Reserve"), funded at the initial closing
of the Marriott Desert Springs Loan in the amount of $1,500,000, and to be
funded with an additional $500,000 as set forth in "--Cash Management;
Lockbox" below; (ii) a tax and insurance escrow reserve (the "Marriott Desert
Springs Tax and Insurance Reserve Account") to be funded only if an
Additional Escrow Event occurs as described in "--Cash Management; Lockbox"
below on each Marriott Desert Springs Due Date in an amount such that the
balance in such escrow is equal to the product of the amount of the next tax
payment or insurance premium, as applicable, times a fraction, the numerator
of which is the number of whole Marriott Desert Springs Accounting Periods
since the date of the last such payment and the denominator of which is the
number of whole Marriott Desert Springs Accounting Periods from the date of
the last such payment to the date of the next such payment; (iii) a capital
improvements reserve account (the "Marriott Desert Springs FF&E Reserve
Account") funded at the initial closing of the Marriott Desert Springs Loan
in an amount equal to $1,489,163, and only if an Additional Escrow Event has
occurred and is continuing, to be funded during each Marriott Desert Springs
Accounting Period in an amount equal to 5.5% of the gross revenues of the
Marriott Desert Springs Property for such fiscal year; (iv) a debt service
reserve account (the "Marriott Desert Springs Loan Debt Service Reserve
Account") funded at the initial closing of the Marriott Desert Springs Loan
in an amount equal to $4,732,357 and to be funded on each Marriott Desert
Springs Due Date as described below; (v) a management incentive reserve
account (the "Management Incentive Reserve Account") to be funded from and
after the Marriott Desert Springs Anticipated Repayment Date, provided the
Marriott Desert Springs Operating Profit exceeds the Marriott Desert Springs
Owner's Priority for such fiscal year, in the amount of the lesser of (i) the
excess of the Marriott Desert Springs Operating Profit over the Marriott
Desert Springs Owner's Priority and (ii) $1,800,000; (vi) an excess cash flow
escrow account for each fiscal year (each an "Excess Cash Flow Escrow
Account") to be funded prior to the Marriott Desert Springs Anticipated
Repayment Date in the priorities set forth in "--Cash Management; Lockbox"
below; and (vii) the Manager Deficit Contribution Account into which the
Marriott Desert Springs Manager may pay the amount described in "The Marriott
Desert Springs Borrower and Property--Property Management" above.
"Marriott Desert Springs Operating Profit" means, with respect to any
fiscal year, gross revenues and receipts derived from the Marriott Desert
Springs Property less certain management expenses incurred by the Marriott
Desert Springs Manager, calculated in accordance with the Marriott Desert
Springs Loan documents. "Marriott Desert Springs Owner's Priority" means,
with respect to any fiscal year, the sum of an amount equal to 10.75% of
certain additional funds invested by the Marriott Desert Springs Borrower in
the Marriott Desert Springs Property, plus the greater of (x) $21,500,000 or
(y) the annual scheduled debt service on the Marriott Desert Springs Loan,
the Marriott Desert Springs Parent Loan and $37,000,000 of the MDSM-DSMLP
Loan.
On each Marriott Desert Springs Due Date, if the Marriott Desert Springs
Debt Service Reserve Account contains less than 600% of the Marriott Desert
Springs Monthly Debt Service Payment Amount on such date, such account is
required to be funded in the priority set forth in "--Cash Management;
Lockbox" below in an amount equal to the Marriott Desert Springs Monthly Debt
Service Amount plus, for any Marriott Desert Springs Due Date occurring
during Marriott Desert Springs Accounting Periods two through five, an
additional amount equal to the sum of (i) 50% of the Marriott Desert Springs
Monthly Debt Service Payment Amount and (ii) such additional amount as may be
required to cause the Marriott Desert Springs Debt Service Reserve Account to
contain the following percentages of the Marriott Desert Springs Monthly Debt
Service Payment amount as of the end of each of the following Marriott Desert
Springs Accounting Periods (on a cumulative basis): second accounting period,
150%; third accounting period, 300%; fourth accounting period, 450%; fifth
accounting period, 600%; provided, however, that the maximum amount to be
retained in the Marriott Desert Springs Loan Debt Service Reserve Account
will be 600% of the Marriott Desert Springs Monthly Debt Service Payment
Amount. If the Marriott Desert Springs Debt Service Reserve Account contains
less than 600% of the Marriott Desert Springs Monthly Debt Service Payment
Amount on any Marriott Desert Springs Due Date after the funding referred to
in the preceding sentence, such account is then required to be funded on such
date in the priority set forth
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in "--Cash Management; Lockbox" below in an amount such that the account has
funds equal to 600% of the Marriott Desert Springs Monthly Debt Service
Payment Amount. A "Marriott Desert Springs Accounting Period" is an
accounting period of four consecutive weeks during a fiscal year, except that
an accounting period may occasionally be longer than four consecutive weeks
to the extent necessary to conform the accounting system to the calendar.
In accordance with the priority of payments set forth in "--Cash
Management; Lockbox" below, on each Marriott Desert Springs Due Date, even if
the Marriott Desert Springs Debt Service Reserve Account contains less than
600% of the Marriott Desert Springs Monthly Debt Service Payment Amount and
prior to such account being funded in full, a debt service reserve account
relating to the Marriott Desert Springs Parent Loan (the "Marriott Desert
Springs Parent Loan Debt Service Reserve Account") is required to be funded,
if such account contains less than 600% of the Marriott Desert Springs Parent
Loan Monthly Debt Service Payment Amount, in an amount equal to the lesser of
the Marriott Desert Springs Parent Loan Monthly Debt Service Payment Amount
or an amount such that the account will contain 600% of the Marriott Desert
Springs Parent Loan Monthly Debt Service Payment Amount.
CASH MANAGEMENT; LOCKBOX. The Marriott Desert Springs Manager has
established and will be required to maintain a segregated bank account in its
name (the "Marriott Desert Springs Manager's Account"). The Marriott Desert
Springs Manager is required to notify all third parties from whom the
Marriott Desert Springs Borrower has accounts receivable that all payments
owing to the Marriott Desert Springs Borrower should be sent directly to the
Marriott Desert Springs Manager's Account. All other revenues received by the
Marriott Desert Springs Manager other than petty cash and amounts in the
"house banks" held at the Marriott Desert Springs Property are required to be
deposited in the Marriott Desert Springs Manager's Account or, if a Marriott
Desert Springs Lockbox Event has occurred, into the Marriott Springs Lockbox
Account within one business day after receipt thereof, or in a segregated
account established by the Marriott Desert Springs Manager at a financial
institution proximate to the Marriott Desert Springs Property (the "Marriott
Desert Springs Local Account"). At least twice each week, the Marriott Desert
Springs Manager is required to transfer by federal wire, the ACH system or
other transfer of next-day available funds into the Marriott Desert Springs
Manager's Account (or if a Marriott Desert Springs Lockbox Event has
occurred, into the Marriott Desert Springs Lockbox Account) all available
funds in the Marriott Desert Springs Local Account, less amounts (a) required
to pay management expenses customarily paid out of the Marriott Desert
Springs Local Account and (b) held as petty cash or in the "house banks" at
the Marriott Desert Springs Property, provided that such amounts described in
this clause (b) may not exceed $150,000 (subject to adjustment at the end of
each year for increases in the Consumer Price Index) and subject to increase
if the number of rooms at the Marriott Desert Springs Property is increased.
The Master Servicer is required to establish and maintain a segregated
account in its name (the "Marriott Desert Springs Cash Collateral Account").
Not later than the 20th day (or if such day is not a business day, the next
succeeding business day) after the end of each Marriott Desert Springs
Accounting Period (the "Operating Profit Payment Date"), the Marriott Desert
Springs Manager is required to transfer by federal wire, the ACH system or
other transfer of next-day available funds from the Marriott Desert Springs
Manager's Account to the Marriott Desert Springs Cash Collateral Account for
application by the Master Servicer on the next Marriott Desert Springs Due
Date an amount equal to the Marriott Desert Springs Operating Profit as of
the end of the immediately preceding Marriott Desert Springs Accounting
Period, calculated on a cumulative basis (taking into account previous
transfers).
On each Marriott Desert Springs Due Date up to and including the Marriott
Desert Springs Anticipated Repayment Date, except during the continuance of a
Marriott Desert Springs Lockbox Event, the Master Servicer is required to
apply the Marriott Desert Springs Operating Profit in the following order of
priority: (a) to fund the Marriott Desert Springs Tax and Insurance Reserve
Account, if required, (b) to fund the Marriott Desert Springs FF&E Reserve
Account, if required, (c) to pay the Marriott Desert Springs Monthly Debt
Service Payment Amount and any other debt due, (d) to fund necessary capital
expenditures approved by the mortgagee, (e) to fund the Marriott Desert
Springs Debt Service Reserve Account as described in "--Reserves" above, (f)
to fund discretionary capital expenditures approved by the mortgagee, (g) to
pay to the Marriott Desert Springs Parent Lender the Marriott Desert Springs
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Parent Loan Monthly Debt Service Payment Amount, (h) to pay to the Marriott
Desert Springs Borrower its administrative expenses (including reasonable
allocations of internal costs) approved by the Master Servicer, (i) to pay to
the Marriott Desert Springs Borrower, for distribution to Marriott DSM,
administrative expenses of Marriott DSM (including reasonable allocations of
internal costs) approved by the Master Servicer, (j) to pay to the Marriott
Desert Springs Borrower, for distribution to Marriott DSM for further
distribution to DSMLP, administrative expenses of DSMLP (including reasonable
allocations of internal costs) approved by the Master Servicer, (k) to pay to
the Marriott Desert Springs Parent Lender the amount required to fund the
Marriott Desert Springs Parent Loan Debt Service Reserve Account, as
described in "--Marriott Desert Springs Parent Loan" below, (l) to fund the
Marriott Desert Springs Debt Service Reserve Account, until such account
contains an amount equal to 600% of the Marriott Desert Springs Monthly Debt
Service Payment Amount, (m) to pay to the Marriott Desert Springs Parent
Lender the amount required to fund the Marriott Desert Springs Parent Loan
Debt Service Reserve Account, until such account contains an amount equal to
600% of the Marriott Desert Springs Parent Loan Monthly Debt Service Payment
Amount, (n) to the Chiller Work Reserve, until the aggregate amount deposited
into the Chiller Work Reserve equals $500,000 (excluding the $1,500,000
deposited upon the closing of the Marriott Desert Springs Loan), and (o) all
remaining amounts to the Excess Cash Flow Escrow Account.
On each Marriott Desert Springs Due Date after the Marriott Desert Springs
Anticipated Repayment Date, except during the continuance of a Marriott
Desert Springs Lockbox Event, the Master Servicer is required to apply the
Marriott Desert Springs Operating Profit in the following order of priority:
(a) to make the same payments in the same priorities as set forth in clauses
(a) through (f) in the preceding paragraph, (b) to pay to the Marriott Desert
Springs Borrower its administrative expenses (including reasonable
allocations of internal costs) approved by the Master Servicer, (c) to pay to
the Marriott Desert Springs Borrower, for distribution to Marriott DSM,
administrative expenses of Marriott DSM (including reasonable allocations of
internal costs) approved by the Master Servicer, (d) to pay to the Marriott
Desert Springs Borrower, for distribution to Marriott DSM for further
distribution to DSMLP, administrative expenses of DSMLP (including reasonable
allocations of internal costs) approved by the Master Servicer, (e) to fund
the Marriott Desert Springs Debt Service Reserve Account, until such account
contains an amount equal to 600% of the Marriott Desert Springs Monthly Debt
Service Payment Amount, (f) if the Marriott Desert Springs Operating Profit
for such fiscal year exceeds the Marriott Desert Springs Owner's Priority for
such fiscal year, to fund the Management Incentive Reserve Account as
described in "--Reserves" above, (g) to repayment of the principal amount of
the Marriott Desert Springs Loan, until the principal of the Marriott Desert
Springs Loan has been paid in full, and then to the payment of Marriott
Desert Springs Excess Interest, and (h) to the Marriott Desert Springs Parent
Lender, in accordance with the terms of the direction letter pertaining to
the Marriott Desert Springs Parent Loan, or if such direction letter has been
rescinded, to MDSM Finance, in accordance with the direction letter
pertaining to the MDSM-DSMLP Loan.
If S&P's rating of MII's long-term senior unsecured debt falls below "A-"
(an "Additional Escrow Event"), the Master Servicer will be required to
maintain the Marriott Desert Springs Tax and Insurance Reserve Account and
the Marriott Desert Springs FF&E Reserve Account, each to be funded as
described in "--Reserves" above. MII's long-term senior unsecured debt is
currently rated "BBB+" by S&P.
If (i) the S&P rating of MII's long-term senior unsecured debt falls below
"BBB+," or (ii) the Marriott Desert Springs Property no longer is managed by
MII or a direct or indirect wholly-owned subsidiary of MII under the Marriott
Desert Springs Management Agreement (a "Marriott Desert Springs Lockbox
Event"), then the following procedures will apply: (a) as soon as possible,
but not later than seven business days after the occurrence of a Marriott
Desert Springs Lockbox Event, the Marriott Desert Springs Manager will be
required to change the name on the Marriott Desert Springs Manager's Account
to the Master Servicer; (b) not later than two weeks after the occurrence of
a Marriott Desert Springs Lockbox Event, the Marriott Desert Springs Manager
will be required to establish a lockbox account (the "Marriott Desert Springs
Lockbox Account"), in the name of the Master Servicer over which the Master
Servicer on behalf of the mortgagee will have sole control, which will be the
Marriott Desert Springs
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Manager's Account converted into a lockbox account, or if it cannot be so
converted, a new lockbox account; (c) the Marriott Desert Springs Manager
will be required to notify third-party payors (other than guests that pay
their bills by cash or check at the hotel) to send all future payments owing
to the Marriott Desert Springs Borrower to the Marriott Desert Springs
Lockbox Account, and to work diligently with such third-party payors to
enable them to send their payments to the Marriott Desert Springs Lockbox
Account within at least 120 days after the occurrence of a Marriott Desert
Springs Lockbox Event; and (d) the Marriott Desert Springs Borrower and the
Marriott Desert Springs Manager are required to deposit into the Marriott
Desert Springs Lockbox Account, within one business day of receipt, any funds
received by them (other than receipts held as petty cash and in the "house
banks" at the Marriott Desert Springs Property) and not yet deposited into
the Marriott Desert Springs Lockbox Account.
In addition, following a Marriott Desert Springs Lockbox Event, the Master
Servicer will be required to establish a segregated account (the "Marriott
Desert Springs Operating Account") in its name, and the Marriott Desert
Springs Manager will be required to transfer all funds (less amounts required
to cover outstanding checks) of the Marriott Desert Springs Borrower then
held in the Marriott Desert Springs Manager's Account to the Marriott Desert
Springs Operating Account. The Marriott Desert Springs Manager will have the
authority to write checks on, and make other transfers from, the Marriott
Desert Springs Operating Account for payment of certain management expenses,
except for taxes and insurance premiums for which escrows are being
maintained. After the Master Servicer has applied funds in the Marriott
Desert Springs Cash Collateral Account to fully fund the Marriott Desert
Springs Tax and Insurance Reserve Account and the Marriott Desert Springs
FF&E Reserve Account, it will be required to transfer, on the first day of
each two week period, from the Marriott Desert Springs Lockbox Account to the
Marriott Desert Springs Operating Account, an amount equal to 50% of budgeted
management expenses for the then-current Marriott Desert Springs Accounting
Period (other than the amounts required to be funded into the Marriott Desert
Springs Tax and Insurance Reserve Account and the Marriott Desert Springs
FF&E Reserve Account). On each Operating Profit Payment Date, the Marriott
Desert Springs Manager is required to notify the Master Servicer of the
Marriott Desert Springs Operating Profit as of the end of the immediately
preceding Marriott Desert Springs Accounting Period, and the Master Servicer
is required to transfer such amount from the Marriott Desert Springs Lockbox
Account to the Marriott Desert Springs Cash Collateral Account.
On each Marriott Desert Springs Due Date prior to and including the
Marriott Desert Springs Anticipated Repayment Date, the Master Servicer is
required to apply the Marriott Desert Springs Operating Profit transferred to
the Marriott Desert Springs Cash Collateral Account in the following order of
priority: (i) to pay the Marriott Desert Springs Monthly Debt Service Payment
Amount and any other debt due, (ii) to fund necessary capital expenditures,
(iii) to fund the Marriott Desert Springs Debt Service Reserve Account as
described in "--Reserves" above, (iv) to fund discretionary capital
expenditures, (v) to pay to the Marriott Desert Springs Parent Lender the
Marriott Desert Springs Parent Loan Monthly Debt Service Payment Amount, (vi)
to pay to the Marriott Desert Springs Borrower its administrative expenses
(including reasonable allocations of internal costs) approved by the Master
Servicer, (vii) to pay to the Marriott Desert Springs Borrower, for
distribution to Marriott DSM, administrative expenses of Marriott DSM
(including reasonable allocations of internal costs) approved by the Master
Servicer, (viii) to pay to the Marriott Desert Spring Borrower, for
distribution to Marriott DSM for further distribution to DSMLP,
administrative expenses of DSMLP (including reasonable allocations of
internal costs) approved by the Master Servicer, (ix) to pay to the Marriott
Desert Springs Parent Lender the amount required to fund the Marriott Desert
Springs Parent Loan Debt Service Reserve Account, as described in "--Marriott
Desert Springs Parent Loan" below, (x) to fund the Marriott Desert Springs
Debt Service Reserve Account, until such account contains an amount equal to
600% of the Marriott Desert Springs Monthly Debt Service Payment Amount, (xi)
to pay to the Marriott Desert Springs Parent Lender the amount required to
fund the Marriott Desert Springs Parent Loan Debt Service Reserve Account,
until such account contains an amount equal to 600% of the Marriott Desert
Springs Parent Loan Monthly Debt Service Payment Amount, (xii) to the Chiller
Work Reserve, as described in "--Reserves" above, and (xiii) all remaining
amounts to the Excess Cash Flow Escrow Account.
On each Marriott Desert Springs Due Date after the Marriott Desert Springs
Anticipated Repayment Date, the Master Servicer is required to apply the
Marriott Desert Springs Operating Profit transferred to
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the Marriott Desert Springs Cash Collateral Account in the following order
of priority: (i) to make the same payments in the same priorities as set
forth in clauses (i) through (iv) in the preceding paragraph, (ii) to pay to
the Marriott Desert Springs Borrower its administrative expenses (including
reasonable allocations of internal costs) approved by the Master Servicer,
(iii) to pay to the Marriott Desert Springs Borrower, for distribution to
Marriott DSM, administrative expenses of Marriott DSM (including reasonable
allocations of internal costs) approved by the Master Servicer, (iv) to pay
to the Marriott Desert Springs Borrower, for distribution to Marriott DSM for
further distribution to DSMLP, administrative expenses of DSMLP (including
reasonable allocations of internal costs) approved by the Master Servicer,
(v) to fund the Marriott Desert Springs Debt Service Reserve Account, until
such account contains an amount equal to 600% of the Marriott Desert Springs
Monthly Debt Service Payment Amount, (vi) if the Marriott Desert Springs
Operating Profit for such fiscal year exceeds the Marriott Desert Springs
Owner's Priority for such fiscal year, to fund the Management Incentive
Reserve Account as described in "--Reserves" above, (vii) to repayment of the
principal amount of the Marriott Desert Springs Loan, until the principal of
the Marriott Desert Springs Loan has been paid in full, and then to the
payment of Marriott Desert Springs Excess Interest, and (viii) to the
Marriott Desert Springs Parent Lender, in accordance with the terms of the
direction letter pertaining to the Marriott Desert Springs Parent Loan, or if
such direction letter has been rescinded, to MDSM Finance, in accordance with
the direction letter pertaining to the MDSM-DSMLP Loan.
To the extent that the Marriott Desert Springs Tax And Insurance Reserve
Account and the Marriott Desert Springs FF&E Reserve Account are required to
be funded from amounts contained in the Marriott Desert Springs Cash
Collateral Account, if the amounts contained therein are insufficient to fund
such accounts on any Marriott Desert Springs Due Date, then funds are
required to be transferred from the Excess Cash Flow Escrow Account to fund
such accounts. If the funds in the Excess Cash Flow Escrow Account are
insufficient to fund such accounts on any Marriott Desert Springs Due Date,
or the amount contained in the Marriott Desert Springs Cash Collateral
Account is insufficient to pay the Marriott Desert Springs Monthly Debt
Service Payment Amount on any Marriott Desert Springs Due Date, funds are
required to be transferred from the Marriott Desert Springs Debt Service
Reserve Account and the Manager Deficit Contribution Account to fund the
Marriott Desert Springs Tax And Insurance Reserve Account and the Marriott
Desert Springs FF&E Reserve Account and to pay the Marriott Desert Springs
Monthly Debt Service Payment Amount.
The funds contained in the Excess Cash Flow Escrow Account for a
particular fiscal year are required to be disbursed following the submission
to the Master Servicer of the following documentation: (i) a letter executed
by the Marriott Desert Springs Manager setting forth the Incentive Management
Fee then due and payable to the Marriott Desert Springs Manager (but not
greater than the amount contained in the Excess Cash Flow Escrow Account and
the Manager Deficit Contribution Account) and showing the calculation
thereof, and (ii) a letter of the Marriott Desert Springs Borrower's
independent auditors setting forth the audited Marriott Desert Springs
Operating Profit for such fiscal year, supporting the Incentive Management
Fee calculation. Within five business days of the submission of such letters,
the amounts contained in the Excess Cash Flow Escrow Account for such fiscal
year are required to be distributed as follows: (i) to the Chiller Work
Reserve, such that an aggregate amount of $500,000 has been deposited into
such account in addition to the amount deposited at closing, (ii) to the
Marriott Desert Springs Manager, for payment of the Incentive Management Fee,
(iii) to the mortgagee, if an event of default under the Marriott Desert
Springs Loan has occurred and is continuing, (iv) to the Marriott Desert
Springs Parent Lender, if the Master Servicer has received a notice from such
lender that an event of default has occurred and is continuing under the
Marriott Desert Springs Parent Loan, (v) to MDSM Finance, for amounts then
due and owing under the MDSM-DSMLP Loan, if MDSM Finance has provided to the
Master Servicer a direction letter, and (vi) the balance to the Marriott
Desert Springs Borrower. The funds contained in the Manager Deficit
Contribution Account, if any, are required to be distributed to the Marriott
Desert Springs Manager at the same time as it will be entitled to receive
distributions from the Excess Cash Flow Escrow Account. The Marriott Desert
Springs Manager may request disbursements from the Marriott Desert Springs
FF&E Reserve Account once a week and will not be required to obtain the
approval of the mortgagee or any other person for individual expenditures,
except as otherwise required by the Marriott Desert Springs Management
Agreement and the Marriott Desert Springs Consent of Manager.
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TRANSFER OF THE MARRIOTT DESERT SPRINGS PROPERTY AND INTERESTS IN THE
MARRIOTT DESERT SPRINGS BORROWER; ENCUMBRANCES. Unless permitted by the
Marriott Desert Springs Loan documents as described below, and with the
exception of Marriott Desert Springs Permitted Encumbrances, the Marriott
Desert Springs Borrower is not permitted without the mortgagee's consent, not
to be unreasonably withheld or delayed, and a written confirmation from the
Rating Agencies that such action will not, in and of itself, result in a
downgrade, withdrawal or qualification of any rating then assigned to any
outstanding Certificates, to (A) sell, assign, convey, transfer or otherwise
dispose of or encumber legal, beneficial or equitable interests in all or any
part of the Marriott Desert Springs Property, (B) permit or suffer any owner,
directly or indirectly, of a beneficial interest in the Marriott Desert
Springs Property to transfer such interest, whether by transfer of stock or
other beneficial interest in any entity or otherwise, (C) mortgage,
hypothecate or otherwise encumber or grant a security interest in all or any
part of the Marriott Desert Springs Property, or (D) file a declaration of
condominium with respect to the Marriott Desert Springs Property, provided
that transfers of limited partnership interests in DSMLP, an indirect owner
of the beneficial interests in the Marriott Desert Springs Property, may be
transferred in accordance with the provisions of the partnership agreement of
DSMLP.
Except as described below, the Marriott Desert Springs Borrower may only
sell, assign, convey, transfer or otherwise dispose of legal or equitable
title to or any interest in the Marriott Desert Springs Property if: (A)
after giving effect to the proposed transfer, (i) the Marriott Desert Springs
Property will be owned by a special purpose entity which will be in
compliance with certain single purpose bankruptcy-remote representations,
warranties and covenants set forth in the Marriott Desert Springs Loan
documents, which has assumed in writing and agreed to comply with the terms
of the Marriott Desert Springs Loan documents, (ii) the Marriott Desert
Springs Borrower will be owned and controlled by a Marriott Desert Springs
Permitted Owner, (iii) the Marriott Desert Springs Property will be managed
by a Marriott Desert Springs Acceptable Manager, and (iv) no event of default
will have occurred and be continuing, and (B) prior to any such transaction,
the proposed transferee delivers to mortgagee an officer's certificate giving
certain assurances to the general effect that the transferee is not an
employee benefit plan, or, in any event, the transfer will not give rise to
"prohibited transactions" under ERISA or similar laws.
A "Marriott Desert Springs Permitted Owner" means one or more of the
following: (a) a person controlled by DSMLP where the sole general partner of
DSMLP is an entity wholly-owned (directly or indirectly) and controlled by
Host Marriott, (b) an insurance company with total hotel assets of $500
million or more, exclusive of the Marriott Desert Springs Property, (c) a
pension fund, pension trust or pension account, or investment vehicle
established by such an entity, that has total assets of $500 million or more,
and that is managed by a person that controls at least $1 billion in hotel
assets, in both cases exclusive of the Marriott Desert Springs Property, (d)
a person in which one or more of the persons, together with their
wholly-owned affiliates, described in (a), (b) or (c) above, collectively own
and control (directly and indirectly) at least a 51% interest, or (e) any
person as to which the Marriott Desert Springs Borrower has received written
confirmation from the Rating Agencies that a transfer to such person, in and
of itself, will not result in a reduction, withdrawal or qualification of any
rating then assigned to any outstanding Certificates.
Notwithstanding the foregoing, transfers of direct or indirect beneficial
ownership interests in the Marriott Desert Springs Borrower will be permitted
if, after giving effect to such transfer: (i) the Marriott Desert Springs
Borrower will be a special purpose entity in compliance with the single
purpose representations, warranties and covenants contained in the Marriott
Desert Springs Loan agreement, (ii) the Marriott Desert Springs Borrower will
either be a Marriott Desert Springs Permitted Owner or be owned and
controlled (directly or indirectly) by a Marriott Desert Springs Permitted
Owner, (iii) if the transfer constitutes a transfer of 25% or more of the
membership interests, stock or other direct equity interests in the Marriott
Desert Springs Borrower or a transfer or issuance of a membership interest in
the Marriott Desert Springs Borrower such transfer will require, among other
things, that the mortgagee receive a legal opinion confirming that the assets
of the new borrower will not be substantively consolidated with the assets of
certain owners or controlling persons of such borrower in a bankruptcy or
similar proceeding, and (iv) if the transfer involves any interest in the
member of the Marriott Desert
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Springs Borrower (or in DSMLP) where, as a result of such transfer, any
member or other entity will own (directly or indirectly) a 49% or more
economic or controlling interest in the Marriott Desert Springs Borrower or a
direct or indirect owner thereof, such transfer will require, among other
things, that the mortgagee receive a legal opinion confirming that the assets
and liabilities of the Marriott Desert Springs Borrower and of its managing
member will not be substantively consolidated with the assets of such owners
or controlling persons of the Marriott Desert Springs Borrower or its
managing member in a bankruptcy or similar proceeding.
Notwithstanding the foregoing, the pledge of membership interests in the
Marriott Desert Springs Borrower by Marriott DSM to the Marriott Desert
Springs Parent Lender and any transfer upon or in lieu of foreclosure in
respect of such pledge, and any transfer by such pledgee after either
foreclosure or transfer in lieu of foreclosure, will not be a default under
the Marriott Desert Springs Loan, provided that (A) the Marriott Desert
Springs Parent Lender does not assign its note or convey a participation
interest therein except to: (i) any affiliate of Goldman Sachs & Co., as well
as any other person or persons, provided that, with respect to such
transferee or transferees, Goldman, Sachs & Co. or one or more affiliates
retains decision-making authority in respect of the Marriott Desert Springs
Parent Loan, (ii) a Marriott Desert Springs Permitted Owner, or (iii) a
person as to whom the Marriott Desert Springs Parent Lender has obtained
written confirmation from the Rating Agencies that such transfer, in and of
itself, will not result in a reduction, withdrawal or qualification of any
rating then assigned to any outstanding Certificates, and (B) in the event of
any foreclosure or transfer in lieu thereof in respect of such pledge, any of
the persons specified in clause (A) are required to be a Marriott Desert
Springs Permitted Owner, as well as any other person referred to in clause
(A)(iii) as to whom a confirmation from the Ratings Agencies is obtained.
Notwithstanding the foregoing, the Marriott Desert Springs Borrower will
be permitted: (i) to merge with a newly formed special purpose entity,
provided that, among other things, a non-substantive consolidation opinion is
delivered to the mortgagee and the conditions set forth in the fourth
preceding paragraph (and to the extent such merger involves the acquisition
of a direct or indirect interest in the Marriott Desert Springs Borrower, the
second preceding paragraph) are complied with; (ii) to admit a new member,
provided that, among other things, the conditions set forth in the second
preceding paragraph are complied with and a non-substantive consolidation
opinion is delivered to the mortgagee; and (iii) to enter into a lease, as
lessor of the Marriott Desert Springs Property, provided that, among other
things: (a) the lessee is required to be a newly created special purpose
entity and be controlled by a Marriott Desert Springs Permitted Owner; (b)
the general partner or managing member of the lessee is required to be a
newly formed special purpose entity; (c) such lease, among other things, (A)
will provide rental and other payments due thereunder from the lessee that
are sufficient to pay all scheduled monthly installments of principal and
interest under the Marriott Desert Springs Loan documents (as well as the
Marriott Desert Springs Parent Loan documents) and all costs, expenses and
liabilities relating to the Marriott Desert Springs Property or the Marriott
Desert Springs Loan to the extent the same are not the responsibility of the
lessee under the lease (or the Marriott Desert Springs Parent Loan, to the
extent the same are the responsibility of the borrower under the Marriott
Desert Springs Parent Loan), (B) will terminate, at the election of the
mortgagee, if the Marriott Desert Springs Loan is not repaid in full on or
before the Marriott Desert Springs Anticipated Repayment Date, and (C) will
provide that, in the event of termination as a result of an event of default
under the Marriott Desert Springs Loan documents or failure of the Marriott
Desert Springs Borrower to repay the Marriott Desert Springs Loan on or
before the Marriott Desert Springs Anticipated Repayment Date, the Marriott
Desert Springs Property and all FF&E owned by the Marriott Desert Springs
Borrower and used by the lessee in connection therewith will be surrendered
to the Marriott Desert Springs Borrower; (d) the rights of the lessee under
the lease will be expressly subordinate to the Marriott Desert Springs Loan,
and will be terminable at the election of any transferee of the Marriott
Desert Springs Property following a foreclosure of the related mortgage; (e)
the Marriott Desert Springs Borrower will have assigned all of its rights
under such lease and related security instruments to the mortgagee as
additional collateral; (f) counsel to the lessee will have provided to the
mortgagee certain enforceability and non-substantive consolidation opinions;
(g) if the general partner of the operating partnership in an UPREIT
structure of which the Marriott Desert Springs Borrower becomes a part has
elected to qualify as a REIT, then the Marriott Desert Springs Borrower will
have the
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right to sell to the lessee FF&E and fixed asset supplies used in connection
with the Marriott Desert Springs Property at their fair market value for cash
that will be escrowed with the mortgagee or a note that will be pledged to
the mortgagee, in each case as additional collateral for the Marriott Desert
Springs Borrower's obligations under the Marriott Desert Springs Loan
documents; (h) prior to and following the execution and delivery of the
lease, no default or event of default under the Marriott Desert Springs Loan
documents will have occurred and be continuing; and (i) the Rating Agencies
will have delivered written confirmation that such proposed lease transaction
will not, in and of itself, result in a downgrade qualification or withdrawal
of any of the ratings then assigned to any of the Certificates.
INSURANCE. The Marriott Desert Springs Borrower is required to maintain,
at its sole cost and expense, the following insurance: (a) polices of
insurance against loss or damage by standard perils included within the
classification "All Risks of Physical Loss," maintained in an aggregate
amount equal to the then full replacement cost of the Marriott Desert Springs
Property and related assets (without deduction for physical depreciation),
with deductibles no greater than those in existence at the time of the
closing of the Marriott Desert Springs Loan, provided that the Marriott
Desert Springs Borrower may have higher deductibles, to the extent the same
are commercially reasonable, but in no event in excess of $100,000 without
confirmation from the Rating Agencies that such deductibles will not result
in a downgrade, qualification, or withdrawal of the ratings then assigned to
the outstanding Certificates (except with respect to earthquake insurance);
(b) earthquake coverage in the same amount as in effect at the time of the
closing of the Marriott Desert Springs Loan, namely, coverage in the maximum
probable loss amount (less insurer required deductible) for the Marriott
Desert Springs Property and the other hotel properties insured under the
Marriott Desert Springs Manager's blanket insurance program, with a
deductible of not greater than 5% of the replacement value of the Marriott
Desert Springs Property, unless otherwise confirmed in writing by the Rating
Agencies that such amounts of insurance and deductibles will not result in a
downgrade, qualification or withdrawal of the ratings then assigned to the
outstanding Certificates; (c) flood insurance (if any part of the Marriott
Desert Springs Property is located in an area identified by the Federal
Emergency Management Agency as an area federally designated a "100 year flood
plain" and flood insurance is generally available at reasonable premiums and
in such amounts as generally are required by institutional lenders for
similar properties (or if not so available from a private carrier, from the
federal government at commercially reasonable premiums to the extent
available)); (d) comprehensive general liability insurance, including broad
form property damage, blanket contractual and personal injuries coverages and
containing minimum limits per occurrence of $50,000,000 for any policy year
(whether from primary or excess and/or umbrella coverage), provided that the
Marriott Desert Springs Borrower is required to increase its liability
insurance in accordance with commercially reasonable practices to the extent
that claims are asserted against the liability coverages in amounts in excess
of $50,000,000 in the aggregate, except to the extent the Marriott Desert
Springs Borrower or Marriott Desert Springs Manager reasonably determines
that such claims are not likely to result in paid claims in excess of
$50,000,000; (e) rental loss and/or business interruption insurance in an
amount sufficient to avoid any coinsurance penalty and equal to the greater
of (i) the estimated Marriott Desert Springs Operating Profit and necessary
continuing expenses from the operation of the Marriott Desert Springs
Property, or (ii) the projected management expenses, plus debt service on the
Marriott Desert Springs Loan and the Marriott Desert Springs Parent Loan, for
the maintenance and operation of the Marriott Desert Springs Property, in
each case for up to the next succeeding 24 months; (f) insurance against loss
or damage from leakage of sprinkler systems and explosion of steam boilers,
air conditioning equipment, high pressure piping, machinery and equipment,
pressure vessels or similar apparatus and against loss of occupancy or use
arising from any such breakdown, in such amounts as are generally available
at reasonable premiums and are generally required by institutional lenders
for property comparable to the Marriott Desert Springs Property; (g) worker's
compensation insurance (or qualification as a self insurer) with respect to
employees (if any) of the Marriott Desert Springs Borrower or the Marriott
Desert Springs Manager, as and to the extent required by applicable law,
regulation or governmental authority; (h) during any period of repair or
restoration costing in excess of $100,000, builder's "all risk" insurance in
an amount not less than the full insurable value of the Marriott Desert
Springs Property; (i) coverage to compensate for the cost of demolition and
the increased cost of construction for the Marriott Desert Springs Property
in an amount satisfactory to the mortgagee, to the
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extent available at commercially reasonable rates; and (j) such other
insurance as may from time to time be reasonably requested by the mortgagee,
provided that such insurance does not result in a material additional cost to
the Marriott Desert Springs Borrower.
Insurers for all-risk coverage are required to have a claims paying
ability rated "A-/X" or better by Best's Insurance Ratings Guide ("Best's")
and "AA" or better by S&P. Insurers providing earthquake coverage are
required to have a claims-paying ability rated "A-/V" or better by Best's and
"BBBq" or better by S&P, provided that the first $25,000,000 of such coverage
is required to be provided by issuers with claims-paying ability ratings of
"AA" or better by S&P. Issuers for the comprehensive general liability
insurance described in clause (d) above is required to have a claims-paying
ability of "A-/VIII" or better by Best's, the first $10,000,000 of such
coverage is required to be provided by issuers with claims-paying ability
ratings of "AA" by S&P and the remaining amount of such coverage is required
to be provided by issuers with claims-paying ability ratings of "BBBq" or
better by S&P.
CASUALTY AND CONDEMNATION. Following the occurrence of a casualty or
condemnation affecting the Marriott Desert Springs Property (unless in the
case of a condemnation, the Marriott Desert Springs Borrower has repaid the
Marriott Desert Springs Loan and all accrued interest thereon in full), the
Marriott Desert Springs Borrower, regardless of whether proceeds are
available, is required to proceed promptly to restore, repair, replace or
rebuild the affected Marriott Desert Springs Property to the extent
practicable to be of at least equal value and of substantially the same
character as prior to such casualty or condemnation, all to be effected in
accordance with the terms of the Marriott Desert Springs Loan documents,
which includes the mortgagee's approval if the cost of restoration exceeds
$1,000,000.
In the event of a casualty at the Marriott Desert Springs Property that
involves a loss of less than 30% of the replacement cost of the improvements
on the Marriott Desert Springs Property or a condemnation that affects less
than 15% of the usable square footage of the improvements on the Marriott
Desert Springs Property, the mortgagee is required to permit the application
of the proceeds resulting therefrom (after reimbursement of any reasonable
costs and expenses incurred by the mortgagee) to pay or reimburse the
Marriott Desert Springs Borrower, for the cost of restoring, repairing,
replacing or rebuilding the Marriott Desert Springs Property, in the manner
described below, provided that no default or event of default under the
Marriott Desert Springs Loan has occurred and is then continuing (other than
a default or event of default caused solely by such casualty or condemnation)
and, in the reasonable judgment of the mortgagee: (i) the Marriott Desert
Springs Property can be restored to an economically viable unit with a
resulting LTV (as reasonably determined by the mortgagee, taking into account
the original underwriting criteria employed by the mortgagee), (ii) the
restoration can be completed by the earliest to occur of: (A) the 365th day
following the later of (1) receipt of the proceeds, or with a written
confirmation from the Rating Agencies that there will be no downgrade,
qualification or withdrawal of the then current ratings of the Certificates
with respect thereto, such longer period as may reasonably be required or (2)
notice of the mortgagee's election to permit restoration, (B) the Marriott
Desert Springs Anticipated Repayment Date, and (C) with respect to a
casualty, the expiration of the payment period on the rental loss insurance
coverage in respect of such casualty; and (iii) during the period of the
restoration, the sum of (A) income derived from the Marriott Desert Springs
Property plus (B) proceeds of rent loss insurance or business interruption
insurance, if any, payable, together with such other monies as the Marriott
Desert Springs Borrower may irrevocably make available for the restoration,
will equal or exceed the sum of (1) expenses in connection with the operation
of the Marriott Desert Springs Property and (2) the debt service on the
Marriott Desert Springs Loan.
If any of the conditions set forth in the foregoing proviso is not
satisfied, or, if a casualty involves a loss of 30% or more of the
replacement cost of the improvements on the Marriott Desert Springs Property
or a condemnation that affects 15% or more of the usable square footage of
the improvements on the Marriott Desert Springs Property, then, unless the
mortgagee elects otherwise, at its sole option, the proceeds are required to
be applied to the prepayment of the Marriott Desert Springs Loan without any
yield maintenance charge or prepayment premium or penalty, other than a yield
maintenance charge if an event of default has occurred and is continuing
(provided such event of default is not caused solely by the casualty or
condemnation in question), and the Marriott Desert Springs Borrower will be
entitled to receive a release of the lien of the mortgage and other loan
documents under the Marriott Desert
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Springs Loan if it is paid in full. So long as no event of default under the
Marriott Desert Springs Loan has occurred and is continuing, the Marriott
Desert Springs Borrower will have the right to receive directly casualty
proceeds and condemnation awards of $1,000,000 or less, provided all such
proceeds and awards will nevertheless be applied to the restoration of the
Marriott Desert Springs Property in accordance with the terms of the Marriott
Desert Springs Loan documents.
If the Marriott Desert Springs Borrower is entitled to reimbursement out
of proceeds, such proceeds are required to be disbursed from time to time
(but not more then once per month) upon the mortgagee being furnished with:
(i) such architect's certificates, waivers of lien, contractor's sworn
statements, title insurance endorsements, bonds, plats of survey and such
other evidences of cost, payment and performance as the mortgagee may
reasonably require and approve, and (ii) all plans and specifications for
such restoration, such plans and specifications to be approved by the
mortgagee prior to commencement of any work (such approval not to be
unreasonably withheld or delayed). In addition, no payment made prior to the
final completion of the restoration is permitted to exceed 95% of the value
of the work performed from time to time; and at all times, the undisbursed
balance of such proceeds remaining in the hands of the mortgagee, together
with the funds deposited with the mortgagee for that purpose, is required to
be at least sufficient in the reasonable judgment of the mortgagee to pay for
the cost of completion of the restoration, free and clear of all liens. Prior
to any disbursement, the mortgagee must have received evidence reasonably
satisfactory to it of the estimated cost of completion of the restoration,
and the Marriott Desert Springs Borrower must have deposited with the
mortgagee eligible collateral in an amount equal to the excess (if any) of
such estimated cost of completion over net proceeds. Any surplus which may
remain out of proceeds received pursuant to a casualty will be paid to the
Marriott Desert Springs Borrower after payment of such costs of restoration.
Any surplus which may remain out of proceeds received pursuant to a
condemnation after payment of such costs of restoration will be paid to the
Marriott Desert Springs Borrower, or if certain conditions set forth in the
Marriott Desert Springs Loan documents are not met, escrowed with and pledged
to the mortgagee as security for the Marriott Desert Springs Loan.
FINANCIAL REPORTING. The Marriott Desert Springs Borrower is required to
furnish to the mortgagee, within 85 days following the end of each fiscal
year, a complete copy of its annual financial statements, audited by a
nationally recognized accounting firm reasonably satisfactory to the
mortgagee, in accordance with GAAP, including balance sheets and statements
of profit and loss. Together with its annual financial statements, the
Marriott Desert Springs Borrower is also required to furnish to the mortgagee
an officer's certificate certifying as of the date thereof whether, to the
Marriott Desert Springs Borrower's knowledge, there exists a default or an
event of default, and if such default or event of default exists, the nature
thereof, the period of time it has existed and the action then being taken to
remedy the same.
In addition, the Marriott Desert Springs Borrower is required to furnish
to the mortgagee (i) not later than 27 days after the end of each Marriott
Desert Springs Accounting Period, unaudited financial statements covering
such period and for the year to date showing in detail for the Marriott
Desert Springs Property, among other things, (a) a breakdown of sales
revenues and operating expenses and the calculation of house profit, ADR and
average occupancy rates, each with a comparison to budget and prior year, (b)
an unaudited profit and loss statement and escrow analysis, and (c) unaudited
periodic and year-to-date reports detailing the calculation of the Marriott
Desert Springs Operating Profit, (ii) not later than 35 days after the end of
each fiscal quarter, in draft form, and not later than 43 days after the end
of each fiscal quarter, in final form, quarterly and year-to-date unaudited
financial statements (including balance sheets, income statements and
statements of cash flows), (iii) on or before January 20 of each year, the
annual plan for the Marriott Desert Springs Property, including an operating
budget and a capital expenditure budget, and (iv) copies of all rent letters,
Format 90s and other periodic reports received from the Marriott Desert
Springs Manager relating to the Marriott Desert Springs Property promptly
upon receipt thereof.
THE MARRIOTT DESERT SPRINGS PARENT LOAN. Simultaneously with the making of
the Marriott Desert Springs Loan by the related Originator to the Marriott
Desert Springs Borrower, GSMC (the "Marriott Desert Springs Parent Lender")
made a loan to Marriott DSM (the "Marriott Desert Springs Parent
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Loan") having a principal balance as of the Cut-Off Date of approximately
$19,733,165 and evidenced by a note issued by Marriott DSM in the initial
principal amount of $20,000,000. As described above under "--Marriott Desert
Springs: The Borrower; The Property--The Borrower," Marriott DSM is the sole
equity member of the Marriott Desert Springs Borrower. The Marriott Desert
Springs Parent Loan is secured by a pledge of all of the membership interests
in the Marriott Desert Springs Borrower.
Any of, among others, (i) a default in the payment of principal or
interest when due, (ii) a default for more than ten days in the payment of
any other amounts due, (iii) a bankruptcy or insolvency event that is not
discharged, stayed or dismissed within 90 days, or (iv) an event of default
occurring under the Marriott Desert Springs Loan, constitutes a default under
the Marriott Desert Springs Parent Loan and the Marriott Desert Springs
Parent Lender has the right to accelerate the Marriott Desert Springs Parent
Loan and to foreclose on the collateral securing the Marriott Desert Springs
Parent Loan.
The Marriott Desert Springs Parent Loan bears interest at a fixed rate per
annum equal to 10.365%, calculated for any period based on the actual number
of days elapsed and a 360-day year. Commencing on January 12, 1998, the
Marriott Desert Springs Parent Loan requires 150 monthly payments (the
"Marriott Desert Springs Parent Loan Monthly Debt Service Payment Amount") of
principal and interest in the amount of approximately $240,057 (based on a
12.5 year amortization schedule and the interest rate referred to above),
with the payment of an additional approximately $20,210 on June 12, 2010 to
fully amortize the Marriott Desert Springs Parent Loan. The Marriott Desert
Springs Parent Loan is scheduled to mature on June 12, 2010. The Marriott
Desert Springs Parent Loan can be prepaid in whole or in part on any payment
date without a yield maintenance charge or prepayment premium on or after
November 25, 2001. Prior to such date, other than in connection with a
casualty or condemnation of the Marriott Desert Springs Property, prepayments
of the Marriott Desert Springs Parent Loan are subject to a prepayment
premium of 4% prior to November 25, 1998 (decreasing annually by 1% on each
November 25th), in each case of the principal amount being prepaid. Since all
of the cash flow from the Marriott Desert Springs Property will be used to
service the Marriott Desert Springs Loan after the Marriott Desert Springs
Anticipated Repayment Date, no cash flow will be available to service the
Marriott Desert Springs Parent Loan after that date until the outstanding
principal balance of the Marriott Desert Springs Loan has been paid in full
together with all accrued and unpaid Marriott Desert Springs Excess Interest.
THE MDSM-DSMLP LOAN. Simultaneously with the making of the Marriott Desert
Springs Loan and the Marriott Desert Springs Parent Loan, MDSM Finance made a
loan in the initial principal amount of $59,727,272 to DSMLP (the "MDSM-DSMLP
Loan"), secured by a pledge of all the membership interests in Marriott DSM.
Pursuant to intercreditor agreements entered into between the related
Originator and MDSM Finance as to the Marriott Desert Springs Loan, and
between GSMC and MDSM Finance as to the Marriott Desert Springs Parent Loan,
MDSM Finance has agreed that (i) all indebtedness due under the MDSM-DSMLP
Loan is expressly subject, subordinate and junior in right of payment to the
Marriott Desert Springs Loan and the Marriott Desert Springs Parent Loan, and
(ii) it will not institute any judicial or other remedial proceeding
(including any bankruptcy or insolvency proceeding) against DSMLP or any of
its interests, rights, assets or properties to collect any moneys due with
respect to the MDSM-DSMLP Loan until one year and one day after the Marriott
Desert Springs Loan and the Marriott Desert Springs Parent Loan have been
paid in full. Prior to the Marriott Desert Springs Anticipated Repayment
Date, payment of interest on the MDSM-DSMLP Loan are only made from the
Excess Cash Flow Escrow Account following payment of the Marriott Desert
Springs Incentive Management Fee, as provided for in "--Cash Management;
Lockbox" above. Since all of the cash flow from the Marriott Desert Springs
Property will be used to service the Marriott Desert Springs Loan after the
Marriott Desert Springs Anticipated Repayment Date, no cash flow will be
available to service the MDSM-DSMLP Loan after that date until the
outstanding principal balance of the Marriott Desert Springs Loan has been
paid in full together with all accrued and unpaid Marriott Desert Springs
Excess and until the Marriott Desert Springs Parent Loan has been paid in
full.
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Graphics Omitted: Photograph of Showcase
[Grande Loan II Logo]
<PAGE>
SHOWCASE: THE BORROWER; THE PROPERTY
THE LOAN. The Showcase Loan had a principal balance as of the Cut-Off Date
of approximately $78,998,166. It is secured by a first priority mortgage lien
encumbering an entertainment and retail center, which is comprised of two
buildings on non-adjoining parcels connected via a skywalk, known as
Showcase, located on Las Vegas Boulevard in Las Vegas, Nevada (the "Showcase
Property"). The Showcase Loan was originated by GMACCM on behalf of GSMC on
September 12, 1997.
THE BORROWER. Showcase Mall Joint Venture (the "Showcase Borrower") is a
Nevada general partnership formed solely for the purpose of owning,
operating, maintaining, managing and selling the Showcase Property. The
Showcase Borrower has no material assets other than the Showcase Property and
related interests. The general partners of the Showcase Borrower are Forest
City Galaxy, Inc. ("Showcase GP I"), a Nevada corporation, and Island Plaza
Partners III LLC ("Showcase GP II"), a Nevada limited liability company.
Showcase GP I and Showcase GP II are also the joint managing partners of the
Showcase Borrower and the sole purpose of each is serving as a general
partner in the Showcase Borrower. Showcase GP I is a wholly-owned subsidiary
of Forest City Rental Properties Corporation, an Ohio corporation ("Forest
City"). Showcase GP II is an indirect wholly owned subsidiary of Island Plaza
III, a Nevada limited partnership. Forest City Commercial Management, Inc.,
which is the property manager for the Showcase Property (the "Showcase
Manager"), is a wholly-owned subsidiary of Forest City.
SECURITY. The Showcase Loan is a non-recourse loan, secured only by the
fee interests of the Showcase Borrower in the Showcase Property and certain
related collateral (including assignments of leases and rents, an assignment
of agreements, licenses, permits, contracts and funds in certain accounts).
Subject to certain limited exceptions, neither the Showcase Borrower nor any
of its affiliates is personally liable for payment of the Showcase Loan. The
Showcase Borrower has represented that it owns good, marketable and
indefeasible fee simple title to the Showcase Property free and clear of all
liens other than encumbrances described in the applicable title insurance
policies and other encumbrances permitted by the mortgagee under the Showcase
Loan documents (the "Showcase Permitted Encumbrances"). The title insurance
policy issued upon the origination of the Showcase Loan insures that the
mortgage securing the Showcase Loan constitutes a valid and enforceable first
lien on the Showcase Property, subject to certain exceptions and exclusions
from coverage set forth in the policy.
THE PROPERTY. The Showcase Property is comprised of the Showcase
Borrower's fee simple interest in approximately 1.17 acres of land improved
with a four-floor entertainment and retail center and a non-adjacent parcel
of approximately 1.53 acres improved with an approximately 1,532 space
parking garage and multi-screen movie theater which are connected via a
skywalk. The Showcase Borrower has been granted an easement for air rights
with respect to the skywalk from MGM Grand Hotel, Inc. The Showcase Property
was constructed between 1995 and 1997 and consists of approximately 189,970
square feet of GLA. As of March 16, 1998, the Showcase Property was
approximately 99% leased. The DSCR for the Showcase Property is approximately
1.44x. The major tenants of the Showcase Property, collectively accounting
for approximately 99% of the occupied GLA, are The World of Coke (the "Coke
Tenant"), Ethel M. Chocolates, Sega Gameworks, All Star Cafe and United
Artists Theatre (together with any successors of any of the foregoing, the
"Showcase Major Tenants"). The other tenant at the Showcase Property is Time
Share Enterprises.
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The following table shows certain data regarding the tenants at the
Showcase Property as of March 16, 1998:
THE TENANTS--SHOWCASE LOAN
<TABLE>
<CAPTION>
APPROXIMATE ANNUALIZED
PARENT COMPANY/ TENANT % OF TOTAL LEASE ANNUALIZED % OF TOTAL BASE RENT
TENANT CREDIT RATING* GLA (SF) GLA (SF) EXPIRATION BASE RENT BASE RENT PER SF
- ---------------------- ----------------- --------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
The World of Coke..... The Coca-Cola 34,641 18.2% 2017 $1,806,002 20.1% $ 52.13
Company/Aa3
All Star Cafe......... Planet Hollywood 36,172 19.0 2016 2,170,320 24.1 60.00
International
Ethel M. Chocolates... Mars, Inc. 28,601 15.1 2012 1,671,840 18.6 58.45
Sega Gameworks........ Sega Enterprises, 47,161 24.8 2012 2,475,953 27.5 52.50
Ltd./Baa2
United Artists
Theatre.............. 41,108 21.6 2017 698,836 7.8 17.00
Time Share
Enterprises.......... 105 0.1 1998 168,000 1.9 1,600.00
--------- ------------- ------------ ------------ ------------
Total/Average ....... 187,788 98.9% $8,990,951 100.0% $ 47.88
============ ============
Vacant............... 2,182 1.1
--------- -------------
Total/Average ....... 189,970 100.0%
========= =============
</TABLE>
- ------------
* Reflects Moody's senior unsecured long-term debt rating of the parent
company as of April 15, 1998. Generally, the parent company may not be
the obligor under the applicable leases.
OPERATING HISTORY. Information regarding occupancy and sales per square
foot of GLA at the Showcase Property with respect to the Showcase Major
Tenants for the respective periods of time indicated below is as follows:
SALES OPERATING HISTORY--SHOWCASE LOAN*
<TABLE>
<CAPTION>
TENANT SALES PSF**
- ----------------------- -------------
<S> <C>
The World of Coke ...... $349
All Star Cafe .......... $195
Ethel M. Chocolates ... $479
Sega Gameworks ......... $153
United Artists Theatre $ 77
</TABLE>
- ------------
* Sales figures are based solely upon information provided by tenants
who were in occupancy during the respective periods indicated in the
footnote below.
** Based upon sales figures (a) for the seven-month period ending
February 28, 1998 with respect to The World of Coke, (b) for the
seven-month period ending February 28, 1998 with respect to All Star
Cafe, (c) for the four-month period ending February 28, 1998 with
respect to Ethel M. Chocolates, (d) for the seven-month period ending
February 28, 1998 with respect to Sega Gameworks and (e) for the
seven month period ending February 28, 1998 with respect to United
Artists Theatre. World of Coke figures are based on approximately
26,330 square feet of retail sales area. Ethel M. Chocolates figures
are based on approximately 19,837 square feet of space currently open
for business (the remaining space is scheduled to open in September
1998).
CERTAIN SHOWCASE MAJOR TENANT LEASE PROVISIONS. The Coke Tenant's lease
(the "Coke Lease") expires on July 31, 2017 provides for four 20-year renewal
options. Upon one year's notice, the Coke Tenant may terminate the Coke Lease
as of (i) the last day of the tenth full lease year, (ii) the last day of the
15th full lease year and (iii) the last day of every fifth lease year during
the option periods. The Coke Lease also provides that the Coke Tenant may
surrender up to a total of approximately 770 square feet of GLA currently
being utilized as retail space upon 90 days notice. This will not result in a
reduction of the base rent due under the Coke Lease. The base rent under the
Coke Lease is currently being reduced by the Coke Tenant Allowance of
$3,646,246, which is being deducted in equal installments of approximately
$26,332 per month over the first 240 months of the term of the Coke Lease. If
the Coke
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Lease is terminated prior to the 240th month of the term for any reason
other than a default by the Coke Tenant, the Showcase Borrower is obligated
to pay the Coke Tenant on a present value basis any remaining amounts of the
Coke Tenant Allowance which have not yet been deducted from the Coke Tenant's
base rent. Pursuant to the Coke Lease, the Coke Tenant has a right of first
refusal (i) to lease any space in the Showcase Property that may become
available for rent and (ii) to purchase the Showcase Property upon comparable
terms and conditions as any contemplated sale (other than a foreclosure
sale).
The Sega Gameworks lease (the "Sega Lease") expires on March 31, 2012 and
provides for three five-year extensions. The terms of the Sega Lease provide
that the base rent under the Sega Lease be reduced if either The World of
Coke or the United Artists Theatre (or a similar quality theatre operation)
ceases operating in the Showcase Property for a period of one year. The
reduced base rent under the Sega Lease would be the base rent multiplied by a
fraction (which may not be less than 85%), in which the numerator is the
gross rent (including percentage rent) under the Sega Lease for the measuring
year and the denominator is the gross rent for the last year in which both
the World of Coke and United Artists Theatre were open. The Showcase Borrower
is entitled to additional rent over 180 months, commencing on May 1, 1997, in
payment of a loan made by the Showcase Borrower to Sega Gameworks in
connection with the Sega Lease, which will be paid in equal installments of
approximately $38,845 per month. The Showcase Borrower is required to deposit
any prepayment of such additional rent in a segregated account which will be
assigned to the mortgagee as additional security for the Showcase Loan.
The Ethel M. Chocolates lease (the "EMC Lease") expires on August 31, 2012
and provides for three five-year renewal options. The EMC Lease provides that
if two or more of the World of Coke, Sega Gameworks or the All Star Cafe
cease to operate all or substantially all of their spaces for nine months or
more, the tenant under the EMC Lease will not be required to pay the base
rent, but will only be obligated to pay to the Showcase Borrower 6% of gross
sales. Additionally, if two or more of the World of Coke, Sega Gameworks or
the All Star Cafe stop operating all or substantially all of their spaces for
18 months or more and one of them has not reopened or been replaced by a
single user retail or entertainment tenant, the tenant under the EMC Lease
may terminate the EMC Lease upon 60 days prior written notice.
The United Artists Theatre lease (the "United Artists Lease") expires on
December 31, 2017 and provides for two five-year renewal options. The United
Artists Lease requires the United Artists Theatre tenant to operate the
premises as a theatre under the name "United Artists Theatres" or "United
Artists" or "UA" until 2007, unless more than 40% of the Showcase Property is
vacant or otherwise not being operated for a period of six months, in which
case the United Artists tenant has no obligation to operate as a theatre
until 30 days after such condition ceases to exist. After the initial 10-year
operating covenant period, upon 120 days notice, the United Artists tenant
may close the theatre or change the use of the premises. The Showcase
Borrower may elect to terminate the United Artists Lease upon receiving
notice of either of the foregoing.
APPRAISAL. An appraisal prepared by Cushman & Wakefield, Inc., dated
August 1997, determined a value for the Showcase Property of approximately
$117,500,000, resulting in a Cut-Off Date LTV Date of approximately 67.2%.
The Showcase appraisal was prepared in accordance with the Uniform Standards
of Professional Appraisal Practice. See "Risk Factors--The Mortgage
Loans--Limitations on Appraisals" herein.
ENGINEERING REPORT. A Property Condition Report on the Showcase Property
was completed at the time the Showcase Loan was originated. The Property
Condition Report concluded that the Showcase Property was generally in good
physical condition and cited no immediate physical needs.
ENVIRONMENTAL ASSESSMENT. A Phase I environmental site assessment dated
August 18, 1997 was completed by a third-party environmental firm. The report
did not reveal any environmental liability that the Seller believes would
have a material adverse impact on the Showcase Borrower's business, assets or
results of operations taken as a whole. Nevertheless, there can be no
assurance that all environmental conditions and risks were identified in such
reports. See "Risk Factors--The Mortgage Loans--Environmental Law
Considerations" herein.
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<PAGE>
PROPERTY MANAGEMENT. The Showcase Property is managed by the Showcase
Manager pursuant to a management agreement (the "Showcase Management
Agreement"). The Showcase Manager is responsible for the operation,
management, maintenance, promotion and leasing of the Showcase Property.
Under the Showcase Management Agreement, the Showcase Manager is entitled to
a management fee equal to 2.25% of the non-parking rental income actually
received. The term of the Showcase Management Agreement continues until
November 1998 and automatically renews for successive one-year terms unless
either party elects not to renew.
Pursuant to an agreement among the mortgagee, the Showcase Borrower and
the Showcase Manager (the "Showcase Consent of Manager"), the Showcase
Manager has agreed that (i) upon 30 days written notice the mortgagee may
exercise all rights of the Showcase Borrower to terminate the Showcase
Management Agreement without the payment of any termination fee, (ii) it will
not terminate the Showcase Management Agreement without giving the mortgagee
prior notice of the event or condition which would allow the Showcase Manager
to terminate the Showcase Management Agreement and the right to cure any
default, (iii) it may not materially amend the Showcase Management Agreement
without the mortgagee's consent, which will not be unreasonably withheld,
delayed or conditioned, and (iv) its rights to receive management fees under
the Showcase Management Agreement are subordinate to the terms and provisions
of the Showcase Loan documents until the Showcase Loan has been repaid in
full.
It is an event of default under the Showcase Loan (subject to certain
notice and cure periods) if, without the mortgagee's prior written consent,
the Showcase Borrower (i) surrenders, terminates or cancels the Showcase
Management Agreement (unless the Showcase Manager is in default thereof and
the termination of the Showcase Management Agreement would be commercially
reasonable) or otherwise replaces the Showcase Manager (unless the Showcase
Manager is replaced with a Showcase Acceptable Manager) or enters into any
other management agreement with respect to the Showcase Property or permits
or suffers any significant delegation of the Showcase Manager's duties
(except to a Showcase Acceptable Manager), (ii) increases or consents to any
increase of the amount of any charges under the Showcase Management Agreement
except as provided therein or on an arm's-length basis and upon commercially
reasonable terms, or (iii) otherwise modifies, changes, supplements, alters,
amends, waives, or releases any of its rights and remedies under the Showcase
Management Agreement except on an arm's-length basis and upon commercially
reasonable terms.
"Showcase Acceptable Manager" means (i) the Showcase Manager or any
affiliate thereof that is in the sole discretion of the mortgagee,
sufficiently capitalized, or (ii) any other property management company
acceptable to the mortgagee in the mortgagee's sole discretion and as to
which the mortgagee has received written confirmation from the Rating
Agencies that such replacement manager, in and of itself, will not result in
the withdrawal, qualification or reduction of any rating then assigned to any
outstanding Certificates.
SHOWCASE: THE LOAN
PAYMENT TERMS. The Showcase Loan bears interest at a fixed rate per annum
equal to 7.523% (the "Showcase Initial Interest Rate") through and including
November 10, 2007. From and after November 11, 2007 (the "Showcase
Anticipated Repayment Date") the Showcase Loan accrues interest at a fixed
rate per annum equal to 9.523% (the "Showcase Revised Interest Rate"). The
Showcase Loan matures on November 11, 2025 (the "Showcase Maturity Date"). As
described below, if the Showcase Borrower does not prepay the Showcase Loan
on or before the Showcase Anticipated Repayment Date, the Showcase Borrower
will be required to pay interest at the Showcase Initial Interest Rate
(together with principal, as described below), and interest accrued equal to
the excess of the Showcase Revised Interest Rate over the Showcase Initial
Interest Rate will be deferred and added to the outstanding indebtedness
under the Showcase Loan, and will, to the extent permitted by applicable law,
earn interest at the Showcase Revised Interest Rate (such accrued and
deferred interest and interest thereon (which is deferred) at the Showcase
Revised Interest Rate, the "Showcase Excess Interest"). Interest on the
Showcase Loan is calculated based on the actual number of days elapsed and a
360-day year.
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The Showcase Loan requires monthly payments (the "Showcase Monthly Debt
Service Payment Amount") of principal and interest of approximately $573,553
(based on a 337 month amortization schedule and the Showcase Initial Interest
Rate). Payment of the balance of the principal, if any, together with all
accrued and unpaid interest, is required on the Showcase Maturity Date. Each
Showcase Monthly Debt Service Payment Amount is due and payable on the 11th
day of each calendar month or, if such day is not a business day, the first
preceding business day (a "Showcase Due Date"). Commencing on the Showcase
Anticipated Repayment Date and on each Showcase Due Date thereafter, in
addition to the Showcase Monthly Debt Service Payment Amount, the Showcase
Borrower is required to apply 100% of the Showcase Excess Cash Flow for the
month preceding the month in which the Showcase Due Date occurs in the
following order of priority (a) to the outstanding principal balance until
the Showcase Loan has been paid in full, and (b) to the Showcase Excess
Interest. "Showcase Excess Cash Flow" means the amounts held as collected
funds in the Showcase Deposit Account after the application of funds (a) to
the amounts required to be paid into the Showcase Tax and Insurance Reserve
Account as described in "--Reserves" below, (b) to pay the Showcase Monthly
Debt Service Payment Amount, (c) to the amounts required to be paid into the
Showcase Capital Reserve Account described in "--Reserves" below, (d) to the
payment of the Showcase Borrower's approved budgeted operating expenses, (e)
to the payment of Showcase Borrower's approved budgeted capital expenditures,
(f) to the payment of extraordinary capital expenditures approved by the
mortgagee in writing, and (g) to the amounts required to be paid into the
Showcase Leasing Reserve Account described in "--Reserves" below. The
scheduled principal balance of the Showcase Loan as of the Showcase
Anticipated Repayment Date will be approximately $67,183,709.
After the occurrence and during the continuance of an event of default
under the Showcase Loan, the entire outstanding principal balance thereof,
and due but unpaid interest thereon, will bear interest at a per annum
default rate equal to the lesser of (a) the maximum rate permitted by
applicable law and (b) 5% in excess of the Showcase Initial Interest Rate or
the Showcase Revised Interest Rate, as applicable, but in no event less than
the "prime rate" published from time to time in The Wall Street Journal, plus
1%.
PREPAYMENT. Voluntary prepayment is prohibited under the Showcase Loan
prior to October 11, 2007 (subject to defeasance rights afforded to the
Showcase Borrower), except in connection with certain casualty or
condemnation events. From and after October 11, 2007, the Showcase Loan may
be prepaid in whole or in part on any Showcase Due Date without payment of a
yield maintenance charge or prepayment premium.
If all or any part of the principal amount of the Showcase Loan is prepaid
upon acceleration of the Showcase Loan following the occurrence of an event
of default under the Showcase Loan prior to the Showcase Anticipated
Repayment Date, the Showcase Borrower will be required to make a yield
maintenance payment in an amount equal to the excess, if any, of (i) the sum
of (A) the aggregate respective present values of all remaining scheduled
interest payments payable on each Showcase Due Date (or the portion of all
such interest payments corresponding to the portion of the principal of the
Showcase Loan to be prepaid upon acceleration) for the period from the date
of such prepayment to (and including) the Showcase Maturity Date, discounted
monthly at a rate equal to a specified treasury constant yield and based on a
360-day year of twelve 30-day months and (B) the aggregate respective present
values of all scheduled principal payments payable on each Showcase Due Date
(or the then unpaid portion thereof to be prepaid upon acceleration) were
such amount paid in full on the Showcase Maturity Date, discounted monthly at
a rate equal to the specified treasury constant yield and based on a 360-day
year of twelve 30-day months over (ii) the then current outstanding principal
balance of the Showcase Loan (or the then unpaid portion thereof to be
prepaid upon acceleration).
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of the Showcase Property under the
Showcase Loan, the mortgagee will be entitled, at its option, to apply such
proceeds to prepay the Showcase Loan, as described in "--Casualty and
Condemnation" below. No yield maintenance payment or prepayment premium or
penalty will be payable upon any mandatory prepayment of the Showcase Loan in
connection with a casualty or condemnation unless an event of default under
the Showcase Loan has occurred and is continuing, in which case the Showcase
Borrower will be required to pay a yield maintenance payment calculated in
the manner described above.
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If a Showcase Low Debt Service Trigger Event or an event of default has
occurred and is continuing, the mortgagee is required to apply funds on
deposit in the Showcase Debt Service Reserve Account as a partial prepayment
of the Showcase Loan as described in "--Reserves" below.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL--DEFEASANCE. The Showcase
Borrower is permitted, prior to the Showcase Anticipated Repayment Date, on
any date on or after the second anniversary of the Closing Date to defease
all (but not a portion) of the Showcase Loan with U.S. Treasury obligations,
provided that, among other conditions, the Showcase Borrower gives the
mortgagee at least thirty days' prior written notice of the date (which is
required to be a Showcase Due Date) of such defeasance (the "Showcase
Defeasance Date"), no event of default exists on the Showcase Defeasance
Date, and provided further that the Showcase Borrower pays on the Showcase
Defeasance Date (i) all accrued and unpaid interest on the Showcase Loan to
but not including the Showcase Defeasance Date, (ii) all other sums then due
under the Showcase Loan and the related loan documents, (iii) the Showcase
Defeasance Deposit and (iv) all reasonable costs and expenses of the
mortgagee incurred in connection with the defeasance. In addition, the
Showcase Borrower will be required to deliver to the mortgagee among other
things (a) a security agreement granting the mortgagee a first priority lien
on the Showcase Defeasance Deposit and the U.S. Treasury obligations
purchased with the Showcase Defeasance Deposit, (b) an opinion of counsel for
the Showcase Borrower in form satisfactory to the mortgagee stating, among
other things, that the Trustee has a perfected first priority security
interest in the U.S. Treasury obligations purchased with the Showcase
Defeasance Deposit, (c) a confirmation, in form and substance reasonably
satisfactory to the mortgagee, from a "Big Six" independent certified public
accounting firm, that the Showcase Defeasance Deposit is sufficient to pay
all scheduled payments due from the Showcase Borrower under the Showcase Loan
in connection with the proposed defeasance, (d) an officer's certificate
certifying that the requirements for defeasance in the Showcase Loan
agreement have been met, (e) confirmation that all conditions to defeasance
have been met from any Rating Agency that has required as a condition to
defeasance that such conditions have been met, and (f) written confirmation
from the Rating Agencies that there will be no downgrade, qualification or
withdrawal of the then current ratings of the Certificates as a result of
such defeasance.
"Showcase Defeasance Deposit" means an amount equal to the sum of (i) the
outstanding principal amount of the Showcase Loan, (ii) without duplication,
all costs and expenses incurred or to be incurred in the purchase of
noncallable U.S. Treasury obligations providing payments on or prior to, but
as close as possible to, all successive Showcase Due Dates upon which
interest and principal payments are required under the Showcase Loan after
the Showcase Defeasance Date and through and including the Showcase
Anticipated Repayment Date (including the outstanding principal balance on
the Showcase Loan on the Showcase Anticipated Repayment Date), and (iii) any
revenue, documentary stamp or intangible taxes in connection with the
transfer of the defeased note or otherwise required in connection with such
defeasance.
Upon receipt of the Showcase Defeasance Deposit, the mortgagee, using the
Showcase Defeasance Deposit, will be required to purchase noncallable U.S.
Treasury obligations on behalf of the Showcase Borrower and such U.S.
Treasury obligations will serve as the sole collateral for the payments of
the amounts due under the Showcase Loan. Upon a deposit of such U.S. Treasury
obligations, the Showcase Borrower will have the right to assign the
obligation to make payments under the Showcase Loan to an entity designated
by the mortgagee. If the Showcase Borrower does assign such obligations, the
Master Servicer will be required in the Pooling Agreement to cause such
obligations to be assumed by a special-purpose bankruptcy-remote entity.
In connection with the defeasance of the Showcase Loan, the Showcase
Borrower will be permitted to obtain the release of the deed of trust lien
encumbering the Showcase Property and all related collateral.
OTHER FINANCING. The Showcase Borrower is not permitted to incur any
additional indebtedness other than: (i) unsecured trade payables debt
incurred in the ordinary course of the Showcase Borrower's business,
customarily paid within 60 days of incurrence and in fact not more then 60
days outstanding, (ii) claims for allocated expense reimbursement arising
under the cash management system of Forest
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City Enterprises, Inc., up to a maximum amount of $10,000, and (iii) any
unsecured loan made by the partners of the Showcase Borrower for the purpose
of paying: (a) operating expenses of the Showcase Borrower (which do not
include noncash items, the Showcase Monthly Debt Service Payment Amount,
other indebtedness of the Showcase Borrower, income and other like taxes,
expenses incurred in connection with the issuance of the related note, the
cost of tenant improvements, leasing commission and capital expenditures,
distributions to the partners of the Showcase Borrower or any management or
asset management fees incurred to any affiliate of the Showcase Borrower, or
any item which would be considered an operating expense but is actually paid
or to be paid by any tenant and not reimbursed by the Showcase Borrower); (b)
capital expenditures, leasing commissions and tenant improvements with
respect to the Showcase Property; and (c) amounts described in clauses (i)
through (vi) in "--Cash Management; Lockbox" below (the "Showcase Required
Payments"); provided such loan is not secured by the Showcase Property or any
other property of the Showcase Borrower pledged to secure the Showcase Loan,
and provided further, that the Showcase Borrower will be permitted to have a
contingent obligation to repay such loan if and only if (A) the Showcase
Borrower's partners' rights with respect to such loan are fully subordinated
to the payment of the Showcase Loan, (B) no payment may be made to a partner
of the Showcase Borrower except to the extent of Showcase Leasing Excess Cash
Flow which the Showcase Borrower is not required to remit to the mortgagee
(or the Showcase Leasing Reserve Account), (C) no payment may be made to a
partner of the Showcase Borrower during the occurrence of an event of default
under the Showcase Loan or after the Showcase Anticipated Repayment Date and
(D) the partner of the Showcase Borrower is prohibited from exercising any
and all remedial action against the Showcase Borrower in connection with such
loan until the Showcase Loan has been paid in full.
"Showcase Leasing Excess Cash Flow" means all amounts deposited in the
Showcase Deposit Account less the sum of (without duplication) (i) amounts in
the Showcase Tax and Insurance Reserve Account, (ii) the Showcase Monthly
Debt Service Payment Amount, (iii) amounts in the Showcase Capital Reserve
Account, (iv) operating expenses, (v) leasing commissions (other than for
Showcase Major Tenants), (vi) tenant improvements (other than for Showcase
Major Tenants) and (vii) extraordinary capital expenditures approved in
writing by the mortgagee.
ALTERATIONS. Except upon compliance with certain conditions set forth in
the Showcase Loan documents (which does not include the approval of the
mortgagee), the Showcase Borrower is prohibited from making or permitting any
demolition, alteration, installation, improvement, expansion or reduction of
or to the Showcase Property or any part thereof.
RESERVES. Pursuant to the terms of the Showcase Loan, the Showcase
Borrower is required to fund the following reserves: (i) a tax and insurance
escrow account (the "Showcase Tax and Insurance Reserve Account") to be
funded from funds available in the Showcase Deposit Account in an amount
equal to (a) one-twelfth of the taxes, assessments, impositions and other
governmental charges that the mortgagee reasonably estimates will be payable
in the next ensuing 12 months and (b) upon a default or an event of default
under the Showcase Loan documents, and from and after the Showcase
Anticipated Repayment Date, one-twelfth of the insurance premiums that the
mortgagee reasonably estimates will be payable for the renewal of the
coverage required to be maintained under the Showcase Loan in order to
accumulate with the mortgagee sufficient funds to pay all such insurance
premiums at least 30 days prior to the expiration of the insurance policies,
(ii) upon the occurrence of a TI Trigger Event, a leasing reserve account or
accounts (the "Showcase Leasing Reserve Account") to cover the cost of tenant
improvement expenses and leasing commissions incurred by the Showcase
Borrower including the Coke Tenant Allowance, to be funded in the amount of
the TI Trigger Event Cash Flow (a) prior to the Showcase Anticipated
Repayment Date, by the Showcase Borrower within 30 days of receipt of such
amount, and (b) after the Showcase Anticipated Repayment Date on each
Showcase Due Date, (iii) a capital reserve account (the "Showcase Capital
Reserve Account") to cover the cost of routine capital improvements
(excluding tenant improvements and leasing commissions and excluding the
costs associated with certain deferred maintenance items identified at the
time of the closing of the Showcase Loan), to be funded on each Showcase Due
Date in an amount equal to $2,375, (iv) a deferred maintenance reserve
account (the "Showcase Deferred Maintenance Reserve Account"), for the
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payment of certain repair work to be performed by the Showcase Borrower, to
be funded in the amount of $6,250 to the extent the Showcase Borrower failed
to perform such repair work within 60 days following the closing of the
Showcase Loan, (v) an unpaid tenant improvements and leasing commissions
account (the "Showcase TI Account"), funded at the closing of the Showcase
Loan in the initial amount of $2,296,899 for the payment of unpaid tenant
improvement and leasing commissions costs related to the leases of the
Showcase Major Tenants (other than the Coke Lease), (vi) if, as of any date,
the net operating income of the Showcase Property for the 12 month period
preceding the most recent fiscal year of the Showcase Borrower, beginning
with the fiscal year ending December 31, 1998, is less than $8,500,000, a low
debt service reserve account (the "Showcase Debt Service Reserve Account"),
to be funded on each Showcase Due Date with all funds remaining in the
Showcase Deposit Account after all Showcase Required Payments have been made.
If, as of any date, the net operating income for the Showcase Property for
the prior 12 calendar month period is less than $7,500,000 (a "Showcase Low
Debt Service Trigger Event"), or an event of default under the Showcase Loan
has occurred and is continuing, on each Showcase Due Date, the mortgagee will
apply the funds on deposit in the Showcase Debt Service Reserve Account as a
partial prepayment of the Showcase Loan. If, after the establishment of the
Showcase Debt Service Reserve Account, the trailing 12 month net operating
income for the Showcase Property exceeds $8,500,000 for four consecutive
quarters, and no event of default under the Showcase Loan has occurred and is
continuing, all funds in the Showcase Debt Service Reserve Account will be
released to the Showcase Borrower.
"Coke Tenant Allowance" means the amount on deposit in the Showcase
Leasing Reserve Account to be used for the purpose of paying the tenant
allowances due to the Coke Tenant under the Coke Lease, which amount may not
exceed $2,300,000.
"TI Trigger Event" means the occurrence of any of the following events:
(i) any of the Showcase Major Tenants vacates its respective space in the
Showcase Property, terminates its respective lease or for any reason ceases
paying rent under its lease, (ii) the mortgagee reasonably projects, as of
the seventh year of the term of the Showcase Loan, that net operating income
minus the sum of (a) the annual debt service on the Showcase Loan and (b)
$28,500 for the eighth year of the term of the Showcase Loan equals less than
$4,000,000, or (iii) the commencement of the ninth year of the term of the
Showcase Loan, unless the Coke Tenant has, prior to such time, entered into a
written agreement to extinguish its right to terminate the Coke Lease, as
described in "The Showcase Property--Certain Showcase Major Tenant Lease
Provisions" above.
"TI Trigger Event Cash Flow" means (i) from September 12, 1997 until the
date on which the Coke Tenant terminates the Coke Lease, as described in "The
Showcase Property--Certain Showcase Major Tenant Lease Provisions" above, 65%
of the Showcase Leasing Excess Cash Flow for the applicable month, provided,
however, that if, on or prior to September 11, 2005, the mortgagee in its
sole discretion reasonably determines that 65% of the Showcase Leasing Excess
Cash Flow will be insufficient to provide a balance in the Showcase Leasing
Reserve Account of at least $6,300,000 by September 11, 2007, then commencing
on September 12, 2005, the TI Trigger Event Cash Flow will mean 75% of the
Showcase Leasing Excess Cash Flow and (ii) from and after the date the Coke
Tenant terminates the Coke Lease, 100% of the Showcase Leasing Excess Cash
Flow for the applicable month, provided, however, that from and after the
Showcase Anticipated Repayment Date, the mortgagee may deposit into the
Showcase Leasing Reserve Account, such amount as it determines in its sole
discretion. In no event may the balance in the Showcase Leasing Reserve
Account exceed (a) $8,000,000 in the event a TI Trigger Event is caused by
the occurrence of any of the events provided for in clause (ii) or (iii) of
the definition of TI Trigger Event, or (b) $50 per square foot for any tenant
that is the subject of a TI Trigger Event pursuant to clause (i) of the
definition of TI Trigger Event, except with respect to the lease with United
Artists Theater Circuit, Inc., in which case the TI Trigger Event Cash Flow
will be limited to $25 per square foot, provided, however, that in the event
there has occurred a TI Trigger Event under both clause (i) and (ii) of the
definition of TI Trigger Event, then in such case the balance in the Showcase
Leasing Reserve Account will be governed by clause (a) above. The balance in
the Showcase Leasing Reserve Account is required to be released at the
beginning of the tenth year of the term of the Showcase Loan if the Coke
Tenant does not exercise its termination rights and no event described in
clause (i) under TI Trigger Event has occurred.
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CASH MANAGEMENT; LOCKBOX. The Showcase Borrower has established and is
required to maintain a deposit account (the "Showcase Deposit Account") and a
property-level sweep account (the "Showcase Property Sweep Account"), each of
which is under the sole dominion and control of the mortgagee. The Showcase
Borrower is required to direct all tenants at the Showcase Property to make
all rent checks payable directly to the Showcase Property Sweep Account, and
to deliver all checks and payments directly to the Showcase Property Manager
for deposit into the Showcase Deposit Account or the Showcase Property Sweep
Account. The Showcase Borrower is required to instruct the Showcase Property
Manager to deposit such checks and payments into the Showcase Property Sweep
Account or the Showcase Deposit Account within one business day after receipt
thereof. The funds on deposit in the Showcase Property Sweep Account are
required to be swept daily into the Showcase Deposit Account, and from and
after the Showcase Anticipated Repayment Date or if an event of default under
the Showcase Loan has occurred and is continuing, the Showcase Borrower is
required to direct all tenants at the Showcase Property to deliver such
checks and payments directly to the mortgagee or its agent.
On each Showcase Due Date, provided no default or event of default under
the Showcase Loan has occurred and is continuing, the mortgagee is required
to distribute funds from the Showcase Deposit Account in the following order
of priority: (i) to fund the Showcase Tax and Insurance Reserve Account, (ii)
to pay the Showcase Monthly Debt Service Payment Amount, (iii) to fund the
Showcase Capital Reserve Account, (iv) prior to the Showcase Anticipated
Repayment Date, to fund the Showcase Deferred Maintenance Reserve Account,
(v) to the extent the Showcase Debt Service Reserve Account is required to be
maintained or from and after the Showcase Anticipated Repayment Date, to the
Showcase Borrower in an amount equal to the budgeted operating expenses (or
if the Showcase Borrower timely requests additional amounts to pay operating
expenses, up to an additional 5% of the budgeted amount on a cumulative
year-to-date basis (less any amounts previously received by the Showcase
Borrower pursuant to this parenthetical) for the Showcase Property, but in no
event more than 5% of such month's budgeted amount for operating expenses)
for the month immediately prior to the month in which such Showcase Due Date
occurs (provided that the Showcase Borrower has delivered to the mortgagee an
officer's certificate certifying that there is not outstanding for more than
60 days any amounts claimed by any creditor to be due and owing from the
Showcase Borrower (except for claims the Showcase Borrower is in good faith
contesting and the payment for which it has escrowed with the mortgagee), and
that the amounts disbursed to the Showcase Borrower pursuant to this clause
(v) is required to be used solely to pay its creditors for costs and expenses
incurred to date), (vi) to the extent the Showcase Debt Service Reserve
Account is required to be maintained or from and after the Showcase
Anticipated Repayment Date, to the Showcase Borrower in an amount equal to
the budgeted capital expenses for the month immediately prior to the month in
which such Showcase Due Date occurs (provided that the Showcase Borrower has
delivered to the mortgagee an officer's certificate certifying that there is
not outstanding for more than 60 days any amounts claimed by any creditor to
be due and owing from the Showcase Borrower for prior capital improvements
(except for claims the Showcase Borrower is in good faith contesting and the
payment for which it has escrowed with the mortgagee), and that the amounts
disbursed to the Showcase Borrower pursuant to this clause (vi) is required
to be used solely to pay for budgeted capital expenditures, (vii) to pay the
costs of extraordinary capital expenditures approved in writing by the
mortgagee, (viii) if applicable, to fund the Showcase Debt Service Reserve
Account, (ix) from and after the Showcase Anticipated Repayment Date, to fund
the Showcase Leasing Reserve Account, (x) from and after the Showcase
Anticipated Repayment Date, to prepay the principal due under the Showcase
Loan until the principal balance of the Showcase Loan is paid in full, (xi)
from and after the Showcase Anticipated Repayment Date, to pay the Showcase
Excess Interest, (xii) to the extent payable following an event of default
under the Showcase Loan, interest accrued and unpaid at the excess of the
default rate over the applicable interest rate, (xiii) if no event of default
under the Showcase Loan has occurred, to the Showcase Borrower or its
designee, any funds remaining in the Showcase Deposit Account (the "Showcase
Remaining Funds"), provided that, prior to the Showcase Anticipated Repayment
Date, in the mortgagee's sole discretion, the mortgagee may permit such a
distribution notwithstanding the occurrence of such an event of default.
Prior to the Showcase Anticipated Repayment Date, all Showcase Remaining
Funds are required to be used first by the Showcase Borrower to pay operating
expenses, tenant improvements and leasing commissions (in such
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priority) for the previous month, and may be deposited by the Showcase
Borrower into a centralized cash management system administered by Forest
City Enterprises, Inc. for itself and its subsidiaries (including the
Showcase Borrower), unless (i) a TI Trigger Event has occurred, (ii) a
bankruptcy or insolvency event has occurred with respect to Forest City
Enterprises, Inc., or (iii) the Showcase Debt Service Reserve Account is
required to be maintained. Upon the occurrence of any of the events described
in clauses (i), (ii) or (iii) above, the Showcase Borrower is prohibited from
depositing Showcase Remaining Funds into the cash management system and is
required to deposit the Showcase Remaining Funds into a separate account
which may not be commingled with any other funds of affiliates of the
Showcase Borrower.
TRANSFER OF THE SHOWCASE PROPERTY AND INTEREST IN THE SHOWCASE BORROWER;
ENCUMBRANCES. Unless permitted by the Showcase Loan documents as described
below, and with the exception of leases entered into in accordance therewith
and Showcase Permitted Encumbrances, the Showcase Borrower is not permitted
to (A) sell, assign, convey, transfer or otherwise dispose of or encumber
legal, beneficial or equitable interests in all or any part of the Showcase
Property, (B) permit or suffer any owner, directly or indirectly, of a
beneficial interest in the Showcase Property to transfer such interest,
whether by transfer of stock or other beneficial interest in any entity or
otherwise, (C) mortgage, hypothecate or otherwise encumber or grant a
security interest in all or any part of the Showcase Property, or (D) file a
declaration of condominium with respect to the Showcase Property.
Except as may be described below, the Showcase Borrower may only sell,
assign, convey, transfer or otherwise dispose of legal or equitable title to
or any interest in the Showcase Property if: (A) after giving effect to the
proposed transaction, (i) the Showcase Property will be owned by a single
purpose entity which, at the time of such transfer, will be in compliance
with certain single purpose bankruptcy-remote representations, warranties and
covenants contained in the Showcase Loan documents relating to the Showcase
Loan and has assumed in writing and agreed to comply with the terms of the
Showcase Loan documents, (ii) the Showcase Property is managed by a Showcase
Acceptable Manager, (iii) the mortgagee has received satisfactory evidence
that the tenant under the Coke Lease has failed to exercise its right of
first refusal and has approved such transfer, (iv) no event of default under
the Showcase Loan has occurred and is continuing, (v) the mortgagee has
consented to such transfer (which consent may not be unreasonably withheld),
(vi) the mortgagee has received written confirmation from the Rating Agencies
that there will be no downgrade, qualification or withdrawal of the then
current ratings of the Certificates as a result of such transfer, and (vii)
the mortgagee has received a legal opinion confirming that the assets of the
Showcase Borrower will not be substantively consolidated with the assets of
certain owners or controlling persons of the Showcase Borrower in a
bankruptcy or similar proceeding, and (B) prior to any such transaction, the
proposed transferee delivers to the mortgagee an officer's certificate giving
certain assurances to the general effect that the transferee is not an
employee benefit plan, or, in any event, the transfer will not give rise to
"prohibited transactions" under ERISA or similar laws.
Notwithstanding the foregoing, a transfer of a direct or indirect
beneficial interest in the Showcase Borrower will be permitted, if, among
other things (i) after giving effect to the proposed transaction, the
Showcase Borrower will be a single purpose entity in compliance with the
single purpose representations, warranties and covenants in the Showcase Loan
documents, (ii) the mortgagee has consented to such transfer (which consent
may not be unreasonably withheld or delayed), (iii) the mortgagee has
received a legal opinion confirming that the assets of the Showcase Borrower
will not be substantively consolidated with the assets of certain owners or
controlling persons of the Showcase Borrower in a bankruptcy or similar
proceeding, (iv) the mortgagee has received satisfactory evidence that the
tenant under the Coke Lease has failed to exercise its right of first refusal
and has approved such transfer, and (v) the mortgagee has received written
confirmation from the Rating Agencies that there will be no downgrade,
qualification or withdrawal of the then current ratings of the Certificates
as a result of such transfer. The foregoing requirements in clauses (i)
through (v) will not apply to any transfer of a direct or indirect limited
partnership interest in the Showcase Borrower so long as such transfer does
not result in the transferee owning greater than a 49% direct or indirect
interest in, or controlling, the Showcase Borrower or any other person that
is required to be or has been established as a single purpose entity pursuant
to the Showcase Loan documents.
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INSURANCE. The Showcase Borrower is required to maintain, at its sole
cost and expense, for the mutual benefit of the Showcase Borrower and the
mortgagee, the following insurance: (a) polices of insurance against loss or
damage by standard perils included within the classification "All Risks of
Physical Loss", maintained in an aggregate amount equal to the then full
replacement cost of the Showcase Property and related assets (without
deduction for physical depreciation), with deductibles no greater than those
in existence at the time of the closing of the Showcase Loan; (b) flood
insurance (if any part of the Showcase Property is located in an area
identified by the Federal Emergency Management Agency as an area federally
designated a "100 year flood plain" and flood insurance is generally
available at reasonable premiums and in such amounts as generally are
required by institutional lenders for similar properties (or if not so
available from a private carrier, from the federal government at commercially
reasonable premiums to the extent available)) in either case, in an amount at
least equal to the lesser of the Showcase Loan amount or the maximum limit of
coverage available under said program; (c) comprehensive general liability
insurance, including broad form property damage, blanket contractual and
personal injuries coverages and containing minimum limits per occurrence of
$1,000,000 (inclusive of a $250,000 self-insurance component), and at least
$50,000,000 excess or umbrella liability insurance and at all times, at least
$10,000,000 excess and/or umbrella liability insurance is required to be
available (such that at all times such coverage is required to be maintained
against which no claim has been asserted) and maintained for any and all
claims, including legal liability imposed on the Showcase Borrower and all
related court costs and attorneys fees; (d) rental loss and/or business
interruption insurance in an amount sufficient to avoid any coinsurance
penalty and equal to the greater of (i) the estimated gross revenue from the
operation of the Showcase Property for a period of up to the next succeeding
12 months with an additional six months available provided repair work is
commenced in a timely manner or (ii) projected operating expenses needed to
maintain and operate the Showcase Property, for a period of up to the next
succeeding two years as the same may be adjusted; (e) insurance against loss
or damage from leakage of sprinkler systems and explosion of steam boilers,
air conditioning equipment, high pressure piping, machinery and equipment,
pressure vessels or similar apparatus and against loss of occupancy or use
arising from any such breakdown, in such amounts as are generally available
at reasonable premiums and are generally required by institutional lenders
for property comparable to the Showcase Property; (f) worker's compensation
insurance with respect to employees (if any) of the Showcase Borrower, as and
to the extent required by applicable law, regulation or governmental
authority; (g) during any period of repair or restoration, builder's "all
risk" insurance in an amount not less than full completion value; (h)
coverage to compensate for the cost of demolition and the increased cost of
construction for the Showcase Property in an amount satisfactory to the
mortgagee, to the extent available at commercially reasonable rates; and (i)
such other insurance as may from time to time be reasonably required by the
mortgagee. Insurers for all-risk coverage are required to have a claims
paying ability rated "AA" or better by the Rating Agencies, provided that the
policies in effect as of the closing of the Showcase Loan, or any other
insurance program maintained by the Showcase Borrower (but not a transferee
of the Showcase Borrower or the Showcase Property) which is substantially the
same as the insurance program in place as of the date of the closing of the
Showcase Loan (including the claims paying ability rating as of the date of
the closing of the Showcase Loan) are deemed satisfactory.
CASUALTY AND CONDEMNATION. Following the occurrence of a casualty or
condemnation affecting the Showcase Property, the Showcase Borrower,
regardless of whether proceeds are available, is required to promptly proceed
to restore, repair, replace or rebuild the affected Showcase Property to the
extent practicable to be of at least equal value and of substantially the
same character as prior to such casualty or condemnation, all to be effected
in accordance with the terms of the Showcase Loan documents applicable to
alterations.
In the event of a casualty at the Showcase Property that involves a loss
of less than 30% of the amount of the Showcase Loan or a condemnation at the
Showcase Property that involves a loss of less than 15% of the amount of the
Showcase Loan, the mortgagee is required to permit the application of the
proceeds resulting therefrom (after reimbursement of any expenses incurred by
the mortgagee) to pay or reimburse the Showcase Borrower for the cost of
restoring, repairing, replacing or rebuilding the Showcase Property, in the
manner described below, provided and on the condition that, no default or
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event of default has occurred and is then continuing and, in the reasonable
judgment of the mortgagee: (i) the Showcase Property can be restored to an
economic unit not less valuable (after taking into account the effect of
terminations of any lease or material agreements due to such casualty or
condemnation) and not less useful than the same was prior to such casualty or
condemnation, (ii) the Showcase Property after such restoration will
adequately secure the outstanding principal balance of the Showcase Loan,
(iii) the restoration can be completed by the earliest to occur of: (A) the
180th day following the casualty or condemnation, or such longer period as
may reasonably be required provided the Showcase Borrower has received
written confirmation from the Rating Agencies that there will be no
downgrade, qualification or withdrawal of the then current ratings of the
Certificates as a result of such longer period, (B) the 180th day prior to
the Showcase Maturity Date, and (C) with respect to a casualty, the
expiration of the payment period on the rental-loss insurance coverage in
respect of such casualty, and (iv) during the period of the restoration, the
sum of (A) income derived from the Showcase Property, plus (B) proceeds of
rent loss insurance or business interruption insurance, if any, will equal or
exceed 105% of the sum of (1) expenses in connection with the operation of
the Showcase Property and (2) the debt service on the Showcase Loan.
If any of the conditions set forth in the foregoing proviso is not
satisfied, then, unless the mortgagee elects otherwise, in its sole
discretion, the proceeds are required to be applied to the prepayment of the
Showcase Loan. If the casualty involves a loss of 30% or more of the amount
of the Showcase Loan, or if the condemnation involves a loss of 15% or more
of the amount of the Showcase Loan, then the Showcase Borrower may elect to
prepay the Showcase Loan within 120 days if the mortgagee elects (such
election to be exercised by notice to the Showcase Borrower which is required
to be given within 30 days after the receipt of the proceeds) to apply the
net proceeds to the prepayment of the Showcase Loan. Any such prepayment will
be without the payment of a yield maintenance or prepayment premium or
penalty other than a yield maintenance charge if an event of default under
the Showcase Loan has occurred and is continuing. So long as no event of
default under the Showcase Loan has occurred and is continuing, the Showcase
Borrower will have the right to receive directly casualty proceeds of
$250,000 or less.
If the Showcase Borrower is entitled to reimbursement out of proceeds,
such proceeds are required to be disbursed from time to time upon the
mortgagee being furnished with (i) such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements, bonds,
plats of survey and such other evidences of cost, payment and performance as
the mortgagee may reasonably require and approve, and (ii) all plans and
specifications for such restoration, which plans and specifications are
required to be approved by the mortgagee prior to commencement of any work
(such approval not to be unreasonably withheld or delayed). In addition, no
payment made prior to the final completion of the restoration is permitted to
exceed 95% of the value of the work performed from time to time; funds other
than proceeds will be disbursed prior to disbursement of such proceeds; and
at all times, the undisbursed balance of such proceeds remaining in the hands
of the mortgagee, together with funds deposited for that purpose or
irrevocably committed to the satisfaction of the mortgagee by or on behalf of
the Showcase Borrower for that purpose, is required to be at least sufficient
in the reasonable judgment of the mortgagee to pay for the cost of completion
of the restoration, free and clear of all liens. Prior to any disbursement,
the mortgagee must have received evidence reasonably satisfactory to it of
the estimated cost of completion of the restoration, and the Showcase
Borrower must have deposited with the mortgagee eligible collateral in an
amount equal to the excess (if any) of such estimated cost of completion over
the net proceeds. Any surplus which may remain out of proceeds received
pursuant to a casualty will be paid to the Showcase Borrower after payment of
such costs of restoration. Any surplus which may remain out of proceeds
received pursuant to a condemnation will be escrowed with mortgagee as
security for the Showcase Loan after payment of such costs of restoration.
FINANCIAL REPORTING. The Showcase Borrower is required to furnish to the
mortgagee within 85 days following the end of each fiscal year, a complete
copy of the Showcase Borrower's annual financial statements and in addition
will furnish to the mortgagee a complete copy of such financial statements,
audited by a "Big Six" accounting firm or another independent certified
public accounting firm reasonably acceptable to the mortgagee within 120 days
following the end of each fiscal year, in accordance with
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GAAP, covering the Showcase Borrower and the Showcase Property for such
fiscal year and containing balance sheets and statements of profit and loss.
Together with its annual financial statements, the Showcase Borrower is also
required to furnish to the mortgagee an officer's certificate certifying as
of the date thereof whether, to the Showcase Borrower's knowledge, there
exists a default or an event of default, and if such default or event of
default exists, the nature thereof, the period of time it has existed and the
action then being taken to remedy the same.
In addition, the Showcase Borrower is required to furnish to the mortgagee
on or before the 30th day after the end of each calendar month, amongst other
things, the following items, accompanied by an officer's certificate on a
quarterly basis: (i) any notice received from a tenant under a lease
threatening non-payment of rent or other default, alleging or acknowledging a
default by landlord, requesting a termination or modification of a lease or
notifying the Showcase Borrower of the exercise or non-exercise of any option
provided for in such tenant's lease, or any other similar material
correspondence received by the Showcase Borrower from tenants during the
subject month; (ii) monthly account receivable statements in a form
reasonably approved by the mortgagee and year-to-date operating statements,
prepared for each calendar month, noting net operating income and other
information necessary and sufficient to fairly represent the results of
operation of the Showcase Property during such calendar month, all in form
reasonably satisfactory to the mortgagee and containing a statement of the
capital expenditures, leasing commissions and tenant improvements and
accounts payable made in respect of the Showcase Property; (iii) a current
rent roll with respect to the Showcase Property in form reasonably
satisfactory to the mortgagee; and (iv) a comparison of the budgeted income
and expenses and the actual income and expenses on a quarterly basis and year
to date basis for the Showcase Property, together with a detailed explanation
of any year-to-date variances of at least 5% or $40,000 (whichever is
greater) between budgeted and actual amounts for such period and
year-to-date, in form reasonably satisfactory to the mortgagee. In addition,
the Showcase Borrower is required to furnish the mortgagee, within 25 days
after request, a report from a "Big Six" independent certified public
accounting firm setting forth the results of performance of agreed-upon
procedures with respect to the amounts set forth in the most current
year-to-date operating statements as well as auditors' comfort letters.
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<PAGE>
Graphics Omitted: Photographs of Crystal City properties in Arlington and
Crystal City; both Crystal Gateway North and 1919 South Eads
[Grande Loan II Logo]
<PAGE>
CRYSTAL CITY POOL: THE BORROWER; THE PROPERTIES
THE LOAN. The Crystal City Pool Loan had a principal balance as of the
Cut-off Date of approximately $76,608,478. It is secured by a first priority
deed of trust lien encumbering the fee in three commercial office buildings
located in Arlington, Virginia, known as Crystal Gateway North ("Crystal
Gateway"), 1919 South Eads Street ("South Eads Street"), and Arlington Plaza
("Arlington Plaza," and collectively, the "Crystal City Pool Properties," or
individually, each a "Crystal City Pool Property"). The Crystal City Pool
Properties are cross-defaulted and cross-collateralized with each other. The
Crystal City Pool Loan was originated by GMACCM, on behalf of GSMC, on
October 31, 1997.
THE BORROWER. CESC Crystal/Rosslyn L.L.C. (the "Crystal City Pool
Borrower") is a Delaware limited liability company formed solely for the
purpose of owning, operating and managing the Crystal City Pool Properties.
The Crystal City Pool Borrower has no material assets other than the Crystal
City Pool Properties and related interests. The sole beneficial owner of the
Crystal City Pool Borrower is Charles E. Smith Commercial Realty, L.P. ("CES
Commercial Realty"), a Delaware limited partnership. Charles E. Smith Real
Estate Services L.P., which is the property manager for the Crystal City Pool
Properties (the "Crystal City Pool Manager"), is an affiliate of CES
Commercial Realty.
SECURITY. The Crystal City Pool Loan is a non-recourse loan, secured only
by the fee interests of the Crystal City Pool Borrower in the Crystal City
Pool Properties and certain other collateral relating thereto (including
assignments of leases and rents, assignments of the Crystal City Pool
Management Agreements, assignments of agreements, licenses, permits and
contracts, and funds in certain accounts). Subject to certain limited
exceptions, neither the Crystal City Pool Borrower nor any of its affiliates
is personally liable for payment of the Crystal City Pool Loan. The Crystal
City Pool Borrower has represented that it owns good and marketable fee
simple to the Crystal City Pool Properties free and clear of all liens other
than encumbrances described in the applicable title insurance policy and
other encumbrances permitted by the mortgagee under the Crystal City Pool
Loan documents (the "Crystal City Pool Permitted Encumbrances"). The title
insurance policy issued upon the origination of the Crystal City Pool Loan
insures that the deed of trust securing the Crystal City Pool Loan
constitutes a valid and enforceable first lien on the Crystal City Pool
Properties, subject to certain exceptions and exclusions from coverage set
forth in the policy.
THE PROPERTIES. Crystal Gateway is comprised of the Crystal City Pool
Borrower's fee simple interest in approximately 2.88 acres of land improved
with an eight-story Class A office building and a four-level subterranean
parking facility containing approximately 919 parking spaces. Crystal Gateway
was built in 1987 and contains approximately 307,716 square feet of net
rentable office space and approximately 4,287 square feet of storage space.
South Eads Street is comprised of the Crystal City Pool Borrower's fee simple
interest in approximately 1.52 acres of land improved with a four-story Class
A office building and a three-level subterranean parking facility containing
approximately 351 parking spaces. South Eads Street was built in 1990 and
contains approximately 93,330 square feet of net rentable office space.
Arlington Plaza is comprised of the Crystal City Pool Borrower's fee simple
interest in approximately 1.15 acres of land improved with an 11-story
triangular shaped office building and a four-level subterranean parking
facility containing approximately 332 parking spaces. Arlington Plaza was
built in 1985 and contains approximately 174,083 square feet of net rentable
office space.
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OCCUPANCY AND MAJOR TENANTS. As of March 1, 1998, Crystal Gateway was
approximately 96.1% leased, South Eads Street was approximately 94.2% leased,
and Arlington Plaza was 100% leased. The ten largest tenants based upon
annualized base rent are shown below:
TEN LARGEST TENANTS BASED ON ANNUALIZED BASE RENT--CRYSTAL CITY POOL LOAN
<TABLE>
<CAPTION>
APPROXIMATE
TENANT APPROXIMATE % OF TOTAL ANNUALIZED
GLA % OF TOTAL ANNUALIZED ANNUALIZED BASE RENT LEASE
TENANT PROPERTY (SF) GLA BASE RENT ($) BASE RENT PER SF EXPIRATION
- ------------------------- ---------------- --------- ------------- ------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
US Government ...........Crystal Gateway,
South Eads
Street &
Arlington Plaza 245,200 42.3% $ 6,060,312 41.2% $24.72 1/99 -3/02
Systems Research ........Arlington Plaza 121,450 21.0 3,328,848 22.6 27.41 9/98 -6/01
General Dynamics Adv.
Technology .............South Eads
Street 29,275 5.1 758,232 5.2 25.90 01/01
Vitro Corporation .......South Eads
Street 20,827 3.6 602,424 4.1 28.93 03/01
Georgetown University ...Arlington Plaza 15,308 2.6 424,368 2.9 27.72 04/02
Advanced Eng. & Research South Eads
Street 13,330 2.3 403,092 2.7 30.24 06/00
H.J. Ford Associates .....Crystal Gateway 10,358 1.8 282,408 1.9 27.26 9/98 -11/98
Bonneville International Arlington Plaza 11,378 2.0 276,792 1.9 24.33 06/04
Management Consulting ...Crystal Gateway 7,022 1.2 193,104 1.3 27.50 10/02
GPS Technologies, Inc. ...South Eads
Street 6,364 1.1 183,804 1.2 28.88 02/99
--------- ------------- ------------- -------------
Total/Average (Ten
Largest) ................ 480,512 82.9% $12,513,384 85.0% $26.04
Remaining ................ 98,904 17.1 2,199,960 15.0 22.24
--------- ------------- ------------- -------------
Total/Average ........... 579,416 100.0% $14,713,344 100.0% $25.39
========= ============= ============= =============
</TABLE>
LEASE EXPIRATION SCHEDULE. The following table shows scheduled lease
expirations (assuming no renewal options) for tenants under leases as of
March 1, 1998 at the Crystal City Pool Properties:
LEASE EXPIRATION SCHEDULE--CRYSTAL CITY POOL LOAN
<TABLE>
<CAPTION>
ANNUALIZED
YEAR ENDING EXPIRING PERCENT OF ANNUALIZED PERCENT OF BASE RENT PER
DECEMBER 31, SQUARE FEET TOTAL SQUARE FEET BASE RENT BASE RENT SQUARE FOOT*
- -------------- ------------- ----------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
1998 .......... 53,742 9.3% $ 1,433,436 9.7% $26.67
1999 .......... 244,607 42.2 6,188,340 42.1 25.30
2000 .......... 50,087 8.6 1,357,320 9.2 27.10
2001 .......... 168,707 29.1 4,620,492 31.4 27.39
2002 .......... 32,434 5.6 812,160 5.5 25.04
2003 .......... -- 0.0 -- 0.0 --
2004........... 12,378 2.1 301,596 2.0 24.37
Vacant ........ 17,461 3.0 -- 0.0 --
------------- ----------------- ------------- ------------
Total/Average. 579,416 100.0% $14,713,344 100.0% $25.39
============= ================= ============= ============
</TABLE>
- ------------
* Expiring square feet and annualized base rent per square foot excludes
square feet and annualized base rent attributable to storage spaces and
parking garages.
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OPERATING HISTORY. The following table shows certain unaudited
information regarding the operating history of the Crystal City Pool
Properties:
<TABLE>
<CAPTION>
UNDERWRITTEN
1995 1996 1997 NET CASH FLOW
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
REVENUE................. $15,466,892 $15,541,563 $15,583,254 $14,812,521
EXPENSES
TOTAL EXPENSES ......... 4,959,970 4,596,410 4,731,709 4,756,665
NET OPERATING INCOME .. 10,506,922 10,945,153 10,851,545 10,055,856
CAPITAL EXPENSES
TOTAL CAPITAL EXPENSES -- -- -- 281,417
------------- ------------- ------------- ---------------
NET CASH FLOW .......... $10,506,922 $10,945,153 $10,851,545 $ 9,774,441
============= ============= ============= ===============
</TABLE>
APPRAISALS. The appraisals, prepared by Cushman & Wakefield, Inc., dated
as of October 2, 1997 and October 10, 1997, determined an aggregate value of
the Crystal City Pool Properties of approximately $115,100,000, resulting in
a Cut-Off Date LTV of approximately 66.6%. Each Crystal City Pool Property
appraisal was prepared in accordance with the Uniform Standards of
Professional Appraisal Practice. See "Risk Factors--The Mortgage
Loans--Limitations on Appraisals" herein.
ENGINEERING REPORTS. Property Condition Reports on the Crystal City Pool
Properties were completed prior to the origination of the Crystal City Pool
Loan. The Property Condition Reports concluded that the Crystal City Pool
Loan Properties were generally in good physical condition and identified no
immediate physical needs.
ENVIRONMENTAL ASSESSMENT. A Phase I environmental site assessment dated
October 20, 1997 was completed by a third-party environmental firm for each
Crystal City Pool Property. The reports did not reveal any environmental
liability that the Seller believes would have a material adverse impact on
the Crystal City Pool Borrower's business, assets or results of operations
taken as a whole. Nevertheless, there can be no assurance that all
environmental conditions and risks were identified in such reports. See "Risk
Factors--The Mortgage Loans--Environmental Law Considerations" herein.
PROPERTY MANAGEMENT. The Crystal City Pool Properties are managed by the
Crystal City Pool Manager pursuant to three separate management agreements
(the "Crystal City Pool Management Agreements"). The Crystal City Pool
Manager is responsible for the management and operation of each Crystal City
Pool Property in accordance with the standards for the management of a
first-class commercial office building in the metropolitan Washington, D.C.
area. Under the terms of each Crystal City Pool Management Agreement, the
Crystal City Pool Manager is entitled to a management fee equal to 3% of
gross revenues of the Crystal City Pool Properties and a leasing fee equal to
2% of gross lease revenues of the Crystal City Pool Properties for each lease
signed (provided that such fee may be reduced to 1% in certain circumstances
if a cooperating broker procures such tenant). In addition, the Crystal City
Pool Manager is entitled to an initial leasing fee for each lease negotiated
with a new tenant or for each lease or lease amendment for additional space
negotiated with an existing tenant, equal to 1% of the annual base rent for
the first 5 years and 0.5% thereafter. The terms of the Crystal City Pool
Management Agreements for South Eads Street and Arlington Plaza expire on
March 31, 2000 and December 31, 2006, respectively and the term of the
Crystal City Pool Management Agreement for Crystal Gateway has been
automatically renewed to July 7, 1998. Each Crystal City Pool Management
Agreement will be automatically renewed on a year to year basis unless
terminated by 90 days' notice given by either of the parties to the agreement
prior to the end of any such year.
Pursuant to three separate agreements among the mortgagee, the Crystal
City Pool Borrower and the Crystal City Pool Manager (the "Crystal City Pool
Consents of Manager"), the Crystal City Pool Manager has agreed that (i) upon
the occurrence and continuation of an event of default under the Crystal City
Pool Loan, the mortgagee may exercise all rights of the Crystal City Pool
Borrower to terminate the Crystal City Pool Management Agreements on 30 days'
notice without any penalty or fee
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(other than accrued and unpaid fees thereunder) and (ii) it will not amend
or modify the Crystal City Pool Management Agreements without the prior
written consent of the mortgagee (which consent will not be unreasonably
withheld or delayed). Unless otherwise waived by the mortgagee, upon the
occurrence of an event of default under the Crystal City Pool Loan documents,
the Crystal City Pool Borrower will, within five business days after the
mortgagee's written request, issue a notice of termination to terminate the
Crystal City Pool Management Agreements and replace the Crystal City Pool
Manager with a Crystal City Pool Acceptable Manager, on commercially
reasonable terms and conditions.
The Crystal City Pool Borrower has agreed that, while the Crystal City
Pool Loan is outstanding, it will retain the Crystal City Pool Manager as its
asset manager for each of the Crystal City Pool Properties (provided the
foregoing will not be applicable with respect to any transferee borrower
permitted as described in "--Transfer of the Crystal City Pool Properties and
Interests in the Crystal City Pool Borrower; Encumbrances"). Any asset
manager (other than the Crystal City Pool Manager or its affiliates) retained
by a transferee borrower must receive written confirmation from the Rating
Agencies that the retention of such property manager will not in and of
itself, result in a reduction, withdrawal or qualification of any rating then
assigned to any outstanding Certificates.
"Crystal City Pool Acceptable Manager" means a reputable and experienced
professional management company and (i) if such manager is to manage two or
less Crystal City Pool Properties (other than the Crystal City Pool
Properties managed by such manager as of the initial closing of the Crystal
City Pool Loan), it will have under management, at the time of its engagement
as manager, leasable square footage of the same property type as such Crystal
City Pool Properties equal to the lesser of 1,000,000 leasable square feet or
three times the leasable square feet of such Crystal City Pool Properties
(excluding the Crystal City Pool Properties), or (ii) if such manager is to
manage all three Crystal City Pool Properties, the mortgagee must have
received written confirmation from the Rating Agencies that the retention of
such property manager will not in and of itself, result in a reduction,
withdrawal or qualification of any rating then assigned to any outstanding
Certificates.
CRYSTAL CITY POOL: THE LOAN
PAYMENT TERMS. The Crystal City Pool Loan bears interest at a fixed rate
per annum equal to 6.904% (the "Crystal City Pool Initial Interest Rate")
through and including November 10, 2007. From and after November 11, 2007
(the "Crystal City Pool Anticipated Repayment Date"), the Crystal City Pool
Loan accrues interest at a fixed rate per annum equal to 8.904% (the "Crystal
City Pool Revised Interest Rate"). The Crystal City Pool Loan matures on
November 11, 2027 (the "Crystal City Pool Maturity Date"). As described
below, if the Crystal City Pool Borrower does not prepay the Crystal City
Pool Loan on the Crystal City Pool Anticipated Repayment Date, the Crystal
City Pool Borrower will be required to pay interest at the Crystal City Pool
Initial Interest Rate (together with principal, as described below), and
interest accrued equal to the excess of the Crystal City Pool Revised
Interest Rate over the Crystal City Pool Initial Interest Rate will be
deferred and added to the outstanding indebtedness under the Crystal City
Pool Loan and will, to the extent permitted by applicable law, earn interest
at the Crystal City Pool Revised Interest Rate (such accrued and deferred
interest and interest thereon (which is deferred), the "Crystal City Pool
Excess Interest"). Interest on the Crystal City Pool Loan is calculated for
any period based on a 360 day year of twelve 30-day months.
The Crystal City Pool Loan requires monthly payments (the "Crystal City
Pool Monthly Debt Service Payment Amount") of principal and interest of
approximately $507,328 (based on a 30-year amortization schedule and the
Crystal City Pool Initial Interest Rate). Payment of the balance of the
principal, if any, together with all accrued and unpaid interest is required
on the Crystal City Pool Maturity Date. Each Crystal City Pool Monthly Debt
Service Payment Amount is due and payable on the 11th day of each calendar
month or, if such day is not a business day, then the immediately preceding
business day (a "Crystal City Pool Due Date"). Commencing from and after the
Crystal City Pool Anticipated Repayment Date and on each Crystal City Pool
Due Date thereafter, in addition to the Crystal City Pool Monthly Debt
Service Payment Amount, the Crystal City Pool Borrower is required to apply
100% of the Crystal City Pool Excess Cash Flow for the month preceding the
month in which the Crystal City Pool Due Date occurs to the outstanding
principal balance of the Crystal City Pool Loan until the Crystal City Pool
Loan has been paid in full.
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"Crystal City Pool Excess Cash Flow" means the excess of (i) the amounts
held as collected funds in the Crystal City Pool Deposit Account after the
application of funds: (a) to fund the Crystal City Pool Tax and Insurance
Reserve Account as described in "--Reserves" below, (b) to pay the Crystal
City Pool Monthly Debt Service Payment Amount including, if applicable,
Crystal City Pool Excess Interest; (c) to fund the amounts required to be
paid into the Crystal City Pool Leasing Reserve Account as described in
"--Reserves" below; (d) to fund the amounts required to be paid into the
Crystal City Pool Capital Reserve Account as described in "--Reserves" below;
(e) to fund the Crystal City Pool Debt Service Reserve Account as described
in "--Reserves" below; and (f) to the mortgagee (to the extent applicable),
the amount equal to interest accrued and unpaid under the Crystal City Pool
Loan at the excess of the default rate over the applicable interest rate;
over (ii) the Crystal City Pool Borrower's budgeted operating expenses,
capital expenditures and other funds reasonably expended by the Crystal City
Pool Borrower due to conditions at the Crystal City Pool Properties posing an
immediate danger to health or safety or constituting violations of law
requiring remediation within less than 30 days, as described in "--Cash
Management; Lockbox" below. The scheduled principal balance of the Crystal
City Pool Loan as of the Crystal City Pool Anticipated Repayment Date will be
approximately $65,925,554.
After the occurrence and during the continuance of an event of default
under the Crystal City Pool Loan, to the extent permitted by applicable law,
the entire outstanding principal balance of the Crystal City Pool Loan along
with due and unpaid interest thereon will bear interest at a per annum
default rate equal to the lesser of (a) the maximum rate permitted by
applicable law, or (b) the greater of (x) 3% above the Crystal City Pool
Initial Interest Rate or the Crystal City Pool Revised Interest Rate, as
applicable, or (y) 1% above the "prime rate" as published from time to time
in The Wall Street Journal.
PREPAYMENT. Voluntary prepayment is prohibited under the Crystal City Pool
Loan until 30 days prior to the Crystal City Pool Anticipated Repayment Date
(subject to defeasance rights afforded to the Crystal City Pool Borrower),
except in connection with certain casualty or condemnation events, and to
cure an event of default by elimination of a Crystal City Pool Property
within five business days of such event of default. From and after the
Crystal City Pool Anticipated Repayment Date, the Crystal City Pool Loan may
be voluntarily prepaid in whole or in part on any Crystal City Pool Due Date
without payment of a yield maintenance charge or prepayment premium.
If all or any part of the principal amount of the Crystal City Pool Loan
is prepaid upon an acceleration of the Crystal City Pool Loan following the
occurrence of an event of default under the Crystal City Pool Loan, the
Crystal City Pool Borrower will be required to make a yield maintenance
payment in an amount equal to the greater of (x) 1% of the outstanding
principal balance of the Crystal City Pool Loan being prepaid, and (y) the
excess, if any, of (i) the sum of (A) the aggregate respective present values
of all scheduled interest payments in respect of the Crystal City Pool Loan
(or the portion of all such interest payments corresponding to the portion of
the principal of the Crystal City Pool Loan to be prepaid upon acceleration)
for the period from the date of such prepayment to the Crystal City Pool
Anticipated Repayment Date, discounted monthly at a rate equal to a specified
treasury constant yield and based on a 360-day year of twelve 30-day months
and (B) the aggregate respective present values of all scheduled principal
payments in respect of the Crystal City Pool Loan (or the then unpaid portion
thereof to be prepaid upon acceleration) were such amount paid in full on the
Crystal City Pool Maturity Date, discounted monthly at a rate equal to the
treasury constant yield and based on a 360-day year of twelve 30-day months
over (ii) the then current outstanding principal amount of the Crystal City
Pool Loan (or the then unpaid portion thereof to be prepaid upon
acceleration).
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of a Crystal City Pool Property
under the Crystal City Pool Loan, the mortgagee will be entitled, at its sole
option, to apply such proceeds to prepay the Crystal City Pool Loan, as
described in "--Casualty and Condemnation" below. No yield maintenance
payment or prepayment premium or penalty will be payable upon any mandatory
prepayment of the Crystal City Pool Loan in connection with a casualty or
condemnation unless an event of default under the Crystal City Pool Loan has
occurred and is continuing, in which case the Crystal City Pool Borrower will
be required to pay a yield maintenance payment calculated in the manner
described above.
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<PAGE>
Prior to two years from the Closing Date, if within five business days an
event of default would occur by reason of a default under the Crystal City
Pool Loan relating to a particular Crystal City Pool Property and the
elimination of such Crystal City Pool Property would result in the full cure
of such event of default, then at the mortgagee's sole option, the Crystal
City Pool Borrower will be permitted to prepay the Crystal City Pool Loan in
a principal amount equal to the Crystal City Pool Release Amount for such
Crystal City Pool Property, together with all accrued and unpaid interest on
the principal amount being repaid and the yield maintenance payment owing as
a result of such prepayment, provided that: (a) such prepayment is made prior
to the earlier of (i) any acceleration of the Crystal City Pool Loan, and
(ii) the 30th day after such event of default; (b) no other event of default
exists as of such prepayment (other than, prior to acceleration, an event of
default that would be cured by such prepayment); and (c) the Crystal City
Pool Borrower will have paid all other amounts then due and owing to the
mortgagee as of such prepayment, including any costs and expenses of the
mortgagee payable under the Crystal City Pool Loan agreement in connection
with such event of default.
"Crystal City Pool Release Amount" means, with respect to a specified
Crystal City Pool Property, an amount equal to the excess of (i) (a) 125% of
the Crystal City Pool Allocated Loan Amount for South Eads Street or
Arlington Plaza, as applicable, or (b) 130% of the Crystal City Pool
Allocated Loan Amount for Crystal Gateway, over (ii) the scheduled payments
of principal made under the Crystal City Pool Loan allocated to such Crystal
City Pool Property (based on the relative Crystal City Pool Allocated Loan
Amounts for all of the Crystal City Pool Properties); provided that in no
event will the Crystal City Pool Release Amount be greater than the then
outstanding principal balance of the Crystal City Pool Loan.
"Crystal City Pool Allocated Loan Amount" means, with respect to each
Crystal City Pool Property, the portion of the principal amount of the
Crystal City Pool Loan allocated to each such Crystal City Pool Property as
specified in the Crystal City Pool Loan agreement and determined as described
under the definition of "Allocated Loan Amount" set forth above under
"Mortgage Pool Characteristics--Certain Characteristics of the Mortgage
Loans."
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL--DEFEASANCE. The Crystal
City Pool Borrower is permitted on any date on or after the second
anniversary from the Closing Date to defease all or a portion of the Crystal
City Pool Loan with U.S. Treasury obligations (provided any partial
defeasance will be in an amount equal to the applicable Crystal City Pool
Release Amount), provided that, among other conditions, the Crystal City Pool
Borrower gives the mortgagee at least thirty days prior written notice of the
date (which is required to be a Crystal City Pool Due Date) of such
defeasance (the "Crystal City Pool Defeasance Date"), no event of default
will exist on the Crystal City Pool Defeasance Date except (prior to an
acceleration of the Crystal City Pool Loan) for an event of default relating
solely to a Crystal City Pool Property that will be released in connection
with such defeasance and provided further that the Crystal City Pool Borrower
pays on the Crystal City Pool Defeasance Date (i) all accrued and unpaid
interest on the Crystal City Pool Loan to but not including the Crystal City
Pool Defeasance Date, (ii) all other sums (not including scheduled interest
or principal payments) then due under the Crystal City Pool Loan and the
related loan documents, (iii) the Crystal City Pool Defeasance Deposit and
(iv) all reasonable costs and expenses of the mortgagee incurred in
connection with the defeasance. In addition, the Crystal City Pool Borrower
will be required to deliver to the mortgagee, among other things (a) a
security agreement granting the mortgagee a first priority lien on the
Crystal City Pool Defeasance Deposit and the U.S. Treasury obligations
purchased with the Crystal City Pool Defeasance Deposit, (b) an opinion of
counsel for the Crystal City Pool Borrower in form satisfactory to the
mortgagee stating, among other things, that the Trustee has a first priority
perfected security interest in the Crystal City Pool Defeasance Deposit and
the U.S. Treasury obligations purchased with the Crystal City Pool Defeasance
Deposit, (c) a confirmation, in form and substance reasonably satisfactory to
the mortgagee, from a "Big Six" independent certified public accounting firm,
that the Crystal City Pool Defeasance Deposit is sufficient to pay all
scheduled payments due from the Crystal City Pool Borrower under the Crystal
City Pool Loan in connection with the proposed defeasance, (d) if required by
the Rating Agencies, the Crystal City Pool Borrower will deliver a
non-consolidation opinion with respect to the successor borrower, if any, in
form and substance satisfactory to the mortgagee and the Rating Agencies, (e)
an officer's certificate certifying that the requirements for defeasance set
forth in the Crystal City Pool Loan
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agreement have been met, and (f) written confirmation from the Rating
Agencies that such defeasance will not result, in and of itself, in a
downgrade, qualification or withdrawal of the then current ratings of the
Certificates. In addition, if only a portion of the Crystal City Pool Loan is
being defeased, the Crystal City Pool Borrower will be required to execute
and deliver all necessary documents to amend and restate the Crystal City
Pool Loan including two substitute notes, one having a principal balance
equal to the defeased portion of the original note and the other having a
principal balance equal to the undefeased portion of the original note.
"Crystal City Pool Defeasance Deposit" means an amount equal to the sum of
(i) the remaining principal amount of the Crystal City Pool Loan (in the case
of a total defeasance) or the principal amount of the defeased note (in the
case of a partial defeasance), as applicable, with interest thereon (ii)
without duplication, any costs and expenses incurred or to be incurred in the
purchase of noncallable U.S. Treasury obligations providing payments on or
prior to, but as close as possible to, all successive Crystal City Pool Due
Dates after the Crystal City Pool Defeasance Date, in the case of a
defeasance for the entire outstanding principal balance of the Crystal City
Pool Loan, or the defeased note, in the case of a defeasance for only a
portion of the outstanding principal balance of the Crystal City Pool Loan,
as applicable, and in amounts equal to the scheduled interest and principal
payments under the Crystal City Pool Loan or the defeased note, as
applicable, and (iii) any revenue, documentary stamp or intangible taxes or
any other tax or charge due in connection with the transfer of the note, the
creation of the defeased note and the undefeased note, if applicable, any
transfer of the defeased note or otherwise required to accomplish the
defeasance.
Prior to the Anticipated Repayment Date and upon the occurrence of a
Crystal City Pool Low Debt Service Trigger Event, all amounts on deposit in
the Crystal City Pool Low Debt Service Reserve Account are required to be
applied by the mortgagee as a partial defeasance of the Crystal City Pool
Loan as described in "--Cash Management; Lockbox" below, provided the
conditions for defeasance set forth above are satisfied.
Upon receipt of the Crystal City Pool Defeasance Deposit, the mortgagee,
using the Crystal City Pool Defeasance Deposit, is required to purchase
noncallable U.S. Treasury obligations on behalf of the Crystal City Pool
Borrower and such U.S. Treasury obligations will serve as the sole collateral
for the payments of the amounts due under the Crystal City Pool Loan or the
defeased portion of the Crystal City Pool Loan in the case of a partial
defeasance. Upon a deposit of such U.S. Treasury obligations, the Crystal
City Pool Borrower will have the right to assign the obligation to make
payments under the Crystal City Pool Loan to an entity designated by the
mortgagee. If the Crystal City Pool Borrower does assign such obligations,
the Master Servicer will be required in the Pooling Agreement to cause such
obligations to be assumed by a special purpose bankruptcy-remote entity.
In connection with the defeasance of the Crystal City Pool Loan, the
Crystal City Pool Borrower will be permitted to obtain the release of the
deed of trust lien encumbering the Crystal City Pool Properties and related
collateral or a portion thereof with respect to a partial defeasance.
OTHER FINANCING. The Crystal City Pool Borrower is not permitted to incur
any additional indebtedness other than unsecured trade payables incurred in
the ordinary course of the Crystal City Pool Borrower's business and
customarily paid within 60 days of incurrence and in fact not more than 60
days outstanding unless the Crystal City Pool Borrower in good faith is
contesting the payment of such trade payables.
ALTERATIONS. Except upon compliance with certain conditions set forth in
the Crystal City Pool Loan documents, the Crystal City Pool Borrower is
prohibited from making or permitting any demolition, alteration,
installation, improvement or decoration to the Crystal City Pool Properties
or any part thereof.
RESERVES. Pursuant to the terms of the Crystal City Pool Loan, the Crystal
City Pool Borrower has established (i) a capital expenditure reserve account,
for the payment of certain routine capital improvements (the "Crystal City
Pool Capital Reserve Account"), funded at the initial closing of the Crystal
City Pool Loan in the amount of $119,150 and to be funded on each Crystal
City Pool Due Date in an amount such that the account balance is equal to not
less than $116,000, provided, however, that
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such balance will be reduced in the event of a release of any Crystal City
Pool Property by an amount equal to the product of $116,000 multiplied by a
fraction, the numerator of which is the related original Crystal City Pool
Allocated Loan Amount and the denominator of which is the original principal
amount of the Crystal City Pool Loan; (ii) a leasing reserve account, for the
payment of tenant improvements and leasing commissions (the "Crystal City
Pool Leasing Reserve Account"), funded at the initial closing of the Crystal
City Pool Loan in the amount of $1,000,000, and to be funded on each Crystal
City Pool Due Date for the first 12 Crystal City Pool Due Dates in an amount
equal to $83,334, and thereafter to be funded on each Crystal City Pool Due
Date in an amount such that the account balance is equal to not less than
$2,000,000, provided, however, that such balance will be reduced (x) in the
event of a release of any Crystal City Pool Property by an amount equal to
the product of $2,000,000 multiplied by a fraction, the numerator of which is
the related original Crystal City Pool Allocated Loan Amount and the
denominator of which is the original principal amount of the Crystal City
Pool Loan, (y) if the Crystal City Pool Borrower exercises its right to
replace the funds on deposit with a letter of credit issued by a bank with a
long term unsecured debt rating of not less than the highest rating then
assigned by the Rating Agencies to any of the Certificates, and (z) if the
Crystal City Pool Borrower exercises its right, after the third anniversary
from the initial closing of the Crystal City Pool Loan, to replace up to
$1,000,000 of the account balance with a guaranty instrument, acceptable to
the mortgagee, executed by CES Commercial Realty, provided such entity will
have and continue to have a long term unsecured debt rating of at least
"BBB-" (or its equivalent) by either Fitch or the Rating Agencies; (iii) a
debt service reserve account (the "Crystal City Pool Debt Service Reserve
Account"), funded at the initial closing of the Crystal City Pool Loan in an
amount equal to approximately $507,328 and to be funded on each Crystal City
Pool Due Date in an amount equal to an amount such that the account balance
is equal to the then current Crystal City Pool Monthly Debt Service Payment
Amount; (iv) a low debt service reserve account (the "Crystal City Pool Low
Debt Service Reserve Account"), funded from and after a Crystal City Pool Low
Debt Service Application Event until a Crystal City Pool Low Debt Service
Return Event and/or from and after the Crystal City Pool Anticipated
Repayment Date in an amount equal to all remaining funds in the Crystal City
Pool Deposit Account after the application of funds under clauses (i) through
(vii) described in the third paragraph in "--Cash Management; Lockbox" below;
and (v) a tax and insurance escrow account (the "Crystal City Pool Tax and
Insurance Reserve Account") to be funded on each Crystal City Pool Due Date
in an amount equal to one-twelfth of the taxes and insurance premiums that
will be payable during the next ensuing 12 months.
"Crystal City Pool Low Debt Service Application Event" means that, as of
any date, the net operating income (with respect to all Crystal City Pool
Properties on an aggregate basis) for the prior 12 calendar month period will
be less than $9,500,000, provided, that until November 1, 1998, the existence
of a Crystal City Pool Low Debt Service Application Event will be determined
based upon annualization of net operating income for the elapsed portion of
fiscal years 1997 and 1998.
"Crystal City Pool Low Debt Service Trigger Event" means that, as of any
date, the net operating income (with respect to all Crystal City Pool
Properties on an aggregate basis) for the prior 12 calendar month period will
be less than $8,500,000, provided, that until November 1, 1998, the existence
of a Crystal City Pool Low Debt Service Trigger Event will be determined
based upon annualization of net operating income for the elapsed portion of
fiscal years 1997 and 1998.
"Crystal City Pool Low Debt Service Return Event" means that as of any
date following a Crystal City Pool Low Debt Service Trigger Event, (i) the
net operating income (with respect to all Crystal City Pool Properties on an
aggregate basis) for the prior 12 month period with respect to four
consecutive quarters will be greater than $9,500,000, provided, that until
November 1, 1998, the existence of a Crystal City Pool Low Debt Service
Return Event will be determined based upon annualization of net operating
income for the elapsed portion of fiscal years 1997 and 1998; and (ii) no
event of default then exists and is continuing.
CASH MANAGEMENT; LOCKBOX. The Crystal City Pool Borrower has established
and will be required to maintain one or more segregated bank accounts in its
name (the "Crystal City Pool Property Level Sweep Account") and a segregated
bank account in the name of the mortgagee (the "Crystal City Pool Deposit
Account"). The Crystal City Pool Borrower is required to notify all tenants
to make all
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payments due under the leases to the Crystal City Pool Borrower, payable
directly to the Crystal City Pool Property Level Sweep Account. Prior to the
occurrence of a Crystal City Pool Lockbox Trigger Event, the Crystal City
Pool Borrower and Crystal City Pool Manager are required to deposit all
payments received by them into the Crystal City Pool Property Level Sweep
Account no later than the close of business on the next business day
following receipt. On the 10th day of each calendar month or, if such day is
not a business day, then on the preceding business day, funds in the Crystal
City Pool Property Level Sweep Account sufficient to fund the Crystal City
Pool Tax and Insurance Reserve Account, the Crystal City Pool Monthly Debt
Service Payment Amount (including Crystal City Pool Excess Interest), the
Crystal City Pool Leasing Reserve Account (if required), and the Crystal City
Pool Capital Reserve Account (if required), are required to be transferred
into the Crystal City Pool Deposit Account. A "Crystal City Pool Lockbox
Trigger Event" means the earlier to occur of a Crystal City Pool Low Debt
Service Application Event, an event of default under the Crystal City Pool
Loan and the Crystal City Pool Anticipated Repayment Date.
From and after a Crystal City Pool Lockbox Trigger Event, the Crystal City
Pool Property Level Sweep Account will be under the sole dominion and control
of the mortgagee and all amounts on deposit in the Crystal City Pool Property
Level Sweep Account are required to be swept daily into the Crystal City Pool
Deposit Account. The Crystal City Pool Borrower and the Crystal City Pool
Manager will be required to deposit all payments received by them into the
Crystal City Pool Deposit Account no later than the close of business on the
next business day following receipt. After the occurrence and during the
continuation of an event of default under the Crystal City Pool Loan and at
such time as the mortgagee may request, the Crystal City Pool Borrower is
required to notify each tenant and party under any operating agreement to
deliver such payments directly to the Crystal City Pool Deposit Account or as
otherwise directed by the mortgagee.
On each Crystal City Pool Due Date, provided no default or event of
default has occurred and is continuing, the mortgagee is required to
distribute funds from the Crystal City Pool Deposit Account in the following
order of priority: (i) to fund the Crystal City Pool Tax and Insurance
Reserve Account, (ii) to pay the Crystal City Pool Monthly Debt Service
Payment Amount including, if applicable, Crystal City Pool Excess Interest,
(iii) from and after a Crystal City Pool Lockbox Trigger Event, to the
Crystal City Pool Borrower, an amount equal to the budgeted operating
expenses and capital expenditures, approved by the mortgagee, for the month
immediately prior to the month in which such Crystal City Pool Due Date
occurs, provided that, prior to such disbursement the Crystal City Pool
Borrower provides the mortgagee with an officer's certificate certifying
that, among other things, the Crystal City Pool Borrower does not have any
unpaid claims of creditors more than 60 days past due and that the amounts
disbursed will be used solely to pay such operating expenses and capital
expenditures, and provided further that the Crystal City Pool Borrower may
request an additional amount to pay operating expenses in excess of the
budgeted amount, up to 105% of the budgeted amount on a cumulative
year-to-date basis, but in no event to exceed more than 105% of such month's
budgeted amount for operating expenses, (iv) to fund the Crystal City Pool
Leasing Reserve Account, if required, (v) to fund the Crystal City Pool
Capital Reserve Account, if required, (vi) to fund the Crystal City Pool Debt
Service Reserve Account, if required, (vii) to pay the mortgagee, if
applicable, an amount equal to interest accrued and unpaid under the Crystal
City Pool Loan at the excess of the default rate over the applicable interest
rate, (viii) from and after a Crystal City Pool Low Debt Service Trigger
Event until a Crystal City Pool Low Debt Service Return Event and/or from and
after the Crystal City Pool Anticipated Repayment Date, to the mortgagee, an
amount equal to all remaining funds not previously disbursed pursuant to
clauses (i) through (vii) above, to be held in the Crystal City Pool Low Debt
Service Reserve Account and disbursed as described below, and (ix) if no
event of default has occurred, the remaining balance to the Crystal City Pool
Borrower. If on the Crystal City Pool Due Date funds in the Crystal City Pool
Deposit Account are insufficient to make the transfer described in clauses
(i) through (iii) above, the Crystal City Pool Borrower is required to
deposit into the Crystal City Pool Deposit Account on such Crystal City Pool
Due Date the amount of such deficiency, and the failure to make such deposit
will constitute an event of default under the Crystal City Pool Loan.
Upon the occurrence of a Crystal City Pool Low Debt Service Trigger Event
all sums in the Crystal City Pool Low Debt Service Reserve Account are
required to be applied by the mortgagee to reduce the
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principal balance of the Crystal City Pool Loan (including accrued and
unpaid Crystal City Pool Excess Interest), and prior to the Crystal City Pool
Anticipated Repayment Date, as a partial defeasance of the Crystal City Pool
Loan with the Crystal City Pool Borrower being responsible for complying with
the provisions for defeasance set forth in the Crystal City Pool Loan
agreement, provided, however, that upon the occurrence of a Crystal City Pool
Loan Debt Service Return Event and prior to the Crystal City Pool Anticipated
Repayment Date, all sums then remaining in the Crystal City Pool Low Debt
Service Reserve Account are required to be disbursed to the Crystal City Pool
Borrower.
TRANSFER OF THE CRYSTAL CITY POOL PROPERTIES AND INTERESTS IN THE CRYSTAL
CITY POOL BORROWER; ENCUMBRANCES. Unless permitted by the Crystal City Pool
Loan documents as described below, and with the exception of leases entered
into in accordance therewith and the Crystal City Pool Permitted
Encumbrances, the Crystal City Pool Borrower is not permitted, with respect
to any Crystal City Pool Property, to: (A) sell, assign, convey, transfer or
otherwise dispose of or encumber legal, beneficial or equitable interests in
all or any part thereof, (B) permit or suffer any owner, directly or
indirectly, of a beneficial interest therein to transfer such interest,
whether by transfer of stock or other beneficial interest in any entity
(including without limitation, membership interests in the Crystal City Pool
Borrower) or otherwise, (C) mortgage, hypothecate or otherwise encumber or
grant a security interest in all or any part thereof or (D) file a
declaration of condominium with respect to any such Crystal City Pool
Property.
Except as described below, the Crystal City Pool Borrower will have a one
time right to sell, assign, convey, transfer or otherwise dispose of legal or
equitable title to or any interest in all or some of the Crystal City Pool
Properties if: (A) after giving effect to the proposed transaction: (i) the
mortgagee has (a) received written confirmation from the Rating Agencies that
such action will not result, in and of itself, in any downgrade,
qualification or withdrawal of the then current ratings of the Certificates
with respect thereto; (b) approved the transferee's organizational documents;
(c) received and approved legal opinions (including non-consolidation
opinions) with respect to such transferee and the Crystal City Pool Borrower
if less than all the Crystal City Pool Properties are being transferred; and
(d) approved all loan documents required by it to effectuate such transfer
(including, without limitation, the assumption of the Crystal City Pool Loan
or a portion thereof by such transferee); (ii) simultaneously therewith, the
Crystal City Pool Borrower pays to the mortgagee a fee equal to 0.5% of the
outstanding amount of the Crystal City Pool Loan if all the Crystal City Pool
Properties are being transferred or the Crystal City Pool Allocated Loan
Amount for the portion thereof, and all of the mortgagee's and the Rating
Agencies' costs and expenses associated with such transfer; (iii) the Crystal
City Pool Properties will be owned by a single purpose entity, which will be
in compliance with certain single purpose bankruptcy-remote representations,
warranties and covenants set forth in the Crystal City Pool Loan agreement,
which has assumed in writing and agreed to comply with the terms of the
Crystal City Pool Loan documents; (iv) each Crystal City Pool Property will
be managed by a Crystal City Pool Acceptable Manager; (v) the transferee will
be a Crystal City Pool Qualified Transferee or an "institutional investor"
approved by the mortgagee and the Rating Agencies or be wholly-owned,
directly or indirectly, by a Crystal City Pool Qualified Transferee or an
"institutional investor" approved by the mortgagee and the Rating Agencies;
(vi) the Crystal City Pool Debt Service Coverage Ratio is not less than
1.38x; and (vii) no event of default will occur and be continuing; and (B)
prior to any such transaction, the proposed transferee delivers to the
mortgagee an officer's certificate giving certain assurances to the general
effect that the transferee is not an employee benefit plan, or, in any event,
the transfer will not give rise to "prohibited transactions" under ERISA or
similar laws.
"Crystal City Pool Debt Service Coverage Ratio" means, as to any date, the
quotient obtained by dividing the net operating income for the Crystal City
Pool Properties, less underwritten reserves for capital improvements, leasing
commissions and tenant improvements, for the 12 month period immediately
preceding such date by the greater of (i) aggregate interest and principal
payments actually due and payable on the Crystal City Pool Loan during such
period and (ii) interest and principal payments on the Crystal City Pool Loan
during such period assuming a loan constant (comprised of interest and
amortization) equal to 9.23% per annum.
"Crystal City Pool Qualified Transferee" means any one of the following:
(a) a pension fund, pension trust or pension account, (b) an insurance
company, (c) a national money-center bank, or (d) a person
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with a long-term unsecured debt rating from the Rating Agencies of at least
investment grade, provided such person or entity described in (a) through (d)
above is either: (i) a person with a current net worth of $500 million or
more (exclusive of the Crystal City Pool Properties) and who controls office
building real estate equity assets (as distinguished from mortgage assets)
with a gross asset value of $1 billion or more (exclusive of the Crystal City
Pool Properties) or, if such person is a pension fund advisor, one which
controls office building real estate equity assets (as distinguished from
mortgage assets) with a gross asset value of $1 billion or more (exclusive of
the Crystal City Pool Properties), or (ii) a pension fund, pension trust or
pension account that has total assets of $500 million or more (exclusive of
the Crystal City Pool Properties), managed by a person (which is an asset
manager or investment advisor) that controls office building real estate
equity assets (as distinguished from mortgage assets) with a gross asset
value of $1 billion or more (exclusive of the Crystal City Pool Properties).
Notwithstanding the foregoing, the general partner(s) and/or limited
partners interests in CES Commercial Realty may be assigned, conveyed or
transferred provided the mortgagee receives a written confirmation from the
Rating Agencies that such action will not result, in and of itself, in any
downgrade, qualification or withdrawal of the then current ratings of the
Certificates with respect thereto and the Crystal City Pool Borrower delivers
to the mortgagee (i) an officer's certificate describing the proposed
transaction and stating that such transaction is permitted by the Crystal
City Pool Loan documents, together with any documents upon which such
officer's certificate is based, and (ii) a legal opinion of counsel to the
Crystal City Pool Borrower or the transferee, in form and substance
consistent with similar opinions then being required by the Rating Agencies,
confirming that the new Crystal City Pool Borrower's assets will not be
substantively consolidated with the assets of certain owners or controlling
persons of such Crystal City Pool Borrower in a bankruptcy or similar
proceeding; provided that such written confirmation from the Rating Agencies
will not be required with respect to any of the following and compliance with
clauses (i) and (ii) above will be required only in connection with a
transaction described in clause (a) (if after the transfer the transferee
together with any affiliate owns more than 49% of the outstanding partnership
interests of CES Commercial Realty), (b) (if after the transfer the
transferee together with any affiliate owns more than 49% of the outstanding
partnership interests of CES Commercial Realty), (c) (if after the transfer
the transferee together with any affiliate owns more than 49% of the voting
stock of the general partner of CES Commercial Realty), (d) or (e) below: (a)
any transfer of outstanding partnership interests of CES Commercial Realty,
so long as, after giving effect thereto, such transfer does not result in the
transferee owning more than 49% of the outstanding partnership interests
(determined on the basis of voting power) of CES Commercial Realty, other
than Charles E. Smith Commercial Realty, Inc., any affiliate of Charles E.
Smith Commercial Realty, Inc., or a Crystal City Pool Qualified Transferee;
(b) any issuance of additional partnership interests of CES Commercial
Realty, so long as, after giving effect thereto, such issuance does not
result in any person owning more than 49% of the outstanding partnership
interests (determined on the basis of voting power) of CES Commercial Realty,
other than Charles E. Smith Commercial Realty, Inc., any affiliate of Charles
E. Smith Commercial Realty, Inc., or a Crystal City Pool Qualified
Transferee; (c) any issuance or transfer of capital stock of the general
partner of CES Commercial Realty, so long as, after giving effect thereto,
such issuance or transfer does not result in the issuee or transferee (other
than Robert H. Smith, Robert P. Kogod, or any affiliate of either of them
other than Charles E. Smith Commercial Realty, Inc., an affiliate of Charles
E. Smith Commercial Realty, Inc., or a Crystal City Pool Qualified
Transferee) owning more than 49% of the outstanding voting stock (determined
on the basis of voting power in the election of directors or trustees) of
such general partner; (d) any merger of the general partner of CES Commercial
Realty with one or more other persons, provided that the survivor of such
merger is a Crystal City Pool Qualified Transferee; or (e) any merger of CES
Commercial Realty with one or more other persons, so long as the surviving
entity is a Crystal City Pool Qualified Transferee. For purposes of clauses
(a), (b), (d) and (e) above, (x) the $500 million net worth requirement in
the definition of "Crystal City Pool Qualified Transferee" will be deemed
satisfied by a publicly traded real estate investment trust with an equity
market capitalization of at least $500 million and (y) a Crystal City Pool
Listed Permitted Owner will be deemed to be a Crystal City Pool Qualified
Transferee; provided, however, that such entity will only be deemed to be a
Crystal City Pool Qualified Transferee (without meeting all of the
requirements set forth in the definition thereof) up to and including October
31, 1999.
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"Crystal City Pool Listed Permitted Owner" means California Real Estate
Investment Trust, Equity Office Properties Trust, Boston Properties, Inc.,
Security Capital Pacific Trust, Crescent Real Estate Equities Company or
Reckson Associates Realty Corp.
INSURANCE. The Crystal City Pool Borrower is required to maintain, at its
sole cost and expense the following policies of insurance: (a) insurance
against loss or damage by standard perils included within the classification
"All Risks of Physical Loss," maintained in an aggregate amount equal to the
then full replacement cost of each Crystal City Pool Property and related
assets (without deduction for physical depreciation), with deductibles no
greater than those in existence at the time of the closing of the Crystal
City Pool Loan, as increased proportionately with the increase in the
Consumer Price Index; (b) earthquake coverage at substantially the same
levels maintained at the closing of the Crystal City Pool Loan or such lesser
amounts as may be approved with written confirmation from the Rating Agencies
that there will be no downgrade, qualification or withdrawal of the then
current ratings of the Certificates with respect thereto; (c) flood insurance
(if any part of the Crystal City Pool Properties is located in an area
identified by the Federal Emergency Management Agency as an area federally
designated a "100 year flood plain" and flood insurance is generally
available at reasonable premiums and in such amounts as generally are
required by institutional lenders for similar property (or, if not so
available from a private carrier, from the federal government at commercially
reasonable premiums to the extent available)), in either case, in an amount
at least equal to the lesser of the Crystal City Pool Allocated Loan Amount
for the related Crystal City Pool Property or the maximum limit of coverage
available under said program; (d) comprehensive general liability insurance,
including broad form property damage, blanket contractual and personal
injuries coverages and containing minimum limits per occurrence of $1,000,000
for any policy year as well as at least $25,000,000 excess and/or umbrella
liability insurance; (e) rental loss and/or business interruption insurance
in an amount sufficient to avoid any co-insurance penalty, and equal to the
greater of (i) estimated gross revenues from the operation of the Crystal
City Pool Properties, net of certain nonrecurring expenses, for a period of
up to the next 18 months, or (ii) projected operating expenses (including
interest and principal payments on the Crystal City Pool Loan) needed to
maintain and operate the Crystal City Pool Properties for a period of up to
the next 18 months; (f) insurance against loss or damage from leakage of
sprinkler systems and explosion of steam boilers, air conditioning equipment
and high pressure piping, machinery and equipment, pressure vessels or
similar apparatus and against loss of occupancy or use arising from any such
breakdown, in such amounts as are generally available at reasonable premiums
and are generally required by institutional lenders for property comparable
to the Crystal City Pool Properties; (g) worker's compensation insurance with
respect to all employees of Crystal City Pool Borrower, as and to the extent
required by applicable law or regulation; (h) during any period of repair or
restoration costing in excess of 10% of the Crystal City Pool Allocated Loan
Amount with respect to any individual Crystal City Pool Property, builder's
"all risk" insurance in an amount not less than the full insurable value of
such Crystal City Pool Property; (i) coverage to compensate for the cost of
demolition and the increased cost of construction for each Crystal City Pool
Property in an amount satisfactory to the mortgagee; and (j) such other
insurance as may from time to time be reasonably required by the mortgagee.
The Crystal City Pool Loan requires insurers to have claims paying abilities
rated "AA" (or its equivalent) or better by the Rating Agencies.
CASUALTY AND CONDEMNATION. Following the occurrence of a casualty or
condemnation affecting a Crystal City Pool Property, the Crystal City Pool
Borrower, regardless of whether proceeds are available, is required to
promptly proceed to restore, repair, replace or rebuild the affected Crystal
City Pool Property, to the extent practicable, to be of at least equal value
and of substantially the same character as prior to such casualty or
condemnation, all to be effected in accordance with the terms of the Crystal
City Pool Loan documents, which includes the mortgagee's approval if the cost
of restoration exceeds (i) $3,000,000, with respect to Crystal Gateway, (ii)
$1,500,000, with respect to South Eads Street, and (iii) $2,000,000, with
respect to Arlington Plaza.
In the event of a casualty or condemnation that involves a loss of less
than 33.333% of the Crystal City Pool Allocated Loan Amount for such affected
Crystal City Pool Property, the mortgagee is required to permit the
application of the proceeds resulting therefrom (after reimbursement of any
expenses incurred by the mortgagee) to pay or reimburse the Crystal City Pool
Borrower, for the cost of restoring,
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repairing, replacing or rebuilding such Crystal City Pool Property, in the
manner described below, provided that no default or event of default under
the Crystal City Pool Loan has occurred and is then continuing and, in the
reasonable judgment of the mortgagee: (i) the Crystal City Pool Property can
be restored to an economic unit not less valuable (taking into account the
effect of the termination of any leases or operating agreements due to such
casualty or condemnation) and not less useful than it was prior to the
casualty or condemnation; (ii) the Crystal City Pool Property, after such
restoration, will adequately secure the outstanding principal balance of its
Crystal City Pool Allocated Loan Amount; (iii) the restoration can be
completed by the earliest to occur of: (A) the 180th day following the
receipt of the proceeds (or, if earlier, the 365th day following the casualty
or condemnation, as applicable), or, with a written confirmation from the
Rating Agencies that such action will not result, in and of itself, in any
downgrade, qualification or withdrawal of the then current ratings of the
Certificates with respect thereto, such longer period as may reasonably be
required; (B) the 180th day prior to the Crystal City Pool Anticipated
Repayment Date; and (C) with respect to a casualty, the expiration of the
payment period on the rental loss insurance coverage in respect of such
casualty; and (iv) during the period of the restoration, the sum of (A)
income derived from the affected Crystal City Pool Property, plus (B)
proceeds of rent loss insurance or business interruption insurance, if any,
payable will equal or exceed 125% of the sum of (1) expenses in connection
with the operation of such Crystal City Pool Property and (2) the debt
service with respect to the Crystal City Pool Allocated Loan Amount for such
Crystal City Pool Property, provided that the foregoing condition will be
deemed satisfied if the net operating income derived from the affected
individual property during the period of restoration (including proceeds from
rent loss insurance or business interruption insurance, if any, payable) will
not be less than such net operating income prior to the casualty or
condemnation in question.
If any of the conditions set forth in the foregoing proviso is not
satisfied, then, unless the mortgagee elects otherwise, in its sole
discretion, the proceeds are required to be applied to the prepayment of the
Crystal City Pool Loan without any yield maintenance charge or prepayment
premium, other than a yield maintenance charge if an event of default has
occurred and is continuing.
In the event of a casualty of condemnation that involves a loss of 33.333%
or more of the Crystal City Pool Allocated Loan Amount for such affected
Crystal City Pool Property, then the mortgagee will have the option (to be
exercised by notice to the Crystal City Pool Borrower within 30 days after
receipt of the proceeds) to apply the net proceeds to the prepayment of the
Crystal City Pool Loan without any yield maintenance charge or prepayment
premium (other than a yield maintenance charge if any event of default has
occurred and is continuing) and the Crystal City Pool Borrower will be
entitled to a release of the liens affecting the Crystal City Pool Property,
with the proceeds applied against the related Crystal City Pool Release
Amount, or, provided the conditions set forth in the proviso above are
complied with, to have such proceeds applied to reimburse the Crystal City
Pool Borrower for the cost of any restoration.
If the Crystal City Pool Borrower is entitled to reimbursement out of
proceeds, such proceeds are required to be disbursed from time to time upon
the mortgagee being furnished with (i) such architect's certificates, waivers
of lien, contractor's sworn statements, title insurance endorsements, bonds,
plats of survey and such other evidences of cost, payment and performance as
the mortgagee may reasonably require and approve, and (ii) all plans and
specifications for such restoration, such plans and specifications to be
approved by the mortgagee prior to commencement of any work (such approval
not to be unreasonably withheld or delayed). In addition, no payment made
prior to the final completion of the restoration is permitted to exceed 90%
of the value of the work performed from time to time; the funds deposited
will be disbursed prior to disbursement of such proceeds; and at all times,
the undisbursed balance of such proceeds remaining in the hands of the
mortgagee, together with funds deposited for that purpose or irrevocably
committed to that purpose by the Crystal City Pool Borrower to the
satisfaction of the mortgagee, is required to be at least sufficient in the
reasonable judgment of the mortgagee to pay for the cost of completion of the
restoration, free and clear of all liens. Prior to any disbursement, the
mortgagee must have received evidence reasonably satisfactory to it of the
estimated cost of completion of the restoration, and the Crystal City Pool
Borrower must have deposited with the mortgagee eligible collateral in an
amount equal to the excess (if any) of such estimated cost of completion over
the net proceeds. Any surplus which may remain out of proceeds received
pursuant to a casualty or condemnation will be paid to the Crystal City Pool
Borrower after payment of such costs of restoration.
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FINANCIAL REPORTING. The Crystal City Pool Borrower is required to
furnish to the mortgagee, within 80 days following the end of each fiscal
year, a complete copy of its annual financial statements, audited by a "Big
Six" accounting firm or another independent certified public accounting firm
reasonably acceptable to the mortgagee, in accordance with GAAP, covering the
Crystal City Pool Properties on a combined and individual basis for such
fiscal year, and containing balance sheets and statements of profit and loss.
Together with its annual financial statements, the Crystal City Pool Borrower
is also required to furnish to the mortgagee: (i) an officer's certificate
certifying as of the date thereof whether, to the Crystal City Pool
Borrower's knowledge, there exists a default or an event of default, and if
such default or event of default exists, the nature thereof, the period of
time it has existed and the action then being taken to remedy the same; (ii)
then current rent rolls; and (iii) an annual report, for the most recently
completed fiscal year, containing occupancy levels.
In addition, the Crystal City Pool Borrower is required to furnish to the
mortgagee on or before the 30th day after the end of each calendar month: (i)
monthly and year-to-date operating statements for such month; (ii) copies of
any notice from a tenant affecting 10,000 or more rentable square feet in a
Crystal City Pool Property alleging a default under its lease, threatening
non-payment of rent, requesting a modification or termination of such lease,
exercising any option of the tenant under its lease, or otherwise material
with respect to such Crystal City Pool Property; (iii) a current rent roll
for each Crystal City Pool Property; and (iv) an occupancy report of each
Crystal City Pool Property.
The Crystal City Pool Borrower is required to furnish to the mortgagee on
or before the 40th day after the end of each calendar quarter: (i) quarterly
and year-to-date operating statements with a balance sheet for the quarter;
(ii) an occupancy report on the Crystal City Pool Properties; (iii) a
calculation of the Crystal City Pool Debt Service Coverage Ratio as of the
last day of such quarter and for each of the prior four quarters; (iv) a
current rent roll for the Crystal City Pool Properties; and (v) a
certification that the representations and warranties of the Crystal City
Pool Borrower in the Crystal City Pool Loan documents are true and correct.
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DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling Agreement and will
consist of fourteen classes (each, a "Class") to be designated as the Class
A-1 Certificates and the Class A-2 Certificates (collectively, the "Class A
Certificates"), the Class X Certificates, the Class B Certificates, the Class
C Certificates, the Class D Certificates, the Class E Certificates, the Class
F Certificates, the Class G Certificates, the Class M Certificates, the Class
MX Certificates, the Class Q Certificates, the Class R Certificates and the
Class LR Certificates. The Class F, Class G, Class M, Class MX, Class Q,
Class R and Class LR Certificates (collectively, the "Private Certificates")
are not offered hereby.
The Certificates represent in the aggregate the entire beneficial
ownership interest in a Trust Fund consisting of: (i) the Mortgage Loans and
all payments under and proceeds of the Mortgage Loans due after the Cut-Off
Date; (ii) any Mortgaged Property acquired on behalf of the Trust Fund
through foreclosure or deed in lieu of foreclosure (upon acquisition, an "REO
Property"); (iii) the Marriott Desert Springs Parent Loan and all payments
under and proceeds of the Marriott Desert Springs Parent Loan due after the
Cut-Off Date; (iv) any property acquired on behalf of the Trust Fund through
foreclosure upon the collateral securing the Marriott Desert Springs Parent
Loan; (v) such funds or assets as from time to time are deposited in the
Collection Account, the Lower-Tier Distribution Account, the Upper-Tier
Distribution Account, the Interest Reserve Account, the Excess Interest
Distribution Account, the Class Q Distribution Account, the Class M
Collection Account, the Class M Distribution Account, and any account
established in connection with REO Properties (an "REO Account"); (vi) the
rights of the mortgagee under all insurance policies with respect to the
Mortgage Loans; (vii) certain rights and remedies under the Loan Sale
Agreement; and (viii) all of the mortgagee's right, title and interest in the
Reserve Accounts and the Lock Box Accounts. The entire beneficial ownership
in the Marriott Desert Springs Parent Loan is represented by the Class M and
Class MX Certificates. The Class M and Class MX Certificates are not entitled
to any distributions on or with respect to any other assets in the Trust
Fund. The Certificates do not represent an interest in or obligation of the
Seller, the Originators, the Master Servicer, the Trustee, the Fiscal Agent,
the Underwriter, the borrowers, the property managers or any of their
respective affiliates.
Upon initial issuance, the Class A-1, Class A-2, Class B, Class C, Class
D, Class E, Class F and Class G Certificates (collectively, the "Sequential
Pay Certificates") and the Class X Certificates will have the following
Certificate Principal Amount or Notional Amount (in each case, subject to a
variance of plus or minus 5%):
<TABLE>
<CAPTION>
INITIAL CERTIFICATE PRINCIPAL
CLASS AMOUNT OR NOTIONAL AMOUNT
- -------------------------- -----------------------------
<S> <C>
Class A-1 ................ $ 278,000,000
Class A-2 ................ $ 694,315,000
Class X .................. $1,148,459,000
Class B .................. $ 91,595,000
Class C .................. $ 84,549,000
Class D .................. $ 98,641,000
Class E .................. $ 70,458,000
Class F .................. $ 63,411,000
Class G .................. $ 28,183,997
</TABLE>
The Certificate Principal Amount of any Class of Sequential Pay
Certificates outstanding at any time represents the maximum amount which the
holders thereof are entitled to receive as distributions allocable to
principal from the cash flow on the Mortgage Loans and the other assets in
the Trust Fund (other than the Marriott Desert Springs Parent Loan);
provided, however, that in the event that Realized Losses previously
allocated to a Class of Certificates in reduction of their Certificate
Principal Amounts are recovered subsequent to the reduction of the
Certificate Principal Amount of such Class to zero, such Class may receive
distributions in respect of such recoveries in accordance with the priorities
set forth
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under "--Distributions--Payment Priorities" herein. The respective
Certificate Principal Amount of each Class of Certificates entitled to
distributions of principal will in each case be reduced by amounts actually
distributed thereon that are allocable to principal and by any Realized
Losses allocated to such Class of Certificates.
The Class X Certificates will not have Certificate Principal Amounts. Each
such Class will represent the right to receive distributions of interest
accrued as described herein on a notional principal amount (a "Notional
Amount"). The Notional Amount of the Class X Certificates will generally
equal the aggregate Certificate Principal Amounts of the Class A-1, Class
A-2, Class B and Class C Certificates outstanding from time to time.
The respective Certificate Principal Amount of each Class of Certificates
entitled to distributions of principal will in each case be reduced by
amounts actually distributed thereon that are allocable to principal and by
any Realized Losses allocated to such Class of Certificates. The Notional
Amount of the Class X Certificates will be reduced to the extent of all
reductions in the aggregate of the Certificate Principal Amounts of the Class
A-1, Class A-2, Class B and Class C Certificates. The Notional Amount of the
Class X Certificates will for purposes of distributions on each Distribution
Date equal the aggregate of the Certificate Principal Amounts of the Class
A-1, Class A-2, Class B and Class C Certificates as of the first day of the
related Interest Accrual Period.
DISTRIBUTIONS
METHOD, TIMING AND AMOUNT. Distributions on the Certificates are required
to be made on the second Business Day following the 11th day of each month,
commencing on June 15, 1998 (each, a "Distribution Date"). All distributions
(other than the final distribution on any Certificate) are required to be
made by the Trustee to the persons in whose names the Certificates are
registered at the close of business on the last day of the month immediately
preceding the month in which the related Distribution Date occurs or, if such
day is not a Business Day, the immediately preceding Business Day. Such
distributions are required to be made (a) by wire transfer in immediately
available funds to the account specified by the Certificateholder at a bank
or other entity having appropriate facilities therefor, if such
Certificateholder provides the Trustee with wiring instructions no less than
five Business Days prior to the related Record Date, or otherwise (b) by
check mailed to such Certificateholder. The final distribution on any Offered
Certificates is required to be made in like manner, but only upon presentment
or surrender (for notation that the Certificate Principal Amount thereof has
been reduced to zero) of such Certificate at the location specified in the
notice to the Certificateholder thereof of such final distribution. All
distributions made with respect to a Class of Certificates on each
Distribution Date will be allocated pro rata among the outstanding
Certificates of such Class based on their respective Percentage Interests.
The "Percentage Interest" evidenced by any Offered Certificate is equal to
the initial denomination thereof as of the Closing Date divided by the
initial Certificate Principal Amount of the related Class.
The aggregate distribution to be made on the Certificates (other than the
Class M and Class MX Certificates) on any Distribution Date will equal the
Available Funds. The "Available Funds" for a Distribution Date will be the
sum of (i) all Monthly Payments or other receipts on account of principal and
interest on or in respect of the Mortgage Loans (including Unscheduled
Payments and Net REO Proceeds, if any) received by the Master Servicer in the
related Collection Period, (ii) all other amounts deposited in the Collection
Account by the Master Servicer pursuant to the Pooling Agreement in respect
of such Distribution Date that are allocable to the Mortgage Loans, including
all P&I Advances made by the Master Servicer, the Trustee or the Fiscal
Agent, as applicable, in respect of such Distribution Date, and any interest
or other income earned on funds in the Interest Reserve Account, (iii) for
the Distribution Date occurring in each March, the related Withheld Amounts
as described herein under "The Pooling Agreement--Accounts--Interest Reserve
Account" and required to be deposited in the Lower-Tier Distribution Account
pursuant to the Pooling Agreement and (iv) any late payments of Monthly
Payments received after the end of the Collection Period relating to such
Distribution Date but prior to the related Master Servicer Remittance Date
but excluding the following:
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(a) amounts permitted to be used to reimburse the Master Servicer, the
Special Servicer, the Trustee or the Fiscal Agent, as applicable, for
previously unreimbursed Advances and interest thereon as described herein
under "The Pooling Agreement--Advances";
(b) the aggregate amount of the Servicing Fee (which includes the fees
for both the Trustee and the Master Servicer) payable to the Master
Servicer and the amounts payable to the Special Servicer described herein
under "The Pooling Agreement--Special Servicer" in each case in respect of
such Distribution Date, and all amounts in the nature of late fees, loan
modification fees, extension fees, loan service transaction fees, demand
fees, beneficiary statement charges, assumption fees, modification fees
and similar fees, and reinvestment earnings on payments received with
respect to the Mortgage Loans which the Master Servicer or Special
Servicer is entitled to receive as additional servicing compensation
pursuant to the terms of the Pooling Agreement (together with the
Servicing Fee, "Servicing Compensation");
(c) all amounts representing scheduled Monthly Payments due after the
related Due Date;
(d) to the extent permitted by the Pooling Agreement, that portion of
liquidation proceeds, insurance proceeds and condemnation proceeds or the
Repurchase Price received with respect to a Mortgage Loan which represents
any unpaid Servicing Compensation as described herein, to which the Master
Servicer, the Special Servicer or the Trustee is entitled;
(e) all amounts representing certain unanticipated or default related
expenses reimbursable or payable to the Master Servicer, the Special
Servicer, the Trustee or Fiscal Agent and other amounts permitted to be
retained by the Master Servicer or withdrawn pursuant to the Pooling
Agreement in respect of various items, including indemnities;
(f) Prepayment Premiums;
(g) Default Interest;
(h) Excess Interest;
(i) with respect to all Mortgage Loans other than the Crystal City Pool
Loan and any Distribution Date occurring in each February, and in any
January occurring in a year that is not a leap year, the related Withheld
Amount as described under "The Pooling Agreement--Accounts--Interest
Reserve Account" herein;
(j) all amounts received with respect to each Mortgage Loan previously
purchased or repurchased pursuant to the Pooling Agreement during the
related Collection Period and subsequent to the date as of which the
amount required to effect such purchase or repurchase was determined;
(k) the amount reasonably determined by the Trustee to be necessary to
pay any applicable federal, state or local taxes imposed on the Upper-Tier
REMIC or the Lower-Tier REMIC under the circumstances and to the extent
described in the Pooling Agreement; and
(l) all amounts received on or in respect of the Marriott Desert Springs
Parent Loan.
"Monthly Payment" with respect to any Mortgage Loan (other than any REO
Mortgage Loan) and any Due Date is the scheduled monthly payment of principal
(if any) and interest at the related Mortgage Rate which is payable by the
related borrower on such Due Date. The Monthly Payment with respect to any
Distribution Date and (i) an REO Mortgage Loan, or (ii) any Mortgage Loan
which is delinquent at its maturity date and with respect to which the
Special Servicer does not enter into an extension, is the monthly payment
that would otherwise have been payable on the related Due Date had the
related Note not been discharged or the related maturity date had not been
reached, as the case may be, determined as set forth in the Pooling
Agreement.
"Unscheduled Payments" are all net liquidation proceeds, net insurance
proceeds and net condemnation proceeds payable under the Mortgage Loans, any
Principal Prepayment, purchase price received with respect to any purchase or
repurchase of any Mortgage Loan and any other payments
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under or with respect to the Mortgage Loans not scheduled to be made, but
excluding Prepayment Premiums, Excess Interest and Default Interest and
excluding any amount paid in connection with the release of the related
Mortgaged Property through defeasance.
"Prepayment Premiums" are payments received on a Mortgage Loan as the
result of the receipt of certain Unscheduled Payments, other than any amount
paid in connection with the release of the related Mortgaged Property through
defeasance, which are intended to compensate the mortgagee for an early and
unscheduled receipt of principal.
"Net REO Proceeds" with respect to any REO Property and any related REO
Mortgage Loan are all revenues received by the Special Servicer with respect
to such REO Property or REO Mortgage Loan (other than the proceeds of a
liquidation thereof) net of any insurance premiums, taxes, assessments and
other costs and expenses permitted to be paid therefrom pursuant to the
Pooling Agreement.
"Principal Prepayments" are unscheduled payments of principal permitted to
be made by a borrower under the terms of a Mortgage Loan and received from
the borrower.
"Collection Period" with respect to a Distribution Date and each Mortgage
Loan is the period beginning on the day after the Due Date in the month
preceding the month in which such Distribution Date occurs (or, in the case
of the Distribution Date occurring on June 15, 1998, beginning on the day
after the Cut-Off Date) and ending on the Due Date in the month in which such
Distribution Date occurs.
"Net Default Interest" with respect to any Mortgage Loan is any Default
Interest accrued on such Mortgage Loan less amounts required to pay the
Master Servicer, the Special Servicer, the Trustee or Fiscal Agent, as
applicable, interest on Advances at the Advance Rate.
"Default Interest" with respect to any Mortgage Loan is interest accrued
on such Mortgage Loan at the excess of (i) the related Default Rate over (ii)
the sum of the related Mortgage Rate plus, if applicable, the related Excess
Rate.
"Default Rate" with respect to any Mortgage Loan is the per annum rate at
which interest accrues on such Mortgage Loan following any event of default
on such Mortgage Loan including a default in the payment of a Monthly
Payment.
"Excess Rate" with respect to each of the Mortgage Loans is the excess of
the related Revised Interest Rate over the related Initial Interest Rate.
"Excess Interest" with respect to each of the Mortgage Loans is the
interest accrued at the related Excess Rate in respect of such Mortgage Loan,
plus interest thereon, to the extent permitted by applicable law, at the
related Revised Interest Rate.
PAYMENT PRIORITIES. As used below in describing the priorities of
distribution of Available Funds for each Distribution Date, the terms set
forth below will have the following meanings.
The "Interest Accrual Amount," with respect to any Distribution Date and
any Class of Sequential Pay Certificates, is equal to interest for the
related Interest Accrual Period at the Pass-Through Rate for such Class on
the related Certificate Principal Amount (provided, that for interest accrual
purposes any distributions in reduction of Certificate Principal Amount or
reductions in Certificate Principal Amount as a result of allocations of
Realized Losses on the Distribution Date occurring in an Interest Accrual
Period will be deemed to have been made on the first day of such Interest
Accrual Period); and "Interest Accrual Amount" with respect to any
Distribution Date and the Class X Certificates is equal to interest for the
related Interest Accrual Period at the Pass-Through Rate for such Class for
such Interest Accrual Period on the applicable Notional Amount (provided,
that for interest accrual purposes any distributions in reduction of Notional
Amount or reductions in Notional Amount as a result of allocations of
Realized Losses on the Distribution Date occurring in an Interest Accrual
Period will be deemed to have been made on the first day of such Interest
Accrual Period) of such Class. Calculations of interest on the Certificates
will be made on the basis of a 360-day year consisting of twelve 30-day
months.
The "Interest Distribution Amount" with respect to any Distribution Date
and each Class of Regular Certificates will equal (A) the sum of (i) the
Interest Accrual Amount for such Distribution Date and (ii) the Interest
Shortfall, if any, for such Distribution Date, less (B) any Excess Prepayment
Interest Shortfall allocated to such Class on such Distribution Date.
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The "Interest Accrual Period" with respect to any Distribution Date is
the calendar month preceding the month in which such Distribution Date
occurs.
Each Interest Accrual Period with respect to each Class of Certificates is
assumed to consist of 30 days.
An "Interest Shortfall" with respect to any Distribution Date for any
Class of Regular Certificates is the sum of (a) the excess, if any, of (i)
the Interest Distribution Amount for such Class for the immediately preceding
Distribution Date, over (ii) all distributions of interest (other than Excess
Interest) made with respect to such Class of Certificates on the immediately
preceding Distribution Date, and (b) to the extent permitted by applicable
law, (i) other than in the case of the Class X Certificates, one month's
interest on any such excess at the Pass-Through Rate applicable to such Class
of Certificates for the current Distribution Date and (ii) in the case of the
Class X Certificates, one month's interest on any such excess at the WAC Rate
for such Distribution Date.
The "Pass-Through Rate" for any Class of Regular Certificates for any
Interest Accrual Period is the per annum rate at which interest accrues on
the Certificates of such Class during such Interest Accrual Period, as
follows:
The Pass-Through Rate on the Class A-1 Certificates is a per annum rate
equal to 6.312000%.
The Pass-Through Rate on the Class A-2 Certificates is a per annum rate
equal to 6.562000%.
The Pass-Through Rate on the Class B Certificates is a per annum rate
equal to the WAC Rate less 0.392%.
The Pass-Through Rate on the Class C Certificates is a per annum rate
equal to the WAC Rate less 0.225%.
The Pass-Through Rate on the Class D, Class E, Class F and Class G
Certificates is a per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class X Certificates is a per annum rate
equal to the excess of (i) the WAC Rate over (ii) the weighted average of
the Pass-Through Rates on the Class A-1, Class A-2, Class B and Class C
Certificates, weighted on the basis of their respective Certificate
Principal Amounts.
The initial Pass-Through Rate for each Class of Offered Certificates is
set forth on the cover page of this Prospectus Supplement.
The "WAC Rate" with respect to any Distribution Date is a per annum rate
equal to the product of the weighted average of the Net Mortgage Rates in
effect for the Mortgage Loans as of their respective Due Dates in the month
preceding the month in which such Distribution Date occurs weighted on the
basis of the respective Stated Principal Balances of the Mortgage Loans on
such Due Dates.
The "Regular Certificates" are the Class A-1, Class A-2, Class B, Class C,
Class D, Class E, Class F, Class G and Class X Certificates.
The "Net Mortgage Rate" with respect to any Mortgage Loan is a per annum
rate equal to the related Mortgage Rate in effect from time to time minus the
related Servicing Fee Rate. However, for purposes of calculating Pass-Through
Rates, the Net Mortgage Rate of such Mortgage Loan will be determined without
regard to any modification, waiver or amendment of the terms, whether agreed
to by the Special Servicer or resulting from a bankruptcy, insolvency or
similar proceeding involving the related borrower.
The "Mortgage Rate" with respect to any Mortgage Loan is the per annum
rate at which interest accrues on such Mortgage Loan as stated in the related
Note in each case without giving effect to the Excess Rate or the Default
Rate. Notwithstanding the foregoing, if any Mortgage Loan does not accrue
interest on the basis of a 360-day year consisting of twelve 30-day months,
then, for purposes of calculating Pass-Through Rates, the Mortgage Rate of
such Mortgage Loan for any one-month period preceding a related Due Date will
be the annualized rate at which interest would have to accrue in respect of
such Mortgage Loan on the basis of a 360-day year consisting of twelve 30-day
months in
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order to produce the aggregate amount of interest actually accrued in
respect of such Mortgage Loan during such one-month period at the related
Mortgage Rate; provided, however, that with respect to all Mortgage Loans
other than the Crystal City Pool Loan, (i) the Mortgage Rate for the one
month period preceding the Due Dates in January and February in any year
which is not a leap year or in February in any year which is a leap year will
be determined net of the Withheld Amount, and (ii) the Mortgage Rate for the
one-month period preceding the Due Date in March will be determined taking
into account the addition of any such Withheld Amounts.
The "Stated Principal Balance" of any Mortgage Loan at any date of
determination will equal (a) the principal balance as of the Cut-Off Date of
such Mortgage Loan, minus (b) the sum of (i) the principal portion of each
Monthly Payment or, if applicable, Extended Monthly Payment due on such
Mortgage Loan after the Cut-Off Date and prior to such date of determination,
if received from the borrower or advanced by the Master Servicer, Trustee or
Fiscal Agent, (ii) all voluntary and involuntary principal prepayments and
other unscheduled collections of principal received with respect to such
Mortgage Loan, to the extent distributed to holders of the Certificates or
applied to other payments required under the Pooling Agreement before such
date of determination and (iii) any adjustment thereto as a result of a
reduction of principal by a bankruptcy court or as a result of a modification
reducing the principal amount due on such Mortgage Loan. The Stated Principal
Balance of a Mortgage Loan with respect to which title to the related
Mortgaged Property has been acquired by the Trust Fund is equal to the
principal balance thereof outstanding on the date on which such title is
acquired less any Net REO Proceeds allocated to principal on such Mortgage
Loan. The Stated Principal Balance of a defaulted Mortgage Loan with respect
to which the Master Servicer or the Special Servicer has determined that it
has received all payments and recoveries which it expects to be finally
recoverable on such Mortgage Loan is zero.
The "Principal Distribution Amount" for any Distribution Date will be
equal to the sum, without duplication, of:
(i) the principal component of all scheduled Monthly Payments due on the
Due Date immediately preceding such Distribution Date (if received, or
advanced by the Master Servicer, Trustee or Fiscal Agent, in respect of such
Distribution Date) with respect to the Mortgage Loans;
(ii) the principal component of all Extended Monthly Payments due on the
related Due Date (if received, or advanced by the Master Servicer, Trustee or
Fiscal Agent, in respect of such Distribution Date) with respect to the
Mortgage Loans;
(iii) the principal component of any payment on any Mortgage Loan received
or applied on or after the maturity date thereof in the related Collection
Period, net of the principal portion of any unreimbursed P&I Advances related
to such Mortgage Loan;
(iv) the portion of Unscheduled Payments allocable to principal of any
Mortgage Loan received or applied during the related Collection Period, net
of the principal portion of any unreimbursed P&I Advances related to such
Mortgage Loan; and
(v) the Principal Shortfall, if any, for such Distribution Date.
For purposes of the foregoing definition of Principal Distribution Amount,
the term "Principal Shortfall" for any Distribution Date means the amount, if
any, by which (i) the Principal Distribution Amount for the preceding
Distribution Date, exceeds (ii) the aggregate amount actually distributed
with respect to principal on such preceding Distribution Date in respect of
such Principal Distribution Amount.
An "REO Mortgage Loan" is any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property.
On each Distribution Date prior to the Cross-over Date, the Available
Funds for such Distribution Date are required to be distributed in the
following amounts and order of priority:
(i) First, pro rata, in respect of interest, to the Class A-1, Class A-2
and Class X Certificates, up to an amount equal to, and pro rata as among
such Classes in accordance with, the Interest Distribution Amounts of such
Classes;
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(ii) Second, to the Class A Certificates, in reduction of their
respective Certificate Principal Amounts in the following order: first, to
the Class A-1 Certificates and second, to the Class A-2 Certificates, in each
case up to an amount equal to the lesser of (i) the Certificate Principal
Amount thereof and (ii) the Principal Distribution Amount for such
Distribution Date;
(iii) Third, to the Class B Certificates, in respect of interest, up to
an amount equal to the aggregate Interest Distribution Amount of such Class;
(iv) Fourth, to the Class B Certificates, in reduction of the Certificate
Principal Amount thereof, up to an amount equal to the Principal Distribution
Amount less the portion of the Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Principal Amount thereof
is reduced to zero;
(v) Fifth, to the Class B Certificates, an amount equal to the aggregate
of unreimbursed Realized Losses previously allocated to such Class, plus
interest thereon at the Pass-Through Rate for such Class compounded monthly
from the date the related Realized Loss was allocated to such Class;
(vi) Sixth, to the Class C Certificates, in respect of interest, up to an
amount equal to the aggregate Interest Distribution Amount of such Class;
(vii) Seventh, to the Class C Certificates, in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Principal
Amount thereof is reduced to zero;
(viii) Eighth, to the Class C Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such Class,
plus interest thereon at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such Class;
(ix) Ninth, to the Class D Certificates in respect of interest, up to an
amount equal to the aggregate Interest Distribution Amount of such Class;
(x) Tenth, to the Class D Certificates, in reduction of the Certificate
Principal Amount thereof, up to an amount equal to the Principal Distribution
Amount less the portion of the Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Principal Amount thereof
is reduced to zero;
(xi) Eleventh, to the Class D Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such Class,
plus interest thereon at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such Class;
(xii) Twelfth, to the Class E Certificates in respect of interest, up to
an amount equal to the aggregate Interest Distribution Amount of such Class;
(xiii) Thirteenth, to the Class E Certificates in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Principal
Amount thereof is reduced to zero;
(xiv) Fourteenth, to the Class E Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such Class,
plus interest thereon at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such Class;
(xv) Fifteenth, to the Class F Certificates in respect of interest, up to
an amount equal to the aggregate Interest Distribution Amount of such Class;
(xvi) Sixteenth, to the Class F Certificates in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Principal
Amount thereof is reduced to zero;
(xvii) Seventeenth, to the Class F Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such Class,
plus interest thereon at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such Class;
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(xviii) Eighteenth, to the Class G Certificates in respect of interest,
up to an amount equal to the aggregate Interest Distribution Amount of such
Class;
(xix) Nineteenth, to the Class G Certificates in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Principal
Amount thereof is reduced to zero;
(xx) Twentieth, to the Class G Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such Class,
plus interest thereon at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such Class;
and
(xxi) Twenty-first, to the Class R Certificates, any amounts remaining in
the Upper-Tier Distribution Account; and to the Class LR Certificates, any
amounts remaining in the Lower-Tier Distribution Account.
On each Distribution Date occurring on and after the Cross-over Date,
regardless of the allocation of principal payments described in priority
Second above, an amount equal to the Principal Distribution Amount is
required to be distributed, first, to the Class A-1 and Class A-2
Certificates, pro rata, based on their respective Certificate Principal
Amounts, in reduction of their respective Certificate Principal Amounts,
until the Certificate Principal Amount of each such Class is reduced to zero,
and, second, to the Class A-1 and Class A-2 Certificates for unreimbursed
amounts of Realized Losses previously allocated to such Classes, pro rata in
accordance with the amount of such unreimbursed Realized Losses so allocated,
plus interest thereon at their respective Pass-Through Rates compounded
monthly from the date the related Realized Loss was allocated to such
Classes. The "Cross-over Date" is the Distribution Date on which the
Certificate Principal Amount of each Class of Certificates entitled to
distributions of principal (other than the Class A-1 and Class A-2
Certificates) has been reduced to zero.
All references to "pro rata" in the preceding clauses, unless otherwise
specified, mean pro rata based upon the amount distributable pursuant to such
clause.
PREPAYMENT PREMIUMS. On any Distribution Date, Prepayment Premiums
collected during the related Collection Period are required to be distributed
to the holders of the Classes of Offered Certificates as described below.
Any Prepayment Premiums (which are generally payable only in connection
with Mortgage Loan events of default) received during any Collection Period
will be distributed on the following Distribution Date as follows: to each of
the Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class F and
Class G Certificates, for each such Class an amount equal to the product of
(a) a fraction, the numerator of which is the amount distributed as principal
to such Class on such Distribution Date, and the denominator of which is the
total amount distributed as principal to all Classes of Offered Certificates
on such Distribution Date, (b) the Base Interest Fraction for the related
Principal Prepayment and such Class of Certificates and (c) the aggregate
amount of Prepayment Premiums collected on such Principal Prepayment during
the related Collection Period. Any Prepayment Premiums collected during the
related Collection Period remaining after such distributions will be
distributed to the holders of the Class X Certificates.
The "Base Interest Fraction" with respect to any Principal Prepayment on
any Mortgage Loan and with respect to any Class of Offered Certificates is a
fraction (A) whose numerator is the greater of (x) zero and (y) the excess of
(i) the Pass-Through Rate on such Class of Offered Certificates for such
Distribution Date over (ii) the sum of the discount rate used in accordance
with the related Mortgage Loan documents in calculating the Prepayment
Premiums with respect to such Principal Prepayment and the Spread Rate for
such Class of Offered Certificates, and (B) whose denominator is the excess
of (i) the Mortgage Rate on the related Mortgage Loan over (ii) the discount
rate used in accordance with the related Mortgage Loan documents in
calculating the Prepayment Premiums with respect to such Principal
Prepayment; provided, however, that under no circumstances shall the Base
Interest Fraction be greater than one. If such discount rate is greater than
the Mortgage Rate on the related Mortgage Loan, then the Base Interest
Fraction shall equal zero.
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The "Spread Rate" for the Class A-1 Certificates is 0.15% per annum, for
the Class A-2 Certificates is 0.20% per annum, for the Class B Certificates
is 0.25% per annum, for the Class C Certificates is 0.30% per annum, for the
Class D Certificates is 0.35% per annum, for the Class E Certificates is
0.40% per annum, for the Class F Certificates is 0.45% per annum and for the
Class G Certificates is 0.50% per annum.
See "Certain Legal Aspects of the Mortgage Loans--Enforceability of
Certain Provisions--Prepayment Provisions" in the Prospectus regarding the
enforceability of Prepayment Premiums.
EXCESS INTEREST. On each Distribution Date, the Trustee is required to
distribute any Excess Interest received (a) with respect to Mortgage Loans
other than the Marriott Desert Springs Loan during the related Collection
Period, to the holders of the Class A-2, Class B, Class C, Class D, Class E,
Class F and Class G Certificates, pro rata, based on their initial
Certificate Principal Amounts, and (b) with respect to the Marriott Desert
Springs Loan during the related Collection Period, to the holders of the
Class F and Class G Certificates, pro rata, based on their initial
Certificate Principal Amounts.
CLASS Q AND CLASS M DISTRIBUTIONS. On each Distribution Date, Net Default
Interest received in the related Collection Period with respect to a default
on a Mortgage Loan will be distributed solely to the Class Q Certificates, to
the extent set forth in the Pooling Agreement. Payments on the Marriott
Desert Springs Parent Loan received in the related Collection Periods will be
available for distribution solely to the Class M and Class MX Certificates,
as set forth in the Pooling Agreement. The Class Q, Class M and Class MX
Certificates are not entitled to any other distributions.
REALIZED LOSSES. The Certificate Principal Amount of each Class of
Sequential Pay Certificates will be reduced without distribution on any
Distribution Date as a write-off to the extent of any Realized Loss allocated
to such Class on such Distribution Date. As referred to herein, the "Realized
Loss" with respect to any Distribution Date shall mean the amount, if any, by
which the aggregate Certificate Principal Amount of all such Classes of
Certificates after giving effect to distributions made on such Distribution
Date exceeds the aggregate Stated Principal Balance of the Mortgage Loans
after giving effect to any payments of principal received or advanced with
respect to the Due Date occurring immediately prior to such Distribution
Date. Any such write-offs will be applied to such Classes of Certificates in
the following order, until each is reduced to zero: first, to the Class G
Certificates; second, to the Class F Certificates; third, to the Class E
Certificates; fourth, to the Class D Certificates; fifth, to the Class C
Certificates; sixth, to the Class B Certificates; and, finally, pro rata, to
the Class A-1 and Class A-2 Certificates, based on their respective
Certificate Principal Amounts. Any amounts recovered in respect of any
amounts previously written off as Realized Losses will be distributed to the
Classes of Certificates described above in reverse order of allocation of
Realized Losses thereto.
Shortfalls in Available Funds resulting from additional servicing
compensation other than the Servicing Fee, interest on Advances to the extent
not covered by Default Interest, extraordinary expenses of the Trust Fund, a
reduction of the interest rate of a Mortgage Loan by a bankruptcy court
pursuant to a plan of reorganization or pursuant to any of its equitable
powers or other unanticipated or default-related expenses (not constituting
Realized Losses) will be allocated to interest due on each Class of
Certificates in the same order as Realized Losses are applied to the
principal balance thereof. Excess Prepayment Interest Shortfalls will be
allocated to each Class of Certificates, pro rata, based upon the amount of
interest which would have otherwise been distributable to each Class. The
Notional Amount of the Class X Certificates will be reduced to reflect
reductions in the Certificate Principal Amount of the Class A-1, Class A-2,
Class B and Class C Certificates resulting from allocations of Realized
Losses.
The "Prepayment Interest Shortfall," with respect to any Distribution Date
and any Mortgage Loan, is equal to the amount of any shortfall in collections
of interest, adjusted to the applicable Net Mortgage Rate, resulting from a
Principal Prepayment on such Mortgage Loan during the related Collection
Period and prior to the Due Date in such Collection Period. Such shortfall
may result because interest on a Principal Prepayment in full is paid by the
related borrower only to the date of prepayment.
The "Excess Prepayment Interest Shortfall" with respect to any
Distribution Date, is the aggregate amount by which the Prepayment Interest
Shortfall with respect to all Principal Prepayments received during the
related Collection Period exceeds the aggregate Servicing Fee (minus the
Trustee Fee) available to be paid to the Master Servicer for such
Distribution Date.
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APPRAISAL REDUCTION AMOUNTS. In the event that an Appraisal Reduction
Event occurs with respect to a Mortgage Loan, (i) the amount advanced by the
Master Servicer with respect to delinquent payments of interest with respect
to the related Mortgage Loan will be reduced as described under "--Appraisal
Reductions" below, and (ii) the Voting Rights of certain Classes will be
reduced as described under "The Pooling Agreement--Amendment" herein. The
reduction of interest advanced by the Master Servicer will have the effect of
reducing the amount available to be distributed as interest on the then most
subordinate Class or Classes of Certificates.
The Certificate Principal Amount of each of the Class G, Class F, Class E,
Class D, Class C and Class B Certificates will be notionally reduced (solely
for purposes of determining the Voting Rights of the related Classes) on any
Distribution Date to the extent of any Appraisal Reduction Amounts allocated
to such Class on such Distribution Date. To the extent that the aggregate of
the Appraisal Reduction Amounts for any Distribution Date exceed such
Certificate Principal Amount, such excess will be applied, subject to any
reversal described below, to notionally reduce the Certificate Principal
Amount of the next most subordinate Class of Certificates on the next
Distribution Date. Any such reductions will be applied in the following order
of priority: first, to the Class G Certificates; second, to the Class F
Certificates; third, to the Class E Certificates; fourth, to the Class D
Certificates; fifth, to the Class C Certificates and finally, to the Class B
Certificates (provided in each case that no Certificate Principal Amount in
respect of any such Class may be notionally reduced below zero). See
"--Payment Priorities" above and "--Appraisal Reductions" below.
SUBORDINATION
As a means of providing a certain amount of protection to the holders of
the Class A-1, Class A-2 and Class X Certificates against losses associated
with delinquent and defaulted Mortgage Loans, the rights of the holders of
the Class B, Class C, Class D, Class E, Class F and Class G Certificates to
receive distributions of interest (other than Excess Interest) and principal,
as applicable, will be subordinated to such rights of the holders of the
Class A-1, Class A-2 and Class X Certificates. The Class B Certificates will
likewise be protected by the subordination of the Class C, Class D, Class E,
Class F and Class G Certificates. The Class C Certificates will likewise be
protected by the subordination of the Class D, Class E, Class F and Class G
Certificates. The Class D Certificates will likewise be protected by the
subordination of the Class E, Class F and Class G Certificates. The Class E
Certificates will likewise be protected by the subordination of the Class F
and Class G Certificates. This subordination will be effected in two ways:
(i) by the preferential right of the holders of a Class of Certificates to
receive on any Distribution Date the amounts of interest and principal
distributable in respect of such Certificates on such date prior to any
distribution being made on such Distribution Date in respect of any Classes
of Certificates subordinate thereto and (ii) by the allocation of Realized
Losses first, to the Class G Certificates; second, to the Class F
Certificates; third, to the Class E Certificates; fourth to the Class D
Certificates; fifth, to the Class C Certificates; sixth, to the Class B
Certificates; and, finally, to the Class A-1 and Class A-2 Certificates, pro
rata, based on their respective Certificate Principal Amounts. No other form
of credit enhancement, including any payments on or other receipts with
respect to the Marriott Desert Springs Parent Loan, will be available for the
benefit of the holders of the Offered Certificates.
APPRAISAL REDUCTIONS
With respect to the first Distribution Date following the earliest of (i)
the third anniversary of the date on which an extension of the maturity date
of a Mortgage Loan becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer, which extension does not change the
amount of Monthly Payments on the Mortgage Loan, (ii) 90 days after an
uncured delinquency occurs in respect of a Mortgage Loan, (iii) 90 days after
the date on which a reduction in the amount of Monthly Payments on a Mortgage
Loan, or a change in any other material economic term of the Mortgage Loan,
becomes effective as a result of a modification of such Mortgage Loan by the
Special Servicer, (iv) 60 days after a receiver has been appointed, (v)
immediately after a borrower declares bankruptcy, and (vi) immediately after
a Mortgage Loan becomes an REO Mortgage Loan each, (an "Appraisal Reduction
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Event"), an Appraisal Reduction Amount is required to be calculated by the
Special Servicer. The "Appraisal Reduction Amount" for any Distribution Date
and for any Mortgage Loan as to which any Appraisal Reduction Event has
occurred will be an amount equal to the excess of (a) the outstanding Stated
Principal Balance of such Mortgage Loan as of the last day of the related
Collection Period over (b) the excess of (i) 90% of the sum of the appraised
values of the related Mortgaged Properties as determined by independent MAI
appraisals (the costs of which is required to be paid by the Master Servicer
as an Advance) over (ii) the sum of (A) to the extent not previously advanced
by the Master Servicer, the Trustee or the Fiscal Agent, all unpaid interest
on such Mortgage Loan at a per annum rate equal to the Mortgage Rate, (B) all
unreimbursed Advances and interest thereon at the Advance Rate in respect of
such Mortgage Loan and (C) all currently due and unpaid real estate taxes and
assessments and insurance premiums and all other amounts, including, if
applicable, ground rents, due and unpaid under the Mortgage Loan (which
taxes, premiums and other amounts have not been the subject of an Advance).
If no independent MAI appraisal has been obtained within twelve months prior
to the first Distribution Date on or after an Appraisal Reduction Event has
occurred, the Special Servicer will be required to estimate the value of the
related Mortgaged Properties (the "Special Servicer's Appraisal Reduction
Estimate") and such estimate will be used for purposes of determining the
Appraisal Reduction Amount. Within 60 days after the Special Servicer
receives notice or is otherwise aware of an Appraisal Reduction Event, the
Special Servicer will be required to obtain an independent MAI appraisal, the
cost of which will be paid by the Master Servicer as a Property Advance. On
the first Distribution Date occurring on or after the delivery of such
independent MAI appraisal, the Special Servicer will be required to adjust
the Appraisal Reduction Amount to take into account such appraisal
(regardless of whether the independent MAI appraisal is higher or lower than
the Special Servicer's Appraisal Reduction Estimate). Annual updates of such
independent MAI appraisal will be obtained during the continuance of an
Appraisal Reduction Event and the Appraisal Reduction Amount will be adjusted
accordingly.
Upon payment in full or liquidation of any Mortgage Loan for which an
Appraisal Reduction Amount has been determined, such Appraisal Reduction
Amount will be eliminated.
DELIVERY, FORM AND DENOMINATION
The Offered Certificates (other than the Class X Certificates) will be
issued, maintained and transferred in the book-entry form only in
denominations of $10,000 initial Certificate Principal Amount, and in
multiples of $1 in excess thereof, and the Class X Certificates will be
issued, maintained and transferred in the book-entry form only in
denominations of $1,000,000 initial Notional Amount, and in multiples of $1
in excess thereof.
The Offered Certificates will initially be represented by one or more
global Certificates for each such Class registered in the name of the nominee
of DTC. The Seller has been informed by DTC that DTC's nominee will be Cede &
Co. No holder of an Offered Certificate will be entitled to receive a
certificate issued in fully registered, certificated form (each, a
"Definitive Certificate") representing its interest in such Class, except
under the limited circumstances described below under "--Definitive
Certificates." Unless and until Definitive Certificates are issued, all
references to actions by holders of the Offered Certificates will refer to
actions taken by DTC upon instructions received from holders of Offered
Certificates through its participating organizations (together with CEDEL and
Euroclear participating organizations, the "Participants"), and all
references herein to payments, notices, reports, statements and other
information to holders of Offered Certificates will refer to payments,
notices, reports and statements to DTC or Cede & Co., as the registered
holder of the Offered Certificates, for distribution to holders of Offered
Certificates through its Participants in accordance with DTC procedures;
provided, however, that to the extent that the party to the Pooling Agreement
responsible for distributing any report, statement or other information has
been provided with the name of the beneficial owner of a Certificate (or the
prospective transferee of such beneficial owner), such report, statement or
other information will be provided to such beneficial owner (or prospective
transferee).
Until Definitive Certificates are issued in respect of the Offered
Certificates, interests in the Offered Certificates will be transferred on
the book-entry records of DTC and its Participants. The Trustee will
initially serve as certificate registrar (in such capacity, the "Certificate
Registrar") for purposes of recording and otherwise providing for the
registration of the Offered Certificates.
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A "Certificateholder" or "holder" under the Pooling Agreement will be the
person in whose name a Certificate is registered in the certificate register
maintained pursuant to the Pooling Agreement, except that solely for the
purpose of giving any consent or taking any action pursuant to the Pooling
Agreement, any Certificate registered in the name of the Seller, the Trustee,
the Master Servicer, the Special Servicer, a manager of a Mortgaged Property,
a mortgagor or any person affiliated with the Seller, the Trustee, the Master
Servicer, or the Special Servicer, such Certificate will be deemed not to be
outstanding and the Voting Rights to which it is entitled will not be taken
into account in determining whether the requisite percentage of Voting Rights
necessary to effect any such consent or take any such action has been
obtained; provided, however, that for purposes of obtaining the consent of
Certificateholders to an amendment to the Pooling Agreement, any Certificates
beneficially owned by the Master Servicer, the Special Servicer or an
affiliate of the Master Servicer or the Special Servicer will be deemed to be
outstanding, provided that such amendment does not relate to compensation of
the Master Servicer or the Special Servicer, or otherwise benefit the Master
Servicer or the Special Servicer in any material respect; and, provided,
further, that for purposes of obtaining the consent of Certificateholders to
any action proposed to be taken by the Special Servicer with respect to a
Specially Serviced Mortgage Loan, any Certificates beneficially owned by the
Master Servicer or an affiliate thereof will be deemed to be outstanding,
provided that the Special Servicer is not the Master Servicer. The Percentage
Interest of any Offered Certificate of any Class will be equal to the
percentage obtained by dividing the denomination of such Certificate by the
aggregate initial Certificate Principal Amount of such Class of Certificates.
See "Description of the Certificates--General" in the Prospectus.
BOOK-ENTRY REGISTRATION
Holders of Offered Certificates may hold their Certificates through DTC
(in the United States) or CEDEL or Euroclear (in Europe) if they are
Participants of such system, or indirectly through organizations that are
participants in such systems. CEDEL and Euroclear will hold omnibus positions
on behalf of the CEDEL Participants and the Euroclear Participants,
respectively, through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositories
(collectively, the "Depositories") which in turn will hold such positions in
customers' securities accounts in the Depositories' names on the books of
DTC. DTC is a limited purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities for its Participants and
to facilitate the clearance and settlement of securities transactions between
Participants through electronic computerized book-entries, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between CEDEL Participants and Euroclear Participants will
occur in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through CEDEL Participants or
Euroclear Participants, on the other, will be effected in DTC in accordance
with DTC rules on behalf of the relevant European international clearing
system by its Depository; however, such cross-market transactions will
require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures. If the transaction complies with all relevant
requirements, Euroclear or CEDEL, as the case may be, will then deliver
instructions to the Depository to take action to effect final settlement on
its behalf.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing,
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dated the business day following the DTC settlement date, and such credits
or any transactions in such securities settled during such processing will be
reported to the relevant CEDEL Participant or Euroclear Participant on such
business day. Cash received in CEDEL or Euroclear as a result of sales of
securities by or through a CEDEL Participant or a Euroclear Participant to a
DTC Participant will be received with value on the DTC settlement date but
will be available in the relevant CEDEL or Euroclear cash account only as of
the business day following settlement in DTC.
The holders of Offered Certificates that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of,
or other interests in, Offered Certificates may do so only through
Participants and Indirect Participants. In addition, holders of Offered
Certificates will receive all distributions of principal and interest from
the Trustee through the Participants who in turn will receive them from DTC.
Under a book-entry format, holders of Offered Certificates may experience
some delay in their receipt of payments, since such payments will be
forwarded by the Trustee to Cede & Co., as nominee for DTC. DTC will forward
such payments to its Participants, which thereafter will forward them to
Indirect Participants or beneficial owners of Offered Certificates.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Offered Certificates among Participants on whose behalf it acts with respect
to the Offered Certificates and to receive and transmit distributions of
principal of, and interest on, the Offered Certificates. Participants and
Indirect Participants with which the holders of Offered Certificates have
accounts with respect to the Offered Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective holders of Offered Certificates. Accordingly, although the
holders of Offered Certificates will not possess the Offered Certificates,
the Rules provide a mechanism by which Participants will receive payments on
Offered Certificates and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder of
Offered Certificates to pledge such Certificates to persons or entities that
do not participate in the DTC system, or to otherwise act with respect to
such Certificates, may be limited due to the lack of a physical certificate
for such Certificates.
DTC has advised the Seller that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling Agreement only
at the direction of one or more Participants to whose accounts with DTC the
Offered Certificates are credited. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are
taken on behalf of Participants whose holdings include such undivided
interests.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations
("CEDEL Participants") and facilitates the clearance and settlement of
securities transactions between CEDEL Participants through electronic
book-entry changes in accounts of CEDEL Participants, thereby eliminating the
need for physical movement of certificates.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear system ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within the Euroclear
system, withdrawal of securities and cash from the Euroclear system, and
receipts of payments with respect to securities in the Euroclear system.
Although DTC, Euroclear and CEDEL have implemented the foregoing
procedures in order to facilitate transfers of interests in Global
Certificates among Participants of DTC, Euroclear and CEDEL, they are under
no obligation to perform or to continue to comply with such procedures, and
such procedures may be discontinued at any time. None of the Seller, the
Trustee, the Master Servicer, the
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Special Servicers or the Underwriter will have any responsibility for the
performance by DTC, Euroclear or CEDEL or their respective direct or indirect
Participants of their respective obligations under the rules and procedures
governing their operations. The information herein concerning DTC, CEDEL and
Euroclear and their book-entry systems has been obtained from sources
believed to be reliable, but the Seller takes no responsibility for the
accuracy or completeness thereof.
DEFINITIVE CERTIFICATES
Definitive Certificates will be delivered to beneficial owners of Offered
Certificates ("Certificate Owners") (or their nominees) only if (i) DTC is no
longer willing or able properly to discharge its responsibilities as
depository with respect to the Offered Certificates, and the Seller is unable
to locate a qualified successor, (ii) the Seller or the Trustee, at its sole
option, elects to terminate the book-entry system through DTC, or (iii) after
the occurrence of an Event of Default under the Pooling Agreement,
Certificate Owners representing a majority in principal amount of the Offered
Certificates of any Class then outstanding advise DTC through DTC
Participants in writing that the continuation of a book-entry system through
DTC (or a successor thereto) is no longer in the best interest of such
Certificate Owners.
Upon the occurrence of any of the events described in clauses (i) through
(iii) in the immediately preceding paragraph, DTC is required to notify all
affected DTC Participants of the availability through DTC of Definitive
Certificates. Upon delivery of Definitive Certificates, the Trustee,
Certificate Registrar and Master Servicer will recognize the holders of such
Definitive Certificates as holders under the Pooling Agreement ("Holders").
Distributions of principal of and interest on the Definitive Certificates
will be made by the Trustee directly to Holders of Definitive Certificates in
accordance with the procedures set forth in the Prospectus and the Pooling
Agreement.
Upon the occurrence of any of the events described in clauses (i) through
(iii) of the second preceding paragraph, requests for transfer of Definitive
Certificates will be required to be submitted directly to the Certificate
Registrar in a form acceptable to the Certificate Registrar (such as the
forms which will appear on the back of the certificate representing a
Definitive Certificate), signed by the Holder or such Holder's legal
representative and accompanied by the Definitive Certificate or Certificates
for which transfer is being requested.
TRANSFER RESTRICTIONS
Each Class B, Class C, Class D and Class E Certificate will bear a legend
substantially to the effect that such Certificate may not be purchased by a
transferee that is (A) an employee benefit plan or other retirement
arrangement, including an individual retirement account or a Keogh plan,
which is subject to Title I of ERISA, or Section 4975 of the Code, or a
"governmental plan" (as defined in Section 3(32) of ERISA) that is subject to
any federal, state or local law ("Similar Law") which is, to a material
extent, similar to the foregoing provisions of ERISA of the Code (each, a
"Plan"), or (B) a collective investment fund in which Plans are invested, an
insurance company using assets of separate accounts or general accounts which
include assets of Plans (or which are deemed pursuant to ERISA or any Similar
Law to include assets of Plans) or other person acting on behalf of any such
Plan or using the assets of any such Plan, other than an insurance company
using the assets of its general account under circumstances whereby such
purchase and the subsequent holding of such Certificate by such insurance
company would be exempt from the prohibited transaction provisions of ERISA
and the Code under Prohibited Transaction Class Exemption 95-60.
Holders of Class B, Class C, Class D and Class E Certificates that are in
book-entry form will be deemed to have represented that they are not persons
or entities referred to in clause (A) or (B) of the legend described in the
preceding paragraph. In the event that holders of the Class B, Class C, Class
D and Class E Certificates become entitled to receive Definitive Certificates
under the circumstances described under "--Definitive Certificates," each
prospective transferee of a Class B, Class C, Class D and Class E Certificate
that is a Definitive Certificate will be required to either deliver to the
Seller, the Certificate Registrar and the Trustee a representation letter
substantially in the form set forth as an exhibit to the Pooling Agreement
stating that such transferee is not a person or entity referred to in clause
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<PAGE>
(A) or (B) of the legend or provide an opinion to the Seller, the
Certificate Registrar and the Trustee as described in the Pooling Agreement.
Any transfer of a Class B, Class C, Class D and Class E Certificate that
would result in a prohibited transaction under ERISA or Section 4975 of the
Code, or a materially similar characterization under any Similar Law will be
deemed absolutely null and void ab initio.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
YIELD
The yield to maturity on the Offered Certificates will depend upon the
price paid by the Certificateholders, the rate and timing of the
distributions in reduction of Certificate Principal Amounts or Notional
Amounts, as applicable, of the related Classes of Certificates, the extent to
which Prepayment Premiums and Excess Interest allocated to a Class of
Certificates are collected, and the rate, timing and severity of losses on
the Mortgage Loans and the extent to which such losses are allocable in
reduction of the Certificate Principal Amounts or Notional Amounts, as
applicable, of such Classes of Certificates, as well as prevailing interest
rates at the time of payment or loss realization.
The rate of distributions in reduction of the Certificate Principal Amount
or Notional Amounts, as applicable, of any Class of Offered Certificates, the
aggregate amount of distributions on any Class of Offered Certificates and
the yield to maturity of any Class of Offered Certificates will be directly
related to the rate of payments of principal (both scheduled and unscheduled)
on the Mortgage Loans and the amount and timing of borrower defaults and the
severity of losses occurring upon a default. While voluntary prepayments of
Mortgage Loans are generally prohibited during applicable Prepayment Lockout
Periods, effective prepayments may occur if a sufficiently significant
portion of the Mortgaged Property is lost due to casualty or condemnation. In
addition, such distributions in reduction of Certificate Principal Amount or
Notional Amount, as applicable, may result from repurchases of Mortgage Loans
made by the Responsible Parties due to missing or defective documentation or
breaches of representations and warranties with respect to the Mortgage Loans
as described herein under "The Pooling Agreement--Representations and
Warranties; Repurchase" or purchases of the Mortgage Loans in the manner
described under "The Pooling Agreement--Optional Termination; Optional
Mortgage Loan Purchase." To the extent a Mortgage Loan requires payment of a
Prepayment Premium in connection with a voluntary prepayment, any such
Prepayment Premium generally is not due in connection with a prepayment due
to casualty or condemnation, is not included in the purchase price of a
Mortgage Loan purchased or repurchased due to a breach of a representation or
warranty, and may not be enforceable or collectible upon a default.
Disproportionate principal payments (whether resulting from differences in
amortization terms, prepayments following expirations of the respective
Prepayment Lockout Periods or otherwise) on the Mortgage Loans will affect
the Pass-Through Rate of the Class X, Class B, Class C, Class D and Class E
Certificates for one or more future periods and therefore the yield on such
Classes.
The Certificate Principal Amount or Notional Amount, as applicable, of any
Class of Offered Certificates may be reduced without distributions thereon as
a result of the occurrence and allocation of Realized Losses, reducing the
maximum amount distributable in respect of Certificate Principal Amount, if
applicable, as well as the amount of interest that would have accrued on such
Certificates in the absence of such reduction. In general, a Realized Loss
occurs when the aggregate principal balance of a Mortgage Loan is reduced
without an equal distribution to applicable Certificateholders in reduction
of the Certificate Principal Amounts of the Certificates. Realized Losses are
likely to occur only in connection with a default on a Mortgage Loan and the
liquidation of the related Mortgaged Properties or a reduction in the
principal balance of a Mortgage Loan by a bankruptcy court.
Because the Notional Amount of the Class X Certificates is based upon the
Certificate Principal Amounts of the Class A-1, Class A-2, Class B and Class
C Certificates, the yield to maturity on the Class X Certificates will be
extremely sensitive to the rate and timing of prepayments of principal
(including both
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voluntary and involuntary prepayments, delinquencies, defaults and
liquidations) on the Mortgage Loans and any repurchase with respect to
breaches of representations and warranties with respect to the Mortgage Loans
to the extent such payments of principal are allocated to each such Class in
reduction of the Certificate Principal Amount thereof.
Certificateholders are not entitled to receive distributions of Monthly
Payments when due except to the extent they are either covered by an Advance
or actually received. Consequently, any defaulted Monthly Payment for which
no such Advance is made will tend to extend the weighted average lives of the
Certificates, whether or not a permitted extension of the due date of the
related Mortgage Loan has been effected.
The rate of payments (including voluntary and involuntary prepayments) on
pools of mortgage loans is influenced by a variety of economic, geographic,
social and other factors, including the level of mortgage interest rates and
the rate at which borrowers default on their mortgage loans. The terms of the
Mortgage Loans (in particular, the term of any Prepayment Lockout Period, the
extent to which Prepayment Premiums are due with respect to any principal
prepayments, the right of the mortgagee to apply condemnation and casualty
proceeds to prepay the Mortgage Loan, the availability of certain rights to
defease all or a portion of the Mortgage Loan, and any increase in the
interest rate and the application of Excess Cash Flow, if applicable, to
prepay the related Mortgage Loan) may affect the rate of principal payments
on Mortgage Loans, and consequently, the yield to maturity of the Classes of
Offered Certificates. See "Mortgage Pool Characteristics" and "Description of
the Mortgaged Properties and the Mortgage Loans" herein.
The timing of changes in the rate of prepayment on the Mortgage Loans may
significantly affect the actual yield to maturity experienced by an investor
even if the average rate of principal payments experienced over time is
consistent with such investor's expectation. In general, the earlier a
prepayment of principal on the Mortgage Loans, the greater the effect on such
investor's yield to maturity. As a result, the effect on such investor's
yield of principal payments occurring at a rate higher (or lower) than the
rate anticipated by the investor during the period immediately following the
issuance of the Offered Certificates would not be fully offset by a
subsequent like reduction (or increase) in the rate of principal payments.
No representation is made as to the rate of principal payments on the
Mortgage Loans or as to the yield to maturity of any Class of Offered
Certificates. In addition, although Excess Cash Flow is applied to reduce
principal of the respective Mortgage Loans after their respective Anticipated
Repayment Dates, there can be no assurance that any of such Mortgage Loans
will be prepaid on that date or any date prior to maturity. An investor is
urged to make an investment decision with respect to any Class of Offered
Certificates based on the anticipated yield to maturity of such Class of
Offered Certificates resulting from its purchase price and such investor's
own determination as to anticipated Mortgage Loan prepayment rates under a
variety of scenarios. The extent to which any Class of Offered Certificates
is purchased at a discount or a premium and the degree to which the timing of
payments on such Class of Offered Certificates is sensitive to prepayments
will determine the extent to which the yield to maturity of such Class of
Offered Certificates may vary from the anticipated yield. An investor should
carefully consider the associated risks, including, in the case of any
Offered Certificates purchased at a discount, the risk that a slower than
anticipated rate of principal payments on the Mortgage Loans could result in
an actual yield to such investor that is lower than the anticipated yield
and, in the case of any Offered Certificates purchased at a premium, the risk
that a faster than anticipated rate of principal payments could result in an
actual yield to such investor that is lower than the anticipated yield.
An investor should consider the risk that rapid rates of prepayments on
the Mortgage Loans, and therefore of amounts distributable in reduction of
the principal balance of Offered Certificates entitled to distributions of
principal, may coincide with periods of low prevailing interest rates. During
such periods, the effective interest rates on securities in which an investor
may choose to reinvest such amounts distributed to it may be lower than the
applicable Pass-Through Rate. Conversely, slower rates of prepayments on the
Mortgage Loans, and therefore, of amounts distributable in reduction of
principal
S-258
<PAGE>
balance of the Offered Certificates entitled to distributions of principal,
may coincide with periods of high prevailing interest rates. During such
periods, the amount of principal distributions resulting from prepayments
available to an investor in such Certificates for reinvestment at such high
prevailing interest rates may be relatively small.
The effective yield to holders of Offered Certificates will be lower than
the yield otherwise produced by the applicable Pass-Through Rate and
applicable purchase prices because while interest will accrue during each
Interest Accrual Period, the distribution of such interest will not be made
until the Distribution Date immediately following such Interest Accrual
Period, and principal paid on any Distribution Date will not bear interest
during the period from the end of such Interest Accrual Period to the
Distribution Date that follows.
YIELD ON THE OFFERED CERTIFICATES
The yield to maturity of Offered Certificates will be sensitive to the
rate and timing of principal payments (including voluntary and involuntary
prepayments and repurchases), delinquencies and liquidations on the Mortgage
Loans.
The following tables indicate the assumed purchase price (before adding
accrued interest, if any), expressed as a percentage of the applicable
Certificate Principal Amount, and the hypothetical pre-tax yield to maturity
on the Offered Certificates, stated on a corporate bond equivalent basis,
based on certain hypothetical scenarios. The pre-tax yields to maturity set
forth in the tables below were calculated by determining the monthly discount
rate that, when applied to the assumed stream of cash flows to be paid on the
Offered Certificates, would cause the discounted present value of such
assumed cash flows to equal the assumed purchase price thereof, plus accrued
interest, if any, as basis points and by converting such monthly rates to
corporate bond equivalent rates. Such calculations of yield and discounted
margin do not take into account variations that may occur in the interest
rates at which investors may be able to reinvest funds received by them as
distributions on the Offered Certificates and consequently, do not purport to
reflect the return on any investment in the Offered Certificates when such
reinvestment rates are considered.
For purposes of preparing the tables, it was assumed that (i) each of the
Mortgage Loans has the following characteristics as of the Cut-Off Date:
<TABLE>
<CAPTION>
REMAINING TERM REMAINING
TO ANTICIPATED TERM TO
CUT-OFF DATE REPAYMENT DATE MATURITY INTEREST SERVICING UNDERWRITTEN NET
MORTGAGE LOAN PRINCIPAL BALANCE (MONTHS) (MONTHS) ACCRUAL FEE CASH FLOW
- ----------------------- ----------------- -------------- ----------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
URS Pool Loan........... $253,000,000 120 300 ACTUAL/360 0.019% $40,349,956
Tharaldson Pool B Loan . $183,352,232 117 297 ACTUAL/360 0.044% $36,701,015
Tharaldson Pool A Loan . $178,671,275 117 297 ACTUAL/360 0.044% $35,628,417
Green Acres Loan........ $159,523,713 117 357 ACTUAL/360 0.019% $19,322,925
Americold Pool Loan .... $148,500,000 120 300 ACTUAL/360 0.019% $48,889,852
Pier 39 Loan............ $116,669,545 119 357 ACTUAL/360 0.029% $13,153,909
One Commerce Square
Loan:
Tranche A.............. $ 79,929,131 119 359 ACTUAL/360 0.0165% $ 8,552,522
Tranche B.............. $ 31,481,501 N/A 52 ACTUAL/360 0.0165% $ 9,021,744
Marriott Desert Springs
Loan................... $102,418,958 145 295 ACTUAL/360 0.049% $21,500,000
Showcase Loan........... $ 78,998,166 114 330 ACTUAL/360 0.044% $ 9,902,261
Crystal City Pool Loan . $ 76,608,478 114 354 30/360 0.039% $ 9,774,441
</TABLE>
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<PAGE>
(ii) each Mortgage Loan will pay principal and interest in accordance with
its terms and scheduled payments will be timely received; (iii) the
Responsible Parties do not repurchase any Mortgage Loan as described herein
under "The Pooling Agreement--Representations and Warranties; Repurchase;"
(iv) none of the Seller, Master Servicer or the Class LR Certificateholders
exercise the right to cause early termination of the Trust Fund; (v) the
Closing Date is May 21, 1998; (vi) there are no delinquencies; (vii) partial
prepayments on the Mortgage Loans are permitted, but are assumed not to
affect the amortization schedules; (viii) no Prepayment Premiums are
collected except as otherwise noted in the tables; (ix) there are no
Prepayment Interest Shortfalls or Appraisal Reduction Amounts; (x)
distributions on the Offered Certificates are made on the 13th day of the
month (each assumed to be a Business Day); (xi) each Mortgage Loan bears
interest at the related Mortgage Rate as described herein; and (xii) unless
otherwise specified in the Scenarios described below, the Mortgage Loans do
not prepay (assumptions (i) through (xii) above are collectively referred to
as the "Mortgage Loan Assumptions").
In the case of Scenario 1 below, it is assumed that all of the Mortgage
Loans having Anticipated Repayment Dates are prepaid in full ("Scenario 1")
on their respective Anticipated Repayment Dates. In the case of Scenario 2,
it is assumed that all Mortgage Loans are prepaid in full on the first Due
Dates on which prepayments in full can be made without payment of any
Prepayment Premium. In the case of Scenarios 3 and 4, it is assumed that all
Mortgage Loans receive payments of principal after their respective
Anticipated Repayment Dates in an amount equal to 100% of Underwritten Net
Cash Flow without payment of any Prepayment Premium until the earlier of (a)
5 years after the Anticipated Repayment Date, and thereupon any remaining
unpaid principal balance is paid in full or (b) the date on which the unpaid
principal balance is paid in full. In the case of Scenario 3, it is assumed
that no Excess Interest is paid on any Mortgage Loan, while In the case of
Scenario 4, it is assumed that Excess Interest is paid from Underwritten Net
Cash Flow commencing on and after the unpaid principal balance of the
applicable Mortgage Loan has been paid in full. Scenarios 1, 2, 3 and 4 are
collectively referred to herein as the "Scenarios." Purchase prices are
expressed in 32nds (i.e. 101-16 means 101 16/32%).
CLASS A-1
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
- --------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
99-16............................. 6.468% 6.468% 6.468% 6.468%
100-00............................ 6.343 6.343 6.343 6.343
100-16............................ 6.219 6.219 6.219 6.219
Modified duration (years)......... 4.02 4.01 4.02 4.02
101-00............................ 6.096% 6.096% 6.096% 6.096%
101-16............................ 5.974 5.974 5.974 5.974
Weighted Average
Life (years)..................... 5.017 5.015 5.019 5.019
First Principal Distribution
Date............................. 06/98 06/98 06/98 06/98
Last Principal Distribution Date . 11/07 10/07 01/08 01/08
</TABLE>
S-260
<PAGE>
CLASS A-2
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
- --------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
100-00............................ 6.621% 6.621% 6.625% 6.995%
100-16............................ 6.550 6.549 6.564 6.935
101-00............................ 6.479 6.478 6.503 6.875
Modified duration (years)......... 6.99 6.95 8.14 8.25
101-16............................ 6.409% 6.407% 6.443% 6.815%
102-00............................ 6.339 6.337 6.383 6.756
Weighted Average
Life (years)..................... 9.712 9.640 12.180 12.180
First Principal Distribution
Date............................. 11/07 10/07 01/08 01/08
Last Principal Distribution Date . 04/08 03/08 08/12 08/12
</TABLE>
CLASS B
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
- --------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
100-00............................ 6.739% 6.738% 6.750% 7.080%
100-16............................ 6.669 6.668 6.695 7.025
101-00............................ 6.599 6.597 6.640 6.971
Modified duration (years)......... 7.07 7.03 9.02 9.08
101-16............................ 6.529% 6.527% 6.586% 6.917%
102-00............................ 6.460 6.458 6.532 6.863
Weighted Average
Life (years)..................... 9.943 9.861 14.433 14.433
First Principal Distribution
Date............................. 04/08 03/08 08/12 08/12
Last Principal Distribution Date . 05/08 04/08 11/12 11/12
</TABLE>
S-261
<PAGE>
CLASS C
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
- --------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
100-00............................ 6.910% 6.910% 6.921% 7.244%
100-16............................ 6.839 6.839 6.865 7.189
101-00............................ 6.769 6.768 6.810 7.134
Modified duration (years)......... 7.03 6.99 9.00 9.05
101-16............................ 6.699% 6.697% 6.756% 7.080%
102-00............................ 6.629 6.627 6.702 7.026
Weighted Average
Life (years)..................... 9.978 9.894 14.638 14.638
First Principal Distribution
Date............................. 05/08 04/08 11/12 11/12
Last Principal Distribution Date . 05/08 04/08 02/13 02/13
</TABLE>
CLASS D
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
- --------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
99-16............................. 7.212% 7.212% 7.208% 7.523%
100-00............................ 7.140 7.140 7.152 7.467
100-16............................ 7.069 7.068 7.096 7.412
Modified duration (years)......... 6.94 6.90 8.91 8.97
101-00............................ 6.997% 6.996% 7.041% 7.357%
101-16............................ 6.927 6.925 6.986 7.302
Weighted Average
Life (years)..................... 9.978 9.894 14.819 14.819
First Principal Distribution
Date............................. 05/08 04/08 02/13 02/13
Last Principal Distribution Date . 05/08 04/08 04/13 04/13
</TABLE>
S-262
<PAGE>
CLASS E
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
- --------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
96-16............................. 7.655% 7.658% 7.553% 7.865%
97-00............................. 7.580 7.582 7.494 7.807
97-16............................. 7.505 7.507 7.436 7.749
Modified duration (years)......... 6.88 6.84 8.84 8.89
98-00............................. 7.431% 7.433% 7.379% 7.692%
98-16............................. 7.358 7.359 7.322 7.635
Weighted Average
Life (years)..................... 9.978 9.894 14.895 14.895
First Principal Distribution
Date............................. 05/08 04/08 04/13 04/13
Last Principal Distribution Date . 05/08 04/08 05/13 05/13
</TABLE>
The following tables indicate the assumed purchase price (before adding
accrued interest), expressed as a percentage of the Notional Amount, and the
hypothetical pre-tax yield to maturity on the Class X Certificates, stated on
a corporate bond equivalent basis, based on certain hypothetical scenarios.
The tables have been prepared based on the Mortgage Loan Assumptions.
CLASS X
ASSUMING 0% DEFAULTS
<TABLE>
<CAPTION>
ASSUMED PURCHASE
PRICE SCENARIO 1 SCENARIO 2 SCENARIOS 3 & 4
- ---------------- ------------ ------------ ---------------
<S> <C> <C> <C>
3-04 7.804% 7.690% 10.541%
3-04+ 7.675 7.561 10.426
3-05 7.547 7.433 10.312
3-05+ 7.420 7.305 10.199
3-06 7.295 7.179 10.087
</TABLE>
CLASS X
ASSUMING 50% DEFAULTS, 50% LOSS SEVERITY*
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE MAY 2003 MAY 2005
- ---------------------- ---------- ----------
<S> <C> <C>
3-04 7.712% 7.754%
3-04+ 7.583 7.625
3-05 7.455 7.497
3-05+ 7.328 7.371
3-06 7.202 7.245
</TABLE>
- ------------
* Assumes (i) the assumptions stated under Scenario 1, (ii) a principal
balance of Mortgage Loans equal to 50% of the Certificate Principal
Amount of the Class G Certificates ($14,091,998.67) defaults in the
indicated month (which defaulted amount is allocated to all then
outstanding Mortgage Loans pro rata), and (iii) there is a 50% loss
severity and 0 months to liquidation.
S-263
<PAGE>
CLASS X
ASSUMING 50% DEFAULTS, 100% LOSS SEVERITY*
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE MAY 2003 MAY 2005
- ---------------------- ---------- ----------
<S> <C> <C>
3-04 7.819% 7.812%
3-04+ 7.690 7.683
3-05 7.562 7.556
3-05+ 7.435 7.429
3-06 7.310 7.303
</TABLE>
- ------------
* Assumes (i) the assumptions stated under Scenario 1, (ii) a principal
balance of Mortgage Loans equal to 50% of the Certificate Principal
Amount of the Class G Certificates ($14,091,998.67) defaults in the
indicated month (which defaulted amount is allocated to all then
outstanding Mortgage Loans pro rata), and (iii) there is a 100% loss
severity and 0 months to liquidation.
CLASS X
ASSUMING 100% DEFAULTS, 50% LOSS SEVERITY*
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE MAY 2003 MAY 2005
- ---------------------- ---------- ----------
<S> <C> <C>
3-04 7.620% 7.705%
3-04+ 7.491 7.576
3-05 7.363 7.448
3-05+ 7.236 7.321
3-06 7.110 7.195
</TABLE>
- ------------
* Assumes (i) the assumptions stated under Scenario 1, (ii) a principal
balance of Mortgage Loans equal to 100% of the Certificate Principal
Amount of the Class G Certificates ($28,183,997.33) defaults in the
indicated month (which defaulted amount is allocated to all then
outstanding Mortgage Loans pro rata), and (iii) there is a 50% loss
severity and 0 months to liquidation.
CLASS X
ASSUMING 100% DEFAULTS, 100% LOSS SEVERITY*
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE MAY 2003 MAY 2005
- ---------------------- ---------- ----------
<S> <C> <C>
3-04 7.833% 7.820%
3-04+ 7.705 7.692
3-05 7.577 7.564
3-05+ 7.450 7.437
3-06 7.325 7.311
</TABLE>
- ------------
* Assumes (i) the assumptions stated under Scenario 1, (ii) a principal
balance of Mortgage Loans equal to 100% of the Certificate Principal
Amount of the Class G Certificates ($28,183,997.33) defaults in the
indicated month (which defaulted amount is allocated to all then
outstanding Mortgage Loans pro rata), and (iii) there is a 100% loss
severity and 0 months to liquidation.
S-264
<PAGE>
CLASS X
ASSUMING 200% DEFAULTS, 50% LOSS SEVERITY*
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE MAY 2003 MAY 2005
- ---------------------- ---------- ----------
<S> <C> <C>
3-04 7.436% 7.609%
3-04+ 7.307 7.480
3-05 7.179 7.352
3-05+ 7.052 7.225
3-06 6.926 7.098
</TABLE>
- ------------
* Assumes (i) the assumptions stated under Scenario 1, (ii) a principal
balance of Mortgage Loans equal to 200% of the Certificate Principal
Amount of the Class G Certificates ($56,367,994.66) defaults in the
indicated month (which defaulted amount is allocated to all then
outstanding Mortgage Loans pro rata), and (iii) there is a 50% loss
severity and 0 months to liquidation.
It is highly unlikely that principal of the Mortgage Loans will be repaid
consistent with the assumptions underlying any one of the Scenarios. The
Mortgage Loans will not have all of the characteristics assumed for purposes
of the Scenarios. Yield and discounted margin will be affected by prepayment
rates. There can be no assurance that the pre-tax yields or discounted
margins, as applicable, on the Offered Certificates will correspond to any of
the pre-tax yields or discounted margins, as applicable, shown herein or that
the aggregate purchase prices of the Offered Certificates will be as assumed.
Investors must make their own decisions as to the appropriate prepayment
assumptions to be used in deciding whether to purchase the Offered
Certificates.
RATED FINAL DISTRIBUTION DATE
The "Rated Final Distribution Date" is the Distribution Date occurring
three years after the latest maturity date of any Mortgage Loan. Because
certain of the Mortgage Loans have maturity dates that occur earlier than the
latest maturity date, and because certain of the Mortgage Loans may be
prepaid prior to maturity, it is possible that the Certificate Principal
Amount of each Class of Offered Certificates will be reduced to zero
significantly earlier than the Rated Final Distribution Date. However,
delinquencies on Mortgage Loans could result in final distributions in
reduction of the Certificate Principal Amount of one or more Classes after
the Rated Final Distribution Date of such Class or Classes.
WEIGHTED AVERAGE LIFE OF OFFERED CERTIFICATES
Weighted average life refers to the average amount of time that will
elapse from the date of determination to the date of distribution or
allocation to the investor of each dollar in reduction of Certificate
Principal Amount. The weighted average lives of the Offered Certificates will
be influenced by, among other things, the rate at which principal of the
Mortgage Loans is paid, which may occur as a result of scheduled
amortization, voluntary or involuntary prepayments or liquidations.
The weighted average lives of the Offered Certificates may also be
affected to the extent that additional distributions in reduction of the
Certificate Principal Amount of such Certificates occur as a result of the
repurchase or purchase of Mortgage Loans from the Trust Fund as described
under "The Pooling Agreement--Representations and Warranties; Repurchase" or
"--Optional Termination; Optional Mortgage Loan Purchase" herein. Such a
repurchase or purchase from the Trust Fund will have the same effect on
distributions to the holders of Certificates as if the related Mortgage Loans
had prepaid in full, except that no Prepayment Premiums are made in respect
thereof. The tables of "Percentage of Initial Certificate Principal Amount
Outstanding For Each Designated Scenario" set forth below indicate the
weighted average life of each Class of Offered Certificates (other than the
Class X Certificates) and set forth the percentage of the initial Certificate
Principal Amount of such Offered Certificates that would be outstanding after
each of the dates shown based on the assumptions for each of the designated
Scenarios described above under "--Yield on the Offered Certificates." The
tables have also been prepared on the basis of the Mortgage Loan Assumptions
described under "--Yield on the Offered Certificates." The Mortgage Loan
Assumptions made in preparing the previous and following tables are expected
to vary, and may vary significantly, from the actual performance of the
Mortgage Loans. It is highly unlikely that principal of the Mortgage Loans
will be repaid consistent with the assumptions underlying any one of the
Scenarios. Investors are urged to conduct their own analysis concerning the
likelihood that the Mortgage Loans may pay or prepay on any particular date.
S-265
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-1
-----------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4
- -------------------------------------- -------------- -------------- ---------------------
<S> <C> <C> <C>
Initial Percent ....................... 100% 100% 100%
May 13, 1999 .......................... 91% 91% 91%
May 13, 2000 .......................... 81% 81% 81%
May 13, 2001 .......................... 71% 71% 71%
May 13, 2002 .......................... 60% 60% 60%
May 13, 2003 .......................... 50% 50% 50%
May 13, 2004 .......................... 40% 40% 40%
May 13, 2005 .......................... 30% 30% 30%
May 13, 2006 .......................... 19% 19% 19%
May 13, 2007 .......................... 7% 7% 7%
May 13, 2008 .......................... 0% 0% 0%
May 13, 2009 .......................... 0% 0% 0%
May 13, 2010 .......................... 0% 0% 0%
May 13, 2011 .......................... 0% 0% 0%
May 13, 2012 .......................... 0% 0% 0%
May 13, 2013 .......................... 0% 0% 0%
Weighted Average
Life (in years)(1) ................... 5.0 5.0 5.0
First Principal Distribution Date .... 06/98 06/98 06/98
Last Principal Distribution Date ..... 11/07 10/07 01/08
</TABLE>
- ------------
(1) The weighted average life of the Class A-1 Certificates is determined
by (i) multiplying the amount of each distribution or allocation in
reduction of Certificate Principal Amount of such Class by the number
of years from the date of determination to the related Distribution
Date, (ii) adding the results and (iii) dividing the sum by the
aggregate distributions or allocations in reduction of Certificate
Principal Amount referred to in clause (i).
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<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-2
-----------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4
- -------------------------------------- -------------- -------------- ---------------------
<S> <C> <C> <C>
Initial Percent ....................... 100% 100% 100%
May 13, 1999 .......................... 100% 100% 100%
May 13, 2000 .......................... 100% 100% 100%
May 13, 2001 .......................... 100% 100% 100%
May 13, 2002 .......................... 100% 100% 100%
May 13, 2003 .......................... 100% 100% 100%
May 13, 2004 .......................... 100% 100% 100%
May 13, 2005 .......................... 100% 100% 100%
May 13, 2006 .......................... 100% 100% 100%
May 13, 2007 .......................... 100% 100% 100%
May 13, 2008 .......................... 0% 0% 96%
May 13, 2009 .......................... 0% 0% 76%
May 13, 2010 .......................... 0% 0% 56%
May 13, 2011 .......................... 0% 0% 32%
May 13, 2012 .......................... 0% 0% 6%
May 13, 2013 .......................... 0% 0% 0%
Weighted Average
Life (in years)(1) ................... 9.7 9.6 12.2
First Principal Distribution Date .... 11/07 10/07 01/08
Last Principal Distribution Date ..... 04/08 03/08 08/12
</TABLE>
- ------------
(1) The weighted average life of the Class A-2 Certificates is determined
by (i) multiplying the amount of each distribution or allocation in
reduction of Certificate Principal Amount of such Class by the number
of years from the date of determination to the related Distribution
Date, (ii) adding the results and (iii) dividing the sum by the
aggregate distributions or allocations in reduction of Certificate
Principal Amount referred to in clause (i).
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<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4
- -------------------------------------- -------------- -------------- ---------------------
<S> <C> <C> <C>
Initial Percent ....................... 100% 100% 100%
May 13, 1999 .......................... 100% 100% 100%
May 13, 2000 .......................... 100% 100% 100%
May 13, 2001 .......................... 100% 100% 100%
May 13, 2002 .......................... 100% 100% 100%
May 13, 2003 .......................... 100% 100% 100%
May 13, 2004 .......................... 100% 100% 100%
May 13, 2005 .......................... 100% 100% 100%
May 13, 2006 .......................... 100% 100% 100%
May 13, 2007 .......................... 100% 100% 100%
May 13, 2008 .......................... 0% 0% 100%
May 13, 2009 .......................... 0% 0% 100%
May 13, 2010 .......................... 0% 0% 100%
May 13, 2011 .......................... 0% 0% 100%
May 13, 2012 .......................... 0% 0% 100%
May 13, 2013........................... 0% 0% 0%
Weighted Average
Life (in years)(1).................... 9.9 9.9 14.4
First Principal Distribution Date .... 04/08 03/08 08/12
Last Principal Distribution Date ..... 05/08 04/08 11/12
</TABLE>
- ------------
(1) The weighted average life of the Class B Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount of such Class by the number of years from
the date of determination to the related Distribution Date, (ii) adding
the results and (iii) dividing the sum by the aggregate distributions
in reduction of Certificate Principal Amount referred to in clause (i).
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<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4
- -------------------------------------- -------------- -------------- ---------------------
<S> <C> <C> <C>
Initial Percent ....................... 100% 100% 100%
May 13, 1999 .......................... 100% 100% 100%
May 13, 2000 .......................... 100% 100% 100%
May 13, 2001 .......................... 100% 100% 100%
May 13, 2002 .......................... 100% 100% 100%
May 13, 2003 .......................... 100% 100% 100%
May 13, 2004 .......................... 100% 100% 100%
May 13, 2005 .......................... 100% 100% 100%
May 13, 2006 .......................... 100% 100% 100%
May 13, 2007 .......................... 100% 100% 100%
May 13, 2008 .......................... 0% 0% 100%
May 13, 2009 .......................... 0% 0% 100%
May 13, 2010 .......................... 0% 0% 100%
May 13, 2011 .......................... 0% 0% 100%
May 13, 2012 .......................... 0% 0% 100%
May 13, 2013........................... 0% 0% 0%
Weighted Average
Life (in years)(1).................... 10.0 9.9 14.6
First Principal Distribution Date .... 05/08 04/08 11/12
Last Principal Distribution Date ..... 05/08 04/08 02/13
</TABLE>
- ------------
(1) The weighted average life of the Class C Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount of such Class by the number of years from
the date of determination to the related Distribution Date, (ii) adding
the results and (iii) dividing the sum by the aggregate distributions
in reduction of Certificate Principal Amount referred to in clause (i).
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<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS D
-----------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4
- -------------------------------------- -------------- -------------- ---------------------
<S> <C> <C> <C>
Initial Percent ....................... 100% 100% 100%
May 13, 1999 .......................... 100% 100% 100%
May 13, 2000 .......................... 100% 100% 100%
May 13, 2001 .......................... 100% 100% 100%
May 13, 2002 .......................... 100% 100% 100%
May 13, 2003 .......................... 100% 100% 100%
May 13, 2004 .......................... 100% 100% 100%
May 13, 2005 .......................... 100% 100% 100%
May 13, 2006 .......................... 100% 100% 100%
May 13, 2007 .......................... 100% 100% 100%
May 13, 2008 .......................... 0% 0% 100%
May 13, 2009 .......................... 0% 0% 100%
May 13, 2010 .......................... 0% 0% 100%
May 13, 2011 .......................... 0% 0% 100%
May 13, 2012 .......................... 0% 0% 100%
May 13, 2013........................... 0% 0% 0%
Weighted Average
Life (in years)(1).................... 10.0 9.9 14.8
First Principal Distribution Date .... 05/08 04/08 02/13
Last Principal Distribution Date ..... 05/08 04/08 04/13
</TABLE>
- ------------
(1) The weighted average life of the Class D Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount of such Class by the number of years from
the date of determination to the related Distribution Date, (ii) adding
the results and (iii) dividing the sum by the aggregate distributions
in reduction of Certificate Principal Amount referred to in clause (i).
S-270
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS E
-----------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4
- -------------------------------------- -------------- -------------- ---------------------
<S> <C> <C> <C>
Initial Percent ....................... 100% 100% 100%
May 13, 1999 .......................... 100% 100% 100%
May 13, 2000 .......................... 100% 100% 100%
May 13, 2001 .......................... 100% 100% 100%
May 13, 2002 .......................... 100% 100% 100%
May 13, 2003 .......................... 100% 100% 100%
May 13, 2004 .......................... 100% 100% 100%
May 13, 2005 .......................... 100% 100% 100%
May 13, 2006 .......................... 100% 100% 100%
May 13, 2007 .......................... 100% 100% 100%
May 13, 2008 .......................... 0% 0% 100%
May 13, 2009 .......................... 0% 0% 100%
May 13, 2010 .......................... 0% 0% 100%
May 13, 2011 .......................... 0% 0% 100%
May 13, 2012 .......................... 0% 0% 100%
May 13, 2013........................... 0% 0% 0%
Weighted Average
Life (in years)(1).................... 10.0 9.9 14.9
First Principal Distribution Date .... 05/08 04/08 04/13
Last Principal Distribution Date ..... 05/08 04/08 05/13
</TABLE>
- ------------
(1) The weighted average life of the Class E Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount of such Class by the number of years from
the date of determination to the related Distribution Date, (ii) adding
the results and (iii) dividing the sum by the aggregate distributions
in reduction of Certificate Principal Amount referred to in clause (i).
S-271
<PAGE>
THE POOLING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of May 11, 1998 (the "Pooling Agreement"), by and
among the Seller, the Master Servicer, each Special Servicer, the Trustee and
the Fiscal Agent.
Reference is made to the Prospectus for important information in addition
to that set forth herein regarding the terms of the Pooling Agreement and
terms and conditions of the Offered Certificates. The Seller will provide to
a prospective or actual holder of an Offered Certificate without charge, upon
written request, a copy (without exhibits) of the Pooling Agreement. Requests
should be addressed to GS Mortgage Securities Corporation II, 85 Broad
Street, New York, New York 10004; Attention: J. Theodore Borter.
ASSIGNMENT OF THE MORTGAGE LOANS
On the Closing Date, the Seller will sell, transfer or otherwise convey,
assign or cause the assignment of the Mortgage Loans and the Marriott Desert
Springs Parent Loan, without recourse, to the Trustee for the benefit of the
holders of Certificates. On or prior to the Closing Date, the Seller will
cause to be delivered to the Trustee, with respect to each Mortgage Loan (i)
the original Note endorsed without recourse to the order of the Trustee, as
trustee; (ii) the original Mortgage(s) or counterpart(s) thereof; (iii) the
assignment(s) of the Mortgage(s) in recordable form in favor of the Trustee;
(iv) to the extent not contained in the Mortgages, the original assignment of
leases and rents or counterpart thereof; (v) if applicable, the original
assignment of assignment of leases and rents to the Trustee; (vi) where
applicable, a copy of the UCC-1 financing statements, if any, including UCC-3
assignments; (vii) the original lender's title insurance policy (or marked
commitments to insure); and (viii) originals or copies of environmental
indemnities, collateral assignments of management agreements and such other
loan documents as are in the possession of the Seller, including original
assignments thereof to the Trustee, unless the Seller is delayed in making
such delivery by reason of the fact that such documents shall not have been
returned by the appropriate recording office in which case it shall notify
the Trustee in writing of such delay and shall deliver such documents to the
Trustee, with copies of them to the Master Servicer, promptly upon the
Seller's receipt thereof.
The Trustee, or any custodian for the Trustee, will hold such documents in
trust for the benefit of the holders of Certificates. The Trustee is
obligated to review such documents for each Mortgage Loan (in certain cases
only to the extent such documents are identified by the Seller as being part
of the related mortgage file) within 45 days after the later of delivery or
execution of the Pooling Agreement and report any missing documents or
certain types of defects therein to the Seller and the applicable Responsible
Party.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
In the Pooling Agreement, the Seller will assign the representations and
warranties made by each Responsible Party in the Loan Sale Agreement and the
GMACCM Responsible Party Agreement to the Trustee for the benefit of
Certificateholders. The representations and warranties to be assigned to the
Trustee for the benefit of the Certificateholders are set forth on Exhibit A
to this Prospectus Supplement.
The Pooling Agreement requires that the Master Servicer, the Special
Servicer or the Trustee notify the applicable Responsible Party and the
Seller upon its becoming aware of any breach of any representation or
warranty with respect to a Mortgage Loan that materially and adversely
affects the value of such Mortgage Loan or the interests of the holders of
the Certificates therein. The GMACCM Responsible Party Agreement provides
that with respect to the Crystal City Pool Loan, the Marriott Desert Springs
Loan and the Showcase Loan, upon a breach by GMACCM of the representations
and warranties set forth in the GMACCM Responsible Party Agreement, that
remains uncured and which materially and adversely affects the value of such
Mortgage Loan or the interests of the Certificateholders therein, GMACCM will
repurchase such Mortgage Loan at the Repurchase Price. In the Loan Sale
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<PAGE>
Agreement, GSMC will make the representations and warranties set forth in
Exhibit A with respect to the Mortgage Loans originated by GSMC and with
respect to the Mortgage Loans originated by GMACCM, but only to the extent
that GMACCM did not make such representations and warranties in the GMACCM
Responsible Party Agreement, and that upon a breach of any of such
representations and warranties that remains uncured and which materially and
adversely affects the value of such Mortgage Loan, or the interest of the
Certificateholders therein, GSMC will repurchase such Mortgage Loan at the
Repurchase Price. The Pooling Agreement will provide that the Trustee will
enforce the rights of the Trust Fund and Certificateholders under the Loan
Sale Agreement and the GMACCM Responsible Party Agreement.
Notwithstanding the foregoing, the Pooling Agreement will provide that
upon discovery by the Trustee, the Special Servicer or the Master Servicer of
a breach of a representation or warranty that causes any Mortgage Loan not to
be a "qualified mortgage" within the meaning of the REMIC provisions of the
Code, such party shall give prompt notice thereof to the Seller and the
applicable Responsible Party and within 90 days after such discovery, if such
breach cannot be cured within such period the applicable Responsible Party
will be required to purchase such Mortgage Loan from the Trust Fund at the
Repurchase Price and if GMACCM is not obligated to repurchase such Mortgage
Loan pursuant to the terms of the GMACCM Responsible Party Agreement, GSMC
will be required to purchase such Mortgage Loan from the Trust Fund at the
Repurchase Price.
The obligations of the Responsible Parties to repurchase or cure
constitute the sole remedies available to holders of Certificates or the
Trustee for a breach of a representation or warranty by the Responsible
Parties with respect to a Mortgage Loan. None of the Seller, the Master
Servicer, the Special Servicer, the Trustee, the Fiscal Agent or any of their
respective affiliates will be obligated to purchase a Mortgage Loan if the
Responsible Parties default on their obligation to repurchase or cure, and no
assurance can be given that the Responsible Parties will fulfill such
obligations. See "The Seller" in the Prospectus. If such obligation is not
met as to a Mortgage Loan that is not a "qualified mortgage," the Upper-Tier
REMIC and Lower-Tier REMIC may be disqualified.
The "Repurchase Price" with respect to a Mortgage Loan shall be equal to
the sum of (i) the outstanding principal balance of such Mortgage Loan (or
relevant portion thereof) as of the date of purchase, (ii) all accrued and
unpaid interest on such Mortgage Loan (or relevant portion thereof) at the
related Mortgage Rate, in effect from time to time, to but not including the
Due Date in the Collection Period of purchase, (iii) all related unreimbursed
Property Advances plus accrued and unpaid interest on related Advances at the
Advance Rate, and unpaid Special Servicing Fees allocable to such Mortgage
Loan (or relevant portion thereof) and (iv) all reasonable out-of-pocket
expenses reasonably incurred by the Master Servicer, the Special Servicer,
the Seller and the Trustee in respect of the breach giving rise to the
repurchase obligation, including any expenses arising out of the enforcement
of the repurchase obligation, which are reimbursable to such parties under
the terms of the Pooling Agreement.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Pooling Agreement requires each of the Master Servicer and the Special
Servicer to service and administer the Mortgage Loans on behalf of the Trust
Fund in the best interests of and for the benefit of all of the holders of
Certificates (as determined by the Master Servicer or the Special Servicer in
the exercise of its good faith and reasonable judgment) in accordance with
applicable law, the terms of the Pooling Agreement and the Mortgage Loans,
and to the extent not inconsistent with the foregoing, in the same manner in
which, and with the same care, skill and diligence as is normal and usual in
its general mortgage servicing and REO Property management activities on
behalf of third parties or on behalf of itself, whichever is higher, with
respect to mortgage loans and REO properties that are comparable to the
Mortgaged Properties, and in each event with a view to the timely collection
of all scheduled payments of principal and interest under the Mortgage Loans
or, if a Mortgage Loan comes into and continues in default and if, in the
good faith and reasonable judgment of the Special Servicer, no satisfactory
arrangements can be made for the collection of the delinquent payments, the
maximization of the recovery on such Mortgage Loan to the Certificateholders
(as a collective whole) on a present value basis (the relevant discounting of
anticipated collection that will be distributable to Certificateholders to be
performed at the related Net Mortgage Rate), but without regard to (i) any
known relationship that the
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<PAGE>
Master Servicer or the Special Servicer, or an affiliate of the Master
Servicer or the Special Servicer, as applicable, may have with the borrowers
or any other parties to the Pooling Agreement; (ii) the ownership of any
Certificate by the Master Servicer or the Special Servicer or any affiliate
of the Master Servicer or the Special Servicer, as applicable; (iii) the
Master Servicer's or the Special Servicer's obligation, as applicable, to
make Advances; or (iv) the right of the Master Servicer (or any affiliate
thereof) or the Special Servicer (or any affiliate thereof), as the case may
be, to receive reimbursement of costs, or the sufficiency of any compensation
for its services under the Pooling Agreement or with respect to any
particular transaction (the "Servicing Standard"). The Master Servicer and
the Special Servicer are permitted, at their own expense, to employ
subservicers, agents or attorneys in performing any of their respective
obligations under the Pooling Agreement. Notwithstanding any subservicing
agreement, the Master Servicer or Special Servicer, as applicable, shall
remain primarily liable to the Trustee and Certificateholders for the
servicing and administering of the Mortgage Loans in accordance with the
provisions of the Pooling Agreement without diminution of such obligation or
liability by virtue of such subservicing agreement. Any subservicing
agreement entered into by the Master Servicer or Special Servicer, as
applicable, will provide that it may be assumed or terminated by the Trustee,
or any successor Master Servicer or Special Servicer, if the Trustee, or any
successor Master Servicer or Special Servicer, has assumed the duties of the
Master Servicer or Special Servicer, respectively. The Pooling Agreement
provides, however, that none of the Master Servicer, the Special Servicer, or
any of their respective directors, officers, employees or agents shall have
any liability to the Trust Fund or the Certificateholders for taking any
action or refraining from taking any action in good faith, or for errors in
judgment. The foregoing provision would not protect the Master Servicer or
the Special Servicer for the breach of its representations or warranties in
the Pooling Agreement, the breach of certain specified covenants therein or
any liability by reason of willful misconduct, bad faith, fraud or negligence
in the performance of its duties or by reason of its reckless disregard of
its obligations or duties under the Pooling Agreement. The Trustee or any
other successor Master Servicer assuming the obligations of the Master
Servicer under the Pooling Agreement will be entitled to the compensation to
which the Master Servicer would have been entitled after the date of the
assumption of the Master Servicer's obligations. If no successor Master
Servicer can be obtained to perform such obligations for such compensation,
additional amounts payable to such successor Master Servicer will be treated
as Realized Losses.
The Master Servicer initially will be responsible for the servicing and
administration of the entire Mortgage Pool. The duties of the Special
Servicer relate to Specially Serviced Mortgage Loans and to any REO Property.
The Pooling Agreement will define a "Specially Serviced Mortgage Loan" to
include any Mortgage Loan with respect to which: (i) the related borrower has
not made two consecutive Monthly Payments (and has not cured at least one
such delinquency by the next due date under the related Mortgage Loan); (ii)
the Master Servicer, the Trustee and/or the Fiscal Agent has made four
consecutive P&I Advances (regardless of whether such P&I Advances have been
reimbursed); (iii) the related borrower has expressed to the Master Servicer
an inability to pay or a hardship in paying the Mortgage Loan in accordance
with its terms; (iv) the Master Servicer has received notice that the related
borrower has become the subject of any bankruptcy, insolvency or similar
proceeding, admitted in writing the inability to pay its debts as they come
due or made an assignment for the benefit of creditors; (v) the Master
Servicer has received notice of a foreclosure or threatened foreclosure of
any lien on the Mortgaged Property securing such Mortgage Loan; (vi) a
default of which the Master Servicer has notice (other than a failure by the
related borrower to pay principal or interest) and which materially and
adversely affects the interests of the Certificateholders has occurred and
remains unremedied for the applicable grace period specified in the Mortgage
Loan (or, if no grace period is specified, 60 days); provided, that a default
requiring a Property Advance will be deemed to materially and adversely
affect the interests of Certificateholders; or (vii) in the opinion of the
Master Servicer (consistent with the Servicing Standard) a default under a
Mortgage Loan is imminent and such Mortgage Loan deserves the attention of
the Special Servicer; provided however, that a Mortgage Loan will cease to be
a Specially Serviced Mortgage Loan (a) with respect to the circumstances
described in clauses (i) and (ii) above, when the borrower thereunder has
brought the Mortgage Loan current and thereafter made three consecutive full
and timely monthly payments, including pursuant to any workout of the
Mortgage Loan, (b) with respect to the circumstances described in clause
(iii), (iv), (v) and (vii) above, when such
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<PAGE>
circumstances cease to exist in the good faith judgment of the Master
Servicer, or (c) with respect to the circumstances described in clause (vi)
above, when such default is cured; provided, in any case, that at that time
no circumstance exists (as described above) that would cause the Mortgage
Loan to continue to be characterized as a Specially Serviced Mortgage Loan.
With respect to any Specially Serviced Mortgage Loan the Master Servicer will
transfer its servicing responsibilities to the Special Servicer, but will
continue to receive payments on such Mortgage Loan (including amounts
collected by the Special Servicer), to make certain calculations with respect
to such Mortgage Loan and to make remittances and prepare certain reports to
the Certificateholders with respect to such Mortgage Loan and upon the curing
of such events the servicing of such Mortgage Loan will be returned to the
Master Servicer.
The Pooling Agreement requires the Master Servicer or the Special
Servicer, as applicable, to make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans consistent
with the Servicing Standard. Consistent with the above, the Master Servicer
or the Special Servicer may, in its discretion, waive any late payment charge
or penalty fee in connection with any delinquent Monthly Payment with respect
to any Mortgage Loan. For any Mortgage Loan with respect to which, under the
terms of the related loan documents, the mortgagee may, in its discretion,
apply insurance proceeds, condemnation awards or escrowed funds to the
prepayment of such loan prior to the expiration of the related Prepayment
Lockout Period, the Master Servicer or Special Servicer, as applicable, may
only require such a prepayment if the Master Servicer or Special Servicer, as
applicable, has determined in accordance with the Servicing Standard that
such prepayment is in the best interest of all Certificateholders. The Master
Servicer and the Special Servicer will be directed in the Pooling Agreement
not to take any enforcement action other than requests for payment with
respect to payment of Excess Interest or principal in excess of the principal
component of the Monthly Payment prior to the final maturity date. The Master
Servicer will also be permitted to forgive the payment of Excess Interest
under the circumstances described under "--Realization Upon Mortgage Loans;
Modifications" below. With respect to any defaulted Mortgage Loan, subject to
the restrictions set forth below under "--Realization Upon Mortgage Loans;
Modifications," the Special Servicer will be entitled to pursue any of the
remedies set forth in the related Mortgage, including the right to acquire,
through foreclosure, all or any of the Mortgaged Properties securing such
Mortgage Loan. The Special Servicer may elect to extend a Specially Serviced
Mortgage Loan (subject to conditions described herein) notwithstanding its
decision to foreclose on certain of the Mortgaged Properties.
ADVANCES
The Master Servicer will be obligated to advance, on the Business Day
immediately preceding a Distribution Date (the "Master Servicer Remittance
Date"), an amount (each such amount, a "P&I Advance") equal to the total or
any portion of the Monthly Payment (with interest calculated at the Net
Mortgage Rate plus the Trustee Fee Rate) on a Mortgage Loan that was
delinquent as of the close of business on the immediately preceding Due Date
(and which delinquent payment has not been cured as of the Master Servicer
Remittance Date), or, with respect to a Mortgage Loan for which the Special
Servicer has elected to extend the payments as described in "--Realization
Upon Mortgage Loans; Modifications" herein, the amount equal to the lesser of
(a) the related Extended Monthly Payment or (b) the Monthly Payment (with
interest calculated at the Net Mortgage Rate plus the Trustee Fee Rate) that
was due prior to the maturity date; provided, however, that the Master
Servicer will not be required to make a P&I Advance to the extent it
determines that such Advance would not ultimately be recoverable out of
related late payments, net insurance proceeds, net condemnation proceeds, net
liquidation proceeds and certain other collections with respect to such
Mortgage Loan as to which such Advances were made. The Master Servicer will
not be required or permitted to make an advance for Excess Interest, Default
Interest or Prepayment Premiums. The amount required to be advanced by the
Master Servicer with respect to any Distribution Date in respect of scheduled
payments (or Extended Monthly Payments) on Mortgage Loans that have been
subject to an Appraisal Reduction Event will equal (i) the amount required to
be advanced by the Master Servicer without giving effect to such Appraisal
Reduction Amounts less (ii) an amount equal to the product of (x) the amount
required to be advanced by the
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Master Servicer in respect to delinquent payments of interest without giving
effect to such Appraisal Reduction Amounts, and (y) a fraction, the numerator
of which is the Appraisal Reduction Amount with respect to such Mortgage Loan
and the denominator of which is the Stated Principal Balance as of the last
day of the related Collection Period.
The Master Servicer will also be obligated (subject to the limitations
described herein) to make cash advances ("Property Advances" and, together
with P&I Advances, "Advances") to pay delinquent real estate taxes, ground
lease rent payments, assessments and hazard insurance premiums and to cover
other similar costs and expenses necessary to preserve the priority of or
enforce the related Mortgage or to maintain such Mortgaged Property. In
addition, the Special Servicer may be obligated to make certain Property
Advances with respect to Specially Serviced Mortgage Loans.
The obligation of the Master Servicer, the Special Servicer, the Trustee
or the Fiscal Agent, as applicable, to make Advances with respect to any
Mortgage Loan pursuant to the Pooling Agreement continues through the
foreclosure of such Mortgage Loan and until the liquidation of such Mortgage
Loan or related Mortgaged Properties. Advances are intended to provide a
limited amount of liquidity, not to guarantee or insure against losses. None
of the Master Servicer, the Special Servicer, the Trustee or the Fiscal Agent
will be required to make any Advance that it determines in its good faith
business judgment will not be ultimately recoverable by the Master Servicer,
the Special Servicer, the Trustee or the Fiscal Agent, as applicable, out of
related late payments, net insurance proceeds, net condemnation proceeds, net
liquidation proceeds and certain other collections with respect to the
Mortgage Loan as to which such Advances were made. In addition, if the Master
Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as
applicable, determines in its good faith business judgment that any Advance
previously made will not be ultimately recoverable from the foregoing
sources, then the Master Servicer, the Special Servicer, the Trustee or the
Fiscal Agent, as applicable, will be entitled to be reimbursed for such
Advance, plus interest thereon at the Advance Rate, out of amounts payable on
or in respect of all of the Mortgage Loans prior to distributions on the
Certificates. Any such judgment or determination with respect to the
recoverability of Advances must be evidenced by an officers' certificate
delivered to the Trustee (or in the case of the Trustee or Fiscal Agent, the
Seller) setting forth such judgment or determination of nonrecoverability and
the procedures and considerations of the Master Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, forming the basis
of such determination (including but not limited to information selected by
the Master Servicer or the Special Servicer in its good faith discretion such
as related income and expense statements, rent rolls, occupancy status,
property inspections, inquiries by the Master Servicer, the Special Servicer,
the Trustee or the Fiscal Agent, as applicable, and an independent appraisal
performed in accordance with MAI standards and methodologies on the
applicable Mortgaged Properties).
To the extent the Master Servicer or Special Servicer fails to make an
Advance it is required to make under the Pooling Agreement, the Trustee,
subject to a determination of recoverability, will be required to make such
required Advance or, in the event the Trustee fails to make such Advance, the
Fiscal Agent, subject to a determination of recoverability, will make such
Advance, in each case pursuant to the terms of the Pooling Agreement. The
Trustee and the Fiscal Agent (or the Master Servicer with respect to a
Property Advance required to be made by the Special Servicer) will be
entitled to rely conclusively on any non-recoverability determination of the
Master Servicer (or the Special Servicer). See "--Duties of the Trustee" and
"--Duties of the Fiscal Agent" below.
The Master Servicer, the Special Servicer, the Trustee or the Fiscal
Agent, as applicable, will be entitled to reimbursement for any Advance made
by it equal to the amount of such Advance and interest accrued thereon at the
Advance Rate from (i) late payments on the Mortgage Loan by the borrower,
(ii) insurance proceeds, condemnation proceeds or liquidation proceeds from
the sale of the defaulted Mortgage Loan or the related Mortgaged Property or
(iii) upon determining in good faith that such Advance or interest is not
recoverable in the manner described in the preceding two clauses, from any
other amounts from time to time on deposit in the Collection Account.
The Master Servicer, the Special Servicer, the Trustee and the Fiscal
Agent will each be entitled to receive interest on Advances at the Prime Rate
(the "Advance Rate"), compounded monthly, as of each
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Master Servicer Remittance Date and the Master Servicer will be authorized
to pay itself, the Special Servicer, the Trustee or the Fiscal Agent, as
applicable, such interest monthly from general collections with respect to
all of the Mortgage Loans prior to any payment to holders of Certificates. If
the interest on such Advance is not recovered from Default Interest on such
Mortgage Loan, a shortfall will result which will have the same effect as a
Realized Loss. The "Prime Rate" is the rate, for any day, set forth as such
in The Wall Street Journal, New York edition.
ACCOUNTS
LOCK BOX ACCOUNTS. With respect to each Mortgage Loan other than the
Crystal City Pool Loan, the One Commerce Square Loan and the Marriott Desert
Springs Loan, one or more accounts in the name of the mortgagee (the "Lock
Box Accounts") have been established into which rents or other revenues from
the related Mortgaged Properties are deposited by the related tenants or
borrower. See "Description of the Mortgaged Properties and the Mortgage
Loans" herein. Agreements governing the Lock Box Accounts provide that the
borrower has no withdrawal or transfer rights with respect thereto and that
funds on deposit in the Lock Box Accounts are periodically swept into the
Collection Account with the balance, if any, to be remitted to the related
borrower. With respect to the One Commerce Square Loan, the Lock Box Account
is established in the name of the One Commerce Square Borrower but is under
the sole dominion and control of the mortgagee. With respect to the Marriott
Desert Springs Loan, the Marriott Desert Springs Borrower has established the
Marriott Desert Springs Manager's Account in the name of the Marriott Desert
Springs Manager and upon the occurrence of a Marriott Desert Springs Lock Box
Event, the Marriott Desert Springs Borrower is required to establish a Lock
Box Account. With respect to the Crystal City Pool Loan, (i) until a Crystal
City Pool Lock Box Trigger Event has occurred, the Crystal City Pool Borrower
is required to deposit all payments received into a Crystal City Pool
Property Level Sweep Account and (ii) upon the occurrence of a Crystal City
Pool Lock Box Trigger Event, the Crystal City Pool Borrower is required to
deposit all payments into the Crystal City Pool Deposit Account, under the
sole dominion and control of the mortgagee. The Lock Box Accounts will not be
assets of the Trust REMICs.
COLLECTION ACCOUNT. On each Due Date, the Master Servicer will be required
to withdraw from each Lock Box Account an amount equal to the Monthly Payment
on the related Mortgage Loan and deposit such amount into a segregated
account (the "Collection Account") established pursuant to the Pooling
Agreement for application towards the Monthly Payment due on the related
Mortgage Loan. With respect to the Marriott Desert Springs Loan and the
Crystal City Pool Loan, to the extent the borrowers thereunder are not
required to maintain a Lock Box Account, the Master Servicer will be required
to direct such borrower to pay their Monthly Payments on each Due Date
directly into the Collection Account. Any excess funds in the Lock Box
Accounts over the amount necessary to fund the Monthly Payment, the Reserve
Accounts and any other amounts due under the Mortgage Loans will be returned
to or retained by the related borrower, provided no event of default of which
the Master Servicer is aware has occurred and is continuing with respect to
such Mortgage Loan. However, after the Anticipated Repayment Date for a
Mortgage Loan, all amounts in the related Lock Box Account in excess of the
amount necessary to fund the Monthly Payment and Reserve Accounts will be
applied to (i) operating and capital expenses (except to the extent such
expenses will be met through disbursements from the Reserve Accounts), (ii)
the reduction of the principal balance of the related Mortgage Loan until
such principal is paid in full and (iii) if applicable, Excess Interest, in
that order and the Master Servicer will be required to withdraw the amounts
referred to in clauses (ii) and (iii) above from the Lock Box Accounts and
deposit them into the Collection Account on each Due Date. The Master
Servicer will also be required to deposit into the Collection Account within
one Business Day of receipt all other payments in respect of the Mortgage
Loans, other than amounts deposited into any Reserve Account. The Master
Servicer will also be required to establish and maintain one or more
segregated accounts in the Trustee's name for the benefit of the holders of
Class M and Class MX Certificates (the "Class M Collection Account") into
which it is required to deposit within one Business Day of receipt all
collections in respect of the Marriott Desert Springs Parent Loan.
DISTRIBUTION ACCOUNTS. The Trustee will be required to establish and
maintain two segregated accounts (the "Lower-Tier Distribution Account" and
the "Upper-Tier Distribution Account") in the name
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of the Trustee for the benefit of the holders of Certificates entitled to
distributions therefrom. With respect to each Distribution Date, the Master
Servicer will be required to disburse from the Collection Account and deposit
into the Lower-Tier Distribution Account, to the extent of funds on deposit
in the Collection Account, on the Master Servicer Remittance Date an
aggregate amount of immediately available funds equal to the sum of (i) the
Available Funds, and (ii) the portion of the Servicing Compensation
representing the Trustee Fee. In addition, the Master Servicer will be
required to deposit all P&I Advances into the Lower-Tier Distribution Account
on the related Master Servicer Remittance Date. To the extent the Master
Servicer fails to do so, the Trustee or the Fiscal Agent will deposit all P&I
Advances into the Lower-Tier Distribution Account as described herein. On
each Distribution Date, the Trustee (i) will be required to withdraw amounts
distributable on such date on the Regular Certificates and on the Class R
Certificates (which are expected to be zero) from the Lower-Tier Distribution
Account and deposit such amounts in the Upper-Tier Distribution Account. See
"Description of the Offered Certificates--Distributions" herein.
INTEREST RESERVE ACCOUNT. The Trustee will be required to establish and
maintain an "Interest Reserve Account" in the name of the Trustee for the
benefit of the holders of the Certificates. On each Master Servicer
Remittance Date occurring in February and on any Master Servicer Remittance
Date occurring in any January which occurs in a year that is not a leap year,
the Master Servicer will be required to deposit, in respect of each Mortgage
Loan other than the Crystal City Pool Loan, an amount equal to one day's
interest at the related Mortgage Rate on the respective Stated Principal
Balance, as of the Due Date in the month preceding the month in which such
Master Servicer Remittance Date occurs, of each such Mortgage Loan, to the
extent a Monthly Payment or P&I Advance is made in respect thereof (all
amounts so deposited in any consecutive January (if applicable) and February,
"Withheld Amounts"). On each Master Servicer Remittance Date occurring in
March, the Trustee will be required to withdraw from the Interest Reserve
Account an amount equal to the Withheld Amounts from the preceding January
(if applicable) and February, if any, and deposit such amount into the
Lower-Tier Distribution Account.
The Trustee will be required to also establish and maintain one or more
segregated accounts for the "Excess Interest Distribution Account" in the
name of the Trustee for the benefit of the Certificateholders entitled to
distributions therefrom, the "Class Q Distribution Account" in the name of
the Trustee for the benefit of the holders of the Class Q Certificates and
the "Class M Distribution Account" in the name of the Trustee for the benefit
of the holders of the Class M Certificates.
The Collection Account, the Lower-Tier Distribution Account, the
Upper-Tier Distribution Account, the Interest Reserve Account, the Excess
Interest Distribution Account, the Class Q Distribution Account, the Class M
Collection Account and the Class M Distribution Account will be held in the
name of the Trustee (or the Master Servicer on behalf of the Trustee) on
behalf of the holders of Certificates and the Master Servicer will be
authorized to make withdrawals from the Collection Account and the Interest
Reserve Account. Each of the Collection Account, any REO Account, the
Lower-Tier Distribution Account, the Upper-Tier Distribution Account, the
Interest Reserve Account, any escrow account, the Excess Interest
Distribution Account, the Class Q Distribution Account, the Class M
Collection Account and the Class M Distribution Account will be either (i)
(A) an account maintained with either a federal or state chartered depository
institution or trust company the long term unsecured debt obligations (or
short-term unsecured debt obligations if the account holds funds for less
than 30 days) or commercial paper of which are rated by each of the Rating
Agencies in its highest rating category at all times (or in the case of the
REO Account, Collection Account, Interest Reserve Account and Escrow Account,
the long term unsecured debt obligations (or short-term unsecured debt
obligations if the account holds funds for less than 30 days) of which are
rated at least "AA-" by Fitch, "Aa3" by Moody's or, if applicable, the short
term rating equivalent thereof) or (B) as to which the Master Servicer or the
Trustee, as applicable, has received written confirmation from each of the
Rating Agencies that holding funds in such account would not cause any Rating
Agency to qualify, withdraw or downgrade any of its ratings on the
Certificates, or (ii) a segregated trust account or accounts maintained with
a federal or state chartered depository institution or trust company acting
in its fiduciary capacity (an "Eligible Bank"). Amounts on deposit in the
Collection Account, the Interest Reserve Account and any REO Account may be
invested
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in certain United States government securities and other high-quality
investments specified in the Pooling Agreement ("Permitted Investments").
Interest or other income earned on funds in the Collection Account will be
paid to the Master Servicer as additional servicing compensation and interest
or other income earned on funds in any REO Account will be payable to the
Special Servicer. Interest or other income earned on funds in the Interest
Reserve Account will be deposited into the Collection Account.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The Master Servicer may make withdrawals from the Collection Account for
the following purposes, to the extent permitted and in the priorities
provided in the Pooling Agreement: (i) to remit on or before each Master
Servicer Remittance Date (A) to the Lower-Tier Distribution Account an amount
equal to the sum of (I) Available Funds and any Prepayment Premiums and (II)
the Trustee Fee for such Distribution Date, (B) to the Class Q Distribution
Account an amount equal to the Net Default Interest received in the related
Collection Period, if any, (C) to the Excess Interest Distribution Account an
amount equal to the Excess Interest received in the related Collection
Period, if any, and (D) to the Interest Reserve Account an amount required to
be withheld as described above under "--Accounts--Interest Reserve Account;"
(ii) to pay or reimburse the Master Servicer, the Special Servicer, the
Trustee or the Fiscal Agent, as applicable, pursuant to the terms of the
Pooling Agreement for Advances made by any of them and interest on Advances,
the Master Servicer's, the Trustee's or the Fiscal Agent's right, as
applicable, to reimbursement for items described in this clause (ii) being
limited as described above under "--Advances;" (iii) to pay on or before each
Master Servicer Remittance Date to the Master Servicer and the Special
Servicer as compensation, the aggregate unpaid Servicing Compensation (not
including the portion of the Servicing Compensation representing the Trustee
Fee) in respect of the immediately preceding Interest Accrual Period; (iv) to
pay on or before each Distribution Date to any person with respect to each
Mortgage Loan or REO Property that has previously been purchased or
repurchased by such person pursuant to the Pooling Agreement, all amounts
received thereon during the related Collection Period and subsequent to the
date as of which the amount required to effect such purchase or repurchase
was determined; (v) to the extent not reimbursed or paid pursuant to any of
the above clauses, to reimburse or pay the Master Servicer, the Special
Servicer, the Trustee, the Fiscal Agent and/or the Seller for unpaid
Servicing Compensation (in the case of the Master Servicer, the Special
Servicer or the Trustee), and certain other unreimbursed expenses incurred by
such person pursuant to and to the extent reimbursable under the Pooling
Agreement and to satisfy any indemnification obligations of the Trust Fund
under the Pooling Agreement; (vi) to pay to the Trustee amounts requested by
it to pay any taxes imposed on the Upper-Tier REMIC or the Lower-Tier REMIC;
(vii) to withdraw any amount deposited into the Collection Account that was
not required to be deposited therein; and (viii) to clear and terminate the
Collection Account pursuant to a plan for termination and liquidation of the
Trust Fund.
SUCCESSOR MANAGER
With respect to each Mortgage Loan, the Master Servicer or the Special
Servicer, as applicable, will be required to enforce the Trustee's rights
with respect to the manager under the related Mortgage Loan and management
agreement. In the event the Master Servicer or the Special Servicer is
entitled itself to terminate, or to cause the related borrower to terminate,
the manager under the Mortgage Loan, the Master Servicer or the Special
Servicer, as the case may be, will be required to promptly give notice of its
right to terminate the manager to the Trustee (who will copy the holders of
Certificates and the Rating Agencies). The most subordinate Class of
Certificates then outstanding (provided, however, that for purposes of
determining the most subordinate Class, in the event that the Class A
Certificates are the only Classes outstanding (other than the Coupon Strip
Certificates or the Class Q, Class M or Residual Certificates), the Class A
Certificates and the Coupon Strip Certificates together will be treated as
the most subordinate Class of Certificates) will have the right to recommend
termination of the manager and, if so, to recommend a Successor Manager.
Holders of Certificates representing Voting Rights of greater than 50% of
such subordinate Class of Certificates will have ten Business Days from the
receipt of such notice to respond to such notice. Upon receipt of a
recommendation to terminate the manager and appoint a Successor Manager, the
Master Servicer or the Special Servicer, as the case may be, will be
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required to give notice of such recommendation to the Trustee (who will copy
the holders of Certificates) and effect such recommendation unless: (i)
within five business days of the receipt of notice of such recommendation
holders of Certificates representing Voting Rights of greater than 50% of any
Class of Certificates which is assigned a rating by any Rating Agency on the
Closing Date reject such proposed Successor Manager; or (ii) the Master
Servicer or the Special Servicer, as the case may be, determines that
effecting such recommendation to terminate is not consistent with the
Servicing Standard and the Master Servicer or Special Servicer elects not to
effect such recommendation. If the Master Servicer or the Special Servicer,
as the case may be, does not receive a required response (or if the response
received is inconsistent) and the Master Servicer or the Special Servicer, as
the case may be, determines it is consistent with the Servicing Standard to
terminate the manager or in the event the manager is otherwise terminated or
resigns under the related Mortgage or management agreement, the Master
Servicer or the Special Servicer, as applicable, will be required to use its
best efforts, or if applicable cause the related borrower, to retain a
Successor Manager (or the recommended Successor Manager, if any) on terms
substantially similar to the existing management agreement or, failing that,
on terms as favorable to the Trust Fund as can reasonably be obtained. For
purposes of this paragraph, a "Successor Manager" shall be reasonably
acceptable to the Master Servicer or the Special Servicer, as applicable,
shall not cause a qualification, withdrawal or downgrading of any of the
ratings assigned to the Certificates by the Rating Agencies, as evidenced in
writing, and shall be a professional management corporation or business
entity which manages, and is experienced in managing, other comparable
commercial properties and meets any criteria in the related loan documents.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
Subject to certain exceptions in the case of certain of the Mortgage Loans
(see "Description of the Mortgaged Properties and the Mortgage Loans"
herein), the Mortgage Loans contain provisions in the nature of "due-on-sale"
clauses, which by their terms (a) provide that the Mortgage Loans shall, at
the mortgagee's option, become due and payable upon the sale or other
transfer of an interest in the related Mortgaged Property or (b) provide that
the Mortgage Loans may not be assumed without the consent of the related
mortgagee in connection with any such sale or other transfer. The Master
Servicer or the Special Servicer, with respect to Specially Serviced Mortgage
Loans, will not be required to enforce such due-on-sale clauses and in
connection therewith will not be required to (i) accelerate payments thereon
or (ii) withhold its consent to such an assumption if (x) such provision is
not exercisable under applicable law or such provision is reasonably likely
to result in meritorious legal action by the borrower or (y) the Master
Servicer or the Special Servicer, as applicable, determines, in accordance
with the Servicing Standard, that granting such consent would be likely to
result in a greater recovery, on a present value basis (discounting at the
related Mortgage Rate), than would enforcement of such clause. If the Master
Servicer or the Special Servicer, as applicable, determines that granting
such consent would be likely to result in a greater recovery, the Master
Servicer or the Special Servicer, as applicable, is authorized to take or
enter into an assumption agreement from or with the proposed transferee as
obligor thereon, provided that (a) the proposed transfer is in compliance
with the terms of the related Mortgage and (b) the Master Servicer or the
Special Servicer, as applicable, has received written confirmation from each
Rating Agency that such assumption or substitution would not, in and of
itself, cause a downgrade, qualification or withdrawal of any of the then
current ratings assigned to the Certificates.
Subject to certain exceptions in the case of certain of the Mortgage Loans
(see "Description of the Mortgaged Properties and the Mortgage Loans"), the
Mortgage Loans contain provisions in the nature of a "due-on-encumbrance"
clause which by their terms (a) provide that the Mortgage Loans shall, at the
mortgagee's option, become due and payable upon the creation of any lien or
other encumbrance on the related Mortgaged Property, or (b) require the
consent of the related mortgagee to the creation of any such lien or other
encumbrance on the related Mortgaged Property. The Master Servicer or the
Special Servicer, as applicable, will not be required to enforce such
due-on-encumbrance clauses and in connection therewith will not be required
to (i) accelerate payments thereon or (ii) withhold its consent to such lien
or encumbrance if the Master Servicer or the Special Servicer, as applicable,
(x) determines,
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in accordance with the Servicing Standard, that such enforcement would not
be in the best interests of the Trust Fund and (y) receives prior written
confirmation from each Rating Agency that granting such consent would not, in
and of itself, cause a downgrade, qualification or withdrawal of any of the
then current ratings assigned to the Certificates.
See "Certain Legal Aspects of the Mortgage Loans--Enforceability of
Certain Provisions" in the Prospectus.
INSPECTIONS
The Master Servicer (or with respect to any Specially Serviced Mortgage
Loan, the Special Servicer) is required to inspect or cause to be inspected
each Mortgaged Property at such times and in such manner as are consistent
with the Servicing Standards, but in any event (i) the Master Servicer is
required to inspect each Mortgaged Property with an Allocated Loan Amount of
(a) $5,000,000 or more at least once every 12 months and (b) less than
$5,000,000 at least once every 24 months, in each case commencing in May 1999
(or at such other times, provided each Rating Agency has confirmed in writing
to the Master Servicer that such schedule will not result in the withdrawal,
downgrading or qualification of the then current ratings assigned to the
Certificates) and (ii) if the Mortgage Loan (a) becomes a Specially Serviced
Mortgage Loan, (b) is delinquent for 60 days or (c) has a debt service
coverage ratio of less than 1.0x, the Master Servicer (or with respect to
Specially Serviced Mortgage Loans, the Special Servicer) is required to
inspect the related Mortgaged Properties as soon as practicable and
thereafter at least every twelve months until such condition ceases to exist.
The cost of any such inspection shall be borne by the Master Servicer unless
the related Mortgage Loan is a Specially Serviced Mortgage Loan, in which
case such cost will be borne by the Trust Fund.
EVIDENCE AS TO COMPLIANCE
The Pooling Agreement requires that each of the Master Servicer and the
Special Servicer cause a nationally recognized firm of independent public
accountants (which may render other services to the Master Servicer), which
is a member of the American Institute of Certified Public Accountants, to
furnish to the Trustee on or before April 30 of each year, beginning April
30, 1999, a report which expresses a statement to the effect that the
assertion of management of the Master Servicer or the Special Servicer that
it has complied with certain minimum mortgage loan servicing standards
identified in the Uniform Single Attestation Program for Mortgage Bankers
established by the Mortgage Bankers Association of America over the servicing
of mortgage loans including the Mortgage Loans for the preceding calendar
year is fairly stated in all material respects, based on an examination,
conducted substantially in compliance with the standards established by the
American Institute of Certified Public Accountants, except for such
exceptions and other qualifications stated in such report.
The Pooling Agreement also requires each of the Master Servicer and the
Special Servicer to deliver to the Trustee, on or before April 30 of each
year, beginning April 30, 1999, an officers' certificate of the Master
Servicer or the Special Servicer, as the case may be, stating that, to the
best of each such officer's knowledge, the Master Servicer or the Special
Servicer, as the case may be, has fulfilled its obligations under the Pooling
Agreement in all material respects throughout the preceding calendar year or,
if there has been a default, specifying each default known to each such
officer and the nature and status thereof, that it has maintained an
effective internal control system over the servicing of mortgage loans
including the Mortgage Loans and the Master Servicer or the Special Servicer,
as the case may be, has received no notice regarding qualification, or
challenging the status, of either Trust REMIC as a REMIC from the Internal
Revenue Service or any other governmental agency or body or, if it has
received any such notice, specifying the details thereof.
CERTAIN MATTERS REGARDING THE SELLER, THE MASTER SERVICER AND THE SPECIAL
SERVICER
Each of the Master Servicer and each Special Servicer may assign its
rights and delegate its duties and obligations under the Pooling Agreement in
connection with the sale or transfer of a substantial portion of its mortgage
servicing or asset management portfolio, provided that certain conditions are
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satisfied including obtaining the consent of the Trustee and written
confirmation of each of the Rating Agencies that such assignment or
delegation will not cause a qualification, withdrawal or downgrading of the
then current ratings assigned to the Certificates. The Pooling Agreement
provides that the Master Servicer or the Special Servicer, as the case may
be, may not otherwise resign from its obligations and duties as Master
Servicer or the Special Servicer, as the case may be, thereunder, except upon
the determination that performance of its duties is no longer permissible
under applicable law and provided that such determination is evidenced by an
opinion of counsel delivered to the Trustee. No such resignation may become
effective until a successor Master Servicer or Special Servicer has assumed
the obligations of the Master Servicer or the Special Servicer under the
Pooling Agreement. The Trustee or any other successor Master Servicer or
Special Servicer assuming the obligations of the Master Servicer or the
Special Servicer under the Pooling Agreement will be entitled to the
compensation to which the Master Servicer or the Special Servicer would have
been entitled. If no successor Master Servicer or Special Servicer can be
obtained to perform such obligations for such compensation, additional
amounts payable to such successor Master Servicer or Special Servicer will be
treated as Realized Losses.
The Pooling Agreement also provides that none of the Seller, the Master
Servicer, the Special Servicer, nor any director, officer, employee or agent
of the Seller, the Master Servicer or the Special Servicer will be under any
liability to the Trust Fund or the holders of Certificates for any action
taken or for refraining from the taking of any action in good faith pursuant
to the Pooling Agreement, or for errors in judgment; provided, however, that
neither the Seller, the Master Servicer, the Special Servicer nor any such
person will be protected against any liability which would otherwise be
imposed by reason of (i) any breach of warranty or representation, or other
representation or specific liability provided in the Pooling Agreement, or
(ii) any willful misconduct, bad faith, fraud or negligence in the
performance of duties thereunder or by reason of reckless disregard of
obligations or duties thereunder. The Pooling Agreement further provides that
the Seller, the Master Servicer, the Special Servicer and any director,
officer, employee or agent of the Seller, the Master Servicer or the Special
Servicer will be entitled to indemnification by the Trust Fund for any loss,
liability or expense incurred in connection with or relating to the Pooling
Agreement or the Certificates, other than any loss, liability or expense (i)
incurred by reason of willful misconduct, bad faith, fraud or negligence in
the performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder, in each case by the person being
indemnified; (ii) imposed by any taxing authority if such loss, liability or
expense is not specifically reimbursable pursuant to the terms of the Pooling
Agreement, or (iii) with respect to any such party, resulting from the breach
by such party of any of its representations or warranties contained in the
Pooling Agreement.
In addition, the Pooling Agreement provides that none of the Seller, the
Master Servicer, nor the Special Servicer will be under any obligation to
appear in, prosecute or defend any legal action unless such action is related
to its duties under the Pooling Agreement and which in its opinion does not
expose it to any expense or liability. The Seller, the Master Servicer or the
Special Servicer may, however, in its discretion undertake any such action
which it may deem necessary or desirable with respect to the Pooling
Agreement and the rights and duties of the parties thereto and the interests
of the holders of Certificates thereunder. In such event, the legal expenses
and costs of such action and any liability resulting therefrom will be
expenses, costs and liabilities of the Trust Fund, and the Seller, the Master
Servicer and the Special Servicer will be entitled to be reimbursed therefor
from the Collection Account.
The Seller is not obligated to monitor or supervise the performance of the
Master Servicer, the Special Servicer or the Trustee under the Pooling
Agreement. The Seller may, but is not obligated to, enforce the obligations
of the Master Servicer or the Special Servicer under the Pooling Agreement
and may, but is not obligated to, perform or cause a designee to perform any
defaulted obligation of the Master Servicer or the Special Servicer or
exercise any right of the Master Servicer or the Special Servicer under the
Pooling Agreement. In the event the Seller undertakes any such action, it
will be reimbursed and indemnified by the Trust Fund in accordance with the
standard set forth above. Any such action by the Seller will not relieve the
Master Servicer or the Special Servicer of its obligations under the Pooling
Agreement.
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Any person into which the Seller or the Master Servicer may be merged or
consolidated, or any person resulting from any merger or consolidation to
which the Seller or the Master Servicer is a party, or any person succeeding
to the business of the Seller or the Master Servicer, will be the successor
of the Seller or the Master Servicer, as the case may be, under the Pooling
Agreement, and shall be deemed to have assumed all of the liabilities and
obligations of the Seller or the Master Servicer under the Pooling Agreement.
EVENTS OF DEFAULT
Events of default of the Master Servicer (each, with respect to the Master
Servicer, an "Event of Default") under the Pooling Agreement consist, among
other things, of (i) any failure by the Master Servicer to remit to the
Collection Account or any failure by the Master Servicer to remit to the
Trustee for deposit into the Upper-Tier Distribution Account, Lower-Tier
Distribution Account, Interest Reserve Account, Excess Interest Distribution
Account, Class Q Distribution Account or Class M Distribution Account any
amount required to be so remitted at the time required to be remitted
pursuant to the Pooling Agreement (which failure is not remedied by 11 A.M.
on the related Distribution Date); or (ii) any failure by the Master Servicer
duly to observe or perform in any material respect any of its other covenants
or agreements or the material breach of its representations or warranties
under the Pooling Agreement which continues unremedied for 30 days after the
giving of written notice of such failure to the Master Servicer by the Seller
or the Trustee, or to the Master Servicer and to the Seller and the Trustee
by the holders of Certificates evidencing Percentage Interests of at least
25% of any affected Class; provided that if such default is not capable of
being cured within such 30 day period and the Master Servicer is diligently
pursuing such cure, the Master Servicer shall be entitled to an additional 30
day period; provided, further, that the failure of the Master Servicer to
perform any covenant or agreement contained in the Pooling Agreement (other
than as provided in clause (i) above) as a result of an inconsistency between
the Pooling Agreement and any Mortgage Loan document will not be an Event of
Default; or (iii) any failure by the Master Servicer to make any Advances as
required pursuant to the Pooling Agreement; or (iv) confirmation in writing
by any Rating Agency that not terminating the Master Servicer would, in and
of itself, cause the then-current rating assigned to any Class of
Certificates to be qualified, withdrawn or downgraded; or (v) certain events
of bankruptcy, insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings and certain actions by, on behalf of or
against the Master Servicer indicating its insolvency or inability to pay its
obligations.
Events of default of the Special Servicer (each, with respect to the
Special Servicer, an "Event of Default") under the Pooling Agreement consist,
among other things, of (i) any failure by the Special Servicer to remit to
the Collection Account any amount so required under the Pooling Agreement; or
(ii) any failure by the Special Servicer duly to observe or perform in any
material respect any of its other covenants or agreements, or the material
breach of its representations or warranties under the Pooling Agreement which
continues unremedied for a period of 30 days after the giving of written
notice of such failure to the Special Servicer by the Master Servicer, the
Seller or the Trustee, or to the Special Servicer, the Master Servicer, the
Seller and the Trustee by the holders of Certificates evidencing Percentage
Interests of at least 25% of any affected Class; or (iii) confirmation in
writing by any Rating Agency that not terminating the Special Servicer would,
in and of itself, cause the then-current rating assigned to any Class of
Certificates to be qualified, withdrawn or downgraded; or (iv) certain events
of bankruptcy, insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings and certain actions by, on behalf of or
against the Special Servicer indicating its insolvency or inability to pay
its obligations.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default with respect to the Master Servicer (acting as
Master Servicer or Special Servicer) occurs, then the Trustee may, and at the
direction of the holders of Certificates evidencing at least 25% of the
aggregate Voting Rights of all Certificateholders, the Trustee will be
required to, terminate all of the rights and obligations of the Master
Servicer as Master Servicer under the Pooling Agreement and in and to the
Trust Fund. Notwithstanding the foregoing, upon any termination of the
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Master Servicer under the Pooling Agreement, the Master Servicer will
continue to be entitled to receive all accrued and unpaid servicing
compensation through the date of termination plus reimbursement for all
Advances and interest on such Advances as provided in the Pooling Agreement.
In the event that the Master Servicer is also the Special Servicer and the
Master Servicer is terminated, the Master Servicer will also be terminated as
Special Servicer.
On and after the date of termination following an Event of Default by the
Master Servicer, the Trustee will succeed to all authority and power of the
Master Servicer (and the Special Servicer if the Special Servicer is also the
Master Servicer) under the Pooling Agreement and will be entitled to the
compensation arrangements to which the Master Servicer (and the Special
Servicer if the Special Servicer is also the Master Servicer) would have been
entitled. If the Trustee is unwilling or unable so to act, or if the holders
of Certificates evidencing at least 25% of the aggregate Voting Rights of all
Certificateholders so request, or if the long-term unsecured debt rating of
the Trustee or the Fiscal Agent is not at least "AA" by Fitch and "Aa2" by
Moody's or if the Rating Agencies do not provide written confirmation that
the succession of the Trustee as Master Servicer or Special Servicer, will
not cause a qualification, withdrawal or downgrading of the then current
ratings assigned to the Certificates, the Trustee must appoint, or petition a
court of competent jurisdiction for the appointment of, a mortgage loan
servicing institution the appointment of which will not result in the
downgrading, qualification or withdrawal of the then current ratings assigned
to any Class of Certificates as evidenced in writing by each Rating Agency to
act as successor to the Master Servicer or Special Servicer under the Pooling
Agreement. Pending such appointment, the Trustee is obligated to act in such
capacity. The Trustee and any such successor may agree upon the servicing
compensation to be paid. If the compensation payable to such successor
exceeds that to which the predecessor Master Servicer was entitled, the
additional servicing compensation will be allocated to the Certificates in
the same manner as Realized Losses.
If the Special Servicer is not the Master Servicer and an Event of Default
with respect to the Special Servicer occurs, the Trustee may, and at the
direction of the holders of at least 25% of the aggregate Voting Rights of
all Certificateholders, the Trustee will be required to, terminate the
Special Servicer and the Trustee will succeed to all the power and authority
of the Special Servicer under the Pooling Agreement, unless such termination
and succession would result in the downgrading, qualification or withdrawal
of the then current ratings assigned to any Class of Certificates, as
evidenced in writing by each Rating Agency, in which case, a successor
Special Servicer shall be appointed in accordance with the Pooling Agreement.
The Trustee or other successor Special Servicer which succeeds to the power
and authority of the Special Servicer will be entitled to the compensation to
which the Special Servicer would have been entitled.
No Certificateholder will have any right under the Pooling Agreement to
institute any proceeding with respect to the Pooling Agreement or the
Mortgage Loans, unless, with respect to the Pooling Agreement, such holder
previously shall have given to the Trustee a written notice of a default
under the Pooling Agreement, and of the continuance thereof, and unless also
the holders of Certificates of each Class affected thereby evidencing
Percentage Interests of at least 25% of such Class shall have made written
request of the Trustee to institute such proceeding in its own name as
Trustee under the Pooling Agreement and shall have offered to the Trustee
such reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute such proceeding.
The Trustee will have no obligation to make any investigation of matters
arising under the Pooling Agreement or to institute, conduct or defend any
litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of Certificates, unless such holders of
Certificates shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
AMENDMENT
The Pooling Agreement may be amended at any time by the Seller, the Master
Servicer, the Special Servicer, the Trustee and the Fiscal Agent without the
consent of any of the holders of Certificates (i) to
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cure any ambiguity; (ii) to correct or supplement any provisions therein
which may be defective or inconsistent with any other provisions therein;
(iii) to amend any provision thereof to the extent necessary or desirable to
maintain the status of each of the Upper-Tier REMIC and Lower-Tier REMIC as a
REMIC, or to prevent the imposition of any material state or local taxes;
(iv) to amend or supplement a provision which will not adversely affect in
any material respect the interests of any Certificateholder not consenting
thereto, as evidenced in writing by an opinion of counsel or confirmation in
writing from each Rating Agency that such amendment will not result in a
qualification, withdrawal or downgrading of the then current ratings assigned
to the Certificates; (v) to amend or supplement any provisions therein to the
extent necessary or desirable to maintain the rating assigned to each of the
Classes of Certificates by each Rating Agency; and (vi) to make any other
provisions with respect to matters which are not inconsistent with any other
provisions therein and will not result in a qualification withdrawal or
downgrading of the then current ratings assigned to the Certificates. The
Pooling Agreement provides that no such amendment shall cause the Upper-Tier
REMIC or the Lower-Tier REMIC to fail to qualify as a REMIC.
The Pooling Agreement may also be amended from time to time by the Seller,
the Master Servicer, the Special Servicer, the Trustee and the Fiscal Agent
with the consent of the holders of Certificates evidencing at least 66 2/3%
of the Percentage Interests of each Class of Certificates affected thereby
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Pooling Agreement or modifying in
any manner the rights of the holders of Certificates; provided, however, that
no such amendment may (i) reduce in any manner the amount of, or delay the
timing of, payments received on the Mortgage Loans which are required to be
distributed on any Certificate; (ii) alter the obligations of the Master
Servicer, the Special Servicer, the Trustee or the Fiscal Agent to make a P&I
Advance or Property Advance or alter the servicing standards set forth in the
Pooling Agreement; (iii) change the percentages of Voting Rights of holders
of Certificates which are required to consent to any action or inaction under
the Pooling Agreement; or (iv) amend the section in the Pooling Agreement
relating to the amendment of the Pooling Agreement, in each case without the
consent of the holders of all Certificates representing all the Percentage
Interests of the Class or Classes affected thereby.
The "Voting Rights" assigned to each Class shall be (a) 0% in the case of
the Class Q, Class M, Class MX, Class R and Class LR Certificates; (b) 6% in
the case of the Class X Certificates, provided that the Voting Rights of the
Class X Certificates will be reduced to zero upon the reduction of the
Notional Amount thereof to zero (the applicable percentage from time to time
is the "Fixed Voting Rights Percentage"); (c) in the case of the Class A-1,
Class A-2, Class B, Class C, Class D, Class E, Class F and Class G
Certificates, a percentage equal to the product of (i) 100% minus the Fixed
Voting Rights Percentage multiplied by (ii) a fraction, the numerator of
which is equal to the aggregate outstanding Certificate Principal Amount of
any such Class (which will be reduced for this purpose by the amount of any
Appraisal Reduction Amounts notionally allocated to such Class, if
applicable) and the denominator of which is equal to the aggregate
outstanding Certificate Principal Amounts of all Classes of Certificates. The
Voting Rights of any Class of Certificates shall be allocated among holders
of Certificates of such Class in proportion to their respective Percentage
Interests.
REALIZATION UPON MORTGAGE LOANS; MODIFICATIONS
SPECIALLY SERVICED MORTGAGE LOANS; APPRAISALS; EXTENSIONS. Within 60 days
following the occurrence of an Appraisal Reduction Event, the Special
Servicer will be required to obtain an appraisal of the Mortgaged Property or
REO Property, as the case may be, from an independent appraiser in accordance
with MAI standards (an "Updated Appraisal"); provided, that, the Special
Servicer will not be required to obtain an Updated Appraisal of any Mortgaged
Property with respect to which there exists an appraisal which is less than
twelve months old. The cost of any Updated Appraisal shall be a Property
Advance to be paid by the Master Servicer.
Following a default in the payment of any principal balance and accrued
interest remaining unpaid on the maturity date of a Mortgage Loan, the
Special Servicer may either foreclose or elect to grant up to three
consecutive one-year extensions of the Specially Serviced Mortgage Loan;
provided that the Special Servicer may only extend such Mortgage Loan if (i)
immediately prior to the default on the
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maturity date (or the first or second anniversary thereof in the case of the
second or third extension, respectively), the related borrower had made
twelve consecutive Monthly Payments (or Extended Monthly Payments in the case
of the second or third extension) on or prior to their Due Dates, (ii) the
Special Servicer determines that (A) extension of such Mortgage Loan is
consistent with the servicing standard described herein and (B) extension of
such Mortgage Loan is likely to result in a recovery which on a net present
value basis would be greater than the recovery that would result from a
foreclosure, (iii) such extension requires that all cash flow on all related
Mortgaged Properties in excess of amounts required to operate and maintain
such Mortgaged Properties be applied to payments of principal and interest on
such Mortgage Loan, (iv) the Special Servicer terminates the related manager
unless the Special Servicer determines that retaining such manager is
conducive to maintaining the value of such Mortgaged Properties and (v) such
extension requires the related borrower to make Extended Monthly Payments.
The Special Servicer's determination to extend shall be made in the Special
Servicer's good faith judgment, and may, but is not required to be, based on
an Updated Appraisal.
The Special Servicer will not be permitted to agree to any extension of a
Mortgage Loan beyond the date which is two years prior to the Rated Final
Distribution Date. If such borrower fails to make an Extended Monthly Payment
during the initial extension period, no further extensions will be granted.
The "Extended Monthly Payment" with respect to any extension of a Mortgage
Loan that is delinquent in the payment of any principal balance and accrued
interest remaining unpaid on its maturity date, is equal to (a) the principal
portion of a revised monthly payment (which will be calculated based on an
amortization schedule which would fully amortize such principal balance and
accrued interest over a term that does not extend past the date occurring two
years prior to the Rated Final Distribution Date (commencing on the maturity
date of such Mortgage Loan) and an interest rate no less than the Mortgage
Rate with respect to such Mortgage Loan), and (b) interest at the applicable
Default Rate; provided, however, that the Special Servicer may agree that the
Extended Monthly Payments may include interest at a rate lower than the
related Default Rate (but, except as otherwise provided in the Pooling
Agreement, not lower than the related Mortgage Rate). In no event will the
Special Servicer be permitted to extend any Mortgage Loan at a rate lower
than the Mortgage Rate.
The Master Servicer or Special Servicer shall be permitted, in its
discretion, to waive all or any accrued Excess Interest if, prior to the
related maturity date, the related borrower has requested the right to prepay
the Mortgage Loan in full together with all payments required by the Mortgage
Loan in connection with such prepayment except for all or a portion of
accrued Excess Interest, provided that the Master Servicer or Special
Servicer, as applicable, determines that (i) in the absence of the waiver of
such Excess Interest, there is a reasonable likelihood that the Mortgage Loan
will not be paid in full on the related Maturity Date and (ii) waiver of the
right to such accrued Excess Interest is reasonably likely to produce a
greater payment in the aggregate to Certificateholders on a present value
basis than a refusal to waive the right to such Excess Interest. Any such
waiver shall not be effective until such prepayment is tendered.
STANDARDS FOR CONDUCT GENERALLY IN EFFECTING FORECLOSURE OR THE SALE OF
DEFAULTED LOANS. In connection with any foreclosure, enforcement of the loan
documents, or other acquisition, the cost and expenses of any such proceeding
shall be paid by the Special Servicer as a Property Advance.
If the Special Servicer elects to proceed with a non-judicial foreclosure
in accordance with the laws of the state where the Mortgaged Property is
located, the Special Servicer shall not be required to pursue a deficiency
judgment against the related Mortgagor, if available, or any other liable
party if the laws of the state do not permit such a deficiency judgment after
a non-judicial foreclosure or if the Special Servicer determines, in its best
judgment, that the likely recovery if a deficiency judgment is obtained will
not be sufficient to warrant the cost, time, expense and/or exposure of
pursuing the deficiency judgment and such determination is evidenced by an
officers' certificate delivered to the Trustee.
Notwithstanding anything herein to the contrary, the Pooling Agreement
will provide that the Special Servicer will not, on behalf of the Trust Fund,
obtain title to a Mortgaged Property as a result of or in lieu of foreclosure
or otherwise, and will not otherwise acquire possession of, or take any other
action with respect to, any Mortgaged Property if, as a result of any such
action, the Trustee, or the Trust Fund or
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the holders of Certificates, would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of, such
Mortgaged Property within the meaning of CERCLA or any comparable law, unless
the Special Servicer has previously determined, based on an environmental
assessment report prepared by an independent person who regularly conducts
environmental audits, that: (i) such Mortgaged Property is in compliance with
applicable environmental laws or, if not, after consultation with an
environmental consultant that it would be in the best economic interest of
the Trust Fund to take such actions as are necessary to bring such Mortgaged
Property in compliance therewith and (ii) there are no circumstances present
at such Mortgaged Property relating to the use, management or disposal of any
hazardous materials for which investigation, testing, monitoring,
containment, clean-up or remediation could be required under any currently
effective federal, state or local law or regulation, or that, if any such
hazardous materials are present for which such action could be required,
after consultation with an environmental consultant it would be in the best
economic interest of the Trust Fund to take such actions with respect to the
affected Mortgaged Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of
sale is required to be issued to the Trustee, to a co-trustee or to its
nominee, on behalf of holders of Certificates. Notwithstanding any such
acquisition of title and cancellation of the related Mortgage Loan, such
Mortgage Loan shall be considered to be an REO Mortgage Loan held in the
Trust Fund until such time as the related REO Property shall be sold by the
Trust Fund and shall be reduced only by collections net of expenses.
If the Trust Fund acquires a Mortgaged Property by foreclosure or
deed-in-lieu of foreclosure upon a default of a Mortgage Loan, the Pooling
Agreement provides that the Trustee (or the Special Servicer, on behalf of
the Trustee), must administer such Mortgaged Property so that it qualifies at
all times as "foreclosure property" within the meaning of Code Section
860G(a)(8). The Pooling Agreement also requires that any such Mortgaged
Property be managed and operated by an "independent contractor," within the
meaning of applicable Treasury regulations, who furnishes or renders services
to the tenants of such Mortgaged Property. Generally, the Lower-Tier REMIC
will not be taxable on income received with respect to a Mortgaged Property
to the extent that it constitutes "rents from real property," within the
meaning of Code Section 856(c)(3)(A) and Treasury regulations thereunder.
"Rents from real property" do not include the portion of any rental based on
the net income or gain of any tenant or sub-tenant. No determination has been
made whether rent on any of the Mortgaged Properties meets this requirement.
"Rents from real property" include charges for services customarily furnished
or rendered in connection with the rental of real property, whether or not
the charges are separately stated. Services furnished to the tenants of a
particular building will be considered as customary if, in the geographic
market in which the building is located, tenants in buildings which are of
similar class are customarily provided with the service. No determination has
been made whether the services furnished to the tenants of the Mortgaged
Properties are "customary" within the meaning of applicable regulations. It
is therefore possible that a portion of the rental income with respect to a
Mortgaged Property owned by the Lower-Tier REMIC, presumably allocated based
on the value of any non-qualifying services, would not constitute "rents from
real property." In addition to the foregoing, any net income from a trade or
business operated or managed by an independent contractor on a Mortgaged
Property owned by the Lower-Tier REMIC, such as a hotel property, will not
constitute "rents from real property." Any of the foregoing types of income
may instead constitute "net income from foreclosure property," which would be
taxable to the Lower-Tier REMIC at the highest marginal federal corporate
rate (currently 35%) and may also be subject to state or local taxes. Any
such taxes would be chargeable against the related income for purposes of
determining the Net REO Proceeds available for distribution to holders of
Certificates. The Pooling Agreement provides that the Special Servicer will
be permitted to cause the Lower-Tier REMIC to earn "net income from
foreclosure property" that is subject to tax if it determines that the net
after-tax benefit to Certificateholders is greater than another method of
operating or net leasing the Mortgaged Property. See "Federal Income Tax
Consequences--REMIC Certificates--Income from Residual
Certificates--Prohibited Transactions; Special Taxes" in the Prospectus.
The Pooling Agreement will provide that the Special Servicer may offer to
sell to any person any defaulted Mortgage Loan or any REO Property, or may
offer to purchase any Specially Serviced
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Mortgage Loan or any REO Property, if and when the Special Servicer
determines, consistent with the Servicing Standard, that no satisfactory
arrangements can be made for collection of delinquent payments thereon and
such a sale would be in the best economic interests of the Trust Fund, but
shall, in any event, so offer to sell any REO Property no later than the time
determined by the Special Servicer to be sufficient to result in the sale of
such REO Property within the period specified in the Pooling Agreement,
including extensions thereof. The Special Servicer is required to give the
Trustee not less than five days' prior written notice of its intention to
sell any Specially Serviced Mortgage Loan or REO Property, in which case the
Special Servicer is required to accept the highest offer (of at least three
offers) received from any person for any Specially Serviced Mortgage Loan or
any REO Property in an amount at least equal to the Repurchase Price or, at
its option, if it has received no offer at least equal to the Repurchase
Price therefor, purchase the Specially Serviced Mortgage Loan or REO Property
at such Repurchase Price.
In the absence of any such offer (or purchase by the Special Servicer),
the Special Servicer shall accept the highest offer received from any person
that is determined by the Special Servicer to be a fair price for such
Specially Serviced Mortgage Loan or REO Property, if the highest offeror is a
person not affiliated with the Special Servicer, or is determined to be a
fair price by the Trustee (based solely upon updated independent appraisals
received by the Trustee), if the highest offeror is affiliated with the
Special Servicer. Neither the Trustee, in its individual capacity, nor any of
its affiliates may make an offer for or purchase any Specially Serviced
Mortgage Loan or any REO Property.
The Pooling Agreement will not obligate the Special Servicer to accept the
highest offer if the Special Servicer determines, in accordance with the
Servicing Standard, that rejection of such offer would be in the best
interests of the holders of Certificates. In addition, the Special Servicer
may accept a lower offer if it determines, in accordance with the Servicing
Standard, that acceptance of such offer would be in the best interests of the
holders of Certificates (for example, if the prospective buyer making the
lower offer is more likely to perform its obligations, or the terms offered
by the prospective buyer making the lower offer are more favorable), provided
that the offeror is not a person affiliated with the Special Servicer. The
Special Servicer is required to use its best efforts to sell all Specially
Serviced Mortgage Loans and REO Property prior to the Rated Final
Distribution Date.
Following a default in the payment of principal or interest on a Mortgage
Loan, the Special Servicer, after consultation with, and agreement by, the
Master Servicer, may elect not to foreclose or institute similar proceedings
or modify such Mortgage Loan (as described below) and instead the Master
Servicer shall continue to make P&I Advances with respect to such
delinquencies so long as the Special Servicer, in its reasonable judgment,
after consultation with, and agreement by, the Master Servicer, concludes (a)
that the election not to foreclose or modify would likely result in a greater
recovery, on a present value basis, than would foreclosure or modification
and (b) such P&I Advances will not be Nonrecoverable Advances. With respect
to such conclusions, the Master Servicer may conclusively rely (absent
manifest error) on the Special Servicer's computations and analysis.
MODIFICATIONS. During the term of a Mortgage Loan, the Special Servicer
may, consistent with the Servicing Standard, agree to modify such Specially
Serviced Mortgage Loan to reduce the amount of principal (but, except as
otherwise provided below, not interest) payable monthly on such Mortgage Loan
provided that (a) a material default in respect of payment on such Mortgage
Loan has occurred or, in the Special Servicer's reasonable and good faith
judgment, a default in respect of payment on such Mortgage Loan is reasonably
foreseeable, and such modification is reasonably likely to produce a greater
recovery to Certificateholders, on a net present value basis, than would
liquidation; (b) the Special Servicer terminates the related manager (unless
the Special Servicer determines that retaining such manager is conducive to
maintaining the value of the related Mortgaged Properties); and (c) the
Special Servicer may only agree to reductions of principal constituting
deferrals and not forgiveness of principal and lasting a period of no more
than twelve consecutive months and, in the aggregate, to no more than three
reductions of twelve months or less each; provided, however,
Certificateholders representing greater than 66 2/3% of all Voting Rights may
direct the Special Servicer not to agree to any such modification. The
Special Servicer will be required to promptly provide a copy of such proposed
modification to the Master Servicer, the Rating Agencies and the Trustee. The
Trustee will be required,
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within five Business Days, to notify, in writing, all of the
Certificateholders that have Voting Rights for such proposed modification.
For purposes of determining whether Certificateholders representing 66 2/3%
of all Voting Rights have directed the Special Servicer not to agree to such
modification, each Certificateholder will have 15 days to respond to such
notice, and any Certificateholder that has not responded within such time
period will be deemed to have consented to such modification. In the event
that the Special Servicer is directed not to agree to such modification, the
Special Servicer will continue to have the options described elsewhere
herein, including foreclosure, subject to the following paragraph, or, if
applicable, extension of the related Mortgage Loan.
Additionally, the Special Servicer may, consistent with the Servicing
Standard, agree to any modification, waiver or amendment of any term or
forgive or defer interest on and principal of, and/or add collateral for, any
Specially Serviced Mortgage Loan with the consent of Certificateholders
representing 100% of the Percentage Interests of the most subordinate Class
of Certificates then outstanding (the "Directing Class"), subject, however,
to each of the following limitations, conditions and restrictions: (a) a
material default in respect of such Mortgage Loan has occurred or, in the
Special Servicer's reasonable and good faith judgment, a default in respect
of payment on such Mortgage Loan is reasonably foreseeable, and such
modification, waiver, amendment or other action is reasonably likely to
produce a greater recovery to Certificateholders on a net present value
basis, than would liquidation; (b) no reduction in the scheduled monthly
payment of interest on any Mortgage Loan as a result of such modification,
waiver or amendment may result in an Interest Shortfall (as computed by the
Trustee) to any Class other than the Directing Class, determined as of the
date of such modification, waiver or amendment; (c) any reduction in the
scheduled monthly payment of principal and/or interest on any Mortgage Loan
must require that all cash flow on all related Mortgaged Properties in excess
of amounts required to operate and maintain such Mortgaged Properties be
applied to payments of principal and interest on such Mortgage Loan; (d) the
Special Servicer may only agree to reductions of principal and/or interest
lasting a period of no more than twelve consecutive months and, in the
aggregate, to no more than three periods of twelve months or less each; (e)
the Special Servicer may not reduce any Prepayment Premium or Prepayment
Lockout Period; (f) the Special Servicer may not forgive an aggregate amount
of principal of the Mortgage Loans in excess of the Certificate Principal
Amount of the Directing Class less the sum of (x) the aggregate amount of
Appraisal Reduction Amounts then outstanding and (y) the aggregate amount of
Interest Shortfalls (as computed by the Trustee) then outstanding (other than
with respect to the Directing Class); and (g) the Special Servicer will not
permit any borrower to add any collateral unless the Special Servicer has
first determined in accordance with the Servicing Standard, based upon an
environmental assessment prepared by an independent person who regularly
conducts environmental assessments, at the expense of the borrower, that such
additional collateral is in compliance with applicable environmental laws and
regulations and that there are no circumstances or conditions present with
respect to such new collateral relating to the use, management or disposal of
any hazardous materials for which investigation, testing, monitoring,
containment, clean-up or remediation would be required under any then
applicable environmental laws and/or regulations. For the purpose of
determining the Percentage Interest of the Directing Class, the Certificates
held by any Certificateholder that holds, or whose affiliate holds, any debt
of any of the borrowers, or any of the affiliates of the borrowers, under the
Mortgage Loans, shall not be taken into consideration. If the
Certificateholders representing 100% of the Percentage Interests of the
second most subordinate Class of Certificates then outstanding consent to
such modification, waiver or amendment, the Directing Class for purposes of
the determinations made in clauses (b) and (f) shall include the second most
subordinate Class of Certificates and the amount by which principal can be
reduced shall not be in excess of 80% of the aggregate principal balance of
both such Classes less the items specified in clauses (f)(x) and (y) above. A
modification pursuant to this paragraph is not subject to the veto of
Certificateholders set forth in the preceding paragraph.
The Master Servicer or the Special Servicer, as applicable, will be
permitted to modify, waive or amend any term of a Mortgage Loan that is not
in default or as to which default is not reasonably foreseeable if, and only
if, such modification, waiver or amendment (a) would not be "significant" as
such term is defined in Code Section 1001 or Treasury Regulations Section
1.860G-2(b)(3), as evidenced by an Opinion of Counsel, (b) would be in
accordance with the Servicing Standard and (c) would not
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adversely affect in any material respect the interest of any
Certificateholder not consenting thereto. The consent thereto of the majority
of Percentage Interests of each Class of Certificates affected thereby or
written confirmation from each Rating Agency that such modification, waiver
or amendment will not result in a qualification, withdrawal or downgrading of
the then-current ratings assigned to the Certificates shall not be required
but shall be conclusive evidence that such modification, waiver or amendment
would not adversely affect in any material respect the interest of any
Certificateholder not consenting thereto. The Master Servicer or the Special
Servicer, as applicable, shall provide copies of any modifications, waiver or
amendment to each Rating Agency.
OPTIONAL TERMINATION; OPTIONAL MORTGAGE LOAN PURCHASE
The Seller and, if the Seller does not exercise its option, the Master
Servicer and, if neither the Seller nor the Master Servicer exercises its
option, the holders of the Class LR Certificates representing greater than a
50% Percentage Interest of the Class LR Certificates will have the option to
purchase all of the Mortgage Loans and the Marriott Desert Springs Parent
Loan and all property acquired in respect of any Mortgage Loan or the
Marriott Desert Springs Parent Loan remaining in the Trust Fund, and thereby
effect termination of the Trust Fund and early retirement of the then
outstanding Certificates, on any Distribution Date on which the aggregate
Stated Principal Balance of the Mortgage Loans remaining in the Trust Fund is
less than 1% of the aggregate Stated Principal Balance of such Mortgage Loans
as of the Cut-Off Date. The purchase price payable upon the exercise of such
option on such a Distribution Date will be an amount equal to the greater of
(i) the sum of (A) 100% of the outstanding principal balance of each Mortgage
Loan and the Marriott Desert Springs Parent Loan included in the Trust Fund
as of the last day of the month preceding such Distribution Date; (B) the
fair market value of all other property included in the Trust Fund as of the
last day of the month preceding such Distribution Date, as determined by an
independent appraiser as of a date not more than 30 days prior to the last
day of the month preceding such Distribution Date; (C) all unpaid interest
accrued on such principal balance of each such Mortgage Loan and the Marriott
Desert Springs Parent Loan (including any Mortgage Loans and the Marriott
Desert Springs Parent Loan as to which title to the related Mortgaged
Property (or the pledged collateral in the case of the Marriott Desert
Springs Parent Loan) has been acquired) at the Mortgage Rate (plus the Excess
Rate, to the extent applicable) to the last day of the Interest Accrual
Period preceding such Distribution Date, and (D) unreimbursed Property
Advances, and unpaid servicing compensation, special servicing compensation,
Trustee Fees and Trust Fund expenses, in each case to the extent permitted
under the Pooling Agreement with interest on all unreimbursed Advances at the
Advance Rate and (ii) the aggregate fair market value of the Mortgage Loans
and the Marriott Desert Springs Parent Loan and all other property acquired
in respect of any Mortgage Loan or the Marriott Desert Springs Parent Loan in
the Trust Fund, on the last day of the month preceding such Distribution
Date, as determined by an independent appraiser acceptable to the Master
Servicer, together with one month's interest thereon at the related Mortgage
Rates (or interest rate in the case of the Marriott Desert Springs Parent
Loan). There can be no assurance that payment of the Certificate Principal
Amount, if any, of each outstanding Class of Certificates plus accrued
interest would be made in full in the event of such a termination of the
Trust Fund. See "Description of the Certificates--Termination" in the
Prospectus.
Any Mortgage Loan purchased under the circumstances described in the
preceding paragraph will be purchased subject to a continuing right of (i)
the holders of the Class Q Certificates to receive from the purchaser(s),
from time to time, payments corresponding to Default Interest with respect to
such Mortgage Loan and (ii) the holders of the Classes of Certificates
entitled to receive the Excess Interest with respect to such Mortgage Loan,
to receive from the purchaser(s), from time to time, payments corresponding
to Excess Interest with respect to such Mortgage Loan.
THE TRUSTEE
LaSalle National Bank, a national banking association with its principal
offices in Chicago, Illinois, will act as Trustee pursuant to the Pooling
Agreement. The Trustee's corporate trust office is located at 135 South
LaSalle Street, Suite 1625, Chicago, Illinois 60674-4107, Attention: Asset
Backed Securities Trust Services Group--GSMSCII--GL--II.
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The Trustee may resign at any time by giving written notice to the
Seller, the Master Servicer and the Rating Agencies, provided that no such
resignation shall be effective until a successor has been appointed. Upon
such notice, the Seller will appoint a successor trustee reasonably
acceptable to the Master Servicer. If no successor trustee is appointed
within one month after the giving of such notice of resignation, the
resigning Trustee may petition the court for appointment of a successor
trustee.
The Seller may remove the Trustee and the Fiscal Agent if, among other
things, the Trustee ceases to be eligible to continue as such under the
Pooling Agreement or if at any time the Trustee becomes incapable of acting,
or is adjudged bankrupt or insolvent, or a receiver of the Trustee or its
property is appointed or any public officer takes charge or control of the
Trustee or of its property. The holders of Certificates evidencing aggregate
Voting Rights of at least 50% of all Certificateholders may remove the
Trustee and the Fiscal Agent upon written notice to the Seller, the Master
Servicer, the Trustee and the Fiscal Agent. Any resignation or removal of the
Trustee and the Fiscal Agent and appointment of a successor trustee and, if
such trustee is not rated at least "AA" by Fitch and "Aa2" by Moody's, fiscal
agent, will not become effective until acceptance of the appointment by the
successor trustee and, if necessary, fiscal agent. Notwithstanding the
foregoing, upon any termination of the Trustee and the Fiscal Agent under the
Pooling Agreement, the Trustee and the Fiscal Agent will continue to be
entitled to receive all accrued and unpaid compensation through the date of
termination plus reimbursement for all Advances made by them and interest
thereon as provided in the Pooling Agreement. Any successor trustee must have
a combined capital and surplus of at least $50,000,000 and such appointment
must not result in the downgrade, qualification or withdrawal of the
then-current ratings assigned to the Certificates, as evidenced in writing by
the Rating Agencies.
Pursuant to the Pooling Agreement, the Trustee will be entitled to receive
a monthly fee (the "Trustee Fee") at a specified rate (the "Trustee Fee
Rate"), payable by the Master Servicer out of the Servicing Fee.
The Trust Fund will indemnify the Trustee and the Fiscal Agent against any
and all losses, liabilities, damages, claims or unanticipated expenses
(including reasonable attorneys' fees) arising in respect of the Pooling
Agreement or the Certificates other than those resulting from the negligence,
bad faith or willful misconduct of the Trustee or the Fiscal Agent, as
applicable. Neither the Trustee nor the Fiscal Agent will be required to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties under the Pooling Agreement, or in the
exercise of any of its rights or powers, if in the Trustee's or the Fiscal
Agent's opinion, as applicable, the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. The
Master Servicer and the Special Servicer each indemnify the Trustee, the
Fiscal Agent, and certain related parties for similar losses incurred related
to the willful misconduct, bad faith, fraud and/or negligence in the
performance of the Master Servicer's or the Special Servicer's duties as
applicable, under the Pooling Agreement or by reason of reckless disregard of
its respective obligations and duties under the Pooling Agreement.
At any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust Fund or property securing the
same is located, the Seller and the Trustee acting jointly will have the
power to appoint one or more persons or entities approved by the Trustee to
act (at the expense of the Trustee) as co-trustee or co-trustees, jointly
with the Trustee, or separate trustee or separate trustees, of all or any
part of the Trust Fund, and to vest in such co-trustee or separate trustee
such powers, duties, obligations, rights and trusts as the Seller and the
Trustee may consider necessary or desirable. Except as required by applicable
law, the appointment of a co-trustee or separate trustee will not relieve the
Trustee of its responsibilities, obligations and liabilities under the
Pooling Agreement.
DUTIES OF THE TRUSTEE
The Trustee (except for the information under the first paragraph of
"--The Trustee") and the Master Servicer (except for the information under
"--The Master Servicer") will make no representation as to the validity or
sufficiency of the Pooling Agreement, the Certificates or the Mortgage Loans,
this Prospectus Supplement or related documents.
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In the event that the Master Servicer fails to make a required Advance,
the Trustee (or with respect to a Property Advance required to be made by the
Special Servicer, the Master Servicer, and if the Master Servicer so fails,
the Trustee), will be obligated to make such Advance, provided that the
Trustee shall not be obligated to make any Advance it deems to be
nonrecoverable. The Trustee shall be entitled to rely conclusively on any
determination by the Master Servicer or Special Servicer, as applicable, that
an Advance, if made, would not be recoverable. The Trustee will be entitled
to reimbursement for each Advance made by it in the same manner and to same
extent as the Master Servicer or Special Servicer, as applicable.
If no Event of Default has occurred, and after the curing of all Events of
Default which may have occurred, the Trustee is required to perform only
those duties specifically required under the Pooling Agreement. Upon receipt
of the various certificates, reports or other instruments required to be
furnished to it, the Trustee is required to examine such documents and to
determine whether they conform on their face to the requirements of the
Pooling Agreement.
In addition, pursuant to the Pooling Agreement, the Trustee, at the cost
and expense of the Seller, based upon reports, documents, and other
information provided to the Trustee, will be obligated to file with the
Securities and Exchange Commission (the "Commission"), in respect of the
Trust and the Certificates, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any
of the foregoing as the Commission may from time to time by rules and
regulations prescribe) required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended,
and any other Form 8-K reports required to be filed pursuant to the Pooling
Agreement.
THE FISCAL AGENT
ABN AMRO Bank N.V., a banking corporation organized under the laws of The
Netherlands, will act as Fiscal Agent pursuant to the Pooling Agreement. The
Fiscal Agent's office is located at 135 South LaSalle Street, Chicago,
Illinois 60674-4107.
The Fiscal Agent may not resign except (i) in the event of the resignation
or removal of the Trustee (in which event, the Fiscal Agent shall be deemed
to have been removed), (ii) upon determination that it may no longer perform
such obligations and duties under applicable law, or (iii) upon written
confirmation from the Rating Agencies that such resignation, without the
appointment of a successor Fiscal Agent, will not in and of itself result in
a downgrade qualification or withdrawal of the then current rating of any
Class of Certificates. Any such determination is required to be evidenced by
an opinion of counsel to such effect delivered to the Seller and the Trustee.
Except as provided in (iii) above, no resignation or removal of the Fiscal
Agent shall become effective until a successor fiscal agent acceptable to
each Rating Agency, as evidenced in writing (which may be the Trustee) shall
have assumed the Fiscal Agent's obligations and duties under the Pooling
Agreement. The Fiscal Agent will not be accountable for the use or
application by the Seller, the Master Servicer or the Special Servicer of any
Certificates issued to it or of the proceeds of such Certificates, or for the
use of or application of any funds paid to the Seller, the Master Servicer or
the Special Servicer in respect of the assignment of the Mortgage Loans to
the Trust Fund, or any funds deposited in or withdrawn from the Lock Box
Accounts, Cash Collateral Accounts, Reserve Accounts, Collection Account,
Upper-Tier Distribution Account, Lower-Tier Distribution Account, Interest
Reserve Account, Excess Interest Distribution Account, Class Q Distribution
Account, Class M Collection Account, Class M Distribution Account or any
other account maintained by or on behalf of the Master Servicer or the
Special Servicer, nor will the Fiscal Agent be required to perform, or be
responsible for the manner of performance of, any of the obligations of the
Master Servicer or the Special Servicer under the Pooling Agreement.
DUTIES OF THE FISCAL AGENT
The Fiscal Agent will make no representation as to the validity or
sufficiency of the Pooling Agreement, the Certificates, the Mortgage Loan,
this Prospectus Supplement (except for the information in the first sentence
under the preceding section with the heading "--The Fiscal Agent") or related
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documents. The duties and obligations of the Fiscal Agent consist only of
making Advances as described below and in "--Advances" above; the Fiscal
Agent will not be liable except for the performance of such duties and
obligations. The Fiscal Agent will not be accountable for the use or
application by the Seller, the Master Servicer or the Special Servicer of any
Certificates issued to it or of the proceeds of such Certificates, or for the
use of or application of any funds paid to the Seller, the Master Servicer or
the Special Servicer in respect of the assignment of the Mortgage Loans to
the Trust Fund, or any funds deposited in or withdrawn from the Lock Box
Accounts, Cash Collateral Accounts, Reserve Accounts, Collection Account,
Upper-Tier Distribution Account, Lower-Tier Distribution Account, Interest
Reserve Account, Excess Interest Distribution Account, Class Q Distribution
Account, Class M Collection Account, Class M Distribution Account or any
other account maintained by or on behalf of the Master Servicer or the
Special Servicer, nor will the Fiscal Agent be required to perform, or be
responsible for the manner of performance of, any of the obligations of the
Master Servicer or the Special Servicer under the Pooling Agreement.
In the event that the Master Servicer and the Trustee fail to make a
required Advance, the Fiscal Agent will be obligated to make such Advance,
provided that the Fiscal Agent will not be obligated to make any Advance that
it deems to be nonrecoverable. The Fiscal Agent shall be entitled to rely
conclusively on any determination by the Master Servicer, Special Servicer or
the Trustee, as applicable, that an Advance, if made, would not be
recoverable. The Fiscal Agent will be entitled to reimbursement for each
Advance made by it in the same manner and to the same extent as the Trustee
and the Master Servicer.
THE MASTER SERVICER
GMAC Commercial Mortgage Corporation ("GMACCM") will initially act as the
Master Servicer. The following information has been provided by GMACCM. None
of the Seller, the Trustee, the Underwriter, or any of their respective
affiliates takes any responsibility therefor or makes any representation or
warranty as to the accuracy or completeness thereof.
GMACCM, a corporation organized under the laws of the State of California,
is a wholly-owned direct subsidiary of GMAC Mortgage Group, Inc., which in
turn is a wholly-owned direct subsidiary of General Motors Acceptance
Corporation. The principal offices of GMACCM are located at 650 Dresher Road,
Horsham, Pennsylvania 19044. Its telephone number is (215) 328-4622. As of
December 31, 1997, GMACCM was the servicer of a portfolio of multifamily and
commercial mortgage loans totaling approximately $40 billion in aggregate
outstanding principal amounts. Neither the Master Servicer, its parent nor
any of its affiliates will guarantee the Certificates or the assets included
in the Trust Fund.
Pursuant to the terms of the Pooling Agreement, the Master Servicer will
be required to indemnify the Seller and the Trustee for any losses, fines,
judgments, costs and expenses incurred by them as a result of the Master
Servicer's willful misfeasance, bad faith or negligent failure to comply with
its duties and obligations under the Pooling Agreement.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Pursuant to the Pooling Agreement, the Master Servicer will be entitled to
withdraw monthly from the Collection Account its portion of the Servicing
Fee. The monthly servicing fee (the "Servicing Fee") for any Distribution
Date is an amount per Interest Accrual Period equal to the sum for each
Mortgage Loan of the product of (i) 1/12 times a per annum rate of (a) with
respect to the Showcase Loan, 0.0440%; (b) with respect to the Crystal City
Pool Loan, 0.0390%; (c) with respect to the Marriott Desert Springs Loan,
0.0490%; (d) with respect to the Tharaldson Pool A Loan and with respect to
the Tharaldson Pool B Loan, 0.0440%; (e) with respect to the Pier 39 Loan,
0.0290%; (f) with respect to the Americold Pool Loan and the URS Pool Loan,
0.0190%; (g) with respect to the One Commerce Square Loan, 0.0165%; and with
respect to the Green Acres Loan, 0.0190% (in each case, the "Servicing Fee
Rate") and (ii) the Stated Principal Balance of such Mortgage Loan, provided,
that, in connection with any partial interest payment, such amounts shall be
computed, for the same period respecting which any related interest payment
due or deemed due on the related Mortgage Loan is computed. The Servicing Fee
includes the compensa-
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tion payable to the Master Servicer and the Trustee Fee. With respect to any
Distribution Date, to the extent that there are Prepayment Interest
Shortfalls with respect to Principal Prepayments received during the related
Collection Period, the Servicing Fee payable to the Master Servicer with
respect to all the Mortgage Loans (but not the fees payable to the Trustee or
Rating Agencies) for the related Distribution Date shall be reduced up to the
amount sufficient to fully offset such Prepayment Interest Shortfalls. The
Master Servicer's portion of the Servicing Fee relating to each Mortgage Loan
will be retained by the Master Servicer from payments and collections
(including insurance proceeds, condemnation proceeds and liquidation
proceeds) in respect of such Mortgage Loan. The Master Servicer will also be
entitled to retain as additional servicing compensation all investment income
earned on amounts on deposit in the Collection Account and the Reserve
Accounts (to the extent not payable to the related borrower under the related
Mortgage Loan or applicable law). The Servicing Fee includes certain amounts
which will be paid to the Rating Agencies for on-going monitoring and
surveillance of the Certificates by the Rating Agencies and for certain
filing fees and related expenses.
In addition, the Master Servicer will be entitled to receive, as
additional servicing compensation, to the extent permitted by applicable law
and the related Mortgage Loans, any late payment charges, assumption fees,
loan modification fees, extension fees, loan service transaction fees,
beneficiary statement charges or similar items (but not including any yield
maintenance charge or prepayment premiums), in each case to the extent
received and not required to be deposited or retained in the Collection
Account pursuant to the Pooling Agreement.
The Master Servicer will be required to pay all expenses incurred in
connection with its responsibilities under the Pooling Agreement (subject to
reimbursement as described herein), including all fees of any subservicers
retained by it.
SPECIAL SERVICERS
GMACCM will initially be appointed as special servicer of the Mortgage
Loans, (in such capacity, the "Special Servicer"). The Special Servicer will,
among other things, oversee the resolution of non-performing Mortgage Loans
and act as disposition manager of REO Properties. The Pooling Agreement will
provide that although more than one Special Servicer may be appointed, only
one Special Servicer may specially service any Mortgage Loan.
The Special Servicer will be obligated to, among other things, oversee the
resolution of non-performing Mortgage Loans and act as disposition manager of
REO Properties. The Pooling Agreement provides that holders of Certificates
evidencing greater than 50% of the Percentage Interests of the most
subordinate Class of Certificates then outstanding (provided, however, that
for purposes of determining the most subordinate Class, in the event that the
Class A Certificates and the Coupon Strip Certificates are the only Classes
outstanding, the Class A Certificates and the Coupon Strip Certificates
together will be treated as the subordinate Class) may replace the Special
Servicer, provided that each Rating Agency confirms to the Trustee in writing
that such replacement, will not cause a qualification, withdrawal or
downgrading of the then-current ratings assigned to any Class of
Certificates.
Pursuant to the Pooling Agreement, the Special Servicer will be entitled
to certain fees, including a special servicing fee (and if the Special
Servicer is the Master Servicer, such fees will be in addition to the
Servicing Fee), payable with respect to each Interest Accrual Period, equal
to the product of (i) 1/12 times a per annum rate of 0.35% and (ii) the
Stated Principal Balance of each related Specially Serviced Mortgage Loan
(the "Special Servicing Fee"); provided, that such amounts shall be computed
on the basis of the same principal amount and, in connection with any partial
interest payment, for the same period respecting which any related interest
payment due or deemed due on the related Mortgage Loan is computed. The
Special Servicer will be entitled, in addition to the Special Servicing Fee,
to receive a "Liquidation Fee" equal to 0.75% of the amount equal to (x) the
proceeds of the sale of any Mortgage Loan or REO Property minus (y) any
broker's commission and related brokerage referral fees and to receive a
"Rehabilitation Fee" with respect to any Mortgage Loan which ceases to be
specially serviced and has made three consecutive Monthly Payments on or
prior to the related Due Dates after the Mortgage Loan has ceased to be a
Specially Serviced Mortgage Loan in an amount equal to 0.75% of the highest
Stated Principal Balance of such Mortgage Loan during the period in which it
was specially
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serviced; provided, however, that such Rehabilitation Fee shall be due only
once for each Mortgage Loan during the term of the Pooling Agreement.
However, no Liquidation Fee will be payable in connection with, or out of,
Liquidation Proceeds resulting from the purchase of any Specially Serviced
Mortgage Loan or REO Property (i) by any Responsible Party as described
herein under "--Representations and Warranties; Repurchase," (ii) by the
Master Servicer, the Seller or the Certificateholders as described herein
under "--Optional Termination; Optional Mortgage Loan Purchase," or (iii) in
certain other limited circumstances. Each of the foregoing fees, along with
certain expenses related to special servicing of a Mortgage Loan, shall be
payable out of funds otherwise available to make payments on the
Certificates.
MASTER SERVICER AND SPECIAL SERVICER PERMITTED TO BUY CERTIFICATES
The Master Servicer and the Special Servicer will be permitted to purchase
any Class of Certificates. Such a purchase by the Master Servicer or the
Special Servicer could cause a conflict relating to the Master Servicer's or
the Special Servicer's duties pursuant to the Pooling Agreement and the
Master Servicer's or the Special Servicer's interest as a holder of
Certificates, especially to the extent that certain actions or events have a
disproportionate effect on one or more Classes of Certificates. The Pooling
Agreement provides that the Master Servicer or Special Servicer shall
administer the Mortgage Loans in accordance with the servicing standard set
forth therein without regard to ownership of any Certificate by the Master
Servicer or the Special Servicer or any affiliate thereof. Additionally, the
Pooling Agreement provides that (i) an affiliate of a borrower may not vote
with respect to matters where there is a potential conflict of interest, (ii)
any Certificateholder that is also the holder of any debt of any of the
affiliates of any of the borrowers under the Mortgage Loans may not vote with
respect to selecting, or directing the actions of the Special Servicer with
respect to such Mortgage Loan, and (iii) the Special Servicer may not be the
holder of any debts of the affiliates of the borrowers under the Mortgage
Loans.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Trustee is obligated to mail to each
Certificateholder, to the Seller, the Paying Agent, the Master Servicer, the
Special Servicer and the Rating Agencies a statement setting forth certain
information with respect to the Mortgage Loans and the Certificates required
pursuant to the Pooling Agreement. Certain information made available on the
monthly reports to Certificateholders can be retrieved via facsimile through
LaSalle National Bank's ASAP System by calling (312) 904-2200, and requesting
statement No. 334. In addition, to the extent provided to it by the Master
Servicer, the Trustee shall make available upon request to each
Certificateholder and Rating Agency a quarterly report and an annual summary
of quarterly reports setting forth certain information with respect to the
borrowers and the Mortgaged Properties. Such quarterly and annual summaries
will be prepared by the Master Servicer solely from information provided to
the Master Servicer pursuant to the Mortgage Loans without modification,
interpretation or analysis (except that the Master Servicer will use its best
efforts to isolate management fees and funded reserves from borrower reported
expenses, if necessary) and the Master Servicer shall not be responsible for
the completeness or accuracy of such information (except that the Master
Servicer will use its best efforts to correct patent errors). Certain
information regarding the Mortgage Loans will be made available by the
Trustee in electronic format through a dial-up bulletin board service
available by calling (714) 282-3990. Additionally, certain information
regarding the Mortgage Loans will be made accessible at the web site
maintained by LaSalle National Bank at www.lnbabs.com. The Master Servicer
may but is not required to make available certain additional information over
the Internet. A form of the monthly reports is included herein as Exhibit C.
Within a reasonable period of time after each calendar year, the Trustee is
obligated to furnish to each person who at any time during such calendar year
was the holder of a Certificate a statement containing certain information
with respect to the Certificates required pursuant to the Pooling Agreement,
aggregated for such calendar year or portion thereof during which such person
was a Certificateholder. See "Description of the Certificates--Reports to
Certificateholders" in the Prospectus.
The Trustee will mail to each Certificateholder upon written request
(provided that each Certificateholder may only make one request per month and
will be required to pay any expenses incurred by the Trustee in connection
with the provision of such information), the Current Report on Form 8-K filed
by the
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Trustee, which will include copies of all quarterly and annual summaries and
a list of all quarterly and annual financial statements and other financial
and property information of the borrowers provided to the Master Servicer
pursuant to the Mortgage Loans (to the extent not inconsistent with the
related borrower's rights under the Mortgage Loan or applicable law) as well
as notice of certain events with respect to the Mortgage Loans which may
affect Certificateholders, such as amendments, modifications and waivers,
imminent or actual defaults and proposed prepayments. Additionally, the
Master Servicer shall make available (to the extent not inconsistent with the
related borrower's rights under the Mortgage Loan or applicable law) to the
Rating Agencies and to the Trustee, which shall make available to the
Certificateholders upon written request (provided that each such
Certificateholder will be required to pay any expenses incurred by the
Trustee in connection with the provision of such information), information
relating to the Mortgaged Properties or the borrowers which has been provided
to the Master Servicer pursuant to the Mortgage Loans, including financial
and operating statements and other information specified on the list
described in the previous sentence and provided to the Master Servicer
pursuant to the Mortgage Loans.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans in California (approximately 16.7% of the Mortgage Loans by
Cut-Off Date Allocated Loan Amount), New York (approximately 13.0% of the
Mortgage Loans by Cut-Off Date Allocated Loan Amount) Pennsylvania
(approximately 10.3% of the Mortgage Loans by Cut-Off Date Allocated Loan
Amount), Illinois (approximately 5.9% of the Mortgage Loans by Cut-Off Date
Allocated Loan Amount), Virginia (approximately 5.8% of the Mortgage Loans by
Cut-Off Date Allocated Loan Amount) and Nevada (approximately 5.6% of the
Mortgage Loans by Cut-Off Date Allocated Loan Amount) which are general in
nature. The summaries do not purport to be complete and are qualified in
their entirety by reference to the applicable federal and state laws
governing the Mortgage Loans.
California, New York, Pennsylvania, Illinois, Virginia and Nevada and
various other states have imposed statutory prohibitions or limitations that
limit the remedies of a mortgagee under a mortgage or a beneficiary under a
deed of trust. All of the Mortgage Loans are nonrecourse loans as to which,
in the event of default by a borrower, recourse may be had only against the
specific property pledged to secure the Mortgage Loan and not against the
borrower's other assets. Even if recourse is available pursuant to the terms
of the Mortgage Loan, certain states have adopted statutes which impose
prohibitions against or limitations on such recourse. The limitations
described below and similar or other restrictions in other jurisdictions
where Mortgaged Properties are located may restrict the ability of the Master
Servicer or the Special Servicer, as applicable, to realize on the Mortgage
Loans and may adversely affect the amount and timing of receipts on the
Mortgage Loans.
California statutes limit the right of the beneficiary to obtain a
deficiency judgment against the trustor (i.e., obligor) following the
non-judicial foreclosure sale under a deed of trust. A deficiency judgment is
a personal judgment against the obligor in most cases equal to the difference
between the amount due to the beneficiary and the fair value of the
collateral. No deficiency judgment is permitted under California law
following a nonjudicial sale under the power of sale provision in a deed of
trust. Other California statutes require the beneficiary to exhaust the
security afforded under the deed of trust by foreclosure in an attempt to
satisfy the full debt before bringing a personal action (if otherwise
permitted) against the obligor for recovery of the debt except in certain
cases involving environmentally impaired real property. California case law
has held that acts such as an offset of an unpledged account or the
application of rents from secured property prior to foreclosure, under some
circumstances, constitute violations of such statutes. Violations of such
statutes may result in the loss of some or all of the security under the loan
and/or loss of the debt. Finally, other statutory provisions in California
limit any deficiency judgment (if otherwise permitted) against the former
trustor following a judicial sale to the excess of the outstanding debt over
the greater of (i) the fair value of the property at the time of the public
sale or (ii) the amount of the winning bid in the foreclosure, and give the
borrower a one-year period within which to redeem the property. California
statutes also provide priority to certain tax liens over the lien of
previously recorded deeds of trust.
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Under New York law, while a foreclosure may proceed either judicially or
non-judicially, nonjudicial foreclosures are virtually unused today. Under
New York law, upon default of a mortgage, a mortgagee is generally presented
with the choice of either proceeding in equity to foreclose upon the
mortgaged property or to proceed at law and sue on the note. New York law
does not require that the mortgagee must bring a foreclosure action before
being entitled to sue on the note. However, once having begun a foreclosure
action or an action to sue on the note or guaranty, a mortgagee is generally
not permitted to initiate the other without leave of court. New York does not
restrict a mortgagee from seeking a deficiency judgment. In order to obtain a
deficiency judgment, a series of procedural and substantive requirements must
be satisfied. In New York, liens for unpaid real estate taxes take priority
over the lien of a previously recorded mortgage.
Mortgage Loans in Pennsylvania are generally secured by mortgages on the
related real estate. Foreclosure of a mortgage is accomplished by foreclosure
in judicial proceedings. Such proceedings are regulated by statutes and rules
and subject throughout to the court's equitable powers. Public notice of the
judgment of foreclosure and sale and the amount of the judgment is given for
a statutory period of time after which the mortgaged real estate is sold at
public auction. The proceeds received from the sale are applied first to the
cost and expenses of the sale and then in satisfaction of the indebtedness
secured by the mortgage. After satisfaction of any other claims or liens, the
remaining proceeds are generally payable to the mortgagor. There is no right
of redemption after foreclosure sale in Pennsylvania. In certain
circumstances, deficiency judgments may be obtained. The remedy of
appointment of receiver for the mortgaged real estate is infrequently used.
Mortgage loans in Illinois are generally secured by mortgages on the
related real estate. Foreclosure of a mortgage is accomplished only by
judicial proceedings; there is no private power of sale under Illinois law.
Common law remedy of strict foreclosure is still available in Illinois.
Foreclosure is regulated by statute and is subject to the court's equitable
powers. Generally, a mortgagee may obtain, where applicable, and seek to
recover, a deficiency judgment. A mortgagor has a statutory right of
redemption which, as to mortgagors of non-residential real estate, may be
waived. A mortgagor also has a statutory right of reinstatement which, in
certain cases, may be granted only once in any given five year period. The
right of reinstatement allows a mortgagor, whose loan has been accelerated
due to a default, to cure said default (by paying principal amount due,
including costs, expenses, attorneys' fees and other fees, but excluding the
portion of principal which would not have been due in absence of
acceleration) within ninety days from the date the court obtains jurisdiction
over mortgagor. The reinstatement right cannot be waived by the mortgagor.
Illinois statutes also provide priority to certain tax liens over the lien of
previously recorded mortgages.
Foreclosure of the lien of a deed of trust in Virginia typically and most
efficiently is accomplished by a non-judicial trustee's sale under a power of
sale provision in the deed of trust. Judicial foreclosure also can be, but
seldom is, used. In a non-judicial foreclosure, public notice of the
trustee's sale, containing certain information, must be given for the time
period prescribed in the deed of trust, but subject to statutory minimums.
After such notice, the trustee may sell the real estate. In a judicial
foreclosure, after notice to all interested parties, a full hearing and
judgment in favor of the lienholder, the court orders a foreclosure sale to
be conducted by a sheriff or court-appointed commissioner in chancery. In
either type of foreclosure sale, the borrower has no right to redeem the
property. A deficiency judgment for a recourse loan may be obtained. Further,
under Virginia law, for certain circumstances and for certain time periods, a
lienholder has the statutory right to obtain a court-appointed receiver,
either with or without notice to the borrower, to collect, protect and
disburse the real property's rents and revenues, and otherwise to maintain
and preserve the real property, pursuant to the court's instructions.
In Nevada, the lien of a deed of trust may be foreclosed upon judicially
or non-judicially. Judicial foreclosures are extremely rare, as they give
rise to a one year right of redemption, and are employed only in cases of
defective trust deeds, mortgages, or cases alleging equitable mortgages. A
non-judicial foreclosure is handled by the trustee under the deed of trust,
typically, a title insurance company or agent, pursuant to a power of sale
granted in the deed of trust, and in accordance with the statutory scheme. A
notice of default and election to sell the property is recorded, notice is
given to the trustor and other parties with an interest in the property, and,
following the expiration of the statutory period, a public
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auction is held. With limited exceptions, Nevada law requires a beneficiary
to exhaust its real property security prior to bringing an action against the
trustor to collect a debt. Deficiency judgments following a foreclosure are
limited to the lesser of (i) the amount by which the debt exceeds the fair
market value of the property sold at the time of sale, with interest from the
date of sale, or (ii) the difference between the proceeds of the sale and the
debt, with interest from the date of sale. In Nevada, certain tax liens enjoy
priority over previously recorded deeds of trust.
In some states, foreclosure may result in automatic termination of
subordinate leases in the absence of either (i) an agreement to the contrary
between the foreclosing lender and the tenant or (ii) circumstances in which
it would be inequitable to permit such termination. In addition, in all
states, real property taxes have priority over the lien of previously
recorded mortgages or deeds of trust and in some states and under certain
circumstances, mechanics' liens and materialmen's liens may also take
priority over the lien of previously recorded mortgages or deeds of trust.
Foreclosure under either a mortgage or a deed of trust or the sale by the
referee or other designated official or by the trustee is often a public
sale. However, because of the difficulty a potential buyer at the sale might
have in determining the exact status of title to the property subject to the
lien of the mortgage or deed of trust and the redemption rights that may
exist, and because the physical condition and financial performance of the
property may have deteriorated during the foreclosure proceedings and/or for
a variety of other reasons, a third party may be unwilling to purchase the
property at the foreclosure sale. Some states require that the lender
disclose to potential bidders at a trustee's sale all known facts materially
affecting the value of the property. Such disclosure may have an adverse
effect on the trustee's or mortgagee's ability to sell the property or upon
the sale price.
USE OF PROCEEDS
The net proceeds from the sale of Offered Certificates will be used by the
Seller to pay the purchase price of the Mortgage Loans.
FEDERAL INCOME TAX CONSEQUENCES
Elections will be made to treat the portion of the Trust Fund exclusive of
the Excess Interest, the Excess Interest Distribution Account, the Default
Interest, the Class Q Distribution Account, the Marriott Desert Springs
Parent Loan, the Class M Collection Account and the Class M Distribution
Account, and, in the opinion of Cadwalader, Wickersham & Taft, special tax
counsel to the Seller, such portion of the Trust Fund will qualify, as two
separate REMICs (the "Upper-Tier REMIC" and the "Lower-Tier REMIC,"
respectively) within the meaning of Code Section 860D. The Reserve Accounts
and the Lock Box Accounts will be treated as beneficially owned by the
respective borrowers for federal income tax purposes. The Lower-Tier REMIC
will hold the Mortgage Loans (exclusive of the Excess Interest and the
Default Interest which will be deposited directly into the Upper-Tier REMIC),
proceeds therefrom, the Collection Account, the Lower-Tier Distribution
Account and any REO Property, and will issue (i) certain uncertificated
classes of regular interests (the "Lower-Tier Regular Interests") to the
Upper-Tier REMIC and (ii) the Class LR Certificates, which will represent the
sole class of residual interests in the Lower-Tier REMIC. The Upper-Tier
REMIC will hold the Lower-Tier REMIC Regular Interests and the Upper-Tier
Distribution Account in which distributions thereon will be deposited and
will issue (i) classes of regular interests represented by the Regular
Certificates and (ii) the Class R Certificates, which will represent the sole
class of residual interests in the Upper-Tier REMIC. In addition, the Class
A-2, Class B, Class C, Class D, Class E, Class F and Class G Certificates
will represent pro rata undivided beneficial interests in designated portions
of the Excess Interest and the related portions of the Excess Interest
Distribution Account, which portion of the Trust Fund will be treated as part
of a grantor trust for federal income tax purposes. Although holders of these
Classes of Certificates will be required to allocate their purchase price
between their interests in the regular interests in the Upper-Tier REMIC and
their beneficial interests in Excess Interest based on the relative fair
market values of each, it is anticipated that the rights to Excess Interest
will have negligible value as of the Closing Date. The Class Q Certificates
will represent pro rata undivided beneficial interests in the portion of the
Trust Fund consisting of Default Interest (subject to an obligation to pay
interest on Advances to the Master Servicer,
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Special Servicer or Trustee, as the case may be) in respect of the Mortgage
Loans and the Class Q Distribution Account, and such portion will be treated
as part of the grantor trust for federal income tax purposes. The Class M and
Class MX Certificates will represent undivided beneficial interests in the
portion of the Trust Fund consisting of the Marriott Desert Springs Parent
Loan, the Class M Collection Account and the Class M Distribution Account,
and such portion will be treated as part of the grantor trust for federal
income tax purposes.
The Offered Certificates will be treated as "real estate assets" under
Code Section 856(c)(4)(A), to the extent that the assets of the REMICs are so
treated. The interest on the Offered Certificates will be "interest on
obligations secured by mortgages on real property" described in Code Section
856(c)(3)(B) for a real estate investment trust, in the same proportion that
the income of the REMICs is so treated.
A beneficial owner's interest in an Offered Certificate will qualify for
the foregoing treatments under Sections 856(c)(4)(A) and 856(c)(3)(B) in
their entirety if at least 95% of the REMICs' assets qualify for such
treatment, and otherwise will qualify to the extent of the REMICs' percentage
of such assets. A Mortgage Loan that has been defeased with U.S. Treasury
securities will not qualify for such treatment. A beneficial owner's interest
in an Offered Certificate will not constitute "loans . . . secured by an
interest in real property which is . . . residential real property" within
the meaning of Code Section 7701(a)(19)(C)(v) in the case of a domestic
building and loan association. The Lower-Tier REMIC and the Upper-Tier REMIC
will be treated as one REMIC solely for the purpose of making the foregoing
determinations.
The regular interests represented by the Offered Certificates generally
will be treated as newly originated debt instruments for federal income tax
purposes. Beneficial owners of the Offered Certificates will be required to
report income on the regular interests represented by the Offered
Certificates in accordance with the accrual method of accounting and any
income from Excess Interest as such amounts are received or accrued by the
Trust Fund, based on their own methods of accounting. See "Federal Income Tax
Consequences--REMIC Certificates--Income from Regular Certificates--General"
in the Prospectus.
It is anticipated that the regular interests represented by the Class A-1,
Class A-2, Class B, Class C and Class D Certificates will be issued at a
premium and that the regular interest represented by the Class E Certificates
will be issued with de minimis original issue discount for federal income tax
purposes.
Although unclear for federal income tax purposes, it is anticipated that
the Class X Certificates will be treated as issued with original issue
discount in an amount equal to the excess of all distributions of interest
expected to be received thereon over their respective issue prices (including
accrued interest). Any "negative" amounts of original issue discount on the
Class X Certificates attributable to rapid prepayment with respect to the
Mortgage Loans will not be deductible currently, but may be offset against
future positive accruals of original issue discount, if any. Finally, a
holder of a Class X Certificate may be entitled to a loss deduction to the
extent it becomes certain that such holder will not recover a portion of its
basis in such Certificate, assuming no further prepayments. In the
alternative, it is possible that rules similar to the "noncontingent bond
method" of the contingent interest rules in the OID Regulations, as amended
on June 12, 1996, may be promulgated with respect to the Class X
Certificates. Under the noncontingent bond method, if the interest payable
for any period is greater or less than the amount projected, the amount of
income included for that period would be either increased or decreased
accordingly. Any net reduction in the income accrual for the taxable year
below zero (a "Negative Adjustment") would be treated by a Certificateholder
as ordinary loss to the extent of prior income accruals and would be carried
forward to offset future interest accruals. At maturity, any remaining
Negative Adjustment would be treated as a loss on retirement of the
Certificate. The legislative history of relevant Code provisions indicates,
however, that negative amounts of original issue discount on an instrument
such as a REMIC regular interest may not give rise to taxable losses in any
accrual period prior to the instrument's disposition or retirement. Thus, it
is not clear whether any losses resulting from a Negative Adjustment would be
recognized currently or be carried forward until disposition or retirement of
the debt obligation. However, unless and until otherwise required under
applicable regulations, the Seller does not intend to treat the payments of
interest on the Class X Certificates as contingent interest.
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The prepayment assumption that will be used to accrue original issue
discount, to amortize premium of an initial owner, or to determine whether
original issue discount is de minimis will be Scenario 1 as described under
"Yield, Prepayment and Maturity Considerations--Yield on the Offered
Certificates" above.
Although not free from doubt, it is anticipated that any prepayment
premiums will be treated as ordinary income to the extent allocable to
beneficial owners of the Offered Certificates as such amounts become due to
such beneficial owners.
ERISA CONSIDERATIONS
The purchase by or transfer to an employee benefit plan or other
retirement arrangement, including an individual retirement account or a Keogh
plan, which is subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or Section 4975 of the Code, or a
"governmental plan" (as defined in Section 3(32) of ERISA) that is subject to
any federal, state or local law ("Similar Law") which is, to a material
extent, similar to the foregoing provisions of ERISA or the Code (each, a
"Plan"), or a collective investment fund in which such Plans are invested, an
insurance company using the assets of separate accounts or general accounts
which include assets of Plans (or which are deemed pursuant to ERISA or
Similar Law to include assets of Plans) or other persons acting on behalf of
any such Plan or using the assets of any such Plan of the Class B, Class C,
Class D and Class E Certificates (the "Subordinate Offered Certificates") is
restricted. See "Description of the Offered Certificates--Transfer
Restrictions." Accordingly, except as specifically referenced herein, the
following discussion does not purport to discuss the considerations under
ERISA or Section 4975 of the Code with respect to the purchase, holding or
disposition of the Subordinate Offered Certificates. For purposes of the
following discussion all references to the Offered Certificates, unless
otherwise indicated, shall be deemed to exclude the Subordinate Offered
Certificates.
As described in the Prospectus under "ERISA Considerations," ERISA and the
Code impose certain duties and restrictions on Plans and certain persons who
perform services for Plans. For example, unless exempted, investment by a
Plan in the Offered Certificates may constitute or give rise to a prohibited
transaction under ERISA or the Code. There are certain exemptions issued by
the United States Department of Labor (the "Department") that may be
applicable to an investment by a Plan in the Offered Certificates. The
Department has granted to the Underwriter an administrative exemption
(Prohibited Transaction Exemption 89-88, 54 Fed. Reg. 42581 (October 17,
1989), as amended, 55 Fed. Reg. 48939 (November 23, 1990)), referred to
herein as the "Exemption," for certain mortgage-backed and asset-backed
certificates underwritten in whole or in part by the Underwriter. The
Exemption might be applicable to the initial purchase, the holding, and the
subsequent resale by a Plan of certain certificates, such as the Offered
Certificates, underwritten by the Underwriter, representing interests in
pass-through trusts that consist of certain receivables, loans and other
obligations, provided that the conditions and requirements of the Exemption
are satisfied. The loans described in the Exemption include mortgage loans
such as the Mortgage Loans. However, it should be noted that in issuing the
Exemption, the Department may not have considered interests in pools of the
exact nature as some of the Offered Certificates.
Among the conditions that must be satisfied for the Exemption to apply are
the following:
(1) The acquisition of Offered Certificates by a Plan is on terms
(including the price for the Offered Certificates) that are at least as
favorable to the Plan as they would be in an arm's length transaction with
an unrelated party;
(2) The rights and interests evidenced by Offered Certificates acquired
by the Plan are not subordinated to the rights and interests evidenced by
other Certificates of the Trust Fund;
(3) The Offered Certificates acquired by the Plan have received a rating
at the time of such acquisition that is in one of the three highest
generic rating categories from any of Moody's, Duff & Phelp's Credit
Rating Co., Fitch or Standard & Poor's Ratings Services ("S&P");
(4) The Trustee must not be an affiliate of any other member of the
Restricted Group;
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(5) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of Offered Certificates represents not
more than reasonable compensation for underwriting the Offered
Certificates. The sum of all payments made to and retained by the Seller
pursuant to the assignment of the Mortgage Loans to the Trust Fund
represents not more than the fair market value of such Mortgage Loans. The
sum of all payments made to and retained by the Master Servicer and any
other servicer represents not more than reasonable compensation for such
person's services under the Pooling Agreement and reimbursement of such
person's reasonable expenses in connection therewith; and
(6) The Plan investing in the Offered Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933.
The Trust Fund must also meet the following requirements:
(a) the corpus of the Trust Fund must consist solely of assets of the
type that have been included in other investment pools;
(b) certificates evidencing interests in such other investment pools must
have been rated in one of the three highest rating categories of Moody's,
Fitch, Duff & Phelp's Credit Rating Co. or S&P for at least one year prior
to the Plan's acquisition of the Offered Certificates pursuant to the
Exemption; and
(c) certificates evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of the Offered Certificates pursuant to
the Exemption.
If all of the conditions of the Exemption are met, whether or not a Plan's
assets would be deemed to include an ownership interest in the Mortgage Loans
in the Mortgage Pool, the acquisition, holding and resale of the Offered
Certificates by Plans would be exempt from certain of the prohibited
transaction provisions of ERISA and the Code.
Moreover, the Exemption can provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur if a
Plan fiduciary causes a Plan to acquire certificates in a trust in which the
fiduciary (or its affiliate) is an obligor on the receivables, loans or
obligations held in the trust provided that, among other requirements, (a) in
the case of an acquisition in connection with the initial issuance of
certificates, at least fifty percent of each Class of certificates in which
Plans have invested is acquired by persons independent of the Restricted
Group and at least fifty percent of the aggregate interest in the trust is
acquired by persons independent of the Restricted Group; (b) such fiduciary
(or its affiliate) is an obligor with respect to five percent or less of the
fair market value of the obligations contained in the trust; (c) the Plan's
investment in certificates of any class does not exceed twenty-five percent
of all of the certificates of that class outstanding at the time of the
acquisition; and (d) immediately after the acquisition no more than
twenty-five percent of the assets of the Plan with respect to which such
person is a fiduciary are invested in certificates representing an interest
in one or more trusts containing assets sold or serviced by the same entity.
The Exemption does not apply to the purchasing or holding of Offered
Certificates by Plans sponsored by the Seller, the Underwriter, the Trustee,
the Master Servicer, any obligor with respect to Mortgage Loans included in
the Trust Fund constituting more than five percent of the aggregate
unamortized principal balance of the assets in the Trust Fund, or any
affiliate of such parties (the "Restricted Group"). Borrowers who are acting
on behalf of Plans or who are investing assets of Plans, and any affiliates
of any such borrowers, should not purchase any of the Offered Certificates.
The Underwriter believes that the conditions to the applicability of the
Exemption will generally be met with respect to the Class A-1, Class A-2 and
Class X Certificates, other than possibly those conditions which are
dependent on facts unknown to the Underwriter or which it cannot control,
such as those relating to the circumstances of the Plan purchaser or the Plan
fiduciary making the decision to purchase any such Class of Offered
Certificates. However, before purchasing an Offered Certificate, a
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fiduciary of a Plan should make its own determination as to the availability
of the exemptive relief provided by the Exemption or the availability of any
other prohibited transaction exemptions, and whether the conditions of any
such exemption will be applicable to the Offered Certificates. THE CLASS B,
CLASS C, CLASS D AND CLASS E CERTIFICATES ARE SUBORDINATE TO ONE OR MORE
OTHER CLASSES OF CERTIFICATES AND, ACCORDINGLY, SUCH CERTIFICATES MAY NOT BE
PURCHASED BY OR TRANSFERRED TO A PLAN OR ANY PERSON ACTING ON BEHALF OF OR
INVESTING THE ASSETS OF A PLAN, UNLESS SUCH PERSON IS AN INSURANCE COMPANY
INVESTING THE ASSETS OF ITS GENERAL ACCOUNT UNDER CIRCUMSTANCES WHEREBY THE
PURCHASE AND HOLDING OF ANY SUCH CERTIFICATE WOULD BE EXEMPT FROM THE
PROHIBITED TRANSACTION PROVISIONS OF ERISA AND THE CODE UNDER PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60.
Any fiduciary of a Plan considering whether to purchase an Offered
Certificate should also carefully review with its own legal advisors the
applicability of the fiduciary duty and prohibited transaction provisions of
ERISA and the Code to such investment. See "ERISA Considerations" in the
Prospectus. A fiduciary of a governmental plan should make its own
determination as to the need for and the availability of any exemptive relief
under any Similar Law.
The sale of Certificates to a Plan is in no respect a representation by
the Seller or the Underwriter that this investment meets all relevant legal
requirements with respect to investments by Plans generally or any particular
Plan, or that this investment is appropriate for Plans generally or any
particular Plan.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related securities"
for purposes of SMMEA. No representation is made as to the proper
characterization of the Offered Certificates for legal investment purposes,
financial regulatory purposes, or other purposes, or as to the ability of
particular investors to purchase the Offered Certificates of any Class under
applicable legal investment restrictions. These uncertainties may adversely
affect the liquidity of the Offered Certificates.
Accordingly, all institutions whose investment activities are subject to
legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their own legal advisors
in determining whether and to what extent the Offered Certificates constitute
legal investments for them or are subject to investment, capital or other
restrictions. See "Legal Investment" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement between
the Seller and the Underwriter, the Offered Certificates will be purchased
from the Seller by the Underwriter, an affiliate of the Seller and GSMC, upon
issuance. Distribution of the Offered Certificates will be made by the
Underwriter from time to time in negotiated transactions or otherwise at
varying prices to be determined at the time of sale. Proceeds to the Seller
from the sale of the Offered Certificates will be $1,362,632,592, plus
accrued interest, if any, from May 1, 1998, before deducting expenses payable
by the Seller.
In connection with the purchase and sale of the Offered Certificates, the
Underwriter may be deemed to have received compensation from the Seller in
the form of underwriting discounts. One or more affiliates of the Underwriter
have entered into and may, in the future, enter into other financing
arrangements with affiliates of some or all of the borrowers.
The Seller has been advised by the Underwriter that, subject to applicable
laws and regulations, it currently intends to make a market in the Offered
Certificates following completion of the offering. However, it is not
obligated to do so and any market making may be discontinued at any time
without notice. In addition, such market-making activity will be subject to
the limits imposed by the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended. There can be no assurance that
an active trading market will develop or be sustained following the
completion of the offering.
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If and to the extent required by applicable law, this Prospectus
Supplement and the accompanying Prospectus may be used by Goldman, Sachs &
Co. in connection with offers and sales of the Offered Certificates in
certain market-making transactions at prices related to prevailing market
prices at the time of sale. The Seller will not receive any proceeds from
such transactions. Goldman, Sachs & Co. may act as principal or agent in such
transactions.
The Seller has agreed to indemnify the Underwriter against, or make
contributions to the Underwriter with respect to, certain liabilities,
including liabilities under the Securities Act of 1933.
In connection with the offering, the Underwriter may purchase and sell the
Offered Certificates in the open market. These transactions may include
purchases to cover short positions created by the Underwriter in connection
with the offering. Short positions created by the Underwriter involve the
sale by the Underwriter of a greater number of Certificates than they are
required to purchase from the Seller in the offering. The Underwriter also
may impose a penalty bid, whereby selling concessions allowed to
broker-dealer in respect of the securities sold in the offering may be
reclaimed by the Underwriter if such Certificates are repurchased by the
Underwriter in covering transactions. These activities may maintain or
otherwise affect the market price of the Certificates, which may be higher
than the price that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time. These transactions
may be affected in the over-the-counter market or otherwise.
This Prospectus Supplement and the Prospectus may only be issued or passed
on in the United Kingdom to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom this Prospectus Supplement and
the Prospectus may otherwise lawfully be issued or passed on.
The Trust Fund described in this Prospectus Supplement may only be
promoted (whether by the issuing or passing on of documents as referred to in
the foregoing restriction or otherwise) by an authorized person under Chapter
III of the Financial Services Act 1986 of the United Kingdom ("FSA") to a
person in the United Kingdom if that person is of a kind described in section
76(2) of the FSA or as permitted by the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991 (as amended).
EXPERTS
Hospitality Valuation Services, Inc., Landauer Associates, Inc., Koeppel
Tenner Real Estate Services, Inc., and Cushman & Wakefield, Inc.
(collectively, the "Appraisers") are each an independent real estate
brokerage, appraisal, management and consulting firm, and have appraised the
current fair market value of the applicable Mortgaged Properties. The results
of such appraisals and references to such firms are set forth in the
information included in this Prospectus Supplement under the heading
"Description of the Mortgaged Properties and the Mortgage Loans" and in the
complete report which will be available for inspection at the corporate trust
office of the Trustee, and such summary report, together with information
based on the complete report included in this Prospectus Supplement, have
been included in this Prospectus Supplement in reliance upon the authority of
the Appraisers as experts on real estate appraisals.
VALIDITY OF OFFERED CERTIFICATES
The validity of the Offered Certificates will be passed upon for the
Seller and for the Underwriter by Cadwalader, Wickersham & Taft, New York,
New York. The material federal income tax consequences of the Offered
Certificates will be passed upon for the Seller by Cadwalader, Wickersham &
Taft.
RATINGS
It is a condition to the issuance of the Offered Certificates that (i)
each of the Class A-1, Class A-2 and Class X Certificates be rated "AAA" by
Fitch and "Aaa" by Moody's; (ii) the Class B Certificates be rated "AA" by
Fitch and "Aa2" by Moody's; (iii) the Class C Certificates be rated "A" by
each of Fitch and "A2" by Moody's; (iv) the Class D Certificates be rated
"BBB" by Fitch and "Baa2" by Moody's; and (v) the Class E Certificates be
rated "BBB-" by Fitch and "Baa3" by Moody's. The ratings on the Offered
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Certificates address the likelihood of the timely receipt by holders thereof
of all distributions of interest to which they are entitled and, except in
the case of the Class X Certificates, distributions of principal by the Rated
Final Distribution Date. A security rating is not a recommendation to buy,
sell or hold securities and may be subject to revision or withdrawal at any
time by the assigning rating organization. A security rating does not address
the frequency of prepayments (both voluntary and involuntary) or the
possibility that Certificateholders might suffer a lower than anticipated
yield, nor does a security rating address the likelihood of receipt of
Prepayment Premiums, Net Default Interest or Excess Interest or the tax
treatment of the Certificates. The ratings do not address the fact that the
Pass-Through Rates of the Offered Certificates, to the extent that they are
based on the WAC Rate, will be affected by changes therein due to variations
in the rates of amortization of the Mortgage Loans. See "Risk Factors" herein
and "Yield Considerations" in the Prospectus.
The Rating Agencies' ratings on mortgage pass-through certificates address
the likelihood of the receipt by holders of payments to which they are
entitled by the Rated Final Distribution Date. The Rating Agencies' ratings
take into consideration the credit quality of the mortgage pool, structural
and legal aspects associated with the Certificates, and the extent to which
the payment stream in the mortgage pool is adequate to make payments required
under the Certificates. Ratings on mortgage pass-through certificates do not,
however, represent an assessment of the likelihood, timing or frequency of
principal prepayments (both voluntary and involuntary) by mortgagors, or the
degree to which such prepayments might differ from those originally
anticipated. In general, the ratings thus address credit risk and not
prepayment risk. Also, a security rating does not represent any assessment of
the yield to maturity that investors may experience or the possibility that
the holders of the Class X Certificates might not fully recover their initial
investment in the event of delinquencies or defaults or rapid prepayments of
the Mortgage Loans (including both voluntary and involuntary prepayments) or
the application of Realized Losses. As described herein, the amounts payable
with respect to the Class X Certificates consist only of interest. If all of
the Mortgage Loans were to prepay in the initial month, with the result that
the Class X Certificateholders receive only a single month's interest and
thus suffer a nearly complete loss of their investment, all amounts "due" to
such holders will nevertheless have been paid, and such result is consistent
with the rating received on each of the Class X Certificates. Accordingly,
the ratings of the Class X Certificates should be evaluated independently
from similar ratings on other types of securities.
There can be no assurance as to whether any rating agency not requested to
rate the Offered Certificates will nonetheless issue a rating and, if so,
what such rating would be. A rating assigned to the Offered Certificates by a
rating agency that has not been requested by the Seller to do so may be lower
than the rating assigned by the Rating Agencies pursuant to the Seller's
request.
The rating of the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency.
S-304
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
<TABLE>
<CAPTION>
<S> <C>
Above Market IBM Rent Component ..................................... S-188
ACMs ................................................................ S-49
ADA ................................................................. S-58
Additional Escrow Event ............................................. S-207
ADR ................................................................. S-70
Advance Rate ........................................................ S-276
Advances ............................................................ S-276
Allocated Loan Amount ............................................... S-69
Americold ........................................................... S-77, S-146
Americold Pool Acceptable Property Manager .......................... S-152
Americold Pool Allocated Loan Amount ................................ S-157
Americold Pool Anticipated Repayment Date ........................... S-18, S-154
Americold Pool Borrower ............................................. S-17, S-146
Americold Pool Breakpoint ........................................... S-152
Americold Pool Building Improvements Reserve Account ................ S-159
Americold Pool Collection Period .................................... S-160
Americold Pool Debt Service Coverage Ratio .......................... S-159
Americold Pool Default Interest ..................................... S-154
Americold Pool Defeasance Date ...................................... S-155
Americold Pool Defeasance Deposit ................................... S-156
Americold Pool Deferred Maintenance Reserve Account ................. S-159
Americold Pool Deposit Account ...................................... S-159
Americold Pool Due Date ............................................. S-154
Americold Pool Excess Cash Flow ..................................... S-154
Americold Pool Excess Interest ...................................... S-18, S-154
Americold Pool Ground Leases ........................................ S-56
Americold Pool Initial Interest Rate ................................ S-17, S-154
Americold Pool Insurance and Tax Reserve Account .................... S-159
Americold Pool Loan ................................................. S-17
Americold Pool Local Account ........................................ S-160
Americold Pool Low Debt Service Application Event ................... S-159
Americold Pool Low Debt Service Reserve Account ..................... S-159
Americold Pool Low Debt Service Return Event ........................ S-159
Americold Pool Low Debt Service Trigger Event ....................... S-159
Americold Pool Master Lease ......................................... S-152
Americold Pool Master Lease Commencement Date ....................... S-152
Americold Pool Master Lease Installment ............................. S-160
Americold Pool Master Lease Installment Balance ..................... S-161
Americold Pool Master Lessee ........................................ S-152
Americold Pool Master Lessor ........................................ S-152
Americold Pool Maturity Date ........................................ S-154
Americold Pool Minimum Rent ......................................... S-152
Americold Pool Monthly Debt Service Payment Amount .................. S-154
Americold Pool Net Cash Flow ........................................ S-159
Americold Pool Note A ............................................... S-17, S-146
Americold Pool Note B ............................................... S-17, S-146
Americold Pool Ongoing Maintenance Reserve Account .................. S-158
Americold Pool Operating Account .................................... S-160
Americold Pool Operating Agreements ................................. S-153
S-305
<PAGE>
Americold Pool Percentage Rent ...................................... S-152
Americold Pool Permitted Encumbrances ............................... S-146
Americold Pool Pre-Approved Party ................................... S-162
Americold Pool Properties ........................................... S-17, S-146
Americold Pool Property Management Agreement ........................ S-151
Americold Pool Receipts ............................................. S-159
Americold Pool Release Amount ....................................... S-157
Americold Pool Revised Interest Rate ................................ S-18, S-154
Americold Pool Substitute Property .................................. S-158
Americold Pool Unimproved Portion ................................... S-158
Annual Debt Service ................................................. S-69
Annualized Base Rent ................................................ S-70
Anticipated Repayment Date .......................................... S-66, S-69
Anticipated Repayment Date Balance .................................. S-69
Anticipated Repayment Date LTV ...................................... S-70
Anticipated Term .................................................... S-70
Appraisal Reduction Amount .......................................... S-253
Appraisal Reduction Event ........................................... S-252
Appraisers .......................................................... S-303
Arbor Property ...................................................... S-131
ARD ................................................................. S-6
ARD LTV ............................................................. S-70
Arlington Plaza ..................................................... S-24, S-229
Available Funds ..................................................... S-244
Average Base Rent Per Square Foot ................................... S-70
Bankruptcy Code ..................................................... S-48
Base Interest Fraction .............................................. S-250
Best's .............................................................. S-213
Borrower's Fee and Leasehold Estate ................................. S-65
Business Day ........................................................ S-10
Captive Production .................................................. S-79
CEDEL ............................................................... S-10, S-64
CEDEL Participants .................................................. S-255
CERCLA .............................................................. S-49
Certificate Owners .................................................. S-256
Certificate Registrar ............................................... S-253
Certificateholder ................................................... S-254
Certificates ........................................................ S-9
CES Commercial Realty ............................................... S-25, S-229
Champaign Borrower .................................................. S-98
Champaign Courtyard Ground Sublease ................................. S-99
Champaign Fairfield Inn Ground Sublease ............................. S-98
Champaign Fee Owner ................................................. S-99
Champaign Sublessor ................................................. S-98
Chiller Work Reserve ................................................ S-205
Class ............................................................... S-3, S-243
Class A Certificates ................................................ S-243
Class M Collection Account .......................................... S-277
Class M Distribution Account ........................................ S-278
Class Q Distribution Account ........................................ S-278
Code ................................................................ S-37
S-306
<PAGE>
Coke Lease .......................................................... S-217
Coke Tenant ......................................................... S-216
Coke Tenant Allowance ............................................... S-223
Cold Storage Qualified Master Lessee ................................ S-84, S-152
Collection Account .................................................. S-277
Collection Period ................................................... S-246
Commission .......................................................... S-292
Coupon Strip Certificates ........................................... S-28
Cross-over Date ..................................................... S-250
Crystal City Pool Acceptable Manager ................................ S-232
Crystal City Pool Allocated Loan Amount ............................. S-234
Crystal City Pool Anticipated Repayment Date ........................ S-25, S-232
Crystal City Pool Borrower .......................................... S-24, S-229
Crystal City Pool Capital Reserve Account ........................... S-235
Crystal City Pool Consents of Manager ............................... S-231
Crystal City Pool Debt Service Coverage Ratio ....................... S-238
Crystal City Pool Debt Service Reserve Account ...................... S-236
Crystal City Pool Defeasance Date ................................... S-234
Crystal City Pool Defeasance Deposit ................................ S-235
Crystal City Pool Deposit Account ................................... S-236
Crystal City Pool Due Date .......................................... S-232
Crystal City Pool Excess Cash Flow .................................. S-233
Crystal City Pool Excess Interest ................................... S-25, S-232
Crystal City Pool Initial Interest Rate ............................. S-25, S-232
Crystal City Pool Leasing Reserve Account ........................... S-236
Crystal City Pool Listed Permitted Owner ............................ S-240
Crystal City Pool Loan .............................................. S-24
Crystal City Pool Lockbox Trigger Event ............................. S-237
Crystal City Pool Low Debt Service Application Event ................ S-236
Crystal City Pool Low Debt Service Reserve Account .................. S-236
Crystal City Pool Low Debt Service Return Event ..................... S-236
Crystal City Pool Low Debt Service Trigger Event .................... S-236
Crystal City Pool Management Agreements ............................. S-231
Crystal City Pool Manager ........................................... S-229
Crystal City Pool Maturity Date ..................................... S-232
Crystal City Pool Monthly Debt Service Payment Amount ............... S-232
Crystal City Pool Permitted Encumbrances ............................ S-229
Crystal City Pool Properties ........................................ S-25, S-229
Crystal City Pool Property .......................................... S-25, S-229
Crystal City Pool Property Level Sweep Account ...................... S-236
Crystal City Pool Qualified Transferee .............................. S-238
Crystal City Pool Release Amount .................................... S-234
Crystal City Pool Revised Interest Rate ............................. S-25, S-232
Crystal City Pool Tax and Insurance Reserve Account ................. S-236
Crystal Gateway ..................................................... S-24, S-229
Cut-Off Date Allocated Loan Amount .................................. S-69
Cut-Off Date LTV .................................................... S-69
Debt Service Coverage Ratio ......................................... S-69
Default Interest .................................................... S-246
Default Rate ........................................................ S-246
Defeasance Lockout Period ........................................... S-27
S-307
<PAGE>
Definitive Certificate .............................................. S-253
Department .......................................................... S-300
Depositories ........................................................ S-254
Directing Class ..................................................... S-289
Distribution Date ................................................... S-244
DSCR ................................................................ S-69
DSMLP ............................................................... S-22, S-198
DTC ................................................................. S-10
Due Date ............................................................ S-27
Eligible Bank ....................................................... S-278
EMC Lease ........................................................... S-218
EPA ................................................................. S-50
EQK ................................................................. S-131
ERISA ............................................................... S-37, S-300
Euroclear ........................................................... S-10, S-64
Euroclear Participants .............................................. S-255
Event of Default .................................................... S-283
Excess Cash Flow .................................................... S-62
Excess Cash Flow Escrow Account ..................................... S-205
Excess Interest ..................................................... S-62, S-246
Excess Interest Distribution Account ................................ S-278
Excess Prepayment Interest Shortfall ................................ S-251
Excess Rate ......................................................... S-246
Exemption ........................................................... S-37, S-300
Extended Monthly Payment ............................................ S-286
First P&I Date ...................................................... S-70
Fiscal Agent ........................................................ S-9
Fitch ............................................................... S-38
Fixed Voting Rights Percentage ...................................... S-285
Forest City ......................................................... S-216
Form 8-K ............................................................ S-76
FSA ................................................................. S-303
GAAP ................................................................ S-67
GLA ................................................................. S-70
GMACCM .............................................................. S-9, S-293
GMACCM Responsible Party Agreement .................................. S-65
Green Acres Acceptable Manager ...................................... S-136
Green Acres Actual Debt Service Coverage Ratio ...................... S-141
Green Acres Additional Debt ......................................... S-53
Green Acres Anticipated Repayment Date .............................. S-16, S-136
Green Acres Approved Additional Loan ................................ S-140
Green Acres Borrower ................................................ S-16, S-131
Green Acres Capital Reserve Account ................................. S-140
Green Acres Consent of Manager ...................................... S-136
Green Acres Debt Service Coverage Ratio ............................. S-140
Green Acres Defeasance Date ......................................... S-138
Green Acres Defeasance Deposit ...................................... S-138
Green Acres Deferred Maintenance Reserve Account .................... S-140
Green Acres Due Date ................................................ S-137
Green Acres Excess Cash Flow ........................................ S-137
Green Acres Excess Interest ......................................... S-16, S-137
S-308
<PAGE>
Green Acres Ground Lease ............................................ S-56, S-131
Green Acres Initial Interest Rate ................................... S-16, S-136
Green Acres Insurance and Tax Reserve Account ....................... S-140
Green Acres Loan .................................................... S-15
Green Acres Lockbox Account ......................................... S-141
Green Acres Low Debt Service Application Event ...................... S-141
Green Acres Low Debt Service Reserve Account ........................ S-140
Green Acres Low Debt Service Return Event ........................... S-141
Green Acres Low Debt Service Trigger Event .......................... S-141
Green Acres Mall .................................................... S-131
Green Acres Management Agreement .................................... S-136
Green Acres Manager ................................................. S-131
Green Acres Maturity Date ........................................... S-136
Green Acres Monthly Debt Service Payment Amount ..................... S-137
Green Acres Outparcel ............................................... S-139
Green Acres Percentage Rent ......................................... S-132
Green Acres Permitted Encumbrances .................................. S-131
Green Acres Property ................................................ S-16, S-131
Green Acres Revised Interest Rate ................................... S-16, S-136
Green Acres Sunrise Outparcel ....................................... S-139
Green Acres Tenant Improvement Reserve Account ...................... S-140
GSMC ................................................................ S-9
Holders ............................................................. S-256
Host Marriott ....................................................... S-198
IBM ................................................................. S-21
IBM Lease ........................................................... S-182
IBM Space Reduction Amount .......................................... S-188
Incentive Management Fee ............................................ S-200
Indirect Participants ............................................... S-254
Initial Interest Rate ............................................... S-62
Initial Pool Balance ................................................ S-65
Interest Accrual Amount ............................................. S-30, S-246
Interest Accrual Period ............................................. S-247
Interest Distribution Amount ........................................ S-30, S-246
Interest Reserve Account ............................................ S-278
Interest Shortfall .................................................. S-30, S-247
Joint Venture ....................................................... S-77, S-146
Lazard .............................................................. S-180
LC .................................................................. S-68
Liquidation Fee ..................................................... S-294
Loan Sale Agreement ................................................. S-65
Loan-to-Value Ratio ................................................. S-69
Lock Box Accounts ................................................... S-277
Lower-Tier Distribution Account ..................................... S-277
Lower-Tier Regular Interests ........................................ S-298
Lower-Tier REMIC .................................................... S-36, S-298
LTV ................................................................. S-66, S-69
LUST ................................................................ S-50
MAI ................................................................. S-75
Management Incentive Reserve Account ................................ S-205
Manager Deficit Contribution Account ................................ S-201
S-309
<PAGE>
Marriott Desert Springs Acceptable Manager .......................... S-201
Marriott Desert Springs Accounting Period ........................... S-206
Marriott Desert Springs Anticipated Repayment Date .................. S-22, S-201
Marriott Desert Springs Borrower .................................... S-21, S-198
Marriott Desert Springs Cash Collateral Account ..................... S-206
Marriott Desert Springs Consent of Manager .......................... S-200
Marriott Desert Springs Defeasance Date ............................. S-203
Marriott Desert Springs Defeasance Deposit .......................... S-204
Marriott Desert Springs Due Date .................................... S-202
Marriott Desert Springs Excess Cash Flow ............................ S-202
Marriott Desert Springs Excess Interest ............................. S-22, S-202
Marriott Desert Springs FF&E Reserve Account ........................ S-205
Marriott Desert Springs Ground Lease ................................ S-56, S-198
Marriott Desert Springs Initial Interest Rate ....................... S-22, S-201
Marriott Desert Springs Loan ........................................ S-21
Marriott Desert Springs Loan Debt Service Reserve Account .......... S-205
Marriott Desert Springs Local Account ............................... S-206
Marriott Desert Springs Lockbox Account ............................. S-207
Marriott Desert Springs Lockbox Event ............................... S-207
Marriott Desert Springs Management Agreement ........................ S-200
Marriott Desert Springs Manager ..................................... S-198
Marriott Desert Springs Manager's Account ........................... S-206
Marriott Desert Springs Maturity Date ............................... S-201
Marriott Desert Springs Monthly Debt Service Payment Amount ........ S-202
Marriott Desert Springs Operating Account ........................... S-208
Marriott Desert Springs Operating Profit ............................ S-205
Marriott Desert Springs Owner's Priority ............................ S-205
Marriott Desert Springs Parent Lender ............................... S-214
Marriott Desert Springs Parent Loan ................................. S-23, S-53, S-214
Marriott Desert Springs Parent Loan Debt Service Reserve Account ... S-206
Marriott Desert Springs Parent Loan Monthly Debt Service Payment
Amount ............................................................. S-215
Marriott Desert Springs Permitted Encumbrances ...................... S-198
Marriott Desert Springs Permitted Owner ............................. S-210
Marriott Desert Springs Property .................................... S-21, S-198
Marriott Desert Springs Revised Interest Rate ....................... S-22, S-201
Marriott Desert Springs Tax and Insurance Reserve Account .......... S-205
Marriott DSM ........................................................ S-22, S-23, S-198
Master Servicer ..................................................... S-9
Master Servicer Remittance Date ..................................... S-275
MDSC ................................................................ S-198
MDSM Finance ........................................................ S-198
MDSM-DSMLP Loan ..................................................... S-53, S-204, S-215
MII ................................................................. S-198
Monthly Payment ..................................................... S-245
Moody's ............................................................. S-38
Mortgage ............................................................ S-65
Mortgage Loan Assumptions ........................................... S-260
Mortgage Pool ....................................................... S-11
Mortgage Rate ....................................................... S-29, S-247
Mortgaged Properties ................................................ S-11
S-310
<PAGE>
Mortgaged Property .................................................. S-65
Mortgages ........................................................... S-11
National Distribution ............................................... S-79
Negative Adjustment ................................................. S-299
Net Default Interest ................................................ S-246
Net Mortgage Rate ................................................... S-29, S-247
Net Operating Income ................................................ S-67
Net REO Proceeds .................................................... S-246
NOI ................................................................. S-67
Note ................................................................ S-11, S-65
Notional Amount ..................................................... S-244
Occupancy ........................................................... S-70
One Commerce Square Acceptable Manager .............................. S-183
One Commerce Square Affiliated Owner ................................ S-180
One Commerce Square Anticipated Repayment Date ...................... S-20, S-184
One Commerce Square Borrower ........................................ S-20, S-180
One Commerce Square Capital Reserve Account ......................... S-188
One Commerce Square Common Improvements ............................. S-180
One Commerce Square Consent of Manager .............................. S-183
One Commerce Square Credit Facility ................................. S-187
One Commerce Square Defeasance Date ................................. S-185
One Commerce Square Defeasance Deposit .............................. S-186
One Commerce Square Deferred Maintenance Reserve Account ........... S-188
One Commerce Square Deposit Account ................................. S-189
One Commerce Square Due Date ........................................ S-184
One Commerce Square Excess Cash Flow ................................ S-184
One Commerce Square Excess Interest ................................. S-20, S-184
One Commerce Square Initial Interest Rate ........................... S-20, S-184
One Commerce Square Leasing Reserve Account ......................... S-187
One Commerce Square Listed Partner Loan Holder ...................... S-193
One Commerce Square Listed Permitted Owner .......................... S-191
One Commerce Square Loan ............................................ S-19
One Commerce Square Low Debt Service Application Event ............. S-189
One Commerce Square Low Debt Service Reserve Account ................ S-188
One Commerce Square Low Debt Service Trigger Event .................. S-189
One Commerce Square Management Agreement ............................ S-183
One Commerce Square Manager ......................................... S-180
One Commerce Square Maturity Date ................................... S-184
One Commerce Square Minor Loss ...................................... S-194
One Commerce Square Monthly Debt Service Payment Amount ............ S-20, S-184
One Commerce Square Note ............................................ S-20, S-184
One Commerce Square Partner Borrowers ............................... S-196
One Commerce Square Partner Lender .................................. S-196
One Commerce Square Partner Loan .................................... S-53, S-196
One Commerce Square Partnership Agreement ........................... S-196
One Commerce Square Permitted Encumbrances .......................... S-180
One Commerce Square Permitted Owner ................................. S-191
One Commerce Square Preferred Equity Holders ........................ S-196
One Commerce Square Property ........................................ S-20, S-180
One Commerce Square REA ............................................. S-181
One Commerce Square Revised Interest Rate ........................... S-20, S-184
S-311
<PAGE>
One Commerce Square Series A Preferred Equity Holders ............... S-196
One Commerce Square Series B Preferred Equity Holder ................ S-53, S-196
One Commerce Square Tax and Insurance Reserve Account ............... S-187
One Commerce Square Tranche A Note .................................. S-19, S-184
One Commerce Square Tranche A Note Maturity Date .................... S-20, S-184
One Commerce Square Tranche B Note .................................. S-20, S-184
One Commerce Square Tranche B Note Maturity Date .................... S-20, S-184
One Commerce Square Unpaid TI/Leasing Commission Reserve Account ... S-188
Operating Profit Payment Date ....................................... S-206
Original Principal Balance .......................................... S-70
Originators. ........................................................ S-26
Participants ........................................................ S-253
Pass-Through Rate ................................................... S-28, S-247
PCBs ................................................................ S-50
Percentage Interest ................................................. S-244
Permitted Investments ............................................... S-279
P&I Advance ......................................................... S-34, S-275
Pier 39 Administrator ............................................... S-170
Pier 39 Affiliate ................................................... S-176
Pier 39 Anticipated Repayment Date .................................. S-19, S-171
Pier 39 Borrower .................................................... S-18, S-167
Pier 39 CA .......................................................... S-167
Pier 39 Capital Reserve Account ..................................... S-174
Pier 39 Cash Trap Event ............................................. S-175
Pier 39 Close Affiliate ............................................. S-176
Pier 39 Debt Service Account ........................................ S-173
Pier 39 Debt Service Coverage Ratio ................................. S-174
Pier 39 Defeasance Date ............................................. S-172
Pier 39 Defeasance Deposit .......................................... S-173
Pier 39 Deferred Maintenance Reserve Account ........................ S-174
Pier 39 Deposit Account ............................................. S-174
Pier 39 Due Date .................................................... S-171
Pier 39 Escalator Reserve Account ................................... S-174
Pier 39 Excess Cash Flow ............................................ S-171
Pier 39 Excess Interest ............................................. S-19, S-171
Pier 39 GP .......................................................... S-19, S-167
Pier 39 Ground Lease ................................................ S-56, S-167
Pier 39 Ground Lessor ............................................... S-167
Pier 39 Inc ......................................................... S-19, S-167
Pier 39 Initial Interest Rate ....................................... S-19, S-171
Pier 39 Loan ........................................................ S-18
Pier 39 Low Debt Service Cash Escrow Account ........................ S-174
Pier 39 Low Debt Service Reserve Account ............................ S-174
Pier 39 Manager ..................................................... S-167
Pier 39 Maturity Date ............................................... S-171
Pier 39 Monthly Debt Service Payment Amount ......................... S-171
Pier 39 Parking Operator ............................................ S-170
Pier 39 Parking Service Agreement ................................... S-171
Pier 39 Permitted Encumbrances ...................................... S-167
Pier 39 Property .................................................... S-18, S-167
S-312
<PAGE>
Pier 39 Property Management Agreement ............................... S-170
Pier 39 Qualified Transferee ........................................ S-176
Pier 39 Revised Interest Rate ....................................... S-19, S-171
Pier 39 Tax and Insurance Escrow Account ............................ S-173
Pier 39 Unfunded Obligations Reserve Account ........................ S-174
Pier 39 G&A Administrative Services Agreement ....................... S-170
PIHLLC .............................................................. S-20, S-180
PIHLP ............................................................... S-196
Plan ................................................................ S-37, S-256, S-300
PML ................................................................. S-83
Pooling Agreement ................................................... S-9, S-272
PPA ................................................................. S-180
Prepayment Interest Shortfall ....................................... S-251
Prepayment Lockout Period ........................................... S-61
Prepayment Premiums ................................................. S-246
Prime Rate .......................................................... S-277
Principal Distribution Amount ....................................... S-33, S-248
Principal Prepayments ............................................... S-246
Principal Shortfall ................................................. S-248
Principal Window .................................................... S-6
Private Certificates ................................................ S-243
Property Advances ................................................... S-276
Property Condition Reports .......................................... S-75
psf ................................................................. S-70
Rated Final Distribution Date ....................................... S-265
Rating Agencies ..................................................... S-39
Realized Loss ....................................................... S-251
Regional Distribution ............................................... S-79
Regional Production ................................................. S-79
Regular Certificates ................................................ S-36, S-247
Rehabilitation Fee .................................................. S-294
REIT ................................................................ S-85
REMIC ............................................................... S-36
REO Account ......................................................... S-243
REO Mortgage Loan ................................................... S-248
REO Property ........................................................ S-243
Repurchase Price .................................................... S-273
Reserve Accounts .................................................... S-66
Residual Certificates ............................................... S-36
Responsible Party ................................................... S-26
Responsible Party's Appraised Value ................................. A-6
Restricted Group .................................................... S-38, S-301
Revised Interest Rate ............................................... S-62
RevPAR .............................................................. S-70
Rules ............................................................... S-255
Sales Per SF ........................................................ S-70
Scenario 1 .......................................................... S-260
Scenarios ........................................................... S-260
Sega Lease .......................................................... S-218
Seller .............................................................. S-9
Senior Offered Certificates ......................................... S-38
S-313
<PAGE>
Sequential Pay Certificates ......................................... S-243
Sequential Pay Certificates. ........................................ S-28
Servicing Compensation .............................................. S-245
Servicing Fee ....................................................... S-293
Servicing Fee Rate .................................................. S-293
Servicing Standard .................................................. S-274
SF/Units ............................................................ S-70
Showcase Acceptable Manager ......................................... S-219
Showcase Anticipated Repayment Date ................................. S-23, S-219
Showcase Borrower ................................................... S-23, S-216
Showcase Capital Reserve Account .................................... S-222
Showcase Consent of Manager ......................................... S-219
Showcase Debt Service Reserve Account ............................... S-223
Showcase Defeasance Date ............................................ S-221
Showcase Defeasance Deposit ......................................... S-221
Showcase Deferred Maintenance Reserve Account ....................... S-222
Showcase Deposit Account ............................................ S-224
Showcase Due Date ................................................... S-220
Showcase Excess Cash Flow ........................................... S-220
Showcase Excess Interest ............................................ S-23, S-219
Showcase GP I ....................................................... S-23, S-216
Showcase GP II ...................................................... S-23, S-216
Showcase Initial Interest Rate ...................................... S-23, S-219
Showcase Leasing Excess Cash Flow ................................... S-222
Showcase Leasing Reserve Account .................................... S-222
Showcase Loan ....................................................... S-23
Showcase Low Debt Service Trigger Event ............................. S-223
Showcase Major Tenants .............................................. S-216
Showcase Management Agreement ....................................... S-219
Showcase Manager .................................................... S-216
Showcase Maturity Date .............................................. S-219
Showcase Monthly Debt Service Payment Amount ........................ S-220
Showcase Permitted Encumbrances ..................................... S-216
Showcase Property ................................................... S-23, S-216
Showcase Property Sweep Account ..................................... S-224
Showcase Remaining Funds ............................................ S-224
Showcase Required Payments .......................................... S-222
Showcase Revised Interest Rate ...................................... S-23, S-219
Showcase Tax and Insurance Reserve Account .......................... S-222
Showcase TI Account ................................................. S-223
Similar Law ......................................................... S-256, S-300
SMMEA ............................................................... S-39
South Eads Street ................................................... S-24, S-229
S&P ................................................................. S-300
Special Servicer .................................................... S-9, S-294
Special Servicer's Appraisal Reduction Estimate ..................... S-253
Special Servicing Fee ............................................... S-294
Specially Serviced Mortgage Loan .................................... S-274
Spread Rate ......................................................... S-251
Stated Principal Balance ............................................ S-248
Subordinate Offered Certificates .................................... S-300
S-314
<PAGE>
Successor Manager ................................................... S-280
TDP Commerce Square ................................................. S-20
TDP-Commerce Square ................................................. S-180
Tharaldson I-A ...................................................... S-98
Tharaldson Pool A Allocated Loan Amount ............................. S-125
Tharaldson Pool A Anticipated Repayment Date ........................ S-15, S-122
Tharaldson Pool A Borrowers ......................................... S-14, S-115
Tharaldson Pool A Consent of Manager ................................ S-121
Tharaldson Pool A Debt Service Coverage Ratio ....................... S-125
Tharaldson Pool A Defeasance Date ................................... S-123
Tharaldson Pool A Defeasance Deposit ................................ S-124
Tharaldson Pool A Deposit Account ................................... S-126
Tharaldson Pool A Due Date .......................................... S-122
Tharaldson Pool A Excess Cash Flow .................................. S-122
Tharaldson Pool A Excess Interest ................................... S-15, S-122
Tharaldson Pool A FF&E Reserve Account .............................. S-125
Tharaldson Pool A Incentive Management Fee .......................... S-121
Tharaldson Pool A Initial Interest Rate ............................. S-14, S-122
Tharaldson Pool A Loan .............................................. S-14
Tharaldson Pool A Management Agreement .............................. S-121
Tharaldson Pool A Maturity Date ..................................... S-122
Tharaldson Pool A Monthly Debt Service Payment Amount ............... S-122
Tharaldson Pool A Permitted Encumbrances ............................ S-115
Tharaldson Pool A Properties ........................................ S-14, S-115
Tharaldson Pool A Property Sweep Account ............................ S-126
Tharaldson Pool A Release Amount .................................... S-125
Tharaldson Pool A Revised Interest Rate ............................. S-15, S-122
Tharaldson Pool A Seasonality Reserve Account ....................... S-125
Tharaldson Pool A Substitute Property ............................... S-127
Tharaldson Pool A Tax and Insurance Escrow Account .................. S-125
Tharaldson Pool Acceptable Manager .................................. S-105
Tharaldson Pool B Allocated Loan Amount ............................. S-109
Tharaldson Pool B Anticipated Repayment Date ........................ S-13, S-106
Tharaldson Pool B Borrowers ......................................... S-13, S-98
Tharaldson Pool B Consent of Manager ................................ S-105
Tharaldson Pool B Debt Service Coverage Ratio ....................... S-109
Tharaldson Pool B Defeasance Date ................................... S-107
Tharaldson Pool B Defeasance Deposit ................................ S-108
Tharaldson Pool B Deposit Account ................................... S-110
Tharaldson Pool B Due Date .......................................... S-106
Tharaldson Pool B Excess Cash Flow .................................. S-106
Tharaldson Pool B Excess Interest ................................... S-13, S-106
Tharaldson Pool B FF&E Reserve Account .............................. S-109
Tharaldson Pool B Ground Leases ..................................... S-56
Tharaldson Pool B Incentive Management Fee .......................... S-105
Tharaldson Pool B Initial Interest Rate ............................. S-13, S-106
Tharaldson Pool B Loan .............................................. S-13
Tharaldson Pool B Management Agreement .............................. S-105
Tharaldson Pool B Maturity Date ..................................... S-106
Tharaldson Pool B Monthly Debt Service Payment Amount ............... S-106
Tharaldson Pool B Permitted Encumbrances ............................ S-98
S-315
<PAGE>
Tharaldson Pool B Properties ........................................ S-13, S-98
Tharaldson Pool B Property Sweep Account ............................ S-110
Tharaldson Pool B Release Amount .................................... S-109
Tharaldson Pool B Revised Interest Rate ............................. S-13, S-106
Tharaldson Pool B Seasonality Reserve Account ....................... S-109
Tharaldson Pool B Substitute Property ............................... S-111
Tharaldson Pool B Tax and Insurance Escrow Account .................. S-110
Tharaldson Pool Manager ............................................. S-98
The Plaza at Green Acres ............................................ S-131
Thomas .............................................................. S-191
TI .................................................................. S-68
TI Trigger Event .................................................... S-223
TI Trigger Event Cash Flow .......................................... S-223
Total Americold Pool Loan ........................................... S-17, S-146
Total Revenue ....................................................... S-67
Total Value ......................................................... S-69
Trust Fund .......................................................... S-1
Trustee ............................................................. S-9, S-65
Trustee Fee ......................................................... S-291
Trustee Fee Rate .................................................... S-291
Two Commerce Square Property ........................................ S-21, S-180
Underwriter ......................................................... S-9
Underwritten Net Cash Flow .......................................... S-68
United Artists Lease ................................................ S-218
Unscheduled Payments ................................................ S-245
Updated Appraisal ................................................... S-285
Upper-Tier Distribution Account ..................................... S-277
Upper-Tier REMIC .................................................... S-36, S-298
URS ................................................................. S-77, S-146
URS Pool Acceptable Property Manager ................................ S-84
URS Pool Allocated Loan Amount ...................................... S-89
URS Pool Anticipated Repayment Date ................................. S-12, S-86
URS Pool Borrower ................................................... S-12, S-77
URS Pool Breakpoint ................................................. S-84
URS Pool Building Improvements Reserve Account ...................... S-90
URS Pool Collection Period .......................................... S-91
URS Pool Debt Service Coverage Ratio ................................ S-91
URS Pool Default Interest ........................................... S-86
URS Pool Defeasance Date ............................................ S-87
URS Pool Defeasance Deposit ......................................... S-88
URS Pool Deferred Maintenance Reserve Account ....................... S-90
URS Pool Deposit Account ............................................ S-91
URS Pool Due Date ................................................... S-86
URS Pool Excess Cash Flow ........................................... S-86
URS Pool Excess Interest ............................................ S-12, S-86
URS Pool Ground Leases .............................................. S-57
URS Pool Initial Interest Rate ...................................... S-12, S-85
URS Pool Insurance and Tax Reserve Account .......................... S-90
URS Pool Loan ....................................................... S-12
URS Pool Local Account .............................................. S-91
URS Pool Low Debt Service Application Event ......................... S-91
S-316
<PAGE>
URS Pool Low Debt Service Reserve Account ........................... S-90
URS Pool Low Debt Service Return Event .............................. S-91
URS Pool Low Debt Service Trigger Event ............................. S-91
URS Pool Master Lease ............................................... S-84
URS Pool Master Lease Commencement Date ............................. S-84
URS Pool Master Lease Installment ................................... S-92
URS Pool Master Lease Installment Balance ........................... S-92
URS Pool Master Lessee .............................................. S-84
URS Pool Master Lessor .............................................. S-84
URS Pool Maturity Date .............................................. S-86
URS Pool Minimum Rent ............................................... S-84
URS Pool Monthly Debt Service Payment Amount ........................ S-86
URS Pool Net Cash Flow .............................................. S-91
URS Pool Ongoing Maintenance Reserve Account ........................ S-90
URS Pool Operating Account .......................................... S-92
URS Pool Operating Agreements ....................................... S-85
URS Pool Percentage Rent ............................................ S-84
URS Pool Permitted Encumbrances ..................................... S-77
URS Pool Pre-Approved Party ......................................... S-94
URS Pool Properties ................................................. S-12, S-77
URS Pool Property Management Agreement .............................. S-83
URS Pool Receipts ................................................... S-91
URS Pool Release Amount ............................................. S-89
URS Pool Revised Interest Rate ...................................... S-12, S-86
URS Pool Substitute Property ........................................ S-89
URS Pool Unimproved Portion ......................................... S-89
UST ................................................................. S-50
UWNCF ............................................................... S-68
Valley Golf Course .................................................. S-198
Value ............................................................... S-69
Vornado GAA ......................................................... S-131
Vornado GAH ......................................................... S-131
Voting Rights ....................................................... S-285
WAC Rate ............................................................ S-29, S-247
</TABLE>
S-317
<PAGE>
EXHIBIT A
REPRESENTATIONS AND WARRANTIES
For purposes of the representations and warranties, the date of
origination of the Green Acres Loan is the date on which the Originator
funded such loan, took an assignment of the existing note and mortgage from
the prior lender. With respect to each Mortgage Loan, as of the Closing Date
(except as may be specified in the representation and warranty or on Schedule
1 to this Exhibit A):
(i) The information set forth in the mortgage loan schedule attached to
the Responsible Party Agreement or Loan Sale Agreement (as applicable) as
to the Mortgage Loan is true and correct in all material respects;
(ii) The applicable Responsible Party is the sole owner and holder of the
Mortgage Loan and has good and marketable title thereto, has full right,
power and authority to sell and assign such Mortgage Loan free and clear
of any interest or claim of a third party;
(iii) The Mortgage Loan has not been since the date of origination by the
applicable Originator, and currently is not, thirty or more days
delinquent, and the mortgagor is not in default thereunder beyond any
applicable grace period for the payment of any obligation to pay principal
and interest, taxes, insurance premiums and required reserves;
(iv) The applicable Originator has not advanced funds, or knowingly
received any advance of funds from a party other than the mortgagor
subject to the related Mortgage, directly or indirectly, for the payment
of any amount required by the Mortgage Loan;
(v) (A) The Mortgage Loan documents have been duly and properly executed,
and (B) the Mortgage Loan documents are legal, valid and binding
obligations of the mortgagor, and their terms are enforceable against the
mortgagor, subject only to bankruptcy, insolvency, moratorium, fraudulent
transfer, fraudulent conveyance, and similar laws affecting rights of
creditors generally and to the application of general principles of
equity;
(vi) The lien of each Mortgage is insured by an ALTA lender's title
insurance policy or its equivalent as adopted in the applicable
jurisdiction issued by a nationally recognized title insurance company,
insuring the Originator, its successors and assigns, as to the first
priority lien of the Mortgage in the original principal amount of the
Mortgage Loan after all advances of principal, subject only to (a) the
lien of current real property taxes, ground rents, water charges, sewer
rents and assessments not yet due and payable, (b) covenants, conditions
and restrictions, rights of way, easements and other matters of public
record, none of which, individually or in the aggregate, in the reasonable
judgment of the Responsible Party, materially interferes with the current
use of the related Mortgaged Property or the security intended to be
provided by such Mortgage or with the mortgagor's ability to pay its
obligations when they become due or the value of the related Mortgaged
Property, and (c) the exceptions (general and specific) set forth in such
policy, none of which, individually or in the aggregate, in the reasonable
judgment of the Responsible Party, materially interferes with the security
intended to be provided by such Mortgage or with the mortgagor's ability
to pay its obligations when they become due (or if a title insurance
policy has not yet been issued in respect of the Mortgage Loan, a policy
meeting the foregoing description is evidenced by a commitment for title
insurance "marked-up" at the closing of the Mortgage Loan). To the
applicable Responsible Party's actual knowledge, no material claims have
been made under such title policy and no claims have been made thereunder;
(vii) As of the date of origination of the Mortgage Loan, and to the best
knowledge of the applicable Responsible Party as of the Closing Date,
there are no mechanics', materialman's or other similar liens or claims
which have been filed for work, labor or materials affecting the Mortgaged
Property which are or may be liens prior to, or equal or coordinate with,
the lien of the Mortgage, unless such lien is insured against under the
related title insurance policy;
(viii) (A) Except as set forth on Schedule 1 attached hereto, as of the
date of origination of the Mortgage Loan, each building or other
improvement located on any Mortgaged Property was
A-1
<PAGE>
insured by a fire and extended perils insurance policy, issued by an
insurer or reinsured by an insurer meeting the requirements of the
Mortgage Loan documents, in an amount not less than the replacement cost
of the Mortgaged Property; each Mortgaged Property was also covered by
business interruption insurance and comprehensive general liability
insurance in amounts generally required by institutional lenders for
similar properties; all premiums on such insurance policies required to be
paid as of the date hereof have been paid; such insurance policies require
prior notice to the insured of termination or cancellation, and no such
notice has been received; and (B) the loan documents obligate the
mortgagor to maintain all such insurance and, at the mortgagor's failure
to do so, authorize the mortgagee to maintain such insurance at the
mortgagor's cost and expense and to seek reimbursement therefor from such
mortgagor;
(ix) Except as set forth on Schedule 1 attached hereto, as of the most
recent date of inspection of each Mortgaged Property by the applicable
Responsible Party, based solely on the applicable Responsible Party's
review of the Property Condition Reports and the applicable Responsible
Party's most recent visual inspection of the Mortgaged Property, no
building or other improvement on any Mortgaged Property has been affected
in any material manner or suffered any material loss as a result of any
fire, wind, explosion, accident, riot, war, or act of God or the public
enemy, and each Mortgaged Property is free of any material damage that
would affect materially and adversely the value of the Mortgaged Property
as security for the Mortgage Loan and is in good repair. The applicable
Responsible Party has neither received notice, nor is otherwise aware of,
any proceedings pending for the total condemnation of any Mortgaged
Property or a partial condemnation of any portion material to the
borrower's ability to perform its obligations under its related Mortgage
Loan;
(x) To the applicable Responsible Party's best knowledge, after review of
compliance confirmations from applicable municipalities, survey and/or
title insurance endorsements, none of the improvements included for the
purpose of determining the appraised value of each Mortgaged Property at
the time of the origination of the Mortgage Loan lies outside of the
boundaries and building restriction lines of the Mortgaged Property, and,
as of the date of origination, no improvements on adjoining properties
materially encroached upon the Mortgaged Property except those which are
insured against by the title insurance policy (including endorsements
thereto) issued in connection with the Mortgage Loan, and, as of the date
of origination, all improvements on the Mortgaged Property complied with
the applicable zoning laws and/or set-back ordinances in force when
improvements were added;
(xi) The Mortgage Loan does not violate applicable usury laws.
(xii) Except as set forth on Schedule 1 attached hereto, since the date
of origination of the Mortgage Loan by the applicable Originator, the
terms of the Mortgage Loan have not been impaired, waived, altered,
satisfied, canceled, subordinated or modified in any respect (except with
respect to modifications the economic terms of which are reflected in the
mortgage loan schedule and which are evidenced by documents in the
Mortgage Loan file delivered to the Trustee) and no portion of the
Mortgaged Property has been released from the lien of the Mortgage in any
manner;
(xiii) All applicable mortgage recording taxes and other filing fees have
been paid in full or deposited with the issuer of the title insurance
policy issued in connection with the Mortgage Loan for payment upon
recordation of the relevant documents;
(xiv) Each assignment of leases and rents, if any, creates a valid
assignment of, or a valid security interest in, certain rights under the
related leases, subject only to a license granted to the relevant
mortgagor to exercise certain rights and to perform certain obligations of
the lessor under such leases, including the right to operate the related
Mortgaged Property, subject only to those exceptions described in clause
(vi) above. To the best of the applicable Responsible Party's knowledge
and without affirmative investigation, no person other than the relevant
mortgagor owns any interest in any payments due under such leases that is
superior to or of equal priority with the mortgagee's interest therein,
subject only to those exceptions described in clause (vi) above;
A-2
<PAGE>
(xv) Each Mortgage, upon due recordation, is a valid and enforceable
first lien on the related Mortgaged Property, subject only to those
exceptions described in clause (vi) above;
(xvi) The applicable Responsible Party has not taken any action, nor has
knowledge that the mortgagor has taken any action, that would cause the
representations and warranties made by the mortgagor in the Mortgage Loan
documents not to be true;
(xvii) The proceeds of the Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder and the applicable
Responsible Party covenants that it will not make any future advances
under the Mortgage Loan to the mortgagor. Except for the escrows and
disbursements therefrom as contemplated by the mortgage loan documents,
any mortgagor requirements for on or off-site improvements or as to
disbursement of any escrow funds therefor have been complied with;
(xviii) The applicable Responsible Party has inspected or caused to be
inspected each Mortgaged Property within the past twelve months preceding
the date hereof;
(xix) The Mortgage Loan does not have a shared appreciation feature,
other contingent interest feature or negative amortization, except with
respect to the payment of Excess Interest and the possible capitalization
thereof after the related Anticipated Repayment Date;
(xx) The Mortgage Loan is a whole loan and contains no equity
participation by the lender;
(xxi) No fraudulent acts were committed by the applicable Responsible
Party in connection with the origination process of the Mortgage Loan;
(xxii) All taxes and governmental assessments that prior to the date of
origination of the Mortgage Loan became due and owing in respect of each
Mortgaged Property have been paid, or an escrow of funds in an amount
sufficient to cover such payments has been established or are insured
against by the title insurance policy issued in connection with the
origination of the Mortgage Loan;
(xxiii) To the extent required under applicable law, the applicable
Responsible Party was authorized to transact and do business in each
jurisdiction in which a Mortgaged Property is located at all times when it
held the Mortgage Loan;
(xxiv) To the best knowledge of the applicable Responsible Party, there
is no material default, breach, violation or event of acceleration
existing under any of the Mortgage Loan documents and the applicable
Responsible Party has not received actual notice of any event (other than
payments due but not yet delinquent) which, with the passage of time or
with notice and the expiration of any grace or cure period, would and does
constitute a default, breach, violation or event of acceleration; no
waiver of the foregoing exists and no person other than the holder of the
Note may declare any of the foregoing;
(xxv) Each Mortgage contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for the
realization against each related Mortgaged Property of the material
benefits of the security, including realization by judicial or, if
applicable, non-judicial foreclosure, and there is no exemption available
to the mortgagor which would materially interfere with such right to
foreclosure;
(xxvi) (A) With respect to each Mortgaged Property, a Phase I
environmental report and, in certain cases, a Phase II environmental
report or an update to such Phase I report was conducted by a licensed
qualified engineer. The applicable Responsible Party has reviewed each
such report and update. (B) The applicable Responsible Party, having made
no independent inquiry other than reviewing the environmental reports and
updates referenced herein and without other investigation or inquiry, has
no knowledge of any material and adverse environmental condition or
circumstance affecting any Mortgaged Property that was not disclosed in
the related report and/or update. The applicable Responsible Party has not
received any actual notice of a material violation of CERCLA or any
applicable federal, state or local environmental law with respect to any
Mortgaged Property
A-3
<PAGE>
that was not disclosed in the related report and/or update. (C) The
applicable Responsible Party has not taken any actions which would cause
any Mortgaged Property not to be in compliance with all federal, state and
local laws pertaining to environmental hazards;
(xxvii) The Mortgage Loan agreement contains provisions for the
acceleration of the payment of the unpaid principal balance of the
Mortgage Loan if (A) the mortgagor voluntarily transfers or encumbers all
or any portion of any related Mortgaged Property, or (B) any direct or
indirect interest in mortgagor is voluntarily transferred or assigned,
other than, in each case as permitted under the terms and conditions of
the Mortgage Loan documents;
(xxviii) In connection with the origination of the Mortgage Loan, the
applicable Originator has received an opinion of counsel (with customary
exceptions, qualifications and assumptions) to the effect that: (A) when
each Mortgage and assignment of leases and rents, if any, are duly
recorded and indexed in the appropriate state and local offices for such
recording and indexing, and when the related UCC financing statements are
filed and indexed in the appropriate state and local offices for such
filing and indexing, such recording and filings shall be sufficient to
perfect the lien on the Mortgaged Property described therein; (B) no
re-recording or re-filing of any said instruments will be necessary to
continue the perfection and priority of the Mortgage lien against the
related Mortgaged Property, other than filing UCC continuation statements
with the appropriate state and local offices as required under the law of
the applicable state to continue the perfection of the liens perfected by
the UCC financing statements; and (C) when recorded and filed as provided
above, each related Mortgage and assignment of leases and rents, if any,
shall constitute a valid, enforceable and perfected lien on, and security
interest in, the related Mortgaged Property;
(xxix) To the best of the applicable Responsible Party's knowledge and
without affirmative investigation or inquiry, there is no pending action,
suit or proceeding, arbitration or governmental investigation against the
mortgagor or any Mortgaged Property an adverse outcome of which could
materially affect the mortgagor's performance of its obligations under the
Mortgage Loan documents;
(xxx) The Mortgage Loan was originated by the applicable Responsible
Party and complies in all material respects with the applicable
Responsible Party's underwriting policies in effect as of the origination
date of the Mortgage Loan, except as described on any exceptions report
delivered to the lender prior to the Closing Date and except to the extent
that such policies are modified and/or superseded;
(xxxi) The origination, servicing and collection practices used by the
applicable Responsible Party have been in all respects legal, proper and
prudent and have met customary industry standards except to the extent
that, in connection with its origination, such standards were modified by
the Responsible Party in its reasonable discretion;
(xxxii) In connection with the assignment, transfer or conveyance of any
individual Mortgage, the Note and Mortgage contain no provision limiting
the right or ability of the applicable Originator to assign, transfer and
convey the Mortgage to any other person or entity;
(xxxiii) If any Mortgaged Property is subject to any leases (other than
any ground lease referred to in (xxxvii) below), to the best of the
Responsible Party's knowledge, the mortgagor is the owner and holder of
the landlord's interest under any leases, and the related Mortgage and
assignment of leases and rents, if any, provides for the appointment of a
receiver for rents or allows the mortgagee to enter into possession to
collect rent or provide for rents to be paid directly to mortgagee in the
event of a default, subject to the exceptions described in clause (vi)
hereof;
(xxxiv) If a Mortgage is a deed of trust, a trustee, duly qualified under
applicable law to serve as such, has been properly designated and
currently so serves and is named in the deed of trust, and no fees or
expenses are or will become payable to the trustee under the deed of
trust, except in connection with the sale or release of the Mortgaged
Property following default or payment of the loan;
A-4
<PAGE>
(xxxv) Any insurance proceeds in respect of a casualty loss or taking
will be applied either to the repair or restoration of all or part of the
related Mortgaged Property, with the mortgagee or a trustee appointed by
it having the right to hold and disburse such proceeds as the repair or
restoration progresses, or to the payment of the outstanding principal
balance of the Mortgage Loan together with any accrued interest thereon,
except to the extent of any excess proceeds after restoration;
(xxxvi) As of the date of origination of the Mortgage Loan based on the
applicable Responsible Party's review of the 100-year flood plain map
provided by FEMA, except for the Mortgaged Properties set forth on
Schedule 1, no Mortgaged Property is located in a special flood hazard
area (Zone A) as defined by the Federal Insurance Administration and with
respect to the Mortgaged Properties set forth on Schedule 1, other than
the Tinley Park Tharaldson Pool A Property, flood insurance coverage has
been obtained;
(xxxvii) With respect to any Mortgage which is secured in whole or in
part by the interest of a borrower as a lessee under a ground lease and
based upon the terms of the ground lease or an estoppel letter from the
ground lessor the following apply to such ground lease, except as set
forth on Schedule 1 hereto:
A. The ground lease or a memorandum thereof has been duly recorded,
the ground lease permits the interest of the lessee thereunder to be
encumbered by the related Mortgage, does not restrict the use of the
Mortgaged Property by the lessee or its successors and assigns in a
manner that would adversely affect the security provided by the
related Mortgage, and there has not been a material change in the
terms of the ground lease since its recordation, with the exception of
written instruments which are part of the related Mortgage Loan
documents delivered to the Trustee.
B. The ground lease is not subject to any liens or encumbrances
superior to, or of equal priority with, the related Mortgage, other
than the related ground lessor's related fee interest.
C. The borrower's interest in the ground lease is assignable to the
holder of the Mortgage upon notice to, but without the consent of, the
lessor thereunder and, in the event that it is so assigned, it is
further assignable by the trustee and its successors and assigns upon
notice to, but without a need to obtain the consent of, such lessor.
D. To the best of the Responsible Party's knowledge, as of the
origination date of the Mortgage Loan, the ground lease was in full
force and effect and no material default had occurred under the ground
lease and there was no existing condition which, but for the passage
of time or the giving of notice, would result in a default under the
terms of the ground lease. Since the origination date of the Mortgage
Loan, no notice of default under the ground lease has been received by
the holder of the Mortgage.
E. The ground lease requires the lessor thereunder to give notice of
any default by the lessee to the mortgagee; and the ground lease, or
an estoppel letter received by the mortgagee from the lessor, further
provides that notice of termination given under the ground lease is
not effective against the mortgagee unless a copy of the notice has
been delivered to the mortgagee in the manner described in such ground
lease or estoppel letter.
F. The mortgagee is permitted a reasonable opportunity (including,
where necessary, sufficient time to gain possession of the interest of
the lessee under the ground lease) to cure any default under the
ground lease, which is curable after the receipt of notice of any
default before the lessor thereunder may terminate the ground lease.
G. The ground lease has a term which extends not less than 10 years
beyond the maturity date of the related Mortgage Loan.
H. The ground lease requires the lessor to enter into a new lease
with the mortgagee upon termination of the ground lease for any
reason, including rejection of the ground lease in a bankruptcy
proceeding, provided the mortgagee cures the lessee's defaults.
A-5
<PAGE>
I. Under the terms of the ground lease and the related Mortgage,
taken together, any related insurance proceeds will be applied either
to the repair or restoration of all or part of the related Mortgaged
Property, with the mortgagee or a trustee appointed by it having the
right to hold and disburse the proceeds as the repair or restoration
progresses, or to the payment of the outstanding principal balance of
the Mortgage Loan together with any accrued interest thereon.
J. Such ground lease does not impose any material restrictions on
subletting.
K. Either the ground lease or the related Mortgage contains the
borrower's covenant that such ground lease shall not be amended,
canceled, or terminated without the prior written consent of the
mortgagee.
L. Either the ground lease or an estoppel letter contains a covenant
that the lessor thereunder is not permitted, in the absence of an
uncured default under the ground lease, to disturb the possession,
interest or quiet enjoyment of any lessee in the relevant portion of
the Mortgaged Property subject to such ground lease for any reason, or
in any manner, which would materially adversely affect the security
provided by the related Mortgage;
(xxxviii) The Mortgage Loan is directly secured by a Mortgage on one or
more commercial properties, and the value assigned by the Responsible
Party, based on appraised values and subject to such adjustments as the
Responsible Party deemed necessary pursuant to its underwriting standards
as modified in connection with its origination of the Mortgage Loan (the
"Responsible Party's Appraised Value") with respect to such property or
properties was, in the aggregate, at least equal to 80% of the principal
balance of the Mortgage Loan at origination; provided that the Responsible
Party's Appraised Value must first be reduced by (1) the amount of any
lien on the property or properties that is senior to the Mortgage Loan and
(2) a proportionate amount of any lien that is in parity with the relevant
Mortgage Loan;
(xxxix) With respect to each Mortgaged Property, a Property Condition
Report was prepared by a licensed engineer. The applicable Responsible
Party has reviewed such Property Condition Report. Except as provided in
the Property Condition Reports, to the best of the applicable Responsible
Party's knowledge, based solely on its review of such Property Condition
Report, certificates of occupancy and building permits, as applicable,
have been issued with respect to the Mortgaged Property;
(xl) Any escrow accounts for taxes or other reserves required to be
funded on the date of origination of the Mortgage Loan pursuant to the
Mortgage Loan documents have been funded and, to the actual knowledge of
the Responsible Party, all such escrow accounts required to have been
funded as of the Cut-Off Date (taking into account any applicable notice
and grace period) have been funded;
(xli) The related Assignment of Mortgage constitutes a legal, valid and
binding assignment of such Mortgage to the Seller, and the related
reassignment of assignment of leases and rents, if any, constitutes a
legal, valid and binding assignment thereof to the Seller; and
(xlii) The related Note is not, and has not been since the date of
origination of the Mortgage Loan, secured by any collateral except the
lien of the related Mortgage, any related assignment of leases and rents
and any related security agreement and escrow agreement; the security for
the Mortgage Loan consists only of the related Mortgaged Property or
Properties, any leases (including without limitation any credit leases)
thereof, and any appurtenances, fixtures and other property located
thereon; and such Mortgaged Property or Properties do not secure any
mortgage loan other than the Mortgage Loan being transferred and assigned
to the Seller hereunder (except for Mortgage Loans, if any, which are
cross-collateralized with other Mortgage Loans being conveyed to the
Seller or subsequent transferee hereunder and identified on the mortgage
loan schedule.
A-6
<PAGE>
SCHEDULE 1 TO EXHIBIT A
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
1. Representation and Warranty (vi)
Tharaldson Pool A Loan: one Mortgaged Property (Mendota Heights) is
subject to a restrictive covenant which provides that it may not be used
for a hotel and for which the holder of such restrictive covenant has
executed an estoppel which provides that the current use of such
Mortgaged Property is not in violation of such restrictive covenant.
2. Representation and Warranty (viii)
Crystal City Pool Loan: The Crystal City Pool Borrower's property and
liability insurance companies have claims paying ability ratings of "AA-"
and "A+". These ratings are less than the "AA" rating required by Section
8.1.1 (c) of the Crystal City Pool Loan agreement.
3. Representation and Warranty (ix)
Tharaldson Pool A Loan: one Mortgaged Property (Racine Super 8) is the
subject of a condemnation proceeding with respect to an unknown portion
of such Mortgaged Property for the purpose of road improvements.
Green Acres Loan: a Property Condition Report stated that the roof of the
enclosed shopping mall was nearing the end of its estimated useful life
and recommended a roof replacement program over the next five years.
4. Representation and Warranty (xii)
Tharaldson Pool A Loan: if the restrictive covenant referred to in
paragraph 1 above is not amended, such Tharaldson Pool A Property may be
released in accordance with section 13.27 of the Tharaldson Pool A Loan
agreement which provides that either that portion of the Tharaldson Pool
A Loan must be paid in full, or a property substituted therefor.
Crystal City Pool Loan: the mortgagee agreed to (a) a one-time waiver
with respect to the prior existence of certain unsecured indebtedness due
to affiliates of the Crystal City Pool Borrower, which indebtedness was
not permitted pursuant to the Crystal City Pool Loan agreement and has
been paid and fully discharged, and (b) a conditional waiver permitting
the auditor's issuance of a written "consent."
Crystal City Pool Loan, Marriott Desert Springs Loan, Tharaldson Pool A
Loan, Tharaldson Pool B Loan, Showcase Loan: GSMC and the Trustee have
entered into a waiver agreement, dated as of the Closing Date, whereby
the Trustee has agreed to enforce each such Mortgage Loan's Revised
Interest Rate at a rate equal to 2% in excess of its Initial Interest
Rate.
5. Representation and Warranty (xxxvi)
The following Mortgaged Properties are located in a special flood hazard
area (Zone A):
One Commerce Square Property
URS Pool Properties: Murfreesboro, Tennessee; Montgomery, Alabama and Ft.
Smith, Arkansas.
Tharaldson Pool A Properties: Tinley Park (unimproved portions of parcel,
but not improvements).
6. Representation and Warranty (xxxvii)
Tharaldson Pool B: The mortgagee has not received evidence of recording
for the two ground leases or related memorandum of lease with respect to
the properties located in Champaign County, Illinois.
(C) Tharaldson Pool B: The two ground leases with respect to the
properties located in Champaign County, Illinois require the prior
written approval of the sublessor prior to any assignment, transfer or
sublet.
A-7
<PAGE>
(E) Green Acres Loan: The Green Acres Ground Lease does not expressly
provide that a notice of termination is not effective against the
mortgagee unless a copy of the notice has been delivered to the
mortgagee, provided that the lessor is required to give notice to the
mortgagee prior to termination.
Marriott Desert Springs Loan: The Marriott Desert Springs Ground Lease
provides that the lessor may not terminate the lease if, after the lessor
provides the required notice of termination to the Marriott Desert
Springs Borrower, the mortgagee delivers to the lessor a nullification of
the termination to the lessor.
Americold Pool Loan: The ground leases and related estoppel certificates
for the properties located in Denver, Colorado, Watsonville, California
and Burley, Idaho do not specifically provide that a notice of
termination is not effective against the mortgagee unless a copy of the
notice has been delivered to the mortgagee.
(G) URS Pool Loan: The Gadsden, Alabama Ground Lease, Tarboro, North
Carolina Ground Lease and the Montgomery, Alabama Ground Lease expire,
with no further renewals, in 2020, 2023 and 2013, respectively, which
dates are prior to the URS Pool Maturity Date.
Americold Pool Loan: The Denver, Colorado Ground Lease expires, with no
further renewals, in 2012, which is prior to the Americold Pool Maturity
Date.
(H) Marriott Desert Springs Loan: The Marriott Desert Springs Ground
Lease does not expressly require the ground lessor to enter into a new
lease with the mortgagee upon rejection of the lease in a bankruptcy
proceeding.
URS Pool Loan: The ground leases for the URS Pool Properties located in
Gadsen, Alabama, Tarboro, North Carolina, and Montgomery, Alabama do not
expressly require the ground lessor to enter into a new lease with the
mortgagee upon rejection of the lease in a bankruptcy proceeding.
Americold Pool Loan: The ground leases for the Americold Pool Properties
located in Burley, Idaho, Denver, Colorado and Watsonville, California do
not expressly require the ground lessor to enter into a new lease with
the mortgagee upon rejection of the lease in a bankruptcy proceeding.
Pier 39 Loan: The Pier 39 Ground Lease does not expressly require the
ground lessor to enter into a new lease with the mortgagee upon a
rejection of the Pier 39 Ground Lease in a bankruptcy proceeding.
(I) Green Acres Loan: The Green Acres Ground Lease provides that
insurance proceeds in the event of a casualty resulting in damage or
destruction not exceeding in the aggregate $1,000,000 are to be paid to
and disbursed by the Green Acres Borrower, provided that proceeds in the
event of a casualty resulting in damage or destruction exceeding
$1,000,000 are paid to and distributed by the mortgagee.
Marriott Desert Springs Loan: Neither the Marriott Desert Springs Ground
Lease nor the Mortgage provides for the application of insurance proceeds
from the Marriott Desert Springs Property subject to the ground lease to
the payment of the outstanding principal balance plus accrued interest of
the Marriott Desert Springs Loan.
URS Pool Loan: The ground leases and related estoppel certificates with
respect to the properties located at Gadsen, Alabama, Tarboro, North
Carolina and Montgomery, Alabama do not specifically provide that the
mortgagee or a trustee appointed by it will have the right to hold and
disburse the proceeds during the repair or restoration of all or part of
the related property, or to the payment of the outstanding principal
balance of the URS Pool Loan together with any accrued interest thereon.
Americold Pool Loan: The ground lease for the property located in
Watsonville, California is silent as to subletting.
(L) Pier 39 Loan: The Pier 39 Ground Lease does not provide the
protection to the mortgagee set forth in this subsection.
A-8
<PAGE>
(M) Either the Marriott Desert Springs Ground Lease or the mortgage
contains the borrower's covenant that such ground lease shall not be
amended, canceled, or terminated without the prior written consent of the
mortgagee, provided that the mortgagee is required to consent to
amendments which do not in the mortgagee's reasonable judgement give rise
to a Material Adverse Effect.
7. Representation and Warranty (xlii)
The Tharaldson Pool A Loan and the Tharaldson Pool B Loan are secured by
the pledge by each related borrower which is a holding company, of its
stock and limited partnership interests in each Tharaldson Pool A Borrower
and Tharaldson Pool B Borrower which is the owner of the fee or leasehold
interest in each Tharaldson Pool A and Tharaldson Pool B Property, as
applicable.
A-9
<PAGE>
EXHIBIT B
WAC RATES
<TABLE>
<CAPTION>
DISTRIBUTION DATE
(ASSUMING THAT THE 13TH
DAY OF EACH MONTH
IS THE DISTRIBUTION DATE) WAC
- ------------------------------------- ------
<S> <C> <C>
June 13, 1998.................... = 7.19
July 13, 1998.................... = 6.97
August 13, 1998.................. = 7.19
September 13, 1998............... = 7.19
October 13, 1998................. = 6.97
November 13, 1998................ = 7.19
December 13, 1998................ = 6.97
January 13, 1999................. = 6.97
February 13, 1999................ = 6.97
March 13, 1999................... = 6.97
April 13, 1999................... = 7.19
May 13, 1999..................... = 6.97
June 13, 1999.................... = 7.19
July 13, 1999.................... = 6.97
August 13, 1999.................. = 7.19
September 13, 1999............... = 7.19
October 13, 1999................. = 6.97
November 13, 1999................ = 7.19
December 13, 1999................ = 6.97
January 13, 2000................. = 7.19
February 13, 2000................ = 6.97
March 13, 2000................... = 6.97
April 13, 2000................... = 7.19
May 13, 2000..................... = 6.97
June 13, 2000.................... = 7.19
July 13, 2000.................... = 6.97
August 13, 2000.................. = 7.19
September 13, 2000............... = 7.19
October 13, 2000................. = 6.97
November 13, 2000................ = 7.19
December 13, 2000................ = 6.97
January 13, 2001................. = 6.97
February 13, 2001................ = 6.97
March 13, 2001................... = 6.97
April 13, 2001................... = 7.19
May 13, 2001..................... = 6.97
June 13, 2001.................... = 7.19
July 13, 2001.................... = 6.97
August 13, 2001.................. = 7.19
September 13, 2001............... = 7.19
October 13, 2001................. = 6.97
November 13, 2001................ = 7.19
December 13, 2001................ = 6.97
January 13, 2002................. = 6.97
February 13, 2002................ = 6.97
March 13, 2002................... = 6.97
April 13, 2002................... = 7.19
May 13, 2002..................... = 6.97
June 13, 2002.................... = 7.19
July 13, 2002.................... = 6.97
August 13, 2002.................. = 7.19
September 13, 2002............... = 7.19
October 13, 2002................. = 6.97
November 13, 2002................ = 7.19
December 13, 2002................ = 6.97
January 13, 2003................. = 6.97
February 13, 2003................ = 6.97
March 13, 2003................... = 6.97
April 13, 2003................... = 7.19
May 13, 2003..................... = 6.97
June 13, 2003.................... = 7.19
July 13, 2003.................... = 6.97
August 13, 2003.................. = 7.19
September 13, 2003............... = 7.19
October 13, 2003................. = 6.97
November 13, 2003................ = 7.19
December 13, 2003................ = 6.97
January 13, 2004................. = 7.19
February 13, 2004................ = 6.97
March 13, 2004................... = 6.97
April 13, 2004................... = 7.19
May 13, 2004..................... = 6.97
June 13, 2004.................... = 7.19
July 13, 2004.................... = 6.97
August 13, 2004.................. = 7.19
September 13, 2004............... = 7.19
October 13, 2004................. = 6.97
November 13, 2004................ = 7.19
December 13, 2004................ = 6.97
January 13, 2005................. = 6.97
February 13, 2005................ = 6.97
March 13, 2005................... = 6.97
<PAGE>
April 13, 2005................... = 7.19
May 13, 2005..................... = 6.97
June 13, 2005.................... = 7.19
July 13, 2005.................... = 6.97
B-1
<PAGE>
DISTRIBUTION DATE
(ASSUMING THAT THE 13TH
DAY OF EACH MONTH
IS THE DISTRIBUTION DATE) WAC
- ------------------------------------- ------
August 13, 2005.................. = 7.19
September 13, 2005............... = 7.19
October 13, 2005................. = 6.97
November 13, 2005................ = 7.19
December 13, 2005................ = 6.97
January 13, 2006................. = 6.97
February 13, 2006................ = 6.97
March 13, 2006................... = 6.97
April 13, 2006................... = 7.19
May 13, 2006..................... = 6.97
June 13, 2006.................... = 7.19
July 13, 2006.................... = 6.97
August 13, 2006.................. = 7.19
September 13, 2006............... = 7.19
October 13, 2006................. = 6.97
November 13, 2006................ = 7.19
December 13, 2006................ = 6.97
January 13, 2007................. = 6.97
February 13, 2007................ = 6.97
March 13, 2007................... = 6.97
April 13, 2007................... = 7.19
May 13, 2007..................... = 6.97
June 13, 2007.................... = 7.19
July 13, 2007.................... = 6.97
August 13, 2007.................. = 7.19
September 13, 2007............... = 7.19
October 13, 2007................. = 6.97
November 13, 2007................ = 7.19
December 13, 2007................ = 6.94
January 13, 2008................. = 7.18
February 13, 2008................ = 6.94
March 13, 2008................... = 7.22
April 13, 2008................... = 7.29
May 13, 2008..................... = 7.06
June 13, 2008.................... = 8.01
July 13, 2008.................... = 7.75
August 13, 2008.................. = 8.01
September 13, 2008............... = 8.01
October 13, 2008................. = 7.75
November 13, 2008................ = 8.01
December 13, 2008................ = 7.75
January 13, 2009................. = 7.75
February 13, 2009................ = 7.75
March 13, 2009................... = 7.75
April 13, 2009................... = 8.01
May 13, 2009..................... = 7.75
June 13, 2009.................... = 8.01
July 13, 2009.................... = 7.75
August 13, 2009.................. = 8.01
September 13, 2009............... = 8.01
October 13, 2009................. = 7.75
November 13, 2009................ = 8.01
December 13, 2009................ = 7.75
January 13, 2010................. = 7.75
February 13, 2010................ = 7.75
March 13, 2010................... = 7.75
April 13, 2010................... = 8.01
May 13, 2010..................... = 7.75
June 13, 2010.................... = 8.01
</TABLE>
B-2
<PAGE>
EXHIBIT C
ABN AMRO
LASALLE NATIONAL BANK
ADMINISTRATOR:
BARBARA MARIK (800) 246-5761
135 S. LASALLE STREET SUITE 1625
CHICAGO, IL 60674-4107
GS MORTGAGE SECURITIES CORPORATION II
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER AND SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-GL II
ABN AMRO ACCT: 99-9999-99-9
STATEMENT DATE:
PAYMENT DATE:
PRIOR PAYMENT:
RECORD DATE:
WAC:
WAM:
FORM OF REPORTS TO CERTIFICATEHOLDERS
<TABLE>
<CAPTION>
NUMBER OF PAGES
-------------------
<S> <C>
Table Of Contents
REMIC Certificate Report
Other Related Information
Asset Backed Facts Sheets
Delinquency Loan Detail
Mortgage Loan Characteristics
Loan Level Listing
TOTAL PAGES INCLUDED IN THIS
PACKAGE
Specially Serviced Loan Detail Appendix A
Modified Loan Detail Appendix B
Realized Loss Detail Appendix C
</TABLE>
INFORMATION IS AVAILABLE FOR THIS ISSUE FROM THE FOLLOWING SOURCES
<TABLE>
<CAPTION>
<S> <C>
LaSalle Web Site www.Inbabs.com
LaSalle Bulletin Board (714) 282-3990
LaSalle ASAP Fax System (312) 904-2200
ASAP #: 999
Monthly Data File Name: 0999MMYY.EXE
</TABLE>
C-1
<PAGE>
ABN AMRO
LASALLE NATIONAL BANK
ADMINISTRATOR:
BARBARA MARIK (800) 246-5761
135 S. LASALLE STREET SUITE 1625
CHICAGO, IL 60674-4107
GS MORTGAGE SECURITIES CORPORATION II
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER AND SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-GL II
ABN AMRO ACCT: 99-9999-99-9
UPPER TIER
STATEMENT DATE:
PAYMENT DATE:
PRIOR PAYMENT:
RECORD DATE:
WAC:
WAM:
<TABLE>
<CAPTION>
ORIGINAL OPENING PRINCIPAL PRINCIPAL
CLASS FACE VALUE(1) BALANCE PAYMENT ADJ. OR LOSS
CUSIP PER $1,000 PER $1,000 PER $1,000 PER $1,000
<S> <C> <C> <C> <C>
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NEGATIVE CLOSING INTEREST INTEREST PASS-THROUGH
CLASS AMORTIZATION BALANCE PAYMENT ADJUSTMENT RATE(2)
CUSIP PER $1,000 PER $1,000 PER $1,000 PER $1,000 NEXT RATE(3)
<S> <C> <C> <C> <C> <C>
</TABLE>
Notes: (1) N denotes notional balance not included in total (2) Interest Paid
minus Interest Adjustment minus Deferred Interest equals Accrual (3)
Estimated
C-2
<PAGE>
ABN AMRO
LASALLE NATIONAL BANK
ADMINISTRATOR:
BARBARA MARIK (800) 246-5761
135 S. LASALLE STREET SUITE 1625
CHICAGO, IL 60674-4107
GS MORTGAGE SECURITIES CORPORATION II
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER AND SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-GL II
ABN AMRO ACCT: 99-9999-99-9
OTHER RELATED INFORMATION
STATEMENT DATE:
PAYMENT DATE:
PRIOR PAYMENT:
RECORD DATE:
WAC:
WAM:
AGGREGATE POOL SUMMARY
Stated Principal Balance Of The Mortgage Pool Prior to Current Distribution
Date:
Stated Principal Balance Of The Mortgage Pool Subsequent to Current
Distribution Date:
SERVICING FEE BREAKDOWN
Current Period Accured Servicing Fees
Less Delinquent Servicing Fees
Plus Additional Servicing Fees
Less Reductions To Servicing Fees
Total Servicing Fees Collected
Special Servicing Fees
Trustee Fees
<TABLE>
<CAPTION>
PRIOR OUTSTANDING CURRENT MONTH
----------------------- -----------------------
PRINCIPAL INTEREST PRINCIPAL INTEREST
<S> <C> <C> <C> <C>
Master Servicer: 0.00 0.00 0.00 0.00
Special Servicer: 0.00 0.00 0.00 0.00
Trustee/Fiscal Agent: 0.00 0.00 0.00 0.00
----------- ---------- ----------- ----------
Totals: 0.00 0.00 0.00 0.00
=========== ========== =========== ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
RECOVERED ADVANCES OUTSTANDING
----------------------- -----------------------
PRINCIPAL INTEREST PRINCIPAL INTEREST
<S> <C> <C> <C> <C>
Master Servicer: 0.00 0.00 0.00 0.00
Special Servicer: 0.00 0.00 0.00 0.00
Trustee/Fiscal Agent: 0.00 0.00 0.00 0.00
----------- ---------- ----------- ----------
Totals: 0.00 0.00 0.00 0.00
=========== ========== =========== ==========
</TABLE>
02/11/98 -- 14:43 (A662-A691) (copyright)1998 LaSalle National Bank
C-3
<PAGE>
ABN AMRO
LASALLE NATIONAL BANK
ADMINISTRATOR:
BARBARA MARIK (800) 246-5761
135 S. LASALLE STREET SUITE 1625
CHICAGO, IL 60674-4107
GS MORTGAGE SECURITIES CORPORATION II
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER AND SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-GL II
ABN AMRO ACCT: 99-9999-99-9
OTHER RELATED INFORMATION
STATEMENT DATE:
PAYMENT DATE:
PRIOR PAYMENT:
RECORD DATE:
WAC:
WAM:
ALLOCATION OF INTEREST SHORTFALLS, LOSSES & EXPENSES
<TABLE>
<CAPTION>
ACCRUED PREPAYMENT
CERTIFICATE INTEREST
CLASS INTEREST SHORTFALL
- --------- --------------- --------------
<S> <C> <C>
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BEGINNING ENDING
UNPAID INTEREST UNPAID
CLASS INTEREST LOSS EXPENSES DISTRIBUTABLE INTEREST
- --------- ------------- ------------ ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C>
</TABLE>
C-4
<PAGE>
ABN AMRO
LASALLE NATIONAL BANK
ADMINISTRATOR:
BARBARA MARIK (800) 246-5761
135 S. LASALLE STREET SUITE 1625
CHICAGO, IL 60674-4107
GS MORTGAGE SECURITIES CORPORATION II
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER AND SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-GL II
ABN AMRO ACCT: 99-9999-99-9
OTHER RELATED INFORMATION
Statement Date:
Payment Date:
Prior Payment:
Record Date:
WAC:
WAM:
ALLOCATION OF ADDITIONAL INTEREST PROCEEDS
<TABLE>
<CAPTION>
NET
PREPAYMENT DEFAULT DEFAULT EXCESS
CLASS PREMIUM INTEREST INTEREST INTEREST
- --------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
</TABLE>
C-5
<PAGE>
ABN AMRO
LASALLE NATIONAL BANK
ADMINISTRATOR:
BARBARA MARIK (800) 246-5761
135 S. LASALLE STREET SUITE 1625
CHICAGO, IL 60674-4107
GS MORTGAGE SECURITIES CORPORATION II
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER AND SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-GL II
ABN AMRO ACCT: 99-9999-99-9
Statement Date:
Payment Date:
Prior Payment:
Record Date:
WAC:
WAM:
<TABLE>
<CAPTION>
DELINQ 1 MONTH DELING 2 MONTHS DELINQ 3+ MONTHS FORECLOSURE/BANKRUPTCY
DISTRIBUTION ------------------ ------------------ ------------------ ------------------
DATE # BALANCE # BALANCE # BALANCE # BALANCE
- -------------- ------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/15/98 0 0 0 0 0 0 0 0
0.00% 0.000% 0.00% 0.000% 0.00% 0.000% 0.00% 0.000%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CURR WEIGHTED
REO MODIFICATIONS PREPAYMENTS AVG.
DISTRIBUTION ------------------ ------------------ ------------------ -----------------
DATE # BALANCE # BALANCE # BALANCE COUPON REMIT
- -------------- ---------------- ------- --------- ------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/15/98 0 0 0 0 0 0
0.00% 0.000% 0.00% 0.000% 0.00% 0.000%
</TABLE>
NOTE: FORECLOSURE AND REO TOTALS ARE INCLUDED IN THE APPROPRIATE DELINQUENCY
AGING CATEGORY
C-6
<PAGE>
ABN AMRO
LASALLE NATIONAL BANK
ADMINISTRATOR:
BARBARA MARIK (800) 246-5761
135 S. LASALLE STREET SUITE 1625
CHICAGO, IL 60674-4107
GS MORTGAGE SECURITIES CORPORATION II
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER AND SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-GL II
ABN AMRO ACCT: 99-9999-99-9
STATEMENT DATE:
PAYMENT DATE:
PRIOR PAYMENT:
RECORD DATE:
WAC:
WAM:
DELINQUENT LOAN DETAIL
<TABLE>
<CAPTION>
PAID OUTSTANDING OUT. PROPERTY
DISCLOSURE DOC THRU CURRENT P&I P&I PROTECTION
CONTROL # DATE ADVANCE ADVANCES** ADVANCES
- -------------- ------ ------------- ------------- ---------------
<S> <C> <C> <C> <C>
0.00 0.00
1. P&I Advance--Loan
A. P&I Advance--Loan in Grace Period delinquent 1 month
B. P&I Advance--Late Payment but less 2. P&I Advance--Loan
than one month delinq delinquent 2 months
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SPECIAL
DISCLOSURE DOC ADVANCE SERVICER FORECLOSURE BANKRUPTCY REO
CONTROL # DESCRIPTION(1) TRANSFER DATE DATE DATE DATE
- -------------- -------------- --------------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C>
3. P&I Advance--Loan delinquent 3
A. P&I Advance--Loan in Grace Period months or More
B. P&I Advance--Late Payment but less than one
month delinq 4. Matured Balloon/Assumed Scheduled Payment
</TABLE>
** Outstanding P&I Advances include the current period P&I Advance
C-7
<PAGE>
ABN AMRO
LASALLE NATIONAL BANK
ADMINISTRATOR:
BARBARA MARIK (800) 246-5761
135 S. LASALLE STREET SUITE 1625
CHICAGO, IL 60674-4107
GS MORTGAGE SECURITIES CORPORATION II
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER AND SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-GL II
ABN AMRO ACCT: 99-9999-99-9
Statement Date:
Payment Date:
Prior Payment:
Record Date:
WAC:
WAM:
LOAN LEVEL DETAIL
<TABLE>
<CAPTION>
PROPERTY OPERATING
TYPE MATURITY STATEMENT
NAME CODE DATE DSCR DATE STATE
- ----------- -------- -------- ---- --------- -----
<S> <C> <C> <C> <C> <C>
* NOI and DSCR, if available and reportable under the
terms of the trust agreement, are based on
information obtained from the related borrower, and
no other party to the agreement shall be held
liable for the accuracy or methodology used to
determine such figures.
3.
P&I
1. P&I Adv--delinquent
A. P&I Adv--in Adv--delinquent 3+
(1) Legend: Grace Period 1 month months
4.
B. P&I Adv-less 2. P&I Mat.
than one month Adv--delinquent Balloon/Assumed
delinq 2 months P&I
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ENDING LOAN
PRINCIPAL NOTE SCHEDULED PREPAYMENT STATUS
NAME BALANCE RATE P&I PREPAYMENT DATE CODE(1)
- ----------- --------- --------------------- -------------- ---------- ---------------- ------
<S> <C> <C> <C> <C> <C> <C>
* NOI and DSCR, if available and reportable under the terms of the trust agreement, are based on information
obtained from the related borrower, and no other party to the agreement shall be held liable for the accuracy
or methodology used to determine such figures.
5.
Prepaid 11.
(1) Legend: in Full 7. Foreclosure 9. REO Modification
6.
Specially
Serviced 8. Bankruptcy 10. DPO
</TABLE>
C-8
<PAGE>
ANNEX A
MORTGAGED PROPERTIES CHARACTERISTICS
<TABLE>
<CAPTION>
MORTGAGE LOAN PROPERTY NAME ADDRESS
<S> <C> <C>
1 Showcase Showcase Las Vegas Boulevard South
2 Crystal City Pool 1919 South Eads 1919 South Eads Street
3 Crystal City Pool Arlington Plaza 2000 North 15th Street
4 Crystal City Pool Crystal Gateway North 1111 Jefferson Davis Highway
5 Marriott Desert Springs Marriott Desert Springs 74855 Country Club Drive
6 Tharaldson Pool A Fairfield Inn, Fayetteville, AR 720 Millsap Road
7 Tharaldson Pool A Sleep Inn, Fayetteville, AR 728 Millsap Road
8 Tharaldson Pool A Comfort Inn, Cedar Rapids, IA 390 33rd Avenue, SW
9 Tharaldson Pool A Fairfield Inn, Coralville, IA 214 9th Street
10 Tharaldson Pool A Country Inn & Suites, Davenport, IA 140 East 55th Street
11 Tharaldson Pool A Fairfield Inn, Davenport, IA 3206 E. Kimberly Road
12 Tharaldson Pool A Residence Inn, Davenport, IA 120 East 55th Street
13 Tharaldson Pool A Fairfield Inn, Sioux City, IA 4716 Southern Hills Drive
14 Tharaldson Pool A Fairfield Inn, Waterloo, IA 2011 La Porte Road
15 Tharaldson Pool A Comfort Inn, Champaign, IL R. 4, 305 Marketview Drive
16 Tharaldson Pool A Comfort Inn, Danville, IL 383 Lynch Road
17 Tharaldson Pool A Fairfield Inn, Fairview Heights, IL 140 Ludwig Drive
18 Tharaldson Pool A Hampton Inn, Fairview Heights, IL 150 Ludwig Drive
19 Tharaldson Pool A Hampton Inn, Forsyth, IL 1429 Hickory Point Drive
20 Tharaldson Pool A Comfort Inn, Galesburg, IL 907 W. Carl Sandburg Drive
21 Tharaldson Pool A Fairfield Inn, Galesburg, IL 901 W. Carl Sandburg Drive
22 Tharaldson Pool A Comfort Inn, Joliet (North), IL 3235 Norman Drive
23 Tharaldson Pool A Comfort Inn, Joliet (South), IL 135 South Larkin Avenue
24 Tharaldson Pool A Fairfield Inn, Joliet (South), IL 1501 Riverboat Center
25 Tharaldson Pool A Comfort Inn, Moline, IL 2600 52nd Avenue
26 Tharaldson Pool A Fairfield Inn, Moline, IL 2705 48th Avenue
27 Tharaldson Pool A Comfort Inn, Morris, IL 70 Gore Road W.
28 Tharaldson Pool A Comfort Suites, Peoria, IL 4021 War Memorial
29 Tharaldson Pool A Courtyard, Peoria, IL 4125 N. War Memorial
30 Tharaldson Pool A Comfort Inn, Quincy, IL 4100 Broadway
31 Tharaldson Pool A Fairfield Inn, Quincy, IL 4315 Broadway
32 Tharaldson Pool A Comfort Inn, Rockford, IL 7392 Argus Drive
33 Tharaldson Pool A Comfort Inn, Springfield, IL 3442 Freedom Drive
34 Tharaldson Pool A Courtyard, Springfield, IL 3462 Freedom Drive
35 Tharaldson Pool A Fairfield Inn, Springfield, IL 3446 Freedom Drive
36 Tharaldson Pool A Sleep Inn, Springfield, IL 3470 Freedom Drive
37 Tharaldson Pool A Hampton Inn, Tinley Park, IL 18501 N. Creek Dr
38 Tharaldson Pool A Comfort Inn, Anderson, IN 2205 E. 59th Street
39 Tharaldson Pool A Comfort Inn, Evansville, IN 5006 Morgan Avenue
40 Tharaldson Pool A Hampton Inn, Ft. Wayne, IN 570 Challenger Parkway
41 Tharaldson Pool A Comfort Inn, Indianapolis, IN 3880 W. 92nd Street
42 Tharaldson Pool A Comfort Inn, Kokomo, IN 522 Essex Drive
43 Tharaldson Pool A Fairfield Inn, Kokomo, IN 1717 E. Lincoln Road
44 Tharaldson Pool A Fairfield Inn, Lafayette, IN 4000 State Rd. 26E
45 Tharaldson Pool A Comfort Inn, Richmond, IN 912 Mendelson Drive
46 Tharaldson Pool A Hampton Inn, Lexington, KY 3060 Lake Crest Circle
47 Tharaldson Pool A Fairfield Inn, Jackson, MI 2395 Shirley Drive
48 Tharaldson Pool A Fairfield Inn, Bloomington,, MN 2401 E. 80th Street
49 Tharaldson Pool A Fairfield Inn, Coon Rapids, MN 8965 Springbrook Drive
50 Tharaldson Pool A Fairfield Inn, Eden Prairie, MN 11325 Viking Drive
51 Tharaldson Pool A Independent, Mendota Heights, MN 1330 Northland Drive
52 Tharaldson Pool A Country Inn & Suites, Owatonna, MN 130 Allen Avenue SW
53 Tharaldson Pool A Fairfield Inn, Bozeman, MT 828 Wheat Drive
54 Tharaldson Pool A Comfort Inn, Great Falls, MT 1120 9th St. South
55 Tharaldson Pool A Fairfield Inn, Great Falls, MT 1000 9th Ave. South
56 Tharaldson Pool A Fairfield Inn, Grand Forks, ND 3051 South 34th Street
57 Tharaldson Pool A Comfort Inn, Jamestown, ND 811 20th Street SW
58 Tharaldson Pool A Fairfield Inn, Minot, ND 900 24th Avenue SW
59 Tharaldson Pool A Courtyard, Akron, OH 100 Springside Drive
60 Tharaldson Pool A Hampton Inn, Akron, OH 80 Springside Drive
61 Tharaldson Pool A Comfort Suites, Columbus, OH 3831 Park Mill Run Drive
62 Tharaldson Pool A Homewood Suites, Columbus, OH 3841 Park Mill Run Drive
63 Tharaldson Pool A Fairfield Inn, Fairborn (Dayton), OH 2500 Paramount Place
64 Tharaldson Pool A Hampton Inn, Fairborn (Dayton), OH 2550 Paramount Place
65 Tharaldson Pool A Fairfield Inn, Lima, OH 2179 Elida Road
66 Tharaldson Pool A Comfort Inn, Marion, OH 256 Jamesway
67 Tharaldson Pool A Fairfield Inn, Marion, OH 227 Jamesway
68 Tharaldson Pool A Hampton Inn, Ontario, OH 1051 North Lexington
69 Tharaldson Pool A Country Inn & Suites, Toledo, OH 541 W. Dussel Drive
70 Tharaldson Pool A Holiday Inn Express, Maumee, OH 521 West Dussel Drive
71 Tharaldson Pool A Fairfield Inn, Youngstown, OH 7397 Tiffany S
72 Tharaldson Pool A Hampton Inn, Youngstown, OH 7395 Tiffany S.
73 Tharaldson Pool A Fairfield Inn, Zanesville, OH 725 Zane Street
74 Tharaldson Pool A Fairfield Inn, Stillwater, OK 418 E. Hall of Fame Avenue
75 Tharaldson Pool A Fairfield Inn, Tulsa, OK 9020 E. 71st Street
76 Tharaldson Pool A Comfort Inn, Sioux Falls, SD 3216 S. Carolyn Avenue
77 Tharaldson Pool A Comfort Suites, Sioux Falls, SD 3208 S. Carolyn Avenue
78 Tharaldson Pool A Fairfield Inn, Amarillo, TX 6600 Interstate 40W
79 Tharaldson Pool A Residence Inn, Amarillo, TX 6700 Interstate 40W
80 Tharaldson Pool A Fairfield Inn, Bryan, TX 4613 South Texas Avenue
81 Tharaldson Pool A Fairfield Inn, Corpus Christi, TX 5217 Blanche Moore Drive
82 Tharaldson Pool A Hampton Inn, Corpus Christi, TX 5209 Blanche Moore Drive
83 Tharaldson Pool A Residence Inn, Corpus Christi, TX 5229 Blanche Moore Drive
84 Tharaldson Pool A Comfort Suites, Longview, TX 3307 N. 4th Street
85 Tharaldson Pool A Fairfield Inn, Longview, TX 3305 N. 4th Street
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ORIGINAL CUT-OFF DATE
ALLOCATED LOAN ALLOCATED LOAN
CITY STATE PROPERTY TYPE AMOUNT AMOUNT APPRAISED VALUE
<S> <C> <C> <C> <C> <C> <C>
1 Las Vegas NV Retail $ 79,500,000 $ 78,998,166 $117,500,000
2 Arlington VA Office $ 14,000,000 $ 13,928,814 $ 20,000,000
3 Arlington VA Office $ 18,666,667 $ 18,571,752 $ 29,800,000
4 Arlington VA Office $ 44,333,333 $ 44,107,911 $ 65,300,000
5 Palm Desert CA Hotel $103,000,000 $102,418,958 $237,000,000
6 Fayetteville AR Hotel $ 1,812,000 $ 1,803,554 $ 3,300,000
7 Fayetteville AR Hotel $ 1,518,000 $ 1,510,924 $ 2,400,000
8 Cedar Rapids IA Hotel $ 1,027,000 $ 1,022,213 $ 2,000,000
9 Coralville IA Hotel $ 1,855,000 $ 1,846,353 $ 3,000,000
10 Davenport IA Hotel $ 1,604,000 $ 1,596,523 $ 3,200,000
11 Davenport IA Hotel $ 1,079,000 $ 1,073,971 $ 2,200,000
12 Davenport IA Hotel $ 2,291,000 $ 2,280,321 $ 6,400,000
13 Sioux City IA Hotel $ 1,529,000 $ 1,521,873 $ 3,300,000
14 Waterloo IA Hotel $ 1,596,000 $ 1,588,561 $ 2,700,000
15 Champaign IL Hotel $ 1,334,000 $ 1,327,782 $ 2,300,000
16 Danville IL Hotel $ 1,288,000 $ 1,281,996 $ 2,000,000
17 Fairview Heights IL Hotel $ 2,709,000 $ 2,696,373 $ 4,600,000
18 Fairview Heights IL Hotel $ 2,192,000 $ 2,181,783 $ 3,500,000
19 Forsyth IL Hotel $ 1,912,000 $ 1,903,088 $ 3,500,000
20 Galesburg IL Hotel $ 1,399,000 $ 1,392,479 $ 2,300,000
21 Galesburg IL Hotel $ 2,041,000 $ 2,031,486 $ 3,500,000
22 Joliet IL Hotel $ 2,421,000 $ 2,409,715 $ 3,800,000
23 Joliet IL Hotel $ 1,600,000 $ 1,592,542 $ 3,600,000
24 Joliet IL Hotel $ 2,099,000 $ 2,089,216 $ 3,600,000
25 Moline IL Hotel $ 1,726,000 $ 1,717,955 $ 3,200,000
26 Moline IL Hotel $ 1,702,000 $ 1,694,067 $ 3,000,000
27 Morris IL Hotel $ 1,400,000 $ 1,393,474 $ 2,600,000
28 Peoria IL Hotel $ 1,999,000 $ 1,989,682 $ 3,600,000
29 Peoria IL Hotel $ 2,914,000 $ 2,900,417 $ 5,500,000
30 Quincy IL Hotel $ 1,945,000 $ 1,935,934 $ 3,300,000
31 Quincy IL Hotel $ 2,466,000 $ 2,454,505 $ 4,000,000
32 Rockford IL Hotel $ 1,730,000 $ 1,721,936 $ 2,900,000
33 Springfield IL Hotel $ 2,259,000 $ 2,248,470 $ 4,200,000
34 Springfield IL Hotel $ 2,782,000 $ 2,769,033 $ 5,400,000
35 Springfield IL Hotel $ 2,097,000 $ 2,087,225 $ 3,400,000
36 Springfield IL Hotel $ 1,568,000 $ 1,560,691 $ 3,100,000
37 Tinley Park IL Hotel $ 1,373,000 $ 1,366,600 $ 3,000,000
38 Anderson IN Hotel $ 1,202,000 $ 1,196,397 $ 2,100,000
39 Evansville IN Hotel $ 1,327,000 $ 1,320,815 $ 2,800,000
40 Ft. Wayne IN Hotel $ 2,500,000 $ 2,488,347 $ 5,400,000
41 Indianapolis IN Hotel $ 1,156,000 $ 1,150,612 $ 2,600,000
42 Kokomo IN Hotel $ 1,448,000 $ 1,441,251 $ 3,500,000
43 Kokomo IN Hotel $ 2,022,000 $ 2,012,575 $ 3,600,000
44 Lafayette IN Hotel $ 2,998,000 $ 2,984,026 $ 5,300,000
45 Richmond IN Hotel $ 1,334,000 $ 1,327,782 $ 2,000,000
46 Lexington KY Hotel $ 2,757,000 $ 2,744,149 $ 4,900,000
47 Jackson MI Hotel $ 2,199,000 $ 2,188,750 $ 4,000,000
48 Bloomington, MN Hotel $ 6,093,000 $ 6,064,599 $ 11,600,000
49 Coon Rapids MN Hotel $ 1,366,000 $ 1,359,633 $ 3,000,000
50 Eden Prairie MN Hotel $ 3,419,000 $ 3,403,063 $ 6,200,000
51 Mendota Heights MN Hotel $ 3,000,000 $ 2,986,016 $ 9,700,000
52 Owatonna MN Hotel $ 1,271,000 $ 1,265,076 $ 2,000,000
53 Bozeman MT Hotel $ 1,201,000 $ 1,195,402 $ 2,400,000
54 Great Falls MT Hotel $ 2,155,000 $ 2,144,955 $ 4,100,000
55 Great Falls MT Hotel $ 2,046,000 $ 2,036,463 $ 3,400,000
56 Grand Forks ND Hotel $ 1,077,000 $ 1,071,980 $ 2,900,000
57 Jamestown ND Hotel $ 1,361,000 $ 1,354,656 $ 2,700,000
58 Minot ND Hotel $ 852,000 $ 848,029 $ 1,800,000
59 Akron OH Hotel $ 3,106,000 $ 3,091,522 $ 4,500,000
60 Akron OH Hotel $ 1,265,000 $ 1,259,104 $ 2,100,000
61 Columbus OH Hotel $ 2,278,000 $ 2,267,382 $ 4,700,000
62 Columbus OH Hotel $ 2,673,000 $ 2,660,541 $ 4,900,000
63 Fairborn OH Hotel $ 2,949,000 $ 2,935,254 $ 4,900,000
64 Fairborn OH Hotel $ 2,456,000 $ 2,444,552 $ 4,700,000
65 Lima OH Hotel $ 2,719,000 $ 2,706,326 $ 4,500,000
66 Marion OH Hotel $ 2,036,000 $ 2,026,510 $ 2,900,000
67 Marion OH Hotel $ 2,001,000 $ 1,991,673 $ 3,200,000
68 Mansfield OH Hotel $ 2,087,000 $ 2,077,272 $ 3,500,000
69 Toledo OH Hotel $ 1,391,000 $ 1,384,516 $ 3,300,000
70 Maumee OH Hotel $ 1,435,000 $ 1,428,311 $ 3,300,000
71 Youngstown OH Hotel $ 2,022,000 $ 2,012,575 $ 3,200,000
72 Youngstown OH Hotel $ 1,886,000 $ 1,877,209 $ 3,400,000
73 Zanesville OH Hotel $ 2,577,000 $ 2,564,988 $ 4,100,000
74 Stillwater OK Hotel $ 1,870,000 $ 1,861,284 $ 3,600,000
75 Tulsa OK Hotel $ 2,019,000 $ 2,009,589 $ 3,800,000
76 Sioux Falls SD Hotel $ 1,478,000 $ 1,471,111 $ 3,500,000
77 Sioux Falls SD Hotel $ 1,979,000 $ 1,969,775 $ 3,700,000
78 Amarillo TX Hotel $ 1,395,000 $ 1,388,498 $ 3,300,000
79 Amarillo TX Hotel $ 2,914,000 $ 2,900,417 $ 6,000,000
80 Bryan TX Hotel $ 1,861,000 $ 1,852,325 $ 2,900,000
81 Corpus Christi TX Hotel $ 2,149,000 $ 2,138,983 $ 3,900,000
82 Corpus Christi TX Hotel $ 2,224,000 $ 2,213,633 $ 3,500,000
83 Corpus Christi TX Hotel $ 3,000,000 $ 2,986,016 $ 4,900,000
84 Longview TX Hotel $ 2,666,000 $ 2,653,573 $ 5,000,000
85 Longview TX Hotel $ 2,433,000 $ 2,421,659 $ 4,600,000
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CURRENT ANTICIPATED
CUT-OFF DATE INTEREST ANNUAL DEBT UNDERWRITTEN NET REPAYMENT BALLOON AMOUNT
LTV RATE SERVICE CASH FLOW DSCR DATE AT ARD
<S> <C> <C> <C> <C> <C> <C> <C>
1 67.2% 7.523% $ 6,882,635 $ 9,902,261 1.44 11/11/07 $67,183,710
2 69.6% 6.904% $ 1,392,216 $ 1,703,409 1.22 11/11/08 $11,986,464
3 62.3% 6.904% $ 1,475,864 $ 2,447,492 1.66 11/11/07 $15,981,953
4 67.5% 6.904% $ 3,505,176 $ 5,623,540 1.60 11/11/07 $37,957,137
5 43.2% 7.800% $ 9,464,715 $21,500,000 2.27 06/11/10 $75,085,499
6 54.7% 6.876% $ 153,287 $ 430,830 2.81 02/11/08 $ 1,424,682
7 63.0% 6.876% $ 128,416 $ 297,500 2.32 02/11/08 $ 1,193,525
8 51.1% 6.876% $ 86,880 $ 174,472 2.01 02/11/08 $ 807,477
9 61.5% 6.876% $ 156,925 $ 380,628 2.43 02/11/08 $ 1,458,490
10 49.9% 6.876% $ 135,691 $ 332,036 2.45 02/11/08 $ 1,259,091
11 48.8% 6.876% $ 91,278 $ 253,793 2.78 02/11/08 $ 848,362
12 35.6% 6.876% $ 193,808 $ 585,342 3.02 02/11/08 $ 1,801,295
13 46.1% 6.876% $ 129,346 $ 353,384 2.73 02/11/08 $ 1,202,173
14 58.8% 6.876% $ 135,014 $ 314,170 2.33 02/11/08 $ 1,254,852
15 57.7% 6.876% $ 112,850 $ 187,774 1.66 02/11/08 $ 1,048,855
16 64.1% 6.876% $ 108,959 $ 213,988 1.96 02/11/08 $ 1,012,688
17 58.6% 6.876% $ 229,169 $ 502,015 2.19 02/11/08 $ 2,129,946
18 62.3% 6.876% $ 185,433 $ 374,047 2.02 02/11/08 $ 1,723,456
19 54.4% 6.876% $ 161,747 $ 386,153 2.39 02/11/08 $ 1,503,306
20 60.5% 6.876% $ 118,349 $ 262,235 2.22 02/11/08 $ 1,099,961
21 58.0% 6.876% $ 172,659 $ 401,414 2.32 02/11/08 $ 1,604,732
22 63.4% 6.876% $ 204,806 $ 415,298 2.03 02/11/08 $ 1,903,507
23 44.2% 6.876% $ 135,353 $ 425,981 3.15 02/11/08 $ 1,257,997
24 58.0% 6.876% $ 177,566 $ 393,447 2.22 02/11/08 $ 1,650,335
25 53.7% 6.876% $ 146,012 $ 303,110 2.08 02/11/08 $ 1,357,064
26 56.5% 6.876% $ 143,981 $ 363,687 2.53 02/11/08 $ 1,338,194
27 53.6% 6.876% $ 118,434 $ 264,352 2.23 02/11/08 $ 1,100,747
28 55.3% 6.876% $ 169,106 $ 424,576 2.51 02/11/08 $ 1,571,710
29 52.7% 6.876% $ 246,511 $ 642,621 2.61 02/11/08 $ 2,287,400
30 58.7% 6.876% $ 164,538 $ 295,769 1.80 02/11/08 $ 1,529,253
31 61.4% 6.876% $ 208,612 $ 459,584 2.20 02/11/08 $ 1,938,888
32 59.4% 6.876% $ 146,350 $ 319,995 2.19 02/11/08 $ 1,360,209
33 53.5% 6.876% $ 191,101 $ 456,275 2.39 02/11/08 $ 1,776,135
34 51.3% 6.876% $ 235,345 $ 615,549 2.62 02/11/08 $ 2,183,784
35 61.4% 6.876% $ 177,397 $ 386,606 2.18 02/11/08 $ 1,648,762
36 50.3% 6.876% $ 132,646 $ 321,781 2.43 02/11/08 $ 1,232,837
37 45.6% 6.876% $ 116,150 $ 203,430 1.75 02/11/08 $ 1,079,519
38 57.0% 6.876% $ 101,684 $ 162,406 1.60 02/11/08 $ 945,070
39 47.2% 6.876% $ 112,258 $ 261,838 2.33 02/11/08 $ 1,043,351
40 46.1% 6.876% $ 211,489 $ 501,882 2.37 02/11/08 $ 1,965,620
41 44.3% 6.876% $ 97,792 $ 235,081 2.40 02/11/08 $ 908,903
42 41.2% 6.876% $ 122,494 $ 333,844 2.73 02/11/08 $ 1,138,487
43 55.9% 6.876% $ 171,052 $ 396,230 2.32 02/11/08 $ 1,589,794
44 56.3% 6.876% $ 253,617 $ 585,009 2.31 02/11/08 $ 2,353,338
45 66.4% 6.876% $ 112,850 $ 180,985 1.60 02/11/08 $ 1,048,855
46 56.0% 6.876% $ 233,230 $ 577,626 2.48 02/11/08 $ 2,164,160
47 54.7% 6.876% $ 186,025 $ 498,473 2.68 02/11/08 $ 1,728,960
48 52.3% 6.876% $ 515,440 $ 1,361,940 2.64 02/11/08 $ 4,782,818
49 45.3% 6.876% $ 115,557 $ 338,817 2.93 02/11/08 $ 1,074,015
50 54.9% 6.876% $ 289,232 $ 676,653 2.34 02/11/08 $ 2,683,810
51 30.8% 6.876% $ 253,786 $ 596,736 2.35 02/11/08 $ 2,354,908
52 63.3% 6.876% $ 107,521 $ 299,544 2.79 02/11/08 $ 999,321
53 49.8% 6.876% $ 101,599 $ 305,184 3.00 02/11/08 $ 944,284
54 52.3% 6.876% $ 182,303 $ 426,209 2.34 02/11/08 $ 1,694,365
55 59.9% 6.876% $ 173,082 $ 399,469 2.31 02/11/08 $ 1,608,664
56 37.0% 6.876% $ 91,109 $ 341,684 3.75 02/11/08 $ 846,789
57 50.2% 6.876% $ 115,134 $ 284,914 2.47 02/11/08 $ 1,070,084
58 47.1% 6.876% $ 72,075 $ 172,230 2.39 02/11/08 $ 669,883
59 68.7% 6.876% $ 262,753 $ 378,891 1.44 02/11/08 $ 2,438,114
60 60.0% 6.876% $ 107,013 $ 125,153 1.17 02/11/08 $ 994,604
61 48.2% 6.876% $ 192,708 $ 450,507 2.34 02/11/08 $ 1,791,073
62 54.3% 6.876% $ 226,124 $ 530,757 2.35 02/11/08 $ 2,098,223
63 59.9% 6.876% $ 249,472 $ 617,086 2.47 02/11/08 $ 2,314,874
64 52.0% 6.876% $ 207,766 $ 547,146 2.63 02/11/08 $ 1,931,025
65 60.1% 6.876% $ 230,015 $ 431,692 1.88 02/11/08 $ 2,134,331
66 69.9% 6.876% $ 172,236 $ 357,249 2.07 02/11/08 $ 1,600,801
67 62.2% 6.876% $ 169,276 $ 416,361 2.46 02/11/08 $ 1,573,283
68 59.4% 6.876% $ 176,551 $ 381,428 2.16 02/11/08 $ 1,640,900
69 42.0% 6.876% $ 117,672 $ 269,821 2.29 02/11/08 $ 1,093,671
70 43.3% 6.876% $ 121,394 $ 235,760 1.94 02/11/08 $ 1,128,266
71 62.9% 6.876% $ 171,052 $ 335,963 1.96 02/11/08 $ 1,589,794
72 55.2% 6.876% $ 159,547 $ 317,136 1.99 02/11/08 $ 1,482,864
73 62.6% 6.876% $ 218,002 $ 529,318 2.43 02/11/08 $ 2,026,161
74 51.7% 6.876% $ 158,194 $ 403,290 2.55 02/11/08 $ 1,470,284
75 52.9% 6.876% $ 170,798 $ 452,065 2.65 02/11/08 $ 1,587,435
76 42.0% 6.876% $ 125,032 $ 333,442 2.67 02/11/08 $ 1,162,075
77 53.2% 6.876% $ 167,414 $ 361,178 2.16 02/11/08 $ 1,555,985
78 42.1% 6.876% $ 118,011 $ 368,490 3.12 02/11/08 $ 1,096,816
79 48.3% 6.876% $ 246,511 $ 636,583 2.58 02/11/08 $ 2,291,127
80 63.9% 6.876% $ 157,432 $ 399,884 2.54 02/11/08 $ 1,463,208
81 54.8% 6.876% $ 181,796 $ 462,087 2.54 02/11/08 $ 1,689,647
82 63.2% 6.876% $ 188,140 $ 431,992 2.30 02/11/08 $ 1,748,616
83 60.9% 6.876% $ 253,786 $ 539,407 2.13 02/11/08 $ 2,358,744
84 53.1% 6.876% $ 225,531 $ 503,718 2.23 02/11/08 $ 2,096,138
85 52.6% 6.876% $ 205,821 $ 501,016 2.43 02/11/08 $ 1,912,942
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE LOAN PROPERTY NAME ADDRESS
<S> <C> <C> <C>
86 Tharaldson Pool A Hampton Inn, San Angelo, TX 2959 Loop 306
87 Tharaldson Pool A Fairfield Inn, Temple, TX 1402 S.W. H.K. Dodgen Loop
88 Tharaldson Pool A Hampton Inn, Temple, TX 1414 S.W. H.K. Dodgen Loop
89 Tharaldson Pool A Fairfield Inn, Appleton, WI 132 Mall Drive
90 Tharaldson Pool A Residence Inn, Appleton, WI 310 Metro Drive
91 Tharaldson Pool A Comfort Inn, Green Bay, WI 3841 Ramada Way
92 Tharaldson Pool A Fairfield Inn, Hudson, WI 2400 Center Drive
93 Tharaldson Pool A Residence Inn, Madison, WI 4862 Hayes Road
94 Tharaldson Pool A Comfort Inn, Onalaska/La Crosse, WI 1223 Crossing Meadows Drive
95 Tharaldson Pool A Super 8, Racine, WI 7141 Kinzie Avenue
96 Tharaldson Pool B Fairfield Inn, Colorado Springs, CO 7085 Commerce Drive
97 Tharaldson Pool B Fairfield Inn, Greeley, CO 2401 W. 29th Street
98 Tharaldson Pool B Holiday Inn Express, Greeley, CO 2563 W. 29th Street
99 Tharaldson Pool B Comfort Inn, Cedar Rapids (North), IA 5055 Rockwell Drive
100 Tharaldson Pool B Fairfield Inn, Council Bluffs, IA 520 30th Avenue
101 Tharaldson Pool B Comfort Inn, Des Moines, IA 5231 Fleur Drive
102 Tharaldson Pool B Comfort Inn, Dubuque, IA 4055 McDonald Drive
103 Tharaldson Pool B Fairfield Inn, Dubuque, IA 3400 Dodge Street
104 Tharaldson Pool B Fairfield Inn, Muscatine, IA 305 Cleveland Street
105 Tharaldson Pool B Comfort Inn, Waterloo, IA 1945 La Porte Road
106 Tharaldson Pool B Super 8, Waterloo, IA 1825 La Porte Road
107 Tharaldson Pool B Comfort Suites, Bloomington, IL 310 B. Greenbriar Drive
108 Tharaldson Pool B Courtyard, Bloomington, IL 310 A. Greenbriar Drive
109 Tharaldson Pool B Courtyard, Champaign, IL 1811 Moreland Blvd.
110 Tharaldson Pool B Fairfield Inn, Champaign, IL 1807 Moreland Blvd.
111 Tharaldson Pool B Fairfield Inn, Danville, IL 389 Lynch Road
112 Tharaldson Pool B Super 8, Danville, IL 377 Lynch Drive
113 Tharaldson Pool B Comfort Inn, Forsyth, IL 134 Barnett Drive
114 Tharaldson Pool B Fairfield Inn, Forsyth, IL 1417 Hickory Point Drive
115 Tharaldson Pool B Comfort Inn, Gurnee, IL 3080 Gurnee Mills Circle E.
116 Tharaldson Pool B Fairfield Inn, Kankakee, IL 1550 State Road 50
117 Tharaldson Pool B Residence Inn, Peoria, IL 4201 N. War Memorial Drive
118 Tharaldson Pool B Fairfield Inn, Peru, IL 4385 Venture Drive
119 Tharaldson Pool B Residence Inn, Rockford, IL 7542 Colosseum Drive
120 Tharaldson Pool B Fairfield Inn, Tinley Park, IL 18511 N. Creek Drive
121 Tharaldson Pool B Super 8, Evansville, IN 4600 Morgan Avenue
122 Tharaldson Pool B Fairfield Inn, Mishawaka, IN 425 University Drive
123 Tharaldson Pool B Hampton Inn, Mishawaka, IN 445 University Drive
124 Tharaldson Pool B Comfort Suites, Terre Haute, IN 501 E. Margaret Avenue
125 Tharaldson Pool B Fairfield Inn, Terre Haute, IN 475 E. Margaret Avenue
126 Tharaldson Pool B Comfort Inn, Topeka, KS 1518 S. W. Wanamaker Road
127 Tharaldson Pool B Days Inn, Topeka, KS 1510 S. W. Wanamaker Road
128 Tharaldson Pool B Fairfield Inn, Topeka, KS 1530 S. W. Westport Drive
129 Tharaldson Pool B Residence Inn, Topeka, KS 1620 S. W. Westport Drive
130 Tharaldson Pool B Comfort Inn, Wichita, KS 9525 E. Corporate Hills
131 Tharaldson Pool B Hampton Inn, Wichita, KS 9449 E. Corporate Hills
132 Tharaldson Pool B Fairfield Inn, Ashland, KY 10945 Route 60
133 Tharaldson Pool B Fairfield Inn, Lexington, KY 3050 Lake Crest Circle
134 Tharaldson Pool B Super 8, Owensboro, KY 1027 Goetz Drive
135 Tharaldson Pool B Hampton Inn, Battle Creek, MI 1150 Riverside Drive
136 Tharaldson Pool B Fairfield Inn, Holland, MI 2854 West Shore Drive
137 Tharaldson Pool B Hampton Inn, Kalamazoo, MI 1550 E. Kilgore Road
138 Tharaldson Pool B Comfort Inn, Brooklyn Center, MN 1600 James Circle North
139 Tharaldson Pool B Comfort Inn, Mankato, MN 131 Apache Place
140 Tharaldson Pool B Country Inn & Suites, Rochester, MN 4323 Hwy 52 N. SW Frontage Rd
141 Tharaldson Pool B Fairfield Inn, St. Cloud, MN 4120 S. 2nd Street
142 Tharaldson Pool B Hampton Inn, Woodbury, MN 1450 Weir Drive
143 Tharaldson Pool B Comfort Inn, Lee's Summit, MO 607 S.E. Oldham Parkway
144 Tharaldson Pool B Fairfield Inn, Lee's Summit, MO 1301 N.E. Windsor Drive
145 Tharaldson Pool B Comfort Inn, Billings, MT 2030 Overland Drive
146 Tharaldson Pool B Fairfield Inn, Billings, MT 2026 Overland Drive
147 Tharaldson Pool B Comfort Inn, Helena, MT 750 Fee Street
148 Tharaldson Pool B Fairfield Inn, Bismarck (North), ND 1120 Century Avenue, E
149 Tharaldson Pool B Fairfield Inn, Bismarck (South), ND 135 Ivy Drive
150 Tharaldson Pool B Comfort Inn, Fargo (East), ND 1407 35th Street S.
151 Tharaldson Pool B Comfort Suites, Fargo, ND 1415 35th Street S.
152 Tharaldson Pool B Fairfield Inn, Fargo, ND 3902 9th Avenue S.W.
153 Tharaldson Pool B Comfort Inn, Fargo (West), ND 3825 9th Avenue S.W.
154 Tharaldson Pool B Comfort Inn, Grand Forks, ND 3251 30th Avenue S.
155 Tharaldson Pool B Comfort Suites, Lincoln, NE 4231 Industrial Avenue
156 Tharaldson Pool B Fairfield Inn, Lincoln, NE 4221 Industrial Avenue
157 Tharaldson Pool B Fairfield Inn, Canton, OH 5285 Broadmoor Circle NW
158 Tharaldson Pool B Residence Inn, Canton, OH 5280 Broadmoor Circle NW
159 Tharaldson Pool B Comfort Inn, Dayton, OH 7125 Miller Lane
160 Tharaldson Pool B Fairfield Inn, Findlay, OH 2000 Tiffin Avenue
161 Tharaldson Pool B Hampton Inn, Findlay, OH 921 Interstate Drive
162 Tharaldson Pool B Fairfield Inn, Mansfield/Ontario, OH 1065 N. Lexington Springmill Road
163 Tharaldson Pool B Fairfield Inn, Middletown, OH 6750 Roosevelt Parkway
164 Tharaldson Pool B Holiday Inn Express, Middletown, OH 6575 Terhune Drive
165 Tharaldson Pool B Fairfield Inn, Springfield, OH 1870 West 1st Street
166 Tharaldson Pool B Residence Inn, Youngstown, OH 7396 Tiffany South
167 Tharaldson Pool B Fairfield Inn, Norman, OK 301 Norman Center
168 Tharaldson Pool B Hampton Inn, Oklahoma City, OK 13500 Plaza Terrace
169 Tharaldson Pool B Holiday Inn Express, Oklahoma City, OK 13520 Plaza Terrace
170 Tharaldson Pool B Holiday Inn Express, Tulsa, OK 9010 E. 71st Street
171 Tharaldson Pool B Fairfield Inn, Abilene, TX 3902 Turner Plaza
172 Tharaldson Pool B Hampton Inn, Abilene, TX 3917 Ridgemont Drive
173 Tharaldson Pool B Hampton Inn, Ft. Worth, TX 4799 SW Loop 820
174 Tharaldson Pool B Comfort Suites, Lewisville, TX 755 A Vista Ridge Mall Drive
175 Tharaldson Pool B Country Inn & Suites, Lewisville, TX 755 B Vista Ridge Mall Drive
176 Tharaldson Pool B Residence Inn, Lewisville, TX 755 C Vista Ridge Mall Drive
177 Tharaldson Pool B Courtyard, Lubbock, TX 4011 S. Loop 289
178 Tharaldson Pool B Fairfield Inn, Lubbock, TX 4007 S. Loop 289
179 Tharaldson Pool B Hampton Inn, Lubbock, TX 4003 S. Loop 289
180 Tharaldson Pool B Fairfield Inn, Midland, TX 2300 Faulkner Drive
181 Tharaldson Pool B Fairfield Inn, Tyler, TX 1945 W. SW Loop 323
182 Tharaldson Pool B Fairfield Inn, Victoria, TX 7502 N. Navarro Street
183 Tharaldson Pool B Fairfield Inn, Waco, TX 5805 North Woodway Drive
184 Tharaldson Pool B Fairfield Inn, Wichita Falls, TX 4414 Westgate Drive
185 Tharaldson Pool B Comfort Inn, Manitowoc, WI 2200 S. 44th Street
186 Tharaldson Pool B Fairfield Inn, Oshkosh, WI 1800 S. Koeller Road
187 Tharaldson Pool B Fairfield Inn, Stevens Point, WI 5317 Hwy 10 East
188 Tharaldson Pool B Comfort Inn, Casper, WY 480 Lathrop
189 Pier 39 Pier 39 Pier 39
190 One Commerce Square One Commerce Square One Commerce Square
191 Green Acres Green Acres Sunrise Highway
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ORIGINAL CUT-OFF DATE
ALLOCATED LOAN ALLOCATED LOAN
CITY STATE PROPERTY TYPE AMOUNT AMOUNT APPRAISED VALUE
<S> <C> <C> <C> <C> <C> <C>
86 San Angelo TX Hotel $ 1,856,000 $ 1,847,349 $ 3,500,000
87 Temple TX Hotel $ 1,683,000 $ 1,675,155 $ 3,100,000
88 Temple TX Hotel $ 1,676,000 $ 1,668,188 $ 2,500,000
89 Appleton WI Hotel $ 1,782,000 $ 1,773,694 $ 3,300,000
90 Appleton WI Hotel $ 2,698,000 $ 2,685,424 $ 4,700,000
91 Green Bay WI Hotel $ 1,501,000 $ 1,494,004 $ 2,200,000
92 Hudson WI Hotel $ 1,535,000 $ 1,527,845 $ 2,800,000
93 Madison WI Hotel $ 2,422,000 $ 2,410,711 $ 4,900,000
94 Onalaska/La Crosse WI Hotel $ 2,354,000 $ 2,343,028 $ 3,700,000
95 Racine WI Hotel $ 1,081,000 $ 1,075,961 $ 2,000,000
96 Colorado Springs CO Hotel $ 2,779,000 $ 2,764,814 $ 4,500,000
97 Greeley CO Hotel $ 1,747,000 $ 1,738,082 $ 3,500,000
98 Greeley CO Hotel $ 1,629,000 $ 1,620,684 $ 3,500,000
99 Cedar Rapids IA Hotel $ 1,730,000 $ 1,721,169 $ 3,000,000
100 Council Bluffs IA Hotel $ 1,989,000 $ 1,978,847 $ 4,300,000
101 Des Moines IA Hotel $ 1,315,000 $ 1,308,287 $ 2,500,000
102 Dubuque IA Hotel $ 1,219,000 $ 1,212,777 $ 2,300,000
103 Dubuque IA Hotel $ 1,739,000 $ 1,730,123 $ 3,500,000
104 Muscatine IA Hotel $ 1,253,000 $ 1,246,604 $ 2,700,000
105 Waterloo IA Hotel $ 1,241,000 $ 1,234,665 $ 2,600,000
106 Waterloo IA Hotel $ 1,095,000 $ 1,089,410 $ 2,400,000
107 Bloomington IL Hotel $ 1,993,000 $ 1,982,826 $ 3,600,000
108 Bloomington IL Hotel $ 3,010,000 $ 2,994,635 $ 4,300,000
109 Champaign IL Hotel $ 2,883,000 $ 2,868,283 $ 5,500,000
110 Champaign IL Hotel $ 1,761,000 $ 1,752,011 $ 3,200,000
111 Danville IL Hotel $ 1,456,000 $ 1,448,568 $ 2,500,000
112 Danville IL Hotel $ 1,186,000 $ 1,179,946 $ 2,200,000
113 Forsyth IL Hotel $ 1,657,000 $ 1,648,541 $ 2,600,000
114 Forsyth IL Hotel $ 2,200,000 $ 2,188,770 $ 3,900,000
115 Gurnee IL Hotel $ 1,928,000 $ 1,918,158 $ 4,400,000
116 Kankakee IL Hotel $ 2,049,000 $ 2,038,540 $ 3,900,000
117 Peoria IL Hotel $ 4,019,000 $ 3,998,484 $ 6,400,000
118 Peru IL Hotel $ 2,608,000 $ 2,594,687 $ 4,100,000
119 Rockford IL Hotel $ 3,781,000 $ 3,761,699 $ 6,500,000
120 Tinley Park IL Hotel $ 1,200,000 $ 1,193,874 $ 2,400,000
121 Evansville IN Hotel $ 1,038,000 $ 1,032,701 $ 2,500,000
122 Mishawaka IN Hotel $ 2,179,000 $ 2,167,877 $ 3,400,000
123 Mishawaka IN Hotel $ 1,613,000 $ 1,604,766 $ 3,400,000
124 Terre Haute IN Hotel $ 2,070,000 $ 2,059,433 $ 3,100,000
125 Terre Haute IN Hotel $ 2,009,000 $ 1,998,745 $ 2,800,000
126 Topeka KS Hotel $ 2,095,000 $ 2,084,306 $ 3,500,000
127 Topeka KS Hotel $ 1,488,000 $ 1,480,404 $ 2,200,000
128 Topeka KS Hotel $ 1,962,000 $ 1,951,985 $ 2,900,000
129 Topeka KS Hotel $ 2,381,000 $ 2,368,846 $ 3,400,000
130 Wichita KS Hotel $ 1,198,000 $ 1,191,885 $ 1,700,000
131 Wichita KS Hotel $ 1,492,000 $ 1,484,384 $ 3,400,000
132 Ashland KY Hotel $ 2,120,000 $ 2,109,178 $ 3,400,000
133 Lexington KY Hotel $ 2,428,000 $ 2,415,606 $ 4,300,000
134 Owensboro KY Hotel $ 1,344,000 $ 1,337,139 $ 2,200,000
135 Battle Creek MI Hotel $ 1,951,000 $ 1,941,041 $ 4,100,000
136 Holland MI Hotel $ 1,666,000 $ 1,657,496 $ 3,200,000
137 Kalamazoo MI Hotel $ 1,451,000 $ 1,443,593 $ 2,700,000
138 Brooklyn Center MN Hotel $ 1,811,000 $ 1,801,755 $ 3,600,000
139 Mankato MN Hotel $ 1,925,000 $ 1,915,173 $ 3,000,000
140 Rochester MN Hotel $ 1,954,000 $ 1,944,025 $ 3,700,000
141 St. Cloud MN Hotel $ 1,315,000 $ 1,308,287 $ 1,900,000
142 Woodbury MN Hotel $ 1,555,000 $ 1,547,062 $ 2,600,000
143 Lee's Summit MO Hotel $ 1,384,000 $ 1,376,935 $ 2,700,000
144 Lee's Summit MO Hotel $ 2,302,000 $ 2,290,249 $ 4,200,000
145 Billings MT Hotel $ 1,845,000 $ 1,835,582 $ 2,900,000
146 Billings MT Hotel $ 2,036,000 $ 2,025,607 $ 3,400,000
147 Helena MT Hotel $ 1,570,000 $ 1,561,986 $ 3,200,000
148 Bismarck ND Hotel $ 1,354,000 $ 1,347,088 $ 2,600,000
149 Bismarck ND Hotel $ 1,365,000 $ 1,358,032 $ 2,600,000
150 Fargo ND Hotel $ 1,327,000 $ 1,320,226 $ 2,300,000
151 Fargo ND Hotel $ 1,658,000 $ 1,649,536 $ 3,300,000
152 Fargo ND Hotel $ 1,674,000 $ 1,665,455 $ 3,700,000
153 Fargo ND Hotel $ 1,183,000 $ 1,176,961 $ 2,200,000
154 Grand Forks ND Hotel $ 1,857,000 $ 1,847,520 $ 3,800,000
155 Lincoln NE Hotel $ 2,347,000 $ 2,335,019 $ 4,100,000
156 Lincoln NE Hotel $ 2,269,000 $ 2,257,417 $ 4,300,000
157 Canton OH Hotel $ 2,314,000 $ 2,302,188 $ 3,400,000
158 Canton OH Hotel $ 3,140,000 $ 3,123,971 $ 5,400,000
159 Dayton OH Hotel $ 1,638,000 $ 1,629,638 $ 2,200,000
160 Findlay OH Hotel $ 2,300,000 $ 2,288,259 $ 3,800,000
161 Findlay OH Hotel $ 2,160,000 $ 2,148,974 $ 3,700,000
162 Mansfield/Ontario OH Hotel $ 2,431,000 $ 2,418,590 $ 3,300,000
163 Middletown OH Hotel $ 2,187,000 $ 2,175,836 $ 3,500,000
164 Middletown OH Hotel $ 2,364,000 $ 2,351,932 $ 3,800,000
165 Springfield, OH Hotel $ 2,618,000 $ 2,604,636 $ 4,700,000
166 Youngstown OH Hotel $ 3,629,000 $ 3,610,475 $ 6,700,000
167 Norman OK Hotel $ 2,244,000 $ 2,232,545 $ 4,500,000
168 Oklahoma City OK Hotel $ 2,111,000 $ 2,100,224 $ 4,600,000
169 Oklahoma City OK Hotel $ 2,900,000 $ 2,885,196 $ 4,900,000
170 Tulsa OK Hotel $ 2,420,000 $ 2,407,647 $ 4,100,000
171 Abilene TX Hotel $ 1,606,000 $ 1,597,802 $ 3,000,000
172 Abilene TX Hotel $ 1,360,000 $ 1,353,058 $ 2,300,000
173 Ft. Worth TX Hotel $ 2,433,000 $ 2,420,580 $ 4,800,000
174 Lewisville TX Hotel $ 2,256,000 $ 2,244,484 $ 4,300,000
175 Lewisville TX Hotel $ 2,150,000 $ 2,139,025 $ 4,300,000
176 Lewisville TX Hotel $ 3,978,000 $ 3,957,693 $ 8,000,000
177 Lubbock TX Hotel $ 2,953,000 $ 2,937,926 $ 5,800,000
178 Lubbock TX Hotel $ 1,708,000 $ 1,699,281 $ 3,300,000
179 Lubbock TX Hotel $ 1,954,000 $ 1,944,025 $ 4,100,000
180 Midland TX Hotel $ 2,661,000 $ 2,647,416 $ 4,400,000
181 Tyler TX Hotel $ 2,196,000 $ 2,184,790 $ 3,600,000
182 Victoria TX Hotel $ 1,385,000 $ 1,377,930 $ 2,100,000
183 Waco TX Hotel $ 3,029,000 $ 3,013,538 $ 5,400,000
184 Wichita Falls TX Hotel $ 2,237,000 $ 2,225,581 $ 4,400,000
185 Manitowoc WI Hotel $ 1,251,000 $ 1,244,614 $ 2,200,000
186 Oshkosh WI Hotel $ 1,093,000 $ 1,087,421 $ 2,200,000
187 Stevens Point WI Hotel $ 1,347,000 $ 1,340,124 $ 2,400,000
188 Casper WY Hotel $ 1,557,000 $ 1,549,052 $ 3,200,000
189 San Francisco CA Retail $ 117,000,000 $ 116,669,545 $ 158,000,000
190 Philadelphia PA Office $ 112,000,000 $ 111,410,632 $ 135,000,000
191 Valley Stream NY Retail $ 160,000,000 $ 159,523,713 $ 253,200,000
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CURRENT ANTICIPATED
CUT-OFF DATE INTEREST ANNUAL DEBT UNDERWRITTEN NET REPAYMENT BALLOON AMOUNT
LTV RATE SERVICE CASH FLOW DSCR DATE AT ARD
<S> <C> <C> <C> <C> <C> <C> <C>
86 52.8% 6.876% $ 157,009 $ 310,454 1.98 02/11/08 $ 1,459,277
87 54.0% 6.876% $ 142,374 $ 366,866 2.58 02/11/08 $ 1,323,256
88 66.7% 6.876% $ 141,782 $ 300,921 2.12 02/11/08 $ 1,317,752
89 53.7% 6.876% $ 150,749 $ 381,635 2.53 02/11/08 $ 1,401,094
90 57.1% 6.876% $ 228,239 $ 514,649 2.25 02/11/08 $ 2,117,847
91 67.9% 6.876% $ 126,978 $ 295,712 2.33 02/11/08 $ 1,180,158
92 54.6% 6.876% $ 129,854 $ 291,264 2.24 02/11/08 $ 1,206,891
93 49.2% 6.876% $ 204,890 $ 569,875 2.78 02/11/08 $ 1,904,293
94 63.3% 6.876% $ 199,138 $ 415,116 2.08 02/11/08 $ 1,850,828
95 53.8% 6.876% $ 91,448 $ 185,907 2.03 02/11/08 $ 849,934
96 61.4% 6.876% $ 235,091 $ 531,425 2.26 02/11/08 $ 2,179,000
97 49.7% 6.876% $ 147,788 $ 348,912 2.36 02/11/08 $ 1,372,058
98 46.3% 6.876% $ 137,806 $ 300,200 2.18 02/11/08 $ 1,279,383
99 57.4% 6.876% $ 146,350 $ 315,090 2.15 02/11/08 $ 1,358,707
100 46.0% 6.876% $ 168,260 $ 414,268 2.46 02/11/08 $ 1,562,120
101 52.3% 6.876% $ 111,243 $ 268,321 2.41 02/11/08 $ 1,032,774
102 52.7% 6.876% $ 103,122 $ 191,931 1.86 02/11/08 $ 957,378
103 49.4% 6.876% $ 147,111 $ 341,743 2.32 02/11/08 $ 1,365,775
104 46.2% 6.876% $ 105,998 $ 282,839 2.67 02/11/08 $ 984,081
105 47.5% 6.876% $ 104,983 $ 267,915 2.55 02/11/08 $ 974,656
106 45.4% 6.876% $ 92,632 $ 275,146 2.97 02/11/08 $ 859,991
107 55.1% 6.876% $ 168,599 $ 291,450 1.73 02/11/08 $ 1,562,701
108 69.6% 6.876% $ 254,632 $ 537,509 2.11 02/11/08 $ 2,363,993
109 52.2% 6.876% $ 243,889 $ 552,973 2.27 02/11/08 $ 2,260,546
110 54.8% 6.876% $ 148,973 $ 373,565 2.51 02/11/08 $ 1,383,053
111 57.9% 6.876% $ 123,171 $ 306,053 2.48 02/11/08 $ 1,143,513
112 53.6% 6.876% $ 100,330 $ 188,409 1.88 02/11/08 $ 931,460
113 63.4% 6.876% $ 140,175 $ 237,536 1.69 02/11/08 $ 1,301,374
114 56.1% 6.876% $ 186,110 $ 351,209 1.89 02/11/08 $ 1,727,835
115 43.6% 6.876% $ 163,100 $ 405,813 2.49 02/11/08 $ 1,514,212
116 52.3% 6.876% $ 173,336 $ 435,698 2.51 02/11/08 $ 1,609,243
117 62.5% 6.876% $ 339,989 $ 661,027 1.94 02/11/08 $ 3,151,278
118 63.3% 6.876% $ 220,625 $ 507,298 2.30 02/11/08 $ 2,044,920
119 57.9% 6.876% $ 319,855 $ 769,411 2.41 02/11/08 $ 2,964,663
120 49.7% 6.876% $ 101,515 $ 189,895 1.87 02/11/08 $ 942,456
121 41.3% 6.876% $ 87,810 $ 249,946 2.85 02/11/08 $ 815,224
122 63.8% 6.876% $ 184,334 $ 358,633 1.95 02/11/08 $ 1,711,342
123 47.2% 6.876% $ 136,452 $ 244,669 1.79 02/11/08 $ 1,266,817
124 66.4% 6.876% $ 175,113 $ 390,621 2.23 02/11/08 $ 1,625,736
125 71.4% 6.876% $ 169,952 $ 365,789 2.15 02/11/08 $ 1,577,828
126 59.6% 6.876% $ 177,227 $ 382,022 2.16 02/11/08 $ 1,645,370
127 67.3% 6.876% $ 125,878 $ 227,774 1.81 02/11/08 $ 1,168,645
128 67.3% 6.876% $ 165,976 $ 371,788 2.24 02/11/08 $ 1,540,915
129 69.7% 6.876% $ 201,422 $ 481,029 2.39 02/11/08 $ 1,869,989
130 70.1% 6.876% $ 101,345 $ 359,632 3.55 02/11/08 $ 940,885
131 43.7% 6.876% $ 126,216 $ 516,419 4.09 02/11/08 $ 1,171,786
132 62.0% 6.876% $ 179,342 $ 373,234 2.08 02/11/08 $ 1,665,005
133 56.2% 6.876% $ 205,398 $ 565,659 2.75 02/11/08 $ 1,906,902
134 60.8% 6.876% $ 113,696 $ 233,665 2.06 02/11/08 $ 1,055,550
135 47.3% 6.876% $ 165,046 $ 452,263 2.74 02/11/08 $ 1,532,276
136 51.8% 6.876% $ 140,936 $ 398,907 2.83 02/11/08 $ 1,308,442
137 53.5% 6.876% $ 122,748 $ 346,496 2.82 02/11/08 $ 1,139,586
138 50.0% 6.876% $ 153,202 $ 332,122 2.17 02/11/08 $ 1,422,322
139 63.8% 6.876% $ 162,846 $ 338,254 2.08 02/11/08 $ 1,511,856
140 52.5% 6.876% $ 165,300 $ 528,218 3.20 02/11/08 $ 1,534,632
141 68.9% 6.876% $ 111,243 $ 203,553 1.83 02/11/08 $ 1,032,774
142 59.5% 6.876% $ 131,546 $ 439,776 3.34 02/11/08 $ 1,221,265
143 51.0% 6.876% $ 117,080 $ 271,296 2.32 02/11/08 $ 1,086,965
144 54.5% 6.876% $ 194,739 $ 483,287 2.48 02/11/08 $ 1,807,944
145 63.3% 6.876% $ 156,079 $ 358,050 2.29 02/11/08 $ 1,449,025
146 59.6% 6.876% $ 172,236 $ 402,362 2.34 02/11/08 $ 1,599,033
147 48.8% 6.876% $ 132,815 $ 325,587 2.45 02/11/08 $ 1,233,046
148 51.8% 6.876% $ 114,542 $ 268,731 2.35 02/11/08 $ 1,063,404
149 52.2% 6.876% $ 115,473 $ 313,168 2.71 02/11/08 $ 1,072,043
150 57.4% 6.876% $ 112,258 $ 239,449 2.13 02/11/08 $ 1,042,199
151 50.0% 6.876% $ 140,259 $ 324,736 2.32 02/11/08 $ 1,302,159
152 45.0% 6.876% $ 141,613 $ 358,018 2.53 02/11/08 $ 1,314,725
153 53.5% 6.876% $ 100,076 $ 247,692 2.48 02/11/08 $ 929,104
154 48.6% 6.876% $ 157,094 $ 408,236 2.60 02/11/08 $ 1,458,450
155 57.0% 6.876% $ 198,546 $ 453,649 2.28 02/11/08 $ 1,843,286
156 52.5% 6.876% $ 191,947 $ 503,818 2.62 02/11/08 $ 1,782,026
157 67.7% 6.876% $ 195,754 $ 377,356 1.93 02/11/08 $ 1,817,368
158 57.9% 6.876% $ 265,630 $ 613,153 2.31 02/11/08 $ 2,462,058
159 74.1% 6.876% $ 138,567 $ 268,006 1.93 02/11/08 $ 1,286,452
160 60.2% 6.876% $ 194,570 $ 464,400 2.39 02/11/08 $ 1,806,373
161 58.1% 6.876% $ 182,726 $ 369,756 2.02 02/11/08 $ 1,696,420
162 73.3% 6.876% $ 205,652 $ 451,115 2.19 02/11/08 $ 1,909,258
163 62.2% 6.876% $ 185,010 $ 442,242 2.39 02/11/08 $ 1,717,625
164 61.9% 6.876% $ 199,984 $ 409,099 2.05 02/11/08 $ 1,856,637
165 55.4% 6.876% $ 221,471 $ 498,046 2.25 02/11/08 $ 2,052,761
166 53.9% 6.876% $ 306,997 $ 606,358 1.98 02/11/08 $ 2,845,481
167 49.6% 6.876% $ 189,832 $ 514,754 2.71 02/11/08 $ 1,762,392
168 45.7% 6.876% $ 178,581 $ 528,744 2.96 02/11/08 $ 1,657,936
169 58.9% 6.876% $ 245,327 $ 586,860 2.39 02/11/08 $ 2,273,876
170 58.7% 6.876% $ 204,721 $ 479,359 2.34 02/11/08 $ 1,900,619
171 53.3% 6.876% $ 135,860 $ 329,827 2.43 02/11/08 $ 1,261,320
172 58.8% 6.876% $ 115,050 $ 243,805 2.12 02/11/08 $ 1,068,116
173 50.4% 6.876% $ 205,821 $ 416,400 2.02 02/11/08 $ 1,907,703
174 52.2% 6.876% $ 190,847 $ 452,491 2.37 02/11/08 $ 1,768,918
175 49.7% 6.876% $ 181,880 $ 468,531 2.58 02/11/08 $ 1,688,566
176 49.5% 6.876% $ 336,521 $ 843,524 2.51 02/11/08 $ 3,124,240
177 50.7% 6.876% $ 249,810 $ 705,997 2.83 02/11/08 $ 2,315,433
178 51.5% 6.876% $ 144,489 $ 362,693 2.51 02/11/08 $ 1,341,428
179 47.4% 6.876% $ 165,300 $ 371,811 2.25 02/11/08 $ 1,534,632
180 60.2% 6.876% $ 225,109 $ 510,795 2.27 02/11/08 $ 2,086,477
181 60.7% 6.876% $ 185,772 $ 441,483 2.38 02/11/08 $ 1,724,694
182 65.6% 6.876% $ 117,165 $ 294,920 2.52 02/11/08 $ 1,087,751
183 55.8% 6.876% $ 256,240 $ 625,205 2.44 02/11/08 $ 2,375,024
184 50.6% 6.876% $ 189,240 $ 497,332 2.63 02/11/08 $ 1,756,894
185 56.6% 6.876% $ 105,829 $ 267,334 2.53 02/11/08 $ 982,510
186 49.4% 6.876% $ 92,463 $ 199,343 2.16 02/11/08 $ 858,420
187 55.8% 6.876% $ 113,950 $ 261,118 2.29 02/11/08 $ 1,057,906
188 48.4% 6.876% $ 131,715 $ 334,974 2.54 02/11/08 $ 1,222,836
189 73.8% 7.107% $ 9,535,613 $ 13,153,909 1.38 02/11/08 $100,515,979
190 82.5% 6.995% $ 14,906,815 $ 17,574,266 1.18 04/11/08 $ 68,865,873
191 63.0% 6.750% $ 12,572,968 $ 19,322,925 1.54 02/11/08 $136,830,761
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
MORTGAGE LOAN PROPERTY NAME ADDRESS
<S> <C> <C> <C>
192 Americold Pool Ash Street 4475 E. 50th Avenue
193 Americold Pool Bettendorf 6875 State Street
194 Americold Pool Boston 100 Widett Circle
195 Americold Pool Burlington 301 South Walnut
196 Americold Pool Burley 280 W. Highway 30
197 Americold Pool Clearfield 755 E. 1700 South St.
198 Americold Pool Connell 720 W. Juniper Street
199 Americold Pool E. Main Street 159 East Main Street
200 Americold Pool Fogelsville 250 Mill Road
201 Americold Pool Ft. Dodge 3543 Maple Drive
202 Americold Pool Hermiston Westland Road
203 Americold Pool Jesse St. 2233 Jesse Street
204 Americold Pool Lois Avenue 4916 South Lois Avenue
205 Americold Pool Milwaukie 9501 SE McLoughlin Blvd
206 Americold Pool Moses Lake 3245 Road N
207 Americold Pool Nampa 224 Fourth St., N
208 Americold Pool Plant City 211 S. Alexander Street
209 Americold Pool Plover 110th Street & Hwy 54
210 Americold Pool Rail Road Ave. Railroad Avenue
211 Americold Pool Watsonville 750 W. Riverside Dr.
212 Americold Pool Rochelle 1010 Americold Drive
213 Americold Pool Rogers St. 69 Rogers Street
214 Americold Pool Rowe Square Rowe Square
215 Americold Pool Salem 4095 Portlad Rd., N.E.
216 Americold Pool Southgate 1845 Westgate Parkway
217 Americold Pool Turlock 2 525 S. Kilroy Road
218 Americold Pool Walla Walla 4-14th Avenue, So.
219 Americold Pool Wallula Dodd Road
220 Americold Pool Woodburn 1440 Silverton Road
221 URS Pool Albertville 1355 Railroad Avenue
222 URS Pool Augusta 533 Laney-Walker Road
223 URS Pool Birmingham 700 W. 25th Avenue
224 URS Pool Charlotte Central 700 West 9th Street
225 URS Pool Charlotte North 1000 Exchange Street
226 URS Pool Columbia 2339 Shop Road
227 URS Pool Ft. Smith 1634 Midland Boulevard
228 URS Pool Gadsden 215 East Air Depot Road
229 URS Pool Gateway 6150 Xavier Drive, SW
230 URS Pool Indianapolis 3320 South Arlington Avenue
231 URS Pool Chelsea Memphis 2378 Spottswood Avenue
232 URS Pool Lakewood 3300 Lakewood Avenue, SW
233 URS Pool Leesport 2174 C, RD2, Orchard Lane
234 URS Pool Marshall West Highway 20
235 URS Pool Memphis Parkway 1100 E Parkway South
236 URS Pool Montezuma 205 S. Airport Drive
237 URS Pool Montgomery [New] 4550 Newcomb Avenue
238 URS Pool Murfreesboro 2841 Stephenson Drive
239 URS Pool Norfolk 3801 E Princess Anne Road
240 URS Pool Oklahoma [1] 821 South Hudson
241 URS Pool Oklahoma [2] 2524 Exchange
242 URS Pool Portland 165 Read Street
243 URS Pool Syracuse 264 Farrell Road
244 URS Pool Tarboro 200 Sara Lee Road
245 URS Pool Tomah Route 2, Box 80-A
246 URS Pool Turlock 1 680 Fifth Street
247 URS Pool Westgate 1740 Westgate Parkway
248 URS Pool West Memphis 1651 S. Airport Road
249 URS Pool Wichita 2707 North Mead
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ORIGINAL CUT-OFF DATE
ALLOCATED LOAN ALLOCATED LOAN
CITY STATE PROPERTY TYPE AMOUNT AMOUNT APPRAISED VALUE
<S> <C> <C> <C> <C> <C> <C>
192 Denver CO Refrigerated Distribution/Warehouse $ 1,768,536 $ 1,768,536 $ 6,200,000
193 Bettendorf IA Refrigerated Distribution/Warehouse $ 4,107,568 $ 4,107,568 $ 14,400,000
194 Boston MA Refrigerated Distribution/Warehouse $ 2,110,834 $ 2,110,834 $ 7,400,000
195 Burlington WA Refrigerated Distribution/Warehouse $ 4,506,915 $ 4,506,915 $ 15,800,000
196 Burley ID Refrigerated Distribution/Warehouse $10,012,197 $ 10,012,197 $ 35,100,000
197 Clearfield UT Refrigerated Distribution/Warehouse $ 7,929,889 $ 7,929,889 $ 27,800,000
198 Connell WA Refrigerated Distribution/Warehouse $ 6,532,174 $ 6,532,174 $ 22,900,000
199 Gloucester MA Refrigerated Distribution/Warehouse $ 2,367,557 $ 2,367,557 $ 8,300,000
200 Fogelsville PA Refrigerated Distribution/Warehouse $16,430,273 $ 16,430,273 $ 57,600,000
201 Fort Dodge IA Refrigerated Distribution/Warehouse $ 1,354,927 $ 1,354,927 $ 4,750,000
202 Hermiston OR Refrigerated Distribution/Warehouse $ 6,703,323 $ 6,703,323 $ 23,500,000
203 Los Angeles CA Refrigerated Distribution/Warehouse $ 2,082,309 $ 2,082,309 $ 7,300,000
204 Tampa FL Refrigerated Distribution/Warehouse $ 128,362 $ 128,362 $ 450,000
205 Portland OR Refrigerated Distribution/Warehouse $ 5,391,183 $ 5,391,183 $ 18,900,000
206 Moses Lake WA Refrigerated Distribution/Warehouse $ 9,755,474 $ 9,755,474 $ 34,200,000
207 Nampa ID Refrigerated Distribution/Warehouse $ 5,819,055 $ 5,819,055 $ 20,400,000
208 Plant City FL Refrigerated Distribution/Warehouse $ 684,595 $ 684,595 $ 2,400,000
209 Plover WI Refrigerated Distribution/Warehouse $13,634,844 $ 13,634,844 $ 47,800,000
210 Gloucester MA Refrigerated Distribution/Warehouse $ 656,070 $ 656,070 $ 2,300,000
211 Watsonville CA Refrigerated Distribution/Warehouse $ 5,191,510 $ 5,191,510 $ 18,200,000
212 Rochelle IL Refrigerated Distribution/Warehouse $ 7,017,096 $ 7,017,096 $ 24,600,000
213 Gloucester MA Refrigerated Distribution/Warehouse $ 3,480,023 $ 3,480,023 $ 12,200,000
214 Gloucester MA Refrigerated Distribution/Warehouse $ 4,079,043 $ 4,079,043 $ 14,300,000
215 Salem OR Refrigerated Distribution/Warehouse $ 9,299,078 $ 9,299,078 $ 32,600,000
216 Atlanta GA Refrigerated Distribution/Warehouse $ 3,052,151 $ 3,052,151 $ 10,700,000
217 Turlock CA Refrigerated Distribution/Warehouse $ 2,595,755 $ 2,595,755 $ 9,100,000
218 Walla Walla WA Refrigerated Distribution/Warehouse $ 2,852,478 $ 2,852,478 $ 10,000,000
219 Wallula WA Refrigerated Distribution/Warehouse $ 1,939,685 $ 1,939,685 $ 6,800,000
220 Woodburn OR Refrigerated Distribution/Warehouse $ 7,017,096 $ 7,017,096 $ 24,600,000
221 Albertville AL Refrigerated Distribution/Warehouse $ 5,854,960 $ 5,854,960 $ 9,800,000
222 Augusta GA Refrigerated Distribution/Warehouse $ 2,688,502 $ 2,688,502 $ 4,500,000
223 Birmingham AL Refrigerated Distribution/Warehouse $ 3,076,841 $ 3,076,841 $ 5,150,000
224 Charlotte NC Refrigerated Distribution/Warehouse $ 1,792,335 $ 1,792,335 $ 3,000,000
225 Charlotte NC Refrigerated Distribution/Warehouse $ 9,977,330 $ 9,977,330 $ 16,700,000
226 Columbia SC Refrigerated Distribution/Warehouse $ 3,345,692 $ 3,345,692 $ 5,600,000
227 Fort Smith AR Refrigerated Distribution/Warehouse $ 2,031,313 $ 2,031,313 $ 3,400,000
228 Gadsden AL Refrigerated Distribution/Warehouse $11,650,176 $ 11,650,176 $ 19,500,000
229 Atlanta GA Refrigerated Distribution/Warehouse $33,000,000 $ 33,000,000 $ 50,700,000
230 Indianapolis IN Refrigerated Distribution/Warehouse $23,000,000 $ 23,000,000 $ 35,400,000
231 Memphis TN Refrigerated Distribution/Warehouse $ 2,569,013 $ 2,569,013 $ 4,300,000
232 Atlanta GA Refrigerated Distribution/Warehouse $ 3,704,159 $ 3,704,159 $ 6,200,000
233 Leesport PA Refrigerated Distribution/Warehouse $17,505,136 $ 17,505,136 $ 29,300,000
234 Marshall MO Refrigerated Distribution/Warehouse $ 9,081,163 $ 9,081,163 $ 15,200,000
235 Memphis TN Refrigerated Distribution/Warehouse $ 8,543,462 $ 8,543,462 $ 14,300,000
236 Montezuma GA Refrigerated Distribution/Warehouse $ 6,392,661 $ 6,392,661 $ 10,700,000
237 Montgomery AL Refrigerated Distribution/Warehouse $ 3,883,392 $ 3,883,392 $ 6,500,000
238 Murfreesboro TN Refrigerated Distribution/Warehouse $ 9,200,652 $ 9,200,652 $ 15,400,000
239 Norfolk VA Refrigerated Distribution/Warehouse $ 4,839,304 $ 4,839,304 $ 8,100,000
240 Oklahoma City OK Refrigerated Distribution/Warehouse $ 1,684,795 $ 1,684,795 $ 2,800,000
241 Oklahoma City OK Refrigerated Distribution/Warehouse $ 2,210,546 $ 2,210,546 $ 3,700,000
242 Portland ME Refrigerated Distribution/Warehouse $ 3,345,692 $ 3,345,692 $ 5,600,000
243 Syracuse NY Refrigerated Distribution/Warehouse $23,000,000 $ 23,000,000 $ 36,500,000
244 Tarboro NC Refrigerated Distribution/Warehouse $ 5,777,434 $ 5,777,434 $ 19,300,000
245 Tomah WI Refrigerated Distribution/Warehouse $11,172,220 $ 11,172,220 $ 18,700,000
246 Turlock CA Refrigerated Distribution/Warehouse $ 6,990,106 $ 6,990,106 $ 11,700,000
247 Atlanta GA Refrigerated Distribution/Warehouse $20,313,127 $ 20,313,127 $ 34,000,000
248 West Memphis AR Refrigerated Distribution/Warehouse $11,411,198 $ 11,411,198 $ 19,100,000
249 Witchita KS Refrigerated Distribution/Warehouse $ 4,958,793 $ 4,958,793 $ 8,300,000
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CURRENT ANTICIPATED
CUT-OFF DATE INTEREST ANNUAL DEBT UNDERWRITTEN NET REPAYMENT BALLOON AMOUNT
LTV RATE SERVICE CASH FLOW DSCR DATE AT ARD
<S> <C> <C> <C> <C> <C> <C> <C>
192 57.0% 6.894% $ 149,857 $ 462,849 1.55 05/11/08 $ 1,396,343
193 57.0% 6.894% $ 348,055 $ 1,088,267 1.57 05/11/08 $ 3,243,119
194 57.0% 6.894% $ 178,862 $ 606,267 1.70 05/11/08 $ 1,666,603
195 57.0% 6.894% $ 381,894 $ 1,783,553 2.34 05/11/08 $ 3,558,422
196 57.0% 6.894% $ 848,384 $ 4,653,746 2.75 05/11/08 $ 7,905,102
197 57.0% 6.894% $ 671,940 $ 3,016,924 2.25 05/11/08 $ 6,261,021
198 57.0% 6.894% $ 553,504 $ 2,368,940 2.14 05/11/08 $ 5,157,460
199 57.0% 6.894% $ 200,615 $ 714,605 1.78 05/11/08 $ 1,869,298
200 57.0% 6.894% $ 1,392,220 $ 2,139,954 0.77 05/11/08 $12,972,475
201 57.0% 6.894% $ 114,810 $ 346,861 1.51 05/11/08 $ 1,069,779
202 57.0% 6.894% $ 568,006 $ 2,739,870 2.41 05/11/08 $ 5,292,590
203 57.0% 6.894% $ 176,445 $ 685,951 1.95 05/11/08 $ 1,644,081
204 57.0% 6.894% $ 10,877 $ 67,936 3.13 05/11/08 $ 101,347
205 57.0% 6.894% $ 456,822 $ 2,131,188 2.34 05/11/08 $ 4,256,593
206 57.0% 6.894% $ 826,631 $ 3,561,526 2.16 05/11/08 $ 7,702,407
207 57.0% 6.894% $ 493,078 $ 680,270 0.69 05/11/08 $ 4,594,418
208 57.0% 6.894% $ 58,009 $ 186,202 1.61 05/11/08 $ 540,520
209 57.0% 6.894% $ 1,155,349 $ 5,024,753 2.18 05/11/08 $10,765,353
210 57.0% 6.894% $ 55,592 $ 164,781 1.48 05/11/08 $ 517,998
211 57.0% 6.894% $ 439,903 $ 2,001,777 2.28 05/11/08 $ 4,098,942
212 57.0% 6.894% $ 594,594 $ 2,872,681 2.42 05/11/08 $ 5,540,328
213 57.0% 6.894% $ 294,880 $ 1,064,918 1.81 05/11/08 $ 2,747,642
214 57.0% 6.894% $ 345,638 $ 1,321,472 1.91 05/11/08 $ 3,220,597
215 57.0% 6.894% $ 787,958 $ 3,364,696 2.14 05/11/08 $ 7,342,061
216 57.0% 6.894% $ 258,624 $ 352,282 0.68 05/11/08 $ 2,409,817
217 57.0% 6.894% $ 219,951 $ 942,005 2.14 05/11/08 $ 2,049,471
218 57.0% 6.894% $ 241,705 $ 973,992 2.02 05/11/08 $ 2,252,166
219 57.0% 6.894% $ 164,359 $ 833,766 2.54 05/11/08 $ 1,531,473
220 57.0% 6.894% $ 594,594 $ 2,737,821 2.30 05/11/08 $ 5,540,328
221 59.7% 6.894% $ 496,120 $ 1,234,730 2.49 05/11/08 $ 4,622,767
222 59.7% 6.894% $ 227,810 $ 390,388 1.71 05/11/08 $ 2,122,699
223 59.7% 6.894% $ 260,716 $ 509,776 1.96 05/11/08 $ 2,429,311
224 59.7% 6.894% $ 151,874 $ 325,639 2.14 05/11/08 $ 1,415,133
225 59.7% 6.894% $ 845,430 $ 1,808,272 2.14 05/11/08 $ 7,877,573
226 59.7% 6.894% $ 283,497 $ 469,088 1.65 05/11/08 $ 2,641,581
227 59.7% 6.894% $ 172,123 $ 419,964 2.44 05/11/08 $ 1,603,817
228 59.7% 6.894% $ 987,178 $ 1,248,273 1.26 05/11/08 $ 9,198,363
229 65.1% 6.894% $ 2,796,257 $ 6,229,915 2.23 05/11/08 $26,055,056
230 65.0% 6.894% $ 1,948,906 $ 3,328,027 1.71 05/11/08 $18,159,585
231 59.7% 6.894% $ 217,685 $ 465,972 2.14 05/11/08 $ 2,028,357
232 59.7% 6.894% $ 313,872 $ 466,188 1.49 05/11/08 $ 2,924,608
233 59.7% 6.894% $ 1,483,299 $ 2,540,676 1.71 05/11/08 $13,821,131
234 59.7% 6.894% $ 769,493 $ 1,544,491 2.01 05/11/08 $ 7,170,006
235 59.7% 6.894% $ 723,931 $ 1,178,457 1.63 05/11/08 $ 6,745,466
236 59.7% 6.894% $ 541,682 $ 1,206,608 2.23 05/11/08 $ 5,047,307
237 59.7% 6.894% $ 329,059 $ 193,891 0.59 05/11/08 $ 3,066,121
238 59.7% 6.894% $ 779,618 $ 1,319,704 1.69 05/11/08 $ 7,264,349
239 59.7% 6.894% $ 410,059 $ 775,282 1.89 05/11/08 $ 3,820,859
240 60.2% 6.894% $ 142,761 $ 327,958 2.30 05/11/08 $ 1,330,225
241 59.7% 6.894% $ 187,311 $ 345,495 1.84 05/11/08 $ 1,745,330
242 59.7% 6.894% $ 283,497 $ 487,851 1.72 05/11/08 $ 2,641,581
243 63.0% 6.894% $ 1,948,906 $ 3,300,227 1.69 05/11/08 $18,159,585
244 29.9% 6.894% $ 489,551 $ 980,566 2.00 05/11/08 $ 4,561,557
245 59.7% 6.894% $ 946,679 $ 2,327,549 2.46 05/11/08 $ 8,820,995
246 59.7% 6.894% $ 592,307 $ 1,392,268 2.35 05/11/08 $ 5,519,018
247 59.7% 6.894% $ 1,721,234 $ 3,011,833 1.75 05/11/08 $16,038,172
248 59.7% 6.894% $ 966,928 $ 1,817,016 1.88 05/11/08 $ 9,009,679
249 59.7% 6.894% $ 420,184 $ 703,853 1.68 05/11/08 $ 3,915,201
</TABLE>
<PAGE>
$1,317,558,000 (Approximate)
GS Mortgage Securities Corporation II
Commercial Mortgage Pass-Through Certificates
Series 1998-GLII
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
<TABLE>
<CAPTION>
Cut-Off Date Principal Balance
Number of ------------------------------ Cut-Off
Loan Name Properties Property Type (000's) % by Balance Date LTV DSCR
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
URS Pool 29 Refrigerated Distribution/Warehouse $ 253,000 18.0% 59.7% 1.88x
Tharaldson Pool B 93 Hotel 183,352 13.0 55.4 2.35
Tharaldson Pool A 90 Hotel 178,671 12.7 53.7 2.35
Green Acres 1 Retail 159,524 11.3 63.0 1.54
Americold Pool (1) 29 Refrigerated Distribution/Warehouse 148,500 10.5 57.0 1.94
Pier 39 1 Retail 116,670 8.3 73.8 1.38
One Commerce Square 1 Office 111,411 7.9 82.5 1.18(2)
Marriott Desert Springs 1 Hotel 102,419 7.3 43.2 2.27
Showcase 1 Retail 78,998 5.6 67.2 1.44
Crystal City Pool 3 Office 76,608 5.4 66.6 1.61
--- ---------- ----- ---- ----
Total/Weighted Average 249 $1,409,153(3) 100.0%(3) 61.0% 1.86x
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A note representing 50% of the total loan amount is being contributed to
the Trust.
(2) The Tranche A DSCR is 1.33x, the Tranche B DSCR is 1.07x.
(3) Balances may not sum to total due to rounding.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Structural Term Sheet
- --------------------------------------------------------------------------------
$1,317,558,000 (Approximate)
GS Mortgage Securities Corporation II
Commercial Mortgage Pass-Through Certificates
Series 1998-GL II
Overview of the Certificates:
<TABLE>
<CAPTION>
Principal/
Notional Anticipated Anticipated
Balance Ratings: Avg. Life Mod. Principal Credit
Class (1) ($000's) Moody's/Fitch (yrs) (2) Dur. (yrs) (2) Window (2) Support
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Publicly Offered Securities:
A-1 $ 278,000 Aaa/AAA 5.0 4.02 6/98 - 11/07 31.0%
A-2 694,315 Aaa/AAA 9.7 6.99 11/07 - 4/08 31.0
B 91,595 Aa2/AA 9.9 7.07 4/08 - 5/08 24.5
C 84,549 A2/A 10.0 7.03 5/08 18.5
D 98,641 Baa2/BBB 10.0 6.94 5/08 11.5
E 70,458 Baa3/BBB- 10.0 6.88 5/08 6.5
X 1,148,459 Aaa/AAA
Privately Offered Securities:
F 63,411 Ba2/BB 5/08 - 6/10 2.0
G 28,184 B2/B 6/10
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Other Privately Offered Certificates are not represented in this table.
(2) Assuming payment in full based on 0 CPR at the ARD. See Scenario 1 in the
Prospectus Supplement.
o Property appraisals included in the prospectus supplement on CD-ROM
Key Features:
Mortgage Loan Seller: GS Mortgage Securities Corporation II
Underwriter: Goldman, Sachs & Co.
Master Servicer: GMAC Commercial Mortgage Corporation
("GMACCM")
Special Servicer: GMACCM
Trustee: LaSalle National Bank
Fiscal Agent: ABN AMRO Bank N.V.
Pricing: May 14, 1998
Settlement: May 21, 1998
Cut-Off Date: May 11, 1998
First Distribution Date: June 15, 1998
Distribution Date: The second Business Day following the 11th
day of each month
Interest Accrual Period: Prior calendar month
Day Count: 30/360
Rated Final Distribution Date: April 13, 2031
Clean Up Call: 1% of the Cut-Off Date principal balance
ERISA Eligible: The Underwriter believes that the conditions
to the applicability of the Underwriter's
exemption will generally be met with respect
to Classes A-1, A-2 and X-1
Structure: Sequential Pay
Tax Treatment: REMIC
Rating Agencies: Moody's, Fitch
Servicer Advancing: Yes
Minimum Denomination: $10,000
Delivery: DTC/CEDEL/Euroclear
================================================================================
Selected Loan Data:
Cut-off Date Balance: (as of May 11, 1998) $1,409,152,997
Number of Mortgage Loans: 10
Number of Properties: 249
Weighted Average Coupon: 7.00%
Weighted Average DSCR: 1.86x
Weighted Average Cut-Off Date LTV: 61.0%
Weighted Average LTV at ARD (1): 48.3%
Weighted Average Remaining Term to ARD: 120 months
Weighted Average Seasoning: 3.5 months
(1) "ARD" is the Anticipated Repayment Date.
Overview of the Loans
<TABLE>
<CAPTION>
Cut-Off Date Principal Balance
--------------------------------
Number of % by
Loan Name Properties Property Type (000's) Balance LTV DSCR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
URS Pool 29 Refrigerated Dist. $253,000 18.0% 59.7% 1.88x
Warehouse
Tharaldson B Pool 93 Hotel 183,352 13.0 55.4 2.35
Tharaldson A Pool 90 Hotel 178,671 12.7 53.7 2.35
Green Acres 1 Retail 159,524 11.3 63.0 1.54
Americold Pool (1) 29 Refrigerated Dist. 148,500 10.5 57.0 1.94
Warehouse
Pier 39 1 Retail 116,670 8.3 73.8 1.38
One Commerce Square 1 Office 111,411 7.9 82.5 1.18(2)
Marriott Desert Springs 1 Hotel 102,419 7.3 43.2 2.27
Showcase 1 Retail 78,998 5.6 67.2 1.44
Crystal City Pool 3 Office 76,608 5.4 66.6 1.61
----- ----------- ---- ---- -----
Total/Weighted Avg. 249 $1,409,153(3) 100%(3) 61.0% 1.86x
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) A note representing 50% of the total loan amount is being contributed to
the Trust.
(2) The Tranche A DSCR is 1.33x, the Tranche B DSCR is 1.07x.
(3) Balances may not sum to total due to rounding.
Geographic Diversification
Cut-Off Date Principal Balance
----------------------------------------
Geographic Number of % by
Distribution Properties (000's) Balance LTV
- --------------------------------------------------------------------------------
California 6 $ 235,948 16.7% 59.4%
New York 2 182,524 13.0 63.0
Pennsylvania 3 145,346 10.3 76.9
Illinois 38 83,333 5.9 57.0
Virginia 4 81,448 5.8 66.3
Nevada 1 78,998 5.6 67.2
Georgia 6 69,151 4.9 62.2
Ohio 25 57,382 4.0 59.7
Texas 25 55,489 4.0 54.5
Other 139 419,535 29.8 56.2
--- ---------- ----- -----
Total/Wtd. Avg. 249 $1,409,153 100.0% 61.0%
- --------------------------------------------------------------------------------
Diversification by Property Type
Cut-Off Date Principal Balance
----------------------------------
Number of % by
Property Type Properties ($000's) Balance DSCR LTV
- --------------------------------------------------------------------------------
Hotel 184 $ 464,443 33.0% 2.33x 52.8%
Refrigerated Distribution/Warehouse 58 401,500 28.5 1.90 59.2
Retail 3 355,192 25.2 1.47 67.5
Office 4 188,019 13.3 1.40 76.0
--- ---------- ---- ----- ----
Total/Weighted Avg. 249 $1,409,153 100.0% 1.86x 61.0%
- --------------------------------------------------------------------------------
(1) Balances may not sum to total due to rounding.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Structural Term Sheet
- --------------------------------------------------------------------------------
$1,317,558,000 (Approximate)
GS Mortgage Securities Corporation II
Commercial Mortgage Pass-Through Certificates
Series 1998-GL II
Overview of Certificates
Approximate Securities Structure
--------------------------------
<TABLE>
<CAPTION>
Anticipated
Principal/Notional Anticipated Ratings: Avg. Principal Credit
Class (1) Balance Moody's/Fitch % of Total Description Life (yrs) (2) Window (2) Support
- ---------------------------------------------------------------------------------------------------------------------------------
Publicly Offered Securities:
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 $ 278,000,000 Aaa/AAA 19.7% Fixed 6.312% 5.0 06/98 - 11/07 31.0%
A-2 694,315,000 Aaa/AAA 49.3 Fixed 6.562% 9.7 11/07 - 04/08 31.0
B 91,595,000 Aa2/AA 6.5 WAC less 0.392% 9.9 04/08 - 05/08 24.5
C 84,549,000 A2/A 6.0 WAC less 0.225% 10.0 05/08 18.5
D 98,641,000 Baa2/BBB 7.0 WAC 10.0 05/08 11.5
E 70,458,000 Baa3/BBB- 5.0 WAC 10.0 05/08 6.5
X 1,148,459,000 Aaa/AAA WAC/IO
Privately Offered Securities:
F 63,411,000 Ba2/BB 4.5 WAC 11.6 05/08 - 06/10 2.0
G 28,183,997 B2/B 2.0 WAC 12.1 06/10
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Other Privately Offered Certificates are not represented in this table.
(2) Assuming payment in full based on 0 CPR at the ARD. See Scenario 1 in the
Prospectus Supplement.
GRAPHIC OMITTED: This chart intends to reflect the size of each Class and
the approximate Certificate coupon under the Scenario I base case in the
Prospectus Supplement.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Structural Term Sheet
- --------------------------------------------------------------------------------
$1,317,558,000 (Approximate)
GS Mortgage Securities Corporation II
Commercial Mortgage Pass-Through Certificates
Series 1998-GL II
Structural Overview
Principal Cash Flow Timeline for Certificates (1)
GRAPHIC OMITTED: CHART DEPICTING PRINCIPAL CASH FLOW TIMELINE FOR CERTIFICATES.
(1) Assuming payment in full at the ARD, based on 0 CPR. See Scenario 1 in the
Prospectus Supplement.
Note: Time 0 is assumed to be June 15, 1998.
Final Principal Payment Date for Certificates (1)
GRAPHIC OMITTED: CHART DEPICTING FINAL PRINCIPAL PAYMENT DATE FOR CERTIFICATES.
Note: Time 0 is assumed to be June 15, 1998.
(1) Assuming payment in full at the ARD based on 0 CPR. See Scenario 1 in the
Prospectus Supplement.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Structural Term Sheet
- --------------------------------------------------------------------------------
$1,317,558,000 (Approximate)
GS Mortgage Securities Corporation II
Commercial Mortgage Pass-Through Certificates
Series 1998-GL II
Structural Overview (continued)
o The Mortgage Pool will consist of ten Mortgage Loans.
o Available Funds will be allocated in the following payment priorities:
Class A-1, A-2, B, C, D, E, F and G
o All Classes will pay interest on a 30/360 basis.
o Mortgage Loan(s) are locked out from prepayment until a minimum of 2 years
from the closing of the securitization. After the lockout period, each
Mortgage Loan(s) is prepayable based on full U.S. Treasury defeasance of
anticipated loan cash flows
Call Protection Time Line
GRAPHIC OMITTED: CHART DEPICTING CALL PROTECTION TIME LINE.
Note: Time 0 is assumed to be the closing date, May 21, 1998.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Structural Term Sheet
- --------------------------------------------------------------------------------
$1,317,558,000 (Approximate)
GS Mortgage Securities Corporation II
Commercial Mortgage Pass-Through Certificates
Series 1998-GL II
Overview of the Loans
<TABLE>
<CAPTION>
Cut-Off Date
Balance Property Number of Underwritten Interest
Loan Name (000's) Type Properties NCF (000's) Rate
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
URS Pool $ 253,000 Refrigerated Dist. 29 $ 40,350 6.894%
Warehouse
Tharaldson Pool B 183,352 Hotel 93 36,701 6.876
Tharaldson Pool A 178,671 Hotel 90 35,628 6.876
Green Acres 159,524 Retail 1 19,323 6.750
Americold Pool 148,500(3) Refrigerated Dist. 29 48,890(4) 6.894
Warehouse
Pier 39 116,670 Retail 1 13,154 7.107
One Commerce 111,411 Office 1 17,574(5) 6.995
Square
Marriott Desert 102,419 Hotel 1 21,500 7.800
Springs
Showcase 78,998 Retail 1 9,902 7.523
Crystal City Pool 76,608 Office 3 9,774 6.904
------- --- ------ -----
Total/Weighted Avg. $1,409,153(8) 249 $252,797(8) 7.000%
- --------------------------------------------------------------------------------------
<CAPTION>
Cut-Off
Amort Date ARD Lockout
Loan Name (yrs) DSCR (1) LTV ARD Balance LTV Term (2) ARD
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
URS Pool 25 1.88x 59.7% $ 199,117 47.0% 2 yrs 05/11/08
Tharaldson Pool B 25 2.35 55.4 144,503 43.7 2 yrs 02/11/08
Tharaldson Pool A 25 2.35 53.7 140,908 42.3 2 yrs 02/11/08
Green Acres 30 1.54 63.0 136,831 54.0 2 yrs 02/11/08
Americold Pool 25 1.94 57.0 116,873 44.9 2 yrs 05/11/08
Pier 39 30 1.38 73.8 100,516 64.0 2 yrs 04/11/08
One Commerce 30(6) 1.18(7) 82.5 68,866 51.0 2 yrs 04/11/08
Square
Marriott Desert 25 2.27 43.2 75,085 31.7 2 yrs 06/11/10
Springs
Showcase 28 1.44 67.2 67,184 57.2 2 yrs 11/11/07
Crystal City Pool 30 1.61 66.6 65,926 57.3 2 yrs 11/11/07
---- ---- ---------- ----
Total/Weighted Avg. 1.86x 61.0% $1,115,808(8) 48.3%
- -------------------------------------------------------------------------------------
</TABLE>
(1) Based on Underwritten Net Cash Flow.
(2) Lockout is from the date of the securitization.
(3) A note representing 50% of the total loan amount is being contributed to
the trust.
(4) The total Americold Pool Underwritten Net Cash Flow is shown.
(5) The Underwritten Net Cash Flow includes that attributable to the above
market IBM rent component.
(6) Tranche A amortizes over a 30-year term, whereas Tranche B amortizes over
a 53-month term (sized to be amortized by the above market IBM rent
component).
(7) DSCR for Tranche A of the One Commerce Square Loan is 1.33x, DSCR for
Tranche B of the Commerce Square Loan is 1.07x.
(8) Balances may not sum to total due to rounding.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Structural Term Sheet
- --------------------------------------------------------------------------------
$1,317,558,000 (Approximate)
GS Mortgage Securities Corporation II
Commercial Mortgage Pass-Through Certificates
Series 1998-GL II
Credit-Enhancing Loan Features
<TABLE>
<CAPTION>
Principal Low DSCR Reserve Lock Box/ Cross
Loan Repayment Reserve Accounts (1) Sweep Account Collateralization Reporting
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
URS Pool ARD (2) Yes DM/Cap Ex Sweep Account Yes M/Q/Y
Tharaldson Pool B ARD (2) No DM/Cap Ex Sweep Account Yes M/Q/Y
Tharaldson Pool A ARD (2) No DM/Cap Ex Sweep Account Yes M/Q/Y
Green Acres ARD (2) Yes DM/Cap Ex Hard Lockbox N.A. M/Q/Y
Americold Pool ARD (2) Yes DM/Cap Ex Hard Lockbox Yes M/Q/Y
Pier 39 ARD (2) Yes DM/Cap Ex Hard Lockbox N.A. M/Q/Y
One Commerce Square ARD (2) Yes TI/LC/DM/Cap Ex Hard Lockbox N.A. M/Q/Y
Marriott Desert Springs ARD (2) Yes DS/Cap Ex Springing Lockbox N.A. M/Q/Y
Showcase ARD (2) Yes Cap Ex Sweep Account N.A. M/Q/Y
Crystal City Pool ARD (2) Yes TI/LC/DS/Cap Ex Springing Lockbox Yes M/Q/Y
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reserve accounts include up front and ongoing reserves. DM = Deferred
Maintenance, TI = Tenant Improvements, LC = Leasing Commissions, DS = Debt
Service, Cap Ex = Capital Expenditures.
(2) At the Anticipated Repayment Date, if the loan has not been repaid in
full, hyperamortization commences. Specifically, the interest rate
increases by 2% and all excess cash flow is used to reduce the outstanding
principal balance; the additional 2% interest is accrued until the
principal balance is zero.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Structural Term Sheet
- --------------------------------------------------------------------------------
$1,317,558,000 (Approximate)
GS Mortgage Securities Corporation II
Commercial Mortgage Pass-Through Certificates
Series 1998-GL II
Overview of the Collateral
Geographic Diversification by
Cut-Off Date Loan Amounts
GRAPHIC OMITTED: PIE CHART DEPICTING GEOGRAPHIC DIVERSIFICATION BY CUT-OFF DATE
LOAN AMOUNTS AND PROVIDING THE FOLLOWING INFORMATION:
California 17%
New York 13%
Pennsylvania 10%
Illinois 6%
Virginia 6%
Nevada 6%
Georgia 5%
Ohio 4%
Texas 4%
Other 29%
Property-Type Distribution by
Cut-Off Date Loan Amounts
GRAPHIC OMITTED: PIE CHART DEPICTING PROPERTY-TYPE DISTRIBUTION BY CUT-OFF DATE
LOAN AMOUNTS AND PROVIDING THE FOLLOWING INFORMATION:
Hotel 33.0%
Refrigerated Distribution/Warehouse 28.5%
Retail 26.2%
Office 12.2%
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Structural Term Sheet
- --------------------------------------------------------------------------------
$1,317,558,000 (Approximate)
GS Mortgage Securities Corporation II
Commercial Mortgage Pass-Through Certificates
Series 1998-GL II
Additional Loan Information
o Removal of the Special Servicer
The Pooling Agreement provides that holders of Certificates evidencing
greater than 50% of the Percentage Interests of the most subordinate Class
of Certificates then outstanding may replace the Special Servicer provided
that each Rating Agency confirms that such replacement will not cause a
qualification, withdrawal or downgrading of the then-current ratings
assigned to any Class of Certificates.
o Appraisal Reductions
With respect to the first Distribution Date following the earliest of (i)
the third anniversary of the date on which an extension of the maturity
date of a Mortgage Loan becomes effective as a result of a modification of
such Mortgage Loan by the Special Servicer, which extension does not
change the amount of Monthly Payments on the Mortgage Loan, (ii) 90 days
after an uncured delinquency occurs in respect of a Mortgage Loan, (iii)
90 days after the date on which a reduction in the amount of Monthly
Payments on a Mortgage Loan, or a change in any other material economic
term of the Mortgage Loan, becomes effective as a result of a modification
of such Mortgage Loan by the Special Servicer, (iv) 60 days after a
receiver has been appointed, (v) immediately after a borrower declares
bankruptcy and (vi) immediately after a Mortgage Loan becomes an REO
Mortgage Loan each, an "Appraisal Reduction Event"), an "Appraisal
Reduction Amount" will be calculated. The Appraisal Reduction Amount for
any Distribution Date and for any Mortgage Loan as to which any Appraisal
Reduction Event has occurred will be an amount equal to the excess of (a)
the outstanding Stated Principal Balance of such Mortgage Loan as of the
last day of the related Collection Period over (b) the excess of (i) 90%
of the sum of the appraised values of the related Mortgaged Properties as
determined by independent MAI appraisals (the costs of which shall be paid
by the Master Servicer as an Advance) over (ii) the sum of (A) to the
extent not previously advanced by the Master Servicer, the Trustee or the
Fiscal Agent, all unpaid interest on such Mortgage Loan at a per annum
rate equal to the Mortgage Rate, (B) all unreimbursed Advances and
interest thereon at the Advance Rate in respect of such Mortgage Loan and
(C) all currently due and unpaid real estate taxes and assessments and
insurance premiums and all other amounts, including, if applicable, ground
rents, due and unpaid under the Mortgage Loan (which taxes, premiums and
other amounts have not been the subject of an Advance). If no independent
MAI appraisal has been obtained within twelve months prior to the first
Distribution Date on or after an Appraisal Reduction Event has occurred,
the Special Servicer will be required to estimate the value of the related
Mortgaged Properties (the "Special Servicer's Appraisal Reduction
Estimate") and such estimate will be used for purposes of determining the
Appraisal Reduction Amount. Within 60 days after the Special Servicer
receives notice or is otherwise aware of an Appraisal Reduction Event, the
Special Servicer will be required to obtain an independent MAI appraisal,
the cost of which will be paid by the Master Servicer as a Property
Advance.
o Special Servicer/Loan Modifications
The initial Special Servicer will be GMACCM. The Special Servicer will be
responsible for servicing loans that, in general, are in default or are in
imminent default and for administering REO properties. The Special
Servicer may modify such loans, if such modification is consistent with
the terms of the Pooling Agreement and, in the sole good faith of the
Special Servicer's judgment, such modification is in the best interests of
the Certificateholders.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
URS Pool Loan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loan Information
- --------------------------------------------------------------------------------
Principal Balance: Original Cut-Off Date(1)
-------- ---------------
$ 253,000,000 $ 253,000,000
Origination Date: April 22, 1998
Interest Rate: 6.894%
Amortization: 25 years
Hyperamortization: After the ARD, interest rate increases to 8.894% and
all excess cash flow is used to reduce outstanding
principal balance; the additional 2% interest is
accrued until principal balance is zero.
Anticipated Repayment
Date ("ARD"): May 11, 2008
Maturity Date: May 11, 2023
The Borrower/Sponsor: URS Real Estate, L.P., a limited-purpose entity
affiliated with Vornado Realty L.P. and Crescent Real
Estate Equities Company.
Call Protection: Two-year prepayment lockout from the date of
securitization with U.S. Treasury defeasance
thereafter until one payment date prior to the ARD.
Cut-Off Date Loan/SF: $57
Up-Front Reserves: Deferred Maintenance: $1,188,894
Ongoing Reserves: CapEx: $5,722,543/year
Low Debt Service: cash flow in excess of debt service
is escrowed if the DSCR falls below 1.25x.
Collection Account: Sweep Lockbox
Cross-Collateralization/
Default: Yes
Partner Loans: None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Property Information
- --------------------------------------------------------------------------------
Single Asset/Portfolio: Portfolio of 29 assets
Property Type: Refrigerated Distribution/Warehouse
Property Location by
Allocated Loan Amount:
GRAPHIC OMITTED: PIE CHART DEPICTING PROPERTY LOCATION BY ALLOCATED LOAN AMOUNT
AND PROVIDING THE FOLLOWING INFORMATION:
Georgia 26.13%
Alabama 9.67%
Indiana 9.09%
New York 9.09%
Tennessee 8.03%
North Carolina 6.94%
Arkansas 5.31%
Wisconsin 4.42%
Missouri 3.59%
California 2.76%
Kansas 1.96%
Virginia 1.91%
Oklahoma 1.54%
Maine 1.32%
South Carolina 1.32%
The Collateral: 29 cold storage warehouses
SF: 4,427,395
Cubic Feet: 113,533,427
Property Management: URS Logistics, Inc.
(dba Americold Logistics)
1997 Net Operating Income: $54,216,403
Underwritten Net Cash Flow: $40,349,956
Appraised Value: $423,450,000
Appraised By: Landauer Associates, Inc.
Appraisal Date: March 1, 1998
Cut-Off Date LTV: 59.7%
DSCR (2): 1.88x
- --------------------------------------------------------------------------------
(1) May 11, 1998.
(2) Based on Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
URS Pool Loan
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Property Description
- ------------------------------------------------------------------------------------------------------------------
Year Built / Square Cubic
Property Location Property Type Renovated Footage Footage
==================================================================================================================
<S> <C> <C> <C> <C> <C>
1. Albertville Albertville, AL Regional Production 1993 64,490 2,192,660
2. Augusta Augusta, GA Regional Distribution 1971/1984 48,284 1,111,663
3. Birmingham Birmingham, AL Regional Distribution 1962/1992 85,893 2,015,990
4. Charlotte Central Charlotte, NC Regional Distribution 1928/1969 65,308 1,028,482
5. Charlotte North Charlotte, NC Regional Distribution 1964/1992 164,820 4,135,790
6. Chelsea Memphis Memphis, TN Captive Production N/A 35,750 585,687
7. Columbia Columbia, SC Regional Distribution 1971/1992 63,742 1,609,950
8. Ft. Smith Fort Smith, AR Regional Production 1960/1989 78,249 1,403,467
9. Gadsden Gadsden, AL Regional Production 1991/1994 118,953 3,970,232
10. Gateway Atlanta, GA National Distribution 1972/1986 475,532 11,120,249
11. Indianapolis Indianapolis, IN National Distribution 1979/1990 311,671 9,110,009
12. Lakewood Atlanta, GA National Distribution 1962/1968 157,092 2,852,540
13. Leesport Leesport, PA National Distribution 1993/1994 168,872 5,753,042
14. Marshall Marshall, MO Captive Production 1985/1992 150,618 4,828,460
15. Memphis Parkway Memphis, TN Regional Distribution 1962/1967 246,169 5,603,013
16. Montezuma Montezuma, GA Captive Production 1965/1990 177,693 4,236,747
17. Montgomery [New] Montgomery, AL Regional Distribution 1989/1991 58,074 1,247,856
18. Murfreesboro Murfreesboro, TN Captive Production 1982/1988 106,500 2,934,000
19. Norfolk Norfolk, VA Regional Distribution 1971/1975 82,984 1,924,376
20. Oklahoma [1] Oklahoma City, OK Regional Production 1928/1961 64,891 721,281
21. Oklahoma [2] Oklahoma City, OK Regional Production 1968/1971 74,126 1,374,001
22. Portland Portland, ME Regional Production 1952/1963 151,649 1,834,971
23. Syracuse Syracuse, NY National Distribution 1960/1987 447,204 11,832,633
24. Tarboro Tarboro, NC Captive Production 1987 104,047 3,433,536
25. Tomah Tomah, WI Captive Production 1989/1994 161,947 4,569,800
26. Turlock 1 Turlock, CA Regional Production 1953/1968 141,287 2,500,236
27. Westgate Atlanta, GA National Distribution 1990/1993 334,862 11,454,919
28. West Memphis West Memphis, AR Regional Distribution 1985/1995 166,376 5,339,012
29. Wichita Wichita, KS Regional Production 1974/1979 126,312 2,808,825
---------- -----------
Total 4,427,395 113,533,427
==================================================================================================================
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
URS Pool Loan
- --------------------------------------------------------------------------------
Property Description
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cut-Off Date
Allocated Loan Appraised Underwritten
Property Amount Value Cut-Off Date LTV Net Cash Flow DSCR
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1 Albertville $ 5,854,960 $ 9,800,000 59.7% $ 1,234,730 2.49x
2 Augusta 2,688,502 4,500,000 59.7 390,388 1.71
3 Birmingham 3,076,841 5,150,000 59.7 509,776 1.96
4 Charlotte Central 1,792,335 3,000,000 59.7 325,639 2.14
5 Charlotte North 9,977,330 16,700,000 59.7 1,808,272 2.14
6 Chelsea Memphis 2,569,013 4,300,000 59.7 465,972 2.14
7 Columbia 3,345,692 5,600,000 59.7 469,088 1.65
8 Ft. Smith 2,031,313 3,400,000 59.7 419,964 2.44
9 Gadsden 11,650,176 19,500,000 59.7 1,248,273 1.25
10 Gateway 33,000,000 50,700,000 65.1 6,229,915 2.23
11 Indianapolis 23,000,000 35,400,000 65.0 3,328,027 1.71
12 Lakewood 3,704,159 6,200,000 59.7 466,188 1.49
13 Leesport 17,505,136 29,300,000 59.7 2,540,676 1.71
14 Marshall 9,081,163 15,200,000 59.7 1,544,491 2.01
15 Memphis Parkway 8,543,462 14,300,000 59.7 1,178,457 1.63
16 Montezuma 6,392,661 10,700,000 59.7 1,206,608 2.23
17 Montgomery [New] 3,883,392 6,500,000 59.7 193,891 0.59
18 Murfreesboro 9,200,652 15,400,000 59.7 1,319,704 1.69
19 Norfolk 4,839,304 8,100,000 59.7 775,282 1.89
20 Oklahoma [1] 1,684,795 2,800,000 60.2 327,958 2.30
21 Oklahoma [2] 2,210,546 3,700,000 59.7 345,495 1.84
22 Portland 3,345,692 5,600,000 59.7 487,851 1.72
23 Syracuse 23,000,000 36,500,000 63.0 3,300,227 1.69
24 Tarboro 5,777,434 19,300,000 29.9 980,566 2.00
25 Tomah 11,172,220 18,700,000 59.7 2,327,549 2.46
26 Turlock 1 6,990,106 11,700,000 59.7 1,392,268 2.35
27 Westgate 20,313,127 34,000,000 59.7 3,011,833 1.75
28 West Memphis 11,411,198 19,100,000 59.7 1,817,016 1.88
29 Wichita 4,958,793 8,300,000 59.7 703,853 1.68
------------ ------------ ----- ------------ ----
Total $253,000,000 $423,450,000 59.7% $ 40,349,956 1.88x
===========================================================================================================================
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Tharaldson Pool B Loan
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Loan Information
- ----------------------------------------------------------------------------------------------
Principal Balance: Original Cut-Off Date (1)
-------- ----------------
<S> <C> <C>
$184,293,000 $183,352,232
Origination Date: January 20, 1998
Interest Rate: 6.876%
Amortization: 25 years
Hyperamortization: After the ARD, interest rate increases
to 8.876% and all excess cash flow is
used to reduce outstanding principal
balance; the additional 2% interest is
accrued until principal balance is zero.
Anticipated Repayment
Date ("ARD"): February 11, 2008
Maturity Date: February 11, 2023
The Borrower/Sponsor: 94 separate limited-purpose entities
controlled by Tharaldson Motels, Inc.
Call Protection: Two-year prepayment lockout from the
date of securitization with U.S. Treasury
defeasance thereafter until the ARD.
Cut-Off Date Loan/Room: $31,299
Up-Front Reserves: Deferred Maintenance: $ 221,009
Environmental: $ 50,938
Seasonality: $ 1,299,196
Tax Liability: $ 1,243,143
Ongoing Reserves: FF&E: 5% of gross revenue
Seasonality: maintain at least one month's
debt service ($1,299,196) at all times
Collection Account: Sweep Lockbox
Cross-Collateralization/
Default: Yes
Partner Loans: None
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Property Information
- --------------------------------------------------------------------------------
Single Asset/Portfolio: Portfolio of 93 assets
Property Type: Limited-Service Hotels
Property Location by
Allocated Loan Amount:
GRAPHIC OMITTED: PIE CHART DEPICTING PROPERTY LOCATION BY ALLOCATED LOAN AMOUNT
AND PROVIDING THE FOLLOWING INFORMATION:
ND 5.7%
KS 5.8%
IA 6.3%
OH 13.4%
IL 17.2%
TX 17.3%
Other 34.3%
Years Built: 1988 - 1996
1997 Occupancy: 76%
1997 Average Daily Rate: $56.07
1997 REVPAR: $42.67
The Collateral: 93 limited-service hotels with
approximately 5,858 rooms
Franchises: Comfort Inn
Comfort Suites
Country Inn & Suites
Courtyard
Days Inn
Fairfield Inn
Hampton Inn
Holiday Inn Express
Residence Inn
Super 8
Property Management: Tharaldson Property Management, Inc.
1997 Net Operating Income: $34,696,365
Underwritten Net Cash Flow: $36,701,015
Appraised Value: $331,000,000
Appraised By: Hospitality Valuation Services, Inc.
Appraisal Date: January 1, 1998
Cut-Off Date LTV: 55.4%
DSCR (2): 2.35x
- --------------------------------------------------------------------------------
(1) May 11, 1998.
(2) Based on Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Tharaldson Pool B Loan
- --------------------------------------------------------------------------------
Property Description
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cut-Off Date Wtd. Avg.
Number of Number of Allocated Loan Cut-Off Date Underwritten Net
Franchise Hotels Rooms Amount Appraised Value LTV Cash Flow DSCR
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Comfort Inn 19 1,097 $ 29,579,231 $ 53,900,000 56.0% $ 5,819,260 2.31x
Comfort Suites 5 306 10,271,299 18,400,000 56.3 1,912,947 2.19
Country Inn & Suites 2 126 4,083,050 8,000,000 51.1 996,749 2.88
Courtyard 3 234 8,800,843 15,600,000 57.6 1,796,479 2.40
Days Inn 1 62 1,480,404 2,200,000 67.3 227,774 1.81
Fairfield Inn 39 2,427 76,423,874 135,200,000 57.4 15,320,481 2.36
Hampton Inn 10 682 17,987,706 35,700,000 50.9 3,930,139 2.57
Holiday Inn Express 4 256 9,265,460 16,300,000 57.4 1,775,518 2.25
Residence Inn 6 442 20,821,168 36,400,000 57.8 3,974,502 2.25
Super 8 4 226 4,639,197 9,300,000 51.0 947,166 2.40
--- ------ ------------- ------------- ---- ------------ ----
Total/Weighted
Average 93 5,858 $ 183,352,232 $ 331,000,000 55.4% (1) $ 36,701,015 2.35x
====================================================================================================================================
<CAPTION>
Cut-Off Date Wtd. Avg.
Number of Number of Allocated Loan Cut-Off Date Underwritten Net
State Hotels Rooms Amount Appraised Value LTV Cash Flow DSCR
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
CO 3 193 $ 6,123,580 $ 11,500,000 54.1% $ 1,180,537 2.27x
IA 8 453 11,521,882 23,300,000 49.8 2,357,253 2.41
IL 14 909 31,569,021 55,500,000 57.6 5,807,846 2.16
IN 5 308 8,863,522 15,200,000 60.5 1,609,658 2.14
KS 6 396 10,561,808 17,100,000 63.3 2,338,664 2.60
KY 3 178 5,861,923 9,900,000 59.3 1,172,558 2.35
MI 3 192 5,042,129 10,000,000 50.6 1,197,666 2.79
MN 5 299 8,516,303 14,800,000 58.3 1,841,923 2.54
MO 2 109 3,667,184 6,900,000 53.2 754,583 2.42
MT 3 179 5,423,174 9,500,000 57.7 1,085,999 2.36
ND 7 443 10,364,819 20,500,000 50.8 2,160,030 2.45
NE 2 123 4,592,437 8,400,000 54.8 957,467 2.45
OH 10 627 24,654,499 40,500,000 61.5 4,499,531 2.15
OK 4 267 9,625,612 18,100,000 53.8 2,109,717 2.58
TX 14 960 31,743,128 59,800,000 53.5 6,564,814 2.43
WI 3 166 3,672,158 6,800,000 54.2 727,795 2.33
WY 1 56 1,549,052 3,200,000 48.4 334,974 2.54
--- ------- ------------- -------------- ---- ------------- ----
Total/Weighted
Average 93 5,858 $ 183,352,232 $ 331,000,000 55.4% (1) $ 36,701,015 2.35x
====================================================================================================================================
</TABLE>
(1) Cut-Off Date LTV is calculated using a simple average.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Tharaldson Pool A Loan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loan Information
- --------------------------------------------------------------------------------
Principal Balance: Original Cut-Off Date (1)
-------- ----------------
$179,508,000 $178,671,275
Origination Date: January 20, 1998
Interest Rate: 6.876%
Amortization: 25 years
Hyperamortization: After the ARD, interest rate increases to 8.876% and
all excess cash flow is used to reduce outstanding
principal balance; the additional 2% interest is
accrued until principal balance is zero.
Anticipated Repayment
Date ("ARD"): February 11, 2008
Maturity Date: February 11, 2023
The Borrower/Sponsor: 92 separate limited-purpose entities
controlled by Tharaldson Motels, Inc.
Call Protection: Two-year prepayment lockout from the
date of securitization with U.S.
Treasury defeasance thereafter until
the ARD.
Cut-Off Date Loan/Room: $30,553
Up-Front Reserves: Deferred Maintenance: $ 267,469
Environmental: $ 61,250
Seasonality: $1,265,463
Tax Liability: $1,276,281
Ongoing Reserves: FF&E: 5% of gross revenue
Seasonality: maintain at least one
month's debt service ($1,265,463) at
all times
Collection Account: Sweep Lockbox
Cross-Collateralization/
Default: Yes
Partner Loans: None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Property Information
- --------------------------------------------------------------------------------
Single Asset/Portfolio: Portfolio of 90 assets
Property Type: Limited-Service Hotels
Property Location by
Allocated Loan Amount:
GRAPHIC OMITTED: PIE CHART DEPICTING PROPERTY LOCATION BY ALLOCATED LOAN AMOUNT
AND PROVIDING THE FOLLOWING INFORMATION:
IN 7.8% TX 13.3% IL 25.0% OTHER 19.8%
MN 8.4% OH 18.3% WI 7.4%
Years Built: 1988 - 1997
1997 Occupancy: 76%
1997 Average Daily Rate: $55.76
1997 REVPAR: $42.41
The Collateral: 90 limited-service hotels with
approximately 5,848 rooms
Franchises: Comfort Inn
Comfort Suites
Country Inn & Suites
Courtyard
Fairfield Inn
Hampton Inn
Homewood Suites
Residence Inn
Sleep Inn
Super 8
Tharaldson Inn & Suites
Property Management: Tharaldson Property Management,
Inc.
1997 Net Operating Income: $33,817,013
Underwritten Net Cash Flow: $35,628,417
Appraised Value: $333,000,000
Appraised By: Hospitality Valuation Services,
Inc.
Appraisal Date: January 1, 1998
Cut-Off Date LTV: 53.7%
DSCR (2): 2.35x
- --------------------------------------------------------------------------------
Property Description
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cut-Off Date Wtd. Avg.
Number of Number of Allocated Loan Cut-Off Underwritten Net
Franchise Hotels Rooms Amount Appraised Value Date LTV Cash Flow DSCR
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Comfort Inn 22 1,311 $ 35,315,615 $ 64,300,000 56.2% $ 6,606,045 2.20x
Comfort Suites 4 247 8,880,413 17,000,000 52.4 1,739,979 2.31
Country Inn & Suites 3 178 4,246,115 8,500,000 51.3 901,401 2.50
Courtyard 3 232 8,760,972 15,400,000 57.9 1,637,061 2.20
Fairfield Inn 35 2,302 72,911,552 132,000,000 55.6 15,272,264 2.46
Hampton Inn 12 789 24,071,273 43,500,000 56.0 4,457,368 2.18
Homewood Suites 1 66 2,660,541 4,900,000 54.3 530,757 2.35
Independent 1 121 2,986,016 9,700,000 30.8 596,736 2.35
Residence Inn 5 354 13,262,889 26,900,000 50.9 2,845,856 2.52
Sleep Inn 2 123 3,071,616 5,500,000 56.6 619,281 2.38
Super 8 1 61 1,075,961 2,000,000 53.8 185,907 2.03
Tharaldson Inn & Suites 1 64 1,428,311 3,300,000 43.3 235,760 1.94
--- ----- ------------- ------------- ---- ------------ ----
Total/Weighted Average 90 5,848 $ 178,671,275 $ 333,000,000 53.7% (1) $ 35,628,415 2.35x
====================================================================================================================================
</TABLE>
(1) May 11, 1998.
(2) Based on Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Tharaldson Pool A Loan
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cut-Off Date
Number of Number of Allocated Loan Wtd. Avg. Underwritten Net
State Hotels Rooms Amount Appraised Value Cut-Off Date LTV Cash Flow DSCR
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
AR 2 122 $ 3,314,478 $ 5,700,000 58.4% $ 728,330 2.59x
IA 7 446 10,929,815 22,800,000 49.7 2,393,825 2.58
IL 23 1,445 44,746,450 79,900,000 56.5 8,619,687 2.27
IN 8 511 13,921,804 27,300,000 52.0 2,657,275 2.25
KY 1 68 2,744,149 4,900,000 56.0 577,626 2.48
MI 1 57 2,188,750 4,000,000 54.7 498,473 2.68
MN 5 458 15,078,387 32,500,000 48.9 3,273,690 2.55
MT 3 184 5,376,820 9,900,000 54.6 1,130,862 2.47
ND 3 176 3,274,665 7,400,000 45.1 798,828 2.87
OH 15 950 32,727,735 57,200,000 58.3 5,924,268 2.13
OK 2 128 3,870,873 7,400,000 52.3 855,355 2.60
SD 2 128 3,440,886 7,200,000 48.4 694,620 2.38
TX 11 726 23,745,797 43,200,000 55.8 4,821,418 2.39
WI 7 449 13,310,666 23,600,000 57.0 2,654,158 2.35
- -- --- ------ ------------- -------------- ---- ------------- ----
Total/Wtd.
Avg. 90 5,848 $ 178,671,275 $ 333,000,000 53.7% (1) $ 35,628,415 2.35x
====================================================================================================================================
</TABLE>
(1) Cut-Off Date LTV is calculated using a simple average.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Green Acres Loan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loan Information
- --------------------------------------------------------------------------------
Principal Balance: Original Cut-Off Date(1)
-------- ---------------
$160,000,000 $159,523,713
Origination Date: February 11, 1998
Interest Rate: 6.750%
Amortization: 30 years
Hyperamortization: After the ARD, the interest rate increases to 8.750%
and all excess cash flow is used to reduce outstanding
principal balance; the additional 2% interest is
accrued until principal balance is zero.
Anticipated Repayment
Date ("ARD"): February 11, 2008
Maturity Date: February 11, 2028
The Borrower/Sponsor: Green Acres Mall, L.L.C., a limited-purpose entity
controlled by Vornado Realty L.P.
Call Protection: Two-year prepayment lockout from the
date of securitization with U.S.
Treasury defeasance thereafter until
one payment date prior to the ARD.
Cut-Off Date Loan/NRSF: $87
Up-Front Reserves: Deferred Maintenance: $69,375
Ongoing Reserves: CapEx: $0.15/SF/year
Low Debt Service: Cash flow in excess
of debt service is escrowed if the
DSCR falls below 1.25x.
Collection Account: Hard Lockbox
Cross-Collateralization/
Default: Not Applicable
Partner Loans: None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Property Information
- --------------------------------------------------------------------------------
Single Asset/Portfolio: Single Asset
Property Type: Retail
Location: Valley Stream, NY
Year Built/Renovated: 1958/1991
Occupancy (2): 91% (as of March 25, 1998)
The Collateral: An enclosed two-story regional
shopping center and 13
free-standing out-parcel buildings
encompassing approximately
1,828,882 rentable square feet.
Covenant Lease
Major Tenants NRSF Expiration Expiration
- ------------- ---- ---------- ----------
Macy's 266,676 N/A 08/18/06
Sterns 186,922 N/A 01/31/07
Sears (ground lease) 144,537 10/31/98 10/31/23
K-Mart 131,433 N/A 08/12/10
Dime Bank 62,200 N/A 08/31/00
Waldbaums 54,225 N/A 09/26/11
Property Management: Vornado Realty L.P.
1997 Net Operating Income: $20,750,067
Underwritten Net Cash Flow: $19,322,925
Appraised Value: $253,200,000
Appraised By: Landauer Associates, Inc.
Appraisal Date: March 1, 1998
Cut-Off Date LTV: 63.0%
DSCR (3): 1.54x
- --------------------------------------------------------------------------------
(1) May 11, 1998.
(2) Excluding storage and anchor space.
(3) Based on Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Green Acres Loan
- --------------------------------------------------------------------------------
Lease Expiration Schedule
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ending Dec. 31 Expiring SF (1) % of Total SF Annualized Base Rent % of Total Base Rent
====================================================================================================================================
<S> <C> <C> <C> <C>
MO/MO 27,711 1.5 % $ 393,716 2.1 %
1998 8,261 0.5 310,490 1.7
1999 63,088 3.4 1,025,285 5.5
2000 92,357 5.0 1,447,817 7.8
2001 61,451 3.4 1,326,099 7.1
2002 56,005 3.1 1,399,830 7.5
2003 54,043 3.0 1,268,170 6.8
2004 41,088 2.2 1,293,224 6.9
2005 77,334 4.2 1,871,844 10.1
2006 323,016 17.7 2,157,966 11.6
2007 245,448 13.4 1,887,319 10.1
Thereafter 527,378 28.8 4234,427 22.7
Vacant 251,702 13.8 -- 0.0
--------- ----- ------------- ------
Total 1,828,882 100.0 % $ 18,616,187 100.0 %
====================================================================================================================================
</TABLE>
(1) Including Storage and Anchor Space.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Americold Pool Loan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loan Information
- --------------------------------------------------------------------------------
Principal Balance (1): Original Cut-Off Date (2)
-------- ----------------
$ 148,500,000 $ 148,500,000
Origination Date: April 22, 1998
Interest Rate: 6.894%
Amortization: 25 years
Hyperamortization: After the ARD, interest rate increases to 8.894% and
all excess cash flow is used to reduce outstanding
principal balance; the additional 2% interest is
accrued until principal balance is zero.
Anticipated Repayment
Date ("ARD"): May 11, 2008
Maturity Date: May 11, 2023
The Borrower/Sponsor: Americold Real Estate, L.P., a
limited-purpose entity affiliated
with Vornado Realty L.P. and Crescent
Real Estate Equities Company.
Call Protection: Two-year prepayment lockout from the
date of securitization with U.S.
Treasury defeasance thereafter until
one payment date prior to the ARD.
Cut-Off Date
Loan/NRSF (3): $50
Up-Front Reserves (3): Deferred Maintenance: $1,948,178
Ongoing Reserves (3): CapEx: $6,534,838/year
Low Debt Service: cash flow in excess
of debt service is escrowed if the
DSCR falls below 1.25x.
Collection Account: Hard Lockbox
Cross-Collateralization/
Default: Yes
Partner Loans: None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Property Information
- --------------------------------------------------------------------------------
Single Asset/Portfolio: Portfolio of 29 assets
Property Type: Refrigerated
Distribution/Warehouse
Property Location by Allocated
Loan Amount:
GRAPHIC OMITTED: PIE CHART DEPICTING PROPERTY LOCATION BY ALLOCATED LOAN AMOUNT
AND PROVIDING THE FOLLOWING INFORMATION:
Florida 0.55%
Colorado 1.19%
Georgia 2.06%
Iowa 3.68%
Illinois 4.73%
Utah 5.34%
California 6.65%
Massachusetts 8.55%
Wisconsin 9.18%
Idaho 10.66%
Pennsylvania 11.06%
Washington 17.23%
Oregon 19.13%
The Collateral: 29 cold storage warehouses
SF: 5,897,736
Cubic Feet: 155,557,330
Property Management: Americold Corporation
(dba Americold Logistics)
1997 Net Operating Income (3): $56,460,577
Underwritten Net Cash Flow (3): $48,889,852
Appraised Value (3): $520,600,000
Appraised By: Landauer Associates
Appraisal Date: March 1, 1998
Cut-Off Date LTV (3): 57.0%
DSCR (4): 1.94x
- --------------------------------------------------------------------------------
(1) A single note, representing 50% of the $297,000,000 loan is being
contributed to the trust, the other 50% note is currently held by GSMC.
(2) May 11, 1998.
(3) Assuming a $297,000,000 loan amount.
(4) Based on Underwritten Net Cash Flow and total loan debt service.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Americold Pool Loan
- --------------------------------------------------------------------------------
Property Description
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Built /
Property Location Property Type Renovated Square Footage Cubic Footage
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1. Ash Street Denver, CO Regional 1976/1980 114,222 2,750,000
Distribution
2. Bettendorf Bettendorf, IA Regional 1973/1977 336,000 8,848,000
Distribution
3. Boston Boston, MA Regional 1969 188,007 3,067,994
Distribution
4. Burley Burley, ID Captive Production 1959/1996 277,626 10,722,101
5. Burlington Burlington, WA Captive Production 1965/1968 194,000 4,655,000
6. Clearfield Clearfield, UT National 1973/1978 358,400 8,601,600
Distribution
7. Connell Connell, WA Captive Production 1969/1971 235,200 5,644,800
8. Main Street Gloucester, MA Regional Production 1961/1973 63,952 1,862,768
9. Fogelsville Fogelsville, PA National 1976/1997 683,914 21,623,336
Distribution
10. Ft. Dodge Fort Dodge, IA Regional 1979/1980 155,811 3,739,464
Distribution
11. Hermiston Hermiston, OR Captive Production 1975 168,000 4,032,000
12. Jesse St. Los Angeles, CA National 1954/1980 141,600 2,682,400
Distribution
13. Lois Avenue Tampa, FL Regional 1953 21,820 400,000
Distribution
14. Milwaukie Milwaukie, OR Regional 1958/1986 163,026 4,688,624
Distribution
15. Moses Lake Moses Lake, WA Captive Production 1967/1979 302,400 7,257,600
16. Nampa Nampa, ID Regional Production 1946/1974 364,000 7,981,000
17. Plant City Plant City, FL Regional Production 1956 33,600 750,000
18. Plover Plover, WI Captive Production 1978/1981 384,400 9,363,200
19. Rail Road Ave. Gloucester, MA Regional Production 1964 11,923 270,480
20. Rochelle Rochelle, IL National 1995 179,712 6,020,352
Distribution
21. Rogers St. Gloucester, MA Regional Production 1967 96,606 2,823,256
22. Rowe Square Gloucester, MA Regional Production 1955/1969 74,713 2,387,465
23. Salem Salem, OR Regional Production 1963/1981 498,400 12,487,600
24. Southgate Atlanta, GA National 1996 100,714 3,726,418
Distribution
25. Turlock 2 Turlock, CA Regional Production 1985 106,400 3,024,000
26. Walla Walla Walla Walla, WA Regional Production 1960/1968 140,000 3,136,000
27. Wallula Wallula, WA Captive Production 1981 40,000 1,200,000
28. Watsonville Watsonville, CA Captive Production 1985 185,980 5,448,500
29. Woodburn Woodburn, OR Regional Production 1952/1979 277,440 6,313,372
---------- -----------
Total 5,897,736 155,507,330
====================================================================================================================================
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Americold Pool Loan
- --------------------------------------------------------------------------------
Property Description
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cut-Off Date Allocated Wtd. Avg. Underwritten
Property Loan Amount Appraised Value Cut-Off Date LTV (1) Net Cash Flow DSCR
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1. Ash Street 1,768,536 6,200,000 57.0% 462,849 1.55x
2. Bettendorf 4,107,568 14,400,000 57.0 1,088,267 1.57
3. Boston 2,110,834 7,400,000 57.0 606,267 1.70
4. Burley 10,012,197 35,100,000 57.0 4,653,746 2.75
5. Burlington 4,506,915 15,800,000 57.0 1,783,553 2.34
6. Clearfield 7,929,889 27,800,000 57.0 3,016,924 2.25
7. Connell 6,532,174 22,900,000 57.0 2,368,940 2.14
8. Main Street 2,367,557 8,300,000 57.0 714,605 1.78
9. Fogelsville 16,430,273 57,600,000 57.0 2,139,954 0.77
10. Ft. Dodge 1,354,927 4,750,000 57.0 346,861 1.51
11. Hermiston 6,703,323 23,500,000 57.0 2,739,870 2.41
12. Jesse St. 2,082,309 7,300,000 57.0 685,951 1.95
13. Lois Avenue 128,362 450,000 57.0 67,936 3.13
14. Milwaukie 5,391,183 18,900,000 57.0 2,131,188 2.34
15. Moses Lake 9,755,474 34,200,000 57.0 3,561,526 2.16
16. Nampa 5,819,055 20,400,000 57.0 680,270 0.69
17. Plant City 684,595 2,400,000 57.0 186,202 1.61
18. Plover 13,634,844 47,800,000 57.0 5,024,753 2.18
19. Rail Road Ave. 656,070 2,300,000 57.0 164,781 1.48
20. Rochelle 7,017,096 24,600,000 57.0 2,872,681 2.42
21. Rogers St. 3,480,023 12,200,000 57.0 1,064,918 1.81
22. Rowe Square 4,079,043 14,300,000 57.0 1,321,472 1.91
23. Salem 9,299,078 32,600,000 57.0 3,364,696 2.14
24. Southgate 3,052,151 10,700,000 57.0 352,282 0.68
25. Turlock 2 2,595,755 9,100,000 57.0 942,005 2.14
26. Walla Walla 2,852,478 10,000,000 57.0 973,992 2.02
27. Wallula 1,939,685 6,800,000 57.0 833,766 2.53
28. Watsonville 5,191,510 18,200,000 57.0 2,001,777 2.28
29. Woodburn 7,017,096 24,600,000 57.0 2,737,821 2.30
------------- ------------- ---- ------------ ----
Total/Weighted
Average 148,500,000 520,600,000 57.0% 48,889,852 1.94x
====================================================================================================================================
</TABLE>
(1) Assuming a $297,000,000 Cut-Off Date Loan Amount.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Pier 39 Loan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loan Information
- --------------------------------------------------------------------------------
Principal Balance: Original Cut-Off Date (1)
-------- ----------------
$117,000,000 $116,669,545
Origination Date: January 27, 1998
Interest Rate: 7.107%
Amortization: 30 years
Hyperamortization: After the ARD, the interest rate increases to 9.107%
and all excess cash flow is used to reduce outstanding
principal balance; the additional 2% interest is
accrued until principal balance is zero.
Anticipated Repayment
Date ("ARD"): April 11, 2008
Maturity Date: February 11, 2028
The Borrower/Sponsor: Pier 39 Limited Partnership, a
limited-purpose entity owned by a group of wealthy
individuals.
Call Protection: Two-year prepayment lockout from the
date of securitization with U.S.
Treasury defeasance thereafter until
three payment dates prior to the ARD.
Cut-Off Date Loan/NRSF: $488
Up-Front Reserves: Deferred Maintenance: $ 1,092,899
Unfunded Obligations: $ 400,000
Escalator Installation: $ 500,000
Ongoing Reserves: CapEx: $126,768/year
Low Debt Service: cash flow in excess
of debt service is escrowed if the
DSCR falls below 1.20x.
Collection Account: Hard Lockbox
Earthquake Insurance: Full Amount of the PML with 10%
deductible
Partner Loans: None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Property Information
- --------------------------------------------------------------------------------
Single Asset/Portfolio: Single Asset
Property Type: Retail/Entertainment
Location: San Francisco, CA
Year Built: 1978
Occupancy: 98% (as of April 1, 1998)
The Collateral: 239,011 square foot
retail/entertainment center with a
980 space parking garage, located
in the Fisherman's Wharf area of
San Francisco, CA.
Property Management: Moor + South
1997 Net Operating Income: $13,737,244
Underwritten Net Cash Flow: $13,153,909
Appraised Value: $158,000,000
Appraisal By: Koeppel Tenner Real Estate
Services, Inc.
Appraisal Date: December 29, 1997
Cut-Off Date LTV: 73.8%
DSCR (2): 1.38x
- --------------------------------------------------------------------------------
(1) May 11, 1998.
(2) Based on Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Pier 39 Loan
- --------------------------------------------------------------------------------
Lease Expiration Schedule
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ending Dec. 31 Expiring SF % of Total SF Annualized Base Rent % of Total Base Rent
====================================================================================================================================
<S> <C> <C> <C> <C>
MO/MO 9,862 4.1% $ 333,570 3.5%
1998 7,889 3.3 884,358 9.3
1999 10,668 4.5 273,066 2.9
2000 25,055 10.5 1,540,624 16.2
2001 12,848 5.4 876,507 9.2
2002 18,804 7.9 1,113,539 11.7
2003 6,228 2.6 560,868 5.9
2004 15,401 6.4 911,172 9.6
2005 11,350 4.7 444,885 4.7
2006 15,578 6.5 815,845 8.6
2007 5,890 2.5 281,538 3.0
Thereafter 95,339 39.9 1,464,291 15.4
Vacant 4,099 1.7 -- 0.0
---------- ------- ------------- -------
Total 239,011 100.0% $ 9,500,262 100.0%
====================================================================================================================================
</TABLE>
Location Map
GRAPHIC OMITTED: MAP DEPICTING LOCATION OF PIER 39.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
One Commerce Square Loan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loan Information
- --------------------------------------------------------------------------------
Principal Balance: Original Cut-Off Date (1)
-------- ----------------
Tranche A: $ 80,000,000 $ 79,929,131
Tranche B: 32,000,000 31,481,501
------------ ------------
Total $112,000,000 $111,410,632
Origination Date: March 16, 1998
Interest Rate: 6.995%
Amortization: Tranche A: $80,000,000 amortized over a 30-year term
Tranche B: $32,000,000 fully amortized over 53-month
term (sized to be amortized by the above market IBM
rent component)
Hyperamortization: Tranche A: After the ARD, interest rate increases to
8.995% and all excess cash flow is used to reduce
outstanding principal balance; the additional 2%
interest is accrued until principal balance is zero.
Tranche B: Not Applicable
Anticipated Repayment Tranche A: April 11, 2008
Date ("ARD"): Tranche B: September 11, 2002
Maturity Date: April 11, 2028
The Borrower/Sponsor: Commerce Square Partners-Philadelphia Plaza, L.P., a
limited-purpose entity indirectly controlled by Lazard
Freres Real Estate Investors, L.L.C.
Call Protection: Two-year prepayment lockout from the date of
securitization with U.S. Treasury defeasance
thereafter until one payment date prior to the ARD.
Cut-Off Date Loan/NRSF: $118
Up-Front Reserves: Unfunded Obligations: $2,978,272
TI/Leasing Commissions: $4,497,025
Deferred Maintenance: $ 352,000
Ongoing Reserves: Cap Ex: $0.20/SF/year
TI/Leasing Commissions: Must maintain minimum balance
of $2,078,164
Low Debt Service: cash flow in excess of debt service
is escrowed if the net operating income falls below
$8,000,000, excluding the above market IBM rent
component.
Collection Account: Hard Lockbox
Partner Loans: $9,250,000 provided by an affiliate of Lazard Freres;
issued to an affiliate of Commerce Square
Partners-Philadelphia Plaza, L.P. and secured by a
pledge of partnership interests.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Property Information
- --------------------------------------------------------------------------------
Single Asset/Portfolio: Single Asset
Property Type: Office
Location: Philadelphia, PA
Year Built: 1987
Occupancy: 91% (as of March 1998)
The Collateral: 942,866 rentable square feet of office and retail
space in a 41-story tower with two levels of
subterranean parking
Major Tenants NRSF Expiration
------------- ---- ----------
IBM 504,112 SF 09/30/02
Stradley Ronon 77,778 SF 12/31/10
Delaware Management 58,532 SF 04/30/02
Kvaerner, Inc. 29,278 SF 10/31/13
Panitch, Schwarze 26,229 SF 10/31/08
Property Management: Thomas Development Partners, LLC
1997 Net Operating Income: $20,974,917
Underwritten Net Tranche A: $8,552,522
Cash Flow (2): Tranche B: $9,021,744
Appraised Value: $135,000,000
Appraised By: Landauer Associates, Inc.
Appraisal Date: February 1, 1998
Cut-Off Date LTV: 82.5%
DSCR (3): Tranche A: 1.33x
Tranche B: 1.07x
- --------------------------------------------------------------------------------
(1) May 11, 1998.
(2) Tranche B Underwritten Net Cash Flow is attributable to the above market IBM
rent component.
(3) Based on Underwritten Net Cash Flow for each Tranche; the combined DSCR is
1.18x.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
One Commerce Square Loan
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Lease Expiration Schedule
Year Ending Dec. 31 Expiring SF % of Total SF Annualized Tenant Base Rent % of Total Base Rent
====================================================================================================================================
<S> <C> <C> <C> <C>
MO/MO 200 0.0% $ 4,000 0.0%
1998 -- 0.0 500 0.0
1999 34,611 3.7 853,597 3.7
2000 8,319 0.9 70,712 0.3
2001 10,280 1.1 149,112 0.6
2002 591,881 62.8 18,205,240 78.6
2003 6,475 0.7 67,988 0.3
2004 -- 0.0 -- 0.0
2005 14,293 1.5 92,905 0.4
2006 34,190 3.6 348,195 1.5
2007 4,466 0.5 58,058 0.3
Thereafter 157,289 16.7 3,325,929 14.4
Vacant 80,862 8.6 -- 0.0
------- ----- ----------- -----
Total 942,866 100.0% $23,176,233 100.0%
====================================================================================================================================
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Marriott Desert Springs Loan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loan Information
- --------------------------------------------------------------------------------
Principal Balance: Original Cut-Off Date (1)
-------- ----------------
$103,000,000 $102,418,958
Origination Date: November 25, 1997
Interest Rate: 7.800%
Amortization: 25 years
Hyperamortization: After the ARD, interest rate increases to 9.800% and
all excess cash flow is used to reduce outstanding
principal balance; the additional 2% interest is
accrued until principal balance is zero.
Anticipated Repayment
Date ("ARD"): June 11, 2010
Maturity Date: December 11, 2022
The Borrower/Sponsor: DS Hotel LLC, a limited-purpose entity
controlled by Host Marriott Corporation.
Call Protection: Two-year prepayment lockout from the date of
securitization with U.S. Treasury defeasance
thereafter until the ARD.
Cut-Off Date Loan/Room: $115,859
Up-Front Reserves: Incentive Management Fee: $1,940,000
Water Chiller: $1,500,000
FF&E: $1,489,163
Debt Service: $4,732,357
Ongoing Reserves: Incentive Management Fee: To be maintained only after
ARD; up to $1,800,000
FF&E: 5.5% of gross revenue
Debt service: Monthly deposit required up to 600% of
required debt service payment
Collection Account: Springing Lockbox
Earthquake Insurance: Full Amount of PML with 5% deductible
Partner Loans: $19,733,165 mezzanine financing provided by GSMC
secured by a pledge of all of the membership interests
in DS Hotel LLC, and $59,727,272 junior financing
provided by an affiliate of Host Marriott Corporation
secured by a pledge of all of the membership interests
in the sole beneficial owner of DS Hotel LLC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Property Information
- --------------------------------------------------------------------------------
Single Asset/Portfolio: Single Asset
Property Type: Full-Service Hotel
Location: Palm Desert, CA
Year Built: 1987
1997 Occupancy: 73%
1997 Average Daily Rate: $169.07
1997 REVPAR: $123.42
The Collateral: 884-room hotel with two golf courses, a 30,000
square foot spa and over 49,000 square feet of
meeting space.
Property Management: Marriott Hotel Services, Inc., a wholly owned
subsidiary of Marriott International, Inc.
1997 Net Operating Income: $21,698,192
Underwritten Net Cash Flow: $21,500,000
Appraised Value: $237,000,000
Appraised By: Hospitality Valuation Services, Inc.
Appraisal Date: November 14, 1997
Cut-Off Date LTV: 43.2%
DSCR (2): 2.27x
- --------------------------------------------------------------------------------
(1) May 11, 1998.
(2) Based on Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Showcase Loan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loan Information
- --------------------------------------------------------------------------------
Principal Balance: Original Cut-Off Date (1)
-------- ----------------
$79,500,000 $78,998,166
Origination Date: September 12, 1997
Interest Rate: 7.523%
Amortization: 28 Years and one month
Hyperamortization: After the ARD, the interest rate increases to 9.523%
and all excess cash flow is used to reduce outstanding
principal balance; the additional 2% interest is
accrued until principal balance is zero.
Anticipated Repayment
Date ("ARD"): November 11, 2007
Maturity Date: November 11, 2025
The Borrower/Sponsor: Showcase Mall Joint Venture, a limited-purpose entity
controlled by Forest City Enterprises.
Call Protection: Two-year prepayment lockout from the date of
securitization with U.S. Treasury defeasance
thereafter until one payment date prior to the ARD.
Cut-Off Date Loan/NRSF: $416
Up-Front Reserves: Unfunded Obligations: $2,296,899
Ongoing Reserves: CapEx: $0.15/SF/year
Low Debt Service: Cash flow in excess of debt service
is escrowed if net operating income falls below
$8,500,000.
Collection Account: Sweep Account
Cross-Collateralization/
Default: Not Applicable
Partner Loans: None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Property Information
- --------------------------------------------------------------------------------
Single Asset/Portfolio: Single Asset
Property Type: Retail/Entertainment
Location: Las Vegas, NV
Year Built: 1997
Occupancy: 99% (as of March 16,1998)
The Collateral: 189,970 square foot retail/entertainment center
with a 1,532 parking space garage, located along
"The Strip" in Las Vegas, NV.
Major Tenants NRSF Expiration
------------- ---- ----------
The World of Coke 34,641 SF 07/31/17
Ethel M Chocolates 28,601 SF 08/31/12
SEGA Gameworks 47,161 SF 03/31/12
All-Star Cafe 36,172 SF 12/31/16
U.A. Theaters 41,108 SF 12/31/17
Property Management: Forest City Commercial Management, Inc.
1997 Net Operating Income: N/A (Opened in July, 1997)
Underwritten Net Cash Flow: $9,902,261
Appraised Value: $117,500,000
Appraised By: Cushman & Wakefield, Inc.
Appraisal Date: August 11, 1997
Cut-Off Date LTV: 67.2%
DSCR (2): 1.44x
- --------------------------------------------------------------------------------
(1) May 11, 1998.
(2) Based on Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Showcase Loan
- --------------------------------------------------------------------------------
Location Map
GRAPHIC OMITTED: MAP DEPICTING LOCATION OF SHOWCASE.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Crystal City Pool Loan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loan Information
- --------------------------------------------------------------------------------
Principal Balance: Original Cut-Off Date (1)
-------- ----------------
$77,000,000 $76,608,478
Origination Date: October 31, 1997
Interest Rate: 6.904%
Amortization: 30 years
Hyperamortization: After the ARD, the interest rate increases to 8.904%
and all excess cash flow is used to reduce
outstanding principal balance; the additional 2%
interest is accrued until principal balance is zero.
Anticipated Repayment
Date ("ARD"): November 11, 2007
Maturity Date: November 11, 2027
The Borrower/Sponsor: CESC/Rosslyn L.LC., a limited-purpose entity
controlled by Charles E. Smith Commercial Realty L.P.
Call Protection: Two-year prepayment lockout from the date of
securitization with U.S. Treasury defeasance
thereafter until the ARD.
Cut-Off Date Loan/NRSF: $132
Up-Front Reserves: TI/Leasing Commissions: $1,000,000
CapEx: $ 116,000
Debt Service: $ 507,328
Ongoing Reserves: TI/Leasing Commissions: $83,333 per month until
September 1998.
Low Debt Service: Cash flow in excess of debt service
is escrowed if net operating income falls below
$9,500,000.
Collection Account: Springing Lockbox
Cross-Collateralization/
Default: Yes
Partner Loans: None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Property Information
- --------------------------------------------------------------------------------
Single Asset/Portfolio: Portfolio of three assets
Property Type: Office
Location: Arlington County, Virginia
Years Built: 1985, 1987 & 1990
Occupancy: 97% (as of March 1, 1998)
The Collateral: Three Class A office buildings, comprising
approximately 579,416 SF, located in the Crystal
City area of Northern Virginia
Office: 572,329 NRSF
Retail: 2,800 NRSF
Storage: 4,287 NRSF
-------
Total Space: 579,416 NRSF
Garage Space: 1,602 spaces
Major Tenants NRSF Expiration
------------- ---- ----------
U.S. Government 245,200 SF 1/99 - 3/02
Systems Research 121,450 SF 9/98 - 6/01
Property Management: Charles E. Smith Real Estate Services, L.P.
1997 Net Operating Income: $10,851,545
Underwritten Net Cash Flow: $9,774,441
Appraised Value: $115,100,000
Appraised By: Cushman & Wakefield, Inc.
Appraisal Date: October 1997
Cut-Off Date LTV: 66.6%
DSCR (2): 1.61x
- --------------------------------------------------------------------------------
(1) May 11, 1998.
(2) Based on Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRANDE LOAN(TM/SM) II LOGO]
GOLDMAN SACHS
- --------------------------------------------------------------------------------
Grande Loan(TM/SM) II: Collateral Term Sheet
Crystal City Pool Loan
- --------------------------------------------------------------------------------
Lease Expiration Schedule
<TABLE>
<CAPTION>
Year Ending Dec. 31 Expiring SF % of Total SF Annualized Tenant Base Rent % of Total Base Rent
====================================================================================================================================
<S> <C> <C> <C> <C>
1998 53,742 9.3% $ 1,433,436 9.7%
1999 244,607 42.2 6,188,340 42.1
2000 50,087 8.6 1,357,320 9.2
2001 168,707 29.1 4,620,492 31.4
2002 32,434 5.6 812,610 5.5
2003 -- 0.0 -- 0.0
2004 12,378 2.1 301,596 2.0
Vacant 17,461 3.0 -- 0.0
-------- --- ----------- -----
Total 579,416 100.0% $14,713,344 100.0%
====================================================================================================================================
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may not
pertain to any securities that will actually be sold. The information contained
in this material may be based on assumptions regarding market conditions and
other matters as reflected therein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy or sell, the securities mentioned herein or
derivatives thereof (including options). This material may be filed with the
Securities and Exchange Commission (the "SEC") and incorporated by reference
into an effective registration statement previously filed with the SEC under
Rule 415 of the Securities Act of 1933, including in cases where the material
does not pertain to securities that are ultimately offered for sale pursuant to
such registration statement. Information contained in this material is current
as of the date appearing on this material only. Information in this material
regarding the securities and the assets backing any securities discussed herein
supersedes all prior information regarding such securities and assets. Any
information in the material, whether regarding the assets backing any securities
discussed herein or otherwise, will be superseded by the information included in
the final prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by the
issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
PROSPECTUS
GS MORTGAGE SECURITIES CORPORATION II
SELLER
COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES (ISSUABLE IN SERIES)
GS Mortgage Securities Corporation II (the "Seller") from time to time
will offer Commercial Mortgage Pass-Through Certificates (the "Offered
Certificates") in series (each, a "Series") by means of this Prospectus and a
separate Prospectus Supplement for each Series. If specified in the related
Prospectus Supplement, a Series may include one or more Classes of
certificates (together with the Offered Certificates, the "Certificates") not
offered by means of this Prospectus. The Certificates of each Series will
evidence beneficial ownership interests in a trust fund (each, a "Trust
Fund") to be established by the Seller. The Certificates of a Series may be
divided into two or more Classes which may have different interest rates and
which may receive principal payments in differing proportions and at
different times. In addition, rights of the holders of certain Classes to
receive principal and interest may be subordinated to those of other Classes.
Each Trust Fund will consist primarily of a pool (each, a "Mortgage Pool")
of (i) one or more mortgage loans secured by first, second or more junior
liens on commercial real estate properties, multifamily residential
properties and/or mixed residential/commercial properties, and related
property and interests, or (ii) certain financial leases and similar
arrangements equivalent to such mortgage loans as described herein and in the
related Prospectus Supplement (the "Mortgage Loans"), conveyed to such Trust
Fund by the Seller, and other assets, including any reserve funds established
with respect to a Series, insurance policies on the Mortgage Loans, letters
of credit, certificate guarantee insurance policies or other credit
enhancements described in the related Prospectus Supplement. If so specified
in the related Prospectus Supplement, the Mortgage Loans included in a
Mortgage Pool may also include participation interests in such types of
mortgage loans and installment contracts for the sale of such types of
properties. The Mortgage Loans will have fixed or adjustable interest rates.
Some Mortgage Loans will fully amortize over their remaining terms to
maturity and others will provide for balloon payments at maturity. Unless
otherwise specified in the related Prospectus Supplement, the Mortgage Loans
will be non-recourse obligations of the mortgagors. The Mortgage Loans will
be either seasoned or newly originated Mortgage Loans acquired by the Seller
from third parties, which third parties may or may not be the originators of
such Mortgage Loans and may or may not be affiliates of the Seller.
Information regarding each Series of Certificates, including interest and
principal payment provisions for each Class of Offered Certificates, as well
as information regarding the size, composition and other characteristics of
the Mortgage Pool relating to such Series, will be furnished in the related
Prospectus Supplement. The Mortgage Loans, other than, if so specified in the
related Prospectus Supplement, Specially Serviced Mortgage Loans, will be
serviced by a Master Servicer identified in the related Prospectus
Supplement. If so specified in the related Prospectus Supplement, Mortgage
Loans that become Specially Serviced Mortgage Loans (as described in such
Prospectus Supplement) will be serviced by a Special Servicer identified
therein.
The Certificates will not represent an obligation of or an interest in the
Seller or any affiliate thereof. Unless otherwise specified in the related
Prospectus Supplement, the Certificates will not be insured or guaranteed by
any governmental agency or instrumentality. Unless otherwise specified in the
related Prospectus Supplement, the Mortgage Loans will not be insured or
guaranteed by any governmental agency or instrumentality or any insurer.
The Seller, as specified in the related Prospectus Supplement, may elect
to treat all or a specified portion of the related Trust Fund as one or more
"real estate mortgage investment conduits" (each a "REMIC"), for federal
income tax purposes. If such an election is made, each Class of Certificates
of a Series will be either "regular interests" or "residual interests", as
specified in the related Prospectus Supplement. If no such election is made,
the Trust Fund, as specified in the related Prospectus Supplement, may elect
to be treated as a "financial asset securitization investment trust"
("FASIT"), or if no such election is made, will be classified as a grantor
trust for federal income tax purposes. See "FEDERAL INCOME TAX CONSEQUENCES."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE OFFERED CERTIFICATES ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS. IN
PARTICULAR, NO INVESTOR SHOULD PURCHASE CERTIFICATES OF ANY CLASS UNLESS THE
INVESTOR UNDERSTANDS AND IS ABLE TO BEAR THE PREPAYMENT, YIELD, LIQUIDITY AND
MARKET RISKS ASSOCIATED WITH THAT CLASS.
THE RISKS ASSOCIATED WITH THE OFFERED CERTIFICATES MAY MAKE THEM
UNSUITABLE FOR SOME INVESTORS. SEE "RISK FACTORS" ON PAGE 4 HEREIN. THE
OFFERED CERTIFICATES ARE COMPLEX SECURITIES AND IT IS IMPORTANT THAT EACH
INVESTOR IN ANY CLASS OF OFFERED CERTIFICATES POSSESS, EITHER ALONE OR
TOGETHER WITH AN INVESTMENT ADVISOR, THE EXPERTISE NECESSARY TO EVALUATE THE
INFORMATION CONTAINED AND INCORPORATED IN THIS PROSPECTUS AND THE RELATED
PROSPECTUS SUPPLEMENT IN THE CONTEXT OF THAT INVESTOR'S FINANCIAL SITUATION.
<PAGE>
THE YIELD OF EACH CLASS OF OFFERED CERTIFICATES WILL DEPEND UPON, AMONG
OTHER THINGS, ITS PURCHASE PRICE, ITS SENSITIVITY TO THE RATE AND TIMING OF
PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS, DEFAULTS AND LIQUIDATIONS) ON THE
MORTGAGE LOANS AND THE ACTUAL CHARACTERISTICS OF THE MORTGAGE LOANS. MORTGAGE
LOAN PREPAYMENT RATES ARE LIKELY TO FLUCTUATE SIGNIFICANTLY FROM TIME TO
TIME. INVESTORS SHOULD CONSIDER THE ASSOCIATED RISKS, INCLUDING:
O FAST MORTGAGE LOAN PREPAYMENT RATES CAN REDUCE THE YIELDS OF THE
OFFERED CERTIFICATES, INCLUDING ANY INTEREST-ONLY CLASSES, PURCHASED
AT A PREMIUM OVER THEIR PRINCIPAL AMOUNTS.
O SLOW MORTGAGE LOAN PREPAYMENT RATES CAN REDUCE THE YIELDS OF THE
OFFERED CERTIFICATES, INCLUDING ANY PRINCIPAL-ONLY CLASSES, PURCHASED
AT A DISCOUNT TO THEIR PRINCIPAL AMOUNTS.
O SMALL DIFFERENCES IN THE ACTUAL CHARACTERISTICS OF THE MORTGAGE LOANS
CAN AFFECT THE WEIGHTED AVERAGE LIVES AND YIELDS OF THE OFFERED
CERTIFICATES.
SEE "RISK FACTORS" AND "YIELD CONSIDERATIONS" IN THIS PROSPECTUS AND "RISK
FACTORS" AND "YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS" IN THE RELATED
PROSPECTUS SUPPLEMENT.
---------
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters, as more fully
described under "PLAN OF DISTRIBUTION" herein and in the related Prospectus
Supplement. Affiliates of the Seller may from time to time act as agents or
underwriters in connection with the sale of the Offered Certificates.
Offerings of certain Classes of the Certificates, as specified in the related
Prospectus Supplement, may be made in one or more transactions exempt from
the registration requirements of the Securities Act of 1933, as amended. Such
offerings are not being made pursuant to the Registration Statement of which
this Prospectus forms a part.
There will have been no secondary market for any Series of the Offered
Certificates prior to the offering thereof. There can be no assurance that
such a market will develop for the Offered Certificates of any Series or, if
it does develop, that it will continue.
This Prospectus may not be used to consummate sales of the Offered
Certificates unless accompanied by a Prospectus Supplement.
---------
The date of this Prospectus is May 1, 1998
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to each Series of Offered Certificates
will, among other things, set forth with respect to such Series of Offered
Certificates, to the extent applicable thereto: (i) any structural features,
such as multiple levels of trusts or the use of special finance vehicles to
hold the Mortgage Pool, used in structuring the transaction; (ii) the
identity of each Class within such Series; (iii) the initial aggregate
principal amount, the interest rate (the "Pass-Through Rate") (or the method
for determining such rate) and the authorized denominations of each Class of
Offered Certificates of such Series; (iv) certain information concerning the
Mortgage Loans relating to such Series, including the principal amount, type
and characteristics of such Mortgage Loans on the Cut-Off Date for such
Series of Offered Certificates, and, if applicable, the amount of any Reserve
Fund for such Series; (v) the identity of the Master Servicer; (vi) the
identity of the Special Servicer, if any, and the characteristics of any
Specially Serviced Mortgage Loans; (vii) the method of selection and powers
of any Operating Advisor directing and approving actions of the Special
Servicer; (viii) the circumstances, if any, under which the Offered
Certificates of such Series are subject to redemption prior to maturity; (ix)
the final scheduled distribution date of each Class of Offered Certificates
of such Series; (x) the method used to calculate the aggregate amount of
principal available and required to be applied to the Offered Certificates of
such Series on each Distribution Date; (xi) the order of the application of
principal and interest payments to each Class of Offered Certificates of such
Series and the allocation of principal to be so applied; (xii) the extent of
subordination of any Subordinate Certificates; (xiii) the principal amount of
each Class of Offered Certificates of such Series that would be outstanding
on specified Distribution Dates, if the Mortgage Loans relating to such
Series were prepaid at various assumed rates; (xiv) the Distribution Dates
for each Class of Offered Certificates of such Series; (xv) the
representations and warranties to be made by the Seller and any other entity,
in respect of the Mortgage Loans; (xvi) if applicable, relevant financial
information with respect to the Borrower(s) and the Mortgaged Properties
underlying the Mortgage Loans relating to such Series; (xvii) information
with respect to the terms of the Subordinate Certificates or Residual
Certificates, if any, of such Series, (xviii) additional information with
respect to any Credit Enhancement or cash flow agreement relating to such
Series and, if the Certificateholders of such Series will be materially
dependent upon any provider of Credit Enhancement or any cash flow agreement
counterparty for timely payment of interest and/or principal on their
Certificates, information (including financial statements) regarding such
provider or counterparty; (xix) additional information with respect to the
plan of distribution of such Series; (xx) whether the Offered Certificates of
such Series will be available in definitive form or through the book-entry
facilities of The Depository Trust Company or another depository; (xxi) if a
Trust Fund contains a concentration of Mortgage Loans having a single
Borrower, including affiliates thereof, or Mortgage Loans secured by
Mortgaged Properties leased to a single lessee, including affiliates thereof,
representing 20% or more of the aggregate principal balance of the Mortgage
Loans in such Trust Fund, financial statements for such Mortgaged Properties
as well as specific information with respect to such Mortgage Loans,
Mortgaged Properties and, to the extent material, leases and additional
information concerning any common ownership, common management or common
control of, or cross-default, cross-collateralization or similar provisions
relating to, such Mortgaged Properties and the concentration of credit risk
thereon; (xxii) if a Trust Fund contains a concentration of Mortgage Loans
having a single Borrower, including affiliates thereof, or Mortgage Loans
secured by Mortgaged Properties leased to a single lessee, including
affiliates thereof, representing 10% or more, but less than 20%, of the
aggregate principal balance of the Mortgage Loans in such Trust Fund,
selected financial information with respect to such Mortgaged Properties as
well as, to the extent material, specific information with respect to any
common ownership, common management or common control of, or cross-default,
cross-collateralization or similar provisions relating to, such Mortgaged
Properties and the concentration of credit risk thereon; (xxiii) if
applicable, additional information concerning any known concerns regarding
unique economic or other factors where there is a material concentration of
any of the Mortgage Loans in a specific geographic region; (xxiv) if
applicable, additional financial and other information concerning individual
Mortgaged Properties when there is a substantial concentration of one or a
few Mortgage Loans in a jurisdiction or region thereof experiencing economic
difficulties which may have a material effect on such Mortgaged Properties;
(xxv) if a Trust Fund contains a substantial concentration of one or a few
2
<PAGE>
Mortgage Loans in a single jurisdiction, a description of material
differences, if any, between the legal aspects of Mortgage Loans in such
jurisdiction and the summary of general legal aspects of Mortgage Loans set
forth under "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS;" and (xxvi) the
rating assigned to each Class of Offered Certificates by the nationally
recognized statistical rating organization or organizations identified
therein.
ADDITIONAL INFORMATION
This Prospectus contains, and the Prospectus Supplement for each Series of
Offered Certificates will contain, a summary of the material terms of the
documents referred to herein and therein, but neither contains nor will
contain all of the information set forth in the Registration Statement (the
"Registration Statement") of which this Prospectus and the related Prospectus
Supplement is a part. For further information, reference is made to such
Registration Statement and the exhibits thereto which the Seller has filed
with the Securities and Exchange Commission (the "Commission"), under the
Securities Act of 1933, as amended (the "Act"). Statements contained in this
Prospectus and any Prospectus Supplement as to the contents of any contract
or other document referred to are summaries and in each instance reference is
made to the copy of the contract or other document filed as an exhibit to the
Registration Statement. Copies of the Registration Statement may be obtained
from the Commission, upon payment of the prescribed charges, or may be
examined free of charge at the Commission's offices. Reports and other
information filed with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission
at Seven World Trade Center, 13th Floor, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission also maintains a site on the World Wide
Web (the "Web") at "http://www.sec.gov" at which users can view and download
copies of reports, proxy and information statements and other information
filed electronically through the Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") system. Copies of the Agreement pursuant to which a
Series of Certificates is issued will be provided to each person to whom a
Prospectus and the related Prospectus Supplement are delivered, upon written
or oral request directed to the Seller at 85 Broad Street, SC Level, New
York, New York 10004 (phone: 212/902-1171), Attention: Prospectus Department.
The Master Servicer or the Trustee will be required to mail to Holders of
Offered Certificates of each Series periodic unaudited reports concerning the
related Trust Fund. Unless and until definitive Certificates are issued, such
reports may be sent on behalf of the related Trust Fund to Cede & Co., as
nominee of The Depository Trust Company ("DTC") and registered Holder of the
Offered Certificates, pursuant to the applicable Agreement. If so specified
in the related Prospectus Supplement, such reports may be sent to beneficial
owners identified to the Master Servicer or Trustee. Such reports may also be
available to holders of interests in the Certificates upon request to their
respective DTC participants. See "DESCRIPTION OF THE CERTIFICATES -- Reports
to Certificateholders." The Seller will file or cause to be filed with the
Commission such periodic reports with respect to each Trust Fund as are
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder. Reports
filed by the Seller with the Commission pursuant to the Exchange Act will be
filed by means of the EDGAR system and therefor should be available at the
Commission's site on the Web.
INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE
All documents filed by the Seller pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Offered Certificates of a Series
shall be deemed to be incorporated by reference into this Prospectus and to
be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
3
<PAGE>
other subsequently filed document which is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Seller will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such
person, a copy of any and all of the documents incorporated herein by
reference (not including the exhibits to such documents, unless such exhibits
are specifically incorporated by reference in such documents). Requests for
such copies should be directed to the office of the Secretary, 85 Broad
Street, New York, New York 10004 (phone: 212/902-1000).
RISK FACTORS
COMMERCIAL AND MULTIFAMILY LENDING GENERALLY.
Commercial and multifamily lending generally is viewed as exposing the
lender to a greater risk of loss than one-to four-family residential lending.
Commercial and multifamily lending typically involves larger loans to single
borrowers or groups of related borrowers than residential one-to-four-family
mortgage loans. Further, the repayment of loans secured by income producing
properties is typically dependent upon the successful operation of the
related real estate project. If the cash flow from the project is reduced
(for example, if leases are not obtained or renewed), the borrower's ability
to repay the loan may be impaired. Commercial and multifamily real estate can
be affected significantly by the supply and demand in the market for the type
of property securing the loan and, therefore, may be subject to adverse
economic conditions. Market values may vary as a result of economic events or
governmental regulations outside the control of the borrower or lender that
impact the cash flow of the property, for example, laws which may require
modifications to properties such as the Americans with Disabilities Act, and
rent control laws in the case of multifamily mortgage loans. See "CERTAIN
LEGAL ASPECTS OF THE MORTGAGE LOANS -- Certain Laws and Regulations," "--Type
of Mortgaged Property" and "--Americans With Disabilities Act" herein.
Unless otherwise specified in the related Prospectus Supplement, no new
appraisals of the Mortgaged Properties will be obtained and no new valuations
will be assigned to the Mortgage Loans by the Seller in connection with the
offering of the Offered Certificates. It is possible that the market values
of the Mortgaged Properties underlying a Series of Certificates will have
declined since the origination of the related Mortgage Loans.
LIMITED OBLIGATIONS.
The Certificates of any Series will represent beneficial ownership
interests solely in the assets of the related Trust Fund and will not
represent an interest in or obligation of the Seller, the Originator, the
Trustee, the Master Servicer, the Special Servicer or any other person. The
related Agreement will provide that the Holders of the Certificates will have
no rights or remedies against the Seller or any of its affiliates for any
losses or other claims in connection with the Certificates or the Mortgage
Loans other than the repurchase of the Mortgage Loans by the Seller, if
specifically set forth in such Agreement. Distributions on any Class of
Certificates will depend solely on the amount and timing of payments and
other collections in respect of the related Mortgage Loans. There can be no
assurance that these amounts, together with other payments and collections in
respect of the related Mortgage Loans, will be sufficient to make full and
timely distributions on any Offered Certificates. Except to the extent
described in the related Prospectus Supplement, neither the Offered
Certificates nor the Mortgage Loans will be insured or guaranteed, in whole
or in part, by the United States or any governmental entity or by any private
mortgage or other insurer.
LIMITED LIQUIDITY.
There will have been no secondary market for any Series of the Offered
Certificates prior to the offering thereof. There can be no assurance that
such a market will develop or, if it does develop, that it will provide
holders of the Offered Certificates with liquidity of investment or continue
for the life of the Offered Certificates.
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VARIABILITY IN AVERAGE LIFE OF OFFERED CERTIFICATES.
The payment experience on the related Mortgage Loans will affect the
actual payment experience on and the weighted average lives of the Offered
Certificates and, accordingly, may affect the yield on the Offered
Certificates. Prepayments on the Mortgage Loans will be influenced by the
prepayment provisions of the related Notes and also may be affected by a
variety of economic, geographic and other factors, including the difference
between the interest rates on the Mortgage Loans (giving consideration to the
cost of refinancing) and prevailing mortgage rates and the availability of
refinancing for commercial mortgage loans. In general, if prevailing interest
rates fall significantly below the interest rates on the Mortgage Loans, the
rate of prepayment on the Mortgage Loans would be expected to increase.
Conversely, if prevailing interest rates rise significantly above the
Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment would
be expected to decrease.
Certain of the Mortgage Loans may provide for a Prepayment Premium in
connection with the prepayment thereof, and certain of the Mortgage Loans may
prohibit prepayments of principal in whole or in part during a specified
period. See "DESCRIPTION OF THE MORTGAGE POOL AND THE UNDERLYING MORTGAGED
PROPERTIES" in the related Prospectus Supplement for a description of the
Prepayment Premiums and lockout periods, if any, for the Mortgage Loans
underlying a Series of Certificates. Such Prepayment Premiums and lockout
periods can, but do not necessarily, provide a material deterrent to
prepayments. In addition, in certain jurisdictions, the enforceability of
provisions in mortgage loans prohibiting prepayment or providing for the
payment of prepayment premiums has been questioned as described under
"CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS -- Enforceability of Certain
Provisions -- Prepayment Provisions." The Seller makes no representation or
warranty as to the effect of such Prepayment Premiums or lockout periods on
the rate of prepayment of the related Mortgage Loans.
The extent to which the Master Servicer or Special Servicer, if any,
forecloses upon, takes title to and disposes of any Mortgaged Property
related to a Mortgage Loan will affect the weighted average lives of the
Offered Certificates. If a significant number of the related Mortgage Loans
are foreclosed upon by the Master Servicer or Special Servicer, if any, and
depending upon the amount and timing of recoveries from related REO
Properties, the weighted average lives of Offered Certificates may be
shortened.
Delays in liquidations of defaulted Mortgage Loans and modifications
extending the maturity of Mortgage Loans will tend to extend the payment of
principal of the Mortgage Loans. Because the ability of the Borrower to make
a Balloon Payment typically will depend upon its ability either to refinance
the Mortgage Loan or to sell the related Mortgaged Property, if a significant
number of the Mortgage Loans underlying a Series of Certificates have Balloon
Payments due at maturity, there is a risk that a number of such Mortgage
Loans may default at maturity, or that the Master Servicer or Special
Servicer, if any, may extend the maturity of a number of such Mortgage Loans
in connection with workouts. No representation or warranty is made by the
Seller as to the ability of any of the related Borrowers to make required
Mortgage Loan payments on a full and timely basis, including Balloon Payments
at the maturity of such Mortgage Loans. In the case of defaults, recovery of
proceeds may be delayed by, among other things, bankruptcy of the Borrower or
adverse conditions in the market where the Mortgaged Property is located.
Shortfalls in distributions to Certificateholders also may result from losses
incurred with respect to Mortgage Loans due to uninsured risks or
insufficient hazard insurance proceeds and from any indemnification of the
Master Servicer or Special Servicer in connection with legal actions relating
to the Agreement or Certificates.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS.
Many of the legal aspects of the Mortgage Loans are governed by the laws
of the jurisdiction in which the respective Mortgaged Properties are located
(which laws may vary substantially). These laws may affect the ability to
foreclose on, and the value of, the Mortgaged Properties securing the
Mortgage Loans. For example, state law determines what proceedings are
required for foreclosure, whether the borrower and any foreclosed junior
lienors may redeem the property, whether and to what extent recourse to the
borrower is permitted, what rights junior mortgagees have and whether the
amount of fees and interest that lenders may charge is limited. In addition,
the laws of some jurisdictions may
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render certain provisions of the Mortgage Loans unenforceable, such as
prepayment provisions, due-on-sale and acceleration provisions. Installment
Contracts and Financial Leases also may be subject to similar legal
requirements. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS" herein.
Delays in liquidations of defaulted Mortgage Loans and shortfalls in amounts
realized upon liquidation as a result of the application of such laws may
result in delays and shortfalls in payments to Certificateholders.
ENVIRONMENTAL LAW CONSIDERATIONS.
The Agreement for each Series generally will provide that an updated phase
I environmental assessment be obtained with respect to any Mortgaged Property
prior to acquiring title thereto or assuming its operation. This requirement
effectively precludes assuming ownership, control or management of the
related Mortgaged Property until a satisfactory environmental assessment is
obtained (or any required remedial action is taken), reducing the likelihood
that the related Trust Fund will become liable for any environmental
condition affecting a Mortgaged Property, but making it more difficult to
foreclose. However, there can be no assurance that the requirements of the
Agreement will in fact insulate the Trust Fund from liability for
environmental conditions.
Under the laws of certain states, failure to perform the remediation of
environmental conditions required or demanded by the state may give rise to a
lien on a Mortgaged Property or a restriction on the right of the owner to
transfer the Mortgaged Property to ensure the reimbursement of remediation
costs incurred by the state. Although the costs of remedial action could be
substantial, the state of the law in certain of these jurisdictions presently
is unclear as to whether and under what circumstances such costs (or the
requirements to otherwise undertake remedial actions) would be imposed on a
secured lender such as the Trust Fund. However, under the laws of some states
and under applicable federal law, a lender may be liable for such costs in
certain circumstances as the "owner" or "operator" of the Mortgaged Property.
See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS -- Environmental
Considerations" herein.
EARLY TERMINATION.
The Trust Fund for a Series of Certificates may be subject to optional
termination by the Master Servicer, the Special Servicer, if any, (if all of
the Mortgage Loans are Specially Serviced Mortgage Loans), or Holders of
certain Classes of Certificates under certain circumstances. In the event of
such termination, Holders of the Offered Certificates might receive some
principal payments earlier than otherwise, which could adversely affect their
anticipated yield to maturity. See "THE AGREEMENT -- Optional Termination"
herein.
THE SELLER
The Seller was incorporated in the State of Delaware on November 16, 1995,
for the purpose of engaging in the business, among other things, of acquiring
and depositing mortgage assets in trusts in exchange for certificates
evidencing interests in such trusts and selling or otherwise distributing
such certificates. The principal executive offices of the Seller are located
at 85 Broad Street, New York, New York 10004. Its telephone number is (212)
902-1000. The Seller will not have any material assets other than the Trust
Funds.
Neither the Seller, nor any of its affiliates will insure or guarantee
distributions on the Certificates of any Series. The Agreement (as defined
below) for each Series will provide that the Holders of the Certificates for
such Series will have no rights or remedies against the Seller or any of its
affiliates for any losses or other claims in connection with the Certificates
or the Mortgage Loans other than the repurchase of the Mortgage Loans by the
Seller, if specifically set forth in such Agreement.
The Certificate of Incorporation, as amended, of the Seller provides that
a director of the corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent that such exemption from liability or limitation thereof
is not permitted under the Delaware General Corporation Law as currently in
effect or as may be amended. In addition,
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the Bylaws of the Seller provide that the Seller shall indemnify to the full
extent permitted by law any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person or such person's
testator or intestate is or was a director, officer or employee of the Seller
or serves or served, at the request of the Seller, any other enterprise as a
director, officer or employee. Insofar as indemnification for liabilities
arising under the Act may be permitted to directors, officers and controlling
persons of the Seller pursuant to the foregoing provisions, or otherwise, the
Seller has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
USE OF PROCEEDS
The Seller intends to apply all or substantially all of the net proceeds
from the sale of each Series offered hereby and by the related Prospectus
Supplement to acquire the Mortgage Loans relating to such Series, to
establish the Reserve Funds, if any, for the Series, to obtain other Credit
Enhancement, if any, for the Series, to pay costs incurred in connection with
structuring and issuing the Certificates and for general corporate purposes.
Certificates may be exchanged by the Seller for Mortgage Loans.
DESCRIPTION OF THE CERTIFICATES*
The Certificates of each Series will be issued pursuant to a separate
Pooling and Servicing Agreement (the "Agreement")** to be entered into among
the Seller, the Master Servicer, the Special Servicer, if any, and the
Trustee for that Series and any other parties described in the related
Prospectus Supplement, substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus is a part or in such other
form as may be described in the related Prospectus Supplement. The following
summaries describe certain provisions expected to be common to each Series
and the Agreement with respect to the underlying Trust Fund. However, the
Prospectus Supplement for each Series will describe more fully additional
characteristics of the Offered Certificates and any additional provisions of
the related Agreement.
At the time of issuance, it is anticipated that the Offered Certificates
of each Series will be rated "investment grade," typically one of the four
highest generic rating categories, by at least one nationally recognized
statistical rating organization at the request of the Seller. Each of such
rating organizations specified in the related Prospectus Supplement as rating
the Offered Certificates of the related Series at the request of the Seller
is hereinafter referred to as a "Rating Agency." A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning Rating Agency. There can be no
assurance as to whether any rating agency not requested to rate the Offered
Certificates will nonetheless issue a rating and, if so, what such rating
would be. A rating assigned to the Offered Certificates by a rating agency
that has not been requested by the Seller to do so may be lower than the
rating assigned by a rating agency pursuant to the Seller's request.
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* Whenever in this Prospectus the terms "Certificates," "Trust Fund"
and "Mortgage Pool" are used, such terms will be deemed to apply,
unless the context indicates otherwise, to a specific Series of
Certificates, the Trust Fund underlying the related Series and the
related Mortgage Pool.
** In the case of a Funding Note (as described below), some or all of
the provisions described herein as being part of the Agreement may be
found in other contractual documents connected with such Funding
Note, such as a collateral indenture or a separate servicing
agreement, and the term "Agreement" as used in this Prospectus will
include such other contractual documents. The Prospectus Supplement
for a Series in which a Funding Note is used will describe such other
contractual documents and will indicate in which documents various
provisions mentioned in this Prospectus are to be found and any
modifications to such provisions.
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GENERAL
The Certificates of each Series will be issued in registered or book-entry
form and will represent beneficial ownership interests in the Trust Fund
created pursuant to the Agreement for such Series. The Trust Fund for each
Series will consist of the following, to the extent provided in the
Agreement: (i) the Mortgage Pool, consisting primarily of the Mortgage Loans
conveyed to the Trustee pursuant to the Agreement; (ii) all payments on or
collections in respect of the Mortgage Loans due on or after the date
specified in the related Prospectus Supplement; (iii) all property acquired
by foreclosure or deed in lieu of foreclosure with respect to the Mortgage
Loans; and (iv) such other assets or rights, such as a Funding Note, as are
described in the related Prospectus Supplement. In addition, the Trust Fund
for a Series may include various forms of Credit Enhancement, such as, but
not limited to, insurance policies on the Mortgage Loans, letters of credit,
certificate guarantee insurance policies, the right to make draws upon one or
more Reserve Funds or other arrangements acceptable to each Rating Agency
rating the Offered Certificates. See "CREDIT ENHANCEMENT." Such other assets,
if any, will be described more fully in the related Prospectus Supplement.
The Prospectus Supplement for any Series will describe any specific
features of the transaction established in connection with the holding of the
underlying Mortgage Pool. For example, if so indicated in the Prospectus
Supplement, at the time the Mortgage Loans are to be acquired from a third
party and conveyed to the Trust Fund, the third party may establish a
bankruptcy-remote special-purpose entity or a trust, to which the Mortgage
Loans will be conveyed and which in turn will issue to the Trustee a debt
instrument collateralized by, having recourse only to, and paying through
payments (which may be net of servicing fees and any retained yield) from,
the Mortgage Pool (a "Funding Note"), and such debt instrument may be
conveyed to the Trust Fund as the medium for holding the Mortgage Pool.
If specified in the related Prospectus Supplement, Certificates of a given
Series may be issued in a single Class or two or more Classes which may pay
interest at different rates, may represent different allocations of the right
to receive principal and interest payments, and certain of which may be
subordinated to other Classes in the event of shortfalls in available cash
flow from the underlying Mortgage Loans or realized losses on the underlying
Mortgage Loans. Alternatively, or in addition, if so specified in the related
Prospectus Supplement, Classes may be structured to receive principal
payments in sequence. The related Prospectus Supplement may provide that each
Class in a group of Classes structured to receive sequential payments of
principal will be entitled to be paid in full before the next Class in the
group is entitled to receive any principal payments, or may provide for
partially concurrent principal payments among one or more of such Classes. If
so specified in the related Prospectus Supplement, a Class of Offered
Certificates may also provide for payments of principal only or interest only
or for disproportionate payments of principal and interest. Subordinate
Certificates of a given Series of Offered Certificates may be offered in the
same Prospectus Supplement as the Senior Certificates of such Series or may
be offered in a separate Prospectus Supplement or may be offered in one or
more transactions exempt from the registration requirements of the Act. Each
Class of Offered Certificates of a Series will be issued in the minimum
denominations specified in the related Prospectus Supplement.
The Prospectus Supplement for any Series including types of Classes
similar to any of those described above will contain a description of their
characteristics and risk factors, including, as applicable, (i) mortgage
principal prepayment effects on the weighted average lives of such Classes,
(ii) the risk that interest only, or disproportionately interest weighted,
Classes purchased at a premium may not return their purchase prices under
rapid prepayment scenarios and (iii) the degree to which an investor's yield
is sensitive to principal prepayments.
The Offered Certificates of each Series will be freely transferable and
exchangeable at the office specified in the related Agreement and Prospectus
Supplement; provided, however, that certain Classes of Offered Certificates
may be subject to transfer restrictions described in the related Prospectus
Supplement.
If specified in the related Prospectus Supplement, the Offered
Certificates may be transferable only in book-entry form through the
facilities of The Depository Trust Company or another depository identified
in such Prospectus Supplement.
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If the Certificates of a Class are transferable only on the books of The
Depository Trust Company (the "Depository"), no person acquiring such a
Certificate that is in book-entry form (each, a "beneficial owner") will be
entitled to receive a physical certificate representing such Certificate
except in the limited circumstances described in the related Prospectus
Supplement. Instead, such Certificates will be registered in the name of a
nominee of the Depository, and beneficial interests therein will be held by
investors through the book-entry facilities of the Depository, as described
herein. The Seller has been informed by the Depository that its nominee will
be Cede & Co. Accordingly, Cede & Co. is expected to be the holder of record
of any such Certificates that are in book-entry form.
If the Certificates of a Class are transferable only on the books of the
Depository, each beneficial owner's ownership of such a Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or
other financial intermediary (each, a "Financial Intermediary") that
maintains the beneficial owner's account for such purpose. In turn, the
Financial Intermediary's ownership of such Certificate will be recorded on
the records of the Depository (or of a participating firm that acts as agent
for the Financial Intermediary, whose interest will in turn be recorded on
the records of the Depository, if the beneficial owner's Financial
Intermediary is not a Depository participant). Beneficial ownership of a
book-entry Certificate may only be transferred in compliance with the
procedures of such Financial Intermediaries and Depository participants.
Because the Depository can act only on behalf of participants, who in turn
act on behalf of indirect participants and certain banks, the ability of a
beneficial owner to pledge book-entry Certificates to persons or entities
that do not participate in the Depository system, or to otherwise act with
respect to such book-entry Certificates, may be limited due to the lack of a
physical certificate for such book-entry Certificates.
The Depository, which is a New York-chartered limited purpose trust
company, performs services for its participants, some of whom (and/or their
representatives) own the Depository. In accordance with its normal procedure,
the Depository is expected to record the positions held by each Depository
participant in the book-entry Certificates, whether held for its own account
or as a nominee for another person. In general, beneficial ownership of
Certificates will be subject to the rules, regulations and procedures
governing the Depository and Depository participants as are in effect from
time to time.
If the Offered Certificates are transferable on the books of the
Depository, the Depository, or its nominee as record holder of the Offered
Certificates, will be recognized by the Seller and the Trustee as the owner
of such Certificates for all purposes, including notices and consents. In the
event of any solicitation of consents from or voting by Certificateholders
pursuant to the Agreement, the Trustee may establish a reasonable record date
and give notice of such record date to the Depository. In turn, the
Depository will solicit votes from the beneficial owners in accordance with
its normal procedures, and the beneficial owners will be required to comply
with such procedures in order to exercise their voting rights through the
Depository.
Distributions of principal of and interest on the book-entry Certificates
will be made on each Distribution Date to the Depository or its nominee. The
Depository will be responsible for crediting the amount of such payments to
the accounts of the applicable Depository participants in accordance with the
Depository's normal procedures. Each Depository participant will be
responsible for disbursing such payments to the beneficial owners for which
it is holding book-entry Certificates and to each Financial Intermediary for
which it acts as agent. Each such Financial Intermediary will be responsible
for disbursing funds to the beneficial owners of the book-entry Certificates
that it represents.
The information herein concerning the Depository and its book-entry system
has been obtained from sources believed to be reliable, but the Seller takes
no responsibility for the accuracy or completeness thereof.
In the event a depository other than The Depository Trust Company is
identified in a Prospectus Supplement, information similar to that set forth
above will be provided with respect to such depository and its book-entry
facilities in such Prospectus Supplement.
DISTRIBUTIONS ON CERTIFICATES
Distributions of principal and interest on the Certificates of each Series
will be made to the registered holders thereof ("Certificateholders" or
"Holders") by the Trustee (or such other paying agent as may be
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identified in the related Prospectus Supplement) on the day (the
"Distribution Date") specified in the related Prospectus Supplement,
beginning in the period specified in the related Prospectus Supplement
following the establishment of the related Trust Fund. Distributions for each
Series will be made by check mailed to the address of the person entitled
thereto as it appears on the certificate register for such Series maintained
by the Trustee, by wire transfer or by such other method as is specified in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the final distribution in retirement of the
Certificates of each Series will be made only upon presentation and surrender
of the Certificates at the office or agency specified in the notice to the
Certificateholders of such final distribution. In addition, the Prospectus
Supplement relating to each Series will set forth the applicable due period,
prepayment period, record date, Cut-Off Date and determination date in
respect of each Series of Certificates.
With respect to each Series of Certificates on each Distribution Date, the
Trustee (or such other paying agent as may be identified in the related
Prospectus Supplement) will distribute to the Certificateholders the amounts
of principal and/or interest, calculated as described in the related
Prospectus Supplement, that are due to be paid on such Distribution Date. In
general, such amounts will include previously undistributed payments of
principal (including principal prepayments, if any) and interest on the
Mortgage Loans (or amounts in respect thereof) received by the Trustee after
a date specified in the related Prospectus Supplement (the "Cut-Off Date")
and prior to the day preceding each Distribution Date specified in the
related Prospectus Supplement.
The related Prospectus Supplement for any Series of Certificates will
specify, for any Distribution Date on which the principal balance of the
Mortgage Loans is reduced due to losses, the priority and manner in which
such losses will be allocated. Unless otherwise specified in the related
Prospectus Supplement, losses on Mortgage Loans generally will be allocated
after all proceeds of defaulted Mortgage Loans have been received by reducing
the outstanding Certificate Principal Amount of the most subordinate
outstanding Class of Certificates. If specified in the related Prospectus
Supplement, losses may be estimated on the basis of a qualified appraisal of
the Mortgaged Property and allocated prior to the final liquidation of the
Mortgaged Property. The related Prospectus Supplement for any Series of
Certificates also will specify the manner in which principal prepayments,
negative amortization and interest shortfalls will be allocated among the
Classes of Certificates.
ACCOUNTS
It is expected that the Agreement for each Series of Certificates will
provide that the Trustee establish an account (the "Distribution Account")
into which the Master Servicer will deposit amounts held in the Collection
Account and from which account distributions will be made with respect to a
given Distribution Date. On each Distribution Date, the Trustee will apply
amounts on deposit in the Distribution Account generally to make
distributions of interest and principal to the Certificateholders in the
manner described in the related Prospectus Supplement.
It is also expected that the Agreement for each Series of Certificates
will provide that the Master Servicer establish and maintain a special trust
account (the "Collection Account") in the name of the Trustee for the benefit
of Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer will deposit into the Collection Account, as
more fully described in the related Prospectus Supplement (other than in
respect of principal of, or interest on, the Mortgage Loans due on or before
the Cut-Off Date): (1) all payments on account of principal, including
principal prepayments, on the Mortgage Loans; (2) all payments on account of
interest on the Mortgage Loans and all Prepayment Premiums; (3) all proceeds
from any insurance policy relating to a Mortgage Loan ("Insurance Proceeds")
other than proceeds applied to restoration of the related Mortgaged Property
or otherwise applied in accordance with the terms of the related Mortgage
Loans; (4) all proceeds from the liquidation of a Mortgage Loan ("Liquidation
Proceeds"), including the sale of any Mortgaged Property acquired on behalf
of the Trust Fund through foreclosure or deed in lieu of foreclosure ("REO
Property"); (5) all proceeds received in connection with the taking of a
Mortgaged Property by eminent domain; (6) any amounts required to be
deposited by the Master Servicer to cover net losses on Permitted Investments
made with funds held in the Collection Account; (7) any amounts required to
be deposited
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in connection with the application of co-insurance clauses, flood damage to
REO Properties and blanket policy deductibles; (8) any amounts required to be
deposited from income with respect to any REO Property and deposited in the
REO Account (to the extent the funds in the REO Account exceed the expenses
of operating and maintaining REO Properties and reserves established
therefor); (9) any Advance made by the Master Servicer that is required to be
deposited therein pursuant to the Agreement; and (10) any amounts received
from Borrowers which represent recoveries of Property Protection Expenses.
Unless otherwise specified in the related Prospectus Supplement, the Special
Servicer, if any, will be required to remit immediately to the Master
Servicer for deposit in the Collection Account any amounts of the types
described above that it receives in respect of the Specially Serviced
Mortgage Loans. "Prepayment Premium" means any premium paid or payable by the
related Borrower in connection with any principal prepayment on any Mortgage
Loan. "Property Protection Expenses" comprise certain costs and expenses
incurred in connection with defaulted Mortgage Loans, acquiring title or
management of REO Property or the sale of defaulted Mortgage Loans or REO
Properties, as more fully described in the related Agreement. As set forth in
the Agreement for each Series, the Master Servicer will be entitled to make
from time to time certain withdrawals from the Collection Account to, among
other things: (i) remit certain amounts for the related Distribution Date
into the Distribution Account; (ii) to the extent specified in the related
Prospectus Supplement, reimburse Property Protection Expenses and pay taxes,
assessments and insurance premiums and certain third-party expenses in
accordance with the Agreement; (iii) pay accrued and unpaid servicing fees to
the Master Servicer out of all Mortgage Loan collections; and (iv) reimburse
the Master Servicer, the Special Servicer, if any, the Trustee and the Seller
for certain expenses and provide indemnification to the Seller, the Master
Servicer, the Trustee and, if applicable, the Special Servicer, as described
in the Agreement.
The amounts at any time credited to the Collection Account may be invested
in Permitted Investments that are payable on demand or in general mature or
are subject to withdrawal or redemption on or before the business day
preceding the next succeeding Master Servicer Remittance Date. The Master
Servicer will be required to remit amounts required for distribution to
Certificateholders to the Distribution Account on the business day preceding
the related Distribution Date that is specified in the related Prospectus
Supplement (the "Master Servicer Remittance Date"). Unless otherwise set
forth in the related Prospectus Supplement, the income from the investment of
funds in the Collection Account in Permitted Investments will constitute
additional servicing compensation for the Master Servicer, and the risk of
loss of funds in the Collection Account resulting from such investments will
be borne by the Master Servicer. The amount of any such loss will be required
to be deposited by the Master Servicer in the Collection Account immediately
as realized.
It is expected that the Agreement for each Series of Certificates will
provide that a special trust account (the "REO Account") will be established
and maintained in order to be used in connection with each REO Property and,
if specified in the related Prospectus Supplement, certain other Mortgaged
Properties. To the extent set forth in the Agreement, certain withdrawals
from the REO Account will be made to, among other things, (i) make
remittances to the Collection Account as required by the Agreement, (ii) pay
taxes, assessments, insurance premiums, other amounts necessary for the
proper operation, management and maintenance of the REO Properties and such
other Mortgaged Properties and certain third-party expenses in accordance
with the Agreement (including expenses relating to any appraisal, property
inspection and environmental assessment reports required by the Agreement)
and (iii) provide for the reimbursement of certain expenses in respect of the
REO Properties and such Mortgaged Properties.
The amount at any time credited to each REO Account will be fully insured
to the maximum coverage possible or will be invested in Permitted Investments
that mature, or are subject to withdrawal or redemption, on or before the
business day on which such amounts are required to be remitted to the Master
Servicer for deposit in the Collection Account. Unless otherwise specified in
the related Prospectus Supplement, the income from the investment of funds in
the REO Account in Permitted Investments shall be deposited in the REO
Account for remittance to the Collection Account, and the risk of loss of
funds in the REO Account resulting from such investments will be borne by the
Trust Fund.
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Unless otherwise specified in the related Prospectus Supplement,
"Permitted Investments" will consist of one or more of the following:
(i) direct obligations of, or guaranteed as to timely payment of principal
and interest by, the United States or any agency or instrumentality thereof
provided that such obligations are backed by the full faith and credit of the
United States;
(ii) direct obligations of, or guaranteed as to timely payment of
principal and interest by, the Federal Home Loan Mortgage Corporation
("FHLMC"), the Federal National Mortgage Association or the Federal Farm
Credit System, provided that any such obligation, at the time of purchase of
such obligation or contractual commitment providing for the purchase thereof,
is qualified by each Rating Agency as an investment of funds backing
securities having ratings equivalent to each Rating Agency's highest initial
rating of the Certificates;
(iii) demand and time deposits in, or certificates of deposit of, or
bankers' acceptances issued by, any bank or trust company, savings and loan
association or savings bank, provided that, in the case of obligations that
are not fully FDIC-insured deposits, the commercial paper and /or long-term
unsecured debt obligations of such depository institution or trust company
(or in the case of the principal depository institution in a holding company
system, the commercial paper or long-term unsecured debt obligations of such
holding company) have the highest rating available for such securities by
each Rating Agency (in the case of commercial paper) or have received one of
the two highest ratings available for such securities by each Rating Agency
(in the case of long-term unsecured debt obligations), or such lower rating
as will not result in the downgrading or withdrawal of the rating or ratings
then assigned to the Certificates by any Rating Agency;
(iv) general obligations of, or obligations guaranteed by, any state of
the United States or the District of Columbia receiving one of the two
highest long-term debt ratings available for such securities by each Rating
Agency, or such lower rating as will not result in the downgrading or
withdrawal of the rating or ratings then assigned to the Certificates by any
such Rating Agency;
(v) commercial or finance company paper (including both
non-interest-bearing discount obligations and interest-bearing obligations
payable on demand or on a specified date not more than one year after the
date of issuance thereof) that is rated by each Rating Agency in its highest
short-term unsecured rating category at the time of such investment or
contractual commitment providing for such investment, and is issued by a
corporation the outstanding senior long-term debt obligations of which are
then rated by each Rating Agency in one of its two highest long-term
unsecured rating categories, or such lower rating as will not result in the
downgrading or withdrawal of the rating or ratings then assigned to the
Certificates by any Rating Agency;
(vi) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation rated in one of the two highest ratings
available to such issuers by each Rating Agency at the time of such
investment, provided that any such agreement must by its terms provide that
it is terminable by the purchaser without penalty in the event any such
rating is at any time lower than such level;
(vii) repurchase obligations with respect to any security described in
clause (i) or (ii) above entered into with a depository institution or trust
company (acting as principal) meeting the ratings standard described in (iii)
above;
(viii) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any state
thereof and rated by each Rating Agency in one of its two highest long-term
unsecured rating categories at the time of such investment or contractual
commitment providing for such investment, subject to such limitations, if
any, as are provided in the related Agreement;
(ix) units of taxable money market funds which funds are regulated
investment companies, seek to maintain a constant net asset value per share
and invest solely in obligations backed by the full faith and credit of the
United States, and have been designated in writing by each Rating Agency as
Permitted Investments with respect to this definition;
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(x) if previously confirmed in writing to the Trustee, any other demand,
money market or time deposit, or any other obligation, security or
investment, as may be acceptable to each Rating Agency as an investment of
funds backing securities having ratings equivalent to each Rating Agency's
highest initial rating of the Certificates; and
(xi) such other obligations as are acceptable as Permitted Investments to
each Rating Agency; provided, however, that (a) such instrument or security
shall qualify as a "cash flow investment" pursuant to the Internal Revenue
Code of 1986, as amended (the "Code") and (b) no instrument or security shall
be a Permitted Investment if (i) such instrument or security evidences a
right to receive only interest payments or (ii) the stated interest rate on
such investment is in excess of 120% of the yield to maturity produced by the
price at which such investment was purchased.
As described in the related Prospectus Supplement, for a Series of
Certificates where the underlying Mortgage Loans are held through a Funding
Note, some of the accounts described above may be held by the issuer or
collateral trustee of such Funding Note.
AMENDMENT
The Agreement for each Series will provide that it may be amended by the
parties thereto without the consent of any of the Certificateholders (i) to
cure any ambiguity, (ii) to correct or supplement any provision therein that
may be inconsistent with any other provision therein or in the Prospectus
Supplement, (iii) to maintain the rating or ratings assigned to the
Certificates by a Rating Agency or (iv) to make other provisions with respect
to matters or questions arising under the Agreement which are not materially
inconsistent with the provisions of the Agreement, provided that any such
amendment pursuant to clause (iv) above will not, as evidenced by an opinion
of counsel acceptable to the Seller and the Trustee, or as otherwise
specified in the Agreement and the related Prospectus Supplement, adversely
affect in any material respect the interests of any Certificateholder.
Unless otherwise specified in the related Prospectus Supplement, each
Agreement also will provide that it may be amended by the parties thereto
with the consent of the Holders of Certificates representing an aggregate
outstanding principal amount of not less than 66 2/3% of each Class of
Certificates affected by the proposed amendment for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of the Agreement or modifying in any manner the rights of Certificateholders;
provided, however, that no such amendment may (i) reduce in any manner the
amount of, or delay the timing of, payments received on Mortgage Loans which
are required to be distributed on any Certificate without the consent of each
affected Certificateholder, (ii) reduce the aforesaid percentage of
Certificates the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all Certificates then
outstanding, or (iii) alter the servicing standard set forth in the
Agreement. Further, the Agreement for each Series may provide that the
parties thereto, at any time and from time to time, without the consent of
the Certificateholders, may amend the Agreement to modify, eliminate or add
to any of its provisions to such extent as shall be necessary to maintain the
qualification of the Trust Fund as a REMIC or a FASIT, as the case may be, or
to prevent the imposition of any additional state or local taxes, at all
times that any of the Certificates are outstanding; provided, however, that
such action, as evidenced by an opinion of counsel acceptable to the Trustee,
is necessary or helpful to maintain such qualification or to prevent the
imposition of any such taxes, and would not adversely affect in any material
respect the interest of any Certificateholder.
The Agreement relating to each Series may provide that no amendment to
such Agreement will be made unless there has been delivered in accordance
with such Agreement an opinion of counsel to the effect that such amendment
will not cause such Series to fail to qualify as a REMIC or a FASIT, as the
case may be, at any time that any of the Certificates are outstanding or
cause a tax to be imposed on the Trust Fund under the REMIC or FASIT
provisions of the Code.
The Prospectus Supplement for a Series may describe other or different
provisions concerning the amendment of the related Agreement.
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TERMINATION
Unless otherwise specified in the related Prospectus Supplement, the
obligations of the parties to the Agreement for each Series will terminate
upon: (i) the purchase of all of the assets of the related Trust Fund, as
described in the related Prospectus Supplement; (ii) the later of (a) the
distribution to Certificateholders of that Series of final payment with
respect to the last outstanding Mortgage Loan or (b) the disposition of all
property acquired upon foreclosure or deed in lieu of foreclosure with
respect to the last outstanding Mortgage Loan and the remittance to the
Certificateholders of all funds due under the Agreement; (iii) the sale of
the assets of the related Trust Fund after the principal amounts of all
Certificates have been reduced to zero under certain circumstances set forth
in the Agreement; or (iv) mutual consent of the parties and all
Certificateholders. With respect to each Series, the Trustee will give or
cause to be given written notice of termination of the Agreement to each
Certificateholder and, unless otherwise specified in the related Prospectus
Supplement, the final distribution under the Agreement will be made only upon
surrender and cancellation of the related Certificates at an office or agency
specified in the notice of termination.
REPORTS TO CERTIFICATEHOLDERS
Concurrently with each distribution for each Series, the Trustee (or such
other paying agent as may be identified in the related Prospectus Supplement)
will make available to each Certificateholder several monthly reports setting
forth such information as is specified in the Agreement and described in the
related Prospectus Supplement, which may include the following information,
if applicable:
(i) a Distribution Date Statement that provides, among other things,
standard information as to principal and interest distributions, Certificate
Principal Amounts, Advances and Scheduled Principal Balances of the Mortgage
Loans;
(ii) a Mortgage Loan Status Report, which provides updated information
regarding the Mortgage Loans and a loan-by-loan listing showing loan name,
property type, location, unpaid principal balance, interest rate, paid
through date and maturity date, which loan-by-loan listing may be made
available electronically;
(iii) a Financial Status Report, which provides, among other things,
revenue, net operating income and debt service coverage ratio for certain
Mortgage Loans;
(iv) a Delinquent Loan Status Report, which provides, among other things,
loan name, loan number and unpaid principal balance of Mortgage Loans which
are delinquent 30-59 days, 60-89 days, 90 days or more, or are in foreclosure
but have not yet become REO Properties;
(v) an Historical Loan Modification Report, which provides, among other
things, information on those Mortgage Loans which have been modified;
(vi) an Historical Loss Estimate Report, which provides on a loan-by-loan
basis, among other things, the aggregate amount of Liquidation Proceeds,
liquidation expenses and realized losses for certain Specially Serviced
Mortgage Loans;
(vii) an REO Status Report, which provides, among other things, for each
REO Property, the date of acquisition, net operating income and the value of
such REO Property (based on the most recent appraisal or valuation); and
(viii) a Watch List, which provides, among other things, a list of
Mortgage Loans in jeopardy of becoming Specially Serviced Mortgage Loans.
THE TRUSTEE
The Seller will select a bank or trust company to act as trustee (the
"Trustee") under the Agreement for each Series and the Trustee will be
identified in the related Prospectus Supplement.
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THE MORTGAGE POOLS
GENERAL
Each Mortgage Pool will consist of one or more mortgage loans secured by
first, second or more junior mortgages, deeds of trust or similar security
instruments ("Mortgages") on, or installment contracts ("Installment
Contracts") for the sale of or financial leases and other similar
arrangements equivalent to such mortgage loans on, fee simple or leasehold
interests in commercial real property, multifamily residential property,
mixed residential/commercial property, and related property and interests
(each such interest or property, as the case may be, a "Mortgaged Property").
Each such mortgage loan, lease or Installment Contract is herein referred to
as a "Mortgage Loan."
Mortgage Loans will be of one or more of the following types:
1. Mortgage Loans with fixed interest rates;
2. Mortgage Loans with adjustable interest rates;
3. Mortgage Loans with principal balances that fully amortize over their
remaining terms to maturity;
4. Mortgage Loans whose principal balances do not fully amortize but
instead provide for a substantial principal payment at the stated maturity
of the loan;
5. Mortgage Loans that provide for recourse against only the Mortgaged
Properties;
6. Mortgage Loans that provide for recourse against the other assets of
the related Borrowers; and
7. any other types of Mortgage Loans described in the related Prospectus
Supplement.
Certain Mortgage Loans ("Simple Interest Loans") may provide that
scheduled interest and principal payments thereon are applied first to
interest accrued from the last date to which interest has been paid to the
date such payment is received and the balance thereof is applied to
principal, and other Mortgage Loans may provide for payment of interest in
advance rather than in arrears.
Mortgage Loans may also be secured by one or more assignments of leases
and rents, management agreements, security agreements, or rents, fixtures and
personalty or operating agreements relating to the Mortgaged Property and in
some cases by certain letters of credit, personal guarantees or both.
Pursuant to an assignment of leases and rents, the obligor (the "Borrower")
on the related promissory note (the "Note") assigns its right, title and
interest as landlord under each lease and the income derived therefrom to the
related lender, while retaining a right, or in some cases a license, to
collect the rents for so long as there is no default. If the Borrower
defaults, the license terminates and the related lender is entitled to
collect the rents from tenants to be applied to the monetary obligations of
the Borrower. State law may limit or restrict the enforcement of the
assignment of leases and rents by a lender until the lender takes possession
of the related Mortgaged Property and a receiver is appointed. See "CERTAIN
LEGAL ASPECTS OF THE MORTGAGE LOANS -- Leases and Rents."
Certain Mortgage Loans may provide for "equity participations" which, as
specified in the related Prospectus Supplement, may or may not be assigned to
the Trust Fund. If so specified in the related Prospectus Supplement, the
Mortgage Loans may provide for holdbacks of certain of the proceeds of such
loans. In such event, the amount of such holdback will be deposited by the
Seller into an escrow account held by the Trustee unless otherwise specified
in the related Prospectus Supplement.
Unless otherwise specified in the Prospectus Supplement for a Series, the
Mortgage Loans will not be insured or guaranteed by the United States, any
governmental agency or any private mortgage insurer.
Unless otherwise specified therein, the Prospectus Supplement relating to
each Series will provide specific information regarding the characteristics
of the Mortgage Loans, as of the Cut-Off Date, including, among other things:
(i) the aggregate principal balance of the Mortgage Loans and the largest,
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smallest and average principal balance of the Mortgage Loans; (ii) the types
of properties securing the Mortgage Loans and the aggregate principal balance
of the Mortgage Loans secured by each type of property; (iii) the interest
rate or range of interest rates of the Mortgage Loans and the weighted
average Mortgage Interest Rate of the Mortgage Loans; (iv) the original and
remaining terms to stated maturity of the Mortgage Loans and the seasoning of
the Mortgage Loans; (v) the earliest and latest origination date and maturity
date and the weighted average original and remaining terms to stated maturity
of the Mortgage Loans; (vi) the loan-to-valuation ratios at origination and
current loan balance-to-original valuation ratios of the Mortgage Loans;
(vii) the geographic distribution of the Mortgaged Properties underlying the
Mortgage Loans; (viii) the minimum interest rates, margins, adjustment caps,
adjustment frequencies, indices and other similar information applicable to
adjustable rate Mortgage Loans; (ix) the debt service coverage ratios
relating to the Mortgage Loans; (x) information with respect to the
prepayment provisions, if any, of the Mortgage Loans; (xi) information as to
the payment characteristics of the Mortgage Loans, including, without
limitation, balloon payment and other amortization provisions; and (xii)
payment delinquencies, if any, relating to the Mortgage Loans. If specified
in the related Prospectus Supplement, the Seller may segregate the Mortgage
Loans in a Mortgage Pool into separate "Mortgage Loan Groups" (as described
in the related Prospectus Supplement) as part of the structure of the
payments of principal and interest on the Certificates of a Series. In such
case, the Seller may disclose the above-specified information by Mortgage
Loan Group. In the event that the Mortgage Loans consist of financial leases
or Installment Contracts, the related Prospectus Supplement will provide
appropriate specific information analogous to that described above.
The Seller will file a current report on Form 8-K (the "Form 8-K") with
the Securities and Exchange Commission within 15 days after the initial
issuance of each Series of Certificates (each, a "Closing Date"), as
specified in the related Prospectus Supplement, which will set forth
information with respect to the Mortgage Loans included in the Trust Fund for
a Series as of the related Closing Date. The Form 8-K will be available to
the Certificateholders of the related Series promptly after its filing.
UNDERWRITING AND INTERIM SERVICING STANDARDS APPLICABLE TO THE MORTGAGE LOANS
Unless otherwise indicated in the related Prospectus Supplement, the
Mortgage Loans in the Mortgage Pool underlying the Certificates of a Series
will be newly-originated or seasoned Mortgage Loans and will be purchased or
otherwise acquired from third parties, which third parties may or may not be
originators of such Mortgage Loans and may or may not be affiliates of the
Seller. The origination standards and procedures applicable to such Mortgage
Loans may differ from Series to Series or among the Mortgage Loans in a given
Mortgage Pool, depending on the identity of the originator or originators. In
the case of seasoned Mortgage Loans, the procedures by which such Mortgage
Loans have been serviced from their origination to the time of their
inclusion in the related Mortgage Pool may also differ from Series to Series
or among the Mortgage Loans in a given Mortgage Pool.
The related Prospectus Supplement for each Series will provide information
as to the origination standards and procedures applicable to the Mortgage
Loans in the related Mortgage Pool and, to the extent applicable and
material, will provide information as to the servicing of such Mortgage Loans
prior to their inclusion in the Mortgage Pool.
ASSIGNMENT OF MORTGAGE LOANS
At the time of issuance of the Certificates of each Series, the Seller
will cause the Mortgage Loans (or, in the case of a structure using a Funding
Note, the Funding Note) to be assigned to the Trustee, together with, as more
fully specified in the related Prospectus Supplement, all payments due on or
with respect to such Mortgage Loans (or Funding Note), other than principal
and interest due on or before the Cut-Off Date and principal prepayments
received on or before the Cut-Off Date. The Trustee, concurrently with such
assignment, will execute and deliver Certificates evidencing the beneficial
ownership interests in the related Trust Fund to the Seller in exchange for
the Mortgage Loans. Each Mortgage Loan will be identified in a schedule
appearing as an exhibit to the Agreement for the related Series (the
"Mortgage Loan Schedule"). The Mortgage Loan Schedule will include, among
other things, as to each Mortgage Loan, information as to its outstanding
principal balance as of the close of business
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on the Cut-Off Date, as well as information respecting the interest rate, the
scheduled monthly (or other periodic) payment of principal and interest as of
the Cut-Off Date and the maturity date of each Note.
In addition, except to the extent otherwise specified in the related
Prospectus Supplement, the Seller will, as to each Mortgage Loan, deliver to
the Trustee: (i) the Note, endorsed to the order of the Trustee without
recourse; (ii) the Mortgage and an executed assignment thereof in favor of
the Trustee or otherwise as required by the Agreement; (iii) any assumption,
modification or substitution agreements relating to the Mortgage Loan; (iv) a
lender's title insurance policy (or owner's policy in the case of a financial
lease or an Installment Contract), together with its endorsements, or, in the
case of Mortgage Loans that are not covered by title insurance, an attorney's
opinion of title issued as of the date of origination of the Mortgage Loan;
(v) if the assignment of leases, rents and profits is separate from the
Mortgage, an executed re-assignment of assignment of leases, rents and
profits to the Trustee; (vi) a copy of any recorded UCC-1 financing
statements and related continuation statements, together with (in the case of
such UCC-1 financing statements which are in effect as of the Closing Date)
an original executed UCC-2 or UCC-3 statement, in a form suitable for filing,
disclosing the assignment to the Trustee of a security interest in any
personal property constituting security for the repayment of the Mortgage;
and (vii) such other documents as may be described in the Agreement (such
documents, collectively, the "Mortgage Loan File"). Unless otherwise
expressly permitted by the Agreement, all documents included in the Mortgage
Loan File are to be original executed documents; provided, however, that in
instances where the original recorded Mortgage, Mortgage assignment or any
document necessary to assign the Seller's interest in financial leases or
Installment Contracts to the Trustee, as described in the Agreement, has been
retained by the applicable jurisdiction or has not yet been returned from
recordation, the Seller may deliver a photocopy thereof certified to be the
true and complete copy of the original thereof submitted for recording, and
the Master Servicer will cause the original of each such document which is
unavailable because it is being or has been submitted for recordation and has
not yet been returned, to be delivered to the Trustee as soon as available.
The Trustee will hold the Mortgage Loan File for each Mortgage Loan in
trust for the benefit of all Certificateholders. Pursuant to the Agreement,
the Trustee is obligated to review the Mortgage Loan File for each Mortgage
Loan within a specified number of days after the execution and delivery of
the Agreement. Unless otherwise specified in the related Prospectus
Supplement, if any document in the Mortgage Loan File is found to be
defective in any material respect, the Trustee will promptly notify the
Seller, the originator of the related Mortgage Loan or such other party as is
designated in the related Agreement (the "Responsible Party") and the Master
Servicer. Unless otherwise specified in the related Prospectus Supplement, if
the Responsible Party cannot cure such defect within the time period
specified in such Prospectus Supplement, the Responsible Party will be
obligated to either substitute the affected Mortgage Loan with a Substitute
Mortgage Loan or Loans, or to repurchase the related Mortgage Loan from the
Trustee within the time period specified in such Prospectus Supplement at a
price specified therein, expected to be generally equal to the principal
balance thereof as of the date of purchase or, in the case of a Series as to
which an election has been made to treat the related Trust Fund as a REMIC,
at such other price as may be necessary to avoid a tax on a prohibited
transaction, as described in Section 860F(a) of the Code, in each case
together with accrued interest at the applicable Mortgage Interest Rate to
the first day of the month following such repurchase, plus the amount of any
unreimbursed advances made by the Master Servicer in respect of such Mortgage
Loan. Unless otherwise specified in the related Prospectus Supplement, this
substitution or purchase obligation will constitute the sole remedy available
to the Holders of Certificates or the Trustee for a material defect in a
constituent document.
The related Prospectus Supplement will describe procedures for the review
and holding of Mortgage Loans in the case of a structure using a Funding
Note.
REPRESENTATIONS AND WARRANTIES
To the extent specified in the related Prospectus Supplement, the
Responsible Party with respect to each Mortgage Loan will have made certain
representations and warranties in respect of such Mortgage Loan and such
representations and warranties will have been assigned to the Trustee and/or
the Seller
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will have made certain representations and warranties in respect of the
Mortgage Loans directly to the Trustee. Such representations and warranties
will be set forth in an annex to the related Prospectus Supplement. Upon the
discovery of the breach of any such representation or warranty in respect of
a Mortgage Loan that materially and adversely affects the interests of the
Certificateholders of the related Series, the Responsible Party or the
Seller, as the case may be, will be obligated either to cure such breach in
all material respects within the time period specified in such Prospectus
Supplement, to replace the affected Mortgage Loan with a Substitute Mortgage
Loan or Loans or to repurchase such Mortgage Loan at a price specified
therein, expected to be generally equal to the unpaid principal balance
thereof at the date of repurchase or, in the case of a Series of Certificates
as to which the Seller has elected to treat the related Trust Fund as a
REMIC, as defined in the Code, at such other price as may be necessary to
avoid a tax on a prohibited transaction, as described in Section 860F(a) of
the Code, in each case together with accrued interest at the per annum
interest rate applicable for the related Mortgage Loan (the "Mortgage Rate"),
to the first day of the month following such repurchase and the amount of any
unreimbursed advances made by the Master Servicer in respect of such Mortgage
Loan. The Master Servicer will be required to enforce such obligation of the
Responsible Party or the Seller for the benefit of the Trustee and the
Certificateholders, following the practices it would employ in its good faith
business judgment were it the owner of such Mortgage Loan. Unless otherwise
specified in the related Prospectus Supplement and subject to the ability of
the Responsible Party or the Seller to cure such breach in all material
respects or deliver Substitute Mortgage Loans for certain Mortgage Loans as
described below, such repurchase obligation will constitute the sole remedy
available to the Certificateholders of such Series for a breach of a
representation or warranty by the Responsible Party or the Seller.
The proceeds of any repurchase of a Mortgage Loan will be deposited,
subject to certain limitations set forth in the related Agreement, into the
Collection Account.
Within the period of time specified in the related Prospectus Supplement,
following the date of issuance of a Series of Certificates, the Responsible
Party or the Seller, as the case may be, may deliver to the Trustee Mortgage
Loans ("Substitute Mortgage Loans") in substitution for any one or more of
the Mortgage Loans ("Defective Mortgage Loans") initially included in the
Trust Fund (or in the Mortgage Pool underlying a Funding Note) but which do
not conform in one or more respects to the description thereof contained in
the related Prospectus Supplement, as to which a breach of a representation
or warranty is discovered, which breach materially and adversely affects the
interests of the Certificateholders, or as to which a document in the related
Mortgage Loan File is defective in any material respect. Unless otherwise
specified in the related Prospectus Supplement, the required characteristics
of any Substitute Mortgage Loan will generally include, among other things,
that such Substitute Mortgage Loan on the date of substitution, will (i) have
an outstanding principal balance, after deduction of all scheduled payments
due in the month of substitution, not in excess of the outstanding principal
balance of the Defective Mortgage Loan (the amount of any shortfall to be
distributed to Certificateholders in the month of substitution), (ii) have a
Mortgage Interest Rate not less than (and not more than 1% greater than) the
Mortgage Interest Rate of the Defective Mortgage Loan, (iii) have a remaining
term to maturity not greater than (and not more than one year less than) that
of the Defective Mortgage Loan and (iv) comply with all of the
representations and warranties set forth in the Agreement as of the date of
substitution.
If so specified in the related Prospectus Supplement, other entities may
also make representations and warranties with respect to the Mortgage Loans
included in a Mortgage Pool. Unless otherwise specified in such Prospectus
Supplement, such other entity will have the same obligations with respect to
such representations and warranties as the Responsible Party or the Seller.
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SERVICING OF THE MORTGAGE LOANS
GENERAL
The Prospectus Supplement related to a Series will identify the master
servicer (the "Master Servicer") to service and administer the Mortgage Loans
as described below, and will set forth certain information concerning the
Master Servicer. The Master Servicer will be responsible for servicing the
Mortgage Loans pursuant to the Agreement for the related Series. The Master
Servicer may have other business relationships with the Seller and its
affiliates.
If so specified in the related Prospectus Supplement, the servicing of
certain Mortgage Loans that are in default or otherwise require special
servicing (the "Specially Serviced Mortgage Loans") will be performed by a
special servicer (the "Special Servicer"). Certain information concerning the
Special Servicer and the standards for determining which Mortgage Loans will
become Specially Serviced Mortgage Loans will be set forth in such Prospectus
Supplement. Subject to the terms of the related Agreement, the Special
Servicer (and not the Master Servicer) will then be responsible for (a)
negotiating modifications, waivers, amendments and other forbearance
arrangements with the Borrower of any Specially Serviced Mortgage Loan,
subject to the limitations described under "--Modifications, Waivers and
Amendments" below; (b) foreclosing on such Specially Serviced Mortgage Loan
if no suitable arrangements can be made to cure the default in the manner
specified in the related Prospectus Supplement; and (c) supervising the
management and operation of the related Mortgaged Property if acquired
through foreclosure or a deed in lieu of foreclosure. The Special Servicer
may have other business relationships with the Seller and its affiliates.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer and the Special Servicer, if any, may subcontract the
servicing of all or a portion of the Mortgage Loans to one or more
sub-servicers. Such sub-servicers may have other business relationships with
the Seller and its affiliates.
SERVICING STANDARDS
The Master Servicer and, except when acting at the direction of any
Operating Advisor, the Special Servicer, if any, will be required to service
and administer the Mortgage Loans solely in the best interests of and for the
benefit of the Certificateholders (as determined by the Master Servicer or
the Special Servicer, if any, as the case may be, in its reasonable judgment
without taking into account differing payment priorities among the Classes of
the related Series of Certificates and any conflicts of interest involving
it), in accordance with the terms of the Agreement and the Mortgage Loans
and, to the extent consistent with such terms, in the same manner in which,
and with the same care, skill, prudence and diligence with which, it services
and administers similar mortgage loans in other portfolios, giving due
consideration to the customary and usual standards of practice of prudent
institutional commercial mortgage lenders and loan servicers. If so specified
in the related Prospectus Supplement, the Master Servicer and Special
Servicer, if any, may also be required to service and administer the Mortgage
Loans in the best interest of an insurer or guarantor or in accordance with
the provisions of a related Funding Note.
OPERATING ADVISOR
If so specified in the related Prospectus Supplement, an advisor (the
"Operating Advisor") may be selected to advise, direct and approve
recommendations of the Special Servicer with respect to certain decisions
relating to the servicing of the Specially Serviced Mortgage Loans. The
related Prospectus Supplement will provide specific information with respect
to the following matters: (i) the duration of the term of the Operating
Advisor; (ii) the method of selection of the Operating Advisor; (iii) certain
decisions as to which the Operating Advisor will have the power to direct and
approve actions of the Special Servicer (for example, foreclosure of a
Mortgaged Property securing a Specially Serviced Mortgage Loan, modification
of a Specially Serviced Mortgage Loan, extension of the maturity of a
Specially Serviced Mortgage Loan beyond a specified term and methods of
compliance with environmental laws) and (iv) the information, recommendations
and reports to be provided to the Operating Advisor by the Special Servicer.
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COLLECTIONS AND OTHER SERVICING PROCEDURES
The Master Servicer and, with respect to any Specially Serviced Mortgage
Loans, the Special Servicer, if any, will make efforts to collect all
payments called for under the Mortgage Loans and will, consistent with the
related Agreement, follow such collection procedures as it deems necessary or
desirable. Consistent with the above, unless otherwise specified in the
related Prospectus Supplement, the Master Servicer or Special Servicer, if
any, may, in its discretion, waive any late payment or assumption charge or
penalty interest in connection with any late payment or assumption of a
Mortgage Loan and, if so specified in the related Prospectus Supplement, may
extend the due dates for payments due on a Note.
It is expected that the Agreement for each Series will provide that the
Master Servicer establish and maintain an escrow account (the "Escrow
Account") in which the Master Servicer will be required to deposit amounts
received from each Borrower, if required by the terms of the related Note,
for the payment of taxes, assessments, certain mortgage and hazard insurance
premiums and other comparable items. The Special Servicer, if any, will be
required to remit amounts received for such purposes on Mortgage Loans
serviced by it for deposit in the Escrow Account and will be entitled to
direct the Master Servicer to make withdrawals from the Escrow Account as may
be required for the servicing of such Mortgage Loans. Withdrawals from the
Escrow Account may be made to effect timely payment of taxes, assessments,
mortgage and hazard insurance premiums and comparable items, to refund to
Borrowers amounts determined to be overages, to remove amounts deposited
therein in error, to pay interest to Borrowers on balances in the Escrow
Account, if required, to repair or otherwise protect the Mortgaged Properties
and to clear and terminate such account. Unless otherwise set forth in the
related Prospectus Supplement, the Master Servicer will be entitled to all
income on the funds in the Escrow Account invested in Permitted Investments
not required to be paid to Borrowers under applicable law. The Master
Servicer will be responsible for the administration of the Escrow Account. If
amounts on deposit in the Escrow Account are insufficient to pay any tax,
insurance premium or other similar item when due, such item will be payable
from amounts on deposit in the Collection Account or otherwise in the manner
set forth in the Prospectus Supplement and Agreement for the related Series.
INSURANCE
Unless otherwise specified in the related Prospectus Supplement, the
Agreement for each Series will require that the Master Servicer maintain or
require each Borrower to maintain insurance in accordance with the related
Mortgage, which generally will include a standard fire and hazard insurance
policy with extended coverage. To the extent required by the related
Mortgage, the coverage of each such standard hazard insurance policy will be
in an amount that is not less than the lesser of 90% of the replacement cost
of the improvements securing such Mortgage Loan or the outstanding principal
balance owing on such Mortgage Loan. Unless otherwise specified in the
related Prospectus Supplement, if a Mortgaged Property was located at the
time of origination of the related Mortgage Loan in a federally designated
special flood hazard area, the Master Servicer also will maintain or require
the related Borrower to maintain in accordance with the related Mortgage
flood insurance in an amount equal to the lesser of the unpaid principal
balance of the related Mortgage Loan and the maximum amount obtainable with
respect to the Mortgaged Property. To the extent set forth in the related
Prospectus Supplement, the cost of any such insurance maintained by the
Master Servicer will be an expense of the Trust Fund payable out of the
Collection Account. The Master Servicer or, if so specified in the related
Prospectus Supplement, the Special Servicer, if any, will cause to be
maintained fire and hazard insurance with extended coverage on each REO
Property in an amount specified in the related Prospectus Supplement and
expected to generally be equal to the greater of (i) an amount necessary to
avoid the application of any coinsurance clause contained in the related
insurance policy and (ii) 90% of the replacement cost of the improvements
which are a part of such property. Unless otherwise specified in the related
Prospectus Supplement, the cost of any such insurance with respect to an REO
Property will be an expense of the Trust Fund payable out of amounts on
deposit in the related REO Account or, if such amounts are insufficient, from
the Collection Account. The Master Servicer or, if so specified in the
related Prospectus Supplement, the Special Servicer, if any, will maintain
flood insurance providing substantially the same coverage as described above
on any REO Property which was located
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in a federally designated special flood hazard area at the time the related
Mortgage Loan was originated. The related Agreement may provide that the
Master Servicer or the Special Servicer, if any, as the case may be, may
satisfy its obligation to cause hazard policies to be maintained by
maintaining a master, or single interest, insurance policy insuring against
losses on the Mortgage Loans or REO Properties, as the case may be. The
incremental cost of such insurance allocable to any particular Mortgage Loan,
if not borne by the related Borrower, will be an expense of the Trust Fund
unless otherwise specified by the related Prospectus Supplement.
Alternatively, the Master Servicer may satisfy its obligation by maintaining,
at its expense, a blanket policy (i.e., not a single interest or master
policy) insuring against losses on the Mortgage Loans or REO Properties, as
the case may be. If such a blanket policy contains a deductible clause, the
Master Servicer or the Special Servicer, if any, as the case may be, will be
obligated to deposit in the Collection Account all sums which would have been
deposited therein but for such clause.
In general, the standard form of fire and hazard extended coverage policy
will cover physical damage to, or destruction of, the improvements on the
Mortgaged Property caused by fire, lightning, explosion, smoke, windstorm,
hail, riot, strike and civil commotion, subject to the conditions and
exclusions particularized in each policy. Since the standard hazard insurance
policies relating to the Mortgage Loans generally will be underwritten by
different insurers and will cover Mortgaged Properties located in various
jurisdictions, such policies will not contain identical terms and conditions.
The most significant terms thereof, however, generally will be determined by
state law and conditions. Most such policies typically will not cover any
physical damage resulting from war, revolution, governmental actions, floods
and other water-related causes, earth movement (including earthquakes,
landslides and mudflows), nuclear reaction, wet or dry rot, vermin, rodents,
insects or domestic animals, theft and, in certain cases, vandalism. The
foregoing list is merely indicative of certain kinds of uninsured risks and
is not intended to be all-inclusive. Any losses incurred with respect to
Mortgage Loans due to uninsured risks (including earthquakes, mudflows and
floods) or insufficient hazard insurance proceeds could affect distributions
to the Certificateholders.
The standard hazard insurance policies covering Mortgaged Properties
securing Mortgage Loans typically will contain a "coinsurance" clause which,
in effect, will require the insured at all times to carry insurance of a
specified percentage (generally 80% to 90%) of the full replacement value of
the dwellings, structures and other improvements on the Mortgaged Property in
order to recover the full amount of any partial loss. If the insured's
coverage falls below this specified percentage, such clause will typically
provide that the insurer's liability in the event of partial loss will not
exceed the greater of (i) the actual cash value (the replacement cost less
physical depreciation) of the structures and other improvements damaged or
destroyed and (ii) such proportion of the loss, without deduction for
depreciation, as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such dwellings, structures and
other improvements.
In addition, to the extent required by the related Mortgage, the Master
Servicer or Special Servicer, if any, may require the Borrower to maintain
other forms of insurance including, but not limited to, loss of rent
endorsements, business interruption insurance and comprehensive public
liability insurance, and the related Agreement may require the Master
Servicer or Special Servicer, if any, to maintain public liability insurance
with respect to any REO Properties. Any cost incurred by the Master Servicer
or Special Servicer, if any, in maintaining any such insurance policy will be
added to the amount owing under the Mortgage Loan where the terms of the
Mortgage Loan so permit; provided, however, that the addition of such cost
will not be taken into account for purposes of calculating the distribution
to be made to Certificateholders. Such costs may be recovered by the Master
Servicer and the Special Servicer, if any, from the Collection Account, with
interest thereon, as provided by the Agreement.
Unless otherwise specified in the related Prospectus Supplement, no pool
insurance policy, special hazard insurance policy, bankruptcy bond,
repurchase bond or guarantee insurance will be maintained with respect to the
Mortgage Loans.
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
Unless otherwise specified in the related Prospectus Supplement, the
Agreement for each Series will require that the Master Servicer and the
Special Servicer, if any, obtain and maintain in effect a fidelity
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bond or similar form of insurance coverage (which may provide blanket
coverage) or any combination thereof insuring against loss occasioned by
fraud, theft or other intentional misconduct of the officers, employees and
agents of the Master Servicer or the Special Servicer, as the case may be.
The related Agreement may allow the Master Servicer and the Special Servicer,
if any, to self-insure against loss occasioned by the errors and omissions of
the officers, employees and agents of the Master Servicer or Special
Servicer, as the case may be, so long as certain criteria set forth in the
Agreement are met.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer's principal compensation for its activities under the
Agreement for each Series will come from the payment to it or retention by
it, with respect to each payment of interest on a Mortgage Loan, of a
"Servicing Fee" (as defined in the related Prospectus Supplement). The exact
amount or method of calculating such Servicing Fee will be established in the
Prospectus Supplement and Agreement for the related Series. Since the
aggregate unpaid principal balance of the Mortgage Loans will generally
decline over time, the Master Servicer's servicing compensation will
ordinarily decrease as the Mortgage Loans amortize.
In addition, the Agreement for a Series may provide that the Master
Servicer will be entitled to receive, as additional compensation, (i)
Prepayment Premiums, late fees and certain other fees collected from
Borrowers and (ii) any interest or other income earned on funds deposited in
the Collection Account (as described under "DESCRIPTION OF THE CERTIFICATES
- -- Accounts") and, except to the extent such income is required to be paid to
the related Borrowers, the Escrow Account.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer will pay the fees and expenses of the Trustee.
The exact amount or method of calculating the servicing fee of the Special
Servicer, if any, and the source from which such fee will be paid will be
described in the Prospectus Supplement for the related Series.
In addition to the compensation described above, the Master Servicer and
the Special Servicer, if any (or any other party specified in the related
Prospectus Supplement), may retain, or be entitled to the reimbursement of,
such other amounts and expenses as are described in the related Prospectus
Supplement.
ADVANCES
The related Prospectus Supplement will set forth the obligations, if any,
of the Master Servicer to make any advances ("Advances") with respect to
delinquent payments on Mortgage Loans, payments of taxes, insurance and
property protection expenses or otherwise. Any such Advances will be made in
the form and manner described in the Prospectus Supplement and Agreement for
the related Series. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer will be obligated to make such an Advance
only to the extent that the Master Servicer has determined that such Advance
will be recoverable. In the event that the Master Servicer determines that it
is required to make an Advance, it will, on or prior to the related
Distribution Date, deposit in the account specified in the Prospectus
Supplement an amount equal to such Advance. Any funds thus advanced,
including Advances previously made that the Master Servicer determines are
not ultimately recoverable, are reimbursable to the Master Servicer from
amounts in the Collection Account to the extent and in the manner described
in the related Prospectus Supplement.
If a Borrower makes a principal payment between scheduled payment dates,
the Borrower may be required to pay interest on the prepayment amount only to
the date of prepayment. If and to the extent described in the related
Prospectus Supplement, the Master Servicer's Servicing Fee may be reduced or
the Master Servicer may be otherwise obligated to advance funds to the extent
necessary to remit interest on any such full or partial prepayment received
from the date of receipt thereof to the next succeeding scheduled payment
date.
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MODIFICATIONS, WAIVERS AND AMENDMENTS
If so specified in the related Prospectus Supplement, the Agreement for
each Series will provide that the Master Servicer may have the discretion,
subject to certain conditions set forth therein, to modify, waive or amend
certain of the terms of any Mortgage Loan without the consent of the Trustee
or any Certificateholder. The extent to which the Master Servicer may modify,
waive or amend any terms of the Mortgage Loans without such consent will be
specified in the related Prospectus Supplement.
Subject to the terms and conditions set forth in the Agreement, the
Special Servicer, if any, may modify, waive or amend the terms of any
Specially Serviced Mortgage Loan if the Special Servicer determines that a
material default has occurred or a payment default has occurred or is
reasonably foreseeable. The Special Servicer, if any, may extend the maturity
date of such Mortgage Loan to a date not later than the date described in the
related Prospectus Supplement. The ability of the Special Servicer to modify,
waive or amend the terms of any Mortgage Loan may be subject to such
additional limitations, including approval requirements, as are set forth in
the related Prospectus Supplement.
Subject to the terms and conditions set forth in the Agreement, the
Special Servicer, if any, will not agree to any modification, waiver or
amendment of the payment terms of a Mortgage Loan unless the Special Servicer
has determined that such modification, waiver or amendment is reasonably
likely to produce a greater recovery on a present value basis than
liquidation of the Mortgage Loan or has made such other determination
described in the related Prospectus Supplement. Prior to agreeing to any such
modification, waiver or amendment of the payment terms of a Mortgage Loan,
the Special Servicer, if any, will give notice thereof in the manner set
forth in the Prospectus Supplement and Agreement for the related Series.
The Prospectus Supplement for a Series may describe other or different
provisions concerning the modification, waiver or amendment of the terms of
the related Mortgage Loans, including, without limitation, requirements for
the approval of an Operating Advisor.
EVIDENCE OF COMPLIANCE
The Agreement for each Series will provide that the Master Servicer and
the Special Servicer, if any, at their own expense, each will cause a firm of
independent public accountants to furnish to the Trustee, annually on or
before a date specified in the Agreement, a statement as to compliance with
the Agreement by the Master Servicer or Special Servicer, as the case may be.
In addition, the Agreement will provide that the Master Servicer and the
Special Servicer, if any, each will deliver to the Trustee, annually on or
before a date specified in the Agreement, a statement signed by an officer to
the effect that, based on a review of its activities during the preceding
calendar year, to the best of such officer's knowledge, the Master Servicer
or Special Servicer, as the case may be, has fulfilled its obligations under
the Agreement throughout such year or, if there has been a default in the
fulfillment of any such obligation, specifying each such default and the
nature and status thereof, and, in the case of a Series of Certificates as to
which a REMIC or FASIT election has been made, whether the Master Servicer or
the Special Servicer, as the case may be, has received a challenge from the
Internal Revenue Service as to the status of the Trust Fund as a REMIC or
FASIT.
CERTAIN MATTERS WITH RESPECT TO THE MASTER SERVICER, THE SPECIAL SERVICER AND
THE TRUSTEE
Unless otherwise specified in the related Prospectus Supplement, the
Agreement for each Series will provide that neither the Master Servicer nor
the Special Servicer, if any, nor any of their directors, officers, employees
or agents will be under any liability to the Trust Fund or the
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement, or for errors in
judgment; provided, however, that neither the Master Servicer nor the Special
Servicer, if any, nor any such person will be protected against any breach of
representations or warranties made by the Master Servicer or the Special
Servicer, as the case may be, in the Agreement, against any specific
liability imposed on the Master Servicer or the Special Servicer, as the case
may be, pursuant to the Agreement, or any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith,
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or negligence in the performance of its duties or by reason of reckless
disregard of its obligations and duties thereunder. The Agreement will
further provide that the Master Servicer, the Special Servicer, if any, and
any of their directors, officers, employees or agents will be entitled to
indemnification by the Trust Fund and will be held harmless against any loss,
liability or expense incurred in connection with any legal action relating to
the Agreement or the Certificates, other than any loss, liability or expense
incurred (i) by reason of willful misfeasance, bad faith or negligence in the
performance of their duties or by reason of reckless disregard of their
obligations and duties thereunder or (ii) in certain other circumstances
specified in the Agreement. Any loss resulting from such indemnification will
reduce amounts distributable to Certificateholders and, unless otherwise
provided in the related Prospectus Supplement, will be borne pro rata by all
Certificateholders without regard to subordination, if any, of one Class to
another.
Unless otherwise provided in the related Prospectus Supplement, neither
the Master Servicer nor the Special Servicer, if any, may resign from its
obligations and duties under the Agreement except upon a determination that
its performance of its duties thereunder is no longer permissible under
applicable law. No such resignation of the Master Servicer will become
effective until the Trustee or a successor Master Servicer has assumed the
Master Servicer's obligations and duties under the Agreement. No such
resignation of a Special Servicer will become effective until the Trustee,
the Master Servicer or a successor Special Servicer has assumed the Special
Servicer's obligations and duties under the Agreement.
The Trustee under each Agreement will be named in the related Prospectus
Supplement. The commercial bank or trust company serving as Trustee may have
normal banking relationships with the Seller, the Master Servicer, the
Special Servicer, if any, and their respective affiliates.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee may resign from its obligations under the Agreement at any time, in
which event a successor Trustee will be appointed. In addition, the Seller
may remove the Trustee if the Trustee ceases to be eligible to act as Trustee
under the Agreement or if the Trustee becomes insolvent, at which time the
Seller will become obligated to appoint a successor Trustee. The Trustee also
may be removed at any time by the Holders of Certificates evidencing the
Voting Rights specified in the related Prospectus Supplement. Any resignation
and removal of the Trustee, and the appointment of a successor Trustee, will
not become effective until acceptance of such appointment by the successor
Trustee.
EVENTS OF DEFAULT
Unless otherwise provided in the related Prospectus Supplement, events of
default (each, an "Event of Default") with respect to the Master Servicer and
the Special Servicer, if any, under the Agreement for each Series will
include: (i) with respect to the Master Servicer, any failure by the Master
Servicer to deposit in the Collection Account or remit to the Trustee for
deposit in the Distribution Account for distribution to Certificateholders
any payment required to be made by the Master Servicer under the terms of the
Agreement on the day required pursuant to the terms of the Agreement; (ii)
with respect to the Special Servicer, if any, any failure by the Special
Servicer to remit to the Master Servicer for deposit in the Collection
Account on the day required any amounts received by it in respect of a
Specially Serviced Mortgage Loan and required to be so remitted; (iii) with
respect to the Master Servicer and the Special Servicer, if any, any failure
on the part of the Master Servicer or the Special Servicer, as the case may
be, duly to observe or perform in any material respect any other of the
covenants or agreements on the part of the Master Servicer or the Special
Servicer, as the case may be, which failure continues unremedied for a period
of 90 days after written notice of such failure has been given to the Master
Servicer or the Special Servicer, as the case may be; (iv) with respect to
the Master Servicer or the Special Servicer, if any, the entering against the
Master Servicer or the Special Servicer, as the case may be, of a decree or
order of a court, agency or supervisory authority for the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, provided that any such decree
or order shall have remained in force undischarged or unstayed for a period
of 60 days; (v) with respect to the Master Servicer or the Special Servicer,
if any, the consent by the Master Servicer or the Special
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Servicer, as the case may be, to the appointment of a conservator or receiver
or liquidator or liquidating committee in any insolvency, readjustment of
debt, marshalling of assets and liabilities, voluntary liquidation or similar
proceedings of or relating to it or of or relating to all or substantially
all of its property; and (vi) with respect to the Master Servicer or the
Special Servicer, if any, the admission by the Master Servicer or Special
Servicer, as the case may be, in writing of its inability to pay its debts
generally as they become due, the filing by the Master Servicer or the
Special Servicer, as the case may be, of a petition to take advantage of any
applicable insolvency or reorganization statute or the making of an
assignment for the benefit of its creditors or the voluntary suspension of
the payment of its obligations.
As long as an Event of Default remains unremedied, the Trustee may, and as
long as an Event of Default remains unremedied or under certain other
circumstances, if any, described in the related Prospectus Supplement at the
written direction of the Holders of Certificates holding at least the
percentage specified in the Prospectus Supplement of all of the Voting Rights
of the Class or Classes specified therein shall, by written notice to the
Master Servicer or Special Servicer, as the case may be, terminate all of the
rights and obligations of the Master Servicer or the Special Servicer, as the
case may be, whereupon the Trustee or another successor Master Servicer or
Special Servicer appointed by the Trustee will succeed to all authority and
power of the Master Servicer or Special Servicer under the Agreement and will
be entitled to similar compensation arrangements. "Voting Rights" means the
portion of the voting rights of all Certificates that is allocated to any
Certificate in accordance with the terms of the Agreement.
CREDIT ENHANCEMENT
GENERAL
If specified in the related Prospectus Supplement for any Series, credit
enhancement may be provided with respect to one or more Classes thereof or
the related Mortgage Loans (the "Credit Enhancement"). Credit Enhancement may
be in the form of the subordination of one or more Classes of the
Certificates of such Series, the establishment of one or more reserve funds,
overcollateralization, a letter of credit, certificate guarantee insurance
policies, the use of cross-support features or another method of Credit
Enhancement described in the related Prospectus Supplement, or any
combination of the foregoing.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Credit Enhancement will not provide protection against all risks
of loss and will not guarantee repayment of the entire principal balance of
the Certificates and interest thereon. If losses occur which exceed the
amount covered by Credit Enhancement or which are not covered by the Credit
Enhancement, Certificateholders will bear their allocable share of
deficiencies.
If Credit Enhancement is provided with respect to a Series, or the related
Mortgage Loans, the related Prospectus Supplement will include a description
of (a) the amount payable under such Credit Enhancement, (b) any conditions
to payment thereunder not otherwise described herein, (c) the conditions (if
any) under which the amount payable under such Credit Enhancement may be
reduced and under which such Credit Enhancement may be terminated or replaced
and (d) the material provisions of any agreement relating to such Credit
Enhancement. Additionally, the related Prospectus Supplement will set forth
certain information with respect to the issuer of any third-party Credit
Enhancement, including (i) a brief description of its principal business
activities, (ii) its principal place of business, place of incorporation and
the jurisdiction under which it is chartered or licensed to do business,
(iii) if applicable, the identity of regulatory agencies which exercise
primary jurisdiction over the conduct of its business and (iv) its total
assets, and its stockholders' or policyholders' surplus, if applicable, as of
the date specified in such Prospectus Supplement. In addition, if the
Certificateholders of such Series will be materially dependent upon any
provider of Credit Enhancement for timely payment of interest and/or
principal on their Certificates, the related Prospectus Supplement will
include audited financial statements on a comparative basis for at least the
prior two years and any other appropriate financial information regarding
such provider.
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SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more Classes
of a Series may be subordinate Certificates. If so specified in the related
Prospectus Supplement, the rights of the Holders of subordinate Certificates
(the "Subordinate Certificates") to receive distributions of principal and
interest on any Distribution Date will be subordinated to such rights of the
Holders of senior Certificates (the "Senior Certificates") to the extent
specified in the related Prospectus Supplement. The Agreement may require a
trustee that is not the Trustee to be appointed to act on behalf of Holders
of Subordinate Certificates.
A Series may include one or more Classes of Senior Certificates entitled
to receive cash flows remaining after distributions are made to all other
Senior Certificates of such Series. Such right to receive payments will
effectively be subordinate to the rights of other Holders of Senior
Certificates. A Series also may include one or more Classes of Subordinate
Certificates entitled to receive cash flows remaining after distributions are
made to other Subordinate Certificates of such Series. If so specified in the
related Prospectus Supplement, the subordination of a Class may apply only in
the event of (or may be limited to) certain types of losses not covered by
insurance policies or other credit support, such as losses arising from
damage to property securing a Mortgage Loan not covered by standard hazard
insurance policies.
The related Prospectus Supplement will set forth information concerning
the amount of subordination of a Class or Classes of Subordinate Certificates
in a Series, the circumstances in which such subordination will be
applicable, the manner, if any, in which the amount of subordination will
decrease over time, the manner of funding any related Reserve Fund and the
conditions under which amounts in any applicable Reserve Fund will be used to
make distributions to Holders of Senior Certificates and/or to Holders of
Subordinate Certificates or be released from the applicable Trust Fund.
CROSS-SUPPORT FEATURES
If the Mortgage Pool for a Series is divided into separate Mortgage Loan
Groups, each backing a separate Class or Classes of a Series, credit support
may be provided by a cross-support feature which requires that distributions
be made on Senior Certificates backed by one Mortgage Loan Group prior to
distributions on Subordinate Certificates backed by another Mortgage Loan
Group within the Trust Fund. The related Prospectus Supplement for a Series
which includes a cross-support feature will describe the manner and
conditions for applying such cross-support feature.
LETTER OF CREDIT
If specified in the related Prospectus Supplement, a letter of credit with
respect to a Series of Certificates will be issued by the bank or financial
institution specified in such Prospectus Supplement (the "Letter of Credit
Bank"). Under the letter of credit, the Letter of Credit Bank will be
obligated to honor drawings thereunder in an aggregate fixed dollar amount,
net of unreimbursed payments thereunder, equal to the percentage specified in
the related Prospectus Supplement of the aggregate principal balance of the
Mortgage Loans on the applicable Cut-Off Date or of one or more Classes of
Certificates (the "Letter of Credit Percentage"). If so specified in the
related Prospectus Supplement, the letter of credit may permit drawings in
the event of losses not covered by insurance policies or other credit
support, such as losses arising from damage not covered by standard hazard
insurance policies. The amount available under the letter of credit will, in
all cases, be reduced to the extent of the unreimbursed payments thereunder.
The obligations of the Letter of Credit Bank under the letter of credit for
any Series of Certificates will expire at the earlier of the date specified
in the related Prospectus Supplement or the termination of the Trust Fund. A
copy of the letter of credit for a Series, if any, will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed within
15 days of issuance of the Certificates of the applicable Series.
CERTIFICATE GUARANTEE INSURANCE
If so specified in the related Prospectus Supplement, certificate
guarantee insurance, if any, with respect to a Series of Certificates will be
provided by one or more insurance companies. Such certificate
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guarantee insurance will guarantee, with respect to one or more Classes of
Certificates of the applicable Series, timely distributions of interest and
principal to the extent set forth in or determined in the manner specified in
the related Prospectus Supplement. If so specified in the related Prospectus
Supplement, the certificate guarantee insurance will also guarantee against
any payment made to a Certificateholder which is subsequently covered as a
"voidable preference" payment under the Bankruptcy Code. A copy of the
certificate guarantee insurance policy for a Series, if any, will be filed
with the Commission as an exhibit to a Current Report on Form 8-K to be filed
with the Commission within 15 days of issuance of the Certificates of the
applicable Series.
RESERVE FUNDS
If specified in the related Prospectus Supplement, one or more reserve
funds (each, a "Reserve Fund") may be established with respect to a Series,
in which cash, a letter of credit, Permitted Investments or a combination
thereof, in the amounts, if any, specified in the related Prospectus
Supplement will be deposited. The Reserve Funds for a Series may also be
funded over time by depositing therein a specified amount of the
distributions received on the applicable Mortgage Loans if specified in the
related Prospectus Supplement. The Seller may pledge the Reserve Funds to a
separate collateral agent specified in the related Prospectus Supplement.
Amounts on deposit in any Reserve Fund for a Series, together with the
reinvestment income thereon, if any, will be applied by the Trustee for the
purposes, in the manner, and to the extent specified in the related
Prospectus Supplement. A Reserve Fund may be provided to increase the
likelihood of timely payments of principal of, and interest on, the
Certificates, if required as a condition to the rating of such Series by each
Rating Agency. If so specified in the related Prospectus Supplement, Reserve
Funds may be established to provide limited protection, in an amount
satisfactory to each Rating Agency, against certain types of losses not
covered by insurance policies or other credit support, such as losses arising
from damage not covered by standard hazard insurance policies. Reserve Funds
also may be established for other purposes and in such amounts as will be
specified in the related Prospectus Supplement. Following each Distribution
Date amounts in any Reserve Fund in excess of any amount required to be
maintained therein may be released from the Reserve Fund under the conditions
and to the extent specified in the related Prospectus Supplement and will not
be available for further application by the Trustee.
Moneys deposited in any Reserve Fund will be invested in Permitted
Investments at the direction of the Seller, except as otherwise specified in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, any reinvestment income or other gain from such
investments will be credited to the related Reserve Fund for such Series, and
any loss resulting from such investments will be charged to such Reserve
Fund. If specified in the related Prospectus Supplement, such income or other
gain may be payable to the Master Servicer as additional servicing
compensation, and any loss resulting from such investment will be borne by
the Master Servicer. The Reserve Fund, if any, for a Series will not be a
part of the Trust Fund unless otherwise specified in the related Prospectus
Supplement, but the right of the Trustee to make draws on the Reserve Fund
will be an asset of the Trust Fund.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such
Reserve Fund, the balance required to be maintained in the Reserve Fund, the
manner in which such required balance will decrease over time, the manner of
funding such Reserve Fund, the purpose for which funds in the Reserve Fund
may be applied to make distributions to Certificateholders and use of
investment earnings from the Reserve Fund, if any.
SWAP AGREEMENT
If so specified in the Prospectus Supplement relating to a Series of
Certificates, the Trust Fund will enter into or obtain an assignment of a
swap agreement pursuant to which the Trust Fund will have the right to
receive, and may have the obligation to make, certain payments of interest
(or other payments) as set forth or determined as described therein. The
Prospectus Supplement relating to a Series of
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Certificates having the benefit of an interest rate swap agreement will
describe the material terms of such agreement and the particular risks
associated with the interest rate swap feature, including market and credit
risk, the effect of counterparty defaults and other risks, if any. The
Prospectus Supplement relating to such Series of Certificates also will set
forth certain information relating to the corporate status, ownership and
credit quality of the counterparty or counterparties to such swap agreement.
In addition, if the Certificateholders of such Series will be materially
dependent upon any counterparty for timely payment of interest and/or
principal on their Certificates, the related Prospectus Supplement will
include audited financial statements on a comparative basis for at least the
prior two years and any other appropriate financial information regarding
such counterparty. A swap agreement may include one or more of the following
types of arrangements, or another arrangement described in the related
Prospectus Supplement.
Interest Rate Swap. In an interest rate swap, the Trust Fund will exchange
the stream of interest payments on the Mortgage Loans for another stream of
interest payments based on a notional amount, which may be equal to the
principal amount of the Mortgage Loans as it declines over time.
Interest Rate Caps. In an interest rate cap, the Trust Fund or the swap
counterparty, in exchange for a fee, will agree to compensate the other if a
particular interest rate index rises above a rate specified in the swap
agreement. The fee for the cap may be a single up-front payment to or from
the Trust Fund, or a series of payments over time.
Interest Rate Floors. In an interest rate floor, the Trust Fund or the
swap counterparty, in exchange for a fee, will agree to compensate the other
if a particular interest rate index falls below a rate or level specified in
the swap agreement. As with interest rate caps, the fee may be a single
up-front payment or it may be paid periodically.
Interest Rate Collars. An interest rate collar is a combination of an
interest rate cap and an interest rate floor. One party agrees to compensate
the other if a particular interest rate index rises above the cap and, in
exchange, will be compensated if the interest rate index falls below the
floor.
YIELD CONSIDERATIONS
GENERAL
The yield to maturity on any Class of Offered Certificates will depend
upon, among other things, the price at which such Certificates are purchased,
the amount and timing of any delinquencies and losses incurred by such Class,
the rate and timing of payments of principal on the Mortgage Loans, and the
amount and timing of recoveries and Insurance Proceeds from REO Mortgage
Loans and related REO Properties, which, in turn, will be affected by the
amortization schedules of the Mortgage Loans, the timing of principal
payments (particularly Balloon Payments) on the related Mortgage Loans
(including delay in such payments resulting from modifications and
extensions), the rate of principal prepayments, including prepayments by
Borrowers and prepayments resulting from defaults, repurchases arising in
connection with certain breaches of the representations and warranties made
in the Agreement and the exercise of the right of optional termination of the
Trust Fund. Generally, prepayments on the Mortgage Loans will tend to shorten
the weighted average lives of each Class of Certificates, whereas delays in
liquidations of defaulted Mortgage Loans and modifications extending the
maturity of Mortgage Loans will tend to lengthen the weighted average lives
of each Class of Certificates. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS -- Enforceability of Certain Provisions" for a description of certain
provisions of each Agreement and statutory, regulatory and judicial
developments that may affect the prepayment experience and maturity
assumptions on the Mortgage Loans.
PREPAYMENT AND MATURITY ASSUMPTIONS
The related Prospectus Supplement may indicate that the related Mortgage
Loans may be prepaid in full or in part at any time, generally without
prepayment premium. Alternatively, a Trust Fund may include Mortgage Loans
that have significant restrictions on the ability of a Borrower to prepay
without incurring a prepayment premium or to prepay at all. As described
above, the prepayment experience of
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the Mortgage Loans will affect the weighted average life of the Offered
Certificates. A number of factors may influence prepayments on multifamily
and commercial loans, including enforceability of due-on-sale clauses,
prevailing mortgage market interest rates and the availability of mortgage
funds, changes in tax laws (including depreciation benefits for
income-producing properties), changes in Borrowers' net equity in the
Mortgaged Properties, servicing decisions, prevailing general economic
conditions and the relative economic vitality of the areas in which the
Mortgaged Properties are located, the terms of the Mortgage Loans (for
example, the existence of due-on-sale clauses), the quality of management of
any income-producing Mortgaged Properties and, in the case of Mortgaged
Properties held for investment, the availability of other opportunities for
investment. A number of factors may discourage prepayments on multifamily
loans and commercial loans, including the existence of any lockout or
prepayment premium provisions in the underlying Note. A lockout provision
prevents prepayment within a certain time period after origination. A
prepayment premium imposes an additional charge on a borrower who wishes to
prepay. Some of the Mortgage Loans may have substantial principal balances
due at their stated maturities ("Balloon Payments"). Balloon Payments involve
a greater degree of risk than fully amortizing loans because the ability of
the Borrower to make a Balloon Payment typically will depend upon its ability
either to refinance the loan or to sell the related Mortgaged Property. The
ability of a Borrower to accomplish either of these goals will be affected by
a number of factors, including the level of available mortgage rates at the
time of the attempted sale or refinancing, the Borrower's equity in the
related Mortgaged Property, the financial condition of the Borrower and
operating history of the related Mortgaged Property, tax laws, prevailing
economic conditions and the availability of credit for commercial real estate
projects generally. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS --
Enforceability of Certain Provisions."
If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Mortgage
Loans, the actual yield to maturity will be lower than that so calculated.
Conversely, if the purchaser of a Certificate offered at a premium calculates
its anticipated yield to maturity based on an assumed rate of distributions
of principal that is slower than that actually experienced on the Mortgage
Loans, the actual yield to maturity will be lower than that so calculated. In
either case, the effect of voluntary and involuntary prepayments of the
Mortgage Loans on the yield on one or more Classes of the Certificates of
such Series in the related Trust Fund may be mitigated or exacerbated by any
provisions for sequential or selective distribution of principal to such
Classes.
The timing of changes in the rate of principal payments on the Mortgage
Loans may significantly affect an investor's actual yield to maturity, even
if the average rate of distributions of principal is consistent with an
investor's expectation. In general, the earlier a principal payment is
received on the Mortgage Loans and distributed on a Certificate, the greater
the effect on such investor's yield to maturity. The effect of an investor's
yield of principal payments occurring at a rate higher (or lower) than the
rate anticipated by the investor during a given period may not be offset by a
subsequent like decrease (or increase) in the rate of principal payments.
The weighted average life of a Certificate refers to the average amount of
time that will elapse from the date of issuance of the Certificate until each
dollar of principal is repaid to the Certificateholders. The weighted average
life of the Offered Certificates will be influenced by the rate at which
principal on the Mortgage Loans is paid, which may be in the form of
scheduled amortization or prepayments. Prepayments on mortgage loans are
commonly measured relative to a prepayment standard or model. The model used
in any Prospectus Supplement, unless otherwise indicated therein, represents
an assumed constant rate of prepayment each month relative to the then
outstanding principal balance of a pool of new mortgage loans.
There can be no assurance that the Mortgage Loans will prepay at any rate
mentioned in any Prospectus Supplement. In general, if prevailing interest
rates fall below the Mortgage Interest Rates on the Mortgage Loans, the rate
of prepayment can be expected to increase.
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CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans which are general in nature. Because many of the legal aspects
of mortgage loans are governed by the laws of the jurisdictions where the
related mortgaged properties are located (which laws may vary substantially),
the following summaries do not purport to be complete, to reflect the laws of
any particular jurisdiction, to reflect all the laws applicable to any
particular Mortgage Loan or to encompass the laws of all jurisdictions in
which the properties securing the Mortgage Loans are situated. In the event
that the Trust Fund for a given Series includes Mortgage Loans having
material characteristics other than as described below, the related
Prospectus Supplement will set forth additional legal aspects relating
thereto.
MORTGAGES AND DEEDS OF TRUST GENERALLY
The Mortgage Loans (other than financial leases and Installment Contracts)
included in the Mortgage Pool for a Series will consist of loans secured by
either mortgages or deeds of trust or other similar security instruments.
There are two parties to a mortgage, the mortgagor, who is the borrower and
owner of the mortgaged property, and the mortgagee, who is the lender. In a
mortgage transaction, the mortgagor delivers to the mortgagee a note, bond or
other written evidence of indebtedness and a mortgage. A mortgage creates a
lien upon the real property encumbered by the mortgage as security for the
obligation evidenced by the note, bond or other evidence of indebtedness.
Although a deed of trust is similar to a mortgage, a deed of trust has three
parties, the borrower-property owner called the trustor (similar to a
mortgagor), a lender called the beneficiary (similar to a mortgagee), and a
third-party grantee called the trustee. Under a deed of trust, the borrower
irrevocably grants the property to the trustee, until the debt is paid, in
trust for the benefit of the beneficiary to secure payment of the obligation
generally with a power of sale. The trustee's authority under a deed of trust
and the mortgagee's authority under a mortgage are governed by applicable
law, the express provisions of the deed of trust or mortgage, and, in some
cases, the directions of the beneficiary.
The real property covered by a mortgage is most often the fee estate in
land and improvements. However, a mortgage may encumber other interests in
real property such as a tenant's interest in a lease of land or improvements,
or both, and the leasehold estate created by such lease. A mortgage covering
an interest in real property other than the fee estate requires special
provisions in the instrument creating such interest or in the mortgage to
protect the mortgagee against termination of such interest before the
mortgage is paid. Certain representations and warranties in the related
Agreement will be made with respect to the Mortgage Loans which are secured
by an interest in a leasehold estate.
Priority of the lien on mortgaged property created by mortgages and deeds
of trust depends on their terms and, generally, on the order of filing with a
state, county or municipal office, although such priority may in some states
be altered by the mortgagee's or beneficiary's knowledge of unrecorded liens,
leases or encumbrances against the mortgaged property. However, filing or
recording does not establish priority over governmental claims for real
estate taxes and assessments or, in some states, for reimbursement of
remediation costs of certain environmental conditions. See "--Environmental
Risks." In addition, the Code provides priority to certain tax liens over the
lien of the mortgage.
INSTALLMENT CONTRACTS
The Mortgage Loans included in the Mortgage Pool for a Series may also
consist of Installment Contracts. Under an Installment Contract the seller
(hereinafter referred to in this Section as the "lender") retains legal title
to the property and enters into an agreement with the purchaser (hereinafter
referred to in this Section as the "borrower") for the payment of the
purchase price, plus interest, over the term of such contract. Only after
full performance by the borrower of the contract is the lender obligated to
convey title to the real estate to the purchaser. As with mortgage or deed of
trust financing, during the effective period of the Installment Contract, the
borrower generally is responsible for maintaining the property in good
condition and for paying real estate taxes, assessments and hazard insurance
premiums associated with the property.
The method of enforcing the rights of the lender under an Installment
Contract varies on a state-by-state basis depending upon the extent to which
state courts are willing, or able pursuant to state
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statute, to enforce the contract strictly according to its terms. The terms
of Installment Contracts generally provide that upon a default by the
borrower, the borrower loses his or her right to occupy the property, the
entire indebtedness is accelerated, and the buyer's equitable interest in the
property is forfeited. The lender in such a situation does not have to
foreclose in order to obtain title to the property, although in some cases a
quiet title action is in order if the borrower has filed the Installment
Contract in local land records and an ejectment action may be necessary to
recover possession. In a few states, particularly in cases of borrower
default during the early years of an Installment Contract, the courts will
permit ejectment of the buyer and a forfeiture of his or her interest in the
property. However, most state legislatures have enacted provisions by analogy
to mortgage law protecting borrowers under Installment Contracts from the
harsh consequences of forfeiture. Under such statutes, a judicial or
nonjudicial foreclosure may be required, the lender may be required to give
notice of default and the borrower may be granted some grace period during
which the contract may be reinstated upon full payment of the default amount
and the borrower may have a post-foreclosure statutory redemption right. In
other states, courts in equity may permit a borrower with significant
investment in the property under an Installment Contract for the sale of real
estate to share in the proceeds of sale of the property after the
indebtedness is repaid or may otherwise refuse to enforce the forfeiture
clause. Nevertheless, generally speaking, the lender's procedures for
obtaining possession and clear title under an Installment Contract for the
sale of real estate in a given state are simpler and less time-consuming and
costly than are the procedures for foreclosing and obtaining clear title to a
mortgaged property.
FINANCIAL LEASES
The Mortgage Loans included in the Mortgage Pool for a Series also may
consist of financial leases. Under a financial lease on real property, the
lessor retains legal title to the leased property and enters into an
agreement with the lessee (hereinafter referred to in this Section as the
"lessee") under which the lessee makes lease payments approximately equal to
the principal and interest payments that would be required on a mortgage note
for a loan covering the same property. Title to the real estate typically is
conveyed to the lessee at the end of the lease term for a price approximately
equal to the remaining unfinanced equity, determined by reference to the
unpaid principal amount, market value, or another method specified in the
related agreement. As with Installment Contracts, the lessee generally is
responsible for maintaining the property in good condition and for paying
real estate taxes, assessments and hazard insurance premiums associated with
the property during the lease term. The related Prospectus Supplement will
describe the specific legal incidents of any financial leases that are
included in the Mortgage Pool for a Series.
RIGHTS OF MORTGAGEES OR BENEFICIARIES
The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order as the mortgagee or beneficiary may determine. Thus, in the event
improvements on the property are damaged or destroyed by fire or other
casualty, or in the event the property is taken by condemnation, the
mortgagee or beneficiary under the senior mortgage or deed of trust will have
the prior right to collect any insurance proceeds payable under a hazard
insurance policy and any award of damages in connection with the condemnation
and to apply the same to the indebtedness secured by the senior mortgage or
deed of trust. Proceeds in excess of the amount of senior mortgage
indebtedness will, in most cases, be applied to the indebtedness of a junior
mortgage or trust deed, if any. The laws of certain states may limit the
ability of mortgagees or beneficiaries to apply the proceeds of hazard
insurance and partial condemnation awards to the secured indebtedness. In
such states, the mortgagor or trustor must be allowed to use the proceeds of
hazard insurance to repair the damage unless the security of the mortgagee or
beneficiary has been impaired. Similarly, in certain states, the mortgagee or
beneficiary is entitled to the award for a partial condemnation of the real
property security only to the extent that its security is impaired.
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The form of mortgage or deed of trust used by many institutional lenders
typically contains a "future advance" clause, which provides, in essence,
that additional amounts advanced to or on behalf of the mortgagor or trustor
by the mortgagee or beneficiary are to be secured by the mortgage or deed of
trust. While such a clause is valid under the laws of most states, the
priority of any advance made under the clause depends, in some states, on
whether the advance was an "obligatory" or "optional" advance. If the
mortgagee or beneficiary is obligated to advance the additional amounts, the
advance may be entitled to receive the same priority as amounts initially
made under the mortgage or deed of trust, notwithstanding that there may be
intervening junior mortgages or deeds of trust and other liens between the
date of recording of the mortgage or deed of trust and the date of the future
advance, and notwithstanding that the mortgagee or beneficiary had actual
knowledge of such intervening junior mortgages or deeds of trust and other
liens at the time of the advance. Where the mortgagee or beneficiary is not
obligated to advance the additional amounts and has actual knowledge of the
intervening junior mortgages or deeds of trust and other liens, the advance
may be subordinate to such intervening junior mortgages or deeds of trust and
other liens. Priority of advances under a "future advance" clause rests, in
many other states, on state law giving priority to all advances made under
the related loan agreement up to a "credit limit" amount stated in the
recorded mortgage.
Another provision typically found in the form of the mortgage or deed of
trust used by many institutional lenders obligates the mortgagor or trustor
to pay before delinquency all taxes and assessments on the property and, when
due, all encumbrances, charges and liens on the property which appear prior
to the mortgage or deed of trust, to provide and maintain fire insurance on
the property, to maintain and repair the property and not to commit or permit
any waste thereof, and to appear in and defend any action or proceeding
purporting to affect the property or the rights of the mortgagee or
beneficiary under the mortgage or deed of trust. Upon a failure of the
mortgagor or trustor to perform any of these obligations, the mortgagee or
beneficiary is given the right under the mortgage or deed of trust to perform
the obligation itself, at its election, with the mortgagor or trustor
agreeing to reimburse the mortgagee or beneficiary for any sums expended by
the mortgagee or beneficiary on behalf of the trustor. All sums so expended
by the mortgagee or beneficiary become part of the indebtedness secured by
the mortgage or deed of trust.
The form of mortgage or deed of trust used by many institutional lenders
typically requires the mortgagor or trustor to obtain the consent of the
mortgagee or beneficiary in respect of actions affecting the mortgaged
property, including, without limitation, leasing activities (including new
leases and termination or modification of existing leases), alterations and
improvements to buildings forming a part of the mortgaged property and
management and leasing agreements for the mortgaged property. Tenants will
often refuse to execute a lease unless the mortgagee or beneficiary executes
a written agreement with the tenant not to disturb the tenant's possession of
its premises in the event of a foreclosure. A senior mortgagee or beneficiary
may refuse to consent to matters approved by a junior mortgagee or
beneficiary with the result that the value of the security for the junior
mortgage or deed of trust is diminished. For example, a senior mortgagee or
beneficiary may decide not to approve a lease or to refuse to grant to a
tenant a non-disturbance agreement. If, as a result, the lease is not
executed, the value of the mortgaged property may be diminished.
FORECLOSURE
Foreclosure of a mortgage is generally accomplished by judicial action
initiated by the service of legal pleadings upon all necessary parties having
an interest in the real property. Delays in completion of foreclosure may
occasionally result from difficulties in locating such necessary parties.
When the mortgagee's right to foreclose is contested, the legal proceedings
necessary to resolve the issue can be time consuming. A judicial foreclosure
may be subject to most of the delays and expenses of other litigation,
sometimes requiring up to several years to complete. At the completion of the
judicial foreclosure proceedings, if the mortgagee prevails, the court
ordinarily issues a judgment of foreclosure and appoints a referee or other
designated official to conduct the sale of the property. Such sales are made
in accordance with procedures which vary from state to state. The purchaser
at such sale acquires
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the estate or interest in real property covered by the mortgage. If the
mortgage covered the tenant's interest in a lease and leasehold estate, the
purchaser will acquire such tenant's interest subject to the tenant's
obligations under the lease to pay rent and perform other covenants contained
therein.
In a majority of cases, foreclosure of a deed of trust is accomplished by
a non-judicial trustee's sale under a specific provision in the deed of trust
and/or applicable statutory requirements which authorizes the trustee,
generally following a request from the beneficiary/lender, to sell the
property at public sale upon any default by the borrower under the terms of
the note or deed of trust. A number of states may also require that a lender
provide notice of acceleration of a note to the borrower. Notice requirements
under a trustee's sale vary from state to state. In some states, prior to the
trustee's sale the trustee must record a notice of default and send a copy to
the borrower-trustor, to any person who has recorded a request for a copy of
a notice of default and notice of sale and to any successor in interest to
the trustor. In addition, the trustee must provide notice in some states to
any other person having an interest in the real property, including any
junior lienholders, and to certain other persons connected with the deed of
trust. In some states, the borrower, or any other person having a junior
encumbrance on the real estate, may, during a reinstatement period, cure the
default by paying the entire amount in arrears plus the costs and expenses
(in some states, limited to reasonable costs and expenses) incurred in
enforcing the obligation. Generally, state law controls the amount of
foreclosure expenses and costs, including attorneys' fees, which may be
recovered by a lender. If the deed of trust is not reinstated, a notice of
sale must be posted in a public place and, in most states, published for a
specific period of time in one or more newspapers. In addition, some state
laws require that a copy of the notice of sale be posted on the property and
sent to all parties having an interest in the real property.
In case of foreclosure under either a mortgage or a deed of trust, the
sale by the referee or other designated official or by the trustee is often a
public sale. However, because of the difficulty a potential buyer at the sale
might have in determining the exact status of title to the property subject
to the lien of the mortgage or deed of trust and the redemption rights that
may exist (see "--Rights of Redemption" below), and because the physical
condition and financial performance of the property may have deteriorated
during the foreclosure proceedings and/or for a variety of other reasons, a
third party may be unwilling to purchase the property at the foreclosure
sale. Some states require that the lender disclose to potential bidders at a
trustee's sale all known facts materially affecting the value of the
property. Such disclosure may have an adverse effect on the trustee's ability
to sell the property or the sale price thereof. Potential buyers may further
question the prudence of purchasing property at a foreclosure sale as a
result of the 1980 decision of the United States Court of Appeals for the
Fifth Circuit in Durrett v. Washington National Insurance Company and other
decisions that have followed the reasoning of Durrett with respect to
fraudulent conveyances under applicable bankruptcy law. In Durrett and its
progeny, the Fifth Circuit and other courts held that the transfer of real
property pursuant to a non-collusive, regularly conducted foreclosure sale
was subject to the fraudulent transfer provisions of the applicable
bankruptcy laws, including the requirement that the price paid for the
property constitute "fair consideration." The reasoning and result of Durrett
and its progeny in respect of the federal bankruptcy code, as amended from
time to time (11 U.S.C.) (the "Bankruptcy Code") was rejected, however, by
the United States Supreme Court in May 1994. The case could nonetheless be
persuasive to a court applying a state fraudulent conveyance law which has
provisions similar to those construed in Durrett. For these and other
reasons, it is common for the lender to purchase the property from the
trustee, referee or other designated official for an amount equal to the
lesser of the fair market value of such property and the outstanding
principal amount of the indebtedness secured by the mortgage or deed of
trust, together with accrued and unpaid interest and the expenses of
foreclosure, in which event, if the amount bid by the lender equals the full
amount of such debt, interest and expenses, the mortgagee's debt will be
extinguished. Thereafter, the lender will assume the burdens of ownership,
including paying operating expenses and real estate taxes and making repairs.
The lender is then obligated as an owner until it can arrange a sale of the
property to a third party. Frequently, the lender employs a third party
management company to manage and operate the property. The costs of operating
and maintaining commercial property may be significant and may be greater
than the income derived from that property. The costs of management and
operation of those mortgaged properties which are hotels, motels or nursing
or convalescent homes or hospitals may be particularly significant because of
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the expertise, knowledge and, especially with respect to nursing or
convalescent homes or hospitals, regulatory compliance, required to run such
operations and the effect which foreclosure and a change in ownership may
have on the public's and the industry's (including franchisor's) perception
of the quality of such operations. The lender will commonly obtain the
services of a real estate broker and pay the broker's commission in
connection with the sale of the property. Depending upon market conditions,
the ultimate proceeds of the sale of the property may not equal the lender's
investment in the property. Moreover, a lender commonly incurs substantial
legal fees and court costs in acquiring a mortgaged property through
contested foreclosure and/or bankruptcy proceedings. Furthermore, an
increasing number of states require that any environmental hazards be
eliminated before a property may be resold. In addition, a lender may be
responsible under federal or state law for the cost of cleaning up a
mortgaged property that is environmentally contaminated. See "--Environmental
Risks" below. As a result, a lender could realize an overall loss on a
mortgage loan even if the related mortgaged property is sold at foreclosure
or resold after it is acquired through foreclosure for an amount equal to the
full outstanding principal amount of the mortgage loan, plus accrued
interest.
In foreclosure proceedings, some courts have applied general equitable
principles. These equitable principles are generally designed to relieve the
borrower from the legal effect of the borrower's defaults under the loan
documents. Examples of judicial remedies that have been fashioned include
judicial requirements that the lender undertake affirmative and expensive
actions to determine the causes of the borrower's default and the likelihood
that the borrower will be able to reinstate the loan. In some cases, courts
have substituted their judgment for the lender's judgment and have required
that lenders reinstate loans or recast payment schedules in order to
accommodate borrowers who are suffering from temporary financial disability.
In other cases, courts have limited the right of the lender to foreclose if
the default under the mortgage instrument is not monetary, such as the
borrower's failing to maintain adequately the property or the borrower's
executing a second mortgage or deed of trust affecting the property. Finally,
some courts have been faced with the issue of whether or not federal or state
constitutional provisions reflecting due process concerns for adequate notice
require that borrowers under deeds of trust or mortgages receive notices in
addition to the statutorily-prescribed minimum notice. For the most part,
these cases have upheld the notice provisions as being reasonable or have
found that the sale by a trustee under a deed of trust, or under a mortgage
having a power of sale, does not involve sufficient state action to afford
constitutional protections to the borrower. There may, however, be state
transfer taxes due and payable upon obtaining such properties at foreclosure.
Such taxes could be substantial.
Under the REMIC provisions of the Code (if applicable) and the related
Agreement, the Master Servicer or Special Servicer, if any, may be required
to hire an independent contractor to operate any REO Property. The costs of
such operation may be significantly greater than the costs of direct
operation by the Master Servicer or Special Servicer, if any. Under the REMIC
provisions of the Code, property acquired by foreclosure generally must not
be held for more than two years. With respect to a Series of Certificates for
which an election is made to qualify the Trust Fund or a part thereof as a
REMIC, the Agreement will permit foreclosed property to be held for more than
two years if the Trustee receives (i) an extension from the Internal Revenue
Service or (ii) an opinion of counsel to the effect that holding such
property for such period is permissible under the applicable REMIC
provisions.
STATE LAW LIMITATIONS ON LENDERS
In some states, after sale pursuant to a deed of trust or foreclosure of a
mortgage, the borrower and foreclosed junior lienors are given a statutory
period in which to redeem the property from the foreclosure sale. In some
states, redemption may occur only upon payment of the entire principal
balance of the loan, accrued interest and expenses of foreclosure. In some
states, redemption may be authorized even if the former borrower pays only a
portion of the sums due. The effect of these types of statutory rights of
redemption is to diminish the ability of the lender to sell the foreclosed
property. Such rights of redemption would defeat the title of any purchaser
from the lender subsequent to foreclosure or sale under a deed of trust.
Consequently, the practical effect of the redemption right is to force the
lender to retain the property and pay the expenses of ownership until the
redemption period has run. See "--Rights of Redemption" below.
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Certain states have imposed statutory prohibitions against or limitations
on recourse to the borrower. For example, some state statutes limit the right
of the beneficiary or mortgagee to obtain a deficiency judgment against the
borrower following foreclosure or sale under a deed of trust. A deficiency
judgment is a personal judgment against the former borrower equal in most
cases to the difference between the net amount realized upon the public sale
of the real property and the amount due to the lender. Other statutes require
the beneficiary or mortgagee to exhaust the security afforded under a deed of
trust or mortgage by foreclosure in an attempt to satisfy the full debt
before bringing a personal action against the borrower on the debt without
first exhausting such security. In some states, the lender, if it first
pursues judgment through a personal action against the borrower on the debt,
may be deemed to have elected a remedy and may thereafter be precluded from
exercising remedies with respect to the security. Consequently, the practical
effect of the election requirement, when applicable, is that lenders will
usually proceed first against the security rather than bringing personal
action against the borrower. Other statutory provisions limit any deficiency
judgment against the former borrower following a judicial sale to the excess
of the outstanding debt over the fair market value of the property at the
time of the public sale. The purpose of these statutes is generally to
prevent a beneficiary or a mortgagee from obtaining a large deficiency
judgment against the former borrower as a result of low bids or the absence
of bids at the judicial sale. See "--Anti-Deficiency Legislation; Bankruptcy
Laws" below.
ENVIRONMENTAL RISKS
Real property pledged as security to a lender may be subject to potential
environmental risks. Of particular concern may be those mortgaged properties
which are, or have been, the site of manufacturing, industrial or disposal
activity. Such environmental risks may give rise to a diminution in value of
property securing any Mortgage Loan or, in certain circumstances as more
fully described below, liability for cleanup costs or other remedial actions,
which liability could exceed the value of such property or the principal
balance of the related Mortgage Loan. In certain circumstances, a lender may
choose not to foreclose on contaminated property rather than risk incurring
liability for remedial actions.
Under the laws of certain states, failure to perform any remedial action
required or demanded by the state of any condition or circumstance that (i)
may pose an imminent or substantial endangerment to the public health or
welfare or the environment, (ii) may result in a release or threatened
release of any hazardous material, or (iii) may give rise to any
environmental claim or demand (each such condition or circumstance, an
"Environmental Condition") may, in certain circumstances, give rise to a lien
on the property to ensure the reimbursement of remedial costs incurred by the
state. In several states, such lien has priority over the lien of an existing
mortgage against such property. In any case, the value of a Mortgaged
Property as collateral for a Mortgage Loan could be adversely affected by the
existence of an Environmental Condition.
The state of the law is currently unclear as to whether and under what
circumstances cleanup costs, or the obligation to take remedial actions, can
be imposed on a secured lender such as the Trust Fund with respect to each
Series. Under the laws of some states and under the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), a lender may be liable as an "owner or operator" for costs of
addressing releases or threatened releases of hazardous substances on a
mortgaged property if such lender or its agents or employees have
participated in the management of the operations of the borrower, even though
the environmental damage or threat was caused by a prior owner or other third
party. Excluded from CERCLA's definition of "owner or operator," however, is
a person "who without participating in the management of the facility, holds
indicia of ownership primarily to protect his security interest (the "secured
creditor exemption").
Notwithstanding the secured creditor exemption, a lender may be held
liable under CERCLA as an owner or operator, if such lender or its employees
or agents participate in management of the property. Judicial decisions
interpreting the secured creditor exemption had varied widely, and one
decision, United States v. Fleet Factors Corp., 901 F.2d 1550 (11th Cir.
1990), cert. denied, 498 U.S. 1046 (1991), had indicated that a lender's mere
power to affect and influence a borrower's operations might be sufficient to
subject the lender to CERCLA liability. However, on September 30, 1996, the
Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of
1996 (the "Lender Liability Act")
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became law. The Lender Liability Act clarifies the secured creditor exemption
to impose liability only on a secured lender who exercises control over
operational aspects of the facility and thus is "participating in
management." A number of environmentally related activities before the loan
is made and during its pendency, as well as "workout" steps to protect a
security interest, are identified as permissible to protect a security
interest without triggering liability. The Lender Liability Act also
identifies the circumstances in which foreclosure and post-foreclosure
activities will not trigger CERCLA liability.
The Lender Liability Act also amends the federal Solid Waste Disposal Act
to limit the liability of lenders holding a security interest for costs of
cleaning up contamination for underground storage tanks. However, the Lender
Liability Act has no effect on other federal or state environmental laws
similar to CERCLA that may impose liability on lenders and other persons, and
not all of those laws provide for a secured creditor exemption. Liability
under many of these laws may exist even if the lender did not cause or
contribute to the contamination and regardless of whether the lender has
actually taken possession of the property through foreclosure, deed in lieu
of foreclosure or otherwise. Moreover, such liability is not limited to the
original or unamortized principal balance of a loan or to the value of a
property securing a loan.
Except as otherwise specified in the related Prospectus Supplement, at the
time the Mortgage Loans were originated, it is possible that no environmental
assessment or a very limited environmental assessment of the Mortgaged
Properties was conducted.
The related Agreement will provide that the Master Servicer or the Special
Servicer, if any, acting on behalf of the Trust Fund, may not acquire title
to, or possession of, a Mortgaged Property underlying a Mortgage Loan, take
over its operation or take any other action that might subject a given Trust
Fund to liability under CERCLA or comparable laws unless the Master Servicer
or Special Servicer, if any, has previously determined, based upon a phase I
assessment (as described below) or other specified environmental assessment
prepared by a person who regularly conducts such environmental assessments,
that the Mortgaged Property is in compliance with applicable environmental
laws and that there are no circumstances relating to use, management or
disposal of any hazardous materials for which investigation, monitoring,
containment, clean-up or remediation could be required under applicable
environmental laws, or that it would be in the best economic interest of a
given Trust Fund to take such actions as are necessary to bring the Mortgaged
Property into compliance therewith or as may be required under such laws. A
phase I assessment generally involves identification of recognized
environmental conditions based on records review, site reconnaissance and
interviews, but does not involve more intrusive investigation such as
sampling or testing of materials. This requirement effectively precludes
enforcement of the security for the related Note until a satisfactory
environmental assessment is obtained or any required remedial action is
taken, reducing the likelihood that a given Trust Fund will become liable for
any Environmental Condition affecting a Mortgaged Property, but making it
more difficult to realize on the security for the Mortgage Loan. However,
there can be no assurance that any environmental assessment obtained by the
Master Servicer will detect all possible Environmental Conditions or that the
other requirements of the Agreement, even if fully observed by the Master
Servicer and the Special Servicer, if any, will in fact insulate a given
Trust Fund from liability for Environmental Conditions.
If a lender is or becomes liable for clean-up costs, it may bring an
action for contribution against the current owners or operators, the owners
or operators at the time of on-site disposal activity or any other party who
contributed to the environmental hazard, but such persons or entities may be
bankrupt or otherwise judgment proof. Furthermore, such action against the
Borrower may be adversely affected by the limitations on recourse in the loan
documents. Similarly, in some states anti-deficiency legislation and other
statutes requiring the lender to exhaust its security before bringing a
personal action against the borrower-trustor (see "--Anti-Deficiency
Legislation; Bankruptcy Laws" below) may curtail the lender's ability to
recover from its borrower the environmental clean-up and other related costs
and liabilities incurred by the lender. Shortfalls occurring as the result of
imposition of any clean-up costs will be addressed in the Prospectus
Supplement and Agreement for the related Series.
RIGHTS OF REDEMPTION
In approximately one-third of the states, after foreclosure sale pursuant
to a deed of trust or a mortgage, the borrower and certain foreclosed junior
lienors are given a specified period in which to
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redeem the property from the foreclosure sale. In some states, redemption may
occur only upon payment of the entire principal balance of the loan, accrued
interest and expenses of foreclosure. In other states, redemption may be
authorized if the former borrower pays only a portion of the sums due. The
effect of a right of redemption is to diminish the ability of the lender to
sell the foreclosed property. The right of redemption may defeat the title of
any purchaser at a foreclosure sale or any purchaser from the lender
subsequent to a foreclosure sale or sale under a deed of trust. Certain
states permit a lender to avoid a post-sale redemption by waiving its right
to a deficiency judgment. Consequently, the practical effect of the
post-foreclosure redemption right is often to force the lender to retain the
property and pay the expenses of ownership until the redemption period has
run. Whether the lender has any rights to recover these expenses from a
borrower who redeems the property depends on the applicable state statute.
The related Prospectus Supplement will contain a description of any statutes
that prohibit recovery of such expenses from a borrower in states where a
substantial number of the Mortgaged Properties for a particular Series are
located. In some states, there is no right to redeem property after a
trustee's sale under a deed of trust.
Borrowers under Installment Contracts generally do not have the benefits
of redemption periods such as may exist in the same jurisdiction for mortgage
loans. Where redemption statutes do exist under state laws for Installment
Contracts, the redemption period is usually far shorter than for mortgages.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGEES
The Mortgage Pool for a Series may include Mortgage Loans secured by
mortgages or deeds of trust some of which are junior to other mortgages or
deeds of trust, some of which may be held by other lenders or institutional
investors. The rights of the Trust Fund (and therefore the
Certificateholders), as mortgagee under a junior mortgage or beneficiary
under a junior deed of trust, are subordinate to those of the mortgagee under
the senior mortgage or beneficiary under the senior deed of trust, including
the prior rights of the senior mortgagee to receive hazard insurance and
condemnation proceeds and to cause the property securing the Mortgage Loan to
be sold upon default of the borrower or trustor, thereby extinguishing the
junior mortgagee's or junior beneficiary's lien unless the junior mortgagee
or junior beneficiary asserts its subordinate interest in the property in
foreclosure litigation and, possibly, satisfies the defaulted senior mortgage
or deed of trust. As discussed more fully below, a junior mortgagee or junior
beneficiary may satisfy a defaulted senior loan in full and, in some states,
may cure such default and loan. In most states, no notice of default is
required to be given to a junior mortgagee or junior beneficiary and junior
mortgagees or junior beneficiaries are seldom given notice of defaults on
senior mortgages. In order for a foreclosure action in some states to be
effective against a junior mortgagee or junior beneficiary, the junior
mortgagee or junior beneficiary must be named in any foreclosure action, thus
giving notice to junior lienors.
ANTI-DEFICIENCY LEGISLATION; BANKRUPTCY LAWS
Some of the Mortgage Loans included in the Mortgage Pool for a Series will
be nonrecourse loans as to which, in the event of default by a Borrower,
recourse may be had only against the specific property pledged to secure the
related Mortgage Loan and not against the Borrower's other assets. Even if
recourse is available pursuant to the terms of the Mortgage Loan against the
Borrower's assets in addition to the Mortgaged Property, certain states have
imposed statutory prohibitions which impose prohibitions against or
limitations on such recourse. For example, some state statutes limit the
right of the beneficiary or mortgagee to obtain a deficiency judgment against
the borrower following foreclosure or sale under a deed of trust. A
deficiency judgment is a personal judgment against the former borrower equal
in most cases to the difference between the net amount realized upon the
public sale of the real property and the amount due to the lender. Other
statutes require the beneficiary or mortgagee to exhaust the security
afforded under a deed of trust or mortgage by foreclosure in an attempt to
satisfy the full debt before bringing a personal action against the borrower.
In certain states, the lender has the option of bringing a personal action
against the borrower on the debt without first exhausting such security;
however, in some of these states, the lender, following judgment on such
personal action, may be deemed to have elected a remedy and may be precluded
from exercising remedies with respect to
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the security. Consequently, the practical effect of the election requirement,
when applicable, is that lenders will usually proceed first against the
security rather than bringing a personal action against the borrower. Other
statutory provisions limit any deficiency judgment against the former
borrower following a judicial sale to the excess of the outstanding debt over
the fair market value of the property at the time of the public sale. The
purpose of these statutes is generally to prevent a beneficiary or a
mortgagee from obtaining a large deficiency judgment against the former
borrower as a result of low bids or the absence of bids at the judicial sale.
Numerous statutory provisions, including the Bankruptcy Code and state
laws affording relief to debtors, may interfere with and delay the ability of
the secured mortgage lender to obtain payment of the loan, to realize upon
collateral and/or to enforce a deficiency judgment. For example, under the
Bankruptcy Code, virtually all actions (including foreclosure actions and
deficiency judgment proceedings) are automatically stayed upon the filing of
the bankruptcy petition, and, often, no interest or principal payments are
made during the course of the bankruptcy proceeding. The delay and
consequences thereof caused by such automatic stay can be significant. Also,
under the Bankruptcy Code, the filing of a petition in bankruptcy by or on
behalf of a junior lienor, including, without limitation, any junior
mortgagee or beneficiary, may stay the senior lender from taking action to
foreclose out such junior lien. Certain of the Mortgaged Properties may have
a junior "wraparound" mortgage or deed of trust encumbering such Mortgaged
Property. In general terms, a "wraparound" mortgage is a junior mortgage
where the full amount of the mortgage is increased by an amount equal to the
principal balance of the senior mortgage and where the junior lender agrees
to pay the senior mortgage out of the payments received from the mortgagor
under the "wraparound" mortgage. As with other junior mortgages, the filing
of a petition under the Bankruptcy Code by or on behalf of such a
"wraparound" mortgagee may stay the senior lender from taking action to
foreclose upon such junior "wraparound" mortgage.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage or deed
of trust secured by property of the debtor may be modified under certain
circumstances. The outstanding amount of the loan secured by the real
property may be reduced to the then current value of the property (with a
corresponding partial reduction of the amount of the lender's security
interest) pursuant to a confirmed plan or lien avoidance proceeding, thus
leaving the lender a general unsecured creditor for the difference between
such value and the outstanding balance of the loan. Other modifications may
include the reduction in the amount of each monthly payment, which reduction
may result from a reduction in the rate of interest and/or the alteration of
the repayment schedule (with or without affecting the unpaid principal
balance of the loan), and/or an extension (or reduction) of the final
maturity date. Some courts with federal bankruptcy jurisdiction have approved
plans, based on the particular facts of the reorganization case, that
effected the curing of a mortgage loan default by paying arrearages over a
number of years. Also, under the Bankruptcy Code, a bankruptcy court may
permit a debtor through its rehabilitative plan to de-accelerate a secured
loan and to reinstate the loan even though the lender accelerated the
mortgage loan and final judgment of foreclosure had been entered in state
court (provided no sale of the property had yet occurred) prior to the filing
of the debtor's petition. This may be done even if the full amount due under
the original loan is never repaid. Other types of significant modifications
to the terms of the mortgage may be acceptable to the bankruptcy court, often
depending on the particular facts and circumstances of the specific case.
Federal bankruptcy law may also interfere with or affect the ability of
the secured mortgage lender to enforce an assignment by a mortgagor of rents
and leases related to the mortgaged property if the related mortgagor is in a
bankruptcy proceeding. Under Section 362 of the Bankruptcy Code, the
mortgagee will be stayed from enforcing the assignment, and the legal
proceedings necessary to resolve the issue can be time-consuming and may
result in significant delays in the receipt of the rents. Rents may also
escape an assignment thereof (i) if the assignment is not fully perfected
under state law prior to commencement of the bankruptcy proceeding, (ii) to
the extent such rents are used by the borrower to maintain the mortgaged
property, or for other court authorized expenses, or (iii) to the extent
other collateral may be substituted for the rents.
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To the extent a mortgagor's ability to make payment on a mortgage loan is
dependent on payments under a lease of the related property, such ability may
be impaired by the commencement of a bankruptcy proceeding relating to a
lessee under such lease. Under the Bankruptcy Code, the filing of a petition
in bankruptcy by or on behalf of a lessee results in a stay in bankruptcy
against the commencement or continuation of any state court proceeding for
past due rent, for accelerated rent, for damages or for a summary eviction
order with respect to a default under the lease that occurred prior to the
filing of the lessee's petition.
In addition, federal bankruptcy law generally provides that a trustee or
debtor in possession in a bankruptcy or reorganization case under the
Bankruptcy Code may, subject to approval of the court, (a) assume the lease
and retain it or assign it to a third party or (b) reject the lease. If the
lease is assumed, the trustee or debtor in possession (or assignee, if
applicable) must cure any defaults under the lease, compensate the lessor for
its losses and provide the lessor with "adequate assurance" of future
performance. Such remedies may be insufficient, however, as the lessor may be
forced to continue under the lease with a lessee that is a poor credit risk
or an unfamiliar tenant if the lease was assigned, and any assurances
provided to the lessor may, in fact, be inadequate. Furthermore, there is
likely to be a period of time between the date upon which a lessee files a
bankruptcy petition and the date upon which the lease is assumed or rejected.
Although the lessee is obligated to make all lease payments currently with
respect to the post-petition period, there is a risk that such payments will
not be made due to the lessee's poor financial condition. If the lease is
rejected, the lessor will be treated as an unsecured creditor with respect to
its claim for damages for termination of the lease and the mortgagor must
relet the mortgaged property before the flow of lease payments will
recommence. In addition, pursuant to Section 502(b) (6) of the Bankruptcy
Code, a lessor's damages for lease rejection are limited.
In a bankruptcy or similar proceeding, action may be taken seeking the
recovery as a preferential transfer of any payments made by the mortgagor
under the related Mortgage Loan to the Trust Fund. Payments on long-term debt
may be protected from recovery as preferences if they are payments in the
ordinary course of business made on debts incurred in the ordinary course of
business. Whether any particular payment would be protected depends upon the
facts specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may
have the power to grant liens senior to the lien of a mortgage, and analogous
state statutes and general principles of equity may also provide a mortgagor
with means to halt a foreclosure proceeding or sale and to force a
restructuring of a mortgage loan on terms a lender would not otherwise
accept. Moreover, the laws of certain states also give priority to certain
tax liens over the lien of a mortgage or deed of trust. Under the Bankruptcy
Code, if the court finds that actions of the mortgagee have been
unreasonable, the lien of the related mortgage may be subordinated to the
claims of unsecured creditors.
Certain of the mortgagors may be partnerships. The laws governing limited
partnerships in certain states provide that the commencement of a case under
the Bankruptcy Code with respect to a general partner will cause a person to
cease to be a general partner of the limited partnership, unless otherwise
provided in writing in the limited partnership agreement. This provision may
be construed as an "ipso facto" clause and, in the event of the general
partner's bankruptcy, may not be enforceable. Certain limited partnership
agreements of the borrowers may provide that the commencement of a case under
the Bankruptcy Code with respect to the related general partner constitutes
an event of withdrawal (assuming the enforceability of the clause is not
challenged in bankruptcy proceedings or, if challenged, is upheld) that might
trigger the dissolution of the limited partnership, the winding up of its
affairs and the distribution of its assets, unless (i) at the time there was
at least one other general partner and the written provisions of the limited
partnership permit the business of the limited partnership to be carried on
by the remaining general partner and that general partner does so or (ii) the
written provisions of the limited partnership agreement permit the limited
partner to agree within a specified time frame (often 60 days) after such
withdrawal to continue the business of the limited partnership and to the
appointment of one or more general partners and the limited partners do so.
In addition, the laws governing general partnerships in certain states
provide that the commencement of a case under the Bankruptcy Code or
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state bankruptcy laws with respect to a general partner of such partnerships
triggers the dissolution of such partnership, the winding up of its affairs
and the distribution of its assets. Such state laws, however, may not be
enforceable or effective in a bankruptcy case. The dissolution of a
mortgagor, the winding up of its affairs and the distribution of its assets
could result in an acceleration of its payment obligation under a related
Mortgage Loan, which may reduce the yield on the Offered Certificates in the
same manner as a principal prepayment.
In addition, the bankruptcy of the general or limited partner of a
mortgagor that is a partnership, or the bankruptcy of a member of a mortgagor
that is a limited liability company or the bankruptcy of a shareholder of a
mortgagor that is a corporation may provide the opportunity in the bankruptcy
case of such partner, member or shareholder to obtain an order from a court
consolidating the assets and liabilities of the partner, member or
shareholder with those of the mortgagor pursuant to the doctrines of
substantive consolidation or piercing the corporate veil. In such a case, the
respective Mortgaged Property, for example, would become property of the
estate of such bankrupt partner, member of shareholder. Not only would the
Mortgaged Property be available to satisfy the claims of creditors of such
partner, member or shareholder, but an automatic stay would apply to any
attempt by the Trustee to exercise remedies with respect to such Mortgaged
Property. However, such an occurrence should not affect the Trustee's status
as a secured creditor with respect to the mortgagor or its security interest
in the Mortgaged Property.
LEASEHOLD RISKS
Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with mortgage loans
secured by the fee estate of the mortgagor. The most significant of these
risks is that the ground lease creating the leasehold estate could terminate,
leaving the leasehold mortgagee without its security. The ground lease may
terminate if, among other reasons, the ground lessee breaches or defaults in
its obligations under the ground lease or there is a bankruptcy of the ground
lessee or the ground lessor. This risk may be minimized if the ground lease
contains certain provisions protective of the mortgagee, but the ground
leases that secure Mortgage Loans may not contain some of these protective
provisions, and mortgages may not contain the other protections discussed in
the next paragraph. Protective ground lease provisions include the right of
the leasehold mortgagee to receive notices from the ground lessor of any
defaults by the mortgagor; the right to cure such defaults, with adequate
cure periods; if a default is not susceptible of cure by the leasehold
mortgagee, the right to acquire the leasehold estate through foreclosure or
otherwise; the ability of the ground lease to be assigned to and by the
leasehold mortgagee or purchaser at a foreclosure sale and for the
concomitant release of the ground lessee's liabilities thereunder; and the
right of the leasehold mortgagee to enter into a new ground lease with the
ground lessor on the same terms and conditions as the old ground lease in the
event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may
require that the ground lease or leasehold mortgage prohibit the ground
lessee from treating the ground lease as terminated in the event of the
ground lessor's bankruptcy and rejection of the ground lease by the trustee
for the debtor-ground lessor. As further protection, a leasehold mortgage may
provide for the assignment of the debtor-ground lessee's right to reject a
lease pursuant to Section 365 of the Bankruptcy Code, although the
enforceability of such clause has not been established. Without the
protections described above, a leasehold mortgagee may lose the collateral
securing its leasehold mortgage. In addition, terms and conditions of a
leasehold mortgage are subject to the terms and conditions of the ground
lease. Although certain rights given to a ground lessee can be limited by the
terms of a leasehold mortgage, the rights of a ground lessee or a leasehold
mortgagee with respect to, among other things, insurance, casualty and
condemnation will be governed by the provisions of the ground lease.
STATUTORY LIABILITIES
The Internal Revenue Code of 1986, as amended, provides priority to
certain tax liens over the lien of the mortgage. In addition, substantive
requirements are imposed upon mortgage lenders in connection with the
origination and the servicing of mortgage loans by numerous federal and some
state
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consumer protection laws. These laws include the federal Truth-in-Lending
Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act,
Fair Credit Billing Act, Fair Credit Reporting Act, and related statutes.
These federal laws impose specific statutory liabilities upon lenders who
originate mortgage loans and who fail to comply with the provisions of the
law. In some cases, this liability may affect assignees of the mortgage
loans.
ENFORCEABILITY OF CERTAIN PROVISIONS
Prepayment Provisions
Courts generally enforce claims requiring prepayment fees unless
enforcement would be unconscionable. However, the laws of certain states may
render prepayment fees unenforceable after a mortgage loan has been
outstanding for a certain number of years, or may limit the amount of any
prepayment fee to a specified percentage of the original principal amount of
the mortgage loan, to a specified percentage of the outstanding principal
balance of a mortgage loan, or to a fixed number of months' interest on the
prepaid amount. In certain states, prepayment fees payable on default or
other involuntary acceleration of a mortgage loan may not be enforceable
against the mortgagor. Some state statutory provisions may also treat certain
prepayment fees as usurious if in excess of statutory limits. See
"--Applicability of Usury Laws." Some of the Mortgage Loans included in the
Mortgage Pool for a Series may not require the payment of specified fees as a
condition to prepayment or such requirements have expired, and to the extent
some Mortgage Loans do require such fees, such fees may not necessarily deter
Borrowers from prepaying their Mortgage Loans.
Due-on-Sale Provisions
The enforceability of due-on-sale clauses has been the subject of
legislation or litigation in many states, and in some cases, typically
involving single family residential mortgage transactions, their
enforceability has been limited or denied. In any event, in situations
relating primarily to residential properties, the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn-St Germain Act") preempts state
constitutional, statutory and case law that prohibits the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in
accordance with their terms, subject to certain exceptions. As a result,
due-on-sale clauses have become generally enforceable except in those states
whose legislatures exercised their authority to regulate the enforceability
of such clauses with respect to mortgage loans that were (i) originated or
assumed during the "window period" under the Garn-St Germain Act, which ended
in all cases not later than October 15, 1982, and (ii) originated by lenders
other than national banks, federal savings institutions and federal credit
unions. FHLMC has taken the position in its published mortgage servicing
standards that, out of a total of eleven "window period states," five states
(Arizona, Michigan, Minnesota, New Mexico and Utah) have enacted statutes
extending, on various terms and for varying periods, the prohibition on
enforcement of due-on-sale clauses with respect to certain categories of
window period loans. Also, the Garn-St Germain Act does "encourage" lenders
to permit assumption of loans at the original rate of interest or at some
other rate less than the average of the original rate and the market rates.
Unless otherwise specified in the related Prospectus Supplement, the
Agreement for each Series will provide that if any Mortgage Loan contains a
provision in the nature of a "due-on-sale" clause, which by its terms
provides that: (i) such Mortgage Loan shall (or may at the mortgagee's
option) become due and payable upon the sale or other transfer of an interest
in the related Mortgaged Property; or (ii) such Mortgage Loan may not be
assumed without the consent of the related mortgagee in connection with any
such sale or other transfer, then, for so long as such Mortgage Loan is
included in the Trust Fund, the Master Servicer, on behalf of the Trustee,
shall take such actions as it deems to be in the best interest of the
Certificateholders in accordance with the servicing standard set forth in the
Agreement, and may waive or enforce any due-on-sale clause contained in the
related Note or Mortgage.
In addition, under federal bankruptcy law, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances,
be eliminated in any modified mortgage resulting from such bankruptcy
proceeding.
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Acceleration on Default
Some of the Mortgage Loans included in the Mortgage Pool for a Series will
include a "debt acceleration" clause, which permits the lender to accelerate
the full debt upon a monetary or nonmonetary default of the borrower. State
courts generally will enforce clauses providing for acceleration in the event
of a material payment default after giving effect to any appropriate notices.
The equity courts of any state, however, may refuse to foreclose a mortgage
or deed of trust when an acceleration of the indebtedness would be
inequitable or unjust or the circumstances would render the acceleration
unconscionable. Furthermore, in some states, the borrower may avoid
foreclosure and reinstate an accelerated loan by paying only the defaulted
amounts and the costs and attorneys' fees incurred by the lender in
collecting such defaulted payments.
Forms of notes, mortgages and deeds of trust used by lenders may contain
provisions obligating the borrower to pay a late charge if payments are not
timely made. In certain states, there are or may be specific limitations upon
the late charges which a lender may collect from a borrower for delinquent
payments.
Upon foreclosure, courts have applied general equitable principles. These
equitable principles are generally designed to relieve the borrower from the
legal effect of his defaults under the loan documents. Examples of judicial
remedies that have been fashioned include judicial requirements that the
lender undertake affirmative and expensive actions to determine the causes of
the borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's judgment and have required that lenders reinstate loans or
recast payment schedules in order to accommodate borrowers who are suffering
from temporary financial disability. In other cases, courts have limited the
right of the lender to foreclose if the default under the mortgage instrument
is not monetary, such as the borrower's failing to maintain adequately the
property or the borrower's executing a second mortgage or deed of trust
affecting the property. Finally, some courts have been faced with the issue
of whether or not federal or state constitutional provisions reflecting due
process concerns for adequate notice require that borrowers under deeds of
trust or mortgages receive notices in addition to the statutorily-prescribed
minimum. For the most part, these cases have upheld the notice provisions as
being reasonable or have found that the sale by a trustee under a deed of
trust, or by a mortgagee under a mortgage having a power of sale, does not
involve sufficient state action to afford constitutional protections to the
borrower.
State courts also are known to apply various legal and equitable
principles to avoid enforcement of the forfeiture provisions of Installment
Contracts. For example, a lender's practice of accepting late payments from
the borrower may be deemed a waiver of the forfeiture clause. State courts
also may impose equitable grace periods for payment of arrearages or
otherwise permit reinstatement of the contract following a default. Not
infrequently, if a borrower under an Installment Contract has significant
equity in the property, equitable principles will be applied to reform or
reinstate the contract or to permit the borrower to share the proceeds upon a
foreclosure sale of the property if the sale price exceeds the debt.
Soldiers' and Sailors' Relief Act
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), an individual Borrower who enters military
service after the origination of such Borrower's Mortgage Loan (including a
Borrower who is in reserve status at the time of the origination of the
Mortgage Loan and is later called to active duty) may not be charged interest
(including fees and charges) above an annual rate of 6% during the period of
such Borrower's active duty status, unless a court orders otherwise upon
application of the lender. Any shortfall in interest collections resulting
from the application of the Relief Act, to the extent not covered by any
applicable credit enhancements, could result in losses to the Holders of the
Certificates. The Relief Act applies to mortgagors who are members of the
Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard and
officers of the U.S. Public Health Service assigned to duty with the
military. Because the Relief Act applies to mortgagors who enter military
service (including reservists who are later called to active duty) after
origination of the related Mortgage Loan, no information can be provided as
to the number of Mortgage Loans that may be
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affected by the Relief Act. Some of the Mortgaged Properties relating to
Mortgage Loans included in the Mortgage Pool for a Series may be owned by
Borrowers who are individuals currently in the military. In addition, the
Relief Act imposes limitations which would impair the ability of the Master
Servicer to foreclose on an affected Mortgage Loan during the Borrower's
period of active duty status and, under certain circumstances, during an
additional three months thereafter. Thus, in the event that such a Mortgage
Loan goes into default, there may be delays and losses occasioned by the
inability to realize upon the Mortgaged Property in a timely fashion.
Forfeitures in Drug and RICO Proceedings
Federal law permits the government to forfeit real property that has been
purchased with the proceeds of certain crimes (including drug trafficking,
racketeering, money laundering, and fraud affecting financial institutions),
and real property that has been used to facilitate certain crimes (including
drug trafficking and money laundering). Forfeitures of real property usually
are accomplished through criminal or civil judicial proceedings. In a
criminal proceeding, forfeiture is imposed as a form of punishment following
conviction of the property owner. Under certain circumstances, the government
may even seize the defendant's real property before a conviction. In a civil
forfeiture, the government brings an action against the real property, rather
than the wrongdoer, based on the legal fiction that the property itself has
been tainted by crime.
The government must publish notice of the forfeiture proceeding and may
give direct notice to all parties known to have an alleged interest in the
property, including holders of mortgage loans. A mortgage lender may avoid
forfeiture of its interest in the property if it can establish that: (i) its
mortgage was executed and recorded before commission of the crime upon which
the forfeiture is based, or (ii) the lender did not know of or consent to the
underlying unlawful conduct. The U.S. Department of Justice has adopted an
expedited settlement policy designed to resolve the claims of lienholders
holding mortgages against properties that are subject to forfeiture.
APPLICABILITY OF USURY LAWS
State and federal usury laws limit the interest that lenders are entitled
to receive on a mortgage loan. In determining whether a given transaction is
usurious, courts may include charges in the form of "points" and "fees" as
"interest," but may exclude payments in the form of "reimbursement of
foreclosure expenses" or other charges found to be distinct from "interest."
If, however, the amount charged for the use of the money loaned is found to
exceed a statutorily established maximum rate, the form employed and the
degree of overcharge are both immaterial. Statutes differ in their provision
as to the consequences of a usurious loan. One group of statutes requires the
lender to forfeit the interest above the applicable limit or imposes a
specified penalty. Under this statutory scheme, the borrower may have the
recorded mortgage or deed of trust cancelled upon paying its debt with lawful
interest, or the lender may foreclose, but only for the debt plus lawful
interest. A second group of statutes is more severe. A violation of this type
of usury law results in the invalidation of the transaction, thereby
permitting the borrower to have the recorded mortgage or deed of trust
cancelled without any payment and prohibiting the lender from foreclosing.
Under the Agreement, a representation and warranty will be made (or the
benefit of such a representation and warranty will be assigned to the Trust
Fund) to the effect that the Mortgage Loans included in a given Trust Fund
complied at origination with applicable laws, including usury laws. Unless
otherwise provided in the related Prospectus Supplement, if this
representation and warranty is breached with respect to any Mortgage Loan in
a manner that materially and adversely affects the interests of
Certificateholders and is not cured within the period of time specified in
the related Prospectus Supplement, a Substitute Mortgage Loan will be
substituted for such Mortgage Loan or such Mortgage Loan will be repurchased
in accordance with the applicable Agreement. See "THE MORTGAGE POOLS --
Representations and Warranties."
The Agreement for each Series will provide that the Master Servicer not
charge interest in excess of that permitted under any applicable state and
federal usury laws, notwithstanding that the applicable Note may provide for
a higher rate.
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ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage
loans, originated by non-federally chartered lenders have historically been
subjected to a variety of restrictions. Such restrictions differed from state
to state, resulting in difficulties in determining whether a particular
alternative mortgage instrument originated by a state-chartered lender was in
compliance with applicable law. These difficulties were alleviated
substantially as a result of the enactment of Title VIII of the Garn-St
Germain Act ("Title VIII"). Title VIII provides that, notwithstanding any
state law to the contrary, state-chartered banks may originate alternative
mortgage instruments in accordance with regulations promulgated by the
Comptroller of the Currency with respect to origination of alternative
mortgage instruments by national banks, state-chartered credit unions may
originate alternative mortgage instruments in accordance with regulations
promulgated by the National Credit Union Administration (the "NCUA") with
respect to origination of alternative mortgage instruments by federal credit
unions, and all other non-federally chartered housing creditors, including
state-chartered savings and loan associations, state-chartered savings banks
and mortgage banking companies, may originate alternative mortgage
instruments in accordance with the regulations promulgated by the Federal
Home Loan Bank Board (now the Office of Thrift Supervision) with respect to
origination of alternative mortgage instruments by federal savings and loan
associations. Title VIII provides that any state may reject applicability of
the provision of Title VIII by adopting, prior to October 15, 1985, a law or
constitutional provision expressly rejecting the applicability of such
provisions. Certain states have taken such action.
LEASES AND RENTS
Some of the Mortgage Loans included in the Mortgage Pool for a Series may
be secured by an assignment of leases and rents, either through a separate
document of assignment or as incorporated in the related mortgage. Under such
assignments, the borrower under the mortgage loan typically assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while retaining a license to collect the rents for
so long as there is no default under the mortgage loan. The manner of
perfecting the lender's interest in rents may depend on whether the
borrower's assignment was absolute or one granted as security for the loan.
Failure to properly perfect the lender's interest in rents may result in the
loss of a substantial pool of funds which could otherwise serve as a source
of repayment for the loan. In the event the borrower defaults, the license
terminates and the lender may be entitled to collect rents. Some state laws
may require that to perfect its interest in rents, the lender must take
possession of the property and/or obtain judicial appointment of a receiver
before becoming entitled to collect the rents. Lenders that actually take
possession of the property, however, may incur potentially substantial risks
attendant to being a mortgagee in possession. Such risks include liability
for environmental clean-up costs and other risks inherent to property
ownership. In addition, if bankruptcy or similar proceedings are commenced by
or in respect of the borrower, the lender's ability to collect the rents may
be adversely affected. In the event of borrower default, the amount of rent
the lender is able to collect from the tenants may be less than the periodic
payments due under the mortgage and can significantly affect the value of the
lender's security interest.
SECONDARY FINANCING; DUE-ON-ENCUMBRANCE PROVISIONS
Some of the Mortgage Loans included in the Mortgage Pool for a Series may
not restrict secondary financing, thereby permitting the Borrower to use the
Mortgaged Property as security for one or more additional loans. Some of the
Mortgage Loans may preclude secondary financing (often by permitting the
first lender to accelerate the maturity of its loan if the Borrower further
encumbers the Mortgaged Property) or may require the consent of the senior
lender to any junior or substitute financing; however, such provisions may be
unenforceable in certain jurisdictions under certain circumstances. Unless
otherwise specified in the related Prospectus Supplement, the Agreement for
each Series will provide that if any Mortgage Loan contains a provision in
the nature of a "due-on-encumbrance" clause, which by its terms: (i) provides
that such Mortgage Loan shall (or may at the mortgagee's option) become due
and payable upon the creation of any lien or other encumbrance on the related
Mortgaged Property; or (ii) requires the consent of the related mortgagee to
the creation of any such lien or other encumbrance
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on the related Mortgaged Property, then for so long as such Mortgage Loan is
included in a given Trust Fund, the Master Servicer or, if such Mortgage Loan
is a Specially Serviced Mortgage Loan, the Special Servicer, if any, on
behalf of such Trust Fund, shall exercise (or decline to exercise) any right
it may have as the mortgagee of record with respect to such Mortgage Loan (x)
to accelerate the payments thereon, or (y) to withhold its consent to the
creation of any such lien or other encumbrance, in a manner consistent with
the servicing standard set forth in the Agreement.
Where the Borrower encumbers the Mortgaged Property with one or more
junior liens, the senior lender is subjected to additional risk. First, the
Borrower may have difficulty servicing and repaying multiple loans. Second,
acts of the senior lender which prejudice the junior lender or impair the
junior lender's security may create a superior equity in favor of the junior
lender. For example, if the Borrower and the senior lender agree to an
increase in the principal amount of or the interest rate payable on the
senior loan, the senior lender may lose its priority to the extent an
existing junior lender is prejudiced or the Borrower is additionally
burdened. Third, if the Borrower defaults on the senior loan and/or any
junior loan or loans, the existence of junior loans and actions taken by
junior lenders can impair the security available to the senior lender and can
interfere with, delay and in certain circumstances even prevent the taking of
action by the senior lender. Fourth, the bankruptcy of a junior lender may
operate to stay foreclosure or similar proceedings by the senior lender.
CERTAIN LAWS AND REGULATIONS
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply
(together with an inability to remedy any such failure) could result in
material diminution in the value of a Mortgaged Property which could,
together with the possibility of limited alternative uses for a particular
Mortgaged Property (e.g., a nursing or convalescent home or hospital), result
in a failure to realize the full principal amount of the related Mortgage
Loan.
TYPE OF MORTGAGED PROPERTY
The lender may be subject to additional risk depending upon the type and
use of the Mortgaged Property in question. For instance, Mortgaged Properties
which are hospitals, nursing homes or convalescent homes may present special
risks to lenders in large part due to significant governmental regulation of
the operation, maintenance, control and financing of health care
institutions. Mortgages on Mortgaged Properties which are owned by the
Borrower under a condominium form of ownership are subject to the
declaration, by-laws and other rules and regulations of the condominium
association. Mortgaged Properties which are hotels or motels may present
additional risk to the lender in that: (i) hotels and motels are typically
operated pursuant to franchise, management and operating agreements which may
be terminable by the franchisor, manager or operator; and (ii) the
transferability of the hotel's operating, liquor and other licenses to the
entity acquiring the hotel either through purchase or foreclosure is subject
to the vagaries of local law requirements. In addition, Mortgaged Properties
which are multifamily residential properties or cooperatively owned
multifamily properties may be subject to rent control laws, which could
impact the future cash flows of such properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which
are structural in nature from existing places of public accommodation to the
extent "readily achievable." In addition, under the ADA, alterations to a
place of public accommodation or a commercial facility are to be made so
that, to the maximum extent feasible, such altered portions are readily
accessible to and usable by disabled individuals. The "readily achievable"
standard takes into account, among other factors, the financial resources of
the affected site, owner, landlord or other applicable person. In addition to
imposing a possible financial burden on the borrower in its capacity as owner
or landlord, the ADA may also impose such requirements on a foreclosing
lender who succeeds to the interest of the Borrower as owner or landlord.
Furthermore, since
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the "readily achievable" standard may vary depending on the financial
condition of the owner or landlord, a foreclosing lender who is financially
more capable than the Borrower of complying with the requirements of the ADA
may be subject to more stringent requirements than those to which the
Borrower is subject.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following generally describes the anticipated material federal income
tax consequences of purchasing, owning and disposing of Certificates. It does
not address special rules which may apply to particular types of investors.
The authorities on which this discussion is based are subject to change or
differing interpretations, and any such change or interpretation could apply
retroactively. Investors should consult their own tax advisors regarding the
Certificates.
For purposes of this discussion, unless otherwise specified, the term
"Mortgage Loans" will be used to refer to Mortgage Loans and Installment
Contracts, and the term "Owner" will refer to the beneficial owner of a
Certificate. In the event that the Mortgage Pool for any Series of
Certificates consists of financial leases or the Trust Fund enters into a
Swap Agreement, the related Prospectus Supplement will describe any
additional or different federal income tax consequences of purchasing, owning
and disposing of such Certificates.
REMIC ELECTIONS
Under the Internal Revenue Code of 1986, as amended (the "Code"), an
election may be made to treat the Trust Fund related to each Series of
Certificates (or segregated pools of assets within the Trust Fund) as a "real
estate mortgage investment conduit" ("REMIC") within the meaning of Section
860D(a) of the Code. If one or more REMIC elections are made, the
Certificates of any Class will be either "regular interests" in a REMIC
within the meaning of Section 860G(a)(1) of the Code ("Regular Certificates")
or "residual interests" in a REMIC within the meaning of Section 860G(a)(2)
of the Code ("Residual Certificates"). The Prospectus Supplement for each
Series of Certificates will indicate whether an election will be made to
treat the Trust Fund as one or more REMICs, and if so, which Certificates
will be Regular Certificates and which will be Residual Certificates.
If a REMIC election is made, the Trust Fund, or each portion thereof that
is treated as a separate REMIC, will be referred to as a "REMIC Pool". If the
Trust Fund is comprised of two REMIC Pools, one will be an "Upper-Tier REMIC"
and one a "Lower-Tier REMIC". The assets of the Lower-Tier REMIC will consist
of the Mortgage Loans and related Trust Fund assets. The assets of the
Upper-Tier REMIC will consist of all of the regular interests issued by the
Lower-Tier REMIC.
The discussion below under the heading "REMIC Certificates" considers
Series for which a REMIC election will be made. Series for which no such
election will be made are addressed under "Non-REMIC Certificates".
REMIC CERTIFICATES
The discussion in this section applies only to a Series of Certificates
for which a REMIC election is made.
Tax Opinion.
Qualification as a REMIC requires ongoing compliance with certain
conditions. Upon the issuance of each Series of Certificates for which a
REMIC election is made, Cleary, Gottlieb, Steen & Hamilton or another law
firm identified in the related Prospectus Supplement, counsel to the Seller,
will deliver its opinion generally to the effect that, with respect to each
such Series of Certificates, under then existing law and assuming compliance
by the Seller, the Master Servicer, the Special Servicer, if any, and the
Trustee for such Series with all of the provisions of the related Agreement
(and such other agreements
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and representations as may be referred to in such opinion), each REMIC Pool
will be a REMIC, and the Certificates of such Series will be treated as
either Regular Certificates or Residual Certificates. This opinion will be
filed as an Exhibit to the Form 8-K relating to such Series of Certificates.
Status of Certificates.
The Certificates will be:
O ASSETS DESCRIBED IN CODE SECTION 7701(A)(19)(C); AND
O "REAL ESTATE ASSETS" UNDER CODE SECTION 856(C)(4)(A),
to the extent the assets of the related REMIC Pool are so treated. Interest
on the Regular Certificates will be "interest on obligations secured by
mortgages on real property or on interests in real property" within the
meaning of Code Section 856(c)(3)(B) in the same proportion that the income
of the REMIC Pool is so treated. If at all times 95% or more of the assets or
income of the REMIC Pool qualify under the foregoing Code sections, the
Certificates (and income thereon) will so qualify in their entirety.
The rules described in the preceding paragraph will be applied to a Trust
Fund consisting of two REMIC Pools as if the Trust Fund were a single REMIC
holding the assets of the Lower-Tier REMIC.
Income from Regular Certificates.
General. Except as otherwise provided in this tax discussion, Regular
Certificates will be taxed as newly originated debt instruments for federal
income tax purposes. Interest, original issue discount and market discount
accrued on a Regular Certificate will be ordinary income to the Owner. All
Owners must account for interest income under the accrual method of
accounting, which may result in the inclusion of amounts in income that are
not currently distributed in cash.
On January 27, 1994 the Internal Revenue Service adopted regulations
applying the original issue discount rules of the Code, and such regulations
were further amended on June 6, 1996 (the "OID Regulations"). Except as
otherwise noted, the discussion below is based on the OID Regulations.
Original Issue Discount. Certain Regular Certificates may have "original
issue discount." An Owner must include original issue discount in income as
it accrues, without regard to the timing of payments.
The total amount of original issue discount on a Regular Certificate is
the excess of its "stated redemption price at maturity" over its "issue
price." The issue price for any Regular Certificate is the price (including
any accrued interest) at which a substantial portion of the Class of
Certificates including such Regular Certificate are first sold to the public.
In general, the stated redemption price at maturity is the sum of all
payments made on the Regular Certificate, other than payments of interest
that (i) are actually payable at least annually over the entire life of the
Certificates and (ii) are based on a single fixed rate or variable rate (or
certain combinations of fixed and variable rates). The stated redemption
price at maturity of a Regular Certificate always includes its original
principal amount, but generally does not include distributions of stated
interest, except in the case of accrual certificates, and, as discussed
below, Interest Only Certificates. An "Interest Only Certificate" is a
Certificate entitled to receive distributions of some or all of the interest
on the Mortgage Loans or other assets in a REMIC Pool and that has either a
notional or nominal principal amount. Special rules for Regular Certificates
that provide for interest based on a variable rate are discussed below in
"Income from Regular Certificates--Variable Rate Regular Certificates".
With respect to an Interest Only Certificate, the stated redemption price
at maturity is likely to be the sum of all payments thereon, determined in
accordance with the Prepayment Assumption (as defined below). In that event,
Interest Only Certificates would always have original issue discount.
Alternatively, in the case of an Interest Only Certificate with some
principal amount, the stated redemption price at maturity might be determined
under the general rules described in the preceding paragraph. If, applying
those rules, the stated redemption price at maturity were considered to equal
the principal amount of such Certificate, then the rules described below
under "Premium" would apply. The Prepayment
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Assumption is the assumed rate of prepayment of the Mortgage Loans used in
pricing the Regular Certificates. The Prepayment Assumption will be set forth
in the related Prospectus Supplement.
Under a de minimis rule, original issue discount on a Regular Certificate
will be considered zero if it is less than 0.25% of the Certificate's stated
redemption price at maturity multiplied by the Certificate's weighted average
maturity. The weighted average maturity of a Regular Certificate is computed
based on the number of full years (i.e., rounding down partial years) each
distribution of principal (or other amount included in the stated redemption
price at maturity) is scheduled to be outstanding. The schedule of such
distributions likely should be determined in accordance with the Prepayment
Assumption.
The Owner of a Regular Certificate generally must include in income the
original issue discount that accrues for each day on which the Owner holds
such Certificate, including the date of purchase, but excluding the date of
disposition. The original issue discount accruing in any period equals:
PV End + Dist -PV Beg
Where:
PV End = present value of all remaining distributions to be made as of
the end of the period;
Dist = distributions made during the period includable in the stated
redemption price at maturity; and
PV Beg = present value of all remaining distributions as of the beginning
of the period.
The present value of the remaining distributions is calculated based on (i)
the original yield to maturity of the Regular Certificate, (ii) events
(including actual prepayments) that have occurred prior to the end of the
period and (iii) the Prepayment Assumption. For these purposes, the original
yield to maturity of a Regular Certificate will be calculated based on its
issue price, assuming that the Certificate will be prepaid in all periods in
accordance with the Prepayment Assumption, and with compounding at the end of
each accrual period used in the formula.
Assuming the Regular Certificates have monthly Distribution Dates,
original issue discount would be computed under the formula generally for the
one-month periods (or shorter initial period) ending on each Distribution
Date. The original issue discount accruing during any accrual period is
divided by the number of days in the period to determine the daily portion of
original issue discount for each day.
The daily portions of original issue discount generally will increase if
prepayments on the underlying Mortgage Loans exceed the Prepayment Assumption
and decrease if prepayments are slower than the Prepayment Assumption
(changes in the rate of prepayments having the opposite effect in the case of
an Interest Only Certificate). If the relative principal payment priorities
of the Classes of Regular Certificates of a Series change, any increase or
decrease in the present value of the remaining payments to be made on any
such Class will affect the computation of original issue discount for the
period in which the change in payment priority occurs.
If original issue discount computed as described above is negative for any
period, the Owner generally will not be allowed a current deduction for the
negative amount but instead will be entitled to offset such amount only
against future positive original issue discount from such Certificate.
However, while not free from doubt, such an Owner may be entitled to deduct
"negative original issue discount" to the extent the Owner's adjusted basis
(as defined in "Sale or Exchange of Certificates" below) in the Certificate
remaining after such deduction is not less than the principal amount of the
Certificate.
Acquisition Premium. If an Owner of a Regular Certificate acquires such
Certificate at a price greater than its "adjusted issue price," but less than
its remaining stated redemption price at maturity, the daily portion for any
day (as computed above) is reduced by an amount equal to the product of (i)
such daily portion and (ii) a fraction, the numerator of which is the amount
by which the price exceeds the adjusted issue price and the denominator of
which is the sum of the daily portions for such Regular Certificate for all
days on and after the date of purchase. The adjusted issue price of a Regular
Certificate on any given day is its issue price, increased by all original
issue discount that has accrued on such Certificate and reduced by the amount
of all previous distributions on such Certificate of amounts included in its
stated redemption price at maturity.
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Market Discount. A Regular Certificate may have market discount (as
defined in the Code). Market discount equals the excess of the adjusted issue
price of a Certificate over the Owner's adjusted basis in the Certificate.
The Owner of a Certificate with market discount must report ordinary interest
income, as the Owner receives distributions on the Certificate of principal
or other amounts included in its stated redemption price at maturity, equal
to the lesser of (a) the excess of the amount of those distributions over the
amount, if any, of accrued original issue discount on the Certificate or (b)
the portion of the market discount that has accrued and not previously been
included in income. Also, such Owner must treat gain from the disposition of
the Certificate as ordinary income to the extent of any accrued, but
unrecognized, market discount. Alternatively, an Owner may elect in any
taxable year to include market discount in income currently as it accrues on
all market discount instruments acquired by the Owner in that year or
thereafter. An Owner may revoke such an election only with the consent of the
Internal Revenue Service.
In general terms, market discount on a Regular Certificate may be treated,
at the Owner's election, as accruing either (a) on the basis of a constant
yield (similar to the method described above for accruing original issue
discount) or (b) alternatively, either (i) in the case of a Regular
Certificate issued without original issue discount, in the ratio of stated
interest distributable in the relevant period to the total stated interest
remaining to be distributed from the beginning of such period (computed
taking into account the Prepayment Assumption) or (ii) in the case of a
Regular Certificate issued with original issue discount, in the ratio of the
amount of original issue discount accruing in the relevant period to the
total remaining original issue discount at the beginning of such period. An
election to accrue market discount on a Regular Certificate on a constant
yield basis is irrevocable with respect to that Certificate.
An Owner may be required to defer a portion of the deduction for interest
expense on any indebtedness that the Owner incurs or maintains in order to
purchase or carry a Regular Certificate that has market discount. The
deferred amount would not exceed the market discount that has accrued but not
been taken into income. Any such deferred interest expense is, in general,
allowed as a deduction not later than the year in which the related market
discount income is recognized.
Market discount with respect to a Regular Certificate will be considered
to be zero if such market discount is de minimis under a rule similar to that
described above in the fourth paragraph under "Original Issue Discount".
Owners should consult their own tax advisors regarding the application of the
market discount rules as well as the advisability of making any election with
respect to market discount.
Discount on a Regular Certificate that is neither original issue discount
nor market discount, as defined above, must be allocated ratably among the
principal payments on the Certificate and included in income (as gain from
the sale or exchange of the Certificate) as the related principal payments
are made (whether as scheduled payments or prepayments).
Premium. A Regular Certificate, other than an accrual certificate or, as
discussed above under "Original Issue Discount", an Interest Only
Certificate, purchased at a cost (net of accrued interest) greater than its
principal amount generally is considered to be purchased at a premium. The
Owner may elect under Code Section 171 to amortize such premium under the
constant yield method, using the Prepayment Assumption. To the extent the
amortized premium is allocable to interest income from the Regular
Certificate, it is treated as an offset to such interest rather than as a
separate deduction. An election made by an Owner would generally apply to all
its debt instruments and may not be revoked without the consent of the
Internal Revenue Service.
Special Election to Apply OID Rules. In lieu of the rules described above
with respect to de minimis discount, acquisition premium, market discount and
premium, an Owner of a Regular Certificate may elect to accrue such discount,
or adjust for such premium, by applying the principles of the OID rules
described above. An election made by a taxpayer with respect to one
obligation can affect other obligations it holds. Owners should consult with
their tax advisors regarding the merits of making this election.
Variable Rate Regular Certificates. The Regular Certificates may provide
for interest that varies based on an interest rate index. The OID Regulations
provide special rules for calculating income from
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certain "variable rate debt instruments" or "VRDIs." A debt instrument must
meet certain technical requirements to qualify as a VRDI, which are outlined
in the next paragraph. Under the regulations, income on a VRDI is calculated
by (1) creating a hypothetical debt instrument that pays fixed interest at
rates equivalent to the variable interest, (2) applying the original issue
discount rules of the Code to that fixed rate instrument, and (3) adjusting
the income accruing in any accrual period by the difference between the
assumed fixed interest amount and the actual amount for the period. In
general, where a variable rate on a debt instrument is based on an interest
rate index (such as LIBOR), a fixed rate equivalent to a variable rate is
determined based on the value of the index as of the issue date of the debt
instrument. In cases where rates are reset at different intervals over the
life of a VRDI, adjustments are made to ensure that the equivalent fixed rate
for each accrual period is based on the same reset interval.
A debt instrument must meet a number of requirements in order to qualify
as a VRDI. A VRDI cannot be issued at a premium above its principal amount
that exceeds a specified percentage of its principal amount (15%, or if less
1.5% times its weighted average life). As a result, Interest Only
Certificates will never be VRDIs. Also, a debt instrument that pays interest
based on a multiple of an interest rate index is not a VRDI if the multiple
is less than 0.65 or greater than 1.35, unless, in general, interest is paid
based on a single formula that lasts over the life of the instrument. A debt
instrument is not a VRDI if it is subject to caps and floors, unless they
remain the same over the life of the instrument or are not expected to change
significantly the yield on the instrument. Variable rate Regular Certificates
other than Interest Only Certificates may or may not qualify as VRDIs
depending on their terms.
In a case where a variable rate Regular Certificate does not qualify as a
VRDI, it will be treated under the OID Regulations as a contingent payment
debt instrument. The Internal Revenue Service issued final regulations
addressing contingent payment debt instruments, but such regulations are not
applicable by their terms to REMIC regular interests. Because no guidance has
been provided with regard to types of variable rate interests other than
VRDIs, until further guidance with regard to such variable rate Regular
Certificates is forthcoming, one method of calculating income on such a
Regular Certificate that appears to be reasonable would be to apply the
principles governing VRDIs outlined above.
Subordinated Certificates. Certain Series of Certificates may contain one
or more Classes of Subordinated Certificates. In the event there are defaults
or delinquencies on the related Mortgage Loans, amounts that otherwise would
be distributed on a Class of Subordinated Certificates may instead be
distributed on other, more senior Classes of Certificates. Since Owners of
Regular Certificates are required to report income under an accrual method,
Owners of Subordinated Certificates will be required to report income without
giving effect to delays and reductions in distributions on such Certificates
attributable to defaults or delinquencies on the Mortgage Loans, except to
the extent that it can be established that amounts are uncollectible. As a
result, the amount of income reported by an Owner of a Subordinated
Certificate in any period could significantly exceed the amount of cash
distributed to such Owner in that period. The Owner eventually will be
allowed a loss (or will be allowed to report a lesser amount of income) to
the extent that the aggregate amount of distributions on the Subordinated
Certificate is reduced as a result of defaults and delinquencies on the
Mortgage Loans. Such a loss could in some circumstances be a capital loss.
Also, the timing and amount of such losses or reductions in income are
uncertain. Owners of Subordinated Certificates should consult their tax
advisors on these points.
Income from Residual Certificates.
Taxation of REMIC Income. Generally, Owners of Residual Certificates in a
REMIC Pool ("Residual Owners") must report ordinary income or loss equal to
their pro rata shares (based on the portion of all Residual Certificates they
own) of the taxable income or net loss of the REMIC. Such income must be
reported regardless of the timing or amounts of distributions on the Residual
Certificates.
The taxable income of a REMIC Pool is generally determined under the
accrual method of accounting in the same manner as the taxable income of an
individual taxpayer. Taxable income is generally gross income, including
interest and original issue discount income, if any, on the assets of the
REMIC Pool and income from the amortization of any premium on Regular
Certificates, minus
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deductions. Market discount (as defined in the Code) with respect to Mortgage
Loans held by a REMIC Pool is recognized in the same fashion as if it were
original issue discount. Deductions include interest and original issue
discount expense on the Regular Certificates, reasonable servicing fees
attributable to the REMIC Pool, other administrative expenses and
amortization of any premium on assets of the REMIC Pool. As previously
discussed, the timing of recognition of "negative original issue discount,"
if any, on a Regular Certificate is uncertain; as a result, the timing of
recognition of the corresponding income to the REMIC Pool is also uncertain.
If the Trust Fund consists of an Upper-Tier REMIC and a Lower-Tier REMIC,
the regular interests issued by the Lower-Tier REMIC to the Upper-Tier REMIC
will be treated as a single debt instrument for purposes of the original
issue discount provisions. A determination that these regular interests can
not be treated as a single debt instrument would have a material adverse
effect on the Owners of Residual Certificates issued by the Lower-Tier REMIC.
A Residual Owner may not amortize the cost of its Residual Certificate.
Taxable income of the REMIC Pool, however, will not include cash received by
the REMIC Pool that represents a recovery of the REMIC Pool's initial basis
in its assets, and such basis will include the issue price of the Residual
Certificates (assuming the issue price is positive). Such recovery of basis
by the REMIC Pool will have the effect of amortization of the issue price of
the Residual Certificate over its life. The period of time over which such
issue price is effectively amortized, however, may be longer than the
economic life of the Residual Certificate. The issue price of a Residual
Certificate is the price at which a substantial portion of the Class of
Certificates including the Residual Certificate are first sold to the public
(or if the Residual Certificate is not publicly offered, the price paid by
the first buyer).
A subsequent Residual Owner must report the same amounts of taxable income
or net loss attributable to the REMIC Pool as an original Owner. No
adjustments are made to reflect the purchase price.
Losses. A Residual Owner that is allocated a net loss of the REMIC Pool
may not deduct such loss currently to the extent it exceeds the Owner's
adjusted basis (as defined in "Sale or Exchange of Certificates" below) in
its Residual Certificate. A Residual Owner that is a U.S. person (as defined
below in "Taxation of Certain Foreign Investors"), however, may carry over
any disallowed loss to offset any taxable income generated by the same REMIC
Pool.
Excess Inclusions. A portion of the taxable income allocated to a Residual
Certificate is subject to special tax rules. That portion, referred to as an
"excess inclusion," is calculated for each calendar quarter and equals the
excess of such taxable income for the quarter over the daily accruals for the
quarter. The daily accruals equal the product of (i) 120% of the federal
long-term rate under Code Section 1274(d) for the month which includes the
Closing Date (determined on the basis of quarterly compounding and properly
adjusted for the length of the quarter) and (ii) the adjusted issue price of
the Certificate at the beginning of such quarter. The adjusted issue price of
a Residual Certificate at the beginning of a quarter is the issue price of
the Certificate, increased by the amount of daily accruals on the Certificate
for all prior quarters, and decreased (but not below zero) by any prior
distributions on the Certificate. If the aggregate value of the Residual
Certificates is not considered to be "significant," then to the extent
provided in Treasury regulations, a Residual Owner's entire share of REMIC
taxable income will be treated as an excess inclusion. The regulations that
have been adopted under Code Sections 860A through 86OG (the "REMIC
Regulations") do not contain such a rule.
Excess inclusions generally may not be offset by unrelated losses or loss
carryforwards or carrybacks of a Residual Owner. In addition, for all taxable
years beginning after August 20, 1996, and unless a Residual Owner elects
otherwise for all other taxable years, the alternate minimum taxable income
of a Residual Owner for a taxable year may not be less than the Residual
Owner's excess inclusions for the taxable year and excess inclusions are
disregarded when calculating a Residual Owner's alternate minimum tax net
operating loss deduction.
Excess inclusions are treated as unrelated business taxable income for an
organization subject to the tax on unrelated business income. In addition,
under Treasury regulations yet to be issued, if a real estate investment
trust, regulated investment company or certain other pass-through entities
are Residual Owners, a portion of the distributions made by such entities may
be treated as excess inclusions.
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Distributions. Distributions on a Residual Certificate (whether at their
scheduled times or as a result of prepayments) generally will not result in
any taxable income or loss to the Residual Owner. If the amount of any
distribution exceeds a Residual Owner's adjusted basis in its Residual
Certificate, however, the Residual Owner will recognize gain (treated as gain
from the sale or exchange of its Residual Certificate) to the extent of such
excess. See "Sale or Exchange of Certificates" below.
Prohibited Transactions; Special Taxes. Net income recognized by a REMIC
Pool from "prohibited transactions" is subject to a 100% tax and is
disregarded in calculating the REMIC Pool's taxable income. In addition, a
REMIC Pool is subject to federal income tax at the highest corporate rate on
"net income from foreclosure property" (which has a technical definition). A
100% tax also applies to certain contributions to a REMIC Pool made after it
is formed. It is not anticipated that any REMIC Pool will (i) engage in
prohibited transactions in which it recognizes a significant amount of net
income, (ii) receive contributions of property that are subject to tax, or
(iii) derive a significant amount of net income from foreclosure property
that is subject to tax.
Negative Value Residual Certificates. The federal income tax treatment of
any consideration paid to a transferee on a transfer of a Residual
Certificate is unclear. Such a transferee should consult its tax advisor. The
preamble to the REMIC Regulations indicates that the Internal Revenue Service
may issue future guidance on the tax treatment of such payments.
In addition, on December 23, 1996, the Internal Revenue Service released
final regulations under Code Section 475 (the "Mark to Market Regulations")
relating to the requirement that a dealer mark certain securities to market.
The Mark to Market Regulations provide that a residual interest is not a
"security" for the purposes of Section 475 of the Code, and thus is not
subject to the mark to market rules.
THE METHOD OF TAXATION OF RESIDUAL CERTIFICATES DESCRIBED IN THIS SECTION
CAN PRODUCE A SIGNIFICANTLY LESS FAVORABLE AFTER-TAX RETURN FOR A RESIDUAL
CERTIFICATE THAN WOULD BE THE CASE IF THE CERTIFICATE WERE TAXABLE AS A DEBT
INSTRUMENT. ALSO, A RESIDUAL OWNER'S RETURN MAY BE ADVERSELY AFFECTED BY THE
EXCESS INCLUSIONS RULES DESCRIBED ABOVE. IN CERTAIN PERIODS, TAXABLE INCOME
AND THE RESULTING TAX LIABILITY FOR A RESIDUAL OWNER MAY EXCEED ANY
DISTRIBUTIONS IT RECEIVES. IN ADDITION, A SUBSTANTIAL TAX MAY BE IMPOSED ON
CERTAIN TRANSFERORS OF A RESIDUAL CERTIFICATE AND CERTAIN RESIDUAL OWNERS
THAT ARE "PASS-THRU" ENTITIES. SEE "TRANSFERS OF RESIDUAL CERTIFICATES"
BELOW. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS BEFORE PURCHASING A
RESIDUAL CERTIFICATE.
Sale or Exchange of Certificates.
An Owner generally will recognize gain or loss upon sale or exchange of a
Regular or Residual Certificate equal to the difference between the amount
realized and the Owner's adjusted basis in the Certificate. The adjusted
basis in a Certificate generally will equal the cost of the Certificate,
increased by income previously recognized, and reduced (but not below zero)
by previous distributions, and by any amortized premium in the case of a
Regular Certificate, or net losses allowed as a deduction in the case of a
Residual Certificate.
Except as described below, any gain or loss on the sale or exchange of a
Certificate held as a capital asset will be capital gain or loss and will be
long-term or short-term depending on whether the Certificate has been held
for more than one year. Such gain or loss will be ordinary income or loss (i)
for a bank or thrift institution, and (ii) in the case of a Regular
Certificate, (a) to the extent of any accrued, but unrecognized, market
discount, or (b) to the extent income recognized by the Owner is less than
the income that would have been recognized if the yield on such Certificate
were 110% of the applicable federal rate under Code Section 1274(d).
A Residual Owner should be allowed a loss upon termination of the REMIC
Pool equal to the amount of the Owner's remaining adjusted basis in its
Residual Certificates. Whether the termination will be treated as a sale or
exchange (resulting in a capital loss) is unclear.
Except as provided in Treasury regulations, the wash sale rules of Code
Section 1091 will apply to dispositions of a Residual Certificate where the
seller of the interest, during the period beginning six
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months before the sale or disposition of the interest and ending six months
after such sale or disposition, acquires (or enters into any other
transaction that results in the application of Code Section 1091) any REMIC
residual interest, or any interest in a "taxable mortgage pool" (such as a
non-REMIC owner trust) that is economically comparable to a residual
interest.
Taxation of Certain Foreign Investors.
Regular Certificates. A Regular Certificate held by an Owner that is a
non-U.S. person (as defined below), and that has no connection with the
United States other than owning the Certificate, will not be subject to U.S.
withholding or income tax with respect to the Certificate provided such Owner
(i) is not a "10-percent shareholder" within the meaning of Code Section
871(h)(3)(B) or a controlled foreign corporation described in Code Section
881(c)(3)(C), and (ii) provides an appropriate statement, signed under
penalties of perjury, identifying the Owner and stating, among other things,
that the Owner is a non-U.S. person and provided further, with respect to
interest income from a Regular Certificate (including original issue
discount), that such interest is not "contingent". If these conditions are
not met, a 30% withholding tax will apply to interest (including original
issue discount) unless an income tax treaty reduces or eliminates such tax or
unless the interest is effectively connected with the conduct of a trade or
business within the United States by such Owner. In the latter case, such
Owner will be subject to United States federal income tax with respect to all
income from the Certificate at regular rates then applicable to U.S.
taxpayers (and in the case of a corporation, possibly also the branch profits
tax).
The term "non-U.S. person" means any person other than a U.S. person. A
U.S. person is a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, an estate that is subject
to U.S. federal income tax regardless of the source of its income or a trust
if (i) a U.S. court is able to exercise primary supervision over the trust's
administration and (ii) one or more U.S. fiduciaries have the authority to
control all of the trust's substantial decisions.
Residual Certificates. A Residual Owner that is a non-U.S. person, and
that has no connection with the United States other than owning a Residual
Certificate, will not be subject to U.S. withholding or income tax with
respect to the Certificate (other than with respect to excess inclusions)
provided that (i) the conditions described in the second preceding paragraph
with respect to Regular Certificates are met and (ii) in the case of a
Residual Certificate in a REMIC Pool holding Mortgage Loans, the Mortgage
Loans were originated after July 18, 1984. Excess inclusions are subject to a
30% withholding tax in all events (notwithstanding any contrary tax treaty
provisions) when distributed to the Residual Owner (or when the Residual
Certificate is disposed of). The Code grants the Treasury Department
authority to issue regulations requiring excess inclusions to be taken into
account earlier if necessary to prevent avoidance of tax. The REMIC
Regulations do not contain such a rule. The preamble thereto states that the
Internal Revenue Service is considering issuing regulations concerning
withholding on distributions to foreign holders of residual interests to
satisfy accrued tax liability due to excess inclusions.
With respect to a Residual Certificate that has been held at any time by a
non-U.S. person, the Trustee (or its agent) will be entitled to withhold (and
to pay to the Internal Revenue Service) any portion of any payment on such
Residual Certificate that the Trustee reasonably determines is required to be
withheld. If the Trustee (or its agent) reasonably determines that a more
accurate determination of the amount required to be withheld from a
distribution can be made within a reasonable period after the scheduled date
for such distribution, it may hold such distribution in trust for the
Residual Owner until such determination can be made.
Special tax rules and restrictions that apply to transfers of Residual
Certificates to and from non-U.S. persons are discussed in the next section.
Transfers of Residual Certificates.
Special tax rules and restrictions apply to transfers of Residual
Certificates to disqualified organizations or foreign investors, and to
transfers of noneconomic Residual Certificates.
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Disqualified Organizations. In order to comply with the REMIC rules of the
Code, the Agreement will provide that no legal or beneficial interest in a
Residual Certificate may be transferred to, or registered in the name of, any
person unless (i) the proposed purchaser provides to the Trustee an
"affidavit" (within the meaning of the REMIC Regulations) to the effect that,
among other items, such transferee is not a "disqualified organization" (as
defined below), is not purchasing a Residual Certificate as an agent for a
disqualified organization (i.e., as a broker, nominee, or other middleman)
and (ii) the transferor states in writing to the Trustee that it has no
actual knowledge that such affidavit is false.
If despite these restrictions a Residual Certificate is transferred to a
disqualified organization, the transfer may result in a tax equal to the
product of (i) the present value of the total anticipated future excess
inclusions with respect to such Certificate and (ii) the highest corporate
marginal federal income tax rate. Such a tax generally is imposed on the
transferor, except that if the transfer is through an agent for a
disqualified organization, the agent is liable for the tax. A transferor is
not liable for such tax if the transferee furnishes to the transferor an
affidavit that the transferee is not a disqualified organization and, as of
the time of the transfer, the transferor does not have actual knowledge that
the affidavit is false.
A disqualified organization may hold an interest in a REMIC Certificate
through a "pass-thru entity" (as defined below). In that event, the pass-thru
entity is subject to tax (at the highest corporate marginal federal income
tax rate) on excess inclusions allocable to the disqualified organization.
However, such tax will not apply to the extent the pass-thru entity receives
affidavits from record holders of interests in the entity stating that they
are not disqualified organizations and the entity does not have actual
knowledge that the affidavits are false except that an "electing large
partnership" will be deemed to be owned by disqualified organizations and
will pay a corporate tax on any excess inclusions.
For these purposes, (i) "disqualified organization" means the United
States, any state or political subdivision thereof, any foreign government,
any international organization, any agency or instrumentality of any of the
foregoing, certain organizations that are exempt from taxation under the Code
(including tax on excess inclusions) and certain corporations operating on a
cooperative basis, (ii) "pass-thru entity" means any regulated investment
company, real estate investment trust, common trust fund, partnership, trust
or estate and certain corporations operating on a cooperative basis and (iii)
"electing large partnership" generally means any non-service partnership with
more than 100 members that elects to apply certain simplified reporting
provisions of the Code. Except as may be provided in Treasury regulations,
any person holding an interest in a pass-thru entity as a nominee for another
will, with respect to that interest, be treated as a pass-thru entity.
Foreign Investors. Under the REMIC Regulations, a transfer of a Residual
Certificate to a non-U.S. person that will not hold the Certificate in
connection with a U.S. trade or business will be disregarded for all federal
tax purposes if the Certificate has "tax avoidance potential." A Residual
Certificate has tax avoidance potential unless, at the time of transfer, the
transferor reasonably expects that:
(i) for each excess inclusion, the REMIC will distribute to the transferee
residual interest holder an amount that will equal at least 30 percent of the
excess inclusion, and
(ii) each such amount will be distributed at or after the time at which
the excess inclusion accrues and not later than the close of the calendar
year following the calendar year of accrual.
A transferor has such reasonable expectation if the above test would be
met assuming that the REMIC's Mortgage Loans will prepay at each rate between
50 percent and 200 percent of the Prepayment Assumption.
The REMIC Regulations also provide that a transfer of a Residual
Certificate from a non-U.S. person to a U.S. person (or to a non-U.S. person
that will hold the Certificate in connection with a U.S. trade or business)
is disregarded if the transfer has "the effect of allowing the transferor to
avoid tax on accrued excess inclusions."
In light of these provisions, the Agreement provides that a Residual
Certificate may not be purchased by or transferred to any person that is not
a U.S. person, unless (i) such person holds the Certificate in connection
with the conduct of a trade or business within the United States and
furnishes
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the transferor and the Trustee with an effective Internal Revenue Service
Form 4224, or (ii) the transferee delivers to both the transferor and the
Trustee an opinion of nationally recognized tax counsel to the effect that
such transfer is in accordance with the requirements of the Code and the
regulations promulgated thereunder and that such transfer will not be
disregarded for federal income tax purposes.
Noneconomic Residual Certificates. Under the REMIC Regulations, a transfer
of a "noneconomic" Residual Certificate will be disregarded for all federal
income tax purposes if a significant purpose of the transfer is to impede the
assessment or collection of tax. Such a purpose exists if the transferor, at
the time of the transfer, either knew or should have known that the
transferee would be unwilling or unable to pay taxes due on its share of the
taxable income of the REMIC. A transferor is presumed to lack such knowledge
if:
(i) the transferor conducted, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and found that the
transferee had historically paid its debts as they came due and found no
significant evidence to indicate that the transferee will not continue to pay
its debts as they become due, and
(ii) the transferee represents to the transferor that it understands that,
as the holder of the noneconomic residual interest, it may incur tax
liabilities in excess of any cash flows generated by the interest and that it
intends to pay taxes associated with holding the residual interest as they
become due.
A Residual Certificate (including a Certificate with significant value at
issuance) is noneconomic unless, at the time of the transfer, (i) the present
value of the expected future distributions on the Certificate at least equals
the product of the present value of the anticipated excess inclusions and the
highest corporate income tax rate in effect for the year in which the
transfer occurs, and (ii) the transferor reasonably expects that the
transferee will receive distributions on the Certificate, at or after the
time at which taxes accrue, in an amount sufficient to pay the taxes.
The Agreement will provide that no legal or beneficial interest in a
Residual Certificate may be transferred to, or registered in the name of, any
person unless the proposed transferee provides to the Trustee the transferee
representations described in the preceding paragraph, and agrees that it will
not transfer the Certificate to any person unless that person agrees to
comply with the same restrictions on future transfers and the transferor
represents to the Trustee that it has no reason to believe that such
representations are false.
Servicing Compensation and Other REMIC Pool Expenses.
Under Code Section 67, an individual, estate or trust is allowed certain
itemized deductions only to the extent that such deductions, in the
aggregate, exceed 2% of the Owner's adjusted gross income, and such a person
is not allowed such deductions to any extent in computing its alternative
minimum tax liability. Under Treasury regulations, if such a person is an
Owner of a REMIC Certificate, the REMIC Pool is required to allocate to such
a person its share of the servicing fees and administrative expenses paid by
a REMIC together with an equal amount of income. Those fees and expenses are
deductible as an offset to the additional income, but subject to the 2%
floor.
In the case of a REMIC Pool that has multiple classes of Regular
Certificates with staggered maturities, fees and expenses of the REMIC Pool
would be allocated entirely to the Owners of Residual Certificates. However,
if the REMIC Pool were a "single-class REMIC" as defined in applicable
Treasury regulations, such deductions would be allocated proportionately
among the Regular and Residual Certificates.
Reporting and Administrative Matters.
Annual reports will be made to the Internal Revenue Service, and to
Holders of record of Regular Certificates, and Owners of Regular Certificates
holding through a broker, nominee or other middleman, that are not excepted
from the reporting requirements, of accrued interest, original issue
discount, information necessary to compute accruals of market discount,
information regarding the percentage of the REMIC Pool's assets meeting the
qualified assets tests described above under "Status of
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Certificates" and, where relevant, allocated amounts of servicing fees and
other Code Section 67 expenses. Holders not receiving such reports may obtain
such information from the related REMIC by contacting the person designated
in IRS Publication 938. Quarterly reports will be made to Residual Holders
showing their allocable shares of income or loss from the REMIC Pool, excess
inclusions, and Code Section 67 expenses.
The Trustee or its agent will sign and file federal income tax returns for
each REMIC Pool. To the extent allowable and if so specified in the related
Prospectus Supplement, the Owner of a Residual Certificate holding the
largest percentage interest will act as the tax matters person for each REMIC
Pool. Each Owner of a Residual Certificate, by the acceptance of its Residual
Certificate, agrees that the Trustee will act as the Owner's agent in the
performance of any duties required of the Owner in the event that the Owner
is the tax matters person.
An Owner of a Residual Certificate is required to treat items on its
federal income tax return consistently with the treatment of the items on the
REMIC Pool's return, unless the Owner owns 100% of the Residual Certificate
for the entire calendar year or the Owner either files a statement
identifying the inconsistency or establishes that the inconsistency resulted
from incorrect information received from the REMIC Pool. The Internal Revenue
Service may assess a deficiency resulting from a failure to comply with the
consistency requirement without instituting an administrative proceeding at
the REMIC level. Any person that holds a Residual Certificate as a nominee
for another person may be required to furnish the REMIC Pool, in a manner to
be provided in Treasury regulations, the name and address of such other
person and other information.
NON-REMIC CERTIFICATES
If no REMIC election is made, the Trust Fund may either elect to be
treated as a "financial asset securitization investment trust" ("FASIT") or
qualify as a grantor trust. The Prospectus Supplement for each Series of
Certificates for which no REMIC election is made will address the material
federal income tax consequences of an investment in such Certificates.
STATE TAX CONSIDERATIONS
In addition to the Federal income tax consequences described in "FEDERAL
INCOME TAX CONSEQUENCES," potential investors should consider the state
income tax consequences of the acquisition, ownership, and disposition of the
Certificates. State income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport to describe
any aspect of the income tax laws of any state. Therefore, potential
investors should consult their own tax advisors with respect to the various
state tax consequences of an investment in the Certificates.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on employee benefit plans subject to ERISA
("ERISA Plans") and prohibits certain transactions between ERISA Plans and
persons who are parties in interest (as defined under ERISA) ("parties in
interest") with respect to such Plans. The Code prohibits a similar set of
transactions between certain plans ("Code Plans," and together with ERISA
Plans, "Plans") and persons who are disqualified persons (as defined in the
Code) with respect to Code Plans.
Investments by ERISA Plans and entities the assets of which are deemed to
include plan assets are subject to ERISA's general fiduciary requirements,
including the requirement of investment prudence and diversification and the
requirement that investments be made in accordance with the documents
governing the ERISA Plan. Before investing in a Certificate, an ERISA Plan
fiduciary should consider, among other factors, whether to do so is
appropriate in view of the overall investment policy and liquidity needs of
the ERISA Plan. Such fiduciary should especially consider the sensitivity of
the investments to the rate of principal payments (including prepayments) on
the Mortgage Loans, as discussed in the Prospectus Supplement related to a
Series.
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PROHIBITED TRANSACTIONS
Section 406 of ERISA and Section 4975 of the Code prohibit parties in
interest and disqualified persons with respect to ERISA Plans and Code Plans
from engaging in certain transactions involving such Plans and their assets
unless a statutory or administrative exemption applies to the transaction.
Section 4975 of the Code and Sections 502(i) and 502(l) of ERISA provide for
the imposition of certain excise taxes and civil penalties on certain persons
that engage or participate in such prohibited transactions. The Depositor,
the Master Servicer, the Special Servicer, if any, the Trustee or certain
affiliates thereof might be considered or might become parties in interest or
disqualified persons with respect to an ERISA Plan or a Code Plan. If so, the
acquisition or holding of Certificates by or on behalf of such Plan could be
considered to give rise to a "prohibited transaction" within the meaning of
ERISA and/or the Code unless an administrative exemption described below or
some other exemption is available.
Special caution should be exercised before the assets of a Plan are used
to purchase a Certificate if, with respect to such assets, the Depositor, the
Master Servicer, the Special Servicer, if any, the Trustee or an affiliate
thereof either: (a) has investment discretion with respect to the investment
of such assets of such Plan; or (b) has authority or responsibility to give,
or regularly gives investment advise with respect to such assets for a fee
and pursuant to an agreement or understanding that such advice will serve as
a primary basis for investment decisions with respect to such assets and that
such advice will be based on the particular investment needs of the Plan.
Further, if the assets included in a Trust Fund were deemed to constitute
"plan assets," it is possible that an ERISA Plan's investment in the
Certificates might be deemed to constitute a delegation, under ERISA, of the
duty to manage plan assets by the fiduciary deciding to invest in the
Certificates, and certain transactions involved in the operation of the Trust
Fund might be deemed to constitute prohibited transactions under ERISA and/or
the Code. Neither ERISA nor the Code define the term "plan assets."
The U.S. Department of Labor (the "Department") has issued regulations
(the "Regulations") concerning whether or not a Plan's assets would be deemed
to include an interest in the underlying assets of an entity (such as the
Trust Fund) for purposes of the reporting and disclosure and general
fiduciary responsibility provisions of ERISA, as well as for the prohibited
transaction provisions of ERISA and the Code, if the Plan acquires an "equity
interest" (such as a Certificate) in such an entity.
Certain exceptions are provided in the Regulations whereby an investing
Plan's assets would be deemed merely to include its interest in the
Certificates instead of being deemed to include an interest in the assets of
the Trust Fund. However, it cannot be predicted in advance nor can there be a
continuing assurance whether such exceptions may be met, because of the
factual nature of certain of the rules set forth in the Regulations. For
example, one of the exceptions in the Regulations states that the underlying
assets of an entity will not be considered "plan assets" if less than 25% of
the value of all classes of equity interest are held by "benefit plan
investors," which are defined as ERISA Plans, Code Plans, and employee
benefit plans not subject to ERISA (for example, governmental plans), but
this exemption is tested immediately after each acquisition of an equity
interest in the entity whether upon initial issuance or in the secondary
market.
Pursuant to the Regulations, if the assets of the Trust Fund were deemed
to be plan assets by reason of a Plan's investment in any Certificates, such
plan assets would include an undivided interest in the Mortgage Loans, the
mortgages underlying the Mortgage Loans and any other assets held in the
Trust Fund. Therefore, because the Mortgage Loans and other assets held in
the Trust Fund may be deemed to be the assets of each Plan that purchases
Certificates, in the absence of an exemption, the purchase, sale or holding
of Certificates of any Series or Class by a Plan might result in a prohibited
transaction and the imposition of civil penalties or excise taxes. The
Department has issued administrative exemptions from application of certain
prohibited transaction restrictions of ERISA and the Code to several
underwriters of mortgage-backed securities (each, an "Underwriter's
Exemption"). Such an Underwriter's Exemption can only apply to
mortgage-backed securities which, among other conditions, are sold in an
offering with respect to which such underwriter serves as the sole or a
managing underwriter, or as a selling or placement agent. If such an
Underwriter's Exemption might be applicable to a Series of Certificates, the
related Prospectus Supplement will refer to such possibility.
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In considering an investment in the Offered Certificates, a Plan fiduciary
should also consider the availability of prohibited transaction exemptions
promulgated by the DOL including, among others, Prohibited Transaction Class
Exemption ("PTCE") 75-1, which exempts certain transactions involving Plans
and certain broker-dealers, reporting dealers and banks; PTCE 90-1, which
exempts certain transactions between insurance company separate accounts and
Parties in Interest; PTCE 91-38, which exempts certain transactions between
bank collective investment funds and Parties in Interest; PTCE 84-14, which
exempts certain transactions effected on behalf of a Plan by a "qualified
professional asset manager"; PTCE 95-60, which exempts certain transactions
between insurance company general accounts and Parties in Interest; and PTCE
96-23, which exempts certain transactions effected on behalf of a Plan by an
"in-house asset manager." There can be no assurance that any of these class
exemptions will apply with respect to any particular Plan investment in the
Certificates or, even if it were deemed to apply, that any exemption would
apply to all prohibited transactions that may occur in connection with such
investment. The Prospectus Supplement with respect to a series of
Certificates may contain additional information regarding the availability of
other exemptions with respect to the Certificates offered thereby.
INSURANCE COMPANY GENERAL ACCOUNTS
Section III of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")
exempts from the application of the prohibited transaction provisions of
Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code
transactions in connection with the servicing, management and operation of a
trust (such as the Trust) in which an insurance company general account has
an interest as a result of its acquisition of certificates issued by the
trust, provided that certain conditions are satisfied. If these conditions
are met, insurance company general accounts would be allowed to purchase
certain Classes of Certificates which do not meet the requirements of the
Exemptions solely because they (i) are subordinated to other Classes of
Certificates in the Trust and/or (ii) have not received a rating at the time
of the acquisition in one of the three highest rating categories from S&P,
Moody's, DCR or Fitch. All other conditions of the Exemptions would have to
be satisfied in order for PTCE 95-60 to be available. Before purchasing such
Class of Certificates, an insurance company general account seeking to rely
on Section III of PTCE 95-60 should itself confirm that all applicable
conditions and other requirements have been satisfied.
The Small Business Job Protection Act of 1996 added a new Section 401(c)
to ERISA, which provides certain exemptive relief from the provisions of Part
4 of Title I of ERISA and Section 4975 of the Code, including the prohibited
transaction restrictions imposed by ERISA and the related excise taxes
imposed by the Code, for transactions involving an insurance company general
account. Pursuant to Section 401(c) of ERISA, the DOL is required to issue
final regulations ("401(c) Regulations") no later than December 31, 1997
which are to provide guidance for the purpose of determining, in cases where
insurance policies supported by an insurer's general account are issued to or
for the benefit of a Plan on or before December 31, 1998, which general
account assets constitute Plan Assets. On December 22, 1997, the DOL proposed
such regulations. Section 401(c) of ERISA generally provides that, until the
date which is 18 months after the 401(c) Regulations become final, no person
shall be subject to liability under Part 4 of Title I of ERISA and Section
4975 of the Code on the basis of a claim that the assets of an insurance
company general account constitute Plan Assets, unless (i) as otherwise
provided by the Secretary of Labor in the 401(c) Regulations to prevent
avoidance of the regulations or (ii) an action is brought by the Secretary of
Labor for certain breaches of fiduciary duty which would also constitute a
violation of federal or state criminal law. Any assets of an insurance
company general account which support insurance policies issued to a Plan
after December 31, 1998 or issued to Plans on or before December 31, 1998 for
which the insurance company does not comply with the 401(c) Regulations may
be treated as Plan Assets. In addition, because Section 401(c) does not
relate to insurance company separate accounts, separate account assets are
still treated as Plan Assets of any Plan invested in such separate account.
Insurance companies contemplating the investment of general account assets in
the Offered Certificates should consult with their legal counsel with respect
to the applicability of Section 401(c) of ERISA, including the general
account's ability to continue to hold the Offered Certificates after the date
which is 18 months after the date the 401(c) Regulations become final.
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UNRELATED BUSINESS TAXABLE INCOME -- RESIDUAL INTERESTS
The purchase of a Certificate evidencing an interest in the Residual
Interest in a Series that is treated as a REMIC by any person, including any
employee benefit plan that is exempt from federal income tax under Code
Section 501(a), including most varieties of ERISA Plans, may give rise to
"unrelated business taxable income" as described in Code Sections 511-515 and
860E. Further, prior to the purchase of an interest in a Residual Interest, a
prospective transferee may be required to provide an affidavit to a
transferor that it is not, nor is it purchasing an interest in a Residual
Interest on behalf of, a "Disqualified Organization," which term as defined
above includes certain tax-exempt entities not subject to Code Section 511,
such as certain governmental plans, as discussed above under "FEDERAL INCOME
TAX CONSEQUENCES -- REMIC Certificates -- Income from Residual Certificates"
and "--Transfers of Residual Certificates."
DUE TO THE COMPLEXITY OF THESE RULES AND THE PENALTIES IMPOSED UPON
PERSONS INVOLVED IN PROHIBITED TRANSACTIONS, IT IS PARTICULARLY IMPORTANT
THAT INDIVIDUALS RESPONSIBLE FOR INVESTMENT DECISIONS WITH RESPECT TO ERISA
PLANS AND CODE PLANS CONSULT WITH THEIR COUNSEL REGARDING THE CONSEQUENCES
UNDER ERISA AND/OR THE CODE OF THEIR ACQUISITIONS AND OWNERSHIP OF
CERTIFICATES.
THE SALE OF CERTIFICATES TO A PLAN IS IN NO RESPECT A REPRESENTATION BY
THE SELLER OR THE APPLICABLE UNDERWRITER THAT THIS INVESTMENT MEETS ALL
RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY PLANS GENERALLY OR
ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR PLANS
GENERALLY OR ANY PARTICULAR PLAN.
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LEGAL INVESTMENT
THE SECONDARY MORTGAGE MARKET ENHANCEMENT ACT
The Prospectus Supplement for each Series will identify those Classes of
Offered Certificates, if any, which constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984
("SMMEA"). The appropriate characterization of those Offered Certificates not
qualifying as "mortgage related securities" ("Non-SMMEA Certificates") under
various legal investment restrictions, and thus the ability of investors
subject to these restrictions to purchase such Offered Certificates, may be
subject to significant interpretive uncertainties. Accordingly, investors
whose investment authority is subject to legal restrictions should consult
their own legal advisors to determine whether and to what extent the
Non-SMMEA Certificates constitute legal investments for them.
A Class or Classes of Offered Certificates of a Series will constitute
"mortgage related securities" ("SMMEA Certificates") for so long as they (i)
are rated in one of the two highest rating categories by at least one
nationally recognized statistical rating organization and (ii) are part of a
Series evidencing interests in a Trust Fund consisting of loans secured by
first liens on real property and originated by certain types of originators
as specified in SMMEA. As "mortgage related securities," the SMMEA
Certificates will constitute legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business
entities (including, but not limited to, state-chartered savings banks,
commercial banks, savings and loan associations and insurance companies, as
well as trustees and state government employee retirement systems) created
pursuant to or existing under the laws of the United States or of any state
(including the District of Columbia and Puerto Rico) whose authorized
investments are subject to state regulation to the same extent that, under
applicable law, obligations issued by or guaranteed as to principal and
interest by the United States or any agency or instrumentality thereof
constitute legal investments for such entities. Pursuant to SMMEA, a number
of states enacted legislation, on or before the October 3, 1991 cutoff for
such enactments, limiting to varying extents the ability of certain entities
(in particular, insurance companies) to invest in "mortgage related
securities" secured by liens on residential, or mixed residential and
commercial properties, in most cases by requiring the affected investors to
rely solely upon existing state law, and not SMMEA. Pursuant to Section 347
of the Riegle Community Development and Regulatory Improvement Act of 1994,
which amended the definition of "mortgage related security" to include, in
relevant part, Offered Certificates satisfying the rating and qualified
originator requirements for "mortgage related securities," but evidencing
interests in a Trust Fund consisting, in whole or in part, of first liens on
one or more parcels of real estate upon which are located one or more
commercial structures, states were authorized to enact legislation, on or
before September 23, 2001, specifically referring to Section 347 and
prohibiting or restricting the purchase, holding or investment by
state-regulated entities in such types of Offered Certificates. Accordingly,
the investors affected by any such state legislation, when and if enacted,
will be authorized to invest in SMMEA Certificates only to the extent
provided in such legislation.
SMMEA also amended the legal investment authority of federally chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in "mortgage
related securities" without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in such securities, and
national banks may purchase such securities for their own account without
regard to the limitations generally applicable to investment securities set
forth in 12 U.S.C. Section 24 (Seventh), subject in each case to such
regulations as the applicable federal regulatory authority may prescribe. In
this connection, effective December 31, 1996, the Office of the Comptroller
of the Currency (the "OCC") has amended 12 C.F.R. Part 1 to authorize
national banks to purchase and sell for their own account, without limitation
as to a percentage of the bank's capital and surplus (but subject to
compliance with certain general standards concerning "safety and soundness"
and retention of credit information in 12 C.F.R. Section 1.5), certain "Type
IV securities," defined in 12 C.F.R. Section 1.2(l) to include certain
"commercial mortgage-related securities" and "residential mortgage-related
securities." As so defined, "commercial mortgage-related security" and
"residential mortgage-related security" mean, in relevant part, "mortgage
related security" within the meaning of SMMEA, provided that, in the case of
a "commercial mortgage-related security," it "represents ownership of a
promissory note or certificate of interest or participation that is directly
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secured by a first lien on one or more parcels of real estate upon which one
or more commercial structures are located and that is fully secured by
interests in a pool of loans to numerous obligors." In the absence of any
rule or administrative interpretation by the OCC defining the term "numerous
obligors," no representation is made as to whether any Class of Offered
Certificates will qualify as "commercial mortgage-related securities," and
thus as "Type IV securities," for investment by national banks. Federal
credit unions should review the National Credit Union Administration ("NCUA")
Letter to Credit Unions No. 96, as modified by Letter to Credit Unions No.
108, which includes guidelines to assist federal credit unions in making
investment decisions for mortgage related securities. The NCUA has adopted
rules, codified at 12 C.F.R. Part 703, which permit federal credit unions to
invest in "mortgage related securities." Upon certain limited circumstances,
other than stripped mortgage related securities, residual interests in
mortgage related securities, and commercial mortgage related securities,
unless the credit union has obtained written approval from the NCUA to
participate in the "investment pilot program" described in 12 C.F.R. 703.140.
All depository institutions considering an investment in the Offered
Certificates should review the "Supervisory Policy Statement on Securities
Activities" dated January 28, 1992, as revised April 15, 1994 (the "Policy
Statement") of the Federal Financial Institutions Examination Council. The
Policy Statement, which has been adopted by the Board of Governors of the
Federal Reserve System, the FDIC, the OCC and the Office of Thrift
Supervision, and by the NCUA (with certain modifications), prohibits
depository institutions from investing in certain "high-risk mortgage
securities" (including Securities such as certain Series, Classes or
subclasses of the Certificates), except under limited circumstances, and sets
forth certain investment practices deemed to be unsuitable for regulated
institutions. On September 29, 1997, the FFIEC released for public comment a
proposed "Supervisory Policy Statement on Investment Securities and End-User
Derivatives Activities" (the "1997 Statement"), which would replace the
Policy Statement. As proposed, the 1997 Statement would delete the specific
"high-risk mortgage securities" tests, and substitute general guidelines
which depository institutions should follow in managing risks (including
market, credit, liquidity, operational (transactional), and legal risks)
applicable to all securities (including mortgage pass-through securities and
mortgage-derivative products) used for investment purposes.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any Offered
Certificates, as certain Series, Classes or subclasses may be deemed
unsuitable investments, or may otherwise be restricted, under such rules,
policies or guidelines (in certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not
limited to, "prudent investor" provisions, percentage-of-assets limits,
provisions which may restrict or prohibit investment in securities which are
not "interest-bearing" or "income-paying," and, with regard to any
Certificates issued in book-entry form, provisions which may restrict or
prohibit investments in securities which are issued in book-entry form.
Except as to the status of SMMEA Certificates identified in the Prospectus
Supplement for a Series as "mortgage related securities" under SMMEA, no
representation is made as to the proper characterization of the Offered
Certificates for legal investment or financial institution regulatory
purposes or other purposes, or as to the ability of particular investors to
purchase Offered Certificates under applicable legal investment restrictions.
The uncertainties described above (and any unfavorable future determinations
concerning legal investment or financial institution regulatory
characteristics of the Offered Certificates) may adversely affect the
liquidity of the Offered Certificates.
Accordingly, all investors whose investment activities are subject to
legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their legal advisors in
determining whether and to what extent the Offered Certificates of any class
constitute legal investments or are subject to investment, capital or other
restrictions and, if applicable, whether SMMEA has been overridden in any
jurisdiction relevant to such investor.
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THE APPRAISAL REGULATIONS
Pursuant to Title XI of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA"), the Board of Governors of the Federal
Reserve System, the OCC, the Federal Deposit Insurance Corporation and the
Office of Thrift Supervision have adopted regulations (the "Appraisal
Regulations") applicable to bank holding companies and their non-bank
subsidiaries, state-chartered banks that are members of the Federal Reserve
System, national banks, state-chartered banks that are not members of the
Federal Reserve System and savings associations, respectively. The Appraisal
Regulations, which are substantially similar, although not identical, for
each agency, generally require the affected institutions and entities to
obtain appraisals performed by state-certified or state-licensed appraisers
(each, a "FIRREA Appraisal") in connection with a wide range of real
estate-related transactions, including the purchase of interests in loans
secured by real estate in the form of mortgage-backed securities, unless an
exemption applies. With respect to purchases of mortgage-backed securities,
the Appraisal Regulations provide for an exemption from the requirement of
obtaining new FIRREA Appraisals for the properties securing the underlying
loans so long as at the time of origination each such loan was the subject of
either a FIRREA Appraisal, or, if a FIRREA Appraisal was not required, met
the appraisal requirements of the appropriate regulator.
No assurance can be given that each of the underlying Mortgage Loans in a
Mortgage Pool will have been the subject of a FIRREA Appraisal or, if a
FIRREA Appraisal was not required, an appraisal that conformed to the
requirements of the appropriate regulator at origination. To the extent
available, information will be provided in the Prospectus Supplement with
respect to appraisals on the Mortgage Loans underlying each Series of
Certificates. However, such information may not be available on every
Mortgage Loan. Prospective investors that may be subject to the Appraisal
Regulations are advised to consult with their legal advisors and/or the
appropriate regulators with respect to the effect of such regulations on
their ability to invest in a particular Series of Certificates.
PLAN OF DISTRIBUTION
The Certificates offered hereby and by means of the related Prospectus
Supplements will be offered through one or more of the methods described
below. The Prospectus Supplement with respect to each such Series of
Certificates will describe the method of offering of such Series of
Certificates, including the initial public offering or purchase price of each
Class of Certificates or the method by which such price will be determined
and the net proceeds to the Seller of such sale.
The Offered Certificates will be offered through the following methods
from time to time and offerings may be made concurrently through more than
one of these methods or an offering of a particular Series of Certificates
may be made through a combination of two or more of these methods:
1. By negotiated firm commitment underwriting and public reoffering by
underwriters specified in the applicable Prospectus Supplement;
2. By placements by the Seller with investors through dealers; and
3. By direct placements by the Seller with investors.
Unless otherwise specified in the related Prospectus Supplement, if
underwriters are used in a sale of any Offered Certificates, such
Certificates will be acquired by the underwriters for their own account and
may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying
prices to be determined at the time of sale or at the time of commitment
thereof. Firm commitment underwriting and public reoffering by underwriters
may be done through underwriting syndicates or through one or more firms
acting alone. The specific managing underwriter or underwriters, if any, with
respect to the offer and sale of the Offered Certificates of a particular
Series will be set forth on the cover of the related Prospectus Supplement
and the members of the underwriting syndicate, if any, will be named in such
Prospectus Supplement. If so specified in the related Prospectus Supplement,
the Offered Certificates will be distributed in a firm commitment
underwriting, subject to the terms and conditions of the underwriting
agreement, by Goldman, Sachs & Co. acting as underwriter with other
underwriters, if any, named therein. The Seller is an affiliate of
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Goldman, Sachs & Co. See "The Seller" herein. The Prospectus Supplement will
describe any discounts and commissions to be allowed or paid by the Seller to
the underwriters, any other items constituting underwriting compensation and
any discounts and commissions to be allowed or paid to the dealers. The
obligations of the underwriters will be subject to certain conditions
precedent. The underwriters with respect to a sale of any Class of
Certificates will be obligated to purchase all such Certificates if any are
purchased. The Seller and, if specified in the Prospectus Supplement, a
selling Certificateholder will agree to indemnify the underwriters against
certain civil liabilities, including liabilities under the Act or will
contribute to payments required to be made in respect thereof.
In the ordinary course of business, Goldman, Sachs & Co., or its
affiliates, and the Seller may engage in various securities and financing
transactions, including repurchase agreements to provide interim financing of
the Seller's mortgage loans pending the sale of such mortgage loans or
interests therein, including the Certificates.
If specified in the Prospectus Supplement relating to a Series of
Certificates, a holder of one or more Classes of Offered Certificates that is
required to deliver a prospectus in connection with the offer and sale
thereof may offer and sell, pursuant to this Prospectus and a related
Prospectus Supplement, such Classes directly, through one or more
underwriters to be designated at the time of the offering of such
Certificates or through dealers acting as agent and/or principal. The
specific managing underwriter or underwriters, if any, with respect to any
such offer and sale of Certificates by unaffiliated parties will be set forth
on the cover of the Prospectus Supplement applicable to such Certificates and
the members of the underwriting syndicate, if any, will be named in such
Prospectus Supplement, and the Prospectus Supplement will describe any
discounts and commissions to be allowed or paid by such unaffiliated parties
to the underwriters, any other items constituting underwriting compensation
and any discounts and commissions to be allowed or paid to any dealers
participating in such offering. Any offerings described in this paragraph may
be restricted in the manner specified in such Prospectus Supplement. Such
transactions may be effected at market prices prevailing at the time of sale,
at negotiated prices or at fixed prices. The underwriters and dealers
participating in such selling Certificateholder's offering of such
Certificates may receive compensation in the form of underwriting discounts
or commissions from such selling Certificateholder, and such dealers may
receive commissions from the investors purchasing such Certificates for whom
they may act as agent (which discounts or commissions will not exceed those
customary in those types of transactions involved). Any dealer that
participates in the distribution of such Certificates may be deemed to be an
"underwriter" within the meaning of the Act, and any commissions and
discounts received by such dealer and any profit on the resale of such
Certificates by such dealer might be deemed to be underwriting discounts and
commissions under the Act.
If the Certificates of a Series are offered other than through
underwriters, the related Prospectus Supplement will contain information
regarding the nature of such offering and any agreements to be entered into
between the Seller and dealers and/or the Seller and the purchasers of such
Certificates. Purchasers of Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be
"underwriters" within the meaning of the Act in connection with reoffers and
sales by them of Certificates. Holders of Certificates should consult with
their legal advisors in this regard prior to any such reoffer or sale.
The place and time of delivery for each Series of Certificates offered
hereby and by means of the related Prospectus Supplement will be set forth in
the Prospectus Supplement with respect to such series.
LEGAL MATTERS
Certain legal matters relating to the Certificates offered hereby will be
passed upon for the Seller by Cleary, Gottlieb, Steen & Hamilton or by other
counsel identified in the related Prospectus Supplement.
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- -------------------------------------------------------------------------------
INSTRUCTIONS TO INSTALL CD-ROM FOR GRANDE LOANTM/SM SECURITIZATION
- -------------------------------------------------------------------------------
ACCESSING APPRAISALS IN ADOBE ACROBAT(1) PDF (PORTABLE DOCUMENT FORMAT)
FOR USERS WITH PRE-INSTALLED ACROBAT READERS
o Insert the disk in the CD-ROM drive and double-click on your CD-ROM drive
icon.
o Please note that the file index.pdf has a listing of all mortgage loans.
Double click on the file index.pdf. Acrobat Reader will launch and display
an index page with a table of contents of the CD-ROM.
o Within index.pdf click on the name of the mortgage loan you wish to
review.
o Acrobat Reader will display the contents of the file (appraisal) on the
screen.
o Once in the Acrobat Reader, use the "Help" menu, which is located in the
upper right hand corner of the screen, to learn about features of the
Reader.
FOR USERS WHO NEED TO INSTALL THE ACROBAT READER
o Insert the disk in the CD-ROM drive and double-click on your CD-ROM drive
icon.
o Double click on the "Acrobat" folder.
o If you are a Windows 95 or Windows NT 4.0 user, double-click on the
"Win95" folder. Once inside the folder, double-click on the "Ar32e30.exe"
file (the Acrobat Reader installation program). Follow the instructions of
the installation program.
o If you are a Windows 3.11 user, double-click on the "Win31" folder. Once
inside the folder, double-click on the "Ar16e30.exe" file (the Acrobat
Reader installation program). Follow the instructions of the installation
program.
o Once your reader is installed, go back to the CD-ROM. Please note that the
file index.pdf has a listing of all mortgage loans. Double click on the
file index.pdf. Acrobat Reader will launch and display an index page with
a table of contents of the CD-ROM.
o Within index.pdf click on the name of the mortgage loan you wish to
review.
o Acrobat Reader will display the contents of the file (appraisal) on
screen.
o Once in the Acrobat Reader, use the "Help" menu, which is located in the
upper right hand corner of the screen, to learn about features of the
Reader.
- ------------
(1) Adobe and Acrobat are registered trademarks of Adobe Systems
Incorporated.
<PAGE>
THIS CD ROM CONTAINS AN ELECTRONIC VERSION OF APPRAISALS FOR THE MORTGAGED
PROPERTIES IN PDF FORMAT AND FORMS PART OF THE PAPER VERSION OF THE
PROSPECTUS SUPPLEMENT. THE INFORMATION CONTAINED IN THIS CD ROM DOES NOT
APPEAR ELSEWHERE IN PAPER FORM IN THIS PROSPECTUS SUPPLEMENT AND MUST BE
CONSIDERED AS PART OF, AND TOGETHER WITH, THE INFORMATION CONTAINED ELSEWHERE
IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THE INFORMATION CONTAINED
IN THIS CD ROM HAS BEEN FILED BY THE SELLER WITH THE SECURITIES AND EXCHANGE
COMMISSION AS PART OF A CURRENT REPORT ON FORM 8-K, WHICH IS INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT, AND IS ALSO AVAILABLE THROUGH THE
PUBLIC REFERENCE BRANCH OF THE SECURITIES AND EXCHANGE COMMISSION. DEFINED
TERMS USED IN THIS CD ROM BUT NOT OTHERWISE DEFINED THEREIN SHALL HAVE THE
RESPECTIVE MEANINGS ASSIGNED TO THEM IN THE PAPER PORTION OF THE PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS. ALL OF THE INFORMATION CONTAINED IN THIS CD
ROM IS SUBJECT TO THE SAME LIMITATIONS AND QUALIFICATIONS CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. PROSPECTIVE INVESTORS ARE STRONGLY
URGED TO READ THE PAPER PORTION OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS IN ITS ENTIRETY PRIOR TO ACCESSING THIS CD ROM. IF THIS CD ROM WAS
NOT RECEIVED IN A SEALED PACKAGE, THERE CAN BE NO ASSURANCES THAT IT REMAINS
IN ITS ORIGINAL FORMAT AND SHOULD NOT BE RELIED UPON FOR ANY PURPOSE.
PROSPECTIVE INVESTORS MAY CONTACT J. THEODORE BORTER OF GOLDMAN, SACHS & CO.
AT (212) 902-3857 TO RECEIVE AN ORIGINAL COPY OF THE CD ROM. UPON OPENING THE
APPRAISAL FILE CONTAINED ON THIS CD ROM, A LEGEND WILL BE DISPLAYED, WHICH
SHOULD BE READ CAREFULLY.
THIS DISKETTE CONTAINS LOAN CHARACTERISTICS/SCHEDULE OF ADDITIONAL
INFORMATION FOR MORTGAGE LOANS IN MICROSOFT EXCEL(1) VERSION 7.0 FORMAT. THE
INFORMATION CONTAINED IN THIS DISKETTE APPEARS ELSEWHERE IN PAPER FORM IN
THIS PROSPECTUS SUPPLEMENT AND MUST BE CONSIDERED AS PART OF, AND TOGETHER
WITH, THE INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS. DEFINED TERMS USED IN THIS DISKETTE BUT NOT OTHERWISE DEFINED
THEREIN SHALL HAVE THE RESPECTIVE MEANINGS ASSIGNED TO THEM IN THE PAPER
PORTION OF THE PROSPECTUS SUPPLEMENT AND PROSPECTUS. ALL OF THE INFORMATION
CONTAINED IN THIS DISKETTE IS SUBJECT TO THE SAME LIMITATIONS AND
QUALIFICATIONS CONTAINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS. PROSPECTIVE INVESTORS ARE STRONGLY URGED TO READ THE PAPER
PORTION OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN ITS ENTIRETY
PRIOR TO ACCESSING THIS DISKETTE. IF THIS DISKETTE WAS NOT RECEIVED IN A
SEALED PACKAGE, THERE CAN BE NO ASSURANCES THAT IT REMAINS IN ITS ORIGINAL
FORMAT AND SHOULD NOT BE RELIED UPON FOR ANY PURPOSE. PROSPECTIVE INVESTORS
MAY CONTACT J. THEODORE BORTER OF GOLDMAN, SACHS & CO. AT (212) 902-3857 TO
RECEIVE AN ORIGINAL COPY OF THE DISKETTE. UPON OPENING THE MICROSOFT EXCEL
FILE CONTAINED ON THIS DISKETTE, A LEGEND WILL BE DISPLAYED, WHICH SHOULD BE
READ CAREFULLY.
- ------------
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
===============================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS
PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE SELLER OR THE TRUST FUND SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
--------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Executive Summary..................................... S-5
Summary of Prospectus Supplement...................... S-9
Risk Factors.......................................... S-40
Mortgage Pool Characteristics......................... S-65
Description of the Mortgage Pool and the Underlying
Mortgaged Properties................................. S-77
Description of the Offered Certificates............... S-243
Yield, Prepayment and Maturity Considerations ........ S-257
The Pooling Agreement................................. S-272
Certain Legal Aspects of the Mortgage Loans .......... S-296
Use of Proceeds....................................... S-298
Federal Income Tax Consequences....................... S-298
ERISA Considerations.................................. S-300
Legal Investment...................................... S-302
Underwriting.......................................... S-302
Experts............................................... S-303
Validity of Offered Certificates...................... S-303
Ratings............................................... S-303
Index of Significant Definitions...................... S-305
Exhibit A--Representations and Warranties............. A-1
Exhibit B--WAC Rates.................................. B-1
Exhibit C--Form of Reports to Certificateholders ..... C-1
Annex A--Mortgaged Properties Characteristics
Collateral and Structural Term Sheets ................
PROSPECTUS
Prospectus Supplement................................. 2
Additional Information................................ 3
Incorporation of Certain Information by Reference .... 3
Risk Factors.......................................... 4
The Seller............................................ 6
Use of Proceeds....................................... 7
Description of the Certificates....................... 7
The Mortgage Pools.................................... 15
Servicing of the Mortgage Loans....................... 19
Credit Enhancement.................................... 25
Swap Agreement........................................ 27
Yield Considerations.................................. 28
Certain Legal Aspects of the Mortgage Loans .......... 30
Federal Income Tax Consequences....................... 46
State Tax Considerations.............................. 56
ERISA Considerations.................................. 56
Legal Investment...................................... 60
Plan of Distribution.................................. 62
Legal Matters......................................... 63
</TABLE>
UNTIL AUGUST 12, 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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<PAGE>
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$1,317,558,000
GS MORTGAGE
SECURITIES CORPORATION II,
SELLER
COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 1998-GL II
<TABLE>
<CAPTION>
<S> <C>
CLASS A-1 CERTIFICATES ... $ 278,000,000
CLASS A-2 CERTIFICATES ... $ 694,315,000
CLASS X CERTIFICATES .... $1,148,459,000
CLASS B CERTIFICATES .... $ 91,595,000
CLASS C CERTIFICATES .... $ 84,549,000
CLASS D CERTIFICATES .... $ 98,641,000
CLASS E CERTIFICATES .... $ 70,458,000
</TABLE>
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[GRAPHIC OMITTED]
GOLDMAN, SACHS & CO.
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