SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report: February 2, 1999
(Date of earliest event reported)
NationsLink Funding Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 333-66805 56-1950039
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(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
NationsBank Corporate Center, 100 North Tryon Street, Charlotte, NC 28255
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (704) 386-2400
<PAGE>
ITEM 5. OTHER EVENTS.
Attached are certain structural and collateral term sheets (the
"Term Sheets") furnished to the Registrant by NationsBanc Montgomery Securities
LLC (the "Underwriter"), the underwriter in respect of the Registrant's proposed
offering of Commercial Mortgage Pass-Through Certificates, Series 1999-LTL-1
(the "Certificates"). The Certificates will be offered pursuant to a Prospectus
and related Prospectus Supplement (together, the "Prospectus"), which will be
filed with the Commission pursuant to Rule 424 under the Securities Act of 1933,
as amended (the "Act"). The Certificates will be registered pursuant to the Act
under the Registrant's Registration Statement on Form S-3 (No. 333-66805) (the
"Registration Statement"). The Registrant hereby incorporates the Term Sheets by
reference in the Registration Statement.
The Term Sheets were prepared solely by the Underwriter, and the
Registrant did not prepare or participate in the preparation of the Collateral
Term Sheets and Structural Term Sheets.
Any statement or information contained in the Term Sheets shall be
modified and superseded for purposes of the Prospectus and the Registration
Statement by statements or information contained in the Prospectus.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
Exhibit 99 Term Sheets.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on behalf of the
Registrant by the undersigned thereunto duly authorized.
NATIONSLINK FUNDING CORPORATION
By: /s/ James E. Naumann
---------------------------------
Name: James E. Naumann
Title: Senior Vice President
Date: February 2, 1999
<PAGE>
Exhibit Index
Item 601(a) of
Regulation S-K
Exhibit No. Description Page
- ----------------- ----------- -----
99 Term Sheets
CONFIDENTIAL
NATIONSLINK FUNDING CORPORATION
COMMERCIAL LOAN
PASS-THROUGH CERTIFICATES
SERIES 1999-LTL-1
$493,000,000 (APPROXIMATE)
FIRST QUARTER 1999
<PAGE>
NOTICE TO RECIPIENTS
This material is being provided to you by NationsBanc Montgomery
Securities LLC ("NMS") for your private information only, and relates only to
certain credit lease-backed and long term conduit real estate mortgage loans
(the "Loans"). Although this material is based on information NMS considers
reliable, neither NMS nor any of their affiliates make any representation that
it is accurate or complete, and it should not be relied upon as such.
Information contained in this material is current as of the date appearing on
this material only. The information contained in this material may be based on
assumptions regarding market conditions and other matters reflected herein.
Neither NMS nor any of their affiliates make any representation 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.
By accepting this material, you agree that you will not distribute or
provide this material to any other person. You are encouraged to conduct your
own due diligence with respect to the Loans, and reference is made to such
actual loan documents for the terms and conditions of such Loans. Neither NMS
nor any of their affiliates is soliciting action from you based upon this
material.
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. In the event any of the Loans described
in this material are actually securitized, the securities backed by such Loans
will be offered to you, if at all, only pursuant to a final public prospectus or
private placement memorandum and, in such event, any information in this
material will be superseded in its entirety by the information contained in such
final prospectus or memorandum. You are urged to read any such final prospectus
or memorandum in its entirety prior to making any investment decision with
regard to securities that may be backed by such Loans.
<PAGE>
DEAL OVERVIEW
o NationsBanc Montgomery Securities LLC ("NMS") will act as lead manager in a
securitization of approximately 110 credit leased backed commercial
mortgage loans, with a projected aggregate principal cutoff balance of
$385,000,000 and 18 long term conduit commercial mortgage loans, with an
aggregate principal cutoff balance of $108,000,000 as of February 1, 1999
(the "Cut-off Date"). It is further expected that this transaction will
settle in early 1999.
o The credit tenant lease loans ("CTL Loans") for this transaction were
originated and underwritten by Capital Lease Funding, L.P. (CLF) and
NationsBank, N.A. ("NationsBank") and are being contributed by CLF, and the
conduit mortgage loans are being contributed by NationsBank. Each mortgage
loan seller will make representations and bear all repurchase obligations
with regard to its loans only.
o Collateral tables appearing in this package set forth anticipated
characteristics of all Loans expected to be included in this transaction in
the aggregate, and separately for CLF (Credit Lease) loans, and NationsBank
(Long Term Conduit) loans.
<PAGE>
PRELIMINARY PROFORMA STRUCTURE DESCRIPTION
<TABLE>
<CAPTION>
PRINCIPAL EXPECTED
EXPECTED APPROXIMATE APPROXIMATE CREDIT EXPECTED REPAYMENT EXPECTED DOLLAR
CLASS RATING CLASS SIZE % OF TOTAL SUPPORT WAL* WINDOW* COUPON PRICE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
S&P/DCR
A-1 AAA/AAA $70,000,000 14.3% 19.5% 3.0 1 - 66 TBD TBD
A-2 AAA/AAA 194,000,000 39.4 19.5 10.0 66 - 163 TBD TBD
A-3 AAA/AAA 132,000,000 26.8 19.5 15.3 163 - 209 TBD TBD
I/O AAA/AAA 493,000,000 19.5 12.4 TBD TBD
B AA/AA 26,000,000 5.3 14.3 17.8 209 - 219 TBD TBD
C A/A 21,000,000 4.3 10.0 18.7 219 - 231 TBD TBD
D BBB/NR 31,000,000 6.3 3.8 20.7 231 - 267 TBD TBD
E BB/NR 11,000,000 2.3 1.5 22.7 267 - 279 TBD TBD
F B/NR 4,000,000 .8 .8 23.5 279 - 285 TBD TBD
G UR 4,000,000 .8 24.2 285 - 300 TBD TBD
TOTAL/WA $493,000,000 100.0% 100.0%
</TABLE>
* Assumes 0% CPR
o Principal payments will be applied to each class entitled thereto on a
sequential basis.
<PAGE>
DEAL SUMMARY
SECURITIES DESCRIPTION
TRANSACTION: NationsLink Funding Corporation Long Term Commercial Loan
Pass-Through Certificates;
TYPE OF OFFERING: Public Bond Offering on Certificates rated AA and above,
Private Placement with resale under Rule 144A for
Certificates rated below AA;
CUT-OFF DATE: February 1, 1999;
TAX ELECTION: REMIC;
BOND COUPONS: TBD;
INTEREST
CALCULATION: 30/360 basis;
LOSSES: Any losses will be applied to the most subordinate class of
Certificates then outstanding.
<PAGE>
DEAL SUMMARY
PARTICIPANTS
DEPOSITOR: NationsLink Funding Corporation;
LOAN SELLERS: Capital Lease Funding, L. P., and NationsBank, N.A.;
PLACEMENT AGENT: NationsBanc Montgomery Securities LLC;
SERVICER: Midland Loan Services, Inc.
SPECIAL SERVICER: Midland Loan Services, Inc.
TRUSTEE: LaSalle National Bank, which also serves as back-up
servicer;
FISCAL AGENT: ABN AMRO Bank N.V.;
LEASE ENHANCEMENT
INSURANCE POLICY
PROVIDER: Lexington Insurance Company (AAA rated subsidiary of AIG)
EXTENDED AMORTIZATION
INSURANCE POLICY
PROVIDER: Columbia Insurance Company (AAA rated subsidiary of
Berkshire Hathaway)
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
Capital Lease Funding, L.P. is a New York-based lender specializing in
originating, underwriting, pooling and financing commercial properties which are
long-term net leased to credit tenants. Such credit tenants generally have a
long-term credit rating from S&P of BBB- or better or carry an Internal Private
Classification of at least BBB- or better from each of S&P and Duff & Phelps
Credit Rating Company. CLF has on a selective basis financed properties having
credit tenants with long term credit ratings from S&P or Internal Private
Classifications of BB- or better, and the pool contains nine such loans.
CLF pioneered the enhancement of net leases with credit tenants to bond type
status. CLF's enhancement mechanisms and underwriting methods have become the de
facto rating agency and industry standards for these types of loans. It
securitized the first multi-credit tenant mortgage pool collateralized by both
bond and bond-type credit tenant leases in February 1997. The $130MM pool for
that transaction included 13 investment grade tenants (rated BBB- or better) and
30 loans, has had no delinquencies or defaults to date. Since 1997, CLF has
financed or committed to finance over $850MM of credit tenant loans ("CTL") with
over 40 credit tenants and has had no defaults to date. All CLF loans are
originated and centrally underwritten by a team of credit lease finance
specialists.
Through its lease enhancement programs, CLF is able to mitigate real estate
event risks in triple and double net leases to ensure that the rent stream which
provides the cash flow for debt service and loan amortization is uninterrupted
by certain real estate or borrower related events.
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
CLF utilizes a broad array of enhancement mechanisms, including reserves,
recourse provisions, specialized insurance with AAA- rated companies and
backstop servicing with AA- rated (minimum) companies, to mitigate specific
event risks and ensure performance of certain borrower/landlord obligations.
With the exception of eight loans which have an approximate total cutoff balance
$57,000,000 which represent 14.8% of the credit lease loans and 11.6% of all
loans in the securitization, all of the Credit Lease Loans fully amortize over
the initial term of the associated credit lease. Any loan structured with an
amortization that exceeds the lease term is insured pursuant to a specialized
insurance policy provided by Columbia Insurance Company which insures payment of
principal and interest on the loan (or prepayment with yield maintenance up to
5%) in the event of a tenant non-renewal and subsequent borrower default.
The underlying mortgaged properties are generally of new construction and are
stand alone.
The weighted average credit rating of the tenants or guarantors securing the CTL
Loans is "A-".
Over half of the leases relating to the CTL loans are guaranteed by a guarantor
in the Retail Drug, Retail Grocery, Food Service or Energy sector.
The top five credit tenants in terms of pool concentration are all public
corporations with long term credit ratings from S&P of BBB+, A-, A, AA- and A,
respectively.
o All numerical information provided herein with respect to the Loans is
provided on an approximate basis and is based on characteristics of the
Loans estimated as of the Cut-Off Date.
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
SUMMARY CHARACTERISTICS
GENERAL
POOL BALANCE $385,000,000
AVERAGE LOAN BALANCE $3,500,000
AVERAGE TENANT/GUARANTOR RATING A-
WTD. AVG. GROSS COUPON 7.46%
WTD. AVG. ORIGINAL TERM TO MATURITY 20 Years 7 Months
WTD. AVG. REMAINING TERM TO MATURITY 19 Years 5 Months
WTD. AVG. ORIGINAL AMORTIZATION TERM 20 Years 7 Months
WTD. AVG. REMAINING AMORTIZATION TERM 19 Years 5 Months
WTD. AVG. DEBT SERVICE COVERAGE 1.05x
WTD. AVG. LOAN-TO-LEASED FEE VALUE 87.3%
WTD. AVG. LOAN-TO-DARK VALUE 114.3%
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
<TABLE>
<CAPTION>
GUARANTOR / TENANT
Number Balance as of % of % of Wtd. Avg. Wtd. Avg. Wtd. Avg.
Credit Of Cut-Off Date Credit Lease Total Pool Original Loan-to-Leased Gross
Tenant / Guarantor Rating* Loans (000's) Pool Balance DSC Fee Value Coupon
Balance
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rite Aid Corporation BBB+ 21 $37,000,000 9.6% 7.5% 1.06x 80.65% 7.58%
CVS Corporation A- 16 35,000,000 9.2 7.2 1.07 84.18 7.62
Koninklijke Ahold, N.V. A 4 32,000,000 8.3 6.5 1.16 86.10 7.36
Home Depot U.S.A., Inc.(1) AA- 3 25,000,000 6.6 5.2 1.00 92.87 7.44
Eckerd Corporation A 12 25,000,000 6.5 5.1 1.04 89.43 7.37
Walgreen Co. A+ 8 24,000,000 6.1 4.8 1.06 82.60 7.11
Circuit City Stores, Inc. IPC-2 3 20,000,000 5.3 4.1 1.01 86.48 8.04
CareGroup, Inc. A 1 20,000,000 5.2 4.0 1.03 84.45 7.25
Blue Cross and Blue Shield of Texas, Inc. A 1 20,000,000 5.1 4.0 1.00 75.60 7.98
Wal-Mart Stores, Inc. AA 2 19,000,000 4.9 3.8 1.01 93.12 7.04
Food Lion, Inc. A- 3 17,000,000 4.5 3.5 1.00 101.60 6.76
Georgia Baptist Health Care System, Inc. IPC-1 1 12,000,000 3.1 2.4 1.00 89.68 8.16
KeyBank National Association A 1 11,000,000 2.8 2.2 1.00 75.86 7.25
The Pep Boys - Manny, Moe & Jack BBB- 5 10,000,000 2.5 1.9 1.01 89.85 7.52
John H. Harland Company IPC-1 1 9,000,000 2.5 1.9 1.01 90.21 8.03
Wegmans Food Markets, Inc. A- 1 8,000,000 2.1 1.7 1.00 81.17 7.50
McDonald's Corporation AA 5 6,000,000 1.4 1.1 1.01 75.15 7.24
The TJX Companies, Inc. BBB+ 1 6,000,000 1.4 1.1 1.03 73.47 7.58
MedPartners, Inc. BB- 1 5,000,000 1.4 1.1 1.00 77.29 7.48
Riggs Bank, N.A. BBB 1 5,000,000 1.4 1.1 1.13 84.70 7.28
Hanson North America, Inc. (1) A 1 5,000,000 1.4 1.1 1.00 94.54 7.47
WellPoint Health Networks, Inc. BBB+ 1 5,000,000 1.2 0.9 1.00 76.90 6.73
State of New Jersey AA+ 1 4,000,000 1.0 0.8 1.49 72.94 7.54
Tandy Corporation A- 1 4,000,000 1.0 0.8 1.02 67.03 7.50
Amoco Oil Company AA+ 3 3,000,000 0.9 0.7 1.01 89.93 7.13
American Drug Stores, Inc.(1) BBB+ 1 3,000,000 0.8 0.6 1.04 87.31 7.31
Bridgestone/Firestone, Inc. IPC-1 2 2,000,000 0.6 0.5 1.05 84.38 7.93
Exxon Corporation AAA 2 2,000,000 0.6 0.4 1.00 75.00 7.41
The Chase Manhattan Bank AA- 1 2,000,000 0.5 0.4 1.25 69.39 7.40
Hannaford Bros. Co. IPC-1 1 2,000,000 0.4 0.4 1.00 78.08 7.48
Boston Gas Company A 1 1,000,000 0.4 0.3 1.17 66.81 7.29
Sears, Roebuck & Co. A- 1 1,000,000 0.3 0.3 1.00 87.25 7.06
Mobil Oil Corporation AA 1 1,000,000 0.3 0.3 1.00 74.35 6.95
NationsBank, N.A. AA- 1 1,000,000 0.3 0.2 1.00 86.33 6.86
United States Postal Service IPC-1 1 1,000,000 0.2 0.2 1.04 83.54 7.17
- -----------------------------------------------------------------------------------------------------------------------------------
Total/Weighted Average 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* S&P Long Term Rating, "IPC" denotes an Internal Private Classification
indicating credit which meets parameters consistent with a rating "BBB-" or
better for "IPC-1", and BB- or better for "IPC-2".
(1) The rating shown is the rating of the parent company. Home Depot, Inc.,
Hanson PLC and American Stores Co., respectively.
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
GUARANTOR / TENANT PRIMARY INDUSTRY
<TABLE>
<CAPTION>
Number Balance as of % of % of Wtd. Avg. Wtd. Avg. Wtd. Avg.
Of Cut-Off Date Credit Lease Total Pool Original Loan-to- Gross
Primary Industry Loans (000's) Pool Balance DSC Leased Fee Coupon
Balance Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail Drug 58 $124,000,000 32.3% 25.2% 1.06x 83.97% 7.45%
Healthcare Services 5 62,000,000 16.0 12.5 1.01 94.72 7.64
Retail Grocery 9 59,000,000 15.4 12.0 1.09 89.73 7.20
Retail Building Materials 4 31,000,000 8.0 6.2 1.00 93.16 7.44
Retail Electronics 4 24,000,000 6.3 4.9 1.01 83.45 7.96
Banking 4 19,000,000 5.0 3.9 1.06 78.32 7.25
Retail Discount & General Merchandise 2 19,000,000 4.9 3.8 1.01 93.12 7.04
Automotive 7 12,000,000 3.1 2.4 1.02 88.82 7.59
Printing 1 9,000,000 2.5 1.9 1.01 90.21 8.03
Energy 7 8,000,000 2.8 1.7 1.04 79.66 7.20
Food Service 5 6,000,000 1.4 1.1 1.01 75.15 7.24
Retail Apparel 1 6,000,000 1.4 1.1 1.03 73.47 7.58
Government 1 4,000,000 1.0 0.8 1.49 72.94 7.54
Department Stores 1 1,000,000 0.4 0.3 1.00 87.25 7.06
Post Office 1 1,000,000 0.2 0.2 1.04 83.54 7.17
- ------------------------------------------------------------------------------------------------------------------------
Total/Weighted Average 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
GUARANTOR / TENANT CREDIT RATING*
<TABLE>
<CAPTION>
Number Balance as of % of Cumulative of % of Wtd. Avg. Wtd. Avg. Wtd. Avg.
Of Cut-Off Date Credit Credit Total Pool Original Loan-to-Leased Gross
Credit Rating Loans (000's) Lease Pool Pool Balance DSC Fee Value Coupon
Balance Balance
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AAA 2 2,000,000 0.5% 0.5% 0.4% 1.01x 84.06% 7.23%
AA+ 4 7,000,000 1.9 2.4 1.5 1.49 72.94 7.54
AA 8 26,000,000 6.7 9.1 5.2 1.01 88.26 7.08
AA- 5 29,000,000 7.4 16.6 5.8 1.00 92.57 7.41
A+ 8 24,000,000 6.1 22.7 4.8 1.07 81.56 7.14
A 21 114,000,000 29.6 52.3 23.1 1.08 85.67 7.33
A- 22 66,000,000 17.2 69.5 13.4 1.04 87.46 7.36
BBB+ 24 55,000,000 13.0 82.5 10.2 1.04 80.77 7.49
BBB 1 5,000,000 1.4 83.9 1.1 1.13 84.70 7.28
BBB- 5 10,000,000 2.5 86.4 1.9 1.01 89.85 7.52
BB- 1 5,000,000 1.4 87.8 1.1 1.00 77.29 7.48
IPC (1) 6 26,000,000 6.8 94.7 5.4 1.01 101.07 8.02
IPC (2) 3 20,000,000 5.3 100.0 4.1 1.01 86.48 8.04
- --------------------------------------------------------------------------------------------------------------------------
Total/Weighted Average 110 $385,000,000 100.0% 100.0% 78.1% 1.05x 87.27% 7.46%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* S&P Long Term Rating, "IPC" denotes an Internal Private Classification
indicating credit which meets parameters consistent with a rating "BBB-" or
better for "IPC (1)", and BB- or better for "IPC (2)".
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
LEASE TYPE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF CUMULATIVE % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT % OF TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
LEASE TYPE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
POOL BALANCE
BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bond 9 $86,000,000 22.3% 22.3% 17.4% 1.02x 92.34% 7.48%
NNN 42 158,000,000 41.1 63.4 32.1 1.04 90.21 7.41
NN 59 141,000,000 36.6 100.0 28.6 1.06 80.89 7.50
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 100.0% 78.1% 1.05x 87.27% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* All Credit Leases are either Bond-Type or have been enhanced to Bond-Type
status.
BALANCE AT CUT-OFF DATE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
LOAN BALANCE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0 to $999,999 7 $6,000,000 1.6% 1.3% 1.02x 80.14% 7.43%
$1,000,000 to $1,499,999 26 34,000,000 8.9 6.9 1.05 79.77 7.37
$1,500,000 to $1,999,999 19 33,000,000 8.5 6.7 1.06 82.43 7.56
$2,000,000 to $2,499,999 16 35,000,000 9.1 7.1 1.05 84.23 7.51
$2,500,000 to $2,999,999 7 19,000,000 4.8 3.8 1.03 83.43 7.69
$3,000,000 to $3,499,999 4 13,000,000 3.3 2.6 1.04 88.72 7.07
$3,500,000 to $3,999,999 4 15,000,000 3.9 3.1 1.17 74.21 7.51
$4,000,000 to $4,999,999 5 23,000,000 6.0 4.7 1.01 88.25 7.09
$5,000,000 to $5,999,999 8 44,000,000 11.4 8.9 1.08 86.51 7.38
$6,000,000 to $6,999,999 1 6,000,000 1.7 1.3 1.00 101.73 6.76
$8,000,000 to $8,999,999 3 25,000,000 6.4 5.0 1.04 88.29 7.25
$9,000,000 to $9,999,999 1 9,000,000 2.5 1.9 1.01 90.21 8.03
$10,000,000 to $14,999,999 6 67,000,000 17.5 13.6 1.05 87.99 7.57
$15,000,000 to $19,999,999 3 55,000,000 14.4 11.2 1.01 98.72 7.57
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The average balance as of the Cut-Off Date is $3,500,000
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
GROSS COUPON RATE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
GROSS COUPON RATE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6.500% to 6.749% 1 $5,000,000 1.2% 0.9% 1.00x 76.90% 6.73%
6.750% to 6.999% 14 49,000,000 12.7 9.9 1.02 92.27 6.85
7.000% to 7.249% 15 49,000,000 12.7 9.9 1.07 88.59 7.10
7.250% to 7.499% 29 118,000,000 30.7 24.0 1.04 86.58 7.36
7.500% to 7.749% 23 57,000,000 14.7 11.5 1.08 77.79 7.58
7.750% to 7.999% 21 65,000,000 16.9 13.2 1.06 92.92 7.87
8.000% to 8.249% 7 43,000,000 11.1 8.7 1.01 87.04 8.10
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average gross coupon rate as of the Cut-Off Date is 7.46%
ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
ORIGINAL TERM TO LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
MATURITY BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
120 to 179 months 77 $216,000,000 56.2% 43.9% 1.05x 84.36% 7.48%
240 to 299 months 21 113,000,000 29.3 22.8 1.06 88.16 7.52
300 to 360 months 12 56,000,000 14.6 11.4 1.02 96.70 7.25
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average original term to maturity as of the Cut-Off Date is 247
months.
<PAGE>
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
REMAINING TERM TO LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
MATURITY BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
60 to 119 months 1 $11,000,000 2.8% 2.2% 1.00x 75.86% 7.25%
120 to 179 months 11 33,000,000 8.6 6.7 1.08 72.87 7.35
180 to 239 months 75 200,000,000 51.8 40.5 1.04 86.68 7.50
240 to 299 months 22 137,000,000 35.6 27.8 1.05 92.24 7.46
300 to 360 months 1 5,000,000 1.3 1.0 1.00 94.65 6.98
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average remaining term to maturity as of the Cut-Off Date is 233
months.
LOAN-TO-LEASED FEE VALUE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
LOAN-TO-LEASED FEE VALUE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
45.0% to 49.9% 1 $1,000,000 0.3% 0.2% 1.04x 45.30% 7.57%
50.0% to 54.9% 1 1,000,000 0.3 0.2 1.00 52.20 7.12
60.0% to 64.9% 1 1,000,000 0.3 0.3 1.37 64.12 7.29
65.0% to 69.9% 7 15,000,000 4.0 3.1 1.08 68.00 7.58
70.0% to 74.9% 7 21,000,000 5.6 4.4 1.23 72.58 7.59
75.0% to 79.9% 18 77,000,000 19.9 15.6 1.06 77.52 7.55
80.0% to 84.9% 29 80,000,000 20.7 16.2 1.05 82.94 7.41
85.0% to 89.9% 22 76,000,000 19.8 15.5 1.02 87.99 7.62
90.0% to 94.9% 10 44,000,000 11.5 9.0 1.01 92.77 7.53
95.0% to 99.9% 11 50,000,000 13.1 10.2 1.02 96.90 7.24
100.0% to 109.9% 3 17,000,000 4.5 3.5 1.00 101.60 6.76
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average loan-to-leased fee value as of the Cut-Off
Date is 87.27%
<PAGE>
LOAN-TO-DARK VALUE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
LOAN-TO-DARK VALUE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Less than 75% 6 $9,000,000 2.4% 1.9% 1.01x 82.65% 7.39%
75.0% to 99.9% 14 60,000,000 15.5 12.1 1.06 81.47 7.50
100.0% to 109.9% 24 75,000,000 19.6 15.3 1.04 82.58 7.55
110.0% to 119.9% 32 111,000,000 28.8 22.5 1.07 89.36 7.56
120.0% to 129.9% 12 57,000,000 14.9 11.7 1.02 86.27 7.40
130.0% to 139.9% 13 39,000,000 10.1 7.9 1.05 93.10 7.38
140.0% to 149.9% 6 16,000,000 4.1 3.2 1.02 95.18 7.05
150.0% to 159.9% 2 12,000,000 3.2 2.5 1.00 101.81 6.76
160.0% to 169.9% 1 5,000,000 1.4 1.1 1.00 94.54 7.47
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average loan-to-dark value as of the Cut-Off Date is
114.26%
DEBT SERVICE COVERAGE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
DEBT SERVICE COVERAGE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.000x to 1.009x 37 188,000,000 48.8 38.1 1.00 92.73 7.49
1.010x to 1.019x 3 14,000,000 3.6 2.8 1.02 91.47 6.97
1.020x to 1.029x 4 11,000,000 2.9 2.3 1.02 73.66 7.60
1.030x to 1.039x 26 72,000,000 18.7 14.6 1.03 83.88 7.44
1.040x to 1.049x 2 4,000,000 1.0 0.8 1.04 86.45 7.28
1.050x to 1.059x 22 40,000,000 10.4 8.1 1.05 81.61 7.54
1.070x to 1.079x 1 2,000,000 0.4 0.3 1.07 74.79 7.89
1.080x to 1.089x 2 4,000,000 1.0 0.8 1.08 78.72 7.63
1.090x to 1.099x 1 8,000,000 2.1 1.7 1.10 95.74 7.32
1.100x to 1.199x 5 15,000,000 3.8 3.0 1.13 79.40 7.32
1.200x to 1.499x 7 27,000,000 7.1 5.6 1.32 74.02 7.42
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Debt service coverage is the ratio of total net rents during the loan term to
total debt service during the loan term. Total net rents are calculated by
deducting total loan-level reserves and total ground rents, if any, from total
gross rents.
* The weighted average debt service coverage as of the Cut-Off Date
is 1.05x
<PAGE>
ORIGINATION
COMPANY: CLF developed the proprietary Hybrid Corporate Bond Lease
Program (the "Program"), in addition to related products,
for the express purpose of providing credit based financing
to owners of single tenant properties net leased pursuant to
Credit Leases.
TENANTS: All tenants or their respective Credit Lease guarantors are
Investment Grade or have received an Internal Private
Classification of at least BBB- from each of S&P and Duff
with the exception of Circuit City Stores, Inc. and
MedPartners, Inc. Circuit City has an Internal Private
Classification indicating credit with characteristics
consistent with a rating of "BB-" or better. MedPartners has
a long-term credit rating from S&P of BB-. The average
corporate unsecured debt rating for the CLF loans in the
pool is "A-".
All corporate credit tenants, particularly those rated BBB
and below, are independently underwritten by CLF as to their
rating trends (up or down), industry trends, and market
position.
<PAGE>
LOAN
o UNDERWRITING: CLF's loan underwriting is centralized to
ensure consistent quality and involves in-depth analysis by
both internal and external specialists of the corporate
credit being financed, the quality of the lease, and value
of the underlying real estate on both a leased fee and "as
dark" basis. CLF's due diligence typically includes a credit
evaluation, a legal analysis of each lease, an assessment of
condemnation and casualty risks, reviews of landlord
obligations, reviews of third-party reports (environmental,
engineering, appraisal), residual risk exposure (for
extended amortization loans), borrower structure, reviews of
loan closing documents, and confirmation with applicable
rating agencies of each tenant's credit rating.
<PAGE>
LOAN COLLATERAL AND BORROWER STRUCTURE
LOAN TERMS: All mortgage loans (with one exception) are fully-amortizing
either before or, co-terminus with the primary term, or in
some cases the first renewal period, of the related Credit
Lease.
CALL PROTECTION: Generally, eight years of lockout followed by yield
maintenance, flat to Treasuries, for the balance of the
mortgage loan term.
SECURITY: All mortgage loans are secured by:
o lock box assignments of leases and rents;
o first mortgages on fee or leasehold interests in the
related premises; and
o a security interest in funds on deposit in reserve
accounts.
BORROWER TYPE: Generally special-purpose entities organized in accordance
with standard rating agency criteria. Bankruptcy-remote
opinions are generally required at origination for all
mortgage loans of more than $5,000,000 (and for all mortgage
loans made to borrowers/landlords with aggregate Program
debt of more than $5,000,000).
<PAGE>
LEASE STRUCTURE
QUALIFIED LEASES: Only Credit Leases of the types listed and described below
are eligible for financing under the Program and are
included in the Pool.
o Bond-Type. The tenant does not have termination or
abatement rights pursuant to the Credit Lease absent a
termination payment that is sufficient to fully prepay
the related loan.
o Triple Net. The tenant may terminate the Credit Lease
or abate rent following a defined condemnation or
casualty event, but generally for no other reason.
o Double Net. The tenant may terminate the Credit Lease
or abate rent following a defined condemnation or
casualty, or following borrower/landlord default with
respect to certain obligations (primarily maintenance
and repairs) under the Credit Lease.
<PAGE>
LEASE ENHANCEMENT MECHANISMS
CLF UTILIZES AN INTEGRATED PROGRAM OF CREDIT LEASE ENHANCEMENT MECHANISMS TO
CREATE A HYBRID CORPORATE BOND BY ENSURING THAT THERE ARE NO INTERRUPTIONS IN
THE CORPORATE CREDIT TENANT'S RENTAL STREAM DUE TO REAL ESTATE RELATED EVENTS.
LEASE ENHANCEMENT Non-cancelable insurance policies have been issued by the
INSURANCE POLICIES: Lease Enhancement Insurance Policy Provider for triple net
and double net leases. In the event a tenant exercises a
termination or abatement right following a condemnation or
casualty event, the Lease Enhancement Insurance Policy
Provider will either (i) make a cash payment as a
replacement for any lost monthly rent or (ii) fully prepay
the mortgage loan, at par.
LEASE SUPPORT In the event of borrower/landlord default with respect
ACTIONS: to obligations under the Credit Lease, the Servicer or
Special Servicer, as applicable, will use its best efforts
to satisfy those obligations to prevent the tenant from
exercising its termination or abatement rights. Lease
Support Actions may include, but are not limited to,
performance of required maintenance and repairs and
initiation and maintenance of appropriate legal actions. The
Servicer and Special Servicer have access to reserve account
funds and, when necessary, are obligated to advance their
own funds (subject to recoverability) and are prohibited
from foreclosure until the Servicer advances exceed 60% of
the dark value of the property.
<PAGE>
BORROWER RESERVE Reserve accounts are established based on an engineering
ACCOUNTS: survey by CLF selected professional third-party engineering
consultants and funded on a monthly basis for mortgage loans
relating to double net leases with quantifiable landlord
obligations. The deposits to these accounts generally
provide at least 125% of the anticipated, inflation-adjusted
costs of maintenance, repair and replacement to the related
premises as they occur. In addition, double net leases are
generally underwritten with debt service coverage in excess
of that required or reserves and principal and interest
payments.
EXPENSE RESERVE CLF provides for a trust-level account to be established and
ACCOUNT: funded on a monthly basis. The deposits made thereto will be
available for Lease Support Actions, trust expenses,
recoverable and non-recoverable advances, prepayment
interest shortfalls and credit support. Unless drawn upon,
the Expense Reserve Account will grow to approximately $2.4
million over the life of the transaction without
consideration of reinvestment income.
<PAGE>
LEASE ENHANCEMENT SUMMARY
<TABLE>
<CAPTION>
TERMINATION OR ABATEMENT
LEASE TYPE EVENT MITIGANT LEASE AS ENHANCED
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bond-Type None Not applicable Not applicable
Triple Net* Condemnation or casualty Non-cancelable insurance policy Bond-Type Equivalent
with AAA-rated insurer
Double Net* (1) Condemnation or (1) Non-cancelable insurance Bond-Type Equivalent
casualty policy with AAA-rated
insurer
(3) Maintenance/repair (3) Escrows equal to 125% of
provision violation consultant's estimate for
maintenance/repairs
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Any Triple Net and Double Net Leases that contain lease provisions other than
casualty or condemnation that could lead to a tenant's right to terminate the
lease or abate rent thereunder have the protection provided by the Servicer's
Lease Support Actions and the AA rated backstop thereto.
<PAGE>
EXTENDED AMORTIZATION MECHANISM
CTL loans that amortize through the first renewal period of the related Credit
Lease each receive the benefit of an individual insurance policy issued by the
Extended Amortization Insurance Policy Provider. Continued debt service on or
repayment of such mortgage loans is thus insured in the event the related tenant
elects not to renew their lease.
EXTENDED Transactions which meet Program underwriting standards may
AMORTIZATION also be eligible for financing through CLF's Extended
PROGRAMsm LOANS: Amortization Program (the "EAPsm"). With one exception (a
balloon mortgage), EAP loans fully amortize either before or
co-terminus with the first renewal period of the related
Credit Lease.
INSURANCE POLICY: In order to eliminate the risk of debt service interruption
due to a tenant non-renewal event, a non-cancelable Extended
Amortization Insurance Policy is underwritten for each EAP
loan.
POLICY PROVIDER: In the event of (i) non-renewal of the Credit Lease and (ii)
borrower/landlord default under the related loan, the
Extended Amortization Insurance Policy Provider (whose
financial strength is rated "AAA" by S&P) must either (a)
fully prepay the loan, with yield maintenance (subject to a
5% cap), or (b) make monthly payments in an amount equal to
the debt service payments due during the extended
amortization period.
<PAGE>
LOAN APPROVAL AND CLOSING PROCESS
LEASE AND CTL loan approval, each Credit Lease is reviewed by a
LOAN REVIEW: trained CLF underwriter using comprehensive underwriting
guidelines developed through consultation with legal and
financial advisors, investors and rating agencies. The
Credit Lease is reviewed specifically to identify and
quantify, as applicable, the risks associated with tenant
termination or abatement rights resulting from condemnation
and casualty events and borrower/landlord default with
respect to obligations under the Credit Lease.
CREDIT REVIEW: Each credit is reviewed by experienced finance specialists
and the ratings confirmed by the rating agencies.
LOAN REVIEW: After an application has been reviewed and a deposit has
COMMITTEE: been received, CLF convenes a loan review committee (made up
of CLF's senior managers) in order to determine whether or
not the transaction meets Program underwriting criteria.
Following the completion of due diligence, the loan review
committee is reconvened for issuance of ultimate mortgage
loan approval or rejection.
<PAGE>
APPLICATION AND Once the application has been accepted, full due diligence
DUE DILIGENCE: is commenced which includes:
o the engagement of CLF-approved or CLF-selected
third-party valuation and environmental consulting
firms and, in the case of double net leases, structural
engineering consulting firms;
o a review and summary of Credit Lease termination and
abatement rights and respective mitigating
enhancements;
o an analysis of the borrower, with electronic background
checks;
o a review of title, survey, etc.;
o a review of the Credit Lease and related premises by
the Lease Enhancement Policy Provider;
o a review of the Credit Lease and third-party reports by
the Servicer; and
o for EAP mortgage loans, a review of the Credit Lease
and valuation report by the Extended Amortization
Insurance Policy Provider.
CLOSING: CTL loans are closed in accordance with pre-defined Program
requirements, including comprehensive borrower/landlord,
premises and tenant/guarantor criteria. Standard
securitization-oriented documentation is used.
<PAGE>
COMPARISON TO LONG-TERM, SENIOR UNSECURED CORPORATE DEBT AND CMBS
The long-term, senior unsecured debt of a corporation is the unconditional
promise of that corporation to make a stream of payments in accordance with the
terms of a bond. Typically senior unsecured debt pays interest only on a
semi-annual basis with principal returned at maturity. In the event of a bond
default, the holders are unsecured and generally recover only against the
unsecured assets of the corporation. Like corporate bonds, the loans originated
under the Enhanced Lease Program contain the unconditional obligation of the
Credit Lease Tenants to make a stream of monthly rental payments, subject only
to certain specified real estate related termination or rent abatement rights
and subject to the right of the credit tenant reject the lease in the event of
bankruptcy. Although corporate bonds do not have the risks associated with the
termination or abatement rights that are contained in many of the Credit Leases
that back the certificates, the Program substantially reduces or eliminates
these real estate related risks. Moreover, unlike long-term, senior unsecured
corporate debt, CTL Loans are self-amortizing and secured by first mortgage
liens. The combination of amortization and security coupled with the strong
financial incentives of the underlying borrower to protect the loan in the event
of a credit tenant default provide the possibility of increasing expected
recoveries to certificate holders that might otherwise be available to such
certificate holders if they held the unsecured corporate bonds of that same
corporate credit. CTL loans also have substantial call protection in the form of
eight year lock-outs followed by yield maintenance flat to US Treasuries for the
duration of the loan.
The certificates also compare favorably in certain respects to commercial
mortgage-backed securities ("CMBS") in terms of credit, prepayment risk and
recovery. CMBS pools generally consist of an aggregation of real estate loans.
Typically, such real estate loans are underwritten based on the value of the
underlying real estate and the strength of the borrower. Amortization periods
usually exceed the term of the loan by a significant amount (10 year terms with
25 or 30 year amortization periods) leaving the balance of the loan (up to 70%)
to be retired at maturity either by refinancing or from the resources of the
borrower. Timeliness of payment and ultimate recovery on real estate loans is
affected by many factors including, the financial strength or lack thereof of
the borrower, the ability of the borrower to refinance the loan at maturity, the
stability of the cash flow from the tenants at the property, the quality of the
leases, and the uncertainties of the real estate and economic cycles.
By comparison to CMBS, the credit quality of the cash flows on all the CTL
loans is defined by the credit quality of the generally single tenant subject to
the long term lease. The risks to interruptions in credit tenant cash flows (and
thus loan payments) is reduced by limiting eligible Credit Lease Tenants to
primarily Investment Grade credits, whose financial strength reduces the risk of
default over a business cycle as compared with non-investment grade tenants.
With the exception of Circuit City and MedPartners, all of the credit tenants in
the pool are Investment Grade, and including all the CTL loans, the average
credit rating is A-. The Investment Grade credit quality of the credit tenants
coupled with the amortizing nature of the credit lease loans and strong call
protection insulate the certificate holders from risks of voluntary or
involuntary prepayments on the mortgage loans.
<PAGE>
CREDIT TENANT LEASE (CTL) LOAN OVERVIEW
o CASH FLOWS: CTL Loans utilize the credit tenant's fixed and predictable
rent stream to pay principal and interest. All tenant rent is lock boxed at
Midland and applied to debt on the due date as well as to scheduled
reserves, if any. The credit tenant pays all property expenses directly or
indirectly.
o CREDIT QUALITY: CTL loan pool has average A- rated credit tenants.
o COLLATERAL: Each CTL loan is collateralized by an absolute assignment of
the credit tenant lease and a first mortgage.
o REAL ESTATE RISK: Performance of the loan depends upon the tenant's
uninterrupted rent stream. Risk of interruption of the tenant's rent as a
result of a real estate related event is eliminated/mitigated by bond or
enhanced bond-type leases.
o CALL PROTECTION: Voluntary prepayment is prohibited for eight years and
permitted thereafter only with a yield maintenance penalty calculated at
flat to U.S. Treasuries.
o AMORTIZATION: Each CTL loan fully amortizes over the term of the underlying
credit tenant lease or if not, then the outstanding balance at the end of
the tenant's initial lease term is fully insured by a subsidiary of
Berkshire Hathaway.
o DEFAULT RISK: S&P static pool cumulative default (default being defined as
the first occurrence of a payment default on any financial obligation)
studies indicate that default probability after ten years for AA, A, BBB,
BB and B credits are 1.00%, 1.76%, 3.71%, 15.07% and 25.55%, respectively.
Standard & Poor's Credit Week, January 28, 1998.
o EVENT RISK: Both S&P and Moody's default studies clearly show that credit
migration (up or down) is almost always a gradual process measured in
years. Sudden defaults of investment grade credits are essentially zero.
For the very small number of credits that do default, according to S&P the
average time from the original rating to default is 7.4, 7.6, 6.6, 5.1, and
3.7 years for AA, A, BBB, BB and B rated credits, respectively. Standard &
Poor's Credit Week, January 28, 1998.
o RECOVERIES: In the unlikely event a credit tenant defaults, potential
recoveries on the underlying CTL loan are enhanced by the amortizing nature
of the loan, the high quality of the mortgaged real estate, and incentives
present for both the tenant to continue to operate the property in case of
a bankruptcy and the borrower to protect the loan in the event of a
rejection of the lease in bankruptcy by the tenant.
<PAGE>
LOAN POOL SUMMARY - LONG TERM CONDUIT
SUMMARY CHARACTERISTICS
- --------------------------------------------------------------------------------
DESCRIPTION
INITIAL POOL BALANCE $108,000,000
AVERAGE BALANCE AS OF CUT-OFF DATE $6,000,000
WTD. AVG. UNDERWRITING DSCR(1) 1.38X
WTD. AVG. CUT-OFF DATE LTV RATIO(2) 60.8%
WTD. AVG. MATURITY DATE LTV RATIO(3) 19.6%
WTD. AVG. MORTGAGE RATE 7.58%
WTD. AVG. ORIGINAL TERM TO MATURITY 17 YEARS 10 MONTHS
WTD. AVG. REMAINING TERM TO MATURITY 16 YEARS 8 MONTHS
WTD. AVG. AGE 1 YEAR 2 MONTHS
WTD. AVG. ORIGINAL AMORTIZATION TERM 22 YEARS 5 MONTHS
WTD. AVG. REMAINING AMORTIZATION TERM 21 YEARS 3 MONTHS
- --------------------------------------------------------------------------------
(1) Ratio of underwritten property net cash flow to annual debt service
(2) Ratio of scheduled balance at Cut-off Date to appraised property value
(3) Ratio of scheduled balance at maturity to appraised property value
<PAGE>
STRATIFICATION TABLES
CUT-OFF DATE BALANCE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF DATE OF MORTGAGE OF CUT-OFF CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
BALANCES LOANS DATE (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0 to $999,999 1 $1,000,000 0.9% 0.2% 1.20x 25.79% 7.13%
$1,000,000 to $1,999,999 3 5,000,000 4.5 1.0 1.23 75.11 7.58
$2,000,000 to $2,999,999 5 12,000,000 11.2 2.4 1.29 62.29 7.32
$3,000,000 to $3,999,999 3 10,000,000 9.2 2.0 1.30 61.37 7.31
$4,000,000 to $4,999,999 1 5,000,000 4.6 1.0 1.54 55.03 7.43
$5,000,000 to $7,499,999 3 17,000,000 16.0 3.5 1.20 72.12 7.63
$10,000,000 to $14,999,999 1 14,000,000 13.3 2.9 1.25 74.23 7.21
$35,000,000 to $45,000,000 1 44,000,000 40.3 8.8 1.54 51.23 7.86
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROPERTY TYPE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGED OF CUT-OFF CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF DATE MORTGAGE
PROPERTIES DATE (000'S) BALANCE BALANCE DSCR LTV RATIO RATE
PROPERTY TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail 11 $76,000,000 70.6% 15.5% 1.41x 60.49% 7.73%
Office 2 18,000,000 16.3 3.6 1.28 72.06 7.24
Mobile Home 4 9,000,000 8.5 1.9 1.21 45.29 7.13
Hotel 1 5,000,000 4.6 1.0 1.54 55.03 7.43
- -----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
PROPERTY LOCATION LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SC 1 $44,000,000 40.3% 8.8% 1.54x 51.23% 7.86%
GA 1 14,000,000 13.3 2.9 1.25 74.23 7.21
TX 3 9,000,000 8.0 1.8 1.29 80.91 7.80
NC 3 7,000,000 6.2 1.4 1.28 73.82 7.78
FL 1 6,000,000 5.9 1.3 1.12 62.43 7.00
NM 1 6,000,000 5.1 1.1 1.25 73.62 7.67
CT 2 5,000,000 4.9 1.1 1.21 49.33 7.13
TN 1 5,000,000 4.6 1.0 1.54 55.03 7.43
NH 2 4,000,000 3.6 0.8 1.21 39.77 7.13
KS 1 3,000,000 3.2 0.7 1.28 69.52 7.44
MD 1 3,000,000 3.0 0.7 1.40 62.42 7.35
PA 1 2,000,000 1.8 0.4 1.25 71.25 7.50
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
MORTGAGE RATE
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
RANGE OF MORTGAGE RATES LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6.750% - 6.999% 1 $2,000,000 1.9% 0.4% 1.41x 79.24% 6.87%
7.000% - 7.249% 7 31,000,000 28.8 6.3 1.21 63.45 7.14
7.250% - 7.499% 4 14,000,000 13.1 2.9 1.42 62.85 7.40
7.500% - 7.749% 2 7,000,000 6.9 1.5 1.25 73.00 7.63
7.750% - 7.999% 1 44,000,000 40.3 8.8 1.54 51.23 7.86
8.000% - 8.499% 3 10,000,000 9.0 2.0 1.24 79.40 8.20
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DSCR (1)
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
RANGE OF DSCRS LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.10x - 1.19x 1 $6,000,000 5.9% 1.3% 1.12x 62.43% 7.00%
1.20x - 1.29x 12 45,000,000 42.0 9.2 1.24 69.03 7.49
1.35x - 1.39x 1 2,000,000 2.2 0.5 1.38 69.83 7.32
1.40x - 1.49x 2 5,000,000 4.9 1.1 1.41 68.95 7.16
1.50x - 1.59x 2 49,000,000 44.9 9.8 1.54 51.62 7.81
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratio of underwritten property net cash flow to annual debt
service
<PAGE>
CUT-OFF DATE LTV RATIO (1)
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF DATE OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
LTVS LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.0% - 29.9% 1 $1,000,000 0.9% 0.2% 1.20x 25.79% 7.13%
30.0% - 49.9% 2 5,000,000 4.6 1.0 1.21 44.86 7.13
50.0% - 59.9% 3 52,000,000 47.9 10.5 1.52 51.62 7.77
60.0% - 64.9% 2 10,000,000 8.9 1.9 1.22 62.43 7.12
65.0 % - 69.9% 2 6,000,000 5.5 1.2 1.32 69.65 7.39
70.0% - 74.9% 3 22,000,000 20.3 4.4 1.25 73.81 7.35
75.0% - 79.9% 4 8,000,000 6.9 1.5 1.28 77.39 7.56
80.0% - 84.9% 1 5,000,000 5.0 1.1 1.25 82.00 8.32
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratio of scheduled balance at Cut-off Date to appraised
property value
MATURITY DATE LTV RATIO (1)
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF MATURITY DATE OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING MATURITY MORTGAGE
LTVS LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.0% - 29.9% 9 $71,000,000 66.1% 14.5% 1.42x 2.47% 7.63%
30.0% - 49.9% 3 9,000,000 8.7 1.9 1.43 37.57 7.42
50.0% - 59.9% 3 21,000,000 19.4 4.3 1.25 57.18 7.49
60.0% - 64.9% 3 6,000,000 5.9 1.3 1.29 61.44 7.66
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 19.59% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratio of scheduled balance at maturity to appraised property value
<PAGE>
ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
ORIGINAL TERM TO OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
MATURITY LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
180 11 $47,000,000 43.1% 9.4% 1.28x 71.28% 7.43%
240 7 62,000,000 56.9 12.5 1.46 52.95 7.70
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF REMAINING TERMS OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
121 - 180 Months 11 $47,000,000 43.1% 9.4% 1.28x 71.28% 7.43%
181 - 240 Months 7 62,000,000 56.9 12.5 1.46 52.95 7.70
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ORIGINAL AMORTIZATION
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
ORIGINAL AMORTIZATION OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
TERM LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
180 1 $3,000,000 3.2% 0.7% 1.28x 69.52% 7.44%
240 9 70,000,000 64.7 14.2 1.42 54.33 7.63
300 4 14,000,000 12.9 2.8 1.37 70.06 7.72
360 4 21,000,000 19.2 4.2 1.26 75.11 7.35
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
GENERAL
o Each Mortgage Loan was originated or, in certain cases, purchased pursuant
to the NationsBank multifamily and commercial mortgage conduit. NationsBank
loans are originated utilizing exclusive internal underwriting and
third-party origination networks. Since 1995, NationsBank has securitized
more than $6 billion of NationsBank loans.
ORIGINATION/ACCUMULATION
o The NationsBank Permanent Loan Group (the "PLG") was formed in 1995 for the
express purpose of underwriting commercial mortgage loans which satisfy
NationsBank lending criteria. Currently, the PLG operates from 10 offices
located across the United States.
o Similarly, NationsBank originates health care loans which are underwritten
by the NationsBank Healthcare Banking Group (the "HCBG"). The HCBG
specializes in arranging financing for the health care industry, and in
1997 underwrote more than $83 million in NationsBank loans.
o Additionally, conduit relationships have been established between
NationsBank and a select group of third-party mortgage loan originators
(each, a "Third-Party Originator"). Third-Party Originators, all of which
are mortgage banking or banking firms with established credit policies,
include Bankers Mutual Mortgage, Inc., Berkshire Mortgage Finance, First
Security Bank, N.A., L.J. Melody & Company, The Patrician Financial Company
and The WMF Group. In the aggregate, these partners originated
approximately $1.5 billion in NationsBank loans in 1997.
<PAGE>
UNDERWRITING
o Each Mortgage Loan was originated against standard underwriting targets. In
order to ensure quality and consistency, NationsBank officers participate in
the entire underwriting review process. Moreover, NationsBank officers
regularly host underwriting forums for all underwriters and originators.
TARGETED UNDERWRITING SUMMARY
<TABLE>
<CAPTION>
LOAN SIZE MINIMUM MAXIMUM AVAILABLE MAXIMUM
PROPERTY TYPE ($MM) DSCR LTV RATIO TERMS AMORTIZATION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Multifamily $0.5 - $50 1.20x 80% 84 - 180 Mos 360 Mos
Retail $0.5 - $50 1.25x 80% 84 - 180 Mos 360 Mos
Office $0.5 - $50 1.25x 75% 84 - 180 Mos 360 Mos
Health Care $0.5 - $25 1.30x 75% 84 - 180 Mos 360 Mos
Franchise $0.5 - $50 1.25x 75% 84 - 120 Mos 240 Mos
Hotel $0.5 - $35 1.35x 75% 84 - 180 Mos 300 Mos
Industrial $0.5 - $25 1.25x 75% 84 - 180 Mos 360 Mos
Mini Storage $0.5 - $15 1.30x 75% 84 - 180 Mos 300 Mos
Golf Course $1 - $20 1.40x 70% 84 - 120 Mos 300 Mos
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PARTICIPANTS
CAPITAL LEASE FUNDING, L.P. is a Loan Seller and a New York-based commercial
mortgage lender specializing in financing commercial real estate leased under
long-term net leases to corporate tenants who are, or whose obligations under
such leases are guaranteed by, corporations whose credit is Investment Grade or
carries an Internal Private Classification. CLF financed more than $129 million
of Credit Leases through a capital markets transaction in January 1997.
LEXINGTON INSURANCE COMPANY ("Lexington") issues non-cancelable Lease
Enhancement Insurance Policies which provide for monthly debt service payments
or full Loan prepayment, at par, in the event of rent abatement or termination,
respectively, following a condemnation or casualty event. Lexington is a
subsidiary of AIG. The financial strength of Lexington has been rated "AAA" by
S&P.
COLUMBIA INSURANCE COMPANY ("Columbia") is the Extended Amortization Insurance
Policy Provider. Columbia issues non-cancelable insurance policies which insure
the performance of CTL loans that are scheduled to amortize beyond the initial
term of the related Credit Lease. Columbia is a subsidiary of Berkshire
Hathaway, Inc. and carries a financial strength rating of "AAA" from S&P.
LASALLE NATIONAL BANK ("LaSalle") is the Trustee. LaSalle is a
nationally-chartered bank with principal offices in Chicago, Illinois. LaSalle
is rated "AA-" by S&P.
ABN AMRO BANK N.V., ("ABN") is the Fiscal Agent. ABN is based in the Netherlands
and is the corporate parent of LaSalle. ABN is rated "AA" by S&P.
<PAGE>
CONFIDENTIAL
NATIONSLINK FUNDING CORPORATION
COMMERCIAL LOAN
PASS-THROUGH CERTIFICATES
SERIES 1999-LTL-1
$493,000,000 (APPROXIMATE)
FIRST QUARTER 1999
<PAGE>
NOTICE TO RECIPIENTS
This material is being provided to you by NationsBanc Montgomery Securities
LLC ("NMS") for your private information only, and relates only to certain
credit lease-backed and long term conduit real estate mortgage loans (the
"Loans"). Although this material is based on information NMS considers reliable,
neither NMS nor any of their affiliates make any representation that it is
accurate or complete, and it should not be relied upon as such. Information
contained in this material is current as of the date appearing on this material
only. The information contained in this material may be based on assumptions
regarding market conditions and other matters reflected herein. Neither NMS nor
any of their affiliates make any representation 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.
By accepting this material, you agree that you will not distribute or
provide this material to any other person. You are encouraged to conduct your
own due diligence with respect to the Loans, and reference is made to such
actual loan documents for the terms and conditions of such Loans. Neither NMS
nor any of their affiliates is soliciting action from you based upon this
material.
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. In the event any of the Loans described
in this material are actually securitized, the securities backed by such Loans
will be offered to you, if at all, only pursuant to a final public prospectus or
private placement memorandum and, in such event, any information in this
material will be superseded in its entirety by the information contained in such
final prospectus or memorandum. You are urged to read any such final prospectus
or memorandum in its entirety prior to making any investment decision with
regard to securities that may be backed by such Loans.
<PAGE>
DEAL SUMMARY
DEAL OVERVIEW
o NationsBanc Montgomery Securities LLC ("NMS") will act as lead manager in a
securitization of approximately 110 credit leased backed commercial
mortgage loans, with a projected aggregate principal cutoff balance of
$385,000,000 and 18 long term conduit commercial mortgage loans, with an
aggregate principal cutoff balance of $108,000,000 as of February 1, 1999
(the "Cut-off Date"). It is further expected that this transaction will
settle in early 1999.
o The credit tenant lease loans ("CTL Loans") for this transaction were
originated and underwritten by Capital Lease Funding, L.P. (CLF) and
NationsBank, N.A. ("NationsBank") and are being contributed by CLF, and the
conduit mortgage loans are being contributed by NationsBank. Each mortgage
loan seller will make representations and bear all repurchase obligations
with regard to its loans only.
o Collateral tables appearing in this package set forth anticipated
characteristics of all Loans expected to be included in this transaction in
the aggregate, and separately for CLF (Credit Lease) loans, and NationsBank
(Long Term Conduit) loans.
<PAGE>
PRELIMINARY PROFORMA STRUCTURE DESCRIPTION
<TABLE>
<CAPTION>
PRINCIPAL EXPECTED
EXPECTED APPROXIMATE APPROXIMATE CREDIT EXPECTED REPAYMENT EXPECTED DOLLAR
CLASS RATING CLASS SIZE % OF TOTAL SUPPORT WAL* WINDOW* COUPON PRICE
S&P/DCR
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 AAA/AAA $70,000,000 14.3% 19.5% 3.0 1 - 66 TBD TBD
A-2 AAA/AAA 194,000,000 39.4 19.5 10.0 66 - 163 TBD TBD
A-3 AAA/AAA 132,000,000 26.8 19.5 15.3 163 - 209 TBD TBD
I/O AAA/AAA 493,000,000 19.5 12.4 TBD TBD
B AA/AA 26,000,000 5.3 14.3 17.8 209 - 219 TBD TBD
C A/A 21,000,000 4.3 10.0 18.7 219 - 231 TBD TBD
D BBB/NR 31,000,000 6.3 3.8 20.7 231 - 267 TBD TBD
E BB/NR 11,000,000 2.3 1.5 22.7 267 - 279 TBD TBD
F B/NR 4,000,000 .8 .8 23.5 279 - 285 TBD TBD
G UR 4,000,000 .8 24.2 285 - 300 TBD TBD
TOTAL/WA $493,000,000 100.0% 100.0%
</TABLE>
* Assumes 0% CPR
o Principal payments will be applied to each class entitled thereto on a
sequential basis.
<PAGE>
SECURITIES DESCRIPTION
TRANSACTION: NationsLink Funding Corporation Long Term Commercial Loan
Pass-Through Certificates;
TYPE OF OFFERING: Public Bond Offering on Certificates rated AA and above,
Private Placement with resale under Rule 144A for
Certificates rated below AA;
CUT-OFF DATE: February 1, 1999;
TAX ELECTION: REMIC;
BOND COUPONS: TBD;
INTEREST
CALCULATION: 30/360 basis;
LOSSES: Any losses will be applied to the most subordinate class of
Certificates then outstanding.
<PAGE>
PARTICIPANTS
DEPOSITOR: NationsLink Funding Corporation;
LOAN SELLERS: Capital Lease Funding, L. P., and NationsBank, N.A.;
PLACEMENT AGENT: NationsBanc Montgomery Securities LLC;
SERVICER: Midland Loan Services, Inc.
SPECIAL SERVICER: Midland Loan Services, Inc.
TRUSTEE: LaSalle National Bank, which also serves as back-up
servicer;
FISCAL AGENT: ABN AMRO Bank N.V.;
LEASE ENHANCEMENT
INSURANCE POLICY
PROVIDER: Lexington Insurance Company (AAA rated subsidiary of AIG)
INSURANCE POLICY
PROVIDER: Columbia Insurance Company (AAA rated subsidiary of
Berkshire Hathaway)
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
Capital Lease Funding, L.P. is a New York-based lender specializing in
originating, underwriting, pooling and financing commercial properties which are
long-term net leased to credit tenants. Such credit tenants generally have a
long-term credit rating from S&P of BBB- or better or carry an Internal Private
Classification of at least BBB- or better from each of S&P and Duff & Phelps
Credit Rating Company. CLF has on a selective basis financed properties having
credit tenants with long term credit ratings from S&P or Internal Private
Classifications of BB- or better, and the pool contains nine such loans.
CLF pioneered the enhancement of net leases with credit tenants to bond type
status. CLF's enhancement mechanisms and underwriting methods have become the de
facto rating agency and industry standards for these types of loans. It
securitized the first multi-credit tenant mortgage pool collateralized by both
bond and bond-type credit tenant leases in February 1997. The $130MM pool for
that transaction included 13 investment grade tenants (rated BBB- or better) and
30 loans, has had no delinquencies or defaults to date. Since 1997, CLF has
financed or committed to finance over $850MM of credit tenant loans ("CTL") with
over 40 credit tenants and has had no defaults to date. All CLF loans are
originated and centrally underwritten by a team of credit lease finance
specialists.
Through its lease enhancement programs, CLF is able to mitigate real estate
event risks in triple and double net leases to ensure that the rent stream which
provides the cash flow for debt service and loan amortization is uninterrupted
by certain real estate or borrower related events.
<PAGE>
CLF utilizes a broad array of enhancement mechanisms, including reserves,
recourse provisions, specialized insurance with AAA- rated companies and
backstop servicing with AA- rated (minimum) companies, to mitigate specific
event risks and ensure performance of certain borrower/landlord obligations.
With the exception of eight loans which have an approximate total cutoff balance
$57,000,000 which represent 14.8% of the credit lease loans and 11.6% of all
loans in the securitization, all of the Credit Lease Loans fully amortize over
the initial term of the associated credit lease. Any loan structured with an
amortization that exceeds the lease term is insured pursuant to a specialized
insurance policy provided by Columbia Insurance Company which insures payment of
principal and interest on the loan (or prepayment with yield maintenance up to
5%) in the event of a tenant non-renewal and subsequent borrower default.
The underlying mortgaged properties are generally of new construction and are
stand alone.
The weighted average credit rating of the tenants or guarantors securing the CTL
Loans is "A-".
Over half of the leases relating to the CTL loans are guaranteed by a guarantor
in the Retail Drug, Retail Grocery, Food Service or Energy sector.
The top five credit tenants in terms of pool concentration are all public
corporations with long term credit ratings from S&P of BBB+, A-, A, AA- and A,
respectively.
o All numerical information provided herein with respect to the Loans is
provided on an approximate basis and is based on characteristics of the
Loans estimated as of the Cut-Off Date.
<PAGE>
SUMMARY CHARACTERISTICS
GENERAL
POOL BALANCE $385,000,000
AVERAGE LOAN BALANCE $3,500,000
AVERAGE TENANT/GUARANTOR RATING A-
WTD. AVG. GROSS COUPON 7.46%
WTD. AVG. ORIGINAL TERM TO MATURITY 20 Years 7 Months
WTD. AVG. REMAINING TERM TO MATURITY 19 Years 5 Months
WTD. AVG. ORIGINAL AMORTIZATION TERM 20 Years 7 Months
WTD. AVG. REMAINING AMORTIZATION TERM 19 Years 5 Months
WTD. AVG. DEBT SERVICE COVERAGE 1.05x
WTD. AVG. LOAN-TO-LEASED FEE VALUE 87.3%
WTD. AVG. LOAN-TO-DARK VALUE 114.3%
<PAGE>
GUARANTOR / TENANT
<TABLE>
<CAPTION>
NUMBER BALANCE % OF % OF WTD. WTD. AVG. WTD.
CREDIT OF AS OF CREDIT TOTAL POOL AVG. LOAN-TO-LEASED AVG.
TENANT / GUARANTOR RATING* LOANS CUT-OFF LEASE BALANCE ORIGINAL FEE VALUE GROSS
DATE POOL DSC COUPON
(000'S) BALANCE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rite Aid Corporation BBB+ 21 $37,000,000 9.6% 7.5% 1.06x 80.65% 7.58%
CVS Corporation A- 16 35,000,000 9.2 7.2 1.07 84.18 7.62
Koninklijke Ahold, N.V. A 4 32,000,000 8.3 6.5 1.16 86.10 7.36
Home Depot U.S.A., Inc.(1) AA- 3 25,000,000 6.6 5.2 1.00 92.87 7.44
Eckerd Corporation A 12 25,000,000 6.5 5.1 1.04 89.43 7.37
Walgreen Co. A+ 8 24,000,000 6.1 4.8 1.06 82.60 7.11
Circuit City Stores, Inc. IPC-2 3 20,000,000 5.3 4.1 1.01 86.48 8.04
CareGroup, Inc. A 1 20,000,000 5.2 4.0 1.03 84.45 7.25
Blue Cross and Blue Shield of A 1 20,000,000 5.1 4.0 1.00 75.60 7.98
Texas, Inc.
Wal-Mart Stores, Inc. AA 2 19,000,000 4.9 3.8 1.01 93.12 7.04
Food Lion, Inc. A- 3 17,000,000 4.5 3.5 1.00 101.60 6.76
Georgia Baptist Health Care IPC-1 1 12,000,000 3.1 2.4 1.00 89.68 8.16
System, Inc.
KeyBank National Association A 1 11,000,000 2.8 2.2 1.00 75.86 7.25
The Pep Boys - Manny, Moe & BBB- 5 10,000,000 2.5 1.9 1.01 89.85 7.52
Jack
John H. Harland Company IPC-1 1 9,000,000 2.5 1.9 1.01 90.21 8.03
Wegmans Food Markets, Inc. A- 1 8,000,000 2.1 1.7 1.00 81.17 7.50
McDonald's Corporation AA 5 6,000,000 1.4 1.1 1.01 75.15 7.24
The TJX Companies, Inc. BBB+ 1 6,000,000 1.4 1.1 1.03 73.47 7.58
MedPartners, Inc. BB- 1 5,000,000 1.4 1.1 1.00 77.29 7.48
Riggs Bank, N.A. BBB 1 5,000,000 1.4 1.1 1.13 84.70 7.28
Hanson North America, Inc. (1) A 1 5,000,000 1.4 1.1 1.00 94.54 7.47
WellPoint Health Networks, Inc. BBB+ 1 5,000,000 1.2 0.9 1.00 76.90 6.73
State of New Jersey AA+ 1 4,000,000 1.0 0.8 1.49 72.94 7.54
Tandy Corporation A- 1 4,000,000 1.0 0.8 1.02 67.03 7.50
Amoco Oil Company AA+ 3 3,000,000 0.9 0.7 1.01 89.93 7.13
American Drug Stores, Inc.(1) BBB+ 1 3,000,000 0.8 0.6 1.04 87.31 7.31
Bridgestone/Firestone, Inc. IPC-1 2 2,000,000 0.6 0.5 1.05 84.38 7.93
Exxon Corporation AAA 2 2,000,000 0.6 0.4 1.00 75.00 7.41
The Chase Manhattan Bank AA- 1 2,000,000 0.5 0.4 1.25 69.39 7.40
Hannaford Bros. Co. IPC-1 1 2,000,000 0.4 0.4 1.00 78.08 7.48
Boston Gas Company A 1 1,000,000 0.4 0.3 1.17 66.81 7.29
Sears, Roebuck & Co. A- 1 1,000,000 0.3 0.3 1.00 87.25 7.06
Mobil Oil Corporation AA 1 1,000,000 0.3 0.3 1.00 74.35 6.95
NationsBank, N.A. AA- 1 1,000,000 0.3 0.2 1.00 86.33 6.86
United States Postal Service IPC-1 1 1,000,000 0.2 0.2 1.04 83.54 7.17
- ---------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* S&P Long Term Rating, "IPC" denotes an Internal Private Classification
indicating credit which meets parameters consistent with a rating "BBB-" or
better for "IPC-1", and BB- or better for "IPC-2".
(1) The rating shown is the rating of the parent company. Home Depot, Inc.,
Hanson PLC and American Stores Co., respectively.
<PAGE>
GUARANTOR / TENANT PRIMARY INDUSTRY
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
PRIMARY INDUSTRY LOANS DATE LEASE POOL BALANCE DSC FEE VALUE COUPON
(000'S) BALANCE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail Drug 58 $124,000,000 32.3% 25.2% 1.06x 83.97% 7.45%
Healthcare Services 5 62,000,000 16.0 12.5 1.01 94.72 7.64
Retail Grocery 9 59,000,000 15.4 12.0 1.09 89.73 7.20
Retail Building Materials 4 31,000,000 8.0 6.2 1.00 93.16 7.44
Retail Electronics 4 24,000,000 6.3 4.9 1.01 83.45 7.96
Banking 4 19,000,000 5.0 3.9 1.06 78.32 7.25
Retail Discount & General 2 19,000,000 4.9 3.8 1.01 93.12 7.04
Merchandise
Automotive 7 12,000,000 3.1 2.4 1.02 88.82 7.59
Printing 1 9,000,000 2.5 1.9 1.01 90.21 8.03
Energy 7 8,000,000 2.8 1.7 1.04 79.66 7.20
Food Service 5 6,000,000 1.4 1.1 1.01 75.15 7.24
Retail Apparel 1 6,000,000 1.4 1.1 1.03 73.47 7.58
Government 1 4,000,000 1.0 0.8 1.49 72.94 7.54
Department Stores 1 1,000,000 0.4 0.3 1.00 87.25 7.06
Post Office 1 1,000,000 0.2 0.2 1.04 83.54 7.17
- -----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
GUARANTOR / TENANT CREDIT RATING*
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF CUMULATIVE % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT OF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
CREDIT RATING LOANS DATE LEASE POOL BALANCE DSC FEE VALUE COUPON
(000'S) POOL BALANCE
BALANCE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AAA 2 $2,000,000 0.5% 0.5% 0.4% 1.01x 84.06% 7.23%
AA+ 4 7,000,000 1.9 2.4 1.5 1.49 72.94 7.54
AA 8 26,000,000 6.7 9.1 5.2 1.01 88.26 7.08
AA- 5 29,000,000 7.4 16.6 5.8 1.00 92.57 7.41
A+ 8 24,000,000 6.1 22.7 4.8 1.07 81.56 7.14
A 21 114,000,000 29.6 52.3 23.1 1.08 85.67 7.33
A- 22 66,000,000 17.2 69.5 13.4 1.04 87.46 7.36
BBB+ 24 55,000,000 13.0 82.5 10.2 1.04 80.77 7.49
BBB 1 5,000,000 1.4 83.9 1.1 1.13 84.70 7.28
BBB- 5 10,000,000 2.5 86.4 1.9 1.01 89.85 7.52
BB- 1 5,000,000 1.4 87.8 1.1 1.00 77.29 7.48
IPC-1 6 26,000,000 6.8 94.7 5.4 1.01 101.07 8.02
IPC-2 3 20,000,000 5.3 100.0 4.1 1.01 86.48 8.04
- --------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 100.0% 78.1% 1.05x 87.27% 7.46%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* S&P Long Term Rating, "IPC" denotes an Internal Private Classification
indicating credit which meets parameters consistent with a rating "BBB-" or
better for "IPC-1", and BB- or better for "IPC-2".
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
LEASE TYPE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF CUMULATIVE % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT % OF TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
LEASE TYPE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
POOL BALANCE
BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bond 9 $86,000,000 22.3% 22.3% 17.4% 1.02x 92.34% 7.48%
NNN 42 158,000,000 41.1 63.4 32.1 1.04 90.21 7.41
NN 59 141,000,000 36.6 100.0 28.6 1.06 80.89 7.50
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 100.0% 78.1% 1.05x 87.27% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* All Credit Leases are either Bond-Type or have been enhanced to Bond-Type
status.
BALANCE AT CUT-OFF DATE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
LOAN BALANCE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0 to $999,999 7 $6,000,000 1.6% 1.3% 1.02x 80.14% 7.43%
$1,000,000 to $1,499,999 26 34,000,000 8.9 6.9 1.05 79.77 7.37
$1,500,000 to $1,999,999 19 33,000,000 8.5 6.7 1.06 82.43 7.56
$2,000,000 to $2,499,999 16 35,000,000 9.1 7.1 1.05 84.23 7.51
$2,500,000 to $2,999,999 7 19,000,000 4.8 3.8 1.03 83.43 7.69
$3,000,000 to $3,499,999 4 13,000,000 3.3 2.6 1.04 88.72 7.07
$3,500,000 to $3,999,999 4 15,000,000 3.9 3.1 1.17 74.21 7.51
$4,000,000 to $4,999,999 5 23,000,000 6.0 4.7 1.01 88.25 7.09
$5,000,000 to $5,999,999 8 44,000,000 11.4 8.9 1.08 86.51 7.38
$6,000,000 to $6,999,999 1 6,000,000 1.7 1.3 1.00 101.73 6.76
$8,000,000 to $8,999,999 3 25,000,000 6.4 5.0 1.04 88.29 7.25
$9,000,000 to $9,999,999 1 9,000,000 2.5 1.9 1.01 90.21 8.03
$10,000,000 to $14,999,999 6 67,000,000 17.5 13.6 1.05 87.99 7.57
$15,000,000 to $19,999,999 3 55,000,000 14.4 11.2 1.01 98.72 7.57
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The average balance as of the Cut-Off Date is $3,500,000
<PAGE>
GROSS COUPON RATE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
GROSS COUPON RATE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6.500% to 6.749% 1 $5,000,000 1.2% 0.9% 1.00x 76.90% 6.73%
6.750% to 6.999% 14 49,000,000 12.7 9.9 1.02 92.27 6.85
7.000% to 7.249% 15 49,000,000 12.7 9.9 1.07 88.59 7.10
7.250% to 7.499% 29 118,000,000 30.7 24.0 1.04 86.58 7.36
7.500% to 7.749% 23 57,000,000 14.7 11.5 1.08 77.79 7.58
7.750% to 7.999% 21 65,000,000 16.9 13.2 1.06 92.92 7.87
8.000% to 8.249% 7 43,000,000 11.1 8.7 1.01 87.04 8.10
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average gross coupon rate as of the Cut-Off Date is 7.46%
ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
ORIGINAL TERM TO LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
MATURITY BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
120 to 179 months 11 42,000,000 10.95% 8.6% 1.08x 73.54% 7.32%
180 to 239 months 66 174,000,000 45.22 35.3 1.05 82.28 7.52
240 to 299 months 21 113,000,000 29.25 22.8 1.05 88.16 7.52
- ----------------------------------------------------------------------------------------------------------------------
300 to 360 months 12 56,000,000 14.58 11.4 1.01 96.70 7.25
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average original term to maturity as of the Cut-Off Date is 247
months.
<PAGE>
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
REMAINING TERM TO LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
MATURITY BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
60 to 119 months 1 $11,000,000 2.8% 2.2% 1.00x 75.86% 7.25%
120 to 179 months 11 33,000,000 8.6 6.7 1.08 72.87 7.35
180 to 239 months 75 200,000,000 51.8 40.5 1.04 86.68 7.50
240 to 299 months 22 137,000,000 35.6 27.8 1.05 92.24 7.46
300 to 360 months 1 5,000,000 1.3 1.0 1.00 94.65 6.98
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average remaining term to maturity as of the Cut-Off Date is 233
months.
LOAN-TO-LEASED FEE VALUE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
LOAN-TO-LEASED FEE VALUE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
45.0% to 49.9% 1 $1,000,000 0.3% 0.2% 1.04x 45.30% 7.57%
50.0% to 54.9% 1 1,000,000 0.3 0.2 1.00 52.20 7.12
60.0% to 64.9% 1 1,000,000 0.3 0.3 1.37 64.12 7.29
65.0% to 69.9% 7 15,000,000 4.0 3.1 1.08 68.00 7.58
70.0% to 74.9% 7 21,000,000 5.6 4.4 1.23 72.58 7.59
75.0% to 79.9% 18 77,000,000 19.9 15.6 1.06 77.52 7.55
80.0% to 84.9% 29 80,000,000 20.7 16.2 1.05 82.94 7.41
85.0% to 89.9% 22 76,000,000 19.8 15.5 1.02 87.99 7.62
90.0% to 94.9% 10 44,000,000 11.5 9.0 1.01 92.77 7.53
95.0% to 99.9% 11 50,000,000 13.1 10.2 1.02 96.90 7.24
100.0% to 109.9% 3 17,000,000 4.5 3.5 1.00 101.60 6.76
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average loan-to-leased fee value as of the Cut-Off Date is 87.27%
<PAGE>
LOAN-TO-DARK VALUE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
LOAN-TO-DARK VALUE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Less than 75% 6 $9,000,000 2.4% 1.9% 1.01x 82.65% 7.39%
75.0% to 99.9% 14 60,000,000 15.5 12.1 1.06 81.47 7.50
100.0% to 109.9% 24 75,000,000 19.6 15.3 1.04 82.58 7.55
110.0% to 119.9% 32 111,000,000 28.8 22.5 1.07 89.36 7.56
120.0% to 129.9% 12 57,000,000 14.9 11.7 1.02 86.27 7.40
130.0% to 139.9% 13 39,000,000 10.1 7.9 1.05 93.10 7.38
140.0% to 149.9% 6 16,000,000 4.1 3.2 1.02 95.18 7.05
150.0% to 159.9% 2 12,000,000 3.2 2.5 1.00 101.81 6.76
160.0% to 169.9% 1 5,000,000 1.4 1.1 1.00 94.54 7.47
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average loan-to-dark value as of the Cut-Off Date is 114.26%
DEBT SERVICE COVERAGE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL ORIGINAL LOAN-TO-LEASED GROSS
DEBT SERVICE COVERAGE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.000x to 1.009x 37 $188,000,000 48.8% 38.1% 1.00x 92.73% 7.49%
1.010x to 1.019x 3 14,000,000 3.6 2.8 1.02 91.47 6.97
1.020x to 1.029x 4 11,000,000 2.9 2.3 1.02 73.66 7.60
1.030x to 1.039x 26 72,000,000 18.7 14.6 1.03 83.88 7.44
1.040x to 1.049x 2 4,000,000 1.0 0.8 1.04 86.45 7.28
1.050x to 1.059x 22 40,000,000 10.4 8.1 1.05 81.61 7.54
1.070x to 1.079x 1 2,000,000 0.4 0.3 1.07 74.79 7.89
1.080x to 1.089x 2 4,000,000 1.0 0.8 1.08 78.72 7.63
1.090x to 1.099x 1 8,000,000 2.1 1.7 1.10 95.74 7.32
1.100x to 1.199x 5 15,000,000 3.8 3.0 1.13 79.40 7.32
1.200x to 1.499x 7 27,000,000 7.1 5.6 1.32 74.02 7.42
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 87.27% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Debt service coverage is the ratio of total net rents during the loan term to
total debt service during the loan term. Total net rents are calculated by
deducting total loan-level reserves and total ground rents, if any, from total
gross rents.
* The weighted average debt service coverage as of the Cut-Off Date is 1.05x
<PAGE>
ORIGINATION
COMPANY: CLF developed the proprietary Hybrid Corporate Bond Lease
Program (the "Program"), in addition to related products,
for the express purpose of providing credit based financing
to owners of single tenant properties net leased pursuant to
Credit Leases.
TENANTS: All tenants or their respective Credit Lease guarantors are
Investment Grade or have received an Internal Private
Classification of at least BBB- from each of S&P and Duff
with the exception of Circuit City Stores, Inc. and
MedPartners, Inc. Circuit City has an Internal Private
Classification indicating credit with characteristics
consistent with a rating of "BB-" or better. MedPartners has
a long-term credit rating from S&P of BB-. The average
corporate unsecured debt rating for the CLF loans in the
pool is "A-".
All corporate credit tenants, particularly those rated BBB
and below, are independently underwritten by CLF as to their
rating trends (up or down), industry trends, and market
position.
<PAGE>
LOAN
o UNDERWRITING: CLF's loan underwriting is centralized to
ensure consistent quality and involves in-depth analysis by
both internal and external specialists of the corporate
credit being financed, the quality of the lease, and value
of the underlying real estate on both a leased fee and "as
dark" basis. CLF's due diligence typically includes a credit
evaluation, a legal analysis of each lease, an assessment of
condemnation and casualty risks, reviews of landlord
obligations, reviews of third-party reports (environmental,
engineering, appraisal), residual risk exposure (for
amortization loans) , borrower structure, reviews
of loan closing documents, and confirmation with applicable
rating agencies of each tenant's credit rating.
<PAGE>
LOAN COLLATERAL AND BORROWER STRUCTURE
LOAN TERMS: All mortgage loans (with one exception) are fully-amortizing
either before or, co-terminus with the primary term, or in
some cases the first renewal period, of the related Credit
Lease.
CALL PROTECTION: Generally, eight years of lockout followed by yield
maintenance, flat to Treasuries, for the balance of the
mortgage loan term.
SECURITY: All mortgage loans are secured by:
o lock box assignments of leases and rents;
o first mortgages on fee or leasehold interests in the
related premises; and
o a security interest in funds on deposit in reserve
accounts.
BORROWER TYPE: Generally special-purpose entities organized in accordance
with standard rating agency criteria. Bankruptcy-remote
opinions are generally required at origination for all
mortgage loans of more than $5,000,000 (and for all mortgage
loans made to borrowers/landlords with aggregate Program
debt of more than $5,000,000).
<PAGE>
LEASE STRUCTURE
QUALIFIED LEASES: Only Credit Leases of the types listed and described below
are eligible for financing under the Program and are
included in the Pool.
o Bond-Type. The tenant does not have termination or
abatement rights pursuant to the Credit Lease absent a
termination payment that is sufficient to fully prepay
the related loan.
o Triple Net. The tenant may terminate the Credit Lease
or abate rent following a defined condemnation or
casualty event, but generally for no other reason.
o Double Net. The tenant may terminate the Credit Lease
or abate rent following a defined condemnation or
casualty, or following borrower/landlord default with
respect to certain obligations (primarily maintenance
and repairs) under the Credit Lease.
<PAGE>
LEASE ENHANCEMENT MECHANISMS
CLF UTILIZES AN INTEGRATED PROGRAM OF CREDIT LEASE ENHANCEMENT MECHANISMS TO
CREATE A HYBRID CORPORATE BOND BY ENSURING THAT THERE ARE NO INTERRUPTIONS IN
THE CORPORATE CREDIT TENANT'S RENTAL STREAM DUE TO REAL ESTATE RELATED EVENTS.
LEASE ENHANCEMENT Non-cancelable insurance policies have been issued by the
INSURANCE POLICIES: Lease Enhancement Insurance Policy Provider for triple net
and double net leases. In the event a tenant exercises a
termination or abatement right following a condemnation or
casualty event, the Lease Enhancement Insurance Policy
Provider will either (i) make a cash payment as a
replacement for any lost monthly rent or (ii) fully prepay
the mortgage loan, at par.
LEASE SUPPORT In the event of borrower/landlord default with respect to
ACTIONS: obligations under the Credit Lease, the Servicer or Special
Servicer, as applicable, will use its best efforts to
satisfy those obligations to prevent the tenant from
exercising its termination or abatement rights. Lease
Support Actions may include, but are not limited to,
performance of required maintenance and repairs and
initiation and maintenance of appropriate legal actions. The
Servicer and Special Servicer have access to reserve account
funds and, when necessary, are obligated to advance their
own funds (subject to recoverability) and are prohibited
from foreclosure until the Servicer advances exceed 60% of
the dark value of the property.
<PAGE>
BORROWER RESERVE Reserve accounts are established based on an engineering
ACCOUNTS: survey by CLF selected professional third-party engineering
consultants and funded on a monthly basis for mortgage loans
relating to double net leases with quantifiable landlord
obligations. The deposits to these accounts generally
provide at least 125% of the anticipated, inflation-adjusted
costs of maintenance, repair and replacement to the related
premises as they occur. In addition, double net leases are
generally underwritten with debt service coverage in excess
of that required or reserves and principal and interest
payments.
EXPENSE RESERVE CLF provides for a trust-level account to be established and
ACCOUNT: funded on a monthly basis. The deposits made thereto will be
available for Lease Support Actions, trust expenses,
recoverable and non-recoverable advances, prepayment
interest shortfalls and credit support. Unless drawn upon,
the Expense Reserve Account will grow to approximately $2.4
million over the life of the transaction without
consideration of reinvestment income.
<PAGE>
LEASE ENHANCEMENT SUMMARY
<TABLE>
<CAPTION>
TERMINATION OR ABATEMENT
LEASE TYPE EVENT MITIGANT LEASE AS ENHANCED
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bond-Type None Not applicable Not applicable
Triple Net* Condemnation or casualty Non-cancelable insurance policy Bond-Type Equivalent
with AAA-rated insurer
Double Net* (1) Condemnation or (1) Non-cancelable insurance Bond-Type Equivalent
casualty policy with AAA-rated insurer
(3) Maintenance/repair (3) Escrows equal to 125% of
provision violation consultant's estimate for
maintenance/repairs
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Any Triple Net and Double Net Leases that contain lease provisions other than
casualty or condemnation that could lead to a tenant's right to terminate the
lease or abate rent thereunder have the protection provided by the Servicer's
Lease Support Actions and the AA rated backstop thereto.
<PAGE>
EXTENDED AMORTIZATION MECHANISM
CTL loans that amortize through the first renewal period of the related Credit
Lease each receive the benefit of an individual insurance policy issued by the
Extended Amortization Insurance Policy Provider. Continued debt service on or
repayment of such mortgage loans is thus insured in the event the related tenant
elects not to renew their lease.
EXTENDED Transactions which meet Program underwriting standards may
AMORTIZATION also be eligible for financing through CLF's Extended
PROGRAMsm LOANS: Amortization Program (the "EAPsm"). With one exception (a
balloon mortgage), EAP loans fully amortize either before or
co-terminus with the first renewal period of the related
Credit Lease.
INSURANCE POLICY: In order to eliminate the risk of debt service interruption
due to a tenant non-renewal event, a non-cancelable Extended
Amortization Insurance Policy is underwritten for each EAP
loan.
POLICY PROVIDER: In the event of (i) non-renewal of the Credit Lease and (ii)
borrower/landlord default under the related loan, the
Extended Amortization Insurance Policy Provider (whose
financial strength is rated "AAA" by S&P) must either (a)
fully prepay the loan, with yield maintenance (subject to a
5% cap), or (b) make monthly payments in an amount equal to
the debt service payments due during the extended
amortization period.
<PAGE>
LOAN APPROVAL AND CLOSING PROCESS
LEASE AND CTL loan approval, each Credit Lease is reviewed by a
LOAN REVIEW: trained CLF underwriter using comprehensive underwriting
guidelines developed through consultation with legal and
financial advisors, investors and rating agencies. The
Credit Lease is reviewed specifically to identify and
quantify, as applicable, the risks associated with tenant
termination or abatement rights resulting from condemnation
and casualty events and borrower/landlord default with
respect to obligations under the Credit Lease.
CREDIT REVIEW: Each credit is reviewed by experienced finance specialists
and the ratings confirmed by the rating agencies.
LOAN REVIEW After an application has been reviewed and a deposit has
COMMITTEE: been received, CLF convenes a loan review committee (made up
of CLF's senior managers) in order to determine whether or
not the transaction meets Program underwriting criteria.
Following the completion of due diligence, the loan review
committee is reconvened for issuance of ultimate mortgage
loan approval or rejection.
<PAGE>
APPLICATION AND Once the application has been accepted, full due diligence
DUE DILIGENCE: is commenced which includes:
o the engagement of CLF-approved or CLF-selected
third-party valuation and environmental consulting
firms and, in the case of double net leases, structural
engineering consulting firms;
o a review and summary of Credit Lease termination and
abatement rights and respective mitigating
enhancements;
o an analysis of the borrower, with electronic background
checks;
o a review of title, survey, etc.;
o a review of the Credit Lease and related premises by
the Lease Enhancement Policy Provider;
o a review of the Credit Lease and third-party reports by
the Servicer; and
o for EAP mortgage loans, a review of the Credit Lease
and valuation report by the Extended Amortization
Insurance Policy Provider.
CLOSING: CTL loans are closed in accordance with pre-defined Program
requirements, including comprehensive borrower/landlord,
premises and tenant/guarantor criteria. Standard
securitization-oriented documentation is used.
<PAGE>
COMPARISON TO LONG-TERM, SENIOR UNSECURED CORPORATE DEBT AND CMBS
The long-term, senior unsecured debt of a corporation is the unconditional
promise of that corporation to make a stream of payments in accordance with the
terms of a bond. Typically senior unsecured debt pays interest only on a
semi-annual basis with principal returned at maturity. In the event of a bond
default, the holders are unsecured and generally recover only against the
unsecured assets of the corporation. Like corporate bonds, the loans originated
under the Enhanced Lease Program contain the unconditional obligation of the
Credit Lease Tenants to make a stream of monthly rental payments, subject only
to certain specified real estate related termination or rent abatement rights
and subject to the right of the credit tenant reject the lease in the event of
bankruptcy. Although corporate bonds do not have the risks associated with the
termination or abatement rights that are contained in many of the Credit Leases
that back the certificates, the Program substantially reduces or eliminates
these real estate related risks. Moreover, unlike long-term, senior unsecured
corporate debt, CTL Loans are self-amortizing and secured by first mortgage
liens. The combination of amortization and security coupled with the strong
financial incentives of the underlying borrower to protect the loan in the event
of a credit tenant default provide the possibility of increasing expected
recoveries to certificate holders that might otherwise be available to such
certificate holders if they held the unsecured corporate bonds of that same
corporate credit. CTL loans also have substantial call protection in the form of
eight year lock-outs followed by yield maintenance flat to US Treasuries for the
duration of the loan.
The certificates also compare favorably in certain respects to commercial
mortgage-backed securities ("CMBS") in terms of credit, prepayment risk and
recovery. CMBS pools generally consist of an aggregation of real estate loans.
Typically, such real estate loans are underwritten based on the value of the
underlying real estate and the strength of the borrower. Amortization periods
usually exceed the term of the loan by a significant amount (10 year terms with
25 or 30 year amortization periods) leaving the balance of the loan (up to 70%)
to be retired at maturity either by refinancing or from the resources of the
borrower. Timeliness of payment and ultimate recovery on real estate loans is
affected by many factors including, the financial strength or lack thereof of
the borrower, the ability of the borrower to refinance the loan at maturity, the
stability of the cash flow from the tenants at the property, the quality of the
leases, and the uncertainties of the real estate and economic cycles.
By comparison to CMBS, the credit quality of the cash flows on all the CTL
loans is defined by the credit quality of the generally single tenant subject to
the long term lease. The risks to interruptions in credit tenant cash flows (and
thus loan payments) is reduced by limiting eligible Credit Lease Tenants to
primarily Investment Grade credits, whose financial strength reduces the risk of
default over a business cycle as compared with non-investment grade tenants.
With the exception of Circuit City and MedPartners, all of the credit tenants in
the pool are Investment Grade, and including all the CTL loans, the average
credit rating is A-. The Investment Grade credit quality of the credit tenants
coupled with the amortizing nature of the credit lease loans and strong call
protection insulate the certificate holders from risks of voluntary or
involuntary prepayments on the mortgage loans.
<PAGE>
CREDIT TENANT LEASE (CTL) LOAN OVERVIEW
o CASH FLOWS: CTL Loans utilize the credit tenant's fixed and predictable
rent stream to pay principal and interest. All tenant rent is lock boxed at
Midland and applied to debt on the due date as well as to scheduled
reserves, if any. The credit tenant pays all property expenses directly or
indirectly.
o CREDIT QUALITY: CTL loan pool has average A- rated credit tenants.
o COLLATERAL: Each CTL loan is collateralized by an absolute assignment of
the credit tenant lease and a first mortgage.
o REAL ESTATE RISK: Performance of the loan depends upon the tenant's
uninterrupted rent stream. Risk of interruption of the tenant's rent as a
result of a real estate related event is eliminated/mitigated by bond or
enhanced bond-type leases.
o CALL PROTECTION: Voluntary prepayment is prohibited for eight years and
permitted thereafter only with a yield maintenance penalty calculated at
flat to U.S. Treasuries.
o AMORTIZATION: Each CTL loan fully amortizes over the term of the underlying
credit tenant lease or if not, then the outstanding balance at the end of
the tenant's initial lease term is fully insured by a subsidiary of
Berkshire Hathaway.
o DEFAULT RISK: S&P static pool cumulative default (default being defined as
the first occurrence of a payment default on any financial obligation)
studies indicate that default probability after ten years for AA, A, BBB,
BB and B credits are 1.00%, 1.76%, 3.71%, 15.07% and 25.55%, respectively.
Standard & Poor's Credit Week, January 28, 1998.
o EVENT RISK: Both S&P and Moody's default studies clearly show that credit
migration (up or down) is almost always a gradual process measured in
years. Sudden defaults of investment grade credits are essentially zero.
For the very small number of credits that do default, according to S&P the
average time from the original rating to default is 7.4, 7.6, 6.6, 5.1, and
3.7 years for AA, A, BBB, BB and B rated credits, respectively. Standard &
Poor's Credit Week, January 28, 1998.
o RECOVERIES: In the unlikely event a credit tenant defaults, potential
recoveries on the underlying CTL loan are enhanced by the amortizing nature
of the loan, the high quality of the mortgaged real estate, and incentives
present for both the tenant to continue to operate the property in case of
a bankruptcy and the borrower to protect the loan in the event of a
rejection of the lease in bankruptcy by the tenant.
<PAGE>
LOAN POOL SUMMARY - LONG TERM CONDUIT
SUMMARY CHARACTERISTICS
- --------------------------------------------------------------------------------
DESCRIPTION
INITIAL POOL BALANCE $108,000,000
AVERAGE BALANCE AS OF CUT-OFF DATE $6,000,000
WTD. AVG. UNDERWRITING DSCR(1) 1.38X
WTD. AVG. CUT-OFF DATE LTV RATIO(2) 60.8%
WTD. AVG. MATURITY DATE LTV RATIO(3) 19.6%
WTD. AVG. MORTGAGE RATE 7.58%
WTD. AVG. ORIGINAL TERM TO MATURITY 17 YEARS 10 MONTHS
WTD. AVG. REMAINING TERM TO MATURITY 16 YEARS 8 MONTHS
WTD. AVG. AGE 1 YEAR 2 MONTHS
WTD. AVG. ORIGINAL AMORTIZATION TERM 22 YEARS 5 MONTHS
WTD. AVG. REMAINING AMORTIZATION TERM 21 YEARS 3 MONTHS
- --------------------------------------------------------------------------------
(1) Ratio of underwritten property net cash flow to annual debt service
(2) Ratio of scheduled balance at Cut-off Date to appraised property value
(3) Ratio of scheduled balance at maturity to appraised property value
<PAGE>
STRATIFICATION TABLES
CUT-OFF DATE BALANCE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF DATE OF MORTGAGE OF CUT-OFF CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
BALANCES LOANS DATE (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0 to $999,999 1 $1,000,000 0.9% 0.2% 1.20x 25.79% 7.13%
$1,000,000 to $1,999,999 3 5,000,000 4.5 1.0 1.23 75.11 7.58
$2,000,000 to $2,999,999 5 12,000,000 11.2 2.4 1.29 62.29 7.32
$3,000,000 to $3,999,999 3 10,000,000 9.2 2.0 1.30 61.37 7.31
$4,000,000 to $4,999,999 1 5,000,000 4.6 1.0 1.54 55.03 7.43
$5,000,000 to $7,499,999 3 17,000,000 16.0 3.5 1.20 72.12 7.63
$10,000,000 to $14,999,999 1 14,000,000 13.3 2.9 1.25 74.23 7.21
$35,000,000 to $45,000,000 1 44,000,000 40.3 8.8 1.54 51.23 7.86
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROPERTY TYPE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGED OF CUT-OFF CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF DATE MORTGAGE
PROPERTIES DATE (000'S) BALANCE BALANCE DSCR LTV RATIO RATE
PROPERTY TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail 11 $76,000,000 70.6% 15.5% 1.41x 60.49% 7.73%
Office 2 18,000,000 16.3 3.6 1.28 72.06 7.24
Mobile Home 4 9,000,000 8.5 1.9 1.21 45.29 7.13
Hotel 1 5,000,000 4.6 1.0 1.54 55.03 7.43
- -----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
PROPERTY LOCATION LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SC 1 $44,000,000 40.3% 8.8% 1.54x 51.23% 7.86%
GA 1 14,000,000 13.3 2.9 1.25 74.23 7.21
TX 3 9,000,000 8.0 1.8 1.29 80.91 7.80
NC 3 7,000,000 6.2 1.4 1.28 73.82 7.78
FL 1 6,000,000 5.9 1.3 1.12 62.43 7.00
NM 1 6,000,000 5.1 1.1 1.25 73.62 7.67
CT 2 5,000,000 4.9 1.1 1.21 49.33 7.13
TN 1 5,000,000 4.6 1.0 1.54 55.03 7.43
NH 2 4,000,000 3.6 0.8 1.21 39.77 7.13
KS 1 3,000,000 3.2 0.7 1.28 69.52 7.44
MD 1 3,000,000 3.0 0.7 1.40 62.42 7.35
PA 1 2,000,000 1.8 0.4 1.25 71.25 7.50
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
MORTGAGE RATE
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
RANGE OF MORTGAGE RATES LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6.750% - 6.999% 1 $2,000,000 1.9% 0.4% 1.41x 79.24% 6.87%
7.000% - 7.249% 7 31,000,000 28.8 6.3 1.21 63.45 7.14
7.250% - 7.499% 4 14,000,000 13.1 2.9 1.42 62.85 7.40
7.500% - 7.749% 2 7,000,000 6.9 1.5 1.25 73.00 7.63
7.750% - 7.999% 1 44,000,000 40.3 8.8 1.54 51.23 7.86
8.000% - 8.499% 3 10,000,000 9.0 2.0 1.24 79.40 8.20
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
DSCR (1)
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
RANGE OF DSCRS LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.10x - 1.19x 1 $6,000,000 5.9% 1.3% 1.12x 62.43% 7.00%
1.20x - 1.29x 12 45,000,000 42.0 9.2 1.24 69.03 7.49
1.35x - 1.39x 1 2,000,000 2.2 0.5 1.38 69.83 7.32
1.40x - 1.49x 2 5,000,000 4.9 1.1 1.41 68.95 7.16
1.50x - 1.59x 2 49,000,000 44.9 9.8 1.54 51.62 7.81
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratio of underwritten property net cash flow to annual debt service
<PAGE>
CUT-OFF DATE LTV RATIO (1)
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF DATE OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
LTVS LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.0% - 29.9% 1 $1,000,000 0.9% 0.2% 1.20x 25.79% 7.13%
30.0% - 49.9% 2 5,000,000 4.6 1.0 1.21 44.86 7.13
50.0% - 59.9% 3 52,000,000 47.9 10.5 1.52 51.62 7.77
60.0% - 64.9% 2 10,000,000 8.9 1.9 1.22 62.43 7.12
65.0 % - 69.9% 2 6,000,000 5.5 1.2 1.32 69.65 7.39
70.0% - 74.9% 3 22,000,000 20.3 4.4 1.25 73.81 7.35
75.0% - 79.9% 4 8,000,000 6.9 1.5 1.28 77.39 7.56
80.0% - 84.9% 1 5,000,000 5.0 1.1 1.25 82.00 8.32
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratio of scheduled balance at Cut-off Date to appraised property value
MATURITY DATE LTV RATIO (1)
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF MATURITY DATE OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING MATURITY MORTGAGE
LTVS LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.0% - 29.9% 9 $71,000,000 66.1% 14.5% 1.42x 2.47% 7.63%
30.0% - 49.9% 3 9,000,000 8.7 1.9 1.43 37.57 7.42
50.0% - 59.9% 3 21,000,000 19.4 4.3 1.25 57.18 7.49
60.0% - 64.9% 3 6,000,000 5.9 1.3 1.29 61.44 7.66
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 19.59% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratio of scheduled balance at maturity to appraised property value
<PAGE>
ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
ORIGINAL TERM TO OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
MATURITY LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
180 11 $47,000,000 43.1% 9.4% 1.28x 71.28% 7.43%
240 7 62,000,000 56.9 12.5 1.46 52.95 7.70
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF REMAINING OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
TERMS LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
121 - 180 Months 11 $47,000,000 43.1% 9.4% 1.28x 71.28% 7.43%
181 - 240 Months 7 62,000,000 56.9 12.5 1.46 52.95 7.70
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ORIGINAL AMORTIZATION
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
ORIGINAL AMORTIZATION OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
TERM LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
180 1 $3,000,000 3.2% 0.7% 1.28x 69.52% 7.44%
240 9 70,000,000 64.7 14.2 1.42 54.33 7.63
300 4 14,000,000 12.9 2.8 1.37 70.06 7.72
360 4 21,000,000 19.2 4.2 1.26 75.11 7.35
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
GENERAL
o Each Mortgage Loan was originated or, in certain cases, purchased pursuant
to the NationsBank multifamily and commercial mortgage conduit. NationsBank
loans are originated utilizing exclusive internal underwriting and
third-party origination networks. Since 1995, NationsBank has securitized
more than $6 billion of NationsBank loans.
ORIGINATION/ACCUMULATION
o The NationsBank Permanent Loan Group (the "PLG") was formed in 1995 for the
express purpose of underwriting commercial mortgage loans which satisfy
NationsBank lending criteria. Currently, the PLG operates from 10 offices
located across the United States.
o Similarly, NationsBank originates health care loans which are underwritten
by the NationsBank Healthcare Banking Group (the "HCBG"). The HCBG
specializes in arranging financing for the health care industry, and in
1997 underwrote more than $83 million in NationsBank loans.
o Additionally, conduit relationships have been established between
NationsBank and a select group of third-party mortgage loan originators
(each, a "Third-Party Originator"). Third-Party Originators, all of which
are mortgage banking or banking firms with established credit policies,
include Bankers Mutual Mortgage, Inc., Berkshire Mortgage Finance, First
Security Bank, N.A., L.J. Melody & Company, The Patrician Financial Company
and The WMF Group. In the aggregate, these partners originated
approximately $1.5 billion in NationsBank loans in 1997.
<PAGE>
UNDERWRITING
o Each Mortgage Loan was originated against standard underwriting targets. In
order to ensure quality and consistency, NationsBank officers participate in
the entire underwriting review process. Moreover, NationsBank officers
regularly host underwriting forums for all underwriters and originators.
TARGETED UNDERWRITING SUMMARY
LOAN SIZE MINIMUM MAXIMUM AVAILABLE MAXIMUM
PROPERTY TYPE ($MM) DSCR LTV RATIO TERMS AMORTIZATION
- --------------------------------------------------------------------------------
Multifamily $0.5 - $50 1.20x 80% 84 - 180 Mos 360 Mos
Retail $0.5 - $50 1.25x 80% 84 - 180 Mos 360 Mos
Office $0.5 - $50 1.25x 75% 84 - 180 Mos 360 Mos
Health Care $0.5 - $25 1.30x 75% 84 - 180 Mos 360 Mos
Franchise $0.5 - $50 1.25x 75% 84 - 120 Mos 240 Mos
Hotel $0.5 - $35 1.35x 75% 84 - 180 Mos 300 Mos
Industrial $0.5 - $25 1.25x 75% 84 - 180 Mos 360 Mos
Mini Storage $0.5 - $15 1.30x 75% 84 - 180 Mos 300 Mos
Golf Course $1 - $20 1.40x 70% 84 - 120 Mos 300 Mos
- --------------------------------------------------------------------------------
<PAGE>
PARTICIPANTS
CAPITAL LEASE FUNDING, L.P. is a Loan Seller and a New York-based commercial
mortgage lender specializing in financing commercial real estate leased under
long-term net leases to corporate tenants who are, or whose obligations under
such leases are guaranteed by, corporations whose credit is Investment Grade or
carries an Internal Private Classification. CLF financed more than $129 million
of Credit Leases through a capital markets transaction in January 1997.
LEXINGTON INSURANCE COMPANY ("Lexington") issues non-cancelable Lease
Enhancement Insurance Policies which provide for monthly debt service payments
or full Loan prepayment, at par, in the event of rent abatement or termination,
respectively, following a condemnation or casualty event. Lexington is a
subsidiary of AIG. The financial strength of Lexington has been rated "AAA" by
S&P.
COLUMBIA INSURANCE COMPANY ("Columbia") is the Extended Amortization Insurance
Policy Provider. Columbia issues non-cancelable insurance policies which insure
the performance of CTL loans that are scheduled to amortize beyond the initial
term of the related Credit Lease. Columbia is a subsidiary of Berkshire
Hathaway, Inc. and carries a financial strength rating of "AAA" from S&P.
LASALLE NATIONAL BANK ("LaSalle") is the Trustee. LaSalle is a
nationally-chartered bank with principal offices in Chicago, Illinois. LaSalle
is rated "AA-" by S&P.
ABN AMRO BANK N.V., ("ABN") is the Fiscal Agent. ABN is based in the Netherlands
and is the corporate parent of LaSalle. ABN is rated "AA" by S&P.
<PAGE>
CONFIDENTIAL
NATIONSLINK FUNDING CORPORATION
COMMERCIAL LOAN
PASS-THROUGH CERTIFICATES
SERIES 1999-LTL-1
$493,000,000 (APPROXIMATE)
FIRST QUARTER 1999
<PAGE>
NOTICE TO RECIPIENTS
This material is being provided to you by NationsBanc Montgomery
Securities LLC ("NMS") for your private information only, and relates only to
certain credit lease-backed and long term conduit real estate mortgage loans
(the "Loans"). Although this material is based on information NMS considers
reliable, neither NMS nor any of their affiliates make any r presentation that
it is accurate or complete, and it should not be relied upon as such.
Information contained in this material is current as of the date appearing on
this material only. The information contained in this material may be based on
assumptions regarding market conditions and other matters reflected herein.
Neither NMS nor any of their affiliates make any representation 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.
By accepting this material, you agree that you will not distribute or
provide this material to any other person. You are encouraged to conduct your
own due diligence with respect to the Loans, and reference is made to such
actual loan documents for the terms and conditions of such Loans. Neither NMS
nor any of their affiliates is soliciting action from you based upon this
material.
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. In the event any of the Loans described
in this material are actually securitized, the securities backed by such Loans
will be offered to you, if at all, only pursuant to a final public prospectus or
private placement memorandum and, in such event, any information in this
material will be superseded in its entirety by the information contained in such
final prospectus or memorandum. You are urged to read any such final prospectus
or memorandum in its entirety prior to making any investment decision with
regard to securities that may be backed by such Loans.
<PAGE>
DEAL SUMMARY
DEAL OVERVIEW
o NationsBanc Montgomery Securities LLC ("NMS") will act as lead manager in a
securitization of approximately 110 credit leased backed commercial
mortgage loans, with a projected aggregate principal cutoff balance of
$385,000,000 and 18 long term conduit commercial mortgage loans, with an
aggregate principal cutoff balance of $108,000,000 as of February 1, 1999
(the "Cut-off Date"). It is further expected that this transaction will
settle in early 1999.
o The credit tenant lease loans ("CTL Loans") for this transaction were
originated and underwritten by Capital Lease Funding, L.P. (CLF) and
NationsBank, N.A. ("NationsBank") and are being contributed by CLF, and the
conduit mortgage loans are being contributed by NationsBank. Each mortgage
loan seller will make representations and bear all repurchase obligations
with regard to its loans only.
o Collateral tables appearing in this package set forth anticipated
characteristics of all Loans expected to be included in this transaction in
the aggregate, and separately for CLF (Credit Lease) loans, and NationsBank
(Long Term Conduit) loans.
<PAGE>
PRELIMINARY PROFORMA STRUCTURE DESCRIPTION
<TABLE>
<CAPTION>
PRINCIPAL EXPECTED
EXPECTED APPROXIMATE APPROXIMATE CREDIT EXPECTED REPAYMENT EXPECTED DOLLAR
CLASS RATING CLASS SIZE % OF TOTAL SUPPORT WAL* WINDOW* COUPON PRICE
S&P/DCR
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 AAA/AAA $70,000,000 14.3% 19.5% 3.0 1 - 66 TBD TBD
A-2 AAA/AAA 194,000,000 39.4 19.5 10.0 66 - 163 TBD TBD
A-3 AAA/AAA 132,000,000 26.8 19.5 15.3 163 - 209 TBD TBD
I/O AAA/AAA 493,000,000 19.5 12.4 TBD TBD
B AA/AA 26,000,000 5.3 14.3 17.8 209 - 219 TBD TBD
C A/A 21,000,000 4.3 10.0 18.7 219 - 231 TBD TBD
D BBB/NR 31,000,000 6.3 3.8 20.7 231 - 267 TBD TBD
E BB/NR 11,000,000 2.3 1.5 22.7 267 - 279 TBD TBD
F B/NR 4,000,000 .8 .8 23.5 279 - 285 TBD TBD
G UR 4,000,000 .8 24.2 285 - 300 TBD TBD
TOTAL/WA $493,000,000 100.0% 100.0%
</TABLE>
* Assumes 0% CPR
o Principal payments will be applied to each class entitled thereto on a
sequential basis.
<PAGE>
DEAL SUMMARY
SECURITIES DESCRIPTION
TRANSACTION: NationsLink Funding Corporation Long Term Commercial Loan
Pass-Through Certificates;
TYPE OF OFFERING: Public Bond Offering on Certificates rated AA and above,
Private Placement with resale under Rule 144A for
Certificates rated below AA;
CUT-OFF DATE: February 1, 1999;
TAX ELECTION: REMIC;
BOND COUPONS: TBD;
INTEREST
CALCULATION: 30/360 basis;
LOSSES: Any losses will be applied to the most subordinate class of
Certificates then outstanding.
<PAGE>
DEAL SUMMARY
PARTICIPANTS
DEPOSITOR: NationsLink Funding Corporation;
LOAN SELLERS: Capital Lease Funding, L. P., and NationsBank, N.A.;
PLACEMENT AGENT: NationsBanc Montgomery Securities LLC;
SERVICER: Midland Loan Services, Inc.
SPECIAL SERVICER: Midland Loan Services, Inc.
TRUSTEE: LaSalle National Bank, which also serves as back-up
servicer;
FISCAL AGENT: ABN AMRO Bank N.V.;
LEASE ENHANCEMENT
INSURANCE POLICY
PROVIDER: Lexington Insurance Company (AAA rated subsidiary of AIG)
EXTENDED
AMORTIZATION
INSURANCE POLICY
PROVIDER: Columbia Insurance Company (AAA rated subsidiary of
Berkshire Hathaway)
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
Capital Lease Funding, L.P. is a New York-based lender specializing in
originating, underwriting, pooling and financing commercial properties which are
long-term net leased to credit tenants. Such credit tenants generally have a
long-term credit rating from S&P of BBB- or better or carry an Internal Private
Classification of at least BBB- or better from each of S&P and Duff & Phelps
Credit Rating Company. CLF has on a selective basis financed properties having
credit tenants with long term credit ratings from S&P or Internal Private
Classifications of BB- or better, and the pool contains nine such loans.
CLF pioneered the enhancement of net leases with credit tenants to bond type
status. CLF's enhancement mechanisms and underwriting methods have become the de
facto rating agency and industry standards for these types of loans. It
securitized the first multi-credit tenant mortgage pool collateralized by both
bond and bond-type credit tenant leases in February 1997. The $130MM pool for
that transaction included 13 investment grade tenants (rated BBB- or better) and
30 loans, has had no delinquencies or defaults to date. Since 1997, CLF has
financed or committed to finance over $850MM of credit tenant loans ("CTL") with
over 40 credit tenants and has had no defaults to date. All CLF loans are
originated and centrally underwritten by a team of credit lease finance
specialists.
Through its lease enhancement programs, CLF is able to mitigate real estate
event risks in triple and double net leases to ensure that the rent stream which
provides the cash flow for debt service and loan amortization is uninterrupted
by certain real estate or borrower related events.
<PAGE>
CLF utilizes a broad array of enhancement mechanisms, including reserves,
recourse provisions, specialized insurance with AAA- rated companies and
backstop servicing with AA- rated (minimum) companies, to mitigate specific
event risks and ensure performance of certain borrower/landlord obligations.
With the exception of eight loans which have an approximate total cutoff balance
$57,000,000 which represent 14.8% of the credit lease loans and 11.6% of all
loans in the securitization, all of the Credit Lease Loans fully amortize over
the initial term of the associated credit lease. Any loan structured with an
amortization that exceeds the lease term is insured pursuant to a specialized
insurance policy provided by Columbia Insurance Company which insures payment of
principal and interest on the loan (or prepayment with yield maintenance up to
5%) in the event of a tenant non-renewal and subsequent borrower default.
The underlying mortgaged properties are generally of new construction and are
stand alone.
The weighted average credit rating of the tenants or guarantors securing the CTL
Loans is "A-".
Over half of the leases relating to the CTL loans are guaranteed by a guarantor
in the Retail Drug, Retail Grocery, Food Service or Energy sector.
The top five credit tenants in terms of pool concentration are all public
corporations with long term credit ratings from S&P of BBB+, A-, A, AA- and A,
respectively.
o All numerical information provided herein with respect to the Loans is
provided on an approximate basis and is based on characteristics of the
Loans estimated as of the Cut-Off Date.
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
SUMMARY CHARACTERISTICS
GENERAL
POOL BALANCE $385,000,000
AVERAGE $3,500,000
AVERAGE TENANT/GUARANTOR RATING A-
WTD. AVG. GROSS COUPON 7.46%
WTD. AVG. ORIGINAL TERM TO MATURITY 20 Years 7 Months
WTD. AVG. REMAINING TERM TO MATURITY 19 Years 5 Months
WTD. AVG. ORIGINAL AMORTIZATION TERM 20 Years 7 Months
WTD. AVG. REMAINING AMORTIZATION TERM 19 Years 5 Months
WTD. AVG. DEBT SERVICE COVERAGE 1.05x
WTD. AVG. LOAN-TO-LEASED FEE VALUE 85.2%
WTD. AVG. LOAN-TO-DARK VALUE 113.5%
<PAGE>
GUARANTOR / TENANT
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF
CREDIT OF CUT-OFF DATE CREDIT LEASE
TENANT / GUARANTOR RATING* LOANS (000'S) POOL
BALANCE
- ----------------------------------------------- --------------- ------------ ---------------- --------------
<S> <C> <C> <C> <C>
Rite Aid Corporation BBB+ 21 $37,000,000 9.6%
CVS Corporation A 16 35,000,000 9.2
Koninklijke Ahold, N.V. A 4 32,000,000 8.3
Home Depot U.S.A., Inc.(1) AA- 3 25,000,000 6.6
Eckerd Corporation A 12 25,000,000 6.5
Walgreen Co. A+ 8 24,000,000 6.1
Circuit City Stores, Inc. IPC-2 3 20,000,000 5.3
CareGroup, Inc. A 1 20,000,000 5.2
Blue Cross and Blue Shield of Texas, Inc. A 1 20,000,000 5.1
Wal-Mart Stores, Inc. AA 2 19,000,000 4.9
Food Lion, Inc. A- 3 17,000,000 4.5
Georgia Baptist Health Care System, Inc. IPC-1 1 12,000,000 3.1
KeyBank National Association A 1 11,000,000 2.8
The Pep Boys - Manny, Moe & Jack BBB- 5 10,000,000 2.5
John H. Harland Company IPC-1 1 9,000,000 2.5
Wegmans Food Markets, Inc. A- 1 8,000,000 2.1
McDonald's Corporation AA 5 6,000,000 1.4
The TJX Companies, Inc. BBB 1 6,000,000 1.4
MedPartners, Inc. BB- 1 5,000,000 1.4
Riggs Bank, N.A. BBB 1 5,000,000 1.4
Hanson North America, Inc. (1) A 1 5,000,000 1.4
WellPoint Health Networks, Inc. BBB+ 1 5,000,000 1.2
State of New Jersey AA+ 1 4,000,000 1.0
Tandy Corporation A- 1 4,000,000 1.0
Amoco Oil Company AA+ 3 3,000,000 0.9
American Drug Stores, Inc.(1) BBB+ 1 3,000,000 0.8
Bridgestone/Firestone, Inc. IPC-1 2 2,000,000 0.6
Exxon Corporation AAA 2 2,000,000 0.6
The Chase Manhattan Bank AA- 1 2,000,000 0.5
Hannaford Bros. Co. IPC-1 1 2,000,000 0.4
Boston Gas Company A 1 1,000,000 0.4
Sears, Roebuck & Co. A- 1 1,000,000 0.3
Mobil Oil Corporation AA 1 1,000,000 0.3
NationsBank, N.A. AA- 1 1,000,000 0.3
United States Postal Service IPC-1 1 1,000,000 0.2
- ----------------------------------------------- --------------- ------------ ---------------- --------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0%
</TABLE>
GUARANTOR / TENANT
<TABLE>
<CAPTION>
% OF WTD. AVG. WTD. AVG. WTD. AVG.
TOTAL POOL CUTOFF LOAN-TO-LEASED GROSS
TENANT / GUARANTOR BALANCE DSC FEE VALUE COUPON
- --------------------------------------------------------- ------------ ------------------ -------------
<S> <C> <C> <C> <C>
Rite Aid Corporation 7.5% 1.07x 80.65% 7.58%
CVS Corporation 7.2 1.07 84.18 7.62
Koninklijke Ahold, N.V. 6.5 1.10 86.10 7.36
Home Depot U.S.A., Inc.(1) 5.2 1.00 92.87 7.44
Eckerd Corporation 5.1 1.04 89.43 7.37
Walgreen Co. 4.8 1.06 82.60 7.11
Circuit City Stores, Inc. 4.1 1.05 86.48 8.04
CareGroup, Inc. 4.0 1.03 84.45 7.25
Blue Cross and Blue Shield of Texas, Inc. 4.0 1.00 75.60 7.98
Wal-Mart Stores, Inc. 3.8 1.01 93.12 7.04
Food Lion, Inc. 3.5 1.00 101.60 6.76
Georgia Baptist Health Care System, Inc. 2.4 1.00 89.68 8.16
KeyBank National Association 2.2 1.01 75.86 7.25
The Pep Boys - Manny, Moe & Jack 1.9 1.01 89.85 7.52
John H. Harland Company 1.9 1.03 90.21 8.03
Wegmans Food Markets, Inc. 1.7 1.00 81.17 7.50
McDonald's Corporation 1.1 1.01 75.15 7.24
The TJX Companies, Inc. 1.1 1.05 73.47 7.58
MedPartners, Inc. 1.1 1.00 77.29 7.48
Riggs Bank, N.A. 1.1 1.01 84.70 7.28
Hanson North America, Inc. (1) 1.1 1.04 94.54 7.47
WellPoint Health Networks, Inc. 0.9 1.00 76.90 6.73
State of New Jersey 0.8 1.69 72.94 7.54
Tandy Corporation 0.8 1.03 67.03 7.50
Amoco Oil Company 0.7 1.01 89.93 7.13
American Drug Stores, Inc.(1) 0.6 1.04 87.31 7.31
Bridgestone/Firestone, Inc. 0.5 1.08 84.38 7.93
Exxon Corporation 0.4 1.00 75.00 7.41
The Chase Manhattan Bank 0.4 1.10 69.39 7.40
Hannaford Bros. Co. 0.4 1.00 78.08 7.48
Boston Gas Company 0.3 1.13 66.81 7.29
Sears, Roebuck & Co. 0.3 1.00 87.25 7.06
Mobil Oil Corporation 0.3 1.00 74.35 6.95
NationsBank, N.A. 0.2 1.00 86.33 6.86
United States Postal Service 0.2 1.08 83.54 7.17
- --------------------------------------------------------- ------------ ------------------ -------------
TOTAL/WEIGHTED AVERAGE 78.1% 1.05x 85.15% 7.46%
- --------------------------------------------------------- ------------ ------------------ -------------
</TABLE>
* S&P Long Term Rating, "IPC" denotes an Internal Private Classification
indicating credit which meets parameters consistent with a rating "BBB-" or
better for "IPC-1", and BB- or better for "IPC-2".
(1) The rating shown is the rating of the parent company. Home Depot, Inc.,
Hanson PLC and American Stores Co., respectively.
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
GUARANTOR / TENANT PRIMARY INDUSTRY
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG.
OF CUT-OFF DATE CREDIT LEASE POOL TOTAL POOL CUTOFF
PRIMARY INDUSTRY LOANS (000'S) BALANCE BALANCE DSC
- ---------------------------------------------- ------------- ------------------ ------------------ ------------------ --------------
<S> <C> <C> <C> <C> <C>
Retail Drug 58 $124,000,000 32.3% 25.2% 1.06x
Healthcare Services 5 62,000,000 16.0 12.5 1.01
Retail Grocery 9 59,000,000 15.4 12.0 1.05
Retail Building Materials 4 31,000,000 8.0 6.2 1.01
Retail Electronics 4 24,000,000 6.3 4.9 1.05
Banking 4 19,000,000 5.0 3.9 1.02
Retail Discount & General Merchandise 2 19,000,000 4.9 3.8 1.01
Automotive 7 12,000,000 3.1 2.4 1.02
Printing 1 9,000,000 2.5 1.9 1.03
Energy 7 8,000,000 2.8 1.7 1.03
Food Service 5 6,000,000 1.4 1.1 1.01
Retail Apparel 1 6,000,000 1.4 1.1 1.05
Government 1 4,000,000 1.0 0.8 1.69
Department Stores 1 1,000,000 0.4 0.3 1.00
Post Office 1 1,000,000 0.2 0.2 1.08
- ---------------------------------------------- -------- ------------------ ------------------ ------------------ ------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x
- ---------------------------------------------- -------- ------------------ ------------------ ------------------ ------------------
</TABLE>
WTD. AVG. WTD. AVG. GROSS
LOAN-TO-LEASED COUPON
PRIMARY INDUSTRY FEE VALUE
- ----------------------------------------- --------------------- ----------------
Retail Drug 83.97% 7.45%
Healthcare Services 81.46 7.64
Retail Grocery 89.73 7.20
Retail Building Materials 93.16 7.44
Retail Electronics 83.45 7.96
Banking 78.32 7.25
Retail Discount & General Merchandise 93.12 7.04
Automotive 88.82 7.59
Printing 90.21 8.03
Energy 79.66 7.20
Food Service 75.15 7.24
Retail Apparel 73.47 7.58
Government 72.94 7.54
Department Stores 87.25 7.06
Post Office 83.54 7.17
- ----------------------------------------- ------------------ -----------------
TOTAL/WEIGHTED AVERAGE 85.15% 7.46%
- ----------------------------------------- ------------------ -----------------
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
GUARANTOR / TENANT CREDIT RATING*
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF CUMULATIVE OF % OF WTD. AVG.
OF CUT-OFF DATE CREDIT CREDIT TOTAL POOL CUTOFF
CREDIT RATING LOANS (000'S) LEASE POL POOL BALANCE DSC
BALANCE BALANCE
- ------------------------------------- ---------- ---------------- ------------- ------------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
AAA 2 2,176,906 0.6% 0.6% 0.4% 1.00x
AA+ 4 7,316,056 1.9 2.5 1.5 1.37
AA 8 25,622,806 6.7 9.1 5.2 1.01
AA- 5 28,668,571 7.4 16.6 5.8 1.01
A+ 8 23,603,377 6.1 22.7 4.8 1.06
A 37 149,522,684 38.8 61.5 30.3 1.05
A- 7 36,274,923 9.4 70.9 7.4 1.01
BBB+ 23 44,607,555 11.6 82.5 9.1 1.06
BBB 1 5,420,502 1.4 83.9 1.1 1.01
BBB- 5 9,592,858 2.5 86.4 2.0 1.01
BB- 1 5,487,777 1.4 87.8 1.1 1.00
IPC-1 6 26,382,261 6.6 94.7 5.4 1.02
IPC-2 3 20,452,972 5.3 100.0 4.2 1.05
- ------------------------------------- ---------- ---------------- ------------- -------------- ----------------- --------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 100.0% 78.1% 1.05x
- ------------------------------------- ---------- ---------------- ------------- -------------- ----------------- --------------
</TABLE>
WTD. AVG. WTD. AVG.
LOAN-TO-LEASED GROSS
CREDIT RATING FEE VALUE COUPON
- ------------------------------------- ----------------- --------------
AAA 75.00% 7.41%
AA+ 80.93 7.35
AA 88.26 7.08
AA- 90.94 7.41
A+ 82.60 7.11
A 83.99 7.49
A- 88.55 7.14
BBB+ 80.73 7.47
BBB 84.70 7.28
BBB- 89.85 7.52
BB- 77.29 7.48
IPC-1 88.45 8.02
IPC-2 86.48 8.04
- ------------------------------------- ----------------- --------------
TOTAL/WEIGHTED AVERAGE 85.15% 7.46%
- ------------------------------------- ----------------- --------------
* S&P Long Term Rating, "IPC" denotes an Internal Private Classification
indicating credit which meets parameters consistent with a rating "BBB-" or
better for "IPC-1", and BB- or better for "IPC-2".
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
LEASE TYPE
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF CUMULATIVE % OF WTD. AVG.
OF CUT-OFF DATE CREDIT % OF TOTAL POOL CUTOFF
LEASE TYPE LOANS (000'S) LEASE POOL POOL BALANCE BALANCE DSC
BALANCE
- ------------------------------------- ----------- -------------------- ------------- ----------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Bond 9 $86,000,000 22.3% 22.3% 17.4% 1.01x
NNN 42 158,000,000 41.1 63.4 32.1 1.04
NN 59 141,000,000 36.6 100.0 28.6 1.08
- ------------------------------------- ----------- -------------------- ------------- ----------------- ---------------- ------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 100.0% 78.1% 1.05x
- ------------------------------------- ----------- -------------------- ------------- ----------------- ---------------- ------------
</TABLE>
WTD. AVG. WTD. AVG.
LOAN-TO-LEASED GROSS
LEASE TYPE FEE VALUE COUPON
- ------------------------------------- ----- ------------------ ---------------
Bond 92.34% 7.48%
NNN 85.04 7.41
NN 80.89 7.50
- ------------------------------------- ----- ------------------ ---------------
TOTAL/WEIGHTED AVERAGE 85.15% 7.46%
- ------------------------------------- ----- ------------------ ---------------
* All Credit Leases are either Bond-Type or have been enhanced to Bond-Type
status.
BALANCE AT CUT-OFF DATE
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG.
OF CUT-OFF DATE CREDIT LEASE TOTAL POOL CUTOFF
LOAN BALANCE LOANS (000'S) POOL BALANCE DSC
BALANCE
- ------------------------------------- ------------- ------------------ ----------------- -------------------- ---------------
<S> <C> <C> <C> <C> <C>
$0 to $999,999 7 $6,000,000 1.6% 1.3% 1.03x
$1,000,000 to $1,499,999 26 34,000,000 8.9 6.9 1.06
$1,500,000 to $1,999,999 19 33,000,000 8.5 6.7 1.07
$2,000,000 to $2,499,999 16 35,000,000 9.1 7.1 1.08
$2,500,000 to $2,999,999 7 19,000,000 4.8 3.8 1.03
$3,000,000 to $3,499,999 4 13,000,000 3.3 2.6 1.04
$3,500,000 to $3,999,999 4 15,000,000 3.9 3.1 1.23
$4,000,000 to $4,999,999 5 23,000,000 6.0 4.7 1.01
$5,000,000 to $5,999,999 8 44,000,000 11.4 8.9 1.04
$6,000,000 to $6,999,999 1 6,000,000 1.7 1.3 1.00
$8,000,000 to $8,999,999 3 25,000,000 6.4 5.0 1.01
$9,000,000 to $9,999,999 1 9,000,000 2.5 1.9 1.03
$10,000,000 to $14,999,999 6 67,000,000 17.5 13.6 1.03
$15,000,000 to $19,999,999 3 55,000,000 14.4 11.2 1.01
- ------------------------------------- ---------- ------------------ ----------------- -------------------- ---------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x
- ------------------------------------- ---------- ------------------ ----------------- -------------------- ---------------
</TABLE>
WTD. AVG. WTD. AVG. GROSS
LOAN-TO-LEASED FEE COUPON
LOAN BALANCE VALUE
- ------------------------------------- --------------------- ---------------
$0 to $999,999 80.14% 7.43%
$1,000,000 to $1,499,999 79.77 7.37
$1,500,000 to $1,999,999 82.43 7.56
$2,000,000 to $2,499,999 84.23 7.51
$2,500,000 to $2,999,999 83.43 7.69
$3,000,000 to $3,499,999 88.72 7.07
$3,500,000 to $3,999,999 74.21 7.51
$4,000,000 to $4,999,999 88.25 7.09
$5,000,000 to $5,999,999 86.51 7.38
$6,000,000 to $6,999,999 101.73 6.76
$8,000,000 to $8,999,999 88.29 7.25
$9,000,000 to $9,999,999 90.21 8.03
$10,000,000 to $14,999,999 87.99 7.57
$15,000,000 to $19,999,999 83.95 7.57
- ------------------------------------- --------------------- ---------------
TOTAL/WEIGHTED AVERAGE 85.15% 7.46%
- ------------------------------------- --------------------- ---------------
* The average balance as of the Cut-Off Date is $3,500,000
<PAGE>
GROSS COUPON RATE
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG. GROSS
OF CUT-OFF DATE CREDIT LEASE TOTAL POOL CUTOFF LOAN-TO-LEASED COUPON
GROSS COUPON RATE LOANS (000'S) POOL BALANCE DSC FEE VALUE
BALANCE
- --------------------- -------- --------------- ----------------- ----------------------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6.500% to 6.749% 1 $5,000,000 1.2% 0.9% 1.00x 76.90% 6.73%
6.750% to 6.999% 14 49,000,000 12.7 9.9 1.02 92.27 6.85
7.000% to 7.249% 15 49,000,000 12.7 9.9 1.05 88.59 7.10
7.250% to 7.499% 29 118,000,000 30.7 24.0 1.03 86.58 7.36
7.500% to 7.749% 23 57,000,000 14.7 11.5 1.11 77.79 7.58
7.750% to 7.999% 21 65,000,000 16.9 13.2 1.04 80.36 7.87
8.000% to 8.249% 7 43,000,000 11.1 8.7 1.04 87.04 8.10
- ---------------------- ------- --------------- ------------------ ---------------------------- ------------------ ------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- ---------------------- ------- ------------------ --------------- ---------------------------- ------------------ ------------------
</TABLE>
* The weighted average gross coupon rate as of the Cut-Off Date is 7.46%
ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG. GROSS
OF CUT-OFF DATE CREDIT LEASE TOTAL POOL CUTOFF LOAN-TO-LEASED COUPON
ORIGINAL TERM TO MATURITY LOANS (000'S) POOL BALANCE DSC FEE VALUE
BALANCE
- ------------------------- -------- ------------------ ----------------- ------------ ---------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
120 to 179 months 11 42,000,000 11.0% 8.6% 1.08x 73.54% 7.32%
180 to 239 months 66 174,000,000 45.2 35.3 1.05 82.28 7.52
240 to 299 months 21 113,000,000 29.3 22.8 1.05 88.16 7.52
- ------------------------- -------- ------------------ ----------------- ------------ ---------- ------------------ -----------------
300 to 360 months 12 56,000,000 14.6 11.4 1.01 96.70 7.25
- ------------------------- -------- ------------------ ----------------- ------------ ---------- ------------------ -----------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- ------------------------- -------- ------------------ ----------------- ------------ ---------- ------------------ -----------------
</TABLE>
* The weighted average original term to maturity as of the Cut-Off Date is 247
months.
<PAGE>
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG.
OF CUT-OFF DATE CREDIT LEASE TOTAL POOL CUTOFF
REMAINING TERM TO MATURITY LOANS (000'S) POOL BALANCE DSC
BALANCE
- ------------------------------------- ------------------ ------------------ ----------------- -------------------- ---------------
<S> <C> <C> <C> <C> <C>
60 to 119 months 1 $11,000,000 2.8% 2.2% 1.01x
120 to 179 months 11 33,000,000 8.6 6.7 1.10
180 to 239 months 75 200,000,000 51.8 40.5 1.05
240 to 299 months 22 137,000,000 35.6 27.8 1.03
300 to 360 months 1 5,000,000 1.3 1.0 1.00
- ------------------------------------- ------------------ ------------------ ----------------- -------------------- ---------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x
- ------------------------------------- ------------------ ------------------ ----------------- -------------------- ---------------
</TABLE>
WTD. AVG. WTD. AVG. GROSS
LOAN-TO-LEASED COUPON
REMAINING TERM TO MATURITY FEE VALUE
- ------------------------------------- ------------------ ------------------
60 to 119 months 75.86% 7.25%
120 to 179 months 72.87 7.35
180 to 239 months 82.58 7.50
240 to 299 months 92.24 7.46
300 to 360 months 94.65 6.98
- ------------------------------------- ------------------ ------------------
TOTAL/WEIGHTED AVERAGE 85.15% 7.46%
- ------------------------------------- ------------------ ------------------
* The weighted average remaining term to maturity as of the Cut-Off Date is 233
months.
LOAN-TO-LEASED FEE VALUE
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG. GROSS
OF CUT-OFF DATE CREDIT LEASE POOL TOTAL POOL CUTOFF LOAN-TO-LEASED COUPON
LOAN-TO-LEASED FEE VALUE LOANS (000'S) BALANCE BALANCE DSC FEE VALUE
- --------------------------- ------ ------------------ ------------------ ------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
45.0% to 49.9% 1 $1,000,000 0.3% 0.2% 1.06x 45.28% 7.57%
50.0% to 54.9% 1 1,000,000 0.3 0.2 1.00 52.18 7.12
60.0% to 64.9% 1 1,000,000 0.3 0.3 1.37 64.12 7.29
65.0% to 69.9% 7 15,000,000 4.0 3.1 1.13 68.00 7.58
70.0% to 74.9% 7 21,000,000 5.6 4.4 1.21 72.58 7.59
75.0% to 79.9% 18 77,000,000 19.9 15.6 1.05 77.03 7.55
80.0% to 84.9% 29 80,000,000 20.7 16.2 1.04 82.94 7.41
85.0% to 89.9% 22 76,000,000 19.8 15.5 1.02 87.99 7.62
90.0% to 94.9% 10 44,000,000 11.5 9.0 1.01 92.77 7.53
95.0% to 99.9% 11 50,000,000 13.1 10.2 1.01 96.90 7.24
100.0% to 109.9% 3 17,000,000 4.5 3.5 1.00 101.60 6.76
- --------------------------- ------- ------------------ ------------------ ------------- ------------ --------------- ---------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- --------------------------- ------- ------------------ ------------------ ------------- ------------ --------------- ---------------
</TABLE>
* The weighted average loan-to-leased fee value as of the Cut-Off Date is 87.27%
<PAGE>
LOAN-TO-DARK VALUE
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG.
OF CUT-OFF DATE CREDIT LEASE TOTAL POOL CUTOFF
LOAN-TO-DARK VALUE LOANS (000'S) POOL BALANCE DSC
BALANCE
- ------------------------------------- ------------------ ------------------ ----------------- -------------------- --------------
<S> <C> <C> <C> <C> <C>
Less than 75% 6 $9,000,000 2.4% 1.9% 1.01x
75.0% to 99.9% 14 60,000,000 15.5 12.1 1.04
100.0% to 109.9% 24 75,000,000 19.6 15.3 1.04
110.0% to 119.9% 32 111,000,000 28.8 22.5 1.09
120.0% to 129.9% 12 57,000,000 14.9 11.7 1.03
130.0% to 139.9% 13 39,000,000 10.1 7.9 1.02
140.0% to 149.9% 6 16,000,000 4.1 3.2 1.02
150.0% to 159.9% 2 12,000,000 3.2 2.5 1.00
160.0% to 169.9% 1 5,000,000 1.4 1.1 1.04
- ------------------------------------- ------------------ ------------------ ----------------- -------------------- --------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x
- ------------------------------------- ------------------ ------------------ ----------------- -------------------- --------------
</TABLE>
WTD. AVG. WTD. AVG. GROSS
LOAN-TO-LEASED COUPON
LOAN-TO-DARK VALUE FEE VALUE
- ------------------------------------- ------------------ ----------------
Less than 75% 82.65% 7.39%
75.0% to 99.9% 81.47 7.50
100.0% to 109.9% 81.13 7.55
110.0% to 119.9% 83.37 7.56
120.0% to 129.9% 86.27 7.40
130.0% to 139.9% 93.10 7.38
140.0% to 149.9% 95.18 7.05
150.0% to 159.9% 101.81 6.76
160.0% to 169.9% 94.54 7.47
- ------------------------------------- ------------------ ----------------
TOTAL/WEIGHTED AVERAGE 85.15% 7.46%
- ------------------------------------- ------------------ ----------------
* The weighted average loan-to-dark value as of the Cut-Off Date is 114.26%
DEBT SERVICE COVERAGE
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG. GROSS
OF CUT-OFF DATE CREDIT LEASE TOTAL POOL CUTOFF LOAN-TO-LEASED COUPON
DEBT SERVICE COVERAGE LOANS (000'S) POOL BALANCE DSC FEE VALUE
BALANCE
- ----------------------- -------- ------------------ ------------ --------------- ------------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.000x to 1.099x 37 $170,000,000 44.2% 34.5% 1.00x 89.30% 7.46%
1.010x to 1.019x 3 24,000,000 6.3 5.0 1.01 81.95 7.14
1.030x to 1.039x 12 58,000,000 15.2 11.8 1.03 85.96 7.50
1.040x to 1.049x 11 29,000,000 7.7 6.0 1.04 86.55 7.41
1.050x to 1.059x 4 10,000,000 2.6 2.0 1.05 78.88 7.49
1.060x to 1.069x 10 20,000,000 5.1 4.0 1.06 80.51 7.61
1.070x to 1.079x 12 20,000,000 5.3 4.2 1.07 82.08 7.49
1.080x to 1.089x 5 7,000,000 1.8 1.4 1.08 80.78 7.54
1.090x to 1.099x 2 3,000,000 0.7 0.5 1.09 79.22 7.98
1.100x to 1.199x 9 32,000,000 8.4 6.6 1.16 76.12 7.39
1.200x to 1.499x 4 7,000,000 1.8 1.4 1.34 68.59 7.77
1.600x to 1.699x 1 4,000,000 1.0 0.8 1.69 72.94 7.54
- ----------------------- -------- ------------------ ------------ --------------- ------------------- ------------------ ------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- ----------------------- -------- ------------------ ------------ --------------- ------------------- ------------------ ------------
</TABLE>
* Debt service coverage is the ratio of the current net rents as of the cutoff
date to current monthly total debt service during as of the cutoff date. Current
net rents are calculated by deducting current loan-level reserves as of the
cutoff date and current ground rents as of the cutoff date, if any, from current
gross rents.
* The weighted average debt service coverage as of the Cut-Off Date is 1.05x
<PAGE>
ORIGINATION
COMPANY: CLF developed the proprietary Hybrid Corporate Bond Lease
Program (the "Program"), in addition to related products,
for the express purpose of providing credit based financing
to owners of single tenant properties net leased pursuant to
Credit Leases.
TENANTS: All tenants or their respective Credit Lease guarantors are
Investment Grade or have received an Internal Private
Classification of at least BBB- from each of S&P and Duff
with the exception of Circuit City Stores, Inc. and
MedPartners, Inc. Circuit City has an Internal Private
Classification indicating credit with characteristics
consistent with a rating of "BB-" or better. MedPartners has
a long-term credit rating from S&P of BB-. The average
corporate unsecured debt rating for the CLF loans in the
pool is "A-".
All corporate credit tenants, particularly those rated BBB
and below, are independently underwritten by CLF as to their
rating trends (up or down), industry trends, and market
position.
<PAGE>
LOAN
o UNDERWRITING: CLF's loan underwriting is centralized to
ensure consistent quality and involves in-depth analysis by
both internal and external specialists of the corporate
credit being financed, the quality of the lease, and value
of the underlying real estate on both a leased fee and "as
dark" basis. CLF's due diligence typically includes a credit
evaluation, a legal analysis of each lease, an assessment of
condemnation and casualty risks, reviews of landlord
obligations, reviews of third-party reports (environmental,
engineering, appraisal), residual risk exposure (for
extended amortization loans) , borrower structure, reviews
of loan closing documents, and confirmation with applicable
rating agencies of each tenant's credit rating.
<PAGE>
LOAN COLLATERAL AND BORROWER STRUCTURE
LOAN TERMS: All mortgage loans (with one exception) are fully-amortizing
either before or, co-terminus with the primary term, or in
some cases the first renewal period, of the related Credit
Lease.
CALL PROTECTION: Generally, eight years of lockout followed by yield
maintenance, flat to Treasuries, for the balance of the
mortgage loan term.
SECURITY: All mortgage loans are secured by:
o lock box assignments of leases and rents;
o first mortgages on fee or leasehold interests in the
related premises; and
o a security interest in funds on deposit in reserve
accounts.
BORROWER TYPE: Generally special-purpose entities organized in accordance
with standard rating agency criteria. Bankruptcy-remote
opinions are generally required at origination for all
mortgage loans of more than $5,000,000 (and for all mortgage
loans made to borrowers/landlords with aggregate Program
debt of more than $5,000,000).
<PAGE>
LEASE STRUCTURE
QUALIFIED LEASES: Only Credit Leases of the types listed and described below
are eligible for financing under the Program and are
included in the Pool.
o Bond-Type. The tenant does not have termination or
abatement rights pursuant to the Credit Lease absent a
termination payment that is sufficient to fully prepay
the related loan.
o Triple Net. The tenant may terminate the Credit Lease
or abate rent following a defined condemnation or
casualty event, but generally for no other reason.
o Double Net. The tenant may terminate the Credit Lease
or abate rent following a defined condemnation or
casualty, or following borrower/landlord default with
respect to certain obligations (primarily maintenance
and repairs) under the Credit Lease.
<PAGE>
LEASE ENHANCEMENT MECHANISMS
CLF UTILIZES AN INTEGRATED PROGRAM OF CREDIT LEASE ENHANCEMENT MECHANISMS TO
CREATE A HYBRID CORPORATE BOND BY ENSURING THAT THERE ARE NO INTERRUPTIONS IN
THE CORPORATE CREDIT TENANT'S RENTAL STREAM DUE TO REAL ESTATE RELATED EVENTS.
LEASE ENHANCEMENT Non-cancelable insurance policies have been issued by the
INSURANCE POLICIES: Lease Enhancement Insurance Policy Provider for triple net
and doublenet leases. In the event a tenant exercises a
termination or abatement right following a condemnation or
casualty event, the Lease Enhancement Insurance Policy
Provider will either (i) make a cash payment as a
replacement for any lost monthly rent or (ii) fully prepay
the mortgage loan, at par.
LEASE SUPPORT
ACTIONS: In the event of borrower/landlord default with respect to
obligations under the Credit Lease, the Servicer or Special
Servicer, as applicable, will use its best efforts to
satisfy those obligations to prevent the tenant from
exercising its termination or abatement rights. Lease
Support Actions may include, but are not limited to,
performance of required maintenance and repairs and
initiation and maintenance of appropriate legal actions. The
Servicer and Special Servicer have access to reserve account
funds and, when necessary, are obligated to advance their
own funds (subject to recoverability) and are prohibited
from foreclosure until the Servicer advances exceed 60% of
the dark value of the property.
<PAGE>
BORROWER RESERVE
ACCOUNTS: Reserve accounts are established based on an engineering
survey by CLF selected professional third-party engineering
consultants and funded on a monthly basis for mortgage loans
relating to double net leases with quantifiable landlord
obligations. The deposits to these accounts generally
provide at least 125% of the anticipated, inflation-adjusted
costs of maintenance, repair and replacement to the related
premises as they occur. In addition, double net leases are
generally underwritten with debt service coverage in excess
of that required or reserves and principal and interest
payments.
EXPENSE RESERVE
ACCOUNT: CLF provides for a trust-level account to be established and
funded on a monthly basis. The deposits made thereto will be
available for Lease Support Actions, trust expenses,
recoverable and non-recoverable advances, prepayment
interest shortfalls and credit support. Unless drawn upon,
the Expense Reserve Account will grow to approximately $2.4
million over the life of the transaction without
consideration of reinvestment income.
<PAGE>
LEASE ENHANCEMENT SUMMARY
<TABLE>
<CAPTION>
TERMINATION OR
LEASE TYPE ABATEMENT EVENT MITIGANT LEASE AS ENHANCED
- -------------------- ---------------------------------------- ---------------------------------------------- -----------------------
<S> <C> <C> <C>
Bond-Type None Not applicable Not applicable
Triple Net* Condemnation or casualty Non-cancelable insurance policy with Bond-Type Equivalent
AAA-rated insurer
Double Net* (1) Condemnation or casualty (1) Non-cancelable insurance policy with Bond-Type Equivalent
(3) Maintenance/repair provision AAA-rated insurer
violation (3) Escrows equal to 125% of consultant's
estimate for maintenance/repairs
- -------------------- ---------------------------------------- ---------------------------------------------- -----------------------
- -------------------- ---------------------------------------- ---------------------------------------------- -----------------------
</TABLE>
* Any Triple Net and Double Net Leases that contain lease provisions other than
casualty or condemnation that could lead to a tenant's right to terminate the
lease or abate rent thereunder have the protection provided by the Servicer's
Lease Support Actions and the AA rated backstop thereto.
<PAGE>
EXTENDED AMORTIZATION MECHANISM
CTL loans that amortize through the first renewal period of the related Credit
Lease each receive the benefit of an individual insurance policy issued by the
Extended Amortization Insurance Policy Provider. Continued debt service on or
repayment of such mortgage loans is thus insured in the event the related tenant
elects not to renew their lease.
EXTENDED Transactions which meet Program underwriting standards may
AMORTIZATION also be eligible for financing through CLF's Extended
PROGRAMsm LOANS: Amortization Program (the "EAPsm"). With one exception (a
balloon mortgage), EAP loans fully amortize either before or
co-terminus with the first renewal period of the related
Credit Lease.
INSURANCE POLICY: In order to eliminate the risk of debt service interruption
due to a tenant non-renewal event, a non-cancelable Extended
Amortization Insurance Policy is underwritten for each EAP
loan.
POLICY PROVIDER: In the event of (i) non-renewal of the Credit Lease and (ii)
borrower/landlord default under the related loan, the
Extended Amortization Insurance Policy Provider (whose
financial strength is rated "AAA" by S&P) must either (a)
fully prepay the loan, with yield maintenance (subject to a
5% cap), or (b) make monthly payments in an amount equal to
the debt service payments due during the extended
amortization period.
<PAGE>
LOAN APPROVAL AND CLOSING PROCESS
LEASE AND CTL loan approval, each Credit Lease is reviewed by a
LOAN REVIEW: trained CLF underwriter using comprehensive underwriting
guidelines developed through consultation with legal and
financial advisors, investors and rating agencies. The
Credit Lease is reviewed specifically to identify and
quantify, as applicable, the risks associated with tenant
termination or abatement rights resulting from condemnation
and casualty events and borrower/landlord default with
respect to obligations under the Credit Lease.
CREDIT REVIEW: Each credit is reviewed by experienced finance specialists
and the ratings confirmed by the rating agencies.
LOAN REVIEW After an application has been reviewed and a deposit has
COMMITTEE: been received, CLF convenes a loan review committee (made up
of CLF's senior managers) in order to determine whether or
not the transaction meets Program underwriting criteria.
Following the completion of due diligence, the loan review
committee is reconvened for issuance of ultimate mortgage
loan approval or rejection.
<PAGE>
APPLICATION AND Once the application has been accepted, full due diligence
DUE DILIGENCE: is commenced which includes:
o the engagement of CLF-approved or CLF-selected
third-party valuation and environmental consulting
firms and, in the case of double net leases, structural
engineering consulting firms;
o a review and summary of Credit Lease termination and
abatement rights and respective mitigating
enhancements;
o an analysis of the borrower, with electronic background
checks;
o a review of title, survey, etc.;
o a review of the Credit Lease and related premises by
the Lease Enhancement Policy Provider;
o a review of the Credit Lease and third-party reports by
the Servicer; and
o for EAP mortgage loans, a review of the Credit Lease
and valuation report by the Extended Amortization
Insurance Policy Provider.
CLOSING: CTL loans are closed in accordance with pre-defined Program
requirements, including comprehensive borrower/landlord,
premises and tenant/guarantor criteria. Standard
securitization-oriented documentation is used.
<PAGE>
COMPARISON TO LONG-TERM, SENIOR UNSECURED CORPORATE DEBT AND CMBS
The long-term, senior unsecured debt of a corporation is the
unconditional promise of that corporation to make a stream of payments in
accordance with the terms of a bond. Typically senior unsecured debt pays
interest only on a semi-annual basis with principal returned at maturity. In the
event of a bond default, the holders are unsecured and generally recover only
against the unsecured assets of the corporation. Like corporate bonds, the loans
originated under the Enhanced Lease Program contain the unconditional obligation
of the Credit Lease Tenants to make a stream of monthly rental payments, subject
only to certain specified real estate related termination or rent abatement
rights and subject to the right of the credit tenant reject the lease in the
event of bankruptcy. Although corporate bonds do not have the risks associated
with the termination or abatement rights that are contained in many of the
Credit Leases that back the certificates, the Program substantially reduces or
eliminates these real estate related risks. Moreover, unlike long-term, senior
unsecured corporate debt, CTL Loans are self-amortizing and secured by first
mortgage liens. The combination of amortization and security coupled with the
strong financial incentives of the underlying borrower to protect the loan in
the event of a credit tenant default provide the possibility of increasing
expected recoveries to certificate holders that might otherwise be available to
such certificate holders if they held the unsecured corporate bonds of that same
corporate credit. CTL loans also have substantial call protection in the form of
eight year lock-outs followed by yield maintenance flat to US Treasuries for the
duration of the loan.
The certificates also compare favorably in certain respects to
commercial mortgage-backed securities ("CMBS") in terms of credit, prepayment
risk and recovery. CMBS pools generally consist of an aggregation of real estate
loans. Typically, such real estate loans are underwritten based on the value of
the underlying real estate and the strength of the borrower. Amortization
periods usually exceed the term of the loan by a significant amount (10 year
terms with 25 or 30 year amortization periods) leaving the balance of the loan
(up to 70%) to be retired at maturity either by refinancing or from the
resources of the borrower. Timeliness of payment and ultimate recovery on real
estate loans is affected by many factors including, the financial strength or
lack thereof of the borrower, the ability of the borrower to refinance the loan
at maturity, the stability of the cash flow from the tenants at the property,
the quality of the leases, and the uncertainties of the real estate and economic
cycles.
By comparison to CMBS, the credit quality of the cash flows on all the
CTL loans is defined by the credit quality of the generally single tenant
subject to the long term lease. The risks to interruptions in credit tenant cash
flows (and thus loan payments) is reduced by limiting eligible Credit Lease
Tenants to primarily Investment Grade credits, whose financial strength reduces
the risk of default over a business cycle as compared with non-investment grade
tenants. With the exception of Circuit City and MedPartners, all of the credit
tenants in the pool are Investment Grade, and including all the CTL loans, the
average credit rating is A-. The Investment Grade credit quality of the credit
tenants coupled with the amortizing nature of the credit lease loans and strong
call protection insulate the certificate holders from risks of voluntary or
involuntary prepayments on the mortgage loans.
<PAGE>
CREDIT TENANT LEASE (CTL) LOAN OVERVIEW
o CASH FLOWS: CTL Loans utilize the credit tenant's fixed and predictable
rent stream to pay principal and interest. All tenant rent is lock boxed at
Midland and applied to debt on the due date as well as to scheduled
reserves, if any. The credit tenant pays all property expenses directly or
indirectly.
o CREDIT QUALITY: CTL loan pool has average A- rated credit tenants.
o COLLATERAL: Each CTL loan is collateralized by an absolute assignment of
the credit tenant lease and a first mortgage.
o REAL ESTATE RISK: Performance of the loan depends upon the tenant's
uninterrupted rent stream. Risk of interruption of the tenant's rent as a
result of a real estate related event is eliminated/mitigated by bond or
enhanced bond-type leases.
o CALL PROTECTION: Voluntary prepayment is prohibited for eight years and
permitted thereafter only with a yield maintenance penalty calculated at
flat to U.S. Treasuries.
o AMORTIZATION: Each CTL loan fully amortizes over the term of the underlying
credit tenant lease or if not, then the outstanding balance at the end of
the tenant's initial lease term is fully insured by a subsidiary of
Berkshire Hathaway.
o DEFAULT RISK: S&P static pool cumulative default (default being defined as
the first occurrence of a payment default on any financial obligation)
studies indicate that default probability after ten years for AA, A, BBB,
BB and B credits are 1.00%, 1.76%, 3.71%, 15.07% and 25.55%, respectively.
Standard & Poor's Credit Week, January 28, 1998.
o EVENT RISK: Both S&P and Moody's default studies clearly show that credit
migration (up or down) is almost always a gradual process measured in
years. Sudden defaults of investment grade credits are essentially zero.
For the very small number of credits that do default, according to S&P the
average time from the original rating to default is 7.4, 7.6, 6.6, 5.1, and
3.7 years for AA, A, BBB, BB and B rated credits, respectively. Standard &
Poor's Credit Week, January 28, 1998.
o RECOVERIES: In the unlikely event a credit tenant defaults, potential
recoveries on the underlying CTL loan are enhanced by the amortizing nature
of the loan, the high quality of the mortgaged real estate, and incentives
present for both the tenant to continue to operate the property in case of
a bankruptcy and the borrower to protect the loan in the event of a
rejection of the lease in bankruptcy by the tenant.
<PAGE>
LOAN POOL SUMMARY - LONG TERM CONDUIT
SUMMARY CHARACTERISTICS
- -------------------------------------------------------------------------------
DESCRIPTION
INITIAL POOL BALANCE $108,000,000
AVERAGE BALANCE AS OF CUT-OFF DATE $6,000,000
WTD. AVG. UNDERWRITING DSCR(1) 1.38X
WTD. AVG. CUT-OFF DATE LTV RATIO(2) 60.8%
WTD. AVG. MATURITY DATE LTV RATIO(3) 19.6%
WTD. AVG. MORTGAGE RATE 7.58%
WTD. AVG. ORIGINAL TERM TO MATURITY 17 YEARS 10 MONTHS
WTD. AVG. REMAINING TERM TO MATURITY 16 YEARS 8 MONTHS
WTD. AVG. AGE 1 YEAR 2 MONTHS
WTD. AVG. ORIGINAL AMORTIZATION TERM 22 YEARS 5 MONTHS
WTD. AVG. REMAINING AMORTIZATION TERM 21 YEARS 3 MONTHS
- -------------------------------------------------------------------------------
(1) Ratio of underwritten property net cash flow to annual debt service
(2) Ratio of scheduled balance at Cut-off Date to appraised property value
(3) Ratio of scheduled balance at maturity to appraised property value
<PAGE>
STRATIFICATION TABLES
CUT-OFF DATE BALANCE
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG.
RANGE OF CUT-OFF DATE BALANCES OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING
LOANS (000'S) BALANCE BALANCE DSCR
- --------------------------------------- ------------------ -------------------- ------------------ ------------------- -------------
<S> <C> <C> <C> <C> <C>
$0 to $999,999 1 $1,000,000 0.9% 0.2% 1.20x
$1,000,000 to $1,999,999 3 5,000,000 4.5 1.0 1.23
$2,000,000 to $2,999,999 5 12,000,000 11.2 2.4 1.29
$3,000,000 to $3,999,999 3 10,000,000 9.2 2.0 1.30
$4,000,000 to $4,999,999 1 5,000,000 4.6 1.0 1.54
$5,000,000 to $7,499,999 3 17,000,000 16.0 3.5 1.20
$10,000,000 to $14,999,999 1 14,000,000 13.3 2.9 1.25
$35,000,000 to $45,000,000 1 44,000,000 40.3 8.8 1.54
- --------------------------------------- ------------------ -------------------- ------------------ ------------------- -------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x
- --------------------------------------- ------------------ -------------------- ------------------ ------------------- -------------
</TABLE>
WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF DATE BALANCES CUT-OFF DATE MORTGAGE
LTV RATIO RATE
- --------------------------------------------- ----------------- --------------
$0 to $999,999 25.79% 7.13%
$1,000,000 to $1,999,999 75.11 7.58
$2,000,000 to $2,999,999 62.29 7.32
$3,000,000 to $3,999,999 61.37 7.31
$4,000,000 to $4,999,999 55.03 7.43
$5,000,000 to $7,499,999 72.12 7.63
$10,000,000 to $14,999,999 74.23 7.21
$35,000,000 to $45,000,000 51.23 7.86
- --------------------------------------------- ----------------- --------------
TOTAL/WEIGHTED AVERAGE 60.84% 7.58%
- --------------------------------------------- ----------------- --------------
<PAGE>
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGED CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF DATE MORTGAGE
PROPERTIES (000'S) BALANCE BALANCE DSCR LTV RATIO RATE
PROPERTY TYPE
- ---------------------- ---------- ------------------- ------------ ------------------- ------------ ----------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail 11 $76,000,000 70.6% 15.5% 1.41x 60.49% 7.73%
Office 2 18,000,000 16.3 3.6 1.28 72.06 7.24
Mobile Home 4 9,000,000 8.5 1.9 1.21 45.29 7.13
Hotel 1 5,000,000 4.6 1.0 1.54 55.03 7.43
- ---------------------- ---------- ------------------- -------------------------------- ------------ ----------------- --------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ---------------------- ---------- ------------------- -------------------------------- ------------ ----------------- --------------
</TABLE>
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF DATE LTV MORTGAGE
PROPERTY LOCATION LOANS (000'S) BALANCE BALANCE DSCR RATIO RATE
- ----------------------- ----------- ------------------ ------------ ---------------- -------------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SC 1 $44,000,000 40.3% 8.8% 1.54x 51.23% 7.86%
GA 1 14,000,000 13.3 2.9 1.25 74.23 7.21
TX 3 9,000,000 8.0 1.8 1.29 80.91 7.80
NC 3 7,000,000 6.2 1.4 1.28 73.82 7.78
FL 1 6,000,000 5.9 1.3 1.12 62.43 7.00
NM 1 6,000,000 5.1 1.1 1.25 73.62 7.67
CT 2 5,000,000 4.9 1.1 1.21 49.33 7.13
TN 1 5,000,000 4.6 1.0 1.54 55.03 7.43
NH 2 4,000,000 3.6 0.8 1.21 39.77 7.13
KS 1 3,000,000 3.2 0.7 1.28 69.52 7.44
MD 1 3,000,000 3.0 0.7 1.40 62.42 7.35
PA 1 2,000,000 1.8 0.4 1.25 71.25 7.50
- ---------------------- ------------- -------------------- --------- --------------- --------------- ------------------ ----------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ---------------------- ------------- -------------------- --------- ---------------- --------------- ------------------ ----------
</TABLE>
MORTGAGE RATE
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF DATE LTV MORTGAGE
RANGE OF MORTGAGE RATES LOANS (000'S) BALANCE BALANCE DSCR RATIO RATE
- ---------------------------- ----- ----- ---------------- -------------- -------------- ------------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
6.750% - 6.999% 1 $2,000,000 1.9% 0.4% 1.41x 79.24% 6.87%
7.000% - 7.249% 7 31,000,000 28.8 6.3 1.21 63.45 7.14
7.250% - 7.499% 4 14,000,000 13.1 2.9 1.42 62.85 7.40
7.500% - 7.749% 2 7,000,000 6.9 1.5 1.25 73.00 7.63
7.750% - 7.999% 1 44,000,000 40.3 8.8 1.54 51.23 7.86
8.000% - 8.499% 3 10,000,000 9.0 2.0 1.24 79.40 8.20
- ---------------------------- ----------- ---------------- -------------- -------------- ------------- ------------------ -----------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ---------------------------- ----------- ---------------- -------------- -------------- ------------- ------------------ -----------
</TABLE>
<PAGE>
DSCR (1)
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG.
OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING
RANGE OF DSCRS LOANS (000'S) BALANCE BALANCE DSCR
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
<S> <C> <C> <C> <C> <C>
1.10x - 1.19x 1 $6,000,000 5.9% 1.3% 1.12x
1.20x - 1.29x 12 45,000,000 42.0 9.2 1.24
1.35x - 1.39x 1 2,000,000 2.2 0.5 1.38
1.40x - 1.49x 2 5,000,000 4.9 1.1 1.41
1.50x - 1.59x 2 49,000,000 44.9 9.8 1.54
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
</TABLE>
WTD. AVG. WTD. AVG.
CUT-OFF DATE LTV MORTGAGE
RANGE OF DSCRS RATIO RATE
- ------------------------------------- ------------------ ---------------
1.10x - 1.19x 62.43% 7.00%
1.20x - 1.29x 69.03 7.49
1.35x - 1.39x 69.83 7.32
1.40x - 1.49x 68.95 7.16
1.50x - 1.59x 51.62 7.81
- ------------------------------------- ------------------ ---------------
TOTAL/WEIGHTED AVERAGE 60.84% 7.58%
- ------------------------------------- ------------------ ---------------
(1) Ratio of underwritten property net cash flow to annual debt service
<PAGE>
CUT-OFF DATE LTV RATIO (1)
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF DATE LTVS OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF DATE LTV MORTGAGE
LOANS (000'S) BALANCE BALANCE DSCR RATIO RATE
- -------------------------- ------------- ----------------- ------------- ------------ ------------ ------------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.0% - 29.9% 1 $1,000,000 0.9% 0.2% 1.20x 25.79% 7.13%
30.0% - 49.9% 2 5,000,000 4.6 1.0 1.21 44.86 7.13
50.0% - 59.9% 3 52,000,000 47.9 10.5 1.52 51.62 7.77
60.0% - 64.9% 2 10,000,000 8.9 1.9 1.22 62.43 7.12
65.0 % - 69.9% 2 6,000,000 5.5 1.2 1.32 69.65 7.39
70.0% - 74.9% 3 22,000,000 20.3 4.4 1.25 73.81 7.35
75.0% - 79.9% 4 8,000,000 6.9 1.5 1.28 77.39 7.56
80.0% - 84.9% 1 5,000,000 5.0 1.1 1.25 82.00 8.32
- -------------------------- ------------- ----------------- -------------- ----------- ------------ ------------------ -------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- -------------------------- ------------- ----------------- --------------- ---------- ------------ ------------------ -------------
</TABLE>
(1) Ratio of scheduled balance at Cut-off Date to appraised property value
MATURITY DATE LTV RATIO (1)
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG.
RANGE OF MATURITY DATE LTVS OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING
LOANS (000'S) BALANCE BALANCE DSCR
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
<S> <C> <C> <C> <C> <C>
0.0% - 29.9% 9 $71,000,000 66.1% 14.5% 1.42x
30.0% - 49.9% 3 9,000,000 8.7 1.9 1.43
50.0% - 59.9% 3 21,000,000 19.4 4.3 1.25
60.0% - 64.9% 3 6,000,000 5.9 1.3 1.29
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
</TABLE>
WTD. AVG. WTD. AVG.
RANGE OF MATURITY DATE LTVS MATURITY DATE MORTGAGE
LTV RATIO RATE
- ------------------------------------- ------------------------ ---------------
0.0% - 29.9% 2.47% 7.63%
30.0% - 49.9% 37.57 7.42
50.0% - 59.9% 57.18 7.49
60.0% - 64.9% 61.44 7.66
- ------------------------------------- ------------------------ ---------------
TOTAL/WEIGHTED AVERAGE 19.59% 7.58%
- ------------------------------------- ------------------------ ---------------
(1) Ratio of scheduled balance at maturity to appraised property value
<PAGE>
ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG.
ORIGINAL TERM TO MATURITY OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING
LOANS (000'S) BALANCE BALANCE DSCR
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
<S> <C> <C> <C> <C> <C>
180 11 $47,000,000 43.1% 9.4% 1.28x
240 7 62,000,000 56.9 12.5 1.46
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
</TABLE>
WTD. AVG. WTD. AVG.
ORIGINAL TERM TO MATURITY CUT-OFF DATE LTV MORTGAGE
RATIO RATE
- ---------------------------------- ------------------ ------------------
180 71.28% 7.43%
240 52.95 7.70
- ---------------------------------- ------------------ ------------------
TOTAL/WEIGHTED AVERAGE 60.84% 7.58%
- ---------------------------------- ------------------ ------------------
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG.
RANGE OF REMAINING TERMS OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING
LOANS (000'S) BALANCE BALANCE DSCR
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
<S> <C> <C> <C> <C> <C>
121 - 180 Months 11 $47,000,000 43.1% 9.4% 1.28x
181 - 240 Months 7 62,000,000 56.9 12.5 1.46
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
</TABLE>
WTD. AVG. WTD. AVG.
RANGE OF REMAINING TERMS CUT-OFF DATE LTV MORTGAGE
RATIO RATE
- ---------------------------------- ------------------ ------------------
121 - 180 Months 71.28% 7.43%
181 - 240 Months 52.95 7.70
- ---------------------------------- ------------------ ------------------
TOTAL/WEIGHTED AVERAGE 60.84% 7.58%
- ---------------------------------- ------------------ ------------------
<PAGE>
ORIGINAL AMORTIZATION
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG.
ORIGINAL AMORTIZATION TERM OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING
LOANS (000'S) BALANCE BALANCE DSCR
- ------------------------------------- ------------------ -------------------- ------------------ -------------------- --------------
<S> <C> <C> <C> <C> <C>
180 1 $3,000,000 3.2% 0.7% 1.28x
240 9 70,000,000 64.7 14.2 1.42
300 4 14,000,000 12.9 2.8 1.37
360 4 21,000,000 19.2 4.2 1.26
- ------------------------------------- ------------------ ----------------------- ------------------ -------------------- -----------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x
- ------------------------------------- ------------------ ----------------------- ------------------ -------------------- -----------
</TABLE>
WTD. AVG. WTD. AVG.
ORIGINAL AMORTIZATION TERM CUT-OFF DATE LTV MORTGAGE
RATIO RATE
- ----------------------------------- ------------------ ------------------
180 69.52% 7.44%
240 54.33 7.63
300 70.06 7.72
360 75.11 7.35
- ----------------------------------- ------------------ ------------------
TOTAL/WEIGHTED AVERAGE 60.84% 7.58%
- ----------------------------------- ------------------ ------------------
GENERAL
o Each Mortgage Loan was originated or, in certain cases, purchased pursuant
to the NationsBank multifamily and commercial mortgage conduit. NationsBank
loans are originated utilizing exclusive internal underwriting and
third-party origination networks. Since 1995, NationsBank has securitized
more than $6 billion of NationsBank loans.
ORIGINATION/ACCUMULATION
o The NationsBank Permanent Loan Group (the "PLG") was formed in 1995 for the
express purpose of underwriting commercial mortgage loans which satisfy
NationsBank lending criteria. Currently, the PLG operates from 10 offices
located across the United States.
o Similarly, NationsBank originates health care loans which are underwritten
by the NationsBank Healthcare Banking Group (the "HCBG"). The HCBG
specializes in arranging financing for the health care industry, and in
1997 underwrote more than $83 million in NationsBank loans.
o Additionally, conduit relationships have been established between
NationsBank and a select group of third-party mortgage loan originators
(each, a "Third-Party Originator"). Third-Party Originators, all of which
are mortgage banking or banking firms with established credit policies,
include Bankers Mutual Mortgage, Inc., Berkshire Mortgage Finance, First
Security Bank, N.A., L.J. Melody & Company, The Patrician Financial Company
and The WMF Group. In the aggregate, these partners originated
approximately $1.5 billion in NationsBank loans in 1997.
<PAGE>
UNDERWRITING
o Each Mortgage Loan was originated against standard underwriting targets. In
order to ensure quality and consistency, NationsBank officers participate
in the entire underwriting review process. Moreover, NationsBank officers
regularly host underwriting forums for all underwriters and originators.
TARGETED UNDERWRITING SUMMARY
<TABLE>
<CAPTION>
LOAN SIZE MINIMUM MAXIMUM AVAILABLE MAXIMUM
PROPERTY TYPE ($MM) DSCR LTV RATIO TERMS AMORTIZATION
- ---------------- ----------------------- ----------------------- ----------------------- ----------------------- -------------------
<S> <C> <C> <C> <C> <C>
Multifamily $0.5 - $50 1.20x 80% 84 - 180 Mos 360 Mos
Retail $0.5 - $50 1.25x 80% 84 - 180 Mos 360 Mos
Office $0.5 - $50 1.25x 75% 84 - 180 Mos 360 Mos
Health Care $0.5 - $25 1.30x 75% 84 - 180 Mos 360 Mos
Franchise $0.5 - $50 1.25x 75% 84 - 120 Mos 240 Mos
Hotel $0.5 - $35 1.35x 75% 84 - 180 Mos 300 Mos
Industrial $0.5 - $25 1.25x 75% 84 - 180 Mos 360 Mos
Mini Storage $0.5 - $15 1.30x 75% 84 - 180 Mos 300 Mos
Golf Course $1 - $20 1.40x 70% 84 - 120 Mos 300 Mos
- ---------------- ----------------------- ----------------------- ----------------------- ----------------------- -------------------
</TABLE>
<PAGE>
PARTICIPANTS
CAPITAL LEASE FUNDING, L.P. is a Loan Seller and a New York-based commercial
mortgage lender specializing in financing commercial real estate leased under
long-term net leases to corporate tenants who are, or whose obligations under
such leases are guaranteed by, corporations whose credit is Investment Grade or
carries an Internal Private Classification. CLF financed more than $129 million
of Credit Leases through a capital markets transaction in January 1997.
LEXINGTON INSURANCE COMPANY ("Lexington") issues non-cancelable Lease
Enhancement Insurance Policies which provide for monthly debt service payments
or full Loan prepayment, at par, in the event of rent abatement or termination,
respectively, following a condemnation or casualty event. Lexington is a
subsidiary of AIG. The financial strength of Lexington has been rated "AAA" by
S&P.
COLUMBIA INSURANCE COMPANY ("Columbia") is the Extended Amortization Insurance
Policy Provider. Columbia issues non-cancelable insurance policies which insure
the performance of CTL loans that are scheduled to amortize beyond the initial
term of the related Credit Lease. Columbia is a subsidiary of Berkshire
Hathaway, Inc. and carries a financial strength rating of "AAA" from S&P.
LASALLE NATIONAL BANK ("LaSalle") is the Trustee. LaSalle is a
nationally-chartered bank with principal offices in Chicago, Illinois. LaSalle
is rated "AA-" by S&P.
ABN AMRO BANK N.V., ("ABN") is the Fiscal Agent. ABN is based in the Netherlands
and is the corporate parent of LaSalle. ABN is rated "AA" by S&P.
<PAGE>
CONFIDENTIAL
NATIONSLINK FUNDING CORPORATION
COMMERCIAL LOAN
PASS-THROUGH CERTIFICATES
SERIES 1999-LTL-1
$493,000,000 (APPROXIMATE)
FIRST QUARTER 1999
<PAGE>
NOTICE TO RECIPIENTS
This material is being provided to you by NationsBanc Montgomery Securities
LLC ("NMS") for your private information only, and relates only to certain
credit lease-backed and long term conduit real estate mortgage loans (the
"Loans"). Although this material is based on information NMS considers reliable,
neither NMS nor any of their affiliates make any representation that it is
accurate or complete, and it should not be relied upon as such. Information
contained in this material is current as of the date appearing on this material
only. The information contained in this material may be based on assumptions
regarding market conditions and other matters reflected herein. Neither NMS nor
any of their affiliates make any representation 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.
By accepting this material, you agree that you will not distribute or
provide this material to any other person. You are encouraged to conduct your
own due diligence with respect to the Loans, and reference is made to such
actual loan documents for the terms and conditions of such Loans. Neither NMS
nor any of their affiliates is soliciting action from you based upon this
material.
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. In the event any of the Loans described
in this material are actually securitized, the securities backed by such Loans
will be offered to you, if at all, only pursuant to a final public prospectus or
private placement memorandum and, in such event, any information in this
material will be superseded in its entirety by the information contained in such
final prospectus or memorandum. You are urged to read any such final prospectus
or memorandum in its entirety prior to making any investment decision with
regard to securities that may be backed by such Loans.
<PAGE>
DEAL SUMMARY
DEAL OVERVIEW
o NationsBanc Montgomery Securities LLC ("NMS") will act as lead manager in a
securitization of approximately 110 credit leased backed commercial
mortgage loans, with a projected aggregate principal cutoff balance of
$385,000,000 and 18 long term conduit commercial mortgage loans, with an
aggregate principal cutoff balance of $108,000,000 as of February 1, 1999
(the "Cut-off Date"). It is further expected that this transaction will
settle in early 1999.
o The credit tenant lease loans ("CTL Loans") for this transaction were
originated and underwritten by Capital Lease Funding, L.P. (CLF) and
NationsBank, N.A. ("NationsBank") and are being contributed by CLF, and the
conduit mortgage loans are being contributed by NationsBank. Each mortgage
loan seller will make representations and bear all repurchase obligations
with regard to its loans only.
o Collateral tables appearing in this package set forth anticipated
characteristics of all Loans expected to be included in this transaction in
the aggregate, and separately for CLF (Credit Lease) loans, and NationsBank
(Long Term Conduit) loans.
<PAGE>
PRELIMINARY PROFORMA STRUCTURE DESCRIPTION
<TABLE>
<CAPTION>
PRINCIPAL EXPECTED
EXPECTED APPROXIMATE APPROXIMATE CREDIT EXPECTED REPAYMENT EXPECTED DOLLAR
CLASS RATING CLASS SIZE % OF TOTAL SUPPORT WAL* WINDOW* COUPON PRICE
S&P/DCR
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 AAA/AAA $70,000,000 14.3% 19.5% 3.0 1 - 66 TBD TBD
A-2 AAA/AAA 194,000,000 39.4 19.5 10.0 66 - 163 TBD TBD
A-3 AAA/AAA 132,000,000 26.8 19.5 15.3 163 - 209 TBD TBD
I/O AAA/AAA 493,000,000 19.5 12.4 TBD TBD
B AA/AA 26,000,000 5.3 14.3 17.8 209 - 219 TBD TBD
C A/A 21,000,000 4.3 10.0 18.7 219 - 231 TBD TBD
D BBB/NR 31,000,000 6.3 3.8 20.7 231 - 267 TBD TBD
E BB/NR 11,000,000 2.3 1.5 22.7 267 - 279 TBD TBD
F B/NR 4,000,000 .8 .8 23.5 279 - 285 TBD TBD
G UR 4,000,000 .8 24.2 285 - 300 TBD TBD
TOTAL/WA $493,000,000 100.0% 100.0%
</TABLE>
* Assumes 0% CPR
o Principal payments will be applied to each class entitled thereto on a
sequential basis.
<PAGE>
SECURITIES DESCRIPTION
TRANSACTION: NationsLink Funding Corporation Long Term Commercial Loan
Pass-Through Certificates;
TYPE OF OFFERING: Public Bond Offering on Certificates rated AA and above,
Private Placement with resale under Rule 144A for
Certificates rated below AA;
CUT-OFF DATE: February 1, 1999;
TAX ELECTION: REMIC;
BOND COUPONS: TBD;
INTEREST
CALCULATION: 30/360 basis;
LOSSES: Any losses will be applied to the most subordinate class of
Certificates then outstanding.
<PAGE>
PARTICIPANTS
DEPOSITOR: NationsLink Funding Corporation;
LOAN SELLERS: Capital Lease Funding, L. P., and NationsBank, N.A.;
PLACEMENT AGENT: NationsBanc Montgomery Securities LLC;
SERVICER: Midland Loan Services, Inc.
SPECIAL SERVICER: Midland Loan Services, Inc.
TRUSTEE: LaSalle National Bank, which also serves as back-up
servicer;
FISCAL AGENT: ABN AMRO Bank N.V.;
LEASE ENHANCEMENT
INSURANCE POLICY
PROVIDER: Lexington Insurance Company (AAA rated subsidiary of AIG)
EXTENDED
AMORTIZATION
INSURANCE POLICY
PROVIDER: Columbia Insurance Company (AAA rated subsidiary of
Berkshire Hathaway)
<PAGE>
LOAN POOL SUMMARY - CREDIT LEASE
Capital Lease Funding, L.P. is a New York-based lender specializing in
originating, underwriting, pooling and financing commercial properties which are
long-term net leased to credit tenants. Such credit tenants generally have a
long-term credit rating from S&P of BBB- or better or carry an Internal Private
Classification of at least BBB- or better from each of S&P and Duff & Phelps
Credit Rating Company. CLF has on a selective basis financed properties having
credit tenants with long term credit ratings from S&P or Internal Private
Classifications of BB- or better, and the pool contains four such loans.
CLF pioneered the enhancement of net leases with credit tenants to bond type
status. CLF's enhancement mechanisms and underwriting methods have become the de
facto rating agency and industry standards for these types of loans. It
securitized the first multi-credit tenant mortgage pool collateralized by both
bond and bond-type credit tenant leases in February 1997. The $130MM pool for
that transaction included 13 investment grade tenants (rated BBB- or better) and
30 loans, has had no delinquencies or defaults to date. Since 1997, CLF has
financed or committed to finance over $850MM of credit tenant loans ("CTL") with
over 40 credit tenants and has had no defaults to date. All CLF loans are
originated and centrally underwritten by a team of credit lease finance
specialists.
Through its lease enhancement programs, CLF is able to mitigate real estate
event risks in triple and double net leases to ensure that the rent stream which
provides the cash flow for debt service and loan amortization is uninterrupted
by certain real estate or borrower related events.
<PAGE>
CLF utilizes a broad array of enhancement mechanisms, including reserves,
recourse provisions, specialized insurance with AAA- rated companies and
backstop servicing with AA- rated (minimum) companies, to mitigate specific
event risks and ensure performance of certain borrower/landlord obligations.
With the exception of eight loans which have an approximate total cutoff balance
$57,000,000 which represent 14.8% of the credit lease loans and 11.6% of all
loans in the securitization, all of the Credit Lease Loans fully amortize over
the initial term of the associated credit lease. Any loan structured with an
amortization that exceeds the lease term is insured pursuant to a specialized
insurance policy provided by Columbia Insurance Company which insures payment of
principal and interest on the loan (or prepayment with yield maintenance up to
5%) in the event of a tenant non-renewal and subsequent borrower default.
The underlying mortgaged properties are generally of new construction and are
stand alone.
The weighted average credit rating of the tenants or guarantors securing the CTL
Loans is "A-".
Over half of the leases relating to the CTL loans are guaranteed by a guarantor
in the Retail Drug, Retail Grocery, Food Service or Energy sector.
The top five credit tenants in terms of pool concentration are all public
corporations with long term credit ratings from S&P of BBB+, A, A, AA- and A,
respectively.
o All numerical information provided herein with respect to the Loans is
provided on an approximate basis and is based on characteristics of the
Loans estimated as of the Cut-Off Date.
<PAGE>
SUMMARY CHARACTERISTICS
- --------------------------------------------------------------------------------
GENERAL
POOL BALANCE $385,000,000
AVERAGE LOAN BALANCE $3,500,000
AVERAGE TENANT/GUARANTOR RATING A-
WTD. AVG. GROSS COUPON 7.46%
WTD. AVG. ORIGINAL TERM TO MATURITY 20 Years 7 Months
WTD. AVG. REMAINING TERM TO MATURITY 19 Years 5 Months
WTD. AVG. ORIGINAL AMORTIZATION TERM 20 Years 7 Months
WTD. AVG. REMAINING AMORTIZATION TERM 19 Years 5 Months
WTD. AVG. DEBT SERVICE COVERAGE 1.05x
WTD. AVG. LOAN-TO-LEASED FEE VALUE 85.2%
WTD. AVG. LOAN-TO-DARK VALUE 113.5%
- --------------------------------------------------------------------------------
<PAGE>
GUARANTOR / TENANT
<TABLE>
<CAPTION>
NUMBER BALANCE % OF % OF WTD. WTD. AVG. WTD.
CREDIT OF AS OF CREDIT TOTAL POOL AVG. LOAN-TO-LEASED AVG.
TENANT / GUARANTOR RATING* LOANS CUT-OFF LEASE BALANCE CUTOFF FEE VALUE GROSS
DATE POOL DSC COUPON
(000'S) BALANCE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rite Aid Corporation BBB+ 21 $37,000,000 9.6% 7.5% 1.07x 80.65% 7.58%
CVS Corporation A 16 35,000,000 9.2 7.2 1.07 84.18 7.62
Koninklijke Ahold, N.V. A 4 32,000,000 8.3 6.5 1.10 86.10 7.36
Home Depot U.S.A., Inc.(1) AA- 3 25,000,000 6.6 5.2 1.00 92.87 7.44
Eckerd Corporation A 12 25,000,000 6.5 5.1 1.04 89.43 7.37
Walgreen Co. A+ 8 24,000,000 6.1 4.8 1.06 82.60 7.11
Circuit City Stores, Inc. IPC-2 3 20,000,000 5.3 4.1 1.05 86.48 8.04
CareGroup, Inc. A 1 20,000,000 5.2 4.0 1.03 84.45 7.25
Blue Cross and Blue Shield of A 1 20,000,000 5.1 4.0 1.00 75.60 7.98
Texas, Inc.
Wal-Mart Stores, Inc. AA 2 19,000,000 4.9 3.8 1.01 93.12 7.04
Food Lion, Inc. A- 3 17,000,000 4.5 3.5 1.00 101.60 6.76
Georgia Baptist Health Care IPC-1 1 12,000,000 3.1 2.4 1.00 89.68 8.16
System, Inc.
KeyBank National Association A 1 11,000,000 2.8 2.2 1.01 75.86 7.25
The Pep Boys - Manny, Moe & BBB- 5 10,000,000 2.5 1.9 1.01 89.85 7.52
Jack
John H. Harland Company IPC-1 1 9,000,000 2.5 1.9 1.03 90.21 8.03
Wegmans Food Markets, Inc. A- 1 8,000,000 2.1 1.7 1.00 81.17 7.50
McDonald's Corporation AA 5 6,000,000 1.4 1.1 1.01 75.15 7.24
The TJX Companies, Inc. A- 1 6,000,000 1.4 1.1 1.05 73.47 7.58
MedPartners, Inc. BB- 1 5,000,000 1.4 1.1 1.00 77.29 7.48
Riggs Bank, N.A. BBB 1 5,000,000 1.4 1.1 1.01 84.70 7.28
Hanson North America, Inc. (1) A 1 5,000,000 1.4 1.1 1.04 94.54 7.47
WellPoint Health Networks, Inc. BBB+ 1 5,000,000 1.2 0.9 1.00 76.90 6.73
State of New Jersey AA+ 1 4,000,000 1.0 0.8 1.69 72.94 7.54
Tandy Corporation A- 1 4,000,000 1.0 0.8 1.03 67.03 7.50
Amoco Oil Company AA+ 3 3,000,000 0.9 0.7 1.01 89.93 7.13
American Drug Stores, Inc.(1) BBB+ 1 3,000,000 0.8 0.6 1.04 87.31 7.31
Bridgestone/Firestone, Inc. IPC-1 2 2,000,000 0.6 0.5 1.08 84.38 7.93
Exxon Corporation AAA 2 2,000,000 0.6 0.4 1.00 75.00 7.41
The Chase Manhattan Bank AA- 1 2,000,000 0.5 0.4 1.10 69.39 7.40
Hannaford Bros. Co. IPC-1 1 2,000,000 0.4 0.4 1.00 78.08 7.48
Boston Gas Company A 1 1,000,000 0.4 0.3 1.13 66.81 7.29
Sears, Roebuck & Co. A- 1 1,000,000 0.3 0.3 1.00 87.25 7.06
Mobil Oil Corporation AA 1 1,000,000 0.3 0.3 1.00 74.35 6.95
NationsBank, N.A. AA- 1 1,000,000 0.3 0.2 1.00 86.33 6.86
United States Postal Service IPC-1 1 1,000,000 0.2 0.2 1.08 83.54 7.17
- ---------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* S&P Long Term Rating, "IPC" denotes an Internal Private Classification
indicating credit which meets parameters consistent with a rating "BBB-" or
better for "IPC-1", and BB- or better for "IPC-2".
(1) The rating shown is the rating of the parent company. Home Depot, Inc.,
Hanson PLC and American Stores Co., respectively.
<PAGE>
GUARANTOR / TENANT PRIMARY INDUSTRY
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL CUTOFF LOAN-TO-LEASED GROSS
PRIMARY INDUSTRY LOANS DATE LEASE POOL BALANCE DSC FEE VALUE COUPON
(000'S) BALANCE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail Drug 58 $124,000,000 32.3% 25.2% 1.06x 83.97% 7.45%
Healthcare Services 5 62,000,000 16.0 12.5 1.01 81.46 7.64
Retail Grocery 9 59,000,000 15.4 12.0 1.05 89.73 7.20
Retail Building Materials 4 31,000,000 8.0 6.2 1.01 93.16 7.44
Retail Electronics 4 24,000,000 6.3 4.9 1.05 83.45 7.96
Banking 4 19,000,000 5.0 3.9 1.02 78.32 7.25
Retail Discount & General 2 19,000,000 4.9 3.8 1.01 93.12 7.04
Merchandise
Automotive 7 12,000,000 3.1 2.4 1.02 88.82 7.59
Printing 1 9,000,000 2.5 1.9 1.03 90.21 8.03
Energy 7 8,000,000 2.8 1.7 1.03 79.66 7.20
Food Service 5 6,000,000 1.4 1.1 1.01 75.15 7.24
Retail Apparel 1 6,000,000 1.4 1.1 1.05 73.47 7.58
Government 1 4,000,000 1.0 0.8 1.69 72.94 7.54
Department Stores 1 1,000,000 0.4 0.3 1.00 87.25 7.06
Post Office 1 1,000,000 0.2 0.2 1.08 83.54 7.17
- -----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
GUARANTOR / TENANT CREDIT RATING*
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF CUMULATIVE % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT OF CREDIT TOTAL POOL CUTOFF LOAN-TO-LEASED GROSS
CREDIT RATING LOANS DATE LEASE POOL BALANCE DSC FEE VALUE COUPON
(000'S) POOL BALANCE
BALANCE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AAA 2 2,000,000 0.6% 0.6% 0.4% 1.00x 75.00% 7.41%
AA+ 4 7,000,000 1.9 2.5 1.5 1.37 80.93 7.35
AA 8 26,000,000 6.7 9.1 5.2 1.01 88.26 7.08
AA- 5 29,000,000 7.4 16.6 5.8 1.01 90.94 7.41
A+ 8 24,000,000 6.1 22.7 4.8 1.06 82.60 7.11
A 37 150,000,000 38.8 61.5 30.3 1.05 83.99 7.49
A- 7 36,000,000 9.4 70.9 7.4 1.01 88.55 7.14
BBB+ 23 45,000,000 11.6 82.5 9.1 1.06 80.73 7.47
BBB 1 5,000,000 1.4 83.9 1.1 1.01 84.70 7.28
BBB- 5 10,000,000 2.5 86.4 2.0 1.01 89.85 7.52
BB- 1 5,000,000 1.4 87.8 1.1 1.00 77.29 7.48
IPC-1 6 26,000,000 6.6 94.7 5.4 1.02 88.45 8.02
IPC-2 3 20,000,000 5.3 100.0 4.2 1.05 86.48 8.04
- --------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 100.0% 78.1% 1.05x 85.15% 7.46%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* S&P Long Term Rating, "IPC" denotes an Internal Private Classification
indicating credit which meets parameters consistent with a rating "BBB-" or
better for "IPC-1", and BB- or better for "IPC-2".
<PAGE>
LEASE TYPE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF CUMULATIVE % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT % OF TOTAL POOL CUTOFF LOAN-TO-LEASED GROSS
LEASE TYPE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
POOL BALANCE
BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bond 9 $86,000,000 22.3% 22.3% 17.4% 1.01x 92.34% 7.48%
NNN 42 158,000,000 41.1 63.4 32.1 1.04 85.04 7.41
NN 59 141,000,000 36.6 100.0 28.6 1.08 80.89 7.50
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 100.0% 78.1% 1.05x 85.15% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* All Credit Leases are either Bond-Type or have been enhanced to Bond-Type
status.
BALANCE AT CUT-OFF DATE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL CUTOFF LOAN-TO-LEASED GROSS
LOAN BALANCE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0 to $999,999 7 $6,000,000 1.6% 1.3% 1.03x 80.14% 7.43%
$1,000,000 to $1,499,999 26 34,000,000 8.9 6.9 1.06 79.77 7.37
$1,500,000 to $1,999,999 19 33,000,000 8.5 6.7 1.07 82.43 7.56
$2,000,000 to $2,499,999 16 35,000,000 9.1 7.1 1.08 84.23 7.51
$2,500,000 to $2,999,999 7 19,000,000 4.8 3.8 1.03 83.43 7.69
$3,000,000 to $3,499,999 4 13,000,000 3.3 2.6 1.04 88.72 7.07
$3,500,000 to $3,999,999 4 15,000,000 3.9 3.1 1.23 74.21 7.51
$4,000,000 to $4,999,999 5 23,000,000 6.0 4.7 1.01 88.25 7.09
$5,000,000 to $5,999,999 8 44,000,000 11.4 8.9 1.04 86.51 7.38
$6,000,000 to $6,999,999 1 6,000,000 1.7 1.3 1.00 101.73 6.76
$8,000,000 to $8,999,999 3 25,000,000 6.4 5.0 1.01 88.29 7.25
$9,000,000 to $9,999,999 1 9,000,000 2.5 1.9 1.03 90.21 8.03
$10,000,000 to $14,999,999 6 67,000,000 17.5 13.6 1.03 87.99 7.57
$15,000,000 to $19,999,999 3 55,000,000 14.4 11.2 1.01 83.95 7.57
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The average balance as of the Cut-Off Date is $3,500,000
<PAGE>
GROSS COUPON RATE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL CUTOFF LOAN-TO-LEASED GROSS
GROSS COUPON RATE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6.500% to 6.749% 1 $5,000,000 1.2% 0.9% 1.00x 76.90% 6.73%
6.750% to 6.999% 14 49,000,000 12.7 9.9 1.02 92.27 6.85
7.000% to 7.249% 15 49,000,000 12.7 9.9 1.05 88.59 7.10
7.250% to 7.499% 29 118,000,000 30.7 24.0 1.03 86.58 7.36
7.500% to 7.749% 23 57,000,000 14.7 11.5 1.11 77.79 7.58
7.750% to 7.999% 21 65,000,000 16.9 13.2 1.04 80.36 7.87
8.000% to 8.249% 7 43,000,000 11.1 8.7 1.04 87.04 8.10
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average gross coupon rate as of the Cut-Off Date is 7.46%
ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL CUTOFF LOAN-TO-LEASED GROSS
ORIGINAL TERM TO LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
MATURITY BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
120 to 179 months 11 42,000,000 11.0% 8.6% 1.08x 73.54% 7.32%
180 to 239 months 66 174,000,000 45.2 35.3 1.05 82.28 7.52
240 to 299 months 21 113,000,000 29.3 22.8 1.05 88.16 7.52
- ----------------------------------------------------------------------------------------------------------------------
300 to 360 months 12 56,000,000 14.6 11.4 1.01 96.70 7.25
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average original term to maturity as of the Cut-Off Date is 247
months.
<PAGE>
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL CUTOFF LOAN-TO-LEASED GROSS
REMAINING TERM TO LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
MATURITY BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
60 to 119 months 1 $11,000,000 2.8% 2.2% 1.01x 75.86% 7.25%
120 to 179 months 11 33,000,000 8.6 6.7 1.10 72.87 7.35
180 to 239 months 75 200,000,000 51.8 40.5 1.05 82.58 7.50
240 to 299 months 22 137,000,000 35.6 27.8 1.03 92.24 7.46
300 to 360 months 1 5,000,000 1.3 1.0 1.00 94.65 6.98
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average remaining term to maturity as of the Cut-Off Date is 233
months.
LOAN-TO-LEASED FEE VALUE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL CUTOFF LOAN-TO-LEASED GROSS
LOAN-TO-LEASED FEE VALUE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
45.0% to 49.9% 1 $1,000,000 0.3% 0.2% 1.06x 45.28% 7.57%
50.0% to 54.9% 1 1,000,000 0.3 0.2 1.00 52.18 7.12
60.0% to 64.9% 1 1,000,000 0.3 0.3 1.37 64.12 7.29
65.0% to 69.9% 7 15,000,000 4.0 3.1 1.13 68.00 7.58
70.0% to 74.9% 7 21,000,000 5.6 4.4 1.21 72.58 7.59
75.0% to 79.9% 18 77,000,000 19.9 15.6 1.05 77.03 7.55
80.0% to 84.9% 29 80,000,000 20.7 16.2 1.04 82.94 7.41
85.0% to 89.9% 22 76,000,000 19.8 15.5 1.02 87.99 7.62
90.0% to 94.9% 10 44,000,000 11.5 9.0 1.01 92.77 7.53
95.0% to 99.9% 11 50,000,000 13.1 10.2 1.01 96.90 7.24
100.0% to 109.9% 3 17,000,000 4.5 3.5 1.00 101.60 6.76
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average loan-to-leased fee value as of the Cut-Off Date is 87.27%
<PAGE>
LOAN-TO-DARK VALUE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL CUTOFF LOAN-TO-LEASED GROSS
LOAN-TO-DARK VALUE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Less than 75% 6 $9,000,000 2.4% 1.9% 1.01x 82.65% 7.39%
75.0% to 99.9% 14 60,000,000 15.5 12.1 1.04 81.47 7.50
100.0% to 109.9% 24 75,000,000 19.6 15.3 1.04 81.13 7.55
110.0% to 119.9% 32 111,000,000 28.8 22.5 1.09 83.37 7.56
120.0% to 129.9% 12 57,000,000 14.9 11.7 1.03 86.27 7.40
130.0% to 139.9% 13 39,000,000 10.1 7.9 1.02 93.10 7.38
140.0% to 149.9% 6 16,000,000 4.1 3.2 1.02 95.18 7.05
150.0% to 159.9% 2 12,000,000 3.2 2.5 1.00 101.81 6.76
160.0% to 169.9% 1 5,000,000 1.4 1.1 1.04 94.54 7.47
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The weighted average loan-to-dark value as of the Cut-Off Date is 114.26%
<PAGE>
DEBT SERVICE COVERAGE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF OF CUT-OFF CREDIT TOTAL POOL CUTOFF LOAN-TO-LEASED GROSS
DEBT SERVICE COVERAGE LOANS DATE (000'S) LEASE POOL BALANCE DSC FEE VALUE COUPON
BALANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.000x to 1.099x 37 $170,000,000 44.2% 34.5% 1.00x 89.30% 7.46%
1.010x to 1.019x 3 24,000,000 6.3 5.0 1.01 81.95 7.14
1.030x to 1.039x 12 58,000,000 15.2 11.8 1.03 85.96 7.50
1.040x to 1.049x 11 29,000,000 7.7 6.0 1.04 86.55 7.41
1.050x to 1.059x 4 10,000,000 2.6 2.0 1.05 78.88 7.49
1.060x to 1.069x 10 20,000,000 5.1 4.0 1.06 80.51 7.61
1.070x to 1.079x 12 20,000,000 5.3 4.2 1.07 82.08 7.49
1.080x to 1.089x 5 7,000,000 1.8 1.4 1.08 80.78 7.54
1.090x to 1.099x 2 3,000,000 0.7 0.5 1.09 79.22 7.98
1.100x to 1.199x 9 32,000,000 8.4 6.6 1.16 76.12 7.39
1.200x to 1.499x 4 7,000,000 1.8 1.4 1.34 68.59 7.77
1.600x to 1.699x 1 4,000,000 1.0 0.8 1.69 72.94 7.54
- ---------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 110 $385,000,000 100.0% 78.1% 1.05x 85.15% 7.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Debt service coverage is the ratio of the current net rents as of the cutoff
date to current monthly total debt service during as of the cutoff date. Current
net rents are calculated by deducting current loan-level reserves as of the
cutoff date and current ground rents as of the cutoff date, if any, from current
gross rents.
* The weighted average debt service coverage as of the Cut-Off Date is 1.05x
<PAGE>
ORIGINATION
COMPANY: CLF developed the proprietary Hybrid Corporate Bond Lease
Program (the "Program"), in addition to related products,
for the express purpose of providing credit based financing
to owners of single tenant properties net leased pursuant to
Credit Leases.
TENANTS: All tenants or their respective Credit Lease guarantors are
Investment Grade or have received an Internal Private
Classification of at least BBB- from each of S&P and Duff
with the exception of Circuit City Stores, Inc. and
MedPartners, Inc. Circuit City has an Internal Private
Classification indicating credit with characteristics
consistent with a rating of "BB-" or better. MedPartners has
a long-term credit rating from S&P of BB-. The average
corporate unsecured debt rating for the CLF loans in the
pool is "A-".
All corporate credit tenants, particularly those rated BBB
and below, are independently underwritten by CLF as to their
rating trends (up or down), industry trends, and market
position.
<PAGE>
LOAN
o UNDERWRITING: CLF's loan underwriting is centralized to
ensure consistent quality and involves in-depth analysis by
both internal and external specialists of the corporate
credit being financed, the quality of the lease, and value
of the underlying real estate on both a leased fee and "as
dark" basis. CLF's due diligence typically includes a credit
evaluation, a legal analysis of each lease, an assessment of
condemnation and casualty risks, reviews of landlord
obligations, reviews of third-party reports (environmental,
engineering, appraisal), residual risk exposure (for
extended amortization loans) , borrower structure, reviews
of loan closing documents, and confirmation with applicable
rating agencies of each tenant's credit rating.
<PAGE>
LOAN COLLATERAL AND BORROWER STRUCTURE
LOAN TERMS: All mortgage loans (with one exception) are fully-amortizing
either before or, co-terminus with the primary term, or in
some cases the first renewal period, of the related Credit
Lease.
CALL PROTECTION: Generally, eight years of lockout followed by yield
maintenance, flat to Treasuries, for the balance of the
mortgage loan term.
SECURITY: All mortgage loans are secured by:
o lock box assignments of leases and rents;
o first mortgages on fee or leasehold interests in the
related premises; and
o a security interest in funds on deposit in reserve
accounts.
BORROWER TYPE: Generally special-purpose entities organized in accordance
with standard rating agency criteria. Bankruptcy-remote
opinions are generally required at origination for all
mortgage loans of more than $5,000,000 (and for all mortgage
loans made to borrowers/landlords with aggregate Program
debt of more than $5,000,000).
<PAGE>
LEASE STRUCTURE
QUALIFIED LEASES: Only Credit Leases of the types listed and described below
are eligible for financing under the Program and are
included in the Pool.
o Bond-Type. The tenant does not have termination or
abatement rights pursuant to the Credit Lease absent a
termination payment that is sufficient to fully prepay
the related loan.
o Triple Net. The tenant may terminate the Credit Lease
or abate rent following a defined condemnation or
casualty event, but generally for no other reason.
o Double Net. The tenant may terminate the Credit Lease
or abate rent following a defined condemnation or
casualty, or following borrower/landlord default with
respect to certain obligations (primarily maintenance
and repairs) under the Credit Lease.
<PAGE>
LEASE ENHANCEMENT MECHANISMS
CLF UTILIZES AN INTEGRATED PROGRAM OF CREDIT LEASE ENHANCEMENT MECHANISMS TO
CREATE A HYBRID CORPORATE BOND BY ENSURING THAT THERE ARE NO INTERRUPTIONS IN
THE CORPORATE CREDIT TENANT'S RENTAL STREAM DUE TO REAL ESTATE RELATED EVENTS.
LEASE ENHANCEMENT Non-cancelable insurance policies have been issued by the
INSURANCE POLICIES: Lease Enhancement Insurance Policy Provider for triple net
and double net leases. In the event a tenant exercises a
termination or abatement right following a condemnation or
casualty event, the Lease Enhancement Insurance Policy
Provider will either (i) make a cash payment as a
replacement for any lost monthly rent or (ii) fully prepay
the mortgage loan, at par.
LEASE SUPPORT In the event of borrower/landlord default with respect to
ACTIONS: obligations under the Credit Lease, the Servicer or Special
Servicer, as applicable, will use its best efforts to
satisfy those obligations to prevent the tenant from
exercising its termination or abatement rights. Lease
Support Actions may include, but are not limited to,
performance of required maintenance and repairs and
initiation and maintenance of appropriate legal actions. The
Servicer and Special Servicer have access to reserve account
funds and, when necessary, are obligated to advance their
own funds (subject to recoverability) and are prohibited
from foreclosure until the Servicer advances exceed 60% of
the dark value of the property.
<PAGE>
BORROWER RESERVE Reserve accounts are established based on an engineering
ACCOUNTS: survey by CLF selected professional third-party engineering
consultants and funded on a monthly basis for mortgage loans
relating to double net leases with quantifiable landlord
obligations. The deposits to these accounts generally
provide at least 125% of the anticipated, inflation-adjusted
costs of maintenance, repair and replacement to the related
premises as they occur. In addition, double net leases are
generally underwritten with debt service coverage in excess
of that required or reserves and principal and interest
payments.
EXPENSE RESERVE CLF provides for a trust-level account to be established and
ACCOUNT: funded on a monthly basis. The deposits made thereto will be
available for Lease Support Actions, trust expenses,
recoverable and non-recoverable advances, prepayment
interest shortfalls and credit support. Unless drawn upon,
the Expense Reserve Account will grow to approximately $2.4
million over the life of the transaction without
consideration of reinvestment income.
<PAGE>
LEASE ENHANCEMENT SUMMARY
<TABLE>
<CAPTION>
TERMINATION OR ABATEMENT
LEASE TYPE EVENT MITIGANT LEASE AS ENHANCED
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bond-Type None Not applicable Not applicable
Triple Net* Condemnation or casualty Non-cancelable insurance policy Bond-Type Equivalent
with AAA-rated insurer
Double Net* (1) Condemnation or (1) Non-cancelable insurance Bond-Type Equivalent
casualty policy with AAA-rated insurer
(3) Maintenance/repair (3) Escrows equal to 125% of
provision violation consultant's estimate for
maintenance/repairs
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Any Triple Net and Double Net Leases that contain lease provisions other than
casualty or condemnation that could lead to a tenant's right to terminate the
lease or abate rent thereunder have the protection provided by the Servicer's
Lease Support Actions and the AA rated backstop thereto.
<PAGE>
EXTENDED AMORTIZATION MECHANISM
CTL loans that amortize through the first renewal period of the related Credit
Lease each receive the benefit of an individual insurance policy issued by the
Extended Amortization Insurance Policy Provider. Continued debt service on or
repayment of such mortgage loans is thus insured in the event the related tenant
elects not to renew their lease.
EXTENDED Transactions which meet Program underwriting standards may
AMORTIZATION also be eligible for financing through CLF's Extended
PROGRAMsm LOANS: Amortization Program (the "EAPsm"). With one exception (a
balloon mortgage), EAP loans fully amortize either before or
co-terminus with the first renewal period of the related
Credit Lease.
INSURANCE POLICY: In order to eliminate the risk of debt service interruption
due to a tenant non-renewal event, a non-cancelable Extended
Amortization Insurance Policy is underwritten for each EAP
loan.
POLICY PROVIDER: In the event of (i) non-renewal of the Credit Lease and (ii)
borrower/landlord default under the related loan, the
Extended Amortization Insurance Policy Provider (whose
financial strength is rated "AAA" by S&P) must either (a)
fully prepay the loan, with yield maintenance (subject to a
5% cap), or (b) make monthly payments in an amount equal to
the debt service payments due during the extended
amortization period.
<PAGE>
LOAN APPROVAL AND CLOSING PROCESS
LEASE AND CTL loan approval, each Credit Lease is reviewed by a
LOAN REVIEW: trained CLF underwriter using comprehensive underwriting
guidelines developed through consultation with legal and
financial advisors, investors and rating agencies. The
Credit Lease is reviewed specifically to identify and
quantify, as applicable, the risks associated with tenant
termination or abatement rights resulting from condemnation
and casualty events and borrower/landlord default with
respect to obligations under the Credit Lease.
CREDIT REVIEW: Each credit is reviewed by experienced finance specialists
and the ratings confirmed by the rating agencies.
LOAN REVIEW After an application has been reviewed and a deposit has
COMMITTEE: been received, CLF convenes a loan review committee (made up
of CLF's senior managers) in order to determine whether or
not the transaction meets Program underwriting criteria.
Following the completion of due diligence, the loan review
committee is reconvened for issuance of ultimate mortgage
loan approval or rejection.
<PAGE>
APPLICATION AND Once the application has been accepted, full due diligence
DUE DILIGENCE: is commenced which includes:
o the engagement of CLF-approved or CLF-selected
third-party valuation and environmental consulting
firms and, in the case of double net leases, structural
engineering consulting firms;
o a review and summary of Credit Lease termination and
abatement rights and respective mitigating
enhancements;
o an analysis of the borrower, with electronic background
checks;
o a review of title, survey, etc.;
o a review of the Credit Lease and related premises by
the Lease Enhancement Policy Provider;
o a review of the Credit Lease and third-party reports by
the Servicer; and
o for EAP mortgage loans, a review of the Credit Lease
and valuation report by the Extended Amortization
Insurance Policy Provider.
CLOSING: CTL loans are closed in accordance with pre-defined Program
requirements, including comprehensive borrower/landlord,
premises and tenant/guarantor criteria. Standard
securitization-oriented documentation is used.
<PAGE>
COMPARISON TO LONG-TERM, SENIOR UNSECURED CORPORATE DEBT AND CMBS
The long-term, senior unsecured debt of a corporation is the unconditional
promise of that corporation to make a stream of payments in accordance with the
terms of a bond. Typically senior unsecured debt pays interest only on a
semi-annual basis with principal returned at maturity. In the event of a bond
default, the holders are unsecured and generally recover only against the
unsecured assets of the corporation. Like corporate bonds, the loans originated
under the Enhanced Lease Program contain the unconditional obligation of the
Credit Lease Tenants to make a stream of monthly rental payments, subject only
to certain specified real estate related termination or rent abatement rights
and subject to the right of the credit tenant reject the lease in the event of
bankruptcy. Although corporate bonds do not have the risks associated with the
termination or abatement rights that are contained in many of the Credit Leases
that back the certificates, the Program substantially reduces or eliminates
these real estate related risks. Moreover, unlike long-term, senior unsecured
corporate debt, CTL Loans are self-amortizing and secured by first mortgage
liens. The combination of amortization and security coupled with the strong
financial incentives of the underlying borrower to protect the loan in the event
of a credit tenant default provide the possibility of increasing expected
recoveries to certificate holders that might otherwise be available to such
certificate holders if they held the unsecured corporate bonds of that same
corporate credit. CTL loans also have substantial call protection in the form of
eight year lock-outs followed by yield maintenance flat to US Treasuries for the
duration of the loan.
The certificates also compare favorably in certain respects to commercial
mortgage-backed securities ("CMBS") in terms of credit, prepayment risk and
recovery. CMBS pools generally consist of an aggregation of real estate loans.
Typically, such real estate loans are underwritten based on the value of the
underlying real estate and the strength of the borrower. Amortization periods
usually exceed the term of the loan by a significant amount (10 year terms with
25 or 30 year amortization periods) leaving the balance of the loan (up to 70%)
to be retired at maturity either by refinancing or from the resources of the
borrower. Timeliness of payment and ultimate recovery on real estate loans is
affected by many factors including, the financial strength or lack thereof of
the borrower, the ability of the borrower to refinance the loan at maturity, the
stability of the cash flow from the tenants at the property, the quality of the
leases, and the uncertainties of the real estate and economic cycles.
By comparison to CMBS, the credit quality of the cash flows on all the CTL
loans is defined by the credit quality of the generally single tenant subject to
the long term lease. The risks to interruptions in credit tenant cash flows (and
thus loan payments) is reduced by limiting eligible Credit Lease Tenants to
primarily Investment Grade credits, whose financial strength reduces the risk of
default over a business cycle as compared with non-investment grade tenants.
With the exception of Circuit City and MedPartners, all of the credit tenants in
the pool are Investment Grade, and including all the CTL loans, the average
credit rating is A-. The Investment Grade credit quality of the credit tenants
coupled with the amortizing nature of the credit lease loans and strong call
protection insulate the certificate holders from risks of voluntary or
involuntary prepayments on the mortgage loans.
<PAGE>
CREDIT TENANT LEASE (CTL) LOAN OVERVIEW
o CASH FLOWS: CTL Loans utilize the credit tenant's fixed and predictable
rent stream to pay principal and interest. All tenant rent is lock boxed at
Midland and applied to debt on the due date as well as to scheduled
reserves, if any. The credit tenant pays all property expenses directly or
indirectly.
o CREDIT QUALITY: CTL loan pool has average A- rated credit tenants.
o COLLATERAL: Each CTL loan is collateralized by an absolute assignment of
the credit tenant lease and a first mortgage.
o REAL ESTATE RISK: Performance of the loan depends upon the tenant's
uninterrupted rent stream. Risk of interruption of the tenant's rent as a
result of a real estate related event is eliminated/mitigated by bond or
enhanced bond-type leases.
o CALL PROTECTION: Voluntary prepayment is prohibited for eight years and
permitted thereafter only with a yield maintenance penalty calculated at
flat to U.S. Treasuries.
o AMORTIZATION: Each CTL loan fully amortizes over the term of the underlying
credit tenant lease or if not, then the outstanding balance at the end of
the tenant's initial lease term is fully insured by a subsidiary of
Berkshire Hathaway.
o DEFAULT RISK: S&P static pool cumulative default (default being defined as
the first occurrence of a payment default on any financial obligation)
studies indicate that default probability after ten years for AA, A, BBB,
BB and B credits are 1.00%, 1.76%, 3.71%, 15.07% and 25.55%, respectively.
Standard & Poor's Credit Week, January 28, 1998.
o EVENT RISK: Both S&P and Moody's default studies clearly show that credit
migration (up or down) is almost always a gradual process measured in
years. Sudden defaults of investment grade credits are essentially zero.
For the very small number of credits that do default, according to S&P the
average time from the original rating to default is 7.4, 7.6, 6.6, 5.1, and
3.7 years for AA, A, BBB, BB and B rated credits, respectively. Standard &
Poor's Credit Week, January 28, 1998.
o RECOVERIES: In the unlikely event a credit tenant defaults, potential
recoveries on the underlying CTL loan are enhanced by the amortizing nature
of the loan, the high quality of the mortgaged real estate, and incentives
present for both the tenant to continue to operate the property in case of
a bankruptcy and the borrower to protect the loan in the event of a
rejection of the lease in bankruptcy by the tenant.
<PAGE>
LOAN POOL SUMMARY - LONG TERM CONDUIT
SUMMARY CHARACTERISTICS
- --------------------------------------------------------------------------------
DESCRIPTION
INITIAL POOL BALANCE $108,000,000
AVERAGE BALANCE AS OF CUT-OFF DATE $6,000,000
WTD. AVG. UNDERWRITING DSCR(1) 1.38X
WTD. AVG. CUT-OFF DATE LTV RATIO(2) 60.8%
WTD. AVG. MATURITY DATE LTV RATIO(3) 19.6%
WTD. AVG. MORTGAGE RATE 7.58%
WTD. AVG. ORIGINAL TERM TO MATURITY 17 YEARS 10 MONTHS
WTD. AVG. REMAINING TERM TO MATURITY 16 YEARS 8 MONTHS
WTD. AVG. AGE 1 YEAR 2 MONTHS
WTD. AVG. ORIGINAL AMORTIZATION TERM 22 YEARS 5 MONTHS
WTD. AVG. REMAINING AMORTIZATION TERM 21 YEARS 3 MONTHS
- --------------------------------------------------------------------------------
(1) Ratio of underwritten property net cash flow to annual debt service
(2) Ratio of scheduled balance at Cut-off Date to appraised property value
(3) Ratio of scheduled balance at maturity to appraised property value
<PAGE>
STRATIFICATION TABLES
CUT-OFF DATE BALANCE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF DATE OF MORTGAGE OF CUT-OFF CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
BALANCES LOANS DATE (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0 to $999,999 1 $1,000,000 0.9% 0.2% 1.20x 25.79% 7.13%
$1,000,000 to $1,999,999 3 5,000,000 4.5 1.0 1.23 75.11 7.58
$2,000,000 to $2,999,999 5 12,000,000 11.2 2.4 1.29 62.29 7.32
$3,000,000 to $3,999,999 3 10,000,000 9.2 2.0 1.30 61.37 7.31
$4,000,000 to $4,999,999 1 5,000,000 4.6 1.0 1.54 55.03 7.43
$5,000,000 to $7,499,999 3 17,000,000 16.0 3.5 1.20 72.12 7.63
$10,000,000 to $14,999,999 1 14,000,000 13.3 2.9 1.25 74.23 7.21
$35,000,000 to $45,000,000 1 44,000,000 40.3 8.8 1.54 51.23 7.86
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROPERTY TYPE
<TABLE>
<CAPTION>
NUMBER BALANCE AS % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGED OF CUT-OFF CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF DATE MORTGAGE
PROPERTIES DATE (000'S) BALANCE BALANCE DSCR LTV RATIO RATE
PROPERTY TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail 11 $76,000,000 70.6% 15.5% 1.41x 60.49% 7.73%
Office 2 18,000,000 16.3 3.6 1.28 72.06 7.24
Mobile Home 4 9,000,000 8.5 1.9 1.21 45.29 7.13
Hotel 1 5,000,000 4.6 1.0 1.54 55.03 7.43
- -----------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
PROPERTY LOCATION LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SC 1 $44,000,000 40.3% 8.8% 1.54x 51.23% 7.86%
GA 1 14,000,000 13.3 2.9 1.25 74.23 7.21
TX 3 9,000,000 8.0 1.8 1.29 80.91 7.80
NC 3 7,000,000 6.2 1.4 1.28 73.82 7.78
FL 1 6,000,000 5.9 1.3 1.12 62.43 7.00
NM 1 6,000,000 5.1 1.1 1.25 73.62 7.67
CT 2 5,000,000 4.9 1.1 1.21 49.33 7.13
TN 1 5,000,000 4.6 1.0 1.54 55.03 7.43
NH 2 4,000,000 3.6 0.8 1.21 39.77 7.13
KS 1 3,000,000 3.2 0.7 1.28 69.52 7.44
MD 1 3,000,000 3.0 0.7 1.40 62.42 7.35
PA 1 2,000,000 1.8 0.4 1.25 71.25 7.50
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
MORTGAGE RATE
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
RANGE OF MORTGAGE RATES LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6.750% - 6.999% 1 $2,000,000 1.9% 0.4% 1.41x 79.24% 6.87%
7.000% - 7.249% 7 31,000,000 28.8 6.3 1.21 63.45 7.14
7.250% - 7.499% 4 14,000,000 13.1 2.9 1.42 62.85 7.40
7.500% - 7.749% 2 7,000,000 6.9 1.5 1.25 73.00 7.63
7.750% - 7.999% 1 44,000,000 40.3 8.8 1.54 51.23 7.86
8.000% - 8.499% 3 10,000,000 9.0 2.0 1.24 79.40 8.20
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
DSCR (1)
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
RANGE OF DSCRS LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.10x - 1.19x 1 $6,000,000 5.9% 1.3% 1.12x 62.43% 7.00%
1.20x - 1.29x 12 45,000,000 42.0 9.2 1.24 69.03 7.49
1.35x - 1.39x 1 2,000,000 2.2 0.5 1.38 69.83 7.32
1.40x - 1.49x 2 5,000,000 4.9 1.1 1.41 68.95 7.16
1.50x - 1.59x 2 49,000,000 44.9 9.8 1.54 51.62 7.81
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratio of underwritten property net cash flow to annual debt service
<PAGE>
CUT-OFF DATE LTV RATIO (1)
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF DATE OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
LTVS LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.0% - 29.9% 1 $1,000,000 0.9% 0.2% 1.20x 25.79% 7.13%
30.0% - 49.9% 2 5,000,000 4.6 1.0 1.21 44.86 7.13
50.0% - 59.9% 3 52,000,000 47.9 10.5 1.52 51.62 7.77
60.0% - 64.9% 2 10,000,000 8.9 1.9 1.22 62.43 7.12
65.0 % - 69.9% 2 6,000,000 5.5 1.2 1.32 69.65 7.39
70.0% - 74.9% 3 22,000,000 20.3 4.4 1.25 73.81 7.35
75.0% - 79.9% 4 8,000,000 6.9 1.5 1.28 77.39 7.56
80.0% - 84.9% 1 5,000,000 5.0 1.1 1.25 82.00 8.32
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratio of scheduled balance at Cut-off Date to appraised property value
MATURITY DATE LTV RATIO (1)
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF MATURITY DATE OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING MATURITY MORTGAGE
LTVS LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.0% - 29.9% 9 $71,000,000 66.1% 14.5% 1.42x 2.47% 7.63%
30.0% - 49.9% 3 9,000,000 8.7 1.9 1.43 37.57 7.42
50.0% - 59.9% 3 21,000,000 19.4 4.3 1.25 57.18 7.49
60.0% - 64.9% 3 6,000,000 5.9 1.3 1.29 61.44 7.66
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 19.59% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratio of scheduled balance at maturity to appraised property value
<PAGE>
ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
ORIGINAL TERM TO OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
MATURITY LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
180 11 $47,000,000 43.1% 9.4% 1.28x 71.28% 7.43%
240 7 62,000,000 56.9 12.5 1.46 52.95 7.70
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
RANGE OF OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
REMAINING TERMS LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
121 - 180 Months 11 $47,000,000 43.1% 9.4% 1.28x 71.28% 7.43%
181 - 240 Months 7 62,000,000 56.9 12.5 1.46 52.95 7.70
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ORIGINAL AMORTIZATION
<TABLE>
<CAPTION>
NUMBER BALANCE AS OF % OF % OF WTD. AVG. WTD. AVG. WTD. AVG.
ORIGINAL AMORTIZATION OF MORTGAGE CUT-OFF DATE CONDUIT POOL TOTAL POOL UNDERWRITING CUT-OFF MORTGAGE
TERM LOANS (000'S) BALANCE BALANCE DSCR DATE LTV RATE
RATIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
180 1 $3,000,000 3.2% 0.7% 1.28x 69.52% 7.44%
240 9 70,000,000 64.7 14.2 1.42 54.33 7.63
300 4 14,000,000 12.9 2.8 1.37 70.06 7.72
360 4 21,000,000 19.2 4.2 1.26 75.11 7.35
- ------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE 18 $108,000,000 100.0% 21.9% 1.38x 60.84% 7.58%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
GENERAL
o Each Mortgage Loan was originated or, in certain cases, purchased pursuant
to the NationsBank multifamily and commercial mortgage conduit. NationsBank
loans are originated utilizing exclusive internal underwriting and
third-party origination networks. Since 1995, NationsBank has securitized
more than $6 billion of NationsBank loans.
ORIGINATION/ACCUMULATION
o The NationsBank Permanent Loan Group (the "PLG") was formed in 1995 for the
express purpose of underwriting commercial mortgage loans which satisfy
NationsBank lending criteria. Currently, the PLG operates from 10 offices
located across the United States.
o Similarly, NationsBank originates health care loans which are underwritten
by the NationsBank Healthcare Banking Group (the "HCBG"). The HCBG
specializes in arranging financing for the health care industry, and in
1997 underwrote more than $83 million in NationsBank loans.
o Additionally, conduit relationships have been established between
NationsBank and a select group of third-party mortgage loan originators
(each, a "Third-Party Originator"). Third-Party Originators, all of which
are mortgage banking or banking firms with established credit policies,
include Bankers Mutual Mortgage, Inc., Berkshire Mortgage Finance, First
Security Bank, N.A., L.J. Melody & Company, The Patrician Financial Company
and The WMF Group. In the aggregate, these partners originated
approximately $1.5 billion in NationsBank loans in 1997.
<PAGE>
UNDERWRITING
o Each Mortgage Loan was originated against standard underwriting targets. In
order to ensure quality and consistency, NationsBank officers participate
in the entire underwriting review process. Moreover, NationsBank officers
regularly host underwriting forums for all underwriters and originators.
TARGETED UNDERWRITING SUMMARY
LOAN SIZE MINIMUM MAXIMUM AVAILABLE MAXIMUM
PROPERTY TYPE ($MM) DSCR LTV RATIO TERMS AMORTIZATION
- --------------------------------------------------------------------------------
Multifamily $0.5 - $50 1.20x 80% 84 - 180 Mos 360 Mos
Retail $0.5 - $50 1.25x 80% 84 - 180 Mos 360 Mos
Office $0.5 - $50 1.25x 75% 84 - 180 Mos 360 Mos
Health Care $0.5 - $25 1.30x 75% 84 - 180 Mos 360 Mos
Franchise $0.5 - $50 1.25x 75% 84 - 120 Mos 240 Mos
Hotel $0.5 - $35 1.35x 75% 84 - 180 Mos 300 Mos
Industrial $0.5 - $25 1.25x 75% 84 - 180 Mos 360 Mos
Mini Storage $0.5 - $15 1.30x 75% 84 - 180 Mos 300 Mos
Golf Course $1 - $20 1.40x 70% 84 - 120 Mos 300 Mos
- --------------------------------------------------------------------------------
<PAGE>
PARTICIPANTS
CAPITAL LEASE FUNDING, L.P. is a Loan Seller and a New York-based commercial
mortgage lender specializing in financing commercial real estate leased under
long-term net leases to corporate tenants who are, or whose obligations under
such leases are guaranteed by, corporations whose credit is Investment Grade or
carries an Internal Private Classification. CLF financed more than $129 million
of Credit Leases through a capital markets transaction in January 1997.
LEXINGTON INSURANCE COMPANY ("Lexington") issues non-cancelable Lease
Enhancement Insurance Policies which provide for monthly debt service payments
or full Loan prepayment, at par, in the event of rent abatement or termination,
respectively, following a condemnation or casualty event. Lexington is a
subsidiary of AIG. The financial strength of Lexington has been rated "AAA" by
S&P.
COLUMBIA INSURANCE COMPANY ("Columbia") is the Extended Amortization Insurance
Policy Provider. Columbia issues non-cancelable insurance policies which insure
the performance of CTL loans that are scheduled to amortize beyond the initial
term of the related Credit Lease. Columbia is a subsidiary of Berkshire
Hathaway, Inc. and carries a financial strength rating of "AAA" from S&P.
LASALLE NATIONAL BANK ("LaSalle") is the Trustee. LaSalle is a
nationally-chartered bank with principal offices in Chicago, Illinois. LaSalle
is rated "AA-" by S&P.
ABN AMRO BANK N.V., ("ABN") is the Fiscal Agent. ABN is based in the Netherlands
and is the corporate parent of LaSalle. ABN is rated "AA" by S&P.
