<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration File No.:333-3885
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus supplement and the prospectus to which it
relates shall not constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
PRELIMINARY PROSPECTUS SUPPLEMENT, DATED NOVEMBER 26, 1996
SUBJECT TO COMPLETION
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 26, 1996)
#############################################################################
MIDLAND LOGO
#############################################################################
$ (APPROXIMATE)
MIDLAND REALTY ACCEPTANCE CORP. (DEPOSITOR)
MIDLAND LOAN SERVICES, L.P. (MASTER SERVICER AND SPECIAL SERVICER)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1996-C2
The Commercial Mortgage Pass-Through Certificates, Series 1996-C2 (the
"Certificates") will consist of 17 Classes of Certificates, designated as the
Class A-1 Certificates, the Class A-2 Certificates, the Class A-3
Certificates, the Class A-EC Certificates, the Class B Certificates, the
Class C Certificates, the Class D Certificates, the Class E Certificates, the
Class F
(continued on next page)
THE OFFERED CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE
DEPOSITOR, THE MORTGAGE LOAN SELLERS, THE MASTER SERVICER, THE SPECIAL
SERVICER, THE TRUSTEE, THE FISCAL AGENT, THE UNDERWRITERS OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THE OFFERED CERTIFICATES NOR THE MORTGAGE
LOANS ARE INSURED OR GUARANTEED BY THE UNITED STATES GOV ERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PROSPECTIVE INVESTORS SHOULD REVIEW FULLY THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS, INCLUDING, WITHOUT LIMITATION, THE FACTORS DISCUSSED UNDER
"RISK FACTORS" AT PAGE S-23 IN THIS PROSPECTUS SUPPLEMENT AND PAGE 9 OF THE
PROSPECTUS BEFORE PURCHASING ANY OF THE OFFERED CERTIFICATES.
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
INITIAL CERTIFICATE OR PASS-THROUGH RATED FINAL
CLASS NOTIONAL BALANCE <F1> RATE <F2> DISTRIBUTION DATE <F3>
- -------------- ------------------------- ---------------- -----------------------
<S> <C> <C> <C>
Class A-1 ..... $ %
- -------------- ------------------------- ---------------- -----------------------
Class A-2 ..... $ %
- -------------- ------------------------- ---------------- -----------------------
Class A-3 ..... $ %
- -------------- ------------------------- ---------------- -----------------------
Class B ....... $ %<F4>
- -------------- ------------------------- ---------------- -----------------------
Class C ....... $ %<F5>
- -------------- ------------------------- ---------------- -----------------------
Class D ....... $ %<F6>
- -------------- ------------------------- ---------------- -----------------------
Class E ....... $ %<F7>
- -------------- ------------------------- ---------------- -----------------------
<FN>
<F1> Approximate, subject to an upward or downward variance of up to 5%.
<F2> In addition to distributions of principal and interest, holders of
certain Classes of Certificates will be entitled to receive a portion
of the Prepayment Premiums received from the borrowers as described
herein. See "DESCRIPTION OF THE CERTIFICATES--Distributions--Prepayment
Premiums" herein.
<F3> The Rated Final Distribution Date (the "Rated Final Distribution Date")
for each Class of Offered Certificates is the Distribution Date
occurring two years after the latest Assumed Maturity Date of any of
the Mortgage Loans. The "Assumed Maturity Date" of (a) any Mortgage
Loan that is not a Balloon Loan is the maturity date of such Mortgage
Loan and (b) any Balloon Loan is the date on which such Mortgage Loan
would be deemed to mature in accordance with its original amortization
schedule absent its Balloon Payment.
<F4> Initial Pass-Through Rate. The Class B Certificates accrue interest at
the Weighted Average Unmodified Net Mortgage Rate less %.
<F5> Initial Pass-Through Rate. The Class C Certificates accrue interest at
the Weighted Average Unmodified Net Mortgage Rate less %.
<F6> Initial Pass-Through Rate. The Class D Certificates accrue interest at
the Weighted Average Unmodified Net Mortgage Rate less %.
<F7> Initial Pass-Through Rate. The Class E Certificates accrue interest at
the Weighted Average Unmodified Net Mortgage Rate less %.
</FN>
</TABLE>
The Offered Certificates will be purchased by Prudential Securities
Incorporated, Deutsche Morgan Grenfell Inc. and Llama Company, L.P. (the
"Underwriters") from the Depositor and will be offered by the Underwriters
from time to time to the public in negotiated transactions or otherwise at
varying prices to be determined at the time of sale. Proceeds to the
Depositor from the sale of the Offered Certificates will be approximately
$ , before deducting certain expenses expected to be approximately $
payable by the Depositor. The Offered Certificates are offered by the
Underwriters, subject to prior sale, when, as and if delivered to and
accepted by the Underwriters and subject to their right to reject orders in
whole or in part. It is expected that delivery of the Offered Certificates
will be made in book-entry form through the Same-Day Funds Settlement System
of The Depository Trust Company ("DTC"), on or about December , 1996 (the
"Delivery Date"), against payment therefor in immediately available funds.
PRUDENTIAL SECURITIES INCORPORATED DEUTSCHE MORGAN GRENFELL INC.
LLAMA COMPANY, L.P.
DECEMBER , 1996
<PAGE>
(continued from previous page)
Certificates, the Class G Certificates, the Class H Certificates, the Class J
Certificates, the Class K-1 Certificates, the Class K-2 Certificates
(collectively, the "Regular Certificates"), the Class R-I Certificates, the
Class R-II Certificates and the Class R-III Certificates (together, the
"Residual Certificates"). Only the Class A-1, Class A-2, Class A-3, Class B,
Class C, Class D and Class E Certificates (the "Offered Certificates") are
offered hereby.
The Certificates will represent beneficial ownership interests in a trust
fund (the "Trust Fund") to be created by Midland Realty Acceptance Corp. (the
"Depositor"). The Trust Fund will consist primarily of a pool (the "Mortgage
Pool") of 139 fixed-rate mortgage loans (the "Mortgage Loans") secured by
first liens on commercial and multifamily residential properties (each, a
"Mortgaged Property").
The Mortgaged Properties consist of multifamily residential housing,
congregate care facilities, retail properties, office buildings, mini
warehouse facilities, industrial properties, hotels, mobile home parks and
mixed use properties. 94 of the Mortgage Loans were originated by Midland
Loan Services, L.P. ("Midland") and subsequently purchased by Midland
Commercial Financing Corp. ("MCFC"). MCFC acquired five of the Mortgage Loans
from other entities in the secondary market. Twenty-one of the Mortgage Loans
were purchased by German American Capital Corporation ("GACC") from various
unaffiliated mortgage banks or other originators in the secondary market.
GACC is an affiliate of Deutsche Morgan Grenfell Inc. ("DMG"). Nineteen of
the Mortgage Loans were originated by Boston Capital Mortgage Company,
Limited Partnership ("BCMC"). BCMC is an affiliate of Llama Company, L.P.
("Llama Company"). MCFC, GACC and BCMC are collectively referred to as the
"Mortgage Loan Sellers." The Mortgage Loans will be sold to the Depositor by
the Mortgage Loan Sellers on or prior to the date of initial issuance of the
Certificates. The characteristics of the Mortgage Loans and the related
Mortgaged Properties are described under "RISK FACTORS" and "DESCRIPTION OF
THE MORTGAGE POOL" herein.
The Class A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class E,
Class F, Class G, Class H and Class J Certificates (the "P&I Certificates")
will be entitled to distributions of interest on their respective Certificate
Balances at the applicable Pass-Through Rate for each such Class. The Class
A-EC Certificates will be entitled to distributions of Class A-EC Excess
Interest, on each Distribution Date. "Class A-EC Excess Interest" is an
amount equal to the Class A-EC Pass-Through Rate multiplied by the Class A-EC
Notional Balance. With respect to each Distribution Date, the Class K-2
Certificates will be entitled to distributions of interest at the Class K-2
Pass-Through Rate on the Class K-2 Notional Balance. The Class K-1
Certificates are principal only and will not be entitled to distributions of
interest. See "DESCRIPTION OF THE CERTIFICATES--Distributions" herein.
Distributions of principal and interest, as applicable, on the Regular
Certificates will be made, to the extent of Available Funds, on the 25th day
of each month or, if any such day is not a Business Day, on the next
succeeding Business Day, beginning in January, 1997 (each, a "Distribution
Date"). Distributions allocable to interest on the Certificates will be made
as described under "DESCRIPTION OF THE CERTIFICATES--Distributions" herein.
THE RIGHTS OF THE HOLDERS OF THE CLASS B, CLASS C, CLASS D, CLASS E, CLASS F,
CLASS G, CLASS H, CLASS J, CLASS K-1 AND CLASS K-2 CERTIFICATES (THE
"SUBORDINATE CERTIFICATES") TO RECEIVE DISTRIBUTIONS OF PRINCIPAL AND
INTEREST WILL BE SUBORDINATE TO SUCH RIGHTS OF THE HOLDERS OF THE CLASS A-1,
CLASS A-2, CLASS A-3 AND CLASS A-EC CERTIFICATES (THE "SENIOR CERTIFICATES");
THE RIGHTS OF THE HOLDERS OF THE CLASS C, CLASS D, CLASS E, CLASS F, CLASS G,
CLASS H, CLASS J, CLASS K-1 AND CLASS K-2 CERTIFICATES TO RECEIVE SUCH
DISTRIBUTIONS WILL BE SUBORDINATE TO SUCH RIGHTS OF THE HOLDERS OF THE CLASS
B CERTIFICATES; THE RIGHTS OF THE CLASS D, CLASS E, CLASS F, CLASS G, CLASS
H, CLASS J, CLASS K-1 AND CLASS K-2 CERTIFICATES TO RECEIVE DISTRIBUTIONS
WILL BE SUBORDINATE TO SUCH RIGHTS OF THE HOLDERS OF THE CLASS C
CERTIFICATES; THE RIGHTS OF THE CLASS E, CLASS F, CLASS G, CLASS H, CLASS J,
CLASS K-1 AND CLASS K-2 CERTIFICATES TO RECEIVE DISTRIBUTIONS WILL BE
SUBORDINATE TO SUCH RIGHTS OF THE CLASS D CERTIFICATES; THE RIGHTS OF THE
HOLDERS OF THE CLASS F, CLASS G, CLASS H, CLASS J, CLASS K-1 AND CLASS K-2
CERTIFICATES TO RECEIVE DISTRIBUTIONS WILL BE SUBORDINATE TO SUCH RIGHTS OF
THE CLASS E CERTIFICATES; THE RIGHTS OF THE HOLDERS OF THE CLASS G, CLASS H,
CLASS J, CLASS K-1 AND CLASS K-2 CERTIFICATES TO RECEIVE DISTRIBUTIONS WILL
BE SUBORDINATE TO SUCH RIGHTS OF THE HOLDERS OF THE CLASS F CERTIFICATES; THE
RIGHTS OF THE CLASS H, CLASS J, CLASS K-1 AND CLASS K-2 CERTIFICATES TO
RECEIVE DISTRIBUTIONS WILL BE SUBORDINATE TO SUCH RIGHTS OF THE HOLDERS OF
THE CLASS G CERTIFICATES; THE RIGHTS OF THE CLASS J, CLASS K-1 AND CLASS K-2
CERTIFICATES TO RECEIVE DISTRIBUTIONS WILL BE SUBORDINATE TO SUCH RIGHTS OF
THE HOLDERS OF THE CLASS H CERTIFICATES; AND THE RIGHTS OF THE CLASS K-1 AND
CLASS K-2 CERTIFICATES TO RECEIVE DISTRIBUTIONS WILL BE SUBORDINATE TO SUCH
RIGHTS OF THE HOLDERS OF THE CLASS J CERTIFICATES. IN ADDITION, EACH CLASS OF
REGULAR CERTIFICATES WILL HAVE THE BENEFIT OF SUBORDINATION OF THE RESIDUAL
CERTIFICATES TO THE EXTENT OF ANY DISTRIBUTIONS TO WHICH THE RESIDUAL
CERTIFICATES WOULD OTHERWISE BE ENTITLED. See "DESCRIPTION OF THE
CERTIFICATES--Subordination" herein.
The Residual Certificates are not entitled to distributions of interest or
principal.
S-2
<PAGE>
The yield to maturity on each Class of the Regular Certificates will be
sensitive, and, in the case of the Class A-EC, Class K-1 and Class K-2
Certificates, will be very sensitive, to the amount and timing of debt
service payments (including both voluntary and involuntary prepayments,
defaults and liquidations) on the Mortgage Loans, and payments with respect
to repurchases thereof that are applied in reduction of the Certificate
Balance of such Class (or, in the case of the Class A-EC or Class K-2
Certificates, which reduce the Class A-EC Notional Balance or the Class K-2
Notional Balance, respectively). No representation is made as to the rate of
prepayments on or liquidations of the Mortgage Loans or as to the anticipated
yield to maturity of any Class of Regular Certificates. All of the Mortgage
Loans generally provide that a permitted prepayment must be accompanied by a
Prepayment Premium; provided, however, that the Prepayment Premium
requirement generally expires prior to the maturity date of a Mortgage Loan.
See "DESCRIPTION OF THE MORTGAGE POOL--Certain Terms and Conditions of the
Mortgage Loans--Prepayment Provisions" herein. Prepayment Premiums, to the
extent collected, are distributable to the holders of the Regular
Certificates as and to the extent described under "DESCRIPTION OF THE
CERTIFICATES--Distributions--Prepayment Premiums" herein.
The yield to investors on each Class of the Regular Certificates will also
be very sensitive to the timing and magnitude of losses on the Mortgage Loans
due to liquidations to the extent that the Certificate Balances of the Class
or Classes of Certificates that are subordinate to such Class have been
reduced to zero. A loss on any one of the Mortgage Loans included in the
Mortgage Pool could result in a significant loss, and in some cases a
complete loss, of an investor's investment in any Class of the Regular
Certificates. No representation is made as to the rate of liquidations of or
losses on the Mortgage Loans.
The Certificates are being issued pursuant to a Pooling and Servicing
Agreement dated as of December 1, 1996 (the "Pooling and Servicing
Agreement"), by and among the Depositor, Midland Loan Services, L.P., as
servicer (in such capacity, the "Master Servicer") and special servicer (in
such capacity, the "Special Servicer"), LaSalle National Bank, as trustee
(the "Trustee"), and ABN AMRO Bank N.V., as fiscal agent (the "Fiscal
Agent"). The obligations of the Master Servicer with respect to the
Certificates will be limited to its contractual servicing obligations and the
obligation under certain circumstances to make Advances with respect to the
Mortgage Loans. See "THE POOLING AND SERVICING AGREEMENT" herein.
It is anticipated that Certificates will have the following ratings from
Fitch Investors Service, L.P. ("Fitch") and Moody's Investor Services, Inc.
("Moody's" and together with Fitch, the "Rating Agencies"):
<TABLE>
<CAPTION>
CLASS FITCH MOODY'S
--------- ----------- -----------
<S> <C> <C>
A-1 AAA Aaa
A-2 AAA Aaa
A-3 AAA Aaa
A-EC AAA Aaa
B AA Aa2
C A A2
D BBB Baa2
E BBB- Baa3
F BB Ba2
G BB- Ba3
H B B2
J B- B3
K-1 unrated unrated
K-2 unrated unrated
R-I unrated unrated
R-II unrated unrated
R-III unrated unrated
</TABLE>
Elections will be made to treat designated portions of the Trust Fund
(such portions of the Trust Fund, the "Trust REMICs"), and the Trust REMICs
will qualify, as three separate "real estate mortgage investment conduits"
(each a "REMIC" or, alternatively, "REMIC I," "REMIC II" and "REMIC III") for
federal income tax purposes. As described more fully herein, the Class A-1,
Class A-2, Class A-3, Class A-EC, Class B, Class C, Class D, Class E, Class
F, Class G, Class H, Class J, Class K-1 and Class K-2 Certificates will
constitute "regular interests" in REMIC III, and the Class R-I Certificates,
the Class R-II Certificates and the Class R-III Certificates will constitute
the sole Class of "residual interests" in REMIC I,
S-3
<PAGE>
REMIC II and REMIC III, respectively. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES," "DESCRIPTION OF THE CERTIFICATES--Delivery, Form and
Denomination" and "ERISA CONSIDERATIONS" herein and "MATERIAL FEDERAL INCOME
TAX CONSEQUENCES," "DESCRIPTION OF THE CERTIFICATES" and "ERISA
CONSIDERATIONS" in the Prospectus.
There is currently no secondary market for the Offered Certificates. The
Underwriters have advised the Depositor that they currently intend to make a
secondary market in the Offered Certificates, but they are under no
obligation to do so. There can be no assurance that such a market will
develop or, if it does develop, that it will continue or will provide
investors with a sufficient level of liquidity of investment. See "RISK
FACTORS--Limited Liquidity" herein.
This Prospectus Supplement does not contain complete information about the
offering of the Offered Certificates. Additional Information is contained in
the Prospectus and investors are urged to read both this Prospectus
Supplement and the Prospectus in full. Sales of the Offered Certificates may
not be consummated unless the purchaser has received both this Prospectus
Supplement and the Prospectus.
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates, whether or not
participating in this distribution, may be required to deliver a Prospectus
Supplement and Prospectus. This is in addition to the obligation of dealers
acting as underwriters to deliver a Prospectus Supplement and Prospectus with
respect to their unsold allotments and subscriptions.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED CERTIFICATES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended (the "1933 Act"), with respect to the Offered Certificates. This
Prospectus Supplement and the accompanying Prospectus, which form a part of
the Registration Statement, omit certain information contained in such
Registration Statement pursuant to the rules and regulations of the
Commission. The Registration Statement can be inspected and copied at the
Public Reference Room of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the Commission's regional offices at Seven World
Trade Center, 13th Floor, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such materials can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W, Washington D.C.
20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the Web site is
http://www.sec.gov.
S-4
<PAGE>
EXECUTIVE SUMMARY
Prospective investors are advised to read carefully, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and the Prospectus relating to the Offered Certificates in making
their investment decision. The following Executive Summary does not include
all relevant information relating to the Offered Certificates or the Mortgage
Loans, particularly with respect to the risks and special considerations
involved with an investment in the Offered Certificates and is qualified in
its entirety by reference to the detailed information appearing elsewhere in
this Prospectus Supplement and the Prospectus. Prior to making any investment
decision, a prospective investor should review fully this Prospectus
Supplement and the Prospectus. Capitalized terms used and not otherwise
defined herein have the respective meanings assigned to them in the
Prospectus.
<TABLE>
<CAPTION>
Approximate Approximate
Percent of Credit
Total Support
- --------------- ------------- ----------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
% CLASS A-EC CLASS A-1 Ratings: (AAA/Aaa) %
----------------- ------------- ----------------------------
Excess interest on
% Class A-1 through Class E CLASS A-2 Ratings: (AAA/Aaa) %
-------------------------------- ----------------------------
% CLASS A-3 Ratings: (AAA/Aaa) %
----------------- ------------- ----------------------------
Ratings:
% (AAA/Aaa) CLASS B Ratings: (AA/Aa2) %
----------------- ------ ------ ----------------------------
% CLASS C Ratings: (A/A2) %
----------------- ------------- ----------------------------
% CLASS D Ratings: (BBB/Baa2) %
------------- ----------------------------
% CLASS E Ratings: (BBB-/Baa3) %
- --------------- ------------- ----------------- ------------- ----------------------------
% CLASS F Ratings: (BB/Ba2) %
- --------------- ------------- --------------------------------------------------------------
% CLASS G Ratings:(BB-/Ba3) %
- --------------- ------------- --------------------------------------------------------------
% CLASS H Ratings: (B/B2) %
- --------------- ------------- --------------------------------------------------------------
% CLASS J Ratings: (B-/B3) %
- --------------- ------------- --------------------------------------------------------------
% CLASS K-2 Interest only CLASS K-1 Principal only
Unrated Unrated
- --------------- ------------- ----------------- ------------- ----------------------------
Not offered hereby: Classes A-EC, F, G, H, J, K-1 and K-2.
Ratings: (Fitch/Moody's)
- ----------------------------------------------------------------------------------------------
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
INITIAL
AGGREGATE
CERTIFICATE WEIGHTED PRINCIPAL
RATING BY PRINCIPAL OR % OF PASS-THROUGH AVERAGE LIFE WINDOW
CLASS FITCH/ MOODY'S NOTIONAL AMOUNT TOTAL DESCRIPTION RATE (YEARS) <F1> (YEARS) <F1>
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Senior Certificates
-----------------------------------------------------------------------------------------------------------------
A-1 AAA/Aaa $ % Fixed Rate %
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
A-2 AAA/Aaa $ % Fixed Rate %
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
A-3 AAA/Aaa $ % Fixed Rate %
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
A-EC AAA/Aaa N/A N/A Excess Interest % <F2> N/A N/A
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
Subordinate Certificates
-----------------------------------------------------------------------------------------------------------------
B AA/Aa2 $ % Variable Rate % <F3>
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
C A/A2 $ % Variable Rate % <F4>
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
D BBB/Baa2 $ % Variable Rate % <F5>
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
E BBB-/ Baa3 $ % Variable Rate % <F6>
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
F BB/ Ba2 $ % Variable Rate % <F7>
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
G BB-/Ba3 $ % Variable Rate % <F7>
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
H B/B2 $ % Variable Rate % <F7>
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
J B-/B3 $ % Variable Rate % <F7>
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
K-1 Unrated $ % Principal Only N/A
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
K-2 Unrated $ N/A Interest Only % <F7> N/A N/A
- --------- -------------- ---------------- --------- ------------------ ---------------- ---------------- -------------
<FN>
<F1> Based respectively on Scenario 2, which assumes a 0% CPR, no defaults
and an Auction in December, 2007, and Scenario 1, which assumes a 0%
CPR and no defaults. See "YIELD AND MATURITY CONSIDERATIONS--Weighted
Average Life" herein.
<F2> Initial Pass-Through Rate. The Certificate Pass-Through Rate will be
equal to a fraction, the numerator of which is the sum of (i) the
excess of the Weighted Average Unmodified Net Mortgage Rate over the
weighted averages of the Pass-Through Rates of the Class A-1, Class A-2
and Class A-3 Certificates multiplied by the Class A-EC Notional
Component A, (ii) the Class B Strip multiplied by the Class B
Certificate Balance, (iii) the Class C Strip multiplied by the Class C
Certificate Balance, (iv) the Class D Strip multiplied by the Class D
Certificate Balance, and (v) the Class E Strip multiplied by the Class
E Certificate Balance, and the denominator of which is the Class A-EC
Notional Balance.
<F3> Initial Pass-Through Rate. The Pass-Through Rate will be the Weighted
Average Unmodified Net Mortgage Rate less % (the "Class B Strip").
<F4> Initial Pass-Through Rate. The Pass-Through Rate will be the Weighted
Average Unmodified Net Mortgage Rate less % (the "Class C Strip").
<F5> Initial Pass-Through Rate. The Pass-Through Rate will be the Weighted
Average Unmodified Net Mortgage Rate less % (the "Class D Strip").
<F6> Initial Pass-Through Rate. The Pass-Through Rate will be the Weighted
Average Unmodified Net Mortgage Rate less % (the "Class E Strip").
<F7> Initial Pass-Through Rate. The Pass-Through Rate will be the Weighted
Average Unmodified Net Mortgage Rate.
</FN>
</TABLE>
S-6
<PAGE>
Securities:
Senior Certificates ....... The Class A-1, Class A-2, Class A-3 and
Class A-EC Certificates.
Subordinate Certificates .. The Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J, Class
K-1 and Class K-2 Certificates.
Residual Certificates:..... The Class R-I, Class R-II and Class R-III
Certificates.
Distribution Dates ........ The 25th day of each month, or if such 25th
day is not a Business Day, the Business Day
immediately following such day, commencing
in January 1997. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" herein.
Scheduled Final
Distribution Date .........
<TABLE>
<CAPTION>
SCHEDULED FINAL
CLASS DESIGNATION DISTRIBUTION DATE
--------------------- ---------------------
<S> <C>
Class A-1 ............
Class A-2 ............
Class A-3 ............
Class A-EC ...........
Class B ..............
Class C ..............
Class D ..............
Class E ..............
Class F ..............
Class G ..............
Class H ..............
Class J ..............
Class K-1 ............
Class K-2 ............
</TABLE>
The Scheduled Final Distribution Dates set
forth above have been determined on the
basis of the assumptions described in
"DESCRIPTION OF THE CERTIFICATES--Scheduled
Final Distribution Date" herein.
Rated Final
Distribution Date ........ As to each Class of Certificates,
.
Early Termination ......... The Trust Fund is subject to early
termination if less than 10% of the Initial
Pool Balance remains outstanding. See
"DESCRIPTION OF THE CERTIFICATES--Early
Termination" herein.
Auction Call Date ......... On or after the Distribution Date occurring
in December 2007, the Trust Fund is subject
to early termination pursuant to the auction
procedures described herein. See
"DESCRIPTION OF THE CERTIFICATES--Auction"
herein.
Master Servicer ........... Midland Loan Services, L.P. See "MIDLAND
LOAN SERVICES, L.P." herein.
Special Servicer .......... Midland Loan Services, L.P. See "MIDLAND
LOAN SERVICES, L.P." herein.
Trustee ................... LaSalle National Bank. See "THE POOLING AND
SERVICING AGREEMENT -- The Trustee" herein.
S-7
<PAGE>
Fiscal Agent ......... ABN AMRO Bank N.V. See "THE POOLING AND
SERVICING AGREEMENT--The Fiscal Agent"
herein.
Federal Tax Status .... Elections will be made to treat designated
portions of the Trust Fund as three separate
"real estate mortgage investment conduits"
("REMIC").
ERISA ................. The Senior Certificates should qualify for
an exemption from the prohibited transaction
provisions of ERISA. The Subordinate
Certificates may be acquired by employee
benefit plans subject to ERISA only if an
exemption from the prohibited transaction
provisions of ERISA is applicable. See
"ERISA CONSIDERATIONS" herein and in the
Prospectus.
SMMEA ................. None of the Offered Certificates are
mortgage-related securities pursuant to the
Secondary Mortgage Market Enhancement Act of
1984.
DTC Eligibility ....... The Offered Certificates are being delivered
through the facilities of The Depository
Trust Company ("DTC").
Closing Date .......... On or about December , 1996.
Structural Summary:
Interest Payments ..... On each Distribution Date, each Class of
Regular Certificates (other than the Class
K-1 Certificates) generally will be entitled
to receive interest distributions in an
amount equal to the Class Interest
Distribution Amount for such Class and
Distribution Date, together with any unpaid
Class Interest Shortfalls remaining from
prior Distribution Dates, in each case to
the extent of Available Funds remaining
after payment to each outstanding Class of
Certificates bearing an earlier sequential
Class designation of (i) the Class Interest
Distribution Amount and any unpaid Class
Interest Shortfall for such Classes, (ii)
the Pooled Principal Distribution Amount for
such Distribution Date for such Classes and
(iii) payment of the unreimbursed amount of
Realized Losses previously allocated to such
Classes. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" herein.
Principal Payments .... The Pooled Principal Distribution Amount for
each Distribution Date will be distributed,
first, to the Class A-1 Certificates, until
the Certificate Balance thereof has been
reduced to zero and thereafter, sequentially
to each other Class of Regular Certificates
(other than the Class A-EC and Class K-2
Certificates), until its Certificate Balance
is reduced to zero, in each case, to the
extent of Available Funds remaining after
(i) payment to each outstanding Class of
Certificates having an earlier sequential
Class designation of the Class Interest
Distribution Amount, any unpaid Class
Interest Shortfalls remaining from prior
Distribution Dates and the Pooled Principal
Distribution Amount for each such Class of
Certificates and the unreimbursed amount of
Realized Losses previously allocated to each
such Class of Certificates and (ii) payment
of the Class Interest Distribution Amount
and any unpaid Class Interest Shortfalls
remaining from prior Distribution Dates to
such Class (or, with respect to the Class
K-1 Certificates, to the Class K-2
Certificates) and to any other outstanding
Class that is pari passu with such Class.
Credit Enhancement .... The Class A-1, Class A-2, Class A-3 and
Class A-EC Certificates are credit enhanced
by the Classes of Subordinate Certificates,
which consist of the Class B, Class C, Class
D, Class E, Class F, Class G, Class H, Class
J, Class K-1 and Class K-2 Certificates.
Each other Class of Regular Certificates
will likewise be protected
S-8
<PAGE>
by the subordination offered by the other
Classes of Certificates that bear a later
sequential designation.
Realized Losses of principal and interest
from any Mortgage Loan and certain other
losses experienced by the Trust Fund will
generally be allocated to the Classes of
Regular Certificates (other than the Class
A-EC and Class K-2 Certificates) in reverse
sequential order starting with the Class K-1
Certificates. Realized Losses allocated to
the Class K-1 Certificates will reduce the
Class K-2 Notional Balance. Realized Losses
allocated to the Class A-1, Class A-2, Class
A-3, Class B, Class C, Class D or Class E
Certificates will reduce the Class A-EC
Notional Balance.
Advances .............. Subject to the limitations described herein,
the Master Servicer is required to make
advances (each such amount, a "P&I Advance")
in respect of delinquent Monthly Payments
(but not Balloon Payments) on the Mortgage
Loans. If the Master Servicer fails to make
an Advance required to be made, the Trustee
shall then be required to make such Advance.
If both the Master Servicer and the Trustee
fail to make such Advance, the Fiscal Agent
shall be required to make such Advance. See
"THE POOLING AND SERVICING
AGREEMENT--Advances" herein.
Collateral Overview:
Loan Details .......... See Annex A hereto for certain
characteristics of Mortgage Loans on a
loan-by-loan basis. All numerical
information provided herein with respect to
the Mortgage Loans is provided on an
approximate basis. All weighted average
information regarding the Mortgage Loans
reflects weighting of the Mortgage Loans by
their Cut-off Date Principal Balances. The
"Cut-off Date Principal Balance" of each
Mortgage Loan is equal to the unpaid
principal balance thereof as of the Cut-off
Date, after application of all payments of
principal due on or before such date,
whether or not received. See also
"DESCRIPTION OF THE MORTGAGE POOL" for
additional statistical information regarding
the Mortgage Loans.
<TABLE>
<CAPTION>
CHARACTERISTICS
---------------
<S> <C>
Aggregate Cut-off Date Principal Balance .. $531,176,571
Number of Mortgage Loans ................... 139
Weighted Average Mortgage Rate ............. 8.74%
Weighted Average Remaining Term to Maturity 118 months
Weighted Average DSCR <F1> .................. 1.36x
Average Mortgage Loan Balance .............. $ 3,821,414
Balloon Mortgage Loans ..................... 97.5%
------------
<FN>
<F1> Debt Service Coverage Ratio ("DSCR") is calculated based
on the ratio of Underwritten Cash Flow to the Annual Debt
Service. For more information on the Debt Service Coverage
Ratios, see "DESCRIPTION OF THE MORTGAGE POOL--Certain
Characteristics of the Mortgage Pool" herein.
</FN>
</TABLE>
S-9
<PAGE>
CUT-OFF DATE PRINCIPAL BALANCES
<TABLE>
<CAPTION>
% BY CUT-OFF DATE NUMBER OF MORTGAGE
CUT-OFF DATE PRINCIPAL BALANCE PRINCIPAL BALANCE LOANS
- ---------------------------------- ------------------ ------------------
<S> <C> <C>
$ 500,000 -$ 999,999 .......... 2.9% 18
$ 1,000,000 -$ 1,999,999 .......... 11.9% 43
$ 2,000,000 -$ 2,999,999 .......... 8.4% 18
$ 3,000,000 -$ 3,999,999 .......... 8.2% 13
$ 4,000,000 -$ 4,999,999 .......... 10.2% 12
$ 5,000,000 -$ 5,999,999 .......... 7.9% 8
$ 6,000,000 -$ 6,999,999 .......... 3.6% 3
$ 7,000,000 -$ 7,999,999 .......... 12.9% 9
$ 8,000,000 -$ 8,999,999 .......... 6.5% 4
$ 9,000,000 -$ 9,999,999 .......... 3.5% 2
$10,000,000 -$10,999,999 .......... 7.8% 4
$11,000,000 -$11,999,999 .......... 2.2% 1
$12,000,000 -$12,999,999 .......... 2.3% 1
$16,000,000 -$16,999,999 .......... 3.2% 1
$17,000,000 -$17,999,999 .......... 3.3% 1
$27,000,000 -$27,999,999 .......... 5.1% 1
----- ---
Total ........................... 100.0% 139
===== ===
</TABLE>
GEOGRAPHICAL DISTRIBUTION
<TABLE>
<CAPTION>
% BY CUT-OFF DATE NUMBER OF MORTGAGE
JURISDICTION PRINCIPAL BALANCE LOANS
- ---------------- ------------------ ------------------
<S> <C> <C>
Texas ........... 16.5% 31
California ...... 14.7% 15
Florida ......... 9.6% 14
Colorado ........ 6.8% 5
Michigan ........ 5.8% 9
New York ........ 5.2% 5
Maryland ........ 5.1% 6
Other <F1> ....... 36.3% 54
----- ---
Total ......... 100.0% 139
===== ===
- ------------
<FN>
<F1> No other jurisdiction has Mortgage Loans aggregating more
than 4.4% of the Initial Pool Balance.
</FN>
</TABLE>
S-10
<PAGE>
DEBT SERVICE COVERAGE RATIOS <F1>
<TABLE>
<CAPTION>
% BY CUT-OFF DATE NUMBER OF MORTGAGE
RANGE OF DEBT SERVICE COVERAGE RATIOS PRINCIPAL BALANCE LOANS
- ---------------------------------------- ------------------ ------------------
<S> <C> <C>
1.15-1.19 ............................... 0.9% 2
1.20-1.24 ............................... 6.2% 9
1.25-1.29 ............................... 21.4% 28
1.30-1.34 ............................... 21.5% 31
1.35-1.39 ............................... 30.3% 34
1.40-1.44 ............................... 8.6% 11
1.45-1.49 ............................... 3.8% 6
1.50-1.54 ............................... 1.6% 4
1.55-1.59 ............................... 2.1% 8
1.60-1.64 ............................... 1.9% 4
2.45-2.49 ............................... 1.5% 1
2.70-2.74 ............................... 0.1% 1
----- ---
Total ................................. 100.0% 139
===== ===
Weighted Average DSCR ................... 1.36x
- ------------
<FN>
<F1> Calculated based on the ratio of Underwritten Cash Flow to
Annual Debt Service. See "DESCRIPTION OF THE MORTGAGE
POOL--Certain Characteristics of the Mortgage Pool" herein
for more information relating to the calculation of debt
service coverage ratios.
</FN>
</TABLE>
LOAN TO VALUE RATIOS
<TABLE>
<CAPTION>
% BY CUT-OFF DATE NUMBER OF MORTGAGE
RANGE OF LOAN TO VALUE RATIOS PRINCIPAL BALANCE LOANS
- --------------------------------- ------------------ ------------------
<S> <C> <C>
30.0% to less than 35.0% ......... 1.1% 2
35.0% to less than 40.0% ......... 0.4% 2
40.0% to less than 45.0% ......... 2.2% 4
50.0% to less than 55.0% ......... 1.5% 3
55.0% to less than 60.0% ......... 9.3% 17
60.0% to less than 65.0% ......... 8.9% 14
65.0% to less than 70.0% ......... 18.8% 34
70.0% to less than 75.0% ......... 35.2% 45
75.0% to less than 80.0% ......... 19.1% 14
80.0% to less than 85.0% ......... 2.0% 3
85.0% to less than 90.0% ......... 1.7% 1
----- ---
Total .......................... 100.0% 139
===== ===
Weighted Average LTV ............. 69.24%
</TABLE>
S-11
<PAGE>
PROPERTY TYPES
<TABLE>
<CAPTION>
% BY CUT-OFF DATE NUMBER OF MORTGAGE
PROPERTY TYPES PRINCIPAL BALANCE LOANS
- -------------------------- ------------------ ------------------
<S> <C> <C>
Congregate Care ........... 0.8% 1
Hotel ..................... 1.5% 1
Industrial ................ 0.6% 1
Industrial/Warehouse ..... 4.2% 8
Mini Warehouse ............ 0.2% 1
Mixed Use ................. 3.2% 1
Mobile Home Park .......... 0.6% 2
Multifamily ............... 38.1% 59
Office .................... 12.8% 17
Office/R&D ................ 2.8% 2
Office/Retail ............. 3.0% 3
Office/Warehouse .......... 0.8% 3
Retail, Anchored .......... 9.9% 9
Retail, Factory Outlet ... 3.1% 3
Retail, Single Tenant .... 9.2% 14
Retail, Unanchored ........ 9.2% 14
----- ---
Total ................... 100.0% 139
===== ===
</TABLE>
MATURITY YEARS
<TABLE>
<CAPTION>
% BY CUT-OFF DATE NUMBER OF MORTGAGE
YEAR PRINCIPAL BALANCE LOANS
- ------------ ------------------ ------------------
<S> <C> <C>
2001 ........ 2.4% 2
2002 ........ 2.2% 2
2003 ........ 13.3% 11
2004 ........ 0.4% 1
2005 ........ 3.2% 3
2006 ........ 57.1% 83
2007 ........ 1.1% 2
2008 ........ 13.2% 21
2010 ........ 0.3% 1
2011 ........ 5.9% 11
2016 ........ 0.2% 1
2021 ........ 0.7% 1
----- ---
Total ..... 100.0% 139
===== ===
</TABLE>
DELINQUENCY STATUS AS OF NOVEMBER 1, 1996
<TABLE>
<CAPTION>
% BY CUT-OFF
DATE PRINCIPAL
STATUS BALANCE
- ---------------- --------------
<S> <C>
NO DELINQUENCIES .................. 100%
</TABLE>
S-12
<PAGE>
PREPAYMENT LOCKOUT/PREMIUM ANALYSIS <F1>
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT
RESTRICTION ASSUMING NO PREPAYMENTS
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Prepayment Restrictions
- -----------------------------------
Lockout ............................
Greater of Yield Maintenance or
Percentage Premium of:
5.00% or greater ..................
4.00% to 4.99% ....................
3.00% to 3.99% ....................
2.00% to 2.99% ....................
1.00% to 1.99% ....................
0.00% to 0.99% ....................
Total of Yield Maintenance .........
Total of Yield Maintenance
and Lockout .......................
Percentage Premium:
5.00% or greater ..................
4.00 to 4.99% .....................
3.00 to 3.99% .....................
2.00 to 2.99% .....................
1.00 to 1.99% .....................
Total with Percentage Premium
Open ...............................
Total ..............................
% of Initial PoolBalance <F2>.......
- ------------------
<FN>
<F1> This table sets forth an analysis of the percentage of the declining
balance of the Mortgage Pool that, on December 1, in each of the years
indicated, will be within a Lockout Period or in which Principal
Prepayments must be accompanied by the indicated Prepayment Premium or
yield maintenance charge. See "DESCRIPTION OF THE MORTGAGE POOL--Certain
Terms and Conditions of the Mortgage Loans--Prepayment Provisions" for the
assumptions used in preparing this table.
<F2> Represents the approximate percentage of the Initial Pool Balance
that will remain outstanding at the indicated date based upon the
assumptions used in preparing this table.
</FN>
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
2003 2004 2005 2006 2007 2008 2009 2010 2011
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prepayment Restrictions
- -----------------------------------
Lockout ............................
Greater of Yield Maintenance or
Percentage Premium of:
5.00% or greater ..................
4.00% to 4.99% ....................
3.00% to 3.99% ....................
2.00% to 2.99% ....................
1.00% to 1.99% ....................
0.00% to 0.99% ....................
Total of Yield Maintenance .........
Total of Yield Maintenance
and Lockout .......................
Percentage Premium:
5.00% or greater ..................
4.00 to 4.99% .....................
3.00 to 3.99% .....................
2.00 to 2.99% .....................
1.00 to 1.99% .....................
Total with Percentage Premium
Open ...............................
Total ..............................
% of Initial PoolBalance <F2> ......
- ------------------
<FN>
<F2> Represents the approximate percentage of the Initial Pool Balance
that will remain outstanding at the indicated date based upon the
assumptions used in preparing this table.
</FN>
</TABLE>
S-13
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and
the Prospectus. Capitalized terms used herein and not otherwise defined
herein have the meanings assigned in the Prospectus. See "INDEX OF
SIGNIFICANT DEFINITIONS" herein and in the Prospectus.
Title of Certificates .. Midland Realty Acceptance Corp. Commercial
Mortgage Pass-Through Certificates, Series
1996-C2 (the "Certificates").
The Certificates ....... $ initial aggregate principal balance
("Certificate Balance") of Class A-1
Certificates;
$ initial Certificate Balance of Class
A-2 Certificates;
$ initial Certificate Balance of Class
A-3 Certificates;
Class A-EC Certificates;
$ initial Certificate Balance of Class B
Certificates;
$ initial Certificate Balance of Class C
Certificates;
$ initial Certificate Balance of Class D
Certificates;
$ initial Certificate Balance of Class E
Certificates;
$ initial Certificate Balance of Class F
Certificates;
$ initial Certificate Balance of Class G
Certificates;
$ initial Certificate Balance of Class H
Certificates;
$ initial Certificate Balance of Class J
Certificates;
$ initial Certificate Balance of Class
K-1 Certificates;
Class K-2 Certificates;
Class R-I Certificates;
Class R-II Certificates; and
Class R-III Certificates.
The aggregate initial Certificate Balance of
all Classes of Certificates is subject to a
permitted variance of plus or minus 5% as
described herein. The Certificates will be
issued pursuant to a Pooling and Servicing
Agreement to be dated as of December 1, 1996
(the "Pooling and Servicing Agreement")
among the Depositor, the Master Servicer,
the Special Servicer, the Trustee and the
Fiscal Agent.
ONLY THE CLASS A-1, CLASS A-2, CLASS A-3,
CLASS B, CLASS C, CLASS D AND CLASS E
CERTIFICATES ARE OFFERED HEREBY.
The Class A-EC, Class F, Class G, Class H,
Class J, Class K-1, Class K-2, Class R-I,
Class R-II and Class R-III Certificates
(collectively, the "Private Certificates")
have not been registered under the 1933 Act
and are not offered hereby. Accordingly, to
the extent this Prospectus Supplement
contains information regarding the terms of
the Private Certificates, such information
is provided solely because of its relevance
to a prospective purchaser of an Offered
Certificate.
Depositor .............. Midland Realty Acceptance Corp., a Missouri
corporation and a wholly owned subsidiary of
Midland Loan Services, L.P. (the Master
Servicer and the Special Servicer). See "THE
DEPOSITOR" in the Prospectus.
S-14
<PAGE>
Master Servicer ........ Midland Loan Services, L.P., a Missouri
limited partnership. See "MIDLAND LOAN
SERVICES, L.P." herein.
Special Servicer ....... Midland Loan Services, L.P., a Missouri
limited partnership. See "MIDLAND LOAN
SERVICES, L.P." herein.
Trustee ................ LaSalle National Bank, a nationally
chartered bank. See "THE POOLING AND
SERVICING AGREEMENT--The Trustee" herein.
Fiscal Agent ........... ABN AMRO Bank N.V., a Netherlands banking
corporation, and the corporate parent of the
Trustee. See "THE POOLING AND SERVICING
AGREEMENT--The Fiscal Agent" herein.
Cut-off Date ........... December 1, 1996, except with respect to the
Newly Originated Mortgage Loans for which
the Cut-off Date will be the date each such
Mortgage Loan was funded.
Closing Date ........... On or about December , 1996.
Distribution Date ...... The 25th day of each month, or if such 25th
day is not a Business Day, the Business Day
immediately following such day, commencing
in January 1997. As used herein, a "Business
Day" is any day other than a Saturday,
Sunday or a day in which banking
institutions in the States of New York,
Missouri or Illinois are authorized or
obligated by law, executive order or
governmental decree to close.
Record Date ............ With respect to each Distribution Date, the
close of business on the last Business Day
of the month preceding the month in which
such Distribution Date occurs.
Interest Accrual Period. With respect to any Distribution Date, the
calendar month preceding the month in which
such Distribution Date occurs. Interest for
each Interest Accrual Period is calculated
based on a 360-day year consisting of twelve
30-day months.
Collection Period ...... With respect to each Distribution Date and
any Mortgage Loan, the period beginning on
the day following the Determination Date in
the month preceding the month in which such
Distribution Date occurs (or, in the case of
the Distribution Date occurring in January,
1997 on the day after the Cut-off Date) and
ending on the Determination Date in the
month in which such Distribution Date
occurs.
Determination Date ..... The 17th day of any month, or if such 17th
day is not a Business Day, the Business Day
immediately preceding such 17th day,
commencing in January, 1997.
Due Date ............... With respect to any Collection Period and
Mortgage Loan, the date on which scheduled
payments are due on such Mortgage Loan
(without regard to grace periods), which
date, for the Mortgage Loans, is the first
day of the month.
Denominations .......... The Class A-1, Class A-2, Class A-3, Class
B, Class C, Class D and Class E Certificates
will be issued in minimum denominations of
Certificate Balance or Notional Balance, as
applicable, of $100,000 and integral
multiples of $1,000 in excess thereof and
will be registered in the name of a nominee
of The Depository Trust Company ("DTC" and,
together with any successor depository
selected by the Depositor, the "Depository")
and beneficial interests therein will be
held by investors through the book-entry
facilities of the Depository. The Depositor
has been informed by DTC that its nominee
will be Cede & Co. Beneficial Owners will
hold and transfer their respective ownership
interests in and to such Book-Entry
S-15
<PAGE>
Certificates through the book-entry
facilities of DTC and will not be entitled
to definitive, fully registered Certificates
except in the limited circumstances set
forth herein. See "DESCRIPTION OF THE
CERTIFICATES--Delivery, Form and
Denomination" herein.
Distributions .......... On each Distribution Date, each Class of
Regular Certificates (other than the Class
K-1 Certificates) will be entitled to
receive interest distributions in an amount
equal to the Class Interest Distribution
Amount for such Class and Distribution Date,
together with any unpaid Class Interest
Shortfalls remaining from prior Distribution
Dates, in each case to the extent of
Available Funds, if any, remaining after (i)
payment of the Class Interest Distribution
Amount and any unpaid Class Interest
Shortfalls remaining from prior Distribution
Dates for each other outstanding Class of
Certificates, if any, having an earlier
sequential Class designation, (ii) payment
of the Pooled Principal Distribution Amount
for such Distribution Date to each
outstanding Class of Certificates having an
earlier sequential Class designation and
(iii) payment of the unreimbursed amount of
Realized Losses, if any, up to an amount
equal to the aggregate of such unreimbursed
amount previously allocated to each other
outstanding Class of Certificates having an
earlier sequential Class designation.
References herein to the sequential Class
designation of such Classes of Certificates
means such Classes in alphabetical order;
provided, however, that the Class A-1, Class
A-2, Class A-3 and Class A-EC Certificates
will be treated pari passu (other than with
respect to distributions of principal) and
the Class K-1 and Class K-2 Certificates
will be treated pari passu.
The "Class Interest Distribution Amount"
with respect to any Distribution Date and
any Class of Regular Certificates (other
than the Class K-1 and Class K-2
Certificates) is equal to interest accrued
during the related Interest Accrual Period
at the applicable Pass-Through Rate for such
Class and such Interest Accrual Period on
the Certificate Balance of such Class;
provided that reductions of the Certificate
Balance or Notional Balance of such Class as
a result of distributions in respect of
principal or the allocation of losses on the
Distribution Date occurring in such Interest
Accrual Period will be deemed to have been
made as of the first day of such Interest
Accrual Period. With respect to any
Distribution Date and the Class K-2
Certificates, the "Class Interest
Distribution Amount" will be an amount equal
to the product of the Class K-2 Pass-Through
Rate and the Class K-2 Notional Balance;
provided that reductions of the Notional
Balance of such Class as a result of
distributions in respect of principal or the
allocation of losses on the Distribution
Date occurring in such Interest Accrual
Period will be deemed to have been made as
of the first day of such Interest Accrual
Period. The Class Interest Distribution
Amount of each Class will be reduced by its
allocable sum of the amount of any
Prepayment Interest Shortfalls not offset by
Prepayment Interest Surplus, the Servicing
Fee and, if the Master Servicer and the
Special Servicer are the same person, the
Special Servicing Fee with respect to such
Distribution Date, all as provided herein.
The Class K-1 Certificates are principal
only certificates and have no Class Interest
Distribution Amount.
The Pooled Principal Distribution Amount for
each Distribution Date will be distributed,
first, to the Class A-1 Certificates, until
the Certificate Balance thereof has been
reduced to zero and thereafter, sequentially
to each other Class of Regular Certificates
(other than the Class A-EC and Class K-2
Certificates, neither of which has a
Certificate Balance and neither of which is
entitled to distributions in respect of
principal) until its Certificate Balance is
reduced to zero, in each case, to the extent
of Available Funds remaining after (i)
payment to each outstanding Class of
Certificates having an earlier sequential
Class designation of the Class Interest
S-16
<PAGE>
Distribution Amount, any unpaid Class
Interest Shortfalls remaining from prior
Distribution Dates and the Pooled Principal
Distribution Amount for each such Class of
Certificates and the unreimbursed amount of
Realized Losses previously allocated to each
such Class of Certificates and (ii) payment
of the Class Interest Distribution Amount
and any unpaid Class Interest Shortfalls
remaining from prior Distribution Dates to
such Class (or, with respect to the Class
K-1 Certificates, to the Class K-2
Certificates) and to any other outstanding
Class that is pari passu with such Class.
The "Pooled Principal Distribution Amount"
for any Distribution Date is equal to the
sum (without duplication), for all Mortgage
Loans, of (i) the principal component of all
scheduled Monthly Payments (other than
Balloon Payments) that become due
(regardless of whether received) on the
Mortgage Loans during the related Collection
Period; (ii) the principal component of all
Assumed Scheduled Payments, as applicable,
deemed to become due (regardless of whether
received) during the related Collection
Period with respect to any Mortgage Loan
that is delinquent in respect of its Balloon
Payment; (iii) the Scheduled Principal
Balance of each Mortgage Loan that was
repurchased from the Trust Fund in
connection with the breach of a
representation or warranty or purchased from
the Trust Fund pursuant to the Pooling and
Servicing Agreement, in either case, during
the related Collection Period; (iv) the
portion of Unscheduled Payments allocable to
principal of any Mortgage Loan that was
liquidated during the related Collection
Period; (v) the principal component of all
Balloon Payments received during the related
Collection Period; (vi) all other Principal
Prepayments received in the related
Collection Period; and (vii) any other full
or partial recoveries in respect of
principal, including Insurance Proceeds,
Condemnation Proceeds, Liquidation Proceeds
and Net REO Proceeds.
Additional Master Servicer or Special
Servicer compensation, interest on Advances,
extraordinary expenses of the Trust Fund and
other similar items will create a shortfall
in Available Funds, which generally will
result in a Class Interest Shortfall for the
most subordinate Class then outstanding.
See "DESCRIPTION OF THE
CERTIFICATES--Distributions" herein.
Advances ............... Subject to the limitations described herein,
the Master Servicer is required to make
advances (each such amount, a "P&I Advance")
in respect of delinquent Monthly Payments on
the Mortgage Loans. The Master Servicer will
not be required to advance the full amount
of any Balloon Payment not made by the
related borrower on its due date, but will
advance an amount equal to the monthly
payment (or portion thereof not received)
deemed to be due on the Mortgage Loan after
such default, calculated on the original
amortization schedule of such Mortgage Loan
with interest as described herein. Upon
determination of the Anticipated Loss with
respect to any Seriously Delinquent Loan,
the amount of any P&I Advance required to be
made with respect to such Seriously
Delinquent Loan on any Distribution Date
will be an amount equal to the product of
(A) the amount of the P&I Advance that would
be required to be made in respect of such
Seriously Delinquent Loan without regard to
the application of this sentence, multiplied
by (B) a fraction, the numerator of which is
equal to the Scheduled Principal Balance of
such Seriously Delinquent Loan as of the
immediately preceding Determination Date
less the Anticipated Loss and the
denominator of which is such Scheduled
Principal Balance. See "THE POOLING AND
SERVICING AGREEMENT--Advances" herein. If
the Master Servicer fails to make a required
P&I Advance, the Trustee, acting in
accordance with the servicing standard, will
be required to
S-17
<PAGE>
make such P&I Advance, and if the Trustee
fails to make a required P&I Advance, the
Fiscal Agent will be required to make such
P&I Advance. See "THE POOLING AND SERVICING
AGREEMENT--The Fiscal Agent" herein.
Subordination .......... As a means of providing a certain amount of
protection to the holders of the Senior
Certificates against losses associated with
delinquent and defaulted Mortgage Loans, the
rights of the holders of the Subordinate
Certificates to receive distributions of
interest and principal, as applicable, will
be subordinated to such rights of the
holders of the Senior Certificates. Each
other Class of Regular Certificates will
likewise be protected by the subordination
offered by the other Classes of Certificates
that bear a later sequential Class
designation. This subordination will be
effected in two ways: (i) by the
preferential right of the holders of a Class
of Certificates to receive, on any
Distribution Date, the amounts of both
interest and principal, as applicable,
distributable in respect of such
Certificates on such Distribution Date prior
to any distribution being made on such
Distribution Date in respect of any Classes
of Certificates subordinate thereto, and
(ii) by the allocation of Realized Losses to
the Certificates in reverse order of their
sequential Class designations, provided that
Realized Losses are allocated pro rata to
the Class A-1, Class A-2 and Class A-3
Certificates in accordance with their
respective Certificate Balances. In
addition, each Class of Regular Certificates
will have the benefit of subordination of
the Residual Certificates to the extent of
any distributions to which the Residual
Certificates would otherwise be entitled.
See "DESCRIPTION OF THE
CERTIFICATES--Subordination" herein. No
other form of credit enhancement is offered
for the benefit of the holders of the
Offered Certificates.
Early Termination ...... Any holder of the Class R-I Certificates
representing more than a 50% Percentage
Interest of the Class R-I Certificates, the
Master Servicer and the Depositor will each
have the option to purchase, at the purchase
price specified herein, all of the Mortgage
Loans, and all property acquired through
exercise of remedies in respect of any
Mortgage Loans, remaining in the Trust Fund,
and thereby effect a termination of the
Trust Fund and early retirement of the then
outstanding Certificates, on any
Distribution Date on which the aggregate
Scheduled Principal Balance of the Mortgage
Loans remaining in the Trust Fund is less
than 10% of the Initial Pool Balance. See
"DESCRIPTION OF THE CERTIFICATES--Early
Termination" herein.
Auction Call Date ...... If the Trust Fund has not been terminated
earlier as described under "DESCRIPTION OF
THE CERTIFICATES--Early Termination" herein,
the Trustee will on the Distribution Date
occurring in September of each year from and
including 2007 and on any date after the
Distribution Date occurring in September
2007 on which the Trustee receives an
unsolicited bona fide offer to purchase all
(but not less than all) of the Mortgage
Loans (each, an "Auction Valuation Date"),
request that four independent financial
advisory or investment banking or investment
brokerage firms nationally recognized in the
field of real estate analysis and reasonably
acceptable to the Master Servicer provide
the Trustee with an estimated value at which
the Mortgage Loans and all other property
acquired in respect of any Mortgage Loan in
the Trust Fund could be sold pursuant to an
auction. If the aggregate value of the
Mortgage Loans and all other property
acquired in respect of any Mortgage Loan, as
determined by the average of the three
highest such estimates, equals or exceeds
the aggregate amount of the Certificate
Balances of all Certificates outstanding on
the Auction Valuation Date, plus unpaid
interest thereon, the anticipated Auction
Fees, unpaid servicing compensation, unreim-
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<PAGE>
bursed Advances (together with interest
thereon at the Advance Rate) and unpaid
Trust Fund expenses, the Trustee will
auction the Mortgage Loans and such property
and thereby effect a termination of the
Trust Fund and early retirement of the then
outstanding Certificates on or after the
Distribution Date in December 2007. The
Trustee will accept no bid lower than the
Minimum Auction Price. See "DESCRIPTION OF
THE CERTIFICATES--Auction" herein.
Certain Federal Income
Tax Consequences ...... Elections will be made to treat the Trust
REMICs, and the Trust REMICs will qualify,
as three separate real estate mortgage
investment conduits (each, a "REMIC I",
"REMIC II" and "REMIC III") for federal
income tax purposes. The Class A-1, Class
A-2, Class A-3, Class A-EC, Class B, Class
C, Class D, Class E, Class F, Class G, Class
H, Class J, Class K-1 and Class K-2
Certificates (collectively, the "Regular
Certificates") will represent "regular
interests" in REMIC III and the Class R-III
Certificates will be designated as the sole
Class of "residual interest" in REMIC III.
Certain uncertificated classes of interests
will represent "regular interests" in REMIC
I and REMIC II and the Class R-I and Class
R-II Certificates will be designated as the
sole Class of "residual interest" in REMIC I
and REMIC II, respectively.
Because they represent regular interests,
the Regular Certificates generally will be
treated as newly originated debt instruments
for federal income tax purposes. Holders of
the Regular Certificates will be required to
include in income all interest on such
Certificates in accordance with the accrual
method of accounting, regardless of a
Certificateholder's usual method of
accounting. None of the Offered Certificates
are expected to be treated for federal
income tax reporting purposes as having been
issued with original issue discount. For the
purposes of determining the rate of accrual
of market discount, original issue discount
and premium for federal income tax purposes,
it has been assumed that the Mortgage Loans
will prepay at the rate of % CPR and that
the Trust Fund will be terminated on the
Distribution Date occurring in December 2007
pursuant to the auction termination
procedure described herein. No
representation is made as to whether the
Mortgage Loans will prepay at that rate or
any other rate or whether the Trust Fund
will be terminated on such date. See
"MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Regular
Interests--Interest and Acquisition
Discount" in the Prospectus.
Certain Classes of the Offered Certificates
may be treated for federal income tax
purposes as having been issued at a premium.
Whether any holder of such a Class of
Certificates will be treated as holding a
Certificate with amortizable bond premium
will depend on such Certificateholder's
purchase price. Holders of such Classes of
Certificates should consult their own tax
advisors regarding the possibility of making
an election to amortize any such premium.
See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Regular Interests"
in the Prospectus.
Offered Certificates held by a mutual
savings bank or domestic building and loan
association will represent interests in
"qualifying real property loans" within the
meaning of Section 593(d) of the Code.
Offered Certificates held by a real estate
investment trust will constitute "real
estate assets" within the meaning of Section
856(c)(6)(B) of the Code, and income with
respect to Offered Certificates will be
considered "interest on obligations secured
by mortgages on real property or on
interests in property" within the meaning of
Section 856(c)(3)(B) of the Code. Offered
Certificates held by a domestic building and
loan association will generally
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<PAGE>
constitute "a regular or a residual interest
in a REMIC" with the meaning of Section
7701(a)(19)(C)(xi) of the Code only in the
proportion that the Mortgage Loans are
secured by multifamily apartment buildings.
See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of the REMIC and its
Holders" in the Prospectus.
For further information regarding the
federal income tax consequences of investing
in the Offered Certificates, see "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES--Taxation of
the REMIC" in the Prospectus and "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES" herein.
ERISA Considerations ... The United States Department of Labor has
issued to Prudential Securities Incorporated
an individual prohibited transaction
exemption, Prohibited Transaction Exemption
90-32, which generally exempts from the
application of certain of the prohibited
transaction provisions of Section 406 of the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the excise
taxes imposed by Sections 4975(a) and (b) of
the Code and the civil penalties imposed by
502(i) of ERISA, transactions relating to
the purchase, sale and holding of
pass-through certificates such as the Senior
Certificates by (a) employee benefit plans
and certain other retirement arrangements,
including individual retirement accounts and
Keogh plans, which are subject to ERISA, the
Code or a governmental plan subject to any
Similar Law (all of which are hereinafter
referred to as "Plans"), (b) collective
investment funds in which such Plans are
invested, (c) other persons acting on behalf
of any such Plan or using the assets of any
such Plan or any entity whose underlying
assets include Plan assets by reason of a
Plan's investment in the entity (within the
meaning of Department of Labor Regulations
Section 2510.3-101) and (d) insurance
companies that are using assets of any
insurance company separate account or
general account in which the assets of such
Plans are invested (or which are deemed
pursuant to ERISA or any Similar Law to
include assets of such Plans) and the
servicing and operation of mortgage pools
such as the Mortgage Pool, provided that
certain conditions are satisfied. See "ERISA
CONSIDERATIONS" herein.
THE SUBORDINATE CERTIFICATES DO NOT MEET THE
REQUIREMENTS OF THE FOREGOING EXEMPTION AND,
ACCORDINGLY, THE SUBORDINATE CERTIFICATES
MAY NOT BE PURCHASED BY OR TRANSFERRED TO A
PLAN OR PERSON ACTING ON BEHALF OF ANY PLAN
OR USING THE ASSETS OF ANY SUCH PLAN, OTHER
THAN AN INSURANCE COMPANY USING ASSETS OF
ITS GENERAL ACCOUNT UNDER CIRCUMSTANCES IN
WHICH SUCH PURCHASE OR TRANSFER AND
SUBSEQUENT HOLDING OF SUCH CERTIFICATES
WOULD NOT CONSTITUTE OR RESULT IN A
PROHIBITED TRANSACTION. THE RESIDUAL
CERTIFICATES MAY NOT BE PURCHASED BY OR
TRANSFERRED TO A PLAN.
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<PAGE>
Ratings ................ It is anticipated that the Certificates will
have the following ratings:
<TABLE>
<CAPTION>
CLASS FITCH MOODY'S
--------- ----------- -----------
<S> <C> <C>
A-1 AAA Aaa
A-2 AAA Aaa
A-3 AAA Aaa
A-EC AAA Aaa
B AA Aa2
C A A2
D BBB Baa2
E BBB- Baa3
F BB Ba2
G BB- Ba3
H B B2
J B- B3
K-1 unrated unrated
K-2 unrated unrated
R-I unrated unrated
R-II unrated unrated
R-III unrated unrated
</TABLE>
A security rating is not a recommendation to
buy, sell or hold securities and may be
subject to revision or withdrawal at any
time by the assigning rating organization.
The Rating Agencies' ratings on mortgage
pass-through certificates address the
likelihood of the receipt by holders of
payments to which they are entitled by the
Rated Final Distribution Date. The Rating
Agencies' ratings take into consideration
the credit quality of the mortgage pool,
structural and legal aspects associated with
the Certificates, and the extent to which
the payment stream in the mortgage pool is
adequate to make payments required under the
Certificates. Ratings on mortgage
pass-through certificates do not, however,
represent an assessment of the likelihood,
timing or frequency of principal prepayments
by borrowers or the degree to which such
prepayments (both voluntary and involuntary)
might differ from those originally
anticipated. The security ratings do not
address the possibility that
Certificateholders might suffer a lower than
anticipated yield. In addition, ratings on
mortgage pass-through certificates do not
address the likelihood of receipt of
Prepayment Premiums or the timing of the
receipt thereof or the likelihood of
collection by the Master Servicer of Default
Interest. In general, the ratings thus
address credit risk and not prepayment risk.
As described herein, the amounts payable
with respect to the Class A-EC Certificates
consist only of interest. If the entire pool
of Mortgage Loans were to prepay in the
initial month, with the result that the
Class A-EC Certificateholders receive only a
single month's interest and thus suffer a
nearly complete loss of their investment,
all amounts "due" to such holders will
nevertheless have been paid, and such result
is consistent with the "AAA" and "Aaa"
ratings received on the Class A-EC
Certificates. The Class A-EC Notional
Balance upon which interest is calculated is
reduced by the allocation of Realized Losses
and prepayments, whether voluntary or
involuntary. The rating does not address the
timing or magnitude of reductions of the
Class A-EC Notional Balance, but only the
obligation to pay interest timely on the
Notional Balance as so reduced from time to
time. Accordingly, the ratings of the Class
A-EC Certificates should be evaluated
independently from similar ratings on other
types of securities. See "RISK FACTORS" and
"RATINGS" herein.
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<PAGE>
Legal Investment ....... The Certificates will not constitute
"mortgage related securities" within the
meaning of the Secondary Mortgage Market
Enhancement Act of 1984. The appropriate
characterization of the Certificates under
various legal investment restrictions, and
thus the ability of investors subject to
these restrictions to purchase the
Certificates, may be subject to significant
interpretative uncertainties. Accordingly,
investors should consult their own legal
advisors to determine whether and to what
extent the Certificates constitute legal
investments for them. See "LEGAL INVESTMENT"
herein and in the Prospectus.
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<PAGE>
RISK FACTORS
Prospective holders of Certificates should consider, among other things,
the factors listed below and in the Prospectus under "RISK FACTORS" in
connection with the purchase of the Certificates.
INVESTMENT IN COMMERCIAL AND MULTIFAMILY MORTGAGE LOANS
Commercial and Multifamily Lending Generally. Commercial and multifamily
lending generally is viewed as exposing a lender to risks which are different
than many of the risks faced in connection with other types of lending, such
as consumer lending. Commercial and multifamily lending generally involves
larger loans, thereby providing lenders with less diversification of risk and
the potential for greater losses resulting from the delinquency and/or
default of individual loans. Many of the Mortgage Loans are non-recourse
obligations of the related borrowers, the repayment of which is often solely
dependent upon the successful operation of the related Mortgaged Properties.
Commercial and multifamily property values and net operating income are
subject to volatility. Many of the Mortgage Loans are also balloon loans,
which may pose additional risks associated with both the value of the related
Mortgaged Property and the borrower's ability to obtain financing as of the
maturity of the related Mortgage Loan. A borrower's ability to repay its loan
may be impaired if future operating results are not comparable to historical
operating results. This may occur for a variety of reasons, including an
increase in vacancy rates, a decline in rental rates, an increase in
operating expenses and/or an increase in necessary capital expenditures. The
income from and market value of a Mortgaged Property may also be adversely
affected by such factors as changes in the general economic climate, the
existence of an oversupply of comparable space or a reduction in demand for
real estate in the area, the attractiveness of the property to tenants and
guests and perceptions regarding such property's safety, convenience and
services. Real estate values and income are also affected by such factors as
government regulations and changes in real estate, zoning or tax laws, the
willingness and ability of a property owner to provide capable management,
changes in interest rate levels, the availability of financing and potential
liability under environmental and other laws.
a. Aging and Deterioration of Commercial and Multifamily Properties. The
age, construction quality and design of a particular Mortgaged Property may
affect the occupancy level as well as the rents that may be charged for
individual leases or, in the case of any Hotel Properties, the amounts that
customers may be charged for the occupancy thereof. The effects of poor
construction quality are likely to require the borrower to spend increasing
amounts of money over time for maintenance and capital improvements. Even
Mortgaged Properties that were well constructed and have been well maintained
will require ongoing capital improvements in order for such Mortgaged
Properties to remain competitive in the market and retain tenants and other
occupants.
b. Leases. Repayment of the Mortgage Loans may be affected by the
expiration or termination of occupancy leases and the ability of the related
borrowers to renew such leases with the existing occupants or to relet the
space on economically favorable terms to new occupants, or the existence of a
market which requires a reduced rental rate, substantial tenant improvements
or expenditures or other concessions to a tenant in connection with a lease
renewal. No assurance can be given that leases that expire can be renewed,
that the space covered by leases that expire or are terminated can be leased
in a timely manner at comparable rents or on comparable terms or that the
borrower will have the cash or be able to obtain the financing to fund any
required tenant improvements. Income from and the market value of the
Mortgaged Properties would be adversely affected if vacant space in the
Mortgaged Properties could not be leased for a significant period of time, if
tenants were unable to meet their lease obligations or if, for any other
reason, rental payments could not be collected. Upon the occurrence of an
event of default by a tenant, delays and costs in enforcing the lessor's
rights could occur. If a significant portion of a Mortgaged Property is
leased to a single tenant, the consequences of the failure of the borrower to
relet such portion of such Mortgaged Property in the event that such tenant
vacates the space leased to it (either as a result of the expiration of the
term of the lease or a default by the tenant) or a failure of such tenant to
perform its obligations under the related lease, will be more pronounced than
if such Mortgaged Property were leased to a greater number of tenants. See
"--Tenant Matters" herein. Certain tenants at the Mortgaged Properties may be
entitled to terminate their leases or reduce their rents based upon
negotiated lease provisions, e.g. if an anchor tenant ceases operations at
the related Mortgaged Property. In such cases, there can be no assurance that
the operation of such provisions will not allow such a termination or rent
reduction. A tenant's lease may also be terminated or otherwise affected if
such tenant become the subject of a bankruptcy proceeding.
c. Competition. Other multifamily and commercial properties located in the
areas of the Mortgaged Properties compete with the Mortgaged Properties of
similar types to attract customers, tenants and other occupants. Such
properties generally compete on the basis of rental rates, location,
condition and features of the property. If any oversupply of available space
exists in a particular market (either as a result of the building of new
construction or a decrease in the number of
S-23
<PAGE>
customers, tenants or other occupants due to a decline in economic activity
in the area), the rental rates for the Mortgaged Properties may be adversely
affected. Commercial or multifamily properties may also face competition from
other types of property as such properties are converted to competitive uses
in the future. Such conversions may occur based upon future trends in the use
of property by tenants and occupants, e.g. the establishment of more home
based offices and businesses and the conversion of warehouse space for
multifamily use. Increased competition could adversely affect income from and
the market value of the Mortgaged Properties.
d. Quality of Management. The successful operation of the Mortgaged
Properties is also dependent on the performance of the respective property
managers of the Mortgaged Properties. Such property managers are responsible
for responding to changes in the local market, planning and implementing the
rental rate structure, including establishing levels of rent payments, and
advising the related borrower so that maintenance and capital improvements
can be carried out in a timely fashion.
Risks Particular to Mini Warehouse Facilities. Tenant privacy, anonymity
and unsupervised access may heighten environmental risks to a lender making a
loan secured by a Mini Warehouse Property. The environmental site assessments
discussed herein did not include an inspection of the contents of the
self-storage units included in the Mini Warehouse Properties and there is no
assurance that all of the units included in the Mini Warehouse Properties are
free from hazardous substances or other pollutants or contaminants or will
remain so in the future. See "--Environmental Risks" below. Mini Warehouse
Properties are also subject to more volatility in terms of supply and demand
than loans secured by other types of properties. Additionally, because of the
construction utilized in connection with certain mini warehouse facilities,
it might be difficult or costly to convert such a facility to an alternative
use. Thus, the liquidation value of such Mini Warehouse Properties may be
substantially less than would be the case if the same were readily adaptable
to other uses.
Risks Particular to Hotel Properties. The Mortgage Pool contains one
Mortgage Loan which is secured by a Mortgage encumbering a Hotel Property.
Hotel Properties are subject to operating risks common to the hotel industry.
These risks include, among other things, a high level of continuing capital
expenditures to keep necessary furniture, fixtures and equipment updated,
competition from other hotels, increases in operating costs (which increases
may not necessarily in the future be offset by increased room rates),
dependence on business and commercial travelers and tourism, increases in
energy costs and other expenses of travel and adverse effects of general and
local economic conditions. These factors could adversely affect the related
borrower's ability to make payments on any Mortgage Loans secured by a Hotel
Property. Since limited service hotels are relatively quick and inexpensive
to construct and may quickly reflect a positive value, an over-building of
such hotels could occur in any given region, which would likely adversely
affect occupancy and daily room rates. Additionally, the revenues of certain
hotels, particularly those located in regions whose economy depends upon
tourism, may be highly seasonal in nature.
Hotel Properties may present additional risks as compared to the other
property types in that: (i) hotels are typically operated pursuant to
franchise, management and operating agreements that may be terminable by the
franchisor, the manager or the operator; (ii) the transferability of a
hotel's operating, liquor and other licenses to the entity acquiring such
hotel either through purchase or foreclosure is subject to the vagaries of
local law requirements; (iii) the potential difficulty of terminating an
ineffective operator of a Hotel Property subsequent to a foreclosure of such
Hotel Property; and (iv) future occupancy rates may be adversely affected by,
among other factors, any negative perception of such Hotel Property based
upon its historical reputation.
The Hotel Property is currently a Holiday Inn franchise; provided,
however, such franchise is to expire in December of 1996, and that such Hotel
Property is expected to convert to a Radisson franchise thereafter. The
continuation of franchises is typically subject to specified operating
standards and other terms and conditions. The franchisor periodically
inspects its licensed properties to confirm adherence to its operating
standards. The failure of the Hotel Properties to maintain such standards or
adhere to such other terms and conditions could result in the loss or
cancellation of the franchise licenses. It is possible that the franchisor
could condition the continuation of a franchise license on the completion of
capital improvements or the making of certain capital expenditures that the
related borrower determines are too expensive or are otherwise unwarranted in
light of general economic conditions or the operating results or prospects of
the affected hotels. In that event, the related borrower may elect to allow
the franchise license to lapse. In any case, if the franchise is terminated,
the related borrower may seek to obtain a suitable replacement franchise or
to operate such Hotel Property independently of a franchise license. The loss
of a franchise license could have a material adverse effect upon the
operations or the underlying value of the hotel covered by the franchise
because of the loss of associated name recognition, marketing support and
centralized reservation systems provided by the franchisor.
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<PAGE>
Risks Particular to Congregate Care Facilities. Loans secured by liens on
properties of this type pose additional risks not associated with loans
secured by liens on other types of income-producing real estate. While
congregate care facilities are not typically subject to extensive licensing
requirements, it is possible that such facilities may be subject to increased
governmental regulation and supervision given the growing number of senior
citizens in the general population. Additionally, the operator of a
congregate care facility may face increased operational expenses in providing
tenants with the varied array of personal services required for such facility
to compete with other similar facilities. Some of such competing facilities
may offer services not offered by such operators or may be owned by
non-profit organizations or government agencies supported by endowments,
charitable contributions, tax revenues and other sources not available to
such operators.
Risks Particular to Mobile Home Parks. Mortgage lenders whose loans are
secured by mortgages encumbering Mobile Home Park Properties may be subject
to additional risks not faced by lenders whose loans are secured by other
types of income producing properties. Since the borrower often does not own
the mobile homes located upon the related Mortgaged Property, the borrower
(and the lender subsequent to any foreclosure) may face additional costs and
delays in obtaining evictions of tenants and the removal of mobile homes upon
a default or abandonment by a tenant.
Risks Particular to Industrial Properties. Mortgage Loans secured by an
Industrial Property or an Industrial/Warehouse Property may be adversely
affected by reduced demand for industrial space occasioned by a decline in a
particular industry segment. Furthermore, an Industrial Property or an
Industrial/Warehouse Property that suited the particular needs of a tenant
may be difficult to lease to a future tenant or may become functionally
obsolete relative to newer properties. Given the inherent nature of the
operations which are typically conducted upon Industrial Properties, a lender
secured by a lien over such properties may be subject to increased
environmental risks.
No Guaranty. No Mortgage Loan is insured or guarantied by the United
States of America, any governmental agency or instrumentality, any private
mortgage insurer or by the Depositor, the Mortgage Loan Sellers, Midland, the
Master Servicer, the Special Servicer, the Trustee, the Fiscal Agent, the
Underwriters or any of their respective affiliates. However, as more fully
described under "DESCRIPTION OF THE MORTGAGE POOL--General" and
"--Representations and Warranties; Repurchase" herein, MCFC, Midland, GACC
and BCMC will be obligated to repurchase a Mortgage Loan if (i) there is a
defect with respect to the documents relating to such Mortgage Loan or (ii)
certain of their respective representations or warranties concerning such
Mortgage Loan are breached and such defect or breach materially and adversely
affects the interests of the Certificateholders and such defect or breach is
not cured as required. There can be no assurance that MCFC, Midland, GACC or
BCMC will be in a financial position to effect such repurchase. See "MIDLAND
LOAN SERVICES, L.P." and "MORTGAGE LOAN SELLERS" herein.
Limited Recourse. The majority of the Mortgage Loans are non-recourse
loans wherein recourse generally may be had only against the specific
Mortgaged Property securing such Mortgage Loan and such limited other assets
as have been pledged to secure such Mortgage Loan, and not against the
borrower's other assets. Consequently, the payment of each non-recourse
Mortgage Loan is primarily dependent upon the sufficiency of the net
operating income from the related Mortgaged Property and, at maturity, upon
the market value of such Mortgaged Property. See "DESCRIPTION OF THE MORTGAGE
POOL--General" herein.
Concentration of Mortgage Loans and Borrowers. In general, a mortgage pool
with a significant portion of its loans having larger average balances and a
smaller number of loans may be subject to losses that are more severe than
other pools having the same or similar aggregate principal balance and
composed of smaller average loan balances and a greater number of loans. In
all cases, each Investor should carefully consider all aspects of any loans
representing a significant percentage of the outstanding principal balance of
a mortgage pool in order to ensure that such loans are not subject to risks
unacceptable to such Investor. Additionally, a mortgage pool with a high
concentration of Mortgage Loans to the same borrower or related borrowers is
subject to the potential risk that a borrower undergoing financial
difficulties might divert its resources or undertake remedial actions (such
as a bankruptcy) in order to alleviate such difficulties, to the detriment of
the Mortgaged Properties. See "DESCRIPTION OF THE MORTGAGE POOL--Certain
Characteristics of the Mortgage Pool--Concentration of Mortgage Loans and
Borrowers" herein.
Tax Considerations Related to Foreclosure. REMIC I might become subject to
federal (and possibly state or local) tax, at the highest marginal corporate
rate (currently 35%), on certain of its net income from the operation and
management of a Mortgaged Property subsequent to the Trust Fund's acquisition
of a Mortgaged Property pursuant to a foreclosure or deed-in-lieu of
foreclosure, thereby reducing net proceeds available for distribution to
Certificateholders. Such taxable net income does not include qualifying
"rents from real property," or any rental income based on the net profits of
a tenant or
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<PAGE>
sub-tenant or allocable to a service that is customary in the area and for
the type of property involved. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Regular Interests," "--Taxation of the REMIC" and
"--Taxation of Holders of Residual Certificates" in the Prospectus.
Future Changes in the Composition of the Mortgage Pool. As principal
payments or if prepayments are made on the Mortgage Loans at different rates
based upon the varied amortization schedules and maturities of the Mortgage
Loans, the Mortgage Pool may be subject to more concentrated risk with
respect to the reduction in both the diversity of types of Mortgaged
Properties and the number of borrowers. Because principal on the Certificates
is payable in sequential order, and no Class receives principal until the
Certificate Balance of the preceding sequential Class or Classes has been
reduced to zero, Classes that have a later sequential designation are more
likely to be exposed to such risk of concentration than Classes with an
earlier sequential priority.
Geographic Concentration. Repayments by borrowers and the market values of
the Mortgaged Properties could be affected by economic conditions generally
or in the regions where the borrowers and the Mortgaged Properties are
located, conditions in the real estate markets where the Mortgaged Properties
are located, changes in governmental rules and fiscal policies, natural
disasters (which may result in uninsured losses) and other factors that are
beyond the control of the borrowers. The economy of any state or region in
which a Mortgaged Property is located may be adversely affected to a greater
degree than that of other areas of the country by certain developments
affecting industries concentrated in such state or region. Moreover, in
recent periods, several regions of the United States have experienced
significant downturns in the market value of real estate. To the extent that
general economic or other relevant conditions in states or regions in which
Mortgaged Properties securing significant portions of the aggregate principal
balance of the Mortgage Loans are located decline and result in a decrease in
commercial property, housing or consumer demand in the region, the income
from and market value of the Mortgaged Properties may be adversely affected.
See "DESCRIPTION OF THE MORTGAGE POOL--Certain Characteristics of the
Mortgage Pool--Geographic Concentration" herein.
Environmental Risks. If an adverse environmental condition exists with
respect to a Mortgaged Property, the Trust Fund may be subject to the
following risks: (i) a diminution in the value of a Mortgaged Property or the
inability to foreclose against such Mortgaged Property; (ii) the inability to
lease such Mortgaged Property to potential tenants; (iii) the potential that
the related borrower may default on a Mortgage Loan due to such borrower's
inability to pay high remediation costs or difficulty in bringing its
operations into compliance with environmental laws; or (iv) in certain
circumstances as more fully described below, liability for clean-up costs or
other remedial actions, which liability could exceed the value of such
Mortgaged Property. Additionally, the environmental condition of a Mortgaged
Property may be affected by the operations of tenants and occupants thereof,
and current and future environmental laws, ordinances or regulations, may
impose additional compliance obligations on business operations that can be
met only by significant capital expenditures.
Under certain federal and state laws, the reimbursement of remedial costs
incurred by state and federal regulatory agencies to correct environmental
conditions are secured by a statutory lien over the subject property, which
lien, in some instances, may be prior to the lien of an existing mortgage.
Any such lien arising with respect to a Mortgaged Property would adversely
affect the value of such Mortgaged Property and could make impracticable the
foreclosure by the Special Servicer on such Mortgaged Property in the event
of a default by the related borrower.
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real property, as well as certain
other categories of parties, may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under, adjacent to or in
such property. The cost of any required remediation and the owner's liability
therefor as to any property is generally not limited under applicable
federal, state or local laws, and could exceed the value of the property
and/or the aggregate assets of the owner. Under some environmental laws, a
secured lender (such as the Trust Fund) may be deemed an "owner" or
"operator" of the related Mortgaged Property if the lender is deemed to have
participated in the management of the borrower, regardless of whether the
borrower actually caused the environmental damage. In such cases, a secured
lender may be liable for the costs of any required removal or remediation of
hazardous substances. The Trust Fund's potential exposure to liability for
cleanup costs will increase if the Trust Fund actually takes possession of a
Mortgaged Property or control of its day-to-day operations; such potential
exposure to environmental liability may also increase if a court grants a
petition to appoint a receiver to operate the Mortgaged Property in order to
protect the Trust Fund's collateral. See "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS--Environmental Risks" in the Prospectus, and "DESCRIPTION OF
THE MORTGAGE POOL--Certain Characteristics of the Mortgage
Pool--Environmental Risks" herein.
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The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to
acquiring title thereto on behalf of the Trust Fund or assuming its
operation. Such requirement may effectively preclude enforcement of the
security for the related Note until a satisfactory environmental site
assessment is obtained (or until any required remedial action is thereafter
taken), but will decrease the likelihood that the Trust Fund will become
liable under any environmental law. However, there can be no assurance that
such environmental site assessment will reveal the existence of conditions or
circumstances that would result in the Trust Fund becoming liable under any
environmental law, or that the requirements of the Pooling and Servicing
Agreement will effectively insulate the Trust Fund from potential liability
under environmental laws. See "THE POOLING AND SERVICING AGREEMENT--Realization
Upon Mortgage Loans--Standards for Conduct Generally in Effecting Foreclosure or
the Sale of Defaulted Loans" herein and "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Environmental Risks" in the Prospectus.
Other Financing. In general, the borrowers are prohibited from encumbering
the related Mortgaged Property with additional secured debt or the
mortgagee's approval is required for such an encumbrance. However, a
violation of such prohibition may not become evident until the related
Mortgage Loan otherwise defaults. In cases in which one or more subordinate
liens are imposed on a Mortgaged Property or the borrower incurs other
indebtedness, the Trust Fund is subject to additional risks, including,
without limitation, the risks that the necessary maintenance of the Mortgaged
Property could be deferred to allow the borrower to pay the required debt
service on the subordinate financing and that the value of the Mortgaged
Property may fall as a result, and that the borrower may have a greater
incentive to repay the subordinate or unsecured indebtedness first and that
it may be more difficult for the borrower to refinance the Mortgage Loan or
to sell the Mortgaged Property for purposes of making any Balloon Payment
upon the maturity of the Mortgage Loan. See "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS--Secondary Financing; Due-on-Encumbrance Provisions" in the
Prospectus, and "DESCRIPTION OF THE MORTGAGE POOL--Certain Characteristics of
the Mortgage Pool--Other Financing" herein.
Bankruptcy of Borrowers. The borrowers may be either individuals or legal
entities. Most of the borrowers which are legal entities are not
bankruptcy-remote entities. The borrowers that are not bankruptcy-remote
entities may be more likely to become insolvent or the subject of a voluntary
or involuntary bankruptcy proceeding because such borrowers may be (a)
operating entities with businesses distinct from the operation of the
property with the associated liabilities and risks of operating an ongoing
business and (b) individuals who may have personal liabilities unrelated to
the property. However, any borrower, even a bankruptcy-remote entity, as
owner of real estate will be subject to certain potential liabilities and
risks as such an owner. No assurance can be given that a borrower will not
file for bankruptcy protection or that creditors of a borrower or a corporate
or individual general partner or member will not initiate a bankruptcy or
similar proceeding against such borrower or corporate or individual general
partner or member. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Foreclosure--Bankruptcy Laws" in the Prospectus.
Limitations of Appraisals and Engineering Reports. In general, appraisals
represent the analysis and opinion of qualified experts and are not
guaranties of present or future value. Moreover, appraisals seek to establish
the amount a willing buyer would pay a willing seller. Such amount could be
significantly higher than the amount obtained from the sale of a Mortgaged
Property under a distress or liquidation sale. Information regarding the
values of the Mortgaged Properties as of the Cut-off Date is presented under
"DESCRIPTION OF THE MORTGAGE POOL--Certain Characteristics of the Mortgage
Pool" herein for illustrative purposes only. The architectural and
engineering reports represent the analysis of the individual engineers or
site inspectors at or before the origination of the respective Mortgage
Loans, have not been updated since they were originally conducted and may not
have revealed all necessary or desirable repairs, maintenance or capital
improvement items.
Zoning Compliance. The Mortgaged Properties are typically subject to
applicable building and zoning ordinances and codes ("Zoning Laws") affecting
the construction and use of real property. Since the Zoning Laws applicable
to a Mortgaged Property (including, without limitation, density, use, parking
and set back requirements) are generally subject to change by the applicable
regulatory authority at any time, certain of the improvements upon the
Mortgaged Properties may not comply fully with all applicable current and
future Zoning Laws. Such changes may limit the ability of the related
borrower to rehabilitate, renovate and update the premises, and to rebuild or
utilize the premises "as is" in the event of a substantial casualty loss with
respect thereto.
Costs of Compliance with Applicable Laws and Regulations. A borrower may
be required to incur costs to comply with various existing and future
federal, state or local laws and regulations applicable to the related
Mortgaged Property, e.g.
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Zoning Laws, and the Americans with Disabilities Act of 1990. See "CERTAIN
LEGAL ASPECTS OF THE MORTGAGE LOANS--Americans With Disabilities Act" in the
Prospectus. The expenditure of such costs, or the imposition of injunctive
relief, penalties or fines in connection with the borrower's noncompliance
could negatively impact the borrower's cash flow, and consequently, its
ability to pay its Mortgage Loan.
Limitations on Enforceability of Cross-Collateralization. Arrangements
whereby certain of the Mortgage Loans (the "Cross-Collateralized Loans") are
cross-collateralized and cross-defaulted with one or more related
Cross-Collateralized Loans could be challenged as fraudulent conveyances by
creditors of any of the related borrowers or by the representative of the
bankruptcy estate of such borrowers if one or more of such borrowers were to
become a debtor in a bankruptcy case. Generally, under federal and most state
fraudulent conveyance statutes, the incurring of an obligation or the
transfer of property (including the granting of a mortgage lien) by a person
will be subject to avoidance under certain circumstances if the person did
not receive fair consideration or reasonably equivalent value in exchange for
such obligation or transfer and (i) was insolvent or was rendered insolvent
by such obligation or transfer, (ii) was engaged in a business or a
transaction, or was about to engage in a business or a transaction, for which
properties remaining with the person constitute an unreasonably small capital
or (iii) intended to incur, or believed that it would incur, debts that would
be beyond the person's ability to pay as such debts matured. Accordingly, a
lien granted by any such borrower could be avoided if a court were to
determine that (x) such borrower was insolvent at the time of granting the
lien, was rendered insolvent by the granting of the lien, was left with
inadequate capital or was not able to pay its debts as they matured and (y)
the borrower did not, when it allowed its Mortgaged Property to be encumbered
by the liens securing the indebtedness represented by the other
Cross-Collateralized Loans, receive fair consideration or reasonably
equivalent value for pledging such Mortgaged Property for the equal benefit
of the other related borrowers. No assurance can be given that a lien granted
by a borrower on a Cross-Collateralized Loan to secure the Mortgage Loan of
an affiliated borrower, or any payment thereon, would not be avoided as a
fraudulent conveyance. See "DESCRIPTION OF THE MORTGAGE POOL--Certain
Characteristics of the Mortgage Pool--Limitations on Enforceability of
Cross-Collateralization" herein for more information regarding the
Cross-Collateralized Loans.
Tenant Matters. Certain of the Mortgaged Properties are leased wholly or
in large part to a single tenant or are wholly or in large part
owner-occupied (each such tenant or owner-occupier, a "Major Tenant"). Any
default by a Major Tenant could adversely affect the related borrower's
ability to make payments on the related Mortgage Loan. There can be no
assurance that any Major Tenant will continue to perform its obligations
under its lease (or, in the case of an owner-occupied Mortgaged Property,
under the related Mortgage Loan documents). See "DESCRIPTION OF THE MORTGAGE
POOL--Certain Characteristics of the Mortgage Pool--Tenant Matters" and
"Annex A" herein.
Ground Leases. Mortgage Loans secured by a Mortgage encumbering a
leasehold interest are subject to certain risks not applicable to a Mortgage
over a fee interest. The most serious of such risks is the potential for the
total loss of the security for the related Mortgage Loan upon the termination
or expiration of the ground lease creating the mortgaged leasehold interest.
See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Foreclosure--Leasehold
Risks" in the Prospectus and "DESCRIPTION OF THE MORTGAGE POOL--Security for
the Mortgage Loans--Ground Leases" herein.
Risks Associated with Loan Income Housing Tax Credits. Certain of the
Mortgaged Properties may be eligible to receive low income housing tax
credits ("Tax Credits") pursuant to the requirements of Section 42 of the
Internal Revenue Code of 1986 (the "Code"). The rent limitations imposed on
such Mortgaged Properties pursuant to the Code may adversely affect the
ability of the applicable borrowers to increase rents to maintain such
Mortgaged Properties in proper condition during periods of rapid inflation or
declining market value of such Mortgaged Properties. In addition, the income
restrictions on tenants imposed by Section 42 of the Code may reduce the
number of eligible tenants in such Mortgaged Properties and result in a
reduction in occupancy rates applicable thereto. In the event a Mortgage
Property eligible for Tax Credits (a "Tax Credit Project") does not maintain
compliance with the Tax Credit restrictions on tenant income or rental rates,
the owners of the Tax Credit Project may lose the Tax Credits related to the
period of the noncompliance and face the recapture of the "accelerated
portions" of any Tax Credit previously taken, plus interest. Because the Tax
Credits are taken over a 10-year period while the Section 42 compliance
period is 15 years, one-third of the Tax Credit taken in years 1 through 10
is considered "accelerated" and is subject to recapture. If the
non-compliance events occur in years 11 through 15, the total accelerated
portion (which equals one-third of the total Tax Credits taken) is reduced
pro rata each subsequent year. Additionally, if a project as a whole fails to
meet the minimum requirements (e.g., the 20-50 or 40-60 set-aside, whichever
is elected), there is recapture of 100% of the accelerated portion of the Tax
Credits taken in each preceding year. Recapture does not occur if
noncompliance is corrected within a "reasonable period," as determined under
the Code. In the event of
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a foreclosure upon a Tax Credit Project during the period when tax credits
are applicable (the "Tax Credit Period"), the subsequent owner will be
required to ensure continued compliance with the requirements of Section 42
of the Code, or the remaining Tax Credits will be no longer be available. See
"DESCRIPTION OF THE MORTGAGE POOL--The Tax Credit Loans."
Litigation. From time to time, there may be legal proceedings pending or
threatened against the borrowers and their affiliates relating to the
business of, or arising out of the ordinary course of business of, the
borrowers and their affiliates. There can be no assurance that any such
litigation will not have a material adverse effect on any borrower's ability
to meet its obligations under the related Mortgage Loan and, thus, on the
distributions to Certificateholders.
Condemnations. From time to time, there may be Condemnations pending or
threatened against one or more of the Mortgaged Properties. There can be no
assurance that the proceeds payable in connection with a total Condemnation
will be sufficient to restore the related Mortgaged Property or to satisfy
the remaining indebtedness of the related Mortgage Loan. The occurrence of a
partial Condemnation may have a material adverse effect on the continued use
of the affected Mortgaged Property, or on any borrower's ability to meet its
obligations under the related Mortgage Loan. Therefore, no assurance can be
made that the occurrence of any Condemnation will not have a negative impact
upon the distributions to Certificateholders.
REPURCHASE OF MORTGAGE LOANS
As more fully described under "DESCRIPTION OF THE MORTGAGE POOL--General"
and "--Representations and Warranties; Repurchase" herein, MCFC and Midland
will be obligated to repurchase a Midland Mortgage Loan, GACC will be
obligated to repurchase a GACC Mortgage Loan and BCMC will be obligated to
repurchase a BCMC Mortgage Loan if (i) there is a defect with respect to the
documents relating to such Mortgage Loan or (ii) certain of its
representations or warranties concerning such Mortgage Loan in the MCFC
Mortgage Loan Purchase Agreement, the GACC Mortgage Loan Purchase Agreement
or the BCMC Mortgage Loan Purchase Agreement, respectively, are breached, if
such defect or breach materially and adversely affects the interests of the
Certificateholders and such defect or breach is not cured as required.
However, there can be no assurance that either MCFC, Midland, GACC or BCMC,
as applicable, will be in a financial position to effect such repurchase. See
"MIDLAND LOAN SERVICES, L.P." and "MORTGAGE LOAN SELLERS" herein. MCFC,
Midland, GACC and BCMC generally will have the right to require the entity
from which they respectively acquired a Mortgage Loan to repurchase such
Mortgage Loan if a representation or warranty in the agreement pursuant to
which MCFC, Midland, GACC or BCMC, as applicable, acquired such Mortgage Loan
is also breached. The ability of Midland to perform its obligations as Master
Servicer and Special Servicer under the Pooling and Servicing Agreement may
be jeopardized if it incurs significant liabilities for the repurchase of
Midland Mortgage Loans as to which there has been a breach of a
representation or warranty.
PREPAYMENT AND YIELD CONSIDERATIONS
Effect of Borrower Defaults and Delinquencies. The aggregate amount of
distributions on the Regular Certificates, the yield to maturity of the
Regular Certificates, the rate of principal payments on the Regular
Certificates and the weighted average life of the Regular Certificates will
be affected by the rate and the timing of delinquencies, defaults, losses or
other shortfalls experienced on the Mortgage Loans. If a purchaser of a
Regular Certificate of any Class calculates its anticipated yield based on an
assumed default rate and amount of losses on the Mortgage Loans that is lower
than the default rate and amount of losses actually experienced and such
additional losses are allocable to such Class of Certificates or, with
respect to the Class A-EC or Class K-2 Certificates, such losses result in a
reduction of the Class A-EC Notional Balance or the Class K-2 Notional
Balance, respectively, such purchaser's actual yield to maturity will be
lower than the anticipated yield calculated and could, under certain extreme
scenarios, be negative. The timing of any loss on a liquidated Mortgage Loan
will also affect the actual yield to maturity of the Regular Certificates to
which a portion of such loss is allocable, even if the rate of defaults and
severity of losses are consistent with an investor's expectations. In
general, the earlier a loss borne by an investor occurs, the greater will be
the effect on such investor's yield to maturity.
Most of the Mortgage Loans are Balloon Loans, which involve a greater risk
of default than self-amortizing loans because the ability of a borrower to
make a Balloon Payment typically will depend upon its ability either to
refinance the related Mortgaged Property or to sell such Mortgaged Property
at a price sufficient to permit the borrower to make the Balloon Payment. The
ability of a borrower to accomplish either of these goals will be affected by
a number of factors at the time of attempted sale or refinancing, including
the level of available mortgage rates, the fair market value of the related
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Mortgaged Property, the borrower's equity in the related Mortgaged Property,
the financial condition of the borrower and the operating history of the
related Mortgaged Property, tax laws, prevailing economic conditions and the
availability of credit for multifamily or commercial properties (as the case
may be) generally. See "YIELD AND MATURITY CONSIDERATIONS--Yield
Considerations--Balloon Payments" herein.
Regardless of whether losses ultimately result, prior to the liquidation
of any defaulted Mortgage Loan, delinquencies on the Mortgage Loans may
significantly delay the receipt of payments by the holder of a Regular
Certificate to the extent that Advances or the subordination of another Class
of Certificates does not fully offset the effects of any delinquency or
default. The Available Funds generally consist of, as more fully described
herein, principal and interest on the Mortgage Loans actually collected or
advanced. The Master Servicer's, the Trustee's or the Fiscal Agent's
obligation, as applicable, to make Advances is limited to the extent
described under "THE POOLING AND SERVICING AGREEMENT--Advances" herein. In
particular, upon determination of the Anticipated Loss with respect to any
Seriously Delinquent Loan, the amount of any P&I Advance required to be made
with respect to such Seriously Delinquent Loan on any Distribution Date will
be an amount equal to the product of (A) the amount of the P&I Advance that
would be required to be made in respect of such Seriously Delinquent Loan
without regard to the application of this sentence, multiplied by (B) a
fraction, the numerator of which is equal to the Scheduled Principal Balance
of such Seriously Delinquent Loan as of the immediately preceding
Determination Date less the Anticipated Loss and the denominator of which is
such Scheduled Principal Balance. In addition, no Advances are required to be
made to the extent that, in the good faith judgment of the Master Servicer,
the Trustee or the Fiscal Agent, as applicable, any such Advance, if made,
would be nonrecoverable from proceeds of the Mortgage Loan to which such
Advance relates. See "THE POOLING AND SERVICING AGREEMENT--Advances" herein.
Effect of Prepayments and other Unscheduled Payments. The investment
performance of the Certificates may vary materially and adversely from the
investment expectations of investors due to the rate of prepayments on the
Mortgage Loans being higher or lower than anticipated by investors. In
addition, in the event of any repurchase of a Mortgage Loan by a Mortgage
Loan Seller or Midland from the Trust Fund under the circumstances described
under "DESCRIPTION OF THE MORTGAGE POOL--Representations and Warranties;
Repurchase" herein, the repurchase price paid will be passed through to the
holders of the Certificates with the same effect as if such Mortgage Loan had
been prepaid in full (except that no Prepayment Premium will be payable with
respect to any such repurchase). No representation is made as to the
anticipated rate of prepayments (voluntary or involuntary) on the Mortgage
Loans or as to the anticipated yield to maturity of any Certificate.
Furthermore, the distribution of Liquidation Proceeds to the Class or Classes
of Certificates then entitled to distributions in respect of principal will
reduce the weighted average lives of such Classes and may reduce or increase
the weighted average life of other Classes of Certificates. See "YIELD AND
MATURITY CONSIDERATIONS" herein.
In general, the yield on Certificates purchased at a premium or at a
discount and the yield on the Class A-EC and Class K-2 Certificates, which
have no Certificate Balances, will be sensitive to the amount and timing of
principal distributions thereon (or of reductions of the respective Notional
Balances). The occurrence of principal distributions at a rate faster than
that anticipated by an investor at the time of purchase will cause the actual
yield to maturity of a Certificate purchased at a premium to be lower than
anticipated. The yield to maturity of the Class A-EC and Class K-2
Certificates will be especially sensitive to the occurrence of high rates of
principal distributions which could result in the failure of the holders of
such Classes to recover fully their initial investments. Conversely, if a
Certificate is purchased at a discount (especially the Class K-1
Certificates) and principal distributions thereon occur at a rate slower than
that assumed at the time of purchase, the investor's actual yield to maturity
will be lower than assumed at the time of purchase.
Effect of Prepayment Premiums. The rate and timing of principal payments
made on a Mortgage Loan will be affected by restrictions on voluntary
prepayments contained in the related Note (e.g., lockout periods and
Prepayment Premiums). All of the Mortgage Loans generally provide that a
permitted prepayment must be accompanied by a Prepayment Premium; provided,
however, that the Prepayment Premium requirement generally expires prior to
the maturity date of a Mortgage Loan. The existence of Prepayment Premiums
generally will result in the Mortgage Loans prepaying at a lower rate.
However, the requirement that a prepayment be accompanied by a Prepayment
Premium may not provide a sufficient economic disincentive to a borrower
seeking to refinance at a more favorable interest rate. In addition, since
holders of the Class A-EC Certificates are anticipated to receive most, if
not all, Prepayment Premiums, potential purchasers of this Class should
especially consider that provisions requiring Prepayment Premiums may not be
enforceable in some states and under federal bankruptcy law and may
constitute interest for usury purposes. Accordingly, no assurance can be
given that the obligation to pay a Prepayment Premium will be enforceable
under applicable state or federal law or, if enforceable, that the
foreclosure proceeds received with respect to a defaulted Mortgage Loan will
be sufficient to make such payment. See "DESCRIPTION OF THE MORTGAGE
POOL--Certain Terms and Conditions of the Mortgage Loans--Prepayment
Provisions" herein.
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Effect of Interest on Advances, Special Servicing Fees and other
Servicing Expenses. As and to the extent described herein, the Master
Servicer, the Trustee or the Fiscal Agent, as applicable, will be entitled to
receive interest on unreimbursed Advances at the Advance Rate from the date
on which the related Advance is made to the date on which such amounts are
reimbursed (which in no event will be later than the Determination Date
following the date on which funds are available to reimburse such Advance
with interest thereon at the Advance Rate). The Master Servicer's, the
Trustee's or the Fiscal Agent's right, as applicable, to receive such
payments of interest is prior to the rights of Certificateholders to receive
distributions on the Regular Certificates and, consequently, may result in
decreased distributions to the Regular Certificates that would not otherwise
have resulted, absent the accrual of such interest. See "THE POOLING AND
SERVICING AGREEMENT--Advances" herein. In addition, certain circumstances,
including delinquencies in the payment of principal and interest, will result
in a Mortgage Loan being specially serviced. The Special Servicer is entitled
to additional compensation for special servicing activities, including
Special Servicing Fees, Disposition Fees and Workout Fees, which may result
in decreased distributions to the Regular Certificates that would not
otherwise have resulted absent such compensation. See "THE POOLING AND
SERVICING AGREEMENT--Special Servicing" herein.
LIMITED LIQUIDITY
There is currently no secondary market for the Offered Certificates. The
Underwriters have advised the Depositor that they currently intend to make a
secondary market in the Offered Certificates, but they are under no
obligation to do so. Accordingly, there can be no assurance that a secondary
market for the Offered Certificates will develop. Moreover, if a secondary
market does develop, there can be no assurance that it will provide holders
of Offered Certificates with liquidity of investment or that it will continue
for the life of the Offered Certificates. The Offered Certificates will not
be listed on any securities exchange.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 139 multifamily and commercial "whole"
mortgage loans (the "Mortgage Loans"). The Mortgage Loans have an aggregate
Cut-off Date Principal Balance of approximately $531,176,571 (the "Initial
Pool Balance"), subject to a variance of plus or minus 5%. The "Cut-off Date
Principal Balance" of each Mortgage Loan is the unpaid principal balance
thereof as of the Cut-off Date, after application of all payments of
principal due on or before such date, whether or not received. Any
description of the terms and provisions of the Mortgage Loans herein is a
generalized description of the terms and provisions of the Mortgage Loans in
the aggregate. Many of the individual Mortgage Loans have special terms and
provisions that deviate from the generalized, aggregated description.
Generally, each Mortgage Loan is evidenced by a separate promissory note
(collectively the "Promissory Notes"), while a limited number of the Mortgage
Loans (related to Mortgage Loans originated in New York) are evidenced by a
form of Mortgage Consolidation, Modification and Extension Agreement
(collectively the "Consolidation Agreements", and with the Promissory Notes,
collectively the "Notes" and individually a "Note"). Each Mortgage Loan is
secured by a mortgage, deed of trust, deed to secure debt or other similar
security instrument that creates a first lien on (all of the foregoing are
individually a "Mortgage" and collectively the "Mortgages"), one or more of a
fee simple estate or a leasehold estate in a real property (a "Mortgaged
Property") improved for multifamily or commercial use. The Mortgaged
Properties consist of properties improved by (a) a congregate care facility
(a "Congregate Care Property," and any Mortgage Loan secured thereby, a
"Congregate Care Loan"); (b) a factory outlet retail facility (a "Factory
Outlet Property," and any Mortgage Loan secured thereby, a "Factory Outlet
Loan" or a "Retail, Factory Outlet Loan"); (c) a hotel (a "Hotel Property,"
and any Mortgage Loan secured thereby, a "Hotel Loan"); (d) an industrial
property (an "Industrial Property," and any Mortgage Loan secured thereby, an
"Industrial Loan"); (e) an industrial/warehouse property (an
"Industrial/Warehouse Property," and any Mortgage Loan secured thereby, an
"Industrial/Warehouse Loan"); (f) a mini warehouse facility (a "Mini
Warehouse Property," and any Mortgage Loan secured thereby, a "Mini Warehouse
Loan"); (g) a multifamily, office and retail property (a "Mixed Use
Property," and any Mortgage Loan secured thereby, a "Mixed Use Loan"); (h) a
mobile home park (a "Mobile Home Park Property," and any Mortgage Loan
secured thereby, a "Mobile Home Park Loan"); (i) an apartment building or
complex consisting of five or more rental units or a complex of duplex units
(a "Multifamily Property," and any Mortgage Loan secured thereby, a
"Multifamily Loan"); (j) an office building (an "Office Property," and any
Mortgage Loan secured thereby, an "Office Loan"); (k) an office/research
facility (an "Office/R&D Property," and any Mortgage Loan secured
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thereby, an "Office/R&D Loan"); (l) an office/retail property (an
"Office/Retail Property," and any Mortgage Loan secured thereby, an
"Office/Retail Loan"); (m) an office/warehouse property (an "Office/Warehouse
Property," and any Mortgage Loan secured thereby, an "Office/Warehouse
Loan"); (n) an anchored retail property (a "Retail, Anchored Property," and
any Mortgage Loan secured thereby, a "Retail, Anchored Loan"); (o) a single
tenant retail property (a "Retail, Single Tenant Property," and any Mortgage
Loan secured thereby, a "Retail, Single Tenant Loan"); or (p) an unanchored
retail property (a "Retail, Unanchored Property," and any Mortgage Loan
secured thereby, a "Retail, Unanchored Loan"). The percentage of the Initial
Pool Balance represented by each type of Mortgaged Property is as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL
PROPERTY TYPE POOL BALANCE NUMBER OF LOANS
- -------------------------- ------------------------ -------------------
<S> <C> <C>
Congregate Care .8% 1
Hotel 1.5% 1
Industrial .6% 1
Industrial/Warehouse 4.2% 8
Mini Warehouse .2% 1
Mixed Use 3.2% 1
Mobile Home Park .6% 2
Multifamily 38.1% 59
Office 12.8% 17
Office/R&D 2.8% 2
Office/Retail 3.0% 3
Office/Warehouse .8% 3
Retail, Anchored 9.9% 9
Retail, Factory Outlet 3.1% 3
Retail, Single Tenant 9.2% 14
Retail, Unanchored 9.2% 14
----- ---
Total 100.0% 139
</TABLE>
None of the Mortgage Loans is insured or guaranteed by the United States
of America, any governmental agency or instrumentality, any private mortgage
insurer or by the Depositor, MCFC, GACC, BCMC, Midland, the Master Servicer,
the Special Servicer, the Trustee, the Fiscal Agent, the Underwriters or any
of their respective affiliates. Seven of the Mortgage Loans, representing
approximately 1.3% of the Initial Pool Balance, provide for full recourse
against the related borrower, one of the Mortgage Loans, representing 2.0% of
the Initial Pool Balance, has a limited guaranty against the related
borrower, while the remainder of the Mortgage Loans are non-recourse loans.
In the event of a borrower default under a non-recourse Mortgage Loan,
recourse generally may be had only against the specific Mortgaged Property or
Mortgaged Properties securing such Mortgage Loan and such limited other
assets as have been pledged to secure such Mortgage Loan, and not against the
borrower's other assets. However, generally, upon the occurrence of certain
circumstances as set forth in the Mortgage Loan documents, typically
including, without limitation, fraud, intentional misrepresentation, waste,
misappropriation of tenant security deposits or rent, and in some cases
failure to maintain any required insurance or misappropriation of any
insurance proceeds or condemnation awards, recourse generally may be had
against the borrower for damages sustained by the mortgagee. In connection
with at least eight of the Mortgage Loans, representing approximately 3.3% of
the Initial Pool Balance, a guaranty of all or a portion of each such
Mortgage Loan was obtained by the separate originators of such Mortgage Loans
(herein collectively, the "Originators" and individually an "Originator").
Such guaranties are intended to encourage the performance by the related
borrower or the guarantor of the obligations to which the guaranty relates.
However, the guarantors may have limited assets and there can be no assurance
that such guarantors will have sufficient assets to support their respective
obligations under such guaranties. In addition, any action to enforce such
guaranties will likely involve significant expense and delays to the Trust
Fund and may not be enforceable if the related guarantor should become the
subject of a bankruptcy, insolvency, reorganization, moratorium or other
similar proceedings. Furthermore, in some states, actions against guarantors
may be limited by anti-deficiency legislation. The Master Servicer or the
Special Servicer, as applicable, on behalf of the Trustee and the
Certificateholders, will be entitled to enforce the terms of such guaranties.
Ninety-nine of the Mortgage Loans (the "Midland Mortgage Loans"),
representing approximately 59.4% of the Initial Pool Balance, were originated
either by (a) Midland Loan Services, L.P. ("Midland") generally in accordance
with Midland's customary underwriting criteria and practices, with such
exceptions thereto as are customarily acceptable to commercial
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mortgage lenders, or (b) unaffiliated entities and subsequently acquired by
Midland after evaluating such Mortgage Loans according to Midland's customary
underwriting criteria and practices, with such exceptions thereto as are
customarily acceptable to commercial mortgage lenders. Midland's underwriting
criteria and practices are described under "--The Midland Mortgage Loan
Program--General," "--Midland's Underwriting Standards" and "--Midland
Underwriting and Closing Procedures" herein. MCFC acquired 94 of the Midland
Mortgage Loans pursuant to a Master Mortgage Loan Purchase Agreement dated as
of June 22, 1994, as amended, between MCFC and Midland. The remaining Midland
Mortgage Loans were acquired by MCFC pursuant to separate purchase
agreements.
Twenty-one of the Mortgage Loans (the "GACC Mortgage Loans"), representing
approximately 28.3% of the Initial Pool Balance, were purchased by GACC from
various originators generally in accordance with GACC's customary
underwriting criteria and practices, with such exceptions thereto as are
customarily acceptable to commercial mortgage lenders. See "--GACC
Underwriting and Closing Procedures" herein. With respect to the GACC
Mortgage Loans, approximately 16.4% of the Initial Pool Balance was
originated by Washington Mortgage Financial Group, approximately 5.9% of the
Initial Pool Balance was originated by Boatmen's National Mortgage, Inc.,
approximately 5.4% of the Initial Pool Balance was originated by Liberty
Mortgage Acceptance Corporation and approximately 0.6% of the Initial Pool
Balance originated by others.
Nineteen of the Mortgage Loans (the "BCMC Mortgage Loans"), representing
approximately 12.4% of the Initial Pool Balance were originated either by
BCMC, correspondents of BCMC or other entities related to BCMC, generally in
accordance with BCMC's customary underwriting criteria and practices, with
such exceptions thereto as are customarily acceptable to commercial mortgage
lenders. See "--BCMC Underwriting and Closing Procedures" herein.
The Depositor will purchase the: (a) Midland Mortgage Loans on or before
the Closing Date from MCFC pursuant to a Mortgage Loan Purchase and Sale
Agreement (the "MCFC Mortgage Loan Purchase Agreement") dated as of ,
1996 (the "Loan Purchase Closing Date"), between MCFC and the Depositor; (b)
GACC Mortgage Loans on or before the Closing Date from GACC pursuant to a
Mortgage Loan Purchase and Sale Agreement (the "GACC Mortgage Loan Purchase
Agreement") dated as of , 1996, between GACC and the Depositor; and (c)
BCMC Mortgage Loans on or before the Closing Date from BCMC pursuant to a
Mortgage Loan Purchase and Sale Agreement (the "BCMC Mortgage Loan Purchase
Agreement") dated as of , 1996, between BCMC and the Depositor. MCFC,
GACC and BCMC are herein sometimes individually referred to as a "Mortgage
Loan Seller," and collectively as the "Mortgage Loan Sellers." As described
under "DESCRIPTION OF THE MORTGAGE POOL--Representations and Warranties;
Repurchase" herein, (i) MCFC and Midland will each be obligated to repurchase
a Midland Mortgage Loan in the event of a breach of a representation or
warranty made by MCFC or Midland in the MCFC Mortgage Loan Purchase Agreement
with respect to such Mortgage Loan, (ii) GACC will be obligated to repurchase
a GACC Mortgage Loan in the event of a breach of a representation or warranty
made by GACC in the GACC Mortgage Loan Purchase Agreement with respect to
such Mortgage Loan and (iii) BCMC will be obligated to repurchase a BCMC
Mortgage Loan in the event of a breach of a representation or warranty made
by BCMC in the BCMC Mortgage Loan Purchase Agreement with respect to such
Mortgage Loan, in each case, if such breach materially and adversely affects
the interests of the Certificateholders and such breach is not cured. MCFC,
Midland, GACC and BCMC each has only limited assets, and there can be no
assurance that either MCFC, Midland, GACC or BCMC has or will have sufficient
assets with which to fulfill any repurchase obligations that may arise. The
Depositor will not have any obligation to fulfill any repurchase obligation
upon the failure of MCFC, Midland, GACC or BCMC to do so. The Depositor will
assign the Mortgage Loans in the Mortgage Pool, together with the Depositor's
rights and remedies against MCFC, Midland, GACC and BCMC in respect of
breaches of representations or warranties regarding the Mortgage Loans, to
the Trustee pursuant to the Pooling and Servicing Agreement. The Master
Servicer and the Special Servicer will each service the Mortgage Loans
pursuant to the Pooling and Servicing Agreement. See "THE POOLING AND
SERVICING AGREEMENT--Servicing of the Mortgage Loans; Collection of
Payments."
SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is secured by a Mortgage encumbering the related
borrower's interest in the related Mortgaged Property. Except with respect to
those Mortgage Loans described in "Ground Leases" below; all of the Mortgage
Loans are secured by a first lien encumbering a fee simple interest in the
related Mortgaged Property, subject generally only to (a) liens for real
estate and other taxes and special assessments, (b) covenants, conditions,
restrictions, rights of way, easements and other encumbrances whether or not
of public record as of the date of recording of such Mortgage, and (c) such
other exceptions and encumbrances on the Mortgaged Property as are reflected
in the related title insurance policies. Each Mortgage Loan is also secured
by an assignment of the related borrower's interest in the leases, rents,
issues and profits of the related Mortgaged Property.
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Seven of the Mortgage Loans, representing approximately 1.3% of the
Initial Pool Balance, provide for full recourse against the related borrower,
one of the Mortgage Loans, representing approximately 2.0% of the Initial
Pool Balance, has a limited guaranty against the related borrower, while the
remainder of the Mortgage Loans are non-recourse loans. However, borrowers
generally have limited assets and there can be no assurance that any borrower
will have sufficient assets to support any such recourse obligations that may
arise. In certain instances, additional collateral may exist in the nature of
letters of credit, the establishment of one or more Reserve Accounts (for one
or more of necessary repairs and replacements, tenant improvements and
leasing commissions, real estate taxes and assessments, insurance premiums,
deferred maintenance and/or scheduled capital improvements or as reserves for
the payment of Monthly Payments and other payments due under the related
Mortgage Loan), grants of security interests in equipment, inventory,
accounts receivable and other personal property, assignments of licenses,
trademarks and/or trade names, one or more guaranties of all or part of the
related Mortgage Loan, the establishment of one or more lockbox collection
accounts for the direct collection of rentals and other income from the
related Mortgaged Property, one or more guaranties with respect to a tenant's
performance of the terms and conditions of such tenant's lease or the
assignment of the proceeds of purchase options. The documents for each
Mortgage Loan typically also provide for the indemnification of the mortgagee
by the related borrower for the presence of any hazardous substances
affecting the Mortgaged Property. However, borrowers generally have limited
assets and there can be no assurance that any borrower will have sufficient
assets to support any such indemnification obligations that may arise. See
"RISK FACTORS--The Mortgage Loans; Investment in Commercial and Multifamily
Mortgage Loans--Environmental Risks" herein.
Ground Leases. Two Mortgage Loans, representing approximately 4.5% of the
Initial Pool Balance, are each secured by a first lien encumbering only the
related borrower's leasehold interest in the related Mortgaged Property. The
related ground leases expire on February 28, 2052 and April 20, 2040
respectively. With respect to each such ground lease, the related ground
lessors have agreed to afford the mortgagee certain notices and rights,
including without limitation, cure rights with respect to breaches of the
related ground lease by the related borrower. See "CERTAIN LEGAL ASPECTS OF
THE MORTGAGE LOANS--Foreclosure--Leasehold Risks" in the Prospectus.
Purchase Options; Rights of First Refusal; Installment Contracts. With
respect to Loan #137, which represents approximately .1% of the Initial Pool
Balance, the property developer from whom the borrower acquired the Mortgaged
Property retained both (a) an option to purchase such Mortgaged Property, at
market value on the date of the exercise of such option, conditional upon the
borrower ceasing operations at such Mortgaged Property; and (b) a right of
first refusal with respect to any bona fide offers to purchase the Mortgaged
Property received by the borrower. The terms of the purchase option indicate
that unless the property developer elects to assume the related Mortgage Loan
and takes title subject to the lien of the related Mortgage, such Mortgage
Loan must be satisfied and the Mortgage must be released when such option is
exercised. With respect to Loan #104, which represents approximately .3% of
the Initial Pool Balance, the tenant/operator of the Mortgaged Property
possesses an option to purchase such Mortgaged Property upon certain
specified terms and conditions, which option has been specifically
subordinated to the lien of the related Mortgage. With respect to Loan #111,
which represents approximately .2% of the Initial Pool Balance, the Housing
Department of the City of Los Angeles possesses a right of first refusal with
respect to any future sale of the related Mortgaged Property. No assurance
can be made that such rights of first refusal would not apply in the context
of a foreclosure of the related Mortgage, and consequently, there may be
additional risks, delays and costs associated with any such foreclosure. See
"RISK FACTORS--Prepayment and Yield Considerations" and "YIELD
CONSIDERATIONS" herein.
With respect to three of the Mortgage Loans, representing approximately
1.2% of the Initial Pool Balance, the related Mortgaged Property is the
subject of an executory installment contract. The related Mortgage was
executed by both the vendor (the borrower) and vendee under such contract,
and encumbers all of their respective interests in the related Mortgaged
Property. Such vendee's execution of such Mortgage as security for the
indebtedness of such borrower may be subject to challenge as a fraudulent
conveyance. See "DESCRIPTION OF THE MORTGAGE POOL--Investment in Commercial
and Multifamily Mortgage Loans--Limitations on Enforceability of
Cross-Collateralization" herein and "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Installment Contracts" in the Prospectus.
THE MIDLAND MORTGAGE LOAN PROGRAM--GENERAL
The mortgage loan program under which Midland originated its Mortgage
Loans targeted the origination of multi-family and commercial real estate
loans (generally with principal balances ranging from $750,000 to
$15,000,000). To generate a
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sufficient volume of loan submissions of this size from a variety of
geographic areas, Midland has developed a network of mortgage bankers,
mortgage brokers and commercial bankers who are paid a fee, at closing, for
referrals and any other services they may provide in connection with the
underwriting and closing of such mortgage loans. See "MIDLAND LOAN SERVICES,
L.P." herein.
Prudential Securities Incorporated ("PSI") serves as financial advisor to
Midland in connection with the development and operation of the loan
origination program. In this capacity, PSI consults with Midland regarding
loan pricing policy and periodically provides Midland with information on
current yields on those U.S. Treasury securities that are used by Midland to
establish the interest rates on mortgage loans. In addition, PSI assists
Midland in making presentations to the Rating Agencies regarding the mortgage
loans and the Master Servicer's servicing capabilities.
Prudential Securities Credit Corp. ("PSCC"), an affiliate of PSI, provides
warehouse financing to MCFC. In this connection PSCC reviewed the
underwriting of each Mortgage Loan originated by Midland before issuance of a
commitment by Midland to make the loan to the related applicant, and also
reviewed the underwriting conducted by Midland and/or MCFC in connection with
the acquisition of the remaining Midland Mortgage Loans. PSCC's review of
underwriting was independent of the review by Midland's own credit review
committee and was intended only to ensure that all loans funded using the
warehouse financing provided by PSCC met Midland's underwriting guidelines,
with such exceptions thereto as are customarily acceptable to commercial
mortgage lenders, in accordance with Midland's agreement with PSCC.
MIDLAND'S UNDERWRITING STANDARDS
Midland's customary underwriting policies and procedures require an
evaluation of both the prospective borrower and the proposed real estate
collateral. Factors typically analyzed in connection with a prospective
borrower include its credit history, capitalization and overall financial
resources and management skill and experience in the applicable property
type. Factors typically analyzed in connection with a Mortgaged Property
include its historical and anticipated future cash flow; age and condition;
appraised value; gross square footage; net rentable area; gross land area;
number of units, rooms or beds; current tenants' size, identity and any
termination or purchase option rights; property interest to be mortgaged (fee
or leasehold); term, expiration and rental rates under current leases;
projected future leasing commissions and retaining costs; applicable market
rentals for similar properties; historical vacancy rate and credit loss rate;
debt service coverage ratio; and loan to value ratio.
Midland generally analyzed historical and current financial information
regarding a Mortgaged Property provided by a prospective borrower to
determine the initial maximum amount of a proposed Midland Mortgage Loan.
This analysis allowed Midland to calculate the initial debt service coverage
ratio and loan-to-value ratio for a proposed Midland Mortgage Loan, based
upon the revenues generally available from the related Mortgaged Property
minus the expenses incurred in operating and maintaining the related
Mortgaged Property, all as adjusted by the actual, historical and market
factors applicable to the property type and location of the related Mortgaged
Property. Except as approved by Midland's credit review committee in
connection with a specific Mortgage Loan, Midland applied its customary
underwriting policies with respect to these ratios and maximum amortization
periods in connection with the Mortgage Loans in the Mortgage Pool originated
by it. Midland's customary underwriting policies for these ratios and maximum
amortization periods are as follows:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
PROPERTY TYPE DSCR MAXIMUM LTV AMORTIZATION PERIOD
- ---------------------- --------- ------------- -------------------
<S> <C> <C> <C>
Congregate Care 1.35 70% 25 years
Hotel 1.40 70% 20 years
Industrial 1.25 75% 25 years
Industrial/Warehouse 1.25 75% 25 years
Mini Warehouse 1.35 70% 20 years
Mobile Home Park 1.25 75% 20 years
Multifamily 1.20 75% 25 years
Office 1.25 75% 25 years
Office/R&D 1.25 75% 25 years
Office/Retail 1.25 75% 25 years
Office/Warehouse 1.25 75% 25 years
Retail, Anchored 1.25 75% 25 years
Retail, Factory Outlet 1.30 75% 25 years
Retail, Single Tenant 1.25 75% 25 years
Retail, Unanchored 1.30 75% 25 years
</TABLE>
With respect to Mortgage Loans secured by a Mixed Use Property, Midland's
customary underwriting policies require an analysis of the percentage of the
net operating income from each of the varied uses of the related Mixed Use
Property in order to determine the appropriate debt service coverage ratio,
loan-to-value ratio and amortization period.
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Actual debt service coverage ratios, loan-to-value ratios and
amortization periods for the Mortgage Loans originated by Midland may and do
vary from the guidelines described above. See "--Certain Characteristics of
the Mortgage Pool" and "Annex A" herein.
MIDLAND UNDERWRITING AND CLOSING PROCEDURES
Based on information obtained from Midland, which has not been
independently verified for accuracy or completeness by any of the Depositor,
the Underwriters, the Trustee, the Master Servicer, the Special Servicer or
the Mortgage Loan Sellers, the following is a general summary of the
customary underwriting policies and procedures typically utilized by Midland
in connection with its underwriting of the Midland Mortgage Loans.
The information utilized by Midland to determine whether to issue a
binding loan commitment typically included two or more years of financial
history for the related Mortgaged Property, a site plan, a rent roll, recent
photographs, a fact sheet completed by the prospective borrower detailing
requested loan terms, ownership information, existing debt, zoning and
property improvement information, copies of specified leases, copies of rent
deposits and utility bills for the most recent 12 months, copies of the most
recent property tax bills and insurance premium statements and a listing of
all other income property owned by the principals of the prospective borrower
detailing revenue, expense, debt service, valuation and current encumbrances.
Midland's analysis of the foregoing included any adjustments deemed advisable
by Midland to take into account projected increases or decreases in terms of
revenue and/or expense. Midland also generally performed a site inspection of
the subject Mortgaged Property, investigated (when possible) four lease
comparables and four sales comparables, met the principals of the prospective
borrower (when practicable), and gathered market information through
interviews with property managers, leasing agents, real estate brokers and
appraisers familiar with the subject Mortgaged Property's market area. The
prospective borrower also was typically required to make a cash deposit equal
to 1% of the requested loan balance with Midland concurrently with the
prospective borrower's submission of a formal loan application.
To complete the underwriting of a proposed Mortgage Loan to be originated
by it, Midland derived an estimate of stabilized net cash flow available to
pay debt service. On the revenue side, Midland evaluated the proposed
Mortgaged Property's rental rates in relation to rental rates for similar
properties in the same market. If the proposed Mortgaged Property is leased
to relatively few tenants (e.g., retail, office, light
industrial/industrial), Midland analyzed the terms of each of the major
leases. On the expense side, Midland collected documentation for major
operating expense items, such as taxes, insurance and utilities (and, in the
case of Hotel Properties, franchise and management fees), to ensure that
Midland's assumptions regarding property expenses were realistic and in line
with historical experience. Midland also substantiated the financial
performance of the proposed Mortgaged Property by reference to industry
standards and to the more specialized expertise of local real estate brokers
and appraisers. If the proposed Mortgaged Property was an office building,
retail center or industrial property, Midland analyzed potential roll-over
risk for the purpose of making appropriate assumptions regarding the average
annual investment in tenant improvements and leasing commissions likely to be
required to keep occupancy of the proposed Mortgaged Property at or above the
occupancy level assumed by Midland.
Midland evaluated underwriting information received with respect to a
proposed Mortgage Loan to be originated by it through the use of Midland's
mortgage loan analysis model, and a final underwriting memorandum with
respect to such proposed Mortgage Loan was prepared which summarized proposed
loan terms, described the prospective borrower, and discussed the major
underwriting assumptions, competitive status of the subject Mortgaged
Property, market conditions in the locale of the subject Mortgaged Property
and the strengths, weaknesses and mitigating factors with respect to such
proposed Mortgage Loan. This information was then presented to Midland's
credit review committee for a determination as to whether a binding
commitment for the proposed Mortgage Loan should be issued. The information
provided to Midland's credit review committee regarding a proposed Mortgage
Loan to be originated by it was simultaneously provided to both MCFC and PSCC
for their consideration. Prior to the issuance of a loan commitment, both
MCFC and PSCC were also required to approve the terms of such proposed
Mortgage Loan.
Generally, following acceptance of the commitment by the prospective
borrower, Midland ordered an appraisal, an architectural and engineering
report and a Phase I environmental site assessment. In certain instances,
Midland may have utilized a report prepared by a third party not selected by
Midland but only if the qualifications of such third party were approved by
Midland and the report met Midland's specifications for such a report.
It was a condition of closing in each of Midland's commitments to make a
proposed Mortgage Loan originated by it that Midland receive third-party
reports satisfactory to it. If the appraisal of a proposed Mortgaged Property
did not confirm the minimum debt service coverage ratio and the maximum
loan-to-value ratio specified in Midland's loan commitment, the loan
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commitment gave Midland the flexibility to reduce the loan amount in order to
maintain those ratios. If the architectural and engineering report indicated
that critical repairs (equal to or exceeding $10,000 in the aggregate) needed
to be made to the proposed Mortgaged Property, the prospective borrower was
required to make those repairs prior to the closing or Midland held back an
amount sufficient to complete those repairs from the Mortgage Loan proceeds.
All Phase I environmental site assessments were reviewed by McRoberts &
Associates, P.C. (the "Environmental Consultant"), an independent third party
environmental attorney retained by Midland. If the Phase I environmental site
assessment indicated the existence of a potentially material and significant
environmentally hazardous condition and recommended further investigation,
the Environmental Consultant prepared a scope of work for a Phase II
assessment and Midland engaged a consultant to perform the additional work.
If either the Phase I or Phase II environmental site assessment indicated the
presence of hazardous material or a significant environmentally hazardous
condition at the proposed Mortgaged Property, the prospective borrower was
required to remediate such condition, provide environmental insurance in an
amount acceptable to Midland, escrow an amount sufficient to pay the costs of
such remediation, provide an indemnity for such costs from a potentially
culpable party, or, if appropriate, implement an operations and maintenance
plan for the management of such condition.
Generally, each completed underwriting file for a Midland Mortgage Loan
contains the following documents:
A Midland Loan Fact Sheet;
Financial statements for the preceding two or more years and the
most recent year-to-date interim statement for the proposed
Mortgaged Property, the prospective borrower, and any proposed
guarantor, co-borrower, general partner of the borrowing entity
and/or limited partner owning 10% or more of the borrowing entity;
Tax returns for the preceding three years for the prospective
borrower and any proposed guarantor, co-borrower, general partner of
the borrowing entity and/or limited partner owning 10% or more of
the borrowing entity;
A current rent roll, certified by the prospective borrower;
For a proposed Mortgaged Property leased to relatively few tenants
(e.g., retail, office, light industrial/industrial), copies of all
leases;
A copy of any ground lease that may affect the proposed Mortgaged
Property;
A site plan of the proposed Mortgaged Property;
A map of the area in which the proposed Mortgaged Property is
located; and
Pictures of the proposed Mortgaged Property and the surrounding
area.
Midland's closing of the Midland Mortgage Loans was managed by one staff
attorney supervising a team of closing coordinators with responsibility for
processing mortgage loans through closing. Each Midland Mortgage Loan was
documented on Midland's form of mortgage loan documents, which were conformed
by legal counsel to the requirements and customary loan documentation of the
state where the related Mortgaged Property is located.
GACC MORTGAGE LOAN PROGRAM-GENERAL
The mortgage loan program under which GACC purchased its Mortgage Loans
targeted the origination of multi-family and commercial real estate loans
with principal balances ranging generally from $1,500,000 to $30,000,000.
GACC has developed a network of originators, mortgage bankers and brokers who
are paid a fee for their services and, in some cases, retain servicing for
such Mortgage Loans.
GACC UNDERWRITING AND CLOSING PROCEDURES
Based on information obtained from GACC, which has not been independently
verified for accuracy or completeness by any of the Depositor, the
Underwriters, the Trustee, the Master Servicer, the Special Servicer, Midland
or the other Mortgage Loan Sellers, the following is a general summary of the
customary underwriting policies and procedures typically utilized by GACC in
connection with its underwriting of the GACC Mortgage Loans.
GACC's customary underwriting policies and procedures generally require an
evaluation of the property, including a site inspection, appraisal,
architectural and engineering report and environmental report (Third party
reports are generally dated no more than six months prior to the origination
of the related loan). Other factors typically analyzed in connection with a
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property include occupancy rates, size, type, location (including trade
area), accessibility and visibility, market presence, property interest to be
mortgaged (fee or leasehold), compliance with applicable laws (including
environmental laws, ADA and zoning), location relative to areas of flood
hazard and potential environmental concerns. The experience, character and
financial strength of borrowers and key principal(s) are evaluated and
considered, as well.
The initial maximum amount of a proposed loan is generally determined by
GACC as a result of underwriting procedures which begin with an analysis of
current and historical financial and operating information provided by the
prospective borrower who is seeking the loan. This due diligence analysis of
the economics of a proposed loan is generally based upon a normalized
operating statement which is developed by GACC by using such sources of
information as the actual operating income and expense statements of the
property (generally, a minimum of the two most recent prior years and current
year-to-date income and expense statements are required for each property to
be mortgaged), its rent roll, the actual terms of the leases which have been
reviewed, tax and insurance bills, a review of service contracts, bills and
invoices for certain expenses incurred, comparable market data and
information from an appraisal which has been independently prepared. Gross
Potential Income is underwritten using (a) either the income for the past
twelve months of operation or an annualized current rent roll if the property
is a multifamily property and (b) if it is a commercial property it will be
the lesser of the actual income based on the current rent roll or income that
is calculated using market rental rates. To the extent that other income is
included it must be documented based upon current leases and contracts and
demonstrate a trend in the past operating performance of the property and its
tenants. The underwriting standards typically employed by GACC will generally
require an economic vacancy rate equal to the greater of 5% of gross income,
the sub-market's economic vacancy rate or the property's historical economic
vacancy rate which can be adjusted for current trends if such trends can be
illustrated over time. As a part of its standard due diligence procedures,
GACC will generally include a management fee equal to the greater of 5% of
gross income or the prevailing rate in the market as a part of its pro forma
operating expenses. This is included whether or not the owner of the property
is currently providing for such a fee to be deducted from the property's
income. Additionally, a funded replacement reserve for immediate repairs and
ongoing repairs will be required for all properties. In the case of
commercial properties a funded reserve for leasing commissions and tenant
improvements will be required. GACC's underwriting policies and procedures
include certain specific minimum criteria which proposed properties must
achieve. These include occupancy requirements of 90% for multifamily
properties and 85% for commercial properties; debt service coverage ratios of
1.25x for multifamily properties and 1.30x for commercial properties and loan
to value ratios which generally do not exceed 75%. This may be exceeded in
the case of a superior multifamily property. The actual occupancy
percentages, loan to value ratios, debt service coverage ratios and other
criteria which GACC establishes for its loans may and do vary from the
guidelines which have been described above. See "--Certain Characteristics of
the Mortgaged Pool" herein and "Annex A" hereto.
GACC will also review a variety of issues regarding the proposed
property's tenants. The creditworthiness, the terms of leases, the lease's
expiration dates and the tenant mix are specifically reviewed. Particular
focus is directed at tenants who contribute more than 10% of the income or
occupy in excess of 5,000 square feet. GACC will also prepare a lease
expiration analysis of the proposed property's rent roll.
GACC also requires that the prospective borrower and its key principal(s)
be analyzed. Such analysis includes an evaluation of credit information,
overall financial strength, review of references, past experience and the
amount of equity in the proposed property. The capabilities of the proposed
property's management is evaluated by GACC's review of its experience, the
size of its staff relative to the proposed property, the tenant mix of the
property, management's past performance record, reporting and control
procedures, and accounting and cash management procedures.
BCMC LOAN PROGRAM
BCMC originates multifamily and commercial real estate mortgage loans in
amounts ranging from $1,000,000 to $15,000,000. BCMC works with a nation-wide
network of mortgage brokers. This network allows BCMC to offer a portfolio of
Mortgage Loans that is both geographically diverse and of varied amounts.
BCMC UNDERWRITING AND CLOSING PROCEDURES
Based on information obtained from BCMC, which has not been independently
verified for accuracy or completeness by any of the Depositor, the
Underwriters, the Trustee, the Master Servicer, the Special Servicer, Midland
or the other Mortgage Loan Sellers, the following is a general summary of the
customary underwriting policies and procedures typically utilized by BCMC in
connection with its underwriting of the BCMC Mortgage Loans.
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BCMC uses a comprehensive process to determine when to offer a loan
commitment. BCMC's application process includes the collection of three or
more years of financial and operating history for the subject property, a
site plan, a rent roll, recent photographs, year-to-date operating statement,
a detailed loan request, information on existing debt, zoning and property
rehabilitation records, copies of tenant leases, rent deposits and utility
bills for the most recent 12 months, copies of past property tax bills and
hazard insurance premium payments, and a complete financial history of the
key principals, including banking relationships, credit history, valuation of
current property owned, and copies of Federal Income Tax returns. BCMC
analyzes this information in order to make estimations as to expected cash
flow.
BCMC conducts a site visit and inspects the prospective Mortgaged
Property, completing a thorough analysis of the surrounding neighborhood and
comparable properties. When practical, BCMC also meets with the prospective
borrower and property managers, and works closely with local real estate
brokers and appraisers to better understand the property's position within
its market. Upon application, the prospective borrower is required to submit
an application fee of between $5,000 and $10,000 as well as funds to complete
the necessary third party reports.
BCMC's underwriting process is geared toward the determination of the
Mortgaged Property's net operating income. This calculation is derived by
evaluating the subject Mortgaged Property's revenue (rental income and other
income) and comparing it to the revenue flow of similar properties in the
market. If the subject Mortgaged Property is leased to multiple tenants, BCMC
analyzes the terms of each individual lease. By looking at each lease, BCMC
can evaluate the potential roll-over risk and estimate annual tenant
improvement costs and leasing commissions that will affect the cash flow.
BCMC also collects information on taxes, insurance, utilities, historic
maintenance repair expenses and management fees (where appropriate). These
items enable BCMC to compile an accurate history of expenses and validate its
underwriting of net operating expenses. BCMC also evaluates projected cash
flow by incorporating the opinion of local real estate brokers and property
appraisers.
BCMC takes the above information and creates a mortgage loan analysis
model and a final underwriting analysis narrative. This narrative includes
the proposed Mortgage Loan terms and major underwriting assumptions, analysis
of both the market and the Mortgaged Property, the history and financial
obligations of the prospective borrowers, along with the strengths,
weaknesses and mitigating factors of the loan.
Prior to completing the narrative analysis and the making of a formal
committee presentation, BCMC orders and reviews an appraisal, an
architectural and engineering report and a Phase I environmental site
assessment. All third party vendors are chosen by BCMC and the reports must
be written to BCMC's standards. If the appraisal of the subject Mortgaged
Property does not confirm the minimum debt service coverage ratio and the
maximum loan-to-value ratio specified in BCMC's loan commitment, BCMC has the
flexibility to reduce the loan amount in order to maintain the underwritten
ratios. BCMC uses architectural and engineering reports to determine the
amount of deferred maintenance and the amount of annual replacement reserves.
BCMC requires that the borrower escrow 150% of the estimated cost of deferred
maintenance at closing. In addition, BCMC requires that replacement reserves
be escrowed on a monthly basis. If the Phase I environmental site assessment
indicates the existence of a potentially material and significant
environmental hazardous condition, the environmental consultant will complete
a Phase II assessment. If either the Phase I or Phase II environmental site
assessment indicates the presence of hazardous conditions, the prospective
borrower is required to remediate those conditions prior to any Mortgage Loan
funding.
In general, each completed underwriting file for a BCMC Mortgage Loan
contains the following documents:
A BCMC loan application, which contains the terms of the prospective
loan;
The prospective borrower's organizational documents;
The prospective borrower's balance sheets and property operating
statements for the past three years;
Tax returns for the general partner/managing member and key principals
for the preceding three years;
A current personal financial statement for all key principals;
A current and year-end rent roll, certified correct by the prospective
borrower;
Copies of all leases;
Copy of the executed property management contract;
Year-to-date operating statement;
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Copy of the current real estate tax bill;
Copies of service contracts;
Background information and resumes on key principals and management
company;
Copy of the latest month's bank statements showing most recent rental
deposits;
Copy of certificate of occupancy;
Confirmation of zoning;
Site plan;
Appraisal;
Phase I environmental report;
Architectural and engineering report;
Aerial photographs prior to construction and after completion;
Any previous third party reports;
ALTA survey;
Existing title insurance policy;
Last insurance bill; and
Geological maps, topographic maps or flood plain information.
The closing of Mortgage Loans is coordinated by BCMC and is managed by a
closing director. BCMC commissions a select team of attorneys who assist in
the closing process.
Each BCMC Mortgage Loan was made pursuant to BCMC's mortgage loan
documents which conform to the requirements for customary loan documentation
of the state where the subject Mortgaged Property is located.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. The Mortgage Loans provide for Monthly Payments to be due on
the first day of each month.
Mortgage Rates; Calculations of Interest. The Mortgage Loans accrue
interest on the basis of a 360-day year consisting of twelve 30-day month.
Except as set forth below, each Mortgage Loan generally accrues interest at
an annualized rate (a "Mortgage Rate") that is fixed for the entire term of
such Mortgage Loan and does not permit any negative amortization or the
deferral of interest. With respect to one of the Mortgage Loans (Loan #16),
representing approximately 1.5% of the Initial Pool Balance, the related Note
provides that (a) the stated interest rate is to increase by 1/8th of 1%,
with an immediate corresponding adjustment in the regularly scheduled
principal and interest payments, each time the borrower fails to use union
labor in connection with certain work at the Mortgaged Property, and (b) the
principal amount of such Mortgage Loan is to increase by $1,000.00, which
increase is to be added to the applicable Balloon Payment, each time the
borrower fails to deliver timely any required financial statements,
certificates, documents, statements or summaries.
Amortization of Principal. One hundred thirty-four of the Mortgage Loans
(the "Balloon Loans"), which represent approximately 97.5% of the Initial
Pool Balance, provide for monthly payments of principal based on amortization
schedules longer than their remaining terms, thereby leaving substantial
principal amounts due and payable on their respective maturity dates (each
such payment, together with interest on the related Balloon Loan for the
one-month period ending on the day preceding such Balloon Loan's maturity
date, a "Balloon Payment"), unless previously prepaid. Five of the Mortgage
Loans (Loan #43, and Loan #49, Loan #79, Loan #98 and Loan #100), which
represent approximately 2.5% of the Initial Pool Balance, have remaining
amortization terms that are the same as their respective remaining terms to
maturity. The weighted average Balloon LTV applicable to the Mortgage Pool is
56.3%. With respect to of the Mortgage Loans, which represent
approximately % of the Initial Pool Balance, the Monthly Payments due on
January 1, 1997 include an amount allocable to the amortization of the
principal amounts of such Mortgage Loans. With respect to of the Mortgage
Loans, which represent approximately % of the Initial Pool Balance (the
"Newly Originated Loans"), the Monthly Payments due on January 1, 1997 are
allocable to interest only on such Mortgage Loans, with the principal amounts
thereof
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scheduled to commence amortizing effective with the February 1, 1997 Monthly
Payments. The Newly Originated Loans were originated after December 1, 1996.
Accordingly, the Monthly Payment due on January 1, 1997 with respect to each
Newly Originated Loan will represent less than one full month of accrued
interest thereon. To offset any resulting interest shortfall to the
Certificateholders, the Depositor will deposit into the Trust Fund on or
before the Closing Date an amount that, when added to the aggregate amount of
Monthly Payments due on the Newly Originated Mortgage Loans on January 1,
1997, will constitute an amount equal to one full month of interest on all
such Newly Originated Loans.
Prepayment Provisions. The imposition of a premium or fee (a "Prepayment
Premium") payable in connection with a voluntary prepayment of each of the
Mortgage Loans is designed primarily to deter a borrower from voluntarily
prepaying the principal amount of its Mortgage Loan. Although certain of the
Mortgage Loans are subject to specified periods following the origination of
such Mortgage Loans wherein no voluntary prepayments are allowed (any such
period, a "Lockout Period"), the Mortgage Loans generally permit each
borrower to voluntarily prepay the entire principal balance of its Mortgage
Loan provided that any applicable Prepayment Premium is paid in connection
therewith; provided, however, that the applicable Prepayment Premium
requirement expires prior to the maturity date of all of the Mortgage Loans.
Voluntary prepayments of less than the full outstanding principal balance of
a Mortgage Loan are generally prohibited; provided, however, that with
respect to Loan #23, representing approximately 1.4% of the Initial Pool
Balance, the related borrower is permitted to make partial voluntary
prepayments of its Mortgage Loan subject to certain specified conditions and
limitations, including payment of the required Prepayment Premium.
Additionally, with respect to Loan #117, representing approximately .2% of
the Initial Pool Balance, the related borrower is permitted to make voluntary
prepayments over either a 20 or 25 year amortization period without the
payment of Prepayment Premiums.
The Prepayment Premium applicable with respect to the majority of the
Mortgage Loans is generally calculated (a) for a certain period (any such
period, a "Yield Maintenance Period") after the origination of such Mortgage
Loan or the expiration of the applicable Lockout Period, if any, on the basis
of a yield maintenance formula and/ or a specified percentage of the amount
prepaid, and (b) after the expiration of the applicable Yield Maintenance
Period, a specified percentage (which percentage may either remain constant
or decline over time) of the amount prepaid. "Annex A" attached hereto
contains more specific information regarding the Prepayment Premiums
applicable to each of the Mortgage Loans.
The Mortgage Loans generally provide that so long as no event of default
then exists, no Prepayment Premium is payable in connection with any
involuntary prepayment resulting from a Casualty or Condemnation. Certain of
the Mortgage Loans may also permit prepayment after an event of default (but
prior to the sale by the mortgagee thereunder of the Mortgaged Property
through foreclosure or otherwise) provided that the related borrower pays the
applicable Prepayment Premium. Certain of the Mortgage Loans may permit the
related borrower to transfer the related Mortgaged Property to a third party
without prepaying the related Mortgage Loan, provided that certain conditions
are satisfied, including, without limitation, an assumption by the transferee
of all of such borrower's obligations in respect of such Mortgage Loan. See
"--'Due-on-Encumbrance' and 'Due-on-Sale' Provisions" herein.
The Depositor makes no representation as to the enforceability of the
provisions of any Mortgage Loan requiring the payment of a Prepayment Premium
or as to the collectability of any Prepayment Premium. See "RISK
FACTORS--Prepayment and Yield Considerations" herein and "CERTAIN LEGAL
ASPECTS OF THE MORTGAGE LOANS--Enforceability of Certain Provisions" in the
Prospectus.
The following "Prepayment Lockout/ Premium Analysis" table sets forth an
analysis of the percentage of the declining balance of the Mortgage Pool
that, on December 1, in each of the years indicated, will be within a Lockout
Period or in which Principal Prepayments must be accompanied by the indicated
Prepayment Premium or yield maintenance charge. This table was prepared
generally on the basis of the following assumptions:
(1) That no defaults or prepayments, voluntary or involuntary, occur with
respect to any of the Mortgage Loans; and
(2) That with respect to Loan #16, the stated interest rate does not
adjust at any time during the term of such Mortgage Loan.
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<PAGE>
PREPAYMENT LOCKOUT/PREMIUM ANALYSIS
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT
RESTRICTION ASSUMING NO PREPAYMENTS
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Prepayment Restrictions
- ----------------------------------
Lockout ...........................
Greater of Yield Maintenance
or Percentage Premium of:
5.00% or greater .................
4.00% to 4.99% ...................
3.00% to 3.99% ...................
2.00% to 2.99% ...................
1.00% to 1.99% ...................
0.00% to 0.99% ...................
Total of Yield Maintenance ........
Total of Yield Maintenance
and Lockout ......................
Percentage Premium:
5.00% or greater .................
4.00 to 4.99% ....................
3.00 to 3.99% ....................
2.00 to 2.99% ....................
1.00 to 1.99% ....................
Total with Percentage Premium ....
Open ..............................
Total .............................
% of Initial Pool Balance <F1> ....
- -------------------------------
<FN>
<F1> Represents the approximate percentage of the Initial Pool Balance that
will remain outstanding at the indicated date based upon the
assumptions used in preparing this table.
</FN>
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
2003 2004 2005 2006 2007 2008 2009 2010 2011
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREPAYMENT RESTRICTIONS
- ----------------------------------
LOCKOUT ...........................
GREATER OF YIELD MAINTENANCE
OR PERCENTAGE PREMIUM OF:
5.00% OR GREATER .................
4.00% TO 4.99% ...................
3.00% TO 3.99% ...................
2.00% TO 2.99% ...................
1.00% TO 1.99% ...................
0.00% TO 0.99% ...................
TOTAL OF YIELD MAINTENANCE ........
TOTAL OF YIELD MAINTENANCE
AND LOCKOUT ......................
PERCENTAGE PREMIUM:
5.00% OR GREATER .................
4.00 TO 4.99% ....................
3.00 TO 3.99% ....................
2.00 TO 2.99% ....................
1.00 TO 1.99% ....................
TOTAL WITH PERCENTAGE PREMIUM ....
OPEN ..............................
TOTAL .............................
% OF INITIAL POOL BALANCE <F1> ....
- ------------
<FN>
<F1> Represents the approximate percentage of the Initial Pool Balance that
will remain outstanding at the indicated date based upon the
assumptions used in preparing this table.
</FN>
</TABLE>
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<PAGE>
"Due-on-Encumbrance" and "Due-on-Sale" Provisions. The Mortgages generally
contain "due-on-encumbrance" clauses that permit the holder of the Mortgage
to accelerate the maturity of the related Mortgage Loan if the borrower
encumbers the related Mortgaged Property without the consent of the
mortgagee. However, in certain of the Mortgage Loans, the related borrower is
allowed, under certain circumstances, to encumber the related Mortgaged
Property with additional liens. See "RISK FACTORS--Investment in Commercial
and Multi-Family Mortgage Loans--Other Financing" herein. The Master Servicer
or the Special Servicer, as applicable, will determine, in a manner
consistent with the servicing standard described herein under "THE POOLING
AND SERVICING AGREEMENT--Servicing of the Mortgage Loans; Collection of
Payments" whether to exercise any right the mortgagee may have under any such
clause to accelerate payment of a Mortgage Loan upon, or to withhold its
consent to, any additional encumbrance of the related Mortgaged Property.
The Mortgages for the Mortgage Loans generally prohibit, without the
mortgagee's prior consent, the borrower from transferring the Mortgaged
Property or allowing a change in ownership, generally defined as, among other
things, (a) a specified percentage (generally ranging from 10% to 50%) change
in the ownership of the borrower, a guarantor or, with respect to certain of
such Mortgage Loans, in the ownership of the general partner of the borrower
or a guarantor, (b) the removal, resignation or change in ownership of any
general partner or managing partner of a borrower, a guarantor or, with
respect to certain of such Mortgage Loans, any general partner of a borrower
or a guarantor, (c) with respect to certain of such Mortgage Loans, the
removal, resignation or change in ownership of the managing agent of the
related Mortgaged Property, or (d) the voluntary or involuntary transfer or
dilution of the controlling interest in the related borrower held by a
specified person; provided, however, that with respect to certain of such
Mortgage Loans, the borrower may be entitled to transfer the Mortgaged
Property or allow a change in ownership if certain conditions are satisfied,
typically including one or more of the following, (i) no event of default has
occurred, (ii) the proposed transferee meets the mortgagee's customary
underwriting criteria, (iii) the Mortgaged Property continues to meet the
mortgagee's customary underwriting criteria, (iv) an acceptable assumption
agreement is executed, and (v) a specified assumption fee (generally 1% to
1.5% of the then outstanding principal balance of the applicable Note) has
been received by the mortgagee. Certain of the Mortgages may also allow
transfers of interests in the related Mortgaged Property in the nature of
residential leases and easements and changes in ownership between partners,
family members, for estate planning purposes, affiliated companies and
certain specified individuals. In the event of any transfer or change in
ownership of the Mortgaged Property in violation of the applicable provisions
of the related Mortgage Loan documents, the related Mortgage Loan documents
generally provide that the mortgagee is permitted to accelerate the maturity
of the related Mortgage Loan. See "CERTAIN LEGAL ASPECTS OF MORTGAGE
LOANS--Enforceability of Certain Provisions--Due-on-Sale Provisions" in the
Prospectus. The Depositor makes no representation as to the enforceability of
any due-on-sale or due-on-encumbrance provision in any Mortgage Loan which is
the subject of a proceeding under the Bankruptcy Code.
Default Provisions. Except as described below, the related Mortgage Loan
documents generally provide that an event of default will exist if (a) any
regular installment of principal and/or interest is not paid when specified
(generally either (i) upon the date the same is due, or (ii) within a
specified period (generally ranging from 5 days to 30 days) after the date
upon which the same was due or following written notice from the mortgagee of
such failure), or (b) any violation of the conditions described in
"--'Due-on-Encumbrance' and 'Due-on-Sale' Provisions" above occurs.
Additionally, the related Mortgage Loan documents may contain other specified
events of default, including one or more of the following: the borrower's
failure to pay taxes or other charges when due, to keep all required
insurance policies in full force and effect, to cure any material violations
of laws or ordinances affecting the Mortgaged Property or to operate the
related Mortgaged Property according to certain criteria; the imposition of a
mechanic's, materialman's or other lien against the Mortgaged Property; the
institution of a bankruptcy, receivership or similar actions against the
borrower or the Mortgaged Property; unapproved conversion of the related
Mortgaged Property to a condominium or cooperative; defaults under certain
other agreements; defaults under or unapproved modifications to any related
franchise agreement; or material changes to or defaults under any related
management agreement.
Upon the occurrence of an event of default with respect to any Mortgage
Loan, the Master Servicer or the Special Servicer, as applicable, may take
such action as the Master Servicer or the Special Servicer deems advisable to
protect and enforce the rights of the Trustee, on behalf of the
Certificateholders, against the related borrower and in and to the related
Mortgaged Property, subject to the terms of the related Mortgage Loan,
including, without limitation, declaring the entire debt to be immediately
due and payable and/or instituting a proceeding, judicial or non-judicial,
for the complete or partial foreclosure of the Mortgage Loan.
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Default Interest. All of the Mortgage Loans provide for imposition of a
rate of interest higher than the stated interest rate upon the occurrence of
an event of default by the related borrower ("Default Interest"). The Default
Interest applicable to the Mortgage Loans is generally calculated as either
(a) a specified rate, (b) a specified rate above the stated interest rate of
such Mortgage Loan, or (c) a rate equal to the greater of (i) a specified
rate above the stated interest rate of such Mortgage Loan, or (ii) a
specified rate above a specified base rate (typically the prime rate reported
in The Wall Street Journal). No assurance can be given as to the
enforceability of any provision of any Mortgage Loan requiring the payment of
any Default Interest or as to the collectability of any Default Interest. See
"CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS--Enforceability of Certain
Provisions" in the Prospectus.
Hazard, Liability and other Insurance. Generally, each Mortgage Loan
requires that the related Mortgaged Property be insured (in an amount not
less than the lesser of (a) the full replacement cost of the Mortgaged
Property or (b) the outstanding principal balance of the related Note, but in
any event in an amount sufficient to ensure that the insurer would not deem
the borrower a co-insurer) against loss or damage by fire or other risks and
hazards covered by a standard extended coverage insurance policy. Generally,
each Mortgage Loan also requires that the related borrower obtain and
maintain during the entire term of the Mortgage Loan (a) comprehensive public
liability insurance, typically with a minimum limit of $1,000,000 per
occurrence, (b) if any part of the Mortgaged Property upon which a material
improvement is located lies in a special flood hazard area and for which
flood insurance has been made available, a flood insurance policy in an
amount equal to the lesser of the outstanding principal balance of the
related Note or the maximum limit of coverage available from governmental
sources, (c) if deemed advisable by the Originator, rent loss and/or business
interruption insurance in an amount equal to all rents or estimated gross
revenues from the operation of the Mortgaged Property for a period as
required by the Mortgage, (d) if applicable, insurance against loss or damage
from explosion of steam boilers, air conditioning equipment, high pressure
piping, machinery and equipment, pressure vessels or similar apparatus, and
(e) such other insurance as may from time to time reasonably be required by
the mortgagee. With respect to many of the Mortgage Loans, the related
borrower has satisfied the applicable insurance requirements by obtaining
blanket insurance policies, subject to the review and approval of the same by
the mortgagee, including the amount of insurance and the number of properties
covered by such policies.
Casualty and Condemnation. The related Mortgage Loan documents typically
provide that in the event of damage to the related Mortgaged Property by
reason of fire or other casualty (a "Casualty"), all insurance proceeds will
be paid to the mortgagee and then it is such mortgagee's option as to whether
to apply such proceeds to the outstanding indebtedness of the related
Mortgage Loan, or to allow such proceeds to be applied to the restoration of
the related Mortgaged Property; provided, however, that if certain conditions
are satisfied, the mortgagee may be required to disburse such proceeds in
connection with a restoration of the related Mortgaged Property. These
required conditions typically include one or more of the following: (a) if
the insurance proceeds payable are less than a specified amount, (b) if less
than a specified percentage of the related Mortgaged Property is destroyed or
if the value of the related Mortgaged Property following such Casualty
remains greater than either a specified amount or a specified percentage of
the value of the related Mortgaged Property immediately preceding such
Casualty, (c) if the Casualty affects less than a specified percentage of the
net rentable area of the Mortgaged Property or interrupts less than a
specified percentage of the rentals from the Mortgaged Property, (d) if such
restoration will cost less than a specified amount and if sufficient funds
are available to complete such restoration, (e) if such restoration can be
accomplished within a specified time period, (f) if the restored Mortgaged
Property will adequately secure the related Mortgage Loan, (g) if adequate
income (including rentals and insurance) will be available during the
restoration period and (h) if no event of default then exists. In certain of
the Mortgage Loans, the lease between the related borrower and a tenant of
all or part of the related Mortgaged Property may require the borrower or the
tenant to rebuild the buildings located upon the related Mortgaged Property
in the event of a Casualty, and the related Mortgage Loan documents may
permit the application of insurance proceeds to satisfy such requirement,
regardless of the value of such Mortgaged Property following such Casualty.
Generally, the Mortgage Loans provide that all awards payable to the
borrower in connection with any taking or exercise of the power of eminent
domain with respect to the related Mortgaged Property (a "Condemnation") will
be paid directly to the mortgagee, and then it is such mortgagee's option as
to whether to apply such proceeds to the outstanding indebtedness of the
related Mortgage Loan, or to allow such proceeds to be applied to the
restoration of the related Mortgaged Property; provided, however, that if
certain conditions are satisfied, the mortgagee may be required to disburse
such awards in connection with a restoration of the related Mortgaged
Property. These required conditions typically include one or more of the
following: (a) if the award is less than a specified amount, (b) if less than
a specified percentage of the related Mortgaged Property is taken, (c) if the
Condemnation affects less than a specified percentage of the net rentable
area of the Mortgaged
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Property or interrupts less than a specified percentage of the rentals from
the Mortgaged Property, (d) if such restoration will cost less than a
specified amount and if sufficient funds are available to complete such
restoration, (e) if such restoration can be accomplished within a specified
time period, (f) if adequate income (including the Condemnation award,
rentals and insurance) will be available during the restoration period, (g)
if no event of default then exists, and (h) if such restoration and repair is
feasible and the related Mortgaged Property will be commercially viable after
such restoration. In certain of the Mortgage Loans, the lease between the
related borrower and a tenant of all or part of the related Mortgaged
Property may require the borrower or the tenant to restore the related
Mortgaged Property in the event of a Condemnation and the related Mortgage
Loan documents may permit the application of condemnation proceeds to satisfy
such requirement.
Delinquencies and Modifications. As of the Cut-off Date for each Mortgage
Loan, no Mortgage Loan was more than 30 days delinquent in respect of any
Monthly Payment, and no Mortgage Loan has been modified in any material
manner since its origination in connection with any default or threatened
default on the part of the related borrower. Any future modifications would
be subject to the conditions and requirements contained in the Pooling and
Servicing Agreement.
Borrower Escrows and Reserve Accounts. In a number of the Mortgage Loans,
the related borrower was required, or may under certain circumstances in the
future be required, to establish one or more reserve or escrow accounts (such
accounts, "Reserve Accounts") for necessary repairs and replacements, tenant
improvements and leasing commissions, real estate taxes and assessments,
water and sewer charges, insurance premiums, environmental remediation,
improvements mandated under the Americans with Disabilities Act of 1990,
deferred maintenance and/or scheduled capital improvements or, under certain
specified circumstances, reserves for the payment of regularly scheduled
payments of principal and/or interest ("Monthly Payments") and other payments
due under the related Mortgage Loan.
THE TAX CREDIT LOANS
Seven Mortgage Loans (Loan #11, Loan #49, Loan #61, Loan #85, Loan #108,
Loan #116 and Loan #121) representing approximately 3.9% of the Initial Pool
Balance (the "Section 42 Mortgage Loans"), are secured by Mortgaged
Properties believed eligible to receive Tax Credits. The Section 42 Mortgage
Loans were originated by BCMC or Midland. All of the Section 42 Mortgage
Loans were underwritten to a Debt Service Coverage Ratio of not less than
1.15x and a Loan to Value Ratio of not greater than 85%.
Background. The Tax Reform Act of 1986 eliminated or restricted most of
the existing federal tax incentives for the production of rental housing
(such as tax-exempt bond financing, accelerated depreciation and deduction of
construction period interest) and replaced them with a federal tax credit for
qualifying property that was acquired, constructed or rehabilitated after
December 31, 1986. The Low Income Housing Tax Credit provisions are set forth
in Section 42 of the Code. The Tax Credit program is administered by the U.S.
Treasury Department. The intent of the Tax Credit Program is to facilitate,
through the tax credit mechanism, the construction or substantial
rehabilitation of affordable multifamily housing with the benefits of this
indirect subsidy flowing to a targeted tenant profile. All of the Mortgaged
Properties relating to the Section 42 Mortgage Loans have been allocated Tax
Credits.
General Rules. Under the Tax Credit provisions, a property owner must
comply with the tenant income restrictions and rental restrictions over a
minimum 15-year compliance period. In addition, agreements governing the
property will normally require an "extended use period" which has the effect
of extending the income and rental restrictions for an additional 15 years.
However, at any time during the last year of the compliance period or at any
time during the extended use period, the property owner may demand that the
related state housing finance agency find a buyer for the property who will
purchase the property subject to the income and rental restrictions and who
will pay enough to both retire any debt on the property and return the
owner's equity investment plus cost-of-living adjustments. If the related
state housing finance agency cannot find such a purchaser within one year of
such demand, the income and rental restrictions cease to apply and rents may
be increased to market rates over a three-year period. In return for agreeing
to these restrictions, the property owner is entitled to receive a Tax Credit
(e.g., a dollar-for-dollar reduction of federal taxes) in each taxable year
over a period of 10 years for a qualified low-income project commencing with
occupancy by qualified tenants.
Income Targeting Test. At the time the project is placed in service, the
property owner must make an irrevocable election of one of two set-aside
rules, either (i) at least 20% of the units must be rented to tenants with
incomes of 50% or less of median income, as adjusted for family size (the
"20-50" set-aside), or (ii) at least 40% of the units must be rented to
tenants with incomes of 60% or less of median income, as adjusted for family
size (the "40-60" set-aside). The aggregate number of Tax Credits the owner
is entitled to is based upon the percentage of total units made available to
qualified tenants. See "--Value of Tax Credits" below.
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The applicable set-aside requirement must be met on an annual basis over
the 15-year compliance periods with tenant income each year measured against
the income limit applicable for that year. Most owners have elected the 40-60
set-aside rule and designated 100% of the units for tenants that qualify
under the income requirements.
Once qualified, tenant income can rise to 140% of the applicable income
limitation for that year without disqualification of the tenant. The
provisions allow the income of an existing tenant to exceed the 140% limit
without disqualification if the next available rental unit of comparable size
is rented (or made available) to a tenant qualifying at 60% of the median
income (or 50% for the 20-50 set-aside projects). In practice, there is no
income limit for existing tenants who initially met the applicable income
requirements in a housing project eligible for Tax Credits (a "Tax Credit
Project") for which the owner has elected to rent 100% of the units thereof
to qualified tenants. A majority of the Section 42 Mortgage Loans are secured
by Mortgaged Properties where the related borrower had elected to rent 100%
of the units to qualified tenants.
Rental Requirements. The Tax Credit provisions require that gross rent for
each low-income unit not exceed 30% of the annual HUD median income, adjusted
for the household size expected to occupy the particular unit. The gross
rental charged for a unit must take into account an allowance for utilities.
If utilities are paid by the tenant, then the maximum allowable Tax Credit
rent is reduced according to utility allowances, as provided in regulations
of the Internal Revenue Service (the "IRS").
Value of Tax Credits. The number of Tax Credits received by the owner of a
qualified project will depend largely on the "qualified basis," which is the
portion of the project's "eligible basis" attributable to low-income units.
In general, qualified basis is the eligible basis times the percentage of
total rental units (up to a maximum of 100%) rented to or made available to
qualifying tenants. Eligible basis is essentially project cost (exclusive of
land). Qualified basis can change from year to year during the relevant
period when tax credits are applicable (the "Tax Credit Period") if owners
elect to make more (or fewer) rental units available to qualifying tenants.
Accordingly, the number of Tax Credits received from year to year could vary.
The number of Tax Credits available to the owner of the property each year
is equal to the "annual tax credit percentage" times the qualified basis. The
annual tax credit percentage available to a particular property is generally
determined when the property is placed in service and will not change
thereafter. In 1987, the "annual tax credit percentage" for new construction
was 9% and the annual tax credit percentage for acquisition of existing
buildings was 4%. In subsequent years, the IRS has published monthly factors
to compute the annual tax credit percentage for projects placed in service
that month. These annual percentages approximate 9% and 4%.
For example, for a newly-constructed Tax Credit Project, Tax Credits equal
to approximately 9% of the project's qualified basis would be available for
each year of the Tax Credit Period. Thus, the aggregate number of Tax Credits
available over the Tax Credit Period would equal approximately 90% of the
project's qualified basis, which for projects which are (and remain) 100% Tax
Credit qualified, may approximate almost 90% of the project cost (excluding
the cost of land). However, when investors consider the amount of funds they
are willing to contribute as limited partners to a partnership which owns a
Tax Credit Project, they generally consider (among other factors) the timing
of the receipt of Tax Credits (future Tax Credits have lower present values).
Accordingly, investor capital contributions for 9% projects generally
approximate 45-50% of the aggregate number of Tax Credits allocated to a
property.
Compliance and Recapture of Tax Credits. Tax Credit compliance over the
15-year compliance period is based on whether tenants qualify. This is
determined by reviewing tenant income (adjusted for family size) in relation
to the HUD median income for the area as described above under "--Income
Targeting Test."
In the event a Tax Credit Project does not maintain compliance with the
Tax Credit restrictions on tenant income or rental rates, the owners of the
Tax Credit Project may lose the Tax Credits related to the period of the
noncompliance and face the partial recapture of previously taken Tax Credits.
The loss of Tax Credits, and the possibility of recapture of Tax Credits
already taken, may provide significant incentive for project owners to keep
the Tax Credit Project in compliance. Additionally, in many cases, it may be
economically prudent for project owners to subsidize poorly performing
projects as opposed to permitting a default on a Section 42 Mortgage Loan
secured by the Tax Credit Project. As the Tax Credits flow to the owner of
the Tax Credit Project, a default on a Section 42 Mortgage Loan that leads to
a foreclosure would result in the prior owners losing any future Tax Credits
and the potential recapture of a portion of any Tax Credits already taken as
discussed in the following paragraph. Additionally, in the event of a
foreclosure upon a Tax Credit Project during the Tax Credit Period, the
subsequent owner will be entitled to the remaining Tax Credits in the same
manner as the original owner of the Tax Credit Project, subject to continued
compliance with Section 42 of the Code. Accordingly, the resale value of the
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<PAGE>
Tax Credit Project during such Tax Credit Period may be enhanced by the
existence of the Tax Credits. In the event of a foreclosure sale during such
period, prospective purchasers may assign a value to the remaining Tax
Credits and reflect such value in the price they are willing to pay to
acquire the Tax Credit Project. Conventional valuation analysis, such as that
based upon net operating income, does not recognize this value. Thus, the
true value may be understated. However, the actual value assigned by
prospective purchasers to the Tax Credits will depend on the remaining term
of the Tax Credit Period, the prevailing market for Tax Credit properties and
other economic factors, and no assurance can be given that the existence of
Tax Credits will generate any increase in the value of the related Mortgaged
Properties. All the Section 42 Mortgage Loans are secured by liens on related
Mortgaged Properties which have been allocated Tax Credits.
Under certain circumstances, a property owner is subject to the recapture
of the "accelerated portions" of any Tax Credit previously taken, plus
interest. Because the Tax Credits are taken over a 10-year period while the
Section 42 compliance period is 15 years, one-third of the Tax Credit taken
in years 1 through 10 is considered "accelerated" and is subject to
recapture. If the non-compliance events occur in years 11 through 15, the
total accelerated portion (which equals one-third of the total Tax Credits
taken) is reduced pro rata each subsequent year. Additionally, if a project
as a whole fails to meet the minimum requirements (e.g., the 20-50 or 40-60
set-aside, whichever is elected), there is recapture of 100% of the
accelerated portion of the Tax Credits taken in each preceding year.
Recapture does not occur if noncompliance is corrected within a "reasonable
period," as determined under the Code.
In substantially all cases, the Tax Credits were allocated to the
Mortgaged Properties securing the Section 42 Mortgage Loans based upon most
of the units therein being held available or occupied by individuals whose
income is 60% or less of the area median gross income for the area in which
the related Mortgaged Properties is located. Under Section 42 of the Code,
the rent that can be charged for the qualified units must be restricted on
the basis of unit size (or number of occupants in pre-1990 properties) and
area median income. In addition, to avoid a recapture of a portion of the Tax
Credits previously taken by a Mortgagor, the Mortgaged Properties securing
the Section 42 Mortgage Loans must meet the income and rental requirements
for at least 15 years.
BCMC received, with respect to each Mortgaged Property securing the
Section 42 Mortgage Loans, evidence as to (i) the number of Tax Credits, (ii)
the "eligible basis," (iii) the "qualified basis," (iv) the "date placed in
service," and (v) compliance with the Tax Credit regulations to date. As part
of the documents related to the origination of each Mortgage Loan, the
Originator also received a copy of the Tax Credit agreement with the
applicable state or local Housing Finance Agency.
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<PAGE>
CERTAIN CHARACTERISTICS OF THE MORTGAGE POOL
Concentration of Mortgage Loans and Borrowers. Several of the Mortgage
Loans have Cut-off Date Principal Balances that are substantially higher than
the average Cut-off Date Principal Balance. The largest single Mortgage Loan
(Loan #1) has a Cut-off Date Principal Balance that represents approximately
5.1% of the Initial Pool Balance. The five largest individual Mortgage Loans
have Cut-off Date Principal Balances that represent in the aggregate
approximately 16.2% of the Initial Pool Balance.
The Mortgage Pool consists of 139 Mortgage Loans to 128 separate
borrowers. Seventeen of the Mortgage Loans were made to a borrower which was
also the borrower in one or more of the other Mortgage Loans. Twenty-one of
the Mortgage Loans were made to borrowers that are affiliated with the
borrower of another Mortgage Loan. However, no set of Mortgage Loans made to
a single borrower or to a single group of affiliated borrowers constitutes
more than approximately 2.8% of the Initial Pool Balance. Thirteen Mortgage
Loans (representing approximately 5.6% of the Initial Pool Balance) are
cross-collateralized and cross-defaulted with one or more other Mortgage
Loans to the related borrower or to a related affiliated borrower. See
"--Limitations on Enforceability of Cross-Collateralization" herein. The
following table sets forth more detailed information regarding Mortgage Loans
made to a single borrower or to a single group of affiliated borrowers. The
column entitled "%" in such table sets forth the approximate percentage of
the Initial Pool Balance represented by each identified group of Mortgage
Loans.
<TABLE>
<CAPTION>
LOAN RELATIONSHIP OF CROSS-COLLATERALIZED AND
NUMBERS % BORROWERS CROSS-DEFAULTED
- ---------------------------- -------- ------------------- ----------------------------
<S> <C> <C> <C>
Loan #30 and Loan #73 1.5% Affiliated Entities No
- ---------------------------- -------- ------------------- ----------------------------
Loan #11, Loan #61, Loan #85 2.8% Affiliated Entities No
and Loan #108
- ---------------------------- -------- ------------------- ----------------------------
Loan #32, Loan #47 and Loan 2.4% Affiliated Entities No
#50
- ---------------------------- -------- ------------------- ----------------------------
Loan #105, Loan #107, Loan 1.3% Same Borrower Yes
#127, Loan #131, Loan #133,
Loan #137 and Loan #138
- ---------------------------- -------- ------------------- ----------------------------
Loan #99, Loan #112 and 0.7% Affiliated Entities No
Loan #119
- ---------------------------- -------- ------------------- ----------------------------
Loan #71 and Loan #109 0.7% Same Borrower Yes
- ---------------------------- -------- ------------------- ----------------------------
Loan #33, Loan #81 1.3% Same Borrower No
- ---------------------------- -------- ------------------- ----------------------------
Loan #19, Loan #63 and 2.2% Affiliated Entities No
Loan #113
- ---------------------------- -------- ------------------- ----------------------------
Loan #26 and Loan #40 2.1% Same Borrower No
- ---------------------------- -------- ------------------- ----------------------------
Loan #22 and Loan #76 1.8% Same Borrower No
- ---------------------------- -------- ------------------- ----------------------------
Loan #51 and Loan #60 1.2% Same Borrower Yes
- ---------------------------- -------- ------------------- ----------------------------
Loan #24 and Loan #128 1.5% Affiliated Entities No
- ---------------------------- -------- ------------------- ----------------------------
Loan #70 and Loan #74 0.9% Affiliated Entities No
- ---------------------------- -------- ------------------- ----------------------------
Loan #18 and Loan #36 2.4% Affiliated Entities Yes
- ---------------------------- -------- ------------------- ----------------------------
</TABLE>
S-48
<PAGE>
Geographic Concentration. The Mortgaged Properties are located in 24
states. Thirty-one of the Mortgage Loans, which represent approximately 16.5%
of the Initial Pool Balance, are secured by liens on Mortgaged Properties
located in Texas; 15 of the Mortgage Loans, which represent approximately
14.7% of the Initial Pool Balance, are secured by liens on Mortgaged
Properties located in California; 14 of the Mortgage Loans, which represent
approximately 9.6% of the Initial Pool Balance, are secured by liens on
Mortgaged Properties located in Florida; 5 of the Mortgage Loans, which
represent approximately 6.8% of the Initial Pool Balance, are secured by
liens on Mortgaged Properties located in Colorado; 9 of the Mortgage Loans,
which represent approximately 5.8% of the Initial Pool Balance, are secured
by liens on Mortgaged Properties located in Michigan; 5 of the Mortgage
Loans, which represent approximately 5.2% of the Initial Pool Balance, are
secured by liens on Mortgaged Properties located in New York; and 6 of the
Mortgage Loans, which represent approximately 5.1% of the Initial Pool
Balance, are secured by liens on Mortgaged Properties located in Maryland.
The remaining Mortgaged Properties are located throughout 17 other states,
with no more than 4.4% of the Initial Pool Balance being secured by Mortgaged
Properties located in any such individual jurisdiction.
Environmental Risks. Except as discussed below, (a) environmental site
assessments with respect to the Mortgaged Properties generally were obtained
either by (i) the Originator within 12 months of the respective origination
dates of the Mortgage Loans, or (ii) the Mortgage Loan Seller within 12
months of the respective dates such Mortgage Loans were acquired by such
Mortgage Loan Seller, and (b) the Mortgaged Properties have been subject to
environmental site assessments within 24 months preceding the Cut-off Date.
Other than as described below, the environmental site assessments did not
reveal the existence of conditions or circumstances respecting the Mortgaged
Properties securing any Mortgage Loan that would constitute or result in a
material violation of applicable environmental law, impose a material
constraint on the operation of such Mortgaged Properties, require any
material change in the use thereof, require any material clean-up, remedial
action or other response with respect to hazardous materials on or affecting
such Mortgaged Properties under any applicable environmental law, with the
exception of conditions or circumstances (a) that such assessments indicated
could be cleaned up, remediated or brought into compliance with applicable
environmental law by the taking of certain actions and (b) either for which
(i) a hold-back or other escrow of funds in an amount not less than the cost
of taking such clean-up, remediation or compliance actions as estimated in
such assessments has been created, (ii) an environmental insurance policy in
an amount satisfactory to the Originator has been obtained by the related
borrower or an indemnity for such costs has been obtained from a potentially
culpable party or (iii) such clean up, remediation or compliance actions have
been completed in compliance with applicable environmental law prior to the
closing of such Mortgage Loan. With respect to one Mortgage Loan (Loan #70),
representing approximately .5% of the Initial Pool Balance, the related
Mortgaged Property is within the boundaries of an active LUST site related to
an adjacent property. The borrower was required to obtain acceptable
environmental insurance for a minimum period of 5 years. With respect to one
Mortgage Loan (Loan #90), representing approximately .3% of the Initial Pool
Balance, the related Mortgaged Property was contaminated with diesel fuel
spilled thereon. The borrower was required to deposit $85,000 of the Mortgage
Loan proceeds in escrow with the lender to ensure remediation. With respect
to one Mortgage Loan (Loan #2), representing approximately 3.3% of the
Initial Pool Balance, the related Mortgaged Property was contaminated by
gasoline products eminating from a service station located on the Mortgaged
Property, and is subject to ongoing monitoring by applicable regulatory
authorities. Mobil Oil Corporation has agreed to remediate any contamination
caused by Mobil's operation of the service station, if and to the extent
required by the governmental agency exercising jurisdiction over this matter.
Investors should understand that the results of the environmental site
assessments do not constitute an assurance or guaranty by the Underwriters,
the Depositor, the Originators, the Mortgage Loan Sellers, Midland, the
borrowers, any environmental consultants or any other person as to the
absence or extent of the existence of any environmental condition on the
Mortgaged Properties that could result in environmental liability. Given the
scope of the environmental site assessments, an environmental condition that
affects a Mortgaged Property may not be discovered or its severity revealed
during the course of the assessment. Further, no assurance can be given that
future changes in applicable environmental laws, the development or discovery
of presently unknown environmental conditions at the Mortgaged Properties or
the deterioration of existing conditions will not require material expenses
for remediation or other material liabilities.
Other Financing. The related Mortgage Loan documents generally prohibit
subordinate financing without the mortgagee's prior consent. With respect to
19 of the Mortgage Loans, representing approximately 14.2% of the Initial
Pool Balance, the related Mortgage Loan documents allow the borrower, under
certain specified circumstances, to either maintain an existing subordinate
mortgage encumbering the related Mortgaged Properties, or to grant such a
subordinate mortgage in the future. Generally, prior to any such subordinate
mortgage being allowed, certain conditions specified in the related
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<PAGE>
Mortgage Loan documents must be satisfied. Such conditions may include one or
more of the following: (a) the purpose, amount, term and amortization period
of the proposed subordinate debt, together with the identity of the
subordinate lender and the terms of the subordinate loan documents, must be
acceptable to the senior mortgagee; (b) pursuant to either the specific terms
of the subordinate mortgage or a separate recorded agreement obtained from
such subordinate lender, the subordinate mortgage must be unconditionally
subordinated to the related Mortgage Loan documents, and the subordinate
lender is also typically prohibited from exercising any remedies against the
borrower without the senior mortgagee's consent and from receiving any
payments on such subordinate debt if, for the immediately prior 12 months,
either (i) the aggregate debt service coverage ratio for such Mortgage Loan
and such subordinate debt is less than a specified ratio, or (ii) the
aggregate loan to value ratio for such Mortgage Loan and such subordinate
debt is greater than a specified ratio; (c) the subordinate debt must be
non-recourse; and (d) acceptable economic conditions regarding the related
Mortgaged Property must exist as of the effective date of such subordinate
financing, typically including (i) an aggregate debt service coverage ratio
for such Mortgage Loan and such subordinate debt equal to or exceeding a
specified ratio, and/or (ii) an aggregate loan to value ratio for such
Mortgage Loan and such subordinate debt of less than a specified ratio.
Zoning Compliance. The Originator generally received assurances that all
of the improvements located upon each respective Mortgaged Property complied
with all Zoning Laws in all respects material to the continued use of the
related Mortgaged Property, or that such improvements qualified as permitted
non-conforming uses.
Property Tax Abatement. Two Mortgaged Properties (representing
approximately 2.1% of the Initial Pool Balance) are currently exempt from
real property taxes in an amount equal to the percentage portion of the
related Mortgaged Property which is rented to lower income households;
provided, however, that in order for such exemption to continue, the related
Mortgaged Property must be: (a) owned and operated by a religious, hospital,
scientific or charitable fund, foundation or corporation (including a limited
partnership in which the managing general partner is an eligible nonprofit
organization) which is eligible for and receives Tax Credits pursuant to
Section 42 of the Code; (b) used exclusively for rental housing and related
facilities; and (c) 20% or more occupied by tenants which qualify as "low
income households" and whose rent does not exceed a statutorily prescribed
rate.
Limitations on Enforceability of Cross-Collateralization. Thirteen of the
Mortgage Loans (the "Cross-Collateralized Loans"), each of which was made to
a borrower that is affiliated with the borrower under another Mortgage Loan
or is the borrower under another Mortgage Loan, are cross-collateralized and
cross-defaulted with one or more related Cross-Collateralized Loans. This
arrangement is designed to reduce the risk that the inability of an
individual Mortgaged Property securing a Cross-Collateralized Loan to
generate net operating income sufficient to pay debt service thereon will
result in defaults (and ultimately losses). The arrangement is based on the
belief that the risk of default is reduced by making the collateral pledged
to secure each related Cross-Collateralized Loan available to support debt
service on, and principal repayment of, the aggregate indebtedness evidenced
by the related Cross-Collateralized Loans. See "--Concentration of the
Mortgage Loans and Borrowers" herein for more information regarding the
Cross-Collateralized Loans.
Tenant Matters. Certain additional information regarding Major Tenants is
set forth in "Annex A" herein. Generally, Major Tenants do not have
investment-grade credit ratings. Many Major Tenants occupy their respective
leased premises pursuant to leases which require them to pay all applicable
real property taxes, maintain insurance over the improvements thereon and
maintain the physical condition of such improvements.
Other Information. The following tables and "Annex A" set forth certain
information with respect to the Mortgage Loans and the Mortgaged Properties,
which was primarily derived from financial statements supplied by each
borrower for its related Mortgaged Property. The financial statements
supplied by the borrowers in most cases are unaudited and were not prepared
in accordance with generally accepted accounting principles. "Net Operating
Income" and "Cash Flow" do not represent the net operating income and cash
flow reflected on the borrowers' financial statements. The differences
between "Net Operating Income" and "Cash Flow" determined by MCFC, GACC and
BCMC and net operating income and cash flow reflected on the borrowers'
financial statements represent the adjustments made by MCFC, GACC and BCMC
described below, which adjustments generally were intended to increase the
level of consistency between the financial statements provided by the
borrowers. However, such adjustments were subjective in nature and were not
made in a uniform manner nor in accordance with generally accepted accounting
principles. "Underwritten NOI" and "Underwritten Cash Flow" are pro forma
numbers prepared by the Mortgage Loan Sellers to reflect their assessment of
the market based performance of the related Mortgaged Property. Neither the
Depositor nor the Underwriters have made any attempt to verify the accuracy
of the financial statements supplied by the borrowers or the accuracy or
appropriateness of the adjustments discussed below that were made by the
Mortgage Loan Sellers to determine "Net Operating Income," "Cash Flow,"
"Underwritten NOI" and "Underwritten Cash Flow."
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<PAGE>
THE NUMBERS REPRESENTING "NET OPERATING INCOME," "CASH FLOW,"
"UNDERWRITTEN NOI" AND "UNDERWRITTEN CASH FLOW" ARE NOT A SUBSTITUTE FOR OR
AN IMPROVEMENT UPON, NET INCOME AS DETERMINED IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES AS A MEASURE OF THE RESULTS OF A MORTGAGED
PROPERTY'S OPERATIONS OR A SUBSTITUTE FOR CASH FLOWS FROM OPERATING
ACTIVITIES DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES AS A MEASURE OF LIQUIDITY. NO REPRESENTATION IS MADE AS TO THE
FUTURE NET CASH FLOW OF THE PROPERTIES, NOR IS "NET OPERATING INCOME," "CASH
FLOW," "UNDERWRITTEN NOI" AND "UNDERWRITTEN CASH FLOW" SET FORTH HEREIN
INTENDED TO REPRESENT SUCH FUTURE NET CASH FLOW.
All of the Mortgaged Properties were appraised at the request of the
Originator of the related Mortgage Loan by a state certified appraiser or an
appraiser belonging to the Appraisal Institute. The purpose of each appraisal
was to provide an opinion of the fair market value of the related Mortgaged
Property. None of the Depositor, the Mortgage Loan Sellers Midland, the
Master Servicer, the Special Servicer, the Underwriters, the Trustee or the
Fiscal Agent or any other entity has prepared or obtained a separate
independent appraisal or reappraisal, unless such person was the Originator
of the related Mortgage Loan. There can be no assurance that another
appraiser would have arrived at the same opinion of value. No representation
is made that any Appraised Value would approximate either the value that
would be determined in a current appraisal of the related Mortgage Property
or the amount that would be realized upon a sale. Accordingly, investors
should not place undue reliance on the Loan-to-Value Ratios set forth herein.
Debt service coverage ratios are used by lenders of loans secured by
income producing property to measure the ratio of (a) cash currently
generated by a property that is available for debt service (that is, cash
that remains after payment of operating expenses) to (b) required debt
service payments. However, debt service coverage ratios only measure the
current, or recent, ability of a property to service mortgage debt. If a
property is not expected to have a stable operating cash flow (for instance,
if it is subject to material leases that are scheduled to expire during the
loan term and that provide for above-market rents, may be difficult to
replace, or both) a debt service coverage ratio may not be a reliable
indicator of a property's ability to service the mortgage debt over the
entire remaining loan term. In addition, a debt service coverage ratio may
not adequately reflect the significant amounts of cash that a property owner
may be required to expend to pay for capital improvements, and for tenant
improvements and leasing commissions when expiring leases are replaced. For
the reasons discussed above, the Debt Service Coverage Ratios presented
herein are limited in their usefulness in predicting the future ability of a
Mortgaged Property to generate sufficient cash flow to repay the related
Mortgage Loan. Accordingly, no assurance can be given, and no representation
is made, that the Debt Service Coverage Ratios accurately reflect that
ability.
For purposes of the tables and "Annex A":
(1) "Net Operating Income" or "NOI" is revenue derived from the use and
operation of the Mortgaged Property (consisting primarily of rental
income) less operating expenses (such as utilities, general administrative
expenses, management fees, advertising, repairs and maintenance) and less
fixed expenses (such as insurance and real estate taxes). NOI generally
does not reflect capital expenditures, replacement reserves, interest
expense, income taxes and non-cash items such as depreciation or
amortization. The Mortgage Loan Sellers adjusted items of revenue and
expense shown on the borrower financial statements in order to reflect the
historical operating results for a Mortgaged Property on a normalized
basis (e.g., adjusting for the payment of two years of real estate taxes
in a single year). Revenue was generally adjusted to eliminate items not
related to the operation of the Mortgaged Property, to eliminate security
deposits and to eliminate non-recurring items. Expense was generally
adjusted to eliminate distributions to owners, items of expense not
related to the operation of the Mortgaged Property, non-recurring items,
such as capital expenditures, and refunds of security deposits. The
Mortgage Loan Sellers made the adjustments based upon their review of the
borrower financial statements, their experience in originating loans and,
in some cases, conversations with borrowers. The adjustments were
subjective in nature and were not uniform for each Mortgaged Property.
(2) "Cash Flow" means, with respect to any Mortgage Loan, the NOI for the
related Mortgaged Property decreased by tenant improvements, leasing
commissions and other non-recurring expenditures, as appropriate.
(3) "Underwritten NOI" means, with respect to any Mortgage Loan, the NOI
for the related Mortgage Property as determined by the applicable Mortgage
Loan Seller in accordance with their underwriting guidelines for similar
properties. Although there are differences in the underwriting guidelines
of the Mortgage Loan Sellers, the nature and types of adjustments made by
each of them were generally the same. Revenue generally is calculated as
follows. Rental
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<PAGE>
revenue is calculated using the lower of actual or market rental rates,
with a vacancy rate equal to the higher of the Mortgaged Property's
historical rate, the market rate or an assumed vacancy rate. Other
revenues, such as parking fees, are included only if sustainable. Certain
revenues, such as application fees and lease termination fees, are not
included. Operating and fixed expenses generally are adjusted to reflect
the higher of the Mortgaged Property's average expenses or a midrange
industry norm for expenses on similar properties in similar locations
(generally adjusted upward to account for inflation), a market rate
management fee and an annual reserve for replacement of capital items.
(4) "Underwritten Cash Flow" means, with respect to any Mortgage Loan,
the Underwritten NOI for such Mortgage Loan decreased by an amount that
the applicable Mortgage Loan Seller has determined to be an appropriate
allowance for average annual tenant improvements and leasing commissions
based upon their respective underwriting guidelines.
(5) "Appraised Value" means, for each of the Mortgaged Properties, the
appraised value of such property as determined by an appraisal thereof
made not more than nine months prior to the origination date of the
related Mortgage Loan and reviewed by the Originator of such Mortgage
Loan.
(6) "Annual Debt Service" means, for any Mortgage Loan, the current
annual debt service (including interest allocable to payment of the
Servicing Fee and principal) payable with respect to such Mortgage Loan
during the 12-month period commencing on the Cut-off Date (assuming no
principal prepayments occur).
(7) "Debt Service Coverage Ratio," "Underwritten DSCR" or "DSCR" means,
with respect to any Mortgage Loan, (a) the Underwritten Cash Flow for the
related Mortgaged Property divided by (b) the Annual Debt Service for such
Mortgage Loan.
(8) "Loan-to-Value Ratio," "Appraised LTV" or "LTV" means, with respect
to any Mortgage Loan, the principal balance of such Mortgage Loan as of
the Cut-off Date divided by the Appraised Value of the Mortgaged Property
securing such Mortgage Loan.
(9) "Balloon LTV" for any Mortgage Loan is calculated in the same manner
as LTV, except that the Balloon Amount is used instead of the Cut-off Date
principal balance.
(10) "Balloon Amount" or "Balloon Balance" for each Mortgage Loan is
equal to the principal amount, if any, due at maturity, taking into
account scheduled amortization, assuming no prepayments or defaults.
(11) "Occupancy Rate" means the percentage of gross leasable area, rooms,
units, beds, pads or sites of a Mortgaged Property that are leased or
occupied. Occupancy rates are calculated based upon the most recent rent
information received by the applicable Mortgage Loan Seller.
(12) "Property Age" means, with respect to the related Mortgaged Property
(or Mortgaged Properties), the difference between the Cut-off Date year
(1996) and the year in which the oldest Mortgaged Property securing a
Mortgage Loan was initially constructed.
(13) "Effective Age" means, with respect to the related Mortgaged
Property (or Mortgaged Properties), the difference between the Cut-off
Date year (1996) and the more recent of the year in which the oldest
Mortgaged Property securing a Mortgage Loan was either initially
constructed or renovated.
(14) "Remaining Term to Maturity" generally means the number of months
remaining from the Cut-off Date until the maturity of a mortgage loan. The
method for calculating the "Remaining Term to Maturity" for any Mortgage
Loan is determined by subtracting (a) the number of Due Dates from and
including the first payment date to and including the Cut-off Date from
(b) the number of Due Dates from and including the first payment date to
and including the original scheduled maturity date for such Mortgage Loan.
(15) "Remaining Amortization Term" for any Mortgage Loan is calculated as
the original amortization term of the related Mortgaged Loan (based upon
such Mortgage Loan's original balance, interest rate and monthly payment)
less the number of Due Dates from and including the first payment date to
and including the Cut-off Date.
(16) The "Year Renovated" is based upon information contained in an
appraisal or engineering report of the related Mortgaged Property or other
written evidence provided by the borrower.
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<PAGE>
(17) The "Occupancy Percentage" and "Occupancy Date" for each Mortgage
Loan are based upon rent information received by the applicable Mortgage
Loan Seller from the related borrower. The "Occupancy Percentage" and
"Occupancy Date" for the Hotel Property are based upon operating
information received by MCFC from the related borrower.
(18) All calculations of any applicable Lockout Period, Yield Maintenance
Period or Prepayment Premium for a Mortgage Loan are determined based upon
such Mortgage Loan's first scheduled payment date.
(19) "Weighted Average Maturity" means the weighted average of the
Remaining Terms to Maturity of the Mortgage Loans.
(20) Due to rounding, percentages may not add to 100% and amounts may not
add to the indicated total.
(21) Mortgage Loans with an "*" under Original Note Date were not closed
as of November 15, 1996. Accordingly, certain terms of such Mortgage Loans
set forth on Annex A may be subject to change.
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<PAGE>
RANGE OF CUT-OFF DATE PRINCIPAL BALANCES
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
RANGE OF CUT-OFF BALANCES BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ------------------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 500,000-$ 999,999 $ 15,519,093 2.9% 18 12.9% 9.05% 1.47 116
$ 1,000,000-$ 1,999,999 $ 63,269,339 11.9% 43 30.9% 8.97% 1.35 133
$ 2,000,000-$ 2,999,999 $ 44,521,927 8.4% 18 12.9% 8.92% 1.34 124
$ 3,000,000-$ 3,999,999 $ 43,414,946 8.2% 13 9.4% 8.88% 1.40 132
$ 4,000,000-$ 4,999,999 $ 54,279,133 10.2% 12 8.6% 8.89% 1.34 109
$ 5,000,000-$ 5,999,999 $ 42,130,499 7.9% 8 5.8% 8.77% 1.33 125
$ 6,000,000-$ 6,999,999 $ 19,342,184 3.6% 3 2.2% 8.74% 1.35 107
$ 7,000,000-$ 7,999,999 $ 68,285,216 12.9% 9 6.5% 8.89% 1.47 122
$ 8,000,000-$ 8,999,999 $ 34,467,251 6.5% 4 2.9% 8.60% 1.36 116
$ 9,000,000-$ 9,999,999 $ 18,804,859 3.5% 2 1.4% 8.43% 1.28 148
$10,000,000-$10,999,999 $ 41,234,628 7.8% 4 2.9% 8.83% 1.31 107
$11,000,000-$11,999,999 $ 11,700,000 2.2% 1 0.7% 8.44% 1.35 120
$12,000,000-$12,999,999 $ 12,339,021 2.3% 1 0.7% 8.54% 1.26 75
$16,000,000-$16,999,999 $ 16,890,000 3.2% 1 0.7% 8.47% 1.29 120
$17,000,000-$17,999,999 $ 17,686,288 3.3% 1 0.7% 8.59% 1.40 76
$27,000,000-$27,999,999 $ 27,292,186 5.1% 1 0.7% 7.61% 1.36 110
-------------- -------------- ----------- --------- ---------- ---------- ----------
$531,176,571 100.0% 139 100.0% 8.74% 1.36 118
</TABLE>
DISTRIBUTION BY LOAN BALANCE
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the ranges of
Cut-off Date Principal Balances reflected in the above table the number of
Mortgage Loans and the Aggregate Cut-off Date Principal Balance for each such
range.
S-54
<PAGE>
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
PROPERTY LOCATION BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ----------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
AZ $ 23,011,216 4.3% 8 5.8% 8.93% 1.35 118
CA $ 78,087,248 14.7% 15 10.8% 8.87% 1.44 128
CO $ 36,075,607 6.8% 5 3.6% 7.95% 1.37 115
CT $ 11,789,335 2.2% 3 2.2% 8.83% 1.32 118
FL $ 50,881,050 9.6% 14 10.1% 8.76% 1.31 129
GA $ 5,761,251 1.1% 3 2.2% 8.79% 1.48 133
MA $ 20,636,346 3.9% 4 2.9% 8.90% 1.39 128
MD $ 27,265,744 5.1% 6 4.3% 9.04% 1.35 126
MI $ 31,062,911 5.8% 9 6.5% 9.16% 1.35 121
MN $ 9,967,329 1.9% 7 5.0% 8.88% 1.40 113
MO $ 18,588,450 3.5% 2 1.4% 8.52% 1.28 120
MT $ 2,273,665 0.4% 2 1.4% 8.96% 1.31 212
NJ $ 14,290,446 2.7% 4 2.9% 8.83% 1.39 90
NM $ 13,748,226 2.6% 3 2.2% 8.56% 1.29 88
NV $ 11,750,000 2.2% 2 1.4% 8.24% 1.35 120
NY $ 27,657,272 5.2% 5 3.6% 8.87% 1.36 118
OK $ 8,277,753 1.6% 4 2.9% 8.71% 1.29 130
OR $ 1,099,380 0.2% 1 0.7% 8.85% 1.34 179
PA $ 20,531,536 3.9% 3 2.2% 8.70% 1.38 82
RI $ 3,980,391 0.7% 1 0.7% 9.06% 1.25 78
TX $ 87,890,568 16.5% 31 22.3% 8.73% 1.36 121
UT $ 2,884,950 0.5% 1 0.7% 9.18% 1.16 142
VA $ 12,098,791 2.3% 4 2.9% 8.91% 1.41 113
WA $ 11,567,106 2.2% 2 1.4% 8.09% 1.30 76
-------------- -------------- ----------- --------- ---------- ---------- ----------
$531,176,571 100.0% 139 100.0% 8.74% 1.36 118
</TABLE>
DISTRIBUTION BY STATE
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the Property
Locations (by State) reflected in the above table the number of Mortgage Loans
and the Aggregate Cut-off Date Principal Balance for each such location.
S-55
<PAGE>
RANGE OF DSCRS
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
RANGE OF DSCR PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
(X) BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- -------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1.15-1.19 $ 4,722,794 0.9% 2 1.4% 9.17% 1.16 151
1.20-1.24 $ 32,990,360 6.2% 9 6.5% 8.91% 1.21 153
1.25-1.29 $113,531,301 21.4% 28 20.1% 8.87% 1.27 110
1.30-1.34 $114,452,758 21.5% 31 22.3% 8.78% 1.32 122
1.35-1.39 $160,747,541 30.3% 34 24.5% 8.59% 1.37 114
1.40-1.44 $ 45,651,432 8.6% 11 7.9% 8.66% 1.41 108
1.45-1.49 $ 20,315,474 3.8% 6 4.3% 8.76% 1.47 124
1.50-1.54 $ 8,636,176 1.6% 4 2.9% 9.04% 1.51 133
1.55-1.59 $ 11,401,409 2.1% 8 5.8% 8.61% 1.56 88
1.60-1.64 $ 10,202,374 1.9% 4 2.9% 8.67% 1.63 184
2.45-2.49 $ 7,850,184 1.5% 1 0.7% 9.00% 2.46 108
2.70-2.74 $ 674,768 0.1% 1 0.7% 9.28% 2.72 112
-------------- -------------- ----------- --------- ---------- ---------- ----------
$531,176,571 100.0% 139 100.0% 8.74% 1.36 118
</TABLE>
DISTRIBUTION BY DSCR
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the ranges of DSCRs
reflected in the above table the number of Mortgage Loans and the Aggregate
Cut-off Date Principal Balance for each such range.
S-56
<PAGE>
RANGE OF LTVS
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
RANGE OF LTV BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ------------ -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
30%-35% $ 5,720,404 1.1% 2 1.4% 9.20% 1.47 139
35%-40% $ 1,997,322 0.4% 2 1.4% 8.84% 1.40 149
40%-45% $ 11,622,290 2.2% 4 2.9% 8.97% 2.16 109
50%-55% $ 8,031,169 1.5% 3 2.2% 8.61% 1.58 208
55%-60% $ 49,378,274 9.3% 17 12.2% 8.82% 1.42 110
60%-65% $ 47,127,156 8.9% 14 10.1% 8.94% 1.38 109
65%-70% $ 99,632,085 18.8% 34 24.5% 8.90% 1.33 117
70%-75% $186,860,213 35.2% 45 32.4% 8.76% 1.33 115
75%-80% $101,344,183 19.1% 14 10.1% 8.40% 1.31 122
80%-85% $ 10,458,614 2.0% 3 2.2% 8.56% 1.30 119
85%-90% $ 9,004,859 1.7% 1 0.7% 8.79% 1.21 179
-------------- -------------- ----------- --------- ---------- ---------- ----------
WTD AVG LTV 69.24% $531,176,571 100.0% 139 100.0% 8.74% 1.36 118
</TABLE>
DISTRIBUTION BY LTV
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the ranges of LTVs
reflected in the above table the number of Mortgage Loans and the Aggregate
Cut-off Date Principal Balance for each such range.
S-57
<PAGE>
TYPES OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
PROPERTY TYPE BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Congregate Care $ 4,475,000 0.8% 1 0.7% 8.48% 1.55 60
Hotel $ 7,850,184 1.5% 1 0.7% 9.00% 2.46 108
Industrial $ 3,200,000 0.6% 1 0.7% 8.85% 1.32 84
Industrial/Warehouse $ 22,194,151 4.2% 8 5.8% 9.01% 1.36 91
Mini Warehouse $ 1,250,000 0.2% 1 0.7% 9.18% 1.44 144
Mixed Use $ 16,890,000 3.2% 1 0.7% 8.47% 1.29 120
Mobile Home Park $ 2,939,559 0.6% 2 1.4% 8.85% 1.48 119
Multifamily $202,352,890 38.1% 59 42.4% 8.54% 1.33 128
Office $ 68,193,447 12.8% 17 12.2% 9.01% 1.31 120
Office/R & D $ 14,839,628 2.8% 2 1.4% 8.67% 1.36 118
Office/Retail $ 15,864,021 3.0% 3 2.2% 8.63% 1.29 82
Office/Warehouse $ 4,423,226 0.8% 3 2.2% 8.95% 1.30 125
Retail, Anchored $ 52,394,340 9.9% 9 6.5% 8.62% 1.38 108
Retail Factory Outlet $ 16,613,613 3.1% 3 2.2% 8.76% 1.37 133
Retail, Single Tenant $ 48,764,394 9.2% 14 10.1% 9.02% 1.40 123
Retail, Unanchored $ 48,932,117 9.2% 14 10.1% 9.05% 1.38 112
-------------- -------------- ----------- --------- ---------- ---------- ----------
$531,176,571 100.0% 139 100.0% 8.74% 1.36 118
</TABLE>
DISTRIBUTION BY PROPERTY TYPE
[GRAPHIC OMITTED]
The omitted material is a pie chart that depicts for each of the Types of
Mortgaged Properties reflected in the above table the number of Mortgage Loans
for each such type of property.
S-58
<PAGE>
RANGE OF MATURITY YEARS
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
YEAR OF MATURITY BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ---------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2001 $ 12,870,000 2.4% 2 1.4% 8.03% 1.39 60
2002 $ 11,681,040 2.2% 2 1.4% 8.86% 1.37 71
2003 $ 70,525,616 13.3% 11 7.9% 8.67% 1.33 80
2004 $ 1,925,000 0.4% 1 0.7% 8.73% 1.34 96
2005 $ 16,813,569 3.2% 3 2.2% 8.98% 1.88 107
2006 $303,227,173 57.1% 83 59.7% 8.72% 1.35 117
2007 $ 5,725,000 1.1% 2 1.4% 8.87% 1.40 127
2008 $ 70,260,982 13.2% 21 15.1% 8.93% 1.36 143
2010 $ 1,837,845 0.3% 1 0.7% 9.15% 1.15 166
2011 $ 31,354,893 5.9% 11 7.9% 8.86% 1.25 178
2016 $ 1,273,665 0.2% 1 0.7% 9.22% 1.30 238
2021 $ 3,681,789 0.7% 1 0.7% 8.49% 1.64 295
-------------- -------------- ----------- --------- ---------- ---------- ----------
$531,176,571 100.0% 139 100.0% 8.74% 1.36 118
</TABLE>
DISTRIBUTION BY MATURITY YEAR
[Graphic Omitted]
The omitted material is a bar graph that depicts for each of the ranges of
Maturity Years reflected in the above table the number of Mortgage Loans and
the Aggregate Cut-off Date Principal Balance for each such range.
S-59
<PAGE>
RANGE OF MORTGAGE RATES
<TABLE>
<CAPTION>
AGGREGATE WEIGHTED
CUT-OFF DATE PCT BY AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
RANGE OF MORTGAGE RATES BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ----------------------- -------------- ---------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
7.50%-7.74% $ 27,292,186 5.1% 1 0.7% 7.61% 1.36 110
7.75%-7.99% $ 8,395,000 1.6% 1 0.7% 7.79% 1.31 60
8.00%-8.24% $ 26,750,000 5.0% 4 2.9% 8.12% 1.35 112
8.25%-8.49% $ 77,838,859 14.7% 14 10.1% 8.45% 1.38 129
8.50%-8.74% $ 92,106,052 17.3% 26 18.7% 8.60% 1.36 104
8.75%-8.99% $149,452,609 28.1% 39 28.1% 8.87% 1.34 126
9.00%-9.24% $103,880,110 19.6% 35 25.2% 9.15% 1.40 121
9.25%-9.49% $ 33,370,816 6.3% 12 8.6% 9.38% 1.34 119
9.50%-9.74% $ 12,090,938 2.3% 7 5.0% 9.60% 1.32 118
-------------- ---------------- ----------- --------- ---------- ---------- ----------
$531,176,571 100.0% 139 100.0% 8.74% 1.36 118
</TABLE>
DISTRIBUTION BY MORTGAGE RATE
[Graphic Omitted]
The omitted materials is a bar graph that depicts for each of the ranges of
Mortgage Rates reflected in the above table the number of Mortgage Loans and
the Aggregate Cut-off Date Principal Balance for each such range.
S-60
<PAGE>
RANGE OF REMAINING TERM OF AMORTIZATION (IN MONTHS)
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
AMOUNT (IN MONTHS) BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ------------------ -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
108 to 120 $ 1,989,559 0.4% 1 0.7% 8.82% 1.53 119
168 to 180 $ 26,437,908 5.0% 5 3.6% 8.73% 1.36 107
192 to 204 $ 2,509,778 0.5% 1 0.7% 9.44% 1.32 117
216 to 228 $ 17,799,239 3.4% 2 1.4% 8.85% 1.34 102
228 to 240 $ 33,338,960 6.3% 17 12.2% 8.93% 1.67 122
240 to 252 $ 2,785,000 0.5% 2 1.4% 8.67% 1.37 124
264 to 276 $ 11,800,000 2.2% 2 1.4% 8.89% 1.31 126
276 to 288 $ 6,190,539 1.2% 2 1.4% 9.19% 1.33 96
288 to 300 $201,871,422 38.0% 61 43.9% 8.95% 1.34 120
300 to 312 $ 76,717,000 14.4% 22 15.8% 8.65% 1.37 113
312 to 324 $ 3,250,000 0.6% 1 0.7% 8.67% 1.62 120
348 to 360 $125,167,165 23.6% 19 13.7% 8.46% 1.30 128
360 to 372 $ 21,320,000 4.0% 4 2.9% 8.12% 1.37 89
-------------- -------------- ----------- --------- ---------- ---------- ----------
WTD AVG TERM: 300 $531,176,571 100.0% 139 100.0% 8.74% 1.36 118
</TABLE>
DISTRIBUTION BY REMAINING AMORTIZATION
[Graphic Omitted]
The omitted material is a bar graph that depicts for each of the ranges of
Remaing term of Amortization reflected in the above table the number of Mortgage
Loans and the Aggregate Cut-off Date Principal Balance for each such range.
S-61
<PAGE>
RANGE OF PROPERTY AGE (IN YEARS)
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
RANGE OF PROPERTY PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
AGE (IN YEARS) BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ----------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
0- 4 $ 91,313,091 17.2% 20 14.4% 8.92% 1.33 129
5- 9 $ 74,460,827 14.0% 21 15.1% 8.90% 1.38 117
10-14 $110,413,998 20.8% 30 21.6% 8.60% 1.34 118
15-19 $ 39,065,992 7.4% 16 11.5% 8.85% 1.32 122
20-24 $ 88,267,972 16.6% 20 14.4% 8.41% 1.44 111
25-29 $ 59,235,606 11.2% 14 10.1% 8.87% 1.39 116
30-34 $ 32,366,890 6.1% 5 3.6% 8.60% 1.31 125
35-39 $ 11,971,768 2.3% 6 4.3% 9.11% 1.34 102
40-44 $ 1,770,466 0.3% 1 0.7% 9.33% 1.36 141
45-49 $ 4,617,925 0.9% 1 0.7% 9.20% 1.35 117
50-54 $ 10,299,239 1.9% 1 0.7% 8.83% 1.37 71
65-69 $ 1,396,337 0.3% 1 0.7% 9.06% 1.43 179
70-74 $ 1,837,845 0.3% 1 0.7% 9.15% 1.15 166
85-89 $ 4,158,614 0.8% 2 1.4% 9.19% 1.20 171
-------------- -------------- ----------- --------- ---------- ---------- ----------
WTD AVG AGE: 17.26 $531,176,571 100.0% 139 100.0% 8.74% 1.36 118
</TABLE>
DISTRIBUTION BY PROPERTY AGE
[Graphic Omitted]
The omitted material is a bar graph that depicts for each of the ranges of
Property Age reflected in the above table the number of Mortgage Loans and
the Aggregate Cut-off Date Principal Balance for each such range.
S-62
<PAGE>
RANGE OF EFFECTIVE PROPERTY AGE (IN YEARS)
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
RANGE OF EFFECTIVE PROPERTY PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
AGE (IN YEARS) BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- --------------------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
0- 4 $220,669,359 41.5% 52 37.4% 8.73% 1.33 124
5- 9 $131,641,325 24.8% 31 22.3% 8.81% 1.43 104
10-14 $101,659,876 19.1% 25 18.0% 8.61% 1.34 116
15-19 $ 26,898,420 5.1% 12 8.6% 8.76% 1.34 114
20-24 $ 15,329,581 2.9% 8 5.8% 8.94% 1.30 118
25-29 $ 16,930,337 3.2% 5 3.6% 8.94% 1.43 155
30-34 $ 13,834,045 2.6% 3 2.2% 8.67% 1.33 132
35-39 $ 2,443,160 0.5% 2 1.4% 9.24% 1.35 159
40-44 $ 1,770,466 0.3% 1 0.7% 9.33% 1.36 141
-------------- -------------- ----------- --------- ---------- ---------- ----------
AVG AGE: 8.17 $531,176,571 100.0% 139 100.0% 8.74% 1.36 118
</TABLE>
DISTRIBUTION BY EFFECTIVE PROPERTY AGE
[Graphic Omitted]
The omitted material is a bar graph that depicts for each of the ranges of
Effective Property Age reflected in the above table the number of Mortgage Loans
and the Aggregate Cut-off Date Principal Balance for each such range.
S-63
<PAGE>
RANGE OF LOAN ORIGINATION YEARS
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
YEAR OF ORIGINATION BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ------------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 28,494,609 5.4% 5 3.6% 8.93% 1.67 92
1996 $502,681,962 94.6% 134 96.4% 8.73% 1.34 120
$531,176,571 100.0% 139 100.0% 8.74% 1.36 118
</TABLE>
[Graphic Omitted]
The omitted material is a bar graph that depicts for each of the ranges of
Loan Origination Years reflected in the above table the number of Mortgage Loans
and the Aggregate Cut-off Date Principal Balance for each such range.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the close of business on the Cut-off Date, as adjusted for
scheduled principal payments due on the Mortgage Loans on or before the
Cut-off Date. Certain of the Mortgage Loans (as indicated on "Annex A")
included in the Mortgage Pool for purposes of this Prospectus Supplement were
not closed or funded as of the date hereof. All information contained herein
with respect to such Mortgage Loans is based upon the terms and conditions
which the Depositor and the related Mortgage Loan Seller anticipate to be the
final terms and conditions for such Mortgage Loans. Prior to the issuance of
the Certificates, one or more Mortgage Loans may be removed from the Mortgage
Pool if the Depositor deems such removal necessary or appropriate or if it is
prepaid. A limited number of other mortgage loans may be included in the
Mortgage Pool prior to the issuance of the Certificates, unless including
such mortgage loans would materially alter the characteristics of the
Mortgage Pool as described herein. Accordingly, the range of Mortgage Rates
and maturities, as well as the other characteristics of the Mortgage Loans
constituting the Mortgage Pool at the time the Certificates are issued may
vary from those described herein.
A Current Report on Form 8-K (the "Form 8-K") will be filed, together with
the Pooling and Servicing Agreement, with the Securities and Exchange
Commission within 15 days after the initial issuance of the Certificates. The
Form 8-K will be available to the Certificateholders promptly after its
filing. In the event that Mortgage Loans are removed from or added to the
Mortgage Pool as set forth in the preceding paragraph, such removal or
addition will be noted in the Form 8-K.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
In the Pooling and Servicing Agreement, the Depositor will assign to the
Trustee for the benefit of Certificateholders certain representations and
warranties made by each of MCFC and Midland in the MCFC Mortgage Loan
Purchase Agreement, by GACC in the GACC Mortgage Loan Purchase Agreement and
by BCMC in the BCMC Mortgage Loan Purchase Agreement. In (a) the MCFC
Mortgage Loan Purchase Agreement, MCFC and Midland will each represent and
warrant (with respect only to the Midland Mortgage Loans and subject to
certain specified exceptions, including, without limitation, those exceptions
described below), in favor of the Depositor as of the Loan Purchase Closing
Date or such other date specified in the related representation or warranty,
among other things, substantially as set forth below; (b) the GACC Mortgage
Loan Purchase Agreement, GACC will represent and warrant (with respect only
to the GACC Mortgage Loans and subject to certain specified exceptions,
including, without limitation, those exceptions described below), in favor of
the Depositor as of the Loan Purchase Closing Date or such other date
specified in the related representation or warranty, among other things,
substantially as set forth below; and (c) the BCMC Mortgage Loan Purchase
Agreement, BCMC will represent and warrant (with respect only to the BCMC
Mortgage Loans and subject to certain specified exceptions, including,
without limitation, those exceptions described below), in favor of the
Depositor as of the Loan Purchase Closing Date or such other date specified
in the related representation or warranty, among other things, substantially
as set forth below:
(1) The information set forth in the Mortgage Loan Schedule attached
thereto is true, complete and correct in all material respects.
(2) No Mortgage Loan was, as of the Cut-off Date, delinquent with respect
to any required Monthly Payment (inclusive of any applicable grace or cure
period), and no such delinquency (in excess of 30 days beyond any applicable
grace or cure period) has occurred within the last twelve months.
(3) As of the date of its origination, each Mortgage Loan either complied
with, or was exempt from, applicable state or federal laws, regulations and
requirements pertaining to usury, and to the best of Mortgage Loan Seller's
and Midland's knowledge, the related Originator complied in all material
respects with all other federal, state or local laws applicable to its
origination.
S-64
<PAGE>
(4) The proceeds of such Mortgage Loan have been fully disbursed, and
there is no requirement for future advances thereunder.
(5) Each related Mortgage Loan document is the legal, valid and binding
obligation of the related borrower or other party executing such Mortgage
Loan document, enforceable in accordance with its terms, there is no valid
offset, defense or counterclaim to any Mortgage Loan, and to the Mortgage
Loan Seller's knowledge, no default, breach, violation or event of
acceleration exists under the related Mortgage or the related Note.
(6) The Mortgage Loan Seller is the sole owner and holder of such Mortgage
Loan, has full right and authority to sell and assign such Mortgage Loan, and
the Mortgage Loan Seller's execution and delivery an assignment of the
related Mortgage and endorsement and delivery of the related Note validly
conveys all of its right, title and interest in such Mortgage Loan free and
clear of encumbrances of any nature.
(7) The related Mortgage Loan documents create a valid first lien on the
related Mortgaged Property (not including personal property) and a valid
first priority assignment of all leases of the related Mortgaged Property,
subject only to (A) the lien of current real estate taxes and special
assessments not yet delinquent or accruing interest or penalties, (B)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record, (C) senior leases and subleases pertaining to such
Mortgaged Property, and (D) other matters (excepting any mechanics' and
materialmen's liens or liens in the nature thereof) to which like properties
are commonly subject (all of the foregoing collectively the "Permitted
Encumbrances"). Uniform Commercial Code financing statements have been filed
or recorded as necessary to perfect the Mortgage Loan Seller's security
interest in personal property constituting a part of the Mortgaged Property
and in which a security interest can be perfected by the filing of such
financing statements.
(8) To the Mortgage Loan Seller's and Midland's knowledge, the related
Mortgage and the related Note have not been materially impaired, waived,
modified, satisfied, canceled or subordinated, and neither the related
Mortgaged Property nor the related borrower has been released from such
Mortgage in any manner which would materially impair the security provided by
such Mortgage.
(9) The Mortgage Loan Seller has not, directly or indirectly, advanced
funds to, or, to the Mortgage Loan Seller's and Midland's knowledge, received
any payment of any amount required under the related Note or the related
Mortgage from a person other than the related borrower.
(10) To the Mortgage Loan Seller's and Midland's knowledge, there are no
condemnation proceedings pending or threatened with respect to any Mortgaged
Property which would materially and adversely affect the value of such
Mortgaged Property, and no Mortgaged Property has been materially damaged.
(11) The related Mortgage is insured by a title insurance policy or a
specimen policy or a "marked-up" title insurance commitment issued in
connection with the closing of such Mortgage Loan (a "Title Policy") in an
amount not less than the stated principal amount of such Mortgage Loan to be
a valid first lien on the related Mortgaged Property (not including personal
property or fixtures), subject only to Permitted Encumbrances. Such Title
Policy contains only those exceptions for encroachments, boundary and other
survey matters and for easements not shown by the public records as are
customarily accepted by prudent commercial mortgage lenders in the related
jurisdiction. No material encroachments exist with respect to the related
Mortgaged Property. No claims have been made by the Mortgage Loan Seller or
Midland under such Title Policy, and to the Mortgage Loan Seller's and
Midland's knowledge, the coverage of such Title Policy has not been
materially impaired.
(12) Each Mortgaged Property is insured by a fire and extended perils
insurance policy, a business interruption or rental continuation insurance
policy, a comprehensive general liability policy and, if any material
improvement on such Mortgaged Property is located in a designated special
flood hazard area, a flood insurance policy.
(13) Based upon a survey, the Title Policy and other documents contained
in the related Mortgage File, at the time of origination of each Mortgage
Loan, the related borrower had sufficient rights with respect to amenities
and ingress and egress identified in an appraisal of the related Mortgaged
Property as being critical to the appraised value thereof, and adequate
utility services were available at such Mortgaged Property.
(14) With respect to each Mortgage Loan secured in whole or in part by a
leasehold interest in the related Mortgaged Property, other than a mortgage
loan also secured by a fee interest in the same Mortgaged Property:
(A) to the Mortgage Loan Seller's and Midland's knowledge, the lease
creating such leasehold interest is in full force and effect, without any
existing defaults and unmodified in any material manner except pursuant to
written instruments contained in the Mortgage File, such lease or a
memorandum thereof has been recorded, and the effective term of such lease
extends not less than 10 years beyond the term of the related Mortgage
Loan;
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(B) the related borrower is permitted to mortgage and sublease its
leasehold interest, and except as may be indicated in the related Title
Policy, the related Mortgage is a first priority lien over such leasehold
interest;
(C) the mortgaged leasehold interest may be transferred in a foreclosure
of the related Mortgage or a conveyance in lieu thereof, and thereafter
may be transferred, upon notice to, but without the consent of, the
related lessor (or, if any such consent is required, either (1) it has
been previously obtained or (2) it is not to be unreasonably withheld)
provided that such lease has not been terminated and all amounts owed
thereunder have been paid;
(D) the related lessor has agreed, in writing: (1) to provide the
mortgagee with a notice of any default by the related borrower under such
lease, and a cure period equal to the time provided to such lessee under
such lease; and (2) that such Ground Lease may not be modified or
terminated without the mortgagee's consent; and
(E) The related Mortgage Loan documents and such lease provide that any
insurance or condemnation proceeds with respect to a partial loss or
taking of the related Mortgaged Property will be applied to the
restoration of such Mortgaged Property or to the related Mortgage Loan.
(15) With respect to each Mortgage Loan secured by both a leasehold and a
fee interest in all or a portion of the related Mortgaged Property, such
related fee interest is subordinate to the lien of the related Mortgage and,
except as approved by the related Originator or the Mortgage Loan Seller, any
right of the related fee owner to cure a default by the borrower under the
related Mortgage is limited to no more than a (A) 30 day period, after notice
is given to such fee owner, to cure monetary defaults, and (B) 60 day period,
after such notice, to cure other defaults or, alternatively, to commence
proceedings to recover possession of such Mortgaged Property plus a
reasonable cure period after recovery of possession if such proceedings are
pursued in good faith and with due diligence.
(16) The related Mortgaged Property is not collateral or security for the
payment or performance of any obligations owed to the Mortgage Loan Seller
other than one or more of the Mortgage Loans, and to the Mortgage Loan
Seller's knowledge, any obligations owed to any other person except for (a)
security interests in personal property and fixtures, (b) Loan #11, Loan #12,
Loan #18, Loan #21, Loan #30, Loan #36, Loan #44, Loan #48, Loan #49, Loan
#53, Loan #59, Loan #61, Loan #67, Loan #84, Loan #97, Loan #99, Loan #108,
Loan #112, Loan #114 and Loan #119 (each of which permits subordinate
financing under the limited circumstances set forth in the related Mortgage
Loan documents),and (c) Loan #64, Loan #77 and Loan #94 (in which each
related Mortgaged Property is subject to an Installment Contract which is
subject and subordinate to the related Mortgage Loan).
(17) Each Mortgage Loan is a "qualified mortgage" for purposes of Section
860G of the Code.
(18) A Phase I Environmental Report and, if recommended by the Phase I
Environmental Report, a Phase II Environmental Report were obtained with
respect to the related Mortgaged Property, and, such Environmental Report(s)
did not indicate the existence of conditions which would constitute a
material violation of applicable environmental law or require clean-up or
other remedial action with respect to hazardous materials with the exception
of conditions which could be brought into compliance with applicable
environmental law or remediated by the taking of certain actions for which a
sufficient escrow of funds has been established, an environmental insurance
policy or an indemnity for costs has been obtained or such compliance actions
or remediation was completed prior to origination of such Mortgage Loan;
provided, however, that with respect to Loan #2 the related Mortgaged
Property was contaminated by gasoline products eminating from a service
station located on the Mortgaged Property, and is subject to ongoing
monitoring by applicable regulatory authorities. Mobil Oil Corporation has
agreed to remediate any contamination caused by Mobil's operation of the
service station, if and to the extent required by the governmental agency
exercising jurisdiction over this matter. Other than with respect to any
conditions identified in such Environmental Report(s), the Mortgage Loan
Seller is without knowledge of any significant failure of the related
Mortgaged Property to comply with applicable environmental law or any actual
or threatened significant release of hazardous materials in respect of such
Mortgaged Property in violation of applicable environmental law.
(19) To the best of Mortgage Loan Seller's and Midland's knowledge, the
related Mortgaged Property complies, in all material respects, with all laws
and regulations pertaining to the zoning, use and occupancy thereof
(excluding applicable environmental laws which is addressed in (18) above)
and all applicable insurance requirements, except such non-compliance (A)
which does not materially and adversely affect the value or intended use of
such Mortgaged Property, (B) which was specifically included in the
determination of such Mortgaged Property's Appraised Value, or (C) for which
a Reserve Account has been established to pay the estimated costs to correct
such non-compliance.
(20) The related Mortgage Loan documents provide for recourse against the
related borrower for damages sustained in connection with fraud, intentional
misrepresentations or misappropriation of tenant security deposits or rent.
The related Mortgage Loan documents contain an indemnity from the related
borrower for damages resulting from violations of applicable environmental
laws.
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(21) As of the Loan Purchase Closing Date, the Reserve Account, if any,
with respect to each Mortgage Loan contains all amounts required by the terms
of the Mortgage Loan documents to be on deposit therein as of such date, and
all such amounts are being transferred to the Depositor as of such date.
(22) For each Mortgage that is a deed of trust or trust deed, a duly
qualified trustee either (A) has been designated or (B) may be substituted
for the currently designated trustee in accordance with applicable law.
(23) Such Mortgage Loan is a whole loan, and the related Mortgage Loan
documents do not provide for any (A) equity participation by the Mortgage
Loan Seller (excepting, however, Loan #11, Loan #49, Loan #61, Loan #85 and
Loan #108, in which BCMC has an equity participation), (B) negative
amortization or (C) contingent interest based upon the cash flow of the
related Mortgaged Property. The Mortgage Loan Seller has no ownership
interest in such Mortgaged Property or the related borrower; excepting,
however, Loan #11, Loan #49, Loan #61, Loan #85 and Loan #108, in which BCMC
has an ownership interest in each related Mortgaged Property and each related
borrower.
(24) Based upon applicable laws, rules and regulations, no tax,
governmental assessment or any installment thereof affecting such Mortgaged
Property (excluding any related personal property) due and owing prior to the
Cut-off Date and which might give rise to a lien superior to the related
Mortgage, has become delinquent such that (A) such taxing authority may
commence proceedings to collect such tax, assessment or installment or (B)
any interest or penalties have commenced to accrue thereon.
(25) The related Mortgage Loan documents contain customary and enforceable
provisions adequate for the practical realization by the holder thereof of
its remedies against the related Mortgaged Property, including, as
applicable, judicial or non-judicial foreclosure.
(26) A tenant estoppel was obtained from all tenants whose leases covered
more than 10% (20% for any such Mortgage Loan with an original balance less
than or equal to $2,500,000) of the net leasable area of the related
Mortgaged Property, and based upon such estoppel, no defaults with respect to
any such lease existed as of the date of such estoppel; excepting, however,
that no tenant estoppels were obtained by BCMC for two tenants on one of the
Mortgage Loans, although BCMC received landlord estoppels from such tenants.
To the Mortgage Loan Seller's and Midland's knowledge, no default or any
condition which, but for the passage of time or the giving of notice, or
both, would result in such a default, exists with respect to such lease .
(27) The related Mortgage Loan documents contain: (A) a representation,
warranty or covenant that the related borrower will not use, cause or permit
to exist any violation of Environmental Law with respect to the related
Mortgaged Property; or (B) an indemnity with respect to any such violation in
favor of the mortgagee.
(28) The related Mortgaged Property has been inspected on behalf of the
related Originator or Mortgage Loan Seller within the last 12 months.
(29) The related Mortgage Loan documents prohibit the related borrower
from encumbering the related Mortgaged Property without the prior written
consent of the mortgagee thereunder; excepting, however: Loan #11, Loan #12,
Loan #18, Loan #21, Loan #30, Loan #36, Loan #44, Loan #48, Loan #49, Loan
#53, Loan #59, Loan #61, Loan #67, Loan #84, Loan #97, Loan #99, Loan #108,
Loan #112, Loan #114 and Loan #119, each of which permits subordinate
financing under the limited circumstances set forth in the related Mortgage.
(30) No Mortgage Loan or group of Mortgage Loans made to a borrower or to
affiliated borrowers accounted for more than 5% of the Initial Pool Balance;
excepting, however, Loan #1, which represents approximately 5.1% of the
Initial Pool Balance.
Each of such representations and warranties, to the extent related to the
enforceability of any document or as to offsets, defenses, counterclaims or
rights of rescission, is qualified to the extent that: (1) enforcement may be
limited (A) by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally, (B) by general
principles of equity (regardless of whether such enforcement is considered in
a proceeding in equity or at law) and (C) by any applicable anti-deficiency
law or statute; and (2) such document may contain certain provisions which
may be unenforceable in accordance with their terms, in whole or in part.
The Pooling and Servicing Agreement requires that the Custodian, the
Master Servicer, the Special Servicer or the Trustee notify MCFC, Midland,
GACC and BCMC, as applicable, upon its becoming aware of any breach of
certain representations or warranties made by (a) MCFC or Midland in the MCFC
Mortgage Loan Purchase Agreement, (b) GACC
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in the GACC Mortgage Loan Purchase Agreement and (c) BCMC in the BCMC
Mortgage Loan Purchase Agreement, as applicable, or that any document
required to be included in the Mortgage File does not conform to the
requirements of the Pooling and Servicing Agreement, which in the case of any
such defect or breach materially and adversely affects the interests of the
Certificateholders. The MCFC Mortgage Loan Purchase Agreement, the GACC
Mortgage Loan Purchase Agreement and the BCMC Mortgage Loan Purchase
Agreement each provide that, within 85 days after notice of such breach from
the Custodian, the Master Servicer, the Special Servicer or the Trustee, MCFC
(but only with respect to those Mortgage Loans acquired by the Depositor
pursuant to the MCFC Mortgage Loan Purchase Agreement), GACC (but only with
respect to those Mortgage Loans acquired by the Depositor pursuant to the
GACC Mortgage Loan Purchase Agreement) and BCMC (but only with respect to
those Mortgage Loans acquired by the Depositor to the BCMC Mortgage Loan
Purchase Agreement) will either (a) repurchase such Mortgage Loan at its
outstanding principal balance (less any Advances previously made on account
of principal), plus accrued interest from the Due Date as to which interest
was last paid or was advanced up to the Due Date in the month following the
month in which such repurchase occurs (less any Advances previously made on
account of interest), the amount of any unreimbursed Advances, together with
interest thereon at the Advance Rate, relating to such Mortgage Loan, the
amount of any unpaid servicing compensation and Trust Fund expenses allocable
to such Mortgage Loan and the amount of any expenses reasonably incurred by
the Master Servicer or the Trustee in respect of such repurchase obligation
(such price, the "Repurchase Price") or (b) promptly cure such breach in all
material respects, provided, however, if such defect or breach cannot be
cured within such 85 day period, so long as MCFC, Midland, GACC or BCMC, as
applicable, has commenced and is diligently proceeding with the cure of such
breach, such 85 day period will be extended for an additional 90 days;
provided, further, that no such extension will be applicable unless MCFC,
Midland, GACC or BCMC, as applicable, delivers to the Depositor (or its
successor in interest) an officer's certificate (i) describing the measures
being taken to cure such breach and (ii) stating that MCFC, Midland, GACC or
BCMC, as applicable, believes such breach will be cured within such 90 days.
Without limiting the generality of the provisions described above, if a
Mortgage Loan fails to constitute a "qualified mortgage" within the meaning
of the REMIC provisions of the Code by reason of the breach of a
representation, warranty or covenant or by reason of missing or defective
documentation, then no extension of the 85 day period in the preceding
sentence will apply. In the event MCFC fails to cure or repurchase any
Midland Mortgage Loan which MCFC is obligated to cure or repurchase (x) based
upon a breach of a representation or warranty with regard to a Mortgage Loan
in the MCFC Mortgage Loan Purchase Agreement, or (y) because such Midland
Mortgage Loan fails to constitute a "qualified mortgage" within the meaning
of the REMIC provisions of the Code by reason of a breach of such
representation or warranty within the applicable period described in the
preceding two sentences, Midland shall cure or repurchase such Mortgage Loan
at the Repurchase Price within two Business Days after the expiration of such
applicable period.
The obligations of MCFC, Midland, GACC or BCMC, as applicable, to
repurchase or cure constitute the sole remedies available to holders of
Certificates or the Trustee for a breach of a representation or warranty with
regard to a Mortgage Loan by MCFC, Midland, GACC or BCMC. Other than as
specifically described in the preceding paragraph, neither MCFC, Midland,
GACC, BCMC, the Special Servicer, the Master Servicer (unless Midland is the
Master Servicer and is otherwise obligated as described herein) nor the
Depositor will be obligated to purchase a Mortgage Loan if any of MCFC,
Midland, GACC or BCMC defaults on their respective obligations to repurchase
or cure, and no assurance can be given that MCFC, Midland, GACC or BCMC, as
applicable, will fulfill their respective obligations. If such obligations
are not met, as to a Mortgage Loan that is not a "qualified mortgage," REMIC
I, REMIC II and REMIC III may be disqualified.
MIDLAND LOAN SERVICES, L.P.
Midland Loan Services, L.P. ("Midland") was organized under the laws of
the State of Missouri in 1992 as a limited partnership. Midland is a real
estate financial services company that provides loan servicing and asset
management for large pools of commercial and multifamily real estate assets
and that originates commercial real estate loans. Midland's address is 210
West 10th Street, 6th Floor, Kansas City, Missouri 64105. Midland will serve
as the Master Servicer and the Special Servicer for the Trust Fund under the
Pooling and Servicing Agreement. In addition, Midland was the Originator with
respect to 94 of the Mortgage Loans.
As of October 31, 1996, Midland and its affiliates were responsible for
the servicing of approximately 11,900 commercial and multifamily loans with
an aggregate principal balance of approximately $12.58 billion, the
collateral for which is located in all 50 states, Puerto Rico and the
District of Columbia. With respect to such loans, approximately 10,900 loans
with an aggregate principal balance of approximately $9.78 billion pertain to
commercial and multifamily mortgage-backed securities.
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Property type concentrations within the portfolio include multifamily,
office, retail, hotel/motel and other types of income producing properties.
Midland and its affiliates also provide commercial loan servicing for
newly-originated loans and loans acquired in the secondary market on behalf
of issuers of commercial and multifamily mortgage-backed securities,
financial institutions and private investors.
Midland and its affiliates provide asset management and disposition
services for commercial and multifamily mortgage-backed securities
transactions, private investors and the Resolution Trust Corporation. As of
June 30, 1996, Midland and its affiliates have provided such services for a
portfolio of approximately 7,153 assets with book values of $6.7 billion.
Midland and its affiliates have liquidated, disposed of or otherwise resolved
approximately 6,474 assets with book values of approximately $5.2 billion.
Since 1994, Midland has been originating commercial and multifamily
mortgage loans for the purpose of disposing of such mortgage loans in
securitization transactions such as this offering. As of November 21, 1996,
Midland has originated or issued commitments for 345 commercial and
multifamily mortgage loans, with an aggregate original principal balance of
approximately $849 million, including 94 of the Mortgage Loans, with an
aggregate original principal balance of approximately $293 million, included
in the Mortgage Pool. See "DESCRIPTION OF THE MORTGAGE POOL--The Midland
Mortgage Loan Program--General" herein.
Midland has been approved as a master and special servicer for investment
grade commercial and multifamily mortgage-backed securities by Fitch and
Standard & Poor's Rating Services, a division of The McGraw-Hill Companies,
Inc. ("S&P"). Midland is ranked "Above Average" as a commercial mortgage
servicer and asset manager by S&P, and "Acceptable" as a master servicer and
"Above Average" as a special servicer by Fitch. S&P rates commercial mortgage
servicers and special servicers in one of five rating categories: Strong,
Above Average, Average, Below Average and Weak. Fitch rates special servicers
in one of five categories: Superior, Above Average, Average, Below Average
and Unacceptable. Fitch rates master servicers as Acceptable or Unacceptable.
The information concerning Midland set forth above has been provided by
Midland and none of the Depositor, the Trustee or the Underwriters makes any
representation or warranty as to the accuracy thereof.
MORTGAGE LOAN SELLERS
Midland Commercial Financing Corp. ("MCFC") is a Missouri corporation and
a special purpose subsidiary of Midland, formed for the purpose of holding
mortgage loans such as the Mortgage Loans from the time of origination
thereof through the time of securitization or other disposition thereof. MCFC
does not currently have, nor is it expected in the future to have, any
significant net worth. However, as described in more detail in "DESCRIPTION
OF THE MORTGAGE POOL--General" and "--Representations and Warranties;
Repurchase," Midland will have a repurchase obligation with respect to the
Midland Mortgage Loans in the event MCFC fails to cure or repurchase any
Midland Mortgage Loan that MCFC is obligated to cure or repurchase pursuant
to the MCFC Mortgage loan Purchase Agreement.
German American Capital Corporation, a Maryland corporation ("GACC"), is a
wholly-owned subsidiary of Deutsche Bank North America Holding Corp., which
in turn is a wholly-owned subsidiary of Deutsche Bank AG, a German
corporation. GACC is also an affiliate of DMG. GACC engages primarily in the
business of purchasing and holding mortgage loans and mortgage-backed
securities pending securitization, repackaging or other disposition. GACC
also acts from time to time as the originator of mortgage loans. Although
GACC purchases and sells mortgage loans and mortgage-backed securities for
its own account, it does not underwrite, deal or act as a broker in
connection with any such loans or securities.
Boston Capital Mortgage Company, Limited Partnership ("BCMC") is a
Massachusetts limited partnership. The partnership is comprised of two
general partners, Boston Capital Mortgage Corporation and Llama Mortgage
Services Corporation, an affiliate of Llama Company, BCMC was formed for the
purpose of soliciting, originating, underwriting and holding mortgage loans
from the time of origination. BCMC is registered as an approved
seller/servicer with the Federal National mortgage Association and the U.S.
Department of Housing and Urban Development. As described in the sections
entitled "DESCRIPTION OF THE MORTGAGE POOL--General" and "--Representations
and Warranties; Repurchase," BCMC will have a repurchase obligation with
respect to the BCMC Mortgage Loans in the event that BCMC fails to cure or
repurchase any BCMC Mortgage Loan that BCMC is obligated to cure or
repurchase pursuant to the BCMC Mortgage Loan Purchase Agreement.
The information concerning MCFC, GACC and BCMC set forth above has been
provided by MCFC, GACC and BCMC, respectively, and none of the Depositor, the
Trustee or the Underwriters makes any representation or warranty as to the
accuracy thereof.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of 17 Classes to be designated as the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates, the
Class A-EC Certificates, the Class B Certificates, the Class C Certificates,
the Class D Certificates, the Class E Certificates, the Class F Certificates,
the Class G Certificates, the Class H Certificates, the Class J Certificates,
the Class K-1 Certificates, the Class K-2 Certificates, the Class R-I
Certificates, the Class R-II Certificates and the Class R-III Certificates.
ONLY THE CLASS A-1, CLASS A-2, CLASS A-3, CLASS B, CLASS C, CLASS D AND CLASS
E CERTIFICATES ARE OFFERED HEREBY. The Pooling and Servicing Agreement will
be included as part of the Form 8-K to be filed with the Commission within 15
days after the Closing Date. See "THE POOLING AND SERVICING AGREEMENT" herein
and "DESCRIPTION OF THE CERTIFICATES" and "SERVICING OF THE MORTGAGE LOANS"
in the Prospectus for more important additional information regarding the
terms of the Pooling and Servicing Agreement and the Certificates.
The Certificates represent in the aggregate the entire beneficial
ownership interest in a Trust Fund consisting primarily of: (i) the Mortgage
Loans, all scheduled payments of interest and principal due after the Cut-off
Date (whether or not received) and all payments under and proceeds of the
Mortgage Loans received after the Cut-off Date (exclusive of payments of
principal and interest due on or before the Cut-off Date); (ii) any Mortgaged
Property acquired on behalf of the Trust Fund through foreclosure or
deed-in-lieu of foreclosure (upon acquisition, an "REO Property"); (iii) such
funds or assets as from time to time are deposited in the Collection Account,
the Distribution Account and any account established in connection with REO
Properties (an "REO Account"); (iv) the rights of the mortgagee under all
insurance policies with respect to the Mortgage Loans; (v) the Depositor's
rights and remedies under the MCFC Mortgage Loan Purchase Agreement, the GACC
Mortgage Loan Purchase Agreement and the BCMC Mortgage Loan Purchase
Agreement; and (vi) all of the mortgagee's right, title and interest in the
Reserve Accounts.
The Certificate Balance of any Class of Certificates outstanding at any
time represents the maximum amount that the holders thereof are entitled to
receive as distributions allocable to principal from the cash flow on the
Mortgage Loans and the other assets in the Trust Fund. The respective
Certificate Balance of each Class of Certificates will in each case be
reduced by amounts actually distributed on such Class that are allocable to
principal and by any Realized Losses allocated to such Class. The Class A-EC
and Class K-2 Certificates are interest only Certificates, have no
Certificate Balances and are not entitled to distributions in respect of
principal. The Class K-1 Certificates are principal only certificates and are
not entitled to distributions in respect of interest.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Regular Certificates will
be made on the 25th day of each month or, if such day is not a Business Day,
then on the next succeeding Business Day, commencing in January, 1997 (each,
a "Distribution Date"). All distributions (other than the final distribution
on any Certificate) will be made by the Trustee to the persons in whose names
the Certificates are registered at the close of business on the last Business
Day of the month preceding the month in which such Distribution Date occurs
(the "Record Date"). Such distributions will be made (i) by wire transfer of
immediately available funds to the account specified by the Certificateholder
at a bank or other entity having appropriate facilities therefor, if such
Certificateholder (a) is DTC or its nominee or (b) provides the Trustee with
wiring instructions no less than five Business Days prior to the related
Record Date and is the registered owner of Certificates the aggregate
Certificate Balance or Notional Balance of which is at least $5,000,000 or
otherwise (ii) by check mailed to such Certificateholder. The "Class A-EC
Notional Balance" as of any date is equal to the sum of the Class A-EC
Notional Component A and the Certificate Balances of the Class B, Class C,
Class D and Class E Certificates. The "Class K-2 Notional Balance" as of any
date is equal to the Certificate Balance of the Class K-1 Certificates. The
Class A-EC and Class K-2 Notional Balances are referred to herein generally
as "Notional Balances." The final distribution on any Certificate will be
made in like manner, but only upon presentment or surrender of such
Certificate at the location specified in the notice to the holder thereof of
such final distribution. All distributions made with respect to a Class of
Certificates on each Distribution Date will be allocated pro rata among the
outstanding Certificates of such Class based on their respective Percentage
Interests. The "Percentage Interest" evidenced by any Regular Certificate is
equal to the initial denomination thereof as of the Closing Date divided by
the initial Certificate Balance (or, with respect to the Class A-EC and Class
K-2 Certificates, the initial Class A-EC Notional Balance or initial Class
K-2 Notional Balance) of the related Class.
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The aggregate distribution to be made on the Regular Certificates on any
Distribution Date will equal the Available Funds. The "Available Funds" for a
Distribution Date will be the sum of all previously undistributed Monthly
Payments or other receipts on account of principal and interest on or in
respect of the Mortgage Loans (including Unscheduled Payments and Net REO
Proceeds, if any) received by the Master Servicer in the related Collection
Period, including all P&I Advances made by the Master Servicer, the Trustee
or the Fiscal Agent, as applicable, in respect of such Distribution Date,
plus all other amounts required to be placed in the Collection Account by the
Master Servicer pursuant to the Pooling and Servicing Agreement allocable to
the Mortgage Loans, but excluding the following:
(a) amounts permitted to be used to reimburse the Master Servicer, the
Trustee or the Fiscal Agent, as applicable, for previously unreimbursed
Advances and interest thereon as described herein under "THE POOLING AND
SERVICING AGREEMENT--Advances";
(b) those portions of each payment of interest which represent the
applicable servicing compensation;
(c) all amounts in the nature of late fees, late charges and similar
fees, NSF check charges, loan modification fees, extension fees, loan
service transaction fees, demand fees, beneficiary statement charges,
assumption fees and similar fees, which the Master Servicer or the Special
Servicer, as applicable, is entitled to retain as additional servicing
compensation;
(d) all amounts representing scheduled Monthly Payments due after the Due
Date in the related Collection Period (such amounts to be treated as
received on the Due Date when due);
(e) that portion of (i) amounts received in connection with the
liquidation of Specially Serviced Mortgage Loans, by foreclosure,
trustee's sale or otherwise, (ii) amounts received in connection with a
sale of a Specially Serviced Mortgage Loan or REO Property in accordance
with the terms of the Pooling and Servicing Agreement, (iii) amounts
(other than Insurance Proceeds) received in connection with the taking of
a Mortgaged Property by exercise of the power of eminent domain or
condemnation ("Condemnation Proceeds"; clauses (i), (ii) and (iii) are
collectively referred to as "Liquidation Proceeds") or (iv) proceeds of
the insurance policies (to the extent such proceeds are not to be applied
to the restoration of the property or released to the borrower in
accordance with the normal servicing procedures of the Master Servicer or
the related sub-servicer, subject to the terms and conditions of the
related Mortgage and Note) ("Insurance Proceeds") with respect to a
Mortgage Loan that represents any unpaid servicing compensation to which
the Master Servicer or Special Servicer is entitled;
(f) all amounts representing certain expenses reimbursable to the Master
Servicer, the Special Servicer, the Trustee or the Fiscal Agent and other
amounts permitted to be retained by the Master Servicer or the Special
Servicer or withdrawn by the Master Servicer from the Collection Account
pursuant to the terms of the Pooling and Servicing Agreement;
(g) Prepayment Premiums received in the related Collection Period;
(h) any interest or investment income on funds on deposit in the
Collection Account or in Permitted Investments in which such funds may be
invested; and
(i) Default Interest received in the related Collection Period with
respect to a Mortgage Loan that is in default with respect to its Balloon
Payment.
The "Monthly Payment" with respect to any Mortgage Loan for any
Distribution Date (other than any REO Mortgage Loan) is the scheduled monthly
payment of principal and interest, excluding any Balloon Payment, which is
payable by the related borrower on the related Due Date. The Monthly Payment
with respect to an REO Mortgage Loan for any Distribution Date is the monthly
payment that would otherwise have been payable on the related Due Date had
the related Note not been discharged (after giving effect to any extension or
other modification), determined as set forth in the Pooling and Servicing
Agreement.
"Unscheduled Payments" are all Liquidation Proceeds, Condemnation Proceeds
and Insurance Proceeds payable under the Mortgage Loans, the Repurchase Price
of any Mortgage Loans that are repurchased or purchased pursuant to the
Pooling and Servicing Agreement and any other payments under or with respect
to the Mortgage Loans not scheduled to be made, including Principal
Prepayments, but excluding Prepayment Premiums.
"Prepayment Premiums" are payments received on a Mortgage Loan as the
result of a Principal Prepayment thereon, not otherwise due thereon in
respect of principal or interest, which are intended to be a disincentive to
prepayment.
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"Net REO Proceeds" with respect to any REO Property and any related
Mortgage Loan are all revenues received by the Special Servicer with respect
to such REO Property or REO Mortgage Loan that do not constitute Liquidation
Proceeds, net of any insurance premiums, taxes, assessments and other costs
and expenses permitted to be paid from the related REO Account pursuant to
the Pooling and Servicing Agreement.
"Principal Prepayments" are payments of principal made by a borrower on a
Mortgage Loan which are received in advance of the scheduled Due Date for
such payments and which are not accompanied by an amount of interest
representing the full amount of scheduled interest due on any date or dates
in any month or months subsequent to the month of prepayment.
The "Collection Period" with respect to a Distribution Date is the period
beginning on the day following the Determination Date in the month preceding
the month in which such Distribution Date occurs (or, in the case of the
Distribution Date occurring in January, 1997 on the day after the Cut-off
Date) and ending on the Determination Date in the month in which such
Distribution Date occurs.
"Determination Date" means the 17th day of any month, or if such 17th day
is not a Business Day, the Business Day immediately preceding such 17th day,
commencing in January, 1996.
"Default Interest" with respect to any Mortgage Loan is interest accrued
on such Mortgage Loan at the excess of the Default Rate over the Mortgage
Rate.
The "Default Rate" with respect to any Mortgage Loan is the annual rate at
which interest accrues on such Mortgage Loan following any event of default
on such Mortgage Loan including a default in the payment of a Monthly Payment
or a Balloon Payment.
Priorities. As used below in describing the priorities of distribution of
Available Funds for each Distribution Date, the terms set forth below will
have the following meanings.
"Class Interest Distribution Amount" with respect to any Distribution Date
and any of the P&I Certificates will equal interest for the related Interest
Accrual Period at the applicable Pass-Through Rate for such Class of
Certificates for such Interest Accrual Period on the Certificate Balance of
such Class. With respect to any Distribution Date and the Class A-EC
Certificates, the "Class Interest Distribution Amount" will equal for any
Distribution Date, the Class A-EC Excess Interest. The Class K-1 Certificates
are principal only Certificates and have no Class Interest Distribution
Amount. With respect to any Distribution Date and the Class K-2 Certificates,
the "Class Interest Distribution Amount" will equal the product of the Class
K-2 Pass-Through Rate and the Class K-2 Notional Balance. For purposes of
determining any Class Interest Distribution Amount, any distributions in
reduction of Certificate Balance (and any resulting reductions in Notional
Balance) as a result of allocations of Realized Losses on the Distribution
Date occurring in such Interest Accrual Period will be deemed to have been
made as of the first day of such Interest Accrual Period. Notwithstanding the
foregoing, the Class Interest Distribution Amount for each Class of
Certificates otherwise calculated as described above will be reduced by such
Class's pro rata share of any Prepayment Interest Shortfall not offset by
Prepayment Interest Surplus, the Servicing Fee and, if the Master Servicer
and the Special Servicer are the same person, the Special Servicing Fee with
respect to such Distribution Date (pro rata according to each respective
Class's Class Interest Distribution Amount determined without regard to this
sentence).
"Class A-EC Excess Interest" with respect to any Distribution Date is an
amount equal to the Class A-EC Pass-Through Rate multiplied by the Class A-EC
Notional Balance.
"Class A-EC Notional Balance" means, as of any date of determination, an
amount equal to the sum of (i) the Class A-EC Notional Component A and (ii)
the Certificate Balances of the Class B, Class C, Class D and Class E
Certificates.
"Class A-EC Notional Component A" means, as of any date of determination,
an amount equal to the sum of the Certificate Balances of the Class A-1,
Class A-2 and Class A-3 Certificates.
"Class A-EC Pass-Through Rate" with respect to any Interest Accrual Period
is a per annum rate equal to a fraction, the numerator of which is the sum of
(i) the excess of the Weighted Average Unmodified Net Mortgage Rate over the
weighted averages of the Pass-Through Rates of the Class A-1, Class A-2 and
Class A-3 Certificates (weighted in each case on the basis of a fraction
equal to the Certificate Balance of each such Class of Certificates divided
by the Class A-EC Notional Component A as of the first day of such Interest
Accrual Period) multiplied by the A-EC Notional Component A, (ii) the Class B
Strip multiplied by the Class B Certificate Balance as of the first day of
such Interest Accrual Period, (iii) the
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Class C Strip multiplied by the Class C Certificate Balance as of the first
day of such Interest Accrual Period, (iv) the Class D Strip multiplied by the
Class D Certificate Balance as of the first day of such Interest Accrual
Period, and (v) the Class E Strip multiplied by the Class E Certificate
Balance as of the first day of such Interest Accrual Period, and the
denominator of which is the Class A-EC Notional Balance as of the first day
of such Interest Accrual Period.
"Prepayment Interest Shortfall" with respect to any Distribution Date and
any Mortgage Loan as to which a Principal Prepayment was made by the related
borrower during the related Collection Period is the amount by which (i) 30
full days of interest at the related Net Mortgage Rate on the Scheduled
Principal Balance of such Mortgage Loan in respect of which interest would
have been due in the absence of such Principal Prepayment on the Due Date
next succeeding the date of such Principal Prepayment exceeds (ii) the amount
of interest received from the related borrower in respect of such Mortgage
Loan during such Collection Period. Such shortfall may result because
interest on a Principal Prepayment is paid by the related borrower only to
the date of prepayment or because no interest is paid on a Principal
Prepayment, to the extent that such Principal Prepayment is applied to reduce
the principal balance of the related Mortgage Loan as of the Due Date
preceding the date of prepayment. Prepayment Interest Shortfalls with respect
to each Distribution Date (to the extent not offset as provided in the
following two sentences) will be allocated to each Class of Certificates pro
rata based on such Class's Class Interest Distribution Amount (without taking
into account the amount of Prepayment Interest Shortfalls to such Class on
such Distribution Date) for such Distribution Date. The amount of any
Prepayment Interest Shortfall with respect to any Distribution Date will be
offset by the Master Servicer first by the amount of any Prepayment Interest
Surplus and then up to an amount equal to the aggregate Servicing Fees to
which the Master Servicer would otherwise be entitled on such Distribution
Date. If the Master Servicer and the Special Servicer are the same person,
any remaining Prepayment Interest Shortfall after the application of the
prior sentence will be offset by the aggregate Special Servicing Fees to
which the Special Servicer would otherwise be entitled to on such
Distribution Date.
"Prepayment Interest Surplus" with respect to any Distribution Date and
any Mortgage Loan as to which a Principal Prepayment was made by the related
borrower during the related Collection Period is the amount by which (i) the
amount of interest received from the related borrower in respect of such
Mortgage Loan during such Collection Period exceeds (ii) 30 full days of
interest at the related Net Mortgage Rate on the Scheduled Principal Balance
of such Mortgage Loan in respect of which interest would have been due in the
absence of such Principal Prepayment on the Due Date next succeeding the date
of such Principal Prepayment. The Master Servicer will be entitled to retain
any Prepayment Interest Surplus as additional servicing compensation to the
extent not required to offset Prepayment Interest Shortfalls as described in
the preceding paragraph.
The "Pass-Through Rate" for any Class of Regular Certificates is the per
annum rate at which interest accrues on the Certificates of such Class during
any Interest Accrual Period. The Pass-Through Rate on the Class A-1, Class
A-2 and Class A-3 Certificates during any Interest Accrual Period will be
%, % and %, respectively. The Pass-Through Rate on the Class A-EC
Certificates during any Interest Accrual Period will be the Class A-EC
Pass-Through Rate. The Pass-Through Rate on the Class B Certificates during
any Interest Accrual Period will be equal to the Weighted Average Unmodified
Net Mortgage Rate less the Class B Strip. The Pass-Through Rate on the Class
C Certificates during any Interest Accrual Period will be equal to the
Weighted Average Unmodified Net Mortgage Rate less the Class C Strip. The
Pass-Through Rate on the Class D Certificates during any Interest Accrual
Period will be equal to the Weighted Average Unmodified Net Mortgage Rate
less the Class D Strip. The Pass-Through Rate on the Class E Certificates
during any Interest Accrual Period will be equal to the Weighted Average
Unmodified Net Mortgage Rate less the Class E Strip. The Pass-Through Rate on
the Class F, Class G, Class H, Class J and Class K-2 Certificates during any
Interest Accrual Period will be equal to the Weighted Average Unmodified Net
Mortgage Rate. The Class K-1 Certificates are principal only certificates and
are not entitled to distributions in respect of interest.
The "Class B Strip" is a rate per annum equal to %.
The "Class C Strip" is a rate per annum equal to %.
The "Class D Strip" is a rate per annum equal to %.
The "Class E Strip" is a rate per annum equal to %.
The "Weighted Average Net Mortgage Rate" for any Interest Accrual Period
is a per annum rate equal to the weighted average of the Net Mortgage Rates
as of the first day of such Interest Accrual Period. The "Net Mortgage Rate"
for each Mortgage Loan, is the Mortgage Rate for such Mortgage Loan (in the
absence of a default) minus the Servicing Fee Rate.
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The "Weighted Average Unmodified Net Mortgage Rate" for any Interest
Accrual Period is a per annum rate equal to the weighted average of the
Unmodified Net Mortgage Rates as of the first day of such Interest Accrual
Period. The "Unmodified Net Mortgage Rate" for each Mortgage Loan, is the Net
Mortgage Rate for such Mortgage Loan as of the Cut-off Date.
The "Interest Accrual Period" with respect to any Distribution Date is the
calendar month preceding the month in which such Distribution Date occurs.
Interest for each Interest Accrual Period is calculated based on a 360-day
year consisting of twelve 30-day months.
"Class Interest Shortfall" means on any Distribution Date for any Class of
Certificates, the excess, if any, of the amount of interest required to be
distributed to the holders of such Class of Certificates on such Distribution
Date over the amount of interest actually distributed to such holders. No
interest will accrue on unpaid Class Interest Shortfalls.
The "Pooled Principal Distribution Amount" for any Distribution Date will
be equal to the sum of (without duplication):
(i) the principal component of all scheduled Monthly Payments (other than
Balloon Payments) that become due (regardless of whether received) on the
Mortgage Loans during the related Collection Period;
(ii) the principal component of all Assumed Scheduled Payments, as
applicable, deemed to become due (regardless of whether received) during
the related Collection Period with respect to any Balloon Loan that is
delinquent in respect of its Balloon Payment;
(iii) the Scheduled Principal Balance of each Mortgage Loan that was,
during the related Collection Period, repurchased from the Trust Fund in
connection with the breach of a representation or warranty as described
herein under "DESCRIPTION OF THE MORTGAGE POOL--Representations and
Warranties; Repurchase" or purchased from the Trust Fund as described
herein under "DESCRIPTION OF THE MORTGAGE POOL--Early Termination" and
"--Auction";
(iv) the portion of Unscheduled Payments allocable to principal of any
Mortgage Loan that was liquidated during the related Collection Period;
(v) the principal component of all Balloon Payments received during the
related Collection Period;
(vi) all other Principal Prepayments received in the related Collection
Period; and
(vii) any other full or partial recoveries in respect of principal,
including Insurance Proceeds, Liquidation Proceeds, Condemnation Proceeds
and Net REO Proceeds.
The "Assumed Scheduled Payment" is an amount deemed due in respect of (i)
any Mortgage Loan that is delinquent in respect of its Balloon Payment and
(ii) any REO Mortgage Loan, which will be equal to the Monthly Payment that
would have been due on the Mortgage Loan in accordance with the terms of the
related Note if (a) the maturity date for such Mortgage Loan had not
occurred, (b) the related Mortgaged Property had not become an REO Property,
such Mortgage Loan was still outstanding and no acceleration of the Mortgage
Loan had occurred, and (c) in the case of any Mortgage Loan that provided for
amortization of principal prior to its maturity date, principal continued to
amortize on the same amortization schedule.
An "REO Mortgage Loan" is any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property.
On each Distribution Date, holders of each Class of Certificates will
receive distributions, up to the amount of Available Funds, in the amounts
and in the order of priority (the "Available Funds Allocation") set forth
below:
(i) First, to the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates and Class A-EC Certificates, pro rata in accordance with
the Class Interest Distribution Amount of each, up to an amount equal to
the Class Interest Distribution Amount of each such Class for such
Distribution Date;
(ii) Second, to the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates and Class A-EC Certificates, pro rata in accordance with
the Class Interest Shortfall of each, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls previously allocated to such
Class on any previous Distribution Dates and not paid;
(iii) Third, to the Class A-1 Certificates, in reduction of the
Certificate Balance thereof, the Pooled Principal Distribution Amount for
such Distribution Date, until the Certificate Balance thereof is reduced
to zero;
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(iv) Fourth, after the Certificate Balance of the Class A-1 Certificates
has been reduced to zero, to the Class A-2 Certificates, in reduction of
the Certificate Balance thereof, the Pooled Principal Distribution Amount
for such Distribution Date, until the Certificate Balance thereof is
reduced to zero;
(v) Fifth, after the Certificate Balance of the Class A-2 Certificates
has been reduced to zero, to the Class A-3 Certificates, in reduction of
the Certificate Balance thereof, the Pooled Principal Distribution Amount
for such Distribution Date, until the Certificate Balance thereof is
reduced to zero;
(vi) Sixth, to the Class A-1 Certificates, Class A-2 Certificates and
Class A-3 Certificates, pro rata, for the unreimbursed amounts of Realized
Losses, if any, together with simple interest thereon at a rate equal to
10.00% per annum from the date on which such unreimbursed Realized Loss
was allocated (or the date on which interest was last paid) to, but not
including, the Distribution Date on which distributions in respect of such
unreimbursed Realized Loss are made pursuant to this subparagraph, up to
an amount equal to the aggregate of such unreimbursed Realized Losses
previously allocated to the Class A-1 Certificates, Class A-2 Certificates
and Class A-3 Certificates and interest thereon, provided that any
distribution pursuant to this subparagraph shall be deemed to be
distributed first in respect of any such interest and then in respect of
any such unreimbursed Realized Loss;
(vii) Seventh, to the Class B Certificates, up to an amount equal to the
Class Interest Distribution Amount of such Class for such Distribution
Date;
(viii) Eighth, to the Class B Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls previously allocated to such
Class on any previous Distribution Dates and not paid;
(ix) Ninth, after the Certificate Balance of the Class A-3 Certificates
has been reduced to zero, to the Class B Certificates, in reduction of the
Certificate Balance thereof, the Pooled Principal Distribution Amount for
such Distribution Date less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause, until the Certificate
Balance thereof is reduced to zero;
(x) Tenth, to the Class B Certificates, for the unreimbursed amounts of
Realized Losses, if any, together with simple interest thereon at a rate
equal to 10.00% per annum from the date on which such unreimbursed
Realized Loss was allocated (or the date on which interest was last paid)
to, but not including, the Distribution Date on which distributions in
respect of such unreimbursed Realized Loss are made pursuant to this
subparagraph, up to an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to the Class B Certificates and
interest thereon, provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed first in respect of any
such interest and then in respect of any such unreimbursed Realized Loss;
(xi) Eleventh, to the Class C Certificates, up to an amount equal to the
Class Interest Distribution Amount of such Class for such Distribution
Date;
(xii) Twelfth, to the Class C Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls previously allocated to such
Class on any previous Distribution Dates and not paid;
(xiii) Thirteenth, after the Certificate Balance of the Class B
Certificates has been reduced to zero, to the Class C Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xiv) Fourteenth, to the Class C Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with simple interest thereon
at a rate equal to 10.00% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the date on which interest
was last paid) to, but not including, the Distribution Date on which
distributions in respect of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated to the Class C
Certificates and interest thereon, provided that any distribution pursuant
to this subparagraph shall be deemed to be distributed first in respect of
any such interest and then in respect of any such unreimbursed Realized
Loss;
(xv) Fifteenth, to the Class D Certificates, up to an amount equal to the
Class Interest Distribution Amount of such Class for such Distribution
Date;
(xvi) Sixteenth, to the Class D Certificates, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously allocated to
such Class on any previous Distribution Dates and not paid;
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(xvii) Seventeenth, after the Certificate Balance of the Class C
Certificates has been reduced to zero, to the Class D Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xviii) Eighteenth, to the Class D Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with simple interest thereon
at a rate equal to 10.00% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the date on which interest
was last paid) to, but not including, the Distribution Date on which
distributions in respect of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated to the Class D
Certificates and interest thereon, provided that any distribution pursuant
to this subparagraph shall be deemed to be distributed first in respect of
any such interest and then in respect of any such unreimbursed Realized
Loss;
(xix) Nineteenth, to the Class E Certificates, up to an amount equal to
the Class Interest Distribution Amount of such Class for such Distribution
Date;
(xx) Twentieth, to the Class E Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls previously allocated to such
Class on any previous Distribution Dates and not paid;
(xxi) Twenty-First, after the Certificate Balance of the Class D
Certificates has been reduced to zero, to the Class E Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xxii) Twenty-Second, to the Class E Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with simple interest thereon
at a rate equal to 10.00% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the date on which interest
was last paid) to, but not including, the Distribution Date on which
distributions in respect of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated to the Class E
Certificates and interest thereon, provided that any distribution pursuant
to this subparagraph shall be deemed to be distributed first in respect of
any such interest and then in respect of any such unreimbursed Realized
Loss;
(xxiii) Twenty-Third, to the Class F Certificates, up to an amount equal
to the Class Interest Distribution Amount of such Class for such
Distribution Date;
(xxiv) Twenty-Fourth, to the Class F Certificates, up to an amount equal
to the aggregate unpaid Class Interest Shortfalls previously allocated to
such Class on any previous Distribution Dates and not paid;
(xxv) Twenty-Fifth, after the Certificate Balance of the Class E
Certificates has been reduced to zero, to the Class F Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xxvi) Twenty-Sixth, to the Class F Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with simple interest thereon
at a rate equal to 10.00% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the date on which interest
was last paid) to, but not including, the Distribution Date on which
distributions in respect of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated to the Class F
Certificates and interest thereon, provided that any distribution pursuant
to this subparagraph shall be deemed to be distributed first in respect of
any such interest and then in respect of any such unreimbursed Realized
Loss;
(xxvii) Twenty-Seventh, to the Class G Certificates, up to an amount
equal to the Class Interest Distribution Amount of such Class for such
Distribution Date;
(xxviii) Twenty-Eighth, to the Class G Certificates, up to an amount
equal to the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class on any previous Distribution Dates and not paid;
(xxix) Twenty-Ninth, after the Certificate Balance of the Class F
Certificates has been reduced to zero, to the Class G Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
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(xxx) Thirtieth, to the Class G Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with simple interest thereon
at a rate equal to 10.00% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the date on which interest
was last paid) to, but not including, the Distribution Date on which
distributions in respect of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated to the Class G
Certificates and interest thereon, provided that any distribution pursuant
to this subparagraph shall be deemed to be distributed first in respect of
any such interest and then in respect of any such unreimbursed Realized
Loss;
(xxxi) Thirty-First, to the Class H Certificates, up to an amount equal
to the Class Interest Distribution Amount of such Class for such
Distribution Date;
(xxxii) Thirty-Second, to the Class H Certificates, up to an amount equal
to the aggregate unpaid Class Interest Shortfalls previously allocated to
such Class on any previous Distribution Dates and not paid;
(xxxiii) Thirty-Third, after the Certificate Balance of the Class G
Certificates has been reduced to zero, to the Class H Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xxxiv) Thirty-Fourth, to the Class H Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with simple interest thereon
at a rate equal to 10.00% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the date on which interest
was last paid) to, but not including, the Distribution Date on which
distributions in respect of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated to the Class H
Certificates and interest thereon, provided that any distribution pursuant
to this subparagraph shall be deemed to be distributed first in respect of
any such interest and then in respect of any such unreimbursed Realized
Loss;
(xxxv) Thirty-Fifth, to the Class J Certificates, up to an amount equal
to the Class Interest Distribution Amount of such Class for such
Distribution Date;
(xxxvi) Thirty-Sixth, to the Class J Certificates, up to an amount equal
to the aggregate unpaid Class Interest Shortfalls previously allocated to
such Class on any previous Distribution Dates and not paid;
(xxxvii) Thirty-Seventh, after the Certificate Balance of the Class H
Certificates has been reduced to zero, to the Class J Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xxxviii) Thirty-Eighth, to the Class J Certificates, for the
unreimbursed amounts of Realized Losses, if any, together with simple
interest thereon at a rate equal to 10.00% per annum from the date on
which such unreimbursed Realized Loss was allocated (or the date on which
interest was last paid) to, but not including, the Distribution Date on
which distributions in respect of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated to the Class J
Certificates and interest thereon, provided that any distribution pursuant
to this subparagraph shall be deemed to be distributed first in respect of
any such interest and then in respect of any such unreimbursed Realized
Loss;
(xxxix) Thirty-Ninth, to the Class K-2 Certificates, up to an amount
equal to the Class Interest Distribution Amount of such Class for such
Distribution Date;
(xl) Fortieth, to the Class K-2 Certificates, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously allocated to
such Class on any previous Distribution Dates and not paid;
(xli) Forty-First, after the Certificate Balance of the Class J
Certificates has been reduced to zero, to the Class K-1 Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xlii) Forty-Second, to the Class K-1 Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with simple interest thereon
at a rate equal to 10.00% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the date on which interest
was last paid) to, but not including, the Distribution Date on which
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distributions in respect of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated to the Class K-1
Certificates and interest thereon, provided that any distribution pursuant
to this subparagraph shall be deemed to be distributed first in respect of
any such interest and then in respect of any such unreimbursed Realized
Loss; and
(xliii) Forty-Third, any remaining funds shall be distributed to the
Residual Certificates.
All references to pro rata in the preceding clauses shall mean pro rata
based on the amount distributable pursuant to such clause.
Additional Master Servicer or Special Servicer compensation, interest on
Advances, extraordinary expenses of the Trust Fund and other similar items
will create a shortfall in Available Funds, which generally will result in a
Class Interest Shortfall for the most subordinate Class then outstanding.
Distributions of Principal on the Class A-1, Class A-2 and Class A-3
Certificates. Notwithstanding anything to the contrary herein or in the
Pooling and Servicing Agreement, on each Distribution Date prior to the
earlier of (i) the Senior Principal Distribution Cross-Over Date and (ii) the
final Distribution Date in connection with the termination of the Trust Fund,
all distributions of principal to the Class A-1 Certificates, the Class A-2
Certificates and the Class A-3 Certificates will be paid, first, to holders
of the Class A-1 Certificates until the Certificate Balance of such
Certificates is reduced to zero, second, to holders of the Class A-2
Certificates until the Certificate Balance of such Certificates is reduced to
zero, and thereafter, to holders of the Class A-3 Certificates, until the
Certificate Balance of such Certificates is reduced to zero. On each
Distribution Date on and after the Senior Principal Distribution Cross-Over
Date, and in any event on the final Distribution Date in connection with the
termination of the Trust Fund, distributions of principal on the Class A-1
Certificates, the Class A-2 Certificates and the Class A-3 Certificates will
be paid to holders of such three Classes of Certificates, pro rata in
accordance with their respective Certificate Balances outstanding immediately
prior to such Distribution Date, until the Certificate Balance of each such
Class of Certificates is reduced to zero.
The "Senior Principal Distribution Cross-Over Date" will be the first
Distribution Date as of which the aggregate Certificate Balance of the Class
A-1 Certificates, Class A-2 Certificates and Class A-3 Certificates
outstanding immediately prior thereto exceeds the sum of (i) the aggregate
Scheduled Principal Balance of the Mortgage Loans that will be outstanding
immediately following such Distribution Date and (ii) the portion of the
Available Distribution Amount for such Distribution Date that will remain
after the distribution of interest to be made on the Class A-1, Class A-2 and
Class A-3 Certificates on such Distribution Date has been made.
Prepayment Premiums. All of the Mortgage Loans generally provide that a
prepayment be accompanied by the payment of a Prepayment Premium for all or a
portion of the period during which such prepayments are permitted.
Any Prepayment Premiums calculated with reference to a yield maintenance
formula ("Yield Maintenance Charges") received in the related Collection
Period will be distributed to the holders of the Certificates outstanding on
such Distribution Date, in the following amounts and order of priority:
(i) to each of the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D and Class E Certificates, an amount equal to the product of (A) a
fraction, the numerator of which is the amount distributed as principal to
such Class on such Distribution Date, and the denominator of which is the
total amount distributed as principal to all Classes of Certificates on
such Distribution Date, (B) the Base Interest Fraction for the related
principal payment and such Class of Offered Certificates and (C) the
aggregate amount of Yield Maintenance Charges collected on such principal
prepayment during the related Collection Period; and
(ii) any remaining Prepayment Premiums following the distribution in
clause (i) immediately above, to the Class A-EC Certificates.
Any Prepayment Premiums that are not Yield Maintenance Charges received in
the related Collection Period will be distributed to the holders of the Class
A-EC Certificates.
The "Base Interest Fraction" with respect to any principal prepayment on
any Mortgage Loan and with respect to any Class of Offered Certificates is a
fraction (A) the numerator of which is the greater of (x) zero and (y) the
difference between the Pass-Through Rate on such Class of Offered
Certificates and the discount rate used in calculating the Yield Maintenance
Charge with respect to such Principal Prepayment and (B) the denominator of
which is the difference between the Mortgage Rate on the related Mortgage
Loan and the discount rate used in calculating the Yield Maintenance Charge
with respect to
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such Principal Prepayment; provided, however, that under no circumstances
shall the Base Interest Fraction be greater than one. If the discount rate
used in calculating the Yield Maintenance Charge with respect to any
Principal Prepayment is greater than the Mortgage Rate on the related
Mortgage Loan, then the Base Interest Fraction shall equal zero.
Notwithstanding the foregoing, Prepayment Premiums will be distributed on
any Distribution Date only to the extent they are received in respect of the
Mortgage Loans in the related Collection Period.
Default Interest with Respect to Balloon Payments. Default Interest
received with respect to a Mortgage Loan that is in default with respect to
its Balloon Payment will be distributed on such Distribution Date to the
holders of the Class of Certificates that is entitled to distributions in
respect of principal on such Distribution Date; provided that if more than
one Class of Certificates is entitled to distributions in respect of
principal on such Distribution Date, the amount of such Default Interest will
be allocated among such Classes pro rata in accordance with their respective
Certificate Balances immediately prior to said Distribution Date.
Realized Losses. The Certificate Balance of the Regular Certificates
(other than the Class A-EC and Class K-2 Certificates) will be reduced
without distribution on any Distribution Date as a write-off to the extent of
any Realized Loss with respect to such Distribution Date. As referred to
herein, the "Realized Loss" with respect to any Distribution Date will mean
the amount, if any, by which (i) the aggregate Certificate Balance after
giving effect to distributions made on such Distribution Date exceeds (ii)
the aggregate Scheduled Principal Balance of the Mortgage Loans as of the Due
Date in the month in which such Distribution Date occurs. Any such write-offs
will be applied to the Classes of Certificates in the following order, until
each is reduced to zero: first, to the Class K-1 Certificates, second, to the
Class J Certificates, third, to the Class H Certificates, fourth, to the
Class G Certificates, fifth, to the Class F Certificates, sixth, to the Class
E Certificates, seventh, to the Class D Certificates, eighth, to the Class C
Certificates, ninth, to the Class B Certificates and finally to the Class
A-1, Class A-2 and Class A-3 Certificates, pro rata in accordance with their
respective Certificate Balances immediately prior to said Distribution Date.
Any amounts recovered in respect of any amounts previously written off as
Realized Losses will be distributed to the Classes of Certificates in reverse
order of allocation of Realized Losses thereto. Realized Losses allocated to
the Class K-1 Certificates will reduce the Class K-2 Notional Balance.
Realized Losses allocated to the Class A-1, Class A-2, Class A-3, Class B,
Class C, Class D or Class E Certificates will reduce the Class A-EC Notional
Balance.
Notwithstanding anything to the contrary contained herein or in the
Pooling and Servicing Agreement, the aggregate amount distributable to each
Class will be reduced by the aggregate amount paid of any indemnification
payments made to any person under the Pooling and Servicing Agreement, such
reduction to be allocated among such Classes pro rata, based upon the
respective amounts so distributable without taking into account the provision
of this paragraph. Such reduction amounts otherwise distributable to a Class
shall be allocated first in respect of interest and second in respect of
principal. For purposes of determining Class Interest Shortfalls and
Certificate Balances, the amount of any such reduction so allocated to a
Class shall be deemed to have been distributed to such Class. See "SERVICING
OF THE MORTGAGE LOANS--Certain Matters With Respect to the Master Servicer,
the Special Servicer, the Trustee and the Depositor" in the Prospectus.
The "Scheduled Principal Balance" of any Mortgage Loan as of any Due Date
will be the principal balance of such Mortgage Loan as of such Due Date,
after giving effect to (i) any Principal Prepayments, non-premium prepayments
or other unscheduled recoveries of principal and any Balloon Payments
received during the related Collection Period and (ii) any payment in respect
of principal, if any, due on or before such Due Date (other than a Balloon
Payment, but including the principal portion of any Assumed Scheduled
Payment, if applicable), irrespective of any delinquency in payment by the
borrower. The Scheduled Principal Balance of any REO Mortgage Loan is equal
to the principal balance thereof outstanding on the date that the related
Mortgaged Property became an REO Property minus any Net REO Proceeds
allocated to principal on such REO Mortgage Loan and reduced by the principal
component of Monthly Payments due thereon on or before such Due Date. With
respect to any Mortgage Loan, from and after the date on which the Master
Servicer makes a determination that it has recovered all amounts that it
reasonably expects to be finally recoverable (a "Final Recovery
Determination"), the Scheduled Principal Balance thereof will be zero.
SCHEDULED FINAL DISTRIBUTION DATE
The "Scheduled Final Distribution Date" with respect to any Class of
Certificates is the Distribution Date on which the aggregate Certificate
Balance or aggregate Notional Balance, as the case may be, of such Class of
Certificates would be reduced to zero based on the assumptions set forth
below. Such Distribution Date shall in each case be as follows:
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<TABLE>
<CAPTION>
SCHEDULED FINAL
CLASS DESIGNATION DISTRIBUTION DATE
--------------------- ---------------------------
<S> <C>
Class A-1 ............
Class A-2 ............
Class A-3 ............
Class A-EC ...........
Class B ..............
Class C ..............
Class D ..............
Class E ..............
Class F ..............
Class G ..............
Class H ..............
Class J ..............
Class K-1 ............
Class K-2.............
</TABLE>
The Scheduled Final Distribution Dates set forth above (the "Scheduled
Final Distribution Dates") were calculated without regard to any delays in
the collection of Balloon Payments and without regard to a reasonable
liquidation time with respect to any Mortgage Loans that may be delinquent.
Accordingly, in the event of defaults on the Mortgage Loans, the actual final
Distribution Date for one or more Classes of the Certificates may be later,
and could be substantially later, than the related Scheduled Final
Distribution Date(s).
In addition, the Scheduled Final Distribution Dates set forth above were
calculated assuming no prepayments (involuntary or voluntary), no Auction, no
Early Termination, no defaults, no modifications and no extensions. Since the
rate of payment (including prepayments) of the Mortgage Loans can be expected
to exceed the scheduled rate of payments, and could exceed such scheduled
rate by a substantial amount, the actual final Distribution Date for one or
more Classes of the Certificates may be earlier, and could be substantially
earlier, than the related scheduled Final Distribution Date(s). The rate of
payments (including prepayments) on the Mortgage Loans will depend on the
characteristics of the Mortgage Loans, as well as on the prevailing level of
interest rates and other economic factors, and no assurance can be given as
to actual payment experience.
SUBORDINATION
As a means of providing a certain amount of protection to the holders of
the Senior Certificates against losses associated with delinquent and
defaulted Mortgage Loans, the rights of the holders of the Subordinate
Certificates to receive distributions of interest and principal, as
applicable, will be subordinated to such rights of the holders of the Senior
Certificates. Each Class of the Regular Certificates with a lower class
designation will likewise be protected by the subordination of all Classes of
Certificates with yet lower Class designations. This subordination will be
effected in two ways: (i) by the preferential right of the holders of a Class
of Certificates to receive on any Distribution Date the amounts of interest
and principal, as applicable, distributable in respect of such Certificates
on such date prior to any distribution being made on such Distribution Date
in respect of any Classes of Certificates subordinate thereto and (ii) by the
allocation of Realized Losses, first, to the Class K-1 Certificates, second,
to the Class J Certificates, third, to the Class H certificates, fourth, to
the Class G Certificates, fifth, to the Class F Certificates, sixth, to the
Class E Certificates, seventh, to the Class D Certificates, eighth, to the
Class C Certificates, ninth, to the Class B Certificates, and, finally, to
the Class A-1, Class A-2 and Class A-3 Certificates, pro rata, in each case
in reduction of the Certificate Balance of such Class until the Certificate
Balance thereof is reduced to zero. In addition, each Class of Regular
Certificates will have the benefit of subordination of the Residual
Certificates to the extent of any distributions to which the Residual
Certificates would otherwise be entitled. No other form of credit enhancement
will be available for the benefit of the holders of the Offered Certificates.
ADDITIONAL RIGHTS OF THE RESIDUAL CERTIFICATES
The Residual Certificates will remain outstanding for as long as the Trust
Fund exists. Holders of the Residual Certificates are not entitled to
distributions in respect of principal, interest or Prepayment Premiums.
Holders of the Residual Certificates are not expected to receive any
distributions until after the Certificate Balances of all other Classes of
Certificates
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have been reduced to zero and only to the extent of any Available Funds
remaining on any Distribution Date and any remaining assets of the REMICs, if
any, on the final Distribution Date for the Certificates, after distributions
in respect of any accrued but unpaid interest on the Certificates and after
distributions in reduction of principal balance have reduced the principal
balances of the Certificates to zero.
A HOLDER OF A GREATER THAN 50% PERCENTAGE INTEREST OF THE CLASS R-I
CERTIFICATES MAY, UNDER CERTAIN CIRCUMSTANCES, PURCHASE THE REMAINING ASSETS
OF THE TRUST FUND, THEREBY EFFECTING THE TERMINATION OF THE TRUST REMICS. SEE
"--EARLY TERMINATION" HEREIN.
EARLY TERMINATION
The holder of the Class R-I Certificates representing greater than a 50%
Percentage Interest of the Class R-I Certificates, and, if such holder does
not exercise its option, the Master Servicer and the Depositor, will have the
option to purchase all of the Mortgage Loans and all property acquired in
respect of any Mortgage Loan remaining in the Trust Fund, and thereby effect
termination of the Trust Fund and early retirement of the then outstanding
Certificates, on any Distribution Date on which the aggregate Scheduled
Principal Balance of the Mortgage Loans remaining in the Trust Fund is less
than 10% of the aggregate principal balance of such Mortgage Loans as of the
Cut-off Date. The purchase price payable upon the exercise of such option on
such a Distribution Date will be an amount equal to not less than the greater
of (i) the sum of (A) 100% of the outstanding principal balance of each
Mortgage Loan included in the Trust Fund as of the last day of the month
preceding such Distribution Date (less any Advances previously made on
account of principal); (B) the fair market value of all other property
included in the Trust Fund as of the last day of the month preceding such
Distribution Date, as determined by an independent appraiser as of a date not
more than 30 days prior to the last day of the month preceding such
Distribution Date; (C) all unpaid interest accrued on such principal balance
of each such Mortgage Loan (including any Mortgage Loan as to which title to
the related Mortgaged Property has been acquired) at the Mortgage Rate to the
last day of the month preceding such Distribution Date (less any Advances
previously made on account of interest); and (D) unreimbursed Advances with
interest thereon at the Advance Rate, unpaid servicing compensation and
unpaid Trust Fund expenses; or (ii) the aggregate fair market value of the
Mortgage Loans, and all other property acquired in respect of any Mortgage
Loan in the Trust Fund, on the last day of the month preceding such
Distribution Date, as determined by an independent appraiser as of a date not
more than 30 days prior to the last day of the month preceding such
Distribution Date, together with one month's interest thereon at the related
Mortgage Rate plus disposition expenses. See "--Additional Rights of the
Residual Certificates" herein.
AUCTION
On each of (i) the Distribution Date occurring in September of each year
from and including 2007 and (ii) any date after the Distribution Date
occurring in September 2007 on which the Trustee receives an unsolicited bona
fide offer to purchase all (but not less than all) of the Mortgage Loans
(each, an "Auction Valuation Date"), the Trustee will request that four
independent financial advisory or investment banking or investment brokerage
firms nationally recognized in the field of real estate analysis and
reasonably acceptable to the Master Servicer provide the Trustee with an
estimated value at which the Mortgage Loans and all other property acquired
in respect of any Mortgage Loan in the Trust Fund could be sold pursuant to
an auction. If the average of the three highest such estimates received
equals or exceeds the aggregate amount of the Certificate Balances of all
Certificates outstanding on the Auction Valuation Date, plus unpaid interest
thereon, the anticipated Auction Fees, unpaid servicing compensation,
unreimbursed Advances (together with interest thereon at the Advance Rate)
and unpaid Trust Fund expenses, the Trustee will conduct an auction of the
Mortgage Loans. The Trustee will, in such case, appoint an auction agent to
solicit offers from prospective purchasers, who must meet certain
requirements described in the Pooling and Servicing Agreement, to purchase
all (but not less than all) of the Mortgage Loans and such property, for a
price not less than an amount equal to the aggregate amount of the
Certificate Balances of all Certificates outstanding as of the close of
business on the closing date (the "Auction Closing Date"), plus unpaid
interest thereon, the Auction Fees, unpaid servicing compensation,
unreimbursed Advances (together with interest thereon at the Advance Rate)
and unpaid Trust Fund expenses (the "Minimum Auction Price"). The Auction
Closing Date shall be no earlier than the Distribution Date in December 2007.
In determining the aggregate Certificate Balances of all Certificates, all
Certificates owned by or on behalf of the Depositor, a property manager, the
Master Servicer, the Special Servicer, the Trustee, a borrower or any
affiliate thereof will be included.
If the Trustee receives no bids that are qualified pursuant to the terms
of the Pooling and Servicing Agreement, the Trust Fund will not be terminated
pursuant to these auction procedures. If the Trustee receives qualified bids,
the Trustee will
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accept the highest of such bids, notify the Depositor, the Master Servicer
and the Special Servicer of the adoption of a plan of complete liquidation
and will sell the Mortgage Loans and such property to the successful bidder
on or before the Remittance Date immediately preceding the third Distribution
Date following the Auction Valuation Date (or such later Distribution Date
determined by the auction agent appointed in accordance with the immediately
preceding paragraph), but, in either event, no later than the Distribution
Date which immediately precedes the date which is 90 days following the date
of adoption of a plan of complete liquidation by the Trustee. Such sale will
effect a termination of the Trust Fund and an early retirement of the then
outstanding Certificates. The Trustee will be entitled to be reimbursed from
the Collection Account for expenses that it or any auction agent incurs in
connection with an auction, including all fees and reasonable expenses of
legal counsel and other professionals ("Auction Fees").
Any auction will be conducted in accordance with auction procedures to be
developed by the auction agent in connection with such auction, provided that
such procedures will include at a minimum provisions substantially to the
effect that: (i) no due diligence of the Master Servicer's, the Special
Servicer's or the Trustee's records with respect to the Mortgage Loans may be
conducted by any bidder prior to being notified that it has submitted the
highest bid; (ii) the auction agent is entitled to require that the highest
bidder provide a non-refundable good faith deposit sufficient to reimburse
the Trustee and the auction agent for all expenses in connection with the
evaluation of such bid and in connection with such highest bidder's due
diligence; (iii) each bidder may be required to enter into a confidentiality
agreement with the Master Servicer, the Special Servicer, the auction agent
and the Trustee prior to being permitted to conduct due diligence; (iv)
borrowers on any of the Mortgage Loans will be prohibited from submitting
bids; and (v) in the event that the highest bidder withdraws, the next
highest bidder will be permitted to conduct due diligence of the Master
Servicer's, the Special Servicer's or the Trustee's records with respect to
the Mortgage Loans as if it were the highest bidder.
DELIVERY, FORM AND DENOMINATION
Book-Entry Certificates. No Person acquiring a Class A-1, Class A-2, Class
A-3, Class B, Class C, Class D and Class E Certificate (each such
Certificate, a "Book-Entry Certificate") will be entitled to receive a
physical certificate representing such Certificate, except under the limited
circumstances described below. Absent such circumstances, the Book-Entry
Certificates will be registered in the name of a nominee of DTC and
beneficial interests therein will be held by investors ("Beneficial Owners")
through the book-entry facilities of DTC, as described herein, in
denominations of $100,000 initial Certificate Balance or Notional Balance and
integral multiples of $1,000 in excess thereof, except one certificate of
each such Class may be issued that represents a different initial Certificate
Balance or Notional Balance to accommodate the remainder of the initial
Certificate Balance or Notional Balance of such Class. The Depositor has been
informed by DTC that its nominee will be Cede & Co. Accordingly, Cede & Co.
is expected to be the holder of record of the Book-Entry Certificates.
No Beneficial Owner of a Book-Entry Certificate will be entitled to
receive a definitive Certificate (a "Definitive Certificate") representing
such person's interest in the Book-Entry Certificates, except as set forth
below. Unless and until Definitive Certificates are issued to Beneficial
Owners in respect of the Book-Entry Certificates under the limited
circumstances described herein, all references to actions taken by
Certificateholders or holders will, in the case of the Book-Entry
Certificates, refer to actions taken by DTC upon instructions from its
participants, and all references herein to distributions, notices, reports
and statements to Certificateholders or holders will, in the case of the
Book-Entry Certificates, refer to distributions, notices, reports and
statements to DTC or Cede & Co., as the case may be, for distribution to
Beneficial Owners in accordance with DTC procedures. DTC may discontinue
providing its services as securities depository with respect to the
Book-Entry Certificates at any time by giving reasonable notice to the
Trustee. Under such circumstances, in the event that a successor securities
depository is not obtained, certificates are required to be printed and
delivered. The Trustee, the Master Servicer, the Special Servicer, the Fiscal
Agent and the Certificate Registrar may for all purposes, including the
making of payments due on the Book-Entry Certificates, deal with DTC as the
authorized representative of the Beneficial Owners with respect to such
Certificates for the purposes of exercising the rights of Certificateholders
under the Pooling and Servicing Agreement.
The Depository Trust Company. DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to
Section 17A of the Securities Exchange Act of 1934, as amended. DTC was
created to hold securities for its participating organizations
("Participants") and to facilitate the clearance and settlement of securities
transactions among Participants through electronic computerized book-entry
charges in Participants' accounts, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers
(including the Underwriters), banks, trust companies and clearing
corporations and certain other
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organizations. The Rules applicable to DTC and its participants are on file
with the Securities and Exchange Commission. Indirect access to the DTC
system also is available to banks, brokers, dealers, trust companies and
other institutions that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly ("Indirect Participants").
DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the
Book-Entry Certificates on DTC's records. The ownership interest of each
Beneficial Owner is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected
to receive written confirmations providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Book-Entry Certificates are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Certificates except in the
event that use of the book-entry system for the Book-Entry Certificates is
discontinued. Neither the Certificate Registrar nor the Trustee will have any
responsibility to monitor or restrict the transfer of ownership interests in
Book-Entry Certificates through the book-entry facilities of DTC.
To facilitate subsequent transfers, all Book-Entry Certificates deposited
by Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Book-Entry Certificates with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the
Book-Entry Certificates; DTC's records reflect only the identity of the
Direct Participants to whose accounts such Book-Entry Certificates are
credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers. Beneficial Owners will not be recognized as
Certificateholders, as such term is used in the Pooling and Servicing
Agreement, by the Trustee or any paying agent (each, a "Paying Agent")
appointed by the Trustee. Beneficial Owners will be permitted to exercise the
rights of Certificateholders only indirectly through DTC and its
Participants.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Beneficial Owner to pledge Book-Entry Certificates to persons or entities
that do not participate in the DTC system, or to otherwise act with respect
to such Book-Entry Certificates, may be limited due to lack of a definitive
Certificate for such Book-Entry Certificates. In addition, under a book-entry
format, Beneficial Owners may experience delays in their receipt of payments,
since distributions will be made by the Trustee or a Paying Agent on behalf
of the Trustee to Cede & Co., as nominee for DTC.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Book-Entry Certificates. Under its usual procedures, DTC mails an Omnibus
Proxy to the Trustee as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Securities are credited on that record
date (identified in a listing attached to the Omnibus Proxy). DTC may take
conflicting actions with respect to Percentage Interests or Voting Rights to
the extent that Participants whose holdings of Book-Entry Certificates
evidence such Percentage Interests or Voting Rights authorize divergent
action.
Neither the Depositor, the Trustee, the Master Servicer, the Special
Servicer, the Fiscal Agent, nor any Paying Agent will have any responsibility
for any aspect of the records relating to, or payments made on account of,
beneficial ownership interests of the Book-Entry Certificates registered in
the name of Cede & Co., as nominee for DTC, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests. In
the event of the insolvency of DTC, a Participant or an Indirect Participant
in whose name Book-Entry Certificates are registered, the ability of the
Beneficial Owners of such Book-Entry Certificates to obtain timely payment
may be impaired. In addition, in such event, if the limits of applicable
insurance coverage by the Securities Investor Protection Corporation are
exceeded or if such coverage is otherwise unavailable, ultimate payment of
amounts distributable with respect to such Book-Entry Certificates may be
impaired.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Depositor believes to be reliable,
but the Depositor takes no responsibility for the accuracy thereof.
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Physical Certificates. The Class A-EC, Class F, Class G, Class H, Class
J, Class K-1, Class K-2, Class R-I, Class R-II and Class R-III Certificates
will be issued in fully registered certificated form only. The Class A-EC,
Class F, Class G, Class H, Class J, Class K-1 and Class K-2 Certificates will
be issued in denominations of $100,000 initial Certificate Balance or
Notional Balance, as applicable, and integral multiples of $1 in excess
thereof, except one Certificate of each such Class may be issued that
represents a different initial Certificate Balance or Notional Balance to
accommodate the remainder of the initial Certificate Balance or Notional
Balance. The Residual Certificates will be issued in definitive, physical,
registered form in Percentage Interests of 5% and integral multiples of a 1%
Percentage Interest in excess thereof.
Book-Entry Certificates will be converted to Definitive Certificates and
reissued to Beneficial Owners or their nominees, rather than to DTC or its
nominee, only if (i)(A) the Depositor advises the Certificate Registrar in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as Depository with respect to any Class of the Book-Entry
Certificates and (B) the Depositor is unable to locate a qualified successor
or (ii) the Depositor, at its option, advises the Trustee and Certificate
Registrar that it elects to terminate the book-entry system through DTC with
respect to any Class of the Book-Entry Certificates.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Certificate Registrar will be required to notify all affected
Beneficial Owners through DTC of the availability of Definitive Certificates.
Upon surrender by DTC of the physical certificates representing the affected
Book-Entry Certificates and receipt of instructions for re-registration, the
Certificate Registrar will reissue the Book-Entry Certificates as Definitive
Certificates to the Beneficial Owners. Upon the issuance of Definitive
Certificates for purposes of evidencing ownership of the Class A-1, Class
A-2, Class A-3, Class B, Class C, Class D or Class E Certificates, the
registered holders of such Definitive Certificates will be recognized as
Certificateholders under the Pooling and Servicing Agreement and,
accordingly, will be entitled directly to receive payments on, and exercise
Voting Rights with respect to, and to transfer and exchange such Definitive
Certificates.
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee or the Certificate Registrar in accordance with the
terms of the Pooling and Servicing Agreement.
REGISTRATION AND TRANSFER
Subject to the restrictions on transfer and exchange set forth in the
Pooling and Servicing Agreement, the holder of any Definitive Certificate may
transfer or exchange the same in whole or part (in a principal amount equal
to the minimum authorized denomination or any integral multiple thereof) by
surrendering such Definitive Certificate at the corporate trust office of the
certificate registrar appointed pursuant to the Pooling and Servicing
Agreement (the "Certificate Registrar") or at the office of any transfer
agent, together with an executed instrument of assignment and transfer in the
case of transfer and a written request for exchange in the case of exchange.
In exchange for any Definitive Certificate properly presented for transfer or
exchange with all necessary accompanying documentation, the Certificate
Registrar will, within five Business Days of such request if made at the
corporate trust office of the Certificate Registrar, or within ten Business
Days if made at the office of a transfer agent (other than the Certificate
Registrar), execute and deliver at such corporate trust office or the office
of the transfer agent, as the case may be, to the transferee (in the case of
transfer) or holder (in the case of exchange) or send by first class mail at
the risk of the transferee (in the case of transfer) or holder (in the case
of exchange) to such address as the transferee or holder, as applicable, may
request, a Definitive Certificate or Definitive Certificates, as the case may
require, for a like aggregate Certificate Balance or Notional Balance, as
applicable, and in such authorized denomination or denominations as may be
requested. The presentation for transfer or exchange of any Definitive
Certificate will not be valid unless made at the corporate trust office of
the Certificate Registrar or at the office of a transfer agent by the
registered holder in person, or by a duly authorized attorney-in-fact. The
Certificate Registrar may decline to accept any request for an exchange or
registration of transfer of any Definitive Certificate during the period of
15 days preceding any Distribution Date.
No fee or service charge will be imposed by the Certificate Registrar for
its services in respect of any registration of transfer or exchange referred
to herein; provided, however, that in connection with the transfer of Private
Certificates to certain institutional accredited investors, the Certificate
Registrar will be entitled to be reimbursed by the transferor for any costs
incurred in connection with such transfer. The Certificate Registrar may
require payment by each transferor of a sum sufficient to pay any tax,
expense or other governmental charge payable in connection with any such
transfer.
For a discussion of certain transfer restrictions, see "ERISA
CONSIDERATIONS" herein.
S-84
<PAGE>
YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Regular Certificate will depend on (a) the price
at which such Certificate is purchased by an investor and (b) the rate,
timing and amount of distributions on such Certificate. The rate, timing and
amount of distributions on any Regular Certificate will in turn depend on,
among other things, (i) the rate and timing of principal payments (including
voluntary prepayments, involuntary prepayments resulting from defaults and
liquidations or other dispositions of the Mortgage Loans and Mortgaged
Properties or the application of insurance or condemnation proceeds and/or
the purchase of the Mortgage Loans as described under "DESCRIPTION OF THE
MORTGAGE POOL--Representations and Warranties; Repurchase" and "DESCRIPTION
OF THE CERTIFICATES--Early Termination" and "--Auction") and the extent to
which such amounts are to be applied in reduction of the Certificate Balance
(or Notional Balance) of the Class of Certificates to which such Certificate
belongs, (ii) the rate, timing and severity of Realized Losses on the
Mortgage Loans and the extent to which such losses are allocable in reduction
of the Certificate Balance (or Notional Balance) of the Class of Certificates
to which such Certificate belongs and (iii) with respect to the Regular
Certificates (other than the Class A-1, Class A-2, Class A-3 and Class K-1
Certificates), the Weighted Average Unmodified Net Mortgage Rate as in effect
from time to time. Disproportionate principal payments (whether resulting
from differences in amortization schedules, prepayments or otherwise) on
Mortgage Loans having Unmodified Net Mortgage Rates that are higher or lower
than the current Weighted Average Unmodified Net Mortgage Rate will affect
the yield on the Class A-EC Certificates. Such disproportionate principal
payments will also affect the Pass-Through Rates of the Regular Certificates
(other than the Class A-1, Class A-2, Class A-3 and Class K-1 Certificates)
and therefore the yield on each such Class.
Rate and Timing of Principal Payments. The yield to holders of the Regular
Certificates purchased at a discount or premium will be affected by the rate
and timing of principal payments made in reduction of the Certificate Balance
of such Certificates. As described herein, the Pooled Principal Distribution
Amount for each Distribution Date generally will be distributable in its
entirety in respect of the Class A-1 Certificates until the Certificate
Balance thereof is reduced to zero, and will thereafter be distributable in
its entirety to each remaining Class of Regular Certificates, sequentially in
order of Class designation, in each case until the Certificate Balance of
each such Class of Certificates is, in turn, reduced to zero. Consequently,
the rate and timing of principal payments made in reduction of the
Certificate Balance of the Regular Certificates will be directly related to
the rate and timing of principal payments on or in respect of the Mortgage
Loans, which will in turn be affected by the amortization schedules thereof,
the dates on which Balloon Payments are due and the rate and timing of
Principal Prepayments and other unscheduled collections thereon (including,
for this purpose, collections made in connection with liquidations of
Mortgage Loans due to defaults, Casualties or Condemnations affecting the
Mortgaged Properties or purchases of Mortgage Loans out of the Trust Fund in
the manner described under "DESCRIPTION OF THE MORTGAGE POOL--Representations
and Warranties; Repurchase" and "DESCRIPTION OF THE CERTIFICATES--Early
Termination" and "--Auction" herein). Prepayments and, assuming the
respective stated maturity dates therefor have not occurred, liquidations and
purchases of the Mortgage Loans will result in distributions on the Regular
Certificates (other than the Class A-EC and Class K-2 Certificates) of
amounts that would otherwise have been distributed over the remaining terms
of the Mortgage Loans. Defaults on the Mortgage Loans, particularly at or
near their stated maturity dates, may result in significant delays in
payments of principal on the Mortgage Loans and, accordingly, on the Regular
Certificates while work-outs are negotiated, foreclosures are completed or
bankruptcy proceedings are resolved. The yield to investors in the
Subordinate Certificates will be very sensitive to the timing and magnitude
of losses on the Mortgage Loans due to liquidations following a default, and
will also be very sensitive to delinquencies in payment. In addition, the
Special Servicer has the option, subject to certain limitations, to extend
the maturity of Mortgage Loans following a default in the payment of a
Balloon Payment. See "THE POOLING AND SERVICING AGREEMENT--Servicing of the
Mortgage Loans; Collection of Payments" and "--Realization Upon Mortgage
Loans" herein and "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Foreclosure"
in the Prospectus.
The rate and timing of principal payments and defaults and the severity of
losses on the Mortgage Loans may be affected by a number of factors,
including, without limitation, the terms of the Mortgage Loans (for example,
the provisions requiring the payment of Prepayment Premiums and amortization
terms that require Balloon Payments), prevailing interest rates, the market
value of the Mortgaged Properties, the demographics and relative economic
vitality of the areas in which the Mortgaged Properties are located, the
general supply and demand for such facilities (and their uses) in such areas,
the quality of management of Mortgaged Properties, the servicing of the
Mortgage Loans, federal and state tax laws (which are subject to change) and
other opportunities for investment.
S-85
<PAGE>
The rate of prepayment on the Mortgage Pool is likely to be affected by
the amount of any required Prepayment Premiums and the borrowers' ability to
refinance their related Mortgaged Loans. If prevailing market interest rates
for mortgage loans of a comparable type, term and risk level have decreased
enough to offset any required Prepayment Premium, a borrower may have an
increased incentive to refinance its Mortgage Loan for purposes of either (i)
converting to another fixed rate loan with a lower interest rate and thereby
"locking in" such rate or (ii) taking advantage of an initial "teaser rate"
on an adjustable rate mortgage loan (that is, a mortgage interest rate below
that which would otherwise apply if the applicable index and gross margin
were applied). However, the ability of a borrower to refinance its Mortgage
Loan will be affected not only by prevailing market rates, but also by the
current market value of the Mortgage Property. See "RISK FACTORS--Prepayment
and Yield Considerations" herein and "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Enforceability of Certain Provisions" in the Prospectus.
In addition, some borrowers may sell Mortgaged Properties in order to
realize their equity therein, to meet cash flow needs or to make other
investments.
If the markets for commercial and multifamily real estate should
experience an overall decline in property values such that the outstanding
balances of the Mortgage Loans exceed the value of the respective Mortgaged
Properties, a borrower under a non-recourse loan may have a decreased
incentive to fund operating cash flow deficits and, as a result, actual
losses may be higher than those originally anticipated by investors.
Neither the Depositor nor any of the Mortgage Loan Sellers makes any
representation as to the particular factors that will affect the rate and
timing of prepayments and defaults on the Mortgage Loans, as to the relative
importance of such factors, as to the percentage of the principal balance of
the Mortgage Loans that will be prepaid or as to which a default will have
occurred as of any date or as to the overall rate of prepayment, default or
principal payment on the Mortgage Loans.
The extent to which the yield to maturity of any Class of Regular
Certificates may vary from the anticipated yield will depend upon the degree
to which they are purchased at a discount or premium and when, and to what
degree, payments of principal on the Mortgage Loans are in turn distributed
in reduction of the Certificate Balance of such Certificates. An investor
should consider, in the case of any Regular Certificate purchased at a
discount, especially the Class K-1 Certificates, the risk that a slower than
anticipated rate of principal payments on the Mortgage Loans could result in
an actual yield to such investor that is lower than the anticipated yield
and, in the case of any Regular Certificate purchased at a premium (or the
Class A-EC and Class K-2 Certificates, which have no Certificate Balances),
the risk that a faster than anticipated rate of principal payments could
result in an actual yield to such investor that is lower than the anticipated
yield. In general, the earlier a payment of principal on the Mortgage Loans
is distributed in reduction of the Certificate Balance of any Regular
Certificate purchased at a discount or premium (or, in the case of the Class
A-EC and Class K-2 Certificates, applied in reduction of the Notional
Balance), the greater will be the effect on an investor's yield to maturity.
As a result, the effect on an investor's yield of principal payments on the
Mortgage Loans occurring at a rate higher (or lower) than the rate
anticipated by the investor during any particular period would not be fully
offset by a subsequent like reduction (or increase) in the rate of such
principal payments. Because the rate of principal payments on the Mortgage
Loans will depend on future events and a variety of factors (as described
more fully below), no assurance can be given as to such rate or the rate of
Principal Prepayments in particular. The Depositor is not aware of any
relevant publicly available or authoritative statistics with respect to the
historical prepayment experience of a large group of commercial and/or
multifamily loans comparable to the Mortgage Loans. See "RISK
FACTORS--Prepayment and Yield Considerations" herein.
The amounts payable with respect to the Class K-1 Certificates derive only
from principal payments on the Mortgage Loans. As a result, the yield on the
Class K-1 Certificates will be adversely affected by slower than expected
payments of principal (including prepayments, defaults and liquidations) on
the Mortgage Loans.
Balloon Payments. Most of the Mortgage Loans are Balloon Loans that will
have substantial payments (that is, Balloon Payments) due at their stated
maturities, unless previously prepaid. The ability of the borrowers to pay
the Balloon Payment at the maturity of the Balloon Loans will depend on their
ability to sell or refinance the Mortgaged Properties, which, in turn,
depends on a number of factors, many of which are beyond the control of such
borrowers. Such factors include the level of interest rates and general
economic conditions at the time of sale or refinancing and changes in
federal, state or local laws, including tax laws, environmental laws and
safety standards. The Certificates are subject to the risk of default by the
borrowers in making the required Balloon Payments. If any borrower with
respect to any of such Balloon Loans is unable to make the applicable Balloon
Payment when due, the average life of the Certificates will be longer than
expected. See the Range of Maturity Years Table in "DESCRIPTION OF THE
MORTGAGE POOL--Certain Characteristics of the Mortgage Pool--Other
Information" herein for additional information regarding maturity dates of
the Mortgage Loans.
S-86
<PAGE>
Losses and Shortfalls. The yield to holders of the Regular Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. Shortfalls in
Available Funds resulting from shortfalls in collections of amounts payable
on the Mortgage Loans (to the extent not advanced) or additional Master
Servicer or Special Servicer compensation, interest on Advances,
extraordinary Trust Fund expenses or other similar items will generally be
borne: first, by the holders of the Class K-1 Certificates, to the extent of
amounts otherwise distributable thereto; second, by the holders of the Class
J Certificates, to the extent of amounts otherwise distributable thereto;
third, by the holders of the Class H Certificates, to the extent of amounts
otherwise distributable thereto; fourth, by the holders of the Class G
Certificates, to the extent of amounts otherwise distributable thereto;
fifth, by the holders of the Class F Certificates, to the extent of amounts
otherwise distributable thereto; sixth, by the holders of the Class E
Certificates, to the extent of amounts otherwise distributable thereto;
seventh, by the holders of the Class D Certificates to the extent of amounts
otherwise distributable thereto; eighth, by the holders of the Class C
Certificates, to the extent of amounts otherwise distributable thereto;
ninth, by the holders of the Class B Certificates, to the extent of amounts
otherwise distributable thereto; and, last, by the holders of the Class A-1,
Class A-2 and Class A-3 Certificates on a pro-rata basis. The amount of any
such shortfall generally will be distributable to holders of such Class on
subsequent Distribution Dates, to the extent of Available Funds on such
Distribution Dates. Any such shortfall will not bear interest, however, and
will therefore negatively affect the yield to maturity of such Class of
Certificates for so long as it is outstanding.
Realized Losses will be allocated, as and to the extent described herein,
to the Classes of Certificates (in reduction of the Certificate Balance of
each such Class) in reverse order of their Class designation. As a result, a
loss on any one of the Mortgage Loans could result in a significant loss, or
in some cases a complete loss, of an investors's investment in any Class of
the Subordinate Certificates. Consequently prospective investors should
perform their own analysis of the expected timing and severity of Realized
Losses prior to investing in any Subordinate Certificate. Even if losses on
the Mortgage Loans are not borne by an investor in any Class, such losses may
affect the weighted average life and yield to maturity of such investor's
Certificates.
Pass-Through Rate. The Pass-Through Rates on the Class B, Class C, Class D
and Class E Certificates are related to the Weighted Average Unmodified Net
Mortgage Rate, the Pass-Through Rates on the Class F, Class G, Class H, Class
J and Class K-2 Certificates are equal to the Weighted Average Unmodified Net
Mortgage Rate and the Class A-EC Pass-Through Rate, used to calculate
interest distributable on the Class A-EC Certificates, is derived with
reference to the Weighted Average Unmodified Net Mortgage Rate.
The Weighted Average Unmodified Net Mortgage Rate will fluctuate over the
lives of the Certificates as a result of scheduled amortization, voluntary
prepayments and liquidations of Mortgage Loans. If principal payments,
including voluntary and involuntary Principal Prepayments, are made on a
Mortgage Loan with a relatively high Unmodified Net Mortgage Rate at a rate
faster than the rate of principal payments on the Mortgage Pool as a whole,
the Pass-Through Rates applicable to the Certificates (other than the Class
A-1, Class A-2 and Class A-3 Certificates) will be adversely affected.
Accordingly, the yield on each such Class of Certificates will be sensitive
to changes in the outstanding principal balances of the Mortgage Loans as a
result of scheduled amortization, voluntary prepayments and liquidations of
Mortgage Loans.
The Pass-Through Rate on each of the Class B, Class C, Class D and Class E
Certificates is equal to the Weighted Average Unmodified Net Mortgage Rate
less the related Class strip and the Pass-Through Rate on each of the Class
F, Class G, Class H, Class J and Class K-2 Certificates is equal to the
Weighted Average Unmodified Net Mortgage Rate. Since the Pass-Through Rates
for the Regular Certificates (other than the Class A-1, Class A-2, Class A-3
and Class K-1 Certificates) are related to the Weighted Average Unmodified
Net Mortgage Rate, a decrease in the Net Mortgage Rate for any Mortgage Loan
as a result of a modification will result in the Certificates accruing
interest at a rate higher than the Net Mortgage Rate for the Mortgage Pool
and there will not be sufficient cash flow to make all interest payments due
on each of such Classes. Any such interest shortfall would affect such
Certificates in reverse sequential order commencing with the Class K-2
Certificates. See "DESCRIPTION OF THE CERTIFICATES--Distributions" herein.
For a description of the interest rates applicable to the Mortgage Loans see
"DESCRIPTION OF THE MORTGAGE POOL--Certain Characteristics of the Mortgage
Pool--Range of Mortgage Rates" herein.
Delay in Payment of Distributions. Because monthly distributions will not
be made to Certificateholders until, at the earliest, the 25th day of the
month following the month in which interest accrued on the Certificates, the
effective yield to the holders of the Regular Certificates will be lower than
the yield that would otherwise be produced by the applicable Pass-Through
Rate and purchase prices (assuming such prices did not account for such
delay).
S-87
<PAGE>
WEIGHTED AVERAGE LIFE
Weighted average life refers to the average amount of time that will
elapse from the date of determination to the date of distribution to the
investor of each dollar distributed in reduction of principal balance or
notional balance of such security. The weighted average life of the Regular
Certificates will be influenced by, among other things, the rate at which
principal of the Mortgage Loans is paid, which may be in the form of
scheduled amortization, Balloon Payments, prepayments or liquidations.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant
Prepayment Rate" or "CPR" model. The CPR model represents an assumed constant
rate of prepayment each month, expressed as an annual rate, relative to the
then outstanding principal balance of a pool of mortgage loans for the life
of such mortgage loans. CPR of "0%" assumes that no Mortgage Loan is prepaid
by a borrower before maturity, while CPRs "2%" and "4%" assume that
prepayments on the Mortgage Loans are made by borrowers at those CPRs. CPR
does not purport to be either an historical description of the prepayment
experience of any pool of mortgage loans or a prediction of the anticipated
rate of prepayment of any mortgage loans, including the Mortgage Loans to be
included in the Trust Fund.
The tables set forth below have been prepared on the basis of certain
assumptions as described below regarding the characteristics of the Mortgage
Loans that are expected to be included in the Mortgage Pool as described
under "DESCRIPTION OF THE MORTGAGE POOL" herein and the performance thereof.
The tables assume, among other things, that: (i) as of the date of issuance
of the Regular Certificates, the Mortgage Loans (except as set forth herein)
provide for a Monthly Payment of principal and interest that would fully
amortize the remaining principal balance of such Mortgage Loan using the
Monthly Payments in the amounts set forth in Annex A hereto, commencing on
the first day of the month immediately following the month in which such
issuance occurs, with, if such Mortgage Loan is a Balloon Loan, the Monthly
Payments in the amounts set forth in Annex A hereto and a principal payment
in the amount that would reduce the principal balance of such Balloon Loan to
zero on the maturity date set forth in Annex A; (ii) none of Midland nor any
of the Mortgage Loan Sellers will repurchase any Mortgage Loan and none of
the Master Servicer, the Special Servicer, the Depositor or the holders of
the Class R-I Certificates exercises its option to purchase Mortgage Loans
and thereby cause a termination of the Trust Fund; (iii) there are no
delinquencies or Realized Losses on the Mortgage Loans; (iv) no Prepayment
Premiums are paid with respect to any Mortgage Loan; (v) payments on the
Certificates will be made on the 25th day of each month, commencing in
January, 1997 (notwithstanding that any such day is not a Business Day); (vi)
there are no additional ongoing Trust Fund expenses payable out of the Trust
Fund other than the Servicing Fee; (vii) the Regular Certificates will be
purchased on the Closing Date; (viii) that no defaults occur with respect to
any of the Mortgage Loans; (ix) that all of the Mortgage Loans accrue
interest based upon a 360-day year composed of twelve 30-day months; (x) that
all Mortgage Loans that have a maturity date other than the first day of a
month make their final payment on the first day of the month following the
month of maturity; (xi) that the number of scheduled payments for each Newly
Originated Mortgage Loan is equal to the actual number of payments plus one,
with the first such payment consisting of interest only and the remaining
payments consisting of principal and interest; and (xii) that with respect to
Loan #16, the stated interest rate does not adjust at any time during the
term of such Mortgage Loan.
The actual performance of the Mortgage Loans will differ from the
assumptions used in calculating the tables set forth below, which are
hypothetical in nature and are provided only to give a general sense of how
the principal cash flows might behave under varying prepayment scenarios. Any
difference between such assumptions and the actual performance of the
Mortgage Loans, or actual prepayment or loss experience, will affect the
percentages of initial Certificate Balance outstanding over time and the
weighted average lives of the Classes of Regular Certificates.
Subject to the foregoing discussion and assumptions, the following tables
indicate the weighted average life of each Class of Regular Certificates, and
set forth the percentages of the initial Certificate Balance or Notional
Balance of each such Class of Regular Certificates that would be outstanding
after each of the Distribution Dates shown based on the assumptions described
above and the following additional assumptions for each of the designated
scenarios (the "Scenarios"). In the case of Scenario 1, it was assumed that
none of the Mortgage Loans prepay prior to their maturity date and that there
are no defaults. In the case of Scenario 2, the prepayment assumptions set
forth in Scenario 1 were assumed and it was further assumed that the Trust
Fund will be terminated pursuant to an auction on the Distribution Date
occurring in December 2007. In the case of Scenario 3 and Scenario 4, it was
assumed that the Mortgage Loans prepay prior to their maturity date at a rate
equal to 2% CPR and 4% CPR, respectively, and that there are no defaults and
that it was further assumed that the Trust Fund will be terminated pursuant
to an auction on the Distribution Date occurring in December 2007. See
"DESCRIPTION OF THE CERTIFICATES--Auction" herein.
S-88
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
(OR NOTIONAL BALANCE)
OUTSTANDING FOR
EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3
SCENARIO SCENARIO SCENARIO
-------------------------- -------------------------- --------------------------
DISTRIBUTION DATE 1 2 3 4 1 2 3 4 1 2 3 4
- ----------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance ............
December 1997 ..............
December 1998 ..............
December 1999 ..............
December 2000 ..............
December 2001 ..............
December 2002 ..............
December 2003 ..............
December 2004 ..............
December 2005 ..............
December 2006 ..............
December 2007 ..............
December 2008 ..............
December 2009 ..............
December 2010 ..............
December 2011 ..............
Weighted Average Life <F1> .
- ------------
<FN>
<F1> The weighted average life of each Class is determined by (i)
multiplying the amount of each distribution in reduction of the
Certificate Balance or Notional Balance of such Class by the number of
years from the date of purchase to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the aggregate
distributions in reduction of Certificate Balance or Notional Balance
referred to in clause (i).
</FN>
</TABLE>
S-89
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
(OR NOTIONAL BALANCE)
OUTSTANDING FOR
EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS D
SCENARIO SCENARIO SCENARIO
-------------------------- -------------------------- --------------------------
DISTRIBUTION DATE 1 2 3 4 1 2 3 4 1 2 3 4
- ----------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance ............
December 1997 ..............
December 1998 ..............
December 1999 ..............
December 2000 ..............
December 2001 ..............
December 2002 ..............
December 2003 ..............
December 2004 ..............
December 2005 ..............
December 2006 ..............
December 2007 ..............
December 2008 ..............
December 2009 ..............
December 2010 ..............
December 2011 ..............
Weighted Average Life <F1> .
- ------------
<FN>
<F1> The weighted average life of each Class is determined by (i)
multiplying the amount of each distribution in reduction of the
Certificate Balance or Notional Balance of such Class by the number of
years from the date of purchase to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the aggregate
distributions in reduction of Certificate Balance or Notional Balance
referred to in clause (i).
</FN>
</TABLE>
S-90
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
(OR NOTIONAL BALANCE)
OUTSTANDING FOR
EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS E CLASS F CLASS G
SCENARIO SCENARIO SCENARIO
-------------------------- -------------------------- --------------------------
DISTRIBUTION DATE 1 2 3 4 1 2 3 4 1 2 3 4
- ----------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance ............
December 1997 ..............
December 1998 ..............
December 1999 ..............
December 2000 ..............
December 2001 ..............
December 2002 ..............
December 2003 ..............
December 2004 ..............
December 2005 ..............
December 2006 ..............
December 2007 ..............
December 2008 ..............
December 2009 ..............
December 2010 ..............
December 2011 ..............
Weighted Average Life <F1> .
- ------------
<FN>
<F1> The weighted average life of each Class is determined by (i)
multiplying the amount of each distribution in reduction of the
Certificate Balance or Notional Balance of such Class by the number of
years from the date of purchase to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the aggregate
distributions in reduction of Certificate Balance or Notional Balance
referred to in clause (i).
</FN>
</TABLE>
S-91
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
(OR NOTIONAL BALANCE)
OUTSTANDING FOR
EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS K-1 AND
CLASS H CLASS J CLASS K-2
SCENARIO SCENARIO SCENARIO
-------------------------- -------------------------- --------------------------
DISTRIBUTION DATE 1 2 3 4 1 2 3 4 1 2 3 4
- ----------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance ............
December 1997 ..............
December 1998 ..............
December 1999 ..............
December 2000 ..............
December 2001 ..............
December 2002 ..............
December 2003 ..............
December 2004 ..............
December 2005 ..............
December 2006 ..............
December 2007 ..............
December 2008 ..............
December 2009 ..............
December 2010 ..............
December 2011 ..............
Weighted Average Life <F1> .
- ------------
<FN>
<F1> The weighted average life of each Class is determined by (i)
multiplying the amount of each distribution in reduction of the
Certificate Balance or Notional Balance of such Class by the number of
years from the date of purchase to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the aggregate
distributions in reduction of Certificate Balance or Notional Balance
referred to in clause (i).
</FN>
</TABLE>
S-92
<PAGE>
THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of December 1, 1996 (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Master Servicer, the Special
Servicer, the Trustee and the Fiscal Agent.
The Depositor will provide to a prospective or actual holder of a
Certificate without charge, upon written request, a copy (without exhibits)
of the Pooling and Servicing Agreement. Requests should be addressed to
Midland Realty Acceptance Corp., 210 West 10th Street, 6th Floor, Kansas
City, Missouri 64105, attention: E. J. Burke at telephone number (816)
843-6272.
ASSIGNMENT OF THE MORTGAGE LOANS
On or before the Closing Date, the Depositor will assign or cause the
assignment of the Mortgage Loans without recourse, to the Trustee for the
benefit of the holders of Certificates. On or prior to the Closing Date, the
Depositor will deliver to the Trustee, with a copy to the Master Servicer,
with respect to each Mortgage Loan the following set of documents (the
"Trustee Mortgage File"):
(i) the original of the related Note, endorsed by the applicable Mortgage
Loan Seller in blank in the following form: "Pay to the order of ,
without recourse" which the Trustee or its designee is authorized to
complete and which Note and all endorsements thereof shall show a complete
chain of endorsement from the Originator to the applicable Mortgage Loan
Seller;
(ii) the related original recorded Mortgage or a copy thereof certified
by the related title insurance company, public recording office or closing
agent to be in the form in which executed or submitted for recording, the
related original recorded Assignment of Mortgage to the applicable
Mortgage Loan Seller or a copy thereof certified by the related title
insurance company, public recording office or closing agent to be in the
form in which executed or submitted for recording and the related original
Assignment of Mortgage executed by the applicable Mortgage Loan Seller in
blank which the Trustee or its designee is authorized to complete (and but
for the insertion of the name of the assignee and any related recording
information which is not yet available to the applicable Mortgage Loan
Seller, is in suitable form for recordation in the jurisdiction in which
the related Mortgaged Property is located);
(iii) if the related security agreement is separate from the Mortgage,
the original security agreement or a counterpart thereof, and if the
security agreement is not assigned under the Assignments of Mortgage
described in clause (ii) above, the related original assignment of such
security agreement to the applicable Mortgage Loan Seller or a counterpart
thereof and the related original assignment of such security agreement
executed by the applicable Mortgage Loan Seller in blank which the Trustee
or its designee is authorized to complete;
(iv) a copy of each Form UCC-1 financing statement, if any, filed with
respect to personal property constituting a part of the related Mortgaged
Property, together with a copy of each Form UCC-2 or UCC-3 assignment, if
any, of such financing statement to the applicable Mortgage Loan Seller
and a copy of each Form UCC-2 or UCC-3 assignment, if any, of such
financing statement executed by the applicable Mortgage Loan Seller in
blank which the Trustee or its designee is authorized to complete (and but
for the insertion of the name of the assignee and any related filing
information which is not yet available to the applicable Mortgage Loan
Seller, is in suitable form for filing in the filing office in which such
financing statement was filed);
(v) the related original of the Loan Agreement, if any, relating to such
Mortgage Loan or a counterpart thereof;
(vi) the related original lender's title insurance policy (or the
original pro forma title insurance policy), together with any endorsements
thereto;
(vii) if any related Assignment of Leases, Rents and Profits is separate
from the Mortgage, the original recorded Assignment of Leases, Rents and
Profits or a copy thereof certified by the related title insurance
company, public recording office, or closing agent to be in the form in
which executed or submitted for recording, the related original recorded
reassignment of such instrument, if any, to the applicable Mortgage Loan
Seller or a copy thereof certified by the related title insurance company
or closing agent to be in the form in which executed or submitted for
recording and the related original reassignment of such instrument, if
any, executed by the applicable Mortgage Loan Seller in blank
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which the Trustee or its designee is authorized to complete (and but for
the insertion of the name of the assignee and any related recording
information which is not yet available to the applicable Mortgage Loan
Seller, is in suitable form for recordation in the jurisdiction in which
the related Mortgaged Property is located) (any of which reassignments,
however, may be included in a related Assignment of Mortgage and need not
be a separate instrument);
(viii) copies of the original Environmental Reports with respect to the
Mortgaged Property made in connection with the origination of such
Mortgage Loan;
(ix) if any related assignment of contracts is separate from the
Mortgage, the original assignment of contracts or a counterpart thereof,
and if the assignment of contracts is not assigned under the Assignments
of Mortgage described in clause (ii) above, the related original
reassignment of such instrument to the applicable Mortgage Loan Seller or
a counterpart thereof and the related original reassignment of such
instrument executed by the applicable Mortgage Loan Seller in blank which
the Trustee or its designee is authorized to complete;
(x) with respect to the related Reserve Accounts, if any, a copy of the
original of any separate agreement with respect thereto between the
related borrower and the Originator;
(xi) the original of any other written agreement, instrument or document
securing such Mortgage Loan, including, without limitation, originals of
any guaranties with respect to such Mortgage Loan or the original letter
of credit, if any, with respect thereto, together with any and all
amendments thereto, including, without limitation, any amendment which
entitles the Master Servicer to draw upon such letter of credit on behalf
of the Trustee for the benefit of the Certificateholders, and the original
of each instrument or other item of personal property given as security
for a Mortgage Loan possession of which by a secured party is necessary to
a secured party's valid, perfected, first priority security interest
therein, together with all assignments or endorsements thereof necessary
to entitle the Master Servicer to enforce a valid, perfected, first
priority security interest therein on behalf of the Trustee for the
benefit of the Certificateholders;
(xii) with respect to the related Reserve Accounts, if any, a copy of the
UCC-1 financing statements, if any, submitted for filing with respect to
the applicable Originator's security interest in such Reserve Accounts and
all funds contained therein, together with a copy of each Form UCC-2 or
UCC-3 assignment, if any, of such financing statement to the applicable
Mortgage Loan Seller and a copy of each Form UCC-2 or UCC-3 assignment, if
any, of such financing statement executed by the applicable Mortgage Loan
Seller in blank which the Trustee or its designee is authorized to
complete (and but for the insertion of the name of the assignee and any
related filing information which is not yet available to the applicable
Mortgage Loan Seller, is in suitable form for filing in the filing office
in which such financing statement was filed); and
(xiii) copies of any and all amendments, modifications and supplements
to, and waivers related to, any of the foregoing.
If the Depositor cannot deliver any original or certified recorded document
described above on the Closing Date, the Depositor will use its best efforts
to deliver (or cause to be delivered) such original or certified recorded
documents within 45 days from the Closing Date (subject to delays
attributable to the failure of the appropriate recording office to return
such documents, in which case the Depositor will deliver such documents
promptly upon receipt thereof). The Trustee is obligated to review the
Trustee Mortgage File for each Mortgage Loan within 45 days after the later
of delivery or the Closing Date and report any missing documents or certain
types of defects therein to the Depositor.
The Master Servicer will hold all remaining Mortgage Loan Documents and
all other documents related to each Mortgage Loan, including copies of any
management agreements, ground leases, appraisals, surveys, environmental
reports and similar documents and any other written agreements relating to
each Mortgage Loan (collectively, the "Master Servicer Mortgage File" and
together with the Trustee Mortgage File, the "Mortgage File") in trust for
the benefit of the Trustee on behalf of Certificateholders. The legal
ownership of all records and documents with respect to each Mortgage Loan
prepared by or that come into the possession of the Master Servicer will
immediately vest in the Trustee, in trust for the benefit of
Certificateholders.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Pooling and Servicing Agreement requires the Master Servicer and the
Special Servicer to service and administer the Mortgage Loans (or in the case
of the Special Servicer, the Specially Serviced Mortgage Loans and REO
Mortgage Loans) on behalf of the Trust Fund solely in the best interests of
and for the benefit of all of the Certificateholders and the
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Trustee in accordance with the terms of the Pooling and Servicing Agreement
and the Mortgage Loans. In furtherance of and to the extent consistent with
the foregoing, except to the extent that the Pooling and Servicing Agreement
provides for a contrary specific course of action, each of the Master
Servicer and the Special Servicer are required to service and administer the
Mortgage Loans (x) in the same manner in which, and with the same care,
skill, prudence and diligence with which it services and administers similar
mortgage loans for other third-party portfolios, giving due consideration to
customary and usual standards of practice of prudent institutional commercial
mortgage loan servicers used with respect to loans comparable to the Mortgage
Loans or (y) in the same manner in which, and with the same care, skill,
prudence and diligence with which, it services and administers similar
mortgage loans which it owns, whichever standard of care is higher, and
taking into account its other obligations under the Pooling and Servicing
Agreement, but without regard to (i) any other relationship that the Master
Servicer, the Special Servicer, any sub-servicer or any affiliate of the
Master Servicer, the Special Servicer or any sub-servicer may have with the
borrowers or any affiliate of such borrowers; (ii) the ownership of any
Certificate by the Master Servicer, the Special Servicer or any affiliate of
either; (iii) the Master Servicer's, the Trustee's or the Fiscal Agent's
obligations, as applicable, to make Advances or to incur servicing expenses
with respect to the Mortgage Loans; (iv) the Master Servicer's, the Special
Servicer's or any sub-servicer's right to receive compensation for its
services under the Pooling and Servicing Agreement or with respect to any
particular transaction; or (v) the ownership, servicing or management for
others, by the Master Servicer, the Special Servicer or any sub-servicer of
any other mortgage loans or property. Each of the Master Servicer and the
Special Servicer is permitted, at its own expense, to employ sub-servicers,
agents or attorneys in performing any of its obligations under the Pooling
and Servicing Agreement, but will not thereby be relieved of any such
obligation, and will be responsible for the acts and omissions of any such
sub-servicers, agents or attorneys. The Pooling and Servicing Agreement
provides, however, that neither the Master Servicer (or its general partner)
nor the Special Servicer (or its general partner), nor any of their
directors, officers, employees or agents, will have any liability to the
Trust Fund or the Certificateholders for taking any action or refraining from
taking an action in good faith or for errors in judgment. The foregoing
provision would not protect the Master Servicer, the Special Servicer or such
person for the breach of any of the Master Servicer's or Special Servicer's
respective representations or warranties in the Pooling and Servicing
Agreement, or against any specific liability imposed on the Master Servicer
or the Special Servicer for a breach of the servicing standards set forth in
the Pooling and Servicing Agreement, any liability by reason of willful
misfeasance, bad faith, fraud or negligence in the performance of its duties
or by reason of its reckless disregard of obligations or duties under the
Pooling and Servicing Agreement.
The Pooling and Servicing Agreement requires the Master Servicer and the
Special Servicer to make reasonable efforts to collect all payments called
for under the terms and provisions of the Mortgage Loans, and to follow
collection procedures as are consistent with the servicing standard under the
Pooling and Servicing Agreement. Consistent with the above, the Master
Servicer or the Special Servicer, as applicable, may, in its discretion,
waive any late payment charge or penalty fee in connection with any
delinquent Monthly Payment or Balloon Payment with respect to any Mortgage
Loan.
ADVANCES
Subject to the limitations described below, the Master Servicer will be
obligated to advance (each such amount, a "P&I Advance"), on the Business Day
preceding each Distribution Date (the "Remittance Date"), an amount equal to
the total or any portion of the Monthly Payment on a Mortgage Loan that was
delinquent as of the close of business on the Business Day preceding such
Remittance Date or, in the event of a default in the payment of a Balloon
Payment, the Assumed Scheduled Payment with respect to the related Balloon
Loan, unless the Master Servicer determines that any such advance would be a
nonrecoverable Advance and delivers to the Trustee an officer's certificate
and accompanying documentation related to a determination of
nonrecoverability as required by the Pooling and Servicing Agreement. In the
event any Mortgage Loan becomes a Seriously Delinquent Loan, the Special
Servicer will order an Updated Appraisal of the related Mortgaged Property
and upon receipt of such Updated Appraisal the Master Servicer will determine
the amount (the "Anticipated Loss") equal to the excess, if any, of (i) the
sum of (w) the Scheduled Principal Balance of such Mortgage Loan as of the
immediately preceding Determination Date, (x) to the extent not previously
advanced by the Master Servicer, the Trustee or the Fiscal Agent, all accrued
and unpaid interest on such Mortgage Loan at a per annum rate equal to the
related Mortgage Rate, (y) all unreimbursed Advances with respect to such
Mortgage Loan with interest thereon at the Advance Rate, and (z) to the
extent not previously advanced by the Master Servicer, the Trustee or the
Fiscal Agent, all currently due but unpaid real estate taxes and assessments,
insurance premiums, and, if applicable, ground rents and a good faith
estimate of any expenses relating to uncontested foreclosure, realization and
liquidation of such Mortgaged Property, over (ii) an amount equal to 90% of
the appraised value of the related Mortgaged Property as reflected in the
Updated Appraisal thereof; provided, however, that in the event the Updated
Appraisal has not been received within 60 days after the Special Servicer
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has ordered such appraisal, the Anticipated Loss shall be equal to 30% of the
Scheduled Principal Balance of the Seriously Delinquent Loan; provided,
however, that in the event the Updated Appraisal has not been received within
60 days after the Special Servicer has ordered such appraisal, the
Anticipated Loss shall be equal to 30% of the Scheduled Principal Balance of
the Seriously Delinquent Loan; provided, further that promptly upon its
receipt of such appraisal, the Servicer shall recalculate the Anticipated
Loss. Upon determination of the Anticipated Loss with respect to any
Seriously Delinquent Loan, the amount of any P&I Advance required to be made
with respect to such Seriously Delinquent Loan on any Distribution Date will
be an amount equal to the product of (A) the amount of the P&I Advance that
would be required to be made in respect of such Seriously Delinquent Loan
without regard to the application of this sentence, multiplied by (B) a
fraction, the numerator of which is equal to the Scheduled Principal Balance
of such Mortgage Loan as of the immediately preceding Determination Date less
the Anticipated Loss and the denominator of which is such Scheduled Principal
Balance. A "Seriously Delinquent Loan" is any Mortgage Loan as to which an
Updated Appraisal has been ordered with respect to the related Mortgaged
Property. See "--Realization Upon Mortgage Loans--Appraisals for Specially
Serviced Mortgage Loans" herein. A Mortgage Loan shall cease to be a
Seriously Delinquent Loan in the event such Mortgage Loan is no longer a
Specially Serviced Mortgage Loan pursuant to the terms of the Pooling and
Servicing Agreement and as to which the related Mortgagor has made 24
consecutive Monthly Payments since the date on which such Mortgage Loan
became a Seriously Delinquent Loan.
In addition to P&I Advances, the Master Servicer will also be obligated
(subject to the limitations described herein) to make cash advances
("Property Advances," and together with P&I Advances, "Advances") to pay (i)
certain costs and expenses incurred in connection with defaulted Mortgage
Loans, acquiring title to, or management of, REO Property or the sale of
defaulted Mortgage Loans or REO Properties, (ii) delinquent real estate
taxes, assessments and hazard insurance premiums and (iii) to cover other
similar costs and expenses necessary to protect and preserve the security of
the related Mortgage. The Master Servicer will not, however, be obligated to
advance from its own funds any amounts required to cure any failure of any
Mortgaged Property to comply with the Americans with Disabilities Act of
1990, and all rules and regulations promulgated pursuant thereto, or any
applicable environmental law or to contain, clean up or remedy any
environmental condition present at any Mortgaged Property.
If the Master Servicer fails to fulfill its obligation to make any
required Advance, the Trustee, acting in accordance with the servicing
standard, will be required to make the Advance subject to its determination
of recoverability. If the Trustee fails to make any such required Advance,
the Fiscal Agent will be required to make the Advance, subject to its
determination of recoverability. Both the Trustee and the Fiscal Agent will
be entitled to rely conclusively on any non-recoverability determination of
the Master Servicer. See "--The Trustee" and "--The Fiscal Agent" below.
The obligation of the Master Servicer, the Trustee or the Fiscal Agent, as
applicable, to make Advances with respect to any Mortgage Loan pursuant to
the Pooling and Servicing Agreement continues through the foreclosure of such
Mortgage Loan and until the liquidation of the Mortgage Loan or related
Mortgaged Properties. Advances are intended to provide a limited amount of
liquidity, not to guarantee or insure against losses. None of the Master
Servicer, the Trustee or the Fiscal Agent will be required to make any
Advance that it determines (based on, among other things, an Updated
Appraisal) in its good faith business judgment will not be recoverable by the
Master Servicer, the Trustee or the Fiscal Agent, as applicable, out of
related late payments, Insurance Proceeds, Liquidation Proceeds and certain
other collections with respect to the Mortgage Loan as to which such Advances
were made. To the extent that any borrower is not obligated under its
Mortgage Loan documents to pay or reimburse any portion of any Advances that
are outstanding with respect to the related Mortgage Loan as a result of a
modification of such Mortgage Loan by the Special Servicer that forgives loan
payments or other amounts that the Master Servicer, the Trustee or the Fiscal
Agent previously advanced, and the Master Servicer, the Trustee or the Fiscal
Agent determines that no other source of payment or reimbursement for such
Advances is available to it, such Advances will be deemed to be
nonrecoverable; provided, however, in connection with the foregoing, the
Master Servicer, the Trustee or the Fiscal Agent will provide an officer's
certificate as described below. In addition, if the Master Servicer, the
Trustee or the Fiscal Agent, as applicable, determines that any Advance
previously made will not be recoverable from the foregoing sources, then the
Master Servicer, the Trustee or the Fiscal Agent, as applicable, will be
entitled to reimburse itself for such Advance, plus interest thereon, out of
amounts on deposit in the Collection Account prior to distributions on the
Certificates. Any such judgment or determination must be evidenced by an
officer's certificate delivered to the Trustee (or, in the case of the
Trustee or the Fiscal Agent, the Depositor) setting forth such judgment or
determination of nonrecoverability and the procedure and considerations of
the Master Servicer, the Trustee or the Fiscal Agent, as applicable, forming
the basis of such determination, which will include a copy of the Updated
Appraisal and any other information or reports obtained by the Master
Servicer, the Trustee or the Fiscal Agent, such as property operating
statements, rent rolls, property inspection reports, engineering reports and
other documentation which may support such determinations.
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The Master Servicer, the Trustee or the Fiscal Agent, as applicable, will
be entitled to reimbursement for any Advance equal to the amount of such
Advance from (i) any collections on or in respect of the particular Mortgage
Loan or REO Property with respect to which each such Advance was made or (ii)
upon determining that such Advance is not recoverable in the manner described
in the preceding paragraph, from any other amounts from time to time on
deposit in the Collection Account.
The Master Servicer, the Trustee or the Fiscal Agent, as applicable, will
be entitled to receive interest at a rate equal to the Prime Rate (as
published in The Wall Street Journal, or if The Wall Street Journal is no
longer published, The New York Times, from time to time), (the "Advance
Rate") on its outstanding Advances and will be authorized to pay itself such
interest from general collections with respect to all of the Mortgage Loans
prior to any payment to holders of Certificates. If the interest on such
Advance is not offset by Default Interest a shortfall will result which
generally will result in a Class Interest Shortfall for the most Subordinate
Class then outstanding.
ACCOUNTS
Collection Account. The Master Servicer will, pursuant to the Pooling and
Servicing Agreement, establish and maintain a segregated account or accounts
(the "Collection Account") into which it will be required to deposit, within
one Business Day of receipt the following payments and collections received
or made by it on or with respect to the Mortgage Loans: (i) all payments on
account of principal on the Mortgage Loans, including the principal component
of Unscheduled Payments on the Mortgage Loans; (ii) all payments on account
of interest and Default Interest on the Mortgage Loans and the interest
portion of all Unscheduled Payments and all Prepayment Premiums; (iii) any
amounts required to be deposited by the Master Servicer in connection with
losses realized on Permitted Investments with respect to funds held in the
Collection Account and in connection with Prepayment Interest Shortfalls;
(iv) (x) all Net REO Proceeds transferred from an REO Account and (y) all
Condemnation Proceeds, Insurance Proceeds and Net Liquidation Proceeds not
required to be applied to the restoration or repair of the related Mortgaged
Property; (v) any amounts received from borrowers that represent recoveries
of Property Advances; and (vi) any other amounts required by the provisions
of the Pooling and Servicing Agreement to be deposited into the Collection
Account by the Master Servicer or the Special Servicer, including, without
limitation, proceeds of any purchase or repurchase of a Mortgage Loan as
described under "DESCRIPTION OF THE MORTGAGE POOL--Representations and
Warranties; Repurchase," "THE POOLING AND SERVICING AGREEMENT--Realization
Upon Mortgage Loans" and "DESCRIPTION OF THE CERTIFICATES--Early Termination"
and "--Auction" herein.
The foregoing requirements for deposits in the Collection Account will be
exclusive, and any payments in the nature of late payment charges, late fees,
NSF check charges, assumption fees, loan modification fees, loan service
transaction fees, extension fees, demand fees, beneficiary statement charges
and similar fees need not be deposited in the Collection Account by the
Master Servicer and, to the extent permitted by applicable law, the Master
Servicer or the Special Servicer, as applicable, will be entitled to retain
any such charges and fees received with respect to the Mortgage Loans. In the
event that the Master Servicer deposits into the Collection Account any
amount not required to be deposited therein, the Master Servicer may at any
time withdraw such amount from the Collection Account.
Distribution Account. The Trustee will, pursuant to the Pooling and
Servicing Agreement, establish and maintain a segregated account or accounts
(the "Distribution Account") in the name of the Trustee for the benefit of
the holders of Certificates. With respect to each Distribution Date, the
Master Servicer will deposit in the Distribution Account, to the extent of
funds on deposit in the Collection Account, on or before the Remittance Date
an aggregate amount of immediately available funds equal to the Available
Funds plus (i) (prior to the EC-Maturity Date) any Prepayment Premiums
received by the Master Servicer during the related Collection Period and (ii)
Default Interest received with respect to a Mortgage Loan that is in default
with respect to its Balloon Payment. To the extent not included in Available
Funds, the Master Servicer will remit to the Trustee all P&I Advances for
deposit into the Distribution Account on the related Remittance Date. See
"DESCRIPTION OF THE CERTIFICATES--Distributions" herein.
The Collection Account and the Distribution Account will be held in the
name of the Trustee (or, in the case of the Collection Account, the Master
Servicer on behalf of the Trustee) on behalf of the holders of Certificates
and the Trustee (and, in the case of the Collection Account, the Master
Servicer) will be authorized to make withdrawals therefrom. Each of the
Collection Account and the Distribution Account will be either (i) a
segregated account or accounts maintained with either a federally or
state-chartered depository institution or trust company the short term
unsecured debt obligations of which are rated "A-1+" by S&P and the long term
unsecured debt obligations of which (or of such institution's parent holding
company) are rated by each of the Rating Agencies in the rating category
equal to or greater than the highest then-current rating assigned to a Class
of Certificates then outstanding at the time of any deposit therein, but in
no event less than "A"
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or (ii) a segregated trust account or accounts maintained with a federally or
state chartered depository institution or trust company acting in its
fiduciary capacity, having, in either case, a combined capital and surplus of
at least $50,000,000 and subject to supervision or examination by federal or
state authority, or otherwise confirmed in writing by each of the Rating
Agencies that the maintenance of such account and subject to regulations
regarding fiduciary funds on deposit substantially similar to 12 CFR 9.10(b),
will not, in and of itself, result in a downgrading, withdrawal or
qualification of the rating then assigned by such Rating Agency to any Class
of Certificates (an "Eligible Bank"). Amounts on deposit in such accounts may
be invested in certain United States government securities and other
investments specified in the Pooling and Servicing Agreement ("Permitted
Investments"). See "DESCRIPTION OF THE CERTIFICATES--Accounts" in the
Prospectus for a listing of Permitted Investments.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The Master Servicer may make withdrawals from the Collection Account for
the following purposes: (i) to remit on or before each Remittance Date to the
Distribution Account an amount equal to Available Funds and any Prepayment
Premiums for such Distribution Date; (ii) to pay or reimburse the Master
Servicer, the Trustee or the Fiscal Agent, as applicable, for Advances made
by it and interest on Advances, the Master Servicer's right to reimburse
itself for items described in this clause (ii) being limited as described
herein under "--Advances"; (iii) to pay on or before each Remittance Date to
the Master Servicer and Special Servicer the fee portion of the servicing
compensation in respect of the related Distribution Date to be paid, in the
case of the Servicing Fee, from interest received on the related Mortgage
Loan, and to pay from time to time, to the Master Servicer, any interest or
investment income earned on funds deposited in the Collection Account, and
pay the Master Servicer as additional servicing compensation any Prepayment
Interest Surplus received in the preceding Collection Period and to pay the
Master Servicer or the Special Servicer, as applicable, any other amounts
constituting additional servicing compensation; (iv) to pay on or before each
Distribution Date to the Depositor, MCFC, GACC, BCMC or other purchaser with
respect to each Mortgage Loan or REO Property that has previously been
purchased or repurchased by it pursuant to the Pooling and Servicing
Agreement, all amounts received thereon during the related Collection Period
and subsequent to the date as of which the amount required to effect such
purchase or repurchase was determined; (v) to the extent not reimbursed or
paid pursuant to any of the above clauses, to reimburse or pay the Master
Servicer, the Special Servicer, the Trustee, the Depositor and/or the Fiscal
Agent, as applicable, for certain other unreimbursed expenses incurred by or
on behalf of such person pursuant to and to the extent reimbursable under the
Pooling and Servicing Agreement and to satisfy any indemnification
obligations of the Trust Fund under the Pooling and Servicing Agreement; (vi)
to pay to the Trustee amounts requested by it to pay taxes on certain net
income with respect to REO Properties; (vii) to withdraw any amount deposited
into the Collection Account that was not required to be deposited therein;
and (viii) to clear and terminate the Collection Account pursuant to a plan
for termination and liquidation of the Trust Fund.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
The Master Servicer or the Special Servicer, as applicable, will be
obligated to enforce the Trustee's rights under the "due-on-sale" clause in
the related Mortgage Loan documents to accelerate the maturity of the related
Mortgage Loan, unless such provision is not enforceable under applicable law
or such enforcement is reasonably likely to result in meritorious legal
action by the related borrower or to the extent the Master Servicer or the
Special Servicer, as applicable, acting in accordance with the servicing
standard described herein, determines that such enforcement is not in the
best interests of the Trust Fund. A "due-on-sale" or "due-on-encumbrance"
clause may, under certain circumstances, be unenforceable against a borrower
that is a debtor in a case under the Bankruptcy Code.
If applicable law prohibits the enforcement of a "due-on-sale" clause or
the Master Servicer or Special Servicer is (i) otherwise prohibited from
taking such action as described in the preceding paragraph or (ii) determines
that such enforcement is not in the best interests of the Trust Fund and, as
a consequence, a Mortgage Loan is assumed, (x) the original borrower may be
released from liability for the unpaid principal balance of the related
Mortgage Loan and interest thereon at the applicable Mortgage Rate during the
remaining term of such Mortgage Loan, (y) the Master Servicer may accept
payments in respect of the Mortgage Loan from the new owner of the Mortgaged
Property and (z) the Master Servicer or the Special Servicer, as applicable,
may enter into an assumption agreement with a new purchaser whereby the new
owner of the Mortgaged Property will be substituted as the borrower and the
original borrower released, so long as (to the extent permitted by law) the
new owner satisfies the underwriting requirements customarily imposed by the
Master Servicer or the Special Servicer, as applicable, as a condition to its
approval of a borrower on a new mortgage loan substantially similar to such
Mortgage Loan. In the event a Mortgage Loan is assumed as described in the
preceding sentences, the Trustee, the
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Master Servicer and the Special Servicer, will not permit any modification of
such Mortgage Loan other than as described below under "--Amendments,
Modifications and Waivers." The Master Servicer or Special Servicer, as
applicable, will be entitled to retain as additional servicing compensation
any assumption fees paid by the original borrower or the new owner in
connection with such assumption. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Enforceability of Certain Provisions--Due-on-Sale Provisions" in the
Prospectus. A new owner of the Mortgaged Property may be substituted or a
junior or senior lien allowed on the Mortgaged Property, without the consent
of the Master Servicer, the Special Servicer or the Trustee in a bankruptcy
proceeding involving the Mortgaged Property.
If any Mortgage Loan contains a provision in the nature of a
"due-on-encumbrance" clause, which by its terms (i) provides that such
Mortgage Loan will (or may at the related mortgagee's option) become due and
payable upon the creation of any lien or other encumbrance on such Mortgaged
Property or (ii) requires the consent of the related mortgagee to the
creation of any such lien or other encumbrance on such Mortgaged Property,
then, for so long as such Mortgage Loan is included in the Trust Fund, the
Master Servicer or the Special Servicer, as applicable, on behalf of the
Trust Fund, will enforce such provision and in connection therewith will (x)
accelerate the payments due on such Mortgage Loan or (y) withhold its consent
to the creation of any such lien or other encumbrance, as applicable, except,
in each case, to the extent that the Master Servicer or the Special Servicer,
as applicable, acting in accordance with the applicable servicing standard,
determines that such enforcement would not be in the best interests of the
Trust Fund and receives written confirmation from S&P that forbearance to
enforce such provision shall not result, in and of itself, in a downgrading,
withdrawal or qualification of the rating then assigned by S&P to any Class
of Certificates. Notwithstanding the foregoing, the Master Servicer or the
Special Servicer, as applicable, may forbear from enforcing any
"due-on-encumbrance" provision in connection with any junior or senior lien
on the Mortgaged Property imposed in connection with any bankruptcy
proceeding involving the Mortgaged Property.
INSPECTIONS; APPRAISALS
The Master Servicer (or the Special Servicer with respect to Specially
Serviced Mortgage Loans or REO Property) is required (at its own expense) to
inspect each Mortgaged Property at such times and in such manner as are
consistent with the servicing standards described herein, but will in any
event (i) inspect each Mortgaged Property at least once every 12 months with
the first such inspection being completed on or prior to June, 1997, unless
each of the Rating Agencies has confirmed in writing that a longer period
between inspections (which may not exceed 24 months) will not result, in and
of itself, in a downgrading, withdrawal or qualification of the rating then
assigned by such Rating Agency to any Class of the Certificates, (ii) if the
Master Servicer or the Special Servicer, as applicable, retains any Financial
and Lease Reporting Fees pursuant to the related Mortgage Loan, inspect the
related Mortgaged Property as soon as practicable thereafter (except to the
extent such property has been inspected by the Master Servicer or the Special
Servicer within the preceding 120 days) and (iii) if any Monthly Payment
becomes more than 60 days delinquent (without giving effect to any grace
period permitted under the related Note or Mortgage) each related Mortgaged
Property shall be inspected by the Special Servicer (at its own expense) as
soon as practicable thereafter.
REALIZATION UPON MORTGAGE LOANS
Appraisals for Specially Serviced Mortgage Loans. Contemporaneously with
the earliest to occur of (i) the effective date of any modification of the
stated maturity, Mortgage Rate, principal balance or amortization terms of
any Specially Serviced Mortgage Loan or other "significant" modification (as
defined in Section 1001 of the Code) of any Mortgage Loan, as to which a
default has occurred or is reasonably foreseeable, (ii) the date 90 days
after the occurrence of any uncured payment delinquency, (iii) the date 180
days after a receiver is appointed in respect of a Mortgaged Property or (iv)
the date a Mortgaged Property becomes an REO Property, the Special Servicer
will promptly order an Updated Appraisal of the Mortgaged Property or REO
Property, as the case may be, except to the extent such appraisal had been
previously obtained within the prior twelve months. In addition, the Special
Servicer will promptly order a new Updated Appraisal or an update from the
prior Updated Appraisal in the event any Mortgage Loan is a Seriously
Delinquent Loan and such prior Updated Appraisal is more than twelve months
old. An "Updated Appraisal" is (i) an appraisal of the related Mortgaged
Property conducted in accordance with MAI standards from an independent
appraiser who is a member of the Appraisal Institute with respect to any
Mortgage Loan with an outstanding principal balance in excess of $3,000,000
and (ii) an internal property valuation performed by the Special Servicer in
accordance with the servicing standard set forth in the Pooling and Servicing
Agreement or an appraisal performed by an independent appraiser with respect
to any Mortgage Loan with an outstanding principal balance equal to or less
than $3,000,000.
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Following a default in the payment of a Balloon Payment, the Special
Servicer may grant any number of successive extensions of up to 12 months (or
the period since the beginning of the first such extension, if shorter) with
respect to the defaulted Mortgage Loan; provided that the Special Servicer
may not grant any such successive extensions if, during the previous 12-month
period, such borrower was 60 days delinquent in payment of any principal or
interest; and provided further that if any extension is granted after the
third successive extension has been granted, such further extension will only
be granted with the approval of the person appointed to advise upon
extensions (the "Extension Advisor"). The Special Servicer may not grant any
extension (i) that permits such borrower to make payments of interest only
for a period, in the aggregate, of greater than 12 months or (ii) extends the
maturity date of any mortgage loan beyond the Rated Final Distribution Date.
Notwithstanding anything to the contrary described herein, the Special
Servicer will not have any right or obligation to consult with or seek and/or
obtain the approval or direction from an Extension Advisor prior to acting,
and the provisions of the Pooling and Servicing Agreement relating thereto or
requiring such will be of no effect during any period that no person is
acting in such capacity.
The holders of 66 2/3% of the aggregate Voting Rights of all Classes of
Regular Certificates, other than the most subordinate such Class of Regular
Certificates, will be entitled to appoint an initial Extension Advisor or
remove and replace the current Extension Advisor by providing written notice
thereof to the Trustee and Special Servicer. The Trustee will notify the
Certificateholders and the Rating Agencies in the event the Trustee receives
written notice from the holders of 66 2/32/3% of the aggregate Voting Rights
of all Classes of Regular Certificates, other than the most subordinate such
Class of Regular Certificates, or, in the case of resignation, from the
Extension Advisor, which notice provides that an initial Extension Advisor
has been appointed or that the current Extension Advisor has been removed or
has been reassigned.
The Extension Advisor will be paid a fee of 0.04% of the Scheduled
Principal Balance of any Mortgage Loan as to which an extension is requested
that requires the Extension Advisor's approval. Such fee is payable first
from loan modification fees from the borrower under the related Mortgage Loan
and, to the extent such amounts are insufficient, from fees otherwise payable
to the Master Servicer and the Special Servicer. The Extension Advisor
generally will be entitled to indemnification from the Trust Fund to the same
extent that the Master Servicer is entitled to indemnification. See
"SERVICING OF THE MORTGAGE LOANS--Certain Matters with Respect to the Master
Servicer, the Special Servicer, the Trustee and the Depositor" in the
Prospectus.
Standards for Conduct Generally in Effecting Foreclosure or the Sale of
Defaulted Loans. In connection with any foreclosure or other acquisition, any
costs and expenses incurred in any such proceedings will be advanced by the
Master Servicer as a Property Advance, unless the Master Servicer determines
that such Advance would constitute a nonrecoverable Advance.
If the Special Servicer elects to proceed with a non-judicial foreclosure
in accordance with the laws of the state in which the Mortgaged Property is
located, the Special Servicer will not be required to pursue a deficiency
judgment against the related borrower, or any other liable party if the laws
of the state do not permit such a deficiency judgment after a non-judicial
foreclosure or if the Special Servicer determines, in its best judgment, that
the likely recovery if a deficiency judgment is obtained will not be
sufficient to warrant the cost, time, expense and/or exposure of pursuing the
deficiency judgment and such determination is evidenced by an officer's
certificate delivered to the Trustee.
Notwithstanding any provision to the contrary, the Special Servicer will
not, on behalf of the Trust Fund, obtain title to a Mortgaged Property as a
result of or in lieu of foreclosure or otherwise, and will not otherwise
acquire possession of, or take any other action with respect to, any
Mortgaged Property if, as a result of any such action, the Trustee, for the
Trust Fund or the holders of Certificates, would be considered to hold title
to, to be a "mortgagee-in-possession" of, or to be an "owner" or "operator"
of, such Mortgaged Property within the meaning of CERCLA or any comparable
law, unless the Special Servicer has previously determined, based on an
updated environmental assessment report prepared by an independent person who
regularly conducts environmental audits, that: (i) such Mortgaged Property is
in compliance with applicable environmental laws or, if not, after
consultation with an environmental consultant, that it would be in the best
economic interest of the Trust Fund to take such actions as are necessary to
bring such Mortgaged Property in compliance therewith and (ii) there are no
circumstances present at such Mortgaged Property relating to the use,
management or disposal of any hazardous materials for which investigation,
testing, monitoring, containment, clean-up or remediation could be required
under any currently effective federal, state or local law or regulation, or
that, if any such hazardous materials are present for which such action could
be required, after consultation with an environmental consultant, it would be
in the best economic interest of the Trust Fund to take such actions with
respect to the affected Mortgaged Property.
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In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed-in-lieu of foreclosure, the deed or certificate of
sale will be issued to the Trustee, or to its nominee (which shall not
include the Master Servicer or the Special Servicer) or a separate trustee or
co-trustee on behalf of the Trustee as the holder of the REMIC I Certificates
and the holders of Certificates. Notwithstanding any such acquisition of
title and cancellation of the related Mortgage Loan, such Mortgage Loan will
be considered to be a Mortgage Loan held in the Trust Fund until such time as
the related REO Property is sold by the Trust Fund and will be reduced by Net
REO Proceeds allocated to principal.
If the Trust Fund acquires a Mortgaged Property by foreclosure or
deed-in-lieu of foreclosure upon a default of a Mortgage Loan, the Pooling
and Servicing Agreement provides that the Special Servicer must administer
such Mortgaged Property so that it qualifies at all times as "foreclosure
property" within the meaning of Code Section 860G(a)(8). The Pooling and
Servicing Agreement also requires that any such Mortgaged Property be managed
and operated by an "independent contractor," within the meaning of applicable
Treasury regulations, who furnishes or renders services to the tenants of
such Mortgaged Property, unless the Special Servicer provides the Trustee
with an opinion of counsel that the operation and management of the Mortgaged
Property other than through an independent contractor will not cause such
Mortgaged Property to fail to qualify as "foreclosure property" (which
opinion will be an expense of the Trust Fund). Generally, REMIC-I will not be
taxable on income received with respect to the Mortgaged Property to the
extent that it constitutes "rents from real property," within the meaning of
Code Section 856(c)(3)(A) and Treasury regulations thereunder. "Rents from
real property" do not include the portion of any rental based on the net
income or gain of any tenant or sub-tenant. NO DETERMINATION HAS BEEN MADE
WHETHER RENT ON ANY OF THE MORTGAGED PROPERTIES MEETS THIS REQUIREMENT.
"Rents from real property" include charges for services customarily furnished
or rendered in connection with the rental of real property, whether the
charges are separately stated. Services furnished to the tenants of a
particular building will be considered as customary if, in the geographic
market in which the building is located, tenants in buildings that are of a
similar class are customarily provided with the service. NO DETERMINATION HAS
BEEN MADE WHETHER THE SERVICES FURNISHED TO THE TENANTS OF THE MORTGAGED
PROPERTIES ARE "CUSTOMARY" WITHIN THE MEANING OF APPLICABLE REGULATIONS. It
is therefore possible that a portion of the rental income with respect to a
Mortgaged Property owned by the Trust Fund, presumably allocated based on the
value of any non-qualifying services, would not constitute "rents from real
property." In addition to the foregoing, any net income from a trade or
business operated or managed by an independent contractor on a Mortgaged
Property owned by REMIC-I, including but not limited to a skilled nursing
care business, will not constitute "rents from real property." Any of the
foregoing types of income may instead constitute "net income from foreclosure
property," which would be taxable to REMIC-I at the highest marginal federal
corporate rate (currently 35%) and may also be subject to state or local
taxes. Any such taxes would be chargeable against the related income for
purposes of determining the Net REO Proceeds available for distribution to
holders of Certificates. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of the REMIC and its Holders," "--Taxation of Regular
Interests," "--Taxation of the REMIC" and "--Taxation of Holders of Residual
Certificates" in the Prospectus.
The Special Servicer may offer to sell to any person any Specially
Serviced Mortgage Loan or any REO Property, if and when the Special Servicer
determines, consistent with the servicing standards set forth in the Pooling
and Servicing Agreement, that no satisfactory arrangements can be made for
collection of delinquent payments thereon and such a sale would be in the
best economic interests of the Trust Fund, but will, in any event, so offer
to sell any REO Property no later than the time determined by the Special
Servicer to be sufficient to result in the sale of such REO Property within
the period specified in the Pooling and Servicing Agreement, including
extensions thereof. The Special Servicer will give the Trustee not less than
10 Business Days' prior written notice of its intention to sell any Specially
Serviced Mortgage Loan or REO Property, in which case the Special Servicer
will accept any offer received from any person that is determined by the
Special Servicer to be a fair price for such Specially Serviced Mortgage Loan
or REO Property, if the highest offeror is an Interested Person, or is
determined to be such a price by the Trustee (which may be based upon updated
independent appraisals received by the Trustee or the Special Servicer, as
applicable), if the highest offeror is an Interested Person; provided,
however, that any offer by an Interested Person in the amount of the
Repurchase Price shall be deemed to be a fair price. "Interested Person"
means the Depositor, the Master Servicer, the Special Servicer, the Trustee,
any borrower or property manager of a Mortgaged Property, an independent
contractor engaged by the Special Servicer to manage or operate an REO
Property or any affiliate of any of the foregoing. Notwithstanding anything
to the contrary herein, neither the Trustee, in its individual capacity, nor
any of its affiliates may offer for or purchase any Specially Serviced
Mortgage Loan or any REO Property. In addition, the Special Servicer may
accept an offer that is not the highest offer if it determines, in accordance
with the servicing standard stated in the Pooling and Servicing Agreement,
that acceptance of such offer would be in the best interests of the holders
of Certificates (for example, if the prospective buyer making the lower offer
is more likely to perform its obligations, or the terms offered by the
prospective buyer making the lower offer are more favorable).
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AMENDMENTS, MODIFICATIONS AND WAIVERS
Neither the Master Servicer nor the Special Servicer may modify, amend,
waive or otherwise consent to the change of the stated maturity date of any
Mortgage Loan, the payment of principal of, or interest or Default Interest
on, any Mortgage Loan, or any other term of a Mortgage Loan, unless (i) such
modification, amendment, waiver or consent is not a "significant
modification" under Section 1001 of the Code, (ii) to the extent such
modification, amendment, waiver or consent would constitute a "significant
modification" under Section 1001 of the Code, such Mortgage Loan is in
default or a default with respect thereto is reasonably foreseeable or (iii)
such modification, amendment, waiver or consent is permitted under
"--Realization Upon Mortgage Loans--Appraisals for Specially Serviced
Mortgage Loans" herein. Neither Master Servicer nor the Special Servicer may
agree to any retroactive modification, amendment, waiver or consent.
THE TRUSTEE
LaSalle National Bank, a nationally chartered bank with its principal
offices in Chicago, Illinois, will act as Trustee pursuant to the Pooling and
Servicing Agreement. The Trustee's corporate trust office is located at 135
South LaSalle Street, Suite 1740, Chicago, Illinois 60603.
The Trustee may resign at any time by giving written notice to the
Depositor, the Master Servicer, the Special Servicer and the Rating Agencies.
Upon such notice of the Trustee's resignation, the Fiscal Agent will also be
deemed removed and, accordingly, the Master Servicer will appoint a successor
trustee, which appointment of successor trustee will not result, in and of
itself, in a downgrading, withdrawal or qualification of the rating then
assigned by the Rating Agencies to any Class of the Certificates as confirmed
in writing by each of the Rating Agencies, and a successor fiscal agent,
which, if the successor trustee is not rated by each Rating Agency in one of
its two highest long-term debt rating categories, will be confirmed in
writing by each of the Rating Agencies that such appointment of such
successor fiscal agent will not result, in and of itself, in a downgrading,
withdrawal or qualification of the rating then assigned by such Rating Agency
to any Class of the Certificates. If no successor trustee and successor
fiscal agent is appointed within 30 days after the giving of such notice of
resignation, the resigning Trustee and departing Fiscal Agent may petition
any court of competent jurisdiction for appointment of a successor trustee
and successor fiscal agent.
The Depositor or the Master Servicer may remove the Trustee and the Fiscal
Agent if, among other things, the Trustee ceases to be eligible to continue
as such under the Pooling and Servicing Agreement or if at any time the
Trustee or the Fiscal Agent becomes incapable of acting, or is adjudged
bankrupt or insolvent, or a receiver of the Trustee or the Fiscal Agent or
its property is appointed or any public officer takes charge or control of
the Trustee or the Fiscal Agent or of its property. The holders of
Certificates evidencing a majority of the aggregate Voting Rights may remove
the Trustee and the Fiscal Agent upon written notice to the Master Servicer,
the Special Servicer, the Depositor, the Trustee and the Fiscal Agent. Any
resignation or removal of the Trustee and the Fiscal Agent and appointment of
a successor trustee and, if such trustee is not rated by each Rating Agency
in one of its two highest long-term debt rating categories, fiscal agent will
not become effective until acceptance of the appointment by the successor
trustee and, if necessary, fiscal agent.
The "Voting Rights" assigned to each Class shall be (i) 0% in the case of
the Residual Certificates, (ii) in the case of any other Class of P&I
Certificates, a percentage equal to the product of (x) 95% so long as the
Class A-EC Notional Balance is greater than zero and 97% thereafter and (y) a
fraction, the numerator of which is equal to the aggregate outstanding
Certificate Balance of such Class and the denominator of which is equal to
the aggregate outstanding Certificate Balances of all such Classes of
Certificates; (iii) in the case of the Class A-EC Certificates, 2% so long as
the Class A-EC Notional Balance is greater than zero, and 0% thereafter; (iv)
0.1% in the Case of Class K-1 Certificates; and (v) 2.9% in the case of Class
K-2 Certificates. The Voting Rights of any Class of Certificates shall be
allocated among holders of Certificates of such Class in proportion to their
respective Percentage Interests; provided, however that, any Certificate held
or beneficially owned by the Depositor, the Master Servicer, the Special
Servicer, the Trustee, a property manager or a borrower or any affiliate
thereof will be deemed not to be outstanding and the Voting Rights to which
it is entitled shall not be taken into account in determining whether the
requisite percentage of Voting Rights necessary to effect any consent,
approval or waiver that specifically relates to any such person has been
obtained (unless such consent, approval or waiver is to an action that would
materially and adversely affect the interests of the holders of any Class of
Certificates while any such person is the holder of Certificates aggregating
not less than 66 2/32/3% of the Percentage Interest of any such Class).
Pursuant to the Pooling and Servicing Agreement, the Trustee will be
entitled to receive a monthly fee from the Master Servicer.
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The Trust Fund will indemnify the Trustee, the Fiscal Agent and their
respective directors, officers, employees, agents and affiliates against any
and all losses, liabilities, damages, claims or expenses (including
reasonable attorneys' fees) arising in respect of the Pooling and Servicing
Agreement or the Certificates (but only to the extent that they are expressly
reimbursable under the Pooling and Servicing Agreement or are unanticipated
expenses incurred by the REMIC) other than those resulting from the
negligence, fraud, bad faith or willful misconduct of the Trustee and those
for which such indemnified persons are indemnified pursuant to the last
sentence of this paragraph. The Trustee will not be required to expend or
risk its own funds or otherwise incur financial liability in the performance
of any of its duties under the Pooling and Servicing Agreement, or in the
exercise of any of its rights or powers, if in the Trustee's opinion the
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it. Each of the Master Servicer and the Special
Servicer will indemnify the Trustee, the Fiscal Agent and their respective
directors, officers, employees, agents and affiliates for similar losses
incurred related to the willful misconduct, fraud, bad faith and/or
negligence in the performance of the Master Servicer's or the Special
Servicer's respective duties under the Pooling and Servicing Agreement or by
reason of reckless disregard of the Master Servicer's or the Special
Servicer's respective obligations and duties under the Pooling and Servicing
Agreement.
DUTIES OF THE TRUSTEE
The Trustee, the Fiscal Agent, the Special Servicer and Master Servicer
will make no representation as to the validity or sufficiency of the Pooling
and Servicing Agreement, the Certificates, this Prospectus Supplement or the
validity, enforceability or sufficiency of the Mortgage Loans or related
documents. The Trustee and the Fiscal Agent will not be accountable for the
use or application by the Depositor of any Certificates or of the proceeds of
such Certificates, or for the use of or application of any funds paid to the
Depositor, the Master Servicer or the Special Servicer in respect of the
Mortgage Loans, or any funds deposited in or withdrawn from the Collection
Account or the Distribution Account by the Depositor, the Master Servicer or
the Special Servicer, other than with respect to any funds held by the
Trustee.
If no Event of Default has occurred of which the Trustee has actual
knowledge and after the curing of all Events of Default that may have
occurred, the Trustee is required to perform only those duties specifically
required under the Pooling and Servicing Agreement. Upon receipt of the
various certificates, reports or other instruments required to be furnished
to it, the Trustee is required to examine such documents and to determine
whether they conform on their face to the requirements of the Pooling and
Servicing Agreement.
If the Master Servicer fails to make any required Advance, the Trustee, as
acting or successor Master Servicer, will be required to make such Advance to
the extent that such Advance is not deemed to be nonrecoverable. The Trustee
will be entitled to rely conclusively on any determination by the Master
Servicer that an Advance, if made, would be nonrecoverable. The Trustee will
be entitled to reimbursement for each Advance made by it in the same manner
and to the same extent as the Master Servicer. See "--Advances" herein.
THE FISCAL AGENT
ABN AMRO Bank N.V., a Netherlands banking corporation and the corporate
parent of the Trustee, will act as Fiscal Agent for the Trustee and will be
obligated to make any Advance required to be made, and not made, by the
Trustee under the Pooling and Servicing Agreement, provided that the Fiscal
Agent will not be obligated to make any Advance that it deems to be
nonrecoverable. The Fiscal Agent will be entitled to rely conclusively on any
determination by the Master Servicer that an Advance, if made, would not be
recoverable. The Fiscal Agent will be entitled to reimbursement for each
Advance made by it in the same manner and to the same extent as the Trustee
and the Master Servicer. See "--Advances" herein.
In the event of the resignation or removal of the Trustee, the Fiscal
Agent shall be entitled to resign, it being understood that the initial
Fiscal Agent shall not be obligated to act in such capacity hereunder at any
time that LaSalle National Bank is not the Trustee. No resignation or removal
of the Fiscal Agent will become effective until a successor fiscal agent has
assumed the Fiscal Agent's obligations and duties under the Pooling and
Servicing Agreement and it is confirmed in writing by each of the Rating
Agencies that the appointment of such successor fiscal agent will not result,
in and of itself, in a downgrading, withdrawal or qualification of the rating
then assigned by such Rating Agency to any Class of the Certificates.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Pursuant to the Pooling and Servicing Agreement, the Master Servicer will
be entitled to receive a monthly servicing fee (the "Servicing Fee") for each
Midland Mortgage Loan equal to a per annum rate of %, for each GACC
Mortgage Loan
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equal to a per annum rate of % and for each BCMC Mortgage Loan equal to a
per annum rate of % (the "Servicing Fee Rate") on the then outstanding
principal balance of such Mortgage Loan calculated on the basis of a 360-day
year consisting of twelve 30-day months. The Servicing Fee relating to each
Mortgage Loan will be retained by the Master Servicer from payments and
collections (including Insurance Proceeds and Liquidation Proceeds) in
respect of such Mortgage Loan. The Master Servicer will also be entitled to
retain as additional servicing compensation (i) all investment income earned
on amounts on deposit in the Reserve Accounts (to the extent consistent with
applicable law and the related Mortgage Loan documents), the Collection
Account and the Distribution Account, (ii) all amounts collected with respect
to the Mortgage Loans (that are not Specially Serviced Mortgage Loans) in the
nature of late payment charges, late fees, NSF check charges (including with
respect to Specially Serviced Mortgage Loans), loan service transaction fees,
extension fees, demand fees, modification fees, assumption fees, beneficiary
statement charges and similar fees and charges (but not including any
Prepayment Premiums so long as the A-EC Notional Balance is greater than zero
or Default Interest), (iii) Financial and Lease Reporting Fees (with respect
to any Mortgage Loan that is not a Specially Serviced Mortgage Loan and to
the extent permitted under the related Mortgage Loan) and (iv) any Prepayment
Interest Surplus (to the extent not offset against any Prepayment Interest
Shortfall in accordance with the provisions of the Pooling and Servicing
Agreement).
The Master Servicer will pay all expenses incurred in connection with its
responsibilities under the Pooling and Servicing Agreement (subject to
reimbursement as described herein), including all fees of any sub-servicers
retained by it, all fees payable to the Trustee and the various expenses of
the Master Servicer specifically described herein.
SPECIAL SERVICING
Midland Loan Services, L.P. will be the initial Special Servicer. The
Special Servicer may be removed without cause and a successor Special
Servicer appointed (i) first, by the holders of the majority of the aggregate
Voting Rights of the Class H and Class J Certificates at such time as
Realized Losses allocated to the Class K-1 Certificates equal or exceed 75%
of the initial Certificate Balance of such Class, but only until such time as
Realized Losses allocated to the Class H and the Class J Certificates equal
or exceed 50% of the aggregate initial Certificate Balances of such Classes;
(ii) second, by the holders of the majority of the aggregate Voting Rights of
the Class G Certificates, but only until such time as Realized Losses
allocated to the Class G Certificates equal or exceed 50% of the initial
Certificate Balance of such Class; and (iii) thereafter, by the holders of
the majority of the aggregate Voting Rights of the second most subordinate
Class of Certificates then outstanding, but only until such time as Realized
Losses allocated to the most subordinate Class equals or exceeds 50% of the
initial Certificate Balance of such Class.
Notwithstanding the foregoing, the removal of the Special Servicer and the
appointment of a successor Special Servicer shall not be effective until (i)
the successor Special Servicer has assumed in writing all of the
responsibilities, duties and liabilities of the Special Servicer hereunder
pursuant to an agreement satisfactory to the Trustee, and (ii) each of the
Rating Agencies confirms to the Trustee in writing that such appointment and
assumption shall not result, in and of itself, in a downgrading, withdrawal
or qualification of the rating then assigned by such Rating Agency to any
Class of Certificates.
The duties of the Special Servicer relate primarily to Specially Serviced
Mortgage Loans and to any REO Property. The Pooling and Servicing Agreement
will define a "Specially Serviced Mortgage Loan" to include any Mortgage Loan
with respect to which: (i) the related borrower is 60 or more days delinquent
in the payment of principal and interest (regardless of whether in respect
thereof P&I Advances have been reimbursed); (ii) the borrower under which has
expressed to the Master Servicer an inability to pay or a hardship in paying
the Mortgage Loan in accordance with its terms; (iii) the Master Servicer has
received notice that the borrower has become the subject of any bankruptcy,
insolvency or similar proceeding, admitted in writing the inability to pay
its debts as they come due or made an assignment for the benefit of
creditors; (iv) the Master Servicer has received notice of a foreclosure or
threatened foreclosure of any lien on the Mortgaged Property securing the
Mortgage Loan; (v) a default of which the Master Servicer has notice (other
than a failure by the borrower to pay principal or interest) and which
materially and adversely affects the interests of the Certificateholders has
occurred and remained unremedied for the applicable grace period specified in
the Mortgage Loan (or, if no grace period is specified, 60 days); provided,
that a default requiring a Property Advance will be deemed to materially and
adversely affect the interests of Certificateholders; (vi) the borrower has
failed to make a Balloon Payment (except in the case where the Master
Servicer and the Special Servicer agree in writing that such Mortgage Loan is
likely to be paid in full within 30 days after such default); or (vii) the
Master Servicer proposes to commence foreclosure or other workout
arrangements; provided, however, that a Mortgage Loan will cease to be a
Specially Serviced Mortgage Loan (a) with respect to the circumstances
described in clauses (i) and (vi) above, when the borrower thereunder has
brought the Mortgage Loan current (with respect to the circumstances
described in clause (vi), pursuant to any workout recommended by the Special
Servicer) and thereafter made three
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consecutive full and timely Monthly Payments, (b) with respect to the
circumstances described in clauses (ii) and (iv) above, when such
circumstances cease to exist in the good faith judgment of the Special
Servicer and with respect to the circumstances described in clauses (iii) and
(vii), when such circumstances cease to exist or (c) with respect to the
circumstances described in clause (v) above, when such default is cured;
provided, in any such case, that at that time no circumstance exists (as
described above) that would cause the Mortgage Loan to continue to be
characterized as a Specially Serviced Mortgage Loan.
Pursuant to the Pooling and Servicing Agreement, the Special Servicer will
be entitled to certain fees, including a special servicing fee (the "Special
Servicing Fee") equal to 1/12th of 0.35% on a monthly basis of the Scheduled
Principal Balance of each related Specially Serviced Mortgage Loan. The
Special Servicer will also receive with respect to any Specially Serviced
Mortgage Loan or REO Property that is sold or transferred or otherwise
liquidated (except in connection with the repurchase of a Mortgage Loan as
described under "DESCRIPTION OF THE MORTGAGE POOL--Representations and
Warranties; Repurchase"), in addition to the Special Servicing Fee, a
disposition fee (the "Disposition Fee") equal to the product of (A) the
excess, if any, of (x) the proceeds of the sale or liquidation of any
Specially Serviced Mortgage Loan or REO Property over (y) any broker's
commission and related brokerage referral fees and (B) (x) 1.5%, if such sale
or liquidation occurs prior to 12 months following the date on which the
Mortgage Loan initially became a Specially Serviced Mortgage Loan or (y)
1.0%, if such sale or liquidation occurs upon or after the expiration of such
12-month period. Furthermore, the Special Servicer shall be entitled to
receive, as additional servicing compensation, a workout fee (the "Workout
Fee") equal to the product of 1.0% and the amount of Net Collections received
by the Master Servicer or the Special Servicer with respect to each Corrected
Mortgage Loan. If any Corrected Mortgage Loan again becomes a Specially
Serviced Mortgage Loan, any right to the Workout Fee with respect to such
Mortgage Loan earned in connection with the initial modification,
restructuring or workout thereof shall terminate, and the Special Servicer
shall be entitled to a new Workout Fee for such Mortgage Loan upon resolution
or workout of the subsequent event of default under such Mortgage Loan. If
the Special Servicer is terminated for any reason it will retain the right to
receive any Workout Fees payable in respect of any Mortgage Loans that become
Corrected Mortgage Loans during the period that it acted as Special Servicer
(and the successor Special Servicer will not be entitled to any portion of
such Workout Fees), in each case until the Workout Fees for any Mortgage Loan
cease to be payable in accordance with this paragraph. Each of the foregoing
fees, along with certain expenses related to special servicing of a Mortgage
Loan, will be payable out of funds otherwise available to pay principal and
interest on the Certificates. The Special Servicer will also be entitled to
retain as additional servicing compensation (i) all investment income earned
on amounts on deposit in any REO Account and (ii) to the extent permitted
under the related Mortgage Loan, all amounts collected with respect to the
Specially Serviced Mortgage Loans in the nature of late payment charges, late
fees, assumption fees, loan modification fees, extension fees, Financial and
Lease Reporting Fees (to the extent such fees are not required to be remitted
to the related borrower pursuant to the related Note), loan service
transaction fees, beneficiary statement charges or similar items (but not
including any Default Interest or Prepayment Premiums), in each case to the
extent received with respect to any Specially Serviced Mortgage Loan and not
required to be deposited or retained in the Collection Account pursuant to
the Pooling and Servicing Agreement.
"Corrected Mortgage Loan" means any Mortgage Loan that is no longer a
Specially Serviced Mortgage Loan pursuant to the first proviso to the
definition of the term "Specially Serviced Mortgage Loan" as a result of the
curing of any event of default under such Specially Serviced Mortgage Loan
through a modification, restructuring or workout entered into by the Special
Servicer.
"Net Collections" means, with respect to any Corrected Mortgage Loan, an
amount equal to all payments on account of interest and principal on such
Mortgage Loan and all Prepayment Premiums.
The Special Servicer shall make its Servicing Officers available to
representatives of a Consulting Certificateholder during normal business
hours upon reasonable notice in order to discuss matters relating to any
Specially Serviced Mortgage Loan and REO Property, except to the extent doing
so is prohibited by applicable law or by any Mortgage Loan Documents. The
Special Servicer may, in its sole discretion, require that an agreement
governing the availability, use and disclosure of any information derived
pursuant to such discussions, and which may provide indemnification to the
Special Servicer for any liability or damage that may arise therefrom, be
executed by the Consulting Certificateholder.
The "Consulting Certificateholder" shall be any holder of Certificates of
the most subordinate Class or the next most subordinate Class then
outstanding, which Classes have an aggregate Certificate Balance of at least
$3,000,000.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Monthly Reports. On each Distribution Date, the Trustee will forward by
mail to each Certificateholder, with copies to the Depositor, the Paying
Agent, the Underwriter, the Master Servicer and each Rating Agency, a
statement as to such distribution setting forth for each class:
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(i) the Pooled Principal Distribution Amount and the amount allocable to
principal, included in Available Funds;
(ii) The Class Interest Distribution Amount distributable to such Class
and the amount of Available Funds allocable thereto, together with any
Class Interest Shortfall allocable to such Class;
(iii) The amount of any P&I Advances by the Master Servicer, the Trustee
or the Fiscal Agent included in the amounts distributed to the
Certificateholders;
(iv) The Certificate Balance of each Class of Certificates after giving
effect to the distribution of amounts in respect of the Pooled Principal
Distribution Amount on such Distribution Date;
(v) Realized Losses and their allocation to the Certificate Balance of
any Class of Certificates;
(vi) The Scheduled Principal Balance of the Mortgage Loans as of the Due
Date preceding such Distribution Date;
(vii) The number and aggregate principal balance of Mortgage Loans (A)
delinquent one month, (B) delinquent two months, (C) delinquent three or
more months, (D) as to which foreclosure proceedings have been commenced
and (E) that otherwise constitute Specially Serviced Mortgage Loans, and,
with respect to each Specially Serviced Mortgage Loan, the amount of
Property Advances made during the related Collection Period, the amount of
the P&I Advances made on such Distribution Date, the aggregate amount of
Property Advances theretofore made that remain unreimbursed and the
aggregate amount of P&I Advances theretofore made that remain
unreimbursed;
(viii) With respect to any Mortgage Loan that became an REO Mortgage Loan
during the preceding calendar month, the principal balance of such
Mortgage Loan as of the date it became an REO Mortgage Loan;
(ix) As of the Due Date preceding such Distribution Date, as to any REO
Property sold during the related Collection Period, the date on which the
Special Servicer made a Final Recovery Determination and the amount of the
proceeds of such sale deposited into the Collection Account, and the
aggregate amount of REO Proceeds and Net REO Proceeds (in each case other
than Liquidation Proceeds) and other revenues collected by the Special
Servicer with respect to each REO Property during the related Collection
Period and credited to the Collection Account, in each case identifying
such REO Property by name;
(x) The outstanding principal balance of each REO Mortgage Loan as of the
close of business on the immediately preceding Due Date and the appraised
value of the related REO Property per the most recent appraisal obtained;
(xi) The amount of the servicing compensation paid to the Master Servicer
with respect to such Distribution Date, and the amount of the additional
servicing compensation that was paid to the Master Servicer with respect
to such Distribution Date;
(xii) The amount of any Special Servicing Fee, Disposition Fee or Workout
Fee paid to the Special Servicer with respect to such Distribution Date;
and
(xiii) (A) The amount of Prepayment Premiums, if any, received during the
related Collection Period, and (B) the amount of Default Interest received
during the related Collection Period.
In the case of information furnished pursuant to subclauses (i), (ii),
(iii) and (xiii)(A) above, the amounts will be expressed as a dollar amount
in the aggregate for all Certificates of each applicable Class and for each
Class of Certificates for a denomination of $1,000 initial Certificate
Balance or Notional Balance.
Within a reasonable period of time after the end of each calendar year,
the Trustee will furnish to each person who at any time during the calendar
year was a holder of a Certificate (except for a Residual Certificate) a
statement containing the information set forth in subclauses (i) and (ii)
above, aggregated for such calendar year or applicable portion thereof during
which such person was a Certificateholder. Such obligation of the Trustee
will be deemed to have been satisfied to the extent that it provided
substantially comparable information pursuant to any requirements of the Code
as from time to time in force.
On each Distribution Date, the Trustee will forward to each holder of a
Residual Certificate a copy of the reports forwarded to the other
Certificateholders on such Distribution Date and a statement setting forth
the amounts, if any, actually distributed with respect to the Residual
Certificates on such Distribution Date.
Within a reasonable period of time after the end of each calendar year,
the Trustee will furnish to each person who at any time during the calendar
year was a holder of a Residual Certificate a statement setting forth the
amounts actually
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distributed with respect to such Certificate aggregated for such calendar
year or applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Trustee will be deemed to have been
satisfied to the extent that it provided substantially comparable information
pursuant to any requirements of the Code as from time to time in force.
In addition, the Trustee will forward to each Certificateholder any
additional information, if any, regarding the Mortgage Loans that the Master
Servicer or the Special Servicer, in its sole discretion, delivers to the
Trustee for distribution to the Certificateholders.
Certain information made available in the Distribution Date statements
referred to above may be obtained by calling LaSalle National Bank's ASAP
System at (312) 904-2200 and requesting statement number 222 or such other
mechanism as the Trustee may have in place from time to time.
Loan Portfolio Analysis System. The Master Servicer will collect and
maintain information regarding the Mortgage Loans in a computerized database,
which the Master Servicer currently commonly refers to as the "Loan Portfolio
Analysis System" or "LPAS." The Master Servicer currently intends to provide
access to LPAS via on-line telephonic communication to Certificateholders,
persons identified by a Certificateholder as a prospective transferee and
such other persons deemed appropriate by the Master Servicer. Information
contained in LPAS regarding the composition of the Mortgage Pool and certain
other information about the Mortgage Pool deemed appropriate by the Master
Servicer will be updated periodically. Certificateholders should contact Brad
Hauger, at telephone number (816) 435-5175, for access to LPAS.
Other Available Information. The Master Servicer or the Special Servicer,
if applicable, will promptly give notice to the Trustee, who will provide a
copy to each Certificateholder, each Rating Agency, the Depositor, the
Underwriters, Midland and the Mortgage Loan Sellers of (a) any notice from a
borrower or insurance company regarding an upcoming voluntary or involuntary
prepayment (including that resulting from a Casualty or Condemnation) of all
or part of the related Mortgage Loan (provided that a request by a borrower
or other party for a quotation of the amount necessary to satisfy all
obligations with respect to a Mortgage Loan will not, in and of itself, be
deemed to be such notice); and (b) of any other occurrence known to it with
respect to a Mortgage Loan or REO Property that the Master Servicer or the
Special Servicer determines would have a material effect on such Mortgage
Loan or REO Property, which notice will include an explanation as to the
reason for such material effect (provided that any extension of the term of
any Mortgage Loan will be deemed to have a material effect).
In addition to the other reports and information made available and
distributed to the Depositor, the Underwriters, the Trustee or the
Certificateholders pursuant to other provisions of the Pooling and Servicing
Agreement, the Master Servicer and the Special Servicer will, in accordance
with such reasonable rules and procedures as it may adopt (which may include
the requirement that an agreement governing the availability, use and
disclosure of such information, and which may provide indemnification to the
Master Servicer or the Special Servicer, as applicable, for any liability or
damage that may arise therefrom, be executed to the extent the Master
Servicer or the Special Servicer, as applicable, deems such action to be
necessary or appropriate), also make available any information relating to
the Mortgage Loans, the Mortgaged Properties or the borrower for review by
the Depositor, the Underwriters, the Trustee, the Certificateholders and any
other persons to whom the Master Servicer or the Special Servicer, as the
case may be, believes such disclosure is appropriate, in each case except to
the extent doing so is prohibited by applicable law or by any documents
related to a Mortgage Loan.
The Trustee will also make available during normal business hours, for
review by the Depositor, the Rating Agencies, any Certificateholder, the
Underwriters, any person identified to the Trustee by a Certificateholder as
a prospective transferee of a Certificate and any other persons to whom the
Trustee believes such disclosure is appropriate, the following items: (i) the
Pooling and Servicing Agreement, (ii) all monthly statements to
Certificateholders delivered since the closing date, (iii) all annual
statements as to compliance delivered to the Trustee and the Depositor and
(iv) all annual independent accountants' reports delivered to the Trustee and
the Depositor. The Master Servicer or the Special Servicer, as appropriate,
will make available at its offices during normal business hours, for review
by the Depositor, the Underwriters, the Trustee, the Rating Agencies, any
Certificateholder, any person identified to the Master Servicer or the
Special Servicer, as applicable, by a Certificateholder as a prospective
transferee of a Certificate any other persons to whom the Master Servicer or
the Special Servicer, as applicable, believes such disclosure is appropriate,
the following items: (i) the inspection reports prepared by or on behalf of
the Master Servicer or the Special Servicer, as applicable, in connection
with the property inspections conducted by the Master Servicer or the Special
Servicer, as applicable, (ii) any and all modifications, waivers and
amendments of the terms of a Mortgage Loan entered into by the Master
Servicer or the Special Servicer and (iii) any and all officer's certificates
and other evidence delivered to the Trustee and the Depositor to support the
Master Servicer's determination that any Advance was, or if made would be, a
Nonrecoverable Advance, in each case except to the extent
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doing so is prohibited by applicable laws or by any documents related to a
Mortgage Loan. The Master Servicer, the Special Servicer and the Trustee will
be permitted to require payment (other than from any Rating Agency) of a sum
sufficient to cover the reasonable costs and expenses incurred by it in
providing copies of or access to any of the above information.
The Master Servicer will, on behalf of the Trust Fund, prepare, sign and
file with the Commission any and all reports, statements and information
respecting the Trust Fund that the Master Servicer or the Trustee determines
are required to be filed with the Commission pursuant to Sections 13(a) or
15(d) of the 1934 Act, each such report, statement and information to be
filed on or prior to the required filing date for such report, statement or
information. Notwithstanding the foregoing, the Depositor will file with the
Commission, within 15 days of the closing date, a Form 8-K together with the
Pooling and Servicing Agreement.
None of the Trustee, the Fiscal Agent, the Master Servicer and the Special
Servicer will be responsible for the accuracy or completeness of any
information supplied to it by a borrower or other third party for inclusion
in any notice or in any other report or information furnished or provided by
the Master Servicer, the Special Servicer or the Trustee hereunder, and the
Master Servicer, the Special Servicer, the Trustee and the Fiscal Agent will
be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
any statement or omission or alleged statement or omission therein, including
any liability related to the inclusion of such information in any report
filed with the Commission.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, three separate "real estate mortgage
investment conduit" ("REMIC") elections will be made with respect to the
Trust Fund, creating three REMICs. Upon the issuance of the Offered
Certificates, Morrison & Hecker L.L.P. will deliver its opinion, generally to
the effect that, assuming compliance with all provisions of the Pooling and
Servicing Agreement, (i) each pool of assets with respect to which a REMIC
election is made will qualify as a REMIC under the Internal Revenue Code of
1986 (the "Code") and (ii) (a) the Class A-1, Class A-2, Class A-3, Class
A-EC, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J,
Class K-1 and Class K-2 Certificates will be, or will represent ownership of,
REMIC "regular interests" and (b) each residual interest will be the sole
"residual interest" in the related REMIC. Holders of the Offered Certificates
will be required to include in income all interest on such Certificates in
accordance with the accrual method of accounting regardless of such
Certificateholders' usual methods of accounting.
Because they represent regular interests, the Regular Certificates
generally will be treated as newly originated debt instruments for federal
income tax purposes. Holders of such Classes of Certificates will be required
to include in income all interest on such Certificates in accordance with the
accrual method of accounting, regardless of a Certificateholder's usual
method of accounting. Except as discussed with respect to the Class , Class
, Class and Class Certificates, the Certificates are not expected to
be treated for federal income tax reporting purposes as having been issued
with original issue discount. The Class A-EC and Class K-2 Certificates
constitute interest only Classes and the Class K-1 Certificates constitute a
principal only Class. These Certificates, together with the Class , Class
and Class Certificates, will be deemed to have been issued with original
issue discount ("OID"). The Trustee intends to treat the Class A-EC and Class
K-2 Certificates as having no "qualified stated interest." Accordingly, the
Class A-EC and Class K-2 Certificates will be considered to be issued with
OID in an amount equal to the excess of all distributions of interest
expected to be received thereon over their respective issue prices (including
accrued interest, if any, unless the holder elects on its federal income tax
return to exclude such amount from the issue price and to recover it on the
first Distribution Date). In addition, the Class K-1 Certificates will be
issued with OID in an amount equal to the excess of the initial principal
balance thereof over their issue price. Any "negative" amounts of OID on the
Class A-EC or Class K-2 Certificates attributable to rapid prepayments with
respect to the Mortgage Loans will not be deductible currently, but may be
offset against future positive accruals of OID, if any. However, the holder
of a Class A-EC or Class K-2 Certificate may be entitled to a loss deduction
to the extent it becomes certain that such holder will not recover a portion
of its basis in such Certificate. No representation is made as to the timing,
amount or character of such loss, if any. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Regular Interests--Interest and Acquisition
Discount." For the purposes of determining the rate of accrual of market
discount, original issue discount and premium for federal income tax
purposes, it has been assumed that the Mortgage Loans will prepay at the rate
of % CPR and that the Trust Fund will be terminated on the Distribution
Date occurring in December 2007 pursuant to the auction termination procedure
described herein. No representation is made as to whether the Mortgage Loans
will prepay at that rate or any other rate or whether the Trust Fund will be
terminated on such date. If it were ultimately determined that market
discount, original issue discount and premium should be amortized over the
longer term of the Mortgage Loans disregarding the assumed termination of the
Trust Fund
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in December 2007, the Class , Class , Class , and Class Certificates
would recognize less original issue discount in the years prior to and
including December 2007 and the Class R-I, R-II and R-III Certificateholders
would realize greater excess inclusion income in such years. Although it is
unclear whether the Class , Class , Class , and Class Certificates
will qualify as "variable rate instruments" under the OID Regulations, it
will be assumed for purposes of determining the original issue discount
thereon that such Certificates so qualify. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Regular Interests--Interest and Acquisition
Discount" in the Prospectus.
Certain Classes of the Offered Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
such a Class of Certificates will be treated as holding a Certificate with
amortizable bond premium will depend on such Certificateholder's purchase
price. Holders of such Classes of Certificates should consult their own tax
advisors regarding the possibility of making an election to amortize any such
premium. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Taxation of Regular
Interests" in the Prospectus.
Offered Certificates held by a mutual savings bank or domestic building
and loan association will represent interests in "qualifying real property
loans" within the meaning of Section 593(d) of the Code. Offered Certificates
held by a real estate investment trust will constitute "real estate assets"
within the meaning of Section 856(c)(6)(B) of the Code, and income with
respect to Offered Certificates will be considered "interest on obligations
secured by mortgages on real property or on interests in property" within the
meaning of Section 856(c)(3)(B) of the Code. Offered Certificates held by a
domestic building and loan association will generally constitute "a regular
or a residual interest in a REMIC" with the meaning of Section
7701(a)(19)(C)(xi) of the Code only in the proportion that the Mortgage Loans
are secured by multifamily apartment buildings. See "MATERIAL FEDERAL INCOME
TAX CONSEQUENCES--Taxation of the REMIC and its Holders" in the Prospectus.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of the REMIC" in the Prospectus.
DUE TO THE COMPLEXITY OF THESE RULES AND THE CURRENT UNCERTAINTY AS TO THE
MANNER OF THEIR APPLICATION TO THE TRUST FUND AND CERTIFICATEHOLDERS, IT IS
PARTICULARLY IMPORTANT THAT POTENTIAL INVESTORS CONSULT THEIR OWN TAX
ADVISORS REGARDING THE TAX TREATMENT OF THEIR ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE CERTIFICATES.
ERISA CONSIDERATIONS
GENERAL
The Subordinate Certificates may not be purchased by or transferred to (A)
an employee benefit plan or other retirement arrangement, including an
individual retirement account or a Keogh plan, which is subject to the
fiduciary responsibility provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code, or a
governmental plan subject to any federal, state or local law ("Similar Law")
that is, to a material extent, similar to the foregoing provisions of ERISA
or the Code ("Plans"), (B) a collective investment fund in which such Plans
are invested, (C) other persons acting on behalf of any such Plan or using
the assets of any such Plan or any entity whose underlying assets include
plan assets by reason of a Plan's investment in the entity (within the
meaning of Department of Labor Regulations Section 2510.3-101) or (D) an
insurance company that is using assets of any insurance company separate
account or general account in which the assets of such Plans are invested (or
which are deemed pursuant to ERISA or any Similar Law to include assets of
such Plans) other than an insurance company using the assets of its general
account under circumstances whereby such purchase and the subsequent holding
of such Certificates would not constitute or result in a prohibited
transaction within the meaning of Section 406 or 407 of ERISA, Section 4975
of the Code or a materially similar characterization under any Similar Law.
Each prospective transferee of a Certificate will be required to deliver to
the Depositor, the Certificate Registrar and the Trustee, (i) a transferee
representation letter, substantially in the form of Exhibit D-2 to the
Pooling and Servicing Agreement, stating that such prospective transferee is
not a person referred to in clause (A), (B), (C) or (D) above, or (ii) an
opinion of counsel which establishes to the satisfaction of the Depositor,
the Trustee and the Certificate Registrar that the purchase or holding of
such Certificate will not result in the assets of the Trust Fund being deemed
to be "plan assets" and subject to the fiduciary responsibility or prohibited
transaction provision of ERISA, the Code or any Similar Law, and will not
constitute or result in a prohibited transaction within the meaning of
Section 406 or 407 of ERISA, Section 4975 of the Code or any Similar Law, and
will not subject the Master Servicer, the Special Servicer, the
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Depositor, the Trustee or the Certificate Registrar to any obligation of
liability (including obligations or liabilities under ERISA or Section 4975
of the Code), which opinion of counsel will not be an expense of the Trustee,
the Trust Fund, the Master Servicer, the Special Servicer, the Certificate
Registrar or the Depositor.
TO THE EXTENT ANY OFFERED CERTIFICATE IS IN BOOK-ENTRY FORM, THE HOLDER OF
THE BENEFICIAL INTEREST IN SUCH CERTIFICATE AND ANY TRANSFEREE THEREOF SHALL
BE DEEMED TO HAVE REPRESENTED THAT IT IS NOT A PERSON REFERRED TO IN CLAUSES
(A), (B), (C) OR (D) ABOVE.
None of the Residual Certificates may be purchased by or transferred to a
Plan. Accordingly, the following discussion does not purport to discuss the
considerations under ERISA or Code Section 4975 with respect to the purchase,
holding or disposition of the Subordinate Certificates and the Residual
Certificates.
ERISA and the Code impose certain duties and restrictions on Plans and
certain persons who perform services for Plans. For example, unless exempted,
investment by a Plan in the Certificates may constitute or give rise to a
prohibited transaction under ERISA or the Code. There are certain exemptions
issued by the United States Department of Labor (the "Department") that may
be applicable to an investment by a Plan in the Offered Certificates,
including the individual administrative exemption described below.
Before purchasing any Offered Certificates, a Plan fiduciary should
consult with its counsel and determine whether there exists any prohibition
to such purchase under the requirements of ERISA, whether the individual
administrative exemption (as described below) applies, including whether the
appropriate conditions set forth therein would be met, or whether any
statutory prohibited transaction exemption is applicable.
CERTAIN REQUIREMENTS UNDER ERISA
General. In accordance with ERISA's general fiduciary standards, before
investing in a Certificate a Plan fiduciary should determine whether to do so
is permitted under the governing Plan instruments and is appropriate for the
Plan in view of its overall investment policy and the composition and
diversification of its portfolio. A Plan fiduciary should especially consider
the ERISA requirement of investment prudence and the sensitivity of the
return on the Certificates to the rate of principal repayments (including
voluntary prepayments by the borrowers and involuntary liquidations) on the
Mortgage Loans, as discussed in "YIELD AND MATURITY CONSIDERATIONS" herein.
Parties in Interest/Disqualified Persons. Other provisions of ERISA (and
corresponding provisions of the Code) prohibit certain transactions involving
the assets of a Plan and persons who have certain specified relationships to
the Plan (so-called "parties in interest" within the meaning of ERISA or
"disqualified persons" within the meaning of the Code). The Depositor, the
Underwriters, the Master Servicer, the Special Servicer or the Trustee or
certain affiliates thereof might be considered or might become "parties in
interest" or "disqualified persons" with respect to a Plan. If so, the
acquisition or holding of Certificates by or on behalf of such Plan could be
considered to give rise to a "prohibited transaction" within the meaning of
ERISA and the Code unless an administrative exemption described below or some
other exemption is available. Special caution should be exercised before the
assets of a Plan are used to purchase a Certificate if, with respect to such
assets, the Depositor, the Underwriters, the Master Servicer, the Special
Servicer or the Trustee or an affiliate thereof either: (i) has discretionary
authority or control with respect to the investment or management of such
assets of such Plan, or (ii) has authority or responsibility to give, or
regularly gives, investment advice with respect to such assets pursuant to an
agreement or understanding that such advice will serve as a primary basis for
investment decisions with respect to such assets and that such advice will be
based on the particular needs of the Plan.
Delegation of Fiduciary Duty. Further, if the assets included in the Trust
Fund were deemed to constitute Plan assets, it is possible that a Plan's
investment in the Certificates might be deemed to constitute a delegation
under ERISA of the duty to manage Plan assets by the fiduciary deciding to
invest in the Certificates, and certain transactions involved in the
operation of the Trust Fund might be deemed to constitute prohibited
transactions under ERISA and the Code. Neither ERISA nor the Code define the
term "plan assets."
The Department has published final regulations (the "Regulations")
concerning whether a Plan's assets would be deemed to include an interest in
the underlying assets of an entity (such as the Trust Fund) for purposes of
the reporting and disclosure and general fiduciary responsibility provisions
of ERISA, as well as for the prohibited transaction provisions of ERISA and
the Code, if the Plan acquires an "equity interest" (such as a Certificate)
in such an entity.
Certain exceptions are provided in the Regulations whereby an investing
Plan's assets would be considered merely to include its interest in the
Certificates instead of being deemed to include an interest in the underlying
assets of a Trust Fund.
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However, the Depositor cannot predict in advance, nor can there be any
continuing assurance whether such exceptions may be met, because of the
factual nature of certain of the rules set forth in the Regulations. For
example, one of the exceptions in the Regulations states that the underlying
assets of an entity will not be considered "plan assets" if less than 25% of
the value of any class of equity interests is held by "benefit plan
investors," which are defined as Plans, individual retirement accounts and
employee benefit plans not subject to ERISA (for example, governmental
plans), but this exception is tested immediately after each acquisition of an
equity interest in the entity whether upon initial issuance or in the
secondary market.
ADMINISTRATIVE EXEMPTIONS
Individual Administrative Exemptions. The Department has granted to
Prudential Securities Incorporated an individual administrative exemption
(Prohibited Transaction Exemption 90-32, 55 Fed. Reg. 23147 (June 6, 1990))
referred to herein as the "Exemption," for certain mortgage-backed and asset
backed certificates underwritten in whole or in part by Prudential Securities
Incorporated. The Exemption might be applicable to the initial purchase, the
holding and the subsequent resale by a Plan of certain certificates, such as
the Senior Certificates, underwritten by the Underwriters, representing
interests in pass-through trusts that consist of certain receivables, loans
and other obligations, provided that the conditions and requirements of the
Exemption are satisfied. The loans described in the Exemption include
mortgage loans such as the Mortgage Loans.
Among the conditions that must be satisfied for the Exemption to apply are
the following:
(1) The acquisition of certificates by a Plan is on terms (including the
price for the certificates) that are at least as favorable to the Plan as
they would be in an arm's length transaction with an unrelated party;
(2) The rights and interests evidenced by certificates acquired by the
Plan are not subordinated to the rights and interests evidenced by other
certificates of the trust fund;
(3) The certificates acquired by the Plan have received a rating at the
time of such acquisition that is one of the three highest generic rating
categories from any of the following: S&P, Moody's, Duff & Phelps or
Fitch;
(4) The trustee must not be an affiliate of any of the following: the
Depositor, the Underwriters, the Master Servicer, the Special Servicer (if
any), any obligor with respect to the Mortgage Loans included in the Trust
Fund constituting more than 5% of the aggregate unamortized balance of the
assets in the Trust Fund, or any affiliate of such parties (the
"Restricted Group");
(5) The sum of all payments made to and retained by the Underwriters in
connection with the distribution of certificates represents not more than
reasonable compensation for underwriting the certificates. The sum of all
payments made to and retained by the depositor pursuant to the assignment
of the mortgage loans to the trust fund represents not more than the fair
market value of such mortgage loans. The sum of all payments made to and
retained by the master servicer and any other servicer represents not more
than reasonable compensation for such person's services under the pooling
and servicing agreement and reimbursement of such person's reasonable
expenses in connection therewith; and
(6) The Plan investing in the certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Commission under the 1933
Act.
The trust fund must also meet the following requirements:
(a) the corpus of the trust fund must consist solely of assets of the
type that have been included in other investment pools;
(b) certificates in such other investment pools must have been rated in
one of the three highest rating categories of S&P, Moody's, Fitch or Duff
& Phelps for at least one year prior to the Plan's acquisition of the
certificates pursuant to the Exemption; and
(c) certificates evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of the certificates pursuant to the
Exemption.
If the conditions of the Exemption are met, the acquisition, holding and
resale of the Senior Certificates by Plans would be exempt from the
prohibited transaction provisions of ERISA and the Code (regardless of
whether a Plan's assets would be considered to include an ownership interest
in the Mortgage Loans in the Mortgage Pool).
S-111
<PAGE>
Moreover, the Exemption can provide relief from certain
self-dealing/conflict-of-interest prohibited transactions that may occur if a
Plan fiduciary causes a Plan to acquire certificates in a trust in which the
fiduciary (or its affiliate) is an obligor on the receivables, loans or
obligations held in the trust provided that, among other requirements, (i) in
the case of an acquisition in connection with the initial issuance of
certificates, at least 50% of each class of certificates in which Plans have
invested is acquired by persons independent of the Restricted Group and at
least 50% of the aggregate interest in the trust is acquired by persons
independent of the Restricted Group; (ii) such fiduciary (or its affiliate)
is an obligor with respect to 5% or less of the fair market value of the
obligations contained in the trust; (iii) the Plan's investment in
certificates of any class does not exceed 25% of all of the certificates of
that class outstanding at the time of the acquisitions; and (iv) immediately
after the acquisition no more than 25% of the assets of the Plan with respect
to which such person is a fiduciary are invested in certificates representing
an interest in one or more trusts containing assets sold or served by the
same entity.
The Exemption does not apply to the purchasing or holding of Senior
Certificates by Plans sponsored by the Depositor, the Underwriters, the
Trustee, the Master Servicer, the Special Servicer, any obligor with respect
to Mortgage Loans included in the Trust Fund constituting more than 5% of the
aggregate unamortized principal balance of the assets in the Trust Fund or
any affiliate of such parties (the "Restricted Group").
THE CHARACTERISTICS OF THE SUBORDINATE CERTIFICATES AND THE RESIDUAL
CERTIFICATES DO NOT MEET THE REQUIREMENTS OF THE EXEMPTION. ACCORDINGLY, THE
SUBORDINATE CERTIFICATES MAY NOT BE PURCHASED BY OR TRANSFERRED TO A PLAN OR
PERSON ACTING ON BEHALF OF ANY PLAN OR USING THE ASSETS OF ANY SUCH PLAN,
OTHER THAN AN INSURANCE COMPANY USING ASSETS OF ITS GENERAL ACCOUNT UNDER
CIRCUMSTANCES IN WHICH SUCH PURCHASE OR TRANSFER WOULD NOT CONSTITUTE OR
RESULT IN A PROHIBITED TRANSACTION. THE RESIDUAL CERTIFICATES MAY NOT BE
PURCHASED BY OR TRANSFERRED TO A PLAN.
Before purchasing a Senior Certificate, a fiduciary of a Plan should make
its own determination as to the availability of the exemptive relief provided
by the Exemption or the availability of any other prohibited transaction
exemptions, and whether the conditions of any such exemption will be
applicable to the Senior Certificates.
Any fiduciary of a Plan (including an entity that is deemed to hold Plan
assets for purposes of ERISA and the Code) considering whether to purchase a
Senior Certificate should also carefully review with its own legal advisors
the applicability of the fiduciary duty and prohibited transaction provisions
of ERISA and the Code to such investment.
EXEMPT PLAN
A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA or Code Section 4975. However, such a governmental plan may be subject
to a Similar Law. A fiduciary of a governmental plan should make its own
determination as to the need for and the availability of any exemptive relief
under any Similar Law.
THE SALE OF SENIOR CERTIFICATES TO A PLAN IS IN NO RESPECT A
REPRESENTATION BY THE DEPOSITOR, THE UNDERWRITERS OR ANY OTHER MEMBER OF THE
RESTRICTED GROUP THAT THIS INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS
WITH RESPECT TO INVESTMENTS BY PLANS GENERALLY OR ANY PARTICULAR PLAN OR THAT
THIS INVESTMENT IS APPROPRIATE FOR PLANS GENERALLY OR ANY PARTICULAR PLAN.
UNRELATED BUSINESS TAXABLE INCOME; RESIDUAL CERTIFICATES
The purchase of a Residual Certificate by any employee benefit plan
qualified under Code Section 401(a) and exempt from taxation under Code
Section 501(a), including most varieties of ERISA Plans, may give rise to
"unrelated business taxable income" as described in Code Sections 511-515 and
860E. Further, prior to the purchase of Residual Certificates, a prospective
transferee may be required to provide an affidavit to a transferor that it is
not, nor is it purchasing a Residual Certificate on behalf of, a
"Disqualified Organization," which term as defined above includes certain
tax-exempt entities not subject to Code Section 511 including certain
governmental plans, as discussed above under the caption "MATERIAL FEDERAL
INCOME TAX CONSEQUENCES" in the Prospectus.
LEGAL INVESTMENT
The Certificates will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA").
The appropriate characterization of the Certificates under various legal
investment restrictions, and thus the ability of investors subject to these
restrictions to purchase the Certificates, may be subject to significant
interpretive uncertainties.
S-112
<PAGE>
The Depositor makes no representations as to the proper characterization
of the Certificates for legal investment purposes, financial institution
regulatory purposes or other purposes or as to the ability of particular
investors to purchase the Certificates under applicable legal investment
restrictions. These uncertainties may adversely affect the liquidity of the
Certificates. Accordingly, all institutions whose investment activities are
subject to legal investment laws and regulations, regulatory capital
requirements or review by regulatory authorities should consult with their
own legal advisors in determining whether and to what extent the Certificates
constitute a legal investment or are subject to investment, capital or other
restrictions.
PLAN OF DISTRIBUTION
Prudential Securities Incorporated, Deutsche Morgan Grenfell Inc. and
Llama Company (the "Underwriters") have agreed, severally and not jointly,
pursuant to an Underwriting Agreement dated December , 1996 (the
"Underwriting Agreement") to purchase from the Depositor the respective
principal or notional amounts of Offered Certificates set forth opposite
their names below.
<TABLE>
<CAPTION>
PRINCIPAL OR NOTIONAL
UNDERWRITER AMOUNT
- --------------------------------------- -------------------------
<S> <C>
Prudential Securities Incorporated .... $
Deutsche Morgan Grenfell Inc. ..........
Llama Company ..........................
---------
Total ................................ $
=========
</TABLE>
The Offered Certificates will be offered by the Underwriters in negotiated
transactions or otherwise, on varying terms (which may include the sale of
separate financial instruments by the Underwriters or an affiliate) and at
varying prices, in each case to be determined at the time of sale. The
Underwriters may effect such transactions by selling such Offered
Certificates to or through dealers, and such dealers may receive compensation
in the form of underwriting discounts, concessions or commissions from the
Underwriters or purchasers of the Offered Certificates for whom they may act
as agent. Any dealers that participate with the Underwriters in the
distribution of the Offered Certificates purchased by the Underwriters may be
deemed to be underwriters, and any discounts or commissions received by them
or the Underwriters and any profit on the resale of Offered Certificates by
them or the Underwriters may be deemed to be underwriting discounts or
commissions under the 1933 Act.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and the Underwriters
generally will be obligated to purchase all of the Offered Certificates if
any are purchased. The Depositor has agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the 1933 Act, or
contribute to payments that the Underwriters may be required to make in
respect thereof.
The Depositor also has been advised by the Underwriters that they
currently expect to make a market in the Offered Certificates, however, they
have no obligation to do so. Any market making may be discontinued at any
time, and there can be no assurance that an active public market for the
Offered Certificates will develop. For further information regarding any
offer or sale of the Offered Certificates pursuant to this Prospectus
Supplement and the Prospectus, see "PLAN OF DISTRIBUTION" in the Prospectus.
PSCC, an affiliate of PSI, has provided a warehouse line of credit (most
of which is non-recourse) to MCFC for the purpose of financing the Mortgage
Loans originated by Midland prior to their sale to the Depositor. In exchange
for providing the warehouse line of credit and agreeing to be responsible for
a portion of any losses realized by MCFC in connection with the sale of such
Mortgage Loans to the Depositor, PSCC receives interest on amounts borrowed
under the warehouse line of credit and will share in any profits realized by
MCFC in connection with the sale of such Mortgage Loans to the Depositor. PSI
provides advice to Midland Loan Services, L.P. in connection with the
disposition of mortgage loans.
USE OF PROCEEDS
The net proceeds from the sale of Offered Certificates will be used by the
Depositor to pay the purchase price of the Mortgage Loans, to repay
indebtedness that has been incurred to obtain funds to acquire the Mortgage
Loans and to pay costs of structuring, issuing and underwriting the Offered
Certificates.
S-113
<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Morrison &
Hecker L.L.P. and for the Underwriters by O'Melveny & Myers LLP.
RATINGS
It is anticipated that the Certificates will have the following ratings:
<TABLE>
<CAPTION>
CLASS FITCH MOODY'S
--------- ----------- -----------
<S> <C> <C>
A-1 AAA Aaa
A-2 AAA Aaa
A-3 AAA Aaa
A-EC AAA Aaa
B AA Aa2
C A A2
D BBB Baa2
E BBB- Baa3
F BB Ba2
G BB- Ba3
H B B2
J B- B3
K-1 unrated unrated
K-2 unrated unrated
R-I unrated unrated
R-II unrated unrated
R-III unrated unrated
</TABLE>
The Rating Agencies' ratings on mortgage pass-through certificates address
the likelihood of the receipt by holders of payments to which they are
entitled by the Rated Final Distribution Date. The Rating Agencies' ratings
take into consideration the credit quality of the mortgage pool, structural
and legal aspects associated with the Certificates, and the extent to which
the payment stream in the mortgage pool is adequate to make payments required
under the Certificates. Ratings on mortgage pass-through certificates do not,
however, represent an assessment of the likelihood, timing or frequency of
principal prepayments by borrowers or the degree to which such prepayments
(both voluntary and involuntary) might differ from those originally
anticipated. The security ratings do not address the possibility that
Certificateholders might suffer a lower than anticipated yield. In addition,
ratings on mortgage pass-through certificates do not address the likelihood
of receipt of Prepayment Premiums or the timing of the receipt thereof or the
likelihood of collection by the Master Servicer of Default Interest. In
general, the ratings thus address credit risk and not prepayment risk. As
described herein, the amounts payable with respect to the Class A-EC
Certificates consist only of interest. If the entire pool of Mortgage Loans
were to prepay in the initial month, with the result that the Class A-EC
Certificateholders receive only a single month's interest and thus suffer a
nearly complete loss of their investment, all amounts "due" to such holders
will nevertheless have been paid, and such result is consistent with the
"AAA" and "Aaa" ratings received on the Class A-EC Certificates. The Class
A-EC Notional Balance upon which interest is calculated is reduced by the
allocation of Realized Losses and prepayments, whether voluntary or
involuntary. The rating does not address the timing or magnitude of
reductions of Class A-EC Notional Balance, but only the obligation to pay
interest timely on the Class A-EC Notional Balance as so reduced from time to
time. Accordingly, the ratings of the Class A-EC Certificates should be
evaluated independently from similar ratings on other types of securities.
There can be no assurance as to whether any rating agency not requested to
rate the Certificates will nonetheless issue a rating and, if so, what such
rating would be. A rating assigned to the Certificates by a rating agency
that has not been requested by the Depositor to do so may be lower than the
rating assigned by the Rating Agencies pursuant to the Depositor's request.
The rating of the Certificates should be evaluated independently from
similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency.
S-114
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
DEFINITIONS PAGE
- ----------- ----
1933 ACT .............................................................. S-4
ADVANCE RATE .......................................................... S-97
ADVANCES .............................................................. S-96
ANNUAL DEBT SERVICE ................................................... S-52
ANTICIPATED LOSS ...................................................... S-95
APPRAISED LTV ......................................................... S-52
APPRAISED VALUE ....................................................... S-52
ASSUMED MATURITY DATE ................................................. S-1
ASSUMED SCHEDULED PAYMENT ............................................. S-74
AUCTION CLOSING DATE .................................................. S-81
AUCTION FEES .......................................................... S-82
AUCTION VALUATION DATE .......................................... S-18, S-81
AVAILABLE FUNDS ....................................................... S-71
AVAILABLE FUNDS ALLOCATION ............................................ S-74
BALLOON AMOUNT ........................................................ S-52
BALLOON BALANCE ....................................................... S-52
BALLOON LOANS ......................................................... S-40
BALLOON LTV ........................................................... S-52
BALLOON PAYMENT ....................................................... S-40
BASE INTEREST FRACTION ................................................ S-78
BCMC ............................................................. S-2, S-69
BCMC MORTGAGE LOAN PURCHASE AGREEMENT ................................. S-33
BCMC MORTGAGE LOANS ................................................... S-33
BENEFICIAL OWNERS ..................................................... S-82
BOOK-ENTRY CERTIFICATE ................................................ S-82
BUSINESS DAY .......................................................... S-15
CASH FLOW ....................................................... S-50, S-51
CASUALTY .............................................................. S-44
CERTIFICATE BALANCE ................................................... S-14
CERTIFICATE REGISTRAR ................................................. S-84
CERTIFICATES ..................................................... S-1, S-14
CLASS A-EC EXCESS INTEREST ....................................... S-2, S-72
CLASS A-EC NOTIONAL BALANCE ..................................... S-70, S-72
CLASS A-EC NOTIONAL COMPONENT A ....................................... S-72
CLASS A-EC PASS-THROUGH RATE .......................................... S-72
CLASS B STRIP .................................................... S-6, S-73
CLASS C STRIP .................................................... S-6, S-73
CLASS D STRIP .................................................... S-6, S-73
CLASS E STRIP .................................................... S-6, S-73
CLASS INTEREST DISTRIBUTION AMOUNT .............................. S-16, S-72
CLASS INTEREST SHORTFALL .............................................. S-74
CLASS K-2 NOTIONAL BALANCE ............................................ S-70
CLOSING DATE ..................................................... S-8, S-15
CODE ........................................................... S-28, S-108
COLLECTION ACCOUNT .................................................... S-97
COLLECTION PERIOD ..................................................... S-72
COMMISSION ............................................................ S-4
CONDEMNATION .......................................................... S-44
CONDEMNATION PROCEEDS ................................................. S-71
CONGREGATE CARE LOAN .................................................. S-31
CONGREGATE CARE PROPERTY .............................................. S-31
CONSOLIDATION AGREEMENTS .............................................. S-31
S-115
<PAGE>
CONSTANT PREPAYMENT RATE ............................................. S-88
CONSULTING CERTIFICATEHOLDER ......................................... S-105
CORRECTED MORTGAGE LOAN .............................................. S-105
CPR .................................................................. S-88
CROSS-COLLATERALIZED LOANS ...................................... S-28, S-50
CUT-OFF DATE PRINCIPAL BALANCE ................................... S-9, S-31
DEBT SERVICE COVERAGE RATIO ........................................... S-52
DEFAULT INTEREST ................................................ S-44, S-72
DEFAULT RATE .......................................................... S-72
DEFINITIVE CERTIFICATE ................................................ S-82
DELIVERY DATE ......................................................... S-1
DEPARTMENT ............................................................ S-110
DEPOSITOR ............................................................. S-2
DEPOSITORY ............................................................ S-15
DETERMINATION DATE .................................................... S-72
DISPOSITION FEE ....................................................... S-105
DISQUALIFIED ORGANIZATION ............................................. S-112
DISTRIBUTION ACCOUNT .................................................. S-97
DISTRIBUTION DATE ................................................ S-2, S-70
DMG ................................................................... S-2
DSCR ............................................................. S-9, S-52
DTC ......................................................... S-1, S-8, S-15
DUE DATE .............................................................. S-15
EFFECTIVE AGE ......................................................... S-52
ELIGIBLE BANK ......................................................... S-98
ENVIRONMENTAL CONSULTANT .............................................. S-37
ERISA .......................................................... S-20, S-109
EXEMPTION ............................................................. S-111
EXTENSION ADVISOR ..................................................... S-100
FACTORY OUTLET LOAN ................................................... S-31
FACTORY OUTLET PROPERTY ............................................... S-31
FINAL RECOVERY DETERMINATION .......................................... S-79
FISCAL AGENT .......................................................... S-3
FITCH ................................................................. S-3
FORM 8-K .............................................................. S-64
GACC ............................................................. S-2, S-69
GACC MORTGAGE LOAN PURCHASE AGREEMENT ................................. S-33
GACC MORTGAGE LOANS ................................................... S-33
HOTEL LOAN ............................................................ S-31
HOTEL PROPERTY ........................................................ S-31
INDIRECT PARTICIPANTS ................................................. S-83
INDUSTRIAL LOAN ....................................................... S-31
INDUSTRIAL PROPERTY ................................................... S-31
INITIAL POOL BALANCE .................................................. S-31
INSURANCE PROCEEDS .................................................... S-71
INTEREST ACCRUAL PERIOD ............................................... S-74
INTERESTED PERSON ..................................................... S-101
IRS ................................................................... S-46
LIQUIDATION PROCEEDS .................................................. S-71
LOAN PORTFOLIO ANALYSIS SYSTEM ........................................ S-107
LOAN PURCHASE CLOSING DATE ............................................ S-33
LOAN-TO-VALUE RATIO ................................................... S-52
LOCKOUT PERIOD ........................................................ S-41
LPAS .................................................................. S-107
LTV ................................................................... S-52
S-116
<PAGE>
MAJOR TENANT .......................................................... S-28
MASTER SERVICER ....................................................... S-3
MASTER SERVICER MORTGAGE FILE ......................................... S-94
MCFC ............................................................. S-2, S-69
MCFC MORTGAGE LOAN PURCHASE AGREEMENT ................................. S-33
MIDLAND .................................................... S-2, S-32, S-68
MIDLAND MORTGAGE LOANS ................................................ S-32
MINI WAREHOUSE LOAN ................................................... S-31
MINI WAREHOUSE PROPERTY ............................................... S-31
MINIMUM AUCTION PRICE ................................................. S-81
MIXED USE LOAN ........................................................ S-31
MIXED USE PROPERTY .................................................... S-31
MOBILE HOME PARK LOAN ................................................. S-31
MOBILE HOME PARK PROPERTY ............................................. S-31
MONTHLY PAYMENT ....................................................... S-71
MOODY'S ............................................................... S-3
MORTGAGE .............................................................. S-31
MORTGAGE FILE ......................................................... S-94
MORTGAGE LOAN SELLER .................................................. S-33
MORTGAGE LOAN SELLERS ............................................ S-2, S-33
MORTGAGE LOANS ........................................................ S-31
MORTGAGE POOL ......................................................... S-2
MORTGAGE RATE ......................................................... S-40
MORTGAGED PROPERTY ............................................... S-2, S-31
MULTIFAMILY LOAN ...................................................... S-31
MULTIFAMILY PROPERTY .................................................. S-31
NET COLLECTIONS ....................................................... S-105
NET MORTGAGE RATE ..................................................... S-73
NET OPERATING INCOME ............................................ S-50, S-51
NET REO PROCEEDS ...................................................... S-72
NOI ................................................................... S-51
NOTE .................................................................. S-31
NOTIONAL BALANCES ..................................................... S-70
OCCUPANCY RATE ........................................................ S-52
OFFERED CERTIFICATES .................................................. S-2
OFFICE LOAN ........................................................... S-31
OFFICE PROPERTY ....................................................... S-31
OFFICE/RETAIL LOAN .................................................... S-32
OFFICE/RETAIL PROPERTY ................................................ S-32
OID ................................................................... S-108
ORIGINATOR ............................................................ S-32
PARTICIPANTS .......................................................... S-82
PASS-THROUGH RATE ..................................................... S-73
PAYING AGENT .......................................................... S-83
PERCENTAGE INTEREST ................................................... S-70
PERMITTED ENCUMBRANCES ................................................ S-65
PERMITTED INVESTMENTS ................................................. S-98
P&I ADVANCE ................................................ S-9, S-17, S-95
P&I CERTIFICATES ...................................................... S-2
PLANS .......................................................... S-20, S-109
POOLED PRINCIPAL DISTRIBUTION AMOUNT ............................ S-17, S-74
POOLING AND SERVICING AGREEMENT ............................ S-3, S-14, S-93
PREPAYMENT INTEREST SHORTFALL ......................................... S-73
PREPAYMENT INTEREST SURPLUS ........................................... S-73
PREPAYMENT PREMIUM .................................................... S-41
S-117
<PAGE>
PREPAYMENT PREMIUMS .................................................. S-71
PRINCIPAL PREPAYMENTS ................................................. S-72
PRIVATE CERTIFICATES .................................................. S-14
PROMISSORY NOTES ...................................................... S-31
PROPERTY ADVANCES ..................................................... S-96
PROPERTY AGE .......................................................... S-52
PSCC .................................................................. S-35
PSI ................................................................... S-35
RATED FINAL DISTRIBUTION DATE ......................................... S-1
RATING AGENCIES ....................................................... S-3
REALIZED LOSS ......................................................... S-79
RECORD DATE ........................................................... S-70
REGULAR CERTIFICATES ............................................. S-2, S-19
REGULATIONS .......................................................... S-110
REMIC ...................................................... S-3, S-8, S-108
REMIC I .......................................................... S-3, S-19
REMIC II ......................................................... S-3, S-19
REMIC III ........................................................ S-3, S-19
REMITTANCE DATE ....................................................... S-95
REO ACCOUNT ........................................................... S-70
REO MORTGAGE LOAN ..................................................... S-74
REO PROPERTY .......................................................... S-70
REPURCHASE PRICE ...................................................... S-68
RESERVE ACCOUNTS ...................................................... S-45
RESIDUAL CERTIFICATES ................................................. S-2
RESTRICTED GROUP .............................................. S-111, S-112
RETAIL, ANCHORED LOAN ................................................. S-32
RETAIL, ANCHORED PROPERTY ............................................. S-32
RETAIL, FACTORY OUTLET LOAN ........................................... S-31
RETAIL, SINGLE TENANT LOAN ............................................ S-32
RETAIL, SINGLE TENANT PROPERTY ........................................ S-32
RETAIL, UNANCHORED LOAN ............................................... S-32
RETAIL, UNANCHORED PROPERTY ........................................... S-32
SCENARIOS ............................................................. S-88
SCHEDULED FINAL DISTRIBUTION DATE ..................................... S-79
SCHEDULED PRINCIPAL BALANCE ........................................... S-79
SECTION 42 MORTGAGE LOANS ............................................. S-45
SENIOR CERTIFICATES ................................................... S-2
SENIOR PRINCIPAL DISTRIBUTION CROSS-OVER DATE ......................... S-78
SERIOUSLY DELINQUENT LOAN ............................................. S-96
SERVICING FEE ......................................................... S-103
SERVICING FEE RATE .................................................... S-104
SIMILAR LAW ........................................................... S-109
SMMEA ................................................................. S-112
S&P ................................................................... S-69
SPECIAL SERVICER ...................................................... S-3
SPECIAL SERVICING FEE ................................................. S-105
SPECIALLY SERVICED MORTGAGE LOAN .............................. S-104, S-105
SUBORDINATE CERTIFICATES .............................................. S-2
TAX CREDIT PERIOD ..................................................... S-46
TAX CREDIT PROJECT .................................................... S-46
TAX CREDITS ........................................................... S-28
TITLE POLICY .......................................................... S-65
TRUST FUND ............................................................ S-2
TRUST REMICS .......................................................... S-3
S-118
<PAGE>
TRUSTEE ............................................................... S-3
TRUSTEE MORTGAGE FILE ................................................. S-93
UNDERWRITERS .................................................... S-1, S-113
UNDERWRITING AGREEMENT ................................................ S-113
UNDERWRITTEN CASH FLOW .......................................... S-50, S-52
UNDERWRITTEN DSCR ..................................................... S-52
UNDERWRITTEN NOI ................................................ S-50, S-51
UNMODIFIED NET MORTGAGE RATE .......................................... S-74
UNSCHEDULED PAYMENTS .................................................. S-71
UPDATED APPRAISAL ..................................................... S-99
VOTING RIGHTS ......................................................... S-102
WEIGHTED AVERAGE NET MORTGAGE RATE .................................... S-73
WEIGHTED AVERAGE UNMODIFIED NET MORTGAGE RATE ......................... S-74
WORKOUT FEE ........................................................... S-105
YIELD MAINTENANCE CHARGES ............................................. S-78
YIELD MAINTENANCE PERIOD .............................................. S-41
ZONING LAWS ........................................................... S-27
S-119
<TABLE>
<CAPTION>
CUT-OFF
LOAN ORIGINAL DATE INTEREST ORIGINAL
NO. PROPERTY NAME BALANCE BALANCE RATE AMORT.
- ---- ----------------------------------------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
1 Kennedy Ridge Apartments 27,497,600 27,292,186 7.61% 360
2 Gateway Shopping Center 18,000,000 17,686,288 8.59% 186
3 Gentry's Landing <F1> 16,890,000 16,890,000 8.47% 360
4 Kendall I Plaza 12,450,000 12,339,021 8.54% 300
5 LAM Research 11,700,000 11,700,000 8.44% 300
6 Bay Plaza K Mart 10,700,000 10,700,000 8.89% 276
7 Preferred Freezer 10,500,000 10,261,698 8.83% 240
8 Rio Norte Shopping Center 10,200,000 10,200,000 8.43% 300
9 Val Mesa Medical Building 10,046,000 10,035,390 9.18% 360
10 Lakewood Cove Apartments 9,800,000 9,800,000 8.09% 360
11 Longhorn Pavillion Apartments 9,010,000 9,004,859 8.79% 360
12 Cape Cod Factory Outlet Mall 8,916,000 8,916,000 8.65% 300
13 Super K Mart #7634 8,700,000 8,656,251 9.49% 300
14 Garden Grove Plaza 8,500,000 8,500,000 8.45% 300
15 North Creek Apartments 8,395,000 8,395,000 7.79% 360
16 Holiday Inn Maingate 8,000,000 7,850,184 9.00% 240
17 Hunter Park Office Plaza 7,850,000 7,850,000 8.91% 300
18 American Financial Center No.5 7,850,000 7,850,000 8.50% 300
19 Westgate Apartments 7,725,000 7,708,582 9.19% 360
20 Malone Plaza 7,700,000 7,700,000 8.83% 300
21 Builder's Square II 7,500,000 7,500,000 8.88% 240
22 Hunter's Ridge Apartments 7,473,000 7,468,832 8.90% 360
23 Camelback Plaza 7,250,000 7,243,381 8.86% 300
24 Blaustein Building 7,125,000 7,114,237 8.93% 240
25 B J's Warehouse Club 7,000,000 6,980,718 8.87% 300
26 Woodhollow Apartments 6,300,000 6,300,000 8.15% 360
27 Big Curve Shopping Center 6,072,000 6,061,466 9.19% 300
28 Windmill Terrace Apartments 5,650,000 5,650,000 8.08% 360
29 Armand Place Apartments 5,625,000 5,625,000 8.49% 360
30 Oakland Valley Apartments 5,550,000 5,525,851 9.24% 300
31 West Bernardo Corporate Plaza 5,200,000 5,186,928 9.42% 300
32 Cobblestone Village Apartments 5,100,000 5,097,084 8.78% 360
33 Name'Office Building 5,050,000 5,045,636 9.19% 300
34 Goodwin Gardens Apartments 5,000,000 5,000,000 8.20% 300
35 Lake George Plaza Outlet Center 5,000,000 5,000,000 8.80% 300
36 North Pointe Office Plaza 4,850,000 4,850,000 8.50% 300
37 The Shoppes at Bellgrade 4,875,000 4,804,044 9.23% 300
38 Cypress Station Shopping Center 4,650,000 4,638,014 9.27% 300
39 Sundance Apartments 4,645,000 4,636,807 8.68% 360
40 Riggs Plaza 4,630,000 4,617,925 9.20% 300
41 Emmett Street & Redstone Hill Road 4,560,000 4,547,929 9.11% 300
42 Shadow Valley Apartments 4,552,000 4,544,199 8.82% 360
43 Casa Devon Apartments 4,525,000 4,512,124 8.97% 173
44 Silvergate Fallbrook Retirement Residence 4,475,000 4,475,000 8.48% 300
45 Inter American Transport Equipment Co. 4,400,000 4,396,286 9.33% 300
46 Midway Mills Shopping Center 4,200,000 4,154,647 8.64% 300
47 Desert Shadows Apartments 4,100,000 4,097,465 8.40% 360
48 Woodland Manor Apartments 4,002,000 3,980,391 9.06% 300
49 Cabana Club Apartments 3,700,000 3,681,789 8.49% 300
50 Whispering Hills Apartments 3,440,000 3,437,950 8.58% 360
51 Sports & Recreation 3,416,000 3,416,000 8.99% 300
52 Promenade Shopping Center 3,400,000 3,397,082 9.23% 300
53 Dulles Square Shopping Center 3,250,000 3,250,000 8.67% 300
54 Somerset Place Apartments 3,240,000 3,240,000 8.30% 300
55 95 Office Park 3,200,000 3,200,000 9.16% 300
<FN>
<F1> Property consists of 54,420 of commercial square feet and 411 multifamily
units. As of the occupancy date, % of the commercial space was occupied
and 99.3% of the multifamily was occupied.
</FN>
</TABLE>
<PAGE>
(RESTUBBED FROM THE ABOVE TABLE)
<TABLE>
<CAPTION>
LOAN TERMS
ORIGINAL FIRST REMAIN. REMAIN.
LOAN TERM TO ORIGINAL PYMT MAT. AMORT. TERM TO
NO. MATURITY NOTE DATE DATE DATE TERM MATURITY
- ---- -------- ------------ --------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
1 120 1/4/96 3/1/96 2/1/06 350 110
2 76 11/15/96<F2> 1/1/97 4/1/03 179 76
3 120 11/12/96 1/1/97 12/1/06 360 120
4 84 2/29/96 4/1/96 3/1/03 291 75
5 120 11/22/96 1/1/97 12/1/06 300 120
6 120 11/22/96 1/1/97 1/30/06 276 120
7 84 11/8/95 1/1/96 11/8/02 228 72
8 120 12/2/96<F3> 1/1/97 12/1/06 300 120
9 120 9/27/96 11/1/96 10/1/06 358 118
10 120 11/22/96 1/1/97 12/1/06 360 120
11 180 10/11/96 12/1/96 11/1/11 359 179
12 144 12/9/96<F3> 1/1/97 12/1/08 300 144
13 120 5/22/96 7/1/96 6/1/06 294 114
14 144 11/27/96<F3> 1/1/97 12/1/08 300 144
15 60 11/25/96 1/1/97 12/1/01 360 60
16 120 11/2/95 1/1/96 12/1/05 228 108
17 120 11/13/96 1/1/97 12/1/06 300 120
18 84 12/5/96<F3> 1/1/97 12/1/03 300 84
19 120 7/31/96 9/1/96 8/1/06 356 116
20 120 11/21/96 1/1/97 12/1/06 300 120
21 144 11/27/96<F3> 1/1/97 12/1/08 240 144
22 180 10/31/96 12/1/96 11/1/11 359 179
23 84 11/1/96 12/1/96 11/1/03 299 83
24 144 10/11/96 12/1/96 11/1/08 239 143
25 120 8/23/96 10/1/96 9/1/06 297 117
26 84 11/27/96<F3> 1/1/97 12/1/03 360 84
27 120 9/20/96 11/1/96 10/1/06 298 118
28 120 11/25/96<F3> 1/1/97 12/1/06 360 120
29 120 12/3/96<F3> 1/1/97 12/1/06 360 120
30 120 6/14/96 8/1/96 7/1/06 295 115
31 144 9/19/96 10/1/96 9/1/08 297 141
32 120 10/24/96 12/1/96 11/1/06 359 119
33 144 10/3/96 12/1/96 11/1/08 299 143
34 120 11/27/96<F3> 1/1/97 12/1/06 300 120
35 120 11/22/96 1/1/97 12/1/06 300 120
36 84 12/5/96<F3> 1/1/97 12/1/03 300 84
37 120 8/10/95 10/1/95 8/14/05 285 105
38 120 8/16/96 10/1/96 9/1/06 297 117
39 120 8/9/96 10/1/96 9/1/06 357 117
40 120 8/19/96 10/1/96 9/1/06 297 117
41 120 8/30/96 10/1/96 9/1/06 297 117
42 120 8/23/96 10/1/96 9/1/06 357 117
43 173 10/3/96 12/1/96 4/1/11 172 172
44 60 11/6/96 1/1/97 12/1/01 300 60
45 84 10/8/96 12/1/96 11/1/03 299 83
46 120 12/26/95 1/1/96 12/31/05 289 108
47 120 10/31/96 12/1/96 11/1/06 359 119
48 84 5/24/96 7/1/96 6/1/03 294 78
49 300 6/3/96 8/1/96 7/1/21 295 295
50 120 10/24/96 12/1/96 11/1/06 359 119
51 144 11/22/96 1/1/97 12/1/08 300 144
52 120 10/24/96 12/1/96 11/1/06 299 119
53 120 11/27/96<F3> 1/1/97 12/1/06 300 120
54 120 11/22/96 1/1/97 12/1/06 300 120
55 132 11/1/96 1/1/97 12/1/07 300 132
<FN>
<F2> Date of modification. Original note date was 3/13/96.
<F3> Anticipated closing date. Mortgage not closed as of November 15, 1996.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
COLLATERAL DESCRIPTION
MORTGAGE
LOAN BALLOON LOAN YEAR YEAR OWNERSHIP
NO. BALANCE SELLER PROPERTY TYPE PROPERTY CITY STATE ZIP UNITS/SF BUILT RENOVATED INTEREST
- ---- ---------- -------- --------------------- ----------------- ----- ----- ---------- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 23,924,020 GACC Multifamily Denver CO 80014 958 Unit 1974 1996 Fee
2 13,311,143 GACC Retail-Anchored Wayne PA 19087 222,145 SF 1967 1990 Fee
3 14,956,317 GACC Mixed Use St. Louis MO 63102 54,420 SF 1965 1995 Leasehold
4 11,078,813 GACC Office/Retail Kendall FL 33143 119,179 SF 1972 1990 Fee
5 9,553,252 MCF Office/R & D Fremont CA 94538 152,928 SF 1987 Fee
6 8,414,036 GACC Retail-Single Tenant Bronx NY 10475 134,032 SF 1994 Fee
7 8,641,755 GACC Industrial/Warehouse Perth Amboy NJ 08861 232,250 SF 1945 1989 Fee
8 8,326,451 MCF Retail-Anchored Laredo TX 78041 161,524 SF 1992 Fee
9 9,012,810 MCF Office Fullerton CA 92635 69,699 SF 1992 Fee
10 8,612,878 MCF Multifamily Henderson NV 89015 260 Unit 1985 Fee
11 7,101,058 BCMC Multifamily Palmdale CA 93550 304 Unit 1993 Fee
12 6,796,143 MCF Retail-Factory Outlet Bourne MA 02561 96,049 SF 1972 1985 Fee
13 7,277,653 GACC Retail-Single Tenant Port Huron MI 48060 193,950 SF 1993 Fee
14 6,440,033 MCF Retail-Anchored Garden Grove CA 92843 131,323 SF 1985 1992 Fee
15 7,965,497 MCF Multifamily Everett WA 98208 264 Unit 1986 Fee
16 5,682,086 MCF Hotel Anaheim CA 92802 313 Unit 1972 1989 Fee
17 6,481,566 MCF Office Riverside CA 92507 110,209 SF 1988 Fee
18 6,981,038 MCF Office Albuquerque NM 87110 105,320 SF 1985 Fee
19 6,931,424 MCF Multifamily Laurel MD 20707 218 Unit 1969 1988 Fee
20 6,345,894 MCF Retail-Anchored Malone NY 14226 179,247 SF 1991 Fee
21 4,586,070 MCF Retail-Single Tenant Livonia MI 48152 109,800 SF 1995 Fee
22 5,910,043 MCF Multifamily Winter Park FL 32792 238 Unit 1986 Fee
23 6,483,446 BCMC Retail-Unanchored Phoenix AZ 85106 46,489 SF 1995 Leasehold
24 4,364,680 MCF Office Baltimore MD 21201 290,176 SF 1963 Fee
25 5,774,376 BCMC Retail-Single Tenant Stoneham MA 02108 119,780 SF 1995 Fee
26 5,837,721 MCF Multifamily Orlando FL 32809 318 Unit 1973 1995 Fee
27 5,045,663 GACC Retail-Unanchored Yuma AZ 85364 126,402 SF 1968 1983 Fee
28 4,964,577 MCF Multifamily Bedford TX 76021 284 Unit 1984 Fee
29 4,982,934 MCF Multifamily Houston TX 77058 244 Unit 1979 Fee
30 4,617,073 BCMC Multifamily Auburn Hills MI 48326 280 Unit 1970 Fee
31 4,052,647 MCF Office Rancho Bernardo CA 92127 65,755 SF 1988 1996 Fee
32 4,542,668 GACC Multifamily Grapevine TX 76051 200 Unit 1984 Fee
33 3,910,400 MCF Office San Antonio TX 78216 158,941 SF 1982 1992 Fee
34 4,058,542 MCF Multifamily Wethersfield CT 06109 163 Unit 1963 Fee
35 4,117,820 MCF Retail-Factory Outlet Queensbury NY 12846 52,230 SF 1987 Fee
36 4,313,125 MCF Office Albuquerque NM 87109 77,691 SF 1983 1994 Fee
37 4,054,629 GACC Retail-Unanchored Midlothian VA 23113 65,429 SF 1991 1994 Fee
38 3,870,953 MCF Retail-Unanchored Houston TX 77090 126,429 SF 1981 1996 Fee
39 4,129,688 MCF Multifamily Tulsa OK 74105 232 Unit 1977 Fee
40 3,848,267 MCF Retail-Unanchored Langley Park MD 20783 76,475 SF 1950 1992 Fee
41 3,782,391 MCF Multifamily Bristol CT 06010 250 Unit 1970 Fee
42 4,057,548 MCF Multifamily Leon Valley TX 78238 250 Unit 1983 Fee
43 0 MCF Multifamily Miami FL 33157 210 Unit 1981 1993 Fee
44 4,151,324 MCF Congregate Care Fallbrook CA 92028 75 Unit 1990 Fee
45 3,962,137 GACC Industrial/Warehouse Hialeah FL 33142 237,796 SF 1959 1985 Fee
46 3,445,918 GACC Retail-Unanchored Carrollton TX 75006 71,990 SF 1986 Fee
47 3,625,674 GACC Multifamily San Antonio TX 78232 204 Unit 1984 Fee
48 3,589,595 BCMC Multifamily Coventry RI 02816 150 Unit 1980 Fee
49 0 BCMC Multifamily Miami FL 33151 334 Unit 1970 Fee
50 3,052,596 GACC Multifamily San Antonio TX 78233 164 Unit 1981 Fee
51 2,630,005 MCF Retail-Single Tenant Westminster CO 80030 61,488 SF 1994 Fee
52 2,827,844 GACC Retail-Unanchored Corpus Christie TX 78412 51,120 SF 1986 Fee
53 2,668,388 MCF Retail-Unanchored Sterling VA 20166 71,704 SF 1989 Fee
54 2,636,462 MCF Multifamily Texas City TX 77590 200 Unit 1984 Fee
55 2,570,678 MCF Office Landover MD 20785 58,245 SF 1988 Fee
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF
LOAN ORIGINAL DATE INTEREST ORIGINAL
NO. PROPERTY NAME BALANCE BALANCE RATE AMORT.
- ---- ----------------------------------------- ---------- ----------- -------- --------
<S> <C> <C> <C> <C>
56 Frankford Center 3,200,000 3,200,000 8.78% 300
57 ICN Pharmaceuticals 3,200,000 3,200,000 8.85% 300
58 Lindell Court Apartments 3,175,000 3,172,106 8.87% 300
59 The Delphax Building 3,150,000 3,139,628 9.55% 300
60 Sports & Recreation 3,100,000 3,100,000 8.99% 300
61 New Grand Hotel 2,888,000 2,884,950 9.18% 360
62 East Hills Village Shopping Center 2,875,000 2,875,000 8.76% 300
63 Rosedale Towers Office Building 2,800,000 2,792,514 9.05% 300
64 Western Hills Apartments 2,734,000 2,726,905 9.23% 300
65 Dillon Factory Stores 2,700,000 2,697,613 9.05% 300
66 Lafayette Business Center 2,625,000 2,625,000 8.76% 300
67 Wyngate Medical Park 2,525,000 2,525,000 8.51% 300
68 University Business Center 2,525,000 2,509,778 9.44% 204
69 Lucas Creek Apartments 2,500,000 2,500,000 8.56% 300
70 Fox Creek Apartments 2,437,500 2,430,685 8.78% 300
71 Spring Hill Apartments I & II 2,400,000 2,400,000 8.48% 240
71 East Ridge Village Apartments I & II N/A N/A N/A N/A
72 Forest Place Apartments 2,360,000 2,351,762 9.20% 300
73 Mulberry Row Apartments 2,325,000 2,312,133 8.91% 300
74 Brentwood Terrace Apartments 2,250,000 2,250,000 8.48% 300
75 580 Cottage Grove Road 2,245,000 2,241,407 9.67% 300
76 Sedgefield Apartments 2,190,000 2,187,930 8.65% 300
77 Bullock Habersham Apartments 2,125,000 2,111,251 8.92% 300
78 North Gaithersburg Shopping Center 2,100,000 2,100,000 8.96% 300
79 OSO Grande Mobile Home Village 2,000,000 1,989,559 8.82% 120
80 Flamingo Pecos Plaza 1,950,000 1,950,000 9.01% 300
81 San Pedro Place Shopping Center 1,950,000 1,946,617 9.19% 300
82 South Post Oak Service Center 1,925,000 1,925,000 8.73% 300
83 Central Avenue Industrial Park 1,900,000 1,900,000 8.87% 300
84 Hammond Street Apartments 1,850,000 1,850,000 8.66% 240
85 Rosenberg Building Apartments 1,839,000 1,837,845 9.15% 360
86 Wicklow Apartments 1,800,000 1,800,000 8.39% 240
87 5300 Harbor Street 1,775,000 1,770,466 9.33% 300
88 Cedar Square Shopping Center 1,760,000 1,760,000 8.60% 300
89 Ames Department Store 1,760,000 1,745,248 9.70% 240
90 Water's Edge Apartments 1,729,605 1,729,605 8.44% 300
91 The Townhouse Apartments 1,725,000 1,719,809 8.99% 240
92 Champlain Apartments 1,706,250 1,698,450 8.98% 300
93 2603 Oaklawn Office 1,650,000 1,647,301 9.54% 300
94 Carriage Green Apartments 1,650,000 1,642,844 9.26% 300
95 Stafford Station 1,600,000 1,600,000 9.21% 300
96 Shoppes at Gloucester 1,550,000 1,541,506 8.97% 300
97 Crosby Green Apartments 1,511,000 1,511,000 8.52% 300
98 Wavertree Apartments 1,500,000 1,500,000 8.63% 180
99 Riverview Apartments 1,435,000 1,429,949 9.15% 300
99 Riverview Professional Building N/A N/A N/A N/A
100 Plainfield Realty 1,400,000 1,396,337 9.06% 180
101 Lincoln Plaza Medical Center 1,390,000 1,386,369 9.19% 300
102 Office Depot Plaza 1,400,000 1,381,801 9.06% 300
103 Callahan Plaza 1,350,000 1,348,816 9.10% 300
104 Precision Metal Products 1,350,000 1,343,160 9.51% 180
105 Frank's Nursery & Craft Store #277 1,330,423 1,309,044 8.70% 240
106 228 River Street 1,300,000 1,300,000 8.66% 300
107 Frank's Nursery & Craft Store #626 1,316,019 1,294,871 8.70% 240
108 Franklin School Apartments 1,275,000 1,273,665 9.22% 360
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
LOAN TERMS
ORIGINAL FIRST REMAIN. REMAIN.
LOAN TERM TO ORIGINAL PYMT MAT. AMORT. TERM TO
NO. MATURITY NOTE DATE DATE DATE TERM MATURITY
- ---- -------- ----------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
56 120 11/22/96 1/1/97 12/1/06 300 120
57 84 11/25/96<F3> 1/1/97 12/1/03 300 84
58 120 10/24/96 12/1/96 11/1/06 299 119
59 115 7/26/96 9/1/96 3/1/06 296 111
60 144 11/22/96 1/1/97 12/1/08 300 144
61 144 9/27/96 11/1/96 10/1/08 358 142
62 120 11/26/96<F3> 1/1/97 12/1/06 300 120
63 120 8/16/96 10/1/96 9/1/06 297 117
64 120 8/7/96 10/1/96 9/1/06 297 117
65 120 10/21/96 12/1/96 11/1/06 299 119
66 120 12/4/96<F3> 1/1/97 12/1/06 300 120
67 120 12/4/96<F3> 2/1/97 1/1/07 300 120
68 120 8/26/96 10/1/96 9/1/06 201 117
69 120 11/15/96 1/1/97 12/1/06 300 120
70 120 8/16/96 10/1/96 9/1/06 297 117
71 144 11/15/96 1/1/97 12/1/08 240 144
71 N/A N/A N/A N/A N/A N/A
72 120 7/12/96 9/1/96 8/1/06 296 116
73 120 5/3/96 7/1/96 6/1/06 294 114
74 120 11/14/96 1/1/97 12/1/06 300 120
75 120 9/13/96 11/1/96 10/1/06 298 118
76 180 10/31/96 12/1/96 11/1/11 299 179
77 120 4/17/96 6/1/96 5/1/06 293 113
78 120 11/6/96 1/1/97 12/1/06 300 120
79 120 10/25/96 12/1/96 11/1/06 119 119
80 120 11/25/96<F3> 1/1/97 12/1/06 300 120
81 144 9/27/96 11/1/96 10/1/08 298 142
82 96 12/3/96 1/1/97 12/1/04 300 96
83 120 11/19/96 1/1/97 12/1/06 300 120
84 144 11/11/96 1/1/97 12/1/08 240 144
85 168 9/27/96 11/1/96 10/1/10 359 166
86 144 11/25/96 1/1/97 12/1/08 240 144
87 144 8/5/96 10/1/96 9/1/08 297 141
88 120 12/3/96<F3> 1/1/97 12/1/06 300 120
89 84 5/31/96 7/1/96 6/1/03 234 78
90 120 11/26/96 1/1/97 12/1/06 300 120
91 120 9/27/96 11/1/96 10/1/06 238 118
92 120 7/1/96 8/1/96 7/1/06 295 115
93 144 9/25/96 11/1/96 10/1/08 298 142
94 120 6/7/96 8/1/96 7/1/06 295 115
95 120 11/14/96 1/1/97 12/1/06 300 120
96 121 4/4/96 6/1/96 6/1/06 293 114
97 120 12/2/96<F3> 1/1/97 12/1/06 300 120
98 180 11/22/96 1/1/97 12/1/11 180 180
99 120 7/11/96 9/1/96 8/1/06 296 116
99 N/A N/A N/A N/A N/A N/A
100 180 10/30/96 12/1/96 11/1/11 179 179
101 144 8/14/96 10/1/96 9/1/08 297 141
102 84 9/18/95 11/1/95 9/18/02 286 70
103 120 10/31/96 12/1/96 11/1/06 299 119
104 144 9/3/96 11/1/96 10/1/08 178 142
105 120 1/26/96 3/1/96 2/1/06 230 110
106 120 11/20/96<F3> 1/1/97 12/1/06 300 120
107 120 1/26/96 3/1/96 2/1/06 230 110
108 240 9/27/96 11/1/96 10/1/16 358 238
<FN>
<F3> Anticipated closing date. Mortgage not closed as of November 15, 1996.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
COLLATERAL DESCRIPTION
MORTGAGE
LOAN BALLOON LOAN YEAR YEAR OWNERSHIP
NO. BALANCE SELLER PROPERTY TYPE PROPERTY CITY STATE ZIP UNITS/SF BUILT RENOVATED INTEREST
- ----- --------- -------- --------------------- ----------------- ----- ----- ---------- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 2,634,169 MCF Retail-Unanchored Dallas TX 75287 53,551 SF 1986 1996 Fee
57 2,861,226 GACC Industrial Orangeburg NY 10962 102,560 SF 1961 1974 Fee
58 2,619,092 MCF Multifamily Spokane WA 99204 102 Unit 1995 Fee
59 2,670,842 BCMC Office/R & D Canton MA 02021 54,540 SF 1991 Fee
60 2,386,714 MCF Retail-Single Tenant Glendale AZ 85308 61,648 SF 1994 Fee
61 2,491,512 BCMC Multifamily Salt Lake City UT 84111 80 Unit 1910 1990 Fee
62 2,365,524 BCMC Retail-Anchored Bakersfield CA 93306 39,460 SF 1983 Fee
63 2,319,351 MCF Office Roseville MN 55113 83,364 SF 1974 Fee
64 2,273,919 BCMC Multifamily Westland MI 48185 144 Unit 1974 1995 Fee
65 2,236,517 BCMC Retail-Factory Outlet Dillon CO 80435 24,029 SF 1982 1994 Fee
66 2,159,826 MCF Office/Warehouse West St. Paul MN 55077 64,417 SF 1988 Fee
67 2,065,205 MCF Office Bethesda MD 20814 23,599 SF 1982 Fee
68 1,526,211 MCF Office Davis CA 95616 57,538 SF 1986 Fee
69 2,047,221 MCF Multifamily Newport News VA 23608 140 Unit 1970 Fee
70 2,006,496 MCF Multifamily Carrollton TX 75006 172 Unit 1969 1995 Fee
71 1,446,085 MCF Multifamily Ringgold GA 30736 69 Unit 1990 Fee
71 N/A N/A Multifamily East Ridge TN 37412 60 Unit 1989 Fee
72 1,961,535 BCMC Multifamily Orlando FL 32810 176 Unit 1975 1992 Fee
73 1,919,699 BCMC Multifamily Ann Arbor MI 48104 120 Unit 1972 Fee
74 1,838,948 MCF Multifamily Euless TX 76040 192 Unit 1968 1993 Fee
75 1,885,283 MCF Office Bloomfield CT 06002 43,049 SF 1989 Fee
76 1,430,923 MCF Multifamily Winter Park FL 32792 111 Unit 1973 Fee
77 1,754,970 BCMC Multifamily East Point GA 30344 128 Unit 1969 1995 Fee
78 1,735,926 MCF Retail-Unanchored Gaithersburg MD 20879 16,400 SF 1991 Fee
79 0 MCF Mobile Home Park Glenn Heights TX 75115 379 Unit 1982 Fee
80 1,613,785 MCF Office Las Vegas NV 89121 35,178 SF 1983 Fee
81 1,509,235 MCF Retail-Unanchored San Antonio TX 78216 29,609 SF 1975 1994 Fee
82 1,676,816 MCF Office/Retail Houston TX 77035 142,370 SF 1982 Fee
83 1,567,331 MCF Industrial/Warehouse Irwindale CA 91010 69,304 SF 1978 Fee
84 1,122,156 MCF Multifamily Tempe AZ 85252 82 Unit 1980 Fee
85 1,509,235 BCMC Multifamily Santa Rosa CA 95403 77 Unit 1922 1992 Fee
86 1,080,919 MCF Multifamily Stillwater OK 74074 124 Unit 1972 1988 Fee
87 1,379,693 MCF Industrial/Warehouse Commerce CA 90040 108,080 SF 1953 Fee
88 1,442,626 BCMC Retail-Anchored Duncanville TX 75137 61,019 SF 1979 1989 Fee
89 1,471,908 GACC Retail-Single Tenant Washington T'shp. PA 16412 56,850 SF 1988 Fee
90 1,412,252 MCF Multifamily Land O' Lakes FL 34639 120 Unit 1988 Fee
91 1,224,844 MCF Multifamily Colorado Springs CO 80910 54 Unit 1965 Fee
92 1,411,090 GACC Multifamily Kansas City MO 64131 166 Unit 1967 1995 Fee
93 1,290,204 MCF Office Dallas TX 75219 34,725 SF 1986 1993 Fee
94 1,373,257 BCMC Multifamily Kalamazoo MI 49007 132 Unit 1966 1995 Fee
95 1,330,153 MCF Office/Retail Worcester MA 01603 40,913 SF 1988 Fee
96 1,278,179 GACC Retail-Unanchored Gloucester VA 23061 24,075 SF 1994 Fee
97 1,236,150 BCMC Multifamily Baytown TX 77520 138 Unit 1971 1996 Fee
98 0 MCF Multifamily Flagstaff AZ 86001 104 Unit 1994 Fee
99 1,191,370 MCF Multifamily Harlingen TX 78550 72 Unit 1973 Fee
99 N/A N/A Office Harlingen TX 78550 15,890 SF 1973 Fee
100 0 MCF Multifamily Plainfield NJ 07601 84 Unit 1929 1993 Fee
101 1,076,328 MCF Office Scottsdale AZ 85253 25,444 SF 1976 1992 Fee
102 1,255,637 GACC Retail-Anchored Lake Worth FL 33463 57,254 SF 1973 1990 Fee
103 1,119,533 GACC Retail-Anchored Callahan FL 32011 91,685 SF 1972 Fee
104 440,269 MCF Industrial/Warehouse El Cajon CA 92020 91,534 SF 1961 Fee
105 936,740 MCF Retail-Single Tenant Bloomfield MI 48302 23,111 SF 1992 Fee
106 1,067,102 MCF Multifamily Hackensack NJ 07601 28 Unit 1993 Fee
107 926,599 MCF Retail-Single Tenant Bricktown NJ 08723 20,877 SF 1985 Fee
108 818,132 BCMC Multifamily Great Falls MT 59404 40 Unit 1910 1990 Fee
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF
LOAN ORIGINAL DATE INTEREST ORIGINAL
NO. PROPERTY NAME BALANCE BALANCE RATE AMORT.
- ---- ----------------------------------------- ---------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
109 North Georgia Business Center 1,250,000 1,250,000 9.18% 240
109 Direct Connection Drive Business Center N/A N/A N/A N/A
110 Westridge Apartments 1,250,000 1,250,000 8.48% 300
111 12222 Moorpark 1,250,000 1,248,638 9.03% 360
112 Somerset Apartments 1,250,000 1,245,452 8.95% 300
113 Town Center Plaza 1,211,000 1,208,889 9.16% 300
114 Deer Creek Apartments 1,160,000 1,159,334 8.76% 360
115 Mt. Airy Manor Apartments 1,100,000 1,100,000 8.92% 264
116 Applegate Trail Apartments 1,100,000 1,099,380 8.85% 360
117 Plaza Farms Apartments 1,060,000 1,057,272 9.28% 300
117 Zito Apartments N/A N/A N/A N/A
117 Washington Street Development N/A N/A N/A N/A
118 Williams Group Office / Warehouse 1,050,000 1,048,226 9.35% 300
119 Buckingham Apartments 1,050,000 1,046,180 8.95% 300
120 Raleigh Square Apartments 1,030,000 1,028,159 9.01% 300
121 Mountain Shadow Apartments 1,000,000 1,000,000 8.64% 360
122 Colonial Apartments 1,000,000 997,322 9.04% 300
123 Village Marketplace of Union Park 1,000,000 995,758 9.51% 240
124 Kendall Plaza Shopping Center 980,000 978,437 9.69% 300
125 Century Mobile Home Park 950,000 950,000 8.92% 240
126 Hy-Vee Shopping Center 944,000 942,435 9.46% 300
127 Frank's Nursery & Craft Store #65 956,708 941,334 8.70% 240
128 ETI Center 935,000 935,000 8.68% 240
129 8801-8811 Castner Drive 930,000 930,000 8.89% 300
130 Garden Gate Apartments 900,000 897,545 8.93% 300
131 Frank's Nursery & Craft Store #244 909,974 895,351 8.70% 240
132 Westview Gardens Apartments 850,000 847,547 9.32% 240
133 Frank's Nursery & Craft Store #245 849,344 835,695 8.70% 240
134 Southern Hills Apartments 815,625 812,787 9.22% 300
134 Wood Haven Apartments N/A N/A N/A N/A
135 Berneta Bivins Office Building 800,000 800,000 9.20% 300
136 2125 West Spur -- HWY 303 750,000 750,000 9.03% 300
137 Frank's Nursery & Crafts Store #168 726,793 715,114 8.70% 240
138 Frank's Nursery & Crafts Store #25 682,878 674,768 9.28% 240
139 43rd Place Industrial 620,000 620,000 8.79% 300
531,176,571 8.74% 303
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
LOAN TERMS
----------
ORIGINAL FIRST REMAIN. REMAIN.
LOAN TERM TO ORIGINAL PYMT MAT. AMORT. TERM TO
NO. MATURITY NOTE DATE DATE DATE TERM MATURITY
- ---- -------- ----------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
109 144 11/15/96 1/1/97 12/1/08 240 144
109 N/A N/A N/A N/A N/A N/A
110 120 11/21/96 1/1/97 12/1/06 300 120
111 120 9/12/96 11/1/96 10/1/06 358 118
112 120 7/11/96 9/1/96 8/1/06 296 116
113 120 9/30/96 11/1/96 10/1/06 298 118
114 144 10/28/96 12/1/96 11/1/08 359 143
115 180 11/6/96 1/1/97 12/1/11 264 180
116 180 10/21/96 12/1/96 11/1/11 359 179
117 180 8/29/96 10/1/96 9/1/11 297 177
117 N/A N/A N/A N/A N/A N/A
117 N/A N/A N/A N/A N/A N/A
118 144 9/26/96 11/1/96 10/1/08 298 142
119 120 7/11/96 9/1/96 8/1/06 296 116
120 180 9/27/96 11/1/96 10/1/11 298 178
121 180 11/13/96 1/1/97 12/1/11 360 180
122 120 8/20/96 10/1/96 9/1/06 297 117
123 144 8/27/96 10/1/96 9/1/08 237 141
124 120 9/10/96 11/1/96 10/1/06 298 118
125 120 11/18/96 1/1/97 12/1/06 240 120
126 120 9/26/96 11/1/96 10/1/06 298 118
127 120 1/26/96 3/1/96 2/1/06 230 110
128 84 12/2/96 1/1/97 12/1/03 240 84
129 120 11/26/96<F3> 1/1/97 12/1/06 300 120
130 120 8/22/96 10/1/96 9/1/06 297 117
131 120 1/26/96 3/1/96 2/1/06 230 110
132 120 9/5/96 11/1/96 10/1/06 238 118
133 120 1/26/96 3/1/96 2/1/06 230 110
134 120 7/29/96 9/1/96 8/1/06 296 116
134 N/A N/A N/A N/A N/A N/A
135 120 11/15/96 1/1/97 12/1/06 300 120
136 120 11/13/96 1/1/97 12/1/06 300 120
137 120 1/26/96 3/1/96 2/1/06 230 110
138 120 3/14/96 5/1/96 4/1/06 232 112
139 120 12/4/96<F3> 1/1/97 12/1/06 300 120
121 300 118
<FN>
<F3> Anticipated Closing Date. Mortgage not closed as of November 15, 1996.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
COLLATERAL DESCRIPTION
MORTGAGE
LOAN BALLOON LOAN YEAR YEAR OWNERSHIP
NO. BALANCE SELLER PROPERTY TYPE PROPERTY CITY STATE ZIP UNITS/SF BUILT RENOVATED INTEREST
- ---- ---------- -------- --------------------- ----------------- ----- ----- ---------- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
109 772,645 MCF Mini-Warehouse Ringgold GA 30736 138 Unit 1995 Fee
109 N/A N/A Mini-Warehouse Rossville GA 30756 36 Unit 1991 Fee
110 1,021,638 MCF Multifamily Tempe AZ 85281 55 Unit 1981 1988 Fee
111 1,118,472 MCF Multifamily Studio City CA 91604 16 Unit 1995 Fee
112 1,033,051 MCF Multifamily Harlingen TX 78550 104 Unit 1973 Fee
113 1,005,627 MCF Office Boca Raton FL 33486 24,519 SF 1985 1996 Fee
114 991,200 MCF Multifamily Dallas TX 75228 104 Unit 1983 Fee
115 593,504 MCF Multifamily Philadelphia PA 19119 66 Unit 1961 Fee
116 868,581 MCF Multifamily Klamath Falls OR 97603 49 Unit 1995 Fee
117 709,819 MCF Multifamily Wheatfield NY 14301 24 Unit 1994 Fee
117 N/A N/A Multifamily Niagara Falls NY 14304 12 Unit 1992 Fee
117 N/A N/A Multifamily Lewiston NY 14092 16 Unit 1992 Fee
118 816,728 MCF Office/Warehouse Albuquerque NM 87106 29,972 SF 1990 Fee
119 867,763 MCF Multifamily Harlingen TX 78552 69 Unit 1978 Fee
120 682,615 MCF Multifamily Oklahoma City OK 73135 104 Unit 1984 Fee
121 784,377 MCF Multifamily Helena MT 59601 36 Unit 1995 Fee
122 828,151 MCF Multifamily Houston TX 77007 156 Unit 1961 1995 Fee
123 625,353 MCF Retail-Unanchored Orlando FL 32807 37,200 SF 1980 Fee
124 823,326 MCF Retail-Unanchored Miami FL 33183 17,123 SF 1982 1992 Fee
125 673,191 MCF Mobile Home Park Alamosa CO 81101 185 Unit 1973 1994 Fee
126 789,150 MCF Retail-Anchored New Ulm MN 56073 51,297 SF 1977 1990 Fee
127 673,611 MCF Retail-Single Tenant Roseville MN 55113 18,491 SF 1981 Fee
128 767,316 MCF Industrial/Warehouse West St. Paul MN 55118 75,802 SF 1960 1981 Fee
129 767,524 MCF Industrial/Warehouse El Paso TX 79907 40,877 SF 1988 Fee
130 743,453 MCF Multifamily Irving TX 75061 55 Unit 1974 1996 Fee
131 640,706 MCF Retail-Single Tenant Eden Prairie MN 55344 18,569 SF 1990 Fee
132 609,238 MCF Multifamily Houston TX 77055 138 Unit 1969 1995 Fee
133 598,016 MCF Retail-Single Tenant Eagan MN 55123 18,558 SF 1990 Fee
134 678,219 MCF Multifamily Sapulpa OK 74066 56 Unit 1975 Fee
134 N/A N/A Multifamily Sapulpa OK 74066 40 Unit 1971 Fee
135 664,927 MCF Office Amarillo TX 79101 21,758 SF 1980 Fee
136 620,971 MCF Office/Warehouse Grand Prairie TX 75053 55,700 SF 1981 Fee
137 511,729 MCF Retail-Single Tenant Battle Creek MI 49815 18,100 SF 1986 Fee
138 488,902 MCF Retail-Single Tenant Grand Rapids MI 49505 30,060 SF 1969 Fee
139 510,490 MCF Industrial/Warehouse Tucson AZ 85717 39,263 SF 1985 Fee
</TABLE>
3
<TABLE>
<CAPTION>
TENANT DATA
LOAN PCT. OF LEASE EXP. APPRAISED
NO. LARGEST TENANT SF PROPERTY DATE VALUE
- ---- ----------------------------------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1 N/A N/A N/A N/A 35,000,000
2 Circuit City 30,686 13.8% 6/01/08 32,000,000
3 Miller Marketing 10,333 19.0% 8/31/97 22,300,000
4 Bed, Bath & Beyond 36,694 30.8% 4/24/00 17,100,000
5 Lam Research 152,928 100.0% 12/31/14 16,222,000
6 K Mart 134,032 100.0% 11/30/19 15,000,000
7 Preferred Freezer 232,250 100.0% 11/30/15 17,100,000
8 Toys R Us 45,000 27.9% 1/31/18 14,100,000
9 St. Jude Cancer Center 29,048 41.7% 4/14/06 13,400,000
10 N/A N/A N/A N/A 12,300,000
11 N/A N/A N/A N/A 10,600,000
12 Bed N Bath 11,036 11.5% 4/30/04 15,200,000
13 K Mart 193,950 100.0% 11/30/18 12,200,000
14 Service Merchandise 31,684 24.1% 2/28/01 12,000,000
15 N/A N/A N/A N/A 11,225,000
16 N/A N/A N/A N/A 19,200,000
17 County of Riverside 66,440 60.3% 10/26/04 10,500,000
18 BPLW Architects/SBS Engineering 15,741<F3> 14.9% 6/30/00<F3> 11,250,000
19 N/A N/A N/A N/A 9,850,000
20 K-Mart 86,749 48.4% 1/31/17 10,580,000
21 Builder's Square II 109,800 100.0% 10/14/20 12,000,000
22 N/A N/A N/A N/A 9,500,000
23 Just For Feet 16,564 35.6% 11/18/09 11,465,000
24 Crown Central Petroleum 67,079 23.1% 12/31/03 10,500,000
25 B J'S Warehouse Club 119,600 99.8% 7/15/15 10,600,000
26 N/A N/A N/A N/A 7,600,000
27 Walgreen's 28,000 22.2% 2/28/99 8,300,000
28 N/A N/A N/A N/A 7,600,000
29 N/A N/A N/A N/A 8,300,000
30 N/A N/A N/A N/A 7,550,000
31 Cymer Laser Technologies 65,755 100.0% 1/01/10 7,650,000
32 N/A N/A N/A N/A 6,480,000
33 Prudential Insurance, Inc. 57,807 36.4% 7/31/02 14,700,000
34 N/A N/A N/A N/A 6,400,000
35 Polo-Ralph Lauren 7,500 14.4% 6/30/99 7,000,000
36 The Insurance Center 12,720 16.4% 12/31/01 7,400,000
37 Ruth Chris' Steak 9,205 14.1% 11/30/06 7,500,000
38 Louis Shanks Furniture 40,698 32.2% 12/31/04 6,100,000
39 N/A N/A N/A N/A 5,850,000
40 Fairlanes Bowling 39,200 51.3% 6/30/04 6,900,000
41 N/A N/A N/A N/A 5,775,000
42 N/A N/A N/A N/A 6,200,000
43 N/A N/A N/A N/A 6,500,000
44 N/A N/A N/A N/A 6,175,000
45 Inter American Transport Equipment 237,796 100.0% 10/07/21 6,600,000
46 The Gym 11,936 16.6% 8/01/01 6,200,000
47 N/A N/A N/A N/A 5,560,000
48 N/A N/A N/A N/A 6,100,000
49 N/A N/A N/A N/A 6,780,000
50 N/A N/A N/A N/A 4,900,000
51 Sports & Recreation 61,488 100.0% 10/31/21 6,100,000
52 Millers Outpost 20,000 39.1% 1/31/02 4,700,000
53 Belfort Furniture 34,235 47.7% 2/1/18 6,100,000
54 N/A N/A N/A N/A 4,700,000
55 The Developmental School 20,931 35.9% 8/31/96 4,600,000
<FN>
<F3> Each tenant occupies 15,741 sq. ft.; Bplw Architects' lease expires
6/30/97.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED FROM ABOVE TABLE)
COLLATERAL VALUE
UNDER- UNDER-
LOAN APPRAIS. APPRAIS. BALLOON CURRENT OCC. AS WRITTEN WRITTEN CASH
NO. DATE LTV LTV OCCUPANCY OF NOI FLOW
- ---- ------- -------- ------- --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12/12/95 78.0% 68.4% 91.50% 12/25/95 3,180,449 3,180,449
2 10/25/96 55.3% 41.6% 92.25% 11/6/96 3,040,987 2,951,631
3 7/30/96 75.7% 67.1% 87.00% 10/24/96 2,062,078 2,007,658
4 12/6/95 72.2% 64.8% 99.30% 7/3/96 1,580,424 1,520,424
5 10/11/96 72.1% 58.9% 100.00% 10/1/96 1,560,110 1,521,239
6 10/1/96 71.3% 56.1% 100.00% 10/10/96 1,437,493 1,430,791
7 9/1/95 60.0% 50.5% 100.00% 11/8/96 1,530,136 1,530,136
8 10/25/96 72.3% 59.1% 93.04% 11/11/96 1,334,520 1,285,510
9 8/21/96 74.9% 67.3% 99.73% 10/8/96 1,291,112 1,232,100
10 11/1/96 79.7% 70.0% 95.77% 10/28/96 1,164,681 1,164,681
11 8/31/96 85.0% 67.0% 89.80% 7/31/96 1,032,910 1,032,910
12 10/17/96 58.7% 44.7% 96.88% 6/1/96 1,276,476 1,199,531
13 2/26/96 71.0% 59.7% 100.00% 1/1/96 1,207,844 1,207,844
14 9/27/96 70.8% 53.7% 100.00% 8/25/96 1,234,189 1,158,379
15 11/14/96 74.8% 71.0% 93.56% 10/19/96 952,597 952,597
16 7/26/95 40.9% 29.6% 73.16% 4/1/96 2,121,500 2,121,500
17 8/19/96 74.8% 61.7% 99.99% 10/23/96 1,103,287 1,058,859
18 11/06/96 69.8% 62.1% 81.60% 10/24/96 1,123,817 979,384
19 6/27/96 78.3% 70.4% 93.58% 11/4/96 1,031,607 1,031,607
20 10/3/96 72.8% 60.0% 100.00% 8/28/96 1,145,898 1,118,808
21 11/01/96 62.5% 38.2% 100.00% 10/15/95 1,103,688 1,076,954
22 10/7/96 78.6% 62.2% 97.06% 9/27/96 858,204 858,204
23 10/1/96 63.2% 56.5% 100.00% 10/1/96 1,020,763 1,006,136
24 9/23/96 67.8% 41.6% 82.08% 10/1/96 1,364,141 1,001,640
25 4/8/96 65.9% 54.5% 99.85% 11/1/96 966,216 966,216
26 11/5/96 82.9% 76.8% 91.51% 10/21/96 770,049 770,049
27 4/15/96 73.0% 60.8% 100.00% 7/31/96 861,841 801,841
28 11/13/96 74.3% 65.3% 98.6% 11/10/96 677,654 677,654
29 10/12/96 67.8% 60.0% 95.08% 10/1/96 758,522 758,522
30 11/30/95 73.2% 61.2% 93.21% 9/30/96 716,162 716,162
31 7/15/96 67.8% 53.0% 100.00% 8/12/96 772,215 688,162
32 8/1/96 78.7% 70.1% 94.00% 8/28/96 607,983 607,983
33 7/20/96 34.3% 26.6% 97.09% 4/28/96 908,722 673,045
34 10/16/96 78.1% 63.4% 97.55% 10/8/96 636,226 636,226
35 10/11/96 71.4% 58.8% 100.00% 8/9/96 723,273 675,175
36 11/6/96 65.5% 58.3% 100.00% 11/8/96 680,093 592,843
37 7/24/96 64.1% 54.1% 100.00% 6/30/95 671,236 652,780
38 7/26/96 76.0% 63.5% 85.97% 5/1/96 725,326 658,982
39 7/16/96 79.3% 70.6% 93.97% 8/1/96 537,275 537,275
40 7/25/96 66.9% 55.8% 99.96% 6/1/96 675,263 640,100
41 7/10/96 78.8% 65.5% 86.40% 8/19/96 610,155 610,155
42 7/9/96 73.3% 65.4% 97.60% 8/1/96 618,395 618,395
43 11/26/95 69.4% 0.0% 99.52% 10/15/96 677,617 677,617
44 7/16/96 71.2% 67.2% 97.33% 10/10/96 671,095 671,095
45 2/15/96 62.9% 60.0% 100.00% 8/8/96 603,694 579,693
46 9/14/95 52.4% 55.6% 100.00% 10/20/95 617,199 593,199
47 7/30/96 73.7% 65.2% 92.65% 8/16/96 501,557 501,557
48 2/7/96 65.3% 58.8% 97.33% 7/31/96 506,284 506,284
49 4/4/96 54.3% 0.0% 92.81% 8/10/96 585,659 585,659
50 7/30/96 70.2% 62.3% 95.12% 8/16/96 411,016 411,016
51 10/15/96 56.0% 43.1% 100.00% 11/1/96 520,812 511,233
52 9/5/96 72.3% 60.2% 95.20% 9/1/96 492,972 460,256
53 11/10/96 52.5% 43.7% 97.19% 9/1/96 557,179 508,143
54 9/5/96 68.9% 56.1% 87.00% 10/9/96 407,553 407,553
55 10/10/96 69.6% 55.9% 100.00% 8/1/96 504,888 448,220
</TABLE>
1
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
COLLATERAL OPERATING PERFORMANCE
ANNUAL UNDER- YTD
LOAN DEBT WRITTEN 1994 CASH 1995 CASH YTD CASH YTD AS PERIOD
NO. SERVICE DSCR 1994 NOI FLOW 1995 NOI FLOW YTD NOI FLOW OF (MONTHS)
- ---- --------- ------- --------- --------- ------------ ------------ --------- --------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,332,112 1.36 3,055,476 3,055,476 3,151,253<F2> 2,959,653<F2>2,014,549 1,937,311 6/30/96 12
2 2,105,916 1.40 2,851,547 2,851,547 2,713,770 2,713,770 1,172,763 1,172,763 6/30/96 6
3 1,554,127 1.29 1,273,843 1,273,843 1,913,575 1,913,575 2,389,262 2,389,262 9/30/96 9
4 1,207,039 1.26 1,570,639 1,570,639 1,553,293 1,553,293 761,559 761,559 6/30/96 6
5 1,124,868 1.35 1,706,676 1,706,676 1,696,800 1,696,800 1,292,958 1,292,958 9/30/96 9
6 1,093,868 1.31 N/A N/A 1,487,336 1,487,336 1,449,580 1,449,580 7/31/96 12
7 1,119,915 1.37 N/A N/A N/A N/A N/A N/A N/A N/A
8 979,831 1.31 1,262,551 1,262,551 1,790,203 1,790,203 1,076,922 1,076,922 7/31/96 7
9 985,642 1.25 913,816 883,254 994,114 947,238 1,001,938 566,966 6/30/96 12
10 870,297 1.34 1,030,361 947,530 988,947 939,977 972,317 879,557 9/30/96 9
11 853,671 1.21 845,754 845,754 902,552 881,941 601,515 601,515 7/31/96 7
12 872,370 1.38 1,178,559 1,178,559 1,438,355 1,438,355 1,171,622 1,171,622 9/30/96 9
13 911,414 1.33 1,227,239 1,227,239 1,227,239 1,227,239 1,022,699 1,022,699 10/31/96 10
14 817,898 1.42 1,232,046 1,181,474 1,294,648 1,192,491 1,274,901 1,246,655 8/31/96 12
15 724,500 1.31 1,012,367 941,663 1,081,431 968,391 965,930 893,773 10/31/96 10
16 863,736 2.46 2,246,172 2,246,172 2,568,611 2,568,611 895,198 895,198 4/1/96 4
17 784,725 1.35 778,533 773,734 943,724 880,159 742,669 738,225 7/31/96 7
18 758,524 1.29 470,495 436,312 1,010,076 613,239 589,733 369,452 8/31/96 8
19 758,425 1.36 973,116 973,919 982,699 982,699 994,295 902,495 9/30/96 12
20 764,689 1.46 1,320,850 1,319,807 1,185,393 1,185,393 629,362 629,362 6/30/96 6
21 802,821 1.34 N/A N/A N/A N/A 878,655 878,655 9/30/96 9
22 715,110 1.20 848,510 760,518 804,063 704,581 439,155 439,155 6/30/96 6
23 721,778 1.39 N/A N/A N/A N/A 462,992 454,885 6/30/96 6
24 765,421 1.31 1,388,579 1,378,034 1,701,814 1,695,590 1,689,955 1,679,836 7/31/96 12
25 697,462 1.39 N/A N/A N/A N/A N/A N/A N/A N/A
26 562,652 1.37 427,914 (307,086) 526,185 (208,815) 441,261 341,188 8/31/96 8
27 620,980 1.29 948,589 948,589 952,979 952,979 727,865 727,865 9/30/96 9
28 501,279 1.35 717,927 717,927 739,781<F1> 739,781<F1> 551,955 326,115 9/30/96 9
29 518,538 1.46 860,865 802,999 827,613 767,783 620,158 579,306 8/31/96 8
30 569,891 1.26 652,394 652,394 757,070 757,070 532,156 532,156 9/30/96 9
31 541,721 1.27 508,085 508,085 696,513 696,513 N/A N/A N/A N/A
32 482,773 1.26 546,624 504,624 571,718 531,718 361,849 361,849 7/31/96 7
33 516,461 1.30 1,091,810 942,528 804,893 804,893 868,897 868,897 5/31/96 12
34 471,067 1.35 650,204 633,027 660,351 613,038 379,420 363,633 7/31/96 7
35 495,326 1.36 794,128 794,128 783,588 783,588 418,103 418,103 6/30/96 6
36 468,642 1.27 524,254 490,071 658,804 658,804 649,662 649,662 9/30/96 9
37 500,176 1.31 555,048 555,048 684,236<F4> 664,236<F4> 348,859 276,819 5/25/96 6
38 478,631 1.38 570,716 536,109 704,162 674,974 168,592 167,745 3/31/96 3
39 435,723 1.23 596,616 596,616 547,813 547,813 239,284 218,075 5/31/96 5
40 473,890 1.35 606,691 588,941 735,821 615,299 N/A N/A N/A N/A
41 463,337 1.32 525,831 525,831 808,421 808,421 N/A N/A N/A N/A
42 432,461 1.43 567,751 202,387 689,604 632,170 696,864 673,718 4/30/96 12
43 560,409 1.21 678,300 607,328 768,798 687,396 772,901 709,516 9/30/96 12
44 431,683 1.55 553,671 553,671 623,120 623,120 434,213 426,652 9/30/96 9
45 455,088 1.27 N/A N/A N/A N/A N/A N/A N/A N/A
46 410,600 1.44 535,634 535,634 629,284 625,067 304,289 301,199 6/20/96 6
47 374,824 1.34 534,148 499,148 557,774 522,774 266,009 266,009 6/30/96 6
48 404,991 1.25 304,303 304,303 349,110 349,110 121,001 121,001 8/1/96 3
49 357,222 1.64 N/A N/A N/A N/A 21,311 21,311 6/30/96 6
50 319,751 1.29 493,131 463,131 461,434 431,434 217,472 217,472 6/30/96 6
51 344,565 1.49 N/A N/A N/A N/A N/A N/A N/A N/A
52 348,841 1.32 503,580 503,580 508,871 508,871 194,198 194,198 5/31/96 5
53 313,619 1.60 434,157 (30,108) 636,463 449,050 349,149 349,149 8/31/96 6
54 307,850 1.32 499,211 440,297 466,405 402,173 460,028 381,349 9/30/96 12
55 326,469 1.37 N/A N/A 490,920 429,477 348,203 286,760 8/31/96 8
<FN>
<F1> Annualized NOI and Cash Flow.
<F2> Annualized NOI and Cash Flow.
<F4> Pro forma NOI and Cash Flow.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
COLLATERAL VALUE
LOAN PCT. OF LEASE EXP. APPRAISED
NO. LARGEST TENANT SF PROPERTY DATE VALUE
- ---- ----------------------------------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
56 Ace Hardware 10,326 19.3% 10/01/98 4,350,000
57 ICN Pharmaceuticals 102,560 100.0% 12/20/21 4,750,000
58 N/A N/A N/A N/A 4,370,000
59 Delphax Company 54,540 100.0% 3/01/06 4,580,000
60 Sports & Recreation 61,648 100.0% 10/31/21 4,810,000
61 N/A N/A N/A N/A 3,410,000
62 Union Bank 4,380 11.1% 11/01/06 3,900,000
63 Gausman & Moore 11,143 13.4% 3/31/03 5,000,000
64 N/A N/A N/A N/A 3,550,000
65 Timberland 5,118 21.3% 6/30/01 4,000,000
66 Andal Corporation 24,202 37.6% 11/30/04 3,550,000
67 Drs. Goldstein, Blundon 2,525 10.7% 10/31/99 4,000,000
68 Soil Conservation 26,450 46.0% 10/03/98 4,470,000
69 N/A N/A N/A N/A 3,400,000
70 N/A N/A N/A N/A 3,400,000
71 N/A N/A N/A N/A 1,700,000
71 N/A N/A N/A N/A 1,500,000
72 N/A N/A N/A N/A 3,650,000
73 N/A N/A N/A N/A 3,250,000
74 N/A N/A N/A N/A 3,080,000
75 Lindberg & Ripple 7,335 17.0% 12/31/99 3,000,000
76 N/A N/A N/A N/A 3,000,000
77 N/A N/A N/A N/A 3,750,000
78 Reliable La-Z-Boy 8,000 48.8% 10/13/98 3,000,000
79 N/A N/A N/A N/A 4,480,000
80 Webster University 4,091 11.6% 4/30/00 3,000,000
81 Shepherd's Shoppe 16,579 56.0% 9/30/02 2,740,000
82 Houston Shutter 17,740 12.5% 12/31/99 2,840,000
83 A & C Plastics, Inc. 8,816 12.7% 3/11/99 2,600,000
84 N/A N/A N/A N/A 2,475,000
85 N/A N/A N/A N/A 2,390,000
86 N/A N/A N/A N/A 2,700,000
87 Master Warehousing Services 55,780 51.6% 8/31/98 2,700,000
88 Beall's 21,015 34.4% 1/31/05 2,600,000
89 Ames Department Store 56,850 100.0% 1/30/09 2,350,000
90 N/A N/A N/A N/A 2,500,000
91 N/A N/A N/A N/A 2,450,000
92 N/A N/A N/A N/A 2,400,000
93 Ferrer, Montes & Polrot, P.C. 34,724 100.0% 8/31/08 2,900,000
94 N/A N/A N/A N/A 2,600,000
95 Children's Playland 9,928 24.3% 12/31/04 2,550,000
96 Fashion Bug 9,350 38.8% 10/31/99 2,260,000
97 N/A N/A N/A N/A 2,200,000
98 N/A N/A N/A N/A 2,075,000
99 N/A N/A N/A N/A 1,961,000
99 Wk Associates 2,050 12.9% 4/15/97 n/a
100 N/A N/A N/A N/A 2,200,000
101 Drs. Chiappetti & Huntington 3,349 13.2% 1/31/01 2,050,000
102 Office Depot 23,168 40.5% 4/1/01 2,050,000
103 Winn Dixie 39,211 42.8% 5/20/07 2,250,000
104 Precision Metal Products, Inc. 87,000 95.0% 6/30/06 2,370,000
105 Frank's Nursery & Crafts Store #277 23,111 100.0% n/a 2,200,000
106 N/A N/A N/A N/A 1,680,000
107 Frank's Nursery & Crafts Store # 20,877 100.0% n/a 2,250,000
108 N/A N/A N/A N/A 1,500,000
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED FROM ABOVE TABLE)
TENANT DATA COLLATERAL VALUE
UNDER- UNDER-
LOAN APPRAIS. APPRAIS. BALLOON CURRENT OCC. AS WRITTEN WRITTEN CASH
NO. DATE LTV LTV OCCUPANCY OF NOI FLOW
- ---- -------- -------- ------- --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
56 10/31/96 73.6% 60.6% 95.51% 11/1/96 466,339 432,959
57 9/23/96 67.4% 60.2% 100.00% 1/25/96 451,892 419,482
58 8/19/96 72.6% 59.9% 95.10% 8/1/96 405,036 405,036
59 3/29/96 68.6% 58.3% 100.00% 11/1/96 460,725 460,725
60 10/19/96 64.4% 49.6% 100.00% 11/1/96 476,171 467,164
61 9/10/96 84.6% 73.1% 100.00% 8/20/96 335,570 327,425
62 9/9/96 73.7% 60.7% 88.43% 11/1/96 405,825 380,728
63 7/31/96 55.9% 46.4% 96.39% 10/20/96 478,567 382,153
64 11/29/96 76.8% 64.1% 93.06% 9/30/96 350,623 350,623
65 9/1/96 67.4% 55.9% 87.60% 9/1/96 386,942 370,552
66 10/24/96 73.9% 60.8% 88.20% 9/5/96 377,713 331,042
67 11/1/96 63.1% 51.6% 100.00% 11/1/96 387,824 351,587
68 5/24/96 56.1% 34.1% 100.00% 10/22/96 443,767 394,566
69 10/4/96 73.5% 60.2% 96.43% 7/1/96 332,332 332,332
70 7/25/96 71.5% 59.0% 94.77% 6/1/96 331,578 331,578
71 9/26/96 75.0% 45.2% 91.30% 6/1/96 194,078 194,078
71 9/26/96 N/A N/A 98.33% 6/1/96 143,252 143,252
72 4/15/96 64.4% 53.7% 90.91% 9/1/96 334,765 334,765
73 12/28/95 71.1% 59.1% 81.67% 9/30/96 290,986 290,986
74 10/30/96 73.1% 59.7% 89.58% 10/8/96 304,739 304,739
75 7/25/96 74.7% 62.8% 87.80% 9/5/96 361,442 303,516
76 10/2/96 72.9% 47.7% 98.20% 9/27/96 285,012 285,012
77 12/19/95 56.3% 46.8% 94.53% 9/30/96 348,098 348,098
78 10/16/96 70.0% 57.9% 99.39% 10/31/96 301,588 286,099
79 9/30/96 44.4% 0.0% 84.17% 9/30/96 462,684 462,684
80 10/20/96 65.0% 53.8% 99.31% 8/1/96 304,594 271,249
81 7/17/96 71.0% 55.1% 100.00% 8/3/96 327,005 302,643
82 10/18/96 67.8% 59.0% 94.24% 10/1/96 281,747 253,987
83 7/26/96 73.1% 60.3% 91.98% 10/16/96 274,038 258,494
84 8/22/96 74.7% 45.3% 96.34% 9/30/96 247,204 247,204
85 9/5/96 76.9% 63.1% 100.00% 9/1/96 206,697 206,697
86 10/25/96 66.7% 40.0% 100.00% 9/15/96 254,130 254,130
87 7/3/96 65.6% 51.1% 100.00% 7/26/96 276,085 249,631
88 10/22/96 67.7% 55.5% 91.48% 9/13/96 242,314 219,857
89 2/27/96 74.3% 62.6% 100.00% 4/25/96 247,915 247,915
90 10/21/96 69.2% 56.5% 95.83% 10/10/96 242,264 242,264
91 9/9/96 70.2% 50.0% 94.44% 9/30/96 250,984 250,984
92 5/3/96 70.8% 58.8% 89.76% 6/1/96 209,078 209,078
93 8/21/96 56.8% 44.5% 100.00% 9/13/96 255,894 232,618
94 11/28/95 63.2% 52.8% 95.45% 8/31/96 213,748 213,748
95 9/03/96 62.7% 52.2% 100.00% 5/1/96 280,537 245,896
96 11/1/95 68.2% 56.7% 100.00% 9/29/96 225,580 212,280
97 9/16/96 68.7% 56.2% 92.03% 10/31/96 183,752 183,752
98 10/23/96 72.3% 0.0% 98.08% 9/30/96 233,384 233,384
99 6/10/96 72.9% 60.8% 88.89% 9/20/96 152,247 152,247
99 N/A N/A N/A 86.19% 9/20/96 33,952 22,854
100 8/5/96 63.5% 0.0% 95.24% 10/10/96 244,870 244,870
101 4/2/96 67.6% 52.5% 98.99% 10/28/96 209,956 177,997
102 5/15/95 67.4% 61.3% 77.09% 9/28/96 206,358 197,770
103 8/12/96 59.9% 49.8% 90.40% 8/1/96 189,728 177,328
104 7/1/96 56.7% 18.6% 95.05% 7/25/96 265,977 237,605
105 8/21/95 59.5% 42.6% 100.00% 11/21/96 223,321 220,423
106 10/29/96 77.4% 63.5% 96.43% 5/1/96 169,083 169,083
107 8/21/95 57.5% 41.2% 100.00% 11/21/96 220,903 218,047
108 9/5/96 84.9% 54.5% 100.00% 8/29/96 163,071 163,071
109 N/A N/A N/A N/A 1,234,000
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED FROM ABOVE TABLE)
COLLATERAL OPERATING PERFORMANCE
ANNUAL UNDER- YTD
LOAN DEBT WRITTEN 1994 CASH 1995 CASH YTD CASH YTD AS PERIOD
NO. SERVICE DSCR 1994 NOI FLOW 1995 NOI FLOW YTD NOI FLOW OF (MONTHS)
- ---- --------- ------- --------- --------- ------------ ------------ --------- --------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 316,486 1.37 313,459 313,459 332,258 332,258 380,555 380,555 9/30/96 12
57 318,316 1.32 N/A N/A N/A N/A N/A N/A N/A N/A
58 316,349 1.28 N/A N/A N/A N/A N/A N/A N/A N/A
59 331,572 1.39 455,033 455,033 456,369 456,369 N/A N/A N/A N/A
60 311,926 1.50 N/A N/A N/A N/A N/A N/A N/A N/A
61 283,350 1.16 270,841 270,841 349,704 349,704 155,771 155,771 6/30/96 6
62 283,874 1.34 47,754 47,754 268,032 268,032 193,373 193,373 7/31/96 7
63 283,121 1.35 555,763 543,003 433,653 420,906 N/A N/A N/A N/A
64 280,509 1.25 371,962 371,962 390,805 232,193 258,963 258,963 9/30/96 9
65 273,010 1.36 148,173 148,173 276,522 276,522 174,263 174,263 6/30/96 6
66 259,189 1.28 294,513 252,916 348,497 334,529 269,907 256,401 9/30/96 9
67 244,188 1.44 391,282 391,282 416,208 416,208 237,746 213,404 8/31/96 8
68 298,770 1.32 379,166 333,529 517,584 512,253 345,528 345,528 9/30/96 9
69 242,782 1.37 274,306 244,394 336,098 288,622 414,223 378,240 6/30/96 12
70 241,073 1.38 250,928 (413,195) 421,716 314,448 338,014 338,014 8/31/96 8
71 249,569 1.35 95,395 95,395 210,334 210,334 N/A N/A N/A N/A
71 N/A N/A 172,767 172,767 155,464 155,464 N/A N/A N/A N/A
72 241,551 1.39 383,319 383,319 277,670 277,670 206,869 206,869 7/31/96 7
73 232,419 1.25 248,450 248,450 313,421 221,572 200,533 200,533 9/30/96 9
74 217,047 1.40 187,786 136,256 294,086 294,086 244,571 244,571 8/31/96 6
75 238,565 1.27 N/A N/A 283,015 167,633 249,474 217,097 9/30/96 9
76 214,277 1.33 278,584 167,776 283,594 247,220 156,645 156,645 6/30/96 6
77 212,600 1.64 242,040 242,040 428,429 428,429 309,521 309,521 9/30/96 9
78 210,788 1.36 317,645 317,645 327,147 327,147 182,879 182,879 7/31/96 7
79 301,689 1.53 486,430 486,430 522,919 522,919 425,370 425,370 5/31/96 5
80 196,532 1.38 233,815 216,800 352,405 345,340 277,378 277,378 10/31/96 10
81 199,425 1.52 292,373 283,073 273,349 273,349 308,316 194,699 9/30/96 9
82 189,601 1.34 314,876 310,270 341,058 341,058 218,961 214,895 8/31/96 8
83 189,311 1.37 267,424 265,774 273,495 273,495 280,855 280,855 4/30/96 12
84 194,911 1.27 N/A N/A 178,106 178,106 241,451 202,482 5/31/96 12
85 179,951 1.15 178,990 178,990 234,274 234,274 149,054 149,054 7/31/96 7
86 185,949 1.37 317,210 267,833 328,434 260,614 212,806 176,546 9/30/96 9
87 183,513 1.36 328,010 328,010 303,526 303,526 N/A N/A N/A N/A
88 171,490 1.28 170,668 170,668 238,399 238,399 143,346 131,977 8/25/96 8
89 199,633 1.24 260,345 260,345 262,157 262,157 N/A N/A N/A N/A
90 166,289 1.46 352,117 320,977 322,110 277,873 179,878 27,590 9/30/96 6
91 186,110 1.35 239,570 29,570 281,152 269,152 124,730 118,730 5/31/96 5
92 171,545 1.22 228,153 228,153 289,041 289,041 99,223 99,223 5/25/96 5
93 173,543 1.34 199,508 141,455 346,737 340,737 N/A N/A N/A N/A
94 169,700 1.26 266,210 266,210 268,260 268,260 212,407 212,407 9/30/96 9
95 163,896 1.50 283,752 283,752 281,836 281,839 N/A N/A N/A N/A
96 155,709 1.36 N/A N/A 248,074 248,074 123,685 123,685 6/30/96 6
97 146,248 1.26 N/A N/A N/A N/A 145,536 145,536 9/30/96 9
98 178,627 1.31 47,530 47,530 190,529 190,529 328,921 328,921 8/31/96 8
99 146,283 1.20 246,812 222,936 215,926 184,287 163,135 126,394 9/30/96 9
99 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
100 170,997 1.43 N/A N/A N/A N/A 200,573 189,573 4/30/96 9
101 142,155 1.25 164,345 134,132 201,820 154,311 161,369 125,928 9/30/96 9
102 141,618 1.40 N/A N/A N/A N/A 111,918 111,918 6/30/96 6
103 137,061 1.29 196,586 196,586 230,937 230,937 117,691 117,691 7/31/96 7
104 169,262 1.40 N/A N/A N/A N/A N/A N/A N/A N/A
105 140,576 1.57 N/A N/A N/A N/A N/A N/A N/A N/A
106 127,302 1.33 152,950 152,950 183,240 183,240 144,561 144,561 9/30/96 9
107 139,054 1.57 N/A N/A N/A N/A N/A N/A N/A N/A
108 125,537 1.30 168,367 168,367 191,878 191,878 90,686 90,686 6/30/96 6
</TABLE>
2
<TABLE>
<CAPTION>
(RESTUBBED FROM ABOVE TABLE)
TENANT DATA COLLATERAL VALUE
LOAN PCT. OF LEASE EXP. APPRAISED
NO. LARGEST TENANT SF PROPERTY DATE VALUE
- ---- ----------------------------------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C>
109 N/A N/A N/A N/A 1,234,000
109 N/A N/A N/A N/A 635,000
110 N/A N/A N/A N/A 1,700,000
111 N/A N/A N/A N/A 1,800,000
112 N/A N/A N/A N/A 1,948,000
113 Parren Corporation 14,025 57.2% 8/31/98 1,950,000
114 N/A N/A N/A N/A 1,800,000
115 N/A N/A N/A N/A 1,470,000
116 N/A N/A N/A N/A 2,110,000
117 N/A N/A N/A N/A 790,000
117 N/A N/A N/A N/A 300,000
117 N/A N/A N/A N/A 500,000
118 Williams Glass Company, Inc. 11,532 38.5% 12/31/07 1,550,000
119 N/A N/A N/A N/A 1,662,000
120 N/A N/A N/A N/A 1,520,000
121 N/A N/A N/A N/A 2,593,500
122 N/A N/A N/A N/A 2,500,000
123 Big Lots (Malone & Hyde) 25,200 67.7% 5/31/05 1,700,000
124 Miami Banquet Hall 3,669 21.4% 11/30/98 1,350,000
125 N/A N/A N/A N/A 1,400,000
126 K-Mart/(HY-VEE Sublessee) 39,797 77.6% 7/31/03 1,275,000
127 Frank's Nursery & Crafts Store #65 18,491 100.0% N/A 1,610,000
128 Eclipse Concert Systems 5,907 7.8% 3/31/97 2,300,000
129 Robles Intl. 25 25,277 61.4% 1/1/98 1,250,000
130 N/A N/A N/A N/A 1,200,000
131 Frank's Nursery & Crafts Store #244 18,569 100.0% N/A 1,500,000
132 N/A N/A N/A N/A 1,900,000
133 Frank's Nursery & Crafts Store #245 18,558 100.0% N/A 1,510,000
134 N/A N/A N/A N/A 570,000
134 N/A N/A N/A N/A 560,000
135 Coldwater Cattle 21,758 100.0% 9/30/21 1,200,000
136 Winner's Circle 5,000 9.0% 2/28/98 1,125,000
137 Frank's Nursery & Crafts Store #168 18,100 100.0% N/A 1,275,000
138 Frank's Nursery & Crafts Store #25 30,060 100.0% N/A 2,100,000
139 Hiline Design 16,195 41.2% 9/30/99 1,100,000
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED FROM ABOVE TABLE)
COLLATERAL VALUE
UNDER- UNDER-
LOAN APPRAIS. APPRAIS. BALLOON CURRENT OCC. AS WRITTEN WRITTEN CASH
NO. DATE LTV LTV OCCUPANCY OF NOI FLOW
- ---- -------- -------- ------- --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
109 9/26/96 66.9% 41.3% 94.93% 6/1/96 151,347 151,347
109 9/26/96 N/A N/A 88.89% 6/1/96 45,901 45,901
110 10/1/96 73.5% 60.1% 98.18% 9/1/96 163,447 163,447
111 7/3/96 69.4% 62.1% 100.00% 8/15/96 145,468 145,468
112 6/6/96 63.9% 53.0% 80.77% 9/20/96 178,932 154,599
113 6/11/96 62.0% 51.6% 100.00% 9/24/96 184,785 154,458
114 5/14/96 64.4% 55.1% 93.27% 9/30/96 179,923 179,923
115 9/25/96 74.8% 40.4% 93.94% 5/29/96 146,736 146,736
116 8/19/96 52.1% 41.2% 100.00% 9/20/96 140,129 140,129
117 6/11/96 66.5% 44.6% 95.83% 8/9/96 60,973 60,973
117 6/11/96 N/A N/A 75.00% 8/9/96 24,364 24,364
117 6/11/96 N/A N/A 93.75% 8/9/96 50,888 50,888
118 4/19/96 67.6% 52.7% 100.00% 8/26/96 156,491 143,192
119 6/4/96 62.9% 52.2% 97.10% 9/18/96 144,083 144,083
120 8/23/96 67.6% 44.9% 94.23% 8/1/96 138,506 138,506
121 9/5/96 38.6% 30.2% 94.44% 8/28/96 124,611 124,611
122 7/3/96 39.9% 33.1% 90.38% 7/22/96 148,594 148,594
123 7/1/96 58.6% 36.8% 100.00% 8/1/96 150,350 140,815
124 6/28/96 72.5% 61.0% 100.00% 7/31/96 152,047 138,566
125 9/5/96 67.9% 48.1% 99.46% 9/30/96 138,461 138,461
126 8/28/96 73.9% 61.9% 100.00% 9/13/96 139,809 125,058
127 8/21/95 58.5% 41.8% 100.00% 11/21/96 160,590 158,482
128 11/1/96 40.7% 33.4% 78.14% 10/1/96 188,387 155,561
129 10/24/96 74.4% 61.4% 99.02% 11/8/96 136,440 124,631
130 10/10/96 74.8% 62.0% 96.36% 6/30/96 116,802 116,802
131 8/22/95 59.7% 42.7% 100.00% 11/21/96 152,746 150,735
132 6/20/96 44.6% 32.1% 86.96% 7/31/96 140,213 140,213
133 8/22/95 55.3% 39.6% 100.00% 11/21/96 142,568 140,664
134 5/17/96 71.9% 60.0% 91.07% 6/30/96 58,319 58,315
134 5/17/96 N/A N/A 95.00% 6/30/96 56,669 56,669
135 10/7/96 66.7% 55.4% 100.00% 10/22/96 124,392 108,550
136 9/18/96 66.7% 55.2% 100.00% 7/1/96 124,500 99,884
137 8/22/95 56.1% 40.1% 100.00% 11/21/96 121,997 120,336
138 8/25/95 32.1% 23.3% 100.00% 11/21/96 208,512 204,857
139 9/23/96 56.4% 46.4% 92.47% 7/19/96 98,270 87,326
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED FROM ABOVE TABLE)
COLLATERAL OPERATING PERFORMANCE
ANNUAL UNDER- YTD
LOAN DEBT WRITTEN 1994 CASH 1995 CASH YTD CASH YTD AS PERIOD
NO. SERVICE DSCR 1994 NOI FLOW 1995 NOI FLOW YTD NOI FLOW OF (MONTHS)
- ---- --------- ------- --------- --------- ------------ ------------ --------- --------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
109 136,700 1.44 127,839 127,839 141,610 141,610 N/A N/A N/A N/A
109 N/A N/A 69,659 69,659 49,188 49,188 N/A N/A N/A N/A
110 120,582 1.36 167,548 167,548 174,703 174,703 177,176 168,051 5/31/96 12
111 121,017 1.20 N/A N/A N/A N/A 45,549 43,254 4/30/96 4
112 125,366 1.23 222,045 185,562 189,994 118,525 56,973 52,713 3/31/96 3
113 123,548 1.25 178,744 178,744 192,260 150,285 103,236 103,236 6/30/96 6
114 109,608 1.64 229,019 229,019 187,981 180,727 115,701 61,501 6/30/96 6
115 114,298 1.28 164,963 164,963 171,115 171,115 70,037 70,037 5/31/96 5
116 104,789 1.34 N/A N/A N/A N/A 46,835 32,253 7/31/96 7
117 109,195 1.25 57,660 57,660 79,162 78,362 N/A N/A N/A N/A
117 N/A N/A 27,627 27,627 34,541 34,041 N/A N/A N/A N/A
117 N/A N/A 57,719 57,719 59,399 58,399 N/A N/A N/A N/A
118 108,775 1.32 134,222 128,402 138,524 132,461 140,766 124,871 4/30/96 11
119 105,308 1.37 196,950 164,403 178,227 147,105 166,259 145,174 9/30/96 9
120 103,809 1.33 178,729 155,646 192,471 192,471 53,019 53,019 5/31/96 5
121 93,463 1.33 N/A N/A N/A N/A 6,272 (6,672) 7/31/96 7
122 101,032 1.47 136,543 17,229 185,259 130,971 119,467 76,246 10/31/96 10
123 111,934 1.26 152,189 142,489 164,504 164,504 N/A N/A N/A N/A
124 104,304 1.33 146,714 146,714 155,507 155,507 N/A N/A N/A N/A
125 101,983 1.36 111,200 111,200 147,384 147,384 42,074 42,074 3/31/96 3
126 98,658 1.27 136,722 130,247 132,960 128,790 N/A N/A N/A N/A
127 101,088 1.57 N/A N/A N/A N/A N/A N/A N/A N/A
128 98,652 1.58 N/A N/A N/A N/A 110,217 110,217 9/1/96 6
129 92,815 1.34 72,421 72,421 158,842 158,842 101,438 101,438 8/31/96 8
130 90,116 1.30 125,821 99,845 128,632 118,085 N/A N/A N/A N/A
131 96,150 1.57 N/A N/A N/A N/A N/A N/A N/A N/A
132 93,882 1.49 4,974 (149,002) 180,608 156,160 139,808 114,138 9/30/96 9
133 89,744 1.57 N/A N/A N/A N/A N/A N/A N/A N/A
134 83,616 1.38 155,023 155,023 179,523 142,286 178,173 159,646 9/30/96 9
134 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
135 81,882 1.33 N/A N/A N/A N/A 72,162 72,162 5/31/96 5
136 75,713 1.32 112,615 91,849 147,773 135,510 N/A N/A N/A N/A
137 76,795 1.57 N/A N/A N/A N/A N/A N/A N/A N/A
138 75,210 2.72 N/A N/A N/A N/A N/A N/A N/A N/A
139 61,370 1.42 74,776 74,776 94,978 94,978 94,978 94,978 3/31/96 12
</TABLE>
3
<TABLE>
<CAPTION>
PREPAYMENT PREMIUM SCHEDULE AFTER PREPAYMENT LOCKOUT PERIOD AND PREPAYMENT YIELD MAINTENANCE PERIOD
---------------------------------------------------------------------------------------------------
PREPAYMENT PREPAYMENT
PREPAYMENT YIELD PREMIUM
LOCKOUT MAINTENANCE (GREATER OF FIRST PREPAYMENT SECOND PREPAYMENT THIRD
PERIOD PERIOD THE FOLLOWING PERIOD PREMIUM PERIOD PREMIUM PERIOD
(MONTHS) (MONTHS) RATE OR TYM) (MONTHS) RATE (MONTHS) RATE (MONTHS)
- ------- ----------- -------------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
0 114 1% 3 1% 0 0% 0
0 40 1% 12 3% 12 2% 6
60 54 1% 0 0% 0 0% 0
0 78 1% 0 0% 0 0% 0
0 108 2% 0 0% 0 0% 0
60 60 1% 0 0% 0 0% 0
0 48 1% 12 3% 12 2% 6
0 96 5% 12<F1> 5%<F1> 0 0% 0
0 96 5% 12 5% 0 0% 0
0 96 2% 12 2% 0 0% 0
120 54 0% 0 0% 0 0% 0
0 132 0% 0 0% 0 0% 0
60 54 1% 0 0% 0 0% 0
0 120 3% 12 3% 0 0% 0
0 57 1% 0 0% 0 0% 0
60 60 2% 0 0% 0 0% 0
0 96 3% 12 2% 0 0% 0
0 72 1% 0 0% 0 0% 0
48 66 1% 0 0% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 120 5% 12 5% 0 0% 0
0 108 5% 12 5% 12 4% 0
0 78 0% 0 0% 0 0% 0
0 108 5% 12 5% 12 4% 0
60 54 0% 0 0% 0 0% 0
0 60 3% 12 3% 6 1% 0
36 78 1% 0 0% 0 0% 0
0 96 1% 12 3% 0 0% 0
72 0 0% 12 2% 12 1% 0
60 54 0% 0 0% 0 0% 0
0 0 0% 132 2% 0 0% 0
48 66 1% 0 0% 0 0% 0
0 120 5% 12 5% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 72 1% 0 0% 0 0% 0
0 114 1% 0 0% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 96 3% 12 3% 0 0% 0
0 60 5% 12 4% 12 3% 12
0 108 1% 0 0% 0 0% 0
0 173 5% 0 0% 0 0% 0
0 54 5% 0 0% 0 0% 0
0 48 1% 12 3% 12 2% 6
0 84 1% 12 3% 12 2% 6
60 54 1% 0 0% 0 0% 0
60 18 0% 0 0% 0 0% 0
0 294 0% 0 0% 0 0% 0
48 66 1% 0 0% 0 0% 0
0 120 5% 12 5% 0 0% 0
60 24 1% 12 3% 12 2% 6
24 84 1%<F2> 0 0% 0 0% 0
0 96 3% 12 3% 0 0% 0
0 96 5% 12 5% 0 0% 0
<FN>
<F1> Lesser of Yield Maintenance or 5%.
<F2> Year 3 greater of YM or 3%; year 4 greater of YM or 2%; year 5-9 greater
of YM or 1%.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED FROM PREVIOUS TABLE)
PREPAYMENT PREMIUM SCHEDULE AFTER PREPAYMENT LOCKOUT PERIOD AND PREPAYMENT YIELD MAINTENANCE PERIOD
- ---------------------------------------------------------------------------------------------------
PREPAYMENT TOTAL
LOCKOUT PREPAYMENT FOURTH PREPAYMENT FIFTH PREPAYMENT PENALTY
PERIOD PREMIUM PERIOD PREMIUM PERIOD PREMIUM PERIOD
(MONTHS) RATE (MONTHS) RATE (MONTHS) RATE (MONTHS)
- ------- ---------- ------ ---------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
0 0% 0 0% 0 0% 117
0 1% 0 0% 0 0% 70
60 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 78
0 0% 0 0% 0 0% 108
60 0% 0 0% 0 0% 120
0 1% 0 0% 0 0% 78
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
120 0% 0 0% 0 0% 174
0 0% 0 0% 0 0% 132
60 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 132
0 0% 0 0% 0 0% 57
60 0% 0 0% 0 0% 120
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 72
48 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 132
0 0% 0 0% 0 0% 132
0 0% 0 0% 0 0% 78
0 0% 0 0% 0 0% 132
60 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 78
36 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 108
72 0% 0 0% 0 0% 96
60 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 132
48 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 132
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 72
0 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 2% 12 1% 0 0% 108
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 173
0 0% 0 0% 0 0% 54
0 1% 0 0% 0 0% 78
0 1% 0 0% 0 0% 114
60 0% 0 0% 0 0% 114
60 0% 0 0% 0 0% 78
0 0% 0 0% 0 0% 294
48 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 132
60 1% 0 0% 0 0% 114
24 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
PREPAYMENT PREMIUM SCHEDULE AFTER PREPAYMENT LOCKOUT PERIOD AND PREPAYMENT YIELD MAINTENANCE PERIOD
- ---------------------------------------------------------------------------------------------------
PREPAYMENT PREPAYMENT
PREPAYMENT YIELD PREMIUM
LOCKOUT MAINTENANCE (GREATER OF FIRST PREPAYMENT SECOND PREPAYMENT THIRD
PERIOD PERIOD THE FOLLOWING PERIOD PREMIUM PERIOD PREMIUM PERIOD
(MONTHS) (MONTHS) RATE OR TYM) (MONTHS) RATE (MONTHS) RATE (MONTHS)
- ---------- ----------- -------------- ------ ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
0 96 5% 12 5% 0 0% 0
36 42 1% 0 0% 0 0% 0
0 96 5% 12 5% 0 0% 0
60 49 1% 0 0% 0 0% 0
0 120 5% 12 5% 0 0% 0
60 78 0% 0 0% 0 0% 0
60 54 1% 0 0% 0 0% 0
24 84 1%<F2> 0 0% 0 0% 0
60 54 0% 0 0% 0 0% 0
60 54 1% 0 0% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 96 1% 12 1% 0 0% 0
0 96 3% 12 1% 0 0% 0
0 72 3% 12 3% 12 2% 12
0 120 5% 12 5% 0 0% 0
NAP NAP NAP NAP NAP NAP NAP NAP
60 54 0% 0 0% 0 0% 0
60 54 0% 0 0% 0 0% 0
0 84 3% 12 3% 0 0% 0
0 60 5% 12 5% 24 2% 12
0 108 5% 12 5% 12 4% 12
60 54 0% 0 0% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 120 5% 12 5% 0 0% 0
0 60 5% 12 4% 18 3% 0
0 96 5% 12 5% 0 0% 0
0 120 5% 12 5% 0 0% 0
120 42 0% 0 0% 0 0% 0
0 120 5% 12 5% 0 0% 0
0 120 5% 12 5% 0 0% 0
0 48 1% 12 3% 12 2% 6
0 48 1% 12 3% 12 2% 6
0 96 5% 12 5% 0 0% 0
0 96 5% 12 5% 0 0% 0
60 54 1% 0 0% 0 0% 0
0 120 5% 12 5% 0 0% 0
60 54 0% 0 0% 0 0% 0
0 108 5% 0 0% 0 0% 0
0 84 1% 12 3% 12 2% 6
60 54 1% 0 0% 0 0% 0
0 108 5% 12 5% 12 4% 12
0 114 2% 0 0% 0 0% 0
NAP NAP NAP NAP NAP NAP NAP NAP
0 108 5% 12 5% 12 4% 12
0 120 5% 12 5% 0 0% 0
0 48 1% 12 3% 12 2% 6
0 84 1% 12 3% 12 2% 6
0 120 5% 12 5% 0 0% 0
0 114 1% 0 0% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 114 1% 0 0% 0 0% 0
120 114 0% 0 0% 0 0% 0
2
<FN>
<F2> Year 3 greater of YM or 3%; year 4 greater of YM or 2%; year 5-9 greater
of YM or 1%.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED FROM PREVIOUS TABLE)
PREPAYMENT PREMIUM SCHEDULE AFTER PREPAYMENT LOCKOUT PERIOD AND PREPAYMENT YIELD MAINTENANCE PERIOD
- --------------------------------------------------------------------------------------------------
PREPAYMENT TOTAL
LOCKOUT REPAYMENT FOURTH PREPAYMENT FIFTH PREPAYMENT PENALTY
PERIOD PREMIUM PERIOD PREMIUM PERIOD PREMIUM PERIOD
(MONTHS) RATE (MONTHS) RATE (MONTHS) RATE (MONTHS)
- --------- ---------- ------ ---------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
0 0% 0 0% 0 0% 108
36 0% 0 0% 0 0% 78
0 0% 0 0% 0 0% 108
60 0% 0 0% 0 0% 109
0 0% 0 0% 0 0% 132
60 0% 0 0% 0 0% 138
60 0% 0 0% 0 0% 114
24 0% 0 0% 0 0% 108
60 0% 0 0% 0 0% 114
60 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 1% 0 0% 0 0% 108
0 0% 0 0% 0 0% 132
NAP NAP NAP NAP NAP NAP NAP
60 0% 0 0% 0 0% 114
60 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 96
0 1% 0 0% 0 0% 108
0 3% 12 2% 12 1% 168
60 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 132
0 0% 0 0% 0 0% 90
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 132
120 0% 0 0% 0 0% 162
0 0% 0 0% 0 0% 132
0 0% 0 0% 0 0% 132
0 1% 0 0% 0 0% 78
0 1% 0 0% 0 0% 78
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
60 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 132
60 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 108
0 1% 0 0% 0 0% 114
60 0% 0 0% 0 0% 114
0 3% 12 2% 12 1% 168
0 0% 0 0% 0 0% 114
NAP NAP NAP NAP NAP NAP NAP
0 3% 12 2% 12 1% 168
0 0% 0 0% 0 0% 132
0 1% 0 0% 0 0% 78
0 1% 0 0% 0 0% 114
0 0% 0 0% 0 0% 132
0 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 114
120 0% 0 0% 0 0% 234
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PREPAYMENT PREMIUM SCHEDULE AFTER PREPAYMENT LOCKOUT PERIOD AND PREPAYMENT YIELD MAINTENANCE PERIOD
- ---------------------------------------------------------------------------------------------------
PREPAYMENT PREPAYMENT
PREPAYMENT YIELD PREMIUM
LOCKOUT MAINTENANCE (GREATER OF FIRST PREPAYMENT SECOND PREPAYMENT THIRD
PERIOD PERIOD THE FOLLOWING PERIOD PREMIUM PERIOD PREMIUM PERIOD
(MONTHS) (MONTHS) RATE OR TYM) (MONTHS) RATE (MONTHS) RATE (MONTHS)
- ---------- ----------- -------------- ------ ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
0 120 5% 12 5% 0 0% 0
NAP NAP NAP NAP NAP NAP NAP NAP
0 96 5% 12 5% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 114 2% 0 0% 0 0% 0
24 84 1%<F2> 0 0% 0 0% 0
0 120 5% 12 5% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 108 5% 12 5% 12 4% 12
0 108 5% 12 5% 12 4% 12
NAP NAP NAP NAP NAP NAP NAP NAP
NAP NAP NAP NAP NAP NAP NAP NAP
0 120 5% 12 5% 0 0% 0
0 114 2% 0 0% 0 0% 0
0 96 5% 12 5% 12 4% 12
0 108 5% 12 5% 12 4% 12
0 96 5% 12 5% 0 0% 0
0 120 5% 12 5% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 60 5% 12 3% 12 2% 12
0 96 5% 12 5% 0 0% 0
0 114 1% 0 0% 0 0% 0
0 60 5% 12 5% 6 1% 0
0 96 5% 12 5% 0 0% 0
0 96 5% 12 1% 0 0% 0
0 114 1% 0 0% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 114 1% 0 0% 0 0% 0
0 96 5% 12 5% 0 0% 0
NAP NAP NAP NAP NAP NAP NAP NAP
0 96 5% 12 5% 0 0% 0
0 96 5% 12 5% 0 0% 0
0 114 1% 0 0% 0 0% 0
0 114 1% 0 0% 0 0% 0
0 96 5% 12 5% 0 0% 0
<FN>
<F2> Year 3 greater of YM or 3%; year 4 greater of YM or 2%; year 5-9 greater
of YM or 1%.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED FROM PREVIOUS TABLE)
PREPAYMENT PREMIUM SCHEDULE AFTER PREPAYMENT LOCKOUT PERIOD AND PREPAYMENT YIELD MAINTENANCE PERIOD
- --------------------------------------------------------------------------------------------------
PREPAYMENT TOTAL
LOCKOUT REPAYMENT FOURTH PREPAYMENT FIFTH PREPAYMENT PENALTY
PERIOD PREMIUM PERIOD PREMIUM PERIOD PREMIUM PERIOD
(MONTHS) RATE (MONTHS) RATE (MONTHS) RATE (MONTHS)
- --------- ---------- -------- ---------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
0 0% 0 0% 0 0% 132
NAP NAP NAP NAP NAP NAP NAP
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 114
24 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 132
0 0% 0 0% 0 0% 108
0 3% 12 2% 12 1% 168
0 3% 12 2% 12 1% 168
NAP NAP NAP NAP NAP NAP NAP
NAP NAP NAP NAP NAP NAP NAP
0 0% 0 0% 0 0% 132
0 0% 0 0% 0 0% 114
0 3% 12 2% 12 1% 156
0 3% 12 2% 12 1% 168
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 132
0 0% 0 0% 0 0% 108
0 1% 0 0% 0 0% 96
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 78
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 108
NAP NAP NAP NAP NAP NAP NAP
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 108
0 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 114
0 0% 0 0% 0 0% 108
</TABLE>
3
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
DEPOSITOR OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE DEPOSITOR SINCE SUCH DATE.
-----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information ....................... S-4
Executive Summary ........................... S-5
Summary of Terms ............................ S-14
Risk Factors ................................ S-23
Description of the Mortgage Pool ............ S-31
Midland Loan Services, L.P. ................. S-68
Mortgage Loan Sellers ....................... S-69
Description of the Certificates ............. S-70
Yield and Maturity Considerations ........... S-85
The Pooling and Servicing Agreement ........ S-93
Material Federal Income Tax Consequences ... S-108
ERISA Considerations ........................ S-109
Legal Investment ............................ S-112
Plan of Distribution ........................ S-113
Use of Proceeds ............................. S-113
Legal Matters ............................... S-114
Ratings ..................................... S-114
Index of Significant Definitions ............ S-115
Annex A ..................................... A-1
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
<S> <C>
Prospectus Supplement ................................ 2
Additional Information ............................... 2
Incorporation of Certain Information by Reference ... 2
Reports .............................................. 3
Summary of Prospectus ................................ 4
Risk Factors ......................................... 9
The Depositor ........................................ 16
Use of Proceeds ...................................... 16
Description of the Certificates ...................... 16
The Mortgage Pools ................................... 22
Servicing of the Mortgage Loans ...................... 26
Credit Enhancement ................................... 33
Certain Legal Aspects of the Mortgage Loans ......... 36
Material Federal Income Tax Consequences ............. 52
State Tax Considerations ............................. 70
ERISA Considerations ................................. 70
Legal Investment ..................................... 72
Plan of Distribution ................................. 72
Legal Matters ........................................ 73
Financial Information ................................ 73
Rating ............................................... 73
Index of Significant Definitions ..................... 74
</TABLE>
$ (APPROXIMATE)
MIDLAND REALTY ACCEPTANCE CORP.
DEPOSITOR
MIDLAND LOAN SERVICES, L.P.
MASTER SERVICER AND SPECIAL SERVICER
CLASS A-1, CLASS A-2, CLASS A-3,
CLASS B, CLASS C, CLASS D
AND CLASS E CERTIFICATES
Commercial Mortgage
Pass-Through Certificates
Series 1996-C2
#############################################################################
MIDLAND LOGO
#############################################################################
---------------------
PROSPECTUS SUPPLEMENT
---------------------
PRUDENTIAL SECURITIES INCORPORATED
DEUTSCHE MORGAN GRENFELL INC.
LLAMA COMPANY, L.P.
DECEMBER , 1996
