<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 33-95447
Information in this preliminary prospectus supplement is not complete and may be
changed. These securities may not be sold nor may offers to buy be accepted
prior to the time a final prospectus is delivered. This preliminary prospectus
supplement is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any State where the offer, solicitation or sale
is not permitted.
SUBJECT TO COMPLETION, DATED OCTOBER 4, 2000
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 4, 2000)
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
AS DEPOSITOR
MIDLAND LOAN SERVICES, INC.
CIBC INC.
MORGAN STANLEY DEAN WITTER MORTGAGE CAPITAL INC.
AS MORTGAGE LOAN SELLERS AND
MIDLAND LOAN SERVICES, INC.
AS MASTER SERVICER AND SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000-C2
-------------------------
PNC Mortgage Acceptance Corp. is offering five classes of its series
2000-C2 commercial mortgage pass-through certificates, which represent
beneficial ownership interests in a trust. The trust's assets will primarily be
mortgage loans secured by first liens on commercial and multifamily residential
properties. The offered certificates are not obligations of PNC Mortgage
Acceptance Corp. or any of its affiliates. No governmental agency or any other
person will insure or guaranty the certificates or the underlying mortgage
loans.
PNC Mortgage Acceptance Corp. will not list the offered certificates on
any national securities exchange or on any automated quotation system of any
registered securities association such as NASDAQ.
INVESTING IN THE CERTIFICATES OFFERED TO YOU INVOLVES RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE S-15 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 9 OF THE
PROSPECTUS.
The following classes of the series 2000-C2 certificates are being
offered by this prospectus supplement.
<TABLE>
<CAPTION>
INITIAL APPROXIMATE INITIAL DESCRIPTION OF
PRINCIPAL PASS-THROUGH PASS-THROUGH SCHEDULED FINAL RATINGS
CLASS BALANCE RATE RATE DISTRIBUTION DATE S&P/MOODY'S
----- ------- ---- ---- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Class A-1 $200,612,000 % Fixed 9/15/08 AAA/Aaa
Class A-2 $620,057,000 % Fixed 9/15/10 AAA/Aaa
Class B $43,052,000 % Fixed 9/15/10 AA/Aa2
Class C $48,433,000 % Fixed 9/15/10 A/A2
Class D $13,453,000 % Fixed 9/15/10 A-/A3
</TABLE>
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved the offered certificates or determined if this
prospectus supplement and the accompanying prospectus are truthful and complete.
It is unlawful to represent otherwise.
Morgan Stanley & Co. Incorporated, PNC Capital Markets, Inc., CIBC
World Markets Corp. and Deutsche Bank Securities Inc, as underwriters, will
purchase the offered certificates from the depositor. They will offer the
offered certificates for sale to the public at negotiated prices determined at
the time of sale. Morgan Stanley & Co. Incorporated is acting as sole bookrunner
and as co-lead manager with PNC Capital Markets on this offering. The depositor
will receive approximately $___________ in sale proceeds, plus accrued interest,
before expenses. It is expected that delivery of the offered certificates will
be made in book-entry form only through the facilities of The Depository Trust
Company in the United States, or Clearstream Banking, societe anonyme,
Luxembourg, or the Euroclear System, in Europe, against payment therefor on or
about October _______, 2000.
---------------------------------
MORGAN STANLEY DEAN WITTER PNC CAPITAL MARKETS
CIBC WORLD MARKETS CORP. DEUTSCHE BANC ALEX. BROWN
DATE OF THIS PROSPECTUS SUPPLEMENT IS ________________, 2000
<PAGE>
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000-C2
GEOGRAPHIC OVERVIEW OF MORTGAGE POOL
Idaho Nebraska Missouri Iowa
$1,231,066 $3,691,012 $12,383,618 $1,696,427
0.11% of total 0.34% of total 1.15% of total 0.16% of total
Minnesota Illinois Indiana Michigan
$3,728,076 $5,894,706 $2,693,465 $49,885,326
0.35% of total 0.55% of total 0.25% of total 4.63% of total
Ohio Pennsylvania New York New Hampshire
$25,867,903 $35,332,715 $270,576,060 $2,748,964
2.40% of total 3.28% of total 25.14% of total 0.26% of total
Massachusetts Connecticut New Jersey Delaware
$14,747,041 $36,983,973 $27,251,092 $1,046,186
1.37% of total 3.44% of total 2.53% of total 0.10% of total
Maryland District of Columbia Virginia North Carolina
$54,962,134 $30,631,780 $45,054,664 $9,395,888
5.11% of total 2.85% of total 4.19% of total 0.87% of total
Tennessee Georgia Florida Alabama
$31,386,353 $11,562,782 $30,408,186 $1,649,708
2.92% of total 1.07% of total 2.83% of total 0.15% of total
Mississippi Kentucky Oklahoma Texas
$18,350,000 $5,320,321 $5,119,815 $53,185,982
1.70% of total 0.49% of total 0.48% of total 4.94% of total
Kansas Colorado Arizona Nevada
$9,123,834 $3,955,608 $54,021,553 $5,017,770
0.85% of total 0.37% of total 5.02% of total 0.47% of total
California Utah Oregon Washington
$176,921,724 $1,599,613 $15,110,873 $17,752,140
16.44% of total 0.15% of total 1.40% of total 1.65% of total
[ ] less than 1.0% of Cut-Off Date Balance
[ ] 1.0 - 5.0% of Cut-Off Date Balance
[ ] 5.0 - 10.0% of Cut-Off Date Balance
[ ] greater than 10.0% of Cut-Off Date Balance
DISTRIBUTION OF PROPERTY TYPES
Retail 32.61%
Office 29.03%
Multifamily 18.50%
Hospitality 8.80%
Industrial 8.75%
Manufactured Housing 1.09%
Self-Storage 0.81%
Other 0.41%
<PAGE>
[PICTURE OMITTED]
475 PARK AVENUE SOUTH, New York, NY
[PICTURE OMITTED]
CAMINO REAL MARKETPLACE, Goleta, CA
[PICTURE OMITTED]
APLETREE BUSINESS PARK, Cheektowaga, NY
[PICTURE OMITTED]
COURTYARD BY MARRIOTT, New York, NY
[PICTURE OMITTED]
BOZZUTO'S WAREHOUSE AND DISTRIBUTION FACILITY, Cheshire, CT
<PAGE>
[PICTURE OMITTED]
500 NORTH CAPITAL, Washington, DC
[PICTURE OMITTED]
ARCADIA CROSSING POWER CENTER, Phoenix, AZ
[PICTURE OMITTED]
SWEETHEART CUP DISTRIBUTION CENTER, Hampstead, MD
[PICTURE OMITTED]
TRIANGLE PLAZA II, College Point, NY
[PICTURE OMITTED]
SOLANA BEACH TOWNE CENTER, Solana Beach, CA
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the offered certificates in two
separate documents that progressively provide more detail:
o the accompanying prospectus, which provides general information, some
of which may not apply to the offered certificates, and
o this prospectus supplement, which describes the specific terms of the
offered certificates.
YOU SHOULD READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
BEFORE INVESTING IN ANY OF THE OFFERED CERTIFICATES.
You should rely only on the information contained in this prospectus
supplement and accompanying prospectus. If the descriptions of the offered
certificates in the prospectus and in this prospectus supplement vary, you
should rely on the information in this prospectus supplement.
We include cross-references in this prospectus supplement and the
prospectus to captions in these materials where you can find further related
discussions. Unless we tell you otherwise, all references to captions are to
sections of this prospectus supplement. The table of contents on page S-4
provides the page numbers on which these captions are located.
You can find a listing of the pages where capitalized terms used in
this prospectus supplement and the prospectus are defined under the caption
"Index of Definitions" on page S-96 in this prospectus supplement.
If you are viewing an electronic copy of this prospectus supplement or
the prospectus, references to internet addresses for web pages contained in this
prospectus supplement or the related prospectus are for informational purposes
only and are intended to be inactive URLs. The depositor and the underwriters
make no representation as to the truth or accuracy of any statements contained
on such web pages.
LIMITATIONS ON OFFERS OR SOLICITATIONS
We do not intend this document to be an offer or solicitation:
o if used in a jurisdiction in which such offer or solicitation is not
authorized;
o if the person making such offer or solicitation is not qualified to do so; or
o if such offer or solicitation is made to anyone to whom it is unlawful to
make such offer or solicitation.
You should rely only on the information contained in this document, the
accompanying prospectus and the related registration statement. We have not
authorized anyone to provide you with information that is different. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate as of the date of this
document.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN UNDERWRITER
AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-3
<PAGE>
TABLE OF CONTENTS
SUMMARY..............................................S-5
RISK FACTORS........................................S-15
DESCRIPTION OF THE MORTGAGE POOL....................S-32
General........................................S-32
Security for the Mortgage Loans................S-33
Underwriting Standards.........................S-34
Certain Terms and Conditions of the
Mortgage Loans................................S-34
Certain Characteristics of the Mortgage Pool...S-39
Other Information..............................S-41
The Sellers....................................S-42
Changes in Mortgage Pool Characteristics.......S-43
Representations and Warranties; Repurchase.....S-44
MASTER SERVICER AND SPECIAL SERVICER................S-47
Background.....................................S-47
Midland's Servicing Portfolio..................S-47
DESCRIPTION OF THE CERTIFICATES.....................S-48
General........................................S-48
Principal Balances.............................S-48
Pass-Through Rates.............................S-49
Distributions..................................S-49
Treatment of REO Properties....................S-53
Appraisal Reductions of Loan Balances..........S-54
Application of Realized Losses and Expense
Losses to Principal Balances..................S-55
Prepayment Interest Excesses and Shortfalls....S-56
Scheduled Final Distribution Date..............S-57
Subordination..................................S-57
Optional Termination...........................S-58
Voting Rights..................................S-58
Delivery, Form and Denomination................S-58
Registration and Transfer of Definitive
Certificates..................................S-60
YIELD AND MATURITY CONSIDERATIONS...................S-60
Rate and Timing of Principal Payments..........S-60
Weighted Average Life..........................S-63
THE POOLING AND SERVICING AGREEMENT.................S-68
Assignment of the Mortgage Loans...............S-68
Servicing of the Mortgage Loans; Collection
of Payments...................................S-69
Collection Activities..........................S-70
Advances.......................................S-70
Accounts.......................................S-72
Enforcement of "Due-on-Sale" Clauses...........S-74
Enforcement of "Due-on-Encumbrance" Clauses....S-75
Inspections....................................S-75
Realization Upon Mortgage Loans................S-75
Amendments, Modifications and Waivers..........S-78
The Trustee....................................S-79
The Fiscal Agent...............................S-80
Servicing Compensation and Payment of
Expenses......................................S-80
Special Servicing..............................S-81
The Operating Adviser..........................S-83
Sub-Servicers..................................S-84
Reports to Certificateholders; Where You
Can Find More Information.....................S-85
MATERIAL FEDERAL INCOME TAX CONSEQUENCES............S-87
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS LOCATED
IN NEW YORK AND CALIFORNIA.....................S-88
New York.......................................S-88
California.....................................S-88
ERISA CONSIDERATIONS................................S-89
Senior Certificates............................S-89
Subordinate Certificates.......................S-91
Insurance Company Purchasers...................S-92
LEGAL INVESTMENT....................................S-92
PLAN OF DISTRIBUTION................................S-93
USE OF PROCEEDS.....................................S-94
LEGAL MATTERS.......................................S-94
RATINGS.............................................S-95
INDEX OF DEFINITIONS................................S-96
APPENDIX I -Mortgage Pool Information................I-1
APPENDIX II -Certain Characteristics of the
Mortgage Loans.................................II-1
APPENDIX III -Significant Loan Summaries...........III-1
TERM SHEET...........................................T-1
FORM OF MONTHLY DISTRIBUTION STATEMENT...............R-1
S-4
<PAGE>
SUMMARY
o This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you need to
consider in making your investment decision. To understand the terms of
the offered certificates you must carefully read this entire document and
the accompanying prospectus.
o This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding and is qualified by the full
description of these calculations, cash flows and other information in
this prospectus supplement and the accompanying prospectus.
o We provide information on the privately offered certificates in this
prospectus supplement only to enhance your understanding of the offered
certificates.
o All numerical information about the mortgage loans is provided on an
approximate basis.
o Unless we tell you otherwise, all percentages of the mortgage loans, or
any group of mortgage loans, referred to in this prospectus supplement are
based on the principal balances as of the cut-off date and not the number
of mortgage loans.
<TABLE>
<CAPTION>
DESCRIPTION APPROXIMATE
APPROXIMATE APPROXIMATE WEIGHTED OF INITIAL
INITIAL RATING BY PERCENT OF PERCENT OF AVERAGE PRINCIPAL PASS- PASS-
PRINCIPAL S&P/ INITIAL POOL CREDIT LIFE WINDOW THROUGH THROUGH
CLASS BALANCE MOODY'S BALANCE SUPPORT (YEARS) (MONTHS) RATE RATE
--------------------------------------------------------------------------------------------------------------------
Senior Certificates
--------- --------------- ------------ ------------- ------------ ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 $200,612,000 AAA/Aaa 18.64% 23.75% 5.70 1-95 Fixed %
--------- --------------- ------------ ------------- ------------ ----------- ---------- ------------- -------------
A-2 $620,057,000 AAA/Aaa 57.61% 23.75% 9.40 95-119 Fixed %
--------- --------------- ------------ ------------- ------------ ----------- ---------- ------------- -------------
X $1,076,288,358 AAA/Aaa N/A N/A N/A N/A Variable IO %
--------------------------------------------------------------------------------------------------------------------
Subordinate Certificates
--------- --------------- ------------ ------------- ------------ ----------- ---------- ------------- -------------
B $43,052,000 AA/Aa2 4.00% 19.75% 9.89 119-119 Fixed %
--------- --------------- ------------ ------------- ------------ ----------- ---------- ------------- -------------
C $48,433,000 A/A2 4.50% 15.25% 9.89 119-119 Fixed %
--------- --------------- ------------ ------------- ------------ ----------- ---------- ------------- -------------
D $13,453,000 A-/A3 1.25% 14.00% 9.97 119-120 Fixed %
--------- --------------- ------------ ------------- ------------ ----------- ---------- ------------- -------------
E-O $150,681,358 -- 14.00% -- -- -- -- --
--------- --------------- ------------ ------------- ------------ ----------- ---------- ------------- -------------
</TABLE>
[ ] Offered certificates. [ ] These certificates are not offered by this
prospectus supplement. They constitute
"privately offered certificates".
The initial principal balances and notional amounts for each class of
certificates may vary by up to 5%.
The percentages indicated under the column "Approximate Percent of Credit
Support" with respect to the class A-1 and class A-2 certificates represent the
approximate credit support for the class A-1 and class A-2 certificates in the
aggregate.
The column entitled "Principal Window" lists the months following the closing
during which certificateholders would receive distributions of principal. The
weighted average life and principal window figures are based on the maturity
assumptions described under "Yield and Maturity Considerations" assuming no
prepayments and that the hyper-amortization loans pay on their anticipated
repayment dates.
For any distribution date, the pass through rate for each of the offered
certificates may not exceed the weighted average of the net mortgage rates.
The privately offered certificates will also include the following classes of
certificates that are not shown above: class V, class R-I, class R-II and class
R-III. These other privately offered certificates do not have principal
balances, notional amounts or pass-through rates. They do not provide any
material credit support for the offered certificates.
S-5
<PAGE>
RELEVANT PARTIES AND DATES
DEPOSITOR
PNC Mortgage Acceptance Corp., a wholly-owned subsidiary of Midland
Loan Services, Inc. PNC Mortgage Acceptance Corp.'s principal offices are
located at 210 West 10th Street, 6th floor, Kansas City, Missouri 64105,
telephone number (816) 435-5000. See "PNC Mortgage Acceptance Corp." in the
prospectus.
SELLERS
Midland Loan Services, Inc., a wholly owned subsidiary of PNC Bank,
N.A., is selling 119 loans (41.4%). Midland is an affiliate of PNC Capital
Markets, Inc.
CIBC Inc. is selling 43 loans (38.2%). CIBC Inc. is an affiliate of
CIBC World Markets Corp.
Morgan Stanley Dean Witter Mortgage Capital Inc. is selling 28 loans
(20.3%). Morgan Stanley Dean Witter Mortgage Capital Inc. is an affiliate of
Morgan Stanley & Co. Incorporated.
BOOK-RUNNING LEAD MANAGER
Morgan Stanley & Co. Incorporated.
UNDERWRITERS
Morgan Stanley & Co. Incorporated, PNC Capital Markets, Inc., CIBC
World Markets Corp. and Deutsche Bank Securities Inc.
MASTER SERVICER
Midland Loan Services, Inc. or any successor master servicer. See
"Master Servicer and Special Servicer".
SPECIAL SERVICER
Midland Loan Services, Inc., or any successor special servicer. See
"Master Servicer and Special Servicer".
TRUSTEE
LaSalle Bank National Association. See "The Pooling and Servicing
Agreement--The Trustee".
FISCAL AGENT
ABN AMRO Bank N.V., a Netherlands banking corporation. See "The Pooling
and Servicing Agreement--The Fiscal Agent".
CONTROLLING CLASS
The most subordinate class of principal balance certificates that has
at least 25% of its initial principal balance still outstanding. If no class has
at least 25% of its initial principal balance still outstanding, the most
subordinate class of principal balance certificates still outstanding will be
the controlling class.
OPERATING ADVISER
The holders of a simple majority of the controlling class, may appoint
an operating adviser as their representative. The master servicer and the
special servicer must notify the operating adviser before taking certain
actions. The operating adviser may replace the special servicer without cause.
See "The Pooling and Servicing Agreement--Special Servicing--Ability of
Operating Adviser to Remove Special Servicer" and "--The Operating Adviser".
S-6
<PAGE>
SIGNIFICANT DATES
CUT-OFF DATE
October 1, 2000.
CLOSING DATE
On or about October _____, 2000.
DISTRIBUTION DATE
The 15th of each month, or if the 15th is not a business day, the next
business day, beginning in November, 2000.
SCHEDULED FINAL DISTRIBUTION DATE
The distribution date on which a class's principal balance or notional
amount would become zero if there are:
o no defaults or delinquencies;
o no prepayments of any kind, except that it is assumed that hyper-amortization
loans will pay on their anticipated repayment dates; and
o no modifications or extensions of any loans.
Please note that it is very unlikely that these assumptions will hold
true. See "Description of the Certificates--Scheduled Final Distribution Date".
RATED FINAL DISTRIBUTION DATE
The distribution date in October, 2033, which is the distribution date
occurring three years after the latest maturity date for any of the mortgage
loans as of the closing date. See "Ratings".
RECORD DATE
For each distribution date, the close of business on the last business
day of the prior calendar month.
INTEREST ACCRUAL PERIOD
For each distribution date, the prior calendar month.
COLLECTION PERIOD
For each distribution date, the period beginning the day after the
determination date in the preceding month and ending on the related
determination date. For the first distribution date, the collection period
begins the day after the cut-off date.
DETERMINATION DATE
For each distribution date, the fifth business day before the
distribution date.
DUE DATE
The date scheduled payments come due under each mortgage loan
(disregarding grace periods). The due date for all the mortgage loans is the
first day of the month.
S-7
<PAGE>
INFORMATION ABOUT THE CERTIFICATES
OFFERED CERTIFICATES
We are offering the following classes of PNC Mortgage Acceptance Corp.
Commercial Mortgage Pass-Through Certificates, Series 2000-C2.
class A-1
class A-2
class B
class C
class D
We have not registered the other classes of certificates under the
Securities Act of 1933 and are not offering them to you.
The approximate initial class principal balance, initial pass-through
rate and interest type of each class of the offered certificates will be as
listed on the chart on page S-5.
CERTIFICATE DESIGNATIONS
In this prospectus supplement, we will refer to the following groups of
certificates by the indicated designations:
------------------------- ----------------------------
DESIGNATION RELATED CLASSES
------------------------- ----------------------------
Offered certificates Classes A-1, A-2, B, C and
D
------------------------- ----------------------------
Privately offered Classes X, E, F, G, H, J,
certificates K, L, M, N, O, V, R-I,
R-II and R-III
------------------------- ----------------------------
Senior certificates Classes A-1, A-2 and X
------------------------- ----------------------------
Principal balance A-1, A-2, B, C, D, E, F,
certificates G, H, J, K, L, M, N and O
------------------------- ----------------------------
Interest only Class X
certificates
------------------------- ----------------------------
Subordinate certificates Classes B, C, D, E, F, G,
H, J, K, L, M, N and O
------------------------- ----------------------------
Deferred interest Class V
certificates
------------------------- ----------------------------
Residual certificates Classes R-I, R-II and R-III
------------------------- ----------------------------
ACCRUAL OF INTEREST
Each class of offered certificates will bear interest. In each case,
that interest will accrue during each interest accrual period based upon:
o the pass-through rate applicable for the particular class for that interest
accrual period,
o the aggregate principal balance of the particular class outstanding
immediately prior to the related distribution date, and
o the assumption that each year consists of 12 30-day months.
DISTRIBUTIONS
Distributions to Senior Certificates
On each distribution date, funds available for distribution from the
mortgage loans, net of prepayment premiums and deferred interest, will be
distributed to the holders of the senior certificates in the following order:
Interest on Senior Certificates: to pay interest pro rata to the
holders of the senior certificates in an amount equal to their interest
entitlement.
Principal on Class A-1 and Class A-2 Certificates: to pay principal
from the funds available for principal distributions to the holders of the class
A-1 and class A-2 certificates, in that order, until reduced to zero. If the
principal amount of each class of principal balance certificates other than the
class A-1 and class A-2 certificates has been reduced to zero, funds available
for principal distributions will be distributed to the holders of the class A-1
and class A-2 certificates, pro rata, rather than sequentially.
Reimbursement of Class A-1 and Class A-2 Losses: to reimburse the
holders of the class A-1 and class A-2 certificates, pro rata, for any losses on
the mortgage loans that resulted in an unreimbursed reduction of the principal
balances of such certificates.
Distributions to Subordinate Certificates
On each distribution date, following the above distributions on the
senior certificates, the trustee will distribute the remaining portion of the
funds available for distribution to the holders of each class of subordinate
certificates in alphabetical order of class designation. In the case of each
class of subordinate certificates, the payments will be as follows:
o first, distributions of interest in an amount equal to the class' interest
entitlement;
o second, to pay principal from the funds available for principal
distributions, if the principal balance of the class A-1 and class A-2
S-8
<PAGE>
certificates and each other class of subordinate certificates, if any, with
an earlier alphabetical class designation has been reduced to zero; and
o third, to reimburse the class for any losses on the mortgage loans that
resulted in an unreimbursed reduction of the principal balance of such class
of certificates.
Each class of subordinate certificates will receive distributions only
after all required distributions have been made on the senior certificates and
each other class of subordinate certificates, if any, with an earlier
alphabetical class designation.
DISTRIBUTION OF PREPAYMENT PREMIUMS
Any prepayment premium collected on a mortgage loan during a collection
period will be distributed on the next distribution date as and to the extent
set forth in "Description of the Certificates--Distributions--Distributions of
Prepayment Premiums".
SUBORDINATION
The rights of the subordinate certificates to receive payments of
principal and interest will be subordinated to the rights of the senior
certificates. Each class of subordinate certificates is also subordinate to the
rights of holders of each other class of subordinate certificates with an
earlier alphabetical class designation.
Such subordination results from:
o applying the funds available from the loans in the order described above; and
o allocating losses on the loans and certain default-related and unanticipated
expenses of the trust to the certificates in reverse order of their
alphabetical class designations.
After the balances of all subordinate certificates have been reduced to
zero, losses are allocated to the class A-1 and class A-2 certificates in
proportion to their class principal balances.
The certificates have no other form of credit enhancement.
INTEREST SHORTFALLS AND EXCESSES DUE TO PREPAYMENTS AND BALLOON PAYMENTS
If a borrower prepays a loan or makes a balloon payment on a loan
before the determination date in any calendar month and pays interest which
accrued on the prepayment or balloon payment from the beginning of the calendar
month, then that interest, net of related master servicer fees, is a
"prepayment/balloon payment interest excess".
If a borrower prepays a loan or makes a balloon payment on a loan after
the determination date in a calendar month and does not pay interest on the
prepayment or balloon payment through the end of the calendar month, then this
interest shortfall, net of related master servicer fees, is a
"prepayment/balloon payment interest shortfall".
Prepayment/balloon payment interest excesses collected during a
collection period will first offset prepayment/balloon payment interest
shortfalls during the collection period. The master servicer retains any
remaining amount as additional servicing compensation. The master servicer must
cover prepayment/balloon payment interest shortfalls not offset by
prepayment/balloon payment interest excesses from its own funds up to certain
maximum amounts.
If and to the extent there are prepayment/balloon payment interest
shortfalls not offset by prepayment/balloon payment interest excesses or covered
by the master servicer from its own funds, then those prepayment/balloon payment
interest shortfalls will be allocated among the certificates in proportion to
the interest accrued on each certificate during the corresponding interest
accrual period. Such net interest shortfalls allocated to a class will reduce
the distributable certificate interest on the class. See "The Pooling and
Servicing Agreement--Servicing Compensation and Payment of Expenses".
S-9
<PAGE>
ADVANCES
The master servicer must make advances for delinquent payments of
principal (except for delinquent balloon payments) and/or interest on the loans.
The master servicer must also make advances to cover certain servicing expenses.
The special servicer must make advances to cover certain servicing expenses that
need to be paid on an emergency basis.
If the special servicer fails to make a required emergency advance, the
master servicer must make it. If the master servicer fails to make a required
advance, the trustee must make it. If the trustee fails to make a required
advance, the fiscal agent must make it.
Advances are required only if the advancing party determines in its
reasonable discretion that they are ultimately recoverable from future
collections on the related mortgage loan or mortgaged property.
All advances will accrue interest at the "prime rate".
To the extent not offset by collected late payment charges or default
interest on the related loan, payments of advance interest will reduce the cash
available to pay interest on the most subordinate class of certificates then
outstanding. See "The Pooling and Servicing Agreement--Advances".
APPRAISAL REDUCTIONS
If certain adverse events or circumstances occur or exist with respect
to a loan or the related mortgaged property, the special servicer must obtain a
new appraisal of the mortgaged property. If the principal balance of the loan,
plus certain other amounts due under the loan, is more than 90% of the new
appraised value plus certain reserves pledged as collateral for the loan, the
amount of interest that the master servicer is required to advance will be
reduced. Due to the payment priorities, this reduction in advances will reduce
the cash available to pay interest on the most subordinate class of certificates
then outstanding. See "Description of the Certificates--Appraisal Reductions of
Loan Balances".
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INFORMATION ABOUT THE MORTGAGE LOANS
The certificates will represent beneficial ownership interests in a
trust fund created by the depositor. The trust fund will consist primarily of a
pool of 190 fixed-rate loans with a total cut-off date principal balance of
approximately $1,076,288,358 (plus or minus 5%). In making this count, where a
single indebtedness is secured by mortgages over multiple separate properties,
each of those separate properties was generally counted as a separate loan
created by allocating a pro rata portion of the cut-off date principal balance
secured by the separate properties.
A first lien on a fee simple or leasehold estate in a mortgaged
property secures each loan.
o Fee - 182 loans (87.8%).
o Leasehold - 6 loans (11.1%).
o Fee and Leasehold - 2 loans (1.1%).
In making this count, loans secured by both a borrower's leasehold interest in a
mortgaged property and the fee interest of the owner of all or a part of that
property are deemed secured by a fee interest.
The mortgage pool includes 2 separate sets of cross-collateralized
loans. The largest of these sets constitutes 0.9% of the initial pool balance.
No person or entity insures or guarantees any of the loans. You should
consider all of the loans to be non-recourse loans.
185 loans (98.9%) are "balloon loans" that are expected to have more
than 10% of their original principal balance remaining unpaid at their maturity
date. 34 of these balloon loans (40.6%) are hyper-amortization loans and provide
for an increase in their interest rate and/or principal amortization prior to
maturity.
The loans generally grant the related borrower a right to transfer its
loan under certain conditions, including the lender's prior consent. Some of the
loans may provide that the lender cannot unreasonably withhold its consent to
the proposed transferee.
Property types included in the mortgage pool include:
o retail - 48 loans (32.6%).
o office - 38 loans (29.0%).
o multifamily - 63 loans (18.5%).
o hospitality - 15 loans (8.8%).
o industrial - 17 loans (8.8%).
o manufactured housing - 4 loans (1.1%).
o self storage - 3 loans (0.8%).
o other - 2 loan (0.4%).
Loans secured by properties located in New York and California each
represent more than 10% of the initial pool balance. Also, loans secured by
properties located in Maryland and Arizona each represent more than 5%, but less
than 10%, of the initial pool balance. None of the remaining 32 jurisdictions
have mortgaged properties securing loans representing 5% or more of the initial
pool balance.
No set of loans to a single borrower or to a single group of affiliated
borrowers constitutes more than 5.6% of the initial pool balance.
32 loans (19.4%) are secured by properties 100% occupied by a single
tenant or the borrower. An additional 20 loans (12.1%) are secured by properties
at least 50% occupied by a single tenant or the borrower.
120 loans (81.4%) permit the borrower to defease its loan, subject to
certain conditions.
Other than loans allowing defeasance, the loans generally permit
voluntary prepayments after any lock-out period if a prepayment premium is also
paid. Prepayment premiums are generally calculated based on a yield maintenance
formula or a specified percentage of the amount prepaid. The prepayment premium
percentage may remain constant or decline over time. The "Percentage of Mortgage
Pool Balance by Prepayment Restriction" table included in the attached Term
Sheet analyzes the percentage of the declining balance of the mortgage pool that
will be within a lock-out period or in which principal prepayments must be
accompanied by the indicated prepayment premium, for each of the time periods
indicated.
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As of the cut-off date, the loans have the following characteristics:
o mortgage rates range from 5.9% to 9.7% per annum, with a weighted average
mortgage rate of 8.2% per annum;
o remaining terms to stated maturity range from 52 months to 239 months, with a
weighted average remaining term to stated maturity of 115 months;
o cut-off date principal balances range from $696,932 to 59,946,195, with an
average cut-off date principal balance of $5,664,676;
o a weighted average debt service coverage ratio of 1.35x; and
o a weighted average cut-off date loan to value ratio of 71.2%.
The characteristics of the loans are more fully described under
"Description of the Mortgage Pool" and in the Appendices.
-----------------------------------------
YIELD AND PREPAYMENT CONSIDERATIONS
The yield on an offered certificate will depend on many factors,
including:
o the pass-through rate for the certificate in effect from time to time;
o whether the certificate is purchased at a discount or premium;
o the timing of principal distributions that reduce the principal balance of
the certificate;
o appraisal reductions;
o expense losses; and
o realized losses.
See "Description of the Certificates--Distributions--Applying Available
Funds" and "--Distributions--Principal Distribution Amount".
We cannot predict the actual rate of principal prepayments. You should
independently estimate prepayment rates to use in evaluating an investment in
the offered certificates. See "Yield and Maturity Considerations".
A different rate of principal payments than you anticipate will cause
the actual yield to vary, perhaps significantly, from your expected yield.
You may be unable to reinvest principal distributions in an alternative
investment with a comparable yield.
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ADDITIONAL INFORMATION ABOUT THE CERTIFICATES
TAX STATUS OF THE CERTIFICATES
An election will be made to treat the trust as three separate "real
estate mortgage investment conduits" - REMIC I, REMIC II and REMIC III - for
federal income tax purposes. In the opinion of counsel, the trust will qualify
for this treatment.
Pertinent federal income tax consequences of an investment in the
offered certificates include:
o Each class of offered certificates will constitute a "regular interest" in
REMIC III.
o The regular interests will be treated as newly originated debt instruments
for federal income tax purposes.
o You will be required to report income on the offered certificates in
accordance with the accrual method of accounting.
o The class ___ certificates will be issued with original issue discount. The
class ____ and class _____ certificates will be issued with de minimis
original issue discount. The class _____ and class _____ certificates will
not be issued with original issue discount.
See "Material Federal Income Tax Consequences" in this prospectus
supplement and in the accompanying prospectus.
OPTIONAL TERMINATION
If the total stated principal balance of all of the loans is less than
1% of the initial pool balance on any distribution date, then each of the
following in this order has an option to purchase all loans and property in the
trust fund at a specified price:
o the majority holders of the controlling class,
o the master servicer,
o the special servicer, and
o any holder of more than 50% of the class R-I certificates.
Such a purchase will terminate the trust fund and cause early
retirement of the then outstanding certificates. See "Description of the
Certificates--Optional Termination".
DENOMINATIONS
You may purchase class A-l and A-2 certificates in minimum
denominations of $25,000 initial principal balance and in any higher
whole-dollar denomination. You may purchase class B, class C and class D
certificates in minimum denominations of $50,000 initial principal balance and
in any higher whole-dollar denomination.
CLEARANCE AND SETTLEMENT
You must hold your certificates in book-entry form. In the United
States, we will deliver through the facilities of The Depository Trust Company.
In Europe, we may deliver through the facilities of Clearstream Banking, societe
anonyme, Luxembourg, or the Euroclear System. DTC, Clearstream or Euroclear
rules and operating procedures govern transfers within the system.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA
Considerations" in this prospectus supplement and in the accompanying
prospectus, the class A-1 and class A-2 certificates are eligible for purchase
by persons investing assets of employee benefit plans or individual retirement
accounts.
THE CLASS B, CLASS C AND CLASS D CERTIFICATES MAY NOT BE PURCHASED BY,
OR TRANSFERRED TO, ANY EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT
SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR SECTION 4975
OF THE INTERNAL REVENUE CODE OF 1986 OR ANY PERSON INVESTING THE ASSETS OF ANY
SUCH EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT (ALTHOUGH THEY MAY BE
PERMITTED TO BE PURCHASED ON THE SECONDARY MARKET PURSUANT TO A PENDING
PUBLISHED PROHIBITED CLASS EXEMPTION). THIS PROHIBITION DOES NOT APPLY TO AN
INSURANCE COMPANY INVESTING ASSETS OF ITS GENERAL ACCOUNT UNDER CIRCUMSTANCES
THAT WOULD QUALIFY FOR AN EXEMPTION UNDER SECTIONS I AND III OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60.
IF YOU ARE A FIDUCIARY OF ANY RETIREMENT PLAN OR OTHER EMPLOYEE BENEFIT
PLAN OR ARRANGEMENT SUBJECT TO ERISA OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, YOU SHOULD
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REVIEW CAREFULLY WITH YOUR LEGAL ADVISORS WHETHER THE PURCHASE OR HOLDING OF THE
OFFERED CERTIFICATES COULD GIVE RISE TO A TRANSACTION THAT IS PROHIBITED UNDER
ERISA OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986.
SEE "ERISA CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE
PROSPECTUS.
RATINGS
It is a condition of the issuance of the offered certificates that they
receive credit ratings no lower than the ratings indicated on the cover of this
prospectus supplement from Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. (or its successors and assigns) and Moody's
Investors Service, Inc. (or its successors and assigns).
A credit rating is not a recommendation to buy, sell or hold securities
and may be revised or withdrawn at any time by the assigning rating agency.
See "Ratings" in this prospectus supplement and in the prospectus for a
discussion of the basis upon which ratings are given, the limitations of and
restrictions on the ratings, and the conclusions that should not be drawn from a
rating.
LEGAL INVESTMENT
None of the classes of offered certificates will constitute "mortgage
related securities" for purposes of the Secondary Mortgage Market Enhancement
Act of 1984.
If your investment authority is restricted by law, then you should
consult your own legal advisors to determine whether and to what extent the
offered certificates constitute legal investments for you. See "Legal
Investment" in this prospectus supplement and in the prospectus.
REPORTS TO CERTIFICATEHOLDERS
The trustee will make monthly reports to certificateholders of record.
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RISK FACTORS
You should carefully consider the risks before making an investment
decision. In particular, the timing and amount of distributions on your
certificates will depend on payments received on and other recoveries with
respect to the loans. Therefore, you should carefully consider the risk factors
relating to the loans and the mortgaged properties.
The risks and uncertainties described below are not the only ones
relating to the offered certificates. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may also impair your
investment.
If any of the following risks actually occur, your investment could be
materially and adversely affected.
This prospectus supplement also contains forward-looking statements
that involve risks and uncertainties. Actual results could differ materially
from those anticipated in these forward-looking statements as a result of a
variety of factors, including the risks described below and elsewhere in this
prospectus supplement and the prospectus.
YOUR INVESTMENT IS NOT INSURED OR GUARANTEED AND YOUR SOURCE FOR REPAYMENT IS
LIMITED
You should consider all of the loans to be nonrecourse loans. You
should also consider them not to be insured or guaranteed by any person or
entity. If a default occurs, the lender's remedies generally are limited to
foreclosing against the specific real property and other assets pledged to
secure the defaulted loan. Such remedies may be insufficient to provide a full
return on your investment. Payment of amounts due under a loan prior to maturity
is dependent primarily on the sufficiency of the net operating income of the
mortgaged property. Payment of a loan at maturity is primarily dependent upon
the borrower's ability to sell or refinance the property for an amount
sufficient to repay the loan.
The offered certificates will represent interests solely in the assets
of the trust and will not represent an interest in or an obligation of any other
person. Distributions on any class of the offered certificates will depend
solely on the amount and timing of payments on the loans.
118 loans (81.0%) were originated within 12 months prior to the cut-off
date. Consequently, these loans do not have a long-standing payment history.
THE REPAYMENT OF A MULTIFAMILY OR COMMERCIAL LOAN IS DEPENDENT ON THE CASH FLOW
PRODUCED BY THE PROPERTY, WHICH CAN BE VOLATILE AND INSUFFICIENT TO ALLOW TIMELY
PAYMENT ON YOUR CERTIFICATES
The loans are secured by various types of income-producing commercial
properties. Because, among other things, commercial lending typically involves
larger loans, it is generally thought to expose a lender to greater risk than
one-to-four family residential lending.
The repayment of a commercial loan is typically dependent upon the
ability of the applicable property to produce cash flow. Even the liquidation
value of a commercial property is determined, in substantial part, by the amount
of the property's cash flow or its potential to generate cash flow. However, net
operating income and cash flow can be volatile and may be insufficient to cover
debt service on the loan at any given time.
A large number of factors may adversely affect the net operating
income, cash flow and property value of the mortgaged properties. Some of these
factors relate to the property itself, such as:
o the age, design and construction quality of the property;
o perceptions regarding the safety, convenience and attractiveness of the
property;
o the proximity and attractiveness of competing properties;
o the adequacy of the property's management and maintenance;
o increases in operating expenses at the property and in relation to competing
properties;
o an increase in the capital expenditures needed to maintain the property or
make improvements;
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o the dependence upon a single tenant, or a concentration of tenants in a
particular business or industry;
o a decline in the financial condition of a major tenant;
o an increase in vacancy rates; and
o a decline in rental rates as leases are renewed or entered into with new
tenants.
Others factors are more general in nature, such as:
o national, regional or local economic conditions, including plant closings,
military base closings, industry slowdowns and unemployment rates;
o local real estate conditions, such as an oversupply of competing properties,
space or housing;
o demographic factors;
o decreases in consumer confidence;
o changes in consumer tastes and preferences; and
o retroactive changes in building codes.
The volatility of net operating income will be influenced by many of
the foregoing factors, as well as by:
o the length of tenant leases;
o the creditworthiness of tenants;
o tenant defaults;
o in the case of rental properties, the rate at which new rentals occur; and
o the property's "operating leverage" (i.e., the percentage of total property
expenses in relation to revenue, the ratio of fixed operating expenses to
those that vary with revenues, and the level of capital expenditures required
to maintain the property and to retain or replace tenants).
A decline in the real estate market or in the financial condition of a
major tenant will tend to have a more immediate effect on the net operating
income of properties with short-term revenue sources and may lead to higher
rates of delinquency or defaults under loans.
CONVERTING COMMERCIAL PROPERTIES TO ALTERNATIVE USES MAY REQUIRE SIGNIFICANT
EXPENDITURES WHICH COULD REDUCE PAYMENTS ON YOUR CERTIFICATES
Some of the mortgaged properties may not be readily convertible to
alternative uses if the current use of those properties were to become
unprofitable for any reason. Converting commercial properties to alternate uses
generally requires substantial capital expenditures. In addition, zoning or
other restrictions also may prevent alternative uses. The liquidation value of
any such mortgaged property consequently may be substantially less than the
liquidation value of a property that the owner could readily adapt to other
uses.
PROPERTY VALUE MAY BE ADVERSELY AFFECTED EVEN WHEN THERE IS NO CHANGE IN CURRENT
OPERATING INCOME
Various factors may adversely affect the value of the mortgaged
properties without affecting the properties' current net operating income. These
factors include, among others:
o changes in governmental regulations, fiscal policy, zoning or tax laws;
o potential environmental legislation or liabilities or other legal
liabilities;
o the availability of refinancing; and
o changes in interest rate levels.
TENANT CONCENTRATION INCREASES THE RISK THAT CASH FLOW WILL BE INTERRUPTED,
WHICH MAY HAVE AN ADVERSE EFFECT ON THE PAYMENT OF YOUR CERTIFICATES
A deterioration in the financial condition of a tenant can be
particularly significant if a mortgaged property is leased to a single tenant or
a small number of tenants, or if the lease payments of such tenant or tenants
account for a significant portion of the property's gross revenue. Such
properties are more susceptible to interruptions of cash flow if a tenant fails
to renew its lease or defaults under its lease. This is so because the owner
may:
o suffer severe financial effects from the absence of all or a significant
portion of the property's rental income;
o require more time to re-lease the space; and
o incur substantial capital costs to make the space appropriate for replacement
tenants.
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Each of these risks is more significant if a mortgaged property is
leased to a single tenant.
In 32 loans (19.4%) a single tenant or the borrower occupies 100% of
the related mortgaged property. In an additional 20 loans (12.1%) a single
tenant or the borrower occupies at least 50% of the related mortgaged property.
A concentration of particular tenants among the mortgaged properties or
of tenants in a particular business or industry may also adversely affect retail
and office properties.
LEASING MORTGAGED PROPERTIES TO MULTIPLE TENANTS MAY RESULT IN HIGHER RE-LEASING
EXPENDITURES, WHICH MAY HAVE AN ADVERSE EFFECT ON THE PAYMENT OF YOUR
CERTIFICATES
If a mortgaged property has multiple tenants, re-leasing expenditures
may be more frequent than in the case of mortgaged properties with fewer
tenants. These additional expenses will reduce the cash flow available for debt
service payments. Mortgaged properties with multiple tenants also may experience
higher continuing vacancy rates and greater volatility in rental income and
expenses.
THE PRESENCE OF LARGE LOANS OR A LARGE CONCENTRATION OF LOANS AMONG RELATED
BORROWERS INCREASES THE POSSIBILITY OF LOSSES ON THE LOANS WHICH MAY HAVE AN
ADVERSE EFFECT ON YOUR CERTIFICATES
The effect of mortgage pool loan losses will be more severe if:
o the pool is comprised of a small number of loans, each with a relatively
large principal amount; or
o the losses relate to loans that account for a disproportionately large
percentage of the pool's aggregate principal balance.
The 13 largest loans represent 40.0% of the initial pool balance. The
potential loss on any of these loans may have a more adverse effect on the
offered certificates than a loss on a smaller loan. Each of the other loans
represents less than 1.7% of the initial pool balance.
A concentration of loans with the same borrower or related borrowers
also can pose increased risks. Several groups of loans are made to the same
borrower or to borrowers related through common ownership and where, in general,
the related mortgaged properties are commonly managed. The 3 largest of these
groups represent 3.8%, 3.6% and 3.0% of the initial pool balance.
The bankruptcy or insolvency of any borrower in any such group could
have an adverse effect on the operation of all of the related mortgaged
properties and on the ability of such related mortgaged properties to produce
sufficient cash flow to make required payments on the related loans. For
example, if a person that owns or controls several mortgaged properties
experiences financial difficulty at one such property, it could:
o defer maintenance at one or more other mortgaged properties in order to
satisfy current expenses with respect to the mortgaged property experiencing
financial difficulty, or
o attempt to avert foreclosure by filing a bankruptcy petition that might have
the effect of interrupting monthly payments for an indefinite period on all
the related loans.
LARGE GEOGRAPHIC CONCENTRATIONS OF MORTGAGED PROPERTIES MAY HAVE AN ADVERSE
EFFECT ON THE PAYMENT OF YOUR CERTIFICATES
Concentrations of mortgaged properties in geographic areas may increase
the risk that adverse economic or other developments or a natural disaster
affecting a particular region of the country could increase the frequency and
severity of losses on loans secured by the properties. In recent periods,
several regions of the United States have experienced significant real estate
downturns. Regional economic declines or adverse conditions in regional real
estate markets could adversely affect the income from, and market value of, the
mortgaged properties located in such region. Other regional factors such as
earthquakes, floods or hurricanes or changes in governmental rules or fiscal
policies also may adversely affect the mortgaged properties located in such
region. For example, mortgaged properties located in California may be more
susceptible to certain hazards (such as earthquakes) than properties in other
parts of the country.
The mortgaged properties are located in 36 jurisdictions. Loans secured
by mortgaged properties located in each of New York and California represent
approximately 25.1% and 16.4% of the initial pool balance. Loans secured by
mortgaged properties located in each of Maryland and Arizona each represent more
than 5%, but less than 10%, of the initial pool balance. None of the remaining
32
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jurisdictions have mortgaged properties securing loans representing 5% or more
of the initial pool balance. See "Description of the Mortgage Pool".
LARGE CONCENTRATIONS OF RETAIL PROPERTIES SECURING LOANS WILL SUBJECT YOUR
INVESTMENT TO THE SPECIAL RISKS OF THESE PROPERTIES
Retail properties secure 48 of the loans (32.6%). The quality and
success of a retail property's tenants significantly affect the property's
value. For example, if the sales of retail tenants were to decline, rents tied
to a percentage of gross sales may decline and those tenants may be unable to
pay their rent or other occupancy costs.
The success of tenants at retail properties will be affected by:
o competition from other retail properties;
o perceptions regarding the safety, convenience and attractiveness of the
property;
o demographics of the surrounding area;
o traffic patterns and access to major thoroughfares;
o availability of parking;
o customer tastes and preferences; and
o the drawing power of other tenants.
The presence or absence of an "anchor store" at a retail property also
can be important. Anchors play a key role in generating customer traffic and
making a retail property desirable for other tenants. Consequently, the economic
performance of an anchored retail property will be adversely affected by:
o an anchor store's failure to renew its lease; o termination of an anchor
store's lease;
o the bankruptcy or economic decline of an anchor store or self-owned anchor;
or
o an anchor store closing its business, even if, as a tenant, it continues to
pay rent.
If an anchor store at a mortgaged property were to close, the related
borrower may be unable to replace the anchor in a timely manner or without
suffering adverse economic consequences. Furthermore, some anchor stores have
co-tenancy clauses in their leases that permit them to cease operating if
certain other stores are not operated at the mortgaged property or if certain
other covenants are breached. Some non-anchor tenants may also be permitted to
terminate their leases if certain other stores are not operated or if those
tenants fail to meet certain business objectives.
Retail properties also face competition from sources outside a given
real estate market. For example, all of the following compete with more
traditional retail properties for consumer dollars:
o factory outlet centers;
o discount shopping centers and clubs;
o catalogue retailers;
o home shopping networks;
o internet web sites; and
o telemarketing.
These alternative retail outlets often have lower operating costs than
traditional retail properties. Continued growth of these alternative retail
outlets could adversely affect the rents, income and market value of the retail
properties in the mortgage pool.
Moreover, additional competing retail properties may be built in the
areas where the retail properties are located.
LARGE CONCENTRATIONS OF OFFICE PROPERTIES SECURING LOANS WILL SUBJECT YOUR
INVESTMENT TO THE SPECIAL RISKS OF THESE PROPERTIES
Office properties secure 38 of the loans (29.0%).
A large number of factors may adversely affect the value of office
properties, including:
o the quality of an office property's tenants;
o the diversity of an office property's tenants or reliance on a single or
dominant tenant;
o the physical attributes of the property in relation to competing office
properties, such as age, condition, design, location, access to
transportation and ability to offer certain amenities, such as sophisticated
building systems;
o the desirability of the area as a business location; and
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o the strength and nature of the local economy, including labor costs and
quality, tax environment and quality of life for employees.
Moreover, the cost of refitting office space for a new tenant is often
higher than the cost of refitting other types of property.
LARGE CONCENTRATIONS OF MULTIFAMILY PROPERTIES SECURING LOANS WILL SUBJECT YOUR
INVESTMENT TO THE SPECIAL RISKS OF THESE PROPERTIES
Multifamily properties secure 63 of the loans (18.5%).
A large number of factors may affect the value and successful operation
of a multifamily property, including:
o the physical attributes of the property, such as its age, appearance and
construction quality;
o the location of the property;
o the characteristics of the surrounding neighborhood;
o the ability of management to provide adequate maintenance and insurance;
o the types of services and amenities provided at the property;
o the property's reputation;
o the tenant mix, such as a tenant population that is dependent upon students,
workers from a particular business or personnel from a local military base;
o the level of mortgage interest rates, which may encourage tenants to purchase
rather than rent housing;
o the presence of competing properties;
o local or national economic conditions;
o the extent to which a property is subject to covenants that require rental to
low income tenants;
o state and local regulations, such as rent control regulations and regulations
that govern eviction; and
o government assistance/rent subsidy programs.
LARGE CONCENTRATIONS OF HOSPITALITY PROPERTIES SECURING LOANS WILL SUBJECT YOUR
INVESTMENT TO THE SPECIAL RISKS OF SUCH PROPERTIES
Hospitality properties secure 15 of the loans (8.8%). Various factors
may adversely affect the economic performance of a hospitality property,
including:
o adverse local, regional, national or international economic and social
conditions, which may limit the amount that can be charged for a room and
reduce occupancy levels;
o the construction of competing hospitality properties;
o continuing expenditures for modernizing, refurbishing and maintaining
existing facilities prior to the expiration of their anticipated useful
lives;
o a deterioration in the financial strength or managerial capabilities of the
owner and operator of a hospitality property; and
o changes in travel patterns, changes in access, increases in energy prices,
strikes, relocation of highways or the construction of additional highways.
Because rooms at hospitality properties generally are rented for short
periods of time, the financial performance of those properties tend to be
affected by adverse economic conditions and competition more quickly than other
types of commercial properties.
Moreover, the hospitality industry is generally seasonal in nature.
This seasonality can be expected to cause periodic fluctuations in a hospitality
property's revenues, occupancy levels, room rates and operating expenses.
Further, in the event of a foreclosure, the trustee or a purchaser of a
hospitality property probably would not be entitled to the rights under any
liquor license for that property. Such party would be required to apply for a
new license in its own name. The inability to obtain a new liquor license may
have an adverse effect on the value of a hospitality property.
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THE AFFILIATION OF SOME OF THE PROPERTIES WITH A FRANCHISE OR HOTEL MANAGEMENT
COMPANY MAY HAVE AN ADVERSE EFFECT ON THE PAYMENT OF YOUR CERTIFICATES
All 15 of the hospitality properties (8.8%) are operated as franchises
of national hotel chains or managed by a hotel management company. The
performance of a hospitality property operated as a franchise or by a hotel
management company depends in part on:
o the continued existence and financial strength of the franchisor or hotel
management company;
o the public perception of the franchise or hotel chain service mark; and
o the duration of the franchise license or management agreements.
The transferability of a franchise license agreement may be restricted.
In the event of a foreclosure, the lender or its agent may not have the right to
use the franchise license without the franchisor's consent. Conversely, in some
instances, the lender may be unable to remove a franchisor or a hotel management
company that it desires to replace following a foreclosure.
The adverse effect of an economic decline in a particular hotel chain
will be more significant if there is a concentration of hotels operated by that
chain among the properties securing loans in the mortgage pool. In this regard,
the largest concentration consists of 1 loan (4.2%) secured by a mortgaged
property operated as a Courtyard by Marriott.
LARGE CONCENTRATIONS OF INDUSTRIAL PROPERTIES SECURING LOANS WILL SUBJECT YOUR
INVESTMENT TO THE SPECIAL RISKS OF SUCH PROPERTIES
Industrial properties secure 17 of the loans (8.8%). Various factors
may adversely affect the economic performance of an industrial property,
including:
o reduced demand for industrial space because of a decline in a particular
industry segment;
o a property becoming functionally obsolete;
o strikes or the unavailability of labor sources;
o changes in energy prices;
o relocation of highways and the construction of additional highways or other
changes in access;
o a change in the proximity of supply sources; and
o environmental hazards.
LARGE CONCENTRATIONS OF MANUFACTURED HOUSING PROPERTIES SECURING LOANS WILL
SUBJECT YOUR INVESTMENT TO THE SPECIAL RISKS OF THESE PROPERTIES
Manufactured Housing properties secure 4 of the loans (1.1%).
Since the borrower often does not own the manufactured housing located
upon the property, the borrower (and the lender following foreclosure) may face
additional costs and delays in obtaining tenant evictions and the removal of
manufactured housing upon default or abandonment by the tenant.
LARGE CONCENTRATIONS OF SELF STORAGE PROPERTIES SECURING LOANS WILL SUBJECT YOUR
INVESTMENT TO THE SPECIAL RISKS OF THESE PROPERTIES
Self storage properties secure 3 of the loans (0.8%).
Tenant privacy, anonymity and unsupervised access may heighten
environmental risks in a loan secured by a self storage property. The
environmental site assessments discussed in this prospectus supplement did not
include an inspection of the contents of the individual self-storage units.
Thus, there is no assurance that these individual units are free from hazardous
substances or other pollutants or contaminants or will remain so in the future.
As leases for individual self storage units are typically short term, these
properties also may be subject to more volatility than loans secured by other
types of properties.
CERTAIN ADDITIONAL RISKS RELATING TO TENANTS
The income from, and market value of, the mortgaged properties leased
to various tenants would be adversely affected if:
o space in the mortgaged properties could not be leased or re-leased;
o tenants were unable to meet their lease obligations;
o a significant tenant were to become a debtor in a bankruptcy case; or
o rental payments could not be collected for any other reason.
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Even if vacated space is successfully relet, the costs associated with
reletting, including tenant improvements and leasing commissions, could be
substantial and could reduce cash flow from the mortgaged properties. Moreover,
if a tenant defaults in its obligations to a borrower, the borrower may incur
substantial costs and experience significant delays associated with enforcing
its rights and protecting its investment, including costs incurred in renovating
and reletting the property.
TENANT BANKRUPTCY MAY ADVERSELY AFFECT THE INCOME PRODUCED BY THE PROPERTY AND
MAY HAVE AN ADVERSE EFFECT ON THE PAYMENT OF YOUR CERTIFICATES
The bankruptcy or insolvency of a major tenant, or a number of smaller
tenants, in retail and office properties may adversely affect the income
produced by a mortgaged property. Under federal bankruptcy law, a tenant/debtor
has the option of affirming or rejecting any unexpired lease. If the tenant
rejects the lease, the landlord's claim for breach of the lease would be a
general unsecured claim against the tenant (absent collateral securing the
claim). The claim would be limited to:
o the unpaid rent under the lease for the periods prior to the bankruptcy
petition or the earlier surrender of the leased premises, plus
o the rent under the lease for the greater of one year or 15%, not to exceed 3
years, of the remaining term of the lease.
FEDERAL OR STATE ENVIRONMENTAL LAWS MAY AFFECT THE VALUE OF A MORTGAGED PROPERTY
OR THE ABILITY OF A BORROWER TO MAKE REQUIRED LOAN PAYMENTS AND MAY HAVE AN
ADVERSE EFFECT ON THE PAYMENT OF YOUR CERTIFICATES
Various environmental laws may make a current or previous owner or
operator of real property liable for the costs of removal or remediation of
hazardous or toxic substances on, under, adjacent to, or in the property. Those
laws often impose liability whether or not the owner or operator knew of, or was
responsible for, the presence of the hazardous or toxic substances. For example,
certain laws impose liability for release of asbestos-containing materials into
the air or require the removal or containment of these materials. In some
states, contamination of a property may give rise to a lien on the property to
assure payment of the costs of cleanup. In some states, this lien has priority
over the lien of a pre-existing mortgage. Additionally, third parties may seek
recovery from owners or operators of real properties for personal injury
associated with exposure to asbestos, lead-based paint or other hazardous
substances.
The owner's liability for any required remediation generally is not
limited by law and could exceed the value of the property and/or the aggregate
assets of the owner. The presence of hazardous or toxic substances also may
adversely affect the owner's ability to refinance the property or to sell the
property to a third party. The presence of, or strong potential for
contamination by, hazardous substances consequently can materially adversely
affect the value of the property and a borrower's ability to repay its loan.
In addition, under certain circumstances, a lender (such as the trust)
could be liable for the costs of responding to an environmental hazard. See
"Certain Legal Aspects of Mortgage Loans" in the prospectus.
ENVIRONMENTAL ISSUES RELATING TO SPECIFIC PROPERTIES MAY HAVE AN ADVERSE EFFECT
ON THE PAYMENT OF YOUR CERTIFICATES
The mortgaged properties securing 180 of the loans (98.6%) have been
subject to Phase I environmental site assessments in connection with the
origination or acquisition of the loans. Environmental consultants have detected
asbestos or lead-based paint at several mortgaged properties by sampling. The
environmental consultants suspect that asbestos or lead-based paint may be
located at other mortgaged properties. In some cases, the asbestos or lead-based
paint is in poor condition. The asbestos or lead-based paint found or suspected
is not expected to present a significant risk as long as the related mortgaged
property is properly managed or, when recommended by the consultant, the problem
is remedied or abated. Nonetheless, the value of a mortgaged property as
collateral for the related loan could be adversely affected, and claims for
damages could arise from parties injured by such asbestos or lead-based paint.
In certain cases, an assessment disclosed known or potential adverse
environmental conditions, such as underground storage tanks or soil or
groundwater contamination. We cannot assure you, however, that the environmental
assessments revealed all existing or potential environmental risks or that all
adverse environmental conditions have been completely remediated. Except as
described herein, where an assessment disclosed a known or potential
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material and adverse environmental condition, the originator required the
borrower to:
o escrow funds deemed sufficient to ensure remediation of or to monitor the
environmental issue;
o obtain an environmental insurance policy that covers the environmental issue;
or
o establish an operations and maintenance plan that, if implemented, would
prevent any material and adverse consequences resulting from the
environmental issue.
Set forth below are some of the known or potential material and adverse
environmental conditions for which an escrow has been established to cover
remediation costs, an environmental insurance policy has been obtained to cover
potential clean-up costs or an indemnity was obtained from a culpable party:
o 2 mortgaged properties (1.4%) - potential or existing contamination arising
from the operation of dry cleaning facilities upon or near such properties;
o 2 mortgaged properties (0.8%) - existing contamination arising from the
operation of gas stations or automobile construction/repair facilities upon
or near such properties;
o 1 mortgaged property (2.2%) - soil and groundwater contamination from a 100
gallon diesel fuel spill at such property; and
o 4 mortgaged properties (4.6%) - other potential or existing soil and/or
groundwater contamination at such properties.
In some cases, the environmental consultant did not recommend that any
action be taken with respect to a known or potential adverse environmental
condition at a mortgaged property or a nearby property because:
o a remediation, under the supervision of an environmental regulatory agency,
had been completed or was currently underway;
o an environmental regulatory agency had issued a "no further action" letter
regarding the condition; or
o a responsible party with respect to the condition had already been
identified.
No environmental site assessments were obtained for the mortgaged
properties securing 10 loans (1.4%). However, the related originator obtained a
secured creditor impaired property policy covering certain environmental matters
with respect to such mortgaged properties.
Each environmental insurance policy obtained with respect to a
mortgaged property contains certain coverage limits, and reporting and notice
requirements. In addition, the policies do not provide coverage for adverse
environmental conditions at levels below legal limits or for conditions
involving asbestos and lead-based paint. There is no assurance that any
insurance proceeds or escrowed funds will be sufficient to complete remediation
of any environmental conditions affecting the related mortgaged property.
The environmental assessments have not revealed any environmental
liability that the depositor believes would have a material adverse effect on
the borrowers' businesses, assets or results of operations taken as a whole.
Nevertheless, there may be material environmental liabilities of which the
depositor is unaware. Moreover, there is no assurance that:
o future laws, ordinances or regulations will not impose any material
environmental liability; or
o the current environmental condition of the mortgaged properties will not be
adversely affected by tenants or by the condition of land or operations in
the vicinity of the mortgaged properties, such as underground storage tanks.
Before the special servicer acquires title to a property on behalf of
the trust or assumes operation of the mortgaged property, it must obtain an
environmental assessment of the mortgaged property. This requirement will
decrease the likelihood that the trust will become liable under any
environmental law. However, this requirement may effectively preclude
foreclosure until a satisfactory environmental assessment is obtained or any
required remedial action is completed. There is accordingly some risk that the
mortgaged property will decline in value while this assessment is being obtained
or the remedial work completed. Moreover, there is no assurance this requirement
will protect the trust from liability under environmental laws.
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THE BORROWER MAY BE UNABLE TO REPAY THE REMAINING PRINCIPAL BALANCE ON ITS
MATURITY DATE OR ANTICIPATED REPAYMENT DATE, WHICH MAY HAVE AN ADVERSE EFFECT ON
THE PAYMENT OF YOUR CERTIFICATES
185 of the loans (98.9%) are expected to have more than 10% of the
original principal balance remaining unpaid on their stated maturity date, or in
the case of hyper-amortization loans, on their anticipated repayment date. We
cannot assure you that each borrower will have the ability to repay the
remaining principal balance on the pertinent date. Additionally, a borrower in a
hyper-amortization loan is not obligated to repay its loan on the anticipated
repayment date. Loans with substantial remaining principal balances at their
stated or anticipated maturity involve greater risk than fully amortizing loans.
A borrower's ability to repay a loan on its maturity date or
anticipated repayment date typically will depend upon its ability either to
refinance the loan or to sell the mortgaged property at a price sufficient to
permit repayment. A borrower's ability to achieve either of these goals will be
affected by a number of factors, including:
o the availability of, and competition for, credit for commercial and
multifamily properties;
o prevailing interest rates;
o the fair market value of the related properties;
o the borrower's equity in the related properties;
o the borrower's financial condition;
o the operating history and occupancy level of the property;
o tax laws; and
o prevailing general and regional economic conditions.
The availability of funds in the credit markets fluctuates over time.
See "Description of the Mortgage Pool - Certain Terms and Conditions of
the Mortgage Loans".
BORROWERS THAT ARE ORGANIZED AS SPECIAL PURPOSE ENTITIES ARE SUBJECT TO THE RISK
OF SUBSTANTIVE CONSOLIDATION
Some of the borrowers are organized as special purpose entities with an
independent director whose consent is required if the borrower were to file a
voluntary bankruptcy petition.
In the event of the bankruptcy of their parent, these borrowers have
been organized so as to minimize the risk of a substantive consolidation into
their parent's bankruptcy estate. However, despite this organizational
structure, there is nevertheless the risk that a bankruptcy court could
consolidate the borrower into its parent's bankruptcy if the separateness
criteria put in place at the borrower's formation are not observed.
BORROWERS THAT ARE NOT SPECIAL-PURPOSE ENTITIES MAY BE MORE LIKELY TO PURSUE A
BANKRUPTCY
The organizational documents of some of the borrowers do not limit the
borrowers' business activities to owning their respective properties.
Most of the borrowers (and any special-purpose entity having an
interest in any of the borrowers) do not have an independent director whose
consent would be required to file a voluntary bankruptcy petition on behalf of
the borrower.
THE BORROWER'S ABILITY TO EFFECT OTHER BORROWINGS MAY REDUCE THE CASH FLOW
AVAILABLE TO THE PROPERTY, WHICH MAY HAVE AN ADVERSE EFFECT ON THE PAYMENT OF
YOUR CERTIFICATES
The loans generally do not permit the borrower to incur additional
indebtedness using the mortgaged property as collateral. For 3 loans (1.0%), the
related borrower is permitted, subject to specified restrictions, to grant a
subordinate mortgage over the related mortgaged property.
When a borrower (or its constituent members) also has one or more other
outstanding loans (even if subordinated, unsecured or mezzanine loans), the
trust is subjected to additional risk. The borrower and/or its constituent
members may have difficulty servicing and repaying multiple loans. The existence
of another loan generally will make it more difficult for the borrower to obtain
refinancing of the loan, which may jeopardize repayment of the loan.
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Moreover, the need to service additional debt may reduce the cash flow available
to the borrower to operate and maintain the mortgaged property.
Additionally, if the borrower (or its constituent members) defaults on
its loan and/or any other loan, actions taken by other lenders could impair the
security available to the trust. If a junior lender files an involuntary
petition for bankruptcy against the borrower or the borrower files a voluntary
petition to stay enforcement by a junior lender, the trust's ability to
foreclose on the property will be automatically stayed, and principal and
interest payments might not be made during the course of the bankruptcy case.
The bankruptcy of another lender also may operate to stay foreclosure by the
trust.
Further, if another loan secured by the mortgaged property is in
default, the other lender may foreclose on the mortgaged property, unless the
other lender has agreed not to foreclose. A foreclosure by the other lender may
cause a delay in payments and/or an involuntary repayment of the loan prior to
maturity. The trust may also be subject to the costs and administrative burdens
of involvement in foreclosure proceedings or related litigation.
BANKRUPTCY PROCEEDINGS RELATING TO A BORROWER MAY RESULT IN A RESTRUCTURING OF
THE LOAN
Under federal bankruptcy law, the filing of a petition in bankruptcy by
or against a borrower will stay the sale of the real property that the borrower
owns, as well as the commencement or continuation of a foreclosure action. In
addition, if a court determines that the value of the mortgaged property is less
than the principal balance of the loan it secures, the court may prevent a
lender from foreclosing on the mortgaged property, subject to certain
protections available to the lender. As part of a restructuring plan, a court
also may reduce the amount of secured indebtedness to the current value of the
mortgaged property. Such an action would make the lender a general unsecured
creditor for the difference between the current value of the property and the
amount of its loan. A bankruptcy court also may:
o grant a debtor a reasonable time to cure a payment default on a loan;
o reduce monthly payments due under a loan;
o change the rate of interest due on a loan; or
o otherwise alter the loan's repayment schedule.
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a
junior lienholder may stay the senior lienholder from taking action to foreclose
on the junior lien. Additionally, the borrower's trustee or the borrower, as
debtor-in-possession, has certain special powers to avoid, subordinate or
disallow debts. In certain circumstances, the claims of the trustee may be
subordinated to financing obtained by a debtor-in-possession subsequent to its
bankruptcy.
Under federal bankruptcy law, the lender will be stayed from enforcing
a borrower's assignment of rents and leases. Federal bankruptcy law also may
interfere with a lender's ability to enforce any lockbox requirements. The legal
proceedings necessary to resolve these issues can be time-consuming and may
significantly delay the lender's receipt of rents. Rents also may escape an
assignment if the borrower uses the rents to maintain the mortgaged property or
for other court authorized expenses.
Thus, the trustee's recovery from borrowers in bankruptcy proceedings
may be significantly delayed, and the total amount ultimately collected may be
substantially less than the amount owed.
THE OPERATION OF COMMERCIAL PROPERTIES IS DEPENDENT UPON SUCCESSFUL MANAGEMENT
The successful operation of a real estate project depends upon the
property manager's performance and viability. The property manager is generally
responsible for:
o responding to changes in the local market;
o planning and implementing a rental structure for the property;
o operating the property and providing building services;
o managing operating expenses; and
o assuring that maintenance and capital improvements are completed in a timely
fashion.
Properties deriving revenues primarily from short-term sources are
generally more management intensive than properties leased to creditworthy
tenants under long-term leases.
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A good property manager can improve cash flow, reduce vacancy, leasing
and repair costs and preserve building value if it:
o controls costs;
o provides appropriate service to tenants; and
o maintains the improvements.
On the other hand, management errors can, in some cases, impair
short-term cash flow and the long-term viability of an income-producing
property.
The depositor makes no representation or warranty as to the skills of
any present or future managers. Additionally, the depositor cannot assure you
that the property managers will be in a financial condition to fulfill their
management responsibilities throughout the terms of their respective management
agreements.
PROPERTY INSPECTIONS PERFORMED ON THE MORTGAGED PROPERTIES MAY NOT REFLECT ALL
CONDITIONS THAT REQUIRE REPAIR ON THE PROPERTY
Licensed engineers or consultants inspected all of the mortgaged
properties in connection with the origination of the loans to assess items such
as:
o structure;
o exterior walls;
o roofing;
o interior construction;
o mechanical and electrical systems; and
o general condition of the site, buildings and other improvements.
However, there is no assurance that the inspectors identified all
conditions requiring repair or replacement.
THE ABSENCE OF OR INADEQUACY OF INSURANCE COVERAGE ON THE MORTGAGED PROPERTIES
MAY HAVE AN ADVERSE EFFECT ON THE PAYMENT OF YOUR CERTIFICATES
The mortgaged properties may suffer casualty losses due to risks that
insurance does not cover or for which insurance coverage is inadequate. There is
no assurance borrowers will be able to maintain adequate insurance. Moreover,
changes in laws may materially affect the borrower's ability to reconstruct the
property or make major repairs or may materially increase the cost of such
reconstruction or repairs.
Certain of the mortgaged properties are located in California, Texas
and along the southeastern coastal areas of the United States. These areas have
historically been at greater risk regarding acts of nature (such as hurricanes,
floods and earthquakes) than other areas. The loans generally do not
specifically require the borrowers to maintain earthquake or hurricane
insurance. Earthquake insurance was required for all loans where the estimated
probable maximum loss exceeded 20%.
As a result of any of the foregoing, the amount available to make
distributions on the certificates could be reduced.
APPRAISALS MAY INACCURATELY REFLECT THE VALUE OF THE MORTGAGED PROPERTIES
The originators obtained an appraisal or other market analysis of each
mortgaged property in connection with the origination or acquisition of the
related loan. The resulting estimates of value were used to calculate the
Cut-off Date LTV Ratios referred to in this prospectus supplement. Those
estimates represent the analysis and opinion of the person performing the
appraisal or market analysis and are not guarantees of present or future values.
Moreover, the values of the mortgaged properties may have changed significantly
since the appraisal or market valuation was performed. In addition, appraisals
seek to establish the amount a typically motivated buyer would pay a typically
motivated seller. Such amount could be significantly higher than the amount
obtained from the sale of a mortgaged property under a distress or liquidation
sale. Information regarding the values of mortgaged properties available to the
depositor is presented in Appendix I, Appendix II and Appendix III for
illustrative purposes only.
THE TIMING OF LOAN AMORTIZATION MAY HAVE AN ADVERSE EFFECT ON THE PAYMENT OF
YOUR CERTIFICATES
As principal payments or prepayments are made on loans in the mortgage
pool, the remaining certificateholders may be subject to more risk because of
the decreased:
o number of mortgaged properties;
o diversity of mortgaged property types;
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o diversity of geographic locations; and
o number of borrowers and affiliated borrowers.
Classes of certificates that have a later alphabetical designation or a
lower payment priority are more likely to be exposed to this concentration risk
than are classes with an earlier alphabetical designation or higher priority.
This is because principal on the certificates is generally payable in sequential
order, and no class entitled to distribution of principal generally receives
principal until the principal amount of the preceding class or classes entitled
to receive principal has been reduced to zero.
SUBORDINATION OF SUBORDINATE CERTIFICATES WILL AFFECT THE TIMING OF PAYMENTS AND
THE APPLICATION OF LOSSES ON YOUR CERTIFICATES
As described in this prospectus supplement, unless your certificates
are class A-1 or class A-2 certificates, your rights to receive distributions of
amounts collected or advanced on or in respect of the loans will be subordinated
to those of the holders of the principal balance certificates with an earlier
alphabetical designation and the interest only certificates. See "Description of
the Certificates--Distributions", "--Application of Realized Losses and Expense
Losses to Principal Balances" and "--Subordination" in this prospectus
supplement and "Description of Credit Support--Subordinate Certificates" in the
prospectus.
THE OPERATION OF A MORTGAGED PROPERTY UPON FORECLOSURE OF THE LOAN MAY AFFECT
THE TAX STATUS OF THE TRUST AND MAY HAVE AN ADVERSE EFFECT ON THE PAYMENT OF
YOUR CERTIFICATES
If the trust acquires a mortgaged property pursuant to a foreclosure or
deed in lieu of foreclosure, the special servicer will generally retain an
independent contractor to operate the property. Any net income from such
operation (other than qualifying "rents from real property"), or any rental
income based on the net profits of a tenant or sub-tenant or allocable to a
non-customary service, will subject the trust to a federal tax on such income at
the highest marginal corporate tax rate (currently 35%), and in addition, to
possible state or local tax. In such event, the net proceeds available for
distribution to certificateholders will be reduced. The special servicer may
permit the trust to earn "net income from foreclosure property" that is subject
to tax if it determines that the net after-tax benefit to certificateholders is
greater than under another method of operating or leasing the mortgaged
property. If the mortgaged property did not qualify as foreclosure property
because of certain disqualifying events, any income realized from operation or
disposition of the property would be subject to a 100% prohibited transaction
tax. It is not anticipated that the trust will receive any income from
prohibited transactions.
STATE LAWS APPLICABLE TO THE ENFORCEMENT OF LENDER REMEDIES MAY AFFECT THE
TIMING OF PAYMENTS ON YOUR CERTIFICATES AND MAY HAVE AN ADVERSE EFFECT ON THE
PAYMENT OF YOUR CERTIFICATES
All of the loans permit the lender to accelerate the debt upon default
by the borrower. The courts of all states will enforce acceleration clauses in
the event of a material payment default. State equity courts, however, may
refuse to permit foreclosure or acceleration if a default is deemed immaterial
or the exercise of those remedies would be unjust or unconscionable.
If a mortgaged property has tenants, the borrower assigns its income as
landlord to the lender as further security, while retaining a license to collect
rents as long as there is no default. If the borrower defaults, the license
terminates and the lender is entitled to collect rents. In certain
jurisdictions, such assignments may not be perfected as security interests until
the lender takes actual possession of the property's cash flow. In some
jurisdictions, the lender may not be entitled to collect rents until the lender
takes possession of the mortgaged property, secures the appointment of a
receiver or otherwise acts to enforce its remedies. In addition, as previously
discussed, a bankruptcy or similar proceeding commenced by or for the borrower
could adversely affect the lender's ability to collect the rents.
The laws of some states, including California and New York, prohibit
more than one "judicial action" to enforce a mortgage obligation. Some courts
have construed the term "judicial action" broadly. In the case of a loan secured
by mortgaged properties located in multiple states, the master servicer or
special servicer may be required to foreclose first on mortgaged properties
located in states where such "one action" rules apply (and where non-judicial
foreclosure is permitted) before foreclosing on properties located in states
where judicial foreclosure is the only permitted method of foreclosure. As a
result, state laws may limit the trust's ability to realize upon the loans.
Foreclosure actions may also, in certain circumstances, subject
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the trust to liability as a "lender-in-possession" or result in the equitable
subordination of the claims of the trustee to the claims of other creditors of
the borrower. The master servicer or the special servicer may take these state
laws into consideration in deciding which remedy to choose following a default
by a borrower.
LOANS SECURED BY MORTGAGES ON A LEASEHOLD INTEREST WILL SUBJECT YOUR INVESTMENT
TO A RISK OF LOSS UPON A LEASE DEFAULT
6 of the loans (11.1%) are secured solely by mortgages encumbering a
borrower's leasehold interest in the property under a ground lease. 2 of the
loans (1.1%) are secured by a mortgage encumbering a borrower's leasehold
interest in a portion of the property and that borrower's fee interest in the
remainder of the property.
Leasehold loans are subject to risks not associated with loans secured
by a lien on the fee estate of the borrower. The most significant of these risks
is that if the landlord terminates the borrower's leasehold interest upon a
lease default, the leasehold mortgagee would lose its security. The ground lease
loans may require the master servicer to give notices or to take actions in
addition to those required for a fee loan in order for the trust to avail itself
of its rights under the related loan. Generally, the related ground lease:
o requires the landlord to give the leasehold mortgagee notice of tenant
defaults and an opportunity to cure them prior to enforcing its remedies;
o prohibits any amendment of the ground lease without the lender's prior
consent;
o permits the leasehold estate to be assigned to the leasehold mortgagee or the
purchaser at a foreclosure sale; and
o contains certain other protective provisions typically included in a
"mortgageable" ground lease.
Upon the bankruptcy of a landlord or tenant under a ground lease, the
debtor entity has the right to assume or reject the lease. If a debtor landlord
rejects the lease, the tenant has the right to remain in possession of its
leased premises for the term of the lease including renewals, at the same rent.
If a debtor tenant/borrower rejects any or all of its leases, the leasehold
lender could succeed to the tenant/ borrower's position under the lease only if
the landlord specifically grants the lender such right. As a result, the lender
may lose its security. If both the landlord and the tenant/borrower are involved
in bankruptcy proceedings, the trustee may be unable to enforce the bankrupt
tenant/borrower's obligation to not terminate a ground lease rejected by a
bankrupt landlord. In such circumstances, a ground lease could be terminated
notwithstanding lender protection agreements.
Ground leases securing the mortgaged properties may provide that the
ground rent payable under the lease increases during the lease term. These
increases may adversely affect the cash flow and net income of the borrower from
the mortgaged property.
MORTGAGES ON A GROUND LESSOR'S FEE INTEREST MAY BE CHALLENGED AS FRAUDULENT
CONVEYANCES
2 of the loans (2.7%) are secured by a mortgage encumbering both a
borrower's leasehold interest in the related mortgaged property under a ground
lease and the fee interest of the owner of all or a part of the property. Each
of these loans is deemed secured by a fee mortgage in this prospectus
supplement. The execution of a mortgage over its fee interest by an
owner/landlord to secure the debt of a borrower/tenant may be subject to
challenge as a fraudulent conveyance. Among other things, a legal challenge to
the granting of the liens may focus on the benefits realized by the
owner/landlord from the loan. If a court concluded that the granting of the
mortgage was an avoidable fraudulent conveyance, it might take actions
detrimental to the holders of the certificates, including, under certain
circumstances, invalidating the mortgage over the fee interest of the
owner/landlord.
CROSS-COLLATERALIZATION OF GROUPS OF LOANS COULD HAVE AN ADVERSE EFFECT ON THE
PAYMENT OF YOUR CERTIFICATES
Cross-collateralization arrangements involving more than one borrower
could be challenged as fraudulent conveyances:
o by creditors of the related borrower in an action brought outside a
bankruptcy case; or
o if the borrower were to become a debtor in a bankruptcy case, by the borrower
or its representative.
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A lien granted by a borrower for the benefit of another borrower in a
cross-collateralization arrangement could be avoided if a court were to
determine that:
1. such borrower was:
o insolvent when it granted the lien;
o rendered insolvent by the granting of the lien;
o left with inadequate capital by granting the lien; or
o not able to pay its debts as they matured; and
2. such borrower did not receive fair consideration or reasonably equivalent
value when it allowed its mortgaged property or properties to be encumbered
by a lien securing the indebtedness of the other borrower.
Among other things, a legal challenge to the granting of the liens may
focus on the benefits realized by such borrower from the respective loan
proceeds, as well as the overall cross-collateralization. If a court were to
conclude that the granting of the liens was an avoidable fraudulent conveyance,
that court could subordinate all or part of the loan to existing or future
indebtedness of that borrower. The court also could recover payments made under
that loan or take other actions detrimental to the holders of the certificates,
including, under certain circumstances, invalidating the loan or the mortgages
securing the cross-collateralized loans.
THE TRUST MAY NOT CONTROL THE TERMINATION OF LEASES UPON FORECLOSURE
In some jurisdictions, a lease may terminate upon the transfer of a
mortgaged property to a foreclosing lender or purchaser at foreclosure if the
tenant lease is:
o subordinate to the lien created by the mortgage, and
o does not contain provisions requiring the tenant to recognize a successor
owner following foreclosure as landlord under the lease (also known as
attornment provisions).
The depositor has not reviewed all the leases to determine if they have
these provisions. Accordingly, if a mortgaged property is located in one of
these jurisdictions and is leased to one or more desirable tenants under leases
that are subordinate to the mortgage but do not contain attornment provisions,
the mortgaged property could experience a further decline in value if such
tenants' leases were terminated. This is particularly likely if the tenants were
paying above-market rents or could not be replaced.
If a lease is not subordinate to a mortgage, the trust will not have
the right to remove the tenant upon foreclosure of the mortgaged property,
unless it has otherwise agreed with the tenant. If a non-subordinate lease
contains provisions inconsistent with the mortgage or that could affect the
enforcement of the lender's rights, the provisions of the lease will take
precedence over the provisions of the mortgage. Many anchor tenant leases may
not be subordinate, or, if subordinate, may provide that the lease terms control
in certain matters, such as the application of insurance proceeds. Some
non-anchor leases may also not be subordinate to the related mortgage.
LITIGATION ARISING OUT OF ORDINARY BUSINESS MAY HAVE AN ADVERSE EFFECT ON YOUR
CERTIFICATES
There may be pending or threatened legal proceedings against the
borrowers and/or managers of the mortgaged properties and their affiliates
arising out of the ordinary business of the borrowers, managers and affiliates.
We cannot assure you that any such litigation would not have a material adverse
effect on the distributions on the certificates.
THE CASH FLOW FROM MORTGAGED PROPERTIES NOT IN COMPLIANCE WITH THE AMERICANS
WITH DISABILITIES ACT MAY BE AFFECTED, WHICH MAY HAVE AN ADVERSE EFFECT ON THE
PAYMENT OF YOUR CERTIFICATES
Under the Americans with Disabilities Act of 1990, all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. Borrowers may incur costs complying with the
ADA. In addition, noncompliance could result in the imposition of fines by the
federal government or an award of damages to private litigants.
VARIOUS CONFLICTS OF INTEREST MAY HAVE AN ADVERSE EFFECT ON YOUR CERTIFICATES
Conflicts Between Various Classes of Certificateholders. The special
servicer is given considerable latitude in determining when and how to liquidate
or modify defaulted loans. The operating
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adviser has the right to replace the special servicer. At any given time, the
holders of the most subordinate class of principal balance certificates that has
at least 25% of its initial principal balance still outstanding will control the
operating adviser. If no class has at least 25% of its initial principal balance
still outstanding, the most subordinate class of principal balance certificates
still outstanding will be the controlling class. These holders may have
interests in conflict with those of the holders of the other certificates. For
instance, these holders might desire to mitigate the potential for loss to their
certificates from a troubled loan by deferring enforcement in the hope of
maximizing future proceeds. However, the interests of the trust may be better
served by prompt action, since delay followed by a market downturn could result
in less proceeds to the trust than would have been realized if earlier action
had been taken.
The special servicer or an affiliate may acquire certain of the most
subordinated certificates, including those that have the right to appoint the
initial operating adviser. Under such circumstances, the special servicer may
have interests that conflict with the interests of the other holders of the
certificates.
Conflicts Between the Trust and Affiliates of the Sellers. Conflicts of
interest may arise between the trust and affiliates of each of the sellers that
engage in the acquisition, development, operation, financing and disposition of
real estate.
Those conflicts may arise because affiliates of each of the sellers
intend to continue to actively acquire, develop, operate, finance and dispose of
real estate-related assets in the ordinary course of their business. During the
course of their business activities, those affiliates may acquire or sell
properties, or finance loans secured by properties which may include the
mortgaged properties or properties that are in the same markets as the mortgaged
properties. In such case, the interests of those affiliates may differ from, and
compete with, the interests of the trust. Decisions made with respect to those
assets may adversely affect the amount and timing of distributions on the
certificates. Midland Loan Services, Inc., one of the sellers, is also the
initial master servicer.
Conflicts Between Managers and the Loan Borrowers. Substantially all of
the property managers for the mortgaged properties or their affiliates manage
additional properties, including properties that may compete with the mortgaged
properties. Affiliates of the managers, and certain of the managers themselves,
also may own other properties, including competing properties. The managers of
the mortgaged properties may accordingly experience conflicts of interest in the
management of the mortgaged properties.
Conflicts Between Sellers of Loans and Classes of Certificateholders.
Affiliates of the sellers could in the future acquire the certificates entitled
to appoint the operating adviser. Decisions made by the operating adviser may
favor the interests of affiliates of such certificateholders in a manner that
could adversely affect the amount and timing of distributions on the other
certificates.
Servicers May Have Conflicts of Interest. Each seller is obligated to
substitute a qualified substitute loan or to repurchase a loan if:
o there is a defect with respect to the documents relating to the loan, or
o one or more of its representations or warranties concerning the loan in the
related loan purchase agreement are breached,
provided that such defect or breach materially and adversely affects the
interests of the certificateholders and such defect or breach is not cured as
required. The ability of Midland to perform its obligations as master servicer
or special servicer under the pooling and servicing agreement may be jeopardized
if it incurs significant liabilities for the repurchase or substitution of
loans. In addition, since the pooling and servicing agreement requires the
master servicer or the special servicer, as applicable, to enforce on behalf of
the trust the sellers' obligations to repurchase or substitute loans, Midland
may experience a conflict of interest to the extent that Midland is obligated to
repurchase or substitute a loan as a seller.
YIELD CONSIDERATIONS
Prepayments May Reduce the Yield on Your Certificates. The yield to
maturity on your certificates may depend, in significant part, upon the rate and
timing of principal payments on the loans. For this purpose, principal payments
include:
o voluntary prepayments, if permitted, and
o involuntary prepayments resulting from:
1. casualty or condemnation of mortgaged properties,
2. defaults and liquidations by borrowers, or
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3. repurchases upon a seller's breach of a representation or warranty.
The investment performance of your certificates may vary materially and
adversely from your expectations if the actual rate of prepayment is higher or
lower than you anticipate.
Voluntary prepayments under certain of the loans require payment of a
prepayment premium unless the loan is within a specified number of days of the
anticipated repayment date or stated maturity date, as the case may be. See
"Description of the Mortgage Pool--Certain Terms and Conditions of the Mortgage
Loans--Prepayment Provisions". Nevertheless, we cannot assure you that the
related borrowers will refrain from prepaying their loans due to the existence
of a prepayment premium. We also cannot assure you that involuntary prepayments
will not occur. The rate at which voluntary prepayments occur on the loans will
be affected by a variety of factors, including:
o the terms of the loans;
o the length of any prepayment lockout period;
o the level of prevailing interest rates;
o the availability of mortgage credit;
o the applicable yield maintenance charges or percentage premiums;
o the master servicer's or special servicer's ability to enforce those charges
or premiums;
o the occurrence of casualties or natural disasters; and
o economic, demographic, tax, legal or other factors.
Generally, the loan documents do not require the borrower to pay a
prepayment premium for prepayments in connection with a casualty or
condemnation, unless an event of default has occurred and is continuing. In
addition, if a seller repurchases any mortgage from the trust due to breaches of
representations or warranties, the repurchase price paid will be passed through
to the holders of the certificates with the same effect as if the loan had been
prepaid, except that no prepayment premium would be payable. Such a repurchase
may therefore adversely affect the yield to maturity on your certificates.
In addition, some of the loans permit the borrower to make prepayments
other than on the first day of a month. If a borrower were to make a prepayment
after the determination date and did not pay interest on the loan through the
end of the month, there might be a shortfall in the amount of interest available
for distribution to certificateholders. The trustee would allocate any shortfall
to each class of certificates on a pro rata basis. See "Description of the
Certificates--Prepayment Interest Excesses and Shortfalls".
The Effect of State Laws Upon the Enforceability of Prepayment Premiums
May Affect the Payment and Yield of Your Certificates. Provisions requiring
prepayment premiums and lock-out periods may not be enforceable in some states
and under federal bankruptcy law. Those provisions for charges and premiums also
may constitute interest under applicable usury laws. Accordingly, we cannot
assure you that the obligation to pay a prepayment premium or to prohibit
prepayments will be enforceable. We also cannot assure you that any foreclosure
proceeds will be sufficient to pay an enforceable prepayment premium.
Additionally, although the collateral substitution provisions related to
defeasance do not have the same effect on the certificateholders as prepayment,
we cannot assure you that a court would not interpret those provisions as
requiring a prepayment premium. In certain jurisdictions, those collateral
substitution provisions might therefore be deemed unenforceable under applicable
law, or usurious.
The Yield on Your Certificate Will Be Affected by the Price at Which
the Certificate Was Purchased and the Rate, Timing and Amount of Distributions
on the Certificate. The yield on any certificate will depend on (1) the price at
which the certificate is purchased by an investor and (2) the rate, timing and
amount of distributions on the certificate. The rate, timing and amount of
distributions on any certificate will, in turn, depend on, among other things:
o the interest rate for the certificate;
o the rate and timing of principal payments, including prepayments, and other
principal collections on or in respect of the loans;
o the extent to which principal collections are applied to or otherwise result
in a reduction of the principal balance or notional amount of the
certificate;
o the rate, timing and severity of losses on or in respect of the loans or
unanticipated expenses of the trust;
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o the timing and severity of any interest shortfalls resulting from prepayments
or balloon payments;
o the timing and severity of any reductions in advances as described under
"Description of the Certificates--Appraisal Reductions of Loan Balances"; and
o the extent to which prepayment premiums are collected and, in turn,
distributed on the certificate.
You Bear the Risk of Borrower Defaults. The rate and timing of
delinquencies or defaults on the loans will affect the following aspects of the
certificates:
o the aggregate amount of distributions on them;
o their yield to maturity;
o their rates of principal payments; and
o their weighted average lives.
The rights of holders of each class of subordinate certificates to
receive certain payments of principal and interest otherwise payable on their
certificates will be subordinated to the rights of the holders of the more
senior certificates having an earlier alphabetical class designation. See
"Description of the Certificates - Distributions". Losses on the loans will be
allocated to the class O, class N, class M, class L, class K, class J, class H,
class G, class F, class E, class D, class C and class B certificates, in that
order, reducing amounts otherwise payable to each class. Any remaining losses
would then be allocated to the class A-1 and class A-2 certificates, pro rata,
based on their then-outstanding class principal balances.
If losses on the loans exceed the aggregate principal amount of the
classes of certificates subordinated to a particular class, that class will
suffer a loss equal to the full amount of the excess (up to the outstanding
principal amount of the class).
If you calculate your anticipated yield based on assumed rates of
default and losses that are lower than the default rate and losses actually
experienced and such losses are allocable to your certificates, your actual
yield to maturity will be lower than your assumed yield. Under certain extreme
scenarios, your yield could be negative. In general, the earlier a loss borne by
your certificates occurs, the greater the effect on your yield to maturity.
Additionally, delinquencies and defaults on the loans may significantly
delay the receipt of distributions by you on your certificates, unless:
o the master servicer makes advances to cover delinquent payments, or
o the subordination of another class of certificates fully offsets the effects
of any such delinquency or default.
Also, if the related borrower does not repay a loan with a
hyper-amortization feature by its anticipated repayment date, the effect will be
to increase the weighted average life of your certificates and, if your
certificate was purchased at a discount, may reduce your yield to maturity.
COMPENSATION TO THE MASTER SERVICER, THE SPECIAL SERVICER AND THE TRUSTEE MAY
HAVE AN ADVERSE EFFECT ON THE PAYMENT OF YOUR CERTIFICATES
To the extent described in this prospectus supplement, the master
servicer, the special servicer, the trustee and the fiscal agent will each be
entitled to receive interest on unreimbursed advances made by it. This interest
will generally accrue from the date on which the related advance is made or the
related expense is incurred through the date of reimbursement. In addition,
under certain circumstances, including delinquencies in the payment of principal
and interest, a loan will be specially serviced, and the special servicer is
entitled to compensation for special servicing activities. The right to receive
interest on advances or special servicing compensation is senior to the rights
of certificateholders to receive distributions.
A NUMBER OF FACTORS THAT AFFECT THE LIQUIDITY OF YOUR CERTIFICATES MAY HAVE AN
ADVERSE EFFECT ON THE VALUE OF YOUR CERTIFICATES
Your certificates will not be listed on any securities exchange, and
there is currently no secondary market for the offered certificates. While each
of the underwriters currently intends to make a secondary market in the offered
certificates, it is not obligated to do so. Accordingly, you may not have an
active or liquid secondary market for your certificates. Lack of liquidity could
result in a substantial decrease in the market value of your certificates. The
market value of your certificates also may be affected by many other factors,
including the then prevailing interest rates. Furthermore, you should be aware
that the market for securities of the same type as the certificates has recently
been
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volatile and offered very limited liquidity. Finally, affiliates of the sellers
may acquire certain classes of offered certificates in which case the market for
those classes of offered certificates may not be as liquid as if third parties
had acquired such certificates.
RISK OF PASS-THROUGH RATE VARIABILITY
The interest rates of the offered certificates may not exceed the
weighted average of the net mortgage rates of the loans. Loans with relatively
high interest rates are more likely to prepay than loans with relatively low
interest rates. Higher rates of principal payments on loans having mortgage
interest rates above the weighted average interest rate of the loans could have
the effect of reducing the interest rate of the offered certificates.
OTHER RISKS
See "Risk Factors" in the prospectus for a description of certain other
risks and special considerations that may be applicable to your certificates.
--------------------------------------------
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The mortgage pool will consist of 190 multifamily and commercial
"whole" loans, with an aggregate Cut-off Date Principal Balance of
$1,076,288,358 (the "INITIAL POOL BALANCE"), subject to a variance of plus or
minus 5%. In making this count, where a single indebtedness is secured by
mortgages over multiple separate properties, each of those separate properties
was generally counted as a separate loan (collectively, the "MULTIPLE PROPERTY
LOANS"), created by allocating a pro rata portion of the cut-off date principal
balance secured by the separate properties. The Multiple Property Loans and all
other loans in the mortgage pool are collectively referred to as the "MORTGAGE
LOANS". All numerical information concerning the Mortgage Loans is approximate.
The "CUT-OFF DATE PRINCIPAL BALANCE" of each Mortgage Loan is its
unpaid principal balance as of October 1, 2000 (the "CUT-OFF DATE"), after
application of all principal payments due on or before such date, whether or not
received.
The description of the Mortgage Loans in this prospectus supplement is
a generalized description of the Mortgage Loans in the aggregate. Many of the
individual Mortgage Loans have special terms and provisions that are different
from the generalized, aggregated description.
Brief summaries of some of the terms of the Mortgage Loans, or groups
of Cross-Collateralized Loans, with Cut-off Date Principal Balances greater than
$20,000,000 are set forth in Appendix III.
Each Mortgage Loan is evidenced by one or more separate promissory
notes. Each Mortgage Loan is secured by a mortgage, deed of trust or other
similar security instrument (all of the foregoing are individually a "MORTGAGE"
and collectively the "MORTGAGES"). Each Mortgage creates a lien on one or more
of a fee simple estate or a leasehold estate in one or more parcels of real
property (a "MORTGAGED PROPERTY") improved for multifamily or commercial use.
See Appendix I for information as to the percentage of the Initial Pool Balance
represented by each type of Mortgaged Property.
None of the Mortgage Loans is insured or guaranteed by the United
States of America, by any governmental agency or instrumentality, by any private
mortgage insurer or by the depositor, the sellers, the master servicer, the
special servicer, the trustee, the fiscal agent, the underwriters or any of
their respective affiliates.
All of the Mortgage Loans should be considered non-recourse loans. This
means that if the loan is in default, the lender's remedies are limited to
foreclosing or acquiring the related Mortgaged Property and any other assets
pledged to secure the loan. For those Mortgage Loans that permit recourse
against any person or entity, the depositor has not evaluated the financial
condition of those persons or entities. In many cases, the only assets such
entities may have are those pledged to secure the loan.
The depositor will purchase the Mortgage Loans on or before the closing
date from the sellers, in each case pursuant to separate mortgage loan purchase
and sale agreements entered into between the depositor and the particular
seller. As described under "Description of the Mortgage Pool--Representations
and Warranties; Repurchase", each seller must repurchase a Mortgage Loan or
substitute a Qualified Substitute Mortgage Loan if a representation or warranty
made by the seller in its
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mortgage loan purchase agreement about the Mortgage Loan was incorrect at the
time it was made, if the breach materially and adversely affects the interests
of the certificateholders and is not cured. There can be no assurance that any
seller has or will have sufficient assets with which to fulfill any repurchase
or substitution obligations that may arise. The depositor will not have any
obligation to fulfill any repurchase obligation if a seller fails to do so. The
depositor will assign the Mortgage Loans, together with the depositor's rights
and remedies against the sellers in respect of breaches of representations or
warranties regarding the Mortgage Loans, to the trustee pursuant to the pooling
and servicing agreement.
SECURITY FOR THE MORTGAGE LOANS
All 190 of the Mortgage Loans are secured by a first lien encumbering
one or more of a fee simple estate or a leasehold estate in the related
Mortgaged Property, subject generally only to:
o liens for real estate and other taxes and special assessments not yet
delinquent or accruing interest or penalties,
o rights of tenants, as tenants only, under third party leases which were not
required to be subordinated,
o covenants, conditions, restrictions, rights of way, easements and other
matters of public record as of the date of recording of the Mortgage or
otherwise specified in the applicable lender's title insurance policy,
o purchase money security interests,
o other exceptions and encumbrances on the Mortgaged Property that are
reflected in the related title insurance policies; and
o other matters to which like properties are commonly subject.
The Mortgaged Property securing 1 Mortgaged Loan (1.1%), is part of a
development district created by an applicable redevelopment agency. This
redevelopment agency has issued its development bonds to provide financing for
certain public infrastructure improvements and environmental remediation. The
development bonds are to be repaid through a special tax levied on the real
properties located in the development district. The annual installments of such
tax apportioned to this Mortgaged Property are included as a separate line item
on its normal real property tax bill.
GROUND LEASES
6 Mortgage Loans (11.1%) are secured solely by a first lien encumbering
the related borrower's leasehold interest in the related Mortgaged Property. 2
additional Mortgage Loans (1.1%) are secured by a first lien encumbering the
related borrower's leasehold interest in a portion of the related Mortgaged
Property and that borrower's fee interest in the remainder of the Mortgaged
Property. For each 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.
The 2 Mortgage Loans (2.7%) secured by Mortgages encumbering both the
related borrower's leasehold interest and the fee interest of the owner/landlord
in all or a part of the related Mortgaged Property are deemed secured by a fee
interest, and not included in the above count. See Appendix II and "Risk
Factors-- Mortgages on a Ground Lessor's Fee Interest May Be Challenged as
Fraudulent Conveyances".
PURCHASE OPTIONS; RIGHTS OF FIRST REFUSAL
With respect to 1 Mortgage Loan (2.2%), the sole tenant possesses an
option to purchase the related Mortgaged Property until March 31, 2003. This
option has not been subordinated to the lien of the related Mortgage. However,
in connection with any exercise of this purchase option:
o the option purchase price is equal to the borrower's cost to acquire and
develop the related Mortgaged Property, plus 15%; and
o the tenant is required to either assume the related Mortgage Loan or to
prepay or defease the Mortgage Loan in accordance with its terms.
CROSS-COLLATERALIZED LOANS
The mortgage pool includes 2 separate sets of Mortgage Loans (the
"CROSS-COLLATERALIZED LOANS") that are cross-collateralized and cross-defaulted
with one or more related Cross-Collateralized Loans. None of the Mortgage Loans
are cross-collateralized or cross-defaulted with any mortgage loan not included
in the mortgage pool. No set of related Cross-Collateralized Loans constitutes
more than 0.9% of the Initial Pool Balance. See Appendix II for more information
regarding the Cross-Collateralized Loans.
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MULTIPLE PROPERTY LOANS
Except as described below, Multiple Property Loans were created
whenever a single indebtedness is secured by Mortgages over multiple separate
Mortgaged Properties. The Multiple Property Loans were created by allocating a
pro rata portion of the Cut-off Date Principal Balance secured by the related
Mortgaged Properties based upon:
o relative appraised value;
o relative underwritable cash flow; or
o prior allocations reflected in the related loan documents.
In those instances where a single indebtedness is secured by Mortgages
over multiple separate Mortgaged Properties that are contiguous or located in a
concentrated geographic area, and where these Mortgaged Properties are generally
treated as a single property by the related borrower for financial purposes,
this indebtedness is deemed to be a single Mortgage Loan secured by one
Mortgaged Property, and is not considered a Multiple Property Loan.
UNDERWRITING STANDARDS
The following is a discussion of the customary underwriting policies
and procedures used to originate the Mortgage Loans. Such policies and
procedures involved an evaluation of both the prospective borrower and the
proposed real estate collateral.
Factors typically analyzed in connection with a Mortgaged Property
include:
Physical Characteristics:
o age and condition;
o appraised value;
o gross square footage, net rentable area and gross land area;
o number of units, rooms or beds; and
o property interest to be mortgaged (fee or leasehold).
Tenants:
o current tenants' size and identity;
o termination or purchase option rights;
o term, expiration and rental rates under current leases;
o leasing commissions; and
o tenant improvements and concessions.
Financial Information:
o historical cash flow;
o applicable market rentals for similar properties;
o historical vacancy rate and credit loss rate;
o debt service coverage ratio; and
o loan-to-value ratio.
A site inspection of the related Mortgaged Property was also typically
performed, and third party appraisals and engineering reports were obtained.
Except as otherwise described in this prospectus supplement, third party Phase I
environmental site assessments were also obtained.
Factors typically analyzed in connection with a prospective borrower
include:
o credit history;
o capitalization and overall financial resources; and
o management skill and experience in the applicable property type.
The above information has been provided by the sellers and has not been
independently verified by the depositor, the master servicer, the special
servicer, the underwriters, the trustee or the fiscal agent.
CERTAIN TERMS AND CONDITIONS OF THE
MORTGAGE LOANS
DUE DATES
Monthly Payments are due on the first day of each month.
MORTGAGE RATES; CALCULATIONS OF INTEREST
188 of the Mortgage Loans (99.5%) accrue interest on the basis of the
actual number of days elapsed each month in an assumed 360-day year. The
remaining 2 Mortgage Loans (0.5%) accrue interest on the basis of an assumed
360-day year with twelve 30-day months. Except with respect to the
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Hyper-Amortization Loans, each Mortgage Loan generally accrues interest at an
annualized rate that is fixed for the entire term of such Mortgage Loan and does
not permit any negative amortization or the deferral of fixed interest.
AMORTIZATION OF PRINCIPAL
Many of the Mortgage Loans provide for monthly payments of principal
based on amortization schedules substantially longer than their remaining terms.
185 Mortgage Loans (98.9%) are "balloon loans" that are expected to have more
than 10% of their original principal balance remaining unpaid at their maturity
date. 34 of such balloon loans (40.6%) are hyper-amortization loans that will
have substantial balloon payments on their Anticipated Repayment Date. Such
hyper-amortization loans also provide for an increase in their interest rate
and/or principal amortization prior to maturity. 5 Mortgage Loans (1.1%) have
remaining amortization terms that are substantially the same as their remaining
terms to maturity. However, if the Monthly Payment for any Mortgage Loan
(including any Hyper-Amortization Loan) is calculated on an assumed 30/360 basis
but interest accrues on an actual/360 basis, there will be a remaining balance
or a larger balloon payment due upon maturity.
The weighted average Balloon LTV Ratio of the mortgage pool is 62.3%.
1 Mortgage Loan (4.6%) requires interest-only payments through and
including April 1, 2003. After that date, equal monthly principal and interest
payments are required.
For 1 Mortgage Loan (1.7%), the grace period for the payment of Monthly
Payments expires on the 16th of each month.
34 of the Mortgage Loans (40.6%) (the "HYPER-AMORTIZATION LOANS") have
the following characteristics:
o each bears interest until its Anticipated Repayment Date at its Initial
Interest Rate;
o each bears interest on and after its Anticipated Repayment Date at its
Revised Interest Rate, and
o each requires that all gross revenue from the Mortgaged Property from and
after its Anticipated Repayment Date be deposited into a lockbox account
controlled by the lender and generally applied in the following order
(although individual loans may have exceptions):
o to tax and insurance reserves;
o to interest at the Initial Interest Rate;
o to all other amounts owed the lender not set forth below;
o to all principal due under the original amortization;
o to all other reserves;
o to all approved operating or capital expenses;
o to all other principal then outstanding;
o to all outstanding Deferred Interest; and
o to the borrower.
To the extent not paid from gross revenues, the payment of interest
accrued at the excess of the Revised Interest Rate over the Initial Interest
Rate is deferred until the maturity date or when the principal is prepaid in
full. The deferred interest may also bear interest at the Revised Interest Rate.
The accrued and deferred interest, and interest thereon, is referred to as
"DEFERRED INTEREST".
"ANTICIPATED REPAYMENT DATE" or "ARD" means for any Hyper-Amortization
Loan the date on and after which the Revised Interest Rate applies and the
lockbox is activated.
"INITIAL INTEREST RATE" means for any Hyper-Amortization Loan the rate
at which such Hyper-Amortization Loan accrues interest from its origination
until its Anticipated Repayment Date.
"REVISED INTEREST RATE" means for any Hyper-Amortization Loan the
increased rate at which the Hyper-Amortization Loan bears interest from and
after its Anticipated Repayment Date. The Revised Interest Rate is typically
equal to the greater of:
o its Initial Interest Rate plus 2%, or
o the yield rate on the U.S. Treasury obligation that matures in the month or
succeeding month in which the original maturity date of the
Hyper-Amortization Loan occurs plus 2%.
The Revised Interest Rate may also be subject to a cap equal to its
Initial Interest Rate plus a percentage specified in the related note.
However, for 5 Hyper-Amortization Loans (9.9%), the Revised Interest
Rate is equal to the greater of the Initial Interest Rate plus 5% or the
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yield rate on the applicable U.S. Treasury obligation plus 5%.
PREPAYMENT PROVISIONS
All 190 of the Mortgage Loans are subject to specified periods
following origination during which no voluntary prepayments are allowed (a
"LOCK-OUT PERIOD").
The Mortgage Loans (other than the Defeasance Loans) generally permit
the borrower to voluntarily prepay the Mortgage Loan after the Lock-out Period
if it pays a prepayment premium. The Mortgage Loan documents (including
Defeasance Loans) generally provide for a specified period prior to maturity
during which a prepayment may be made without a prepayment premium (the "OPEN
PERIOD"). Other than as described below or during any such Open Period, the
Mortgage Loans prohibit any borrower from making a partial prepayment.
1 Mortgage Loan (1.4%) allows the borrower to obtain a release of any
of the 5 separate Mortgaged Properties securing such Mortgage Loan. In order to
obtain this release, the borrower must, among other things:
o satisfy the requirements for a defeasance of this Mortgage Loan, provided
that the amount of substitute collateral must be related to 125% of the
Mortgage Loan balance allocated to the Mortgaged Property being released;
o provide acceptable evidence to the lender that the combined debt service
coverage ratio of the Mortgaged Properties not being released is not less
1.40 to 1; and
o provide acceptable evidence to the lender that the combined loan-to-value
ratio of the Mortgaged Properties not being released is not greater than
75%.
2 of the Cross-Collateralized Loans (0.5%) allow the
cross-collateralization to be terminated if the debt service coverage ratio for
the remaining Mortgaged Property (after giving effect to the release) is not
less than 1.75 to 1 for the trailing twelve months. The borrower's ability to
obtain such release is dependent upon certain other conditions, including there
being no existing default, and the borrower providing the lender with 30 days'
prior written notice, an acceptable title insurance policy endorsement and
payment of all costs and expenses incurred by the lender in connection with the
release.
A borrower does not have to pay a prepayment premium if it pays a
Hyper-Amortization Loan on or after its Anticipated Repayment Date.
For Mortgage Loans other than the Defeasance Loans, the applicable
prepayment premium is generally calculated:
o for a certain period (a "YIELD MAINTENANCE PERIOD") after the origination
of the related Mortgage Loan or the expiration of the applicable Lock-out
Period, if any, on the basis of a yield maintenance formula or, for some
Mortgage Loans, a specified percentage of the amount prepaid if the
percentage is greater than the yield maintenance amount, and
o after the expiration of the applicable Yield Maintenance Period, a
specified percentage of the amount prepaid, which percentage may either
remain constant or decline over time.
Appendix II contains more specific information about the prepayment
premiums for each Mortgage Loan, including the method of calculation of the
prepayment premiums.
The Mortgage Loans typically:
o provide that a borrower has to pay a prepayment premium in connection with
any involuntary prepayment resulting from a casualty or condemnation only
if the loan is in default;
o require the payment of the applicable prepayment premium for any prepayment
after an event of default (but prior to the sale by the mortgagee of the
Mortgaged Property through foreclosure or otherwise); and
o permit the borrower to transfer the Mortgaged Property to a third party
without prepaying the Mortgage Loan if certain conditions are satisfied,
including, without limitation, an assumption by the transferee of all of
the borrower's obligations under the Mortgage Loan.
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.
The "Percentage of Mortgage Pool Balance by Prepayment Restriction"
table included in the attached Term Sheet sets forth an analysis of the
percentage of the declining balance of the mortgage pool that, for each of the
time periods indicated, will
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be within a Lock-out Period or in which Principal Prepayments must be
accompanied by the indicated prepayment premium.
DEFEASANCE
For 120 of the Mortgage Loans (81.4%) (the "DEFEASANCE LOANS"), even
though a voluntary prepayment may be generally prohibited, the borrower may,
after the expiration of a specified period during which defeasance is
prohibited, obtain a release of the related Mortgaged Property by pledging
certain substitute collateral to the holder of the Mortgage Loan. No defeasance
may occur before the second anniversary of the closing date. This substitute
collateral consists of direct, non-callable United States Treasury obligations
that provide for payments prior, but as close as possible, to all dates on which
a Monthly Payment or final balloon payment is due. Each of the payments on the
substitute collateral must be equal to or greater than the Monthly Payment or
final balloon payment due on such date. For Hyper-Amortization Loans, the
payments on the substitute collateral must be sufficient to pay-off the loan on
its Anticipated Repayment Date. Any excess amounts will be returned to the
borrower.
A borrower's ability to obtain a release is in each case subject to the
lender's consent or to the satisfaction of certain conditions specified in the
related loan documents, including provision of all opinions of counsel
(including opinions as to REMIC issues and full enforceability of all related
mortgage loan documents) and a requirement that a written confirmation be
obtained from the applicable Rating Agency that the acceptance of the pledge of
the substitute collateral in lieu of a full prepayment will not result in a
qualification, downgrade or withdrawal of the rating then assigned by each
Rating Agency to any class of the certificates. The costs and expenses
associated with obtaining a defeasance will not be an expense of the trust.
"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. The special servicer will determine, in a manner
consistent with the servicing standard described under "The Pooling and
Servicing Agreement--Servicing of the Mortgage Loans; Collection of Payments",
whether to exercise or waive its right to exercise any right the mortgagee may
have under any such clause to accelerate payment of a Mortgage Loan upon any
additional encumbrance of the related Mortgaged Property.
The Mortgages generally prohibit the borrower from transferring any
material interest in the Mortgaged Property or allowing a material change in the
ownership or control of the related borrower, without the mortgagee's prior
consent. However, a transfer or change generally will be permitted if certain
conditions specified in the related Mortgage Loan documents are satisfied. These
conditions may include one or more of the following:
o no event of default exists;
o the proposed transferee meets the mortgagee's customary underwriting
criteria;
o the Mortgaged Property continues to meet the mortgagee's customary
underwriting criteria; and
o an acceptable assumption agreement is executed.
The related Mortgages may also allow changes in the ownership or
control of the related borrower between partners, members or shareholders as of
the closing of the Mortgage Loan, family members, affiliated companies and
certain specified individuals, or for estate planning purposes.
The special servicer will determine, in a manner consistent with the
servicing standard described under "The Pooling and Servicing
Agreement--Servicing of the Mortgage Loans; Collection of Payments", whether to
exercise or waive its right to exercise any right the mortgagee may have to
accelerate payment of a Mortgage Loan upon any transfer of all or any of a
Mortgaged Property or any transfer or change in ownership or control of the
related borrower. The depositor makes no representation as to the enforceability
of any due-on-sale or due-on-encumbrance provision in any Mortgage Loan that is
the subject of a proceeding under federal bankruptcy law. See "Certain Legal
Aspects of Mortgage Loans--Due-on-Sale and Due-on-Encumbrance Provisions" in the
prospectus.
HAZARD, LIABILITY AND OTHER INSURANCE
Generally, each Mortgage Loan requires that the Mortgaged Property be
insured against loss or damage by fire or other risks and hazards covered by a
standard extended coverage insurance policy. The
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minimum amount of such insurance is usually the lesser of the full replacement
cost of the Mortgaged Property or the outstanding principal balance of the loan,
but in any event in an amount sufficient to ensure that the insurer would not
deem the borrower a co-insurer. Generally, each Mortgage Loan also requires that
the related borrower maintain the following insurance during the term of the
Mortgage Loan:
o comprehensive public liability insurance, typically with a minimum limit of
$1,000,000 per occurrence;
o 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
least of the outstanding principal balance of the loan, full replacement
cost of the Mortgaged Property and the maximum limit of coverage available
from governmental sources;
o if deemed advisable by the originator, rent loss and/or business
interruption insurance in an amount equal to all net operating income from
the operation of the Mortgaged Property for a period as required by the
Mortgage; and
o 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.
The Mortgage Loans generally do not require the borrower to maintain
earthquake insurance.
With respect to many of the Mortgage Loans, the borrower has satisfied
the applicable insurance requirements by obtaining blanket insurance policies.
The mortgagee generally has the right to review and approve the blanket
insurance policy, including the amount of insurance and the number of properties
covered by the policy.
CASUALTY AND CONDEMNATION
The Mortgage Loan documents typically provide that all material
insurance proceeds or condemnation awards will be paid to the mortgagee if:
o the Mortgaged Property is damaged by fire or another casualty; or
o any taking or exercise of the power of eminent domain occurs with respect
to a Mortgaged Property.
In general, the mortgagee then has the option to either apply the proceeds or
awards to the outstanding indebtedness of the Mortgage Loan, or allow the
borrower to use the proceeds to restore the Mortgaged Property. However, if
certain specified conditions are satisfied, the mortgagee may be required to pay
the proceeds or awards to the borrower for restoration of the Mortgaged
Property. In certain of the Mortgage Loans, the lease between the borrower and a
tenant of all or part of the Mortgaged Property may require the borrower or the
tenant to restore the Mortgaged Property if a casualty or condemnation occurs.
In this case, the Mortgage Loan documents may permit the application of all
applicable proceeds or awards to satisfy the requirement.
FINANCIAL REPORTING
The Mortgages generally contain a covenant that requires the borrower
to provide the mortgagee with certain financial reports at least once a year
about the borrower's operations at the Mortgaged Property. Such reports
typically include information about income and expenses for the property for the
period covered by such reports, and/or current tenancy information. However, in
the case of owner-occupied properties, the borrower typically provides financial
information for itself instead of the Mortgaged Property.
DELINQUENCIES
No Mortgage Loan was 30 or more days delinquent in respect of any
Monthly Payment as of the Cut-off Date, or during the 12 months immediately
preceding the Cut-off Date.
BORROWER ESCROWS AND RESERVE ACCOUNTS
In many of the Mortgage Loans, the 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 those matters
and in such amounts deemed necessary by the originator of the loan. These
matters may include one or more of the following:
o necessary repairs and replacements,
o tenant improvements and leasing commissions,
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o real estate taxes and assessments,
o water and sewer charges,
o insurance premiums,
o environmental remediation,
o improvements mandated under the Americans with Disabilities Act of 1990, or
o deferred maintenance and/or scheduled capital improvements.
Appendix II contains more specific information about the Reserve
Accounts for each Mortgage Loan.
CERTAIN CHARACTERISTICS OF THE MORTGAGE POOL
CONCENTRATION OF MORTGAGE LOANS AND BORROWERS
The largest single Mortgage Loan has a Cut-off Date Principal Balance
that represents 5.6% of the Initial Pool Balance. The 13 largest individual
Mortgage Loans represent in the aggregate 40.0% of the Initial Pool Balance. No
set of Mortgage Loans made to a single borrower or to a single group of
affiliated borrowers constitutes more than 5.6% of the Initial Pool Balance. See
Appendix II for further information regarding these Mortgage Loans.
ENVIRONMENTAL RISKS
Phase I environmental site assessments were obtained for 180 of the
Mortgaged Properties securing Mortgage Loans as follows:
o 108 (81.6%) during the 18-month period ending on the Cut-off Date;
o 6 (1.5%) during the period from 18 months to 24 months prior to the Cut-off
Date;
o 57 (12.6%) during the period from 24 months to 30 months prior to the
Cut-off Date; and
o 9 (2.8%) during the period prior to 30 months prior to the Cut-off Date.
No environmental site assessments were obtained for the Mortgaged
Properties securing 10 Mortgage Loans (1.4%). However, the related originator
obtained a secured creditor impaired property policy covering certain
environmental matters with respect to these Mortgaged Properties.
Except as described herein, where an environmental site assessment
disclosed a known or potential material and adverse environmental condition, the
originator required the borrower to:
o escrow funds deemed sufficient to ensure remediation of or to monitor the
environmental issue;
o obtain an environmental insurance policy that covers the environmental
issue; or
o establish an operations and maintenance plan that, if implemented, would
prevent any material and adverse consequences resulting from the
environmental issue.
In some cases, the environmental consultant did not recommend that any
action be taken with respect to a known or potential adverse environmental
condition at a Mortgaged Property or a nearby property because:
o a remediation, under the supervision of an environmental regulatory agency,
had been completed or was currently underway;
o an environmental regulatory agency had issued a "no further action" letter
regarding the condition; or
o a responsible party with respect to the condition had already been
identified.
See "Risk Factors--Environmental Issues Relating to Specific Properties
May Have an Adverse Effect on the Payment of Your Certificates" for more
information about the environmental condition of certain Mortgaged Properties.
Some of the Mortgaged Properties are in areas of known groundwater
contamination or in the vicinity of sites containing "leaking underground
storage tanks" or other potential sources of groundwater contamination. The
environmental site assessments mentioned above generally do not anticipate that
the borrower will have to undertake remedial investigations or actions at these
sites. Further, the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 and certain state environmental laws provide for a
third-party defense that generally would preclude liability for a party whose
property is contaminated by off-site sources. In addition, in its final "Policy
Toward Owners of Property Containing Contaminated Aquifers," dated May 24, 1995,
the United States Environmental Protection Agency stated that it would not take
enforcement actions
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against the owner of such property to require the performance of remediation
actions or the payment of remediation costs. This policy statement is subject to
certain conditions and applies only if the hazardous substances have come to be
located on or in a property solely as a result of subsurface migration in an
aquifer from a source or sources outside the property.
Even if the owners of these Mortgaged Properties and the trust fund are
not liable for such contamination, enforcement of the borrower's or the trust
fund's rights against third parties may result in additional transaction costs.
In addition, the presence of such contamination or potential contamination may
affect the borrower's ability to:
o refinance the Mortgage Loan using the Mortgaged Property as collateral, or
o sell the Mortgaged Property to a third party.
The presence of such contamination or potential contamination may also affect
the value of the Mortgaged Property that may be realized upon any foreclosure.
You 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 sellers, 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. There can be no assurance that any hold-back or other
escrow of funds to pay the cost of completing any clean-up, remediation or
compliance actions with respect to a Mortgaged Property will be sufficient to
complete such actions.
GEOGRAPHIC CONCENTRATION
Mortgage Loans secured by Mortgaged Properties located in New York and
California respectively represent approximately 25.1% and 16.4% of the Initial
Pool Balance. Additionally, Mortgage Loans secured by Mortgaged Properties
located in Maryland and Arizona each represent at least 5%, but less than 10%,
of the Initial Pool Balance. The occurrence of adverse economic conditions in
any such jurisdiction may affect repayments of such Mortgage Loans or the value
of the related Mortgaged Properties. Such Mortgaged Properties may be more
susceptible to certain special hazard losses than properties located in other
areas of the country. No more than 5% of the Initial Pool Balance is secured by
Mortgaged Properties located in any other jurisdiction. See "Risk
Factors--Increased Geographic Concentrations of Mortgaged Properties May Have an
Adverse Effect on the Payment of Your Certificates" and Appendix I.
ZONING COMPLIANCE
The originator for each Mortgage Loan 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 the improvements qualified as permitted
non-conforming uses. Where a Mortgaged Property is operated as a permitted
non-conforming use, an analysis was generally conducted as to whether existing
replacement cost hazard insurance or, if necessary, supplemental "law and
ordinance coverage" would, in the event of a material casualty, be sufficient to
satisfy the entire Mortgage Loan or, taking into account the cost of the repair,
be sufficient to pay down that Mortgage Loan to a level that the remaining
collateral would be adequate security for the remaining loan amount.
TENANT MATTERS
Certain additional information regarding Mortgaged Properties that are
owner occupied or leased in whole or in large part to a single tenant is listed
in Appendix I. Generally, these owners or major tenants do not have
investment-grade credit ratings. The major tenants generally occupy their
premises pursuant to leases which may require them to pay all applicable real
property taxes, maintain insurance over the improvements thereon and maintain
the physical condition of such improvements. In 32 of the Mortgage Loans
(19.4%), a single tenant or the borrower occupies 100% of the related Mortgaged
Property. In an additional 20 of the Mortgage Loans (12.1%), a single tenant or
the borrower 50% or more of the related Mortgaged Property.
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OTHER INFORMATION
Each of the tables in Appendix I lists certain characteristics of the
mortgage pool presented, where applicable, as of the Cut-off Date. The sum in
any column of any of the tables in Appendix I may not add to 100% and may not
equal the indicated total due to rounding. For a detailed presentation of
certain of the characteristics of the Mortgage Loans and the Mortgaged
Properties, on an individual basis, see Appendix II. For brief summaries of
certain of the terms of the Mortgage Loans, or groups of Cross-Collateralized
Loans, with Cut-off Date Principal Balances greater than $20,000,000, see
Appendix III. Certain information regarding Mortgage Loans secured by Mortgages
encumbering multifamily properties is listed in Appendix II.
For purposes of the tables in Appendix I and for the information
included in this prospectus supplement and in Appendix II and Appendix III, the
following definitions and assumptions apply:
DEBT SERVICE COVERAGE RATIO
In general, income property lenders use debt service coverage ratios
(DSCR) to measure the ratio of (a) cash currently generated by a property that
is available for debt service 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 does not possess a stable
operating expectancy (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
and/or that may be difficult to replace), 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.
For purposes of this prospectus supplement, including for the tables in
Appendix I and the information in Appendix II and Appendix III, the "DEBT
SERVICE COVERAGE RATIO" or "DSCR" for any Mortgage Loan (or group of
Cross-Collateralized Loans) is the ratio of "Underwritable Cash Flow" estimated
to be produced by the related Mortgaged Property or Properties to the annualized
amount of debt service payable under that Mortgage Loan (or that group of
Cross-Collateralized Loans).
"UNDERWRITABLE CASH FLOW" in each case is an estimate of stabilized
cash flow available for debt service. In general, it is the estimated stabilized
revenue derived from the use and operation of a Mortgaged Property (consisting
primarily of rental income) less the sum of:
o estimated stabilized operating expenses (such as utilities, administrative
expenses, repairs and maintenance, management fees and advertising),
o fixed expenses (such as insurance, real estate taxes and, if applicable,
ground lease payments) and
o recurring capital expenditures and reserves for capital expenditures,
including tenant improvement costs and leasing commissions.
Underwritable Cash Flow generally does not reflect interest expenses and
non-cash items such as depreciation and amortization.
In determining Underwritable Cash Flow for a Mortgaged Property, the
seller relied on rent rolls and other generally unaudited financial information
provided by the borrowers and calculated stabilized estimates of cash flow that
took into consideration historical financial statements, material changes in the
operating position of the Mortgaged Property of which the seller was aware
(e.g., new signed leases or end of "free rent" periods and market data), and
estimated recurring capital expenditures and reserves for leasing commission and
tenant improvements. The seller made certain adjustments to particular items in
the operating statements and operating information obtained from the borrowers,
resulting in either an increase or decrease in the estimate of Underwritable
Cash Flow derived therefrom. These adjustments were based upon the seller's
evaluation of such operating statements and operating information and the
assumptions applied by the borrowers in preparing such statements and
information. Such adjustments may not have been consistent with generally
accepted accounting principles. In certain cases, partial year operating income
data was annualized, with certain adjustments for items deemed not appropriate
to be annualized, or borrower supplied "trailing-12 months" income and/or
expense information was utilized. In certain instances, historical expenses were
inflated. For purposes of calculating Underwritable Cash Flow for Mortgage Loans
where leases have been executed by one or more affiliates of the borrower, the
rents under some of such leases have been adjusted to reflect market rents for
similar properties. In some cases, lease rentals were adjusted to take into
account rent reviews scheduled to occur within the next 12 months. Several
Mortgage Loans are secured by Mortgaged Properties with newly constructed
improvements and, accordingly, there were no
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historical operating results or financial statements available with respect to
such Mortgaged Properties. In such cases, items of revenue and expense used in
calculating Underwritable Cash Flow were generally derived from rent rolls,
estimates set forth in the related appraisal or from borrower-supplied
information.
No assurance can be given with respect to the accuracy of the
information provided by any borrowers, or the adequacy of the procedures used by
the seller in determining the presented operating information.
THE DEBT SERVICE COVERAGE RATIOS ARE PRESENTED FOR ILLUSTRATIVE
PURPOSES ONLY AND, AS DISCUSSED ABOVE, ARE LIMITED IN THEIR USEFULNESS IN
ASSESSING THE CURRENT, OR PREDICTING THE FUTURE, ABILITY OF A MORTGAGED PROPERTY
TO GENERATE SUFFICIENT CASH FLOW TO REPAY THE MORTGAGE LOAN. ACCORDINGLY, NO
ASSURANCE CAN BE GIVEN, AND NO REPRESENTATION IS MADE THAT THE DEBT SERVICE
COVERAGE RATIOS ACCURATELY REFLECT THAT ABILITY.
CUT-OFF DATE LOAN-TO-VALUE
References in the tables to "CUT-OFF DATE LOAN-TO-VALUE" or "CUT-OFF
DATE LTV" are references to the ratio, expressed as a percentage, of the Cut-off
Date Principal Balance of a Mortgage Loan (or the aggregate principal balance of
a group of Cross-Collateralized Loans) to the value of the related Mortgaged
Property or Properties as determined by the most recent appraisal or market
valuation of such Mortgaged Property, as described below.
References to "BALLOON LTV" or "BALLOON LTV RATIO" are references to
the ratio, expressed as a percentage of the principal balance of a Mortgage Loan
(or the aggregate principal balance of a group of Cross-Collaterialized Loans)
anticipated to be outstanding at its maturity date, or for a Hyper-Amortization
Loan, at its Anticipated Repayment Date (calculated based on the Maturity
Assumptions and a 0% CPR) to the value of the related Mortgaged Property or
Properties as determined by the most recent appraisal or market valuation of
such Mortgaged Property or Properties available to the depositor.
No representation is made that any such value would approximate either
the value that would be determined in a current appraisal of the related
Mortgaged Property or the amount that would be realized upon a sale.
Each Mortgaged Property was appraised at the request of the originator
of the 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 Mortgaged Property. None of the depositor, the
sellers, 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 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 Mortgaged Property or the amount that
would be realized upon a sale. Accordingly, you should not place undue reliance
on the loan-to-value ratios set forth in this prospectus supplement.
YEAR BUILT/RENOVATED
References to "years built/renovated" are references to the later of
the year in which a Mortgaged Property was originally constructed or the most
recent year in which the Mortgaged Property was substantially renovated.
WEIGHTED AVERAGES
References to "weighted averages" are references to averages weighted
on the basis of the Cut-off Date Principal Balances of the Mortgage Loans.
THE SELLERS
MIDLAND LOAN SERVICES, INC.
Midland Loan Services, L.P., was organized under the laws of the State
of Missouri in 1992 as a limited partnership. On April 3, 1998, Midland Loan
Services, Inc., a newly formed, wholly owned subsidiary of PNC Bank, National
Association, acquired substantially all of the assets of Midland Loan Services,
L.P. Since 1994, Midland has been originating commercial and multifamily
mortgage loans for the purpose of securitization. All of the loans to be sold by
Midland were originated either by Midland or PNC Bank, N.A. Midland is an
affiliate of PNC Capital Markets, Inc. See "Master Servicer".
14 of the Mortgage Loans (8.3%) will be sold by Midland to the
depositor on the closing date.
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An additional 105 Mortgage Loans (33.1%) were originated by Midland or PNC Bank,
N.A. and sold to various Delaware owner trusts established by Midland. The
holders of the certificates for the owner trusts will sell their certificates to
Morgan Stanley Dean Witter Mortgage Capital Inc. on the closing date. On the
closing date, Morgan Stanley Dean Witter Mortgage Capital Inc. intends to
terminate the owner trusts and transfer to the depositor the Mortgage Loans that
were in the owner trusts. Since Midland will be the only person responsible to
the trust for breaches of the representations and warranties that relate to
these Mortgage Loans and for defects in documentation related to these Mortgage
Loans, it is referred to in this prospectus supplement as the seller of these
Mortgage Loans.
CIBC INC.
CIBC Inc. is a majority-owned subsidiary of Canadian Imperial Holdings
Inc. and is incorporated under the laws of Delaware. Canadian Imperial Holdings
Inc. is a wholly-owned subsidiary of CIBC Delaware Holdings Inc., also a
Delaware corporation, which is a subsidiary of Canadian Imperial Bank of
Commerce. Canadian Imperial Bank of Commerce is a bank chartered under the Bank
Act of Canada having its head office in the City of Toronto, in the Province of
Ontario, Canada. It is licensed to do business in the United States through its
Agency located at 425 Lexington Avenue, New York, New York 10017. CIBC Inc. is a
commercial finance company that originates commercial and multifamily real
estate loans, purchases participations in loans from third-party lenders and
otherwise extends credit to Fortune 1000 companies. CIBC Inc. has offices in
Atlanta, Chicago, Houston, Dallas, San Francisco, Los Angeles and New York. The
principal office of CIBC Inc. is located at 425 Lexington Avenue, New York, New
York 10017.
CIBC Inc. is an affiliate of CIBC World Markets Corp., formerly known
as CIBC Oppenheimer Corp. Although CIBC World Markets is an indirect, wholly
owned subsidiary of Canadian Imperial Bank of Commerce, it is solely responsible
for its contractual obligations and commitments. Any securities products offered
or recommended or purchased or sold in any client accounts by CIBC World
Markets:
o will not be insured by the Federal Deposit Insurance Corporation;
o will not be deposits or other obligations of Canadian Imperial Bank of
Commerce;
o will not be endorsed or guaranteed by Canadian Imperial Bank of Commerce;
and
o will be subject to investment risks, including possible loss of principal
invested.
MORGAN STANLEY DEAN WITTER MORTGAGE CAPITAL INC.
Morgan Stanley Dean Witter Mortgage Capital Inc. is a subsidiary of
Morgan Stanley & Co. Incorporated and was formed as a New York corporation to
originate and acquire loans secured by mortgages on commercial and multifamily
real estate. Each of Morgan Stanley Dean Witter Mortgage Capital Inc.'s Mortgage
Loans was originated by one of the participants in Morgan Stanley Dean Witter
Mortgage Capital Inc.'s commercial and multifamily mortgage loan conduit
program, was originated directly by Morgan Stanley Dean Witter Mortgage Capital
Inc. or was purchased. All loans were underwritten by Morgan Stanley Dean Witter
Mortgage Capital Inc.'s underwriters. The principal offices of Morgan Stanley
Dean Witter Mortgage Capital Inc. are located at 1585 Broadway, New York, New
York 10036. Its telephone number is (212) 761-4700.
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. Prior to the issuance of the certificates, one or more Mortgage Loans may
be removed from the mortgage pool if:
o the depositor deems such removal necessary or appropriate, or
o the loan 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 in this prospectus supplement. Accordingly, the range of interest
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 in this prospectus supplement.
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A Current Report on Form 8-K will be filed, together with the pooling
and servicing agreement, with the Securities and Exchange Commission within 15
days after the closing date. If Mortgage Loans are removed from or added to the
mortgage pool as set forth in the preceding paragraph, the removal or addition
will be noted in the Form 8-K.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
The following is a summary of certain of the representations and
warranties to be made by each seller with respect to each of its Mortgage Loans.
Other representations and warranties may also be required by the Rating Agencies
or the purchasers of the privately offered certificates. The representations
will be made as of the closing date or as of another date specifically stated in
the representation or warranty. There may be exceptions to some of the
representations and warranties.
1. The information in the schedule of the Mortgage Loans attached to the
related mortgage loan purchase agreement is true and correct in all
material respects as of the Cut-off Date.
2. The seller owns the Mortgage Loans and is conveying them free and clear of
pledges, liens or security interests.
3. No scheduled payment of principal and interest under any Mortgage Loan is
30 days or more past due as of the Cut-off Date nor has been during the
preceding 12-month period.
4. The related Mortgage constitutes a valid and enforceable first lien upon
the related Mortgaged Property, subject to:
o creditors' rights limitations and general principles of equity,
o liens for current real estate taxes and assessments not yet delinquent
or accruing interest or penalties,
o exceptions and exclusions specifically referred to in the lender's
title insurance policy,
o purchase money security interests for fixtures, equipment and other
personal property,
o other matters to which like properties are commonly subject,
o the rights of tenants to remain at the related Mortgaged Property
following foreclosure, and
o the lien for another Mortgage Loan which is cross-collateralized with
such Mortgage Loan.
5. The related Mortgage has not been satisfied, cancelled, rescinded or
subordinated in whole or in material part.
6. The seller is not aware of any proceeding pending for the total or partial
condemnation of the related Mortgaged Property.
7. The related Mortgaged Property is or will be covered by an American Land
Title Association (or an equivalent or state-approved form) lender's title
insurance policy that insures that the related Mortgage is a valid, first
priority lien on such Mortgaged Property, subject only to the exceptions
stated in the policy.
8. The proceeds of the Mortgage Loan have been fully disbursed and there is no
obligation for future advances with respect to such Mortgage Loan.
9. Each note, Mortgage and other agreement of the borrower with respect to the
Mortgage Loan is its legal, valid and binding obligation, enforceable in
accordance with its terms, subject to:
o the non-recourse provisions of the loan,
o applicable state anti-deficiency or market value limit deficiency
legislation,
o bankruptcy, insolvency, reorganization and state laws related to
creditors' rights, and
o general principles of equity.
The pooling and servicing agreement will require that the custodian,
the master servicer, the special servicer or the trustee notify the applicable
seller upon its becoming aware:
o of any breach of certain representations or warranties made by that
seller in its mortgage loan purchase agreement, or
o that any document required to be included in the mortgage file does
not conform to the requirements of the pooling and servicing
agreement. We refer to any such non-conformance as a "defect". See
"The Pooling and Servicing Agreement--Assignment of the Mortgage
Loans".
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The applicable mortgage loan purchase agreement provides that, if a
breach or defect that materially and adversely affects the value of the Mortgage
Loan or the interests of the trustee or the certificateholders is not cured
within the applicable cure period, the applicable seller will either:
1. repurchase the affected Mortgage Loan for a purchase price (the "REPURCHASE
PRICE") equal to the sum of:
o outstanding principal balance,
o unpaid accrued interest at the applicable rate (in absence of a
default and excluding any Deferred Interest) to, but not including,
the date of repurchase,
o the amount of any unreimbursed Servicing Advances relating to the
Mortgage Loan,
o accrued interest on Advances (including P&I Advances) at the Advance
Rate,
o the amount of any unpaid servicing compensation (other than master
servicing fees and the standby special servicing fee) and trust fund
expenses allocable to the Mortgage Loan, and
o the amount of any expenses reasonably incurred by the master servicer,
the special servicer or the trustee in respect of the repurchase
obligation, including any expenses arising out of the enforcement of
the repurchase obligation, or
2. substitute a Qualified Substitute Mortgage Loan for the affected Mortgage
Loan and pay the trustee a shortfall amount equal to the difference between
the Repurchase Price of the affected Mortgage Loan calculated as of the
date of substitution and the Stated Principal Balance of the Qualified
Substitute Mortgage Loan as of the date of substitution.
Each of the mortgage loan purchase agreements provides that certain
defects are conclusively presumed to materially and adversely affect the value
of the Mortgage Loan or the interests of the trustee and the certficateholders.
If the Mortgage Loan continues to be a "qualified mortgage" within the
meaning of the REMIC provisions of the Internal Revenue Code of 1986, the
applicable cure period will be 90 days commencing when the seller receives
notice of or discovers that the Mortgage Loan is a defective Mortgage Loan. If
the breach or defect cannot be cured within the 90-day period, then so long as
the seller has commenced and is diligently proceeding with the cure of the
breach or defect, the 90-day period will be extended for an additional 90 days.
However, the seller will be entitled to an extension only if it delivers to the
master servicer and the trustee an officer's certificate:
o describing the measures being taken to cure the breach or defect,
o stating that it is possible to cure the breach or defect within the 90 day
period, and
o stating that the Mortgage Loan continues to be a "qualified mortgage"
within the meaning of the REMIC provisions of the Internal Revenue Code of
1986.
Furthermore, with respect to document defects for a defaulted Mortgage Loan,
such additional cure period may not be permitted or may be shortened to end no
later than 90 days after the applicable seller receives notice of or discovers
that the Mortgage Loan is in default.
If the breach or defect causes the Mortgage Loan to no longer be a
"qualified mortgage" within the meaning of the REMIC provisions of the Internal
Revenue Code of 1986, the applicable cure period will be 60 days commencing when
the applicable seller, the depositor, the custodian, the master servicer, the
special servicer or the trustee discovers such breach or defect, and no
extension of the 60-day period will be permitted.
If the seller is required to repurchase the Mortgage Loan or substitute
a Qualified Substitute Mortgage Loan for the Mortgage Loan because of a breach
or defect and such Mortgage Loan is one of a cross-collateralized group of
Mortgage Loans, the seller will also be required to repurchase or substitute all
of the other Mortgage Loans in the cross-collateralized group at the same time.
A "QUALIFIED SUBSTITUTE MORTGAGE LOAN" is a mortgage loan which must,
on the date of substitution:
1. have an outstanding principal balance, after application of all scheduled
payments of principal and interest due during or prior to the month of
substitution, not in excess of the Stated Principal Balance of the deleted
Mortgage Loan as of the due date in the calendar month during which the
substitution occurs;
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2. have a mortgage rate not less than the Mortgage Rate of the deleted
Mortgage Loan;
3. have the same due date as the deleted Mortgage Loan;
4. accrue interest on the same basis as the deleted Mortgage Loan (for
example, on the basis of a 360-day year consisting of twelve 30-day
months);
5. have a remaining term to stated maturity not greater than, and not more
than two years less than, the remaining term to stated maturity of the
deleted Mortgage Loan;
6. have an original loan to-value-ratio not higher than that of the deleted
Mortgage Loan and a current loan-to-value ratio not higher than the then
current loan-to-value ratio of the deleted Mortgage Loan;
7. comply as of the date of substitution with all of the representations and
warranties listed in the applicable mortgage loan purchase agreement;
8. have an environmental report for the related Mortgaged Property, which will
be part of the related mortgage file;
9. have an original debt service coverage ratio not less than the original
debt service coverage ratio of the deleted Mortgage Loan and a current debt
service coverage ratio not less than the then current debt service coverage
ratio of the deleted Mortgage Loan;
10. be determined by an opinion of counsel to be a "qualified replacement
mortgage" within the meaning of Section 860G(a)(4) of the Internal Revenue
Code of 1986;
11. not have a maturity date after the date three years prior to the Rated
Final Distribution Date;
12. not be substituted for a deleted Mortgage Loan unless the trustee has
received prior confirmation in writing by each Rating Agency that the
substitution will not result in the withdrawal, downgrade, or qualification
of the rating assigned by the Rating Agency to any class of the
certificates then rated by the Rating Agency. The seller will pay the cost,
if any, of obtaining the confirmation;
13. not be substituted for a deleted Mortgage Loan if it would result in the
termination of the REMIC status of REMIC I, REMIC II or REMIC III or the
imposition of tax on REMIC I, REMIC II or REMIC III other than a tax on
income expressly permitted or contemplated to be received by the terms of
the pooling and servicing agreement; and
14. not be substituted for a deleted Mortgage Loan unless the operating adviser
has approved the substitution based upon, among other things, an
engineering report and the environmental report obtained for the Qualified
Substitute Mortgage Loan, which approval may not be unreasonably withheld.
If two or more mortgage loans are substituted for one or more deleted
Mortgage Loans, then:
o the amounts described in clause (1) above will be determined on the basis
of total principal balances,
o the rates described in clause (2) above will be determined on a weighted
average basis, and
o the remaining term to stated maturity referred to in clause (5) above will
be determined on a weighted average basis.
When a Qualified Substitute Mortgage Loan is substituted for a deleted
Mortgage Loan, the applicable seller will certify that the Qualified Substitute
Mortgage Loan meets all of the requirements of the above definition and shall
send the certification to the trustee.
The obligations of the sellers to substitute, repurchase or cure
constitute the sole remedies available to the trustee for the benefit of the
holders of certificates for:
o a breach of a representation or warranty with regard to a Mortgage Loan by
a seller, or
o missing or defective Mortgage Loan documentation.
If a seller defaults on its obligation to substitute, repurchase or
cure, no other person will have an obligation to fulfill the seller's
obligations. No assurance can be given that any seller will fulfill its
obligations. If such obligations are not met, as to a Mortgage Loan that is not
a "qualified mortgage" within the meaning of the REMIC provisions of the
Internal Revenue Code of 1986, REMIC I, REMIC II and REMIC III may be
disqualified.
--------------------------
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MASTER SERVICER AND SPECIAL SERVICER
BACKGROUND
Midland Loan Services, L.P., was organized under the laws of the State
of Missouri in 1992 as a limited partnership. On April 3, 1998, Midland Loan
Services, Inc., a newly-formed, wholly-owned subsidiary of PNC Bank, National
Association, acquired substantially all of the assets of Midland Loan Services,
L.P. 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 for the trust fund. In
addition, Midland and its affiliates are the seller with respect to 119 of the
Mortgage Loans (41.4%). See "Description of the Mortgage Pool--The Sellers".
Standard & Poor's Ratings Services and Fitch, Inc. have approved
Midland as a master and special servicer for investment grade-rated commercial
and multifamily mortgage-backed securities. Midland is also a HUD/FHA-approved
mortgagee and a FannieMae-approved multifamily loan servicer.
MIDLAND'S SERVICING PORTFOLIO
As of August 31, 2000, Midland was servicing approximately 13,900
commercial and multifamily loans with a principal balance of approximately $48.8
billion. The collateral for these loans is located in all 50 states, the
District of Columbia, Puerto Rico and Canada. Approximately 9,950 of the loans,
with a total principal balance of approximately $39.3 billion, pertain to
commercial and multifamily mortgage-backed securities. The portfolio includes
multifamily, office, retail, hospitality and other types of income producing
properties. Midland also services newly-originated loans and loans acquired in
the secondary market for:
o financial institutions,
o private investors, and
o issuers of commercial and multifamily mortgage-backed securities.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The certificates are issued under the pooling and servicing agreement
and will consist of 20 classes:
o Class A-1 Certificates
o Class A-2 Certificates
o Class X Certificates
o Class B Certificates
o Class C Certificates
o Class D Certificates
o Class E Certificates
o Class F Certificates
o Class G Certificates
o Class H Certificates
o Class J Certificates
o Class K Certificates
o Class L Certificates
o Class M Certificates
o Class N Certificates
o Class O Certificates
o Class V Certificates
o Class R-I Certificates
o Class R-II Certificates
o Class R-III Certificates
WE ARE ONLY OFFERING THE CLASS A-1, A-2, B, C AND D CERTIFICATES TO
YOU. See "The Pooling and Servicing Agreement" in this prospectus supplement and
"Description of the Certificates" and "Description of the Governing Document" in
the prospectus for additional important information regarding the terms of the
pooling and servicing agreement and the certificates. The pooling and servicing
agreement will be filed with the Securities and Exchange Commission on Form 8-K
within 15 days after the closing date.
The certificates represent the entire beneficial ownership interest in
a trust fund consisting primarily of:
o the Mortgage Loans and principal and interest due after the Cut-off Date
and all payments under and proceeds of the Mortgage Loans received after
the Cut-off Date (exclusive of Principal Prepayments received prior to the
Cut-off Date and scheduled payments of principal and interest due on or
before the Cut-off Date),
o any Mortgaged Property acquired on behalf of the trust fund through
foreclosure, deed-in-lieu of foreclosure or otherwise (upon acquisition, an
"REO PROPERTY"),
o funds or assets from time to time deposited in the Collection Account, the
Distribution Account, the Interest Reserve Account and any account
established in connection with REO Properties (an "REO ACCOUNT"),
o the rights of the mortgagee under all insurance policies with respect to
the Mortgage Loans, and
o the depositor's rights and remedies under the applicable mortgage loan
purchase agreement, and all of the mortgagee's right, title and interest in
the Reserve Accounts.
The class V certificates will evidence undivided interests in a grantor
trust consisting of collections of Deferred Interest on the Mortgage Loans. The
principal balance certificates and the interest only certificates will not
receive any Deferred Interest collected on the Mortgage Loans.
As described under "Material Federal Income Tax Consequences", the
class R-I, R-II and R-III certificates will constitute "residual interests" in a
REMIC. We do not anticipate that the residual certificates will receive any
distributions of cash from the trust.
PRINCIPAL BALANCES
Upon initial issuance, each class of principal balance certificates
will have the class principal balance set forth in the table on page S-5, which
may vary by up to 5%.
The principal balance of any class of principal balance certificates
outstanding at any time represents the maximum amount that holders are entitled
to receive as distributions allocable to principal. The principal balance of
each class will be reduced by:
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o amounts distributed to the class as principal, and
o any Realized Losses and Expense Losses allocated to the class.
PASS-THROUGH RATES
The rate per annum at which any class of certificates accrues interest
from time to time is its "pass-through rate".
The pass-through rate for each class of the offered certificates is
fixed at the per annum rate set forth on the table on page S-5 of this
prospectus supplement. However, these pass-through rates may not exceed the
weighted average of the Net Mortgage Rates for the related distribution date,
weighted on the basis of the Mortgage Loans respective Stated Principal Balances
immediately before the distribution date.
The "STATED PRINCIPAL BALANCE" of each Mortgage Loan will generally
equal its unpaid principal balance as of the Cut-off Date (or in the case of a
Qualified Substitute Mortgage Loan as of the date of substitution), after
applying payments due on or before that date (whether or not received), reduced
(to not less than zero) on each subsequent distribution date by:
o any payments or other collections (or advances for such amounts) of
principal of such Mortgage Loan that have been distributed on the
certificates on such date or would have been distributed on such date if
they had not been applied to cover Additional Trust Fund Expenses, and
o the principal portion of any Realized Loss allocable to such Mortgage Loan
during the related Collection Period.
However, except as stated in the discussion under
"--Distributions--Treatment of REO Properties", if any Mortgage Loan is paid in
full, liquidated or otherwise removed from the trust fund, the Stated Principal
Balance of the Mortgage Loan will be zero beginning on the first distribution
date following the Collection Period during which the event occurred.
The "NET MORTGAGE RATE" for each Mortgage Loan is the interest rate for
the Mortgage Loan minus the rates at which the master servicer fee, the standby
special servicer fee and the trustee fee are computed. This calculation is made
without giving effect to any Revised Interest Rate or any default rate. The Net
Mortgage Rate for any Mortgage Loan will be determined without regard to any
post-closing date modification, waiver or amendment of the Mortgage Loan's terms
for purposes of calculating pass-through rates.
The certificates accrue interest on the basis of a 360-day year
consisting of twelve 30-day months. Therefore, when calculating the pass-through
rate for each class of certificates for a distribution date, the Net Mortgage
Rate of a Mortgage Loan that accrues interest on an actual/360 basis (the
"INTEREST RESERVE LOANS") will be adjusted to an annual rate generally equal to
a fraction, expressed as a percentage, the numerator of which is, subject to
adjustment as described below, 12 times the amount of interest that accrued or
would have accrued with respect to that Mortgage Loan on an actual/360 basis
during the related interest accrual period, based on its Stated Principal
Balance immediately preceding that distribution date and its mortgage interest
rate in effect as of October 1, 2000 less the rates at which the related master
servicer fee, the standby special servicer fee and the trustee fee are computed,
and the denominator of which is the Stated Principal Balance of the Mortgage
Loan immediately prior to that distribution date.
Notwithstanding the foregoing, if the subject distribution date occurs
during January (except during a leap year) or February, then, in the case of any
particular Interest Reserve Loan, the numerator of the fraction described in the
preceding paragraph will be decreased by any Interest Reserve Amount with
respect to that Mortgage Loan that is transferred from the Collection Account to
the Interest Reserve Account during that month. Furthermore, if the subject
distribution date occurs during March, then, in the case of any particular
Interest Reserve Loan, the numerator of the fraction described in the preceding
paragraph will be increased by any Interest Reserve Amounts with respect to that
Mortgage Loan that are transferred from the Interest Reserve Account to the
Distribution Account during that month.
See "The Pooling and Servicing Agreement--Servicing Compensation and
Payment of Expenses".
DISTRIBUTIONS
METHOD, TIMING AND AMOUNT
Distributions on the certificates will be made on the 15th day of each
month or, if the 15th is not a
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business day, then on the next business day, beginning in November 2000.
The "RECORD DATE" for each distribution date is the last business day
of the month preceding the month in which the distribution date occurs. Except
for the final distribution, all distributions will be made by the trustee to the
persons in whose names the certificates are registered at the close of business
on the Record Date.
The distributions will be made:
o by wire transfer of immediately available funds if the certificateholder
provides the trustee with wiring instructions before the Record Date, or
o otherwise by check mailed to the certificateholder.
The final distribution on a certificate will be made only upon
presentment or surrender of the certificate as specified in the notice of final
distribution.
The final distribution on any certificate will be determined without
regard to possible future reimbursement of any Realized Loss or Expense Loss
previously allocated to the certificate. Any distribution after the final
distribution to reimburse a previously-allocated Realized Loss or Expense Loss
will be made by check mailed to the certificateholder that surrendered the
certificate. Such a distribution is possible, but unlikely.
Distributions on a class of offered certificates are allocated among
the outstanding certificates of the class based on their principal balances.
DETERMINING AVAILABLE FUNDS
The total distribution on the certificates will equal the Available
Funds. The "AVAILABLE FUNDS" for a distribution date in general will equal:
o amounts on deposit in the Collection Account at the close of business on
the Determination Date, excluding:
1. Monthly Payments collected but due on a due date after the related
Collection Period,
2. prepayment premiums and Deferred Interest (which are distributed
separately),
3. amounts payable or reimbursable to any person other than the
certificateholders (including amounts payable to the master servicer,
the special servicer, the trustee or the fiscal agent as compensation
or to reimburse outstanding Advances, and amounts payable as Additional
Trust Fund Expenses),
4. amounts deposited in the Collection Account in error,
5. Excess Liquidation Proceeds, and
6. if the distribution date occurs during January of any year that is not
a leap year or February of any year, the Interest Reserve Amounts for
the Interest Reserve Loans to be deposited into the Interest Reserve
Account; plus
o any P&I Advances and Compensating Interest Payments made for the
distribution date and not already included; plus
o if the distribution date occurs during March of any year, the Interest
Reserve Amounts in the Interest Reserve Account.
"PRINCIPAL PREPAYMENTS" are payments of principal on a Mortgage Loan
that:
o are received before the scheduled due date, and
o are not accompanied by interest representing the full amount of scheduled
interest due in any month after the month of payment.
The "COLLECTION PERIOD" for a distribution date:
o begins on the day after the Determination Date in the preceding month (or,
in the case of the November 2000 distribution date, on the day after the
Cut-off Date), and
o ends on the Determination Date in the month in which the distribution date
occurs.
The "DETERMINATION DATE" for a distribution date is the fifth business
day before the distribution date.
APPLYING AVAILABLE FUNDS
On each distribution date, the trustee will first apply Available
Funds to make distributions to the holders of the senior certificates in the
following order:
1. to pay interest to the holders of the classes of senior certificates, up to
an amount equal to, and
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<PAGE>
pro rata as among those classes in accordance with, the Distributable
Certificate Interest for that class for that distribution date;
2. to pay principal from the Principal Distribution Amount for that
distribution date:
o first to the holders of the class A-1 certificates; and
o second to the holders of the class A-2 certificates;
in each case, up to an amount equal to the lesser of:
(a) the then-outstanding principal balance of the class; and
(b) the remaining portion of the Principal Distribution Amount.
However, principal payments will be made to the class A-1 and class A-2
certificates up to an amount equal to, and pro rata based on, their
outstanding class principal balances:
o if the principal balance of the subordinate certificates has been
reduced to zero; or
o on the final distribution date, if the trust fund is terminated as
discussed under "--Optional Termination" below; and
3. to reimburse the holders of the class A-1 and class A-2 certificates, up to
an amount equal to, and pro rata as among those classes in accordance with
the amount of Realized Losses and Expense Losses, if any, previously
allocated to the class A-1 and class A-2 certificates and for which no
reimbursement has previously been paid.
On each distribution date, the holders of each class of subordinate
certificates will be entitled to the following distributions, to the extent of
the Available Funds remaining after all required distributions have been made on
the senior certificates and each other class of subordinate certificates, if
any, with an earlier alphabetical class designation:
1. distributions of interest, up to an amount equal to the Distributable
Certificate Interest in respect of such class of certificates for that
distribution date;
2. if the principal balance of the class A-1 and class A-2 certificates and
each other class of subordinate certificates, if any, with an earlier
alphabetical class designation has been reduced to zero, distributions of
principal, up to an amount equal to the lesser of:
(a) the then-outstanding principal balance of that class, and
(b) the remaining Principal Distribution Amount (or, on the final
distribution date in connection with the termination of the trust fund,
up to an amount equal to the then-outstanding principal balance of the
class); and
3. distributions for the purpose of reimbursement, up to an amount equal to
all Realized Losses and Expense Losses, if any, previously allocated to
such class and for which no reimbursement has previously been paid.
The trustee will pay any remaining Available Funds to the holders of
the residual certificates.
Reimbursement of previously allocated Realized Losses and Expense
Losses will not constitute distributions of principal for any purpose and will
not reduce the principal balances of the reimbursed certificates.
DISTRIBUTION OF EXCESS LIQUIDATION PROCEEDS
If the trust receives any Excess Liquidation Proceeds, those proceeds
will be deposited into the Excess Liquidation Proceeds Account. On each
distribution date, amounts on deposit in the Excess Liquidation Proceeds Account
will be used to reimburse the holders of the principal balance certificates (in
order of alphabetical class designation) for, and to the extent of, unreimbursed
Realized Losses or Expense Losses previously allocated to them. Distributions
will be made to the holders of the class A-1 and class A-2 certificates pro rata
as between such classes in accordance with the respective then-outstanding
aggregate certificate balances of such certificates. The depositor does not
expect that certificateholders will receive any distributions of Excess
Liquidation Proceeds. See "The Pooling and Servicing Agreement--Accounts--Excess
Liquidation Proceeds Account".
"EXCESS LIQUIDATION PROCEEDS" means the excess of:
o all liquidation proceeds from the sale or liquidation of a Mortgage Loan or
related REO
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Property, net of any related liquidation expenses, interest on any related
Advances and any related Servicing Advances, over
o the amount needed to pay off the Mortgage Loan in full.
Reimbursement of previously allocated Realized Losses or Expense Losses
will not constitute distributions of principal for any purpose and will not
reduce the principal balances of the reimbursed certificates.
DISTRIBUTABLE CERTIFICATE INTEREST
The "DISTRIBUTABLE CERTIFICATE INTEREST" for each class of certificates
will equal:
o the interest accrued for the prior calendar month, at the applicable
pass-through rate on the principal balance or notional amount of the class
at the close of the preceding distribution date (or in the case of the
first distribution date, the closing date),
o reduced (to not less than zero) by the class's allocable share of any Net
Aggregate Prepayment/Balloon Payment Interest Shortfall for the
distribution date, and
o increased by the class's Class Interest Shortfall, if any, for the
distribution date.
See "--Prepayment Interest Excesses and Shortfalls" below.
The "CLASS INTEREST SHORTFALL" for a class of certificates for a
distribution date equals:
o zero on the initial distribution date; and
o for subsequent distribution dates, the excess, if any, of:
1. all Distributable Certificate Interest for the class on the preceding
distribution date,
over
2. all distributions of interest made for the class on the preceding
distribution date.
PRINCIPAL DISTRIBUTION AMOUNT
The "PRINCIPAL DISTRIBUTION AMOUNT " for any distribution date will, in
general, equal the following:
o the principal portions of all Monthly Payments (other than balloon
payments) and Assumed Monthly Payments due or deemed due, as the case may
be, on the Mortgage Loans on the due dates occurring during the related
Collection Period; plus
o all payments (including voluntary principal prepayments and balloon
payments) and other collections received on the Mortgage Loans during the
related Collection Period that were identified and applied by the master
servicer as recoveries of principal, in each case net of any portion of
such amounts that represents a payment or other recovery of the principal
portion of any Monthly Payment (other than a balloon payment) due, or the
principal portion of any Assumed Monthly Payment deemed due, on a Mortgage
Loan on a due date during or prior to the related Collection Period and not
previously paid or recovered.
If on any distribution date the aggregate amount of distributions of
principal made on the principal balance certificates is less than the Principal
Distribution Amount, then the amount of the shortfall will be included in the
Principal Distribution Amount for the next distribution date.
The "MONTHLY PAYMENT" for any Mortgage Loan (other than any REO
Mortgage Loan) will, in general, be the scheduled payment of principal and/or
interest (excluding balloon payments, default interest and Deferred Interest)
due from time to time. The Monthly Payment will be adjusted for any waiver,
modification or amendment of the terms of the Mortgage Loan whether agreed to by
the master servicer or special servicer, or resulting from a bankruptcy or
similar proceeding.
The "ASSUMED MONTHLY PAYMENT"
o for a balloon loan that is delinquent as to all or any portion of its
balloon payment beyond the end of the Collection Period in which its
original maturity date occurs, is an amount that is deemed due on its
original maturity date and on each successive due date that it remains or
is deemed to remain outstanding. This amount is equal to the Monthly
Payment that would have been due if the balloon payment had not become due,
and the loan had continued to amortize under the amortization schedule, if
any, in effect immediately prior to maturity and had continued to accrue
interest in accordance with its terms in effect immediately prior to
maturity.
o for a Mortgage Loan as to which the related Mortgaged Property has become
an REO
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Property, is an amount that is deemed due on each due date while the REO
Property remains part of the trust fund. This amount is equal to the
Monthly Payment (or, in the case of a balloon loan described in the
preceding bullet point, the Assumed Monthly Payment) due on the last due
date before acquisition of the REO Property.
DISTRIBUTIONS OF PREPAYMENT PREMIUMS
Any prepayment premium collected during a Collection Period will be
distributed on the next distribution date. Prepayment premiums distributed to
the holders of a class of certificates may be insufficient to compensate them
fully for any loss in yield attributable to the related Principal Prepayments.
Any prepayment premium will be distributed as follows. The holders of
the class A, class B, class C, class D, class E, class F and class G
certificates receiving principal distributions on such distribution date will be
entitled to a total amount equal to the lesser of:
o the prepayment premium, and
o the prepayment premium multiplied by a fraction:
1. the numerator of which equals the excess, if any, of:
o the pass-through rate applicable to the most senior class of the
outstanding class A, class B, class C, class D, class E, class F
and class G certificates (or, if both classes of class A
certificates are still outstanding, the class A-1 certificates),
over
o the Discount Rate, and
2. the denominator of which equals the excess, if any, of the interest
rate for the prepaid Mortgage Loan, over the Discount Rate.
If more than one of the class A-1, class A-2, class B, class C, class
D, class E, class F and class G certificates is entitled to principal
distributions on the distribution date, the amount described in the preceding
sentence will be allocated among the classes in proportion to the principal
distributions to which they are entitled on the distribution date. Some
certificates that receive principal may not receive prepayment premiums based on
the above fraction.
All prepayment premiums not distributed to holders of these principal
balance certificates will be distributed to the holders of the interest only
certificates.
The "DISCOUNT RATE" is the rate which, when compounded monthly, is
equivalent to the Treasury Rate when compounded semi-annually.
The "TREASURY RATE" is the yield calculated by the linear interpolation
of the yields of U.S. Treasury constant maturities with a maturity date (one
longer and one shorter) most nearly approximating the maturity date (or
Anticipated Repayment Date, if applicable) of the Mortgage Loan prepaid. The
trustee will use the yields reported in Federal Reserve Statistical Release H.15
Selected Interest Rates under the heading "U.S. government securities/Treasury
constant maturities" for the calendar week before the Principal Prepayment. If
Release H.15 is no longer published, the trustee will select a comparable
publication to determine the Treasury Rate.
TREATMENT OF REO PROPERTIES
If the trust fund acquires a Mortgaged Property through foreclosure,
deed in lieu of foreclosure or otherwise, then, until the REO Property is
liquidated, the related Mortgage Loan (an "REO MORTGAGE LOAN") will be treated
as outstanding for several purposes, including:
o determining distributions on the certificates,
o allocations of Realized Losses and Expense Losses to the certificates,
o computing master servicing fees, special servicing fees and trustee fees,
and
o determining pass-through rates and the Principal Distribution Amount.
Net operating revenues and other net proceeds derived from such REO
Property will be "applied" by the master servicer as principal, interest and
other amounts "due" on the Mortgage Loan. With some exceptions, the master
servicer, the trustee and the fiscal agent are required to make P&I Advances on
the REO Mortgage Loan, if proceeds received from the REO Property are less than
the Assumed Monthly Payment for the REO Mortgage
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Loan. See "The Pooling and Servicing Agreement--Advances".
APPRAISAL REDUCTIONS OF LOAN BALANCES
An Appraisal Reduction will be calculated following the earliest of any
of the following "APPRAISAL REDUCTION EVENTS" affecting a Mortgage Loan:
o the third anniversary of the effective date of a modification agreed to by
the special servicer that extends a Mortgage Loan's maturity date without
changing the amount of the Monthly Payment,
o 90 days after an uncured delinquency occurs on a Mortgage Loan,
o 30 days after a receiver is appointed or an involuntary bankruptcy
proceeding commences,
o immediately after a borrower declares bankruptcy, and
o immediately after a Mortgage Loan becomes an REO Mortgage Loan.
The "APPRAISAL REDUCTION" for any Mortgage Loan as to which any
Appraisal Reduction Event has occurred will be an amount equal to:
o the outstanding Stated Principal Balance of such Mortgage Loan as of the
last day of the related Collection Period, less
o the excess, if any, of:
1. 90% of the sum of:
(a) the appraised or otherwise estimated value of the related
Mortgaged Property or Properties, plus
(b) the amount of all reserves and escrows that are pledged as
collateral for the Mortgage Loan (other than those that are for
taxes and insurance), but only to the extent that such amounts are
not taken into account in determining the appraised or otherwise
estimated value of the related Mortgaged Property or Properties
over
2. the sum of:
(a) all unpaid interest on the principal balance of the Mortgage Loan
(without giving effect to any default rates or Revised Interest
Rates), but only if not previously advanced by the master
servicer, the trustee or the fiscal agent,
(b) all unreimbursed Advances for the Mortgage Loan, plus interest at
the Advance Rate,
(c) all currently due and unpaid real estate taxes and assessments and
insurance premiums and all other amounts, including, if
applicable, ground rents, due and unpaid under the Mortgage Loan
(which taxes, premiums and other amounts have not been escrowed or
the subject of an Advance), and
(d) unpaid special servicing compensation.
Within 60 days (or such longer period as the special servicer is (as
certified thereby to the Trustee in writing) diligently and in good faith
proceeding to obtain such appraisal or internal valuation) after the special
servicer becomes aware of an Appraisal Reduction Event, the special servicer
must:
o obtain a fair market value appraisal of the related Mortgaged Property or
REO Property from an independent appraiser who is a member of the Appraisal
Institute, with at least five years experience in the related property type
and in the jurisdiction in which the Mortgaged Property or REO Property is
located, or
o at its discretion, conduct an internal property valuation in accordance
with the servicing standard if the Mortgage Loan has an outstanding
principal balance equal to or less than an amount determined by the Rating
Agencies, which will be specified in the pooling and servicing agreement.
Each of the above is referred to as an "UPDATED APPRAISAL". If the
special servicer has completed or obtained an appraisal or internal valuation
during the prior 12 months, the special servicer may use that appraisal or
valuation as the "Updated Appraisal" for purposes of calculating the Appraisal
Reduction, if using such appraisal or valuation is consistent with the servicing
standard. The master servicer will pay the cost of any Updated Appraisal as a
Servicing Advance, unless the Updated Appraisal is an internal valuation
performed by the special servicer or if the Advance would be a nonrecoverable
Advance.
If the special servicer is not using a previously obtained appraisal or
internal valuation to calculate the Appraisal Reduction, the special
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servicer must estimate the value of the related Mortgaged Property or REO
Property (the "APPRAISAL REDUCTION ESTIMATE"). This estimate will be used to
calculate the Appraisal Reduction until the Updated Appraisal is completed.
However, if the Updated Appraisal is not obtained within 120 days after the
Appraisal Reduction Event, the Appraisal Reduction will be 25% of principal
balance of the Mortgage Loan until the Updated Appraisal is received.
The special servicer will calculate the Appraisal Reduction based on
the Updated Appraisal or the special servicer's Appraisal Reduction Estimate. If
the Appraisal Reduction is calculated using the Appraisal Reduction Estimate,
then on the first distribution date after the delivery of the Updated Appraisal,
the special servicer will adjust the Appraisal Reduction to take into account
the Updated Appraisal.
The special servicer will obtain annual updates of the Updated
Appraisal during the continuance of an Appraisal Reduction Event. The master
servicer will pay the cost of such annual updates as a Servicing Advance, unless
the Advance would be nonrecoverable. In addition, the operating adviser may at
any time request the special servicer to obtain (at the operating adviser's
expense) an Updated Appraisal. The special servicer will recalculate the
Appraisal Reduction each time an Updated Appraisal is obtained. The special
servicer will deliver a copy of each Updated Appraisal to the master servicer,
the trustee and the operating adviser within 15 days after it receives the
Updated Appraisal.
The Appraisal Reduction will be eliminated upon full payment or
liquidation of the Mortgage Loan or if the Mortgage Loan is no longer a
Specially Serviced Mortgage Loan.
An Appraisal Reduction:
o will reduce the master servicer's, the trustee's and the fiscal agent's
obligation to advance delinquent interest on the Mortgage Loan;
o may reduce current distributions to one or more of the then most
subordinate classes of principal balance certificates; and
o may cause an Expense Loss to be allocated to one or more of the then most
subordinate classes of principal balance certificates.
See "The Pooling and Servicing Agreement--Advances".
APPLICATION OF REALIZED LOSSES AND EXPENSE LOSSES TO PRINCIPAL BALANCES
If immediately following distributions on any distribution date the
Stated Principal Balance of the Mortgage Pool is less than the total principal
balance of the principal balance certificates, then the principal balances of
the various classes of the principal balance certificates will be reduced as
follows:
o First, the principal balances of the various classes of the subordinate
certificates will be reduced, sequentially in reverse alphabetical order
beginning with the class O certificates. The principal balance of the
lowest class will be reduced until:
1. the deficit is reduced to zero; or
2. the principal balance of that class is reduced to zero.
o Any deficit remaining after reducing the principal balance of the most
subordinate class to zero will be applied to reduce the principal balance
of the next lowest class, and so forth until the deficit is eliminated or
until the total principal balance on all the subordinate certificates is
reduced to zero.
If any portion of the deficit remains after the total principal balance
of all the subordinate certificates is reduced to zero, then the class principal
balances of the class A-1 and class A-2 certificates will be reduced, in
proportion to their remaining class principal balances, until:
o the deficit is reduced to zero; or
o the principal balances of the class A-1 and class A-2 certificates are
reduced to zero.
In general, any such deficit will result from Realized Losses and/or
Expense Losses on the Mortgage Loans. Accordingly, these reductions in the
principal balances allocate Realized Losses and Expense Losses among the
certificates.
Within a given class of principal balance certificates, Realized Losses
and Expense Losses will be allocated to holders in proportion to their
percentage interests in the class.
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Realized Losses arise when the master servicer becomes unable to
collect all amounts due and owing under a Mortgage Loan for any reason,
including:
o fraud;
o bankruptcy; or
o an uninsured casualty loss.
If the Mortgage Loan and any related REO Property have been fully
liquidated, the "REALIZED LOSS" would equal:
o the sum of:
1. the outstanding principal balance;
2. accrued and unpaid interest on the loan to but not including the due
date in the Collection Period when the liquidation occurs, excluding
Deferred Interest and default interest in excess of the mortgage
interest rate;
3. all unreimbursed Servicing Advances; and
4. all outstanding liquidation expenses;
minus
o the total liquidation proceeds received, if any.
If any part of the debt due under a Mortgage Loan is forgiven, then the
amount forgiven would also be a Realized Loss.
The trust fund incurs "EXPENSE LOSSES" when it pays Additional Trust
Fund Expenses.
"ADDITIONAL TRUST FUND EXPENSES" include, among other things:
o special servicing fees, workout fees and disposition fees,
o interest on Advances not paid from default interest or late payment charges
on the related Mortgage Loan as and to the extent described in "The Pooling
and Servicing Agreement - Advances",
o the cost of legal opinions obtained as part of servicing the loans and
administering the trust fund, if these costs are not covered by a Servicing
Advance or paid by a borrower,
o certain unanticipated, non-Mortgage Loan specific expenses of the trust
fund, including:
1. indemnities and reimbursements to the trustee, the fiscal agent, the
master servicer, the special servicer and the depositor, and
2. certain federal, state and local taxes, and related expenses payable
out of the trust fund, and
o other trust fund expenses not included in the calculation of Realized Loss
for which there is no corresponding collection from a borrower.
PREPAYMENT INTEREST EXCESSES AND SHORTFALLS
If a borrower prepays all or part of a Mortgage Loan or makes a balloon
payment on a Mortgage Loan on or before the Determination Date in any calendar
month and pays interest which accrued on the prepayment or balloon payment from
the beginning of the calendar month through the day preceding the prepayment
date or balloon payment date, then such interest (less related master servicer
fees), is a "PREPAYMENT/BALLOON PAYMENT INTEREST EXCESS".
If a borrower prepays all or part of a Mortgage Loan or makes a balloon
payment on a Mortgage Loan after the Determination Date in a calendar month and
does not pay interest on the prepayment or balloon payment through the end of
the calendar month, then this shortfall in a full month's interest on the
prepayment (less related master servicer fees) is a "PREPAYMENT/BALLOON PAYMENT
INTEREST SHORTFALL".
Prepayment/Balloon Payment Interest Excesses collected during a
Collection Period will be used to offset Prepayment/Balloon Payment Interest
Shortfalls during the Collection Period. The master servicer will retain any
remaining amount as additional servicing compensation.
The master servicer must pay out of its own funds, without right of
reimbursement, any Prepayment/Balloon Payment Interest Shortfalls in respect of
the Mortgage Loans that are not offset by Prepayment/Balloon Payment Interest
Excesses. However, the maximum amount that the master servicer must pay is the
Stated Principal Balance of the Mortgage Loans on which it has received its
master servicing fee for such distribution date multiplied by 0.02% per annum.
Any payment that the master servicer makes to cover such shortfalls will be a
"COMPENSATING INTEREST PAYMENT".
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The total of all Prepayment/Balloon Payment Interest Shortfalls
remaining in a Collection Period after offsetting Prepayment/Balloon Payment
Interest Excesses and applying Compensating Interest Payments, is the "NET
AGGREGATE PREPAYMENT/BALLOON PAYMENT INTEREST SHORTFALL" for the distribution
date.
The trustee will allocate any Net Aggregate Prepayment/Balloon Payment
Interest Shortfall among the certificates in proportion to the interest accrued
on each class for the distribution date. Such an allocation will reduce the
Distributable Certificate Interest for each class.
See "The Pooling and Servicing Agreement--Servicing Compensation and
Payment of Expenses".
SCHEDULED FINAL DISTRIBUTION DATE
The "SCHEDULED FINAL DISTRIBUTION DATE" for a class of certificates is
the distribution date on which its principal balance or notional amount would
become zero if there is no:
o early termination of the trust,
o repurchase of any loan,
o default or delinquency on any loan,
o prepayment of any kind, except that Hyper-Amortization Loans are assumed to
pay on their Anticipated Repayment Dates, or
o modification or extension of any loan.
It is very unlikely that these assumptions will hold true.
The Scheduled Final Distribution Date for each class of the offered
certificates is the distribution date in the month and year listed for such
class in the "Scheduled Final Distribution Date" column in the table on the
cover page. These 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, if there are defaults on the Mortgage Loans, the actual
final distribution date for one or more classes may be later, and could be
substantially later, than the related Scheduled Final Distribution Date(s).
Since the rate of payment (including voluntary and involuntary
prepayments) of the Mortgage Loans may exceed the scheduled rate of payments,
and may exceed such scheduled rate by a substantial amount, the actual final
distribution date for one or more classes 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. No assurance can be given as to
actual payment experience.
SUBORDINATION
The right of each class of subordinate certificates to receive
principal and interest distributions is subordinated to the rights of:
o the senior certificates, and
o each other class of subordinate certificates with an earlier alphabetical
class designation.
This subordination is intended to:
o protect the senior certificates against losses associated with delinquent
and defaulted Mortgage Loans, and
o enhance the likelihood of timely receipt by senior certificateholders of
the full amount of Distributable Certificate Interest payable to them, and
the ultimate receipt by the class A-1 and class A-2 certificateholders of
principal equal to the initial class principal balance of those classes.
Similarly, but to decreasing degrees, this subordination is also
intended to increase the likelihood that the holders of the other classes of
offered certificates will timely receive all of the Distributable Certificate
Interest payable on their certificates on each distribution date, and that they
will eventually be paid all of their principal.
The subordination will be accomplished by:
o applying Available Funds as described above under "--Distributions", and
o allocating Realized Losses and Expense Losses to the principal balance
certificates in reverse alphabetical order.
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Realized Losses and Expense Losses are allocated to the class A-1 and
class A-2 certificates in proportion to their principal balances.
No other form of credit enhancement is provided.
OPTIONAL TERMINATION
If on any distribution date the total Stated Principal Balance of the
Mortgage Loans is less than 1% of the Initial Pool Balance, then each of the
following (in this order) has an option to terminate the trust:
o the majority holders of the Controlling Class,
o the master servicer,
o the special servicer, and
o the holder of the majority of the class R-I certificate interests.
The termination is effected by purchasing all the Mortgage Loans and
all property acquired in respect of any Mortgage Loan then remaining in the
trust fund. Termination would cause early retirement of all then-outstanding
certificates.
The option exercise price equals the sum of:
o 100% of the total unpaid principal balance of the remaining Mortgage Loans
other than:
1. loans as to which the special servicer has determined all payments or
recoveries have been made, and
2. loans as to which the Mortgaged Property has become an REO Property,
o accrued and unpaid interest on those loans to the due date in the
Collection Period when the termination occurs,
o unreimbursed Servicing Advances plus interest at the Advance Rate, and
o the fair market value of any other property (including REO Property)
remaining in the trust fund.
The option exercise price, net of amounts payable to persons other than
certificateholders, will constitute Available Funds for the final distribution
date.
VOTING RIGHTS
At all times during the term of the pooling and servicing agreement the
voting rights for the certificates will be allocated as follows:
o 98% to the holders of the classes of principal balance certificates in
proportion to the principal balances of those classes, and
o 2% to the holders of the interest only certificates.
Each certificateholder of a class will share in the voting rights of
that class in proportion to the certificateholder's percentage interest in the
class.
DELIVERY, FORM AND DENOMINATION
BOOK-ENTRY CERTIFICATES
Initially, the offered certificates will be registered in the name of a
nominee of The Depository Trust Company. Investors will hold their beneficial
interests in the offered certificates through the book-entry facilities of DTC.
Investors will not receive physical certificates except in the limited
circumstances described below.
DTC has informed the depositor that its nominee will be Cede & Co.
Accordingly, Cede & Co. is expected to be the holder of record of the offered
certificates. Certificateholders may also hold certificates through Clearstream
Banking, societe anonyme, Luxembourg or Euroclear (in Europe), if they are
participants in those systems or indirectly through organizations that are
participants in those systems. Clearstream and Euroclear will hold omnibus
positions on behalf of their participants through customers' certificates
accounts in Clearstream's and Euroclear's names on the books of their respective
depositaries, which in turn will hold such positions in customers' certificates
accounts in the depositaries' names on the books of DTC.
Transfers between DTC participants will occur in accordance with DTC
rules. Transfers between Clearstream participants and Euroclear participants
will occur in accordance with their rules.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream or
Euroclear, on the other, will be effected in DTC in accordance with DTC rules
through Clearstream's or Euroclear's depositary. Clearstream participants and
Euroclear participants
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may not deliver instructions directly to these depositaries.
Because of time-zone differences, credits of certificates received in
Clearstream or Euroclear as a result of a transaction with a DTC participant
will be made during subsequent certificates settlement processing and dated the
business day following the DTC settlement date. Such credits or any transactions
in such certificates settled during such processing will be reported to the
relevant Euroclear or Clearstream participant on such business day. Cash
received in Clearstream or Euroclear as a result of sales of certificates by or
through a Clearstream participant or a Euroclear participant to a DTC
participant will be received with value on the DTC settlement date, but will be
available in the relevant Clearstream or Euroclear cash account only as of the
business day following settlement in DTC.
The trustee will not be responsible for monitoring or restricting
transfer of ownership interests in offered certificates through the book-entry
facilities of DTC.
In DTC's book-entry system, a purchaser purchases through, or as, a
direct participant. The direct participant receives credit for the certificates
on DTC's records. The ownership interest of each beneficial owner is ultimately
reflected on the records of one of DTC's direct or indirect participants.
Beneficial owners are expected to receive written confirmations detailing the
transaction and periodic statements of their holdings, from the direct or
indirect DTC participant with whom the beneficial owner dealt. Neither the
depositor, the trustee, the master servicer, the special servicer, the fiscal
agent nor any paying agent is responsible for records of ultimate beneficial
ownership or for payments to ultimate beneficial owners.
So long as any class of offered certificates are held in book-entry
form:
o actions by certificateholders will be taken by DTC upon instructions from
its participants, who in turn receive instructions directly or indirectly
from the beneficial owners of those certificates, and
o distributions, notices, reports and statements to certificateholders will
be sent to DTC or its nominee as the registered holder of those
certificates for ultimate distribution to beneficial owners of those
certificates in accordance with DTC procedures and applicable law.
Neither DTC nor its nominee will consent or vote with respect to the
offered certificates. Instead, DTC and its nominee take steps to facilitate
consent or voting in accordance with instructions from participants, who in turn
are expected to follow instructions issued by the beneficial owners of those
certificates.
Because DTC can only act on behalf of its participants, who in turn act
on behalf of indirect participants and certain banks, a beneficial owner may be
able to pledge or otherwise deal in offered certificates only with persons that
participate in the DTC system.
Under a book-entry format, beneficial owners may experience delays in
their receipt of payments, since distributions by the trustee or a paying agent
on behalf of the trustee will be paid directly to DTC's nominee.
If DTC or a direct or indirect participant becomes insolvent, then the
ability of ultimate beneficial owners to obtain timely payment may be impaired.
If an insolvency causes a loss that exceeds the limits of applicable Securities
Investor Protection Corporation insurance or if such coverage is unavailable,
the ultimate payment of amounts distributable on offered certificates may be
impaired.
DEFINITIVE CERTIFICATES
The trustee will issue definitive physical certificates to
certificateholders only if:
o the depositor elects to terminate the book-entry system, or
o DTC is no longer willing or able to act as depositary and the depositor
cannot locate a qualified successor to DTC.
The trustee would then issue definitive physical certificates upon
surrender of the physical certificates held by DTC with instructions from DTC
for registering definitive physical certificates in the names of the beneficial
owners. Upon becoming registered holders of certificates, those beneficial
owners will then be entitled directly to:
o receive payments,
o exercise voting rights, and
o transfer and exchange their certificates.
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Definitive certificates will be transferable and exchangeable at the
offices of the trustee, the certificate registrar or another transfer agent.
DENOMINATIONS
The trust will issue class A certificates in minimum denominations of
$25,000 initial principal balance (and any larger whole dollar amount). The
trust will issue the remaining classes of offered certificates in minimum
denominations of $50,000 initial principal balance (or any larger whole dollar
amount). However, the trust may issue one certificate for each class in a lower
denomination to make up the difference between certificate interests sold and
the total amount offered.
REGISTRATION AND TRANSFER OF DEFINITIVE CERTIFICATES
Subject to the restrictions in the pooling and servicing agreement,
holders may transfer or exchange any definitive physical certificate in whole or
in part. No transfer or exchange can be of an amount smaller than the
denominations specified under "--Delivery, Form and Denomination
--Denominations" above. The registered holder or his attorney-in-fact must
surrender the definitive certificate at the corporate trust office of the
certificate registrar appointed under the pooling and servicing agreement or at
the office of any transfer agent. The certificate must be accompanied by:
o an executed instrument of assignment and transfer, in the case of transfer,
or
o a written request for exchange, in the case of exchange.
The certificate registrar will cancel the old certificate and execute
and deliver (or mail) a new definitive certificate to the appropriate person
within a reasonable period of time.
New certificates sent by first class mail will be sent at the risk of
the transferee or holder to the address specified by the person presenting the
old certificates for transfer or exchange and requesting such mailing.
The certificate registrar may decline to register an exchange or
transfer during the 15 days preceding any distribution date.
The certificate registrar will not charge a fee for registering a
transfer or exchange. However, the certificate registrar may require the
transferor of a privately offered certificate to reimburse it for any tax,
expense or other governmental charge it incurs in effecting the transfer.
For a discussion of certain transfer restrictions, see "ERISA
Considerations".
-------------------------------------------
YIELD AND MATURITY CONSIDERATIONS
The yield on any offered certificate will depend on:
o the pass-through rate in effect from time to time for the certificate;
o the price paid for the certificate, plus accrued interest;
o the rate and timing of payments of principal on the certificate; and
o the aggregate amount of distributions on the certificate.
RATE AND TIMING OF PRINCIPAL PAYMENTS
The yield to holders of any offered certificates purchased at a
discount or premium will be affected by the rate and timing of principal
payments made in reduction of the principal balance of those certificates. As
described in this prospectus supplement, the Principal Distribution Amount for
each distribution date generally will be distributed to the holders of the class
A-1 certificates until their principal balance is reduced to zero, and then will
be distributed to the holders of each remaining class of principal balance
certificates, sequentially in alphabetical order of class designation, in each
case until the principal balance of each class of certificates is, in turn,
reduced to zero.
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The rate and timing of principal payments made in reduction of the
principal balance of the offered certificates will be directly related to the
rate and timing of principal payments on the Mortgage Loans, which will in turn
be affected by:
o the amortization schedules of the loans, including any hyper-amortization
of a Hyper-Amortization Loan following its Anticipated Repayment Date,
o the dates on which balloon payments are due, and
o the rate and timing of Principal Prepayments and other unscheduled
collections on the loans, including:
1. liquidations of Mortgage Loans due to defaults, casualties or
condemnations affecting the Mortgaged Properties, or
2. repurchases 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--Optional
Termination".
Prepayments, liquidations and repurchases of the Mortgage Loans will
result in distributions on the principal balance certificates of amounts that
would otherwise have been distributed over the remaining terms of the Mortgage
Loans. Conversely, 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 principal balance 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" in this prospectus supplement and
"Certain Legal Aspects of 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:
o the terms of the Mortgage Loans (for example, the provisions requiring the
payment of prepayment premiums and amortization terms that require balloon
payments),
o prevailing interest rates,
o the market value of the Mortgaged Properties,
o the demographics and relative economic vitality of the areas in which the
Mortgaged Properties are located,
o the general supply and demand for such facilities (and their uses) in the
areas in which the Mortgaged Properties are located,
o the quality of management of the Mortgaged Properties,
o the servicing of the Mortgage Loans,
o federal and state tax laws (which are subject to change), and
o other opportunities for investment.
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 Mortgage 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 converting to another
fixed rate loan with a lower interest rate.
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 Mortgaged Property.
See "Risk Factors--Yield Considerations" in this prospectus supplement
and "Certain Legal Aspects of Mortgage Loans--Default Interest and Limitations
on Prepayments" in the prospectus.
You should consider the risk that rapid rates of prepayments on the
Mortgage Loans, and corresponding increased payments of principal on the
principal balance certificates, may coincide with periods of low prevailing
interest rates. During these periods, the effective interest rates on securities
in which you may choose to reinvest amounts paid to
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you as principal may be lower than the yield on your certificate. Conversely,
slower rates of prepayments on the Mortgage Loans, and corresponding decreased
payments of principal on the principal balance certificates, may coincide with
periods of high prevailing interest rates. During these periods, the amount of
principal payments available to you for reinvestment at such high prevailing
interest rates may be relatively small. 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. Some borrowers may also be motivated by
federal and state tax laws (which are subject to change) to sell Mortgaged
Properties prior to the exhaustion of tax depreciation benefits.
If the markets for commercial and multifamily real estate experience an
overall decline in property values, the outstanding balance of a Mortgage Loan
could exceed the value of the Mortgaged Property. A borrower under a
non-recourse loan would then have a decreased incentive to fund operating cash
flow deficits and, as a result, actual losses could be higher than you
originally anticipated.
Neither the depositor nor the sellers make any representation as to:
o the particular factors that will affect the rate and timing of prepayments
and defaults on the Mortgage Loans,
o the relative importance of such factors,
o the percentage of the Mortgage Loans that will default or be prepaid, or
o 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 offered
certificates may vary from your 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 on or
otherwise result in the reduction of the principal balance of your certificates.
You should consider the risk that your actual yield may be lower than
anticipated if:
o in the case of any principal balance certificate purchased at a discount,
principal payments on the Mortgage Loans are slower than you anticipated,
and
o in the case of any principal balance certificate purchased at a premium,
principal payments on the Mortgage Loans are faster than you anticipated.
In general, the earlier a payment of principal on the Mortgage Loans is
distributed in reduction of the principal balance of any principal balance
certificate purchased at a discount or premium, the greater will be the effect
on your yield to maturity. As a result, the effect on your yield of principal
payments on the Mortgage Loans occurring at a rate higher (or lower) than the
rate you anticipated 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), the depositor can give you no assurance 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--Yield Considerations".
BALLOON PAYMENTS AND ANTICIPATED REPAYMENT DATE PAYMENTS
Most of the Mortgage Loans are either balloon loans that will have
substantial balloon payments due at their stated maturities or are
Hyper-Amortization Loans that will have a substantial balance still owing on
their Anticipated Repayment Dates. A borrower's ability to pay a balloon
payment, or pay-off a loan on its Anticipated Repayment Date, may depend on its
ability to sell or refinance the property. Factors beyond the borrower's control
may affect this ability, including:
o the level of interest rates and general economic conditions at the time,
and
o changes in federal, state or local laws, including tax, environmental and
safety laws.
A failure to make a balloon payment on time, or to pay-off an
Hyper-Amortization Loan on its Anticipated Repayment Date, will lengthen the
average life of the certificates. See the Remaining Terms to Stated Maturity
Table in Appendix I for additional information regarding the maturity dates of
the Mortgage Loans.
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LOSSES AND SHORTFALLS
The yield to holders of the offered certificates will also depend on
the extent to which such holders are required to bear the effects of losses or
shortfalls on the Mortgage Loans.
Shortfalls in Available Funds may result from:
o shortfalls in collections of amounts payable on the Mortgage Loans (unless
advanced),
o additional master servicer or special servicer compensation,
o Additional Trust Fund Expenses, including interest on Advances, or
o other similar items.
Shortfalls in Available Funds (other than Net Aggregate
Prepayment/Balloon Payment Interest Shortfalls) will generally be borne by
holders of each class of principal balance certificates in reverse alphabetical
order in each case to the extent of amounts otherwise payable to the class. Any
such shortfalls will be allocated to the holders of the class A-1 and class A-2
certificates on a pro rata basis.
Realized Losses and Expense Losses will be:
o allocated to the principal balance certificates in reverse alphabetical
order of their class designation, and
o applied to reduce the principal balance of each affected class.
As a result, a loss on any one of the Mortgage Loans could cause a
significant loss, even a complete loss, of an investor's investment in any
class, but especially the subordinate certificates with the latest alphabetic
designations. You should make your own estimate of the expected timing and
severity of Realized Losses and Expense Losses before investing in any
subordinate certificate.
PASS-THROUGH RATES
The pass-through rates for the offered certificates may not exceed the
weighted average of the Net Mortgage Rates.
The weighted average of the pass-through rates for the principal
balance certificates will fluctuate based on the relative sizes of the principal
balances of those classes.
The weighted average of the Net Mortgage Rates will fluctuate over the
lives of the offered certificates as a result of scheduled amortization,
voluntary prepayments, liquidations and repurchases of loans.
If principal reductions occur on loans with higher than average Net
Mortgage Rates at a rate proportionally faster than principal reductions on the
mortgage pool as a whole, the pass-through rates for the offered certificates
may be adversely affected.
DELAY IN PAYMENT OF DISTRIBUTIONS
Monthly distributions will be made no earlier than the 15th day of the
month following the month in which the interest accrued on the certificates. You
should take this delay into account in determining how much to pay for the
offered certificates.
WEIGHTED AVERAGE LIFE
Weighted average life refers to the average amount of time that will
elapse from the date a security is issued to the date each dollar is distributed
in reduction of the principal balance of the security. The weighted average life
of each class of principal balance certificates is determined by:
o multiplying the amount of each distribution in reduction of the principal
balance of that class by the number of years from the date of purchase to
the related distribution date,
o adding the results, and
o dividing the sum by the total distributions in reduction of the principal
balance of that class.
The weighted average life of any principal balance certificate will be
influenced by, among other things:
o the rate at which principal of the Mortgage Loans is paid or otherwise
collected or advanced, and
o the extent that payments, collections and/or advances of principal are
applied to reduce the certificate's principal balance.
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
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pool of mortgage loans for the life of those loans. As used in each of the
following tables, the column headed "0%" assumes that none of the Mortgage Loans
is prepaid before maturity, except that each Hyper-Amortization Loan is assumed
to pay on its Anticipated Repayment Date. The columns headed "3%", "5%", "7%",
"10%" and "15%" assume that no prepayments are made on any Mortgage Loan during
the Mortgage Loan's Lock-out Period or Yield Maintenance Period or, with respect
to Defeasance Loans, prior to their Open Period, if any, and are otherwise made
on each of the Mortgage Loans at the indicated CPRs. The tables and assumptions
are intended to illustrate the sensitivity of the weighted average life of a
class of offered certificates to various prepayment rates and are not intended
to predict or to provide information that will enable you to predict the actual
weighted average life of any class of offered certificates. Consequently, no
assurance can be given and no representation is made that:
o prepayments of the Mortgage Loans (whether or not in a Lock-out Period or a
Yield Maintenance Period or, with respect to Defeasance Loans, prior to
their Open Period) will conform to any particular CPR,
o all the Mortgage Loans will prepay in accordance with the assumptions at
the same rate,
o Mortgage Loans that are in a Lock-out Period or Yield Maintenance Period
will not prepay, or
o Defeasance Loans will not prepay prior to their Open Period.
The tables have been prepared on the basis of the following assumptions
(collectively, the "MATURITY ASSUMPTIONS"):
o the Initial Pool Balance is approximately $1,076,288,358.
o the initial principal balance for each class of offered certificates is the
amount on the cover page,
o the pass-through rate for each class of certificates is as described in
this prospectus supplement:
o the scheduled Monthly Payments for each Mortgage Loan are the amounts
listed in Appendix II,
o all Monthly Payments are due and timely received on the first day of each
month commencing in November 2000,
o there are no delinquencies or losses on the Mortgage Loans,
o there are no extensions of maturity of the Mortgage Loans,
o there are no Appraisal Reductions for the Mortgage Loans,
o there are no casualties or condemnations affecting the Mortgaged
Properties,
o prepayments are made on each of the Mortgage Loans at the indicated CPRs,
except that:
1. no prepayments are received for any Mortgage Loan during a Lock-out
Period, Defeasance Period or Yield Maintenance Period, and
2. Hyper-Amortization Loans are paid in full on their Anticipated
Repayment Dates,
o no one exercises its right to terminate the trust fund as described under
"Description of the Certificates--Optional Termination",
o no Mortgage Loan is required to be repurchased or replaced by a seller or
other party,
o no Prepayment/Balloon Payment Interest Shortfalls are incurred,
o there are no Additional Trust Fund Expenses,
o distributions on the certificates are made on the 15th day of each month,
commencing in November 2000,
o the certificates are issued on October 23, 2000,
o the only expenses payable out of the trust are the master servicer fees,
the standby special servicer fees and the trustee fees, and
o the prepayment provisions for each Mortgage Loan are assumed to begin on
the first payment date of such Mortgage Loan and any resulting prepayment
premiums are allocated as described under "Description of the
Certificates--Distributions--Distributions of Prepayment Premiums".
To the extent that the Mortgage Loans have characteristics that differ
from those assumed in preparing the tables set forth below, the offered
certificates may mature earlier or later than indicated by the tables.
It is highly unlikely that the Mortgage Loans will prepay in accordance
with the Maturity Assumptions at any constant rate until maturity or
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that all the Mortgage Loans will prepay in accordance with the Maturity
Assumptions at the same rate. In addition, variations in the actual prepayment
experience and the balance of the Mortgage Loans that prepay may increase or
decrease the percentages of initial class principal balances (and weighted
average lives) shown in the following tables. These variations may occur even if
the average prepayment experience of the Mortgage Loans were to reflect the
Maturity Assumptions and any of the specified CPR percentages.
You should conduct your own analyses of the rates at which the Mortgage
Loans may be expected to prepay.
Subject to the above discussion and assumptions, the following tables
indicate:
o the weighted average life of each class of the offered certificates, and
o the percentages of the initial principal balance of each class of the
offered certificates that would be outstanding after each of the listed
distribution dates at various CPRs, starting after the expiration of
lockout, defeasance and yield maintenance periods.
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<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OF THE CLASS A-1 CERTIFICATES
AT THE SPECIFIED CPRS
PREPAYMENT ASSUMPTION (CPR)
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
-- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100% 100%
October, 2001 95 95 95 95 95 95
October, 2002 90 90 90 90 90 90
October, 2003 85 85 85 85 85 85
October, 2004 79 79 79 79 79 79
October, 2005 72 71 71 71 71 71
October, 2006 60 60 60 60 60 60
October, 2007 35 35 35 35 35 35
October, 2008 0 0 0 0 0 0
Weighted average life (years) 5.70 5.70 5.70 5.70 5.69 5.69
</TABLE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OF THE CLASS A-2 CERTIFICATES
AT THE SPECIFIED CPRS
PREPAYMENT ASSUMPTION (CPR)
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
-- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100% 100%
October, 2001 100 100 100 100 100 100
October, 2002 100 100 100 100 100 100
October, 2003 100 100 100 100 100 100
October, 2004 100 100 100 100 100 100
October, 2005 100 100 100 100 100 100
October, 2006 100 100 100 100 100 100
October, 2007 100 100 100 100 100 100
October, 2008 93 93 93 93 93 93
October, 2009 84 84 84 84 84 84
October, 2010 0 0 0 0 0 0
Weighted average life (years) 9.40 9.40 9.40 9.39 9.39 9.38
</TABLE>
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<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OF THE CLASS B CERTIFICATES
AT THE SPECIFIED CPRS
PREPAYMENT ASSUMPTION (CPR)
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
-- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100% 100%
October, 2001 100 100 100 100 100 100
October, 2002 100 100 100 100 100 100
October, 2003 100 100 100 100 100 100
October, 2004 100 100 100 100 100 100
October, 2005 100 100 100 100 100 100
October, 2006 100 100 100 100 100 100
October, 2007 100 100 100 100 100 100
October, 2008 100 100 100 100 100 100
October, 2009 100 100 100 100 100 100
October, 2010 0 0 0 0 0 0
Weighted average life (years) 9.89 9.89 9.89 9.89 9.89 9.89
</TABLE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OF THE CLASS C CERTIFICATES
AT THE SPECIFIED CPRS
PREPAYMENT ASSUMPTION (CPR)
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
-- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100% 100%
October, 2001 100 100 100 100 100 100
October, 2002 100 100 100 100 100 100
October, 2003 100 100 100 100 100 100
October, 2004 100 100 100 100 100 100
October, 2005 100 100 100 100 100 100
October, 2006 100 100 100 100 100 100
October, 2007 100 100 100 100 100 100
October, 2008 100 100 100 100 100 100
October, 2009 100 100 100 100 100 100
October, 2010 0 0 0 0 0 0
Weighted average life (years) 9.89 9.89 9.89 9.89 9.89 9.89
</TABLE>
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<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OF THE CLASS D CERTIFICATES
AT THE SPECIFIED CPRS
PREPAYMENT ASSUMPTION (CPR)
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
-- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100% 100%
October, 2001 100 100 100 100 100 100
October, 2002 100 100 100 100 100 100
October, 2003 100 100 100 100 100 100
October, 2004 100 100 100 100 100 100
October, 2005 100 100 100 100 100 100
October, 2006 100 100 100 100 100 100
October, 2007 100 100 100 100 100 100
October, 2008 100 100 100 100 100 100
October, 2009 100 100 100 100 100 100
October, 2010 0 0 0 0 0 0
Weighted average life (years) 9.97 9.97 9.96 9.95 9.94 9.93
</TABLE>
THE POOLING AND SERVICING AGREEMENT
The certificates will be issued under a pooling and servicing agreement
to be dated as of October 1, 2000, among the depositor, the master servicer, the
special servicer, the trustee and the fiscal agent.
You may obtain a free copy of the pooling and servicing agreement
(without exhibits) by writing to:
PNC Mortgage Acceptance Corp.
210 West 10th Street, 6th Floor
Kansas City, Missouri 64105
Attention: Lawrence D. Ashley
You may also request a copy by telephone at (816) 435-5000.
ASSIGNMENT OF THE MORTGAGE LOANS
By the closing date, the sellers must assign the Mortgage Loans to the
trustee for the benefit of the certificateholders. The assignments will be
without recourse. Each seller must also deliver the following documents, among
others, for each of its Mortgage Loans:
o the original note, endorsed (without recourse) to the order of the trustee;
o the original or a copy of the related mortgage(s), together with originals
or copies of any intervening assignments of such document(s), in each case
(unless the particular document has not been returned from the applicable
recording office) with evidence of recording noted on the document;
o the original or a copy of any related assignment(s) of leases and rents (if
any such item is a document separate from the mortgage), together with
originals or copies of any intervening assignments of any such document(s),
in each case (unless the particular document has not been returned from the
applicable recording office) with evidence of recording noted on the
document;
o an assignment of each related mortgage in favor of the trustee, in
recordable form;
o an assignment of any related assignment(s) of leases and rents (if any such
item is a document separate from the mortgage) in favor of the trustee, in
recordable form;
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o an original or copy of the related lender's title insurance policy (or, if
a title insurance policy has not yet been issued, a commitment for title
insurance "marked-up" at the closing of such Mortgage Loan or other binding
commitment to issue title insurance);
o originals or copies of all assumptions, modifications and substitution
agreements in those instances where the terms or provisions of the mortgage
have been modified or the Mortgage Loan assumed;
o an assignment in favor of the trustee of each effective UCC financing
statement; and
o in those cases where applicable, a copy of the related ground lease.
If a seller cannot deliver any original recorded document described
above or a copy of such document showing evidence of having been recorded on the
closing date, the seller will deliver it promptly after receipt from the
recording office. The failure to receive a recorded document due to delays of a
public recording office will not cause a Mortgage Loan to be a defective
Mortgage Loan.
The trustee is obligated to review the documents delivered to it for
each Mortgage Loan within 60 days after the later of delivery or the closing
date and report any missing documents or certain types of defects to the
depositor. The scope of the trustee's review of each mortgage file is, in
general, limited solely to confirming that certain of the documents listed above
have been received in the manner specified. None of the trustee, the fiscal
agent, the master servicer, the special servicer or the custodian is under any
duty or obligation to inspect, review or examine any of the documents relating
to the Mortgage Loans to determine whether such document is valid, effective,
enforceable, in recordable form or otherwise appropriate for the represented
purpose.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The pooling and servicing agreement will require:
o the master servicer to service and administer the Mortgage Loans; and
o the special servicer to service and administer 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 trustee (as determined by the master
servicer or the special servicer, as applicable, in its good faith and
reasonable judgment) in accordance with applicable law, the mortgage loan
documents and the pooling and servicing agreement.
Unless the pooling and servicing agreement requires a contrary specific
course of action, the master servicer and the special servicer must each act in
accordance with the higher of the following standards:
o in the same manner, 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 that prudent institutional commercial mortgage loan
servicers use for comparable mortgage loans, or
o in the same manner in which, and with the same care, skill, prudence and
diligence with which, it services and administers similar mortgage loans
that it owns.
In observing this standard, the master servicer and special servicer
may take into account their other obligations under the pooling and servicing
agreement. However, they may not take into account:
o any other relationship that the master servicer or the special servicer or
their affiliates, as the case may be, may have with any borrower;
o the ownership of any certificate by the master servicer or the special
servicer, as the case may be, or their respective affiliates;
o any obligation to make Advances or incur servicing expenses;
o the master servicer's or the special servicer's right to receive
compensation for its services;
o the ownership or servicing or management for others by the master servicer,
the special servicer or any sub-servicer of any other mortgage loans or
property; and
o the obligation, if any, of the master servicer, the special servicer, any
sub-servicer or any of their affiliates to replace or repurchase any
Mortgage Loan that it sold to the trust fund.
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<PAGE>
To the extent consistent with the foregoing and subject to terms of the
pooling and servicing agreement, the master servicer and the special servicer
must use reasonable efforts to seek to maximize the timely recovery of principal
and interest on a net present value basis on the Mortgage Loans or Specially
Serviced Mortgage Loans, as applicable, and in the best interests of the trust
and the certificateholders (as a collective whole), as determined by the master
servicer or the special servicer, as the case may be, in its reasonable
judgment.
However, neither the master servicer nor the special servicer, nor any
of their directors, members, managers, officers, employees or agents, will have
any liability to the trust fund or the certificateholders for:
o taking any action or refraining from taking any action in good faith; or
o for errors in judgment.
The master servicer, the special servicer and such persons are not
protected against liability for:
o breaching their representations or warranties in the pooling and servicing
agreement,
o willful misfeasance, bad faith or negligence in performing its duties under
the pooling and servicing agreement, or
o negligent disregard of its obligations or duties under the pooling and
servicing agreement.
The master servicer and the special servicer must make reasonable
efforts to collect amounts due under the Mortgage Loans, and must follow
collection procedures consistent with the servicing standard under the pooling
and servicing agreement. The special servicer may waive late payment charges or
penalty fees on delinquent Monthly Payments or balloon payments on Specially
Serviced Mortgage Loans. The master servicer may waive such amounts on all other
Mortgage Loans.
COLLECTION ACTIVITIES
The master servicer monitors the performance of all loans. It tracks
the status of outstanding payments due, grace periods and due dates. It
calculates and assesses late fees. The master servicer has created a customized
collection system that:
o downloads all current loan information from the servicing system on a daily
basis,
o prepares several regular delinquency reports,
o generates and mails a series of delinquency notice letters, including
payment-reminder letters to borrowers at 10 days past due, and more
strongly worded collection letters at 30 and 60 days past due, and
o flags higher-risk Mortgage Loans, such as those with a large principal
balance or chronic delinquency, so that the borrower receives a telephone
call rather than a letter.
A delinquent Mortgage Loan will be transferred to the special servicer
when the loan becomes a Specially Serviced Mortgage Loan. See "--Special
Servicing".
ADVANCES
Except as noted below, if a loan is delinquent at the close of business
on the Determination Date for a distribution date, the master servicer will
advance an amount equal to the Monthly Payment or the Assumed Monthly Payment,
as applicable, less the related master servicer fee (each such amount, a "P&I
ADVANCE").
The master servicer must make the P&I Advance on the business day
before each distribution date.
The amount of interest to be advanced for a Mortgage Loan for which an
Appraisal Reduction has been calculated will equal the product of:
1. the amount of interest that would otherwise be required to be advanced, and
2. a fraction,
o whose numerator equals the Stated Principal Balance of the loan at the
close of the preceding distribution date less the Appraisal Reduction,
and
o whose denominator is such Stated Principal Balance.
In addition to P&I Advances, the master servicer will also be obligated
to make cash advances ("SERVICING ADVANCES" and together with P&I Advances,
"ADVANCES") to pay:
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<PAGE>
o certain costs and expenses incurred in connection with defaulted Mortgage
Loans, acquiring or managing REO Property or selling defaulted Mortgage
Loans or REO Properties,
o delinquent real estate taxes, assessments and hazard insurance premiums,
and
o other similar costs and expenses necessary to protect and preserve the
security of a Mortgage.
However, the special servicer will be obligated to make any Servicing
Advance that needs to be paid on an emergency basis.
If the special servicer fails to make a required emergency Advance, the
master servicer must make the Advance. If the master servicer fails to make a
required Advance, the trustee must make the Advance. If the trustee fails to
make a required Advance, the fiscal agent must make it. Any Advance by the
fiscal agent will cure the trustee's failure to make an Advance.
However, each of the master servicer, the special servicer, the trustee
and the fiscal agent only has to make an Advance if it determines that it will
be recoverable from late payments, insurance proceeds, liquidation proceeds or
other collections on the Mortgage Loan. NONE OF THE MASTER SERVICER, THE SPECIAL
SERVICER, THE TRUSTEE OR THE FISCAL AGENT IS REQUIRED TO MAKE ANY ADVANCE THAT
IT DETERMINES IS NOT SO RECOVERABLE.
If the master servicer or the special servicer makes such a
nonrecoverability determination, it must deliver to the trustee (and, with
respect to the special servicer, the master servicer) an officer's certificate
explaining the procedures and basis for the determination and supplying
documentation which supports the determination, which will include a copy of the
Updated Appraisal and any other information or reports obtained by the master
sevicer, the special servicer, the trustee or the fiscal agent, such as:
o property operating statements,
o rent rolls,
o property inspection reports, and
o engineering reports.
Both the trustee and the fiscal agent will be entitled to rely
conclusively on a nonrecoverability determination by the master servicer or the
special servicer. The master servicer will be entitled to rely conclusively on a
nonrecoverability determination by the special servicer.
Unless there is a nonrecoverability determination, the obligation to
make Advances on a Mortgage Loan continues until foreclosure and liquidation of
the loan and related properties. Advances are intended to provide a limited
amount of liquidity, not to guarantee or insure against losses.
If the special servicer agrees to a modification of a Mortgage Loan
that forgives loan payments or other amounts that the special servicer, the
master servicer, the trustee or the fiscal agent previously advanced, and the
special servicer, 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.
The master servicer, the trustee and the fiscal agent will each be
entitled to recover any P&I Advances made by it, out of its own funds, from
collections on the Mortgage Loan as to which the Advance was made. If the master
servicer, the trustee or the fiscal agent determines that an Advance previously
made is not so recoverable, that Advance, plus interest, will be repaid from
amounts on deposit in the Collection Account before further distributions on the
certificates.
Interest is payable on Advances at a floating rate (the "ADVANCE RATE")
equal to the prime rate as published in The Wall Street Journal. If Advance
interest is outstanding on a Mortgage Loan at the time a late payment charge or
default interest is collected for that Mortgage Loan, then those amounts will be
used to pay such outstanding Advance interest. If those collections are
insufficient, any remaining Advance interest will be paid from general
collections on all Mortgage Loans at the time that the Advance is repaid.
However, no interest will accrue for any P&I Advance until after the
grace period for the related Mortgage Loan has expired. In addition, no interest
will accrue for a P&I Advance if the borrower pays the delinquent Monthly
Payment on or before the business day before the related distribution date.
If interest on Advances is not offset by default interest, late payment
charges or other amounts, the shortfall will reduce amounts payable on the
certificates. Hence, it is possible that the making of Advances (and the
charging of interest on
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<PAGE>
Advances while they are outstanding) could reduce total amounts payable to
certificateholders even if all amounts due from borrowers are eventually
received.
ACCOUNTS
COLLECTION ACCOUNT
The master servicer will establish and maintain a segregated account or
accounts (the "COLLECTION ACCOUNT") into which it must deposit the following
amounts relating to the Mortgage Loans:
o all principal payments;
o all payments of interest, including default interest and Deferred Interest,
any prepayment premiums and any late fees and late payment charges;
o any amounts required to be deposited by the master servicer for:
1. losses realized on permitted investments of funds in the Collection
Account, and
2. Prepayment/Balloon Payment Interest Shortfalls;
o all Net REO Proceeds transferred from an REO Account;
o all condemnation proceeds, insurance proceeds and net liquidation proceeds
not required to be applied to restore or repair the Mortgaged Property;
o any amounts received from borrowers as recoveries of Servicing Advances;
o proceeds of any purchase or repurchase of a Mortgage Loan by the applicable
seller, and
o other amounts that the pooling and servicing agreement requires the master
servicer to deposit into the Collection Account.
The master servicer will deposit these amounts into the Collection
Account within two business days after receipt. The Collection Account will be
held by the master servicer for the benefit of the trustee and the
certificateholders.
See "Description of the Mortgage Pool--Representations and Warranties;
Repurchase", "The Pooling and Servicing Agreement--Realization Upon Mortgage
Loans" and "Description of the Certificates--Optional Termination".
"REO PROCEEDS" for any REO Property are all revenues received by the
special servicer on the REO Property other than liquidation proceeds.
"NET REO PROCEEDS" for any REO Property are REO Proceeds less any
insurance premiums, taxes, assessments and other costs and expenses permitted to
be paid from the related REO Account.
The master servicer need not deposit into the Collection Account any
payments in the nature of NSF check charges, assumption fees, loan modification
fees, loan service transaction fees, extension fees, demand fees, beneficiary
statement charges and similar fees. To the extent permitted by applicable law
and as provided in the pooling and servicing agreement, the master servicer or
the special servicer may retain such amounts as additional servicing
compensation. If the master servicer mistakenly deposits any amount into the
Collection Account, it may withdraw the mistaken deposit from the Collection
Account at any time.
INTEREST RESERVE ACCOUNT
The trustee will establish and maintain an "INTEREST RESERVE ACCOUNT"
for the benefit of the holders of the certificates. For the distribution date in
each January (other than a leap year) and each February, the trustee will
deposit into the Interest Reserve Account for each Mortgage Loan bearing
interest computed on an actual/360 basis (the "INTEREST RESERVE LOANS") an
amount equal to one day's interest at the related Mortgage Rate less the rates
at which the related master servicer fee, the standby special servicer fee and
the trustee fee are computed on its Stated Principal Balance as of the due date
in the month in which the distribution date occurs (the "INTEREST RESERVE
AMOUNT"). The trustee will not make the deposit if the applicable Monthly
Payment has not been paid or advanced. The trustee will calculate the Interest
Reserve Amount without regard to the adjustments to the Net Mortgage Rates for
Interest Reserve Loans described under "Description of the
Certificates--Pass-Through Rates". For distribution dates in March of each year,
the trustee will deposit the Interest Reserve Amounts into the Distribution
Account and include these amounts as part of the Available Funds for the
distribution date.
EXCESS LIQUIDATION PROCEEDS ACCOUNT
If any Excess Liquidation Proceeds are received, the trustee will
establish and maintain a
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segregated account or accounts (the "EXCESS LIQUIDATION PROCEEDS ACCOUNT") in
the name of the trustee, in trust for the benefit of the certificateholders. On
the business day before each distribution date, the master servicer will remit
to the trustee from the Collection Account and for deposit into the Excess
Liquidation Proceeds Account all Excess Liquidation Proceeds received during the
related collection period. The trustee will distribute Excess Liquidation
Proceeds to the certificateholders in the manner set forth in "Description of
the Certificates--Distributions--Distributions of Excess Liquidation Proceeds".
DISTRIBUTION ACCOUNT
The trustee will establish a segregated account or accounts (the
"DISTRIBUTION ACCOUNT") into which the master servicer must deposit the
following amounts:
o a total amount equal to the Available Funds (to the extent included in the
Collection Account, which will be determined without regard to Interest
Reserve Amounts),
o any prepayment premiums and Deferred Interest received during the
Collection Period, and
o all P&I Advances required for the distribution date and not already
included in the Available Funds.
The master servicer will deposit these amounts into the Distribution
Account on the business day before each distribution date. The Distribution
Account will be held by the trustee for the benefit of the certificateholders.
See "Description of the Certificates--Distributions".
WHERE ACCOUNTS MAY BE MAINTAINED
The Collection Account, Distribution Account, Interest Reserve Account
and Excess Liquidation Proceeds Account must each be either:
o for funds that will be held for more than 30 days, an account or accounts
maintained with a depository institution or trust company the long-term
unsecured debt obligations of which (or of its parent holding company) are
rated "Aa3" or better by Moody's (or, if not so rated by Moody's, then
otherwise approved by Moody's), and "A" or better by Standard & Poor's (or,
if not so rated by Standard & Poor's, then otherwise approved by Standard &
Poor's); or
o for funds that will be held for 30 days or less, an account or accounts
maintained with a depository institution or trust company, the short-term
unsecured debt obligations of which (or of its parent holding company's)
are rated "P1" or better by Moody's (or, if not so rated by Moody's, then
otherwise approved by Moody's), and "A-1" or better by Standard & Poor's
(or, if not so rated by Standard & Poor's, then otherwise approved by
Standard & Poor's); or
o a segregated trust account or accounts maintained with a federal- or
state-chartered depository institution or trust company acting in its
fiduciary capacity:
1. having a combined capital and surplus of at least $50,000,000,
2. subject to supervision or examination by a federal or state authority,
and
3. for state-chartered institutions, subject to regulations regarding
fiduciary funds on deposit substantially similar to 12 CFR 9.10(b); or
o an account which each of the Rating Agencies confirms 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; or
o an account or accounts maintained with PNC Bank, National Association so
long as PNC Bank long term unsecured debt rating shall be at least "A1"
from Moody's; provided that PNC Bank has the required ratings from Standard
and Poor's specified above.
INVESTMENT OF FUNDS IN THE ACCOUNTS
Amounts on deposit in such accounts may be invested in United States
government securities and other investments specified in the pooling and
servicing agreement. See "Description of the Governing Documents--Collection and
Other Servicing Procedures With Respect to Mortgage Loans--Accounts" in the
prospectus for a listing of permitted investments.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The master servicer may withdraw funds from the Collection Account for
the following purposes:
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o to remit Available Funds, Deferred Interest and prepayment premiums to the
Distribution Account,
o to remit Excess Liquidation Proceeds to the Excess Liquidation Proceeds
Account,
o to pay or reimburse itself, the special servicer, the trustee or the fiscal
agent for Advances and interest on Advances, those payments or
reimbursements to be made from the sources described under "--Advances"
above,
o to pay the unpaid portion of the master servicing fee, the standby special
servicing fee and the special servicing fee (in the case of the master
servicing fee, from interest received on the related Mortgage Loan),
o to pay the trustee fee to the trustee,
o to pay to itself any investment income earned on funds deposited in the
Collection Account,
o to pay any Prepayment/Balloon Payment Interest Excess received in the
preceding Collection Period to itself as additional servicing compensation,
o to pay to itself or the special servicer other amounts constituting
additional servicing compensation,
o to pay to the depositor, the applicable seller or other purchaser with
respect to each Mortgage Loan or REO Property that has been purchased or
repurchased by it, all amounts received on such loan or property during the
related Collection Period and subsequent to the date as of which the amount
required to effect the purchase or repurchase was determined,
o to reimburse or pay itself, the special servicer, the trustee, the
depositor and/or the fiscal agent for other unreimbursed expenses that are
reimbursable under the pooling and servicing agreement,
o to satisfy any indemnification obligations of the trust fund under the
pooling and servicing agreement,
o to pay to the trustee amounts requested by it to pay taxes on certain net
income with respect to REO Properties,
o to withdraw any amount mistakenly deposited into the Collection Account,
and
o to clear and terminate the Collection Account upon termination and
liquidation of the trust fund.
ENFORCEMENT OF "DUE-ON-SALE" CLAUSES
The special servicer will exercise or waive its right to exercise
"due-on-sale" clauses in Mortgage Loan documents in accordance with the
servicing standard. However, with respect to any Mortgage Loan that has a then
outstanding principal balance equal to or greater than the lesser of $20 million
and 2% of the then outstanding principal balance of all of the Mortgage Loans,
the special servicer may waive a "due-on-sale" clause only if it first obtains
written confirmation from each Rating Agency that the waiver will not result in
a qualification, downgrade or withdrawal of the rating then assigned by that
Rating Agency to any class of certificates.
The costs and expenses associated with obtaining such a Rating Agency
confirmation will not be an expense of the Trust. For purposes of determining
whether such a Rating Agency confirmation is required, all Mortgage Loans in a
set of Cross-Collateralized Loans and all Mortgage Loans in a group with the
same or affiliated borrowers will be aggregated and treated as one. See "--The
Operating Adviser" for additional limitations on the ability of the special
servicer to waive "due-on-sale" clauses.
If the special servicer waives the "due-on-sale" clause it may either:
o release the original borrower from liability under the Mortgage Loan and
substitute the new owner as the borrower, or
o enter into an assumption agreement with the new owner of the Mortgaged
Property.
To the extent permitted by law, the special servicer will enter into an
assumption or substitution agreement only if the credit status of the
prospective new owner is in compliance with:
o the special servicer's regular commercial mortgage origination or servicing
standards and criteria,
o the terms of the Mortgage Loan, and
o any other standards set by the special servicer consistent with the
servicing standard.
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If a Mortgage Loan is assumed, the only permitted modifications that
may be made as part of the assumption are those described below under
"--Amendments, Modifications and Waivers".
The master servicer will receive 75% and the special servicer will
receive 25% of assumption fees on non-Specially Serviced Mortgage Loans paid by
the borrower or the new owner as additional servicing compensation. The special
servicer will receive 100% of the assumption fees on Specially Serviced Mortgage
Loans as additional servicing compensation.
In a bankruptcy or similar proceeding involving a Mortgaged Property, a
court may substitute a new owner or impose a junior or senior lien on the
Mortgaged Property, without the consent of the master servicer, the special
servicer or the trustee.
ENFORCEMENT OF "DUE-ON-ENCUMBRANCE" CLAUSES
Most of the Mortgage Loans contain a "due-on-encumbrance" clause, which
generally either:
o provides that the 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 the Mortgaged Property, or
o requires the consent of the related mortgagee to the creation of any lien
or other encumbrance on the Mortgaged Property.
Such clauses usually permit the owner of the Mortgage Loan to either:
o accelerate the payments due on the Mortgage Loan, or
o withhold its consent to the creation of any such lien or other encumbrance.
The special servicer may in accordance with the servicing standard
either exercise or waive its right to exercise the trust fund's rights under the
"due-on-encumbrance" clauses in the Mortgage Loan documents. However, the
special servicer may consent to the creation of any lien or encumbrance, only if
it first obtains written confirmation from each of the Rating Agencies that such
consent will not result in a qualification, downgrade or withdrawal of the
rating then assigned by that Rating Agency to any class of certificates.
The special servicer must use reasonable efforts to require the
borrower to pay the cost of such Rating Agency confirmation. The master servicer
will advance any costs not paid by the borrower as a Servicing Advance (unless
the Advance would be nonrecoverable).
See "--The Operating Adviser" for additional limitations on the ability
of the special servicer to waive "due-on-encumbrance" clauses.
The special servicer may forbear from enforcing any
"due-on-encumbrance" provision in connection with any junior or senior lien on a
Mortgaged Property imposed in a bankruptcy proceeding involving the Mortgaged
Property without obtaining a Rating Agency confirmation.
INSPECTIONS
The special servicer is responsible for inspecting the Mortgaged
Properties securing Specially Serviced Mortgage Loans and REO Properties. The
master servicer is responsible for inspecting the other Mortgaged Properties.
Each Mortgaged Property and REO Property will be inspected at least once every
two years and within 60 days after it becomes a Specially Serviced Mortgage
Loan. If a Mortgage Loan has a then current principal balance of at least
$2,000,000 or 2% of the then outstanding principal balance of all Mortgage Loans
in the trust fund or is a Specially Serviced Mortgaged Loan, the related
Mortgaged Property will be inspected at least once every year. The annual and
bi-annual inspections described above will be done at the expense of the
servicer performing the inspection. The inspection done at the time a Mortgage
Loan becomes a Specially Serviced Mortgage Loan will be an expense of the trust.
The master servicer and the special servicer will cause a written inspection
report to be prepared as soon as reasonably possible after completing the
inspection. A copy of each inspection report must be delivered to the trustee
and the operating adviser within 15 days after its preparation.
REALIZATION UPON MORTGAGE LOANS
STANDARDS FOR CONDUCT GENERALLY IN EFFECTING FORECLOSURE OR THE SALE OF
DEFAULTED LOANS
The master servicer will advance costs and expenses of a foreclosure or
other acquisition as a Servicing Advance, unless the Advance would be
nonrecoverable.
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The special servicer may proceed with a non-judicial foreclosure under
the laws of the state where the property is located. The special servicer need
not pursue a deficiency judgment against the borrower or any other party if the
laws of the state do not permit a deficiency judgment after a non-judicial
foreclosure. The special servicer may also refrain from seeking a deficiency
judgment if it determines that the likely recovery would not warrant the cost,
time, expense and/or exposure of pursuing the deficiency judgment.
Until the conditions listed in the next sentence are satisfied, the
special servicer may not obtain title or possession or take any other action
regarding a Mortgaged Property on behalf of the trust fund, if as a result the
trustee or the trust fund would be considered to hold title, to be a
"mortgagee-in-possession", or to be an "owner" or "operator" within the meaning
of the Comprehensive Environmental Response, Compensation and Liability Act of
1980 or any comparable law. The special servicer may proceed with such steps if
it has determined, based on an updated environmental assessment report prepared
by an independent person who regularly conducts environmental audits, that:
o the Mortgaged Property complies with applicable environmental laws or, if
not, after consultation with an environmental consultant, that it would be
in the trust fund's best economic interest to take necessary corrective
measures, and
o there are no circumstances present at the Mortgaged Property relating to
the use, management or disposal of hazardous materials for which
investigation, testing, monitoring, containment, clean-up or remediation
could be required under current federal, state or local law or regulation,
or if any such hazardous materials are present for which such action could
be required, after consultation with an environmental consultant, that it
would be in the trust fund's best economic interest to take such actions.
The cost of any environmental assessments, as well as the cost of any
remedial, corrective or other further action contemplated by the prior paragraph
will be advanced as a Servicing Advance, unless the advance would not be
recoverable.
If 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 will not include the master servicer or
the special servicer) or to a separate trustee or co-trustee on behalf of the
trustee, as the holder of the REMIC I certificates and as trustee for the
holders of the certificates. Notwithstanding any such acquisition of title and
cancellation of the related Mortgage Loan, the Mortgage Loan will be considered
to be a Mortgage Loan held in the trust fund until the related REO Property is
sold by the trust fund, which must occur before the close of the third taxable
year following the taxable year in which the trust acquired the property. The
Internal Revenue Service has the authority to grant extensions of this period.
The principal balance of the loan will be reduced by Net REO Proceeds allocated
to it as a recovery of 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 special
servicer must administer the Mortgaged Property so that it qualifies at all
times as "foreclosure property" within the meaning of section 860G(a)(8) of the
Internal Revenue Code. An "independent contractor," within the meaning of
applicable Treasury regulations, must manage and operate any Mortgaged Property,
unless the special servicer provides the trustee with an opinion of counsel that
the operation and management of the property other than through an independent
contractor will not cause the property to fail to qualify as "foreclosure
property". The expense of the legal opinion will be covered by a Servicing
Advance, unless the advance would not be recoverable. The special servicer must
hire the independent contractor within 90 days after the trust fund acquires the
Mortgaged Property. Generally, REMIC I will not be taxed on income received on
Mortgaged Property which constitutes "rents from real property," under section
856(c)(3)(A) of the Internal Revenue Code and the related Treasury regulations.
"Rents from real property" do not include the portion of any rental
based on the net income or gain of any tenant or sub-tenant. No determination
has been made whether rent on any of the Mortgaged Properties meets this
requirement.
"Rents from real property" include charges for services customarily
furnished or rendered in connection with the rental of real property, whether or
not the charges are separately stated. Services furnished to the tenants of a
particular building will be considered customary if, in the geographic market in
which the building is located, tenants in buildings that are of a similar class
are customarily provided
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with the service. The depositor has not determined 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 from a Mortgaged Property owned by the trust fund would not
constitute "rents from real property".
Net income from a trade or business operated or managed by an
independent contractor on a Mortgaged Property owned by REMIC I does not
constitute "rents from real property". Finally, any income from the sale of REO
Property that is held by REMIC I as a dealer in property is not considered "rent
from real property".
If the REO Property remains "foreclosure property", any income that is
not "rent from real property" is subject to tax at the highest corporate rate
(currently 35%). REMIC I may also be subject to state and local taxes on such
amounts. In addition, certain income from REO Property may be subject to a
"prohibited transactions" tax. Any such income would be subject to a 100% tax;
however, REMIC I does not expect any income from any REO Property to be subject
to this 100% tax. See "Federal Income Tax Consequences--Prohibited Transactions
Tax and Other Taxes" in the prospectus.
Any such taxes would be chargeable against the related income for
purposes of determining the Net REO Proceeds available for distribution to
holders of certificates. The pooling and servicing agreement allows the special
servicer to cause the trust fund to earn "net income from foreclosure property"
that is subject to tax, if it determines that the net after-tax benefit to
certificateholders is greater than what would be realized under another method
of operating or leasing the Mortgaged Property. See "Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular Certificates" and
"--Taxation of Owners of REMIC Residual Certificates" in the prospectus.
SALE OF SPECIALLY SERVICED MORTGAGE LOANS AND REO PROPERTIES
The special servicer may offer to sell a Specially Serviced Mortgage
Loan or an REO Property, if it determines in accordance with the servicing
standard that the sale would be in the best economic interests of the trust
fund.
The special servicer must give the trustee and the operating adviser at
least 10 business days prior written notice of its intention to sell any
Specially Serviced Mortgage Loan or REO Property The operating adviser may
purchase the loan or property, directly or through an affiliate, for cash equal
to the Repurchase Price.
If the operating adviser (or a designated affiliate) fails to purchase
the loan or property within 10 business days after the operating advisor
receives notice, either the special servicer or the master servicer, in that
order of priority, may purchase the loan or property, directly or through an
affiliate, for cash equal to the Repurchase Price.
If none of the forgoing purchases the loan or property, the special
servicer may then offer to sell the loan or property if and when the special
servicer determines that the sale would be in the best economic interests of the
trust fund. The special servicer must sell the loan or property within the
period specified in the pooling and servicing agreement, including extensions.
The operating adviser, the master servicer and the special servicer may
offer to purchase any such loan or property. The special servicer will accept
any offer received from any person:
o that it determines to be a fair price, unless the highest offeror is the
special servicer or one of its affiliates, or
o that the trustee determines to be a fair price, if the highest offeror is
the special servicer or one of its affiliates.
In making such a fairness determination, the special servicer or
trustee may rely upon an updated independent appraisal. Any offer from the
depositor, the master servicer, the special servicer, any borrower, the manager
of a Mortgaged Property or any of their affiliates in the amount of the
Repurchase Price shall be deemed to be a fair price.
Neither the trustee (in its individual capacity) nor any of its
affiliates may purchase or offer to purchase the loan or property.
The special servicer may accept an offer other than the highest offer
if it determines that accepting the offer would be in the best interests of the
certificateholders. For example, the person making the lower offer could be more
likely to perform its obligations or the lower offer may have more favorable
terms.
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AMENDMENTS, MODIFICATIONS AND WAIVERS
Subject to any restrictions applicable to REMICs, and to limitations
under the pooling and servicing agreement, the master servicer may amend any
term of any loan that is not a Specially Serviced Mortgage Loan, if the
amendment:
o does not affect the maturity date, interest rate, principal balance,
amortization term or payment frequency of the loan (each, a "MONEY TERM"),
or
o cures any ambiguity in the loan, or corrects or supplements any provisions
of the loan that are inconsistent with any other provisions of the loan or
corrects any error in the loan.
The term "Money Term" does not include any provisions relating to late fees,
Deferred Interest or Default Interest. However, the master servicer must obtain
the consent of the special servicer to amend, modify or waive:
o any event of default provision,
o any obligation of the borrower to pay any assumption fee, modification fee
or any other fees or expenses, all or part of which the special servicer
may be entitled to as servicing compensation, or
o any term relating to the release or substitution of collateral.
Subject to restrictions applicable to REMICs and to limitations in the
pooling and servicing agreement, the special servicer may agree to a
modification, waiver or amendment of the terms of any Specially Serviced
Mortgage Loan if, in the special servicer's reasonable judgment:
o the related borrower is in default or default is reasonably foreseeable,
and
o the modification, waiver or amendment would increase the recovery to
certificateholders on a net present value basis.
Examples of the types of modifications, waivers or amendments to which
the special servicer may agree include:
o reducing the amounts owing under the loan by forgiving principal, accrued
interest and/or any prepayment premium,
o reducing the amount of the monthly payment on the loan, including a
reduction in the interest rate,
o not enforcing any right granted under any note or mortgage relating to the
loan,
o extending the maturity date of the loan, and/or
o accepting a principal prepayment during a Lock-out Period.
However, the special servicer may not permit a borrower to extend the
maturity date to a date later than:
o two years before the Rated Final Distribution Date, or
o 20 years before the expiration of any ground lease that secures the loan.
If the terms of a Mortgage Loan having one of the ten largest current
outstanding principal balances of all Mortgage Loans in the trust fund require
the related borrower to obtain the Mortgagee's consent before changing any
franchise with respect to any hotel or motel located on the related Mortgaged
Property, the master servicer or special servicer, as applicable, may consent to
any such change only if it first obtains written confirmation from each Rating
Agency that the consent will not result in a qualification, downgrade or
withdrawal of the rating then assigned by that Rating Agency to any class of
certificates. For purposes of determining whether such a Rating Agency
confirmation is required, all Mortgage Loans in a set of Cross-Collateralized
Loans and all Mortgage Loans in a group with the same or affiliated borrowers
will be aggregated and treated as one. In addition, the master servicer may
grant such consent only if it first receives the consent of the special
servicer. The master servicer or the special servicer, as applicable, shall use
its reasonable efforts to cause the borrower to pay the costs of obtaining any
required Rating Agency confirmation. If such costs are not paid by the borrower,
the master servicer will advance such costs as a Servicing Advance, unless such
Advance would be a Nonrecoverable Advance.
Modifications of a Mortgage Loan that forgive principal or interest
(other than Deferred Interest and, in some cases, default interest) will cause
Realized Losses on the loan. Such Realized Losses will be allocated among the
classes of certificates as described under "Description of the Certificates--
Application of Realized Loses and
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Expense Losses and Principal Balances" and "--Subordination" in this prospectus
supplement.
THE TRUSTEE
LaSalle Bank National Association will act as trustee. The address of
the trustee's corporate trust office is:
135 South LaSalle Street
Suite 1625
Chicago, Illinois 60603
Attn: Asset-Backed Securities Trust Services Group--PNC Mortgage
Acceptance Corp. Commercial Mortgage Pass-Through Certificates,
Series 2000-C2
RESIGNATION AND REMOVAL OF TRUSTEE
The trustee may resign at any time by notifying the depositor, the
master servicer, the special servicer and the Rating Agencies in writing. The
trustee's resignation will also remove the fiscal agent. The master servicer
will appoint the successor trustee and fiscal agent. Before appointing a
successor trustee, the master servicer must obtain confirmation from the Rating
Agencies that the successor trustee's appointment will not adversely affect the
rating then assigned by the Rating Agencies to any of the certificates. If any
successor fiscal agent is not rated by each rating agency in one of its two
highest long-term unsecured debt rating categories and written confirmation will
be obtained from each Rating Agency that the successor fiscal agent's
appointment will not adversely affect the rating then assigned by the Rating
Agency to any certificates. The resigning trustee must pay any cost of obtaining
the Rating Agency confirmations. If the successor trustee and successor fiscal
agent are not appointed within 30 days after the notice of resignation, the
resigning trustee and departing fiscal agent may petition a court of competent
jurisdiction to appoint 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:
o the trustee becomes ineligible to continue as such under the pooling and
servicing agreement,
o the trustee or the fiscal agent becomes incapable of acting,
o the trustee or the fiscal agent is adjudged bankrupt or insolvent,
o a receiver is appointed for the trustee, the fiscal agent or their
property, or
o any public officer takes charge or control of the trustee, the fiscal agent
or their property.
The holders of certificates evidencing a majority of the total 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. If such removal is without cause, the reasonable costs and expenses of
the removed trustee and fiscal agent in connection with such removal shall be
paid as an Additional Trust Fund Expense.
Resignation or removal of the trustee and the fiscal agent is effective
only when the successor trustee (and fiscal agent, if necessary) accepts the
appointment.
TRUSTEE FEE
The pooling and servicing agreement entitles the trustee to a monthly
fee from amounts in the Collection Account. The trustee fee is calculated at the
rate specified in the pooling and servicing agreement and is based on the then
outstanding principal balance of each Mortgage Loan and in the same manner as
interest is calculated on the Mortgage Loan. Any trustee fee rate calculated on
an Actual/360 basis will be recomputed on a 30/360 basis for purposes of
calculating the Net Mortgage Rate.
INDEMNIFICATION OF TRUSTEE
The trust fund will indemnify the trustee, the fiscal agent and their
directors, officers, employees, agents and affiliates against any and all
losses, liabilities, damages, claims or expenses (including reasonable
attorneys' fees) arising under 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). However, the indemnification will not apply to matters resulting
from the negligence, bad faith or willful misconduct of the indemnified person
or for any expense or liability specifically required to be borne by the trustee
in the pooling and servicing agreement. The trustee need not expend or risk its
own funds or otherwise incur financial liability in
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performing its duties under the pooling and servicing agreement, or in
exercising its rights or powers, if in the trustee's opinion the repayment of
such funds or adequate indemnity against the risk of liability is not reasonably
assured.
The master servicer and the special servicer will each indemnify the
trustee, the fiscal agent and their directors, officers, employees, agents and
affiliates for similar losses related to the willful misconduct, bad faith
and/or negligence in the performance or negligent disregard by the master
servicer or the special servicer, as the case may be, of its duties under the
pooling and servicing agreement.
DUTIES OF 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 must perform only those duties specifically imposed under the
pooling and servicing agreement. If an event of default has occurred and has not
been cured, the trustee will be required to use the same degree of skill and
care in exercising its rights and powers under the pooling and servicing
agreement that a prudent person would use in its own personal affairs under
similar circumstances. Upon receipt of the various certificates, reports or
other documents required to be furnished to it, the trustee must examine the
documents and determine whether they conform on their face to the requirements
of the pooling and servicing agreement.
If the master servicer fails to make a required Advance, the trustee
must make the Advance unless it deems the Advance nonrecoverable. See
"--Advances".
Except for funds held by the trustee, the trustee and the fiscal agent
will not be accountable for:
o the use or application by the depositor of any certificates or the proceeds
of the certificates,
o the use or application of funds paid to the depositor, the master servicer
or the special servicer relating to the Mortgage Loans, or
o the use or application of funds deposited in or withdrawn from the
Collection Account or the Distribution Account by the depositor, the master
servicer or the special servicer.
The trustee, the fiscal agent, the special servicer and master servicer
will make no representation as to:
o the validity or sufficiency of the pooling and servicing agreement, the
certificates, this prospectus supplement or the prospectus, or
o the validity, enforceability or sufficiency of the Mortgage Loans or
related documents.
THE FISCAL AGENT
ABN AMRO Bank N.V., a Netherlands banking corporation that is the
trustee's indirect parent, will act as fiscal agent for the trustee. The fiscal
agent must make any Advance the trustee is required to make but does not make.
However, the fiscal agent need not make any Advance that it deems
nonrecoverable. See "--Advances".
If the trustee resigns or is removed, the fiscal agent will resign or
will be removed. The initial fiscal agent need not act in such capacity at any
time that LaSalle Bank National Association is not the trustee.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The master servicer will be entitled to a monthly servicing fee for
each Mortgage Loan. The fee is calculated at the per annum rate listed in
Appendix II based on the then outstanding principal balance of the Mortgage Loan
and in the same manner as interest is calculated on the Mortgage Loan. Any
master servicing fee rate calculated on an Actual/360 basis will be recomputed
on a 30/360 basis for purposes of calculating the Net Mortgage Rate.
The master servicing fee for each loan will be retained by the master
servicer from payments and collections (including insurance proceeds and
liquidation proceeds) on the loan. The master servicer will also retain as
additional servicing compensation:
o all investment income earned on amounts in the Reserve Accounts (to the
extent consistent with applicable law and the related Mortgage Loan
documents) and the Collection Account,
o all amounts collected on the Mortgage Loans (except Specially Serviced
Mortgage Loans) in the nature of late payment charges or late fees or
default interest (other than amounts used to pay
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Advance interest), loan service transaction fees, demand fees, beneficiary
statement charges and similar fees and charges (but excluding prepayment
premiums),
o 75% of any extension fees, modification fees, consent fees and assumption
fees collected on the Mortgage Loans (except Specially Serviced Mortgage
Loans),
o all insufficient funds check charges (including insufficient funds check
charges arising from Specially Serviced Mortgage Loans), and
o any Prepayment/Balloon Payment Interest Excess (to the extent not offset
against any Prepayment/Balloon Payment Interest Shortfall).
If Midland resigns or is terminated as the master servicer and the
successor master servicer agrees to perform the services of the master servicer
for an amount less than the master servicing fee, the certificateholders will
not receive any portion of the excess master servicing fee.
The master servicer will pay all expenses incurred by it in connection
with its responsibilities under the pooling and servicing agreement (subject to
reimbursement as provided in the agreement), including all fees of any
sub-servicers retained by it.
SPECIAL SERVICING
ABILITY OF OPERATING ADVISER TO REMOVE SPECIAL SERVICER
The operating advisor may at any time remove the special servicer
without cause and appoint a successor special servicer. The removal of the
special servicer and appointment of a successor special servicer will be
effective only when:
o the successor special servicer has assumed in writing all of the
responsibilities, duties and liabilities of the special servicer under the
pooling and servicing agreement, and
o each Rating Agency confirms to the trustee in writing that such appointment
and assumption will not result, in and of itself, in a downgrading,
withdrawal or qualification of the rating then assigned by the Rating
Agency to any class of certificates.
The operating adviser or the successor special servicer must pay:
o the cost of obtaining such Rating Agency confirmation, and
o if the termination of the special servicer was without cause, the
reasonable out-of-pocket costs and expenses of any such transfer.
The removed special servicer may receive all amounts accrued and owing to it on
or prior to the effective date of the removal, including the right to receive
workout fees and disposition fees as and to the extent described under
"--Special Servicer Compensation."
DUTIES OF SPECIAL SERVICER
The duties of the special servicer relate primarily to Specially
Serviced Mortgage Loans and to any REO Property. A "SPECIALLY SERVICED MORTGAGE
LOAN" is any Mortgage Loan for which at least one of the following conditions
exist.
Loans with Monetary Defaults
o The borrower is at least 60 days delinquent in paying principal and
interest or other obligation (regardless of whether P&I Advances have been
reimbursed), or
o the borrower has failed to make a balloon payment, except where either
o the master servicer and the special servicer agree in writing that the
loan is likely to be paid in full within 30 days after such default, or
o on or before the date of the default, the borrower has delivered to the
master servicer a firm commitment to refinance the related Mortgage
Loan within 60 days of the default;
however, such loans cease to be Specially Serviced Mortgage Loans when:
o the borrower brings the loan current (under workout terms agreed to by the
special servicer for a balloon payment default),
o the borrower makes three consecutive full and timely monthly payments, and
o no other circumstances exist that would cause the loan to be characterized
as a Specially Serviced Mortgage Loan.
Loans that are likely to have Monetary Defaults
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o The borrower has expressed to the master servicer an inability to pay or a
hardship in paying the loan in accordance with its terms,
o the master servicer has received notice of a foreclosure or threatened
foreclosure of any lien on the property securing the loan,
o the master servicer or special 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, or
o the master servicer proposes to commence foreclosure or other workout
arrangements;
however, such loans cease to be Specially Serviced Mortgage Loans when:
o the above circumstances cease to exist in the good faith and reasonable
judgment of the special servicer, and
o no other circumstances exist that would cause the loan to be characterized
as a Specially Serviced Mortgage Loan.
Loans with Nonmonetary Defaults
o The master servicer or the special servicer has notice that a nonmonetary
default that materially and adversely affects the interests of the
certificateholders has occurred and the default remains uncured after the
specified grace period (or, if no grace period is specified, after 60
days);
however, such loans cease to be Specially Serviced Mortgage Loans when:
o the default is cured, and
o no other circumstances exist that would cause the loan to be characterized
as a Specially Serviced Mortgage Loan.
A default requiring a Servicing Advance will be deemed to materially
and adversely affect the interests of certificateholders for purposes of
determining whether a Mortgage Loan is a Specially Serviced Mortgage Loan.
SPECIAL SERVICER COMPENSATION
The special servicer is entitled to a monthly standby special servicing
fee and a monthly special servicing fee. The standby special servicing fee will
accrue with respect to each Mortgage Loan (including each Specially Serviced
Mortgage Loan and each Mortgage Loan as to which the related Mortgaged Property
has become an REO Property) in the same manner as the master servicing fee, at a
rate equal to 0.005% per annum. The standby special servicer fee payable to the
special servicer each month will be reduced, but not below zero, by the amount
of any special servicer fee, workout fee or disposition fee paid to the special
servicer during that month. The special servicing fee is an amount equal to
0.25% per annum of the Stated Principal Balance of each Specially Serviced
Mortgage Loan. The special servicer will also receive a disposition fee on any
Specially Serviced Mortgage Loan or REO Property sold, transferred or otherwise
liquidated equal to 1% of:
o the proceeds of the sale, liquidation or condemnation of, or any partial or
unscheduled payment with respect to, any Specially Serviced Mortgage Loan
or REO Property
less
o any broker's commission and related brokerage referral fees.
No disposition fee will be paid in connection with:
o the repurchase of a Mortgage Loan as described under "Description of the
Mortgage Pool--Representations and Warranties; Repurchase";
o the termination of the trust as described under "Description of the
Certificates--Optional Termination", or
o the purchase of any defaulted Mortgage Loan by the operating adviser, the
master servicer or special servicer as described under "The Pooling and
Servicing Agreement--Realization Upon Mortgage Loans--Sale of Specially
Serviced Mortgage Loans and REO Properties".
Each of these fees, plus certain special servicing expenses, will be
paid from funds that would otherwise be used to pay principal and interest on
the certificates.
The special servicer is also entitled to a workout fee equal to 1.0% of
the Net Collections received by the master servicer or the special servicer on
each Corrected Mortgage Loan. "NET COLLECTIONS" means all payments of interest
and principal and all prepayment premiums.
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A loan which has ceased to be a Specially Serviced Mortgage Loan by
virtue of a cure resulting from a modification, restructuring or workout
negotiated by the special servicer evidenced by a signed writing is a "CORRECTED
MORTGAGE LOAN"
If any Corrected Mortgage Loan again becomes a Specially Serviced
Mortgage Loan, any right to the workout fee terminates for the initial
modification, restructuring or workout. However, the special servicer will
receive a new workout fee for the loan upon resolution or workout of a
subsequent event of default under the loan. If the special servicer is
terminated for any reason, it will receive:
o any workout fees payable on--
o Mortgage Loans that became Corrected Mortgage Loans while it acted as
special servicer; and
o Specially Serviced Mortgage Loans for which the terminated special
servicer had cured the event of default through a modification,
restructuring or workout negotiated by the special servicer and
evidenced by a signed writing, but which had not as of the time the
special servicer was terminated become a Corrected Mortgage Loan
solely because the borrower had not made three consecutive timely
monthly payments and which subsequently becomes a Corrected Mortgage
Loan as a result of the borrower making such three consecutive timely
monthly payments; and
o a portion of any disposition fee that becomes payable with respect to a
Specially Serviced Mortgage Loan or related REO Property that was being
administered by the special servicer at the time of termination. The
terminated special servicer and the successor special servicer will
apportion the disposition fee between themselves in a manner that reflects
their relative contributions in earning the fee.
The special servicer will also retain as additional servicing
compensation:
o all investment income earned on amounts on deposit in any REO Account,
o if permitted under the Mortgage Loan, late payment charges or late fees or
default interest (other than amounts used to pay Advance interest),
assumption fees, loan modification fees, extension fees, loan service
transaction fees, beneficiary statement charges or similar items that are
collected on Specially Serviced Mortgage Loans, and
o if permitted under the Mortgage Loan, 25% of any extension fees,
modification fees, consent fees and assumption fees collected on Mortgage
Loans that are not Specially Serviced Mortgage Loans.
Additional special servicing compensation does not include prepayment
premiums or any other amount required to be deposited or retained in the
Collection Account.
THE OPERATING ADVISER
SELECTION
The holders of more than 50% of the principal balance of the
Controlling Class may appoint an operating adviser to represent their interests.
If the holders of more than 50% of the principal balance of the Controlling
Class cannot agree on the election of the operating adviser, then Midland Loan
Services, Inc. will be the operating adviser.
The "CONTROLLING CLASS" is the most subordinate class of principal
balance certificates that still has at least 25% of its original principal
balance outstanding. If no class has at least 25% of its initial principal
balance still outstanding, the most subordinate class of principal balance
certificates still outstanding will be the controlling class.
RIGHTS AND POWERS
The operating adviser may advise the special servicer about the
following matters:
o foreclosure or similar conversion of the ownership of properties securing
Specially Serviced Mortgage Loans that are in default, including acquiring
an REO Property,
o amendment, waiver or modification of a Money-Term or any other material
non-monetary term of a Specially Serviced Mortgage Loan,
o proposed sale of a defaulted Mortgage Loan or REO Property for less than
the Repurchase Price, except upon termination of the trust fund as
described under "Description of the Certificates--Optional Termination",
o acceptance of a discounted payoff,
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o determination to bring an REO Property into compliance with environmental
laws or to address hazardous materials located at an REO Property,
o release of collateral, other than in accordance with the terms or upon
satisfaction of a loan,
o acceptance of substitute or additional collateral, other than in accordance
with the terms of a loan,
o any waiver of a "due-on-sale" or "due-on-encumbrance" clause,
o acceptance of an assumption agreement releasing a borrower from liability
under a loan, and
o any release of a letter of credit or debt service reserve,
provided that, in the event that the special servicer determines that immediate
action is necessary to protect the interest of the certificateholders (as a
collective whole), the special servicer may take any such action without waiting
for the operating adviser's response.
The operating adviser may object to the above actions in writing within
10 business days after being notified of the proposed action and provided with
all reasonably requested information. The operating adviser will be considered
to have approved any such action if it does not object within 10 days.
Furthermore, the special servicer shall not be obligated to obtain the approval
of the operating adviser for any actions to be taken with respect to any
particular Mortgage Loan if the special servicer has notified the operating
adviser in writing of the various actions that the special servicer proposes to
take with respect to such Mortgage Loan and, for 60 days following the first
such notice, the operating adviser has objected to all of those proposed actions
and has failed to suggest any alternative actions that the special servicer
considers to be consistent with the servicing standard.
The operating adviser also may advise the special servicer to take, or
to refrain from taking, such other actions as the operating adviser deems
advisable. However, the operating adviser may never require the special servicer
to violate the pooling and servicing agreement, including its obligation to act
in accordance with the servicing standard.
LIMITATION ON LIABILITY OF OPERATING ADVISER
The operating adviser and its officers, directors, employees and owners
will have no liability to certificateholders for any action taken, or for
refraining from the taking of any action. By accepting certificates, each
certificateholder agrees that the operating adviser:
o may have special relationships and interests that conflict with those of
holders of one or more classes of certificates,
o may act solely in the interests of the holders of the Controlling Class,
o has no duties to certificateholders, except for holders of the Controlling
Class,
o may act to favor the interests of the Controlling Class over the interests
of other classes, and
o will violate no duty and incur no liability by acting solely in the
interests of the Controlling Class.
No certificateholder may take legal action against the operating
adviser because it acted solely in the interests of the Controlling Class.
SUB-SERVICERS
The master servicer and special servicer may each delegate its
servicing obligations to one or more third-party sub-servicers. Despite any such
delegation, the master servicer or special servicer remains directly responsible
for the delegated duties and for the acts and omissions of any sub-servicer. The
master servicer or the special servicer must monitor the performance of any
sub-servicer that it uses. 2 Mortgage Loans (1.1%) are currently serviced by
third-party servicers that are expected to continue to service such loans as
sub-servicers. Except for the sub-servicing agreements related to these Mortgage
Loans, each sub-servicing agreement must provide that if the master servicer or
the special servicer is no longer acting in such capacity under the pooling and
servicing agreement, the trustee or any successor to the master servicer or
special servicer may:
o assume the master servicer's or special servicer's rights under the
sub-servicing agreement, and/or
o terminate the sub-servicer without payment of a termination fee.
The sub-servicing agreements for the Mortgage Loans that will be
sub-serviced on the closing date provide that the related sub-servicer may only
be terminated if it is in default under its sub-servicing agreement.
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The master servicer and special servicer are solely responsible for the
fees owed to any sub-servicer they retain, even if those fees are more than the
fees they are receiving under the pooling and servicing agreement. Generally,
each sub-servicer will be reimbursed for any expenses for which the master
servicer or special servicer would be reimbursed under the pooling and servicing
agreement. See "-- Servicing Compensation and Payment of Expenses".
REPORTS TO CERTIFICATEHOLDERS; WHERE YOU CAN FIND MORE INFORMATION
MONTHLY REPORTS
Based solely on information provided in Commercial Mortgage Securities
Association periodic loan update reports and certain other reports provided by
the master servicer and the special servicer and delivered to the trustee, the
trustee will prepare and make available electronically (or, upon request,
provide by first class mail) on each distribution date to each certificateholder
a reporting statement substantially in the form of, and containing the
information set forth in, the report form attached to this prospectus
supplement.
The master servicer will provide the trustee with the Commercial
Mortgage Securities Association Loan Set-up File and the following portions of
the Commercial Mortgage Securities Association Investor Reporting Package
reports and files:
o Loan Periodic Update File,
o Financial File,
o Property File,
o Servicer Watch List,
o Delinquent Loan Status Report,
o REO Status Report,
o Comparative Financial Status Report,
o Historical Loan Modification Report,
o Historical Liquidation Report,
o Operating Statement Analysis Report, and
o NOI Adjustment Worksheet.
Due to the time required to collect all the necessary data and enter it
onto the master servicer's computer system, the master servicer is not required
to provide these reports (other than the Loan Periodic Update File) before the
distribution date in January 2001.
If you hold your certificates in book-entry form through DTC, you may
obtain direct access to the monthly reports of the trustee as if you were a
direct certificateholder, provided that you deliver a written certification to
the trustee confirming your beneficial ownership in those certificates.
Otherwise, until definitive certificates are issued in respect of your
certificates, the information contained in the trustee's monthly reports will be
available to you only to the extent that it is made available through DTC and
the DTC participants or is available on the trustee's internet website. See
"Description of the Certificates--Delivery, Form and Denomination--Book-Entry
Certificates".
The trustee will make available each month on the trustee's internet
website the trustee's report and any files comprising the CMSA Investor
Reporting Package that it has received from the master servicer or the special
servicer. The trustee's internet website is currently located at www.lnbabs.com.
In addition, bond factor information may be obtained from the Trustee by calling
800-246-5761. The Trustee will make available through its electronic bulletin
board system, on a confidential basis, certain information related to the
Mortgage Loans. The bulletin board is located at (714) 282-3990. Investors that
have an account on the bulletin board may retrieve the loan level data file for
each transaction in the directory.
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
owned an offered certificate a statement listing the amount of principal and
interest paid to the person during the year. The trustee may satisfy this
obligation by delivering substantially comparable information pursuant to any
requirements of the Internal Revenue Code of 1986.
CMBS SURVEILLANCE INQUIRIES
The master servicer currently maintains an Internet-based investor
reporting system, CMBS Investor Insight(sm), that contains updated performance
information at the portfolio, loan and property levels on the various commercial
mortgage-backed securities transactions that it services. Certificateholders,
prospective transferees and other appropriate parties may obtain access to CMBS
Investor Insight(sm) through the master servicer's
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website, www.midlandls.com. The master servicer may require registration and
the execution of an access agreement in connection with providing access
to CMBS Investor Insight(sm). Specific questions about portfolio, loan and
property performance may be sent to the master servicer via e-mail at
[email protected].
OTHER AVAILABLE INFORMATION
In addition to the other reports and information made available and
distributed under the pooling and servicing agreement by the trustee, the master
servicer and the special servicer will also make available any other information
relating to the Mortgage Loans, the Mortgaged Properties or the borrowers for
review by the depositor, the underwriters, the operating adviser, the trustee
and the Rating Agencies. The master servicer and the special servicer will also
make such information available to any person that the trustee at the request of
the master servicer or special servicer certifies is a certificateholder or
potential certificateholder. The trustee may base the certification on any
information from the certificateholder or the potential certificateholder that
it may require in its sole discretion. Such person will be required to pay any
expenses incurred by the trustee in making such certification. The master
servicer and the special servicer are not required to provide the information if
doing so is prohibited by applicable law or by any documents related to a
Mortgage Loan. The master servicer and the special servicer may adopt reasonable
rules and procedures governing access to the information, which may include a
requirement that the person requesting such information execute an agreement
governing the availability, use and disclosure of such information. The
agreement may provide for the indemnification of the master servicer or the
special servicer for any liability or damage that may arise from the use or
disclosure of the information.
Unless the pooling and servicing agreement specifically specifies a
particular method of delivery, the master servicer and the special servicer may
each satisfy their obligation to deliver any statement, report or information to
certificateholders by:
o physically delivering a paper copy of such statement, report or
information,
o delivering such statement, report or information in a commonly used
electronic format, or
o making such statement, report or information available on the master
servicer's internet website or the trustee's internet website.
The following are available for your review at the trustee's offices
during normal business hours:
o the pooling and servicing agreement,
o all monthly statements to certificateholders,
o annual compliance statements, and
o annual accountants' reports.
Unless prohibited by applicable law or the Mortgage Loan documents, the
following will be available for your review at the trustee's offices during
normal business hours:
o all modifications, waivers and amendments of the Mortgage Loans,
o officer's certificates and other evidence supporting a determination that
an Advance is nonrecoverable, and
o upon request, the property inspection reports.
The master servicer, the special servicer and the trustee may impose a
reasonable charge for expenses of providing copies or access to the above
information. The Rating Agencies and the operating adviser will not have to pay
any such charge.
FILINGS WITH THE SEC
The master servicer will, on behalf of the trust fund, prepare, sign
and file with the Securities and Exchange Commission all reports, statements and
information respecting the trust fund that the master servicer or the depositor
determines are required to be filed with the SEC or the filing of which is
otherwise desirable. The master servicer will file each report, statement and
information on or prior to the required filing date. However, the depositor will
file with the SEC, within 15 days of the closing date, a Form 8-K together with
the pooling and servicing agreement.
The trustee, the fiscal agent, the master servicer and the special
servicer are not responsible for the accuracy or completeness of any information
supplied to it by a borrower or other third party for inclusion in any notice,
report or information furnished or provided by the master servicer, the special
servicer or the trustee under the pooling and servicing agreement. The trust
fund will indemnify
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and hold harmless the master servicer, the special servicer, the trustee and the
fiscal agent against any loss, liability or expense incurred in connection with
any legal action relating to any statement or omission or alleged statement or
omission in any information supplied by a borrower or other third party,
including any liability related to the inclusion of the information in any
report filed with the SEC.
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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 respective
portions of 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:
o 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;
o the class A-1, class A-2, class X, class B, class C, class D, class E,
class F, class G, class H, class J, class K, class L, class M, class N and
class O certificates will be, or will represent ownership of, REMIC
"regular interests";
o the class R-I, class R-II and class R-III certificates, respectively, will
be the sole "residual interest" in the related REMIC; and
o the class V certificates will represent beneficial interests in the portion
of the trust assets consisting of Deferred Interest, which portion will be
treated as a grantor trust for federal income tax purposes.
The certificates representing regular interests generally will be
treated as newly originated debt instruments for federal income tax purposes.
Holders of those certificates will be required to include in income all interest
on the certificates in accordance with the accrual method of accounting,
regardless of a certificateholder's usual method of accounting. The class ____
and class ____ certificates are not expected to be treated as having been issued
with original issue discount for federal income tax reporting purposes. The
class ____and class ____ certificates are expected to be treated as having been
issued with de minimis original issue discount for federal income tax purposes.
The class ____ certificates are expected to be treated as having been issued
with original issue discount for federal income tax purposes.
The IRS has issued regulations under Sections 1271 to 1275 of the
Internal Revenue Code of 1986 generally addressing the treatment of debt
instruments issued with original issue discount. Holders of the offered
certificates should be aware, however, that those regulations and Section
1272(a)(6) of the Internal Revenue Code of 1986 do not adequately address
certain issues relevant to, or are not applicable to, prepayable securities such
as the offered certificates. We recommend that holders consult with their own
tax advisor concerning the tax treatment of the offered certificates.
For the purposes of determining the rate of accrual of market discount,
original issue discount and premium for federal income tax purposes, the
Prepayment Assumption (as defined in the prospectus) is that the Mortgage Loans
will prepay at the rate of 0% CPR, except that Hyper-Amortization Loans are
assumed to pay on their Anticipated Repayment Dates. No representation is made
as to whether the Mortgage Loans will prepay at that rate or any other rate. See
"Federal Income Tax Consequences--REMICs--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount" and "--Premium" 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 the 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 "Federal Income Tax Consequences--REMICS--Taxation of Holders of REMIC
Regular Certificates" in the prospectus.
Generally, the offered certificates will be "real estate assets" within
the meaning of Section
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856(c)(5)(B) of the Internal Revenue Code of 1986. In addition, interest
(including original issue discount, if any) on the offered certificates will be
interest described in Section 856(c)(3)(B) of the Internal Revenue Code of 1986.
As of the closing date, 19.6% of the Mortgage Loans are secured by real
estate used for residential or certain other purposes prescribed in Section
7701(a)(19)(C) of the Internal Revenue Code of 1986, and consequently the
offered certificates will be treated as assets qualifying under that section to
only a limited extent. Accordingly, investment in the offered certificates may
not be suitable for thrift institutions seeking to be treated as a "domestic
building and loan association" under Section 7701(a)(19)(C) of the Internal
Revenue Code of 1986. The determination as to the percentage of the REMIC's
assets that constitute assets described in the foregoing sections of the
Internal Revenue Code of 1986 will be made with respect to each calendar quarter
based on the average adjusted basis of each category of the assets held by the
REMIC during such calendar quarter. The trustee will report those determinations
to certificateholders in the manner and at times required by applicable Treasury
regulations.
Finally, the offered certificates will be treated as "qualified
mortgages" for another REMIC under Section 860G(a)(3)(C) of the Internal Revenue
Code of 1986 and "permitted assets" for a "financial asset securitization
investment trust" under Section 860L(c) of the Code.
If the trust collects a prepayment premium on a mortgage loan, it is
anticipated that the prepayment premium will be reported as ordinary income and
allocated to the class of certificates entitled to the premium. For federal
income tax reporting purposes, the premium or charge will be reported as income
upon actual receipt by the master servicer. The correct characterization of and
timing for recognition of, prepayment premiums is not entirely clear.
Certificateholders should consult their tax advisors concerning the tax
treatment of prepayment premiums.
For more information regarding the federal income tax consequences of
investing in the offered certificates, see "Federal Income Tax
Consequences--REMICs--Taxable Income 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 YOU CONSULT YOUR OWN TAX ADVISORS REGARDING THE TAX
TREATMENT OF YOUR ACQUISITION, OWNERSHIP AND DISPOSITION OF THE CERTIFICATES.
-----------------------------------------
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS LOCATED IN NEW YORK AND CALIFORNIA
The following discussion summarizes certain legal aspects of Mortgage
Loans secured by real property in New York (25.1%) and California (16.4%), which
are general in nature. These summaries do not purport to be complete and are
qualified in their entirety by reference to the applicable federal and state
laws governing the Mortgage Loans.
NEW YORK
Under New York law, while a foreclosure may be accomplished either
judicially or non-judicially, nonjudicial foreclosures are virtually unused
today. Upon a default, a mortgagee may either proceed in equity to foreclose
upon the mortgaged property or to proceed at law and sue on the note. New York
law does not require that the mortgagee must bring a foreclosure action before
being entitled to sue on the note. However, once having begun a foreclosure
action or an action to sue on the note or guaranty, a mortgagee is generally not
permitted to initiate the other without leave of court. New York permits a
mortgagee to seek a deficiency judgment in a judicial foreclosure action,
provided that certain statutory procedural and substantive requirements are
satisfied.
CALIFORNIA
Under California law a foreclosure may be accomplished either
judicially or non-judicially. Generally, no deficiency judgment is permitted
under California law following a nonjudicial sale under a deed of trust. Other
California statutes, except in certain cases involving environmentally impaired
real property, require the lender to attempt to satisfy the full debt through a
foreclosure against the property before bringing a personal action (if otherwise
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permitted) against the borrower for recovery of the debt. California case law
has held that acts such as an offset of an unpledged account or the application
of rents from secured property prior to foreclosure, under some circumstances,
constitute violations of such statutes. Violations of such statutes may result
in the loss of some or all of the security under the loan. Finally, other
statutory provisions in California limit any deficiency judgment (if otherwise
permitted) against the borrower, and possibly any guarantor, following a
judicial sale to the excess of the outstanding debt over the greater of (i) the
fair market value of the property at the time of the public sale or (ii) the
amount of the winning bid in the foreclosure. Borrowers also are allowed a
one-year period within which to redeem the property.
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ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement plan or
arrangement that is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA" ), or Section 4975 of the Internal Revenue Code of
1986 (each a "PLAN" ) and any entity whose assets include assets of a Plan
should carefully review with its legal advisers whether the purchase or holding
of offered certificates could give rise to a transaction that is prohibited or
is not otherwise permitted either under ERISA or Section 4975 of the Internal
Revenue Code of 1986 or whether there exists any applicable statutory or
administrative exemption. See "ERISA Considerations" in the accompanying
prospectus.
SENIOR CERTIFICATES
The Department of Labor has issued to some of the underwriters an
individual prohibited transaction exemption (Prohibited Transaction Exemption
No. 90-24, as amended by Prohibited Transaction Exemption No. 97-34, issued to
Morgan Stanley & Co. Incorporated, and Prohibited Transaction Exemption No.
98-08 issued to PNC Capital Markets, Inc.). These exemptions generally exempt
from the application of the prohibited transaction provisions of Section 406(a)
and (b) and 407(a) of ERISA, and the excise taxes imposed on such prohibited
transactions pursuant to Section 4975(a) and (b) of the Internal Revenue Code of
1986, certain transactions, among others, relating to:
o the servicing and operation of mortgage loans, such as the Mortgage Loans,
and
o the purchase, sale and holding of mortgage pass-through certificates, such
as the senior certificates, underwritten by an "underwriter".
For purposes of this discussion, the term "underwriter" includes:
1. Morgan Stanley & Co. Incorporated , for purposes of Prohibited Transaction
Exemption No. 90-24, and PNC Capital Markets, Inc., for purposes of
Prohibited Transaction Exemption No. 98-08,
2. any person directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with Morgan Stanley &
Co. Incorporated or PNC Capital Markets, as applicable, and
3. any member of the underwriting syndicate or selling group of which a person
described in (1) or (2) is a manager or co-manager with respect to the
senior certificates, including any of the other underwriters.
Each of the individual prohibited transaction exemptions sets forth six
general conditions that must be satisfied for a transaction involving the
purchase, sale and holding of senior certificates to be covered by the
exemption:
o First, the acquisition of the senior certificates by a Plan must be on
terms that are at least as favorable to the Plan as they would be in an
arm's-length transaction with an unrelated party.
o Second, the rights and interests evidenced by the senior certificates must
not be subordinated to the rights and interests evidenced by the other
certificates of the same trust.
o Third, at the time of acquisition by the Plan the senior certificates must
be rated in one of the three highest generic rating categories by Standard
& Poor's Ratings Services, Moody's Investors Service or Fitch, Inc. (or
their successors and assigns).
o Fourth, the trustee cannot be an affiliate of any other member of the
"RESTRICTED GROUP," which, in addition to the trustee, consists of:
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o the underwriters,
o the depositor,
o the master servicer,
o the special servicer,
o any sub-servicer,
o any mortgagor with respect to a Mortgage Loan constituting more than
5% of the aggregate unamortized principal balance of the Mortgage
Loans as of the date of initial issuance of the senior certificates,
and
o any and all affiliates of any of the above persons.
o Fifth, the sum of all payments made to and retained by:
o the underwriters must represent not more than reasonable compensation
for underwriting the senior certificates;
o the depositor pursuant to the assignment of the Mortgage Loans to the
trust fund must represent not more than the fair market value of those
obligations; and
o the master servicer, the special servicer or any sub-servicer must
represent not more than reasonable compensation for that person's
services under the pooling and servicing agreement and reimbursement
of that person's reasonable expenses in connection therewith.
o Sixth, the investing Plan must be an accredited investor as defined in Rule
501(a)(1) of Regulation D under the Securities Act of 1933.
Because the senior certificates are not subordinated to any other class
of certificates, the second condition is satisfied for the senior certificates.
Since the senior certificates must be rated not lower than "Aaa" by Moody's and
"AAA" by Standard & Poor's, on the closing date, the third condition will be
satisfied for the senior certificates on the closing date. As the initial
trustee is not an affiliate of any other members of the restricted group, the
fourth condition will also be satisfied on the closing date. A Plan fiduciary
contemplating purchasing a senior certificate in the secondary market must
determine that the senior certificates continue to satisfy the third and fourth
conditions on the date of purchase. A Plan fiduciary contemplating the purchase
of a senior certificate must decide for itself whether the first and fifth
conditions will be satisfied. A Plan's authorizing fiduciary will be deemed to
make a representation regarding satisfaction of the sixth general condition set
forth above in connection with the purchase of a senior certificate.
Each of the individual prohibited transaction exemptions also requires
that the trust fund meet the following requirements:
o the trust fund must consist solely of assets of the type that have been
included in other investment pools;
o certificates in those other investment pools must have been rated in one of
the three highest categories of Standard & Poor's, Moody's or Fitch for at
least one year prior to the Plan's acquisition of the senior certificates;
and
o certificates in those other investment pools must have been purchased by
investors other than Plans for at least one year prior to any Plan's
acquisition of senior certificates.
If the above conditions are satisfied, they may provide an exemption
from the restrictions imposed by Sections 406 (a) and 407 (a) of ERISA, as well
as the excise taxes imposed by Sections 4975 (a) and (b) of the Internal Revenue
Code of 1986 by reason of Sections 4975 (c) (1) (A) through (D) of the Internal
Revenue Code of 1986, in connection with:
o the direct or indirect sale, exchange or transfer of senior certificates
acquired by a Plan upon initial issuance,
o the direct or indirect acquisition or disposition in the secondary market
of senior certificates by a Plan, or
o the continued holding of senior certificates by a Plan.
However, no exemption is provided from the restrictions of Sections 406
(a) (1) (E), 406 (a) (2) and 407 of ERISA for the acquisition or holding of a
senior certificate on behalf of a Plan sponsored by any member of the Restricted
Group, by any person who has discretionary authority or renders investment
advice with respect to the assets of that Plan.
Moreover, the exemptions provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when
any person who has discretionary authority or renders investment advice with
respect to the investment of
S-90
<PAGE>
plan assets causes a Plan to acquire senior certificates, provided that, among
other requirements:
o the person (or its affiliate) is an obligor with respect to 5% or less of
the fair market value of the obligations or receivables contained in the
trust;
o the Plan is not a plan with respect to which any member of the Restricted
Group is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA);
o in the case of an acquisition in connection with the initial issuance of a
class of senior certificates, at least 50% of that class is acquired by
persons independent of the Restricted Group and at least 50% of the
aggregate interest in the trust fund is acquired by persons independent of
the Restricted Group;
o the Plan's investment in senior certificates does not exceed 25% of all of
the certificates of that class outstanding at the time of the acquisition;
and
o immediately after the acquisition, no more than 25% of the assets of the
Plan with respect to which the person has discretionary authority or
renders investment advice are invested in certificates representing an
interest in one or more trusts containing assets sold or serviced by the
same entity.
Finally, if certain specific conditions of the individual prohibited
transaction exemptions are satisfied, they may provide an exemption from the
restrictions imposed by Sections 406(a), 406(b) and 407(a) of ERISA, and the
taxes imposed by Sections 4975(a) and (b) of the Internal Revenue Code of 1986
by reason of Section 4975(c) of the Internal Revenue Code of 1986 for
transactions in connection with the servicing, management and operation of the
Mortgage Loans. The depositor expects that the specific conditions of the
exemptions required for this purpose will be satisfied with respect to the
senior certificates.
You should be aware, however, that even if the conditions specified in
one or more parts of the individual prohibited transaction exemptions are
satisfied, they may not cover all acts that may be considered prohibited
transactions.
Before purchasing a senior certificate, a Plan fiduciary should itself
confirm that all of the conditions of the individual prohibited transaction
exemptions would be satisfied. The Plan fiduciary should also consider whether
any other prohibited transaction exemptions are available.
SUBORDINATE CERTIFICATES
The characteristics of each class of the subordinate certificates do
not meet the requirements of the second condition for the underwriters'
individual prohibited transaction exemptions because they are subordinated to
the class A certificates. Accordingly, subordinate certificates may not be
acquired by, on behalf of or with assets of:
1. a Plan,
2. a governmental plan subject to any federal, state or local law that is, to
a material extent, similar to the provisions of ERISA or the Internal
Revenue Code of 1986 ("OTHER PLANS"),
3. a collective investment fund in which Plans or Other Plans are invested,
4. other persons acting on behalf of any Plan or Other Plans or using the
assets of any Plan or Other Plans or any entity whose underlying assets
include plan assets by reason of a Plan's or Other Plan's investment in the
entity (within the meaning of the Department of Labor regulations Section
2510.3-101), or
5. an insurance company that is using assets of any insurance company separate
account or general account in which the assets of any Plan or Other Plans
are invested (or which are deemed pursuant to ERISA or any similar law to
include assets of any Plan or Other Plans) other than an insurance company
using the assets of its general account whereby such general account is
able to rely on Section III of Prohibited Transaction Class Exemption 95-60
or the final regulation issued by the Department of Labor under Section 401
(c) of ERISA (both of which are discussed in the prospectus under "ERISA
Considerations--Insurance Company General Accounts") under circumstances
whereby the assets of the trust fund will not be treated as "plan assets"
for purposes of applying the fiduciary responsiblitity and the prohibited
transactions provisions of ERISA, the Internal Revenue Code of 1986 or any
similar law.
Each prospective transferee of a definitive subordinate certificate
must deliver to the depositor, the certificate registrar and the trustee either:
o a transferee representation letter, substantially in the form attached as
an exhibit to the pooling and
S-91
<PAGE>
servicing agreement, stating that the prospective transferee is not a
person referred to in clause 1, 2, 3, 4 or 5 of the first paragraph of this
section, or
o an opinion of counsel which establishes to the satisfaction of the
depositor, the trustee and the certificate registrar that the purchase or
holding of the certificate will not:
o constitute or result in a prohibited transaction within the meaning of
Section 406 or 407 of ERISA, Section 4975 of the Internal Revenue Code
of 1986 or any similar law, and
o subject the master servicer, the special servicer, the depositor, the
trustee or the certificate registrar to any obligation or liability,
including obligations or liabilities under ERISA or Section 4975 of
the Internal Revenue Code of 1986.
If you purchase a beneficial interest in a book-entry subordinate certificate,
you will be deemed to have made the representation in the first bullet point of
this paragraph.
The 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.
In addition, the Department of Labor has published in the Federal
Register, a proposed prohibited transaction exemption, which would be
retroactively effective as of August 23, 2000, and which would amend each of the
individual prohibited transaction exemptions described above under "--Senior
Certificates" as follows:
o the first condition (which provides that the certificates acquired by a
Plan may not be subordinated to the rights and interests evidenced by the
other certificates of the same trust) would not apply to the certificates,
and
o the third condition (which provides that the certificates at the time of
acquisition by the Plan must be rated in one of the three highest generic
ratings categories by either Standard & Poor's, Moody's or Fitch) would be
extended to include the four highest generic ratings categories.
If the proposed prohibited transaction exemption is adopted, a Plan would be
eligible to acquire any class of subordinate certificates that is rated in one
of the four highest generic ratings categories at the time of acquisition
provided that the other conditions discussed above under "--Senior Certificates"
are satisfied. The pooling and servicing agreement will permit the certificate
registrar to waive the requirements in the second paragraph of this section if
the proposed prohibited transaction exemption is adopted so as to amend the
first and third conditions of the individual prohibited transaction exemptions
as described above.
However, it is not certain if and when the proposed amendments will be
issued in final form, and it is not certain that, if finalized, the proposed
amendments will contain the same relief as is currently proposed. Fiduciaries of
Plans should, and other potential investors who may be analyzing the potential
liquidity of their investment may wish to, consult with their advisors regarding
the proposed amendments.
INSURANCE COMPANY PURCHASERS
Purchasers that are insurance companies should consult their legal
advisers with respect to the applicability of Section III of Prohibited
Transaction Class Exemption 95-60, regarding transactions by insurance company
general accounts. See also "ERISA Considerations--Insurance Company General
Accounts" in the accompanying prospectus.
-------------------------------
LEGAL INVESTMENT
The offered certificates will not constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984.
The appropriate characterization of the certificates under various
legal investment restrictions may be subject to significant interpretive
uncertainties. As a result, the depositor is unable to determine whether
investors subject to these
S-92
<PAGE>
restrictions may purchase the certificates. The depositor makes no
representations as to:
o the proper characterization of the offered certificates for legal
investment purposes, financial institution regulatory purposes or other
purposes, or
o the ability of particular investors to purchase the offered certificates
under applicable legal investment restrictions.
In addition, some states have enacted legislation overriding the legal
investment provisions of SMMEA.
All depository institutions considering investment in the offered
certificates should review the Federal Financial Institutions Examination
Council's Supervisory Policy Statement on the Selection of Securities Dealers
and Unsuitable Investment Practices (to the extent adopted by their respective
regulatory authorities), setting forth, in relevant part, certain investment
practices deemed to be unsuitable for an institution's investment portfolio, as
well as guidelines for investing in certain types of mortgage related
securities.
There may be other restrictions on the ability of certain investors to
purchase the offered certificates or to purchase offered certificates
representing more than a specified percentage of the investor's assets. All
institutions whose investment activities are subject to legal investment laws
and regulations, regulatory capital requirements or review by regulatory
authorities should consult 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
Subject to the underwriting agreement, each underwriter has agreed to
purchase the principal amounts of offered certificates set forth opposite its
name below:
UNDERWRITER CLASS A-1 CLASS A-2 CLASS B
Morgan Stanley & Co. Incorporated $ $ $
PNC Capital Markets, Inc.
CIBC World Markets Corp.
Deutsche Bank Securities Inc.
Total
UNDERWRITER CLASS C CLASS D
Morgan Stanley & Co. Incorporated $ $
PNC Capital Markets, Inc.
CIBC World Markets Corp.
Deutsche Bank Securities Inc.
Total
The underwriting agreement imposes conditions on the obligations of the
underwriters. The underwriters must purchase all of the offered certificates if
they purchase any.
The underwriters have advised the depositor that they propose to offer
the offered certificates from time to time for sale in one or more negotiated
transactions or otherwise at prices to be determined at the time of sale. The
underwriters may effect such transactions by selling such classes of offered
certificates to or through dealers and such dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the
underwriters and/or from purchasers for whom they act as agent.
The offered certificates are offered by the underwriters when, as and
if issued by the depositor, delivered to and accepted by the underwriters and
S-93
<PAGE>
subject to their right to reject orders in whole or in part.
It is expected that delivery of the offered certificates to the
underwriters will be made in book-entry form through the facilities of DTC
against payment therefor on or about October ______, 2000, which is the ______
business day following the date of pricing of the certificates. Under Rule
15c6-1 adopted by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, trades in the secondary market generally are required to
settle in three business days, unless the parties to any trade expressly agree
otherwise. Accordingly, purchasers who wish to trade offered certificates in the
secondary market prior to such delivery should specify a longer settlement
cycle, or should refrain from specifying a shorter settlement cycle, if failing
to do so would result in a settlement date that is earlier than the delivery
date of the offered certificates.
The underwriters and any dealers that participate with the underwriters
in the distribution of the offered certificates may be deemed to be
underwriters, and any discounts or commissions received by them and any profit
on the resale of such classes of offered certificates by them may be deemed to
be underwriting discounts or commissions, under the Securities Act of 1933.
The depositor has agreed to indemnify the underwriters against civil
liabilities, including liabilities under the Securities Act of 1933 or
contribute to payments the underwriters may be required to make in respect
thereof.
The underwriters intend to make a secondary market in the offered
certificates. They have no obligation to do so, however, and any market making
may be discontinued at any time.
If and to the extent required by applicable law or regulation, this
prospectus supplement and the prospectus may be used by PNC Capital Markets,
Inc. in connection with market-making transactions in the offered certificates.
PNC Capital Markets, Inc. may act as principal or as agent in such transactions.
Sales may be made at negotiated prices determined at the time of sale.
-------------------------------------
USE OF PROCEEDS
The depositor will use the net proceeds from the sale of the offered
certificates to pay part of the purchase price for the Mortgage Loans and to pay
the costs of structuring, issuing and underwriting the offered certificates.
-------------------------------------
LEGAL MATTERS
The legality of the offered certificates and the material federal
income tax consequences of investing in the offered certificates will be passed
upon for the depositor by Morrison & Hecker, L.L.P., Kansas City, Missouri.
Certain legal matters with respect to the offered certificates will be passed
upon for the underwriters by Latham & Watkins, New York, New York.
-------------------------------------
S-94
<PAGE>
RATINGS
It is a condition of the issuance of the offered certificates that they
receive the following credit ratings from Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. and Moody's Investors Service, Inc.
(with their successors and assigns, the "RATING AGENCIES"):
CLASS S&P MOODYS
Class A-1 AAA Aaa
Class A-2 AAA Aaa
Class B AA Aa2
Class C A A2
Class D A- A3
The ratings of the offered certificates address the likelihood of the
timely receipt by the holders of all payments of interest to which they are
entitled and the ultimate receipt by the holders of all payments of principal to
which they are entitled, if any, by the distribution date in October 2033 (the
"RATED FINAL DISTRIBUTION DATE" ). This date is the distribution date occurring
three years after the latest maturity date for any of the mortgage loans as of
the closing date. The ratings take into consideration:
o the credit quality of the Mortgage Loans in the mortgage pool,
o structural and legal aspects associated with the certificates, and
o the extent to which the payment stream from the mortgage pool is adequate
to make the required payments on the certificates.
The ratings on the offered certificates should be evaluated
independently from similar ratings on other types of securities. A security
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the assigning rating agency.
The ratings of the certificates do not represent any assessment of:
o the tax attributes of the offered certificates or of the trust,
o the likelihood or frequency of principal prepayments on the Mortgage Loans,
o the degree to which such prepayments might differ from those originally
anticipated,
o whether and to what extent prepayment premiums, Deferred Interest and
default interest will be received or Net Aggregate Prepayment/Balloon
Payment Interest Shortfalls will be realized, or
o the yield to maturity that investors may experience.
The ratings thus address credit risk and not prepayment risk.
It is possible that a rating agency other than Standard & Poor's and
Moody's could issue an unsolicited rating for one or more of the classes of
certificates. These unsolicited ratings could be lower than the ratings issued
by Standard & Poor's and Moody's.
S-95
<PAGE>
INDEX OF DEFINITIONS
Additional Trust Fund Expenses...................S-56
Advance Rate.....................................S-71
Advances.........................................S-70
Anticipated Repayment Date.......................S-35
Appraisal Reduction..............................S-54
Appraisal Reduction Estimate.....................S-55
Appraisal Reduction Events.......................S-54
ARD..............................................S-35
Assumed Monthly Payment..........................S-52
Available Funds..................................S-50
Balloon LTV......................................S-42
Balloon LTV Ratio................................S-42
Class Interest Shortfall.........................S-52
Collection Account...............................S-72
Collection Period................................S-50
Compensating Interest Payment....................S-56
Constant Prepayment Rate.........................S-63
Controlling Class................................S-83
Corrected Mortgage Loan..........................S-83
CPR..............................................S-63
Cross-Collateralized Loans.......................S-33
Cut-off Date.....................................S-32
Cut-off Date Loan-to-Value.......................S-42
Cut-off Date LTV.................................S-42
Cut-off Date Principal Balance...................S-32
Debt Service Coverage Ratio......................S-41
Defeasance Loans.................................S-37
Deferred Interest................................S-35
Determination Date...............................S-50
Discount Rate....................................S-53
Distributable Certificate Interest...............S-52
Distribution Account.............................S-73
DSCR.............................................S-41
ERISA............................................S-89
Excess Liquidation Proceeds......................S-51
Excess Liquidation Proceeds Account..............S-73
Expense Losses...................................S-56
Hyper-Amortization Loans.........................S-35
Initial Interest Rate............................S-35
Initial Pool Balance.............................S-32
Interest Reserve Account.........................S-72
Interest Reserve Amount..........................S-72
Interest Reserve Loans.....................S-49, S-72
Lock-out Period..................................S-36
Maturity Assumptions.............................S-64
Money Term.......................................S-78
Monthly Payment..................................S-52
Mortgage.........................................S-32
Mortgage Loans...................................S-32
Mortgaged Property...............................S-32
Mortgages........................................S-32
Multiple Property Loans..........................S-32
Net Aggregate Prepayment/Balloon Payment
Interest Shortfall............................S-57
Net Collections..................................S-82
Net Mortgage Rate................................S-49
Net REO Proceeds.................................S-72
Open Period......................................S-36
Other Plans......................................S-91
P&I Advance......................................S-70
Plan.............................................S-89
Prepayment/Balloon Payment Interest Excess.......S-56
Prepayment/Balloon Payment Interest Shortfall....S-56
Principal Distribution Amount....................S-52
Principal Prepayments............................S-50
Qualified Substitute Mortgage Loan...............S-45
Rated Final Distribution Date....................S-95
Rating Agencies..................................S-95
Realized Loss....................................S-56
Record Date......................................S-50
REMIC............................................S-87
REO Account......................................S-48
REO Mortgage Loan................................S-53
REO Proceeds.....................................S-72
REO Property.....................................S-48
Repurchase Price.................................S-45
Reserve Accounts.................................S-38
Restricted Group.................................S-89
Revised Interest Rate............................S-35
Scheduled Final Distribution Date................S-57
Servicing Advances...............................S-70
Specially Serviced Mortgage Loan.................S-81
Stated Principal Balance.........................S-49
Treasury Rate....................................S-53
Underwritable Cash Flow..........................S-41
Updated Appraisal................................S-54
Yield Maintenance Period.........................S-36
S-96
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
SELLERS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE REMAINING TERM AVERAGE AVERAGE WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE TO MATURITY MORTGAGE CUT-OFF DATE AVERAGE
SELLER LOANS BALANCE ($) BALANCE (%) (MOS) RATE (%) LTV (%) DSCR (x)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CIBC 43 411,442,994 38.23 119 8.489 71.0 1.36
MSDWMC 28 218,785,231 20.33 109 8.551 71.0 1.30
PNC 119 446,060,133 41.44 115 7.779 71.5 1.36
-------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
=========================================================================================================================
</TABLE>
I-1
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE REMAINING TERM AVERAGE AVERAGE WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE TO MATURITY MORTGAGE CUT-OFF DATE AVERAGE
CUT-OFF DATE BALANCE ($) LOANS BALANCE ($) BALANCE (%) (MOS) RATE (%) LTV (%) DSCR (x)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 - 1,000,000 5 4,207,801 0.39 129 7.388 69.3 1.32
1,000,001 - 2,000,000 55 84,667,978 7.87 107 7.589 67.9 1.50
2,000,001 - 3,000,000 49 119,713,531 11.12 108 7.887 69.1 1.39
3,000,001 - 4,000,000 24 80,370,846 7.47 122 8.073 69.1 1.35
4,000,001 - 5,000,000 9 40,583,899 3.77 113 7.653 69.2 1.48
5,000,001 - 6,000,000 7 39,879,292 3.71 127 8.075 69.3 1.34
6,000,001 - 7,000,000 4 25,256,353 2.35 116 8.348 67.9 1.36
7,000,001 - 8,000,000 5 37,869,977 3.52 121 7.784 76.4 1.23
8,000,001 - 9,000,000 7 59,919,942 5.57 117 8.459 73.8 1.28
9,000,001 - 10,000,000 3 28,688,011 2.67 119 8.580 68.2 1.41
10,000,001 - 15,000,000 7 90,574,577 8.42 122 8.243 74.0 1.31
15,000,001 - 20,000,000 2 33,740,300 3.13 120 8.095 76.8 1.26
20,000,001 - 25,000,000 3 68,622,592 6.38 115 8.514 74.6 1.26
25,000,001 > = 10 362,193,261 33.65 114 8.481 71.3 1.34
-------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
=========================================================================================================================
</TABLE>
Min: $ 696,932
Max: $ 59,946,195
Average: $ 5,664,676
I-2
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE AVERAGE WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE REMAINING TERM MORTGAGE RATE CUT-OFF DATE AVERAGE
STATE LOANS BALANCE ($) BALANCE (%) TO MATURITY (MOS) (%) LTV (%) DSCR (x)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
New York 18 270,576,060 25.14 119 8.398 70.9 1.35
California 28 176,921,724 16.44 116 8.281 71.4 1.31
Maryland 4 54,962,134 5.11 117 8.449 73.7 1.33
Arizona 9 54,021,553 5.02 112 8.304 73.5 1.25
Texas 14 53,185,982 4.94 123 8.103 70.9 1.34
Michigan 6 49,885,326 4.63 124 8.497 72.3 1.30
Virginia 13 45,054,664 4.19 115 8.300 68.7 1.38
Connecticut 4 36,983,973 3.44 79 9.045 67.5 1.38
Pennsylvania 9 35,332,715 3.28 121 7.920 72.4 1.37
Tennessee 5 31,386,353 2.92 117 8.277 75.3 1.32
District of Columbia 2 30,631,780 2.85 113 8.373 74.5 1.27
Florida 10 30,408,186 2.83 114 8.324 73.8 1.37
New Jersey 8 27,251,092 2.53 101 7.237 63.4 1.70
Ohio 8 25,867,903 2.40 133 8.122 72.7 1.28
Mississippi 1 18,350,000 1.70 120 7.915 79.8 1.25
Washington 8 17,752,140 1.65 108 7.048 68.4 1.40
Oregon 3 15,110,873 1.40 117 8.840 69.6 1.35
Massachusetts 3 14,747,041 1.37 99 7.210 69.4 1.33
Missouri 4 12,383,618 1.15 96 6.362 74.5 1.39
Georgia 4 11,562,782 1.07 107 8.481 68.1 1.30
North Carolina 2 9,395,888 0.87 112 8.112 59.1 1.54
Kansas 4 9,123,834 0.85 155 7.669 59.1 1.65
Illinois 2 5,894,706 0.55 97 7.399 78.1 1.22
Kentucky 3 5,320,321 0.49 96 6.401 75.8 1.69
Oklahoma 2 5,119,815 0.48 118 8.380 74.2 1.31
Nevada 2 5,017,770 0.47 143 6.528 63.2 1.50
Colorado 3 3,955,608 0.37 102 6.870 61.9 1.59
</TABLE>
I-3
<PAGE>
MORTGAGE POOL INFORMATION
STATES
(continued)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE AVERAGE WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE REMAINING TERM MORTGAGE RATE CUT-OFF DATE AVERAGE
STATE LOANS BALANCE ($) BALANCE (%) TO MATURITY (MOS) (%) LTV (%) DSCR (x)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Minnesota 2 3,728,076 0.35 117 7.029 74.7 1.47
Nebraska 2 3,691,012 0.34 110 7.611 76.3 1.29
New Hampshire 1 2,748,964 0.26 95 6.900 70.5 1.37
Indiana 1 2,693,465 0.25 99 8.250 58.2 1.39
Iowa 1 1,696,427 0.16 95 7.050 74.6 1.25
Alabama 1 1,649,708 0.15 97 6.730 71.7 1.49
Utah 1 1,599,613 0.15 113 8.510 66.7 1.25
Idaho 1 1,231,066 0.11 95 7.150 71.4 1.34
Delaware 1 1,046,186 0.10 118 8.430 76.1 1.25
--------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
================================================================================================================================
</TABLE>
I-4
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PROPERTY TYPES
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE REMAINING AVERAGE AVERAGE WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE TERM TO MATURITY MORTGAGE CUT-OFF DATE AVERAGE
PROPERTY TYPE LOANS BALANCE ($) BALANCE (%) (MOS) RATE (%) LTV (%) DSCR (x)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail 48 350,997,309 32.61 116 8.194 74.2 1.30
Office 38 312,393,723 29.03 118 8.427 69.9 1.32
Multifamily 63 199,108,395 18.50 118 7.706 73.9 1.34
Hospitality 15 94,734,571 8.80 116 8.742 64.6 1.48
Industrial 17 94,180,584 8.75 102 8.431 69.2 1.38
Manufactured Housing 4 11,734,482 1.09 93 6.745 70.4 1.54
Self Storage 3 8,692,479 0.81 96 6.508 39.7 2.54
Other 2 4,446,815 0.41 107 7.393 58.8 1.45
----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
==================================================================================================================================
</TABLE>
I-5
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
MORTGAGE RATES
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED
NUMBER OF AGGREGATE AGGREGATE REMAINING WEIGHTED AVERAGE WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE TERM TO AVERAGE MORTGAGE CUT-OFF DATE AVERAGE
MORTGAGE RATE (%) LOANS BALANCE ($) BALANCE (%) MATURITY (MOS) RATE (%) LTV (%) DSCR (x)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5.501 - 6.000 3 6,520,642 0.61 97 5.971 69.5 1.52
6.001 - 6.500 22 47,622,598 4.42 105 6.343 64.8 1.67
6.501 - 7.000 26 75,280,986 6.99 98 6.770 69.3 1.48
7.001 - 7.500 13 57,008,525 5.30 106 7.352 74.6 1.34
7.501 - 8.000 6 44,059,570 4.09 115 7.818 78.9 1.30
8.001 - 8.500 64 473,132,180 43.96 122 8.329 72.7 1.30
8.501 - 9.000 46 319,898,568 29.72 117 8.727 69.5 1.34
9.001 - 9.500 7 47,197,561 4.39 88 9.185 67.8 1.38
9.501 - 10.000 3 5,567,727 0.52 113 9.610 54.4 1.67
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
===================================================================================================================================
</TABLE>
Min: 5.930%
Max: 9.660%
Weighted Average Coupon: 8.208%
I-6
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
SEASONING
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED
NUMBER OF AGGREGATE AGGREGATE REMAINING WEIGHTED AVERAGE WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE TERM TO AVERAGE MORTGAGE CUT-OFF DATE AVERAGE
SEASONING (MOS) LOANS BALANCE ($) BALANCE (%) MATURITY (MOS) RATE (%) LTV (%) DSCR (x)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(less than) = 0 9 122,588,000 11.39 123 8.491 70.8 1.39
1 - 12 110 772,637,092 71.79 118 8.475 72.2 1.30
13 - 24 49 104,070,748 9.67 103 6.746 63.9 1.59
25 - 36 21 74,739,769 6.94 94 7.012 72.0 1.40
37 - 48 1 2,252,749 0.21 82 8.270 66.3 1.21
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
====================================================================================================================================
</TABLE>
Min: 0
Max: 38
Weighted Average: 7
I-7
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED
NUMBER OF AGGREGATE AGGREGATE REMAINING WEIGHTED AVERAGE WEIGHTED
ORIGINAL TERM TO STATED MATURITY MORTGAGE CUT-OFF DATE CUT-OFF DATE TERM TO AVERAGE MORTGAGE CUT-OFF DATE AVERAGE
(MOS) LOANS BALANCE ($) BALANCE (%) MATURITY (MOS) RATE (%) LTV (%) DSCR (x)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
61 - 120 172 989,171,733 91.91 111 8.214 71.1 1.35
121 - 180 15 79,642,031 7.40 153 8.114 73.2 1.26
181 - 240 3 7,474,594 0.69 230 8.398 61.1 1.47
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
===================================================================================================================================
</TABLE>
Min: 66
Max: 240
Weighted Average: 120
I-8
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED
NUMBER OF AGGREGATE AGGREGATE REMAINING WEIGHTED AVERAGE WEIGHTED
REMAINING TERM TO STATED MORTGAGE CUT-OFF DATE CUT-OFF DATE TERM TO AVERAGE MORTGAGE CUT-OFF DATE AVERAGE
MATURITY (MOS) LOANS BALANCE ($) BALANCE (%) MATURITY (MOS) RATE (%) LTV (%) DSCR (x)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 - 60 1 1,178,311 0.11 52 7.990 40.6 1.43
61 - 120 170 915,844,931 85.09 111 8.166 71.4 1.35
121 - 180 16 151,790,521 14.10 138 8.451 71.0 1.36
181 - 240 3 7,474,594 0.69 230 8.398 61.1 1.47
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
====================================================================================================================================
</TABLE>
Min: 52
Max: 239
Weighted Average: 115
I-9
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL AMORTIZATION TERMS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE REMAINING TERM AVERAGE AVERAGE WEIGHTED AVERAGE
ORIGINAL AMORTIZATION TERM MORTGAGE CUT-OFF DATE CUT-OFF DATE TO MATURITY MORTGAGE CUT-OFF DATE AVERAGE BALLOON
(MOS) LOANS BALANCE ($) BALANCE (%) (MOS) RATE (%) LTV (%) DSCR (x) LTV (%)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALLOON LOANS
240 12 35,338,953 3.28 122 7.841 58.3 1.68 36.2
300 62 189,658,528 17.62 109 7.989 67.2 1.46 56.1
301-359 2 75,286,819 7.00 116 7.983 76.4 1.33 68.9
360 109 764,063,972 70.99 115 8.310 72.5 1.31 65.3
----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 185 1,064,348,272 98.89 114 8.214 71.3 1.35 62.9
----------------------------------------------------------------------------------------------------------------------------------
FULLY AMORTIZING LOANS
180 2 4,465,492 0.41 157 6.401 59.5 1.37 1.5
181-239 1 3,101,888 0.29 224 8.900 73.9 1.30 4.0
240 2 4,372,706 0.41 234 8.042 52.1 1.58 2.7
----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 5 11,940,086 1.11 203 7.651 60.5 1.43 2.6
----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $ 1,076,288,358 100.00% 115 8.208% 71.2% 1.35x 62.3%
==================================================================================================================================
</TABLE>
Min: 180
Max: 360
Weighted Average: 342
I-10
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING AMORTIZATION TERMS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED
AGGREGATE AGGREGATE REMAINING AVERAGE WEIGHTED AVERAGE WEIGHTED
REMAINING AMORTIZATION TERM NUMBER OF CUT-OFF DATE CUT-OFF DATE TERM TO MORTGAGE CUT-OFF DATE AVERAGE
(MOS) MORTGAGE LOANS BALANCE BALANCE (%) MATURITY (MOS) RATE (%) LTV (%) DSCR (x)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
121 - 180 2 4,465,492 0.41 157 6.401 59.5 1.37
181 - 240 15 42,813,547 3.98 141 7.938 58.8 1.64
241 - 300 59 132,858,528 12.34 105 7.660 67.2 1.44
301 - 360 113 869,150,791 80.75 115 8.308 72.4 1.32
361 > = 1 27,000,000 2.51 120 8.380 73.7 1.36
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
====================================================================================================================================
</TABLE>
Min: 157
Max: 360
Weighted Average: 335
I-11
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE REMAINING AVERAGE AVERAGE WEIGHTED
DEBT SERVICE MORTGAGE CUT-OFF DATE CUT-OFF DATE TERM TO MATURITY MORTGAGE CUT-OFF DATE AVERAGE
COVERAGE RATIO (x) LOANS BALANCE ($) BALANCE (%) (MOS) RATE (%) LTV (%) DSCR (x)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.16 - 1.25 49 265,708,556 24.69 123 8.250 74.7 1.23
1.26 - 1.35 58 419,566,651 38.98 117 8.306 73.8 1.30
1.36 - 1.50 44 301,936,926 28.05 108 8.305 67.6 1.40
1.51 - 1.75 28 67,111,108 6.24 115 7.358 63.6 1.61
1.76 - 2.00 7 12,024,448 1.12 101 7.196 60.5 1.85
2.01 > = 4 9,940,668 0.92 99 6.922 42.5 2.51
---------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
=================================================================================================================================
</TABLE>
Min: 1.16x
Max: 2.81x
Weighted Average: 1.35x
I-12
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED WEIGHTED
CUT-OFF DATE NUMBER OF AGGREGATE AGGREGATE REMAINING AVERAGE AVERAGE WEIGHTED
LOAN-TO-VALUE MORTGAGE CUT-OFF DATE CUT-OFF DATE TERM TO MORTGAGE CUT-OFF DATE AVERAGE
RATIO (%) LOANS BALANCE ($) BALANCE (%) MATURITY (MOS) RATE (%) LTV (%) DSCR (x)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
20.1 - 30.0 1 4,417,257 0.41 96 6.500 27.5 2.81
30.1 - 40.0 1 1,899,896 0.18 96 6.500 39.6 2.68
40.1 - 50.0 7 13,278,646 1.23 141 7.807 46.9 1.71
50.1 - 60.0 15 44,391,585 4.12 105 7.945 58.2 1.48
60.1 - 70.0 50 296,301,800 27.53 110 8.504 66.1 1.40
70.1 - 80.0 114 693,517,503 64.44 117 8.133 74.7 1.30
80.1 - 90.0 2 22,481,671 2.09 138 7.841 82.1 1.26
---------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
=================================================================================================================================
</TABLE>
Min: 27.5%
Max: 83.8%
Weighted Average: 71.2%
I-13
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE REMAINING AVERAGE AVERAGE WEIGHTED
BALLOON LOAN-TO-VALUE MORTGAGE CUT-OFF DATE CUT-OFF DATE TERM TO MORTGAGE CUT-OFF DATE AVERAGE
RATIO (%) LOANS BALANCE ($) BALANCE (%) MATURITY (MOS) RATE (%) LTV (%) DSCR (x)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.1 - 10.0 5 11,940,086 1.11 203 7.651 60.5 1.43
10.1 - 20.0 1 4,417,257 0.41 96 6.500 27.5 2.81
20.1 - 30.0 1 1,899,896 0.18 96 6.500 39.6 2.68
30.1 - 40.0 7 21,529,048 2.00 137 8.055 59.9 1.47
40.1 - 50.0 15 40,016,981 3.72 103 7.474 60.0 1.48
50.1 - 60.0 48 231,397,469 21.50 116 8.296 65.8 1.43
60.1 - 70.0 99 685,373,598 63.68 114 8.266 73.6 1.30
70.1 - 80.0 14 79,714,022 7.41 118 8.080 79.9 1.27
----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
==================================================================================================================================
</TABLE>
Min: 1.3%
Max: 72.7%
Weighted Average: 62.3%
I-14
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
HYPER AMORTIZING LOANS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE REMAINING AVERAGE AVERAGE WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE TERM TO MORTGAGE CUT-OFF DATE AVERAGE
HYPER AMORTIZING LOANS BALANCE ($) BALANCE (%) MATURITY (MOS) RATE (%) LTV (%) DSCR (x)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
No 156 639,171,819 59.39 118 8.152 70.5 1.34
Yes 34 437,116,539 40.61 112 8.289 72.3 1.36
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
===================================================================================================================================
</TABLE>
I-15
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
OWNERSHIP TYPES
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY AVERAGE WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE REMAINING AVERAGE AVERAGE WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE TERM TO MORTGAGE CUT-OFF DATE AVERAGE
OWNERSHIP TYPE LOANS BALANCE ($) BALANCE (%) MATURITY (MOS) RATE (%) LTV (%) DSCR (x)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fee Simple 182 945,019,264 87.80 115 8.163 71.6 1.35
Fee & Leasehold 2 11,651,216 1.08 117 8.796 70.2 1.34
Leasehold 6 119,617,878 11.11 118 8.500 68.6 1.35
----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE 190 $1,076,288,358 100.00% 115 8.208% 71.2% 1.35x
==================================================================================================================================
</TABLE>
I-16
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PREPAYMENT RESTRICTION ANALYSIS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS OCTOBER 2000 OCTOBER 2001 OCTOBER 2002 OCTOBER 2003 OCTOBER 2004 OCTOBER 2005
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Locked Out 100.00% 98.59% 94.13% 86.80% 86.09% 82.04%
Yield Maintenance Total 0.00% 1.41% 5.87% 13.20% 13.81% 17.18%
Open 0.00% 0.00% 0.00% 0.00% 0.10% 0.78%
---------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
---------------------------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $1,076,288,358 $1,066,944,505 $1,056,818,645 $1,045,628,995 $1,033,512,677 $1,019,134,814
% Initial Pool Balance 100.00% 99.13% 98.19% 97.15% 96.03% 94.69%
=================================================================================================================================
-----------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS OCTOBER 2006 OCTOBER 2007 OCTOBER 2008 OCTOBER 2009 OCTOBER 2010
-----------------------------------------------------------------------------------------------------------------
Locked Out 79.00% 81.84% 89.08% 79.32% 69.11%
Yield Maintenance Total 17.67% 17.28% 5.99% 6.25% 8.66%
Open 3.33% 0.88% 4.92% 14.43% 22.23%
-----------------------------------------------------------------------------------------------------------------
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00%
-----------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $996,812,485 $946,414,106 $830,573,100 $776,385,667 $61,088,047
% Initial Pool Balance 92.62% 87.93% 77.17% 72.14% 5.68%
=================================================================================================================
</TABLE>
Note: (1) The above analysis is based on Maturity Assumptions and a 0% CPR as
discussed in the Prospectus Supplement.
I-17
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
ORIGINAL AGGREGATE CUT-OFF
LOAN PRINCIPAL CUT-OFF DATE BALANCE/
NO. SELLER(1) PROPERTY NAME(2) BALANCE DATE BALANCE(3) UNIT OR SF(4)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 CIBC 475 Park Avenue South $60,000,000 $59,946,195 $147
2 MSDWMC Camino Real Marketplace $49,000,000 $49,000,000 $98
3 CIBC Courtyard by Marriott $45,000,000 $45,000,000 $184,426
4 CIBC AppleTree Business Park $37,250,000 $37,227,201 $86
5 MSDWMC Bozzuto's Warehouse and Distribution Facility $32,970,000 $32,843,136 $33
6 Midland 500 North Capitol $29,630,000 $29,539,428 $168
7 Midland Arcadia Crossing Power Center $29,460,000 $29,367,163 $66
8 CIBC Sweetheart Cup Distribution Center $27,000,000 $27,000,000 $26
9 CIBC Triangle Plaza II $26,307,584 $26,286,819 $191
10 Midland Solana Beach Towne Centre $26,000,000 $25,983,319 $103
11 Midland Continental Teves Building $24,125,000 $24,093,491 $102
12 CIBC Discovery Creative & Technology Center $23,650,000 $23,581,086 $159
13 MSDWMC Springfield Gardens Shopping Center $21,000,000 $20,948,014 $218
14 Midland Post Trace Apartments $18,350,000 $18,350,000 $37,757
15 CIBC Northside Marketplace $15,400,000 $15,390,300 $81
16 MSDWMC Suburban Lodge - Norcross (I) $3,550,000 $3,477,018 $21,409
17 MSDWMC Suburban Lodge - Matthews (I) $3,270,000 $3,202,774 $21,409
18 MSDWMC Suburban Lodge - Douglasville (I) $2,800,000 $2,742,437 $21,409
19 MSDWMC Suburban Lodge - Columbus (Eastland) (I) $2,800,000 $2,742,437 $21,409
20 MSDWMC Suburban Lodge - Indianapolis (I) $2,750,000 $2,693,465 $21,409
21 CIBC Triangle Plaza I $14,862,500 $14,851,920 $194
22 CIBC Taconic Corporate Park $14,500,000 $14,457,060 $69
23 CIBC Fairway Plaza $14,250,000 $14,241,024 $84
24 CIBC Monticello Mall $12,900,000 $12,892,056 $84
25 MSDWMC Town Center Shopping Center $12,400,000 $12,393,142 $127
26 MSDWMC 1450 Marina Way South Office Building $11,600,000 $11,451,777 $122
27 Midland The Waterford at Portage Apartments Phase I (A) $5,807,000 $5,799,016 $33,365
28 Midland The Waterford at Portgage Trail Phase II (A) $4,350,000 $4,344,020 $33,365
29 Midland River Drive Center I $10,500,000 $10,287,599 $107
30 Midland Kingsley Hotel & Suites $10,000,000 $10,000,000 $66,667
31 CIBC Homewood Suites $9,400,000 $9,400,000 $87,850
32 CIBC Grants Pass Shopping Center $9,300,000 $9,288,011 $40
33 CIBC Imperial Plaza $9,000,000 $8,991,222 $75
34 Midland The Waterford at Spencer Oaks Apartments $8,880,000 $8,862,388 $42,608
35 CIBC Hickory Hollow $8,640,000 $8,634,613 $78
36 MSDWMC 26600 Telegraph Road Office Building $8,600,000 $8,582,702 $88
37 MSDWMC Huntington Medical Center $8,500,000 $8,482,855 $128
38 MSDWMC Home Depot - Gardena $8,250,000 $8,232,483 $61
39 MSDWMC Montego Palms Apartments $8,175,000 $8,133,680 $96,830
40 Midland Mountain Village Apartments $7,880,000 $7,713,717 $26,784
41 Midland The Harvard Community Health Building $7,800,000 $7,644,388 $105
42 Midland Waterford at Sterling Place Apartments $7,650,000 $7,629,751 $38,149
43 Midland Regents Place Apartment Homes $7,600,000 $7,591,873 $29,200
44 MSDWMC First Carousel Office Building (II) $5,000,000 $4,993,722 $65
45 MSDWMC Corporate Center II Office Building (II) $2,500,000 $2,496,861 $65
46 Midland Sunrise Village $7,300,000 $7,290,248 $64
47 MSDWMC Ahwatukee Plaza $6,600,000 $6,584,520 $91
48 CIBC U.S. Government Intelligence Center $6,400,000 $6,393,687 $77
49 CIBC Trails End Apartments $6,200,000 $6,193,113 $21,504
50 CIBC Lakeview Executive Center $6,100,000 $6,085,033 $114
51 MSDWMC Piedmont Tech Office Building $6,000,000 $5,986,809 $92
52 Midland Aerospace Dynamics International, Inc. $5,900,000 $5,882,808 $41
53 CIBC Garden Way $5,880,000 $5,876,342 $22
54 Midland Windscape Apartments $6,000,000 $5,870,858 $45,866
55 MSDWMC The Shops at Eagle Pointe (B) $3,400,000 $3,395,759 $126
56 MSDWMC The Shops at Haw Creek (B) $1,950,000 $1,947,568 $126
57 Midland Best Buy $5,400,000 $5,400,000 $119
58 Midland Regency at South Shore $5,250,000 $5,063,459 $44,030
59 Midland Woodlake Village Apartments $5,000,000 $4,890,312 $31,348
60 Midland Torrance Van & Storage $4,708,000 $4,696,517 $45
61 CIBC Southside Plaza Shopping Center $4,575,000 $4,563,607 $35
62 Midland Lackland Self Storage $4,650,000 $4,417,257 $3,525
63 Midland Imperial Mobile Home Park $4,500,000 $4,396,251 $24,023
64 Midland The Falls Apartments $4,280,000 $4,267,400 $32,086
65 Midland Chesapeake Estates of Grantville $4,100,000 $4,014,812 $11,570
66 CIBC Deerfield Town Square $3,950,000 $3,947,699 $98
67 Midland Westbridge Garden Villas Apartments $4,000,000 $3,913,143 $23,293
68 Midland Two Charlesgate West $3,950,000 $3,831,856 $68
69 Midland Tower Center $3,800,000 $3,797,532 $58
70 MSDWMC Park Central Plaza $3,625,000 $3,620,598 $45
71 Midland Comfort Suites $3,465,000 $3,459,657 $44,931
72 Midland Mission Bank Building $3,450,000 $3,444,400 $48
73 CIBC Cambridge Court Apartments $3,450,000 $3,439,218 $26,055
74 Midland Huntington Crossing $3,400,000 $3,396,674 $194
75 Midland Research & Development Building $3,375,000 $3,270,797 $55
76 Midland 4084 Office Building $3,260,000 $3,254,444 $101
77 Midland Poulsbo Village $3,300,000 $3,187,764 $74
78 MSDWMC Studio Heights Apartments $3,200,000 $3,186,288 $72,416
79 Midland Hilltop Court $3,200,000 $3,130,062 $115,928
80 CIBC Rite Aid - Flatbush $3,150,000 $3,101,888 $286
81 Midland Scripps Terrace Business Park $3,075,000 $3,069,389 $54
82 Midland Village Square Office Park $3,066,000 $3,066,000 $57
83 Midland Imperial Gardens Apartments $3,150,000 $3,047,007 $21,160
84 CIBC 2001 Greenville $3,050,000 $3,045,406 $96
85 Midland ASG Corporate Office $3,050,000 $3,044,687 $122
86 Midland Hackettstown Commerce Park Bldg. II $3,049,000 $3,040,783 $52
87 Midland San Diego Medical Building $2,950,000 $2,948,107 $213
88 CIBC Wood Park Apartments $2,950,000 $2,947,015 $14,237
89 Midland San Gabriel Business Park $2,875,000 $2,870,122 $103
90 Midland Pacific Grinding Wheel Property $3,100,000 $2,852,196 $30
91 Midland La Casa Illusion Apartments $2,851,000 $2,847,337 $47,456
92 CIBC Washington Place Apartments & Washington Park Apartments $2,850,000 $2,847,170 $16,553
93 CIBC Mt. Airy Apartments $2,800,000 $2,783,796 $39,208
94 Midland Coventry Manor Phase I $2,850,000 $2,754,772 $32,795
95 Midland Office Max $2,900,000 $2,748,964 $92
96 CIBC Austin Square $2,700,000 $2,694,004 $55
97 Midland Maplewood Commons Shopping Center $2,750,000 $2,690,286 $95
98 Midland Deerfield Cove (Floresta Estate) $2,675,000 $2,628,142 $32,852
99 Midland Timber Glen II $2,681,000 $2,623,483 $36,437
100 Midland Stone Ridge Towne Centre $2,700,000 $2,611,428 $61
101 Midland Crown Pointe Apartments $2,650,000 $2,598,099 $34,186
102 Midland Joslyn Loft Apartments $2,535,000 $2,529,640 $87,229
103 MSDWMC Hendersonville Plaza $2,500,000 $2,487,340 $27
104 Midland Griffin Street Parking Garage $2,550,000 $2,474,815 $14
105 Midland 601 8th Avenue $2,500,000 $2,420,831 $88
106 Midland Dalton Place $2,497,000 $2,416,896 $15,593
107 CIBC Dicks Clothing & Sporting Goods - Richmond $2,400,000 $2,400,000 $53
108 CIBC Hampton Inn $2,400,000 $2,398,031 $38,678
109 Midland Penns View Apartments $2,450,000 $2,382,258 $46,711
110 Midland U-Stor University Mini Storage $2,500,000 $2,375,325 $2,557
111 MSDWMC El Portal Apartments $2,375,000 $2,367,371 $27,528
112 Midland Holiday Inn Express $2,370,000 $2,363,205 $28,133
113 CIBC Confetti Apartments West $2,290,000 $2,286,882 $38,761
114 Midland Hoopskirt Factory Apartments $2,268,000 $2,263,885 $52,648
115 Midland Bayview Apartments $2,425,000 $2,252,749 $20,295
116 Midland Garden Park Apartments $2,300,000 $2,229,646 $25,926
117 CIBC Gambro Dialysis Center Office Building $2,215,000 $2,211,248 $70
118 MSDWMC PetSmart-Greensburg $2,200,000 $2,198,004 $84
119 CIBC Village at Western Branch $2,200,000 $2,197,609 $21,131
120 Midland Gramercy Park Town Homes $2,227,000 $2,180,096 $27,950
121 CIBC Western Oaks Apartments $2,175,000 $2,172,799 $12,487
122 Midland Grafalloy Building $2,168,000 $2,161,592 $47
123 Midland Airborne Express Distribution Center $2,166,000 $2,159,634 $55
124 Midland Spanish Spur Apartments $2,143,000 $2,138,054 $13,363
125 Midland Buie Del Mar Office Building $2,128,000 $2,123,921 $162
126 CIBC 72 Hudson Street $2,100,000 $2,096,112 $116,451
127 Midland Walgreen's Hollis Shopping Center $2,150,000 $2,074,344 $128
128 CIBC Ramada Limited $2,100,000 $2,072,738 $23,030
129 CIBC Kingston Place Apartments $2,070,000 $2,066,066 $22,457
130 Midland Deer Trace North Mobile Home Community $2,100,000 $2,052,700 $14,060
131 MSDWMC Lawndale Shopping Center $2,044,000 $2,039,618 $118
132 Midland Paradise Apartments $2,060,000 $1,996,902 $15,128
133 Midland 5 Lawrence Properties $1,972,000 $1,972,000 $57
134 CIBC Holiday Inn Express - Manhattan Beach $1,960,000 $1,950,007 $44,318
135 Midland Superstition Springs Plaza $1,942,000 $1,936,535 $146
136 Midland The Menlo Plaza Shopping Center $2,000,000 $1,936,248 $28
137 Midland 7023 Little River Turnpike $2,000,000 $1,935,695 $51
138 Midland California Bank & Trust $1,925,000 $1,923,765 $179
139 CIBC Tampa Multifamily Portfolio II $1,930,000 $1,919,742 $16,269
140 Midland Lackland Self Storage $2,000,000 $1,899,896 $2,861
141 Midland Firehouse Square $1,937,000 $1,885,695 $60
142 Midland Beringer Place Apartments $1,888,000 $1,885,466 $38,479
143 Midland 2300 Boynton Avenue Building $1,900,000 $1,844,901 $80
144 Midland Miramar Industrial Showroom $1,900,000 $1,842,034 $52
145 Midland Woodhaven Apartments $1,835,000 $1,830,171 $19,893
146 CIBC Oak Hollow Apartments $1,800,000 $1,797,438 $37,447
147 Midland Westbrooke Shopping Center $1,750,000 $1,696,427 $84
148 Midland Coventry Manor Phase II $1,750,000 $1,691,527 $23,824
149 CIBC Holiday Inn Express - Blythe $1,700,000 $1,687,820 $25,573
150 Midland The Northwood Village Apartments $1,680,000 $1,675,629 $21,482
151 Midland Eastwyck Apartments $1,700,000 $1,649,708 $12,130
152 Midland The Ridgepoint Apartments $1,750,000 $1,613,296 $9,603
153 MSDWMC Hollywood Video & Retail Shops $1,613,000 $1,608,014 $134
154 Midland 4630 Forge Road $1,637,000 $1,600,129 $47
155 Midland Snow Garden Apartments $1,605,000 $1,599,613 $66,651
156 Midland Ruth's Chris Steak House $1,600,000 $1,598,973 $209
157 Midland Lofstrand Industrial $1,600,000 $1,597,252 $40
158 Midland Mesa Villa Apartments $1,630,000 $1,595,292 $27,039
159 Midland San Bernardino Mitsubishi $1,635,000 $1,588,400 $99
160 Midland Lake Mall $1,575,000 $1,571,328 $42
161 CIBC Holiday Inn Express - St. Augustine $1,550,000 $1,544,982 $30,900
162 CIBC Annie Apartments & Santo Villas Apartments $1,537,500 $1,536,037 $20,211
163 Midland Lincoln Court Apartments $1,540,000 $1,512,564 $26,079
164 Midland Spring Meadows Apartments $1,500,000 $1,498,456 $17,839
165 Midland Oakwood Center $1,500,000 $1,454,210 $22
166 Midland 180 Prospect Street $1,440,000 $1,432,543 $23,484
167 Midland Lincoln Heights Shopping Center $1,400,000 $1,356,388 $94
168 Midland ABC Building Supply Warehouse $1,385,000 $1,355,445 $25
169 Midland Northrock Business Park Buildings $1,400,000 $1,332,108 $42
170 Midland 1825 & 2011 Spruce Street $1,280,000 $1,276,760 $85,117
171 Midland Deer Trace South Mobile Home Community $1,300,000 $1,270,719 $16,720
172 Midland Silverton Plaza $1,255,000 $1,231,066 $61
173 Midland Foothill Hacienda $1,250,000 $1,223,326 $53,188
174 Midland Briarwood Apartments $1,230,000 $1,191,874 $19,539
175 Midland Marc's Retail Center $1,250,000 $1,178,311 $24
176 Midland Windemere Apartments $1,200,000 $1,174,892 $32,636
177 Midland 4401-4225 East 46th Avenue $1,170,000 $1,163,606 $13
178 Midland Gaslight Village Apartments $1,200,000 $1,161,372 $24,195
179 Midland Guinea Road Warehouse $1,150,000 $1,111,900 $32
180 Midland Legacy Business Park Medical Office - 7 $1,125,000 $1,104,627 $123
181 Midland 3240 Prospect Street $1,125,000 $1,092,352 $91
182 Midland Ridgeview Heights Apartments $1,100,000 $1,067,491 $22,239
183 Midland Wawaset Park Apartments $1,048,000 $1,046,186 $32,693
184 Midland Flying Cloud Office Building $1,041,000 $1,037,790 $94
185 Midland Medical Office Building $1,040,000 $1,035,507 $57
186 MSDWMC 7930 National Highway Industrial Building $950,000 $946,839 $28
187 Midland 3603 Peck Road $975,000 $928,305 $84
188 Midland The Exmet Building $890,000 $862,098 $31
189 Midland Acquest Building $800,000 $773,626 $59
190 Midland The Savannah Apartments $700,000 $696,932 $9,680
TOTAL/WEIGHTED AVERAGE $1,083,298,584 $1,076,288,358
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MATURITY DATE ORIGINAL ORIGINAL REMAINING
OR ANTICIPATED TERM TO AMORT. TERM TO
LOAN NOTE REPAYMENT DATE MATURITY OR TERM REMAINING MATURITY OR SECURITY
NO. DATE ARD(5) ARD (MOS) (MOS)(6) AMORT. TERM ARD (MOS) TYPE (7)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 7/31/00 8/1/10 120 360 358 118 Leasehold
2 3/31/00 4/1/10 120 324 324 114 Leasehold
3 9/13/00 10/1/10 120 300 300 120 Fee Simple
4 8/30/00 9/1/10 120 360 359 119 Fee Simple
5 12/30/99 1/1/07 84 360 351 75 Fee Simple
6 3/29/00 4/1/10 120 360 354 114 Fee Simple
7 3/23/00 4/1/10 120 360 354 114 Fee Simple
8 9/28/00 10/1/10 120 360 360 120 Fee Simple
9 8/29/00 9/1/10 120 353 352 119 Fee Simple
10 8/25/00 9/1/10 120 360 359 119 Fee Simple
11 6/20/00 7/1/10 120 360 357 117 Fee Simple
12 7/14/99 4/1/10 120 360 354 114 Fee Simple
13 4/6/00 5/1/10 120 360 355 115 Fee Simple
14 9/1/00 10/1/10 120 360 360 120 Fee Simple
15 8/7/00 9/1/10 120 360 359 119 Fee Simple
16 12/29/98 1/1/09 120 300 279 99 Fee Simple
17 12/29/98 1/1/09 120 300 279 99 Fee Simple
18 12/29/98 1/1/09 120 300 279 99 Fee Simple
19 12/29/98 1/1/09 120 300 279 99 Fee Simple
20 12/29/98 1/1/09 120 300 279 99 Fee Simple
21 8/29/00 9/1/10 120 360 359 119 Fee Simple
22 2/17/00 3/1/10 120 360 353 113 Fee Simple
23 8/7/00 9/1/10 120 360 359 119 Fee Simple
24 8/16/00 9/1/10 120 360 359 119 Fee Simple
25 6/22/00 12/1/10 125 360 359 122 Fee Simple
26 1/27/00 2/1/15 180 240 232 172 Fee Simple
27 6/16/00 7/1/15 180 360 357 177 Fee Simple
28 6/16/00 7/1/15 180 360 357 177 Fee Simple
29 8/18/98 9/1/08 120 360 335 95 Fee Simple
30 9/20/00 10/1/10 120 300 300 120 Fee Simple
31 9/14/00 10/1/10 120 300 300 120 Fee Simple
32 6/29/00 7/1/10 120 360 357 117 Fee and Leasehold
33 8/1/00 8/1/10 120 360 358 118 Fee Simple
34 5/5/00 6/1/15 180 360 356 176 Fee Simple
35 8/7/00 9/1/10 120 360 359 119 Fee Simple
36 5/2/00 6/1/10 120 360 356 116 Fee Simple
37 5/26/00 6/1/10 120 360 356 116 Fee Simple
38 4/19/00 11/1/05 66 360 355 61 Fee Simple
39 12/28/99 1/1/10 120 360 351 111 Fee Simple
40 8/31/98 9/1/08 120 360 335 95 Fee Simple
41 5/19/98 4/30/09 130 360 332 102 Fee Simple
42 4/20/00 5/1/15 180 360 355 175 Fee Simple
43 7/31/00 8/1/10 120 360 358 118 Fee Simple
44 6/7/00 7/1/10 120 360 357 117 Fee Simple
45 6/7/00 7/1/10 120 360 357 117 Fee Simple
46 6/27/00 7/1/10 120 360 357 117 Fee Simple
47 4/27/00 5/1/10 120 360 355 115 Fee Simple
48 7/19/00 8/1/10 120 360 358 118 Fee Simple
49 8/1/00 8/1/10 120 360 358 118 Fee Simple
50 4/14/00 5/1/10 120 360 355 115 Fee Simple
51 5/2/00 5/1/10 120 360 355 115 Fee Simple
52 3/30/00 4/1/10 120 360 354 114 Fee Simple
53 8/25/00 9/1/10 120 360 359 119 Fee Simple
54 8/27/98 9/1/08 120 360 335 95 Fee Simple
55 6/27/00 7/1/10 120 360 357 117 Fee Simple
56 6/27/00 7/1/10 120 360 357 117 Fee Simple
57 Not closed 10/1/15 180 360 360 180 Fee Simple
58 2/4/98 3/1/08 120 300 269 89 Fee Simple
59 7/27/98 8/1/08 120 360 334 94 Fee Simple
60 4/7/00 5/1/10 120 360 355 115 Fee Simple
61 4/18/00 5/1/10 120 360 355 115 Fee Simple
62 9/14/98 10/1/08 120 240 216 96 Fee Simple
63 3/31/98 4/1/08 120 360 330 90 Fee Simple
64 4/20/00 5/1/10 120 360 355 115 Fee Simple
65 8/24/98 9/1/08 120 360 335 95 Fee Simple
66 8/10/00 9/1/10 120 360 359 119 Fee Simple
67 9/28/98 10/1/13 180 360 336 156 Fee Simple
68 9/2/98 10/1/08 120 300 276 96 Fee Simple
69 8/31/00 9/1/10 120 360 359 119 Fee Simple
70 6/2/00 7/1/10 120 360 357 117 Fee Simple
71 7/27/00 8/1/10 120 300 298 118 Fee Simple
72 8/31/00 9/1/20 240 240 239 239 Fee Simple
73 3/30/00 4/1/10 120 360 354 114 Fee Simple
74 7/18/00 8/1/10 120 360 358 118 Fee Simple
75 8/27/98 9/1/08 120 300 275 95 Fee Simple
76 5/24/00 6/1/10 120 360 356 116 Fee Simple
77 9/25/98 10/1/08 120 300 276 96 Fee Simple
78 1/19/00 2/1/10 120 360 352 112 Fee Simple
79 9/9/98 10/1/08 120 360 336 96 Fee Simple
80 11/2/99 6/1/19 234 234 224 224 Leasehold
81 5/31/00 6/1/10 120 360 356 116 Fee Simple
82 9/27/00 10/1/10 120 360 360 120 Fee Simple
83 9/30/98 10/1/08 120 300 276 96 Fee Simple
84 7/19/00 8/1/10 120 300 298 118 Fee Simple
85 7/14/00 8/1/10 120 300 298 118 Fee Simple
86 3/16/00 4/1/10 120 360 354 114 Fee Simple
87 8/25/00 9/1/10 120 360 359 119 Fee Simple
88 7/10/00 8/1/10 120 360 358 118 Fee Simple
89 7/27/00 8/1/10 120 300 298 118 Fee Simple
90 10/16/98 11/1/13 180 180 157 157 Fee Simple
91 6/19/00 7/1/10 120 360 357 117 Fee Simple
92 8/3/00 9/1/10 120 300 299 119 Fee Simple
93 11/10/99 1/1/10 121 360 350 111 Fee Simple
94 10/1/98 11/1/08 120 300 277 97 Fee Simple
95 8/12/98 9/1/08 120 240 215 95 Ground Lease
96 10/20/99 11/1/10 132 300 297 121 Fee Simple
97 9/21/98 10/1/08 120 360 336 96 Fee Simple
98 7/1/98 8/1/08 120 360 334 94 Fee Simple
99 7/20/98 8/1/08 120 360 334 94 Fee Simple
100 9/15/98 10/1/08 120 300 276 96 Fee Simple
101 10/8/98 11/1/08 120 360 337 97 Fee Simple
102 5/12/00 6/1/10 120 360 356 116 Fee Simple
103 3/23/00 4/1/10 120 300 294 114 Fee Simple
104 10/15/98 11/1/08 120 300 277 97 Fee Simple
105 10/29/98 11/1/08 120 300 277 97 Ground Lease
106 7/24/98 8/1/08 120 300 274 94 Fee Simple
107 Not closed 10/1/10 120 300 300 120 Leasehold
108 8/17/00 9/1/10 120 300 299 119 Fee Simple
109 11/2/98 12/1/08 120 300 278 98 Fee Simple
110 9/18/98 10/1/08 120 240 216 96 Fee Simple
111 3/24/00 4/1/10 120 360 354 114 Fee Simple
112 5/23/00 6/1/10 120 300 296 116 Fee Simple & Ground Lease
113 6/2/00 7/1/10 120 360 357 117 Fee Simple
114 5/30/00 6/1/10 120 360 356 116 Fee Simple
115 7/9/97 8/1/07 120 240 202 82 Fee Simple
116 10/15/98 11/1/08 120 300 277 97 Fee Simple
117 5/26/00 6/1/10 120 360 356 116 Fee Simple
118 7/17/00 8/1/10 120 360 358 118 Fee Simple
119 7/31/00 8/1/10 120 360 358 118 Fee Simple
120 9/28/98 10/1/08 120 360 336 96 Fee Simple
121 7/10/00 8/1/10 120 360 358 118 Fee Simple
122 3/15/00 4/1/10 120 360 354 114 Fee Simple
123 3/15/00 4/1/07 84 360 354 78 Fee Simple
124 6/7/00 7/1/10 120 300 297 117 Fee Simple
125 5/2/00 6/1/10 120 360 356 116 Fee Simple
126 5/18/00 6/1/10 120 360 356 116 Fee Simple
127 9/29/98 10/1/08 120 300 276 96 Fee Simple
128 11/4/99 11/1/09 119 240 230 109 Fee Simple
129 5/24/00 6/1/10 120 360 356 116 Fee Simple
130 9/14/98 10/1/08 120 360 336 96 Fee Simple
131 4/25/00 5/1/10 120 360 355 115 Fee Simple
132 9/3/98 10/1/08 120 300 276 96 Fee Simple
133 9/13/00 10/1/10 120 240 240 120 Fee Simple
134 5/26/00 6/1/10 120 240 236 116 Fee Simple
135 2/25/00 3/1/10 120 360 353 113 Fee Simple
136 10/14/98 11/1/08 120 300 277 97 Fee Simple
137 8/31/98 9/1/08 120 300 275 95 Fee Simple
138 8/25/00 9/1/10 120 360 359 119 Fee Simple
139 3/30/00 4/1/10 120 300 294 114 Fee Simple
140 9/14/98 10/1/08 120 240 216 96 Fee Simple
141 11/2/98 12/1/08 120 300 278 98 Fee Simple
142 6/7/00 7/1/10 120 360 357 117 Fee Simple
143 9/23/98 10/1/08 120 300 276 96 Fee Simple
144 8/18/98 9/1/08 120 300 275 95 Fee Simple
145 4/18/00 5/1/10 120 360 355 115 Fee Simple
146 6/15/00 7/1/10 120 360 357 117 Fee Simple
147 8/19/98 9/1/08 120 300 275 95 Fee Simple
148 10/1/98 11/1/08 120 300 277 97 Fee Simple
149 4/5/00 5/1/10 120 240 235 115 Fee Simple
150 4/27/00 5/1/10 120 360 355 115 Fee Simple
151 10/13/98 11/1/08 120 300 277 97 Fee Simple
152 10/7/98 11/1/13 180 180 157 157 Fee Simple
153 3/15/00 4/1/10 120 360 354 114 Fee Simple
154 9/30/98 10/1/08 120 360 336 96 Fee Simple
155 2/29/00 3/1/10 120 360 353 113 Fee Simple
156 8/25/00 9/1/10 120 360 359 119 Fee Simple
157 7/18/00 8/1/10 120 300 298 118 Fee Simple
158 9/21/98 10/1/08 120 360 336 96 Fee Simple
159 9/18/98 10/1/08 120 300 276 96 Fee Simple
160 4/18/00 5/1/10 120 360 355 115 Fee Simple
161 4/28/00 5/1/10 120 300 295 115 Fee Simple
162 8/25/00 9/1/10 120 300 299 119 Fee Simple
163 11/2/98 12/1/08 120 360 338 98 Fee Simple
164 8/31/00 9/1/10 120 300 299 119 Fee Simple
165 9/2/98 10/1/08 120 300 276 96 Fee Simple
166 3/16/00 4/1/10 120 300 294 114 Fee Simple
167 9/10/98 10/1/08 120 300 276 96 Fee Simple
168 9/24/98 10/1/08 120 360 336 96 Fee Simple
169 8/19/98 9/1/08 120 240 215 95 Fee Simple
170 6/29/00 7/1/10 120 300 297 117 Fee Simple
171 9/14/98 10/1/08 120 360 336 96 Fee Simple
172 8/10/98 9/1/08 120 360 335 95 Fee Simple
173 9/16/98 10/1/10 144 360 336 120 Fee Simple
174 10/8/98 11/1/08 120 300 277 97 Fee Simple
175 1/20/98 2/1/05 84 240 208 52 Fee Simple
176 9/25/98 10/1/08 120 360 336 96 Fee Simple
177 3/17/00 4/1/10 120 300 294 114 Fee Simple
178 10/1/98 11/1/08 120 300 277 97 Fee Simple
179 9/23/98 10/1/08 120 300 276 96 Fee Simple
180 9/25/98 10/1/08 120 360 336 96 Fee Simple
181 8/24/98 9/1/08 120 300 275 95 Fee Simple
182 9/12/98 10/1/08 120 300 276 96 Fee Simple
183 7/17/00 8/1/10 120 300 298 118 Fee Simple
184 2/2/00 3/1/15 180 360 353 173 Fee Simple
185 4/10/00 5/1/10 120 300 295 115 Fee Simple
186 2/25/00 3/1/10 120 360 353 113 Fee Simple
187 9/14/98 10/1/18 240 240 216 216 Fee Simple
188 8/31/98 9/1/08 120 300 275 95 Fee Simple
189 9/28/98 10/1/08 120 300 276 96 Fee Simple
190 4/20/00 5/1/10 120 300 295 115 Fee Simple
122 342 335 115
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTEREST SCHEDULED
LOAN INTEREST ACCRUAL RELATED BORROWER BALLOON UNDERWRITABLE NET OPERATING
NO. RATE METHOD LOAN GROUPS (BY LOAN NO.) BALANCE BALLOON LTV (4) CASH FLOW INCOME
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8.800% Actual/360 $54,640,288 58.13% $7,719,744 $8,201,841
2 8.270% Actual/360 $44,916,336 68.37% $5,449,725 $5,538,922
3 8.790% Actual/360 $37,908,896 56.58% $6,618,509 $7,424,657
4 8.450% Actual/360 $33,651,513 65.34% $4,469,508 $4,906,448
5 9.170% Actual/360 $31,355,399 63.99% $4,496,612 $4,798,018
6 8.410% Actual/360 $26,783,482 67.64% $3,389,181 $3,645,191
7 8.300% Actual/360 $26,563,408 67.25% $3,202,319 $3,383,454
8 8.380% Actual/360 $24,356,748 66.46% $3,345,801 $3,449,248
9 7.447% Actual/360 21 $23,018,492 69.75% $2,924,844 $2,945,541
10 8.220% Actual/360 87, 138, 156 $23,393,877 67.42% $2,937,932 $3,134,267
11 8.610% Actual/360 $21,912,764 68.48% $2,831,701 $2,997,962
12 8.580% Actual/360 $21,434,772 66.98% $2,864,400 $3,080,629
13 8.330% Actual/360 $18,928,142 67.60% $2,350,091 $2,394,258
14 7.915% Actual/360 40 $16,399,501 71.30% $2,006,552 $2,128,052
15 8.310% Actual/360 23, 35 $13,867,900 66.04% $1,786,356 $1,887,240
16 8.250% Actual/360 17, 18, 19, 20 $2,946,753 49.28% $523,740 $571,003
17 8.250% Actual/360 16, 18, 19, 20 $2,714,333 49.28% $361,126 $402,546
18 8.250% Actual/360 16, 17, 19, 20 $2,324,200 49.28% $396,287 $439,066
19 8.250% Actual/360 16, 17, 18, 20 $2,324,200 49.28% $394,732 $440,458
20 8.250% Actual/360 16, 17, 18, 19 $2,282,696 49.28% $313,666 $354,099
21 7.708% Actual/360 9 $13,193,704 72.10% $1,660,731 $1,671,220
22 8.920% Actual/360 $13,243,816 63.07% $1,891,637 $2,154,436
23 8.310% Actual/360 15, 35 $12,832,310 65.14% $1,699,708 $1,811,251
24 8.420% Actual/360 $11,645,879 69.74% $1,470,312 $1,563,480
25 8.940% Actual/360 $11,281,918 67.96% $1,511,655 $1,572,121
26 8.260% Actual/360 $5,185,620 31.91% $1,464,607 $1,606,652
27 8.450% Actual/360 28, 34, 42 $4,741,257 62.12% $601,429 $643,429
28 8.450% Actual/360 27, 34, 42 $3,551,659 62.12% $515,177 $549,177
29 6.890% Actual/360 $9,145,451 64.63% $1,174,499 $1,368,034
30 8.610% Actual/360 $8,404,010 56.40% $1,352,456 $1,569,088
31 8.480% Actual/360 $7,851,896 55.69% $1,361,305 $1,522,645
32 8.650% Actual/360 $8,443,118 64.45% $1,169,693 $1,260,042
33 8.510% Actual/360 $8,143,356 67.86% $1,133,086 $1,216,677
34 8.480% Actual/360 27, 28, 42 $7,254,895 61.74% $999,512 $1,051,512
35 8.360% Actual/360 15, 23 $7,789,363 72.12% $1,052,796 $1,109,029
36 8.430% Actual/360 $7,767,702 64.20% $1,004,476 $1,132,474
37 8.420% Actual/360 $7,675,630 66.17% $1,010,387 $1,023,650
38 8.830% Actual/360 $7,931,665 65.01% $978,065 $1,034,765
39 8.180% Actual/360 78 $7,342,550 67.36% $916,001 $937,001
40 6.700% Actual/360 14 $6,828,606 68.29% $753,058 $825,058
41 7.450% Actual/360 $6,781,687 64.59% $813,062 $876,680
42 8.100% Actual/360 27, 28, 34 $6,157,236 67.66% $790,770 $840,770
43 8.180% Actual/360 150 $6,833,272 71.93% $817,782 $885,333
44 8.730% Actual/360 45 $4,547,384 63.75% $601,470 $683,081
45 8.730% Actual/360 44 $2,273,692 63.75% $292,033 $343,778
46 8.540% Actual/360 $6,620,285 61.87% $882,754 $963,665
47 8.510% Actual/360 $5,973,366 67.12% $773,907 $809,215
48 8.470% Actual/360 $5,785,592 59.34% $747,864 $835,658
49 8.040% Actual/360 $5,549,182 53.36% $886,314 $958,314
50 8.360% Actual/360 $5,501,975 65.50% $717,366 $767,934
51 8.720% Actual/360 $5,455,933 62.89% $717,744 $804,665
52 8.580% Actual/360 $5,353,510 60.36% $723,448 $796,818
53 8.370% Actual/360 $5,302,306 55.81% $825,386 $935,354
54 6.610% Actual/360 $5,186,741 64.43% $670,355 $702,355
55 8.750% Actual/360 56 $3,093,588 72.65% $386,876 $412,526
56 8.750% Actual/360 55 $1,774,263 72.65% $220,872 $232,893
57 8.230% Actual/360 $4,367,090 57.84% $592,462 $599,290
58 7.490% Actual/360 $4,277,891 56.77% $645,813 $675,063
59 6.690% Actual/360 $4,332,268 69.32% $527,201 $566,201
60 8.380% Actual/360 $4,254,484 67.00% $540,904 $594,774
61 8.310% Actual/360 $4,121,728 71.06% $535,550 $563,936
62 6.500% Actual/360 $3,125,256 19.47% $1,167,412 $1,186,061
63 7.150% Actual/360 $3,947,043 69.86% $442,263 $451,413
64 7.720% Actual/360 $3,808,166 71.18% $476,354 $513,787
65 6.770% Actual/360 $3,559,666 51.93% $530,230 $547,580
66 8.690% Actual/360 $3,587,636 67.69% $470,533 $500,120
67 6.350% Actual/360 $2,978,175 46.39% $452,940 $494,940
68 6.910% Actual/360 $3,160,737 49.39% $499,346 $575,192
69 8.160% Actual/360 $3,414,385 71.13% $437,671 $478,659
70 8.830% Actual/360 $3,304,116 63.54% $440,174 $506,064
71 8.990% Actual/360 $2,941,155 57.33% $484,103 $561,168
72 8.360% Actual/360 $190,873 2.71% $598,396 $700,743
73 8.330% Actual/360 $3,109,131 71.89% $414,429 $447,429
74 8.500% Actual/360 $3,079,288 64.83% $392,162 $416,773
75 7.000% Actual/360 $2,707,300 60.16% $380,037 $446,717
76 9.000% Actual/360 $2,984,950 64.89% $393,488 $436,943
77 6.140% Actual/360 $2,576,189 48.61% $429,403 $475,449
78 8.470% Actual/360 39 $2,892,803 53.57% $375,738 $386,738
79 6.320% Actual/360 $2,744,832 68.62% $345,288 $352,038
80 8.900% Actual/360 $166,755 3.97% $441,852 $444,017
81 8.770% Actual/360 $2,801,696 64.85% $365,642 $408,142
82 8.260% Actual/360 $2,762,257 61.38% $346,626 $402,864
83 6.380% Actual/360 $2,478,498 59.15% $337,423 $373,423
84 9.100% Actual/360 $2,590,903 63.56% $407,691 $449,170
85 8.400% Actual/360 $2,548,106 66.79% $372,753 $398,944
86 8.850% Actual/360 $2,782,961 66.26% $364,291 $407,758
87 8.220% Actual/360 10, 138, 156 $2,654,305 61.51% $333,197 $356,657
88 8.380% Actual/360 121 $2,661,336 68.24% $363,075 $414,825
89 8.530% Actual/360 $2,410,478 50.22% $365,361 $419,878
90 6.300% Actual/360 $72,475 1.69% $370,076 $399,764
91 8.660% Actual/360 $2,592,429 69.13% $323,777 $339,633
92 8.350% Actual/360 $2,371,609 57.84% $358,963 $410,563
93 7.990% Actual/360 $2,500,785 71.45% $321,605 $339,355
94 5.990% Actual/360 148 $2,213,172 58.24% $329,714 $360,731
95 6.900% 30/360 $1,941,176 49.77% $367,258 $390,907
96 8.940% Actual/360 $2,263,834 62.88% $345,162 $364,398
97 6.350% Actual/360 $2,360,836 67.45% $318,373 $352,871
98 7.660% Actual/360 $2,376,435 67.90% $365,522 $385,522
99 6.790% Actual/360 $2,329,237 69.53% $274,470 $292,470
100 6.360% Actual/360 $2,123,048 62.44% $286,036 $308,254
101 6.640% Actual/360 176 $2,292,622 59.55% $319,497 $338,497
102 8.250% Actual/360 $2,283,034 71.34% $286,516 $293,766
103 8.630% Actual/360 $2,097,275 58.26% $317,571 $368,488
104 6.750% Actual/360 $2,029,587 36.90% $349,779 $375,204
105 6.320% Actual/360 $1,962,613 47.87% $285,785 $311,572
106 7.000% Actual/360 $2,003,332 60.16% $298,462 $344,962
107 9.230% Actual/360 $2,045,569 56.82% $342,171 $371,365
108 9.500% Actual/360 $2,059,405 54.19% $393,763 $446,882
109 6.830% Actual/360 114, 141, 163 $1,955,502 55.87% $355,180 $369,392
110 6.530% Actual/360 169 $1,682,116 44.27% $435,719 $453,562
111 8.230% Actual/360 $2,135,394 61.90% $295,787 $313,537
112 9.370% Actual/360 $2,031,734 58.05% $332,281 $406,341
113 8.480% Actual/360 $2,071,067 62.76% $271,295 $288,523
114 8.790% Actual/360 109, 141, 163 $2,067,317 62.65% $268,608 $280,281
115 8.270% 30/360 $1,694,677 49.84% $300,524 $328,274
116 6.530% Actual/360 $1,817,878 60.00% $282,554 $304,054
117 9.020% Actual/360 $2,026,882 65.38% $268,433 $299,212
118 8.760% Actual/360 $2,001,720 64.57% $249,826 $262,846
119 8.120% Actual/360 $1,972,788 54.80% $277,176 $303,176
120 6.490% Actual/360 $1,919,337 68.94% $261,880 $281,380
121 8.380% Actual/360 88 $1,962,171 65.41% $247,645 $291,145
122 8.530% Actual/360 $1,965,004 67.76% $250,781 $277,036
123 8.550% Actual/360 $2,043,860 68.13% $240,978 $255,142
124 8.770% Actual/360 $1,809,333 59.32% $275,421 $315,421
125 8.600% Actual/360 $1,931,654 62.31% $247,815 $272,257
126 8.720% Actual/360 $1,909,147 64.72% $236,280 $241,280
127 5.930% Actual/360 $1,666,715 52.08% $273,282 $292,701
128 9.610% Actual/360 $1,569,872 41.31% $365,619 $411,933
129 8.630% Actual/360 $1,878,116 69.56% $246,107 $269,107
130 6.180% Actual/360 171 $1,794,140 63.51% $291,027 $298,327
131 8.800% Actual/360 $1,861,938 68.33% $242,242 $262,212
132 6.770% Actual/360 $1,641,182 63.74% $251,583 $285,243
133 8.200% Actual/360 $1,407,113 54.33% $241,146 $264,725
134 9.570% Actual/360 $1,455,926 35.77% $407,126 $459,522
135 9.080% Actual/360 $1,783,026 66.66% $236,070 $251,748
136 6.280% Actual/360 $1,568,045 55.12% $290,747 $337,050
137 6.760% Actual/360 $1,592,387 57.90% $343,675 $406,613
138 8.220% Actual/360 10, 87, 156 $1,732,047 51.70% $221,213 $239,008
139 8.390% Actual/360 $1,608,384 65.92% $260,815 $290,315
140 6.500% Actual/360 $1,344,197 28.00% $480,056 $489,946
141 7.080% Actual/360 109, 114, 163 $1,558,069 53.73% $237,552 $286,672
142 8.525% Actual/360 $1,711,632 71.32% $204,707 $216,957
143 7.090% Actual/360 $1,528,831 50.13% $220,785 $258,378
144 7.070% Actual/360 $1,527,393 60.02% $220,244 $244,889
145 8.120% Actual/360 $1,648,343 67.28% $229,764 $252,764
146 8.340% Actual/360 $1,622,711 69.05% $217,949 $230,621
147 7.050% Actual/360 $1,405,947 61.80% $186,229 $203,059
148 5.990% Actual/360 94 $1,358,965 56.62% $185,269 $203,019
149 8.690% Actual/360 $1,227,553 38.36% $360,451 $409,027
150 8.160% Actual/360 43 $1,510,516 70.26% $180,265 $199,765
151 6.730% Actual/360 $1,352,206 58.79% $209,821 $243,821
152 6.580% Actual/360 $43,260 1.27% $321,607 $363,607
153 8.370% Actual/360 $1,454,968 65.84% $182,417 $189,617
154 6.180% Actual/360 $1,398,576 63.00% $190,412 $217,688
155 8.510% Actual/360 $1,455,402 60.64% $185,356 $192,556
156 8.220% Actual/360 10, 87, 138 $1,439,623 56.68% $185,363 $203,152
157 8.470% Actual/360 $1,339,285 53.57% $208,686 $240,614
158 6.440% Actual/360 $1,402,863 68.60% $169,670 $184,420
159 7.190% Actual/360 $1,319,625 56.15% $246,168 $262,047
160 8.530% Actual/360 $1,428,100 64.91% $182,447 $212,375
161 9.660% Actual/360 $1,336,373 54.10% $262,729 $301,927
162 8.610% Actual/360 $1,288,648 62.86% $262,263 $281,263
163 6.830% Actual/360 109, 114, 141 $1,339,551 55.81% $197,552 $217,852
164 8.130% Actual/360 $1,243,502 65.45% $175,196 $196,196
165 6.790% Actual/360 $1,195,787 38.95% $223,907 $273,989
166 8.520% Actual/360 $1,207,138 59.61% $215,963 $231,213
167 6.670% Actual/360 $1,111,850 58.52% $158,094 $165,561
168 6.430% Actual/360 $1,191,670 62.72% $154,737 $171,942
169 7.130% Actual/360 110 $962,469 39.28% $223,186 $272,101
170 8.350% Actual/360 $1,068,388 66.77% $154,167 $159,072
171 6.180% Actual/360 130 $1,110,659 68.35% $162,996 $166,796
172 7.150% Actual/360 $1,100,557 63.80% $135,819 $162,357
173 6.430% Actual/360 $1,024,367 53.91% $133,949 $140,549
174 6.450% Actual/360 $969,677 49.73% $137,498 $152,748
175 7.990% Actual/360 $1,027,550 35.43% $179,398 $213,359
176 6.520% Actual/360 101 $1,035,077 62.73% $148,480 $157,480
177 8.250% Actual/360 $973,514 40.73% $199,597 $222,072
178 6.220% Actual/360 $938,983 56.91% $131,694 $143,694
179 6.300% Actual/360 $902,495 55.37% $138,435 $160,191
180 7.160% Actual/360 $987,119 63.48% $128,429 $148,385
181 7.360% Actual/360 $912,361 60.82% $175,773 $201,696
182 6.980% Actual/360 $882,120 61.26% $117,001 $130,393
183 8.430% Actual/360 $876,269 63.73% $125,851 $139,227
184 8.790% Actual/360 $862,250 57.48% $123,375 $135,619
185 8.360% Actual/360 $868,352 59.89% $167,551 $196,306
186 8.540% Actual/360 $860,427 66.19% $110,371 $123,330
187 6.860% Actual/360 $37,587 2.59% $109,737 $116,022
188 6.910% Actual/360 $711,940 55.84% $100,338 $108,068
189 6.330% Actual/360 $628,436 57.13% $94,184 $105,939
190 8.290% Actual/360 $583,332 60.76% $87,860 $105,860
8.208% 62.27%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN MONTHLY APPRAISED CUT-OFF DATE PERCENT PERCENT LEASED
NO. PAYMENT (8) DSCR(4) VALUE VALUE AS OF DATE LTV(4) LEASED (9) AS OF DATE (9)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $474,165 1.36 $94,000,000 5/25/00 63.77% 95.7% 7/26/00
2 $342,382 1.33 $65,700,000 3/3/00 74.58% 97.4% 6/30/00
3 $371,188 1.49 $67,000,000 9/1/00 67.16% 92.1% 6/30/00
4 $285,101 1.31 $51,500,000 6/1/00 72.29% 96.2% 8/17/00
5 $269,327 1.39 $49,000,000 10/15/99 67.03% 100.0% 12/30/99
6 $225,942 1.25 $39,600,000 2/3/00 74.59% 100.0% 3/9/00
7 $222,360 1.20 $39,500,000 2/16/00 74.35% 100.0% 6/2/00
8 $205,315 1.36 $36,650,000 8/14/00 73.67% 100.0% 7/20/00
9 $184,028 1.32 $33,000,000 7/1/00 79.66% 100.0% 6/14/00
10 $194,781 1.26 $34,700,000 7/13/00 74.88% 97.9% 9/1/00
11 $187,384 1.26 $32,000,000 4/7/00 75.29% 100.0% 6/9/00
12 $183,191 1.30 $32,000,000 7/25/00 73.69% 100.0% 7/1/00
13 $158,949 1.23 $28,000,000 2/21/00 74.81% 100.0% 8/1/00
14 $133,560 1.25 $23,000,000 7/20/00 79.78% 97.0% 7/26/00
15 $116,345 1.28 $21,000,000 5/4/00 73.29% 98.4% 7/1/00
16 $27,990 1.39 $5,175,000 10/22/98 58.15% 92.4% 6/30/00
17 $25,782 1.39 $4,750,000 10/23/98 58.15% 74.6% 6/30/00
18 $22,077 1.39 $4,925,000 10/22/98 58.15% 85.8% 6/30/00
19 $22,077 1.39 $5,225,000 11/4/98 58.15% 79.1% 6/30/00
20 $21,682 1.39 $5,475,000 11/3/98 58.15% 68.6% 6/30/00
21 $106,041 1.31 $18,300,000 7/1/00 81.16% 100.0% 6/14/00
22 $115,837 1.36 $21,000,000 11/1/99 68.84% 78.8% 10/1/99
23 $107,657 1.32 $19,700,000 5/2/00 72.29% 100.0% 7/1/00
24 $98,459 1.24 $16,700,000 7/12/00 77.20% 98.0% 8/15/00
25 $99,238 1.27 $16,600,000 4/8/00 74.66% 97.7% 8/31/00
26 $98,912 1.23 $16,250,000 12/2/99 70.47% 100.0% 1/21/00
27 $44,445 1.20 $7,500,000 4/26/00 75.98% 91.1% 6/8/00
28 $33,294 1.20 $5,850,000 4/26/00 75.98% 94.8% 6/8/00
29 $69,083 1.42 $14,150,000 4/9/98 72.70% 100.0% 5/1/00
30 $81,265 1.39 $14,900,000 8/1/00 67.11% 61.4% 8/31/00
31 $75,565 1.50 $14,100,000 8/15/00 66.67% 80.5% 6/30/00
32 $72,500 1.34 $13,100,000 7/1/00 70.90% 98.1% 7/1/00
33 $69,266 1.36 $12,000,000 6/21/00 74.93% 88.8% 9/21/00
34 $68,154 1.22 $11,750,000 4/4/00 75.42% 97.0% 4/14/00
35 $65,579 1.34 $10,800,000 5/4/00 79.95% 89.0% 7/26/00
36 $65,700 1.27 $12,100,000 3/20/00 70.93% 98.8% 8/2/00
37 $64,876 1.30 $11,600,000 4/1/00 73.13% 100.0% 4/1/00
38 $65,375 1.25 $12,200,000 2/10/00 67.48% 100.0% 12/31/99
39 $61,014 1.25 $10,900,000 11/30/99 74.62% 98.7% 9/25/00
40 $50,848 1.23 $10,000,000 8/5/98 77.14% 93.8% 3/22/00
41 $54,272 1.25 $10,500,000 3/12/98 72.80% 100.0% 7/20/00
42 $56,667 1.16 $9,100,000 3/31/00 83.84% 96.0% 4/17/00
43 $56,723 1.20 $9,500,000 6/28/00 79.91% 95.0% 7/13/00
44 $39,264 1.26 $6,600,000 5/20/00 70.01% 98.9 % 6/1/00
45 $19,632 1.26 $4,100,000 2/17/00 70.01% 78.6% 9/26/00
46 $56,338 1.31 $10,700,000 4/30/00 68.13% 100.0% 6/25/00
47 $50,795 1.27 $8,900,000 2/29/00 73.98% 100.0% 8/1/00
48 $49,074 1.27 $9,750,000 6/22/00 65.58% 100.0% 7/1/00
49 $45,666 1.62 $10,400,000 6/13/00 59.55% 95.1% 5/25/00
50 $46,300 1.29 $8,400,000 12/30/99 72.44% 93.0% 6/30/00
51 $47,074 1.27 $8,675,000 10/29/99 69.01% 100.0% 8/1/00
52 $45,701 1.32 $8,870,000 12/15/99 66.32% 100.0% 3/21/00
53 $44,671 1.54 $9,500,000 4/12/00 61.86% 98.0% 8/25/00
54 $38,359 1.46 $8,050,000 7/27/98 72.93% 96.0% 12/31/99
55 $26,748 1.20 $4,250,000 3/3/00 79.75% 91.1% 6/21/00
56 $15,341 1.20 $2,450,000 3/2/00 79.75% 100.0% 6/21/00
57 $40,493 1.22 $7,550,000 8/9/00 71.52% 100.0% 10/1/00
58 $38,763 1.39 $7,535,000 12/17/97 67.20% 99.0% 5/31/00
59 $32,231 1.36 $6,250,000 5/26/98 78.24% 98.0% 12/29/99
60 $35,801 1.26 $6,350,000 1/17/00 73.96% 100.0% 4/6/00
61 $34,564 1.29 $5,800,000 9/27/99 78.68% 96.3% 8/31/00
62 $34,669 2.81 $16,050,000 6/8/98 27.52% 76.1% 4/9/00
63 $30,393 1.21 $5,650,000 2/13/98 77.81% 97.3% 6/30/00
64 $30,574 1.30 $5,350,000 1/20/00 79.76% 98.5% 4/4/00
65 $26,647 1.66 $6,855,000 2/23/98 58.57% 100.0% 12/10/99
66 $30,906 1.27 $5,300,000 6/29/00 74.48% 96.8% 8/9/00
67 $24,889 1.52 $6,420,000 8/3/98 60.95% 92.0% 12/31/99
68 $27,691 1.50 $6,400,000 7/7/98 59.87% 100.0% 8/4/00
69 $28,308 1.29 $4,800,000 7/15/00 79.12% 100.0% 6/19/00
70 $28,725 1.28 $5,200,000 3/1/00 69.63% 89.1% 6/1/00
71 $29,054 1.39 $5,130,000 6/29/00 67.44% 74.7% 6/30/00
72 $29,635 1.68 $7,050,000 6/22/00 48.86% 93.6% 8/8/00
73 $26,113 1.32 $4,325,000 2/2/00 79.52% 96.2% 7/13/00
74 $26,143 1.25 $4,750,000 5/18/00 71.51% 100.0% 7/12/00
75 $23,854 1.33 $4,500,000 6/25/98 72.68% 100.0% 1/25/00
76 $26,231 1.25 $4,600,000 4/21/00 70.75% 100.0% 4/12/00
77 $21,545 1.66 $5,300,000 7/14/98 60.15% 91.0% 1/20/00
78 $24,537 1.28 $5,400,000 12/15/99 59.01% 100.0% 7/2/00
79 $19,849 1.45 $4,000,000 6/15/98 78.25% 100.0% 2/28/00
80 $28,402 1.30 $4,200,000 8/11/99 73.85% 100.0% 4/28/00
81 $24,235 1.26 $4,320,000 4/26/00 71.05% 100.0% 5/24/00
82 $23,055 1.25 $4,500,000 8/14/00 68.13% 100.0% 8/1/00
83 $21,033 1.34 $4,190,000 8/13/98 72.72% 100.0% 7/5/00
84 $25,805 1.32 $4,076,000 6/20/00 74.72% 97.8% 6/30/00
85 $24,354 1.28 $3,815,000 2/15/00 79.81% 100.0% 7/7/00
86 $24,205 1.25 $4,200,000 1/18/00 72.40% 100.0% 6/30/00
87 $22,100 1.26 $4,315,000 7/11/00 68.32% 100.0% 9/1/00
88 $22,433 1.35 $3,900,000 5/6/00 75.56% 99.5% 6/11/00
89 $23,208 1.31 $4,800,000 5/15/00 59.79% 95.0% 7/25/00
90 $26,665 1.16 $4,300,000 8/20/98 66.33% 100.0% 12/31/99
91 $22,246 1.21 $3,750,000 5/4/00 75.93% 97.0% 6/1/00
92 $22,662 1.32 $4,100,000 6/15/00 69.44% 95.0% 4/30/00
93 $20,526 1.31 $3,500,000 5/27/99 79.54% 100.0% 7/1/99
94 $18,345 1.50 $3,800,000 3/6/98 72.49% 100.0% 5/31/00
95 $22,310 1.37 $3,900,000 6/1/98 70.49% 100.0% 12/31/99
96 $22,547 1.28 $3,600,000 8/1/00 74.83% 100.0% 8/23/00
97 $17,111 1.55 $3,500,000 8/5/98 76.87% 100.0% 6/30/00
98 $18,998 1.60 $3,500,000 6/17/98 75.09% 99.0% 9/1/00
99 $17,460 1.31 $3,350,000 4/23/98 78.31% 97.2% 4/20/00
100 $17,995 1.32 $3,400,000 5/27/98 76.81% 94.0% 3/13/00
101 $16,995 1.57 $3,850,000 8/1/98 67.48% 97.0% 12/30/99
102 $19,045 1.25 $3,200,000 3/8/00 79.05% 100.0% 6/30/00
103 $20,350 1.30 $3,600,000 11/1/99 69.09% 94.8% 8/15/00
104 $17,618 1.65 $5,500,000 8/21/98 45.00% 100.0% 12/31/99
105 $16,600 1.43 $4,100,000 8/30/98 59.04% 100.0% 12/31/99
106 $17,648 1.41 $3,330,000 5/21/98 72.58% 94.0% 5/30/00
107 $20,520 1.39 $3,600,000 6/26/00 66.67% 100.0% NAP
108 $20,969 1.56 $3,800,000 6/28/00 63.11% 75.2% NAP
109 $17,051 1.74 $3,500,000 8/21/98 68.06% 98.0% 1/17/00
110 $18,684 1.94 $3,800,000 6/10/98 62.51% 77.2% 2/10/00
111 $17,809 1.38 $3,450,000 10/12/99 68.62% 98.8% 9/1/00
112 $20,493 1.35 $3,500,000 3/28/00 67.52% 85.0% 6/30/00
113 $17,576 1.29 $3,300,000 4/7/00 69.30% 98.3% 7/1/00
114 $17,907 1.25 $3,300,000 5/10/00 68.60% 100.0% 5/16/00
115 $20,693 1.21 $3,400,000 6/14/97 66.26% 98.2% 6/30/00
116 $15,573 1.51 $3,030,000 8/31/98 73.59% 100.0% 12/31/99
117 $17,854 1.25 $3,100,000 3/15/00 71.33% 97.0% 5/1/00
118 $17,323 1.20 $3,100,000 4/27/00 70.90% 100.0% 7/14/00
119 $16,327 1.41 $3,600,000 6/12/00 61.04% 96.2% 6/30/00
120 $14,062 1.55 $2,784,000 7/28/98 78.31% 97.4% 12/31/99
121 $16,539 1.25 $3,000,000 5/6/00 72.43% 97.7% 6/11/00
122 $16,716 1.25 $2,900,000 2/24/00 74.54% 100.0% 3/10/00
123 $16,731 1.20 $3,000,000 1/26/00 71.99% 100.0% 2/25/00
124 $17,648 1.30 $3,050,000 3/13/00 70.10% 85.6% 5/23/00
125 $16,514 1.25 $3,100,000 3/10/00 68.51% 100.0% 4/3/00
126 $16,476 1.20 $2,950,000 3/30/00 71.05% 100.0% 6/18/00
127 $13,761 1.66 $3,200,000 5/28/98 64.82% 100.0% 9/15/00
128 $19,726 1.54 $3,800,000 10/2/99 54.55% 71.3% 6/30/00
129 $16,108 1.27 $2,700,000 3/6/00 76.52% 95.4% 5/16/00
130 $12,835 1.89 $2,825,000 6/26/98 72.66% 100.0% 1/27/00
131 $16,153 1.25 $2,725,000 1/20/00 74.85% 100.0% 8/31/00
132 $14,259 1.47 $2,575,000 7/7/98 77.55% 98.0% 4/11/00
133 $16,741 1.20 $2,590,000 5/10/00 76.14% 100.0% 9/11/00
134 $18,359 1.85 $4,070,000 2/4/00 47.91% 82.2% NAP
135 $15,738 1.25 $2,675,000 12/12/99 72.39% 100.0% 3/17/00
136 $13,231 1.83 $2,845,000 6/26/98 68.06% 95.0% 6/30/00
137 $13,831 2.07 $2,750,000 7/10/98 70.39% 100.0% 4/30/00
138 $14,421 1.28 $3,350,000 7/7/00 57.43% 100.0% 9/1/00
139 $15,398 1.41 $2,440,000 2/1/00 78.68% 97.5% 7/6/00
140 $14,911 2.68 $4,800,000 6/5/98 39.58% 99.6% 4/9/00
141 $13,789 1.44 $2,900,000 9/16/98 65.02% 100.0% 2/22/00
142 $14,551 1.17 $2,400,000 4/20/00 78.56% 96.0% 5/1/00
143 $13,538 1.36 $3,050,000 7/28/98 60.49% 100.0% 1/1/00
144 $13,514 1.36 $2,545,000 4/13/98 72.38% 100.0% 8/14/00
145 $13,618 1.41 $2,450,000 3/15/00 74.70% 97.0% 7/31/00
146 $13,637 1.33 $2,350,000 4/7/00 76.49% 100.0% 5/18/00
147 $12,425 1.25 $2,275,000 7/15/98 74.57% 100.0% 4/10/00
148 $11,265 1.37 $2,400,000 3/6/98 70.48% 96.0% 2/12/00
149 $14,958 2.01 $3,200,000 12/16/99 52.74% 62.3% NAP
150 $12,515 1.20 $2,150,000 3/29/00 77.94% 100.0% 4/25/00
151 $11,724 1.49 $2,300,000 8/28/98 71.73% 93.0% 12/20/99
152 $15,321 1.75 $3,400,000 7/30/98 47.45% 96.0% 12/31/99
153 $12,254 1.24 $2,210,000 10/10/99 72.76% 83.0% 8/1/00
154 $10,005 1.59 $2,220,000 8/5/98 72.08% 100.0% 6/30/00
155 $12,352 1.25 $2,400,000 11/12/99 66.65% 98.6% 1/31/00
156 $11,987 1.29 $2,540,000 7/11/00 62.95% 100.0% 9/1/00
157 $12,851 1.35 $2,500,000 3/13/00 63.89% 100.0% 7/10/00
158 $10,238 1.38 $2,045,000 7/30/98 78.01% 96.6% 6/20/00
159 $11,755 1.75 $2,350,000 6/13/98 67.59% 100.0% 12/31/99
160 $12,144 1.25 $2,200,000 2/28/00 71.42% 100.0% 3/27/00
161 $13,715 1.60 $2,470,000 2/8/00 62.55% 78.2% 4/30/00
162 $12,495 1.75 $2,050,000 5/18/00 74.93% 93.5% 7/1/00
163 $10,070 1.63 $2,400,000 9/2/98 63.02% 95.0% 1/17/00
164 $11,707 1.25 $1,900,000 1/5/00 78.87% 90.5% 6/6/00
165 $10,402 1.79 $3,070,000 8/21/98 47.37% 81.2% 6/1/00
166 $11,615 1.55 $2,025,000 11/8/99 70.74% 100.0% 6/30/00
167 $9,602 1.37 $1,900,000 4/16/98 71.39% 99.5% 1/25/00
168 $8,690 1.48 $1,900,000 8/13/98 71.34% 100.0% 9/7/00
169 $10,964 1.70 $2,450,000 6/11/98 54.37% 100.0% 2/14/00
170 $10,178 1.26 $1,600,000 11/16/99 79.80% 100.0% 8/1/00
171 $7,945 1.71 $1,625,000 6/26/98 78.20% 100.0% 1/27/00
172 $8,476 1.34 $1,725,000 7/1/98 71.37% 100.0% 5/27/00
173 $7,843 1.42 $1,900,000 7/29/98 64.39% 100.0% 8/15/00
174 $8,267 1.39 $1,950,000 9/22/98 61.12% 85.0% 5/18/00
175 $10,448 1.43 $2,900,000 10/17/97 40.63% 100.0% 6/7/00
176 $7,601 1.63 $1,650,000 7/15/98 71.21% 100.0% 12/27/99
177 $9,225 1.80 $2,390,000 2/8/00 48.69% 100.0% 8/15/00
178 $7,894 1.39 $1,650,000 8/18/98 70.39% 100.0% 12/31/99
179 $7,622 1.51 $1,630,000 7/9/98 68.21% 90.0% 7/1/00
180 $7,606 1.41 $1,555,000 5/7/98 71.04% 100.0% 6/30/00
181 $8,211 1.78 $1,500,000 7/6/98 72.82% 100.0% 3/31/00
182 $7,761 1.26 $1,440,000 6/1/98 74.13% 92.0% 7/31/00
183 $8,389 1.25 $1,375,000 5/15/00 76.09% 97.0% 7/12/00
184 $8,219 1.25 $1,500,000 1/6/00 69.19% 100.0% 2/7/00
185 $8,276 1.69 $1,450,000 8/20/99 71.41% 94.0% 7/31/00
186 $7,332 1.25 $1,300,000 1/18/00 72.83% 100.0% 6/1/00
187 $7,477 1.22 $1,450,000 8/3/98 64.02% 100.0% 10/14/99
188 $6,239 1.34 $1,275,000 6/23/98 67.62% 100.0% 2/2/00
189 $5,317 1.48 $1,100,000 7/1/98 70.33% 100.0% 9/27/99
190 $5,538 1.32 $960,000 3/27/00 72.60% 94.0% 4/20/00
1.35x 71.21%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN
NO. LARGEST TENANT (10) % NSF ADDRESS
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 New York State Board of Education 7.8% 475 Park Avenue South
2 Costco 27.7% 6900 - 7095 Marketplace Drive
3 NAP 114 West 40th Street
4 GSA-Internal Revenue Service 28.2% 2875 Union Road
5 Bozzuto's Inc. 100.0% 275 School House Road
6 United States Government 88.8% 500 North Capitol Street, Nw
7 Target #950 26.2% Sec 44th St & Thomas Rd
8 Sweetheart Cup Inc. 100.0% 630 Hanover Pike
9 National Amusements, Inc. 53.8% 2855 Ulmer Street W/O Whitestone Expressway
10 Dixieline Lumber 16.5% 600-900 Lomas Santa Fe Drive
11 Continental Teves, Inc. 100.0% 4351 N Atlantic Road
12 Discovery Communications, Inc. 100.0% 8040 Kennett Street
13 Pathmark 62.4% 134-146 Springfield Boulevard
14 NAP 340 Arbor Drive
15 Sports Authority 22.7% 2263-2321 Gallatin Pike North
16 NAP 1990 Willowtrail Parkway
17 NAP 9211 East Independence Boulevard
18 NAP 5820 Plaza Parkway
19 NAP 4790 Hilton Corporate Drive
20 NAP 5820 West 85th Street
21 Babies "R" Us 48.7% 3915 20th Avenue W/O Whitestone Expressway
22 Blue Cross Blue Shield 46.0% 2651 Strang Boulevard
23 PetsMart 15.4% 5710-5866 Fairmont Parkway
24 Ames Department Store 37.2% 11 Hamilton Avenue
25 Denault's Hardware 15.4% 30000-30190 Town Center Drive
26 QRS Coporation 50.1% 1450 Marina Way
27 NAP 1761 East Waterford Court
28 NAP 1776 East Waterford Court
29 Langan Engineering 42.8% 619 River Drive
30 NAP 39475 Woodward Avenue
31 NAP 8130 Porter Road
32 Gottschalks 19.3% 931 Ne D Street
33 Holiday Universal, Inc. (Bally's) 21.3% 3400 Aramingo Avenue
34 NAP 2100 Spencer Road
35 Best Buy Stores 40.4% 5320 Hickory Hollow Parkway
36 Meadowbrook, Inc. 64.0% 26600 Telegraph Road
37 Huntington Medical Group 100.0% 180 East Pulaski Road
38 Home Depot 100.0% 740 West 182nd St.
39 NAP 385 S. Catalina Avenue
40 NAP 5890 Bandolero Drive
41 Harvard Pilgrim Health Care, Inc. 100.0% 228 Billerica Road
42 NAP 701 Sterling Place
43 NAP 2588-1 Seaford Circle
44 Cendant 91.9% 7814 Carousel Lane
45 Abacus 20.0% 4456 Corporation Lane
46 Savon Store #3259 34.2% 1801-1891 North Euclid Street/1701, 1715-1723 North
Euclid Street
47 Gold's Gym 39.2% 5031 East Elliot Road
48 United States of America 100.0% 3920 Pender Drive
49 NAP 34 Sherry Drive
50 North Suffolk Cardiology 24.0% 45 Research Way
51 Wilson & Company 15.5% 9633 South 48th Street
52 Aerospace Dynamics International, Inc 62.0% 25540 Rye Canyon Road
53 CSC 72.7% 1 Garden Way
54 NAP 300 Cirby Hills Drive
55 Fresco 20.7% 2990 Eagle Drive
56 Mattress King 45.5% 1050 Buford Highway
57 Best Buy 100.0% 300 Brown Rd.
58 NAP 322 Washington Place
59 NAP 3919 Cedar Crest Drive
60 Torrance Van & Storage Co., dba S&M Moving 100.0% 12128 Burke Street
61 K-Mart 65.8% Us Highway 220
62 NAP 390 South Van Brunt Street
63 NAP 106 East Jefferson Street
64 NAP 2283 Graydon Boulevard
65 NAP 580 Bowcreek Road
66 Books A Million 49.8% 3825-3901 Hillsboro Boulevard
67 NAP 6250 Hargrove Avenue
68 Trans National 100.0% 2-6 Charlesgate West/1161 Boyleston Street
69 Winn Dixie 67.3% 7300 Nw 4th Boulevard
70 Victory Chapel/ Nice 11.5% 1464-1592 Park Avenue
71 NAP 969 Kruse Way
72 The Mission Bank 37.0% 5201 Johnson Drive
73 NAP 46-110 Dodge Street
74 Kinko's Inc. 33.6% 929-943 Huntington Drive
75 Pall Filtron 100.0% 50 Bearfoot Road
76 Ritzert & Layton 27.0% 4084 University Drive
77 Six Star 13.5% 19439 - 19689 7th Avenue Ne
78 NAP 10621 Valley Spring Lane
79 NAP 500 Windor Drive
80 Rite Aid 100.0% 1555-1569 Flatbush Avenue
81 Burns & McDonnell Waste Consultants, Inc. 24.5% 10625-35 Scripps Ranch Boulevard
82 Engineering Group 20.1% 13601-13663 Office Place
83 NAP 3608-60 Imperial Gardens Drive
84 Billarcadia Inc. 52.9% 2001-2101 Greenville Avenue
85 Account Solutions Group, LLC 100.0% 205 Bryant Woods South
86 Buchanan Construction Products 100.0% 101 Bilby Road
87 San Diego Fertility Center 55.5% 11515 El Camino Real
88 NAP 3175 North Portland Avenue
89 Foothill Cardiology 12.0% 416 W Las Tunas Drive
90 Radiac Abrasives 100.0% 13120 Smokey Point Blvd
91 NAP 2401 W. Avalon
92 NAP 513, 515, 518, 525 E. Town Street And 196-200 S.
Washington Avenue
93 NAP 201 Watersville Road
94 NAP 3926 Redwood Drive
95 Office Max, Inc. 100.0% 777 South Willow Street
96 TJ Maxx 60.9% Wilma Rudolph Boulevard, Us Highway 79
97 Paperwarehouse 33.8% 1900 County Road D
98 NAP 1415-1427 Se 8th Avenue
99 NAP 999 Old State Route 74
100 Super Valu 39.7% 3853 Us Route 209
101 NAP 2611 84th Street Court South
102 NAP 621 South 15th Street
103 Health Care Management 37.0% 500 West Main Street
104 United States of America 100.0% 1002 Wood Street
105 Odd Job 52.8% 601 8th Avenue
106 NAP 2815 Peavy Road
107 Dicks Clothing & Sporting Goods 100.0% 1520 W. Koger Center Boulevard
108 NAP 2702 O.W. Curry Drive
109 NAP 303 Vine Street
110 NAP 5240 E. 21st N.
111 NAP 10824 S.W. 2nd Street
112 NAP 9707 Se Stark St
113 NAP 18802-18820 W. Mandan Street
114 NAP 309-313 Arch Street
115 NAP 100 Sheridan Road
116 NAP 28621 25th Place South
117 Gambro 66.5% 900 Madison Avenue
118 PetsMart 100.0% U.S. Highway 30 & State Highway 66
119 NAP 6020 Churchland Boulevard
120 NAP 6405 Gillespie Road
121 NAP 7408 NW 23rd Street
122 Grafalloy 100.0% 1020 North Marshall Avenue
123 Airborne Freight Corp. 100.0% 245 West Lodge Road
124 NAP 6835 Pecan Valley Drive
125 Buie Communities, LLC 52.2% 11260 El Camino Real
126 NAP 72 Hudson Street
127 Walgreen's 57.3% 109-62 Francis Lewis Boulevard
128 NAP 795 South I-35
129 NAP 6957-6971 Pearl Road
130 NAP W/S Dixie Highway (Us 25)
131 Blockbuster Videos 26.1% 801- 821 South 75th Street
132 NAP 101-633 Paradise Road
133 Danish Inspirations 26.1% 1105 Massachusetts
134 NAP 900 Sepulveda Boulevard
135 Kyoto Bowl 19.2% 1914 South Power Road
136 Factory 29.3% 1211-1231 West Saint Marys Road
137 Community Mortgage Company 11.7% 7023 Little River Turnpike
138 California Bank & Trust 100.0% 11752 El Camino Real
139 NAP 13609 N. 20th St., 13610 N. 31st St., 13802 N. 21st St.,
5901 Gibson Ave., 2016 E. 131st Ave., 11740 North 15th St.
140 NAP 201 Jordan Road
141 DiMuro, Ginsberg & Lieberma 24.1% 902-910 King Street
142 NAP 111 N. Locust Street
143 1st American Title 18.4% 2300 Boynton Avenue
144 Office Furniture Outlet 43.6% 8830-8840 Miramar Road
145 NAP 4574 Onondaga Boulevard
146 NAP 1001 Adoue Street
147 JT's Fine Wines 15.4% 5000 E. P. True Parkway
148 NAP 4100 Redwood Drive
149 NAP 600 West Donlon Street
150 NAP 1301 Northwood Boulevard
151 NAP 551 Village Green Drive East
152 NAP 2700 Westridge
153 Hollywood Video 42.0% 7910 North 43rd Avenue
154 Liberty Wire & Cable 44.3% 4630 Forge Road
155 NAP 474 East 25 South
156 Ruth's Chris Steak House 100.0% 11582 El Camino Real
157 McKesson BioServices 24.1% 687 Lofstrand Lane
158 NAP 130 North 56th Street
159 Southern Automotive Inc. 100.0% 645 Auto Center Drive
160 True Value Hardware 29.1% 1803 Main Street
161 NAP 2310 State Road 16
162 NAP 902-906 East Annie Street, 9601-9611 North Nebraska Avenue,
506-520 & 1806 East 138th Avenue And 1801 East 139th Avenue
163 NAP 6367-74 Lancaster Avenue
164 NAP 3101-3125 Butler Street
165 Brown Bear 10.0% 14100 Us 19 North
166 NAP 180 Prospect Street
167 Auto Zone 57.8% 3009-3031 North Broadway
168 ABC Supply Co. Inc. 100.0% 5757 Tiros Drive
169 Apollo Group Inc. 19.0% 3450 N. Rock Rd.
170 NAP 1825 & 2011 Spruce Street
171 NAP W/S Dixie Highway (Us 25)
172 A.G. Edwards & Sons 25.8% 290 Bobwhite Court
173 NAP 190 California Boulevard
174 NAP 2026 & 2032 Carlee Drive
175 Marc Glassman, Inc. 87.7% 2487 State Street East
176 NAP 121 View Road
177 United Western Supply Co. 49.1% 4401-4425 East 46th Avenue
178 NAP 505 Gaslight Lane
179 Meridian Movers 86.8% 5610 Sandy Lewis Drive
180 Gary P. Welch, D.D.S & Bradley P. Welch 37.8% 1701-7 Green Valley Parkway
181 Georgetown University 61.2% 3240 Prospect St Nw
182 NAP 456 Tolland Turnpike
183 NAP 2600 W. 7th Street
184 All American Semi-Conductor of MN, Inc. 50.6% 6608 Flying Cloud Drive
185 Samuel Rosemberg MD 27.1% 17090 & 17100 West Twelve Mile Rd
186 Libbey-Owens Ford Co. 42.9% 7930 National Highway
187 Kragen Automotive 100.0% 3603 Peck Road
188 Exmet Corporation 100.0% 7 Great Hill Road
189 ENCO Systems, Inc., a Delaware Corp. 100.0% 24555 Hallwood Court
190 NAP 910 East Felt Street
</TABLE>
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<TABLE>
<CAPTION>
LOAN PROPERTY PROPERTY
NO. CITY STATE ZIP CODE TYPE SUB-TYPE UNITS/NSF
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 New York NY 10016 Office Urban 408,517
2 Goleta CA 93117 Retail Anchored 497,474
3 New York NY 10018 Hotel Limited Service 244
4 Cheektowaga NY 14227 Office Suburban Office 434,593
5 Cheshire CT 06410 Industrial Warehouse/Distribution 986,565
6 Washington DC 20001 Office Downtown Office 175,698
7 Phoenix AZ 85018 Retail Grocery Anchored Retail 446,433
8 Hampstead MD 21074 Industrial Warehouse/Distribution 1,034,470
9 College Point NY 11357 Retail Anchored 137,984
10 Solana Beach CA 92075 Retail Anchored 251,272
11 Auburn Hills MI 48326 Office Office Distribution 236,770
12 Silver Springs MD 20910 Office Suburban Office 148,530
13 Springfield Gardens (Queens) NY 11413 Retail Anchored 96,018
14 Ridgeland MS 39157 Multifamily Garden Apartment 486
15 Nashville TN 37115 Retail Anchored 189,299
16 Norcross GA 30093 Hotel Extended Stay 149
17 Matthews NC 28105 Hotel Extended Stay 139
18 Douglasville GA 30135 Hotel Extended Stay 132
19 Columbus OH 43232 Hotel Extended Stay 139
20 Indianapolis IN 46278 Hotel Extended Stay 135
21 College Point NY 11357 Retail Anchored 76,726
22 Yorktown Heights NY 10598 Office Suburban Office 210,000
23 Pasadena TX 77505 Retail Anchored 169,132
24 Monticello NY 12701 Retail Anchored 153,124
25 Laguna Niguel CA 92677 Retail Unanchored Retail 97,653
26 Richmond CA 94804 Office Suburban Office 93,887
27 Akron OH 44313 Multifamily Garden Apartment 168
28 Akron OH 44313 Multifamily Garden Apartment 136
29 Elmwood Park NJ 07407 Office Suburban Office 95,966
30 Bloomfield Hills MI 48304 Hotel Downtown Hotel 150
31 Falls Church VA 22042 Hotel Limited Service 107
32 Grants Pass OR 97526 Retail Anchored 230,574
33 Philadelphia PA 19134 Retail Shadow Anchored Retail 119,784
34 Denton TX 76205 Multifamily Garden Apartment 208
35 Nashville TN 37013 Retail Anchored 111,409
36 Southfield MI 48034 Office Suburban Office 97,709
37 Huntington Station NY 11746 Office Medical Office 66,316
38 Los Angeles CA 90248 Retail Big Box 135,000
39 Pasadena CA 91106 Multifamily Garden Apartment 84
40 El Paso TX 79912 Multifamily Garden Apartment 288
41 Chelmsford MA 01824 Office Medical Office 73,035
42 Lancaster Township PA 17603 Multifamily Garden Apartment 200
43 Tampa FL 33612 Multifamily Garden Apartment 260
44 Richmond VA 23294 Office Suburban Office 62,299
45 Virginia Beach VA 23462 Office Suburban Office 52,268
46 Fullerton CA 92835 Retail Anchored 113,789
47 Ahwatukee AZ 85044 Retail Unanchored Retail 72,650
48 Fairfax VA 22030 Office Suburban Office 83,130
49 Burlington NC 27215 Multifamily Garden Apartment 288
50 East Setauket NY 11733 Office Suburban Office 53,287
51 Phoenix AZ 85044 Office Suburban Office 64,894
52 Santa Clarita CA 91355 Industrial Manufacturing Facility 144,689
53 East Greenbush NY 10281 Industrial Suburban 265,857
54 Roseville CA 95678 Multifamily Garden Apartment 128
55 Woodstock GA 30189 Retail Unanchored Retail 27,000
56 Forsyth County GA 30041 Retail Unanchored Retail 15,412
57 Auburn Hills MI 48326 Retail Anchored 45,520
58 Erie PA 16505 Multifamily Retirement 115
59 Independence MO 64055 Multifamily Garden Apartment 156
60 Santa Fe Springs CA 90670 Office Office Distribution 103,569
61 Martinsville VA 24112 Retail Anchored 131,343
62 Englewood NJ 07631 Self Storage Self-Storage 124,200
63 Shorewood IL 60431 Manufactured Housing Mobile Home Park 183
64 Columbus OH 43220 Multifamily Garden Apartment 133
65 East Hanover PA 17028 Manufactured Housing Mobile Home Park 347
66 Deerfield Beach FL 33442 Retail Unanchored Retail 40,168
67 Las Vegas NV 89107 Multifamily Garden Apartment 168
68 Boston MA 02215 Office Suburban Office 56,006
69 Gainesville FL 32607 Retail Anchored 65,400
70 Orange Park FL 32073 Retail Unanchored Retail 81,353
71 Springfield OR 97477 Hotel Downtown Hotel 77
72 Mission KS 66205 Office Suburban Office 72,236
73 Rochester NY 14606 Multifamily Garden Apartment 132
74 Monrovia CA 91016 Retail Specialty Shopping Center 17,530
75 Northborough MA 01532-0840 Industrial Light Industrial 60,000
76 Fairfax VA 22030 Office Suburban Office 32,066
77 Poulsbo WA 98370 Retail Shadow Anchored Retail 42,832
78 Toluca Lake CA 91602 Multifamily Mid-Rise 44
79 Palisades Park NJ 07650 Multifamily Garden Apartment 27
80 Brooklyn NY 11210 Retail Shadow Anchored Retail 10,829
81 San Diego CA 92131 Office Office Distribution 56,796
82 Woodbridge VA 22192 Office Office 54,660
83 St. Ann MO 63074 Multifamily Garden Apartment 144
84 Dallas TX 75206 Retail Unanchored Retail 31,594
85 Amherst NY 14228 Office Single/Tenant Office 25,000
86 Hackettstown NJ 07840 Industrial Light Industrial 58,447
87 San Diego CA 92130 Office Medical Office 13,858
88 Oklahoma City OK 73112 Multifamily Garden Apartment 207
89 San Gabriel CA 91776 Office Medical Office 27,749
90 Marysville WA 98270 Industrial Light Industrial 95,625
91 Phoenix AZ 85015 Multifamily Garden Apartment 60
92 Columbus OH 43215 Multifamily Mid-Rise/Garden 172
93 Mount Airy MD 21771 Multifamily Garden Apartment 71
94 Independence MO 64055 Multifamily Garden Apartment 84
95 Manchester NH 03103-4036 Retail Unanchored Retail 30,000
96 Clarksville TN 37043 Retail Shadow Anchored Retail 49,259
97 Maplewood MN 55109 Retail Shadow Anchored Retail 28,284
98 Deerfield Beach FL 33020 Multifamily Multifamily 80
99 Union Township OH 45103 Multifamily Garden Apartment 72
100 Stone Ridge NY 12484 Retail Grocery Anchored Retail 42,890
101 Lakewood WA 98409 Multifamily Garden Apartment 76
102 Omaha NE 68102 Multifamily Garden Apartment 29
103 Hendersonville TN 37075 Retail Anchored 91,825
104 Dallas TX 75202 Other Parking Garage 164,700
105 New York NY 10018 Retail Unanchored Retail 27,460
106 Dallas TX 75228 Multifamily Garden Apartment 155
107 Richmond VA 23235 Retail Shadow Anchored Retail 45,000
108 Killeen TX 76542 Hotel Limited Service 62
109 Philadelphia PA 19106 Multifamily Garden Apartment 51
110 Wichita KS 67208 Self Storage Self-Storage 118,358
111 Sweetwater FL 33174 Multifamily Garden Apartment 86
112 Portland OR 97216 Hotel Limited Service 84
113 Santa Clarita CA 91351 Multifamily Garden Apartment 59
114 Philadelphia PA 19106 Multifamily Elevator Apartment 43
115 Bremerton WA 98310 Multifamily Garden Apartment 111
116 Federal Way WA 98003 Multifamily Garden Apartment 86
117 Bridgeport CT 06606 Office Medical Office 31,420
118 Hempfield Township PA 15601 Retail Big Box 26,040
119 Portsmouth VA 23703 Multifamily Garden Apartment 104
120 Memphis TN 38134 Multifamily Garden Apartment 78
121 Bethany OK 73008 Multifamily Garden Apartment 174
122 El Cajon CA 92021 Industrial Light Industrial 45,907
123 Tempe AZ 85283 Office Office Distribution 39,360
124 San Antonio TX 78223 Multifamily Garden Apartment 160
125 San Diego CA 92130 Office Suburban Office 13,115
126 Hoboken NJ 07030 Multifamily Mid-Rise 18
127 Jamaica NY 11429 Retail Anchored 16,124
128 Waxahachie TX 75165 Hotel Limited Service 90
129 Middleburg Heights OH 44130 Multifamily Garden Apartment 92
130 Florence KY 41042 Manufactured Housing Mobile Home Park 146
131 Houston TX 77023 Retail Unanchored Retail 17,265
132 Louisville KY 40258 Multifamily Garden Apartment 132
133 Lawrence KS 66044 Mixed Use Mixed Use 34,650
134 Manhattan Beach CA 90266 Hotel Limited Service 44
135 Mesa AZ 85206 Retail Unanchored Retail 13,268
136 Tucson AZ 85745 Retail Grocery Anchored Retail 68,678
137 Annandale VA 22003-5908 Office Suburban Office 38,318
138 San Diego CA 92130 Office Single/Tenant Office 10,774
139 Tampa FL 33612, 33613 Multifamily Garden Apartment 118
140 Brick NJ 08724 Self Storage Self-Storage 65,656
141 Alexandria VA 22314 Office Office 31,431
142 Spokane WA 99206 Multifamily Garden Apartment 49
143 Fairfield CA 94533 Office Suburban Office 23,004
144 San Diego CA 92126 Industrial Industrial Showroom 35,188
145 Syracuse NY 13219 Multifamily Garden Apartment 92
146 Alvin TX 77511 Multifamily Garden Apartment 48
147 West Des Moines IA 50265 Retail Unanchored Retail 20,112
148 Independence MO 64055 Multifamily Garden Apartment 71
149 Blythe CA 92225 Hotel Limited Service 66
150 Corsicana TX 75110 Multifamily Garden Apartment 78
151 Mobile AL 36609 Multifamily Garden Apartment 136
152 Houston TX 77054 Multifamily Garden Apartment 168
153 Glendale AZ 85301 Retail Shadow Anchored Retail 12,000
154 Colorado Springs CO 80907 Industrial Light Industrial 33,730
155 Ephraim UT 84627 Multifamily Garden Apartment 24
156 San Diego CA 92130 Retail Restaurant 7,661
157 Rockville MD 20850 Warehouse Bulk Warehouse 39,551
158 Mesa AZ 85205 Multifamily Garden Apartment 59
159 San Bernardino CA 92346 Retail Unanchored Retail 15,980
160 Lake Stevens WA 98258 Retail Unanchored Retail 37,438
161 St. Augustine FL 32095 Hotel Limited Service 50
162 Tampa FL 33612 & 33613 Multifamily Garden Apartment 76
163 Philadelphia PA 19151 Multifamily Garden Apartment 58
164 Springfield IL 62703 Multifamily Garden Apartment 84
165 Clearwater FL 33764 Retail Unanchored Retail 66,475
166 East Orange NJ 07017 Multifamily Garden Apartment 61
167 Los Angeles CA 90031-2701 Retail Anchored 14,406
168 Springfield VA 22151 Warehouse Bulk Warehouse 53,315
169 Wichita KS 67226 Office Office 31,500
170 Philadelphia PA 19103 Multifamily Garden Apartment 15
171 Florence KY 41042 Manufactured Housing Mobile Home Park 76
172 Boise ID 83706 Office Suburban Office 20,189
173 San Luis Obispo CA 93405 Multifamily Garden Apartment 23
174 Pueblo CO 81005 Multifamily Garden Apartment 61
175 Salem OH 44460 Retail Shadow Anchored Retail 48,800
176 Steilacoom WA 98388 Multifamily Garden Apartment 36
177 Denver CO 80216 Industrial Light Industrial 88,380
178 Bellevue NE 68005 Multifamily Garden Apartment 48
179 Burke VA 22032 Warehouse Flex Warehouse 34,554
180 Henderson NV 89014 Office Suburban Office 9,000
181 Washington DC 20007 Office Downtown Office 11,961
182 Willington CT 06279 Multifamily Garden Apartment 48
183 Wilmington DE 19805 Multifamily Elevator Apartment 32
184 Eden Prairie MN 55344 Office Suburban Office 11,000
185 Southfield MI 48076 Office Medical Office 18,237
186 Pennsauken NJ 08110 Industrial Warehouse 33,600
187 El Monte CA 91731 Retail Anchored 11,117
188 Naugatuck CT 06770 Industrial Light Industrial 28,250
189 Farmington Hills MI 48335 Industrial Industrial 13,101
190 Brownfield TX 79316 Multifamily Garden Apartment 72
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ESCROWS FOR MONTHLY ESCROW -
ESCROWS FOR REPLACEMENT REPLACEMENT UPFRONT (12) CURRENT (13)
LOAN YEAR YEAR CAPEX RESERVES RESERVES AND ESCROW - ESCROW -
NO. BUILT RENOVATED (YES/NO)? (YES/NO)? CAPEX (ENG) (11) CAPEX CAPEX (RR)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1969 1999 Yes No $6,790 $0 $0
2 1999 Yes Yes $435 $0 $0
3 1997-1998 No No $0 $0 $0
4 1972 2000 Yes No $5,432 $5,432 $0
5 1963 1997 Yes Yes $8,706 $8,706 $87,057
6 1965 No Yes $2,829 $0 $0
7 1997 No Yes $4,092 $0 $0
8 2000 Yes No $8,621 $8,621 $0
9 1999 Yes No $1,725 $0 $0
10 1974 1999 Yes Yes $0 $259,750 $259,750
11 2000 Yes No $0 $0 $28,830
12 1995 1999 Yes No $1,857 $0 $9,379
13 2000 Yes Yes $1,200 $1,200 $4,800
14 1989 1994 Yes No $0 $182,050 $182,050
15 1998 Yes No $2,366 $2,366 $0
16 1996 Yes Yes $3,773 $0 $61,197
17 1995 Yes Yes $3,575 $0 $55,179
18 1996 Yes Yes $3,159 $0 $48,760
19 1997 Yes Yes $3,260 $0 $50,317
20 1997 Yes Yes $3,245 $0 $50,074
21 1999 Yes No $959 $0 $0
22 1950/1965 1990 Yes No $3,500 $3,500 $21,179
23 1999 Yes No $2,114 $2,114 $0
24 1967 1999 Yes No $1,914 $1,914 $0
25 1979 1987 Yes Yes $1,709 $0 $1,709
26 1999 Yes Yes $1,587 $0 $14,319
27 1998 No Yes $2,800 $0 $0
28 1999 No Yes $2,267 $0 $0
29 1991 Yes Yes $1,263 $21,625 $0
30 1958 1997 Yes Yes $0 $1,000,000 $1,000,000
31 1997-1998 Yes No $13,574 $13,574 $13,574
32 1964-1966, 1979, 1989 2000 Yes No $2,882 $2,882 $5,776
33 1987 1999 Yes No $1,497 $2,995 $1,497
34 1998 No Yes $3,467 $0 $0
35 1979 1998 Yes No $2,321 $2,321 $0
36 1970 1990 Yes Yes $1,628 $0 $4,884
37 1992 1997 Yes Yes $1,105 $1,105 $2,211
38 1964 1989 Yes Yes $2,250 $0 $9,000
39 1973 1999 Yes Yes $1,750 $0 $9,646
40 1981 Yes No $0 $220,000 $0
41 1985 1989 No Yes $1,217 $0 $0
42 1997 No Yes $3,333 $0 $0
43 1973 1998 Yes Yes $5,417 $25,563 $25,563
44 1981 Yes Yes $1,038 $0 $2,077
45 1982 1999 Yes Yes $871 $0 $1,742
46 1976 1997 Yes Yes $1,395 $26,500 $26,500
47 1979 1999 Yes Yes $908 $0 $3,632
48 1981 1994 Yes No $1,455 $1,455 $1,455
49 1968, 1971 2000 No No $0 $0 $0
50 1997-1998 Yes No $667 $667 $2,682
51 1999 No No $0 $0 $0
52 1974 1984 Yes Yes $1,206 $16,000 $16,000
53 1967 1994 Yes No $3,395 $3,395 $0
54 1988 No No $0 $0 $0
55 1999 Yes Yes $338 $0 $676
56 1999 Yes Yes $193 $0 $385
57 2000 No Yes $569 $0 $0
58 1989 No Yes $2,518 $0 $0
59 1988 Yes No $0 $13,375 $8,801
60 1998 No Yes $866 $0 $0
61 1987/1989 1997 Yes No $1,642 $1,642 $6,600
62 1995 No Yes $825 $0 $0
63 1960 Yes Yes $520 $11,438 $0
64 1986 No Yes $3,119 $0 $0
65 1986 No Yes $760 $0 $0
66 1998-2000 Yes No $395 $395 $0
67 1985 No Yes $3,500 $0 $0
68 1965 1993 No Yes $933 $0 $0
69 1989 No Yes $818 $0 $0
70 1972 1999 Yes Yes $1,017 $0 $2,033
71 1999 No No $0 $0 $0
72 1974 Yes Yes $1,196 $49,375 $0
73 1970 2000 Yes No $2,750 $2,750 $13,838
74 1999 No Yes $219 $0 $0
75 1988 No Yes $1,000 $0 $0
76 1973 1988 No Yes $535 $0 $0
77 1984 No No $0 $0 $0
78 1987 1998 Yes Yes $917 $917 $6,417
79 1997 Yes Yes $127 $13,000 $0
80 1931 1995 Yes No $181 $181 $1,625
81 1984 No Yes $568 $0 $0
82 1985 No Yes $911 $0 $0
83 1964 Yes Yes $3,000 $17,875 $4,032
84 1927, 1938, 1939 2000 Yes No $395 $0 $395
85 2000 Yes Yes $417 $23,025 $23,025
86 1990 No Yes $324 $0 $0
87 1999 No No $0 $0 $0
88 1969 1999 Yes No $4,123 $4,123 $4,123
89 1979 No Yes $463 $0 $0
90 1968 No Yes $752 $0 $0
91 1985 No Yes $1,250 $0 $0
92 1920, 1949, 1963 1999 Yes No $4,300 $4,300 $0
93 1968-1972 1998 Yes No $1,479 $1,479 $13,368
94 1972 No Yes $1,750 $0 $0
95 1966 No Yes $45 $0 $0
96 1999-2000 Yes No $615 $0 $1,231
97 1990 No Yes $471 $0 $0
98 1972 1999 Yes Yes $1,667 $256,309 $11,217
99 1997 No Yes $403 $0 $0
100 1950 1996 No Yes $536 $0 $0
101 1987 1996 No Yes $1,583 $0 $0
102 1915 1999 No Yes $605 $0 $0
103 1974 1990 Yes Yes $1,148 $3,525 $9,264
104 1976 Yes Yes $208 $13,625 $14,450
105 1935 1990 No Yes $343 $0 $0
106 1970 1996 No Yes $3,850 $0 $0
107 2000 No No $0 $0 $0
108 1999 Yes No $4,348 $4,348 $0
109 1901 1988 No Yes $1,184 $0 $0
110 1984 No Yes $1,480 $0 $0
111 1971 No No $0 $37,500 $37,500
112 1986 1997 No No $0 $40,000 $0
113 1984 1999 Yes No $1,229 $1,229 $2,463
114 1875 1979 No Yes $1,008 $0 $0
115 1977 1997 No No $0 $0 $0
116 1977 1985 Yes No $1,792 $150,000 $107,398
117 1932 2000 Yes No $524 $524 $1,577
118 1999 Yes Yes $326 $0 $326
119 1972 1999 No No $0 $0 $0
120 1996 No Yes $1,625 $0 $0
121 1970 1999 Yes No $3,205 $3,205 $3,205
122 1967 1999 No Yes $384 $0 $0
123 2000 No Yes $328 $0 $0
124 1974 Yes Yes $3,333 $25,500 $25,500
125 1999 No Yes $219 $0 $0
126 1920 2000 Yes No $417 $417 $1,256
127 1991 No Yes $121 $0 $0
128 1985 1997 Yes No $3,648 $3,648 $7,110
129 1964 1999 Yes No $1,917 $1,917 $5,778
130 1989 No Yes $304 $0 $0
131 1999 Yes Yes $217 $0 $868
132 1972 1985 No Yes $2,791 $0 $0
133 1890 1987 Yes Yes $453 $18,750 $18,750
134 1995 Yes No $3,333 $3,333 $10,036
135 1999 No Yes $167 $0 $0
136 1972 No Yes $1,478 $0 $0
137 1973 No Yes $633 $0 $0
138 1999 No No $0 $0 $0
139 1969-1973 Yes No $2,458 $2,458 $12,373
140 1996 No Yes $825 $0 $0
141 1890 1989 No Yes $655 $0 $0
142 1999 No Yes $817 $0 $0
143 1991 No No $0 $0 $0
144 1982 Yes Yes $440 $90,025 $0
145 1970 Yes Yes $1,533 $45,000 $9,670
146 1983 2000 Yes No $1,056 $1,056 $2,116
147 1992 No Yes $250 $0 $0
148 1977 No Yes $1,480 $0 $0
149 1995 Yes No $3,964 $3,964 $92,122
150 1980 No Yes $1,625 $0 $0
151 1975 No Yes $2,833 $0 $0
152 1980 No No $0 $0 $0
153 1999 Yes Yes $150 $0 $750
154 1997 No Yes $422 $0 $0
155 1998 No Yes $600 $0 $0
156 1999 No Yes $96 $0 $0
157 1979 Yes Yes $666 $105,000 $105,000
158 1985 1997 No Yes $1,230 $0 $0
159 1987 No Yes $417 $0 $0
160 1966 1995 Yes Yes $483 $37,031 $37,442
161 1992 1998 Yes No $3,219 $3,219 $12,944
162 1983, 1981 Yes No $1,583 $1,583 $0
163 1927 1986 Yes Yes $899 $17,500 $18,521
164 1995 No Yes $1,750 $0 $0
165 1986 No Yes $1,108 $0 $0
166 1950 Yes Yes $1,396 $45,000 $0
167 1997 No Yes $239 $0 $0
168 1960 No No $0 $0 $0
169 1995 No Yes $658 $0 $0
170 1900 1986 No Yes $313 $0 $0
171 1994 No Yes $158 $0 $0
172 1985 No Yes $337 $0 $0
173 1973 No Yes $575 $0 $0
174 1978 1997 No Yes $1,271 $0 $0
175 1978 1997 No No $0 $0 $0
176 1986 No Yes $750 $0 $0
177 1952 Yes Yes $737 $14,000 $0
178 1972 No Yes $1,000 $0 $0
179 1979 No Yes $576 $0 $0
180 1998 No Yes $150 $0 $0
181 1906 1975 No Yes $150 $0 $0
182 1970 Yes Yes $1,142 $29,250 $6,750
183 1931 1985 Yes Yes $1,115 $112,500 $112,500
184 1998 No Yes $184 $0 $0
185 1963 1969 No Yes $304 $0 $0
186 1987 Yes Yes $560 $0 $3,360
187 1961 1998 No Yes $139 $0 $0
188 1988 No Yes $235 $0 $0
189 1986 No Yes $195 $0 $0
190 1972 No Yes $1,500 $0 $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UPFRONT (12) CURRENT (11)
ESCROW - ESCROW - ESCROWS FOR MONTHLY (14) UPFRONT (15) CURRENT (16) ESCROWS FOR MONTHLY (14)
LOAN REPLACEMENT REPLACEMENT INSURANCE ESCROW - ESCROW - ESCROW - TAXES ESCROW -
NO. RESERVES RESERVES (YES/NO)? INSURANCE INSURANCE INSURANCE (YES/NO)? TAXES
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $0 $0 Yes $4,098 $12,293 $12,293 Yes $162,047
2 $2,175 $2,175 Yes $8,527 $27,673 $42,635 Yes $12,238
3 $5,431 $5,431 No $0 $0 $0 No $0
4 $0 $0 No $0 $0 $0 Yes $33,051
5 $13,706 $87,057 No $0 $0 $0 Yes $0
6 $0 $11,370 Yes $1,576 $0 $17,331 No $51,341
7 $0 $16,450 Yes $4,429 $0 $1,047 No $23,917
8 $0 $0 Yes $5,170 $31,020 $0 Yes $25,735
9 $0 $0 Yes $4,571 $27,425 $27,425 Yes $22,667
10 $24,893 $24,893 No $0 $0 $0 No $22,828
11 $28,830 $0 No $0 $0 $0 No $0
12 $0 $0 No $0 $0 $0 No $0
13 $1,200 $4,800 Yes $3,471 $11,942 $20,826 Yes $12,439
14 $0 $0 Yes $2,281 $0 $0 No $16,556
15 $14,896 $14,896 No $0 $0 $0 Yes $14,310
16 $0 $61,197 Yes $524 $3,621 $3,237 Yes $2,723
17 $0 $55,179 Yes $475 $3,377 $3,068 Yes $3,018
18 $0 $48,760 Yes $492 $3,207 $2,914 Yes $2,409
19 $0 $50,317 Yes $528 $3,377 $3,045 Yes $6,152
20 $0 $50,074 Yes $490 $3,238 $2,985 Yes $5,848
21 $0 $0 Yes $2,285 $13,712 $13,712 Yes $9,583
22 $0 $0 Yes $2,548 $10,192 $22,932 Yes $16,402
23 $42,125 $42,125 No $0 $0 $0 Yes $17,380
24 $168,109 $168,109 Yes $4,963 $64,515 $59,552 Yes $10,782
25 $0 $1,709 Yes $0 $0 $0 Yes $15,851
26 $0 $14,319 Yes $2,698 $8,093 $26,979 Yes $1,550
27 $0 $2,800 Yes $2,193 $0 $17,547 No $9,418
28 $0 $2,267 Yes $1,850 $0 $14,796 No $7,439
29 $0 $29,634 No $0 $0 $0 No $13,895
30 $0 $0 Yes $0 $0 $0 No $9,132
31 $0 $0 No $0 $0 $0 Yes $15,386
32 $518,750 $518,750 Yes $2,645 $21,160 $23,805 Yes $12,374
33 $2,500 $2,500 Yes $2,209 $15,461 $13,253 Yes $15,426
34 $0 $6,945 Yes $2,478 $0 $19,824 No $14,437
35 $0 $0 No $0 $0 $0 Yes $7,375
36 $0 $4,884 Yes $793 $7,140 $9,519 Yes $13,306
37 $7,355 $8,461 Yes $1,018 $3,055 $5,092 Yes $14,142
38 $3,125 $9,000 No $0 $0 $0 Yes $0
39 $19,650 $12,456 Yes $750 $0 $8,250 Yes $7,511
40 $0 $0 Yes $1,594 $0 $17,529 No $14,640
41 $0 $32,773 No $0 $0 $0 No $0
42 $0 $10,036 Yes $2,391 $0 $19,128 No $10,371
43 $0 $0 Yes $2,174 $0 $15,215 No $8,246
44 $0 $2,077 Yes $432 $711 $1,558 Yes $3,095
45 $0 $1,742 Yes $363 $597 $1,307 Yes $2,597
46 $0 $1,397 Yes $1,326 $0 $3,979 No $8,744
47 $0 $3,632 Yes $688 $3,440 $6,192 Yes $8,460
48 $0 $0 Yes $591 $1,181 $1,181 Yes $8,143
49 $0 $0 Yes $2,454 $9,816 $7,362 Yes $6,000
50 $0 $0 Yes $837 $5,024 $3,349 Yes $10,750
51 $0 $0 No $0 $0 $0 No $0
52 $0 $4,823 No $0 $0 $0 No $6,756
53 $22,863 $22,863 Yes $2,395 $7,184 $4,789 Yes $17,703
54 $0 $0 No $0 $0 $0 No $6,515
55 $0 $676 Yes $429 $5,150 $6,008 Yes $2,520
56 $0 $385 Yes $190 $2,275 $2,655 Yes $1,030
57 $0 $0 No $0 $0 $0 No $0
58 $0 $2,547 Yes $2,019 $0 $3,347 No $10,640
59 $0 $0 Yes $1,364 $0 $2,729 No $4,433
60 $0 $2,597 Yes $1,235 $0 $17,295 No $2,603
61 $6,250 $6,250 Yes $506 $2,025 $3,544 Yes $1,094
62 $0 $18,695 No $0 $0 $0 No $19,040
63 $0 $6,700 No $0 $0 $0 No $4,792
64 $0 $9,386 Yes $989 $0 $10,980 No $6,120
65 $0 $17,534 Yes $185 $0 $3,692 No $10,135
66 $0 $0 Yes $1,643 $11,503 $9,860 Yes $2,441
67 $0 $79,273 Yes $1,764 $0 $1,587 No $5,317
68 $0 $4,492 No $0 $0 $0 No $0
69 $0 $0 Yes $1,010 $0 $0 No $7,157
70 $875 $2,908 Yes $2,815 $0 $1,408 Yes $4,375
71 $0 $0 Yes $1,149 $0 $0 No $5,300
72 $0 $0 No $0 $0 $0 No $8,276
73 $76,250 $3,750 Yes $1,933 $1,933 $9,664 Yes $6,567
74 $0 $0 Yes $456 $0 $3,645 No $3,988
75 $0 $23,716 Yes $289 $0 $5,869 No $4,117
76 $0 $1,072 Yes $223 $0 $902 No $2,162
77 $0 $0 Yes $1,047 $0 $5,818 No $5,430
78 $917 $6,417 Yes $335 $1,339 $3,684 Yes $3,585
79 $0 $2,912 Yes $521 $0 $4,308 No $4,224
80 $0 $0 No $0 $0 $0 Yes $359
81 $0 $1,138 No $0 $0 $0 No $3,266
82 $0 $0 Yes $303 $0 $0 No $5,110
83 $0 $25,370 Yes $2,633 $0 $13,735 No $3,577
84 $97,625 $97,625 Yes $876 $7,887 $2,521 Yes $3,250
85 $0 $0 Yes $264 $0 $792 No $2,715
86 $0 $1,298 No $0 $0 $0 No $2,795
87 $0 $0 No $0 $0 $0 No $1,177
88 $229,890 $229,890 Yes $1,529 $9,176 $9,176 Yes $1,518
89 $0 $0 Yes $778 $0 $6,223 No $3,298
90 $0 $16,244 Yes $262 $0 $3,700 Yes $0
91 $0 $1,251 Yes $487 $0 $1,460 No $3,413
92 $47,625 $47,625 Yes $1,400 $5,599 $9,051 Yes $4,487
93 $0 $0 Yes $457 $6,400 $4,194 Yes $2,975
94 $0 $3,549 Yes $683 $0 $3,506 No $3,570
95 $0 $1,064 No $0 $0 $0 No $5,712
96 $0 $3,000 Yes $781 $0 $1,563 Yes $2,504
97 $0 $10,668 Yes $1,042 $0 $8,337 No $6,745
98 $0 $5,020 Yes $1,632 $0 $14,052 No $5,721
99 $0 $4,930 Yes $210 $0 $2,515 No $2,895
100 $0 $12,147 Yes $1,541 $0 $13,707 No $1,728
101 $0 $16,759 Yes $1,114 $0 $7,921 No $3,124
102 $0 $1,213 Yes $417 $0 $833 No $2,380
103 $3,525 $9,264 Yes $815 $0 $4,075 Yes $2,167
104 $0 $4,499 Yes $609 $0 $6,699 No $5,875
105 $0 $7,208 Yes $557 $0 $8,500 No $10,413
106 $0 $95,295 Yes $1,388 $0 $7,419 No $4,792
107 $0 $0 No $0 $0 $0 No $0
108 $0 $0 Yes $958 $2,873 $1,915 Yes $2,779
109 $0 $13,444 Yes $779 $0 $1,722 No $3,339
110 $0 $18,654 Yes $536 $0 $1,607 No $6,279
111 $38,438 $37,500 Yes $1,699 $19,790 $10,102 Yes $5,303
112 $0 $0 Yes $842 $0 $8,423 No $5,862
113 $0 $0 Yes $845 $2,534 $3,379 Yes $3,200
114 $0 $2,016 Yes $764 $0 $3,055 No $3,273
115 $0 $0 No $0 $0 $0 No $3,535
116 $0 $0 Yes $850 $0 $850 No $2,558
117 $38,269 $38,269 Yes $559 $5,594 $6,713 Yes $4,975
118 $0 $326 No $0 $0 $0 No $0
119 $19,500 $19,500 Yes $1,259 $5,037 $5,037 Yes $2,583
120 $0 $36,811 Yes $705 $0 $8,455 No $3,064
121 $45,963 $45,963 Yes $1,306 $7,838 $7,838 Yes $1,122
122 $0 $1,536 Yes $505 $0 $3,030 No $1,557
123 $0 $1,318 No $0 $0 $0 No $0
124 $0 $3,333 Yes $1,394 $0 $13,942 No $2,991
125 $0 $437 Yes $152 $0 $188 No $2,117
126 $0 $0 Yes $498 $4,485 $5,482 Yes $1,929
127 $0 $2,658 Yes $532 $0 $2,210 No $2,735
128 $10,938 $0 Yes $1,285 $7,500 $2,288 Yes $1,842
129 $33,531 $33,531 Yes $449 $3,140 $3,588 Yes $5,167
130 $0 $6,891 Yes $348 $0 $804 No $1,199
131 $0 $868 Yes $360 $906 $2,344 Yes $2,353
132 $0 $11,876 Yes $1,105 $0 $13,257 No $1,456
133 $0 $0 Yes $558 $0 $3,349 No $3,410
134 $0 $0 Yes $1,395 $13,945 $16,734 Yes $2,833
135 $0 $1,277 Yes $310 $0 $2,169 No $721
136 $0 $12,919 Yes $601 $0 $8,811 No $6,297
137 $0 $14,323 Yes $88 $0 $90 No $2,129
138 $0 $0 No $0 $0 $0 No $504
139 $5,375 $5,375 Yes $1,881 $5,643 $13,168 Yes $2,716
140 $0 $18,696 No $0 $0 $0 No $3,820
141 $0 $13,448 Yes $515 $0 $1,605 No $2,868
142 $0 $817 Yes $333 $0 $667 No $2,469
143 $0 $0 Yes $0 $1,057 $0 No $2,380
144 $0 $10,181 Yes $0 $1,050 $0 No $1,793
145 $0 $4,600 Yes $1,077 $0 $4,036 No $7,166
146 $33,250 $33,250 Yes $874 $9,537 $10,726 Yes $2,417
147 $0 $5,927 Yes $360 $0 $5,394 No $4,700
148 $0 $3,000 Yes $384 $0 $1,773 No $2,102
149 $0 $0 Yes $479 $1,914 $3,350 Yes $1,745
150 $0 $2,149 Yes $726 $0 $5,079 No $2,220
151 $0 $41,194 Yes $2,108 $0 $32,384 No $1,737
152 $0 $0 Yes $1,637 $0 $13,621 No $6,768
153 $0 $750 Yes $275 $1,668 $964 Yes $3,083
154 $0 $9,277 Yes $191 $0 $4,083 No $1,738
155 $0 $3,000 Yes $311 $0 $3,735 No $1,266
156 $0 $0 No $0 $0 $0 No $928
157 $0 $0 Yes $331 $0 $2,647 No $2,697
158 $0 $17,803 Yes $314 $0 $118 No $1,355
159 $0 $661 Yes $0 $4,474 $0 Yes $0
160 $0 $1,455 Yes $717 $0 $0 No $2,367
161 $0 $0 Yes $1,462 $5,848 $10,233 Yes $1,626
162 $66,813 $66,813 Yes $1,050 $5,248 $4,198 Yes $2,394
163 $0 $18,463 Yes $953 $0 $3,007 No $2,494
164 $0 $0 Yes $577 $0 $0 No $5,026
165 $0 $25,098 Yes $1,144 $0 $9,233 No $3,907
166 $0 $7,130 Yes $966 $0 $2,898 No $6,431
167 $0 $5,413 Yes $0 $3,131 $0 No $1,937
168 $0 $0 Yes $320 $0 $3,515 No $0
169 $0 $15,610 Yes $338 $0 $481 No $5,826
170 $0 $313 Yes $325 $0 $2,320 No $857
171 $0 $3,587 Yes $225 $0 $1,033 No $683
172 $0 $5,897 Yes $702 $0 $0 No $3,484
173 $0 $7,726 Yes $313 $0 $2,194 No $1,292
174 $0 $28,726 Yes $676 $0 $6,088 No $841
175 $0 $0 Yes $793 $0 $13,889 No $1,911
176 $0 $10,001 Yes $259 $0 $1,233 No $1,434
177 $0 $3,002 Yes $879 $0 $5,276 No $3,215
178 $0 $2,719 Yes $426 $0 $1,223 No $2,052
179 $0 $13,059 Yes $133 $0 $2,920 No $2,293
180 $0 $3,400 Yes $299 $0 $3,590 No $1,142
181 $0 $3,566 Yes $90 $0 $721 No $2,186
182 $0 $11,267 No $0 $0 $0 No $2,496
183 $0 $0 Yes $401 $0 $801 No $1,301
184 $0 $1,176 No $0 $0 $0 No $2,132
185 $0 $912 Yes $203 $0 $1,830 No $2,825
186 $1,250 $4,610 Yes $924 $1,904 $7,449 Yes $2,624
187 $0 $3,151 No $0 $0 $0 No $2,523
188 $0 $5,415 No $0 $0 $2,450 No $0
189 $0 $4,417 Yes $204 $0 $736 No $1,877
190 $0 $4,513 Yes $332 $0 $995 No $1,987
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UPFRONT (15) CURRENT (16) ESCROWS FOR MONTHLY (17) UPFRONT (18) CURRENT (19)
LOAN ESCROW - ESCROW - TI/LC ESCROW - ESCROW - ESCROW - LOCKOUT
NO. TAXES TAXES (YES/NO)? TI/LC TI/LC TI/LC SEASONING(20) PERIOD
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $324,093 $324,093 Yes $20,833 $0 $0 2 26
2 $0 $61,191 No $0 $0 $0 6 30
3 $0 $0 No $0 $0 $0 0 24
4 $353,348 $320,297 Yes $11,905 $11,905 $0 1 25
5 $1,010,000 $1,010,000 Yes $16,443 $16,443 $164,428 9 33
6 $0 $308,048 Yes $0 $1,199,744 $1,215,627 6 36
7 $0 $95,666 Yes $6,250 $420,000 $450,996 6 36
8 $154,409 $0 No $0 $0 $0 0 24
9 $68,000 $68,000 No $0 $10,000 $10,000 1 25
10 $0 $136,966 No $0 $0 $0 1 36
11 $0 $0 Yes $0 $3,046,196 $3,046,196 3 36
12 $0 $0 Yes $10,191 $0 $50,954 6 30
13 $49,754 $37,316 Yes $1,250 $1,200 $5,000 5 29
14 $0 $0 No $0 $0 $0 0 59
15 $128,793 $114,483 Yes $6,041 $6,041 $0 1 25
16 $6,072 $13,543 No $0 $0 $0 21 45
17 $2,298 $21,490 No $0 $0 $0 21 45
18 $4,375 $23,679 No $0 $0 $0 21 45
19 $12,429 $23,307 No $0 $0 $0 21 45
20 $6,781 $33,897 No $0 $0 $0 21 45
21 $28,750 $28,750 No $0 $5,000 $5,000 1 25
22 $102,125 $46,247 No $0 $375,000 $285,982 7 31
23 $139,042 $121,662 Yes $8,642 $8,642 $0 1 25
24 $56,832 $46,050 Yes $5,850 $5,850 $0 1 25
25 $95,107 $110,958 Yes $0 $200,000 $0 3 27
26 $47,875 $59,904 No $0 $0 $0 8 32
27 $0 $18,836 No $0 $0 $0 3 36
28 $0 $14,879 No $0 $0 $0 3 36
29 $0 $12,860 Yes $8,924 $0 $209,280 25 47
30 $0 $27,395 No $0 $0 $0 0 59
31 $108,648 $108,648 No $0 $0 $0 0 24
32 $49,497 $61,871 Yes $13,158 $13,158 $26,369 3 27
33 $123,409 $107,983 Yes $3,750 $7,500 $3,750 2 26
34 $0 $101,060 No $0 $0 $0 4 36
35 $66,372 $58,997 Yes $2,365 $2,365 $0 1 25
36 $85,161 $28,706 Yes $10,000 $0 $30,068 4 28
37 $28,171 $56,455 Yes $3,333 $750,000 $756,667 4 28
38 $34,567 $34,567 Yes $4,750 $0 $22,172 5 29
39 $29,456 $45,068 No $0 $0 $0 9 33
40 $0 $122,273 No $0 $0 $0 25 59
41 $0 $0 No $0 $0 $0 28 65
42 $0 $8,865 No $0 $0 $0 5 36
43 $0 $82,461 No $0 $0 $0 2 35
44 $6,068 $12,138 Yes $5,295 $0 $10,384 3 27
45 $5,092 $10,183 Yes $4,443 $0 $8,711 3 27
46 $0 $56,104 No $0 $0 $0 3 36
47 $25,380 $59,220 Yes $0 $170,000 $170,000 5 29
48 $32,571 $32,571 No $0 $0 $0 2 26
49 $12,000 $6,000 No $0 $0 $0 2 26
50 $21,500 $57,937 Yes $3,548 $3,548 $14,269 5 29
51 $0 $0 No $0 $0 $0 5 60
52 $0 $33,426 Yes $4,583 $0 $18,419 6 36
53 $116,595 $98,892 No $0 $0 $0 1 25
54 $0 $32,574 No $0 $0 $0 25 49
55 $20,161 $25,201 No $0 $0 $7,500 3 27
56 $8,240 $10,300 Yes $1,284 $0 $2,569 3 27
57 $0 $0 Yes $2,845 $0 $0 0 36
58 $0 $63,487 No $0 $0 $0 31 48
59 $0 $38,399 No $0 $0 $0 26 35
60 $0 $13,015 Yes $3,750 $0 $11,250 5 36
61 $9,845 $13,127 No $0 $0 $0 5 29
62 $0 $22,965 No $0 $0 $0 24 48
63 $0 $14,225 No $0 $0 $0 30 47
64 $0 $18,260 No $0 $0 $0 5 36
65 $0 $19,397 No $0 $0 $0 25 47
66 $19,529 $17,088 Yes $2,083 $2,083 $0 1 25
67 $0 $16,298 No $0 $0 $0 24 89
68 $0 $0 No $0 $0 $0 24 35
69 $0 $0 Yes $1,250 $0 $0 1 36
70 $21,786 $30,626 Yes $2,500 $0 $5,000 3 27
71 $0 $53,000 No $0 $0 $0 2 36
72 $0 $0 No $0 $0 $0 1 36
73 $65,673 $27,320 No $0 $0 $0 6 30
74 $0 $19,938 Yes $1,250 $0 $0 2 36
75 $0 $6,553 Yes $6,091 $0 $144,453 25 59
76 $0 $6,486 Yes $1,250 $20,000 $22,504 4 36
77 $0 $21,365 No $0 $0 $0 24 59
78 $18,295 $22,507 No $0 $0 $0 8 32
79 $0 $24,048 No $0 $0 $0 24 47
80 $359 $3,232 No $0 $0 $0 10 34
81 $0 $16,331 Yes $1,667 $0 $3,339 4 36
82 $0 $0 Yes $1,000 $0 $0 0 36
83 $0 $32,199 No $0 $0 $0 24 59
84 $29,250 $32,500 Yes $3,000 $0 $44,814 2 26
85 $0 $20,932 Yes $2,500 $0 $0 2 36
86 $0 $2,304 Yes $4,167 $0 $16,749 6 36
87 $0 $7,060 No $0 $0 $0 1 36
88 $16,696 $16,696 No $0 $0 $0 2 26
89 $0 $16,492 Yes $2,000 $0 $0 2 36
90 $21,197 $0 No $0 $0 $0 23 89
91 $0 $13,651 No $0 $0 $0 3 36
92 $17,949 $13,462 No $0 $0 $0 1 25
93 $20,828 $7,391 No $0 $0 $0 10 34
94 $0 $37,451 No $0 $0 $0 23 59
95 $0 $46,706 Yes $1,716 $0 $40,357 25 47
96 $0 $5,008 No $0 $0 $0 11 35
97 $0 $38,427 No $0 $0 $0 24 59
98 $0 $59,839 No $0 $0 $0 26 59
99 $0 $4,288 No $0 $0 $0 26 47
100 $0 $22,414 No $0 $0 $0 24 59
101 $0 $16,170 No $0 $0 $0 23 59
102 $0 $4,759 No $0 $0 $0 4 36
103 $10,466 $23,549 Yes $3,061 $0 $15,304 6 30
104 $0 $47,003 No $0 $0 $0 23 35
105 $0 $23,683 Yes $583 $0 $12,250 23 35
106 $0 $38,380 No $0 $0 $0 26 59
107 $0 $0 No $0 $0 $0 0 24
108 $27,786 $25,007 No $0 $0 $0 1 25
109 $0 $23,373 No $0 $0 $0 22 35
110 $0 $26,661 No $0 $0 $0 24 59
111 $31,817 $58,331 No $0 $0 $0 6 30
112 $0 $23,446 No $0 $0 $0 4 36
113 $15,998 $19,198 No $0 $0 $0 3 27
114 $0 $19,635 No $0 $0 $0 4 36
115 $0 $19,962 No $0 $0 $0 38 60
116 $0 $7,693 No $0 $0 $0 23 59
117 $9,951 $19,901 Yes $1,844 $1,844 $662,257 4 28
118 $0 $0 Yes $760 $0 $760 2 26
119 $10,333 $10,333 No $0 $0 $0 2 26
120 $0 $9,876 No $0 $0 $0 24 59
121 $12,345 $12,345 No $0 $0 $0 2 26
122 $0 $7,782 Yes $1,250 $0 $5,024 6 36
123 $0 $0 No $0 $0 $0 6 36
124 $0 $32,903 No $0 $0 $0 3 59
125 $0 $10,549 Yes $1,000 $0 $2,000 4 36
126 $5,788 $4,997 No $0 $0 $0 4 28
127 $0 $6,481 Yes $1,828 $0 $40,223 24 47
128 $4,112 $16,570 No $0 $0 $0 10 34
129 $10,333 $21,115 No $0 $0 $0 4 28
130 $0 $15,192 No $0 $0 $0 24 47
131 $11,763 $21,174 No $0 $0 $0 5 29
132 $0 $13,104 No $0 $0 $0 24 47
133 $0 $17,052 Yes $500 $0 $0 0 36
134 $19,833 $25,499 No $0 $0 $0 4 28
135 $0 $12,244 Yes $833 $0 $4,194 7 36
136 $0 $25,186 Yes $2,000 $0 $43,205 23 59
137 $0 $3,195 No $0 $0 $0 25 59
138 $0 $3,022 No $0 $0 $0 1 36
139 $19,013 $29,877 No $0 $0 $0 6 30
140 $0 $4,951 No $0 $0 $0 24 48
141 $0 $10,028 Yes $3,000 $0 $61,611 22 35
142 $0 $9,877 No $0 $0 $0 3 36
143 $0 $17,795 Yes $1,250 $0 $29,582 24 59
144 $0 $10,841 Yes $1,000 $0 $23,914 25 59
145 $0 $51,507 No $0 $0 $0 5 36
146 $24,167 $26,583 No $0 $0 $0 3 27
147 $0 $28,195 Yes $200 $0 $4,742 25 35
148 $0 $20,834 No $0 $0 $0 23 59
149 $6,250 $11,823 No $0 $0 $0 5 29
150 $0 $15,541 No $0 $0 $0 5 35
151 $0 $17,786 No $0 $0 $0 23 59
152 $0 $70,930 No $0 $0 $0 23 89
153 $6,167 $21,584 No $0 $0 $0 6 30
154 $0 $9,628 Yes $1,000 $0 $22,655 24 59
155 $0 $11,398 No $0 $0 $0 7 35
156 $0 $5,570 No $0 $0 $0 1 36
157 $0 $29,668 No $0 $0 $0 2 36
158 $0 $10,955 No $0 $0 $0 24 59
159 $9,897 $0 No $0 $0 $0 24 59
160 $0 $9,470 Yes $667 $0 $2,007 5 36
161 $6,502 $11,379 No $0 $0 $0 5 29
162 $19,150 $16,756 No $0 $0 $0 1 25
163 $0 $17,459 No $0 $0 $0 22 35
164 $0 $0 No $0 $0 $0 1 36
165 $0 $41,992 No $0 $0 $0 24 59
166 $0 $13,131 No $0 $0 $0 6 36
167 $0 $8,517 No $0 $0 $0 24 59
168 $0 $0 Yes $2,083 $0 $46,105 24 59
169 $0 $7,899 No $0 $0 $0 25 59
170 $0 $5,144 No $0 $0 $0 3 36
171 $0 $8,725 No $0 $0 $0 24 47
172 $0 $3,006 Yes $1,667 $0 $32,009 25 59
173 $0 $6,113 No $0 $0 $0 24 71
174 $0 $3,279 No $0 $0 $0 23 59
175 $0 $13,197 No $0 $0 $0 32 60
176 $0 $6,994 No $0 $0 $0 24 59
177 $0 $16,072 Yes $417 $0 $1,675 6 36
178 $0 $5,953 No $0 $0 $0 23 59
179 $0 $7,389 Yes $1,250 $0 $28,311 24 59
180 $0 $3,450 Yes $500 $0 $11,332 24 59
181 $0 $17,491 Yes $1,042 $47,500 $75,416 25 59
182 $0 $3,726 No $0 $0 $0 24 47
183 $0 $1,301 No $0 $0 $0 2 36
184 $0 $10,859 Yes $200 $0 $1,006 7 36
185 $0 $2,825 Yes $1,500 $0 $4,516 5 36
186 $8,108 $5,108 Yes $0 $50,000 $0 7 31
187 $0 $7,393 Yes $375 $0 $8,500 24 119
188 $0 $14,299 No $0 $0 $0 25 59
189 $0 $6,102 Yes $1,000 $0 $22,654 24 59
190 $0 $13,909 No $0 $0 $0 5 59
7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PREPAYMENT CODE(21)
TOTAL
LOAN ADMIN COST YM
NO. DEF YM5 YM3 YM2 YM1 YM OPEN (BPS) (22) CODE (23)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 87 7 8.22 NAP
2 86 4 8.22 NAP
3 89 7 8.22 NAP
4 82 13 8.22 NAP
5 47 4 8.22 NAP
6 80 4 8.22 NAP
7 80 4 8.22 NAP
8 89 7 8.22 NAP
9 88 7 8.22 NAP
10 80 4 8.22 NAP
11 80 4 8.22 NAP
12 83 7 8.22 NAP
13 87 4 8.22 NAP
14 56 5 8.22 A
15 88 7 8.22 NAP
16 71 4 8.22 NAP
17 71 4 8.22 NAP
18 71 4 8.22 NAP
19 71 4 8.22 NAP
20 71 4 8.22 NAP
21 88 7 8.22 NAP
22 82 7 8.22 NAP
23 88 7 8.22 NAP
24 88 7 8.22 NAP
25 94 4 8.22 NAP
26 144 4 8.22 NAP
27 140 4 8.22 NAP
28 140 4 8.22 NAP
29 66 7 8.22 C
30 56 5 8.22 A
31 89 7 8.22 NAP
32 86 7 8.22 NAP
33 87 7 8.22 NAP
34 140 4 8.22 NAP
35 88 7 8.22 NAP
36 88 4 8.22 NAP
37 88 4 8.22 NAP
38 33 4 13.22 NAP
39 83 4 8.22 NAP
40 57 4 8.22 A
41 59 6 8.22 A
42 140 4 8.22 NAP
43 81 4 8.22 A
44 89 4 8.22 NAP
45 89 4 8.22 NAP
46 80 4 8.22 NAP
47 84 7 8.22 NAP
48 87 7 8.22 NAP
49 87 7 8.22 NAP
50 84 7 8.22 NAP
51 60 8.22 F
52 80 4 8.22 NAP
53 88 7 8.22 NAP
54 71 0 8.22 NAP
55 89 4 8.22 NAP
56 89 4 8.22 NAP
57 138 6 8.22 A
58 66 6 8.22 B
59 77 8 8.22 A
60 80 4 8.22 NAP
61 84 7 8.22 NAP
62 65 7 8.22 NAP
63 67 6 8.22 C
64 77 7 8.22 NAP
65 66 7 8.22 D
66 88 7 8.22 NAP
67 87 4 8.22 A
68 78 7 8.22 A
69 80 4 8.22 NAP
70 89 4 13.22 NAP
71 80 4 8.22 NAP
72 200 4 8.22 NAP
73 83 7 8.22 NAP
74 77 7 8.22 NAP
75 54 7 8.22 A
76 80 4 8.22 NAP
77 54 7 8.22 A
78 84 4 8.22 NAP
79 66 7 8.22 C
80 193 7 8.22 NAP
81 80 4 8.22 NAP
82 80 4 8.22 NAP
83 57 4 8.22 A
84 87 7 8.22 NAP
85 80 4 8.22 NAP
86 80 4 8.22 NAP
87 80 4 8.22 NAP
88 87 7 8.22 NAP
89 80 4 8.22 NAP
90 87 4 8.22 A
91 80 4 8.22 NAP
92 88 7 8.22 NAP
93 80 7 8.22 NAP
94 54 7 8.22 A
95 66 7 8.22 C
96 90 7 8.22 NAP
97 57 4 8.22 A
98 54 7 8.22 A
99 66 7 8.22 C
100 54 7 8.22 A
101 57 4 8.22 A
102 80 4 8.22 NAP
103 86 4 8.22 NAP
104 81 4 8.22 A
105 78 7 8.22 A
106 57 4 8.22 A
107 89 7 8.22 NAP
108 88 7 8.22 NAP
109 81 4 8.22 A
110 54 7 8.22 A
111 86 4 8.22 NAP
112 80 4 8.22 NAP
113 86 7 8.22 NAP
114 80 4 8.22 NAP
115 48 12 8.22 A
116 57 4 8.22 A
117 85 7 8.22 NAP
118 90 4 8.22 NAP
119 87 7 8.22 NAP
120 57 4 8.22 A
121 87 7 8.22 NAP
122 80 4 8.22 NAP
123 44 4 8.22 NAP
124 57 4 8.22 A
125 80 4 8.22 NAP
126 85 7 8.22 NAP
127 66 7 8.22 E
128 78 7 8.22 NAP
129 85 7 8.22 NAP
130 66 7 8.22 E
131 87 4 8.22 NAP
132 66 7 8.22 A
133 80 4 8.22 NAP
134 85 7 8.22 NAP
135 80 4 8.22 NAP
136 54 7 8.22 A
137 57 4 8.22 A
138 80 4 8.22 NAP
139 83 7 8.22 NAP
140 65 7 8.22 NAP
141 81 4 8.22 A
142 80 4 8.22 NAP
143 54 7 8.22 A
144 54 7 8.22 A
145 77 7 8.22 NAP
146 86 7 8.22 NAP
147 78 7 8.22 A
148 54 7 8.22 A
149 84 7 8.22 NAP
150 81 4 8.22 A
151 57 4 8.22 A
152 85 6 8.22 A
153 86 4 8.22 NAP
154 57 4 8.22 A
155 81 4 8.22 NAP
156 80 4 8.22 NAP
157 80 4 8.22 NAP
158 57 4 8.22 A
159 54 7 8.22 A
160 80 4 8.22 NAP
161 84 7 8.22 NAP
162 88 7 8.22 NAP
163 81 4 8.22 A
164 80 4 8.22 NAP
165 54 7 8.22 A
166 80 4 8.22 NAP
167 54 7 8.22 A
168 54 7 8.22 A
169 54 7 8.22 A
170 80 4 8.22 NAP
171 66 7 8.22 E
172 57 4 8.22 A
173 69 4 8.22 A
174 57 4 8.22 A
175 18 6 8.22 A
176 57 4 8.22 A
177 80 4 8.22 NAP
178 57 4 8.22 A
179 54 7 8.22 A
180 54 7 8.22 A
181 57 4 8.22 A
182 66 7 8.22 C
183 80 4 8.22 NAP
184 140 4 8.22 NAP
185 80 4 8.22 NAP
186 85 4 8.22 NAP
187 117 4 8.22 A
188 54 7 8.22 A
189 54 7 8.22 A
190 57 4 8.22 A
</TABLE>
<PAGE>
FOOTNOTES TO APPENDIX II
1. "Midland", "CIBC" and "MSDWMC" denote Midland Loan Services, Inc., CIBC Inc.
and Morgan Stanley Dean Witter Mortgage Capital Inc., respectively, as
Sellers.
2. Sets of Mortgage Loans that have identical alphabetical coding designate
multiple loans that are cross-collateralized and cross-defaulted, while
Mortgage Loans that have identical Roman Numeral coding indicate multiple
properties securing one note. The following loan pools represent cross
collateralized/cross-defaulted properties and are designated by identical
alphabetical coding: Mortgage Loan Nos. 27-28 and 55-56. Mortgage Loans Nos.
16-20 and 44-45 represent multiple properties securing a single note.
3. Mortgage Loan No. 57, Best Buy, and Mortgage Loan No. 107, Dicks Clothing
and Sporting Goods - Richmond, were not closed or funded as of the date
hereof. All information about those Mortgage Loans herein or in the
prospectus supplement is based upon the terms and conditions which are
anticipated to be the final terms and conditions for those Mortgage Loans.
Mortgage Loan No. 1, 475 Park Avenue South, is permitted to obtain future
mezzanine debt. See Appendix III for more information.
Mortgage Loan No. 4, Appletree Business Park, is permitted to obtain future
mezzanine debt. See Appendix III for more information.
Mortgage Loan No. 12, Discovery Creative & Technology Center, has existing
mezzanine debt. See Appendix III for more information.
With respect to Mortgage Loan Nos. 16, 17, 18, 19 and 20 (The Suburban Lodge
Properties), the 5 Mortgaged Properties secure one note in the original
principal balance of $15,170,000. The Borrower may obtain a release of one
or more of the Mortgaged Properties from the lien under certain conditions,
including (i) defeasance of an amount equal to 125% of the released property
allocated loan balance, (ii) maintenance of at least a 1.40x combined DSCR
for the remaining collateral, and (iii) maintenance of a maximum 75%
combined LTV for the remaining collateral.
Mortgage Loan Nos. 55 and 56, The Shops at Eagle Pointe and Shops at Haw
Creek, are evidenced by 2 separate promissory notes and secured by 2
separate Mortgages that are cross-defaulted and cross-collateralized. Either
property may be released from the cross-collateralization under certain
conditions including maintenance by the remaining collateral of DSCR of at
least 1.75x for the trailing 12 months and certain other release
requirements being satisfied.
With respect to Mortgage Loan No. 65, Chesapeake Estates of Grantville, the
Borrower is permitted to release certain specified undeveloped parcels of
land from the lien under certain conditions, including the lender receiving
an acceptable title endorsement and the Borrower paying the lender a $10,000
fee plus all costs incurred by it in connection with the release.
II-1
<PAGE>
With respect to Mortgage Loan No. 136, The Menlo Plaza Shopping Center, the
Borrower is permitted to release a specified pad site from the lien under
certain conditions, including (i) there being no event of default, (ii) the
release not causing a default under any of the remaining leases at the
Mortgaged Property, (iii) the Borrower recording use restrictions and
easements over the pad site acceptable to the lender, (iv) the lender
receiving an acceptable title endorsement and an acceptable revised ALTA
survey, (v) the Borrower providing acceptable evidence that the pad site is
a separate tax parcel, and (vi) the Borrower paying the lender all costs
incurred by it in connection with the release.
With respect to Mortgage Loan No. 5, Bozzuto's Warehouse and Distribution
Facility, the Borrower is obligated under an unsecured $1,528,589 note
payable to Bozzuto's, Inc., an affiliated entity and the sole tenant of the
Mortgaged Property. Such unsecured note is expressly subordinated to this
Mortgage Loan.
Mortgage Loan No. 26, 1450 Marina Way South Office Building Property, is
part of the Marina West Development District ("District"), which is subject
to a certain development bond indenture. The indenture provided financing
for certain public infrastructure improvements and environmental remediation
required for property development. The obligations under the bond indenture
are apportioned among the properties located in the District, and are repaid
through a special tax levied on the properties in the District and collected
and enforced as a separate line item on such property's regular tax bill.
With respect to each of Mortgage Loan No. 27, Waterford at Portage
Apartments Phase I, Mortgage Loan No. 28, Waterford at Portage Trail Phase
II, Mortgage Loan No. 34, Waterford at Spencer Oaks Apartments and Mortgage
Loan No. 42, Waterford at Sterling Place Apartments, the related Borrower is
obligated under an unsecured note payable to M. Myers Development, Inc., the
general partner of each such Borrower. Such unsecured notes are subordinate
to the related Mortgage by a Subordination and Standstill Agreement entered
into by such general partner. In addition, each Borrower is allowed to
obtain unsecured loans from such general partner and its respective limited
partners. The lender of any such unsecured loans must enter into an
acceptable Subordination and Standstill Agreement providing that such
unsecured loans are subordinate to the related Mortgage Loan.
With respect to Mortgage Loan No. 10, Solana Beach Towne Centre, the
Borrower is allowed to obtain secondary debt for a renovation or
reconstruction of any building upon the Mortgaged Property. See Appendix III
for more information.
With respect to Mortgage Loan No. 14, Post Trace Apartments, the Borrower is
allowed to obtain unsecured loans from Case Trace Corp., an affiliated
entity. Case Trace Corp. must enter into an acceptable Subordination and
Standstill Agreement providing that such unsecured loans are subordinate to
this Mortgage Loan.
With respect to Mortgage Loan No. 54, Windscape Apartments, the Borrower is
permitted to obtain financing secured by the Mortgaged Property if the LTV
of the aggregate loan amounts does not exceed 80%, payments on the
subordinate loan are prohibited in any month where the trailing twelve
II-2
<PAGE>
month DSCR is less than 1.20x, and the maturity date of the subordinate deed
of trust is no sooner than three (3) months after the maturity date of this
Mortgage Loan.
With respect to Mortgage Loan No. 94, Coventry Manor Phase I, the Borrower
is permitted to obtain financing secured by the Mortgaged Property if the
subordinate loan amount does not exceed $500,000, the LTV of the aggregate
loan amounts does not exceed 80%, and payments on the subordinate loan are
prohibited in any month where the trailing twelve month DSCR is less than
1.20x.
With respect to Mortgage Loan No. 148, Coventry Manor Phase II, the Borrower
is permitted to obtain financing secured by the Mortgaged Property if the
subordinate loan amount does not exceed $500,000, the LTV of the aggregate
loan amounts does not exceed 80%, and payments to the subordinate loan are
prohibited in any month where the trailing twelve month DSCR is less than
1.20x.
4. Certain ratios including Cut-off Date Principal Balance/Unit or SF, DSCR,
Cut-off Date LTV and Balloon LTV are calculated on a combined basis for
Mortgage Loans that are secured by multiple properties or are
cross-collateralized and cross-defaulted. For the purposes of the
statistical information set forth in this prospectus supplement, as to such
multiple property loans, a portion of the aggregate Cut-off Date Principal
Balance has been allocated to each property, based upon either the
allocation assigned in the related loan documents or upon the Underwritable
Cash Flows of each such property. For purposes of information contained
within the prospectus supplement, balloon loans are defined as having a
Mortgage Loan that will have balance at maturity (or Anticipated Repayment
Date for a Hyper-Amortization Loan) totaling 10% or more of its original
principal balance.
5. "ARD" indicates the Anticipated Repayment Date for hyper-amortizing Mortgage
Loans. Thirty-four of the Mortgage Loans in the Mortgage Pool are
Hyper-Amortization Loans. See "Description of the Mortgage Loans -
Amortization of Principal" for more information.
6. The Amortization Term shown is the basis for determining the fixed monthly
principal and interest payment as set forth in the related note. Due to the
actual/360 interest calculation methodology applied to most Mortgage Loans,
the actual amortization to a zero balance will be longer.
7. Mortgage Loan No. 13, Springfield Gardens Shopping Center, is secured by a
mortgage encumbering both the Borrower's leasehold interest in the Mortgaged
Property and the fee interest of the ground lessor in the Mortgaged
Property. The ground lessor is an entity affiliated with the Borrower. This
Mortgage Loan is deemed secured by a fee interest for purposes of this
prospectus supplement.
Mortgage Loan No. 32, Grants Pass Shopping Center, is secured by a mortgage
encumbering both the Borrower's fee interest in the majority of the
Mortgaged Property and the Borrower's leasehold interest in a small parcel
of the Mortgaged Property.
II-3
<PAGE>
Mortgage Loan No. 37, Huntington Medical Center, is secured by a mortgage
encumbering both the Borrower's leasehold interest in the Mortgaged Property
and the fee interest of the ground lessor in the Mortgaged Property. The
ground lessor is an entity affiliated with the sole tenant of the Mortgaged
Property. This Mortgage Loan is deemed secured by a fee interest for
purposes of this prospectus supplement. However, the mortgage lien over the
fee interest of the ground lessor can be foreclosed only upon the occurrence
of certain specified events of default.
With respect to Mortgage Loan No. 53, Garden Way, the Borrower owns the fee
interest in the Mortgaged Property. It has leased the Mortgaged Property to
an Industrial Development Agency (IDA) for a nominal amount. The IDA has
sub-leased the Mortgaged Property back to the Borrower for a nominal fee.
This Mortgage Loan is secured by a mortgage encumbering all of the
Borrower's fee and sub-leasehold interest in the Mortgaged Property and the
leasehold interest of the IDA. This Mortgage Loan is deemed secured by a fee
interest for purposes of this prospectus supplement.
Mortgage Loan No. 112, Holiday Inn Express, is secured by a mortgage over
the leasehold held by the Borrower in a portion of the subject property and
the fee interest of the Borrower in the remaining portion of the subject
property.
8. Mortgage Loan No. 2, Camino Real Marketplace, provides for monthly payments
of interest only until May, 2003, and thereafter provides for monthly
payments of interest and principal based on a 324 month amortization term.
The monthly payment used to calculate the DSCR for this Mortgage Loan
reflects only the monthly interest payment. During the 3 year interest-only
period, interest accrues each month according to the actual number of days
the Mortgage Loan is outstanding, therefore, the monthly interest payments
will vary depending on the number of days included in the preceding month.
The Monthly Debt Service disclosed is the average monthly interest payment
over a 12 month period.
Mortgage Loan No. 25, Town Center Shopping Center provided for 3 months of
interest-only payments for the first 3 months of the Mortgage Loan term.
9. In general for each property, "Percent Leased" was determined based on a
rent roll provided by the related Borrower. In certain cases, "Percent
Leased" was determined based on an appraisal, executed lease, operating
statement or occupancy report. "Percent Leased as of Date" indicates the
date as of which "Percent Leased" was determined based on such information.
For hospitality properties, the data shown is the average daily occupancy
rate, generally for the immediately preceding 12-month period.
10. "Largest Tenant" refers to the tenant that represents the greatest
percentage of the total square footage at the related Mortgaged Property.
11. Monthly Replacement/Capex Reserve Escrow indicates the amount the lender
currently collects monthly (on an annual basis) for deposit into the related
Mortgaged Property's Capex Escrow account. In certain cases, the related
deposits will end upon certain dates or are capped at certain amounts. In
certain cases, annual collection amounts may change, such as in the case of
hospitality
II-4
<PAGE>
loans, which generally base collections on related-property revenues.
On-going collections may not be adequate to fund all capital expense
requirements for the related Mortgaged Property for the term of the related
Mortgage Loan.
12. Upfront Capex Escrow and Upfront Replacement Reserve Escrow indicates the
amount the lender collected (or, in certain cases, a letter of credit
received), for deposit into the related Mortgaged Property's Capex Escrow
and Replacement Reserve Escrow accounts at the closing of the related
Mortgage Loan to fully or partially fund estimated property-related deferred
maintenance costs and/or on-going capital expenses.
13. Current Capex Balance and current Replacement Reserve Escrow indicates the
balance of the related Mortgaged Property's Capex Escrow and Replacement
Reserve accounts as of September, 2000. In certain cases, balances will not
be replenished upon a release of funds.
14. Monthly Insurance Escrow and Monthly Tax Escrow indicates the amount the
lender currently collects monthly (on an annual basis) for deposit into the
related Mortgaged Property's Insurance Escrow and Tax Escrow accounts. The
related deposits are in amounts adequate to pay estimated property hazard
insurance bills and real estate tax bills, when due.
15. Upfront Insurance Escrow and Upfront Tax Escrow indicates the amounts the
lender collected (or, in certain cases, a letter of credit received), for
deposit into the related Mortgaged Property's Insurance Escrow and Tax
Escrow accounts at the closing of the related Mortgage Loan to fully or
partially fund estimated insurance premiums and real estate tax bills.
16. Current Insurance Balance and current Tax Balance indicates the balance of
the related Mortgaged Property's Insurance Escrow and Tax Escrow accounts as
of September, 2000. In certain cases, balances will not be replenished upon
a release of funds.
17. Monthly TI/LC Escrow indicates the amount the lender currently collects
monthly (on an annual basis) for deposit into the related Mortgaged
Property's Tenant Improvement and Leasing Commission Escrow account. In
certain cases, the related deposits will end upon certain events (for
example, certain tenant renewals), or upon certain dates, or are capped at
certain amounts. On-going collections may not be adequate to fund all tenant
improvement and leasing commission requirements for the related Mortgaged
Property for the term of the related Mortgage Loan.
18. Upfront TI/LC Escrow indicates the amount the lender collected (or, in
certain cases, a letter of credit received), for deposit into the related
Mortgaged Property's Tenant Improvement and Leasing Commission Escrow
account at the closing of the related Mortgage Loan.
19. Current TI/LC Balance indicates the balance of the related Mortgaged
Property's Tenant Improvement and Leasing Commission Escrow account as of
September, 2000. In certain cases, balances will not be replenished upon a
release of funds.
20. "Seasoning" represents the number of payments elapsed from the date of the
first regularly scheduled payment or due date to and including the Cut-Off
Date.
II-5
<PAGE>
21. Indicates prepayment provisions from the first due date as stated in the
Mortgage Loan. "DEF" represents defeasance. "YM" represents yield
maintenance. "YM5" represents the greater of yield maintenance or 5%, "YM3"
represents the greater of yield maintenance or 3%, "YM2" represents the
greater of yield maintenance or 2% and "YM1" represents the greater of yield
maintenance or 1%, of the outstanding principal balance at such time,
respectively. "Open" represents a period during which Principal Prepayments
are permitted without payment of a prepayment premium. For each Mortgage
Loan, the number set forth under a category of prepayment provision
represents the number of payment dates in the original term to maturity for
which such provision applies.
Mortgage Loan No. 56, The Shops at Haw Creek, has a $450,000 letter of
credit in place in lieu of a leasing holdback. If certain leasing conditions
are not met by June 27, 2001, the lender may apply all or a portion of
proceeds from the letter of credit necessary to pay all taxes, assessments
and/or insurance premiums due and payable with respect to the property and
then to partially prepay the Mortgage Loan. Any such partial prepayment is
subject to a prepayment premium equal to the greater of (x)1% of the prepaid
amount and (y) the product of a yield maintenance formula.
Mortgage Loan No. 153, Hollywood Video & Retail Shops, has a $203,096
leasing holdback in place. If not released within 10 months of the closing
of the Mortgage Loan, the holdback will be applied to partially prepay the
Mortgage Loan, subject to a prepayment premium equal to the greater of (i)
1% of the prepaid amount, and (ii) the product of a yield maintenance
formula.
22. The "Administrative Cost Rate" indicated for each Mortgage Loan will be the
sum of the master servicing fee rate, the standby special servicing fee rate
and the trustee fee rate, and will be calculated based on the same interest
calculation methodology applicable to each Mortgage Loan.
23. Mortgage Loans with associated Yield Maintenance Premiums are categorized
according to unique Yield Maintenance Formulas. There are six unique yield
maintenance formulas represented by the mortgage loans, each labeled as "A",
"B", "C", "D", "E" and "F". Summaries for the six formulas are listed
beginning on page II-7.
II-6
<PAGE>
YIELD MAINTENANCE FORMULAS
The following are summaries of yield maintenance provisions, or formulas,
contained in the related promissory note for certain of the mortgage loans.
There are six unique yield maintenance formulas represented by the mortgage
loans, each labeled as "A", "B", "C", "D", "E" and "F". Each Mortgage Loan,
which provides for a yield maintenance formula, references the applicable
formula printed below in the column titled "YM Formula".
A The "Yield Maintenance Amount" shall mean the present value, as of the
Prepayment Date, of the remaining scheduled payments of principal and
interest from the Prepayment Date through the Maturity Date (including any
balloon payment) determined by discounting such payments at the Discount
Rate (hereinafter defined), less the amount of principal being prepaid. The
term "Discount Rate" shall mean the rate which, when compounded monthly, is
equivalent to the Treasury Rate (hereinafter defined), when compounded
semi-annually. The term "Treasury Rate" shall mean the yield calculated by
the linear interpolation of the yields, as reported in Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Government Securities/Treasury Constant Maturities for the week ending prior
to the Prepayment Date, of U.S. Treasury constant maturities with maturity
dates (one shorter and one longer) most nearly approximating the Maturity
Date. (In the event Release H.15 is no longer published, Lender shall select
a comparable publication to determine the Treasury Rate.)
B The "Yield Maintenance Amount" shall mean the aggregate (without
duplication) of:
the product obtained by multiplying (1) the entire unpaid principal balance
of this Note at the time of prepayment, times (2) the difference obtained by
subtracting from the interest rate on this Note the yield rate (the "Yield
Rate") on the 6.125% U.S. Treasury Security due August, 2007 (the "Specified
U.S. Treasury Security"), as the Yield Rate is reported in the Wall Street
Journal on the fifth Business Day (as hereinafter defined) preceding (x) the
date notice of prepayment is given to holder hereof where prepayment is
voluntary, or (y) the date holder hereof accelerates the Loan, times (3) the
present value factor calculated using the following formula:
1-(1+r) -n
----------
r
r = Yield Rate
n = the number of years, and any fraction thereof, remaining between the
prepayment date and the Maturity Date.
In the event that no Yield Rate is published for the Specified U.S. Treasury
Security, then the nearest equivalent U.S. Treasury Security shall be
selected at Lender's sole discretion. If the publication of such Yield Rates
in the Wall Street Journal is discontinued, Lender shall determine such
Yield Rates from another source selected by Lender. As used herein, the term
"Business Day" means any day other than a Saturday, a Sunday, or any other
day on which Lender hereof is not open for business.
II-7
<PAGE>
C The "Yield Maintenance Amount" shall mean the aggregate (without
duplication) of:
the product obtained by multiplying (1) the entire unpaid principal balance
of this Note at the time of prepayment, times (2) the difference obtained by
subtracting from the interest rate on this Note the yield rate (the "Yield
Rate") on the 5.5% U.S. Treasury Security due February, 2008 (the "Specified
U.S. Treasury Security"), as the Yield Rate is reported in the Wall Street
Journal on the fifth Business Day (as hereinafter defined) preceding (x) the
date notice of prepayment is given to holder hereof where prepayment is
voluntary, or (y) the date holder hereof accelerates the Loan, times (3) the
present value factor calculated using the following formula:
1-(1+r) -n
----------
r
r = Yield Rate
n = the number of years, and any fraction thereof, remaining between the
prepayment date and the Maturity Date.
In the event that no Yield Rate is published for the Specified U.S. Treasury
Security, then the nearest equivalent U.S. Treasury Security shall be
selected at Lender's sole discretion. If the publication of such Yield Rates
in the Wall Street Journal is discontinued, Lender shall determine such
Yield Rates from another source selected by Lender. As used herein, the term
"Business Day" means any day other than a Saturday, a Sunday, or any other
day on which Lender hereof is not open for business.
D The "Yield Maintenance Amount" shall mean the aggregate (without
duplication) of:
the product obtained by multiplying (1) the entire unpaid principal balance
of this Note at the time of prepayment, times (2) the difference obtained by
subtracting from the interest rate on this Note the yield rate (the "Yield
Rate") on the 5.5% U.S. Treasury Security due February 28, 2008 (the
"Specified U.S. Treasury Security"), as the Yield Rate is reported in the
Wall Street Journal on the fifth Business Day (as hereinafter defined)
preceding (x) the date notice of prepayment is given to holder hereof where
prepayment is voluntary, or (y) the date holder hereof accelerates the Loan,
times (3) the present value factor calculated using the following formula:
1-(1+r) -n
----------
r
r = Yield Rate
n = the number of years, and any fraction thereof, remaining between the
prepayment date and the Maturity Date.
In the event that no Yield Rate is published for the Specified U.S. Treasury
Security, then the nearest equivalent U.S. Treasury Security shall be
selected at Lender's sole discretion. If the publication of such Yield Rates
in the Wall Street Journal is discontinued, Lender shall determine such
Yield Rates from another source selected by Lender. As used herein, the term
"Business Day" means any day other than a Saturday, a Sunday, or any other
day on which Lender hereof is not open for business.
II-8
<PAGE>
E The "Yield Maintenance Amount" shall mean the aggregate (without
duplication) of:
the product obtained by multiplying (1) the entire unpaid principal balance
of this Note at the time of prepayment, times (2) the difference obtained by
subtracting from the interest rate on this Note the yield rate (the "Yield
Rate") on the 5.625% U.S. Treasury Security due May, 2008 (the "Specified
U.S. Treasury Security"), as the Yield Rate is reported in the Wall Street
Journal on the fifth Business Day (as hereinafter defined) preceding (x) the
date notice of prepayment is given to holder hereof where prepayment is
voluntary, or (y) the date holder hereof accelerates the Loan, times (3) the
present value factor calculated using the following formula:
1-(1+r) -n
----------
r
r = Yield Rate
n = the number of years, and any fraction thereof, remaining between the
prepayment date and the Maturity Date.
In the event that no Yield Rate is published for the Specified U.S. Treasury
Security, then the nearest equivalent U.S. Treasury Security shall be
selected at Lender's sole discretion. If the publication of such Yield Rates
in the Wall Street Journal is discontinued, Lender shall determine such
Yield Rates from another source selected by Lender. As used herein, the term
"Business Day" means any day other than a Saturday, a Sunday, or any other
day on which Lender hereof is not open for business.
F The "Yield Maintenance Amount" shall mean the aggregate without duplication
of:
the product obtained by subtracting (1) the entire outstanding principal
balance of this Note as of the date of the prepayment from (2) the present
value as of the date of the prepayment of the remaining scheduled payments
of principal and interest under this note including any final installment of
principal payable on the maturity date of this Note determined by
discounting such payments at the U.S. Treasury Constant Maturities rate, as
such rate is reported in the Federal Reserve Statistical Release H.15 (519)
Selected Interest Rates (or comparable publication as determined by the
holder of this Note) under the heading "U.S. government securities/Treasury
constant maturities" for the week ending prior to the date of the relevant
prepayment of the Note, with a maturity date most nearly approximating the
maturity date of this Note when compounded on a monthly basis.
II-9
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
APPENDIX III
SIGNIFICANT LOAN SUMMARIES
LOAN NO. 1 - 475 PARK AVENUE SOUTH
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
Cut-off Date Balance: $59,946,195 Balloon Balance: $54,640,288
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Office
---------------------------------------------------------------------------------------------------------------------
Origination Date: July 31, 2000 Location: New York, NY
---------------------------------------------------------------------------------------------------------------------
Maturity Date: August 1, 2010 Year Renovated: 1994, 1998, 1999
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 8.800% Appraised Value: $94,000,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $5,689,974 Current LTV: 63.8%
---------------------------------------------------------------------------------------------------------------------
DSCR: 1.36x Balloon LTV: 58.1%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $7,719,744 Occupancy: 95.7%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: July 26, 2000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN. The 475 Park Avenue South Loan (the "Park Avenue Loan") is
secured by a first leasehold mortgage on a 35-story, 408,517 square foot office
building located in the Borough of Manhattan, New York City (the "Park Avenue
Property"). The Canadian Imperial Bank of Commerce, New York Agency, originated
the Park Avenue Loan on July 31, 2000.
THE BORROWER. The borrower is 475 Building Company LLC, a New York
limited liability company (the "Park Avenue Borrower"). The managing member of
the Park Avenue Borrower is 475 Building Corp., a New York corporation. The Park
Avenue Borrower is a special purpose, bankruptcy remote entity. A
non-consolidation opinion was obtained at the closing of the Park Avenue Loan.
MANAGEMENT. The Park Avenue Property is managed by Cohen Brothers
Realty, an entity affiliated with the Park Avenue Borrower. Cohen Brothers
Realty owns and operates 10 office properties similar to the Park Avenue
Property and within the same sub-market.
THE PROPERTY. The Park Avenue Property is located on the southeast
corner of Park Avenue South and East 32nd Street in Madison/Union Square
district of the Midtown South office market in New York City. It consists of a
35-story office building with 408,517 square feet of net rentable area
(including 31,483 square feet of below grade space within storage areas) and a
150 space parking garage. The Park Avenue Property was built in 1969. As of July
26, 2000, it is 95.7% leased by 58 office and 2 retail tenants. No single tenant
occupies more than 8% of the Park Avenue Property's net rentable area.
SECURITY. The Park Avenue Loan is secured by an Amended, Restated and
Consolidated Leasehold Mortgage and Security Agreement, an Assignment of Leases
and Rents, UCC Financing Statements and certain additional security documents.
Such Leasehold Mortgage is a first lien on the Park Avenue Borrower's leasehold
interest in the Park Avenue Property. The related ground lease, with all
extensions, expires on April 30, 2072. The Park Avenue Loan is non-recourse,
subject to certain limited exceptions.
PAYMENT TERMS. The Park Avenue Loan has a fixed Mortgage Rate of 8.80%,
an original term of 120 months and an original amortization of 360 months. The
Park Avenue Loan requires monthly principal and interest payments of $474,164.51
until maturity, at which time all unpaid principal and accrued interest is due.
The Park Avenue Loan accrues interest computed on the basis of the actual number
of days elapsed each month in a 360-day year.
LOCKBOX. Upon any default or upon the Park Avenue Borrower incurring
any permitted mezzanine financing, the lender may require all gross income from
the Park Avenue Property to be deposited into a lockbox account controlled by
the lender.
Disbursements from the lockbox account are made as follows:
o to fund required reserves for the payment of real estate taxes, insurance
and other impounds;
III-1
<PAGE>
o to pay all interest then due;
o to pay all principal then due;
o to fund other reserves required under the related security documents;
o to pay all other amounts owed the lender with respect to the Park Avenue
Loan; and
o to the Park Avenue Borrower (provided no event of default is then in
effect).
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the earlier of (a) 2 years following the date of the assignment of the Park
Avenue Loan to a REMIC in connection with a securitization or (b) 5 years after
the closing of the Park Avenue Loan. Thereafter, until February 1, 2010, any
prepayment must be in the form of a defeasance. Any such defeasance will include
release of the Park Avenue Property and the pledge of substitute collateral in
the form of direct, non-callable United States Treasury obligations providing
for payments prior, but as close as possible, to all scheduled Monthly Payment
dates, and on the Maturity Date. Each such payment must be equal to or greater
than each scheduled Monthly Payment during the loan term, and equal to or
greater than the anticipated balloon balance due on the Maturity Date.
Additionally, a written confirmation must be obtained from each applicable
rating agency specifying that the defeasance would not result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class of
Certificates. From and after February 1, 2010, the Park Avenue Loan may be
prepaid without the payment of any prepayment consideration.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the Park Avenue Loan
immediately due and payable upon the transfer of the Park Avenue Property or any
ownership interest in the Park Avenue Borrower. The Park Avenue Borrower has a
one time right to transfer the Park Avenue Property to a qualifying single asset
transferee approved by the lender if:
o the proposed transferee reasonably satisfies the lender that it possesses
the ownership and managerial experience and financial resources customarily
required by the lender for properties such as the Park Avenue Property;
o the proposed transferee assumes the obligations of the Park Avenue
Borrower;
o no event of default then exists; and
o the lender receives a 1% assumption fee, all reasonably required documents,
a title policy endorsement and reimbursement for all of its costs and
expenses.
The Park Avenue Loan documents also allow transfers of membership
interests in the Park Avenue Borrower which:
o do not amount, in the aggregate, to a transfer of 49% or more of such
membership interests to a third party;
o are the result of a death or physical or mental disability, or
o are to an immediate family member or trust for such a family member.
ESCROW/RESERVES. There are tax and insurance reserves which require
monthly deposits in amounts sufficient to pay real estate taxes and insurance
premiums when due. There are also the following reserves:
o a replacement reserve funded by deposits of $6,786.00per month;
o a leasing reserve, with a cap of $2,000,000, funded by the following annual
deposits:
o $250,000 for the first 2 years;
o $450,000 for the first 6 years; and
o $400,000 for the first 2 years.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited. The Park Avenue Borrower is allowed to obtain
so-called "mezzanine financing", secured by non-managing membership
III-2
<PAGE>
interests in the Park Avenue Borrower, at any time when the Park Avenue Borrower
is under the control of Cohen Brothers Realty or Sherman Cohen. This mezzanine
financing must satisfy certain specified conditions, including, without
limitation, that:
o the aggregate loan-to-value ratio of the Park Avenue Loan and the mezzanine
financing must not exceed 85%;
o the aggregate debt service coverage ratio of the Park Avenue Loan and the
mezzanine financing must be not less than 1.15 to 1;
o the mezzanine lender must be approved by the lender; and
o the mezzanine lender and the lender must enter into an intercreditor
agreement that, among other things, restricts payments under the mezzanine
financing, the mezzanine lender's enforcement of its remedies and the
transfer of the mezzanine loan.
III-3
<PAGE>
LOAN NO. 2 - CAMINO REAL MARKETPLACE
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
Cut-off Date Balance: $49,000,000 Balloon Balance: $45,916,336
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Retail
---------------------------------------------------------------------------------------------------------------------
Origination Date: March 31, 2000 Location: Goleta, CA
---------------------------------------------------------------------------------------------------------------------
*Maturity Date: April 1, 2010 Year Built: 1999
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 8.270% Appraised Value: $65,700,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $4,108,582 Cut-off LTV: 74.6%
---------------------------------------------------------------------------------------------------------------------
**DSCR: 1.33x Balloon LTV: 68.4%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $5,449,725 Occupancy: 97.4%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: June 30, 2000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
*For purposes hereof, the Anticipated Repayment Date described below is assumed
to be the Maturity Date of the Camino Real Loan
**DSCR is based on interest-only payments scheduled for the first three years of
the loan term.
THE LOAN. The Camino Real Loan (the "Camino Real Loan") is secured by a
first leasehold mortgage on the Camino Real Marketplace, a 497,474 square foot
retail power center located at 6900-7095 Marketplace Drive in Goleta, Santa
Barbara County, California (the "Camino Real Property"). The Camino Real Loan
was originated on March 31, 2000, by or on behalf of Morgan Stanley Dean Witter
Mortgage Capital Inc.
THE BORROWER. The borrower is Camino Real Limited Liability Company, a
California limited company (the "Camino Real Borrower"). The managing member of
the Camino Real Borrower is WYNPAC I, Limited Liability Company, a California
limited liability company. The Camino Real Borrower is a special purpose,
bankruptcy remote entity. A non-consolidation opinion was obtained at the
closing of the Camino Real Loan.
MANAGEMENT. The Camino Real Property is managed by Wynmark Company, an
entity affiliated with the Camino Real Borrower.
THE PROPERTY. The Camino Real Property is located in Goleta, Santa
Barbara County, California. It contains 497,474 square feet of net rentable
area, including 427,467 square feet of anchor space and 70,007 square feet of
other retail space. It was constructed in 1999. As of June 30, 2000, the Camino
Real Property is 97.4% leased to 29 tenants. Costco is the largest tenant,
occupying 28% of the net rentable area under a lease currently expiring on
November 30, 2018. Home Depot is the 2nd largest tenant, occupying 26% of the
net rentable area under a lease currently expiring on January 31, 2015. No other
single tenant occupies more than 7% of the Camino Real Property's net rentable
area.
SECURITY. The Camino Real Loan is secured by a Leasehold Deed of Trust,
Security Agreement and Fixture Filing, an Assignment of Leases and Rents and
certain additional security documents. The Deed of Trust is a first lien on the
Camino Real Borrower's leasehold interest in the Camino Real Property. The
related ground lease, with all extensions, expires on November 22, 2069. The
Camino Real Loan is non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Camino Real Loan has a fixed Mortgage Rate of 8.270%
until April 1, 2010 (the "Anticipated Repayment Date"), at which time the
Mortgage Rate will adjust to the greater of (i) 13.270%% or (ii) the then
applicable yield rate on U.S. Treasury obligations maturing during April, 2020,
the month in which the actual maturity date of the Camino Real Loan occurs, plus
190 basis points, plus 5%. Although the Camino Real Loan has a stated term of
240 months, it is assumed for purposes hereof that it has a term of 120 months
with a maturity date of the Anticipated Repayment Date. The Camino Real Loan
requires interest-only payments through and including April 1, 2003. Thereafter,
the Camino Real Loan requires monthly payments of principal and interest equal
to $378,595.67 (calculated based on a 324 month amortization term) until the
Anticipated Repayment Date. If the Camino Real Loan is not prepaid on such date,
all of the cash flow from the Camino Real Property is to be applied as described
in "Lockbox" below. If not sooner satisfied, all unpaid principal and accrued
but unpaid interest
III-4
<PAGE>
is due on April 1, 2020. The Camino Real Loan accrues interest computed on the
basis of the actual number of days elapsed each month in a 360-day year.
LOCKBOX. All gross income from the Camino Real Property is to be
directly deposited into a lockbox account under the lender's control. Prior to
the Anticipated Repayment Date, disbursements from such account are made as
follows:
o to fund required reserves for the payment of real estate taxes and
insurance;
o to fund required reserves for the payment of required ground lease payments
for the next calendar month;
o to pay lender all default interest and late charges under the Camino Real
loan documents;
o to fund required reserves for the payment of the required principal or
interest payments owed under the Camino Real Loan for the next calendar
month;
o to fund required reserves for the payment of capital expenses for the next
calendar month approved by the lender;
o to fund reserves for the payment of tenant improvements and leasing
commissions for the next calendar month, as required under the Camino Real
loan documents; and
o provided no default under the Camino Real Loan has occurred and remains
uncured to the Camino Real Borrower for its use.
Subsequent to the Anticipated Repayment Date, disbursements from such
account are made as follows:
o to fund required reserves for the payment of real estate taxes and
insurance;
o to fund required reserves for the payment of required ground lease payments
for the next calendar month;
o to pay lender all default interest and late charges under the Camino Real
loan documents;
o to fund required reserves for the payment of the required scheduled
principal or interest payments owed under the Camino Real Loan for the next
calendar month;
o to fund required reserves for the payment of capital expenses for the next
calendar month approved by the lender;
o to fund reserves for the payment of tenant improvements and leasing
commissions for the next calendar month, as required under the Camino Real
loan documents;
o to pay operating expenses for the next calendar month as set forth in an
annual budget approved by the lender;
o to pay other extraordinary expenses approved by the lender;
o to pay all remaining outstanding principal;
o to pay all accrued and unpaid interest then due;
o to pay all other amounts owed the lender with respect to the Camino Real
Loan; and
o to the Camino Real Borrower for its use.
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the earlier of (a) March 31, 2003, or (b) 2 years following the date of the
assignment of the Camino Real Loan to a REMIC in connection with a
securitization. Thereafter, until January 1, 2010, any prepayment must be in the
form of defeasance. Any such defeasance will include the release of the Camino
Real Property and the pledge of substitute collateral in the form of direct,
non-callable United States Treasury obligations providing for payments prior,
but as close as possible, to all scheduled Monthly Payment dates, and on the
Maturity Date. Each such payment must be equal to or greater than each scheduled
Monthly Payment during the loan term, and greater than the anticipated balloon
balance due on the Maturity Date. Additionally, a written confirmation must be
obtained from each applicable rating agency specifying that the defeasance would
not result in a downgrade, qualification or withdrawal of the then current
ratings assigned
III-5
<PAGE>
to any class of certificates. Including and after January 1, 2010, the Camino
Real Loan may be prepaid without the payment of any prepayment consideration.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the Camino Real Loan
immediately due and payable upon the transfer of the Camino Real Property or any
ownership interest in the Camino Real Borrower, WYNPAC I, Limited Liability
Company or certain other specified affiliated entities. The Camino Real Borrower
has a one-time right to transfer the Camino Real Property to a qualifying
special purpose transferee approved by the lender if:
o the proposed transferee assumes the obligations of the Camino Real
Borrower;
o the lender receives a .5% assumption fee, all reasonably required
documents, certificates and legal opinions; and
o each applicable rating agency confirms in writing that the sale of the
Camino Real Property to such transferee would not result in a
qualification, downgrade or withdrawal of any rating in effect immediately
prior to such sale for any of the Certificates.
Additionally, transfers of ownership interests in the Camino Real
Borrower, WYNPAC I, Limited Liability Company or certain other specified
affiliated entities, are allowed if such transfers:
o do not amount, in the aggregate, to a transfer of 25% or more of such
ownership interests;
o are between WYNPAC I, Limited Liability Company and ACG - Camino Real
Investors, LLC;
o are by will or intestate succession upon the death of any individual; or
o are made by a holder of such ownership interests to a revocable living
trust or similar entity controlled by such holder for estate planning
purposes.
The Camino Real Loan documents also contemplate a waiver of such
transfer prohibition by the lender if:
o the proposed transferee is a special purpose, bankruptcy remote entity;
o the lender has approved the proposed transferee, in its reasonable
discretion;
o if, following such transfer, one person or entity, individually or through
affiliates, owns greater than a 10% interest in the Camino Real Borrower
the lender receives a nonconsolidation opinion acceptable to it and the
applicable rating agencies; and
o each applicable rating agency confirms in writing that the sale of the
Camino Real Property to such transferee would not result in a
qualification, downgrade or withdrawal of any rating in effect immediately
prior to such sale for any of the Certificates.
ESCROW/RESERVES. There are tax and insurance reserves which requires
monthly deposits in an amount sufficient to pay real estate taxes and insurance
premiums when due. There are also reserves for the payment of ground lease
expenses, capital expenditures and leasing costs, each of which are funded as
described in "Lockbox" above.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited.
III-6
<PAGE>
LOAN NO. 3 - COURTYARD BY MARRIOTT
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $45,000,000 Balloon Balance: $37,908,896
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Hotel
---------------------------------------------------------------------------------------------------------------------
Origination Date: September 13, 2000 Location: New York, NY
---------------------------------------------------------------------------------------------------------------------
*Maturity Date: October 1, 2010 Year Built: 1998
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 8.790% Appraised Value: $67,000,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $4,454,260 Current LTV: 67.2%
---------------------------------------------------------------------------------------------------------------------
DSCR: 1.49x Balloon LTV: 56.6%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $6,618,509 Occupancy: 92.1%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: June 30, 2000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
*For purposes hereof, the Anticipated Repayment Date described below is assumed
to be the Maturity Date of the Marriott Loan
THE LOAN. The Courtyard By Marriott Loan (the "Marriott Loan") is
secured by a first mortgage on a 244-room limited service hotel located on West
40th Street between 6th Avenue and Broadway in New York City (the "Marriott
Property"). CIBC originated the Marriott Loan on September 13, 2000.
THE BORROWER. The borrower is Granite Park, LLC, a Delaware limited
liability company (the "Marriott Borrower"). The managing member of the Marriott
Borrower is 40th Street Hotel, Inc., a Delaware corporation. The Marriott
Borrower is owned 99.0% by Granite Park Development Corp. and 1.0% by 40th
Street Hotel, Inc. Both Granite Park Development Corp. and 40th Street Hotel,
Inc. are fully controlled and managed by Harry Gross. The Marriott Borrower is a
special purpose, bankruptcy remote entity formed in 1997 to own and operate the
Marriott Property.
MANAGEMENT. The Marriott Property is managed by Crossroads Hospitality
Company, a subsidiary of Interstate Hotel Corporation. Interstate Hotel
Corporation manages approximately 150 full and limited service hotel properties
throughout the United States including 3 New York City properties, the Roosevelt
Hotel (1,040 rooms), Comfort Inn (131 rooms) and the Courtyard By Marriott (244
rooms).
THE PROPERTY. The Marriott Property is located on West 40th Street
between 6th Avenue and Broadway in New York City. It is a 244-room limited
service hotel that was constructed in 1998. It has 144 king rooms, 96 double
rooms and 4 suites, with an average room size of 225 square feet. Standard room
furnishings include a king or two double beds, a dresser, a vanity, a 25"
television and a high-speed data port. Hotel amenities include 1,848 square feet
of meeting space in the lower lobby, concierge service and a 75-seat
restaurant/lounge that serves breakfast, lunch and light snacks.
SECURITY. The Marriott Loan is secured by a Mortgage and Security
Agreement, an Assignment of Leases and Rents, UCC Financing Statements and
certain additional security documents. Such Mortgage is a first lien on the fee
simple interest in the Marriott Property. The Marriott Loan is non-recourse,
subject to certain limited exceptions.
PAYMENT TERMS. The Marriott Loan has a fixed Mortgage Rate of 8.790%
until October 1, 2010 (the "Anticipated Repayment Date"), at which time the
Mortgage Rate will adjust to the greater of (i) 10.790% or (ii) the then
applicable yield rate on U.S. Treasury obligations maturing during September,
2025, the month in which the actual maturity date of the Marriott Loan occurs,
plus 2%. Although the Marriott Loan has a stated term of 300 months, it is
assumed for purposes hereof that it has a term of 120 months with a maturity
date of the Anticipated Repayment Date. The Marriott Loan has an original
amortization term of 300 months. The Marriott Loan requires monthly payments of
principal and interest equal to $371,188.35 until the Anticipated Repayment
Date. If the Marriott Loan is not prepaid on such date, all of the cash flow
from the Marriott Property is to be applied as described in "Lockbox" below. If
not sooner satisfied, all unpaid principal and accrued but unpaid interest is
due on September 1, 2025. The Marriott Loan accrues interest computed on the
basis of the actual number of days elapsed each month in a 360-day year.
III-7
<PAGE>
LOCKBOX. Upon any default or upon the occurrence of the Anticipated
Repayment Date, the lender may require all gross income from the Marriott
Property to be deposited into a lockbox account controlled by the lender. Prior
to the Anticipated Repayment Date, disbursements from such account are made as
follows:
o to fund required reserves for the payment of real estate taxes,
insurance and other impounds;
o to pay all interest then due;
o to pay all principal then due;
o to fund other reserves required under the related security documents;
o to pay all other amounts owed the lender with respect to the Marriott
Loan; and
o to the Marriott Borrower.
Subsequent to the Anticipated Repayment Date, disbursements from such
account are made as follows:
o to fund required reserves for the payment of real estate taxes,
insurance and other impounds;
o to pay all interest (at the initial Mortgage Rate) then due;
o to pay all principal then due;
o to fund other reserves required under the related security documents;
o to pay budgeted operating expenses (less management fees payable to
affiliates of the Marriott Borrower) approved by the lender;
o to pay budgeted capital expenses approved by the lender;
o to pay other extraordinary expenses approved by the lender;
o to pay all remaining outstanding principal;
o to pay all accrued and unpaid interest then due;
o to pay all other amounts owed the lender with respect to the Marriott
Loan; and
o to the Marriott Borrower for its use.
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the earlier of (a) 2 years following the date of the assignment of the
Marriott Loan to a REMIC in connection with a securitization or (b) 5 years
after the closing of the Marriott Loan. Thereafter, until April 1, 2010, any
prepayment must be in the form of a defeasance. Any such defeasance will include
release of the Marriott Property and the pledge of substitute collateral in the
form of direct, non-callable United States Treasury obligations providing for
payments prior, but as close as possible, to all scheduled Monthly Payment
dates, and on the Maturity Date. Each such payment must be equal to or greater
than each scheduled Monthly Payment during the loan term, and equal to or
greater than the anticipated balloon balance due on the Maturity Date.
Additionally, a written confirmation must be obtained from each applicable
rating agency specifying that the defeasance would not result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class of
Certificates. From and after April 1, 2010, the Marriott Loan may be prepaid
without the payment of any prepayment consideration.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the Marriott Loan immediately
due and payable upon the transfer of the Marriott Property or any ownership
interest in the Marriott Borrower. The Marriott Borrower has a one time right to
transfer the Marriott Property to a qualifying single asset transferee approved
by the lender if:
o the proposed transferee reasonably satisfies the lender that it
possesses the ownership and managerial experience and financial
resources customarily required by the lender for properties such as the
Marriott Property,
o the proposed transferee assumes the obligations of the Marriott
Borrower,
III-8
<PAGE>
o no event of default then exists, and
o the lender receives a 1% assumption fee, all reasonably required
documents, a title policy endorsement and reimbursement for all of its
costs and expenses.
The Marriott Loan documents also allow transfers of membership
interests in the Marriott Borrower which:
o do not amount, in the aggregate, to a transfer of 49% or more of such
membership interests to a third party;
o are the result of a death or physical or mental disability, or
o are to an immediate family member or trust for such a family member.
ESCROW/RESERVES. There are tax and insurance reserves which require
monthly deposits in amounts sufficient to pay real estate taxes and insurance
premiums when due. There is also a furniture, fixtures and equipment reserve
funded by a $1,000 deposit at closing. The franchise agreement for the Marriott
Property also requires the Marriott Borrower to deposit furniture, fixtures and
equipment reserves with the Crossroads Hospitality Company, the manager of the
Marriott Property. Each month, Crossroads Hospitality Company will be required
to:
o pay to the lender, for deposit into the furniture, fixtures and
equipment reserve held by the lender, the amount by which the required
franchise agreement reserves is less than 1/12th of 4% of the prior
year's revenue for the Marriott Property; and
o provide (i) a certificate stating that all actual monthly furniture,
fixtures and equipment expenditures comply with the Marriott franchise
agreement and (ii) acceptable evidence of the actual furniture,
fixtures and equipment expenditures incurred.
Upon an event of default, Crossroads Hospitality Company will deny the Marriott
Borrower access to the required franchise agreement reserves and all future
furniture, fixtures and equipment deposits will be collected directly by the
lender for deposit into the furniture, fixtures and equipment reserve held by
it.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited.
III-9
<PAGE>
LOAN NO. 4 - APPLETREE BUSINESS PARK
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $37,227,201 Balloon Balance: $33,651,513
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Office
---------------------------------------------------------------------------------------------------------------------
Origination Date: August 30, 2000 Location: Cheektowaga, NY
---------------------------------------------------------------------------------------------------------------------
*Maturity Date: September 1, 2010 Year Renovated: 1994-1997, 2000
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 8.450% Appraised Value: $51,500,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $3,421,216 Current LTV: 72.3%
---------------------------------------------------------------------------------------------------------------------
DSCR: 1.31x Balloon LTV: 65.3%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $4,469,508 Occupancy: 96.2%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: August 17, 2000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
*For purposes hereof, the Anticipated Repayment Date described below is assumed
to be the Maturity Date of the Appletree Loan
THE LOAN. The Appletree Business Park Loan (the "Appletree Loan") is
secured by a first mortgage on a 434,593 square foot office complex located in
Cheektowaga, New York (the "Appletree Property"). CIBC originated the Appletree
Loan on August 30, 2000.
THE BORROWER. The borrower is Appletree Realty Holdings, LLC, a
Delaware limited liability company (the "Appletree Borrower"). The managing
member of the Appletree Borrower is ABP Associates, L.L.C., a New York limited
liability company controlled and managed by Jay Kaiser. The Appletree Borrower
is a special purpose, bankruptcy remote entity.
MANAGEMENT. The Appletree Property is managed by AmCap, Inc., an entity
affiliated with the Appletree Borrower. AmCap, Inc. owns and operates 11
anchored retail centers, two office properties and one daycare facility.
THE PROPERTY. The Appletree Property is located in Cheektowaga, New
York. It consists of 2 office buildings and 2 retail pad sites with an aggregate
434,593 square feet of net rentable area. The larger of the office buildings
contains 391,608 square feet of net rentable area in 1 1/2 stories. It was
originally constructed in the early 1970s as an enclosed shopping mall and
converted into its current use between 1994 and 1997. The one and two-story
sections of the building are separated (except for a common area hallway) by a
six-screen, 21,547 square foot movie theater oocupying approximately 5% of the
leasable space. The other office building is a one-story office building
containing 32,475 square feet of net rentable area. It was converted from a
supermarket during 1999 and 2000. As of August 17, 2000, the Appletree Property
is 96.2% leased by 29 tenants. The Internal Revenue Service is the largest
tenant, occupying 28% of the net rentable area under a lease currently expiring
on December 26, 2005. No other single tenant occupies more than 13% of the
Appletree Property's net rentable area.
SECURITY. The Appletree Loan is secured by an Amended, Restated and
Consolidated Mortgage and Security Agreement, an Assignment of Leases and Rents,
UCC Financing Statements and certain additional security documents. Such
Mortgage is a first lien on the fee simple interest in the Appletree Property.
The Appletree Loan is non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Appletree Loan has a fixed Mortgage Rate of 8.450%
until September 1, 2010 (the "Anticipated Repayment Date"), at which time the
Mortgage Rate will adjust to the greater of (i) 10.450% or (ii) the then
applicable yield rate on U.S. Treasury obligations maturing during September,
2030, the month in which the actual maturity date of the Appletree Loan occurs,
plus 2%. Although the Appletree Loan has a stated term of 360 months, it is
assumed for purposes hereof that it has a term of 120 months with a maturity
date of the Anticipated Repayment Date. The Appletree Loan has an original
amortization term of 360 months. The Appletree Loan requires monthly payments of
principal and interest equal to $285,101.35 until the Anticipated Repayment
Date. If the Appletree Loan is not prepaid on the Anticipated Repayment Date,
all of the cash flow from the Appletree Property is to be applied as described
in "Lockbox" below. If not sooner satisfied, all unpaid principal and accrued
III-10
<PAGE>
but unpaid interest is due on September 1, 2030. The Appletree Loan accrues
interest computed on the basis of the actual number of days elapsed each month
in a 360-day year.
LOCKBOX. Upon the occurrence of certain specified defaults, if the
balance of the General Reserve (hereinafter defined) falls below $900,000 or
upon the occurrence of the Anticipated Repayment Date, the lender may require
all gross income from the Appletree Property to be deposited into a lockbox
account controlled by the lender. Prior to the Anticipated Repayment Date,
disbursements from such account are made as follows:
o to fund required reserves for the payment of real estate taxes;
o to pay all interest then due;
o to pay all principal then due;
o to pay all other amounts owed the lender with respect to the Appletree
Loan;
o to fund other reserves required under the related security documents;
o to reimburse the Appletree Borrower for any of the above amounts
directly paid by it;
o to reimburse the General Reserve for any of the above amounts paid by
disbursements from the General Reserve;
o to reimburse the Appletree Borrower for certain operating expenses with
respect to the Appletree Property;
o to replenish the General Reserve to $1,000,000, if necessary, provided
that only up to 75% of the net cash flow can be used for such
replenishment; and
o to the Appletree Borrower.
Subsequent to the Anticipated Repayment Date, disbursements from such
account are made as follows:
o to fund required reserves for the payment of real estate taxes;
o to pay all interest (at the initial Mortgage Rate) then due;
o to pay all principal then due;
o to pay all other amounts owed the lender with respect to the Appletree
Loan;
o to fund other reserves required under the related security documents;
o to reimburse the Appletree Borrower for any of the above amounts
directly paid by it;
o to pay budgeted operating expenses approved by the lender;
o to pay budgeted capital expenses approved by the lender;
o to pay other extraordinary expenses approved by the lender;
o to pay all remaining outstanding principal;
o to pay all accrued and unpaid interest then due; and
o to the Appletree Borrower for its use.
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the earlier of (a) 2 years following the date of the assignment of the
Appletree Loan to a REMIC in connection with a securitization or (b) 4 years
after the closing of the Appletree Loan. Thereafter, until September 1, 2009,
any prepayment must be in the form of a defeasance. Any such defeasance will
include the release of the Appletree Property and the pledge of substitute
collateral in the form of direct, non-callable United States Treasury
obligations providing for payments prior, but as close as possible, to all
scheduled Monthly Payment dates, and on the Maturity Date. Each such payment
must be equal to or greater than each scheduled Monthly Payment during the loan
term, and equal to or greater than the anticipated balloon balance due on the
Maturity Date. Additionally, a written confirmation must be obtained from each
applicable rating agency specifying that the defeasance would not result in a
downgrade,
III-11
<PAGE>
qualification or withdrawal of the then current ratings assigned to any Class of
Certificates. From and after September 1, 2009, the Appletree Loan may be
prepaid without the payment of any prepayment consideration.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the Appletree Loan immediately
due and payable upon the transfer of the Appletree Property or any ownership
interest in the Appletree Borrower. The Appletree Borrower has a one time right
to transfer the Appletree Property to a qualifying single asset transferee
approved by the lender if:
o the proposed transferee reasonably satisfies the lender that it
possesses the ownership and managerial experience and financial
resources customarily required by the lender for properties such as the
Appletree Property;
o the proposed transferee assumes the obligations of the Appletree
Borrower;
o no event of default then exists;
o each applicable rating agency confirms in writing that the sale of the
Appletree Property to such transferee would not result in a
qualification, downgrade or withdrawal of any rating in effect
immediately prior to such sale for any of the Certificates; and
o the lender receives a $100,000 assumption fee, all reasonably required
documents, a title policy endorsement and reimbursement for all of its
costs and expenses.
The lender's consent is not required and no assumption fee is payable
in connection with any transfer of all or substantially all of the Appletree
Property to a transferee with net assets of at least $100,000,000 as of the date
of such transfer, if such transferee is:
o REIT whose stock is traded on a major securities exchange;
o an ERISA-regulated pension fund; or
o an insurance company licensed to do business in one or more states.
In connection with any transfer of all or substantially all of the Appletree
Property to a REIT whose stock is not traded on a major securities exchange, no
assumption fee is payable but the lender's consent is required. The lender may
not unreasonably withhold or delay such consent if:
o the REIT meets certain specified tests with regard to ownership of
assets or a demonstrated history of being a borrower under securitized
mortgage loans; or
o each applicable rating agency confirms in writing that such transfer to
such REIT would not result in a qualification, downgrade or withdrawal
of any rating in effect immediately prior to such sale for any of the
Certificates.
The lender's consent is not required and no assumption fee is payable
in connection with any transfer of all or substantially all of the Appletree
Property to an entity under the control of AmCap, Inc. or Jay Kaiser.
The Appletree Loan documents also allow transfers of membership
interests in the Appletree Borrower which:
o do not amount, in the aggregate, to a transfer of 49% or more of such
membership interests to a third party;
o are the result of a death or physical or mental disability,
o are to an immediate family member or trust for such a family member;
o among holders of membership interests in the Appletree Borrower as of
the closing of the Appletree Loan, entities under their control and
trusts for the benefit of such persons;
o to, between and among family members of the holders of membership
interests in the Appletree Borrower as of the closing of the Appletree
Loan, entities under their control and trusts for the benefit of such
persons, provided that no change in control of the Appletree Borrower
occurs;
III-12
<PAGE>
o to employees of AmCap, Inc., provided no change in control of the
Appletree Borrower occurs; or
o up to 49% of the membership interests in the Appletree Borrower (but
not membership interests in any manager or managing member) may be
transferred to one or more tax-exempt charitable institutions, provided
that no change in control of the Appletree Borrower occurs.
ESCROW/RESERVES. There is a tax reserve which requires monthly deposits
in an amount sufficient to pay real estate taxes when due; provided, however,
that no monthly deposits for tax reserves are required for the portions of the
Appletree Property occupied by the General Services Administration and Key Bank.
No insurance reserve is required as long as the Appletree Borrower provides
evidence that the annual insurance premium has been prepaid in advance. There
are also the following reserves:
o a replacement reserve funded by the deposits of $5,432.42 per month;
o a leasing reserve funded by monthly deposits sufficient:
o to ensure that the balance of this reserve will be $750,000 on December
1, 2005 (provided that in the event the IRS exercises its remaining
five-year lease extension option, all or a part of this reserve nay be
returned to the Appletree Borrower); and
o to the extent any of this reserve is thereafter utilized for leasing
expenses or returned to the Appletree Borrower, to ensure that the
balance of this reserve will be $750,000 on the Anticipated Repayment
Date; and
o a general operating reserve (the "General Reserve") funded by a
$1,000,000 deposit at closing, and as necessary to replenish this
general reserve to $1,000,000, by additional deposits of a portion of
the net cash flow from the Appletree Property.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited. The Appletree Borrower is allowed to obtain
so-called "mezzanine financing", secured by non-managing membership interests in
the Appletree Borrower, at any time when the Appletree Borrower is under the
control of AmCap, Inc. or Jay Kaiser. This mezzanine financing must satisfy
certain specified conditions, including, without limitation, that:
o the aggregate loan-to-value ratio of the Appletree Loan and the
mezzanine financing must not exceed 87%;
o the aggregate debt service coverage ratio of the Appletree Loan and the
mezzanine financing must be not less than 1.05 to 1;
o the mezzanine lender must be approved by the lender; and
o the mezzanine lender and the lender must enter into an intercreditor
agreement that, among other things, restricts payments under the
mezzanine financing, the mezzanine lender's enforcement of its remedies
and the transfer of the mezzanine loan.
III-13
<PAGE>
LOAN NO. 5 - BOZZUTO'S WAREHOUSE AND DISTRIBUTION FACILITY
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $32,843,136 Balloon Balance: $31,355,399
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Industrial
---------------------------------------------------------------------------------------------------------------------
Origination Date: December 30, 1999 Location: Cheshire, CT
---------------------------------------------------------------------------------------------------------------------
*Maturity Date: January 1, 2007 Year Renovated: 1997
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 9.170% Appraised Value: $49,000,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $3,231,922 Cut-off LTV: 67.0%
---------------------------------------------------------------------------------------------------------------------
DSCR: 1.39x Balloon LTV: 64.0%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $4,496,612 Occupancy: 100%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: December 30, 1999
---------------------------------------------------------------------------------------------------------------------
</TABLE>
*For purposes hereof, the Anticipated Repayment Date described below is assumed
to be the Maturity Date of the Bozzuto Loan
THE LOAN. The Bozzuto Warehouse and Distribution Facility Loan (the
"Bozzuto Loan") is secured by a mortgage on a 116 acre parcel of land located at
275 Schoolhouse Road and 400 Industrial Avenue in Cheshire, Connecticut, which
land has been improved with a 2-building, 986,565 square foot industrial food
warehouse and distribution facility and an adjacent repair garage (the "Bozzuto
Property"). The Bozzuto Loan was originated on December 30, 1999, by or on
behalf of Morgan Stanley Dean Witter Mortgage Capital Inc.
THE BORROWER. The borrower is Industrial Avenue LLC, a Connecticut
limited limited liability company (the "Bozzuto Borrower"). The managing member
of the Bozzuto Borrower is Schoolhouse Industrial Development Corporation, a
Connecticut corporation. Both of the Bozzuto Borrower and Schoolhouse Industrial
Development Corporation are special purpose, bankruptcy remote entities. A
non-consolidation opinion was obtained at the closing of the Bozzuto Loan.
MANAGEMENT. The Bozzuto Property is leased and managed by Bozzuto's,
Inc., a Connecticut corporation, and an affiliate of the Bozzuto Borrower.
Bozzuto's, Inc. is a full service food wholesale distributor of groceries and
perishable items.
THE PROPERTY. The Bozzuto Property is located in Cheshire, Connecticut.
It consists of (a) 1 warehouse/distribution building containing 252,375 square
feet of dry storage and warehouse and distribution space; (b) 1 warehouse and
distribution building, containing 727,890 square feet which is split between
warehouse and distribution space, refrigerated freezer and cooler storage space
and office space; and (c) a 6,300 square foot truck repair garage. As of
December 30, 1999, the Bozzuto Property is 100% leased to Bozzuto's, Inc., an
affiliate of the Bozzuto Borrower, pursuant to a lease agreement with a current
expiration date of January 1, 2030.
SECURITY. The Bozzuto Loan is secured by an Open End Mortgage and
Security Agreement, an Assignment of Leases and Rents, UCC Financing Statements
and certain additional security documents. The Mortgage is a first lien on the
fee interest in the Bozzuto Property. The Bozzuto Loan is non-recourse, subject
to certain limited exceptions. A portion of the Bozzuto Property is an
appurtenant parking easement over real property owned by an affiliate of the
Bozzuto Borrower, Cheshire Industrial Development, LLC ("Cheshire"). This
easement right is subject to a mortgage granted by Chesire securing a
non-interest bearing note with a $167,500 principal balance remaining as of the
Cut-off Date. The Bozzuto Borrower has delivered a letter of credit to the
lender to ensure that funds are available to satisfy this note when due in
April, 2001.
PAYMENT TERMS. The Bozzuto Loan has a fixed Mortgage Rate of 9.170%
until January 1, 2007 (the "Anticipated Repayment Date"), at which time the
Mortgage Rate will adjust to the greater of (i) 14.170%% or (ii) the then
applicable yield rate on U.S. Treasury obligations maturing during January 2030,
the month in which the actual maturity date of the Bozzuto Loan occurs, plus 5%;
provided, that as long as the Bozzuto Loan is an asset of a REMIC trust
established in connection with the securitization of the Bozzuto Loan following
the Anticipated Repayment Date, the Mortgage Rate will adjust be equal to
11.170%. Although the Bozzuto Loan has a stated term of 360 months, it is
assumed for purposes hereof that it has a term of 84 months with a maturity date
of the
III-14
<PAGE>
Anticipated Repayment Date. The Bozzuto Loan has an original amortization term
of 360 months. The Bozzuto Loan requires monthly payments of principal and
interest equal to $269,326.85 until the Anticipated Repayment Date. If the
Bozzuto Loan is not prepaid on such date, all of the cash flow from the Bozzuto
Property is to be applied as described in "Lockbox" below. If not sooner
satisfied, all unpaid principal and accrued but unpaid interest is due on
January 1, 2030. The Bozzuto Loan accrues interest computed on the basis of the
actual number of days elapsed each month in a 360-day year.
LOCKBOX. All gross income from the Bozzuto Property is to be directly
deposited into a lockbox account under the lender's control. Prior to the
Anticipated Repayment Date, disbursements from such account are made as follows:
o to fund required reserves for the payment of real estate taxes and
insurance;
o to pay lender all default interest and late charges under the Bozzuto
loan documents;
o to fund required reserves for the payment of the required principal or
interest payments owed under the Bozzuto Loan for the next calendar
month;
o to fund required reserves for the payment of capital expenses for the
next calendar month approved by the lender;
o to fund reserves for the payment of tenant improvements and leasing
commissions for the next calendar month, as required under the Bozzuto
loan documents; and
o provided no default under the Bozzuto Loan has occurred and remains
uncured to the Bozzuto Borrower for its use.
Subsequent to the Anticipated Repayment Date, disbursements from such
account are made as follows:
o to fund required reserves for the payment of real estate taxes and
insurance;
o to pay lender all default interest and late charges under the Bozzuto
loan documents;
o to fund required reserves for the payment of the required scheduled
principal or interest payments owed under the Bozzuto Loan for the next
calendar month;
o to fund required reserves for the payment of capital expenses for the
next calendar month approved by the lender;
o to fund reserves for the payment of tenant improvements and leasing
commissions for the next calendar month, as required under the Bozzuto
loan documents;
o to pay operating expenses for the next calendar month as set forth in
an annual budget approved by the lender;
o to pay other extraordinary expenses approved by the lender;
o to pay all remaining outstanding principal;
o to pay all accrued and unpaid interest then due;
o to pay all other amounts owed the lender with respect to the Bozzuto
Loan; and
o to the Bozzuto Borrower for its use.
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the earlier of (a) December 30, 2003, or (b) 2 years following the date of
the assignment of the Bozzuto Loan to a REMIC in connection with a
securitization. Thereafter, until October 1, 2006, any prepayment must be in the
form of defeasance. Any such defeasance will include the release of the Bozzuto
Property and the pledge of substitute collateral in the form of direct,
non-callable United States Treasury obligations providing for payments prior,
but as close as possible, to all scheduled Monthly Payment dates, and on the
Maturity Date. Each such payment must be equal to or greater than each scheduled
Monthly Payment during the loan term, and greater than the anticipated balloon
balance due on the Maturity Date. Additionally, a written confirmation must be
obtained from each applicable rating agency specifying that the defeasance would
not result in a downgrade, qualification or withdrawal of the then current
ratings assigned
III-15
<PAGE>
to any class of certificates. Including and after October 1, 2006, the Bozzuto
Loan may be prepaid without the payment of any prepayment consideration.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the Bozzuto Loan immediately
due and payable upon the transfer of the Bozzuto Property or any ownership
interest in the Bozzuto Borrower, Schoolhouse Industrial Development Corporation
or certain other specified affiliated entities. The Bozzuto Borrower has a
one-time right to transfer the Bozzuto Property to a qualifying special purpose
transferee approved by the lender if:
o the proposed transferee assumes the obligations of the Bozzuto
Borrower;
o the lender receives a 1% assumption fee, a $5,000 administrative fee,
all reasonably required documents, certificates and legal opinions; and
o each applicable rating agency confirms in writing that the sale of the
Bozzuto Property to such transferee would not result in a
qualification, downgrade or withdrawal of any rating in effect
immediately prior to such sale for any of the Certificates.
The Bozzuto Loan documents also contemplate a waiver of such transfer
prohibition by the lender if:
o the proposed transferee is a special purpose, bankruptcy remote entity;
o the lender has approved the proposed transferee, in its reasonable
discretion;
o if, following such transfer, one person or entity, individually or
through affiliates, owns greater than a 10% interest in the Bozzuto
Borrower the lender receives a nonconsolidation opinion acceptable to
it and the applicable rating agencies;
o each applicable rating agency confirms in writing that the sale of the
Bozzuto Property to such transferee would not result in a
qualification, downgrade or withdrawal of any rating in effect
immediately prior to such sale for any of the Certificates; and
o after such transfer, Michael A. Bozzuto and Jayne A. Bozzuto own,
directly or indirectly, not less than 51% of the membership interests
in the Bozzuto Borrower.
ESCROW/RESERVES. At closing, the Bozzuto Borrower delivered to the
lender a $1,010,000 letter of credit in lieu of on-going tax and insurance
reserves. No tax and insurance reserves are required as long as no default
occurs under the Bozzuto Loan and the Bozzuto Borrower annually provides the
lender with a replacement letter of credit in the then required amount. The
Bozzuto Borrower also delivered to the lender 2 additional letters of credit, in
the amounts of $1,825,000 and $335,000, as additional security. The first of
these relates to certain tax savings available to the Bozzuto Borrower from the
town of Cheshire. The second of these relates to the mortgage described in
"Security" above encumbering the appurtenant parking parcel that is included in
the Bozzuto Property. These letters of credit will continue to be held as
additional collateral so long as no default occurs under the Bozzuto Loan and
the Bozzuto Borrower annually provides the lender with replacement letters of
credit in the then required amount. There are also reserves for the payment of
capital expenditures ($8,706 monthly) and leasing costs ($16,443 monthly), each
of which are funded as described in "Lockbox" above.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited. The Bozzuto Borrower is allowed to maintain an
existing unsecured debt of $1,528,589 in favor of Bozzuto's, Inc., the sole
tenant of the Bozzuto Property. The documents evidencing this debt have been
expressly subordinated to the Bozzuto Loan.
III-16
<PAGE>
LOAN NO. 6 - 500 NORTH CAPITOL
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $29,539,428 Balloon Balance: $26,783,482
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Office
---------------------------------------------------------------------------------------------------------------------
Origination Date: March 29, 2000 Location: Washington, DC
---------------------------------------------------------------------------------------------------------------------
Maturity Date: April 1, 2010 Year Built: 1965
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 8.410% Appraised Value: $39,600,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $2,711,302 Cut-off LTV: 74.6%
---------------------------------------------------------------------------------------------------------------------
DSCR: 1.25x Balloon LTV: 67.6%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $3,389,181 Occupancy: 100.00%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: March 9, 2000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN. The 500 North Capitol Loan (the "500 North Capitol Loan") is
secured by a first mortgage on an eight story, 175,698 net rentable square foot
office building (the "500 North Capitol Property") located at 500 North Capitol
Street, Washington, DC. Midland Loan Services, Inc. originated the 500 North
Capitol Loan on March 29, 2000.
THE BORROWER. The borrower is 500 North Capitol L.L.C., a District of
Columbia limited liability company (the "500 North Capitol Borrower").. The
managing members of the 500 North Capitol Borrower are Clark North Capitol
Limited Partnership and JBG North Capitol Limited Partnership, each of which is
a Maryland limited partnership. The 500 North Capitol Borrower is a special
purpose, bankruptcy remote entity. A non-consolidation opinion was obtained at
the closing of the 500 North Capitol Loan.
The majority owner of Clark North Capitol Limited Partnership is CEI
Realty. The majority owner of CEI Realty is Clark Enterprises Incorporated, a
Bethesda, Maryland based holding company formed in 1972. CEI is ranked at #107
in the Forbes Private 500 and its 1998 sales were $1.5 billion. The general
partner in JBG North Capitol Limited Partnership is JBG Real Estate Associates
III, Inc., an affiliate of JBG Companies, a Washington DC based real estate
company.
MANAGEMENT. The 500 North Capitol Property is managed by the TrizecHahn
Corporation, one of the largest real estate companies in North America.
TrizecHahn owns and/or manages a 68 million square foot portfolio of office
properties in the U.S. and Canada. The property manager responsible for the 500
North Capitol Property also manages four other assets in the area, totaling
772,000 square feet.
THE PROPERTY. The 500 North Capitol Property is located on the corner
of North Capitol St. and E Street in the Capitol Hill District of Washington,
DC. The 500 North Capitol Property was constructed in 1965. It consists of an
8-story, 175,838 square foot office building with 2 parking garage levels. As of
March 9, 2000, the 500 North Capitol Property is 100% leased to the Internal
Revenue Service pursuant to a lease currently expiring on December 31, 2009.
SECURITY. The 500 North Capitol Loan is secured by a Deed of Trust and
Security Agreement, an Assignment of Leases and Rents, UCC Financing Statements
and certain additional security documents. Such Deed of Trust is a first lien on
the fee interest in the 500 North Capitol Property. The 500 North Capitol Loan
is non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The 500 North Capitol Loan has a fixed Mortgage Rate of
8.41%, an original term of 120 months and an original amortization of 360
months. The 500 North Capitol Loan requires monthly principal and interest
payments of $225,941.85 until maturity, at which time all unpaid principal and
accrued interest is due. The 500 North Capitol Loan accrues interest computed on
the basis of the actual number of days elapsed each month in a 360-day year.
III-17
<PAGE>
LOCKBOX. The 500 North Capitol Borrower deposited $2,816,871.30 (the
"Initial Lockbox Deposit") into a lockbox account under the lender's control.
Disbursements of all or part of the Initial Lockbox Deposit from such account
are to be made as follows:
o to pay all costs and expenses associated with the administration of
such account;
o to fund required reserves for the payment of real estate taxes and
insurance;
o to pay lender all advances made by it on behalf of the 500 North
Capitol Borrower, or costs and expenses incurred by lender in
connection with any enforcement of its rights under the 500 North
Capitol loan documents; and
o to pay all monthly debt service and other payments then due under the
500 North Capitol loan documents.
Any amount of the Initial Lockbox Deposit remaining in the lockbox account
following the Lockbox Effective Date (hereinafter defined) is to be returned to
the 500 North Capitol Borrower.
Upon the date (the "Lockbox Effective Date") of the lender's receipt of
a rent payment from each tenant of the 500 North Capitol Property directly into
the lockbox account (which must occur no later than the rent payments due
January 1, 2001), all gross income from the 500 North Capitol Property,
including all tenant rent payments then due, are to be directly deposited into
the lockbox account. Disbursements from such account are made as follows:
o to pay all costs and expenses associated with the administration of
such account;
o to fund required reserves for the payment of real estate taxes and
insurance;
o to pay lender all advances made by it on behalf of the 500 North
Capitol Borrower, or costs and expenses incurred by lender in
connection with any enforcement of its rights under the 500 North
Capitol loan documents;
o to pay all monthly debt service and other payments then due under the
500 North Capitol loan documents; and
o the remaining balance to the 500 North Capitol Borrower for its use
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the later of (a) 3 years following the date of the first regularly scheduled
monthly payment or (b) 2 years following the date of the assignment of the 500
North Capitol Loan to a REMIC in connection with a securitization. Thereafter,
until January 1, 2010, any prepayment must be in the form of defeasance. Any
such defeasance will include the release of the 500 North Capitol Property and
the pledge of substitute collateral in the form of direct, non-callable United
States Treasury obligations providing for payments prior, but as close as
possible, to all scheduled Monthly Payment dates, and on the Maturity Date. Each
such payment must be equal to or greater than each scheduled Monthly Payment
during the loan term, and greater than the anticipated balloon balance due on
the Maturity Date. Additionally, a written confirmation must be obtained from
each applicable rating agency specifying that the defeasance would not result in
a downgrade, qualification or withdrawal of the then current ratings assigned to
any class of certificates. Including and after January 1, 2010, the 500 North
Capitol Loan may be prepaid without the payment of any prepayment consideration.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the 500 North Capitol Loan
immediately due and payable upon the transfer of the 500 North Capitol Property
or any ownership interest in the 500 North Capitol Borrower. The 500 North
Capitol Loan documents contemplate a potential waiver of such prohibition by the
lender if:
o the lender has expressly approved the proposed transfer in writing;
o no event of default then exists;
o the proposed transferee and the 500 North Capitol Property reasonably
satisfy the lender's underwriting standards;
o the proposed transferee must be a special purpose, bankruptcy remote
entity;
o the lender receives a nonconsolidation opinion acceptable to it and the
applicable rating agencies; and
III-18
<PAGE>
o the lender receives a 1% assumption fee and reimbursement for all costs
and expenses.
Additionally, any transfer of 49% or more of ownership interests in the
500 North Capitol Borrower or its managers, requires a nonconsolidation opinion
acceptable to the lender and the applicable rating agencies. The 500 North
Capitol Loan documents allow transfers of membership interests in the 500 North
Capitol Borrower which:
o do not amount, in the aggregate, to a transfer of 49% or more of such
membership interests to third parties; or
o are the result of a death or physical or mental disability.
ESCROW/RESERVES. There are tax and insurance reserves which require
monthly deposits in amounts sufficient to pay real estate taxes and insurance
premiums when due. There are also the following reserves:
o a capital improvement reserve funded by deposits of $2,828.50 per
month;
o a tenant improvement and leasing commission reserve funded as follows:
o a deposit of $583,000.00 at closing to fund the costs of tenant
improvements and leasing commissions incurred in connection with the
leasing of certain specified space at the 500 North Capitol Property;
o a deposit of $616,744.00 at closing to ensure the satisfactory leasing
of certain specified space at the 500 North Capitol Property;
o a deposit of $400,000.00 on or before December 31, 2007;
o a deposit of $800,000.00 on or before December 31, 2008; and
o a monthly deposit of $66,000.00 commencing on January 1, 2009 and
continuing though December 1, 2009.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited.
III-19
<PAGE>
LOAN NO. 7 - ARCADIA CROSSING
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $29,367,163 Balloon Balance: $26,563,408
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Retail
---------------------------------------------------------------------------------------------------------------------
Origination Date: March 23, 2000 Location: Phoenix, AZ
---------------------------------------------------------------------------------------------------------------------
Maturity Date: April 1, 2010 Year Built: 1997
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 8.300% Appraised Value: $39,500,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $2,668,314 Cut-off LTV: 74.3%
---------------------------------------------------------------------------------------------------------------------
DSCR: 1.20x Balloon LTV: 67.2%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $3,202,319 Occupancy: 100.00%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: June 2, 2000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN. The Arcadia Crossing Loan (the "Arcadia Loan") is secured by
a first mortgage on a 13 building, 446,433 square foot retail center (the
"Arcadia Property") located at the southeast corner of 44th Street and Thomas
Road, Phoenix, Arizona. Midland Loan Services, Inc. originated the Arcadia Loan
on March 23, 2000.
THE BORROWER. The borrower is Arcadia Crossing, L.L.C., an Arizona
limited liability company (the "Arcadia Borrower"). The managing member of the
Arcadia Borrower is Jeca, Inc., an Arizona corporation. The Arcadia Borrower is
a special purpose, bankruptcy remote entity. A non-consolidation opinion was
obtained at the closing of the Arcadia Loan.
MANAGEMENT. The Arcadia Property is managed by Fry Investment Company,
an entity affiliated with the Arcadia Borrower. Fry Investment Company also
manages an additional 248,900 square feet of retail space and 45,000 square feet
of office space for entities affiliated with principals of the Arcadia Borrower.
THE PROPERTY. The Arcadia Property is a 44.23 acre site located at the
southeast corner of 44th Street and Thomas Road, Phoenix, Arizona. It consists
of 9 contiguous buildings and 4 stand-alone, single-story retail buildings. The
Arcadia Property was constructed in 1997, and contains 446,433 rentable square
feet. As of June 2, 2000, the Arcadia Property is 100% leased to 26 tenants .
Target is the largest tenant, occupying 26% of the net rentable area under a
lease currently expiring on January 31, 2015. Montgomery Wards is the 2nd
largest tenant, occupying 20% of the net rentable area under a lease currently
expiring on October 31, 2014. Fry's is the 3rd largest tenant, occupying 17% of
the net rentable area under a lease currently expiring on March 28, 2015. No
other single tenant occupies more than 7% of the Arcadia Property's net rentable
area.
SECURITY. The Arcadia Loan is secured by a Deed of Trust and Security
Agreement, an Assignment of Leases and Rents, UCC Financing Statements and
certain additional security documents. Such Deed of Trust is a first lien on the
fee interest in the Arcadia Property. The Arcadia Loan is non-recourse, subject
to certain limited exceptions.
PAYMENT TERMS. The Arcadia Loan has a fixed Mortgage Rate of 8.30%, an
original term of 120 months and an original amortization of 360 months. The
Arcadia Loan requires monthly principal and interest payments of $222,359.53
until maturity, at which time all unpaid principal and accrued interest is due.
The Arcadia Loan accrues interest computed on the basis of the actual number of
days elapsed each month in a 360-day year.
LOCKBOX. All gross income from the Arcadia Property is to be directly
deposited into a lockbox account under the lender's control. Disbursements from
such account are made as follows:
o to pay all costs and expenses associated with the administration of
such account;
o to fund required reserves for the payment of real estate taxes and
insurance;
o to pay lender all advances made by it on behalf of the Arcadia
Borrower, or costs and expenses incurred by lender in connection with
any enforcement of its rights under the Arcadia loan documents;
o to pay all monthly debt service and other payments then due under the
Arcadia loan documents;
III-20
<PAGE>
o after reserving an amount in such account sufficient to pay all of the
foregoing payments that will be payable upon the next succeeding
Payment Date, the remaining balance to the Arcadia Borrower for its
use.
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the later of (a) 3 years following the date of the first regularly scheduled
monthly payment or (b) 2 years following the date of the assignment of the
Arcadia Loan to a REMIC in connection with a securitization. Thereafter, until
January 1, 2010, any prepayment must be in the form of defeasance. Any such
defeasance will include the release of the Arcadia Property and the pledge of
substitute collateral in the form of direct, non-callable United States Treasury
obligations providing for payments prior, but as close as possible, to all
scheduled Monthly Payment dates, and on the Maturity Date. Each such payment
must be equal to or greater than each scheduled Monthly Payment during the loan
term, and greater than the anticipated balloon balance due on the Maturity Date.
Additionally, a written confirmation must be obtained from each applicable
rating agency specifying that the defeasance would not result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any class of
certificates. Including and after January 1, 2010, the Arcadia Loan may be
prepaid without the payment of any prepayment consideration.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the Arcadia Loan immediately
due and payable upon the transfer of the Arcadia Property or any ownership
interest in the Arcadia Borrower. The Arcadia Loan documents contemplate a
potential waiver of such prohibition by the lender if:
o the lender has expressly approved the proposed transfer in writing;
o no event of default then exists;
o the proposed transferee and the Arcadia Property reasonably satisfy the
lender's underwriting standards; and
o the lender receives a 1% assumption fee and reimbursement for all costs
and expenses.
Additionally any transfer of 49% or more of ownership interest in the
Arcadia Borrower or its manager requires a non-consolidation opinion acceptable
to the lender and the applicable rating agencies. The Arcadia Loan documents
also allow transfers of membership interests in the Arcadia Borrower which:
o do not amount, in the aggregate, to a transfer of 49% or more of such
membership interests to third parties; or
o are the result of a death or physical or mental disability.
ESCROW/RESERVES. There is an insurance escrow which requires deposits
in an amount sufficient to pay insurance premiums when due. No monthly deposits
for tax reserves are required for the portions of the Arcadia Property occupied
by Fry's Foods (owned by Kroger Company), Target or Montgomery Ward so long as:
o the Arcadia Borrower continues to own the Arcadia Property;
o each of the above tenants remains in operation at the Arcadia Property;
o no event of default occurs under the Loan Documents;
o the lender receives satisfactory evidence of the payment of all
required taxes; and
o each of the above tenants maintains a Standard & Poor's issuer credit
rating of BBB or better.
There are also the following reserves:
o a capital improvement reserve funded by deposits of $4,092.33 per
month, with a cap of $88,000;
o a tenant improvement and leasing commission reserve funded at closing
by a deposits of $420,000 to ensure the occupancy of a specified
tenant;
o a tenant improvement and leasing commission reserve funded by deposits
of $6,250.00 per month, with a cap of $300,000;
III-21
<PAGE>
o a required repairs reserve funded by a deposit of $13,365 at closing
for the completion of elevator repairs in the Montgomery Ward space.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited.
III-22
<PAGE>
LOAN NO. 8 - SWEETHEART CUP DISTRIBUTION CENTER
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $27,000,000 Balloon Balance: $24,356,748
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Industrial
---------------------------------------------------------------------------------------------------------------------
Origination Date: September 28, 2000 Location: Hampstead, MD
---------------------------------------------------------------------------------------------------------------------
*Maturity Date: October 1, 2010 Year Built: 2000
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 8.380% Appraised Value: $36,650,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $2,463,778 Current LTV: 73.7%
---------------------------------------------------------------------------------------------------------------------
DSCR: 1.36x Balloon LTV: 66.5%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $3,345,801 Occupancy: 100.0%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: July 20, 2000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
*For purposes hereof, the Anticipated Repayment Date described below is assumed
to be the Maturity Date of the Sweetheart Cup Loan
THE LOAN. The Sweetheart Cup Distribution Center Loan (the "Sweetheart
Cup Loan") is secured by a first mortgage on a 1,034,470 square foot industrial
center located in Hampstead, Maryland (the "Sweetheart Cup Property"). CIBC
originated the Sweetheart Cup Loan on September 28, 2000.
THE BORROWER. The borrower is D&L Development LLC, a Maryland limited
liability company (the "Sweetheart Cup Borrower"). The managing member of the
Sweetheart Cup Borrower is DM Development Inc., a Delaware corporation. The
Sweetheart Cup Borrower is a special purpose, bankruptcy remote entity.
MANAGEMENT. The Sweetheart Cup Property is managed by Cappelli
Enterprises, Inc., an entity affiliated with the Sweetheart Cup Borrower.
Cappelli Enterprises also manages several other properties owned by affiliates
of the Sweetheart Cup Borrower.
THE PROPERTY. The Sweetheart Cup Property is located on the southwest
corner of the intersection of Houcksville Road and Maryland Route 30 in
Hampstead, Carroll County, Maryland. It consists of a rectangular structural
steel building with tilt-up concrete exterior walls and clear height inside of
32 feet. It contains 1,034,000 rentable square feet (including 7,200 square feet
of office space) and 85 loading dock doors. The Sweetheart Cup Property was
built in 2000. As of July 20, 2000, the Sweetheart Cup Property is 100% leased
by Sweetheart Holdings, Inc. under a lease currently expiring on July 20, 2019.
Sweetheart Holdings uses the Sweetheart Cup Property as a distribution center
for its plastic and paper disposable food service and food packaging products.
SECURITY. The Sweetheart Cup Loan is secured by a Mortgage and Security
Agreement, an Assignment of Leases and Rents, UCC Financing Statements and
certain additional security documents. Such Mortgage is a first lien on the
simple interest in the Sweetheart Cup Property. The Sweetheart Cup Loan is
non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Sweetheart Cup Loan has a fixed Mortgage Rate of
8.380% until October 1, 2010 (the "Anticipated Repayment Date"), at which time
the Mortgage Rate will adjust to the greater of (i) 10.380% or (ii) the then
applicable yield rate on U.S. Treasury obligations maturing during October,
2030, the month in which the actual maturity date of the Sweetheart Cup Loan
occurs, plus 2%. Although the Sweetheart Cup Loan has a stated term of 360
months, it is assumed for purposes hereof that it has a term of 120 months with
a maturity date of the Anticipated Repayment Date. The Sweetheart Cup Loan has
an original amortization term of 360 months. The Sweetheart Cup Loan requires
monthly payments of principal and interest equal to $205,314.81 until the
Anticipated Repayment Date. If the Sweetheart Cup Loan is not prepaid on such
date, all of the cash flow from the Sweetheart Cup Property is to be applied as
described in "Lockbox" below. If not sooner satisfied, all unpaid principal and
accrued but unpaid interest is due on October 1, 2030. The Sweetheart Cup Loan
accrues interest computed on the basis of the actual number of days elapsed each
month in a 360-day year.
III-23
<PAGE>
LOCKBOX. Upon any default or upon the occurrence of the Anticipated
Repayment Date, the lender may require all gross income from the Sweetheart Cup
Property to be deposited into a lockbox account controlled by the lender. Prior
to the Anticipated Repayment Date, disbursements from such account are made as
follows:
o to fund required reserves for the payment of real estate taxes,
insurance and other impounds;
o to pay all interest then due;
o to pay all principal then due;
o to fund other reserves required under the related security documents;
o to pay all other amounts owed the lender with respect to the Sweetheart
Cup Loan; and
o to the Sweetheart Cup Borrower.
Subsequent to the Anticipated Repayment Date, disbursements from such
account are made as follows:
o to fund required reserves for the payment of real estate taxes,
insurance and other impounds;
o to pay all interest (at the initial Mortgage Rate) then due;
o to pay all principal then due;
o to fund other reserves required under the related security documents;
o to pay budgeted operating expenses (less management fees payable to
affiliates of the Sweetheart Cup Borrower) approved by the lender;
o to pay budgeted capital expenses approved by the lender;
o to pay other extraordinary expenses approved by the lender;
o to pay all remaining outstanding principal;
o to pay all accrued and unpaid interest then due;
o to pay all other amounts owed the lender with respect to the Sweetheart
Cup Loan; and
o to the Sweetheart Cup Borrower for its use.
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the earlier of (a) 2 years following the date of the assignment of the
Sweetheart Cup Loan to a REMIC in connection with a securitization or (b) 4
years after the closing of the Sweetheart Cup Loan. Thereafter, until April 1,
2010, any prepayment must be in the form of a defeasance. Any such defeasance
will include release of the Sweetheart Cup Property and the pledge of substitute
collateral in the form of direct, non-callable United States Treasury
obligations providing for payments prior, but as close as possible, to all
scheduled Monthly Payment dates, and on the Maturity Date. Each such payment
must be equal to or greater than each scheduled Monthly Payment during the loan
term, and equal to or greater than the anticipated balloon balance due on the
Maturity Date. Additionally, a written confirmation must be obtained from each
applicable rating agency specifying that the defeasance would not result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
any Class of Certificates. From and after April 1, 2010, the Sweetheart Cup Loan
may be prepaid without the payment of any prepayment consideration.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the Sweetheart Cup Loan
immediately due and payable upon the transfer of the Sweetheart Cup Property or
any ownership interest in the Sweetheart Cup Borrower. The Sweetheart Cup
Borrower has a one-time right to transfer the Sweetheart Cup Property to a
qualifying single asset transferee approved by the lender if:
o the proposed transferee reasonably satisfies the lender that it
possesses the ownership and managerial experience and financial
resources customarily required by the lender for properties such as the
Sweetheart Cup Property;
o the proposed transferee assumes the obligations of the Sweetheart Cup
Borrower;
III-24
<PAGE>
o no event of default then exists; and
o the lender receives a 1% assumption fee, all reasonably required
documents, a title policy endorsement and reimbursement for all of its
costs and expenses.
The Sweetheart Cup Loan documents also allow transfers of membership
interests in the Sweetheart Cup Borrower which:
o do not amount, in the aggregate, to a transfer of 49% or more of such
membership interests to a third party;
o are the result of a death or physical or mental disability, or
o are to an immediate family member or trust for such a family member.
ESCROW/RESERVES. No real estate taxes or insurance reserves are
required as long as the Sweetheart Cup Borrower provides evidence that the real
estate taxes and insurance premium have been paid when payable. There is a
replacement reserve funded by deposits of $8,620.58 per month.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited.
III-25
<PAGE>
LOAN NO. 9 - TRIANGLE PLAZA II
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $26,286,819 Balloon Balance: $23,018,492
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Retail
---------------------------------------------------------------------------------------------------------------------
Origination Date: August 29, 2000 Location: College Point, NY
---------------------------------------------------------------------------------------------------------------------
*Maturity Date: September 1, 2010 Year Built: 1999
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 7.4471% Appraised Value: $33,000,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $2,208,338 Current LTV: 79.7%
---------------------------------------------------------------------------------------------------------------------
DSCR: 1.32x Balloon LTV: 69.8%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $2,924,844 Occupancy: 100.0%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: June 14, 2000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
*For purposes hereof, the Anticipated Repayment Date described below is assumed
to be the Maturity Date of the Triangle Plaza II Loan
THE LOAN. The Triangle Plaza II Loan (the "Triangle Plaza II Loan") is
secured by a first mortgage on a 137,984 square foot retail center located in
the College Point section of Queens, New York (the "Triangle Plaza II
Property"). CIBC originated the Triangle Plaza II Loan on August 29, 2000.
THE BORROWER. The borrower is Triangle Plaza II, LLC, a New York
limited liability company (the "Triangle Plaza II Borrower"). The managing
member of the Triangle Plaza II Borrower is Triangle Plaza II Manager Inc., a
New York corporation. Lester P. Petracca is the President and majority
shareholder of Triangle Plaza II Manager Inc.. The Triangle Plaza II Borrower is
a special purpose, bankruptcy remote entity formed in 1998 to own and operate
the Triangle Plaza II Property.
MANAGEMENT. The Triangle Plaza II Property is managed by Triangle
Equities, an entity affiliated with the Triangle Plaza II Borrower. Triangle
Equities and its related entities develop, own, and manage industrial and
commercial property in New York City and Long Island.
THE PROPERTY. The Triangle Plaza II Property is located at the
intersection of 28th Avenue and the Whitestone Expressway within the College
Point section of Queens, New York. It consists of consists of a 137,984 square
foot, structural steel shopping center with available on-site parking lot
(approximately 1,117 spaces). The Triangle Plaza II Property was constructed in
1999. As of June 14, 2000, the Triangle Plaza II Property is 100% leased.
National Amusements, Inc. (12-screen multiplex), is the largest tenant,
occupying 54% of the net rentable area under a lease currently expiring on June
30, 2019. Toys "R" Us is the 2nd largest tenant, occupying 32% of the net
rentable area under a lease currently expiring on June 30, 2019. Kids "R" Us is
the 3rd largest tenant, occupying 14% of the net rentable area under a lease
currently expiring on June 30, 2019.
SECURITY. The Triangle Plaza II Loan is secured by a Mortgage and
Security Agreement, an Assignment of Leases and Rents, UCC Financing Statements
and certain additional security documents. Such Mortgage is a first lien on the
fee simple interest in the Triangle Plaza II Property. The Triangle Plaza II
Loan is non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Triangle Plaza II Loan has a fixed Mortgage Rate of
7.4471% until September 1, 2010 (the "Anticipated Repayment Date"), at which
time the Mortgage Rate will adjust to the greater of (i) 9.4471% or (ii) the
then applicable yield rate on U.S. Treasury obligations maturing during
September, 2030, the month in which the actual maturity date of the Triangle
Plaza II Loan occurs, plus 2%. Although the Triangle Plaza II Loan has a stated
term of 360 months, it is assumed for purposes hereof that it has a term of 120
months with a maturity date of the Anticipated Repayment Date. The Triangle
Plaza II Loan has an original amortization term of 353 months. The Triangle
Plaza II Loan requires monthly payments of principal and interest equal to
$184,028.17 until the Anticipated Repayment Date. If the Triangle Plaza II Loan
is not prepaid on such date, all of the cash flow from the Triangle Plaza II
Property is to be applied as described in "Lockbox" below. If not sooner
satisfied, all unpaid principal and accrued but unpaid interest is due on
September 1, 2030. The Triangle Plaza II Loan accrues interest computed on the
basis of the actual number of days elapsed each month in a 360-day year.
III-26
<PAGE>
LOCKBOX. Upon any default or upon the occurrence of the Anticipated
Repayment Date, the lender may require all gross income from the Triangle Plaza
II Property to be deposited into a lockbox account controlled by the lender.
Prior to the Anticipated Repayment Date, disbursements from such account are
made as follows:
o to fund required reserves for the payment of real estate taxes,
insurance and other impounds;
o to pay all interest then due;
o to pay all principal then due;
o to fund other reserves required under the related security documents;
o to pay all other amounts owed the lender with respect to the Triangle
Plaza II Loan; and
o to the Triangle Plaza II Borrower.
Subsequent to the Anticipated Repayment Date, disbursements from such
account are made as follows:
o to fund required reserves for the payment of real estate taxes,
insurance and other impounds;
o to pay all interest (at the initial Mortgage Rate) then due;
o to pay all principal then due;
o to fund other reserves required under the related security documents;
o to pay budgeted operating expenses (less management fees payable to
affiliates of the Triangle Plaza II Borrower) approved by the lender;
o to pay budgeted capital expenses approved by the lender;
o to pay other extraordinary expenses approved by the lender;
o to pay all remaining outstanding principal;
o to pay all accrued and unpaid interest then due;
o to pay all other amounts owed the lender with respect to the Triangle
Plaza II Loan; and
o to the Triangle Plaza II Borrower for its use.
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the earlier of (a) 2 years following the date of the assignment of the
Triangle Plaza II Loan to a REMIC in connection with a securitization or (b) 4
years after the closing of the Triangle Plaza II Loan. Thereafter, until March
1, 2010, any prepayment must be in the form of a defeasance. Any such defeasance
will include the release of the Triangle Plaza II Property and the pledge of
substitute collateral in the form of direct, non-callable United States Treasury
obligations providing for payments prior, but as close as possible, to all
scheduled Monthly Payment dates, and on the Maturity Date. Each such payment
must be equal to or greater than each scheduled Monthly Payment during the loan
term, and equal to or greater than the anticipated balloon balance due on the
Maturity Date. Additionally, a written confirmation must be obtained from each
applicable rating agency specifying that the defeasance would not result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
any Class of Certificates. From and after March 1, 2010, the Triangle Plaza II
Loan may be prepaid without the payment of any prepayment consideration.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the Triangle Plaza II Loan
immediately due and payable upon the transfer of the Triangle Plaza II Property
or any ownership interest in the Triangle Plaza II Borrower. The Triangle Plaza
II Borrower has the right to transfer the Triangle Plaza II Property to a
qualifying single asset transferee approved by the lender if:
o the proposed transferee reasonably satisfies the lender that it
possesses the ownership and managerial experience and financial
resources customarily required by the lender for properties such as the
Triangle Plaza II Property,
o the proposed transferee assumes the obligations of the Triangle Plaza
II Borrower,
III-27
<PAGE>
o no event of default then exists, and
o the lender receives a 1% assumption fee, all reasonably required
documents, a title policy endorsement and reimbursement for all of its
costs and expenses.
The Triangle Plaza II Loan documents also allow transfers of membership
interests in the Triangle Plaza II Borrower which:
o do not amount, in the aggregate, to a transfer of 49% or more of such
membership interests to a third party;
o are the result of a death or physical or mental disability, or
o are to an immediate family member or trust for such a family member.
ESCROW/RESERVES. There are tax and insurance reserves which require
monthly deposits in amounts sufficient to pay real estate taxes and insurance
premiums when due. There is also a replacement reserve funded on a monthly basis
at the rate of $1,724.83 per month, and a leasing reserve funded by a $10,000.00
deposit at closing.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited.
III-28
<PAGE>
LOAN NO. 10 - SOLANA BEACH TOWNE CENTRE
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $25,983,319 Balloon Balance: $23,393,877
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Retail
---------------------------------------------------------------------------------------------------------------------
Origination Date: August 25, 2000 Location: Solana Beach, CA
---------------------------------------------------------------------------------------------------------------------
Maturity Date: September 1, 2010 Year Renovated: 1999
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 8.220% Appraised Value: $34,700,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $2,337,375 Cut-off LTV: 74.9%
---------------------------------------------------------------------------------------------------------------------
DSCR: 1.26x Balloon LTV: 67.4%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $2,937,932 Occupancy: 97.9%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: September 1, 2000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN. The Solana Beach Towne Centre Loan (the "Solana Loan") is
secured by a first mortgage on a 13 building, 251,272 square foot retail center
(the "Solana Property") located at 600-900 Lomas Santa Fe Drive, Solana Beach,
California. PNC Bank, National Association originated the Solana Loan on August
25, 2000.
THE BORROWER. The borrower is SB Towne Centre, LLC, a California
limited liability company (the "Solana Borrower"). The managing member of the
Solana Borrower is SBTC Assets, Inc., a California corporation. The Solana
Borrower is a special purpose, bankruptcy remote entity. A non-consolidation
opinion was obtained at the closing of the Solana Loan.
MANAGEMENT. The Solana Property is managed by American Assets, an
entity affiliated with the Solana Borrower, with Flocke & Avoyer Commercial Real
Estate handling all leasing responsibilities. American Assets, Inc. has been in
operation for 30 years and manages over 1,000,000 square feet of retail space
and over 1,500,000 square feet of office space in San Diego.
THE PROPERTY. The Solana Property is located at the intersection of
Lomas Santa Fe Drive and Interstate 5 in Solana Beach, California. It consists
of 13 single-story retail buildings. The Solana Property was constructed in 1974
and renovated to its current configuration in 1999. It contains 251,272 rentable
square feet of space. As of September 1, 2000, the Solana Property is 97.9%
leased to 51 tenants, including Marshalls (current lease expiration of January
31, 2005), DixieLine Lumber (current lease expiration of June 30, 2004) and
Sav-On Drug Stores (current lease expiration of September 10, 2004). No single
tenant occupies more than 16% of the Solana Property's net rentable area.
SECURITY. The Solana Loan is secured by a Deed of Trust and Security
Agreement, an Assignment of Leases and Rents, UCC Financing Statements and
certain additional security documents. Such Deed of Trust is a first lien on the
fee interest in the Solana Property. The Solana Loan is non-recourse, subject to
certain limited exceptions.
OPTIONAL PROPERTY RENOVATION. The Solana Borrower has the right to
substantially renovate or replace any of the buildings located upon the Solana
Property if:
o the lender has expressly approved the proposed renovation or
replacement in writing, such consent not to be unreasonably withheld;
o the debt service coverage ratio for the Solana Loan prior to and
following such renovation or replacement, not including the income from
the buildings being renovated or replaced, must equal or exceed 1.10x;
o the lender receives a new or amended lease executed by the tenant of
the renovated or replacement building satisfying certain economic
specified terms;
o any tenant that is replacing a "rated" tenant in connection with the
proposed renovation or replacement must possess an equivalent "rating";
III-29
<PAGE>
o the Solana Borrower must deposit with the lender a satisfactory
irrevocable letter of credit equal to $137 times the total rentable
square feet of the building being renovated or replaced;
o the renovated or replacement building must comply with all applicable
zoning or similar laws;
o the lender must receive satisfactory title insurance endorsements;
o the lender must receive a satisfactory construction performance bond in
connection with the renovation or replacement of any building over
16,000 square feet of gross rentable space;
o the lender must receive reimbursement for all of its reasonable costs
and expenses; and
o no event of default then exists.
Any construction financing obtained by the Solana Borrower in connection with
any such renovation or replacement must not be secured by liens or security
interests over the Solana Property.
PAYMENT TERMS. The Solana Loan has a fixed Mortgage Rate of 8.22%, an
original term of 120 months and an original amortization of 360 months. The
Solana Loan requires monthly principal and interest payments of $194,781.24
until maturity, at which time all unpaid principal and accrued interest is due.
The Solana Loan accrues interest computed on the basis of the actual number of
days elapsed each month in a 360-day year.
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the later of (a) 3 years following the date of the first regularly scheduled
monthly payment or (b) 2 years following the date of the assignment of the
Solana Loan to a REMIC in connection with a securitization. Thereafter, until
June 1, 2010, any prepayment must be in the form of defeasance. Any such
defeasance will include the release of the Solana Property and the pledge of
substitute collateral in the form of direct, non-callable United States Treasury
obligations providing for payments prior, but as close as possible, to all
scheduled Monthly Payment dates, and on the Maturity Date. Each such payment
must be equal to or greater than each scheduled Monthly Payment during the loan
term, and greater than the anticipated balloon balance due on the Maturity Date.
Additionally, a written confirmation must be obtained from each applicable
rating agency specifying that the defeasance would not result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any class of
certificates. Including and after June 1, 2010, the Solana Loan may be prepaid
without the payment of any prepayment consideration.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the Solana Loan immediately
due and payable upon the transfer of the Solana Property or any ownership
interest in the Solana Borrower. The Solana Loan documents contemplate a
potential waiver of such prohibition by the lender if:
o the lender has expressly approved the proposed transfer in writing;
o no event of default then exists;
o the proposed transferee and the Solana Property reasonably satisfy the
lender's underwriting standards; and
o the lender receives a 0.5% assumption fee and reimbursement for all
costs and expenses.
The Solana Borrower has a one-time right to transfer the Solana
Property to an UPREIT or similar venture formed by the Solana Borrower, if: o
the lender has reasonably approved the proposed transferee and all documentation
related to such transfer;
o no material adverse change has occurred in the financial condition of
the Solana Borrower or financial or physical condition of the Solana
Property; and
o the lender receives a $5,000 administrative fee and reimbursement for
all of out of pocket expenses.
Each member of the Solana Borrower has a one-time right to transfer all
or any of its interest in the Solana Borrower for estate planning purposes if:
o the proposed transferees agree to assume the obligations of the
transferor upon the death of the transferor;
III-30
<PAGE>
o no material adverse change has occurred in the financial condition of
the Solana Borrower or financial or physical condition of the Solana
Property; and
o the lender receives a $3,500 administrative fee and reimbursement for
all of out of pocket expenses.
Additionally any transfer of 49% or more of ownership interest in the
Solana Borrower or its manager requires a non-consolidation opinion acceptable
to the lender and the applicable rating agencies. The Solana Loan documents also
allow transfers of membership interests in the Solana Borrower which:
o do not amount, in the aggregate, to a transfer of 49% or more of such
membership interests to a third party; or
o are the result of a death or physical or mental disability.
ESCROW/RESERVES. There are tax reserves which require monthly deposits
in amounts sufficient to pay real estate taxes when due. No monthly deposits for
insurance reserves are required so long as:
o the Solana Borrower annually provides the lender an insurance renewal
certificate; and
o no event of default has occurred.
There are also the following reserves:
o a required repairs reserve funded by the deposit of a $259,750 letter
of credit delivered at closing;
o a replacement reserve funded by the deposit of a $24,893 letter of
credit delivered at closing.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited.
III-31
<PAGE>
LOAN NO. 11 - CONTINENTAL TEVES
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $24,093,491 Balloon Balance: $21,912,764
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Office
---------------------------------------------------------------------------------------------------------------------
Origination Date: June 20, 2000 Location: Auburn Hills, MI
---------------------------------------------------------------------------------------------------------------------
Maturity Date: July 1, 2010 Year Built: 2000
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 8.610% Appraised Value: $32,000,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $2,248,612 Cut-off LTV: 75.3%
---------------------------------------------------------------------------------------------------------------------
DSCR: 1.26x Balloon LTV: 68.5%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $2,831,701 Occupancy: 100.00%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: June 9, 2000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN. The Continental Teves Loan (the "Continental Loan") is
secured by a first mortgage on a two story, 236,770 square foot office building
(the "Continental Property") located at 4351 North Atlantic Road, Auburn Hills,
Michigan. Midland Loan Services, Inc. originated the Continental Loan on June
20, 2000.
THE BORROWER. The borrower is North Harmon, L.L.C., a Michigan limited
liability company (the "Continental Borrower"). The managing member of the
Continental Borrower is Harmon CT Corporation, a Michigan corporation. The
Continental Borrower is a special purpose, bankruptcy remote entity. A
non-consolidation opinion was obtained at the closing of the Continental Loan.
MANAGEMENT. The Continental Property is managed by J. Bennett
Donaldson, one of the principals of the Continental Borrower. Mr. Bennett has an
ownership interest in 2,000,000 square feet of industrial/ high-tech buildings,
located mostly in lower Michigan. All leasing is handled by Signature
Associates-ONCOR.
THE PROPERTY. The Continental Property is located in the Auburn Hills
Corporate Center at 4351 North Atlantic Road, Auburn Hills, Michigan, one of the
fastest growing suburban cities in southeastern Michigan. The Continental
Property consists of one two-story, 236,770 square foot office/R&D facility that
was constructed in 2000. Continental Teves is the sole tenant of the Continental
Property under a lease that currently expires on June 30, 2020. Continental
Teves is a wholly owned subsidiary of Continental AG, a BBB+ rated company by
Standard and Poor's.
SECURITY. The Continental Loan is secured by a Mortgage, an Assignment
of Leases and Rents, UCC Financing Statements and certain additional security
documents. Such Mortgage is a first lien on the fee interest in the Continental
Property. The Continental Loan is non-recourse, subject to certain limited
exceptions.
PAYMENT TERMS. The Continental Loan has a fixed Mortgage Rate of 8.61%,
an original term of 120 months and an original amortization of 360 months. The
Continental Loan requires monthly principal and interest payments of $187,384.37
until maturity, at which time all unpaid principal and accrued interest is due.
The Continental Loan accrues interest computed on the basis of the actual number
of days elapsed each month in a 360-day year.
LOCKBOX. All gross income from the Continental Property is to be
directly deposited into a lockbox account under the lender's control.
Disbursements from such account are made as follows:
o to pay all costs and expenses associated with the administration of
such account;
o to fund required reserves for the payment of real estate taxes and
insurance;
o to pay lender all advances made by it on behalf of the Continental
Borrower, or costs and expenses incurred by lender in connection with
any enforcement of its rights under the Continental loan documents;
o to pay all monthly debt service and other payments then due under the
Continental loan documents;
o the remaining balance to the Continental Borrower for its use.
III-32
<PAGE>
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the later of (a) 3 years following the date of the first regularly scheduled
monthly payment or (b) 2 years following the date of the assignment of the
Continental Loan to a REMIC in connection with a securitization. Thereafter,
until April 1, 2010, any prepayment must be in the form of defeasance. Any such
defeasance will include the release of the Continental Property and the pledge
of substitute collateral in the form of direct, non-callable United States
Treasury obligations providing for payments prior, but as close as possible, to
all scheduled Monthly Payment dates, and on the Maturity Date. Each such payment
must be equal to or greater than each scheduled Monthly Payment during the loan
term, and greater than the anticipated balloon balance due on the Maturity Date.
Additionally, a written confirmation must be obtained from each applicable
rating agency specifying that the defeasance would not result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any class of
certificates. Including and after April 1, 2010, the Continental Loan may be
prepaid without the payment of any prepayment consideration.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the Continental Loan
immediately due and payable upon the transfer of the Continental Property or any
ownership interest in the Continental Borrower. The Continental documents
contemplate a potential waiver of such prohibition by the lender if:
o the lender has expressly approved the proposed transfer in writing;
o no event of default then exists;
o the proposed transferee and the Continental Property reasonably satisfy
the lender's underwriting standards; and
o the lender receives a 1% assumption fee and reimbursement for all costs
and expenses.
Additionally, any transfer of 49% or more of ownership interests in the
Continental Borrower or its manager requires a nonconsolidation opinion
acceptable to the lender and the applicable rating agencies. The Continental
Loan documents allow transfers of membership interest in the Continental
Borrower which:
o do not amount, in the aggregate, to a transfer of 49% or more of such
membership interests to third parties; or
o are the result of a death or physical or mental disability.
ESCROW/RESERVES. No monthly deposits for tax and insurance reserves are
required so long as:
o Continental Teves, Inc. ("Continental Teves") remains in operation at
the Continental Property;
o no default occurs under Continental Teves' lease; and
o the lender receives satisfactory evidence of the payment of all
required taxes and insurance premiums.
There are also the following reserves:
o a capital improvement reserve funded by the deposit of a $28,830 letter
of credit delivered at closing, with such letter of credit to be
increased by an additional $28,830.00 face amount each year up to a cap
of $288,300;
o a tenant improvement and leasing commission reserve funded by the
deposit of a $3,046,196 letter of credit delivered at closing; and
o a environmental reserve, funded by the deposit of a $50,000 letter of
credit delivered at closing, to ensure that the Continental Borrower
obtains a no further action letter from the Michigan Department of
Environmental Quality with respect to the remediation of a diesel fuel
spill at the Continental Property.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited.
III-33
<PAGE>
LOAN NO. 12 - DISCOVERY CREATIVE & TECHNOLOGY CENTER
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $23,581,086 Balloon Balance: $21,434,772
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Office
---------------------------------------------------------------------------------------------------------------------
Origination Date: July 14, 1999 Location: Silver Springs, MD
---------------------------------------------------------------------------------------------------------------------
*Maturity Date: April 1, 2010 Year Renovated: 1999
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 8.580% Appraised Value: $32,000,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $2,198,287 Current LTV: 73.7%
---------------------------------------------------------------------------------------------------------------------
DSCR: 1.30x Balloon LTV: 67.0%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $2,864,400 Occupancy: 100.0%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: July 1, 2000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
*For purposes hereof, the Anticipated Repayment Date described below is assumed
to be the Maturity Date of the Discovery Center Loan
THE LOAN. The Discovery Creative & Technology Center Loan (the
"Discovery Center Loan") is secured by a first mortgage on a 148,530 square foot
office building located in Silver Springs, Maryland (the "Discovery Center
Property"). CIBC originated the Discovery Center Loan on July 14, 1999.
THE BORROWER. The borrower is Kennett Street Venture, L.C., a Maryland
limited liability company (the "Discovery Center Borrower"). The managing member
of the Discovery Center Borrower is Kennett Street Manager, LLC, a Delaware
limited liability company. The Discovery Center Borrower is a special purpose,
bankruptcy remote entity. A non-consolidation opinion was obtained at the
closing of the Discovery Center Loan.
MANAGEMENT. The Discovery Center Property is managed by Park Center
Management, an entity affiliated with the Discovery Center Borrower. Park Center
Management is the property manager for a portfolio of office complexes, shopping
centers and industrial developments located in Virginia and Maryland that are
owned by affiliates of the Discovery Center Borrower.
THE PROPERTY. The Discovery Center Property is located at 8040 Kennett
Street, Silver Springs, Maryland. It consists of a 3-story office building with
148,530 square feet of net rentable area. It has office space, video editing
rooms, specialized computer rooms, a mainframe computer facility and sky-bridge
access to a 785-car, four-story parking garage owned and operated by Montgomery
County. The Discovery Center Property was built in 1995. As of July 1, 2000, the
Discovery Center Property is 100% leased by Discovery Communications, Inc. under
a lease currently expiring in April 2015. Discovery Communications, Inc.
produces several cable television channels, including the Discovery Channel, The
Learning Channel, Animal Planet and the Travel Channel. Discovery Communications
intends to use the Discovery Center Property as the main office headquarters for
its Internet business.
SECURITY. The Discovery Center Loan is secured by a Deed of Trust and
Security Agreement, an Assignment of Leases and Rents, UCC Financing Statements
and certain additional security documents. Such Deed of Trust is a first lien on
the fee simple interest in the Discovery Center Property. The Discovery Center
Loan is non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Discovery Center Loan has a fixed Mortgage Rate of
8.580% until April 1, 2010 (the "Anticipated Repayment Date"), at which time the
Mortgage Rate will adjust to the greater of (i) 10.580% or (ii) the then
applicable yield rate on U.S. Treasury obligations maturing during April, 2030,
the month in which the actual maturity date of the Discovery Center Loan occurs,
plus 2%. Although the Discovery Center Loan has a stated term of 360 months, it
is assumed for purposes hereof that it has a term of 120 months with a maturity
date of the Anticipated Repayment Date. The Discovery Center Loan has an
original amortization term of 360 months. The Discovery Center Loan requires
monthly payments of principal and interest equal to $183,190.60 until the
Anticipated Repayment Date. If the Discovery Center Loan is not prepaid on such
date, all of the cash flow from the Discovery Center Property is to be applied
as described in "Lockbox" below. If not sooner satisfied, all unpaid
III-34
<PAGE>
principal and accrued but unpaid interest is due on April 1, 2030. The Discovery
Center Loan accrues interest computed on the basis of the actual number of days
elapsed each month in a 360-day year.
LOCKBOX. Upon any default or upon the occurrence of the Anticipated
Repayment Date, the lender may require all gross income from the Discovery
Center Property to be deposited into a lockbox account controlled by the lender.
Prior to the Anticipated Repayment Date, disbursements from such account are
made as follows:
o to fund required reserves for the payment of real estate taxes,
insurance and other impounds;
o to pay all interest then due;
o to pay all principal then due;
o to fund other reserves required under the related security documents;
o to pay all other amounts owed the lender with respect to the Discovery
Center Loan; and
o to the Discovery Center Borrower.
Subsequent to the Anticipated Repayment Date, disbursements from such
account are made as follows:
o to fund required reserves for the payment of real estate taxes,
insurance and other impounds;
o to pay all interest (at the initial Mortgage Rate) then due;
o to pay all principal then due;
o to fund other reserves required under the related security documents;
o to pay budgeted operating expenses (less management fees payable to
affiliates of the Discovery Center Borrower) approved by the lender;
o to pay budgeted capital expenses approved by the lender;
o to pay other extraordinary expenses approved by the lender;
o to pay all remaining outstanding principal;
o to pay all accrued and unpaid interest then due;
o to pay all other amounts owed the lender with respect to the Discovery
Center Loan; and
o to the Discovery Center Borrower for its use.
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the earlier of (a) 2 years following the date of the assignment of the
Discovery Center Loan to a REMIC in connection with a securitization or (b) 5
years after the closing of the Discovery Center Loan. Thereafter, until October
1, 2009, any prepayment must be in the form of a defeasance. Any such defeasance
will include release of the Discovery Center Property and the pledge of
substitute collateral in the form of direct, non-callable United States Treasury
obligations providing for payments prior, but as close as possible, to all
scheduled Monthly Payment dates, and on the Maturity Date. Each such payment
must be equal to or greater than each scheduled Monthly Payment during the loan
term, and equal to or greater than the anticipated balloon balance due on the
Maturity Date. Additionally, a written confirmation must be obtained from each
applicable rating agency specifying that the defeasance would not result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
any Class of Certificates. From and after October 1, 2009, the Discovery Center
Loan may be prepaid without the payment of any prepayment consideration.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the Discovery Center Loan
immediately due and payable upon the transfer of the Discovery Center Property
or any ownership interest in the Discovery Center Borrower. The Discovery Center
Borrower has a one-time right to transfer the Discovery Center Property to a
qualifying single asset transferee approved by the lender if:
III-35
<PAGE>
o the proposed transferee reasonably satisfies the lender that it
possesses the ownership and managerial experience and financial
resources customarily required by the lender for properties such as the
Discovery Center Property;
o the proposed transferee assumes the obligations of the Discovery Center
Borrower;
o no event of default then exists; and
o the lender receives a 1% assumption fee, all reasonably required
documents, a title policy endorsement and reimbursement for all of its
costs and expenses and the applicable following assumption fee:
o 0.5% if the proposed transferee is Discovery Communications, Inc.
("Discovery Communications"), the primary tenant of the Discovery
Center Property; or
o 1% if the proposed transferee is not Discovery Communications.
Discovery Communications has an option to purchase the Discovery Center
Property, until March 31, 2003, for a purchase price equal to the Discovery
Center Borrower's cost to acquire and improve the Discovery Center Property plus
15%. In order to exercise this option, Discovery Communications must either
assume the Discovery Center Loan as described above, or prepay or defease the
Discovery Center Loan as if it were the Discovery Center Borrower at the time of
such prepayment or defeasance.
The Discovery Center Loan documents also allow transfers of managing
membership interests in the Discovery Center Borrower which:
o do not amount, in the aggregate, to a transfer of 10% or more of such
managing membership interests to a third party;
o are the result of a death or physical or mental disability, or
o are to an immediate family member or trust for such a family member.
ESCROW/RESERVES. No real estate taxes or insurance reserves are
required as long as the Discovery Center Borrower provides evidence that the
real estate taxes and insurance premium have been paid when payable. There is a
replacement reserve funded by deposits of $1,856.67 per month.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited. At closing, the non-managing membership interests
in the Discovery Center Borrower were pledged to secure a so-called "mezzanine
loan" in the original principal amount of $3,150,000. Additionally, the
mezzanine lender and the lender also entered into an intercreditor agreement
that, among other things, restricts the mezzanine lender's enforcement of its
remedies and the transfer of the mezzanine loan.
III-36
<PAGE>
LOAN NO. 13 - SPRINGFIELD GARDENS SHOPPING CENTER
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $20,948,014 Balloon Balance: $18,928,142
---------------------------------------------------------------------------------------------------------------------
Loan Type: Principal & Interest Property Type: Retail
---------------------------------------------------------------------------------------------------------------------
Origination Date: April 6, 2000 Location: Queens, New York
---------------------------------------------------------------------------------------------------------------------
*Maturity Date: May 1, 2010 Year Built: 2000
---------------------------------------------------------------------------------------------------------------------
Initial Mortgage Rate: 8.330% Appraised Value: $28,000,000
---------------------------------------------------------------------------------------------------------------------
Annual Debt Service: $1,907,383 Cut-off LTV: 74.8%
---------------------------------------------------------------------------------------------------------------------
DSCR: 1.23x Balloon LTV: 67.6%
---------------------------------------------------------------------------------------------------------------------
Underwritable Net Cash Flow: $2,350,091 Occupancy: 100%
---------------------------------------------------------------------------------------------------------------------
Occupancy Date: August 1, 2000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
*For purposes hereof, the Anticipated Repayment Date described below is assumed
to be the Maturity Date of the Springfield Gardens Loan
THE LOAN. The Springfield Gardens Shopping Center Loan (the
"Springfield Gardens Loan") is secured by a first mortgage on a 96,018 square
foot single story shopping center located at 134-146 Springfield Boulevard
(Merrick Boulevard and Springfield Boulevard) in Queens, New York (the
"Springfield Gardens Real Property"). The Springfield Gardens Loan was
originated on April 6, 2000, by or on behalf of Morgan Stanley Dean Witter
Mortgage Capital Inc.
THE BORROWER. The borrower is Mattone Group Springnex LLC, a New York
limited liability company (the "Springfield Gardens Borrower"). The managing
member of the Springfield Gardens Borrower is JMM SPE Corp., a New York
corporation. Both of Springfield Gardens Borrower and JMM SPE Corp. are special
purpose, bankruptcy remote entities. A non-consolidation opinion was obtained at
the closing of the Springfield Gardens Loan.
MANAGEMENT. The Springfield Gardens Real Property is leased and managed
by Mattone Group Management, LLC, a New York limited liability company, an
affiliate of the Springfield Gardens Borrower.
THE PROPERTY. The Springfield Gardens Property is located in Queens,
New York. It consists of a single story neighborhood shopping center with
approximately 96,018 square feet of gross leaseable area and approximately 432
surface parking spaces. As of August 1, 2000, the Springfield Gardens Property
is 100% leased to 12 tenants. A Pathmark Supermarket is the largest tenant,
occupying 62% of the net rentable area under a lease currently expiring on March
31, 2025. It is one of 137 Pathmark supermarkets operated by Pathmark Stores,
Inc., primarily in New York and New Jersey. Pathmark Stores, Inc. was the debtor
in a Chapter 11 bankruptcy that was concluded on September 19, 2000. Other major
or national tenants include Party City, Blockbuster Video, Elmhurst Hospital,
Radio Shack, One Price Clothing and Payless Shoes. Other than Pathmark, no
single tenant occupies more than 10% of the Springfield Gardens Property's net
rentable area.
SECURITY. The Springfield Gardens Loan is secured by an Agreement of
Consolidation and Modification of Note and Mortgage, an Assignment of Leases and
Rents, UCC Financing Statements and certain additional security documents. The
Springfield Gardens Loan is non-recourse, subject to certain limited exceptions.
The Agreement of Consolidation is a first lien on the Springfield Gardens
Borrower's leasehold interest in the Springfield Gardens Property and on the fee
interest in the Springfield Gardens Property owned by an affiliate of the
Springfield Gardens Borrower, JMM Springnex LLC, a New York limited liability
company (the "Ground Lessor"). The Springfield Gardens Loan is deemed secured by
a fee mortgage in this prospectus supplement. The Ground Lessor's granting of a
mortgage over its fee interest to secure the Springfield Gardens Loan may be
subject to challenge as a fraudulent conveyance. Among other things, a legal
challenge to the granting of the mortgage may focus on the benefits realized by
the Ground Lessor from the Springfield Gardens Loan. If a court concluded that
the granting of the mortgage was an avoidable fraudulent conveyance, it might
take actions detrimental to the holders of the certificates, including, under
certain circumstances, invalidating the mortgage over the fee interest of the
Ground Lessor.
III-37
<PAGE>
PAYMENT TERMS. The Springfield Gardens Loan has a fixed Mortgage Rate
of 8.330% until May 1, 2010 (the "Anticipated Repayment Date"), at which time
the Mortgage Rate will adjust to the greater of (i) 13.330%% or (ii) the then
applicable yield rate on U.S. Treasury obligations maturing during May, 2030,
the month in which the actual maturity date of the Springfield Gardens Loan
occurs, plus 5%. Although the Springfield Gardens Loan has a stated term of 360
months, it is assumed for purposes hereof that it has a term of 120 months with
a maturity date of the Anticipated Repayment Date. The Springfield Gardens Loan
has an original amortization term of 360 months. The Springfield Gardens Loan
requires monthly payments of principal and interest equal to $158,948.60 until
the Anticipated Repayment Date. If the Springfield Gardens Loan is not prepaid
on such date, all of the cash flow from the Springfield Gardens Property is to
be applied as described in "Lockbox" below. If not sooner satisfied, all unpaid
principal and accrued but unpaid interest is due on May 1, 2030. The Springfield
Gardens Loan accrues interest computed on the basis of the actual number of days
elapsed each month in a 360-day year.
LOCKBOX. All gross income from the Springfield Gardens Property is to
be directly deposited into a lockbox account. Prior to the "Lockbox Conversion
Date" (the earlier to occur of (i) the Anticipated Repayment Date, (ii) a
default under the Springfield Gardens Loan documents and (iii) the Springfield
Gardens Borrower's failure to maintain specified debt service coverage
requirements), disbursements from such account are made by the Springfield
Gardens Borrower as follows:
o to fund required reserves for the payment of real estate taxes and
insurance;
o to fund required reserves for the payment of the required principal or
interest payments owed under the Springfield Gardens Loan;
o to fund required other impound reserves required under the Springfield
Gardens Loan documents;
o to pay lender all default interest and late charges under the
Springfield Gardens Loan documents; and
o to the Springfield Gardens Borrower for its use.
Subsequent to the Lockbox Conversion Date, the lender shall control
disbursements from such account. Those disbursements are to be made as follows:
o to fund required reserves for the payment of real estate taxes and
insurance;
o to fund required reserves for the payment of the required principal or
interest payments owed under the Springfield Gardens Loan;
o to fund required other impound reserves required under the Springfield
Gardens Loan documents;
o to pay lender all default interest and late charges under the
Springfield Gardens Loan documents;
o to pay budgeted operating expenses approved by the lender;
o to pay other extraordinary expenses approved by the lender;
o to pay all remaining outstanding principal and accrued and unpaid
interest then due under the Springfield Gardens Loan documents; and
o to the Springfield Gardens Borrower for its use.
PREPAYMENT/DEFEASANCE. No prepayment or defeasance is permitted prior
to the earlier of (a) May 1, 2005, or (b) 2 years following the date of the
assignment of the Springfield Gardens Loan to a REMIC in connection with a
securitization. Thereafter, until February 1, 2010, any prepayment must be in
the form of defeasance. Any such defeasance will include the release of the
Springfield Gardens Property and the pledge of substitute collateral in the form
of direct, non-callable United States Treasury obligations providing for
payments prior, but as close as possible, to all scheduled Monthly Payment
dates, and on the Maturity Date. Each such payment must be equal to or greater
than each scheduled Monthly Payment during the loan term, and greater than the
anticipated balloon balance due on the Maturity Date. Additionally, a written
confirmation must be obtained from each applicable rating agency specifying that
the defeasance would not result in a downgrade, qualification or withdrawal of
the then current ratings assigned to any class of certificates. Including and
after February 1, 2010, the Springfield Gardens Loan may be prepaid without the
payment of any prepayment consideration.
III-38
<PAGE>
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the lender will have the option to declare the Springfield Gardens Loan
immediately due and payable upon the transfer of the Springfield Gardens
Property or any ownership interest in the Springfield Gardens Borrower, JMM SPE
Corp. or certain other specified affiliated entities. After April 6, 2001, the
Springfield Gardens Borrower has a one-time right to transfer the Springfield
Gardens Property to a qualifying special purpose transferee approved by the
lender if:
o no event of default then exists;
o the proposed transferee is a special purpose, bankruptcy remote entity;
o the Springfield Gardens Borrower gives to the lender:
o 30 days written notice of the proposed transfer;
o all reasonably required information concerning the proposed
transferee; and
o a non-refundable application fee of $2,500.00;
o the proposed transferee assumes the obligations of the Springfield
Gardens Borrower;
o the lender receives a 1% assumption fee, all reasonably required
documents and reimbursement for all of its costs and expenses;
o the lender receives an acceptable legal opinion, including, if
required, an acceptable nonconsolidation opinion; and
o each applicable rating agency confirms in writing that the sale of the
Springfield Gardens Property to such transferee would not result in a
qualification, downgrade or withdrawal of any rating in effect
immediately prior to such sale for any of the Certificates.
Additionally, transfers of ownership interests in the Springfield
Gardens Borrower, JMM SPE Corp. or certain other specified affiliated entities,
are allowed if such transfers:
o do not amount, in the aggregate, to a transfer of 49% or more of such
ownership interests to third parties;
o are by will or intestate succession upon the death of any individual;
provided, that the lender may require a nonconsolidation opinion
acceptable to it and the applicable rating agencies; or
o are to an immediate family member or trust for such a family member;
provided, that the lender may require a nonconsolidation opinion
acceptable to it and the applicable rating agencies.
ESCROW/RESERVES. There are tax and insurance reserves which require
monthly deposits in amounts sufficient to pay real estate taxes and insurance
premiums when due. There is also a replacement reserve funded on a monthly basis
at the rate of $1,200.00 per month, and a leasing reserve funded on a monthly
basis at the rate of $1,250.00 per month, with a cap of $50,000.00.
SUBORDINATION/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited.
III-39
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
--------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER | [MORGAN STANLEY | October 2, 2000
Securitized Products Group | DEAN WITTER LOGO] |
--------------------------------------------------------------------------------
CMBS NEW ISSUE
PNC MORTGAGE ACCEPTANCE CORP.
SERIES 2000-C2
PRELIMINARY TERM SHEET
------------------------
EXPECTED PRICING DATE: OCTOBER [ ], 2000
------------------------
$925,607,000
(APPROXIMATE)
MIDLAND LOAN SERVICES, INC.
CIBC INC.
MORGAN STANLEY DEAN WITTER MORTGAGE CAPITAL INC.
AS SELLERS
MIDLAND LOAN SERVICES, INC.,
AS MASTER SERVICER AND AS SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
------------------------
MORGAN STANLEY DEAN WITTER PNC CAPITAL MARKETS
CIBC WORLD MARKETS CORP. DEUTSCHE BANC ALEX. BROWN
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE
U.K. SECURITIES AND FUTURES AUTHORITY
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
TRANSACTION HIGHLIGHTS
>> Contributors:
--------------------------------------------------------------------------------
SELLERS NO. OF LOANS CUT-OFF DATE BALANCE % OF POOL
--------------------------------------------------------------------------------
Midland 119 $446,060,133 41.4
CIBC 43 $411,442,994 38.2
MSDWMC 28 $218,785,231 20.3
--------------------------------------------------------------------------------
TOTAL: 190 $1,076,288,358 100.0%
--------------------------------------------------------------------------------
>> Loan Pool:
o Average Loan Balance: $5.7 million (0.5% of Pool)
o Largest Loan Balance: $59.9 million (5.6% of Pool
o Five Largest Loans: $224.0 million (20.8% of Pool)
o Thirteen Largest Loans: $430.8 million (40.0% of Pool)
>> Credit Statistics:
o Weighted average debt service coverage ratio of 1.35x
o Weighted average cut-off date loan-to-value ratio of 71.2%
>> Property Types:
o Retail, office, industrial & multifamily properties comprise 88.9% of
Pool
[PIE CHART]
Retail 32.6%
Office 29.0%
Multifamily 18.5%
Hospitality 8.8%
Industrial 8.8%
Manufactured Housing 1.1%
Self Storage 0.8%
Other 0.4%
>> Call Protection:
o Lockout period followed by defeasance: 81.4% of Pool
o Lockout period followed by yield maintenance or the greater of yield
maintenance and 1%, 3% or 5% of the principal amount prepaid: 18.6% of
Pool
>> Collateral Terms: The Pool has a weighted average mortgage rate of 8.208%
and a weighted average remaining term of 115 months
>> Collateral Information: Updated loan information will be part of the monthly
remittance report available from the Trustee in addition to detailed payment
and delinquency information. Updated property operating and occupancy
information, to the extent delivered by borrowers, will be available to
Certificateholders from the Master Servicer
>> Bond Information: Cash flows are expected to be modeled by TREPP, CONQUEST
and INTEX and are expected to be available on BLOOMBERG
>> It is expected that this transaction will be included as a part of the
Lehman Aggregate Bond Index
T-2
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
OFFERED CERTIFICATES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
RATING AVERAGE INITIAL
SUBORDINATION (S&P/ LIFE PRINCIPAL PASS-THROUGH
CLASS AMOUNT(1) LEVELS MOODY'S) (YEARS)(2) WINDOW(3) RATE(4)(5)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A-1 $200,612,000 23.75% AAA/Aaa 5.70 11/00 - 09/08 [ ]
--------------------------------------------------------------------------------------------------------
A-2 $620,057,000 23.75% AAA/Aaa 9.40 09/08 - 09/10 [ ]
--------------------------------------------------------------------------------------------------------
B $43,052,000 19.75% AA/Aa2 9.89 09/10 - 09/10 [ ]
--------------------------------------------------------------------------------------------------------
C $48,433,000 15.25% A/A2 9.89 09/10 - 09/10 [ ]
--------------------------------------------------------------------------------------------------------
D $13,453,000 14.00% A-/A3 9.97 09/10 - 10/10 [ ]
--------------------------------------------------------------------------------------------------------
</TABLE>
PRIVATE CERTIFICATES (6)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
RATING AVERAGE INITIAL
SUBORDINATION (S&P/ LIFE PRINCIPAL PASS-THROUGH
CLASS AMOUNT(1) LEVELS MOODY'S) (YEARS)(2) WINDOW(3) RATE(4)(5)(7)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
X $1,076,288,358 -- AAA/Aaa 9.03 -- [ ]
--------------------------------------------------------------------------------------------------------
E-O $150,681,358 -- -- -- -- --
--------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) In the case of each such Class, subject to a permitted variance of
plus or minus 5%. The Class X Notional Amount is equal to the sum
of all Certificate Balances outstanding from time to time.
(2) Based on Maturity Assumptions and a 0% CPR as described in the
Prospectus Supplement.
(3) Principal Window is the period during which distributions of
principal are expected to be made to the holders of each
designated Class in accordance with the Maturity Assumptions and a
0% CPR as described in the Prospectus Supplement.
(4) Other than the Class E, Class F, Class G and Class X of the
private certificates, each Class of Certificates will accrue
interest generally at a fixed rate of interest subject to a WAC
cap.
(5) The Pass-Through Rates on each of the Classes will be determined
at pricing.
(6) Certificates to be offered privately pursuant to Rule 144A and are
not offered hereby.
(7) The Pass-Through Rate on the Class X Certificates on each
Distribution Date will equal, in general, the NWAC Rate minus the
weighted average of the Pass-Through Rates of the classes of
certificates that are entitled to distributions of principal.
T-3
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
I. ISSUE CHARACTERISTICS
Issue Type: Public: Class A-1, A-2, B, C and D (the "Offered
Certificates")
Private (Rule 144A): Class X, E, F, G, H, J, K,
L, M, N and O (not offered hereby)
Securities Offered: Five monthly pay, multi-class fixed-rate
principal and interest sequential pay commercial
mortgage REMIC Pass-Through Certificates
Collateral: The collateral consists of a $1,076,288,358 pool
of fixed-rate commercial and multifamily Mortgage
Loans
Sellers: Midland Loan Services, Inc., CIBC Inc. and Morgan
Stanley Dean Witter Mortgage Capital Inc.
Book-Running Manager: Morgan Stanley & Co. Incorporated
Co-Lead Managers: Morgan Stanley & Co. Incorporated and PNC Capital
Markets, Inc.
Co-Managers: CIBC World Markets Corp. and Deutsche Bank
Securities Inc.
Master Servicer: Midland Loan Services, Inc.
Special Servicer: Midland Loan Services, Inc.
Trustee/Fiscal Agent: LaSalle Bank National Association / ABN AMRO Bank
N.V.
Pricing Date: On or about October [ ], 2000
Closing Date: On or about October [ ], 2000
Distribution Dates: The 15th of each month, or if the 15th is not a
business day, the next business day beginning in
November, 2000
Cut-Off Date: October 1, 2000
Minimum Denominations: $25,000 for Class A Certificates; $50,000 for
Class B, C and D Certificates
Settlement Terms: DTC, Euroclear and Clearstream, same day funds,
with accrued interest
Legal/Regulatory Status: Class A-1 and A-2 Certificates are expected to be
eligible for exemptive relief under ERISA. No
Class of Certificates is SMMEA eligible
Risk Factors: THE CERTIFICATES INVOLVE A DEGREE OF RISK AND MAY
NOT BE SUITABLE FOR ALL INVESTORS. SEE THE "RISK
FACTORS" SECTION OF THE PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS
T-4
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
II. STRUCTURE CHARACTERISTICS
Class A-1, A-2, B, C and D certificates are fixed-rate, monthly pay,
multi-class, sequential pay REMIC Pass-Through Certificates. The Class E, F
and G Certificates are weighted average coupon REMIC Pass-Through
Certificates. The Class X Certificates are variable rate interest only REMIC
Pass-Through Certificates. All Classes of Certificates derive their cash
flows from the entire pool of Mortgage Loans.
[CHART OMITTED]
Note: (1) Class X is entitled to interest (on a notional amount equal to the
aggregate pool balance) at an annual rate generally equal to the
difference between the weighted average of the net mortgage rates
over the weighted average of the pass-through rates for the classes
of Principal Balance Certificates.
(2) To be placed privately pursuant to Rule 144A and not offered hereby.
T-5
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
Interest Distributions: Each Class of Certificates (other than the Class V
and Class R Certificates) will be entitled on each
Distribution Date to interest accrued at its
Pass-Through Rate on the outstanding Certificate
Balance or Notional Amount of such Class, as
applicable.
Pass-Through Rates: Class A-1: [ ]
Class A-2: [ ]
Class B: [ ]
Class C: [ ]
Class D: [ ]
Classes E-O: --
Class X: See Note on page T-2
The Pass-Through Rate for each class of Principal
Balance Certificates for any Distribution Date will
not exceed the weighted average net mortgage rate
("NWAC") for such Distribution Date.
Principal Distributions: Principal will be distributed on each Distribution
Date to the most senior Class (i.e., the Class with
the earliest alphabetical/numerical Class
designation) of the Principal Balance Certificates
outstanding, until its Certificate Balance is
reduced to zero (sequential order). If, due to
losses, the Certificate Balances of the Class B
through Class O Certificates are reduced to zero,
payments of principal to the Class A-1 and A-2
Certificates will be made on a pro rata basis.
T-6
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
Prepayment Premium Allocation: Any Prepayment Premium collected with respect to
a Mortgage Loan during any particular Collection
Period will be distributed to the holders of
each Class of Principal Balance Certificates
(other than an excluded class as defined below)
then entitled to distributions of principal on
such distribution date. Such class will be
entitled to an aggregate amount (allocable on a
pro rata basis based on principal payments if
there is more than one Class of Principal
Balance Certificates entitled to a distribution
of principal) equal to the lesser of (a) such
Prepayment Premium Payment and (b) such
Prepayment Premium Payment multiplied by a
fraction, the numerator of which is equal to the
excess, if any, of the Pass-Through Rate
applicable to the most senior of such Classes of
Principal Balance Certificates then outstanding
(or, in the case of two Classes of Class A
Certificates, the one with the earlier payment
priority), over the relevant Discount Rate (as
defined in the Prospectus Supplement), and the
denominator of which is equal to the excess, if
any, of the Mortgage Rate of the Mortgage Loan
that prepaid, over the relevant Discount Rate.
The portion, if any, of the Prepayment Premium
remaining after such payments to the holders of
the Principal Balance Certificates will be
distributed to the holders of the Class X
Certificates. For the purposes of the foregoing,
the classes H, J, K, L, M, N and O are the
excluded classes.
The following is an example of the Prepayment
Premium Allocation under (b) above based on the
information contained herein and the following
assumptions:
o Two Classes of Certificates: Class A-1 and X
o The characteristics of the Mortgage Loan
being prepaid are as follows
- Loan Balance: $10,000,000
- Mortgage Rate: 8.00%
- Maturity Date: 10 years
(October 1, 2010)
o The Discount Rate is equal to 5.75%
o The Class A-1 Pass Through Rate is equal
to 7.00%
CLASS A-1 CLASS X
METHOD CERTIFICATES CERTIFICATES
--------------------------------------------- ------------ ------------
(Class A-1 Pass Through Rate - Discount Rate) (7.00% - 5.75% (100.00%-55.56%)
--------------------------------------------- ---------------
(Mortgage Rate - Discount Rate) (8.00% - 5.75%)
--------------- ----------------
Prepayment Premium Allocation 55.56% 44.44%
T-7
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
Credit Enhancement: Each Class of Certificates (other than Classes A-1,
A-2 and X) will be subordinate to all other Classes
with an earlier alphabetical Class designation.
Advancing: The Master Servicer, the Trustee and the Fiscal
Agent (in that order) will each be obligated to
make P&I Advances and Servicing Advances, including
delinquent property taxes and insurance (and the
Special Servicer will be obligated to make
emergency Servicing Advances), but only to the
extent that such Advances are deemed recoverable.
Realized Losses and Realized Losses and Expense Losses, if any, will be
Expense Losses: allocated to the Class O, Class N, Class M, Class
L, Class K, Class J, Class H, Class G, Class F,
Class E, Class D, Class C and Class B Certificates,
in that order, and then to Classes A-1 and A-2, pro
rata, in each case reducing amounts payable
thereto. Any interest shortfall of any Class of
Certificates will result in unpaid interest for
such Class which will be payable, without interest,
in subsequent periods, subject to available funds.
Prepayment/Balloon For any Distribution Date, any Net Aggregate
Interest Shortfalls: Prepayment Interest Shortfall not offset by the
Master Servicing Fee (but not to exceed 0.02% per
annum per loan), will generally be allocated pro
rata to each Class of Certificates in proportion to
its entitlement to interest.
Appraisal Reductions: An appraisal reduction generally will be created in
the amount, if any, by which the Principal Balance
of a Specially Serviced Mortgage Loan (plus other
amounts overdue in connection with such loan)
exceeds 90% of the appraised value of the related
Mortgaged Property, plus reserves for escrows
(other than taxes and insurance) that are pledged
as collateral for the loan. The Appraisal Reduction
Amount will reduce proportionately the amount of
delinquent interest advanced for such loan, which
reduction will result, in general, in a reduction
of interest distributable to the most subordinate
Class of Principal Balance Certificate outstanding.
An Appraisal Reduction will be reduced to zero as
of the date the related Mortgage Loan has become a
corrected mortgage loan, as defined in the
Prospectus Supplement.
T-8
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
Operating Adviser: The Operating Adviser, which may be appointed by
the Controlling Class, will have the right to
advise the Special Servicer with respect to certain
actions regarding Specially Serviced Mortgage
Loans. Examples include the right to make certain
modifications, foreclose, sell, bring an REO
Property into environmental compliance or accept
substitute or additional collateral. In addition,
subject to the satisfaction of certain conditions,
the Operating Adviser will have the right to direct
the Trustee to remove the Special Servicer and
appoint a successor Special Servicer that must be
acceptable to each Rating Agency.
Controlling Class: The Controlling Class will generally be the most
subordinate Class of Certificates outstanding at
any time or, if the Certificate Balance of such
Class is less than 25% of the initial Certificate
Balance of such Class, the next most subordinate
Class of Principal Balance Certificates still
outstanding will be the controlling class.
Special Servicer: In general, the Special Servicer has the right to
modify the terms of a Specially Serviced Mortgage
Loan if it determines that the related borrower is
in default or default is reasonably foreseeable and
such modification would increase the net present
value of the proceeds to the Trust, provided that
the Special Servicer generally may not extend the
maturity date of a Mortgage Loan beyond two years
prior to the Rated Final Distribution Date.
Optional Termination: The majority holders of the Controlling Class, then
the Master Servicer, then the Special Servicer and
then the holder of a majority of the R-I
Certificates will have the option to purchase, in
whole but not in part, the remaining assets of the
Trust on or after the Distribution Date on which
the current aggregate stated principal balance of
the Mortgage Loans is less than or equal to 1% of
the initial aggregate stated principal balance of
the Mortgage Loans. Such purchase price will
generally be at a price equal to the sum of (1) the
unpaid aggregate Scheduled Principal Balance of the
Mortgage Loans, plus accrued and unpaid interest,
(2) unreimbursed Advances and interest thereon and
(3) the appraised value of any REO property.
T-9
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
Reports to The Trustee will prepare and make available
Certificateholders: electronically (or, upon request, provide by first
class mail) a monthly report to Certificateholders.
The Trustee's monthly report and the reports and
files comprising the Commercial Mortgage Securities
Association Investor Reporting Package will be
available electronically on the Trustee's internet
website at www.lnbabs.com. Information regarding
the Mortgage Loans will also be available through
Midland's internet-based investor reporting system,
CMBS Investor Insight(sm), at www.midlandls.com.
T-10
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
III. SELLERS Midland Loan Services, Inc.
The Mortgage Pool includes 119 Mortgage Loans, representing
approximately 41.4% of the Initial Pool Balance, which were
originated by or on behalf of PNC Bank N.A. or Midland Loan
Services, Inc. ("MLS").
MLS is a wholly owned subsidiary of PNC Bank, National
Association. MLS is a real estate financial services company
engaged in the servicing and origination of commercial and
multifamily mortgage loans. PNC Capital Markets is an
affiliate of MLS.
CIBC Inc.
The Mortgage Pool includes 43 Mortgage Loans, representing
approximately 38.2% of the Initial Pool Balance, which were
either acquired or originated by or on behalf of CIBC Inc.
CIBC Inc. is a majority owned subsidiary of Canadian Imperial
Holdings Inc. and is incorporated under the laws of Delaware.
Canadian Imperial Holdings Inc. is a wholly owned subsidiary
of CIBC Delaware Holdings Inc., also a Delaware corporation,
which is a subsidiary of Canadian Imperial Bank of Commerce,
a bank chartered under the Bank Act of Canada. CIBC Inc. is a
commercial finance company that originates commercial and
multifamily real estate loans, purchases participations in
loans from third-party lenders and otherwise extends credit
to Fortune 1000 companies. CIBC Inc. is an affiliate of CIBC
World Markets Corp., formerly known as CIBC Oppenheimer Corp.
Morgan Stanley Dean Witter Mortgage Capital, Inc. ("MSDWMC")
The Mortgage Pool includes 28 Mortgage Loans, representing
approximately 20.3% of the Initial Pool Balance, that were
originated on behalf of MSDWMC.
MSDWMC is a subsidiary of Morgan Stanley & Co. Incorporated
and was formed to originate and purchase mortgage loans
secured by commercial and multifamily real estate.
T-11
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
IV. COLLATERAL DESCRIPTION
Summary: The Mortgage Pool consists of a $1,076,288,358 pool of
190 fixed-rate, mortgage loans secured by liens on
commercial and multifamily properties located throughout
36 jurisdictions. As of the Cut-Off Date, the Mortgage
Loans have a weighted average mortgage rate of 8.208%
and a weighted average remaining term to maturity of 115
months. See the Appendices to the Prospectus Supplement
for more detailed collateral information.
Seismic Review For loans originated by Midland, PNC Bank, N.A., CIBC or
Process: MSDWMC, all loan requests secured by properties in
California are subject to a third party seismic report.
Generally, any proposed loan originated by Midland, PNC
Bank, N.A., CIBC or MSDWMC as to which the property was
estimated to have a PML in excess of 20% of the
estimated replacement cost would either be subject to a
lower loan-to-value limit at origination, be conditioned
on seismic upgrading, be conditioned on satisfactory
earthquake insurance or be declined.
T-12
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
<TABLE>
<CAPTION>
SIGNIFICANT MORTGAGE LOANS
PERCENT OF UNITS/ CURRENT BALLOON
PROPERTY CURRENT TOTAL SQUARE LOAN TO LOAN TO
PROPERTY NAME CITY STATE TYPE BALANCE BALANCE FEET DSCR VALUE VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
475 Park Avenue South New York NY Office $59,946,195 5.6% 408,517 1.36 63.8% 58.1%
Camino Real Marketplace Goleta CA Retail $49,000,000 4.6% 497,474 1.33 74.6% 68.4%
Courtyard by Marriott New York NY Hotel $45,000,000 4.2% 244 1.49 67.2% 56.6%
AppleTree Business Park Cheektowaga NY Office $37,227,201 3.5% 434,593 1.31 72.3% 65.3%
Bozzuto's Warehouse and
Distribution Facility Cheshire CT Industrial $32,843,136 3.1% 986,565 1.39 67.0% 64.0%
500 North Capitol Washington DC Office $29,539,428 2.7% 175,698 1.25 74.6% 67.6%
Arcadia Crossing Power Center Phoenix AZ Retail $29,367,163 2.7% 446,433 1.20 74.3% 67.2%
Sweetheart Cup Distribution
Center Hampstead MD Industrial $27,000,000 2.5% 1,034,470 1.36 73.7% 66.5%
Triangle Plaza II College Point NY Retail $26,286,819 2.4% 137,984 1.32 79.7% 69.8%
Solana Beach Town Centre Solana Beach CA Retail $25,983,319 2.4% 251,272 1.26 74.9% 67.4%
Continental Teves Building Auburn Hills MI Office $24,093,491 2.2% 236,770 1.26 75.3% 68.5%
Discovery Creative &
Technology Center Silver Springs MD Office $23,581,086 2.2% 148,530 1.30 73.7% 67.0%
Springfield Gardens Shopping
Center Springfield Gardens NY Retail $20,948,014 1.9% 96,018 1.23 74.8% 67.6%
---------------------
TOTAL $430,815,852 40.0%
</TABLE>
T-13
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
GEOGRAPHIC DISTRIBUTION
[MAP OF UNITED STATES]
WA 1.65% OK 0.48% TN 2.92% MA 1.37%
OR 1.40% TX 4.94% OH 2.40% CT 3.44%
CA 16.44% MN 0.35% AL 0.15% NJ 2.53%
ID 0.11% IA 0.16% PA 3.28% DE 0.10%
NV 0.47% MO 1.15% VA 4.19% MD 5.11%
UT 0.15% IL 0.55% NC 0.87% DC 2.85%
AZ 5.02% MS 1.70% GA 1.07%
CO 0.37% MI 4.63% FL 2.83%
NE 0.34% IN 0.25% NH 0.26%
KS 0.85% KY 0.49% NY 25.14%
T-14
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
SELLERS
--------------------------------------------------------------------------------
NO. AGGREGATE %
OF CUT-OFF DATE OF
LOANS BALANCE POOL
--------------------------------------------------------------------------------
CIBC 43 411,442,994 38.23
MSDWMC 28 218,785,231 20.33
Midland 119 446,060,133 41.44
--------------------------------------------------------------------------------
TOTAL: 190 1,076,288,358 100.00
--------------------------------------------------------------------------------
CURRENT BALANCES
--------------------------------------------------------------------------------
NO. AGGREGATE %
OF CUT-OFF DATE OF
LOANS BALANCE POOL
--------------------------------------------------------------------------------
1 - 1,000,000 5 4,207,801 0.39
1,000,001 - 2,000,000 55 84,667,978 7.87
2,000,001 - 3,000,000 49 119,713,531 11.12
3,000,001 - 4,000,000 24 80,370,846 7.47
4,000,001 - 5,000,000 9 40,583,899 3.77
5,000,001 - 6,000,000 7 39,879,292 3.71
6,000,001 - 7,000,000 4 25,256,353 2.35
7,000,001 - 8,000,000 5 37,869,977 3.52
8,000,001 - 9,000,000 7 59,919,942 5.57
9,000,001 - 10,000,000 3 28,688,011 2.67
10,000,001 - 15,000,000 7 90,574,577 8.42
15,000,001 - 20,000,000 2 33,740,300 3.13
20,000,001 - 25,000,000 3 68,622,592 6.38
25,000,001 (great than or equal to) 10 362,193,261 33.65
--------------------------------------------------------------------------------
TOTAL: 190 1,076,288,358 100.00
--------------------------------------------------------------------------------
Min: 696,932 Max: 59,946,195 Average: 5,664,676
--------------------------------------------------------------------------------
STATES
--------------------------------------------------------------------------------
NO. AGGREGATE %
OF CUT-OFF DATE OF
LOANS BALANCE POOL
--------------------------------------------------------------------------------
New York 18 270,576,060 25.14
California 28 176,921,724 16.44
Maryland 4 54,962,134 5.11
Arizona 9 54,021,553 5.02
Texas 14 53,185,982 4.94
Michigan 6 49,885,326 4.63
Other 111 416,735,579 38.72
--------------------------------------------------------------------------------
TOTAL: 190 1,076,288,358 100.00
--------------------------------------------------------------------------------
PROPERTY TYPE
--------------------------------------------------------------------------------
NO. AGGREGATE %
OF CUT-OFF DATE OF
LOANS BALANCE POOL
--------------------------------------------------------------------------------
Retail 48 350,997,309 32.61
Office 38 312,393,723 29.03
Multifamily 63 199,108,395 18.5
Hospitality 15 94,734,571 8.80
Industrial 17 94,180,584 8.75
Manufactured Housing 4 11,734,482 1.09
Self Storage 3 8,692,479 0.81
Other 2 4,446,815 0.41
--------------------------------------------------------------------------------
TOTAL: 190 1,076,288,358 100.00
--------------------------------------------------------------------------------
MORTGAGE RATES (%)
--------------------------------------------------------------------------------
NO. AGGREGATE %
OF CUT-OFF DATE OF
LOANS BALANCE POOL
--------------------------------------------------------------------------------
5.501 - 6.000 3 6,520,642 0.61
6.001 - 6.500 22 47,622,598 4.42
6.501 - 7.000 26 75,280,986 6.99
7.001 - 7.500 13 57,008,525 5.30
7.501 - 8.000 6 44,059,570 4.09
8.001 - 8.500 64 473,132,180 43.96
8.501 - 9.000 46 319,898,568 29.72
9.001 - 9.500 7 47,197,561 4.39
9.501 - 10.000 3 5,567,727 0.52
--------------------------------------------------------------------------------
TOTAL: 190 1,076,288,358 100.00
--------------------------------------------------------------------------------
Min: 5.930 Max: 9.660 Wtd. Avg: 8.208
--------------------------------------------------------------------------------
ORIGINAL TERMS TO STATED MATURITY (MOS.)
--------------------------------------------------------------------------------
NO. AGGREGATE %
OF CUT-OFF DATE OF
LOANS BALANCE POOL
--------------------------------------------------------------------------------
61 - 120 172 989,171,733 91.91
121 - 180 15 79,642,031 7.40
181 - 240 3 7,474,594 0.69
--------------------------------------------------------------------------------
TOTAL: 190 1,076,288,358 100.00
--------------------------------------------------------------------------------
Min: 66 Max: 240 Wtd. Avg.: 122
--------------------------------------------------------------------------------
REMAINING TERMS TO STATED MATURITY (MOS.)
--------------------------------------------------------------------------------
NO. AGGREGATE %
OF CUT-OFF DATE OF
LOANS BALANCE POOL
--------------------------------------------------------------------------------
1 - 60 1 1,178,311 0.11
61 - 120 170 915,844,931 85.09
121 - 180 16 151,790,521 14.10
181 - 240 3 7,474,594 0.69
--------------------------------------------------------------------------------
TOTAL: 190 1,076,288,358 100.00
--------------------------------------------------------------------------------
Min: 52 Max: 239 Wtd. Avg.: 115
--------------------------------------------------------------------------------
BALLOON LOANS
--------------------------------------------------------------------------------
NO. AGGREGATE %
OF CUT-OFF DATE OF
LOANS BALANCE POOL
--------------------------------------------------------------------------------
Yes 185 1,064,348,272 98.9
No 5 11,940,086 1.1
--------------------------------------------------------------------------------
TOTAL: 190 1,076,288,358 100.00
--------------------------------------------------------------------------------
DEBT SERVICE COVERAGE RATIOS (x)
--------------------------------------------------------------------------------
NO. AGGREGATE %
OF CUT-OFF DATE OF
LOANS BALANCE POOL
--------------------------------------------------------------------------------
1.16 - 1.25 49 265,708,556 24.69
1.26 - 1.35 58 419,566,651 38.98
1.36 - 1.50 44 301,936,926 28.05
1.51 - 1.75 28 67,111,108 6.24
1.76 - 2.00 7 12,024,448 1.12
2.01 >= 4 9,940,668 0.92
--------------------------------------------------------------------------------
TOTAL: 190 1,076,288,358 100.00
--------------------------------------------------------------------------------
Min: 1.16 Max: 2.81 Wtd. Avg.: 1.35
--------------------------------------------------------------------------------
CURRENT LOAN-TO-VALUE RATIOS (%)
--------------------------------------------------------------------------------
NO. AGGREGATE %
OF CUT-OFF DATE OF
LOANS BALANCE POOL
--------------------------------------------------------------------------------
20.1 - 30.0 1 4,417,257 0.41
30.1 - 40.0 1 1,899,896 0.18
40.1 - 50.0 7 13,278,646 1.23
50.1 - 60.0 15 44,391,585 4.12
60.1 - 70.0 50 296,301,800 27.53
70.1 - 80.0 114 693,517,503 64.44
80.1 - 90.0 2 22,481,671 2.09
--------------------------------------------------------------------------------
TOTAL: 190 1,076,288,358 100.00
--------------------------------------------------------------------------------
Min: 27.5 Max: 83.8 Wtd. Avg.: 71.2
--------------------------------------------------------------------------------
BALLOON LOAN-TO-VALUE RATIOS (%)
--------------------------------------------------------------------------------
NO. AGGREGATE %
OF CUT-OFF DATE OF
LOANS BALANCE POOL
--------------------------------------------------------------------------------
0.1 - 10.0 5 11,940,086 1.11
10.1 - 20.0 1 4,417,257 0.41
20.1 - 30.0 1 1,899,896 0.18
30.1 - 40.0 7 21,529,048 2.00
40.1 - 50.0 15 40,016,981 3.72
50.1 - 60.0 48 231,397,469 21.50
60.1 - 70.0 99 685,373,598 63.68
70.1 - 80.0 14 79,714,022 7.41
--------------------------------------------------------------------------------
TOTAL: 190 1,076,288,358 100.00
--------------------------------------------------------------------------------
Min: 1.3 Max: 72.7 Wtd. Avg.: 62.3
--------------------------------------------------------------------------------
T-15
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
$925,607,000 (APPROXIMATE)
PNC MORTGAGE ACCEPTANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
PREPAYMENT PROTECTION ANALYSIS
PERCENTAGE OF COLLATERAL BY PREPAYMENT RESTRICTION
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS OCTOBER 2000 OCTOBER 2001 OCTOBER 2002 OCTOBER 2003 OCTOBER 2004 OCTOBER 2005
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Locked Out 100.00% 98.59% 94.13% 86.80% 86.09% 82.04%
Yield Maintenance Total 0.00% 1.41% 5.87% 13.20% 13.81% 17.18%
Open 0.00% 0.00% 0.00% 0.00% 0.10% 0.78%
----------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
----------------------------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $1,076,288,358 $1,066,944,505 $1,056,818,645 $1,045,628,995 $1,033,512,677 $1,019,134,814
% Initial Pool Balance 100.00% 99.13% 98.19% 97.15% 96.03% 94.69%
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS OCTOBER 2006 OCTOBER 2007 OCTOBER 2008 OCTOBER 2009 OCTOBER 2010
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Locked Out 79.00% 81.84% 89.08% 79.32% 69.11%
Yield Maintenance Total 17.67% 17.28% 5.99% 6.25% 8.66%
Open 3.33% 0.88% 4.92% 14.43% 22.23%
-----------------------------------------------------------------------------------------------------------------
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00%
-----------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $996,812,485 $946,414,106 $830,573,100 $776,385,667 $61,088,047
% Initial Pool Balance 92.62% 87.93% 77.17% 72.14% 5.68%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) The above analysis is based on Maturity Assumptions and a 0% CPR as
discussed in the Prospectus Supplement.
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, PNC Capital
Markets, Inc., CIBC World Markets Corp. and Deutsche Bank Securities Inc.
(collectively, the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transactions in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
--------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
135 S. LaSalle Street Suite 1625 MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
Chicago, IL 60603 COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
Administrator: Analyst:
Kori Sumser (312)904-0390 REPORTING PACKAGE TABLE OF CONTENTS Thomas Helms (714) 282-3980 (203)
[email protected] [email protected]
====================================================================================================================================
<S> <C> <C>
====================================== ==================================================== ======================================
Page(s)
Issue Id: PNCM00C2 REMIC Certificate Report Closing Date:
Monthly Data File Name: Ratings First Payment Date: 11/15/2000
Bond Interest Reconciliation Assumed Final Payment Date:
Cash Reconciliation Summary
====================================== 15 Month Historical Loan Status Summary ======================================
15 Month Historical Payoff/Loss Summary
Historical Collateral Level Prepayment Report
Delinquent Loan Detail
Mortgage Loan Characteristics
Loan Level Detail
Specially Serviced Report
Modified Loan Detail
Realized Loss Detail
Appraisal Reduction Detail
====================================================
=============================================================================================
CONTACT INFORMATION
---------------------------------------------------------------------------------------------
DEPOSITOR: PNC MORTGAGE ACCEPTANCE CORP.
UNDERWRITERS: MORGAN STANLEY & CO. INCORPORATED AND PNC CAPITAL MARKETS, INC.
MASTER SERVICER: MIDLAND LOAN SERVICES, INC.
RATING AGENCIES: MOODY'S INVESTORS SERVICE, INC. AND STANDARD & POOR'S RATINGS SERVICES
=============================================================================================
==================================================================
INFORMATION IS AVAILABLE FOR THIS ISSUE FROM THE FOLLOWING SOURCES
------------------------------------------------------------------
LaSalle Web Site www.lnbabs.com
Servicer Website www.midlandls.com
LaSalle Bulletin Board (714) 282-3990
LaSalle Factor Line (800) 246-5761
==================================================================
====================================================================================================================================
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
WAC: COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
WA Life Term: SERIES 2000-C2 Record Date:
WA Amort Term: ABN AMRO ACCT: XX-XXXX-XX-X
Current Index:
Next Index:
====================================================================================================================================
ORIGINAL OPENING PRINCIPAL PRINCIPAL NEGATIVE CLOSING INTEREST INTEREST PASS-THROUGH
CLASS FACE VALUE (1) BALANCE PAYMENT ADJ. OR LOSS AMORTIZATION BALANCE PAYMENT ADJUSTMENT RATE (2)
CUSIP Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Next Rate (3)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
Total P&I Payment 0.00
==============================
Notes: (1) N denotes notional balance not included in total
(2) Interest Paid minus Interest Adjustment minus Deferred Interest equals Accrual
(3) Estimated
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
BOND INTEREST RECONCILIATION
===============================================================================================================================
Deductions Additions
----------------------------------------- ---------------------------------
Accrual Accrued Add. Deferred & Prior Prepay- Other Distributable
------------- Certificate Allocable Trust Accretion Interest Int. Short- ment Interest Certificate
Class Method Days Interest PPIS Expense(1) Interest Losses falls Due Penalties Proceeds(2) Interest
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
===============================================================================================================================
<CAPTION>
====================== ======================
Remaining
Interest Outstanding Credit Support
Payment Interest --------------------
Amount Shortfalls Original Current(3)
---------------------- ----------------------
<S> <C> <C> <C>
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
0.00 0.00
====================== ======================
(1) Additional Trust Expenses are fees allocated directly to the bond resulting in a deduction to accrued interest and not carried
as an outstanding shortfall.
(2) Other Interest Proceeds include default interest, PPIE and Recoveries of Interest.
(3) Determined as follows: (A) the ending balance of all the classes less (B) the sum of (i) the ending balance of the class
and (ii) the ending balance of all classes which are not subordinate to the class divided by (A).
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
CASH RECONCILIATION SUMMARY
====================================================================================================================================
<S> <C> <C>
------------------------------------------- ------------------------------------------- ------------------------------------------
INTEREST SUMMARY SERVICING FEE SUMMARY PRINCIPAL SUMMARY
------------------------------------------- ------------------------------------------- ------------------------------------------
Current Scheduled Interest Current Servicing Fees SCHEDULED PRINCIPAL:
Less Deferred Interest Plus Fees Advanced for PPIS Current Scheduled Principal
Plus Advance Interest Less Reduction for PPIS Advanced Scheduled Principal
Plus Unscheduled Interest Plus Unscheduled Servicing Fees ------------------------------------------
PPIS Reducing Scheduled Interest ------------------------------------------- Scheduled Principal Distribution
Less Total Fees Paid To Servicer Total Servicing Fees Paid ------------------------------------------
Plus Fees Advanced for PPIS ------------------------------------------- UNSCHEDULED PRINCIPAL:
Less Fee Strips Paid by Servicer Curtailments
Less Misc. Fees & Expenses ------------------------------------------- Prepayments in Full
Less Non Recoverable Advances PPIS SUMMARY Liquidation Proceeds
------------------------------------------- ------------------------------------------- Repurchase Proceeds
Interest Due Trust Other Principal Proceeds
------------------------------------------- Gross PPIS ------------------------------------------
Less Trustee Fee Reduced by PPIE Unscheduled Principal Distribution
Less Fee Strips Paid by Trust Reduced by Shortfalls in Fees ------------------------------------------
Less Misc. Fees Paid by Trust Reduced by Other Amounts Remittance Principal
------------------------------------------- ------------------------------------------- ------------------------------------------
Remittance Interest PPIS Reducing Scheduled Interest
------------------------------------------- ------------------------------------------- ------------------------------------------
PPIS Reducing Servicing Fee Servicer Wire Amount
------------------------------------------- ------------------------------------------
PPIS Due Certificate
-------------------------------------------
----------------------------------------------------------
POOL BALANCE SUMMARY
----------------------------------------------------------
Balance Count
----------------------------------------------------------
Beginning Pool
Scheduled Principal Distribution
Unscheduled Principal Distribution
Deferred Interest
Liquidations
Repurchases
Ending Pool
----------------------------------------------------------
-------------------------------------------------------------------------------------------------------
ADVANCES
--------
PRIOR OUTSTANDING CURRENT PERIOD RECOVERED ENDING OUTSTANDING
Principal Interest Principal Interest Principal Interest Principal Interest
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
====================================================================================================================================
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
ASSET BACKED FACTS ~ 15 MONTH HISTORICAL LOAN STATUS SUMMARY
============ ============================================================================= =====================================
Delinquency Aging Categories Special Event Categories (1)
----------------------------------------------------------------------------- -------------------------------------
Specially
Delinq 1 Month Delinq 2 Months Delinq 3+ Months Foreclosure REO Modifications Serviced Bankruptcy
Distribution ----------------------------------------------------------------------------- -------------------------------------
Date # Balance # Balance # Balance # Balance # Balance # Balance # Balance # Balance
============ ============================================================================= =====================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01/00/00
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
============ ============================================================================= =====================================
(1) Note: Modification, Specially Serviced & Bankruptcy Totals are Included in the Appropriate Delinquency Aging Category
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
ASSET BACKED FACTS ~ 15 MONTH HISTORICAL PAYOFF/LOSS SUMMARY
============ ================================================================================== ==================================
Appraisal Realized
Ending Pool (1) Payoffs (2) Penalties Reduct. (2) Liquidations (2) Losses (2) Remaining Term Curr Weighted Avg.
Distribution ---------------------------------------------------------------------------------- ----------------------------------
Date # Balance # Balance # Amount # Balance # Balance # Amount Life Amort. Coupon Remit
============ ================================================================================== ==================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
============ ================================================================================== ==================================
(1) Percentage based on pool as of cutoff. (2) Percentage based on pool as of beginning of period.
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
HISTORICAL COLLATERAL LEVEL PREPAYMENT REPORT
======================== ============================== ==================== =============== =============================
Remaining Term
Disclosure Distribution Initial Payoff Penalty Prepayment Maturity Property ------------------ Note
Control # Date Balance Code Amount Amount Date Date Type State DSCR Life Amort. Rate
======================== ============================== ==================== =============== =============================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
======================== ============================== ==================== =============== =============================
CUMULATIVE 0 0
===============
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
DELINQUENT LOAN DETAIL
===============================================================================================================================
Paid Outstanding Out. Property Special
Disclosure Doc Thru Current P&I P&I Protection Advance Servicer Foreclosure Bankruptcy REO
Control # Date Advance Advances** Advances Description (1) Transfer Date Date Date Date
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===============================================================================================================================
A. P&I Advance - Loan in Grace Period 1. P&I Advance - Loan delinquent 1 month
B. P&I Advance - Late Payment but (less than) one month delinq 2. P&I Advance - Loan delinquent 2 months
3. P&I Advance - Loan delinquent 3 months or More
4. Matured Balloon/Assumed Scheduled Payment
===============================================================================================================================
** Outstanding P&I Advances include the current period P&I Advance
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
MORTGAGE LOAN CHARACTERISTICS
<S> <C>
DISTRIBUTION OF PRINCIPAL BALANCES DISTRIBUTION OF MORTGAGE INTEREST RATES
================================================================= =================================================================
Weighted Average Weighted Average
Current Scheduled # of Scheduled % of ------------------ Current Mortgage # of Scheduled % of ------------------
Balances Loans Balance Balance Term Coupon DSCR Interest Rate Loans Balance Balance Term Coupon DSCR
================================================================= =================================================================
=================================================================
0 0 0.00%
================================================================= =================================================================
0 0 0.00% Minimum Mortgage Interest Rate 10.0000%
================================================================= Maximum Mortgage Interest Rate 10.0000%
Average Scheduled Balance
Maximum Scheduled Balance DISTRIBUTION OF REMAINING TERM (BALLOON)
Minimum Scheduled Balance =================================================================
Weighted Average
DISTRIBUTION OF REMAINING TERM (FULLY AMORTIZING) Balloon # of Scheduled % of ------------------
================================================================= Mortgage Loans Loans Balance Balance Term Coupon DSCR
Weighted Average =================================================================
Fully Amortizing # of Scheduled % of ------------------ 0 to 60
Mortgage Loans Loans Balance Balance Term Coupon DSCR 61 to 120
================================================================= 121 to 180
181 to 240
241 to 360
================================================================= =================================================================
0 0 0.00% 0 0 0.00%
================================================================= =================================================================
Minimum Remaining Term Minimum Remaining Term 0
Maximum Remaining Term Maximum Remaining Term 0
10/02/2000 - 14:20 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date: 01/00/1900
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date: 01/00/1900
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment: 01/00/1900
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment: 01/00/1900
SERIES 2000-C2 Record Date: 01/00/1900
ABN AMRO ACCT: XX-XXXX-XX-X
MORTGAGE LOAN CHARACTERISTICS
<S> <C>
DISTRIBUTION OF DSCR (CURRENT) GEOGRAPHIC DISTRIBUTION
================================================================= =================================================================
Debt Service # of Scheduled % of # of Scheduled % of
Coverage Ratio Loans Balance Balance WAMM WAC DSCR State Loans Balance Balance WAMM WAC DSCR
================================================================= =================================================================
=================================================================
0 0 0.00%
=================================================================
Maximum DSCR
Minimum DSCR
DISTRIBUTION OF DSCR (CUTOFF)
=================================================================
Debt Service # of Scheduled % of
Coverage Ratio Loans Balance Balance WAMM WAC DSCR
=================================================================
================================================================= =================================================================
0 0 0.00% 0 0.00%
================================================================= =================================================================
Maximum DSCR 0.00
Minimum DSCR 0.00
10/02/2000 - 14:20 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date: 01/00/1900
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date: 01/00/1900
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment: 01/00/1900
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment: 01/00/1900
SERIES 2000-C2 Record Date: 01/00/1900
ABN AMRO ACCT: XX-XXXX-XX-X
MORTGAGE LOAN CHARACTERISTICS
<S> <C>
DISTRIBUTION OF PROPERTY TYPES DISTRIBUTION OF LOAN SEASONING
================================================================= =================================================================
# of Scheduled % of # of Scheduled % of
Property Types Loans Balance Balance WAMM WAC DSCR Number of Years Loans Balance Balance WAMM WAC DSCR
================================================================= =================================================================
================================================================= =================================================================
0 0 0.00% 0 0 0.00%
================================================================= =================================================================
DISTRIBUTION OF AMORTIZATION TYPE DISTRIBUTION OF YEAR LOANS MATURING
================================================================= =================================================================
Current Scheduled # of Scheduled % of # of Scheduled % of
Balances Loans Balance Balance WAMM WAC DSCR Year Loans Balance Balance WAMM WAC DSCR
================================================================= =================================================================
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009 & Longer
================================================================= =================================================================
0 0 0.00%
================================================================= =================================================================
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
LOAN LEVEL DETAIL
==============================================================================================================================
Operating Ending Spec.
Disclosure Property Statement Maturity Principal Note Scheduled Mod. Serv ASER
Control # Grp Type State DSCR NOI Date Date Balance Rate P&I Flag Flag Flag
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
==============================================================================================================================
W/Avg 0.00 0 0 0
==============================================================================================================================
<CAPTION>
====================================
Loan Prepayment
Status -------------------------
Code(1) Amount Penalty Date
====================================
<S> <C> <C> <C>
====================================
0 0
====================================
* NOI and DSCR, if available and reportable under the terms of the Pooling and Servicing Agreement, are based on information
obtained from the related borrower, and no other party to the agreement shall be held liable for the accuracy or methodology
used to determine such figures.
------------------------------------------------------------------------------------------------------------------------------------
(1) Legend: A. P&I Adv - in Grace Period 1. P&I Adv - delinquent 1 month 7. Foreclosure
B. P&I Adv - (less than) one month delinq 2. P&I Adv - delinquent 2 months 8. Bankruptcy
3. P&I Adv - delinquent 3+ months 9. REO
4. Mat. Balloon/Assumed P&I 10. DPO
5. Prepaid in Full 11. Modification
6. Specially Serviced
====================================================================================================================================
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
SPECIALLY SERVICED (PART I) ~ LOAN DETAIL
===================== =================== ================================= ================================ ================
Balance Remaining Term
Disclosure Transfer ----------------- Note Maturity -------------- Property NOI
Control # Date Scheduled Actual Rate Date Life Amort. Type State NOI DSCR Date
===================== =================== ================================= ================================ ================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===================== =================== ================================= ================================ ================
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
SPECIALLY SERVICED LOAN DETAIL (PART II) ~ SERVICER COMMENTS
====================================================================================================================================
Disclosure Resolution
Control # Strategy Comments
====================================================================================================================================
<S> <C> <C>
====================================================================================================================================
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
MODIFIED LOAN DETAIL
====================================================================================================================================
Disclosure Modification Modification Modification
Control # Date Code Description
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
====================================================================================================================================
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
REALIZED LOSS DETAIL
====================================================================================================================================
Beginning Gross Proceeds Aggregate Net Net Proceeds
Distribution Disclosure Appraisal Appraisal Scheduled Gross as a % of Liquidation Liquidation as a % of Realized
Period Control # Date Value Balance Proceeds Sched Principal Expenses * Proceeds Sched. Balance Loss
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
CURRENT TOTAL 0.00 0.00 0.00 0.00 0.00
CUMULATIVE 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
* Aggregate liquidation expenses also include outstanding P&I advances and unpaid servicing fees, unpaid trustee fees, etc.
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO PNC MORTGAGE ACCEPTANCE CORP. Statement Date:
LaSalle Bank N.A. MIDLAND LOAN SERVICES, INC., MASTER SERVICER Payment Date:
MIDLAND LOAN SERVICES, INC., SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Next Payment:
SERIES 2000-C2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
APPRAISAL REDUCTION DETAIL
====================== ======================== ====================================== ================ ====== ================
Remaining Term Appraisal
Disclosure Appraisal Scheduled Reduction Note Maturity --------------- Property ---------------
Control # Red. Date Balance Amount Rate Date Life Amort. Type State DSCR Value Date
---------------------- ------------------------ -------------------------------------- ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================== ======================== ====================================== ================ ====== ================
10/03/2000 - 08:38 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PROSPECTUS
PNC MORTGAGE ACCEPTANCE CORP.
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
Our name is PNC Mortgage Acceptance Corp. and we intend to offer commercial
mortgage pass-through certificates from time to time. These offers may be made
through one or more different methods, including offerings through underwriters.
See "Method of Distribution."
<TABLE>
<CAPTION>
------------------------------------------------------------ ---------------------------------------------------------
<S> <C>
THE OFFERED CERTIFICATES: THE TRUST ASSETS:
The offered certificates will be issuable in The assets of each trust will include:
series. Each series of offered certificates will:
o mortgage loans secured by first and junior
o have its own series designation, liens on, or security interests in, various
o consist of one or more classes with various interests in commercial and multifamily real
payment characteristics, properties,
o evidence beneficial ownership interests in a o mortgage-backed securities that directly or
trust established by us, and indirectly evidence interests in, or are directly
o be payable solely out of trust assets. or indirectly secured by, such types of mortgage
loans,
We do not currently intend to list the offered o direct obligations of the United States or
certificates of any series on any national securities other governmental agencies, or
exchange or the Nasdaq stock market. o some combination of such types of mortgage
loans, mortgage-backed securities and government
securities.
Trust assets may also include letters of credit,
surety bonds, insurance policies, guarantees, reserve
funds, guaranteed investment contracts, interest rate
or currency exchange agreements, interest rate cap
or floor agreements, or other similar
instruments and agreements.
------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
In connection with each offering, we will prepare a supplement to this
prospectus in order to describe in more detail the particular certificates being
offered and the related trust assets. In that document, we will also state the
price to the public for each class of offered certificates or explain the method
for determining such price. In addition, in that document, we will identify the
applicable lead or managing underwriter(s), if any, and the relevant
underwriting arrangements. You may not purchase the offered certificates of any
series unless you have also received the prospectus supplement for that series.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 9 IN THIS
PROSPECTUS, AS WELL AS THOSE SET FORTH IN THE RELATED PROSPECTUS SUPPLEMENT,
PRIOR TO INVESTING.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE OFFERED CERTIFICATES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 4, 2000
<PAGE>
IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS PROSPECTUS
When deciding whether to invest in any of the offered certificates, you
should only rely on the information contained in this prospectus and the related
prospectus supplement. We have not authorized any dealer, salesman or other
person to give any information or to make any representation that is different.
In addition, information in this prospectus or any related prospectus supplement
is current only as of the date on its cover. By delivery of this prospectus and
any related prospectus supplement, we are not offering to sell any securities,
and are not soliciting an offer to buy any securities, in any state where the
offer and sale is not permitted.
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TABLE OF CONTENTS
IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS PROSPECTUS.........2
SUMMARY OF PROSPECTUS.......................................................4
RISK FACTORS................................................................9
DESCRIPTION OF THE TRUST ASSETS............................................32
YIELD AND MATURITY CONSIDERATIONS..........................................37
PNC MORTGAGE ACCEPTANCE CORP...............................................42
DESCRIPTION OF THE CERTIFICATES............................................42
DESCRIPTION OF THE GOVERNING DOCUMENT......................................48
DESCRIPTION OF CREDIT SUPPORT..............................................59
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS....................................61
FEDERAL INCOME TAX CONSEQUENCES............................................71
STATE AND OTHER TAX CONSEQUENCES..........................................101
ERISA CONSIDERATIONS......................................................101
LEGAL INVESTMENT..........................................................104
USE OF PROCEEDS...........................................................106
METHOD OF DISTRIBUTION....................................................106
WHERE YOU CAN FIND MORE INFORMATION.......................................107
LEGAL MATTERS.............................................................108
FINANCIAL INFORMATION.....................................................108
RATINGS...................................................................108
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SUMMARY OF PROSPECTUS
This summary contains selected information from this prospectus. It does not
contain all of the information you need to consider in making your investment
decision. To understand all of the terms of a particular offering of
certificates, you should read carefully this prospectus and the related
prospectus supplement in full.
WHO WE ARE
PNC Mortgage Acceptance Corp. is a Missouri corporation and a wholly
owned subsidiary of Midland Loan Services, Inc. Our principal offices are
located at:
210 West 10th Street
6th Floor
Kansas City, Missouri 64105
Our main telephone number is (816) 435-5000. See "PNC Mortgage
Acceptance Corp."
THE SECURITIES BEING OFFERED
The securities that will be offered pursuant to this prospectus and the
related prospectus supplements consist of mortgage pass-through certificates.
These certificates will be issued in series, and each series will, in turn,
consist of one or more classes. Each class of offered certificates must, at the
time of issuance, be assigned an investment grade rating by at least one
nationally recognized statistical rating organization. Typically, the four
highest rating categories, within which there may be sub-categories or
gradations to indicate relative standing, signify investment grade. See
"Ratings."
Each series of offered certificates will evidence beneficial ownership
interests in a trust established by us and containing the assets described in
this prospectus and the related prospectus supplement.
THE OFFERED CERTIFICATES MAY BE ISSUED WITH OTHER CERTIFICATES
We may not publicly offer all the mortgage pass-through certificates
evidencing interests in a particular trust. We may elect to:
o retain some of those certificates;
o place some privately with institutional investors; or
o deliver some to the applicable seller as partial consideration for the
related mortgage assets.
In addition, some of those certificates may not satisfy the rating
requirement described above for offered certificates.
THE GOVERNING DOCUMENTS
In general, a pooling and servicing agreement or other similar
agreement or collection of agreements will govern--
o the creation of and transfer of assets to each trust;
o the issuance of the related series of certificates; and
o the servicing and administration of the trust assets.
The parties to the governing document(s) will always include a trustee
and us. We will be responsible for establishing the trust relating to each
series of offered certificates. In addition, we will transfer or arrange for the
transfer of the initial trust assets to that trust. In general, the trustee will
be responsible for, among other things, making payments and preparing and
disseminating certain reports to the holders of the offered and non-offered
certificates.
If the trust assets include mortgage loans, the parties to the
governing document(s) will also include--
o a master servicer that will generally be responsible for performing
customary servicing duties with respect to those mortgage loans that are
not defaulted, non-performing or otherwise problematic in any material
respect; and
o a special servicer that will generally be responsible for servicing and
administering mortgage loans that are defaulted, non-performing or
otherwise problematic in any material respect and real estate assets
acquired in respect of defaulted mortgage loans.
The same person or entity, or affiliated entities, may act as both
master servicer and special servicer for any trust.
If the trust assets include mortgage-backed securities, the parties to
the governing document(s)
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may also include a manager that will be responsible for performing various
administrative duties with respect to the mortgage-backed securities. If the
related trustee assumes these duties, however, there will be no manager.
In the related prospectus supplement, we will identify the trustee and
any master servicer, special servicer or manager for each trust and will
describe their respective duties in further detail.
See "Description of the Governing Document."
CERTAIN CHARACTERISTICS OF THE MORTGAGE ASSETS
The trust assets with respect to any series of offered certificates
will, in general, include mortgage loans. Each mortgage loan to be included in a
trust will constitute the obligation of one or more persons to repay a debt.
Each mortgage loan will be secured by a first or junior lien on, or security
interest in, the ownership, leasehold or other interest(s) of the related
borrower or another person in one or more commercial or multifamily real
properties. In particular, those properties may include:
o rental or cooperatively-owned buildings with multiple dwelling units;
o retail properties related to the sale of consumer goods and other products,
or related to providing entertainment, recreational or personal services,
to the general public;
o office buildings;
o hospitality properties;
o casino properties;
o health care-related facilities;
o industrial facilities;
o warehouse facilities, mini-warehouse facilities and self-storage
facilities;
o restaurants, taverns and other establishments involved in the food and
beverage industry;
o manufactured housing communities, mobile home parks and recreational
vehicle parks;
o recreational and resort properties;
o arenas and stadiums;
o churches and other religious facilities;
o parking lots and garages;
o mixed use properties;
o other income-producing properties; and
o unimproved land that is zoned for multifamily residential or commercial
use.
The mortgage loans to be included in a trust may have a variety of
payment terms. For example, a mortgage loan:
o may provide for the accrual of interest at a mortgage interest rate that is
fixed over its term, that resets on one or more specified dates or that
otherwise adjusts from time to time;
o may provide for the accrual of interest at a mortgage interest rate that
may be converted at the borrower's election from an adjustable to a fixed
interest rate or from a fixed to an adjustable interest rate;
o may provide for no accrual of interest;
o may provide for level payments to stated maturity, for payments that reset
in amount on one or more specified dates or for payments that otherwise
adjust from time to time to accommodate changes in the interest rate or to
reflect the occurrence of certain events;
o may be fully amortizing or, alternatively, may be partially amortizing or
non-amortizing, with a substantial payment of principal due on its stated
maturity date;
o may permit the negative amortization or deferral of accrued interest;
o may prohibit some or all voluntary prepayments or require payment of a
premium, fee or charge in connection with those prepayments; and/or
o may provide for payments of principal, interest or both, on due dates that
occur monthly, bimonthly, quarterly, semi-annually, annually or at some
other interval.
Any mortgage loan may have two or more component parts, each having
characteristics that are otherwise described in this prospectus as being
attributable to separate and distinct mortgage loans.
We do not originate mortgage loans. However, Midland Loan Services,
Inc. or one of our other affiliates may originate some of the mortgage loans
underlying the offered certificates. Unless we expressly state otherwise in the
related prospectus supplement, the repayment of any of the mortgage loans to be
included in a trust will not be guaranteed or insured by us, any of our
affiliates, any governmental agency or instrumentality or any other person. See
"Description of the Trust Assets--Mortgage Loans."
The trust assets with respect to any series of offered certificates may
also include mortgage participations, mortgage pass-through certificates,
collateralized mortgage obligations and other
5
<PAGE>
mortgage-backed securities, that evidence an interest in, or are secured by a
pledge of, one or more mortgage loans of the type described above. See
"Description of the Trust Assets--Mortgage-Backed Securities."
We will describe the specific characteristics of the mortgage assets
underlying a series of offered certificates in the related prospectus
supplement.
In general, the total outstanding principal balance of the mortgage
assets transferred by us to any particular trust will equal or exceed the
initial total outstanding principal balance of the related series of
certificates. In the event that the total outstanding principal balance of the
related mortgage assets initially delivered by us to the related trustee is less
than the initial total outstanding principal balance of any series of
certificates, we may deposit or arrange for the deposit of cash or liquid
investments on an interim basis with the related trustee to cover the shortfall.
For 90 days following the date of initial issuance of that series of
certificates, we will be entitled to obtain a release of the deposited cash or
investments if we deliver or arrange for delivery of a corresponding amount of
mortgage assets. If we fail, however, to deliver mortgage assets sufficient to
make up the entire shortfall, any of the cash or, following liquidation,
investments remaining on deposit with the related trustee will be used by the
related trustee to pay down the principal balance of the related series of
certificates, as described in the related prospectus supplement.
CERTAIN CHARACTERISTICS OF THE OFFERED CERTIFICATES
An offered certificate may entitle the holder to receive:
o a stated principal amount;
o interest on a principal balance or notional amount, at a fixed, variable or
adjustable pass-through rate;
o specified, fixed or variable portions of the interest, principal or other
amounts received on the related mortgage assets;
o payments of principal, with disproportionate, nominal or no distributions
of interest;
o payments of interest, with disproportionate, nominal or no distributions of
principal;
o payments of interest or principal that commence only as of a specified date
or only after the occurrence of certain events, such as the payment in full
of the interest and principal outstanding on one or more other classes of
certificates of the same series;
o payments of principal to be made, from time to time or for designated
periods, at a rate that is faster (and, in some cases, substantially
faster) or slower (and, in some cases, substantially slower) than the rate
at which payments or other collections of principal are received on the
related mortgage assets;
o payments of principal to be made based on a specified principal payment
schedule or other methodology, which payments may be limited to the amount
of available funds; or
o payments of all or part of the prepayment or repayment premiums, fees and
charges, equity participation payments or other similar items received on
the related mortgage assets.
Any class of offered certificates may be senior or subordinate to one
or more other classes of certificates of the same series, including a
non-offered class of certificates of that series, for purposes of some or all
payments, allocations of losses or both.
A class of offered certificates may have two or more component parts,
each having characteristics that are otherwise described in this prospectus as
being attributable to separate and distinct classes.
We will describe the specific characteristics of each class of offered
certificates in the related prospectus supplement. See "Description of the
Certificates."
THE TRUST WILL INCLUDE COLLECTION AND DISTRIBUTION ACCOUNTS
The master servicer must establish and maintain one or more collection
accounts for deposit of all payments and collections received or advanced on the
Mortgage Loans. The trustee must establish a distribution account for deposit of
amounts from the collection account to be used for distributions of principal
and interest to certificate holders.
CREDIT SUPPORT AND INTEREST RATE PROTECTION FOR THE OFFERED CERTIFICATES
Some classes of offered certificates may be protected in full or in
part against certain defaults and losses on the related mortgage assets through
the subordination of one or more other classes of certificates of the same
series or by other types of credit support. The other types of credit support
may
6
<PAGE>
include a letter of credit, a surety bond, an insurance policy, a guarantee or a
reserve fund. We will describe the credit support, if any, for each class of
offered certificates in the related prospectus supplement.
The assets of any particular trust may also include any of the
following agreements:
o guaranteed investment contracts pursuant to which moneys held in the funds
and accounts established for the related series of certificates will be
invested at a specified rate;
o interest rate exchange agreements, interest rate cap or floor agreements,
or other agreements and arrangements designed to reduce the effects of
interest rate fluctuations on the related mortgage assets or on one or more
classes of offered certificates of the related series; or
o if any of the mortgage assets are payable in a foreign currency, foreign
currency exchange agreements or other agreements and arrangements designed
to reduce the effects of foreign currency fluctuations on the related
mortgage assets or one or more classes of offered certificates of the
related series.
We will describe the types of reinvestment and interest rate
protection, if any, for each class of offered certificates in the related
prospectus supplement.
See "Risk Factors," "Description of the Trust Assets" and
"Description of Credit Support."
ADVANCES TO COVER DELINQUENT PAYMENTS OF PRINCIPAL AND INTEREST ON THE
MORTGAGE ASSETS.
If the related trust assets include mortgage loans, the master
servicer, the trustee, any provider of credit support and any other specified
person may be obligated to make, or may have the option of making, certain
advances with respect to delinquent scheduled payments of principal, interest or
both on the mortgage loans. Any party making advances will be entitled to
reimbursement from subsequent recoveries on the related mortgage loan and as
otherwise described in this prospectus or the related prospectus supplement.
That party may also be entitled to receive interest on its advances for a
specified period. See "Description of the Certificates--Advances in Respect of
Delinquencies."
If the related trust assets include mortgage-backed securities, we will
describe in the related prospectus supplement any comparable advancing
obligation in respect of those mortgage-backed securities or the underlying
mortgage loans.
OPTIONAL TERMINATION
We will describe in the related prospectus supplement any circumstances
in which a specified party is permitted or obligated to purchase or sell any of
the mortgage assets underlying a series of offered certificates. In particular,
a master servicer, special servicer or other designated party may be permitted
or obligated to purchase or sell:
o all the mortgage assets in any particular trust, which would cause a
termination of the trust; or
o that portion of the mortgage assets in any particular trust as is necessary
or sufficient to retire one or more classes of offered certificates of the
related series.
See "Description of the Certificates--Termination."
FEDERAL INCOME TAX CONSEQUENCES
Any class of offered certificates will constitute or evidence ownership
of either:
o "regular interests" or "residual interests" in a "real estate mortgage
investment conduit" under Sections 860A through 860G of the Internal
Revenue Code of 1986; or
o "regular interests" or "residual interests" in a "financial asset
securitization investment trust" under Section 860L(a) of the Internal
Revenue Code of 1986; or
o interests in a grantor trust under Subpart E of Part I of Subchapter J of
the Internal Revenue Code of 1986.
See "Federal Income Tax Consequences."
ERISA CONSIDERATIONS
If you are a fiduciary of an employee benefit plan or other retirement
plan or arrangement, you should review with your legal advisor whether the
purchase or holding of offered certificates could give rise to a transaction
that is prohibited or is not otherwise permissible under applicable law. See
"ERISA Considerations."
7
<PAGE>
LEGAL INVESTMENT
If your investment authority is subject to legal restrictions, you
should consult your legal advisor to determine whether and to what extent the
offered certificates constitute a legal investment for you. We will specify in
the related prospectus supplement which classes of the offered certificates will
constitute "mortgage related securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984. See "Legal Investment."
8
<PAGE>
RISK FACTORS
You should consider the following factors, as well as the factors set
forth under "Risk Factors" in the related prospectus supplement, in deciding
whether to purchase offered certificates.
A NUMBER OF FACTORS THAT AFFECT THE LIQUIDITY OF YOUR CERTIFICATES MAY HAVE
AN ADVERSE EFFECT ON THE VALUE OF YOUR CERTIFICATES
The offered certificates may have limited or no liquidity. We cannot
assure you that a secondary market for your certificates will develop. There
will be no obligation on the part of anyone to establish a secondary market.
Even if a secondary market does develop for your certificates, it may provide
you with less liquidity than you anticipated and it may not continue for the
life of your certificates.
We will describe in the related prospectus supplement the information
that will be available to you with respect to your certificates. The limited
nature of such information may adversely affect the liquidity of your
certificates.
We do not currently intend to list the offered certificates on any
national securities exchange or the Nasdaq stock market.
Lack of liquidity will impair your ability to sell your certificates
and may prevent you from doing so at a time when you may want or need to sell
your certificates. This lack of liquidity could adversely affect the market
value of your certificates. We do not expect that you will have any redemption
rights with respect to your certificates.
If you decide to sell your certificates, you may have to sell them at a
discount from the price you paid for reasons unrelated to the performance of
your certificates or the related mortgage assets. Pricing information regarding
your certificates may not be generally available on an ongoing basis.
THE MARKET VALUE OF YOUR CERTIFICATES WILL BE SENSITIVE TO FLUCTUATIONS
IN PREVAILING INTEREST RATES AND SPREADS
The market value of your certificates will be sensitive to fluctuations
in current interest rates. However, a change in the market value of your
certificates as a result of an upward or downward movement in current interest
rates may not equal the change in the market value of your certificates as a
result of an equal but opposite movement in interest rates.
Investor perceptions regarding the quality of commercial
mortgage-backed securities generally as an investment relative to alternative
investments such as U.S. treasury securities will affect the market value of
your certificates. That market value will decline if potential investors prefer
the safety of investments such as U.S. treasury securities. This may occur
regardless of the performance of your certificates or the related mortgage
assets.
PAYMENTS ON YOUR CERTIFICATES WILL BE MADE SOLELY FROM THE LIMITED
ASSETS OF THE RELATED TRUST
Your certificates do not represent obligations of any person or entity
and do not represent a claim against any assets other than those of the related
trust. Unless we expressly state otherwise in the related prospectus supplement,
neither we, nor any of our affiliates nor any governmental agency or
instrumentality or other person will guarantee or insure payment on your
certificates. If the related trust assets are insufficient to make payments on
your certificates, you will bear the resulting loss. Any advances made by a
master servicer or other party with respect to the mortgage assets underlying
your certificates are intended solely to provide liquidity and not credit
support. The party making those advances will have a right to reimbursement,
probably with interest, which is senior to your right to receive payment on your
certificates.
ANY CREDIT SUPPORT FOR YOUR CERTIFICATES MAY BE INSUFFICIENT TO PROTECT YOU
AGAINST ALL POTENTIAL LOSSES
THE AMOUNT OF CREDIT SUPPORT WILL BE LIMITED
The rating agencies that assign ratings to your certificates will
establish the amount of credit support, if any, for your certificates based on,
among other things, an assumed level of defaults, delinquencies and losses with
respect to the related mortgage assets. Actual losses may, however, exceed the
assumed levels. See "Description of the Certificates--Allocation of Losses and
Shortfalls" and "Description of Credit Support." If actual losses on the related
mortgage assets exceed the assumed
9
<PAGE>
levels, you may be required to bear the additional losses.
CREDIT SUPPORT MAY NOT COVER ALL TYPES OF LOSSES
The credit support, if any, for your certificates may not cover all of
your potential losses. For example, certain forms of credit support may not
cover or may provide limited protection against losses that you may suffer by
reason of fraud or negligence or as a result of certain uninsured casualties at
the real properties securing the related mortgage loans. You may be required to
bear any losses that are not covered by the credit support.
DISPROPORTIONATE BENEFITS TO CERTAIN CLASSES AND SERIES
If a form of credit support covers multiple classes or series and
losses exceed the amount of the credit support, it is possible that the holders
of offered certificates of another series or class will be disproportionately
benefited by this credit support to your detriment.
THE INVESTMENT PERFORMANCE OF YOUR CERTIFICATES WILL DEPEND UPON PAYMENTS,
DEFAULTS AND LOSSES ON THE UNDERLYING MORTGAGE LOANS
THE TERMS OF THE UNDERLYING MORTGAGE LOANS WILL AFFECT PAYMENTS ON YOUR
CERTIFICATES
Each of the mortgage loans underlying the offered certificates will
specify the terms on which the related borrower must repay the outstanding
principal amount of the loan. The rate, timing and amount of scheduled payments
of principal may vary significantly from mortgage loan to mortgage loan. The
rate at which the underlying mortgage loans amortize will directly affect the
rate at which the principal balance or notional amount of your certificates is
paid down or otherwise reduced.
In addition, any mortgage loan underlying the offered certificates may
permit the related borrower to prepay the loan during some or all of the loan
term. In general, a borrower will be more likely to prepay its mortgage loan
when it has an economic incentive to do so, such as obtaining a larger loan on
the same underlying real property or a lower or otherwise more advantageous
interest rate through refinancing. If a mortgage loan includes some form of
prepayment restriction, the likelihood of prepayment should be less. These
restrictions may include:
o an absolute or partial prohibition against voluntary prepayments during
some or all of the loan term; or
o a requirement that voluntary prepayments be accompanied by some form of
prepayment premium, fee or charge during some or all of the loan term.
In many cases, a mortgage loan will have no restrictions on the
application of insurance proceeds or condemnation proceeds as a prepayment of
principal.
The amount, rate and timing of payments and other collections on the
mortgage loans will, to some degree, be unpredictable because of borrower
defaults and because of casualties and condemnations with respect to the
underlying real properties.
The investment performance of your certificates may vary materially and
adversely from your expectations due to:
o the rate of prepayments and other unscheduled collections of principal on
the underlying mortgage loans being faster or slower than you anticipated,
or
o the rate of defaults on the underlying mortgage loans being faster, or the
severity of losses on the underlying mortgage loans being greater, than you
anticipated.
The actual yield to you, as a holder of an offered certificate, may not
equal the yield you anticipated at the time of your purchase, and the total
return on investment that you expected may not be realized. In deciding whether
to purchase any offered certificates, you should make an independent decision as
to the appropriate prepayment, default and loss assumptions to be used. If the
trust assets underlying your certificates include mortgage-backed securities,
the terms of those securities may lessen or enhance the effects to you that may
result from prepayments, defaults and losses on the mortgage loans underlying
those securities.
PREPAYMENTS ON THE UNDERLYING MORTGAGE LOANS WILL AFFECT THE AVERAGE LIFE OF
YOUR CERTIFICATES
Payments of principal and/or interest on your certificates will depend
upon, among other things, the rate and timing of payments on the related
mortgage assets. Prepayments on the underlying mortgage loans may result in a
faster rate of principal payments on your certificates, which would result in
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a shorter average life for your certificates, than if these prepayments had not
occurred. The rate and timing of principal prepayments on pools of mortgage
loans varies among pools and is influenced by a variety of economic,
demographic, geographic, social, tax and legal factors. Accordingly, neither you
nor we can predict the rate and timing of principal prepayments on the mortgage
loans directly or indirectly underlying your certificates. As a result,
repayment of your certificates could occur significantly earlier or later, and
the average life of your certificates could be significantly shorter or longer,
than you expected.
The extent to which prepayments on the underlying mortgage loans
ultimately affect the average life of your certificates depends on the terms and
provisions of your certificates. A class of offered certificates may entitle the
holders to a pro rata share of any prepayments on the related mortgage loans, to
all or a disproportionately large share of those prepayments, or to none or a
disproportionately small share of those prepayments. If you are entitled to a
disproportionately large share of any prepayments on the underlying mortgage
loans, your certificates may be retired at an earlier date. If, however, you are
only entitled to a small share of the prepayments on the underlying mortgage
loans, the average life of your certificates may be extended. Your entitlement
to receive payments, including prepayments, of principal of the underlying
mortgage loans may:
o vary based on the occurrence of certain events, such as the retirement of
one or more other classes of certificates of the same series; or
o be subject to certain contingencies, such as prepayment and default rates
with respect to the underlying mortgage loans.
We will describe the terms and provisions of your certificates more
fully in the related prospectus supplement.
PREPAYMENTS ON THE UNDERLYING MORTGAGE LOANS WILL AFFECT THE YIELD ON YOUR
CERTIFICATES
If you purchase your certificates at a discount or premium, the yield
on your certificates will be sensitive to prepayments on the mortgage loans. If
you purchase your certificates at a discount, you should consider the risk that
a slower than anticipated rate of principal payments on the underlying mortgage
loans could result in your actual yield being lower than your anticipated yield.
Alternatively, if you purchase your certificates at a premium, you should
consider the risk that a faster than anticipated rate of principal payments on
the underlying mortgage loans could result in your actual yield being lower than
your anticipated yield. The potential effect that prepayments may have on the
yield of your certificates will increase as the discount deepens or the premium
increases. If the amount of interest payable on your certificates is
disproportionately large, as compared to the amount of principal payable on your
certificates, you may fail to recover your original investment under some
prepayment scenarios.
DELINQUENCIES, DEFAULTS AND LOSSES ON THE UNDERLYING MORTGAGE LOANS MAY AFFECT
THE AMOUNT AND TIMING OF PAYMENTS ON YOUR CERTIFICATES
The rate and timing of delinquencies and defaults, and the severity of
losses, on the underlying mortgage loans will affect the amount and timing of
payments on the related series of offered certificates to the extent that their
effects are not offset by delinquency advances or some form of credit support.
Unless otherwise covered by delinquency advances or some form of credit
support, defaults on the underlying mortgage loans may delay payments on the
related series of offered certificates while the defaulted mortgage loans are
worked-out or liquidated. However, liquidations of defaulted mortgage loans
prior to maturity could affect the yield and average life of an offered
certificate in a manner similar to a voluntary prepayment.
If you calculate your anticipated yield to maturity based on an assumed
rate of default and amount of losses on the underlying mortgage loans that is
lower than the default rate and amount of losses actually experienced, then, to
the extent that you are required to bear the additional losses, your actual
yield to maturity will be lower than you calculated and could, under certain
scenarios, be negative. Furthermore, the timing of losses on the underlying
mortgage loans can affect your yield. In general, the earlier you bear any loss
on an underlying mortgage loan, the greater the negative effect on your yield.
See "--Repayment of a Commercial or Multifamily Mortgage Loan Depends
Upon the Performance and Value of the Underlying Real Property and the Related
Borrower's Ability to Refinance the Property" below.
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AN INCREASED RISK OF DEFAULT IS ASSOCIATED WITH BALLOON PAYMENTS
Any of the mortgage loans underlying your certificates may be
non-amortizing or only partially amortizing. The borrowers under those mortgage
loans are required to make substantial payments of principal and interest (that
is, balloon payments) on the maturity dates of the loans. The ability of a
borrower to make a balloon payment generally depends upon the borrower's ability
to refinance or sell the real property securing the loan. The ability of the
borrower to refinance or sell the property will be affected by a number of
factors, including:
o the fair market value and condition of the underlying real property;
o the prevailing level of interest rates;
o the borrower's equity in the underlying real property;
o the borrower's financial condition;
o the operating history of the underlying real property;
o changes in zoning and tax laws;
o changes in competition in the relevant area;
o changes in rental rates in the relevant area;
o changes in governmental regulation and fiscal policy;
o prevailing general and regional economic conditions;
o the state of the fixed income and mortgage markets; and
o the availability of credit for multifamily rental or commercial properties.
See "--Repayment of a Commercial or Multifamily Mortgage Loan Depends
Upon the Performance and Value of the Underlying Real Property and the Related
Borrower's Ability to Refinance the Property" below.
Neither we nor any of our affiliates have an obligation to refinance
any mortgage loan underlying your certificates.
The related master servicer or special servicer may, within prescribed
limits, extend and modify mortgage loans underlying your certificates that are
in default or as to which a payment default is imminent in order to maximize
recoveries on those loans. The related master servicer or special servicer is
only required to determine that any extension or modification is reasonably
likely to produce a greater recovery than a liquidation of the real property
securing the defaulted loan. The decision of the master servicer or special
servicer to extend or modify a mortgage loan may not in fact produce a greater
recovery.
REPAYMENT OF A COMMERCIAL OR MULTIFAMILY MORTGAGE LOAN DEPENDS UPON THE
PERFORMANCE AND VALUE OF THE UNDERLYING REAL PROPERTY AND THE RELATED BORROWER'S
ABILITY TO REFINANCE THE PROPERTY
MOST OF THE MORTGAGE LOANS UNDERLYING YOUR CERTIFICATES WILL BE NONRECOURSE
LOANS TO ENTITIES
You should consider all of the mortgage loans underlying your
certificates to be non-recourse loans. This means that, in the event of a
default, recourse will be limited to the related real property or properties
securing the defaulted mortgage loan. In those cases where recourse to a
borrower or guarantor is permitted by the loan documents, we generally will not
undertake any evaluation of the financial condition of the borrower or
guarantor. Unlike individuals, entities formed to acquire real property
generally do not have personal assets and creditworthiness at stake. A
borrower's sophistication can lead to protracted litigation or bankruptcy in
default situations.
Consequently, full and timely payment on each mortgage loan underlying
your certificates will depend on one or more of the following:
o the sufficiency of the net operating income of the applicable real
property;
o the market value of the applicable real property at or prior to maturity;
and
o the ability of the related borrower to refinance or sell the applicable
real property.
In general, the value of a multifamily or commercial property will
depend on its ability to generate net operating income. The ability of an owner
to finance a multifamily or commercial property will depend, in large part, on
the property's value and ability to generate net operating income.
Unless we state otherwise in the related prospectus supplement, none of
the mortgage loans underlying your certificates will be insured or guaranteed by
us, any of our affiliates or any governmental entity or private mortgage
insurer.
The risks associated with lending on multifamily and commercial
properties are inherently different from those associated with lending on the
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security of single-family residential properties. This is because multifamily
rental and commercial real estate lending involves larger loans and, as
described above, repayment is dependent upon the successful operation and value
of the related real estate project.
WE MAY NOT KNOW WHAT UNDERWRITING STANDARDS THE ORIGINATOR OF A MORTGAGE LOAN
APPLIED
The originators of the mortgage loans may have used underwriting
criteria that differ from the criteria which our affiliates use, and in some
cases we may be unable to verify the criteria that the originator used. Loans
may have been originated over long periods of time using varying underwriting
standards that we cannot now confirm. We will not generally reunderwrite
mortgage loans acquired for inclusion in a trust. Instead, we will rely upon
representations and warranties by the seller of the mortgage loan and the
seller's obligation to repurchase the loan if a representation or warranty was
not true when made.
MANY RISK FACTORS ARE COMMON TO MOST OR ALL MULTIFAMILY AND COMMERCIAL
PROPERTIES
The following factors, among others, will affect the ability of a
multifamily or commercial property to generate net operating income and,
accordingly, its value:
o the age, design and construction quality of the property;
o perceptions regarding the safety, convenience and attractiveness of the
property;
o the characteristics of the neighborhood where the property is located;
o the proximity and attractiveness of competing properties;
o the existence and construction of competing properties;
o the adequacy of the property's management and maintenance;
o national, regional or local economic conditions, including plant closings,
industry slowdowns and unemployment rates;
o local real estate conditions, including an increase in or oversupply of
comparable commercial or residential space;
o demographic factors;
o customer tastes and preferences;
o retroactive changes in building codes; and
o changes in governmental rules, regulations and fiscal policies, including
environmental legislation.
Particular factors that may adversely affect the ability of a
multifamily or commercial property to generate net operating income include:
o an increase in interest rates, real estate taxes and other operating
expenses;
o an increase in the capital expenditures needed to maintain the property or
make improvements;
o a decline in the financial condition of a major tenant and, in particular,
a sole tenant or anchor tenant;
o an increase in vacancy rates;
o a decline in rental rates as leases are renewed or replaced; and
o natural disasters and civil disturbances such as earthquakes, hurricanes,
floods, eruptions or riots.
The volatility of net operating income generated by a multifamily or
commercial property over time will be influenced by many of the foregoing
factors, as well as by:
o the length of tenant leases;
o the creditworthiness of tenants;
o the rental rates at which leases are renewed or replaced;
o the percentage of total property expenses in relation to revenue;
o the ratio of fixed operating expenses to those that vary with revenues; and
o the level of capital expenditures required to maintain the property and to
maintain or replace tenants.
Therefore, commercial and multifamily properties with short-term or
less creditworthy sources of revenue and/or relatively high operating costs,
such as those operated as hospitality and self-storage properties, can be
expected to have more volatile cash flows than commercial and multifamily
properties with medium- to long-term leases from creditworthy tenants and/or
relatively low operating costs. A decline in the real estate market will tend to
have a more immediate effect on the net operating income of commercial and
multifamily properties with short-term revenue sources and may lead to higher
rates of delinquency or defaults on the mortgage loans secured by those
properties.
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THE SUCCESSFUL OPERATION OF A MULTIFAMILY OR COMMERCIAL PROPERTY DEPENDS ON
TENANTS
Generally, multifamily and commercial properties are subject to leases.
The owner of a multifamily or commercial property typically uses lease or rental
payments for the following purposes:
o to pay for maintenance and other operating expenses associated with the
property;
o to fund repairs, replacements and capital improvements at the property; and
o to service mortgage loans secured by, and any other debt obligations
associated with operating, the property.
Factors that may adversely affect the ability of a multifamily or
commercial property to generate net operating income from lease and rental
payments include:
o an increase in vacancy rates, which may result from tenants deciding not to
renew an existing lease or discontinuing operations;
o an increase in tenant payment defaults;
o a decline in rental rates as leases are entered into, renewed or extended
at lower rates;
o an increase in the capital expenditures needed to maintain the property or
to make improvements; and
o a decline in the financial condition of a major or sole tenant.
Various factors that will affect the operation and value of a
commercial property include:
o the business operated by the tenants;
o the creditworthiness of the tenants; and
o the number of tenants.
DEPENDENCE ON A SINGLE TENANT OR A SMALL NUMBER OF TENANTS MAKES A PROPERTY
RISKIER COLLATERAL
In those cases where an income-producing property is leased to a single
tenant or is primarily leased to one or a small number of major tenants, a
deterioration in the financial condition or a change in the plan of operations
of any such tenant can have particularly significant effects on the net
operating income generated by the property. If a single or major tenant defaults
under its lease or fails to renew its lease, the resulting adverse financial
effect on the operation of the property will be substantially more severe than
would be the case for a property occupied by a large number of less significant
tenants.
An income-producing property operated for retail, office or industrial
purposes also may be adversely affected by a decline in a particular business or
industry if a concentration of tenants at the property is engaged in that
business or industry.
TENANT BANKRUPTCY ADVERSELY AFFECTS PROPERTY PERFORMANCE
The bankruptcy or insolvency of a major tenant, or a number of smaller
tenants, at a commercial property may adversely affect the income produced by
the property. Under the U.S. bankruptcy code, a tenant has the option of
assuming or rejecting any unexpired lease. If the tenant rejects the lease, the
landlord's claim for breach of the lease would be a general unsecured claim
against the tenant unless there is collateral securing the claim. The claim
would be limited to:
o the unpaid rent under the lease for the periods prior to the bankruptcy
petition or any earlier surrender of the leased premises, plus
o an amount equal to the rent under the lease for the greater of one year or
15% (but not more than 3 years) of the remaining lease term.
THE SUCCESS OF AN INCOME-PRODUCING PROPERTY DEPENDS ON RELETTING VACANT SPACES
The operations at an income-producing property will be adversely
affected if the owner or property manager is unable to renew leases or relet
space on comparable terms when existing leases expire or become defaulted. Even
if vacated space is successfully relet, the costs associated with reletting can
be substantial and could reduce cash flow from the property. Moreover, if a
tenant defaults in its lease obligations, the landlord may incur substantial
costs and experience significant delays associated with enforcing its rights and
protecting its investment, including costs incurred in renovating and reletting
the property.
If a property has multiple tenants, re-leasing expenditures may be more
frequent than in the case of a property with fewer tenants, which would reduce
the cash flow generated by the multi-tenanted property. Multi-tenanted
properties may also experience higher continuing vacancy rates and greater
volatility in rental income and expenses.
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PROPERTY VALUE MAY BE ADVERSELY AFFECTED EVEN WHEN CURRENT OPERATING INCOME IS
NOT
Various factors may affect the value of multifamily and commercial
properties without affecting their current net operating income, including:
o changes in interest rates;
o the availability of refinancing sources;
o changes in governmental regulations, licensing or fiscal policy;
o changes in zoning or tax laws; and
o potential environmental or other legal liabilities.
PROPERTY MANAGEMENT MAY AFFECT PROPERTY OPERATIONS AND VALUE
The operation of an income-producing property will depend upon the
property manager's performance and viability. The property manager generally is
responsible for:
o responding to changes in the local market;
o planning and implementing the rental structure, including staggering
durations of leases and establishing levels of rent payments;
o operating the property and providing building services;
o managing operating expenses; and
o ensuring that maintenance and capital improvements are carried out in a
timely fashion.
Income-producing properties that derive revenues primarily from
short-term rental commitments, such as hospitality or self-storage properties,
generally require more intensive management than properties leased to tenants
under long-term leases.
By controlling costs, providing appropriate and efficient services to
tenants and maintaining improvements in good condition, a property manager can
maintain or improve occupancy rates, business and cash flow, reduce operating
and repair costs and preserve building value. However, management errors can, in
some cases, impair the long-term viability of an income-producing property.
MAINTAINING A PROPERTY IN GOOD CONDITION IS EXPENSIVE
An owner may expend a substantial amount to maintain, renovate or
refurbish a commercial or multifamily property. The effects of poor construction
quality will increase over time in the form of increased maintenance and capital
improvements. Even superior construction will deteriorate over time if
management does not schedule and perform adequate maintenance in a timely
fashion.
COMPETITION WILL ADVERSELY AFFECT THE PROFITABILITY AND VALUE OF AN
INCOME-PRODUCING PROPERTY
Some income-producing properties are located in highly competitive
areas. Comparable income-producing properties located in the same area compete
on the basis of a number of factors including:
o rental rates;
o location;
o type of business or services and amenities offered; and
o nature and condition of the particular property.
The profitability and value of an income-producing property may be
adversely affected by a comparable property that:
o offers lower rents;
o has lower operating costs;
o offers a more favorable location; or
o offers better facilities.
Costs of renovating, refurbishing or expanding an income-producing
property in order to remain competitive can be substantial.
THE TYPES AND CONCENTRATIONS OF INCOME-PRODUCING PROPERTIES UNDERLYING THE
MORTGAGE LOANS IN A TRUST WILL SUBJECT YOUR CERTIFICATES TO SPECIAL RISKS
The mortgage loans underlying a series of offered certificates may be
secured by numerous types of multifamily and commercial properties. The adequacy
of an income-producing property as security for a mortgage loan depends in large
part on its value and ability to generate net operating income. The following is
a discussion of some of the various factors that may affect the value and
operations of the listed types of multifamily and commercial properties. The
effect of these factors upon your certificates will be dependent upon the
relative amounts of each particular property type included in a trust.
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MULTIFAMILY RENTAL PROPERTIES
Factors affecting the value and operation of a multifamily rental
property include:
o the physical attributes of the property, such as its age, appearance,
amenities and construction quality;
o the types of services offered at the property;
o the location of the property;
o the characteristics of the surrounding neighborhood, which may change over
time;
o the rents charged for dwelling units at the property relative to the rents
charged for comparable units at competing properties;
o the ability of management to provide adequate maintenance and insurance;
o the property's reputation;
o the level of mortgage interest rates, which may encourage tenants to
purchase rather than lease housing;
o the existence or construction of competing or alternative residential
properties, including other apartment buildings and complexes, manufactured
housing communities, mobile home parks and single-family housing;
o the ability of management to respond to competition;
o the tenant mix and whether the property is primarily occupied by workers
from a particular company or type of business, personnel from a local
military base or students;
o adverse local, regional or national economic conditions, which may limit
the amount that may be charged for rents and may result in a reduction in
timely rent payments or a reduction in occupancy levels;
o state and local regulations, which may affect the property owner's ability
to increase rent to the market rent for an equivalent apartment;
o the extent to which the property is subject to land use restrictive
covenants or contractual covenants that require that units be rented to low
income tenants;
o the extent to which the cost of operating the property, including the cost
of utilities and the cost of required capital expenditures, may increase;
and
o the extent to which increases in operating costs may be passed through to
tenants.
Because units in a multifamily rental property are leased to
individuals, usually for no more than a year, the property is likely to respond
relatively quickly to a downturn in the local economy or to the closing of a
major employer in the area.
Certain states regulate the relationship of an owner and its tenants at
a multifamily rental property. Among other things, these states may:
o require written leases;
o require good cause for eviction;
o require disclosure of fees;
o prohibit unreasonable rules;
o prohibit retaliatory evictions;
o prohibit restrictions on a resident's choice of unit vendors;
o limit the basis on which a landlord may increase rent; or
o prohibit a landlord from terminating a tenancy solely by reason of the sale
of the owner's building.
Apartment building owners have been the subject of suits under state
"Unfair and Deceptive Practices Acts" and other general consumer protection
statutes for coercive, abusive or unconscionable leasing and sales practices.
Some counties and municipalities also impose rent control regulations
on apartment buildings. These regulations may limit rent increases to:
o fixed percentages;
o percentages of increases in the consumer price index;
o increases set or approved by a governmental agency; or
o increases determined through mediation or binding arbitration.
In many cases, the rent control laws do not provide for decontrol of
rental rates upon vacancy of individual units. Any limitations on a landlord's
ability to raise rents at a multifamily rental property may impair the
landlord's ability to repay a mortgage loan secured by the property or to meet
operating costs.
Some multifamily rental properties are subject to land use restrictive
covenants or contractual covenants in favor of federal or state housing
agencies. These covenants generally require that a minimum number or percentage
of units be rented to tenants who have incomes that are substantially lower than
median incomes in the area or region. These covenants may limit the potential
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rental rates that an owner can charge at a multifamily rental property, the
potential tenant base for the property or both. An owner may subject a
multifamily rental property to these covenants in exchange for tax credits or
rent subsidies. When the credits or subsidies cease, net operating income will
decline.
Some mortgage loans underlying the offered certificates will be secured
by the related borrower's interest in multiple units in a residential
condominium project and the related voting rights in the owners' association for
the project. Due to the nature of condominiums, a default on any of those
mortgage loans will not allow the holder of the mortgage loan the same
flexibility in realizing on its real property collateral as is generally
available with respect to multifamily rental properties that are not
condominiums. The rights of other unit owners, the governing documents of the
owners' association and the state and local laws applicable to condominiums must
be considered and respected. Consequently, servicing and realizing upon the
collateral for those mortgage loans could subject the lender to greater delay,
expense and risk than a loan secured by a multifamily rental property that is
not a condominium.
COOPERATIVELY-OWNED APARTMENT BUILDINGS
Some multifamily properties are owned or leased by cooperative
corporations. In general, each shareholder in the corporation is entitled to
occupy a particular apartment unit pursuant to a long-term proprietary lease or
occupancy agreement.
A cooperative corporation is directly responsible for building
maintenance and payment of real estate taxes and hazard and liability insurance
premiums. A cooperative corporation's ability to meet debt service obligations
on a mortgage loan secured by, and to pay all other operating expenses of, the
cooperatively owned property depends primarily upon the receipt of:
o maintenance payments from the tenant/shareholders, and
o any rental income from units or commercial space that the cooperative
corporation might control.
A cooperative corporation may have to impose special assessments on the
tenant/shareholders in order to pay unanticipated expenditures. Accordingly, a
cooperative corporation is highly dependent on the financial well being of its
tenant/shareholders.
In a typical cooperative conversion plan, the owner of a rental
apartment building contracts to sell the building to a newly formed cooperative
corporation. The owner or sponsor allocates shares to each apartment unit, and
the current tenants have a certain period to subscribe at prices discounted from
the prices to be offered to the public after this period. As part of the
consideration for the sale, the owner or sponsor receives all the unsold shares
of the cooperative corporation. In general, the sponsor controls the
corporation's board of directors and management for a limited period of time. If
the sponsor holds the shares allocated to a large number of apartment units, the
lender on a mortgage loan secured by a cooperatively owned property may be
adversely affected by a decline in the creditworthiness of the sponsor.
Many cooperative conversion plans are "non-eviction" plans. Under a
non-eviction plan, a tenant at the time of conversion who chooses not to
purchase shares is entitled to reside in the unit as a subtenant of the owner of
the shares allocated to the apartment unit. Any applicable rent control or rent
stabilization laws would continue to be applicable to the sub-tenancy. In
addition, the subtenant may be entitled to renew its lease for an indefinite
number of years with continued protection from rent increases above those
permitted by any applicable rent control and rent stabilization laws. The
owner/shareholder is responsible for the maintenance payments to the cooperative
corporation without regard to whether it receives rent from the subtenant or
whether the rent payments are lower than maintenance payments on the unit. Newly
formed cooperative corporations typically have the greatest concentration of
non-tenant/shareholders.
RETAIL PROPERTIES
The term "retail property" encompasses a broad range of properties at
which businesses sell consumer goods and other products and provide various
entertainment, recreational or personal services to the general public. Some
examples of retail properties include:
o shopping centers;
o factory outlet centers;
o malls;
o automotive sales and service centers;
o consumer oriented businesses;
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o department stores;
o grocery stores;
o convenience stores;
o specialty shops;
o gas stations;
o movie theaters;
o fitness centers;
o bowling alleys;
o salons; and
o dry cleaners.
Unless owner occupied, retail properties generally derive all or a
substantial percentage of their income from lease payments from commercial
tenants. Therefore, it is important for the owner of a retail property to
attract and keep tenants, particularly significant tenants, that are able to
meet their lease obligations. In order to attract tenants, the owner of a retail
property may be required:
o to lower rents;
o to grant a potential tenant a "free rent" or reduced rent period;
o to improve the condition of the property generally; or
o to make at its own expense, or grant a rent abatement to cover, tenant
improvements for a potential tenant.
A prospective tenant will also be interested in the number and type of
customers that it will be able to attract at a particular retail property. The
ability of a tenant at a particular retail property to attract customers will be
affected by a number of factors related to the property and the surrounding
area, including:
o competition from other retail properties;
o perceptions regarding the safety, convenience and attractiveness of the
property;
o perceptions regarding the safety of the surrounding area;
o demographics of the surrounding area;
o the strength and stability of the local, regional and national economies;
o traffic patterns and access to major thoroughfares;
o the visibility of the property;
o availability of parking;
o the particular mixture of the goods and services offered at the property;
o customer tastes, preferences and spending patterns; and
o the drawing power of other tenants.
The success of a retail property is often dependent on the success of
its tenants' businesses. A significant component of the total rent paid by
tenants of retail properties is often tied to a percentage of gross sales or
revenues. Declines in sales or revenues of the tenants will likely cause a
corresponding decline in percentage rents and/or impair the tenants' ability to
pay their rent or other occupancy costs. A default by a tenant under its lease
could result in delays and costs in enforcing the landlord's rights. A decline
in the local economy and reduced consumer spending would directly and adversely
affect retail properties.
Repayment of a mortgage loan secured by a retail property will be
affected by the expiration of space leases at the property and the ability of
the borrower to renew or relet the space on comparable terms. Even if vacant
space is successfully relet, the costs associated with reletting, including
tenant improvements, leasing commissions and free rent, may be substantial and
could reduce cash flow from a retail property.
The presence or absence of an anchor tenant in a multi-tenanted retail
property can be important. Anchor tenants play a key role in generating customer
traffic and making the center desirable for other tenants. An "anchor tenant"
is, in general, a retail tenant whose space is substantially larger in size than
that of other tenants at the same retail property and whose operation is vital
in attracting customers to the property. At some retail properties, the anchor
tenant owns the space it occupies. In those cases where the property owner does
not control the space occupied by the anchor tenant, the property owner may not
be able to take actions with respect to the space that it otherwise typically
would take, such as granting concessions to retain an anchor tenant or removing
an ineffective anchor tenant. In some cases, an anchor tenant may cease to
operate at the property, even though it continues to own or pay rent on the
vacant space. If an anchor tenant ceases operations at a retail property, other
tenants at the property may be entitled to terminate their leases prior to the
scheduled termination date or to pay rent at a reduced rate for the remaining
term of the lease.
Various factors will adversely affect the economic performance of an
"anchored" retail property, including:
o an anchor tenant's failure to renew its lease;
o termination of an anchor tenant's lease;
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o the bankruptcy or economic decline of an anchor tenant or a self-owned
anchor;
o the cessation of the business of a self-owned anchor or of an anchor
tenant, even if it continues to own the property or pay rent; or
o a loss of an anchor tenant's ability to attract shoppers.
Retail properties may also face competition from sources outside a
given real estate market or with lower operating costs. For example, all of the
following compete with more traditional department stores and specialty shops
for consumer dollars:
o factory outlet centers;
o discount shopping centers and clubs;
o catalogue retailers;
o television shopping networks and programs;
o internet web sites; and
o telemarketing.
Similarly, home movie rentals and pay-per-view movies provide alternate
sources of entertainment to movie theaters. Continued growth of these
alternative retail outlets, which are often characterized by lower operating
costs, and entertainment sources could adversely affect the rents collectible at
retail properties.
Gas stations, automotive sales and service centers and dry cleaners
also pose unique environmental risks because of the nature of their businesses.
OFFICE PROPERTIES
Factors affecting the value and operation of an office property
include:
o the number and quality of the tenants, particularly significant tenants, at
the property;
o the physical attributes of the building in relation to competing buildings;
o the location of the property with respect to the central business district
or population centers;
o demographic trends within the metropolitan area to move away from or
towards the central business district;
o social trends combined with space management trends, which may change
towards options such as telecommuting or "hoteling" to satisfy space needs;
o tax incentives offered to businesses or property owners by cities or
suburbs adjacent to or near where the building is located;
o local competitive conditions, such as the supply of office space or the
existence or construction of new competitive office buildings;
o the quality and philosophy of building management;
o access to mass transportation; and
o changes in zoning laws.
An economic decline in a tenant's business may adversely affect an
office property. The risk of such an economic decline is increased if revenue is
dependent on a single tenant or if there is a significant concentration of
tenants in a particular business or industry.
Office properties are also subject to competition with other office
properties in the same market. Competitive factors affecting an office property
include:
o rental rates;
o the building's age, condition and design, including floor sizes and layout;
o access to public transportation and availability of parking; and
o amenities offered to its tenants, including sophisticated building systems,
such as fiber optic cables, satellite communications or other base building
technological features.
The cost of refitting office space for a new tenant is often higher
than for other property types.
The success of an office property also depends on the local economy.
Factors influencing a company's decision to locate in a given area include:
o the cost and quality of labor;
o tax incentives; and
o quality of life matters, such as schools and cultural amenities.
The strength and stability of the local or regional economy will affect
an office property's ability to attract stable tenants on a consistent basis. A
central business district may have a substantially different economy from that
of a suburb.
HOSPITALITY PROPERTIES
Hospitality properties may involve different types of hotels and
motels, including:
o full service hotels;
o resort hotels with many amenities;
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o limited service hotels;
o hotels and motels associated with national or regional franchise chains;
o hotels that are not affiliated with any franchise chain but may have their
own brand identity; and
o other lodging facilities.
Factors affecting the economic performance of a hospitality property
include:
o the location of the property and its proximity to major population centers
or attractions;
o the seasonal nature of business at the property;
o the level of room rates relative to those charged by competitors;
o quality and perception of the franchise affiliation;
o economic conditions, either local, regional or national, which may limit
the amount that can be charged for a room and may result in a reduction in
occupancy levels;
o the existence or construction of competing hospitality properties;
o nature and quality of the services and facilities;
o financial strength and capabilities of the owner and operator;
o the need for continuing expenditures for modernizing, refurbishing and
maintaining existing facilities;
o increases in operating costs, which may not be offset by increased room
rates;
o the property's dependence on business and commercial travelers and tourism;
and
o changes in travel patterns caused by changes in access, energy prices,
labor strikes, relocation of highways, the reconstruction of additional
highways or other factors.
Because limited service hotels and motels are relatively quick and
inexpensive to construct and may quickly reflect a positive value, an
over-building of these hotels and motels could occur in any given region, which
would likely adversely affect occupancy and daily room rates. Further, because
rooms at hospitality properties are generally rented for short periods of time,
hospitality properties tend to be more sensitive to adverse economic conditions
and competition than many other types of commercial properties. Additionally,
the revenues of certain hospitality properties, particularly those located in
regions whose economies depend upon tourism, may be highly seasonal in nature.
Hospitality properties may be operated pursuant to franchise
agreements. The continuation of a franchise 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 hospitality property to maintain those standards
or adhere to those other terms and conditions could result in the loss or
cancellation of the franchise license. 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 owner of the
hospitality property determines are too expensive or are otherwise unwarranted
in light of the operating results or prospects of the property. In that event,
the owner of the hospitality property may elect to allow the franchise license
to lapse. In any case, if the franchise is terminated, the owner of the
hospitality property may seek to obtain a suitable replacement franchise or to
operate the property independently of a franchise license. The loss of a
franchise license could have a material adverse effect upon the operations or
value of the hospitality property, because of the loss of associated name
recognition, marketing support and centralized reservation systems provided by
the franchisor.
The viability of any hospitality property that is a franchise of a
national or a regional hotel or motel chain is dependent upon:
o the continued existence and financial strength of the franchisor;
o the public perception of the franchise service mark; and
o the duration of the franchise licensing agreement.
A franchisor may restrict the transferability of its franchise license
agreements. In this case, the lender must obtain the consent of the franchisor
for the continued use of the franchise license by the hospitality property
following a foreclosure. Conversely, a lender may be unable to remove a
franchisor that it desires to replace following a foreclosure. Further, in the
event of a foreclosure on a hospitality property, the lender or other purchaser
of the hospitality property may not be entitled to the rights under any
associated liquor license. That party would be required to apply for its own
liquor license. There can be no assurance that a new license could be obtained
or that it could be obtained promptly.
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CASINO PROPERTIES
Factors affecting the economic performance of a casino property
include:
o location, including proximity to or easy access from major population
centers;
o appearance;
o economic conditions, either local, regional or national, which may limit
the amount of disposable income that potential patrons may have for
gambling;
o the existence or construction of competing casinos;
o dependence on tourism; and
o local or state governmental regulation.
Competition among major casinos may involve attracting patrons by
providing alternate forms of entertainment, such as performers and sporting
events, and offering low-priced or free food and lodging. In addition, casino
owners may expend substantial sums to modernize, refurbish and maintain existing
facilities.
Because of their dependence on disposable income of patrons, casino
properties are likely to respond quickly to a downturn in the economy.
To avoid criminal influence, the ownership and operation of casino
properties is often subject to local or state governmental regulation. A
government agency or authority may have jurisdiction over or influence with
respect to the foreclosure of a casino property and/or the bankruptcy of its
owner or operator. In some jurisdictions, it may be necessary to receive
governmental approval before foreclosing, which could result in substantial
delays to a lender. Gaming licenses are not transferable, including in
connection with a foreclosure. We can not assure you that a lender or another
purchaser in foreclosure or otherwise will be able to obtain the requisite
approvals to continue operating the foreclosed property as a casino.
Any given state or municipality that currently allows legalized
gambling could pass legislation banning it.
The loss of a gaming license for any reason would have a material
adverse effect on the value of a casino property.
HEALTH CARE-RELATED PROPERTIES
Health-care related properties include:
o hospitals;
o skilled nursing facilities;
o nursing homes;
o congregate care facilities; and
o in some cases, assisted living centers and housing for seniors.
Health care-related facilities, particularly nursing homes, may receive
a substantial portion of their revenues from government reimbursement programs,
primarily Medicaid and Medicare. Medicaid and Medicare are subject to:
o statutory and regulatory changes;
o retroactive rate adjustments;
o administrative rulings;
o policy interpretations;
o delays by fiscal intermediaries; and
o government funding restrictions.
All of the foregoing can adversely affect the operating revenues of a
health care-related facility. Moreover, governmental payors have employed
cost-containment measures that limit payments to health care providers. In
addition, there are currently under consideration various proposals for national
health care relief that could further limit these payments.
Providers of long-term nursing care and other medical services are
highly regulated by federal, state and local law. They are subject to numerous
factors that can increase the cost of operation, limit growth and, in extreme
cases, require or result in suspension or cessation of operations, including:
o federal and state licensing requirements;
o facility inspections;
o rate setting;
o reimbursement policies; and
o laws relating to the adequacy of medical care, distribution of
pharmaceuticals, use of equipment, personnel operating policies and
maintenance of and additions to facilities and services.
Under applicable federal and state laws and regulations, Medicare and
Medicaid reimbursements generally may not be made to any person other than the
provider who actually furnished the related material goods and services.
Accordingly, if a lender
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forecloses on a health care-related facility, neither the lender nor a
subsequent lessee or operator of the property would generally be entitled to
obtain from federal or state governments any outstanding reimbursement payments
relating to services furnished at the property prior to the foreclosure.
Furthermore, in the event of foreclosure, there can be no assurance that a
lender or other purchaser in a foreclosure sale would be entitled to the rights
under any required licenses and regulatory approvals. The lender or other
purchaser may have to apply for its own licenses and approvals. There can be no
assurance that a new license could be obtained or that a new approval would be
granted.
Health care-related facilities are generally "special purpose"
properties that could not be readily converted to general residential, retail or
office use. This will adversely affect their liquidation value. Furthermore,
transfers of health care-related facilities are subject to regulatory approvals
under state, and in some cases federal, law that are not required for transfers
of most other types of commercial properties.
INDUSTRIAL PROPERTIES
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment and/or
by a general slowdown in the economy. In addition, an industrial property that
suited the particular needs of its original tenant may be difficult to relet to
another tenant or may become functionally obsolete relative to newer properties.
The value and operation of an industrial property depends on:
o location of the property, the desirability of which in a particular
instance may depend on:
(1) availability of labor services;
(2) proximity to supply sources and customers; and
(3) accessibility to various modes of transportation and shipping,
including railways, roadways, airline terminals and ports;
o building design of the property, the desirability of which in a particular
instance may depend on:
(4) ceiling heights;
(5) column spacing;
(6) number and depth of loading bays;
(7) divisibility;
(8) floor loading capacities;
(9) truck turning radius;
(10) overall functionality; and
(11) adaptability of the property, because industrial tenants often need
space that is acceptable for highly specialized activities; and
o the quality and creditworthiness of individual tenants, because industrial
properties frequently have higher tenant concentrations.
Industrial properties are generally "special purpose" properties that
an owner could not readily convert to general residential, retail or office use.
This will adversely affect their liquidation value.
Industrial properties may also pose unique environmental risks
depending upon the nature of the business conducted at the property.
WAREHOUSE, MINI-WAREHOUSE AND SELF-STORAGE FACILITIES
Warehouse, mini-warehouse and self-storage properties are considered
vulnerable to competition because both acquisition costs and break-even
occupancy are relatively low. In addition, an owner would incur substantial
capital expenditures to convert a warehouse, mini-warehouse or self-storage
property to an alternative use. These factors will materially impair the
liquidation value of the property if its operation for storage purposes becomes
unprofitable due to decreased demand, competition, age of improvements or other
factors.
Successful operation of a warehouse, mini-warehouse or self-store
property depends on:
o building design;
o location and visibility;
o tenant privacy;
o efficient access to the property;
o proximity to potential users, including apartment complexes or commercial
users;
o services provided at the property, such as security;
o age and appearance of the improvements; and
o quality of management.
Warehouse properties may pose environmental risks depending upon the
nature of the business conducted in the warehouse.
RESTAURANTS AND TAVERNS
Factors affecting the economic viability of individual restaurants,
taverns and other
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establishments that are part of the food and beverage service industry include:
o competition from facilities having businesses similar to a particular
restaurant or tavern;
o perceptions by prospective customers of safety, convenience, services and
attractiveness;
o the cost, quality and availability of food and beverage products;
o negative publicity, resulting from instances of food contamination,
food-borne illness, crime and similar events;
o changes in demographics, consumer habits and traffic patterns;
o the ability to provide or contract for capable management; and
o retroactive changes to building codes, similar ordinances and other legal
requirements.
Adverse economic conditions, whether local, regional or national, may
limit the amount that may be charged for food and beverages and the extent to
which potential customers dine out. Because of the nature of the business,
restaurants and taverns tend to respond to adverse economic conditions more
quickly than do many other types of commercial properties. Furthermore, the
transferability of any operating, liquor and other licenses to an entity
acquiring a bar or restaurant, either through purchase or foreclosure, is
subject to local law requirements.
The food and beverage service industry is highly competitive. The
principal means of competition are:
o segment;
o product;
o price;
o value;
o quality;
o service;
o convenience;
o location; and
o the nature and condition of the restaurant facility.
A restaurant or tavern operator competes with the operators of
comparable establishments in the area in which its restaurant or tavern is
located. Other restaurants could have:
o lower operating costs;
o more favorable locations;
o more effective marketing;
o more efficient operations; or
o better facilities.
The location and condition of a particular restaurant or tavern will
affect the number of customers and, to a certain extent, the prices that the
operator may charge. The characteristics of an area or neighborhood in which a
restaurant or tavern is located may change over time or in relation to competing
facilities. Also, the cleanliness and maintenance at a restaurant or tavern will
affect its appeal to customers. In the case of a regionally- or nationally-known
chain restaurant, there may be costly expenditures for renovation, refurbishment
or expansion, regardless of its condition.
Factors affecting the success of a regionally- or nationally-known
chain restaurant include:
o actions and omissions of any franchisor, including management practices
that adversely affect the nature of the business or that require
renovation, refurbishment, expansion or other expenditures;
o the degree of support the franchisor provides or arranges, including its
franchisee organizations and third-party providers of products or services;
and
o the bankruptcy or business discontinuation of the franchisor or any of its
franchisee organizations or third-party providers.
Chain restaurants may be operated under franchise agreements, and these
agreements typically do not contain provisions protective of lenders. A
franchisor typically may terminate a borrower's rights as a franchisee without
informing the lender, and the borrower may be precluded from competing with the
franchisor upon termination. In addition, a lender that acquires title to a
restaurant site through foreclosure or similar proceedings may be restricted in
the use of the site or may be unable to succeed to the rights of the franchisee
under the related franchise agreement. The transferability of a franchise may be
subject to other restrictions. Also, federal and state franchise regulations may
impose additional risk, including the risk that the transfer of a franchise
acquired through foreclosure or similar proceedings may require registration
with governmental authorities or disclosure to prospective transferees.
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MANUFACTURED HOUSING COMMUNITIES, MOBILE HOME PARKS AND RECREATIONAL VEHICLE
PARKS
Manufactured housing communities and mobile home parks consist of land
that is divided into "spaces" or "home sites" that are primarily leased to
owners of the individual mobile homes or other housing units. The homeowner
often invests in site-specific improvements such as carports, steps, fencing,
skirts around the base of the home, and landscaping. The landowner typically
provides private roads within the park, common facilities and, in many cases,
utilities. Due to relocation costs and, in some cases, demand for home sites,
the value of a mobile home or other housing unit in place in a manufactured
housing community or mobile home park is generally higher, and can be
significantly higher, than the value of the same unit not placed in a
manufactured housing community or mobile home park. As a result, a well-operated
manufactured housing community or mobile home park that has achieved stabilized
occupancy is typically able to maintain occupancy at or near that level. For the
same reason, a lender that provided financing for the home of a tenant who
defaulted on his or her space rent generally has an incentive to keep rental
payments current until the home can be resold in place, rather than to allow the
unit to be removed from the park. In general, the individual mobile homes and
other housing units will not constitute collateral for a mortgage loan
underlying a series of certificates.
Recreational vehicle parks lease spaces primarily or exclusively for
motor homes, travel trailers and portable truck campers, primarily designed for
recreational, camping or travel use. In general, parks that lease recreational
vehicle spaces have a less stable tenant population than parks occupied
predominantly by mobile homes. However, it is not unusual for the owner of a
recreational vehicle to leave the vehicle at the park on a year-round basis or
to use the vehicle as low cost housing and reside in the park indefinitely.
Factors that affect the successful operation of a manufactured housing
community, mobile home park or recreational vehicle park include:
o the number of comparable competing properties in the local market;
o the age, appearance and reputation of the property;
o the quality of management; and
o the types of facilities and services it provides.
Manufactured housing communities and mobile home parks also compete
against alternative forms of residential housing, including multifamily rental
properties, cooperatively owned apartment buildings, condominium complexes and
single-family residential developments. Recreational vehicle parks also compete
against alternative forms of recreation and short-term lodging, such as staying
at a hotel at the beach.
Manufactured housing communities, mobile home parks and recreational
vehicle parks are "special purpose" properties that the operator cannot readily
convert to general residential, retail or office use. This will adversely affect
the liquidation value of the property if its current operations become
unprofitable due to competition, age of the improvements or other factors.
Certain states regulate the relationship of an owner of a manufactured
housing community or mobile home park and its tenants in a manner similar to the
way they regulate the relationship between a landlord and tenant at a
multifamily rental property. Some states also regulate changes in the use of a
manufactured housing community or mobile home park and require that the owner
give written notice to its tenants a substantial period of time prior to the
projected change.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on manufactured housing
communities and mobile home parks. These ordinances may limit rent increases to:
o fixed percentages;
o percentages tied to the consumer price index;
o increases set or approved by a governmental agency; or
o increases determined through mediation or binding arbitration.
In many cases, the rent control laws either do not permit vacancy
decontrol or permit vacancy decontrol only in the relatively rare event that the
mobile home or manufactured housing unit is removed from the home site. Local
authority to impose rent control on manufactured housing communities and mobile
home parks is pre-empted by state law in certain states and rent control is not
imposed at the state level in those states. In some states, however, local rent
control ordinances are not pre-empted for tenants having short-term or
month-to-month leases, and properties there may be subject
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to various forms of rent control with respect to those tenants.
RECREATIONAL AND RESORT PROPERTIES
Security for a mortgage loan may include a golf course, marina, ski
resort, amusement park or other property used for recreational purposes or as a
resort. Factors affecting the economic performance of a property of this type
include:
o the location and appearance of the property;
o the appeal of the recreational activities offered;
o the existence or construction of competing properties, whether or not they
offer the same activities;
o the need to make capital expenditures to maintain, refurbish, improve
and/or expand facilities in order to attract potential patrons;
o geographic location and dependence on tourism;
o changes in travel patterns caused by changes in energy prices, strikes,
location of highways, construction of additional highways and similar
factors;
o seasonality of the business, which may cause periodic fluctuations in
operating revenues and expenses;
o sensitivity to weather and climate changes; and
o local, regional and national economic conditions.
Statutes and government regulations that govern the use of, and
construction on, rivers, lakes and other waterways will affect a marina or other
recreational or resort property located next to water.
Because of the nature of the business, recreational and resort
properties tend to respond to adverse economic conditions more quickly than
other types of commercial properties.
Recreational and resort properties are generally "special purpose"
properties that the owner cannot readily convert to alternative uses. This will
adversely affect their liquidation value.
ARENAS AND STADIUMS
The success of an arena or stadium generally depends on its ability to
attract patrons to a variety of events, including:
o sporting events;
o musical events;
o theatrical events;
o animal shows; and/or
o circuses.
The ability to attract patrons is dependent on such factors as:
o the appeal of the particular event;
o the cost of admission;
o perceptions by prospective patrons of the safety, convenience, services and
attractiveness of the arena or stadium;
o perceptions by prospective patrons of the safety of the surrounding area;
and
o the alternative forms of entertainment available in the particular locale.
In some cases, an arena's or stadium's success will depend on its
ability to attract and keep a sporting team as a tenant. An arena or stadium may
become unprofitable, or unacceptable to a sporting team, due to decreased
attendance, competition and age of improvements. Often, substantial expenditures
must be made to modernize, refurbish and/or maintain existing facilities.
Arenas and stadiums are "special purpose" properties that the owner
cannot readily convert to alternative uses. The "special purpose" nature of
these facilities will adversely affect their liquidation value.
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CHURCHES AND OTHER RELIGIOUS FACILITIES
Churches and other religious facilities generally depend on charitable
donations to meet expenses and pay for maintenance and capital expenditures.
Several social, political and economic factors affect attendance at a religious
facility and the willingness of attendees to make donations. Local, regional or
national economic conditions may also adversely affect donations. Religious
facilities are "special purpose" properties that the owner cannot readily
convert to alternative uses. The "special purpose" nature of these facilities
will adversely affect their liquidation value.
PARKING LOTS AND GARAGES
The primary source of income for parking lots and garages is the rental
fees charged for parking spaces. Factors affecting the success of a parking lot
or garage include:
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o the number of rentable parking spaces and rates charged;
o the location of the lot or garage and, in particular, its proximity to
places where large numbers of people work, shop or live;
o the amount of alternative parking spaces in the area;
o the availability of mass transit; and
o the perceptions of the safety, convenience and services of the lot or
garage.
UNIMPROVED LAND
The value of unimproved land is largely a function of its potential
use. The land's potential use may depend on:
o its location;
o its size;
o the surrounding neighborhood; and
o local zoning laws.
BORROWER CONCENTRATION WITHIN A TRUST EXPOSES INVESTORS TO GREATER RISK OF
DEFAULT AND LOSS
A particular borrower or group of related borrowers may be associated
with multiple real properties securing the mortgage loans in any particular
trust. The bankruptcy or insolvency of, or other financial problems with respect
to, that borrower or group of borrowers could have an adverse effect on the
operation of all of the related real properties and on the ability of those
properties to produce sufficient cash flow to make required payments on the
related mortgage loans. For example, if a borrower or group of related borrowers
that owns or controls several real properties experiences financial difficulty
at one of those properties, it could defer maintenance at another of those
properties in order to satisfy current expenses with respect to the first
property. That borrower or group of related borrowers could also attempt to
avert foreclosure by filing a bankruptcy petition that might have the effect of
interrupting debt service payments on all the related mortgage loans for an
indefinite period. In addition, multiple real properties owned by the same
borrower or related borrowers are likely to have common management. This would
increase the risk that financial or other difficulties experienced by the
property manager could have a greater impact on the lender, including one of the
trusts, holding the related loans.
LOAN CONCENTRATION WITHIN A TRUST EXPOSES INVESTORS TO GREATER RISK OF DEFAULT
AND LOSS
Any of the mortgage loans in one of the trusts may be substantially
larger than the other loans in that trust. In general, the inclusion in a trust
of one or more mortgage loans that have outstanding principal balances that are
substantially larger than the other mortgage loans in the trust can result in
losses that are more severe, relative to the size of the related mortgage pool,
than would be the case if the total balance of that pool were distributed more
evenly.
GEOGRAPHIC CONCENTRATION WITHIN A TRUST EXPOSES INVESTORS TO GREATER RISK OF
DEFAULT AND LOSS
If a concentration of mortgage loans in any of the trusts is secured by
real properties in a particular locale, state or region, the holders of the
related offered certificates will have a greater exposure to:
o any adverse economic developments that occur in the locale, state or region
where the properties are located;
o changes in the real estate market where the properties are located;
o changes in governmental rules and fiscal policies in the governmental
jurisdiction where the properties are located; and
o acts of nature, including floods, tornadoes and earthquakes, in the areas
where properties are located.
CHANGES IN POOL COMPOSITION WILL CHANGE THE NATURE OF YOUR INVESTMENT
The mortgage loans underlying any series of offered certificates will
amortize at different rates and mature on different dates. In addition, some of
those mortgage loans may be prepaid or liquidated. As a result, the relative
composition of the mortgage pool will change over time.
If you purchase certificates with a pass-through rate that is equal to
or calculated based upon a weighted average of interest rates on the underlying
mortgage loans, your pass-through rate will be affected, and may decline, as the
relative composition of the mortgage pool changes.
In addition, as payments and other collections of principal are
received with respect to
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the underlying mortgage loans, the remaining mortgage pool backing your
certificates may exhibit an increased concentration with respect to property
type, number and affiliation of borrowers and geographic location.
SUBORDINATE DEBT INCREASES THE LIKELIHOOD OF A BORROWER DEFAULT
Most mortgage loans included in one of the trusts will either:
o prohibit the related borrower from encumbering the related real property
with additional secured debt; or
o require the consent of the holder of the mortgage loan prior to so
encumbering the property.
However, a lender may be unaware of a violation of this prohibition
until the borrower otherwise defaults on the mortgage loan. You should be aware
that a lender, such as one of the trusts, may not realistically be able to
prevent a borrower from incurring subordinate debt.
The existence of any secured subordinated indebtedness increases the
difficulty of refinancing a mortgage loan backing your certificates at the
loan's maturity. In addition, the related borrower may have difficulty repaying
multiple loans. Moreover, the filing of a petition in bankruptcy by, or on
behalf of, a junior lienholder may prevent the senior lienholder from taking
action to foreclose its lien. See "Certain Legal Aspects of Mortgage
Loans--Subordinate Financing".
BORROWER BANKRUPTCY MAY ADVERSELY AFFECT PAYMENT ON YOUR CERTIFICATES
Under the U.S. bankruptcy code, the filing of a petition in bankruptcy
by or against a borrower will stay the sale of a real property owned by that
borrower, as well as the commencement or continuation of a foreclosure action.
In addition, if a court determines that the value of a real property is less
than the principal balance of the mortgage loan it secures, the court may reduce
the amount of secured indebtedness to the then-value of the property. Such an
action would make the lender a general unsecured creditor for the difference
between the then-value of the property and the amount of its outstanding
mortgage indebtedness. A bankruptcy court also may:
o grant a debtor a reasonable time to cure a payment default on a mortgage
loan;
o reduce monthly payments due under a mortgage loan;
o change the rate of interest due on a mortgage loan; or
o otherwise alter the mortgage loan's repayment schedule.
Additionally, the borrower, as debtor-in-possession, or its bankruptcy
trustee has certain special powers to avoid, subordinate or disallow debts. In
certain circumstances, the claims of a secured lender, such as one of the
trusts, may be subordinated to financing obtained by a debtor-in-possession
subsequent to its bankruptcy.
Under the U.S. bankruptcy code, a lender will be stayed from enforcing
a borrower's assignment of rents and leases. The U.S. bankruptcy code also may
interfere with a lender's ability to enforce lockbox requirements. The legal
proceedings necessary to resolve these issues can be time consuming and may
significantly delay the receipt of rents. Rents also may escape an assignment to
the extent they are used by a borrower to maintain its property or for other
court authorized expenses.
As a result of the foregoing, the related trust's recovery with respect
to borrowers in bankruptcy proceedings may be significantly delayed, and the
total amount ultimately collected may be substantially less than the amount
owed.
ENVIRONMENTAL LIABILITIES WILL ADVERSELY AFFECT THE VALUE AND OPERATION OF
CONTAMINATED PROPERTY AND MAY DETER A LENDER FROM FORECLOSING
We can give you no assurance as to any environmental testing conducted
at the related real properties in connection with the origination of the
mortgage loans underlying your certificates:
o that the environmental testing identified all adverse environmental
conditions and risks at the related real properties;
o that the results of the environmental testing were accurately evaluated in
all cases;
o that the related borrowers have implemented or will implement all
operations and maintenance plans and other remedial actions recommended by
an environmental consultant that conducted the testing at the related real
properties; or
o that any recommended remedial action will fully remediate or otherwise
address all the
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identified adverse environmental conditions and risks.
In addition, tenants, such as gasoline stations or dry cleaners, or
conditions or operations in the vicinity of the property, such as leaking
underground storage tanks at another property nearby, could adversely affect the
current environmental condition of a real property securing a mortgage loan
underlying your certificates.
Various environmental laws may make a current or previous owner or
operator of real property liable for the costs of removal or remediation of
hazardous or toxic substances on, under or adjacent to the property. Those laws
often impose liability whether or not the owner or operator knew of, or was
responsible for, the presence of the hazardous or toxic substances. For example,
certain laws impose liability for release of asbestos containing materials into
the air or require the removal or containment of the materials. The owner's
liability for any required remediation generally is unlimited and could exceed
the value of the property and/or the total assets of the owner. In addition, the
presence of hazardous or toxic substances, or the failure to remediate the
adverse environmental condition, may adversely affect the owner's or operator's
ability to use the affected property. In certain states, contamination of a
property may give rise to a lien on the property to ensure the costs of cleanup.
In some of those states, this lien has priority over the lien of an existing
mortgage. In addition, third parties may seek recovery from owners or operators
of real property for personal injury associated with exposure to hazardous
substances, including asbestos and lead-based paint. Persons who arrange for the
disposal or treatment of hazardous or toxic substances may be liable for the
costs of removal or remediation of the substances at the disposal or treatment
facility.
The federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, commonly referred to as "CERCLA", together with certain
other federal and state laws, provide that a secured lender, such as one of the
trusts, may be liable as an "owner" or "operator" of the real property,
regardless of whether the borrower or a previous owner caused the environmental
damage, if:
o agents or employees of the lender are deemed to have participated in the
management of the borrower, or
o under certain conditions, the lender actually takes possession of a
borrower's property or control of its day-to-day operations, including
through the appointment of a receiver or foreclosure.
Although recently enacted legislation clarifies the activities in which
a lender may engage without becoming subject to liability under CERCLA and
similar federal laws, that legislation has no applicability to state
environmental laws. Moreover, future laws, ordinances or regulations could
impose material environmental liability.
Federal law requires owners of residential housing constructed prior to
1978 to disclose to potential residents or purchasers:
o any condition on the property that causes exposure to lead-based paint, and
o the potential hazards to pregnant women and young children, including that
the ingestion of lead-based paint chips and/or the inhalation of dust
particles from lead-based paint by children can cause permanent injury,
even at low levels of exposure.
Property owners may be liable for injuries to their tenants or third
parties resulting from exposure under various laws that impose affirmative
obligations on property owners of residential housing containing lead-based
paint.
SOME PROVISIONS IN THE MORTGAGE LOANS UNDERLYING YOUR CERTIFICATES MAY BE
CHALLENGED AS BEING UNENFORCEABLE
CROSS-COLLATERALIZATION ARRANGEMENTS
It may be possible to challenge cross-collateralization arrangements
involving more than one borrower as a fraudulent conveyance, even if the
borrowers are related. If one of those borrowers were to become a debtor in a
bankruptcy case, creditors of the bankrupt party or the representative of the
bankruptcy estate of the bankrupt party could seek to have the bankruptcy court
avoid any lien granted by the bankrupt party to secure repayment of another
borrower's loan. In order to do so, the court would have to determine that:
o the bankrupt party was--
1) insolvent at the time of granting the lien,
2) rendered insolvent by the granting of the lien,
3) left with inadequate capital, or
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4) not able to pay its debts as they matured; and
o the bankrupt party did not receive fair consideration or reasonably
equivalent value for pledging its property to secure the debt of the other
borrower.
If the court were to conclude that the granting of the lien was an
avoidable fraudulent conveyance, it could nullify the lien or mortgage effecting
the cross-collateralization. The court could also allow the bankrupt party to
recover payments it made pursuant to the avoided cross-collateralization.
PREPAYMENT PREMIUMS, FEES AND CHARGES
Under the laws of a number of states, the enforceability of any
mortgage loan provisions that require payment of a prepayment premium, fee or
charge upon a voluntary and/or an involuntary prepayment is unclear. If those
provisions were unenforceable in connection with an involuntary prepayment,
borrowers would have an incentive to default in order to prepay their loans.
DUE-ON-SALE AND DEBT ACCELERATION CLAUSES
Many of the mortgage loans underlying the offered certificates will
contain a due-on-sale clause. This clause permits the lender, with some
exceptions, to accelerate the maturity of the mortgage loan upon the sale,
transfer or conveyance of:
o the related real property; or
o an ownership interest in the related borrower.
All of the mortgage loans will include some form of debt-acceleration
clause, which permits the lender to accelerate the debt upon specified monetary
or non-monetary defaults by the related borrower. The courts of all states will
enforce acceleration clauses in the event of a material payment default. The
equity courts of any state, however, may refuse to allow the foreclosure of a
mortgage or deed of trust or to permit the acceleration of the indebtedness if:
o the default is deemed to be immaterial;
o the exercise of these remedies would be inequitable or unjust; or
o the circumstances would render the acceleration unconscionable.
ASSIGNMENTS OF LEASES
Many of the mortgage loans underlying the offered certificates will
also be secured by an assignment of leases and rents. The related borrower will
assign its interest in the leases on the related real property and the income
from those leases to the lender as additional security for the related mortgage
loan. Generally, the borrower may continue to collect rents until the borrower
defaults. In some cases, state law may require that the lender take possession
of the property, obtain a judicial appointment of a receiver or take some other
similar action before becoming entitled to collect the rents. In addition, the
commencement of bankruptcy or similar proceedings by or in respect of the
borrower will adversely affect the lender's ability to collect the rents. See
"Certain Legal Aspects of Mortgage Loans--Foreclosure--Bankruptcy Laws."
DEFEASANCE
A mortgage loan underlying a series of offered certificates may, during
specified periods and subject to certain conditions, permit the related borrower
to pledge to the holder of the mortgage loan a specified amount of direct,
non-callable United States government securities in exchange for releasing the
lien on the underlying real property. The cash amount which a borrower must
expend to purchase the required United States government securities may exceed
the principal balance of the mortgage loan. There can be no assurance that a
court would not interpret that excess amount as a form of prepayment premium or
would not take it into account for usury purposes. In some states, some forms of
prepayment premiums are unenforceable. If the payment of that excess amount were
held to be unenforceable, the remaining portion of the cash amount to be
delivered may be insufficient to purchase the requisite amount of United States
government securities.
LACK OF INSURANCE COVERAGE EXPOSES A TRUST TO RISK FOR CERTAIN SPECIAL HAZARD
LOSSES
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements of a property by
fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and
civil commotion, subject to the conditions and exclusions specified in the
related policy. The specific forms of policy vary from state to state. Most
insurance policies do not cover any physical damage resulting from:
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o war;
o revolution;
o governmental actions;
o floods and other water-related causes;
o earth movement, including earthquakes; landslides and mudflows;
o wet or dry rot;
o vermin;
o domestic animals; and
o certain other kinds of risks.
Unless the related mortgage loan documents specifically require the
borrower to insure against physical damage arising from these causes, and the
borrower does so, the resulting losses may be borne by you as a holder of
offered certificates.
MORTGAGE LOANS SECURED BY MORTGAGES ON GROUND LEASES CREATE RISKS NOT PRESENT
WHEN LENDING ON A FEE OWNERSHIP INTEREST IN A REAL PROPERTY
In order to secure a mortgage loan, a borrower may grant a lien on its
leasehold interest in a real property as tenant under a ground lease. If the
ground lease does not provide for notice to a lender of a default by the
borrower under the lease, and a reasonable opportunity for the lender to cure
the default, the lender may be unable to prevent termination of the lease and
may lose its collateral.
In addition, upon the bankruptcy of a landlord or a tenant under a
ground lease, the debtor entity has the right to assume or reject the ground
lease. If a debtor landlord rejects the lease, the tenant has the right to
remain in possession of its leased premises at the rent reserved in the lease
for the term, including renewals. If a debtor tenant rejects any or all of its
leases, the tenant's lender may not be able to succeed to the tenant's position
under the lease unless the landlord has specifically granted the lender that
right. If both the landlord and the tenant are involved in bankruptcy
proceedings, it is possible that the trustee for your certificates could be
deprived of its security interest in the leasehold estate, notwithstanding
lender protection provisions contained in the lease or mortgage loan documents.
CHANGES IN ZONING LAWS MAY ADVERSELY AFFECT THE USE OR VALUE OF A REAL PROPERTY
Due to changes in zoning requirements after an income-producing
property was built, a property may not comply with current zoning laws,
including density, use, parking and set back requirements. Accordingly, the
property may be a "permitted non-conforming structure" or the operation of the
property may be a "permitted non-conforming use". This means that the owner is
not required to alter the property's structure or use to comply with the new
law, but the owner may be limited in its ability to rebuild the premises "as is"
in the event of a substantial casualty loss. This may adversely affect the cash
flow available following the casualty. If a substantial casualty were to occur,
insurance proceeds may not be sufficient to pay a mortgage loan secured by the
property in full. In addition, if the property were repaired or restored in
conformity with the current law, its value or revenue-producing potential may be
less than before the casualty.
COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT OF 1990 MAY BE EXPENSIVE
Under the Americans With Disabilities Act of 1990, all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. If a property does not currently comply with
that law, the owner of the property may be required to incur significant costs
in order to bring the property into compliance. In addition, noncompliance could
result in the imposition of fines by the federal government or an award or
damages to private litigants.
LITIGATION MAY ADVERSELY AFFECT A BORROWER'S ABILITY TO REPAY ITS MORTGAGE LOAN
A borrower may be a defendant in litigation arising out of, among other
things, the following:
o breach of contract involving a tenant, a supplier or other party;
o negligence resulting in a personal injury; or
o responsibility for an environmental problem.
Litigation will divert the borrower's attention from operating its
property. If the litigation were decided adversely to the borrower, the award to
the plaintiff may adversely affect the borrower's ability to repay a mortgage
loan secured by the property.
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"RESIDUAL INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" HAVE ADVERSE
TAX CONSEQUENCES
INCLUSION OF TAXABLE INCOME IN EXCESS OF CASH RECEIVED
If you own a certificate that is a "residual interest" in a "real
estate mortgage investment conduit" or "REMIC", you will have to report on your
income tax return as ordinary income your pro rata share of the taxable income
of the REMIC, regardless of the amount or timing of your possible receipt of any
cash on the certificate. As a result, your certificate may have "phantom income"
early in the term of the REMIC, because the taxable income from the certificate
may exceed the amount of cash you actually receive. Although you will have a
corresponding amount of tax losses later in the term of the REMIC, the present
value of the "phantom income" may significantly exceed the present value of the
tax losses. Therefore, the after-tax yield on any "residual interest"
certificate may be significantly less than that of a corporate bond or other
instrument having similar cash flow characteristics. In fact, certain offered
certificates which are "residual interests" may have a negative value.
You must report your share of the taxable income and net loss of the
REMIC until all the certificates in the related series have a principal balance
of zero. See "Federal Income Tax Consequences--REMICs".
SOME TAXABLE INCOME OF A "RESIDUAL INTEREST" CAN NOT BE OFFSET UNDER THE TAX
CODE
A portion of the taxable income from a "residual interest" certificate
may be treated as "excess inclusion" under the Internal Revenue Code of 1986.
You will have to pay tax on the "excess inclusion" regardless of whether you
have other credits, deductions or losses. In particular, the tax on "excess
inclusion":
o generally will not be reduced by losses from other activities;
o for a tax-exempt holder, will be treated as unrelated business taxable
income; and
o for a foreign holder, will not qualify for any exemption from withholding
tax.
CERTAIN ENTITIES SHOULD NOT INVEST IN CERTIFICATES WHICH ARE "RESIDUAL
INTERESTS"
The fees and non-interest expenses of a REMIC will be allocated pro
rata to certificates that are "residual interests" of the REMIC. However,
individuals will only be able to deduct these expenses as miscellaneous itemized
deductions, which are subject to numerous restrictions and limitations under the
Internal Revenue Code of 1986. Therefore, the certificates that are "residual
interests" generally are not appropriate investments for:
o individuals;
o estates;
o trusts beneficially owned by any individual or estate; and
o pass-through entities having any individual, estate or trust as a
shareholder, member or partner.
In addition, the "residual interest" certificates are subject to
numerous transfer restrictions. These restrictions reduce your ability to
liquidate a "residual interest" certificate. For example, unless we indicate
otherwise in the related prospectus supplement, you will not be able to transfer
a "residual interest" certificate to a non-U.S. person under the Internal
Revenue Code of 1986.
See "Federal Income Tax Consequences--REMICs--Taxation of Owners of
REMIC Residual Certificates".
PROBLEMS WITH BOOK-ENTRY REGISTRATION
Your certificates may be issued in book-entry form through the
facilities of The Depository Trust Company. As a result:
o you will be able to exercise your rights as a certificateholder only
indirectly through DTC and its participating organizations;
o you may have only limited access to information regarding your
certificates;
o you may suffer delays in the receipt of payments on your certificates; and
o your ability to pledge or otherwise take action with respect to your
certificates may be limited due to the lack of a physical certificate
evidencing your ownership of those certificates.
See "Description of the Certificates--Book-Entry Registration and
Definitive Certificates."
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POTENTIAL CONFLICTS OF INTEREST CAN AFFECT A PERSON'S PERFORMANCE
The master servicer or special servicer for any of the trusts, or any
of their respective affiliates, may purchase certificates evidencing interests
in that trust.
In addition, the master servicer or special servicer for any of the
trusts, or any of their respective affiliates, may have interests in, or other
financial relationships with, borrowers under the related mortgage loans.
In servicing the mortgage loans in any of the trusts, the related
master servicer and special servicer will each be required to observe the terms
of the governing document(s) for the related series of offered certificates and,
in particular, to act in accordance with the servicing standard described in the
related prospectus supplement. You should consider, however, that either of
these parties, if it or an affiliate owns certificates, or has financial
interests in or other financial dealings with any of the related borrowers, may
have interests when dealing with the mortgage loans that are in conflict with
your interests. For example, if the related special servicer owns any
certificates, it could seek to mitigate the potential loss on its certificates
from a troubled mortgage loan by delaying enforcement in the hope of realizing
greater proceeds in the future. However, this action by a special servicer could
result in a lower recovery to the related trust than would have been the case if
the special servicer had not delayed in taking enforcement action.
Furthermore, the master servicer or special servicer for any of the
trusts may service existing and new loans for third parties, including
portfolios of loans similar to the mortgage loans included in that trust. The
properties securing these other loans may be in the same markets as and compete
with the properties securing mortgage loans in that trust. Accordingly, that
master servicer or special servicer may be acting on behalf of parties with
conflicting interests.
THE RATING ON A CLASS OF CERTIFICATES REFLECTS ONLY THE RATING AGENCY'S
ASSESSMENT OF THE LIKELIHOOD THAT CERTIFICATE HOLDERS WILL RECEIVE PAYMENTS TO
WHICH THEY ARE LEGALLY ENTITLED.
Ratings on mortgage pass-through certificates reflect no assessment of
the likelihood of principal prepayments by borrowers or of the degree to which
the prepayments might differ from those originally anticipated. As a result, if
you purchase any offered certificates, you might suffer a lower than anticipated
yield. For example, if you purchase interest only certificates, you might, in
certain cases, fail to recoup your initial investment even though you receive
all payments to which you are entitled. Ratings also do not evaluate the price
of the certificates or the suitability of the certificates as an investment for
you.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD-LOOKING STATEMENTS
This prospectus and the related prospectus supplement contain
forward-looking statements that involve risks and uncertainties. Actual events
could differ from those anticipated in these forward-looking statements because
of a variety of factors, including the risks described in the "Risk Factors"
sections and elsewhere in this prospectus or the related prospectus supplement.
You should make your own estimate of future events that you consider material
before you invest.
DESCRIPTION OF THE TRUST ASSETS
We will be responsible for establishing the trust underlying each
series of offered certificates. The assets of the trust will primarily consist
of:
o various types of multifamily and/or commercial mortgage loans;
o mortgage participations, pass-through certificates, collateralized mortgage
obligations or other mortgage-backed securities that directly or indirectly
evidence interests in, or are secured by pledges of, one or more of various
types of multifamily and/or commercial mortgage loans;
o direct obligations of the United States or other governmental agencies; or
o a combination of mortgage loans, mortgage-backed securities or government
securities of the types described above.
We do not originate mortgage loans. Accordingly, we must acquire each
of the mortgage loans to be included in one of the trusts from the originator or
a subsequent assignee. In some cases,
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that originator or subsequent assignee will be Midland Loan Services, Inc. or
another of our affiliates.
Unless we indicate otherwise in the related prospectus supplement,
neither we nor any of our affiliates nor any governmental agency or
instrumentality or other person will guarantee or insure any of those mortgage
assets.
MORTGAGE LOANS
Each mortgage loan underlying the offered certificates will constitute
the obligation of one or more persons to repay a debt. A promissory note or bond
will evidence that obligation. That obligation will be secured by a mortgage,
deed of trust or other security instrument that creates a first or junior lien
on, or security interest in, one or more of the following types of real
property:
o rental or cooperatively-owned buildings with multiple dwelling units;
o retail properties related to the sale of consumer goods and other products
to the general public, such as shopping centers, malls, factory outlet
centers, automotive sales centers, department stores and other retail
stores, grocery stores, specialty shops, convenience stores and gas
stations;
o retail properties related to providing entertainment, recreational and
personal services to the general public, such as movie theaters, fitness
centers, bowling alleys, salons, dry cleaners and automotive service
centers;
o office properties;
o hospitality properties, such as hotels, motels and other lodging
facilities;
o casino properties;
o health care-related properties, such as hospitals, skilled nursing
facilities, nursing homes, congregate care facilities and, in some cases,
assisted living centers and senior housing;
o industrial properties;
o warehouse facilities, mini-warehouse facilities and self-storage
facilities; o restaurants, taverns and other establishments involved in the
food and beverage industry;
o manufactured housing communities, mobile home parks and recreational
vehicle parks;
o recreational and resort properties, such as recreational vehicle parks,
golf courses, marinas, ski resorts and amusement parks;
o arenas and stadiums;
o churches and other religious facilities;
o parking lots and garages;
o mixed use properties; and
o unimproved land zoned for multifamily residential or commercial use.
A mortgage loan may encumber the following types of real property
interests:
o a fee interest or estate, which consists of ownership of the property for
an indefinite period;
o an estate for years, which consists of ownership of the property for a
specified period of years;
o a leasehold interest or estate, which consists of a right to occupy and use
the property for a specified period of years, subject to the terms and
conditions of a lease;
o shares in a cooperative corporation that owns the property; or
o any other real estate interest under applicable local law.
Any of these real property interests may be subject to deed
restrictions, easements, rights of way and other matters of public record.
Zoning laws and other legal restrictions may apply to the use of any particular
real property and the improvements constructed on it.
If indicated in the related prospectus supplement, a junior lien on the
real property may secure one or more of the mortgage loans underlying a series
of offered certificates. However, the trust may not include the loan or loans
secured by the more senior liens on that property. The primary risk to the
holder of a mortgage loan secured by a junior lien on a real property is the
possibility that the foreclosure proceeds remaining after payment of the loans
secured by more senior liens will be insufficient to pay the junior loan in
full. In a foreclosure proceeding, the sale proceeds are applied:
o first to the payment of court costs and fees in connection with the
foreclosure;
o second to the payment of real estate taxes; and
o third to the payment of all principal, interest, prepayment or acceleration
penalties, if any, and all other amounts owing to the holder of the senior
loans.
The claims of the holders of the senior loans must be satisfied in full before
the holder of the junior loan receives any payments on the junior loan. If a
lender forecloses on a junior loan, it does so subject to any related senior
loans.
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If indicated in the related prospectus supplement, the mortgage loans
underlying a series of offered certificates may be delinquent as of the date the
certificates are initially issued. In those cases, we will describe in the
related prospectus supplement the period of the delinquency, any forbearance
arrangement then in effect, the condition of the related real property and the
ability of the related real property to generate income to service the mortgage
debt. However, we will not transfer to a trust any mortgage loan if we know, at
the time of transfer, that the loan is:
o more than 90 days delinquent in any scheduled principal or interest
payment; or
o in foreclosure.
DEFAULT AND LOSS CONSIDERATIONS WITH RESPECT TO THE MORTGAGE LOANS
Mortgage loans secured by liens on income-producing properties differ
substantially from mortgage loans secured by owner-occupied single-family homes.
The repayment of a loan secured by a lien on an income-producing property
typically depends upon the successful operation of the property and its ability
to generate income sufficient to make payments on the loan. This is particularly
true because most or all of the mortgage loans underlying the offered
certificates will be non-recourse loans.
The debt service coverage ratio of a multifamily or commercial mortgage
loan is a measure of the likelihood of default on the loan. In general, the
"debt service coverage ratio" of a multifamily or commercial mortgage loan at
any given time is the ratio of:
o the amount of income derived or expected to be derived from the related
real property for a twelve-month period that is available to pay debt
service, to
o the annualized scheduled payments of principal and/or interest on the
mortgage loan and any other senior loans that are secured by the related
real property.
The amount described in clause (a) of the preceding sentence is often a
highly subjective number based on several assumptions and adjustments to
revenues and expenses for the property. We will provide a more detailed
discussion of its calculation in the related prospectus supplement.
The cash flow generated by a multifamily or commercial property will
generally fluctuate over time and may or may not suffice to make the mortgage
loan payments, cover operating expenses and fund capital improvements. The
condition of the local real estate market and/or area economy may affect
operating revenues of a non-owner occupied, income-producing property. Changes
in market and business conditions tend to affect properties leased, occupied or
used on a short-term basis (such as certain health care-related facilities,
hotels and motels, recreational vehicle parks, and mini-warehouse and
self-storage facilities) more rapidly than properties typically leased for
longer periods (such as warehouses, retail stores, office buildings and
industrial facilities).
Some commercial properties may be owner-occupied or leased to a small
number of tenants. The operating revenues of these properties may depend
substantially on the financial condition of the borrower or one or a few
tenants. Mortgage loans secured by liens on owner-occupied and single-tenant
properties may pose a greater likelihood of default and loss than loans secured
by liens on multifamily properties or on multi-tenant commercial properties.
Increased property operating expenses can increase the likelihood of a
default on a loan secured by the property. Increases in property operating
expenses may result from:
o increases in energy costs and labor costs;
o increases in interest rates and real estate tax rates; and
o changes in governmental rules, regulations and fiscal policies.
Some "net leases" of commercial properties may obligate the lessee,
rather than the borrower/landlord, to pay operating expenses. However, a net
lease will yield stable net operating income to the borrower/landlord only if
the lessee can pay both increased operating expenses and rent payments.
Lenders also look to the loan-to-value ratio of a mortgage loan as a
factor in evaluating the likelihood of loss if a property is liquidated
following a default. In general, the "loan-to-value ratio" of a multifamily or
commercial mortgage loan at any given time is the ratio, expressed as a
percentage, of:
o the then outstanding principal balance of the mortgage loan and any other
senior loans that are
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secured by the related real property, to
o the estimated value of the related real property based on an appraisal, a
cash flow analysis, a recent sales price or another method.
A low loan-to-value ratio means the borrower has a large amount of its
own equity in the property that secures its loan. In these circumstances:
o the borrower has a greater financial incentive to perform under the
mortgage loan in order to protect its equity, and
o the lender has greater protection against loss on liquidation following a
default.
Loan-to-value ratios are not necessarily an accurate measure of the
likelihood of loss in a pool of multifamily and commercial mortgage loans. For
example, estimated property value at the time the loan was originated may exceed
the value of the property when the offered certificates are issued. Property
values fluctuate. Even current appraisals are not necessarily reliable estimates
of value. Appraised values of income-producing properties are generally based
on:
o the market comparison method, which takes into account the recent resale
value of comparable properties at the date of the appraisal;
o the cost replacement method, which takes into account the cost of replacing
the property at such date;
o the income capitalization method, which takes into account the property's
projected net cash flow; or
o some combination of these methods.
Each of these appraisal methods presents analytical difficulties:
o it is often difficult to find truly comparable properties that have
recently been sold;
o the replacement cost of a property may have little to do with its current
market value; and
o income capitalization is inherently based on inexact projections of income
and expense and selection of a capitalization rate and discount rate.
If different appraisal methods yield significantly different results,
an accurate determination of value and, correspondingly, a reliable analysis of
the likelihood of default and loss, is even more difficult.
A property's performance will affect its value. As a result, if a
multifamily or commercial mortgage loan defaults because the income generated by
the related property is insufficient to pay operating costs and expenses as well
as debt service, then the value of the property will decline and a liquidation
loss may occur.
We believe that the foregoing considerations are important factors that
generally distinguish mortgage loans secured by liens on income-producing real
estate from single-family mortgage loans. However, the originators of the
mortgage loans underlying the offered certificates may not have considered all
these factors for the loans they originated.
See "Risk Factors--Repayment of a Commercial or Multifamily Mortgage
Loan Depends Upon the Performance and Value of the Underlying Real Property
and the Related Borrower's Ability to Refinance the Property."
PAYMENT PROVISIONS OF THE MORTGAGE LOANS
Except as described in the related prospectus supplement, each of the
mortgage loans included in one of the trusts will have the following features:
o an original term to maturity of not more than approximately 40 years; and
o scheduled payments of principal, interest or both, to be made on specified
dates, that occur monthly, bimonthly quarterly, semi-annually, annually or
at some other interval.
A mortgage loan included in one of the trusts may also:
o provide for the accrual of interest at a mortgage interest rate that is
fixed over its term, that resets on one or more specified dates or that
otherwise adjusts from time to time;
o provide for the accrual of interest at a mortgage interest rate that may be
converted at the borrower's election from an adjustable to a fixed interest
rate or from a fixed to an adjustable interest rate;
o provide for no accrual of interest;
o provide for level payments to stated maturity, for payments that reset in
amount on one or more specified dates or for payments that otherwise adjust
from time to time to accommodate changes in the interest rate or to reflect
the occurrence of certain events;
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o be fully amortizing or partially amortizing or non-amortizing, with a
substantial payment of principal due on its stated maturity date;
o permit the negative amortization or deferral of accrued interest; and/or
o prohibit some or all voluntary prepayments or require payment of a premium,
fee or charge in connection with those prepayments.
MORTGAGE LOAN INFORMATION IN PROSPECTUS SUPPLEMENTS
In general, the prospectus supplement will provide the following
information about the mortgage loans in each trust:
o the total outstanding principal balance and the largest, smallest and
average outstanding principal balances;
o the type or types of property that provide security for repayment;
o the earliest and latest origination date and maturity date;
o the original and remaining terms to maturity, or the range thereof, and the
weighted average original and remaining terms to maturity;
o loan-to-value ratios either at origination or at a more recent date, or the
range thereof, and the weighted average of those loan-to-value ratios;
o the mortgage interest rates, or the range thereof, and the weighted average
mortgage interest rate;
o if any mortgage loans have adjustable mortgage interest rates, the index or
indices upon which the adjustments are based, the adjustment dates, the
range of gross margins and the weighted average gross margin, and any
limits on mortgage interest rate adjustments at the time of any adjustment
and over the life of the loan;
o information on the payment characteristics, including applicable prepayment
restrictions;
o debt service coverage ratios either at origination or at a more recent
date, or the range thereof, and the weighted average of those debt service
coverage ratios; and
o the geographic distribution of the properties securing the mortgage loans
on a state-by-state basis.
If we are unable to provide the specific information described above at
the time a series of offered certificates is initially offered, we will provide:
o more general information in the related prospectus supplement; and
o specific information in a Current Report on Form 8-K filed with the SEC
within 15 days after the issuance of the certificates.
If a trust includes any mortgage loan, or group of related mortgage
loans, that represent a material concentration of credit risk, we will include
in the related prospectus supplement financial statements or other financial
information on the related real property or properties.
MORTGAGE-BACKED SECURITIES
The mortgage backed-securities underlying a series of offered
certificates may include:
o mortgage participations, mortgage pass-through certificates, collateralized
mortgage obligations or other mortgage-backed securities that are not
insured or guaranteed by any governmental agency or instrumentality; or
o certificates issued and/or insured or guaranteed by the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, the
Governmental National Mortgage Association, the Federal Agricultural
Mortgage Corporation or another federal or state governmental agency or
instrumentality.
In addition, each of those mortgage-backed securities will directly or
indirectly evidence an interest in, or be secured by a pledge of, multifamily
and/or commercial mortgage loans.
We will describe in the related prospectus supplement characteristics
of the mortgage-backed securities included in a trust, including the following
information:
o the initial and outstanding principal amount(s) and type of the securities;
o the original and remaining term(s) to stated maturity of the securities;
o the pass-through or bond rate(s) of the securities or the formula for
determining these rate(s);
o the payment characteristics of the securities;
o the identity of the issuer(s), servicer(s) and trustee(s) for the
securities;
o a description of the related credit support, if any;
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o the type(s) of mortgage loans underlying the securities;
o the circumstances under which the underlying mortgage loans, or the
securities themselves, may be purchased prior to maturity;
o the terms and conditions for substituting mortgage loans backing the
securities; and
o the characteristics of any agreements or instruments providing interest
rate protection to the securities.
In our reports filed under the Exchange Act of 1934, we will provide
the same information about mortgage-backed securities included in a trust as is
provided by the issuer of the security:
o in its own reports filed under the Securities Exchange Act of 1934, if the
security was publicly offered; or
o in whatever reports the issuer of the security provides to the related
trustee, if the security was privately issued.
The prospectus supplement for a series will contain the disclosure
concerning the mortgage-backed securities described in the preceding paragraph
and, in particular, will disclose the underlying mortgage loans appropriately in
light of the percentage of the aggregate principal balance of all assets
represented by the principal balance of the mortgage-backed securities.
GOVERNMENT SECURITIES
The prospectus supplement for a series of certificates evidencing
interests in assets of a trust fund that include government securities will
specify, to the extent available:
o the aggregate approximate initial and outstanding principal amounts or
notional amounts, as applicable, and types of the government securities to
be included in the trust fund;
o the original and remaining terms to stated maturity of the government
securities;
o whether the government securities are entitled only to interest payments,
only to principal payments or to both;
o the interest rates of the government securities or the formula to determine
the rates, if any;
o the applicable payment provisions for the government securities; and
o to what extent, if any, the obligation evidenced by the related series of
certificates is backed by the full faith and credit of the United States.
UNDELIVERED MORTGAGE ASSETS
In general, the total outstanding principal balance of the mortgage
assets transferred by us to any particular trust will equal or exceed the
initial total outstanding principal balance of the related series of
certificates. If we initially deliver to the trustee mortgage assets with total
outstanding principal balances less than the initial total outstanding principal
balance of any series of certificates, we may cover the shortfall by depositing
or arranging to deposit with the related trustee cash or liquid investments on
an interim basis. For 90 days following the date of initial issuance of that
series of certificates, we will be entitled to obtain a release of the deposited
cash or investments if we deliver or arrange for delivery of a corresponding
amount of mortgage assets. However, If we fail to deliver mortgage assets
sufficient to make up the entire shortfall, the related trustee will liquidate
the investments and use the cash and proceeds of the liquidation to pay down the
total principal balance of the related series of certificates, as described in
the related prospectus supplement.
YIELD AND MATURITY CONSIDERATIONS
The yield on your certificates will depend on:
o the price you paid for your certificates;
o the pass-through rate on your certificates;
o the amount and timing of payments on your certificates.
The following discussion contemplates a trust established by us that
consists primarily of mortgage loans. If one of the trusts also includes a
mortgage-backed security, the payment terms of that security will lessen or
enhance the effects that the characteristics and behavior of mortgage loans
backing that security can have on the yield to maturity and/or weighted average
life of a class of offered certificates. If one of the trusts includes a
mortgage-backed security or government security, we will discuss in the related
prospectus supplement the effect, if any, that these securities may have on the
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yield to maturity and weighted average lives of the related offered
certificates.
PASS-THROUGH RATE
A class of interest-bearing offered certificates may have a fixed,
variable or adjustable pass-through rate. We will specify in the related
prospectus supplement the pass-through rate for each class of interest-bearing
offered certificates or, if the pass-through rate is variable or adjustable, the
method of determining the pass-through rate.
PAYMENT DELAYS
There will be a delay between the date on which payments on the
underlying mortgage loans are due and the date on which those payments are
passed through to you and other investors. That delay will reduce the yield that
would otherwise be produced if mortgage loan payments were passed through on
your certificates on the same date that the payments were due.
YIELD AND PREPAYMENT CONSIDERATIONS
The yield to maturity on your certificates will be affected by the rate
of principal payments on the mortgage loans and the allocation of those
principal payments to reduce the principal balance or notional amount of your
certificates. The rate of principal payments will be affected by the following:
o the amortization schedules of the mortgage loans, which may change from
time to time to reflect, among other things, changes in mortgage interest
rates or partial prepayments of principal;
o the dates on which any balloon payments are due; and
o the rate of principal prepayments on the mortgage loans, including
voluntary prepayments by borrowers and involuntary prepayments resulting
from liquidations, casualties or purchases of mortgage loans.
Because the rate of principal prepayments will depend on future events
and a variety of factors, we cannot give you any assurance as to what that rate
will be.
The yield to maturity of your certificates may vary from your
anticipated yield depending upon:
o whether you purchased your certificates at a discount or premium and, if
so, the extent of that discount or premium; and
o when, and to what degree, payments of principal on the underlying mortgage
loans reduce the principal balance or notional amount of your certificates.
If you purchase your certificates at a discount, you should consider
the risk that a slower than anticipated rate of principal payments on the
underlying mortgage loans could result in an actual yield to you that is lower
than your anticipated yield. If you purchase your certificates at a premium, you
should consider the risk that a faster than anticipated rate of principal
payments on the underlying mortgage loans could result in an actual yield to you
that is lower than your anticipated yield.
If your certificates entitle you to payments of interest, with
disproportionate, nominal or no payments of principal, you should consider that
your yield will be extremely sensitive to prepayments on the underlying mortgage
loans and, under some prepayment scenarios, may be negative.
If a class of offered certificates accrues interest on a notional
amount, that notional amount will, in general, either:
(a) be based on the principal balances of some or all of the mortgage
assets in the related trust; or
(b) be equal to the total principal balance of one or more of the other
classes of certificates of the same series.
Accordingly, the yield on that class of certificates will be inversely
related to, as applicable, the rate at which payments and other collections of
principal are received on the mortgage assets referred to in clause (a) above or
payments are made in reduction of the total principal balance of the class or
classes of certificates referred to in clause (b) above.
Several factors may influence repayments of principal on the mortgage
loans, including:
o the availability of mortgage credit;
o the relative economic vitality of the area in which the related real
properties are located;
o the quality of management of the related real properties;
o the servicing of the mortgage loans;
o possible changes in tax laws; and
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o the availability of other investment opportunities.
In general, those factors which increase the attractiveness of selling
or refinancing a multifamily or commercial property that secures a mortgage
loan, as well as those factors which increase the likelihood of default under
the mortgage loan, would be expected to cause the rate of prepayment to
accelerate. In contrast, those factors having an opposite effect would be
expected to cause the rate of prepayment to slow.
The existence and enforceability of prepayment restrictions, such as
prepayment lock-out periods and requirements that voluntary principal
prepayments be accompanied by prepayment premiums, fees or charges, could also
effect the rate of principal payments on the mortgage loans. If enforceable,
those provisions could either bar or discourage a borrower from voluntarily
prepaying its mortgage loan, which could slow the rate of prepayments.
Prevailing market interest rates for mortgage loans of a comparable
type, term and risk level, may also affect the rate of prepayment. As prevailing
market interest rates decline, a borrower may have an increased incentive to
refinance its mortgage loan. Even in the case of adjustable rate mortgage loans,
as prevailing market interest rates decline, the related borrowers may have an
increased incentive to refinance in order to:
o convert to a fixed rate loan and thereby "lock in" that rate; or
o take advantage of a different index, margin or rate cap or floor on another
adjustable rate mortgage loan.
Subject to prevailing market interest rates and economic conditions
generally, a borrower may sell a real property in order to:
o realize its equity in the property;
o meet cash flow needs; or
o make other investments.
Federal and state tax laws, which are subject to change, may motivate
borrowers to sell their properties prior to the exhaustion of tax depreciation
benefits. We make no representation as to:
o the particular factors that will affect prepayments of, or losses on, the
mortgage loans underlying any series of offered certificates;
o the relative importance of those factors;
o the percentage of the principal balance of those mortgage loans that will
be paid or incur a loss as of any date; or
o the overall rate of prepayments or losses on those mortgage loans.
WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received or losses are
realized on the mortgage loans underlying any series of offered certificates
will affect the ultimate maturity and the weighted average life of one or more
classes of the offered certificates of that related series. In general, weighted
average life refers to the average amount of time that will elapse from the date
of issuance of an instrument until each dollar allocable as principal of the
instrument is repaid to the investor.
The weighted average life and maturity of a class of offered
certificates will be influenced by the rate at which principal on the underlying
mortgage loans is paid to that class, whether in the form of scheduled
amortization or prepayments, including voluntary prepayments by borrowers and
involuntary prepayments resulting from liquidations, casualties or condemnations
and purchases of mortgage loans out of the related trust.
Prepayment rates on loans are commonly measured relative to a
prepayment standard or model, such as the Constant Prepayment Rate or "CPR"
prepayment model or the Standard Prepayment Assumption or "SPA" prepayment
model. CPR represents an assumed constant rate of prepayment each month
(expressed as an annual percentage) relative to the then outstanding principal
balance of a pool of mortgage loans for the life of the loans. SPA represents an
assumed variable rate of prepayment each month (expressed as an annual
percentage) relative to the then outstanding principal balance of a pool of
mortgage loans, with different prepayment assumptions often expressed as
percentages of SPA. For example, a prepayment assumption of 100% of SPA might
assume prepayment rates of 0.2% per annum of the then outstanding principal
balance of those loans in the first month of the life of the loans and an
additional 0.2% per annum in each month thereafter until the thirtieth month.
Beginning in the thirtieth month, and in each month thereafter during the life
of the loans, 100% of SPA would assume a
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constant prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption is a
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any particular pool of mortgage loans.
Moreover, the CPR and SPA models were developed based upon historical prepayment
experience for single-family mortgage loans. It is unlikely that the prepayment
experience of the mortgage loans underlying any series of offered certificates
will conform to any particular level of CPR or SPA.
In the prospectus supplement for a series of offered certificates, we
will include tables, if applicable, setting forth the projected weighted average
life of each class of those offered certificates with a total principal balance,
and the percentage of the initial total certificate principal balance of each
class that would be outstanding on specified dates, based on the assumptions
stated in that prospectus supplement, including assumptions regarding
prepayments on the underlying mortgage loans. Those tables and assumptions
illustrate the sensitivity of the weighted average lives of the certificates to
various assumed prepayment rates and are not intended to predict, or to provide
information that will enable you to predict, the actual weighted average lives
of your certificates.
OTHER FACTORS AFFECTING YIELD, WEIGHTED AVERAGE LIFE AND MATURITY
BALLOON PAYMENTS; EXTENSIONS OF MATURITY
Some or all of the mortgage loans underlying a series of offered
certificates may require the borrower to make a balloon payment at maturity. A
borrower's ability to make a balloon payment typically will depend upon its
ability either to:
o refinance the loan; or
o to sell the related real property.
If a borrower is unable to refinance or sell the property, the borrower might
default on the mortgage loan unless the maturity of the mortgage loan is
extended in connection with a workout. If a borrower defaults, recovery of
proceeds may be delayed by bankruptcy proceedings or adverse economic conditions
in the market where the property is located.
In order to minimize losses on defaulted mortgage loans, the related
master servicer or special servicer may be authorized within prescribed limits
to modify mortgage loans that are in default or as to which a payment default is
reasonably foreseeable. Any defaulted balloon payment or modification that
extends the maturity of a mortgage loan may delay payments of principal on your
certificates and extend the weighted average life of your certificates.
NEGATIVE AMORTIZATION
Mortgage loans that permit negative amortization to occur can affect
the weighted average life of a class of certificates. Negative amortization
loans require current interest payments at a rate lower than the rate at which
interest is accruing on the mortgage loan. The unpaid portion of the current
interest is added to the related principal balance. Negative amortization most
commonly occurs on adjustable rate mortgage loans that:
o limit the amount by which the scheduled payment may adjust in response to a
change in the mortgage interest rate;
o provide that the scheduled payment will adjust less frequently than the
mortgage interest rate; or
o provide for constant scheduled payments regardless of adjustments to the
mortgage interest rate.
Negative amortization on loans in a trust may cause negative
amortization on the offered certificates. We will describe in the related
prospectus supplement, if applicable, how this negative amortization will be
allocated among the classes of a series of offered certificates.
The portion of any mortgage loan negative amortization allocated to a
class of offered certificates may result in a deferral of some or all of the
interest payable on those certificates. Deferred interest may be added to the
aggregate principal balance of a class of offered certificates. During a period
of increasing interest rates, an adjustable rate mortgage loan that permits
negative amortization would be expected to not amortize or to amortize at a
slower rate than if interest rates were declining or remaining constant. This
slower rate of mortgage loan amortization would cause a slower rate of
amortization for one or more classes of certificates of the related series. This
would increase the weighted average lives of those classes of certificates to
which mortgage loan negative amortization is allocated or
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that bear the effects of a slower rate of amortization of the underlying
mortgage loans.
During a period of declining interest rates, the scheduled payment on
an adjustable rate mortgage loan may exceed the amount necessary to amortize the
loan fully over its remaining amortization schedule and pay interest at the then
applicable mortgage interest rate. The result is the accelerated amortization of
the mortgage loan. The acceleration in amortization of a mortgage loan will
shorten the weighted average lives of those classes of certificates that entitle
their holders to a portion of the principal payments on the mortgage loan.
The extent to which the inclusion in a trust of mortgage loans that
permit negative amortization will affect the yield on your certificates will
depend upon:
o whether you purchase your certificates at a premium or a discount; and
o whether the payment characteristics of the underlying mortgage loans delay
or accelerate the payments of principal on, or in reduction of the notional
amount of, your certificates.
See "-Yield and Prepayment Considerations".
FORECLOSURES AND PAYMENT PLANS
The weighted average life of and yield on your certificates will be
affected by:
o the number of foreclosures with respect to the underlying mortgage loans;
and
o the principal amount of the foreclosed mortgage loans in relation to the
principal amount of those mortgage loans that are repaid in accordance with
their terms.
Servicing decisions made with respect to mortgage loans, including the
use of payment plans prior to a demand for acceleration and the restructuring of
mortgage loans in bankruptcy proceedings or otherwise, may also affect the
payment patterns of particular mortgage loans and the weighted average life of
and yield on your certificates.
LOSSES AND SHORTFALLS ON THE MORTGAGE ASSETS
The yield on your certificates will directly depend on the extent to
which you are required to bear the effects of any losses or shortfalls in
collections on the underlying mortgage loans and the timing of those losses and
shortfalls. In general, the earlier that you bear any loss or shortfall, the
greater the negative effect on the yield of your certificates.
The amount of any losses or shortfalls in collections on the mortgage
assets in any of the trusts will, to the extent not covered or offset by draws
on any reserve fund or under any instrument of credit support, be allocated
among the various classes of certificates of the related series in the priority
and manner, and subject to the limitations, that we specify in the related
prospectus supplement. As described in the related prospectus supplement, those
allocations may be effected by:
o a reduction in the entitlements to interest and/or the total principal
balances of one or more classes of certificates; and/or
o the establishment of a priority of payments among classes of certificates.
If you purchase subordinated certificates, the yield to maturity on
those certificates may be extremely sensitive to losses and shortfalls in
collections on the underlying mortgage loans.
ADDITIONAL CERTIFICATE AMORTIZATION
If your certificates have a principal balance, then they entitle you to
a specified portion of the principal payments received on the underlying
mortgage loans. They may also entitle you to payments of principal from the
following sources:
o amounts attributable to interest accrued but not currently payable on one
or more other classes of certificates;
o interest received or advanced on the underlying mortgage assets that is in
excess of the interest currently accrued on the certificates of the
applicable series;
o prepayment premiums, fees and charges, payments from equity participations
or any other amounts received on the underlying mortgage assets that do not
constitute interest or principal; or
o any other amounts described in the related prospectus supplement.
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The amortization of your certificates out of the sources described in
the prior paragraph would shorten their weighted average life and, if your
certificates were purchased at a premium, reduce their yield to maturity.
PNC MORTGAGE ACCEPTANCE CORP.
We were incorporated in the State of Missouri on September 17, 1996. We
are a wholly-owned subsidiary of Midland Loan Services, Inc., a Delaware
corporation. We were organized, among other things, for the purposes of issuing
debt securities and establishing trusts, selling beneficial interests therein
and acquiring and selling mortgage assets to those trusts. Our principal
executive offices are located at:
210 West 10th Street
6th Floor
Kansas City, Missouri 64105
Our telephone number is (816) 435-5000. We do not have, and we do not
expect to have, any significant assets.
DESCRIPTION OF THE CERTIFICATES
Each series of offered certificates, together with any non-offered
certificates of the same series, will represent the entire beneficial ownership
interest in a trust established by us. Each series of offered certificates will
consist of one or more classes. Any non-offered certificates of that series will
likewise consist of one or more classes.
A "series" of certificates are all those certificates that:
o have the same series designation;
o were issued pursuant to the same governing documents; and
o represent beneficial ownership interests in the same trust.
A "class" of certificates are all those certificates of a particular
series that:
o have the same class designation; and
o have the same payment terms.
The respective classes of offered and non-offered certificates of any
series may have a variety of payment terms. An offered certificate may entitle
the holder to receive:
o a stated principal amount, which will be represented by its principal
balance;
o interest on a principal balance or notional amount, at a fixed, variable or
adjustable pass-through rate;
o specified, fixed or variable portions of the interest, principal or other
amounts received on the related mortgage assets;
o payments of principal, with disproportionate, nominal or no distributions
of interest;
o payments of interest, with disproportionate, nominal or no distributions of
principal;
o payments of interest or principal that commence only as of a specified date
or only after the occurrence of certain events, such as the payment in full
of the interest and principal outstanding on one or more other classes of
certificates of the same series;
o payments of principal to be made, from time to time or for designated
periods, at a rate that is faster (and, in some cases, substantially
faster) or slower (and, in some cases, substantially slower) than the rate
at which payments or other collections of principal are received on the
related mortgage assets;
o payments of principal to be made, subject to available funds, based on a
specified principal payment schedule or other methodology; or
o payments of all or part of the prepayment or repayment premiums, fees and
charges, equity participations payments or other similar items received on
the related mortgage assets.
Any class of offered certificates may be senior or subordinate to one
or more other classes of certificates of the same series, including a
non-offered class of certificates of that series, for purposes of some or all
payments and/or allocations of losses or other shortfalls.
A class of offered certificates may have two or more component parts,
each having characteristics that are described in this prospectus as being
attributable to separate and distinct classes. For example, a class of offered
certificates may have a total principal balance on which it accrues interest at
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a fixed, variable or adjustable rate. That class of offered certificates may
also accrue interest on a total notional amount at a different fixed, variable
or adjustable rate. In addition, a class of offered certificates may accrue
interest on one portion of its total principal balance or notional amount at one
fixed, variable or adjustable rate and on another portion of its total principal
balance or notional amount at a different fixed, variable or adjustable rate.
Each class of offered certificates will be issued in minimum
denominations corresponding to specified principal balances, notional amounts or
percentage interests, as described in the related prospectus supplement. A class
of offered certificates may be issued in fully registered, definitive form and
evidenced by physical certificates or may be issued in book-entry form through
the facilities of The Depository Trust Company. Offered certificates held in
fully registered, definitive form may be transferred or exchanged, subject to
any restrictions on transfer described in the related prospectus supplement, at
the location specified in the related prospectus supplement, without the payment
of any service charges, except for any tax or other governmental charge payable
in connection with the transfer or exchange. Interests in offered certificates
held in book entry form will be transferred on the book-entry records of DTC and
its participating organizations.
See"--Book-Entry Registration and Definitive Certificates".
PAYMENTS ON THE CERTIFICATES
Payments on a series of offered certificates may occur monthly,
bimonthly, quarterly, semi-annually, annually or at any other specified
interval. In the prospectus supplement for each series of offered certificates,
we will identify:
o the periodic payment date for that series; and
o the record date as of which certificateholders entitled to payments on any
particular payment date will be established.
All payments with respect to a class of offered certificates on any
payment date will be allocated pro rata among the outstanding certificates of
that class in proportion to the respective principal balances, notional amounts
or percentage interests, as the case may be, of those certificates. Payments on
an offered certificate will be made to the holder entitled thereto either:
o by wire transfer of immediately available funds to the account of that
holder at a bank or similar entity, provided that the holder has furnished
the party making the payments with wiring instructions no later than the
applicable record date and has satisfied any other conditions specified in
the related prospectus supplement; or
o by check mailed to the address of that holder as it appears in the
certificate register, in all other cases.
In general, the final payment on any offered certificate will be made
only upon presentation and surrender of that certificate at the location
specified to the holder in the notice of final payment.
PAYMENTS OF INTEREST
In the case of each class of interest-bearing offered certificates,
interest will accrue from time to time, at the applicable pass-through rate and
in accordance with the applicable interest accrual method, on the total
outstanding principal balance or notional amount of that class.
The pass-through rate for a class of interest-bearing offered
certificates may be fixed, variable or adjustable. We will specify in the
related prospectus supplement the pass-through rate for each class of
interest-bearing offered certificates or, in the case of a variable or
adjustable pass-through rate, the method for determining that pass-through rate.
Interest may accrue with respect to any offered certificate on the
basis of:
o a 360-day year consisting of 12 30-day months;
o the actual number of days elapsed during each relevant period in a year
assumed to consist of 360 days;
o the actual number of days elapsed during each relevant period in a normal
calendar year; or
o another method identified in the related prospectus supplement.
We will identify the interest accrual method for each class of offered
certificates in the related prospectus supplement.
Subject to available funds and any adjustments to interest entitlements
described in the related prospectus supplement, accrued interest on each class
of interest-bearing offered certificates will
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normally be payable on each payment date. However, in the case of some classes
of interest-bearing offered certificates, which we will refer to as "compound
interest certificates", payments of accrued interest will only begin on a
particular payment date or under the circumstances described in the related
prospectus supplement. Prior to that time, the amount of accrued interest
otherwise payable on that class will be added to its total principal balance on
each date or otherwise deferred as described in the related prospectus
supplement.
If a class of offered certificates accrues interest on a total notional
amount, that total notional amount, in general, will be either:
(c) based on the principal balances of some or all of the related
mortgage assets; or
(d) equal to the total principal balances of one or more other
classes of certificates of the same series.
Reference to the notional amount of any certificate is solely for
convenience in making certain calculations of interest and does not represent
the right to receive any distributions of principal.
We will describe in the related prospectus supplement the extent to
which the amount of accrued interest that is payable on, or that may be added to
the total principal balance of, a class of interest-bearing offered certificates
may be reduced as a result of any contingencies, including shortfalls in
interest collections due to prepayments, delinquencies, losses and deferred
interest on the related mortgage assets.
PAYMENTS OF PRINCIPAL
A class of offered certificates may or may not have a total principal
balance. If it does, the total principal balance outstanding from time to time
will represent the maximum amount that the holders of that class will be
entitled to receive as principal out of the future cash flow on the related
mortgage assets and the other related trust assets. The total outstanding
principal balance of any class of offered certificates will be reduced by:
o payments of principal actually made to the holders of that class; and
o if and to the extent that we so specify in the related prospectus
supplement, losses of principal on the related mortgage assets that are
allocated to or are required to be borne by that class.
If a class of offered certificates are compound interest certificates,
then the total outstanding principal balance of that class may be increased by
the amount of any interest accrued, but not currently payable, on that class. We
will describe in the related prospectus supplement any other adjustments to the
total outstanding principal balance of a class of offered certificates.
Unless we so state in the related prospectus supplement, the initial
total principal balance of all classes of a series will not be greater than the
total outstanding principal balance of the related mortgage assets transferred
by us to the related trust. We will specify the expected initial total principal
balance of each class of offered certificates in the related prospectus
supplement.
The payments of principal to be made on a series of offered
certificates from time to time will, in general, be a function of the payments,
other collections and advances received or made on the mortgage assets as
described in the related prospectus supplement. Payments of principal on a
series of offered certificates may also be made from the following sources:
o amounts attributable to interest accrued but not currently payable on one
or more other classes of certificates;
o interest received or advanced on the underlying mortgage assets that
exceeds the interest currently accrued on the certificates of the
applicable series;
o prepayment premiums, fees and charges, payments from equity participations
or any other amounts received on the underlying mortgage assets that do not
constitute interest or principal; or
o any other amounts described in the related prospectus supplement.
We will describe in the related prospectus supplement the principal
entitlement of each class of offered certificates on each payment date.
ALLOCATION OF LOSSES AND SHORTFALLS
If and to the extent that any losses or shortfalls in collections on
the mortgage assets in any of the trusts are not covered or offset by
delinquency advances or draws on any reserve fund or under any
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instrument of credit support, they will be allocated among the classes of
certificates of the related series in the priority and manner, and subject to
the limitations, specified in the related prospectus supplement. As described in
the related prospectus supplement, the allocations may be effected as follows:
o by reducing the entitlements to interest and/or the total principal
balances of one or more of those classes; and/or
o by establishing a priority of payments among those classes.
See "Description of Credit Support."
ADVANCES IN RESPECT OF DELINQUENCIES
If any trust established by us includes mortgage loans, then as and to
the extent described in the related prospectus supplement, the related master
servicer, the related trustee, any related provider of credit support and any
other specified person may be obligated to advance, or have the option of
advancing, delinquent payments of principal and interest due on those mortgage
loans, other than balloon payments. If there are any limitations with respect to
a party's advancing obligations, we will discuss those limitations in the
related prospectus supplement.
Advances are intended to maintain a regular flow of scheduled interest
and principal payments to certificateholders. Advances are not a guarantee
against losses. The advancing party will be entitled to recover all of its
advances out of subsequent recoveries on the related mortgage loans, including
amounts drawn under any fund or instrument constituting credit support, and out
of any other specific sources identified in the related prospectus supplement.
If and to the extent that we specify in the related prospectus
supplement, any entity making advances will be entitled to receive interest on
some or all of those advances for a specified period during which they are
outstanding at the rate specified in that prospectus supplement. That entity may
be entitled to payment of interest on its outstanding advances periodically from
general collections on the mortgage assets in the related trust, or at such
other times and from such sources as we may describe in the related prospectus
supplement, prior to any payment to the related series of certificateholders.
If any trust established by us includes mortgage-backed securities, we
will discuss in the related prospectus supplement any comparable advancing
obligations in respect of those securities or the mortgage loans that back them.
REPORTS TO CERTIFICATEHOLDERS
On or about each payment date, the related trustee will forward to each
offered certificateholder a statement substantially in the form, or specifying
the information, set forth in the related prospectus supplement. In general,
that statement will include information regarding:
o the payments made on that payment date with respect to the applicable class
of offered certificates; and
o the recent performance of the mortgage assets.
Within a reasonable period of time after the end of each calendar year,
the trustee will be required to furnish to each person who at any time during
the calendar year was a holder of an offered certificate a statement containing
information regarding the principal, interest and other amounts paid on the
applicable class of offered certificates, totaled for that calendar year or the
applicable portion thereof during which the person was a certificateholder. The
obligation to provide that annual statement will be deemed to have been
satisfied by the related trustee to the extent that substantially comparable
information is provided pursuant to any requirements of the Internal Revenue
Code of 1986.
See, also, "--Book-Entry Registration and Definitive Certificates"
below.
If one of the trusts includes mortgage-backed securities, the ability
of the related trustee to include in any payment date statement information
regarding the mortgage loans that back those securities will depend on
comparable reports being received with respect to them.
VOTING RIGHTS
Voting rights will be allocated among the respective classes of offered
and non-offered certificates of each series in the manner described in the
related prospectus supplement. Certificateholders will generally not have a
right to vote, except with respect to certain amendments to the governing
documents or as otherwise specified in the related
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prospectus supplement. See "Description of the Governing Document--Amendment."
As and to the extent described in the related prospectus supplement,
the holders of specified amounts of certificates of a particular series will
have the right to act as a group to remove or replace the related trustee,
master servicer, special servicer or manager. In general, any removal or
replacement must be for cause. We will identify exceptions in the related
prospectus supplement.
TERMINATION
The trust for each series of offered certificates will terminate and
cease to exist following:
o the final payment or other liquidation of the last mortgage asset in that
trust; and
o the payment, or provision for payment, to the certificateholders of that
series of all amounts required to be paid to them.
Written notice of termination of a trust will be given to each affected
certificateholder, and the final distribution will be made only upon
presentation and surrender of the certificates of the related series at the
location to be specified in the notice of termination.
If we so specify in the related prospectus supplement, one or more
designated parties will be entitled to purchase all of the mortgage assets
underlying a series of offered certificates, resulting in an early retirement of
the certificates and an early termination of the related trust. We will describe
in the related prospectus supplement the circumstances under which that purchase
may occur.
In addition, if we so specify in the related prospectus supplement, on
a specified date or upon the reduction of the total principal balance of a
specified class or classes of certificates by a specified percentage or amount,
a party designated in the related prospectus supplement may be authorized or
required to solicit bids for the purchase of all the mortgage assets of the
related trust or of a sufficient portion of the mortgage assets to retire that
class or those classes of certificates. The solicitation of bids must be
conducted in a commercially reasonable manner, and assets will, in general, be
sold at their fair market value. If the fair market value of the mortgage assets
being sold is less than their unpaid balance, then the certificateholders of one
or more classes of certificates may receive an amount less than the total
certificate principal balance of, and accrued and unpaid interest on, their
certificates.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
Any class of offered certificates may be issued in book-entry form
through the facilities of The Depository Trust Company. If so, that class will
be represented by one or more global certificates registered in the name of DTC
or its nominee. If we so specify in the related prospectus supplement, we will
arrange for clearance and settlement through the Euroclear System or Clearstream
Banking, societe anonyme, Luxembourg, for so long they are participants in DTC.
THE DEPOSITORY TRUST COMPANY
DTC is:
o a limited-purpose trust company organized under the New York Banking Law;
o a "banking corporation" within the meaning of the New York Banking Law;
o a member of the Federal Reserve System;
o a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
o a "clearing agency" registered pursuant to the provisions of Section 17A of
the Securities Exchange Act of 1934.
DTC was created to hold securities for DTC participants and to
facilitate the clearance and settlement of securities transactions between DTC
participants through electronic computerized book-entry changes in their
accounts, which eliminates the need for physical movement of securities
certificates. DTC participants that maintain accounts with DTC include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include other organizations. DTC is owned by a number of DTC
participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as banks, brokers, dealers
and trust companies that directly or indirectly clear through or maintain a
custodial relationship with a DTC participant that maintains an account with
DTC. The rules applicable to DTC and DTC participants are on file with the SEC.
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Purchases of book-entry certificates under the DTC system must be made
by or through, and will be recorded on the records of, the brokerage firm, bank,
thrift institution or other financial intermediary (each, a "FINANCIAL
INTERMEDIARY") that maintains the beneficial owner's account for this purpose.
In turn, the Financial Intermediary's ownership of those certificates will be
recorded on the records of DTC or, alternatively, if the beneficial owner's
Financial Intermediary is not a DTC participant, on the records of a
participating firm that acts as agent for the Financial Intermediary, whose
interest will in turn be recorded on the records of DTC. A beneficial owner of
book-entry certificates must rely on the foregoing procedures to evidence its
beneficial ownership of those certificates. The beneficial ownership interest of
the owner of a book-entry certificate may only be transferred by compliance with
the rules, regulations and procedures of the Financial Intermediaries and DTC
participants.
DTC has no knowledge of the actual beneficial owners of the book-entry
certificates. DTC's records reflect only the identity of the DTC participants to
whose accounts those certificates are credited, which may or may not be the
actual beneficial owners. The DTC participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC
participants, and by DTC participants to Financial Intermediaries and 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.
Payments on the book-entry certificates will be made to DTC. DTC's
practice is to credit DTC participants' accounts on the related payment date in
accordance with their respective holdings shown on DTC's records, unless DTC has
reason to believe that it will not receive payment on that date. Disbursement of
payments by DTC participants to Financial Intermediaries and beneficial owners
will be:
o governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or
registered in "street name";
o the sole responsibility of each DTC participant, subject to any statutory
or regulatory requirements in effect from time to time.
Under a book-entry system, beneficial owners may receive payments after
the related payment date.
The only "certificateholders" of book-entry certificates will be DTC or
its nominee. Parties to the governing documents for any series of offered
certificates need not recognize beneficial owners of book-entry certificates as
"certificateholders". The beneficial owners of book-entry certificates will be
permitted to exercise the rights of "certificateholders" only indirectly through
the DTC participants, who in turn will exercise their rights through DTC. We
have been informed that DTC will take action permitted to be taken by a
"certificateholder" only at the direction of one or more DTC participants. DTC
may take conflicting actions with respect to the book-entry certificates to the
extent that the actions are taken on behalf of Financial Intermediaries whose
holdings include those certificates.
Because DTC can act only on behalf of DTC participants, who in turn act
on behalf of Financial Intermediaries and certain beneficial owners, the ability
of a beneficial owner to pledge its interest in a class of book-entry
certificates to persons or entities that do not participate in the DTC system,
or otherwise to take actions in respect of its interest in a class of book-entry
certificates, may be limited due to the lack of a physical certificate
evidencing the interest.
Unless we specify otherwise in the related prospectus supplement,
beneficial owners of affected offered certificates initially issued in
book-entry form will not be able to obtain physical certificates that represent
those offered certificates, unless:
o we advise the related trustee in writing that DTC is no longer willing or
able to discharge properly its responsibilities as depository with respect
to those offered certificates and we are unable to locate a qualified
successor; or
o we elect, at our option, to terminate the book-entry system through DTC
with respect to those offered certificates.
Upon the occurrence of either of the two events described above, DTC
will be required to notify all DTC participants of the availability through DTC
of physical certificates with respect to the affected offered certificates. Upon
surrender by DTC of the certificate or certificates representing a class of
book-entry offered certificates, together with instructions for registration,
the related trustee or other designated party will be required to issue to the
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beneficial owners identified in those instructions physical certificates
representing those offered certificates.
CLEARSTREAM BANKING
Clearstream Banking is incorporated under the laws of Luxembourg as a
professional depository. Clearstream holds securities for its participants and
facilitates the clearance and settlement of securities through electronic
book-entry changes in their cash and securities accounts. Transactions can
settle in Clearstream in any of 28 currencies, including United States dollars.
Clearstream provides safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing to its
participants. Clearstream interfaces with domestic markets in several countries.
The Luxembourg Monetary Institute regulates Clearstream as a professional
depository. Clearstream participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Indirect
access to Clearstream is also available to others, such as banks, brokers,
dealers, and trust companies that maintain a clearing or custodial relationship
with a Clearstream participant.
EUROCLEAR
The Euroclear System was created in 1968 to hold securities for
participants and to clear and settle transactions between participants through
simultaneous electronic book-entry delivery against payment. Transactions may
now be settled in any of 40 currencies, including United States dollars. The
Euroclear System includes various other services, including securities lending
and borrowing, and interfaces with domestic markets in several countries. The
Euroclear System is operated by the Brussels, Belgium office of Morgan Guaranty
Trust Company of New York (the "EUROCLEAR OPERATOR"), under a contract with
Euroclear Clearance System S.C., a Belgian cooperative corporation. All
operations are conducted by the Euroclear Operator, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Euroclear
Operator. Euroclear participants include banks (including central banks),
securities brokers and dealers. Indirect access to Euroclear is also available
to other firms that maintain a clearing or custodial relationship with a
Euroclear participant.
The Euroclear Operator is the Belgian branch of a New York banking
corporation that is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
The Euroclear Operator acts only on behalf of Euroclear participants,
and has no record of or relationship with persons holding through participants.
DESCRIPTION OF THE GOVERNING DOCUMENT
The offered certificates of each series will be issued pursuant to a
pooling and servicing agreement or other similar agreement or collection of
agreements (individually and collectively, the ("GOVERNING DOCUMENT"). In
general, the parties to the Governing Document for a series of offered
certificates will include us, a trustee, a master servicer and a special
servicer. However, if the related trust assets include mortgage-backed
securities, the Governing Document may include a manager as a party, but may not
include a master servicer, special servicer or other servicer as a party. We
will identify in the related prospectus supplement the parties to the Governing
Document for a series of offered certificates. Midland Loan Services, our parent
corporation, will be the master servicer for each of the trusts, unless we
specify a different master servicer in the related prospectus supplement.
Midland Loan Services may also be the special servicer for some of the trusts.
Any party to the Governing Document for a series of offered
certificates, or any of its affiliates, may own certificates issued thereunder.
Except in limited circumstances, certificates that are held by the related
master servicer, special servicer or manager will have the same voting rights as
certificates held by others.
A form of a pooling and servicing agreement has been filed as an
exhibit to the registration statement of which this prospectus is a part.
However, the provisions of the Governing Document for each series of offered
certificates will vary depending upon the nature of the certificates to be
issued thereunder and the nature of the related trust assets. The following
summaries describe certain provisions that may appear in the Governing Document
for each series of offered certificates. The prospectus supplement for each
series of offered certificates will provide additional information
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regarding the Governing Document for that series. The summaries in this
prospectus do not describe all of the provisions of the Governing Document for
each series of certificates. You should refer to the provisions of the Governing
Document for your certificates and to the description of those provisions in the
related prospectus supplement for additional information. We will provide a copy
of the Governing Document, exclusive of exhibits, that relates to your
certificates, without charge, upon written request addressed to our principal
executive offices specified under "PNC Mortgage Acceptance Corp."
ASSIGNMENT OF MORTGAGE ASSETS
At the time of initial issuance of any series of offered certificates,
we will assign or cause to be assigned to the designated trustee the mortgage
assets to be included in the related trust, together with certain related
assets. We will specify in the related prospectus all material documents for the
related mortgage assets that will be delivered to the related trustee, and all
other actions to be taken by us or any prior holder of the related mortgage
assets, in connection with that assignment. Concurrently with that assignment,
the related trustee will deliver to our designee or us the certificates of that
series in exchange for the mortgage assets and the other assets to be included
in the related trust.
Each mortgage asset included in one of the trusts will be identified in
a schedule appearing as an exhibit to the related Governing Document. That
schedule generally will include detailed information about each mortgage asset
transferred to the related trust, including:
o in the case of a mortgage loan:
1) the address of the related real property and the type of that
property;
2) the mortgage interest rate and, if applicable, the applicable index,
gross margin, adjustment date and any rate cap information;
3) the remaining term to maturity;
4) the remaining amortization term; and
5) the outstanding principal balance; and
o in the case of a mortgage-backed security, the outstanding principal
balance and the pass-through rate or coupon rate.
REPRESENTATIONS AND WARRANTIES WITH
RESPECT TO MORTGAGE ASSETS; REPURCHASES
AND OTHER REMEDIES
Unless we state otherwise in the prospectus supplement for any series
of offered certificates, we will, with respect to each mortgage asset in the
related trust, make or assign, or cause to be made or assigned, certain
representations and warranties (the person making the representations and
warranties, the "WARRANTING PARTY") covering, by way of example:
o the accuracy of the information set forth for each mortgage asset on the
schedule of mortgage assets appearing as an exhibit to the Governing
Document for that series;
o the Warranting Party's title to each mortgage asset and the authority of
the Warranting Party to sell that mortgage asset; and
o in the case of a mortgage loan:
1) the enforceability of the related mortgage note and mortgage;
2) the existence of title insurance insuring the lien priority of the
related mortgage;
3) the payment status of the mortgage loan; and
4) the delivery of all documents required to be delivered with respect to
the mortgage loan as contemplated under "--Assignment of Mortgage
Assets."
We will identify the Warranting Party, and give a more complete
sampling of the representations and warranties made by the Warranting Party, in
the related prospectus supplement. We will also specify in the related
prospectus supplement any remedies against the Warranting Party available to the
related certificateholders, or the related trustee on their behalf, in the event
of a breach of any of those representations and warranties. In most cases, the
Warranting Party will be a prior holder of the particular mortgage assets.
COLLECTION AND OTHER SERVICING PROCEDURES WITH RESPECT TO MORTGAGE LOANS
The Governing Document for each series of offered certificates will
govern the servicing and administration of any mortgage loans included in the
related trust.
In general, the related master servicer and special servicer, directly
or through sub-servicers, will be obligated to service and administer for the
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benefit of the related certificateholders the mortgage loans in any of the
trusts. The master servicer and the special servicer will be required to service
and administer those mortgage loans in accordance with applicable law and,
further, in accordance with the terms of the related Governing Document, the
mortgage loans themselves and any instrument of credit support included in that
trust. Subject to the foregoing, the master servicer and the special servicer
will each have full power and authority to do any and all things in connection
with the servicing and administration of the mortgage loans that it may deem
necessary and desirable.
As part of its servicing duties, each of the master servicer and the
special servicer for one of the trusts will be required to make reasonable
efforts to collect all payments called for under the terms and provisions of the
related mortgage loans that it services and, in general will be obligated to
follow the same collection procedures that it would follow for comparable
mortgage loans held for its own account, provided that:
o those procedures are consistent with the terms of the related Governing
Document; and
o they do not impair recovery under any instrument of credit support included
in the related trust.
Consistent with the foregoing, the master servicer and the special
servicer will each be permitted, in its discretion, to waive any default charge
in connection with collecting a late payment on any defaulted mortgage loan.
ACCOUNTS
We expect that Governing Document will require the Master Servicer to
establish and maintain one or more collection accounts in the name of the
trustee for the benefit of certificateholders. The master servicer will
generally be required to deposit into the collection account all amounts
received on or in respect of the mortgage loans. The master servicer may make
withdrawals from the collection account to, among other things:
o remit certain amounts for the related payment date into the distribution
account;
o pay certain property protection expenses, taxes, assessments and insurance
premiums and certain third-party expenses in accordance with the Governing
Document;
o pay accrued and unpaid servicing fees and other servicing compensation to
the master servicer and the special servicer;
o reimburse the master servicer, the special servicer, the trustee and us for
certain expenses; and
o provide indemnification to the master servicer, the special servicer, the
trustee and us, as described in the Governing Document.
The related prospectus supplement may provide for additional
circumstances when the master servicer may make withdrawals from the collection
account.
We expect that the Governing Document for each series of certificates
will require the trustee to establish a distribution account into which the
master servicer will deposit amounts held in the collection account from which
certificateholder distributions will be made for each payment date. On each
payment date, the trustee will apply amounts on deposit in the distribution
account generally to make distributions of interest and principal to the
certificateholders in the manner and in the amounts described in the related
prospectus supplement.
The amount at any time credited to the collection account or the
distribution account may be invested in Permitted Investments that:
o are payable on demand; or
o in general mature or are subject to withdrawal or redemption on the date so
specified in the Governing Document.
The master servicer must remit to the distribution account on or before
the business day preceding the related payment date amounts on deposit in the
collection account that are required for distribution to certificateholders.
The income from the investment of funds in the collection account and
the distribution account in Permitted Investments will constitute additional
compensation for the master servicer or the trustee. The risk of loss of funds
in the collection account and the distribution account resulting from such
investments will be borne by the master servicer or trustee, as applicable. The
amount of each such loss must be deposited by the master servicer or the trustee
in the collection account or the distribution account, as the case may be,
promptly as realized.
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We expect that the Governing Document for each series of certificates
will require that an account be established and maintained for use in connection
with:
o real properties acquired upon foreclosure of a mortgage loan, which are
commonly referred to as "REO properties"; and
o if specified in the related prospectus supplement, certain other real
properties securing the mortgage loans.
To the extent set forth in the Governing Document, certain withdrawals
from this account will be made to, among other things:
o make remittances to the collection account as required;
o pay taxes, assessments, insurance premiums, other amounts necessary for the
proper operation, management and maintenance of the REO properties and
other specified real properties securing the mortgage loans and certain
third-party expenses; and
o reimburse certain expenses in respect of the REO properties and the other
specified real properties securing the mortgage loans.
The amount at any time credited to this account may be invested in
Permitted Investments that are payable on demand or mature, or are subject to
withdrawal or redemption, on or before the business day preceding the day on
which these amounts must be remitted to the master servicer for deposit in the
collection account. The income from the investment of funds in the account in
Permitted Investments will be for the benefit of the master servicer, the
special servicer or the trustee, as applicable, and the risk of loss of funds in
this account resulting from such investments will be borne by the master
servicer, the special servicer or the trustee, as applicable.
PERMITTED INVESTMENTS
"PERMITTED INVESTMENTS" will generally consist of one or more of the
following, unless the rating agencies rating certificates of a series require
other or additional investments:
o direct obligations of, or obligations guaranteed as to full and timely
payment of principal and interest by, the United States or any agency or
instrumentality thereof, provided that such obligations are backed by the
full faith and credit of the United States of America;
o direct obligations of the Federal Home Loan Mortgage Corporation (debt
obligations only), the Federal National Mortgage Association (debt
obligations only), the Federal Farm Credit System (consolidated system-wide
bonds and notes only), the Federal Home Loan Banks (consolidated debt
obligations only), the Student Loan Marketing Association (debt obligations
only), the Financing Corp. (consolidated debt obligations only) and the
Resolution Funding Corp. (debt obligations only);
o federal funds, time deposits in, or unsecured certificates of deposit of,
or bankers' acceptances, or repurchase obligations, all having maturities
of not more than 365 days, issued by any bank or trust company, savings and
loan association or savings bank, depositing institution or trust company
having the highest short-term rating available from each rating agency
rating the certificates of a series;
o commercial paper having a maturity of 365 days or less (including both
non-interest-bearing discount obligations and interest-bearing obligations
payable on demand or on a specified date not more than one year after the
date of issuance thereof and demand notes that constitute vehicles for
investment in commercial paper) that is rated by each rating agency rating
the certificates of a series in its highest short-term unsecured rating
category;
o shares of taxable money market funds or mutual funds that seek to maintain
a constant net asset value and have been rated by each rating agency rating
the certificates of a series as permitted investments with respect to this
definition; and
o other obligations acceptable as Permitted Investments to each rating agency
rating the certificates of a series.
INSURANCE
The Governing Document for each series will require that the master
servicer use reasonable efforts in accordance with the servicing standard
specified in the related prospectus supplement to cause each borrower to
maintain insurance in accordance with the related mortgage loan documents, which
generally will include a standard fire and hazard insurance policy with extended
coverage. To the extent required by the related mortgage loan, the coverage of
each such standard hazard insurance policy will be in an amount that is at least
equal to the lesser of:
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o the full replacement cost of the improvements and equipment securing the
mortgage loan; or
o the outstanding principal balance owing on the mortgage loan or the amount
as is necessary to prevent any reduction in such policy by reason of the
application of co-insurance and to prevent the trustee for the series from
being deemed to be a co-insurer in each case with a replacement cost rider.
The master servicer will also use its reasonable efforts to cause each
borrower to maintain any other insurance required by the related mortgage loan.
Subject to the requirements for modification, waiver or amendment of a
mortgage loan (See "--Modifications, Waivers and Amendments"), the master
servicer may in its reasonable discretion consistent with the servicing standard
set forth in the related Governing Document waive the requirement of a mortgage
loan that the related borrower maintain earthquake insurance on the related
mortgaged property. If a mortgaged property is located in a federally designated
special flood hazard area, the master servicer will also use its reasonable
efforts in accordance with the servicing standard in the related prospectus
supplement to cause the related borrower to maintain flood insurance in an
amount equal to the lesser of the unpaid principal balance of the related
mortgage loan and the maximum amount obtainable with respect to the mortgage
loan. The Governing Document will provide that the master servicer must maintain
the foregoing insurance if the related borrower fails to maintain this insurance
to the extent the insurance is available at commercially reasonable rates and to
the extent the trustee, as mortgagee, has an insurable interest.
The cost of any insurance maintained by the master servicer will be
advanced by the master servicer. The special servicer will cause to be
maintained fire and hazard insurance on each REO property in such amounts as are
specified in the related Governing Document. The cost of any insurance for an
REO property will be payable out of amounts collected on the related REO
property or will be advanced by the master servicer. The special servicer will
maintain flood insurance providing substantially the same coverage as described
above on any REO property that was located in a federally designated special
flood hazard area at the time the related mortgage loan was originated.
Any insurance that is required to be maintained with respect to any REO
property will only be so required to the extent the insurance is available at
commercially reasonable rates.
The Governing Document will provide that the master servicer or special
servicer, as applicable, may satisfy its obligation to cause hazard insurance
policies to be maintained by maintaining a master force placed insurance policy
insuring against losses on the mortgage loans or REO properties, as the case may
be. The incremental cost of the insurance allocable to any particular mortgage
loan or REO property, if not borne by the related borrower, will be advanced by
the master servicer.
Alternatively, the master servicer or special servicer, as applicable,
may satisfy its obligation by maintaining, at its expense, a blanket policy
(i.e., not a master force placed policy) insuring against losses on the mortgage
loans or REO properties, as the case may be. If a blanket or master force placed
policy contains a deductible clause, the master servicer or the special
servicer, as applicable, will be obligated to deposit in the collection account
all sums that would have been deposited in the account but for such clause to
the extent that the deductible exceeds the deductible limitation that pertained
to the related mortgage loan, or in the absence of any such deductible
limitation, the deductible limitation that is consistent with the servicing
standard under the Governing Document.
The prospectus supplement may describe other provisions concerning the
insurance policies required to be maintained under the Governing Document.
Unless otherwise specified in the applicable prospectus supplement, no
pool insurance policy, special hazard insurance policy, bankruptcy bond,
repurchase bond or guarantee insurance will be maintained with respect to the
mortgage loans.
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
The Governing Document for each series will generally require that the
master servicer and the special servicer obtain and maintain in effect a
fidelity bond or similar form of insurance coverage (which may provide blanket
coverage) or any combination thereof insuring against loss occasioned by fraud,
theft or other intentional misconduct of the officers and employees of the
master servicer and the special servicer. The Governing Document will allow the
master servicer and the special servicer to self-insure against loss occasioned
by the errors and
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omissions of the officers and employees of the master servicer and the special
servicer so long as certain criteria set forth in the Governing Document are
met.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The master servicer's principal compensation for its activities under
the Governing Document for each series will come from the payment to it or
retention by it, with respect to each mortgage loan, of a "servicing fee". The
exact amount and calculation of the servicing fee will be established in the
prospectus supplement and Governing Document for the related series. Since the
total unpaid principal balance of the mortgage loans will generally decline over
time, the master servicer's servicing compensation will ordinarily decrease as
the mortgage loans amortize.
In addition, the Governing Document for a series may provide that the
master service is entitled to receive, as additional compensation:
o prepayment premiums, late fees and certain other fees collected from
borrowers;
o any interest or other income earned on funds deposited in the collection
account and, distribution account except to the extent such income is
required to be paid to the related borrowers, any escrow accounts.
The amount and calculation of the fee for the servicing of specially
serviced mortgage loans will be described in the prospectus supplement and the
Governing Document for each series.
In addition to the compensation described above, the master servicer
and the special servicer or any other party specified in the applicable
prospectus supplement, may retain, or be entitled to the reimbursement of, such
other amounts and expenses as are described in the applicable prospectus
supplement.
MODIFICATIONS, WAIVERS AND AMENDMENTS
The Governing Document for each series will provide the master servicer
or the special servicer with the discretion to modify, waive or amend certain of
the terms of any mortgage loan without the consent of the trustee or any
certificateholder subject to certain conditions set listed in the Governing
Document. These conditions will generally include the condition that the
modification, waiver or amendment will not result in the mortgage loan ceasing
to be a "qualified mortgage" under the REMIC regulations.
EVENTS OF DEFAULT
In summary, the Governing Document for each series will provide that
the following are events of default with respect to the master servicer and
special servicer:
o any failure by the master servicer or the special servicer to remit to the
collection account, or any failure by the master servicer to remit to the
trustee for deposit into the distribution account, any amount the Governing
Document requires to be so remitted;
o any failure by the master servicer or special servicer duly to observe or
perform in any material respect any of its other covenants or agreements or
the breach of its representations or warranties (which breach materially
and adversely affects the interests of the certificateholders, the trustee,
the master servicer or the special servicer with respect to any mortgage
loan) under the Governing Document, which in each case continues unremedied
for 30 days after the giving of written notice of such failure to the
master servicer or the special servicer by the trustee or us, or to the
master servicer, special servicer, the trustee and us, by the holders of
certificates evidencing voting rights of at least 25% of any affected
class;
o confirmation in writing by any of the rating agencies that the then current
rating assigned to any class of certificates would be withdrawn, downgraded
or qualified unless the master servicer or special servicer, as applicable,
is removed;
o certain events of insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings and certain actions by, on behalf of
or against the master servicer or special servicer, as applicable,
indicating its insolvency or inability to pay its obligations; or
o any failure by the master servicer to make a required advance.
The related Governing Document may provide for other events of default
or additional cure periods to the extent required or permitted by the rating
agencies rating certificates of a series.
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RIGHTS UPON EVENT OF DEFAULT
As long as an event of default remains unremedied, the trustee may
terminate all of the rights and obligations of the master servicer or special
servicer, as the case may be, and the trustee must do so upon the written
direction of the holders of certificates entitled to 25% of the aggregate voting
rights of all certificates of a series. The Governing Document provides that the
terminated master servicer or special servicer remains entitled to receive all
accrued and unpaid servicing compensation through the date of termination plus,
in the case of the master servicer, all advances and interest thereon as
provided in the Governing Document. The Governing Document for the series may
specify that the special servicer is entitled under certain circumstances to
continue to receive workout fees and other similar fees after it is terminated.
The holders of certificates evidencing at least 66 2/3% of the total
voting rights of the certificates of a series may, on behalf of all holders of
certificates, waive any default by the master servicer or special servicer in
the performance of its obligations under the Governing Document and its
consequences, except a default in making any required deposits to (including
advances) or payments from the collection account or the distribution account or
in remitting payments as received, in each case in accordance with the Governing
Document. Upon any such waiver of a past default, the default will cease to
exist, and any event of default arising therefrom will be deemed to have been
remedied for every purpose of the Governing Document. No such waiver will extend
to any subsequent or other default or impair any resulting right.
On and after the date of termination, the trustee will succeed to all
authority and power of the terminated master servicer or special servicer under
the Governing Document and will be entitled to compensation similar to that to
which the terminated master servicer or special servicer would have been
entitled. The trustee must appoint, or petition a court of competent
jurisdiction to appoint, an established mortgage loan servicing institution to
act as successor to the terminated master servicer or special servicer under the
Governing Document if:
o the trustee is unwilling or unable to act as successor;
o the holders of certificates evidencing a majority of the total voting
rights so request; or
o the trustee is not approved as a master servicer or special servicer, as
applicable, by each of the rating agencies rating the certificates of such
series;
the appointment of which will not result in the downgrading, withdrawal or
qualification of the ratings then assigned to any class of certificates as
evidenced in writing by each rating agency rating the certificates of such
series.
The trustee and any successor may agree upon the servicing compensation to
be paid, which in no event may be greater than the compensation payable to the
master servicer or the special servicer, as the case may be, under the Governing
Document.
OTHER MATTERS
The master servicer and/or the special servicer for one of the trusts,
directly or through sub-servicers, must also perform various other customary
functions of a servicer of comparable loans, including:
o maintaining escrow or impound accounts for the payment of taxes, insurance
premiums, ground rents and similar items, or otherwise monitoring the
timely payment of those items;
o ensuring that the related properties are properly insured;
o attempting to collect delinquent payments;
o supervising foreclosures;
o negotiating modifications;
o responding to borrower requests for partial releases of the encumbered
property, easements, consents to alteration or demolition and similar
matters;
o protecting the interests of certificateholders with respect to senior
lienholders;
o conducting inspections of the related real properties on a periodic or
other basis;
o collecting and evaluating financial statements for the related real
properties;
o managing or overseeing the management of real properties acquired on behalf
of the trust through foreclosure, deed-in-lieu of foreclosure or otherwise;
and
o maintaining servicing records relating to mortgage loans in the trust.
We will specify in the related prospectus supplement when, and the
extent to which, servicing of a mortgage loan is to be transferred from a master
servicer to a special servicer. In general, a special
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servicer for any of the trusts will be responsible for the servicing and
administration of:
o mortgage loans that are delinquent in respect of a specified number of
scheduled payments;
o mortgage loans as to which there is a material non-monetary default;
o mortgage loans as to which the related borrower has entered into or
consented to bankruptcy, appointment of a receiver or conservator or
similar insolvency proceeding, or the related borrower has become the
subject of a decree or order for such a proceeding which shall have
remained in force undischarged or unstayed for a specified number of days;
and
o real properties acquired as part of the trust in respect of defaulted
mortgage loans.
The related Governing Document may also may provide that if a default
on a mortgage loan in the related trust has occurred or, in the judgment of the
related master servicer, a payment default is reasonably foreseeable, the
related master servicer may elect to transfer the servicing of that mortgage
loan, in whole or in part, to the related special servicer. When the
circumstances no longer warrant a special servicer continuing to service a
particular mortgage loan, such as when the related borrower is paying in
accordance with the forbearance arrangement entered into between the special
servicer and that borrower, the master servicer will generally resume the
servicing duties with respect to the particular mortgage loan.
Unless we state otherwise in the related prospectus supplement, the
master servicer for your series will be responsible for filing and settling
claims in respect of particular mortgage loans for your series under any
applicable instrument of credit support.
See "Description of Credit Support" in this prospectus.
A borrower's failure to make required mortgage loan payments may mean
that operating income from the related borrower's real property is insufficient
to service the mortgage debt, or may reflect the diversion of that income from
the servicing of the mortgage debt. In addition, a borrower that is unable to
make mortgage loan payments may also be unable to make timely payment of taxes
and otherwise to maintain and insure the related real property. In general, the
related special servicer will be required to:
o monitor any mortgage loan that is in default;
o evaluate whether the causes of the default can be corrected over a
reasonable period without significant impairment of the value of the
related real property;
o initiate corrective action in cooperation with the mortgagor if cure is
likely;
o inspect the related real property; and
o take such other actions as it deems necessary and appropriate.
A significant period of time may elapse before a special servicer is
able to assess the success of any corrective action or the need for additional
initiatives. The time within which a special servicer can make the initial
determination of appropriate action, evaluate the success of corrective action,
develop additional initiatives, institute foreclosure proceedings and actually
foreclose (or accept a deed to a real property in lieu of foreclosure) on behalf
of the certificateholders of the related series may vary considerably depending
on:
o the particular mortgage loan;
o the related real property;
o the borrower;
o the presence of an acceptable party to assume the mortgage loan;
o and the laws of the jurisdiction in which the related real Property is
located.
If a borrower files a bankruptcy petition, the special servicer may not
be permitted to accelerate the maturity of the defaulted loan or to foreclose on
the related real property for a considerable period of time. See "Certain Legal
Aspects of Mortgage Loans--Foreclosure--Bankruptcy Laws."
A special servicer may also perform certain limited duties in respect
of mortgage loans for which the master servicer is primarily responsible, such
as performing property inspections and collecting and evaluating financial
statements. A master servicer may perform certain limited duties in respect of
any mortgage loan for which the special servicer is primarily responsible, such
as continuing to receive payments on the mortgage loan, making certain
calculations with respect to the mortgage loan and making remittances and
preparing certain reports to the related trustee and/or certificateholders with
respect to the mortgage loan. The duties of the master servicer and special
servicer for your series will be more fully described in the related prospectus
supplement.
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SUB-SERVICERS
A master servicer or special servicer may delegate its servicing
obligations to one or more third-party servicers or sub-servicers. However,
unless we specify otherwise in the related prospectus supplement, the master
servicer or special servicer will remain obligated under the related Governing
Document. Each sub-servicing agreement between a master servicer or special
servicer, as applicable, and a sub-servicer must provide for servicing of the
applicable mortgage loans consistent with the related Governing Document. Each
master servicer or special servicer for one of the trusts must monitor the
performance of sub-servicers that it retains.
Unless we specify otherwise in the related prospectus supplement, any
master servicer or special servicer for the related trust will be solely liable
for all fees owed by it to any sub-servicer, regardless of whether the master
servicer's or special servicer's compensation pursuant to the related Governing
Document is sufficient to pay those fees. Each sub-servicer will be entitled to
reimbursement from the master servicer or special servicer, as the case may be,
that retained it, for certain expenditures that it makes, generally to the same
extent the master servicer or special servicer would be reimbursed under the
related Governing Document.
COLLECTION OF PAYMENTS ON MORTGAGE-BACKED SECURITIES
Unless we specify otherwise in the related prospectus supplement, if a
mortgage-backed security is included among the trust assets underlying any
series of offered certificates, then:
o that mortgage-backed security will be registered in the name of the related
trustee or its designee;
o the related trustee will receive payments on that mortgage-backed security;
and
o subject to any conditions described in the related prospectus supplement,
the related trustee or a designated manager will, on behalf and at the
expense of the trust, exercise all rights and remedies in respect of that
mortgaged-backed security, including the prosecution of any legal action
necessary in connection with any payment default.
CERTAIN MATTERS REGARDING THE MASTER
SERVICER, THE SPECIAL SERVICER, THE REMIC
ADMINISTRATOR, THE MANAGER AND THE DEPOSITOR
Unless we specify otherwise in the related prospectus supplement, no
master servicer, special servicer or manager for any of the trusts may resign
from its obligations in such capacity, except upon--
o the appointment of, and the acceptance of the appointment by, a successor
to the resigning party and receipt by the related trustee of written
confirmation from each applicable rating agency that the resignation and
appointment will not result in a withdrawal or downgrade of any rating
assigned by that rating agency to any class of certificates of the related
series; or
o a determination that those obligations are no longer permissible under
applicable law or are in material conflict by reason of applicable law with
any other activities carried on by the resigning party.
In general, no resignation will become effective until the related
trustee or other successor has assumed the obligations and duties of the
resigning master servicer, special servicer or manager, as the case may be. Each
master servicer, special servicer and, if it receives distributions on
mortgage-backed securities, manager for one of the trusts will be required to
maintain a fidelity bond and errors and omissions policy or their equivalent
that provides coverage against losses that may be sustained as a result of an
officer's or employee's misappropriation of funds or errors and omissions,
subject to such limitations as to amount of coverage, deductible amounts,
conditions, exclusions and exceptions as may be permitted by the rating agencies
assigning ratings to the related series of certificates.
In no event will we, any master servicer, special servicer or manager
for one of the trusts, or any of our or their respective directors, officers,
employees or agents be under any liability to the related trust or
certificateholders for any action taken, or not taken, in good faith pursuant to
the Governing Document for any series of certificates or for errors in judgment.
None of those persons or entities will be protected, however, against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of obligations or duties under the
Governing Document for any series of certificates or by reason of reckless
disregard of those obligations and duties.
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Furthermore, the Governing Document for each series of offered
certificates will entitle us, the master servicer, special servicer and/or
manager for the related trust, and our and their respective directors, officers,
employees and agents to indemnification out of the related trust assets for any
loss, liability or expense incurred in connection with any legal action that
relates to that Governing Document or series of offered certificates or to the
related trust. The indemnification will not extend, however, to any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of obligations or duties under that Governing
Document, or by reason of reckless disregard of those obligations or duties.
Neither we nor any master servicer, special servicer or manager for the
related trust will be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to its respective responsibilities under the
Governing Document for any series of offered certificates or that in its opinion
may involve it in any ultimate expense or liability. However, we and each of
those other parties may undertake any legal action that may be necessary or
desirable with respect to the enforcement and/or protection of the rights and
duties of the parties to the Governing Document for any series of offered
certificates and the interests of the certificateholders of that series under
that Governing Document. In that event, the legal expenses and costs of the
action, and any liability resulting therefrom, will be expenses, costs and
liabilities of the related trust and payable out of related trust assets.
Any person into which we or any related master servicer, special
servicer or manager may be merged or consolidated, or any person resulting from
any merger or consolidation to which we or any related master servicer, special
servicer or manager is a party, or any person succeeding to the business of us
or any related master servicer, special servicer or manager, will be the
successor of us or that master servicer, special servicer or manager, as the
case may be, under the Governing Document for each series of offered
certificates.
The compensation arrangements with respect to the master servicer,
special servicer and/or manager for any of the trusts will be described in the
related prospectus supplement. In general, that compensation will be payable out
of the related trust assets.
AMENDMENT
The Governing Document for each series of offered certificates may be
amended by the parties thereto, without the consent of any of the holders of
those certificates, or of any non-offered certificates of the same series, for
the following reasons:
1) to cure any ambiguity;
2) to correct, modify or supplement any provision in the Governing
Document that is inconsistent with any other provision in the
Governing Document, in this prospectus or the related prospectus
supplement or to correct any error;
3) to maintain the ratings assigned to each class of the certificates for
that series;
4) to add any other provisions with respect to matters or questions
arising under the Governing Document that are not inconsistent with
the existing provisions of that document;
5) to the extent applicable, to relax or eliminate any requirement under
the Governing Document imposed by the provisions of the Internal
Revenue Code of 1986 relating to REMICs if the provisions of that code
are amended or clarified so as to allow for the relaxation or
elimination of that requirement;
6) to relax or eliminate any requirement under the Governing Document
imposed by the Securities Act of 1933 or the rules under that Act if
the Securities Act of 1933 or those rules are amended or clarified so
as to allow for the relaxation or elimination of that requirement;
7) to comply with any requirements imposed by the Internal Revenue Code
of 1986 or any final, temporary or, in some cases, proposed
regulation, revenue ruling, revenue procedure or other written
official announcement or interpretation relating to federal income tax
laws, or to avoid a prohibited transaction or reduce the incidence of
any tax that would arise from any actions taken with respect to the
operation of any REMIC created under the Governing Document;
8) to the extent applicable, to modify, add to or eliminate certain
transfer restrictions relating to the certificates that are "residual
interests" in a
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REMIC; or
9) for any other purpose.
However, no amendment of the Governing Document for any series of
offered certificates covered by clauses (4), (5), (6) or (9) may:
o be inconsistent with the provisions of the Governing document;
o adversely affect in any material respect the interests of any holders of
offered or non-offered certificates of that series; or
o result in a downgrade or withdrawal of any then current rating assigned to
any class of certificates of the related series, as evidenced by written
confirmation to that effect from each applicable rating agency obtained by
or delivered to the related trustee.
In general, the Governing Document for a series of offered certificates
may also be amended by the parties to that document, with the consent of the
holders of offered and non-offered certificates representing not less than
66-2/3%, or another percentage specified in the related prospectus supplement,
of all the voting rights allocated to those classes of that series that are
affected by the amendment. However, the Governing Document for a series of
offered certificates may not be amended to:
o reduce in any manner the amount of, or delay the timing of, payments
received on the related mortgage assets that are required to be distributed
on any offered or non-offered certificate of that series without the
consent of the holder of that certificate; or
o adversely affect in any material respect the interests of the holders of
any class of offered or non-offered certificates of that series in any
other manner without the consent of the holders of all certificates of that
class; or
o modify the provisions of the Governing Document relating to amendments
thereof without the consent of the holders of all offered and non-offered
certificates of that series then outstanding.
LIST OF CERTIFICATEHOLDERS
Three or more certificateholders of record of any series may request
access to a recent list of certificateholders for that series for the purpose of
communicating with other holders of certificates of the same series with respect
to their rights under the related Governing Document. The related trustee or
other certificate registrar of that series will afford the requesting
certificateholders access during normal business hours to the most recent list
of certificateholders of that series. If the date of the list is more than 90
days before the date of receipt of the certificateholders' request, then the
trustee, if it is not the certificate registrar for that series, must request
from the registrar a current list and provide access to the current list
promptly upon receipt.
THE TRUSTEE
The trustee for each series of offered certificates will be named in
the related prospectus supplement. The commercial bank, national banking
association, banking corporation or trust company that serves as trustee for any
series of offered certificates may have typical banking relationships with us
and our affiliates and with any of the other parties to the related Governing
Document and its affiliates.
DUTIES OF THE TRUSTEE
The trustee for each series of offered certificates will make no
representation as to the validity or sufficiency of those certificates, the
related Governing Document or any underlying mortgage asset or related document
and will not be accountable for the use or application by or on behalf of any
other party to the related Governing Document of any funds paid to that party in
respect of those certificates or the underlying mortgage assets. If no event of
default has occurred and is continuing, the trustee for each series will be
required to perform only those duties specifically required under the related
Governing Document. However, upon receipt of any of the various certificates,
reports or other instruments required to be furnished to it pursuant to the
related Governing Document, the trustee must examine those documents and
determine whether they conform to the requirements of that Governing Document.
CERTAIN MATTERS REGARDING THE TRUSTEE
Unless the related prospectus supplement describes another source of
payment, the fees of the trustee for any series of offered certificates will be
paid by the related trust assets.
The trustee for each series of offered certificates will be entitled to
indemnification, out of related trust assets, for any loss, liability or expense
incurred by that trustee in connection with its
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acceptance or administration of its trusts under the related Governing Document.
The indemnification of a trustee will not extend to any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence on
the part of the trustee in the performance of its obligations and duties under
the related Governing Document, or by reason of its reckless disregard of those
obligations or duties.
The trustee for each series of offered certificates will be entitled to
execute any of its trusts or powers and perform any of its duties under the
related Governing Document, either directly or by or through agents or
attorneys. The trustee will not be responsible for any willful misconduct or
negligence on the part of any such agent or attorney appointed by it with due
care.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The trustee for any series of offered certificates may resign at any
time. We will be obligated to appoint a successor to a resigning trustee. We may
also remove the trustee for any series of offered certificates if that trustee
ceases to be eligible to continue as such under the related Governing Document.
Unless we indicate otherwise in the related prospectus supplement, the trustee
for any series of offered certificates may also be removed at any time by the
holders of the offered and non-offered certificates of that series evidencing
not less than 51%, or such other percentage specified in the related prospectus
supplement, of the voting rights for that series. However, if the removal was
without cause, the certificateholders effecting the removal may be responsible
for any costs and expenses incurred by the terminated trustee in connection with
its removal. Any resignation or removal of a trustee and appointment of a
successor trustee will not become effective until acceptance of the appointment
by the successor trustee.
DESCRIPTION OF CREDIT SUPPORT
Credit support may be provided with respect to one or more classes of
the offered certificates of any series or with respect to the related mortgage
assets. That credit support may be in the form of any of the following:
o the subordination of one or more other classes of certificates of the same
series;
o the use of a letter of credit, a surety bond, an insurance policy or a
guarantee;
o interest rate or foreign currency exchange agreements;
o the establishment of one or more reserve funds; or
o any combination of the foregoing.
If and to the extent described in the related prospectus supplement,
any of the above forms of credit support may provide credit enhancement for
non-offered certificates, as well as offered certificates, or for more than one
series of certificates.
If you are the beneficiary of any particular form of credit support,
that credit support may not protect you against all risks of loss and will not
guarantee payment to you of all amounts to which you are entitled under your
certificates. If losses or shortfalls occur that exceed the amount covered by
that credit support or that are of a type not covered by that credit support,
you will bear your allocable share of deficiencies. Moreover, if that credit
support covers the offered certificates of more than one class or series and
total losses on the related mortgage assets exceed the amount of that credit
support, it is possible that the holders of offered certificates of other
classes and/or series will be disproportionately benefited by that credit
support to your detriment.
If you are the beneficiary of any particular form of credit support, we
will include in the related prospectus supplement a description of the
following:
o the nature and amount of coverage under that credit support;
o any conditions to payment not otherwise described in this prospectus;
o any conditions under which the amount of coverage under that credit support
may be reduced and under which that credit support may be terminated or
replaced; and
o the material provisions relating to that credit support.
Additionally, we will set forth in the related prospectus supplement
certain information with respect to the obligor, if any, under any instrument of
credit support.
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SUBORDINATE CERTIFICATES
If and to the extent described in the related prospectus supplement,
one or more classes of certificates of any series may be subordinate to one or
more other classes of certificates of that series. If you purchase subordinate
certificates, your right to receive distributions out of collections and
advances on the related trust assets on any payment date will be subordinated to
the corresponding rights of the holders of the more senior classes of
certificates. If and to the extent described in the related prospectus
supplement, the subordination of a class of certificates may apply only in the
event of certain types of losses or shortfalls. In the related prospectus
supplement, we will set forth information concerning the method and amount of
subordination provided by a class or classes of subordinate certificates in a
series and the circumstances under which that subordination will be available.
If the mortgage assets in any trust are divided into separate groups,
each supporting a separate class or classes of certificates of the related
series, credit support may be provided by cross-support provisions requiring
that distributions be made on senior certificates evidencing interests in one
group of mortgage assets prior to distributions on subordinate certificates
evidencing interests in a different group of mortgage assets. We will describe
in the related prospectus supplement the manner and conditions for applying any
cross-support provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO MORTGAGE LOANS
The mortgage loans included in any trust may be covered for certain
default risks by insurance policies or guarantees. If so, we will describe in
the related prospectus supplement the nature of these default risks and the
extent of the coverage.
ARRANGEMENTS PROVIDING INTEREST RATE PROTECTION
The trust assets for a series of offered certificates may include
guaranteed investment contracts pursuant to which moneys held in the funds and
accounts established for that series will be invested at a specified rate. The
trust assets may also include:
o interest rate exchange agreements;
o interest rate cap agreements;
o interest rate floor agreements; or
o other agreements or arrangements intended to reduce the effects of interest
rate fluctuations.
In the related prospectus supplement, we will describe any agreements
or other arrangements designed to protect the holders of a class of offered
certificates against shortfalls resulting from movements or fluctuations in
interest rates. If applicable, we will also identify any obligor under the
agreement or other arrangement.
ARRANGEMENTS PROVIDING FOREIGN CURRENCY PROTECTION
If any of the mortgage assets are payable in a foreign currency, the
trust assets for a series of offered certificates may include:
o foreign currency exchange agreements; or
o other agreements and arrangements designed to reduce the effects of foreign
currency fluctuations on the related mortgage assets or one or more classes
of offered certificates of the related series.
In the related prospectus supplement, we will describe any of these
agreements or other arrangements. If applicable, we will also identify any
obligor under the agreement or other arrangement.
LETTER OF CREDIT
If and to the extent described in the prospectus supplement,
deficiencies in amounts otherwise payable on a series of offered certificates or
certain classes of those certificates will be covered by one or more letters of
credit, issued by a bank or other financial institution specified in the related
prospectus supplement. Under a letter of credit, the issuing financial
institution will be obligated to honor draws under the letter of credit for a
total fixed dollar amount, net of unreimbursed payments under the letter of
credit, generally equal to a percentage of either:
o the total principal balance of some or all of the related mortgage assets
as of the date the related trust was formed; or
o the initial total principal balance of one or more classes of certificates
of the applicable series.
This percentage will be specified in the related prospectus supplement.
The letter of credit may permit draws only in the event of certain types of
losses and shortfalls. The amount available under
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the letter of credit will, in all cases, be reduced to the extent of the
unreimbursed payments under the letter of credit and may otherwise be reduced as
described in the related prospectus supplement. The obligations of the issuing
financial institution under the letter of credit for any series of offered
certificates will expire at the earlier of the date specified in the related
prospectus supplement or the termination of the related trust.
CERTIFICATE INSURANCE AND SURETY BONDS
If and to the extent described in the related prospectus supplement,
deficiencies in amounts otherwise payable on a series of offered certificates or
certain classes of those certificates will be covered by insurance policies or
surety bonds provided by one or more insurance companies or sureties. Those
instruments may cover, with respect to one or more classes of the offered
certificates of the related series, timely distributions of interest and
principal or timely distributions of interest and distributions of principal on
the basis of a schedule of principal distributions set forth in or determined in
the manner specified in the related prospectus supplement. We will describe in
the related prospectus supplement any limitations on the draws that may be made
under any such instrument.
RESERVE FUNDS
If and to the extent described in the related prospectus supplement,
deficiencies in amounts otherwise payable on a series of offered certificates or
certain classes of those certificates will be covered, to the extent of
available funds, by one or more reserve funds in which cash, a letter of credit,
permitted investments, a demand note or a combination of the foregoing, will be
deposited, in the amounts specified in the related prospectus supplement. If and
to the extent described in the related prospectus supplement, the reserve fund
for the related series of offered certificates may also be funded over time.
Amounts on deposit in any reserve fund for a series of offered
certificates will be applied for the purposes, in the manner, and to the extent
specified in the related prospectus supplement. If and to the extent described
in the related prospectus supplement, reserve funds may be established to
provide protection only against certain types of losses and shortfalls.
Following each payment date for the related series of offered certificates,
amounts in a reserve fund in excess of any required balance may be released from
the reserve fund under the conditions and to the extent specified in the related
prospectus supplement.
CREDIT SUPPORT WITH RESPECT TO MBS
If and to the extent described in the related prospectus supplement,
any mortgage-backed security included in one of the trusts and/or the mortgage
loans that back that security may be covered by one or more of the types of
credit support described in this prospectus. We will specify in the related
prospectus supplement, as to each form of credit support, the information
indicated above with respect to that mortgage-backed security, to the extent
that the information is material and available.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
Most, if not all, of the underlying mortgage loans will be secured by
multifamily and commercial properties in the United States. Some mortgage loans
underlying a series of offered certificates may be secured by multifamily and
commercial properties outside the United States.
The following discussion contains general summaries of certain legal
aspects of mortgage loans secured by multifamily and commercial properties in
the United States. Because these legal aspects are governed by applicable state
law and these laws may differ substantially, the summaries do not purport to
cover all applicable laws, to reflect the laws of any particular state or to
encompass the laws of all jurisdictions in which the security for the mortgage
loans underlying the offered certificates is situated. Accordingly, you should
be aware that the summaries are qualified in their entirety by reference to the
applicable laws of those states. See "Description of the Trust Assets--Mortgage
Loans."
If a significant percentage of mortgage loans underlying a series of
offered certificates are secured by properties in a particular state, we will
discuss the relevant state laws in the related prospectus supplement, to the
extent they vary materially from this discussion. For purposes of this
discussion, "mortgage loan" means a multifamily or commercial mortgage loan that
directly or indirectly backs a series of offered certificates.
Each mortgage loan will be evidenced by a note or bond and secured by
an instrument granting a
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security interest in real property. The instrument granting a security interest
in real property may be a mortgage, deed of trust or a deed to secure debt,
depending upon the prevailing practice and law in the state in which the related
mortgaged property is located. Mortgages, deeds of trust and deeds to secure
debt are called "mortgages" in this prospectus supplement. A mortgage creates a
lien upon, or grants a title interest in, the covered real property, and
represents the security for the repayment of the indebtedness evidenced by the
note or bond. The priority of this lien or interest depends on the terms of the
mortgage. The priority, in some cases, will depend on:
o the terms of separate subordination agreements or inter-creditor agreements
with others that hold interests in the real property;
o the knowledge of the parties to the mortgage; and
o the order of recordation of the mortgage in the appropriate public
recording office.
However, the lien of a recorded mortgage will generally be subordinate
to later-arising liens for real estate taxes and assessments and other charges
imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage-
o a mortgagor, who is the owner of the encumbered interest into the subject
property and usually the borrower; and
o a mortgagee, who is the lender.
In contrast, a deed of trust is a three-party instrument. The parties
to a deed of trust are-
o the trustor, the equivalent of a mortgagor;
o the trustee to whom the real property is conveyed; and
o the beneficiary, who is the lender.
Under a deed of trust, the trustor grants the property, irrevocably
until the debt is paid, in trust and generally with a power of sale, to the
trustee to secure repayment of the related note or bond.
A deed to secure debt typically has two parties. Pursuant to a deed to
secure debt, the grantor, who is the equivalent of a mortgagor, conveys title to
the real property to the grantee, who is the lender, generally with a power of
sale, until the debt is repaid.
If the borrower is a land trust, there would be an additional party
because legal title to the property is held by a land trustee under a land trust
agreement for the benefit of the borrower. At origination of a mortgage loan
involving a land trust, the borrower may execute a separate undertaking to make
payments on the mortgage note. In no event is the land trustee personally liable
for the mortgage note obligation.
The mortgagee's authority under a mortgage, the trustee's authority
under a deed of trust and the grantee's authority under a deed to secure debt
are governed by:
o the express provisions of the related instrument;
o the law of the state in which the real property is located;
o certain federal laws; and
o in some deed-of-trust transactions, the directions of the beneficiary.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases and/or may be accompanied by a separate
assignment of rents and leases. Under an assignment of rents and leases, the
borrower assigns to the lender the borrower's rights under, and all income from,
each lease. The borrower generally retains a revocable license to directly
collect the rents until a default. If the borrower defaults, the license
terminates and the lender is entitled to collect the rents directly. Local law
may require that the lender take possession of the property, obtain a
court-appointed receiver and/or take other similar action before becoming
entitled to collect the rents.
Mortgages that encumber a hotel or motel generally require the borrower
to pledge room rates as additional security for the loan. In most states, these
rates are considered accounts receivable under the Uniform Commercial Code. In
general, the lender must file financing statements in order to perfect its
security interest in the room rates and must file continuation statements,
generally every five years, to maintain that perfection. Mortgage loans secured
by hotels or motels may be included in one of the trusts even if the security
interest in the room rates was not perfected or the requisite Uniform Commercial
Code filings were allowed to lapse. A
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lender will generally be required to commence a foreclosure action or otherwise
take possession of the property in order to enforce its rights to collect the
room rates following a default, even if the lender's security interest in room
rates is perfected under applicable non-bankruptcy law.
In the bankruptcy setting, the lender will be stayed from enforcing its
rights to collect hotel and motel room rates. However, the room rates will
constitute "cash collateral" and cannot be used by the bankrupt borrower without
a hearing or the lender's consent or unless the lender's interest in the room
rates is given adequate protection, such as a cash payment for otherwise
encumbered funds or a replacement lien on unencumbered property, in either case
equal in value to the amount of room rates that the bankrupt borrower proposes
to use. See "--Foreclosure--Bankruptcy Laws".
PERSONAL PROPERTY
Certain types of mortgaged properties, such as hotels, motels and
nursing homes, may include personal property that may, to the extent owned by
the borrower and not previously pledged, constitute a significant portion of the
property's value as security. The creation and enforcement of liens on personal
property are governed by the Uniform Commercial Code. Accordingly, if a borrower
pledges personal property as security for a mortgage loan, the lender generally
must file Uniform Commercial Code financing statements in order to perfect its
security interest in the personal property and must file continuation
statements, generally every five years, to maintain that perfection. In certain
cases, mortgage loans secured in part by personal property may be included in
one of the trusts even if the security interest in the personal property was not
perfected or the requisite Uniform Commercial Code filings were allowed to
lapse.
FORECLOSURE
FORECLOSURE PROCEDURES VARY FROM STATE TO STATE
Foreclosure is a legal procedure that allows the lender to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the borrower defaults in payment or performance of its obligations
under the note or mortgage, the lender has the right to institute foreclosure
proceedings to sell the real property at public auction to satisfy the
indebtedness.
The two primary methods of foreclosing a mortgage are:
o judicial foreclosure, involving court proceedings; and
o non-judicial foreclosure pursuant to a power of sale granted in the
mortgage instrument.
Other foreclosure procedures are available in some states, but they are
either infrequently used or available only in limited circumstances.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are made. A foreclosure
action sometimes requires several years to complete.
JUDICIAL FORECLOSURE
A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated by
the service of legal pleadings upon all parties having a recorded subordinate
interest in the real property and all parties in possession of the property,
under leases or otherwise, whose interests are subordinate to the mortgage.
Difficulties in locating defendants can delay proceedings. When the lender's
right to foreclose is contested, the legal proceedings can be time-consuming.
Upon a successful completion of the judicial foreclosure proceeding, the court
generally issues a judgment of foreclosure and appoints a referee or other
officer to conduct a public sale of the mortgaged property. The proceeds of the
public sale are used to satisfy the judgment. These sales are made in accordance
with procedures that vary from state to state.
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EQUITABLE AND OTHER LIMITATIONS ON ENFORCEABILITY OF CERTAIN PROVISIONS
Courts have traditionally used general equitable principles to limit
the remedies available to lenders in foreclosure actions where the court viewed
the foreclosures as harsh or unfair. Relying on these principles, a court may:
o alter the specific terms of a loan as necessary to prevent or remedy an
injustice, undue oppression or overreaching;
o require the lender to determine the cause of the borrower's default and the
likelihood that the borrower will be able to reinstate the loan;
o require the lender to reinstate a loan or recast a payment schedule in
order to accommodate a borrower that is suffering from a temporary
financial disability; or
o limit the lender's foreclosure rights in the case of a non-monetary
default, such as a failure to adequately maintain the mortgaged property or
an impermissible further encumbrance of the mortgaged property.
Some courts have addressed the issue of whether federal or state
constitutional provisions reflecting due process concerns for adequate notice
require that a borrower receive notice in addition to statutorily-prescribed
minimum notice. For the most part, these cases have upheld the reasonableness of
the statutory notice provisions or have found that a public sale under a
mortgage providing for a power of sale does not involve sufficient state action
to trigger constitutional protections.
In addition, some states may have statutory protection such as the
right of the borrower to reinstate its mortgage loan after commencement of
foreclosure proceedings but prior to a foreclosure sale.
NONJUDICIAL FORECLOSURE/POWER OF SALE
In states permitting non-judicial foreclosure proceedings, foreclosure
of a deed of trust is generally accomplished by a non-judicial trustee's sale
pursuant to a power of sale typically granted in the deed of trust. A power of
sale may also be contained in any other type of mortgage instrument if
applicable law so permits. A power of sale under a deed of trust allows the
trustee to conduct a non-judicial public sale generally following a request from
the beneficiary/lender to sell the property after a default by the borrower if
notice of sale is given in accordance with the terms of the mortgage and
applicable state law.
In some states, prior to a non-judicial public sale, the trustee under
the deed of trust must record a notice of default and notice of sale and send a
copy to the borrower and to any other party who has recorded a request for a
copy of a notice of default and notice of sale. In addition, in some states, the
trustee must provide notice to any other party having an interest of record in
the real property, including junior lienholders. A notice of sale must be posted
in a public place and, in most states, published for a specified period of time
in one or more newspapers. The borrower or junior lienholder may then have the
right during a reinstatement period required in some states to cure the default
by paying the entire actual amount in arrears, without regard to the
acceleration of the indebtedness, plus the lender's expenses incurred in
enforcing the obligation. In other states, the borrower or the junior lienholder
is not provided a period to reinstate the loan, but has only the right to pay
off the entire debt to prevent the foreclosure sale. Generally, state law
governs the procedure for public sale, the parties entitled to notice, the
method of giving notice and the applicable time periods.
PUBLIC SALE
A third party may be unwilling to purchase a mortgaged property at a
public sale because of:
o difficulty in determining the exact status of title to the property due to,
among other things, redemption rights that may exist; and
o possible physical deterioration of the property that may have occurred
during the foreclosure proceedings.
Therefore, it is common for the lender to purchase the mortgaged
property, subject to the borrower's right in some states to remain in possession
during a redemption period. In that case, the lender will have both the benefits
and burdens of ownership, including the obligation to:
o pay debt service on any senior mortgages;
o pay taxes;
o obtain casualty insurance; and
o make repairs necessary to render the property suitable for sale.
The costs of operating and maintaining a commercial or multifamily
residential property may be significant and may be greater than the income
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derived from that property. The lender also will commonly obtain the services of
a real estate broker and pay the broker's commission in connection with the sale
or lease of the property. Whether the ultimate proceeds of the sale of the
property equal the lender's investment in the property depends upon market
conditions. Moreover, because of the expenses associated with acquiring, owning
and selling a mortgaged property, a lender could realize an overall loss on a
mortgage loan even if the mortgaged property is sold at foreclosure, or resold
after it is acquired through foreclosure, for an amount equal to the full
outstanding principal amount of the loan plus accrued interest.
The holder of a junior mortgage that forecloses on a mortgaged property
does so subject to senior mortgages and any other prior liens, and may have to
keep senior mortgage loans current in order to avoid foreclosure of its interest
in the property. In addition, if the foreclosure of a junior mortgage triggers
the enforcement of a "due-on-sale" clause contained in a senior mortgage, the
junior mortgagee could be required to pay the full amount of the senior mortgage
indebtedness or face foreclosure.
RIGHTS OF REDEMPTION
The purposes of a foreclosure action are to enable the lender to
realize upon its security and to bar the borrower, and all persons who have
interests in the property that are subordinate to that of the foreclosing
lender, from exercising their "equity of redemption". The doctrine of equity of
redemption provides that, until the property encumbered by a mortgage has been
sold in accordance with a properly conducted foreclosure and foreclosure sale,
those having interests that are subordinate to that of the foreclosing lender
have the right to redeem the property by paying the entire debt with interest.
Those having an equity of redemption must generally be made parties and joined
in the foreclosure proceeding in order for their equity of redemption to be
terminated.
Equity of redemption is a common-law, non-statutory right that should
be distinguished from post-sale statutory rights of redemption. In some states,
the borrower and foreclosed junior lienholders are given a statutory period in
which to redeem the property after a foreclosure. In some states, statutory
redemption may occur only upon payment of the foreclosure sale price. In other
states, redemption may be permitted if the former borrower pays only a portion
of the sums due. A statutory right of redemption will diminish the ability of
the lender to sell the foreclosed property, because the exercise of a right of
redemption would defeat the title of any purchaser through a foreclosure.
Consequently, the practical effect of the redemption right is to force the
lender to own the property until the redemption period has expired. In some
states, a post-sale statutory right of redemption may exist following a judicial
foreclosure, but not following a trustee's sale under a deed of trust.
ANTI-DEFICIENCY LEGISLATION
Some or all of the mortgage loans may be non-recourse loans. Recourse
after default on these loans will be limited to the related mortgaged property
and any other assets pledged to secure the related mortgage loan. However, even
if a mortgage loan provides for recourse to the borrower's other assets, a
lender's ability to realize upon those assets may be limited by state law. For
example, in some states, a lender cannot obtain a deficiency judgment against
the borrower following foreclosure or sale under a deed of trust. A deficiency
judgment is a personal judgment against the former borrower equal to the
difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. Other states may require the lender
to exhaust the security afforded under a mortgage before bringing a personal
action against the borrower. In certain other states, the lender has the option
of bringing a personal action against the borrower on the debt without first
exhausting the security, but in doing so, the lender may be precluded from
foreclosing upon the security. Finally, other statutory provisions, designed to
protect borrowers from exposure to large deficiency judgments that might result
from bidding at below-market values at the foreclosure sale, limit any
deficiency judgment to the excess of the outstanding debt over the fair market
value of the property at the time of the sale.
LEASEHOLD CONSIDERATIONS
Mortgage loans may be secured by a mortgage on the borrower's leasehold
interest under a ground lease. Leasehold mortgage loans are subject to certain
risks not associated with mortgage loans secured by a lien on the fee estate of
the borrower. The most significant of these risks is that if the borrower's
leasehold were to be terminated, the leasehold mortgagee would lose its
security. This risk may be lessened if the ground lease:
o requires the lessor to give the lender notices of lessee defaults and an
opportunity to cure them;
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o permits the leasehold estate to be assigned to and by the lender or the
purchaser at a foreclosure sale; and
o contains certain other protective provisions typically included in a
"mortgageable" ground lease.
Certain mortgage loans, however, may be secured by ground leases that
do not contain these provisions.
COOPERATIVE SHARES
Mortgage loans may be secured by a security interest on the borrower's
ownership interest in shares, and the proprietary leases belonging to those
shares, allocable to cooperative dwelling units that may be vacant or occupied
by non-owner tenants. Loans secured in this manner are subject to certain risks
not associated with mortgage loans secured by a lien on a borrower's fee estate
in real property. The loan typically is subordinate to any mortgage on the
cooperative's building. This mortgage, if foreclosed, could extinguish the
equity in the building and the proprietary leases of the dwelling units derived
from ownership of the shares of the cooperative. Further, transfer of shares in
a cooperative is subject to various regulations as well as to restrictions under
the governing documents of the cooperative. The shares may be canceled in the
event that associated maintenance charges due under the related proprietary
leases are not paid. Typically, a recognition agreement between the lender and
the cooperative provides, among other things, that the lender may cure a default
under a proprietary lease.
Under the laws applicable in many states, "foreclosure" on cooperative
shares is accomplished by a sale in accordance with the provisions of Article 9
of the Uniform Commercial Code and the security agreement relating to the
shares. Article 9 of the Uniform Commercial Code requires that a sale be
conducted in a "commercially reasonable" manner, which may be dependent upon,
among other things, the notice given the debtor and the method, manner, time,
place and terms of the sale. Article 9 of the Uniform Commercial Code provides
that the proceeds of the sale will be applied first to pay the costs and
expenses of the sale and then to satisfy the indebtedness secured by the
lender's security interest. A recognition agreement, however, generally provides
that the lender's right to reimbursement is subject to the right of the
cooperative corporation to receive sums due under the proprietary leases.
BANKRUPTCY LAWS
The U.S. bankruptcy code and state insolvency laws may interfere with
or affect a lender's ability to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the U.S. bankruptcy code, virtually all
actions, including foreclosure actions and deficiency judgment proceedings,
affecting the debtor are automatically stayed upon the filing of the bankruptcy
petition. It is not unusual for the debtor to make no interest or principal
payments during the course of the bankruptcy case. The delay and the
consequences of the delay caused by an automatic stay can be significant. Also,
the filing of a petition in bankruptcy by or on behalf of a junior lienholder
may stay the senior lender from taking action to foreclose out the junior lien.
Under the U.S. bankruptcy code, the amount and terms of a mortgage loan
secured by a lien on property of the debtor may be modified under certain
circumstances, provided that substantive and procedural safeguards protective of
the lender are met. A bankruptcy court may, among other things:
o reduce the secured portion of the outstanding amount of the loan to the
then-current value of the property, which would leave the lender a general
unsecured creditor for the difference between the then-current value of the
property and the outstanding balance of the loan;
o reduce the amount of each scheduled payment, by means of a reduction in the
rate of interest and/or an alteration of the repayment schedule, with or
without affecting the unpaid principal balance of the loan;
o extend or shorten the term to maturity;
o permit the debtor to cure a mortgage loan default by paying the arrearage
over a number of years; or
o permit the debtor, through its rehabilitative plan, to reinstate a mortgage
loan payment schedule even if the lender has obtained a final judgment of
foreclosure prior to the filing of the debtor's petition.
Federal bankruptcy law may also have the effect of interfering with or
blocking the ability of a secured lender to enforce the borrower's assignment of
rents and leases related to the mortgaged property. Even if the lender is
ultimately allowed to enforce the assignment, the legal proceedings necessary to
resolve the issue could be time-consuming, and cause delays in the lender's
receipt of the rents
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The commencement of a bankruptcy case involving the tenant under a
lease of the related property may impair a borrower's ability to make payment on
a mortgage loan. Under the U.S. bankruptcy code, the filing of a petition in
bankruptcy by or on behalf of a tenant results in a stay in bankruptcy against
the commencement or continuation of any state court proceeding for past due
rent, for accelerated rent, for damages or for a summary eviction order with
respect to a default under the lease that occurred prior to the filing of the
tenant's bankruptcy petition. In addition, the U.S. bankruptcy code generally
provides that a trustee or debtor-in-possession may, subject to approval of the
court:
o assume the lease and retain it or assign it to a third party; or
o reject the lease.
If the lease is assumed, the trustee, debtor-in-possession or assignee,
if applicable, must cure any defaults under the lease, compensate the lessor for
its losses and provide the lessor with "adequate assurance" of future
performance. These remedies may be insufficient, and any assurances provided to
the lessor may be inadequate. If the debtor rejects the lease, the lessor will
be treated, except potentially to the extent of any security deposit, as an
unsecured creditor with respect to its claim for damages for termination of the
lease. The U.S. bankruptcy code also limits a lessor's damages for lease
rejection to:
o the rent under the lease without regard to acceleration for the greater of
one year, or 15%, not to exceed three years, of the remaining term of the
lease; plus
o unpaid rent to the earlier of the surrender of the property or the tenant's
bankruptcy filing.
ENVIRONMENTAL CONSIDERATIONS
A lender may be subject to environmental risks when taking a security
interest in real property. Of particular concern may be properties that are or
have been used for industrial, manufacturing, military or disposal activity.
These environmental risks include the possible diminution of the value of a
contaminated property or, as discussed below, potential liability for clean-up
costs or other remedial actions. These remedial or clean-up costs could exceed
the value of the property or the amount of the lender's loan. In certain
circumstances, a lender may decide to abandon a contaminated mortgaged property
as collateral for its loan rather than foreclose and risk liability for clean-up
costs.
SUPERLIEN LAWS
Under the laws of many states, contamination on a property may give
rise to a lien on the property for clean-up costs. In several states, such a
lien has priority over all existing liens, including those of existing
mortgages. In these states, the lien of a mortgage may lose its priority to such
a "superlien".
CERCLA
The federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, commonly referred to as "CERCLA", imposes strict
liability on present and past "owners" and "operators" of contaminated real
property for the costs of clean-up. A secured lender may be liable as an "owner"
or "operator" of a contaminated mortgaged property if agents or employees of the
lender have participated in the management of the mortgaged property or the
operations of the borrower. Liability may exist even if the lender did not cause
or contribute to the contamination and regardless of whether the lender has
actually taken possession of the mortgaged property through foreclosure, deed in
lieu of foreclosure or otherwise. Moreover, liability is not limited to the
original or unamortized principal balance of a loan or to the value of the
mortgaged property. Excluded from CERCLA's definition of "owner" or "operator",
however, is a person who, without participating in the management of the
facility, holds indicia of ownership primarily to protect his security interest.
This is the so-called "secured creditor exemption".
The Asset Conservation, Lender Liability and Deposit Insurance Act of
1996 amended, among other things, the provisions of CERCLA with respect to
lender liability and the secured creditor exemption. This Act offers substantial
protection to lenders by defining the activities in which a lender can engage
without losing the benefit of the secured creditor exemption. In order for a
lender to be deemed to have participated in the management of a mortgaged
property, the lender must actually participate in the operational affairs of the
property of the borrower. The Act provides that "merely having the capacity to
influence, or unexercised right to control" operations does not constitute
participation in management. A lender will lose the protection of the secured
creditor exemption only if:
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o it exercises decision-making control over the borrower's environmental
compliance and hazardous substance handling and disposal practices; or
o assumes day-to-day management of operational functions of the mortgaged
property.
The Act also provides that a lender will continue to have the benefit
of the secured creditor exemption even if it purchases a mortgaged property at a
foreclosure sale or accepts a deed-in-lieu of foreclosure, provided that the
lender seeks to sell the mortgaged property at the earliest practicable
commercially reasonable time on commercially reasonable terms.
CERTAIN OTHER FEDERAL AND STATE LAWS
Many states have statutes similar to CERCLA, and not all those statutes
provide for a secured creditor exemption. In addition, under federal law, there
is potential liability relating to hazardous wastes and underground storage
tanks under the federal Resource Conservation and Recovery Act.
Certain federal, state and local laws, regulations and ordinances
govern the management, removal, encapsulation or disturbance of
asbestos-containing materials. These laws, as well as common law standards, may
impose liability for releases of or exposure to asbestos-containing materials
and may permit third parties to seek recovery from owners or operators of real
properties for personal injuries associated with such releases.
Federal law requires owners of residential housing constructed prior to
1978 to disclose to potential residents or purchasers any known lead-based paint
hazards and imposes treble damages for any failure to disclose. In addition, the
ingestion of lead-based paint chips or dust particles by children can result in
lead poisoning. The owner of a property where these circumstances exist may be
held liable for injuries and for the costs of removal or encapsulation of the
lead-based paint.
In a few states, transfers of some types of properties are conditioned
upon cleanup of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed in lieu of foreclosure
or otherwise, may be required to clean up the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law
causes of action related to hazardous environmental conditions on a property,
such as actions based on nuisance or on toxic tort resulting in death, personal
injury or damage to property. Although it may be more difficult to hold a lender
liable under common law causes of action, unanticipated or uninsured liabilities
of the borrower may jeopardize the borrower's ability to meet its loan
obligations.
Federal, state and local environmental regulatory requirements change
often. It is possible that compliance with a new regulatory requirement could
impose significant compliance costs on a borrower. These costs may jeopardize
the borrower's ability to meet its loan obligations.
ADDITIONAL CONSIDERATIONS
Remediating hazardous substance contamination at a property can be very
costly. If a lender becomes liable, it can bring an action for contribution
against the owner or operator who created the environmental hazard. However,
that individual or entity may be without substantial assets. Accordingly, it is
possible that the costs could become a liability of the related trust and
occasion a loss to the related certificateholders.
If the operations on a foreclosed property are subject to environmental
laws and regulations, the lender must operate the property in accordance with
those laws and regulations. This compliance may entail substantial expense,
especially in the case of industrial or manufacturing properties.
In addition, a lender may have to disclose environmental conditions on
a property to government entities and/or to prospective buyers, including
prospective buyers at a foreclosure sale or following foreclosure. This
disclosure may decrease the amount that prospective buyers are willing to pay
for the affected property, sometimes substantially.
ENVIRONMENTAL SITE ASSESSMENTS
In most cases, an environmental site assessment of each mortgaged
property will have been performed in connection with the origination of the
related mortgage loan or at some time prior to the issuance of the related
series of offered certificates. Environmental site assessments, however, vary
considerably in their content, quality and cost. Even when adhering to good
professional practices,
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environmental consultants will sometimes not detect significant environmental
problems.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the mortgage loans may contain "due-on-sale" and
"due-on-encumbrance" clauses that purport to permit the lender to accelerate the
maturity of the loan if the borrower transfers or encumbers the mortgaged
property. In recent years, court decisions and legislative actions placed
substantial restrictions on the right of lenders to enforce these clauses in
many states. However, the Garn-St. Germain Depository Institutions Act of 1982
generally preempts state laws that prohibit the enforcement of due-on-sale
clauses and permits lenders to enforce these clauses in accordance with their
terms, subject to certain limitations prescribed in that Act and the regulations
promulgated under the Act.
JUNIOR LIENS; RIGHTS OF HOLDERS OF SENIOR LIENS
Any of the trusts may include mortgage loans secured by junior liens,
and the loans secured by the related senior liens may not be included in that
trust. The primary risk to holders of mortgage loans secured by junior liens is
the possibility that adequate funds will not be received in connection with a
foreclosure of the related senior liens to satisfy fully both the senior loans
and the junior loan.
In the event that a holder of a senior lien forecloses on a mortgaged
property, the proceeds of the foreclosure or similar sale will be applied in
accordance with the law of the state in which the property is located.
Generally, that order is as follows:
o first, to the payment of court costs and fees in connection with the
foreclosure;
o second, to real estate taxes;
o third, in satisfaction of all principal, interest, any prepayment or
acceleration penalties, and any other sums due and owing to the holder of
the senior liens; and
o last, in satisfaction of all principal, interest, any prepayment and
acceleration penalties and any other sums due and owing to the holder of
the junior mortgage loan.
SUBORDINATE FINANCING
The terms of certain of the mortgage loans may not restrict the
borrower from using the mortgaged property as security for one or more
additional loans, or the restrictions may be unenforceable. If a borrower
encumbers a mortgaged property with one or more junior liens, the senior lender
is exposed to the following additional risks:
o the borrower may have difficulty servicing and repaying multiple loans;
o if the subordinate financing permits recourse to the borrower, as is
frequently the case, and the senior loan does not permit recourse, a
borrower may have more incentive to repay sums due on the subordinate loan;
o acts of the senior lender that prejudice the junior lender or impair the
junior lender's security, such as the senior lender agreeing to an increase
in the principal amount of or the interest rate payable on the senior loan,
may create a superior priority in favor of the junior lender;
o if the borrower defaults on the senior loan and/or any junior loan or
loans, the existence of junior loans and actions taken by junior lenders
can impair the security available to the senior lender and can interfere
with or delay the taking of action by the senior lender; and
o the bankruptcy of a junior lender may operate to stay foreclosure or
similar proceedings by the senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Notes and mortgages may contain provisions that require the borrower to
pay a late charge or additional interest if payments are late. They may also
contain provisions that prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment premium, fee or
charge. In certain states, there are or may be specific limitations on the late
charges that a lender may collect from a borrower for delinquent payments.
Certain states also limit the amounts that a lender may collect from a borrower
as an additional charge if the loan is prepaid. In addition, the enforceability
of provisions that provide for prepayment premiums, fees and charges upon an
involuntary prepayment is unclear under the laws of many states.
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APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980 provides that state usury limitations do not apply to
certain types of residential (including multifamily) first mortgage loans
originated by certain lenders after March 31, 1980. Title V authorized any state
to re-impose interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision that expressly rejects application of the federal law.
In addition, even where Title V is not rejected, any state may adopt a provision
limiting discount points or other charges on mortgage loans covered by Title V.
Certain states have taken action to re-impose interest rate limits and/or to
limit discount points or other charges.
CERTAIN LAWS AND REGULATIONS
Multifamily and commercial properties are subject to compliance with
various federal, state and local statutes and regulations. Failure to comply,
together with an inability to remedy any failure, could result in material
diminution in the value of a mortgaged property.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and the
related rules, public accommodations, such as hotels, restaurants, shopping
centers, hospitals, schools and social service center establishments, must
remove architectural and communication barriers that are structural in nature
from existing places of public accommodation to the extent "readily achievable".
In addition, under the ADA, alterations to a place of public accommodation or a
commercial facility are to be made so that, to the maximum extent feasible, the
altered portions are readily accessible to and usable by disabled individuals.
The "readily achievable" standard takes into account, among other factors, the
financial resources of the affected site owner, landlord or other applicable
person. In addition to imposing a possible financial burden on the borrower in
its capacity as owner or landlord, the ADA may also impose requirements on a
foreclosing lender who succeeds to the interest of the borrower as owner or
landlord. Furthermore, since the "readily achievable" standard may vary
depending on the financial condition of the owner or landlord, a foreclosing
lender who is financially more capable than the borrower of complying with the
requirements of the ADA may be subject to more stringent requirements than those
to which the borrower is subject.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940,
a borrower who enters military service after the origination of a loan,
including a borrower who was in reserve status and is called to active duty
after origination of the mortgage loan, may not be charged interest, including
fees and charges, above an annual rate of 6% during the period of the borrower's
active duty status, unless a court orders otherwise upon application of the
lender. The Act applies to individuals who are members of the Army, Navy, Air
Force, Marines, National Guard, Reserves, Coast Guard and officers of the U.S.
Public Health Service assigned to duty with the military. Because the Act
applies to individuals who enter military service, including reservists who are
called to active duty, after origination of the related mortgage loan, no
information can be provided as to the number of loans with individuals as
borrowers that may be affected by the Act.
Application of the Act would adversely affect, for an indeterminate
period of time, the ability of a master servicer or special servicer to collect
the full amount of interest on certain of the mortgage loans underlying the
offered certificates. Any shortfalls in interest collections resulting from the
application of the Act would result in a reduction of the amounts distributable
to the holders of certificates of the related series, and would not be covered
by advances or, unless otherwise specified in the related prospectus supplement,
any form of credit support provided in connection with the certificates. In
addition, the Act imposes limitations that would impair the ability of a master
servicer or special servicer to foreclose on an affected mortgage loan during
the borrower's period of active duty status and, under certain circumstances,
during an additional three-month period after the active duty status ceases.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that the government can seize property owned by
persons convicted of drug-related crimes or criminal violations of the Racketeer
Influenced and Corrupt Organizations, or "RICO" statute, if the property was
used in, or purchased with, the proceeds of those crimes. Under procedures
contained in the comprehensive Crime Control Act of 1984, the government may
seize the property even before conviction. The government must publish notice of
the forfeiture proceeding and
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give notice to all parties "known to have an alleged interest in the property",
including the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that:
o its mortgage was executed and recorded before commission of the crime upon
which the forfeiture is based; or
o the lender was, at the time of execution of the mortgage, "reasonably
without cause to believe" that the property was used in, or purchased with
the proceeds of, illegal drug or RICO activities.
FEDERAL INCOME TAX CONSEQUENCES
This is a general discussion of the material federal income tax
consequences of owning the offered certificates. To the extent it relates to
matters of law or legal conclusions, it represents the opinion of our counsel,
subject to any qualifications as may be expressed in this discussion. Unless
otherwise specified in the related prospectus supplement, our counsel for each
series will be Morrison & Hecker L.L.P.
This discussion is directed to certificateholders that hold the offered
certificates as "capital assets" within the meaning of Section 1221 of the
Internal Revenue Code of 1986 (for purposes of this "Federal Income Tax
Consequences" section and the "ERISA Considerations" section, the "CODE"). It
does not purport to discuss all federal income tax consequences that may be
relevant to owners of the offered certificates, particularly as to investors
subject to special treatment under the Code, such as:
o banks;
o insurance companies; and
o foreign investors.
Further, this discussion and the opinion referred to below are based on
authorities that can change, or be interpreted differently, with possible
retroactive effect. No rulings have been or will be sought from the Internal
Revenue Service with respect to any of the federal income tax consequences
discussed below. Accordingly, the IRS may take contrary positions.
Investors and preparers of tax returns (including those filed by any
REMIC or other issuer) should be aware that under applicable Treasury
regulations a provider of advice on specific issues of law is not considered an
income tax return preparer unless the advice:
o is given with respect to events that have occurred at the time the advice
is rendered and is not given with respect to the consequences of
contemplated actions; and
o is directly relevant to the determination of an entry on a tax return.
Accordingly, even if this discussion addresses an issue regarding the
tax treatment of the owner of certificates, investors should consult their own
tax advisors regarding that issue. Investors should do so not only as to federal
taxes, but also as to state and local taxes. See "State and Other Tax
Consequences".
The following discussion addresses securities of three general types:
o certificates representing interests in a trust, or a portion of a trust, as
to which a designated party under the related Governing Document (the
"REMIC ADMINISTRATOR") will make a real estate mortgage investment conduit
("REMIC") election under Sections 860A through 860G of the Code;
o certificates representing interests in a trust, or portion of a trust, as
to which a fixed asset securitization investment trust ("FASIT") election
is made under Section 860L of the Code; and
o certificates ("GRANTOR TRUST CERTIFICATES") representing interests in a
trust or a portion of a trust (a "GRANTOR TRUST Fund"), as to which no
REMIC or FASIT election will be made.
The prospectus supplement for each series will indicate whether a REMIC
election, or elections, will be made for the related trust and, if such an
election is to be made, will identify all "regular interests" and "residual
interests" in the REMIC. If so specified in the applicable prospectus
supplement, the portion of a trust fund as to which a REMIC election is not made
may be treated as either a grantor trust for federal income tax purposes or a
FASIT. For purposes of this tax discussion, references to a
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"certificateholder" or a "holder" are to the beneficial owner of a certificate.
The following discussion is limited in applicability to the offered
certificates. Moreover, this discussion applies only to the extent that mortgage
assets held by a trust consist solely of mortgage loans. To the extent that
other trust assets, including mortgage-backed securities and government
securities, are to be held by a trust, the tax consequences associated with the
inclusion of such assets will be disclosed in the related prospectus supplement.
The following discussion is based in part upon the rules governing
original issue discount that are set forth in Sections 1271-1273 and 1275 of the
Code and in the Treasury regulations issued under such sections (the "OID
REGULATIONS"). It is also based on the rules governing REMICs in Sections
860A-860G of the Code and in the Treasury regulations issued under those
statutes (the "REMIC REGULATIONS"). The OID Regulations do not adequately
address certain issues relevant to, and in some instances provide that they are
not applicable to, securities such as the offered certificates.
REMICS
CLASSIFICATION OF REMICS
With respect to each series as to which the REMIC Administrator will
make a REMIC election, our counsel will deliver its opinion generally to the
effect that, assuming compliance with all provisions of the related Governing
Document and certain other documents, and subject to certain assumptions set
forth therein, the related trust, or each applicable portion of the trust, will
qualify as a REMIC and the REMIC Certificates offered with respect thereto will
be considered to evidence ownership of "regular interests" (such certificates,
the "REMIC REGULAR CERTIFICATES") or the sole class of "residual interests"
(such certificates, the "REMIC RESIDUAL CERTIFICATES") in that REMIC within the
meaning of sections 860A-860G of the Code.
QUALIFICATION AS A REMIC
In order for the trust to qualify as a REMIC, there must be ongoing
compliance on the part of the trust with the requirements set forth in the Code.
The trust must fulfill an asset test, which requires that no more than a de
minimis portion of its assets, as of the close of the third calendar month
beginning after the "STARTUP DAY" (which for purposes of this discussion is the
date of issuance of the certificates) and at all times thereafter, may consist
of assets other than "qualified mortgages" and "permitted investments." The
REMIC Regulations provide a "safe harbor" pursuant to which the de minimis
requirement is met if at all times the total adjusted basis of the nonqualified
assets is less than 1% of the total adjusted basis of all the REMIC's assets. An
entity that fails to meet the safe harbor may nevertheless demonstrate that it
holds no more than a de minimis amount of nonqualified assets. A REMIC also must
provide "reasonable arrangements" to prevent its residual interest from being
held by "disqualified organizations" and applicable tax information to
transferors or agents that violate this requirement. Accordingly, the Governing
Document for each series will contain provisions intended to assure that the
asset and reasonable arrangements tests will be met at all times that the
Certificates are outstanding. See "--Taxation of Owners of REMIC Residual
Certificates--Tax and Restrictions on Transfer of REMIC Residual Certificates to
Certain Organizations."
A qualified mortgage is any obligation that is principally secured by
an interest in real property and that is either transferred to the REMIC on the
Startup Day or is purchased by the REMIC within a three-month period after that
date pursuant to a fixed-price contract in effect on the Startup Day. Qualified
mortgages include whole mortgage loans if, in general:
o the fair market value of the real property security (including buildings
and structural components) is at least 80% of the principal balance of the
mortgage loan either at origination or as of the Startup Day (an original
loan-to-value ratio of not more than 125% with respect to the real property
security); or
o substantially all the proceeds of the mortgage loan or the underlying
mortgage loan were used to acquire, improve or protect an interest in real
property that, at the origination date, was the only security for the
mortgage loan or underlying mortgage loan.
If the mortgage loan has been substantially modified other than in
connection with a default or reasonably foreseeable default, it must meet the
loan-to-value test in the first bullet point of the preceding sentence as of the
date of the last such modification or at closing. A qualified mortgage includes
a qualified replacement mortgage, which is any property that would have been
treated as a qualified
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mortgage if it were transferred to the REMIC pool on the Startup Day and that is
received either:
o in exchange for any qualified mortgage within a three-month period
thereafter; or
o in exchange for a "defective obligation" within a two-year period
thereafter.
A "defective obligation" includes:
o a mortgage in default or as to which default is reasonably foreseeable;
o a mortgage as to which a customary representation or warranty made at the
time of transfer to the REMIC pool has been breached;
o a mortgage that was fraudulently procured by the mortgagor; and
o a mortgage that was not in fact principally secured by real property (but
only if such mortgage is disposed of within 90 days of discovery).
A mortgage loan that is "defective" as described in the last bullet
point and that is not sold or, if within two years of the Startup Day,
exchanged, within 90 days of discovery, ceases to be a qualified mortgage after
such 90-day period. For purposes of this discussion, where the applicable
prospectus supplement provides for a fixed retained yield with respect to the
mortgaged properties underlying a series of certificates, references to the
mortgaged properties will be deemed to refer to that portion of the mortgaged
properties held by the trust fund which does not include the fixed retained
yield.
Permitted investments include cash flow investments, qualified reserve
assets and foreclosure property. A cash flow investment is any investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not to exceed 13 months,
until the next scheduled distribution to holders of interests in the REMIC.
Foreclosure property is real property acquired by the REMIC in connection with
default or imminent default of a qualified mortgage and generally held for not
more than three years after the year in which the property is acquired, with
extensions granted by the IRS.
If an entity electing to be treated as a REMIC fails to comply with one
or more of the ongoing requirements of the Code for such status during any
taxable year, the Code provides that the entity may lose its status as a REMIC
for that year and thereafter. In that event, such entity may be taxable as a
corporation, and the related REMIC Certificates may not be accorded the status
or given the tax treatment described below. Although the Code authorizes the
Treasury Department to issue regulations providing relief in the event of an
inadvertent termination of REMIC status, no such regulations have been issued.
Any such relief, moreover, may be accompanied by sanctions, such as the
imposition of a corporate tax on all or a portion of the related trust's income
for the period in which the requirements for the status are not satisfied. The
Governing Document with respect to each REMIC will include provisions designed
to maintain the related trust's status as a REMIC under the Code. It is not
anticipated that the status of any trust as a REMIC will be inadvertently
terminated.
CHARACTERIZATION OF INVESTMENTS IN REMIC CERTIFICATES
If 95% or more of the assets of the REMIC qualify for any of the
following characterizations at all times during a calendar year, the REMIC
Certificates will qualify for the corresponding status in their entirety for
that calendar year:
o "real estate assets" within the meaning of Section 856(c)(5)(B) of the
Code, and
o assets described in Section 7701(a)(19)(C) of the Code (to the extent that
the REMIC assets constitute mortgages on property not used for residential
or certain other prescribed purposes, the REMIC Certificates will not be
treated as assets qualifying under Section 7701(a)(19)(C)).
Interest (including original issue discount) on the REMIC Regular
Certificates and income allocated to the REMIC Residual Certificates will be
interest described in Section 856(c)(3)(B) of the Code to the extent that such
certificates are treated as "real estate assets" within the meaning of Section
856(c)(5)(B) of the Code. If less than 95% of the REMIC's assets consist of
assets described the preceding paragraph, then a REMIC certificate will qualify
for the corresponding tax treatment in such categories in the proportion that
such REMIC assets are qualifying assets.
In addition, the REMIC Regular Certificates will be:
o "qualified mortgages" within the meaning of Section 860G(a)(3) of the Code
in the hands of another REMIC, and
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o "permitted assets" under Section 860L(c)(1)(G) for a "financial asset
securitization investment trust" or "FASIT".
The REMIC Administrator will determine the percentage of the REMIC's
assets that constitute assets described in the foregoing sections of the Code
with respect to each calendar quarter based on the average adjusted basis of
each category of the assets held by the REMIC during such calendar quarter. The
REMIC Administrator will report those determinations to certificateholders in
the manner and at the times required by applicable Treasury regulations.
The assets of the REMIC will include, in addition to mortgage loans,
payments on mortgage loans held pending distribution on the REMIC Certificates
and any property acquired by foreclosure held pending sale, and may include
amounts in reserve accounts. It is unclear whether property acquired by
foreclosure held pending sale, and amounts in reserve accounts would be
considered to be part of the mortgage loans, or whether those assets, to the
extent not invested in assets described in the foregoing sections of the Code,
otherwise would receive the same treatment as the mortgage loans for purposes of
all of the foregoing sections of the Code. In addition, in some instances
mortgage loans may not be treated entirely as assets described in the foregoing
sections of the Code. If so, we will describe in the related prospectus
supplement the mortgage loans that may not be so treated. Treasury regulations
do provide, however, that cash received from payments on mortgage loans held
pending distribution is considered part of the mortgage loans for purposes of
Section 856(c)(4)(A) of the Code.
To the extent an offered certificate represents ownership of an
interest in any mortgage loan that is secured in part by the related borrower's
interest in an account containing any holdback of loan proceeds, a portion of
the certificate may not represent ownership of assets described in Section
7701(a)(19)(C) of the Code and "real estate assets" under Section 856(c)(4)(A)
of the Code. Also the interest on the certificate may not constitute "interest
on obligations secured by mortgages on real property" within the meaning of
Section 856(c)(3)(B) of the Code.
Finally, holders of REMIC Certificates should be aware that:
o REMIC Certificates held by a regulated investment company will not
constitute "government securities" within the meaning of Code Section
851(b)(3)(A)(i); and
o REMIC Certificates held by a real estate investment trust will not
constitute "Government Securities" within the meaning of Code Section
856(c)(4)(A).
REMIC certificates held by certain financial institutions will
constitute an "evidence of indebtedness" within the meaning of Code Section
582(c)(i).
TIERED REMIC STRUCTURES
For certain series of REMIC Certificates, two or more separate
elections may be made to treat designated portions of the related trust as
separate REMICs ("TIERED REMICS") for federal income tax purposes. As to each
such series of REMIC Certificates, assuming compliance with all provisions of
the related Governing Document, the Tiered REMICs will each qualify as a REMIC,
and the REMIC Certificates issued by the Tiered REMICs will be considered
"regular interests" or the sole class of "residual interests" to evidence
ownership of REMIC Regular Certificates or REMIC Residual Certificates in the
related REMIC within the meaning of the Code.
Solely for purposes of determining whether the REMIC Certificates will
be "real estate assets" within the meaning of Section 856(c)(5)(B) of the Code,
and "loans secured by an interest in real property" under Section 7701(a)(19)(C)
of the Code, and whether the income on such certificates is interest described
in Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one
REMIC.
TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC or its assets.
Unless otherwise provided herein, interest on the REMIC Regular Certificates
will be taxed as ordinary income to the holders of such Certificates using the
accrual method of accounting, regardless of the certificateholder's normal
methods of accounting.
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ORIGINAL ISSUE DISCOUNT
Certain REMIC Regular Certificates may be issued with "original issue
discount" within the meaning of Section 1273(a) of the Code. Any holders of
REMIC Regular Certificates issued with original issue discount generally will be
required to include original issue discount in income as it accrues, in
accordance with the "constant yield" method described below, in advance of the
receipt of the cash attributable to such income. In addition, Section 1272(a)(6)
of the Code provides special rules applicable to REMIC Regular Certificates and
certain other debt instruments issued with original issue discount. Regulations
have not been issued under that section. Further, the application of the OID
Regulations to the REMIC Regular Certificates remains unclear in other respects
because the OID Regulations either do not address, or are subject to varying
interpretation with regard to, several relevant issues.
The Code requires that a reasonable prepayment assumption be used with
respect to mortgage loans held by a REMIC in computing the accrual of original
issue discount on REMIC Regular Certificates issued by that REMIC, and that
adjustments be made in the amount and rate of accrual of such discount to
reflect differences between the actual prepayment rate and the prepayment
assumption. The prepayment assumption is to be determined in a manner prescribed
in Treasury regulations that have not yet been issued. The Conference Committee
Report accompanying the Tax Reform Act of 1986 (the "COMMITTEE REPORT")
indicates that Congress intended that the regulations will provide that the
prepayment assumption used with respect to a REMIC Regular Certificate will be
the same as that used in pricing the initial offering of such REMIC Regular
Certificate. The prepayment assumption used in reporting original issue discount
for each series of REMIC Regular Certificates will be consistent with this
standard and will be disclosed in the related prospectus supplement. However,
neither we nor any other person will make any representation that the mortgage
loans will in fact prepay at a rate conforming to the prepayment assumption or
at any other rate or that the prepayment assumption will not be challenged by
the IRS on audit.
The original issue discount, if any, on a REMIC Regular Certificate
will be the excess of its stated redemption price at maturity over its issue
price.
The issue price of a particular class of REMIC Regular Certificates
will be the first cash price at which a substantial amount of REMIC Regular
Certificates of that class is sold to the public (excluding sales to bond
houses, brokers and underwriters). If less than a substantial amount of a
particular class of REMIC Regular Certificates is sold for cash on or prior to
the related date of initial issuance, the issue price for such class will be its
fair market value on the related issue date. The issue price of a REMIC Regular
Certificate also includes the amount paid by an initial certificateholder for
accrued interest that relates to a period prior to the issue date of the REMIC
Regular Certificate.
Under the OID Regulations, the stated redemption price of a REMIC
Regular Certificate is equal to the total of all payments to be made on such
certificate other than "qualified stated interest". "Qualified stated interest"
is interest that is unconditionally payable at least annually during the entire
term of the instrument, at:
o a "single fixed rate";
o a "qualified floating rate";
o an "objective rate";
o a combination of a single fixed rate and one or more "qualified floating
rates" or one "qualified inverse floating rate"; or
o a combination of "qualified floating rates" that can reasonably be expected
to have approximately the same values throughout the term of the
instrument.
In the case of REMIC Regular Certificates bearing adjustable interest
rates, the determination of the total amount of original issue discount and the
timing of the inclusion thereof will vary according to the characteristics of
such REMIC Regular Certificates. If the original issue discount rules apply to
such certificates, we will describe in the related prospectus supplement the
manner in which these rules will be applied with respect to those certificates
in preparing information returns to the certificateholders and the IRS.
Certain classes of the REMIC Regular Certificates may provide for the
first interest payment with respect to those certificates to be made more than
one month after the date of issuance, a period which is longer than the
subsequent monthly intervals between interest payments. Assuming the "accrual
period" (as defined below) for original issue discount is each monthly period
that ends on a payment date, in some cases, as a consequence of this "long first
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accrual period", some or all interest payments may be required to be included in
the stated redemption price of the REMIC Regular Certificate and accounted for
as original issue discount. Because interest on REMIC Regular Certificates must
in any event be accounted for under an accrual method, applying this analysis
would result in only a slight difference in the timing of the inclusion in
income of the yield on the REMIC Regular Certificates.
In addition, if the accrued interest to be paid on the first payment
date is computed with respect to a period that begins prior to the related issue
date, a portion of the purchase price paid for a REMIC Regular Certificate will
reflect such accrued interest. In such cases, information returns provided to
the certificateholders and the IRS will be based on the position that the
portion of the purchase price paid for the interest accrued with respect to
periods prior to the related issue date is treated as part of the overall cost
of that REMIC Regular Certificate, and not as a separate asset the cost of which
is recovered entirely out of interest received on the next payment date, and
that portion of the interest paid on the first payment date in excess of
interest accrued for a number of days corresponding to the number of days from
the related issue date to the first payment date should be included in the
stated redemption price of that REMIC Regular Certificate. However, the OID
Regulations state that all or some portion of such accrued interest may be
treated as a separate asset the cost of which is recovered entirely out of
interest paid on the first payment date. It is unclear how an election to do so
would be made under the OID Regulations and whether that election could be made
unilaterally by a certificateholder.
Notwithstanding the general definition, original issue discount on a
REMIC Regular Certificate will be considered zero if it is less than a de
minimis amount determined under the Code. Original issue discount on a REMIC
Regular Certificate will be considered to be de minimis if it is less than 0.25%
of the stated redemption price of the REMIC Regular Certificate multiplied by
its weighted average maturity. For this purpose, the weighted average maturity
of the REMIC Regular Certificate is computed as the sum of the amounts
determined, as to each payment included in the stated redemption price of such
REMIC Regular Certificate, by multiplying:
o the number of complete years, rounding down for partial years, from the
issue date until such payment is expected to be made, presumably taking
into account the relevant prepayment assumption, by
o a fraction, the numerator of which is the amount of the payment, and the
denominator of which is the stated redemption price at maturity of such
REMIC Regular Certificate.
Under the OID Regulations, original issue discount of only a de minimis
amount, other than de minimis original issue discount attributable to a
so-called "teaser" interest rate or an initial interest holiday, will be
included in income as each payment of stated principal is made, based on the
product of:
o the total amount of such de minimis original issue discount; and
o a fraction, the numerator of which is the amount of such principal payment
and the denominator of which is the outstanding stated principal amount of
the REMIC Regular Certificate.
The OID Regulations also would permit a certificateholder to elect to
accrue de minimis original issue discount into income currently based on a
constant yield method. See "--Taxation of Owners of REMIC Regular
Certificates--Market Discount" below for a description of this election under
the OID Regulations.
If original issue discount on a REMIC Regular Certificate is in excess
of a de minimis amount, the holder of that certificate must include in ordinary
gross income the sum of the "daily portions" of original issue discount for each
day during its taxable year on which it held the REMIC Regular Certificate,
including the purchase date but excluding the disposition date. In the case of
an original holder of a REMIC Regular Certificate, the daily portions of
original issue discount will be determined as follows.
As to each "accrual period", a calculation will be made of the portion
of the original issue discount that accrued during such accrual period. Unless
we state otherwise in the related prospectus supplement, each accrual period
will begin on a date that corresponds to a payment date, or in the case of the
first period, begins on the issue date, and ends on the day preceding the
immediately following payment date. The portion of original issue discount that
accrues in any accrual period will equal the excess, if any, of:
o the sum of:
(A) the present value, as of the end of the accrual period, of all of the
distributions
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remaining to be made on the REMIC Regular Certificate, if any,
in future periods; and
(B) the distributions made on such REMIC Regular Certificate during the
accrual period of amounts included in the stated redemption price,
over the adjusted issue price of such REMIC Regular Certificate at the
beginning of the accrual period.
The present value of the remaining distributions referred to in the
preceding sentence will be calculated:
o assuming that distributions on the REMIC Regular Certificate will be
received in future periods based on the mortgage loans being prepaid at a
rate equal to the applicable prepayment assumption;
o using a discount rate equal to the original yield to maturity of the
certificate; and
o taking into account events, including actual prepayments, that have
occurred before the close of the accrual period.
For these purposes, the original yield to maturity of the certificate
will be calculated based on its issue price and assuming that distributions on
the certificate will be made in all accrual periods based on the mortgage loans
being prepaid at a rate equal to the applicable prepayment assumption. The
adjusted issue price of a REMIC Regular Certificate at the beginning of any
accrual period will equal the issue price of the certificate, increased by the
total amount of original issue discount that accrued with respect to the
certificate in prior accrual periods, and reduced by the amount of any
distributions made on the certificate in prior accrual periods other than
amounts of qualified stated interest. The original issue discount accruing
during any accrual period, computed as described above, will be allocated
ratably to each day during the accrual period to determine the daily portion of
original issue discount for such day. Although original issue discount will be
reported to certificateholders based on the applicable prepayment assumption,
there is no assurance that the mortgage loans will be prepaid at that rate and
no representation is made to the certificateholders that mortgage loans will be
prepaid at that rate or at any other rate.
A subsequent purchaser of a REMIC Regular Certificate that purchases
the certificate at a cost, excluding any portion of that cost attributable to
accrued qualified stated interest, less than its remaining stated redemption
price will also be required to include in gross income the daily portions of any
original issue discount with respect to the certificate. However, each daily
portion will be reduced, if that cost is in excess of its "adjusted issue
price", in proportion to the ratio such excess bears to the total original issue
discount remaining to be accrued on the REMIC Regular Certificate. The adjusted
issue price of a REMIC Regular Certificate on any given day between payment
dates equals the sum of:
o the adjusted issue price, or, in the case of the first accrual period, the
issue price, of that certificate at the beginning of the accrual period
which includes such day; plus
o the daily portions of original issue discount for all days during the
accrual period prior to such day.
A holder who pays an acquisition premium instead may elect to accrue
original issue discount by treating the purchase as a purchase at original
issue.
If the foregoing method for computing original issue discount results
in a negative amount of original issue discount as to any accrual period with
respect to a REMIC Regular Certificate, the amount of original issue discount
allocable to that accrual period will be zero. That is, no current deduction of
the negative amount will be allowed to the holder of the certificate. The holder
will instead only be permitted to offset the negative amount against future
positive original issue discount, if any, attributable to that certificate.
Although not free from doubt, it is possible that a certificateholder may be
permitted to deduct a loss to the extent his or her basis in the certificate
exceeds the maximum amount of payments the certificateholder could ever receive
with respect to the certificate. However, any such loss may be a capital loss,
which is limited in its deductibility. The foregoing considerations are
particularly relevant to Stripped Interest Certificates, which can have negative
yields under certain circumstances that are not default related. A "STRIPPED
INTEREST CERTIFICATE" is a certificate that entitles the holder to payment of
interest, with disproportionate, little or no payments of principal.
MARKET DISCOUNT
A certificateholder that purchases a REMIC Regular Certificate at a
market discount, other than a de minimis amount, in the case of a REMIC Regular
Certificate issued without original issue discount, at a purchase price less
than its remaining stated principal
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amount, or in the case of a REMIC Regular Certificate issued with original issue
discount, at a purchase price less than its adjusted issue price, will recognize
gain upon receipt of each distribution representing some or all of the stated
redemption price. In particular, under Section 1276 of the Code such a
certificateholder generally must allocate the portion of each distribution
representing some or all of the stated redemption price first to accrued market
discount not previously included in income, and to recognize ordinary income to
that extent. A certificateholder may elect to include market discount in income
currently as it accrues rather than including it on a deferred basis in
accordance with the foregoing. If made, this election will apply to all market
discount bonds acquired by the certificateholder on or after the first day of
the first taxable year to which the election applies.
The OID Regulations also permit a certificateholder to elect to accrue
all interest and discount, including de minimis market or original issue
discount, in income as interest, and to amortize premium, based on a constant
yield method. If a certificateholder makes this election with respect to a REMIC
Regular Certificate with market discount, the certificateholder would be deemed
to have made an election to include currently market discount in income with
respect to all other debt instruments having market discount that the
certificateholder acquires during the taxable year of the election or
thereafter, and possibly previously acquired instruments. Similarly, a
certificateholder that made this election for a certificate that is acquired at
a premium would be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that the
certificateholder owns or acquires. See "--Taxation of Owners of REMIC Regular
Certificates--Premium" below. Each of the elections in this and the preceding
paragraph to accrue interest, discount and premium with respect to a certificate
on a constant yield method or as interest would be irrevocable except with the
approval of the IRS.
However, market discount with respect to a REMIC Regular Certificate
will be considered to be zero for purposes of Section 1276 of the Code if the
market discount is less than 0.25% of the remaining stated redemption price of
that REMIC Regular Certificate multiplied by the number of complete years to
maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations. It is likely that the IRS would apply the same rule with respect to
market discount, presumably taking into account the applicable prepayment
assumption. If market discount is treated as de minimis under this rule, it
appears that the actual discount would be treated in a manner similar to
original issue discount of a de minimis amount. See "--Taxation of Owners of
REMIC Regular Certificates--Original Issue Discount" above. Such treatment would
result in discount being included in income at a slower rate than discount would
be required to be included in income using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than one
installment. The Treasury Department has not yet issued treasury regulations
implementing the market discount rules; therefore, you should consult your own
tax advisors regarding the application of these rules and the advisability of
making any of the elections allowed under Code Sections 1276 through 1278. Until
the Treasury Department issues regulations, certain rules described in the
Committee Report apply. The Committee Report indicates that in each accrual
period market discount on REMIC Regular Certificates should accrue, at the
certificateholder's option:
o on the basis of a constant yield method;
o in the case of a REMIC Regular Certificate issued without original issue
discount, in an amount that bears the same ratio to the total remaining
market discount as the stated interest paid in the accrual period bears to
the total amount of stated interest remaining to be paid on the REMIC
Regular Certificate as of the beginning of the accrual period; or
o in the case of a REMIC Regular Certificate issued with original issue
discount, in an amount that bears the same ratio to the total remaining
market discount as the original issue discount accrued in the accrual
period bears to the total original issue discount remaining on the REMIC
Regular Certificate at the beginning of the accrual period.
The prepayment assumption used in calculating the accrual of original
issue discount is also used in calculating the accrual of market discount. To
the extent that REMIC Regular Certificates provide for monthly or other periodic
distributions throughout their term, the effect of these rules may be to require
market discount to be
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includible in income at a rate that is not significantly slower than the rate at
which that discount would accrue if it were original issue discount. Moreover,
in any event a holder of a REMIC Regular Certificate generally will be required
to treat a portion of any gain on the sale or exchange of that certificate as
ordinary income to the extent of the market discount accrued to the date of
disposition under one of the foregoing methods, less any accrued market discount
previously reported as ordinary income.
Further, under Section 1277 of the Code a holder of a REMIC Regular
Certificate may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a REMIC Regular Certificate purchased with market discount.
For these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during that taxable year and is, in general, allowed as a deduction not later
than the year in which the market discount is includible in income. If a holder,
however, has elected to include market discount in income currently as it
accrues, the interest deferral rule described above would not apply.
PREMIUM
A REMIC Regular Certificate purchased at a cost that is greater than
its remaining stated redemption price at maturity will be considered to be
purchased at a premium. For the purposes of the preceding sentence, any portion
of that cost attributable to accrued qualified stated interest at maturity is
excluded. The holder of such a REMIC Regular Certificate may elect under Section
171 of the Code to amortize this premium under the constant yield method over
the life of the certificate. If a holder elects to amortize the premium, that
premium would be amortized on a constant yield method and would be applied as an
offset against qualified stated interest (and not as a separate deduction item).
If made, such an election will apply to all debt instruments having amortizable
bond premium that the holder owns or subsequently acquires. The OID Regulations
also permit certificateholders to elect to include all interest, discount and
premium in income based on a constant yield method, further treating the
certificateholder as having made the election to amortize premium generally. See
"--Taxation of Owners of REMIC Regular Certificates--Market Discount" above. The
Committee report states that the same rules that apply to accrual of market
discount will also apply in amortizing bond premium under Section 171 of the
Code. These rules will require use of a Prepayment Assumption in accruing market
discount with respect to REMIC Regular Certificates without regard to whether
those certificates have original issue discount.
The Treasury Department issued final Treasury regulations in December
1997 which address the amortization of bond premiums (the "PREMIUM AMORTIZATION
REGULATIONS"). The preamble to the Premium Amortization Regulations indicate
that they do not apply to Regular Interests in a REMIC or any pool of debt
instruments the yield on which may be affected by prepayments. The Premium
Amortization Regulations describe the yield method of amortizing premium and
provide that a bond holder may offset the premium against corresponding interest
income only as that income is taken into account under the bond holder's method
of accounting. For instruments that may be called or prepaid prior to maturity,
a bond holder will be deemed to exercise its option and an issuer will be deemed
to exercise its redemption right in a manner that maximizes the holder's yield.
A holder of a debt instrument may elect to amortize bond premium under the
Premium Amortization Regulations for the taxable year containing the effective
date, with the election applying to all the holder's debt instruments held on
the first day of the taxable year. Because the Premium Amortization Regulations
are specifically not applicable to Regular Certificates purchasers who pay a
premium for their Regular Certificates should consult their tax advisors
regarding any election to amortize premium and the method to be employed.
REALIZED LOSSES
Under Section 166 of the Code, both corporate holders of the REMIC
Regular Certificates and noncorporate holders of the REMIC Regular Certificates
that acquire the certificates in connection with a trade or business should be
allowed to deduct, as ordinary losses, any losses sustained during a taxable
year in which their certificates become wholly or partially worthless as the
result of one or more realized losses on the mortgage loans. However, it appears
that a noncorporate holder that does not acquire a REMIC Regular Certificate in
connection with a trade or business will not be entitled to deduct a loss under
Section 166 of the Code until that holder's certificate becomes wholly worthless
(that is, until its principal balance has been reduced to zero), and that the
loss will be characterized as a short-term capital loss.
Each holder of a REMIC Regular Certificate will be required to accrue
interest and original issue
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discount with respect to that certificate, without giving effect to any
reductions in distributions attributable to defaults or delinquencies on the
related mortgage loans, until it can be established that any such reduction
ultimately will not be recoverable. As a result, the amount of taxable income
reported in any period by the holder of a REMIC Regular Certificate could exceed
the amount of economic income actually realized by the holder in that period.
Although the holder of a REMIC Regular Certificate eventually will recognize a
loss or reduction in income attributable to previously accrued and included
income that, as the result of a realized loss, ultimately will not be realized,
the law is unclear with respect to the timing and character of that loss or
reduction in income.
TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
GENERAL
Although a REMIC is a separate entity for federal income tax purposes,
a REMIC generally is not subject to entity-level taxation, except with regard to
income from prohibited transactions and certain other transactions. See
"-Prohibited Transactions Tax and Other Taxes" below. Rather, the taxable income
or net loss of a REMIC is generally taken into account by the holder of the
REMIC Residual Certificates. Accordingly, the REMIC Residual Certificates will
be subject to tax rules that differ significantly from those that would apply if
the REMIC Residual Certificates were treated for federal income tax purposes as
direct ownership interests in the mortgage loans or as debt instruments issued
by the REMIC.
A holder of a REMIC Residual Certificate generally will be required to
report its daily portion of the taxable income or, subject to the limitations
noted in this discussion, the net loss of the REMIC for each day during a
calendar quarter that such holder owned such REMIC Residual Certificate. For
this purpose, the taxable income or net loss of the REMIC will be allocated to
each day in the calendar quarter ratably using a "30 days per month/90 days per
quarter/360 days per year" convention unless otherwise disclosed in the related
prospectus supplement. The daily amounts so allocated will then be allocated
among the REMIC Residual Certificateholders in proportion to their respective
ownership interests on that day. Any amount included in the gross income or
allowed as a loss of any REMIC Residual Certificateholder by virtue of this
paragraph will be treated as ordinary income or loss. Ordinary income derived
from the REMIC Residual Certificates will be "portfolio income" for taxpayers
subject to the Code Section 469 limitation or the deductibility of "passive
losses." The taxable income of the REMIC will be determined under the rules
described below in "--Taxable Income of the REMIC" and will be taxable to the
REMIC Residual Certificateholders without regard to the timing or amount of cash
distributions by the REMIC until the REMIC's termination.
A holder of a REMIC Residual Certificate that purchased the certificate
from a prior holder also will be required to report on its federal income tax
return amounts representing its daily share of the taxable income or net loss of
the REMIC for each day that it holds that REMIC Residual Certificate. Those
daily amounts generally will equal the amounts of taxable income or net loss
determined as described above. The Committee Report indicates that certain
modifications of the general rules may be made, by regulations, legislation or
otherwise to reduce or increase the income of a REMIC Residual Certificateholder
that purchased that REMIC Residual Certificate from a prior holder of that
certificate at a price greater than (or less than) the adjusted basis (as
defined below) such REMIC Residual Certificate would have had in the hands of an
original holder of the certificate. The REMIC Regulations, however, do not
provide for any such modifications.
Any payments received by a holder of a REMIC Residual Certificate from
the seller of that certificate in connection with the acquisition of that REMIC
Residual Certificate will be taken into account in determining the income of
that holder for federal income tax purposes. Although it appears likely that any
such payment would be includible in income immediately upon its receipt, the IRS
might assert that the payment should be included in income over time according
to an amortization schedule or according to some other method. Because of the
uncertainty concerning the treatment of these payments, it is recommended that
holders of REMIC Residual Certificates consult their tax advisors concerning the
treatment of these payments for income tax purposes.
The amount of income REMIC Residual Certificateholders must report, or
the tax liability associated with that income, may exceed the amount of cash
distributions received from the REMIC for the corresponding period.
Consequently, REMIC Residual Certificateholders should have other sources of
funds sufficient to pay any federal income taxes
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due as a result of their ownership of REMIC Residual Certificates or unrelated
deductions against which income may be offset, subject to the rules relating to
"excess inclusions", residual interests without "significant value" and
"non-economic" residual interests discussed below. The fact that the tax
liability associated with the income allocated to REMIC Residual
Certificateholders may exceed the cash distributions received by those REMIC
Residual Certificateholders for the corresponding period may significantly
adversely affect those REMIC Residual Certificateholders' after-tax rate of
return. This disparity between income and distributions may not be offset by
corresponding losses or reductions of income attributable to the REMIC Residual
Certificateholder until subsequent tax years and, then, may not be completely
offset due to changes in the Code, tax rates or character of the income or loss.
REMIC Residual Certificates may in some instances have negative "value". See
"Risk Factors--Residual Interests in a `Real Estate Mortgage Investment Conduit'
Have Adverse Tax Consequences".
TAXABLE INCOME OF THE REMIC
The taxable income of the REMIC will equal:
o the income from the mortgage loans and other assets of the REMIC; plus
o any cancellation of indebtedness income due to the allocation of realized
losses to REMIC Regular Certificates; less
o the sum of:
1. the deductions allowed to the REMIC for interest, including original
issue discount;
2. stated interest for Regular Certificates;
3. amortization of any premium with respect to mortgage loans; and
4. servicing fees and other expenses (except as otherwise stated in this
prospectus).
For purposes of determining its taxable income, the REMIC will have an
initial total basis in its assets equal to the sum of the issue prices of all
REMIC Certificates, or, if a class of REMIC Certificates is not sold initially,
their fair market values. Such total basis will be allocated among the mortgage
loans and the other assets of the REMIC in proportion to their respective fair
market values.
The issue price of any REMIC Certificates offered by this prospectus
will be determined in the manner described above under "-Taxation of Owners of
REMIC Regular Certificates-Original Issue Discount". The issue price of a REMIC
Certificate received in exchange for an interest in the mortgage loans or other
property will equal the fair market value of those interests in the mortgage
loans or other property. Accordingly, if one or more classes of REMIC
Certificates are retained initially rather than sold, the REMIC Administrator
may be required to estimate the fair market value of those interests in order to
determine the basis of the REMIC in the mortgage loans and other property held
by the REMIC.
Subject to possible application of the de minimis rules, the method of
accrual by the REMIC of original issue discount income and market discount
income with respect to mortgage loans that it holds will be equivalent to the
method for accruing original issue discount income for holders of REMIC Regular
Certificates, that is, under the constant yield method taking into account the
applicable prepayment assumption. However, a REMIC that acquires loans at a
market discount must include such market discount in income currently, as it
accrues, on a constant yield basis. See "--Taxation of Owners of REMIC Regular
Certificates" above, which describes a method for accruing this discount income
that is analogous to that required to be used by a REMIC for mortgage loans with
market discount that it holds.
A mortgage loan will be deemed to have been acquired with discount (or
premium) to the extent that the REMIC's basis in the mortgage loan, determined
as described in the preceding paragraph, is less than (or greater than) its
stated redemption price. Any such discount will be includible in the income of
the REMIC as it accrues, in advance of receipt of the cash attributable to that
income, under a method similar to the method described above for accruing
original issue discount on the REMIC Regular Certificates. It is anticipated
that each REMIC will elect under Section 171 of the Code to amortize any premium
on the mortgage loans. Premium on any mortgage loan to which that election
applies may be amortized under a constant yield method, presumably taking into
account the applicable prepayment assumption.
A REMIC will be allowed deductions for interest, including original
issue discount, on the REMIC Regular Certificates equal to the deductions that
would be allowed if the REMIC Regular Certificates were indebtedness of the
REMIC. Original issue discount will be considered to accrue for this purpose as
described above under "-Taxation
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of Owners of REMIC Regular Certificates-Original Issue Discount", except that
the de minimis rule and the adjustments for subsequent holders of REMIC Regular
Certificates described in that section will not apply.
If a class of REMIC Regular Certificates is issued at a price in excess
of the stated redemption price of that class (such excess, "ISSUE PREMIUM"), the
net amount of interest deductions that are allowed the REMIC in each taxable
year with respect to the REMIC Regular Certificates of that class will be
reduced by an amount equal to the portion of the Issue Premium that is
considered to be amortized or repaid in that year. Although the matter is not
entirely certain, it is likely that Issue Premium would be amortized under a
constant yield method in a manner analogous to the method of accruing original
issue discount described above under "-Taxation of Owners of REMIC Regular
Certificates-Original Issue Discount".
As a general rule, a REMIC will determine its taxable income in the
same manner as if it were an individual having the calendar year as its taxable
year and using the accrual method of accounting. However, the REMIC may not take
into account any item of income, gain, loss or deduction allocable to a
prohibited transaction. See "-Prohibited Transactions Tax and Other Taxes"
below. Further, the limitation on miscellaneous itemized deductions imposed on
individuals by Section 67 of the Code will not be applied at the REMIC level. As
a result, the REMIC will be allowed deductions for servicing, administrative and
other non-interest expenses in determining its taxable income. All these
expenses will be allocated as a separate item to the holders of REMIC
Certificates, subject to the limitation of Section 67 of the Code. See
"--Pass-Through of Non-Interest Expenses of the REMIC as Itemized Deductions"
below. If the deductions allowed to the REMIC exceed its gross income for a
calendar quarter, that excess will be the net loss for the REMIC for that
calendar quarter.
BASIS RULES, NET LOSSES AND DISTRIBUTIONS
The adjusted basis of a REMIC Residual Certificate will be equal to the
amount paid for that REMIC Residual Certificate, increased by amounts included
in the income of the holder of a REMIC Residual Certificate and decreased, but
not below zero, by distributions made, and by net losses allocated, to that
holder.
A holder of a REMIC Residual Certificate may not take into account any
net loss for any calendar quarter to the extent the net loss exceeds the
holder's adjusted basis in its REMIC Residual Certificate as of the close of
such calendar quarter, determined without regard to that net loss. Any loss that
is not currently deductible by reason of this limitation may be carried forward
indefinitely to future calendar quarters and, subject to the same limitation,
may be used only to offset income from the REMIC Residual Certificate. The
ability of the holders of REMIC Residual Certificates to deduct net losses may
be subject to additional limitations under the Code. We recommend that you
consult your tax advisors as to these limitations.
Any distribution on a REMIC Residual Certificate will be treated as a
nontaxable return of capital to the extent it does not exceed the holder's
adjusted basis in the REMIC Residual Certificate. To the extent a distribution
on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated
as gain from the sale of that REMIC Residual Certificate. Holders of certain
REMIC Residual Certificates may be entitled to distributions early in the term
of the related REMIC under circumstances in which their bases in those REMIC
Residual Certificates will not be sufficiently large that such distributions
will be treated as nontaxable returns of capital. Their bases in those REMIC
Residual Certificates will initially equal the amount paid for the REMIC
Residual Certificates and will be increased by their allocable shares of taxable
income of the REMIC. However, such bases increases may not occur until the end
of the calendar quarter, or perhaps the end of the calendar year, with respect
to which such REMIC taxable income is allocated to the REMIC Residual
Certificateholders. To the extent such REMIC Residual Certificateholders'
initial bases are less than the distributions to such REMIC Residual
Certificateholders (and increases in such initial bases either occur after such
distributions or, together with their initial bases, are less than the amount of
such distributions), gain will be recognized to such REMIC Residual
Certificateholders on such distributions and will be treated as gain from the
sale of their REMIC Residual Certificates.
The effect of these rules is that a holder of a REMIC Residual
Certificate may not amortize its basis in a REMIC Residual Certificate, but may
only recover its basis through distributions, through the deduction of any net
losses of the REMIC or upon the sale of its REMIC Residual Certificate. See
"-Sales of REMIC Certificates" below. For a
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discussion of possible modifications of these rules that may require adjustments
to income of a holder of a REMIC Residual Certificate other than an original
holder in order to reflect any difference between the cost of such REMIC
Residual Certificate to that holder and the adjusted basis such REMIC Residual
Certificate would have in the hands of an original holder see "--Taxation of
Owners of REMIC Residual Certificates--General" above.
EXCESS INCLUSIONS
Any "excess inclusions" with respect to a REMIC Residual Certificate
will be subject to federal income tax in all events. For holders of REMIC
Residual Certificates, excess inclusions:
o will not be permitted to be offset by deductions, losses or loss carryovers
from other activities;
o will be treated as "unrelated business taxable income" to an otherwise
tax-exempt organization; and
o will not be eligible for any rate reduction or exemption under any
applicable tax treaty with respect to the 30% United States withholding tax
imposed on distributions to REMIC Residual Certificateholders that are
foreign investors. See, however "-Foreign Investors in REMIC Certificates"
below.
Furthermore, for purposes of the alternative minimum tax:
o excess inclusions will not be permitted to be offset by the alternative tax
net operating loss deduction; and
o alternative minimum taxable income may not be less than the taxpayer's
excess inclusions.
This last rule has the effect of preventing non-refundable tax credits
from reducing the taxpayer's income tax to an amount lower than the alternative
minimum tax on excess inclusions.
In general, the "excess inclusions" with respect to a REMIC Residual
Certificate for any calendar quarter will be the excess, if any, of:
o the daily portions of REMIC taxable income allocable to that REMIC Residual
Certificate, over
o the sum of the "daily accruals" (as defined below) for each day during that
quarter that the REMIC Residual Certificate was held by the REMIC Residual
Certificateholder.
The daily accruals of a REMIC Residual Certificateholder will be
determined by allocating to each day during a calendar quarter its ratable
portion of the product of the "adjusted issue price" of the REMIC Residual
Certificate at the beginning of the calendar quarter and 120% of the "long-term
Federal rate" in effect on the issue date. For this purpose, the adjusted issue
price of a REMIC Residual Certificate as of the beginning of any calendar
quarter will be equal to:
o the issue price of the REMIC Residual Certificate;
o increased by the sum of the daily accruals for all prior quarters; and
o decreased, but not below zero, by any distributions made with respect to
that REMIC Residual Certificate before the beginning of that quarter.
The issue price of a REMIC Residual Certificate is the initial offering
price to the public, excluding bond houses and brokers, at which a substantial
amount of the REMIC Residual Certificates were sold. The "long-term Federal
rate" is an average of current yields on Treasury securities with a remaining
term of greater than nine years, computed and published monthly by the IRS.
Although it has not done so, the Treasury Department also has
authority to issue regulations that would treat the entire amount of income
accruing on a REMIC Residual Certificate as an excess inclusion if the REMIC
Residual Certificates are considered not to have "significant value".
The REMIC Regulations provide that in order to be treated as having
significant value, the REMIC Residual Certificates must have:
o a total issue price at least equal to 2% of the total issue prices of all
of the related REMIC's regular and residual interests; and
o the anticipated weighted average life of the REMIC Residual Certificates
must equal or exceed 20% of the anticipated weighted average life of the
REMIC, based on the Prepayment Assumption and on any required or permitted
clean up calls or required liquidation provided for in the REMIC's
organizational documents.
In the related prospectus supplement we will disclose whether offered
REMIC Residual Certificates may be considered to have "significant value" under
the REMIC Regulations. Any disclosure
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that a REMIC Residual Certificate will have "significant value" will be based
upon certain assumptions, and we will make no representation that a REMIC
Residual Certificate will have "significant value" for purposes of the
above-described rules.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the total excess inclusions with respect to those REMIC
Residual Certificates, reduced, but not below zero, by the real estate
investment trust taxable income, within the meaning of Section 857(b)(2) of the
Code, excluding any net capital gain, will be allocated among the shareholders
of that trust in proportion to the dividends received by those shareholders from
that trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Regulated investment companies, common trust funds and certain
cooperatives are subject to similar rules.
The Small Business Job Protection Act of 1996 has eliminated the
special rule permitting Section 593 institutions ("thrift institutions") to use
net operating losses and other allowable deductions to offset their excess
inclusion income from REMIC Residual Certificates that have "significant value"
within the meaning of the REMIC Regulations, effective for taxable years
beginning after December 31, 1995, except with respect to REMIC Residual
Certificates continuously held by a thrift institution since November 1, 1995.
NONECONOMIC REMIC RESIDUAL CERTIFICATES
Under the REMIC Regulations, transfers of "non-economic" REMIC Residual
Certificates will be disregarded for all federal income tax purposes if "a
significant purpose of the transfer was to enable the transferor to impede the
assessment or collection of tax". If a transfer is disregarded, the purported
transferor will continue to remain liable for any taxes due with respect to the
income on that "non-economic" REMIC Residual Certificate. The REMIC Regulations
provide that a REMIC Residual Certificate is non-economic unless, based on the
Prepayment Assumption and on any required or permitted clean up call or required
liquidation provided for in the REMIC's organizational documents:
1. the present value of the expected future distributions, discounted using
the "applicable Federal rate" for obligations whose term ends on the close
of the last quarter in which excess inclusions are expected to accrue with
respect to the REMIC Residual Certificate, which rate is computed and
published monthly by the IRS, on the REMIC Residual Certificate equals at
least the present value of the expected tax on the anticipated excess
inclusions; and
2. the transferor reasonably expects that the transferee will receive
distributions with respect to the REMIC Residual Certificate at or after
the time the taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes.
Accordingly, all transfers of REMIC Residual Certificates that may
constitute non-economic residual interests will be subject to certain
restrictions under the terms of the related Governing Document that are intended
to reduce the possibility of any such transfer being disregarded. These
restrictions will require each party to a transfer to provide an affidavit that
no purpose of the transfer is to impede the assessment or collection of tax,
including certain representations as to the financial condition of the
prospective transferee as well as the prospective transferee's acknowledgement
that it understands that it may incur tax liabilities in excess of any cash flow
generated by the REMIC Residual Interest. In addition, the transferor will also
be required to make a reasonable investigation to determine the transferee's
historic payment of its debts and ability to continue to pay its debts as they
come due in the future. Prior to purchasing a REMIC Residual Certificate,
prospective purchasers should consider the possibility that a purported transfer
of that REMIC Residual Certificate by such a purchaser to another purchaser at
some future date may be disregarded in accordance with the above-described rules
which would result in the retention of tax liability by the first purchaser.
We will disclose in the related prospectus supplement whether offered
REMIC Residual Certificates may be considered "non-economic" residual interests
under the REMIC Regulations. Any disclosure that a REMIC Residual Certificate
will not be considered "non-economic" will be based upon certain assumptions,
and we will make no representation that a REMIC Residual Certificate will not be
considered "non-economic" for purposes of the above-described rules. See
"-Foreign Investors in REMIC Certificates" below for additional restrictions
applicable to transfers of certain REMIC Residual Certificates to foreign
persons.
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MARK-TO-MARKET RULES
The IRS recently released regulations under Section 475 of the Code
(the "MARK-TO-MARKET REGULATIONS") relating to the requirement that a securities
dealer mark to market securities held for sale to customers. This mark-to-market
requirement applies to all securities owned by a dealer, except to the extent
that the dealer has specifically identified a security as held for investment.
The Mark-to-Market Regulations provide that for purposes of this mark-to-market
requirement, a REMIC Residual Certificate is not treated as a security for
purposes of Section 475 of the Code, and thus is not subject to the
mark-to-market rules. It is recommended that prospective purchasers of a REMIC
Residual Certificate consult their tax advisors regarding the Mark-to-Market
Regulations.
FOREIGN INVESTORS
The REMIC Regulations provide that the transfer of a REMIC Residual
Certificate that has a "tax avoidance potential" to a "foreign person" will be
disregarded for federal income tax purposes. This rule appears to apply to a
transferee who is not a U.S. Person (as defined below in "--Foreign Investors in
REMIC Certificates") unless the transferee's income in respect of the REMIC
Residual Certificate is effectively connected with the conduct of a United
States trade or business. A REMIC Residual Certificate is deemed to have a tax
avoidance potential unless, at the time of transfer, the transferor reasonably
expects that the REMIC will distribute to the transferee amounts that will equal
at least 30% of each excess inclusion, and that these amounts will be
distributed at or after the time the excess inclusion accrues and not later than
the end of the calendar year following the year of accrual. If the non-U.S.
Person transfers the REMIC Residual Certificate to a U.S. Person, the transfer
will be disregarded, and the foreign transferor will continue to be treated as
the owner, if the transfer has the effect of allowing the transferor to avoid
tax on accrued excess inclusions.
Any attempted transfer or pledge in violation of the transfer
restrictions will be absolutely null and void and will vest no rights in any
purported transferee. Investors in REMIC Residual Certificates are advised to
consult their own tax advisors with respect to transfers of the REMIC Residual
Certificates and, in addition, pass-through entities are advised to consult
their own tax advisors with respect to any tax that may be imposed on a
pass-through entity.
Unless we state otherwise in the related prospectus supplement,
transfers of REMIC Residual Certificates to investors that are not United States
Persons (as defined below in "-Foreign Investors in REMIC Certificates") will be
prohibited under the related Governing Document. If transfers of REMIC Residual
Certificates to investors that are not United States Persons are permitted
pursuant to the related Governing Document, we will describe in the related
prospectus supplement any additional restrictions applicable to transfers of
certain REMIC Residual Certificates to those persons.
PASS-THROUGH OF NON-INTEREST EXPENSES OF THE REMIC AS ITEMIZED DEDUCTIONS
A REMIC will generally allocate its fees and expenses to the holders of
the related REMIC Residual Certificates. Temporary Treasury regulations
indicate, however, that in the case of a REMIC that is similar to a single class
grantor trust, such fees and expenses and a matching amount of additional income
will be allocated among holders of the related REMIC Regular and Residual
Certificates on a daily basis in proportion to the relative amounts of income
accruing to each Certificateholder on that day. Unless we state otherwise in the
related prospectus supplement, such fees and expenses will be allocated to
holders of the related REMIC Residual Certificates in their entirety and not to
the holders of the related REMIC Regular Certificates.
A holder of a REMIC Residual Certificates or REMIC Regular
Certificates, who receives an allocation of fees and expenses in accordance with
the preceding discussion, and who is an individual, estate or trust, or a
"pass-through entity" beneficially owned by one or more individuals, estates or
trusts will:
o add an amount equal to that individual's, estate's or trust's share of
those fees and expenses to that holder's gross income; and
o treat that individual's, estate's or trust's share of those fees and
expenses as a miscellaneous itemized deduction allowable subject to the
limitation of Section 67 of the Code, which permits such deductions only to
the extent they, together with other miscellaneous itemized deductions of
the holder, exceed 2% of such taxpayer's adjusted gross income.
In addition, Section 68 of the Code provides that the amount of
itemized deductions otherwise allowable for an individual whose adjusted gross
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income exceeds a specified amount will be reduced by the lesser of:
o 3% of the excess of the individual's adjusted gross income over that
amount; and
o 80% of the amount of itemized deductions otherwise allowable for the
taxable year.
The amount of additional taxable income reportable by REMIC
Certificateholders that are subject to the limitations of either Section 67 or
Section 68 of the Code may be substantial. As a result, these certificateholders
may have total taxable income in excess of the total amount of cash received on
the certificates with respect to interest at the pass-through rate on such
certificates or discount thereon. Furthermore, in determining the alternative
minimum taxable income of a holder of a REMIC Certificate that is an individual,
estate or trust, or a "pass-through entity" beneficially owned by one or more
individuals, estates or trusts, no deduction will be allowed for that holder's
allocable portion of servicing fees and other miscellaneous itemized deductions
of the REMIC, even though an amount equal to the amount of these fees and other
deductions will be included in the holder's gross income. Accordingly, REMIC
Residual Certificates will generally not be appropriate investments for:
o individuals;
o estates or trusts; or
o pass-through entities beneficially owned by one or more individuals,
estates or trusts.
It is recommended that these prospective investors consult with their
tax advisors prior to making an investment in such certificates.
SALES OF REMIC CERTIFICATES
If a REMIC Certificate is sold, the selling certificateholder will
recognize gain or loss equal to the difference between the amount realized on
the sale and its adjusted basis in the REMIC Certificate. The adjusted basis of
a REMIC Regular Certificate generally will equal:
o the cost of the REMIC Regular Certificate to the certificateholder;
o increased by income reported by such certificateholder with respect to the
REMIC Regular Certificate (including original issue discount and market
discount income); and
o reduced (but not below zero) by distributions (other than qualified stated
interest) on that REMIC Regular Certificate received by that
certificateholder and by any amortized premium.
The adjusted basis of a REMIC Residual Certificate will be determined
as described above under "--Taxation of Owners of REMIC Residual
Certificates--Basis Rules, Net Losses and Distributions". Except as described
below, any gain or loss will be capital gain or loss, provided the REMIC
Certificate is held as a capital asset (generally, property held for investment)
within the meaning of Section 1221 of the Code. However, REMIC Certificates will
be "evidences of indebtedness" within the meaning of Section 582(c)(1) of the
Code, so that a bank or thrift institution's gain or loss recognized from the
sale of a REMIC Certificate to which this Section applies will be ordinary
income or loss. The Code as of the date of this prospectus provides for lower
rates as to long-term capital gains than those applicable to the short-term
capital gains and ordinary income realized or received by individuals. No such
rate differential exists for corporations. In addition, the distinction between
a capital gain or loss and ordinary income or loss remains relevant for other
purposes.
Gain from the sale of a REMIC Regular Certificate that might otherwise
be a capital gain will be treated as ordinary income to the extent of the gain
that does not exceed the excess, if any, of:
o the amount that would have been includible in the seller's income with
respect to such REMIC Regular Certificate assuming that income had accrued
on the certificate at a rate equal to 110% of the "applicable Federal rate"
(generally, a rate based on an average of current yields on Treasury
securities having a maturity comparable to that of the certificate based on
the application of the Prepayment Assumption to such certificate),
determined as of the date of purchase of the REMIC Regular Certificate;
over
o the amount of ordinary income actually includible in the seller's income
prior to the sale.
In addition, gain recognized on the sale of a REMIC Regular Certificate
by a seller who purchased the REMIC Regular Certificate at a market discount
will be taxable as ordinary income in an amount not exceeding the portion of
such discount that accrued during the period the REMIC Certificate was held by
that holder, reduced by any market discount included in income under the rules
described
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above under "--Taxation of Owners of REMIC Regular Certificates--Market
Discount" and "--Premium".
A portion of any gain from the sale of a REMIC Regular Certificate that
might otherwise be capital gain may be treated as ordinary income to the extent
that the certificate is held as part of a "conversion transaction" within the
meaning of Section 1258 of the Code. A conversion transaction generally is one
in which the taxpayer has taken two or more positions in the same or similar
property that reduce or eliminate market risk, if substantially all of the
taxpayer's return is attributable to the time value of the taxpayer's net
investment in such transaction. The amount of gain so realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate "applicable Federal rate" at the time the taxpayer
enters into the conversion transaction, subject to appropriate reduction for
prior inclusion of interest and other ordinary income items from the
transaction.
Finally, a non-corporate taxpayer may elect to have net capital gain
taxed at ordinary income rates rather than capital gains rates in order to
include the net capital gain in total net investment income for the taxable
year, for purposes of the rule that limits the deduction of interest on
indebtedness incurred to purchase or carry property held for investment to a
taxpayer's net investment income.
Except as may be provided in Treasury regulations yet to be issued, if
the seller of a REMIC Residual Certificate reacquires that REMIC Residual
Certificate, or acquires any other residual interest in a REMIC or any similar
interest in a "taxable mortgage pool" (as defined in Section 7701(i) of the
Code) during the period beginning six months before, and ending six months
after, the date of a sale, that sale will be subject to the "wash sale" rules of
Section 1091 of the Code. In that event, any loss realized by the REMIC Residual
Certificateholder on the sale will not be deductible, but instead will be added
to the REMIC Residual Certificateholder's adjusted basis in the newly-acquired
asset.
PROHIBITED TRANSACTIONS TAX AND OTHER TAXES
The Code imposes a tax on REMICs equal to 100% of the net income
derived from "prohibited transactions" (a "PROHIBITED TRANSACTIONS TAX"). In
general, subject to certain specified exceptions a prohibited transaction means:
o the disposition of a mortgage loan;
o the receipt of income from a source other than a mortgage loan or certain
other permitted investments;
o the receipt of compensation for services; or
o gain from the disposition of an asset purchased with the payments on the
mortgage loans for temporary investment pending distribution on the REMIC
Certificates.
It is not anticipated that any REMIC will engage in any prohibited
transactions as to which it would be subject to a material Prohibited
Transaction Tax.
In addition, certain contributions to a REMIC made after the day on
which the REMIC issues all of its interests could result in the imposition of a
tax on the REMIC equal to 100% of the value of the contributed property (a
"CONTRIBUTIONS TAX"). Each Governing Document will include provisions designed
to prevent the acceptance of any contributions that would be subject to this
tax.
REMICs also are subject to federal income tax at the highest corporate
rate on "net income from foreclosure property", determined by reference to the
rules applicable to real estate investment trusts. "Net income from foreclosure
property" generally means income from foreclosure property other than qualifying
rents and other qualifying income for a real estate investment trust. Under
certain circumstances, the special servicer may be authorized to conduct
activities with respect to a real property acquired by a trust that causes the
trust to incur this tax if doing so would, in the reasonable discretion of the
special servicer, maximize the net after-tax proceeds to certificateholders.
However, under no circumstance will the special servicer cause the acquired real
property to cease to be a "permitted investment" under Section 860G(a)(5) of the
Code.
Unless otherwise disclosed in the related prospectus supplement, it is
not anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
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Unless we state otherwise in the related prospectus supplement, and to
the extent permitted by then applicable laws, any Prohibited Transactions Tax,
Contributions Tax, tax on "net income from foreclosure property" or state or
local income or franchise tax that may be imposed on the REMIC will be borne by
the related REMIC Administrator, master servicer, special servicer, manager or
trustee, in any case out of its own funds, if the person has sufficient assets
to do so, and the tax arises out of a breach of that person's obligations under
the related Governing Document. Any such tax not borne by a REMIC Administrator,
master servicer, special servicer, manager or trustee would be charged against
the related trust resulting in a reduction in amounts payable to holders of the
related REMIC Certificates.
TAX AND RESTRICTIONS ON TRANSFERS OF REMIC
RESIDUAL CERTIFICATES TO CERTAIN ORGANIZATIONS
An entity will not qualify as a REMIC unless there are reasonable
arrangements designed to ensure that;
o residual interests in the entity are not held by disqualified
organizations; and
o information necessary for the application of the tax described in this
prospectus will be made available.
Restrictions on the transfer of REMIC Residual Certificates and certain
other provisions that are intended to meet this requirement will be included in
each Governing Document, and will be discussed in any prospectus supplement
relating to the offering of any REMIC Residual Certificate.
If a REMIC Residual Certificate is transferred to a "disqualified
organization" (as defined below), a tax would be imposed on the transfer of that
REMIC Residual Certificate in an amount (determined under the REMIC Regulations)
equal to the product of:
o the present value of the total anticipated excess inclusions with respect
to such REMIC Residual Certificate for periods after the transfer; and
o the highest marginal federal income tax rate applicable to corporations.
The present value will be calculated using a discount rate equal to the
"applicable Federal rate" for obligations whose term ends on the close of the
last quarter in which excess inclusions are expected to accrue with respect to
the REMIC Residual Certificate.
The anticipated excess inclusions must be determined as of the date
that the REMIC Residual Certificate is transferred and must be based on:
o events that have occurred up to the time of the transfer;
o the Prepayment Assumption; and
o any required or permitted clean up calls or required liquidation provided
for in the REMIC's organizational documents.
This tax generally would be imposed on the transferor of the REMIC
Residual Certificate. However, if the transfer is through an agent for a
disqualified organization, the tax would instead be imposed on the agent. A
transferor of a REMIC Residual Certificate would in no event be liable for this
tax if the transferee furnishes to the transferor an affidavit that the
transferee is not a disqualified organization and, as of the time of the
transfer, the transferor does not have actual knowledge that this affidavit is
false.
In addition, if a Disqualified Organization is the record holder of an
interest in a pass-through entity that owns a Residual Certificate, the
pass-through entity must pay tax equal to the product of (1) the amount of
excess inclusion income of the REMIC for that taxable year allocable to the
interest held by the Disqualified Organization; multiplied by (2) the highest
marginal federal income tax rate imposed on corporations by Code Section
11(b)(1).
A pass-through entity will not be subject to this tax for any period,
however, if each record holder of an interest in the pass-through entity
furnishes to the pass-through entity:
o the holder's social security number and a statement under penalties of
perjury that the social security number is that of the record holder; or
o a statement under penalties of perjury that the record holder is not a
disqualified organization.
For taxable years beginning on or after January 1, 1998, if an
"electing large partnership" holds a REMIC Residual Certificate, all interests
in the electing large partnership are treated as held by disqualified
organizations for purposes of the tax imposed upon a pass-through entity by
Section
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860E(c) of the Code. An exception to this tax, otherwise available to a
pass-through entity that is furnished certain affidavits by record holders of
interests in the entity and that does not know such affidavits are false, is not
available to an electing large partnership.
For these purposes, a "disqualified organization" means:
o the United States, any State or political subdivision thereof, any foreign
government, any international organization, or any agency or
instrumentality of the foregoing (but would not include an instrumentality
if all of its activities are subject to tax and, except for the Federal
Home Loan Mortgage Corporation, a majority of its board of directors is not
selected by any such governmental agency);
o any organization (other than certain farmers' cooperatives described in
Section 521 of the Code) that is exempt from federal income tax, unless it
is subject to the tax or "unrelated business taxable income" imposed by
Section 511 of the Code; or
o a rural electric or telephone cooperative.
For these purposes, a "pass-through entity" means any regulated
investment company, real estate investment trust, trust, partnership or certain
other entities described in Section 860E(e)(6) of the Code. An "electing large
partnership" means any partnership having more than 100 members during the
preceding tax year (other than certain service partnerships and commodity
pools), which elect to apply simplified reporting provisions under the Code. In
addition, a person holding an interest in a pass-through entity as a nominee for
another person will, with respect to that interest, be treated as a pass-through
entity.
LIQUIDATION AND TERMINATION
A REMIC will terminate after the payment date following the REMIC's
receipt of the final payment in respect of the mortgage loans or upon the
REMIC's sale of its assets following its adoption of a plan of complete
liquidation. If the REMIC adopts a plan of complete liquidation, within the
meaning of Code Section 860F(a)(4)(A)(i), which may be accomplished by
designating in the REMIC's final tax return a date on which such adoption is
deemed to occur, and sells all of its assets other than cash within a 90-day
period beginning on that date, the REMIC will not be subject to any Prohibited
Transaction Tax. The REMIC must credit or distribute in liquidation all of the
sale proceeds plus its cash, other than the amounts retained to meet claims, to
holders of Regular and REMIC Residual Certificates within the 90-day period. The
last distribution on a REMIC Regular Certificate will be treated as a payment in
retirement of a debt instrument. In the case of a REMIC Residual Certificate, if
the last distribution on the REMIC Residual Certificate is less than the REMIC
Residual Certificateholder's adjusted basis in that certificate, the REMIC
Residual Certificateholder should (but may not) be treated as realizing a
capital loss equal to the amount of this difference.
REPORTING AND OTHER ADMINISTRATIVE MATTERS
Solely for purposes of the administrative provisions of the Code, the
REMIC will be treated as a partnership and REMIC Residual Certificateholders
will be treated as partners. Unless otherwise stated in the related prospectus
supplement, the REMIC Administrator will file REMIC federal income tax returns
on behalf of the related REMIC, and will be designated as and will act as the
"tax matters person" with respect to the REMIC in all respects. Tax information
reports will be furnished quarterly to each REMIC Residual Certificateholder who
holds a REMIC Residual Certificate on any day in the prior calendar quarter as
discussed below.
As the tax matters person, the REMIC Administrator, subject to certain
notice requirements and various restrictions and limitations, generally will
have the authority to act on behalf of the REMIC and the holders of REMIC
Residual Certificates in connection with the administrative and judicial review
of items of income, deduction, gain or loss of the REMIC, as well as the REMIC's
classification. Holders of REMIC Residual Certificates generally will be
required to report these REMIC items consistently with their treatment on the
related REMIC's tax return and may in some circumstances be bound by a
settlement agreement between the REMIC Administrator, as tax matters person, and
the IRS concerning any of these REMIC items. Adjustments made to the REMIC's tax
return may require a holder of a REMIC Residual Certificate to make
corresponding adjustments on its return, and an audit of the REMIC's tax return,
or the adjustments resulting from such an audit, could result in an audit of the
return of a holder of a REMIC Residual Certificate.
No REMIC will be registered as a tax shelter pursuant to Section 6111
of the Code because it is not
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anticipated that any REMIC will have a net loss for any of the first five
taxable years of its existence. Any person that holds a REMIC Residual
Certificate as a nominee for another person may be required to furnish to the
related REMIC, in a manner to be provided in Treasury regulations, the name and
address of that person and other information.
Reporting of interest income, including any original issue discount,
with respect to REMIC Regular Certificates is required annually, and may be
required more frequently under Treasury regulations. These information reports
generally are required to be sent to individual holders of REMIC Regular
Interests and the IRS. Holders of REMIC Regular Certificates that are:
o corporations;
o trusts;
o securities dealers; and
o certain other non-individuals;
will be provided interest and original issue discount income information and the
information set forth in the following paragraph upon request in accordance with
the requirements of the applicable regulations. The information must be provided
by the later of 30 days after the end of the quarter for which the information
was requested, or two weeks after the receipt of the request. The REMIC must
also comply with rules requiring a privately placed REMIC Regular Certificate
issued with original issue discount to disclose on its face the amount of
original issue discount and the issue date, and requiring such information to be
reported to the IRS. Reporting with respect to REMIC Residual Certificates,
including:
o income;
o excess inclusions;
o investment expenses; and
o relevant information regarding qualification of the REMIC's assets;
will be made as required under the Treasury regulations, generally on a
quarterly basis.
As applicable, the REMIC Regular Certificate information reports will
include a statement of the adjusted issue price of the REMIC Regular Certificate
at the beginning of each accrual period. In addition, the reports will include
information required by regulations with respect to computing the accrual of any
market discount. Because exact computation of the accrual of market discount on
a constant yield method would require information relating to the holder's
purchase price that the REMIC may not have, these regulations only require that
information pertaining to the appropriate proportionate method of accruing
market discount be provided. See "--Taxation of Owners of REMIC Regular
Certificates--Market Discount".
Unless we state otherwise in the related prospectus supplement, the
REMIC Administrator will have the responsibility for complying with the
foregoing reporting rules.
BACKUP WITHHOLDING WITH RESPECT TO REMIC CERTIFICATES
Payments of interest and principal, as well as payments of proceeds
from the sale of REMIC Certificates, may be subject to the "backup withholding
tax" under Section 3406 of the Code at a rate of 31% if recipients of these
payments fail to furnish to the payor certain information, including their
taxpayer identification numbers, or otherwise fail to establish an exemption
from this tax. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against that recipient's federal income
tax. Furthermore, the IRS may impose certain penalties on a recipient of
payments that is required to supply information but does not do so in the proper
manner.
FOREIGN INVESTORS IN REMIC CERTIFICATES
Unless we stated otherwise in the related prospectus supplement, a
holder of a REMIC Regular Certificate that is not a "United States Person" (as
defined below) and is not subject to federal income tax as a result of any
direct or indirect connection to the United States in addition to its ownership
of a REMIC Regular Certificate generally will not be subject to United States
federal income or withholding tax in respect of a distribution on a REMIC
Regular Certificate if the holder complies to the extent necessary with certain
identification requirements. These requirements include delivery of a statement,
signed by the certificateholder under penalties of perjury, certifying that the
certificateholder is not a United State Person and providing the name and
address of the certificateholder. If a non-United States Person's REMIC Regular
Certificate is effectively connected with the conduct by the Certificateholder
of a trade or business within the United States, then the income realized on the
certificate will be subject to U.S. income tax at regular graduated income tax
rates.
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For these purposes, "United States Person" means:
o a citizen or resident of the United States;
o a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision of the
United States;
o an estate whose income from sources outside the United States is includible
in gross income for United States federal income tax purposes regardless of
its connection with the conduct of a trade or business within the United
States; or
o a trust as to which (1) a court in the United States is able to exercise
primary supervision over the administration of the trust and (2) one or
more United States Persons have the authority to control all substantial
decisions of the trust.
It is possible that the IRS may assert that the foregoing tax exemption
should not apply with respect to a REMIC Regular Certificate held by a holder of
a REMIC Residual Certificate that owns directly or indirectly a 10% or greater
interest in the certificates. If the holder does not qualify for exemption,
distributions of interest to that holder, including distributions in respect of
accrued original issue discount, may be subject to a tax rate of 30%, subject to
reduction under any applicable tax treaty.
It is possible, under regulations promulgated under Section 881 of the
Code concerning conduit financing transactions, that the exemption from
withholding taxes described above may not be available to a holder who is not a
United States person and (1) owns 10% or more of one or more underlying
borrowers or (2) if the holder is a controlled foreign corporation, is related
to one or more borrowers.
Further, it appears that a REMIC Regular Certificate would not be
included in the estate of a nonresident alien individual and would not be
subject to United States estate taxes. However, it is recommended that
certificateholders who are nonresident alien individuals consult their tax
advisors concerning this question.
Unless we state otherwise in the related prospectus supplement,
transfers of REMIC Residual Certificates will be prohibited under the related
Governing Document to any investor that is:
o a foreign person; or
o a United States Person, if classified as a partnership under the Code,
unless all of its beneficial owners are United States Persons.
GRANTOR TRUST FUNDS
CLASSIFICATION OF GRANTOR TRUST FUNDS
With respect to each series of certificates as to which no REMIC
election will be made, our counsel will deliver its opinion to the effect that,
assuming compliance with all provisions of the related Governing Document, the
related Grantor Trust Fund will be classified as a grantor trust under subpart
E, part I of subchapter J of the Code and not as a partnership or an association
taxable as a corporation.
For purposes of the following discussion, a certificate representing an
undivided equitable ownership interest in the principal of the mortgage loans
constituting the related Grantor Trust Fund, together with interest thereon at a
pass-through rate, will be referred to as a "GRANTOR TRUST FRACTIONAL INTEREST
CERTIFICATE". A certificate representing ownership of all or a portion of the
difference between interest paid on the mortgage loans constituting the related
Grantor Trust Fund (net of normal administration fees) and interest paid to the
holders of Grantor Trust Fractional Interest Certificates issued with respect to
the Grantor Trust Fund will be referred to as a "GRANTOR TRUST STRIP
CERTIFICATE". A Grantor Trust Strip Certificate may also evidence a nominal
ownership interest in the principal of the mortgage loans constituting the
related Grantor Trust Fund.
CHARACTERIZATION OF INVESTMENTS IN GRANTOR TRUST CERTIFICATES
GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATES
In the case of Grantor Trust Fractional Interest Certificates, unless
we state otherwise in the related prospectus supplement, our counsel will
deliver an opinion that, in general, Grantor Trust Fractional Interest
Certificates will represent interests in:
o "loans secured by an interest in real property" within the meaning of
Section 7701(a)(19)(C)(v) of the Code, but generally only to the extent
that the underlying mortgage loans have been made with respect to property
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that is used for residential or certain other prescribed purposes;
o "obligation[s] (including any participation or certificate of beneficial
ownership therein) which . . . [are] principally secured by an interest in
real property" within the meaning of Section 860G(a)(3) of the Code;
o "permitted assets" within the meaning of Section 860L(a)(1)(C) of the Code;
and
o "real estate assets" within the meaning of Section 856(c)(5)(B) of the
Code.
In addition, our counsel will deliver an opinion that interest on
Grantor Trust Fractional Interest Certificates will to the same extent be
considered "interest on obligations secured by mortgages on real property or on
interests in real property" within the meaning of Section 856(c)(3)(B) of the
Code.
GRANTOR TRUST STRIP CERTIFICATES
Even if Grantor Trust Strip Certificates evidence an interest in a
Grantor Trust Fund:
o consisting of mortgage loans that are "loans secured by an interest in real
property" within the meaning of Section 7701(a)(19)(C)(v) of the Code;
o consisting of mortgage loans that are "real estate assets" within the
meaning of Section 856(c)(5)(B) of the Code; and
o interest on which is "interest on obligations secured by mortgages on real
property" within the meaning of Section 856(c)(3)(A) of the Code;
o it is unclear whether the Grantor Trust Strip Certificates, and the income
therefrom, will be so characterized. Our counsel will not deliver any
opinion on these questions. We recommend that prospective purchasers to
which the characterization of an investment in Grantor Trust Strip
Certificates is material consult their tax advisors regarding whether the
Grantor Trust Strip Certificates, and the income therefrom, will be so
characterized.
The Grantor Trust Strip Certificates will be:
o "obligation[s] (including any participation or certificate of beneficial
ownership therein) which [are] principally secured by an interest in real
property" within the meaning of Section 860G(a)(3)(A) of the Code; and,
o in general, "permitted assets" within the meaning of Section 860L(a)(1)(C)
of the Code.
TAXATION OF OWNERS OF GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATES
Holders of a particular series of Grantor Trust Fractional Interest
Certificates generally will be:
o required to report on their federal income tax returns their shares of the
entire income from the mortgage loans, including amounts used to pay
reasonable servicing fees and other expenses, in accordance with their
method of accounting; and
o will be entitled to deduct their shares of any such reasonable servicing
fees and other expenses subject to the limitations discussed below.
Because of stripped interests, market or original issue discount, or premium,
the amount includible in income on account of a Grantor Trust Fractional
Interest Certificate may differ significantly from the amount distributable
thereon representing interest on the mortgage loans.
Under Section 67 of the Code, an individual, estate or trust holding a
Grantor Trust Fractional Interest Certificate directly or through certain
pass-through entities will be allowed a deduction for these reasonable servicing
fees and expenses only to the extent that the total of that holder's
miscellaneous itemized deductions exceeds 2% of that holder's adjusted gross
income. In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of:
o 3% of the excess of the individual's adjusted gross income over such
amount; or
o 80% of the amount of itemized deductions otherwise allowable for the
taxable year.
The amount of additional taxable income reportable by holders of
Grantor Trust Fractional Interest Certificates who are subject to the
limitations of either Section 67 or Section 68 of the Code may be substantial.
Further, certificateholders (other than corporations) subject to the alternative
minimum tax may not deduct miscellaneous itemized deductions in determining such
holder's alternative minimum taxable income.
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Although it is not entirely clear, it appears that in transactions in
which multiple classes of Grantor Trust Certificates (including Grantor Trust
Strip Certificates) are issued, these fees and expenses should be allocated
among the classes of Grantor Trust Certificates using a method that recognizes
that each such class benefits from the related services. In the absence of
statutory or administrative clarification as to the method to be used, we
currently expect that information returns or reports to the IRS and
certificateholders will be based on a method that allocates such expenses among
classes of Grantor Trust Certificates with respect to each period based on the
distributions made to each such class during that period.
The federal income tax treatment of Grantor Trust Fractional Interest
Certificates of any series will depend on whether they are subject to the
"stripped bond" rules of Section 1286 of the Code. The separation of ownership
of the right to receive some or all of the interest payments on an obligation
from ownership of the right to resume some or all of the principal payments
creates "stripped bonds" with respect to principal payments and stripped coupons
with respect to interest payments. Grantor Trust Fractional Interest
Certificates may be subject to those rules if:
o a class of Grantor Trust Strip Certificates is issued as part of the same
series; or
o we or any of our affiliates retains (for our or their own account or for
purposes of resale) a right to receive a specified portion of the interest
payable on a mortgage asset.
Further, the IRS has ruled that an unreasonably high servicing fee
retained by a seller or servicer will be treated as a retained ownership
interest in mortgages that constitutes a stripped coupon. We will include in the
related prospectus supplement information regarding servicing fees paid to a
master servicer, a special servicer, any sub-servicer or their respective
affiliates.
IF STRIPPED BOND RULES APPLY
If the stripped bond rules apply, each Grantor Trust Fractional
Interest Certificate will be treated as having been issued with "original issue
discount" within the meaning of Section 1273(a) of the Code. This is subject,
however, to the discussion below regarding:
o the treatment of certain stripped bonds as market discount bonds; and
o de minimis market discount.
See "--REMICs--Taxation of Owners of Grantor Trust Fractional Interest
Certificates--Market Discount" below.
Under the stripped bond rules, the holder of a Grantor Trust Fractional
Interest Certificate (whether a cash or accrual method taxpayer) will be
required to report original issue discount from its Grantor Trust Fractional
Interest Certificate for each month in an amount equal to the income that
accrues on the certificate in that month calculated under a constant yield
method, in accordance with the rules of the Code relating to original issue
discount. This economic accrual of income includible in the income of the
Grantor Trust Fractional Interest Certificateholder in any taxable year may
exceed amounts actually received during the year.
The original issue discount on a Grantor Trust Fractional Interest
Certificate will be the excess of the certificate's stated redemption price over
its issue price. The issue price of a Grantor Trust Fractional Interest
Certificate as to any purchaser will be equal to the price paid by the purchaser
of the Grantor Trust Fractional Interest Certificate. The stated redemption
price of a Grantor Trust Fractional Interest Certificate will be:
o the sum of all payments to be made on such certificate, other than
"qualified stated interest", if any;
o the certificate's share of reasonable servicing fees and other expenses.
See "--Taxation of Owners of Grantor Trust Fractional Interest
Certificates--If Stripped Bond Rules Do Not Apply" below for a definition of
"qualified stated interest". In general, the amount of such income that accrues
in any month would equal the product of:
o the holder's adjusted basis in the Grantor Trust Fractional Interest
Certificate at the beginning of that month (see "--Taxation of Owners of
Grantor Trust Fractional Interest Certificates--Sales of Grantor Trust
Certificates" below); and
o the yield of the Grantor Trust Fractional Interest Certificate to the
holder.
The yield would be computed as the rate (compounded based on the
regular interval between
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payment dates) that, if used to discount the holder's share of future payments
on the mortgage loans, would cause the present value of those future payments to
equal the price at which the holder purchased the certificate. In computing
yield under the stripped bond rules, a certificateholder's share of future
payments on the mortgage loans will not include any payments made in respect of
any ownership interest in the mortgage loans retained by us, a master servicer,
a special servicer, any sub-servicer or their respective affiliates, but will
include such certificateholder's share of any reasonable servicing fees and
other expenses.
Section 1272(a)(6) of the Code requires:
o the use of a reasonable prepayment assumption in accruing original issue
discount; and
o adjustments in the accrual of original issue discount when prepayments do
not conform to the prepayment assumption, with respect to certain
categories of debt instruments.
Legislation in 1997 extended the scope of that section to any pool of
debt instruments the yield on which may be affected by reason of prepayments.
The precise application of the new legislation is unclear in certain respects.
For example, it is uncertain whether:
o a prepayment assumption will be applied
1) collectively to all a taxpayer's investments in pools of debt
instruments; or
2) on an investment-by-investment basis; and
o the assumed prepayment rate is to be determined based on conditions:
1) at the time of the first sale of the Grantor Trust Fractional Interest
Certificate or,
2) with respect to any holder, at the time of purchase of the Grantor
Trust Fractional Interest Certificate by that holder.
It is recommended that certificateholders consult their tax advisors
concerning reporting original issue discount with respect to Grantor Trust
Fractional Interest Certificates.
In the case of a Grantor Trust Fractional Interest Certificate acquired
at a price equal to the principal amount of the mortgage loans allocable to that
certificate, the use of a prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest income.
In the case, however, of a Grantor Trust Fractional Interest Certificate
acquired at a discount or premium (that is, at a price less than or greater than
such principal amount, respectively), the use of a reasonable prepayment
assumption would increase or decrease the yield, and thus accelerate or
decelerate, respectively, the reporting of income.
In the absence of statutory or administrative clarification, we
currently expect that information reports or returns to the IRS and
certificateholders will be based on:
o a prepayment assumption determined when certificates are offered and sold
hereunder; and
o on a constant yield computed using a representative initial offering price
for each class of certificates.
However, neither we nor any other person will make any representation
that:
o the mortgage loans will in fact prepay at a rate conforming to the
applicable prepayment assumption or any other rate or
o the applicable prepayment assumption will not be challenged by the IRS on
audit.
Certificateholders also should bear in mind that the use of a
representative initial offering price will mean that the information returns or
reports, even if otherwise accepted as accurate by the IRS, will in any event be
accurate only as to the initial certificateholders of each series who bought at
that price.
Under Treasury Regulation Section 1.1286-1, certain stripped bonds are
to be treated as market discount bonds and, accordingly, any purchaser of such a
bond is to account for any discount on the bond as market discount rather than
original issue discount. This treatment only applies, however, if immediately
after the most recent disposition of the bond by a person stripping one or more
coupons from the bond and disposing of the bond or coupon:
o there is no original issue discount or only a de minimis amount of original
issue discount; or
o the annual stated rate of interest payable on the original bond is no more
than one percentage point lower than the gross interest rate payable on the
original mortgage loan, before subtracting any servicing fee or any
stripped coupon.
If interest payable on a Grantor Trust Fractional Interest Certificate
is more than one
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percentage point lower than the gross interest rate payable on the mortgage
loans, we will disclose that fact in the related prospectus supplement. If the
original issue discount or market discount on a Grantor Trust Fractional
Interest Certificate determined under the stripped bond rules is less than the
product of:
o 0.25% of the stated redemption price; and
o the weighted average years to maturity of the mortgage loans,
then such original issue discount or market discount will be considered to be de
minimis. Original issue discount or market discount of only a de minimis amount
will be included in income in the same manner as de minimis original issue
discount and market discount described in "--Taxation of Owners of Grantor Trust
Fractional Interest Certificates--If Stripped Bond Rules Do Not Apply" and
"--Market Discount" below.
IF STRIPPED BOND RULES DO NOT APPLY
Subject to the discussion below on original issue discount, if the
stripped bond rules do not apply to a Grantor Trust Fractional Interest
Certificate, the certificateholder will be required to report its share of the
interest income on the mortgage loans in accordance with the certificateholder's
normal method of accounting. In that case, the original issue discount rules
will apply, even if the stripped bond rules do not apply, to a Grantor Trust
Fractional Interest Certificate to the extent it evidences an interest in
mortgage loans issued with original issue discount.
The original issue discount, if any, on the mortgage loans will equal
the difference between the stated redemption price of such mortgage loans and
their issue price. For a definition of "stated redemption price", see
"--REMICs--Taxation of Owners of REMIC Regular Certificates--Original Issue
Discount" above. In general, the issue price of a mortgage loan will be the
amount received by the borrower from the lender under the terms of the mortgage
loan, less any "points" paid by the borrower. The stated redemption price of a
mortgage loan will equal its principal amount, unless the mortgage loan provides
for an initial "teaser", or below-market interest rate. The determination as to
whether original issue discount will be considered to be de minimis will be
calculated using the same test as in the REMIC discussion. See
"--REMICs--Taxation of Owners of REMIC Regular Certificates--Original Issue
Discount" above.
In the case of mortgage loans bearing adjustable or variable interest
rates, we will describe in the related prospectus supplement the manner in which
such rules will be applied with respect to those mortgage loans by the trustee
or master servicer, as applicable, in preparing information returns to the
certificateholders and the IRS.
If original issue discount is in excess of a de minimis amount, all
original issue discount with respect to a mortgage loan will be required to be
accrued and reported in income each month, based on a constant yield. Under
recent legislation, Section 1272(a)(6) of the Code requires that a prepayment
assumption be used in computing yield with respect to any pool of debt
instruments, the yield on which may be affected by prepayments. The precise
application of the new legislation is unclear in certain respects. For example,
it is uncertain:
o whether a prepayment assumption will be applied:
(1) collectively to all a taxpayer's investments in pools of debt
instruments; or
(2) on an investment-by-investment basis.
o as to investments in Grantor Trust Fractional Interest Certificates,
whether the assumed prepayment rate is to be determined based on
conditions:
(1) at the time of the first sale of the Grantor Trust Fractional Interest
Certificate or,
(2) with respect to any holder, at the time of that holder's purchase of
the Grantor Trust Fractional Interest Certificate.
We recommend that certificateholders consult their own tax advisors
concerning reporting original issue discount with respect to Grantor Trust
Fractional Interest Certificates and refer to the related prospectus supplement
with respect to each series to determine whether and in what manner the original
issue discount rules will apply to mortgage loans in such series.
A purchaser of a Grantor Trust Fractional Interest Certificate that
purchases such Grantor Trust Fractional Interest Certificate at a cost less than
the certificate's allocable portion of the total remaining stated redemption
price of the mortgage loans held in the related trust must also include in gross
income the certificate's daily portions of any original issue discount with
respect to the mortgage loans. However, each such daily portion will be reduced,
if the cost of the Grantor Trust Fractional Interest Certificate to the
purchaser is in excess of the certificate's allocable portion of the total
"adjusted
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issue prices" of the mortgage loans held in the related trust, approximately in
proportion to the ratio the excess bears to the certificate's allocable portion
of the total original issue discount remaining to be accrued on the mortgage
loans.
The adjusted issue price of a mortgage loan on any given day equals the
sum of:
o the adjusted issue price (or, in the case of the first accrual period, the
issue price) of the mortgage loan at the beginning of the accrual period
that includes that day; and
o the daily portions of original issue discount for all days during the
accrual period prior to that day.
The adjusted issue price of a mortgage loan at the beginning of any
accrual period will equal the issue price of the mortgage loan, increased by:
o the total amount of original issue discount with respect to such mortgage
loan that accrued in prior accrual periods, and reduced by
o the amount of any payments made on the mortgage loan in prior accrual
periods of amounts included in its stated redemption price.
In the absence of statutory or administrative clarification, we
currently expect that information reports or returns to the IRS and
certificateholders will be based on:
o a prepayment assumption determined when certificates are offered and sold
hereunder and disclosed in the related prospectus supplement; and
o a constant yield computed using a representative initial offering price for
each class of certificates.
However, neither we nor any other person will make any representation
that:
o the mortgage loans will in fact prepay at a rate conforming to the
applicable prepayment assumption or any other rate; or
o the applicable prepayment assumption will not be challenged by the IRS on
audit.
Certificateholders also should bear in mind that the use of a
representative initial offering price will mean that the information returns or
reports, even if otherwise accepted as accurate by the IRS, will in any event be
accurate only as to the initial certificateholders of each series who bought at
that price.
MARKET DISCOUNT
If the stripped bond rules do not apply to a Grantor Trust Fractional
Interest Certificate, a certificateholder may be subject to the market discount
rules of Sections 1276 through 1278 of the Code to the extent an interest in a
mortgage loan is considered to have been purchased at a "market discount". That
is:
o in the case of a mortgage loan issued without original issue discount, at a
purchase price less than its remaining stated redemption price (as defined
above); or
o in the case of a mortgage loan issued with original issue discount, at a
purchase price less than its adjusted issue price (as defined above).
If market discount is in excess of a de minimis amount (as described
below), the holder generally will be required to include in income in each month
the amount of such discount that has accrued (under the rules described in the
next paragraph) through that month that has not previously been included in
income, but limited, in the case of the portion of such discount that is
allocable to any mortgage loan, to the payment of stated redemption price on the
mortgage loan that is received by (or, in the case of accrual basis
certificateholders, due to) the trust in that month. A certificateholder may
elect to include market discount in income currently as it accrues (under a
constant yield method based on the yield of the certificate to such holder)
rather than including it on a deferred basis in accordance with the foregoing
under rules similar to those described in "--REMICs--Taxation of Owners of REMIC
Regular Interests--Market Discount" above.
Section 1276(b)(3) of the Code authorizes the Treasury Department to
issue regulations providing for the method for accruing market discount on debt
instruments, the principal of which is payable in more than one installment.
Until regulations are issued by the Treasury Department, certain rules described
in the Committee Report apply. Under those rules, in each accrual period market
discount on the mortgage loans should accrue, at the holder's option:
o on the basis of a constant yield method;
o in the case of a mortgage loan issued without original issue discount, in
an amount that bears
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the same ratio to the total remaining market discount as the stated
interest paid in the accrual period bears to the total stated interest
remaining to be paid on the mortgage loan as of the beginning of
the accrual period; or
o in the case of a mortgage loan issued with original issue discount, in an
amount that bears the same ratio to the total remaining market discount as
the original issue discount accrued in the accrual period bears to the
total original issue discount remaining at the beginning of the accrual
period.
Under recent legislation, Section 1272(a)(6) of the Code requires that
a prepayment assumption be used in computing the accrual of original issue
discount with respect to any pool of debt instruments, the yield on which may be
affected by prepayments. Because the mortgage loans will be such a pool, it
appears that the prepayment assumption used (or that would be used) in
calculating the accrual of original issue discount, if any, is also to be used
in calculating the accrual of market discount. However, the precise application
of the new legislation is unclear in certain respects. For example, it is
uncertain whether:
o a prepayment assumption will be applied:
(1) collectively to all of a taxpayer's investments in pools of debt
instruments, or
(2) on an investment-by-investment basis; and
o the assumed prepayment rate is to be determined:
(1) at the time of the first sale of the Grantor Trust Fractional Interest
Certificate, or
(2) with respect to any holder, at the time of that holder's purchase of
the Grantor Trust Fractional Interest Certificate.
Moreover, because regulations clarifying the legislation referred to in
the preceding paragraph have not been issued, it is not possible to predict what
effect these regulations might have on the tax treatment of a mortgage loan
purchased at a discount in the secondary market. We recommend that
certificateholders consult their own tax advisors concerning accrual of market
discount with respect to Grantor Trust Fractional Interest Certificates.
Certificateholders should also refer to the related prospectus supplement with
respect to each series to determine whether and in what manner the market
discount will apply to mortgage loans in that series purchased at a market
discount.
To the extent that the mortgage loans provide for periodic payments of
stated redemption price, market discount may be required to be included in
income at a rate that is not significantly slower than the rate at which the
discount would be included in income if it were original issue discount.
Market discount with respect to mortgage loans may be considered to be
de minimis and, if so, will be includible in income under de minimis rules
similar to those described above in "--REMICs--Taxation of Owners of REMIC
Regular Certificates --Original Issue Discount" above.
Further, under the rules described above in "--REMICs--Taxation of
Owners of REMIC Regular Certificates--Market Discount", any discount that is not
original issue discount and exceeds a de minimis amount may require the deferral
of interest expense deductions attributable to accrued market discount not yet
includible in income, unless an election has been made to report market discount
currently as it accrues. This rule applies without regard to the origination
dates of the mortgage loans. If such an election is made to accrue market
discount on a Grantor Trust Fractional Interest Certificate on a constant yield
basis, such election is deemed made with respect to all other debt instruments
with market discount which the certificateholder acquires during the year of
election or thereafter.
PREMIUM
If a certificateholder is treated as acquiring the underlying mortgage
loans at a premium, that is, at a price in excess of their remaining stated
redemption price, the certificateholder may elect under Section 171 of the Code
to amortize using a constant yield method the portion of such premium allocable
to mortgage loans originated after September 27, 1985. Amortizable premium is
treated as an offset to interest income on the related debt instrument, rather
than as a separate interest deduction. However, premium allocable to mortgage
loans originated before September 28, 1985 or to mortgage loans for which an
amortization election is not made, should be:
o allocated among the payments of stated redemption price on the mortgage
loan; and
o allowed as a deduction as such payments are made (or, for a
certificateholder using the accrual method of accounting, when such
payments of stated redemption price are due).
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A certificateholder that makes this election for a mortgage loan or any
other debt instrument that is acquired at a premium will be deemed to have made
an election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that the certificateholder acquires during the year of
the election or thereafter.
It is not clear whether a prepayment assumption should be used in
computing amortization of premium allowable under Section 171 of the Code
similar to that described for calculating the accrual of market discount of
Grantor Trust Fractional Interest Certificates. See "--Taxation of Owners of
Grantor Trust Fractional Interest Certificates--Market Discount", above.
If a premium is not subject to amortization using a reasonable
prepayment assumption, the holder of a Grantor Trust Fractional Interest
Certificate representing an interest in a mortgage loan acquired at a premium
should recognize a loss if a mortgage loan with respect to an asset prepays in
full, equal to the difference between:
o the portion of the prepaid principal amount of the mortgage loan or
underlying mortgage loan that is allocable to the certificate; and
o the portion of the adjusted basis of the certificate that is allocable to
the mortgage loan or underlying mortgage loan.
If a reasonable prepayment assumption is used to amortize the premium,
it appears that such a loss would be available, if at all, only if prepayments
have occurred at a rate faster than the reasonable assumed prepayment rate. It
is not clear whether any other adjustments would be required to reflect
differences between an assumed prepayment rate and the actual rate of
prepayments.
The IRS has issued Premium Amortization Regulations. The Premium
Amortization Regulations specifically do not apply to pre-payable debt
instruments or any pool of debt instruments the yield on which may be affected
by prepayments, such as the trust fund, which are subject to Section 1272(a)(6)
of the Code. Absent further guidance from the IRS and to the extent set forth in
the related prospectus supplement, the trustee will account for amortizable bond
premium in the manner described in this section. Prospective purchasers should
consult their tax advisors regarding amortizable bond premium and the Premium
Amortization Regulations.
TAXATION OF OWNERS OF GRANTOR TRUST STRIP CERTIFICATES
The "stripped coupon" rules of Section 1286 of the Code will apply to
the Grantor Trust Strip Certificates. Except as described above in "--Taxation
of Owners of Grantor Trust Fractional Interest Certificates--If Stripped Bond
Rules Apply", no regulations or published rulings under Section 1286 of the Code
have been issued and some uncertainty exists as to how it will be applied to
securities such as the Grantor Trust Strip Certificates. Accordingly, we
recommend that holders of Grantor Trust Strip Certificates consult their tax
advisors concerning the method to be used in reporting income or loss with
respect to these certificates.
The OID Regulations do not apply to "stripped coupons", although they
provide general guidance as to how the original issue discount sections of the
Code will be applied.
Under the stripped coupon rules, it appears that original issue
discount will be required to be accrued in each month on the Grantor Trust Strip
Certificates based on a constant yield method. In effect, each holder of Grantor
Trust Strip Certificates would include as interest income in each month an
amount equal to the product of the holder's adjusted basis in the Grantor Trust
Strip Certificate at the beginning of that month and the yield of the Grantor
Trust Strip Certificate to the holder. This yield would be calculated based on:
o the price paid for that Grantor Trust Strip Certificate by its holder; and
o the payments remaining to be made thereon at the time of the purchase;
o plus an allocable portion of the servicing fees and expenses to be paid
with respect to the mortgage loans.
See "--Taxation of Owners of Grantor Trust Fractional Interest
Certificates--If Stripped Bond Rules Apply" above.
As noted above, Section 1272(a)(6) of the Code requires that:
o a prepayment assumption be used in computing the accrual of original issue
discount with respect to certain categories of debt instruments; and
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o adjustments be made in the amount and rate of accrual of such discount when
prepayments do not conform to such prepayment assumption.
It appears that those provisions would apply to Grantor Trust Strip
Certificates. It is uncertain whether the assumed prepayment rate would be
determined based on conditions:
o at the time of the first sale of the Grantor Trust Strip Certificate or,
o with respect to any subsequent holder, at the time of purchase of the
Grantor Trust Strip Certificate by that holder.
If the method for computing original issue discount under Section
1272(a)(6) results in a negative amount of original issue discount as to any
accrual period with respect to a REMIC Regular Certificate, the amount of
original issue discount allocable to that accrual period will be zero. That is,
no current deduction of the negative amount will be allowed to the holder of the
certificate. The holder will instead only be permitted to offset the negative
amount against future positive original issue discount (if any) attributable to
the certificate. Although not free from doubt, it is possible that a
certificateholder may be permitted to deduct a loss to the extent his or her
basis in the certificate exceeds the maximum amount of payments the
certificateholder could ever receive with respect to the certificate. However,
any such loss may be a capital loss, which is limited in its deductibility. The
foregoing considerations are particularly relevant to Stripped Interest
Certificates, which can have negative yields under circumstances that are not
default related.
The accrual of income on the Grantor Trust Strip Certificates will be
significantly slower using a prepayment assumption than if yield is computed
assuming no prepayments. In the absence of statutory or administrative
clarification, we currently expect that information returns or reports to the
IRS and certificateholders will be based on:
o the applicable prepayment assumption disclosed in the related prospectus
supplement; and
o a constant yield computed using a representative initial offering price for
each class of certificates.
However, neither we nor any other person will make any representation
that:
o the mortgage loans will in fact prepay at a rate conforming to the
applicable prepayment assumption or at any other rate; or
o the applicable prepayment assumption will not be challenged by the IRS on
audit.
Certificateholders also should bear in mind that the use of a
representative initial offering price will mean that the information returns or
reports, even if otherwise accepted as accurate by the IRS, will in any event be
accurate only as to the initial certificateholders of each series who bought at
that price. We recommend that prospective purchasers of the Grantor Trust Strip
Certificates consult their tax advisors regarding the use of the applicable
prepayment assumption.
SALES OF GRANTOR TRUST CERTIFICATES
Any gain or loss, equal to the difference between the amount realized
on the sale or exchange of a Grantor Trust Certificate and its adjusted basis,
recognized on the sale or exchange of a Grantor Trust Certificate by an investor
who holds the Grantor Trust Certificate as a capital asset, will be capital gain
or loss, except as described below.
The adjusted basis of a Grantor Trust Certificate generally will equal
its cost:
o increased by any income reported by the seller, including original issue
discount and market discount income; and o reduced (but not below zero) by
any:
(1) previously reported losses;
(2) amortized premium; and
(3) distributions with respect to such Grantor Trust Certificate.
The Code as of the date of this prospectus provides for lower rates as
to long-term capital gains, than those applicable to the short-term capital
gains and ordinary income realized or received by individuals. No such rate
differential exists for corporations. In addition, the distinction between a
capital gain or loss and ordinary income or loss remains relevant for other
purposes.
Gain or loss from the sale of a Grantor Trust Certificate may be
partially or wholly ordinary and not capital in certain circumstances. Gain
attributable to accrued and unrecognized market discount will be treated as
ordinary income, as will gain or loss recognized by banks and other financial
institutions subject to Section 582(c) of the Code.
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Furthermore, a portion of any gain that might otherwise be capital gain
may be treated as ordinary income to the extent that the Grantor Trust
Certificate is held as part of a "conversion transaction" within the meaning of
Section 1258 of the Code. A conversion transaction generally is one in which the
taxpayer has taken two or more positions in the same or similar property that
reduce or eliminate market risk, if substantially all of the taxpayer's return
is attributable to the time value of the taxpayer's net investment in such
transaction. The amount of gain realized in a conversion transaction that is
recharacterized as ordinary income generally will not exceed the amount of
interest that would have accrued on the taxpayer's net investment at 120% of the
appropriate "applicable Federal rate" at the time the taxpayer enters into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income items from the transaction. The "applicable
Federal rate" is computed and published monthly by the IRS.
Finally, a taxpayer may elect to have net capital gain taxed at
ordinary income rates rather than capital gains rates in order to include the
net capital gain in total net investment income for that taxable year, for
purposes of the rule that limits the deduction of interest on indebtedness
incurred to purchase or carry property held for investment to a taxpayer's net
investment income.
GRANTOR TRUST REPORTING
Unless we state otherwise in the related prospectus supplement, the
trustee will furnish to each holder of a Grantor Trust Certificate with each
distribution a statement setting forth the amount of the distribution allocable
to:
o principal on the underlying mortgage loans; and
o interest thereon at the related pass-through rate.
In addition, the trustee will furnish, within a reasonable time after
the end of each calendar year, to each holder of a Grantor Trust Certificate who
was such a holder at any time during the year:
o information regarding the amount of servicing compensation received by the
master servicer, the special servicer or any sub-servicer; and
o such other customary factual information as the trustee deems necessary or
desirable to enable holders of Grantor Trust Certificates to prepare their
tax returns.
The trustee will furnish comparable information to the IRS as and when
required by law to do so. Because the rules for accruing discount and amortizing
premium with respect to the Grantor Trust Certificates are uncertain in various
respects, we can give no assurance that the IRS will agree with the trustee's
information reports of such items of income and expense. Moreover, these
information reports, even if otherwise accepted as accurate by the IRS, will in
any event be accurate only as to the initial certificateholders that bought
their certificates at the representative initial offering price used in
preparing the reports.
On August 13, 1998, the IRS published proposed regulations, which will,
when effective, establish a reporting framework for interests in "widely held
fixed investment trusts" similar to that for regular interests in REMICs. A
widely-held fixed investment trust is defined as any entity classified as a
"trust" under Treasury Regulation Section 301.7701-4(c) in which any interest is
held by a middleman. A middleman would include, but is not limited to:
o a custodian of a person's account;
o a nominee; and
o a broker holding an interest for a customer in street name.
These regulations are proposed to be effective for calendar years
beginning on or after the date that the final regulations are published in the
Federal Register.
BACKUP WITHHOLDING
In general, the rules described above in "--REMICs--Backup Withholding
with Respect to REMIC Certificates" will also apply to Grantor Trust
Certificates.
FOREIGN INVESTORS
In general, the discussion with respect to REMIC Regular Certificates
in "--REMICs--Foreign Investors in REMIC Certificates" above applies to Grantor
Trust Certificates. However, unless we state otherwise in the related prospectus
supplement, Grantor Trust Certificates will be eligible for exemption from U.S.
withholding tax, subject to the conditions described in such discussion, only to
the extent the related mortgage loans were originated after July 18, 1984.
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To the extent that interest on a Grantor Trust Certificate would be
exempt under Sections 871(h)(1) and 881(c) of the Code from United States
withholding tax, and the Grantor Trust Certificate is not held in connection
with a certificateholder's trade or business in the United States, the Grantor
Trust Certificate will not be subject to United States estate taxes in the
estate of a nonresident alien individual.
FASITS
If and to the extent set forth in the prospectus supplement relating to
a particular series of certificates, an election may be made to treat the
related trust fund or one or more segregated pools of assets therein as one or
more financial asset securitization investment trusts, or FASITs, within the
meaning of the Code Section 860L(a). Qualification as a FASIT requires ongoing
compliance with certain conditions. With respect to each series of FASIT
certificates, our counsel will advise us that in such firm's opinion, assuming:
o the making of such an election;
o compliance with the pooling agreement; and
o compliance with any changes in the law, including any amendments to the
Code or applicable Treasury Regulations thereunder,
each FASIT pool will qualify as a FASIT. In that case, the regular certificates
will be considered to be "regular interests" in the FASIT and will be treated
for federal income tax purposes as if they were newly originated debt
instruments, and the residual certificate will be considered to be "ownership
interest" in the FASIT pool. The prospectus supplement for each series of
certificates will indicate whether one or more FASIT elections will be made with
respect to the related trust fund.
FASIT treatment has become available pursuant to recently enacted
legislation, and no Treasury regulations have as yet been issued detailing the
circumstances under which a FASIT election may be made or the consequences of
such an election. If a FASIT election is made with respect to any trust fund or
as to any segregated pool of assets therein, the related prospectus supplement
will describe the federal income tax consequences of the election.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in
"Federal Income Tax Consequences", potential investors should consider the state
and local tax consequences of the acquisition, ownership, and disposition of the
offered certificates. State tax law may differ substantially from the
corresponding federal law, and the discussion above does not purport to describe
any aspect of the tax laws of any state or other jurisdiction. Therefore, we
recommend that prospective investors consult their tax advisors with respect to
the various tax consequences of investments in the offered certificates.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA") and Section 4975 of the Code impose certain requirements on certain
employee benefit plans, and on other retirement plans and arrangements, such as:
o individual retirement accounts and annuities,
o Keogh plans,
o collective investment funds,
o separate accounts, and
o insurance company general accounts,
o as well as on funds or entities in which these plans, accounts or
arrangements are invested.
ERISA and the Code also impose certain requirements on fiduciaries of
these plans, accounts or arrangements, in connection with the investment of the
assets of the related plan, account or arrangement.
Some employee benefit plans, such as governmental plans, and church
plans which have not made an election under the Code are not subject to ERISA
requirements. Accordingly, assets of these plans may be invested in the offered
certificates without regard to the ERISA considerations described below, subject
to the provisions of other applicable federal and state laws. Any such plan
which is qualified and exempt from taxation under Sections 401(a) and 501(a) of
the Code, however, is subject to the prohibited transaction rules in Section 503
of the Code.
ERISA imposes certain general fiduciary requirements on fiduciaries,
including:
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o investment prudence and diversification; and
o the investment of the assets of the related plan, account or arrangement in
accordance with the documents governing the plan, account or arrangement.
Section 406 of ERISA and Section 4975 of the Code also prohibit a broad
range of transactions involving assets of a plan, account or arrangement and
persons who have certain specified relationships to the plan, account or
arrangement, unless a statutory or administrative exemption is available. The
types of transactions that are prohibited include:
o sales, exchanges or leases of property;
o loans or other extensions of credit; and
o the furnishing of goods and services.
Certain persons that participate in such a prohibited transaction may
be subject to an excise tax imposed under Section 4975 of the Code and/or a
penalty imposed under Section 502(i) of ERISA, unless a statutory or
administrative exemption is available. In addition, the persons involved in the
prohibited transaction may have to rescind the transaction and pay an amount to
the plan, account or arrangement for any losses realized by the plan, account or
arrangement for any profits realized by these persons. In addition, individual
retirement accounts involved in the prohibited transaction may be disqualified
which would result in adverse tax consequences to the owner of the account.
REGULATION OF ASSETS INCLUDED IN A PLAN, ACCOUNT OR ARRANGEMENT
A fiduciary's investment of the assets of a plan, account or
arrangement in offered certificates may cause the underlying mortgage assets and
other trust assets to be deemed assets of the plan, account or arrangement.
A fiduciary of an investing plan is any person who in connection with
the assets of the plan, account or arrangement:
o has discretionary authority or control over the management or disposition
of assets; or
o provides investment advice for a fee.
Section 2510.3-101 of the United States Department of Labor regulations
provides that when a plan, account or arrangement acquires an equity interest in
an entity, the assets of the plan, account or arrangement include both the
equity interest and an undivided interest in each of the underlying assets of
the entity, unless an exception applies.
If the mortgage loans and other trust assets constitute assets of a
plan, account or arrangement, then any party exercising management or
discretionary control regarding those assets, such as the related trustee,
master servicer or special servicer, any sub-servicer or affiliates of these
parties may be deemed to be a "fiduciary" with respect to the investing plan,
account or arrangement and be subject to the fiduciary responsibility provisions
of ERISA. In addition, if the trust assets constitute assets of a plan, account
or arrangement, transactions involving the trust assets may involve prohibited
transactions under ERISA or the Code. For example, if a person who has a
relationship to a plan, account or arrangement is a borrower under a mortgage
loan included in the trust assets, the purchase of certificates by the plan,
account or arrangement could constitute a prohibited loan between the plan,
account or arrangement and the party in interest.
The underlying assets will not be included if the equity participation
in the entity by benefit plan investors is not "significant". Equity
participation by benefit plan investors will be "significant" if, on any date,
25% or more of the value of any class of equity interests in the entity is held
by benefit plan investors, which include not only benefit plans subject to ERISA
but also governmental plans, church plans and other plans not subject to ERISA.
The percentage owned by benefit plan investors is determined by excluding the
investments of persons:
o with discretionary authority or control over the assets of the entity;
o who provide investment advice directly or indirectly for a fee with respect
to the assets; and
o who are affiliates of these persons.
In the case of a trust, investments by us or by the related trustee,
master servicer, special servicer, any other party with discretionary authority
over the trust assets and the affiliates of these persons will be excluded.
Because the availability of this exemption depends upon the identity of
the holders of the offered certificates at any time, there can be no assurance
that any class of the offered certificates will qualify for this exemption.
The Department of Labor regulations provide that where a plan, account
or arrangement
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purchases a "guaranteed governmental mortgage pool certificate", the assets of
the plan, account or arrangement include the certificate but do not include any
of the mortgages underlying the certificate. The regulations include in the
definition of a "guaranteed governmental mortgage pool certificate" certain
certificates issued or guaranteed by the federal Home Loan Mortgage Corporation,
the Government National Mortgage Association or the Federal National Mortgage
Association but do not include certificates issued or guaranteed by the Federal
Agricultural Mortgage Corporation. Accordingly, even if these types of
mortgaged-backed securities, other than Federal Agricultural Mortgage
Corporation certificates, included in the trust assets were deemed to be assets
of the investors of a plan, account or arrangement, the underlying mortgages,
other than the mortgages underlying any Federal Agricultural Mortgage
Corporation certificates, would not be treated as assets of the plan, account or
arrangement. Private label mortgage participations, mortgage pass-through
certificates, Federal Agricultural Mortgage Corporation certificates or other
mortgage-backed securities are not "guaranteed governmental mortgage pool
certificates" within the meaning of the regulations.
In addition, the acquisition or holding of offered certificates by or
on behalf of a plan, account or arrangement could give rise to a prohibited
transaction if we or the related trustee, master servicer or special servicer or
any related underwriter, sub-servicer, REMIC administrator, manager, borrower or
obligor under any credit enhancement mechanism, or certain of their affiliates,
has, or acquires, a relationship to an investing plan, account or arrangement.
If you invest on behalf of a plan, account or arrangement, you should
consult your legal counsel and review the ERISA discussion in the related
prospectus supplement before purchasing any certificates.
PROHIBITED TRANSACTION EXEMPTIONS
If you are a fiduciary of a plan, account or arrangement, before
purchasing any offered certificates, you should consider the availability of one
of the Department of Labor's prohibited transaction exemptions, such as
prohibited transaction class exemption 75-1, which exempts certain transactions
involving plans, accounts and arrangements and certain broker-dealers, reporting
dealers and banks.
We cannot provide any assurance that such a class exemption will apply
with respect to any particular investment on behalf of a plan, account or
arrangement in the certificates or, even if it were deemed to apply, that the
exemption would apply to all transactions that may occur in connection with the
investment. The prospectus supplement with respect to the offered certificates
of any series may contain additional information regarding the availability of
other exemptions, such as the one discussed below.
UNDERWRITERS EXEMPTIONS
The Department of Labor has issued individual prohibited transaction
exemptions to most of the underwriters that we would use. Each of these
individual prohibited transaction exemptions generally exempt from the
application of the prohibited transaction provisions of ERISA and the Code
certain transactions relating to, among other things:
o the servicing and operation of certain trust assets pools, and
o the purchase, sale and holding of certain certificates that are
underwritten by that underwriter, or any person under common control with
that underwriter.
In order for these exemptions to apply, certain requirements must be
satisfied, including:
o the acquisition of the certificate by a plan, account or arrangement must
be on terms that are at least as favorable to the plan, account or
arrangement as they would be in an arm's-length transaction with an
unrelated party;
o the rights and interests evidenced by the certificates must not be
subordinated to the rights and interests evidenced by the other
certificates evidencing interests in the same mortgage asset pool;
o at the time of its acquisition by the plan, account or arrangement, the
certificate must be rated in one of the three highest generic rating
categories of any nationally recognized statistical rating organization;
o the trustee cannot be an affiliate of us, the servicer or certain other
persons;
o the sum of all payments made to and retained by the trustee, the servicer
and certain other persons must represent not more than reasonable
compensation for underwriting the certificates;
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o the sum of all payments made to and retained by us must represent not more
than the fair market value of obligations deposited in the trust;
o the sum of all payments made to and retained by the master servicer, the
special servicer and any sub-servicer must represent not more than
reasonable compensation for such person's services and reimbursement of
such person's reasonable expenses in connection therewith; and
o the investing plan, account or arrangement must be an accredited investor.
The prospectus supplement with respect to the offered certificates of
any series may contain additional information regarding the availability of
these exemptions.
INSURANCE COMPANY GENERAL ACCOUNTS
The Small Business Job Protection Act of 1996 added a new Section
401(c) to ERISA, which provides relief from the fiduciary and prohibited
transaction provisions of ERISA and the Code for transactions involving an
insurance company general account. This exemption is in addition to any
exemption that may be available under Section III of prohibited transaction
class exemption 95-60 for the purchase and holding of offered certificates by an
insurance company general account.
Pursuant to Section 401(c) of ERISA, the U.S. Department of Labor
issued a final regulation on January 5, 2000, providing guidance for
determining, in cases where insurance policies supported by an insurer's general
account are issued to or for the benefit of an ERISA Plan on or before December
31, 1998, which general account assets are Plan Assets. That regulation
generally provides that if certain specified requirements are satisfied with
respect to insurance policies issued on or before December 31, 1998, the assets
of an insurance company general account will not be Plan Assets.
Any assets of an insurance company general account which support
insurance policies issued to a plan, account or arrangement after December 31,
1998 or issued to a plan, account or arrangement on or before December 31, 1998
for which the insurance company does not comply with the requirements set forth
in the final regulation under section 401(c) of ERISA may be treated as assets
of the plan, account or arrangement. In addition, because Section 401(c) of
ERISA and the regulation issued under Section 401(c) of ERISA do not relate to
insurance company separate accounts, separate account assets are still treated
as assets of any plan, account or arrangement invested in the separate account.
If you are an insurance company contemplating the investment of general account
assets in offered certificates, you should consult your legal counsel as to the
applicability of Section 401(c) of ERISA and the availability of exemptive
relief under prohibited transaction class exemption 95-60.
CONSULTATION WITH COUNSEL
If you are a plan fiduciary which proposes to purchase offered
certificates on behalf of or with assets of a plan, account or arrangement, you
should consider your general fiduciary obligations under ERISA and you should
consult with your legal counsel as to the potential applicability of ERISA and
the Code to any investment and the availability of any prohibited transaction
exemption in connection with any investment.
TAX EXEMPT INVESTORS
A plan, account or arrangement that is exempt from federal income
taxation pursuant to Section 501 of the Code will be subject to federal income
taxation to the extent that its income is "unrelated business taxable income"
within the meaning of Section 512 of the Code. All "excess inclusions" of a
REMIC allocated to a REMIC residual certificate held by a tax-exempt plan,
account or arrangement will be considered "unrelated business taxable income"
and will be subject to federal income tax.
See "Federal Income Tax Consequences--REMICs--Taxation of Owners of
REMIC Residual Certificates-Excess Inclusions" in this prospectus.
LEGAL INVESTMENT
If and to the extent specified in the related prospectus supplement,
the offered certificates of any series will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984 ("SMMEA"). "Mortgage related securities" are legal investments to the same
extent that, under applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any of its agencies or
instrumentalities constitute legal investments for
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entities, the authorized investments of which are subject to state regulation.
Prior to December 31, 1996, classes of offered certificates would be
"mortgage related securities" for purposes of SMMEA only if they:
o were rated in one of the two highest rating categories by at least one
nationally recognized statistical rating organization; and
o were part of a series evidencing interests in a trust asset consisting of
loans directly secured by a first lien on a single parcel of real estate
upon which is located a dwelling or mixed residential and commercial
structure, and originated by the types of originators specified in SMMEA.
Further, under SMMEA as originally enacted, if a state enacted
legislation prior to October 3, 1991 that specifically limited the legal
investment authority of any entities referred to in the preceding paragraph with
respect to "mortgage related securities" under such definition, offered
certificates would constitute legal investments for entities subject to the
legislation only to the extent provided in that legislation.
Effective December 31, 1996, the definition of "mortgage related
securities" was modified to include among the types of loans to which the
securities may relate, loans secured by "one or more parcels of real estate upon
which is located one or more commercial structures". In addition, the related
legislative history states that this expanded definition includes multifamily
loans secured by more than one parcel of real estate upon which is located more
than one structure. Until September 23, 2001, any state may enact legislation
limiting the extent to which "mortgage related securities" under this expanded
definition would constitute legal investments under that state's laws.
SMMEA also amended the legal investment authority of federally
chartered depository institutions as follows:
o federal savings and loan associations and federal savings banks may invest
in, sell or otherwise deal with "mortgage related securities" without
limitation as to the percentage of their assets represented by those
securities; and
o federal credit unions may invest in "mortgage related securities" and
national banks may purchase "mortgage related securities" for their own
account without regard to the limitations generally applicable to
investment securities prescribed in 12 U.S.C. 24 (Seventh),
subject in each case to the regulations that the applicable federal regulatory
authority may prescribe.
Effective December 31, 1996, the Office of the Comptroller of the
Currency amended 12 C.F.R. Part 1 to authorize national banks to purchase and
sell for their own account, without limitation as to a percentage of the bank's
capital and surplus (but subject to compliance with certain general standards
concerning "safety and soundness" and retention of credit information in 12
C.F.R. Section 1.5), certain "Type IV securities", defined in 12 C.F.R. Section
1.2(1) to include certain "commercial mortgage-related securities" and
"residential mortgage-related securities". As defined, "commercial
mortgage-related security" and "residential mortgage-related security" mean, in
relevant part, "mortgage related security" within the meaning of SMMEA, provided
that, in the case of a "commercial mortgage-related security," it "represents
ownership of a promissory note or certificate of interest or participation that
is directly secured by a first lien on one or more parcels of real estate upon
which one or more commercial structures are located and that is fully secured by
interests in a pool of loans to numerous obligors." In the absence of any rule
or administrative interpretation by the Office of the Comptroller of the
Currency defining the term "numerous obligors," no representation is made as to
whether any class of offered certificates will qualify as "commercial
mortgage-related securities", and thus as "Type IV securities", for investment
by national banks.
The National Credit Union Administration has adopted rules, codified at
12 C.F.R. Part 703, which permit federal credit unions to invest in "mortgage
related securities" under certain limited circumstances, other than stripped
mortgage related securities, residual interests in mortgage related securities,
and commercial mortgage related securities, unless the credit union has obtained
written approval from the National Credit Union Administration to participate in
the "investment pilot program" described in 12 C.F.R. Section 703.140. The
Office of Thrift Supervision has issued Thrift Bulletin 13a (December 1, 1998),
"Management of Interest Rate Risk, Investment Securities, and Derivatives
Activities", which thrift institutions subject to the jurisdiction of the Office
of Thrift
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Supervision should consider before investing in any of the offered certificates.
All depository institutions considering an investment in the offered
certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities" of the Federal Financial
Institutions Examination Council, which has been adopted by the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision and the Office of the Comptroller
of the Currency effective May 26, 1998, and by the National Credit Union
Administration effective October 1, 1998. The policy statement sets forth
general guidelines which depository institutions must follow in managing risks,
including market, credit, liquidity, operational (transaction), and legal risks,
applicable to all securities, including mortgage pass-through securities and
mortgage-derivative products used for investment purposes.
There may be other restrictions on your ability either to purchase
certain classes of offered certificates or to purchase any class of offered
certificates representing more than a specified percentage of your assets. We
make no representations as to the proper characterization of any class of
offered certificates for legal investment or other purposes. Also, we make no
representations as to the ability of particular investors to purchase any class
of offered certificates under applicable legal investment restrictions. These
uncertainties may adversely affect the liquidity of any class of offered
certificates. Accordingly, if your investment activities are subject to legal
investment laws and regulations, regulatory capital requirements or review by
regulatory authorities you should consult with your legal advisor in determining
whether and to what extent the offered certificates of any class and series
constitute legal investments or are subject to investment, capital or other
restrictions.
USE OF PROCEEDS
Unless otherwise specified in the related prospectus supplement, the
net proceeds to be received from the sale of the offered certificates of any
series will be applied by us to the purchase of assets for the related trust or
will be used by us to cover expenses related to these purchases. We expect to
sell the certificates from time to time, but the timing and amount of offerings
of certificates will depend on a number of factors, including the volume of
mortgage assets acquired by us, prevailing interest rates, availability of funds
and general market conditions.
METHOD OF DISTRIBUTION
The certificates offered by this prospectus and the related prospectus
supplements will be offered in series through one or more of the methods
described below. The prospectus supplement prepared for the offered certificates
of each series will describe the method of offering being utilized for the
offered certificates and will state the net proceeds to us from the sale of the
offered certificates.
We intend that offered certificates will be offered through the
following methods from time to time and that offerings may be made concurrently
through more than one of these methods or that an offering of the offered
certificates of a particular series may be made through a combination of two or
more of these methods. Such methods are as follows:
o by negotiated firm commitment or best efforts underwriting and public
offering by one or more underwriters specified in the related prospectus
supplement;
o by placements by us with institutional investors through dealers; and
o by direct placements by us with institutional investors.
In addition, if specified in the related prospectus supplement, the
offered certificates of a series may be offered in whole or in part to the
seller of the related mortgage assets that would comprise the related trust
assets for the certificates. Furthermore, the related trust assets for one
series of offered certificates may include offered certificates from other
series.
If underwriters are used in a sale of any offered certificates, other
than in connection with an underwriting on a best efforts basis, the offered
certificates will be acquired by the underwriters for their own account. These
certificates may be resold from time to time in one or more transactions,
including negotiated transactions, at fixed public offering prices or at varying
prices to be determined
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at the time of sale or at the time of commitment therefor. The managing
underwriter or underwriters with respect to the offer and sale of offered
certificates of a particular series will be described on the cover of the
prospectus supplement relating to the series and the members of the underwriting
syndicate, if any, will be named in the relevant prospectus supplement.
Underwriters may receive compensation from us or from purchasers of the
offered certificates in the form of discounts, concessions or commissions.
Underwriters and dealers participating in the distribution of the offered
certificates may be deemed to be underwriters in connection with the
certificates, and any discounts or commissions received by them from us and any
profit on the resale of offered certificates by them may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933.
It is anticipated that the underwriting agreement pertaining to the
sale of the offered certificates of any series will provide that:
o the obligations of the underwriters will be subject to certain conditions
precedent;
o the underwriters will be obligated to purchase all the certificates if any
are purchased (other than in connection with an underwriting on a best
efforts basis); and
o in limited circumstances, we will indemnify the several underwriters and
the underwriters will indemnify us against certain civil liabilities,
including liabilities under the Securities Act of 1933, or will contribute
to payments required to be made in respect of any liabilities.
The prospectus supplement with respect to any series offered by
placements through dealers will contain information regarding the nature of the
offering and any agreements to be entered into between us and purchasers of
offered certificates of the series.
We anticipate that the offered certificates will be sold primarily to
institutional investors. Purchasers of offered certificates, including dealers,
may, depending on the facts and circumstances of the purchases, be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with re-offers and sales by them of offered certificates. Holders of offered
certificates should consult with their legal advisors in this regard prior to
any reoffer or sale.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933 with respect to the
certificates offered by this prospectus. This prospectus forms a part of the
registration statement. This prospectus and the related prospectus supplement do
not contain all of the information with respect to an offering that is contained
in the registration statement. For further information regarding the documents
referred to in this prospectus and the related prospectus supplement, you should
refer to the registration statement and its exhibits.
You can inspect the registration statement and its exhibits, and make
copies of these documents at prescribed rates, at the public reference
facilities maintained by the SEC at its Public Reference Section:
450 Fifth Street, N.W.
Washington, D.C. 20549,
and at its Regional Offices located as follows:
Chicago Regional Office:
500 West Madison
14th Floor
Chicago, Illinois 60661
New York Regional Office
Seven World Trade Center
New York, New York 10048.
You can also obtain copies of these materials electronically through
the SEC's Web site at www.sec.gov.
In connection with each series of offered certificates, we will file or
arrange to have filed with the SEC with respect to the related trust any
periodic reports that are required under the Securities Exchange Act of 1934.
All documents and reports that are so filed for any particular trust prior to
the termination of an offering of certificates are incorporated by reference
into, and should be considered a part of, this prospectus. Upon request, we will
provide without charge to each person receiving this prospectus in connection
with an
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offering, a copy of any or all documents or reports that are so incorporated by
reference. All requests should be directed to us in writing at:
210 West 10th Street
6th Floor
Kansas City, Missouri 64105
Attention: Lawrence D. Ashley
or by telephone at (816) 435-5000.
LEGAL MATTERS
Unless otherwise specified in the related prospectus supplement,
certain legal matters in connection with the certificates of each series,
including certain federal income tax consequences, will be passed upon for us by
Morrison & Hecker L.L.P., our counsel.
FINANCIAL INFORMATION
A new trust will be formed with respect to each series, and no trust
will engage in any business activities or have any assets or obligations prior
to the issuance of the related series. Accordingly, no financial statements with
respect to any trust will be included in this prospectus or in the related
prospectus supplement. We have determined that our financial statements will not
be material to the offering of any offered certificates.
RATINGS
It is a condition to the issuance of any class of offered certificates
that they will have been rated not lower than investment grade, that is, in one
of the four highest rating categories, by at least one nationally recognized
statistical rating organization.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by the holders of the certificates of all collections on the underlying
mortgage assets to which the holders are entitled. These ratings address:
o the structural, legal and issuer-related aspects associated with the
certificates;
o the nature of the underlying mortgage assets; and
o the credit quality of the guarantor, if any.
Ratings on mortgage pass-through certificates do not represent any
assessment of the likelihood of principal prepayments by borrowers or of the
degree by which the prepayments might differ from those originally anticipated.
As a result, if you purchase any offered certificates, you might suffer a lower
than anticipated yield. In addition, if you purchase Stripped Interest
Certificates you might, in certain cases, fail to recoup your initial
investment. Furthermore, ratings on mortgage pass-through certificates do not
address the price of the certificates or the suitability of the certificates to
you as an investment.
In particular, ratings on the offered certificates of any series will
not represent any assessment of:
o the tax attributes of those certificates or of the related trust;
o whether or to what extent prepayments of principal may be received on the
underlying mortgage loans;
o the likelihood or frequency of prepayments of principal on the underlying
mortgage loans;
o the degree to which the amount or frequency of prepayments on the
underlying mortgage loans might differ from those originally anticipated;
o whether or to what extent the interest distributable on any class of
offered certificates may be reduced in connection with interest shortfalls
resulting from the timing of voluntary prepayments;
o the likelihood that prepayment premiums, fees and charges or interest in
excess of interest at the related mortgage interest rates will be received
with respect to the underlying mortgage loans; or
o whether the holders of any Stripped Interest Certificates, despite
receiving all distributions of interest to which they are entitled, would
or would not ultimately recover their initial investments in those
certificates.
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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. Each security rating should be evaluated
independently of any other security rating.
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