<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 11, 1997.
REGISTRATION NO. 333-21315
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-11
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
ASSET SECURITIZATION CORPORATION
(Exact name of registrant as specified in governing instruments)
2 WORLD FINANCIAL CENTER
BUILDING B, 21ST FLOOR
NEW YORK, NEW YORK 10281-1198
(Address of principal executive offices)
ROBERT K. ROTTMANN
CHIEF FINANCIAL OFFICER AND TREASURER
ASSET SECURITIZATION CORPORATION
2 WORLD FINANCIAL CENTER
BUILDING B, 21ST FLOOR
NEW YORK, NEW YORK 10281-1198
(Name and address of agent for service)
Copies to:
<TABLE>
<CAPTION>
<S> <C>
Barry M. Funt, Esq.
Asset Securitization Corporation Anna H. Glick, Esq.
2 World Financial Center Cadwalader, Wickersham & Taft
Building B, 21st Floor 100 Maiden Lane
New York, New York 10281-1198 New York, New York 10038
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM CAPTION IN PROSPECTUS
- ------------ -------------------------------------------------
<S> <C> <C>
Item 1. Forepart of the Registration Statement and Outside Front Cover Page
Outside Front Cover Page of Prospectus.
Item 2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover Pages
of Prospectus.
Item 3. Summary Information, Risk Factors and Ratio Executive Summary; Summary of Prospectus; Risk
of Earnings to Fixed Charges. Factors
Item 4. Determination of Offering Price. *
Item 5. Dilution. *
Item 6. Selling Security Holders. *
Item 7. Plan of Distribution. Plan of Distribution
Item 8. Use of Proceeds. Use of Proceeds
Item 9. Selected Financial Data. *
Item 10. Management's Discussion and Analysis of *
Financial Condition and Results of
Operations.
Item 11. General Information as to Registrant. The Depositor
Item 12. Policy with Respect to Certain Activities. Outside Front Cover Page; Description of the
Subordinated Certificates
Item 13. Investment Policies of Registrant. Outside Front Cover Page; Description of the
Subordinated Certificates; Description of the
Mortgage Pool
Item 14. Description of Real Estate. Description of the Mortgage Pool
Item 15. Operating Data. *
Item 16. Tax Treatment of Registrant and Its Certain Federal Income Tax Consequences
Security Holders.
Item 17. Market Price of and Dividends on the *
Registrant's Common Equity and Related
Stockholder Matters.
Item 18. Description of Registrant's Securities. Outside Front Cover Page; Risk Factors;
Description of the Subordinated Certificates;
Description of the Mortgage Pool; Certain Federal
Income Tax Consequences
Item 19. Legal Proceedings. *
Item 20. Security Ownership of Certain Beneficial *
Owners and Management.
Item 21. Directors and Executive Officers. *
Item 22. Executive Compensation. *
Item 23. Certain Relationships and Related *
Transactions.
Item 24. Selection, Management and Custody of Description of the Subordinated Certificates;
Registrant's Investments. Description of the Mortgage Pool; The Pooling and
Servicing Agreement-Servicing of the Mortgage
Loans
Item 25. Policies with Respect to Certain *
Transactions.
Item 26. Limitations of Liability. The Pooling and Servicing Agreement-Certain
Matters Regarding the Depositor, the Servicer and
the Special Servicer
Item 27. Financial Statements and Information. Financial Information
Item 28. Interests of Named Experts and Counsel. *
Item 29. Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities.
</TABLE>
- ------------
* Not applicable or answer is in the negative.
<PAGE>
PROSPECTUS
$133,312,786
Subordinated Certificates
[NOMURA CAPITAL LOGO]
Asset Securitization Corporation, Depositor
Nomura Asset Capital Corporation, Mortgage Loan Seller
AMRESCO MANAGEMENT, INC., SERVICER AND SPECIAL SERVICER
LASALLE NATIONAL BANK, TRUSTEE
The Commercial Mortgage Pass-Through Certificates, Series 1997-D4, Class
B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates
(the "Subordinated Certificates"), together with the Senior Certificates, the
Junior Subordinated Certificates, the Class V-1, Class V-2, Class R and Class
LR Certificates (each as defined herein, and collectively, the
"Certificates"), represent beneficial ownership interests in a trust fund
(the "Trust Fund") created by Asset Securitization Corporation (the
"Depositor"). The Trust Fund consists primarily of a pool (the "Mortgage
Pool") of 121 fixed-rate mortgage loans, with original terms to maturity of
generally not more than thirty years (the "Mortgage Loans"), secured by first
liens on 252 commercial and multifamily residential properties (the
"Mortgaged Properties"). The Mortgaged Properties consist of anchored and
unanchored retail properties, office buildings, full and limited service
(cover page continued)
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" HEREIN COMMENCING ON PAGE 20.
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
INITIAL CLASS PASS THROUGH PRICE TO UNDERWRITING
CERTIFICATE BALANCE RATE PUBLIC(1)(2) DISCOUNT(3)
- ------------ ------------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C>
Class B-1 .. $35,082,312 7.525% 89.468750% 2%
Class B-2 .. $35,082,312 7.525% 87.250000% 2%
- ------------ ------------------- -------------- ----------------- --------------
Class B-3 .. $14,032,925 7.525% 84.093750% 2%
- ------------ ------------------- -------------- ----------------- --------------
Class B-4 .. $21,049,387 7.525% 67.656250% 3%
- ------------ ------------------- -------------- ----------------- --------------
Class B-5 .. $14,032,925 7.525% 64.531250% 3%
- ------------ ------------------- -------------- ----------------- --------------
Class B-6 .. $14,032,925 7.525% 50.984375% 3%
</TABLE>
- -----------------------------------------------------------------------------
(1) Plus accrued interest from April 11, 1997.
(2) The aggregate net proceeds to the Depositor from the sale of the
Subordinated Certificates will be $101,859,783, before deducting
expenses payable by the Depositor.
(3) As a percent of price to public.
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE
DEPOSITOR, THE ORIGINATORS, THE SERVICER, THE SPECIAL SERVICER, THE TRUSTEE,
THE FISCAL AGENT OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE
CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR GUARANTEED BY
ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
There is currently no secondary market for the Subordinated Certificates.
The Underwriter currently expects to make a secondary market in the
Subordinated Certificates, but has no obligation to do so. There can be no
assurance that an active secondary market for the Subordinated Certificates
will develop or that any such market, if established, will continue. See
"Plan of Distribution" herein.
The Subordinated Certificates are offered by the Underwriter subject to
prior sale, when, as and if issued, delivered to and accepted by the
Underwriter and subject to the right to reject orders in whole or in part. It
is expected that delivery of the Subordinated Certificates will be made
through the facilities of The Depository Trust Company ("DTC") in the United
States and Centrale de Livraison de Valeurs Mobiliers S.A. ("CEDEL") and The
Euroclear System ("Euroclear") in Europe, on or about April 16, 1997
(the "Closing Date").
NOMURA SECURITIES INTERNATIONAL, INC.
The Date of this Prospectus is April 11, 1997
<PAGE>
(continuation of cover page)
hotels, multifamily residential housing, nursing homes, industrial
properties, factory outlet centers, mobile home and recreational vehicle
parks and an assisted living facility. The characteristics of the Mortgage
Loans and the Mortgaged Properties are more fully described herein under
"Description of the Mortgage Pool." The Mortgage Loans were either purchased
or originated by the Mortgage Loan Seller and will be sold to the Depositor
on or prior to the date of initial issuance of the Certificates.
The Certificates consist of twenty-six classes (each, a "Class"),
designated as the Class A-1A Certificates, Class A-1B Certificates, Class
A-1C Certificates, Class A-1D Certificates, Class A-1E Certificates, Class
A-CS1 Certificates, Class PS-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates, Class A-6
Certificates, Class A-7 Certificates and Class A-8 Certificates
(collectively, the "Senior Certificates"), Class B-1 Certificates, Class B-2
Certificates, Class B-3 Certificates, Class B-4 Certificates, Class B-5
Certificates, Class B-6 Certificates, Class B-7 Certificates, Class B-7H
Certificates, Class V-1 Certificates, Class V-2 Certificates, Class LR
Certificates and Class R Certificates. Only the Class B-1 Certificates, Class
B-2 Certificates, Class B-3 Certificates, Class B-4 Certificates, Class B-5
Certificates and Class B-6 Certificates (collectively, the "Subordinated
Certificates") are being offered hereby; the Senior Certificates have been
publicly offered under a separate prospectus and are not offered hereby; and
the Class B-7, Class B-7H (collectively, the "Junior Subordinated
Certificates"), Class V-1, Class V-2, Class R and Class LR Certificates are
not offered hereby.
Distributions on the Subordinated Certificates will be made, to the extent
of Available Funds, on the 14th day of each month, or, if any such 14th day
is not a business day, then on the next succeeding business day, beginning on
April 16, 1997 (each, a "Distribution Date"); provided, however, the
Distribution Date will be no earlier than the third business day following
the 11th day of each month and, provided, further, that if the 11th day of
any month is not a business day, the Distribution Date will be the fourth
business day following the 11th day of such month. Distributions allocable to
interest on the Subordinated Certificates on each Distribution Date will be
based on the Pass-Through Rate for each respective Class as described herein
and the aggregate principal balance (the "Certificate Balance") of such Class
outstanding immediately prior to such Distribution Date. Distributions in
respect of principal of the Subordinated Certificates will be made as
described herein under "Description of the Subordinated Certificates --
Distributions -- Priorities."
THE YIELD TO INVESTORS WILL BE SENSITIVE TO THE TIMING AND MAGNITUDE OF
LOSSES ON THE MORTGAGE LOANS DUE TO LIQUIDATIONS. IN ADDITION, TO THE EXTENT
LOSSES ON THE MORTGAGE LOANS EXCEED THE PRINCIPAL BALANCE OF THE CLASSES OF
CERTIFICATES SUBORDINATE TO ANY CLASS OF SUBORDINATED CERTIFICATES, SUCH
CLASS OF SUBORDINATED CERTIFICATES WILL BEAR A LOSS EQUAL TO THE AMOUNT OF
SUCH EXCESS UP TO AN AMOUNT EQUAL TO THE OUTSTANDING CERTIFICATE BALANCE
THEREOF. NO REPRESENTATION IS MADE AS TO THE RATE OF PREPAYMENTS ON, OR RATE
OR AMOUNT OF LIQUIDATIONS OF, THE MORTGAGE LOANS OR AS TO THE ANTICIPATED
YIELD TO MATURITY OF ANY SUBORDINATED CERTIFICATE. THE YIELD TO MATURITY ON
EACH CLASS OF THE SUBORDINATED CERTIFICATES WILL BE SENSITIVE TO THE RATE AND
TIMING OF PRINCIPAL PAYMENTS (INCLUDING BOTH VOLUNTARY AND INVOLUNTARY
PREPAYMENTS, DEFAULTS AND LIQUIDATIONS) ON THE MORTGAGE LOANS AND PAYMENTS
WITH RESPECT TO REPURCHASES THEREOF THAT ARE APPLIED IN REDUCTION OF THE
CERTIFICATE BALANCE OF SUCH CLASS. SEE "PREPAYMENT AND YIELD CONSIDERATIONS"
HEREIN.
AMRESCO Management, Inc. will act as Servicer of the Mortgage Loans. The
obligations of the Servicer with respect to the Certificates will be limited
to its contractual servicing obligations and the obligation under certain
circumstances to make Advances in respect of the Mortgage Loans. In certain
limited circumstances AMRESCO Management, Inc., in its capacity as the
initial Special Servicer may be required to make Property Advances. If the
Servicer is not the Special Servicer and the Special Servicer fails to make
the required Advance, the Servicer, subject to a recoverability
determination, will be required to make the Advance. The Servicer will not
act as an insurer or credit enhancer of the Mortgage Pool. If the Servicer
fails to make a required Advance, the Trustee, subject to a recoverability
determination, will be required to make such Advance. If the Trustee fails to
make a required Advance, the Fiscal Agent, subject to a recoverability
determination, will be required to make the Advance. See "The Pooling and
Servicing Agreement -- Advances" herein.
It is a condition to the issuance of the Subordinated Certificates that
the Class B-1 Certificates be rated "BB+" by each of Standard & Poor's Rating
Services ("S&P") and Fitch Investors Service, L.P. ("Fitch"), the Class B-2
Certificates be rated "BB" by each of S&P and Fitch, the Class B-3
Certificates be rated "BB-" by each of S&P and Fitch, the Class B-4 (cover
page continued)
<PAGE>
(continuation of cover page)
Certificates be rated "B+" by S&P, the Class B-5 Certificates be rated "B" by
S&P and the Class B-6 Certificates be rated "B-" by S&P. For a description of
the limitations of the ratings of the Subordinated Certificates, see "Rating"
herein. The Rated Final Distribution Date of each Class of Subordinated
Certificates is April 14, 2029.
Elections will be made to treat designated portions of the Trust Fund,
exclusive of the Reserve Accounts, Lock Box Accounts, Cash Collateral
Accounts, Excess Interest and Default Interest as two separate "real estate
mortgage investment conduits" (each a "REMIC" or, alternatively, the
"Upper-Tier REMIC" and the "Lower-Tier REMIC," respectively) for federal
income tax purposes. The Senior Certificates, Subordinated Certificates and
Junior Subordinated Certificates constitute "regular interests" in the
Upper-Tier REMIC, and the Class R and Class LR Certificates constitute the
sole Class of "residual interests" in the Upper-Tier REMIC and Lower-Tier
REMIC, respectively. The Subordinated Certificates, together with the Senior
Certificates and Junior Subordinated Certificates, are sometimes collectively
referred to herein as the "Regular Certificates." The Class V-1 Certificates
represent the right to receive Net Default Interest and the Class V-2
Certificates represent the right to receive Excess Interest, which portions
of the Trust Fund will be treated as a grantor trust for federal income tax
purposes. See "Certain Federal Income Tax Consequences" herein.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
SUBORDINATED CERTIFICATES, INCLUDING OVER-ALLOTMENTS OR SHORT SALES OF THE
SUBORDINATED CERTIFICATES, BIDS FOR AND PURCHASES OF THE SUBORDINATED
CERTIFICATES IN THE OPEN MARKET AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
The distribution of this Prospectus and the offer or sale of the
Subordinated Certificates may be restricted by law in certain jurisdictions.
Persons into whose possession this Prospectus or any Subordinated
Certificates come must inform themselves about, and observe, any such
restrictions. In particular, there are restrictions on the distribution of
this Prospectus and the offer or sale of the Subordinated Certificates in the
United Kingdom (see "Plan of Distribution" herein).
The Depositor does not intend to register the Subordinated Certificates
under the Securities and Exchange Law of Japan (the "SEL"). Accordingly, the
Subordinated Certificates may not be offered or sold directly or indirectly
in Japan, and this Prospectus may not be distributed or circulated in Japan,
except in circumstances that do not constitute an offer to the public within
the meaning of the SEL.
The transferability of the Subordinated Certificates is subject to certain
limitations. See "Description of the Subordinated Certificates -- Transfer
Restrictions."
All capitalized terms herein have the meanings described herein. See
"Index of Significant Definitions" and "Glossary of Key Real Estate, Mortgage
and Mortgage Loan Underwriting Terms" herein.
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING
TRANSACTIONS IN THE SUBORDINATED CERTIFICATES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A COPY OF THIS PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2
<PAGE>
PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Summary of Prospectus.............................................................. 6
Risk Factors ...................................................................... 20
The Mortgage Loans................................................................ 20
The Certificates.................................................................. 35
Industry Overview.................................................................. 41
The Depositor...................................................................... 42
The Mortgage Loan Seller........................................................... 42
The Trustee........................................................................ 43
The Fiscal Agent................................................................... 43
The Servicer and Initial Special Servicer.......................................... 43
Description of the Mortgage Pool................................................... 44
General........................................................................... 44
Security for the Mortgage Loans................................................... 45
The Mortgage Loan Program--Underwriting Standards................................. 45
Significant Mortgage Loans........................................................ 48
Certain Terms and Conditions of the Mortgage Loans................................ 57
Additional Mortgage Loan Information.............................................. 62
Description of the Subordinated Certificates....................................... 75
General........................................................................... 75
Subordination..................................................................... 76
Distributions..................................................................... 76
Realized Losses................................................................... 84
Prepayment Interest Shortfalls.................................................... 85
Delinquency Reduction Amounts and Appraisal Reduction Amounts..................... 85
Appraisal Reductions.............................................................. 86
Delivery, Form and Denomination................................................... 86
Book-Entry Registration........................................................... 87
Definitive Certificates........................................................... 89
Transfer Restrictions............................................................. 90
Prepayment and Yield Considerations................................................ 91
Mortgagor Defaults................................................................ 91
Yield Tables...................................................................... 92
Yield............................................................................. 99
Rated Final Distribution Date..................................................... 100
Weighted Average Life of Subordinated Certificates................................ 100
The Pooling and Servicing Agreement................................................ 109
General........................................................................... 109
Assignment of the Mortgage Loans.................................................. 109
Representations and Warranties; Repurchase........................................ 109
Servicing of the Mortgage Loans; Collection of Payments........................... 115
Advances.......................................................................... 116
Accounts.......................................................................... 118
Withdrawals from the Collection Account........................................... 119
Enforcement of "Due-on-Sale" and "Due-on-Encumbrance" Clauses..................... 120
Inspections....................................................................... 120
Insurance Policies................................................................ 121
Evidence as to Compliance......................................................... 122
3
<PAGE>
PAGE
------
Certain Matters Regarding the Depositor, the Servicer and the Special Servicer ... 122
Events of Default................................................................. 123
Rights Upon Event of Default...................................................... 124
Amendment......................................................................... 124
Voting Rights..................................................................... 125
Realization Upon Mortgage Loans................................................... 125
Modifications..................................................................... 131
Termination....................................................................... 132
Optional Termination.............................................................. 132
The Trustee....................................................................... 133
Duties of the Trustee............................................................. 133
Duties of the Fiscal Agent........................................................ 134
Servicing Compensation and Payment of Expenses.................................... 134
Special Servicing................................................................. 134
Servicer and Special Servicer Permitted to Buy Certificates....................... 136
Reports to Certificateholders; Available Information.............................. 136
Trustee Reports.................................................................. 136
Servicer Reports................................................................. 137
Other Information................................................................ 138
ERISA Considerations............................................................... 140
Certain Legal Aspects of Mortgage Loans............................................ 140
General........................................................................... 140
Types of Mortgage Instruments..................................................... 140
Leases and Rents.................................................................. 141
Personalty........................................................................ 141
Subordinate Financing............................................................. 141
Foreclosure....................................................................... 142
Judicial Foreclosure.............................................................. 142
Non-Judicial Foreclosure/Power of Sale............................................ 142
Limitations on Lender's Rights.................................................... 142
Rights of Redemption.............................................................. 144
Anti-Deficiency Legislation....................................................... 144
Leasehold Risks................................................................... 144
Bankruptcy Laws................................................................... 145
Environmental Legislation......................................................... 146
Due-on-Sale and Due-on-Encumbrance................................................ 147
Acceleration on Default........................................................... 148
Default Interest, Prepayment Charges and Prepayments.............................. 148
Applicability of Usury Laws....................................................... 148
Alternative Mortgage Instruments.................................................. 148
Soldiers' and Sailors' Civil Relief Act of 1940................................... 149
Forfeitures in Drug and RICO Proceedings.......................................... 149
Certain Laws and Regulations...................................................... 149
Type of Mortgaged Property........................................................ 149
Americans with Disabilities Act................................................... 150
Certain Federal Income Tax Consequences............................................ 151
General........................................................................... 151
Status of Subordinated Certificates............................................... 151
Qualification as a REMIC.......................................................... 152
Taxation of Subordinated Certificates ............................................ 153
4
<PAGE>
PAGE
------
General......................................................................... 153
Original Issue Discount......................................................... 153
Acquisition Premium............................................................. 154
Market Discount................................................................. 155
Premium......................................................................... 155
Election to Treat All Interest Under the Constant Yield Method.................. 156
Treatment of Losses............................................................. 156
Sale or Exchange of Subordinated Certificates..................................... 156
Taxes That May Be Imposed on a REMIC.............................................. 157
Liquidation of the REMIC.......................................................... 157
Taxation of Certain Foreign Investors............................................. 158
Backup Withholding................................................................ 158
Reporting Requirements............................................................ 158
Legal Investment................................................................... 159
Use of Proceeds.................................................................... 159
Plan of Distribution............................................................... 160
Legal Matters...................................................................... 161
Financial Information.............................................................. 161
Rating............................................................................. 161
Available Information.............................................................. 161
Index of Significant Definitions................................................... 162
Glossary of Key Real Estate, Mortgage and Mortgage Loan Underwriting Terms ....... 168
Annex A--Loan Characteristics...................................................... A-1
Annex B--Global Clearance, Settlement and Tax Documentation Procedures ............ B-1
Annex C--Form of Reports to Certificateholders .................................... C-1
INDEX OF TABLES
Mortgage Notes .................................................................... 66
Range of DSCRs..................................................................... 69
Range of Loan-to-Value Ratios...................................................... 69
Range of Loan-to-Value Ratios at Earlier of Anticipated Repayment Dates or
Maturity.......................................................................... 69
Mortgaged Properties By State...................................................... 70
Range of Year Built................................................................ 70
Cut-Off Date Loan Amount By Property Type.......................................... 71
Range of Loan Amounts or Loan Balances............................................. 72
Range of Anticipated Remaining Term in Months...................................... 72
Range of Remaining Term in Months.................................................. 73
Anticipated Repayment By Year...................................................... 73
Range of Mortgage Rates............................................................ 74
Delinquency Status as of March 1, 1997............................................. 74
Range of Remaining Lock-Out Period In Months....................................... 74
</TABLE>
5
<PAGE>
SUMMARY OF PROSPECTUS
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
relating to the Subordinated Certificates in making their investment
decision. The following Summary of Prospectus does not include all relevant
information relating to the securities and collateral described herein,
particularly with respect to the risks and special considerations involved
with an investment in such securities, and is qualified in its entirety by
reference to the detailed information appearing elsewhere in this Prospectus.
Prior to making an investment decision, a prospective investor should
carefully review this Prospectus. Capitalized terms used and not otherwise
defined in the Summary of Prospectus have the respective meanings assigned to
them in this Prospectus. See "Index of Significant Definitions" and "Glossary
of Key Real Estate, Mortgage and Mortgage Loan Underwriting Terms" in this
Prospectus.
OVERVIEW OF THE OFFERING
Nomura Asset Capital Corporation (the "Mortgage Loan Seller") is a leading
underwriter of commercial mortgages having originated approximately $15.7
billion in the past three years. The commercial mortgage-backed securities
("CMBS") market has recently experienced significant growth with
securitization volumes of $20.1 billion, $18.5 billion and $30.5 billion in
1994, 1995, and 1996, respectively. Through December 1996, affiliates of the
Mortgage Loan Seller, including the Depositor, have securitized $7.3 billion
of commercial mortgage loans originated by the Mortgage Loan Seller and by
unaffiliated originators through twenty separate transactions. The
securitization described herein is being marketed in three separate
offerings: (i) investment grade classes with a principal balance in the
aggregate of $1,248,930,326, which have been sold pursuant to a separate
Prospectus; (ii) below investment grade classes with a principal balance in
the aggregate of $133,312,786, which are being offered hereby; and (iii) two
unrated junior subordinated "first loss" classes with an aggregate principal
balance equal to $21,049,393 (approximately 1.5% of the Initial Pool Balance)
which are not being offered hereby. It is expected that the "first loss"
class will be sold to the Special Servicer or an affiliate of the Special
Servicer in a private transaction. However, there can be no assurance that
the Special Servicer or an affiliate of the Special Servicer will purchase
such Certificates.
Historically, the below investment grade classes of CMBS securitizations
have been sold through private transactions. Typically, the size of such
class is smaller than would normally trade in the public markets. In light of
the greater liquidity that could result from the relatively large size of the
below investment grade portion of this securitization, this offering of
Subordinated Certificates is being made on a registered basis. This offering
provides investors with the opportunity to invest in subordinated CMBS having
the following characteristics:
o Diversification of Underlying Mortgage Pool. This offering is secured
by Mortgages on 252 Mortgaged Properties. The Mortgaged Properties are
located in 39 states. No single Mortgage Loan represents greater than
5% of the Initial Pool Balance. The Mortgage Pool is also diversified
by property type, and includes loans secured by retail, office, hotel,
multifamily, industrial, mobile home park and healthcare properties.
Accordingly, default risk has been diversified over the entire
Mortgage Pool and is not concentrated in a single Mortgaged Property
or property type.
o Prepayment Restrictions. All of the Mortgage Loans prohibit prepayment
during all or substantially all of their terms to maturity or the
Anticipated Repayment Date, whichever is earlier. Accordingly, the
yield to investors should not be significantly affected by voluntary
prepayment.
o Debt Service Coverage. The Cut-off Date weighted average debt service
coverage ratio of the Mortgage Pool (analogous to EBITDA less
maintenance capital expenditures and leasing costs divided by annual
mortgage loan principal and interest payments) is 1.42. For commercial
mortgages, as the debt service coverage ratio on an individual
Mortgage Loan starts to rise substantially over 1.0, defaults should
be less likely absent unanticipated events or economic downturns.
o Initial Equity Cushion. Each of the Mortgage Loans originated or
purchased by the Mortgage Loan Seller is generally consistent with its
underwriting standards. Those underwriting standards provide for a
maximum loan to value ratio of between 70% and 80% depending on the
property type on an individual Mortgage Loan. The weighted average
ratio of Mortgage Loan principal balance to appraised value for the
Mortgage Pool is 67%.
o Deleveraging. The Mortgage Loan Seller's mortgage documentation
generally prohibits, with certain exceptions, the incurrence of
additional secured debt. However, see "Risk Factors -- Other
Financing." Since principal generally is amortized with each Monthly
Payment (and the application of Excess Cash Flow, if applicable), the
ratio of the amount outstanding on any Mortgage Loan to the initial
appraised value of the Mortgaged Property underlying such Mortgage
Loan will decrease over time.
6
<PAGE>
INDUSTRY OVERVIEW
The commercial real estate market is estimated to be valued at
approximately $3 trillion. While much of this real estate is owned free of
any mortgage or other debt, a sizable portion is financed through commercial
mortgages. Commercial mortgages are predominantly secured by income producing
properties, including multifamily residential, office buildings, retail
properties, industrial properties, warehouse properties, mixed use
properties, mobile home parks, hotels, self-storage facilities, nursing
homes, assisted living facilities and senior housing centers. The commercial
real estate mortgage market is estimated to be valued at approximately $1
trillion. The traditional holders of the majority of commercial mortgage
loans have been banks, life insurance companies and savings and loan
institutions. In 1996, commercial banks held approximately 41% of outstanding
commercial mortgage loans, followed by life insurance companies (21%),
savings and loans (7%) and private mortgage-backed securities conduits (7%).
Other major holders include pension funds and federal agencies. Recently,
however, life insurance companies and pension funds have increasingly been
investing in beneficial interests in securitized pools of commercial mortgage
loans.
CMBS issuances have grown significantly since 1990, with over $114 billion
in aggregate issuances from the beginning of 1990 through the end of 1996. In
1996 alone, over $30 billion of CMBS were issued. See "Industry Overview"
herein.
PARTICIPANTS
DEPOSITOR ..................... Asset Securitization Corporation, a Delaware
corporation and a wholly owned subsidiary of
Nomura Asset Capital Corporation (the
"Mortgage Loan Seller"), and an affiliate of
Nomura Securities International, Inc.
("NSI" or the "Underwriter"). See "The
Depositor" herein.
MORTGAGE LOAN SELLER .......... Nomura Asset Capital Corporation, a Delaware
corporation, the parent of the Depositor and
an affiliate of NSI.
Nomura Asset Capital Corporation, the
Mortgage Loan Seller, was incorporated in
1992 and is engaged primarily in the
business of originating commercial mortgage
loans. The Mortgage Loan Seller has been
involved in the origination of approximately
$15.7 billion in commercial mortgage loans
and other commercial real estate investments
from inception through March 1, 1997.
Affiliates of the Mortgage Loan Seller have
been involved in a total of twenty-one
offerings of CMBS from June 1993 through
March 1997 (including the Senior
Certificates not being offered pursuant to
this Prospectus) totaling approximately $8.9
billion in initial principal amount. The
Mortgage Loans included in these offerings
were predominantly originated directly by
the Mortgage Loan Seller. See "The Mortgage
Loan Seller."
SERVICER AND SPECIAL
SERVICER ..................... AMRESCO Management, Inc., a Texas
corporation ("AMI"), will be the Servicer
and initial Special Servicer (the "Servicer"
and the "Special Servicer" in such
respective capacities) and in such
capacities will be responsible for servicing
the Mortgage Loans as described under "The
Pooling and Servicing Agreement." The
Servicer will also be required to make
certain Advances in accordance with the
terms of the Pooling and Servicing
Agreement. See "The Pooling and Servicing
Agreement -- Advances." AMI is a wholly
owned subsidiary of AMRESCO, INC.
("AMRESCO"), a publicly traded (NASDAQ)
company. The servicing of all performing
loans will be performed by the AMRESCO
Services Division of AMI.
As of January 31, 1997, AMRESCO's portfolio
consisted of approximately 9,374 loans with
an aggregate principal balance of
approximately $16.9 billion. Within this
servicing portfolio are loans which have
been securitized in a total of 43 loan
portfolios with an aggregate principal
balance of $10.6 billion. The portfolio is
significantly diversified both
geographically and by product type.
7
<PAGE>
The Special Servicer will be responsible for
servicing functions with respect to Mortgage
Loans that, in general, are in default or as
to which default is imminent and for
administering any REO Property. The holders
of greater than 50% of the Percentage
Interest of the most subordinate Class of
Certificates then outstanding (which Class
will initially be the Junior Subordinated
Certificates) will be entitled, at their
option, to remove the Special Servicer with
or without cause, and appoint a successor
Special Servicer, provided that each Rating
Agency confirms in writing that such removal
and appointment, in and of itself, would not
cause a downgrade, qualification or
withdrawal of the then current ratings
assigned to any Class of Certificates
(provided, however, that for purposes of
determining the most subordinate class, the
Class A-1A, Class A-1B, Class A-1C, A-1D,
Class A-CS1 and Class PS-1 Certificates
collectively and the Class B-7 and Class
B-7H Certificates together, will, in each
case, be treated as one class). The Servicer
and Special Servicer will be permitted to
purchase any Class of Certificates. See
"Risk Factors -- The Certificates --
Servicer or Special Servicer May Purchase
Certificates; Conflict of Interest" and "The
Pooling and Servicing Agreement -- Special
Servicing" herein. It is anticipated that
the Special Servicer or an affiliate of the
Special Servicer will purchase all or a
majority of the Class B-7 Certificates.
However, there can be no assurance that the
Special Servicer or an affiliate of the
Special Servicer will purchase such
Certificates.
ORIGINATORS ................... The Mortgage Loan Seller and Bloomfield
Acceptance Company, LLC, a Michigan limited
liability company (individually,
"Bloomfield," and together with the Mortgage
Loan Seller, the "Originators").
All of the Mortgage Loans were originated by
the Mortgage Loan Seller or Bloomfield as
shown in the following table during the
period commencing September 3, 1996 and
ending on the Cut-off Date:
ORIGINATORS OF THE MORTGAGE LOANS (1)
<TABLE>
<CAPTION>
% OF
INITIAL NUMBER OF
POOL MORTGAGE
ORIGINATOR BALANCE LOANS
- ---------------------------------- --------- -----------
<S> <C> <C>
Nomura Asset Capital Corporation .. 96.4% 108
Bloomfield Acceptance Company,
LLC............................... 3.6% 13
</TABLE>
(1) All statistical information set forth in this and the following
tables in the Summary regarding the "% of Initial Pool Balance" is based on the
Cut-off Date Principal Balance of the related Mortgage Loan or Loans.
THE MORTGAGE POOL
MORTGAGE LOAN POOL
CHARACTERISTICS .............. The mortgage loan pool consists of
approximately 121 fixed rate mortgage loans
secured by approximately 252 commercial and
multifamily properties with an aggregate
principal balance of approximately
$1,403,292,505 as of the Cut-off Date. Each
Mortgage Loan is generally non-recourse and
is secured by one or more first mortgage
liens encumbering the related borrower's
interest in the related property or
properties. The Mortgage Pool includes the
following three types of loans: balloon,
anticipated repayment date ("ARD") and fully
amortizing. "ARD Loans" generally are
Mortgage Loans that substantially fully
amortize by their respective maturity dates
(and not their Anticipated Repayment Dates)
but provide for an Anticipated Repayment
Date on which a
8
<PAGE>
substantial amount of principal will be due
if the borrower elects to prepay the
Mortgage Loan in full on such date. Such
Mortgage Loans provide for an increased
interest rate after the Anticipated
Repayment Date and require the application
of all Excess Cash Flow to amortize
principal after the Anticipated Repayment
Date. See "Description of the Mortgage Pool
-- Certain Terms and Conditions of the
Mortgage Loans" herein. Approximately 96% of
the Initial Pool Balance consists of ARD
Loans. See "Description of the Mortgage Pool
-- Significant Mortgage Loans -- The Marina
Harbor Loan and Properties" for a discussion
of certain provisions of the Marina Harbor
Loan which differ from the general ARD loan
provisions.
The Mortgage Pool is diversified with
mortgage loans in 39 different states. The
largest concentration by principal amount is
in California with approximately 21% of the
pool. The mortgage loan pool is also
diversified by property type. The largest
concentrations by principal amount are in
retail (not including factory outlet) (33%),
office (24%) and hotel (15%) properties. The
other property types included in the
Mortgage Pool include multifamily
residential housing, nursing homes,
industrial properties, factory outlet
centers, mobile home and recreational
vehicle parks and an assisted living
facility. The mortgage loan pool includes 23
loans of over $20 million each, which make
up approximately 64% of the total principal
balance. The mortgage pool has a weighted
average debt service coverage ratio of 1.42x
and a weighted average loan to current
appraised value ratio of 67%.
GENERAL CHARACTERISTICS (AS OF CUT-OFF DATE,
UNLESS OTHERWISE INDICATED)
<TABLE>
<CAPTION>
<S> <C>
Initial Pool Balance (1)..................................$1,403,292,505
Number of Mortgage Loans.................................. 121
Number of Mortgaged Properties............................ 252
Average Mortgage Loan Balance............................. $11,597,459
Weighted Average Months Since Loan Origination ........... 1
Weighted Average Mortgage Rate............................ 8.666%
Range of Mortgage Rates................................... 7.575%-10.1%
Weighted Average Remaining Term to the Earlier of
Maturity or Anticipated Repayment Date................... 140 months
Range of Remaining Term to the Earlier of Maturity or
Anticipated Repayment Date............................... 80-241 months
Weighted Average Original Amortization Term (2) .......... 312 months
Range of Original Amortization............................ 156-360 months
Weighted Average DSCR (3)................................. 1.42
Range of DSCR (3)......................................... 1.22-2.20
Weighted Average LTV (4).................................. 67%
Range of LTV.............................................. 34%-86%
Weighted Average LTV at Earlier of Anticipated
Repayment Date or Maturity (5)........................... 51%
Percentage of Initial Pool Balance made up of:
ARD Loans .............................................. 96.2%
Fully Amortizing Loans (other than ARD Loans) .......... 2.5%
Balloon Loans .......................................... 1.2%
Loans Delinquent as of the Cut-off Date................... 0%
</TABLE>
9
<PAGE>
(1) Subject to a permitted variance of plus or minus 5%.
(2) "Weighted Average Remaining Amortization Term" reflects the fact
that certain Mortgage Loans provide for Monthly Payments based on amortization
schedules at least 60 months longer than the remaining stated terms of such
Mortgage Loans. See "Description of the Mortgage Pool -- Certain Terms and
Conditions of the Mortgage Loans -- Amortization of Principal" herein.
(3) DSCR for any Mortgage Loan is equal to the Net Cash Flow from the
related Mortgaged Property divided by the Annual Debt Service for such
Mortgaged Property (as defined below).
(4) "LTV" or "Loan-to-Value Ratio" means, with respect to any Mortgage
Loan, the principal balance of such Mortgage Loan as of the Cut-off Date
divided by the appraised value of the Mortgaged Property or Properties securing
such Mortgage Loan.
(5) "LTV at Earlier of Anticipated Repayment Date or Maturity" for any
Mortgage Loan is calculated in the same manner as LTV as of the Cut-off Date,
except that the Mortgage Loan Cut-off Date Principal Balance used to calculate
the LTV as of the Cut-off Date has been adjusted to give effect to the
amortization of the applicable Mortgage Loan as of its maturity date or, in the
case of a Mortgage Loan that has an Anticipated Repayment Date, as of its
Anticipated Repayment Date. Such calculation thus assumes that the appraised
value of the Mortgaged Property or Properties securing a Mortgage Loan on the
maturity date or Anticipated Repayment Date, as applicable, is the same as the
appraised value as of the Cut-off Date. There can be no assurance that the
value of any particular Mortgaged Property will not have declined from the
appraised value.
NSI HAS MADE AVAILABLE AN ELECTRONIC VERSION
OF THIS PROSPECTUS ON THE WORLD WIDE WEB AT
"HTTP://WWW.NOMURANY.COM". THE PASSWORD FOR
ACCESS TO SUCH WEB SITE IS "CMBS". CERTAIN
STATISTICAL INFORMATION INCLUDED IN THIS
PROSPECTUS CAN BE DOWNLOADED FROM SUCH WEB
SITE.
REPRESENTATIONS AND
WARRANTIES .................... The Mortgage Loan Seller will sell the
Mortgage Loans to the Depositor and, in
connection therewith, will make certain
representations and warranties, as more
fully described herein. The Depositor will
assign the Mortgage Loans, together with its
rights and remedies in respect of breaches
of the Mortgage Loan Seller's
representations and warranties to the
Trustee for the benefit of
Certificateholders. With respect to Mortgage
Loans acquired by the Mortgage Loan Seller
from Bloomfield, the Mortgage Loan Seller
will also assign to the Depositor and the
Depositor will assign to the Trustee for the
benefit of the Certificateholders, any
rights and remedies in respect of breaches
of representations or warranties made by
Bloomfield. See "The Pooling and Servicing
Agreement -- Representations and Warranties;
Repurchase."
THE OFFERING
SUBORDINATED CERTIFICATES ..... $133,312,786 of Subordinated Certificates
consisting of $35,082,312 Class B-1
Certificates, $35,082,312 Class B-2
Certificates, $14,032,925 Class B-3
Certificates, $21,049,387 Class B-4
Certificates, $14,032,925 Class B-5
Certificates, and $14,032,925 Class B-6
Certificates.
TITLE OF CERTIFICATES ......... Asset Securitization Corporation, Commercial
Mortgage Pass-Through Certificates, Series
1997-D4. The Subordinated Certificates,
together with the other Classes of
Certificates represent beneficial ownership
interests in the Trust Fund to be created by
the Depositor. The Trust Fund consists
primarily of a Mortgage Pool of 121 Mortgage
Loans, with original terms to maturity of
generally not more than thirty years,
secured by first liens on 252 commercial and
multifamily Mortgaged Properties.
SUBORDINATION ................. As a means of providing protection to the
holders of the Senior Certificates against
losses associated with delinquent and
defaulted Mortgage Loans, the rights of the
holders of the Subordinated Certificates to
receive distributions of interest and
principal with respect to the Mortgage Loans
will be subordinate to the corresponding
rights of the holders of the Senior
Certificates. The rights of
10
<PAGE>
the holders of the Class B-1 Certificates to
receive distributions of interest and
principal will be subordinate to those of
the Senior Certificates; the rights of the
holders of the Class B-2 Certificates to
receive distributions of interest and
principal will be subordinate to those of
the Senior Certificates and Class B-1
Certificates; the rights of the holders of
the Class B-3 Certificates to receive
distributions of interest and principal will
be subordinate to those of the Senior
Certificates, Class B-1 and Class B-2
Certificates; the rights of the holders of
the Class B-4 Certificates to receive
distributions of interest and principal will
be subordinate to those of the Senior
Certificates, Class B-1, Class B-2 and Class
B-3 Certificates; the rights of the holders
of the Class B-5 Certificates to receive
distributions of interest and principal will
be subordinate to those of the Senior
Certificates, Class B-1, Class B-2, Class
B-3 and Class B-4 Certificates; and the
rights of the holders of the Class B-6
Certificates to receive distributions of
interest and principal will be subordinate
to those of the Senior Certificates, Class
B-1, Class B-2, Class B-3, Class B-4 and
Class B-5 Certificates. The rights of the
Junior Subordinated Certificates to receive
distributions of interest and principal will
be subordinate to those of the Senior
Certificates and the Subordinated
Certificates. This subordination will be
effected in two ways: (i) by the
preferential right of holders of a Class of
Certificates to receive on any Distribution
Date the amounts of interest and principal
distributable in respect of such
Certificates on such Distribution Date prior
to any distribution being made on such
Distribution Date in respect of any Classes
of Certificates subordinate thereto and (ii)
by the allocation of Realized Losses, first,
to the Junior Subordinated Certificates,
second, to the Class B-6 Certificates,
third, to the Class B-5 Certificates,
fourth, to the Class B-4 Certificates,
fifth, to the Class B-3 Certificates, sixth,
to the Class B-2 Certificates, seventh, to
the Class B-1 Certificates, and finally, to
the Senior Certificates in accordance with
the terms of the Pooling and Servicing
Agreement. No other form of credit
enhancement will be available for the
benefit of the holders of the Subordinated
Certificates. See "Description of the
Subordinated Certificates" and "Description
of the Subordinated Certificates --
Distributions -- Priorities" herein.
CERTIFICATE SUMMARY ........... Each Class of Certificates has the aggregate
initial Certificate Balance, and other
characteristics set forth below. The
Subordinated Certificates, together with the
Senior Certificates, the Junior Subordinated
Certificates, the Class V-1, Class V-2,
Class R and Class LR Certificates have been
issued pursuant to the Pooling and Servicing
Agreement.
11
<PAGE>
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVG.
AVERAGE LIFE*
INITIAL AGGREGATE PERCENT PASS-THROUGH (YRS.)
CERTIFICATE PRINCIPAL PERCENT OF RATE AS FROM THE
OR OF CREDIT OF CUT-OFF CLOSING PRINCIPAL
CLASS RATINGS NOTIONAL AMOUNT TOTAL SUPPORT DESCRIPTION DATE DATE WINDOW*
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Senior Certificates (not offered hereby)
-----------------------------------------------------------------------------------------------------------
A-1A AAA/AAA/Aaa/AAA $ 127,000,000 9.05% 32.0% Fixed Rate 7.35000% 3.59 4/97-10/03
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
A-1B AAA/AAA/Aaa/AAA $ 91,010,000 6.49% 32.0% Fixed Rate 7.40000% 6.84 10/03-5/04
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
A-1C AAA/AAA/Aaa/AAA $ 65,000,000 4.63% 32.0% Fixed Rate 7.42000% 8.27 5/04-9/06
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
A-1D AAA/AAA/Aaa/AAA $ 671,228,903 47.83% 32.0% Fixed Rate 7.49000% 9.83 9/06-7/07
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
A-1E AAA/na/Aa2/na $ 84,197,550 6.00% 26.0% Fixed Rate 7.52500% 11.44 7/07-1/09
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
Weighted Average
A-2 AA+/AA/Aa2/na $ 28,065,850 2.00% 24.0% Coupon 7.40691% 11.89 1/09-3/09
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
Weighted Average
A-3 AA/na/na/na $ 49,115,237 3.50% 20.5% Coupon 7.45691% 11.91 3/09-3/09
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
Weighted Average
A-4 A+/A/A2/na $ 21,049,387 1.50% 19.0% Coupon 7.48691% 12.25 3/09-2/10
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
Weighted Average
A-5 A/na/na/na $ 42,098,775 3.00% 16.0% Coupon 7.53691% 13.86 2/10-10/11
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
Weighted Average
A-6 BBB+/BBB/Baa2/BBB $ 28,065,850 2.00% 14.0% Coupon 7.62691% 14.63 10/11-1/12
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
Weighted Average
A-7 BBB/na/na/na $ 21,049,387 1.50% 12.5% Coupon 7.67691% 14.74 1/12-1/12
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
Weighted Average
A-8 BBB-/na/na/BBB- $ 21,049,387 1.50% 11.0% Coupon 8.02691% 14.82 1/12-2/12
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
Interest Only:
Weighted
A-CS1 AAA/AAA/Aaa/na $ 127,000,000 n/a N/A Average Coupon 1.26691% 2.31** N/A
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
Interest Only:
Weighted
PS-1 AAA/AAA/Aaa/na $1,403,292,505 n/a N/A Average Coupon 0.99954% 5.83** N/A
- ------- ----------------- --------------------- --------- ------------------------- -------------- ---------- ------------
</TABLE>
Rating Agencies (Fitch, DCR, Moody's, S&P)
<TABLE>
<CAPTION>
SUBORDINATED CERTIFICATES OFFERED HEREBY
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B-1 BB+/BB+ $35,082,312 2.5% 8.5% Fixed Rate 7.525% 14.89 2/12-3/12
- ------ --------- ------------- ------ ------ ------------ -------- ------- ------------
B-2 BB/BB $35,082,312 2.5% 6.0% Fixed Rate 7.525% 14.94 3/12-4/12
- ------ --------- ------------- ------ ------ ------------ -------- ------- ------------
B-3 BB-/BB- $14,032,925 1.0% 5.0% Fixed Rate 7.525% 14.99 4/12-4/12
- ------ --------- ------------- ------ ------ ------------ -------- ------- ------------
B-4 B+/na $21,049,387 1.5% 3.5% Fixed Rate 7.525% 15.61 4/12-3/13
- ------ --------- ------------- ------ ------ ------------ -------- ------- ------------
B-5 B/na $14,032,925 1.0% 2.5% Fixed Rate 7.525% 16.64 3/13-11/15
- ------ --------- ------------- ------ ------ ------------ -------- ------- ------------
B-6 B-/na $14,032,925 1.0% 1.5% Fixed Rate 7.525% 19.74 11/15-4/17
</TABLE>
Rating Agencies (S&P, Fitch)
<TABLE>
<CAPTION>
JUNIOR SUBORDINATED CERTIFICATES (NOT OFFERED HEREBY)
- -----------------------------------------------------------------------------------------------
WEIGHTED
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B-7 and $21,049,393 Average
B-7H Unrated (approx.) 1.5% 0% Coupon 8.61691 19.99 4/17-4/17
- --------- --------- --------------- ------ ---- ---------- --------- ------- ----------
</TABLE>
* Based on 0% Constant Prepayment Rate and with all ARD Loans assumed to
prepay on the related Anticipated Repayment Date.
** Calculated on a cash flow basis. Average life data is for illustrative
purposes only, as the Class A-CS1 and Class PS-1 Certificates are not
entitled to any distributions of principal and do not have average
lives.
12
<PAGE>
CUT-OFF DATE .................. March 27, 1997.
CLOSING DATE .................. On or about April 16, 1997.
DISTRIBUTION DATE ............. The 14th day of each month, or if such 14th
day is not a business day, the business day
immediately following such 14th day,
commencing on April 16, 1997; provided,
however, that the Distribution Date will be
no earlier than the third business day
following the 11th day of each month;
provided, further, that if the 11th day of
any month is not a business day, the
Distribution Date will be the fourth
business day following the 11th day of such
month. A business day is any day other than
a Saturday, a Sunday or any day on which
banking institutions in the States of
Georgia, Illinois or New York are authorized
or obligated by law, executive order or
governmental decree to close.
TRUSTEE ....................... LaSalle National Bank, a nationally
chartered bank (the "Trustee"). See "The
Pooling and Servicing Agreement -- The
Trustee" herein.
FISCAL AGENT .................. ABN AMRO Bank N.V., a Netherlands banking
corporation (the "Fiscal Agent") and the
corporate parent of the Trustee.
REPORTS TO CERTIFICATEHOLDERS . On each Distribution Date, the Trustee will
be required to prepare and forward to each
Certificateholder, the Depositor, the
Servicer, the Special Servicer, the
Underwriter, each Rating Agency and, if
requested, any potential investors in the
Certificates a Distribution Date Statement
as described under "The Pooling and
Servicing Agreement -- Reports to
Certificateholders; Available Information --
Trustee Reports." In addition, the Servicer
will be required to deliver to the Trustee
and the Trustee will be required to deliver
to each Certificateholder, the Depositor,
the Underwriter, each Rating Agency and, if
requested, any potential investor in the
Certificates, on each Distribution Date, a
Delinquent Loan Status Report, an Historical
Loan Modification Report, an Historical Loss
Estimate Report, an REO Status Report, a
Watch List and a Comparative Financial
Status Report, each as described under "The
Pooling and Servicing Agreement -- Reports
to Certificateholders; Available Information
-- Servicer Reports." The Trustee will also
be required to make available at its
offices, during normal business hours, for
review by any Holder of a Certificate, the
Depositor, the Special Servicer, the
Servicer, the Underwriter, any Rating
Agency, any potential investor in the
Certificates or any other Person to whom the
Depositor believes such disclosure is
appropriate, among other things, the
following items: Mortgaged Property
operating statements, rent rolls, retail
sales information, Mortgaged Property
inspection reports and all modifications,
waivers and amendments of the terms of a
Mortgage Loan entered into by the Servicer
or the Special Servicer. See "The Pooling
and Servicing Agreement -- Reports to
Certificateholders; Available Information --
Other Information."
A Current Report on Form 8-K (the "Form
8-K") will be filed by the Depositor,
together with the Pooling and Servicing
Agreement, with the Securities and Exchange
Commission within fifteen days after the
initial issuance of the Subordinated
Certificates. Such Form 8-K will be
available to purchasers and potential
purchasers of the Subordinated Certificates.
INTEREST PAYMENTS ............. Interest on the Subordinated Certificates
will accrue at the applicable Pass-Through
Rate on the outstanding Certificate Balance
thereof. On each Distribution Date, each
Class of Subordinated Certificates will be
entitled to receive interest distributions
in an amount equal to the Interest
Distribution Amount (subject to the
priorities described under "Description of
the Subordinated Certificates --
Distributions") for such Class and
Distribution Date, together with any
Interest Shortfalls remaining from prior
Distribution Dates, in each case to the
extent of Available Funds, if any, remaining
after (i) payment of the
13
<PAGE>
Interest Distribution Amounts, unreimbursed
Interest Shortfalls, and, depending on
relative priority, Reduction Interest
Distribution Amounts and Reduction Interest
Shortfalls for the Senior Certificates and
(ii), if applicable, payment of the
Principal Distribution Amount for such
Distribution Date and an amount equal to the
aggregate unreimbursed Realized Losses
previously allocated to any Senior
Certificates.
The "Interest Distribution Amount" with
respect to any Distribution Date and any
Class of Subordinated Certificates is equal
to interest accrued during the related
Interest Accrual Period at the Pass-Through
Rate on such Class on the Certificate
Balance of such Class.
PRINCIPAL PAYMENTS ............ The Principal Distribution Amount for each
Distribution Date will be distributed to the
Senior Certificates (other than the Class
A-CS1 and Class PS-1 Certificates) until the
Certificate Balances of all the Classes of
Senior Certificates (other than the Class
A-CS1 and Class PS-1 Certificates) have been
reduced to zero before being applied, first,
to the Class B-1 Certificates, in reduction
of the Certificate Balance thereof, until
the Certificate Balance of such Class has
been reduced to zero, second, to the Class
B-2 Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance of such Class has been
reduced to zero, third, to the Class B-3
Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance of such Class has been
reduced to zero, fourth, to the Class B-4
Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance of such Class has been
reduced to zero, fifth, to the Class B-5
Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance of such Class has been
reduced to zero, sixth, to the Class B-6
Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance of such Class has been
reduced to zero, and, seventh, to certain of
the Junior Subordinated Certificates in
accordance with the Pooling and Servicing
Agreement, in each case to the extent of
Available Funds remaining after required
distributions of interest to such Class and
after making interest and principal
distributions to any more senior Class of
Certificates.
The "Principal Distribution Amount" for any
Distribution Date is equal to the sum, for
all Mortgage Loans, of (i) the principal
component of all scheduled Monthly Payments
(other than Balloon Payments) due on the
Mortgage Loans on or before the related Due
Date (if received or advanced); (ii) the
principal component of all Assumed Scheduled
Payments or Minimum Defaulted Monthly
Payments, as applicable, due on or before
the related Due Date (if received or
advanced) with respect to any Mortgage Loan
that is delinquent in respect of its Balloon
Payment; (iii) the Stated Principal Balance
of each Mortgage Loan that was, during the
related Collection Period, repurchased from
the Trust Fund in connection with the breach
of a representation or warranty or purchased
from the Trust Fund as described herein
under "The Pooling and Servicing Agreement
-- Optional Termination"; (iv) the portion
of Unscheduled Payments allocable to
principal of any Mortgage Loan that was
liquidated during the related Collection
Period; (v) all Balloon Payments and, to the
extent not included in the preceding
clauses, any other principal payment on any
Mortgage Loan received on or after the
Maturity Date thereof, to the extent
received during the related Collection
Period; (vi) to the extent not included in
the preceding clauses (iii) or (iv), all
other Principal Prepayments received in the
related Collection Period; and (vii) to the
extent not included in the preceding
clauses, any other full or partial
recoveries in respect of principal,
including net insurance proceeds, net
liquidation proceeds and Net REO Proceeds
received in the related Collection Period
(in the case of clauses (i) through (vii)
net of any
14
<PAGE>
reimbursement for related outstanding P&I
Advances allocable to principal and
excluding any amounts representing
recoveries of Subordinate Class Advance
Amounts).
The Certificate Balance of the Certificates
will be reduced without distribution on any
Distribution Date as a write-off to the
extent of any Realized Loss allocated to the
applicable Class of Certificates on the
related Distribution Date. As referred to
herein, the "Realized Loss" with respect to
any Distribution Date shall mean the amount,
if any, by which the aggregate Certificate
Balance of the Certificates after giving
effect to distributions made on such
Distribution Date exceeds the aggregate
Stated Principal Balance of the Mortgage
Loans as of the Due Date occurring in the
month in which such Distribution Date
occurs. Except as described in the next
sentence, any such Realized Losses will be
applied to the Classes of Certificates in
the following order, until the Certificate
Balance of each is reduced to zero: first,
to the Junior Subordinated Certificates,
second, to the Class B-6 Certificates,
third, to the Class B-5 Certificates,
fourth, to the Class B-4 Certificates,
fifth, to the Class B-3 Certificates, sixth,
to the Class B-2 Certificates, seventh, to
the Class B-1 Certificates and finally, to
certain Classes of the Senior Certificates
in accordance with the priorities set forth
in the Pooling and Servicing Agreement. Any
amounts recovered in respect of any amounts
previously written-off as Realized Losses
will be distributed to the Classes of
Certificates in reverse order of allocation
of Realized Losses thereto.
The Trust Fund will include two separate
real estate mortgage investment conduits
(each, a "REMIC"). Collections on the
Mortgage Loans will be used to make payments
of principal and interest on interests (the
"Lower-Tier Interests") in a REMIC (the
"Lower-Tier REMIC"). Those payments in turn
will be used to make distributions on the
Certificates (other than the Class LR, Class
V-1 and Class V-2 Certificates), which
represent interests in a second REMIC (the
"Upper-Tier REMIC"). For purposes of
simplicity, distributions will generally be
described herein as if made directly from
collections on the Mortgage Loans to the
holders of the Certificates.
RECORD DATE ................... With respect to each Distribution Date other
than the Distribution Date occurring on
April 16, 1997, the close of business on the
10th day of the month in which such
Distribution Date occurs, or if such day is
not a business day, the preceding business
day; the Record Date for the Distribution
Date occurring on April 16, 1997 for all
purposes other than the receipt of
distributions is March 27, 1997.
INTEREST ACCRUAL PERIOD ....... With respect to any Distribution Date other
than the Distribution Date occurring on
April 16, 1997, the period commencing on and
including the 11th day of the month
preceding the month in which such
Distribution Date occurs and ending on and
including the 10th day of the month in which
such Distribution Date occurs; the Interest
Accrual Period with respect to the
Distribution Date occurring on April 16,
1997 is assumed to consist of 14 days. Each
Interest Accrual Period other than the
Interest Accrual Period with respect to the
Distribution Date occurring on April 16,
1997 is assumed to consist of 30 days.
EXPECTED FINAL DISTRIBUTION
DATE .......................... April 14, 2017, the date on which the
Certificate Balance of the Subordinated
Certificates will be reduced to zero, based
on the assumption that all Mortgage Loans
are paid in full on the earlier of their
maturity date or Anticipated Repayment Date,
that there are no defaults or unadvanced
delinquencies with
15
<PAGE>
respect to such Mortgage Loans, and that no
prepayments are made (other than payment in
full on the Anticipated Repayment Date).
SCHEDULED FINAL DISTRIBUTION
DATE .......................... As to each Class of Subordinated
Certificates, April 14, 2027, the next
Distribution Date occurring after the latest
maturity date of any Mortgage Loan.
RATED FINAL DISTRIBUTION DATE . As to each Class of Subordinated
Certificates, April 14, 2029, the next
Distribution Date occurring two years after
the latest Assumed Maturity Date of any of
the Mortgage Loans. The "Assumed Maturity
Date" of (a) any Mortgage Loan that is not a
Balloon Loan is the maturity date of such
Mortgage Loan and (b) any Balloon Loan is
the date on which such Mortgage Loan would
be deemed to mature in accordance with its
original amortization schedule absent its
Balloon Payment.
COLLECTION PERIOD ............. With respect to a Distribution Date, the
period beginning on the day after the Due
Date in the month preceding the month in
which such Distribution Date occurs (or,
with respect to the first Distribution Date,
the day after the Cut-off Date) and ending
at the close of business on the Due Date in
the month in which such Distribution Date
occurs.
DUE DATE ...................... With respect to any Distribution Date and/or
any Mortgage Loan, as the case may be, the
11th (or in the case of certain of the
Mortgage Loans, if the 11th day is not a
business day, either the next business day
or the first preceding business day) of the
month in which such Distribution Date
occurs.
VOTING RIGHTS ................. Holders of the Subordinated Certificates
will have Voting Rights under the Pooling
and Servicing Agreement, which Voting Rights
may be exercised, among other things, to
direct certain actions of the Special
Servicer after a default on a Mortgage Loan
or to replace the Special Servicer.
Following a default on a Balloon Loan at the
maturity thereof and upon the satisfaction
of certain conditions contained in the
Pooling and Servicing Agreement the holders
(including, if applicable, the Special
Servicer or an affiliate thereof) of greater
than 50% of the Percentage Interests of the
most subordinate Class or Classes of
Certificates then outstanding representing a
minimum of 1.0% of the aggregate initial
Certificate Balance of all Classes of
Certificates (which Class initially will be
the Junior Subordinated Certificates) may at
their sole discretion, elect to provide the
Special Servicer with Instructions to extend
such Mortgage Loan. If the Certificate
Balance of such Class or Classes of
Certificates has been reduced to less than
40% of the initial Certificate Balances
thereof, the holders of such Class together
with the holders of the next most
subordinate class will be treated as a
single Class for purposes of such Voting
Rights. It is anticipated that the Special
Servicer or an affiliate of the Special
Servicer will own a majority of the Junior
Subordinated Certificates and, therefore,
will be able to control the vote with
respect to such matters for so long as the
outstanding Certificate Balance of the
Junior Subordinated Certificates meets the
criteria set forth above.
PASS-THROUGH RATES ............ The per annum rate at which interest accrues
(the "Pass-Through Rate") on the Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5
and Class B-6 Certificates will be equal to
7.525%. See "Description of Subordinated
Certificates -- Distributions" herein.
The Pass-Through Rates of the other Classes
of Certificates are set forth herein under
"Description of the Subordinated
Certificates -- Distributions."
16
<PAGE>
ADVANCES ...................... The Servicer is required to make P&I
Advances with respect to delinquent Monthly
Payments on the Mortgage Loans, subject to
the limitations described herein, and
provided that the Servicer will make only
one P&I Advance with respect to each
Mortgage Loan for the benefit of the most
subordinate Class of Certificates then
outstanding (unless the related delinquent
Monthly Payment is received prior to the
following Due Date). If the Servicer fails
to make a required P&I Advance, the Trustee
will be required to make the P&I Advance,
and if the Trustee fails to make a required
P&I Advance, the Fiscal Agent will be
required to make such P&I Advance, in each
case subject to a determination that such
P&I Advance would be recoverable. If the
Servicer, the Trustee or the Fiscal Agent,
as applicable, determines in its good faith
business judgment that any P&I Advance
previously made will not be recoverable,
then the Servicer, the Trustee or the Fiscal
Agent, as applicable, will be entitled to
reimburse itself for such P&I Advance, plus
interest thereon, out of amounts payable on
or in respect of all of the Mortgage Loans
prior to distributions on the Certificates.
See "Description of the Pooling and
Servicing Agreement -- Advances" herein.
OPTIONAL TERMINATION .......... The Depositor, and if the Depositor does not
exercise the option, the Servicer and, if
neither the Servicer nor the Depositor
exercises the option, the holders of the
Class LR Certificates representing greater
than a 50% Percentage Interest of the Class
LR Certificates, will have the option to
purchase at the purchase price specified
herein, all of the Mortgage Loans and all
property acquired through exercise of
remedies in respect of any Mortgage Loan
remaining in the Trust Fund, and thereby
effect termination of the Trust Fund and
early retirement of the then outstanding
Certificates, on any Distribution Date on
which the aggregate Stated Principal Balance
of the Mortgage Loans remaining in the Trust
Fund is less than 1% of the Initial Pool
Balance. Additionally, the holders of the
Class LR Certificates representing 100% of
the Percentage Interest of the Class LR
Certificates, and if the holders of the
Class LR Certificates do not exercise their
option, the holders of the most subordinate
Class of Certificates (not including the
Class B-7H Certificates), will have the
option to purchase at the purchase price
specified herein any Mortgage Loan on its
Anticipated Repayment Date. See "The Pooling
and Servicing Agreement -- Optional
Termination" herein.
DENOMINATIONS ................. The Class B-1, Class B-2, Class B-3, Class
B-4, Class B-5 and Class B-6 Certificates
will be issuable in registered form, in
minimum denominations of Certificate Balance
of $100,000 and multiples of $1 in excess
thereof.
CLEARANCE AND SETTLEMENT ...... Holders of Subordinated Certificates may
elect to hold their Certificates through any
of DTC (in the United States) or CEDEL or
Euroclear (in Europe). Transfers within DTC,
CEDEL or Euroclear, as the case may be, will
be in accordance with the usual rules and
operating procedures of the relevant system.
Crossmarket transfers between persons
holding directly or indirectly through DTC,
on the one hand, and counterparties holding
directly or indirectly through CEDEL or
Euroclear, on the other, will be effected in
DTC through the relevant Depositaries of
CEDEL or Euroclear. The Depositor may elect
to terminate the book-entry system through
DTC with respect to all or any portion of
any Class of the Subordinated Certificates.
See "Description of the Subordinated
Certificates -- Delivery, Form and
Denomination," "--Book-Entry Registration"
and "--Definitive Certificates" herein.
<PAGE>
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES ................. Elections will be made to treat the Trust
REMICs, and the Trust REMICs will qualify,
as two separate REMICs for federal income
tax purposes. The Senior
17
<PAGE>
Certificates, the Subordinated Certificates
and the Junior Subordinated Certificates
constitute "regular interests" in the
Upper-Tier REMIC, and the Class R and Class
LR Certificates (collectively the "Residual
Certificates") are designated as the sole
Classes of "residual interests" in the
Upper-Tier REMIC and Lower-Tier REMIC,
respectively. The Class V-1 Certificates
represent the right to receive Net Default
Interest, subject to the obligation to
reimburse the Servicer, the Trustee or the
Fiscal Agent, as applicable, for interest on
Advances, and the Class V-2 Certificates
represent the right to receive Excess
Interest, which portions of the Trust Fund
will be treated as a grantor trust for
federal income tax purposes. See "Certain
Federal Income Tax Consequences" herein.
The Subordinated Certificates will be
treated as newly originated debt instruments
for federal income tax purposes. Beneficial
owners of the Subordinated Certificates will
be required to report income thereon in
accordance with the accrual method of
accounting. It is anticipated that the
Subordinated Certificates will be treated
as having been issued with original issue
discount in an amount equal to the excess
of their initial Certificate Balances over
their respective issue prices. See "Certain
Federal Income Tax Consequences" herein.
ERISA CONSIDERATIONS .......... Because the Subordinated Certificates are
subordinate to one or more other Classes of
Certificates, the purchase and holding of
the Subordinated Certificates by or on
behalf of (i) an employee benefit plan or
other retirement arrangement subject to
Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
or Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code"), or (ii) a
governmental plan (as defined in Section
3(32) of ERISA) subject to any federal,
state or local law ("Similar Law") which is,
to a material extent, similar to the
foregoing provisions of ERISA or the Code
(each, a "Plan"), may result in prohibited
transactions within the meaning of ERISA,
the Code or any Similar Law. No transfer of
a Subordinated Certificate that is a
Definitive Certificate shall be made unless
the prospective transferee has (a) delivered
to the Depositor, the Certificate Registrar
and the Trustee a representation letter
stating that that the transferee is not a
Plan or a person acting on behalf of or
investing the assets of a Plan, other than
an insurance company investing the assets of
its general account under circumstances
whereby the purchase and subsequent holding
of the Subordinated Certificate would be
exempt from the prohibited transaction
restrictions of ERISA and the Code under
Sections I and III of Prohibited Transaction
Class Exemption ("PTE") 95-60 or (b)
provided an opinion of counsel and such
other documentation as described under
"ERISA Considerations". The transferee of a
beneficial interest in a Subordinated
Certificate that is not a Definitive
Certificate will be deemed to have
represented, by its ownership thereof, that
it is not a person described in clause (a)
above. See "Description of the Subordinated
Certificates --Transfer Restrictions" and
"ERISA Considerations" herein.
RATINGS ....................... It is a condition to the issuance of the
Subordinated Certificates that the Class B-1
Certificates be rated "BB+" by each of S&P
and Fitch, the Class B-2 Certificates be
rated "BB" by each of S&P and Fitch, the
Class B-3 Certificates be rated "BB-" by
each of S&P and Fitch, the Class B-4
Certificates be rated "B+" by S&P, the Class
B-5 Certificates be rated "B" by S&P and the
Class B-6 Certificates be rated "B-" by S&P.
A security rating is not a recommendation to
buy, sell or hold securities and may be
subject to revision or withdrawal at any
time by the assigning rating organization.
The Rating Agencies' ratings on the
18
<PAGE>
Subordinated Certificates address the
likelihood of the timely payment of interest
and the ultimate repayment of principal by
the Rated Final Distribution Date. A
security rating does not address the
frequency of prepayments (both voluntary and
involuntary) or the possibility that
Certificateholders might suffer a lower than
anticipated yield, nor does a security
rating address the likelihood of receipt of
Prepayment Premiums, Net Default Interest or
Excess Interest. A security rating does not
represent any assessment of the yield to
maturity that investors may experience. See
"Risk Factors and Other Special
Considerations" and "Rating" herein.
LEGAL INVESTMENT .............. The appropriate characterization of the
Subordinated Certificates under various
legal investment restrictions, and thus the
ability of investors subject to these
restrictions to purchase the Subordinated
Certificates, may be subject to significant
interpretative uncertainties. The
Subordinated Certificates will not
constitute "mortgage related securities"
within the meaning of the Secondary Mortgage
Market Enhancement Act of 1984, as amended.
Accordingly, investors should consult their
own legal advisors to determine whether and
to what extent the Subordinated Certificates
constitute legal investments for them. See
"Legal Investment" herein.
USE OF PROCEEDS ............... The net proceeds from the sale of
Subordinated Certificates, together with the
net proceeds from the sale of the Senior
Certificates and Junior Subordinated
Certificates, will be used by the Depositor
to pay the purchase price of the Mortgage
Loans.
RISK FACTORS .................. See "Risk Factors" immediately following
this Summary for a discussion of certain
factors that should be considered in
connection with the purchase of the
Subordinated Certificates.
19
<PAGE>
RISK FACTORS
Prospective holders of Subordinated Certificates should consider, among
other things, the following factors in connection with the purchase of the
Subordinated Certificates.
THE MORTGAGE LOANS
Risks Associated with Commercial and Multifamily Lending Generally. The
Mortgage Loans are secured by anchored and unanchored retail properties,
office buildings, full and limited service hotels, multifamily residential
housing, nursing homes, industrial properties, factory outlet centers, mobile
home and recreational vehicle parks and an assisted living facility. Mortgage
Loans secured by commercial and multifamily properties are markedly different
from one-to-four family residential mortgage loans. Commercial and
multifamily lending is generally viewed as exposing a lender to a greater
risk of loss than one-to-four-family residential lending. The repayment of
loans secured by commercial or multifamily properties is typically dependent
upon the successful operation of the related real estate project, the
businesses operated by the tenants and the creditworthiness of such tenants,
i.e., the ability of the applicable property to produce cash flow. Even the
liquidation value of a commercial or multifamily residential property is
determined more by capitalization of the property's cash flow than any
absolute value of buildings and improvements thereon. Lenders typically look
to the debt service coverage ratio (that is the ratio of net cash flow to
debt service) of a loan secured by income-producing property as an important
measure of the risk of default on such a loan. Commercial and multifamily
lending also typically involves larger loans to a single obligor than
one-to-four-family residential lending.
Volatility. Commercial and multifamily property values and cash flows are
subject to volatility and may be sufficient or insufficient to cover debt
service on the related Mortgage Loan at any given time. The volatility of
property values and cash flows depends upon a number of factors, including
(i) the volatility of property revenue and (ii) the property's "operating
leverage," which generally refers to (a) the percentage of total property
operating expenses in relation to property revenue, (b) the breakdown of
property operating expenses between those that are fixed and those that vary
with revenue and (c) the level of capital expenditures required to maintain
the property and retain or replace tenants. The net operating income and
value of the Mortgaged Properties may be adversely affected by a number of
factors, including, but not limited to, national, regional and local economic
conditions (which may be adversely impacted by plant closings, industry
slowdowns and other factors); local real estate conditions (such as an
oversupply of housing, retail space, office space or hotel rooms); changes or
continued weakness in specific industry segments; changes in applicable
healthcare regulations, including reimbursement requirements; perceptions by
prospective tenants and, in the case of retail properties, retailers and
shoppers, of the safety, convenience, services and attractiveness of the
property; the willingness and ability of the property's owner to provide
capable management and adequate maintenance; demographic factors; retroactive
changes to building or similar codes; increases in operating expenses (such
as energy costs); the number of tenants or, if applicable, the diversity of
types of business operated by such tenants; and laws regulating the maximum
rental permitted to be charged to a residential tenant. Properties with
short-term, less creditworthy revenue sources and/or relatively high
operating leverage, such as health care related facilities, hotels and motels
can be expected to have more volatile cash flows than properties with medium
to long-term tenant commitments from creditworthy tenants and/or relatively
low operating leverage. A decline in the real estate market, in the financial
condition of a major tenant or a general decline in the local or national
economy will tend to have a more immediate effect on the net operating income
of such properties and may lead to higher rates of delinquency or defaults.
Historical operating results of the Mortgaged Properties may not be
comparable to future operating results. In addition, other factors may
adversely affect the Mortgaged Properties' value without affecting their
current net operating income, including changes in governmental regulations,
zoning or tax laws; potential environmental or other legal liabilities; the
availability of refinancing; and changes in interest rate levels.
The age, construction quality and design of a particular property may
affect the occupancy level as well as the rents that may be charged for
individual leases. The effects of poor construction quality or design will
increase over time in the form of increased maintenance and capital
improvements. Even good construction will deteriorate over time if the
property managers do not schedule and perform adequate maintenance in a
timely fashion. If, during the terms of the Mortgage Loans, competing
properties of a similar type are built in the areas where the Mortgaged
Properties are located or similar properties in the vicinity of the Mortgaged
Properties are substantially updated and refurbished, the value and net
operating income of such Mortgaged Properties could be reduced. There is no
assurance that the value of any Mortgaged Property during the term of the
related Mortgage Loan will equal or exceed the appraised value determined in
connection with the origination of such Mortgage Loan. However, the Mortgage
Loans generally provide for deferred
20
<PAGE>
maintenance reserves in an amount sufficient to remediate any deficiencies
raised by the engineering report issued in connection with the origination of
the related Mortgage Loan. In addition, most of the Mortgage Loans contain
ongoing capital expenditure reserve requirements.
Additionally, some of the Mortgaged Properties may not readily be
converted to alternative uses if such Mortgaged Properties were to become
unprofitable due to competition, age of the improvements, decreased demand or
other factors. The conversion of nursing homes or hotels to alternative uses
would generally require substantial capital expenditures. Thus, if the
operation of any such Mortgaged Properties becomes unprofitable such that the
borrower becomes unable to meet its obligations on the related loan, the
liquidation value of any such property may be substantially less, relative to
the amount owing on the related loan, than would be the case if such property
were readily adaptable to other uses.
Other multifamily residences, hotels, retail properties, office buildings,
mobile home parks, nursing homes and industrial properties located in the
areas of the Mortgaged Properties compete with the Mortgaged Properties of
such types to attract residents, retailers, customers, patients and tenants.
Increased competition frequently leads to lowering of rents in a market and
could adversely affect income from and market value of the Mortgaged
Properties.
Borrower Default; Nonrecourse Mortgage Loans. The Mortgage Loans are not
insured or guaranteed by any governmental entity, by any private mortgage
insurer, or by the Depositor, the Mortgage Loan Seller, the Servicer, the
Special Servicer, Bloomfield, the Trustee, the Fiscal Agent or any of their
respective affiliates.
Each Mortgage Loan is generally a nonrecourse loan as to which, in the
event of a default under such Mortgage Loan, recourse generally may be had
only against the specific properties and other assets that have been pledged
to secure the Mortgage Loan. See "Description of the Mortgage Pool" herein.
Consequently, payment on each Mortgage Loan prior to maturity is dependent
primarily on the sufficiency of the net operating income of the related
Mortgaged Property, and at maturity (whether at scheduled maturity or, in the
event of a default under the related Mortgage Loan, upon the acceleration of
such maturity), upon the then market value of the related Mortgaged Property
(taking into account any adverse effect of a foreclosure proceeding on the
market value of the Mortgaged Property) or the ability of the related
borrower to refinance the Mortgaged Property. All of the Mortgage Loans were
originated within 7 months prior to the Cut-off Date. Consequently, the
Mortgage Loans do not have as long standing a payment history as mortgage
loans originated on earlier dates.
Property Management. The successful operation of a real estate project is
also dependent on the performance and viability of the property manager of
such project. Different property types vary in the extent to which the
property manager is involved in property marketing, leasing and operations on
a daily basis. Properties deriving revenues primarily from short-term sources
(such as hotels) are generally more management intensive than properties
leased to creditworthy tenants under long-term leases. The property manager
is responsible for responding to changes in the local market, planning and
implementing the rental structure, including establishing levels of rent
payments, operating the properties and providing building services, managing
operating expenses and advising the borrowers so that maintenance and capital
improvements can be carried out in a timely fashion. There can be no
assurance that the property managers will at all times be in a financial
condition to continue to fulfill their management responsibilities under the
related management agreements throughout the terms thereof. The property
managers are operating companies and unlike limited purpose entities, may not
be restricted from incurring debt and other liabilities in the ordinary
course of business or otherwise. Moreover, a majority of the properties
secured by the Mortgage Loans are managed by affiliates of the applicable
borrower. Such relationship could raise additional difficulties in connection
with a Mortgage Loan in default or undergoing special servicing and a dispute
between the partners or members of a borrower could disrupt the management of
the underlying property which may cause an adverse effect on cash flow.
However, many of the Mortgage Loans permit the lender to remove the manager
upon the occurrence of an event of default, a decline in cash flow below
specified levels or other specified triggers.
Retail Properties. 33% of the Mortgage Loans, based on Initial Pool
Balance, are secured by retail properties (other than factory outlet
centers). See "Description of the Mortgage Pool --Additional Mortgage Loan
Information -- Types of Mortgaged Property" herein. Significant factors
determining the value of retail properties are the quality of the tenants as
well as fundamental aspects of real estate such as location and market
demographics. The correlation between the success of tenant businesses and
property value is more direct with respect to retail properties than other
types of commercial property because a significant component of the total
rent paid by retail tenants is often tied to a percentage of gross sales.
Whether a retail property is "anchored" or "unanchored" is also an important
distinction. Retail properties that are anchored have traditionally been
perceived to be less risky. While there is no strict definition of an anchor,
it is
21
<PAGE>
generally understood that a retail anchor tenant is proportionately large in
size and is vital in attracting customers to the property. 27%, based on
Initial Pool Balance, of the Mortgage Loans secured by retail properties (not
including factory outlet centers), are "anchored" and 6% are "unanchored."
Furthermore, the correlation between the success of tenant businesses and
property value is increased when the property is a single tenant property.
3%, based on Initial Pool Balance, of the Mortgage Loans secured by retail
properties (not including factory outlet centers), are secured by single
tenant properties.
Unlike office or hotel properties, retail properties also face competition
from sources outside a given real estate market. Catalogue retailers, home
shopping networks, telemarketing and outlet centers all compete with more
traditional retail properties for consumer dollars. Continued growth of these
alternative retail outlets (which are often characterized by lower operating
costs) could adversely affect the rents collectible at the retail properties
included in the Mortgage Pool.
Office Properties. 24% of the Mortgage Loans, based on Initial Pool
Balance, are secured by office properties. See "Description of the Mortgage
Pool -- Additional Mortgage Loan Information -- Types of Mortgaged Property"
herein. Significant factors determining the value of office properties are
the quality of the tenants in the building, the physical attributes of the
building in relation to competing buildings and the strength and stability of
the market area as a desirable business location. Office properties may be
adversely affected if there is an economic decline in the business operated
by the tenants. The risk of such an adverse effect is increased if revenue is
dependent on a single tenant or if there is a significant concentration of
tenants in a particular business or industry.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a property's age,
condition, design (e.g. floor sizes and layout), access to transportation and
ability or inability to offer certain amenities to its tenants, including
sophisticated building systems (such as fiberoptic cables, satellite
communications or other base building technological features).
The success of an office property also depends on the local economy. A
company's decision to locate office headquarters in a given area, for
example, may be affected by such factors as labor cost and quality, tax
environment and quality of life issues such as schools and cultural
amenities. A central business district may have an economy which is markedly
different from that of a suburb. The local economy will impact on an office
property's ability to attract stable tenants on a consistent basis. In
addition, the cost of refitting office space for a new tenant is often more
costly than for other property types.
Hotel Properties. 15% of the Mortgage Loans, based on Initial Pool
Balance, are secured by full service hotels or limited service hotels. These
hotels are comprised of hotels associated with national franchise chains,
hotels associated with regional franchise chains and hotels that are not
affiliated with any franchise chain but may have their own brand identity.
See "Description of the Mortgage Pool -- Additional Mortgage Loan Information
- -- Types of Mortgaged Property" herein for certain statistical information on
the Hotel Properties and Hotel Loans.
Various factors, including location, quality and franchise affiliation
affect the economic performance of a hotel. Adverse economic conditions,
either local, regional or national, may limit the amount that can be charged
for a room and may result in a reduction in occupancy levels. The
construction of competing hotels can have similar effects. To meet
competition in the industry and to maintain economic values, continuing
expenditures must be made for modernizing, refurbishing, and maintaining
existing facilities prior to the expiration of their anticipated useful
lives. In connection with such concerns, in all of the Hotel Loans, the
related borrower is required to fund FF&E reserves. Because hotel rooms
generally are rented for short periods of time, hotels tend to respond more
quickly to adverse economic conditions and competition than do other
commercial properties. Furthermore, the financial strength and capabilities
of the owner and operator of a hotel may have a substantial impact on such
hotel's quality of service and economic performance. Additionally, the hotel
and lodging industry is generally seasonal in nature and this seasonality can
be expected to cause periodic fluctuations in room and other revenues,
occupancy levels, room rates and operating expenses. In connection with such
concerns, in the case of certain Hotel Loans, the related borrower is
required to fund seasonal reserves. The demand for particular accommodations
may also be affected by changes in travel patterns caused by changes in
energy prices, strikes, relocation of highways, the construction of
additional highways and other factors.
Certain of the Hotel Properties are franchisees of national or regional
hotel chains. The viability of any such Hotel Property depends in part on the
continued existence and financial strength of the franchisor, the public
perception of the franchise service mark and the duration of the franchise
licensing agreements. The transferability of franchise license agreements may
be restricted and, in the event of a foreclosure on any such Hotel Property,
the mortgagee may not have
22
<PAGE>
the right to use the franchise license without the franchisor's consent.
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
Hotel Property, it is unlikely that the Trustee (or Servicer or Special
Servicer) or purchaser of such Hotel Property would be entitled to the rights
under any liquor license for such Hotel Property and such party would be
required to apply in its own right for such license or licenses. There can be
no assurance that a new license could be obtained or that it could be
obtained promptly.
Multifamily Properties. 13% of the Mortgage Loans, based on Initial Pool
Balance, are secured by multifamily apartment buildings. See "Description of
the Mortgage Pool -- Additional Mortgage Loan Information -- Types of
Mortgaged Property" herein.
Significant factors determining the value and successful operation of a
multifamily property are the location of the property, the number of
competing residential developments in the local market (such as apartment
buildings, manufactured housing communities and site-built single family
homes), the physical attributes of the multifamily apartment building (such
as its age and appearance) and state and local regulations affecting such
property. In addition, the successful operation of an apartment building will
depend upon other factors such as its reputation, the ability of management
to provide adequate maintenance and insurance, and the types of services it
provides.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. 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. A few states offer more significant protection.
For example, there are provisions that limit the basis on which a landlord
may terminate a tenancy or increase its rent or prohibit a landlord from
terminating a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment
buildings. These ordinances may limit rent increases to fixed percentages, to
percentages of increases in the consumer price index, to increases set or
approved by a governmental agency, or to increases determined through
mediation or binding arbitration. In many cases, the rent control laws do not
permit vacancy decontrol. Local authority to impose rent control 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 to various forms of rent control
with respect to those tenants. Any limitations on a borrower's ability to
raise property rents may impair such borrower's ability to repay its Mortgage
Loan from its net operating income or the proceeds of a sale or refinancing
of the related Mortgaged Property.
Adverse economic conditions, either local or national, may limit the
amount of rent that can be charged and may result in a reduction in timely
rent payments or a reduction in occupancy levels. Occupancy and rent levels
may also be affected by construction of additional housing units, local
military base closings and national and local politics, including current or
future rent stabilization and rent control laws and agreements. In addition,
the level of mortgage interest rates may encourage tenants to purchase
single-family housing. The location and construction quality of a particular
building may affect the occupancy level as well as the rents that may be
charged for individual units. The characteristics of a neighborhood may
change over time or in relation to newer developments.
Industrial Properties. 6% of the Mortgage Loans, based on Initial Pool
Balance, are secured by industrial properties. See "Description of the
Mortgage Pool -- Additional Mortgage Loan Information -- Types of Mortgaged
Property" herein. Significant factors determining the value of industrial
properties are the quality of tenants, building design and adaptability and
the location of the property. Concerns about the quality of tenants,
particularly major tenants, are similar in both office properties and
industrial properties, although industrial properties are more frequently
dependent on a single tenant.
Aspects of building site design and adaptability affect the value of an
industrial property. Site characteristics which are valuable to an industrial
property include clear heights, column spacing, number of bays and bay
depths, divisibility, truck turning radius and overall functionality and
accessibility.
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
Mobile Home Park Properties. 4% of the Mortgaged Properties, based on
Initial Pool Balance, are operated as mobile home parks, recreational vehicle
parks or combinations thereof. See "Description of the Mortgage Pool --
Additional Mortgage Loan Information -- Types of Mortgaged Property" for
certain statistical information on such loans.
23
<PAGE>
Significant factors determining the value of mobile home park properties
are generally similar to the factors affecting the value of multifamily
residential properties. In addition, the mobile home park properties are
"special purpose" properties that could not be readily converted to general
residential, retail or office use. In fact, certain states also regulate
changes in mobile home park use and require that the landlord give written
notice to its tenants a substantial period of time prior to the projected
change. Consequently, if the operation of any of the mobile home park
properties becomes unprofitable due to competition, age of the improvement or
other factors such that the borrower becomes unable to meet its obligation on
the related Mortgage Loan, the liquidation value of that mobile home park
property may be substantially less, relative to the amount owing on the
Mortgage Loan, than would be the case if the mobile home park property were
readily adaptable to other uses.
Senior Housing/Healthcare Properties. 3% of the Mortgaged Properties,
based on Initial Pool Balance, are operated as senior housing/healthcare
properties. See "Description of the Mortgage Pool -- Additional Mortgage Loan
Information -- Types of Mortgaged Property" herein for certain statistical
information on such loans. Significant factors determining the value of
senior housing and healthcare properties include federal and state laws,
competition with similar properties on a local and regional basis and the
continued availability of revenue from government reimbursement programs,
primarily Medicaid and Medicare.
Providers of long-term nursing care and other medical services are subject
to federal and state laws that relate to the adequacy of medical care,
distribution of pharmaceuticals, rate setting, equipment, personnel,
operating policies and additions to facilities and services and, to the
extent dependent on patients whose fees are reimbursed by private insurers,
to the reimbursement policies of such insurers. In addition, facilities where
such care or other medical services are provided are subject to periodic
inspection by governmental authorities to determine compliance with various
standards necessary for continued licensing under state law and continued
participation in the Medicaid and Medicare reimbursement programs. The
failure of any of such borrowers to maintain or renew any required license or
regulatory approval could prevent it from continuing operations at a
Mortgaged Property (in which case no revenues would be received from such
property or portion thereof requiring licensing) or, if applicable, bar it
from participation in government reimbursement programs. Furthermore, in the
event of foreclosure, there can be no assurance that the Trustee (or Servicer
or Special Servicer) or purchaser in a foreclosure sale would be entitled to
the rights under such licenses and such party may have to apply in its own
right for such a license. There can be no assurance that a new license could
be obtained.
Under applicable federal and state laws and regulations, Medicare and
Medicaid, only the provider who actually furnished the related medical goods
and services generally may sue for or enforce its rights to reimbursement.
Accordingly, in the event of foreclosure, none of the Trustee, the Servicer,
the Special Servicer or 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
respective properties prior to such foreclosure.
The operators of such nursing homes are likely to compete on a local and
regional basis with others that operate similar facilities, some of which
competitors may be better capitalized, may offer services not offered by such
operators or may be owned by non-profit organizations or government agencies
supported by endowments, charitable contributions, tax revenues and other
sources not available to such operators. The successful operation of a
Mortgaged Property that is a nursing home will generally depend upon the
number of competing facilities in the local market, as well as upon other
factors such as its age, appearance, reputation and management, the types of
services it provides and the quality of care and the cost of that care.
Nursing home facilities may receive a substantial portion of their
revenues from government reimbursement programs, primarily Medicaid and
Medicare. Medicaid and Medicare are subject to statutory and regulatory
changes, retroactive rate adjustments, administrative rulings, policy
interpretations, delays by fiscal intermediaries and government funding
restrictions. Moreover, governmental payors have employed cost-containment
measures that limit payments to health care providers, and there are
currently under consideration various proposals for national health care
reform that could further limit those payments. Accordingly, there can be no
assurance that payments under government reimbursement programs will, in the
future, be sufficient to fully reimburse the cost of caring for program
beneficiaries. If not, net operating income of the Mortgaged Properties that
receive revenues from those sources, and consequently the ability of the
related borrowers to meet their Mortgage Loan obligations, could be adversely
affected.
Factory Outlet Properties. 2% of the Mortgage Loans, based on Initial Pool
Balance, are secured by factory outlet centers. See "Description of the
Mortgage Pool -- Additional Mortgage Loan Information -- Types of Mortgaged
Property" herein. The factory outlet center business depends, in part, on the
pricing differential between goods sold in the
24
<PAGE>
factory outlet centers and similar or identical goods sold in a traditional
department store or retailer. While this pricing differential results, in
part, because of lower operating costs resulting from the elimination of
distribution layers and the reduced rent and overhead at factory outlet
centers, there can be no assurance that traditional retailers will not
compete aggressively to regain sales nor can there be any assurance that the
factory outlet center business will not be adversely affected by other
changes in the distribution and sale of retail goods.
Further, newer outlet centers are being constructed closer to metropolitan
and suburban areas, thereby decreasing the economic viability of older
centers that are located farther away. Numerous factory outlet centers have
been developed in recent years and are currently being developed. As a result
of this rapid growth, there is a risk of overdevelopment and increased
competition for tenants. The terms of leases of stores in factory outlet
centers typically are shorter than those in traditional malls or shopping
centers, thereby increasing the risks of tenants relocating to competing
centers.
Factory Outlet Properties are also subject to the risks described above
under "--Retail Properties."
Tenant Credit Risk. Income from and the market value of retail, factory
outlet, office and industrial Mortgaged Properties would be adversely
affected if space in the Mortgaged Properties could not be leased, if tenants
were unable to meet their lease obligations, if a significant tenant were to
become a debtor in a bankruptcy case under the United States Bankruptcy Code
or if for any other reason rental payments could not be collected. If tenant
sales in the Mortgaged Properties that contain retail space were to decline,
rents based upon such sales would decline and tenants may be unable to pay
their rent or other occupancy costs. Upon the occurrence of an event of
default by a tenant, delays and costs in enforcing the lessor's rights could
be experienced. Repayment of the Mortgage Loans will be affected by the
expiration of space leases and the ability of the respective borrowers to
renew the leases or relet the space on comparable terms. Even if vacated
space is successfully relet, the costs associated with reletting, including
tenant improvements, leasing commissions and free rent, could be substantial
and could reduce cash flow from the Mortgaged Properties.
In the case of retail properties, the failure of an anchor tenant to renew
its lease, the termination of an anchor tenant's lease, the bankruptcy or
economic decline of an anchor tenant, or the cessation of the business of an
anchor (notwithstanding its continued payment of rent) can have a
particularly negative effect on the economic performance of a shopping center
property given the importance of anchor tenants in attracting traffic to
other stores. In addition, the failure of any anchor tenant to operate from
its premises may give certain tenants the right to terminate or reduce rents
under their leases.
Concentration of Mortgage Loans; Borrowers. Several of the Mortgage Loans
have Cut-off Date Principal Balances that are substantially higher than the
average Cut-off Date Principal Balance. The largest Mortgage Loan, which is
secured by the Kendall Square Pool Properties, located in East Cambridge,
Massachusetts, has a Cut-off Date Principal Balance that represents
approximately 5.0% of the Initial Pool Balance. The second largest Mortgage
Loan, which is secured by the Saracen Pool Properties, located in suburban
Boston, Massachusetts, has a Cut-off Date Principal Balance that represents
approximately 4.9% of the Initial Pool Balance. The third largest Mortgage
Loan, which is secured by the property known as International Plaza, located
in New York City, has a Cut-off Date Principal Balance that represents
approximately 4.7% of the Initial Pool Balance. The ten largest Mortgage
Loans have Cut-off Date Principal Balances that represent, in the aggregate,
approximately 40% of the Initial Pool Balance. See "Description of the
Mortgage Pool -- Significant Mortgage Loans" for a description of these
Mortgage Loans.
25
<PAGE>
The following table sets forth Mortgage Loans secured by more than one
Mortgaged Property.
MORTGAGE LOANS SECURED BY MORE THAN ONE MORTGAGED PROPERTY
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF % OF INITIAL
LOAN NAME PROPERTIES STATES POOL BALANCE
- ------------------------------------- -------------- ------------- ----------------
<S> <C> <C> <C>
Kendall Square*....................... 3 1 5.0%
Saracen............................... 6 1 4.9%
K-Mart Distribution Centers........... 2 2 4.5%
Burnham Pacific*...................... 2 1 4.2%
Hudson Hotels......................... 16 6 4.0%
Sunwest*.............................. 72 11 3.6%
Uniprop*.............................. 4 3 2.4%
Jacobs Malls.......................... 2 2 2.3%
M & H................................. 3 1 2.0%
Prime Retail II*...................... 3 3 1.9%
Ambassador Apartments II.............. 2 1 1.5%
Holladay.............................. 11 2 1.4%
2 St. Marks/Greystone* ............... 2 2 1.1%
Tramz................................. 2 1 0.8%
Cleveland Industrial Portfolio ....... 8 1 0.6%
EconoLodge Portfolio* ................ 6 2 0.4%
Magnolia-Western Investments.......... 2 1 0.4%
Buena/Leisure Nursing................. 2 1 0.4%
Sutton Place and South Livingston .... 2 1 0.3%
</TABLE>
- ------------
* Loans entered into with multiple borrowers. See "--Limitations on the
Enforceability of Cross-Collateralization" below and "Description of
the Mortgage Pool -- Cross-Collateralization and Cross-Default of
Certain Mortgage Loans" herein.
In addition there are three pairs and one group of four Mortgage Loans
that were made to affiliated borrowers which are not cross-collateralized or
cross-defaulted, no one of which represents more than 2% of the Initial Pool
Balance.
In general, concentrations in a mortgage pool in which one or more loans
that have outstanding principal balances that are substantially larger than
the other mortgage loans in such pool can result in losses that are more
severe, relative to the size of the pool, than would be the case if the
aggregate balance of such pool were more evenly distributed among the
mortgage loans in such pool. Concentrations of Mortgage Loans with the same
borrower or related borrowers can also pose increased risks. For example, if
a person that owns or controls several Mortgaged Properties experiences
financial difficulty at one Mortgaged Property, it could defer maintenance at
one Mortgaged Property in order to satisfy current expenses with respect to
another Mortgaged Property, or it could attempt to avert foreclosure by
filing a bankruptcy petition that might have the effect of interrupting
Monthly Payments (subject to the Servicer's obligation to make Advances) for
an indefinite period on all of the related Mortgage Loans.
Limitations on Enforceability of Cross-Collateralization. 19 of the
Mortgage Loans representing approximately 41.8% of the Initial Pool Balance
and having Cut-off Date Principal Balances ranging from $3,800,000 to
$69,598,691 are secured by more than one Mortgaged Property. These
arrangements seek to reduce the risk that the inability of a Mortgaged
Property securing each such Mortgage Loan to generate net operating income
sufficient to pay debt service will result in defaults and ultimate losses.
See "--Concentration of Mortgage Loans; Borrowers" above.
Cross-collateralization arrangements involving more than one borrower (as
indicated on the chart entitled "Mortgage Loans Secured by More Then One
Property" above) could be challenged as a fraudulent conveyance by creditors
of a borrower or by the representative of the bankruptcy estate of a
borrower, if a borrower were to become a debtor in a bankruptcy case.
Generally, under federal and most state fraudulent conveyance statutes, the
incurring of an obligation or the transfer of property by a person will be
subject to avoidance under certain circumstances if the person did not
receive fair consideration or reasonably equivalent value in exchange for
such obligation or transfer and (i) was insolvent or was
26
<PAGE>
rendered insolvent by such obligation or transfer, (ii) was engaged in
business or a transaction, or was about to engage in business or a
transaction, for which any property remaining with the person was an
unreasonably small capital or (iii) intended to, or believed that it would,
incur debts that would be beyond the person's ability to pay as such debts
matured. Accordingly, a lien granted by a borrower to secure repayment of
another borrower's Mortgage Loan could be avoided if a court were to
determine that (i) such borrower was insolvent at the time of granting the
lien, was rendered insolvent by the granting of the lien, or was left with
inadequate capital, or was not able to pay its debts as they matured and (ii)
the borrower did not, when it allowed its Mortgaged Property to be encumbered
by a lien securing the entire indebtedness represented by the other Mortgage
Loan, receive fair consideration or reasonably equivalent value for pledging
such Mortgaged Property for the equal benefit of the other borrower.
Other Financing. The Mortgage Loans generally prohibit incurring any debt
that is secured by the related Mortgaged Property. The Mortgage Loans do,
however, generally permit the related borrower to incur unsecured
indebtedness in limited circumstances for the purchase of certain items used
in the ordinary course of business, such as equipment and in the case of
certain of the Mortgage Loans, limited amounts of secured (but not by the
Mortgaged Property) or unsecured debt is permitted for other purposes. The
existence of such other indebtedness could adversely affect the financial
viability of the related borrowers or the security interest of the lender in
the equipment or other assets acquired through such financings or could
complicate bankruptcy proceedings and delay foreclosure on the Mortgaged
Property. See "Certain Legal Aspects of the Mortgage Loans -- Subordinate
Financing" herein. Additionally, the Mortgage Loan Seller has made loans to
affiliates of certain of the borrowers ("Mezzanine Debt") secured by their
equity interests in the borrowers, as set forth on the following table:
MEZZANINE DEBT
<TABLE>
<CAPTION>
MORTGAGE MEZZANINE
LOAN BALANCE DEBT BALANCE COMBINED LTV
MORTGAGE LOAN (1) (2) (3)
- ------------------------ -------------- -------------- --------------
<S> <C> <C> <C>
Residence Inn--Herndon . $13,481,513 $800,000 71%
One Ethel Rd. ........... $ 2,172,731 $225,000 58%
Burlington Square ....... $14,642,002 $335,000(4) 70%
</TABLE>
- ------------
(1) As of the Cut-off Date.
(2) Initial principal balance.
(3) "Combined LTV" means "LTV" as defined herein, but adding the original
principal balance of the Mezzanine Debt to the numerator.
(4) The loan is to the borrower, but is guaranteed by an affiliate.
In addition, the Mortgage Loan Seller has a $2,300,000 senior
participation interest in a financing arrangement with entities which control
the Kendall Borrowers. See "Description of the Mortgage Pool -- Significant
Mortgage Loans -- Kendall Square Pool Loan and Properties."
Equity Investments by the Mortgage Loan Seller and/or its Affiliates. The
Mortgage Loan Seller and/or its affiliates (the "Preferred Interest Holder")
has acquired a preferred equity interest in 16 borrowers or their affiliates,
which are the borrowers (or affiliates) with respect to Mortgage Loans
representing approximately 25.6% of the Initial Pool Balance, as set forth in
the following table:
PREFERRED EQUITY (APPROXIMATE) INVESTMENTS IN BORROWERS AND AFFILIATES
<TABLE>
<CAPTION>
APPROXIMATE AMOUNT
MORTGAGE LOAN OF PREFERRED EQUITY INTEREST IN BORROWER
MORTGAGE LOAN BALANCE(1) INVESTMENT(2) OR ITS AFFILIATE
- --------------------------------- --------------- ------------------- --------------------
<S> <C> <C> <C>
Saracen........................... $68,923,230 $7,500,000 Affiliate
International Plaza............... $65,750,000 $5,250,000 Borrower
Sunwest........................... $50,500,000 $6,700,000 Affiliate/Borrower
Westin--Indianapolis.............. $41,700,000 $5,900,000 Borrower
Two Gateway Center................ $34,423,045 $4,000,000 Borrower
Lakeside Village.................. $24,971,982 $2,000,000 Borrower
Danvers Crossing Shopping Center . $13,627,151 $ 390,000 Borrower
The Plaza Burr Corners I & II .... $12,278,439 $1,035,000 Borrower
Tramz............................. $11,599,902 $1,350,000 Borrower
27
<PAGE>
APPROXIMATE AMOUNT
MORTGAGE LOAN OF PREFERRED EQUITY INTEREST IN BORROWER
MORTGAGE LOAN BALANCE(1) INVESTMENT(2) OR ITS AFFILIATE
- --------------------------------- --------------- ------------------- --------------------
Hood Commons...................... $9,025,000 $975,000 Borrower
Residence Inn--Livermore.......... $6,060,000 $740,000 Borrower
Englar Shopping Center............ $5,523,398 $430,000 Borrower
Totem Square Shopping Center ..... $5,425,000 $385,000 Borrower
Days Inn--Providence.............. $3,955,000 $460,000 Borrower
Washington Square Shopping
Center........................... $3,463,909 $307,000 Borrower
Slauson Apts. .................... $1,772,762 $170,000 Borrower
</TABLE>
- ------------
(1) As of the Cut-off Date, the total Initial Pool Balance of all Mortgage
Loans in which the Preferred Interest Holder has a preferred equity
interest is $358,998,818.
(2) Initial amount of investment.
In general, with respect to each such borrower, the Preferred Interest
Holder is entitled to receive certain preferred distributions prior to
distributions being made to the other partners or members. No monthly
distribution to the Preferred Interest Holder is permitted to be made until
all required monthly debt service payments, reserve payments, other payments
under the related Mortgage Loan ("Monthly Mortgage Loan Payments") and any
obligations to other creditors have been made when due and all monthly
operating expenses with respect to the related Mortgaged Property ("Monthly
Operating Expenses") have been paid. After payment of such amounts, the
Preferred Interest Holder is entitled to receive a distribution of a
preferred yield and a monthly return of capital equal to either (i) a
scheduled minimum payment or (ii) the greater of a scheduled minimum payment
and specified percentage of certain remaining cash flow from the Mortgaged
Property or Properties, after payment of Monthly Mortgage Loan Payments,
Monthly Operating Expenses and the monthly preferred yield to the Preferred
Interest Holder (or, in each case, if certain breaches have occurred, 100% of
such remaining cash flow).
Under the related partnership agreement, operating agreement or similar
agreement, the Preferred Interest Holder has certain specified rights,
including, in most cases, the right to terminate and replace the manager of
the related Mortgaged Property or Properties upon the occurrence of certain
specified breaches or, in some cases, if the DSCR as of certain dates falls
below certain levels generally equal to the DSCR at the time of the
origination of the related Mortgage Loan. However, the right of the Preferred
Interest Holder to terminate any manager is expressly subordinate to the
right of the Servicer to terminate and replace such manager. If the Preferred
Interest Holder is entitled to terminate a manager at a time when the
Servicer does not have such a right, then prior to termination, the Preferred
Interest Holder must receive confirmation from each of the Rating Agencies
that such termination would not cause any Rating Agency to withdraw, qualify
or downgrade any of its then-current ratings on the Certificates. Other than
the increase in the percentage of the cash flow used to calculate the monthly
return of capital and the right to terminate the manager as described above,
the Preferred Interest Holder has no further remedies under the relevant
partnership, operating or similar agreement in the event of nonpayment of its
monthly preferred yield and return of capital.
In general, the Preferred Interest Holder has the right to approve the
annual budget for the Mortgaged Properties, which right is subject to any
right that the Servicer may have to approve such budgets. The Preferred
Interest Holder also has the right to approve certain actions of the related
borrowers, including certain transactions with affiliates, prepayment or
refinancing of the related Mortgage Loan, transfer of the related Mortgaged
Property, entry into or modification of substantial leases or improvement of
the related Mortgaged Properties to a materially higher standard than
comparable properties in the vicinity of such Mortgaged Properties (unless
approved by the Servicer as described below), and the dissolution,
liquidation or the taking of certain bankruptcy actions with respect to the
borrower. With respect to the making of any capital improvements in addition
to those reserved for under the related Mortgage Loan, the Servicer alone may
approve such leases and improvements without the consent of the Preferred
Interest Holder. In such event, the expenditure of amounts to make such
additional capital improvements, rather than to make the monthly distribution
to the Preferred Interest Holder, will not cause a breach which gives rise to
a right to terminate the related manager.
An affiliate of the borrower with respect to the Mortgaged Property known
as Madison House has an option for approximately 18 months to require the
Mortgage Loan Seller or its affiliate to make a preferred equity investment
in such entity of up to $1,200,000.
An affiliate of the Mortgage Loan seller owns a 60% common equity
ownership interest in the Borrower with respect to the Mortgaged Property
known as South DeKalb Mall. An additional equity investment in the form of
preferred equity in an amount up to $2.5 million funded by another affiliate
of the Mortgage Loan Seller will be available to the borrower for up to
approximately three years. The proceeds of this investment may be used for
any capital improvement including additional tenant buildout.
28
<PAGE>
The Mortgage Loan Seller owns a 27% membership interest in Westin Hotel
LLC ("Westin"), the owner of Westin Hotels and Resorts Worldwide, Inc.
("Westin Resorts"). Westin Resorts owns the borrower with respect to the
Mortgaged Property known as Westin -- Indianapolis and the manager of such
hotel. The Mortgage Loan Seller's membership interests in Westin are
non-voting interests.
An affiliate of the Mortgage Loan Seller has a common equity investment of
$3,547,500 in the parent of the borrower with respect to the Mortgaged
Property known as the Montague Park Tech Center.
For an additional description of the preferred equity interests in the
borrowers and/or affiliates related to the Saracen Pool Loan (including the
commitment to fund an additional $1,000,000 of preferred equity) and Sunwest
Pool Loan, see "Description of the Mortgage Pool -- Significant Mortgage
Loans -- The Saracen Pool Loan and Properties" and "--Sunwest Pool Loan and
Properties."
Tax Considerations Related to Foreclosure. If the Trust Fund were to
acquire a Mortgaged Property subsequent to a default on the related Mortgage
Loan pursuant to a foreclosure or deed in lieu of foreclosure, the Special
Servicer would be required to retain an independent contractor to operate and
manage the Mortgaged Property. Any net income from such operation and
management, other than qualifying "rents from real property," or any rental
income based on the net profits of a tenant or sub-tenant or allocable to a
service that is non-customary in the area and for the type of building
involved, will subject the Trust REMIC to federal (and possibly state or
local) tax on such income at the highest marginal corporate tax rate
(currently 35%), thereby reducing net proceeds available for distribution to
Certificateholders. See "Certain Federal Income Tax Consequences -- Taxes
That May Be Imposed on a REMIC -- Net Income From Foreclosure Property"
herein.
Risk of Different Timing of Mortgage Loan Amortization. As set forth on
the table below, the different types of Mortgaged Properties securing the
Mortgage Loans have varying weighted average terms to maturity. If and as
principal payments or prepayments are made on a Mortgage Loan, the remaining
Mortgage Pool will be subject to more concentrated risk with respect to the
diversity of properties, types of properties, geographic concentration (see
"--Geographic Concentration" below) and with respect to the number of
borrowers. Because principal on the Certificates is payable in sequential
order, and no Class entitled to distributions of prinicpal receives principal
until the Certificate Balance of the preceding Class or Classes so entitled
has been reduced to zero, Classes that have a later sequential designation,
such as the Subordinated Certificates, are more likely to be exposed to the
risk of concentration discussed in the preceding sentence than Classes with
higher sequential priority.
WEIGHTED AVERAGE REMAINING TERM TO MATURITY FOR VARIOUS PROPERTY TYPES
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING TERM TO THE
EARLIER OF MATURITY OR
% OF INITIAL ANTICIPATED REPAYMENT
PROPERTY TYPE POOL BALANCE DATE (IF APPLICABLE)
- ------------------------ -------------- ----------------------
<S> <C> <C>
Retail (Anchored)........ 26.9% 129
Retail (Unanchored) .... 6.2% 154
Office .................. 24.2% 118
Hotel (Full Service) ... 8.7% 156
Hotel (Limited Service) 4.4% 154
Hotel (Extended Stay) ... 2.0% 180
Multifamily ............. 12.8% 140
Nursing Home ............ 3.3% 175
Industrial .............. 5.8% 218
Factory Outlet .......... 1.9% 123
Mobile Home/RV Park .... 3.5% 118
Assisted Living ......... 0.2% 179
TOTAL/WTD. AVG. ......... 100% 140
</TABLE>
29
<PAGE>
Geographic Concentration. The Mortgaged Properties are located in 39
states. The tables below set forth the states in which a significant
percentage of the Mortgaged Properties are located and the concentration of
property types within those states. See the table entitled "Geographic
Distribution of the Mortgaged Properties" for a description of geographic
location of the Mortgaged Properties. Except as set forth below, no state
contains more than 5% (by Cut-off Date Principal Balance or Allocated Loan
Amount) of the Mortgaged Properties.
SIGNIFICANT GEOGRAPHIC CONCENTRATION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
NUMBER OF
% OF INITIAL MORTGAGED
STATE POOL BALANCE PROPERTIES
- --------------- -------------- ------------
<S> <C> <C>
California ..... 21% 32
Massachusetts . 12% 11
New York ....... 8% 11
New Jersey ..... 6% 7
Florida ........ 6% 10
North Carolina 5% 10
</TABLE>
30
<PAGE>
GEOGRAPHIC CONCENTRATION OF PROPERTY TYPES (1)
<TABLE>
<CAPTION>
TYPE CA MA NY
- ------------------------- ------ ------ ------
<S> <C> <C> <C>
Assisted Living 0.2%
Hotel--Extended Stay 0.4
Hotel--Full Service 1.1%
Hotel--Limited Service 0.2 0.5
Multifamily 5.4 0.8
Nursing 1.6
Office 0.8 9.6% 5.2
Office--R&D 2.3
Retail--Anchored 6.6 0.9
Retail--Anchored 0.2
Retail--Mall 1.7
Retail--Unanchored 1.2
Retail--Secondary
Anchored 0.2 1.0
------ ------ ------
TOTAL 21% 12% 8%
------ ------ ------
<FN>
- ------------
(1) Based on Initial Pool Balance.
</TABLE>
Repayments by borrowers and the market value of the Mortgaged Properties
could be adversely affected by economic conditions generally or in regions
where the borrowers and the Mortgaged Properties are located, conditions in
the real estate markets where the Mortgaged Properties are located, changes
in governmental rules and fiscal policies, acts of nature (which may result
in uninsured losses), and other factors which are beyond the control of the
borrowers.
The economy of any state or region in which a Mortgaged Property is
located may be adversely affected to a greater degree than that of other
areas of the country by certain developments affecting industries
concentrated in such state or region. Moreover, in recent periods, several
regions of the United States have experienced significant downturns in the
market value of real estate. To the extent that general economic or other
relevant conditions in states or regions in which concentrations of Mortgaged
Properties securing significant portions of the aggregate principal balance
of the Mortgage Loans are located decline and result in a decrease in
commercial property, housing or consumer demand in the region, the income
from and market value of the Mortgaged Properties may be adversely affected.
Exercise of Remedies. The Mortgage Loans generally contain a due-on-sale
clause, which permits the lender to accelerate the maturity of the Mortgage
Loan if the mortgagor sells, transfers or conveys the related Mortgaged
Property or its interest in the Mortgaged Property. All of the Mortgage Loans
also include a debt-acceleration clause, which permits the lender to
accelerate the debt upon specified monetary or non-monetary defaults of the
mortgagor. The courts of all states will enforce clauses providing for
acceleration in the event of a material payment default. The equity courts of
any state, however, may refuse the foreclosure of a mortgage or deed of trust
or permit the acceleration of the indebtedness as a result of a default
deemed to be immaterial or if the exercise of such remedies would be
inequitable or unjust or the circumstances would render the acceleration
unconscionable.
Each of the Mortgage Loans is secured by an assignment of leases and rents
pursuant to which the related mortgagor assigned its right, title and
interest as landlord under the leases on the related Mortgaged Property and
the income derived therefrom to the lender as further security for the
related Mortgage Loan, while retaining a license to collect rents for so long
as there is no default. In the event the mortgagor defaults, the license
terminates and the lender is entitled to collect rents. In some cases, such
assignments may not be perfected as security interests prior to actual
possession of the cash flow. In some cases, state law may require that the
lender take possession of the Mortgaged Property and obtain a judicial
appointment of a receiver before becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings are commenced by or in respect
of the mortgagor, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of Mortgage Loans -- Leases and Rents."
Environmental Law Considerations. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner
or operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under, adjacent to, or in
such property. Such laws often impose liability whether or
31
<PAGE>
not the owner or operator knew of, or was responsible for, the presence of
such hazardous or toxic substances. The cost of any required remediation and
the owner's liability therefor is generally not limited under such
circumstances and could exceed the value of the property and/or the aggregate
assets of the owner. Under the laws of certain states, contamination of a
property may give rise to a lien on the property to assure the costs of
cleanup. In some such states this lien has priority over the lien of an
existing mortgage against such property. In addition, the presence of
hazardous or toxic substances, or the failure to properly remediate such
property, may adversely affect the owner's or operator's ability to refinance
using such property as collateral. Persons who arrange for the disposal or
treatment of hazardous or toxic substances may also be liable for the costs
of removal or remediation of such substances at the disposal or treatment
facility. Certain laws impose liability for release of asbestos containing
materials ("ACMs") into the air or require the removal or containment of ACMs
and third parties may seek recovery from owners or operators of real
properties for personal injury associated with ACMs or other exposure to
chemicals or other hazardous substances. For all of these reasons, the
presence of, or contamination by, hazardous substances at, on, under,
adjacent to, or in a property can materially adversely affect the value of
the property.
Under some environmental laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), as well as certain state laws, a secured lender (such as the
Trust Fund) may be liable, as an "owner" or "operator," for the costs of
responding to a release or threat of a release of hazardous substances on or
from a borrower's property regardless of whether the borrower or a previous
owner caused the environmental damage, if (i) agents or employees of a lender
are deemed to have participated in the management of the borrower or (ii) the
Trust Fund actually takes possession of a borrower's property or control of
its day-to-day operations, as for example, through the appointment of a
receiver 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, such legislation has no applicability
to state environmental law. See "Certain Legal Aspects of the Mortgage Loans
- -- Environmental Legislation."
All of the Mortgaged Properties have been subject to environmental site
assessments or studies within the eighteen months preceding the Cut-off Date.
No assessment or study revealed any environmental condition or circumstance
that the Depositor believes will have a material adverse impact on the value
of the related Mortgaged Property or the borrower's ability to pay its debt.
In the cases where the environmental assessments revealed the existence of
friable and non-friable ACMs and lead based paint, the borrowers agreed to
establish and maintain operations and maintenance or abatement programs
and/or environmental reserves. The environmental studies and assessments
revealed that 45% of the Mortgaged Properties, based on Initial Pool Balance,
contained ACM's. In the case of the Mortgage Loan secured by the Sutton Place
and South Livingston retail properties, the environmental assessments
revealed the presence of hazardous waste at the Sutton Place property caused
by a dry cleaning operation. The environmental consultant estimated it will
take a maximum of $230,000 to commence cleanup plus $60,000 per year for
three years to complete the cleanup. The related borrower has established an
approximately $400,000 reserve to cover such estimated maximum costs. In the
case of the Sunwest Pool Properties, the related borrower has established a
$2,000,000 reserve to cover the remediation of groundwater contamination at
facility number 5859 (which has an Allocated Loan Amount of $162,930) and
facility number 7055 (which has an Allocated Loan Amount of $1,198,665).
Based on information from the environmental consultant, among other sources,
it is believed that the groundwater contamination at facility number 5859 was
caused by an upgradient LUST site owned by Chevron. In accordance with the
terms of the related Mortgage, the reserved amounts will not be released to
the borrower until the environmental considerations have been resolved to the
satisfaction of the Servicer. The environmental consultant's report indicated
that maintenance and/or remediation with respect to these properties would
cost a maximum of $1,200,000. In the case of the Mortgage Loan secured by the
How 'Bout Arden property, the environmental assessment revealed groundwater
contamination and determined that the related Mortgaged Property was not
responsible. Groundwater monitoring has indicated there are declining levels
of contaminants in the groundwater (ranging from slightly above the
regulatory limit to none) and an additional test is currently being
conducted. The state environmental agency has indicated that the declining
levels of contaminants and the expected results from the current test will be
sufficient for them to grant closure of the file relating to this site. In
the case of the Kendall Square Loan, environmental tests in the 1980's
disclosed elevated levels of volatile organic compounds present in
groundwater monitoring wells at One Kendall Square. Although recent tests
have disclosed contaminants below reportable levels, and although the
environmental consultant has estimated that additional testing and
remediation would cost $25,000, the Kendall Borrower has reserved $100,000
for such testing and remediation and the remediation of certain other
environmental issues raised by the environmental assessment. In the case of
the Mortgage Loan secured by the Alzina Office Complex, the environmental
assessments revealed the presence of fuel oil and gasoline contamination in
the
32
<PAGE>
parking lot. The related borrower established a $400,000 reserve, which
amount, according to the environmental consultant, would be the maximum
amount needed for remediation. In the case of Two Gateway Plaza, nonfriable
ACM is present on one floor which is currently used as a cafeteria. Even
though the environmental consultant concluded that this ACM poses no risk to
health or the environment at this time, a $1,200,000 reserve has been
established to finance ACM removal, which is anticipated to be used for
future renovation of the floor. It recently has been estimated that the costs
of the anticipated ACM removal will be approximately $989,000. Certain of the
Mortgaged Properties have off-site leaking underground storage tank sites
located nearby which the environmental consultant has advised are not likely
to contaminate the related Mortgaged Properties but will require future
monitoring. The environmental assessments revealed other adverse
environmental conditions such as the existence of storage tanks needing
replacement or removal, PCBs in equipment on-site and elevated radon levels,
in connection with which environmental reserves have been established and/or
removal or monitoring programs have been implemented. There can be no
assurance that all environmental conditions and risks have been identified in
such environmental assessments or studies, as applicable, or that any such
environmental conditions will not have a material adverse effect on the value
or cash flow of the related Mortgaged Property.
Federal law requires owners of residential housing constructed prior to
1978 to disclose to potential residents or purchasers any condition on the
property that causes exposure to lead-based paint. In addition, every
contract for the purchase and sale of any interest in residential housing
constructed prior to 1978 must contain a "Lead Warning Statement" that
informs the purchaser of the potential hazards to pregnant women and young
children associated with exposure to lead-based paint. 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 can be held liable for injuries to their tenants
resulting from exposure to lead-based paint under various state and local
laws and regulations that impose affirmative obligations on property owners
of residential housing containing lead-based paint. The environmental
assessments revealed the existence of lead-based paint at certain of the
multifamily residential properties. In these cases the borrowers have either
implemented operations and maintenance programs or are in the process of
removing the lead-based paint. The Depositor believes that the presence of
lead-based paint at these Mortgaged Properties will not have a material
adverse effect on the value of the related Mortgaged Property or ability of
the related borrowers to repay their loans.
The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to
acquiring title thereto on behalf of the Trust Fund or assuming its
operation. Such requirement may effectively preclude enforcement of the
security for the related Note until a satisfactory environmental site
assessment is obtained (or until any required remedial action is thereafter
taken), but will decrease the likelihood that the Trust Fund will become
liable under any environmental law. However, there can be no assurance that
the requirements of the Pooling and Servicing Agreement will effectively
insulate the Trust Fund from potential liability under environmental laws.
See "The Pooling and Servicing Agreement -- Realization Upon Mortgage Loans
- -- Standards for Conduct Generally in Effecting Foreclosure or the Sale of
Defaulted Loans" and "Certain Legal Aspects of Mortgage Loans --
Environmental Legislation" herein.
Balloon Payments. Nine of the Mortgage Loans are Balloon Loans which will
have substantial payments of principal ("Balloon Payments") due at their
stated maturities unless previously prepaid. 106 of the Mortgage Loans have
Anticipated Repayment Dates, and have substantial scheduled principal
balances as of such date. Loans that require Balloon Payments involve a
greater risk to the lender than fully amortizing loans because the ability of
a borrower to make a Balloon Payment typically will depend upon its ability
either to refinance the loan or to sell the related Mortgaged Property at a
price sufficient to permit the borrower to make the Balloon Payment.
Similarly, the ability of a borrower to repay a loan on the Anticipated
Repayment Date will depend on its ability to either refinance the Mortgage
Loan or to sell the related Mortgaged Property. The ability of a borrower to
accomplish either of these goals will be affected by all of the factors
described above affecting property value and cash flow, as well as a number
of other factors at the time of attempted sale or refinancing, including the
level of available mortgage rates, prevailing economic conditions and the
availability of credit for multifamily or commercial properties (as the case
may be) generally.
33
<PAGE>
AMORTIZATION CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF INITIAL NUMBER OF
TYPE OF LOAN POOL BALANCE MORTGAGE LOANS
- -------------------------------------------------- -------------- --------------
<S> <C> <C>
ARD Loans ......................................... 96.2% 106
Fully Amortizing Loans (other than the ARD Loans) 2.5% 6
Balloon Mortgage Loans ............................ 1.2% 9
</TABLE>
One Action Considerations. Several states (including California) have laws
that prohibit more than one "judicial action" to enforce a mortgage
obligation, and some courts have construed the term "judicial action"
broadly. Accordingly, the Pooling and Servicing Agreement will require the
Servicer to obtain advice of counsel prior to enforcing any of the Trust
Fund's rights under any of the Mortgage Loans that include properties where
the rule could be applicable. In addition, in the case of a Pool Loan secured
by Mortgaged Properties located in multiple states, the Servicer may be
required to foreclose first on 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. See "Certain Legal Aspects of Mortgage
Loans --Foreclosure" herein.
Limitations of Appraisals and Market Studies. In general, appraisals
represent the analysis and opinion of the respective appraisers at or before
the time made and are not guarantees of, and may not be indicative of,
present or future value. There can be no assurance that another appraiser
would not have arrived at a different valuation, even if such appraiser used
the same general approach to and same method of appraising the property.
Moreover, appraisals seek to establish the amount a typically motivated buyer
would pay a typically motivated seller. Such amount could be significantly
higher than the amount obtained from the sale of a Mortgaged Property under a
distress or liquidation sale. Information regarding the values of the
Mortgaged Properties as of the Cut-off Date is presented under "Description
of the Mortgage Pool" herein for illustrative purposes only. Additionally, no
appraisals were performed for the Sunwest Pool Properties. A capitalization
rate of 9.5% was applied to the net cash flow as determined by the Mortgage
Loan Seller in determining the approximate value of these properties.
Conflicts of Interest. A substantial number of the Mortgaged Properties
are managed by property managers affiliated with the respective borrowers.
These property managers may also manage and/or franchise additional
properties, including properties that may compete with the Mortgaged
Properties. Moreover, affiliates of the managers, or the managers themselves,
may also own other properties, including competing properties. Accordingly,
the managers of the Mortgaged Properties may experience conflicts of interest
in the management of such properties.
Additionally, as described above under "--The Mortgage Loans --Other
Financing," and "--Equity Investments by the Mortgage Loan Seller and/or its
Affiliates," the Mortgage Loan Seller and/or an affiliate has acquired a
preferred equity interest in certain of the borrowers or their affiliates,
which are the borrowers (or affiliates) with respect to Mortgage Loans
representing approximately 25.6% of the Initial Pool Balance and has an
obligation to fund preferred equity with respect to 2 Mortgage Loans
representing approximately 2% of the Initial Pool Balance. In addition, the
Mortgage Loan Seller or an affiliate has an equity interest in the borrower
with respect to the South DeKalb Mall and has an equity interest in the
parent of the borrower with respect to the Montague Park Tech Center and in
the indirect parent of the borrower with respect to Westin -- Indianapolis
and the manager of such hotel. See "--Equity Investments by Affiliates of
Mortgage Loan Seller." In addition, the Mortgage Loan Seller or an affiliate
may have other financing arrangements with affiliates of the borrowers and
may enter into additional financing relationships in the future. Certain
officers and directors of the Depositor and its affiliates own equity
interests in affiliates of the borrowers.
Ground Leases. Forty-three of the Mortgaged Properties, representing
security for approximately 13% of the Initial Pool Balance, are leasehold
interests.
Each of the Mortgage Loans secured by mortgages on leasehold estates were
underwritten taking into account payment of the ground lease rent, except in
cases where the Mortgage Loan has a lien on both the ground lessor's and
ground lessee's interest in the Mortgaged Property. On the bankruptcy of a
lessor or a lessee under a ground lease, the debtor entity has the right to
assume (continue) or reject (terminate) the ground lease. Pursuant to Section
365(h) of the Bankruptcy Code, as it is presently in effect, a ground lessee
whose ground lease is rejected by a debtor ground lessor has the right to
remain in possession of its leased premises under the rent reserved in the
lease for the term (including renewals) of the ground lease but is not
entitled to enforce the obligation of the ground lessor to provide any
services required under the ground lease. In the event a ground
lessee/borrower in bankruptcy rejects any or all of its ground leases,
34
<PAGE>
the leasehold mortgagee would have the right to succeed to the ground
lessee/borrower's position under the lease only if the ground lessor had
specifically granted the mortgagee such right. In the event of concurrent
bankruptcy proceedings involving the ground lessor and the ground
lessee/borrower, the Trustee may be unable to enforce the bankrupt ground
lessee/borrower's obligation to refuse to treat a ground lease rejected by a
bankrupt ground lessor as terminated. In such circumstances, a ground lease
could be terminated notwithstanding lender protection provisions contained
therein or in the mortgage.
Zoning Compliance; Inspections. Due to changes in applicable building and
zoning ordinances and codes ("Zoning Laws") affecting certain of the
Mortgaged Properties which have come into effect after the construction of
improvements on such Mortgaged Properties and to other reasons, certain
improvements may not comply fully with current Zoning Laws, including
density, use, parking and set back requirements, but qualify as permitted
non-conforming uses. Such changes may limit the ability of the borrower to
rebuild the premises "as is" in the event of a substantial casualty loss with
respect thereto and may adversely affect the ability of the borrower to meet
its Mortgage Loan obligations from cash flow. While it is expected that
insurance proceeds would be available for application to the related Mortgage
Loan if a substantial casualty were to occur, no assurance can be given that
such proceeds would be sufficient to pay off such Mortgage Loan in full or
that, if the Mortgaged Property were to be repaired or restored in conformity
with current law, what its value would be relative to the remaining balance
on the related Mortgage Loan, whether the property would have a value equal
to that before the casualty, or what its revenue-producing potential would
be.
Inspections of the Mortgaged Properties were conducted in connection with
the origination of the Mortgage Loans by licensed engineers to assess the
structure, exterior walls, roofing interior construction, mechanical and
electrical systems and general condition of the site, buildings and other
improvements located on the Mortgaged Properties. There can be no assurance
that all conditions requiring repair or replacement have been identified in
such inspections.
Costs of Compliance with Americans with Disabilities Act. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. To the extent the Mortgaged Properties do
not comply with the ADA, the borrowers may incur costs of complying with the
ADA. In addition, noncompliance could result in the imposition of fines by
the federal government or an award of damages to private litigants.
Litigation. There may be legal proceedings pending and, from time to time,
threatened against the borrowers and their affiliates relating to the
business of or arising out of the ordinary course of business of the
borrowers and their affiliates. There can be no assurance that such
litigation will not have a material adverse effect on the distributions to
Certificateholders.
Obligor Default. In order to maximize recoveries on defaulted Mortgage
Loans, the Special Servicer may, under certain limited circumstances, extend
and/or modify Mortgage Loans that are in default or as to which a payment
default is reasonably foreseeable, including in particular with respect to
Balloon Payments. While the Special Servicer will have a duty to determine
that any such extension or modification is likely to produce a greater
recovery on a present value basis than liquidation, there can be no assurance
that such flexibility with respect to extensions or modifications will
increase the present value of receipts from or proceeds of Mortgage Loans
that are in default or as to which a default is reasonably foreseeable.
THE CERTIFICATES
Limited Assets. If the Trust Fund is insufficient to make payments on the
Subordinated Certificates, no other assets will be available for payment of
the deficiency.
Subordination in Right of Payment. As and to the extent described below
under "Description of the Subordinated Certificates -- Subordination," the
Subordinated Certificates are subordinate in right of payment to the Senior
Certificates. The rights of the holders of the Class B-1 Certificates to
receive distributions of interest and principal will be subordinate to those
of the Senior Certificates; the rights of the holders of the Class B-2
Certificates to receive distributions of interest and principal will be
subordinate to those of the Senior Certificates and Class B-1 Certificates;
the rights of the holders of the Class B-3 Certificates to receive
distributions of interest and principal will be subordinate to those of the
Senior Certificates, Class B-1 and Class B-2 Certificates; the rights of the
holders of the Class B-4 Certificates to receive distributions of interest
and principal will be subordinate to those of the Senior Certificates, Class
B-1, Class B-2 and Class B-3 Certificates; the rights of the holders of the
Class B-5 Certificates to receive distributions of interest and principal
will be subordinate to those of the Senior Certificates, Class B-1, Class
B-2, Class B-3 and Class B-4 Certificates; and the rights
35
<PAGE>
of the holders of the Class B-6 Certificates to receive distributions of
interest and principal will be subordinate to those of the Senior
Certificates, Class B-1, Class B-2, Class B-3, Class B-4, and Class B-5
Certificates, in each case to the extent described herein under "Description
of the Subordinated Certificates --Subordination" and "--Distributions."
Allocation of Realized Losses on the Mortgage Loans. All Realized Losses
and other shortfalls in collections on the Mortgage Loans and all
extraordinary expenses that may be incurred by the Trust Fund will be
allocated in the following order of priority, first, pro rata to the Class
B-7 and Class B-7H Certificates until the Certificate Balances of such
Classes have been reduced to zero, second, to the Class B-6 Certificates
until the Certificate Balance of such Class has been reduced to zero, third,
to the Class B-5 Certificates until the Certificate Balance of such Class has
been reduced to zero, fourth, to the Class B-4 Certificates until the
Certificate Balance of such Class has been reduced to zero, fifth, to the
Class B-3 Certificates until the Certificate Balance of such Class has been
reduced to zero, sixth, to the Class B-2 Certificates until the Certificate
Balance of such Class has been reduced to zero, seventh, to the Class B-1
Certificates until the Certificate Balance of such Class has been reduced to
zero and eighth, to the Senior Certificates as described under "Description
of the Subordinated Certificates -- Distributions." INVESTORS IN THE
SUBORDINATED CERTIFICATES SHOULD CONSIDER THE RISK THAT LOSSES ON THE
MORTGAGE LOANS COULD RESULT IN THE FAILURE OF SUCH INVESTORS TO FULLY RECOVER
THEIR INITIAL INVESTMENTS. NO REPRESENTATION IS MADE AS TO THE FREQUENCY OF
DELINQUENCIES, DEFAULTS AND/OR LIQUIDATIONS THAT MAY OCCUR WITH RESPECT TO
THE MORTGAGE LOANS, OR THE MAGNITUDE OF ANY LOSSES THAT MAY OCCUR WITH
RESPECT TO THE MORTGAGE LOANS OR THE LIKELIHOOD OR MAGNITUDE OF ANY
EXTRAORDINARY EXPENSES THAT MAY BE INCURRED WITH RESPECT TO THE TRUST FUND.
Effect of Mortgagor Defaults. The aggregate amount of distributions on the
Subordinated Certificates, the yield to maturity of the Subordinated
Certificates, the rate of principal payments on the Subordinated Certificates
and the weighted average life of the Subordinated Certificates will be
affected by the rate and the timing of delinquencies and defaults on the
Mortgage Loans. Delinquencies on the Mortgage Loans, unless advanced, may
result in shortfalls in distributions of interest and/or principal to the
Subordinated Certificates for the current month. See "--Limitations on
Advancing" below. Any late payments received on or in respect of the Mortgage
Loans will be distributed to the Certificates in the priorities described
more fully herein, but no interest will accrue on such shortfall during the
period of time such payment is delinquent. Thus, because the Subordinated
Certificates will not accrue interest on shortfalls, delinquencies may result
in losses and shortfalls being allocated to the Subordinated Certificates,
which will reduce the amounts distributable to the Subordinated Certificates
and thereby adversely affect the yield to maturity of such Certificates.
If a purchaser of a Subordinated Certificate of any Class calculates its
anticipated yield based on an assumed rate of default and amount of losses on
the Mortgage Loans that is lower than the default rate and amount of losses
actually experienced and such additional losses are allocable to such Class
of Certificates, such purchaser's actual yield to maturity will be lower than
that so calculated and could, under certain scenarios, be negative. The
timing of any loss on a liquidated Mortgage Loan will also affect the actual
yield to maturity of the Subordinated Certificates to which all or a portion
of such loss is allocable, even if the rate of defaults and severity of
losses are consistent with an investor's expectations. In general, the
earlier a loss borne by an investor occurs, the greater is the effect on such
investor's yield to maturity. See "Yield and Prepayment Considerations --
Mortgagor Defaults."
As and to the extent described herein, the Servicer, the Special Servicer,
the Trustee or the Fiscal Agent, as applicable, will be entitled to receive
interest on unreimbursed Advances and unreimbursed servicing expenses that
(a) are recovered out of amounts received on the Mortgage Loan as to which
such Advances were made or such servicing expenses were incurred, which
amounts are in the form of reimbursement from the related borrower, late
payments, liquidation proceeds, insurance proceeds, condemnation proceeds or
amounts paid in connection with the purchase of such Mortgage Loan out of the
Trust Fund or (b) are determined to be nonrecoverable Advances. Such interest
will accrue from (and including) the date on which the related Advance is
made or the related expense incurred to (but excluding) the date on which (x)
in the case of clause (a) above, such amounts are recovered and (y) in the
case of clause (b) above, a determination of non-recoverability is made to
the extent that there are funds available in the Collection Account for
reimbursement of such Advance. The Servicer's, the Special Servicer's, the
Trustee's or the Fiscal Agent's right, as applicable, to receive such
payments of interest is prior to the rights of Certificateholders to receive
distributions on the Subordinated Certificates and, consequently, may result
in losses being allocated to the Subordinated Certificates that would not
otherwise have resulted absent the accrual of such interest. Such losses will
be allocated with the same priorities as Realized Losses. See "--Realized
Losses" herein. In addition, certain circumstances, including delinquencies
in the payment of principal and interest, may result in a Mortgage Loan being
specially serviced. The Special Servicer is entitled to additional
compensation for special servicing activities which may result in losses
being allocated to the Subordinated Certificates that would not otherwise
have resulted absent such compensation. See "The Pooling and Servicing
Agreement -- Special Servicing" herein.
36
<PAGE>
Even if losses on the Mortgage Loans are not borne by an investor in a
particular Class of Subordinated Certificates, such losses may affect the
weighted average life and yield to maturity of such investor's Certificates.
Losses on the Mortgage Loans, to the extent not allocated to such Class of
Subordinated Certificates, may result in a higher percentage ownership
interest evidenced by such Certificates than would otherwise have resulted
absent such loss. The consequent effect on the weighted average life and
yield to maturity of the Subordinated Certificates will depend upon the
characteristics of the remaining Mortgage Loans.
Regardless of whether losses ultimately result, delinquencies and defaults
on the Mortgage Loans may significantly delay the receipt of payments by the
holder of a Subordinated Certificate, to the extent that Advances or the
subordination of another Class of Certificates does not fully offset the
effects of any such delinquency or default. The Available Funds generally
consist of, as more fully described herein, principal and interest on the
Mortgage Loans actually collected or advanced.
As described under "Description of the Subordinated Certificates --
Distributions" herein, if the portion of Available Funds distributable in
respect of interest on the Subordinated Certificates on any Distribution Date
is less than the Interest Distribution Amount then payable for such class,
the shortfall will be distributable without interest on such shortfall to
holders of such Class of Certificates on subsequent Distribution Dates, to
the extent of Available Funds.
Limitations on Advancing. Upon the occurrence of each Appraisal Reduction
Event, the Special Servicer will calculate and report to the Servicer, the
paying agent appointed by the Trustee pursuant to the Pooling and Servicing
Agreement (the "Paying Agent") and the Trustee the Appraisal Reduction Amount
calculated in connection with such Appraisal Reduction Event as described
herein under "Description of the Subordinated Certificates -- Appraisal
Reductions." The amount required to be advanced in respect of delinquent
Monthly Payments, Assumed Scheduled Payments or Minimum Defaulted Monthly
Payments on a Mortgage Loan that has been subject to an Appraisal Reduction
Event will equal the product of (a) the amount that would be required to be
advanced by the Servicer without giving effect to such Appraisal Reduction
Event and (b) a fraction, the numerator of which is the Stated Principal
Balance of the Mortgage Loan less any Appraisal Reduction Amounts thereof and
the denominator of which is the Stated Principal Balance. The Servicer,
Trustee or Fiscal Agent will make only one P&I Advance in respect of each
Mortgage Loan for the benefit of the most subordinate Class of Certificates
then outstanding, unless the related delinquent Monthly Payment is cured
prior to the next Due Date on such Mortgage Loan. See "The Pooling and
Servicing Agreement -- Advances." The amount to be advanced by the Servicer,
Trustee or Fiscal Agent in respect of any Mortgage Loan on any Distribution
Date will be reduced by the greater of the reduction in respect of any
Appraisal Reduction Amount and the reduction described in the preceding
sentence.
The amount of any reduction in a P&I Advance pursuant to the preceding
paragraph will reduce the amount distributable to the Class B-6 Certificates
unless the subordination of the Class B-7 and Class B-7H Certificates, and in
the case of any other of the Subordinated Certificates, the subordination of
those Classes with a lower priority (i.e., higher numeric suffix), fully
offsets the effects of any unadvanced delinquency or default.
The Servicer's, the Trustee's or the Fiscal Agent's obligation, as
applicable, to make Advances in respect of a Mortgage Loan that is delinquent
as to its Balloon Payment is limited to the extent described under "The
Pooling and Servicing Agreement -- Advances" herein.
Limited Liquidity and Market Value. There is currently no secondary market
for the Subordinated Certificates. While the Underwriter has advised that it
currently intends to make a secondary market in the Subordinated
Certificates, it is under no obligation to do so. Accordingly, there can be
no assurance that a secondary market for the Subordinated Certificates, will
develop. Moreover, if a secondary market does develop, there can be no
assurance that it will provide holders of Subordinated Certificates with
liquidity of investment or that it will continue for the life of the
Subordinated Certificates. The Subordinated Certificates will not be listed
on any securities exchange.
In addition, the Subordinated Certificates may not be purchased by a Plan
or a person acting on behalf of a Plan or investing the assets of a Plan
unless certain criteria set forth under "Description of the Subordinated
Certificates -- Transfer Restrictions" have been met.
Lack of liquidity could result in a precipitous drop in the market value
of the Subordinated Certificates. In addition, market value of the
Subordinated Certificates at any time may be affected by many factors,
including then prevailing interest rates, and no representation is made by
any person or entity as to the market value of the Subordinated Certificates
at any time.
37
<PAGE>
Limited Nature of Ratings. Any rating assigned by a Rating Agency to a
Class of Certificates will reflect such Rating Agency's assessment solely of
the likelihood that holders of Certificates of such Class will receive
payments to which such Certificateholders are entitled under the Pooling and
Servicing Agreement. Such rating will not constitute an assessment of the
likelihood that principal prepayments on the related Mortgage Loans will be
made, the degree to which the rate of such prepayments might differ from that
originally anticipated or the likelihood of early optional termination of the
Certificates. Such rating will not address the possibility that prepayment at
lower rates than anticipated by an investor may cause such investor to
experience a lower than anticipated yield.
The amount, type and nature of subordination levels established with
respect to the Certificates will be determined on the basis of criteria
established by each Rating Agency rating such Certificates. Such criteria are
sometimes based upon an actuarial analysis of the behavior of mortgage loans
in a larger group. Such analysis is often the basis upon which each Rating
Agency determines the amount of subordination levels required with respect to
each such Class. There can be no assurance that the historical data
supporting any such actuarial analysis will accurately reflect future
experience nor any assurance that the data derived from a large pool of
mortgage loans accurately predicts the delinquency, foreclosure or loss
experience of the Mortgage Loans. No assurance can be given that values of
any Mortgaged Properties have remained or will remain at their levels on the
respective dates of origination of the related Mortgage Loans. Moreover,
there is no assurance that appreciation of real estate values generally will
limit loss experiences on the Mortgaged Properties. If the commercial or
multifamily residential real estate markets should experience an overall
decline in property values such that the outstanding principal balances of
the Mortgage Loans in the Trust Fund and any secondary financing on the
related Mortgaged Properties become equal to or greater than the value of the
Mortgaged Properties, the rates of delinquencies, foreclosures and losses
could be higher than those now generally experienced by institutional
lenders. In addition, adverse economic conditions (which may or may not
affect real property values) may affect the timely payment by mortgagors of
scheduled payments of principal and interest on the Mortgage Loans and,
accordingly, the rates of delinquencies, foreclosures and losses with respect
to the Trust Fund. See "Rating" herein.
Special Prepayment and Yield Considerations. The yield to maturity on the
Subordinated Certificates will depend on, among other things, the rate and
timing of principal payments (including both voluntary prepayments, in the
case of the Mortgage Loans that permit voluntary prepayment, and involuntary
prepayments, such as prepayments resulting from casualty or condemnation,
defaults and liquidations) on the Mortgage Loans and the allocation thereof
to reduce the Certificate Balances of the Subordinated Certificates entitled
to distributions of principal. See "Prepayment and Yield Considerations"
herein. In addition, in the event of any repurchase of a Mortgage Loan from
the Trust Fund by the Mortgage Loan Seller or the Depositor under the
circumstances described under "The Pooling and Servicing Agreement --
Representations and Warranties -- Repurchase" herein or the purchase of the
Mortgage Loans by the holders of the Class LR Certificates or the most
subordinate Class of Certificates then outstanding under the circumstances
described under "The Pooling and Servicing Agreement -- Optional Termination"
herein, the repurchase or purchase price paid would be passed through to the
holders of the Certificates with the same effect as if such Mortgage Loan had
been prepaid in full (except that no Prepayment Premium would be payable with
respect to any such repurchase). No representation is made as to the
anticipated rate of prepayments (voluntary or involuntary) on the Mortgage
Loans or as to the anticipated yield to maturity of any Certificate. See
"Prepayment and Yield Considerations" herein.
BECAUSE SUBSTANTIALLY ALL PRINCIPAL RECEIVED ON THE MORTGAGE LOANS IS
FIRST ALLOCATED TO THE SENIOR CERTIFICATES UNTIL THEIR RESPECTIVE CERTIFICATE
BALANCES ARE REDUCED TO ZERO BEFORE PRINCIPAL IS ALLOCATED TO THE
SUBORDINATED CERTIFICATES, THE SUBORDINATED CERTIFICATES MAY NOT RECEIVE ANY
PRINCIPAL FOR A SUBSTANTIAL PERIOD OF TIME.
In general, if a Subordinated Certificate is purchased at a discount and
principal distributions thereon occur at a rate slower than that assumed at
the time of purchase, the investor's actual yield to maturity may be lower
than assumed at the time of purchase.
38
<PAGE>
The investment performance of the Subordinated Certificates may vary
materially and adversely from the investment expectations of investors due to
prepayments on the Mortgage Loans that are lower than anticipated by
investors. The actual yield to the holder of a Subordinated Certificate may
not be equal to the yield anticipated at the time of purchase of the
Subordinated Certificate or, notwithstanding that the actual yield is equal
to the yield anticipated at that time, the total return on investment
expected by the investor or the expected weighted average life of the
Subordinated Certificate may not be realized. IN DECIDING WHETHER TO PURCHASE
ANY SUBORDINATED CERTIFICATES, AN INVESTOR SHOULD MAKE AN INDEPENDENT
DECISION AS TO THE APPROPRIATE PREPAYMENT ASSUMPTIONS TO BE USED. See
"Prepayment and Yield Considerations" herein.
All of the Mortgage Loans provide for a Lock-out Period during which
voluntary prepayment is prohibited. The table below sets forth certain
information regarding the Lock-out Periods. For further statistical
information on a loan-by-loan basis, see Annex A hereto.
OVERVIEW OF LOCK-OUT PERIODS
<TABLE>
<CAPTION>
<S> <C>
Minimum Lock-out Period at Origination ........ 77 months
Minimum Remaining Lock-out Period .............. 75 months
Maximum Remaining Lock-out Period .............. 240 months
Weighted Remaining Average Lock-out Period .... 137 months
</TABLE>
The following table sets forth the number of, and percentages of the
Initial Pool Balance represented by, Mortgage Loans with respect to which the
related Lock-out Period expires (i) on or one to six months prior to their
respective Anticipated Repayment Dates or (ii) no earlier than the last six
months of their loan term. See "Description of the Mortgage Pool -- Certain
Terms and Conditions of the Mortgage Loans -- Prepayment Provisions" and
"--Defeasance Provisions" herein.
LOCK-OUT PERIOD CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF
INITIAL NUMBER OF
POOL MORTGAGE
TYPE OF LOAN BALANCE LOANS
- ---------------------------------------------------------------- --------- -----------
<S> <C> <C>
Lock-out Period Ending on/or close to Anticipated Repayment Date 96.2% 106
Lock-out Period Ending on/or close to Maturity Date.............. 3.8 15
TOTAL ........................................................... 100% 121
</TABLE>
The rate at which voluntary prepayments occur on the Mortgage Pool will be
affected by a variety of factors, including, without limitation, the terms of
the Mortgage Loans, the level of prevailing interest rates as compared to the
applicable Mortgage Rate, the availability of mortgage credit and economic,
demographic, tax, legal and other factors. In general, however, if prevailing
interest rates remain at or above the rates borne by such Mortgage Loans,
such Mortgage Loans may be the subject of lower principal prepayments than if
prevailing rates fall significantly below the mortgage rates on the Mortgage
Loans. The rate of principal payments on the Subordinated Certificates may be
affected by the rate of principal payments on the Mortgage Loans and is
likely to be affected by the Lock-out Periods and Prepayment Premium
provisions applicable to the Mortgage Loans and by the extent to which a
Servicer is able to enforce such provisions. Mortgage Loans with a Lock-out
Period or Prepayment Premium provision, to the extent enforceable, generally
would be expected to experience a lower rate of principal prepayments than
otherwise identical mortgage loans without such provisions, with shorter
Lock-out Periods or with lower Prepayment Premiums.
All of the Mortgage Loans provide that after the applicable Defeasance
Lock-out Period, the borrower may obtain the release of the related Mortgaged
Property from the lien of the related Mortgage upon the delivery and pledge
to the Trustee of noncallable U.S. Treasury or other noncallable U.S.
government obligations which provide payments on or prior to all successive
payment dates through maturity (or, in the case of the ARD Loans, through the
Anticipated Repayment Date) in the amounts due on such dates (or, in the case
of ARD Loans, the amounts outstanding on the related Anticipated Repayment
Date), and upon the satisfaction of certain other conditions. See
"Description of the Mortgage Pool -- Property Releases."
See "Prepayment and Yield Considerations" and "Certain Federal Income Tax
Consequences" herein.
39
<PAGE>
Certain Federal Tax Considerations Regarding Original Issue Discount. The
Subordinated Certificates will be issued with "original issue discount" for
federal income tax purposes, which generally will result in recognition of
some taxable income in advance of the receipt of cash attributable to such
income. See "Federal Income Tax Consequences -- Taxation of Subordinated
Certificates."
ERISA Considerations. Generally, ERISA applies to investments made by
employee benefit plans and transactions involving the assets of such plans.
The Subordinated Certificates may not be purchased by a Plan or a person
acting on behalf of a Plan or using assets of a Plan unless certain criteria
described under "Description of the Subordinated Certificates -- Transfer
Restrictions" have been met. Due to the complexity of regulations which
govern such plans, prospective investors that are subject to ERISA are urged
to consult their own counsel regarding consequences under ERISA of
acquisition, ownership and disposition of the Subordinated Certificates. See
"ERISA Considerations."
Servicer or Special Servicer May Purchase Certificates; Conflict of
Interest. The Servicer, the Special Servicer or an affiliate thereof will be
permitted to purchase any Class of Certificates. It is anticipated that the
Special Servicer or an affiliate of the Special Servicer will purchase all or
a majority of the Class B-7 Certificates. However, there can be no assurance
that the Special Servicer or an affiliate of the Special Servicer will
purchase such Certificates. Following any such purchase of Certificates, the
Servicer or Special Servicer will have rights as a holder of Certificates,
including certain Voting Rights, which are in addition to such entity's
rights as Servicer or Special Servicer under the Pooling and Servicing
Agreement. Consequently, any purchase of Certificates by the Servicer or
Special Servicer, as the case may be, could cause a conflict between such
entity's duties pursuant to the Pooling and Servicing Agreement and its
interest as a holder of a Certificate, especially to the extent that certain
actions or events have a disproportionate effect on one or more Classes of
Certificates. Following a default on a Mortgage Loan at the maturity thereof
and upon the satisfaction of certain conditions contained in the Pooling and
Servicing Agreement, the Special Servicer may, if directed to do so by the
holders (including Special Servicer or an affiliate thereof) of greater than
50% of the Percentage Interests of the most subordinate Class or Classes of
Certificates then outstanding (which Class will initially be the Junior
Subordinated Certificates) having an aggregate initial Certificate Balance
representing a minimum of 1.0% of the aggregate initial Certificate Balances
of all Classes of Certificates (or if the Certificate Balance of such Class
or Classes has been reduced to less than 40% of the initial Certificate
Balances thereof, the holders of such Class or Classes together with the
holders of the next most subordinate Class), elect to extend such Mortgage
Loan. See "The Pooling and Servicing Agreement -- Realization Upon Mortgage
Loans -- Foreclosure Proceedings; Action of Directing Holders." In addition
to the foregoing, the holders of greater than 50% of the Percentage Interests
of the most subordinate Class of Certificates then outstanding (initially the
Junior Subordinated Certificates) will be entitled, at their option, to
remove the Special Servicer with or without cause, and appoint a successor
Special Servicer, provided that each Rating Agency confirms in writing that
such removal and appointment, in and of itself, would not cause a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class
of Certificates. The Pooling and Servicing Agreement provides that the
Mortgage Loans shall be administered in accordance with the servicing
standard set forth therein without regard to ownership of any Certificate by
the Servicer, Special Servicer, or any affiliate thereof. See also "The
Pooling and Servicing Agreement -- Amendment."
Consents. Under certain circumstances, the consent or approval of the
holders of a specified percentage of the aggregate Certificate Balance of the
outstanding Certificates will be required to direct and will be sufficient to
bind all Certificateholders to certain actions, including amending the
Pooling and Servicing Agreement in certain circumstances. See "The Pooling
and Servicing Agreement -- Amendment."
40
<PAGE>
INDUSTRY OVERVIEW
The commercial real estate market is estimated to be valued at
approximately $3 trillion. While much of this real estate is owned free of
any mortgage or other debt, a sizable portion is financed through commercial
mortgages. Commercial mortgages are predominantly secured by income producing
properties, including multifamily, office buildings, retail properties,
industrial properties, warehouse properties, mixed use properties, mobile
home parks, hotels, self-storage facilities, nursing homes, assisted living
facilities and senior housing centers. The commercial real estate mortgage
market is estimated to be valued at approximately $1 trillion. The
traditional holders of the majority of commercial mortgage loans have been
banks, life insurance companies and savings and loan institutions. In 1996,
commercial banks held approximately 41% of outstanding commercial mortgages,
followed by life insurance companies with 21% and both savings and loans and
private mortgage backed securities conduits with 7%. Other major holders
include pension funds and federal agencies. Recently, however, life insurance
companies and pension funds have in increasing percentages been investing in
beneficial interests in securitized pools of commercial mortgage loans.
CMBS issuances have grown significantly since 1990, with over $114 billion
in aggregate issuances from the beginning of 1990 through the end of 1996. In
1996 alone, approximately $30 billion of CMBS were issued. A portion of these
CMBS issuances consist of what is commonly referred to as "conduit"
securitizations. Under conduit programs, affiliates of investment banks
(among others) agree to purchase newly originated commercial mortgage loans
from their "conduit partners," or originators, on specified terms. Some
affiliates of investment banks, such as the Mortgage Loan Seller, also
originate loans directly in addition to acquiring loans from third parties.
According to the February 10, 1997 issue of Commercial Mortgage Alert (the
"CMA Report"), the term "conduit" now refers to any program that originates
and pools mortgage loans for securitization, whether operated by affiliates
of investment banks or through alliances between mortgage banks and their
funding sources. These conduit CMBS securitizations generally include a large
number of borrowers with mortgage loans of relatively small size. According
to the CMA Report, $18.147 billion of conduit CMBS were issued through 1996,
of which $10.212 billion was issued in 1996 alone, up 127% from 1995.
Fundamentally, the evaluation of a particular CMBS involves two separate
but interdependent types of analysis. First, the value of CMBS is ultimately
dependent on the value of the underlying pool of mortgage loans. Also
important are the terms of the CMBS, particularly with respect to
subordination, which ultimately determine a holder's rights to payments.
The key to valuing any commercial mortgage loan is to evaluate both the
collateral value of the mortgaged property (usually measured by loan-to-value
ratio) as well as the ability of the property to generate sufficient cash
flow to make timely mortgage payments to the lender (usually measured by a
debt service coverage ratio). Because of the unavoidable level of
subjectivity inherent in valuing real property (even a valuation method based
on capitalization of cash flows requires selection of a capitalization rate),
debt service coverage ratio may be a more reliable indicator of the credit
quality and default risk of a commercial mortgage. For commercial mortgages,
as the debt service coverage ratio starts to rise substantially over 1.0,
defaults should be less likely absent unanticipated risks or economic
downturns. However, the "net cash flow" or "net operating income" used in
calculating the debt service coverage ratio is also subjective in that it
reflects the adjustments made by the party calculating such ratio and will
not necessarily reflect the amounts calculated and adjusted by the applicable
rating agencies and is often not determined in accordance with generally
accepted accounting principles.
Because CMBS issuances are often effected in multiple tranches with
various levels of subordination, it is important to evaluate the terms
affecting the payment rights of any particular security. Once a pool of
mortgage loans has been evaluated and conclusions reached about the probable
defaults and losses to be experienced by the pool as a whole, a critical
factor in evaluating any particular class of CMBS secured by such pool is
where such class stands in terms of priority of payment and whether the
aggregate size of the classes subordinate to such class is sufficiently large
to absorb any losses in the pool without principal loss to such class. Losses
in the pool occur (and are allocated to the CMBS classes in inverse order of
payment priority) when, following a borrower default on a mortgage loan, less
than the full amount of unpaid principal and accrued interest is recovered
through the workout of the loan or liquidation of the mortgaged property.
Losses can also occur through the incurrence of greater than anticipated
servicing costs and expenses (e.g. bankruptcy and foreclosure costs and costs
of operating REO Property) that cannot be recovered from property proceeds.
Based on the comfort level derived from the support provided by the
subordinate classes, one can then assess the risk of principal loss to the
class being considered and compare that risk to the price/interest rate being
offered for that security. A similar determination forms a portion of the
analysis performed by rating agencies assigning ratings to various tranches
of CMBS, focusing on, among other things, given benchmarks of loan to value
ratio and debt service coverage ratio for each ratings classification.
41
<PAGE>
The American Council of Life Insurance Companies issues quarterly reports
on commercial mortgage loans owned by its members ("ACLI Reports"), which
show delinquencies and foreclosure by property type and region. For the
quarters ending June 30, 1988 to December 31, 1996, the ACLI Reports
indicated delinquencies ranging from a low of 1.79% (December 31, 1996) to a
high of 7.53% (June 30, 1992). Delinquencies by property type as of December
31, 1996 were as follows: hotels--1.23%; multifamily--0.48%;
industrial--1.08%; retail--1.62%; and office--2.78%. The loans comprising the
data in the ACLI Reports are loans originated or acquired by life insurance
companies. The results of the analysis are reflective of the portfolio of
mortgage loans included in the ACLI Reports and the demographic and regional
trends of the time period covered by the ACLI Reports and cannot be viewed as
being indicative of the performance of the Mortgage Pool.
Commercial and multifamily mortgage loans have experienced varying degrees
of delinquencies and defaults over time and by property type. While several
studies have estimated historical default rate experience for commercial
mortgage pools with various characteristics, to date no one study has been
chosen to represent a benchmark default rate. Recent studies have indicated,
however, that (i) the debt service coverage ratio of a commercial mortgage
loan is one of the factors most significantly correlated with default rates
and (ii) fully amortizing loans are generally less likely to default than
balloon loans.
THE DEPOSITOR
Asset Securitization Corporation, the Depositor, is a Delaware corporation
organized on June 23, 1992 for the purpose of acquiring Mortgage Loans and
selling interests therein or bonds secured thereby. It is a wholly owned
subsidiary of Nomura Asset Capital Corporation, which is in turn a wholly
owned subsidiary of Nomura Holding America Inc., a United States-based
holding company, incorporated in Delaware, which is wholly owned by The
Nomura Securities Co., Ltd., a Japanese corporation. The Nomura Securities
Co., Ltd. is engaged in the domestic and international securities business.
The Depositor maintains its principal office at Two World Financial Center --
Building B, 21st Floor, New York, New York 10281-1198. Its telephone number
is (212) 667-9300.
The Depositor does not have, nor is it expected in the future to have, any
significant assets.
THE MORTGAGE LOAN SELLER
The Mortgage Loan Seller is Nomura Asset Capital Corporation, a Delaware
corporation, the parent of the Depositor and an affiliate of NSI.
Nomura Asset Capital Corporation, the Mortgage Loan Seller, was
incorporated in 1992 and is engaged primarily in the business of originating
commercial mortgage loans. The Mortgage Loan Seller has been involved in the
origination of approximately $15.7 billion in commercial mortgage loans and
other commercial real estate investments in the past three years. According
to the CMA Report referred to above, (see "Industry Overview"), the Mortgage
Loan Seller ranked second for conduit CMBS issuance through 1996 (with $2.247
billion issued) and first for issuance in 1996 alone (with $1.662 billion
issued).
The Mortgage Loan Seller's principal offices are located at 2 World
Financial Center, Building B, 21st Floor, New York, New York 10281-1198, and
it maintains regional offices in Chicago and Los Angeles. A total of
approximately 110 professionals are involved in the origination, underwriting
and closing of commercial mortgage loans.
Affiliates of the Mortgage Loan Seller have been involved in a total of
twenty-one offerings of CMBS from June 1993 through March 1997 totaling
approximately $8.9 billion in initial principal amount (including the
offering of the Senior Certificates). The Mortgage Loans included in these
offerings were predominately originated directly by the Mortgage Loan Seller.
42
<PAGE>
Of the foregoing offerings, 12 public offerings, totaling approximately
$7.0 billion issued between November 1993 and March 1997 (excluding the Asset
Securitization Corporation, Commercial Mortgage Pass-Through Certificates,
Series 1997-D4) and involving mortgage loans originated by the Mortgage Loan
Seller and unaffiliated originators had delinquency rates as of March 31,
1997 as follows:
<TABLE>
<CAPTION>
<S> <C>
30-59 days delinquent: 0.00%
60-89 days delinquent: 0.11%
90+ days delinquent: 0.34%
In foreclosure: 0.29%
</TABLE>
The delinquency rates, calculated as described above, for all mortgage
loans included in all previous CMBS offerings of Asset Securitization
Corporation and Nomura Asset Securities Corporation (including mortgage loans
originated by the Mortgage Loan Seller and unaffiliated originators), and the
corresponding aggregate initial principal balances as of the dates indicated,
were as follows:
<TABLE>
<CAPTION>
3/31/96 3/31/95 3/31/94
---------------- ---------------- ----------------
<S> <C> <C> <C>
Aggregate Initial Principal Balance $3.9 billion $1.4 billion $0.2 billion
30-59 days delinquent: 0.55% 0.00% 0.00%
60-89 days delinquent: 0.00% 0.00% 0.00%
90+ days delinquent: 0.00% 0.00% 0.00%
In foreclosure: 0.00% 0.00% 0.00%
</TABLE>
These mortgage loans are not necessarily representative of the Mortgage
Loans included in the Mortgage Pool. There are many factors which could
affect delinquency and default rates for any particular pool of mortgage
loans. See "Risk Factors" and "Industry Overview." The delinquency/default
statistics presented herein do not purport to be a prediction of the future
performance of the Mortgage Loans.
The delinquency information set forth above has been taken from the
servicer remittance reports prepared in connection with previous CMBS
offerings of Asset Securitization Corporation and Nomura Asset Securities
Corporation and none of the Depositor, Mortgage Loan Seller, Servicer,
Special Servicer, Trustee, Fiscal Agent or the Underwriter makes any
representation or warranty as to the accuracy thereof.
The Mortgage Loan Seller is a wholly-owned subsidiary of Nomura Holding
America Inc., a Delaware corporation wholly-owned by The Nomura Securities
Co., Ltd., a Japanese corporation.
THE TRUSTEE
LaSalle National Bank, a nationally chartered bank with its principal
offices in Chicago, Illinois, is the Trustee pursuant to the Pooling and
Servicing Agreement. The Trustee's corporate trust office is located at 135
South LaSalle Street, Suite 1740, Chicago, Illinois 60603, Attention: Asset
Backed Securities Trust Services, Nomura-D4.
THE FISCAL AGENT
ABN AMRO Bank N.V., a banking corporation organized under the laws of The
Netherlands, is the Fiscal Agent pursuant to the Pooling and Servicing
Agreement. The Fiscal Agent's office is located at 135 South LaSalle Street,
Chicago, Illinois 60603. The Fiscal Agent will be deemed to have been removed
in the event of the resignation or removal of the Trustee.
THE SERVICER AND INITIAL SPECIAL SERVICER
AMRESCO Management, Inc. ("AMI") is the Servicer and initial Special
Servicer and in such capacities is responsible for servicing the Mortgage
Loans as described under "The Pooling and Servicing Agreement." The Servicer
is also required to make certain Advances as described under "The Pooling and
Servicing Agreement -- Advances" herein. AMI is a wholly owned subsidiary of
AMRESCO, INC. ("AMRESCO") a publicly traded (NASDAQ) company. The principal
offices of AMI are located at 235 Peachtree Street, NE, Suite 900, Atlanta,
Georgia 30303. The servicing of all performing loans will be performed by the
AMRESCO Services Division of AMI.
As of January 31, 1997 AMRESCO's portfolio consisted of approximately
9,374 loans with an aggregate principal balance of approximately $16.9
billion. Within this servicing portfolio are loans which have been
securitized in a total of 43 loan portfolios with an aggregate principal
balance of $10.6 billion.
43
<PAGE>
The information concerning the Servicer set forth herein has been provided
by the Servicer, and none of the Mortgage Loan Seller, the Depositor, the
Trustee, the Fiscal Agent or the Underwriter makes any representation or
warranty as to the accuracy thereof.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 121 fixed rate Mortgage Loans secured by
252 multifamily and commercial properties with an aggregate Cut-off Date
Principal Balance of approximately $1,403,292,505 (the "Initial Pool
Balance"). All numerical information provided herein with respect to the
Mortgage Loans is provided on an approximate basis. All percentages of the
Mortgage Pool, or of any specified sub-group thereof, referred to herein
without further description are approximate percentages by aggregate Cut-off
Date Principal Balance. Descriptions of the terms and provisions of the
Mortgage Loans are generalized descriptions of the terms and provisions of
the Mortgage Loans in the aggregate. Many of the individual Mortgage Loans
have specific terms and provisions that deviate from the general description.
Each Mortgage Loan is evidenced by one or more promissory notes (each, a
"Note") and secured by one or more mortgages, deeds of trust or other similar
security instruments (a "Mortgage"). Each of the Mortgages create a first
lien on the interests of the related borrower in the related Mortgaged
Property, as set forth on the following table:
SECURITY FOR THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF NUMBER OF
INITIAL POOL MORTGAGED
INTEREST OF BORROWER ENCUMBERED BALANCE (1) PROPERTIES
- ------------------------------- -------------- ------------
<S> <C> <C>
Fee Simple Estate............... 87% 209
Leasehold....................... 13 43
TOTAL........................... 100% 252
</TABLE>
- ------------
(1) Based on the principal balance of the Mortgage Loan or, for any Pool
Loan, Allocated Loan Amount of the related Mortgaged Property. For
any Mortgaged Property where the ground lessee and the ground lessor
are both parties to the Mortgage, the Mortgaged Property was
categorized as a Fee Simple Estate.
Each Mortgaged Property consists of land improved by (i) a retail property
(a "Retail Property," and any Mortgage Loan secured thereby, a "Retail
Loan"), (ii) an office building (an "Office Property," and any Mortgage Loan
secured thereby, an "Office Loan"), (iii) a full, limited service or extended
stay hotel property (a "Hotel Property," and any Mortgage Loan secured
thereby, a "Hotel Loan"), (iv) an apartment building or complex consisting of
five or more rental units (a "Multifamily Property," and any Mortgage Loan
secured thereby, a "Multifamily Loan"), (v) a nursing home (each, a "Senior
Housing/Healthcare Property," and any Mortgage Loan secured thereby, a
"Senior Housing/Healthcare Loan"), (vi) an industrial property (an
"Industrial Property," and any Mortgage Loan secured thereby, an "Industrial
Loan"), (vii) a factory outlet center (a "Factory Outlet Property," and any
Mortgage Loan secured thereby, a "Factory Outlet Loan"), (viii) a mobile home
community or recreational vehicle park or a combination thereof (a "Mobile
Home Property," and any Mortgage Loan secured thereby, a "Mobile Home Loan")
or (ix) an assisted living facility (an "Assisted Living Property," and any
Mortgage Loan secured thereby, an "Assisted Living Loan"). Certain
statistical information relating to the various types of Mortgaged Properties
is set forth under "--Additional Mortgage Information -- Types of Mortgaged
Property" herein.
19 of the Mortgage Loans are secured by two or more Mortgaged Properties,
either pursuant to cross-collateralization with other Mortgage Loans in the
Mortgage Pool or pursuant to a single Note by a single borrower secured by
multiple Mortgaged Properties, or both. See "Risk Factors -- Concentration of
Mortgage Loans; Borrowers" herein.
None of the Mortgage Loans are insured or guaranteed by the United States,
any governmental agency or instrumentality, any private mortgage insurer or
by the Depositor, the Mortgage Loan Seller, Bloomfield, the Servicer, the
Special Servicer, the Trustee or the Fiscal Agent or any of their respective
affiliates. All of the Mortgage Loans are non-recourse loans so that, in the
event of a borrower default on any Mortgage Loan, recourse may generally be
had only against the specific Mortgaged Property or Mortgaged Properties
securing such Mortgage Loan and such limited other
44
<PAGE>
assets as have been pledged to secure such Mortgage Loan, and not against the
borrower's other assets. However, generally, the Mortgage Loans may become
recourse upon the occurrence of certain events of default under the Mortgage
Loans, including, in most cases, the transfer or voluntary encumbrance of the
Mortgaged Property without the consent of the mortgagee.
The Mortgage Loans were generally underwritten in accordance with the
underwriting criteria described under "The Mortgage Loan Program --
Underwriting Standards." The Depositor purchased the Mortgage Loans included
in the Mortgage Pool on March 27, 1997 from the Mortgage Loan Seller pursuant
to a Mortgage Loan Purchase and Sale Agreement (the "Mortgage Loan Purchase
and Sale Agreement") dated as of March 27, 1997 between the Mortgage Loan
Seller and the Depositor. The Mortgage Loan Seller is obligated under the
Mortgage Loan Purchase and Sale Agreement to repurchase a Mortgage Loan in
the event of a breach of a representation or warranty of the Mortgage Loan
Seller with respect to such Mortgage Loan as described under "The Pooling and
Servicing Agreement -- Representations and Warranties -- Repurchase" herein.
The Depositor, on March 27, 1997, assigned the Mortgage Loans in the Mortgage
Pool, together with the Depositor's rights and remedies against the Mortgage
Loan Seller in respect of breaches of representations or warranties regarding
the Mortgage Loans, to LaSalle National Bank, as Trustee, for the benefit of
the Certificateholders, pursuant to the Pooling and Servicing Agreement.
AMRESCO Management, Inc., in its capacity as Servicer, will service the
Mortgage Loans pursuant to the Pooling and Servicing Agreement. The Depositor
has made no representations or warranties with respect to the Mortgage Loans
and will have no obligation to repurchase or substitute for Mortgage Loans
with deficient documentation or which are otherwise defective. The Mortgage
Loan Seller, as seller of the Mortgage Loans to the Depositor, sold such
Mortgage Loans without recourse, and, accordingly, in such capacity, has no
obligations with respect to the Certificates other than pursuant to the
limited representations, warranties and covenants made by it to the Depositor
and assigned by the Depositor to the Trustee for the benefit of the
Certificateholders. See "The Pooling and Servicing Agreement -- Assignment of
the Mortgage Loans."
The Mortgage Loan Seller or an affiliate has acquired a preferred equity
interest in 16 borrowers or groups of borrowers, which are the borrowers with
respect to Mortgage Loans representing approximately 25.6% of the Initial
Pool Balance and has committed to fund preferred equity on 2 additional loans
representing approximately 2% of the Initial Pool Balance. See "Risk Factors
- -- Equity Investments by the Mortgage Loan Seller and/or its Affiliates" and
"--Conflicts of Interest" herein.
SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is generally non-recourse and is secured by one or more
Mortgages encumbering the related borrower's interest in the applicable
Mortgaged Property or Properties. Each Mortgage Loan is also secured by an
assignment of the related borrower's interest in the leases, rents, issues
and profits of the related Mortgaged Properties. In certain instances,
additional collateral exists in the nature of partial indemnities or
guaranties, or the establishment and pledge of one or more reserve or escrow
accounts for, among other things, necessary repairs, replacements and
environmental remediation, real estate taxes and insurance premiums, deferred
maintenance and/or scheduled capital improvements, re-leasing reserves and
seasonal working capital reserves (such accounts, "Reserve Accounts"). The
Mortgage Loans generally provide for the indemnification of the mortgagee by
the borrower for the presence of any hazardous substances affecting the
Mortgaged Property. Each Mortgage constitutes a first lien on a Mortgaged
Property, subject generally only to (i) liens for real estate and other taxes
and special assessments, not yet due and payable (ii) covenants, conditions,
restrictions, rights of way, easements and other encumbrances whether or not
of public record as of the date of recording of the related Mortgage, such
exceptions having been acceptable to the Mortgage Loan Seller in connection
with the purchase or origination of the related Mortgage Loan, and (iii) such
other exceptions and encumbrances on Mortgaged Properties as are reflected in
the related title insurance policies. See "Description of the Mortgage Pool
- -- Certain Terms and Conditions of the Mortgage Loans -- Escrows."
THE MORTGAGE LOAN PROGRAM -- UNDERWRITING STANDARDS
Each Mortgage Loan was originated by the Mortgage Loan Seller or
Bloomfield, as set forth below under "--Additional Mortgage Loan Information
- -- Mortgaged Properties by Originator", and is generally consistent with the
underwriting standards applied by the Mortgage Loan Seller in connection with
the purchase or origination of each of the Mortgage Loans.
The Mortgage Loan Seller purchased the Mortgage Loans that it did not
originate pursuant to the purchase and sale agreements with Bloomfield during
a period commencing on September 20, 1996 and ending on the Cut-off Date.
45
<PAGE>
The Mortgage Loan Seller's underwriting process involves calculations of
Net Cash Flow reflecting certain adjustments. This Net Cash Flow calculation
is used to determine DSCR. "Net Cash Flow" with respect to a given Mortgage
Loan or Mortgaged Property means cash flow available for debt service, as
determined by the Mortgage Loan Seller based upon borrower supplied
information for a recent period that is generally the twelve months prior to
the origination of such Mortgage Loan, adjusted for stabilization and, in the
case of certain Mortgage Loans, may have been updated to reflect a more
recent operating period. Net Cash Flow does not reflect debt service,
subordinated ground rent, non-cash items such as depreciation or
amortization, and does not reflect actual capital expenditures and may have
been adjusted by, among other things, (i) in the case of the Multifamily
Properties and Mobile Home Properties, annualizing rental revenue shown on a
recent rent roll before applying a vacancy factor without further regard to
the terms (including expiration dates) of the leases shown thereon, (ii) in
the case of certain Office Properties, Industrial Properties and Retail
Properties, determining current revenues from leases in place, (iii) in the
case of certain of the Hotel Properties, assuming the occupancy rate was less
than the actual occupancy rate to account for a higher occupancy rate or to
reflect new construction in the market, (iv) assuming the occupancy rate for
the Mortgaged Property or pool of Mortgaged Properties was less than the
actual occupancy rate, including in the case of certain of the Hotel
Properties, to account for a high occupancy rate or to reflect new
construction in the market, (v) in the case of the Retail Properties,
excluding certain percentage rent, (vi) excluding certain non-recurring
income and/or expenses, (vii) assuming an adjustment of 3% to 5% of revenue
was made for a management fee and an adjustment of 3.5% to 8% of room revenue
was made for franchise fees (for Hotel Properties only) with respect to the
Mortgaged Property, (viii) taking into account new tax assessments and
utility savings from the installation of new energy efficient equipment, (ix)
in certain cases, assuming that operating and/or capital expenses with
respect to the Mortgaged Property were greater than actual expenses, (x)
subtracting from net operating income replacement or capital expenditure
reserves, and (xi) in the case of the Retail Properties and Office
Properties, subtracting from net operating income an assumed allowance for
tenant improvements, leasing commissions and free rent.
"Net Cash Flow" reflects the calculations and adjustments used by the
Mortgage Loan Seller for its underwriting process and may or may not reflect
the amounts calculated and adjusted by the Rating Agencies for their own
analysis. In addition, "Net Cash Flow" and the DSCRs derived therefrom are
not a substitute for cash flow as determined in accordance with generally
accepted accounting principles as a measure of the results of the property's
operations or a substitute for cash flows from operating activities
determined in accordance with generally accepted accounting principles as a
measure of liquidity.
Reletting costs and capital expenditures are crucial to the operation of
commercial and multifamily properties. Each investor should make its own
assessment of the level of reletting costs and capital expenditures of the
Mortgaged Properties, and the consequent effect of such costs and
expenditures on the actual net operating income, Net Cash Flow and debt
service coverage ratios of the Mortgage Loans.
No representation is made as to the future net cash flow of the
properties, nor is "Net Cash Flow" set forth in this Prospectus intended to
represent such future net cash flow.
46
<PAGE>
The Mortgage Loan Seller's underwriting guidelines generally consist of
the following standards:
UNDERWRITING STANDARDS(1) BY PROPERTY TYPE:
<TABLE>
<CAPTION>
<S> <C>
MULTIFAMILY PROPERTIES
Minimum DSCR .............................. 1.20
Minimum Occupancy Rate .................... 85%
Maximum Loan to Value Ratio ............... 80%
HOTEL
Minimum DSCR .............................. 1.40
Maximum Annual Occupancy Rate.............. 80%
Minimum Annual Occupancy Rate ............. 55%
Maximum Loan to Value Ratio ............... 75%
NURSING HOME/ASSISTED LIVING
Minimum DSCR .............................. 1.30
Min. Amount of Time in Operation .......... 12 mo.
Minimum Occupancy Rate .................... 85%
Maximum Loan to Value Ratio ............... 70%
MOBILE HOME PARK
Minimum DSCR .............................. 1.20
Minimum Occupancy Rate .................... 85%
Maximum % of Homes for Sale ............... 15%
Maximum % of Homes Rented by Residents ... 5%
Maximum Loan to Value Ratio ............... 80%
OFFICE
Minimum DSCR .............................. 1.25
Minimum Occupancy Rate .................... 80%
Maximum Loan to Value Ratio ............... 75%
RETAIL
Minimum DSCR .............................. 1.20
Minimum Occupancy Rate .................... 85%
Maximum Loan to Value Ratio ............... 80%
INDUSTRIAL
Minimum DSCR .............................. 1.25
Minimum Occupancy Rate .................... 85%
Maximum Loan to Value Ratio ............... 75%
FACTORY OUTLET
Minimum DSCR............................... 1.30
Minimum Occupancy Rate..................... 70%
Maximum Loan to Value Ratio ............... 75%
</TABLE>
- ------------
(1) The underwriting guidelines described herein were generally followed
but were not satisfied in every case. See Annex A hereto for the
specific characteristics of the Mortgage Loans and Mortgaged
Properties.
In underwriting each Mortgage Loan in connection with the origination or
acquisition thereof, income information provided by the related borrower was
examined by the Mortgage Loan Seller. In addition, the operating history of
the property, industry data regarding the local real estate market and the
appraiser's analysis were reviewed and, if conditions warranted, net
operating income with respect to the related Mortgaged Property was adjusted
for purposes of determining whether the Mortgaged Property satisfied the debt
service coverage ratio required by the Mortgage Loan Seller's underwriting
guidelines. In accordance with the underwriting guidelines, net operating
income of any Mortgaged Property may have been adjusted by, among other
things, the adjustments listed in the definition of "Net Cash Flow" described
under "--Additional Loan Information." In connection with the underwriting,
net operating income was based upon
47
<PAGE>
information provided by the borrower and neither the Depositor nor the
Mortgage Loan Seller makes any representation as to the accuracy of such
information; provided, however, that, with respect to certain of the Mortgage
Loans, the Mortgage Loan Seller or the borrower engaged independent
accountants to review or perform certain procedures to verify such
information.
Each Originator was required to cause each Mortgaged Property to be
inspected to determine whether it was in acceptable physical condition. The
inspection included a review of ongoing maintenance programs, common area
upkeep, mechanical systems and grounds maintenance. In addition, an
engineering study and an environmental review were prepared by appropriate
consultants. With respect to environmental matters, a Phase I environmental
assessment (and, where appropriate, a Phase II environmental assessment) was
conducted for each Mortgaged Property. A credit investigation was completed
for all prospective borrowers, in connection with which a credit report not
more than 30 days old as of the date of the loan application and current
financial statements were obtained. The borrowers with respect to 128 of the
Mortgaged Properties representing, in the aggregate, 60% of the Initial Pool
Balance, provided audited financial statements, agreed upon procedures or
statements certified by an independent accountant. The cash flow and NOI
information presented in Annex A may not correspond to the comparable
information included in the accountants' reports because of adjustments made
by the Mortgage Loan Seller as part of its underwriting procedures.
SIGNIFICANT MORTGAGE LOANS
In connection with the origination of each of the Mortgage Loans listed
below, other than the Kmart Distribution Centers Loan, the Mortgage Loan
Seller, in addition to its ordinary underwriting procedures, obtained audited
financials or agreed upon procedures for a recent 12 month period with
respect to the related Mortgaged Properties and obtained a market rental
analysis for the Mortgaged Properties relating to the Sunwest Loan.
Kendall Square Pool Loan and Properties
The Loan. The largest Mortgage Loan in the Mortgage Pool is the Mortgage
Loan secured by the Mortgaged Properties known as the Kendall Square
Properties (the "Kendall Square Pool Loan"). The Kendall Square Pool Loan was
originated by the Mortgage Loan Seller on December 27, 1996. It had an
original principal balance of $69,700,000 and has a Cut-off Date Principal
Balance of $69,598,691, which represents approximately 5.0% of the Initial
Pool Balance, and is secured by a fee and leasehold Mortgage encumbering
office, biotech lab space, storage and retail space in East Cambridge,
Massachusetts (the "Kendall Square Pool Properties").
The Kendall Square Pool Loan was made to Athenaeum Property LLC, Old
Kendall Property LLC, Old Cambridge Property LLC and JONA Property LLC (each,
a "Kendall Borrower," collectively, the "Kendall Borrowers") on a joint and
several basis. Each Kendall Borrower is a Massachusetts special purpose
limited liability company. Each of the Kendall Borrowers is owned and
controlled by a limited partnership or limited liability company (the "Upper
Level Owners") that is in turn controlled by Robert A. Jones, Allan Jones and
K. George Najarian, the principals of The Athenaeum Group ("TAG"). An
affiliate of Boston Capital Institutional Advisors ("BCIA"), STB Corp., is a
special limited partner or special member, as applicable, in each Upper Level
Owner. OKS Realty Trust, an affiliate of BCIA, provided mezzanine financing
in the amount of $14,300,000 to the Upper Level Owners on December 27, 1996
(the "BCIA Mezzanine Financing"). STB Corp. will have control over the
affairs of such Upper Level Owner in the event of a default under the BCIA
Mezzanine Financing and will continue to occupy its special limited partner
or special member, as applicable, position until the BCIA Mezzanine Financing
is repaid in full. The obligations of the Upper Level Owners to such
affiliate of BCIA are secured, among other things, by a pledge of voting
rights of 100% of the shareholders of the general partner of the owners of
the Upper Level Owner; however, enforcement of these pledges is not permitted
before repayment in full of the Kendall Square Pool Loan. The Mortgage Loan
Seller has a $2,300,000 senior participation interest in the BCIA Mezzanine
Financing.
Payment and prepayment terms for the Kendall Pool Loan are as set forth on
Annex A and as described under "Certain Terms and Conditions of the Mortgage
Loans -- Property Releases."
Lock Box; Reserve Accounts. The Kendall Borrowers have entered into a lock
box agreement whereby all revenue is deposited directly into a Lock Box
Account controlled by the Servicer. The Kendall Borrowers have also
established an on-going tax and insurance reserve account, a tenant releasing
reserve account, an ongoing capital expenditure reserve account and an
up-front environmental reserve account. See "The Pooling and Servicing
Agreement -- Accounts -- Lock Box Accounts," "--Escrows" and "Risk Factors --
Environmental Law Considerations."
48
<PAGE>
The Properties. The Kendall Square Pool Properties consist of Phases I
and II of One Kendall Square (including a surface parking lot at 66 Binney
Street), and 215 First Street (including a surface parking lot at 195 First
Street), all located in Cambridge, Massachusetts. The Kendall Square
Properties are managed by TAG, an affiliate of the Kendall Borrowers (as
described above). See "Certain Terms and Conditions of the Mortgage Loans --
Mortgage Provisions Relating to Servicer's Right to Termination of Management
Agreement".
One Kendall Square -- Phases I and II. One Kendall Square is a planned
960,000 square foot of GLA mixed use development, situated on a 10.25 acre
campus in East Cambridge, in walking distance to the MIT campus and public
transportation. To date, nearly 660,000 (460,008 of which is subject to the
lien of the related Mortgage) square feet of GLA of office, laboratory and
retail space, a 9 screen movie theater (not subject to the lien of the
related Mortgage) and a 1,530 car garage (not subject to the lien of the
related Mortgage) have been completed at the complex. Old Kendall Property
LLC and Old Cambridge Property LLC entered into a lease for over 650
additional parking spaces located in the 1,530 car garage. Such lease expires
on December 31, 2088. The property includes the buildings of the former
Boston Woven Hose Factory which, beginning in 1984, were rehabilitated. As of
December 6, 1996, Phase I was approximately 100% occupied and Phase II was
approximately 100% occupied. As of December 5, 1996, the combined appraised
value was $69,500,000. The borrowers with respect to One Kendall Square are
Old Kendall Property LLC and Old Cambridge Property LLC.
215 First Street. 215 First Street, also known as "Athenaeum House", was
built in stages beginning in 1895 as the original headquarters for The
Athenaeum Press. The property was rehabilitated in 1981 and occupies a full
city block, housing approximately 310,887 square feet of GLA of office,
laboratory and service retail space. The six level property, overlooking the
Charles River and the Kendall Square area of Cambridge also contains a full
service health club. An affiliate of the Kendall Borrowers leases
approximately 300 parking spaces in adjacent lots (such properties are not
subject to the lien of the related mortgage and such income was not included
in determining the Net Cash Flow). In addition, an adjacent parking lot at
195 First Street, a property which is owned in fee by one of the Kendall
Borrowers and is subject to the lien of the related Mortgage. As of December
6, 1996, the property was approximately 97% occupied, and as of December 5,
1996, the appraised value was $29,000,000. The borrower with respect to the
215 First Street property is Athenaeum Property LLC.
See "Risk Factors -- Commercial Lending Generally" "--Retail Properties"
and "--Office Properties" for a discussion of certain matters associated with
retail and office properties.
The Saracen Pool Loan and Properties
The Loan. The second largest Mortgage Loan in the Mortgage Pool is the
Mortgage Loan secured by the Mortgaged Properties known as the Saracen Pool
Properties (the "Saracen Pool Loan"). The Saracen Pool Loan was originated by
the Mortgage Loan Seller on December 31, 1996. It had an original principal
balance of $69,000,000 and has a Cut-off Date Principal Balance of
$68,923,230, which represents approximately 4.9% of the Initial Pool Balance,
and is secured by fee Mortgages encumbering six office building properties
located in suburban Boston (each, a "Saracen Pool Property", and,
collectively, the "Saracen Pool Properties"). The Saracen Pool Mortgages are
cross-collateralized and cross-defaulted.
The Saracen Pool Loan was made to Wells Avenue Senior Holdings LLC (the
"Saracen Borrower"), a special purpose Massachusetts limited liability
company owned by Wells Avenue Senior Holdings Inc. and Wells Avenue Holdings
LLC ("Wells Holdings"). Saraceno Holding Trust General Partnership ("Saraceno
G.P.") owns a 99% interest in Wells Holdings. Kurt W. Saraceno is the
principal with respect to such affiliates. Pacific Preferred LLC, an
affiliate of Lazard Freres Real Estate Fund II L.P. ("Lazard") holds a 1%
interest in Wells Holdings and will continue to occupy this position until a
mezzanine financing made on December 31, 1996 from Lazard to Wells Holdings
in the amount of $21,387,000 (the "Lazard Mezzanine Financing") is repaid in
full and a $113,000 capital contribution of Pacific Preferred LLC has been
returned in accordance with the Wells Holdings operating agreement. The
obligations of Wells Holdings under the Lazard Mezzanine Financing are
secured by a pledge by Saraceno G.P. of its 99% membership interest in Wells
Holdings, however, enforcement of this pledge is not permitted before
repayment in full of the Saracen Pool Loan. Additionally, an affiliate of the
Mortgage Loan Seller has made a preferred equity capital contribution to
Wells Holdings in the amount of $7,500,000 and is the special member of Wells
Holdings. Such affiliate also is committed to fund an additional $1 million
of preferred equity in Wells Holdings over the next three years subject to
certain conditions. See "Risk Factors and Other Special Considerations --
Other Financing" and "--Equity Investments by the Mortgage Loan Seller and/or
its Affiliates" for a discussion of capital contributions by affiliates of
the Mortgage Loan Seller and "Description of the Mortgage Pool."
49
<PAGE>
Payment and prepayment terms for the Saracen Pool Loan are as set forth on
Annex A hereto and as described under "Certain Terms and Conditions of the
Mortgage Loans -- Property Releases."
Lock Box; Reserve Accounts. The Saracen Borrower has entered into a lock
box agreement whereby all revenue is required to be deposited directly into a
Lock Box account controlled by the Servicer. The Saracen Borrower has also
established reserve accounts, including an on-going tax and insurance reserve
account, an on-going capital expenditure reserve account, an up-front
deferred maintenance reserve account, an on-going tenant rollover account and
an up-front environmental reserve account. See "The Pooling and Servicing
Agreement -- Accounts -- Lock Box Accounts," "--Escrows" and "Risk Factors --
Environmental Law Considerations."
The Properties. The Saracen Pool Properties consist of six office building
complexes located in the Route 128 Corridor of suburban Boston. The
properties have a mix of high-tech, software, financial and other service
tenants. The Saracen Pool Properties are managed by Saracen Companies, Inc.,
an affiliate of the Saracen Borrower. See "Certain Terms and Conditions of
the Mortgage Loans -- Mortgage Provisions Relating to Servicer's Right to
Termination of Management Agreement."
128 Tech Center, Waltham. This office building complex, constructed in
1986, is a four-building 217,500 square feet of GLA office complex located on
10.64 acres in Waltham, Massachusetts. As of December 3, 1996, the property
was approximately 100% occupied, and as of December 1996, the appraised value
was $32,800,000.
7/57 Wells Avenue, Newton. This office building, constructed in 1982,
contains 88,400 square feet of GLA and is located on 10.64 acres in Newton,
Massachusetts. As of December 3, 1996, the property was approximately 98%
occupied, and as of December 1996, the appraised value was $11,300,000.
75/85/95 Wells Avenue, Newton. This office building, known as Wells
Research Center and constructed in 1970, was expanded in 1986 and contains
238,911 square feet of GLA and is located on 21.4 acres. As of December 3,
1996, the property was approximately 100% occupied, and as of December 1996,
the appraised value was $35,600,000.
201 University Avenue, Westwood. This office building complex, converted
from an industrial building to corporate office space in 1982 by the
Borrower's principals, contains 82,000 square feet of GLA including a health
club and an auditorium. Computer Associates leases the entire property. As of
December 3, 1996, the property was 100% occupied, and as of December 1996,
the appraised value of the property was $12,200,000.
Dedham Place, Dedham. This office building, constructed in 1987, contains
162,300 square feet of GLA, is located on 15.18 acres and is attached to a
Hilton Hotel which is not subject to the lien of the Mortgage. As of December
3, 1996, the property was approximately 100% occupied and as of December 1996
the appraised value was $25,400,000.
333 Elm Street, Dedham. This office building, constructed in 1984 and
known as Norfork Place, contains 48,068 square feet of GLA and is situated on
2.01 acres. As of December 3, 1996, the property was approximately 84%
occupied and of December 1996 the appraised value was $5,100,000.
See "Risk Factors -- Commercial Lending Generally" and "--Office
Properties" for a discussion of certain matters associated with office
properties.
The International Plaza Loan and Property
The Loan. The third largest Mortgage Loan in the Mortgage Pool is the
Mortgage Loan secured by the Mortgaged Property known as International Plaza
(the "International Plaza Loan"). The International Plaza Loan was made to
International Plaza Associates LP (the "International Plaza Borrower"), a New
York limited partnership. The International Plaza Loan was originated by the
Mortgage Loan Seller on March 5, 1997. It had an original principal balance
of $65,750,000 and has a Cut-off Date Principal Balance of $65,750,000, which
represents approximately 4.7% of the Initial Pool Balance and is secured by a
twenty-eight story office building at 750 Lexington Ave., in New York City,
New York (the "International Plaza Property"). The International Plaza
Borrower has a fee interest in a portion of the International Plaza Property
and a leasehold interest with respect to the remainder of such property.
The general partner of the International Plaza Borrower is 750 Lexington
Building Corporation, a special purpose New York corporation, and the limited
partner is 750 Lexington Avenue Associates, LLC, a special purpose New York
limited liability company. The International Plaza Borrower and the manager
of the International Plaza Property are
50
<PAGE>
directly or indirectly controlled by Sherman Cohen, Edward B. Cohen and
Charles Cohen. Additionally, the Mortgage Loan Seller owns a preferred
limited partnership interest in the International Plaza Borrower in the
amount of $5,250,000. See "Risk Factors and Other Special Considerations --
Other Financings" for a discussion of preferred equity interests of the
Mortgage Loan Seller and its affiliates.
The recourse obligations of the International Plaza Borrower in the event
of misconduct, removal or disposal of property after default,
misappropriation, and other similar conduct is guaranteed by a recourse
obligation of Sherman Cohen and Edward B. Cohen.
The payment and prepayment terms of the International Plaza Loan are as
set forth in Annex A, hereto and as described below under "--Certain Terms
and Conditions of the Mortgage Loans -- Property Releases."
Lock Box; Reserve Accounts. The International Plaza Borrower has
established a Lock Box Account with respect to the International Plaza
Property and is required to cause each tenant of the International Plaza
Property to pay all rents directly into the Lock Box Account. The
International Plaza Borrower has also established reserve accounts, including
an on-going tax and insurance reserve account, an on-going replacement
reserve account, an up-front required repair reserve account, an on-going
ground lease rent reserve account and an on-going tenant improvement reserve
account. See "The Pooling and Servicing Agreement -- Lock Box Accounts" and
"--Escrows."
The Property. The International Plaza Property is a twenty-eight story
office building, constructed in 1989, containing 362,079 square feet of GLA
of office space and 22,680 square feet of GLA of retail space, and is located
in midtown Manhattan. As of January 1, 1997, the International Plaza Property
was approximately 95% occupied, and as of January 1, 1997, the appraised
value was $104,000,000. The International Plaza Property is currently
occupied by approximately 37 tenants with the two largest tenants, Morrison,
Cohen, Singer & Weinstein and Edwards & Angell, occupying approximately 13%
and approximately 11% of the building, respectively. The International Plaza
Property is managed by Cohen Brothers Realty Corporation, an affiliate of the
International Plaza Borrower.
See "Risk Factors -- Commercial Lending Generally," "--Office Properties"
and "--Ground Leases" for discussion of certain matters associated with
office properties, and ground leases.
The Kmart Distribution Center Loan and Properties.
The Loan. The fourth largest loan in the Mortgage Pool is the Mortgage
Loan secured by the Mortgaged Properties known as the Kmart Distribution
Properties (the "Kmart Distribution Center Loan"). The Kmart Distribution
Center Loan was originated by the Mortgage Loan Seller, had an original
principal balance and Cut-off Date Principal Balance of $63,000,000, which
represents 4.5%, of the Initial Pool Balance, and is secured by a Mortgage
encumbering the fee interest in two industrial warehouse properties that are
leased by Kmart Corporation and operated as distribution centers (the "Kmart
Distribution Properties"). The Kmart Distribution Center Loan was made to
Brighton Lease Management, LLC and Greensboro Lease Management, LLC
(together, the "Brentwood Borrowers"). Both of the Kmart Distribution
Properties are cross-collateralized and cross-defaulted.
Payment and prepayment terms for the Kmart Distribution Centers Loan are
as set forth on Annex A and as described under "Certain Terms and Conditions
of the Mortgage Loans --Property Releases."
Lock Box Account. The Brentwood Borrower has established a Lock Box
Account and is required to cause Kmart Corporation, as tenant of the Kmart
Distribution Properties, to pay all rents into the Lock Box Account. See "The
Pooling and Servicing Agreement -- Accounts -- Lock Box Accounts."
The Properties. The Kmart Distribution Properties consist of an industrial
warehouse property located in Brighton, Colorado (the "Brighton Distribution
Center") and an industrial warehouse property located in Greensboro, North
Carolina (the "Greensboro Distribution Center"). Both Kmart Distribution
Properties were acquired by the Brentwood Borrower in sale/leaseback
transactions with Kmart Corporation, as the seller/lessee, under two separate
leases. As of February 1, 1997, Kmart Corporation operated thirteen
distribution centers nationwide.
The Brighton Distribution Center was constructed in 1994 by Kmart
Corporation and has been occupied by Kmart Corporation since that time. The
Brighton Distribution Center contains 1,278,600 square feet of GLA and is
equipped with state of the art computer controlled facilities from entry to
shipping.
The Greensboro Distribution Center was constructed in 1992 by Kmart
Corporation and has been occupied by Kmart Corporation since that time. The
Greensboro Distribution Center contains 1,546,575 square feet of GLA and is
the second largest Kmart distribution center on the east coast.
51
<PAGE>
The Credit Lease. The Kmart Distribution Properties are leased to Kmart
Corporation under two separate twenty-five year leases (the "Kmart Leases").
The terms of the Kmart Leases are triple net and require the tenant to pay
all rent without deduction, setoff, abatement or other reduction,
notwithstanding casualty condemnation and prohibition of use. The Kmart
Leases may not be terminated for any reason other than a material taking or
casualty, provided, however, that Kmart Corporation agrees to purchase the
related Kmart Distribution Property for an amount at least equal to the
outstanding principal balance of the loan allocable to such property. In the
event of a sublease, Kmart Corporation remains fully liable for the
performance of its obligations under the Kmart Lease.
The Mortgage Loan Seller has, in its underwriting analysis, applied market
rental rates to the Kmart Distribution Properties as well as the rent
obligations under the Kmart Leases.
The senior secured and senior unsecured debt of Kmart Corporation is rated
BB-and B+, respectively, by S&P and BB+ and BB-, respectively, by DCR.
See "Risk Factors -- Industrial Properties" for a discussion of the
certain matters associated with industrial properties.
Burnham Pacific Pool Loan and Properties
The Loan. The fifth largest Mortgage Loan in the Mortgage Pool is the
Mortgage Loan secured by the Mortgaged Properties known as the Burnham
Pacific Pool Properties (the "Burnham Pacific Loan"). The Burnham Pacific
Loan is made up of two loans which were originated by the Mortgage Loan
Seller and made to BPP/Valley Central, L.P. (the "Valley Central Borrower")
on January 30, 1997, as amended on February 19, 1997 (the "Valley Central
Loan") and BPP/Puente Hills, Inc. (the "Puente Hills Borrower" and together
with the Valley Central Borrower, the "Burnham Pacific Borrowers") (the
"Puente Hills Loan"). The Burnham Pacific Loan had an original principal
balance and a Cut-off Date Principal Balance of $58,500,000, which represents
4.2% of the Initial Pool Balance, and is secured by two fee Mortgages
encumbering two shopping centers in California (the "Burnham Pacific
Properties"). Both of the loans which make up the Burnham Pacific Loan are
cross-defaulted and each Burnham Pacific Borrower has guaranteed the
indebtedness of the other Burnham Pacific Borrower.
The "Valley Central Borrower" is a special purpose entity owned 99% by
BPP/Valley Central Inc., its general partner (which is 100% owned by Burnham
Pacific Properties Inc. ("Burnham Inc.")), and 1% by a limited partner. The
"Puente Hills Borrower" is a special purpose corporation, 100% owned by
Burnham Inc. Burnham Inc. owns twenty-six retail properties in California and
four industrial and office properties in Southern California. Burnham Inc. is
publicly traded on the New York Stock Exchange.
Payment and prepayment terms for the Burnham Pacific Loan are as set forth
on Annex A hereto and as described below under "--Certain Terms and
Conditions of the Mortgage Loans --Excess Interest," and "--Property
Releases."
Lock Box; Reserve Accounts. The Burnham Pacific Borrowers have entered
into a lock box agreement whereby all rent is required to be deposited
directly into a Lock Box Account controlled by the Servicer. See "The Pooling
and Servicing Agreement -- Accounts -- Lock Box Accounts" and "--Escrows."
The Burnham Pacific Borrowers have also established reserve accounts,
including an ongoing tax and insurance reserve account, an ongoing capital
expenditure reserve account and an up-front deferred maintenance reserve
account.
The Properties. The Burnham Pacific Properties consist of two shopping
centers outside of Los Angeles, California. The Burnham Pacific Properties
are managed by Burnham Pacific Properties, Inc., an affiliate of the Burnham
Pacific Borrowers.
Valley Central Shopping Center. This shopping center, the largest in
Lancaster, was built in 1988 and consists of 480,092 square feet of GLA.
Major tenants include Wal-Mart, Homebase, Circuit City, Staples, Michaels,
Marshalls and Cinemark Theaters which occupy 24.5%, 23.7%, 6.7%, 3.5%, 3.7%,
5.6% and 7.3% of the Valley Central Shopping Center's GLA, respectively.
Another major tenant, Costco, occupies space that is not subject to the
related Mortgage. As of January 1997, the property was approximately 97%
occupied and the appraised value was $42,200,000.
Plaza at Puente Hills. This shopping center, located in the City of
Industry, was built in 1986 and renovated in 1992, and consists of 516,538
square feet of GLA on approximately 43.7 acres. Major tenants include IKEA
Furniture Warehouse, AMC Theaters 10 Plex, Office Depot and Circuit City
which occupy 29.0%, 8.0%, 5.8% and 6.0% of the Plaza at Puente Hill's GLA,
respectively. Other major tenants at the center who are not subject to the
related Mortgage include Home Depot, Sam's Club, Toys R Us, and Best Buy. As
of January 1997, the property was approximately 90% occupied and the
appraised value was $61,000,000.
52
<PAGE>
See "Risk Factors -- Commercial Lending Generally" and "--Retail
Properties" for a discussion of certain matters associated with retail
properties.
The Hudson Hotels Pool Loan and Properties
The Loan. The sixth largest Mortgage Loan in the Mortgage Pool is the
Mortgage Loan secured by the Mortgaged Properties known as Hudson Hotels (the
"Hudson Hotels Pool Loan"). The Hudson Hotels Pool Loan, originated by the
Mortgage Loan Seller on November 27, 1996, was made to HH Properties-I, Inc.,
a special purpose New York corporation (the "Hudson Hotels Borrower"). It had
an original principal balance of $56,000,000 and has a Cut-off Date Principal
Balance of $55,854,069, which represents approximately 4.0% of the Initial
Pool Balance. It is secured by fee Mortgages encumbering fifteen hotel
properties and by a Mortgage encumbering a ground leasehold interest in
another hotel property. The fee Mortgages and ground leasehold Mortgage are
collectively referred to as the "Hudson Hotels Mortgages" and the fee
interests and ground leasehold interest encumbered by the Hudson Hotels
Mortgages are referred to individually as a "Hudson Hotels Property" and
collectively as the "Hudson Hotels Properties." The Hudson Hotels Mortgages
are cross-collateralized and cross-defaulted.
Payment and prepayment terms for the Hudson Hotels Pool Loan are as set
forth on Annex A hereto and as described below under "--Certain Terms and
Conditions of the Mortgage Loans -- Excess Interest" and "--Property
Releases."
Lock Box; Reserve Accounts. The Hudson Hotels Borrower has established a
Lock Box Account with respect to each Hudson Hotels Property and is required
to cause each of the credit card companies with whom such Hudson Hotels
Property is affiliated to pay all amounts payable to the Hudson Hotels
Borrower directly into the related Lock Box Account. The Hudson Hotels
Borrower is also required to deposit, within one business day after receipt
thereof, any other receipts and income with respect to each Hudson Hotels
Property into its related Lock Box Account. The Hudson Hotels Borrower has
also established reserve accounts, including an on-going tax and insurance
reserve account, an on-going ground lease rent reserve account, an up-front
deferred maintenance reserve account, an on-going capital expenditures
reserve account, and an on-going seasonal reserve account. See "The Pooling
and Servicing Agreement -- Accounts -- Lock Box Accounts" and "--Escrows."
The Properties. The Hudson Hotels Properties consist of sixteen hotel
properties located in six states. Three of the hotel properties are full
service hotels offering food, beverages and other amenities consistent with
those offered by a full service hotel, while the remaining thirteen hotel
properties are limited service hotels. The Hudson Hotel Properties are
franchised or operated as eight Fairfield Inns, two Comfort Inns, one
Econolodge and five independent or non-flagged hotels. The Hudson Hotel
Properties are managed by Hudson Hotels Corporation, a New York corporation
(the "Hudson Hotels Manager") and an affiliate of the Hudson Hotels Borrower,
pursuant to separate management agreements between the Hudson Hotels Manager
and the Hudson Hotels Borrower. See "Certain Terms and Conditions of the
Mortgage Loans -- Mortgage Provisions Relating to Servicer's Right to
Termination of Management Agreement." The Hudson Hotels Manager is publicly
traded on the NASDAQ Small Cap Market. The appraised value of the Hudson
Hotels Properties was $90,700,000. The average occupancy rate for the Hudson
Hotels Properties in the aggregate for the twelve months ending September 30,
1996 was 73.7% and the average ADR for such period was $51.93. The Hudson
Hotels Properties are located in North Carolina (seven properties), New York
(four properties), South Carolina (two properties), Florida, Georgia, and
Virginia.
See "Risk Factors -- Commercial Lending Generally" and "--Hotels" for a
discussion of certain matters relating to hotel properties.
The Marina Harbor Loan and Property
The Loan. The seventh largest Mortgage Loan in the Mortgage Pool is the
Mortgage Loan secured by the Mortgaged Property known as Marina Harbor
Apartments and Anchorage (the "Marina Harbor Loan"). The Marina Harbor Loan
was originated by the Mortgage Loan Seller on September 25, 1996. It had an
original principal balance of $51,000,000 and has a Cut-off Date Principal
Balance of $50,586,851, which represents approximately 3.6% of the Initial
Pool Balance, and is secured by a Mortgage encumbering a ground leasehold
interest in an apartment complex comprised of sixteen two and three story
buildings in Marina del Rey, California (the "Marina Harbor Property"). The
Marina Harbor Loan has an amortization schedule of 240 months and a term of
198 months with the result that a Balloon Payment of $17,841,000 is due on
its maturity date of March 11, 2013 (the "Marina Harbor Maturity Date"). If
the Marina Harbor
53
<PAGE>
Borrower fails to pay the balance of the principal and accrued interest on
the Marina Harbor Maturity Date, the Servicer is authorized under the Pooling
and Servicing Agreement to enter into a modification of the Marina Harbor
Loan to provide for terms similar to those provided for in other ARD Loans
described herein, including the additional amortization of principal through
the application of excess cash flow. See "Description of the Mortgage Pool --
Certain Terms and Conditions of the Mortgage Loans -- Excess Interest"
herein. For purposes of the charts and tables included herein, the maturity
date of the Marina Harbor Loan shown assumes that the Mortgage Loan has been
modified as described above.
The Marina Harbor Loan was made to Marina Pacific Associates (the "Marina
Harbor Borrower"), which is a special purpose California limited partnership.
The general partners of the Marina Harbor Borrower are the Epstein Family
Trust and CMR, Inc., a California corporation, whose common stock is owned by
James H. Ring, Jacqueline Morgan and Suzanne Caplan.
The payment and prepayment terms of the Marina Harbor Loan are as set
forth in Annex A hereto and as described below under "--Certain Terms and
Conditions of the Mortgage Loans --Excess Interest" and "--Property
Releases."
Lock Box; Reserve Accounts. The Marina Harbor Borrower has established a
Lock Box Account with respect to the Marina Harbor Property and is required
to pay or cause to be paid all rents and income of any nature arising from
the ownership, possession or use of the Marina Harbor Property within one
business day after receipt thereof into the Lock Box Account. The Marina
Harbor Borrower has also established reserve accounts, including an on-going
tax and insurance reserve account, an on-going ground lease rent reserve
account and an on-going capital expenditures reserve account. See "The
Pooling and Servicing Agreement -- Accounts -- Lock Box Accounts" and
"--Escrows."
The Property. The Marina Harbor Property is an 846 unit apartment complex
constructed in 1962 and 1968. The complex consists of sixteen buildings,
containing studio, 1-, 2-, and 3-bedroom apartments. The apartments at the
complex had an occupancy rate as of October 31, 1996, of approximately 97%.
The complex also contains 671 boat slips, which had an occupancy rate as of
October 31, 1996, of 82%. The Marina Harbor Property is managed by EJ
Management, Inc., a California corporation (the "Marina Harbor Manager") and
an affiliate of the Marina Harbor Borrower, and is submanaged by E&S Ring
Management Corp., a California corporation (the "Marina Harbor Submanager")
and an affiliate of the Marina Harbor Borrower.
The borrower's interest in the Marina Harbor Property was created under a
ground lease with the County of Los Angeles, as ground lessor, which expires
on April 1, 2023. The ground lease provides for the payment of annual base
rent plus various percentages of rent with respect to rental of apartments,
boat slips, miscellaneous sales and other items.
The ground lease and related documents contain provisions for the
protection of lender's rights such as the right to notice and cure defaults.
However, under the ground lease, the ground lessor has retained certain
controls with respect to the Marina Harbor Property, including the approval
of subleases of apartments in excess of one year, the right to approve any
modification of the Marina Harbor Loan to the extent the modification could
be viewed as a "replacement" or "renewal" thereof and approval of any future
loans secured by the Marina Harbor. In addition, the ground lease provides
that the proceeds of all property insurance policies will be used to restore
and rebuild the property and will be held by the ground lessor for
distribution to the ground lessee in reimbursement of restoration and
rebuilding costs. The lender may only apply such proceeds to pay the Marina
Harbor Loan to the extent proceeds remain after application to restore and
repair the Marina Harbor Property.
See "Risk Factors -- Commercial Lending Generally" and "--Ground Leases"
for a discussion of certain matters associated with ground leases.
Sunwest Pool Loan and Properties
The Loan. The eighth largest Mortgage Loan in the Mortgage Pool is the
Mortgage Loan secured by 72 retail properties (the "Sunwest Pool
Properties"). The Sunwest Pool Loan was originated on January 30, 1997. It
had an original principal balance of $50,500,000 and a Cut-off Date Principal
Balance of $50,500,000, which represents approximately 3.6% of the Initial
Pool Balance, and is secured by fee Mortgages encumbering 14 retail
properties, by the ground lessor's fee interest and ground lessee's leasehold
interest in 25 retail properties and by leasehold Mortgages encumbering 33
retail properties (the "Sunwest Pool Loan"). The Sunwest Pool Loan was made
to (i) Sunwest N.C. Trust (the "Sunwest Trust Borrower"), a special purpose
Delaware business trust, with Wilmington Trust Company, as trustee
("Wilmington"), and Sunwest Properties N.C., Inc., a special purpose Delaware
corporation, as the beneficiary thereof, and is secured by 62 of
54
<PAGE>
the Sunwest Pool Properties, including 33 properties encumbered by the
leasehold Mortgages, and (ii) to Sunwest Properties N.C. II, Inc., a special
purpose Delaware corporation (the "Sunwest Inc. Borrower" and together with
the Sunwest Trust Borrower, the "Sunwest Borrowers") and is secured by 10 of
the Sunwest Pool Properties. Robert Pierson, Jr., Judith Pierson and Robert
Pierson, Sr. are the principals with respect to the Sunwest Borrowers. All 72
of the Sunwest Pool Properties are cross-collateralized and cross-defaulted.
The Mortgage Loan Seller has acquired a preferred equity interest in the
initial amount of $6,700,000 in the Sunwest Borrowers. The aggregate cash
flow from all the Sunwest Pool Properties are available to make the required
distributions in respect of the preferred equity interest in either of the
Sunwest Borrowers.
Payment, prepayment and defeasance terms for the Sunwest Pool Loan are as
set forth on Annex A hereto and as described below under "--Certain Terms and
Conditions of the Mortgage Loans-Excess Interest" and "--Property Releases."
Lock Box; Reserve Accounts. The Sunwest Borrowers have each established a
Lock Box Account with respect to their respective Sunwest Pool Properties and
are required to cause the tenants of each Sunwest Pool Property to pay all
rents directly into the Lock Box Account. The Sunwest Borrowers have also
each established reserve accounts, including on-going tax and insurance
reserve accounts, on-going ground lease rent reserve accounts, on-going
capital expenditures reserve accounts, up-front engineering expense reserve
accounts and up-front environmental reserve accounts. See "The Pooling and
Servicing Agreement--Accounts-Lock Box Accounts," "--Escrows" and "Risk
Factors -- Environmental Law Considerations."
The Properties. The Sunwest Pool Properties consist of 72 retail
properties, the majority of which are single tenant properties. The Sunwest
Pool Properties are generally former Safeway stores, which were sold by
Safeway Stores, Inc., a Maryland corporation, after its leveraged buy out in
the 1980s. None of the Sunwest Pool Properties are currently being operated
as Safeway stores. The Sunwest Pool Properties are currently being leased by
70 different tenants with the top 5 tenants, based on underwritten rental
payment, being Gold's Gym (6.9%), Super Value Stores (6.7%), Office Depot
(6.1%), Drug Emporium (4.9%) and Michaels MJ Design (3.1%). The Sunwest Pool
Properties are located in 11 states with the largest concentration in Texas
(65%) and the remainder in 10 other states with the maximum concentration in
any such state below 10%. The Sunwest Pool Properties are managed by S.W.
Commercial Management and Leasing, Inc. See "Certain Terms and Conditions of
the Mortgage Loans--Mortgage Provisions Relating to Servicer's Right to
Terminate Management Agreements."
No MAI appraisals were obtained with respect to the Sunwest Pool
Properties. A capitalization rate of 9.5% was applied to the net cash flow as
determined by the Mortgage Loan Seller in its underwriting in determining the
approximate value of the properties. An independent appraiser advised the
Mortgage Loan Seller that such capitalization rate would be appropriate.
Ground Leases. The Sunwest Borrowers' interest in 33 of the Sunwest Pool
Properties are leasehold interests. There are 21 different ground lessors
with respect to these properties, some of which do not provide for direct
notice of default to a lender, but all of which do provide for notice to the
leasehold owner of record. To provide the mortgagee with certain protections,
the Sunwest Trust Borrower was formed to hold title to the Sunwest Pool
Properties (except for those fee interest properties located in states in
which the Delaware business trust is unable to hold title to real property).
Under the terms of the trust, Wilmington is required to act at the direction
of the Servicer if any event occurs which could reasonably be expected to
result in a termination of the ground lease, including without limitation,
any failure to exercise any option to extend or renew the term of any ground
lease within a specified period of time, any default, or any casualty or
condemnation, thereby providing the Servicer with notice of any defaults.
With respect to certain of the ground leases encumbered by the Sunwest
Loan that have a term to maturity shorter than thirty years, the principal
allocated to such properties amortizes based on their remaining terms.
55
<PAGE>
Other Significant Mortgage Loans.
The next 12 largest Mortgage Loans are as follows:
<TABLE>
<CAPTION>
CUT-OFF
DATE ANTICIPATED
PRINCIPAL REMAINING PREFERRED APPRAISED
LOAN /PROPERTY CITY/STATE BALANCE(A) TERM EQUITY DSCR VALUE
- ------------------------- --------------- ----------- ----------- ------------- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
WESTIN-INDIANAPOLIS Indianapolis
Indiana $41,700,000 144 $5,900,000 1.42 $68,000,000
TWO GATEWAY CENTER Newark
New Jersey $34,423,045 118 $4,000,000 1.73 $53,650,000
UNIPROP Margate
Aztec Estates Florida $33,500,000 121 1.46 $20,500,000
Kings Manor Ft. Lauderdale
Florida 121 1.46 $ 9,900,000
Old Dutch Farms Novi
Michigan 121 1.46 $ 9,050,000
Park of the Four Seasons Blaine
Minnesota 121 1.46 $13,750,000
MONTAGUE PARK TECH CENTER San Jose
California $32,964,627 119 1.27 $54,000,000
JACOBS MALL Grand Island
Conestoga Mall Nebraska $31,700,000 144 1.32 $27,600,000
Randolph Mall Asheboro
North Carolina 144 1.32 $19,200,000
M&H La Habra
LaHabra Marketplace California $28,701,826 118 1.91 $33,900,000
Madera
Bethard Square California 118 1.91 $ 4,500,000
Sacramento
How 'Bout Arden California 118 1.91 $21,000,000
NASSAU PARK II West Windsor
New Jersey $28,000,000 120 1.24 $36,500,000
PRIME RETAIL II
Coeur D'Alene Factory Coeur D'Alene
Outlets Idaho $27,000,000 123 1.51 $18,700,000
Oak Creek Factory Sedona
Outlets Arizona 123 1.51 $12,300,000
Bend
Bend Factory Outlets Oregon 123 1.51 $13,000,000
LAKESIDE VILLAGE San Leandro
California $24,971,982 119 $2,000,000 1.39 $33,690,000
ASIAN GARDENS MALL Westminster
California $24,326,512 178 1.31 $36,900,000
NORTHWOOD CENTRE Tallahassee
Florida $23,000,000 120 1.35 $35,600,000
SOUTH DEKALB MALL Decatur
Georgia $21,798,649 118 $2,500,000(d) 1.41 $30,000,000
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
% OF
SPACE EXPIRATION
ANCHOR/ OCCUPIED YEAR OF
CUT-OFF SQ. FT./ MAJOR BY ANCHOR/ ANCHOR/ LOCK BOX
DATE NO. OF TENANT/ MAJOR MAJOR RESERVE GROUND
LOAN /PROPERTY LTV UNITS OCCUPANCY FRANCHISE TENANT TENANT ACCOUNTS(C) LEASE
- ------------------------- ------- --------- --------- ---------------------- ---------- ---------- --------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WESTIN-INDIANAPOLIS
61% 573 74% Hard Lockbox
TWO GATEWAY CENTER
64% 738,201 90% Prudential Insurance 18% 2007(b) Hard Lockbox
UNIPROP
Aztec Estates 63% 645 95% Soft Lockbox
Kings Manor 63% 314 97% Soft Lockbox
Old Dutch Farms 63% 293 99% Soft Lockbox
Park of the Four Seasons 63% 572 99% Soft Lockbox
MONTAGUE PARK TECH CENTER
61% 417,532 100% Ultra Tech Stepper 23% 2005 Hard Lockbox
JACOBS MALL
Conestoga Mall 68% 504,550 96% Dillards 25% 2000 Hard Lockbox
Randolph Mall 68% 283,921 88% Belk-Yates (Not Owned) n/a n/a Hard Lockbox
M&H
LaHabra Marketplace 48% 392,443 76% Oshmans 14% 2016 Hard Lockbox
Bethard Square 48% 92,988 84% Canned Foods Inc. 23% 2002 Hard Lockbox
How 'Bout Arden 48% 164,909 96% Home Express 34% 2003 Hard Lockbox
NASSAU PARK II
77% 202,104 100% Walmart (Not Owned) n/a n/a Hard Lockbox
PRIME RETAIL II
Coeur D'Alene Factory
Outlets 61% 179,125 81% Hard Lockbox
Oak Creek Factory
Outlets 61% 82,062 99% Hard Lockbox
Bend Factory Outlets 61% 96,895 100% Hard Lockbox
LAKESIDE VILLAGE
74% 608 93% Soft Lockbox
ASIAN GARDENS MALL 2 Month Debt
66% 111,824 99% Service Reserve
NORTHWOOD CENTRE
65% 502,023 91% Publix 10% 2005 Hard Lockbox Yes
SOUTH DEKALB MALL
73% 328,078 95% Rich's (Not Owned) n/a n/a Hard Lockbox
<FN>
- ------------
(a) Loan Amounts for loans secured by more than one Property appear next to
the first mortgaged property securing that loan.
(b) Portions of the Prudential Space are subject to various tenant
cancellation options.
(c) In general, a "Hard Lockbox" is one in which the rental payments with
respect to a Mortgaged Property are deposited directly into the Lockbox
Account, whereas a "Soft Lockbox" is one in which the manager of a
mortgaged property collects the rental payments and periodically
deposits them into the Lockbox Account.
(d) A commitment to fund this amount has been issued, however, such amount
has not been funded as of the Cut-off Date.
</TABLE>
56
<PAGE>
The above 20 Mortgage Loans represent 60% of the Initial Pool Balance and
have ARD or Maturity Dates as follows:
<TABLE>
<CAPTION>
EARLIER OF ARD OR
MORTGAGE LOAN/PROPERTY PRINCIPAL AMOUNT MATURITY DATE
- -------------------------- ---------------- -----------------
<S> <C> <C>
Kendall Square............. $ 69,598,691.32 1/11/07
Saracen.................... 68,923,229.56 2/11/07
International Plaza........ 65,750,000.00 3/11/07
K-Mart Distribution
Center.................... 63,000,000.00 4/11/17
Burnham Pacific............ 58,500,000.00 3/11/04
Hudson Hotels.............. 55,854,068.56 12/11/08
Marina Harbour Apts........ 50,586,851.37 3/11/13
Sunwest.................... 50,500,000.00 3/11/12
Westin-Indianapolis........ 41,700,000.00 3/11/09
Two Gateway Center......... 34,423,045.11 1/11/07
Uniprop.................... 33,500,000.00 4/11/07
Montague Park Tech Center . 32,964,627.38 2/11/07
Jacobs Mall................ 31,700,000.00 3/11/09
M & H...................... 28,701,825.62 1/11/07
Nassau Park II............. 28,000,000.00 3/11/07
Prime Retail II............ 27,000,000.00 6/11/07
Lakeside Village........... 24,971,982.08 2/11/07
Asian Gardens Mall......... 24,326,512.37 1/11/12
Northwood Centre........... 23,000,000.00 3/11/07
South Dekalb Mall.......... 21,798,648.97 1/11/07
TOTAL ..................... $834,799,482.34
</TABLE>
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Annex A. For a detailed presentation of the characteristics of the
Mortgage Loans, on a loan-by-loan basis, see Annex A hereto.
Due Dates. All of the Mortgage Loans provide for Monthly Payments to be
due on the eleventh day of each month or, in the case of certain of the
Mortgage Loans, if the eleventh day is not a business day, the next business
day or the first preceding business day.
Mortgage Rates; Calculations of Interest. Each of the Mortgage Loans
accrues interest on the basis of a 360-day year consisting of twelve 30-day
months or on the basis of the actual number of days elapsed and a 360 day
year. Each of the Mortgage Loans accrues interest at the Mortgage Rate, which
is fixed for the entire remaining term of such Mortgage Loan; provided,
however, as described below under "--Excess Interest," certain of the
Mortgage Loans accrue interest at a higher rate after their respective
Anticipated Repayment Dates. As used herein, the term "Mortgage Rate" does
not include the Excess Rate.
Excess Interest. 106 of the Mortgage Loans, representing approximately 96%
of the Initial Pool Balance, bear interest at their respective Mortgage Rates
until an Anticipated Repayment Date. Commencing on the respective Anticipated
Repayment Date, except as described below, each such Mortgage Loan generally
will bear interest at a fixed rate per annum (the "Revised Rate") equal to
the greater of (a) the Mortgage Rate plus a specified percentage (of no more
than 2%, so long as the Mortgage Loan is included in the Mortgage Pool) and
(b) the Treasury Rate plus a specified percentage (of no more than 2%, so
long as the Mortgage Loan is included in the Mortgage Pool). "Treasury Rate"
means, as of the related Anticipated Repayment Date, the yield on noncallable
U.S. Treasury obligations with terms most nearly approximating the related
stated maturity date. Until the principal balance of each such Mortgage Loan
has been reduced to zero, such Mortgage Loan will only be required to pay
interest at the Mortgage Rate and the interest accrued at the excess of the
related Revised Rate over the related Mortgage Rate will be deferred (such
accrued and deferred interest and interest thereon, if any, is "Excess
Interest"). Except where limited by applicable law, Excess Interest so
accrued will earn interest at the Revised Rate. Prior to the Anticipated
Repayment Date, borrowers under ARD Loans will be required to enter into a
Lock Box agreement whereby all revenue will be deposited directly into a Lock
Box Account controlled by the Servicer. From and after the Anticipated
Repayment Date, in addition to paying interest (at the
57
<PAGE>
Mortgage Rate) and principal (based on the amortization schedule) (together,
the "Monthly Debt Service Payment"), the related borrower generally will be
required to apply all monthly cash flow from the related Mortgaged Property
or Properties to pay the following amounts in the following order of
priority: (i) required payments to the tax and insurance escrow fund and any
ground lease escrow fund, (ii) payment of Monthly Debt Service, (iii)
payments to any other required escrow funds, (iv) payment of operating
expenses pursuant to the terms of an annual budget approved by the Servicer,
(v) payment of approved extraordinary operating expenses or capital expenses
not set forth in the approved annual budget or allotted for in any escrow
fund, (vi) principal on the Mortgage Loan until such principal is paid in
full and (vii) to Excess Interest. The cash flow from the Mortgaged Property
or Properties securing an ARD Loan after payments of items (i) through (v)
above is referred to herein as "Excess Cash Flow." As described below, ARD
Loans generally provide that the related borrower is prohibited from
prepaying the Mortgage Loan until the one to six months prior to the
Anticipated Repayment Date but, upon the commencement of such period, may
prepay the loan, in whole or in part, without payment of a Prepayment
Premium. The Anticipated Repayment Date for each ARD Loan is listed in Annex
A.
The holders of 100% of the Percentage Interests in the Class LR
Certificates, and if the holders of the Class LR Certificates do not exercise
their option, the holders of 100% of the Percentage Interests in the most
subordinate Class of Certificates then outstanding (not including the Class
B-7H Certificates), will have the option to purchase such ARD Loan on or
after its Anticipated Repayment Date at a price equal to its outstanding
principal balance plus accrued and unpaid interest and unreimbursed Advances
with interest thereon. As a condition to such purchase, such holders will be
required to deliver an opinion of counsel to the effect that such purchase
would not (i) result in a gain which would be subject to the tax on net
income derived from prohibited transactions imposed by Code Section
860F(a)(1) or otherwise result in the imposition of any other tax on the
Lower-Tier REMIC or Upper-Tier REMIC under the REMIC provisions of the Code
or (ii) cause either of the Lower-Tier REMIC or Upper-Tier REMIC to fail to
qualify as a REMIC.
Amortization of Principal. As set forth in the following table, certain
Mortgage Loans (the "Balloon Loans") provide for monthly payments of
principal based on amortization schedules at least 60 months longer than
their original terms thereby leaving substantial principal amounts due and
payable (each such payment, a "Balloon Payment") on their respective maturity
dates, unless previously prepaid. The remaining Mortgage Loans have remaining
amortization terms that are generally the same as their respective remaining
terms to maturity.
AMORTIZATION CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF
INITIAL NUMBER OF
POOL MORTGAGE
TYPE OF LOAN BALANCE LOANS
- ---------------------------------------------- --------- -----------
<S> <C> <C>
ARD Loans ..................................... 96.2% 106
Fully Amortizing Loans (other than ARD Loans) 2.5% 6
Balloon Mortgage Loans ........................ 1.2% 9
</TABLE>
Prepayment Provisions. All of the Mortgage Loans prohibit voluntary
prepayment during a period (each, a "Lock-out Period") from the date of
origination ranging from approximately 77 months to 239 months. The weighted
average Lock-out Period from the date of origination for the Mortgage Loans
is approximately 138 months and the weighted average remaining Lock-out
Period from the Cut-off Date is approximately 137 months. None of the
Mortgage Loans require the payment of a premium or fee (a "Prepayment
Premium") upon the voluntary prepayment of such Mortgage Loans on or after
the expiration of the related Lock-out Period. The Lock-out Periods for the
ARD Loans all expire on or one to six months prior to their respective
Anticipated Repayment Dates and the Lock-out Periods for the Balloon and
fully amortizing Mortgage Loans (other than ARD Loans) all expire no earlier
than the last one to six months prior to their respective maturities. Certain
of the prepayment terms of each of the Mortgage Loans are more particularly
described in Annex A.
OVERVIEW OF LOCK-OUT PERIODS
<TABLE>
<CAPTION>
<S> <C>
Minimum Lock-out Period at Origination ......... 77 months
Minimum Remaining Lock-out Period............... 75 months
Maximum Remaining Lock-out Period............... 240 months
Weighted Average Remaining Lock-out Period .... 137 months
</TABLE>
58
<PAGE>
LOCK-OUT PERIOD CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF NUMBER OF
INITIAL POOL MORTGAGE
TYPE OF LOAN BALANCE LOANS
- ------------------------------------------------------------ -------------- -----------
<S> <C> <C>
Lock-out Period Ending on/close to Anticipated Repayment
Date........................................................ 96.2% 106
Lock-out Period Ending on/close to Maturity Date ............ 3.8 15
TOTAL........................................................ 100% 121
</TABLE>
The Mortgage Loans provide generally that in the event of a condemnation
or casualty, the mortgagee may apply the condemnation award or insurance
proceeds to the repayment of debt, which, in the case of some of the Mortgage
Loans, will require payment of any applicable Prepayment Premium. However, in
the case of most of the Mortgage Loans, if the award or loss is less than a
specified percentage of the original principal balance of the Mortgage Loan
and if in the reasonable judgment of the mortgagee (i) the Mortgaged Property
can be restored within six months prior to the maturity of the related Note
to a property no less valuable or useful than it was prior to the
condemnation or casualty, (ii) after a restoration the Mortgaged Property
would adequately secure the outstanding balance of the Note and (iii) no
event of default has occurred or is continuing, the proceeds or award may be
applied by the borrower to the costs of repairing or replacing the Mortgaged
Property. The Pooling and Servicing Agreement provides that if a Mortgage
Loan provides that the mortgagee may in its discretion apply certain amounts
to a prepayment of principal (e.g., by applying casualty or condemnation
proceeds or funds escrowed for improvements not completed by the required
date) prior to the expiration of the related Lock-out Period, the Special
Servicer cannot apply such funds to such a prepayment unless the Special
Servicer has first received the consent of the Servicer (if the Special
Servicer is not the Servicer) or the holders of 66 2/3% of the Voting Rights
of the Certificates responding within 20 business days to a solicitation of
their consent. If such consent is not obtained, such funds will be made
available to the related borrowers for their proscribed use.
A limited number of Mortgage Loans provide that if casualty or
condemnation proceeds are above a specified amount, the borrower will be
permitted to supplement such proceeds with an amount sufficient to prepay the
entire principal balance of the Mortgage Loan. In such event, no Prepayment
Premium would be required to be paid.
Neither the Depositor nor the Mortgage Loan Seller makes any
representation as to the enforceability of the provision of any Mortgage Loan
requiring the payment of a Prepayment Premium, or of the collectability of
any Prepayment Premium. See "Risk Factors -- The Certificates -- Special
Prepayment and Yield Considerations" herein and "Certain Legal Aspects of
Mortgage Loans -- Default Interest, Prepayment Charges and Prepayments"
herein.
Property Releases. All of the Mortgage Loans permit the applicable
borrower at any time after a specified period (the "Defeasance Lock-out
Period"), which is generally the greater of approximately three years from
the date of origination and two years from March 27, 1997, provided no event
of default exists, to obtain a release of a Mortgaged Property from the lien
of the related Mortgage (a "Defeasance Option"), proceeded that, among other
conditions, the borrower (a) pays on any Due Date (the "Release Date") (i)
all interest accrued and unpaid on the principal balance of the Note to and
including the Release Date, (ii) all other sums, excluding scheduled interest
or principal payments, due under the Mortgage Loan and all other loan
documents executed in connection therewith, (iii) an amount (the "Collateral
Substitution Deposit") equal to the sum of (x) the remaining principal amount
of the Mortgage Loan or, if applicable, 125% (generally) of the Allocated
Loan Amount of the related Mortgaged Property or Properties sought to be
released, (y) the amount, if any, which, when added to such amount, will be
sufficient to purchase direct non-callable obligations of the United States
of America providing payments (1) on or prior to, but as close as possible
to, all successive scheduled payment dates from the Release Date to the
related maturity date, assuming, in the case of an ARD Loan, that such loan
prepays on the related Anticipated Repayment Date and (2) in amounts equal to
the scheduled payments due on such Due Dates under the Mortgage Loan, and (z)
any costs and expenses incurred in connection with the purchase of such U.S.
government obligations and (b) delivers a security agreement granting the
Trust Fund a first priority lien on the Collateral Substitution Deposit and
the U.S. government obligations purchased with the Collateral Substitution
Deposit and an opinion of counsel to such effect. The Pool Loans generally
require that (i) prior to the release of a related Mortgaged Property, a
specified percentage (generally 125%) of the Allocated Loan Amount for such
Mortgaged Property be defeased and (ii) that the DSCR with respect to the
remaining Mortgaged Properties after the defeasance be no less than the
greater of (x) the DSCR at origination and (y) the DSCR immediately prior to
such defeasance. The Servicer will be responsible for purchasing the U.S.
government obligations on behalf of the borrower at the borrower's expense.
Any
59
<PAGE>
amount in excess of the amount necessary to purchase such U.S. government
obligations will be returned to the borrower. Simultaneously with such
actions, the related Mortgaged Property will be released from the lien of the
Mortgage Loan and the pledged U.S. government obligations (together with any
Mortgaged Property not released, in the case of a partial defeasance) will be
substituted as the collateral securing the Mortgage Loan.
In general, a successor borrower established or designated by the Mortgage
Loan Seller will assume all of the defeased obligations of a borrower
exercising a Defeasance Option under a Mortgage Loan and the borrower will be
relieved of all of the defeased obligations thereunder. If a Mortgage Loan is
partially defeased, the related Note will be split and only the defeased
portion of the borrower's obligations will be transferred to the successor
borrower.
The Depositor makes no representation as to the enforceability of the
defeasance provisions of any Mortgage Loan. See "Risk Factors and Other
Special Considerations -- The Certificates -- Special Prepayment and Yield
Considerations."
Escrows. All of the Mortgage Loans, other than the Englar Plaza Shopping
Center Loan, the Kmart Distribution Center Loan and the Northridge Shopping
Center Loan, provide for monthly escrows to cover property taxes. All of the
Mortgage Loans provide for monthly escrows to cover insurance premiums on the
Mortgaged Properties (except in cases where six months to one year of
insurance premiums are escrowed). Certain of the Mortgage Loans secured by
leasehold interests also provide for escrows to make ground lease payments.
Thirteen of the Mortgage Loans, which represent approximately 8% of the
Initial Pool Balance (which includes all Mortgage Loans other than Mobile
Home Loans and the Kmart Distribution Center Loan) do not require monthly
escrows to cover ongoing replacements and capital repairs.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. The Mortgage Loans
generally contain "due-on-sale" and "due-on-encumbrance" clauses that in each
case permit the holder of the Mortgage Loan to accelerate the maturity of the
Mortgage Loan if the borrower sells or otherwise transfers or encumbers the
related Mortgaged Property without the consent of the mortgagee. The Special
Servicer will determine, in a manner consistent with the Servicing Standard,
whether to exercise any right the mortgagee may have under any such clause to
accelerate payment of the related Mortgage Loan upon, or to withhold its
consent to, any transfer or further encumbrance of the related Mortgaged
Property. Certain of the Mortgage Loans provide that the mortgagee may
condition an assumption of the loan on the receipt of an assumption fee,
which is in some cases equal to one percent of the then unpaid principal
balance of the applicable Note, in addition to the payment of all costs and
expenses incurred in connection with such assumption. Certain of the Mortgage
Loans provide that such consent may not be unreasonably withheld provided
that (i) no event of default has occurred, (ii) the proposed transferee is
creditworthy and has sufficient experience in the ownership and management of
properties similar to the Mortgaged Property, (iii) the Rating Agencies have
confirmed in writing that such transfer will not result in a qualification,
reduction or withdrawal of the then current rating of the Certificates, (iv)
the transferee has executed and delivered an assumption agreement evidencing
its agreement to abide by the terms of the Mortgage Loan together with legal
opinions and title insurance endorsements and (v) the assumption fee has been
received (which assumption fee will be paid to the Servicer and Special
Servicer as provided in the Pooling and Servicing Agreement and will not be
paid to the Certificateholders). See "Certain Legal Aspects of Mortgage Loans
- -- Due-on-Sale and Due-on-Encumbrance" herein. See "Risk Factors -- The
Mortgage Loans -- Exercise of Remedies." The Depositor makes no
representation as to the enforceability of any due-on-sale or
due-on-encumbrance provision in any Mortgage Loan.
Mortgage Provisions Relating to Servicer's Right to Terminate Management
Agreements. Certain of the Mortgage Loans permit the Special Servicer to
cause the related borrowers to terminate the related management agreements
upon the occurrence of certain events. Generally, each Mortgage Loan with
Cut-off Date Principal Balances in excess of $21,000,000 and certain other
Mortgage Loans, where an affiliate of the borrower manages the related
Mortgaged Property or Properties provides that if the DSCR for such Mortgage
Loan falls below a certain level, the Special Servicer will have the right to
cause the termination of the related management agreement and replace the
manager with a manager acceptable to the Special Servicer. The Mortgage Loans
generally allow the Special Servicer to terminate the related management
agreements upon the occurrence of certain events of default under the related
loan agreements or mortgage documents. In addition, the Special Servicer is
generally permitted to cause the termination of a management agreement if the
manager breaches certain provisions of the management agreement which would
permit the termination of such agreement thereunder.
Cross-Collateralization and Cross-Default of Certain Mortgage
Loans. Nineteen of the Mortgage Loans (the "Pool Loans") with Cut-off Date
Principal Balances ranging from $3,800,000 million to $69,598,691 million and
comprising 42% of the Mortgage Pool by Cut-off Date Principal Balance are
secured by more than one Mortgaged Property. However,
60
<PAGE>
because certain states require the payment of a mortgage recording or
documentary stamp tax based upon the principal amount of debt secured by a
mortgage, the Mortgages recorded with respect to certain Mortgaged Properties
secure only 150% of the Allocated Loan Amount of such Mortgaged Properties
(rather than the entire initial principal balance of the related Notes). See
"Risk Factors and Other Special Considerations --Limitations on
Enforceability of Cross-Collateralization" and "Loan Characteristics" on
Annex A.
Hazard, Liability and Other Insurance. The Mortgage Loans generally
require that each Mortgaged Property be insured by a hazard insurance policy
in an amount equal to the greatest of (i) the full replacement cost of the
improvements and equipment without deduction for physical depreciation, (ii)
the outstanding principal balance of the Mortgage Loan (or, with respect to
Pool Loans, the full insurable value of the Mortgaged Property) and (iii)
such amount that the insurer would not deem the borrower a co-insurer, or in
an amount satisfying other similar standards and by a flood insurance policy
if any part of the Mortgaged Property is located in an area identified by the
Federal Emergency Management Agency as an area having special flood hazards
and for which flood insurance has been made available under the National
Flood Insurance Program in an amount at least equal to the outstanding
principal amount of the Mortgage Loan (or with respect to Pool Loans, the
full insurable value of the Mortgaged Property) or the maximum limit of
coverage available, whichever is less, or in an amount satisfying other
similar standards. With respect to Mortgaged Properties located in earthquake
risk areas, certain of the related Mortgaged Properties are insured by
earthquake insurance, and certain of such insured Mortgaged Properties may be
insured in amounts less than the outstanding principal balance of such
Mortgage Loans. With respect to Mortgaged Properties located in areas having
special hurricane hazards, certain of the related Mortgaged Properties are
insured by hurricane insurance in amounts less than the outstanding principal
balance of such Mortgage Loans. The hazard insurance policy is required to
cover loss or damage by fire and lightning or other risks and hazards covered
by a standard extended coverage insurance policy including, but not limited
to, riot and civil commotion, vandalism, malicious mischief, burglary and
theft. Mobile Home Properties located in earthquake risk areas or areas
having special hurricane hazards are not insured against earthquake or
hurricane damage.
The Mortgage Loans also generally require that the borrower obtain and
maintain during the entire term of the Mortgage Loan (i) comprehensive public
liability insurance, including broad form property damage, blanket
contractual and personal injuries coverages and containing minimum limits per
occurrence as specified in the related Mortgage, (ii) rent loss and/or
business interruption insurance in an amount equal to the greater of (x)
estimated annual (or a specified longer period) gross revenues from the
operations of the Mortgaged Property and (y) projected annual (or a specified
longer period) operating expense (including debt service) for the maintenance
and operation of the Mortgaged Property, or in an amount satisfying other
similar standards, (iii) except with respect to certain of the Mobile Home
Loans, insurance against loss or damage from leakage of sprinkler systems and
explosion of steam boilers, air conditioning equipment, high pressure piping,
machinery and equipment, and pressure vessels, (iv) if the Mortgaged Property
is a commercial property, worker's compensation insurance, (v) during any
period of repair or restoration, builders "all risk" insurance, and (vi) such
other insurance as may from time to time be reasonably required by the
mortgagee in order to protect its interests.
61
<PAGE>
ADDITIONAL MORTGAGE LOAN INFORMATION
<TABLE>
<CAPTION>
<S> <C>
GENERAL CHARACTERISTICS (AS OF CUT-OFF DATE, UNLESS OTHERWISE INDICATED)
Initial Pool Balance (1) ........................................................ $1,403,292,505
Number of Mortgage Loans ........................................................ 121
Number of Mortgaged Properties .................................................. 252
Average Mortgage Loan Balance ................................................... $11,597,459
Weighted Average Mortgage Rate .................................................. 8.666%
Range of Mortgage Rates ......................................................... 7.575%-10.1%
Weighted Average Remaining Term to the Earlier of Maturity or Anticipated
Repayment Date ................................................................. 140 Months
Range of Remaining Term to the Earlier of Maturity or Anticipated Repayment Date 80-241 Months
Weighted Average Original Amortization Term (2) ................................. 312
Range of Original Amortization .................................................. 156-360
Weighted Average DSCR (3) ....................................................... 1.42
Range of DSCR (3) ............................................................... 1.22-2.20
Weighted Average LTV (4) ........................................................ 67%
Range of LTV .................................................................... 34%-86%
Weighted Average LTV at Earlier of Anticipated Repayment Date or Maturity (5) .. 51%
Percentage of Initial Pool Balance made up of:
ARD Loans ...................................................................... 96.2%
Fully Amortizing Loans (other than ARD Loans) .................................. 2.5%
Balloon Loans .................................................................. 1.2%
Delinquent as of Cut-off Date ................................................... 0%
</TABLE>
- ------------
(1) Subject to a permitted variance of plus or minus 5%.
(2) "Weighted Average Original Amortization Term" reflects the fact that
certain Mortgage Loans provide for Monthly Payments based on
amortization schedules at least 60 months longer than the remaining
stated terms of such Mortgage Loans. See "Description of the Mortgage
Pool -- Certain Terms and Conditions of the Mortgage Loans --
Amortization of Principal" herein.
(3) DSCR for any Mortgage Loan is equal to the Net Cash Flow from the
related Mortgaged Property divided by the Annual Debt Service for such
Mortgaged Property (as defined below).
(4) "LTV" or "Loan-to-Value Ratio" means, with respect to any Mortgage
Loan, the principal balance of such Mortgage Loan as of the Cut-off
Date divided by the appraised value of the Mortgaged Property or
Properties securing such Mortgage Loan.
(5) "LTV at Earlier of Anticipated Repayment Date or Maturity" for any
Mortgage Loan is calculated in the same manner as LTV as of the Cut-off
Date, except that the Mortgage Loan Cut-off Date Principal Balance used
to calculate the LTV as of the Cut-off Date has been adjusted to give
effect to the amortization of the applicable Mortgage Loan as of its
maturity date or, in the case of a Mortgage Loan that has an
Anticipated Repayment Date, as of its Anticipated Repayment Date. Such
calculation thus assumes that the appraised value of the Mortgaged
Property or Properties securing a Mortgage Loan on the maturity date or
Anticipated Repayment Date, as applicable, is the same as the appraised
value as of the Cut-off Date. There can be no assurance that the value
of any particular Mortgaged Property will not have declined from the
appraised value.
The following tables and Annex A set forth certain information with
respect to the Mortgage Loans and Mortgaged Properties. The statistics in the
following tables and Annex A were primarily derived from information provided
to the Depositor by Bloomfield or the Mortgage Loan Seller, which information
may have been obtained from the borrowers without independent verification
except as noted. For purposes of the tables and Annex A:
(1) "Net Cash Flow" is as defined under "--The Mortgage Loan Program --
Underwriting Standards."
(2) "Underwritten NOI" means Net Cash Flow before deducting for capital
expenditures, tenant improvements and leasing commissions.
62
<PAGE>
(3) "1994 NOI", "1995 NOI" and "1996 NOI" (which is for the period ending
as of the date specified in Annex A) is the net operating income for a
Mortgaged Property as established by information provided by the borrowers,
except that in certain cases such net operating income has been adjusted by
removing certain non-recurring expenses and revenue or by certain other
normalizations. 1994 NOI, 1995 NOI and 1996 NOI do not necessarily reflect
accrual of certain costs such as taxes and capital expenditures and do not
reflect non-cash items such as depreciation or amortization. In some cases,
capital expenditures may have been treated by a borrower as an expense or
expenses treated as capital expenditures. The Depositor has not made any
attempt to verify the accuracy of any information provided by each borrower
or to reflect changes in net operating income that may have occurred since
the date of the information provided by each borrower for the related
Mortgaged Property. 1994 NOI, 1995 NOI and 1996 NOI were not necessarily
determined in accordance with generally accepted accounting principles.
Moreover, 1994 NOI, 1995 NOI and 1996 NOI are not a substitute for net income
determined in accordance with generally accepted accounting principles as a
measure of the results of a property's operations or a substitute for cash
flows from operating activities determined in accordance with generally
accepted accounting principles as a measure of liquidity and in certain cases
may reflect partial-year annualizations.
For purposes of determining 1996 NOI as set forth on Annex A:
"YE" means for the twelve-month period ended December 31, 1996;
"YTD" means for the period commencing on January 1, 1996 and ending on
date indicated;
"Ann." means an annualized NOI calculated for the period indicated; and
"TTM" means NOI calculated for the trailing twelve months ending on the
date indicated.
(4) "Allocated Loan Amount" means, for each Mortgaged Property, the
portion of the principal amount of the related Mortgage Loan allocated to
such Mortgaged Property for certain purposes (including, without limitation,
determining the release prices of properties, if the Mortgage Loan permits
such releases) under such Mortgage Loan. The Allocated Loan Amount for each
Mortgaged Property securing a Mortgage Loan was determined generally based on
the ratio of the Net Cash Flow or net operating income (calculated as
provided in the related Mortgage Loan) or appraised value, or some
combination thereof, of such Mortgaged Property to the aggregate Net Cash
Flow or appraised value, or some combination thereof, of all the Mortgaged
Properties securing such Mortgage Loan. The Allocated Loan Amount for each
Mortgaged Property may be adjusted upon the payment of principal of the
related Mortgage Loan, whether upon amortization, prepayment, or otherwise.
"Cut-off Date Allocated Loan Amount" means for each Mortgaged Property the
Allocated Loan Amount of such property as of the Cut-off Date. There can be
no assurance, and it is unlikely, that the Allocated Loan Amounts represent
the current values of individual Mortgaged Properties, the price at which an
individual Mortgaged Property could be sold in the future to a willing buyer
or the replacement cost of the Mortgaged Properties.
(5) "Original Loan Balance" means the principal balance of the Mortgage
Loan as of the date of origination.
(6) "Cut-off Date Principal Balance" means the principal balance of the
Mortgage Loan as of the Cut-off Date.
(7) "Cut-off Date Principal Balance/Unit" means the principal balance per
unit of measure as of the Cut-off Date.
(8) "Annual Debt Service" means for any Mortgage Loan the current annual
debt service payable during the twelve month period commencing on May 11,
1997 on the related Mortgage Loan.
(9) "DSCR" means, with respect to any Mortgage Loan, (a) the Net Cash Flow
for the related Mortgaged Property or Properties, divided by (b) the Annual
Debt Service for such Mortgage Loan. The calculation of "DSCR" may differ
from the calculation of the debt service coverage ratios referred to under
"--The Mortgage Loan Program -- Underwriting Standards; Representations." For
the Econolodge Portfolio and the Cleveland Industrial Portfolio, DSCR was
calculated using a twenty-five year amortization schedule, whereas all other
calculations for such loans were based on shorter amortization schedules as
required by the Mortgage documents for such Mortgaged Properties for so long
as excess cash is available.
(10) "Stated Maturity Date" means the maturity date of the Mortgage Loan
as stated in the related Note or Loan Agreement.
(11) "Anticipated Repayment Date" means for ARD Loans, the date on which
interest begins accruing at the Revised Rate and/or Excess Cash Flow is
retained pursuant to the related Lock-box Agreements to application to
payment of principal and Excess Interest.
63
<PAGE>
(12) "Anticipated Remaining Term" means the term of the Mortgage Loan from
the Cut-off Date to the earlier of the Anticipated Repayment Date, if
applicable, and the maturity date.
(13) "Remaining Lock-out" means the period of the term of the related
Mortgage Loan from the Cut-off Date during which the Mortgage Loan may not be
prepaid.
(14) "Value" means for each of the Mortgaged Properties, the appraised
value of such property as determined by an appraisal thereof and in
accordance with MAI standards made not more than 18 months prior to the
origination date of the related Mortgage Loan. No MAI appraisals were
obtained with respect to the Sunwest Pool Properties. A capitalization rate
of 9.5% was applied to the net cash flow as determined by the Mortgage Loan
Seller in its underwriting in determining the approximate value of those
properties.
(15) "Maturity Date/Anticipated Repayment Date LTV" for any Mortgage Loan
is calculated in the same manner as Cut-off Date LTV, except that the
Mortgage Loan Cut-off Date Principal Balance used to calculate the Cut-off
Date LTV has been adjusted to give effect to the amortization of the
applicable Mortgage Loan as of its maturity date or, in the case of a
Mortgage Loan that has an Anticipated Repayment Date, as of its Anticipated
Repayment Date. Such calculation thus assumes that the appraised value of the
Mortgaged Property or Properties securing a Mortgage Loan on the maturity
date or Anticipated Repayment Date, as applicable, is the same as the
appraised value as of the Cut-off Date. There can be no assurance that the
value of any particular Mortgaged Property will not have declined from the
appraised value.
(16) "Amortization" means the number of months, based on the constant
Monthly Payment as stated in the related Note or Loan Agreement, that would
be necessary to reduce the principal balance of the related Note to zero if
interest on such Note was calculated based on twelve 30-day months and a
360-day year.
(17) "Year Built/Renovated" means the year in which the respective
Mortgaged Property was built and/or renovated.
(18) "Unit" and "Unit of Measure" mean the number of units in the
respective Mortgaged Property.
(19) "Occupancy" means the percentage of gross leaseable area, rooms,
units, beds or sites of the property that is leased. Occupancy rates are
calculated within a recent period and in certain cases reflect the average
occupancy rate over a period of time.
(20) "Underwritten Occupancy" means the occupancy rate used in determining
Net Cash Flow.
(21) "Anchor" means, with respect to the Retail Properties, the largest,
second and third largest tenants, if any.
(22) "Major Tenants" mean one of the largest tenants. An asterisk next to
a Major Tenant means that the property occupied by such tenant is not owned
by the related borrower and not subject to the lien of the related Mortgage.
(23) "Major Tenant Percentage of Square Feet" means the square feet leased
to a Major Tenant as a percentage of the total square feet of the Mortgaged
of Property.
(24) "Major Tenant Lease Expiration Date" means the year in which a Major
Tenant's lease is scheduled to expire.
(25) "Franchise" means the regional or national franchise affiliation of a
Hotel Property.
(26) "Audit/Agreed Upon Procedures/Review" indicates Mortgaged Properties
for which independent accountants performed audits, reviews or specified
procedures upon financial information provided by the borrower at the request
of the Mortgage Loan Seller or the borrower. The cash flow and NOI
information presented in Annex A may not correspond to the comparable
information included in the accountants' reports because of adjustments made
by the Mortgage Loan Seller as part of its underwriting procedures.
(27) "Identified Deferred Maintenance" is the estimated amount of deferred
maintenance in the respective Mortgaged Property's structural engineering
report.
(28) "Reserve for Deferred Maintenance" is the actual dollars escrowed at
the loan origination for deferred maintenance repairs.
(29) "Actual On-going Capital Reserves" means the annual reserves, as
indicated, per unit of measure or as a percentage of gross revenue and
escrowed on a monthly basis.
(30) "GLA" means the square footage of the gross leaseable area of each
Mortgaged Property.
64
<PAGE>
Due to rounding, percentages in the following tables may not add to 100%
and amounts may not add to indicated total or subtotal.
Mortgaged Properties secured, or partially secured, by a leasehold estate
are indicated on Annex A under the heading "Property Name" with an asterisk.
Mortgage Loans accruing interest on the basis of the actual number of days
elapsed and a 360-day year are indicated on Annex A under the heading
"Mortgage Rate" with an asterisk.
The tables below set forth certain summary information regarding the
Mortgage Loans. See Annex A hereto for certain characteristics of Mortgage
Loans on a loan-by-loan basis. All percentages of Initial Pool Balances used
herein and in Annex A are based upon the Cut-off Date Principal Balance of
the related Mortgage Loan or, with respect to Pool Loans, are based upon the
Allocated Loan Amount of the related Mortgaged Property. All weighted average
information regarding the Mortgage Loans reflects weighting of the Mortgage
Loans by their Cut-off Date Principal Balances or, with respect to Pool
Loans, Allocated Loan Amounts. The "Cut-off Date Principal Balance" of each
Mortgage Loan is equal to the unpaid principal balance thereof as of the
Cut-off Date, after application of all payments of principal due on or before
such date, whether or not received. All numerical information provided herein
and in Annex A with respect to the Mortgage Loans is provided on an
approximate basis. No Mortgage Loan represents more than 5% of the entire
pool of Mortgage Loans. See "--Changes in Mortgage Pool Characteristics"
herein.
On the following tables, the "Remaining Anticipated Term" and the
"Remaining Lockout" are calculated from the Cut-off Date. Because certain of
the Mortgage Loans have first Due Dates on which principal and interest is
due subsequent to the Cut-off Date, the Remaining Anticipated Term and the
Remaining Lockout with respect to each such Mortgage Loan is longer than the
Anticipated Term and the Lockout. Remaining Anticipated Term indicates the
actual number of periods from the Cut-off Date until the earlier of the
maturity date or Anticipated Repayment Date and Remaining Lockout indicates
the actual number of periods from the Cut-off Date until the expiration of
the Lockout period.
65
<PAGE>
MORTGAGE NOTES
<TABLE>
<CAPTION>
CUT-OFF
DATE MONTHLY
LOAN # LOAN NAME BORROWER LEGAL NAME NOTE BALANCE PAYMENT
- ------ -------------------------------- ------------------------------------------ ---- -------------- -----------
<S> <C> <C> <C> <C> <C>
1 KENDALL SQUARE OLD KENDALL PROPERTY LLC $69,598,691 $535,191.92
2 Saracen Wells Ave. Senior Holdings LLC $68,923,230 $507,982.11
3 International Plaza International Plaza L.P. A $64,650,000 $506,294.87
3 International Plaza International Plaza L.P. B $ 1,100,000 $ 13,756.37
4 K-Mart Distribution Centers Brentwood Holding Corp. $63,000,000 $542,047.98
5 Burnham Pacific BPP/Puente Hills, LP A $33,100,000 $255,054.69
5 Burnham Pacific BPP/Valley Central. LP B $25,400,000 $195,721.73
6 Hudson Hotels HH Properties-I, Inc. $55,854,069 $477,257.43
7 Marina Harbour Apts. Marina Pacific Assoc. $50,586,851 $434,553.48
8 Sunwest Sunwest N.C. Trust A $46,707,370 $374,331.67
8 Sunwest Sunwest N.C. Trust B $ 3,792,630 $ 29,593.20
9 Westin--Indianapolis Westin Indianapolis, LLC $41,700,000 $356,075.92
10 Two Gateway Center Townsend Gateway LP $34,423,045 $273,746.58
11 Uniprop Uniprop M.H.C. Income Fund I,L.P. $33,500,000 $251,438.84
12 Montague Park Tech Center Montague LLC $32,964,627 $255,849.29
13 Jacobs Mall J.A. Rand LLC A $19,200,000 $148,857.77
13 Jacobs Mall J.A. Conestoga LLC B $12,500,000 $ 99,590.06
14 M & H M & H Realty Partners L.P. $28,701,826 $202,502.73
15 Nassau Park II Hendon Princeton Assoc. No. 3 L.P. $28,000,000 $210,590.91
16 Prime Retail II Prime Retail, L. P. $27,000,000 $214,688.86
17 Lakeside Village Friedkin/Lakes Village Assoc. $24,971,982 $182,309.59
18 Asian Gardens Mall Asian Garden Limited, LP $24,326,512 $204,955.35
19 Northwood Centre Mark Northwood Assoc., L.P. $23,000,000 $193,330.26
20 South Dekalb Mall CV NACC Dekalb, L.L.C. $21,798,649 $178,117.95
21 Ambassador Apartments II Ambassador XI, L.P. $21,500,000 $158,960.07
22 Century Square Mall Terra Century Assoc., L.P. $21,000,000 $168,517.64
23 Holladay Holladay Midwest/Mishawaka $20,270,000 $167,751.65
24 Knollwood Village Apartments Knollwood Village Assoc LP $19,940,533 $156,056.26
25 Tuscon Place Artus Inc. I LLC $17,325,000 $132,723.44
26 2 St. Marks/Greystone 2 St.Marks LP $15,371,078 $115,928.91
27 Holiday Inn--Alexandria Gadsby Lodging Assoc. LP $14,875,834 $148,503.33
28 Hamilton Park Health Care Center First Connecticut Holding Group, L.L.C. II $14,636,056 $135,109.15
29 Burlington Square Burlington Executive Center Assoc. I $14,642,002 $110,475.16
30 Alzina Office Building Alzina Building, LLC $14,019,336 $124,931.71
31 Danvers Crossing Shopping Center DanCross Assoc. LP $13,627,151 $109,381.72
32 Residence Inn-Herndon Herndon Lodge GP $13,481,513 $115,611.56
33 Del Mar Del Mar Village L.P. $12,482,642 $ 98,650.18
34 The Plaza Burr Corners I & II Burr Plaza I L.P. $12,278,439 $ 99,664.32
35 Holiday Inn New Orleans Mikins Corporation $11,909,688 $113,096.92
36 Tramz Tramz New York, Ltd. L.P. $11,599,902 $107,757.82
37 Shadyside Gardens Apartment Shadyside Assoc. L.P. $10,500,000 $ 82,787.26
38 Radisson Inn--Columbus Columbus Hawaii L.P. $ 9,665,000 $ 87,935.46
39 Hood Commons Preferred Merchant Hood LLC $ 9,025,000 $ 67,358.20
40 30 Broad Street 30 Broad Assoc., LP $ 9,000,000 $ 74,605.37
41 Cleveland Industrial Portfolio Legacy Property Investments VI, Ltd. $ 8,665,157 $ 92,224.11
42 Sehome Village Bellingham Marketplace Assoc., LP $ 8,300,000 $ 63,525.94
43 Festival at Moreno Valley Hemlock Properties, LLC $ 8,065,000 $ 70,245.38
44 Madison House HJM--Madison Health Care Center, LLC $ 6,725,941 $ 61,147.07
<CAPTION>
STATED ANTICIPATED
MATURITY MORTGAGE REMAINING REMAINING
LOAN # DATE RATE LOCKOUT TERM AMORTIZATION
- ------ -------- -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1 01/11/27 8.485%* 117 118 360
2 02/11/27 8.035%* 118 119 360
3 03/11/27 8.700%* 115 120 360
3 03/11/27 8.700%* 115 120 120
4 03/11/22 9.2975%* 240 241 299
5 03/11/22 7.981%* 80 84 300
5 03/11/22 7.981%* 80 84 300
6 12/11/21 9.190%* 140 141 300
7 10/11/16 8.250%* 191 192 240
8 03/11/27 8.660%* 179 180 325
8 03/11/27 8.660%* 179 180 360
9 03/11/22 9.214%* 143 144 300
10 01/11/22 8.325%* 117 118 299
11 04/11/27 8.240%* 117 121 360
12 02/11/27 8.590%* 115 119 360
13 03/11/27 8.590%* 143 144 360
13 03/11/27 8.890%* 143 144 360
14 01/11/27 7.575%* 114 118 360
15 03/11/27 8.262%* 119 120 360
16 03/11/22 8.350%* 119 123 300
17 02/11/27 7.935%* 118 119 360
18 04/11/22 9.050%* 177 178 303
19 03/11/22 9.020%* 119 120 300
20 01/11/22 8.650%* 117 118 300
21 03/11/27 8.080%* 119 120 360
22 04/11/27 8.970%* 180 181 360
23 03/11/22 8.830%* 113 120 300
24 10/11/26 8.660% 111 115 360
25 03/11/27 8.460%* 142 144 360
26 02/11/27 8.280%* 115 119 360
27 12/11/11 8.590%* 173 177 180
28 12/11/16 9.300%* 173 177 240
29 01/11/27 8.280%* 138 142 360
30 01/11/17 8.820%* 75 82 240
31 11/11/23 8.670%* 112 116 324
32 02/11/22 9.250%* 175 179 300
33 01/11/27 8.785%* 114 118 360
34 01/11/22 8.570%* 114 118 300
35 10/11/16 9.670%* 171 175 240
36 12/11/16 9.390%* 173 177 240
37 03/11/22 8.250%* 113 120 300
38 04/11/19 9.580%* 114 121 264
39 04/11/27 8.180%* 117 121 360
40 04/11/22 8.850% 117 121 300
41 02/11/22 8.480%* 151 155 156
42 04/11/27 8.450%* 114 121 360
43 04/11/17 8.550%* 174 181 240
44 10/11/21 9.960%* 171 175 300
</TABLE>
66
<PAGE>
MORTGAGE NOTES (CONTINUED)
<TABLE>
<CAPTION>
CUT-OFF
DATE MONTHLY
LOAN # LOAN NAME BORROWER LEGAL NAME NOTE BALANCE PAYMENT
- ------ -------------------------------- ------------------------------------------ ---- -------------- -----------
<S> <C> <C> <C> <C> <C>
45 Decker Building Decker Assoc. LLC $ 6,500,000 $ 50,988.91
46 EconoLodge Portfolio Lark Investment Co. Inc. LLC A $ 2,120,000 $ 19,983.21
46 EconoLodge Portfolio Fredricksburg Inn LLC B $ 1,575,000 $ 14,846.02
46 EconoLodge Portfolio Wytheville Assoc. LLC C $ 998,111 $ 9,408.24
46 EconoLodge Portfolio Country Roads Assoc. LLC D $ 608,018 $ 5,731.20
46 EconoLodge Portfolio Chesapeake Assoc. LLC E $ 525,483 $ 4,953.22
46 EconoLodge Portfolio Sunrise West Assoc. LLC F $ 476,388 $ 4,490.45
47 Residence Inn-Livermore RI Livermore, L.P. $ 6,060,000 $ 50,192.99
48 140 Allen SJP Allen Road, L.L.C. $ 5,991,620 $ 50,146.51
49 Brookside Commons Apartments Brookside Commons LP $ 5,900,000 $ 48,426.33
50 Lincoln Park Center Lincoln Park Plaza Assoc. LP $ 5,892,333 $ 48,452.36
51 Magnolia-Western Investments Magnolia-Western Investments, LP $ 5,781,465 $ 57,844.78
52 Buena/Leisure Nursing MEK Assoc. LLC, a CA LLC $ 5,609,541 $ 54,607.09
53 Englar Shopping Center Englar Center L.P. $ 5,523,398 $ 45,656.17
54 Totem Square Shopping Center Totem Square Partners $ 5,425,000 $ 44,343.58
55 Equitable of Iowa Building EIB Acquisition, LLC $ 5,169,401 $ 50,538.09
56 Inn at Manchester Inn at Manchester, Inc. $ 5,090,239 $ 48,039.36
57 Outlets Limited Mall Venture Outlet Mall LLC $ 4,959,958 $ 43,644.66
58 Warwick Commons 399 Bald Hill Rd Prtnrs $ 5,000,000 $ 40,632.67
59 Alden Terrace Investments Alden Terrace Investments, LP $ 4,731,830 $ 47,342.96
60 6000 Metro Drive 6000 Metro LLC $ 4,707,742 $ 39,234.34
61 Country Hearth Inn--Orlando Heritage Inn Assoc., LP $ 4,574,045 $ 43,028.34
62 Longwood Manor Investments Longwood Manor Investments LP $ 4,563,370 $ 45,657.48
63 Tech Center 29 Tech Center 29 LP $ 4,532,434 $ 36,883.45
64 Davol Square Jewelry Bldg. Davol Square Jewelry Mart, LLC $ 4,484,492 $ 38,966.64
65 Lincoln MHP Lincoln Park Assoc., LP $ 4,144,091 $ 32,263.51
66 National Bank of California Fairfax Centre L.L.C. $ 4,119,395 $ 32,983.13
67 Best Western-Jacksonville EDC Park Partnership $ 4,092,178 $ 38,754.43
68 The Lab The Lab, LP $ 4,060,002 $ 33,835.22
69 Northridge Shopping Center Minsyr-Oxbridge LLC $ 4,000,000 $ 33,857.01
70 Days Inn-Providence Gano Holdings, LLC $ 3,955,000 $ 37,124.44
71 Plymouth Mall Plymouth Mall L.P. $ 3,941,797 $ 32,770.40
72 Residence Inn-Gainesville Triple T Inns of Arizona, Inc. $ 3,925,000 $ 33,721.39
73 Ramada Inn Bossier Red River Lodging, Inc. $ 3,788,821 $ 36,494.76
74 Sutton Place + South Livingston Livingston Assoc. A $ 3,116,000 $ 26,128.02
74 Sutton Place + South Livingston Livingston Assoc. B $ 684,000 $ 5,735.42
75 Old Town Square Progressive Old Town Sq. LLC $ 3,742,129 $ 30,906.86
76 Anza Corporate Center Bayco Investment Co. $ 3,492,575 $ 28,656.23
77 Washington Square Washington Square Shopping Center, LP $ 3,463,909 $ 29,671.95
78 Winston Village Winston Perris, L.P. $ 3,370,372 $ 28,856.32
79 Plaza Reyes Adobe Retail Center The Canwood Street, GP $ 3,350,000 $ 28,067.21
80 Comfort Inn--Castaic Castaic Hotel Properties, Inc. $ 2,994,486 $ 26,818.18
81 Pocono Green Pocono Green Plaza Assoc. LLC $ 2,993,860 $ 25,114.29
82 Saunders Plaza JRSM Corporation $ 2,969,460 $ 25,232.91
83 Heritage Bank Building Heritage Building, LLC $ 2,917,946 $ 24.621.44
84 Arvada Plaza Arvada Plaza Retail LLC $ 2,897,637 $ 25,417.89
85 Good Guys Plaza PRET Subsidiary, Inc. $ 2,850,000 $ 23,527.99
<CAPTION>
STATED ANTICIPATED
MATURITY MORTGAGE REMAINING REMAINING
LOAN # DATE RATE LOCKOUT TERM AMORTIZATION
- ------ -------- -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
45 03/11/22 8.190% 116 120 300
46 03/11/22 9.660%* 176 180 240
46 03/11/22 9.660%* 176 180 240
46 03/11/22 9.660%* 176 180 240
46 03/11/22 9.660%* 176 180 240
46 03/11/22 9.660%* 176 180 240
46 03/11/22 9.660%* 176 180 240
47 04/11/22 8.840%* 174 181 300
48 02/11/22 8.950%* 175 179 300
49 03/11/22 8.730%* 113 120 300
50 01/11/27 9.230%* 174 178 360
51 02/11/12 8.714%* 178 179 180
52 02/11/17 10.100%* 175 179 240
53 01/11/22 8.790%* 114 118 300
54 03/11/22 8.680% 116 120 300
55 01/11/12 8.280%* 78 82 180
56 02/11/17 9.650%* 175 179 240
57 10/11/16 8.580%* 171 175 240
58 04/11/22 8.610%* 174 181 300
59 02/11/12 8.714%* 178 179 180
60 01/11/22 8.890%* 114 118 300
61 11/11/16 9.550%* 172 176 240
62 02/11/12 8.714%* 178 179 180
63 11/11/21 8.580%* 76 80 300
64 01/11/17 8.470%* 111 118 240
65 01/11/27 8.620%* 78 82 360
66 01/11/27 8.930%* 114 118 360
67 02/11/17 9.700%* 175 179 240
68 11/11/21 8.870%* 112 116 300
69 04/11/17 8.160%* 174 181 240
70 03/11/17 9.600%* 173 180 240
71 01/11/22 8.860%* 114 118 300
72 03/11/22 9.290%* 176 180 300
73 01/11/17 9.930%* 174 178 240
74 03/11/22 8.990%* 116 120 300
74 03/11/22 8.990%* 116 120 300
75 01/11/07 8.780%* 114 118 300
76 01/11/22 8.700%* 111 118 300
77 11/11/21 9.210%* 112 116 300
78 02/11/22 9.230%* 112 119 300
79 03/11/22 8.980%* 113 120 300
80 01/11/22 9.790%* 174 178 300
81 01/11/22 8.970%* 114 118 300
82 11/11/21 9.110%* 112 116 300
83 02/11/22 9.050%* 115 119 300
84 02/11/22 9.540% 115 119 300
85 03/11/22 8.800%* 113 120 300
</TABLE>
67
<PAGE>
MORTGAGE NOTES (CONTINUED)
<TABLE>
<CAPTION>
CUT-OFF
DATE MONTHLY
LOAN # LOAN NAME BORROWER LEGAL NAME NOTE BALANCE PAYMENT
- ------ -------------------------------- ------------------------------------------ ---- -------------- -----------
<S> <C> <C> <C> <C> <C>
86 Candlelite Apartments Candlelite Apts., Ltd. $ 2,789,524 $ 23,077.12
87 Topinkas Village Shopping Center Arbela Assoc., Inc. $ 2,800,000 $ 23,306.06
88 Village Park MHP Essex Village Park, L.P. $ 2,797,014 $ 21,867.82
89 Woodland Park Investments Co. Woodland Park Investment Co., LLC $ 2,703,333 $ 27,047.42
90 View Park Convalescent Center View Park Investments LP $ 2,666,452 $ 26,678.41
91 Key RV Park Marathon Assoc., Ltd. $ 2,494,904 $ 20,979.91
92 Ramada Inn--Nashville Umi Management Inc. $ 2,295,601 $ 21,679.90
93 Barstow Plaza Theme Family Limited Partneship A $ 2,216,600 $ 18,035.22
94 Aspen Care Center Aspen Properties, L.C. $ 2,195,603 $ 19,779.82
95 Senate/Virginian Apartments Senate & Virginian Apts, L.C. $ 2,193,798 $ 18,057.28
96 One Ethel Road One Ethel Road Associate, L.P. $ 2,172,731 $ 17,578.85
97 American Plaza Shopping Center American Plaza LLC $ 2,145,565 $ 17,910.40
98 Diamond Inn Diamond Inc. Motel, LC $ 2,096,068 $ 20,265.45
99 Hocking Mall Shopping Center Chieftian Assoc., Inc. a NY Corp. $ 1,959,209 $ 17,028.02
100 Kessler Garden Apartments K.G. L. P. $ 1,947,258 $16,164.50
101 Chateau Apartments Chateau LLC $ 1,939,000 $16,007.29
102 Knights Inn-Maumee Tulsi Corporation $ 1,921,318 $18,145.13
103 Tiffany Bay Apartments Tiffany Bay Investors, L.P. $ 1,898,835 $14,528.64
104 Airport Commerce Center Sherwood Partners, LP $ 1,870,000 $16,014.34
105 Bakerview MHP Bakerview Mobile Estates Inc. $ 1,792,220 $15,452.15
106 Slauson Apts. SKG Slauson $ 1,772,762 $13,827.65
107 El Camino Apts. McAllen Camino Real Apts., Ltd. $ 1,771,548 $13,260,19
108 Park Isle Club Apartments Park Isle Assoc. $ 1,693,967 $14,382.93
109 Planet Pacific Building Puerta Real Partners $ 1,696,221 $13,517.45
110 Butler Place Apartments Butler Place Assoc. $ 1,538,000 $12,540.24
111 Cedar Springs MHP Cedar Springs Assoc. LLC $ 1,500,000 $11,997.65
112 Emory Arms Apartments Emory Arms Venture, LLP $ 1,493,209 $12,587.95
113 Fairdale Apartments Fairdale Apartments, Ltd. $ 1,493,949 $11,897.00
114 Holiday Inn Express-East Haven Frontage Road Company, LLC $ 1,500,000 $13,708.85
115 Holiday Inn--Bennettsville Marlboro Lodgings Corp. $ 1,430,000 $13,357.50
116 Michigan Trailer Park Osborn Investors, L.P. $ 1,382,553 $11,698.84
117 Hidden Meadow Hid-Med Ltd. $ 1,344,554 $10,707.30
118 Econolodge Arizona Lake Powell Holdings, Inc. $ 1,200,000 $11,492.94
119 Holiday Inn--S. Kingston South Kingstown Hotel Assoc. LLC $ 1,200,000 $11,029.32
120 North Acres Mobile Home Park Burton DeYoung $ 1,010,529 $ 8,067.22
121 Trainer Hill MHP Union Investment Group Ltd. $ 996,895 $ 9,275.65
TOTAL $1,403,292,505
<CAPTION>
STATED ANTICIPATED
MATURITY MORTGAGE REMAINING REMAINING
LOAN # DATE RATE LOCKOUT TERM AMORTIZATION
- ------ -------- -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
86 11/11/21 8.780% 172 176 300
87 04/11/22 8.900%* 81 85 300
88 02/11/27 8.670%* 115 119 360
89 02/11/12 8.714%* 178 179 180
90 02/11/12 8.714%* 178 179 180
91 01/11/22 9.000%* 114 118 300
92 02/11/17 9.660%* 172 179 240
93 12/11/21 8.590%* 113 117 300
94 02/11/17 8.990%* 115 119 240
95 12/11/21 8.730% 113 117 300
96 02/11/27 9.050%* 112 119 360
97 01/11/07 8.910%* 114 118 300
98 02/11/17 10.000%* 175 179 240
99 01/11/22 9.410%* 114 118 300
100 02/11/07 8.850%* 115 119 300
101 03/11/07 8.800%* 113 120 300
102 02/11/17 9.660%* 175 179 240
103 02/11/27 8.440% 115 119 360
104 03/11/22 9.250%* 173 180 300
105 10/11/06 9.280% 111 115 300
106 11/11/26 8.630% 112 116 360
107 12/11/26 8.190%* 113 117 360
108 11/11/21 9.100% 112 116 300
109 01/11/22 8.350%* 111 118 300
110 03/11/22 8.650%* 116 120 300
111 03/11/07 8.420%* 116 120 300
112 10/11/06 9.000% 111 115 300
113 11/11/06 8.320% 112 116 300
114 03/11/17 9.220%* 113 120 240
115 03/11/17 9.530%* 176 180 240
116 01/11/22 9.080% 114 118 300
117 11/11/06 8.320% 112 116 300
118 03/11/17 9.890%* 173 180 240
119 03/11/17 9.300%* 173 180 240
120 02/11/22 8.380%* 115 119 300
121 01/11/17 9.430%* 174 178 240
8.666% 137 140 312
</TABLE>
68
<PAGE>
RANGE OF DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
PERCENT BY
CUT-OFF NUMBER AGGREGATE
DATE DEBT OF CUT-OFF WEIGHTED
SERVICE LOANS/ CUT-OFF DATE DATE AVERAGE
COVERAGE LOAN PRINCIPAL PRINCIPAL MORTGAGE
RATIO POOLS BALANCE BALANCE RATE
- ------------ -------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
1.2-1.299.... 28 $ 304,178,348 21.7% 8.782%
1.3-1.399.... 32 457,144,101 32.6 8.608
1.4-1.499.... 24 302,993,612 21.6 8.663
1.5-1.599.... 11 135,377,084 9.6 9.028
1.6-1.699.... 11 89,451,335 6.4 8.445
1.7-1.799.... 6 60,068,858 4.3 8.462
1.8-1.899.... 3 9,196,733 0.7 8.848
1.9-1.999.... 2 33,661,784 2.4 7.723
2.0-2.099.... 3 10,020,652 0.7 9.130
2.1-2.199.... 1 1,200,000 0.1 9.300
Total/Wtd.
Avg. ...... 121 $1,403,292,505 100% 8.666%
<CAPTION>
CUT-OFF
DATE DEBT WEIGHTED WEIGHTED
SERVICE AVERAGE AVERAGE WEIGHTED WEIGHTED
COVERAGE REMAINING AMORTIZATION AVERAGE AVERAGE
RATIO TERM TERM DSCR LTV
- ------------ ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
1.2-1.299.... 162 328 1.25 75%
1.3-1.399.... 133 325 1.35 69
1.4-1.499.... 136 313 1.44 64
1.5-1.599.... 140 284 1.52 62
1.6-1.699.... 111 288 1.68 57
1.7-1.799.... 140 253 1.75 60
1.8-1.899.... 169 212 1.82 58
1.9-1.999.... 126 342 1.92 48
2.0-2.099.... 170 221 2.05 56
2.1-2.199.... 180 240 2.20 34
Total/Wtd.
Avg. ...... 140 312 1.42 67%
</TABLE>
RANGE OF LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF WEIGHTED
LOANS/ CUT-OFF DATE DATE AVERAGE
LOAN TO LOAN PRINCIPAL PRINCIPAL MORTGAGE
VALUE RATIO POOLS BALANCE BALANCE RATE
- ------------- -------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
30%-34.99%.... 1 $ 1,200,000 0.1% 9.300%
35%-39.99%.... 1 2,703,333 0.2 8.714
45%-49.99%.... 6 53,031,567 3.8 8.045
50%-54.99%.... 9 42,794,620 3.0 9.017
55%-59.99%.... 14 163,529,764 11.7 8.263
60%-64.99%.... 26 368,959,038 26.3 8.807
65%-69.99%.... 19 190,762,355 13.6 8.874
70%-74.99%.... 33 378,537,998 27.0 8.559
75%-79.99%.... 10 88,273,830 6.3 8.575
80%-84.99%.... 1 50,500,000 3.6 8.660
85%-89.99%.... 1 63,000,000 4.5 9.298
Total/Wtd.
Avg. ....... 121 $1,403,292,505 100% 8.666%
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
LOAN TO REMAINING AMORTIZATION MINIMUM MAXIMUM AVERAGE AVERAGE
VALUE RATIO TERM TERM DSCR DSCR DSCR LTV
- ------------- ----------- -------------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
30%-34.99%.... 180 240 2.20 2.20 2.20 34%
35%-39.99%.... 179 180 1.69 1.69 1.69 36
45%-49.99%.... 140 292 1.65 2.05 1.88 48
50%-54.99%.... 152 278 1.25 1.71 1.49 53
55%-59.99%.... 117 310 1.26 2.05 1.58 57
60%-64.99%.... 129 320 1.27 1.82 1.44 62
65%-69.99%.... 146 292 1.23 1.68 1.38 67
70%-74.99%.... 138 318 1.22 1.71 1.37 72
75%-79.99%.... 121 342 1.24 1.41 1.31 77
80%-84.99%.... 180 328 1.24 1.24 1.24 80
85%-89.99%.... 241 299 1.23 1.23 1.23 86
Total/Wtd.
Avg. ....... 140 312 1.22 2.20 1.42 67%
</TABLE>
<PAGE>
RANGE OF LOAN-TO-VALUE RATIOS AT EARLIER OF ANTICIPATED REPAYMENT DATES OR
MATURITY
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF WEIGHTED
LOANS/ CUT-OFF DATE DATE AVERAGE
LOAN TO LOAN PRINCIPAL PRINCIPAL MORTGAGE
VALUE RATIO POOLS BALANCE BALANCE RATE
- --------------- -------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
less than 30% .. 19 $ 135,240,583 9.6% 8.694%
30% to 34.99% .. 7 40,914,332 2.9 9.359
35% to 39.99% .. 5 27,134,309 1.9 9.432
40% to 44.99% .. 8 119,223,907 8.5 8.846
45% to 49.99% .. 15 166,087,657 11.8 9.102
50% to 54.99% .. 19 274,509,694 19.6 8.353
55% to 59.99% .. 18 286,144,292 20.4 8.654
60% to 64.99% .. 19 223,382,492 15.9 8.605
65% to 69.99% .. 6 90,416,378 6.4 8.170
70% to 74.99% .. 5 40,238,864 2.9 8.683
Total/Wtd.
Avg. .......... 121 $1,403,292,505 100% 8.666%
<CAPTION>
WEIGHTED
WEIGHTED WEIGHTED AVERAGE
AVERAGE AVERAGE WEIGHTED LTV AT EARLIER
LOAN TO REMAINING AMORTIZATION MINIMUM MAXMIUM AVERAGE OF ARD OR
VALUE RATIO TERM TERM DSCR DSCR DSCR MATURITY
- --------------- ----------- -------------- --------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
less than 30% .. 182 219 1.34 2.20 1.57 18%
30% to 34.99% .. 177 240 1.27 1.82 1.49 32
35% to 39.99% .. 174 257 1.37 2.05 1.45 37
40% to 44.99% .. 190 314 1.23 1.91 1.47 42
45% to 49.99% .. 148 295 1.25 1.73 1.45 48
50% to 54.99% .. 114 315 1.26 1.73 1.51 52
55% to 59.99% .. 132 338 1.23 1.68 1.33 58
60% to 64.99% .. 128 338 1.22 1.41 1.34 63
65% to 69.99% .. 119 358 1.24 1.43 1.34 67
70% to 74.99% .. 113 360 1.28 1.39 1.34 71
Total/Wtd.
Avg. .......... 140 312 1.22 2.20 1.42 51%
</TABLE>
69
<PAGE>
MORTGAGED PROPERTIES BY STATE
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
CUT-OFF WEIGHTED
CUT-OFF DATE DATE AVERAGE
NUMBER OF PRINCIPAL PRINCIPAL MORTGAGE
STATE PROPERTIES BALANCE BALANCE RATE
- ----------------- ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
CA ............... 32 $ 298,458,574 21.3% 8.390%
MA ............... 11 166,791,073 11.9 8.296
NY ............... 11 108,910,959 7.8 8.792
NJ ............... 7 89,023,452 6.3 8.554
FL ............... 10 78,732,838 5.6 8.890
NC ............... 10 71,050,155 5.1 9.132
CO ............... 13 67,820,271 4.8 8.787
IN ............... 13 64,956,782 4.6 9.075
TX ............... 43 51,043,445 3.6 8.528
VA................ 10 44,327,735 3.2 9.043
MI................ 6 39,801,532 2.8 8.712
CT ............... 5 31,494,619 2.2 9.102
GA ............... 4 30,461,044 2.2 8.695
AZ................ 4 27,007,553 1.9 8.526
MD ............... 4 25,263,575 1.8 8.547
NE ............... 5 22,250,308 1.6 8.726
OH ............... 11 22,210,684 1.6 9.143
PA ............... 2 21,996,895 1.6 8.991
WA ............... 4 16,527,749 1.2 8.611
LA ............... 2 15,698,510 1.1 9.733
RI ............... 4 14,639,492 1.0 8.891
IL ............... 1 14,019,336 1.0 8.820
ID ............... 1 11,900,000 0.8 8.350
NH ............... 1 9,025,000 0.6 8.180
MN................ 1 8,678,759 0.6 8.240
OR ............... 1 8,000,000 0.6 8.350
SC ............... 3 7,962,931 0.6 9.251
TN ............... 4 6,388,380 0.5 9.108
UT ............... 5 5,351,124 0.4 9.320
IA ............... 1 5,169,401 0.4 8.280
MT ............... 5 4,705,354 0.3 8.660
WI ............... 1 4,144,091 0.3 8.620
OK ............... 3 2,211,118 0.2 8.660
NV ............... 1 2,193,798 0.2 8.730
MO ............... 4 1,954,512 0.1 8.660
KS ............... 4 1,321,212 0.1 8.660
AR ............... 2 675,321 0.0 8.660
WV ............... 1 608,018 0.0 9.660
WY ............... 2 516,906 0.0 8.660
TOTAL/WTD. AVG. 252 $1,403,292,505 100% 8.666%
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE AVERAGE
STATE TERM AMORTIZATION DSCR LTV
- ----------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
CA ............... 138 298 1.50 63%
MA ............... 120 357 1.40 65
NY ............... 128 329 1.38 62
NJ ............... 133 310 1.49 68
FL ............... 131 317 1.41 66
NC ............... 185 312 1.35 74
CO ............... 183 317 1.33 77
IN ............... 138 300 1.39 63
TX ............... 158 336 1.30 76
VA................ 167 252 1.55 62
MI................ 124 348 1.40 73
CT ............... 141 287 1.44 68
GA ............... 129 290 1.51 67
AZ................ 139 336 1.34 69
MD ............... 112 300 1.34 70
NE ............... 143 353 1.31 68
OH ............... 139 223 1.53 68
PA ............... 181 355 1.23 72
WA ............... 120 330 1.29 70
LA ............... 176 240 1.59 69
RI ............... 161 260 1.52 64
IL ............... 82 240 1.35 68
ID ............... 123 300 1.51 61
NH ............... 121 360 1.35 74
MN................ 121 360 1.46 63
OR ............... 123 300 1.51 61
SC ............... 148 289 1.48 64
TN ............... 145 280 1.37 65
UT ............... 155 257 1.59 64
IA ............... 82 180 1.49 71
MT ............... 180 328 1.24 80
WI ............... 82 360 1.29 78
OK ............... 180 328 1.24 80
NV ............... 117 300 1.45 65
MO ............... 180 328 1.24 80
KS ............... 180 328 1.24 80
AR ............... 180 328 1.24 80
WV ............... 180 240 1.41 75
WY ............... 180 328 1.24 80
TOTAL/WTD. AVG. 140 312 1.42 67%
</TABLE>
<PAGE>
RANGE OF YEAR BUILT
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE WEIGHTED
CUT-OFF DATE CUT-OFF AVERAGE
RANGE OF NUMBER OF PRINCIPAL PRINCIPAL MORTGAGE
YEAR BUILT PROPERTIES BALANCE BALANCE RATE
- --------------- ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
1875-1900....... 3 $31,369,164 2.2% 8.422%
1900-1909....... 5 29,181,347 2.1 8.563
1910-1919....... 4 6,538,320 0.5 8.415
1920-1929....... 4 10,220,904 0.7 8.492
1930-1939....... 4 41,043,891 2.9 8.565
1940-1949....... 1 7,375,729 0.5 9.190
1950-1959....... 13 30,840,317 2.2 8.933
1960-1969....... 52 207,290,211 14.8 8.578
1970-1979....... 71 302,595,505 21.6 8.604
1980-1989....... 73 545,578,426 38.9 8.664
1990-1997....... 22 191,258,692 13.6 8.897
TOTAL/WTD.
AVG........... 252 $1,403,292,505 100% 8.666%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
ANTICIPATED AVERAGED WEIGHTED WEIGHTED
RANGE OF REMAINING AMORTIZATION AVERAGE AVERAGE
YEAR BUILT TERM TERM DSCR LTV
- --------------- ------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
1875-1900....... 118 330 1.44 69%
1900-1909....... 121 329 1.38 69
1910-1919....... 128 296 1.36 72
1920-1929....... 107 215 1.43 68
1930-1939....... 121 334 1.44 66
1940-1949....... 141 300 1.50 62
1950-1959....... 129 319 1.35 72
1960-1969....... 151 281 1.46 66
1970-1979....... 134 310 1.46 67
1980-1989....... 132 323 1.43 64
1990-1997....... 176 317 1.31 74
TOTAL/WTD.
AVG........... 140 312 1.42 67%
</TABLE>
70
<PAGE>
CUT-OFF DATE LOAN AMOUNT BY PROPERTY TYPE
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE WEIGHTED WEIGHTED
CUT-OFF DATE CUT-OFF DATE CUT-OFF AVERAGE AVERAGE
NUMBER OF PRINCIPAL PRINCIPAL SUM OF BALANCE/ MORTGAGE REMAINING
PROPERTY TYPE PROPERTIES BALANCE BALANCE UNITS UNIT RATE TERM
- ----------------- ---------- -------------- ------------ --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSISTED LIVING . 1 $ 2,703,333 0.2% 250 $10,813 8.714% 179
HOTEL
Extended Stay..... 4 28,556,752 2.0 448 63,743 9.240 180
Full Service ..... 13 121,519,753 8.7 2,686 45,242 9.267 156
Ltd. Service ..... 27 61,435,256 4.4 2,896 21,214 9.395 154
---------- -------------- ------------ --------- -------- -------- ---------
TOTAL HOTEL ..... 44 211,511,761 15.1 6,030 35,077 9.301 159
INDUSTRIAL
Industrial ....... 11 17,603,838 1.3 1,625,413 11 8.668 136
Warehouse ........ 3 63,516,319 4.5 2,909,811 22 9.291 240
---------- -------------- ------------ --------- -------- -------- ---------
TOTAL
INDUSTRIAL....... 14 81,120,157 5.8 4,535,224 18 9.156 218
MOBILE HOME PARK 12 49,618,205 3.5 3,190 15,554 8.427 118
MULTIFAMILY ...... 23 179,021,849 12.8 5,237 34,184 8.304 140
NURSING........... 10 46,910,257 3.3 1,340 35,008 9.254 175
OFFICE
Office............ 29 307,324,369 21.9 4,262,199 72 8.483 118
R&D .............. 1 32,964,627 2.3 417,532 79 8.590 119
---------- -------------- ------------ --------- -------- -------- ---------
TOTAL OFFICE ... 30 340,288,996 24.2 4,679,731 73 8.493 118
RETAIL
Retail Anchored . 26 304,658,163 21.7 5,719,245 53 8.430 125
Retail Factory
Outlet .......... 3 27,000,000 1.9 358,082 75 8.350 123
Retail Mall....... 2 46,125,161 3.3 439,902 105 8.861 150
Retail/Office..... 1 3,742,129 0.3 102,607 36 8.780 118
Retail Unanchored 82 83,584,825 6.0 2,500,081 33 8.762 156
Retail Secondary
Anchored ........ 4 27,007,666 1.9 400,059 68 8.539 141
---------- -------------- ------------ --------- -------- -------- ---------
TOTAL RETAIL ..... 118 492,117,945 35.1 9,519,976 52 8.531 133
TOTAL/WTD. AVG. . 252 $1,403,292,505 100% 8.666% 140
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
LTV WEIGHTED
AS OF THE AVERAGE
WEIGHTED WEIGHTED WEIGHTED ANTICIPATED WEIGHTED YEAR
AVERAGE MIN MAX AVERAGE AVERAGE REPAYMENT AVERAGE BUILT/
PROPERTY TYPE AMORTIZATION DSCR DSCR DSCR LTV DATE/MATURITY OCCUPANCY RENOVATED
- ----------------- ------------ ---- ---- -------- -------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSISTED LIVING . 180 1.69 1.69 1.69 36% 1% 88% 1977
HOTEL
Extended Stay..... 289 1.45 1.47 1.46 67 44 81 1993
Full Service ..... 264 1.41 2.20 1.51 61 38 74 1992
Ltd. Service ..... 280 1.39 2.05 1.54 62 43 70 1992
------------ ---- ---- -------- -------- ------------- --------- ---------
TOTAL HOTEL ..... 272 1.39 2.20 1.51 62 41 74 1992
INDUSTRIAL
Industrial ....... 233 1.31 1.49 1.39 66 30 95 1958
Warehouse ........ 298 1.23 1.49 1.23 86 41 100 1993
------------ ---- ---- -------- -------- ------------- --------- ---------
TOTAL
INDUSTRIAL....... 284 1.23 1.49 1.26 82 38 99 1985
MOBILE HOME PARK 348 1.29 2.05 1.46 64 57 95 1976
MULTIFAMILY ...... 312 1.25 1.82 1.38 73 53 95 1986
NURSING........... 226 1.50 2.05 1.68 65 24 94 1983
OFFICE
Office............ 335 1.25 1.73 1.42 63 55 96 1986
R&D .............. 360 1.27 1.27 1.27 61 55 100 1990
------------ ---- ---- -------- -------- ------------- --------- ---------
TOTAL OFFICE ... 338 1.25 1.73 1.41 63 55 96 1987
RETAIL
Retail Anchored . 331 1.22 1.91 1.44 66 57 94 1990
Retail Factory
Outlet .......... 300 1.51 1.51 1.51 61 51 91 1992
Retail Mall....... 302 1.31 1.41 1.36 69 54 97 1979
Retail/Office..... 300 1.28 1.28 1.28 61 52 93 1984
Retail Unanchored 313 1.24 1.65 1.30 75 58 95 1979
Retail Secondary
Anchored ........ 322 1.23 1.97 1.44 64 52 99 1991
------------ ---- ---- -------- -------- ------------- --------- ---------
TOTAL RETAIL ..... 323 1.22 1.97 1.41 67 56 95 1987
TOTAL/WTD. AVG. . 312 1.22 2.20 1.42 67% 51 92% 1987
</TABLE>
71
<PAGE>
RANGE OF LOAN AMOUNTS OR LOAN BALANCES
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
NUMBER CUT-OFF CUT-OFF
OF LOANS/ DATE DATE WEIGHTED
RANGE OF CUT-OFF LOAN PRINCIPAL PRINCIPAL AVERAGE
DATE LOAN AMOUNTS POOLS BALANCE BALANCE MORTGAGE RATE
- ----------------------- ----------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
less than $1,000,000 ... 1 $ 996,895 0.1% 9.430%
1,000,000-4,999,999 .... 63 174,344,858 12.4 8.974
5,000,000-9,999,999 .... 20 133,692,096 9.5 8.905
10,000,000-14,999,999 .. 11 144,052,564 10.3 8.866
15,000,000-19,999,999 .. 3 52,636,611 3.8 8.483
20,000,000-24,999,999 .. 7 156,867,143 11.2 8.640
25,000,000-29,999,999 .. 3 83,701,826 6.0 8.055
30,000,000-34,999,999 .. 4 132,587,672 9.4 8.461
40,000,000-44,999,999 .. 1 41,700,000 3.0 9.214
50,000,000-54,999,999 .. 2 101,086,851 7.2 8.455
55,000,000-59,999,999 .. 2 114,354,069 8.1 8.572
60,000,000-64,999,999 .. 1 63,000,000 4.5 9.298
65,000,000-69,999,999 .. 3 204,271,921 14.6 8.402
Total/Wtd. Avg. ...... 121 $1,403,292,505 100% 8.666%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
ANTICIPATED AVERAGE WEIGHTED WEIGHTED
RANGE OF CUT-OFF REMAINING AMORTIZATION AVERAGE AVERAGE
DATE LOAN AMOUNTS TERM TERM DSCR LTV
- ----------------------- ------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
less than $1,000,000 ... 178 240 1.34 59%
1,000,000-4,999,999 .... 137 281 1.49 63
5,000,000-9,999,999 .... 148 277 1.45 67
10,000,000-14,999,999 .. 144 279 1.43 68
15,000,000-19,999,999 .. 126 360 1.33 75
20,000,000-24,999,999 .. 137 326 1.35 70
25,000,000-29,999,999 .. 120 341 1.55 62
30,000,000-34,999,999 .. 125 344 1.45 64
40,000,000-44,999,999 .. 144 300 1.42 61
50,000,000-54,999,999 .. 186 284 1.29 76
55,000,000-59,999,999 .. 112 300 1.60 59
60,000,000-64,999,999 .. 241 299 1.23 86
65,000,000-69,999,999 .. 119 359 1.38 63
Total/Wtd. Avg. ...... 140 312 1.42 67%
</TABLE>
<PAGE>
RANGE OF ANTICIPATED REMAINING TERM IN MONTHS
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE WEIGHTED
OF CUT-OFF CUT-OFF AVERAGE
RANGE OF LOANS/ DATE DATE ANTICIPATED
ANTICIPATED LOAN PRINCIPAL PRINCIPAL REMAINING
REMAINING TERM POOLS BALANCE BALANCE TERM
- --------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
72-83.9 ........ 4 $ 27,865,263 2.0% 82
84-95.9......... 2 61,300,000 4.4 84
108-119.9....... 46 445,239,639 31.7 118
120-131.9....... 22 299,812,000 21.4 121
132-143.9....... 2 70,496,071 5.0 141
144-155.9....... 4 99,390,157 7.1 145
168-179.9....... 26 171,094,524 12.2 178
180-191.9....... 13 114,508,000 8.2 180
192-203.9....... 1 50,586,851 3.6 192
240-251.9....... 1 63,000,000 4.5 241
Total/Wtd.
Avg........... 121 $1,403,292,505 100% 140
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE WEIGHTED WEIGHTED
ANTICIPATED AMORTIZATION MORTGAGE AVERAGE AVERAGE
REMAINING TERM TERM RATE DSCR LTV
- --------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
72-83.9 ........ 256 8.651% 1.36 70%
84-95.9......... 300 8.023 1.67 57
108-119.9....... 338 8.424 1.44 66
120-131.9....... 331 8.558 1.38 67
132-143.9....... 312 9.001 1.46 63
144-155.9....... 317 8.857 1.36 66
168-179.9....... 252 9.236 1.55 62
180-191.9....... 309 8.848 1.31 73
192-203.9....... 240 8.250 1.34 72
240-251.9....... 299 9.928 1.23 86
Total/Wtd.
Avg........... 312 8.666% 1.42 67%
</TABLE>
72
<PAGE>
RANGE OF REMAINING TERM IN MONTHS
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE WEIGHTED
OF CUT-OFF CUT-OFF AVERAGE
LOANS/ DATE DATE ANTICIPATED
RANGE OF LOAN PRINCIPAL PRINCIPAL REMAINING
REMAINING TERM POOLS BALANCE BALANCE TERM
- --------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
108-119.9....... 7 $ 13,958,885 1.0% 117
120-131.9....... 2 3,439,000 0.2 120
168-179.9....... 7 40,491,685 2.9 166
228-239.9....... 17 144,856,594 10.3 170
240-251.9....... 7 21,350,000 1.5 176
264-275.9....... 1 9,665,000 0.7 121
288-299.9....... 30 224,521,359 16.0 133
300-311.9....... 22 332,617,512 23.7 148
312-323.9....... 1 13,627,151 1.0 116
348-359.9....... 17 312,165,320 22.2 120
360-371.9....... 10 286,600,000 20.4 139
Total/Wtd.
Avg........... 121 $1,403,292,505 100% 140
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
RANGE OF AMORTIZATION MORTGAGE AVERAGE AVERAGE
REMAINING TERM TERM RATE DSCR LTV
- --------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
108-119.9....... 300 8.804% 1.40 61%
120-131.9....... 300 8.634 1.60 62
168-179.9....... 180 8.613 1.77 57
228-239.9....... 240 8.970 1.47 67
240-251.9....... 240 8.902 1.51 59
264-275.9....... 264 9.580 1.56 72
288-299.9....... 294 8.897 1.48 65
300-311.9....... 299 8.796 1.41 67
312-323.9....... 324 8.670 1.40 71
348-359.9....... 360 8.299 1.42 66
360-371.9....... 353 8.532 1.31 71
Total/Wtd.
Avg........... 312 8.666% 1.42 67%
</TABLE>
<PAGE>
ANTICIPATED REPAYMENT BY YEAR
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE WEIGHTED
OF CUT-OFF CUT-OFF AVERAGE
LOANS/ DATE DATE ANTICIPATED
LOAN PRINCIPAL PRINCIPAL REMAINING
YEAR POOLS BALANCE BALANCE TERM
- --------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
2003............ 1 $ 4,532,434 0.3% 80
2004............ 5 84,632,829 6.0 83
2006............ 14 59,833,663 4.3 116
2007............ 54 685,217,976 48.8 119
2008............ 1 55,854,069 4.0 141
2009............ 4 105,367,002 7.5 144
2010............ 1 8,665,157 0.6 155
2011............ 8 72,070,948 5.1 176
2012............ 31 213,531,576 15.2 180
2013............ 1 50,586,851 3.6 192
2017............ 1 63,000,000 4.5 241
Total/Wtd.
Avg........... 121 $1,403,292,505 100% 140
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
AMORTIZATION MORTGAGE AVERAGE AVERAGE
YEAR TERM RATE DSCR LTV
- --------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
2003............ 300 8.580% 1.35 66%
2004............ 286 8.200 1.59 61
2006............ 329 8.739 1.41 72
2007............ 336 8.455 1.42 66
2008............ 300 9.190 1.50 62
2009............ 336 8.808 1.35 66
2010............ 156 8.480 1.49 67
2011............ 236 9.237 1.59 61
2012............ 288 9.028 1.41 68
2013............ 240 8.250 1.34 72
2017............ 299 9.298 1.23 86
Total/Wtd.
Avg........... 312 8.666% 1.42 67%
</TABLE>
73
<PAGE>
RANGE OF MORTGAGE RATES
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE WEIGHTED
OF CUT-OFF CUT-OFF WEIGHTED AVERAGE
LOANS/ DATE DATE AVERAGE ANTICIPATED WEIGHTED WEIGHTED WEIGHTED
RANGE OF LOAN PRINCIPAL PRINCIPAL MORTGAGE REMAINING AVERAGE AVERAGE AVERAGE
MORTGAGE RATES POOLS BALANCE BALANCE RATE TERM AMORT. TERM DSCR LTV
- ---------------- -------- -------------- ------------ ---------- ------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7.50%-7.7499% .. 1 $ 28,701,826 2.0% 7.575% 118 360 1.91 48%
7.75%-7.999%..... 2 83,471,982 5.9 7.967 94 318 1.60 62
8.00%-8.249% ... 7 145,219,777 10.3 8.110 121 354 1.44 62
8.25%-8.499% ... 19 303,009,807 21.6 8.357 134 314 1.41 70
8.50%-8.749% ... 27 335,918,917 23.9 8.658 139 318 1.38 68
8.75%-8.999% ... 23 141,728,874 10.1 8.871 130 309 1.34 67
9.00%-9.249% ... 15 174,231,965 12.4 9.145 142 303 1.41 63
9.25%-9.499% ... 10 114,460,795 8.2 9.303 211 285 1.34 76
9.50%-9.749% ... 11 54,133,706 3.9 9.626 165 247 1.49 67
9.75%-9.999% ... 4 14,709,248 1.0 9.912 177 280 1.70 60
10.00%-10.249% . 2 7,705,609 0.5 10.073 179 240 1.65 64
Total/Wtd.
Avg............. 121 $1,403,292,505 100% 8.666% 140 312 1.42 67%
</TABLE>
DELINQUENCY STATUS AS OF MARCH 1, 1997
No Delinquencies
<PAGE>
RANGE OF REMAINING LOCK-OUT PERIOD IN MONTHS
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF CUT-OFF
LOCK-OUT LOANS/ DATE DATE
PERIOD LOAN PRINCIPAL PRINCIPAL
IN MONTHS POOLS BALANCE BALANCE
- ---------------- -------- -------------- ------------
<S> <C> <C> <C>
72-83.9.......... 6 $ 89,165,263 6.4%
108-119.9........ 68 745,051,639 53.1
132-143.9........ 5 161,221,071 11.5
144-155.9........ 1 8,665,157 0.6
168-179.9........ 38 264,602,524 18.9
180-191.9........ 2 71,586,851 5.1
240-241.9........ 1 63,000,000 4.5
Total/Wtd.
Avg............. 121 $1,403,292,505 100%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
LOCK-OUT AVERAGE ANTICIPATED WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED
PERIOD REMAINING REMAINING AVERAGE AVERAGE MORTGAGE AVERAGE AVERAGE
IN MONTHS LOCKOUT TERM AMORTIZATION TERM RATE DSCR LTV
- ---------------- ----------- ------------- -------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
72-83.9.......... 79 83 286 286 8.219% 1.58 61%
108-119.9........ 116 119 335 332 8.478 1.42 66
132-143.9........ 141 143 324 324 8.940 1.40 65
144-155.9........ 151 155 156 300 8.480 1.49 67
168-179.9........ 175 179 268 276 9.089 1.48 66
180-191.9........ 188 189 275 275 8.461 1.31 72
240-241.9........ 240 241 299 299 9.298 1.23 86
Total/Wtd.
Avg............. 137 140 312 313 8.666% 1.42 67%
</TABLE>
74
<PAGE>
DESCRIPTION OF THE SUBORDINATED CERTIFICATES
GENERAL
The Certificates have been issued pursuant to the Pooling and Servicing
Agreement and consist of twenty-six Classes, designated as the Class A-1A
Certificates, the Class A-1B Certificates, the Class A-1C Certificates, the
Class A-1D Certificates, the Class A-1E Certificates the Class A-CS1
Certificates, the Class PS-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4 Certificates, the Class A-5
Certificates, the Class A-6 Certificates, the Class A-7 Certificates, the
Class A-8 Certificates, the Class B-1 Certificates, the Class B-2
Certificates, the Class B-3 Certificates, the Class B-4 Certificates, the
Class B-5 Certificates, the Class B-6 Certificates, the Class B-7
Certificates, the Class B-7H Certificates, the Class V-1 Certificates, the
Class V-2 Certificates, the Class R Certificates and the Class LR
Certificates. Only the Subordinated Certificates are offered hereby. The
Senior Certificates have been publicly offered under a separate prospectus
and are not offered hereby. The Junior Subordinated Certificates, Class V-1,
Class V-2, Class R and Class LR Certificates are not offered hereby. The
Class A-CS1 and Class PS-1 Certificates are sometimes referred to herein as
the "Coupon Strip Certificates."
The Certificates represent in the aggregate the entire beneficial
ownership interest in a Trust Fund consisting of: (i) the Mortgage Loans and
all payments under and proceeds of the Mortgage Loans due after the Cut-off
Date; (ii) any Mortgaged Property acquired by the Special Servicer on behalf
of the Trust Fund through foreclosure or deed in lieu of foreclosure (upon
acquisition, an "REO Property") such funds or assets as from time to time are
deposited in the Collection Account, the Distribution Account, the Upper-Tier
Distribution Account, the Interest Reserve Account, the Excess Interest
Distribution Account, the Default Interest Distribution Account and any
account established in connection with REO Properties (an "REO Account");
(iv) the rights of the mortgagee under all insurance policies with respect to
the Mortgage Loans; (v) the Depositor's rights and remedies under the
Mortgage Loan Purchase and Sale Agreement and Bloomfield Purchase Agreement;
and (vi) all of the mortgagee's right, title and interest in the Reserve
Accounts, the Cash Collateral Accounts and Lock Box Accounts.
The Class B-1 Certificates have an initial Certificate Balance of
$35,082,312. The Class B-2 Certificates have an initial Certificate Balance
of $35,082,312. The Class B-3 Certificates have an initial Certificate
Balance of $14,032,925. The Class B-4 Certificates have an initial
Certificate Balance of $21,049,387. The Class B-5 Certificates have an
initial Certificate Balance of $14,032,925. The Class B-6 Certificates have
an initial Certificate Balance of $14,032,925.
The Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-1E, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6, Class A-7 and Class A-8
Certificates have initial Certificate Balances of $127,000,000, $91,010,000,
$65,000,000, $671,228,903, $84,197,550, $28,065,850, $49,115,237,
$21,049,387, $42,098,775, $28,065,850, $21,049,387 and $21,049,387,
respectively. The Class B-7 and Class B-7H Certificates have initial
Certificate Balances, in the aggregate, of $21,049,393. The Class A-CS1
Certificates have an initial Notional Balance equal to $127,000,000, which is
equal to the Certificate Balance of the Class A-1A Certificates. The Class
PS-1 Certificates have an initial Notional Balance equal to $1,403,292,505,
which is equal to the aggregate Stated Principal Balance of the Mortgage
Loans as of the Cut-off Date.
The initial Certificate Balance of each of the Class R, Class LR, Class
V-1 and Class V-2 Certificates is zero. Additionally, the Class R, Class LR,
Class V-1 and Class V-2 Certificates do not have a Notional Balance.
The Certificate Balance of any Class of Certificates outstanding at any
time represents the maximum amount which the holders thereof are entitled to
receive as distributions allocable to principal from the cash flow on the
Mortgage Loans and the other assets in the Trust Fund; provided, however,
that in the event Realized Losses previously allocated to a Class of
Certificates in reduction of the Certificate Balance thereof are recovered
subsequent to the reduction of the Certificate Balance of such Class to zero,
such Class may receive distributions in respect of such recoveries in
accordance with the priorities set forth under "--Distributions --
Priorities" herein.
The respective Certificate Balance of each Class of Certificates (other
than the Coupon Strip Certificates, the Class V-1, Class V-2, Class R and
Class LR Certificates) will in each case be reduced by amounts actually
distributed thereon that are allocable to principal and by any Realized
Losses allocated to such Class of Certificates. The Notional Balance of the
Class A-CS1 Certificates will at all times equal the Certificate Balance of
the Class A-1A Certificates. The Notional Balance of the Class PS-1
Certificates will for purposes of distributions on each Distribution Date
equal the aggregate Stated Principal Balance of the Mortgage Loans as of the
first day of the related Interest Accrual Period. The Notional Balance of the
Class PS-1 Certificates will be reduced to the extent of all reductions in
the aggregate Stated Principal Balance of the Mortgage Loans.
75
<PAGE>
SUBORDINATION
As a means of providing a certain amount of protection to the holders of
the Senior Certificates against losses associated with delinquent and
defaulted Mortgage Loans, the rights of the holders of the Subordinated
Certificates and the Junior Subordinated Certificates to receive
distributions of interest and principal with respect to the Mortgage Loans,
as applicable, will be subordinated to the corresponding rights of the
holders of the Senior Certificates. The rights of the holders of the Class
B-1 Certificates to receive distributions of interest and principal will be
subordinate to those of the Senior Certificates; the rights of the holders of
the Class B-2 Certificates to receive distributions of interest and principal
will be subordinate to those of the Senior Certificates and Class B-1
Certificates; the rights of the holders of the Class B-3 Certificates to
receive distributions of interest and principal will be subordinate to those
of the Senior Certificates, Class B-1 and Class B-2 Certificates; the rights
of the holders of the Class B-4 Certificates to receive distributions of
interest and principal will be subordinate to those of the Senior
Certificates, Class B-1, Class B-2 and Class B-3 Certificates; the rights of
the holders of the Class B-5 Certificates to receive distributions of
interest and principal will be subordinate to those of the Senior
Certificates, Class B-1, Class B-2, Class B-3 and Class B-4 Certificates; and
the rights of the holders of the Class B-6 Certificates to receive
distributions of interest and principal will be subordinate to those of the
Senior Certificates, Class B-1, Class B-2, Class B-3, Class B-4, and Class
B-5 Certificates. The rights of the Junior Subordinated Certificates to
receive distributions of interest and principal will be subordinate to those
of the Senior Certificates and the Subordinated Certificates. This
subordination will be effected in two ways: (i) by the preferential right of
the holders of a Class of Certificates to receive on any Distribution Date
the amounts of interest and principal, distributable in respect of such
Certificates on such date prior to any distribution being made on such
Distribution Date in respect of any Classes of Certificates subordinate
thereto, as described below under "--Distributions," and (ii) by the
allocation of Realized Losses, first, to the Junior Subordinated
Certificates, second, to the Class B-6 Certificates, third, to the Class B-5
Certificates, fourth, to the Class B-4 Certificates, fifth, to the Class B-3
Certificates, sixth, to the Class B-2 Certificates, seventh, to the Class B-1
Certificates, and finally, to the Senior Certificates in accordance with the
terms of the Pooling and Servicing Agreement, as described below under
"--Realized Losses." No other form of credit enhancement will be available
for the benefit of the holders of the Subordinated Certificates. BECAUSE OF
THE SUBORDINATION OF THE SUBORDINATED CERTIFICATES, THE YIELD OF THE
SUBORDINATED CERTIFICATES WILL BE EXTREMELY SENSITIVE AND THE TIMING AND
MAGNITUDE OF UNADVANCED DELINQUENCIES AND LOSSES ON THE MORTGAGE LOANS DUE TO
LIQUIDATIONS.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Certificates will be made
on the Distribution Date. All distributions (other than the final
distribution on any Certificate) will be made by the Trustee to the persons
in whose names the Certificates are registered at the close of business on
the 10th day of the month in which the related Distribution Date occurs, or
if such day is not a business day, the preceding business day (the "Record
Date"); the Record Date for the Distribution Date occurring on April 16, 1997
for all purposes other than the receipt of distributions is March 27, 1997.
Such distributions will be made (a) by wire transfer in immediately available
funds to the account specified by the Certificateholder at a bank or other
entity having appropriate facilities therefor, if such Certificateholder
provides the Trustee with wiring instructions no less than five business days
prior to the related Record Date and is the registered owner of Certificates
the aggregate Certificate Balance of which is at least $5,000,000, or
otherwise (b) by check mailed to such Certificateholder. The final
distribution on any Subordinated Certificates will be made in like manner,
but only upon presentment or surrender (for notation that the Certificate
Balance thereof has been reduced to zero) of such Certificate at the location
specified in the notice to the holder thereof of such final distribution. All
distributions made with respect to a Class of Certificates on each
Distribution Date will be allocated pro rata among the outstanding
Certificates of such Class based on their respective Percentage Interests.
The "Percentage Interest" evidenced by any Subordinated Certificate is equal
to the initial denomination thereof as of the Closing Date divided by the
initial Certificate Balance or Notional Balance, as applicable, of the
related Class.
The aggregate distribution to be made with respect to the Certificates on
any Distribution Date will equal the Available Funds. The "Available Funds"
for a Distribution Date will be the sum of all previously undistributed
Monthly Payments or other receipts on account of principal and interest on or
in respect of the Mortgage Loans (including Unscheduled Payments and Net REO
Proceeds, if any) received by the Servicer in the related Collection Period,
plus (i) all P&I Advances (except Subordinate Class Advance Amounts) made by
the Servicer, the Trustee or the Fiscal Agent, as applicable, in respect of
such Distribution Date, (ii) for the Distribution Date occurring in each
March, the "Withheld Amounts" as described under "--The Pooling and Servicing
Agreement -- Accounts -- Interest Reserve Account" and required to be
deposited in the Distribution Account pursuant to the Pooling and Servicing
Agreement, (iii) all other
76
<PAGE>
amounts required to be deposited in the Collection Account by the Servicer
pursuant to the Pooling and Servicing Agreement allocable to the Mortgage
Loans, (iv) any late payments of Monthly Payments received after the end of
the Collection Period relating to such Distribution Date but prior to the
related Servicer Remittance Date and (v) any Prepayment Interest Shortfalls
remitted by the Servicer to the Collection Account (as described under
"--Prepayment Interest Shortfalls"), but excluding the following:
(a) amounts permitted to be used to reimburse the Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, for previously
unreimbursed Advances and interest thereon as described herein under "The
Pooling and Servicing Agreement -- Advances";
(b) the aggregate amount of the Servicing Fee (which includes the fees
for both the Trustee and the Servicer) and the other Servicing
Compensation (e.g., late fees, loan modification fees, extension fees,
loan service transaction fees, demand fees, beneficiary statement charges,
and similar fees) payable to the Servicer and the Special Servicing Fee
and other amounts payable to the Special Servicer described under "The
Pooling and Servicing Agreement -- Special Servicing" herein), and
reinvestment earnings on payments received with respect to the Mortgage
Loans which the Servicer or Special Servicer is entitled to receive as
additional servicing compensation, in each case in respect of such
Distribution Date;
(c) all amounts representing scheduled Monthly Payments due after the
related Due Date;
(d) to the extent permitted by the Pooling and Servicing Agreement, that
portion of liquidation proceeds, insurance proceeds and condemnation
proceeds with respect to a Mortgage Loan which represents any unpaid
Servicing Fee and special servicing compensation together with interest
thereon as described herein, to which the Servicer, the Special Servicer
and the Trustee, are entitled;
(e) all amounts representing certain expenses reimbursable or payable to
the Servicer, the Special Servicer, the Trustee or the Fiscal Agent and
other amounts permitted to be retained by the Servicer or withdrawn
pursuant to the Pooling and Servicing Agreement in respect of various
items, including interest thereon as provided in the Pooling and Servicing
Agreement;
(f) Prepayment Premiums;
(g) Default Interest;
(h) Excess Interest;
(i) with respect to the Mortgage Loans known as the Saracen, Burnham
Pacific, M&H, Lakeside and Ambassador loans and any Distribution Date
relating to each Interest Accrual Period ending in each February or any
January occurring in a year which is not a leap year, an amount equal to
one day of interest on the Stated Principal Balance of each such Mortgage
Loan as of the Due Date occurring in the month preceding the month in
which such Distribution Date occurs at the related Mortgage Rate to the
extent such amounts are to be deposited in the Interest Reserve Account
and held for future distribution;
(j) all amounts received with respect to each Mortgage Loan previously
purchased or repurchased pursuant to the Pooling and Servicing Agreement
during the related Collection Period and subsequent to the date as of
which the amount required to effect such purchase or repurchase was
determined; and
(k) the amount reasonably determined by the Trustee to be necessary to
pay any applicable federal, state or local taxes imposed on the Upper-Tier
REMIC or the Lower-Tier REMIC under the circumstances and to the extent
described in the Pooling and Servicing Agreement.
The "Monthly Payment" with respect to any Mortgage Loan (other than any
REO Mortgage Loan) and any Due Date is the scheduled monthly payment of
principal (if any) and interest at the Mortgage Rate, excluding any Balloon
Payment (but not excluding any constant Monthly Payment), which is payable by
the related borrower on the related Due Date. The Monthly Payment with
respect to an REO Mortgage Loan for any Distribution Date is the monthly
payment that would otherwise have been payable on the related Due Date had
the related Note not been discharged, determined as set forth in the Pooling
and Servicing Agreement.
"Unscheduled Payments" are all net liquidation proceeds, net insurance
proceeds and net condemnation proceeds payable under the Mortgage Loans, the
repurchase price of any Mortgage Loan repurchased by the Mortgage Loan Seller
77
<PAGE>
or Bloomfield due to a breach of a representation or warranty made by them or
the purchase price paid by the parties described under "The Pooling and
Servicing Agreement -- Optional Termination", and any other payments under or
with respect to the Mortgage Loans not scheduled to be made, including
Principal Prepayments, but excluding Prepayment Premiums.
"Net REO Proceeds" with respect to any REO Property and any related REO
Mortgage Loan are all revenues received by the Special Servicer with respect
to such REO Property or REO Mortgage Loan net of any insurance premiums,
taxes, assessments and other costs and expenses permitted to be paid
therefrom pursuant to the Pooling and Servicing Agreement.
"Principal Prepayments" are payments of principal made by a borrower on a
Mortgage Loan which are received in advance of the scheduled Due Date for
such payments and which are not accompanied by an amount of interest
representing the full amount of scheduled interest due on any date or dates
in any month or months subsequent to the month of prepayment, other than any
amount paid in connection with the release of the related Mortgaged Property
through defeasance.
The "Collection Period" with respect to a Distribution Date is the period
beginning on the day after the Due Date in the month preceding the month in
which such Distribution Date occurs (or, with respect to the first
Distribution Date, the day after the Cut-off Date) and ending on the Due Date
in the month in which such Distribution Date occurs.
"Net Default Interest" with respect to any Mortgage Loan is any Default
Interest accrued on such Mortgage Loan less amounts required to pay the
Servicer, the Trustee or Fiscal Agent, as applicable, interest on Advances at
the Advance Rate.
"Default Interest" with respect to any Mortgage Loan is interest accrued
on such Mortgage Loan at the excess of (i) the related Default Rate over (ii)
the sum of the related Mortgage Rate and, if applicable, the related Excess
Rate.
The "Default Rate" with respect to any Mortgage Loan is the per annum rate
at which interest accrues on such Mortgage Loan following any event of
default on such Mortgage Loan including a default in the payment of a Monthly
Payment or a Balloon Payment.
"Excess Interest" with respect to each of the Mortgage Loans that has a
Revised Rate, interest accrued on such Mortgage Loan allocable to the Excess
Rate.
"Excess Rate" with respect to each of the Mortgage Loans that has a
Revised Rate, the difference between (a) the applicable Revised Rate and (b)
the applicable Mortgage Rate.
Payment Priorities. As used below in describing the priorities of
distribution of Available Funds for each Distribution Date, the terms set
forth below will have the following meanings.
The "Interest Accrual Amount" with respect to any Distribution Date and
any Class of Certificates (other than the Class A-CS1, Class PS-1, Class V-1,
Class V-2, Class R and Class LR Certificates), is equal to interest for the
related Interest Accrual Period at the Pass-Through Rate for such Class on
the related Certificate Balance or Notional Balance, as applicable (provided,
that for interest accrual purposes any distributions in reduction of
Certificate Balance or reductions in Certificate Balance as a result of
allocations of Realized Losses on the Distribution Date occurring in an
Interest Accrual Period will be deemed to have been made on the first day of
such Interest Accrual Period). The "Interest Accrual Amount" with respect to
any Distribution Date and the Class A-CS1 Certificates is equal to interest
for the related Interest Accrual Period at the Pass-Through Rate for such
class for such Interest Accrual Period on the Notional Balance of such class
(provided, that any reductions in the Notional Balance of such class as a
result of distributions in reduction of the Certificate Balance of the Class
A-1A Certificates or allocations of Realized Losses to the Certificate
Balance of the Class A-1A Certificates on the Distribution Date occurring in
an Interest Accrual Period, will be deemed to have occurred on the first day
of such Interest Accrual Period). The "Interest Accrual Amount" with respect
to any Distribution Date and the Class PS-1 Certificates is equal to interest
for the related Interest Accrual Period at the Pass-Through Rate for such
class for such Interest Accrual Period on the Notional Balance of such class.
Calculations of interest (except in respect of the Interest Accrual Period
beginning in March 1997) due in respect of the Certificates will be made on
the basis of a 360-day year consisting of twelve 30-day months.
The "Interest Distribution Amount" with respect to any Distribution Date
and any Class of Certificates (other than the Class PS-1, Class V-1, Class
V-2, Class R and Class LR Certificates) is equal to the Interest Accrual
Amount thereof for such Distribution Date.
78
<PAGE>
The "Interest Distribution Amount" with respect to any Distribution Date
and the Class PS-1 Certificates is the Interest Accrual Amounts for such
Distribution Date minus the aggregate Reduction Interest Distribution Amounts
in respect of such Distribution Date.
The "Reduction Interest Distribution Amount" for the Class PS-1
Certificates with respect to any Distribution Date and each of clauses Third,
Seventh, Eleventh, Fifteenth, Nineteenth and Twenty-Third under "Distribution
of Available Funds" is the amount of interest accrued for the Interest
Accrual Period at the applicable Reduction Interest Pass-Through Rate for
such Interest Accrual Period on the aggregate amount of Appraisal Reduction
Amounts and Delinquency Reduction Amounts notionally allocated to the related
classes referred to in subclause (B) of each such clause as of such
Distribution Date, as described below under "--Delinquency Reduction Amounts
and Appraisal Reduction Amounts."
The "Reduction Interest Pass-Through Rate" (i) with respect to Appraisal
Reduction Amounts and Delinquency Reduction Amounts notionally allocated to
the Class B-6 Certificates, the Weighted Average Net Mortgage Pass-Through
Rate minus 7.525%, (ii) with respect to Appraisal Reduction Amounts and
Delinquency Reduction Amounts notionally allocated to the Class B-5
Certificates, the Weighted Average Net Mortgage Pass-Through Rate minus
7.525%, (iii) with respect to Appraisal Reduction Amounts and Delinquency
Reduction Amounts notionally allocated to the Class B-4 Certificates, the
Weighted Average Net Mortgage Pass-Through Rate minus 7.525%, (iv) with
respect to Appraisal Reduction Amounts and Delinquency Reduction Amounts
notionally allocated to the Class B-3 Certificates, the Weighted Average Net
Mortgage Pass-Through Rate minus 7.525%, (v) with respect to Appraisal
Reduction Amounts and Delinquency Reduction Amounts notionally allocated to
the Class B-2 Certificates, the Weighted Average Net Mortgage Pass-Through
Rate minus 7.525%, (vi) with respect to Appraisal Reduction Amounts and
Delinquency Reduction Amounts notionally allocated to the Class B-1
Certificates, the Weighted Average Net Mortgage Pass-Through Rate minus
7.525%, (vii) with respect to Appraisal Reduction Amounts and Delinquency
Reduction Amounts notionally allocated to the Class A-8 Certificates, 0.59%,
(viii) with respect to Appraisal Reduction Amounts and Delinquency Reduction
Amounts notionally allocated to the Class A-7 Certificates, 0.94%, (ix) with
respect to Appraisal Reduction Amounts and Delinquency Reduction Amounts
notionally allocated to the Class A-6 Certificates, 0.99%, (x) with respect
to Appraisal Reduction Amounts and Delinquency Reduction Amounts notionally
allocated to the Class A-5 Certificates, 1.08%, (xi) with respect to
Appraisal Reduction Amounts and Delinquency Reduction Amounts notionally
allocated to the Class A-4 Certificates, 1.13%, (xii) with respect to
Appraisal Reduction Amounts and Delinquency Reduction Amounts notionally
allocated to the Class A-3 Certificates, 1.16%, (xiii) with respect to
Appraisal Reduction Amounts and Delinquency Reduction Amounts notionally
allocated to the Class A-2 Certificates, 1.21%, and (xiv) with respect to
Appraisal Reduction Amounts and Delinquency Reduction Amounts notionally
allocated to the Class A-1E Certificates, the Weighted Average Net Mortgage
Pass-Through Rate minus 7.525%.
The "Reduction Interest Shortfalls" with respect to any Distribution Date
and each of the clauses Third, Seventh, Eleventh, Fifteenth, Nineteenth and
Twenty-Third under "Distribution of Available Funds" is any shortfall in the
Reduction Interest Distribution Amount required to be distributed to the
Class PS-1 Certificates pursuant to such clause on such Distribution Date.
The "Interest Accrual Period" with respect to any Distribution Date
commences on the eleventh day of the month preceding the month in which such
Distribution Date occurs and ends on the tenth day of the month in which such
Distribution Date occurs provided that the first Interest Accrual Period is
assumed to consist of 14 days. Except for the first Interest Accrual Period,
each Interest Accrual Period is assumed to consist of 30 days.
An "Interest Shortfall" with respect to any Distribution Date for any
Class of Subordinated Certificates is any shortfall in the amount of interest
required to be distributed on such Class on such Distribution Date.
The "Prepayment Interest Shortfall" with respect to any Distribution Date
is equal to the amount of any shortfall in collections of interest (adjusted
to the applicable Net Mortgage Pass-Through Rate plus the Trustee Fee)
resulting from a Principal Prepayment on such Mortgage Loan during the
related Collection Period and prior to the related Due Date. Such shortfall
may result because interest on a Principal Prepayment in full is paid by the
related borrower only to the date of prepayment.
"Delinquency Reduction Amount" is in connection with a Delinquency an
amount equal to the scheduled payment due on the related Due Date (adjusted
to the applicable Net Mortgage Pass-Through Rate with respect to the interest
portion) and not received from a borrower under any Mortgage Loan.
79
<PAGE>
"Delinquency" means any failure of the borrower to make a scheduled
payment on a Due Date.
The "Pass-Through Rate" for any Class of Certificates is the per annum
rate at which interest accrues on such Class during any Interest Accrual
Period.
The Pass-Through Rate on the Class B-1, Class B-2, Class B-3, Class B-4,
Class B-5 and Class B-6 Certificates is a per annum rate equal to 7.525%.
The Pass-Through Rate on the Class A-1A, Class A-1B, Class A-1C, Class
A-1D and Class A-1E Certificates is a per annum rate equal to 7.350%, 7.400%,
7.420%, 7.490% and 7.525%, respectively. The Pass-Through Rate on the Class
A-CS1 Certificates is a per annum rate equal to the Weighted Average Net
Mortgage Pass-Through Rate minus 7.350%. The Pass-Through Rate on the Class
PS-1 Certificates is a per annum rate equal to the Weighted Average Net
Mortgage Pass-Through Rate minus the Weighted Average Pass-Through Rate. The
Pass-Through Rate on the Class A-2 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 1.21%. The
Pass-Through Rate on the Class A-3 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 1.16%. The
Pass-Through Rate on the Class A-4 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 1.13%. The
Pass-Through Rate on the Class A-5 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 1.08%. The
Pass-Through Rate on the Class A-6 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 0.99%. The
Pass-Through Rate on the Class A-7 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 0.94%. The
Pass-Through Rate on the Class A-8 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus 0.59%.
The Pass-Through Rate on the Class B-7 and the Class B-7H Certificates is
a per annum rate equal to the Weighted Average Net Mortgage Pass-Through
Rate.
The "Weighted Average Pass-Through Rate" for purposes of calculating the
Pass-Through Rate on the Class PS-1 Certificates, with respect to any
Interest Accrual Period, is the amount (expressed as a percentage), the
numerator of which is the sum of (i) the sum of the products of (A) the
Pass-Through Rate with respect to each class of Certificates having a
Pass-Through Rate (other than the Coupon Strip Certificates) and (B) the
Certificate Balance of such class as of the first day of such Interest
Accrual Period and (ii) the product of (A) the Pass-Through Rate on the Class
A-CS1 Certificates and (B) the Notional Balance of such class as of such date
and the denominator of which is the sum of the Certificate Balances of each
class included in clause (i)(A) above as of such date (provided in each case,
any reductions in Certificate Balance or Notional Balance, as applicable, as
a result of distributions or allocations of Realized Losses to such Classes
or the related Class, respectively, occurring in an Interest Accrual Period
will be deemed to have been made on the first day of such Interest Accrual
Period).
The "Weighted Average Net Mortgage Pass-Through Rate" is the fraction
(expressed as a percentage) the numerator of which is the sum of the products
of (i) the Net Mortgage Pass-Through Rate and (ii) the Stated Principal
Balance of each Mortgage Loan and the denominator of which is the sum of the
Stated Principal Balances of each Mortgage Loan as of the Due Date occurring
in the month preceding the month in which such Distribution Date occurs.
The "Net Mortgage Pass-Through Rate" with respect to any Mortgage Loan and
any Distribution Date is the Mortgage Pass-Through Rate for such Mortgage
Loan for the related Interest Accrual Period minus the aggregate of the
applicable Servicing Fee Rate.
The "Mortgage Pass-Through Rate" with respect to the Mortgage Loans that
provide for calculations of interest based on twelve months of 30 days each,
is equal to the Mortgage Rate thereof.
The "Mortgage Pass-Through Rate" with respect to the Mortgage Loans (other
than the Mortgage Loans known as the Nassau Park II, Saracen, Burnham
Pacific, M&H, Lakeside and Ambassador loans) that provide for interest based
on a 360-day year and the actual number of days elapsed for any Interest
Accrual Period, is equal to the Mortgage Rate thereof multiplied by a
fraction the numerator of which is the actual number of days in such Interest
Accrual Period and the denominator of which is 30.
The "Mortgage Pass-Through Rate" with respect to the Mortgage Loan secured
by the Nassau Park II property, for any Interest Accrual Period, is equal to
(a) the Mortgage Rate thereof multiplied by a fraction the numerator of which
is the actual number of days in such Interest Accrual Period and the
denominator of which is 30 plus (b) 0.05%.
80
<PAGE>
The "Mortgage Pass-Through Rate" with respect to the Saracen, Burnham
Pacific, M&H, Lakeside and Ambassador loans for any Interest Accrual Period
commencing in any (a) January, February, April, June, September and November
and any December occurring in a year immediately preceding any year which is
not a leap year, is the Mortgage Rate thereof, or (b) March (other than March
1997), May, July, August and October and any December occurring in a year
immediately preceding a year which is a leap year, is equal to the Mortgage
Rate thereof multiplied by a fraction the numerator of which is the actual
number of days in such Interest Accrual Period and the denominator of which
is 30.
Notwithstanding the foregoing, the Mortgage Pass-Through Rate with respect
to each Mortgage Loan (other than the Mortgage Loan secured by the Nassau
Park II property) for the first Interest Accrual Period is the Mortgage Rate
thereof and the Mortgage Pass-Through Rate for the Mortgage Loan secured by
the Nassau Park II property for the first Interest Accrual Period is the
Mortgage Rate thereof plus (i) 0.05%.
The "Mortgage Rate" with respect to each Mortgage Loan and any Interest
Accrual Period is the annual rate, not including any Excess Rate, at which
interest accrues on such Mortgage Loan during such period (in the absence of
a default), as set forth in the related Note and on Annex A. The Mortgage
Rate for purposes of calculating the Weighted Average Net Mortgage
Pass-Through Rate will be the Mortgage Rate of such Mortgage Loan without
taking into account any reduction in the interest rate by a bankruptcy court
pursuant to a plan of reorganization or pursuant to any of its equitable
powers or a reduction on interest or principal due to a modification as
described under "The Pooling and Servicing Agreement -- Modifications".
The "Principal Distribution Amount" for any Distribution Date will be
equal to the sum of:
(i) the principal component of all scheduled Monthly Payments (other than
Balloon Payments) due on the Mortgage Loans on or before the related Due Date
(if received or advanced);
(ii) the principal component of all Assumed Scheduled Payments or Minimum
Defaulted Monthly Payments, as applicable, due on or before the related Due
Date (if received or advanced) with respect to any Mortgage Loan that is
delinquent in respect of its Balloon Payment;
(iii) the Stated Principal Balance of each Mortgage Loan that was, during
the related Collection Period, repurchased from the Trust Fund in connection
with the breach of a representation or warranty or purchased from the Trust
Fund as described herein under "The Pooling and Servicing Agreement --
Optional Termination";
(iv) the portion of Unscheduled Payments allocable to principal of any
Mortgage Loan which was liquidated during the related Collection Period;
(v) all Balloon Payments and, to the extent not included in the preceding
clauses, any other principal payment on any Mortgage Loan received on or
after the Maturity Date thereof, to the extent received during the related
Collection Period;
(vi) to the extent not included in the preceding clause (iii) or (iv), all
other Principal Prepayments received in the related Collection Period; and
(vii) to the extent not included in the preceding clauses, any other full
or partial recoveries in respect of principal, including net insurance
proceeds, net liquidation proceeds and Net REO Proceeds received in the
related Collection Period (in the case of clauses (i) through (vii) net of
any reimbursement for related outstanding P&I Advances allocable to principal
and excluding any amounts representing recoveries of Subordinate Class
Advance Amounts).
The "Assumed Scheduled Payment" with respect to any Mortgage Loan that is
delinquent in respect of its Balloon Payment (including any REO Mortgage Loan
as to which the Balloon Payment would have been past due) is an amount equal
to the sum of (a) the principal portion of the Monthly Payment that would
have been due on such Mortgage Loan on the related Due Date based on the
constant payment required by the related Note or the original amortization
schedule thereof (as calculated with interest at the related Mortgage Rate),
if applicable, assuming such Balloon Payment has not become due after giving
effect to any modification, and (b) interest at the applicable Net Mortgage
Pass-Through Rate.
An "REO Mortgage Loan" is any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property.
Distribution of Available Funds. On each Distribution Date, the Available
Funds for such Distribution Date will be distributed in the following amounts
and order of priority:
(i) First, to all Classes of Senior Certificates in an aggregate amount
equal to the sum of (a) the aggregate of the Interest Distribution Amounts
of all such Classes; (b) the aggregate of all Unpaid Interest Shortfalls
previously
81
<PAGE>
allocated to any Class of Senior Certificates and the Reduction Interest
Distribution Amounts of the Senior Certificates (other than the Class
A-1A, Class A-1B, Class A-1C, Class A-1D and Class A-CS1 Certificates) and
the unpaid Reduction Interest Shortfalls previously allocated to the
Senior Certificates (other than the Class A-1A, Class A-1B, Class A-1C,
Class A-1D and Class A-CS1 Certificates); (c) the Principal Distribution
Amount (which amount will be allocated to one or more Classes of Senior
Certificates until the Certificate Balances of all Classes thereof have
been reduced to zero); and (d) the amount of any unreimbursed Realized
Losses previously allocated to any Class of Senior Certificates;
(ii) Second, to the Class B-1 Certificates in respect of interest, up to
an amount equal to the aggregate Interest Distribution Amount of such
Class;
(iii) Third, pro rata, (A) to the Class B-1 Certificates in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class, (B) to the Class PS-1
Certificates in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate Balance of the
Class B-1 Certificates as described under "--Deliquency Reduction Amounts
and Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the aggregate unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under clause (B);
(iv) Fourth, to the Class B-1 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant
to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(v) Fifth, to the Class B-1 Certificates, to the extent not distributed
pursuant to all prior clauses, for the unreimbursed amounts of Realized
Losses, if any, an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such Class;
(vi) Sixth, to the Class B-2 Certificates in respect of interest, up to
an amount equal to the aggregate Interest Distribution Amount of such
Class;
(vii) Seventh, pro rata, (A) to the Class B-2 Certificates in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class, (B) to the Class PS-1
Certificates in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate Balance of the
Class B-2 Certificates as described under "--Deliquency Reduction Amounts
and Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the aggregate unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under clause (B);
(viii) Eighth, to the Class B-2 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant
to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(ix) Ninth, to the Class B-2 Certificates, to the extent not distributed
pursuant to all prior clauses, for the unreimbursed amounts of Realized
Losses, if any, an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such Class;
(x) Tenth, to the Class B-3 Certificates in respect of interest, up to an
amount equal to the aggregate Interest Distribution Amount of such Class;
(xi) Eleventh, pro rata, (A) to the Class B-3 Certificates in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class, (B) to the Class PS-1
Certificates in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate Balance of the
Class B-3 Certificates as described under "--Deliquency Reduction Amounts
and Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the aggregate unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under clause (B);
(xii) Twelfth, to the Class B-3 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant
to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
82
<PAGE>
(xiii) Thirteenth, to the Class B-3 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xiv) Fourteenth, to the Class B-4 Certificates in respect of interest,
up to an amount equal to the aggregate Interest Distribution Amount of
such Class;
(xv) Fifteenth, pro rata, (A) to the Class B-4 Certificates in respect of
interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class, (B) to the Class PS-1
Certificates in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate Balance of the
Class B-4 Certificates as described under "--Deliquency Reduction Amounts
and Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the aggregate unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under clause (B);
(xvi) Sixteenth, to the Class B-4 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant
to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xvii) Seventeenth, to the Class B-4 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xviii) Eighteenth, to the Class B-5 Certificates in respect of interest,
up to an amount equal to the aggregate Interest Distribution Amount of
such Class;
(xix) Nineteenth, pro rata, (A) to the Class B-5 Certificates in respect
of interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such Class, (B) to the Class PS-1
Certificates in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate Balance of the
Class B-5 Certificates as described under "--Deliquency Reduction Amounts
and Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the aggregate unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under clause (B);
(xx) Twentieth, to the Class B-5 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant
to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xxi) Twenty-first, to the Class B-5 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xxii) Twenty-second, to the Class B-6 Certificates in respect of
interest, up to an amount equal to the aggregate Interest Distribution
Amount of such Class;
(xxiii) Twenty-third, pro rata, (A) to the Class B-6 Certificates in
respect of interest, up to an amount equal to the aggregate unpaid
Interest Shortfalls previously allocated to such Class, (B) to the Class
PS-1 Certificates in respect of the Reduction Interest Distribution Amount
attributable to the notional reduction in the Certificate Balance of the
Class B-6 Certificates as described under "--Deliquency Reduction Amounts
and Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the
Class PS-1 Certificates, up to an amount equal to the aggregate unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under clause (B);
(xxiv) Twenty-fourth, to the Class B-6 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant
to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xxv) Twenty-fifth, to the Class B-6 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
83
<PAGE>
(xxvi) Twenty-sixth, pro rata, to the Class B-7 and Class B-7H
Certificates in respect of interest, up to an amount equal to the
aggregate Interest Distribution Amounts of such classes;
(xxvii) Twenty-seventh, pro rata, to the Class B-7 and Class B-7H
Certificates in respect of interest, up to an amount equal to the
aggregate unpaid Interest Shortfalls previously allocated to such classes;
(xxviii) Twenty-eighth, pro rata, based on Certificate Balance to the
Class B-7 and Class B-7H Certificates in reduction of the Certificate
Balances thereof, an amount equal to the Principal Distribution Amount
less amounts of the Principal Distribution Amount distributed pursuant to
all prior clauses, until the Certificate Balance of each such class is
reduced to zero;
(xxix) Twenty-ninth, pro rata, to the Class B-7 and Class B-7H
Certificates, to the extent not distributed pursuant to all prior clauses,
for the unreimbursed amounts of Realized Losses, if any, an amount equal
to the aggregate of such unreimbursed Realized Losses previously allocated
to such classes; and
(xxx) Thirtieth, to the Class R and Class LR Certificates.
All references to pro rata in the preceding clauses with respect to
interest and Interest Shortfalls mean pro rata based on the amount
distributable pursuant to such clauses, with respect to distribution of
principal other than for unreimbursed Realized Losses mean pro rata based on
Certificate Balance and with respect to distributions with respect to
unreimbrused Realized Losses mean pro rata based on the amount of
unreimbursed Realized Losses previously allocated to the applicable Classes.
Prepayment Premiums. On each Distribution Date, Prepayment Premiums with
respect to any Unscheduled Payments (including voluntary and involuntary
prepayments) received in the related Collection Period shall be distributed
to the holders of the Senior Certificates outstanding on such Distribution
Date as specified in the Pooling and Servicing Agreement, but will not be
applied to reduce the outstanding Certificate Balance of any such Class.
Prepayment Premiums will not be distributed to holders of the Subordinated
Certificates.
Default Interest and Excess Interest. On each Distribution Date, Net
Default Interest and Excess Interest received in the related Collection
Period with respect to a default on a Mortgage Loan will be distributed
solely to the Class V-1 and Class V-2 Certificates, respectively, to the
extent set forth in the Pooling and Servicing Agreement, and will not be
available for distribution to holders of the Subordinated Certificates. The
Class V-1 and Class V-2 Certificates are not entitled to any other
distributions of interest, principal or Prepayment Premiums.
The holders of 100% of the Percentage Interest of the Class LR
Certificates or the most subordinate Class of Certificates outstanding (other
than the Class B-7H Certificates) will have the limited right to purchase the
ARD Loans on their related Anticipated Repayment Dates under the
circumstances described under "The Pooling and Servicing Agreement--Optional
Termination" herein.
REALIZED LOSSES
The Certificate Balance of the Certificates will be reduced without
distribution on any Distribution Date as a write-off to the extent of any
Realized Loss allocated to the applicable Class of Certificates on the
related Distribution Date. As referred to herein, the "Realized Loss" with
respect to any Distribution Date shall mean the amount, if any, by which the
aggregate Certificate Balance of the Certificates after giving effect to
distributions made on such Distribution Date exceeds the aggregate Stated
Principal Balance of the Mortgage Loans as of the Due Date occurring in the
month in which such Distribution Date occurs. Except as described in the next
sentence, any such Realized Losses will be applied to the Classes of
Certificates in the following order, until the Certificate Balance of each is
reduced to zero: first, to the Junior Subordinated Certificates, second, to
the Class B-6 Certificates, third, to the Class B-5 Certificates, fourth, to
the Class B-4 Certificates, fifth, to the Class B-3 Certificates, sixth, to
the Class B-2 Certificates, seventh, to the Class B-1 Certificates and
finally, to certain Classes of the Senior Certificates in accordance with the
priorities set forth in the Pooling and Servicing Agreement. Any amounts
recovered in respect of any amounts previously written-off as Realized Losses
will be distributed to the Classes of Certificates in reverse order of
allocation of Realized Losses thereto. Shortfalls in Available Funds
resulting from Servicing Compensation (other than the Servicing Fee),
interest on Advances to the extent not covered by Default Interest,
extraordinary expenses of the Trust Fund (other than indemnification
expenses), a reduction on the interest rate of a Mortgage Loan by a
bankruptcy court pursuant to a plan of reorganization or pursuant to any of
its equitable powers, a reduction in interest rate or a forgiveness of
principal of a Mortgage Loan as described under "The Pooling and Servicing
Agreement -- Modifications," herein or otherwise, will be allocated in the
same manner as Realized
84
<PAGE>
Losses. Shortfalls in Available Funds resulting from (i) unanticipated
indemnification expenses of the Trust Fund required to be paid pursuant to
the Pooling and Servicing Agreement and (ii) Prepayment Interest Shortfalls
in excess of the sum of (x) the related Servicing Fee attributable to the
Mortgage Loan being prepaid (not including the portion of the Servicing fee
attributable to the Trustee) and (y) investment income on the related
Principal Prepayment for the period such amount is held in the Collection
Account during the related Interest Accrual Period, will be allocated to, and
be deemed distributed to, each Class of Certificates, pro rata, based upon
amounts distributable to each such Class and, in the case of indemnification
expenses, will be allocated, first, in respect of interest and, second, in
respect of principal. The Notional Balance of the Class A-CS1 Certificates
will be reduced to reflect reductions in the Certificate Balance of the Class
A-1A Certificates resulting from allocations of Realized Losses; the Notional
Balance of the Class PS-1 Certificates will be reduced to reflect reductions
in the Stated Principal Balances of the Mortgage Loans as a result of
write-offs in respect of final recovery determinations in respect of
liquidation of defaulted Mortgage Loans.
The "Stated Principal Balance" of any Mortgage Loan at any date of
determination will equal (a) the principal balance as of the Cut-off Date of
such Mortgage Loan, minus (b) the sum of (i) the principal portion of each
Monthly Payment, Minimum Defaulted Monthly Payment or Assumed Scheduled
Payment due on such Mortgage Loan after the Cut-off Date up to such date of
determination, (ii) all voluntary and involuntary principal prepayments and
other unscheduled collections of principal received with respect to such
Mortgage Loan, to the extent distributed to holders of the Certificates or
applied to other payments required under the Pooling and Servicing Agreement
before such date of determination and (iii) any principal forgiven by the
Special Servicer or Interest Shortfalls resulting from reductions or
deferrals of interest, each as described herein under "The Pooling and
Servicing Agreement -- Modifications." The Stated Principal Balance of a
Mortgage Loan with respect to which title to the related Mortgaged Property
has been acquired by the Trust Fund is equal to the principal balance thereof
outstanding on the date on which such title is acquired less any Net REO
Proceeds allocated to principal on such Mortgage Loan. The Stated Principal
Balance of a Specially Serviced Mortgage Loan with respect to which the
Servicer or Special Servicer has determined that it has received all payments
and recoveries which the Servicer or the Special Servicer, as applicable,
expects to be finally recoverable on such Mortgage Loan is zero.
PREPAYMENT INTEREST SHORTFALLS
The Servicer will deposit from its own funds any Prepayment Interest
Shortfalls into the Collection Account on the Servicer Remittance Date to the
extent such Prepayment Interest Shortfalls do not exceed the aggregate of the
related Servicing Fee attributable to the Mortgage Loan being prepaid due the
Servicer and the investment income accruing on the related Principal
Prepayment for the related Collection Period. Any Prepayment Interest
Shortfall in excess of the related Servicing Fee attributable to the Mortgage
Loan being prepaid and the investment income accruing on the related
Principal Prepayment due to the Servicer for such period will be allocated to
each Class of Certificates, pro rata, based on amounts distributable to each
such Class. Any interest that accrues on a prepayment of a Mortgage Loan
after the Due Date and before the following Servicer Remittance Date will be
paid to the Servicer.
DELINQUENCY REDUCTION AMOUNTS AND APPRAISAL REDUCTION AMOUNTS.
On or after any Distribution Date on which the Class B-6 Certificates are
the most subordinate class of Certificates outstanding, the Certificate
Balances of the certain Classes of the Senior Certificates and the Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates will be
notionally reduced (solely for purposes of determining the payment priority
of interest on the Class PS-1 Certificates in respect of Reduction Interest
Distribution Amounts) on any Distribution Date to the extent of any
Delinquency Reduction Amounts or Appraisal Reduction Amounts with respect to
such Distribution Date; provided that (i) if a Delinquency and an Appraisal
Reduction Event occur with respect to the same Distribution Date and the same
Mortgage Loan, the reduction will equal the Appraisal Reduction Amount, (ii)
following the occurrence of an Appraisal Reduction Event with respect to any
Mortgage Loan, no further Delinquency Reduction Amounts will be applied with
respect to such Mortgage Loan and any Delinquency Reduction Amounts
previously applied will be reversed and (iii) for any Distribution Date, the
aggregate of the Appraisal Reduction Amounts and Delinquency Reduction
Amounts may not exceed the Certificate Balance (as adjusted by any notional
reductions) of the most subordinate class of Certificates outstanding among
certain Classes of the Senior Certificates and the Class B-1, Class B-2,
Class B-3, Class B-4, Class B-5 and Class B-6 Certificates (and to the extent
the aggregate of the Appraisal Reduction Amounts and Delinquence Reduction
Amounts exceeds such Certificate Balance, such excess will be applied subject
to any reversal described below, to notionally reduce the next most
subordinate Class of Certificates on the next
85
<PAGE>
Distribution Date). Any such reductions will be applied notionally, first, to
the Class B-6 Certificates, second, to the Class B-5 Certificates, third, to
the Class B-4 Certificates, fourth, to the Class B-3 Certificates, fifth, to
the Class B-2 Certificates, sixth, to the Class B-1 Certificates, and
finally, to the Classes of Senior Certificates (provided in each case that no
Certificate Balance in respect of any such class may be notionally reduced
below zero). Any notional reduction of the Certificate Balance of such
Certificates as a result of any Delinquency or Appraisal Reduction Event will
be reversed to the extent there is a recovery of any or all of the
Delinquency Amounts or a Realized Loss. Additionally, a reversal or
additional reduction will occur to the extent that the Servicer's Appraisal
Estimate is less than or greater than the Appraisal Reduction as adjusted to
take into account a subsequent independent MAI appraisal. For purposes of
calculating Interest Accrual Amounts, any such reduction or reversal or
additional reductions made on the Distribution Date occurring in an Interest
Accrual Period will be deemed to have been made on the first day of such
Interest Accrual Period. See "Description of the Offered Certificates --
Distribution --Priorities" herein.
APPRAISAL REDUCTIONS
With respect to the Distribution Date following the earliest of (i) the
third anniversary of the date on which an extension of the maturity date of a
Mortgage Loan becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer, which extension does not change the
amount of Monthly Payments on the Mortgage Loan (unless during such extension
period the borrower has been delinquent for 60 days or more, in which case,
the first Distribution Date following such 60 day delinquency), (ii) 90 days
after an uncured delinquency occurs in respect of a Mortgage Loan, (iii)
immediately after the date on which a reduction in the amount of Monthly
Payments on a Mortgage Loan, or a change in any other material economic term
of the Mortgage Loan, becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer, (iv) immediately after a receiver has
been appointed, (v) immediately after a borrower declares bankruptcy, (vi)
immediately after a Mortgage Loan becomes an REO Mortgage Loan, (vii) upon a
default in the payment of a Balloon Payment, (viii) immediately after an
occurrence of an event for which a Property Advance would be required to be
made by the Servicer or (ix) any other event which, in the discretion of the
Servicer and of which the Servicer becomes aware in performing its
obligations in accordance with the Servicing Standard would materially and
adversely impair the value of the Mortgaged Property and security for the
related Mortgage Loan (any of (i), (ii), (iii), (iv), (v), (vi), (vii),
(viii) and (ix), an "Appraisal Reduction Event"), an Appraisal Reduction
Amount will be calculated. The "Appraisal Reduction Amount" for any
Distribution Date and for any Mortgage Loan as to which any Appraisal
Reduction Event has occurred will be an amount equal to the excess of (a) the
outstanding Stated Principal Balance of such Mortgage Loan over (b) the
excess of (i) 90% of the sum of the appraised values of the related Mortgaged
Properties as determined by independent MAI appraisals (the costs of which
shall be paid by the Servicer as an Advance) over (ii) the sum of (A) to the
extent not previously advanced by the Servicer, the Trustee or the Fiscal
Agent, all unpaid interest on such Mortgage Loan at a per annum rate equal to
the Mortgage Rate, (B) all unreimbursed Advances and interest thereon at the
Advance Rate in respect of such Mortgage Loan and (C) all currently due and
unpaid real estate taxes, ground rents and assessments and insurance premiums
and all other amounts due and unpaid under the Mortgage Loan (which tax,
premiums and other amounts have not been the subject of an Advance by the
Servicer). If no independent MAI appraisal has been obtained within twelve
months prior to the first Distribution Date on or after an Appraisal
Reduction Event has occurred, the Servicer will be required to estimate the
value of the related Mortgaged Properties (the "Servicer's Appraisal
Estimate") and such estimate will be used for purposes of the Appraisal
Reduction Amount. Within 30 days after the Appraisal Reduction Event, the
Servicer will be required to obtain an independent MAI appraisal. On the
first Distribution Date occurring on or after the delivery of such
independent MAI appraisal, the Servicer will be required to adjust the
Appraisal Reduction Amount to take into account such appraisal (regardless of
whether the independent MAI appraisal is higher or lower than the Servicer's
Appraisal Estimate). Appraisal Reduction Amounts will be recalculated
annually based on Updated Appraisals.
DELIVERY, FORM AND DENOMINATION
The Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6
Certificates will be issued, maintained and transferred in book-entry form
only, in denominations of $100,000 initial Certificate Balances and in
multiples of $1 in excess thereof.
The Subordinated Certificates will initially be represented by one or more
global Certificates for each such Class registered in the name of the nominee
of DTC. The Depositor has been informed by DTC that DTC's nominee will be
Cede & Co. No holder of a Subordinated Certificate will be entitled to
receive a Definitive Certificate representing its
86
<PAGE>
interest in such Class, except under the limited circumstances described
under "--Definitive Certificates." Unless and until Definitive Certificates
are issued, all references to actions by holders of the Subordinated
Certificates will refer to actions taken by DTC upon instructions received
from holders of Subordinated Certificates through its participating
organizations (together with CEDEL and Euroclear participating organizations,
the "Participants", and all references herein to payments, notices, reports,
statements and other information to holders of Subordinated Certificates will
refer to payments, notices, reports and statements to DTC or Cede & Co., as
the registered holder of the Subordinated Certificates, for distribution to
holders of Subordinated Certificates through its Participants in accordance
with DTC procedures; provided, however, that to the extent that the party
responsible for distributing any report, statement or other information has
been provided with the name of the beneficial owner of a Certificate (or the
prospective transferee of such beneficial owner), such report, statement or
other information will be provided to such beneficial owner (or prospective
transferee).
Until Definitive Certificates are issued in respect of the Subordinated
Certificates, interests in the Subordinated Certificates will be transferred
on the book-entry records of DTC and its Participants. The Trustee will
initially serve as certificate registrar (in such capacity, the "Certificate
Registrar") for purposes of recording and otherwise providing for the
registration of the Subordinated Certificates.
A "Certificateholder" under the Pooling and Servicing Agreement will be
the person in whose name a Certificate is registered in the certificate
register maintained pursuant to the Pooling and Servicing Agreement, except
that solely for the purpose of giving any consent or taking any action
pursuant to the Pooling and Servicing Agreement, any Certificate registered
in the name of the Depositor, the Servicer, the Special Servicer, the
Trustee, a manager of a Mortgaged Property, a Mortgagor or any person
affiliated with the Depositor, the Servicer, the Special Servicer, the
Trustee, such manager or a Mortgagor will be deemed not to be outstanding and
the Voting Rights to which it is entitled will not be taken into account in
determining whether the requisite percentage of Voting Rights necessary to
effect any such consent or take any such action has been obtained; provided,
however, that for purposes of obtaining the consent of Certificateholders to
an amendment to the Pooling and Servicing Agreement, any Certificates
beneficially owned by the Servicer or Special Servicer or an affiliate will
be deemed to be outstanding, provided that such amendment does not relate to
compensation of the Servicer or Special Servicer or otherwise benefit the
Servicer or the Special Servicer in any material respect; and, provided,
further, that for purposes of obtaining the consent of Certificateholders to
any action proposed to be taken by the Special Servicer with respect to a
Specially Serviced Mortgage Loan, any Certificates beneficially owned by the
Servicer or an affiliate will be deemed to be outstanding, provided that, the
Special Servicer is not the Servicer. Notwithstanding the foregoing, solely
for purposes of providing or distributing any reports, statements or other
information pursuant to the Pooling and Servicing Agreement, a
Certificateholder will include any beneficial owner (or prospective
transferee of a beneficial owner) to the extent that the party required or
permitted to provide or distribute such report, statement or other
information has been provided with the name of such beneficial owner (or
prospective transferee). The Percentage Interest of any Class of Subordinated
Certificate will be equal to the percentage obtained by dividing the
denomination of such Certificate by the aggregate initial Certificate Balance
of such Class of Certificates. See "--Book-Entry Registration" and
"--Definitive Certificates" herein.
BOOK-ENTRY REGISTRATION
Holders of Subordinated Certificates may hold their Certificates through
DTC (in the United States) or CEDEL or Euroclear (in Europe) if they are
Participants of such system, or indirectly through organizations that are
participants in such systems. CEDEL and Euroclear will hold omnibus positions
on behalf of the CEDEL Participants and the Euroclear Participants,
respectively, through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of
DTC. DTC is a limited purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities for its Participants and
to facilitate the clearance and settlement of securities transactions between
Participants through electronic computerized book-entries, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
87
<PAGE>
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between CEDEL Participants and Euroclear Participants will
occur in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through CEDEL Participants or
Euroclear Participants, on the other, will be effected in DTC in accordance
with DTC rules on behalf of the relevant European international clearing
system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time).
The relevant European international clearing system will, if the transaction
meets its settlement requirements, deliver instructions to its Depositary to
take action to effect final settlement on its behalf by delivering or
receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. CEDEL
Participants and Euroclear Participants may not deliver instructions directly
to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business
day following the DTC settlement date, and such credits or any transactions
in such securities settled during such processing will be reported to the
relevant CEDEL Participant or Euroclear Participant on such business day.
Cash received in CEDEL or Euroclear as a result of sales of securities by or
through a CEDEL Participant or a Euroclear Participant to a DTC Participant
will be received with value on the DTC settlement date but will be available
in the relevant CEDEL or Euroclear cash account only as of the business day
following settlement in DTC. For additional information regarding clearance
and settlement procedures for the Subordinated Certificates and for
information with respect to tax documentation procedures relating to the
Subordinated Certificates, see Annex B hereto.
The holders of Subordinated Certificates that are not Participants or
Indirect Participants but desire to purchase, sell or otherwise transfer
ownership of, or other interests in, Subordinated Certificates may do so only
through Participants and Indirect Participants. In addition, holders of
Subordinated Certificates will receive all distributions of principal and
interest from the Trustee through the Participants who in turn will receive
them from DTC. Similarly, reports distributed to Certificateholders pursuant
to the Pooling and Servicing Agreement and requests for the consent of
Certificateholders will be delivered to beneficial owners only through DTC,
Euroclear, CEDEL and their respective participants. Under a book-entry
format, holders of Subordinated Certificates may experience some delay in
their receipt of payments, reports and notices, since such payments, reports
and notices will be forwarded by the Trustee to Cede & Co., as nominee for
DTC. DTC will forward such payments, reports and notices to its Participants,
which thereafter will forward them to Indirect Participants, CEDEL, Euroclear
or holders of Subordinated Certificates, as applicable.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Subordinated Certificates among Participants on whose behalf it acts with
respect to the Subordinated Certificates and to receive and transmit
distributions of principal of, and interest on, the Subordinated
Certificates. Participants and Indirect Participants with which the holders
of Subordinated Certificates have accounts with respect to the Subordinated
Certificates similarly are required to make book-entry transfers and receive
and transmit such payments on behalf of their respective holders of
Subordinated Certificates. Accordingly, although the holders of Subordinated
Certificates will not possess the Subordinated Certificates, the Rules
provide a mechanism by which Participants will receive payments on
Subordinated Certificates and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder of
Subordinated Certificates to pledge such Certificates to persons or entities
that do not participate in the DTC system, or to otherwise act with respect
to such Certificates, may be limited due to the lack of a physical
certificate for such Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of a Subordinated Certificate under the Pooling and
Servicing Agreement only at the direction of one or more Participants to
whose accounts with DTC the Subordinated Certificates are credited. DTC may
take conflicting actions with respect to other undivided interests to the
extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
Except as required by law, neither the Depositor, the Servicer, the Fiscal
Agent nor the Trustee will have any liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests
in the Subordinated Certificates held by Cede & Co., as nominee for DTC, or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
88
<PAGE>
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations
("CEDEL Participants") and facilitates the clearance and settlement of
securities transactions between CEDEL Participants through electronic
book-entry changes in accounts of CEDEL Participants, thereby eliminating the
need for physical movement of certificates. Transactions may be settled in
CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. CEDEL interfaces with
domestic markets in several countries. As a professional depository, CEDEL is
subject to regulation by the Luxembourg Monetary Institute. CEDEL
Participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the Underwriter. Indirect access to CEDEL is also available to
others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a CEDEL Participant, either
directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear system ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of
27 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 generally similar to
the arrangements for cross-market transfers with DTC described above.
Euroclear is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator"), under contract with Euroclear
Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear system on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial
intermediaries and may include the Underwriter. Indirect access to the
Euroclear system is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which 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.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within the Euroclear
system, withdrawal of securities and cash from the Euroclear system, and
receipts of payments with respect to securities in the Euroclear system. All
securities in the Euroclear system are held on a fungible basis without
attribution of specific certificates to specific securities clearance
accounts. The Euroclear Operator acts under the Terms and Conditions only on
behalf of Euroclear Participants and has no record of or relationship with
persons holding through Euroclear Participants.
The information herein concerning DTC, CEDEL and Euroclear and their
book-entry systems has been obtained from sources believed to be reliable,
but the Depositor takes no responsibility for the accuracy or completeness
thereof.
DEFINITIVE CERTIFICATES
Subordinated Certificates issued in fully registered, certificated form
("Definitive Certificates" will be delivered to Certificate Owners (or their
nominees) only if (i) DTC is no longer willing or able to properly discharge
its responsibilities as depository with respect to the Book-Entry
Certificates, and the Trustee is unable to locate a qualified successor, (ii)
the Depositor or the Trustee, at its sole option, elects to terminate the
book-entry system through DTC with respect to some or all of any Class or
Classes of Certificates, or (iii) after the occurrence of an Event of Default
under the Pooling and Servicing Agreement, Certificate Owners representing a
majority in principal amount of the Book-Entry Certificates then outstanding
advise DTC through DTC Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the
best interest of Certificate Owners.
Upon the occurrence of any of the events described in clauses (i) through
(iii) in the immediately preceding paragraph, the Trustee is required to
notify all affected Certificateholders (through DTC and related DTC
Participants)
89
<PAGE>
of the availability through DTC of Definitive Certificates. Upon delivery of
Definitive Certificates, the Trustee, Certificate Registrar, and Servicer
will recognize the holders of such Definitive Certificates as holders under
the Pooling and Servicing Agreement ("Holders"). Distributions of principal
and interest on the Definitive Certificates will be made by the Trustee
directly to Holders of Definitive Certificates in accordance with the
procedures set forth herein and in the Pooling and Servicing Agreement.
Upon the occurrence of any of the events described in clauses (i) through
(iii) of the second preceding paragraph, requests for transfer of Definitive
Certificates will be required to be submitted directly to the Certificate
Registrar in a form acceptable to the Certificate Registrar (such as the
forms which will appear on the back of the certificate representing a
Definitive Certificate), signed by the Holder or such Holder's legal
representative and accompanied by the Definitive Certificate or Certificates
for which transfer is being requested. The Trustee will be appointed as the
initial Certificate Registrar.
TRANSFER RESTRICTIONS
In the event that holders of the Subordinated Certificates become entitled
to receive Definitive Certificates under the circumstances described under
"--Definitive Certificates", each prospective transferee of a Subordinated
Certificate that is a Definitive Certificate will be required to (a) deliver
to the Depositor, the Certificate Registrar and the Trustee a representation
letter substantially in the form set forth as an exhibit to the Pooling and
Servicing Agreement stating that such transferee is not a Plan or a person
acting on behalf of or investing the assets of a Plan, other than an
insurance company investing the assets of its general account under
circumstances whereby the purchase and subsequent holding of the Subordinated
Certificate would be exempt from the prohibited transaction restrictions of
ERISA and the Code under Sections I and III of PTE 95-60, or (b) provide an
opinion of counsel and such other documentation as described under "ERISA
Considerations" herein. The purchaser or transferee of any interest in a
Subordinated Certificate that is not a Definitive Certificate shall be deemed
to represent that it is not a person described in clause (a) above.
The Subordinated Certificates will contain a legend describing such
restrictions on transfer and the Pooling and Servicing Agreement will provide
that any attempted or purported transfer in violation of these transfer
restrictions will be null and void.
90
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
MORTGAGOR DEFAULTS
Effect on Subordinated Certificates. The aggregate amount of
distributions on the Subordinated Certificates offered hereby, the yield to
maturity of such Subordinated Certificates, the rate of principal payments on
such Subordinated Certificates and the weighted average life of such
Subordinated Certificates will be affected by the rate and the timing of
delinquencies and defaults on the Mortgage Loans. If a purchaser of a
Subordinated Certificate of any Class calculates its anticipated yield based
on an assumed rate of default and amount of losses on the Mortgage Loans that
is lower than the default rate and amount of losses actually experienced and
such additional losses are allocable to such Class of Certificates, such
purchaser's actual yield to maturity will be lower than that so calculated
and could be negative. The timing of any loss on a liquidated Mortgage Loan
will also affect the actual yield to maturity of the Subordinated
Certificates to which a portion of such loss is allocable, even if the rate
of defaults and severity of losses are consistent with an investor's
expectations. In general, the earlier a loss borne by an investor occurs, the
greater is the effect on such investor's yield to maturity.
The yield to investors in the Subordinated 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. MOREOVER, BECAUSE THE SUBORDINATE CERTIFICATES AND
THE JUNIOR SUBORDINATE CERTIFICATES ARE SUBORDINATED TO THE SENIOR
CERTIFICATES, REALIZED LOSSES WILL BE ALLOCATED, FIRST, TO THE CLASS B-7 AND
CLASS B-7H CERTIFICATES, PRO RATA, UNTIL THEIR CERTIFICATE BALANCES ARE
REDUCED TO ZERO, SECOND, TO THE CLASS B-6 CERTIFICATES, UNTIL THEIR
CERTIFICATE BALANCE IS REDUCED TO ZERO, THIRD, TO THE CLASS B-5 CERTIFICATES,
UNTIL THEIR CERTIFICATE BALANCE IS REDUCED TO ZERO, FOURTH, TO THE CLASS B-4
CERTIFICATES, UNTIL THEIR CERTIFICATE BALANCE IS REDUCED TO ZERO, FIFTH, TO
THE CLASS B-3 CERTIFICATES, UNTIL THEIR CERTIFICATE BALANCE IS REDUCED TO
ZERO, SIXTH, TO THE CLASS B-2 CERTIFICATES, UNTIL THEIR CERTIFICATE BALANCE
IS REDUCED TO ZERO, SEVENTH, TO THE CLASS B-1 CERTIFICATES, UNTIL THEIR
CERTIFICATE BALANCE IS REDUCED TO ZERO, AND EIGHTH, TO THE SENIOR
CERTIFICATES IN THE ORDER SET FORTH IN THE POOLING AND SERVICING AGREEMENT.
AS A RESULT, LOSSES ON THE MORTGAGE LOANS COULD RESULT IN A SIGNIFICANT LOSS,
OR IN SOME CASES A COMPLETE LOSS, OF AN INVESTOR'S INVESTMENT IN THE
SUBORDINATE CERTIFICATES. CONSEQUENTLY, PROSPECTIVE INVESTORS SHOULD PERFORM
THEIR OWN ANALYSIS OF THE EXPECTED TIMING AND SEVERITY OF REALIZED LOSSES
PRIOR TO INVESTING IN THE SUBORDINATE CERTIFICATES.
As and to the extent described herein, the Servicer and Special Servicer,
as applicable, will be entitled to receive (a) interest on unreimbursed
Advances and unreimbursed servicing expenses that (i) are recovered out of
amounts received on the Mortgage Loan as to which such Advances were made or
such servicing expenses were incurred, which amounts are in the form of late
payments, liquidation proceeds, insurance proceeds, condemnation proceeds or
amounts paid in connection with the purchase of such Mortgage Loan out of the
Trust Fund or (ii) are determined to be nonrecoverable Advances and (b)
special servicing compensation for Specially Serviced Loans and REO Mortgage
Loans. The Servicer's or Special Servicer's right to receive such payments of
interest or additional compensation are prior to the rights of
Certificateholders to receive distributions on the Certificates and,
consequently, may result in losses being allocated to the Subordinated
Certificates that would not otherwise have resulted absent the accrual of
such interest or such additional compensation.
Regardless of whether losses ultimately result, delinquencies and defaults
on the Mortgage Loans may significantly delay the receipt of payments by the
holder of a Subordinated Certificate, to the extent that Advances or another
Class of Certificates does not fully offset the effects of any such
delinquency or default. INVESTORS IN THE SUBORDINATED CERTIFICATES SHOULD
CONSIDER THE RISK THAT LOSSES ON THE MORTGAGE LOANS COULD RESULT IN THE
FAILURE OF SUCH INVESTORS TO FULLY RECOVER THEIR INITIAL INVESTMENTS. NO
REPRESENTATION IS MADE AS TO THE FREQUENCY OF DELINQUENCIES, DEFAULTS AND/OR
LIQUIDATIONS THAT MAY OCCUR WITH RESPECT TO THE MORTGAGE LOANS, OR THE
MAGNITUDE OF ANY LOSSES THAT MAY OCCUR WITH RESPECT TO THE MORTGAGE LOANS OR
THE LIKELIHOOD OR MAGNITUDE OF ANY EXTRAORDINARY EXPENSES THAT MAY BE
INCURRED WITH RESPECT TO THE TRUST FUND.
91
<PAGE>
YIELD TABLES
The following Yield Tables assume that: (i) there is no prepayment prior
to the earlier of the Anticipated Repayment date or the Maturity Date (the
Mortgage Loans generally provide that prepayments are prohibited until the
Maturity Date or Anticipated Repayment Date (or in the case of certain
Mortgage loans, three or six months prior to the Anticipated Repayment Date
or Maturity Date), and prior to such dates a Mortgaged Property can be
released only upon defeasance through the substitution of U.S. Treasury
obligations), (ii) all ARD Loans are repaid on their Anticipated Repayment
Date, (iii) no defaults occur during the 3 year period commencing on the
Cut-off Date with respect to any Mortgage Loans, (iv) defaults are calculated
in cumulative percentages specified of the Cut-off Date Principal Balance,
giving effect to (a) scheduled principal payments, including balloon
payments, previously received and (b) elimination of the cumulative principal
balance assumed to have previously defaulted, (v) losses on defaulted
Mortgage Loans are recognized and applied to the Certificates immediately,
(vi) the assumed loss percentages are the net loss (including lost interest,
(if any), loss of principal and reimbursement of certain expenses) and (vii)
yields are calculated as monthly discount rates equating the loss-adjusted
stream of cash flows in each scenario to the assumed Certificate purchase
prices and converting such monthly discount rates to corporate bond
equivalent yields.
The information provided below is subject to the following qualifications
and, therefore, actual yields on the Subordinated Certificates and the
performance of the Mortgage Pool as a whole may vary based on the performance
of the Mortgage Loans: (i) defaults and losses will occur based on individual
Mortgage Loans, not as fixed percentages of the Mortgage Pool balance; (ii)
certain individual loans and groups of loans with related borrowers exceed
the maximum percentage of the Mortgage Pool assumed to default in any year;
(iii) defaults and loss levels will depend upon the specific property type
and geographical and borrower concentrations in the Mortgage Pool and may not
relate to the historical experience of the Mortgage Loan Seller or other
industry participants with other mortgage loans; (iv) failure of ARD Loans to
prepay in full on the Anticipated Repayment Date may increase the average
life and duration of the Certificates, lowering yields to maturity on any
Certificates purchased at a discount and lengthening the period of time
during which such Certificates are exposed to potential losses; and (v)
delays between the timing of Mortgage Loan defaults and recognition of losses
on the related Mortgage Loans may result in the incurrence of additional
expenses (including reimbursement of Advances together with interest thereon,
Servicing Fees and Special Servicing Fees, Principal Recovery Fees and
servicing and loan workout expenses) which, like interest and principal
distributions on the Senior Certificates, must be paid prior to payments of
principal on the Subordinated Certificates. While the indicated loss
percentages employed in these tables are assumed to include such additional
expenses, protracted delays in the Mortgage Loan workout process could
increase such additional expenses considerably. Many of the additional
expenses represent fees or reimbursement of expenses to the Special Servicer,
who may be an affiliate of the holder of the Junior Subordinated
Certificates. See "Risk Factors -- Servicer or Special Servicer May Purchase
Certificates; Conflict of Interest". Investors should continue to monitor the
performance of the Mortgage Loans and update the assumptions they apply to
evaluate their investment in the Subordinated Certificates.
92
<PAGE>
WEIGHTED AVERAGE LIFE, FIRST AND LAST PRINCIPAL PAYMENT
DATE, YIELD AND MODIFIED DURATION OF
CLASS B-1 CERTIFICATES
AT VARIOUS ASSUMED PRICES AND MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO
-----------------------------------------------------
1 2 3 4 5
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage(a).......... 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a)($mm) ...... $0 $10.5 $21.1 $42.1 $63.2
As a percentage of Initial Pool Balance . 0% .75% 1.5% 3.0% 4.5%
Applied to Class B-1 Certificates ($mm) . $0 $ 0 $ 0 $ 0 $ 0
As a percentage of Class B-1
Certificates............................. 0% 0% 0% 0% 0%
-----------------------------------------------------------------------------------------------------------------
Weighted average life (years) 14.89 14.90 14.91 14.92 14.95
First principal payment date 2/14/12 2/14/12 3/14/12 3/14/12 3/14/12
Last principal payment date 3/14/12 3/14/12 3/14/12 4/14/12 4/14/12
Price (%) 85.46875........................ 9.51 9.51 9.51 9.51 9.50 Yield to Maturity
8.09 8.10 8.10 8.10 8.11 Modified Duration
Price (%) 87.46875........................ 9.22 9.22 9.22 9.22 9.22 Yield to Maturity
8.18 8.18 8.18 8.19 8.20 Modified Duration
Price (%) 89.46875........................ 8.95 8.95 8.95 8.95 8.95 Yield to Maturity
8.26 8.27 8.27 8.27 8.28 Modified Duration
Price (%) 91.46875........................ 8.68 8.68 8.68 8.68 8.68 Yield to Maturity
8.34 8.35 8.35 8.35 8.36 Modified Duration
Price (%) 93.46875........................ 8.43 8.43 8.43 8.43 8.42 Yield to Maturity
8.42 8.43 8.43 8.43 8.44 Modified Duration
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
93
<PAGE>
WEIGHTED AVERAGE LIFE, FIRST AND LAST PRINCIPAL PAYMENT
DATE, YIELD AND MODIFIED DURATION OF
CLASS B-2 CERTIFICATES
AT VARIOUS ASSUMED PRICES AND MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO
-----------------------------------------------------
1 2 3 4 5
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage(a).......... 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a)($mm) ...... $0 $10.5 $21.1 $42.1 $63.2
As a percentage of Initial Pool Balance . 0% .75% 1.5% 3.0% 4.5%
Applied to Class B-2 Certificates ($mm) . $0 $ 0 $ 0 $ 0 $ 0
As a percentage of Class B-2
Certificates............................. 0% 0% 0% 0% 0%
-----------------------------------------------------------------------------------------------------------------
Weighted average life (years) 14.94 14.96 14.97 15.26 16.26
First principal payment date 3/14/12 3/14/12 3/14/12 4/14/12 4/14/12
Last principal payment date 4/14/12 4/14/12 4/14/12 3/14/13 2/14/17
Price (%) 83.25........................... 9.83 9.83 9.83 9.81 9.75 Yield to Maturity
8.01 8.01 8.01 8.09 8.31 Modified Duration
Price (%) 85.25........................... 9.54 9.54 9.54 9.52 9.46 Yield to Maturity
8.10 8.10 8.10 8.18 8.41 Modified Duration
Price (%) 87.25........................... 9.25 9.25 9.25 9.24 9.19 Yield to Maturity
8.18 8.19 8.19 8.27 8.50 Modified Duration
Price (%) 89.25........................... 8.98 8.98 8.98 8.96 8.92 Yield to Maturity
8.27 8.27 8.28 8.35 8.60 Modified Duration
Price (%) 91.25........................... 8.71 8.71 8.71 8.70 8.67 Yield to Maturity
8.35 8.35 8.36 8.44 8.69 Modified Duration
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
94
<PAGE>
WEIGHTED AVERAGE LIFE, FIRST AND LAST PRINCIPAL PAYMENT
DATE, YIELD AND MODIFIED DURATION OF
CLASS B-3 CERTIFICATES
AT VARIOUS ASSUMED PRICES AND MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO
-------------------------------------------------------
1 2 3 4 5
--------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage(a).......... 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a)($mm) ...... $0 $10.5 $21.1 $42.1 $63.2
As a percentage of Initial Pool Balance . 0% .75% 1.5% 3.0% 4.5%
Applied to Class B-3 Certificates ($mm) . $0 $ 0 $ 0 $ 0 $ 0
As a percentage of Class B-3
Certificates............................. 0% 0% 0% 0% 0%
-----------------------------------------------------------------------------------------------------------------
Weighted average life (years) 14.99 15.07 15.56 16.55 19.99
First principal payment date 4/14/12 4/14/12 4/14/12 3/14/13 2/14/17
Last principal payment date 4/14/12 11/14/12 3/14/13 10/14/15 4/14/17
Price (%) 80.09375........................ 10.31 10.31 10.27 10.19 9.99 Yield to Maturity
7.87 7.89 8.00 8.22 8.84 Modified Duration
Price (%) 82.09375........................ 10.00 10.00 9.96 9.89 9.72 Yield to Maturity
7.97 7.99 8.10 8.32 8.98 Modified Duration
Price (%) 84.09375........................ 9.70 9.70 9.67 9.61 9.45 Yield to Maturity
8.06 8.08 8.20 8.43 9.10 Modified Duration
Price (%) 86.09375........................ 9.41 9.41 9.38 9.33 9.19 Yield to Maturity
8.15 8.17 8.29 8.53 9.23 Modified Duration
Price (%) 88.09375........................ 9.13 9.13 9.11 9.06 8.95 Yield to Maturity
8.23 8.25 8.38 8.62 9.35 Modified Duration
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
95
<PAGE>
WEIGHTED AVERAGE LIFE, FIRST AND LAST PRINCIPAL PAYMENT
DATE, YIELD AND MODIFIED DURATION OF
CLASS B-4 CERTIFICATES
AT VARIOUS ASSUMED PRICES AND MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO
--------------------------------------------------------
1 2 3 4 5
--------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage(a).......... 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a)($mm) ...... $0 $10.5 $21.1 $42.1 $63.2
As a percentage of Initial Pool Balance . 0% .75% 1.5% 3.0% 4.5%
Applied to Class B-4 Certificates ($mm) . $0 $ 0 $ 0 $ 0 $14.0
As a percentage of Class B-4
Certificates............................. 0% 0% 0% 0% 66.7%
-----------------------------------------------------------------------------------------------------------------
Weighted average life (years) 15.61 15.93 16.88 19.84 19.99
First principal payment date 4/14/12 11/14/12 3/14/13 10/14/15 4/14/17
Last principal payment date 3/14/13 12/14/13 11/14/16 4/14/17 4/14/17
Price (%) 63.65625........................ 13.31 13.25 13.13 12.80 9.36 Yield to Maturity
7.06 7.11 7.23 7.58 6.65 Modified Duration
Price (%) 65.65625........................ 12.87 12.82 12.71 12.40 8.91 Yield to Maturity
7.19 7.25 7.38 7.75 6.81 Modified Duration
Price (%) 67.65625........................ 12.46 12.41 12.31 12.02 8.47 Yield to Maturity
7.32 7.38 7.51 7.91 6.96 Modified Duration
Price (%) 69.65625........................ 12.07 12.02 11.92 11.65 8.06 Yield to Maturity
7.44 7.50 7.65 8.07 7.11 Modified Duration
Price (%) 71.65625........................ 11.69 11.65 11.56 11.30 7.66 Yield to Maturity
7.56 7.63 7.78 8.22 7.26 Modified Duration
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
96
<PAGE>
WEIGHTED AVERAGE LIFE, FIRST AND LAST PRINCIPAL PAYMENT
DATE, YIELD AND MODIFIED DURATION OF
CLASS B-5 CERTIFICATES
AT VARIOUS ASSUMED PRICES AND MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO
-------------------------------------------------------
1 2 3 4 5
---------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage(a).......... 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a)($mm) ...... $0 $10.5 $21.1 $42.1 $ 63.2
As a percentage of Initial Pool Balance . 0% .75% 1.5% 3.0% 4.5%
Applied to Class B-5 Certificates ($mm) . $0 $ 0 $ 0 $ 7.0 $ 14.0
As a percentage of Class B-5
Certificates............................. 0% 0% 0% 50.0% 100.0%
-----------------------------------------------------------------------------------------------------------------
Weighted average life (years) 16.64 18.85 19.98 19.99 N/A
First principal payment date 3/14/13 12/14/13 11/14/16 4/14/17 N/A
Last principal payment date 11/14/15 4/14/17 4/14/17 4/14/17 N/A
Price (%) 60.53125........................ 13.87 13.58 13.02 11.42 0.44 Yield to Maturity
6.98 7.21 7.49 6.71 4.13 Modified Duration
Price (%) 62.53125........................ 13.41 13.14 13.02 10.94 (0.35) Yield to Maturity
7.13 7.38 7.49 6.88 4.19 Modified Duration
Price (%) 64.53125........................ 12.97 12.72 12.61 10.49 (1.09) Yield to Maturity
7.27 7.54 7.67 7.05 4.25 Modified Duration
Price (%) 66.53125........................ 12.55 12.32 12.22 10.06 (1.80) Yield to Maturity
7.41 7.70 7.83 7.21 4.30 Modified Duration
Price (%) 68.53125........................ 12.16 11.94 11.84 9.66 (2.49) Yield to Maturity
7.54 7.86 8.00 7.36 4.36 Modified Duration
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
97
<PAGE>
Weighted Average Life, First and Last Principal Payment
Date, Yield and Modified Duration of
Class B-6 Certificates
at Various Assumed Prices and Mortgage Loan
Default Rates Assuming 30% Losses on Defaulted Mortgage Loans
<TABLE>
<CAPTION>
SCENARIO
----------------------------------------------------
1 2 3 4 5
---------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage(a).......... 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a)($mm) ...... $0 $10.5 $21.1 $ 42.1 $ 63.2
As a percentage of Initial Pool Balance . 0% .75% 1.5% 3.0% 4.5%
Applied to Class B-6 Certificates ($mm) . $0 $ 0 $ 0 $ 14.0 $ 14.0
As a percentage of Class B-6
Certificates............................. 0% 0% 0% 100.0% 100.0%
-----------------------------------------------------------------------------------------------------------------
Weighted average life (years) 19.74 19.99 19.99 N/A N/A
First principal payment date 11/14/15 4/14/17 4/14/17 N/A N/A
Last principal payment date 4/14/17 4/14/17 4/14/17 N/A N/A
Price (%) 46.984375....................... 17.33 17.29 17.29 7.15 0.11 Yield to Maturity
5.92 5.93 5.93 3.68 3.19 Modified Duration
Price (%) 48.984375....................... 16.64 16.61 16.61 6.03 (1.18) Yield to Maturity
6.15 6.16 6.16 3.76 3.26 Modified Duration
Price (%) 50.984375 ...................... 16.00 15.97 15.97 4.98 (2.39) Yield to Maturity
6.36 6.37 6.37 3.84 3.32 Modified Duration
Price (%) 52.984375....................... 15.40 15.38 15.37 3.99 (3.54) Yield to Maturity
6.57 6.58 6.58 3.91 3.38 Modified Duration
Price (%) 54.984375....................... 14.85 14.82 14.82 3.05 (4.62) Yield to Maturity
6.77 6.79 6.79 3.99 3.44 Modified Duration
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
98
<PAGE>
YIELD
The yield to maturity on the Subordinated Certificates will depend upon
the price paid by the Certificateholder, the rate and timing of the
distributions in reduction of Certificate Balance of such Certificates and
the rate, timing and severity of Realized Losses on the Mortgage Loans and
the extent to which such losses are allocable in reduction of the Certificate
Balance of such Certificates, as well as prevailing interest rates at the
time of payment or loss realization.
The rate of distributions in reduction of the Certificate Balance of any
Class of Subordinated Certificates, the aggregate amount of distributions on
any Class of Subordinated Certificates and the yield to maturity of any Class
of Subordinated Certificates will be directly related to the rate of payments
of principal (both scheduled and unscheduled) on the Mortgage Loans and the
amount and timing of borrower defaults. In addition, such distributions in
reduction of Certificate Balance may result from repurchases by the Mortgage
Loan Seller due to missing or defective documentation breaches of
representations and warranties with respect to the Mortgage Loans as
described herein under "The Pooling and Servicing Agreement --
Representations and Warranties; Repurchase," purchases of the Mortgage Loans
in the manner described under "The Pooling and Servicing Agreement --
Optional Termination" or purchases of ARD Loans by Class LR
Certificateholders as described under "Description of the Mortgage Pool --
Certain Terms and Conditions of the Mortgage Loans."
BECAUSE SUBSTANTIALLY ALL PRINCIPAL RECEIVED ON THE MORTGAGE LOANS IS
FIRST ALLOCATED TO THE SENIOR CERTIFICATES UNTIL THEIR RESPECTIVE CERTIFICATE
BALANCES ARE REDUCED TO ZERO, BEFORE PRINCIPAL IS ALLOCATED TO THE
SUBORDINATED CERTIFICATES, THE SUBORDINATED CERTIFICATES MAY NOT RECEIVE ANY
PRINCIPAL FOR A SUBSTANTIAL PERIOD OF TIME.
The Certificate Balance of any Class of Subordinated Certificates may be
reduced without distributions thereon as a result of the allocation of
Realized Losses to such Class, reducing the maximum amount distributable to
such Class in respect of Certificate Balance, as well as the amount of
interest that would have accrued thereon in the absence of such reduction. In
general, a Realized Loss occurs when the aggregate principal balance of a
Mortgage Loan is reduced without an equal distribution to Certificateholders
in reduction of the Certificate Balances of the Certificates. Realized Losses
are likely to occur only in connection with a default on a Mortgage Loan and
the liquidation of the related Mortgaged Properties or a reduction in the
principal balance of a Mortgage Loan by a bankruptcy court.
Because the ability of a borrower to make a Balloon Payment will depend
upon its ability either to refinance the Mortgage Loan or to sell the related
Mortgaged Properties, there is a risk that a borrower may default at the
maturity date. In connection with a default on the Balloon Payment, the
Special Servicer may agree to extend the maturity date thereof as described
under "The Pooling and Servicing Agreement -- Realization Upon Mortgage
Loans." In the case of any such default, recovery of proceeds may be delayed
by and until, among other things, work-outs are negotiated, foreclosures are
completed or bankruptcy proceedings are resolved. In addition, the Directing
Holders may instruct to delay the commencement of any foreclosure proceedings
under certain conditions described herein. Certificateholders are not
entitled to receive distributions of Monthly Payments or the Balloon Payment
when due except to the extent they are either covered by an Advance or
actually received. Consequently, any defaulted Monthly Payment for which no
such Advance is made and a defaulted Balloon Payment will tend to extend the
weighted average lives of the Certificates, whether or not a permitted
extension of the due date of the related Mortgage Loan has been effected.
The rate of payments (including voluntary and involuntary prepayments) on
pools of Mortgage Loans is influenced by a variety of economic, demographic,
geographic, social, tax, legal and other factors, including the level of
mortgage interest rates and the rate at which borrowers default on their
mortgage loans.
If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Mortgage
Loans, the actual yield to maturity will be lower than that so calculated.
The effect of voluntary and involuntary prepayments of the Mortgage Loans on
the yield of each Class of Subordinated Certificates will be diminished by
the distribution of all principal first to the Senior Certificates, until the
Certificate Balances thereof have been reduced to zero, before any
distributions in respect of principal are made on any Class of Subordinated
Certificates.
The timing of changes in the rate of prepayment on the Mortgage Loans may
significantly affect the actual yield to maturity experienced by an investor
even if the average rate of principal payments experienced over time is
consistent with such investor's expectation. In general, the earlier a
prepayment of principal on the Mortgage Loans is applied in reduction of the
Certificate Balance of a Class of Subordinated Certificates, the greater the
effect on such investor's yield to maturity.
99
<PAGE>
The rate of principal payments on the Mortgage Loans is affected by the
existence of Lock-out Periods and Prepayment Premium provisions of the
Mortgage Loans, and by the extent to which the Servicer is able to enforce
such provisions. Mortgage Loans with a Lock-out Period or a Prepayment
Premium provision, to the extent enforceable, generally would be expected to
experience a lower rate of principal prepayments than otherwise identical
Mortgage Loans without such provisions, with shorter Lock-out Periods or with
lower Prepayment Premiums. All of the Mortgage Loans have Lock-out Periods
ranging from 77 months to 239 months following origination. The weighted
average Lock-out Period for the Mortgage Loans is approximately 138 months.
All Mortgage Loans are locked out until no earlier than three or six months
preceding their Anticipated Repayment Date or maturity date, as applicable.
See "Description of the Mortgage Pool -- Certain Terms and Conditions of the
Mortgage Loans -- Prepayment Provisions" herein.
No representation is made as to the rate of principal payments on the
Mortgage Loans or as to the yield to maturity of any Class of Subordinated
Certificates. In addition, although Excess Cash Flow is applied to reduce the
principal of the ARD Loans after their respective Anticipated Repayment
Dates, there can be no assurance that any of such Mortgage Loans will be
prepaid on that date or any date prior to maturity. An investor is urged to
make an investment decision with respect to any Class of Subordinated
Certificates based on the anticipated yield to maturity of such Class of
Subordinated Certificates resulting from its purchase price and such
investor's own determination as to anticipated Mortgage Loan prepayment rates
under a variety of scenarios. The extent to which any Class of Subordinated
Certificates is purchased at a discount or a premium and the degree to which
the timing of payments on such Class of Subordinated Certificates is
sensitive to prepayments will determine the extent to which the yield to
maturity of such Class of Subordinated Certificates may vary from the
anticipated yield. An investor should carefully consider the associated
risks, including, in the case of any Subordinated Certificates purchased at a
discount, the risk that a slower than anticipated rate of principal payments
on the Mortgage Loans could result in an actual yield to such investor that
is lower than the anticipated yield and, in the case of any Subordinated
Certificates purchased at a premium, the risk that a faster than anticipated
rate of principal payments could result in an actual yield to such investor
that is lower than the anticipated yield.
An investor should consider the risk that rapid rates of prepayments on
the Mortgage Loans, and therefore of amounts distributable in reduction of
the principal balance of the Subordinated Certificates may coincide with
periods of low prevailing interest rates. During such periods, the effective
interest rates on securities in which an investor may choose to reinvest
amounts distributed in reduction of the principal balance of such investor's
Subordinated Certificate may be lower than the Pass-Through Rate. Conversely,
slower rates of prepayments on the Mortgage Loans, and therefore of amounts
distributable in reduction of principal balance of the Subordinated
Certificates, may coincide with periods of high prevailing interest rates.
During such periods, the amount of principal distributions resulting from
prepayments available to an investor for reinvestment at such high prevailing
interest rates may be relatively small.
The effective yield to holders of Subordinated Certificates will be lower
than the yield otherwise produced by the Pass-Through Rate and applicable
purchase prices because while interest is required to be paid by the
borrowers on the eleventh day of each month, the distribution of such
interest will not be made until the Distribution Date occurring in such
month, and principal paid on any Distribution Date will not bear interest
during the period after the interest is paid and before the Distribution Date
occurs. Additionally, as described under "Description of the Subordinated
Certificates -- Distributions" herein, if the portion of the Available Funds
distributable in respect of interest on any Class of Subordinated
Certificates on any Distribution Date is less than the amount of interest
required to be paid to the holders of such Class, the shortfall will be
distributable to holders of such Class of Certificates on subsequent
Distribution Dates, to the extent of Available Funds on such Distribution
Dates. Any such shortfall will not bear interest, however, and will therefore
negatively affect the yield to maturity of such Class of Certificates for so
long as it is outstanding.
RATED FINAL DISTRIBUTION DATE
The "Rated Final Distribution Date," April 14, 2029, is the Distribution
Date occurring two years after the latest Assumed Maturity Date of any of the
Mortgage Loans. Because certain of the Mortgage Loans have maturity dates
that occur earlier than the latest maturity date, and because certain of the
Mortgage Loans may be prepaid prior to maturity, it is possible that the
Certificate Balance of each Class of Subordinated Certificates will be
reduced to zero significantly earlier than the Rated Final Distribution Date.
WEIGHTED AVERAGE LIFE OF SUBORDINATED CERTIFICATES
Weighted average life refers to the average amount of time that will
elapse from the date of determination to the date of distribution or
allocation to the investor of each dollar in reduction of Certificate Balance
that is distributed or allocated,
100
<PAGE>
respectively. The weighted average lives of the Subordinated Certificates
will be influenced by, among other things, the rate at which principal of the
Mortgage Loans is paid, which may occur as a result of scheduled
amortization, Balloon Payments, voluntary or involuntary prepayments or
liquidations.
Other Factors Affecting Weighted Average Life. The weighted average lives
of the Subordinated Certificates may also be affected to the extent that
additional distributions in reduction of the Certificate Balance of such
Certificates occur as a result of the repurchase or purchase of Mortgage
Loans from the Trust Fund as described under "The Pooling and Servicing
Agreement -- Representations and Warranties; Repurchase" or "--Optional
Termination" herein. Such a repurchase or purchase from the Trust Fund will
have the same effect on distributions to the holders of Certificates as if
the related Mortgage Loans had prepaid in full, except that no Prepayment
Premiums are made in respect thereof.
A number of Mortgage Loans have Balloon Payments due at maturity, and
because the ability of a mortgagor to make a Balloon Payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
Balloon Payments may default at maturity, or that the servicer may extend the
maturity of such a Mortgage Loan in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things,
bankruptcy of the mortgagor or adverse conditions in the market where the
property is located. Any defaulted Balloon Payment or modification that
extends the maturity of a Mortgage Loan will tend to extend the weighted
average life of the Certificates, thereby lengthening the period of time
elapsed from the date of issuance of a Certificate until it is retired.
The number of foreclosures and the principal amount of the Mortgage Loans
that are foreclosed in relation to the number of Mortgage Loans that are
repaid in accordance with their terms will affect the weighted average life
of the Mortgage Loans and that of the Certificates. Servicing decisions made
with respect to the Mortgage Loans, including the use of payment plans prior
to a demand for acceleration and the restructuring of Mortgage Loans in
bankruptcy proceedings, may also have an effect upon the payment patterns of
particular Mortgage Loans and thus the weighted average life of the
Certificates.
Acceleration of mortgage payments as a result of certain transfers of or
the creation of encumbrances upon underlying Mortgaged Property is another
factor affecting prepayment rates. A number of the Mortgage Loans may include
"due-on-sale" clauses or "due-on-encumbrance" clauses that allow the holder
of the Mortgage Loans to demand payment in full of the remaining principal
balance of the Mortgage Loans upon sale or certain other transfers of or the
creation of encumbrances upon the related Mortgaged Property. See "Certain
Legal Aspects of Mortgage Loans -- Due-on-Sale and Due-on-Encumbrance" and
"Description of the Agreements -- Due-on-Sale and Due-on-Encumbrance
Provisions."
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus is the "Constant Prepayment Rate" or
"CPR" model. The CPR model represents an assumed constant annual rate of
prepayment each month, expressed as a per annum percentage of the
then-scheduled principal balance of the pool of mortgage loans. As used in
the following tables, the columns headed "0% CPR" assume that none of the
Mortgage Loans is prepaid before the related Anticipated Repayment Date or
maturity date, as applicable. The columns headed "10% CPR," "25% CPR," "50%
CPR" and "100% CPR" assume that prepayments on the Mortgage Loans are made at
those levels of CPR following the expiration of any Lock-out Period until the
related Anticipated Repayment Date or maturity date, as applicable. All
columns in the following table assume that all of the ARD Loans are fully
prepaid on their related Anticipated Repayment Date and all of the other
Mortgage Loans are paid in full on their maturity date. There is no
assurance, however, that prepayments of the Mortgage Loans will conform to
any level of CPR, and no representation is made that the Mortgage Loans will
prepay at the levels of CPR shown or at any other prepayment rate. The
foregoing assumptions are referred to herein as the "Prepayment Assumptions."
The tables of "Percentages of Initial Certificate Balance Outstanding" set
forth below indicate the weighted average life of each Class of Subordinated
Certificates and set forth the percentage of the initial Certificate Balance
of such Subordinated Certificates that would be outstanding after each of the
dates shown at the various CPRs and based on the Prepayment Assumptions. The
table of "Percentage of Initial Pool Balance" set forth below indicates the
weighted average life of the Mortgage Loans, in their entirety, and sets
forth the percentage of the Cut-off Date Pool Balance of the Mortgage Loans
that would be outstanding after each of the dates shown at 0% CPR. For
purposes of preparing the tables, it was assumed that each of the Mortgage
Loans has the following characteristics: (i) each Mortgage Loan will pay
principal and interest in accordance with its terms and scheduled payments
will be timely received on the 11th day of each month; (ii) the Mortgage Loan
Seller does not repurchase any Mortgage Loan as described under "The Pooling
and Servicing Agreement -- Representations and Warranties -- Repurchase";
(iii) none of the Depositor, Servicer, or the
101
<PAGE>
Class LR Certificateholders exercise the right to cause early termination of
the Trust Fund; and (iv) the date of determination of weighted average life
is the Closing Date. These assumptions are collectively referred to as the
"Mortgage Loan Assumptions." The Mortgage Loan Assumptions made in preparing
the following tables are expected to vary from the actual performance of the
Mortgage Loans. It is highly unlikely that principal of the Mortgage Loans
will be repaid consistent with assumptions underlying any one of the
scenarios. Investors are urged to conduct their own analysis concerning the
likelihood that the Mortgage Loans may pay or prepay on any particular date.
Based on the Mortgage Loan Assumptions and the Prepayment Assumptions, the
table below indicates the weighted average life of the Mortgage Loans, in
their entirety, and sets forth the percentages of the Initial Pool Balance of
the Mortgage Loans that would be outstanding after the Distribution Date in
March of each of the years indicated.
PERCENTAGE OF INITIAL POOL BALANCE
OUTSTANDING AT 0% CPR
<TABLE>
<CAPTION>
MORTGAGE LOANS
DISTRIBUTION DATE(1) 0% CPR
- ------------------------------------ ------------------
<S> <C>
Initial Percentage................... 100%
March 14, 1998....................... 99
March 14, 1999....................... 98
March 14, 2000....................... 97
March 14, 2001....................... 95
March 14, 2002....................... 94
March 14, 2003....................... 92
March 14, 2004....................... 85
March 14, 2005....................... 83
March 14, 2006....................... 81
March 14, 2007....................... 38
March 14, 2008....................... 31
March 14, 2009....................... 20
March 14, 2010....................... 19
March 14, 2011....................... 17
March 14, 2012....................... 7
March 14, 2013....................... 3
March 14, 2014....................... 3
March 14, 2015....................... 3
March 14, 2016....................... 2
March 14, 2017....................... 2
March 14, 2018....................... 0
Weighted Average Life (years)(2) .... 13.33
<FN>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Mortgage Loans, in their entirety,
is determined by (i) multiplying the aggregate amount of Monthly
Payments in reduction of the aggregate Stated Principal Balance of
the Mortgage Loans by the number of years from the Closing Date to
the related Distribution Date, (ii) adding the results and (iii)
dividing the sum by the aggregate distributions in reduction of the
aggregate Stated Principal Balance referred to in clause (i).
</TABLE>
102
<PAGE>
Based on the Mortgage Loan Assumptions, the Prepayment Assumptions and the
various CPRs, the tables below indicate the weighted average life of the
Subordinated Certificates and set forth the percentages of the initial
Certificate Balance of the Subordinated Certificates that would be
outstanding after the Distribution Date in March of each of the years
indicated, at the indicated CPRs.
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B-1
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- ---------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ................ 100% 100% 100% 100% 100%
March 14, 1998 .................... 100 100 100 100 100
March 14, 1999 .................... 100 100 100 100 100
March 14, 2000 .................... 100 100 100 100 100
March 14, 2001 .................... 100 100 100 100 100
March 14, 2002 .................... 100 100 100 100 100
March 14, 2003 .................... 100 100 100 100 100
March 14, 2004 .................... 100 100 100 100 100
March 14, 2005 .................... 100 100 100 100 100
March 14, 2006 .................... 100 100 100 100 100
March 14, 2007 .................... 100 100 100 100 100
March 14, 2008 .................... 100 100 100 100 100
March 14, 2009 .................... 100 100 100 100 100
March 14, 2010 .................... 100 100 100 100 100
March 14, 2011 .................... 100 100 100 100 100
March 14, 2012 .................... 0 0 0 0 0
March 14, 2013 .................... 0 0 0 0 0
March 14, 2014 .................... 0 0 0 0 0
March 14, 2015 .................... 0 0 0 0 0
March 14, 2016 .................... 0 0 0 0 0
March 14, 2017 .................... 0 0 0 0 0
March 14, 2018 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 14.89 14.89 14.89 14.88 14.72
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B-1 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
103
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B-2
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- ---------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ................ 100% 100% 100% 100% 100%
March 14, 1998 .................... 100 100 100 100 100
March 14, 1999 .................... 100 100 100 100 100
March 14, 2000 .................... 100 100 100 100 100
March 14, 2001 .................... 100 100 100 100 100
March 14, 2002 .................... 100 100 100 100 100
March 14, 2003 .................... 100 100 100 100 100
March 14, 2004 .................... 100 100 100 100 100
March 14, 2005 .................... 100 100 100 100 100
March 14, 2006 .................... 100 100 100 100 100
March 14, 2007 .................... 100 100 100 100 100
March 14, 2008 .................... 100 100 100 100 100
March 14, 2009 .................... 100 100 100 100 100
March 14, 2010 .................... 100 100 100 100 100
March 14, 2011 .................... 100 100 100 100 100
March 14, 2012 .................... 36 34 31 25 0
March 14, 2013 .................... 0 0 0 0 0
March 14, 2014 .................... 0 0 0 0 0
March 14, 2015 .................... 0 0 0 0 0
March 14, 2016 .................... 0 0 0 0 0
March 14, 2017 .................... 0 0 0 0 0
March 14, 2018 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 14.94 14.94 14.94 14.93 14.91
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B-2 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
104
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B-3
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- ---------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ................ 100% 100% 100% 100% 100%
March 14, 1998 .................... 100 100 100 100 100
March 14, 1999 .................... 100 100 100 100 100
March 14, 2000 .................... 100 100 100 100 100
March 14, 2001 .................... 100 100 100 100 100
March 14, 2002 .................... 100 100 100 100 100
March 14, 2003 .................... 100 100 100 100 100
March 14, 2004 .................... 100 100 100 100 100
March 14, 2005 .................... 100 100 100 100 100
March 14, 2006 .................... 100 100 100 100 100
March 14, 2007 .................... 100 100 100 100 100
March 14, 2008 .................... 100 100 100 100 100
March 14, 2009 .................... 100 100 100 100 100
March 14, 2010 .................... 100 100 100 100 100
March 14, 2011 .................... 100 100 100 100 100
March 14, 2012 .................... 100 100 100 100 96
March 14, 2013 .................... 0 0 0 0 0
March 14, 2014 .................... 0 0 0 0 0
March 14, 2015 .................... 0 0 0 0 0
March 14, 2016 .................... 0 0 0 0 0
March 14, 2017 .................... 0 0 0 0 0
March 14, 2018 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 14.99 14.99 14.99 14.99 14.99
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B-3 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
105
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B-4
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- ---------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ................ 100% 100% 100% 100% 100%
March 14, 1998 .................... 100 100 100 100 100
March 14, 1999 .................... 100 100 100 100 100
March 14, 2000 .................... 100 100 100 100 100
March 14, 2001 .................... 100 100 100 100 100
March 14, 2002 .................... 100 100 100 100 100
March 14, 2003 .................... 100 100 100 100 100
March 14, 2004 .................... 100 100 100 100 100
March 14, 2005 .................... 100 100 100 100 100
March 14, 2006 .................... 100 100 100 100 100
March 14, 2007 .................... 100 100 100 100 100
March 14, 2008 .................... 100 100 100 100 100
March 14, 2009..................... 100 100 100 100 100
March 14, 2010 .................... 100 100 100 100 100
March 14, 2011 .................... 100 100 100 100 100
March 14, 2012 .................... 100 100 100 100 100
March 14, 2013 .................... 0 0 0 0 0
March 14, 2014 .................... 0 0 0 0 0
March 14, 2015 .................... 0 0 0 0 0
March 14, 2016 .................... 0 0 0 0 0
March 14, 2017 .................... 0 0 0 0 0
March 14, 2018 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 15.61 15.61 15.61 15.61 15.61
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B-4 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
106
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B-5
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- --------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ............... 100% 100% 100% 100% 100%
March 14, 1998 ................... 100 100 100 100 100
March 14, 1999 ................... 100 100 100 100 100
March 14, 2000 ................... 100 100 100 100 100
March 14, 2001 ................... 100 100 100 100 100
March 14, 2002 ................... 100 100 100 100 100
March 14, 2003 ................... 100 100 100 100 100
March 14, 2004 ................... 100 100 100 100 100
March 14, 2005 ................... 100 100 100 100 100
March 14, 2006 ................... 100 100 100 100 100
March 14, 2007 ................... 100 100 100 100 100
March 14, 2008 ................... 100 100 100 100 100
March 14, 2009 ................... 100 100 100 100 100
March 14, 2010 ................... 100 100 100 100 100
March 14, 2011 ................... 100 100 100 100 100
March 14, 2012 ................... 100 100 100 100 100
March 14, 2013 ................... 52 52 52 52 52
March 14, 2014 ................... 33 33 33 33 33
March 14, 2015 ................... 13 13 13 13 13
March 14, 2016 ................... 0 0 0 0 0
March 14, 2017 ................... 0 0 0 0 0
March 14, 2018 ................... 0 0 0 0 0
Weighted Average Life (years)(2) . 16.64 16.64 16.64 16.64 16.64
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B-5 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date of determination to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the aggregate
distributions in reduction of Certificate Balance referred to in clause
(i).
107
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B-6
-----------------------------------------------------
DISTRIBUTION DATE (1) 0% CPR 10% CPR 25% CPR 50% CPR 100% CPR
- ---------------------------------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ................ 100% 100% 100% 100% 100%
March 14, 1998 .................... 100 100 100 100 100
March 14, 1999 .................... 100 100 100 100 100
March 14, 2000 .................... 100 100 100 100 100
March 14, 2001 .................... 100 100 100 100 100
March 14, 2002 .................... 100 100 100 100 100
March 14, 2003 .................... 100 100 100 100 100
March 14, 2004 .................... 100 100 100 100 100
March 14, 2005 .................... 100 100 100 100 100
March 14, 2006 .................... 100 100 100 100 100
March 14, 2007 .................... 100 100 100 100 100
March 14, 2008 .................... 100 100 100 100 100
March 14, 2009 .................... 100 100 100 100 100
March 14, 2010 .................... 100 100 100 100 100
March 14, 2011 .................... 100 100 100 100 100
March 14, 2012 .................... 100 100 100 100 100
March 14, 2013 .................... 100 100 100 100 100
March 14, 2014 .................... 100 100 100 100 100
March 14, 2015 .................... 100 100 100 100 100
March 14, 2016 .................... 91 91 91 91 91
March 14, 2017 .................... 66 66 66 66 66
March 14, 2018 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 19.74 19.74 19.74 19.74 19.74
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B-6 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
108
<PAGE>
THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates have been issued pursuant to a Pooling and Servicing
Agreement dated as of March 27, 1997 (the "Pooling and Servicing Agreement"),
by and among the Depositor, the Servicer, the Special Servicer, the Trustee
and the Fiscal Agent.
The Depositor will provide to a prospective or actual holder of any
Subordinated Certificate without charge, upon written request, a copy
(without exhibits) of the Pooling and Servicing Agreement. Requests should be
addressed to Asset Securitization Corporation, 2 World Financial Center,
Building B, New York, New York 10281-1198.
ASSIGNMENT OF THE MORTGAGE LOANS
On March 27, 1997, the Depositor, transferred or otherwise conveyed,
assigned or caused the assignment of the Mortgage Loans, without recourse, to
the Trustee for the benefit of the holders of Certificates. On or prior to
March 27, 1997, the Depositor has delivered to the Trustee, with respect to
each Mortgage Loan certain documents and instruments including, among other
things, the following: (i) the original Mortgage Note endorsed without
recourse to the order of the Trustee, as trustee; (ii) the original mortgage
or counterpart thereof; (iii) the assignment of the mortgage in recordable
form in favor of the Trustee; (iv) if applicable, preceding assignments of
mortgages; (v), the related security agreement, if applicable, (vi) to the
extent not contained in the Mortgages, the original assignments of leases and
rents or counterpart thereof; (vii) if applicable, the original assignments
of assignments of leases and rents to the Trustee; (viii) if applicable,
preceding assignments of assignments of leases and rents; (ix) where
applicable, a certified copy of the UCC-1 Financing Statements, if any,
including UCC-3 continuation statements and UCC-3 assignments; (x) the
original loan agreements and (xi) the original lender's title insurance
policy (or marked commitments to insure). The Trustee will hold such
documents in trust for the benefit of the holders of Certificates. The
Depositor will promptly cause the assignment of each Mortgage Loan to be
recorded in the appropriate public office for real property records, except
in the State of California or in other states where, in the opinion of
counsel acceptable to the Trustee, such recording is not required to protect
the Trustee's interest in the Mortgage Loan against the claim of any
subsequent transferee or any successor to or creditor of the Depositor, the
Servicer, the relevant Mortgage Loan Seller or any other prior holder of the
Mortgage Loan.
The Trustee is obligated to review such documents for each Mortgage Loan
within 45 days after the later of the receipt of such documents or March 27,
1997 and report any missing documents or certain types of defects therein to
the Depositor. If any such document is found to be missing or defective in
any material respect, the Trustee (or such custodian) shall take such action
as required in the Pooling and Servicing Agreement, which may include
immediately notifying the Servicer and the Depositor. If the Mortgage Loan
Seller, upon notification, cannot cure the omission or defect within a
specified number of days after receipt of such notice, the Mortgage Loan
Seller will be obligated, within a specified number of days of receipt of
such notice, to repurchase the related Mortgage Loan from the Trustee at the
Purchase Price or substitute for such Mortgage Loan. There can be no
assurance that the Mortgage Loan Seller will fulfill this repurchase or
substitution obligation. Although the Servicer is obligated to use its best
efforts to enforce such obligation, neither the Servicer nor the Depositor
will be obligated to repurchase or substitute for such Mortgage Loan if the
Mortgage Loan Seller defaults on its obligation. This repurchase or
substitution obligation may constitute the sole remedy available to the
Certificateholders or the Trustee for omission of, or a material defect in, a
constituent document.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
In the Pooling and Servicing Agreement, the Depositor has assigned the
representations and warranties made by the Mortgage Loan Seller to the
Depositor in the Mortgage Loan Purchase and Sale Agreement to the Trustee for
the benefit of Certificateholders. In the Mortgage Loan Purchase and Sale
Agreement, the Mortgage Loan Seller has represented and warrantied, among
other things, that (subject to certain exceptions specified in the Mortgage
Loan Purchase and Sale Agreement), as of March 27, 1997 (unless otherwise
specified):
(i) immediately prior to the sale, transfer and assignment to the
Depositor, each related Note and Mortgage were not subject to an
assignment or pledge, and the Mortgage Loan Seller has good title to, and
is the sole owner of, each Mortgage Loan;
(ii) the Mortgage Loan Seller has full right and the authority to sell,
assign and transfer such Mortgage Loan;
(iii) the Mortgage Loan Seller is transferring such Mortgage Loan free
and clear of any and all liens, pledges, charges or security interests of
any nature encumbering such Mortgage Loan;
(iv) each related Note, Mortgage, Assignment of Leases and Rents (if any)
and other agreement executed in connection with such Mortgage Loan are
legal, valid and binding obligations of the related borrower, enforceable
in
109
<PAGE>
accordance with their terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
the enforcement of creditors rights generally, or by general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law), and there is no valid defense,
counterclaim, or right of recission available to the related borrower with
respect to such Mortgage, Note and other agreements;
(v) each related Assignment of Leases and Rents, if any, creates a valid,
collateral or first priority assignment of, or a valid first priority
security interest in, certain rights under the related leases, subject
only to a license granted to the related borrower to exercise certain
rights and to perform certain obligations of the lessor under such leases,
including the right to operate the related Mortgaged Property; no person
other than the related borrower owns any interest in any payments due
under such leases that is superior to or of equal priority with the
mortgagee's interest therein;
(vi) each related assignment of Mortgage from the Mortgage Loan Seller to
the Depositor, and any related Reassignment of Assignment of Leases and
Rents, if any, or assignment of any other agreement executed in connection
with such Mortgage Loan, from the Mortgage Loan Seller to the Depositor
constitutes the legal, valid and binding assignment from the Mortgage Loan
Seller to the Depositor except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, liquidation, receivership,
moratorium or other laws relating to or affecting creditor's rights
generally, or by general principles or equity (regardless of whether such
enforcement is considered in a proceeding in equity or law);
(vii) since origination, and except as set forth in the related mortgage
file, such Mortgage Loan has not been waived, modified, altered,
satisfied, canceled, subordinated or rescinded and, each related Mortgaged
Property has not been released from the lien of the related Mortgage in
any manner which materially interferes with the security intended to be
provided by such Mortgage;
(viii) each related Mortgage is a valid and enforceable first lien on the
related Mortgaged Property, and such Mortgaged Property (subject to the
matters discussed in clause (xi) below) is free and clear of any
mechanics' and materialmen's liens which are prior to or equal with the
lien of the related Mortgage, except those which are insured against by a
lender's title insurance policy (as set forth in the Mortgage Loan
Purchase and Sale Agreement);
(ix) the Mortgage Loan Seller has not taken any action that would cause
the representations and warranties made by each related borrower in the
Mortgage Loan not to be true;
(x) the Mortgage Loan Seller has no knowledge that the representations
and warranties made by each related borrower in such Mortgage Loan are not
true in any material respect;
(xi) the lien of each related Mortgage is insured by an ALTA lender's
title insurance policy (or a binding commitment therefor), or its
equivalent as adopted in the applicable jurisdiction, insuring the
Mortgage Loan Seller, its successors and assigns, as to a valid and
perfected first priority security interest in the related Mortgaged
Property and the first priority lien of the Mortgage in the original
principal amount of such Mortgage Loan (as set forth on the Mortgage Loan
Schedule which is an exhibit to the Pooling and Servicing Agreement) after
all advances of principal, subject only to (a) the lien of current real
property taxes, ground rents, water charges, sewer rents and assessments
not yet due and payable, (b) covenants, conditions and restrictions,
rights of way, easements and other matters of public record, none of
which, individually or in the aggregate, materially interferes with the
current use of the Mortgaged Property or the security intended to be
provided by such Mortgage or with the borrower's ability to pay its
obligations when they become due or the value of the Mortgaged Property
and (c) the exceptions (general and specific) set forth in such lender's
title insurance policy, none of which, individually or in the aggregate,
materially interferes with the security intended to be provided by such
Mortgage or with the borrower's ability to pay its obligations when they
become due or the value of the Mortgaged Property; the Mortgage Loan
Seller or its successors or assigns is the sole named insured of such
policy; such policy is assignable to the Depositor without the consent of
or any notification to the insurer, and is in full force and effect upon
the consummation of the transactions contemplated by the Mortgage Loan
Purchase and Sale Agreement; no claims have been made under such policy
and the Mortgage Loan Seller has not done anything, by act or omission,
and the Mortgage Loan Seller has no knowledge of any matter, which would
impair or diminish the coverage of such policy; to the extent required by
applicable law the insurer issuing such policy is qualified to do business
in the jurisdiction in which the related Mortgaged Properties are located;
110
<PAGE>
(xii) the proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder and it covenants
that it will not make any future advances under the Mortgage Loan to the
related borrower;
(xiii) each related Mortgaged Property is free of any material damage
that would affect materially and adversely the value of such Mortgaged
Property as security for the Mortgage Loan and is in good repair and there
is no proceeding pending for the total or partial condemnation of such
Mortgaged Property, other than with respect to a portion of the property
in the Sunwest Pool known as facility number 5833, located in North
Richland Hills, Texas; the condemnation proceeding with respect to such
portion will not have a material adverse effect on the cash flow of such
facility;
(xiv) each of the related borrowers (and in the case of certain loans,
each of the operators of the senior housing/healthcare facility) is in
possession of all material licenses, permits and other authorizations
necessary and required by all applicable laws for the conduct of its
business; all such licenses, permits and authorizations are valid and in
full force and effect; and if a related Mortgaged Property is improved by
a senior housing or healthcare facility, the most recent inspection or
survey by governmental authorities having jurisdiction in connection with
such licenses, permits and authorizations did not cite such Mortgaged
Property for material violations (which shall include only "Level A"
violations, in the case of skilled nursing facilities, that have not been
cured);
(xv) the Mortgage Loan Seller or Bloomfield has inspected or caused to be
inspected each related Mortgaged Property within the past twelve months
preceding the Cut-off Date or within one month of origination of the
Mortgage Loan;
(xvi) such Mortgage Loan does not have a shared appreciation feature,
other contingent interest feature or negative amortization;
(xvii) such Mortgage Loan is a whole loan and no other party holds a
participation interest in the Mortgage Loan;
(xviii) (A) the Mortgage Rate (exclusive of any default interest or yield
maintenance charges) of such Mortgage Loan complied as of the date of
origination with, or is exempt from, applicable state or federal laws,
regulations and other requirements pertaining to usury; any and all other
requirements of any federal, state or local laws, including, without
limitation, truth-in-lending, real estate settlement procedures, equal
credit opportunity or disclosure laws, applicable to such Mortgage Loan
have been complied with as of the date of origination of such Mortgage
Loan or (B) the Mortgage Loan Seller has received an opinion to such
effect;
(xix) (A) with respect to each Mortgage Loan originated by the Mortgage
Loan Seller, no fraudulent acts were committed by the Mortgage Loan Seller
during the origination process of such Mortgage Loan and the origination,
servicing and collection of each Mortgage Loan is in all respects legal,
proper and prudent in accordance with customary industry standards and (B)
with respect to each Mortgage Loan originated by Bloomfield, to the best
of the Mortgage Loan Seller's knowledge, no fraudulent acts were committed
by Bloomfield during the origination process of such Mortgage Loan and to
the best of the Mortgage Loan Seller's knowledge, the origination,
servicing and collection of each Mortgage Loan is in all respects legal,
proper and prudent in accordance with customary industry standards;
(xx) all taxes and governmental assessments that prior to March 27, 1997
became due and owing in respect of each related Mortgaged Property have
been paid, or an escrow of funds in an amount sufficient to cover such
payments has been established;
(xxi) all escrow deposits and payments required pursuant to the Mortgage
Loan are in the possession, or under the control, of the Mortgage Loan
Seller or its agent and there are no deficiencies in connection therewith;
(xxii) to the extent required under applicable law, as of the Cut-off
Date, the Mortgage Loan Seller was authorized to transact and do business
in the jurisdiction in which each related Mortgaged Property is located at
all times when it held the Mortgage Loan;
(xxiii) each related Mortgaged Property is insured by a fire and extended
perils insurance policy, issued by an insurer meeting the requirements of
the Mortgage Loans, in an amount not less than the replacement cost and
the amount necessary to avoid the operation of any co-insurance provisions
with respect to the Mortgaged Property; each related Mortgaged Property is
also covered by business interruption insurance and comprehensive general
liability
111
<PAGE>
insurance in amounts generally required by institutional lenders for
similar properties; all premiums on such insurance policies required to be
paid as of the date hereof have been paid; such insurance policies require
prior notice to the insured of termination or cancellation, and no such
notice has been received; each related Mortgage obligates the related
borrower to maintain all such insurance and, at such borrower's failure to
do so, authorizes the mortgagee to maintain such insurance at the
borrower's cost and expense and to seek reimbursement therefor from such
borrower;
(xxiv) there is no default, breach, violation or event of acceleration
existing under the related Mortgage or the related Note and no event
which, with the passage of time or with notice and the expiration of any
grace or cure period, would and does constitute a default, breach,
violation or event of acceleration;
(xxv) such Mortgage Loan has not been 30 or more days delinquent since
origination and as of the Cut-off Date was not delinquent;
(xxvi) each related Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the
benefits of the security, including realization by judicial or, if
applicable, non-judicial foreclosure, and there is no exemption available
to the borrower which would interfere with such right to foreclose;
(xxvii) in each related Mortgage or Loan Agreement, the related borrower
represents and warrants that it has not used, caused or permitted to exist
and will not use, cause or permit to exist on the related Mortgaged
Property any Hazardous Materials in any manner which violates federal,
state or local laws, ordinances, regulations, orders, directives or
policies governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials; the related borrower agrees to indemnify, defend and hold the
mortgagee and its successors and assigns harmless from and against any and
all losses, liabilities, damages, injuries, penalties, fines, expenses,
and claims of any kind whatsoever (including attorneys' fees and costs)
paid, incurred or suffered by, or asserted against, any such party
resulting from a breach of any representation, warranty or covenant given
by the borrower in such Mortgage or Loan Agreement. A Phase I
environmental report was conducted by a reputable environmental engineer
in connection with such Mortgage Loan, which report, except as otherwise
disclosed herein did not indicate any material non-compliance or material
existence of Hazardous Materials. To the best of the Mortgage Loan
Seller's knowledge, each related Mortgaged Property is in material
compliance with all applicable federal, state and local laws pertaining to
environmental hazards, and no notice of violation of such laws has been
issued by any governmental agency or authority; the Mortgage Loan Seller
has not taken any action which would cause the related Mortgaged Property
not to be in compliance with all federal, state and local laws pertaining
to environmental hazards;
(xxviii) each related Mortgage or Loan Agreement contains provisions for
the acceleration of the payment of the unpaid principal balance of such
Mortgage Loan if, without the prior written consent of the mortgagee or
the satisfaction of certain conditions, the related Mortgaged Property, or
any interest therein, is directly or indirectly transferred or sold, or
encumbered in connection with subordinate financing;
(xxix) (1) the Mortgage Loan is directly secured by a Mortgage on a
commercial property or multifamily residential property, and (2) the fair
market value of such real property, as evidenced by an MAI appraisal
conducted within 12 months of the origination of the Mortgage Loan (except
with respect to the Mortgaged Properties included in the Sunwest Pool, in
which case, market value was determined by using a capitalization rate),
was at least equal to 80% of the principal amount of the Mortgage Loan (a)
at origination (or if the Mortgage Loan has been modified in a manner that
constituted a deemed exchange under Section 1001 of the Code at a time
when the Mortgage Loan was not in default or default with respect thereto
was not reasonably foreseeable, the date of the last such modification) or
(b) at March 27, 1997; provided that the fair market value of the real
property interest must first be reduced by (A) the amount of any lien on
the real property interest that is senior to the Mortgage Loan (unless
such senior lien also secures a Mortgage Loan, in which event the
computation described in (a) and (b) shall be made on an aggregated basis)
and (B) a proportionate amount of any lien that is in parity with the
Mortgage Loan (unless such other lien secures a Mortgage Loan that is
cross-collateralized with such Mortgage Loan, in which event the
computation described in (a) and (b) shall be made on an aggregate basis);
(xxx) except with respect to the Mortgage Loan secured by the Mortgaged
Property known as South DeKalb Mall, neither the Mortgage Loan Seller nor
any affiliate thereof has any obligation or right to make any capital
contribution to any borrower under a Mortgage Loan, other than
contributions made on or prior to March 27, 1997;
112
<PAGE>
(xxxi) with respect to each Mortgaged Property except with respect to the
Mortgaged Properties in the Sunwest Pool, where a material portion of the
estate of the related borrower therein is a leasehold estate and the fee
interest of the ground lessor is not subject and subordinate to the
related Mortgage, that
(A) The ground lease or a memorandum regarding it has been duly
recorded. The ground lease permits the interest of the lessee to be
encumbered by the related Mortgage and does not restrict the use of
the related Mortgaged Property by such lessee, its successors or
assigns in a manner that would adversely affect the security provided
by the related Mortgage. There has been no material change in the
terms of such ground lease since its recordation, except by written
instruments, all of which are included in the related Mortgage File;
(B) Except with respect to the Mortgage Loan known as Marina Harbor,
the lessor under such ground lease has agreed in writing and included
in the related Mortgage File that the ground lease may not be amended,
modified, canceled or terminated without the prior written consent of
the mortgagee and that any such action without such consent is not
binding on the mortgagee, its successors or assigns;
(C) The ground lease has an original term (or an original term plus
one or more optional renewal terms, which, under all circumstances,
may be exercised, and will be enforceable, by the mortgagee) that
extends not less than 10 years beyond the stated maturity of the
related Mortgage Loan;
(D) The ground lease is not subject to any liens or encumbrances
superior to, or of equal priority with, the Mortgage (subject to those
exceptions comparable to those in clause (xi) above). The ground lease
is, and provides that it shall remain prior to any Mortgage or other
lien upon the related fee interest;
(E) Except with respect to the Mortgage Loan known as Marina Harbor,
the ground lease is assignable to the mortgagee under the leasehold
estate and its assigns without the consent of the lessor thereunder;
(F) As of the date of execution and delivery, the ground lease is in
full force and effect and no default has occurred, nor is there any
existing condition which, but for the passage of time or giving of
notice, would result in a default under the terms of the ground lease;
(G) The ground lease or ancillary agreement between the lessor and
the lessee requires the lessor to give notice of any default by the
lessee to the mortgagee. The ground lease or ancillary agreement
further provides that no notice given is effective against the
mortgagee unless a copy has been given to the mortgagee in a manner
described in the ground lease or ancillary agreement;
(H) A mortgagee is permitted a reasonable opportunity (including,
where necessary, sufficient time to gain possession of the interest of
the lessee under the ground lease through legal proceedings, or to
take other action so long as the mortgagee is proceeding diligently)
to cure any default under the ground lease which is curable after the
receipt of notice of any default before the lessor may terminate the
ground lease. All rights of the mortgagee under the ground lease and
the related Mortgage (insofar as it relates to the ground lease) may
be exercised by or on behalf of the mortgagee;
(I) Except with respect to the Mortgage Loan known as Marina Harbor,
the ground lease does not impose any restrictions on subletting that
would be viewed as commercially unreasonable by an institutional
investor. The lessor is not permitted to disturb the possession,
interest or quiet enjoyment of any subtenant of the lessee in the
relevant portion of the Mortgaged Property subject to the ground lease
for any reason, or in any manner, which would adversely affect the
security provided by the related Mortgage;
(J) Any related insurance proceeds or condemnation award (other than
in respect of a total or substantially total loss or taking) will be
applied either to the repair or restoration of all or part of the
related Mortgaged Property, with the mortgagee or a trustee appointed
by it (or in the case of the Marina Harbor Property, the ground lessor
acting in trust for the named insureds) having the right to hold and
disburse such proceeds as repair or restoration progresses, or, if
permitted by the related ground lease, to the payment of the
outstanding principal balance of the Mortgage Loan, together with any
accrued interest, except that in the case of condemnation awards, the
ground lessor is entitled to an amount of such award generally based
on the value of the unimproved land taken; and
(K) Except with respect to the Mortgage Loans known as Marina Harbor,
International Plaza and 30 Broad Street, under the terms of the ground
lease and the related Mortgage, any related insurance proceeds, or
113
<PAGE>
condemnation award in respect of a total or substantially total loss
or taking of the related Mortgaged Property will be applied first to
the payment of the outstanding principal balance of the Mortgage Loan,
together with any accrued interest (except where contrary to
applicable law or in cases where a different allocation would not be
viewed as commercially unreasonable by any institutional investor,
taking into account the relative duration of the ground lease and the
related Mortgage and the ratio of the market value of the related
Mortgage property to the outstanding principal balance of such
Mortgage Loan). Until the principal balance and accrued interest rate
are paid in full, neither the lessee nor the lessor under the ground
lease will have the option to terminate or modify the ground lease
without prior written consent of the mortgagee as a result of any
casualty or partial condemnation, except to provide for an abatement
of the rent;
(xxxii) with respect to each Mortgage Loan originated by Bloomfield, that
(A) such Mortgage Loan was underwritten in accordance with standards
established by the Mortgage Loan Seller, using application forms and
related credit documents approved by the Mortgage Loan Seller;
(B) the Mortgage Loan Seller approved each application and related
credit documents before a commitment by Bloomfield was issued, and no
such commitment was issued until the Mortgage Loan Seller agreed to
fund such loan;
(C) the closing documents for such Mortgage Loan were prepared on
forms approved by the Mortgage Loan Seller, and reflect the Mortgage
Loan Seller as the successor and assign to Bloomfield; and
(D) such loan was actually funded by the Mortgage Loan Seller, and
was assigned to the Mortgage Loan Seller at the closing;
(xxxiii) The leases to the Kmart Corporation with respect to the
Mortgaged Properties securing the Kmart Distribution Properties (A) are
triple net leases, (B) require the tenant to pay all rent without
reduction, setoff, abatement or other reduction, notwithstanding casualty,
condemnation and prohibition of use and (C) may not be terminated for any
reason other than a material taking or casualty, provided, however, that
Kmart Corporation agrees to purchase the related Kmart Distribution
Property for an amount at least equal to the outstanding principal balance
of the loan allocable to such property;
(xxxiv) With respect to each Mortgaged Property improved by a hotel, the
Mortgage Loan Seller has filed and/or recorded (or sent for filing and/or
recording on the closing date of the related Mortgage Loan) Uniform
Commercial Code financing statements on all furniture, fixtures, equipment
and all other personal property used in the operation of the hotel; and
(xxxv) The Mortgage Loan documents for each Mortgage Loan having a
Cut-off Date Principal Balance in excess of $20,000,000 requires that the
Board of Directors of the borrower, its corporate general partner, or
managing member, as applicable, include an independent director.
The Pooling and Servicing Agreement requires that the Servicer, the
Special Servicer or the Trustee notify the Mortgage Loan Seller and the
Depositor upon its becoming aware of (a) any breach of any representation or
warranty contained in clauses (i), (ii), (iii), (iv), (v), (vi), (vii),
(viii), (ix), (xi), (xii), (xv), (xvi), (xvii), (xviii), (xix), (xx), (xxiv)
or (xxix) and (b) any breach of any representation or warranty contained in
clauses (x), (xiii), (xiv), (xxi), (xxii), (xxiii), (xxv), (xxvi), (xxvii),
(xxviii), (xxx), (xxxi), (xxxii), (xxxiii), (xxxiv) or (xxxv) that materially
and adversely affects the value of such Mortgage Loan or the interests of the
holders of the Certificates therein. The Mortgage Loan Purchase and Sale
Agreement provides that, with respect to any such Mortgage Loan, within 90
days after notice from the Servicer, the Special Servicer or the Trustee, the
Mortgage Loan Seller shall either (a) repurchase such Mortgage Loan at an
amount equal to (i) the outstanding principal balance of the Mortgage Loan as
of the Due Date as to which a payment was last made by the borrower (less any
P&I Advances previously made on account of principal), (ii) accrued interest
up to the Due Date in the month following the month in which such repurchase
occurs (less P&I Advances previously made on account of interest), (iii) the
amount of any unreimbursed Advances (with interest thereon) and any
unreimbursed servicing compensation relating to such Mortgage Loan and (iv)
any expenses reasonably incurred or to be incurred by the Servicer, the
Special Servicer or the Trustee in respect of the breach or defect giving
rise to the repurchase obligation, including any expenses arising out of the
enforcement of the repurchase obligation (such price the "Repurchase Price")
or (b) promptly cure such breach in all material respects, provided, however,
that in the event that such breach is capable of being cured, as determined
by the Servicer, but not within such 90-day period and the Mortgage Loan
Seller, has
114
<PAGE>
commenced and is diligently proceeding with the cure of such breach, the
Mortgage Loan Seller will have an additional 90 days to complete such cure;
provided, further, that with respect to such additional 90-day period the
Mortgage Loan Seller shall have delivered an officer's certificate to the
Trustee and the Servicer setting forth the reason such breach is not capable
of being cured within the initial 90-day period and what actions the Mortgage
Loan Seller is pursuing in connection with the cure thereof and stating that
the Mortgage Loan Seller anticipates that such breach will be cured within
the additional 90-day period; and, provided, further, that in the event the
Mortgage Loan Seller fails to cure such breach within such additional 90-day
period, the Repurchase Price shall include interest on any Advances made in
respect of the related Mortgage Loan during such period.
Notwithstanding the foregoing, upon discovery by the Trustee, any
custodian for the Trustee, the Servicer or Special Servicer of a breach of a
representation or warranty that causes any Mortgage Loan not to be a
"qualified mortgage" within the meaning of the REMIC provisions of the Code,
such person shall give prompt notice thereof to the Depositor and within 90
days after such discovery, if such breach cannot be cured within such period,
the Depositor shall purchase, or cause the Mortgage Loan Seller to purchase,
such Mortgage Loan from the Trust Fund at the Repurchase Price.
The obligations of the Mortgage Loan Seller to repurchase or cure
constitute the sole remedies available to holders of Certificates or the
Trustee for a breach of a representation or warranty by the Mortgage Loan
Seller with respect to a Mortgage Loan. None of the Depositor (except as
described in the previous paragraph), the Servicer, the Special Servicer, the
Trustee or the Fiscal Agent will be obligated to purchase a Mortgage Loan if
the Mortgage Loan Seller defaults on its obligation to repurchase or cure,
and no assurance can be given that the Mortgage Loan Seller will fulfill such
obligations. No assurance can be given that the Depositor will perform any
obligation to cure or repurchase a Mortgage Loan for a breach of any
representation referred to in the second preceding paragraph. If such
obligation is not met, as to a Mortgage Loan that is not a "qualified
mortgage," the Upper-Tier REMIC and Lower-Tier REMIC may be disqualified.
However, with respect to the Mortgage Loans acquired by the Mortgage Loan
Seller from Bloomfield, the Mortgage Loan Seller will also assign to the
Depositor, and the Depositor will further assign to the Trustee, the Mortgage
Loan Seller's rights and remedies against Bloomfield in respect of the
representations and warranties made by Bloomfield in its purchase and sale
agreement with the Mortgage Loan Seller (the "Bloomfield Purchase
Agreement"), except that the Trustee will be required to reassign such rights
and remedies to the Mortgage Loan Seller as to individual Mortgage Loans
repurchased by the Mortgage Loan Seller.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Pooling and Servicing Agreement requires the Servicer and Special
Servicer to service and administer the Mortgage Loans on behalf of the Trust
Fund solely in the best interests of and for the benefit of all of the
holders of Certificates (as determined by the Servicer or Special Servicer in
the exercise of its reasonable judgment) in accordance with applicable law,
the terms of the Pooling and Servicing Agreement and the Mortgage Loans and
to the extent not inconsistent with the foregoing, in the same manner in
which, and with the same care, skill, prudence and diligence with which, it
(a) services and administers similar mortgage loans comparable to the
Mortgage Loans and held for other third party portfolios or (b) administers
mortgage loans for its own account, whichever standard is higher, but without
regard to (i) any known relationship that the Servicer or Special Servicer,
or an affiliate of the Servicer or Special Servicer, may have with the
borrowers or any other party to the Pooling and Servicing Agreement; (ii) the
ownership of any Certificate by the Servicer or Special Servicer or any
affiliate of the Servicer or Special Servicer, as applicable; (iii) the
Servicer's or Special Servicer's obligation to make Advances or to incur
servicing expenses with respect to the Mortgage Loans; (iv) the Servicer's or
Special Servicer's right to receive compensation for its services under the
Pooling and Servicing Agreement or with respect to any particular
transaction; or (v) the ownership, or servicing or management for others, by
the Servicer or Special Servicer of any other mortgage loans or property (the
"Servicing Standard"). The Servicer and the Special Servicer are permitted,
at their own expense, to employ subservicers, agents or attorneys in
performing any of their respective obligations under the Pooling and
Servicing Agreement, but will not thereby be relieved of any such obligation,
and will be responsible for the acts and omissions of any such subservicers,
agents or attorneys. The Pooling and Servicing Agreement provides, however,
that neither the Servicer, the Special Servicer nor any of their respective
directors, officers, employees or agents shall have any liability to the
Trust Fund or the Certificateholders for taking any action or refraining from
taking an action in good faith, or for errors in judgment. The foregoing
provision would not protect the Servicer or the Special Servicer for the
breach of its representations or warranties in the Pooling and Servicing
Agreement, or any liability by reason of willful misconduct, bad faith, fraud
or negligence in the performance of its duties or by reason of its reckless
disregard of obligations or duties under the Pooling and Servicing Agreement.
115
<PAGE>
The Pooling and Servicing Agreement requires the Servicer or the Special
Servicer, as applicable, to make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans. Consistent
with the above, the Servicer or Special Servicer may, in its discretion,
waive any late payment charge in connection with any delinquent Monthly
Payment or Balloon Payment with respect to any Mortgage Loan. With respect to
the ARD Loans, the Servicer and Special Servicer will be directed in the
Pooling and Servicing Agreement not to take any enforcement action with
respect to payment of Excess Interest or principal in excess of the principal
component of the constant Monthly Payment prior to the final maturity date.
The Pooling and Servicing Agreement provides that if a Mortgage Loan provides
that the lender may in its direction apply certain amounts to a prepayment of
principal (e.g., by applying casualty or condemnation proceeds or funds
escrowed improvements not completed by the required date) prior to the
expiration of the related Lock-out Period, the Special Servicer cannot
consent to such a prepayment unless the Special Servicer has first received
the consent of the Servicer or the holders of 66 2/3% of the Voting Rights of
the Certificates responding to a solicitation of their consent. With respect
to any Specially Serviced Mortgage Loan, subject to the restrictions set
forth below under "--Realization Upon Mortgage Loans," the Special Servicer
will be entitled to pursue any of the remedies set forth in the related
Mortgage, including the right to acquire, through foreclosure, all or any of
the Mortgaged Properties securing such Mortgage Loan. The Servicer or Special
Servicer may elect to extend a Mortgage Loan (subject to conditions described
herein) notwithstanding its decision to foreclose on certain of the Mortgaged
Properties.
ADVANCES
The Servicer will be obligated to advance, on the business day immediately
preceding a Distribution Date (the "Servicer Remittance Date") an amount
(each such amount, a "P&I Advance") equal to the total or any portion of the
Monthly Payment or Minimum Defaulted Monthly Payment on a Mortgage Loan (with
interest at the Mortgage Pass-Through Rate) not received that was delinquent
as of the close of business on the immediately preceding Due Date (and which
delinquent payment has not been cured as of the Servicer Remittance Date),
or, in the event of a default in the payment of amounts due on the maturity
date of a Mortgage Loan, the amount equal to the Monthly Payment or portion
thereof not received that was due prior to the maturity date provided,
however, the Servicer will not be required to make an Advance to the extent
it determines that such advance would not be ultimately recoverable from late
payments, net insurance proceeds, net liquidation proceeds and other
collections with respect to the related Mortgage Loan. P&I Advances are
intended to maintain a regular flow of scheduled interest and principal
payments to holders of the Certificates entitled thereto, rather than to
guarantee or insure against losses. The Servicer will not be required or
permitted to make a P&I Advance for Excess Interest or Default Interest. The
amount required to be advanced in respect of delinquent Monthly Payments,
Assumed Scheduled Payments or Minimum Defaulted Monthly Payments on a
Mortgage Loan that has been subject to an Appraisal Reduction Event will
equal the product of (a) the amount that would be required to be advanced by
the Servicer without giving effect to such Appraisal Reduction Event and (b)
a fraction, the numerator of which is the Stated Principal Balance of the
Mortgage Loan (as of the last day of the related Collection Period) less any
Appraisal Reduction Amounts thereof and the denominator of which is the
Stated Principal Balance (as of the last day of the related Collection
Period). In addition, and without duplication the Servicer will (i) make only
one P&I Advance in respect of each Mortgage Loan for the benefit of the most
subordinate Class of Certificates then outstanding unless the related
defaulted Monthly Payment is cured prior to the following Due Date on any
Mortgage Loan and (ii) not make any P&I Advance in respect of Reduction
Interest Distribution Amounts or Reduction Interest Shortfalls. The amount to
be advanced by the Servicer, Trustee or Fiscal Agent in respect of any
Mortgage Loan on any Distribution Date will be reduced by the greater of the
reduction in respect of any Appraisal Reduction Amount and the reduction
described in the preceding sentence. On any Servicer Remittance Date on which
the Servicer is not required to make a P&I Advance to the most subordinate
Class of Certificates (as described above), the Servicer will initially make
such P&I Advance (for accounting purposes only) but will be required,
immediately subsequent to the making of such P&I Advance, to reimburse itself
(without interest) for such P&I Advance from and up to all amounts with
respect to such Mortgage Loan that would be distributed to the most
subordinate Class on the related Distribution Date then outstanding if such
Mortgage Loan was not in default (such amount of reimbursement, the
"Subordinate Class Advance Amount"). No interest will accrue on, or be
payable with respect to, any outstanding Subordinate Class Advance Amount.
The obligation of the Servicer, the Special Servicer, the Trustee or the
Fiscal Agent, as applicable, to make Advances with respect to any Mortgage
Loan pursuant to the Pooling and Servicing Agreement continues through the
foreclosure of such Mortgage Loan and until the liquidation of the Mortgage
Loan or related Mortgaged Properties. P&I Advances are intended to provide a
limited amount of liquidity, not to guarantee or insure against losses. None
of the Servicer, the Special Servicer, the Trustee or the Fiscal Agent will
be required to make any Advance that it determines in its good faith
116
<PAGE>
business judgment will not be recoverable by the Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, out of related late
payments, net insurance proceeds, net liquidation proceeds and other
collections with respect to the Mortgage Loan as to which such Advances were
made. In addition, if the Servicer, the Special Servicer, the Trustee or the
Fiscal Agent, as applicable, determines in its good faith business judgment
that any Advance previously made will not be recoverable from the foregoing
sources, then the Servicer, the Special Servicer, the Trustee or the Fiscal
Agent, as applicable, will be entitled to reimburse itself for such Advance,
plus interest thereon, out of amounts payable on or in respect of all of the
Mortgage Loans prior to distributions on the Certificates. Any such judgment
or determination with respect to the recoverability of Advances must be
evidenced by an officers' certificate delivered to the Trustee, Fiscal Agent
and Depositor, in the case of the Servicer, the Servicer, in the case of the
Special Servicer, the Depositor, in the case of the Trustee or the Fiscal
Agent and the Trustee in the case of the Fiscal Agent, setting forth such
judgment or determination of nonrecoverability and the considerations of the
Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as
applicable, forming the basis of such determination (including but not
limited to information selected by the person making such determination in
its good faith discretion such as related income and expense statements, rent
rolls, occupancy status, property inspections, inquiries by the Servicer, the
Special Servicer, the Trustee or the Fiscal Agent, as applicable, and an
independent appraisal performed in accordance with MAI standards conducted
within the past twelve months on the applicable Mortgaged Property).
The Trustee will provide to the Servicer written statements prior to the
Servicer Remittance Date listing (i) the aggregate Reduction Interest
Distribution Amounts and Reduction Interest Shortfalls for such Distribution
Date and (ii) the distribution due to the Holders of the most subordinate
Class of Certificates. For purposes of determining the most subordinate
Class, (i) the Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-CS1
and Class PS-1 Certificates collectively and (ii) the Class B-7 and Class
B-7H Certificates together will, in each case, be treated as one Class.
In addition to P&I Advances, the Servicer (and in limited circumstances,
the Special Servicer) will also be obligated (subject to the limitations
described herein) to make cash advances ("Property Advances," and together
with P&I Advances, "Advances") to pay delinquent real estate taxes,
assessments and hazard insurance premiums and to cover other similar costs
and expenses necessary to preserve the priority of the related Mortgage,
enforce the terms of any Mortgage Loan or to maintain such Mortgaged
Property.
To the extent the Servicer fails to make an Advance it is required to make
under the Pooling and Servicing Agreement, the Trustee, subject to a
determination of recoverability, will make such required Advance or, in the
event the Trustee fails to make such Advance, the Fiscal Agent, subject to a
determination of recoverability, will make such Advance, in each case
pursuant to the terms of the Pooling and Servicing Agreement. To the extent
the Special Servicer fails to make an Advance it is required to make under
the Pooling and Servicing Agreement, the Servicer, subject to a determination
of recoverability, will make such an Advance. Both the Trustee and the Fiscal
Agent will be entitled to rely conclusively on any non-recoverability
determination of the Servicer or the Special Servicer, as the case may be.
See "--Trustee" and "--Fiscal Agent" below.
The Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as
applicable, will be entitled to reimbursement for any Advance made by it in
an amount equal to the amount of such Advance and interest accrued thereon at
the Advance Rate (i) from late payments on the Mortgage Loan by the
Mortgagor, (ii) from insurance proceeds, condemnation proceeds, liquidation
proceeds from the sale of the Specially Serviced Mortgage Loan or the related
Mortgaged Property or other collections relating to the Mortgage Loan or
(iii) upon determining in good faith that such Advance or interest is not
recoverable in the manner described in the preceding two clauses, from any
other amounts from time to time on deposit in the Collection Account.
The Servicer, the Special Servicer, the Trustee and the Fiscal Agent will
each be entitled to receive interest on Advances at a per annum rate equal to
the sum of (i) the Prime Rate plus (ii) 1% (the "Advance Rate"), compounded
monthly, as of each Servicer Remittance Date and the Servicer will be
authorized to pay itself, the Special Servicer, the Trustee or the Fiscal
Agent, as applicable, such interest monthly from general collections with
respect to all of the Mortgage Loans prior to any payment to holders of
Certificates. To the extent that the payment of such interest at the Advance
Rate results in a shortfall in amounts otherwise payable on one or more
Classes of Certificates on the next Distribution Date, the Servicer, the
Trustee or the Fiscal Agent, as applicable, will be obligated to make a cash
advance to cover such shortfall, but only to the extent the Servicer, the
Trustee or the Fiscal Agent, as applicable, concludes that, with respect to
each such Advance, such Advance can be recovered from amounts payable on or
in respect of the
117
<PAGE>
Mortgage Loan to which the Advance is related. If the interest on such
Advance is not recovered from Default Interest on such Mortgage Loan, a
shortfall will result which will have the same effect as a Realized Loss. The
"Prime Rate" is the rate, for any day, set forth as such in the "Money Rates"
section of The Wall Street Journal, Eastern Edition.
ACCOUNTS
Lock Box Accounts. With respect to 47 Mortgage Loans, which represent in
the aggregate 79% of the Initial Pool Balance, one or more accounts in the
name of the related borrower (the "Lock Box Accounts") have been established
into which rents or other revenues from the related Mortgaged Properties are
deposited by the related tenants or manager. Any Lock Box which does not
require the related borrower to instruct tenants to deposit rents directly
into such account will instead require the borrower or the related property
manager to deposit rents and other revenues in the related Lock Box Account.
Agreements governing the Lock Box Accounts provide that the borrower has no
withdrawal or transfer rights with respect thereto and that all funds on
deposit in the Lock Box Accounts are periodically swept into the Cash
Collateral Accounts. Additionally, the Mortgage Loans that have Anticipated
Repayment Dates require that a Lock Box Account be established prior to their
respective Anticipated Repayment Dates. The Lock Box Accounts will not be an
asset of the Trust REMICs.
Cash Collateral Accounts. With respect to each Mortgage Loan that has a
Lock Box Account, one or more accounts in the name of the Servicer (the "Cash
Collateral Accounts") have been established into which funds in the related
Lock Box Accounts will be swept on a regular basis. The Reserve Accounts
generally will be sub-accounts of the Cash Collateral Accounts. Any excess
over the amount necessary to fund the Monthly Payment, the Reserve Accounts
and any other amounts due under the Mortgage Loans will be returned to or
retained by the related borrower provided no event of default of which the
Servicer is aware has occurred and is continuing with respect to such
Mortgage Loan. However, as described under "Description of the Mortgage Pool
- -- Certain Terms and Conditions of the Mortgage Loans -- Excess Interest,"
after the respective Anticipated Repayment Date, if applicable, all amounts
in the related Cash Collateral Account in excess of the amount necessary to
fund the Monthly Payment and Reserve Accounts will be applied to (i)
operating and capital expenses, (ii) the reduction of the principal balance
of the related Mortgage Loan until such principal is paid in full and (iii)
Excess Interest, in that order. The Cash Collateral Accounts will not be an
asset of the Trust REMICs.
Collection Account. The Servicer will establish and maintain a segregated
account (the "Collection Account") pursuant to the Pooling and Servicing
Agreement, and on each Due Date withdraw from each Cash Collateral Account an
amount equal to the Monthly Payment on the related Mortgage Loan and deposit
such amount into the Collection Account for application towards the Monthly
Payment (including Servicing Fees) due on the related Mortgage Loan. The
Servicer shall also deposit into the Collection Account within one business
day of receipt all other payments in respect of the Mortgage Loans, other
than amounts to be deposited into any Reserve Account.
Distribution Accounts. The Trustee will establish and maintain one or more
segregated accounts ("Distribution Accounts") in the name of the Trustee for
the benefit of the holders of Certificates. With respect to each Distribution
Date, the Servicer will deposit in the Distribution Account, to the extent of
funds on deposit in the Collection Account, on the Servicer Remittance Date
an aggregate amount of immediately available funds equal to the sum of (i)
the Available Funds and (ii) the portion of the Servicing Fee representing
the Trustee's Fee. The Servicer will deposit all P&I Advances into the
Distribution Account on the related Servicer Remittance Date. To the extent
the Servicer fails to do so, the Trustee or the Fiscal Agent will deposit all
P&I Advances into the Distribution Account as described herein. See
"Description of the Subordinated Certificates -- Distributions" herein.
Interest Reserve Account. The Servicer will establish and maintain an
Interest Reserve Account ("Interest Reserve Account") in the name of the
Trustee for the benefit of the holders of the Certificates. On each Servicer
Remittance Date relating to an Interest Accrual Period ending in any February
and on any Servicer Remittance Date relating to an Interest Accrual Period
ending in any January which occurs in a year which is not a leap year, the
Servicer will be required to deposit, in respect of the Mortgage Loans known
as the Saracen, Burnham Pacific, M&H, Lakeside and Ambassador loans, into the
Interest Reserve Account, an amount equal to one day's interest collected on
the Stated Principal Balance of such Mortgage Loan as of the Due Date
occurring in the month preceding the month in which such Servicer Remittance
Date occurs at the related Mortgage Rate, to the extent a full Monthly
Payment or P&I Advance is made in respect thereof (all amounts so deposited
in any consecutive January and February, "Withheld Amounts"). On each
Servicer Remittance Date occurring in March, the Servicer will be required to
withdraw from the Interest Reserve Account an amount equal to the Withheld
Amounts from the preceding January and February, if any, and deposit such
amount into the Distribution Accounts.
118
<PAGE>
The Trustee will also establish and maintain one or more segregated
accounts for each of the "Upper-Tier Distribution Account," the "Default
Interest Distribution Account" and the "Excess Interest Distribution
Account," each in the name of the Trustee for the benefit of the holders of
the Certificates.
The Cash Collateral Accounts, Collection Account, the Distribution
Account, the Upper-Tier Distribution Account, the Interest Reserve Account,
the Excess Interest Distribution Account and the Default Interest
Distribution Account will be held in the name of the Trustee (or the Servicer
on behalf of the Trustee) on behalf of the holders of Certificates and the
Servicer will be authorized to make withdrawals from the Cash Collateral
Accounts, the Collection Account and the Interest Reserve Account. Each of
the Cash Collateral Account, Collection Account, any REO Account, the
Distribution Account, the Upper-Tier Distribution Account, the Interest
Reserve Account, the Excess Interest Distribution Account and the Default
Interest Distribution Account will be either (i) (A) an account or accounts
maintained with a depository institution or trust company the short term
unsecured debt obligations or commercial paper of which are rated at least
A-1 by S&P, P-1 by Moody's, D-1 by DCR and F-1+ by Fitch in the case of
accounts in which funds are held for 30 days or less (or, in the case of
accounts in which funds are held for more than 30 days, the long term
unsecured debt obligations of which are rated at least "AA" by Fitch, DCR and
S&P and "Aaa" by Moody's) or (B) as to which the Trustee has received written
confirmation from each of the Rating Agencies that holding funds in such
account would not cause any Rating Agency to qualify, withdraw or downgrade
any of its ratings on the Certificates or (ii) a segregated trust account or
accounts maintained with a federal or state chartered depository institution
or trust company acting in its fiduciary capacity which, in the case of a
state chartered depository institution, is subject to regulations
substantially similar to 12 C.F.R. Section 9.10(b), having in either case a
combined capital surplus of at least $50,000,000 and subject to supervision
or examination by federal and state authority, or any other account that, as
evidenced by a written confirmation from each Rating Agency that such account
would not, in and of itself, cause a downgrade, qualification or withdrawal
of the then current ratings assigned to the Certificates, which may be an
account maintained with the Trustee or the Servicer (an "Eligible Bank").
Amounts on deposit in the Collection Account, Cash Collateral Account, any
REO Account and the Interest Reserve Account may be invested in certain
United States government securities and other high-quality investments
specified in the Pooling and Servicing Agreement ("Permitted Investments").
Interest or other income earned on funds in the Collection Account and Cash
Collateral Accounts will be paid to the Servicer (except to the extent
required to be paid to the related borrower) as additional servicing
compensation and interest or other income earned on funds in any REO Account
will be payable to the Special Servicer. Interest or other income earned on
funds in the Interest Reserve Account will be paid to NSI as compensation for
arranging for on-going monitoring and surveillance of the Subordinated
Certificates by the Rating Agencies.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The Servicer may make withdrawals from the Collection Account for the
following purposes, to the extent permitted and in the priorities provided in
the Pooling and Servicing Agreement: (i) to remit on or before each Servicer
Remittance Date (A) to the Distribution Account an amount equal to the sum of
(I) Available Funds and any Prepayment Premiums and (II) the Trustee Fee for
such Distribution Date, (B) to the Default Interest Distribution Account an
amount equal to the Net Default Interest received in the related Collection
Period, (C) to the Excess Interest Distribution Account an amount equal to
the Excess Interest received in the related Collection Period, if any, and
(D) to the Interest Reserve Account an amount required to be withheld as
described under "--Accounts -- Interest Reserve Account"; (ii) to pay or
reimburse the Servicer, the Special Servicer, the Trustee and the Fiscal
Agent, as applicable, for Advances made by any of them and, if applicable,
interest on Advances (provided, that the Trustee and Fiscal Agent will have
priority with respect to such payment or reimbursement), the Servicer's right
to reimbursement for items described in this clause (ii) being limited as
described herein under "--Advances"; (iii) to pay on or before each Servicer
Remittance Date to the Servicer and the Special Servicer as compensation, the
aggregate unpaid Servicing Compensation (not including the portion of the
Servicing Fee representing the Trustee's Fee), Special Servicing Fee,
Principal Recovery Fee, if any, and any other servicing or special servicing
compensation in respect of the immediately preceding calendar month; (iv) to
pay on or before each Distribution Date to the Depositor, Mortgage Loan
Seller or Bloomfield with respect to each Mortgage Loan or REO Property that
has previously been purchased or repurchased by it pursuant to the Pooling
and Servicing Agreement, all amounts received thereon during the related
Collection Period and subsequent to the date as of which the amount required
to effect such purchase or repurchase was determined; (v) to the extent not
reimbursed or paid pursuant to any of the above clauses, to reimburse or pay
the Servicer, the Special Servicer, the Trustee, the Fiscal Agent and/or the
Depositor for unpaid servicing compensation (in the case of the Servicer, the
Special Servicer or the Trustee) and certain other unreimbursed expenses
incurred by such persons pursuant to and to the extent reimbursable under the
Pooling and
119
<PAGE>
Servicing Agreement and to satisfy any indemnification obligations of the
Trust Fund under the Pooling and Servicing Agreement; (vi) to pay to the
Trustee amounts requested by it to pay taxes on certain net income with
respect to REO Properties; (vii) to withdraw any amount deposited into the
Collection Account that was not required to be deposited therein; and (viii)
to clear and terminate the Collection Account pursuant to a plan for
termination and liquidation of the Trust Fund.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
The Mortgage Loans contain provisions in the nature of "due-on-sale"
clauses, which by their terms (a) provide that the Mortgage Loans shall (or
may at the mortgagee's option) become due and payable upon the sale or other
transfer of an interest in the related Mortgaged Property or (b) provide that
the Mortgage Loans may not be assumed without the consent of the related
mortgagee in connection with any such sale or other transfer. The Servicer or
the Special Servicer, as applicable, will not be required to enforce such
due-on-sale clauses and in connection therewith will not be required to (i)
accelerate payments thereon or (ii) withhold its consent to such an
assumption if (x) such provision is not exercisable under applicable law or
such provision is reasonably likely to result in meritorious legal action by
the borrower or (y) the Servicer or the Special Servicer, as applicable,
determines, in accordance with the Servicing Standard, that granting such
consent would be likely to result in a greater recovery, on a present value
basis (discounting at the related Mortgage Rate), than would enforcement of
such clause. If the Servicer or the Special Servicer, as applicable,
determines that granting such consent would be likely to result in a greater
recovery or such provision is not legally enforceable, the Servicer or the
Special Servicer, as applicable, is authorized to take or enter into an
assumption agreement from or with the proposed transferee as obligor thereon
provided that (a) the credit status of the prospective transferee is in
compliance with the Servicer's or Special Servicer's, as applicable, regular
commercial mortgage origination or servicing standards and criteria and the
terms of the related Mortgage and (b) the Servicer or the Special Servicer,
as applicable, has received written confirmation from each of Fitch, Moody's
and S&P, and, if the Mortgage Loan represents greater than 2% of the
aggregate Stated Principal Balances of the Mortgage Loans, DCR that such
assumption or substitution would not, in and of itself, cause a downgrade,
qualification or withdrawal of the then current ratings assigned to the
Certificates. No assumption agreement may contain any terms that are
different from any term of any Mortgage or related Note, except pursuant to
the provisions described under "--Realization Upon Mortgage Loans" and
"Modifications" herein.
The Mortgage Loans contain provisions in the nature of a
"due-on-encumbrance" clause which by their terms (a) provide that the
Mortgage Loans shall (or may at the mortgagee's option) become due and
payable upon the creation of any lien or other encumbrance on the related
Mortgaged Property, or (b) require the consent of the related mortgagee to
the creation of any such lien or other encumbrance on the related Mortgaged
Property. The Servicer or the Special Servicer, as applicable, will not be
required to enforce such due-on-encumbrance clauses and in connection
therewith will not be required to (i) accelerate payments thereon or (ii)
withhold its consent to such lien or encumbrance if the Servicer or the
Special Servicer, as applicable, (x) determines, in accordance with the
Servicing Standard, that such enforcement would not be in the best interests
of the Trust Fund and (y) receives prior written confirmation from each of
Fitch, Moody's and S&P, and, if the Mortgage Loan represents greater than 2%
of the aggregate Stated Principal Balances of the Mortgage Loans, DCR that
granting such consent would not, in and of itself, cause a downgrade,
qualification or withdrawal of any of the then current ratings assigned to
the Certificates. See "Certain Legal Aspects of the Mortgage Loans --
Due-on-Sale and Due-on-Encumbrance."
INSPECTIONS
The Servicer (or with respect to any Specially Serviced Mortgage Loan, the
Special Servicer) is required to inspect each Mortgaged Property at such
times and in such manner as are consistent with the Servicing Standards
described herein, but in any event (i) is required to inspect each Mortgaged
Property securing a Note, with a Stated Principal Balance (or in the case of
a Note secured by more than one Mortgaged Property, having an Allocated Loan
Amount) of (a) $2,000,000 or more at least once every twelve months and (b)
less than $2,000,000 at least once every 24 months, in each case commencing
in May 1997 (or at such lesser frequency, provided each Rating Agency has
confirmed in writing to the Servicer that such schedule will not result in
the withdrawal, downgrading or qualification of the then-current ratings
assigned to the Certificates) and (ii) if the Mortgage Loan (a) becomes a
"Specially Serviced Mortgage Loan," (b) is delinquent for 60 days or (c) has
a debt service coverage ratio of less than 1.0, the Special Servicer is
required to inspect the related Mortgaged Properties as soon as practicable
and thereafter at least every twelve months.
120
<PAGE>
INSURANCE POLICIES
The Pooling and Servicing Agreement requires the Servicer (or the Special
Servicer in the case of an REO Property) to obtain or cause the mortgagor on
each Mortgage Loan to maintain fire and hazard insurance with extended
coverage on the related Mortgaged Property in an amount which is at least
equal to the lesser of (A) one hundred percent (100%) of the then "full
replacement cost" of the improvements and equipment without deduction for
physical depreciation, and (B) the outstanding principal balance of the
related Mortgage Loan, or such greater amount as is necessary to prevent any
reduction, by reason of the application of co-insurance and to prevent the
Trustee thereunder from being deemed a co-insurer and provided such policy
shall include a "replacement cost" rider. The Pooling and Servicing Agreement
also requires the Servicer (or the Special Servicer in the case of an REO
Property) to obtain or cause the mortgagor on each Mortgaged Property to
maintain insurance providing coverage against at least 18 months of rent
interruptions (24 months with respect to an REO Property) and any other
insurance as is required in the related Mortgage Loan. In the case of an REO
Property, if the Special Servicer fails to maintain fire and hazard insurance
as described above or flood insurance as described below, the Servicer shall
maintain such insurance, and if the Servicer does not maintain such
insurance, the Trustee shall maintain such insurance and if the Trustee does
not maintain such insurance, the Fiscal Agent shall do so, subject to the
provisions concerning nonrecoverable Advances. Any cost incurred by the
Servicer, Special Servicer, Trustee or Fiscal Agent in maintaining any such
insurance shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so
permit.
In general, the standard form of fire and hazard extended coverage policy
covers physical damage to or destruction of the improvements of the property
by fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil
commotion, subject to certain conditions and exclusions in each policy.
Although the policies relating to the Mortgage Loans will be underwritten by
different insurers in different states and therefore will not contain
identical terms and conditions, most such policies will not cover any
physical damage resulting from war, revolution, governmental actions, floods
and other water-related causes, earth movement (including earthquakes,
landslides and mudflows), wet or dry rot, vermin, domestic animals and
certain other kinds of uninsured risks. Nonetheless, certain of the Mortgage
Loans require insurance coverage for floods and other water-related causes
and earth movement. When a Mortgaged Property is located in a federally
designated flood area, the Pooling and Servicing Agreement requires the
Servicer to use its best efforts to cause the related borrower to maintain,
or if not maintained, to itself obtain (subject to the provisions concerning
nonrecoverable Advances) flood insurance. Such flood insurance shall be in an
amount equal to the lesser of (i) the unpaid principal balance of the related
Mortgage Loan and (ii) the maximum amount of such insurance required by the
terms of the related Mortgage and as is available for the related property
under the national flood insurance program, if available. If an REO Property
(i) is located in a federally designated special flood hazard area or (ii) is
related to a Mortgage Loan pursuant to which earthquake insurance was in
place at the time of origination and continues to be available at
commercially reasonable rates, the Pooling and Servicing Agreement requires
that the Special Servicer obtain (subject to the provisions concerning
nonrecoverable Advances) flood insurance and/or earthquake insurance. If a
recovery due to a flood or earthquake is not available for an REO Property
but would have been available if such insurance were maintained, the Special
Servicer will be required (subject to the provisions concerning
nonrecoverable Advances) to (i) immediately deposit into the Collection
Account from its own funds the amount that would have been recovered or (ii)
apply to the restoration and repair of the property from its own funds the
amount that would have been recovered, if such application is consistent with
the Servicing Standard; provided, however, that the Special Servicer shall
not be responsible for any shortfall in insurance proceeds resulting from an
insurer's refusal or inability to pay a claim.
The Servicer or the Special Servicer may obtain and maintain a blanket
insurance policy insuring against fire and hazard losses on all of the
Mortgaged Properties (other than REO Properties) as to which the related
borrower has not maintained insurance to satisfy its obligations concerning
the maintenance of insurance coverage. Any such blanket insurance policy
shall be maintained with an insurer qualified under the terms of the Pooling
and Servicing Agreement. Additionally, the Servicer or the Special Servicer
may obtain a master force placed insurance policy, as long as such policy is
issued by an insurer qualified under the terms of the Pooling and Servicing
Agreement and provides no less coverage in scope and amount than otherwise
required to be maintained as described in the preceding paragraphs.
The ability of the Servicer to assure that fire and hazard, flood or
earthquake insurance proceeds are appropriately applied may be dependent upon
its being named as an additional insured under such policy, or upon the
extent to which information in this regard is furnished by mortgagors.
121
<PAGE>
Under the terms of the Mortgage Loans, the borrowers will be required to
present claims to insurers under hazard insurance policies maintained on the
related Mortgaged Properties. The Servicer or Special Servicer, as
applicable, on behalf of itself, the Trustee and Certificateholders, is
obligated to present or cause to be presented claims under any blanket
insurance policy insuring against hazard losses on Mortgaged Properties
securing the Mortgage Loans. However, the ability of the Servicer or Special
Servicer, as applicable, to present or cause to be presented such claims is
dependent upon the extent to which information in this regard is furnished to
the Servicer or Special Servicer, as applicable, by the borrowers.
All insurance policies required shall name the Trustee or the Servicer or
the Special Servicer, on behalf of the Trustee as the mortgagee, as loss
payee.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement requires the Servicer to cause a
nationally recognized firm of independent public accountants, which is a
member of the American Institute of Certified Public Accountants, to furnish
to the Trustee, the Depositor and the Rating Agencies on or before March 15
of each year, beginning March 15, 1998, a statement to the effect that such
firm has examined certain documents and records relating to the servicing of
similar mortgage loans for the preceding twelve months and that on the basis
of their examination, conducted substantially in compliance with generally
accepted auditing standards and the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC, such
servicing has been conducted in compliance with similar agreements except for
such significant exceptions or errors in records that, in the opinion of such
firm, generally accepted auditing standards and the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FHLMC require it to report, in which case such exceptions and
errors shall be so reported.
The Pooling and Servicing Agreement also requires the Servicer to deliver
to the Trustee, the Depositor and the Rating Agencies on or before March 15
of each year, beginning March 15, 1998, an officer's certificate of the
Servicer stating that, to the best of such officer's knowledge, the Servicer
has fulfilled its obligations under the Pooling and Servicing Agreement
throughout the preceding year or, if there has been a default, specifying
each default known to such officer and the action proposed to be taken with
respect thereto.
CERTAIN MATTERS REGARDING THE DEPOSITOR, THE SERVICER AND THE SPECIAL
SERVICER
Each of the Servicer and Special Servicer may assign its rights and
delegate its duties and obligations under the Pooling and Servicing Agreement
in connection with the sale or transfer of a substantial portion of its
mortgage servicing or asset management portfolio, provided that certain
conditions are satisfied including obtaining the consent of the Trustee and
written confirmation of each Rating Agency that such assignment or delegation
will not cause a qualification, withdrawal or downgrading of the then-current
ratings assigned to the Certificates. The Pooling and Servicing Agreement
provides that the Servicer or Special Servicer may not otherwise resign from
its obligations and duties as Servicer or Special Servicer thereunder, except
upon the determination that performance of its duties is no longer
permissible under applicable law and provided that such determination is
evidenced by an opinion of counsel delivered to the Trustee. No such
resignation may become effective until the Trustee or a successor Servicer or
Special Servicer has assumed the obligations of the Servicer or Special
Servicer under the Pooling and Servicing Agreement. The Trustee or any other
successor Servicer or Special Servicer assuming the obligations of the
Servicer or Special Servicer under the Pooling and Servicing Agreement will
be entitled to the compensation to which the Servicer or Special Servicer
would have been entitled. If no successor Servicer or Special Servicer can be
obtained to perform such obligations for such compensation, additional
amounts payable to such successor Servicer or Special Servicer will be
treated as Realized Losses. In addition, the Pooling and Servicing Agreement
provides that the Depositor is permitted to remove the Servicer at any time
without cause provided that (i) each Rating Agency has confirmed in writing
that such removal will not result in a downgrade, qualification or withdrawal
of the then current rating of any Class of Certificates and (ii) the
successor Servicer shall be a servicing company that (x) is an affiliate of
the Depositor and (y) was acquired by an affiliate of the Depositor.
The Pooling and Servicing Agreement also provides that neither the
Depositor, the Servicer, the Special Servicer, nor any director, officer,
employee or agent of the Depositor, the Servicer or the Special Servicer will
be under any liability to the Trust Fund or the holders of Certificates for
any action taken or for refraining from the taking of any action in good
faith pursuant to the Pooling and Servicing Agreement, or for errors in
judgment; provided, however, that neither the Depositor, the Servicer, the
Special Servicer nor any such person will be protected against any breach of
its representations
122
<PAGE>
and warranties made in the Pooling and Servicing Agreement or any liability
which would otherwise be imposed by reason of willful misconduct, bad faith,
fraud or negligence in the performance of duties thereunder or by reason of
reckless disregard of obligations and duties thereunder. The Pooling and
Servicing Agreement further provides that the Depositor, the Servicer, the
Special Servicer and any director, officer, employee or agent of the
Depositor, the Servicer and the Special Servicer will be entitled to
indemnification by the Trust Fund for any loss, liability or expense incurred
in connection with any legal action relating to the Pooling and Servicing
Agreement or the Certificates, other than any loss, liability or expense (i)
incurred by reason of willful misconduct, bad faith, fraud or negligence (or
in the case of the Servicer, by reason of any specific liability imposed for
a breach of the Servicing Standard) in the performance of duties thereunder
or by reason of reckless disregard of obligations and duties thereunder or
(ii) imposed by any taxing authority if such loss, liability or expense is
not specifically reimbursable pursuant to the terms of the Pooling and
Servicing Agreement.
In addition, the Pooling and Servicing Agreement provides that neither the
Depositor, the Servicer, nor the Special Servicer will be under any
obligation to appear in, prosecute or defend any legal action unless such
action is related to its duties under the Pooling and Servicing Agreement and
which in its opinion does not expose it to any expense or liability. The
Depositor, the Servicer or the Special Servicer may, however, in its
discretion undertake any such action which it may deem necessary or desirable
with respect to the Pooling and Servicing Agreement and the rights and duties
of the parties thereto and the interests of the holders of Certificates
thereunder. In such event, the legal expenses and costs of such action and
any liability resulting therefrom will be expenses, costs and liabilities of
the Trust Fund, and the Depositor, the Servicer and the Special Servicer will
be entitled to be reimbursed therefor and to charge the Collection Account.
The Depositor is not obligated to monitor or supervise the performance of
the Servicer, the Special Servicer or the Trustee under the Pooling and
Servicing Agreement. The Depositor may, but is not obligated to, enforce the
obligations of the Servicer or the Special Servicer under the Pooling and
Servicing Agreement and may, but is not obligated to, perform or cause a
designee to perform any defaulted obligation of the Servicer or the Special
Servicer or exercise any right of the Servicer or the Special Servicer under
the Pooling and Servicing Agreement. In the event the Depositor undertakes
any such action, it will be reimbursed by the Trust Fund from the Collection
Account to the extent not recoverable from the Servicer or Special Servicer,
as applicable. Any such action by the Depositor will not relieve the Servicer
or the Special Servicer of its obligations under the Pooling and Servicing
Agreement.
Any person into which the Servicer may be merged or consolidated, or any
person resulting from any merger or consolidation to which the Servicer is a
party, or any person succeeding to the business of the Servicer, will be the
successor of the Servicer under the Pooling and Servicing Agreement, and
shall be deemed to have assumed all of the liabilities and obligations of the
Servicer under the Pooling and Servicing Agreement, if each of the Rating
Agencies has confirmed in writing that such merger or consolidation or
transfer of assets and succession, in and of itself, will not cause a
downgrade, qualification or withdrawal of the then current ratings assigned
by such Rating Agency to any Class of Certificates.
EVENTS OF DEFAULT
Events of default of the Servicer (each, an "Event of Default") under the
Pooling and Servicing Agreement consist, among other things, of (i) any
failure by the Servicer to remit to the Collection Account or any failure by
the Servicer to remit to the Trustee for deposit into the Upper-Tier
Distribution Account, Distribution Account, Excess Interest Distribution
Account, Interest Reserve Account or Default Interest Distribution Account
any amount required to be so remitted pursuant to the Pooling and Servicing
Agreement or (ii) any failure by the 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 under the Pooling and Servicing
Agreement which continues unremedied for thirty (30) days after the giving of
written notice of such failure to the Servicer by the Depositor or the
Trustee, or to the Servicer and to the Depositor and the Trustee by the
holders of Certificates evidencing Percentage Interests of at least 25% of
any affected Class; or (iii) any failure by the Servicer to make any Advances
as required pursuant to the Pooling and Servicing Agreement; or (iv)
confirmation in writing by any Rating Agency that not terminating the
Servicer would, in and of itself, cause the then-current rating assigned to
any Class of Certificates to be qualified, withdrawn or downgraded; (v)
certain events of insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings and certain actions by, on behalf of or
against the Servicer indicating its insolvency or inability to pay its
obligations or (vi) the Servicer shall no longer be an "approved" servicer by
each of the Rating Agencies for mortgage pools similar to the Trust Fund.
Events of Default of the Special Servicer under the Pooling and Servicing
Agreement include the items specified in clauses (i) through (vi) above with
respect to, and to the extent applicable to, the Special Servicer.
123
<PAGE>
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default with respect to the Servicer or Special Servicer
occurs, then the Trustee may, and at the direction of the holders of
Certificates evidencing at least 25% of the aggregate Voting Rights of all
Certificateholders, the Trustee will, terminate all of the rights and
obligations of the Servicer or Special Servicer as servicer or special
servicer under the Pooling and Servicing Agreement and in and to the Trust
Fund. Notwithstanding the foregoing, upon any termination of the Servicer
under the Pooling and Servicing Agreement the Servicer will continue to be
entitled to receive all accrued and unpaid servicing compensation through the
date of termination plus all Advances and interest thereon as provided in the
Pooling and Servicing Agreement. In the event that the Servicer is also the
Special Servicer and the Servicer is terminated, the Servicer will also be
terminated as Special Servicer.
On and after the date of termination following an Event of Default by the
Servicer, the Trustee will succeed to all authority and power of the Servicer
(and the Special Servicer if the Special Servicer is also the Servicer) under
the Pooling and Servicing Agreement and will be entitled to the compensation
arrangements to which the Servicer (and the Special Servicer if the Servicer
is also the Special Servicer) would have been entitled. If the Trustee is
unwilling or unable so to act, or if the holders of Certificates evidencing
at least 25% of the aggregate Voting Rights of all Certificateholders so
request, or if the long-term unsecured debt rating of the Trustee or the
Fiscal Agent is not at least "AA" by S&P, DCR and Fitch and "Aa2" by Moody's
or if the Rating Agencies do not provide written confirmation that the
succession of the Trustee as Servicer, will not cause a qualification,
withdrawal or downgrading of the then-current ratings assigned to the
Certificates, the Trustee must appoint, or petition a court of competent
jurisdiction for the appointment of, a mortgage loan servicing institution
the appointment of which will not result in the downgrading, qualification or
withdrawal of the rating or ratings then assigned to any Class of
Certificates as evidenced in writing by each Rating Agency to act as
successor to the Servicer under the Pooling and Servicing Agreement. Pending
such appointment, the Trustee is obligated to act in such capacity. The
Trustee and any such successor may agree upon the servicing compensation to
be paid.
If the Special Servicer is not the Servicer and an Event of Default with
respect to the Special Servicer occurs, the Trustee will terminate the
Special Servicer and the Servicer will succeed to all the power and authority
of the Special Servicer under the Pooling and Servicing Agreement (provided
that such termination would not result in the downgrading, qualification or
withdrawal of the rating or ratings assigned to any Class of Certificates as
evidenced in writing by each Rating Agency) and will be entitled to the
compensation to which the Special Servicer would have been entitled.
No Certificateholder will have any right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Pooling and
Servicing Agreement or the Mortgage Loans, unless, with respect to the
Pooling and Servicing Agreement, such holder previously shall have given to
the Trustee a written notice of a default under the Pooling and Servicing
Agreement, and of the continuance thereof, and unless also the holders of
Certificates of any Class affected thereby evidencing Percentage Interests of
at least 25% of such Class shall have made written request of the Trustee to
institute such proceeding in its own name as Trustee under the Pooling and
Servicing Agreement and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee, for 60 days after its receipt
of such notice, request and offer of indemnity, shall have neglected or
refused to institute such proceeding.
The Trustee will have no obligation to make any investigation of matters
arising under the Pooling and Servicing Agreement or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order
or direction of any of the holders of Certificates, unless such holders of
Certificates shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
AMENDMENT
The Pooling and Servicing Agreement may be amended at any time by the
Depositor, the Servicer, the Special Servicer, the Trustee and the Fiscal
Agent without the consent of any of the holders of Certificates (i) to cure
any ambiguity; (ii) to correct or supplement any provisions therein which may
be defective or inconsistent with any other provisions therein; (iii) to
amend any provision thereof to the extent necessary or desirable to maintain
the rating or ratings assigned to each Class of Certificates; (iv) to amend
or supplement a provision which will not adversely affect in any material
respect the interests of any Certificateholder not consenting thereto, as
evidenced in writing by an opinion of counsel or confirmation in writing from
each Rating Agency that such amendment will not result in a qualification,
124
<PAGE>
withdrawal or downgrading of the then-current ratings assigned to the
Certificates; and (v) to amend or supplement any provisions therein to the
extent not inconsistent with the provisions of the Pooling and Servicing
Agreement and will not result in a downgrade, qualification or withdrawal of
the then current ratings assigned to any Class of Certificates as confirmed
in writing by each Rating Agency.
The Pooling and Servicing Agreement may also be amended from time to time
by the Depositor, the Servicer, the Special Servicer, the Trustee and the
Fiscal Agent with the consent of the holders of Certificates evidencing at
least 66 2/3% of the Percentage Interests of each Class of Certificates
affected thereby for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Pooling and Servicing
Agreement or modifying in any manner the rights of the holders of
Certificates; provided, however, that no such amendment may (i) reduce in any
manner the amount of, or delay the timing of, payments received on the
Mortgage Loans which are required to be distributed on any Certificate; (ii)
alter the obligations of the Servicer, the Special Servicer, the Trustee or
the Fiscal Agent to make a P&I Advance or Property Advance or alter the
servicing standards set forth in the Pooling and Servicing Agreement; (iii)
change the percentages of Voting Rights of holders of Certificates which are
required to consent to any action or inaction under the Pooling and Servicing
Agreement; or (iv) amend the section in the Pooling and Servicing Agreement
relating to the amendment of the Pooling and Servicing Agreement, in each
case without the consent of the holders of all Certificates representing all
the Percentage Interests of the Class or Classes affected thereby.
VOTING RIGHTS
The "Voting Rights" assigned to each Class shall be (a) 0% in the case of
the Class V-1, Class V-2, Class R and Class LR Certificates, (b) 0.09% in the
case of the Class A-CS1 Certificates and 3.58% in the case of the Class PS-1
Certificates (the sum of such percentages for each such Class outstanding is
the "Fixed Voting Rights Percentage"), provided that the Voting Rights of the
(i) Class A-CS1 Certificates will be reduced to zero upon the reduction of
the Notional Balance of such Class to zero and (ii) Class PS-1 Certificates
will be reduced to zero on the Distribution Date on which none of the A-1B,
Class A-1C, Class A-1D, Class A-1E, Class B-1, Class B-2, Class B-3, Class
B-4, Class B-5 and Class B-6 Certificates are outstanding, (c) in the case of
the Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-1E, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7 and Class
B-7H Certificates, a percentage equal to the product of (x) 100% minus the
Fixed Voting Rights Percentage multiplied by (y) a fraction, the numerator of
which is equal to the aggregate outstanding Certificate Balance of any such
Class and the denominator of which is equal to the aggregate outstanding
Certificate Balances of all Classes of Certificates. The Coupon Strip
Certificates will not be entitled to vote with respect to proposed extensions
of a Specially Serviced Mortgage Loan. The Voting Rights of any Class of
Certificates shall be allocated among holders of Certificates of such Class
in proportion to their respective Percentage Interests, except that any
Certificate beneficially owned by the Depositor, the Servicer, the Special
Servicer, any mortgagor, the Trustee, a manager, or any of their respective
affiliates will be deemed not to be outstanding; provided, however, that for
purposes of obtaining the consent of Certificateholders to an amendment to
the Pooling and Servicing Agreement, any Certificates beneficially owned by
the Servicer or Special Servicer or an affiliate thereof will be deemed to be
outstanding, provided that such amendment does not relate to compensation of
the Servicer, Special Servicer or otherwise benefit such entity or an
affiliate (other than solely in its capacity as Certificateholder); and,
provided, further, that for purposes of obtaining the consent of
Certificateholders to any action proposed to be taken by the Special Servicer
with respect to a Specially Serviced Mortgage Loan, any Certificates
beneficially owned by the Servicer or an affiliate will be deemed to be
outstanding if the Special Servicer is not the Servicer or any affiliate. The
Certificates beneficially owned by the Special Servicer or an affiliate
thereof shall be deemed outstanding for purposes of determining who the
Directing Holders (as defined below) are and for purposes of issuing
Instructions (as defined below). The Voting Rights of each Class of
Certificates will be deemed to be reduced on any day on which an Appraisal
Reduction Amount is allocated to such Class. The Fixed Voting Right
Percentage of the Class A-CS1 Certificates will be proportionally reduced
upon the allocation of Appraisal Reduction Amounts with respect to the Class
A-1A Certificates based on the amount of such reduction. The Fixed Voting
Right Percentage of the Class PS-1 Certificates will be proportionally
reduced upon the allocation of Appraisal Reduction Amounts to the Class A-1B,
Class A-1C, Class A-1D, Class A-1E, Class A-2, Class A-3, Class A-4, Class
A-5, Class A-6, Class A-7, Class A-8, Class B-1, Class B-2, Class B-3, Class
B-4, Class B-5 and Class B-6 Certificates based on the amount of such
reduction.
REALIZATION UPON MORTGAGE LOANS
Specially Serviced Mortgage Loans; Appraisals;
Extensions. Contemporaneously with the earliest of (i) the effective date of
any modification of the Mortgage Rate, principal balance or amortization
terms of any Mortgage Loan, any
125
<PAGE>
extension of the Maturity Date of a Mortgage Loan or consent to the release
of any Mortgaged Property or REO Property from the lien of the related
Mortgage, (ii) the occurrence of an Appraisal Reduction Event, (iii) a
default in the payment of a Balloon Payment, or (iv) the date on which the
Special Servicer, consistent with the Servicing Standard, requests an Updated
Appraisal (as defined below), the Servicer (after consultation with the
Special Servicer) will obtain an appraisal (or a letter update from an
existing appraisal which is less than three years old) of the Mortgaged
Property from an independent appraiser who is a member of the American
Institute of Real Estate Appraisers (an "Updated Appraisal") provided, that,
the Servicer will not be required to obtain an Updated Appraisal of any
Mortgaged Property with respect to which there exists an appraisal which is
less than twelve months old.
Following a default on a Mortgage Loan at maturity, the Special Servicer
may either foreclose or elect to grant a one-year extension of the Specially
Serviced Mortgage Loan; provided that the Special Servicer may only extend
such Mortgage Loan if (i) immediately prior to the default on the Balloon
Payment the related borrower had made twelve consecutive Monthly Payments on
or prior to their Due Dates, (ii) the Special Servicer determines in its
reasonable judgment that such borrower has attempted in good faith to
refinance such Mortgage Loan or Mortgaged Property, (iii) the Special
Servicer determines that (A) extension of such Mortgage Loan is consistent
with the Servicing Standard and (B) extension of such Mortgage Loan is likely
to result in a recovery which on a net present value basis would be greater
than the recovery that would result from a foreclosure, (iv) such extension
requires that all cash flow on all related Mortgage Properties in excess of
amounts required to operate and maintain such Mortgaged Properties be applied
to payments of principal and interest on such Mortgage Loan and (v) the
Special Servicer terminates the related Manager unless the Special Servicer
determines that retaining such Manager is conducive to maintaining the value
of such Mortgaged Properties; provided, further, that, if, after notice to
all Certificateholders, holders of Certificates evidencing at least 66 2/3%
of the Voting Rights of each Class of Certificates entitled to vote direct
the Special Servicer not to extend, the Special Servicer will not extend;
provided, further, that, if the Special Servicer is not the Servicer and the
Servicer would not elect to extend, holders of Certificates evidencing
greater than (a) 50% of the aggregate Voting Rights of all Certificateholders
entitled to vote and (b) 66 2/3% of the aggregate Voting Rights of all
Certificateholders entitled to vote who respond to such notice, may direct
the Special Servicer not to extend. Notwithstanding the foregoing, the
Special Servicer may extend pursuant to the Instructions of the Directing
Holders (as described and defined below). The holders of the Class A-CS1 and
Class PS-1 Certificates will not be entitled to vote with respect to proposed
extensions of a Specially Serviced Mortgage Loan.
The Special Servicer may, after presenting a proposal to and consulting
with the Servicer (if the Special Servicer is not the Servicer), and taking
into account the LTV of a Specially Serviced Mortgage Loan as indicated in
the Updated Appraisal, grant subsequent one-year extensions of such Specially
Serviced Mortgage Loan if (i) the related borrower has made twelve
consecutive monthly payments in an amount equal to or greater than the
Minimum Defaulted Monthly Payments and (ii) the requirements set forth in
clauses (ii)-(iv) of the preceding paragraph are satisfied; provided,
however, that, if, after notice to all Certificateholders, holders of
Certificates evidencing at least 66 2/3% of the aggregate Percentage
Interests of each Class of Certificates direct the Special Servicer not to
extend, the Special Servicer will not extend; provided, further, that, if the
Special Servicer is not the Servicer and the Servicer would not elect to
extend, holders of Certificates evidencing greater than (a) 50% of the
aggregate Voting Rights of all Certificateholders and (b) 66 2/3% of the
aggregate Voting Rights of all Certificateholders who respond to such notice,
may direct the Special Servicer not to extend. Notwithstanding the foregoing,
the Special Servicer may extend pursuant to the Instructions of the Directing
Holders. The Special Servicer will not agree to any extension of a Mortgage
Loan beyond two years prior to the Rated Final Distribution Date. If such
borrower fails to make a Minimum Defaulted Monthly Payment more than once
during an extension period, no further extensions will be granted (provided,
however, that the Special Servicer may grant such extension if the borrower
has been delinquent on no more than one such Minimum Defaulted Monthly
Payment within a 24-month period and the requirements set forth in clauses
(ii) through (iv) of the preceding paragraph are satisfied).
Any extension pursuant to the two preceding paragraphs will require
monthly payments in an amount equal to or greater than the Minimum Defaulted
Monthly Payment.
The "Minimum Defaulted Monthly Payment" with respect to any extension of a
Mortgage Loan that is delinquent in respect of its Balloon Payment, is equal
to (a) the principal portion of the Monthly Payment that would have been due
on such Mortgage Loan on the related Due Date based on the original
amortization schedule thereof (or, if there is no amortization schedule, the
principal portion of the constant Monthly Payment that would have been due),
assuming such Balloon Payment had not become due, after giving effect to any
modification, and (b) interest at the applicable Default Rate; provided,
however, that the Special Servicer may agree that the Minimum Defaulted
Monthly Payments may include
126
<PAGE>
interest at a rate lower than the related Default Rate (but in no event lower
than the related Mortgage Rate) (the "Lower Rate") provided that if, after
notice to all Certificateholders, holders of Certificates evidencing at least
66 2/3% of the Voting Rights of each Class direct (or, in the event that the
Special Servicer is not the Servicer and the Servicer would not agree to the
Lower Rate, Certificateholders representing greater than (a) 50% of the
aggregate Voting Rights of all Certificateholders and (b) 66 2/3% of the
aggregate Voting Rights of all Certificateholders who respond to such notice)
the Special Servicer not to agree to permit payments to include interest at
the Lower Rate, the Special Servicer shall not agree to payments with
interest at the Lower Rate; provided, further, that if the Minimum Defaulted
Monthly Payment is to include interest at the Lower Rate, the Special
Servicer may agree that interest on such Mortgage Loan accrues at the Lower
Rate; and provided that if, after notice to all Certificateholders, holders
of Certificates evidencing at least 66 2/3% of the Voting Rights of each
Class direct the Special Servicer that such Mortgage Loan shall accrue
interest at the related Default Rate, then such Mortgage Loan will continue
to accrue interest at the Default Rate thereof and the excess of interest
accrued on such Mortgage Loan over the amount included in the Minimum
Defaulted Monthly Payments (i.e., interest at the Lower Rate) will be added
to the outstanding principal balance of such Mortgage Loan. Notwithstanding
the foregoing, if the Directing Holders have given Instructions to the
Special Servicer to extend, the Special Servicer will be required to follow
the Directing Holders' Instructions with respect to interest so long as the
Minimum Defaulted Monthly Payment is at least equal to the Lower Rate.
The Special Servicer will only be permitted to extend pursuant to the
preceding paragraphs or pursuant to instructions from Directing Holders.
Under certain circumstances the Special Servicer may modify the terms of
Specially Serviced Mortgage Loans as described below under "--Modifications."
Defaulted Balloon Payments; Foreclosure Proceedings; Action of Directing
Holders. The Special Servicer may be given revocable instructions
("Instructions") to extend a Specially Serviced Mortgage Loan serviced by it
that has defaulted on the Balloon Payment (which extension will be restricted
to the actions that the Special Servicer could have otherwise taken with
respect to such Mortgage Loan except that (a) the actions of the Directing
Holders will not be subject to the rejection of the holders of the
Certificates and (b) the related borrower will not have had to make twelve
consecutive Monthly Payments on or prior to their Due Dates) by the holders
of a majority in Percentage Interest of the most subordinate Class of
Certificates then outstanding (determined as provided below) having an
aggregate initial Certificate Balance representing a minimum of 1.0% of the
aggregate initial Certificate Balances of all Classes of Certificates (or if
the Certificate Balance of such Class or Classes has been reduced to less
than 40% of the initial Certificate Balances thereof, the holders of such
Class or Classes together with the holders of the next most subordinate
Class) (the "Directing Holders") under the following circumstance: if the
Special Servicer has determined to commence foreclosure or acquisition
proceedings, the Special Servicer will notify the Trustee (who will, in turn,
notify the Directing Holders), the Servicer and the Depositor of its proposed
action. If the Special Servicer receives contrary Instructions within seven
days from the Directing Holders, the Special Servicer will delay such
proceedings, and the procedures described below shall apply to the servicing
of such Mortgage Loan. In the event that the Special Servicer does not
receive such Instructions within such seven-day period, the Special Servicer
may proceed with the foreclosure or acquisition. If the Directing Holders
revoke their Instructions to extend the Mortgage Loan, the Special Servicer
will service the Mortgage Loan without regard to such original Instructions;
provided, however, that the Directing Holders will be required to maintain
the Collateral Account (as described below) unless and until the Mortgage
Loan is no longer a Specially Serviced Mortgage Loan for nine consecutive
months or has been liquidated. For purposes of determining the Directing
Holders with respect to any Mortgage Loan, the Class A-1A, Class A-1B, Class
A-1C, Class A-1D, Class A-CS1 and Class PS-1 Certificates collectively, and
the Class B-7 and Class B-7H Certificates together, will, in each case, be
treated as one class.
Deposits by Directing Holders. If the Special Servicer receives
Instructions and the Servicer has not otherwise been required to obtain an
Updated Appraisal as described above, the Servicer (after consultation with
the Special Servicer) will obtain an Updated Appraisal as soon as reasonably
practicable to determine the fair market value of each related Mortgaged
Property, after accounting for the estimated liquidation and carrying costs
(the "Fair Market Value" of such Mortgaged Property). Within two Business
Days after the Special Servicer's receipt of Instructions, the Directing
Holders are required to deposit (in proportion to their respective Percentage
Interests) into a segregated account (the "Collateral Account") established
by the Servicer an amount equal to the lesser of (a) 125% of the Fair Market
Value of the related Mortgaged Property and (b) the outstanding principal
balance of the Mortgage Loan plus unreimbursed Advances (with interest
thereon) and unpaid accrued interest (the "Deposit"). If no Updated Appraisal
has yet been obtained, the amount of the Deposit will be determined based on
the Special Servicer's (or if the Special Servicer is a Directing Holder, the
127
<PAGE>
Servicer's) estimate of the Fair Market Value of the Mortgaged Property, in
which case, upon the Special Servicer's receipt of such Updated Appraisal,
the Special Servicer (or if the Special Servicer is a Directing Holder, the
Servicer) will remit any excess deposit to the Directing Holders, or the
Directing Holders will deposit in the Collateral Account any shortfall, as
the case may be. In the event that the Directing Holders do not make the
required deposit within two business days of the Special Servicer's receipt
of Instructions, the Special Servicer will disregard such Instructions. The
Directing Holders will be deemed to have granted to the Special Servicer (or
the Servicer, if applicable) for the benefit of Certificateholders a first
priority security interest in the Collateral Account, as security for the
obligations of the Directing Holders.
If the Special Servicer is acting pursuant to Instructions, the Special
Servicer or the Servicer, as applicable, shall withdraw from the Collateral
Account and remit to the Servicer for deposit into the Collection Account on
or prior to the Business Day preceding each Servicer Remittance Date a sum
equal to the P&I Advances and Property Advances for the related Mortgage Loan
which in the absence of Instructions would be made by the Servicer (and the
obligation to make such advances shall not be subject to a non-recoverability
standard) and the Directing Holders shall, upon request therefor by the
Special Servicer (or if the Special Servicer is a Directing Holder, the
Servicer), deposit from their own funds into the Collateral Account the
amount of such P&I Advances or Property Advances. If the Directing Holders
fail to make such Deposit within one Business Day after receipt of the
Special Servicer's or Servicer's, as applicable, request, the Special
Servicer will no longer be required to follow such Instructions and will
specially service such Mortgage Loan as though no Instructions had been
given; provided, however, that the Directing Holders will be required to
maintain the Collateral Account unless and until the related Mortgage Loan is
no longer a Specially Serviced Mortgage Loan for nine consecutive months or
has been liquidated. The Special Servicer or Servicer, as applicable, will
invest amounts on deposit in the Collateral Account in Permitted Investments
upon direction by the Directing Holders. Directing Holders will be entitled
to reinvestment income as received, and will reimburse the Collateral Account
for any losses incurred.
Settlement. If a Balloon Loan or the related Mortgaged Property which is
subject to Instructions is liquidated or disposed of, the Servicer will
withdraw from the Collateral Account, and deposit into the Collection Account
as additional liquidation proceeds for distribution to Certificateholders in
accordance with the priorities described herein, the lesser of (a) the amount
by which 125% of the Fair Market Value (determined at the time of the
Deposit) exceeds the net sales proceeds, and (b) the amount by which the
outstanding principal balance of the related Mortgage Loan plus unreimbursed
Advances (with interest thereon) and unpaid accrued interest exceeds the net
sales proceeds, provided that in no event may such additional liquidation
proceeds exceed the unpaid principal balance, accrued and unpaid interest
(including Default Interest), unpaid advances made by the Servicer, Special
Servicer, Trustee or Fiscal Agent and interest thereon, and any expenses paid
by the Trust Fund with respect to such Mortgage Loan.
If the amount realized upon disposition of the Mortgage Loan or Mortgaged
Property exceeds 125% of the Fair Market Value, the Servicer shall deposit
the excess in the Collection Account to the extent not required by applicable
law to be paid to the related borrower. If the Mortgage Loan has not been
realized upon on or before the third anniversary of the Instructions (or such
earlier date so that the Trust Fund owns the Mortgaged Property for no more
than two years), the Directing Holders will be required to purchase the
Mortgage Loan for a purchase price equal to the Fair Market Value (determined
at the time of the Deposit). Amounts on deposit in the Collateral Account
will be applied toward the purchase price.
If at any time following the establishment of a Collateral Account and
prior to the disposition of a Specially Serviced Mortgage Loan or Mortgaged
Property, the Mortgaged Property suffers a hazard loss that results in the
Mortgaged Property not being rebuilt and payments to the Trustee are made
under the related hazard insurance policy, the Special Servicer or Servicer,
as applicable, will pay all amounts on deposit in the Collateral Account to
the Directing Holders. In addition, after amounts required to be deposited in
the Collection Account have been withdrawn from the Collateral Account, as
described above, following foreclosure, liquidation, disposition, purchase by
Directing Holders or, if the related Mortgage Loan is no longer a Specially
Serviced Mortgage Loan for nine consecutive months, any related remaining
amounts in the Collateral Account will be released to the Directing Holders.
No Advances. Until the disposition of the Specially Serviced Mortgage Loan
or Mortgaged Property, as to which Directing Holders have provided
Instructions, or the cure of such default, no P&I Advances will be made in
respect of amounts distributable to the Class of the Directing Holders in
respect of such Mortgage Loan.
Material Defaults; Foreclosure. Upon the occurrence of a material default
under a Specially Serviced Mortgage Loan, the Special Servicer may,
consistent with servicing standards, accelerate such Specially Serviced
Mortgage Loan and commence a foreclosure or other acquisition with respect to
the related Mortgaged Property or Properties, provided, that
128
<PAGE>
the Special Servicer determines that such acceleration and foreclosure are
more likely to produce a greater recovery to Certificateholders on a present
value basis (discounting at the related Mortgage Rate) than would a waiver of
such default or an extension or modification in accordance with the
provisions described above or under "--Modifications." In connection with any
foreclosure or other acquisition as to which the Special Servicer is not
required to act under Instructions from the Directing Holders, the Servicer
is required to pay the costs and expenses in any such proceedings as an
Advance unless the Servicer determines, in its good faith judgment, that such
Advance would constitute a Nonrecoverable Advance. The Servicer will be
entitled to reimbursement of Advances (with interest at the Advance Rate)
made as described in the preceding sentence. If the Special Servicer is
acting pursuant to Instructions, the cost and expenses in any such proceeding
will be required to be paid by the Directing Certificateholders or the
Special Servicer, without reimbursement therefor by the Trust Fund.
Standards for Conduct Generally in Effecting Foreclosure or the Sale of
Defaulted Loans. In connection with any foreclosure or other acquisition, the
cost and expenses of any such proceeding shall be paid by the Special
Servicer as a Property Advance.
If the Special Servicer elects to proceed with a non-judicial foreclosure
in accordance with the laws of the state where the Mortgaged Property is
located, the Special Servicer shall not be required to pursue a deficiency
judgment against the related Mortgagor, if available, or any other liable
party if the laws of the state do not permit such a deficiency judgment after
a non-judicial foreclosure or if the Special Servicer determines, in its best
judgment, that the likely recovery if a deficiency judgment is obtained will
not be sufficient to warrant the cost, time, expense and/or exposure of
pursuing the deficiency judgment and such determination is evidenced by an
officers' certificate delivered to the Trustee.
Notwithstanding any provision to the contrary, the Special Servicer shall
not, on behalf of the Trust Fund, obtain title to a Mortgaged Property as a
result of or in lieu of foreclosure or otherwise, and shall not otherwise
acquire possession of, or take any other action with respect to, any
Mortgaged Property if, as a result of any such action, the Trustee, for the
Trust Fund or the holders of Certificates, would be considered to hold title
to, to be a "mortgagee-in-possession" of, or to be an "owner" or "operator"
of, such Mortgaged Property within the meaning of CERCLA or any comparable
law, unless the Special Servicer has previously determined, based on an
environmental assessment report prepared by an independent person who
regularly conducts environmental audits, that: (i) such Mortgaged Property is
in compliance with applicable environmental laws or, if not, after
consultation with an environmental consultant that it would be in the best
economic interest of the Trust Fund to take such actions as are necessary to
bring such Mortgaged Property in compliance therewith and (ii) there are no
circumstances present at such Mortgaged Property relating to the use,
management or disposal of any hazardous materials for which investigation,
testing, monitoring, containment, clean-up or remediation could be required
under any currently effective federal, state or local law or regulation, or
that, if any such hazardous materials are present for which such action could
be required, after consultation with an environmental consultant it would be
in the best economic interest of the Trust Fund to take such actions with
respect to the affected Mortgaged Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of
sale shall be issued to the Trustee, or to its nominee, on behalf of holders
of Certificates. Notwithstanding any such acquisition of title and
cancellation of the related Mortgage Loan, such Mortgage Loan shall be
considered to be an REO Mortgage Loan held in the Trust Fund until such time
as the related REO Property shall be sold by the Trust Fund and shall be
reduced only by collections net of expenses.
If the Trust Fund acquires a Mortgaged Property by foreclosure or
deed-in-lieu of foreclosure upon a default of a Mortgage Loan, the Pooling
and Servicing Agreement provides that the Trustee (or the Special Servicer,
on behalf of the Trustee), must administer such Mortgaged Property so that it
qualifies at all times as "foreclosure property" within the meaning of Code
Section 860G(a)(8). The Pooling and Servicing Agreement also requires that
any such Mortgaged Property be managed and operated by an "independent
contractor," within the meaning of applicable Treasury regulations, who
furnishes or renders services to the tenants of such Mortgaged Property.
Generally, the Trust REMICs will not be taxable on income received with
respect to the Mortgaged Property to the extent that it constitutes "rents
from real property," within the meaning of Code Section 856(c)(3)(A) and
Treasury regulations thereunder. "Rents from real property" do not include
the portion of any rental based on the net income or gain of any tenant or
sub-tenant. No determination has been made whether rent on any of the
Mortgaged Properties meets this requirement. "Rents from real property"
include charges for services customarily furnished or rendered in connection
with the rental of real property, whether or not the charges are separately
stated. Services furnished to the tenants of a particular building will be
considered as customary if, in the geographic market in which the building is
located, tenants in buildings which are of
129
<PAGE>
similar Class are customarily provided with the service. No determination has
been made whether the services furnished to the tenants of the Mortgaged
Properties are "customary" within the meaning of applicable regulations. It
is therefore possible that a portion of the rental income with respect to a
Mortgaged Property owned by the Trust Fund, presumably allocated based on the
value of any non-qualifying services, would not constitute "rents from real
property." In addition to the foregoing, any net income from a trade or
business operated or managed by an independent contractor on a Mortgaged
Property owned by the Lower-Tier REMIC, including but not limited to a hotel
or skilled nursing care business, will not constitute "rents from real
property." Any of the foregoing types of income may instead constitute "net
income from foreclosure property," which would be taxable to the Lower-Tier
REMIC at the highest marginal federal corporate rate (currently 35%) and may
also be subject to state or local taxes. Any such taxes would be chargeable
against the related income for purposes of determining the Net REO Proceeds
available for distribution to holders of Certificates. Under the Pooling and
Servicing Agreement, the Special Servicer is required to determine whether
the earning of such income taxable to the Lower-Tier REMIC would result in a
greater recovery to Certificateholders on a net after-tax basis than a
different method of operation of such property. See "Certain Federal Income
Tax Consequences -- Taxes That May Be Imposed on a REMIC -- Net Income from
Foreclosure Property."
If title to any Mortgaged Property is acquired by the Trust Fund, the
Special Servicer, pursuant to the Pooling and Servicing Agreement and on
behalf of the Trust Fund, will be required to sell the Mortgaged Property
within two years of acquisition, unless the Trustee receives (i) an opinion
of independent counsel to the effect that the holding of the property by the
Trust Fund subsequent to two years after its acquisition will not result in
the imposition of a tax on the Trust REMICs or cause the Trust Fund to fail
to qualify as REMICs under the Code at any time that any Certificate is
outstanding or (ii) an extension from the Internal Revenue Service.
The limitations imposed by the Pooling and Servicing Agreement and the
REMIC provisions of the Code on the operations and ownership of any Mortgaged
Property acquired on behalf of the Trust Fund may result in the recovery of
an amount less than the amount that would otherwise be recovered. See
"Certain Legal Aspects of Mortgage Loans -- Foreclosure."
The Special Servicer may offer to sell to any person any Specially
Serviced Mortgage Loan or any REO Property, or may offer to purchase any
Specially Serviced Mortgage Loan or any REO Property (in each case at the
repurchase price set forth in the Pooling and Servicing Agreement, which
includes unpaid principal and interest thereon), if and when the Special
Servicer determines, consistent with the Servicing Standard set forth in the
Pooling and Servicing Agreement, that no satisfactory arrangements can be
made for collection of delinquent payments thereon and such a sale would be
in the best economic interests of the Trust Fund, but shall, in any event, so
offer to sell any REO Property no later than the time determined by the
Special Servicer to be sufficient to result in the sale of such REO Property
within the period specified in the Pooling and Servicing Agreement, including
extensions thereof. The Special Servicer shall give the Trustee not less than
ten days' prior written notice of its intention to sell any Specially
Serviced Mortgage Loan or REO Property, in which case the Special Servicer
shall accept the highest offer received from any person for any Specially
Serviced Mortgage Loan or any REO Property in an amount at least equal to the
Repurchase Price or, at its option, if it has received no offer at least
equal to the Repurchase Price therefor, purchase the Specially Serviced
Mortgage Loan or REO Property at such Repurchase Price.
In the absence of any such offer (or purchase by the Special Servicer),
the Special Servicer shall accept the highest offer received from any person
that is determined by the Special Servicer to be a fair price for such
Specially Serviced Mortgage Loan or REO Property, if the highest offeror is a
person not affiliated with the Special Servicer, the Servicer or the
Depositor or is determined to be a fair price by the Trustee (after
consultation with an independent appraiser if the highest offeror is an
interested party). Notwithstanding anything to the contrary herein, neither
the Trustee, in its individual capacity, nor any of its affiliates may make
an offer for or purchase any Specially Serviced Mortgage Loan or any REO
Property.
The Special Servicer shall not be obligated by either of the foregoing
paragraphs or otherwise to accept the highest offer if the Special Servicer
determines, in accordance with the Servicing Standard, that rejection of such
offer would be in the best interests of the holders of Certificates. In
addition, the Special Servicer may accept a lower offer if it determines, in
accordance with the Servicing Standard, that acceptance of such offer would
be in the best interests of the holders of Certificates (for example, if the
prospective buyer making the lower offer is more likely to perform its
obligations, or the terms offered by the prospective buyer making the lower
offer are more favorable), provided that the offeror is not a person
affiliated with the Special Servicer. The Special Servicer is required to use
its best efforts to sell all Specially Serviced Mortgage Loans and REO
Property prior to the Rated Final Distribution Date.
130
<PAGE>
MODIFICATIONS
The Special Servicer may, consistent with the Servicing Standard, agree to
any modification, waiver or amendment of any term of, forgive or defer
interest on and principal of, and/or add collateral for, any Mortgage Loan
with the consent of Certificateholders representing 100% of the Percentage
Interests of the most subordinate Class of Certificates then outstanding
determined as provided below, subject, however, to each of the following
limitations, conditions and restrictions: (i) a material default on such
Mortgage Loan has occurred or, in the Special Servicer's reasonable and good
faith judgment, a default in respect of payment on such Mortgage Loan is
reasonably foreseeable, and such modification, waiver, amendment or other
action is reasonably likely to produce a greater recovery to
Certificateholders on a present value basis (the relevant discounting of
anticipated collections that will be distributable to Certificateholders will
be done at the related Mortgage Rate), than would liquidation; (ii) the
Special Servicer may not extend the date on which any Balloon Payment is
scheduled to be due on any Specially Serviced Mortgage Loan except as
described under "Realization Upon Mortgage Loans"; (iii) no reduction of any
scheduled monthly payment of principal and/or interest on any Specially
Serviced Mortgage Loan may result in a debt service coverage ratio for such
Mortgage Loan of greater than 1.10 to 1, and the Special Servicer may only
agree to reductions lasting a period of no more than twelve months and, in
the aggregate, no more than three consecutive reductions of twelve months or
less each; (iv) the Special Servicer may not release or substitute collateral
or release mortgagors or guarantors except in accordance with the provisions
of the related Loan Documents; (v) the Special Servicer may not forgive an
aggregate amount of principal of the Mortgage Loans in excess of the
Certificate Balance of most the subordinate Class of Certificates then
outstanding minus the aggregate of the greater of (A) any Appraisal Reduction
Amounts and (B) Delinquency Reduction Amounts of each Mortgage Loan that, in
each case have not resulted in Realized Losses; (vi) the Special Servicer
will not permit any borrower to add any collateral unless the Special
Servicer has first determined in accordance with the Servicing Standard,
based upon an environmental assessment prepared by an independent person who
regularly conducts environmental assessments, at the expense of the borrower,
that such additional collateral is in compliance with applicable
environmental laws and regulations and that there are no circumstances or
conditions present with respect to such new collateral relating to the use,
management or disposal of any hazardous materials for which investigation,
testing, monitoring, containment, clean-up or remediation would be required
under any then applicable environmental laws and/or regulations; and (vii)
the Special Servicer may waive or reduce a Lock-out Period or any Prepayment
Premiums only if the commencement of a foreclosure proceeding with respect to
the related Mortgage Loan is imminent and the Special Servicer first receives
written notification from the Servicer that such action in the opinion of the
Servicer, consistent with the Servicing Standard and based solely upon
information furnished by the Special Servicer without independent
investigation of the Servicer thereof, is likely to produce a greater
recovery, on a present value basis, than would a foreclosure. For purposes of
obtaining the consent of the most subordinate Class of Certificates
outstanding to any modification described above, (i) the Class A-1A, Class
A-1B, Class A-1C, Class A-1D, Class A-CS1, and Class PS-1 Certificates
collectively and (ii) the Class B-7 and Class B-7H Certificates together,
will, in each case, be treated as one class. For purposes of determining the
amount of principal which the Special Servicer may forgive pursuant to clause
(vi) above, the most subordinate Class will include the next subordinate
Class (determined as provided in the preceding sentence) provided that
Certificateholders evidencing 100% of the Percentage Interests of such Class
consent to such forgiveness. Notwithstanding the foregoing, the Special
Servicer will not be required to oppose the confirmation of a plan in any
bankruptcy or similar proceeding involving a borrower if in its reasonable
and good faith judgment such opposition would not ultimately prevent the
confirmation of such plan or one substantially similar.
Any payment of interest, which is deferred as described herein will not,
for purposes, including, without limitation, calculating monthly
distributions to Certificateholders, be added to the unpaid principal balance
of the related Mortgage Loan, notwithstanding that the terms of such Mortgage
Loan so permit or that such interest may actually be capitalized.
Following the execution of any modification, waiver or amendment agreed to
by the Special Servicer pursuant to clause (i) above, the Special Servicer
must deliver to the Trustee an officer's certificate setting forth in
reasonable detail the basis of the determination made by it pursuant to
clause (i) above.
Except as otherwise provided above under "Realization Upon Mortgage Loans"
and "Modifications," the Special Servicer or the Servicer may not modify any
term of a Mortgage Loan unless such modification (i) would not be
"significant" as such term is defined in Code Section 1001 or Treasury
Regulation Section 1.860G-2(b)(3) and (ii) would be in accordance with the
servicing standard set forth in the Pooling and Servicing Agreement. The
Pooling and Servicing Agreement will require the Servicer or Special
Servicer, as applicable, to provide copies of any modifications or extensions
to each Rating Agency.
131
<PAGE>
In the event that the Special Servicer is unable to obtain consent from
100% of the Percentage Interests of the most subordinate Class of
Certificates, the Special Servicer will continue to retain the options
described under "Realization Upon Mortgage Loans" including foreclosure or
extension.
TERMINATION
The obligations created by the Pooling and Servicing Agreement for the
Certificates will terminate upon the payment to Certificateholders of all
amounts held in the Collection Account or Distribution Account to be paid to
them pursuant to the Pooling and Servicing Agreement following the later to
occur of (i) the receipt or collection of the last payment due on any
Mortgage Loan included in the Trust Fund or (ii) the liquidation or
disposition of the last asset held by the Trust Fund. In no event, however,
will the trust created by the Pooling and Servicing Agreement continue beyond
the expiration of twenty-one years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the United Kingdom, living on the date hereof. Written notice of termination
of the Pooling and Servicing Agreement will be given to each
Certificateholder by the Trustee, and the final distribution will be made
only upon surrender and cancellation of the Certificates at an office or
agency appointed by the Trustee, which will be specified in the notice of
termination.
OPTIONAL TERMINATION
The Depositor or the Servicer and, if neither the Depositor nor the
Servicer exercises its option, the holders of the Class LR Certificates
representing greater than 50% of the Percentage Interest of the Class LR
Certificates will have the option to purchase all of the Mortgage Loans and
all property acquired in respect of any Mortgage Loan remaining in the Trust
Fund, and thereby effect termination of the Trust Fund and early retirement
of the then outstanding Certificates, on any Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans remaining in the
Trust Fund is less than 1% of the aggregate principal balance of such
Mortgage Loans as of the Cut-off Date. The purchase price payable upon the
exercise of such option on such a Distribution Date will be an amount equal
to the greater of (i) the sum of (A) 100% of the outstanding principal
balance of each Mortgage Loan included in the Trust Fund as of the last day
of the month preceding such Distribution Date (less any P&I Advances
previously made on account of principal); (B) the fair market value of all
other property included in the Trust Fund as of the last day of the month
preceding such Distribution Date, as determined by an independent appraiser
as of a date not more than 30 days prior to the last day of the month
preceding such Distribution Date; (C) all unpaid interest accrued on such
principal balance of each such Mortgage Loan (including any Mortgage Loans as
to which title to the related Mortgaged Property has been acquired) at the
Mortgage Rate (plus the Excess Rate, to the extent applicable) to the last
day of the month preceding such Distribution Date (less any P&I Advances
previously made on account of principal); and (D) unreimbursed Advances (with
interest thereon) and unpaid Trust Fund fees and expenses and (ii) the
aggregate fair market value of the Mortgage Loans and all other property
acquired in respect of any Mortgage Loan in the Trust Fund, on the last day
of the month preceding such Distribution Date, as determined by an
independent appraiser acceptable to the Servicer, together with one month's
interest thereon at the Mortgage Rate. The holders of 100% of the Percentage
Interest in the Class LR Certificates may purchase any Mortgage Loan on its
Anticipated Repayment Date at a price equal to the sum of the following: (i)
100% of the outstanding principal balance of such Mortgage Loan on such
Anticipated Repayment Date (less any P&I Advances previously made on account
of principal); (ii) all unpaid interest accrued on such principal balance of
such Mortgage Loan at the Mortgage Rate thereof, to the last day of the
Interest Accrual Period preceding such Anticipated Repayment Date (less any
P&I Advances previously made on account of interest); (iii) the aggregate
amount of all unreimbursed Advances with respect to such Mortgage Loan, with
interest thereon at the Advance Rate, and all unpaid Special Servicing Fees,
Servicing Fees and any other compensation due to the Servicer or Special
Servicer, Trustee Fees and Trust Fund expenses; and (iv) the amount of any
liquidation expenses incurred by the Trust Fund in connection with such
purchase.
Notwithstanding the foregoing, such Mortgage Loan may not be purchased if
the fair market value of the Mortgage Loan is greater than 100% of the
outstanding principal balance of such Mortgage Loan.
The Holder of 100% of the most subordinate Class of Certificates (provided
that the Class B-7H Certificates shall not be considered a Class for such
purposes) may purchase any Mortgage Loan on or after its Anticipated
Repayment Date under the same terms and conditions hereunder as in the case
of a purchase by the Holder of the Class LR Certificates if the Holder of the
Class LR Certificates either (i) notifies the Holder of the most subordinate
Class of Certificates that it will not purchase such Mortgage Loan or (ii)
does not, in fact, purchase such Mortgage Loan on its Anticipated Repayment
Date. See "Description of the Certificates -- Termination."
132
<PAGE>
THE TRUSTEE
The Trustee may resign at any time by giving written notice to the
Depositor, the Servicer and the Rating Agencies, provided that no such
resignation shall be effective until a successor has been appointed. Upon
such notice, the Servicer will appoint a successor trustee. If no successor
trustee is appointed within one month after the giving of such notice of
resignation, the resigning Trustee may petition the court for appointment of
a successor trustee.
The Servicer or the Depositor may remove the Trustee and the Fiscal Agent
if, among other things, the Trustee ceases to be eligible to continue as such
under the Pooling and Servicing Agreement or if at any time the Trustee
becomes incapable of acting, or is adjudged bankrupt or insolvent, or a
receiver of the Trustee or its property is appointed or any public officer
takes charge or control of the Trustee or of its property. The holders of
Certificates evidencing aggregate Voting Rights of at least 50% of all
Certificateholders may remove the Trustee and the Fiscal Agent upon written
notice to the Depositor, the Servicer, the Trustee and the Fiscal Agent. Any
resignation or removal of the Trustee and the Fiscal Agent and appointment of
a successor trustee and, if such trustee is not rated at least "AA" by each
Rating Agency, fiscal agent, will not become effective until acceptance of
the appointment by the successor trustee and, if necessary, fiscal agent.
Notwithstanding the foregoing, upon any termination of the Trustee and Fiscal
Agent under the Pooling and Servicing Agreement, the Trustee and Fiscal Agent
will continue to be entitled to receive all accrued and unpaid compensation
through the date of termination plus all Advances and interest thereon as
provided in the Pooling and Servicing Agreement. Any successor trustee must
have a combined capital and surplus of at least $50,000,000 and such
appointment must not result in the downgrade, qualification or withdrawal of
the then-current ratings assigned to the Certificates, as evidenced in
writing by the Rating Agencies.
Pursuant to the Pooling and Servicing Agreement, the Trustee will be
entitled to withdraw from the Distribution Account a monthly fee (the
"Trustee Fee"), which constitutes a portion of the Servicing Fee.
The Trust Fund will indemnify the Trustee and the Fiscal Agent against any
and all losses, liabilities, damages, claims or unanticipated expenses
(including reasonable attorneys' fees) arising in respect of the Pooling and
Servicing Agreement or the Certificates other than those resulting from the
negligence, bad faith or willful misconduct of the Trustee or the Fiscal
Agent, as applicable. Neither the Trustee nor the Fiscal Agent will be
required to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties under the Pooling and
Servicing Agreement, or in the exercise of any of its rights or powers, if in
the Trustee's or the Fiscal Agent's opinion, as applicable, the repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it. Each of the Servicer, the Special Servicer, the
Depositor, the Paying Agent, the Certificate Registrar and the Custodian will
indemnify the Trustee, the Fiscal Agent, and certain related parties for
similar losses incurred related to the willful misconduct, bad faith, fraud
and/or negligence in the performance of each such party's respective duties
under the Pooling and Servicing Agreement or by reason of reckless disregard
of its obligations and duties under the Pooling and Servicing Agreement.
At any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust Fund or property securing the
same is located, the Depositor and the Trustee acting jointly will have the
power to appoint one or more persons or entities approved by the Trustee to
act (at the expense of the Trustee) as co-trustee or co-trustees, jointly
with the Trustee, or separate trustee or separate trustees, of all or any
part of the Trust Fund, and to vest in such co-trustee or separate trustee
such powers, duties, obligations, rights and trusts as the Depositor and the
Trustee may consider necessary or desirable. Except as required by applicable
law, the appointment of a co-trustee or separate trustee will not relieve the
Trustee of its responsibilities, obligations and liabilities under the
Pooling and Servicing Agreement.
DUTIES OF THE TRUSTEE
The Trustee (except for the information under the first paragraph of
"--The Trustee") and Servicer (except for the information under "--The
Servicer") will make no representation as to the validity or sufficiency of
the Pooling and Servicing Agreement, the Certificates or the Mortgage Loans,
this Prospectus or related documents. The Trustee will not be accountable for
the use or application by the Depositor, the Servicer or the Special Servicer
of any Certificates issued to them or of the proceeds of such Certificates,
or for the use of or application of any funds paid to the Depositor, the
Servicer or the Special Servicer in respect of the assignment of the Mortgage
Loans to the Trust Fund, or any funds deposited in or withdrawn from the Lock
Box Accounts, Cash Collateral Accounts, Reserve Accounts, Collection Account,
Excess Interest Distribution Account, Interest Reserve Account and Default
Interest Distribution Account or any other account maintained by or on behalf
of the Servicer or Special Servicer, nor will the Trustee be required to
perform, or be responsible for the manner of performance of, any of the
obligations of the Servicer or Special Servicer under the Pooling and
Servicing Agreement.
133
<PAGE>
In the event that the Servicer fails to make a required Advance, the
Trustee will make such Advance, provided that the Trustee shall not be
obligated to make any Advance it deems to be nonrecoverable. The Trustee
shall be entitled to rely conclusively on any determination by the Servicer
or the Special Servicer that an Advance, if made, would not be recoverable.
The Trustee will be entitled to reimbursement for each Advance, with
interest, made by it in the same manner and to same extent as the Servicer or
the Special Servicer.
If no Event of Default has occurred, and after the curing of all Events of
Default which may have occurred, the Trustee is required to perform only
those duties specifically required under the Pooling and Servicing Agreement.
Upon receipt of the various certificates, reports or other instruments
required to be furnished to it, the Trustee is required to examine such
documents and to determine whether they conform on their face to the
requirements of the Pooling and Servicing Agreement.
DUTIES OF THE FISCAL AGENT
The Fiscal Agent will make no representation as to the validity or
sufficiency of the Pooling and Servicing Agreement, the Certificates, the
Mortgage Loan, this Prospectus (except for the information above, see "--The
Fiscal Agent") or related documents. The duties and obligations of the Fiscal
Agent consist only of making Advances as described below and in "--Advances"
above; the Fiscal Agent shall not be liable except for the performance of
such duties and obligations.
In the event that the Servicer and the Trustee fail to make a required
Advance, the Fiscal Agent will make such Advance, provided that the Fiscal
Agent will not be obligated to make any Advance that it deems to be
nonrecoverable. The Fiscal Agent shall be entitled to rely conclusively on
any determination by the Servicer or the Trustee, as applicable, that an
Advance, if made, would not be recoverable. The Fiscal Agent will be entitled
to reimbursement for each Advance made by it in the same manner and to the
same extent as the Trustee and the Servicer.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Pursuant to the Pooling and Servicing Agreement, the Servicer will be
entitled to withdraw monthly from the Collection Account its portion of the
Servicing Fee. The monthly servicing fee (the "Servicing Fee") for any
Distribution Date is an amount per Interest Accrual Period equal to the
product of (i) a per annum rate of 0.05% (the "Servicing Fee Rate") and (ii)
the Stated Principal Balance of such Mortgage Loan as of the Due Date and
includes the compensation payable to the Servicer and the Trustee Fee. The
Servicer's portion of the Servicing Fee relating to each Mortgage Loan will
be retained by the Servicer from payments and collections (including
insurance proceeds, condemnation proceeds and liquidation proceeds) in
respect of such Mortgage Loan. The Servicer will also be entitled to retain
as additional servicing compensation (together with the Servicer's portion of
the Servicing Fee, "Servicing Compensation") (i) all investment income earned
on amounts on deposit in the Collection Account and certain Reserve Accounts
(to the extent consistent with the related Mortgage Loan) and (ii) to the
extent permitted by applicable law and the related Mortgage Loans, any late
payment charges, one-half of any loan modification or extension fees (payable
in connection with a modification for which review by the Servicer is
required), loan service transaction fees, beneficiary statement changes, or
similar items (but not including Prepayment Premiums). If a review by the
Servicer is not required, the Special Servicer will be entitled to the full
amount of any modification or extension fees.
If the Servicer accepts a voluntary prepayment on a Mortgage Loan after
the related Lock-out Period with respect to such loan which results in a
Prepayment Interest Shortfall, the Servicer will be obligated to reduce its
Servicing Compensation as provided above under "Description of the
Subordinated Certificates -- Distributions -- Prepayment Interest
Shortfalls."
The Servicer will pay all expenses incurred in connection with its
responsibilities under the Pooling and Servicing Agreement (subject to
reimbursement as described herein), including all fees of any subservicers
retained by it. The Trustee will withdraw monthly from the Distribution
Account the portion of the Servicing Fee representing the Trustee Fee.
SPECIAL SERVICING
AMI will initially be appointed as Special Servicer to, among other
things, oversee the resolution of non-performing Mortgage Loans and act as
disposition manager of REO Properties. The Pooling and Servicing Agreement
will provide that more than one Special Servicer may be appointed, but only
one Special Servicer may specially service any Mortgage Loan.
134
<PAGE>
The Pooling and Servicing Agreement provides that holders of Certificates
evidencing greater than 50% of the Percentage Interests of the most
subordinate Class of Certificates then outstanding (provided, however, that
for purposes of determining the most subordinate Class, the Class A-1A, Class
A-1B, Class A-1C, Class A-1D, Class A-CS1 and Class PS-1 Certificates
collectively, and the Class B-7 and Class B-7H Certificates together, will,
in each case, be treated as one Class) may replace the Special Servicer,
provided that each Rating Agency confirms to the Trustee in writing that such
replacement, in and of itself, will not cause a qualification, withdrawal or
downgrading of the then-current ratings assigned to any Class of
Certificates.
The duties of the Special Servicer relate to Specially Serviced Mortgage
Loans and to any REO Property. The Pooling and Servicing Agreement will
define a "Specially Serviced Mortgage Loan" to include any Mortgage Loan with
respect to which: (i) the related borrower has not made two consecutive
Monthly Payments (and has not cured at least one such delinquency by the next
due date under the related Mortgage Loan) or (ii) the Servicer, the Trustee
and/or the Fiscal Agent has made four consecutive P&I Advances (regardless of
whether such P&I Advances have been reimbursed); (iii) the borrower has
expressed to the Servicer an inability to pay or a hardship in paying the
Mortgage Loan in accordance with its terms; (iv) the 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; (v) the
Servicer has received notice of a foreclosure or threatened foreclosure of
any lien on the Mortgaged Property securing the Mortgage Loan; (vi) a default
of which the Servicer has notice (other than a failure by the borrower to pay
principal or interest) and which materially and adversely affects the
interests of the Certificateholders has occurred and remained unremedied for
the applicable grace period specified in the Mortgage Loan (or, if no grace
period is specified, 60 days); provided, that a default requiring a Property
Advance will be deemed to materially and adversely affect the interests of
Certificateholders; (vii) the Special Servicer proposes to commence
foreclosure or other workout arrangements; or (viii) such borrower has failed
to make a Balloon Payment as and when due; provided, however, that a Mortgage
Loan will cease to be a Specially Serviced Mortgage Loan (i) with respect to
the circumstances described in clauses (i), (ii), and (viii) above, when the
borrower thereunder has brought the Mortgage Loan current (or, with respect
to the circumstances described in clause (viii), pursuant to a work-out
implemented by the Special Servicer) and thereafter made three consecutive
full and timely monthly payments, including pursuant to any workout of the
Mortgage Loan, (ii) with respect to the circumstances described in clause
(iii), (iv), (v) and (vii) above, when such circumstances cease to exist in
the good faith judgment of the Servicer, or (iii) with respect to the
circumstances described in clause (vi) above, when such default is cured;
provided, in either case, that at that time no circumstance exists (as
described above) that would cause the Mortgage Loan to continue to be
characterized as a Specially Serviced Mortgage Loan.
Pursuant to the Pooling and Servicing Agreement, the Special Servicer will
be entitled to certain fees including a special servicing fee, payable with
respect to each Interest Accrual Period, equal to 1/12 of 0.50% of the Stated
Principal Balance of each related Specially Serviced Mortgage Loan (the
"Special Servicing Fee"). The Special Servicer will be entitled, in addition
to the Special Servicing Fee, to a "Principal Recovery Fee" with respect to
each Specially Serviced Mortgage Loan or REO Property which Principal
Recovery Fee will be in an amount equal to 1% of all amounts received in
respect thereof and allocable as a recovery of principal which will be
payable when the Mortgage Loan or REO Property is sold or liquidated or when
the Specially Serviced Mortgage Loan ceases to be a Specially Serviced
Mortgage Loan. However, no Principal Recovery Fee will be payable in
connection with, or out of Liquidation Proceeds resulting from, the purchase
of any Specially Serviced Mortgage Loan or REO Property (i) by the Mortgage
Loan Seller or Bloomfield as described herein under "The Pooling and
Servicing Agreement -- Representations and Warranties; Repurchase"; (ii) by
the Servicer, the Depositor or the Certificateholders as described herein
under "The Pooling and Servicing Agreement -- Optional Termination" or (iii)
in certain other limited circumstances. In addition, the Special Servicer
will be entitled to receive (i) any (or, if the Servicer's consent is
required, 50% of) assumption fees and certain loan modification fees related
to the Specially Serviced Mortgage Loans and (ii) any income earned on
deposits in the REO Accounts. Notwithstanding the foregoing, in the event
that the Special Servicer is, or is an affiliate of, the holder of
Certificates representing greater than 50% of the Percentage Interests of the
most subordinate Class of Certificates then outstanding (determined as
provided below), the Special Servicer will be entitled to receive a Special
Servicing Fee for each Interest Accrual Period equal to 1/12 of 0.25% of the
Stated Principal Balance of each Specially Serviced Mortgage Loan and
one-half of the Principal Recovery Fee it would otherwise be entitled to.
For purposes of determining whether the Special Servicer is entitled to
full compensation, with respect to any Mortgage Loan, the Class A-1A, Class
A-1B, Class A-1C, Class A-1D, Class A-CS1 and Class PS-1 Certificates
collectively, and the Class B-7 and Class B-7H Certificates together, will in
each case, be treated as one class.
135
<PAGE>
SERVICER AND SPECIAL SERVICER PERMITTED TO BUY CERTIFICATES
The Servicer and Special Servicer will be permitted to purchase any Class
of Certificates. Such a purchase by the Servicer or Special Servicer could
cause a conflict relating to the Servicer's or Special Servicer's duties
pursuant to the Pooling and Servicing Agreement and the Servicer's or Special
Servicer's interest as a holder of Certificates, especially to the extent
that certain actions or events have a disproportionate effect on one or more
Classes of Certificates. The Pooling and Servicing Agreement provides that
the Servicer or Special Servicer shall administer the Mortgage Loans in
accordance with the servicing standard set forth therein without regard to
ownership of any Certificate by the Servicer or Special Servicer or any
affiliate thereof.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
TRUSTEE REPORTS
Based on information provided in monthly reports prepared by the Servicer
and the Special Servicer and delivered to the Trustee, the Trustee will
prepare and forward on each Distribution Date to each Certificateholder, the
Depositor, the Servicer, the Special Servicer, the Underwriter, each Rating
Agency and, if requested, any potential investors in the Certificates:
1. A statement (a "Distribution Date Statement") setting forth, among
other things: (i) the amount of distributions, if any, made on such
Distribution Date to the Holders of each Class of Certificates applied to
reduce the respective Certificate Balances thereof; (ii) the amount of
distributions, if any, made on such Distribution Date to Holders of each
Class of Certificates allocable to (A) the Interest Accrual Amount less
any Prepayment Interest Shortfalls (not absorbed by the Servicer) and/or
(B) Prepayment Premiums and/or Reduction Interest Distribution Amounts;
(iii) the number of outstanding Mortgage Loans, the aggregate unpaid
principal balance of the Mortgage Loans at the close of business on the
related Due Date; (iv) the number and aggregate unpaid principal balance
of Mortgage Loans (A) delinquent one Collection Period, (B) delinquent two
Collection Periods, (C) delinquent three or more Collection Periods, (D)
that are Specially Serviced Mortgage Loans that are not delinquent, or (E)
as to which foreclosure proceedings have been commenced; (v) with respect
to any Mortgage Loan as to which the related Mortgaged Property became a
REO Property during the preceding calendar month, the city, state,
property type, latest DSCR, the Stated Principal Balance and unpaid
principal balance of such Mortgage Loan as of the date such Mortgaged
Property became an REO Property; (vi) as to any Mortgage Loan repurchased
by the Mortgage Loan Seller or otherwise liquidated or disposed of during
the related Collection Period, the loan number thereof and the amount of
proceeds of any repurchase of a Mortgage Loan, Liquidation Proceeds and/or
other amounts, if any, received thereon during the related Collection
Period and the portion thereof included in the Available Funds for such
Distribution Date; (vii) with respect to any REO Property included in the
Trust Fund as of the close of business on the related Due Date, the loan
number of the related Mortgage Loan, the value of such REO Property based
on the most recent appraisal or valuation and the amount of any other
income collected with respect to any REO Property net of related expenses
and other amounts, if any, received on such REO Property during the
related Collection Period and the portion thereof included in the
Available Funds for such Distribution Date; (viii) with respect to any REO
Property sold or otherwise disposed of during the related Collection
Period, (A) the loan number of the related Mortgage Loan, (B) the Realized
Losses attributable to such Mortgage Loan, (C) the amount of sale proceeds
and other amounts, if any, received in respect of such REO Property during
the related Collection Period and the portion thereof included in the
Available Funds for such Distribution Date and (D) the date of the related
determination by the Special Servicer that it has recovered all payments
which it expects to be finally recoverable (the "Final Recovery
Determination"); (ix) the aggregate Certificate Balance of each Class of
Certificates before and after giving effect to the distributions made on
such Distribution Date, separately identifying any reduction in the
aggregate Certificate Balance of each such Class due to Realized Losses
and/or Trust Fund expenses; (x) the aggregate amount of Principal
Prepayments (other than Liquidation Proceeds and Insurance Proceeds) made
during the related Collection Period and the aggregate amount of any
Prepayment Interest Shortfalls (not absorbed by the Servicer) for such
Distribution Date; (xi) the Pass-Through Rate and the Reduction Interest
Pass-Through Rate, if any, applicable to each Class of Certificates for
such Distribution Date; (xii) the aggregate amount of the Servicing Fee,
Special Servicing Fee, Principal Recovery Fee and any other servicing or
special servicing compensation retained by or paid to the Servicer and the
Special Servicer during the related Collection Period; (xiii) the amount
of Realized Losses, Trust Fund expenses, Interest Shortfalls and Reduction
Interest Shortfalls, if any, incurred with respect to the
136
<PAGE>
Mortgage Loans during the related Collection Period and in the aggregate
for all prior Collection Periods (except to the extent reimbursed or
paid); (xiv) the aggregate amount of Property Advances and P&I Advances
(net of reimbursed Advances) outstanding which have been made by the
Servicer, the Special Servicer, the Trustee and the Fiscal Agent; (xv) the
amount of any Appraisal Reduction Amounts allocated during the related
Collection Period on a loan-by-loan basis and the total Appraisal
Reduction Amounts as of such Distribution Date on a loan-by-loan basis. In
the case of information furnished pursuant to subclauses (i), (ii) and
(ix) above, the amounts shall be expressed as a dollar amount in the
aggregate for all Certificates of each applicable Class and per single
Certificate of a specified minimum denomination.
2. A report containing information regarding the Mortgage Loans as of the
end of the related Collection Period, which report shall contain
substantially the categories of information regarding the Mortgage Loans
set forth in this Prospectus in the tables under the caption "Description
of the Mortgage Pool -- Certain Terms and Conditions of the Mortgage
Loans" (calculated, where applicable, on the basis of the most recent
relevant information provided by the borrowers to the Servicer or the
Special Servicer and by the Servicer or the Special Servicer, as the case
may be, to the Trustee) which shall also include a loan-by-loan listing
(in descending balance order) showing loan name, property type, location,
unpaid principal balance, Mortgage Rate, paid through date, maturity date,
net interest portion of the Monthly Payment, principal portion of the
Monthly Payment and any Prepayment Premiums received. Such report will be
made available electronically; provided, however, the Trustee will provide
Certificateholder with a written copy of such report upon request.
Certain information made available in the Distribution Date Statements
referred to in item (1) above may be obtained by calling LaSalle National
Bank's ASAP System at (312) 904-2200 and requesting statement number 244 or
such other mechanism as the Trustee may have in place from time-to-time.
SERVICER REPORTS
The Servicer is required to deliver to the Trustee prior to each
Distribution Date, and the Trustee is to deliver to each Certificateholder,
the Depositor, the Underwriter, each Rating Agency and, if requested, any
potential investor in the Certificates, on each Distribution Date, the
following six reports:
(a) A "Comparative Financial Status Report" substantially containing the
content in Annex C-1 attached hereto, setting forth, to the extent such
information is provided by the related borrowers, among other things, the
occupancy, revenue, net operating income and DSCR for the Mortgage Loans
with the greatest outstanding principal balance as of the current date of
the latest information available immediately preceding the preparation of
such report for each of the following periods: (i) the most current
available year-to-date, (ii) the previous two full fiscal years, and (iii)
the "base year" (representing the original underwriting information used
as of the Cut-off Date).
(b) A "Delinquent Loan Status Report" substantially containing the
content in Annex C-2 attached hereto, setting forth, among other things,
those Mortgage Loans which, as of the close of business on the Due Date
immediately preceding the preparation of such report, were delinquent one
Collection Period, delinquent two Collection Periods, delinquent three or
more Collection Periods, current but specially serviced, or in foreclosure
but not REO Property.
(c) An "Historical Loan Modification Report" substantially containing the
content in Annex C-3 attached hereto, setting forth, among other things,
those Mortgage Loans which, as of the close of business on the Due Date
immediately preceding the preparation of such report, have been modified
pursuant to the Pooling and Servicing Agreement (i) during the related
Collection Period and (ii) since the Cut-off Date, showing the original
and the revised terms thereof.
(d) An "Historical Loss Estimate Report" substantially containing the
content in Annex C-4 attached hereto, setting forth, among other things,
as of the close of business on the Due Date immediately preceding the
preparation of such report, (i) the aggregate amount of liquidation
proceeds and liquidation expenses, both for the current period and
historically, and (ii) the amount of Realized Losses occurring during the
related Collection Period, set forth on a Mortgage Loan-by-Mortgage Loan
basis.
(e) An "REO Status Report" substantially containing the content in Annex
C-5 attached hereto, setting forth, among other things, with respect to
each REO Property that was included in the Trust Fund as of the close of
business on the Due Date immediately preceding the preparation of such
report, (i) the acquisition date of such REO Property,
137
<PAGE>
(ii) the amount of income collected with respect to any REO Property net
of related expenses and other amounts, if any, received on such REO
Property during the related Collection Period and (iii) the value of the
REO Property based on the most recent appraisal or other valuation thereof
available to the Servicer as of such date of determination (including any
prepared internally by the Special Servicer).
(f) A "Watch List" substantially containing the content in Annex C-6
attached hereto, setting forth, among other things, any Mortgage Loan that
is in jeopardy of becoming a Specially Serviced Mortgage Loan.
The information that pertains to Specially Serviced Mortgage Loans and REO
Properties reflected in such reports shall be based solely upon the reports
delivered by the Special Servicer to the Servicer at least one business day
prior to the Servicer Remittance Date. Absent manifest error, (i) none of the
Servicer, the Special Servicer or the Trustee shall be responsible for the
accuracy or completeness of any information supplied to it by a borrower or
third party that is included in any reports, statements, materials or
information prepared or provided by the Servicer, the Special Servicer or the
Trustee, as applicable, (ii) the Trustee will not be responsible for the
accuracy or completeness of any information supplied to it by the Servicer or
Special Servicer that is included in any reports, statements, materials or
information prepared or provided by the Servicer or Special Servicer, as
applicable, and (iii) the Trustee will be entitled to conclusively rely upon
the Servicer's reports and the Special Servicer's reports without any duty or
obligation to recompute, verify or re-evaluate any of the amounts or other
information stated therein.
The Servicer is also required to deliver to the Trustee the following
materials:
(a) Annually, on or before June 30 of each year, commencing with June 30,
1997, with respect to each Mortgaged Property and REO Property, an
"Operating Statement Analysis" substantially containing the content in
Annex C-7 attached hereto as of the end of the preceding fiscal year,
together with copies of the operating statements and rent rolls (but only
to the extent the related borrower is required by the Mortgage to deliver,
or otherwise agrees to provide such information) for such Mortgaged
Property or REO Property as of the end of the preceding calendar year. The
Servicer (or the Special Servicer in the case of Specially Serviced
Mortgage Loans and REO Properties) is required to use its best reasonable
efforts to obtain said annual operating statements and rent rolls.
(b) Within thirty days of receipt by the Servicer (or within ten days of
receipt by the Special Servicer with respect to any Specially Serviced
Mortgage Loan or REO Property) of annual operating statements, if any,
with respect to any Mortgaged Property or REO Property, an "NOI Adjustment
Worksheet" for such Mortgaged Property (with the annual operating
statements attached thereto as an exhibit), presenting the computations
made in accordance with the methodology described in the Pooling and
Servicing Agreement to "normalize" the full year net operating income and
debt service coverage numbers used by the Servicer in the other reports
referenced above.
The Trustee is to deliver a copy of each Operating Statement Analysis
report and NOI Adjustment Worksheet that it receives from the Servicer to the
Depositor, the Underwriter and each Rating Agency promptly after its receipt
thereof. Upon request, the Trustee will make such reports available to the
Certificateholders and the Special Servicer. Any Certificateholder and any
potential investor in the Certificates may obtain a copy of any NOI
Adjustment Worksheet for a Mortgaged Property or REO Property in the
possession of the Trustee upon request.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee is required to send to each person who at any time
during the calendar year was a Certificateholder of record, a report
summarizing on an annual basis (if appropriate) the items provided to
Certificateholders in the monthly Distribution Date Statements and such other
information as may be required to enable such Certificateholders to prepare
their federal income tax returns. Such information is to include the amount
of original issue discount accrued on each Class of Certificate held by
persons other than holders exempted from the reporting requirements and
information regarding the expenses of the Trust Fund.
OTHER INFORMATION
The Pooling and Servicing Agreement requires that the Trustee make
available at its offices, during normal business hours, for review by any
Holder of a Certificate, the Depositor, the Special Servicer, the Servicer,
any Rating Agency, any potential investor in the Certificates or any other
Person to whom the Depositor believes such disclosure is appropriate,
originals or copies of, among other things, the following items (except to
the extent not permitted by applicable law or under any of the Mortgage Loan
documents): (i) the Pooling and Servicing Agreement and any amendments
thereto, (ii) all Distribution Date Statements delivered to holders of the
relevant Class of Certificates since March 27, 1997, (iii) all annual
officers' certificates and accountants' reports delivered by the Servicer and
Special Servicer to the Trustee since
138
<PAGE>
March 27, 1997 regarding compliance with the relevant agreements, (iv) the
most recent property inspection report prepared by or on behalf of the
Servicer or the Special Servicer with respect to each Mortgaged Property, (v)
the most recent annual operating statements, rent rolls (to the extent such
rent rolls have been made available by the related borrower) and retail
"sales information," if any, collected by or on behalf of the Servicer or the
Special Servicer with respect to each Mortgaged Property, (vi) any and all
modifications, waivers and amendments of the terms of a Mortgage Loan entered
into by the Servicer and/or the Special Servicer, and (vii) any and all
officers' certificates and other evidence delivered to or by the Trustee to
support the Servicer's, the Trustee's or the Fiscal Agent's, as the case may
be, determination that any Advance, if made, would not be recoverable and
(viii) any other materials provided to a requesting Certificateholder as
provided in the Pooling and Servicing Agreement in situations where such
requesting Certificateholder declined to enter into a confidentiality
agreement with the Servicer. Copies of any and all of the foregoing items
will be available from the Trustee upon request; however, the Trustee will be
permitted to require payment of a sum sufficient to cover the reasonable
costs and expenses of providing such copies.
139
<PAGE>
ERISA CONSIDERATIONS
Because the Subordinated Certificates are subordinate to one or more
Classes of Certificates, the purchase and holding of the Subordinated
Certificates by or on behalf of a Plan may result in "prohibited
transactions" within the meaning of ERISA, Section 4975 of the Code or any
Similar Law. Accordingly, each prospective transferee of a Subordinated
Certificate that is a Definitive Certificate will be required to (a) deliver
to the Depositor, the Certificate Registrar and the Trustee a representation
letter substantially in the form set forth as an exhibit to the Pooling and
Servicing Agreement stating that such transferee is not a Plan or a person
acting on behalf of or investing the assets of a Plan, other than an
insurance company investing the assets of its general account under
circumstances whereby the purchase and subsequent holding of the Subordinated
Certificate would be exempt from the prohibited transaction restrictions of
ERISA and the Code under Sections I and III of PTE 95-60, or (b) provide (i)
an opinion of counsel in form and substance satisfactory to the Certificate
Registrar that the purchase of the Subordinated Certificate will not result
in the assets of the Trust Fund being deemed to be "plan assets" and subject
to the prohibited transaction restrictions of ERISA, the Code or any Similar
Law and will not subject the Depositor, the Servicer, the Special Servicer,
the Trustee, or the Fiscal Agent to any obligation in addition to those
undertaken in the Pooling and Servicing Agreement and (ii) such other
opinions of counsel, officers' certificates and agreements as the Certificate
Registrar may require in connection with such transfer. The purchaser or
transferee of any interest in a Subordinated Certificate that is not a
Definitive Certificate will be deemed to have represented, by its ownership
thereof, that it is not a person described in clause (a) above. The
Subordinated Certificates will contain a legend describing such restrictions
on transfer and the Pooling and Servicing Agreement will provide that any
attempted or purported transfer in violation of these transfer restrictions
will be null and void.
The sale of Certificates to a Plan is in no respect a representation by
the Depositor or the Underwriter that this investment meets all relevant
legal requirements with respect to investments by Plans generally or any
particular Plan, or that this investment is appropriate for Plans generally
or any particular Plan.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties
that are general in nature. Because such legal aspects are governed by
applicable state law (which laws may differ substantially), the summaries do
not purport to be complete nor to reflect the laws of any particular state,
nor to encompass the laws of all states in which the security for the
Mortgage Loans is situated. The summaries are qualified in their entirety by
reference to the applicable federal and state laws governing the Mortgage
Loans.
GENERAL
All of the Mortgage Loans are loans evidenced by a note or bond and
secured by instruments granting a security interest in real property which
may be mortgages, deeds of trust, or deeds to secure debt, depending upon the
prevailing practice and law in the state in which the Mortgaged Property is
located. Mortgages, deeds of trust and deeds to secure debt are herein
collectively referred to as "mortgages." Any of the foregoing types of
mortgages will create a lien upon, or grant a title interest in, the subject
property, the priority of which will depend on the terms of the particular
security instrument, as well as separate, recorded, contractual arrangements
with others holding interests in the mortgaged property, the knowledge of the
parties to such instrument as well as the order of recordation of the
instrument in the appropriate public recording office. However, recording
does not generally establish priority over governmental claims for real
estate taxes and assessments and other charges imposed under governmental
police powers.
TYPES OF MORTGAGE INSTRUMENTS
A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties -a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In contrast,
a deed of trust is a three-party instrument, among a trustor (the equivalent
of a mortgagor), a trustee to whom the mortgaged property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. As used in
this Prospectus, unless the context otherwise requires, "mortgagor" includes
the trustor under a deed of trust and a grantor under a deed to secure debt.
Under a deed of trust, the mortgagor grants the property, irrevocably until
the debt is paid, in trust, generally with a power of sale as security for
the indebtedness evidenced by the related note. A deed to secure debt
140
<PAGE>
typically has two parties. By executing a deed to secure debt, the grantor
conveys title to, as opposed to merely creating a lien upon, the subject
property to the grantee until such time as the underlying debt is repaid,
generally with a power of sale as security for the indebtedness evidenced by
the related mortgage note. As used in this Prospectus, unless the context
otherwise requires, the term "mortgagee" means the lender and, in the case of
the deed of trust, the trustee thereunder in certain cases. In case the
mortgagor under a mortgage 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 mortgagor. At origination of a
mortgage loan involving a land trust, the mortgagor executes a separate
undertaking to make payments on the mortgage note. 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 the express
provisions of the mortgage, the law of the state in which the real property
is located, certain federal laws (including, without limitation, the
Soldiers' and Sailor's Civil Relief Act of 1940) and, in some cases, in 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, pursuant to which the mortgagor assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while the mortgagor retains a revocable license to
collect the rents for so long as there is no unremedied default. If the
mortgagor defaults and such default is not remedied by the mortgagor within
the cure period, if any, the license terminates and the lender is entitled to
collect the rents. Local law may require that the lender take possession of
the property and/or obtain a court-appointed receiver before becoming
entitled to collect the rents. In most States, hotel and motel room rates are
considered accounts receivable under the Uniform Commercial Code ("UCC");
generally these rates are either assigned by the mortgagor, which remains
entitled to collect such rates absent a default, or pledged by the mortgagor,
as security for the loans. In general, the lender must file financing
statements in order to perfect its security interest in the rates and must
file continuation statements, generally every five years, to maintain
perfection of such security interest. Even if the lender's security interest
in room rates is perfected under the UCC, the lender will generally be
required to commence a foreclosure or otherwise take possession of the
property in order to collect the room rates after a default.
Even after a foreclosure, the potential rent payments from the property
may be less than the periodic payments that had been due under the mortgage.
For instance, the net income that would otherwise be generated from the
property may be less than the amount that would have been needed to service
the mortgage debt if the leases on the property are at below-market rents, or
as the result of excessive maintenance, repair or other obligations which a
lender succeeds to as landlord.
PERSONALTY
Certain types of Mortgaged Properties, such as hotels, motels and
industrial plants, are likely to derive a significant part of their value
from personal property which does not constitute "fixtures" under applicable
state real property law, and hence, would not be subject to the lien of a
mortgage. Such property is generally pledged or assigned as security to the
lender under the UCC. In order to perfect its security interest therein, the
lender generally must file UCC financing statements and, to maintain
perfection of such security interest, file continuation statements generally
every five years.
SUBORDINATE FINANCING
Where the mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the
mortgagor may have difficulty servicing and repaying multiple loans. In
addition, if the junior loan permits recourse to the mortgagor (as junior
loans often do) and the senior loan does not, a mortgagor may be more likely
to repay sums due on the junior loan than those on the senior loan. Second,
acts of the senior lender that prejudice the junior lender or impair the
junior lender's security may create a superior equity in favor of the junior
lender. For example, if the mortgagor and the senior lender agree to an
increase in the principal amount of or the interest rate payable on the
senior loan, the senior lender may lose its priority to the extent any
existing junior lender is harmed or the mortgagor is additionally burdened.
Third, if the mortgagor 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. Moreover, the bankruptcy of
a junior lender may operate to stay foreclosure or similar proceedings by the
senior lender.
141
<PAGE>
FORECLOSURE
Foreclosure is a legal procedure that allows the mortgagee to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the mortgagor defaults in payment or performance of its
obligations under the note or mortgage and, by reason thereof, the
indebtedness has been accelerated, the mortgagee has the right to institute
foreclosure proceedings to sell the mortgaged property at public auction to
satisfy the indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage vary
from state to state. Two primary methods of foreclosing a mortgage are
judicial foreclosure and non-judicial foreclosure pursuant to a power of sale
granted in the mortgage instrument. There are other foreclosure procedures
available in some states that are either infrequently used or available only
in certain limited circumstances, such as strict foreclosure.
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 subordinate
interest of record in the real property and all parties in possession of the
property, under leases or otherwise, whose interests are subordinate to the
mortgage. Delays in completion of the foreclosure may occasionally result
from difficulties in locating defendants. When the lender's right to
foreclosure is contested, the legal proceedings can be costly and
time-consuming. Upon successful completion of a 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 which are used to satisfy the judgment. Such sales
are made in accordance with procedures that vary from state to state.
NON-JUDICIAL FORECLOSURE/POWER OF SALE
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale pursuant to the power of sale granted in the deed of trust. A
power of sale is typically granted in a deed of trust. It may also be
contained in any other type of mortgage instrument. A power of sale allows a
non-judicial public sale to be conducted generally following a request from
the beneficiary/lender to the trustee to sell the property upon any default
by the mortgagor under the terms of the mortgage note or the mortgage
instrument and after notice of sale is given in accordance with the terms of
the mortgage instrument, as well as applicable state law. In some states,
prior to such sale, the trustee under a deed of trust must record a notice of
default and notice of sale and send a copy to the mortgagor 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 mortgagor 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 acceleration) plus the
expenses incurred in enforcing the obligation. In other states, the mortgagor
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, the procedure for public sale, the parties entitled to
notice, the method of giving notice and the applicable time periods are
governed by state law and vary among the states. Foreclosure of a deed to
secure debt is also generally accomplished by a non-judicial sale similar to
that required by a deed of trust, except that the lender or its agent, rather
than a trustee, is typically empowered to perform the sale in accordance with
the terms of the deed to secure debt and applicable law.
LIMITATIONS ON LENDER'S RIGHTS
United States courts have traditionally imposed general equitable
principles to limit the remedies available to a mortgagee in connection with
foreclosure. These equitable principles are generally designed to relieve the
mortgagor from the legal effect of mortgage defaults, to the extent that such
effect is perceived as harsh or unfair. Relying on such principles, a court
may alter the specific terms of a loan to the extent it considers necessary
to prevent an injustice, undue oppression or overreaching, or may require the
lender to undertake affirmative and expensive actions to determine the cause
of the mortgagor's default and the likelihood that the mortgagor will be able
to reinstate the loan. In some cases, courts have substituted their judgment
for the lender's and have required that lenders reinstate loans or recast
payment schedules in order to accommodate mortgagors who are suffering from a
temporary financial disability. In other cases, courts have limited the right
of the lender to foreclose if the default under the mortgage is not monetary,
e.g., the mortgagor failed to maintain the mortgaged property adequately or
the mortgagor executed a junior mortgage on the
142
<PAGE>
mortgaged property. The exercise by the court of its equity powers will
depend on the individual circumstances of each case presented to it. Finally,
some courts have been faced with the issue of whether federal or state
constitutional provisions reflecting due process concerns for adequate notice
require that a mortgagor receive notice in addition to statutorily-prescribed
minimum notice. For the most part, these cases have upheld the reasonableness
of the 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
afford constitutional protections to the mortgagor.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are interposed, and
sometimes require several years to complete.
Also, a third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the value of such
property at the time of sale, due to, among other things, redemption rights
which may exist and the possibility of physical deterioration of the property
during the foreclosure proceedings. Potential buyers may be reluctant to
purchase property at a foreclosure sale as a result of the 1980 decision of
the United States Court of Appeals for the Fifth Circuit in Durrett v.
Washington National Insurance Company and other decisions that have followed
its reasoning. The court in Durrett held that even a non-collusive, regularly
conducted foreclosure sale was a fraudulent transfer under the federal
Bankruptcy Code, as amended from time to time (11 U.S.C.) and, therefore,
could be rescinded in favor of the bankrupt's estate, if (i) the foreclosure
sale was held while the debtor was insolvent and not more than one year prior
to the filing of the bankruptcy petition and (ii) the price paid for the
foreclosed property did not represent "fair consideration" ("reasonably
equivalent value" under the Bankruptcy Code). Although the reasoning and
result of Durrett in respect of the Bankruptcy Code was rejected by the
United States Supreme Court in May 1994, the case could nonetheless be
persuasive to a court applying a state fraudulent conveyance law which has
provisions similar to those construed in Durrett. For these reasons, it is
common for the lender to purchase the mortgaged property for an amount equal
to the lesser of fair market value and the underlying debt and accrued and
unpaid interest plus the expenses of foreclosure. Generally, state law
controls the amount of foreclosure costs and expenses which may be recovered
by a lender. Thereafter, subject to the mortgagor's right in some states to
remain in possession during a redemption period, if applicable, the lender
will become the owner of the property and have both the benefits and burdens
of ownership of the mortgaged property. For example, the lender will have the
obligation to pay debt service on any senior mortgages, to pay taxes, obtain
casualty insurance and to make such repairs at its own expense as are
necessary to render the property suitable for sale. Frequently, the lender
employs a third party management company to manage and operate the property.
The costs of operating and maintaining a commercial or multifamily
residential property may be significant and may be greater than the income
derived from that property. The costs of management and operation of those
mortgaged properties which are hotels, motels or restaurants or nursing or
convalescent homes or hospitals may be particularly significant because of
the expertise, knowledge and, with respect to nursing or convalescent homes
or hospitals, regulatory compliance, required to run such operations and the
effect which foreclosure and a change in ownership may have on the public's
and the industry's (including franchisors') perception of the quality of such
operations. The lender will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale of the
property. Depending upon market conditions, the ultimate proceeds of the sale
of the property may not equal the lender's investment in the property.
Moreover, a lender commonly incurs substantial legal fees and court costs in
acquiring a mortgaged property through contested foreclosure and/or
bankruptcy proceedings. Furthermore, a few states require that any
environmental contamination at certain types of properties be cleaned up
before a property may be resold. In addition, a lender may be responsible
under federal or state law for the cost of cleaning up a mortgaged property
that is environmentally contaminated. See "--Environmental Legislation."
Generally state law controls the amount of foreclosure expenses and costs,
including attorneys' fees, that may be recovered by a lender.
A junior mortgagee may not foreclose on the property securing the junior
mortgage unless it forecloses subject to senior mortgages and any other prior
liens, in which case it may be obliged to make payments on the senior
mortgages to avoid their foreclosure. In addition, in the event that the
foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale"
clause contained in a senior mortgage, the junior mortgagee may be required
to pay the full amount of the senior mortgage to avoid its foreclosure.
Accordingly, with respect to those Mortgage Loans which are junior mortgage
loans, if the lender purchases the property the lender's title will be
subject to all senior mortgages, prior liens and certain governmental liens.
The proceeds received by the referee or trustee from the sale are
generally applied first to the costs, fees and expenses of sale, to unpaid
real estate taxes and assessments and then in satisfaction of the
indebtedness secured by the mortgage under which the sale was conducted. Any
proceeds remaining after satisfaction of senior mortgage debt are generally
143
<PAGE>
payable to the holders of junior mortgages and other liens and claims in
order of their priority, whether or not the mortgagor is in default. Any
additional proceeds are generally payable to the mortgagor. The payment of
the proceeds to the holders of junior mortgages may occur in the foreclosure
action of the senior mortgage or a subsequent ancillary proceeding or may
require the institution of separate legal proceedings by such holders.
RIGHTS OF REDEMPTION
The purposes of a foreclosure action are to enable the mortgagee to
realize upon its security and to bar the mortgagor, and all persons who have
an interest in the property which is subordinate to the mortgage being
foreclosed, from exercise of their "equity of redemption." The doctrine of
equity of redemption provides that, until the property covered by a mortgage
has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having an interest which is subordinate to that of
the foreclosing mortgagee have an equity of redemption and may redeem the
property by paying the entire debt with interest. In addition, in some
states, when a foreclosure action has been commenced, the redeeming party
must pay certain costs of such action. 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 cut off and terminated.
The equity of redemption is generally a common-law (non-statutory) right
which exists prior to completion of the foreclosure, is not waivable by the
mortgagor, must be exercised prior to foreclosure sale and should be
distinguished from the post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage,
the mortgagor and foreclosed junior lienors are given a statutory period in
which to redeem the property from the foreclosure sale. In some states,
statutory redemption may occur only upon payment of the foreclosure sale
price. In other states, redemption may be authorized if the former mortgagor
pays only a portion of the sums due. The effect of a statutory right of
redemption is to diminish the ability of the lender to sell the foreclosed
property. The exercise of a right of redemption would defeat the title of any
purchaser from a foreclosure sale or sale under a deed of trust.
Consequently, the practical effect of the redemption right is to force the
lender to maintain the property and pay the expenses of ownership 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.
Under the REMIC Regulations currently in effect, property acquired by
foreclosure generally must not be held for more than two years. The Pooling
and Servicing Agreement will permit foreclosed property to be held for more
than two years if the Trustee receives (i) an extension from the Internal
Revenue Service or (ii) an opinion of counsel to the effect that holding such
property for such period is permissible under the REMIC provisions of the
Code.
ANTI-DEFICIENCY LEGISLATION
Some or all of the Mortgage Loans may be nonrecourse loans, as to which
recourse may be had only against the specific property securing the related
Mortgage Loan and a personal money judgment may not be obtained against the
mortgagor. Even if a mortgage loan by its terms provides for recourse to the
mortgagor, some states impose prohibitions or limitations on such recourse.
For example, statutes in some states limit the right of the lender to obtain
a deficiency judgment against the mortgagor following foreclosure or sale
under a deed of trust. A deficiency judgment would be a personal judgment
against the former mortgagor equal to the difference between the net amount
realized upon the public sale of the real property and the amount due to the
lender. Some states require the lender to exhaust the security afforded under
a mortgage by foreclosure in an attempt to satisfy the full debt before
bringing a personal action against the mortgagor. In certain other states,
the lender has the option of bringing a personal action against the mortgagor
on the debt without first exhausting such security; however, in some of these
states, the lender, following judgment on such personal action, may be deemed
to have elected a remedy and may be precluded from exercising remedies with
respect to the security. In some cases, a lender will be precluded from
exercising any additional rights under the note or mortgage if it has taken
any prior enforcement action. Consequently, the practical effect of the
election requirement, in those states permitting such election, is that
lenders will usually proceed against the security first rather than bringing
a personal action against the mortgagor. Finally, other statutory provisions
limit any deficiency judgment against the former mortgagor following a
judicial sale to the excess of the outstanding debt over the fair market
value of the property at the time of the public sale. The purpose of these
statutes is generally to prevent a lender from obtaining a large deficiency
judgment against the former mortgagor as a result of low or no bids at the
judicial sale.
LEASEHOLD RISKS
Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with mortgage loans
secured by the fee estate of the mortgagor. The most significant of these
risks is that
144
<PAGE>
the ground lease creating the leasehold estate could terminate, leaving the
leasehold mortgagee without its security. The ground lease may terminate if,
among other reasons, the ground lessee breaches or defaults in its
obligations under the ground lease or there is a bankruptcy of the ground
lessee or the ground lessor. This risk may be minimized if the ground lease
contains certain provisions protective of the mortgagee, but the ground
leases that secure Mortgage Loans may not contain some of these protective
provisions, and mortgages may not contain the other protections discussed in
the next paragraph. Protective ground lease provisions include the right of
the leasehold mortgagee to receive notices from the ground lessor of any
defaults by the mortgagor; the right to cure such defaults, with adequate
cure periods; if a default is not susceptible of cure by the leasehold
mortgagee, the right to acquire the leasehold estate through foreclosure or
otherwise; the ability of the ground lease to be assigned to and by the
leasehold mortgagee or purchaser at a foreclosure sale and for the
concomitant release of the ground lessee's liabilities thereunder; and the
right of the leasehold mortgagee to enter into a new ground lease with the
ground lessor on the same terms and conditions as the old ground lease in the
event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may
require that the ground lease or leasehold mortgage prohibit the ground
lessee from treating the ground lease as terminated in the event of the
ground lessor's bankruptcy and rejection of the ground lease by the trustee
for the debtor-ground lessor. As further protection, a leasehold mortgage may
provide for the assignment of the debtor-ground lessee's right to reject a
lease pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as
amended (11 U.S.C.) (the "Bankruptcy Code"), although the enforceability of
such clause has not been established. Without the protections described in
the foregoing paragraph, a leasehold mortgagee may lose the collateral
securing its leasehold mortgage. In addition, terms and conditions of a
leasehold mortgage are subject to the terms and conditions of the ground
lease. Although certain rights given to a ground lessee can be limited by the
terms of a leasehold mortgage, the rights of a ground lessee or a leasehold
mortgagee with respect to, among other things, insurance, casualty and
condemnation will be governed by the provisions of the ground lease.
BANKRUPTCY LAWS
The Bankruptcy Code and related state laws may interfere with or affect
the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings)
are automatically stayed upon the filing of the bankruptcy petition, and,
usually, no interest or principal payments are made during the course of the
bankruptcy case. The delay and the consequences thereof caused by such
automatic stay can be significant. Also, under the Bankruptcy Code, the
filing of a petition in bankruptcy by or on behalf of a junior lienor may
stay the senior lender from taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage secured
by property of the debtor may be modified under certain circumstances. The
outstanding amount of the loan secured by the real property may be reduced to
the then-current value of the property (with a corresponding partial
reduction of the amount of lender's security interest) pursuant to a
confirmed plan or lien avoidance proceeding, thus leaving the lender a
general unsecured creditor for the difference between such value and the
outstanding balance of the loan. Other modifications may include the
reduction in the amount of each scheduled payment, which reduction may result
from a reduction in the rate of interest and/or the alteration of the
repayment schedule (with or without affecting the unpaid principal balance of
the loan), and/or an extension (or reduction) of the final maturity date.
Some courts with federal bankruptcy jurisdiction have approved plans, based
on the particular facts of the reorganization case, that effected the curing
of a mortgage loan default by paying arrearages over a number of years. Also,
under federal bankruptcy law, a bankruptcy court may permit a debtor through
its rehabilitative plan to de-accelerate a secured loan and to reinstate the
loan even though the lender accelerated the mortgage loan and final judgment
of foreclosure had been entered in state court (provided no sale of the
property had yet occurred) prior to the filing of the debtor's petition. This
may be done even if the full amount due under the original loan is never
repaid.
The Bankruptcy Code has been amended to provide that a lender's perfected
pre-petition security interest in leases, rents and hotel revenues continues
in the post-petition leases, rents and hotel revenues, unless a bankruptcy
court orders to the contrary "based on the equities of the case." Thus,
unless a court orders otherwise, revenues from a Mortgaged Property generated
after the date the bankruptcy petition is filed will constitute "cash
collateral" under the Bankruptcy Code. Debtors may only use cash collateral
upon obtaining the lender's consent or a prior court order finding that the
lender's interest in the Mortgaged Properties and the cash collateral is
"adequately protected" as such term is defined and interpreted under the
Bankruptcy Code. It should be noted, however, that the court may find that
the lender has no
145
<PAGE>
security interest in either pre-petition or post-petition revenues if the
court finds that the loan documents do not contain language covering
accounts, room rents, or other forms of personalty necessary for a security
interest to attach to hotel revenues.
To the extent that a mortgagor's ability to make payment on a mortgage
loan is dependent on its receipt of payments of rent under a lease of the
related property, such ability may be impaired by the commencement of a
bankruptcy proceeding relating to a lessee under such lease. Under the
Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a
lessee results in a stay in bankruptcy against the commencement or
continuation of any state court proceeding for past due rent, for accelerated
rent, for damages or for a summary eviction order with respect to a default
under the lease that occurred prior to the filing of the lessee's petition.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the
lease and retain it or assign it to a third party or (b) reject the lease. If
the lease is assumed, the trustee or debtor in possession (or assignee, if
applicable) must cure any defaults under the lease, compensate the lessor for
its losses and provide the lessor with "adequate assurance" of future
performance. Such remedies may be insufficient, however, as the lessor may be
forced to continue under the lease with a lessee that is a poor credit risk
or an unfamiliar tenant if the lease was assigned, and any assurances
provided to the lessor may, in fact, be inadequate. If the lease is rejected,
the lessor will be treated as an unsecured credit or with respect to its
claim for damages for termination of the lease. In addition, pursuant to
Section 502(b)(6) of the Bankruptcy Code, a lessor's damages for lease
rejection in respect of future rent installments are limited to the rent
reserved by the lease, without acceleration, for the greater of one year, or
15%, not to exceed three years, of the remaining term of the lease.
In a bankruptcy or similar proceeding, action may be taken seeking the
recovery as a preferential transfer of any payments made by the mortgagor
under the related Mortgage Loan to the Trust Fund. Payments on long-term debt
may be protected from recovery as preferences if they are payments in the
ordinary course of business made on debts incurred in the ordinary course of
business. Whether any particular payment would be protected depends upon the
facts specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may
have the power to grant liens senior to the lien of a mortgage, and analogous
state statutes and general principles of equity may also provide a mortgagor
with means to halt a foreclosure proceeding or sale and to force a
restructuring of a mortgage loan on terms a lender would not otherwise
accept. Moreover, the laws of certain states also give priority to certain
tax liens over the lien of a mortgage or deed of trust. Under the Bankruptcy
Code, if the court finds that actions of the mortgagee have been
unreasonable, the lien of the related mortgage may be subordinated to the
claims of unsecured creditors.
Pursuant to the federal doctrine of "substantive consolidation" or to the
(predominantly state law) doctrine of "piercing the corporate veil," a
bankruptcy court, in the exercise of its equitable powers, also has the
authority to order that the assets and liabilities of a related entity be
consolidated with those of an entity before it. Thus, property ostensibly the
property of one entity may be determined to be the property of a different
entity in bankruptcy, the automatic stay applicable to the second entity
extended to the first and the rights of creditors of the first entity
impaired in the fashion set forth above in the discussion of ordinary
bankruptcy principles. Depending on facts and circumstances not wholly in
existence at the time a loan is originated or transferred to the Trust Fund,
the application of any of these doctrines to one or more of the mortgagors in
the context of the bankruptcy of one or more of their affiliates could result
in material impairment of the rights of the Certificateholders.
For each mortgagor that is described as a "special purpose entity,"
"single purpose entity" or "bankruptcy-remote entity" in this Prospectus, the
activities that may be conducted by such mortgagor and its ability to incur
debt are restricted by the applicable Mortgage or the organizational
documents of such mortgagor in such manner as is intended to make the
likelihood of a bankruptcy proceeding being commenced by or against such
mortgagor remote, and such mortgagor has been organized and is designed to
operate in a manner such that its separate existence should be respected
notwithstanding a bankruptcy proceeding in respect of one or more affiliated
entities of such mortgagor. However, the Depositor makes no representation as
to the likelihood of the institution of a bankruptcy proceeding by or in
respect of any mortgagor or the likelihood that the separate existence of any
mortgagor would be respected if there were to be a bankruptcy proceeding in
respect of any affiliated entity of a mortgagor.
ENVIRONMENTAL LEGISLATION
A lender may be subject to unforeseen environmental risks when taking a
security interest in real or personal property.
146
<PAGE>
Under the laws of many states, contamination on a property may give rise
to a lien on the property for cleanup costs. In several states, such a lien
has priority over all existing liens (a "superlien") including those of
existing mortgages; in those states, the lien of a mortgage contemplated by
this transaction may lose its priority to such a superlien.
CERCLA imposes strict, as well as joint and several, liability on several
classes of potentially responsible parties, including current owners and
operators of the property, regardless of whether they caused or contributed
to the contamination. Many states have laws similar to CERCLA. CERCLA
excludes from the definition of "owner or operator" any person "who, without
participating in the management of . . . [the] facility, holds indicia of
ownership primarily to protect his security interest" ("secured-creditor
exemption").
A lender may lose its secured-creditor exemption and be held liable under
CERCLA as an owner or operator, if such lender or its employees or agents
participate in management of the property. Also, if the lender takes title to
or possession of the property, the secured-creditor exemption may be deemed
to be unavailable, and the lender may be liable to the government or private
parties for clean-up or other remedial costs pursuant to CERCLA.
A decision in May 1990 of the United States Court of Appeals for the
Eleventh Circuit in United States v. Fleet Factors Corp. very narrowly
construed the CERCLA secured-creditor exemption. The Court held that a
mortgagee need not have involved itself in the day-to-day operations of the
mortgaged property or in decisions relating to hazardous waste in order to be
liable under CERCLA; rather, liability could attach to a mortgagee if its
involvement in the management of the property is sufficiently broad to
support the inference that it had the capacity to influence the mortgagor's
treatment of hazardous waste. Such capacity to influence could be inferred
from the extent of the mortgagee's involvement in the mortgagor's financial
management. A subsequent decision by the United States Court of Appeals for
the Ninth Circuit in In re Bergsoe Metal Corp. disagreed with the Fleet
Factors opinion, ruling that a secured lender had no liability absent "some
actual management of the facility" on the part of the lender.
The scope of the secured-creditor exemption under CERCLA has now been
clarified by Congress with the enactment of the Asset Conservation, Lender
Liability, and Deposit Insurance Protection Act of 1996 (the "DIPA Act"). In
connection with pre-foreclosure activities, the DIPA Act clarifies that the
lender is considered to be "participating in the management" of secured
property only if it (1) exercises decision-making control over the
environmental compliance of the property such that it has undertaken
responsibility for hazardous substances handling or disposal practices; or
(2) exercises control comparable to that of a manager of the property, either
in terms of day-to-day decision-making on environmental compliance matters,
or in terms of management of all or substantially all non-environmental
operational functions.
With respect to post-foreclosure activities, the DIPA Act makes clear that
the lender may take title to the secured property and conduct
post-foreclosure activities with respect to the property without losing the
liability exemption, as long as the lender tries to divest itself of the
property at the earliest practicable, "commercially reasonable" time, on
"commercially reasonable" terms (taking into account market conditions and
legal and regulatory requirements).
If a lender is or becomes liable, it may bring an action for contribution
against the owner or operator who created the environmental contamination,
but that person or entity may be bankrupt or otherwise judgment proof. It is
possible that cleanup costs could become a liability of the Trust Fund and
occasion a loss to Certificateholders in certain circumstances described
above if such remedial costs were incurred.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Certain of the Mortgage Loans may contain due-on-sale and
due-on-encumbrance clauses. These clauses generally provide that the lender
may accelerate the maturity of the loan if the mortgagor sells or otherwise
transfers or encumbers the mortgaged property. Certain of these clauses may
provide that, upon an attempted breach thereof by the mortgagor of an
otherwise non-recourse loan, the mortgagor becomes personally liable for the
mortgage debt. The enforceability of due-on-sale clauses has been the subject
of legislation or litigation in many states and, in some cases, the
enforceability of these clauses was limited or denied. However, with respect
to certain loans the Garn-St Germain Depository Institutions Act of 1982
preempts state constitutional, statutory and case law that prohibits the
enforcement of due-on-sale clauses and permits lenders to enforce these
clauses in accordance with their terms subject to certain limited exceptions.
The Servicer, on behalf of the Trust Fund, will determine whether to exercise
any right the Trustee may have as mortgagee to accelerate payment of any such
Mortgage Loan or to withhold its consent to any transfer or further
encumbrance in accordance with the general Servicing Standard described
herein.
147
<PAGE>
ACCELERATION ON DEFAULT
Some of the Mortgage Loans included in a Trust Fund will include a
"debt-acceleration" clause, which permits the lender to accelerate the full
debt upon a monetary or nonmonetary default of the borrower. The courts of
all states will enforce clauses providing for acceleration in the event of a
material payment default after giving effect to any appropriate notices. The
equity courts of any state, however, may refuse to foreclose a mortgage or
deed of trust when an acceleration of the indebtedness would be inequitable
or unjust or the circumstances would render the acceleration unconscionable.
Furthermore, in some states, the borrower may avoid foreclosure and reinstate
an accelerated loan by paying only the defaulted amounts and the costs and
attorneys' fees incurred by the lender in collecting such defaulted payments.
DEFAULT INTEREST, PREPAYMENT CHARGES AND PREPAYMENTS
Forms of notes and mortgages used by lenders may contain provisions
obligating the mortgagor to pay a late charge or additional interest if
payments are not timely made, and in some circumstances may provide for
prepayment fees or yield maintenance penalties if the obligation is paid
prior to maturity or prohibit such prepayment for a specified period. In
certain states, there are or may be specific limitations upon the late
charges which a lender may collect from a mortgagor for delinquent payments.
Certain states also limit the amounts that a lender may collect from a
mortgagor as an additional charge if the loan is prepaid. The enforceability,
under the laws of a number of states of provisions providing for prepayment
fees or penalties upon, or prohibition of, an involuntary prepayment is
unclear, and no assurance can be given that, at the time a Prepayment Premium
is required to be made on a Mortgage Loan in connection with an involuntary
prepayment, the obligation to make such payment, or the provisions of any
such prohibition, will be enforceable under applicable state law. The absence
of a restraint on prepayment, particularly with respect to Mortgage Loans
having higher Mortgage Rates, may increase the likelihood of refinancing or
other early retirements of the Mortgage Loans.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential (including
multifamily but not other commercial) first mortgage loans originated by
certain lenders after March 31, 1980. A similar federal statute was in effect
with respect to mortgage loans made during the first three months of 1980.
The statute authorized any state to reimpose 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 so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on mortgage loans covered
by Title V. Certain states have taken action to reimpose interest rate limits
and/or to limit discount points or other charges.
The Depositor has been advised by counsel that a court interpreting Title
V would hold that first mortgage loans secured by primarily residential
properties that are originated on or after January 1, 1980 are subject to
federal preemption. Therefore, in a state that has not taken the requisite
action to reject application of Title V or to adopt a provision limiting
discount points or other charges prior to origination of such mortgage loans,
any such limitation under such state's usury law would not apply to such
mortgage loans.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage
loans, originated by non-federally chartered lenders have historically been
subjected to a variety of restrictions. Such restrictions differed from state
to state, resulting in difficulties in determining whether a particular
alternative mortgage instrument originated by a state-chartered lender was in
compliance with applicable law. These difficulties were alleviated
substantially as a result of the enactment of Title VIII of the Garn-St
Germain Act ("Title VIII"). Title VIII provides that, notwithstanding any
state law to the contrary, state-chartered banks may originate alternative
mortgage instruments in accordance with regulations promulgated by the
Comptroller of the Currency with respect to origination of alternative
mortgage instruments by national banks, state-chartered credit unions may
originate alternative mortgage instruments in accordance with regulations
promulgated by the National Credit Union Administration (the "NCUA") with
respect to origination of alternative mortgage instruments by federal credit
unions, and all other non-federally chartered housing creditors, including
state-chartered savings and loan associations, state-chartered savings banks
and mortgage banking companies, may originate alternative mortgage
instruments in accordance with the regulations promulgated by the Federal
Home Loan Bank Board (now the Office of Thrift Supervision) with respect to
origination of alternative mortgage instruments by federal savings and loan
148
<PAGE>
associations. Title VIII provides that any state may reject applicability of
the provision of Title VIII by adopting, prior to October 15, 1985, a law or
constitutional provision expressly rejecting the applicability of such
provisions. Certain states have taken such action.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a mortgagor who enters military service after the
origination of such mortgagor's Mortgage Loan (including a mortgagor 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 such mortgagor's active duty
status, unless a court orders otherwise upon application of the lender. The
Relief Act applies to mortgagors who are members of the Army, Navy, Air
Force, Marines, National Guard, Reserves, Coast Guard and officers of the
U.S. Public Health Service assigned to duty with the military. Because the
Relief Act applies to mortgagors who enter military service (including
reservists who are called to active duty) after origination of the related
Mortgage Loan, no information can be provided as to the number of loans that
may be affected by the Relief Act. Application of the Relief Act would
adversely affect, for an indeterminate period of time, the ability of any
servicer to collect full amounts of interest on certain of the Mortgage
Loans. Any shortfalls in interest collections resulting from the application
of the Relief Act would result in a reduction of the amounts distributable to
the holders of the Certificates and would not be covered by Advances or
credit support provided in connection with such Certificates. In addition,
the Relief Act imposes limitations that would impair the ability of the
servicer to foreclose on an affected Mortgage Loan during the mortgagor's
period of active duty status, and, under certain circumstances, during an
additional three month period thereafter. Thus, in the event that such a
Mortgage Loan goes into default, there may be delays and losses occasioned
thereby.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the
"Crime Control Act"), the government may seize the property even before
conviction. The government must publish notice of the forfeiture proceeding
and may 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: (i) its mortgage was executed and recorded before
commission of the crime upon which the forfeiture is based or (ii) 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.
CERTAIN LAWS AND REGULATIONS
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply
(together with an inability to remedy any such failure) could result in
material diminution in the value of a Mortgaged Property which could,
together with the possibility of limited alternative uses for a particular
Mortgaged Property (i.e., a nursing or convalescent home or hospital), result
in a failure to realize the full principal amount of the related Mortgage
Loan.
TYPE OF MORTGAGED PROPERTY
The lender may be subject to additional risk depending upon the type and
use of the Mortgaged Property in question. For instance, Mortgaged Properties
which are hospitals, nursing homes or convalescent homes may present special
risks to lenders in large part due to significant governmental regulation of
the operation, maintenance, control and financing of health care
institutions. Mortgages on Mortgaged Properties which are owned by the
borrower under a condominium form of ownership are subject to the
declaration, by-laws and other rules and regulations of the condominium
association. Mortgaged Properties which are hotels or motels may present
additional risk to the lender in that: (i) hotels and motels are typically
operated pursuant to franchise, management and operating agreements which may
be terminable by the operator and (ii) the transferability of the hotel's
operating, liquor and other licenses to the entity acquiring the hotel either
149
<PAGE>
through purchase or foreclosure is subject to the vagaries of local law
requirements. In addition, Mortgaged Properties which are multifamily
residential properties or cooperatively owned multifamily properties may be
subject to rent control laws, which could impact the future cash flows of
such properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which
are structural in nature from existing places of public accommodation to the
extent "readily achievable." In addition, under the ADA, alterations to a
place of public accommodation or a commercial facility are to be made so
that, to the maximum extent feasible, such altered portions are readily
accessible to and usable by disabled individuals. The "readily achievable"
standard takes into account, among other factors, the financial resources of
the affected site, owner, landlord or other applicable person. In addition to
imposing a possible financial burden on the borrower in its capacity as owner
or landlord, the ADA may also impose such requirements on a foreclosing
lender who succeeds to the interest of the borrower as owner or landlord.
Furthermore, since 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.
150
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of the
Subordinated Certificates and is based on the advice of Cadwalader,
Wickersham & Taft. The discussion below does not purport to address all
federal income tax consequences that may be applicable to particular
categories of investors, some of which may be subject to special rules. In
addition, this discussion does not address state, local or foreign tax issues
with respect to the acquisition, ownership or disposition of the Subordinated
Certificates. The authorities on which this discussion is based are subject
to change or differing interpretations, and any such change or interpretation
could apply retroactively. This discussion reflects the applicable provisions
of the Code, as well as regulations (the "REMIC Regulations") promulgated by
the U.S. Department of the Treasury. Investors should consult their own tax
advisors in determining the federal, state, local, foreign or any other tax
consequences to them of the purchase, ownership and disposition of the
Subordinated Certificates.
Elections will be made to treat the Trust Fund, exclusive of the Reserve
Accounts, the Lock Box Accounts, the Cash Collateral Accounts, the Excess
Interest and the Default Interest in respect of the Mortgage Loans (such
portion of the Trust Fund, the "Trust REMICs"), as two separate REMICs (the
"Upper-Tier REMIC" and the "Lower-Tier REMIC," respectively) within the
meaning of Code Section 860D. The Lower-Tier REMIC holds the Mortgage Loans,
proceeds therefrom, the Collection Account, the Distribution Account and any
REO Property, and has issued (i) certain uncertificated classes of regular
interests (the "Lower-Tier Regular Interests") to the Upper-Tier REMIC and
(ii) the Class LR Certificates, which represents the sole class of residual
interests in the Lower-Tier REMIC. The Upper-Tier REMIC holds the Lower-Tier
Regular Interests and the Upper-Tier Distribution Account in which
distributions thereon will be deposited, and has issued the Class A-1A, Class
A-1B, Class A-1C, Class A-1D, Class A-1E, Class A-CS1, Class PS-1, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7 and Class
B-7H Certificates (the "Regular Certificates"), as classes of regular
interests and the Class R Certificates as the sole class of residual
interests in the Upper-Tier REMIC. Qualification as a REMIC requires ongoing
compliance with certain conditions. Assuming (i) the making of appropriate
elections, (ii) compliance with the Pooling and Servicing Agreement and (iii)
compliance with any changes in the law, including any amendments to the Code
or applicable temporary or final regulations of the U.S. Department of the
Treasury ("Treasury Regulations") thereunder, in the opinion of Cadwalader,
Wickersham & Taft, the Trust Fund will qualify as two separate REMICs.
References in this discussion to the "REMIC" will, unless the context
dictates otherwise, refer to each of the Upper-Tier REMIC and the Lower-Tier
REMIC. The Class V-1 and Class V-2 Certificates represent pro rata undivided
beneficial interests in the portion of the Trust Fund consisting of Excess
Interest and Default Interest in respect of the Mortgage Loans, respectively,
and such portions will be treated as a grantor trust for federal income tax
purposes.
For purposes of this discussion, a "Certificateholder" or "holder" means the
beneficial owner of a Subordinated Certificate.
STATUS OF SUBORDINATED CERTIFICATES
Subordinated Certificates held by a real estate investment trust will
constitute "real estate assets" within the meaning of Code Sections
856(c)(5)(A) and 856(c)(6) and interest on the Subordinated Certificates will
be considered "interest on obligations secured by mortgages on real property
or on interests in real property" within the meaning of Code Section
856(c)(3)(B) in the same proportion that, for both purposes, the assets of
the related REMIC and the income thereon would be so treated. Subordinated
Certificates held by a domestic building and loan association will be treated
as "regular or residual interests in a REMIC" under Code Section
7701(a)(19)(C)(xi), but only in the proportion that the REMIC holds "loans .
. . secured by an interest in real property which is . . . residential real
property" within the meaning of Code Section 7701(a)(19)(C)(v). Mortgage
Loans constitute loans described in Code Section 7701(a)(19)(C)(v) if a
sufficiently limited portion of the real property securing the Mortgage Loans
is devoted to commercial use. For this purpose, Mortgage Loans secured by
multifamily residential housing should qualify. It is also likely that
Mortgage Loans secured by nursing homes and an assisted living facility would
qualify as "loans secured by an interest in . . . health institutions or
facilities, including structures designed or used primarily for residential
purposes for . . . persons under care" within the meaning of Code Section
7701(a)(19)(C)(vii). If at all times 95% or more of the assets of the related
REMIC or the income thereon qualify for the foregoing treatments, the
Subordinated Certificates will qualify for the corresponding status in their
entirety. For purposes of Code Section 856(c)(5)(A), payments of principal
and interest on a Mortgage Loan that are reinvested pending distribution to
holders of Subordinated Certificates qualify for such treatment. Subordinated
151
<PAGE>
Certificates held by a regulated investment company will not constitute
"government securities" within the meaning of Code Section 851(b)(4)(A)(i).
Subordinated Certificates held by certain financial institutions will
constitute an "evidence of indebtedness" within the meaning of Code Section
582(c)(1).
QUALIFICATION AS A REMIC
In order for each of the Upper-Tier REMIC and the Lower-Tier REMIC to
qualify as a REMIC, there must be ongoing compliance on the part of the
applicable portions of the Trust Fund with the requirements set forth in the
Code. Each of the Upper-Tier REMIC and the Lower-Tier REMIC must fulfill an
asset test, which requires that no more than a de minimis portion of the
assets of each REMIC, as of the close of the third calendar month beginning
after the "Startup Day" (which for purposes of this discussion is March 27,
1997, the date of the 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 will be met if at all times the aggregate
adjusted basis of the nonqualified assets is less than one percent of the
aggregate adjusted basis of all the REMIC's assets. Each REMIC also must
provide "reasonable arrangements" to prevent its residual interests from
being held by "disqualified organizations" or agents thereof and must furnish
applicable tax information to transferors or agents that violate this
requirement. The Pooling and Servicing Agreement provides that no legal or
beneficial interest in the Class R or Class LR Certificates may be
transferred or registered unless certain conditions, designed to prevent
violation of this requirement, are met.
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
thereafter pursuant to a fixed price contract in effect on the Startup Day.
Qualified mortgages include whole mortgage loans, such as the Mortgage Loans,
and regular interests in another REMIC, such as the Lower-Tier Regular
Interests that will be held by the Upper-Tier REMIC, provided, in general,
(i) the fair market value of the real property security (including buildings
and structural components thereof) is at least 80% of the principal balance
of the related 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 (ii) substantially all the proceeds of the
Mortgage Loan or the underlying mortgage 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. 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 (i) of the
preceding sentence as of the date of the last such modification. A mortgage
loan that was not in fact principally secured by real property or is
otherwise not a qualified mortgage must be disposed of within 90 days of
discovery of such defect, or otherwise ceases to be a qualified mortgage
after such 90-day period.
Permitted investments include cash flow investments, qualified reserve
assets and foreclosure property. A cash flow investment is an investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not exceeding 13
months, until the next scheduled distribution to holders of interests in the
REMIC. The Upper-Tier REMIC and Lower-Tier REMIC will not hold any reserve
funds. Foreclosure property is real property acquired by the Lower-Tier REMIC
in connection with the default or imminent default of a qualified mortgage,
provided the Depositor had no knowledge or reason to know as of the Startup
Day that such a default had occurred or would occur. Foreclosure property may
generally be held for not more than two years, with extensions granted by the
Internal Revenue Service.
In addition to the foregoing requirements, the various interests in a
REMIC also must meet certain requirements. All of the interests in a REMIC
must be either of the following: (i) one or more classes of regular interests
or (ii) a single class of residual interests on which distributions, if any,
are made pro rata. A regular interest is an interest in a REMIC that is
issued on the Startup Day with fixed terms, is designated as a regular
interest, and unconditionally entitles the holder to receive a specified
principal amount (or other similar amount), and provides that interest
payments (or other similar amounts), if any, at or before maturity either are
payable based on a fixed rate or a qualified variable rate, or consist of a
specified, nonvarying portion of the interest payments on the qualified
mortgages. Such a specified portion may consist, among other things, of a
fixed or qualified variable rate on some or all of the qualified mortgages in
excess of a different fixed or qualified variable rate on some or all of the
qualified mortgages. The specified principal amount of a regular interest
that provides for interest payments consisting of a specified, nonvarying
portion of interest payments on qualified mortgages may be zero. A residual
interest is an interest in a REMIC other than a regular interest that is
issued on the Startup Day that is designated as a residual interest. An
interest in a REMIC may be treated as a regular interest even
152
<PAGE>
if payments of principal with respect to such interest are subordinated to
payments on other regular interests or the residual interest in the REMIC,
and are dependent on the absence of defaults or delinquencies on qualified
mortgages or permitted investments, lower than reasonably expected returns on
permitted investments, expenses incurred by the REMIC or prepayment interest
shortfalls. Accordingly, in the opinion of Cadwalader, Wickersham & Taft, the
Regular Certificates constitute classes of regular interests in the
Upper-Tier REMIC, the Lower-Tier Regular Interests constitute classes of
regular interests in the Lower-Tier REMIC and the Class R Certificates and
Class LR Certificates represent the sole classes of residual interests in the
Upper-Tier REMIC and Lower-Tier REMIC, respectively.
If an entity fails to comply with one or more of the ongoing requirements
of the Code for status as one or more REMICs during any taxable year, the
Code provides that the entity or applicable portion thereof will not be
treated as a REMIC for such year and thereafter. In this event, any entity
that is the obligor with respect to debt obligations with two or more
maturities, such as the Trust Fund, may be treated as a separate association
taxable as a corporation under Treasury Regulations, and the Subordinated
Certificates may be treated as equity interests therein. The Code, however,
authorizes the Treasury Department to issue regulations that address
situations where failure to meet one or more of the requirements for REMIC
status occurs inadvertently and in good faith. Investors should be aware,
however, that the Conference Committee Report to the Tax Reform Act of 1986
(the "1986 Act") indicates that the relief may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the Trust
Fund's income for the period of time in which the requirements for REMIC
status are not satisfied.
TAXATION OF SUBORDINATED CERTIFICATES
General. The Subordinated Certificates generally will be treated for
federal income tax purposes as newly-originated debt instruments. In general,
interest, original issue discount ("OID") and market discount on a
Subordinated Certificate will be treated as ordinary income to the holder of
a Subordinated Certificate, and principal payments (other than principal
payments that do not exceed accrued market discount) on a Subordinated
Certificate will be treated as a return of capital to the extent of the
Certificateholder's basis allocable thereto. Certificateholders must use the
accrual method of accounting with respect to Subordinated Certificates,
regardless of the method of accounting otherwise used by such
Certificateholders.
Original Issue Discount. Holders of debt instruments issued with OID
generally must include original issue discount in ordinary income for federal
income tax purposes as it accrues, in accordance with a constant interest
method that takes into account the compounding of interest, in advance of
receipt of the cash attributable to such income. The following discussion is
based in part on Treasury Regulations issued on February 2, 1994, and amended
on June 14, 1996, under Code Sections 1271 through 1273 and 1275 (the "OID
Regulations") and in part on the provisions of the 1986 Act. Holders of the
Subordinated Certificates should be aware, however, that the OID Regulations
do not adequately address certain issues relevant to prepayable securities,
such as the Subordinated Certificates. To the extent such issues are not
addressed in such Regulations, it is anticipated that the Trustee will apply
the principles of such regulations and the methodology described in the
Conference Committee Report to the 1986 Act. No assurance can be provided
that the Internal Revenue Service will not take a different position as to
those matters not currently addressed by the OID Regulations. Moreover, the
OID Regulations include an anti-abuse rule allowing the Internal Revenue
Service to apply or depart from the OID Regulations where necessary or
appropriate to ensure a reasonable tax result in light of the applicable
statutory provisions. A tax result will not be considered unreasonable under
the anti-abuse rule in the absence of a substantial effect on the present
value of a taxpayer's tax liability. Investors are advised to consult their
own tax advisors as to the discussion herein and the appropriate method for
reporting interest and original issue discount with respect to the
Subordinated Certificates.
The total amount of OID on a Subordinated Certificate is the excess of the
"stated redemption price at maturity" of the Subordinated Certificate over
its "issue price." The issue price of a Subordinated Certificate is the price
at which a substantial amount of such Class is first sold to investors (other
than bond houses, brokers or underwriters) or their fair market value if not
issued to investors. Because the Depositor retained the Subordinated
Certificates on the Startup Day, although not free from doubt, it is
anticipated that the Trustee will use the fair market value of the
Subordinated Certificates as of the Startup Day, as determined by the
Depositor, as their issue prices for computing OID. As a result, investors
who buy at a price that is different from such price may have either
"acquisition premium" or "market discount" with respect to the Subordinated
Certificate. See "Acquisition Premium" and "Market Discount" below. The
stated redemption price at maturity of a Subordinated Certificate is the sum
of all payments provided by the Subordinated Certificate other than qualified
stated interest payments. Under the OID Regulations, qualified stated
interest generally includes interest payable at a single fixed rate if such
interest payments are unconditionally payable at intervals of one year
153
<PAGE>
or less during the entire term of the obligation. Accordingly, because the
Subordinate Certificates will all bear a fixed rate of interest, all payments
of interest on the Subordinated Certificates will be treated as qualified
stated interest and consequently as not includible in the stated redemption
price at maturity of such Classes. Based on the foregoing, it is anticipated
that the Subordinated Certificates will be issued with OID in an amount equal
to the excess of their initial Certificate Balances over their respective
issue prices.
Under a de minimis rule, OID on a Subordinated Certificate will be
considered to be zero if such OID is less than 0.25% of the stated redemption
price at maturity of the Subordinated Certificate multiplied by the weighted
average maturity of the Subordinated Certificate. For this purpose, the
weighted average maturity of the Subordinated Certificate is computed as the
sum of the amounts determined by multiplying the number of full years (i.e.,
rounding down partial years) from the issue date until each distribution in
reduction of stated redemption price at maturity is scheduled to be made by a
fraction, the numerator of which is the amount of each distribution included
in the stated redemption price at maturity of the Subordinated Certificate
and the denominator of which is the stated redemption price at maturity of
the Subordinated Certificate. The Conference Committee Report to the 1986 Act
provides that the schedule of such distributions should be determined in
accordance with the Prepayment Assumptions (defined above under "Prepayment
and Yield Considerations -- Weighted Average Life of Subordinated
Certificates") and the anticipated reinvestment rate, if any, relating to the
Subordinated Certificates. The Prepayment Assumptions with respect to the
Subordinated Certificates include a 0% constant prepayment rate, with all ARD
Loans prepaying on their Anticipated Repayment Dates. No representation is
made that the Mortgage Loans will prepay at such rate or any other rate.
Holders generally must report de minimis OID pro rata as principal payments
are received, and such income will be capital gain if the Subordinated
Certificate is held as a capital asset. Under the OID Regulations, however,
holders of Subordinated Certificates may elect to accrue all de minimis OID,
as well as market discount and market premium, under the constant yield
method. See "Election to Treat All Interest Under the Constant Yield Method."
Based on the foregoing, it is anticipated that the Subordinated Certificate
will not be issued with de minimis OID.
A Certificateholder generally must include in gross income for any taxable
year the sum of the "daily portions," as defined below, of the OID, if any,
on the Subordinated Certificate accrued during an accrual period for each day
on which it holds the Subordinated Certificate, including the date of
purchase but excluding the date of disposition. A calculation will be made of
the OID that accrues during each successive full accrual period (or shorter
period from the date of original issue). Each accrual period with respect to
the Subordinated Certificates will begin on each Distribution Date (or the
Startup Day in the case of the first accrual period) and end on the day
preceding the next Distribution Date. Under Code Section 1272(a)(6), OID is
to be calculated initially based on a principal payment schedule that takes
into account expected prepayment behavior and an anticipated reinvestment
rate in the manner to be specified in Treasury Regulations. The Conference
Committee Report to the 1986 Act indicates that such schedule is intended to
be based on the Prepayment Assumptions with no assumed reinvestment rate. The
OID accruing in a full accrual period will be the excess, if any, of (i) the
sum of (a) the present value of all of the remaining distributions to be made
on the Subordinated Certificate as of the end of that accrual period and (b)
the distributions made on the Subordinated Certificate during the accrual
period that are included in the Subordinated Certificate's stated redemption
price at maturity over (ii) the adjusted issue price of the Subordinated
Certificate at the beginning of the accrual period. The present value of the
remaining distributions referred to in the preceding sentence is calculated
based on (i) the yield to maturity of the Subordinated Certificate as of the
Startup Day, (ii) events (including actual prepayments, if any) that have
occurred prior to the end of the accrual period, (iii) the Prepayment
Assumptions and (iv) a schedule of interest payments based on the Mortgage
Rates and the maturities of the Mortgage Loans based on the Prepayment
Assumptions. For these purposes, the adjusted issue price of a Subordinated
Certificate at the beginning of any accrual period equals the issue price of
the Subordinated Certificate, increased by the aggregate amount of original
issue discount with respect to the Subordinated Certificate that accrued in
all prior accrual periods and reduced by the amount of distributions included
in the Subordinated Certificate's stated redemption price at maturity that
were made on the Subordinated Certificate that were attributable to such
prior periods. In addition, the original yield to maturity of a Subordinated
Certificate should be calculated based on its issue price, assuming that the
Subordinated Certificate will be paid in all periods in accordance with the
Prepayment Assumptions, and with compounding at the end of each accrual
period used in the formula. The OID accruing during any accrual period (as
determined in this paragraph) will be divided by the number of days in the
period to determine the daily portion of OID for each day in the period. OID
for the first short accrual period between the Startup Day and the first
Distribution Date will be determined using the exact method.
Acquisition Premium. A purchaser of a Subordinated Certificate at a price
greater than its adjusted issue price and less than its remaining stated
redemption price at maturity acquires the Subordinated Certificate with
"acquisition
154
<PAGE>
premium. For this purpose, the amount paid for accrued interest on the
Subordinated Certificate is excluded. Such a purchaser will be required to
include in gross income the daily portions of the OID on the Subordinated
Certificate reduced pro rata by a fraction, the numerator of which is the
excess of its purchase price over such adjusted issue price and the
denominator of which is the excess of the remaining stated redemption price
at maturity over the adjusted issue price. Alternatively, such a subsequent
purchaser may elect to treat all such acquisition premium under the constant
yield method, as described below under the heading "Election to Treat All
Interest Under the Constant Yield Method."
Market Discount. A purchaser of a Subordinated Certificate may be subject
to the market discount rules of Code Sections 1276 through 1278. Under these
Code sections and the principles applied by the OID Regulations in the
context of OID, "market discount" is the amount by which the purchaser's
original basis in the Subordinated Certificate (excluding accrued interest)
is exceeded by the adjusted issue price of such Subordinated Certificate at
the time of purchase. Such purchaser generally will be required to recognize
ordinary income to the extent of accrued market discount on such Subordinated
Certificate as distributions includible in the stated redemption price at
maturity thereof are received, in an amount not exceeding any such
distribution. Such market discount would accrue in a manner to be provided in
Treasury Regulations and should take into account the Prepayment Assumptions.
The Conference Committee Report to the 1986 Act provides that until such
regulations are issued, such market discount would accrue either (i) on the
basis of a constant interest rate or (ii) either in the ratio of interest
accrued for the relevant period to the sum of interest accrued for such
period plus the remaining interest as of the end of such period or in the
ratio of OID accrued for the relevant period to the sum of the OID accrued
for such period plus the remaining OID as of the end of such period. Such
purchaser also generally will be required to treat a portion of any gain on a
sale or exchange of the Subordinated 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 as partial distributions in reduction of the stated
redemption price at maturity were received. Such purchaser will be required
to defer deduction of a portion of the excess of the interest paid or accrued
on indebtedness incurred to purchase or carry the Subordinated Certificate
over the interest (including OID) distributable thereon. The deferred portion
of such interest expense in any taxable year generally will not exceed the
accrued market discount on the Subordinated Certificate for such year. Any
such deferred interest expense is, in general, allowed as a deduction not
later than the year in which the related market discount income is recognized
or the Subordinated Certificate is disposed of. As an alternative to the
inclusion of market discount in income on the foregoing basis, the
Certificateholder may elect to include market discount in income currently as
it accrues on all market discount instruments acquired by such
Certificateholder in that taxable year or thereafter, in which case the
interest deferral rule will not apply. See "Election to Treat All Interest
Under the Constant Yield Method" below regarding an alternative manner in
which such election may be deemed to be made.
Market discount with respect to a Subordinated Certificate will be
considered to be zero if such market discount is less than 0.25% of the
remaining stated redemption price at maturity of such Subordinated
Certificate multiplied by the weighted average maturity of the Subordinated
Certificate remaining after the date of purchase, rounding down the date each
payment included in the stated redemption price at maturity is expected to be
made to the next lowest number of whole years. Such de minimis market
discount should be reportable in the same manner as de minimis OID as
determined above under "Original Issue Discount." Treasury Regulations
implementing the market discount rules have not yet been issued, and
investors should therefore consult their own tax advisors regarding the
application of these rules as well as the advisability of making any of the
elections with respect thereto. Investors should also consult Revenue
Procedure 92-67 concerning the elections to include market discount in income
currently and to accrue market discount on the basis of a constant interest
rate.
Premium. Subordinated Certificates may be purchased at a premium, i.e.,
at a cost greater than their remaining stated redemption price at maturity.
If the Certificateholder holds such a Subordinated Certificate as a "capital
asset" within the meaning of Code Section 1221, the Certificateholder may
elect under Code Section 171 to amortize such premium under the constant
interest method. Such election applies to all debt instruments held by the
Certificateholders at the beginning of the taxable year as to which the
election is made or acquired thereafter and is irrevocable except with the
consent of the Internal Revenue Service. The Conference Committee Report to
the 1986 Act indicates a Congressional intent that the same rules that will
apply to the accrual of market discount on installment obligations will also
apply to amortizing bond premium under Code Section 171 on installment
obligations such as the Subordinated Certificates, although it is unclear
whether the alternatives to the constant interest method described above
under "Market Discount" are available. Amortizable bond premium will be
treated as an offset to interest income on a Subordinated Certificate rather
than as a separate deduction item. See "Election to Treat All Interest Under
the Constant Yield Method" below regarding an alternative manner in which the
Code Section 171 election may be deemed to be made.
155
<PAGE>
Election to Treat All Interest Under the Constant Yield Method. A holder
of a debt instrument such as a Subordinated Certificate may elect to treat
all interest that accrues on the instrument using the constant yield method,
with none of the interest being treated as qualified stated interest. For
purposes of applying the constant yield method to a debt instrument subject
to such an election, (i) "interest" includes stated interest, original issue
discount, de minimis OID, market discount and de minimis market discount, as
adjusted by any amortizable bond premium or acquisition premium and (ii) the
debt instrument is treated as if the instrument were issued on the holder's
acquisition date in the amount of the holder's adjusted basis immediately
after acquisition. A holder generally may make such an election on an
instrument by instrument basis or for a class or group of debt instruments.
However, if the holder makes such an election with respect to a debt
instrument with amortizable bond premium or with market discount, the holder
is deemed to have made elections to amortize bond premium or to report market
discount income currently as it accrues under the constant yield method,
respectively, for all debt instruments acquired by the holder in the same
taxable year or thereafter. The election is made on the holder's federal
income tax return for the year in which the debt instrument is acquired and
is irrevocable except with the approval of the Internal Revenue Service.
Investors should consult their own tax advisors regarding the advisability of
making such an election.
Treatment of Losses. Certificateholders will be required to report income
with respect to the Subordinated Certificates on the accrual method of
accounting, without giving effect to delays or reductions in distributions
attributable to defaults or delinquencies on the Mortgage Loans, except to
the extent it can be established that such losses are uncollectible.
Accordingly, the holder of a Subordinated Certificate may have income, or may
incur a diminution in cash flow as a result of a default or delinquency, but
may not be able to take a deduction (subject to the discussion below) for the
corresponding loss until a subsequent taxable year. In this regard, investors
are cautioned that while they may generally cease to accrue interest income
if it reasonably appears that the interest will be uncollectible, the
Internal Revenue Service may take the position that original issue discount
must continue to be accrued in spite of its uncollectability until the debt
instrument is disposed of in a taxable transaction or becomes worthless in
accordance with the rules of Code Section 166.
To the extent the rules of Code Section 166 regarding bad debts are
applicable, it appears that Certificateholders that are corporations or that
otherwise hold the Subordinated Certificates in connection with a trade or
business should in general be allowed to deduct as an ordinary loss such loss
with respect to principal sustained during the taxable year on account of any
such Subordinated Certificates becoming wholly or partially worthless, and
that, in general, Certificateholders that are not corporations and that do
not hold the Subordinated Certificates in connection with a trade or business
will be allowed to deduct as a loss, which may be a short-term capital loss,
any loss sustained during the taxable year on account of any such
Subordinated Certificates becoming wholly worthless. The Internal Revenue
Service could assert, however, that losses on the Subordinated Certificates
are deductible based on some other method that may defer such deductions for
all holders, such as reducing future cash flow for purposes of computing
original issue discount. This may have the effect of creating "negative" OID
which would be deductible only against future positive OID or otherwise upon
termination of the Class. Certificateholders are urged to consult their own
tax advisors regarding the appropriate timing, amount and character of any
loss sustained with respect to such Subordinated Certificates. While losses
attributable to interest previously reported as income should be deductible
as ordinary losses by both corporate and non-corporate holders, the Internal
Revenue Service may take the position that losses attributable to accrued OID
may only be deducted as short-term capital losses by non-corporate holders
not engaged in a trade or business. Special loss rules are applicable to
banks and thrift institutions, including rules regarding reserves for bad
debts. Such taxpayers are advised to consult their tax advisors regarding the
treatment of losses on Subordinated Certificates.
Sale or Exchange of Subordinated Certificates. If a Certificateholder
sells or exchanges a Subordinated Certificate, the Certificateholder will
recognize gain or loss equal to the difference, if any, between the amount
received and its adjusted basis in the Subordinated Certificate. The adjusted
basis of a Subordinated Certificate generally will equal the cost of the
Subordinated Certificate to the seller, increased by any OID or market
discount previously included in the seller's gross income with respect to the
Subordinated Certificate and reduced by amounts included in the stated
redemption price at maturity of the Subordinated Certificate that were
previously received by the seller, by any amortized premium, and by any
recognized losses.
Except as described above with respect to market discount, and except as
provided in this paragraph, any gain or loss on the sale or exchange of a
Subordinated Certificate realized by an investor who holds the Subordinated
Certificate as a capital asset will be capital gain or loss and will be
long-term or short-term depending on whether the Subordinated Certificate has
been held for the long-term capital gain holding period (more than one year).
Such gain will be treated as ordinary income (i) if a Subordinated
Certificate is held as part of a "conversion transaction" as defined in Code
Section
156
<PAGE>
1258(c), up to the amount of interest that would have accrued on the holder's
net investment in the conversion transaction at 120% of the appropriate
applicable Federal rate under Code Section 1274(d) in effect at the time the
holder entered into the transaction minus any amount previously treated as
ordinary income with respect to any prior disposition of property that was
held as a part of such transaction, (ii) in the case of an non-corporate
taxpayer, to the extent such taxpayer has made an election under Code Section
163(d)(4) to have net capital gains taxed as investment income at ordinary
income rates, or (iii) to the extent that such gain does not exceed the
excess, if any, of (a) the amount that would have been includible in the
gross income of the holder if its yield on such Subordinated Certificate were
110% of the applicable Federal rate as of the date of purchase, over (b) the
amount of income actually includible in the gross income of such holder with
respect to such Subordinated Certificate. In addition, gain or loss
recognized from the sale of a Subordinated Certificate by certain banks or
thrift institutions will be treated as ordinary income or loss pursuant to
Code Section 582(c). Capital gains of certain non-corporate taxpayers are
subject to a lower tax rate than ordinary income of such taxpayers. The
maximum tax rate for corporations is the same with respect to both ordinary
income and capital gains.
TAXES THAT MAY BE IMPOSED ON A REMIC
Prohibited Transactions. Income from certain transactions by a REMIC,
called prohibited transactions, will be taxed directly to the related REMIC
at a 100% rate. Prohibited transactions generally include (i) the disposition
of a qualified mortgage other than for (a) substitution within two years of
the Startup Day for a defective (including a defaulted) obligation (or
repurchase in lieu of substitution of a defective (including a defaulted)
obligation at any time) or for any qualified mortgage within three months of
the Startup Day, (b) foreclosure, default, or imminent default of a qualified
mortgage, (c) bankruptcy or insolvency of the REMIC, or (d) a qualified
(complete) liquidation, (ii) the receipt of income from assets that are not
the type of mortgages or investments that the REMIC is permitted to hold,
(iii) the receipt of compensation for services, or (iv) the receipt of gain
from disposition of cash flow investments other than pursuant to a qualified
liquidation. Notwithstanding (i) and (iv), it is not a prohibited transaction
to sell REMIC property to prevent a default on regular interests as a result
of a default on qualified mortgages or to facilitate a qualified liquidation
or a clean-up call. The REMIC Regulations indicate that the modification of a
Mortgage Loan generally will not be treated as a disposition if it is
occasioned by a default or reasonably foreseeable default, an assumption of
the Mortgage Loan, or the waiver of a due-on-sale or due-on encumbrance
clause. It is not anticipated that either REMIC will engage in any prohibited
transaction.
Contributions to a REMIC After the Startup Day. In general, a REMIC will
be subject to a tax at a 100% rate on the value of any property contributed
to the REMIC after the Startup Day. Exceptions are provided for cash
contributions to the REMIC (i) during the three months following the Startup
Day, (ii) made to a qualified reserve fund by a holder of a Residual
Certificate, (iii) in the nature of a guarantee, (iv) made to facilitate a
qualified liquidation or clean-up call, and (v) as otherwise permitted in
Treasury Regulations yet to be issued. It is not anticipated that there will
be any taxable contributions to either REMIC.
Net Income from Foreclosure Property. The Lower-Tier REMIC will be 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. Generally, property acquired by foreclosure or
deed in lieu of foreclosure would be treated as "foreclosure property" for a
period of two years, with possible extensions. Net income from foreclosure
property generally means gain from the sale of a foreclosure property that is
inventory property and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real estate investment
trust. Examples of taxable net income from foreclosure property include net
income received as a result of the operation and management of a trade or
business on the foreclosure property (within the meaning of the rules
applicable to real estate investment trusts), income from the furnishing or
rendering of services to the tenants of such foreclosure property by an
independent contractor, to the extent that such services are not customarily
furnished to tenants in properties of a similar class in the geographic
market in which the property is located, and rental income based on the net
profits of a tenant.
LIQUIDATION OF THE REMIC
If a 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 such date, the REMIC will not be taxable on any gain on the sale
of its assets, provided that the REMIC credits or distributes in liquidation
all of the sale proceeds plus its cash (other than amounts retained to meet
claims) to holders of regular and residual interests within the 90-day
period.
157
<PAGE>
TAXATION OF CERTAIN FOREIGN INVESTORS
Interest, including OID, distributable to holders of Subordinated
Certificates who are non-resident aliens, foreign corporations, or other
Non-U.S. Persons (i.e., any person who is not a "U.S. Person"), will be
considered "portfolio interest" and, therefore, generally will not be subject
to a 30% United States withholding tax, provided that such Non-U.S. Person
(i) is not a "10-percent shareholder" within the meaning of Code Section
871(h)(3)(B) or a controlled foreign corporation described in Code Section
881(c)(3)(C) and (ii) provides the Trustee, or the person who would otherwise
be required to withhold tax from such distributions under Code Section 1441
or 1442, with an appropriate statement, signed under penalties of perjury,
identifying the beneficial owner and stating, among other things, that the
beneficial owner of the Subordinated Certificate is a Non-U.S. Person. If
such statement, or any other required statement, is not provided, 30%
withholding will apply unless reduced or eliminated pursuant to an applicable
tax treaty or unless the interest on the Subordinated Certificate is
effectively connected with the conduct of a trade or business within the
United States by such Non-U.S. Person. In the latter case, such Non-U.S.
Person will be subject to United States federal income tax at regular rates.
Investors who are Non-U.S. Persons should consult their own tax advisors
regarding the specific tax consequences to them of owning a Certificate. The
term "U.S. Person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, an estate
that is subject to U.S. federal income tax regardless of the source of its
income or a trust if (A) for taxable years beginning after December 31, 1996
(or for taxable years ending after August 20, 1996, if the trustee has made
an applicable election) a court within the United States is able to exercise
primary supervision over the administration of such trust, and one or more
United States fiduciaries have the authority to control all substantial
decisions of such trust, or (B) for all other taxable years, such trust is
subject to United States federal income tax regardless of the source of its
income.
BACKUP WITHHOLDING
Distributions made on the Subordinated Certificates, and proceeds from the
sale of the Subordinated Certificates to or through certain brokers, may be
subject to a "backup" withholding tax under Code Section 3406 at the rate of
31% on "reportable payments" (including interest distributions, original
issue discount, and, under certain circumstances, principal distributions)
unless the Certificateholder complies with certain reporting and/or
certification procedures, including the provision of its taxpayer
identification number to the Trustee, its agent or the broker who effected
the sale of the Subordinated Certificate, or such Certificateholder is
otherwise an exempt recipient under applicable provisions of the Code. Any
amounts to be withheld from distributions on the Subordinated Certificates
would be refunded by the Internal Revenue Service or allowed as a credit
against the Certificateholder's federal income tax liability.
REPORTING REQUIREMENTS
Each of the Upper-Tier REMIC and the Lower-Tier REMIC will be required to
maintain its books on a calendar year basis and to file federal income tax
returns in a manner similar to a partnership. The form for such returns is
Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return.
The Trustee will be required to sign each REMIC's returns.
Reports of accrued interest, OID, if any, and information necessary to
compute the accrual of any market discount on the Subordinated Certificates
will be made annually to the Internal Revenue Service and to individuals,
estates, non-exempt and non-charitable trusts, and partnerships who are
either holders of record of Subordinated Certificates or beneficial owners
who own Subordinated Certificates through a broker or middleman as nominee.
All brokers, nominees and all other non-exempt holders of record of
Subordinated Certificates (including corporations, non-calendar year
taxpayers, securities or commodities dealers, real estate investment trusts,
investment companies, common trust funds, thrift institutions and charitable
trusts) may request such information for any calendar quarter by telephone or
in writing by contacting the person designated in Internal Revenue Service
Publication 938 with respect to the Upper-Tier REMIC and Lower-Tier REMIC.
Holders through nominees must request such information from the nominee.
Treasury Regulations require that, in addition to the foregoing
requirements, information must be furnished annually to holders of
Subordinated Certificates and filed annually with the Internal Revenue
Service concerning the percentage of each REMIC's assets meeting the
qualified asset tests described above under "Status of Subordinated
Certificates."
DUE TO THE COMPLEXITY OF THESE RULES AND THE CURRENT UNCERTAINTY AS TO THE
MANNER TO THEIR APPLICATION TO THE TRUST FUND AND CERTIFICATEHOLDERS, IT IS
PARTICULARLY IMPORTANT THAT POTENTIAL INVESTORS CONSULT THEIR OWN TAX
ADVISORS REGARDING THE TAX TREATMENT OF THEIR ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE SUBORDINATE CERTIFICATES.
158
<PAGE>
LEGAL INVESTMENT
The Subordinated Certificates will not constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984, as amended ("SMMEA"). The appropriate characterization of the
Subordinated Certificates under various legal investment restrictions, and
thus the ability of investors subject to these restrictions to purchase the
Subordinated Certificates, may be subject to significant interpretive
uncertainties.
All depository institutions considering an investment in the Subordinated
Certificates should review the "Supervisory Policy Statement on Securities
Activities" dated January 28, 1992, as revised April 15, 1994 (the "Policy
Statement") of the Federal Financial Institutions Examination Council. The
Policy Statement, which has been adopted by the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, the Office
of the Comptroller of the Currency and the Office of Thrift Supervision, and
by the National Credit Union Administration (with certain modifications),
prohibits depository institutions from investing in certain "high-risk
mortgage securities," except under limited circumstances, and sets forth
certain investment practices deemed to be unsuitable for regulated
institutions.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any
Subordinated Certificates, as they may be deemed unsuitable investments, or
may otherwise be restricted, under such rules, policies or guidelines.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not
limited to, "prudent investor" provisions, percentage-of-assets limits,
provisions which may restrict or prohibit investment in securities which are
not "interest bearing" or "income paying," and provisions which may restrict
or prohibit investments in securities which are issued in book-entry form.
No representation is made as to the proper characterization of the
Subordinated Certificates for legal investment purposes, financial
institution regulatory purposes, or other purposes, or as to the ability of
particular investors to purchase the Subordinated Certificates under
applicable legal investment restrictions. The uncertainties described above
(and any unfavorable future determinations concerning legal investment or
financial institution regulatory characteristics of the Subordinated
Certificates) may adversely affect the liquidity of the Subordinated
Certificates. Accordingly, all institutions whose investment activities are
subject to legal investment laws and regulations, regulatory capital
requirements or review by regulatory authorities should consult with their
own legal advisors in determining whether and to what extent the Subordinated
Certificates constitute a legal investment or are subject to investment,
capital or other restrictions.
Investors should consult their own legal advisors in determining whether
and to what extent the Subordinated Certificates constitute legal investments
for such investors.
USE OF PROCEEDS
The net proceeds from the sale of Subordinated Certificates will be
distributed by the Depositor to its parent, the Mortgage Loan Seller, who
contributed the Mortgage Loans, in part, to the Depositor.
159
<PAGE>
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") between the Depositor and Nomura
Securities International, Inc. (the "Underwriter"), the Underwriter has
agreed to purchase from the Depositor, and the Depositor has agreed to sell
to the Underwriter, the Subordinated Certificates at the price to the public
set forth on the cover page of this Prospectus, less underwriting discount.
The Underwriting Agreement provides that the obligations of the
Underwriter are subject to the approval of certain legal matters by counsel,
and to certain other conditions. The nature of the Underwriter's obligations
is such that the Underwriter is committed to purchase all of the Subordinated
Certificates, if any are purchased, at an aggregate purchase price of 76.41%
of the initial Certificate Balance thereof, plus accrued interest from April
11, 1997, before deducting expenses payable by the Depositor. After the
initial public offering of the Subordinated Certificates, the offering price
and other selling terms may be changed by the Underwriter.
The Depositor will indemnify the Underwriter against certain liabilities,
including civil liabilities under the Act or will contribute to payments that
the Underwriter may be required to make in respect thereof in accordance with
the terms and provisions of the Underwriting Agreement.
Pursuant to the provisions of NASD Conduct Rule 2810(b)(2)(C), NASD
members may not execute transactions in the Subordinated Certificates for any
accounts over which they exercise discretionary authority without prior
written approval of the customer.
There is currently no secondary market for the Subordinated Certificates.
The Underwriter currently expects to make a secondary market in the
Subordinated Certificates, but has no obligation to do so. There can be no
assurance that an active secondary market for the Subordinated Certificates
will develop or that any such market, if established, will continue.
To facilitate this offering, the Underwriter may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Subordinated
Certificates. This may include over-allotments or short sales of the
Subordinated Certificates, which involves the sale by the Underwriter of more
Subordinated Certificates than have been sold to it by the Depositor. In such
circumstances, the Underwriter would cover such over-allotments or short
positions by purchasing Subordinated Certificates in the open market. In
addition, the Underwriter may stabilize or maintain the price of the
Subordinated Certificates by bidding for or purchasing Subordinated
Certificates in the open market or by imposing penalty bids, whereby selling
concessions allowed to broker-dealers participating in this offering may be
reclaimed if Subordinated Certificates sold by them are repurchased in
connection with stabilization transactions. The effect of these transactions
may be to stabilize or maintain the market price of the Subordinated
Certificates at a level above that which might otherwise prevail in the open
market. Such transactions, if commenced, may be discontinued at any time.
This Prospectus may only be issued or passed on in the United Kingdom to a
person who is of a kind described in Article 9(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1988 or is a person
to whom this Prospectus may otherwise lawfully be issued or passed on.
The Trust Fund described in this Prospectus may only be promoted (whether
by the issuing or passing on of documents as referred to in the foregoing
restriction or otherwise) by an authorized person under Chapter III of the
Financial Services Act 1986 of the United Kingdom ("FSA") to a person in the
United Kingdom if that person is of a kind described in section 76(2) of the
FSA or as permitted by the Financial Services (Promotion of Unregulated
Schemes) Regulations 1991.
The Mortgage Loan Seller and the Underwriter are wholly owned subsidiaries
of Nomura Holding America Inc. The Depositor is a wholly owned subsidiary of
the Mortgage Loan Seller. The Mortgage Loan Seller or an affiliate has
acquired a preferred equity interest in 16 of the borrowers or their
affiliates, which are the borrowers (or affiliates) with respect to Mortgage
Loans representing approximately 25.6% of the Initial Pool Balance. In
addition, the Mortgage Loan Seller or an affiliate has an equity interest in
the borrower with respect to the South Dekalb Mall and has an equity interest
in the parent of the borrower with respect to the Montague Park Tech Center
and in Westin. See "Risk Factors -- Other Financing," "--Equity Investments
by the Mortgage Loan Seller and/or its Affiliates" and "--Conflicts of
Interest." In addition, the Mortgage Loan Seller or an affiliate may have
other financing arrangements with affiliates of the borrowers and may enter
into additional financing relationships in the future. Certain officers and
directors of the Depositor and its affiliates own equity interests in
affiliates of the borrowers.
160
<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and the
Underwriter by Cadwalader, Wickersham & Taft, New York, New York.
FINANCIAL INFORMATION
A new Trust Fund is being formed with respect to the Certificates and the
Trust Fund will not engage in any business activities or have any assets or
obligations prior to the issuance of the Certificates. Accordingly, no
financial statements with respect to the Trust Fund will be included in this
Prospectus.
RATING
It is a condition to the issuance of the Subordinated Certificates that
the Class B-1 Certificates be rated "BB+" by each of S&P and Fitch, the Class
B-2 Certificates be rated "BB" by each of S&P and Fitch, the Class B-3
Certificates be rated "BB-" by each of S&P and Fitch, the Class B-4
Certificates be rated "B+" by S&P, the Class B-5 Certificates be rated "B" by
S&P and the Class B-6 Certificates be rated "B-" by S&P.
The Rating Agencies' ratings on mortgage pass-through certificates address
the likelihood of the timely payment of interest and the ultimate repayment
of principal by the Rated Final Distribution Date. The Rating Agencies'
ratings take into consideration the credit quality of the Mortgage Pool,
structural and legal aspects associated with the Certificates, and the extent
to which the payment stream in the Mortgage Pool is adequate to make payments
required under the Certificates. Ratings on mortgage pass-through
certificates do not, however, represent an assessment of the likelihood,
timing or frequency of principal prepayments (both voluntary and involuntary)
by mortgagors, or the degree to which such prepayments might differ from
those originally anticipated. The security ratings do not address the
possibility that Certificateholders might suffer a lower than anticipated
yield. In addition, ratings on mortgage pass-through certificates do not
address the likelihood of receipt of Prepayment Premiums, Net Default
Interest or Excess Interest or the timing or frequency of the receipt
thereof. In general, the ratings thus address credit risk and not prepayment
risk. Also, a security rating does not represent any assessment of the yield
to maturity that investors may experience.
There can be no assurance as to whether any rating agency not requested to
rate the Subordinated Certificates will nonetheless issue a rating and, if
so, what such rating would be. A rating assigned to the Subordinated
Certificates by a rating agency that has not been requested by the Depositor
to do so may be lower than the rating assigned by the Rating Agencies
pursuant to the Depositor's request.
The rating of the Subordinated 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.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a
part) under the Act with respect to the Subordinated Certificates. This
Prospectus contains summaries of the material terms of the documents referred
to herein, but does not contain all of the information set forth in the
Registration Statement pursuant to the rules and regulations of the
Commission. For further information, reference is made to such Registration
Statement and the exhibits thereto. Such Registration Statement and exhibits
can be inspected and copied at prescribed rates at the public reference
facilities maintained by the Commission at its Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549, and at its Regional Offices
located as follows: Midwest Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and Northeast
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048.
The Commission also maintains a site on the World Wide Web (the "Web") at
"http://www.sec.gov" at which users can view and download copies of reports,
proxy and information statements and other information filed electronically
through the Electronic Data Gathering, Analysis and Retrieval ("EDGAR")
system.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given
or made, such information or representations must not be relied upon. This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy any securities other than the Subordinated Certificates or an offer of
the Subordinated Certificates to any person in any state or other
jurisdiction in which such offer would be unlawful. The delivery of this
Prospectus at any time does not imply that information herein is correct as
of any time subsequent to its date; however, if any material change occurs
while this Prospectus is required by law to be delivered, this Prospectus
will be amended or supplemented accordingly.
161
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
<TABLE>
<CAPTION>
<S> <C>
1
1986 Act 153
A
AA 119
Aaa 119
ACLI Reports 42
ACMs 32
Actual On-going Capital Reserves 64
35,
ADA 150
Advance Rate 117
Advances 117
Allocated Loan Amount 63
AMI 7
Amortization 64
AMRESCO 7
Anchor 64
Ann 63
Annual Debt Service 63
Anticipated Remaining Term 64
Anticipated Repayment Date 63
Appraisal Reduction Amount 86
Appraisal Reduction Event 86
ARD Loans 8
Assisted Living Loan 44
Assisted Living Property 44
Assumed Maturity Date 16
Assumed Scheduled Payment 81
Audit/Agreed Upon Procedures/Review 64
Available Funds 76
B
Balloon Loans 58
Balloon Payment 58
Balloon Payments 33
Bankruptcy Code 145
Bloomfield 8
Bloomfield Purchase Agreement 115
Burnham Inc 52
Burnham Pacific Borrowers 52
Burnham Pacific Loan 52
C
Cash Collateral Accounts 118
CEDEL 1
CEDEL Participants 89
CERCLA 32
Certificate Balance 1
Certificate Registrar 87
Certificateholder 87
Certificates 1
Class 1
CMA Report 41
Code 18
162
<PAGE>
Collateral Account 127
Collateral Substitution Deposit 59
Collection Account 118
Collection Period 78
Commission 161
Constant Prepayment Rate 101
Cooperative 89
Coupon Strip Certificates 75
CPR 101
Crime Control Act 149
Cut-off Date Principal Balance 63
Cut-off Date Principal Balance/Unit 63
D
Default Interest 78
Default Interest Distribution Account 119
Default Rate 78
Defeasance Lock-out Period 59
Defeasance Option 59
Definitive Certificates 89
Delinquency 80
Delinquency Reduction Amount 79
Deposit 127
Depositaries 87
Depositor 1
Directing Holders 127
Distribution Accounts 118
Distribution Date 1
Distribution Date Statement 136
DSCR 63
1,
DTC B-1
E
EDGAR 161
Eligible Bank 119
Euroclear 1
Euroclear Operator 89
Euroclear Participants 89
Event of Default 123
Excess Cash Flow 58
57,
Excess Interest 78
Excess Interest Distribution Account 119
Excess Rate 78
F
Factory Outlet Loan 44
Factory Outlet Property 44
Fair Market Value 127
Final Recovery Determination 136
Fiscal Agent 13
Fixed Voting Rights Percentage 125
Franchise 64
FSA 160
163
<PAGE>
G
GLA 64
Global Securities B-1
GlobalSecurities B-1
H
Holders 90
Hotel Loan 44
Hotel Property 44
Hudson Hotels Borrower 53
Hudson Hotels Manager 53
Hudson Hotels Pool Loan 53
I
Identified Deferred Maintenance 64
Indirect Participants 87
Industrial Loan 44
Industrial Property 44
Industry Overview 42
Initial Pool Balance 44
Instructions 127
Interest Accrual Amount 78
Interest Accrual Period 79
Interest Reserve Account 118
Interest Shortfall 79
International Plaza Borrower 50
International Plaza Loan 50
International Plaza Property 50
J
Junior Subordinated Certificates 1
K
Kendall Square Pool Loan 48
Kendall Square Pool Properties 48
L
Lazard 49
Lazard Mezzanine Financing 49
Level A 111
Lock Box Accounts 118
Lower Rate 127
Lower-Tier Regular Interests 151
Lower-Tier REMIC 2
LTV 62
M
Major Tenant Lease Expiration Date 64
Major Tenant Percentage of Square Feet 64
Major Tenants 64
Marina Harbor Borrower 54
Marina Harbor Loan 53
Marina Harbor Manager 54
Marina Harbor Maturity Date 53
Marina Harbor Property 53
Marina Harbor Submanager 54
Maturity Date/Anticipated Repayment Date LTV 64
Mezzanine Debt 27
Minimum Defaulted Monthly Payment 126
164
<PAGE>
Mobile Home Loan 44
Mobile Home Property 44
Monthly Debt Service Payment 58
Monthly Mortgage Loan Payments 28
Monthly Operating Expenses 28
Monthly Payment 77
Mortgage 44
Mortgage Loan Assumptions 102
Mortgage Loan Purchase and Sale Agreement 45
Mortgage Loan Seller 6, 7
Mortgage Loans 1
Mortgage Pool 1
Mortgaged Properties 1
Multifamily Loan 44
Multifamily Property 44
N
NCUA 148
Net Cash Flow 46
Net Default Interest 78
Net REO Proceeds 78
Note 44
NSI 7
O
Occupancy 64
Office Loan 44
Office Property 44
OID 153
OID Regulations 153
Original Loan Balance 63
Originators 8
P
Participants 87
Pass-Through Rate 16
Percentage Interest 76
Permitted Investments 119
P&I Advance 116
Plan of Distribution 2
Policy Statement 159
Pool Loans 60
Pooling and Servicing Agreement 109
Prepayment Assumptions 101
Prepayment Interest Shortfall 79
Prepayment Premium 58
Prime Rate 118
Principal Prepayments 78
Principal Recovery Fee 135
Property Advances 117
Puente Hills Borrower 52
Puente Hills Loan 52
R
Rated Final Distribution Date 100
15,
Realized Loss 84
Record Date 76
165
<PAGE>
Regular Certificates 151
Release Date 59
Relief Act 149
Remaining Lock-out 64
REMIC 2
REMIC Regulations 151
REO Account 75
REO Mortgage Loan 81
REO Property 75
Repurchase Price 114
Reserve Accounts 45
Reserve for Deferred Maintenance 64
Residual Certificates 18
Retail Loan 44
Retail Property 44
Revised Rate 57
RICO 149
Rules 88
S
Saracen Borrower 49
Saracen Pool Loan 49
Saracen Pool Properties 49
Saracen Pool Property 49
SEL 2
Senior Certificates 1
Senior Housing/Healthcare Loan 44
Senior Housing/Healthcare Property 44
Servicer 7
Servicer Remittance Date 116
Servicer's Appraisal Estimate 86
Servicing Compensation 134
Servicing Fee 134
Servicing Fee Rate 134
Servicing Standard 115
SMMEA 159
Special Servicing Fee 135
Specially Serviced Mortgage Loan 135
Startup Day 152
Stated Maturity Date 63
Stated Principal Balance 85
Subordinate Class Advance Amount 116
Subordinated Certificates 1
T
Terms and Conditions 89
Title V 148
Title VIII 148
Treasury Rate 57
Treasury Regulations 151
Trust Fund 1
Trust REMICs 151
Trustee 13
Trustee Fee 133
TTM 63
166
<PAGE>
U
UCC 141
Underwriter 160
Underwriting Agreement 160
Underwritten NOI 62
Underwritten Occupancy 64
Unit 64
Unscheduled Payments 77
Updated Appraisal 126
Upper-Tier REMIC 2
U.S. Person 158
V
Valley Central Borrower 52
Valley Central Loan 52
Value 64
W
Web 161
Wells Holdings 49
Withheld Amounts 118
Y
YE 63
Year Built/Renovated 64
YTD 63
Z
Zoning Laws 35
</TABLE>
167
<PAGE>
GLOSSARY OF KEY REAL ESTATE, MORTGAGE
AND MORTGAGE LOAN UNDERWRITING TERMS
- -A-
"ACMS" means asbestos containing materials.
"ACTUAL ON-GOING CAPITAL RESERVES" means the annual reserves per unit of
measure or as a percentage of gross revenue, as indicated, and escrowed on a
monthly basis.
"ALLOCATED LOAN AMOUNT" means, for each Mortgaged Property, the portion of
the principal amount of the related Mortgage Loan allocated to such Mortgaged
Property for certain purposes (including, without limitation, determining the
release prices of properties, if the Mortgage Loan permits such releases)
under such Mortgage Loan. The Allocated Loan Amount for each Mortgaged
Property securing a Mortgage Loan was determined generally based on the ratio
of the Net Cash Flow or net operating income (calculated as provided in the
related Mortgage Loan) or appraised value, or some combination thereof, of
such Mortgaged Property to the aggregate Net Cash Flow or appraised value, or
some combination thereof, of all the Mortgaged Properties securing such
Mortgage Loan. The Allocated Loan Amount for each Mortgaged Property may be
adjusted upon the payment of principal of the related Mortgage Loan, whether
upon amortization, prepayment, or otherwise.
"AMORTIZATION" means the number of months, based on the constant Monthly
Payment as stated in the related Note or Loan Agreement, that would be
necessary to reduce the principal balance of the related Note to zero if
interest on such Note were calculated based on twelve 30-day months and a
360-day year.
"ANCHOR" means, with respect to Retail Properties, the largest, second
largest and third largest tenants, if any.
"ANNUAL DEBT SERVICE" means the current annual debt service payable on the
related Mortgage Loan.
"ANTICIPATED REMAINING TERM" means the term of the Mortgage Loan from the
Cut-off Date to the earlier of the Anticipated Repayment Date, if applicable,
or the maturity date.
"ANTICIPATED REPAYMENT DATE" or "ARD" means, for ARD Loans, the date on which
interest begins accruing at the Revised Rate and Excess Cash Flow is retained
pursuant to the related Lock-box Agreements to be applied to payment of
principal and Excess Interest.
"APPRAISAL REDUCTION AMOUNT" means, for any Distribution Date and for any
Mortgage Loan as to which any Appraisal Reduction Event has occurred, an
amount equal to the excess of (a) the outstanding Stated Principal Balance of
such Mortgage Loan over (b) the excess of (i) 90% of the sum of the appraised
values of the related Mortgaged Properties as determined by independent MAI
appraisals (the costs of which shall be paid by the Servicer as an Advance)
over (ii) the sum of (A) to the extent not previously advanced by the
Servicer, the Trustee or the Fiscal Agent, all unpaid interest on such
Mortgage Loan at a per annum rate equal to the Mortgage Rate, (B) all
unreimbursed Advances and interest thereon at the Advance Rate in respect of
such Mortgage Loan and (C) all currently due and unpaid real estate taxes,
ground rents and assessments and insurance premiums and all other amounts due
and unpaid under the Mortgage Loan (which tax, premiums and other amounts
have not been the subject of an Advance by the Servicer).
"APPRAISAL REDUCTION EVENT" means any of the following: (i) the third
anniversary of the date on which an extension of the maturity date of a
Mortgage Loan becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer, which extension does not change the
amount of Monthly Payments on the Mortgage Loan (unless during such extension
period the borrower has been delinquent for 60 days or more, in which case,
the first Distribution Date following such 60 day delinquency), (ii) 90 days
after an uncured delinquency occurs in respect of a Mortgage Loan, (iii)
immediately after the date on which a reduction in the amount of Monthly
Payments on a Mortgage Loan, or a change in any other material economic term
of the Mortgage Loan, becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer, (iv) immediately after a receiver has
been appointed, (v) immediately after a borrower declares bankruptcy, (vi)
immediately after a Mortgage Loan becomes an REO Mortgage Loan, (vii) upon a
default in the payment of a Balloon Payment, (viii) immediately after an
occurrence of an event for which a Property Advance would be required to be
made by the Servicer or (ix) any other event which, in the discretion of the
Servicer and of which the Servicer becomes aware in performing its
obligations in accordance with the Servicing Standard, would materially and
adversely impair the value of the Mortgaged Property and security for the
related Mortgage Loan.
168
<PAGE>
"ARD LOAN" generally means a Mortgage Loan that substantially fully amortizes
by its respective repayment date (and not its Anticipated Repayment Dates)
but provides for an Anticipated Repayment Date on which a substantial amount
of principal will be due if the borrower elects to prepay the Mortgage Loan
in full on such date.
"ASSUMED MATURITY DATE" means with respect to (a) any Mortgage Loan that is
not a Balloon Loan, the maturity date of such Mortgage Loan and (b) any
Balloon Loan, the date on which a Mortgage Loan would be deemed to mature in
accordance with its original amortization schedule absent its Balloon
Payment.
- -B-
"BALLOON LOANS" means a Mortgage Loan that provide for monthly payments of
principal based on an amortization schedule at least 60 months longer than
its original term.
"BALLOON PAYMENT" means the substantial payment of principal due at the
maturity date of a Balloon Loan unless previously prepaid.
- -C-
"CASH COLLATERAL ACCOUNTS" means, with respect to each Mortgage Loan that has
a Lock Box Account, one or more accounts established in the name of the
Servicer and into which funds in the related Lock Box Accounts will be swept
on a regular basis.
"COLLATERAL ACCOUNT" means a segregated account established by the Servicer
to receive certain deposits by the Directing Holders upon the occurrence of
certain defaults on Balloon Payments.
"COLLATERAL SUBSTITUTION DEPOSIT" means an amount equal to the sum of (x) the
remaining principal amount of the Mortgage Loan or, if applicable, 125%
(generally) of the Allocated Loan Amount of the related Mortgaged Property or
Properties sought to be released, (y) the amount, if any, which, when added
to such amount, will be sufficient to purchase direct non-callable
obligations of the United States of America providing payments (1) on or
prior to, but as close as possible to, all successive scheduled payment dates
from the Release Date to the related maturity date, assuming, in the case of
an ARD Loan, that such loan prepays on the related Anticipated Repayment Date
and (2) in amounts equal to the scheduled payments due on such Due Dates
under the Mortgage Loan, and (z) any costs and expenses incurred in
connection with the purchase of such U.S. government obligation.
"CONSTANT PREPAYMENT RATE" or "CPR" means the prepayment model used in the
Prospectus and representing an assumed constant annual rate of prepayment
each month, expressed as a per annum percentage of the then-scheduled
principal balance of the pool of mortgage loans.
"CUT-OFF DATE ALLOCATED LOAN AMOUNT" means, for each Mortgaged Property, the
Allocated Loan Amount of such property as of the Cut-off Date.
"CUT-OFF DATE PRINCIPAL BALANCE" means, for each Mortgage Loan, the unpaid
principal balance thereof as of the Cut-off Date.
- -D-
"DEFEASANCE LOCK-OUT PERIOD" means a specified period, which is generally the
greater of approximately three years from the date of origination and two
years from March 27, 1997, after which, provided no event of default exists,
a release of a Mortgaged Property from the lien of the related Mortgage may
be obtained.
"DEFEASANCE OPTION" means a release of a Mortgaged Property from the lien of
the related Mortgage in exchange for a Collateral Substitution Deposit
following the Defeasance Lock-out Period.
"DELINQUENCY" means any failure of the borrower to make a scheduled payment
on a Due Date.
"DSCR" means, with respect to any Mortgage Loan, the Net Cash Flow for the
related Mortgaged Property divided by the Annual Debt Service for such
Mortgaged Property.
- -E-
"EXCESS CASH FLOW" means the cash flow from the Mortgaged Property or
Properties securing an ARD Loan after payments of the following: (i) required
payments to the tax and insurance escrow fund and any ground lease escrow
fund,
169
<PAGE>
(ii) payment of Monthly Debt Service, (iii) payments to any other required
escrow funds, (iv) payment of operating expenses pursuant to the terms of an
annual budget approved by the Servicer, and (v) payment of approved
extraordinary operating expenses or capital expenses not set forth in the
approved annual budget or allotted for in any escrow fund.
"EXCESS INTEREST" means, with respect to each of the Mortgage Loans that has
a Revised Rate, interest accrued on such Mortgage Loan allocable to the
Excess Rate.
"EXCESS RATE" means, with respect to each of the Mortgage Loans that has a
Revised Rate, the difference between (a) the applicable Revised Rate and (b)
the applicable Mortgage Rate.
- -F-
"FAIR MARKET VALUE" means the fair market value of a Mortgaged Property,
after accounting for the estimated liquidation and carrying costs.
"FINAL RECOVERY DETERMINATION" means the date of the determination by the
Special Servicer that it has recovered all payments which it expects to be
finally recoverable.
- -G-
"GLA" means the square footage of the gross leasable area of each Mortgaged
Property.
- -I-
"IDENTIFIED DEFERRED MAINTENANCE" means the estimated amount of deferred
maintenance in a Mortgaged Property's structural engineering report.
"INITIAL POOL BALANCE" means the Cut-off Date Principal Balance of the
Mortgage Pool.
- -L-
"LOAN-TO-VALUE RATIO" or "LTV" means, with respect to any Mortgage Loan, the
principal balance of such Mortgage Loan as of the Cut-off Date divided by the
appraised value of the Mortgaged Property or Properties securing such
Mortgage Loan.
"LOCK BOX ACCOUNTS" means one or more accounts that have been established in
the name of the related borrower into which rents or other revenues from
related Mortgaged Properties are deposited by the tenants or manager. All
funds on deposit in the Lock Box Accounts are periodically swept into the
Cash Collateral Accounts.
"LOCK-OUT PERIOD" means a period during which a Mortgage Loan prohibits
voluntary prepayment.
- -M-
"MEZZANINE DEBT" means loans made by the Mortgage Loan Seller to affiliates
of certain of the borrowers that are secured by equity interests in the
borrowers or affiliates of the borrowers.
"MONTHLY DEBT SERVICE PAYMENT" means the payment of interest at the Mortgage
Rate and principal based on the amortization schedule.
"MONTHLY MORTGAGE LOAN PAYMENTS" means all required monthly debt service
payments, reserve payments and other payments under the related Mortgage
Loan.
"MONTHLY OPERATING EXPENSES" means all monthly operating expenses with
respect to a related Mortgaged Property.
"MONTHLY PAYMENT" means the scheduled monthly payment of principal (if any)
and interest at the Mortgage Rate, excluding any Balloon Payment but not
excluding any constant Monthly Payment, which is payable by the related
borrower on the related Due Date.
"MORTGAGE" means a mortgage, deed of trust or other similar security
instrument.
"MORTGAGE LOAN ASSUMPTIONS" means the following assumptions regarding the
Mortgage Loans: (i) each Mortgage Loan will pay principal and interest in
accordance with its terms and scheduled payments will be timely received on
the 11th day
170
<PAGE>
of each month; (ii) the Mortgage Loan Seller does not repurchase any Mortgage
Loan as described under "The Pooling and Servicing Agreement-Representations
and Warranties-Repurchase"; (iii) none of the Depositor, Servicer, or the
Class LR Certificateholders exercise the right to cause early termination of
the Trust Fund; and (iv) the date of determination of weighted average life
is April 16, 1997.
"MORTGAGE LOAN PURCHASE AND SALE AGREEMENT" means the Mortgage Loan Purchase
and Sale Agreement to be dated as of the Cut-off Date between the Mortgage
Loan Seller and the Depositor pursuant to which the Depositor will purchase
the Mortgage Loans to be included in the Mortgage Pool.
"MORTGAGE LOAN SELLER" means Nomura Asset Capital Corporation.
"MORTGAGE LOANS" means the 121 fixed-rate mortgage loans included in the
Mortgage Pool.
"MORTGAGE POOL" means a pool of 121 fixed-rate mortgage loans, with original
terms to maturity of generally not more than thirty years, deposited in the
Trust Fund by the Depositor.
"MORTGAGE RATE" means, with respect to each Mortgage Loan, the annual rate,
not including any Excess Rate, at which interest accrues on such Mortgage
Loan.
"MORTGAGED PROPERTIES" means the anchored and unanchored retail properties,
office buildings, full and limited service hotels, multifamily residential
housing, nursing homes, industrial properties, factory outlet centers, mobile
home and recreational vehicle parks and an assisted living facility which
secure the Mortgage Loans.
- -N-
"NET CASH FLOW" means cash flow available for debt service, as determined by
the Mortgage Loan Seller based upon borrower supplied information for a
recent period that is generally the twelve months prior to the origination of
such Mortgage Loan, adjusted for stabilization and, in the case of certain
Mortgage Loans, may have been updated to reflect a more recent operating
period. Net Cash Flow does not reflect debt service, non-cash items such as
depreciation or amortization, and does not reflect actual capital
expenditures and may have been adjusted by, among other things, (i) assuming
the occupancy rate for the Mortgaged Property was less than the actual
occupancy rate, (ii) subtracting from net operating income replacement or
capital expenditure reserves, (iii) assuming that a 4% to 5% management fee
and a 4% to 8% franchise fee (for Hotel Properties only) was payable with
respect to the Mortgaged Property, (iv) in certain cases, assuming that
operating and/or capital expenses with respect to the Mortgaged Property were
greater than actual expenses, (v) in the case of the Retail Properties,
excluding certain percentage rent, (vi) in the case of the Retail Properties
and Office Properties, subtracting from net operating income an assumed
allowance for tenant improvements and leasing commissions, (vii) in the case
of the Multifamily Properties and Mobile Home Properties, rental revenue
shown on a recent rent roll was annualized before applying a vacancy factor
without further regard to the terms (including expiration dates) of the
leases shown thereon, (viii) excluding certain non-recurring income and/or
expenses, (ix) in the case of certain Office Properties, Industrial
Properties and Retail Properties, determining current revenues from leases in
place, (x) in the case of certain of the Hotel Properties, assuming the
occupancy rate was less than the actual occupancy rate to account for a high
occupancy rate or to reflect new construction in the market and (xi) to take
into account new tax assessments and utility savings from the installation of
new energy efficient equipment.
"NET MORTGAGE PASS-THROUGH RATE" means, with respect to any Mortgage Loan and
any Distribution Date, the Mortgage Pass-Through Rate for such Mortgage Loan
for the related Interest Accrual Period minus the aggregate of the applicable
Servicing Fee Rate.
"NET REO PROCEEDS" means, with respect to any REO Property and any related
REO Mortgage Loan, all revenues received by the Special Servicer with respect
to such REO Property or REO Mortgage Loan net of any insurance premiums,
taxes, assessments and other costs and expenses permitted to be paid
therefrom pursuant to the Pooling and Servicing Agreement
"NET OPERATING INCOME" or "NOI" means the net operating income for a
Mortgaged Property as established by information provided by the borrowers,
except that in certain cases such net operating income has been adjusted by
removing certain non-recurring expenses and revenue or by certain other
normalizations.
"NOTE" means a promissory note.
171
<PAGE>
- -O-
"OCCUPANCY" means the percentage of gross leasable area, rooms, units, beds
or sites of the property that is leased.
"ORIGINAL PRINCIPAL LOAN BALANCE" means the principal balance of the Mortgage
Loan as of the date of origination.
"ORIGINATORS" means Bloomfield and the Mortgage Loan Seller.
- -P-
"P&I ADVANCE" means an amount advanced by the Servicer, the Trustee or the
Fiscal Agent, as applicable and in each case subject to a recoverability
determination, equal to the total or any portion of the Monthly Payment or
Minimum Defaulted Monthly Payment on a Mortgage Loan (with interest at the
Mortgage Pass-Through Rate) not received that was delinquent as of the close
of business on the immediately preceding Due Date (and which delinquent
payment has not been cured as of the Servicer Remittance Date), or, in the
event of a default in the payment of amounts due on the maturity date of a
Mortgage Loan, the amount equal to the Monthly Payment or portion thereof not
received that was due prior to the maturity date.
"PASS-THROUGH RATE" means, for any Class of Certificates, the per annum rate
at which interest accrues on the Certificates of such Class during any
Interest Accrual Period.
"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing Agreement
to be dated as of March 27, 1997, by and among the Depositor, the Servicer,
the Special Servicer, the Trustee and the Fiscal Agent.
"PREFERRED INTEREST HOLDER" means the Mortgage Loan Seller or its affiliates
in the capacity as holder of a preferred equity interest in a borrower or an
affiliate of a borrower.
"PROPERTY ADVANCES" means an amount advanced by the Servicer, the Trustee or
the Fiscal Agent, as applicable and in each case subject to a recoverability
determination, to pay delinquent real estate taxes, assessments and hazard
insurance premiums and to cover other similar costs and expenses necessary to
preserve the priority of the related Mortgage, enforce the terms of any
Mortgage Loan or to maintain such Mortgaged Property.
- -R-
"RATED FINAL DISTRIBUTION DATE" means April 14, 2029, the Distribution Date
occurring after the latest Assumed Maturity Date of any of the Mortgage
Loans.
"REALIZED LOSS" means, with respect to any Distribution Date, the amount, if
any, by which the aggregate Certificate Balance of the Certificates after
giving effect to distributions made on such Distribution Date exceeds the
aggregate Stated Principal Balance of the Mortgage Loans as of the Due Date
occurring in the month in which such Distribution Date occurs.
"RELEASE DATE" means any Due Date on which a borrower exercises its
Defeasance Option.
"REMAINING LOCK-OUT" means the period of the term of the related Mortgage
Loan from the Cut-off Date during which the Mortgage Loan may not be prepaid.
"REO ACCOUNT" means any account established in connection with REO
Properties.
"REO MORTGAGE LOAN" means any Mortgage Loan as to which the related Mortgaged
Property has become an REO Property.
"REO PROPERTY" means, upon acquisition, any Mortgaged Property acquired by
the Special Servicer on behalf of the Trust Fund through foreclosure or deed
in lieu of foreclosure.
"REPRESENTATIONS AND WARRANTIES OF THE MORTGAGE LOAN SELLER" means those
representations and warranties made by the Mortgage Loan Seller to the
Depositor in the Mortgage Loan Purchase and Sale Agreement and assigned by
the Depositor to the Trustee for the benefit of Certificateholders pursuant
to the Pooling and Servicing Agreement, as more fully described under "The
Pooling and Servicing Agreement -- Representations and Warranties;
Repurchase."
"RESERVE ACCOUNTS" means one or more reserve or escrow accounts for, among
other things, necessary repairs, replacements and environmental remediation,
real estate taxes and insurance premiums, deferred maintenance and/or
scheduled capital improvements, re-leasing reserves and seasonal working
capital reserves.
172
<PAGE>
"RESERVE FOR DEFERRED MAINTENANCE" means the actual dollars escrowed at the
loan origination for deferred maintenance repairs.
- -S-
"SERVICER" means AMRESCO Management, Inc.
"SERVICING STANDARD" means the standards established under the Pooling and
Servicing Agreement which require the Servicer and Special Servicer to
service and administer the Mortgage Loans on behalf of the Trust Fund solely
in the best interests of and for the benefit of all of the holders of
Certificates (as determined by the Servicer or Special Servicer in the
exercise of its reasonable judgment) in accordance with applicable law, the
terms of the Pooling and Servicing Agreement and the Mortgage Loans and to
the extent not inconsistent with the foregoing, in the same manner in which,
and with the same care, skill, prudence and diligence with which, it (a)
services and administers similar mortgage loans comparable to the Mortgage
Loans and held for other third party portfolios or (b) administers mortgage
loans for its own account, whichever standard is higher, but without regard
to (i) any known relationship that the Servicer or Special Servicer, or an
affiliate of the Servicer or Special Servicer, may have with the borrowers or
any other party to the Pooling and Servicing Agreement; (ii) the ownership of
any Certificate by the Servicer or Special Servicer or any affiliate of the
Servicer or Special Servicer, as applicable; (iii) the Servicer's or Special
Servicer's obligation to make Advances or to incur servicing expenses with
respect to the Mortgage Loans; (iv) the Servicer's or Special Servicer's
right to receive compensation for its services under the Pooling and
Servicing Agreement or with respect to any particular transaction; or (v) the
ownership, or servicing or management for others, by the Servicer or Special
Servicer of any other mortgage loans or property.
"SPECIAL SERVICER" means AMRESCO Management, Inc.
"SPECIALLY SERVICED MORTGAGE LOAN" means any Mortgage Loan with respect to
which: (i) the related borrower has not made two consecutive Monthly Payments
(and has not cured at least one such delinquency by the next due date under
the related Mortgage Loan) or (ii) the Servicer, the Trustee and/or the
Fiscal Agent has made four consecutive P&I Advances (regardless of whether
such P&I Advances have been reimbursed); (iii) the borrower has expressed to
the Servicer an inability to pay or a hardship in paying the Mortgage Loan in
accordance with its terms; (iv) the 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; (v) the Servicer has
received notice of a foreclosure or threatened foreclosure of any lien on the
Mortgaged Property securing the Mortgage Loan; (vi) a default of which the
Servicer has notice (other than a failure by the borrower to pay principal or
interest) and which materially and adversely affects the interests of the
Certificateholders has occurred and remained unremedied for the applicable
grace period specified in the Mortgage Loan (or, if no grace period is
specified, 60 days); provided, that a default requiring a Property Advance
will be deemed to materially and adversely affect the interests of
Certificateholders; (vii) the Special Servicer proposes to commence
foreclosure or other workout arrangements; or (viii) such borrower has failed
to make a Balloon Payment as and when due; provided, however, that a Mortgage
Loan will cease to be a Specially Serviced Mortgage Loan (a) with respect to
the circumstances described in clauses (i), (ii), and (viii) above, when the
borrower thereunder has brought the Mortgage Loan current (or, with respect
to the circumstances described in clause (viii), pursuant to a work-out
implemented by the Special Servicer) and thereafter made three consecutive
full and timely monthly payments, including pursuant to any workout of the
Mortgage Loan, (b) with respect to the circumstances described in clause
(iii), (iv), (v) and (vii) above, when such circumstances cease to exist in
the good faith judgment of the Servicer, or (c) with respect to the
circumstances described in clause (vi) above, when such default is cured;
provided, in either case, that at that time no circumstance exists (as
described above) that would cause the Mortgage Loan to continue to be
characterized as a Specially Serviced Mortgage Loan.
"STATED MATURITY DATE" means the maturity date of the Mortgage Loan as stated
in the related Note or Loan Agreement.
"STATED PRINCIPAL BALANCE" means, with respect to any Mortgage Loan at any
date of determination, an amount equal to (a) the principal balance as of the
Cut-off Date of such Mortgage Loan, minus (b) the sum of (i) the principal
portion of each Monthly Payment, Minimum Defaulted Monthly Payment or Assumed
Scheduled Payment due on such Mortgage Loan after the Cut-off Date up to such
date of determination, (ii) all voluntary and involuntary principal
prepayments and other unscheduled collections of principal received with
respect to such Mortgage Loan, to the extent distributed to holders of the
Certificates or applied to other payments required under the Pooling and
Servicing Agreement before such date of determination and (iii) any principal
forgiven by the Special Servicer or Interest Shortfalls resulting from
reductions or deferrals of interest.
173
<PAGE>
- -T-
"TTM" means NOI calculated for the trailing twelve months ending on the date
indicated.
- -U-
"UNDERWRITTEN NOI" means Net Cash Flow before deducting for capital
expenditures, tenant improvements and leasing commissions.
"UNDERWRITTEN OCCUPANCY" means the occupancy rate used in determining Net
Cash Flow.
"UPDATED APPRAISAL" means an appraisal (or a letter update from an existing
appraisal which is less than three years old) of the Mortgaged Property from
an independent appraiser who is a member of the American Institute of Real
Estate Appraisers.
- -V-
"VALUE" means for each of the Mortgaged Properties, the appraised value of
such property as determined by an appraisal thereof and in accordance with
MAI standards made not more than 18 months prior to the origination date of
the related Mortgage Loan.
- -W-
"WEIGHTED AVERAGE NET MORTGAGE PASS-THROUGH RATE" means, with respect to any
Distribution Date, the fraction (expressed as a percentage) the numerator of
which is the sum of the products of (i) the Net Mortgage Pass-Through Rate
and (ii) the Stated Principal Balance of each Mortgage Loan and the
denominator of which is the sum of the Stated Principal Balances of each
Mortgage Loan as of the Due Date occurring in the month preceding the month
in which such Distribution Date occur.
- -Z-
"ZONING LAWS" means applicable building and zoning ordinances and codes.
174
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
MORTGAGED PROPERTY CHARACTERISTICS
LOAN ASSET
# # PROPERTY NAME ADDRESS CITY STATE ZIP PROPERTY TYPE
- ---- ----- ------------------------------------- ----------------------------- -------------- ----- ----- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
KENDALL SQUARE
--------------
1 1 Phase II 1 Kendall Sq. Phase 2 Cambridge MA 02142 Office
1 2 Athenaeum House 215 1st Street Cambridge MA 02142 Office
1 3 Phase I One Kendall Square Cambridge MA 02142 Office
SARACEN
-------
2 1 Wells Research 75-85-95 Wells Ave. Newton MA 02159 Office
2 2 128 Technology Center 125 Roberts Road Waltham MA 02154 Office
2 3 Dedham Place East St. & Allied Dr. Dedham MA 02026 Office
2 4 201 University 201 University Ave. Westwood MA 02090 Office
2 5 7-57 Wells Avenue 7-57 Wells Avenue Newton MA 02159 Office
2 6 Norfolk 333 Elm Street Dedham MA 02026 Office
3 *International Plaza 750 Lexington Ave. New York NY 10022 Office
K-MART DISTRIBUTION CENTER
--------------------------
4 1 K-Mart Brighton Distribution Center 18875 Bromley Lane Brighton CO 80601 Industrial
-Warehouse
4 2 K-Mart Greensboro Distribution Center 300 Penry Road Greensboro NC 27405 Industrial-
Warehouse
BURNHAM PACIFIC
---------------
5 1 Puente Hills 17525-18271 Gale City of Industry CA 91748 Retail-Anchored
5 2 Valley Central 44655 Vly Central Way Lancaster CA 93536 Retail-Anchored
HUDSON HOTELS
-------------
6 1 Seagate Hotel 400 So. Ocean Blvd Delray Beach FL 33483 Hotel-Full Service
6 2 Durham-Duke 2306 Elba St. Durham NC 27705 Hotel-Full Service
6 3 Brookwood Inn--Pittsford 800 Pittsford-Victor Rd. Pittsford NY 14534 Hotel-Full Service
6 4 Fairfield Inn--Richmond 7300 W. Broad St. Richmond VA 23294 Hotel-Ltd. Service
6 5 Fairfield Inn--Cary 1716 Walnut St. Cary NC 27511 Hotel-Ltd. Service
6 6 Fairfield Inn--Wilmington 4926 Market St. Wilmington NC 28403 Hotel-Ltd. Service
6 7 Fairfield Inn--Columbia 8104 Two Notch Rd. Columbia SC 29223 Hotel-Ltd. Service
6 8 Fairfield Inn--Charleston 7415 Northside Dr. Charleston SC 29420 Hotel-Ltd. Service
6 9 Fairfield Inn--Durham RTP 4507 NC Highway 55 Durham NC 27713 Hotel-Ltd. Service
6 10 Comfort Inn--Jamestown 2800 N. Main St. Ext. Jamestown NY 14701 Hotel-Ltd. Service
6 11 Raleigh 3201 Wake Forest Rd. Raleigh NC 27609 Hotel-Ltd. Service
6 12 *Fairfield Inn--Statesville 1503 E. Broad St. Statesville NC 28677 Hotel-Ltd. Service
6 13 Charlotte 1200 W. Sugar Creek Rd. Charlotte NC 28213 Hotel-Ltd. Service
6 14 Comfort Inn--Rochester 1501 Ridge Rd. West Rochester NY 14615 Hotel-Ltd. Service
6 15 Fairfield Inn--Albany 2586 N. Slappey Blvd. Albany GA 31701 Hotel-Ltd. Service
6 16 EconoLodge--Canandaigua 170 Eastern Blvd. Canandaigua NY 14424 Hotel-Ltd. Service
7 *Marina Harbor Apts and Anchorage 4500 Via Marina Marina del Rey CA 90292 Multifamily
SUNWEST
-------
8 1 SunWest 5032 14540 Memorial Drive Houston TX 77079 Retail-Unanchored
8 2 SunWest 7924 1937 Parker Road Plano TX 75023 Retail-Unanchored
8 3 SunWest 8001 2524 N. Galloway Ave Mesquite TX 75150 Retail-Unanchored
8 4 SunWest 5833 7800 Grapevine Highway N. Richland Hills TX 76118 Retail-Unanchored
8 5 SunWest 7801 15 West 1st Street Havre MT 59501 Retail-Unanchored
8 6 SunWest 5858 2770 Trinity Mills Road Carrollton TX 75006 Retail-Unanchored
8 7 SunWest 7802 2nd Street & 2nd Ave NW Sidney MT 59270 Retail-Unanchored
8 8 *SunWest 7442 2218 Greenville Avenue Dallas TX 75206 Retail-Unanchored
8 9 SunWest 7862 1201 South Stockton Monahans TX 79756 Retail-Unanchored
8 10 *SunWest 7055 1873 South Wadsworth Lakewood CO 80232 Retail-Unanchored
8 11 *SunWest 7507 3065 Josey Lane Carrollton TX 75007 Retail-Unanchored
8 12 SunWest 5126 401 16th Street Orange TX 77630 Retail-Unanchored
8 13 SunWest 5038 2747 East Fifth Street Tyler TX 75701 Retail-Unanchored
8 14 *SunWest 7311 3101 South Elm Place Broken Arrow OK 74012 Retail-Unanchored
8 15 SunWest 5131 100 Cleveland SC Cleveland TX 77327 Retail-Unanchored
8 16 SunWest 7641 28522 FM 149 Road Tomball TX 77375 Retail-Unanchored
8 17 SunWest 7075 103 West Prospect Fort Collins CO 80525 Retail-Unanchored
8 18 *SunWest 5808 13548 Preston Road Dallas TX 75240 Retail-Unanchored
8 19 SunWest 7704 590 32nd Street Clifton CO 81520 Retail-Unanchored
8 20 *SunWest 7098 5820 South 1st Street Austin TX 78745 Retail-Unanchored
8 21 SunWest 5011 2010 South Sheridan Tulsa OK 74112 Retail-Unanchored
8 22 SunWest 7613 NW Bypass & W 3rd St Great Falls MT 59404 Retail-Unanchored
8 23 *SunWest 5801 335 South Cedar Ridge Duncanville TX 75116 Retail-Unanchored
<PAGE>
LOAN ASSET
# # PROPERTY NAME ADDRESS CITY STATE ZIP PROPERTY TYPE
- ---- ----- ------------------------------------- ----------------------------- -------------- ----- ----- -----------------
8 24 SunWest 5057 1305 Tenaha Center TX 75935 Retail-Unanchored
8 25 *SunWest 5861 3614 Camp Bowie Blvd. Fort Worth TX 76107 Retail-Unanchored
8 26 *SunWest 7032 3333 Finley Irving TX 75062 Retail-Unanchored
8 27 SunWest 7125 6400 Nieman Road Shawnee KS 66203 Retail-Unanchored
8 28 *SunWest 5822 6500 Skillman Dallas TX 75231 Retail-Unanchored
8 29 SunWest 7792 3707 Lemmon Avenue Dallas TX 75219 Retail-Unanchored
8 30 *SunWest 7033 9825 Miller Road Dallas TX 75238 Retail-Unanchored
8 31 SunWest 7118 1201 South Noland Independence MO 64055 Retail-Unanchored
8 32 SunWest 7816 1380 North Main Street Vidor TX 76704 Retail-Unanchored
8 33 *SunWest 7615 715 South Haynes Miles City MT 59301 Retail-Unanchored
8 34 *SunWest 7736 429 West Broadway West Memphis AR 72301 Retail-Unanchored
8 35 *SunWest 7446 14th Street & Grand Ave Billings MT 59101 Retail-Unanchored
8 36 SunWest 7742 1818 Ninth Street Wichita Falls TX 76301 Retail-Unanchored
8 37 SunWest 7342 280 West Main Street Vernal UT 84078 Retail-Unanchored
8 38 SunWest 7020 2215 East Marsalis Dallas TX 75216 Retail-Unanchored
8 39 *SunWest 7595 10525 Edgebrook Houston TX 77034 Retail-Unanchored
8 40 SunWest 7019 4500 Live Oak Dallas TX 75204 Retail-Unanchored
8 41 *SunWest 7925 1949 John West Road Dallas TX 75228 Retail-Unanchored
8 42 *SunWest 7344 3990 Washington Ogden UT 84403 Retail-Unanchored
8 43 *SunWest 7031 911 North Hampton Desoto TX 75115 Retail-Unanchored
8 44 SunWest 7738 3314 Bell Street Amarillo TX 79106 Retail-Unanchored
8 45 SunWest 7126 1300 North Highway 7 Blue Springs MO 64015 Retail-Unanchored
8 46 *SunWest 7154 1665 Winchester Memphis TN 38116 Retail-Unanchored
8 47 *SunWest 7849 1605 West Pioneer Pkwy Arlington TX 76013 Retail-Unanchored
8 48 *SunWest 7599 2127 East Southmore Pasadena TX 77502 Retail-Unanchored
8 49 SunWest 7121 712 West Commerical Springfield MO 65803 Retail-Unanchored
8 50 SunWest 7063 709 North Federal Riverton WY 83501 Retail-Unanchored
8 51 *SunWest 7585 105 West Edgewood Friendswood TX 77546 Retail-Unanchored
8 52 SunWest 7751 1343 Miner Street Idaho Springs CO 80452 Retail-Unanchored
8 53 *SunWest 5016 7301 South Shields Oklahoma City OK 73149 Retail-Unanchored
8 54 *SunWest 7097 9316 North Lamar Austin TX 78753 Retail-Unanchored
8 55 *SunWest 7576 1600 Midwestern Parkway Wichita Falls TX 76302 Retail-Unanchored
8 56 SunWest 7116 3510 Prospect Kansas City MO 64128 Retail-Unanchored
8 57 *SunWest 7601 16550 El Camino Real Houston TX 77062 Retail-Unanchored
8 58 SunWest 7070 111 Church Street Florence CO 81226 Retail-Unanchored
8 59 SunWest 7110 4601 Parallel Street Kansas City KS 66101 Retail-Unanchored
8 60 *SunWest 7728 1102 South Dewey North Platte NE 69101 Retail-Unanchored
8 61 SunWest 7067 535 Green Street Craig CO 81625 Retail-Unanchored
8 62 SunWest 7589 611 North Burlington Hastings NE 68901 Retail-Unanchored
8 63 *SunWest 7989 1717-1722 W.2nd Grand Island NE 68801 Retail-Unanchored
8 64 *SunWest 7516 306 East Paisano Avenue El Paso TX 79901 Retail-Unanchored
8 65 SunWest 5141 601 Brown Street Osawatomie KS 22482 Retail-Unanchored
8 66 *SunWest 7343 300 Main Street Richfield UT 84701 Retail-Unanchored
8 67 SunWest 7040 111 Park Street Powell WY 82435 Retail-Unanchored
8 68 SunWest 7701 705 Kansas Avenue Garden City KS 67846 Retail-Unanchored
8 69 SunWest 7451 259 14th Street Burlington CO 80807 Retail-Unanchored
8 70 *SunWest 5859 1927 East Beltline Road Carrollton TX 75006 Retail-Unanchored
8 71 *SunWest 7145 5316 Rogers Avenue Fort Smith AR 72902 Retail-Unanchored
8 72 *SunWest 7551 202 Clubview Levelland TX 79336 Retail-Unanchored
9 Westin--Indianapolis 50 South Capitol Ave Indianapolis IN 46204 Hotel-Full Service
10 Two Gateway Center 283-299 Market St. Newark NJ 07102 Office
UNIPROP
-------
11 1 Aztec Estates 1-A Sundial Circle Drive Margate FL 33068 Mobile Home Park
11 2 Park of the Four Seasons 50 113th Avenue, NE Blaine MN 55434 Mobile Home Park
11 3 Kings Manor 12500 State Road 84 Ft. Lauderdale FL 33325 Mobile Home Park
11 4 Old Dutch Farms 27000 Napier Road Novia MI 48009 Mobile Home Park
12 Montague Park Tech Center Junction Avenue San Jose CA 95134 Office-R&D
JACOBS MALL
-----------
13 1 Conestoga Mall NEC U.S. 281 & 13th Grand Island NE 68803 Retail-Anchored
13 2 Randolph Mall NEC 49 & 64 Asheboro NC 27203 Retail-Anchored
<PAGE>
LOAN ASSET
# # PROPERTY NAME ADDRESS CITY STATE ZIP PROPERTY TYPE
- ---- ----- ------------------------------------- ----------------------------- -------------- ----- ----- -----------------0
M & H
-----
14 1 LaHabra Marketplace 1500-1900 Imperial Hwy La Habra CA 90631 Retail-Anchored
14 2 How 'Bout Arden 2100 Arden Way Sacramento CA 95825 Retail-Anchored
14 3 Bethard Square 301-342 West Olive Ave. Madera CA 93638 Retail-Anchored
15 Nassau Park II Rt.1&Quaker Bridge West Windsor NJ 08540 Retail-Anchored
PRIME RETAIL II
---------------
16 1 Coeur D'Alene Factory Outlets 3900 Riverbend Ave. Coeur D'Alene ID 83854 Retail-Factory
Outlet
16 2 Bend Factory Outlets 61330 S. Highway 97 Bend OR 97702 Retail-Factory
Outlet
16 3 Oak Creek Factory Outlets 6601-6657 Hwy. 179 Sedona AZ 86351 Retail-Factory
Outlet
17 Lakeside Village 4170 Spring Lake Drive San Leandro CA 94578 Multifamily
18 Asian Gardens Mall 9200 Bolsa Ave. Westminster CA 92683 Retail-Mall
19 Northwood Centre 1940 N. Monroe St. Tallahassee FL 32303 Retail-Anchored
20 South Dekalb Mall 2801 Candler Road Decatur GA 30034 Retail-Mall
AMBASSADOR APARTMENTS II
------------------------
21 1 Country Club West 1001 50th. Ave. Greeley CO 80634 Multifamily
21 2 Courtney Park Apts. 4470 S. Lemay Ave. Fort Collins CO 80525 Multifamily
22 *Century Square Mall Mountain View Drive West Mifflin PA 15122 Retail-Anchored
HOLLADAY
--------
23 1 Byrkit 400 S. Byrkit Ave. Mishawaka IN 46544 Industrial
23 2 LTV 105 Niles Ave. South Bend IN 46617 Office
23 3 3300 Sample 3300 West Sample St. South Bend IN 46619 Industrial
23 4 Blackthorn--Wells Olive Rd/Nimtz Pkwy South Bend IN 46628 Industrial
23 5 West Jefferson 1501 Liberty Dr. Mishawaka IN 46545 Multifamily
23 6 Willow Trace--II 820 Fessler Prkwy. Nashville TN 37210 Industrial
23 7 Dugdale 17390 Dugdale Rd. South Bend IN 46635 Office
23 8 Niles/Colfax 431 E. Colfax Ave. South Bend IN 46601 Office
23 9 Michiana 53830 Generations Dr. South Bend IN 46635 Office
23 10 Colfax 220 W. Colfax Ave. South Bend IN 46601 Office
23 11 Pru 53822 Generation Dr South Bend IN 46635 Office
24 Knollwood Village Apartments 2130 E. Hill Grand Blanc MI 48439 Multifamily
25 Tucson Place NWC Wetmore & 1st Tucson AZ 85705 Retail-Anchored
2 ST. MARKS/GREYSTONE
---------------------
26 1 Greystone Apartments 7585 Ingram Road San Antonio TX 78232 Multifamily
26 2 St. Marks 37 St. Marks Place New York NY 10003 Multifamily
27 Holiday Inn--Alexandria 480 King Street Alexandria VA 22314 Hotel-Full
Service
28 Hamilton Park Health Care Center 525 Monmouth Street Jersey City NJ 07302 Nursing
29 Burlington Square Middlesex Turnpike Burlington MA 01803 Retail-Secondary
Anchored
30 Alzina Office Building 100 North First St. Springfield IL 62705 Office
31 Danvers Crossing Shopping Center 8-10 Newbury St Danvers MA 01923 Retail-Anchored
32 Residence Inn--Herndon 315 Elden Street Herndon VA 22070 Hotel-Extended
Stay
33 Del Mar Village Shopping Center 7154 Beracasa Way Boca Raton FL 33434 Retail-Anchored
34 Plaza at Burr Corners I&II 1129 Tolland Tpk. Manchester CT 06040 Retail-Anchored
35 *Holiday Inn New Orleans 100 West Bank Expwy. Gretna LA 70053 Hotel-Full
Service
TRAMZ
-----
36 1 Holiday Inn--Carrier Circle 6501 College Drive East Syracuse NY 13057 Hotel-Full
Service
36 2 Holiday Inn--Airport 6701 Buckley Road North Syracuse NY 13212 Hotel-Full
Service
37 Shadyside Gardens Apartment 2641 Shadyside Ave. Suitland MD 20746 Multifamily
38 Radisson Inn--Columbus 4900 Sinclair Road Columbus OH 43229 Hotel-Full
Service
39 Hood Commons Crystal Avenue Derry NH 03038 Retail-Anchored
40 *30 Broad Street 30 Broad Street New York NY 10004 Office
CLEVELAND INDUSTRIAL PORTFOLIO
------------------------------
41 1 6200 Harvard 6200 Harvard Avenue Cleveland OH 44105 Industrial
41 2 Berea Road 10408-10750 Berea Road Lakewood OH 44102 Industrial
41 3 East 34th Street 2912-2972 East 34th Street Cleveland OH 44115 Industrial
<PAGE>
LOAN ASSET
# # PROPERTY NAME ADDRESS CITY STATE ZIP PROPERTY TYPE
- ---- ----- ------------------------------------- ----------------------------- -------------- ----- ----- -----------------
41 4 Eddy Road 341-353 Eddy Road Cleveland OH 44108 Industrial
41 5 Grant 5207-5215 Grant Avenue Cleveland OH 44125 Industrial
41 6 Stones Levee 401-607 Stones Levee Cleveland OH 44113 Industrial
41 7 Industrial Parkway 1261 Industrial Parkway Brunswick OH 44212 Industrial-
Warehouse
41 8 Babbitt Road 1261-1267 Babbitt Road Euclid OH 44132 Industrial
42 Sehome Village 300 36th St. Bellingham WA 98226 Retail-Anchored
43 Festival at Moreno Valley 24318 Hemolck Moreno Valley CA 92387 Retail-Anchored
44 Madison House 34 Wildwood Avenue Madison CT 06443 Nursing
45 Decker Building 33 Union Square West New York NY 10003 Multifamily
ECONOLODGE PORTFOLIO
--------------------
46 1 Woodbridge Econolodge 13317 Gordon Blvd Woodbridge VA 22191 Hotel-Ltd. Service
46 2 Fredericksburg Econolodge 5321 Jeff Davis Hwy Fredericksburg VA 22401 Hotel-Ltd. Service
46 3 *Wytheville Econolodge 1190 E. Main Street Wytheville VA 24382 Hotel-Ltd. Service
46 4 *Bluefield Econolodge 3400 Cumberland Rd. Bluefield WV 24701 Hotel-Ltd. Service
46 5 Chesapeake Econolodge 4725 N. Military Highway Chesapeake VA 23321 Hotel-Ltd. Service
46 6 Midlothian Econolodge 6523 Midlothian Turnpike Richmond VA 23225 Hotel-Ltd. Service
47 Residence Inn-Livermore 1000 Airway Boulevard Livermore CA 94550 Hotel-Extended
Stay
48 140 Allen 140 Allen Road Bernards Twsp. NJ 07936 Office
49 Brookside Commons Apartments 235 E. Main Street East Hartford CT 06108 Multifamily
50 Lincoln Park Center 3600 Fort Street Lincoln Park MI 48146 Retail-Anchored
MAGNOLIA-WESTERN INVESTMENTS, LP
--------------------------------
51 1 Magnolia Gardens 17922 San Fernando Miss. Granada Hills CA 91604 Nursing
51 2 Western Convalescent 2190 W. Adams Blvd. Los Angeles CA 90018 Nursing
BUENA/LEISURE NURSING
---------------------
52 1 Buena Ventura Care Center 1016 S. Record Ave Los Angeles CA 90023 Nursing
52 2 Leisure Glen 1505 Colby Drive Glendale CA 91205 Nursing
53 Englar Shopping Center MD Rte 140/Englar Road Westminster MD 21157 Retail-Anchored
54 Totem Square Shopping Center 11815 124th Ave. NE Kirkland WA 98034 Retail-Unanchored
55 Equitable of Iowa Building 604 Locust Street Des Moines IA 50309 Office
56 Clarion Suites Inn 191 Spencer Street Manchester CT 06040 Hotel-Extended
Stay
57 Outlets Limited Mall 3750 Venture Drive Duluth GA 30136 Retail-Secondary
Anchored
58 Warwick Commons 399 Bald Hill Road Warwick RI 02886 Retail-Anchored
59 Alden Terrace 1240 Hoover Street Los Angeles CA 90006 Nursing
60 6000 Metro Drive 6000 Metro Drive Baltimore MD 21215 Office
61 Country Hearth Inn--Orlando 9861 International Dr. Orlando FL 32819 Hotel-Full Service
62 Longwood Manor 4853 W. Washington Blvd. Los Angeles CA 90016 Nursing
63 Tech Center 29 12200 Tech Road Silver Spring MD 20904 Office
64 Davol Square Jewelry Bldg. 3 Davol Square Providence RI 02903 Retail-Unanchored
65 Lincoln MHP 10301 And 10315 W. Greenfield West Allis WI 53214 Mobile Home Park
66 National Bank of California 145 S. Fairfax Ave. Los Angeles CA 90036 Office
67 Best Western--Jacksonville 300 N. Park Avenue Orange Park FL 32073 Hotel-Full Service
68 The Lab 2930 Bristol Street Costa Mesa CA 92626 Retail-Unanchored
69 Northridge Shopping Center W 80th Ave/Wadsworth Arvada CO 80003 Retail-Anchored
70 Days Inn--Providence 220 India Street Providence RI 02903 Hotel-Full Service
71 Plymouth Mall 2700 Plymouth Rd. Ann Arbor MI 48104 Retail-Secondary
Anchored
72 Residence Inn--Gainesville 4001 SW 13th Street Gainesville FL 32608 Hotel-Extended
Stay
73 Ramada Inn Bossier 750 Isle of Capri Blvd. Bossier LA 71111 Hotel-Ltd. Service
SUTTON PLACE + SOUTH LIVINGSTON
-------------------------------
74 1 Sutton Place 998-1100 St George Ave Rahway NJ 07065 Retail-Anchored
74 2 79 South Livingston 79 South Livingston Ave Livingston NJ 07039 Retail-Unanchored
75 Old Town Square Mountain & College Fort Collins CO 80524 Retail
76 Anza Corporate Center 433 Airport Blvd. Burlingame CA 94010 Office
77 Washington Square Shopping Center 1111 E. Washington Ave. Escondido CA 92025 Retail-Secondary
Anchored
78 Winston Village 2055 N. Perris Blvd Perris CA 92571 Retail-Unanchored
79 Plaza Reyes Adobe Retail Center 30313 Canwood St Agoura Hills CA 91301 Retail-Unanchored
<PAGE>
LOAN ASSET
# # PROPERTY NAME ADDRESS CITY STATE ZIP PROPERTY TYPE
- ---- ----- ------------------------------------- ----------------------------- -------------- ----- ----- -----------------
80 Comfort Inn--Castaic 31558 Castaic Rd. Castaic CA 91384 Hotel-Ltd. Service
81 Pocono Green Shopping Center Midlothian Turnpike Richmond VA 23235 Retail-Unanchored
82 Saunders Plaza 4533 MacArthur Blvd Newport Beach CA 92660 Retail-Unanchored
83 Heritage Bank Building 1313 Dolley Madison McLean VA 22101 Office
84 Arvada Plaza 9212-9588 West 58th Ave. Arvada CO 85704 Retail-Unanchored
85 Good Guys Plaza 1331 Guerneville Rd Santa Rosa CA 95402 Retail-Unanchored
86 Candlelite Apartments 700 Candelite Ct. Fort Wayne IN 46807 Multifamily
87 Topinkas Village Shopping Center 19111--19191 Telegraph Rd. Detroit MI 48219 Retail-Anchored
88 Village Park MHP 724 Creek Ridge Road Greensboro NC 27406 Mobile Home Park
89 Woodland Park Retirement 21200 Ventura Blvd. Woodland Hills CA 91634 Assisted Living
90 View Park Convalescent Center 3737 Don Felipe Drive Los Angeles CA 90008 Nursing
91 Key RV Park 6099 Overseas Highway Marathon FL 33050 Mobile Home Park
92 Ramada Inn--Nashville 837 Briley Parkway Nashville TN 37217 Hotel-Ltd. Service
93 Barstow Plaza 901 Armory Road Barstow CA 92311 Retail-Anchored
94 Aspen Care Center 2325 Madison Avenue Ogden UT 84401 Nursing
95 Senate House and Virginian 935 & 965 Cottage Grove Las Vegas NV 89119 Multifamily
96 One Ethel Road One Ethel Road Edison NJ 08817 Office
97 American Plaza Shopping Center 701 Galvin Road Bellevue NE 68005 Retail-Anchored
98 Diamond Inn 1009 South Main St. Salt Lake City UT 84111 Hotel-Ltd. Service
99 Hocking Mall Shopping Center C.R. 33A & S.R. 664 Logan OH 43138 Retail-Anchored
100 Kessler Garden Apts. 5480 N. Michigan Rd. Indianapolis IN 46228 Multifamily
101 Chateau Apartments 2000 24th Street Nashville TN 37212 Multifamily
102 Knights Inn-Maumee 1520 S Holland Maumee OH 43537 Hotel-Ltd. Service
103 Tiffany Bay Clear Lake 1605 Tiffany Court Houston TX 77058 Multifamily
104 *Airport Commerce Center 16126 Sherman Way Van Nuys CA 91406 Office
105 Bakerview MHP 505 West Bakerview Bellingham WA 98226 Mobile Home Park
106 Slauson Apartments 4707-41 Slauson Ave Los Angeles CA 90001 Multifamily
107 El Camino Real Apartments 1600 Tamarack McAllen TX 78501 Multifamily
108 Park Isle Club Apartments 790 73rd Street Miami Beach FL 33141 Multifamily
109 Planet Pacific Building 27405 Puerta Real Mission Viejo CA 92691 Office
110 Butler Place Apartments 14 & 20 Butler Pl Brooklyn NY 11238 Multifamily
111 Cedar Springs 400 Susan Cedar Springs MI 49319 Mobile Home Park
112 Emory Arms Apartments 1295 E. Rock Spr. Rd. Atlanta GA 30306 Multifamily
113 Fairdale Apartments 6600 Fairdale San Antonio TX 78218 Multifamily
114 *Holiday Inn Express -East Haven 30 Frontage Road East Haven CT 06518 Hotel-Ltd. Service
115 Holiday Inn Express-Bennetsville 213 US Hwy 15 Bennettsville SC 29512 Hotel-Ltd. Service
116 Michigan Trailer Park 3140 W. Osborne Phoenix AZ 85017 Mobile Home Park
117 Hidden Meadows Apartments 5959 Wurzbach San Antonio TX 78238 Multifamily
118 Econolodge Arizona 121 S. Lake Powell Page AZ 86040 Hotel-Ltd. Service
119 Holiday Inn--S. Kingston 3009 Tower Hill Rd South Kingston RI 02874 Hotel-Full Service
120 North Acres Mobile Home Park 302 E. "N" Street Yakima WA 98901 Mobile Home Park
121 Trainer Hill MHP 4300 West Ninth Street Trainer PA 19013 Mobile Home Park
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
$29,544,340 $29,501,397 $124 $4,223,357 $4,169,895 $ 4,600,418 TTM 11/30/96 $ 4,294,941
20,414,344 20,384,672 66 2,157,309 2,601,977 2,862,522 TTM 11/30/96 3,002,213
19,741,316 19,712,622 89 2,908,497 2,732,416 2,579,271 TTM 11/30/96 2,805,624
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
69,700,000 69,598,691 90 9,289,163 9,504,288 10,042,211 10,102,778
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
19,497,301 19,475,608 82 2,667,258 2,995,470 2,994,149 TTM 11/30/96 2,863,071
17,666,917 17,647,261 81 2,500,550 2,621,380 2,469,041 TTM 11/30/96 2,423,022
14,148,837 14,133,095 87 1,820,126 2,080,887 2,111,059 TTM 11/30/96 1,415,876
7,656,783 7,648,264 93 1,364,262 1,583,114 1,615,543 TTM 11/30/96 1,299,184
6,937,010 6,929,292 78 590,010 881,831 681,936 TTM 11/30/96 876,328
3,093,152 3,089,711 64 290,599 445,740 236,491 TTM 11/30/96 357,867
----------- ----------- ------------ ---------- ---------- ---------- ----------
69,000,000 68,923,230 82 9,232,805 10,608,422 10,108,219 9,235,348
65,750,000 65,750,000 171 11,168,393 11,718,933 12,093,512 TTM 10/31/96 9,442,321
31,513,457 31,513,457 25 3,990,166
31,486,543 31,486,543 20 3,986,759
----------- ------------ ------------ ----------
63,000,000 63,000,000 22 7,976,925
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
33,100,000 33,100,000 64 6,080,004 6,174,558 6,013,949 TTM 12/31/96 5,571,650
25,400,000 25,400,000 53 4,046,563 4,235,896 4,124,189 TTM 12/31/96 4,122,150
----------- ------------ ------------ ---------- ---------- ---------- ----------
58,500,000 58,500,000 59 10,126,567 10,410,454 10,138,138 9,693,800
7,395,000 7,375,729 105,368 1,256,361 1,342,788 1,285,670 TTM 9/30/96 1,226,029
6,090,000 6,074,130 40,494 950,677 1,023,261 1,291,575 TTM 9/30/96 1,197,701
4,510,000 4,498,247 41,650 885,220 908,673 870,389 TTM 9/30/96 732,733
4,375,000 4,363,599 35,190 169,077 712,682 884,477 TTM 9/30/96 872,067
3,935,000 3,924,746 31,398 272,900 686,954 766,592 TTM 9/30/96 737,848
3,545,000 3,535,762 29,465 166,446 697,741 678,815 TTM 9/30/96 619,227
3,365,000 3,356,231 26,017 (84,699) 461,528 640,195 TTM 9/30/96 656,315
3,185,000 3,176,700 26,695 (30,985) 477,050 578,128 TTM 9/30/96 564,503
3,130,000 3,121,843 32,519 126,727 581,520 591,663 TTM 9/30/96 549,407
3,000,000 2,992,182 29,626 493,896 549,864 539,113 TTM 9/30/96 514,568
2,775,000 2,767,769 18,576 490,353 574,387 631,975 TTM 9/30/96 589,238
2,515,000 2,508,446 21,258 20,767 393,860 433,420 TTM 9/30/96 419,139
2,340,000 2,333,902 17,681 380,511 370,608 426,293 TTM 9/30/96 379,091
2,275,000 2,269,072 27,338 488,333 469,262 441,986 TTM 9/30/96 412,955
2,215,000 2,209,228 18,108 72,627 451,045 353,982 TTM 9/30/96 318,818
1,350,000 1,346,482 20,715 221,796 229,824 263,596 TTM 9/30/96 253,321
----------- ------------ ------------ ---------- ---------- ---------- ----------
56,000,000 55,854,069 30,842 5,880,007 9,931,047 10,677,870 10,042,960
51,000,000 50,586,851 59,795 7,275,475 7,640,886 7,366,892 TTM 10/31/96 7,324,895
2,529,561 2,529,561 69 367,313 400,174 420,938 TTM 2/97 334,378
1,912,588 1,912,588 38 26,173 69,580 47,949 TTM 2/97 241,968
1,828,252 1,828,252 52 TTM 2/97 231,321
1,826,954 1,826,954 50 228,028 256,195 239,530 TTM 2/97 234,008
1,629,613 1,629,613 49 244,083 244,177 244,181 TTM 2/97 219,865
1,707,171 1,707,171 40 146,245 267,505 267,501 TTM 2/97 239,792
1,436,135 1,436,135 37 233,218 206,774 192,610 TTM 2/97 181,760
1,709,217 1,709,217 79 266,984 245,915 245,915 TTM 2/97 222,253
1,298,090 1,298,090 43 192,696 201,652 211,650 TTM 2/97 172,258
1,198,665 1,198,665 24 155,302 152,023 TTM 2/97 159,915
1,205,911 1,205,911 45 148,721 163,294 166,024 TTM 2/97 153,021
1,218,846 1,218,846 23 158,159 193,925 209,195 TTM 2/97 169,220
1,164,070 1,164,070 51 157,954 159,533 159,535 TTM 2/97 151,415
1,107,881 1,107,881 36 107,746 118,116 135,170 TTM 2/97 148,985
1,059,419 1,059,419 28 143,399 144,260 144,264 TTM 2/97 135,831
1,049,421 1,049,421 27 151,275 157,317 160,519 TTM 2/97 144,427
1,043,414 1,043,414 47 97,575 101,257 189,100 TTM 2/97 132,538
1,167,641 1,167,641 50 158,984 158,258 158,258 TTM 2/97 148,105
952,988 952,988 11 115,930 151,661 172,385 TTM 2/97 134,180
1,106,065 1,106,065 52 145,284 160,409 160,403 TTM 2/97 147,736
717,300 717,300 16 135,157 151,977 143,538 TTM 2/97 109,449
603,631 603,631 17 99,342 33,201 52,825 TTM 2/97 80,339
874,438 874,438 28 74,287 122,619 122,616 TTM 2/97 112,981
<PAGE>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
$ 777,402 $ 777,402 $ 26 $ 124,541 $ 114,986 $ 123,805 TTM 2/97 $ 99,724
720,365 720,365 39 98,765 124,650 155,426 TTM 2/97 104,569
795,036 795,036 36 TTM 2/97 101,803
669,878 669,878 35 93,591 93,279 93,792 TTM 2/97 86,727
763,071 763,071 26 111,471 101,573 71,703 TTM 2/97 100,284
602,279 602,279 48 28,556 100,006 TTM 2/97 77,408
501,112 501,112 22 143,291 168,502 159,537 TTM 2/97 88,482
890,733 890,733 24 135,343 128,340 119,830 TTM 2/97 114,138
498,568 498,568 13 53,112 75,547 84,860 TTM 2/97 66,957
511,948 511,948 18 295 TTM 2/97 69,528
564,588 564,588 23 87,386 89,377 80,896 TTM 2/97 73,620
524,028 524,028 24 87,451 73,076 73,076 TTM 2/97 68,363
504,251 504,251 26 68,684 70,431 73,486 TTM 2/97 68,259
368,933 368,933 27 61,486 61,381 63,781 TTM 2/97 51,127
481,368 481,368 24 66,312 68,723 66,650 TTM 2/97 65,510
506,781 506,781 18 66,219 76,697 76,698 TTM 2/97 68,759
438,427 438,427 22 53,142 59,500 59,497 TTM 2/97 56,722
505,862 505,862 24 86,875 92,120 92,907 TTM 2/97 73,860
497,166 497,166 22 70,060 69,724 69,724 TTM 2/97 65,492
507,428 507,428 26 57,677 70,894 68,153 TTM 2/97 65,882
422,106 422,106 14 51,056 4,446 (12,666)TTM 2/97 73,369
404,261 404,261 17 32,728 48,856 38,206 TTM 2/97 53,065
403,780 403,780 13 1,794 40,066 72,125 TTM 2/97 55,771
392,586 392,586 16 60,783 56,278 56,274 TTM 2/97 53,102
447,615 447,615 18 45,906 72,235 73,107 TTM 2/97 59,471
356,983 356,983 17 48,621 50,041 50,044 TTM 2/97 46,906
354,572 354,572 15 48,028 53,862 60,958 TTM 2/97 47,046
394,863 394,863 17 77,671 56,272 42,972 TTM 2/97 52,573
331,854 331,854 30 50,946 42,800 42,800 TTM 2/97 42,287
385,937 385,937 18 57,523 56,947 73,397 TTM 2/97 51,921
374,516 374,516 17 47,806 54,391 54,390 TTM 2/97 50,297
365,241 365,241 17 49,377 55,628 55,626 TTM 2/97 50,280
302,534 302,534 16 41,818 47,697 44,132 TTM 2/97 40,020
358,002 358,002 11 87,022 112,433 112,932 TTM 2/97 90,330
261,121 261,121 36 18,264 33,682 43,348 TTM 2/97 33,998
288,498 288,498 20 39,713 43,365 40,027 TTM 2/97 37,581
363,859 363,859 20 33,450 69,149 63,390 TTM 2/97 48,696
244,729 244,729 13 33,039 37,187 37,190 TTM 2/97 33,030
259,853 259,853 9 38,889 31,597 28,332 TTM 2/97 36,270
281,031 281,031 13 42,398 41,929 41,926 TTM 2/97 38,576
239,524 239,524 28 16,777 25,260 27,543 TTM 2/97 31,106
207,401 207,401 19 26,725 28,192 28,196 TTM 2/97 27,075
193,354 193,354 11 32,844 26,573 31,758 TTM 2/97 27,486
162,335 162,335 21 19,915 23,827 23,827 TTM 2/97 21,828
155,435 155,435 9 39,693 39,072 39,072 TTM 2/97 35,303
134,276 134,276 18 20,458 18,579 19,748 TTM 2/97 19,033
162,930 162,930 7 32,239 45,056 45,056 TTM 2/97 30,054
110,734 110,734 5 23,261 31,691 22,606 TTM 2/97 26,146
163,577 163,577 5 80,504 74,123 74,123 TTM 2/97 38,427
----------- ------------ ------------ ---------- ---------- ---------- ----------
50,500,000 50,500,000 27 6,091,763 6,723,135 6,960,690 6,824,006
41,700,000 41,700,000 72,775 6,291,514 7,150,356 7,897,762 TTM 12/31/96 7,323,945
34,473,575 34,423,045 47 5,915,125 5,979,532 6,149,264 TTM 10/31/96 7,074,917
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
12,666,889 12,666,889 19,639 1,544,045 1,588,265 1,583,078 TTM 9/30/96 1,609,324
8,678,759 8,678,759 15,173 1,055,557 1,085,930 1,196,067 TTM 9/25/96 1,259,903
6,427,484 6,427,484 20,470 781,391 821,053 828,701 TTM 9/30/96 846,912
5,726,868 5,726,868 19,546 744,447 731,943 760,608 TTM 9/25/96 783,587
----------- ------------ ------------ ---------- ---------- ---------- ----------
33,500,000 33,500,000 18,366 4,125,440 4,227,191 4,368,454 4,499,726
33,000,000 32,964,627 79 2,069,437 3,941,288 4,160,168 TTM 12/31/96 4,669,489
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
19,200,000 19,200,000 38 2,486,555 2,514,922 2,384,915 TTM 12/31/96 2,512,568
12,500,000 12,500,000 44 1,628,687 1,711,994 1,955,772 TTM 12/31/96 1,792,033
----------- ------------ ------------ ---------- ---------- ---------- ----------
31,700,000 31,700,000 40 4,115,242 4,226,916 4,340,687 4,304,601
<PAGE>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
$15,884,176 $15,857,560 $ 40 $1,620,635 $1,806,581 TTM 12/31/96 $2,863,896
11,465,239 11,446,027 69 1,788,378 1,793,543 TTM 12/31/96 1,887,308
1,400,585 1,398,238 15 378,450 279,828 TTM 12/31/96 251,798
----------- ------------ ------------ ---------- ---------- ----------
28,750,000 28,701,826 44 3,787,463 3,879,952 5,003,002
28,000,000 28,000,000 139 1,728,961 TTM 12/31/96 3,249,803
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
11,900,000 11,900,000 66 $2,912,707 2,575,897 2,325,507 TTM 12/31/96 1,790,400
8,000,000 8,000,000 83 1,362,814 1,344,567 1,379,263 TTM 12/31/96 1,194,616
7,100,000 7,100,000 87 1,351,700 1,393,444 1,361,420 TTM 12/31/96 1,271,268
----------- ------------ ------------ ---------- ---------- ---------- ----------
27,000,000 27,000,000 75 5,627,221 5,313,908 5,066,190 4,256,284
25,000,000 24,971,982 41,072 2,650,453 2,798,362 3,128,516 TTM 12/31/96 3,219,783
24,375,000 24,326,512 218 2,334,399 2,885,176 3,278,009 TTM 12/31/96 3,352,220
23,000,000 23,000,000 46 3,940,852 4,056,339 4,131,299 TTM 12/31/96 3,775,966
21,845,301 21,798,649 66 3,550,084 3,745,511 3,534,086 TTM 12/31/96 3,550,330
----------- ----------
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
11,400,000 11,400,000 39,583 1,226,695 1,530,811 1,568,299 TTM 12/31/96 1,500,513
10,100,000 10,100,000 40,726 1,159,288 1,417,466 1,423,551 TTM 12/31/96 1,367,176
----------- ------------ ------------ ---------- ---------- ---------- ----------
21,500,000 21,500,000 40,112 2,385,983 2,948,277 2,991,850 2,867,689
21,000,000 21,000,000 51 2,826,109 2,765,134 2,601,411 TTM 12/31/96 2,692,929
3,450,000 3,450,000 10 504,954 516,098 612,499 TTM 12/31/96 584,140
2,880,000 2,880,000 82 433,067 439,463 436,100 TTM 12/31/96 434,793
2,255,000 2,255,000 10 383,402 390,120 428,430 TTM 12/31/96 357,039
2,000,000 2,000,000 41 275,481 YTD Ann. 12/31/96 262,123
1,875,000 1,875,000 19,531 240,836 243,747 267,802 TTM 12/31/96 263,865
1,750,000 1,750,000 33 215,128 217,479 269,706 TTM 12/31/96 257,058
1,660,000 1,660,000 58 207,882 210,480 229,673 TTM 12/31/96 241,303
1,545,000 1,545,000 70 272,835 271,942 269,532 TTM 12/31/96 238,489
1,330,000 1,330,000 108 102,097 176,066 206,104 TTM 12/31/96 194,473
1,050,000 1,050,000 37 137,098 199,093 180,835 TTM 12/31/96 180,811
475,000 475,000 73 76,438 76,914 76,299 TTM 12/31/96 71,332
----------- ------------ ------------ ---------- ---------- ---------- ----------
20,270,000 20,270,000 N/A 2,573,737 2,741,402 3,252,461 3,085,426
20,000,000 19,940,533 30,772 2,640,142 2,851,292 2,857,373 TTM 8/31/96 2,771,116
17,325,000 17,325,000 63 1,761,481 2,102,056 2,087,911 TTM 11/30/96
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
11,967,093 11,954,004 20,899 1,731,587 1,714,042 1,526,187 TTM 11/30/96 1,490,823
3,420,815 3,417,074 178 516,292 585,507 619,485 TTM 12/31/96 524,060
----------- ------------ ------------ ---------- ---------- ---------- ----------
15,387,909 15,371,078 N/A 2,247,879 2,299,549 2,145,672 2,014,883
15,000,000 14,875,834 65,532 3,893,523 4,111,381 4,144,668 TTM 10/31/96 3,982,652
14,700,000 14,636,056 58,544 2,219,100 3,413,592 2,471,363 TTM 9/30/96 2,500,846
14,664,000 14,642,002 170 1,812,150 1,939,929 1,883,081 TTM 10/31/96 1,839,022
14,066,000 14,019,336 55 2,242,329 2,284,343 2,668,504 TTM 11/30/96 2,311,839
13,670,000 13,627,151 78 1,736,497 1,957,340 2,029,886 TTM 11/30/96 1,937,684
13,500,000 13,481,513 80,247 2,078,708 2,373,430 2,559,600 TTM 11/30/96 2,261,537
12,500,000 12,482,642 81 1,133,123 1,095,179 1,509,337 TTM 12/31/96 1,672,705
12,305,000 12,278,439 45 1,630,958 1,463,092 1,560,044 TTM 11/30/96 1,710,402
11,990,000 11,909,688 38,668 1,829,139 2,237,718 2,457,301 TTM 11/30/96 2,262,123
6,640,500 6,611,944 32,571 1,262,676 1,310,137 1,409,908 TTM 10/31/96 1,364,743
5,009,500 4,987,958 26,674 1,111,419 1,076,207 1,108,535 TTM 10/31/96 992,046
----------- ------------ ------------ ---------- ---------- ---------- ----------
11,650,000 11,599,902 29,743 2,374,096 2,386,343 2,518,442 2,356,789
10,500,000 10,500,000 30,086 1,098,761 1,381,171 1,339,523 TTM 12/31/96 1,372,206
9,665,000 9,665,000 36,063 1,392,312 1,788,613 2,128,136 TTM 12/31/96 2,050,842
9,025,000 9,025,000 43 1,388,348 1,391,003 1,280,019 TTM 12/31/96 1,201,359
9,000,000 9,000,000 22 2,286,971 1,236,884 TTM 12/31/96 1,788,398
1,753,525 1,746,503 14 303,407 294,339 305,449 TTM 11/30/96 283,852
1,681,513 1,674,779 7 313,989 326,162 331,776 TTM 11/30/96 311,168
1,599,085 1,592,681 8 278,141 333,000 326,690 TTM 11/30/96 310,532
<PAGE>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
$1,106,787 $1,102,355 $ 8 $ 235,966 $ 212,474 $ 200,894 TTM 11/30/96 $ 201,025
953,632 949,812 12 167,208 164,411 165,956 TTM 11/30/96 159,197
604,236 601,816 7 132,378 132,582 132,858 TTM 11/30/96 115,407
518,395 516,319 6 197,913 188,589 180,814 TTM 11/30/96 138,810
482,826 480,892 5 127,148 140,584 159,528 TTM 11/30/96 183,602
----------- ------------ ------------ ---------- ---------- ---------- ----------
8,700,000 8,665,157 8 1,756,150 1,792,141 1,803,965 1,703,593
8,300,000 8,300,000 65 1,104,509 1,032,868 1,029,562 TTM 12/31/96 1,022,662
8,065,000 8,065,000 41 1,303,892 1,265,991 1,298,745 TTM 12/31/96 1,197,445
6,750,000 6,725,941 74,733 988,189 1,369,023 TTM 9/30/96 1,220,672
6,500,000 6,500,000 361,111 763,197 TTM 12/31/96 919,609
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
2,120,000 2,120,000 32,615 457,225 480,991 471,531 TTM 10/30/96 375,708
1,575,000 1,575,000 9,000 203,551 234,100 268,008 TTM 10/30/96 257,732
998,111 998,111 13,863 241,293 241,982 222,042 TTM 10/31/96 182,527
608,018 608,018 12,667 137,043 194,123 188,065 TTM 10/30/96 176,382
525,483 525,483 9,915 101,652 85,287 97,605 TTM 10/30/96 81,712
476,388 476,388 6,617 47,636 65,925 102,509 TTM 10/30/96 62,445
----------- ------------ ------------ ---------- ---------- ---------- ----------
6,303,000 6,303,000 12,996 1,188,399 1,302,408 1,349,759 1,136,506
6,060,000 6,060,000 63,125 820,525 1,039,661 1,351,568 TTM 12/31/96 1,003,438
6,000,000 5,991,620 96 1,083,618 1,153,834 1,249,680 4 Mo. Ann. 12/31/96 1,053,569
5,900,000 5,900,000 23,228 519,497 630,527 797,817 TTM 2/28/97 866,507
5,900,000 5,892,333 34 875,019 876,291 954,597 TTM 10/31/96 897,307
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
3,300,000 3,289,454 33,227 1,119,282 716,377 756,949 TTM 9/30/96 755,349
2,500,000 2,492,011 19,318 770,365 523,316 586,284 TTM 9/30/96 579,341
----------- ------------ ------------ ---------- ---------- ---------- ----------
5,800,000 5,781,465 25,357 1,889,647 1,239,693 1,343,233 1,334,690
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
2,886,253 2,880,881 29,100 658,307 822,393 652,213 TTM 9/30/96 628,229
2,733,747 2,728,660 29,028 472,373 627,125 585,557 TTM 9/30/96 508,172
----------- ------------ ------------ ---------- ---------- ---------- ----------
5,620,000 5,609,541 29,065 1,130,680 1,449,518 1,237,770 1,136,401
5,535,000 5,523,398 45 800,481 809,105 822,507 TTM 11/30/96 792,110
5,425,000 5,425,000 43 802,690 876,507 TTM 12/31/96 850,080
5,200,000 5,169,401 24 1,543,939 1,976,660 1,790,509 TTM 10/30/96 1,257,123
5,100,000 5,090,239 48,945 707,667 847,866 1,019,991 TTM 11/30/96 972,029
5,000,000 4,959,958 29 1,157,521 1,363,656 1,393,804 TTM 12/31/96 1,220,207
5,000,000 5,000,000 91 677,015 691,591 678,697 TTM 12/31/96 675,101
4,747,000 4,731,830 22,533 1,274,412 1,642,380 1,602,028 TTM 9/30/96 1,225,780
4,717,500 4,707,742 60 801,927 853,173 870,615 TTM 11/30/96 766,837
4,600,000 4,574,045 30,494 1,057,043 974,283 1,085,800 TTM 11/30/96 957,215
4,578,000 4,563,370 23,047 1,005,633 1,311,260 995,214 TTM 9/30/96 995,845
4,550,000 4,532,434 81 772,093 670,226 675,241 TTM 10/31/96 680,620
4,500,000 4,484,492 55 834,131 901,769 850,921 TTM 9/30/96 843,520
4,150,000 4,144,091 20,720 541,865 557,919 546,003 TTM 12/31/96 510,560
4,125,000 4,119,395 75 755,852 646,671 YTD Ann 11/30/96 609,158
4,100,000 4,092,178 20,359 588,583 945,365 987,544 TTM 11/30/96 844,393
4,075,000 4,060,002 130 346,426 553,104 654,020 TTM 9/30/96 602,751
4,000,000 4,000,000 30 949,806 938,208 898,865 TTM 12/31/96 816,675
3,955,000 3,955,000 29,081 826,610 805,077 815,477 TTM 1/31/97 831,713
3,950,000 3,941,797 46 484,891 561,773 575,977 TTM 11/30/96 600,005
3,925,000 3,925,000 49,063 612,258 693,003 705,148 TTM 11/30/96 683,181
3,800,000 3,788,821 15,528 826,231 1,518,322 1,283,898 TTM 10/31/96 1,019,897
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
3,116,000 3,116,000 69 473,788 520,121 521,692 TTM 12/31/96 439,321
684,000 684,000 122 114,064 119,407 127,831 TTM 12/31/96 109,301
----------- ------------ ------------ ---------- ---------- ---------- ----------
3,800,000 3,800,000 75 587,852 639,528 649,523 548,622
3,750,000 3,742,129 36 545,658 563,181 674,815 TTM 10/31/96 634,033
3,500,000 3,492,575 53 481,718 501,889 532,208 TTM 11/30/96 538,220
3,476,000 3,463,909 61 494,060 507,366 579,964 TTM 10/31/96 507,664
3,375,000 3,370,372 70 425,654 459,239 511,099 TTM 12/31/96 492,965
3,350,000 3,350,000 88 465,500 406,669 491,662 TTM 12/31/96 465,456
<PAGE>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
----------- ------------ ------------ ---------- ---------- ---------- ------------------- ----------
$3,000,000 $2,994,486 $24,954 $554,983 $533,801 $555,934 TTM 11/30/96 $546,058
3,000,000 2,993,860 68 348,879 456,239 482,023 TTM 11/30/96 452,472
2,980,000 2,969,460 87 368,473 493,244 517,345 TTM 11/30/96 442,985
2,922,000 2,917,946 55 322,127 454,149 528,279 TTM 12/6/96 482,215
2,900,000 2,897,637 19 302,054 484,650 539,061 TTM 10/31/96 569,448
2,850,000 2,850,000 84 535,931 543,242 600,284 TTM 12/31/96 510,610
2,800,000 2,789,524 21,458 420,958 405,871 428,779 TTM 11/30/96 443,179
2,800,000 2,800,000 82 378,360 417,032 403,201 TTM 11/30/96 393,530
2,800,000 2,797,014 11,606 335,614 370,444 385,594 TTM 12/31/96 397,783
2,712,000 2,703,333 10,813 705,086 723,854 670,605 TTM 9/30/96 622,004
2,675,000 2,666,452 26,934 590,136 648,780 576,827 TTM 9/30/96 576,977
2,500,000 2,494,904 11,497 367,792 382,349 429,972 TTM 12/31/96 432,613
2,300,000 2,295,601 15,942 454,327 499,653 575,525 TTM 11/30/96 489,327
2,223,000 2,216,600 56 339,818 340,460 402,800 TTM 9/30/96 370,815
2,200,000 2,195,603 30,494 515,420 508,738 538,052 TTM 12/31/96 428,916
2,200,000 2,193,798 16,875 352,124 339,687 371,578 TTM 9/30/96 345,638
2,175,000 2,172,731 38 218,389 224,771 391,713 TTM 12/31/96 403,012
2,150,000 2,145,565 47 276,460 296,764 291,425 TTM 11/30/96 314,123
2,100,000 2,096,068 33,808 73,336 522,865 TTM 12/31/96 351,161
1,963,000 1,959,209 19 356,433 352,560 340,552 TTM 11/30/96 320,761
1,950,000 1,947,258 14,641 54,213 207,014 275,550 TTM 11/30/96 280,358
1,939,000 1,939,000 29,379 257,019 258,144 258,996 TTM 12/31/96 262,175
1,925,000 1,921,318 11,934 437,309 480,920 500,649 TTM 11/30/96 348,034
1,900,000 1,898,835 41,279 233,381 230,750 249,170 TTM 11/30/96 234,953
1,870,000 1,870,000 45 19,307 276,850 349,484 TTM 12/31/96 313,149
1,800,000 1,792,220 14,338 225,994 250,493 258,845 TTM 11/30/96 241,763
1,777,000 1,772,762 24,622 216,973 234,336 272,586 TTM 5/31/96 241,334
1,775,000 1,771,548 13,123 306,684 289,174 305,994 TTM 11/30/96 289,526
1,700,000 1,693,967 16,940 300,279 311,528 314,200 TTM 9/30/96 248,904
1,700,000 1,696,221 44 310,073 392,184 YTD Ann. 11/30/96 331,321
1,538,000 1,538,000 32,042 114,829 139,762 187,139 TTM 2/28/97 211,858
1,500,000 1,500,000 6,944 217,396 317,053 356,620 TTM 10/30/96 306,161
1,500,000 1,493,209 24,887 194,422 211,393 278,255 TTM 11/30/96 242,308
1,500,000 1,493,949 6,791 386,446 419,964 225,414 TTM 11/30/96 314,458
1,500,000 1,500,000 18,293 96,481 207,579 425,985 TTM 11/30/96 332,761
1,430,000 1,430,000 27,500 56,528 268,207 289,826 TTM 12/31/96 254,926
1,385,000 1,382,553 9,156 180,145 183,191 181,587 TTM 11/30/96 185,014
1,350,000 1,344,554 8,456 262,514 252,136 200,329 TTM 11/30/96 259,694
1,200,000 1,200,000 19,048 390,062 481,647 519,694 TTM 12/30/96 263,907
1,200,000 1,200,000 11,429 322,310 463,306 472,235 TTM 12/31/96 364,366
1,012,000 1,010,529 8,864 111,332 139,684 183,435 TTM 11/30/96 133,449
1,000,000 996,895 9,773 200,698 146,596 183,243 TTM 11/30/96 151,985
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE
- ---------- ---------- ---------- ---------- ------------- ---- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6,414,752 $ 6,404,859 $ 7,012,817 $ 6,608,228 $3,942,900 1.40
4,260,341 4,729,718 5,122,557 5,245,734 2,533,428 1.40
5,337,787 5,322,464 5,113,002 5,260,930 2,486,120 1.40
- ---------- ---------- ---------- ---------- ------------- ----
16,012,880 16,457,041 17,248,376 17,114,892 8,962,448 1.40 6,422,303 8.485%* 01/11/2027 01/11/2007
4,737,152 5,149,508 5,249,003 5,097,663 2,476,062 1.42
4,329,968 4,394,768 4,415,133 4,331,629 2,065,531 1.42
3,197,899 3,322,468 3,573,753 3,634,556 1,960,171 1.42
1,940,021 2,054,547 2,115,423 1,791,700 1,180,106 1.42
1,484,669 1,763,835 1,497,638 1,694,891 704,687 1.42
702,281 837,554 655,347 766,089 282,981 1.42
- ---------- ---------- ---------- ---------- ------------- ----
16,391,990 17,522,680 17,506,297 17,316,528 8,669,538 1.42 6,095,785 8.035%* 02/11/2027 02/11/2007
15,790,754 16,432,370 16,720,960 14,920,353 8,203,972 1.31 6,240,615 8.700%* 03/11/2027 03/11/2007
4,030,471 3,990,166 1.23
4,027,029 3,986,759 1.23
---------- ------------- ----
8,057,500 7,976,925 1.23 6,504,564 9.2975%* 03/11/2022 04/11/2017
8,325,381 8,395,800 8,233,241 7,900,763 5,278,174 1.69
5,296,738 5,345,605 5,278,613 5,330,578 3,869,254 1.69
- ---------- ---------- ---------- ---------- ------------- ----
13,622,119 13,741,405 13,511,854 13,231,341 9,147,428 1.69 5,409,317 7.981%* 03/11/2022 03/11/2004
4,451,309 4,593,095 4,609,388 4,534,388 999,310 1.50
2,102,018 2,348,475 2,819,894 2,655,245 1,064,939 1.50
2,548,600 2,627,963 2,570,016 2,437,316 610,867 1.50
954,828 1,772,505 2,007,933 1,958,938 774,120 1.50
1,120,262 1,736,628 1,824,306 1,804,122 647,642 1.50
1,006,968 1,651,774 1,713,391 1,618,452 538,304 1.50
668,443 1,484,525 1,827,771 1,735,530 569,539 1.50
746,657 1,427,250 1,651,464 1,593,041 484,851 1.50
858,485 1,463,686 1,570,493 1,510,499 473,882 1.50
1,390,072 1,550,208 1,536,541 1,479,074 440,614 1.50
1,241,284 1,364,392 1,449,397 1,449,397 516,768 1.50
734,447 1,291,925 1,437,880 1,437,880 347,245 1.50
1,161,704 1,163,959 1,302,010 1,302,010 313,990 1.50
1,332,803 1,361,122 1,321,665 1,314,506 347,230 1.50
842,697 1,292,185 1,161,927 1,161,927 260,722 1.50
751,519 777,272 806,576 780,079 214,317 1.50
- ---------- ---------- ---------- ---------- ------------- ----
21,912,096 27,906,964 29,610,652 28,772,404 8,604,339 1.50 5,727,089 9.190%* 12/11/2021 12/11/2008
13,329,069 13,565,335 13,714,304 13,809,463 6,988,912 1.34 5,214,642 8.250%* 10/11/2016 03/11/2013
468,853 410,442 410,519 340,992 300,311 1.24
250,166 290,271 268,514 252,478 227,064 1.24
250,676 234,284 217,051 1.24
276,973 257,950 259,698 236,998 216,897 1.24
245,000 245,000 245,068 220,827 193,469 1.24
183,941 269,346 269,346 243,067 202,676 1.24
255,928 229,894 215,654 206,029 170,499 1.24
282,520 260,948 260,948 238,086 202,919 1.24
225,101 202,406 229,939 173,138 154,110 1.24
277,526 259,641 246,958 142,306 1.24
232,738 211,741 207,754 196,575 143,166 1.24
239,763 198,510 185,551 175,430 144,702 1.24
159,838 161,170 161,170 153,178 138,199 1.24
212,712 226,945 226,708 208,433 131,528 1.24
145,750 145,867 145,867 138,659 125,775 1.24
199,290 160,704 160,694 147,875 124,588 1.24
125,221 115,018 172,047 164,352 123,875 1.24
277,207 235,429 211,165 200,665 138,623 1.24
181,462 211,545 217,761 203,754 113,139 1.24
200,174 214,466 217,748 201,772 131,313 1.24
169,626 196,851 190,476 146,398 85,158 1.24
127,398 77,197 132,441 126,362 71,663 1.24
202,183 161,218 161,218 152,582 103,814 1.24
<PAGE>
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE
- ---------- ---------- ---------- ---------- ------------- ---- --------- -------- ---------- -----------
126,310 116,202 107,146 101,853 92,294 1.24
145,392 138,809 141,800 118,571 85,522 1.24
146,346 139,198 94,387 1.24
95,110 94,599 95,110 88,151 79,528 1.24
231,291 183,073 198,033 182,564 90,592 1.24
75,002 75,002 100,054 77,769 71,503 1.24
212,842 203,856 136,305 124,604 59,492 1.24
167,603 163,029 158,062 149,907 105,748 1.24
103,390 77,435 77,579 69,687 59,190 1.24
155,000 154,888 147,144 60,779 1.24
118,566 111,977 102,941 96,656 67,028 1.24
142,624 112,347 126,958 121,979 62,213 1.24
82,602 71,237 82,151 69,676 59,865 1.24
65,417 64,655 67,738 55,091 43,800 1.24
87,045 69,558 70,434 66,956 57,148 1.24
157,887 160,272 160,254 152,449 60,165 1.24
67,285 60,307 61,142 58,127 52,050 1.24
123,089 117,704 117,873 100,125 60,056 1.24
122,546 118,424 124,989 119,890 59,024 1.24
83,005 95,838 96,181 91,455 60,242 1.24
120,093 51,268 102,536 74,217 50,113 1.24
51,561 66,010 73,600 70,903 47,994 1.24
129,063 146,521 126,444 120,853 47,937 1.24
121,599 100,637 100,637 93,189 46,608 1.24
95,902 100,857 93,484 88,864 53,141 1.24
58,680 58,813 59,404 56,904 42,381 1.24
60,743 60,748 56,976 54,464 42,095 1.24
128,787 81,123 82,135 78,145 46,878 1.24
68,558 43,609 45,623 43,444 39,398 1.24
100,013 99,164 99,164 94,229 45,819 1.24
104,364 90,161 110,685 106,180 44,463 1.24
90,087 96,041 97,249 91,626 43,362 1.24
50,867 54,958 51,417 49,281 35,917 1.24
182,967 162,282 194,562 187,306 42,502 1.24
22,661 38,208 40,550 38,750 31,000 1.24
40,593 43,970 40,640 38,640 34,251 1.24
73,359 90,571 75,652 70,698 43,198 1.24
43,803 44,000 47,282 43,090 29,054 1.24
39,682 42,947 39,054 37,101 30,850 1.24
86,162 70,816 71,670 68,134 33,364 1.24
41,382 48,439 48,269 45,875 28,436 1.24
32,772 34,341 35,506 34,064 24,623 1.24
57,330 53,323 57,853 54,675 22,955 1.24
21,831 25,639 26,072 24,137 19,272 1.24
49,621 50,052 50,920 46,816 18,453 1.24
26,937 18,888 20,606 19,575 15,941 1.24
108,097 87,211 83,461 72,934 19,343 1.24
110,269 109,997 109,997 104,546 13,146 1.24
209,972 194,913 194,574 159,413 19,420 1.24
- ---------- ---------- ---------- ---------- ------------- ----
9,196,605 9,115,272 9,622,609 8,808,797 5,995,385 1.24 4,847,098 8.660%* 03/11/2027 03/11/2012
23,325,514 25,497,225 25,575,859 25,091,637 6,069,363 1.42 4,272,911 9.214%* 03/11/2022 03/11/2009
12,448,100 12,648,534 13,032,870 14,176,658 5,696,922 1.73 3,284,959 8.325%* 01/11/2022 01/11/2007
2,984,702 2,982,193 3,028,893 3,040,269 1,577,074 1.46
1,873,051 1,936,182 2,086,910 2,144,362 1,231,303 1.46
1,311,612 1,354,589 1,360,062 1,391,438 831,212 1.46
1,156,136 1,189,270 1,226,722 1,272,317 768,937 1.46
- ---------- ---------- ---------- ---------- ------------- ----
7,325,501 7,462,234 7,702,587 7,848,386 4,408,526 1.46 3,017,266 8.240%* 04/11/2027 04/11/2007
3,003,168 4,917,191 5,027,218 5,536,538 3,896,063 1.27 3,070,191 8.590%* 02/11/2027 02/11/2007
3,847,163 3,925,918 3,766,166 3,899,100 2,292,714 1.32
2,531,525 2,735,633 3,006,320 2,839,829 1,627,922 1.32
- ---------- ---------- ---------- ---------- ------------- ----
6,378,688 6,661,551 6,772,486 6,738,929 3,920,636 1.32 2,981,374 8.708%* 03/11/2027 03/11/2009
<PAGE>
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE
- ---------- ---------- ---------- ---------- ------------- ---- --------- -------- ---------- -----------
2,443,620 2,698,884 4,128,373 2,667,562 1.91
2,410,648 2,502,709 2,527,438 1,764,570 1.91
473,917 393,116 360,630 200,465 1.91
---------- ---------- ---------- ------------- ----
5,328,185 5,594,709 7,016,441 4,632,597 1.91 2,430,033 7.575%* 01/11/2027 01/11/2007
2,321,441 4,117,238 3,126,553 1.24 2,527,091 8.262%* 03/11/2027 03/11/2007
3,805,886 3,526,875 3,235,685 2,779,423 1,632,730 1.51
1,886,032 1,954,908 1,936,212 1,818,681 1,075,297 1.51
1,877,395 1,991,745 1,940,087 1,918,277 1,177,316 1.51
---------- ---------- ---------- ---------- ------------- ----
7,569,313 7,473,928 7,111,982 6,516,381 3,885,343 1.51 2,576,266 8.350%* 03/11/2022 06/11/2007
4,379,913 4,607,536 4,864,168 5,020,231 3,042,855 1.39 2,187,715 7.935%* 02/11/2027 02/11/2007
3,887,751 4,626,721 5,118,851 5,149,579 3,231,686 1.31 2,459,464 9.050%* 04/11/2022 01/11/2012
5,619,648 5,763,122 5,722,721 5,645,883 3,136,126 1.35 2,319,963 9.020%* 03/11/2022 03/11/2007
6,168,449 6,197,373 6,206,977 6,237,617 3,013,893 1.41 2,137,415 8.650%* 01/11/2022 01/11/2007
1,848,263 1,996,917 2,087,318 2,130,160 1,428,513 1.43
1,723,325 1,830,012 1,897,761 1,950,391 1,305,176 1.43
- ---------- ---------- ---------- ---------- ------------- ----
3,571,588 3,826,929 3,985,079 4,080,551 2,733,689 1.43 1,907,521 8.080%* 03/11/2027 03/11/2007
4,895,143 4,825,459 4,643,395 4,742,083 2,469,772 1.22 2,022,212 8.970%* 04/11/2027 04/11/2012
842,471 887,056 902,757 429,099 1.31
653,208 664,154 692,456 691,083 393,913 1.31
573,251 571,081 591,965 521,319 284,754 1.31
284,000 270,230 240,469 1.31
424,505 446,375 466,718 476,292 239,865 1.31
342,332 324,155 389,348 376,035 221,196 1.31
243,960 257,631 266,660 278,649 217,965 1.31
411,197 414,631 431,284 410,804 212,056 1.31
142,600 254,150 290,564 276,623 180,192 1.31
288,911 367,184 361,638 361,613 151,199 1.31
115,798 116,314 117,475 112,248 63,965 1.31
- ---------- ---------- ---------- ---------- ------------- ----
3,195,762 4,258,146 4,779,164 4,677,653 2,634,673 1.31 2,013,020 8.830%* 03/11/2022 03/11/2007
4,185,419 4,328,701 4,372,249 4,446,669 2,609,116 1.39 1,872,675 8.660% 10/11/2026 10/11/2006
2,423,907 2,787,276 2,840,931 2,822,772 2,007,184 1.26 1,592,681 8.460%* 03/11/2027 03/11/2009
3,053,680 3,129,248 2,955,240 2,912,537 1,347,823 1.33
766,159 843,806 862,177 784,301 498,563 1.33
- ---------- ---------- ---------- ---------- ------------- ----
3,819,839 3,973,054 3,817,417 3,696,838 1,846,386 1.33 1,391,147 8.280%* 02/11/2027 02/11/2007
10,695,119 11,142,213 11,011,092 10,437,111 3,202,733 1.80 1,782,040 8.590%* 12/11/2011
11,532,536 13,604,018 14,338,462 14,445,392 2,438,346 1.50 1,621,310 9.300%* 12/11/2016 12/11/2011
2,297,040 2,443,025 2,437,464 2,400,029 1,749,446 1.32 1,325,702 8.280%* 01/11/2027 01/11/2009
3,597,386 3,689,874 3,774,091 3,611,363 2,016,656 1.35 1,499,181 8.820%* 01/11/2017 01/11/2004
2,169,685 2,409,270 2,593,855 2,462,376 1,838,495 1.40 1,312,581 8.670%* 11/11/2023 11/11/2006
4,285,498 4,744,744 5,111,975 4,751,847 2,023,945 1.46 1,387,339 9.250%* 02/11/2022 02/11/2012
1,660,237 1,695,375 2,090,635 2,332,595 1,531,551 1.29 1,183,802 8.785%* 01/11/2027 01/11/2007
2,111,101 2,072,774 2,244,152 2,364,932 1,575,724 1.32 1,195,972 8.570%* 01/11/2022 01/11/2007
5,086,777 5,778,198 6,077,040 5,865,212 1,968,862 1.45 1,357,163 9.670%* 10/11/2016 10/11/2011
4,783,716 4,697,833 4,646,338 4,646,338 1,132,426 1.48
4,080,891 4,011,806 4,089,219 4,089,219 787,585 1.48
- ---------- ---------- ---------- ---------- ------------- ----
8,864,607 8,709,639 8,735,557 8,735,557 1,920,011 1.48 1,293,094 9.390%* 12/11/2016 12/11/2011
2,545,465 2,570,625 2,591,736 2,620,472 1,271,350 1.28 993,447 8.250%* 03/11/2022 03/11/2007
7,413,368 7,721,936 8,060,498 8,060,498 1,647,817 1.56 1,055,226 9.580%* 04/11/2019 04/11/2007
2,096,577 2,124,536 2,032,871 1,995,716 1,089,076 1.35 808,298 8.180%* 04/11/2027 04/11/2007
6,659,027 6,488,481 5,355,932 5,949,357 1,409,196 1.57 895,264 8.850%* 04/11/2022 04/11/2007
370,785 358,301 368,119 353,535 207,771 1.49
434,138 436,529 438,460 429,318 224,080 1.49
369,684 409,546 405,509 397,169 221,590 1.49
<PAGE>
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE
- ---------- ---------- ---------- ---------- ------------- ---- --------- -------- ---------- -----------
326,386 302,589 294,915 301,183 142,805 1.49
205,424 209,612 211,423 205,021 135,859 1.49
171,483 169,542 170,068 158,475 82,659 1.49
277,622 248,694 234,354 213,377 97,686 1.49
332,915 315,238 333,835 363,516 135,670 1.49
- ---------- ---------- ---------- ---------- ------------- ----
2,488,437 2,450,051 2,456,683 2,421,594 1,248,120 1.49 1,106,689 8.480%* 02/11/2022 02/11/2010
1,288,118 1,212,645 1,210,537 1,231,047 940,229 1.23 762,311 8.450%* 04/11/2027 04/11/2007
1,949,123 1,739,065 1,778,919 1,728,110 1,070,887 1.27 842,945 8.550%* 04/11/2017 04/11/2012
5,922,477 6,430,931 6,509,722 1,198,172 1.63 733,765 9.960%* 10/11/2021 10/11/2011
959,704 1,295,352 910,609 1.49 611,867 8.190% 03/11/2022 03/11/2007
880,270 907,239 919,238 839,297 333,743 1.41
956,555 1,209,292 1,213,295 1,210,130 197,225 1.41
593,383 609,767 638,828 602,681 152,393 1.41
436,997 504,756 505,516 503,494 151,207 1.41
357,729 366,408 381,815 366,364 63,394 1.41
369,762 385,674 442,803 383,676 43,261 1.41
- ---------- ---------- ---------- ---------- ------------- ----
3,594,696 3,983,136 4,101,495 3,905,642 941,223 1.41 712,948 9.660%* 03/11/2022 03/11/2012
2,394,036 2,648,048 3,129,396 2,648,048 871,036 1.45 602,316 8.840%* 04/11/2022 04/11/2012
1,462,493 1,447,313 1,447,308 1,447,312 822,583 1.37 601,758 8.950%* 02/11/2022 02/11/2012
1,075,143 1,213,793 1,519,755 1,602,791 803,007 1.38 581,116 8.730%* 03/11/2022 03/11/2007
1,186,483 1,164,546 1,256,018 1,228,671 756,843 1.30 581,428 9.230%* 01/11/2027 01/11/2012
4,244,568 3,988,954 4,010,962 4,010,962 725,649 1.82
4,208,715 4,747,298 5,336,412 5,336,412 540,641 1.82
- ---------- ---------- ---------- ---------- ------------- ----
8,453,283 8,736,252 9,347,374 9,347,374 1,266,290 1.82 694,137 8.714%* 02/11/2012
3,016,339 3,038,686 3,144,790 3,144,790 603,479 1.66
2,562,355 2,891,895 3,070,188 3,070,188 484,672 1.66
- ---------- ---------- ---------- ---------- ------------- ----
5,578,694 5,930,581 6,214,978 6,214,978 1,088,151 1.66 655,285 10.100%* 02/11/2017 02/11/2012
984,936 982,282 1,008,335 988,108 762,755 1.39 547,874 8.790%* 01/11/2022 01/11/2007
1,206,694 1,287,308 1,260,194 724,085 1.36 532,123 8.680%* 03/11/2022 03/11/2007
3,462,277 3,897,664 3,789,231 3,194,371 902,477 1.49 606,457 8.280%* 01/11/2012 01/11/2004
2,340,558 2,503,529 2,534,306 2,514,541 846,302 1.47 576,472 9.650%* 02/11/2017 02/11/2012
1,405,600 1,677,193 1,727,170 1,654,300 1,031,245 1.97 523,736 8.580% 10/11/2016 10/11/2011
913,006 918,920 906,303 905,226 617,768 1.27 487,592 8.610%* 04/11/2022 04/11/2012
6,141,833 6,617,279 6,632,911 1,162,780 2.05 568,116 8.714%* 02/11/2012
996,660 1,056,625 1,108,327 1,021,227 671,165 1.43 470,812 8.890%* 01/11/2022 01/11/2007
3,484,152 3,505,124 3,821,031 3,626,246 775,903 1.50 516,340 9.550%* 11/11/2016 11/11/2011
6,170,614 6,926,860 7,050,936 936,445 1.71 547,890 8.714%* 02/11/2012
1,148,456 1,036,450 1,067,872 1,084,151 597,708 1.35 442,601 8.580%* 11/11/2021 11/11/2003
1,378,724 1,493,333 1,406,024 1,408,821 747,494 1.60 467,600 8.470%* 01/11/2017 01/11/2007
656,753 693,257 719,927 500,560 1.29 387,162 8.620%* 01/11/2027 01/11/2004
1,340,709 1,141,873 1,125,490 501,160 1.27 395,798 8.930%* 01/11/2027 01/11/2007
3,066,305 3,730,405 3,816,678 3,816,678 653,559 1.41 465,053 9.700%* 02/11/2017 02/11/2012
647,522 765,015 873,821 815,898 554,722 1.37 406,023 8.870%* 11/11/2021 11/11/2006
1,248,883 1,234,753 1,219,336 1,155,403 682,914 1.68 406,284 8.160%* 04/11/2017 04/11/2012
2,836,093 2,853,968 2,843,320 2,861,320 688,647 1.55 445,493 9.600%* 03/11/2017 03/11/2012
791,456 887,591 924,904 936,799 539,408 1.37 393,245 8.860%* 01/11/2022 01/11/2007
1,738,827 1,791,918 1,873,882 1,808,956 592,733 1.46 404,657 9.290%* 03/11/2022 03/11/2012
1,997,429 2,974,866 2,739,189 2,484,871 895,653 2.05 437,937 9.930%* 01/11/2017 01/11/2012
762,860 798,241 783,803 717,109 393,993 1.29
161,942 171,275 179,166 161,869 99,391 1.29
- ---------- ---------- ---------- ---------- ------------- ----
924,802 969,516 962,969 878,978 493,384 1.29 382,361 8.990%* 03/11/2022 03/11/2007
1,233,252 1,288,381 1,354,693 1,340,624 472,947 1.28 370,882 8.780%* 01/11/2007
883,911 904,279 914,816 953,105 430,187 1.25 343,875 8.700%* 01/11/2022 01/11/2007
631,907 649,091 727,504 690,435 438,786 1.23 356,063 9.210%* 11/11/2021 11/11/2006
592,000 630,553 688,291 671,580 440,806 1.27 346,276 9.230%* 02/11/2022 02/11/2007
591,913 542,320 619,744 607,611 420,948 1.25 336,807 8.980%* 03/11/2022 03/11/2007
<PAGE>
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE
- ---------- ---------- ---------- ---------- ------------- ---- --------- -------- ---------- -----------
1,559,416 1,589,632 1,638,104 1,599,718 466,037 1.45 321,818 9.790%* 01/11/2022 01/11/2012
436,689 615,424 638,217 613,990 396,719 1.32 301,371 8.970%* 01/11/2022 01/11/2007
481,108 589,376 632,767 575,963 405,156 1.34 302,795 9.110%* 11/11/2021 11/11/2006
690,573 807,211 882,112 867,226 396,672 1.34 295,457 9.050%* 02/11/2022 02/11/2007
603,968 754,232 824,818 828,792 420,633 1.38 305,015 9.540% 02/11/2022 02/11/2007
710,668 726,565 715,635 682,005 466,964 1.65 282,336 8.800%* 03/11/2022 03/11/2007
756,785 754,123 780,774 799,520 404,049 1.46 276,925 8.780% 11/11/2021 11/11/2011
605,395 619,933 581,936 573,071 359,797 1.29 279,673 8.900%* 04/11/2022 04/11/2004
484,177 524,606 569,148 391,758 1.49 262,414 8.670%* 02/11/2027 02/11/2007
2,144,298 2,175,920 2,086,611 547,004 1.69 324,569 8.714%* 02/11/2012
2,939,373 3,352,091 3,438,203 547,277 1.71 320,141 8.714%* 02/11/2012
672,035 692,518 764,325 421,763 1.68 251,759 9.000%* 01/11/2022 01/11/2007
1,645,067 1,868,904 1,827,190 1,782,844 400,185 1.54 260,159 9.660%* 02/11/2017 02/11/2012
475,662 465,762 526,039 507,365 329,292 1.52 216,423 8.590%* 12/11/2021 12/11/2006
1,800,557 1,977,944 2,054,224 410,916 1.73 237,358 8.990%* 02/11/2017 02/11/2007
522,394 548,312 569,572 577,440 313,138 1.45 216,687 8.730% 12/11/2021 12/11/2006
507,514 481,279 648,421 674,150 306,281 1.45 210,946 9.050%* 02/11/2027 02/11/2007
375,097 396,373 400,800 428,437 272,222 1.27 214,925 8.910%* 01/11/2007
145,977 874,520 856,581 393,990 1.62 243,185 10.000%* 02/11/2017 02/11/2012
454,793 450,395 436,584 417,516 257,128 1.26 204,336 9.410%* 01/11/2022 01/11/2007
341,100 635,493 706,197 718,811 247,108 1.27 193,974 8.850%* 02/11/2007
417,799 445,715 452,208 465,211 240,197 1.25 192,087 8.800%* 03/11/2007
872,194 930,287 971,757 971,757 396,622 1.82 217,742 9.660%* 02/11/2017 02/11/2012
399,943 406,488 419,034 414,857 222,741 1.28 174,344 8.440% 02/11/2027 02/11/2007
341,061 436,496 498,640 475,752 258,165 1.34 192,172 9.250%* 03/11/2022 03/11/2012
315,915 328,898 346,183 238,638 1.29 185,426 9.280% 10/11/2006
417,763 411,361 423,127 423,986 223,334 1.35 165,932 8.630% 11/11/2026 11/11/2006
564,103 551,838 600,713 608,284 254,801 1.60 159,122 8.190%* 12/11/2026 12/11/2006
497,845 501,595 512,000 481,407 221,943 1.29 172,595 9.100% 11/11/2021 11/11/2006
514,376 556,784 598,076 574,846 258,217 1.59 162,209 8.350%* 01/11/2022 01/11/2007
284,376 292,058 376,689 394,638 196,444 1.31 150,483 8.650%* 03/11/2022 03/11/2007
489,050 576,330 605,471 295,361 2.05 143,972 8.420%* 03/11/2007
315,317 351,913 391,497 399,761 225,380 1.49 151,055 9.000% 10/11/2006
747,029 798,496 797,718 817,068 259,458 1.82 142,764 8.320% 11/11/2006
742,278 964,919 1,309,936 1,235,753 270,973 1.65 164,506 9.220%* 03/11/2017 03/11/2007
104,906 616,509 651,354 651,354 222,358 1.39 160,290 9.530%* 03/11/2017 03/11/2012
277,627 279,695 282,022 181,239 1.29 140,386 9.080% 01/11/2022 01/11/2007
521,658 568,338 596,720 591,280 219,944 1.71 128,488 8.320% 11/11/2006
762,811 878,411 884,460 695,921 229,111 1.66 137,915 9.890%* 03/11/2017 03/11/2012
1,504,352 1,596,368 1,528,092 1,466,035 291,064 2.20 132,352 9.300%* 03/11/2017 03/11/2012
209,823 254,522 279,467 127,749 1.32 96,807 8.380%* 02/11/2022 02/11/2007
292,239 269,390 308,746 148,925 1.34 111,308 9.430%* 01/11/2017 01/11/2012
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BALLOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REMAINING REPAYMENT BUILT/ UNIT OF
LOCKOUT LOCKBOX TERM VALUE LTV DATE LTV AMORTIZATION RENOVATED UNIT MEASURE
--------- ------- ----------- ----------- --- ----------- ------------ -------------- --------- -------
<S> <C>
$41,800,000 71% 64% 1930/1980/1985 238,648 sf
29,000,000 71% 64% 1895/1979 310,887 sf
27,700,000 71% 64% 1900/1980 221,360 sf
--------- ----------- --- ----------- ---------
117 YES 118 98,500,000 71% 64% 360 770,895
35,600,000 56% 50% 1970/1986 238,911 sf
32,800,000 56% 50% 1986 217,500 sf
25,400,000 56% 50% 1987 162,300 sf
12,200,000 56% 50% 1970/1982 82,000 sf
11,300,000 56% 50% 1982 88,400 sf
5,100,000 56% 50% 1984 48,068 sf
--------- ----------- --- ----------- ---------
118 YES 119 122,400,000 56% 50% 360 837,179
115 Yes 120 104,000,000 63% 57% 356 1989 384,759 sf
36,650,000 86% 41% 1994 1,278,600 sf
36,600,000 86% 41% 1992 1,546,575 sf
--------- ----------- --- ----------- ---------
240 YES 241 73,250,000 86% 41% 299 2,825,175
61,000,000 57% 51% 1986/1992 516,538 sf
42,200,000 57% 51% 1988/1993 480,092 sf
--------- ----------- --- ----------- ---------
80 YES 84 103,200,000 57% 51% 300 996,630
10,700,000 62% 49% 1948/1960/1995 70 rooms
8,700,000 62% 49% 1985/1988/1996 150 rooms
7,900,000 62% 49% 1987 108 rooms
6,400,000 62% 49% 1987/1994 124 rooms
6,200,000 62% 49% 1986/1994 125 rooms
6,100,000 62% 49% 1985/1994 120 rooms
5,100,000 62% 49% 1988/1994 129 rooms
5,500,000 62% 49% 1985/1994 119 rooms
5,100,000 62% 49% 1986/1994 96 rooms
5,000,000 62% 49% 1985 101 rooms
4,700,000 62% 49% 1984/1995 149 rooms
4,500,000 62% 49% 1985/1994 118 rooms
4,700,000 62% 49% 1989/1995 132 rooms
3,800,000 62% 49% 1987 83 rooms
4,100,000 62% 49% 1982/1994 122 rooms
2,200,000 62% 49% 1984 65 rooms
--------- ----------- --- ----------- ---------
140 YES 141 90,700,000 62% 49% 300 1,811
191 Yes 192 70,000,000 72% 25% 240 1962/1968/1996 846 units
3,161,168 80% 60% 1971 36,644 sf
2,390,143 80% 60% 1974 50,678 sf
2,284,749 80% 60% 1981 35,000 sf
2,283,127 80% 60% 1977 36,850 sf
2,036,511 80% 60% 1981 33,207 sf
2,133,435 80% 60% 1982 43,046 sf
1,794,724 80% 60% 1963 38,500 sf
2,135,992 80% 60% 1966 21,650 sf
1,622,210 80% 60% 1985 30,375 sf
1,497,961 80% 60% 1965 50,437 sf
1,507,015 80% 60% 1976 26,640 sf
1,523,179 80% 60% 1982 52,066 sf
1,454,727 80% 60% 1990 22,936 sf
1,384,508 80% 60% 1976 30,666 sf
1,323,945 80% 60% 1981 38,439 sf
1,311,451 80% 60% 1978 38,526 sf
1,303,945 80% 60% 1969 22,125 sf
1,459,190 80% 60% 1976 23,313 sf
1,190,940 80% 60% 1983 86,091 sf
1,382,239 80% 60% 1973 21,393 sf
896,403 80% 60% 1979 44,785 sf
754,351 80% 60% 1982 34,739 sf
1,092,776 80% 60% 1976 30,885 sf
<PAGE>
BALLOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REMAINING REPAYMENT BUILT/ UNIT OF
LOCKOUT LOCKBOX TERM VALUE LTV DATE LTV AMORTIZATION RENOVATED UNIT MEASURE
--------- ------- ----------- ----------- --- ----------- ------------ -------------- --------- -------
$ 971,511 80% 60% 1984 29,418 sf
900,233 80% 60% 1960 18,392 sf
993,548 80% 60% 1970 22,279 sf
837,140 80% 60% 1960 19,022 sf
953,603 80% 60% 1971 29,038 sf
752,662 80% 60% 1951 12,460 sf
626,235 80% 60% 1970 22,536 sf
1,113,141 80% 60% 1964 36,516 sf
623,055 80% 60% 1983 38,168 sf
639,776 80% 60% 1980 28,897 sf
705,560 80% 60% 1973 24,835 sf
654,873 80% 60% 1969 22,080 sf
630,158 80% 60% 1965 19,340 sf
461,052 80% 60% 1961 13,558 sf
601,561 80% 60% 1967 20,223 sf
633,319 80% 60% 1974 27,630 sf
547,898 80% 60% 1965 19,684 sf
632,171 80% 60% 1971 20,880 sf
621,303 80% 60% 1973 22,366 sf
634,128 80% 60% 1975 19,643 sf
527,502 80% 60% 1974 29,296 sf
505,201 80% 60% 1974 23,556 sf
504,599 80% 60% 1977 30,978 sf
490,611 80% 60% 1974 24,880 sf
559,380 80% 60% 1971 24,641 sf
446,118 80% 60% 1966 20,663 sf
443,105 80% 60% 1969 23,463 sf
493,457 80% 60% 1973 22,800 sf
414,714 80% 60% 1964 10,978 sf
482,301 80% 60% 1972 21,929 sf
468,028 80% 60% 1978 21,780 sf
456,438 80% 60% 1973 21,527 sf
378,074 80% 60% 1963 19,240 sf
447,392 80% 60% 1970 33,514 sf
326,321 80% 60% 1960 7,304 sf
360,534 80% 60% 1974 14,600 sf
454,711 80% 60% 1969 18,382 sf
305,836 80% 60% 1960 18,539 sf
324,735 80% 60% 1965 28,716 sf
351,202 80% 60% 1973 21,304 sf
299,331 80% 60% 1951 8,704 sf
259,187 80% 60% 1975 10,873 sf
241,633 80% 60% 1971 16,971 sf
202,868 80% 60% 1959 7,918 sf
194,245 80% 60% 1957 18,068 sf
167,803 80% 60% 1961 7,493 sf
203,613 80% 60% 1971 22,878 sf
138,383 80% 60% 1972 22,150 sf
204,421 80% 60% 1983 36,062 sf
- ---------- --------- ----------- --- ----------- ---------
179 YES 180 63,109,359 80% 60% 328 1,905,163
143 Yes 144 68,000,000 61% 49% 300 1989/1997 573 rooms
117 Yes 118 53,650,000 64% 53% 299 1972/1993 738,201 sf
20,500,000 63% 57% 1970 645 pads
13,750,000 63% 57% 1972/1983 572 pads
9,900,000 63% 57% 1972 314 pads
9,050,000 63% 57% 1972 293 pads
--------- ----------- --- ----------- ---------
117 YES 121 53,200,000 63% 57% 360 1,824
115 Yes 119 54,000,000 61% 55% 360 1985/1990 417,532 sf
27,600,000 68% 60% 1974 504,550 sf
19,200,000 68% 60% 1982/1989 283,921 sf
--------- ----------- --- ----------- ---------
143 YES 144 46,800,000 68% 60% 360 788,471
<PAGE>
BALLOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REMAINING REPAYMENT BUILT/ UNIT OF
LOCKOUT LOCKBOX TERM VALUE LTV DATE LTV AMORTIZATION RENOVATED UNIT MEASURE
--------- ------- ----------- ----------- --- ----------- ------------ -------------- --------- -------
$33,900,000 48% 43% 1960/1996 392,443 sf
21,000,000 48% 43% 1988 164,909 sf
4,500,000 48% 43% 1968/1986 92,988 sf
--------- ----------- --- ----------- ---------
114 Yes 118 59,400,000 48% 43% 360 650,340
119 Yes 120 36,500,000 77% 69% 360 1996 202,104 sf
18,700,000 61% 51% 1991/1992 179,125 sf
13,000,000 61% 51% 1993 96,895 sf
12,300,000 61% 51% 1992 82,062 sf
--------- ----------- --- ----------- ---------
119 Yes 123 44,000,000 61% 51% 300 358,082
118 Yes 119 33,690,000 74% 66% 360 1972 608 units
177 Yes 178 36,900,000 66% 47% 303 1987 111,824 sf
119 Yes 120 35,600,000 65% 55% 300 1967/1989 502,023 sf
117 Yes 118 30,000,000 73% 61% 300 1970 328,078 sf
14,900,000 75% 67% 1986 288 units
13,800,000 75% 67% 1986 248 units
--------- ----------- --- ----------- ---------
119 YES 120 28,700,000 75% 67% 360 536
180 Yes 181 28,800,000 73% 61% 360 1991 415,713 sf
4,600,000 65% 55% 1907/1988 347,022 sf
5,000,000 65% 55% 1989 35,000 sf
3,200,000 65% 55% 1928/1985 221,241 sf
2,930,000 65% 55% 1996 48,858 sf
2,500,000 65% 55% 1969/1986 96 units
3,080,000 65% 55% 1989 52,616 sf
2,500,000 65% 55% 1991/1994 28,600 sf
2,500,000 65% 55% 1990 22,206 sf
2,150,000 65% 55% 1993 12,365 sf
2,000,000 65% 55% 1928/1988 28,363 sf
720,000 65% 55% 1992 6,512 sf
--------- ----------- --- ----------- ---------
113 YES 120 31,180,000 65% 55% 300 N/A
111 115 25,250,000 79% 70% 360 1970/1994 648 units
142 Yes 144 23,750,000 73% 64% 360 1989 273,555 sf
16,000,000 72% 65% 1984/1985 572 units
5,350,000 72% 65% 1912/1987 19,243
--------- ----------- --- ----------- ---------
115 YES 119 21,350,000 72% 65% 360 N/A
173 177 30,000,000 50% 1% 180 1974/1985 227 rooms
173 Yes 177 21,000,000 70% 33% 240 1989 250 beds
138 142 21,300,000 69% 60% 360 1992 86,290 sf
75 Yes 82 20,700,000 68% 57% 240 1974 256,513 sf
112 Yes 116 19,300,000 71% 62% 324 1989/1994 175,733 sf
175 Yes 179 20,000,000 67% 48% 300 1988/1995 168 rooms
114 Yes 118 16,000,000 78% 71% 360 1982 153,523 sf
114 Yes 118 17,000,000 72% 61% 300 1966/1996 271,134 sf
171 Yes 175 16,300,000 73% 36% 240 1972/1985/1994 308 rooms
12,000,000 54% 26% 1967/1987 203 rooms
9,300,000 54% 26% 1967/1971/1990 187 rooms
--------- ----------- --- ----------- ---------
173 YES 177 21,300,000 54% 26% 240 390
113 120 14,000,000 75% 62% 300 1963/1987 349 units
114 121 13,400,000 72% 58% 264 1971/1986 268 rooms
117 Yes 121 12,200,000 74% 66% 360 1968/1990 208,980 sf
117 121 17,500,000 51% 42% 300 1932/1995 416,880 sf
2,080,000 67% 1% 1925 123,095 sf
2,335,000 67% 1% 1905 236,066 sf
2,380,000 67% 1% 1939 191,287 sf
<PAGE>
BALLOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REMAINING REPAYMENT BUILT/ UNIT OF
LOCKOUT LOCKBOX TERM VALUE LTV DATE LTV AMORTIZATION RENOVATED UNIT MEASURE
--------- ------- ----------- ----------- --- ----------- ------------ -------------- --------- -------
$ 1,595,000 67% 1% 1918 142,026 sf
1,035,000 67% 1% 1930 78,000 sf
1,055,000 67% 1% 1905 81,790 sf
1,640,000 67% 1% 1974 84,636 sf
825,000 67% 1% 1917 103,412 sf
--------- ----------- --- ----------- ---------
151 YES 155 12,945,000 67% 1% 156 1,040,312
114 121 11,610,000 71% 65% 360 1969/1991 128,451 sf
174 181 12,250,000 66% 30% 240 1989 198,127 sf
171 Yes 175 11,000,000 61% 45% 300 1994 90 beds
116 120 10,000,000 65% 53% 300 1893/1995 18 units
2,400,000 75% 37% 1972/1994 65 rooms
2,100,000 75% 37% 1972 175 rooms
1,160,000 75% 37% 1975 72 rooms
1,120,000 75% 37% 1973 48 rooms
700,000 75% 37% 1981 53 rooms
880,000 75% 37% 1975 72 rooms
--------- ----------- --- ----------- ---------
176 YES 180 8,360,000 75% 37% 240 485
174 Yes 181 10,000,000 61% 42% 300 1990/1997 96 rooms
175 179 11,250,000 53% 37% 300 1983/1996 62,250 sf
113 120 8,100,000 73% 61% 300 1952/1954/1996 254 units
174 178 8,200,000 72% 60% 360 1955/1995 175,679 sf
4,800,000 59% 2% 1963/1966 99 beds
5,000,000 59% 2% 1969 129 beds
--------- ----------- --- ----------- ---------
178 179 9,800,000 59% 2% 180 228
4,300,000 67% 33% 1967/1988 99 rooms
4,100,000 67% 33% 1972/1982 94 rooms
--------- ----------- --- ----------- ---------
175 179 8,400,000 67% 33% 240 193
114 Yes 118 7,700,000 72% 61% 300 1987 123,909 sf
116 Yes 120 7,500,000 72% 59% 300 1980 125,611 sf
78 Yes 82 7,300,000 71% 49% 180 1924/1990 217,638 sf
175 179 7,500,000 68% 33% 240 1991 104 rooms
171 175 11,000,000 45% 19% 240 1986/1993 170,886 sf
174 181 6,800,000 74% 51% 300 1985 55,200 sf
178 179 8,000,000 59% 2% 180 1961/1987 210 beds
114 118 7,500,000 63% 53% 300 1987 78,971 sf
172 176 7,700,000 59% 29% 240 1985 150 rooms
178 179 6,500,000 70% 2% 180 1965 198 beds
76 80 6,900,000 66% 59% 300 1988 55,872 sf
111 118 6,800,000 66% 47% 240 1875/1992 81,284 sf
78 82 5,300,000 78% 74% 360 1952/1978 200 pads
114 118 5,500,000 75% 68% 360 1984 54,759 sf
175 179 6,500,000 63% 31% 240 1974/1994 201 rooms
112 116 5,750,000 71% 60% 300 1955/1993 31,165 sf
174 181 8,000,000 50% 22% 240 1979/1991 135,471 sf
173 Yes 180 6,800,000 58% 28% 240 1989 136 rooms
114 118 6,000,000 66% 56% 300 1966/1996 86,038 sf
176 180 5,500,000 71% 51% 300 1986 80 rooms
174 178 6,810,000 56% 28% 240 1968/1972/1996 244 rooms
4,800,000 64% 55% 1950/1987 44,885 sf
1,100,000 64% 55% 1982 5,605 sf
--------- ----------- --- ----------- ---------
116 120 5,900,000 64% 55% 300 50,490
114 118 6,100,000 61% 52% 300 1900/1984 102,607 sf
111 118 6,500,000 54% 45% 300 1972 65,553 sf
112 Yes 116 5,000,000 69% 59% 300 1978 56,845 sf
112 119 4,700,000 72% 61% 300 1990 48,275 sf
113 Yes 120 4,550,000 74% 62% 300 1980/1987 38,262 sf
<PAGE>
BALLOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REMAINING REPAYMENT BUILT/ UNIT OF
LOCKOUT LOCKBOX TERM VALUE LTV DATE LTV AMORTIZATION RENOVATED UNIT MEASURE
--------- ------- ----------- ----------- --- ----------- ------------ -------------- --------- -------
174 178 $4,725,000 63% 46% 300 1988 120 rooms
114 118 4,100,000 73% 62% 300 1986/1995 44,005 sf
112 116 4,250,000 70% 60% 300 1966/1993 34,122 sf
115 119 4,700,000 62% 53% 300 1976/1994 52,992 sf
115 119 5,500,000 53% 44% 300 1964 152,621 sf
113 120 5,180,000 55% 46% 300 1986 33,968 sf
172 176 3,750,000 74% 49% 300 1972/1986 130 units
81 85 3,825,000 73% 66% 300 1991 33,960 sf
115 119 4,400,000 64% 58% 360 1972/1984 241 pads
178 179 7,500,000 36% 1% 180 1974/1977 250 beds
178 179 4,800,000 56% 1% 180 1964/1995 99 beds
114 118 3,670,000 68% 58% 300 1955/1985 217 pads
172 179 4,300,000 53% 26% 240 1978/1993 144 rooms
113 117 3,600,000 62% 52% 300 1982/1991 39,412 sf
115 119 3,500,000 63% 46% 240 1963 72 beds
113 117 3,390,000 65% 53% 300 1972 130 units
112 Yes 119 4,100,000 53% 49% 360 1987 57,093 sf
114 118 3,400,000 63% 53% 300 1986/1988 45,265 sf
175 179 3,600,000 58% 29% 240 1995 62 rooms
114 118 3,300,000 59% 51% 300 1977 100,680 sf
115 119 2,750,000 71% 60% 300 1966/1994 133 units
113 120 2,600,000 75% 63% 300 1961 66 units
175 179 3,100,000 62% 30% 240 1986/1990 161 rooms
115 119 2,400,000 79% 70% 360 1981 46 units
173 180 2,800,000 67% 47% 300 1990 41,330 sf
111 115 2,800,000 64% 54% 300 1975 125 pads
112 Yes 116 2,250,000 79% 70% 360 1964 72 units
113 117 2,800,000 63% 57% 360 1972 135 units
112 116 2,250,000 75% 63% 300 1958 100 units
111 118 3,050,000 56% 46% 300 1983 38,268 sf
116 120 2,000,000 77% 65% 300 1915 48 units
116 120 3,250,000 46% 39% 300 1969/1995 216 pads
111 115 2,300,000 65% 54% 300 1968 60 units
112 116 3,000,000 50% 41% 300 1968/1973 220 units
113 120 3,200,000 47% 34% 240 1963/1987/1995 82 rooms
176 180 1,950,000 73% 36% 240 1994 52 rooms
114 118 1,860,000 74% 62% 300 1950 151 pads
112 116 2,600,000 52% 42% 300 1975 159 units
173 180 2,000,000 60% 30% 240 1970/1992 63 rooms
173 180 3,500,000 34% 16% 240 1968/1995 105 rooms
115 119 1,750,000 58% 48% 300 1961/1994 114 pads
174 178 1,700,000 59% 28% 240 1951/1996 102 pads
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AUDIT/AGREED ACTUAL U/W
U/W UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY OCCUP- PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD ANCY REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ------------ ------ ------------ ----------- ----------- ------- ------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
100% 12/6/96 95% $ 57,600 $ 62,550 0.12 0.20 Genzyme Corp
97% 12/6/96 93% 312,400 375,500 0.20 0.20 Commonwealth of Mass Revenue
100% 12/6/96 95% 57,850 69,313 0.15 0.20 The Office @ 1 Kendall Square
----------- -----------
YES 427,850 507,363
100% 12/3/96 95% 21,300 26,625 0.16 0.19 Marcam
100% 12/3/96 95% 44,625 55,781 0.18 0.15 Parametric Technology
100% 12/3/96 95% 59,485 74,356 0.18 0.15 Computer Associates(Harvard PHC)
100% 12/3/96 95% 34,730 43,413 0.29 0.29 Computer Associates
98% 12/3/96 94% 17,625 22,032 0.37 0.37 Geo Centers
84% 12/3/96 84% 22,065 27,582 0.18 0.24 Lojack
----------- -----------
YES 199,830 249,789
95% 1/1/97 93% Yes 15,500 19,375 0.25 0.25 Morrison, Cohen, Singer and Weinstien
100% 2/20/97 100% -- -- -- -- Kmart Corporation
100% 2/20/97 100% -- -- -- -- Kmart Corporation
YES
90% 1/10/97 90% 10,275 12,844 0.15 0.15 IKEA
97% 1/1/97 95% 62,635 78,294 0.16 0.16 WalMart
----------- -----------
YES 72,910 91,138
70% TTM 9/30/96 70% 10,750 13,438 5% 5%
80% TTM 9/30/96 75% 15,000 18,750 5% 5%
81% TTM 9/30/96 77% -- -- 5% 5%
77% TTM 9/30/96 75% 3,250 4,063 5% 5%
78% TTM 9/30/96 78% 9,900 12,375 5% 5% Fairfield Inn
79% TTM 9/30/96 75% 41,150 51,438 5% 5% Fairfield Inn
79% TTM 9/30/96 75% -- -- 5% 5% Fairfield Inn
81% TTM 9/30/96 78% -- -- 5% 5% Fairfield Inn
82% TTM 9/30/96 79% 7,500 9,375 5% 5% Fairfield Inn
78% TTM 9/30/96 75% -- -- 5% 5% Fairfield Inn
57% TTM 9/30/96 57% 5,400 6,750 5% 5% Comfort Inn
70% TTM 9/30/96 70% 9,000 11,250 5% 5% Comfort Inn
68% TTM 9/30/96 68% -- -- 5% 5% Fairfield Inn
80% TTM 9/30/96 80% 17,950 22,438 5% 5% Comfort Inn
53% TTM 9/30/96 53% 8,000 10,000 5% 5% Fairfield Inn
70% TTM 9/30/96 68% 3,500 4,375 5% 5% Econo Lodge
----------- -----------
YES 131,400 164,252
97% 10/31/96 94% Yes 690,990 690,990 397 397
100% 12/31/96 93% 15,405 19,256 0.15 0.15 Drug Emporium
100% 12/31/96 93% -- -- 0.15 0.15 Montgomery Ward
100% 12/31/96 93% -- -- 0.15 0.15 Gold's Gym
100% 12/31/96 93% -- -- 0.15 0.15 Office Depot
100% 12/31/96 93% 9,000 11,250 0.15 0.15 Super Valu Stores
100% 12/31/96 93% -- -- 0.15 0.15 Gold's Gym
100% 12/31/96 93% -- -- 0.15 0.15 Super Valu Stores
100% 12/31/96 93% -- -- 0.15 0.15 Whole Foods Market
100% 12/31/96 93% 900 1,125 0.15 0.15 Furr's Supermarket
100% 12/31/96 93% 2,680 3,350 0.15 0.15 World of Sleep
100% 12/31/96 93% 28,950 36,188 0.15 0.15 Drug Emporium
100% 12/31/96 93% 1,000 1,250 0.15 0.15 Brookshire Brothers
100% 12/31/96 93% 1,000 1,250 0.15 0.15 Trans Texas Amusement
100% 12/31/96 93% 45,000 56,250 0.15 0.15 May Drugs
100% 12/31/96 93% 20,750 25,938 0.15 0.15 H.E. Butt Grocery Co.
100% 12/31/96 93% 1,200 1,500 0.15 0.15 Academy Sporting Goods
100% 12/31/96 93% -- -- 0.15 0.15 Chuck E. Cheese's Pizza
100% 12/31/96 93% 2,000 2,500 0.15 0.15 Western Auto/Designer Shoe
25% 12/31/96 93% 2,500 3,125 0.15 0.15 Baby U
100% 12/31/96 93% 26,250 32,813 0.15 0.15 Future Firm
57% 12/31/96 93% 11,100 13,875 0.15 0.15 Office Depot
100% 12/31/96 93% 65,000 81,250 0.15 0.15 Big Bear Sports
100% 12/31/96 93% 1,500 1,875 0.15 0.15 Michael's MJ Design
<PAGE>
AUDIT/AGREED ACTUAL U/W
U/W UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY OCCUP- PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD ANCY REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ------------ ------ ------------ ----------- ----------- ------- ------- -------------------------------------
100% 12/31/96 93% $ 5,000 $ 6,250 0.15 0.15 U Save Foods
100% 12/31/96 93% -- -- 0.15 0.15 Thrift Mart IGA
100% 12/31/96 93% 6,000 7,500 0.15 0.15 A.C., Inc
100% 12/31/96 93% 150 188 0.15 0.15 Tile Shop
100% 12/31/96 93% 2,000 2,500 0.15 0.15 Texas Drug Warehouse
100% 12/31/96 93% -- -- 0.15 0.15 Rudy's Country Bar-B-Q
100% 12/31/96 93% 45,760 57,200 0.15 0.15 Gold's Gym
100% 12/31/96 93% 5,500 6,875 0.15 0.15 Big Lots
100% 12/31/96 93% 675 844 0.15 0.15 Brookshire Brothers
100% 12/31/96 93% -- -- 0.15 0.15 Super Valu Stores
100% 12/31/96 93% 7,500 9,375 0.15 0.15 Fleming Companies, Inc
100% 12/31/96 93% 100 125 0.15 0.15 Thurman Kitchen & Bath
100% 12/31/96 93% 3,000 3,750 0.15 0.15 Wichita Food Mart
100% 12/31/96 93% -- -- 0.15 0.15 True Value Hardware
100% 12/31/96 93% 1,500 1,875 0.15 0.15 Minyard Food Stores
100% 12/31/96 93% -- -- 0.15 0.15 Office Depot
100% 12/31/96 93% -- -- 0.15 0.15 Minyard Food Stores
100% 12/31/96 93% -- -- 0.15 0.15 Buckner Bingo
100% 12/31/96 93% -- -- 0.15 0.15 Bank of Utah
100% 12/31/96 93% -- -- 0.15 0.15 Comerica Bank
100% 12/31/96 93% -- -- 0.15 0.15 Hobby Lobby
100% 12/31/96 93% 5,800 7,250 0.15 0.15 Blue Springs Fitness
100% 12/31/96 93% 9,750 12,188 0.15 0.15 Chism Trail Supermarkets
100% 12/31/96 93% -- -- 0.15 0.15 Western Auto
100% 12/31/96 93% 29,700 37,125 0.15 0.15 Mercantile Thrift Stores
100% 12/31/96 93% 2,850 3,563 0.15 0.15 Ramey Supermarkets
100% 12/31/96 93% 7,000 8,750 0.15 0.15 Stecks IGA
100% 12/31/96 93% 5,000 6,250 0.15 0.15 Crafts Plus
100% 12/31/96 93% 50,000 62,500 0.15 0.15 Coast to Coast Hardware
100% 12/31/96 93% 5,300 6,625 0.15 0.15 Langston Company
100% 12/31/96 93% 500 625 0.15 0.15 Calcasieu Lumber
100% 12/31/96 93% 1,500 1,875 0.15 0.15 McDuff's Super Center
100% 12/31/96 93% 2,500 3,125 0.15 0.15 Fleming Companies
100% 12/31/96 93% 36,430 45,538 0.15 0.15 Cortran--J Larkins Club
100% 12/31/96 93% -- -- 0.15 0.15 Skyline Super Foods
100% 12/31/96 93% 6,850 8,563 0.15 0.15 Chas Ball Market
100% 12/31/96 93% -- -- 0.15 0.15 Performance Today
47% 12/31/96 93% 6,100 7,625 0.15 0.15 US Postal Service
100% 12/31/96 93% -- -- 0.15 0.15 Fleming Companies
100% 12/31/96 93% 5,000 6,250 0.15 0.15 Bag 'N Save
100% 12/31/96 93% 8,300 10,375 0.15 0.15 Melek Service Center
100% 12/31/96 93% 5,000 6,250 0.15 0.15 Bob's Market
100% 12/31/96 93% -- -- 0.15 0.15 Crawford Auto Parts
100% 12/31/96 93% -- -- 0.15 0.15 Aldrich and Company
100% 12/31/96 93% -- -- 0.15 0.15 Appliance Mart
100% 12/31/96 93% -- -- 0.15 0.15 US Postal Service
100% 12/31/96 93% 1,000 1,250 0.15 0.15 Auto Zone
100% 12/31/96 93% 2,000 2,500 0.15 0.15 Michael's MJ Design
100% 12/31/96 93% 3,853 4,816 0.15 0.15 Fenn Food Market
----------- -----------
YES 505,853 632,320
74% TTM 12/31/96 74% Yes 395,600 494,500 5% 5% Westin
90% 1/1/97 90% Yes 1,108,500 1,300,000 0.25 0.27 Prudential Insurance
95% 1/97 91% 34,925 43,656 50 50
99% 12/25/96 91% 50,660 63,325 50 50
97% 1/25/97 91% 7,950 9,938 50 50
99% 1/26/97 93% 5,030 6,290 50 50
----------- -----------
YES 98,565 123,209
100% 1/1/97 95% Yes 75,800 83,380 0.20 0.22 Ultra Tech Stepper
96% 1/22/97 95% 23,050 29,000 0.15 0.15 Dillards
88% 1/22/97 86% 24,500 31,000 0.15 0.16 Belk--Yates*
----------- -----------
YES 47,550 60,000
76% 1/14/97 76% $ 15,300 $ 19,125 0.15 0.15 Oshmans
97% 1/21/97 96% 32,700 40,875 0.15 0.15 Home Express
84% 1/1/97 84% 66,540 83,175 0.15 0.15 Canned Foods Inc.
----------- -----------
YES 114,540 143,175
100% 1/1/97 97% Yes -- -- 0.15 0.15 Walmart, Home Depot, Sam*
81% 1/8/97 81% 8,750 8,750 0.15 0.15
100% 1/8/97 95% 4,850 4,850 0.15 0.15
99% 1/8/97 95% 23,000 23,000 0.15 0.15
----------- -----------
YES 36,600 36,600
93% 1/8/97 90% Yes 291 291
99% 2/97 95% 5,000 6,250 0.20 0.20
91% 1/1/97 90% Yes 224,217 280,271 0.29 0.29 Publix
95% 10/29/96 90% 137,250 172,188 0.35 0.35 Rich's*
95% 1/24/97 94% 48,516 60,645 250 250
94% 1/24/97 90% 43,494 54,368 250 250
----------- -----------
YES 92,010 115,013
100% 2/5/97 98% 53,770 67,213 0.15 0.15 Builders Square
93% 2/97 93% 30,000 37,500 0.15 0.16
100% 2/97 95% 0.15 0.15
AUDIT/AGREED ACTUAL U/W
U/W UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY OCCUP- PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD ANCY REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ------------ ------ ------------ ----------- ----------- ------- ------- -------------------------------------
87% 12/26/96 87% 22,000 27,500 0.15 0.16
100% 12/96 95% -- -- 0.15 0.15
99% 1/3/97 93% 5,000 6,250 250 250
100% 1/3/97 95% 0.15 0.15
100% 1/3/97 95% -- -- 0.15 0.15
100% 12/26/96 95% 0.15 0.15
100% 1/3/97 95% 0.15 0.15
88% 2/97 88% 8,000 10,000 0.15 0.15
100% 12/26/96 96% 0.15 0.15
----------- -----------
65,000 81,250
94% 10/31/96 92% Yes 149,590 186,988 250 250
94% 1/6/97 94% 1,100 -- 0.15 0.15 WalMart
87% TTM 11/30/96 87% 92,615 115,769 250 250
100% 2/1/96 95% 3,000 3,750 0.29 0.20 The Gap
----------- -----------
95,615 119,519
79% TTM 10/31/96 75% 20,000 4% 5%
97% 9/30/96 95% 33,500 41,875 250 250 Holiday Inn
100% 11/20/96 96% Yes 60,400 75,500 0.18 0.18 Staples
100% 12/4/96 95% -- -- 0.20 0.20 DORS
100% 10/16/96 98% -- 6,000 0.15 0.15 Home Quarters
79% TTM 11/30/96 78% 8,500 10,625 4% 5% Residence Inn
97% 8/1/96 90% 92,920 342,559 0.15 0.15 Winn Dixie
97% 12/16/96 96% 12,875 16,094 0.15 0.16 Caldor
75% TTM 11/30/96 73% 12,000 15,000 5% 5% Holiday Inn
67% TTM 10/31/96 67% 7,780 9,725 4% 5% Holiday Inn
68% TTM 10/31/96 68% 10,780 13,475 4% 5% Holiday Inn
----------- -----------
YES 18,560 23,200
96% 12/5/96 92% 76,750 95,938 250 289
69% TTM 12/31/96 69% -- 88,838 5% 5% Radisson Inn
94% 2/3/97 90% 119,780 148,225 0.20 0.20 Shaws Superstore
65% 1/2/96 55% 116,010 145,013 0.03 0.20 New York Stock Exchange
100% 11/17/96 95% 68,510 84,338 0.37 0.37 Anderson International
99% 11/17/96 95% 17,000 20,000 0.15 0.15 Metal Fabricating Inc.
92% 11/17/96 92% 116,200 143,950 0.23 0.23 Peck Distributing
<PAGE>
AUDIT/AGREED ACTUAL U/W
U/W UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY OCCUP- PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD ANCY REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ------------ ------ ------------ ----------- ----------- ------- ------- -------------------------------------
87% 11/17/96 87% $ 5,000 $ 5,000 0.19 0.19 Ritrama Duramark
100% 11/17/96 95% 208 0.15 Sensikal
77% 11/17/96 77% 45,860 46,485 0.04 0.15 Potter Ind.
93% 11/17/96 56% 7,000 7,000 0.22 0.22 Skate Inc
98% 11/17/96 95% 49,210 53,298 0.24 0.24 ADC Inc.
----------- -----------
308,988 360,070
91% 2/10/97 91% 38,510 48,138 0.15 0.15 Payless Drugs
88% 1/1/97 88% -- -- 0.17 0.17 Homebase
98% 7/96 95% Yes 250 250
95% 2/14/97 95% -- -- 500 500
82% TTM 10/30/96 75% 1,000 1,250 4% 5% EconoLodge
52% TTM 10/30/96 54% 1,000 1,250 4% 5% EconoLodge
66% TTM 10/30/96 62% 7,560 9,450 4% 5% EconoLodge
74% TTM 10/30/96 76% -- -- 4% 5% EconoLodge
68% TTM 10/30/96 64% 4,350 5,438 4% 5% EconoLodge
57% TTM 10/30/96 49% 8,500 10,625 4% 5% EconoLodge
----------- -----------
22,410 28,013
91% TTM 12/31/96 80% 4% 5% Residence Inn
100% 1/8/97 96% 12,150 15,188 0.22 0.32 Bea Systems
92% 1/20/97 92% 87,900 109,875 248 250 Farmer Jack
100% 11/15/96 95% 11,000 13,750 0.34 0.34
94% TTM 9/30/96 94% 10,000 12,000 300 300
85% TTM 9/30/96 85% 3,500 4,200 300 300
----------- -----------
13,500 16,200
94% TTM 9/30/96 94% 27,150 33,938 250 250
82% TTM 9/30/96 82% 15,650 19,563 250 250
----------- -----------
42,800 53,500
100% 12/5/96 98% -- -- 0.15 0.15 Kmart
85% 1/13/97 85% Yes 93,600 117,000 0.19 0.19
95% 10/16/96 90% 258,250 270,781 0.26 0.26 Equitable
74% TTM 11/30/96 74% 46,550 58,188 0.05 0.05 Clarion Suites
96% 1/9/97 93% 2,000 2,000 0.24 0.24 Burlington Coat Factory
100% 12/31/96 95% 70,775 88,469 0.03 0.15 Filene's Basement
97% TTM 9/30/96 95% -- -- 300 300
100% 12/11/96 95% 18,800 23,500 0.20 0.20 Baltimore VNA Foundation
84% TTM 11/30/96 80% 124,100 170,750 4% 5% Country Hearth Inn
93% TTM 9/30/96 93% 500 600 300 300
100% 11/4/96 95% 2,500 0.03 0.20
80% 1/1/97 80% 38,300 47,875 0.23 0.23 Trainor and Associates
95% 1/2/97 92% 22,000 27,500 25 50
98% 12/13/96 93% 865 0.20 0.20 Bet Zedek
71% TTM 11/30/96 71% 53,250 66,563 4% 5% Best Western
100% 1/08/97 90% 500 625 0.15 0.15 Urban Outfitters
100% 2/26/97 93% 500 625 0.20 0.20 Hobby Lobby
68% TTM 1/31/97 68% 3,000 3,750 5% 5% Days Inn
97% 11/20/96 93% 1,000 1,250 0.20 0.20 Merchants Warehouse
78% TTM 11/30/96 75% 36,500 45,625 4% 5% Residence Inn
58% TTM 10/31/96 53% 698,150 872,688 5% 5% Ramada Inn
100% 1/24/97 95% 2,500 3,125 0.20 0.20 Drug Fair
100% 2/5/97 92% 2,000 2,500 0.56 0.56
----------- -----------
4,500 5,625
93% 12/4/96 93% 11,310 14,138 0.03 0.48
99% 12/12/96 90% 46,975 58,719 0.20 0.20 Empress Court Restaurant
100% 1/1/97 93% 500 -- 0.29 0.29
94% 12/31/96 88% -- -- -- 0.15
94% 1/31/97 93% 10,135 12,669 0.24 0.24
<PAGE>
AUDIT/AGREED ACTUAL U/W
U/W UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY OCCUP- PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD ANCY REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ------------ ------ ------------ ----------- ----------- ------- ------- -------------------------------------
72% TTM 11/30/96 70% -- -- 4% 5% Comfort Inn
92% 12/15/96 92% $ 2,075 -- 0.15 0.15 The Cosmetics Center
100% 11/30/96 93% -- $ 20,967 0.15 0.15 Coco's Restaurant
95% 11/30/96 95% 17,300 21,625 0.21 0.21 Heritage Bank
100% 12/12/96 93% 36,500 45,625 0.20 0.20 World of Color
96% 1/20/97 91% 6,500 4,375 0.20 0.20 The Good Guys Stereo
96% 12/20/96 95% 17,725 22,156 301 301
100% 1/14/97 95% 1,689 0.20 0.45 Arbor Drugs
96% 1/16/97 95% 6,780 8,475 25
88% TTM 9/30/96 88% 5,000 6,000 300 300
95% TTM 9/30/96 95% 5,500 6,600 300 300
75% 12/31/96 75% 12,000 15,000 25 50
66% TTM 11/30/96 64% 63,501 79,376 4% 5% Ramada Inn
96% 12/31/96 92% 3,000 -- 0.18 0.18
92% TTM 12/31/96 92% 34,285 42,856 250
98% 10/31/96 95% 15,000 18,750 200 250
78% 12/1/96 78% 800 1,000 0.33 0.37 Execu-Flow
88% 12/23/96 88% -- -- 0.15 0.15 Old Country Buffet
61% TTM 12/31/96 60% 1,600 -- 4% 5%
100% 11/1/96 96% 46,750 36,625 0.03 0.23 Ames
92% 11/25/96 92% 24,700 30,875 250 250
95% 1/31/97 93% 109,300 136,625 333 333
43% TTM 11/30/96 43% 4,774 5,968 5% 5% Knights Inn
98% 11/30/96 95% 34,995 43,744 265 265
88% 1/30/97 88% 200 -- 0.03 0.15 Xymox Corporation
100% 11/30/96 95% 8,250 -- 25
92% 12/18/96 92% 12,650 15,813 200 250
96% 12/1/96 95% 12,200 15,250 257 257
100% 10/24/96 95% 30,515 38,144 269 269
100% 11/1/96 90% 0.23
97% 11/6/96 95% 264,500 330,625 321 321
95% 1/2/97 85% 60,870 76,088 25 50
100% 8/26/96 95% 32,350 5,000 282.13 282.13
98% 12/5/96 90% 17,000 21,250 250 250
67% TTM 11/30/96 63% 1,993 -- 4% 5% Holiday Inn Express
64% TTM 12/31/96 64% 1,000 -- 4% 5% Holiday Inn Express
76% 11/30/96 76% 10,700 13,375 25 25
99% 12/2/96 95% 10,000 12,500 250 250
66% TTM 12/31/96 52% 115,624 133,362 4% 5% EconoLodge
49% TTM12/31/96 50% 75,000 93,750 5% 5% Holiday Inn
98% 11/30/96 95% 900 -- 50
92% 11/30/96 92% 13,050 62,500 27 30
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
DATE SF ANCHOR2/TENANTS2 DATE 2 SF ANCHOR3/TENANTS3 DATE 3 SF
---------- ----- -------------------------------- ---------- ----- ---------------------- ---------- -----
<C> <C> <C> <C> <C> <C> <C> <C>
2005 41% Nueroscience 1998 16% Mitotix 2003 13%
1998 24% Fitness 2003 10% LeukoSite Lab 1999 8%
1998 13% Whitehead Institute 1998 10%
1999 39% Thomson Financial 1998 16%
2001 100%
2002 43% Healthcare 2001 35%
1999 100%
1997 26% The Tower Group 2001 11%
2001 24% Welty Leger Corp 1997 16% Boston Systems Office 2001 14%
2005 13% Edwards and Angell 2005 11% Shoppers Parking Corp. 2008 6%
2022 100%
2022 100%
2007 29% AMC Theaters 2007 8% Circuit City 2008 6%
2010 25% Homebase 2008 24% Circuit City 2011 7%
2004 78%
2000 100%
2001 100%
2000 100%
2005 100%
2004 100%
2001 100 %
2002 100%
1997 100%
1998 62%
2000 100%
1998 100%
2012 100%
1999 59%
1998 100%
2004 100%
1999 59%
1997 100%
2000 5%
2003 100%
1999 56%
2001 100%
2006 100%
<PAGE>
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
DATE SF ANCHOR2/TENANTS2 DATE 2 SF ANCHOR3/TENANTS3 DATE 3 SF
---------- ----- -------------------------------- ---------- ----- ---------------------- ---------- -----
1998 100%
2000 100%
2002 100%
2003 100%
1998 88%
1999 100%
2001 100%
1999 63%
2001 100%
2000 100%
1998 100%
1999 100%
2001 100%
2001 100%
1997 100%
1999 100%
2000 100%
1997 100%
1997 100%
2001 100%
1997 100%
2001 100%
1997 100%
2000 100%
2000 100%
2001 100%
1998 100%
1997 100%
2001 100%
1997 100%
2002 100%
1997 100%
1997 100%
2002 100%
2006 100%
2001 100%
2000 58%
2000 47%
2001 100%
2000 100%
2001 100%
1997 100%
2000 50%
1999 100%
1997 100%
1999 100%
1997 57%
2002 100%
1998 100%
2007 18% Prudential 2001 13% State of NJ 2000 11%
2005 23% Equitable (Phoenix Technologies) 2003 21% Lifeguard 2002 19%
2000 25% Sears 2029 13% Yonkers 2000 12%
Roses 2003 21% Sears 2009 15%
<PAGE>
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
DATE SF ANCHOR2/TENANTS2 DATE 2 SF ANCHOR3/TENANTS3 DATE 3 SF
---------- ----- -------------------------------- ---------- ----- ---------------------- ---------- -----
2016 14% Service Merchandise 2001 13% Office Max 2011 9%
2003 34% Good Guys 1999 8%
2002 23% Thrifty Drug 2004 22%
Best Buy 2011 29% Linens & Things 2010 17%
2005 10%
JC Penney* Furniture Land 1998 8%
2016 21% Phar-Mor 2005 16%
2009 32% Best Buy 2013 24%
2000 26% Workshop 1998 14%
2007 22% Barnes & Noble 2008 18% Tower Records 2007 14%
1999 43% Illinois State Brd of Ed. 2001 55%
2015 49% Office Max--Outparcel 2008 14%
2007 29% Eckerd Drug 2002 7%
1999 36% Waldbaums Grocery 2010 20%
2013 28% Ames 2000 24% Decelle 1999 13%
2003 8% HB Turck Hlding LLC 2006 4%
2001 66% DMT Eng. 2000 34%
2002 42% Clecorr Inc. 1998 19%
2000 32% Vitex Corp 1997 31%
<PAGE>
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
DATE SF ANCHOR2/TENANTS2 DATE 2 SF ANCHOR3/TENANTS3 DATE 3 SF
---------- ----- -------------------------------- ---------- ----- ---------------------- ---------- -----
2000 63% First Forms Inc. 2004 20%
*1990 58% Multi--Flow Dispensers 2001 32%
1999 45% Lake Erie Graphics 1997 22%
1997 27% Formatech 1997 13%
1999 42% MPC Powder Coating 1998 20% Cuyahoga Plastics 1997 17%
2012 28% The Childrens Co 1997 16%
2009 52% Edwards Theater 2005 12%
2006 100%
1999 23% JC Penney 2001 11% Arbour Drugs 1997 9%
2011 55% A&P 2012 31%
1999 42% Student Loan Liquidity 15%
2001 22% Trad-A-House O'Neill's Theater 2004 20%
2005 46%
2001 48% US Telecom Sprint 2002 29%
2001 9% Talbots 1998 6%
2005 19% The Price REIT Inc 2000 18% National Bank of Cal. 2003 12%
2003 39% Tower Records 1998 13%
2003 42%
2012 22% Rite-Aid 1998 15%
2000 42% United Jersey Bank 1999 14%
1998 23%
<PAGE>
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
DATE SF ANCHOR2/TENANTS2 DATE 2 SF ANCHOR3/TENANTS3 DATE 3 SF
---------- ----- -------------------------------- ---------- ----- ---------------------- ---------- -----
2001 15% Party Land 2000 11%
2001 46%
1998 16% Comstock 1998 11% Burk and Associates 2000 9%
2002 9% Salvation Army 1999 8% Ace Hardware 2003 7%
2001 32% 0%
2007 30% Blockbuster Video 2001 21%
1998 31% Tutor Time 2005 19%
2001 22%
2003 45%
1998 11%
</TABLE>
<PAGE>
ANNEX B
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Asset
Securitization Corporation, Commercial Mortgage Pass-Through Certificates,
Series 1997-D4 (the "Global Securities") will be available only in book-entry
form. Investors in the Global Securities may hold such Global Securities
through any of The Depository Trust Company ("DTC"), CEDEL or Euroclear. The
Global Securities will be tradable as home market instruments in both the
European and U.S. domestic markets. Initial settlement and all secondary
trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional Eurobond practice (i.e., seven calendar days settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Subordinated Certificates will be effected on a delivery
against payment basis through the respective Depositaries of CEDEL and
Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations of their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name
of CEDE & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, CEDEL and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts
as DTC Participants.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional Eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional Eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date, calculated on the basis of a year
of 360 days consisting of twelve 30-day months. Payment will then be made by
the respective Depositary to the DTC Participant's account against delivery
of the Global Securities. After settlement has been completed, the Global
Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the CEDEL
Participant's
B-1
<PAGE>
or Euroclear Participant's account. The securities credit will appear the
next day (European time) and the cash debit will be back-valued to, and the
interest on the Global Securities will accrue from, the value date (which
would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade
fails), the CEDEL or Euroclear cash debit will be valued instead as of the
actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day
funds settlement. The most direct means of doing so is to pre-position funds
for settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants can elect not to pre-position funds and allow that
credit line to be drawn upon to finance settlement. Under this procedure,
CEDEL Participants or Euroclear Participants purchasing Global Securities
would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts.
However, interest on the Global Securities would accrue from the value date.
Therefore, in many cases the investment income on the Global Securities
earned during that one day period may substantially reduce or offset the
amount of such overdraft charges, although this result will depend on each
CEDEL Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective Depositary for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participant a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depositary, to a DTC Participant. The seller will send
instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases,
CEDEL or Euroclear will instruct the respective Depositary, as appropriate,
to deliver the bonds to the DTC Participant's account against payment.
Payment will include interest accrued on the Global Securities from and
including the last coupon payment date to and excluding the settlement date,
calculated on the basis of a year of 360 days consisting of 12 30-day months.
The payment will then be reflected in the account of the CEDEL Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in
the CEDEL Participant's or Euroclear Participant's account would be
back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the CEDEL Participant or Euroclear
Participant have a line of credit with its respective clearing system and
elect to be in debit in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft charges incurred
over the one-day period. If settlement is not completed on the intended value
date (i.e., the trade fails) receipt of the cash proceeds in the CEDEL
Participant's or Euroclear Participant's account would instead be valued as
of the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase Global
Securities from DTC Participants for delivery to CEDEL Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least one
day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL
or Euroclear (or through DTC if the holder has an address outside the U.S.)
will be subject to the 30% U.S. withholding tax that generally applies to
payments
B-2
<PAGE>
of interest (including original issue discount) on registered debt issued by
U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business in the chain or intermediaries between such beneficial
owner and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate.
Exceptions for non-U.S. Persons (Form W-8): Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from
the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must be
filed within 30 days of such change.
Exception for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business
in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are beneficial owners of a
Certificate and reside in a country that has a tax treaty with the United
States can obtain an exemption or reduced tax rate (depending on the treaty
terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate
Certificate). If the treaty provides only for a reduced rate, withholding tax
will be imposed at that rate unless the filer alternatively files Form W-8.
Form 1001 may be filed by the holder of a Certificate or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The holder of a Global
Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any political subdivision thereof, (iii) an estate the
income of which is includible in gross income for United States tax purposes,
regardless of its source or (iv) a trust if (A) for taxable years beginning
after December 31, 1996 (or for taxable years ending after August 20, 1996,
if the trustee has made an applicable election) a court within the United
States is able to exercise primary supervision over the administration of
such trust, and one or more United states fiduciaries have the authority to
control all substantial decisions of such trust, or (B) for all other taxable
years, such trust is subject to United States federal income tax regardless
of the source of its income. This summary does not deal with all aspects of
U.S. federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of
the Global Securities.
B-3
<PAGE>
ANNEX C-1
FORM OF COMPARATIVE FINANCIAL STATUS REPORT
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
COMPARATIVE FINANCIAL STATUS REPORT
AS OF
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ORIGINAL UNDERWRITING INFORMATION PRIOR FULL YEAR OPERATING INFORMATION
BASE YEAR AS OF NORMALIZED
- -----------------------------------------------------------------------------------------------------------------------------------
CURRENT LAST LAST
STATED PAID ANNUAL PROP. FINANCIAL (1) PROP. FINANCIAL (1)
LOAN PRINCIPAL THRU DEBT INSPECT. INFO AS % TOTAL $ DSCR INSPECT. INFO AS % TOTAL $ DSCR
NUM. CITY STATE BALANCE DATE SERVICE DATE OF DATE OCC. REV. NOI X DATE OF DATE OCC. REV. NOI X
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
LIST ALL MORTGAGE LOANS CURRENTLY IN THE TRUST (WITH OR WITHOUT INFORMATION) IN DESCENDING PRINCIPAL BALANCE ORDER.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
TOTAL: $ $ WA $ $ WA WA $ $ WA
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
RECEIVED REQUIRED
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
FINANCIAL INFORMATION: LOANS BALANCE LOANS BALANCE
- ----------------------------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
# % $ % # % $ %
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
CURRENT FULL YEAR:
- ------------------------------------------------------ --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
CURRENT FULL YEAR RECEIVED WITH DSCR LESS THAN 1:
- ------------------------------------------------------ --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
PRIOR FULL YEAR:
- ------------------------------------------------------ --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
PRIOR FULL YEAR RECEIVED WITH DSCR LESS THAN 1:
- ------------------------------------------------------ --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
(1) DSCR CALCULATED USING NET CASH FLOW/ANNUAL DEBT SERVICE.
- ----------------------------------------------------------------------- ----- --- ---- -------- --------- ---- ----- --- ----
(2) NET CHANGE SHOULD COMPARE THE LATEST YEAR TO THE UNDERWRITING YEAR.
- ----------------------------------------------------------------------- ----- --- ---- -------- --------- ---- ----- --- ----
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
COMPARATIVE FINANCIAL STATUS REPORT
AS OF
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
"ACTUAL" (2)
CURRENT ANNUAL OPERATING INFORMATION YTD FINANCIAL INFORMATION NET CHANGE
AS OF NORMALIZED MONTH REPORTED CURRENT & BASE
- --------------------------------------------------------------------------------------------------------------
LAST
PROP. FINANCIAL (1) FINANCIAL %
INSPECT. INFO AS % TOTAL $ DSCR INFO AS % TOTAL $ % % TOTAL DSCR
DATE OF DATE OCC. REV. NOI X OF DATE OCC. REV. NOI DSCR OCC. REV. X
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
WA $ $ WA WA $ $ WA WA $ WA
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
- ------ ------- ------ ------ ----- ----- ------- ------ ------ ---- ----- ------ ------ -----
</TABLE>
C-1-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE>
FORM OF DELINQUENT LOAN STATUS REPORT
ANNEX C-2
COMMERCIAL MORTGAGE ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
DELINQUENT LOAN STATUS REPORT
AS OF
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)=a+b+c+d
- ------- ----- ------- ---- --------- --------- --------- -------- -----------------
SQ. FT. TOTAL
LOAN OR OUTSTAND. TOTAL OTHER
NUMBER, UNITS, PAID SCHED. P&I OUTSTAND. ADVANCES CURRENT
CITY & PROP. OCC %, THRU PRINCIPAL ADVANCES EXPENSES (TAXES & TOTAL MONTHLY
STATE TYPE DATE DATE BALANCE TO DATE TO DATE ESCROW) EXPOSURE P&I
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
- ------- ----- ------- ---- --------- --------- --------- -------- -------- -------
FCL--Foreclosure
- ----------------------- ---- --------- --------- --------- -------- -------- -------
LTM--Latest 12 Months
- ----------------------- ---- --------- --------- --------- -------- -------- -------
* Status should contain a code indicating the current direction of each loan such as
(FCL--In Foreclosure, MOD-- Modification, DPO--Discount Payoff, NS--Note Sale,
BK--Bankruptcy, PP--Payment
- -------------------------------------------------------------------------------------------
Plan, Curr--Current, TBD--To Be Determined, etc.) It is possible to combine the status
codes if the loan is going in more than one direction (i.e. FCL/Mod, BK/Mod, BK/FCL/DPO).
- -------------------------------------------------------------------------------------------
** App--Appraisal, BPO--Broker Opinion, Inc.-- Internal Value
- ------------------------------------------------------------------------ -------- -------
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
(f) (g)=(.92*f)-e
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
DATE
LOSS NOI
MOST APPRAISAL TRANSFER USING FILED/
CURRENT LTM LTM ACCURATE BPO OR DATE/ 92% FCL
INTEREST MATURITY NOI NOI, VALUATION PROPERTY INTERNAL CLOSING APPR. OR SALE
RATE DATE DATE DSCR DATE VALUE VALUE** DATE BPO (f) DATE STATUS*
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4 COLLECTION PERIODS DELINQUENT
- --------------------------------------------------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
3 COLLECTION PERIODS DELINQUENT
- --------------------------------------------------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
1 TO 2 COLLECTION PERIODS DELINQUENT
- --------------------------------------------------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
SPECIALLY SERVICES MORTGAGE LOANS THAT ARE CURRENT
- --------------------------------------------------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
</TABLE>
C-2-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE>
ANNEX C-3
FORM OF HISTORICAL LOAN MODIFICATION REPORT
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
HISTORICAL LOAN MODIFICATION REPORT
AS OF
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
BALANCE BALANCE AT THE
WHEN SENT EFFECTIVE DATE NUM.
LOAN CITY/ MOD./ EFFECTIVE TO SPECIAL OF MONTHS/
NUMBER STATE EXTENSION DATE SERVICER REHABILITATION OLD RATE NEW RATE
- ------- ----- --------- ---------- ---------- -------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------- ----- --------- ---------- ---------- -------------- -------- --------
THIS REPORT IS HISTORICAL
- ------------------------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
TOTAL FOR ALL LOANS:
- -------------- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
TOTAL FOR LOANS IN CURRENT MONTHS:
- ------------------------------------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
# OF LOANS $ BALANCE
- ------- ----- --------- ---------- ---------- -------------- -------- --------
MODIFICATIONS:
- -------------- --------- ---------- ---------- -------------- -------- --------
MATURITY DATE EXTENSIONS:
- ------------------------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
TOTAL:
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
FORM OF HISTORICAL LOAN MODIFICATION REPORT
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
HISTORICAL LOAN MODIFICATION REPORT
AS OF
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
TOTAL (2) EST.
NUM. FUTURE
MONTHS INTEREST LOSS
FOR (1) REALIZED TO TRUST $
NEW OLD NEW CHANGE OF LOSS TO (RATE
OLD P&I P&I MATURITY MATURITY MOD. TRUST $ REDUCTION) COMMENTS
- ------- ----- -------- -------- --------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
- ------- ----- -------- -------- --------- ------------ ------------- ----------
</TABLE>
C-3-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE>
ANNEX C-4
FORM OF HISTORICAL LOSS ESTIMATE REPORT
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
HISTORICAL LOSS ESTIMATE REPORT (REO-SOLD OR DISCOUNTED PAYOFF)
AS OF
<TABLE>
<CAPTION>
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
(c) = b/a (a) (b) (d) (e) (f) (g)
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
LATEST
% REC. APPRAISAL EFFECT NET AMT.
SERVICER FROM OR BROKERS DATE OF SALES RECEIVED STATED TOTAL P&I TOTAL
LOAN ID CITY/STATE SALE OPINION SALE PRICE FROM SALE BALANCE ADVANCED EXPENSES
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------- ------------ ------------- ------------- ----------- --------- ---------- ---------
THIS REPORT IS HISTORICAL
- ---------------------------------------- ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
TOTAL ALL LOANS
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
CURRENT MONTH ONLY:
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- --------- ---------- ---------
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
ANNEX C-4
FORM OF HISTORICAL LOSS ESTIMATE REPORT
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
HISTORICAL LOSS ESTIMATE REPORT (REO-SOLD OR DISCOUNTED PAYOFF)
<TABLE>
<CAPTION>
AS OF
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
(h) (i)=d(f+g+h) (k)+i-e (m) (n)+k+m (o)=n/e
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
ACTUAL DATE MINOR
LOSSES LOSS MINOR ADJ. TOTAL LOSS LOSS % OF
SERVICING PASSED PASSED ADJ. TO PASSED WITH SCHEDULED
FEES NET PROCEEDS THRU THRU TRUST THRU ADJUSTMENT BALANCE
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------- ------------ ------------- ------------- ----------- ---------
- ----------------------------------------- ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
- ------------ ------------- ------------ ------------ ------------- ------------- ----------- ---------
</TABLE>
C-4-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE>
ANNEX C-5
FORM OF REO STATUS REPORT
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
REO STATUS REPORT
AS OF
<TABLE>
<CAPTION>
- ------- --------- -------- -------- --------- -------- -------- -------- ---------------- -------- -------- -------- ------
(a) (b) (c) (d) (e)=a+b+c+d
- ------- --------- -------- -------- --------- -------- -------- -------- ---------------- -------- -------- -------- ------
LOAN SQ. FT. (YTD)
NUM./ OR TOTAL OTHER MOST
CITY UNITS/ PAID SCHED. P&I ADVANCES TOTAL CURRENT CURRENT NOI RECENT
& PROP. OCC. %/ THRU PRINCIPAL ADVANCES (TAXES & EXPENSES TOTAL MONTHLY INTEREST MATURITY AS OF NOI/
STATE TYPE DATE DATE BALANCE TO DATE ESCROW) TO DATE EXPOSURE P&I RATE DATE DATE DSCR
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- ----------------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REAL ESTATE OWNED
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- ----------------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
(1) Using the following codes: App. -- Appraisal; BPO -- Brokers Opinion; Int. -- Internal Value.
- ------- --------- -------- -------- --------- -------- -------- -------- -------- ------- -------- -------- -------- ------
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
REO STATUS REPORT
AS OF
<TABLE>
<CAPTION>
- ------ --------- -------- ------------------------------ -------- --------
(f) (g)=(.92*f)-e
- ------ --------- -------- ------------------------------ -------- --------
($1) LOAN
MOST APPRAISAL, TRANSFER USING
ACCURATE BPO OR DATE/ 92% REO
APPR. PROPERTY INTERNAL CLOSING APPR. OR ACQUISITION PENDING
DATE VALUE VALUE DATE BPO (f) DATE OFFERS COMMENTS
- ------- --------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
- ------- --------- -------- -------- --------- -------- -------- --------
</TABLE>
C-5-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE>
<TABLE>
ANNEX C-6
FORM OF WATCH LIST
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
WATCH LIST
AS OF
<CAPTION>
- --------- --------------- --------- --------- -------- ---------- ---------- --------- --------------------------------------
STATED PAID CURRENT
LOAN PRINCIPAL THRU MATURITY DSC
NUMBER PROPERTY TYPE CITY STATE BALANCE DATE DATE (%) COMMENT/REASON ON WATCH LIST
- --------- --------------- --------- --------- -------- ---------- ---------- --------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
List all loans on Watch List and the reason for each being on the Watch List. List should be sorted in descending loan balance
order.
- -------------------------------------------------------------------------------------------------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
Total: $
- --------- --------------- --------- --------- -------- ---------- ---------- --------- ----------------------------------------
</TABLE>
C-6-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
<PAGE>
ANNEX C-7
FORM OF OPERATING STATEMENT ANALYSIS
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
OPERATING STATEMENT ANALYSIS REPORT
AS OF
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW:
--------------
Servicer Loan Number
-------------- ------------ ------------ -------------- -------------- ----------- ------
Property Type
-----------------------------------------------------------------------------------------------
Property Address, City, State
-----------------------------------------------------------------------------------------------
Net Rentable Square Feet
-------------- ------------
Year Built/Year Renovated
-------------- ------------ ------------ -------------- --------------
Year of Operations UNDERWRITING 1994 1995 1996 YTD
-------------- ------------ ------------ -------------- --------------
Occupancy Rate*
-------------- ------------ ------------ -------------- --------------
Average Rental Rate
-------------- ------------ ------------ -------------- --------------
* Occupancy rates are year end or the ending date of the financial statement for the period.
INCOME: NO. OF MOS.
-------------- ----------- -------
Number of Mos. Annualized PRIOR YEAR CURRENT YEAR
-------------- ------------ ------------ -------------- -------------- ----------- -------
Period Ended UNDERWRITING 1994 1995 1996 1997 YTD** 1995-BASE 1995-1994
Statement Classification BASE YEAR NORMALIZED NORMALIZED NORMALIZED AS OF / /96 VARIANCE VARIANCE
-------------- ------------ ------------ -------------- -------------- ----------- -------
Rental Income
-------------- ------------ ------------ -------------- -------------- ----------- -------
Pass Through/Escalations
-------------- ------------ ------------ -------------- -------------- ----------- -------
Other Income
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
EFFECTIVE GROSS INCOME $0.00 $0.00 $0.00 $0.00 $0.00 % %
-------------- ------------ ------------ -------------- -------------- ----------- -------
Normalized -- Full year financial statements that have been reviewed by the underwriter or the
Servicer.
** YTD numbers will not be normalized.
OPERATING EXPENSES:
-------------- ------------ ------------ -------------- -------------- ----------- -------
Real Estate Taxes
-------------- ------------ ------------ -------------- -------------- ----------- -------
Property Insurance
-------------- ------------ ------------ -------------- -------------- ----------- -------
Utilities
-------------- ------------ ------------ -------------- -------------- ----------- -------
Repairs and Maintenance
-------------- ------------ ------------ -------------- -------------- ----------- -------
Management Fees
-------------- ------------ ------------ -------------- -------------- ----------- -------
Payroll & Benefits Expense
-------------- ------------ ------------ -------------- -------------- ----------- -------
Advertising & Marketing
-------------- ------------ ------------ -------------- -------------- ----------- -------
Professional Fees
-------------- ------------ ------------ -------------- -------------- ----------- -------
Other Expenses
-------------- ------------ ------------ -------------- -------------- ----------- -------
Ground Rent
-------------- ------------ ------------ -------------- -------------- ----------- -------
TOTAL OPERATING EXPENSES $0.00 $0.00 $0.00 $0.00 $0.00 % %
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
OPERATING EXPENSES RATIO
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
NET OPERATING INCOME $0.00 $0.00 $0.00 $0.00 $0.00
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
Leasing Commissions
-------------- ------------ ------------ -------------- -------------- ----------- -------
Tenant Improvements
-------------- ------------ ------------ -------------- -------------- ----------- -------
Replacement Reserve
-------------- ------------ ------------ -------------- -------------- ----------- -------
TOTAL CAPITAL ITEMS $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
N.O.I. AFTER CAPITAL ITEMS $0.00 $0.00 $0.00 $0.00 $0.00
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
DEBT SERVICE (PER SERVICER) $0.00 $0.00 $0.00 $0.00 $0.00
-------------- ------------ ------------ -------------- -------------- ----------- -------
CASH FLOW AFTER DEBT SERVICE $0.00 $0.00 $0.00 $0.00 $0.00
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
(1) DSCR: (NOI/DEBT SERVICE)
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
DSCR: (AFTER RESERVES/CAP ITEMS)
-------------- ------------ ------------ -------------- -------------- ----------- -------
-------------- ------------ ------------ -------------- -------------- ----------- -------
SOURCE OF FINANCIAL DATE:
------------------------------------------------------------------------------------------------
(i.e., operating statements, financial statements, tax return, other)
NOTES AND ASSUMPTIONS:
- ---------------------------------------------------------------------------------------------------------------------------------
The years shows above will always show a three year history. 1996 is the current year financials; 1997 is the prior
year financials.
This report may vary depending on the property type and due to reporting differences among the financial statements
of the borrowers.
INCOME: COMMENT
EXPENSE: COMMENT
CAPITAL ITEMS: COMMENT
(1) Used in the Comparative Financial Status Report.
</TABLE>
C-7-1
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED HEREBY NOR AN OFFER
OF SUCH SECURITIES TO ANY PERSON IN ANY STATE OR OTHER JURISDICTION IN WHICH
SUCH AN OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME
DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE; HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS
REQUIRED BY LAW TO BE DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR
SUPPLEMENTED ACCORDINGLY.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Summary of Prospectus...................... 6
Risk Factors .............................. 20
Industry Overview.......................... 41
The Depositor.............................. 42
The Mortgage Loan Seller................... 42
The Trustee ............................... 43
The Fiscal Agent .......................... 43
The Servicer and Initial Special Servicer 43
Description of the Mortgage Pool .......... 44
Description of the Subordinated
Certificates.............................. 75
Prepayment and Yield Considerations ...... 91
The Pooling and Servicing Agreement ...... 109
ERISA Considerations ...................... 140
Certain Legal Aspects of Mortgage Loans .. 140
Certain Federal Income Tax Consequences ... 151
Legal Investment........................... 159
Use of Proceeds............................ 159
Plan of Distribution ...................... 160
Legal Matters ............................. 161
Financial Information ..................... 161
Rating .................................... 161
Available Information ..................... 161
Index of Significant Definitions .......... 162
Glossary of Key Real Estate, Mortgage and
Mortgage Loan Underwriting Terms.......... 168
Annex A--Loan Characteristics.............. A-1
Annex B--Global Clearance, Settlement and
Tax Documentation Procedures ............. B-1
Annex C--Form of Reports to
Certificateholders ....................... C-1
</TABLE>
<PAGE>
$133,312,786
SUBORDINATED CERTIFICATES
ASSET SECURITIZATION
CORPORATION,
DEPOSITOR
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES,
SERIES 1997-D4
[NOMURA CAPITAL LOGO]
PROSPECTUS
NOMURA SECURITIES
INTERNATIONAL, INC.
APRIL 11, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered, other than underwriting
compensation, are set forth below. All such expenses, except for the filing
fee, are estimated.
<TABLE>
<CAPTION>
ITEM AMOUNT
- ------------------------------------------ ------------
<S> <C>
SEC Registration Fee ...................... $ 41,585.31
Blue Sky and NASD Fees and Expenses ....... $ 24,500
Legal Fees and Expenses.................... $350,000
Accounting Fees and Expenses............... $ 11,875
Servicer's and Trustee's Fees and
Expenses.................................. $ 4,750
Printing and Engraving Fees................ $200,000
Rating Agency Fees......................... $190,000
Miscellaneous.............................. $ 25,000
------------
$847,710.31
============
</TABLE>
- ------------
ITEM 31. SALES TO SPECIAL PARTIES.
Not applicable.
ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.
To be provided by amendment.
ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the form of Underwriting Agreement included in the Registration
Statement, the Underwriter is obligated under certain circumstances to
indemnify certain controlling persons of the Depositor against certain
liabilities, including liabilities under the Act.
The Depositor's By-laws and Certificate of Incorporation provide for
indemnification of directors and officers of the Depositor to the full extent
permitted by Delaware law and the power to purchase and maintain insurance on
behalf of directors and officers against any liability asserted against them
and incurred by them in such capacities. The Certificate of Incorporation
further provides that no director of the Depositor shall be personally liable
to the Depositor or to its stockholders for monetary damages for any breach
of such director's fiduciary duty as a director of the Depositor, provided
that such limitation on a director's liability shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of
loyalty to the Depositor or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of Delaware,
or (iv) for any transaction from which the director derived an improper
personal benefit.
Section 145 of the Delaware General Corporation Law provides, in
substance, that Delaware corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents
in connection with actions, suits or proceedings brought against them by a
third party or in the right of the corporation, by reason of the fact that
they are or were such directors, officers, employees or agents, against
expenses incurred in any such action, suit or proceeding.
The Pooling and Servicing Agreement provides that no director, officer,
employee or agent of the Depositor is liable to the Trust Fund or the
Certificateholders, except for such person's own willful misfeasance, bad
faith or gross negligence in the performance of duties or reckless disregard
of obligations and duties. The Pooling and Servicing Agreement
II-1
<PAGE>
provides further than, with the exceptions stated above, a director, officer,
employee or agent of the Depositor is entitled to be indemnified against any
loss, liability or expenses incurred in connection with legal actions
relating to the Pooling and Servicing Agreement and the Certificates, other
than such expenses relating to particular Mortgage Loans.
ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
Not applicable.
ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.
<TABLE>
<CAPTION>
<S> <C>
1.1 Revised Form of Underwriting Agreement
3.1* Certificate of Incorporation of Asset Securitization Corporation as currently in effect
3.2** Bylaws of Asset Securitization Corporation as currently in effect
4.1* Form of Pooling and Servicing Agreement
5.1* Opinion of Cadwalader, Wickersham & Taft as to legality (including the consent of such firm)
8.1* Opinion of Cadwalader, Wickersham & Taft as to certain tax matters (included in Exhibit 5.1)
24.1* Consent of Cadwalader, Wickersham & Taft (included as part of Exhibits 5.1 and 8.1)
25.1* Power of Attorney (located on the signature page of the initial filing of this Registration Statement)
</TABLE>
- ------------
* Previously filed.
** Previously filed in connection with Registration Statement No.
33-89494 and incorporated by reference herein.
ITEM 36. UNDERTAKINGS.
A. Undertaking in Respect of Indemnification
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant, pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant, as
the case may be, will, unless in the opinion of its counsel that the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the act and will be governed by the final
adjudication of such issue.
B. Undertaking pursuant to Rule 430A.
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-11 and has duly caused this Post-effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of New York, State of
New York, on April 11, 1997.
ASSET SECURITIZATION
CORPORATION
By: /s/ Michael Berman
_________________________
Name: Michael Berman
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-effective Amendment No. 1 to the Registration Statement has been signed
by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
- ----------------------- -----------------------------------------
<S> <C>
*
- ------------------------
Ethan Penner President and Director
/s/ Michael Berman
- ----------------------
Michael Berman Chief Executive Officer and Director
*
----------------------- Chief Financial Officer and Treasurer
Robert Rottmann (Principal Accounting Officer)
*
-----------------------
William Wraith Director
*
-----------------------
Richard Ader Director
*
-----------------------
Hiroshi Tsujimura Director
*
-----------------------
Max C. Chapman, Jr. Chairman and Director
*
-----------------------
Mark W. McGauley Director
*By: /s/ Michael Berman
________________________________
Name: /s/ Michael Berman
_______________________________
Attorney-in-fact
</TABLE>
II-3
<PAGE>
EXHIBITS INDEX
<TABLE>
<CAPTION>
SEQUENTIAL PAGE
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT NUMBER
- ------------------ ----------------------------------------------------------------------------------- -------------------
<S> <C> <C>
1.1 Revised Form of Underwriting Agreement
3.1* Certificate of Incorporation of Asset Securitization Corporation as currently in
effect
3.2** Bylaws of Asset Securitization Corporation as currently in effect
4.1* Form of Pooling and Servicing Agreement
5.1* Opinion of Cadwalader, Wickersham & Taft as to legality (including the consent of
such firm)
8.1* Opinion of Cadwalader, Wickersham & Taft as to certain tax matters (included in
Exhibit 5.1)
24.1* Consent of Cadwalader, Wickersham & Taft (included as part of Exhibits 5.1 and 8.1)
25.1* Power of Attorney (located on the signature page of the initial filing of this
Registration Statement)
</TABLE>
- ------------
* Previously filed.
** Previously filed in connection with Registration Statement No.
33-89494 and incorporated by reference herein.
II-4
<PAGE>
$133,312,786
ASSET SECURITIZATION CORPORATION
CLASS B-1 COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
CLASS B-2 COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
CLASS B-3 COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
CLASS B-4 COMMERCIAL-MORTGAGE PASS-THROUGH CERTIFICATES,
CLASS B-5 COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, AND
CLASS B-6 COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
UNDERWRITING AGREEMENT
Nomura Securities International, Inc.
Two World Financial Center - Building B
New York, New York 10281-1198
April 11, 1997
Dear Sirs:
1. Introduction. Asset Securitization Corporation, a Delaware
corporation (the "Company"), proposes to issue and sell $133,312,786 principal
amount of Commercial Mortgage Pass-Through Certificates of the classes stated
above (collectively, the "Certificates") to Nomura Securities International,
Inc. (the "Underwriter"), subject to the terms and conditions set forth herein.
The Certificates have been issued pursuant to a pooling and servicing agreement
(the "Pooling and Servicing Agreement") among the Company, as depositor,
AMRESCO Management, Inc., as servicer (the "Servicer"), and special servicer
(the "Special Servicer"), LaSalle National Bank, as trustee (the "Trustee"),
and ABN AMRO Bank N.V., as fiscal agent (the "Fiscal Agent"). The Certificates
evidence beneficial ownership interests in the Trust Fund (as defined in the
Pooling and Servicing Agreement) consisting of a pool (the "Mortgage Pool") of
121 mortgage loans (the "Mortgage Loans"), all as described in the Prospectus
(as defined below). The Mortgage Loans have been acquired by the Company from
Nomura Asset Capital Corporation (the "Mortgage Loan Seller") pursuant to a
Mortgage Loan Contribution, Purchase and Sale Agreement (the "Purchase
Agreement"), by and between the Company and the Mortgage Loan Seller. This is
to confirm the arrangements with respect to the purchase of the Certificates by
the Underwriter. Terms not defined herein which are defined in the Pooling and
Servicing Agreement shall have the meanings ascribed to them in the Pooling and
Servicing Agreement.
<PAGE>
Elections will be made to treat designated portions of the Trust
Fund, exclusive of the Reserve Accounts, Lock Box Accounts, Cash Collateral
Accounts, the Excess Interest and the Default Interest (each as defined in the
Prospectus) (such portions of the Trust Fund, the "Trust REMICs"), and the
Trust REMICs will qualify, as two separate "real estate mortgage investment
conduits" (each, a "REMIC" or, alternatively, the "Upper-Tier REMIC" and the
"Lower-Tier REMIC," respectively) within the meaning of Code Section 860D. The
Reserve Accounts, the Lock Box Accounts and the Cash Collateral Accounts will
be treated as beneficially owned by the respective borrowers for federal income
tax purposes. The Lower-Tier REMIC will hold the Mortgage Loans (exclusive of
the Excess Interest and the Default Interest), proceeds therefrom, the
Collection Account, the Distribution Account and any REO Property, and will
issue (i) certain uncertificated classes of regular interests (the "Lower-Tier
Regular Interests") to the Upper-Tier REMIC and (ii) the Class LR Certificates,
which will represent the sole class of residual interest in the Lower-Tier
REMIC. The Upper-Tier REMIC will hold the Lower-Tier Regular Interests in the
Upper-Tier REMIC Distribution Account in which distributions thereon will be
deposited, and will issue (i) the classes of regular interests represented by
the Regular Certificates and (ii) the Class R Certificates, which will
represent the sole class of residual interests in the Upper-Tier REMIC. The
Class V-1 and Class V-2 Certificates will represent pro rata undivided
beneficial interests in the portion of the Trust Fund consisting of Default
Interest and Excess Interest in respect of the Mortgage Loans, respectively,
and such portions will be treated as a grantor trust for federal income tax
purposes.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-11
(Registration No. 333-21315) covering the registration of the Certificates,
under the Securities Act of 1933, as amended (the "Act"), including the related
preliminary prospectus, or prospectuses, and either (A) has prepared and filed
an amendment to such registration statement, including a final prospectus, (B)
if the Company has elected to rely upon Rule 430A ("Rule 430A") of the rules
and regulations of the Commission under the 1933 Act (the "Rules and
Regulations"), will prepare and file a prospectus, in accordance with the
provisions of Rule 430A and Rule 424(b) ("Rule 424(b)") of the Rules and
Regulations, promptly after execution and delivery of this Agreement. The
information, if any, included in such prospectus that was omitted from the
prospectus included in such registration statement at the time it became
effective but that is deemed, pursuant to paragraph (b) of Rule 430A, to be
part of such registration statement at the time it became effective is referred
to herein as the "Rule 430A Information". Each prospectus used before the time
such registration statement became effective, and any prospectus that omits the
Rule 430A Information that is used after such effectiveness and prior to the
<PAGE>
execution and delivery of this Agreement, is herein called a "preliminary
prospectus". Such registration statement, including the exhibits thereto, as
amended to the date hereof and including, if applicable, the Rule 430A
Information, is herein called the "Registration Statement," and the prospectus
included in such Registration Statement is herein called the "Prospectus",
except that, if the final prospectus first furnished to the Underwriter after
the execution of this Agreement for use in connection with the offering of the
Certificates differs from the prospectus included in such Registration
Statement (whether or not such prospectus is required to be filed pursuant to
Rule 424(b)), the term "Prospectus" shall refer to the final prospectus first
furnished to the Underwriter for such use.
The Company hereby agrees with the Underwriter as follows:
2. Representations and Warranties of the Company. The Company
represents and warrants to the Underwriter as of the date hereof, and as of the
Closing Date referred to in Section 3(b) hereof as follows:
(a) The Registration Statement has become effective under the
Act, and no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Act. On the effective
date of the Registration Statement and at all times subsequent thereto,
up to the Closing Date, (A) the Registration Statement conformed and will
conform in all material respects to the requirements of the Act and the
Rules and Regulations, and did not and will not include any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, and (B) the Prospectus and any amendments or supplements
thereto will conform in all material respects to the requirements of the
Act and the Rules and Regulations, will contain all material information
included in any other prospectus relating to the Mortgage Pool and will
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they
are made, not misleading; provided, however, that the foregoing does not
apply to statements or omissions in such documents based upon written
information furnished to the Company by the Underwriter specifically for
use therein.
<PAGE>
(b) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its assets and
conduct its business as described in the Prospectus, and to enter into
and perform its obligations under this Agreement, the Purchase Agreement
and the Pooling and Servicing Agreement; and the Company has received no
notice of proceedings relating to the revocation or modification of any
license, certificate authority or permit applicable to its owning such
properties or conducting business which singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the conduct of the business, operations,
financial condition, assets or income of the Company. The Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each other jurisdiction in which it owns or leases property
of a nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that a failure to so
qualify or be in good standing would have a material adverse effect on
the business, operations, condition (financial or otherwise), affairs,
assets, regulatory situation or business prospects of the Company. The
Company has no subsidiaries.
(c) This Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid and binding instrument of the
Company in accordance with its terms.
(d) The Pooling and Servicing Agreement and the Purchase
Agreement, when executed and delivered as contemplated hereby and
thereby, will have been duly executed and delivered by the Company and
will constitute, when so executed and delivered, a legal, valid and
binding instrument enforceable against the Company in accordance with its
terms, except as enforceability may be limited by (i) applicable
bankruptcy, reorganization, insolvency, moratorium and other laws
affecting the rights of creditors generally and (ii) general principles
of equity and the discretion of the court (regardless of whether
enforceability of such remedies is considered in a proceeding in equity
or at law); and the Pooling and Servicing Agreement and the Purchase
Agreement conform to the description thereof in the Prospectus.
(e) The issuance of the Certificates has been duly authorized
by the Company and have been validly issued and outstanding; and the
Certificates will be entitled to the benefits provided by the Pooling and
Servicing Agreement. The Certificates are in all material respects in the
form contemplated by the Pooling and Servicing Agreement; and the
Certificates will conform in all material respects to the description
thereof contained in the Prospectus.
(f) As of the Closing Date, the Certificates, the Pooling and
Servicing Agreement and the Purchase Agreement will each conform in all
material respects to the respective descriptions thereof contained in the
Prospectus and such descriptions constitute a fair and accurate summary
of the provisions thereof and the transactions contemplated therein.
(g) The representations and warranties made by the Company in
the Pooling and Servicing Agreement and made in any Officer's
Certificates of the Company delivered pursuant to the Pooling and
Servicing Agreement will be true and correct at the time made and on the
Closing Date and you may rely on the representations and warranties made
by us to the parties to the Pooling and Servicing Agreement as if such
representations and warranties were included in this Section 2(a).
<PAGE>
(h) None of (A) the issuance and sale of the Certificates,
(B) the execution, delivery or performance by the Company of this
Agreement, the Purchase Agreement or the Pooling and Servicing Agreement,
(C) the consummation of the transactions contemplated herein and therein,
and (D) compliance by the Company with the provisions hereof or thereof,
violates, conflicts with or constitutes a breach of any of the terms or
provisions of, or, after giving effect to the transactions contemplated
herein and therein, will violate, conflict with or constitute a breach of
any of the terms or provisions of, or a default under (or an event that
with notice or the lapse of time, or both, would constitute a default),
or require consent under, or result in the imposition of a lien or
encumbrance on any assets of the Company, or an acceleration of any
indebtedness of the Company pursuant to, (1) the certificate of
incorporation or bylaws of the Company, (2) any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to
which the Company is a party or by which it or its assets is or may be
bound, (3) any statute, rule or regulation applicable to the Company or
any of its assets or (4) any judgment, order or decree of any court or
governmental agency or authority having jurisdiction over the Company or
any of its assets, except for any violations, defaults, conflicts or
breaches which are not, in the aggregate, material to the business,
operations, condition (financial or otherwise), affairs, assets,
regulatory situation or business prospects of the Mortgage Pool, in the
aggregate, or the Company.
(i) No consent, approval, authorization or order of, or
filing, registration, qualification, license or permit of or with, (A)
any court or governmental agency, body or administrative agency or (B)
any other person is required for (1) the execution, delivery and
performance by the Company of this Agreement, the Purchase Agreement or
the Pooling and Servicing Agreement, (2) the transactions contemplated
herein or therein or (3) the issuance and sale of the Certificates and
the transactions contemplated hereby and thereby, except such as have
been obtained and made under the Act and state securities or Blue Sky
laws and regulations or such as may be required by the NASD.
(j) There is (A) no action, suit, investigation or proceeding
before or by a court, arbitrator or governmental agency, body or
official, domestic or foreign, now pending or, to the best knowledge of
the Company threatened or contemplated to which the Company is or may be
party or to which the business or the assets of the Company are subject,
(B) no statute, rule, regulation or order that any governmental agency or
that has been proposed by any governmental body and (C) no injunction,
restraining order or order of any nature by a federal or state court or
foreign court of competent jurisdiction to which the Company is or may be
subject or to which the business or assets of the Company are or may be
subject, that, in the case of clauses (A), (B) and (C) above, (1) is
required to be disclosed in the Prospectus and that is not so disclosed,
or (2) could reasonably be expected to (x) result in a material adverse
effect on the business, operations, condition (financial or otherwise),
affairs, assets, regulatory situation or business prospects of the
Mortgage Pool, in the aggregate, or the Company, (y) interfere with or
adversely affect the issuance or marketability of the Certificates
pursuant hereto or (z) in any manner materially adversely affect the
performance by the Company of its obligations under or the validity or
enforceability of this Agreement, the Purchase Agreement, the Pooling and
Servicing Agreement or the Certificates.
(k) The transfer of the Mortgage Loans to the Trust Fund at
or prior to the Closing Date and the sale by the Company of the
Certificates will be treated by the Company for financial accounting and
reporting purposes as a sale of assets and not as a pledge of assets to
secure debt.
<PAGE>
(l) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus except as
otherwise stated therein, (A) there has been no material adverse change
in the Mortgage Pool, in the aggregate, whether or not arising in the
ordinary course of business and (B) there have been no transactions
entered into by the Company which are material, other than those in the
ordinary course of business.
(m) Neither the Company nor the Trust Fund is or, as a result
of the offer and sale of the Certificates as contemplated in the
Prospectus and in this Agreement will become, an "investment company" as
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), or an "affiliated person" of any such
"investment company" that is registered or is required to be registered
under the Investment Company Act (or an "affiliated person" of any such
"affiliated person"), as such terms are defined in the Investment Company
Act.
3. Purchase, Sale and Delivery. (a) On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell the
Certificates to the Underwriter. The purchase price for the Certificates will
be 76.41% of the aggregate initial principal balance thereof as of March 27,
1997 (the "Cut-off Date"), plus accrued interest from April 11, 1997 up to but
not including the Closing Date, before deducting expenses payable by the
Company.
(b) Delivery of the Certificates shall be made, against payment of
the purchase price therefor, at the offices of Cadwalader, Wickersham &
Taft, 100 Maiden Lane, New York, New York 10038, or such other location
as may be mutually acceptable. Such delivery and payment shall be made at
10:00 A.M. New York City time, on April 16, 1997 or at such other time as
shall be agreed upon by the Underwriter and the Company. The time and
date of such delivery and payment are herein called the "Closing Date."
(c) Delivery of the Certificates shall be made by the Company to
the Underwriter against payment of the purchase price specified above in
immediately available funds by wire transfer. Unless delivery is made
through the facilities of the Depository Trust Company, the Certificates
so to be delivered will be in definitive, fully registered form, in such
denominations and registered in such names as you request, and will be
made available for inspection and packaging at your office at least
twenty-four hours prior to the Closing Date.
4. Offering by Underwriter. It is understood that the
Underwriter proposes to offer the Certificates for sale to the public as set
forth in the Prospectus.
5. Covenants of the Company. The Company covenants and agrees
with the Underwriter as follows:
(a) The Company will advise you or your counsel promptly of any
order or communication suspending or preventing, or threatening to
suspend or prevent, the offer and sale of the Certificates, or of any
proceedings or examinations that may lead to such an order or
communication, whether by or of the Commission or any authority
administering any state securities or Blue Sky law, as soon as the
Company is advised thereof, and will use its best efforts to prevent the
issuance of any such order or communication and to obtain as soon as
possible its lifting, if issued.
<PAGE>
(b) The Company will not amend the Registration Statement or amend
or supplement the Prospectus prior to the Closing Date unless the
Underwriter shall previously have been advised thereof and shall not have
objected thereto within a reasonable time after being furnished a copy
thereof. The Company shall promptly prepare, upon the Underwriter
request, any amendment to the Registration Statement or amendment or
supplement to the Prospectus that may be necessary or advisable in
connection with the offering of the Certificates.
(c) If at any time after the date hereof when a prospectus relating
to the Certificates is required to be delivered under the Act any event
occurs as a result of which, in the judgment of the Company or in the
reasonable opinion of counsel for the Company or counsel for the
Underwriter, it becomes necessary or advisable to amend the Registration
Statement or to amend or supplement the Prospectus in order to make the
statements in the Prospectus, in the light of the circumstances when such
Prospectus is delivered to a prospective purchaser, not misleading, or if
it is necessary at any time to amend the Registration Statement or to
amend or supplement the Prospectus to comply with the Act, the Company
promptly will (i) notify the Underwriter and (ii) prepare and file with
the Commission an amendment or supplement which will correct such
statement or omission or an amendment which will effect such compliance.
(d) The Company will make generally available to the holders of the
Certificates and will deliver to you, in each case as soon as
practicable, an earnings statement covering the twelve-month period
beginning after the Closing Date, which will satisfy the provisions of
Section 10 (a) of the Act with respect to the Certificates.
(e) The Company will furnish to you copies of the Registration
Statement (two of which will be signed and will include all documents and
exhibits thereto), the preliminary prospectus, the Prospectus, and all
amendments and supplements to such documents, in each case as soon as
available and in such quantities as you request.
(f) The Company will arrange for the qualification of the
Certificates for sale and the determination of their eligibility for
investment under the laws of such jurisdictions as you reasonably
designate and will continue such qualifications in effect so long as
reasonably required for the distribution. provided, however, that the
Company shall not be required to qualify to do business in any
jurisdiction where it is not qualified on the date hereof or to take any
action which would subject it to general or unlimited service of process
in any jurisdiction in which it is not, on the date hereof, subject to
such service of process.
(g) The Company will pay all expenses incidental to the performance
of its obligations under this Agreement and will reimburse the
Underwriter for any expenses (including reasonable fees and disbursements
of counsel and accountants) incurred by it in connection with
qualification of the Certificates and determination of their eligibility
for investment under the laws of such jurisdictions as you designate and
the printing of memoranda relating thereto, for any fees charged by the
nationally recognized statistical rating agencies for the rating of the
Certificates, for the filing fee of the National Association of
Securities Dealers, Inc. relating to the Certificates, if applicable, and
for expenses incurred in distributing preliminary prospectuses to the
Underwriter.
<PAGE>
(h) The Pooling and Servicing Agreement will provide that, during
the period when a prospectus is required by law to be delivered in
connection with the sale of the Certificates pursuant to this Agreement,
the Servicer or the Trustee will file or cause to be filed, on a timely
and complete basis, all documents that are required to be filed by the
Company or on behalf of the Trust Fund with the omission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(i) So long as the Certificates shall be outstanding, the Company
will deliver to you the annual statement of compliance delivered to the
Trustee pursuant to the Pooling and Servicing Agreement and the annual
statement of a firm of independent public accountants furnished to the
Trustee pursuant to the Pooling and Servicing Agreement as soon as
reasonably practicable after such statements are furnished to the
Company.
6. Conditions to the Obligations of the Underwriter. The
obligations of the Underwriter to purchase and pay for the Certificates will be
subject to the accuracy of the representations and warranties on the part of
the Company as of the date hereof and the Closing Date, to the accuracy of the
statements made in any officers' certificates (each an "Officer's Certificate")
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional conditions precedent:
(a)(i) At the time that this Agreement is executed, Price
Waterhouse shall have furnished to you a letter, addressed to you, and in
form and substance satisfactory to you in all respects, reflecting the
performance of the procedures previously requested by you and including a
statement to the effect that using the assumptions and methodology used
by the Company, all of which shall be described in such letter or the
Prospectus, they have recalculated such numbers, percentages, dates and
amounts included in the tables ("Yield Tables") attached as Appendix A to
their letter and included in the Prospectus as you may reasonably
request, compared the results of their calculations to the corresponding
items in the Prospectus, and found each such number, percentage, date and
amount set forth in the Prospectus to be in agreement with the results of
such calculations. To the extent historical financial delinquency or
related information is included with respect to one or more servicers,
such letter or letters shall also relate to such information.
<PAGE>
(a)(ii) At the Closing Date, Price Waterhouse shall have furnished
to you a letter, addressed to you, and in form and substance satisfactory
to you in all respects and dated as of the Closing Date, (x) to the
effect that they reaffirm the statements made in the letter furnished
pursuant to Section 6(a)(i) as of the Closing Date, and (y) relating, to
the extent such information is not covered in the letter or letters
provided pursuant to clause (a)(i), to a portion of the information set
forth on the Mortgage Loan Schedule attached to the Pooling and Servicing
Agreement or, if a letter relating to the same information is provided to
the Trustee, indicating that you are entitled to rely upon its letter to
the Trustee.
(b) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall not
have been any change, or any development involving a prospective change,
in or affecting the Mortgage Pool, in the aggregate, the effect of which,
in any case, is, in your judgment, so material and adverse as to make it
impracticable or inadvisable to proceed with the offering or the delivery
of the Certificates as contemplated by the Registration Statement and the
Prospectus. All actions required to be taken and all filings required to
be made by the Company under the Act prior to the sale of the
Certificates shall have been duly taken or made; and prior to the Closing
Date, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose
shall have been instituted, or to the knowledge of the Company or you,
shall be contemplated by the Commission or by any authority administering
any state securities or Blue Sky law.
(c) The Certificates shall be given the rating set forth in
Schedule I hereto by Fitch Investors Service, L.P. ("Fitch") and/or
Standard & Poor's Rating Services ("S&P").
(d) You shall have received the opinion of Cadwalader, Wickersham &
Taft, counsel for the Company, dated the Closing Date, reasonably
satisfactory to you.
(e) You shall have received a letter from Barry M. Funt, Esq.,
in-house counsel for the Company, dated the Closing Date, reasonably
satisfactory to you.
<PAGE>
Each opinion also shall relate to such other matters as you
reasonably may request. With respect to such opinions, each counsel: (1)
may express its reliance as to factual matters on the representations and
warranties made by, and on certificates or other documents finished by
officers of, the parties to this Agreement, the Pooling and Servicing
Agreement and the Purchase Agreement; (2) may assume, as applicable, the
due authorization, execution and delivery of the instruments and
documents referred to therein by the parties thereto; (3) may qualify
such opinion only as to the federal laws of the United States of America,
the laws of the State of New York and the General Corporation Law of the
State of Delaware; and (4) may, to the extent necessary, rely as to the
laws of states other than New York on the opinion of local counsel.
(f) You shall have received from Mayer, Brown & Platt, counsel for
the Trustee, an opinion or opinions, dated as of the Closing Date, with
respect to such matters as the Underwriter shall reasonably request, in
form and substance reasonably satisfactory to the Underwriter.
(g) You shall have received from Weil, Gotshal & Manges LLP,
counsel for the Servicer, an opinion or opinions, dated as of the Closing
Date, with respect to such matters as the Underwriter shall reasonably
request, in form and substance reasonably satisfactory to the
Underwriter.
(h) You shall have received Officer's Certificates signed by such
of the principal executive, financial and accounting officers of the
Company as you may request, dated as of the Closing Date, in which such
officers, to the best of their knowledge after reasonable investigation,
shall state that the representations and warranties of the Company in
this Agreement are true and correct in all material respects; that the
Company has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to the Closing Date;
that no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are contemplated; that, subsequent to the dates as of which
information is given in the Prospectus as amended or supplemented, and
except as set forth or contemplated in the Prospectus, there has not been
any material adverse change in the Mortgage Pool, in the aggregate; that,
except as otherwise stated in the Prospectus, there are no material
actions, suits or proceedings pending before any court or governmental
agency, authority or body or, to their knowledge, threatened, affecting
the Company or the transactions contemplated by this Agreement; and that
attached thereto are true and correct copies of a letter or letters from
one or more nationally recognized statistical rating agencies confirming
that the Certificates have received the ratings set forth in Schedule I
hereto and that such ratings have not been lowered since the date of such
letter.
<PAGE>
The Company will furnish you with such conformed copies of such
opinions, certificates, letters and documents as you reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
if the Company is in breach of any covenants or agreements contained herein, or
if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Underwriter, this Agreement and all obligations of the
Underwriter hereunder may be canceled at, or at any time prior to, the Closing
Date by the Underwriter. Notice of such cancellation shall be given to the
Company in writing, or by telephone or telegraph confirmed in writing.
7. Reimbursement of Underwriter's Expenses. If the sale of the
Certificates provided for herein is not consummated because any condition to
the obligation of the Underwriter set forth in Section 6 is not satisfied or
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or comply with any provision hereof, other than by
reason of a default by the Underwriter, the Company will reimburse the
Underwriter, upon demand, for all out-of-pocket expenses (including reasonable
fees and disbursements of counsel) that shall have been incurred by it in
connection with the proposed purchase and sale of the Certificates.
8. Indemnification and Contribution. The Company agrees with
the Underwriter that:
(a) The Company will indemnify and hold harmless the
Underwriter and each person who controls the Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
losses, claims, damages or liabilities, joint or several to which they may
become liable under the 1933 Act, the 1934 Act, or other federal or state law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, or the Prospectus, or in any amendment
or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and agrees to
reimburse such indemnified party for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company as herein stated by the Underwriter specifically for use in connection
with the preparation thereof.
<PAGE>
(b) The Underwriter will indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act,
to the same extent as the foregoing indemnity from the Company to the
Underwriter, but only with reference to written information furnished to the
Company as herein stated by or on behalf of the Underwriter specifically for
use in connection with the preparation of the documents referred to in the
foregoing indemnity. This indemnity will be in addition to any liability that
the Underwriter may otherwise have. The Company and the Underwriter each
acknowledge that (i) the statements set forth in the second sentence of the
second to last paragraph of the cover page, (ii) the statements set forth in
the first sentence of the last paragraph of the cover page, (iii) the
information set forth in the second paragraph under the caption "Plan of
Distribution" and (iv) the second sentence of the fifth full paragraph under
the caption "Plan of Distribution" included in the Prospectus constitute the
only information furnished in writing by or on behalf of the Underwriter for
inclusion in the documents referred to in the foregoing indemnity.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability that it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled (i) to
participate therein, and (ii) to the extent that it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party or parties shall have reasonably
concluded that there may be legal defenses available to it or them and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right
to select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties; upon receipt of notice from the indemnifying party to such
indemnified party of its election to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not
be liable for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel,
approved by the Underwriter in the case of paragraph (a) of this Section 8,
representing the indemnified parties under such paragraph (a) who are parties
to such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party; and except that, if clause (i)
or (iii) is applicable, such liability shall only be in respect of the counsel
referred to in such clause (i) or (iii).
<PAGE>
(d) If the indemnification provided for in this Section 8
shall for any reason be unavailable to an indemnified party under this Section
8, then the Company and the Underwriter shall contribute to the amount paid or
payable by such indemnified party as a result of the aggregate losses, claims,
damages and liabilities referred to in paragraph (a) or (b) above, in such
proportion as is appropriate to reflect (i) the relative benefits received by
the Company on the one hand and the Underwriter on the other from the offering
of the Certificates and (ii) the relative fault of the Company on the one hand
and the Underwriter on the other in connection with the statement or omission
that resulted in such losses, claims, damages and liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Underwriter shall be deemed to be in the same proportion as the
total proceeds from the offering of the Certificates (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions (before deducting expenses) received by the Underwriter with
respect to such offering, in each case as set forth on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and the Underwriter
agree that it would not be just and equitable if contributions pursuant to this
paragraph (d) were to be determined by pro rata allocation or by any other
method of allocation that does not take account of the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending against any action or claim which is the subject of
this paragraph (d). Notwithstanding the provisions of this paragraph (d), the
Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Certificates underwritten and
distributed by it were offered to the public exceeds the amount of any damages
that the Underwriter has otherwise been required to pay or become liable to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8 each person, if any, who controls the Underwriter within the
meaning of either the 1933 Act of the 1934 Act shall have the same rights to
contribution as the Underwriter, and each person, if any, who controls the
Company within the meaning of either the 1933 Act or the 1934 Act, each
director and each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company. Any party entitled to contribution will promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect of which a claim for contribution may be made
against another party or parties under this paragraph (d), notify such party or
parties from whom contribution may be sought, but the omission to so notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this paragraph (d).
<PAGE>
9. Termination. (a) This Agreement shall be subject to termination
in the absolute discretion of the Underwriter, by notice given to the Company
prior to delivery of and payment for the Certificates, if prior to such time
(i) trading of securities generally on the New York Stock Exchange or the
American Stock Exchange shall have been suspended or materially limited, (ii) a
general moratorium on commercial banking activities in the State of New York
shall have been declared by either Federal or New York State authorities or
(iii) there shall have occurred any material outbreak or declaration of
hostilities or other calamity or crisis the effect of which on the financial
markets of the United States is such as to make it, in the reasonable judgment
of the Underwriter, impracticable to market the Certificates on the terms
specified herein.
(b) If this Agreement is terminated in accordance with
Section 9(a), except if the event described in Section 9(a)(i) occurred
directly or indirectly as a result of the action of the Underwriter and such
event is the basis upon which the Underwriter seeks termination, the Company
shall reimburse the Underwriter for the reasonable fees and expenses of its
counsel and for such other out-of-pocket expenses as shall have been incurred
in connection with this Agreement and the proposed purchase of the
Certificates, and upon demand, the Company shall pay the full amount thereof to
the Underwriter.
(c) This Agreement will survive delivery of and payment for
the Certificates. The provisions of Sections 7, 8 and 12 shall survive the
termination or cancellation of this Agreement.
10. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Underwriter, will be mailed,
delivered or telegraphed and confirmed to the Underwriter at 2 World Financial
Center - Building B, New York, New York 10281-1198, attention of Manager -
Mortgage Finance Department; or, if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at 2 World Financial Center -
Building B, New York, New York 10281-1198, attention of Manager Mortgage
Finance Department.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8, and
their successors and assigns, and no other person will have any right or
obligation hereunder.
12. Applicable Law; Counterparts. THIS AGREEMENT WILL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This
Agreement may be executed in any number of counterparts, each of which shall
for all purposes be deemed to be an original and all of which shall together
constitute but one and the same instrument.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicate hereof,
whereupon it will become a binding agreement among the Company and the
Underwriter in accordance with its terms.
Very truly yours,
ASSET SECURITIZATION CORPORATION
By: Name:_____________________________
_____________________________
Title:
The foregoing Underwriting Agreement
hereby is confirmed and accepted as
of the date first above written.
NOMURA SECURITIES INTERNATIONAL, INC.
By: _________________________
Title:
<PAGE>
SCHEDULE I
Initial aggregate Certificate Balance of the Units: $133,312,786.
INITIAL
CERTIFICATE PASS-THROUGH FITCH
CERTIFICATES BALANCE RATE S&P RATING RATING
- -----------------------------------------------------------------------------
Class B-1 Certificates........ $35,082,312 7.525% BB+ BB+
Class B-2 Certificates........ $35,082,312 7.525% BB BB
Class B-3 Certificates........ $14,032,925 7.525% BB- BB-
Class B-4 Certificates........ $21,049,387 7.525% B+
Class B-5 Certificates........ $14,032,925 7.525% B
Class B-6 Certificates........ $14,032,925 7.525% B-
