<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 20, 1997.
REGISTRATION NO. 333-21315
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE
AMENDMENT NO. 2
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> <C>
BARRY M. FUNT, ESQ. FAITH D. GROSSNICKLE, ESQ.
ANNA H. GLICK, ESQ. ASSET SECURITIZATION CORPORATION TIMOTHY G. LITTLE, ESQ.
CADWALADER, WICKERSHAM & TAFT 2 WORLD FINANCIAL CENTER SHEARMAN & STERLING
100 MAIDEN LANE BUILDING B, 21ST FLOOR 599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10038 NEW YORK, NEW YORK 10281-1198 NEW YORK, NEW YORK 10022
</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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM OFFERING AGGREGATE AMOUNT OF
PRICE PER UNIT OFFERING PRICE REGISTRATION
TITLE OF SECURITIES BEING REGISTERED AMOUNT BEING REGISTERED (1) (1) FEE
- ----------------------------------------------- ----------------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Subordinated Units (2)..........................
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 $137,231,536 100% $137,231,536 $41,585.31(3)
Certificates...................................
- ----------------------------------------------- ----------------------- ---------------- ---------------- ---------------
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee.
(2) The Subordinated Units consist of $36,113,562 (approximate) of Class
B-1, $36,113,562 (approximate) of Class B-2, $14,445,425 (approximate)
of Class B-3, $21,668,137 (approximate) of Class B-4, $14,445,425
(approximate) of Class B-5 and $14,445,425 (approximate) of Class B-6
Commercial Mortgage Pass-Through Certificates.
(3) $303.03 of the registration fee was paid in connection with the initial
filing of the registration statement. The amount paid with this filing
is $41,282.28.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<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 Units;
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>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THIS REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
SUBJECT TO COMPLETION, DATED MARCH 20, 1997
PROSPECTUS
$137,231,536 (APPROXIMATE)
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
SUBORDINATED UNITS CONSISTING OF $36,113,562 (APPROXIMATE) CLASS B-1,
$36,113,562 (APPROXIMATE)
CLASS B-2, $14,445,425 (APPROXIMATE) CLASS B-3, $21,663,137 (APPROXIMATE)
CLASS B-4, $14,445,425
(APPROXIMATE) CLASS B-5, AND $14,445,425 (APPROXIMATE) CLASS B-6
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
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"),
will represent beneficial ownership interests in a trust fund (the "Trust
Fund") to be created by Asset Securitization Corporation (the "Depositor"). The
Trust Fund will consist primarily of a pool (the "Mortgage Pool") of 123
fixed-rate mortgage loans, with original terms to maturity of generally not
more than thirty years (the "Mortgage Loans"), secured by first liens on 255
commercial and multifamily residential properties (the "Mortgaged Properties").
The Mortgaged Properties consist of anchored and unanchored retail properties,
office buildings, full and
(cover page continued)
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" HEREIN COMMENCING ON PAGE 19.
<TABLE>
<CAPTION>
PASS-THROUGH PRICE TO UNDERWRITING PROCEEDS TO
RATE(1) PUBLIC(2) DISCOUNT(3) DEPOSITOR(4)
- ---------------------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Per Subordinated Unit(5) ....
Total ....................... $ $ $ $
- ---------------------------- ---------------- ---------------- ---------------- ---------------
</TABLE>
- -----------------------------------------------------------------------------
(1) The Pass-Through Rate is the rate for the Distribution Date occurring
in April, 1997. The Pass-Through Rate for the Subordinated Units for
each subsequent Distribution Date will be equal to ___%.
(2) Plus accrued interest, if any, from the date of issuance.
(3) The Depositor and the Mortgage Loan Seller have each agreed to
indemnify the Underwriters against, and provide contribution with
respect to, certain liabilities, including civil liabilities under
the Securities Act of 1933, as amended (the "Act"). See "Plan of
Distribution."
(4) Before deducting expenses payable by the Depositor estimated at
$ .
(5) The Subordinated Units are comprised of $36,113,562 of Class B-1,
$36,113,562 of Class B-2, $14,445,425 of Class B-3, $21,668,137 of
Class B-4, $14,445,425 of Class B-5 and $14,445,425 of Class B-6
Certificates. No Class of Subordinated Certificates will be
separately tradable unless and until a Class of Subordinated
Certificates is rated investment grade by Standard & Poor's Rating
Services or Fitch Investors Service LP, and only such investment
grade Class shall be separately tradable.
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE
DEPOSITOR, THE MORTGAGE LOAN SELLER, 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 Units or the
Subordinated Certificates. Each of the Underwriters currently expects to make a
secondary market in the Subordinated Units and, if separately traded, the
Subordinated Certificates, but has no obligation to do so. There can be no
assurance that an active secondary market for the Subordinated Units or, if
separately traded, the Subordinated Certificates will develop or that any such
market, if established, will continue. See "Plan of Distribution" herein.
The Subordinated Units are offered by the Underwriters subject to prior
sale, when, as and if issued, delivered to and accepted by the Underwriters and
subject to the right to reject orders in whole or in part. It is expected that
delivery of the Subordinated Units 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 , 1997.
BEAR, STEARNS & CO. INC. NOMURA SECURITIES INTERNATIONAL, INC.
The Date of this Prospectus is , 1997
<PAGE>
(continuation of cover page)
limited service 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 will 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 in the form of Subordinated Units (the "Subordinated Units"); the Senior
Certificates are being offered concurrently with the Subordinated Certificates
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 (i)
the Senior Certificates are issued and offered and (ii) 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 Certificates be rated "B+" by
S&P, the Class B-5
(cover page continued)
<PAGE>
(continuation of cover page)
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 will constitute "regular interests" in the Upper-Tier REMIC, and
the Class R and Class LR Certificates will 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
will represent the right to receive Net Default Interest and the Class V-2
Certificates will 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 distribution of this Prospectus and the offer or sale of the
Subordinated Units and Subordinated Certificates may be restricted by law in
certain jurisdictions. Persons into whose possession this Prospectus or any
Subordinated Units or 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 Units and Subordinated Certificates in the United Kingdom (see
"Plan of Distribution" herein).
The Depositor does not intend to register the Subordinated Units and
Subordinated Certificates under the Securities and Exchange Law of Japan (the
"SEL"). Accordingly, the Subordinated Units and 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 Units and 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" herein.
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING
TRANSACTIONS IN THE SUBORDINATED UNITS OR, IF SEPARATELY TRADED, 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 ...................................................................... 19
The Mortgage Loans................................................................ 19
The Certificates.................................................................. 34
Industry Overview.................................................................. 40
The Depositor...................................................................... 41
The Mortgage Loan Seller........................................................... 41
The Trustee........................................................................ 42
The Fiscal Agent................................................................... 42
The Servicer and Initial Special Servicer.......................................... 42
Description of the Mortgage Pool................................................... 43
General........................................................................... 43
Security for the Mortgage Loans................................................... 44
The Mortgage Loan Program--Underwriting Standards................................. 44
Significant Mortgage Loans........................................................ 47
Certain Terms and Conditions of the Mortgage Loans................................ 56
Additional Mortgage Loan Information.............................................. 61
Changes in Mortgage Pool Characteristics.......................................... 75
Description of the Subordinated Units.............................................. 75
Description of the Subordinated Certificates....................................... 76
General........................................................................... 76
Subordination..................................................................... 77
Distributions..................................................................... 77
Realized Losses................................................................... 85
Prepayment Interest Shortfalls.................................................... 86
Delinquency Reduction Amounts and Appraisal Reduction Amounts..................... 86
Appraisal Reductions.............................................................. 87
Delivery, Form and Denomination................................................... 87
Book-Entry Registration........................................................... 88
Definitive Certificates........................................................... 90
Transfer Restrictions............................................................. 91
Prepayment and Yield Considerations................................................ 92
Mortgagor Defaults................................................................ 92
Yield Tables...................................................................... 93
Yield............................................................................. 101
Rated Final Distribution Date..................................................... 102
Weighted Average Life of Subordinated Certificates................................ 102
The Pooling and Servicing Agreement................................................ 112
General........................................................................... 112
Assignment of the Mortgage Loans.................................................. 112
Representations and Warranties; Repurchase........................................ 112
Servicing of the Mortgage Loans; Collection of Payments........................... 118
Advances.......................................................................... 118
Accounts.......................................................................... 120
Withdrawals from the Collection Account........................................... 122
Enforcement of "Due-on-Sale" and "Due-on-Encumbrance" Clauses..................... 122
Inspections....................................................................... 123
3
<PAGE>
PAGE
------
Insurance Policies................................................................ 123
Evidence as to Compliance......................................................... 124
Certain Matters Regarding the Depositor, the Servicer and the Special Servicer ... 125
Events of Default................................................................. 126
Rights Upon Event of Default...................................................... 126
Amendment......................................................................... 127
Voting Rights..................................................................... 127
Realization Upon Mortgage Loans................................................... 128
Modifications..................................................................... 133
Termination....................................................................... 134
Optional Termination.............................................................. 134
The Trustee....................................................................... 135
Duties of the Trustee............................................................. 135
Duties of the Fiscal Agent........................................................ 136
Servicing Compensation and Payment of Expenses.................................... 136
Special Servicing................................................................. 137
Servicer and Special Servicer Permitted to Buy Certificates....................... 138
Reports to Certificateholders; Available Information.............................. 138
Trustee Reports.................................................................. 138
Servicer Reports................................................................. 139
Other Information................................................................ 140
ERISA Considerations............................................................... 142
Certain Legal Aspects of Mortgage Loans............................................ 142
General........................................................................... 142
Types of Mortgage Instruments..................................................... 142
Leases and Rents.................................................................. 143
Personalty........................................................................ 143
Installment Contracts............................................................. 143
Subordinated Financing............................................................ 144
Foreclosure....................................................................... 144
Judicial Foreclosure.............................................................. 144
Non-Judicial Foreclosure/Power of Sale............................................ 144
Limitations on Lender's Rights.................................................... 145
Rights of Redemption.............................................................. 146
Anti-Deficiency Legislation....................................................... 147
Leasehold Risks................................................................... 147
Bankruptcy Laws................................................................... 148
Environmental Legislation......................................................... 149
Due-on-Sale and Due-on-Encumbrance................................................ 150
Acceleration on Default........................................................... 150
Default Interest, Prepayment Charges and Prepayments.............................. 150
Applicability of Usury Laws....................................................... 151
Alternative Mortgage Instruments.................................................. 151
Soldiers' and Sailors' Civil Relief Act of 1940................................... 151
Forfeitures in Drug and RICO Proceedings.......................................... 152
Certain Laws and Regulations...................................................... 152
Type of Mortgaged Property........................................................ 152
Americans with Disabilities Act................................................... 152
Certain Federal Income Tax Consequences............................................ 153
General........................................................................... 153
4
<PAGE>
PAGE
------
Status of Subordinated Certificates............................................... 153
Qualification as a REMIC.......................................................... 154
Taxation of Subordinated Certificates and Subordinated Units...................... 155
General.......................................................................... 155
Original Issue Discount.......................................................... 155
Acquisition Premium.............................................................. 157
Market Discount.................................................................. 157
Premium.......................................................................... 158
Election to Treat All Interest Under the Constant Yield Method................... 158
Treatment of Losses.............................................................. 158
Sale or Exchange of Subordinated Units........................................... 159
Taxes That May Be Imposed on a REMIC.............................................. 159
Liquidation of the REMIC.......................................................... 160
Taxation of Certain Foreign Investors............................................. 160
Backup Withholding................................................................ 160
Reporting Requirements............................................................ 160
Legal Investment................................................................... 161
Use of Proceeds.................................................................... 162
Plan of Distribution............................................................... 163
Legal Matters...................................................................... 164
Financial Information.............................................................. 164
Rating............................................................................. 164
Available Information.............................................................. 164
Index of Significant Definitions................................................... 166
Glossary of Key Real Estate, Mortgage and Mortgage Loan Underwriting Terms ....... 172
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
Annex D--Description of Map and Photographs located on the inside front and
inside back covers (EDGAR version only) .......................................... D-1
INDEX OF TABLES
Mortgage Notes .................................................................... 65
Range of DSCRs..................................................................... 68
Range of Loan-to-Value Ratios...................................................... 68
Range of Loan-to-Value Ratios at Earlier of Anticipated Repayment Dates or
Maturity.......................................................................... 68
Mortgaged Properties By State...................................................... 69
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
Delinquency Status as of March 1, 1997............................................. 74
Range of Mortgage Rates............................................................ 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 Units and 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 herein have
the respective meanings assigned to them in this Prospectus. See "Index of
Significant Definitions" 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 $1,285,633,826, which are
being sold pursuant to a separate Prospectus; (ii) below investment grade
classes with a principal balance in the aggregate of $137,237,536, which are
being offered hereby in the form of Subordinated Units; and (iii) an unrated
junior subordinated "first loss" class with a principal balance equal to
$21,668,143 (approximately 1.5% of the Initial Pool Balance). 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
Units 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 255 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 weighted average debt service coverage ratio
of the Mortgage Pool (analogous to EBITDA less maintenance capital
expenditures 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 risks 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."
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"). 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 20
offerings of CMBS from 1993 through December
1996 totaling approximately $7.3 billion in
initial principal amount. These offerings
included nine offerings totaling approximately
$6.2 billion issued since March 1994 and which
are backed by mortgage loans predominantly
originated directly by the Mortgage Loan
Seller. See "The Mortgage Loan Seller."
SERVICER AND SPECIAL SERVICER . AMRESCO Management, Inc., a Texas
corporation, 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." AMRESCO
Management, Inc. ("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.
AMI provides servicing for AMRESCO's
portfolio, which as of January 1, 1997,
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
7
<PAGE>
balance of $10.6 billion. The portfolio is
significantly diversified both geographically
and by product type.
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 .. 96.5% 110
Bloomfield Acceptance Company,
LLC............................... 3.5% 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 will consist of
approximately 123 fixed rate mortgage loans
secured by approximately 255 commercial and
multifamily properties with an aggregate
principal balance of approximately
$1,444,542,505 (subject to a permitted
variance of plus or minus 5%). 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 LoansARD Loans" generally are
8
<PAGE>
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 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) (37%), 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 24 loans of over $20 million
each, which make up approximately 65% 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).................................. $1,444,542,505
Number of Mortgage Loans.................................. 123
Number of Mortgaged Properties............................ 255
Average Mortgage Loan Balance............................. $11,744,248
Weighted Average Months Since Loan Origination ........... 1
Weighted Average Mortgage Rate............................ 8.663%
Range of Mortgage Rates................................... 7.575%-10.100%
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 Remaining Amortization Term (2) ......... 314 months
Range of Remaining Amortization........................... 156-360 months
Weighted Average DSCR (3)................................. 1.42
Range of DSCR (3)......................................... 1.23-2.20
Weighted Average LTV (4).................................. 67%
Range of LTV.............................................. 34%-85%
Weighted Average LTV at Earlier of Anticipated
Repayment Date or Maturity (5)........................... 51%
Percentage of Initial Pool Balance made up of:
ARD Loans .............................................. 96.4%
Fully Amortizing Loans (other than ARD Loans) .......... 2.4%
Balloon Loans .......................................... 1%
Loans Delinquent as of 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 UNITS ............ $137,231,536 (approximate) Subordinated Unit
consisting of $36,113,562 (approximate)
Class B-1 Certificates, $36,113,562
(approximate) Class B-2 Certificates,
$14,445,425 (approximate) Class B-3
Certificates, $21,668,137 (approximate)
Class B-4 Certificates, $14,445,425
(approximate) Class B-5 Certificates, and
$14,445,425 (approximate) Class B-6
Certificates. No Class of Subordinated
Certificates will be separately tradable
unless and until a Class of Subordinated
Certificates is rated investment grade by
either Standard & Poor's Rating Services
("S&P") or Fitch Investors Service, L.P.
("Fitch"), and only such investment grade
Class shall be separately tradable. All
references herein to the Subordinated Units
are deemed to include the Subordinated
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 will represent beneficial
ownership interests in the Trust Fund to be
created by the Depositor. The Trust Fund
will consist primarily of a Mortgage Pool of
123 Mortgage Loans, with original terms to
maturity of
10
<PAGE>
generally not more than thirty years, secured
by first liens on 255 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 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.
However, because the Subordinated Units
consist of the Class B-1, Class B-2, Class
B-3, Class B-4, Class B-5 and Class B-6
Certificates, the priorities of allocation
of Realized Losses and distribution of
principal will have a different effect on
the overall investment results of a holder
of a Subordinated Unit than on a holder of
Certificates of a single Class of
Certificates (if such Class were separately
tradable).
CERTIFICATE SUMMARY ........... Each Class of Certificates has the
approximate aggregate initial Certificate
Balance, subject to a permitted variance of
plus or minus 5%, 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 will be
issued pursuant to the Pooling and Servicing
Agreement.
11
<PAGE>
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
INITIAL AGGREGATE PERCENT PASS-THROUGH WEIGHTED
CERTIFICATE PRINCIPAL PERCENT OF RATE AS AVG.
OR OF CREDIT OF CUT-OFF LIFE* PRINCIPAL
CLASS RATINGS NOTIONAL AMOUNT TOTAL SUPPORT DESCRIPTION DATE (YRS.) WINDOW*
- --------------- --------- --------------------- --------- --------- ---------------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Senior Certificates (not offered hereby)
------------------------------------------------------------------------------------------------------------------------
A-1A, A-1B,
A-1C, A-1D
and A-1E n/a $1,068,961,453 74% 26% Fixed Rate
- --------------- --------- --------------------- --------- --------- ---------------- -------------- ---------- -----------
A-2, A-3,
A-4, A-5, A-6, Weighted Average
A-7 and A-8 n/a $ 216,681,373 15% 11% Coupon
- --------------- --------- --------------------- --------- --------- ---------------- -------------- ---------- -----------
Interest Only:
A-CS1 and Weighted
PS-1 n/a $1,572,792,505 n/a Average Coupon
- --------------- --------- --------------------- --------- --------- ---------------- -------------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
SUBORDINATED CERTIFICATES (COLLECTIVELY, THE SUBORDINATED UNITS OFFERED HEREBY)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B-1 BB+/BB+ $ 36,113,562 2.5% 8.5% Fixed Rate 7.53% 14.96 3/12-4/12
B-2 BB/BB $ 36,113,562 2.5% 6% Fixed Rate 7.53% 15.03 4/12-4/12
B-3 BB-/BB- $ 14,445,425 1% 5% Fixed Rate 7.53% 15.03 4/12-4/12
B-4 B+/NR $ 21,668,137 1.5% 3.5% Fixed Rate 7.53% 15.53 4/12-3/13
B-5 B/NR $ 14,445,425 1% 2.5% Fixed Rate 7.53% 16.33 3/13-3/15
B-6 B-/NR $ 14,445,425 1% 1.5% Fixed Rate 7.53% 19.55 3/15-4/17
Junior Subordinated Certificates (not offered hereby)
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted
$ 21,668,143 Average
B-7 and B-7H Unrated (approx.) 1.5% 0% Coupon
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rating Agencies (S&P, Fitch)
* Based on 0% Constant Prepayment Rate and with all ARD Loans assumed to
prepay on the related Anticipated Repayment Date. See "Prepayment and
Yield Considerations" herein.
** Not offered hereby.
CUT-OFF DATE .................. April , 1997.
CLOSING DATE .................. On or about April , 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
12
<PAGE>
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, each
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,
each 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, each 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. In the event Mortgage Loans
are removed from the Mortgage Pool, such
removal will be noted in the Form 8-K. Such
Form 8-K will be available to purchasers and
potential purchasers of the Subordinated
Units.
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 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
13
<PAGE>
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, 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) which become due on the
Mortgage Loans on the related Due Date; (ii)
the principal component of all Assumed
Scheduled Payments or Minimum Defaulted
Monthly Payments, as applicable, deemed to
become due on the related Due Date 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.
Amounts received on any Mortgage Loan that
represent recoveries of any Subordinate Class
Advance Amount will not be included in the
calculation of "Principal Distribution
Amount."
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
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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, 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 the Closing
Date.
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 nine 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 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"AssumedMaturityDate"" 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 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
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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
[ ]%. See "Description of Subordinated
Certificates -- Distributions."
The Pass-Through Rates of the other Classes
of Certificates are set forth herein under
"Description of the Subordinated
Certificates -- Distributions."
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, 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 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.
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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 $50,000, $50,000, $20,000, $30,000,
$20,000 and $20,000, respectively and
multiples of $5,000, $5,000, $2,000, $3,000,
$2,000 and $2,000, respectively 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.
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 Certificates, the
Subordinated Certificates and the Junior
Subordinated Certificates will constitute
"regular interests" in the Upper-Tier REMIC,
and the Class R and Class LR Certificates
(collectively the "Residual Certificates")
will be designated as the sole Classes of
"residual interests" in the Upper-Tier REMIC
and Lower-Tier REMIC, respectively. The
Class V-1 Certificates will 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 will 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. Although not free from doubt, it
is anticipated that for purposes of
computing and accruing original issue
discount the Subordinated Certificates will
be aggregated and that the Subordinated
Units will be treated as issued with
original issue discount in an amount equal
to the excess of their aggregate initial
Certificate Balances [(plus days of
interest at the Pass-Through Rates thereon)]
over their issue price. 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
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<PAGE>
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 (i) the
Senior Certificates be issued and offered,
(ii) 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 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 Units, 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 Units.
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RISK FACTORS
Prospective holders of Subordinated Units should consider, among other
things, the following factors in connection with the purchase of the
Subordinated Units.
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
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<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." 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 a specified level or other specified
triggers.
Retail Properties. 35% 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
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<PAGE>
generally understood that a retail anchor tenant is proportionately large in
size and is vital in attracting customers to the property. 29%, 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.
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 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.
21
<PAGE>
Multifamily Properties. 12% 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.
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.
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. 3% 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.
22
<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 payers 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
23
<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 4.8% 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 4.8% 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 4.6% of the Initial Pool Balance. The ten largest Mortgage Loans
have Cut-off Date Principal Balances that represent, in the aggregate,
approximately 39% of the Initial Pool Balance. See "Description of the Mortgage
Pool--Significant Mortgage Loans" for a description of these Mortgage Loans.
24
<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>
M & H................................ 3 1 2.0%
Holladay............................. 11 2 1.4%
Saracen.............................. 6 1 4.8%
2 St. Marks/Greystone* .............. 2 2 1.1%
Hudson Hotels........................ 16 6 3.9%
Jacobs Malls......................... 2 2 2.2%
Magnolia-Western Investments L.P. ... 2 1 0.4%
Sunwest*............................. 72 11 3.5%
Tramz................................ 2 1 0.8%
Kendall Square*...................... 3 1 4.8%
Ambassador Apartments II............. 2 1 1.5%
Sutton Place and South Livingston ... 2 1 0.3%
Buena/Leisure Nursing................ 2 1 0.4%
Keegan & Willow...................... 2 1 0.4%
Cleveland Industrial Portfolio ...... 8 1 0.6%
EconoLodge Portfolio* ............... 6 2 0.4%
Prime Retail II*..................... 3 3 1.9%
K-Mart Distribution Center........... 2 2 4.3%
Uniprop*............................. 4 3 2.3%
Burnham Pacific*..................... 2 1 4.1%
</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 and which do not represent 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, or at another income-producing property that it owns or
controls, it could defer maintenance at one Mortgaged Property in order to
satisfy current expenses with respect to another Mortgaged Property or other
income-producing property that it owns or controls, 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. Twenty of the
Mortgage Loans representing approximately 41% 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), however, could be challenged as fraudulent conveyances 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
25
<PAGE>
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 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>
PRINCIPAL PRINCIPAL
BALANCE BALANCE
OF MORTGAGE OF MEZZANINE COMBINED LTV
MORTGAGE LOAN LOAN (1) DEBT (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 17 borrowers or their affiliates,
which are the borrowers (or affiliates) with respect to Mortgage Loans
representing approximately 27% 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
Security Square Mall............. $36,000,000 $6,500,000 Borrower
26
<PAGE>
APPROXIMATE AMOUNT
MORTGAGE LOAN OF PREFERRED EQUITY INTEREST IN BORROWER
MORTGAGE LOAN BALANCE(1) INVESTMENT(2) OR ITS AFFILIATE
- ------------------ -------------- ------------------- ------------------------
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
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 $ 275,000 Borrower
Slauson Apts. ................... $ 1,772,762 $ 170,000 Borrower
</TABLE>
- ------------
(1) As of Cut-off Date, the total Initial Pool Balance of all Mortgage Loans
in which the Preferred Interest Holder has a preferred equity interest
is $394,998,818.
(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.
27
<PAGE>
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.
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 hotels franchised
under the Westin flag. 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 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 distribution 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 TERMS 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)........ 29% 134
Retail (Unanchored) .... 6% 154
Office .................. 24% 118
Hotel (Full Service) ... 8% 156
Hotel (Limited Service) 4% 154
Hotel (Extended Stay) ... 2% 180
Multifamily ............. 12% 140
Nursing Home ............ 3% 175
Industrial .............. 6% 217
Factory Outlet .......... 2% 123
Mobile Home/RV Park .... 3% 118
Assisted Living ......... 0% 179
TOTAL: 100%
</TABLE>
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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 ........ 5% 10
North Carolina 5% 11
</TABLE>
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<PAGE>
GEOGRAPHIC CONCENTRATION OF PROPERTY TYPES (1)
<TABLE>
<CAPTION>
TYPE 1 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
</TABLE>
- ------------
(1) Based on Initial Pool Balance.
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
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<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, 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. 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 in an amount sufficient 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 certain issues raised by the related
assessments which relate primarily to two of the properties and include the
possible remediation and/or monitoring of groundwater and/or soil
contamination. The environmental consultant's report indicated that maintenance
and/or remediation with respect to such issues would cost a maximum of
$1,200,000. 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 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 vacant floor. Even though
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
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<PAGE>
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 --
Servicing of the Mortgage Loans; 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. 9 of the Mortgage Loans are Balloon Loans which will have
substantial payments of principal ("Balloon Payments") due at their stated
maturities unless previously prepaid. 108 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.
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% 108
Fully Amortizing Loans (other than the ARD Loans) 2% 6
Balloon Mortgage Loans ............................ 1% 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
32
<PAGE>
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 27% 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 hotels franchised under the Westin flag. 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-five 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, 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
33
<PAGE>
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 fiduciary 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 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
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<PAGE>
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.
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.
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<PAGE>
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), does not
fully offset the effects of any unadvanced delinquency or default. The amount
of any reduction in the P&I Advance pursuant to the preceding paragraph will
reduce the amount distributable to any Class of Subordinated Certificates to
the extent that the Certificate Balance of each Class of Certificates that is
subordinate to such Class has been previously reduced by Realized Losses.
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 Units or Subordinated Certificates. While the Underwriters
have advised that they currently intend to make a secondary market in the
Subordinated Units and, if separately traded, the Subordinated Certificates,
they are under no obligation to do so. Accordingly, there can be no assurance
that a secondary market for the Subordinated Units or, if separately traded,
the Subordinated Certificates, will develop. Moreover, if a secondary market
does develop, there can be no assurance that it will provide holders of
Subordinated Units or Subordinated Certificates with liquidity of investment or
that it will continue for the life of the Subordinated Units or Subordinated
Certificates. Neither the Subordinated Units nor the Subordinated Certificates
will be listed on any securities exchange.
In addition, the Subordinated Units may not be purchased by a Plan or a
person acting on behalf of a Plan or using 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 Units or Subordinated Certificates. In addition, market value
of the Subordinated Units or 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 Units or Subordinated Certificates at any time.
No Class of Subordinated Certificates will be separately tradable unless and
until a Class of Subordinated Certificates is rated investment grade by S&P or
Fitch, and only such investment grade Class shall be separately tradable.
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
36
<PAGE>
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 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.
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.
37
<PAGE>
OVERVIEW OF LOCK-OUT PERIODS
<TABLE>
<CAPTION>
<S> <C>
Minimum Lock-out Period at Origination ........ 80 months
Minimum Remaining Lock-out Period .............. 75 months
Maximum Remaining Lock-out Period .............. 240 months
Weighted Remaining Average Lock-out Period .... 138 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 three or 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% 108
Lock-out Period Ending on/or close to Maturity Date.............. 4 15
TOTAL: 100%
</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.
Certain Federal Tax Considerations Regarding Original Issue Discount. The
Subordinated Units 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
and Subordinated Units."
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."
38
<PAGE>
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."
39
<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 the 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 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.
40
<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, employing a total of
professionals involved in the origination, underwriting, closing and
securitization of commercial mortgage loans.
Affiliates of the Mortgage Loan Seller have been involved in a total of
twenty offerings of CMBS from 1993 through December 1996 totaling approximately
$7.3 billion in initial principal amount. These offerings included nine
offerings totaling approximately $6.2 billion issued since March 1994 and which
are backed by mortgage loans predominantly originated directly by the Mortgage
Loan Seller.
41
<PAGE>
All mortgage loans originated by the Mortgage Loan Seller and unaffiliated
originators included in all previous CMBS offerings of Asset Securitization
Corporation and Nomura Asset Securities Corporation, a wholly owned subsidiary
of the Mortgage Loan Seller have an aggregate initial principal balance of $6.2
billion as of March 31, 1997. At March 31, 1997, the delinquency rates for
these loans are as follows:
<TABLE>
<CAPTION>
<S> <C>
30-59 day
delinquent: 0.00%;
60-89 day
delinquent: 0.11%;
90+ day 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 day delinquent: 0.55%; 0.00% 0.00%
60-89 day delinquent: 0.00%; 0.00% 0.00%
90+ day 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 Underwriters 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, will act as Trustee pursuant to the Pooling and
Servicing Agreement. The Trustee's corporate trust office is located at 135
South LaSalle Street, Suite 1740, Chicago, Illinois 60603, 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, will act as 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") will be the Servicer and initial Special
Servicer 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 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.
AMI provides servicing for AMRESCO's portfolio, which as of January 1, 1997
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.
42
<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 Underwriters makes any representation or
warranty as to the accuracy thereof.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 123 fixed rate Mortgage Loans secured by
255 multifamily and commercial properties with an aggregate Cut-off Date
Principal Balance of approximately $1,444,542,505 (the "Initial Pool Balance"),
subject to a variance of plus or minus 5%. 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% 210
Leasehold....................... 13 45
TOTAL........................... 100% 255
</TABLE>
- ------------
(1) Based on the Allocated Loan Amount of the related Mortgaged Property.
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 or limited service 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.
Twenty 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
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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 will purchase the Mortgage Loans to be
included in the Mortgage Pool on or before the Closing Date from the Mortgage
Loan Seller pursuant to a Mortgage Loan Purchase and Sale Agreement (the
"Mortgage Loan Purchase and Sale Agreement") to be dated as of the Cut-off Date
between the Mortgage Loan Seller and the Depositor. The Mortgage Loan Seller
will be 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 will assign 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 will make no representations or warranties with
respect to the Mortgage Loans and will have no obligation to repurchase or
substitute for Mortgage Loans with deficient documentation or which are
otherwise defective. The Mortgage Loan Seller, as seller of the Mortgage Loans
to the Depositor, is selling such Mortgage Loans without recourse, and,
accordingly, in such capacity, will have 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 17 borrowers or groups of borrowers, which are the borrowers with
respect to Mortgage Loans representing approximately 27% 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.
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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, 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 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, (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, leasing commissions and free rent, (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, and (x) to take
into account new tax assessments and utility savings from the installation of
new energy efficient equipment.
"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.
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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 ............... 70%
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 ............... 75%
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 ............... 70%
RETAIL
Minimum DSCR .............................. 1.25
Minimum Occupancy Rate .................... 85%
Maximum Loan to Value Ratio ............... 75%
INDUSTRIAL
Minimum DSCR .............................. 1.25
Minimum Occupancy Rate .................... 85%
Maximum Loan to Value Ratio ............... 70%
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
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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 129 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, the Mortgage Loan Seller, in addition to its ordinary underwriting
procedures, obtained audited financials for the year ending December 31, 1996
with respect to the related Mortgaged Properties and obtained market rental
analysis for the Office Properties and Retail Properties.
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 4.8% of the Initial Pool Balance, and is secured
by a fee and leasehold Mortgage encumbering office, biotech lab space 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"). Each Kendall
Borrower is a Massachusetts special purpose limited liability company. Each of
the Kendall Borrowers is 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 provided mezzanine
financing in the amount of $14,300,000 to the Upper Level Owners on December
27, 1996 (the "BCIA Mezzanine Financing"). OKS Realty Trust 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, prepayment and defeasance 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, 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."
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
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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
900,000 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 460,008 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 at 66 Binney Street. 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). 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 4.8% 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. 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."
Payment, prepayment and defeasance 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
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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, 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. 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 1983 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 4.6% 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 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.
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The payment, prepayment and defeasance 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 13.3% and
approximately 10.5% 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 of
$62,500,000, has a Cut-off Date Principal Balance of $62,500,000, which
represents 4.3%, 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
Brentwood Holding Corporation (the "Brentwood Borrower"). The Kmart
Distribution Center Loan is fully amortized over a twenty-five year term. Both
of the Kmart Distribution Properties are cross-collateralized and
cross-defaulted.
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 are being 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.
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 equal to the outstanding 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.
50
<PAGE>
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") on February 19, 1997 (the "Puente
Hills Loan"). The Burnham Pacific Loan had an original principal balance of
$58,500,000 and has a Cut-off Date Principal Balance of $58,500,000, which
represents 4.1% 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, prepayment, and defeasance 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 $42,300,000.
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.
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
51
<PAGE>
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 3.9% 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, prepayment, and defeasance 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 3.5% 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
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.
52
<PAGE>
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, prepayment, and defeasance 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 Mariner's Village Property. 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 lease 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 $50,000,000 and has a Cut-off Date Principal Balance of
$50,000,000, which represents approximately 3.4% 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 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.
53
<PAGE>
The Mortgage Loan Seller has acquired a preferred equity interest in the
initial amount of $489,000 in the Sunwest Inc. Borrower and $7.2 million in the
Sunwest Trust Borrower. 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 (63%) 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 Termination of Management
Agreement."
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.
54
<PAGE>
Other Significant Mortgage Loans.
The next 13 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
SECURITY SQUARE MALL Baltimore County
Maryland 36,000,000 181 6,500,000 1.27 47,000,000
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
Ft. Lauderdale
Kings Manor Florida 121 1.46 9,900,000
Novi
Old Dutch Farms Michigan 121 1.46 9,050,000
Park of the Four Blaine
Seasons 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
Asheboro
Randolph Mall 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 1.41 $30,000,000
</TABLE>
<PAGE>
(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 LEASE
------- --------- --------- --------------------- ---------- ---------- -------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WESTIN-INDIANAPOLIS
61% 573 74% Hard Lockbox
SECURITY SQUARE MALL
77 361,804 94 Sears (Not Owned) 58% n/a Hard Lockbox
TWO GATEWAY CENTER
64 738,201 90 Prudential Insurance 19 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 97 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
</TABLE>
- ------------
(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.
55
<PAGE>
The above 21 Mortgage Loans represent 60% of the Initial Pool Balance and
have ADR or Maturity Dates as follows:
<TABLE>
<CAPTION>
EARLIER OF ADR OR
MORTGAGE LOAN/PROPERTY PRINCIPAL AMOUNT MATURITY DATE
- -------------------------- ---------------- -----------------
<S> <C> <C>
Burnham Pacific............ $ 58,500,000.00 3/11/04
M & H...................... 28,701,825.62 1/11/07
Two Gateway Center......... 34,423,045.11 1/11/07
Kendall Square............. 69,598,691.32 1/11/07
South Dekalb Mall.......... 21,798,648.97 1/11/07
Saracen.................... 68,923,229.56 2/11/07
Lakeside Village........... 24,971,982.08 2/11/07
Montague Park Tech Center . 32,964,627.38 2/11/07
International Plaza........ 65,750,000.00 3/11/07
Northwood Centre........... 23,000,000.00 3/11/07
Nassau Park II............. 28,000,000.00 3/11/07
Uniprop.................... 33,500,000.00 4/11/07
Prime Retail II............ 27,000,000.00 6/11/07
Hudson Hotels.............. 55,854,068.56 12/11/08
Jacobs Mall................ 31,700,000.00 3/11/09
Westin-Indianapolis........ 41,700,000.00 3/11/09
Asian Gardens Mall......... 24,326,512.37 1/11/12
Security Square Mall....... 36,000,000.00 4/11/12
Sunwest.................... 49,500,000.00 3/11/12
Marina Harbour Apts........ 50,586,851.37 3/11/13
K-Mart Distribution
Center.................... 62,250,000.00 4/11/17
$869,049,482.34
================
</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. 108 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
56
<PAGE>
controlled by the Servicer. From and after the Anticipated Repayment Date, in
addition to paying interest (at the 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 three month period 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
will have the option for up to two months after the Anticipated Repayment Date
for any ARD Loan to purchase such ARD Loan 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 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% 108
Fully Amortizing Loans (other than ARD Loans) 2% 6
Balloon Mortgage Loans ........................ 1% 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 80 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 138 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 about three or 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 three or 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 ......... 80 months
Minimum Remaining Lock-out Period............... 75 months
Maximum Remaining Lock-out Period............... 240 months
Weighted Average Remaining Lock-out Period .... 138 months
</TABLE>
57
<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% 108
Lock-out Period Ending on/close to Maturity Date ............ 4 15
100%
</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 the Closing Date, 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
58
<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) also 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. The Mortgage Loans generally 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. Twenty
of the Mortgage Loans (the "Pool Loans") with Cut-off Date Principal Balances
ranging from $3,800,000 million to $69,957,549 million and comprising 41% of
the Mortgage Pool by Cut-off Date Principal Balance are secured by more than
one Mortgaged Property. However,
59
<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 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.
60
<PAGE>
ADDITIONAL MORTGAGE LOAN INFORMATION
<TABLE>
<CAPTION>
<S> <C>
GENERAL CHARACTERISTICS (AS OF CUT-OFF DATE, UNLESS OTHERWISE INDICATED)
Initial Pool Balance (1) ........................................................ $1,444,542,505
Number of Mortgage Loans ........................................................ 123
Number of Mortgaged Properties .................................................. 255
Average Mortgage Loan Balance ................................................... $11,744,248
Weighted Average Mortgage Rate .................................................. 8.66%
Range of Mortgage Rates ......................................................... 7.575%-10.1%
Weighted Average Remaining Term to the Earlier of Maturity or Anticipated
Repayment Date ................................................................. 141 Months
Range of Remaining Term to the Earlier of Maturity or Anticipated Repayment Date 80-241 Months
Weighted Average Original Amortization Term (2) ................................. 314
Range of Original Amortization .................................................. 156-360
Weighted Average DSCR (3) ....................................................... 1.42
Range of DSCR (3) ............................................................... 1.21-2.20
Weighted Average LTV (4) ........................................................ 67%
Range of LTV .................................................................... 34%-85%
Weighted Average LTV at Earlier of Anticipated Repayment Date or Maturity (5) .. 51%
Percentage of Initial Pool Balance made up of:
ARD Loans ...................................................................... 96%
Fully Amortizing Loans (other than ARD Loans) .................................. 2%
Balloon Loans ................................................................. 1%
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.
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<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 Principal 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 per unit of
measure as of the Cut-off Date.
(7) "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.
(8) "DSCR" means, with respect to any Mortgage Loan, (a) the Net Cash Flow
for the related Mortgaged Property, divided by (b) the Annual Debt Service for
such Mortgaged Property. 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."
(9) "Stated Maturity Date" means the maturity date of the Mortgage Loan as
stated in the related Note or Loan Agreement.
(10) "Anticipated Repayment Date" 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 application to payment of
principal and Excess Interest.
(11) "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.
(12) "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.
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<PAGE>
(13) "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.
(14) "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.
(15) "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.
(16) "Year Built/Renovated" means the year in which the respective Mortgaged
Property was built and/or renovated.
(17) "Unit" and "Unit of Measure" mean the number of units in the respective
Mortgaged Property.
(18) "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.
(19) "Underwritten Occupancy" means the occupancy rate used in determining
Net Cash Flow.
(20) "Anchor" means, with respect to the Retail Properties, the largest,
second and third largest tenants, if any.
(21) "Major Tenants" mean the largest tenants for office, industrial and
unanchored retail properties.
(22) "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.
(23) "Major Tenant Lease Expiration Date" means the year in which a Major
Tenant's lease is scheduled to expire.
(24) "Franchise" means the regional or national franchise affiliation of a
Hotel Property.
(25) "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.
(26) "Identified Deferred Maintenance" is the estimated amount of deferred
maintenance in the respective Mortgaged Property's structural engineering
report.
(27) "Reserve for Deferred Maintenance" is the actual dollars escrowed at
the loan origination for deferred maintenance repairs.
(28) "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.
(29) "GLA" means the square footage of the gross leaseable area of each
Mortgaged Property.
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 borrowers under the Mortgage Loans having a capital
letter under the column "Asset #" on Annex A are related to borrowers under the
Mortgage Loans with the same letter designation, but such Mortgage Loans are
not cross-collateralized with each other.
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<PAGE>
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.
Certain statistical information set forth herein may change prior to the date
of issuance of the Certificates due to changes in the composition of the
Mortgage Pool prior to the Closing Date. 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.
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<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 Center Brentwood Holding Corp. 62,250,000 520,908.57
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 Security Square Mall MDC Investment Property LLC 36,000,000 291,998.46
11 Two Gateway Center Townsend Gateway LP 34,423,045 273,746.58
12 Uniprop Uniprop M.H.C. Income Fund I,L.P. 33,500,000 251,438.84
13 Montague Park Tech Center Montague LLC 32,964,627 255,849.29
14 Jacobs Mall J.A. Rand LLC A 19,200,000 148,857.77
14 Jacobs Mall J.A. Conestoga LLC B 12,500,000 99,590.06
15 M & H M & H Realty Partners L.P. 28,701,826 202,502.73
16 Nassau Park II Hendon Princeton Assoc. No. 3 L.P. 28,000,000 210,590.91
17 Prime Retail II Prime Retail, L. P. 27,000,000 214,688.86
18 Lakeside Village Friedkin/Lakes Village Assoc. 24,971,982 182,309.59
19 Asian Gardens Mall Asian Garden Limited, LP 24,326,512 204,955.35
20 Northwood Centre Mark Northwood Assoc., L.P. 23,000,000 193,330.26
21 South Dekalb Mall CV NACC Dekalb, L.L.C. 21,798,649 178,117.95
22 Ambassador Apartments II Ambassador XI, L.P. 21,500,000 158,960.07
23 Century Square Mall Terra Century Assoc., L.P. 21,000,000 170,483.95
24 Holladay Holladay Midwest/Mishawaka 20,270,000 167,751.65
25 Knollwood Village Apartments Knollwood Village Assoc LP 19,940,533 156,056.26
26 Tuscon Place Artus Inc. I LLC 17,325,000 132,723.44
27 2 St. Marks/Greystone 2 St.Marks LP 15,371,078 115,928.91
28 Holiday Inn--Alexandria Gadsby Lodging Assoc. LP 14,875,834 148,503.33
29 Hamilton Park Health Care Center First Connecticut Holding Group, L.L.C. II 14,636,056 135,109.15
30 Burlington Square Burlington Executive Center Assoc. I 14,642,002 110,475.16
31 Alzina Office Building Alzina Building, LLC 14,019,336 124,931.71
32 Danvers Crossing Shopping Center DanCross Assoc. LP 13,627,151 109,381.72
33 Residence Inn-Herndon Herndon Lodge GP 13,481,513 115,611.56
34 Del Mar Del Mar Village L.P. 12,482,642 98,650.18
35 The Plaza Burr Corners I & II Burr Plaza I L.P. 12,278,439 99,664.32
36 Holiday Inn New Orleans Mikins Corporation 11,909,688 113,096.92
37 Tramz Tramz New York, Ltd. L.P. 11,599,902 107,757.82
38 Shadyside Gardens Apartment Shadyside Assoc. L.P. 10,500,000 82,787.26
39 Radisson Inn--Columbus Columbus Hawaii L.P. 9,665,000 87,935.46
40 Hood Commons Preferred Merchant Hood LLC 9,025,000 67,358.20
41 30 Broad Street 30 Broad Assoc., LP 9,000,000 74,605.37
42 Cleveland Industrial Portfolio Legacy Property Investments VI, Ltd. 8,665,157 92,224.11
43 Sehome Village Bellingham Marketplace Assoc., LP 8,300,000 63,525.94
65
<PAGE>
CUT-OFF
DATE MONTHLY
LOAN # LOAN NAME BORROWER LEGAL NAME NOTE BALANCE PAYMENT
- ------ -------------------------------- ----------------------------------------- ---- ----------- -----------
44 Festival at Moreno Valley Moreno Valley Fest. Ltd $ 8,065,000 $ 70,245.38
45 Madison House HJM--Madison Health Care Center, LLC 6,725,941 61,147.07
46 Decker Building Decker Assoc. LLC 6,500,000 50,988.91
47 EconoLodge Portfolio Lark Investment Co. Inc. LLC A 2,120,000 19,983.21
47 EconoLodge Portfolio Fredricksburg Inn LC B 1,575,000 14,846.02
47 EconoLodge Portfolio Wytheville Assoc. LC C 998,111 9,408.24
47 EconoLodge Portfolio Country Roads Assoc. LC D 608,018 5,731.20
47 EconoLodge Portfolio Chesapeake Assoc. LC E 525,483 4,953.22
47 EconoLodge Portfolio Sunrise West Assoc. LC F 476,388 4,490.45
48 Residence Inn-Livermore 6,060,000 50,192.99
49 140 Allen SJP Allen Road, L.L.C. 5,991,620 50,146.51
50 Keegan's Willow To-be-formed 6,000,000 45,795.06
51 Brookside Commons Apartments Brookside Commons LP 5,900,000 48,426.33
52 Lincoln Park Center Lincoln Park Plaza Assoc. LP 5,892,333 48,452.36
53 Magnolia-Western Investments, LP Magnolia-Western Investments, LP 5,781,465 57,844.78
54 Buena/Leisure Nursing MEK Assoc. LLC, a CA LLC 5,609,541 54,607.09
55 Englar Shopping Center Englar Center L.P. 5,523,398 45,656.17
56 Totem Square Shopping Center Totem Square Partners 5,425,000 44,343.58
57 Equitable of Iowa Building EIB Acquisition, LLC 5,169,401 50,538.09
58 Inn at Manchester Inn at Manchester, Inc. 5,090,239 48,039.36
59 Outlets Limited Mall Venture Outlet Mall LLC 4,959,958 43,644.66
60 Warwick Commons 399 Bald Hill Rd Prtnrs 5,000,000 40,632.67
61 Alden Terrace Investments LP Alden Terrace Investments, LP 4,731,830 47,342.96
62 6000 Metro Drive 6000 Metro LLC 4,707,742 39,234.34
63 Country Hearth Inn--Orlando Heritage Inn Assoc., LP 4,574,045 43,028.34
64 Longwood Manor Investments LP Longwood Manor Investments LP 4,563,370 45,657.48
65 Tech Center 29 Tech Center 29 LP 4,532,434 36,883.45
66 Davol Square Jewelry Bldg. Davol Square Jewelry Mart, LLC 4,484,492 38,966.64
67 Lincoln MHP Lincoln Park Assoc., LP 4,144,091 32,263.51
68 National Bank of California Fairfax Centre L.L.C. 4,119,395 32,983.13
69 Best Western-Jacksonville EDC Park Partnership 4,092,178 38,754.43
70 The Lab The Lab, LP 4,060,002 33,835.22
71 Northridge Shopping Center Minsyr-Oxbridge LLC 4,000,000 33,857.01
72 Days Inn-Providence Gano Holdings, LLC 3,955,000 37,124.44
73 Plymouth Mall Plymouth Mall L.P. 3,941,797 32,770.40
74 Residence Inn-Gainesville Triple T Inns of Arizona, Inc. 3,925,000 33,721.39
75 Ramada Inn Bossier Red River Lodging, Inc. 3,788,821 36,494.76
76 Sutton Place + South Livingston Livingston Assoc. A 3,116,000 26,128.02
76 Sutton Place + South Livingston Livingston Assoc. B 684,000 5,735.42
77 Old Town Square Progressive Old Town Sq. LLC 3,742,129 30,906.86
78 Anza Corporate Center Bayco Investment Co. 3,492,575 28,656.23
79 Washington Square Washington Square Shopping Center, LP 3,463,909 29,671.95
80 Winston Village Winston Perris, L.P. 3,370,372 28,856.32
81 Plaza Reyes Adobe Retail Center The Canwood Street, GP 3,350,000 28,067.21
82 Comfort Inn--Castaic Castaic Hotel Properties, Inc. 2,994,486 26,818.18
83 Pocono Green Pocono Green Plaza Assoc. LLC 2,993,860 25,114.29
84 Saunders Plaza JRSM Corporation 2,969,460 25,232.91
85 Heritage Bank Building Heritage Building, LLC 2,917,946 24.621.44
86 Arvada Plaza Arvada Plaza Retail LLC 2,897,637 25,417.89
66
<PAGE>
CUT-OFF
DATE MONTHLY
LOAN # LOAN NAME BORROWER LEGAL NAME NOTE BALANCE PAYMENT
- ------ -------------------------------- ----------------------------------------- ---- ----------- -----------
87 Good Guys Plaza PRET Subsidiary, Inc. $ 2,850,000 $ 23,527.99
88 Candlelite Apartments Candlelite Apts., Ltd. 2,789,524 23,077.12
89 Topinkas Village Shopping Center Arbela Assoc., Inc. 2,800,000 23,306.06
90 Village Park MHP Essex Village Park, L.P. 2,797,014 21,867.82
91 Woodland Park Investments Co. Woodland Park Investment Co., LLC 2,703,333 27,047.42
92 View Park Convalescent Center View Park Investments LP 2,666,452 26,678.41
93 Key RV Park Marathon Assoc., Ltd. 2,494,904 20,979.91
94 Ramada Inn--Nashville Umi Management Inc. 2,295,601 21,679.90
95 Barstow Plaza Theme Family Limited Partneship A 2,216,600 18,035.22
96 Aspen Care Center Aspen Properties, L.C. 2,195,603 19,779.82
97 Senate/Virginian Apartments Senate & Virginian Apts, L.C. 2,193,798 18,057.28
98 One Ethel Road One Ethel Road Associate, L.P. 2,172,731 17,578.85
99 American Plaza Shopping Center American Plaza LLC 2,145,565 17,910.40
100 Diamond Inn Diamond Inc. Motel, LC 2,096,068 20,265.45
101 Hocking Mall Shopping Center Chieftian Assoc., Inc. a NY Corp. 1,959,209 17,028.02
102 Kessler Garden Apartments K.G. L. P. 1,947,258 16,164.50
103 Chateau Apartments Chateau LLC 1,939,000 16,007.29
104 Knights Inn-Maumee Tulsi Corporation 1,921,318 18,145.13
105 Tiffany Bay Apartments Tiffany Bay Investors, L.P. 1,898,835 14,528.64
106 Airport Commerce Center Sherwood Partners, LP 1,870,000 16,014.34
107 Bakerview MHP Bakerview Mobile Estates Inc. 1,792,220 15,452.15
108 Slauson Apts. SKG Slauson 1,772,762 13,827.65
109 El Camino Apts. McAllen Camino Real Apts., Ltd. 1,771,548 13,260,19
110 Park Isle Club Apartments Park Isle Assoc. 1,693,967 14,382.93
111 Planet Pacific Building Puerta Real Partners 1,696,221 13,517.45
112 Butler Place Apartments Butler Place Assoc. 1,538,000 12,540.24
113 Cedar Springs MHP Cedar Springs Assoc. LLC 1,500,000 11,997.65
114 Emory Arms Apartments Emory Arms Venture, LLP 1,493,209 12,587.95
115 Fairdale Apartments Fairdale Apartments, Ltd. 1,493,949 11,897.00
116 Holiday Inn Express-East Haven Frontage Road Company, LLC 1,500,000 13,708.85
117 Holiday Inn--Bennettsville Marlboro Lodgings Corp. 1,430,000 13,357.50
118 Michigan Trailer Park Osborn Investors, L.P. 1,382,553 11,698.84
119 Hidden Meadow Hid-Med Ltd. 1,344,554 10,707.30
120 Econolodge Arizona Lake Powell Holdings, Inc. 1,200,000 11,492.94
121 Holiday Inn--S. Kingston South Kingstown Hotel Assoc. LLC 1,200,000 11,029.32
122 North Acres Mobile Home Park Burton DeYoung 1,010,529 8,067.22
123 Trainer Hill MHP Union Investment Group Ltd. 996,895 9,275.65
</TABLE>
67
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<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 04/11/22 8.965% * 240 241 300
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 04/11/27 9.090% * 180 181 360
11 01/11/22 8.325% * 117 118 299
12 04/11/27 8.240% * 120 121 360
13 02/11/27 8.590% * 115 119 360
14 03/11/27 8.590% * 143 144 360
14 03/11/27 8.890% * 143 144 360
15 01/11/27 7.575% * 114 118 360
16 03/11/27 8.262% * 119 120 360
17 03/11/22 8.350% * 119 123 300
18 02/11/27 7.935% * 118 119 360
19 04/11/22 9.050% * 177 178 303
20 03/11/22 9.020% * 119 120 300
21 01/11/22 8.650% * 117 118 300
22 03/11/27 8.080% * 119 120 360
23 04/11/27 9.100% * 180 181 360
24 03/11/22 8.830% * 116 120 300
25 10/11/26 8.660% 111 115 360
26 03/11/27 8.460% * 142 144 360
27 02/11/27 8.280% * 115 119 360
28 12/11/11 8.590% * 173 177 180
29 12/11/16 9.300% * 173 177 240
30 01/11/27 8.280% * 138 142 360
31 01/11/17 8.820% * 75 82 240
32 11/11/23 8.670% * 112 116 324
33 02/11/22 9.250% * 175 179 300
34 01/11/27 8.785% * 114 118 360
35 01/11/22 8.570% * 114 118 300
36 10/11/16 9.670% * 171 175 240
37 12/11/16 9.390% * 173 177 240
38 03/11/22 8.250% * 113 120 300
39 04/11/19 9.580% * 114 121 264
40 04/11/27 8.180% * 117 121 360
41 04/11/22 8.850% 117 121 300
42 02/11/22 8.480%* 151 155 156
43 04/11/27 8.450% * 114 121 360
65
<PAGE>
STATED ANTICIPATED
MATURITY MORTGAGE REMAINING REMAINING
LOAN # DATE RATE LOCKOUT TERM AMORTIZATION
- ------ -------- -------- --------- ----------- ------------
44 04/11/17 8.550%* 177 181 240
45 10/11/21 9.960%* 171 175 300
46 03/11/22 8.190 116 120 300
47 03/11/22 9.660%* 176 180 240
47 03/11/22 9.660%* 176 180 240
47 03/11/22 9.660%* 176 180 240
47 03/11/22 9.660%* 176 180 240
47 03/11/22 9.660%* 176 180 240
47 03/11/22 9.660%* 176 180 240
48 04/11/22 8.840%* 177 181 300
49 02/11/22 8.950%* 175 179 300
50 04/11/27 8.420%* 117 121 360
51 03/11/22 8.730%* 113 120 300
52 01/11/27 9.230%* 174 178 360
53 02/11/12 8.714%* 178 179 180
54 02/11/17 10.100%* 175 179 240
55 01/11/22 8.790%* 114 118 300
56 03/11/22 8.680% 116 120 300
57 01/11/12 8.280%* 78 82 180
58 02/11/17 9.650%* 175 179 240
59 10/11/16 8.580%* 171 175 240
60 04/11/22 8.610%* 177 181 300
61 02/11/12 8.714%* 178 179 180
62 01/11/22 8.890%* 114 118 300
63 11/11/16 9.550%* 172 176 240
64 02/11/12 8.714%* 178 179 180
65 11/11/21 8.580%* 76 80 300
66 01/11/17 8.470%* 111 118 240
67 01/11/27 8.620%* 78 82 360
68 01/11/27 8.930%* 114 118 360
69 02/11/17 9.700%* 175 179 240
70 11/11/21 8.870%* 112 116 300
71 04/11/17 8.160%* 174 181 240
72 03/11/17 9.600%* 173 180 240
73 01/11/22 8.860%* 114 118 300
74 03/11/22 9.290%* 176 180 300
75 01/11/17 9.930%* 174 178 240
76 03/11/22 8.990%* 116 120 300
76 03/11/22 8.990%* 116 120 300
77 01/11/07 8.780%* 114 118 300
78 01/11/22 8.700%* 111 118 300
79 11/11/21 9.210%* 112 116 300
80 02/11/22 9.230%* 112 119 300
81 03/11/22 8.980%* 113 120 300
82 01/11/22 9.790%* 174 178 300
83 01/11/22 8.970%* 114 118 300
84 11/11/21 9.110%* 112 116 300
85 02/11/22 9.050%* 115 119 300
86 02/11/22 9.540% 115 119 300
66
<PAGE>
STATED ANTICIPATED
MATURITY MORTGAGE REMAINING REMAINING
LOAN # DATE RATE LOCKOUT TERM AMORTIZATION
- ------ -------- -------- --------- ----------- ------------
87 03/11/22 8.800%* 113 120 300
88 11/11/21 8.780% 172 176 300
89 04/11/22 8.900%* 81 85 300
90 02/01/27 8.670%* 115 119 360
91 02/11/12 8.714%* 178 179 180
92 02/11/12 8.714%* 178 179 180
93 01/11/22 9.000%* 114 118 300
94 02/11/17 9.660%* 172 179 240
95 12/11/21 8.590%* 113 117 300
96 02/11/17 8.990%* 115 119 240
97 12/11/21 8.730% 113 117 300
98 02/11/27 9.050%* 112 119 360
99 01/11/07 8.910%* 114 118 300
100 02/11/17 10.000%* 175 179 240
101 01/11/22 9.410%* 114 118 300
102 02/11/07 8.850%* 115 119 300
103 03/11/07 8.800%* 113 120 300
104 02/11/17 9.660%* 175 179 240
105 02/11/27 8.440% 115 119 360
106 03/11/22 9.250%* 173 180 300
107 10/11/06 9.280% 111 115 300
108 11/11/26 8.630% 112 116 360
109 12/11/26 8.190%* 113 117 360
110 11/11/21 9.100% 112 116 300
111 01/11/22 8.350%* 111 118 300
112 03/11/22 8.650%* 116 120 300
113 03/11/07 8.420%* 116 120 300
114 10/11/06 9.000% 111 115 300
115 11/11/06 8.320% 112 116 300
116 03/11/17 9.220%* 113 120 240
117 03/11/17 9.530%* 176 180 240
118 01/11/22 9.080% 114 118 300
119 11/11/06 8.320% 112 116 300
120 03/11/17 9.890%* 173 180 240
121 03/11/17 9.300%* 173 180 240
122 02/11/22 8.380%* 115 119 300
123 01/11/17 9.430%* 174 178 240
</TABLE>
67
<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>
1.2-1.29....... 29 $ 339,428,348 23.5% 8.761%
1.3-1.39....... 32 457,144,101 31.6 8.608
1.4-1.49....... 25 308,993,612 21.4 8.658
1.5-1.59....... 11 135,377,084 9.4 9.028
1.6-1.69....... 11 89,451,335 6.2 8.445
1.7-1.79....... 6 60,068,858 4.2 8.462
1.8-1.89....... 3 9,196,733 0.6 8.848
1.9-1.99....... 2 33,661,784 2.3 7.723
2.0-2.09....... 3 10,020,652 0.7 9.130
2.1-2.2........ 1 1,200,000 0.1 9.300
-------- -------------- ------------ ----------
Total/Weighted
Average...... 123 $1,444,542,505 100% 8.663%
======== ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<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>
1.2-1.29....... 164 332 1.26 75%
1.3-1.39....... 133 325 1.35 69
1.4-1.49....... 136 314 1.44 64
1.5-1.59....... 140 284 1.52 62
1.6-1.69....... 111 288 1.68 57
1.7-1.79....... 140 253 1.75 60
1.8-1.89....... 169 212 1.82 58
1.9-1.99....... 126 342 1.92 48
2.0-2.09....... 170 221 2.05 56
2.1-2.2........ 180 240 2.20 34
----------- -------------- ---------- ----------
Total/Weighted
Average...... 141 314 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%-34.9%...... 1 $ 1,200,000 0.1% 9.300%
35%-39.9%...... 1 2,703,333 0.2 8.714
45%-49.9%...... 7 57,031,567 3.9 8.053
50%-54.5%...... 8 38,794,620 2.7 9.106
55%-59.9%...... 15 164,729,764 11.4 8.275
60%-64.9%...... 26 374,259,038 25.9 8.793
65%-69.9%...... 18 184,262,355 12.8 8.898
70%-74.9%...... 35 395,037,998 27.3 8.556
75%-79.9%...... 10 113,773,830 7.9 8.768
80%-85%........ 2 112,750,000 7.8 8.828
-------- -------------- ------------ ----------
Total/Weighted
Average ..... 123 $1,444,542,505 100% 8.663%
======== ============== ============ ==========
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<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%-34.9%...... 180 240 2.20 2.20 2.20 34%
35%-39.9%...... 179 180 1.69 1.69 1.69 36
45%-49.9%...... 143 288 1.65 2.05 1.86 48
50%-54.5%...... 149 282 1.25 1.71 1.47 53
55%-59.9%...... 117 309 1.26 2.05 1.58 57
60%-64.9%...... 129 320 1.27 1.82 1.44 63
65%-69.9%...... 147 292 1.23 1.68 1.38 67
70%-74.9%...... 137 318 1.21 1.71 1.36 72
75%-79.9%...... 140 352 1.24 1.41 1.30 77
80%-85%........ 214 312 1.24 1.28 1.26 83
----------- -------------- --------- --------- ---------- ----------
Total/Weighted
Average ..... 141 314 1.21 2.20 1.42 67%
=========== ============== ========= ========= ========== ==========
</TABLE>
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>
0% to 29.9%..... 19 $135,240,583 9.4% 8.694%
30% to 34.9% ... 7 40,914,332 2.8 9.359
35% to 39.9% ... 6 89,384,309 6.2 9.107
40% to 44.9% ... 7 56,223,907 3.9 8.340
45% to 49.9% ... 15 166,087,657 11.5 9.102
50% to 54.9% ... 19 274,509,694 19.0 8.353
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
- --------------- -------- -------------- ------------ ----------
55% to 59.9% ... 18 286,144,292 19.8 8.654
60% to 64.9% ... 20 259,382,492 18.0 8.683
65% to 69.9% ... 7 96,416,378 6.7 8.186
70% to 75%...... 5 40,238,864 2.8 8.683
-------- -------------- ------------ ----------
Total/Weighted
Average....... 123 $1,444,542,505 100% 8.663%
======== ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
LOAN TO REMAINING AMORTIZATION MINIMUM MAXMIUM AVERAGE AVERAGE
VALUE RATIO TERM TERM DSCR DSCR DSCR LTV
- --------------- ----------- -------------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
0% to 29.9%..... 182 219 1.34 2.20 1.57 62%
30% to 34.9% ... 177 240 1.27 1.82 1.49 66
35% to 39.9% ... 221 287 1.28 2.05 1.33 80
40% to 44.9% ... 132 331 1.38 1.91 1.74 52
45% to 49.9% ... 148 295 1.25 1.73 1.45 63
50% to 54.9% ... 114 315 1.26 1.73 1.51 61
55% to 59.9% ... 132 338 1.23 1.68 1.33 68
60% to 64.9% ... 135 341 1.21 1.41 1.33 73
65% to 69.9% ... 119 358 1.24 1.43 1.34 75
70% to 75%...... 113 360 1.28 1.39 1.34 79
----------- -------------- --------- --------- ---------- ----------
Total/Weighted
Average....... 141 314 1.21 2.20 1.42 67%
=========== ============== ========= ========= ========== ==========
</TABLE>
68
<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 20.7% 8.390%
MA ....... 11 166,791,073 11.5 8.296
NY ....... 11 108,910,959 7.5 8.792
NJ ....... 7 89,023,452 6.2 8.554
FL ....... 10 78,512,016 5.4 8.892
NC ....... 10 70,675,315 4.9 8.985
CO ....... 13 67,445,111 4.7 8.631
IN ....... 13 64,956,782 4.5 9.075
MD ....... 5 61,263,575 4.2 8.866
TX ....... 45 57,043,445 3.9 8.516
VA ....... 10 44,327,735 3.1 9.043
MI ....... 6 39,614,629 2.7 8.714
CT ....... 5 31,494,619 2.2 9.102
GA ....... 4 30,461,044 2.1 8.695
AZ ....... 4 27,007,553 1.9 8.526
NE ....... 5 22,250,308 1.5 8.726
OH ....... 11 22,210,684 1.5 9.143
PA ....... 2 21,996,895 1.5 9.115
WA ....... 4 16,527,749 1.1 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
MN ....... 1 9,086,484 0.6 8.240
NH ....... 1 9,025,000 0.6 8.180
OR ....... 1 8,000,000 0.6 8.350
SC ....... 3 7,692,931 0.6 9.251
TN ....... 4 6,388,380 0.4 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 ... 255 $1,444,542,505 100% 8.663%
============ ============== ============ ==========
</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 ....... 185 313 1.37 73
CO ....... 183 317 1.35 77
IN ....... 138 300 1.39 63
MD ....... 153 335 1.30 74
TX ....... 154 339 1.31 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
NE ....... 143 353 1.31 68
OH ....... 139 223 1.53 68
PA ....... 181 355 1.21 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
MN ....... 121 360 1.46 63
NH ....... 121 360 1.35 74
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 ....... 180 327 1.24 80
AR ....... 180 328 1.24 80
WV ....... 180 240 1.41 75
WY ....... 180 328 1.24 80
----------- -------------- ---------- ----------
Total ... 141 314 1.42 67%
=========== ============== ========== ==========
</TABLE>
69
<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>
1900........... 3 $ 31,369,164 2.2% 8.422%
1900-1909...... 5 29,181,347 2.0 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 2.8 8.565
1940-1949...... 1 7,375,729 0.5 9.190
1950-1959...... 13 30,840,317 2.1 8.933
1960-1969...... 52 207,290,211 14.3 8.578
1970-1979...... 74 344,595,505 23.9 8.651
1980-1989...... 73 545,578,426 37.8 8.664
1990-1997...... 22 190,508,692 13.2 8.802
------------ -------------- ------------ ----------
Total/Wtd.
Avg.......... 255 $1,444,542,505 100% 8.663%
============ ============== ============ ==========
</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>
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...... 138 316 1.44 68
1980-1989...... 132 323 1.43 64
1990-1997...... 175 317 1.33 74
------------- -------------- ---------- ----------
Total/Wtd.
Avg.......... 141 314 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 8.4 2,686 45,242 9.267 156
Ltd. Service ... 27 61,435,256 4.3 2,896 21,214 9.395 154
---------- -------------- ------------ ---------- -------- -------- ---------
TOTAL HOTEL ... 44 211,511,762 14.6 6,030 35,077 9.301 159
INDUSTRIAL
Industrial ...... 11 17,603,838 1.2 1,625,413 11 8.668 136
Warehouse ....... 3 62,766,319 4.3 2,909,811 22 8.961 240
---------- -------------- ------------ ---------- -------- -------- ---------
TOTAL INDUSTRIAL 14 80,370,157 5.6 4,535,224 18 8.897 217
MOBILE HOME PARK 12 49,618,205 3.4 3,190 15,554 8.427 118
MULTIFAMILY ..... 23 179,021,849 12.4 24,469 7,316 8.304 140
---------- -------------- ------------ ---------- -------- -------- ---------
NURSING.......... 10 46,910,257 3.2 1,340 35,008 9.254 175
---------- -------------- ------------ ---------- -------- -------- ---------
OFFICE
Office........... 29 307,324,369 21.3 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 23.6 4,679,731 73 8.493 118
RETAIL
Retail Anchored 29 346,658,163 24.0 6,237,686 56 8.506 131
Retail Factory
Outlet ......... 3 27,000,000 1.9 358,082 75 8.350 123
Retail Mall...... 2 46,125,161 3.2 439,902 105 8.861 150
Retail Office ... 1 3,742,129 0.3 102,607 36 8.780 118
Retail
Unanchored ..... 82 83,584,825 5.8 2,500,081 33 8.762 156
Retail Secondary
Anchored ....... 4 27,007,666 1.9 400,059 68 8.539 141
---------- -------------- ------------ ---------- -------- -------- ---------
TOTAL RETAIL .. 121 534,117,945 37 10,038,417 53 8.572 136
TOTAL/WTD.
AVG. ........... 255 $1,444,542,505 100% 8.663% 141
========== ============== ============ ========== ======== ======== =========
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
LTV AVERAGE
AS OF THE WEIGHTED CUT-OFF WEIGHTED
WEIGHTED ANTICIPATED WEIGHTED AVERAGE PRINCIPAL AVERAGE WEIGHTED WEIGHTED
AVERAGE MIN MAX REPAYMENT AVERAGE NUMBER BALANCE YEAR AVERAGE AVERAGE
PROPERTY TYPE AMORTIZATION DSCR DSCR DATE/MATURITY OCCUPANCY OF UNITS PER UNIT BUILT DSCR LTV
------------ ---- ---- ------------- --------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSISTED LIVING 180 1.69 1.69 1% 88% 250 10,813 1977 1.69 36%
HOTEL
EXTENDED STAY ... 289 1.45 1.47 44 81 129 66,748 1993 1.46 67
FULL SERVICE ... 264 1.41 2.20 38 74 328 55,374 1992 1.51 61
LTD. SERVICE ... 280 1.39 2.05 43 70 119 24,188 1992 1.54 62
------------ ---- ---- ------------- --------- --------- --------- -------- -------- --------
TOTAL HOTEL ... 272 1.39 2.20 41 74 241 47,851 1992 1.51 62
INDUSTRIAL
INDUSTRIAL ...... 233 1.31 1.49 30 95 177,832 16 1958 1.39 66
WAREHOUSE ....... 299 1.28 1.49 39 100 1,401,607 22 1993 1.28 85
------------ ---- ---- ------------- --------- --------- --------- -------- -------- --------
TOTAL INDUSTRIAL 284 1.28 1.49 37 99 1,133,558 21 1985 1.30 81
MOBILE HOME PARK 348 1.29 2.05 57 95 403 16,829 1976 1.46 64
MULTIFAMILY ..... 312 1.25 1.82 53 95 878 50,710 1986 1.38 73
------------ ---- ---- ------------- --------- --------- --------- -------- -------- --------
NURSING.......... 226 1.50 2.05 24 94 166 43,286 1983 1.68 65
------------ ---- ---- ------------- --------- --------- --------- -------- -------- --------
OFFICE
OFFICE........... 335 1.25 1.73 55 96 296,752 95 1985 1.42 63
R&D ............. 360 1.27 1.27 55 100 417,532 79 1990 1.27 61
------------ ---- ---- ------------- --------- --------- --------- -------- -------- --------
TOTAL OFFICE .. 338 1.25 1.73 55 96 308,461 93 1987 1.41 63
RETAIL
RETAIL ANCHORED 334 1.21 1.91 57 94 318,144 66 1989 1.42 67
RETAIL FACTORY
OUTLET ......... 300 1.51 1.51 51 91 129,237 76 1992 1.51 61
RETAIL MALL...... 302 1.31 1.41 54 97 214,025 146 1979 1.36 69
RETAIL OFFICE ... 300 1.28 1.28 52 93 102,607 36 1984 1.28 61
RETAIL
UNANCHORED ..... 313 1.24 1.65 58 95 45,621 50 1979 1.30 75
RETAIL SECONDARY
ANCHORED ....... 322 1.23 1.97 52 99 98,013 112 1991 1.44 64
------------ ---- ---- ------------- --------- --------- --------- -------- -------- --------
TOTAL RETAIL .. 326 1.21 1.97 57 95 244,314 73 1987 1.40 68
TOTAL/WTD.
AVG. ........... 314 1.21 2.20 51 92 1987 1.42 67%
============ ==== ==== ============= ========= ========= ========= ======== ======== ========
</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 .. 64 179,344,858 12.4 8.964
5,000,000-9,999,999 .. 20 134,692,096 9.3 8.894
10,000,000-14,999,999 11 144,052,564 10.0 8.866
15,000,000-19,999,999 3 52,636,611 3.6 8.483
20,000,000-24,999,999 7 156,867,143 10.9 8.658
25,000,000-29,999,999 3 83,701,826 5.8 8.055
30,000,000-34,999,999 4 132,587,672 9.2 8.461
35,000,000-39,999,999 1 36,000,000 2.5 9.090
40,000,000-44,999,999 1 41,700,000 2.9 9.214
50,000,000-54,999,999 2 101,086,851 7.0 8.455
55,000,000-59,999,999 2 114,354,069 7.9 8.572
60,000,000-64,999,999 1 62,250,000 4.3 8.965
65,000,000-69,999,999 3 204,271,921 14.1 8.402
----------- -------------- ------------ ---------------
TOTAL/WTD. AVG. .... 123 $1,444,542,505 100% 8.663%
=========== ============== ============ ===============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
WEIGHTED
AVERAGE WEIGHTED
ANTICIPATED AVERAGE WEIGHTED WEIGHTED
RANGE OF CUT-OFF REMAINING AMORTIZATION AVERAGE AVERAGE
DATE LOAN AMOUNTS TERM TERM DSCR LTV
- --------------------- ------------- -------------- ---------- ----------
LESS THAN 1,000,000 .. 178 240 1.34 59%
1,000,000-4,999,999 .. 138 282 1.49 63
5,000,000-9,999,999 .. 145 280 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
35,000,000-39,999,999 181 360 1.27 77
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
60,000,000-64,999,999 241 300 1.28 85
65,000,000-69,999,999 119 359 1.38 63
------------- -------------- ---------- ----------
TOTAL/WTD. AVG. .... 141 314 1.42 67%
============= ============== ========== ==========
RANGE OF ANTICIPATED REMAINING TERM IN MONTHS
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
- -------------- -------- -------------- ------------ -------------
80-89.......... 6 $ 89,165,263 6.2% 83
110-119........ 46 445,239,639 30.8 118
120-129........ 23 305,812,000 21.2 121
140-149........ 5 161,221,071 11.2 143
150-159........ 1 8,665,157 0.6 155
170-179........ 26 171,094,524 11.8 178
180-189........ 14 150,508,000 10.4 181
190-199........ 1 50,586,851 3.5 192
240-250........ 1 62,250,000 4.3 241
-------- -------------- ------------ -------------
TOTAL/WTD.
AVG.......... 123 $1,444,542,505 100% 141
============== ============ =============
(RESTUBBED TABLE CONTINUED FROM ABOVE)
WIEGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE WEIGHTED WEIGHTED
ANTICIPATED AMORTIZATION MORTGAGE AVERAGE AVERAGE
REMAINING TERM TERM RATE DSCR LTV
- -------------- -------------- ---------- ---------- ----------
80-89.......... 286 8.219% 1.58 61%
110-119........ 338 8.424 1.44 66
120-129........ 331 8.555 1.38 67
140-149........ 324 8.940 1.40 65
150-159........ 156 8.480 1.49 67
170-179........ 252 9.236 1.55 62
180-189........ 322 8.924 1.30 74
190-199........ 240 8.250 1.34 72
240-250........ 300 8.965 1.28 85
-------------- ---------- ---------- ----------
TOTAL/WTD.
AVG.......... 314 8.663% 1.42 67%
============== ========== ========== ==========
72
<PAGE>
RANGE OF REMAINING TERM IN MONTHS
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF CUT-OFF WTD. AVG.
LOANS/ DATE DATE ANTICIPATED
RANGE OF LOAN PRINCIPAL PRINCIPAL REMAINING
REMAINING TERM POOLS BALANCE BALANCE TERM
- -------------- -------- -------------- ------------ -------------
115-125........ 9 $ 17,397,885 1.2% 118
175-185........ 7 40,491,685 2.8 166
235-245........ 24 166,206,594 11.5 171
265-275........ 1 9,665,000 0.7 121
295-305........ 52 556,388,871 38.5 142
315-325........ 1 13,627,151 0.9 116
355-365........ 29 640,765,320 44.4 132
-------------- ------------ -------------
TOTAL/WTD.
AVG.......... 123 $1,444,542,505 100% 141
============== ============ =============
(RESTUBBED TABLE CONTINUED FROM ABOVE)
WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE
WTD. AVG. AVERAGE CUT-OFF CUT-OFF
RANGE OF AMORTIZATION MORTGAGE DATE DATE
REMAINING TERM TERM RATE DSCR LTV
- -------------- -------------- ---------- ---------- ----------
115-125........ 300 8.770% 1.44 62%
175-185........ 180 8.613 1.77 57
235-245........ 240 8.961 1.47 66
265-275........ 264 9.580 1.56 72
295-305........ 297 8.799 1.45 66
315-325........ 324 8.670 1.40 71
355-365........ 357 8.453 1.36 69
-------------- ---------- ---------- ----------
TOTAL/WTD.
AVG.......... 314 8.663% 1.42 67%
============== ========== ========== ==========
ANTICIPATED REPAYMENT BY YEAR
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF CUT-OFF WTD. AVG.
LOANS/ DATE DATE ANTICIPATED
LOAN PRINCIPAL PRINCIPAL REMAINING
YEAR POOLS BALANCE BALANCE TERM
- -------------- -------- -------------- ------------ -------------
2003........... 1 $ 4,532,434 0.3% 80
2004........... 5 84,632,829 5.9 83
2006........... 14 59,833,663 4.1 116
2007........... 55 691,217,976 47.9 119
2008........... 1 55,854,069 3.9 141
2009........... 4 105,367,002 7.3 144
2010........... 1 8,665,157 0.6 155
2011........... 8 72,070,948 5.0 176
2012........... 32 249,531,576 17.3 180
2013........... 1 50,586,851 3.5 192
2017........... 1 62,250,000 4.3 241
-------------- ------------ -------------
TOTAL/WTD.
AVG.......... 123 $1,444,542,505 100% 141
============== ============ =============
(RESTUBBED TABLE CONTINUED FROM ABOVE)
WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE
WTD. AVG. AVERAGE CUT-OFF CUT-OFF
AMORTIZATION MORTGAGE DATE DATE
YEAR TERM RATE DSCR LTV
- -------------- -------------- ---------- ---------- ----------
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........... 299 9.048 1.39 70
2013........... 248 8.250 1.34 72
2017........... 300 8.965 1.28 85
-------------- ---------- ---------- ----------
TOTAL/WTD.
AVG.......... 314 8.663% 1.42 67%
============== ========== ========== ==========
73
<PAGE>
RANGE OF MORTGAGE RATES
<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF CUT-OFF WEIGHTED WTD. AVG.
LOANS/ DATE DATE AVERAGE ANTICIPATED WEIGHTED WEIGHTED
RANGE OF LOAN PRINCIPAL PRINCIPAL MORTGAGE REMAINING WTD. AVG. 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%
GREATER THAN
7.75%-8.999% .. 2 83,471,982 5.8 7.967 94 318 1.60 62
GREATER THAN
8.00%-8.249% . 9 206,306,629 14.3 8.152 139 323 1.41 65
GREATER THAN
8.25%-8.499% . 18 247,922,955 17.2 8.385 123 330 1.43 69
GREATER THAN
8.50%-8.799% . 27 335,918,917 23.3 8.658 139 318 1.38 68
GREATER THAN
8.75%-8.999% . 25 186,966,987 12.9 8.894 161 300 1.34 73
GREATER THAN
9.00%-9.249% . 17 242,595,365 16.8 9.142 154 316 1.37 66
GREATER THAN
9.25%-9.499% . 7 36,109,281 2.5 9.336 171 253 1.49 63
GREATER THAN
9.50%-9.799% . 11 54,133,706 3.7 9.626 165 247 1.49 67
GREATER THAN
9.75%-9.999% . 5 16,805,316 1.2 9.923 177 275 1.69 60
GREATER THAN
10.00%-10.249% 1 5,609,541 0.4 10.100 179 240 1.66 67
-------------- ------------ ---------- ------------- ------------- ---------- ----------
TOTAL/WTD.
AVG............ 123 $1,444,542,505 100% 8.663% 141 314 1.42 67%
============== ============ ========== ============= ============= ========== ==========
</TABLE>
DELINQUENCY STATUS AS OF MARCH 1, 1997
STATUS
-------------------
NO DELINQUENCIES
RANGE OF REMAINING LOCK-OUT PERIOD IN MONTHS
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF CUT-OFF
LOCK-OUT LOANS/ DATE DATE
PERIOD LOAN PRINCIPAL PRINCIPAL
IN MONTHS POOLS BALANCE BALANCE
- ---------------- -------- -------------- ------------
72-83.9.......... 6 $ 89,165,263 6.2%
108-119.9........ 68 717,551,639 49.7
120-131.9........ 1 33,500,000 2.3
132-133.9........ 5 161,221,071 11.2
134-145.9........ 1 8,665,157 0.6
158-169.9........ 38 264,602,524 18.3
170-171.9........ 3 107,586,851 7.4
210-221.9........ 1 62,250,000 4.3
-------- -------------- ------------
TOTAL/WTD.
AVG............. 123 $1,444,542,505 100%
======== ============== ============
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WTD. AVG. WEIGHTED
LOCK-OUT AVERAGE ANTICIPATED WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED
PERIOD REMAINING REMIANING 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........ 116 119 334 331 8.489 1.41 66
120-131.9........ 120 121 360 360 8.240 1.46 63
132-133.9........ 141 143 324 324 8.940 1.40 65
134-145.9........ 151 155 156 300 8.480 1.49 67
158-169.9........ 175 179 268 276 9.089 1.48 66
170-171.9........ 185 186 304 304 8.697 1.29 74
210-221.9........ 240 241 300 300 8.965 1.28 85
----------- ------------- -------------- ---------- ---------- ---------- ----------
TOTAL/WTD.
AVG............. 138 141 314 315 8.663% 1.42 67%
=========== ============= ============== ========== ========== ========== ==========
</TABLE>
74
<PAGE>
RANGE OF REMAINING LOCK-OUT PERIOD IN MONTHS
PERCENT BY
NUMBER AGGREGATE
OF CUT-OFF CUT-OFF
LOCK-OUT LOANS/ DATE DATE
PERIOD LOAN PRINCIPAL PRINCIPAL
IN MONTHS POOLS BALANCE BALANCE
- ----------------------- -------- -------------- ------------
72-86................... 6 $ 89,165,263 6.2%
106-116................. 50 335,278,042 23.2
116-126................. 20 436,573,597 30.2
136-146................. 5 161,221,071 11.2
146-156................. 1 8,665,157 0.6
166-176................. 25 138,546,561 9.6
176-186................. 14 161,055,963 11.2
186-196................. 1 50,586,851 3.5
236-246................. 1 62,250,000 4.3
-------- -------------- ------------
TOTAL/WEIGHTED
AVERAGE................ 123 $1,444,542,505 100%
======== ============== ============
(RESTUBBED TABLE CONTINUED FROM ABOVE)
WEIGHTED WEIGHTED
WEIGHTED WEIGHTED AVERAGE AVERAGE
LOCK-OUT AVERAGE AVERAGE CUT-OFF CUT-OFF
PERIOD REMAINING MORTGAGE DATE DATE
IN MONTHS LOCKOUT RATE DSCR LTV
- ----------------------- ----------- ---------- ---------- ----------
72-86................... 83 8.219% 1.58 61%
106-116................. 119 8.626 1.40 66
116-126................. 120 8.387 1.42 67
136-146................. 143 8.940 1.40 65
146-156................. 155 8.480 1.49 67
166-176................. 178 9.332 1.57 61
176-186................. 180 8.884 1.37 74
186-196................. 192 8.250 1.34 72
236-246................. 241 8.965 1.28 85
----------- ---------- ---------- ----------
TOTAL/WEIGHTED
AVERAGE................ 140 8.661% 1.42 67%
=========== ========== ========== ==========
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus of the Mortgage Pool and the Mortgaged
Properties is based upon the Mortgage Pool as expected to be constituted at the
close of business on the Cut-off Date, as adjusted for the scheduled principal
payments due on the Mortgage Loans on or before the Cut-off Date. Prior to the
issuance of the Subordinated Certificates, a Mortgage Loan may be removed from
the Mortgage Pool if the Depositor deems such removal necessary or appropriate
or if it is prepaid. This may cause the range of Mortgage Rates and maturities
as well as the other characteristics of the Mortgage Loans to vary from those
described herein.
A Current Report on Form 8-K will be available to purchasers of the
Subordinated Certificates and 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. In the event Mortgage Loans are removed from the Mortgage Pool as
set forth in the preceding paragraph, such removal will be noted in the Form
8-K. Such Form 8-K will be available to purchasers and potential purchasers of
the Subordinated Units.
DESCRIPTION OF THE SUBORDINATED UNITS
The Subordinated Units consist of $36,113,562 (approximate) Class B-1
Certificates, $36,113,562 (approximate) Class B-2 Certificates, $14,445,425
(approximate) Class B-3 Certificates, $21,668,137 (approximate) Class B-4
Certificates, $14,449,429 (approximate) Class B-5 certificates, and $14,445,425
(approximate) Class B-6 Certificates. No Class of Subordinated Certificates
will be separately tradable unless and until a Class of Subordinated
Certificates is rated investment grade by either S&P or Fitch, and only such
investment grade Class shall be separately tradable. See "Description of the
Subordinated Certificates" for further information concerning the Subordinated
Certificates. All references herein to the Subordinated Units are deemed to
include the Class B-1 certificates, Class B-2 Certificates, Class B-3
Certificates, Class B-4 Certificates, Class B-5 Certificates, and the Class B-6
Certificates which comprise the Subordinated Units.
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DESCRIPTION OF THE SUBORDINATED CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of twenty-six Classes to be 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 in the form of Subordinated Units. The Senior
Certificates are being offered concurrently with the Subordinated Certificates
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 will have an initial Certificate Balance of
$36,113,562. The Class B-2 Certificates will have an initial Certificate
Balance of $36,113,562. The Class B-3 Certificates will have an initial
Certificate Balance of $14,445,425. The Class B-4 Certificates will have an
initial Certificate Balance of $21,668,137. The Class B-5 Certificates will
have an initial Certificate Balance of $14,445,425. The Class B-6 Certificates
will have an initial Certificate Balance of $14,445,425.
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 will have initial Certificate Balances of $128,250,000,
$90,777,000, $66,525,000, $696,736,903, $86,672,550, $28,890,850, $50,558,987,
$21,668,137, $43,336,275, $28,890,850, $21,668,137 and $21,668,137,
respectively. The Class B-7 and Class B-7H Certificates will have initial
Certificate Balances, in the aggregate, of approximately $21,668,143. The Class
A-CS1 Certificates will have an initial Notional Balance equal to $128,250,000,
which is equal to the Certificate Balance of the Class A-1A Certificates. The
Class PS-1 Certificates will have an initial Notional Balance equal to
$[1,444,542,505.38], 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 will be zero. Additionally, the Class R, Class LR,
Class V-1 and Class V-2 Certificates will 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 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
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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.
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 the Closing Date. 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
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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 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, Trustee Fee and special serving 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 __________ Loan 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.
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"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
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 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 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.
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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 classes 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" with respect to any Distribution
Date is (i) when the Class B-6 Certificates are the most subordinate class
outstanding, the Weighted Average Net Mortgage Pass-Through Rate minus %, (ii)
when the Class B-5 Certificates are the most subordinate class outstanding, the
Weighted Average Net Mortgage Pass-Through Rate minus
%, (iii) when the Class B-4 Certificates are the most subordinate class
outstanding, the Weighted Average Net Mortgage Pass-Through Rate minus %, (iv)
when the Class B-3 Certificates are the most subordinate class outstanding, the
Weighted Average Net Mortgage Pass-Through Rate minus %, (v) when the Class B-2
Certificates are the most subordinate class outstanding, the Weighted Average
Net Mortgage Pass-Through Rate minus %, (vi) when the Class B-1 Certificates
are the most subordinate class outstanding, the Weighted Average Net Mortgage
Pass-Through Rate minus %, (vii) when the Class A-8 Certificates are the most
subordinate class outstanding %, (viii) when the Class A-8 Certificates are the
most subordinate class outstanding %, (ix) when the Class A-6 Certificates are
the most subordinate class outstanding %, (x) when the Class A-5 Certificates
are the most subordinate class outstanding %, (xi) when the Class A-4
Certificates are the most subordinate class outstanding, %, (xii) when the
Class A-3 Certificates are the most subordinate class outstanding,
% and (xiii) when the Class A-2 Certificates are the most subordinate class
outstanding, %.
The "Reduction Interest Shortfalls" with respect to any Distribution Date
and each of the classes 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 9 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.
"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 %.
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 %, %, %,
% and %, respectively. The Pass-Through Rate on the Class A-CS1
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Certificates is a per annum rate equal to the Weighted Average Net Mortgage
Pass-Through Rate minus %. 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. 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 %. 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
%. 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 %. 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 %. 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 %. 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 %.
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 class 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 Loan secured by Nassau Park II) 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) 0.045%.
The "Mortgage Pass-Through Rate" with respect to the [ ] 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 for the first Interest Accrual Period is the Mortgage
Rate thereof.
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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) which become due on the Mortgage Loans on the related Due
Date;
(ii) the principal component of all Assumed Scheduled Payments or Minimum
Defaulted Monthly Payments, as applicable, deemed to become due on the related
Due Date 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.
Amounts received on any Mortgage Loan that represents recoveries of any
Subordinate Class Advance Amount will not be included in the calculation of
"Principal Distribution Amount."
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 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
shortfall in the Principal Distribution Amount distributable to any Class
of Senior Certificates on a prior Distribution Date and 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;
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(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, first, to the extent not
distributed pursuant to all prior clauses, any shortfall in the Principal
Distribution Amount distributable on prior Distribution Dates and, second,
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 prior clauses, until the Certificate Balance of such Class is reduced to
zero;
(ix) Ninth, to the Class B-2 Certificates, first, to the extent not
distributed pursuant to all prior clauses, any shortfall in the Principal
Distribution Amount distributable on prior Distribution Dates and, second,
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;
(xiii) Thirteenth, to the Class B-3 Certificates, first, to the extent not
distributed pursuant to all prior clauses, any shortfall in the Principal
Distribution Amount distributable on prior Distribution Dates and, second,
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;
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(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, first, to the extent
not distributed pursuant to all prior clauses, any shortfall in the
Principal Distribution Amount distributable on prior Distribution Dates
and, second, 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, first, to the extent
not distributed pursuant to all prior clauses, any shortfall in the
Principal Distribution Amount distributable on prior Distribution Dates
and, second, 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, first, to the extent
not distributed pursuant to all prior clauses, any shortfall in the
Principal Distribution Amount distributable on prior Distribution Dates
and, second, 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;
(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;
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(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, first, to the extent not distributed pursuant to all prior
clauses, any shortfall in the Principal Distribution Amount distributable
on prior Distribution Dates and, second, 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.
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.
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 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 (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.
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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 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 notionally to the next most
subordinate Class of Certificates on the next Distribution Date). Any such
reductions will be applied notionally 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
specified above (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 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.
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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, (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 $50,000, $50,000, $20,000, $30,000, $20,000 and
$20,000 initial Certificate Balances, respectively and in multiples of $5,000,
$5,000, $2,000, $3,000, $2,000, and $2,000, respectively, in excess thereof.
All references herein to Subordinated Certificates and Definitive Certificates
are deemed to include Subordinated Certificates and Definitive Certificates
comprising global and definitive Subordinated Units.
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 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).
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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").
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.
88
<PAGE>
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.
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 Underwriters. 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.
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<PAGE>
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 Underwriters.
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) 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.
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<PAGE>
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.
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<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.
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<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 first 3 years with respect to any Mortgage Loans, (iv) defaults are
calculated in cumulative percentages specified of the Initial 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 Units.
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<PAGE>
WEIGHTED AVERAGE LIFE, FIRST AND LAST PRINCIPAL PAYMENT
DATE, YIELD AND DURATION OF
ALL SUBORDINATED UNITS
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> <C>
Cumulative Default Percentage:(a) 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a) ($mm) .... $ 0 10.8 $ 21.7 $ 43.3 $ 65.0
As a percentage of Initial Pool Balance 0% .75% 1.5% 3.00% 4.5%
Applied to Subordinated Units ($mm) .... $ 0 $ 0 $ 0 $ 21.7 $ 43.3
As a percentage of Subordinated Units ... 0% 0% 0% 15.8% 31.6%
- --------------------------------------------------------------------------------------------------------------
Weighted average life (years) 15.70 16.03 16.36 16.45 16.59
First principal payment date 3/2012 3/2012 3/2012 3/2012 4/2012
Last principal payment date 4/2017 4/2017 4/2017 4/2017 4/2017
Price (%) 75.063......................... 11.09 11.06 11.03 10.16 8.96 Yield to Maturity
7.76 7.81 7.86 7.78 7.73 Duration
Price (%) 77.641......................... 10.66 10.63 10.61 9.73 8.53 Yield to Maturity
7.89 7.95 8.01 7.93 7.89 Duration
Price (%) 79.984......................... 10.28 10.26 10.24 9.36 8.16 Yield to Maturity
8.02 8.08 8.14 8.06 8.02 Duration
Price (%) 82.484......................... 9.90 9.88 9.86 8.98 7.78 Yield to Maturity
8.14 8.20 8.27 8.19 8.16 Duration
Price (%) 84.984......................... 9.54 9.52 9.51 8.62 7.41 Yield to Maturity
8.26 8.33 8.39 8.32 8.29 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.
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<PAGE>
WEIGHTED AVERAGE LIFE AND FIRST AND LAST PRINCIPAL PAYMENT
DATE OF CLASS B-1 CERTIFICATES
AT VARIOUS ASSUMED 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 $ 10.8 $ 21.7 $ 43.3 $ 65.0
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) 14.96 14.97 14.98 15.01 15.03
First principal payment date 3/2012 3/2012 3/2012 3/2012 4/2012
Last principal payment date 4/2012 4/2012 4/2012 4/2012 4/2012
</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 AND FIRST AND LAST PRINCIPAL PAYMENT
DATE OF CLASS B-2 CERTIFICATES
AT VARIOUS ASSUMED 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 $ 10.8 $ 21.7 $ 43.3 $ 65.0
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) 15.03 15.03 15.03 15.24 16.10
First principal payment date 4/2012 4/2012 4/2012 4/2012 4/2012
Last principal payment date 4/2012 4/2012 4/2012 3/2013 9/2016
</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 AND FIRST AND LAST PRINCIPAL PAYMENT
DATE OF CLASS B-3 CERTIFICATES
AT VARIOUS ASSUMED 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 $ 10.8 $ 21.7 $ 43.3 $ 65.0
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) 15.03 15.04 15.43 16.32 20.00
First principal payment date 4/2012 4/2012 4/2012 3/2013 9/2016
Last principal payment date 4/2012 6/2012 3/2013 3/2015 4/2017
</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 AND FIRST AND LAST PRINCIPAL PAYMENT
DATE OF CLASS B-4 CERTIFICATES
AT VARIOUS ASSUMED 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% 5.00% 10.0% 15.0%
Cumulative Losses Realized(a)
($mm)...................................... $ 0 $ 10.8 $ 21.7 $ 43.3 $ 65.0
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 $ 14.4
As a percentage of Class B-4 Certificates 0% 0% 0% 0% 66.6%
- ---------------------------------------------------------------------------------------------
Weighted average life (years) 15.53 15.87 16.62 19.76 20.03
First principal payment date 4/2012 6/2012 3/2013 3/2015 4/2017
Last principal payment date 3/2013 3/2013 5/2016 4/2017 4/2017
</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>
WEIGHTED AVERAGE LIFE AND FIRST AND LAST PRINCIPAL PAYMENT
DATE OF CLASS B-5 CERTIFICATES
AT VARIOUS ASSUMED 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 $ 10.8 $ 21.7 $ 43.3 $65.0
As a percentage of Initial Pool Balance .. 0% .75% 1.5% 3.0% 4.5%
Applied to Class B-5 Certificates ($mm) .. $ 0 $ 0 $ 0 $ 7.2 $14.4
As a percentage of Class B-5 Certificates 0% 0% 0% 50% 100%
- --------------------------------------------------------------------------------------------
Weighted average life (years) 16.33 18.39 19.95 20.03 N/A
First principal payment date 3/2013 3/2013 5/2016 4/2017 N/A
Last principal payment date 3/2015 4/2017 4/2017 4/2017 N/A
</TABLE>
- ------------
(a) Defaults and losses assumed to occur in equal monthly percentages of
outstanding pool balance beginning in the 37th month after the Cut-off
Date.
99
<PAGE>
WEIGHTED AVERAGE LIFE AND FIRST AND LAST PRINCIPAL PAYMENT
DATE OF CLASS B-6 CERTIFICATES
AT VARIOUS ASSUMED MORTGAGE LOAN
DEFAULT RATES ASSUMING 30% LOSSES ON DEFAULTED MORTGAGE LOANS
<TABLE>
<CAPTION>
SCENARIO 1 2 3 4 5
- ------------------------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cumulative Default Percentage:(a) 0% 2.5% 5.0% 10.0% 15.0%
Cumulative Losses Realized(a)
($mm)...................................... $ 0 $ 10.8 $ 21.7 $ 43.3 $ 65.0
As a percentage of Initial Pool Balance .. 0% .75% 1.50% 3.00% 4.5%
Applied to Class B-6 Certificates ($mm) .. $ 0 $ 0 $ 0 $ 14.4 $ 14.4
As a percentage of Class B-6 Certificates 0% 0% 0% 100.0% 100.0%
- ---------------------------------------------------------------------------------------------
Weighted average life (years) 19.55 20.03 20.03 N/A N/A
First principal payment date 3/2015 4/2017 4/2017 N/A N/A
Last principal payment date 4/2017 4/2017 4/2017 N/A N/A
</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.
100
<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.
101
<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 139 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 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,
102
<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. 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 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 2, 1997. These assumptions are
collectively referred to as the "Mortgage Loan Assumptions." The Mortgage Loan
Assumptions made in
103
<PAGE>
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, the Prepayment Assumptions and the
various CPRs, the tables 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.
104
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
SUBORDINATED UNITS
-----------------------------------------------------
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 .................... 76 76 75 74 66
March 14, 2013 .................... 14 14 14 14 14
March 14, 2014 .................... 12 12 12 12 12
March 14, 2015 .................... 10 10 10 10 10
March 14, 2016 .................... 8 8 8 8 8
March 14, 2017 .................... 6 6 6 6 6
March 14, 2018 .................... 0 0 0 0 0
March 14, 2019 .................... 0 0 0 0 0
March 14, 2020 .................... 0 0 0 0 0
March 14, 2021 .................... 0 0 0 0 0
March 14, 2022 .................... 0 0 0 0 0
March 14, 2023 .................... 0 0 0 0 0
March 14, 2024 .................... 0 0 0 0 0
March 14, 2025 .................... 0 0 0 0 0
March 14, 2026 .................... 0 0 0 0 0
March 14, 2027 .................... 0 0 0 0 0
March 14, 2028 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 15.70 15.70 15.70 15.70 15.69
</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 Subordinated Units is determined by
(i) multiplying the amount of each distribution in reduction of the
aggregate Certificate Balances of the Classes comprising the
Subordinated Unit by the number of years from the date of determination
to the related Distribution Date, (ii) adding the results and (iii)
dividing the sum by the aggregate distributions in reduction of
Certificate 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-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 .................... 9 8 6 3 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
March 14, 2019 .................... 0 0 0 0 0
March 14, 2020 .................... 0 0 0 0 0
March 14, 2021 .................... 0 0 0 0 0
March 14, 2022 .................... 0 0 0 0 0
March 14, 2023 .................... 0 0 0 0 0
March 14, 2024 .................... 0 0 0 0 0
March 14, 2025 .................... 0 0 0 0 0
March 14, 2026 .................... 0 0 0 0 0
March 14, 2027 .................... 0 0 0 0 0
March 14, 2028 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 14.96 14.96 14.96 14.95 14.92
</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 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).
106
<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 ................... 100 100 100 100 73
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
March 14, 2019 ................... 0 0 0 0 0
March 14, 2020 ................... 0 0 0 0 0
March 14, 2021 ................... 0 0 0 0 0
March 14, 2022 ................... 0 0 0 0 0
March 14, 2023 ................... 0 0 0 0 0
March 14, 2024 ................... 0 0 0 0 0
March 14, 2025 ................... 0 0 0 0 0
March 14, 2026 ................... 0 0 0 0 0
March 14, 2027 ................... 0 0 0 0 0
March 14, 2028 ................... 0 0 0 0 0
Weighted Average Life (years)(2) 15.03 15.03 15.03 15.03 15.01
</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 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-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 .................... 100 100 100 100 100
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
March 14, 2019 .................... 0 0 0 0 0
March 14, 2020 .................... 0 0 0 0 0
March 14, 2021 .................... 0 0 0 0 0
March 14, 2022 .................... 0 0 0 0 0
March 14, 2023 .................... 0 0 0 0 0
March 14, 2024 .................... 0 0 0 0 0
March 14, 2025 .................... 0 0 0 0 0
March 14, 2026 .................... 0 0 0 0 0
March 14, 2027 .................... 0 0 0 0 0
March 14, 2028 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 15.03 15.03 15.03 15.03 15.03
</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 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).
108
<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
March 14, 2019 .................... 0 0 0 0 0
March 14, 2020 .................... 0 0 0 0 0
March 14, 2021 .................... 0 0 0 0 0
March 14, 2022 .................... 0 0 0 0 0
March 14, 2023 .................... 0 0 0 0 0
March 14, 2024 .................... 0 0 0 0 0
March 14, 2025 .................... 0 0 0 0 0
March 14, 2026 .................... 0 0 0 0 0
March 14, 2027 .................... 0 0 0 0 0
March 14, 2028 .................... 0 0 0 0 0
Weighted Average Life (years)(2) . 15.53 15.53 15.53 15.53 15.53
</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 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).
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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 ................... 36 36 36 36 36
March 14, 2014 ................... 18 18 18 18 18
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
March 14, 2019 ................... 0 0 0 0 0
March 14, 2020 ................... 0 0 0 0 0
March 14, 2021 ................... 0 0 0 0 0
March 14, 2022 ................... 0 0 0 0 0
March 14, 2023 ................... 0 0 0 0 0
March 14, 2024 ................... 0 0 0 0 0
March 14, 2025 ................... 0 0 0 0 0
March 14, 2026 ................... 0 0 0 0 0
March 14, 2027 ................... 0 0 0 0 0
March 14, 2028 ................... 0 0 0 0 0
Weighted Average Life (years)(2) . 16.33 16.33 16.33 16.33 16.33
</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 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).
110
<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 ................... 99 99 99 99 99
March 14, 2016 ................... 77 77 77 77 77
March 14, 2017 ................... 53 53 53 53 53
March 14, 2018 ................... 0 0 0 0 0
March 14, 2019 ................... 0 0 0 0 0
March 14, 2020 ................... 0 0 0 0 0
March 14, 2021 ................... 0 0 0 0 0
March 14, 2022 ................... 0 0 0 0 0
March 14, 2023 ................... 0 0 0 0 0
March 14, 2024 ................... 0 0 0 0 0
March 14, 2025 ................... 0 0 0 0 0
March 14, 2026 ................... 0 0 0 0 0
March 14, 2027 ................... 0 0 0 0 0
March 14, 2028 ................... 0 0 0 0 0
Weighted Average Life (years)(2)
19.55 19.55 19.55 19.55 19.55
</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 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).
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<PAGE>
THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of , 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 the Closing Date, the Depositor will sell, transfer or otherwise convey,
assign or cause the assignment of the Mortgage Loans, without recourse, to the
Trustee for the benefit of the holders of Certificates. On or prior to the
Closing Date, the Depositor will deliver to the Trustee, with 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 Closing Date
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 will assign 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 will represent and warrant, among other
things, that (subject to certain exceptions specified in the Mortgage Loan
Purchase and Sale Agreement), as of the Closing Date (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
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<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);
(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;
(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;
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<PAGE>
(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) no fraudulent acts were committed by the Mortgage Loan Seller or
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 respect legal, proper and
prudent in accordance with customary industry standards;
(xx) all taxes and governmental assessments that prior to the Closing Date
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 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) other than payments due but not yet 30 days delinquent, 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;
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<PAGE>
(xxv) such Mortgage Loan has not been 30 or more days delinquent since
origination and as of the Cut-off Date was not 30 or more days 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 the Closing Date; 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) 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 the Closing
Date;
(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;
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(B) 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. 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) 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) Except with respect to the Mortgage Loans known as Marina Harbor,
International Plaza and 30 Broad Street, where such proceeds or awards
first go to the ground lessor, 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 having the right to hold and
disburse such proceeds as repair or restoration progresses, or to the
payment of the outstanding principal balance of the Mortgage Loan,
together with any accrued interest; 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
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
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(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, and
(xxxiii) The least to the Kmart Corporation with respect to the Mortgaged
Properties securing the Kmart Distribution Center Loan is a "triple net lease,"
which has a term equal or greater to the maturity date of the Kmart
Distribution Center Loan and provides for rent payments in an amount at least
equal to the Monthly Payment due on the related Note.
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) or (xxxiii) 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 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
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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.
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 Net Mortgage
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Pass-Through Rate plus the Trustee Fee 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 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.
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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 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 remain in the Lock Box Account or 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 of 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
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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 (the "Distribution Account") 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 Loan known as
the [ ] loan, 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 Account.]
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, F-1 by Fitch and, if rated by DCR, its highest short term rating
category, each 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
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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 or 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 and Principal Recovery
Fee, if any, respectively, 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 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, 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 Rating Agency that such
assumption or substitution would not, in and of itself, cause a downgrade,
qualification or withdrawal of the then current
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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 Rating Agency that granting such consent would
not, in and of itself, cause a downgrade, qualification or withdrawal of any of
the then current ratings assigned to the Certificates. See "Certain Legal
Aspects of the Mortgage Loans -- 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.
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
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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 issues 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 issues 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.
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.
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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 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.
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 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.
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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.
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
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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, 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.
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) [ ]% in the
case of the Class A-CS1 Certificates and [ ]% 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 the Class B-7 and Class B-7H
Certificates are the most subordinate Class of Certificates 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
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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 and Class PS-1
Certificates will be proportionally reduced upon the allocation of Appraisal
Reduction Amounts with respect to any component of such Classes 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
extension of the Maturity Date of a Mortgage Loan or consent to the release
of any Mortgaged Property or REO Property, as the case may be, 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
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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 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
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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 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.
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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 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.
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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
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. 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
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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.
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; (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.
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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.
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
100% 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 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; (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
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Accrual Period preceding such Anticipated Repayment Date; (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.
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 it or of the proceeds of such Certificates, or for the
use of or application of any funds paid to the Depositor, the Servicer
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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.
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 0.045% (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.
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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.
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
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(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.
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, each 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; (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 month, (B)
delinquent two months, (C) delinquent three or more months, (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 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 appraised value of such REO
Property 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
and 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 (B) 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; (x) the aggregate amount of Principal Prepayments 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 applicable to each Class of
Certificates for such
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Distribution Date; (xii) the aggregate amount of the Servicing Fee, Special
Servicing Fee and Principal Recovery Fee 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 and Interest
Shortfalls, if any, incurred with respect to the Mortgage Loans during the
related Collection Period; (xiv) the aggregate amount of Property Advances
and P&I 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) and such information shall be presented in a tabular format
substantially similar to the format utilized in this Prospectus under such
caption and 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 loan-by-loan listing 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, each 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 Servicer
Remittance Date for each of 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
or two Collection Periods days, delinquent three Collection Periods,
delinquent four Collection Periods or more, 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.
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(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, (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 on or prior to the related
Due Date. Absent manifest error, 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.
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, NOI Adjustment Worksheet and Comparative Financial Status Report that
it receives from the Servicer to the Depositor, each 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 Offered Certificates
since the Closing Date, (iii) all annual officers' certificates and
accountants' reports delivered by the Servicer and Special Servicer to the
Trustee since the Closing Date regarding compliance with the relevant
agreements, (iv) the most recent property inspection report
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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.
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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 Underwriters 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
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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.
INSTALLMENT CONTRACTS
The Mortgage Loans included in a Trust Fund may also consist of Installment
Contracts. Under an Installment Contract the seller (hereinafter referred to in
this Section as the "lender" retains legal title to the property and enters
into an agreement with the purchaser (hereinafter referred to in this Section
as the "borrower") for the payment of the purchase price, plus interest, over
the term of such contract. Only after full performance by the borrower of the
contract is the lender obligated to convey title to the real estate to the
borrower. As with mortgage or deed of trust financing, during the effective
period of the Installment Contract, the borrower is generally responsible for
maintaining the property in good condition and for paying real estate taxes,
assessments and hazard insurance premiums associated with the property.
The method of enforcing the rights of the lender under an Installment
Contract varies on a state-by-state basis depending upon the extent to which
state courts are willing, or able pursuant to state statute, to enforce the
contract strictly according to its terms. The terms of Installment Contracts
generally provide that upon a default by the borrower, the borrower loses his
or her right to occupy the property, the entire indebtedness is accelerated,
and the buyer's equitable
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interest in the property is forfeited. The lender in such a situation does not
have to foreclose in order to obtain title to the property, although in some
cases a quiet title action is in order if the borrower has filed the
Installment Contract in local land records and an ejectment action may be
necessary to recover possession. In a few states, particularly in cases of
borrower default during the early years of an Installment Contract, the courts
will permit ejectment of the buyer and a forfeiture of his or her interest in
the property. However, most state legislatures have enacted provisions by
analogy to mortgage law protecting borrowers under Installment Contracts from
the harsh consequences of forfeiture. Under such statutes, a judicial or
nonjudicial foreclosure may be required, the lender may be required to give
notice of default and the borrower may be granted some grace period during
which the contract may be reinstated upon full payment of the default amount
and the borrower may have a post-foreclosure statutory redemption right. In
other states, courts in equity may permit a borrower with significant
investment in the property under an Installment Contract for the sale of real
estate to share in the proceeds of sale of the property after the indebtedness
is repaid or may otherwise refuse to enforce the forfeiture clause.
Nevertheless, generally speaking, the lender's procedures for obtaining
possession and clear title under an Installment Contract for the sale of real
estate in a given state are simpler and less time-consuming and costly than are
the procedures for foreclosing and obtaining clear title to a mortgaged
property.
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.
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
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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 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
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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 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.
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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 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.
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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 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.
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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.
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.
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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.
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.
State courts also are known to apply various legal and equitable principles
to avoid enforcement of the forfeiture provisions of Installment Contracts. For
example, a lender's practice of accepting late payments from the borrower may
be deemed a waiver of the forfeiture clause. State courts also may impose
equitable grace periods for payment of arrearages or otherwise permit
reinstatement of the contract following a default. Not infrequently, if a
borrower under an Installment Contract has significant equity in the property,
equitable principles will be applied to reform or reinstate the contract or to
permit the borrower to share the proceeds upon a foreclosure sale of the
property if the sale price exceeds the debt.
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
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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 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
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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 any form of Credit
Support (if any) 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 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.
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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 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 will hold the Mortgage Loans,
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
interests in the Lower-Tier REMIC. The Upper-Tier REMIC will hold the
Lower-Tier Regular Interests and the Upper-Tier Distribution Account in which
distributions thereon will be deposited, and will issue 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 United States 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 will 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.
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." 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 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).
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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 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 will
provide that no legal or beneficial interest in the Class R or Class LR
Certificate 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 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
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Certificates will constitute classes of regular interests in the Upper-Tier
REMIC, the Lower-Tier Regular Interests will constitute classes of regular
interests in the Lower-Tier REMIC and the Class R Certificates and Class LR
Certificates will 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 AND SUBORDINATED UNITS
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.
Under an aggregation rule in the OID Regulations, because the Subordinated
Certificates will be sold as Subordinated Units, they may be treated as a
single debt instrument for purposes of determining issue price, stated
redemption price at maturity and original yield to maturity (each as defined
below), for accruing original issue discount, and for certain other purposes.
This rule would not apply, however, if, among other things, the Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5 or Class B-6 Certificates were "part
of an issue a substantial portion of which is traded on an established market."
Under applicable Treasury regulations, a debt instrument is traded on an
established market if, among other things, price quotations are available from
dealers, brokers or traders. It is not certain whether this requirement will be
met. Accordingly, the Depositor believes that the Subordinated Certificates
should be treated as a single debt instrument for OID purposes. If the
aggregation rule applies, it should have no major effect on the holder of a
Subordinated Unit. Upon a sale of one or more classes of Subordinated
Certificates, the holder should allocate its adjusted basis in the Subordinated
Unit between the sold and retained portions for purposes of computing gain or
loss. See "Sale or Exchange of Subordinated Units." It is not clear how a
subsequent purchaser of a single class of Subordinated Certificates would
compute original discount with respect to such Class. The balance of this
discussion assumes that the aggregation rule will apply.
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The total amount of OID on a Subordinated Unit is the excess of the "stated
redemption price at maturity" of the Subordinated Unit over its "issue price."
The issue price of a Subordinated Unit is the price at which a substantial
amount of such Subordinated Units is first sold to investors (other than bond
houses, brokers or underwriters). The issue price will also include any accrued
interest attributable to the period prior to the issue date of the Subordinated
Units, unless the holder elects on its federal income tax return to exclude
such amounts from the issue price and to recover it on the first Distribution
Date. The stated redemption price at maturity of a Subordinated Unit is the sum
of all payments provided by the Subordinated Unit 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 or less during
the entire term of the obligation. Qualified stated interest does not include
the portion of interest payable on the first Distribution Date that exceeds
interest for the number of days between the Startup Day and the first
Distribution Date. Accordingly, because the Subordinate Certificates will all
bear the same fixed rate of interest, it is anticipated that the Trustee will
treat all payments of interest on the Subordinated Units [(other than days of
interest payable at the Pass-Through Rates thereon payable on the first
Distribution Date)] 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 Units will be issued
with OID in an amount equal to the excess of their aggregate initial
Certificate Balance [(plus days of interest at the Pass-Through Rate thereon)]
over their issue price (including accrued interest).
Under a de minimis rule, OID on a Subordinated Unit will be considered to be
zero if such OID is less than 0.25% of the stated redemption price at maturity
of the Subordinated Unit multiplied by the weighted average maturity of the
Subordinated Unit. For this purpose, the weighted average maturity of the
Subordinated Unit 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 Unit and the denominator of which is the stated
redemption price at maturity of the Subordinated Unit. 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 Units. The Prepayment Assumptions with respect to
the Subordinated Units is [a % constant prepayment rate] [based on Scenario set
forth above under "Prepayment and Yield Considerations."] 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 Unit is held
as a capital asset. Under the OID Regulations, however, holders of Subordinated
Units 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 Units will not be issued with de minimis OID.
A Certificateholder of a Subordinated Unit issued with OID 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 Unit accrued during
an accrual period for each day on which it holds the Subordinated Unit,
including the date of purchase but excluding the date of disposition. With
respect to a Subordinated Unit determined to be issued with OID, 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 Units 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 Unit as of the end of that accrual period and (b) the
distributions made on the Subordinated Unit during the accrual period that are
included in the Subordinated Unit's stated redemption price at maturity over
(ii) the adjusted issue price of the Subordinated Unit 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 Unit 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
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Assumptions. For these purposes, the adjusted issue price of a Subordinated
Unit at the beginning of any accrual period equals the issue price of the
Subordinated Unit, increased by the aggregate amount of original issue discount
with respect to the Subordinated Unit that accrued in all prior accrual periods
and reduced by the amount of distributions included in the Subordinated Unit's
stated redemption price at maturity that were made on the Subordinated Unit
that were attributable to such prior periods. In addition, the original yield
to maturity of a Subordinated Unit should be calculated based on its issue
price, assuming that the Subordinated Unit 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 Unit issued with OID at a
price greater than its adjusted issue price and less than its remaining stated
redemption price at maturity will be required to include in gross income the
daily portions of the OID on the Subordinated Unit 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 Unit 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 Unit is exceeded by the adjusted issue price of such
Subordinated Unit 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 Unit 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 Unit 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 Unit 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 Unit 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 Unit 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 Unit 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 Unit multiplied by the
weighted average maturity of the Subordinated Unit 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.
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Premium. Subordinated Units 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 Unit 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 Units, 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 Unit 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.
Election to Treat All Interest Under the Constant Yield Method. A holder of
a debt instrument such as a Subordinated Unit 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 Units 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 Unit 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 Units 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 Units becoming wholly or partially worthless, and that, in
general, Certificateholders that are not corporations and that do not hold the
Subordinated Units 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 Units becoming
wholly worthless. The Internal Revenue Service could assert, however, that
losses on the Subordinated Units 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 Units. 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 Units.
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Sale or Exchange of Subordinated Units. If a Certificateholder sells or
exchanges a Subordinated Unit, the Certificateholder will recognize gain or
loss equal to the difference, if any, between the amount received and its
adjusted basis in the Subordinated Unit. The adjusted basis of a Subordinated
Unit generally will equal the cost of the Subordinated Unit to the seller,
increased by any OID or market discount previously included in the seller's
gross income with respect to the Subordinated Unit and reduced by amounts
included in the stated redemption price at maturity of the Subordinated Unit
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 Unit realized by an investor who holds the Subordinated Unit as a
capital asset will be capital gain or loss and will be long-term or short-term
depending on whether the Subordinated Unit 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 Unit is held as part of a "conversion
transaction" as defined in Code Section 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
Unit 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 Unit. In addition, gain or loss recognized
from the sale of a Subordinated Unit 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
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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.
TAXATION OF CERTAIN FOREIGN INVESTORS
Interest, including OID, distributable to holders of Subordinated Units or
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 Unit or 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 Unit or
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 Units or Subordinated Certificates,
and proceeds from the sale of the Subordinated Units or 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
Unit or 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 Units or 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. It is anticipated that
the REMIC's books and the Trustee's reports to investors will reflect the
aggregate treatment of the Subordinated Units as a single debt instrument,
without regard to whether the Subordinated Certificates become separately
tradable.
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Reports of accrued interest, OID, if any, and information necessary to
compute the accrual of any market discount on the Subordinated Units 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 Units or beneficial owners who own Subordinated Units
through a broker or middleman as nominee. All brokers, nominees and all other
non-exempt holders of record of Subordinated Units (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
Units 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.
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.
161
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of Subordinated Units will be used by the
Depositor to pay part of the purchase price of the Mortgage Loans.
162
<PAGE>
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") between the Depositor and Bear, Stearns & Co.
Inc. and Nomura Securities International, Inc. (the "Underwriters"), each of
the Underwriters has severally agreed to purchase from the Depositor, and the
Depositor has agreed to sell to each of the Underwriters, the respective
principal balance of Subordinated Units set forth opposite its name at the
price to the public set forth on the cover page of this Prospectus, less
underwriting discount:
<TABLE>
<CAPTION>
PRINCIPAL BALANCE OF
UNDERWRITERS SUBORDINATED UNITS(1)
- ------------- ------------------------
<S> <C>
Bear, Stearns & Co. Inc.................... $
Nomura Securities International, Inc. ....
------------------------
$
========================
</TABLE>
- ------------
(1) Subject to a permitted variance of plus or minus 5%.
The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to the approval of certain legal matters by counsel,
and to certain other conditions. The nature of the Underwriters' obligations is
such that the Underwriters are committed to purchase all of the Subordinated
Units, if any are purchased, at a purchase price of [ ]% of the initial
principal balance thereof as of the Cut-off Date, plus accrued interest from
the Cut-off Date, before deducting expenses payable by the Depositor. In the
event of default by any Underwriter, the Underwriting Agreement provides that,
in certain circumstances, the purchase commitment of the non-defaulting
Underwriter may be increased or the Underwriting Agreement may be terminated.
After the initial public offering of the Subordinated Units, the offering price
and other selling terms may be changed by the Underwriters.
The Depositor and the Mortgage Loan Seller will indemnify the Underwriters
against certain liabilities, including civil liabilities under the Act or will
contribute to payments that the Underwriters 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 transaction in the Subordinated Units 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 Units or the
Subordinated Certificates. Each of the Underwriters currently expects to make a
secondary market in the Subordinated Units and, if separately traded, the
Subordinated Certificates, but has no obligation to do so. There can be no
assurance that an active secondary market for the Subordinated Units or, if
separately traded, Subordinated Certificates will develop or that any such
market, if established, will continue.
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 NSI 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 17 of the borrowers or their affiliates, which are the
borrowers (or affiliates) with respect to Mortgage Loans representing
approximately 27% 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
163
<PAGE>
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.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Cadwalader,
Wickersham & Taft, New York, New York. Certain legal matters will be passed
upon for the Underwriters by Shearman & Sterling, 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 (i)
the Senior Certificates be issued and offered, (ii) 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.
164
<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 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.
165
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
<TABLE>
<CAPTION>
<S> <C>
1
1986 Act 155
A
AA 121
Aaa 121
ACLI Reports 41
ACMs 31
Act 1
Actual On-going Capital Reserves 63
34,
ADA 152
Advance Rate 120
Advances 120
Allocated Loan Amount 62
AMI 7
Amortization 63
AMRESCO 7
Anchor 63
Ann 62
Annual Debt Service 62
Anticipated Remaining Term 62
Anticipated Repayment Date 62
Appraisal Reduction Amount 87
Appraisal Reduction Event 87
ARD Loans 8
Assisted Living Loan 43
Assisted Living Property 43
Assumed Maturity Date 15
Assumed Scheduled Payment 82
Audit/Agreed Upon Procedures/Review 63
Available Funds 77
B
Balloon Loans 57
Balloon Payment 57
Balloon Payments 32
Bankruptcy Code 147
Bloomfield 8
Bloomfield Purchase Agreement 118
Burnham Inc 51
Burnham Pacific Borrowers 51
Burnham Pacific Loan 51
C
Cash Collateral Accounts 120
CEDEL 1
CEDEL Participants 89
CERCLA 31
Certificate Balance 1
Certificate Registrar 88
Certificateholder 88
Certificates 1
Class 1
CMA Report 40
166
<PAGE>
Code 17
Collateral Account 130
Collateral Substitution Deposit 58
Collection Account 121
Collection Period 79
Commission 164
Constant Prepayment Rate 103
Cooperative 90
Coupon Strip Certificates 76
CPR 103
Crime Control Act 152
Cut-off Date Principal Balance 62
D
Default Interest 79
Default Interest Distribution Account 121
Default Rate 79
Defeasance Lock-out Period 58
Defeasance Option 58
Definitive Certificates 90
Delinquency 80
Delinquency Reduction Amount 80
Deposit 130
Depositaries 88
Depositor 1
Directing Holders 129
Distribution Account 121
Distribution Date 1
Distribution Date Statement 138
DSCR 62
DTC 1
E
EDGAR 164
Eligible Bank 122
Euroclear 1
Euroclear Operator 90
Euroclear Participants 90
Event of Default 126
Excess Cash Flow 57
56,
Excess Interest 79
Excess Interest Distribution Account 121
Excess Rate 79
F
Factory Outlet Loan 43
Factory Outlet Property 43
Fair Market Value 130
Final Recovery Determination 138
Fiscal Agent 13
Fixed Voting Rights Percentage 127
Franchise 63
FSA 163
167
<PAGE>
G
GLA 63
H
Holders 90
Hotel Loan 43
Hotel Property 43
Hudson Hotels Borrower 52
Hudson Hotels Manager 52
Hudson Hotels Pool Loan 51
I
Identified Deferred Maintenance 63
Indirect Participants 88
Industrial Loan 43
Industrial Property 43
Industry Overview 41
Initial Pool Balance 43
Instructions 129
Interest Accrual Amount 79
Interest Accrual Period 80
Interest Reserve Account 121
Interest Shortfall 80
International Plaza Borrower 49
International Plaza Loan 49
International Plaza Property 49
J
Junior Subordinated Certificates 1
K
Kendall Square Pool Loan 47
Kendall Square Pool Properties 47
L
Lazard 48
Lazard Mezzanine Financing 48
Level A 114
Lock Box Accounts 120
Lower Rate 129
Lower-Tier Regular Interests 153
Lower-Tier REMIC 2
LTV 61
M
Major Tenants 63
Marina Harbor Borrower 53
Marina Harbor Loan 52
Marina Harbor Manager 53
Marina Harbor Maturity Date 52
Marina Harbor Property 52
Marina Harbor Submanager 53
Maturity Date/Anticipated Repayment Date LTV 63
Mezzanine Debt 26
Minimum Defaulted Monthly Payment 129
Mobile Home Loan 43
Mobile Home Property 43
Monthly Debt Service Payment 57
Monthly Mortgage Loan Payments 27
168
<PAGE>
Monthly Operating Expenses 27
Monthly Payment 78
Mortgage 43
Mortgage Loan Assumptions 103
Mortgage Loan Purchase and Sale Agreement 44
Mortgage Loan Seller 6, 7
Mortgage Loans 1
Mortgage Pool 1
Mortgaged Properties 1
Multifamily Loan 43
Multifamily Property 43
N
NCUA 151
Net Cash Flow 45
Net Default Interest 79
Net REO Proceeds 79
Note 43
NSI 7
O
Occupancy 63
Office Loan 43
Office Property 43
OID 155
OID Regulations 155
Original Principal Loan Balance 62
Originators 8
P
Participants 87
Pass-Through Rate 16
Percentage Interest 77
Permitted Investments 122
P&I Advance 118
Plan of Distribution 2
Policy Statement 161
Pool Loans 59
Pooling and Servicing Agreement 112
Prepayment Assumptions 103
Prepayment Interest Shortfall 80
Prepayment Premium 57
Prime Rate 120
Principal Prepayments 79
Principal Recovery Fee 137
Property Advances 120
Puente Hills Borrower 51
Puente Hills Loan 51
R
Rated Final Distribution Date 102
Realized Loss 85
Record Date 77
Regular Certificates 153
Release Date 58
Relief Act 151
Remaining Lock-out 62
169
<PAGE>
REMIC 2
REMIC Regulations 153
REO Account 76
REO Mortgage Loan 82
REO Property 76
Repurchase Price 117
Reserve Accounts 44
Reserve for Deferred Maintenance 63
Residual Certificates 17
Retail Loan 43
Retail Property 43
Revised Rate 56
RICO 152
Rules 89
S
Saracen Borrower 48
Saracen Pool Loan 48
Saracen Pool Properties 48
Saracen Pool Property 48
SEL 2
Senior Certificates 1
Senior Housing/Healthcare Loan 43
Senior Housing/Healthcare Property 43
Servicer 7
Servicer Remittance Date 118
Servicer's Appraisal Estimate 87
Servicing Compensation 136
Servicing Fee 136
Servicing Fee Rate 136
Servicing Standard 118
SMMEA 161
Special Servicing Fee 137
Specially Serviced Mortgage Loan 137
Startup Day 154
Stated Maturity Date 62
Stated Principal Balance 86
Subordinate Class Advance Amount 119
Subordinated Certificates 1
Subordinated Units 1
T
Terms and Conditions 90
Title V 151
Title VIII 151
Treasury Rate 56
Treasury Regulations 153
Trust Fund 1
Trust REMICs 153
Trustee 13
Trustee Fee 135
TTM 62
170
<PAGE>
U
UCC 143
Underwriters 163
Underwriting Agreement 163
Unit 63
Unscheduled Payments 79
Updated Appraisal 128
Upper-Tier REMIC 2
U.S. Person 160
V
Valley Central Borrower 51
Valley Central Loan 51
Value 63
W
Web 164
Wells Holdings 48
Withheld Amounts 121
Y
YE 62
Year Built/Renovated 63
YTD 62
Z
Zoning Laws
</TABLE>
171
<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, (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.
"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.
172
<PAGE>
"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 the Closing Date, 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,
(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.
173
<PAGE>
"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 remain in the Lock Box Account or 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 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 2, 1997.
174
<PAGE>
"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 123 fixed-rate mortgage loans included in the
Mortgage Pool.
"MORTGAGE POOL" means a pool of 123 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
"NOTE" means a promissory note.
- -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
175
<PAGE>
Monthly Payment on a Mortgage Loan (with interest at the Net Mortgage
Pass-Through Rate plus the Trustee Fee 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 or Component, the per
annum rate at which interest accrues on the Certificates of such Class or
component during any Interest Accrual Period.
"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing Agreement to
be dated as of [ ], 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.
"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
176
<PAGE>
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.
- -T-
"TTM" means NOI calculated for the trailing twelve months ending on the date
indicated.
- -U-
"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.
177
<PAGE>
- -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.
178
<PAGE>
ANNEX A
<TABLE>
<CAPTION>
LOAN # ASSET # PROPERTY NAME ADDRESS CITY STATE ZIP
- ------ ------- ------------- ------- ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
KENDALL SQUARE
1 1 Phase II 1 Kendall Sq. Phase 2 Cambridge MA 02142
1 2 Athenaeum House 215 1st Street Cambridge MA 02142
1 3 Phase I One Kendall Square Cambridge MA 02142
SARACEN
2 1 Wells Research 75-85-95 Wells Ave. Newton MA 02159
2 2 128 Technology Center 125 Roberts Road Waltham MA 02154
2 3 Dedham Place East St. & Allied Dr. Dedham MA 02026
2 4 201 University 201 University Ave. Westwood MA 02090
2 5 7-57 Wells Avenue 7-57 Wells Avenue Newton MA 02159
2 6 Norfolk 333 Elm Street Dedham MA 02026
3 International Plaza 750 Lexington Ave. New York NY 10022
K-MART DISTRIBUTION CENTER
4 1 K-Mart Brighton Distribution Center 18875 Bromley Lane Brighton CO 80601
4 2 K-Mart Greensboro Distribution Center 300 Penry Road Greensboro NC 27405
BURNHAM PACIFIC
5 1 Puente Hills 17525-18271 Gale City of Industry CA 91748
5 2 Valley Central 44655 Vly Central Way Lancaster CA 93536
HUDSON HOTELS
6 1 Seagate Hotel 400 So. Ocean Blvd Delray Beach FL 33483
6 2 Durham-Duke 2306 Elba St. Durham NC 27705
6 3 Brookwood Inn -- Pittsford 800 Pittsford-Victor Rd. Pittsford NY 14534
6 4 Fairfield Inn -- Richmond 7300 W. Broad St. Richmond VA 23294
6 5 Fairfield Inn -- Cary 1716 Walnut St. Cary NC 27511
6 6 Fairfield Inn -- Wilmington 4926 Market St. Wilmington NC 28403
6 7 Fairfield Inn -- Columbia 8104 Two Notch Rd. Columbia SC 29223
6 8 Fairfield Inn -- Charleston 7415 Northside Dr. Charleston SC 29420
6 9 Fairfield Inn -- Durham RTP 4507 NC Highway 55 Durham NC 27713
6 10 Comfort Inn -- Jamestown 2800 N. Main St. Ext. Jamestown NY 14701
6 11 Raleigh 3201 Wake Forest Rd. Raleigh NC 27609
6 12 Fairfield Inn -- Statesville 1503 E. Broad St. Statesville NC 28677
6 13 Charlotte 1200 W. Sugar Creek Rd. Charlotte NC 28213
6 14 Comfort Inn -- Rochester 1501 Ridge Rd. West Rochester NY 14615
6 15 Fairfield Inn -- Albany 2586 N. Slappey Blvd. Albany GA 31701
6 16 EconoLodge -- Canandaigua 170 Eastern Blvd. Canandaigua NY 14424
7 Marina Harbor Apts and Anchorage 4500 Via Marina Marina del Rey CA 90292
SUNWEST
8 1 SunWest 5032 14540 Memorial Drive Houston TX 77079
8 2 SunWest 7924 1937 Parker Road Plano TX 75023
8 3 SunWest 8001 2524 N. Galloway Ave Mesquite TX 75150
8 4 SunWest 5833 7800 Grapevine Highway N. Richland Hill TX 76118
8 5 SunWest 7801 15 West 1st Street Havre MT 59501
8 6 SunWest 5858 2770 Trinity Mills Road Carrollton TX 75006
8 7 SunWest 7802 2nd Street & 2nd Ave NW Sidney MT 59270
8 8 SunWest 7442 2218 Greenville Avenue Dallas TX 75206
8 9 SunWest 7862 1201 South Stockton Monahans TX 79756
8 10 SunWest 7055 1873 South Wadsworth Lakewood CO 80232
8 11 SunWest 7507 3065 Josey Lane Carrollton TX 75007
8 12 SunWest 5126 401 16th Street Orange TX 77630
8 13 SunWest 5038 2747 East Fifth Street Tyler TX 75701
8 14 SunWest 7311 3101 South Elm Place Broken Arrow OK 74012
8 15 SunWest 5131 100 Cleveland SC Cleveland TX 77327
8 16 SunWest 7641 28522 FM 149 Road Tomball TX 77375
8 17 SunWest 7075 103 West Prospect Fort Collins CO 80525
8 18 SunWest 5808 13548 Preston Road Dallas TX 75240
8 19 SunWest 7704 590 32nd Street Clifton CO 81520
8 20 SunWest 7098 5820 South 1st Street Austin TX 78745
8 21 SunWest 5011 2010 South Sheridan Tulsa OK 74112
8 22 SunWest 7613 NW Bypass & W 3rd St Great Falls MT 59404
8 23 SunWest 5801 335 South Cedar Ridge Duncanville TX 75116
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
PROPERTY TYPE BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
- ------------- ------- ------- ------------ -------- -------- ------- --- --------
Office 29,544,340 29,501,397 124 4,223,357 4,169,895 4,600,418 TTM 11/30/96 4,294,941
Office 20,414,344 20,384,672 66 2,157,309 2,601,977 2,862,522 TTM 11/30/96 3,002,213
Office 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
Office 19,497,301 19,475,608 82 2,667,258 2,995,470 2,994,149 TTM 11/30/96 2,863,071
Office 17,666,917 17,647,261 81 2,500,550 2,621,380 2,469,041 TTM 11/30/96 2,423,022
Office 14,148,837 14,133,095 87 1,820,126 2,080,887 2,111,059 TTM 11/30/96 1,415,876
Office 7,656,783 7,648,264 93 1,364,262 1,583,114 1,615,543 TTM 11/30/96 1,299,184
Office 6,937,010 6,929,292 78 590,010 881,831 681,936 TTM 11/30/96 876,328
Office 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
Office 65,750,000 65,750,000 171 11,168,393 11,718,933 12,093,512 TTM 10/31/96 9,442,321
Industrial-Warehouse 31,138,297 31,138,297 24 3,910,363 3,990,166
Industrial-Warehouse 31,111,703 31,111,703 20 3,907,024 3,986,759
---------- ---------- --- ---------- ----------
62,250,000 62,250,000 22 7,817,387 7,976,925
Retail-Anchored 33,100,000 33,100,000 64 6,080,004 6,174,558 6,013,949 TTM 12/31/96 5,571,650
Retail-Anchored 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
Hotel-Full Service 7,395,000 7,375,729 105,368 1,256,361 1,342,788 1,285,670 TTM 9/30/96 1,226,029
Hotel-Full Service 6,090,000 6,074,130 40,494 950,677 1,023,261 1,291,575 TTM 9/30/96 1,197,701
Hotel-Full Service 4,510,000 4,498,247 41,650 885,220 908,673 870,389 TTM 9/30/96 732,733
Hotel-Ltd. Service 4,375,000 4,363,599 35,190 169,077 712,682 884,477 TTM 9/30/96 872,067
Hotel-Ltd. Service 3,935,000 3,924,746 31,398 272,900 686,954 766,592 TTM 9/30/96 737,848
Hotel-Ltd. Service 3,545,000 3,535,762 29,465 166,446 697,741 678,815 TTM 9/30/96 619,227
Hotel-Ltd. Service 3,365,000 3,356,231 26,017 -84,699 461,528 640,195 TTM 9/30/96 656,315
Hotel-Ltd. Service 3,185,000 3,176,700 26,695 -30,985 477,050 578,128 TTM 9/30/96 564,503
Hotel-Ltd. Service 3,130,000 3,121,843 32,519 126,727 581,520 591,663 TTM 9/30/96 549,407
Hotel-Ltd. Service 3,000,000 2,992,182 29,626 493,896 549,864 539,113 TTM 9/30/96 514,568
Hotel-Ltd. Service 2,775,000 2,767,769 18,576 490,353 574,387 631,975 TTM 9/30/96 589,238
Hotel-Ltd. Service 2,515,000 2,508,446 21,258 20,767 393,860 433,420 TTM 9/30/96 419,139
Hotel-Ltd. Service 2,340,000 2,333,902 17,681 380,511 370,608 426,293 TTM 9/30/96 379,091
Hotel-Ltd. Service 2,275,000 2,269,072 27,338 488,333 469,262 441,986 TTM 9/30/96 412,955
Hotel-Ltd. Service 2,215,000 2,209,228 18,108 72,627 451,045 353,982 TTM 9/30/96 318,818
Hotel-Ltd. Service 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
Multifamily 51,000,000 50,586,851 59,795 7,275,475 7,640,886 7,366,892 TTM 10/31/96 7,324,895
Retail-Unanchored 2,529,561 2,529,561 69 367,313 400,174 420,938 TTM 2/97 334,378
Retail-Unanchored 1,912,588 1,912,588 38 26,173 69,580 47,949 TTM 2/97 241,968
Retail-Unanchored 1,828,252 1,828,252 52 231,321
Retail-Unanchored 1,826,954 1,826,954 50 228,028 256,195 239,530 TTM 2/97 234,108
Retail-Unanchored 1,629,613 1,629,613 49 244,083 244,177 244,181 TTM 2/97 219,865
Retail-Unanchored 1,707,171 1,707,171 40 146,245 267,505 267,501 TTM 2/97 239,792
Retail-Unanchored 1,436,135 1,436,135 37 233,218 206,774 192,610 TTM 2/97 181,760
Retail-Unanchored 1,709,217 1,709,217 79 266,984 245,915 245,915 TTM 2/97 222,253
Retail-Unanchored 1,298,090 1,298,090 43 192,696 201,652 211,650 TTM 2/97 172,258
Retail-Unanchored 1,198,665 1,198,665 24 155,302 152,023 TTM 2/97 159,915
Retail-Unanchored 1,205,911 1,205,911 45 148,721 163,294 166,024 TTM 2/97 153,021
Retail-Unanchored 1,218,846 1,218,846 23 158,159 193,925 209,195 TTM 2/97 169,220
Retail-Unanchored 1,164,070 1,164,070 51 157,954 159,533 159,535 TTM 2/97 151,415
Retail-Unanchored 1,107,881 1,107,881 36 107,746 118,116 135,170 TTM 2/97 148,985
Retail-Unanchored 1,059,419 1,059,419 28 143,399 144,260 144,264 TTM 2/97 135,831
Retail-Unanchored 1,049,421 1,049,421 28 151,275 157,317 160,519 TTM 2/97 144,427
Retail-Unanchored 1,043,414 1,043,414 47 97,575 101,257 189,100 TTM 2/97 132,538
Retail-Unanchored 1,167,641 1,167,641 50 158,984 158,258 158,258 TTM 2/97 148,105
Retail-Unanchored 952,988 952,988 11 115,930 151,661 172,385 TTM 2/97 134,180
Retail-Unanchored 1,106,065 1,106,065 52 145,284 160,409 160,403 TTM 2/97 147,736
Retail-Unanchored 717,300 717,300 16 135,157 151,977 143,538 TTM 2/97 109,449
Retail-Unanchored 603,631 603,631 17 99,342 33,201 52,825 TTM 2/97 80,339
Retail-Unanchored 874,438 874,438 28 74,287 122,619 122,616 TTM 2/97 112,981
<PAGE>
LOAN # ASSET # PROPERTY NAME ADDRESS CITY STATE ZIP
- ------ ------- ------------- ------- ---- ------ ----
8 24 SunWest 5057 1305 Tenaha Center TX 75935
8 25 SunWest 5861 3614 Camp Bowie Blvd. Fort Worth TX 76107
8 26 SunWest 7032 3333 Finley Irving TX 75062
8 27 SunWest 7125 6400 Nieman Road Shawnee KS 66203
8 28 SunWest 5822 6500 Skillman Dallas TX 75231
8 29 SunWest 7792 3707 Lemmon Avenue Dallas TX 75219
8 30 SunWest 7033 9825 Miller Road Dallas TX 75238
8 31 SunWest 7118 1201 South Noland Independence MO 64055
8 32 SunWest 7816 1380 North Main Street Vidor TX 76704
8 33 SunWest 7615 715 South Haynes Miles City MT 59301
8 34 SunWest 7736 429 West Broadway West Memphis AR 72301
8 35 SunWest 7446 14th Street & Grand Ave Billings MT 59101
8 36 SunWest 7742 1818 Ninth Street Wichita Falls TX 76301
8 37 SunWest 7342 280 West Main Street Vernal UT 84078
8 38 SunWest 7020 2215 East Marsalis Dallas TX 75216
8 39 SunWest 7595 10525 Edgebrook Houston TX 77034
8 40 SunWest 7019 4500 Live Oak Dallas TX 75204
8 41 SunWest 7925 1949 John West Road Dallas TX 75228
8 42 SunWest 7344 3990 Washington Ogden UT 84403
8 43 SunWest 7031 911 North Hampton Desoto TX 75115
8 44 SunWest 7738 3314 Bell Street Amarillo TX 79106
8 45 SunWest 7126 1300 North Highway 7 Blue Springs MO 64015
8 46 SunWest 7154 1665 Winchester Memphis TN 38116
8 47 SunWest 7849 1605 West Pioneer Pkwy Arlington TX 76013
8 48 SunWest 7599 2127 East Southmore Pasadena TX 77502
8 49 SunWest 7121 712 West Commerical Springfield MO 65803
8 50 SunWest 7063 709 North Federal Riverton WY 83501
8 51 SunWest 7585 105 West Edgewood Friendswood TX 77546
8 52 SunWest 7751 1343 Miner Street Idaho Springs CO 80452
8 53 SunWest 5016 7301 South Shields Oklahoma City OK 73149
8 54 SunWest 7097 9316 North Lamar Austin TX 78753
8 55 SunWest 7576 1600 Midwestern Parkway Wichita Falls TX 76302
8 56 SunWest 7116 3510 Prospect Kansas City MO 64128
8 57 SunWest 7601 16550 El Camino Real Houston TX 77062
8 58 SunWest 7070 111 Church Street Florence CO 81226
8 59 SunWest 7110 4601 Parallel Street Kansas City KS 66101
8 60 SunWest 7728 1102 South Dewey North Platte NE 69101
8 61 SunWest 7067 535 Green Street Craig CO 81625
8 62 SunWest 7589 611 North Burlington Hastings NE 68901
8 63 SunWest 7989 1717-1722 W.2nd Grand Island NE 68801
8 64 SunWest 7516 306 East Paisano Avenue El Paso TX 79901
8 65 SunWest 5141 601 Brown Street Osawatomie KS 22482
8 66 SunWest 7343 300 Main Street Richfield UT 84701
8 67 SunWest 7040 111 Park Street Powell WY 82435
8 68 SunWest 7701 705 Kansas Avenue Garden City KS 67846
8 69 SunWest 7451 259 14th Street Burlington CO 80807
8 70 SunWest 5859 1927 East Beltline Road Carrollton TX 75006
8 71 SunWest 7145 5316 Rogers Avenue Fort Smith AR 72902
8 72 SunWest 7551 202 Clubview Levelland TX 79336
9 Westin -- Indianapolis 50 South Capitol Ave Indianapolis IN 46204
10 Security Square Mall Security Blvd Baltimore Cty. MD 21244
11 Two Gateway Center 283-299 Market St. Newark NJ 07102
UNIPROP
12 1 Aztec Estates 1-A Sundial Circle Drive Margate FL 33068
12 2 Park of the Four Seasons 50 113th Avenue, NE Blaine MN 55434
12 3 Kings Manor 12500 State Road 84 Ft. Lauderdale FL 33325
12 4 Old Dutch Farms 27000 Napier Road Novia MI 48009
13 Montague Park Tech Center Junction Avenue San Jose CA 95134
JACOBS MALL
14 1 Conestoga Mall NEC U.S. 281 & 13th Grand Island NE 68803
14 2 Randolph Mall NEC 49 & 64 Asheboro NC 27203
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
PROPERTY TYPE BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
- ------------- ------- ------- ------------ -------- -------- ------- --- -------
Retail-Unanchored 777,402 777,402 26 124,541 114,986 123,805 TTM 2/97 99,724
Retail-Unanchored 720,365 720,365 39 98,765 124,650 155,426 TTM 2/97 104,569
Retail-Unanchored 795,036 795,036 36 TTM 2/97 101,803
Retail-Unanchored 669,878 669,878 35 93,591 93,279 93,792 TTM 2/97 86,727
Retail-Unanchored 763,071 763,071 26 111,471 101,573 71,703 TTM 2/97 100,284
Retail-Unanchored 602,279 602,279 48 28,556 100,006 TTM 2/97 77,408
Retail-Unanchored 501,112 501,112 22 143,291 168,502 159,537 TTM 2/97 88,482
Retail-Unanchored 890,733 890,733 24 135,343 128,340 119,830 TTM 2/97 114,138
Retail-Unanchored 498,568 498,568 13 53,112 75,547 84,860 TTM 2/97 66,957
Retail-Unanchored 511,948 511,948 18 295 TTM 2/97 69,528
Retail-Unanchored 564,588 564,588 23 87,386 89,377 80,896 TTM 2/97 73,620
Retail-Unanchored 524,028 524,028 24 87,451 73,076 73,076 TTM 2/97 68,363
Retail-Unanchored 504,251 504,251 26 68,684 70,431 73,486 TTM 2/97 68,259
Retail-Unanchored 368,933 368,933 27 61,486 61,381 63,781 TTM 2/97 51,127
Retail-Unanchored 481,368 481,368 24 66,312 68,723 66,650 TTM 2/97 65,510
Retail-Unanchored 506,781 506,781 18 66,219 76,697 76,698 TTM 2/97 68,759
Retail-Unanchored 438,427 438,427 22 53,142 59,500 59,497 TTM 2/97 56,722
Retail-Unanchored 505,862 505,862 24 86,875 92,120 92,907 TTM 2/97 73,860
Retail-Unanchored 497,166 497,166 22 70,060 69,724 69,724 TTM 2/97 65,492
Retail-Unanchored 507,428 507,428 26 57,677 70,894 68,153 TTM 2/97 65,882
Retail-Unanchored 422,106 422,106 14 51,056 4,446 -12,666 TTM 2/97 73,369
Retail-Unanchored 404,261 404,261 17 32,728 48,856 38,206 TTM 2/97 53,065
Retail-Unanchored 403,780 403,780 13 1,794 40,066 72,125 TTM 2/97 55,771
Retail-Unanchored 392,586 392,586 16 60,783 56,278 56,274 TTM 2/97 53,102
Retail-Unanchored 447,615 447,615 18 45,906 72,235 73,107 TTM 2/97 59,471
Retail-Unanchored 356,983 356,983 17 48,621 50,041 50,044 TTM 2/97 46,906
Retail-Unanchored 354,572 354,572 15 48,028 53,862 60,958 TTM 2/97 47,046
Retail-Unanchored 394,863 394,863 17 77,671 56,272 42,972 TTM 2/97 52,573
Retail-Unanchored 331,854 331,854 30 50,946 42,800 42,800 TTM 2/97 42,287
Retail-Unanchored 385,937 385,937 18 57,523 56,947 73,397 TTM 2/97 51,921
Retail-Unanchored 374,516 374,516 17 47,806 54,391 54,390 TTM 2/97 50,297
Retail-Unanchored 365,241 365,241 17 49,377 55,628 55,626 TTM 2/97 50,280
Retail-Unanchored 302,534 302,534 16 41,818 47,697 44,132 TTM 2/97 40,020
Retail-Unanchored 358,002 358,002 11 87,022 112,433 112,932 TTM 2/97 90,330
Retail-Unanchored 261,121 261,121 36 18,264 33,682 43,348 TTM 2/97 33,998
Retail-Unanchored 288,498 288,498 20 39,713 43,365 40,027 TTM 2/97 37,581
Retail-Unanchored 363,859 363,859 20 33,450 69,149 63,390 TTM 2/97 48,696
Retail-Unanchored 244,729 244,729 13 33,039 37,187 37,190 TTM 2/97 33,030
Retail-Unanchored 259,853 259,853 9 38,889 31,597 28,332 TTM 2/97 36,270
Retail-Unanchored 281,031 281,031 13 42,398 41,929 41,926 TTM 2/97 38,576
Retail-Unanchored 239,524 239,524 28 16,777 25,260 27,543 TTM 2/97 31,106
Retail-Unanchored 207,401 207,401 19 26,725 28,192 28,196 TTM 2/97 27,075
Retail-Unanchored 193,354 193,354 11 32,844 26,573 31,758 TTM 2/97 27,486
Retail-Unanchored 162,335 162,335 21 19,915 23,827 23,827 TTM 2/97 21,828
Retail-Unanchored 155,435 155,435 9 39,693 39,072 39,072 TTM 2/97 35,303
Retail-Unanchored 134,276 134,276 18 20,458 18,579 19,748 TTM 2/97 19,033
Retail-Unanchored 162,930 162,920 7 32,239 45,056 45,056 TTM 2/97 30,054
Retail-Unanchored 110,734 110,734 5 23,261 31,691 22,606 TTM 2/97 26,146
Retail-Unanchored 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 6,973,356 6,824,000
Hotel-Full Service 41,700,000 41,700,000 72,775 5,825,299 6,385,645 7,047,202 TTM 12/31/96 7,323,945
Retail-Anchored 36,000,000 36,000,000 100 5,469,863 6,840,963 5,864,297 TTM 11/31/96 4,912,628
Office 34,473,575 34,423,045 47 5,915,125 5,979,532 6,149,264 TTM 10/31/96 7,074,917
Mobile Home Park 12,739,631 12,739,631 19,751 1,544,045 1,588,265 1,583,078 TTM 9/30/96 1,609,324
Mobile Home Park 9,086,484 9,086,484 15,885 1,055,557 1,085,930 1,196,067 TTM 9/25/96 1,259,903
Mobile Home Park 6,133,920 6,133,920 19,535 781,391 821,053 828,701 TTM 9/30/96 846,912
Mobile Home Park 5,539,965 5,539,965 18,908 744,447 731,943 760,608 TTM 9/25/96 783,587
---------- ---------- ------ --------- --------- --------- ---------
33,500,000 33,500,000 18,524 4,125,440 4,227,191 4,368,454 4,499,726
Office-R&D 33,000,000 32,964,627 79 2,069,437 3,941,288 4,160,168 TTM 12/31/96 4,669,489
Retail-Anchored 19,200,000 19,200,000 38 2,486,555 2,514,922 2,384,915 TTM 12/31/96 2,512,568
Retail-Anchored 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>
LOAN # ASSET # PROPERTY NAME ADDRESS CITY STATE ZIP
- ------ ------- ------------- ------- ---- ------ ----
M & H
15 1 LaHabra Marketplace 1500-1900 Imperial Hwy La Habra CA 90631
15 2 How \'Bout Arden 2100 Arden Way Sacramento CA 95825
15 3 Bethard Square 301-342 West Olive Ave. Madera CA 93638
16 Nassau Park II Rt.1& Quaker Bridge West Windsor NJ 08540
PRIME RETAIL II
17 1 Coeur D\'Alene Factory Outlets 3900 Riverbend Ave. Coeur D\'Alene ID 83854
17 2 Bend Factory Outlets 61330 S. Highway 97 Bend OR 97702
17 3 Oak Creek Factory Outlets 6601-6657 Hwy. 179 Sedona AZ 86351
18 Lakeside Village 4170 Spring Lake Drive San Leandro CA 94578
19 Asian Gardens Mall 9200 Bolsa Ave. Westminster CA 92683
20 Northwood Centre 1940 N. Monroe St. Tallahassee FL 32303
21 South Dekalb Mall 2801 Candler Road Decatur GA 30034
AMBASSADOR APARTMENTS II
22 1 Country Club West 1001 50th. Ave. Greeley CO 80634
22 2 Courtney Park Apts. 4470 S. Lemay Ave. Fort Collins CO 80525
23 Century Square Mall Mountain View Drive West Mifflin PA 15122
HOLLADAY
24 1 Byrkit 400 S. Byrkit Ave. Mishawaka IN 46544
24 2 LTV 105 Niles Ave. South Bend IN 46617
24 3 3300 Sample 3300 West Sample St. South Bend IN 46619
24 4 Blackthorn -- Wells Olive Rd/Nimtz Pkwy South Bend IN 46628
24 5 West Jefferson 1501 Liberty Dr. Mishawaka IN 46545
24 6 Willow Trace -- II 820 Fessler Prkwy. Nashville TN 37210
24 7 Dugdale 17390 Dugdale Rd. South Bend IN 46635
24 8 Niles/Colfax 431 E. Colfax Ave. South Bend IN 46601
24 9 Michiana 53830 Generations Dr. South Bend IN 46635
24 10 Colfax 220 W. Colfax Ave. South Bend IN 46601
24 11 Pru 53822 Generation Dr South Bend IN 46635
25 Knollwood Village Apartments 2130 E. Hill Grand Blanc MI 48439
26 Tucson Place NWC Wetmore & 1st Tucson AZ 85705
2 ST. MARKS/GREYSTONE
27 1 Greystone Apartments 7585 Ingram Road San Antonio TX 78232
27 2 St. Marks 37 St. Marks Place New York NY 10003
28 Holiday Inn -- Alexandria 480 King Street Alexandria VA 22314
29 Hamilton Park Health Care Center 525 Monmouth Street Jersey City NJ 07302
30 Burlington Square Middlesex Turnpike Burlington MA 01803
31 Alzina Office Building 100 North First St. Springfield IL 62705
32 Danvers Crossing Shopping Center 8-10 Newbury St Danvers MA 01923
33 Residence Inn -- Herndon 315 Elden Street Herndon VA 22070
34 Del Mar Village Shopping Center 7154 Beracasa Way Boca Raton FL 33434
35 Plaza at Burr Corners I&II 1129 Tolland Tpk. Manchester CT 06040
36 Holiday Inn New Orleans 100 West Bank Expwy. Gretna LA 70053
TRAMZ
37 1 Holiday Inn -- Carrier Circle 6501 College Drive East Syracuse NY 13057
37 2 Holiday Inn -- Airport 6701 Buckley Road North Syracuse NY 13212
38 Shadyside Gardens Apartment 2641 Shadyside Ave. Suitland MD 20746
39 Radisson Inn -- Columbus 4900 Sinclair Road Columbus OH 43229
40 Hood Commons Crystal Avenue Derry NH 03038
41 30 Broad Street 30 Broad Street New York NY 10004
CLEVELAND INDUSTRIAL PORTFOLIO
42 1 6200 Harvard 6200 Harvard Avenue Cleveland OH 44105
42 2 Berea Road 10408-10750 Berea Road Lakewood OH 44102
42 3 East 34th Street 2912-2972 East 34th Street Cleveland OH 44115
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
PROPERTY TYPE BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
- ------------- ------- ------- ------------ -------- -------- ------- --- --------
Retail-Anchored 15,884,176 15,857,560 40 1,620,635 1,806,581 TTM 12/31/96 $2,863,896
Retail-Anchored 11,465,239 11,446,027 69 1,788,378 1,793,543 TTM 12/31/96 1,887,308
Retail-Anchored 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
Retail-Anchored 28,000,000 28,000,000 139 1,728,961 TTM 12/31/96 3,249,803
Retail-Factory Outlet 11,900,000 11,900,000 66 2,912,707 2,575,897 2,325,507 TTM 12/31/96 1,790,400
Retail-Factory Outlet 8,000,000 8,000,000 83 1,362,814 1,344,567 1,379,263 TTM 12/31/96 1,194,616
Retail-Factory Outlet 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
Multifamily 25,000,000 24,971,982 41,072 2,650,453 2,798,362 3,128,516 TTM 12/31/96 3,219,783
Retail-Mall 24,375,000 24,326,512 218 2,334,399 2,885,176 3,278,009 TTM 12/31/96 3,352,220
Retail-Anchored 23,000,000 23,000,000 46 3,940,852 4,056,339 4,131,299 TTM 12/31/96 3,775,966
Retail-Mall 21,845,301 21,798,649 66 3,550,084 3,745,511 3,534,086 TTM 12/31/96 3,550,330
---------
Multifamily 11,400,000 11,400,000 39,583 1,226,695 1,530,811 1,568,299 TTM 12/31/96 1,500,513
Multifamily 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
Retail-Anchored 21,000,000 21,000,000 51 2,826,109 2,765,134 2,601,411 TTM 12/31/96 2,692,929
Industrial 3,450,000 3,450,000 10 504,954 516,098 612,499 TTM 12/31/96 584,140
Office 2,880,000 2,880,000 82 433,067 439,463 436,100 TTM 12/31/96 434,793
Industrial 2,255,000 2,255,000 10 383,402 390,120 428,430 TTM 12/31/96 357,039
Industrial 2,000,000 2,000,000 41 275,481 YTD Ann. 12/31/96 262,123
Multifamily 1,875,000 1,875,000 19,531 240,836 243,747 267,802 TTM 12/31/96 263,865
Industrial 1,750,000 1,750,000 33 215,128 217,479 269,706 TTM 12/31/96 257,058
Office 1,660,000 1,660,000 58 207,882 210,480 229,673 TTM 12/31/96 241,303
Office 1,545,000 1,545,000 70 272,835 271,942 269,532 TTM 12/31/96 238,489
Office 1,330,000 1,330,000 108 102,097 176,066 206,104 TTM 12/31/96 194,473
Office 1,050,000 1,050,000 37 137,098 199,093 180,835 TTM 12/31/96 180,811
Office 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
Multifamily 20,000,000 19,940,533 30,772 2,640,142 2,851,292 2,857,373 TTM 8/31/96 2,771,116
Retail-Anchored 17,325,000 17,325,000 63 1,761,481 2,102,056 2,087,911 TTM 11/30/96
Multifamily 11,967,093 11,954,004 20,899 1,731,587 1,714,042 1,526,187 TTM 11/30/96 1,490,823
Multifamily 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
Hotel-Full Service 15,000,000 14,875,834 65,532 3,893,523 4,111,381 4,144,668 TTM 10/31/96 3,982,652
Nursing 14,700,000 14,636,056 58,544 2,219,100 3,413,592 2,471,363 TTM 9/30/96 2,500,846
Retail-Secondary Anchored 14,664,000 14,642,002 170 1,812,150 1,939,929 1,883,081 TTM 10/31/96 1,839,022
Office 14,066,000 14,019,336 55 2,242,329 2,284,343 2,668,504 TTM 11/30/96 2,311,839
Retail-Anchored 13,670,000 13,627,151 78 1,736,497 1,957,340 2,029,886 TTM 11/30/96 1,937,684
Hotel-Extended Stay 13,500,000 13,481,513 80,247 2,078,708 2,373,430 2,559,600 TTM 11/30/96 2,261,537
Retail-Anchored 12,500,000 12,482,642 81 1,133,123 1,095,179 1,509,337 TTM 12/31/96 1,672,705
Retail-Anchored 12,305,000 12,278,439 45 1,630,958 1,463,092 1,560,044 TTM 11/30/96 1,710,402
Hotel-Full Service 11,990,000 11,909,688 38,668 1,829,139 2,237,718 2,457,301 TTM 11/30/96 2,262,123
Hotel-Full Service 6,640,500 6,611,944 32,571 1,262,676 1,310,137 1,409,908 TTM 10/31/96 1,364,743
Hotel-Full Service 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 27,743 2,374,096 2,386,343 2,518,442 2,356,789
Multifamily 10,500,000 10,500,000 30,086 1,098,761 1,381,171 1,339,523 TTM 12/31/96 1,372,206
Hotel-Full Service 9,665,000 9,665,000 36,063 1,392,312 1,788,613 2,128,136 TTM 12/31/96 2,050,842
Retail-Anchored 9,025,000 9,025,000 43 1,388,348 1,391,003 1,280,019 TTM 12/31/96 1,201,359
Office 9,000,000 9,000,000 22 2,286,971 1,236,884 TTM 12/31/96 1,788,398
Industrial 1,753,525 1,746,503 14 303,407 294,339 305,449 TTM 11/30/96 283,852
Industrial 1,681,513 1,674,779 7 313,989 326,162 331,776 TTM 11/30/96 311,168
Industrial 1,599,085 1,592,681 8 278,141 333,000 326,690 TTM 11/30/96 310,532
<PAGE>
LOAN # ASSET # PROPERTY NAME ADDRESS CITY STATE ZIP
- ------ ------- ------------- ------- ---- ------ ----
42 4 Eddy Road 341-353 Eddy Road Cleveland OH 44108
42 5 Grant 5207-5215 Grant Avenue Cleveland OH 44125
42 6 Stones Levee 401-607 Stones Levee Cleveland OH 44113
42 7 Industrial Parkway 1261 Industrial Parkway Brunswick OH 44212
42 8 Babbitt Road 1261-1267 Babbitt Road Euclid OH 44132
43 Sehome Village 300 36th St. Bellingham WA 98226
44 Festival at Moreno Valley 24318 Hemolck Moreno Valley CA 92387
45 Madison House 34 Wildwood Avenue Madison CT 06443
46 Decker Building 33 Union Square West New York NY 10003
ECONOLODGE PORTFOLIO
47 1 Woodbridge Econolodge 13317 Gordon Blvd Woodbridge VA 22191
47 2 Fredericksburg Econolodge 5321 Jeff Davis Hwy Fredericksburg VA 22401
47 3 Wytheville Econolodge 1190 E. Main Street Wytheville VA 24382
47 4 Bluefield Econolodge 3400 Cumberland Rd. Bluefield WV 24701
47 5 Chesapeake Econolodge 4725 N. Military Highway Chesapeake VA 23321
47 6 Midlothian Econolodge 6523 Midlothian Turnpike Richmond VA 23225
48 Residence Inn-Livermore 1000 Airway Boulevard Livermore CA 94550
49 140 Allen 140 Allen Road Bernards Twsp. NJ 07936
KEEGAN'S WILLOW
50 1 Keegan's Village Shopping Center 11873 Bissonnet Drive Houston TX 77099
50 2 Willow Park Shopping Center 14147 Northwest Freeway Houston TX 77040
51 1 Brookside Commons Apartments 235 E. Main Street East Hartford CT 06108
52 1 Lincoln Park Center 3600 Fort Street Lincoln Park MI 48146
MAGNOLIA-WESTERN INVESTMENTS, LP
53 1 Magnolia Gardens 17922 San Fernando Miss. Granada Hills CA 91604
53 2 Western Convalescent 2190 W. Adams Blvd. Los Angeles CA 90018
BUENA/LEISURE NURSING
54 1 Buena Ventura Care Center 1016 S. Record Ave Los Angeles CA 90023
54 2 Leisure Glen 1505 Colby Drive Glendale CA 91205
55 Englar Shopping Center MD Rte 140/Englar Road Westminster MD 21157
56 Totem Square Shopping Center 11815 124th Ave. NE Kirkland WA 98034
57 Equitable of Iowa Building 604 Locust Street Des Moines IA 50309
58 Clarion Suites Inn 191 Spencer Street Manchester CT 06040
59 Outlets Limited Mall 3750 Venture Drive Duluth GA 30136
60 Warwick Commons 399 Bald Hill Road Warwick RI 02886
61 Alden Terrace 1240 Hoover Street Los Angeles CA 90006
62 6000 Metro Drive 6000 Metro Drive Baltimore MD 21215
63 Country Hearth Inn -- Orlando 9861 International Dr. Orlando FL 32819
64 Longwood Manor 4853 W. Washington Blvd. Los Angeles CA 90016
65 Tech Center 29 12200 Tech Road Silver Spring MD 20904
66 Davol Square Jewelry Bldg. 3 Davol Square Providence RI 02903
67 Lincoln MHP 10301 And 10315 W. Greenfield West Allis WI 53214
68 National Bank of California 145 S. Fairfax Ave. Los Angeles CA 90036
69 Best Western -- Jacksonville 300 N. Park Avenue Orange Park FL 32073
70 The Lab 2930 Bristol Street Costa Mesa CA 92626
71 Northridge Shopping Center W 80th Ave/Wadsworth Arvada CO 80003
72 Days Inn -- Providence 220 India Street Providence RI 02903
73 Plymouth Mall 2700 Plymouth Rd. Ann Arbor MI 48104
74 Residence Inn -- Gainsville 4001 SW 13th Street Gainesville FL 32608
75 Ramada Inn Bossier 750 Isle of Capri Blvd. Bossier LA 71111
SUTTON PLACE + SOUTH LIVINGSTON
76 1 Sutton Place 998-1100 St George Ave Rahway NJ 07065
76 2 79 South Livingston 79 South Livingston Ave Livingston NJ 07039
77 Old Town Square Mountain & College Fort Collins CO 80524
78 Anza Corporate Center 433 Airport Blvd. Burlingame CA 94010
79 Washington Square Shopping Center 1111 E. Washington Ave. Escondido CA 92025
80 Winston Village 2055 N. Perris Blvd Perris CA 92571
81 Plaza Reyes Adobe Retail Center 30313 Canwood St Agoura Hills CA 91301
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
PROPERTY TYPE BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
- ------------- ------- ------- ------------ -------- -------- ------- --- --------
Industrial 1,106,787 1,102,355 8 235,966 212,474 200,894 TTM 11/30/96 201,025
Industrial 953,632 949,812 12 167,208 164,411 165,956 TTM 11/30/96 159,197
Industrial 604,236 601,816 7 132,378 132,582 132,858 TTM 11/30/96 115,407
Industrial-Warehouse 518,395 516,319 6 197,913 188,589 180,814 TTM 11/30/96 138,810
Industrial 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
Retail-Anchored 8,300,000 8,300,000 65 1,104,509 1,032,868 1,029,562 TTM 12/31/96 1,022,662
Retail-Anchored 8,065,000 8,065,000 41 1,303,892 1,265,991 1,298,745 TTM 12/31/96 1,197,445
Nursing 6,750,000 6,725,941 74,733 988,189 1,369,023 TTM 9/30/96 1,220,672
Multifamily 6,500,000 6,500,000 361,111 763,197 TTM 12/31/96 919,609
Hotel-Ltd. Service 2,120,000 2,120,000 32,615 457,225 480,991 471,531 TTM 10/30/96 375,708
Hotel-Ltd. Service 1,575,000 1,575,000 9,000 203,551 234,100 268,008 TTM 10/30/96 257,732
Hotel-Ltd. Service 998,111 998,111 13,863 241,293 241,982 222,042 TTM 10/31/96 182,527
Hotel-Ltd. Service 608,018 608,018 12,667 137,043 194,123 188,065 TTM 10/30/96 176,382
Hotel-Ltd. Service 525,483 525,483 9,915 101,652 85,287 97,605 TTM 10/30/96 81,712
Hotel-Ltd. Service 476,388 476,388 6,617 47,636 65,925 102,509 TTM 10/30/96 62,445
---------- ---------- ------- --------- --------- --------- ---------
6,303,000 6,303,000 17,963 1,188,399 1,302,408 1,349,759 1,136,506
Hotel-Extended Stay 6,060,000 6,060,000 63,125 820,525 1,039,661 1,351,568 TTM 12/31/96 1,003,438
Office 6,000,000 5,991,620 96 1,083,618 1,153,834 1,249,680 12/31/96 ann. 1,053,569
Retail-Anchored 3,150,000 3,150,000 34 498,741 490,668 475,937 TTM 12/31/96 474,778
Retail-Anchored 2,850,000 2,850,000 44 323,647 415,911 352,629 TTM 12/31/96 402,061
---------- ---------- ------- --------- --------- --------- ---------
6,000,000 6,000,000 38 822,388 906,579 828,566 876,839
Multifamily 5,900,000 5,900,000 23,228 519,497 630,527 797,817 TTM 2/28/97 866,507
Retail-Anchored 5,900,000 5,892,333 34 875,019 876,291 954,597 TTM 10/31/96 897,307
Nursing 3,300,000 3,289,454 33,227 1,119,282 716,377 756,949 TTM 9/30/96 755,349
Nursing 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 25,257 1,889,647 1,239,693 1,343,233 1,334,690
Nursing 2,886,253 2,880,881 29,100 658,307 822,393 652,213 TTM 9/30/96 628,229
Nursing 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
Retail-Anchored 5,535,000 5,523,398 45 800,481 809,105 822,507 TTM 11/30/96 792,110
Retail-Unanchored 5,425,000 5,425,000 43 802,690 876,507 TTM 12/31/96 850,080
Office 5,200,000 5,169,401 24 1,543,939 1,976,660 1,790,509 TTM 10/30/96 1,257,123
Hotel-Extended Stay 5,100,000 5,090,239 48,945 707,667 847,866 1,019,991 TTM 11/30/96 972,029
Retail-Secondary Anchored 5,000,000 4,959,958 29 1,157,521 1,363,656 1,393,804 TTM 12/31/96 1,220,207
Retail-Anchored 5,000,000 5,000,000 91 677,015 691,591 678,697 TTM 12/31/96 675,101
Nursing 4,747,000 4,731,830 22,533 1,274,412 1,642,380 1,602,028 TTM 9/30/96 1,225,780
Office 4,717,500 4,707,742 60 801,927 853,173 870,615 TTM 11/30/96 766,837
Hotel-Full Service 4,600,000 4,574,045 30,494 1,057,043 974,283 1,085,800 TTM 11/30/96 957,215
Nursing 4,578,000 4,563,370 23,047 1,005,633 1,311,260 995,214 TTM 9/30/96 995,845
Office 4,550,000 4,532,434 81 772,093 670,226 675,241 TTM 10/31/96 680,620
Retail-Unanchored 4,500,000 4,484,492 55 834,131 901,769 850,921 TTM 9/30/96 843,520
Mobile Home Park 4,150,000 4,144,091 20,720 541,865 557,919 546,003 TTM 12/31/96 510,560
Office 4,125,000 4,119,395 75 755,852 646,671 YTD Ann 11/30/96 609,158
Hotel-Full Service 4,100,000 4,092,178 20,359 588,583 945,365 987,544 TTM 11/30/96 844,393
Retail-Unanchored 4,075,000 4,060,002 130 346,426 553,104 654,020 TTM 9/30/96 602,751
Retail-Anchored 4,000,000 4,000,000 30 949,806 938,208 898,865 TTM 12/31/96 816,675
Hotel-Full Service 3,955,000 3,955,000 29,081 826,610 805,077 815,477 TTM 1/31/97 831,713
Retail-Secondary Anchored 3,950,000 3,941,797 46 484,891 561,773 575,977 TTM 11/30/96 600,005
Hotel-Extended Stay 3,925,000 3,925,000 49,063 612,258 693,003 705,148 TTM 11/30/96 683,181
Hotel-Ltd. Service 3,800,000 3,788,821 15,528 826,231 1,518,322 1,283,898 TTM 10/31/96 1,019,897
Retail-Anchored 3,116,000 3,116,000 69 473,788 520,121 521,692 TTM 12/31/96 439,321
Retail-Unanchored 684,000 684,000 122 114,064 119,407 127,831 TTM 12/31/96 $109,301
---------- ---------- ------- --------- --------- --------- ---------
3,800,000 3,800,000 79 587,852 639,528 649,523 548,622
Retail 3,750,000 3,742,129 36 545,658 563,181 674,815 TTM 10/31/96 634,033
Office 3,500,000 3,492,575 53 481,718 501,889 532,208 TTM 11/30/96 538,220
Retail-Secondary Anchored 3,476,000 3,463,909 61 494,060 507,366 579,964 TTM 10/31/96 507,664
Retail-Unanchored 3,375,000 3,370,372 70 425,654 459,239 511,099 TTM 12/31/96 492,965
Retail-Unanchored 3,350,000 3,350,000 88 465,500 406,669 491,662 TTM 12/31/96 465,456
<PAGE>
LOAN # ASSET # PROPERTY NAME ADDRESS CITY STATE ZIP
- ------ ------- ------------- ------- ---- ------ ----
82 Comfort Inn -- Castaic 31558 Castaic Rd. Castaic CA 91384
83 Pocono Green Shopping Center Midlothian Turnpike Richmond VA 23235
84 Saunders Plaza 4533 MacArthur Blvd Newport Beach CA 92660
85 Heritage Bank Building 1313 Dolley Madison McLean VA 22101
86 Arvada Plaza 9212-9588 West 58th Ave. Arvada CO 85704
87 Good Guys Plaza 1331 Guerneville Rd Santa Rosa CA 95402
88 Candlelite Apartments 700 Candelite Ct. Fort Wayne IN 46807
89 Topinkas Village Shopping Center 19111--19191 Telegraph Rd. Detroit MI 48219
90 Village Park MHP 724 Creek Ridge Road Greensboro NC 27406
91 Woodland Park Retirement 21200 Ventura Blvd. Woodland Hills CA 91634
92 View Park Convalescent Center 3737 Don Felipe Drive Los Angeles CA 90008
93 Key RV Park 6099 Overseas Highway Marathon FL 33050
94 Ramada Inn -- Nashville 837 Briley Parkway Nashville TN 37217
95 Barstow Plaza 901 Armory Road Barstow CA 92311
96 Aspen Care Center 2325 Madison Avenue Ogden UT 84401
97 Senate House and Virginian 935 & 965 Cottage Grove Las Vegas NV 89119
98 One Ethel Road One Ethel Road Edison NJ 08817
99 American Plaza Shopping Center 701 Galvin Road Bellevue NE 68005
100 Diamond Inn 1009 South Main St. Salt Lake City UT 84111
101 Hocking Mall Shopping Center C.R. 33A & S.R. 664 Logan OH 43138
102 Kessler Garden Apts. 5480 N. Michigan Rd. Indianapolis IN 46228
103 Chateau Apartments 2000 24th Street Nashville TN 37212
104 Knights Inn-Maumee 1520 S Holland Maumee OH 43537
105 Tiffany Bay Clear Lake 1605 Tiffany Court Houston TX 77058
106 Airport Commerce Center 16126 Sherman Way Van Nuys CA 91406
107 Bakerview MHP 505 West Bakerview Bellingham WA 98226
108 Slauson Apartments 4707-41 Slauson Ave Los Angeles CA 90001
109 El Camino Real Apartments 1600 Tamarack McAllen TX 78501
110 Park Isle Club Apartments 790 73rd Street Miami Beach FL 33141
111 Planet Pacific Building 27405 Puerta Real Mission Viejo CA 92691
112 Butler Place Apartments 14 & 20 Butler Pl Brooklyn NY 11238
113 Cedar Springs 400 Susan Cedar Springs MI 49319
114 Emory Arms Apartments 1295 E. Rock Spr. Rd. Atlanta GA 30306
115 Fairdale Apartments 6600 Fairdale San Antonio TX 78218
116 Holiday Inn Express -East Haven 30 Frontage Road East Haven CT 06518
117 Holiday Inn Express-Bennetsvill 213 US Hwy 15 Bennettsville SC 29512
118 Michigan Trailer Park 3140 W. Osborne Phoenix AZ 85017
119 Hidden Meadows Apartments 5959 Wurzbach San Antonio TX 78238
120 Econolodge Arizona 121 S. Lake Powell Page AZ 86040
121 Holiday Inn -- S. Kingston 3009 Tower Hill Rd South Kingstown RI 02874
122 North Acres Mobile Home Park 302 E. "N" Street Yakima WA 98901
123 Trainer Hill MHP 4300 West Ninth Street Trainer PA 19013
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN PRINCIPAL 1996 PERIOD
PROPERTY TYPE BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI U/W NOI
- ------------- ------- ------- ------------ -------- -------- ------- --- --------
Hotel-Ltd. Service 3,000,000 2,994,486 24,954 554,983 533,801 555,934 TTM 11/30/96 546,058
Retail-Unanchored 3,000,000 2,993,860 68 348,879 456,239 482,023 TTM 11/30/96 452,472
Retail-Unanchored 2,980,000 2,969,460 87 368,473 493,244 517,345 TTM 11/30/96 442,985
Office 2,922,000 2,917,946 55 322,127 454,149 528,279 TTM 12/6/96 482,215
Retail-Unanchored 2,900,000 2,897,637 19 302,054 484,650 539,061 TTM 10/31/96 569,448
Retail-Unanchored 2,850,000 2,850,000 84 535,931 543,242 600,284 TTM 12/31/96 510,610
Multifamily 2,800,000 2,789,524 21,458 420,958 405,871 428,779 TTM 11/30/96 443,179
Retail-Anchored 2,800,000 2,800,000 82 378,360 417,032 403,201 TTM 11/30/96 393,530
Mobile Home Park 2,800,000 2,797,014 11,606 335,614 370,444 385,594 TTM 12/31/96 397,783
Assisted Living 2,712,000 2,703,333 10,813 705,086 723,854 670,605 TTM 9/30/96 622,004
Nursing 2,675,000 2,666,452 26,934 590,136 648,780 576,827 TTM 9/30/96 576,977
Mobile Home Park 2,500,000 2,494,904 11,497 367,792 382,349 429,972 TTM 12/31/96 432,613
Hotel-Ltd. Service 2,300,000 2,295,601 15,942 454,327 499,653 575,525 TTM 11/30/96 489,327
Retail-Anchored 2,223,000 2,216,600 56 339,818 340,460 402,800 TTM 9/30/96 370,815
Nursing 2,200,000 2,195,603 30,494 515,420 508,738 538,052 TTM 12/31/96 428,916
Multifamily 2,200,000 2,193,798 16,875 352,124 339,687 371,578 TTM 9/30/96 345,638
Office 2,175,000 2,172,731 38 218,389 224,771 391,713 TTM 12/31/96 403,012
Retail-Anchored 2,150,000 2,145,565 47 276,460 296,764 291,425 TTM 11/30/96 314,123
Hotel-Ltd. Service 2,100,000 2,096,068 33,808 73,336 522,865 TTM 12/31/96 351,161
Retail-Anchored 1,963,000 1,959,209 19 356,433 352,560 340,552 TTM 11/30/96 320,761
Multifamily 1,950,000 1,947,258 14,641 54,213 207,014 275,550 TTM 11/30/96 280,358
Multifamily 1,939,000 1,939,000 29,379 257,019 258,144 258,996 TTM 12/31/96 262,175
Hotel-Ltd. Service 1,925,000 1,921,318 11,934 437,309 480,920 500,649 TTM 11/30/96 348,034
Multifamily 1,900,000 1,898,835 41,279 233,381 230,750 249,170 TTM 11/30/96 234,953
Office 1,870,000 1,870,000 45 19,307 276,850 349,484 TTM 12/31/96 313,149
Mobile Home Park 1,800,000 1,792,220 14,338 225,994 250,493 258,845 TTM 11/30/96 241,763
Multifamily 1,777,000 1,772,762 24,622 216,973 234,336 272,586 TTM 5/31/96 241,334
Multifamily 1,775,000 1,771,548 13,123 306,684 289,174 305,994 TTM 11/30/96 289,526
Multifamily 1,700,000 1,693,967 16,940 300,279 311,528 314,200 TTM 9/30/96 248,904
Office 1,700,000 1,696,221 44 310,073 392,184 TTM 11/30/96 331,321
Multifamily 1,538,000 1,538,000 32,042 114,829 139,762 187,139 TTM 2/28/97 211,858
Mobile Home Park 1,500,000 1,500,000 6,944 217,396 317,053 356,620 TTM 10/30/96 306,161
Multifamily 1,500,000 1,493,209 24,887 194,422 211,393 278,255 TTM 11/30/96 242,308
Multifamily 1,500,000 1,493,949 6,791 386,446 419,964 225,414 TTM 11/30/96 314,458
Hotel-Ltd. Service 1,500,000 1,500,000 18,293 96,481 207,579 425,985 TTM 11/30/96 332,761
Hotel-Ltd. Service 1,430,000 1,430,000 27,500 56,528 268,207 289,826 TTM 12/31/96 254,926
Mobile Home Park 1,385,000 1,382,553 9,156 180,145 183,191 181,587 TTM 11/30/96 185,014
Multifamily 1,350,000 1,344,554 8,456 262,514 252,136 200,329 TTM 11/30/96 259,694
Hotel-Ltd. Service 1,200,000 1,200,000 19,048 390,062 481,647 519,694 TTM 12/30/96 263,907
Hotel-Full Service 1,200,000 1,200,000 11,429 322,310 463,306 472,235 TTM 12/31/96 364,366
Mobile Home Park 1,012,000 1,010,529 8,864 111,332 139,684 183,435 TTM 11/30/96 133,449
Mobile Home Park 1,000,000 996,895 9,773 200,698 146,596 183,243 TTM 11/30/96 151,985
<PAGE>
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT REMAINING
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE LOCKOUT
- ----------- --------- --------- ------- ------------- ---- ------- ---- ---- ---- --------
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 117
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 118
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 115
3,990,166 4,030,471 3,990,166 1.28
3,986,759 4,027,029 3,986,759 1.28
---------- ---------- --------- ----
7,976,925 8,057,500 7,976,925 1.28 6,250,903 8.965%* 04/11/2022 04/11/2017 240
8,325,381 8,395,800 8,233,241 7,900,763 5,278,174 1.69 03/11/2022 03/11/2004 80
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 80
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 140
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 191
468,853 410,442 410,519 340,992 300,377 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
245,000 245,000 245,068 220,827 209,879 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
282,520 260,948 260,948 238,016 202,919 1.24
225,101 202,406 229,939 173,128 154,110 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
200,174 214,466 217,748 203,272 131,713 1.24
169,626 196,851 190,476 146,898 85,158 1.24
127,398 77,197 132,441 126,302 71,663 1.24
202,183 161,218 161,218 152,582 108,814 1.24
BALOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REPAYMENT BUILT UNIT OF
LOCK BOX TERM VALUE LTV DATE LTV AMORTIZATION RENOVATED UNIT MEASURE
- --------- ------------ ----- --- ----------- ------------ --------- ------ --------
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
----------- --- --- ---------
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
----------- --- --- ---------
Yes 119 122,400,000 56% 50% 360 837,179
Yes 120 104,000,000 63% 57% 356 1989 384,759 sf
36,650,000 85% 40% 1994 1,278,600 sf
36,600,000 85% 40% 1992 1,546,575 sf
----------- --- --- ---------
Yes 241 73,250,000 85% 40% 300 2,825,175
61,000,000 57% 51% 1986/1992 516,538 sf
42,200,000 57% 51% 1988/1993 480,092 sf
----------- --- --- ---------
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
----------- --- --- ---------
Yes 141 90,700,000 62% 49% 300 1,811
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
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT REMAINING
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE LOCKOUT
- ----------- --------- --------- ------- ------------- ---- ------- ---- ---- ---- --------
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 51,127 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 88,804 53,141 1.24
58,680 58,813 59,404 56,904 42,381 1.24
60,743 60,748 56,976 54,404 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 72,394 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
- ----------- ---------- ---------- ---------- --------- ----
9,196,609 9,115,272 9,622,604 8,808,017 5,995,385 1.24 4,847,098 8.660%* 03/11/2027 03/11/2012 179
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 143
10,028,074 9,912,821 9,229,998 8,430,127 4,446,981 1.27 3,503,982 9.090%* 04/11/2027 04/11/2012 180
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 117
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 4,408,526 1.46 3,017,266 8.240%* 04/11/2027 04/11/2007 120
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 115
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 143
BALOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REPAYMENT BUILT UNIT OF
LOCK BOX 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
----------- --- --- ---------
Yes 180 63,109,359 80% 60% 328 1,905,163
Yes 144 68,000,000 61% 49% 300 1989/1997 573 rooms
----------- --- --- ---------
Yes 181 47,000,000 77% 64% 360 1972/1986 361,804 sf
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
----------- --- --- ---------
Yes 121 53,200,000 63% 57% 360 1,824
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
----------- --- --- ---------
Yes 144 46,800,000 68% 60% 360 788,471
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT REMAINING
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE LOCKOUT
- ----------- --------- --------- ------- ------------- ---- ------- ---- ---- ---- -------
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 5,394,709 7,016,441 4,632,597 1.91 2,430,033 7.575%* 01/11/2027 01/11/2007 114
2,321,441 4,231,055 4,117,238 3,126,553 1.24 2,527,091 8.262%* 03/11/2027 03/11/2007 119
3,805,886 3,526,875 2,779,423 1,632,730 1.51
1,886,032 1,954,908 1,818,681 1,075,297 1.51
1,877,395 1,991,745 1,918,277 1,177,316 1.51
---------- --------- ---------- ---------- ----
7,569,313 7,473,528 6,516,381 3,885,343 1.51 2,576,266 8.350%* 03/11/2022 06/11/2007 119
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 118
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 177
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 119
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 117
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 3,825,929 3,985,079 4,080,551 2,733,689 1.43 1,907,521 8.080%* 03/11/2027 03/11/2007 119
4,895,143 4,825,459 4,643,395 4,742,083 2,469,772 1.21 2,045,819 9.10%* 04/11/2027 04/11/2012 180
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 116
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 111
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 142
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 3,606,838 1,846,386 1.33 1,391,147 8.280%* 02/11/2027 02/11/2007 115
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 173
11,532,536 13,604,018 14,338,462 2,438,346 1.50 1,621,310 9.300%* 12/11/2016 12/11/2011 173
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 138
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 75
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 112
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 175
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 114
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 114
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 171
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 8,735,657 8,735,577 1,920,011 1.48 1,293,094 9.390%* 12/11/2016 12/11/2011 173
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 113
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 114
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 117
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 117
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
BALOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REPAYMENT BUILT UNIT OF
LOCK BOX 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
---------- --- --- --------
Yes 118 59,400,000 48% 43% 360 650,340
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
---------- --- --- --------
Yes 123 44,000,000 61% 51% 300 358,082
Yes 119 33,690,000 74% 66% 360 1972 608 units
Yes 178 36,900,000 66% 47% 303 1987 111,824 sf
Yes 120 35,600,000 65% 55% 300 1967/1989 502,023 sf
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
---------- --- --- --------
Yes 120 28,700,000 75% 67% 360 536
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
---------- --- --- --------
Yes 120 31,180,000 65% 55% 300 802,879
115 25,250,000 79% 70% 360 1970/1994 648 units
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 sf
---------- --- --- --------
Yes 119 21,350,000 72% 65% 360
177 30,000,000 50% 1% 180 1974/1985 227 rooms
Yes 177 21,000,000 70% 33% 240 1989 250 beds
142 21,300,000 69% 60% 360 1992 86,290 sf
Yes 82 20,700,000 68% 57% 240 1974 256,513 sf
Yes 116 19,300,000 71% 62% 324 1989/1994 175,733 sf
Yes 179 20,000,000 67% 48% 300 1988/1995 168 rooms
Yes 118 16,000,000 78% 71% 360 1982 153,523 sf
Yes 118 17,000,000 72% 61% 300 1966/1996 271,134 sf
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
---------- --- --- --------
Yes 177 21,300,000 54% 26% 240 390
120 14,000,000 75% 62% 300 1963/1987 349 units
121 13,400,000 72% 58% 264 1971/1986 268 rooms
Yes 121 12,200,000 74% 66% 360 1968/1990 208,980 sf
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
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT REMAINING
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE LOCKOUT
- ----------- --------- --------- ------- ------------- ---- ------- ---- ---- ---- --------
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 151
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 114
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 177
5,922,477 6,430,931 6,509,722 1,198,172 1.63 733,765 9.960%* 10/11/2021 10/11/2011 171
959,704 1,295,352 910,609 1.49 611,867 8.190% 03/11/2022 03/11/2007 116
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 176
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 177
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 175
773,913 720,506 717,086 715,866 415,569 1.41
582,563 621,010 685,575 623,798 357,395 1.41
--------- --------- --------- --------- --------- ----
1,356,476 1,341,516 1,402,661 1,339,664 772,964 1.41 549,541 8.420%* 04/11/2027 04/11/2007 117
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 113
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 174
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 178
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 175
984,936 982,282 1,008,335 988,108 762,755 1.39 547,874 8.790%* 01/11/2022 01/11/2007 114
1,206,694 1,287,308 1,260,194 724,085 1.36 532,123 8.680%* 03/11/2022 03/11/2007 116
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 78
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 175
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 171
913,006 918,920 906,303 905,226 617,768 1.27 487,592 8.610%* 04/11/2022 04/11/2012 177
6,141,833 6,617,279 6,632,911 1,162,780 2.05 568,116 8.714%* 02/11/2012 178
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 114
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 172
6,170,614 6,926,860 7,050,936 936,445 1.71 547,890 8.714%* 02/11/2012 178
1,148,456 1,036,450 1,067,872 1,084,151 597,708 1.35 442,601 8.580%* 11/11/2021 11/11/0203 76
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 111
656,753 693,257 719,927 500,560 1.29 387,162 8.620%* 01/11/2027 01/11/2004 78
1,340,709 1,141,873 1,125,490 501,160 1.27 395,798 8.930%* 01/11/2027 01/11/2007 114
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 175
647,522 765,015 873,821 815,898 554,722 1.37 406,023 8.870%* 11/11/2021 11/11/2006 112
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 174
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 173
791,456 887,591 924,904 936,799 539,408 1.37 393,245 8.860%* 01/11/2022 01/11/2007 114
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 176
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 174
762,860 798,241 783,803 717,109 393,993 1.29
161,942 171,275 179,166 161,869 99,391 1.29
--------- --------- --------- --------- --------- ----
924,802 969,516 962,969 555,862 493,384 1.29 382,361 8.990%* 03/11/2022 03/11/2007 116
1,233,252 1,288,381 1,354,693 1,340,624 472,947 1.28 370,882 8.780%* 01/11/2007 114
883,911 904,279 914,816 953,105 430,187 1.25 343,875 8.700%* 01/11/2022 01/11/2007 111
631,907 649,091 727,504 690,435 438,786 1.23 356,063 9.210%* 11/11/2021 11/11/2006 112
592,000 630,553 688,291 671,580 440,806 1.27 346,276 9.230%* 02/11/2022 02/11/2007 112
591,913 542,320 619,744 607,611 420,948 1.25 336,807 8.980%* 03/11/2022 03/11/2007 113
BALOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REPAYMENT BUILT UNIT OF
LOCK BOX 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
---------- --- --- ---------
Yes 155 12,945,000 67% 1% 156 1,040,312
121 11,610,000 71% 65% 360 1969/1991 128,451 sf
181 12,250,000 66% 30% 240 1989 198,127 sf
Yes 175 11,000,000 61% 45% 300 1994 90 beds
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
---------- --- --- ---------
Yes 180 8,360,000 75% 37% 240 485
Yes 181 10,000,000 61% 42% 300 1990/1997 96 rooms
179 11,250,000 53% 37% 300 1983/1996 62,250 sf
4,600,000 73% 66% 1979 92,240 sf
3,600,000 73% 66% 1979 64,397 sf
---------- --- --- ---------
121 8,200,000 73% 66% 360 156,637
120 8,100,000 73% 61% 300 1952/1954/1996 254 units
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
---------- --- --- ---------
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
---------- --- --- ---------
179 8,400,000 67% 33% 240 193
Yes 118 7,700,000 72% 61% 300 1987 123,909 sf
Yes 120 7,500,000 72% 59% 300 1980 125,611 sf
Yes 82 7,300,000 71% 49% 180 1924/1990 217,638 sf
179 7,500,000 68% 33% 240 1991 104 rooms
175 11,000,000 45% 19% 240 1986/1993 170,886 sf
181 6,800,000 74% 51% 300 1985 55,200 sf
179 8,000,000 59% 2% 180 1961/1987 210 beds
118 7,500,000 63% 53% 300 1987 78,971 sf
176 7,700,000 59% 29% 240 1985 150 rooms
179 6,500,000 70% 2% 180 1965 198 beds
80 6,900,000 66% 59% 300 1988 55,872 sf
118 6,800,000 66% 47% 240 1875/1992 81,284 sf
82 5,300,000 78% 74% 360 1952/1978 200 pads
118 5,500,000 75% 68% 360 1984 54,759 sf
179 6,500,000 63% 31% 240 1974/1994 201 rooms
116 5,750,000 71% 60% 300 1955/1993 31,165 sf
181 8,000,000 50% 22% 240 1979/1991 135,471 sf
Yes 180 6,800,000 58% 28% 240 1989 136 rooms
118 6,000,000 66% 56% 300 1966/1996 86,038 sf
180 5,500,000 71% 51% 300 1986 80 rooms
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
---------- --- --- ---------
120 5,900,000 64% 55% 300 50,490
118 6,100,000 61% 52% 300 1900/1984/1984 102,607 sf
118 6,500,000 54% 45% 300 1972 65,553 sf
Yes 116 5,000,000 69% 59% 300 1978 56,845 sf
119 4,700,000 72% 61% 300 1990 48,275 sf
Yes 120 4,550,000 74% 62% 300 1980/1987 38,262 sf
ANNUAL STATED ANTICIPATED
DEBT MORTGAGE MATURITY REPAYMENT REMAINING
1994 REV 1995 REV 1996 REV U/W REV NET CASH FLOW DSCR SERVICE RATE DATE DATE LOCKOUT
- ----------- --------- --------- ------- ------------- ---- ------- ---- ---- ---- --------
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 174
436,689 615,424 638,217 613,990 396,719 1.32 301,371 8.970%* 01/11/2022 01/11/2007 114
481,108 589,376 632,767 575,963 405,156 1.34 302,795 9.110%* 11/11/2021 11/11/2006 112
690,573 807,211 882,112 867,226 396,672 1.34 295,457 9.050%* 02/11/2022 02/11/2007 115
603,968 754,232 824,818 828,792 420,633 1.38 305,015 9.540% 02/11/2022 02/11/2007 115
710,668 726,565 715,635 682,005 466,964 1.65 282,336 8.800%* 03/11/2022 03/11/2007 113
756,785 754,123 780,774 799,520 404,049 1.46 276,925 8.780% 11/11/2021 11/11/2011 172
605,395 619,933 581,936 573,071 359,797 1.29 279,673 8.900%* 04/11/2022 04/11/2004 81
484,177 524,606 569,148 391,758 1.49 262,414 8.670%* 02/1/2027 02/11/2007 115
2,144,298 2,175,920 2,086,611 547,004 1.69 324,569 8.714%* 02/11/2012 178
2,939,373 3,352,091 3,438,203 547,277 1.71 320,141 8.714%* 02/11/2012 178
672,035 692,518 764,325 421,763 1.68 251,759 9.000%* 01/11/2022 01/11/2007 114
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 172
475,662 465,762 526,039 507,365 329,292 1.52 216,423 8.590%* 12/11/2021 12/11/2006 113
1,800,557 1,977,944 2,054,224 410,916 1.73 237,358 8.990%* 02/11/2017 02/11/2007 115
522,394 548,312 569,572 577,440 313,138 1.45 216,687 8.730% 12/11/2021 12/11/2006 113
507,514 481,279 648,421 674,150 306,281 1.45 210,946 9.050%* 02/11/2027 02/11/2007 112
375,097 396,373 400,800 428,437 272,222 1.27 214,925 8.910%* 01/11/2007 114
145,977 874,520 856,581 393,990 1.62 243,185 10.000%* 02/11/2017 02/11/2012 175
454,793 450,395 436,584 417,516 257,128 1.26 204,336 9.410%* 01/11/2022 01/11/2007 114
341,100 635,493 706,197 718,811 247,108 1.27 193,974 8.850%* 02/11/2007 115
417,799 445,715 452,208 465,211 240,197 1.25 192,087 8.800%* 03/11/2007 113
872,194 930,287 971,757 971,757 396,622 1.82 217,742 9.660%* 02/11/2017 02/11/2012 175
399,943 406,488 419,034 414,857 222,741 1.28 174,344 8.440% 02/11/2027 02/11/2007 115
341,061 436,496 498,640 475,752 258,165 1.34 192,172 9.250%* 03/11/2022 03/11/2012 173
315,915 328,898 346,183 238,638 1.29 185,426 9.280% 10/11/2006 111
417,763 411,361 423,127 423,986 223,334 1.35 165,932 8.630% 11/11/2026 11/11/2006 112
564,103 551,838 600,713 608,284 254,801 1.60 159,122 8.190%* 12/11/2026 12/11/2006 113
497,845 501,595 512,000 481,407 221,943 1.29 172,595 9.100% 11/11/2021 11/11/2006 112
514,376 556,784 598,076 574,846 258,217 1.59 162,209 8.350%* 01/11/2022 01/11/2007 111
284,376 292,058 376,689 394,638 196,444 1.31 150,483 8.650%* 03/11/2022 03/11/2007 116
489,050 576,330 605,471 295,361 2.05 143,972 8.420%* 03/11/2007 116
315,317 351,913 391,497 399,761 225,380 1.49 151,055 9.000% 10/11/2006 111
747,029 798,496 797,718 817,068 259,458 1.82 142,764 8.320% 11/11/2006 112
742,278 964,919 1,309,936 1,235,753 270,973 1.65 164,506 9.220%* 03/11/2017 03/11/2007 113
104,906 616,509 651,354 651,354 222,358 1.39 160,290 9.530%* 03/11/2017 03/11/2012 176
277,627 279,695 282,022 181,239 1.29 140,386 9.008% 01/11/2022 01/11/2007 114
521,658 568,338 596,720 591,280 219,944 1.71 128,488 8.320% 11/11/2006 112
762,811 878,411 884,460 695,921 229,111 1.66 137,915 9.890%* 03/11/2017 03/11/2012 173
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 173
209,823 254,522 279,467 127,749 1.32 96,807 8.380%* 02/11/2022 02/11/2007 115
292,239 269,390 308,746 148,925 1.34 111,308 9.430%* 01/11/2017 01/11/2012 174
BALOON/
ANTICIPATED ANTICIPATED YEAR
REMAINING REPAYMENT BUILT UNIT OF
LOCK BOX TERM VALUE LTV DATE LTV AMORTIZATION RENOVATED UNIT MEASURE
- --------- ------------ ----- --- ----------- ------------ --------- ------ --------
178 4,725,000 63% 46% 300 1988 120 rooms
118 4,100,000 73% 62% 300 1986/1995 44,005 sf
116 4,250,000 70% 60% 300 1966/1993 34,122 sf
119 4,700,000 62% 53% 300 1976/1994 52,992 sf
119 5,500,000 53% 44% 300 1964 152,621 sf
120 5,180,000 55% 46% 300 1986 33,968 sf
176 3,750,000 74% 49% 300 1972/1986 130 units
85 3,825,000 73% 66% 300 1991 33,960 sf
119 4,400,000 64% 58% 360 1972/1984 241 pads
179 7,500,000 36% 1% 180 1974/1977 250 beds
179 4,800,000 56% 1% 180 1964/1995 99 beds
118 3,670,000 68% 58% 300 1955/1985 217 pads
179 4,300,000 53% 26% 240 1978/1993 144 rooms
117 3,600,000 62% 52% 300 1982/1991 39,412 sf
119 3,500,000 63% 46% 240 1963 72 beds
117 3,390,000 65% 53% 300 1972 130 units
Yes 119 4,100,000 53% 49% 360 1987 57,093 sf
118 3,400,000 63% 53% 300 1986/1988 45,265 sf
179 3,600,000 58% 29% 240 1995 62 rooms
118 3,300,000 59% 51% 300 1977 100,680 sf
119 2,750,000 71% 60% 300 1966/1994 133 units
120 2,600,000 75% 63% 300 1961 66 units
179 3,100,000 62% 30% 240 1986/1990 161 rooms
119 2,400,000 79% 70% 360 1981 46 units
180 2,800,000 67% 47% 300 1990 41,330 sf
115 2,800,000 64% 54% 300 1975 125 pads
Yes 116 2,250,000 79% 70% 360 1964 72 units
117 2,800,000 63% 57% 360 1972 135 units
116 2,250,000 75% 63% 300 1958 100 units
118 3,050,000 56% 46% 300 1983 38,268 sf
120 2,000,000 77% 65% 300 1915 48 units
120 3,250,000 46% 39% 300 1969/1995 216 pads
115 2,300,000 65% 54% 300 1968 60 units
116 3,000,000 50% 41% 300 1968/1973 220 units
120 3,200,000 47% 34% 240 1963/1987/1995 82 rooms
180 1,950,000 73% 36% 240 1994 52 rooms
118 1,860,000 74% 62% 300 1950 151 pads
116 2,600,000 52% 42% 300 1975 159 units
180 2,000,000 60% 30% 240 1970/1992 63 rooms
180 3,500,000 34% 16% 240 1968/1995 105 rooms
119 1,750,000 58% 48% 300 1961/1994 114 pads
178 1,700,000 59% 28% 240 1951/1996 102 pads
<PAGE>
AUDIT/AGREED ACTUAL U/W
UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY U/W_O PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD CC REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ----------- ----- ------------ ----------- ----------- ------- ------- -------------------------------------
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% -- -- -- --
100% 2/20/97 100% -- -- -- --
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>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXIRATION TOTAL
DATE SF ANCHOR2/TENANTS2 DATE 2 SF ANCHOR3/TENANTS3 DATE 3 SF
- ---------- ----- ------------------- ---------- ----- ---------------------- --------- -----
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%
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>
AUDIT/AGREED ACTUAL U/W
UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY U/W_O PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD CC REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ------------ ----- ------------ ----------- ----------- ------- ------- ------------------------
100% 12/31/96 93% 5,000 6,250 0.15 0.15 U Save Foods1998
100% 12/31/96 93% -- -- 0.15 0.15 Thrift Mart IGA
0% 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 Commercial 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 IGA1998
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
94% 11/96 91% 27,750 34,688 0.21 0.21 Sears*
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
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXIRATION 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
2000 100
1999 100
2000 100
1997 100
1997 100
2001 100
1997 100
2001 100
1997 100
2000 100
2000 100
2001 100
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
N/A JC Penney* N/A Hecht's* N/A
2007 44% Lucent Tech. 2001 10%
2005 23% Technologies 2003 21% Lifeguard 2002 19%
2000 25% Sears 2029 13% Yonkers 2000 12%
23% Roses 2003 21% Sears 2009 15%
<PAGE>
AUDIT/AGREED ACTUAL U/W
UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY U/W_O PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD CC REVIEW MAINTENANCE MAINTENANCE ITEMS ITEMS ANCHOR/TENANTS/FRANCHISE
- --------- ------------ ----- ------------ ----------- ----------- ------- ------- -------------------------
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
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>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXIRATION 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 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>
AUDIT/AGREED ACTUAL U/W
UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY U/W_O PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD CC 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
93% 12/31/96 93% 2,500 3,125 0.15 0.15 Kroger
100% 12/31/96 95% -- 0.15 0.15 Kroger
----------- -----------
2,500 3,125
92% 1/20/97 92% 87,900 109,875 248 250
100% 11/15/96 95% 11,000 13,750 0.34 0.34 Arbor Drugs
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 National Bank of California
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 Ethan Allen
94% 12/31/96 88% -- -- -- 0.15
94% 1/31/97 93% 10,135 12,669 0.24 0.24
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXIRATION TOTAL
DATE SF ANCHOR2/TENANTS2 DATE 2 SF ANCHOR3/TENANTS3 DATE 3 SF
- ---------- ----- ------------------------------ ---------- ----- ------------------ --------- -----
2000 63% First Forms Inc. 2004 20%
1999 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 48% Hollywood Video 2005 11%
2000 53%
1997 9% Farmer Jack 1999 23%
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%
2003 28% Bet Zedek 2005 19% The Price REIT Inc 2000 18%
2003 39% Tower Records 1998 13%
2003 42%
2012 22% Rite-Aid 1998 15%
2000 42% United Jersey Bank 1999 14%
1998 23%
2003 27%
<PAGE>
AUDIT/AGREED ACTUAL U/W
UPON IDENTIFIED RESERVE FOR ONGOING ONGOING
OCCUPANCY U/W_O PROCEDURE DEFERRED DEFERRED CAPITAL CAPITAL
OCCUPANCY PERIOD CC 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
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
LEASE % OF LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL EXIRATION 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>
<TABLE>
<CAPTION>
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
COMPARATIVE FINANCIAL STATUS REPORT
AS OF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
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
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
- ----- ---- ----- --------- ---- ------- -------- --------- ---- ----- --- ---- -------- --------- ---- ----- --- ----
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>
ANNEX C-1
C-1-1
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
"ACTUAL" (2)
Current Annual Operating Information YTD Financial Information Net Change
as of Normalized Month Reported Current & Base
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
LAST
PROP. FINANCIAL (1) FINANCIAL %
LOAN INSPECT. INFO AS % TOTAL $ DSCR INFO AS % TOTAL $ % % TOTAL DSCR
NUM. DATE OF DATE OCC. REV. NOI X OF DATE OCC. REV. NOI DSCR OCC. REV. X
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
List all Mortgage Loans currently in the Trust (with or without information) in descending principal
balance order.
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
TOTAL: WA $ $ WA WA $ $ WA WA $ WA
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
FINANCIAL INFORMATION:
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
- ----- -------- --------- ---- ----- --- ---- --------- ---- ----- --- ---- ---- ----- -----
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>
C-1-1
<PAGE>
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--Bankrupcy, 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>
ANNEX C-2
C-2-1
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
(F) (G)=(.92*F)-E
- ------- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
DATE
LOSS NOI
LOAN MOST APPRAISAL TRANSFER USING FILED/
NUMBER, CURRENT LTM LTM ACCURATE BPO OR DATE/ 92% FCL
CITY & INTEREST MATURITY NOI NOI, VALUATION PROPERTY INTERNAL CLOSING APPR. OR SALE
STATE RATE DATE DATE DSCR DATE VALUE VALUE** DATE BPO (F) DATE STATUS*
- ------- -------- -------- ---- ---- --------- -------- --------- -------- --------- ------ -------
<S> <C> <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>
<TABLE>
<CAPTION>
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
HISTORICAL LOAN MODIFICATION REPORT
AS OF
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
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
- ------- ----- --------- ---------- ---------- -------------- -------- --------
THIS REPORT IS HISTORICAL
- ------------------------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
TOTAL FOR ALL LOANS:
- -------------- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
TOTAL FOR LOANS IN CURRENT MONTHS:
- ------------------------------------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
# OF LOANS $ BALANCE
- ------- ----- --------- ---------- ---------- -------------- -------- --------
MODIFICATIONS:
- -------------- --------- ---------- ---------- -------------- -------- --------
MATURITY DATE EXTENSIONS:
- ------------------------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
TOTAL:
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
- ------- ----- --------- ---------- ---------- -------------- -------- --------
</TABLE>
C-3-1
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
HISTORICAL LOAN MODIFICATION REPORT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS OF
- --------------------------------------------------------------------------------------------
TOTAL (2) EST.
NUM. FUTURE
MONTHS INTEREST LOSS
FOR (1) REALIZED TO TRUST $
LOAN NEW OLD NEW CHANGE OF LOSS TO (RATE
NUMBER OLD P&I P&I MATURITY MATURITY MOD. TRUST $ REDUCTION) COMMENTS
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
THIS REPORT IS HISTORICAL
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
TOTAL FOR ALL LOANS:
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
TOTAL FOR LOANS IN CURRENT MONTHS:
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
MODIFICATIONS:
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
MATURITY DATE EXTENSIONS:
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
TOTAL:
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
- ------- ------- --- -------- -------- --------- ------------ ------------- ---------
</TABLE>
ANNEX C-3
FORM OF HISTORICAL LOAN MODIFICATION REPORT
C-3-1
<PAGE>
<TABLE>
<CAPTION>
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
HISTORICAL LOSS ESTIMATE REPORT (REO-SOLD OR DISCOUNTED PAYOFF)
AS OF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
(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
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
THIS REPORT IS HISTORICAL
- ----------------------------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
TOTAL ALL LOANS:
- -------------------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
CURRENT MONTH ONLY:
- -------------------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
- -------- ---------- ------- ---------- ------- ----- --------- ------- --------- --------
</TABLE>
C-4-1
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
HISTORICAL LOSS ESTIMATE REPORT (REO-SOLD OR DISCOUNTED PAYOFF)
AS OF
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
(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
SERVICER SERVICING PASSED PASSED ADJ. TO PASSED WITH SCHEDULED
LOAN ID FEES NET PROCEEDS THRU THRU TRUST THRU ADJUSTMENT BALANCE
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
THIS REPORT IS HISTORICAL
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
TOTAL ALL LOANS:
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
CURRENT MONTH ONLY:
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
- -------- --------- ------------ ------- ------ ------- ------ ---------- ----------
</TABLE>
ANNEX C-4
FORM OF HISTORICAL LOSS ESTIMATE REPORT
C-4-1
<PAGE>
<TABLE>
<CAPTION>
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
REO STATUS REPORT
AS OF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)=A+B+C+D
- ----- ----- ------- ---- --------- -------- -------- -------- ----------------- -------- --------
LOAN SQ. FT.
NUM./ OR TOTAL OTHER
CITY UNITS/ PAID SCHED. P&I ADVANCES TOTAL CURRENT CURRENT
& PROP. OCC %/ THRU PRINCIPAL ADVANCES (TAXES & EXPENSES TOTAL MONTHLY INTEREST MATURITY
STATE TYPE DATE DATE BALANCE TO DATE ESCROW) TO DATE EXPOSURE P&I RATE DATE
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
REAL ESTATE OWNED
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- ------------------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
(1) Using the following codes: App.--Appraisal; BPO-- Brokers Opinion; Int.--Internal Value.
- ----- ----- ------- ---- --------- -------- -------- -------- -------- ------- -------- --------
</TABLE>
C-5-1
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
REO STATUS REPORT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AS OF
- ------------------------------------------------------------------------------------------------------
(F) (G)=(.92*F)-E
- ----- ----- ------ ----- -------- ---------- ------------------------------- ------- ---------
LOAN (YTD) ($1) LOSS
NUM./ MOST MOST APPRAISAL, TRANSFER USING
CITY NOI RECENT ACCURATE BPO OR DATE/ 92% REO
& AS OF NOI/ APPR. PROPERTY INTERNAL CLOSING APPR. OR ACQUISITION PENDING
STATE DATE DSCR DATE VALUE VALUE DATE BPO (F) DATE OFFERS COMMENTS
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
(1) Using the following codes: App.--Appraisal; BPO-- Brokers Opinion; Int.--Internal Value.
- ----- ----- ------ ----- -------- ---------- -------- -------- ----------- ------- ---------
</TABLE>
ANNEX C-5
FORM OF REO STATUS REPORT
C-5-1
<PAGE>
ASSET SECURITIZATION CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-D4
WATCH LIST
AS OF
<TABLE>
<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>
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 ASSUMPTIOSN:
- -------------------------------- -------------- ------------ ------------ -------------- -------------- ----------- -----------
</TABLE>
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. ANNEX C-7
C-7-1
<PAGE>
ANNEX D
The following graphic material is included in the paper and electronic
versions of this Prospectus Supplement.
A. The inside front cover contains a map of the contiguous United
States showing the concentration of the Mortgaged Properties in the pool by
state as follows:
Number of Percentage
State Properties Value of Total
- ----- ---------- ----- --------
Arizona 4 $ 27,007,563 1.9%
Arkansas 2 $ 675,321 0.0%
California 32 $ 298,458,574 20.7%
Colorado 13 $ 67,612,111 4.7%
Connecticut 5 $ 31,494,619 2.2%
Florida 10 $ 78,512,016 5.4%
Georgia 4 $ 30,461,044 2.1%
Idaho 1 $ 11,900,000 0.8%
Illinois 1 $ 14,019,336 1.0%
Indiana 13 $ 64,956,782 4.5%
Iowa 1 $ 5,169,401 0.4%
Kansas 4 $ 1,321,212 0.1%
Louisiana 2 $ 15,698,510 1.1%
Maryland 5 $ 61,263,575 4.2%
Massachusetts 11 $ 166,791,073 11.5%
Michigan 6 $ 39,614,629 2.7%
Minnesota 1 $ 9,086,484 0.6%
Missouri 4 $ 1,954,512 0.1%
Montana 5 $ 4,705,354 0.3%
Nebraska 5 $ 22,136,616 1.5%
Nevada 1 $ 2,193,798 0.2%
New Hampshire 1 $ 9,025,000 0.6%
New Jersey 7 $ 89,023,452 6.2%
New York 11 $ 108,910,959 7.5%
North Carolina 10 $ 70,675,315 4.9%
Ohio 11 $ 22,210,684 1.5%
<PAGE>
Number of Percentage
State Properties Value of Total
- ----- ---------- ----- --------
Oklahoma 3 $ 2,211,118 0.2%
Oregon 1 $ 8,000,000 0.6%
Pennsylvania 2 $ 21,996,895 1.5%
Rhode Island 4 $ 14,639,492 1.0%
South Carolina 3 $ 7,692,931 0.6%
Tennessee 4 $ 6,388,830 0.4%
Texas 45 $ 57,043,445 3.9%
Utah 5 $ 5,351,124 0.4%
Virginia 10 $ 44,327,735 3.1%
Washington 4 $ 16,527,749 1.1%
West Virginia 1 $ 608,018 0.0%
Wisconsin 1 $ 4,144,091 0.3%
Wyoming 2 $ 516,906 0.0%
B. There are photographs of certain of the Mortgaged Properties(1)
contained on the inside front cover as follows:
International Plaza: New York, NY. The photograph shows an aerial view
of the modern high-rise glass office building located in midtown Manhattan.
Marina Harbor Apartments: Marina del Rey, CA. The photograph shows two
red brick buildings in the low-rise apartment complex, located in a landscaped
suburban setting with a stream running in front of the buildings.
One Kendall Square: Cambridge, MA. The photograph shows three
connected, modern office buildings, approximately six stories high, two of
which appear to be steel and glass and one of which is a glass tower-like
structure.
Puente Hills: City of Industry, CA. The photograph shows the portion
of a suburban low-rise outdoor retail mall and the portion of the parking lot
in front of Office Depot.
- --------
1 The photographs of the Mortgaged Properties included in this Prospectus
are not representative of all of the Mortgaged Properties included in any pool
loan or of any particular type of Mortgaged Property.
-2-
<PAGE>
Wells Research Center: Newton, MA. The photograph shows the red brick,
low-rise research facility in a landscaped office-park setting and a portion of
the parking lot.
K-Mart Distribution Center: Brighton, CO. The photograph shows the
warehouse facility with numerous K-Mart trucks parked in front.
Westin Hotel: Indianapolis, IN. The photograph shows the modern
high-rise, full-service hotel overlooking the surrounding buildings and city
streets.
Montague Park Tech Center: San Jose, CA. The photograph shows the
modern low-rise research facility in a landscaped office-park setting and a
portion of the parking lot.
There are photographs of certain of the Mortgaged Properties(2)
contained on the inside back cover as follows:
Kessler Garden Apartments. The photograph shows a portion of the red
brick, low-rise apartment complex, including the balconies located off some of
the rooms, a portion of the parking available and a large grass area in front
of the parking area.
Bend Factory Outlets. The photograph shows a portion of the newly
constructed, traditional-style factory outlet mall with the storefronts for
tenants Cape Isle Knitters and Bass Shoe Outlet, including a portion of the
parking area.
Courtney Park Apartments. The photograph shows a portion of the red
brick and gray shingle low-rise apartment complex including a small landscaped
and grass area and a portion of the parking lot.
Outlets Limited Mall. The photograph shows a portion of the outlet
mall, located in a modern, warehouse-like facility with very high ceilings,
with the storefront for tenant Accessory Corner.
Alzina Office Building. The photograph shows a portion of the glass
and white stone office building located on a city street.
- ------
2 The photographs of the Mortgaged Properties included in this
Prospectus are not representative of all of the Mortgaged Properties included
in any pool loan or of any particular type of Mortgaged Property.
-3-
<PAGE>
North Acres Mobile Home Park. The photograph shows a stationary
ranch-style mobile home surrounded by a brick and metal fence and some
landscaping in the mobile home park.
Asian Gardens Mall. The photograph shows the low-rise Asian-style
white building and green thatch-style roof and a portion of the parking lot
containing well-manicured small green trees.
Burlington Square. The photograph shows the two-story white with red
trim building of the shopping center with the storefront for tenant Staples as
well as a portion of the parking lot.
Holiday Inn Express-East Haven. The photograph shows the front of the
two-story white limited service hotel with parking in front of the rooms.
Davol Square Jewelry Building. The photograph shows the red brick
loft-style building with large windows and a red awning at a portion of the
first floor.
Heritage Bank Building. The photograph shows the entrance to the
modern white stone building with a green awning at the entrance to Weichert
Realtors.
Tuscon Place. The photograph shows a portion of the suburban low-rise
outdoor retail mall and the portion of the parking lot in front of tenants
WalMart, Payless Shoe Store and Office Max, located in a mountain area with
mountains in the background behind the mall.
View Park Convalescent Center: 3737 Don Felipe Drive. The photograph
shows a portion of the single story convalescent center, located in a suburban
setting on a tree-lined street.
Oak Creek Factory Outlets. The photograph shows a portion of the white
stone with terra cotta accents, single-story outlet center and a portion of the
parking lot, located in a mountain area with red rock formations in the
background behind the outlet center.
Michiana: 23 Medical Park Plaza. The photograph shows the entrance to
the modern, low-rise office building.
Del Mar. The photograph shows the single-story retail outdoor mall and
a portion of the parking lot.
Fairfield Inn - Richmond. This photograph shows the entrance to the
low-rise, limited service hotel.
Madison House. The photograph shows the entrance to the
traditional style building nursing home.
Greystone Apartments. The photograph shows the pool area at the
three-story, brick and shingle roof apartment complex.
-4-
<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 .............................. 19
Industry Overview.......................... 40
The Depositor.............................. 41
The Mortgage Loan Seller................... 41
The Trustee ............................... 42
The Fiscal Agent .......................... 42
The Servicer and Initial Special Servicer 42
Description of the Mortgage Pool .......... 43
Description of the Subordinated Units .... 75
Description of the Subordinated
Certificates.............................. 76
Prepayment and Yield Considerations ...... 92
The Pooling and Servicing Agreement ...... 112
ERISA Considerations ...................... 142
Certain Legal Aspects of Mortgage Loans .. 142
Certain Federal Income Tax Consequences ... 153
Legal Investment........................... 161
Use of Proceeds............................ 162
Plan of Distribution ...................... 163
Legal Matters ............................. 164
Financial Information ..................... 164
Rating .................................... 164
Available Information ..................... 164
Index of Significant Definitions .......... 166
Glossary of Key Real Estate, Mortgage and
Mortgage Loan Underwriting Terms.......... 172
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>
$137,231,536
(APPROXIMATE)
ASSET SECURITIZATION
CORPORATION,
DEPOSITOR
SUBORDINATED UNITS CONSISTING OF
$36,113,562 (APPROXIMATE) CLASS B-1,
$36,113,562 (APPROXIAMTE) CLASS B-2,
$14,445,425 (APPROXIMATE) CLASS B-3,
$21,668,137 (APPROXIMATE) CLASS B-4,
$14,445,425 (APPROXIMATE) CLASS B-5, AND
$14,445,425 (APPROXIMATE) CLASS B-6
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES,
SERIES 1997-D4
[Insert Graphic]
PROSPECTUS
BEAR, STEARNS & CO. INC.
NOMURA SECURITIES
INTERNATIONAL, INC.
[ ], 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 Underwriters are 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 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>
- ------------
* To be filed by amendment.
** 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 Pre-effective
Amendment No. 2 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 March 20, 1997.
ASSET SECURITIZATION CORPORATION
By: /s/ Ethan Penner
Name: Ethan Penner
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Pre-effective Amendment No. 2 to the Registration Statement has been signed by
the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
- ------------------------ -----------------------------------------
<S> <C>
/s/ Ethan Penner
------------------------
Ethan Penner President and Director
*
------------------------
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/ Ethan Penner
Name: Ethan Penner
------------------
Attorney-in-fact
</TABLE>
II-3
<PAGE>
EXHIBITS INDEX
<TABLE>
<CAPTION>
SEQUENTIAL PAGE
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT NUMBER
- ------------------ ----------------------------------------------------------------------------------- -------------------
<S> <C> <C>
1.1 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>
- ------------
* To be filed by amendment.
** Previously filed.
*** Previously filed in connection with Registration Statement No.
33-89494 and incorporated by reference herein.
II-4
<PAGE>
$ (APPROXIMATE)
ASSET SECURITIZATION CORPORATION
SUBORDINATED UNITS, CONSISTING OF 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
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Nomura Securities International, Inc.
Two World Financial Center -- Building B
New York, New York 10281-1198
, 1997
Dear Sirs:
1. Introduction. Asset Securitization Corporation, a Delaware corporation
(the "Company"), proposes to issue and sell $ (approximate) principal amount of
Subordinated Units (the "Units") consisting of Commercial Mortgage Pass-Through
Certificates of the classes stated above (collectively, the "Certificates") to
Bear, Stearns & Co. Inc. and Nomura Securities International, Inc. (the
"Underwriters"), acting severally and not jointly, subject to the terms and
conditions set forth herein. The Certificates are to be 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"), La Salle National
Bank, as trustee (the "Trustee"), and ABN AMRO Bank N.V., as fiscal agent (the
"Fiscal Agent"). Upon issuance, each Unit will comprise $ (approximate) Class
B-1 Certificates, $ (approximate) Class B-2 Certificates, $ (approximate) Class
B-3 Certificates, $ (approximate) Class B-4 Certificates, $ (approximate) Class
B-5 Certificates and $ (approximate) Class B-6 Certificates. The Pooling and
Servicing Agreement will provide for terms relating to the issuance of Units,
comprised of the Certificates, including whether and to what extent such
Certificates will be separately transferrable. The Certificates will evidence
beneficial ownership interests in the Trust Fund (as defined in the Pooling and
Servicing Agreement) consisting of a pool (the "Mortgage Pool") of 123 mortgage
loans (the "Mortgage Loans"), all as described in the Prospectus (as defined
below). The Mortgage Loans will be acquired by the Company from Nomura Asset
Capital Corporation (the "Mortgage Loan Seller") pursuant to a Mortgage Loan
Purchase and Sale Agreement (the "Purchase Agreement"), by and between the
Company and the Mortgage Loan Seller, in exchange for immediately available
funds. This is to confirm the arrangements with respect to the purchase of the
Units and the Certificates included therein by the Underwriters. 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.
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) for federal income
<PAGE>
tax purposes. The Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-CS1,
Class PS1, 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 will constitute "regular
interests" in the Upper-Tier REMIC. The Class R and Class LR Certificates will
constitute the sole classes of "residual interests" in the Upper-Tier REMIC and
the Lower-Tier REMIC, respectively. The Class V-1 Certificates will represent
the right to receive Default Interest and the Class V-2 Certificates will
represent the right to receive Excess Interest, which portions of the Trust
Fund will be treated as part of the 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 Units and the
Certificates, (collectively, the "Securities") under the Securities Act of
1933, as amended (the "Act"), including the related preliminary prospectus, or
prospectuses, and either (A) has prepared and proposes to file, prior to the
effective date of such registration statement, an amendment to such
registration statement, including a final prospectus or (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 execution and delivery of this
Agreement, is herein called a "preliminary prospectus". Such registration
statement, including the exhibits thereto, as amended at the time it became
effective and including, if applicable, the Rule 430A Information, is herein
called the "Registration Statement," and the prospectus included in the
Registration Statement at the time it became effective 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 Securities differs from the prospectus included in the
Registration Statement at the time it became effective (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 Underwriters as follows:
2. Representations and Warranties of the Company. The Company represents and
warrants to each 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 any Underwriter specifically for use therein.
(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
2
<PAGE>
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 Securities has been duly authorized by the Company
and, when such Securities are executed and authenticated in accordance with
the Pooling and Servicing Agreement and delivered against payment pursuant
to this Agreement, such Securities will be validly issued and outstanding;
and the Securities will be entitled to the benefits provided by the Pooling
and Servicing Agreement. The Securities are in all material respects in the
form contemplated by the Pooling and Servicing Agreement; and the Units and
Certificates will conform in all material respects to the description
thereof contained in the Prospectus.
(f) As of the Closing Date, the Units, the Certificates, the Pooling and
Servicing Agreement and the Mortgage Loan Purchase and Sale 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 by the Mortgage Loan Seller in the Purchase
Agreement and made in any Officer's Certificates of the Company or the
Mortgage Loan Seller delivered pursuant to the Pooling and Servicing
Agreement or the Purchase 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
and the Purchase Agreement as if such representations and warranties were
included in this Section 2.
(h) None of (A) the issuance and sale of the Securities (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,
3
<PAGE>
indenture, mortgage, deed of trust or other agreement or instrument to
which the Company is a party or by 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 Securities 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 has been enacted, adopted or issued by any
governmental agency or that has been proposed by any governmental body and
(C) no injunction, retraining 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 Securities 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 Securities.
(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 Securities 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.
(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 Securities 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 to each Underwriter, and
each Underwriter agrees to purchase, severally and not jointly, from the
Company, the principal amount of Units set forth opposite its name on Schedule
I hereto. The purchase price for the Units will be % of the initial principal
balance thereof as of , 1997 (the "Cut-off Date"), plus accrued interest from
the Cut-Off Date up to but not including the Closing Date, before deducting
expenses payable by the Company.
4
<PAGE>
(b) Delivery of the Units 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 , 1997 or at such other time as shall be agreed upon by the
Underwriters and the Company. The time and date of such delivery and
payment are herein called the "Closing Date."
(c) Delivery of the Units shall be made by the Company to the Underwriters
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 Underwriters. It is understood that the Underwriters
propose to offer the Securities for sale to the public as set forth in the
Prospectus.
5. Covenants of the Company. The Company covenants and agrees with the
several Underwriters 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 Securities, 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.
(b) The Company will not amend the Registration Statement or amend or
supplement the Prospectus prior to the Closing Date unless the Underwriters
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 Underwriters 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 Securities.
(c) If at any time after the date hereof when a prospectus relating to the
Securities 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 Underwriters, 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 Underwriters 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
Securities 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 11(a) of the Act
with respect to the Securities.
(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 Securities 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
5
<PAGE>
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 Underwriters for
any expenses (including reasonable fees and disbursements of counsel and
accountants) incurred by them in connection with qualification of the
Securities 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 Securities, for the
filing fee of the National Association of Securities Dealers, Inc. relating
to the Securities, if applicable, and for expenses incurred in distributing
preliminary prospectuses to the Underwriters.
(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 Securities 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 Commission pursuant to Section 13, 14 or 15(d) of
the Exchange Act.
(i) So long as the Securities 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 such statements are
furnished to the Company.
6. Conditions to the Obligations of the Underwriters. The obligations of the
Undrwriters to purchase and pay for the Securities 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.
(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 Time, (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
6
<PAGE>
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 Securities 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 Securities 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 II
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 applicable Closing Date, to the effect
set forth in Annex A hereto.
(e) You shall have received a letter from Barry M. Funt, Esq., in-house
counsel for the Company, dated the applicable Closing Date, to the effect
set forth in Annex B hereto.
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 furnished by officers of, the parties to
this Agreement, the Pooling and Servicing Agreement and the Mortgage Loan
Purchase and Sale 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. Such counsel shall also confirm that the Underwriters
may rely, on and as of the Closing Date, on any opinion or opinions of such
counsel submitted to the rating agency or agencies rating the Offered
Certificates as if addressed to the Underwriters and dated the Closing Date.
(f) You shall have received from Cadwalader, Wickersham & Taft, counsel
for the Company, a letter, dated as of the Closing Date, stating that you
may rely on the opinions delivered by such firm under the Pooling and
Servicing Agreement and the Purchase Agreement and to the rating agency or
agencies rating the Certificates and the Units as if such opinions were
addressed directly to you (copies of which opinions shall be delivered to
you).
(g) 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 Underwriters shall reasonably request, in form and
substance reasonably satisfactory to the Underwriters.
(h) 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 Underwriters shall reasonably request, in
form and substance reasonably satisfactory to the Underwriters.
(i) You shall have received from Shearman & Sterling, counsel for the
Underwriters, such opinion or opinions, dated as of the Closing Date, with
respect to the validity of the Securities, the Registration Statement, the
Prospectus and other related matters as the Underwriters may require, and
the Company shall have furnished to such counsel such documents as they may
have requested from it for the purpose of enabling them to pass upon such
matters.
(j) 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
7
<PAGE>
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 II hereto and that such
ratings have not been lowered since the date of such letter.
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 Underwriters, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the Closing
Date by the Underwriters. Notice of such cancellation shall be given to the
Company in writing, or by telephone or telegraph confirmed in writing.
7. Indemnification. (a) The Company agrees to indemnify and hold harmless
each Underwriter, each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and the
respective officers, directors, partners, employees, representatives and agents
of the Underwriters or any controlling person, to the fullest extent lawful,
from and against any and all losses, claims, damages, liabilities and expenses
whatsoever (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending against
any litigation), commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation, joint or several, to
which they or any of them may become subject under the Act, the Exchange Act,
or otherwise, insofar as such losses, claims, damages, liabilities or expenses
(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 at the time it became effective or in any amendment
thereof, or in the Prospectus, or in any amendment thereof 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; provided, however, that the Company
will not be liable in any such case to the extent, but only to the extent, that
any such loss, claim, damage, liability or expense 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 or on behalf of the
Underwriters specifically for use in connection with the preparation thereof.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have.
(b) The Underwriters severally, and not jointly, agree to indemnify and
hold harmless the Company, each of the directors of the Company, each of
the officers of the Company who shall have signed the Registration
Statement, and each other person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any losses, claims, damages, liabilities and expenses whatsoever
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims,
damages or expenses (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, at the time it became
effective, or any amendment thereof, or any preliminary prospectus or the
Prospectus, or in any amendment thereof 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, in each case to the extent, but only to
the extent, that any such loss, claim, damage,
8
<PAGE>
liability or expense 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, by or on behalf of such Underwriter expressly for
use therein; provided, however, that in no case shall the Underwriters be
liable or responsible for any amount in excess of the discounts and
commissions received by the Underwriters, as set forth on the cover page of
the Prospectus. This indemnity will be in addition to any liability which
the Underwriters may otherwise have. The Company acknowledges that (i) the
statements set forth in the first sentence of the last paragraph of the
cover page, (ii) the names of the Underwriters appearing on the cover page,
(iii) the list under the caption "Plan of Distribution" setting forth the
names of the Underwriters and the principal amount of units agreed to be
purchased by such Underwriters and (iv) the information set forth in the
second paragraph under the caption "Plan of Distribution" included in the
Prospectus constitute the only information furnished in writing by or on
behalf of any Underwriter expressly for use in the Registration Statement
or the Prospectus or in any amendment thereof or supplement thereto, as the
case may be, and each Underwriter confirms, on its behalf, that such
statements are correct.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above 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 such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from
any liability which it may have under this Section 7 except to the extent
that it has been prejudiced in any material respect by such failure or from
any liability which it may have otherwise). In case any such action is
brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein, and 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.
Notwithstanding the foregoing, the indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified
party or parties unless (i) the employment of such counsel shall have been
authorized in writing by one of the indemnifying parties in connection with
the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such act, or within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional
to those available to one or all of the indemnifying parties (in which case
the indemnifying parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses shall be borne by the indemnifying parties;
provided, however, that the indemnifying party under subsection (a) or (b)
above shall only be liable for the legal expenses of one counsel (in
addition to any local counsel) for all indemnified parties in each
jurisdiction in which any claim or action is brought. Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall not
be liable for any settlement of any claim or action effected without its
written consent; provided, however, that such consent was not unreasonably
withheld.
(d) In order to provide for contribution in circumstances in which the
indemnification provided for in Section 7 hereof is for any reason held to
be unavailable, on grounds of public policy or otherwise, from the Company
or the Underwriters or is insufficient to hold harmless a party indemnified
thereunder, the Company and the Underwriters shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and
any amount paid in settlement of, any action, suit or proceeding or any
claims asserted, but after deducting in the case of losses, claims,
damages, liabilities and expenses suffered by the Company any contribution
received by the Company from persons, other than the Underwriters, who may
also be liable for contribution, including persons who control the Company
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, officers of the Company who signed the Registration
9
<PAGE>
Statement and directors of the Company) to which the Company and the
Underwriters may be subject in such proportions as is appropriate to
reflect the relative benefits received by the Company on one hand and the
Underwriters on the other from the offering of the Securities or, if such
allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice
as provided in Section 7(c) hereof, in such proportion as is appropriate to
reflect not only the relative benefits referred to above but also the
relative fault of the Company on one hand and the Underwriters on the other
in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Company on one hand and the
Underwriters on the other shall be deemed to be in the same proportion as (x)
the total proceeds from the offering of the Securities (net of underwriting
discounts and commissions but before deducting expenses) received by the
Company and (y) the underwriting discounts and commissions received by the
Underwriters, respectively, applicable to the securities purchased by each such
Underwriter. The relative fault of the Company on one hand and the Underwriters
on the other 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 on one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section
7(d) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this Section 7(d), (x) in no case
shall the Underwriters be liable or responsible for any amount in excess of the
underwriting discount with respect to the Securities purchased by such
Underwriter and (y) no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 7(d), each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, and the respective officers, directors, partners, employees,
representatives and agents of the Underwriters or any controlling person shall
have the same rights to contribution as such Underwriter, and each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, 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, subject in each case to clauses
(x) and (y) of this Section 7(d). 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 Section 7(d), notify such
party or parties from whom contribution may he 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 obligation it or they may have under this
Section 7(d) or otherwise. No party shall be liable for contribution with
respect to any action or claim settled without its consent; provided, however,
that such consent was not unreasonably withheld.
8. Obligations of the Mortgage Loan Seller. The Mortgage Loan Seller agrees
with each Underwriter, for the sole and exclusive benefit of such Underwriter
and each person who controls such Underwriter within the meaning of either the
Act or the Exchange Act and not for the benefit of any assignee thereof or any
other person or persons dealing with such Underwriter, in consideration of and
as an inducement to its agreement to purchase the Units from the Company, to
indemnify and hold harmless each Underwriter against any failure by the Company
to perform its obligations to such Underwriter (including its contribution
obligation) pursuant to Section 7 hereof; provided, however, that the aggregate
liability of the Mortgage Loan Seller for the foregoing indemnity shall not
exceed an amount equal to the aggregate principal amount of the Securities.
9. Default of Underwriters. If any Underwriter or Underwriters
participating in an offering of Units default in their obligations to
purchase Units hereunder and the aggregate purchase price of Units which such
defaulting Underwriter or Underwriters agreed but failed to purchase does not
exceed 10%
10
<PAGE>
of the aggregate purchase price of the Units then being purchased, the
Underwriters may make arrangements satisfactory to the Company for the purchase
of such Units by other persons, including any of the Underwriters, but if no
such arrangements are made by the Closing Date the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective total
commitments as set forth in Schedule I hereto, to purchase the Units which such
defaulting Underwriter or Underwriters agreed but failed to purchase. If any
Underwriter or Underwriters so default and the aggregate purchase price of
Units with respect to which such default or defaults occur is more than 10% of
the aggregate purchase price of Units then being purchased, and arrangements
satisfactory to the Underwriters and the Company for the purchase of such Units
by other persons are not made within 36 hours after such default, this
Agreement will terminate without liability on the part of any non-defaulting
Underwriter or the Company, except as provided in Section 10. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
10. Survival of Certain Representations and Obligations. All representations
and warranties, covenants and agreements of the Underwriters and the Company
contained in this Agreement, including the agreements contained in Sections
5(g) and 11(d) and the indemnity and contribution agreements contained in
Sections 7 and 8 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of the Underwriters or any
controlling person thereof or by or on behalf of the Company or any controlling
person thereof, and shall survive delivery of and payment for the Units to and
by the Underwriters. The representations contained in Section 2 and the
agreements contained in Sections 5(g), 7, 8 and 11(d) shall survive the
termination of this Agreement, including any termination pursuant to Section
11.
11. Effective Date of Agreement and Termination. (a) This Agreement shall
become effective upon execution and delivery of a counterpart hereof by each
of the parties hereto.
(b) The Underwriters shall have the right to terminate this Agreement at
any time prior to the Closing Date by notice to the Company from the
Underwriters, without liability (other than with respect to Section 10) on
the Underwriters' part to the Company, if, on or prior to such date, (i)
the Company shall have failed, refused or been unable to perform in any
material respect any agreement on their part to be performed hereunder,
(ii) any other condition to the obligations of the Underwriters hereunder
as provided in Section 6 is not fulfilled when and as required in any
material respect, (iii) in the reasonable judgment of the Underwriters, any
material adverse change shall have occurred since the respective dates as
of which information is given in the Prospectus in the business,
operations, condition (financial or otherwise), affairs, assets, regulatory
situation or business prospects of the Mortgage Pool, in the aggregate, or
the Company, whether or not arising in the ordinary course of business or
(iv) (A) any domestic or international event or act or occurrence has
materially disrupted, or in the opinion of the Underwriters will in the
immediate future materially disrupt, securities markets; or if trading on
the New York or American Stock Exchanges shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum
ranges for prices for securities shall have been required on the New York
or American Stock Exchanges by the New York or American Stock Exchanges or
by order of the Commission or any other governmental authority having
jurisdiction; or (B) if the United States shall have become involved in a
war or major hostilities; or (C) if a banking moratorium has been declared
by a state or Federal authority, or if a banking moratorium in foreign
exchange trading by major international banks or persons has been declared;
or (D) if there shall have been such change in the market for securities in
general or in political, financial or economic conditions as in your
judgment would be so materially adverse as to make it inadvisable to
proceed with the offering, sale and delivery of the Securities on the terms
contemplated herein.
(c) Any notice of termination pursuant to this Section 11 shall be by
telephone, telex, telephonic facsimile, or telegraph, confirmed in writing
by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to clause (iv) of Section 11(b),
in which case each party will be responsible for its own
11
<PAGE>
expenses), or if the sale of the Units provided for herein is not
consummated because any condition to the obligations of the Underwriters
set forth herein is not satisfied or because of any refusal, inability or
failure on the party of the Company to perform any agreement herein or
comply with any provision hereof, the Company will reimburse the
Underwriters for all out-of-pocket expenses (including the reasonable fees
and expenses of Underwriters' counsel), incurred by the Underwriters in
connection herewith.
12. Notices. All communications hereunder will be in writing, and, if sent
to the Underwriters, will be mailed, delivered or telegraphed and confirmed to
you at 245 Park Avenue, New York, New York 10167, Attention: General Counsel or
if sent to either the Company or the Mortgage Loan Seller, will be mailed,
delivered or telegraphed and confirmed to it at Two World Financial Center --
Building B, 21st Floor, New York, New York 10281-1198, Attention:
; provided, however, that any notice to an Underwriter pursuant
to Section 7 will be mailed, delivered or telegraphed to such Underwriter at
the address furnished by it.
12. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and thereto, and their respective successors and the
officers and directors and controlling persons referred to in Section 7, and no
other person will have any right or obligation hereunder or thereunder.
13. Representation of Underwriters. You will act for the several
Underwriters in connection with the offering of Securities governed by this
Agreement, and any action under this Agreement taken by you will be binding
upon all the Underwriters identified herein.
14. Construction. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
12
<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, the Mortgage Loan Seller and the
several Underwriters in accordance with its terms.
Very truly yours,
ASSET SECURITIZATION CORPORATION
By: Name:
-----------------------
-----------------------
Title:
NOMURA ASSET CAPITAL CORPORATION
By: Name:
-----------------------
-----------------------
Title:
The foregoing Underwriting Agreement
hereby is confirmed and accepted
as of the date first above written.
BEAR, STEARNS & CO. INC.
NOMURA SECURITIES INTERNATIONAL, INC.
By: Bear, Stearns & Co. Inc.
By:
-------------------------------
Title:
13
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF UNITS
- ------------------------------------------ --------------------
<S> <C>
Bear, Stearns & Co. Inc. .................. $
Nomura Securities International, Inc. ....
--------------------
$
====================
</TABLE>
S-1
<PAGE>
SCHEDULE II
Initial aggregate Certificate Balance of the Units: $
(approximate).
<TABLE>
<CAPTION>
INITIAL CERTIFICATE PASS-THROUGH
CERTIFICATES BALANCE RATE S& RATING FITCH RATING
- ----------------------- ------------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Class B-1 Certificates $36,113,562 BB+ BB+
Class B-2 Certificates 36,113,562 BB BB
Class B-3 Certificates 14,445,425 BB- BB-
Class B-4 Certificates 21,668,137 B+
Class B-5 Certificates 14,445,425 B
Class B-6 Certificates 14,445,425 B-
</TABLE>
S-2
<PAGE>
ANNEX A
FORM OF OPINION TO BE DELIVERED BY CADWALADER, WICKERSHAM & TAFT
1. The Registration Statement is effective under the Act, and, to the best
of our knowledge, no stop order with respect thereto has been issued by the
Commission and no proceedings for that purpose have been instituted or are
pending or contemplated under the Act.
2. The Registration Statement, as of its effective date, and the Prospectus,
as of its issue date and the date hereof (in each case, with the exception of
any numerical, financial, statistical and quantitative data included therein,
as to which we express no view), appeared on their respective faces to be
appropriately responsive in all material respects to the requirements of the
Act and the rules and regulations thereunder applicable to such documents as of
the relevant date.
3. The statements in the Prospectus under the headings "Legal Investment,"
"Certain Federal Income Tax Consequences" and "ERISA Considerations," insofar
as such statements purport to summarize matters of federal law or legal
conclusions with respect thereto, have been reviewed by us and are correct in
all material respects. The statements made under the captions "Summary of
Prospectus," "The Pooling and Servicing Agreement," "Description of the
Subordinated Units" and "Description of the Subordinated Certificates" in the
Prospectus, insofar as such statements purport to summarize certain provisions
of the Securities and the Pooling and Servicing Agreement and the transactions
contemplated therein, are correct in all material respects.
4. The Pooling and Servicing Agreement is not required to be qualified under
the Trust Indenture Act of 1939, as amended, and neither the Company nor the
Trust Fund created by the Pooling and Servicing Agreement is, or as a result of
the offer and sale of the Securities as contemplated in the Prospectus and in
this Agreement will become, an "investment company" as defined in the
Investment Company Act, or an "affiliated person" of any such "investment
company" that is required to be registered under the Investment Company Act of
1940, as amended.
5. Assuming that the elections required by Section 860D(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), are properly made, and assuming
that the Trust Fund is administered in compliance with the Pooling and
Servicing Agreement as in effect on the Closing Date, and with any subsequent
changes in the law, including any amendments to the Code or applicable Treasury
regulations thereunder, (a) the Upper-Tier REMIC and Lower-Tier REMIC will each
qualify for treatment for federal income tax purposes as a real estate mortgage
investment conduit, as defined in Section 860D of the Code; (b) the Class A-1A,
Class A-1B, Class A-1C, Class A-1D, Class A-CS1, Class PS1, 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 will constitute "regular interests" in the Upper-Tier REMIC
and the Class R Certificates will constitute the sole class of "residual
interests" in the Upper-Tier REMIC within the meaning of the Code; and (c) the
Class A-1A-L, Class A-1B-L, Class A-1C-L, Class A-1D-L, Class A-2-L, Class
A-3-L, Class A-4-L, Class A-5-L, Class B-1-L, Class B-2-L, Class B-3-L, Class
B-4-L, Class B-5-L, Class B-6-L, Class B-7-L and Class B-7H-L Interests will
constitute "regular interests" in the Lower-Tier REMIC and the Class LR
Certificates will constitute the sole class of "residual interests" in the
Lower-Tier REMIC within the meaning of the Code. Furthermore, (x) those
portions of the Trust Fund exclusive of the Upper-Tier REMIC and the Lower-Tier
REMIC will be characterized for federal income tax purposes as a grantor trust
under Subpart E, Part 1 of Subchapter J of the Code; (y) the Class V-1
Certificates will represent the sole class of pro rata undivided beneficial
interests in that portion of the Trust Fund consisting of the Default Interest
and funds in the Default Interest Distribution Account; and (z) the Class V-2
Certificates will represent pro rata undivided beneficial interests in that
portion of the Trust Fund consisting of the Excess Interest and funds in the
Excess Interest Distribution Account.
6. Each of this Agreement, the Pooling and Servicing Agreement and the
Purchase Agreement (collectively, the "Agreements") has been duly executed and
delivered by the Company and constitutes the legal, valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization,
A-1
<PAGE>
moratorium, receivership or other laws relating to creditors' rights
generally, and to general principles of equity including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except that the
enforcement of rights with respect to indemnification and contribution
obligations may be limited by applicable law.
7. The Securities are in a form authorized by the Pooling and Servicing
Agreement and, when the Securities have been duly authenticated and delivered
by the Trustee in the manner contemplated in the Pooling and Servicing
Agreement and paid for by the Underwriters pursuant to the Underwriting
Agreement, the Securities will be validly issued and outstanding and will be
entitled to the benefits provided by the Pooling and Servicing Agreement.
8. Assuming compliance with applicable state securities and Blue Sky laws,
as to which such counsel need express no opinion, and except for the filing of
a registration statement under the Act, no consent, approval, authorization or
order of, or filing, registration, qualification, license or permit of or with,
(i) any court or governmental agency, body or administrative agency or (ii) any
other person is required for (a) the execution, delivery and performance by the
Company of the Agreements, (b) the transactions contemplated herein or therein
or (c) the issuance and sale of the Securities and the transactions
contemplated hereby and thereby, except such as have been obtained and made or
have been disclosed in the Prospectus, and except where the failure to obtain
such consents or waivers would not, singly or in the aggregate, result in a
material adverse change in the business, operations, condition (financial or
otherwise), affairs, assets, regulatory situation or business prospects of the
Company, whether or not arising in the ordinary course of business.
9. Such counsel has no reason to believe that, as of the effective date of
the Registration Statement, the Registration Statement contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that as of its date or as of the date hereof, the Prospectus contained or
contains any untrue statement of a material fact or omitted or omits to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; it being
understood that such counsel need express no view as to the adequacy or
accuracy of (i) the financial, numerical, statistical or quantitative
information included in the Registration Statement or the Prospectus or (ii)
any information contained in any computer disk, CD-ROM or other electronic
media accompanying the Prospectus.
A-2
<PAGE>
ANNEX B
FORM OF OPINION TO BE DELIVERED BY BARRY M. FUNT, ESQ.
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, is duly qualified to do
business in the State of New York as a foreign corporation and the State of New
York is the only state in which it is required to be so qualified. The Company
has no subsidiaries.
2. The Company has all requisite corporate power and authority to own its
assets and conduct its business, as described in the Prospectus, and to
execute, deliver and perform its obligations under the Agreements.
3. 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 Mortgage Loan Pool or the business,
operations, financial condition, assets or income of the Company.
4. The execution, delivery and performance of the Agreements by the Company
have been duly authorized by all necessary corporate action of the Company.
5. The Securities have been duly and validly authorized by all necessary
corporate action of the Company.
6. None of (i) the issuance or sale of the Securities, (ii) the execution,
delivery or performance of the terms of the Agreements, (iii) the consummation
of the transactions contemplated herein or therein, or (iv) compliance by the
Company with the terms or provisions hereof or thereof, will result in the
breach of any term or provision of the certificate of incorporation or by-laws
of the Company or conflict with, result in a breach or violation of or the
acceleration of indebtedness under or constitute a default under (or an event
that with notice or the lapse of time, or both, would constitute a default), or
requires consent under, or results in the imposition of a lien or encumbrance
on any assets of the Company pursuant to (a) the terms of any indenture,
agreement or instrument to which the Company is a party or by which it or its
asset is or may be bound, (b) any statute, rule or regulation applicable to the
Company or any of its assets, or (c) to the best of such counsel's knowledge,
any order or decree of any applicable court, regulatory body, administrative
agency or governmental body having jurisdiction over the Company or any of its
assets.
7. To the best of such counsel's knowledge, there is no action, suit,
proceeding or investigation, whether pending, threatened or contemplated, to
which the Company is or may be subject or to which the business or assets of
the Company are or may be subject, before any court, arbitrator or governmental
agency, administrative agency or other tribunal which, either individually or
in the aggregate, (a) asserts the invalidity of the Agreements or the
Securities or (b) seeks to prevent the issuance of the Securities or the
consummation of any of the transactions contemplated by the Agreements, (c) is
required to be disclosed in the Prospectus and is not so disclosed or (d) would
materially and adversely affect (i) the performance by the Company of its
obligations under, or the validity or enforceability of, any of the Agreements
or the Securities, or (ii) any rights with regard to the Mortgaged Properties.
8. There is (a) no statute, rule, regulation or order that has been enacted,
adopted or issued by any governmental agency or that has been proposed by any
governmental body and (b) 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) and (b)
above, is required to be disclosed in the Prospectus and that is not so
disclosed.
B-1
[Letterhead of Cadwalader Wickersham & Taft]
March 20, 1997
Asset Securitization Corporation
Two World Financial Center
Building B, 21st Floor
New York, New York 10281
Re: Subordinate Commercial Mortgage Pass-Through Certificates,
Series 1997-D4
Ladies and Gentlemen:
We have acted as your counsel in connection with the Registration
Statement on Form S-11 (File No. 333-21315) (the "Registration Statement")
filed with the Securities and Exchange Commission (the "Commission") pursuant
to the Securities Act of 1933, as amended (the "Act"). The Registration
Statement covers Subordinated Commercial Mortgage Pass-Through Certificates,
Series 1997-D4 (the "Certificates") to be sold by Asset Securitization
Corporation ("ASC"). The Certificates will be issued under a pooling and
servicing agreement (the "Pooling and Servicing Agreement") among ASC, AMRESCO
Management, Inc., in its capacity as servicer and as special servicer (the
"Servicer"), LaSalle National Bank, as trustee (the "Trustee"), and ABN AMRO
Bank N.V., as fiscal agent (the "Fiscal Agent"). A form of the Pooling and
Servicing Agreement is included as an Exhibit to the Registration Statement.
Capitalized terms used and not otherwise defined herein have the respective
meanings ascribed to such terms in the Registration Statement.
In rendering the opinion set forth below, we have examined and relied
upon the following: (1) the Registration Statement and the Prospectus
constituting a part thereof, each substantially in the form being filed with
the Commission as of the date hereof; (2) the form of the Pooling and Servicing
Agreement being filed as an exhibit to the Registration Statement; and (3) such
other documents, materials, and authorities as we have deemed necessary in
order
<PAGE>
Asset Securitization Corporation -2- March 20, 1997
to enable us to render our opinion set forth below. The opinion set forth below
assumes that the foregoing documents and materials are not changed materially
prior to execution and that the Pooling and Servicing Agreement is performed in
accordance with its terms.
Based on the foregoing, we are of the opinion that:
1. When the Pooling and Servicing Agreement for the Certificates has
been duly and validly authorized, executed and delivered by ASC,
the Servicer, Trustee and Fiscal Agent, the Pooling and Servicing
Agreement will constitute a valid and legally binding agreement
of ASC, enforceable against ASC in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting the enforcement of rights of
creditors generally and to general principles of equity and the
discretion of the court (regardless of whether enforceability is
considered in a proceeding in equity or at law); and
2. When the Pooling and Servicing Agreement for the Certificates has
been duly and validly authorized, executed and delivered by ASC,
the Servicer, Trustee and Fiscal Agent, and the Certificates have
been duly executed, authenticated, delivered and sold as
contemplated in the Prospectus, the Certificates will be legally
and validly issued, fully paid and nonassessable, and the holders
of the Certificates will be entitled to the benefits of the
Pooling and Servicing Agreement.
Furthermore, we have advised ASC with respect to certain federal
income tax aspects of the proposed issuance of the Certificates. Such advice
has formed the basis for the description of material federal income tax
consequences for holders of the Certificates that appears under the heading
"Certain Federal Income Tax Consequences" in the Prospectus. Such descriptions
do not purport to discuss all possible federal income tax ramifications of the
proposed issuance of the Certificates, but, with respect to those federal
income tax consequences that are discussed, in our opinion, the description is
accurate in all material respects.
<PAGE>
Asset Securitization Corporation -3- March 20, 1997
We hereby consent to the filing of this letter as an Exhibit to the
Registration Statement and to the reference to this firm under the headings
"Legal Matters" and "Certain Federal Income Tax Consequences" in the Prospectus
forming a part of the Registration Statement. This consent is not to be
construed as an admission that we are a person whose consent is required to be
filed with the Registration Statement under the provisions of the Act.
Very truly yours,
/s/ Cadwalader, Wickersham & Taft
---------------------------------
Cadwalader, Wickersham & Taft
