<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 33-99774-02
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 9, 1997
[GRANDE LOAN GOLDMAN SACHS LOGO]
$942,890,000 (APPROXIMATE)
GS MORTGAGE SECURITIES CORPORATION II
AS SELLER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-GL I
-----------------
The Commercial Mortgage Pass-Through Certificates, Series 1997-GL I (the
"Certificates") will represent beneficial ownership interests in a trust fund
(the "Trust Fund") to be created by GS Mortgage Securities Corporation II
(the "Seller"). The Trust Fund will consist primarily of a pool (the
"Mortgage Pool") of 8 mortgage loans, with original terms to maturity of not
more than 30 years (the "Mortgage Loans"), secured by first liens on 96
commercial properties (the "Mortgaged Properties"). The Mortgaged Properties
include office buildings, retail properties, industrial properties and one
multifamily property. The Mortgage Loans were originated by Goldman Sachs
Mortgage Company ("GSMC") and GMAC Commercial Mortgage Corporation ("GMACCM")
on behalf of GSMC. See "Mortgage Pool Characteristics--General".
(cover page continued on page S-3)
<TABLE>
<CAPTION>
INITIAL CERTIFICATE INITIAL RATED FINAL
PRINCIPAL OR NOTIONAL PASS-THROUGH EXPECTED RATINGS DISTRIBUTION
CLASS AMOUNT (1) RATE (2) DESCRIPTION (4) DCR/MOODY'S/FITCH DATE
- -------------- --------------------- -------------- ---------------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Class A-1 ..... $ 50,000,000 (3) LIBOR plus 0.23%(5) AAA/Aaa/AAA July 13, 2030
Class A-2A .... $131,100,000 6.940000% Fixed AAA/Aaa/AAA July 13, 2030
Class A-2B .... $240,900,000 6.860000% Fixed AAA/Aaa/AAA July 13, 2030
Class A-2C .... $ 30,000,000 6.930000% Fixed AAA/Aaa/AAA July 13, 2030
Class A-2D..... $222,190,000 6.940000% Fixed AAA/Aaa/AAA July 13, 2030
Class X-1A(6) . $ 50,000,000 0.630850% WAC/IO AAA/Aaa/AAA July 13, 2030
Class X-2(6) .. $892,890,000 1.069550% WAC/IO AAA/Aaa/AAA July 13, 2030
Class B ....... $ 78,160,000 7.153088% Adjusted WAC less 0.96% AA/Aa2/AA July 13, 2030
Class C ....... $ 14,660,000 7.193088% Adjusted WAC less 0.92% AA-/Aa3/AA- July 13, 2030
Class D ....... $ 53,750,000 7.213088% Adjusted WAC less 0.90% A/A2/A- July 13, 2030
Class E ....... $ 14,650,000 7.283088% Adjusted WAC less 0.83% A-/A3/A- July 13, 2030
Class F ....... $ 48,860,000 7.353088% Adjusted WAC less 0.76% BBB/Baa2/BBB July 13, 2030
Class G ....... $ 58,620,000 7.823088% Adjusted WAC less 0.29% NR/NR/BBB- July 13, 2030
</TABLE>
------------
(1) Approximate, subject to adjustment as described herein.
(2) The Class A-1, Class X-1A, Class X-2, Class B, Class C, Class D, Class
E, Class F and Class G Certificates bear interest at variable rates.
The Pass-Through Rates shown in the table above for such Certificates
are the rates for the Distribution Date occurring in September 1997.
The Pass-Through Rates for such Certificates for each subsequent
Distribution Date will be calculated as provided herein. See
"Description of the Offered Certificates--Distributions--Payment
Priorities" herein.
(3) The Class A-1 Pass-Through Rate for the initial Distribution Date will
be based on LIBOR as determined on August 12, 1997.
(4) "WAC" means weighted average coupon, "Adjusted WAC" means weighted
average coupon adjusted as described herein, "Fixed" means fixed rate
coupon, "LIBOR" means the Pass-Through Rate is based upon the London
interbank offered rate for one month U.S. dollar deposits as further
described herein under "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Mortgage Loans--The
AAPT Pool Loan--Payment Terms", and IO means interest only. "WAC",
"Adjusted WAC", "Fixed" and "LIBOR" are descriptions of the type of
Pass-Through Rates borne by the related Classes and "IO" designates
that the related Class is entitled only to distributions of interest.
(5) After the Distribution Date in July 2004, the Pass-Through Rate on the
Class A-1 Certificates will be a per annum rate equal to LIBOR plus
.70%, subject to a maximum per annum rate as described under
"Description of the Offered Certificates--Distribution" herein.
(6) The Class X-1A and Class X-2 Certificates will not have Certificate
Principal Amounts and will not be entitled to receive distributions of
principal. Interest will accrue on such Classes of Certificates at the
Pass-Through Rates thereof on the Notional Amounts thereof. The
Notional Amount of the Class X-1A Certificates is initially
$50,000,000, which is equal to the aggregate principal balance of the
AAPT LIBOR Components as of the Cut-Off Date. The Notional Amount of
the Class X-2 Certificates is initially $892,890,000, which is equal to
the aggregate initial Certificate Principal Amount of the Class A-2A,
Class A-2B, Class A-2C, Class A-2D, Class B, Class C, Class D, Class E,
Class F and Class G Certificates. See "Description of the Offered
Certificates--General" herein.
-----------------
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" HEREIN COMMENCING ON PAGE S-45 AND "RISK FACTORS" IN
THE PROSPECTUS COMMENCING ON PAGE 4.
-----------------
The Offered Certificates will be purchased by Goldman, Sachs & Co. (the
"Underwriter") from the Seller and will be offered by the Underwriter from
time to time to the public in negotiated transactions or otherwise at varying
prices to be determined at the time of sale. Proceeds to the Seller from the
sale of the Offered Certificates will be $1,005,685,202 plus accrued
interest, if any, from August 1, 1997 (or August 14, 1997, in the case of the
Class A-1 Certificates) before deducting expenses payable by the Seller.
-----------------
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE SELLER,
THE ORIGINATORS, THE MASTER SERVICER, THE SPECIAL SERVICERS, THE TRUSTEE, THE
UNDERWRITER, 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 SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
The Offered Certificates are offered by the Underwriter subject to prior
sale, when, as and if issued, delivered to and accepted by the Underwriter.
It is expected that delivery of the Offered Certificates will be made through
the facilities of The Depository Trust Company ("DTC") in the United States
and Cedel Bank, S.A. ("CEDEL") and The Euroclear System ("Euroclear") in
Europe, on or about August 14, 1997 against payment therefor in immediately
available funds.
GOLDMAN, SACHS & CO.
-----------------
The date of this Prospectus Supplement is August 7, 1997.
<PAGE>
(continuation of cover page)
The Certificates will consist of twenty classes (each a "Class"),
designated as the Class A-1 Certificates, Class A-2A Certificates, Class A-2B
Certificates, Class A-2C Certificates, Class A-2D Certificates, Class X-1A
Certificates, Class X-1B Certificates, Class X-2 Certificates, Class B
Certificates, Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates, Class H
Certificates, Class M Certificates, Class Q Certificates, Class R
Certificates, Class MR Certificates and Class LR Certificates. Only the Class
A-1, Class A-2A, Class A-2B, Class A-2C, Class A-2D, Class X-1A, Class X-2,
Class B, Class C, Class D, Class E, Class F and Class G Certificates
(collectively, the "Offered Certificates") are offered hereby; the Class
X-1B, Class H, Class M, Class Q, Class R, Class MR and Class LR Certificates
(collectively, the "Private Certificates") are not offered hereby.
The Mortgage Pool consists of two groups: "Loan Group 1" which generally
consists of the floating rate components of the AAPT Pool Loan, and "Loan
Group 2", which consists of the fixed rate component of the AAPT Pool Loan
and the other Mortgage Loans. The characteristics of the Mortgage Loans and
the Mortgaged Properties are more fully described herein under "Mortgage Pool
Characteristics" and "Description of the Mortgage Pool and the Underlying
Mortgaged Properties".
Distributions on the Offered Certificates will be made, to the extent of
Available Funds (as defined herein), on the second Business Day immediately
following the 11th day of the month, beginning on September 15, 1997 (each, a
"Distribution Date"). As more fully described herein, distributions allocable
to interest on the Certificates on each Distribution Date will be based on
the pass-through rate for the respective Class (the "Pass-Through Rate") and
the aggregate principal balance (the "Certificate Principal Amount") or
notional balance (the "Notional Amount"), as applicable, of such Class
outstanding immediately prior to such Distribution Date. Distributions in
respect of principal of the Offered Certificates will be made as described
herein under "Description of the Offered Certificates--Distributions--Payment
Priorities."
THE YIELD TO MATURITY ON EACH CLASS OF THE OFFERED CERTIFICATES WILL BE
SENSITIVE TO, AND THE YIELD TO MATURITY ON THE CLASS X-1A AND THE CLASS X-2
CERTIFICATES WILL BE EXTREMELY SENSITIVE TO, THE RATE AND TIMING OF PRINCIPAL
PAYMENTS (INCLUDING BOTH VOLUNTARY AND INVOLUNTARY PREPAYMENTS,
DELINQUENCIES, DEFAULTS AND LIQUIDATIONS) ON THE MORTGAGE LOANS AND PAYMENTS
WITH RESPECT TO REPURCHASES THEREOF THAT HAVE THE EFFECT OF REDUCING THE
CERTIFICATE PRINCIPAL AMOUNT OR THE NOTIONAL AMOUNT, AS THE CASE MAY BE, OF
SUCH CLASS. THE YIELD TO INVESTORS, IN PARTICULAR THE INVESTORS IN
SUBORDINATE CLASSES, WILL BE SENSITIVE TO THE TIMING AND MAGNITUDE OF
DELINQUENCIES AND LOSSES ON THE MORTGAGE LOANS. THE RIGHTS OF THE HOLDERS OF
THE CLASS B, CLASS C, CLASS D, CLASS E, CLASS F, AND CLASS G CERTIFICATES TO
RECEIVE DISTRIBUTIONS OF PRINCIPAL AND INTEREST WILL BE SUBORDINATED TO SUCH
RIGHTS OF THE HOLDERS OF CERTIFICATES WITH AN EARLIER SEQUENTIAL DESIGNATION
(AND THE CLASS X-1A, CLASS X-1B, AND CLASS X-2 CERTIFICATES WITH RESPECT TO
PAYMENTS OF INTEREST). IN ADDITION, WITH RESPECT TO ANY CLASS OF CERTIFICATES
ENTITLED TO PRINCIPAL DISTRIBUTIONS, TO THE EXTENT LOSSES ON THE MORTGAGE
LOANS EXCEED THE PRINCIPAL AMOUNT OF ALL CLASSES OF CERTIFICATES SUBORDINATE
TO SUCH CLASS, SUCH CLASS WILL BEAR A LOSS EQUAL TO THE AMOUNT OF SUCH EXCESS
UP TO AN AMOUNT EQUAL TO THE REMAINING PRINCIPAL AMOUNT THEREOF. HOLDERS OF
THE CLASS A-1 CERTIFICATES WILL GENERALLY BE ENTITLED TO RECEIVE
DISTRIBUTIONS OF PRINCIPAL FROM PRINCIPAL PAYMENTS ON THE FLOATING RATE
COMPONENTS OF THE AAPT POOL LOAN. SEE "DESCRIPTION OF THE OFFERED
CERTIFICATES--DISTRIBUTIONS" AND "DESCRIPTION OF THE MORTGAGE POOL AND THE
UNDERLYING MORTGAGED PROPERTIES--DESCRIPTION OF THE MORTGAGE LOANS--THE AAPT
POOL LOAN" HEREIN. THEREFORE THE CLASS A-1 CERTIFICATES WILL BE EXTREMELY
SENSITIVE TO THE RATE AND TIMING OF PRINCIPAL PAYMENTS ON THE AAPT POOL LOAN
(INCLUDING THOSE RESULTING FROM VOLUNTARY AND INVOLUNTARY PREPAYMENTS,
DELINQUENCIES, DEFAULTS, LIQUIDATIONS AND/OR ANY REPURCHASE OF THE AAPT POOL
LOAN). NO REPRESENTATION IS MADE AS TO THE RATE, TIMING OR MAGNITUDE OF ANY
SUCH EVENT WITH RESPECT TO ANY OF THE MORTGAGE LOANS OR AS TO THE ANTICIPATED
YIELD TO MATURITY OF ANY OFFERED CERTIFICATE. IN ADDITION, ALTHOUGH THE
PASS-THROUGH RATE ON THE CLASS A-1 CERTIFICATES IS BASED ON LIBOR, AS
DESCRIBED UNDER "DESCRIPTION OF THE OFFERED
CERTIFICATES--DISTRIBUTIONS--PAYMENT PRIORITIES" HEREIN, AFTER THE
DISTRIBUTION DATE IN JULY 2004, THE CLASS A-1 CERTIFICATES WILL BE SUBJECT TO
A CAP ON THE CLASS A-1 PASS-THROUGH RATE. SEE "YIELD, PREPAYMENT AND MATURITY
CONSIDERATIONS" HEREIN.
GMACCM will act as master servicer of the Mortgage Loans (in such
capacity, the "Master Servicer"). The obligations of the Master Servicer with
respect to the Certificates will be limited to its contractual servicing
obligations and the obligation under certain circumstances to make Advances
(as defined herein) in respect of the Mortgage Loans. See "The Pooling
Agreement--Advances" herein. The Master Servicer will not act as an insurer
or credit enhancer of the Mortgage Pool. If the Master Servicer fails to make
a required Advance, LaSalle National Bank (the "Trustee"), as acting or
successor Master Servicer, acting in accordance with the servicing standard
set forth in the Pooling Agreement, will be required to make such Advance. If
the Trustee fails to make a required Advance, ABN AMRO Bank N.V., as the
fiscal agent of the Trustee (the "Fiscal Agent"), acting in accordance with
the servicing standard set forth in the Pooling Agreement, will be required
to make such Advance.
Elections will be made to treat designated portions of the Trust Fund
(such portions of the Trust Fund, the "Trust REMICs"), exclusive of the
Reserve Accounts, Lock Box Accounts, the Excess Interest, the Default
Interest, the Excess Interest Distribution Account, the Class Q Distribution
Account, the Montehiedra Partner Loans and the Class M Distribution Account
(each as defined herein), and the Trust REMICs, in the opinion of counsel,
will qualify, as three separate "real estate mortgage investment conduits"
(each, a "REMIC" or, alternatively, the "Upper-Tier REMIC", the "Middle-Tier
REMIC" and the "Lower-Tier REMIC", respectively) for federal income tax
purposes. The Class A-1, Class A-2A, Class A-2B, Class A-2C, Class A-2D,
Class X-1A, Class X-1B, Class X-2, Class B, Class C, Class D, Class E, Class
F, Class G and Class H Certificates will represent "regular interests" in the
Upper-Tier REMIC. The Class R, Class MR and Class LR Certificates will
constitute the sole Classes of "residual interests" in the Upper-Tier REMIC,
the Middle-Tier REMIC and the Lower-Tier REMIC, respectively. In addition,
the Class A-1, Class A-2B, Class A-2C, Class A-2D, Class B, Class C, Class D,
Class E and Class F Certificates will also represent undivided beneficial
interests in designated portions of the Excess Interest, which portion of the
Trust Fund will be treated as part of a grantor trust for federal income tax
purposes. The Offered Certificates, together with the Class X-1A, Class X-1B,
Class X-2 and Class H Certificates, are sometimes collectively referred to
herein as the "Regular Certificates". See "Federal Income Tax Consequences"
herein and "Federal Income Tax Consequences" in the Prospectus.
If and to the extent required by applicable law, this Prospectus
Supplement and the accompanying Prospectus may be used by Goldman, Sachs &
Co. in connection with offers and sales of the Offered Certificates related
to certain market-making transactions, at prices related to prevailing market
prices at the time of sale. The Seller will not receive any proceeds from
such transactions. Goldman, Sachs & Co. may act as principal or as agent in
such transactions. See "Underwriting" herein and "Plan of Distribution" in
the Prospectus.
THE OFFERED CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE
PART OF A SEPARATE SERIES OF THE SELLER'S CERTIFICATES AND ARE BEING OFFERED
PURSUANT TO ITS PROSPECTUS DATED JUNE 9, 1997, OF WHICH THIS PROSPECTUS
SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE
PROSPECTUS CONTAINS IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS
NOT CONTAINED HEREIN, AND PROSPECTIVE INVESTORS ARE URGED TO READ THE
PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE OFFERED
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
UNTIL NOVEMBER 6, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT
RELATES. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES, INCLUDING
SHORT-COVERING TRANSACTIONS IN SUCH CERTIFICATES, AND THE IMPOSITION OF A
PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING" HEREIN AND "PLAN OF DISTRIBUTION" IN THE
PROSPECTUS.
There is currently no secondary market for the Offered Certificates. The
Underwriter currently expects to make a secondary market in the Offered
Certificates, but has no obligation to do so. There can be no assurance that
such a market will develop or, if it does develop, that it will continue. See
"Underwriting" herein.
The distribution of this Prospectus Supplement dated August 7, 1997 and
the Prospectus dated June 9, 1997, and the offer or sale of Certificates may
be restricted by law in certain jurisdictions. Persons into whose possession
this Prospectus Supplement and the Prospectus or any Certificates come must
inform themselves about, and observe, any such restrictions. In particular,
there are restrictions on the distribution of this Prospectus Supplement and
the Prospectus and the offer or sale of Certificates in the United Kingdom
(see "Underwriting" herein).
S-3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
S-4
<PAGE>
EXECUTIVE SUMMARY
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and the Prospectus relating to the Offered Certificates in making
their investment decision. The following Executive Summary does not include
all relevant information relating to the 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 Supplement and the Prospectus. Prior to making any investment
decision, a prospective investor should carefully review this Prospectus
Supplement and the Prospectus. Capitalized terms used and not otherwise
defined herein have the respective meanings assigned to them in this
Prospectus Supplement and the Prospectus.
CERTIFICATE SUMMARY
<TABLE>
<CAPTION>
APPROXIMATE
PERCENT OF
APPROXIMATE TOTAL
CREDIT SUPPORT CERTIFICATES
-------------------------------------------------
INITIAL
CERTIFICATE
PRINCIPAL RATINGS
CLASS AMOUNT (DCR/MOODY'S/FITCH)
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS X-1A AND Class A-1 $ 50,000,000 (AAA/Aaa/AAA)
CLASS X-1B**
$50,000,000
(Notional Amount)
(AAA/Aaa/AAA) 5.1%
--------------------------------------------------------------------
CLASS X-2 Class A-2A $ 131,100,000 (AAA/Aaa/AAA) 13.4%
$892,890,000 -------------------------------------------------
(Notional Amount) Class A-2B $ 240,900,000 (AAA/Aaa/AAA) 24.7%
(AAA/Aaa/AAA) -------------------------------------------------
Class A-2C $ 30,000,000 (AAA/Aaa/AAA) 3.1%
-------------------------------------------------
31.0%* Class A-2D $ 222,190,000 (AAA/Aaa/AAA) 22.7%
-------------------------------------------------
23.0% Class B $ 78,160,000 (AA/Aa2/AA) 8.0%
-------------------------------------------------
21.5% Class C $ 14,660,000 (AA-/Aa3/AA-) 1.5%
-------------------------------------------------
16.0% Class D $ 53,750,000 (A/A2/A-) 5.5%
-------------------------------------------------
14.5% Class E $ 14,650,000 (A-/A3/A-) 1.5%
-------------------------------------------------
9.5% Class F $ 48,860,000 (BBB/Baa2/BBB) 5.0%
-------------------------------------------------
3.5% Class G $ 58,620,000 (NR/NR/BBB-) 6.0%
-------------------------------------------------
n/a Class H** $ 34,208,999 (NR/NR/BB) 3.5%
-------------------------------------------------
</TABLE>
* Represents the approximate credit support for the Class A-1,
Class A-2A, Class A-2B, Class A-2C and
Class A-2D Certificates in the aggregate.
** Not offered hereby.
*** The Class M, Class Q, Class R, Class MR and Class LR
Certificates are not offered hereby or represented in this
table.
S-5
<PAGE>
CERTIFICATE SUMMARY
<TABLE>
<CAPTION>
INITIAL
CERTIFICATE WTD.
RATINGS PRINCIPAL OR INITIAL AVG.
(DCR/MOODY'S/ NOTIONAL % OF PASS-THROUGH LIFE PRINCIPAL
CLASS FITCH) AMOUNT TOTAL DESCRIPTION RATE (YRS.)*** WINDOW***
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Grade
Certificates
- ------------------------- -------------- ------- ---------------- -------------- --------- -------------
A-1 AAA/Aaa/AAA $ 50,000,000 5.1% LIBOR plus 0.23%* ** 6.9 07/04
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
A-2A AAA/Aaa/AAA $131,100,000 13.4% Fixed Rate 6.940000% 3.2 09/97-12/03
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
A-2B AAA/Aaa/AAA $240,900,000 24.7% Fixed Rate 6.860000% 6.3 12/03
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
A-2C AAA/Aaa/AAA $ 30,000,000 3.1% Fixed Rate 6.930000% 8.1 12/03-04/07
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
A-2D AAA/Aaa/AAA $222,190,000 22.7% Fixed Rate 6.940000% 9.7 04/07
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
Interest Only:
Weighted Average
X-1A AAA/Aaa/AAA $50,000,000 n/a Coupon 0.630850% n/a n/a
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
Interest Only:
Weighted Average
X-2 AAA/Aaa/AAA $892,890,000 n/a Coupon 1.069550% n/a n/a
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
Adjusted WAC
B AA/Aa2/AA $ 78,160,000 8.0% less 0.96% 7.153088% 9.7 04/07-05/07
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
Adjusted WAC
C AA-/Aa3/AA- $ 14,660,000 1.5% less 0.92% 7.193088% 9.9 05/07-07/07
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
Adjusted WAC
D A/A2/A- $ 53,750,000 5.5% less 0.90% 7.213088% 9.9 07/07
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
Adjusted WAC
E A-/A3/A- $ 14,650,000 1.5% less 0.83% 7.283088% 9.9 07/07
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
Adjusted WAC
F BBB/Baa2/BBB $ 48,860,000 5.0% less 0.76% 7.353088% 9.9 07/07
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
Adjusted WAC
G NR/NR/BBB- $ 58,620,000 6.0% less 0.29% 7.823088% 15.4 07/07-07/14
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
Non-Offered Rated Certificates***
- ---------------------------------------- ------- ---------------- -------------- --------- -------------
H**** NR/NR/BB $34,208,999 3.5% Adjusted WAC 8.113088% 16.9 07/14
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
Interest Only:
Weighted Average
X-1B**** AAA/Aaa/AAA $ 50,000,000 n/a Coupon 0% n/a n/a
- ---------- -------------- -------------- ------- ---------------- -------------- --------- -------------
</TABLE>
The Class M, Class Q, Class R, Class MR and Class LR Certificates are not
represented in this table.
* After the Distribution Date in July 2004, the Pass-Through Rate on the
Class A-1 Certificates will be a per annum rate equal to LIBOR plus
.70%, subject to a maximum per annum rate as described under
"Description of the Offered Certificates--Distributions" herein.
** The Class A-1 Pass-Through Rate for the initial Distribution Date will
be based on LIBOR as determined on August 12, 1997.
*** The weighted average life ("Weighted Average Life") and period during
which distributions of principal would be received (the "Principal
Window") set forth in the foregoing table with respect to each Class of
Certificates are based on the assumptions that there are no losses on
the Mortgage Loans, no extensions of maturity dates of Mortgage Loans
that do not have Anticipated Repayment Dates, prepayment in full of
Mortgage Loans having Anticipated Repayment Dates on such dates, and
otherwise on the basis of the assumptions for Scenario 1 set forth
under "Yield, Prepayment and Maturity Considerations--Weighted Average
Life of Offered Certificates".
**** Not offered hereby.
MORTGAGE LOAN SUMMARY
<TABLE>
<CAPTION>
ANTICIPATED ORIGINAL
CUT-OFF DATE REPAYMENT FINAL AMORTIZATION CUT-OFF
MORTGAGE NO. PRINCIPAL DATE MATURITY TERM MORTGAGE DATE ARD
LOAN PROPERTIES BALANCE ("ARD") DATE (MONTHS) RATE DSCR* LTV LTV**
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CADILLAC FAIRVIEW POOL LOAN 8 $258,460,281 12/11/03 11/26/26 360 7.935% 1.56X 62.4% 58.1%
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
CENTURY PLAZA TOWERS LOAN 1 $229,369,475 4/9/07 3/9/27 360 8.039125% 1.76X 49.9% 43.9%
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
AAPT POOL LOAN 48 N/A N/A 7/11/27 N/A N/A 1.72X 52.4% N/A
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
AAPT FIXED COMPONENT N/A $ 75,149,361 7/11/07 N/A *** 7.480% N/A N/A 37.1%
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
LIBOR
AAPT LIBOR A COMPONENT N/A $ 30,000,000 7/11/04 N/A IO + 0.93% N/A N/A 47.1%
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
LIBOR
AAPT LIBOR B COMPONENT N/A $ 20,000,000 7/11/04 N/A IO + 0.76% N/A N/A 47.1%
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
N/A
380 MADISON LOAN 1 $ 89,000,000 7/11/14 420**** 7.848% 2.26X 45.2% 37.9%
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
CAP POOL LOAN 25 $ 87,946,446 7/11/07 7/11/27 360 7.480% 1.60X 60.8% 52.9%
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
WHITEHALL POOL LOAN 11 $ 72,228,349 N/A 9/10/00 300 8.680% 1.74X 43.7% 41.9%
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
RITZ PLAZA LOAN 1 $ 62,365,309 4/11/07 4/24/27 360 8.135% 1.34X 67.4% 59.7%
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
MONTEHIEDRA LOAN 1 $ 52,579,779 5/11/07 5/11/27 360 8.230% 1.69X 57.2% 50.6%
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
TOTAL/WEIGHTED AVERAGE***** 96 $977,099,000 N/A N/A N/A N/A 1.70X 55.1% 48.8%
- --------------------------- ---------- -------------- ------------ ---------- -------------- ------------ ------- --------- -------
</TABLE>
The terms "Anticipated Repayment Date", "DSCR", "ARD LTV" and "Cut-Off Date
LTV" are defined in this Prospectus Supplement in the explanatory notes set
forth prior to the tables under "Mortgage Pool Characteristics". The
Montehiedra Partner Loans are not represented in this table.
* Based on Underwritten Net Cash Flow. The DSCR for the AAPT Pool Loan
assumes LIBOR of 5.6875%. The DSCR for the 380 Madison Loan only
reflects the initial interest-only period.
** The 380 Madison Loan and the Whitehall Pool Loan do not have an
Anticipated Repayment Date. The date used to calculate the ARD LTV for
such Mortgage Loans is their stated maturity date. The ARD LTV with
respect to the AAPT Components is based on the aggregate unpaid
principal balance of the AAPT Pool Loan at the applicable ARD for the
applicable Component, assuming in the case of the ARD LTV for the AAPT
Fixed Component that the AAPT LIBOR A Component and AAPT LIBOR B
Component are paid in full on their ARD and collateral relative to the
Cut-Off Date LTV has been released pursuant to a 1.20x release price.
*** The Fixed Component of the AAPT Pool Loan amortizes on the following
schedule: 1) $4,184,000 fully amortizes in 53 months; and 2)
$71,100,000 amortizes on a 305 month schedule for the first 84 months
and then amortizes on a 276 month schedule thereafter.
**** The 380 Madison Loan has a 60-month interest only period and then
amortizes on a 360-month schedule.
S-6
<PAGE>
PROSPECTUS SUPPLEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
EXECUTIVE SUMMARY..................................................................... S-5
SUMMARY OF PROSPECTUS SUPPLEMENT...................................................... S-9
RISK FACTORS.......................................................................... S-45
The Mortgage Loans................................................................... S-45
The Offered Certificates............................................................. S-66
MORTGAGE POOL CHARACTERISTICS......................................................... S-72
General.............................................................................. S-72
Security for the Mortgage Loans...................................................... S-73
Certain Characteristics of the Mortgage Loans........................................ S-73
Underwriting Standards............................................................... S-84
Additional Information............................................................... S-85
DESCRIPTION OF THE MORTGAGE POOL AND THE UNDERLYING MORTGAGED PROPERTIES ............. S-86
Description of the Borrowers and the Properties...................................... S-86
The Cadillac Fairview Borrowers and Properties...................................... S-86
The Century Towers Borrower and Property............................................ S-96
The AAPT Borrowers and Properties................................................... S-101
The 380 Madison Borrower and Property............................................... S-105
The CAP Borrower and Properties..................................................... S-107
The Whitehall Borrower and Properties............................................... S-111
The Ritz Plaza Borrower and Property................................................ S-116
The Montehiedra Borrower and Property............................................... S-119
Description of the Mortgage Loans.................................................... S-122
The Cadillac Fairview Pool Loan..................................................... S-122
The Century Plaza Towers Loan....................................................... S-132
The AAPT Pool Loan.................................................................. S-139
The 380 Madison Loan................................................................ S-154
The CAP Pool Loan................................................................... S-161
The Whitehall Pool Loan............................................................. S-173
The Ritz Plaza Loan................................................................. S-180
The Montehiedra Loan................................................................ S-187
DESCRIPTION OF THE OFFERED CERTIFICATES............................................... S-196
General.............................................................................. S-196
Distributions........................................................................ S-197
Subordination........................................................................ S-209
Appraisal Reductions................................................................. S-210
Delivery, Form and Denomination...................................................... S-210
Book-Entry Registration.............................................................. S-211
Definitive Certificates.............................................................. S-213
Transfer Restrictions................................................................ S-214
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS......................................... S-215
Yield................................................................................ S-215
Yield on the Offered Certificates.................................................... S-217
Rated Final Distribution Date........................................................ S-225
Weighted Average Life of Offered Certificates........................................ S-226
THE POOLING AGREEMENT................................................................. S-238
General.............................................................................. S-238
S-7
<PAGE>
PAGE
---------
Assignment of the Mortgage Loans..................................................... S-238
Representations and Warranties; Repurchase........................................... S-238
Servicing of the Mortgage Loans; Collection of Payments.............................. S-239
Advances............................................................................. S-241
Accounts............................................................................. S-243
Withdrawals From the Collection Account.............................................. S-245
Successor Manager.................................................................... S-245
Enforcement of "Due-on-Sale" and "Due-on-Encumbrance" Clauses........................ S-246
Inspections.......................................................................... S-247
Evidence as to Compliance............................................................ S-247
Certain Matters Regarding the Seller, the Master Servicer and the Special Servicer .. S-247
Events of Default.................................................................... S-249
Rights Upon Event of Default......................................................... S-249
Amendment............................................................................ S-250
Realization Upon Mortgage Loans; Modifications....................................... S-251
Optional Termination; Optional Mortgage Loan Purchase................................ S-256
The Trustee.......................................................................... S-256
Duties of the Trustee................................................................ S-257
The Fiscal Agent..................................................................... S-258
Duties of the Fiscal Agent........................................................... S-258
The Master Servicer.................................................................. S-259
Servicing Compensation and Payment of Expenses....................................... S-259
Special Servicers.................................................................... S-260
Master Servicer and Special Servicer Permitted to Buy Certificates................... S-261
Reports to Certificateholders........................................................ S-262
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS........................................... S-263
USE OF PROCEEDS....................................................................... S-265
FEDERAL INCOME TAX CONSEQUENCES....................................................... S-265
ERISA CONSIDERATIONS.................................................................. S-267
LEGAL INVESTMENT...................................................................... S-270
UNDERWRITING.......................................................................... S-270
EXPERTS............................................................................... S-271
VALIDITY OF OFFERED CERTIFICATES ..................................................... S-272
RATINGS .............................................................................. S-272
INDEX OF SIGNIFICANT DEFINITIONS...................................................... S-274
Financial Information
Cadillac Fairview Properties ....................................................... Exhibit A-1
Century Plaza Towers ............................................................... Exhibit A-2
AAPT Properties .................................................................... Exhibit A-3
Representations and Warranties ....................................................... Exhibit B
Adjusted WAC Rates ................................................................... Exhibit C
Form of Reports to Certificateholders ............................................... Exhibit D
Mortgaged Properties Characteristics ................................................ Annex A
</TABLE>
S-8
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary
are defined elsewhere in this Prospectus Supplement or in the Prospectus. An
Index of Significant Definitions included at the end of this Prospectus
Supplement sets forth the pages on which the definitions of certain principal
terms appear.
Title of Certificates ......... GS Mortgage Securities Corporation II,
Commercial Mortgage Pass-Through
Certificates, Series 1997-GL I (the
"Certificates").
Certificate Principal Amount
and Notional Amount .......... Each Class of Offered Certificates has the
approximate aggregate initial Certificate
Principal Amount or Notional Amount set
forth on the cover page of this Prospectus
Supplement, subject to a variance of plus
or minus 5%. The Offered Certificates,
together with the Private Certificates,
will be issued pursuant to a Pooling and
Servicing Agreement to be dated as of the
Cut-Off Date (the "Pooling Agreement")
among the Seller, the Master Servicer,
each Special Servicer, the Trustee and the
Fiscal Agent.
Seller ........................ GS Mortgage Securities Corporation II, a
Delaware corporation (the "Seller"), an
affiliate of Goldman Sachs Mortgage
Company, a New York limited partnership
("GSMC"), and Goldman, Sachs & Co. (the
"Underwriter"). See "The Seller" in the
Prospectus.
Master Servicer ............... GMAC Commercial Mortgage Corporation, a
California corporation ("GMACCM" and, in
its capacity as master servicer, the
"Master Servicer"), will serve as the
master servicer of the Mortgage Loans.
GMACCM will appoint AMRESCO Services,
L.P., a Delaware limited partnership
("AMRESCO Services"), as subservicer with
respect to the Century Plaza Towers Loan,
and an affiliate of Banco Popular de
Puerto Rico, as subservicer with respect
to the Montehiedra Loan. Notwithstanding
the existence of any subservicing
agreement, the Master Servicer shall
remain primarily liable for the servicing
of the Mortgage Loans. See "The Pooling
Agreement--The Master Servicer" herein and
"Servicing of the Mortgage Loans" in the
Prospectus.
Special Servicers ............. The initial special servicers (in such
capacities, the "Special Servicers") will
be (i) GMACCM with respect to the Mortgage
Loans other than the Century Plaza Towers
Loan and the Whitehall Pool Loan, and (ii)
AMRESCO Management Inc., a Texas
corporation ("AMRESCO Management"), with
respect to the Century Plaza Towers Loan
and the Whitehall Pool Loan. See "The
Pooling Agreement -- Special Servicers"
herein.
Trustee ....................... LaSalle National Bank, a national banking
association (the "Trustee"). See "The
Pooling Agreement--The Trustee" herein.
S-9
<PAGE>
Fiscal Agent ................. ABN AMRO Bank N.V., a Netherlands banking
corporation (the "Fiscal Agent"), and the
indirect corporate parent of the Trustee.
Cut-Off Date .................. August 11, 1997.
Closing Date .................. On or about August 14, 1997.
Distribution Date ............. The second Business Day immediately
following the 11th day of each month,
commencing on September 15, 1997.
"Business Day" means any day other than a
Saturday, a Sunday or any day on which
banking institutions in the City of New
York, New York, the cities in which the
principal servicing offices of the Master
Servicer or the Special Servicer are
located, or the city in which the
corporate trust office of the Trustee is
located, are authorized or obligated by
law, executive order or governmental
decree to be closed.
Record Date ................... With respect to each Distribution Date and
each Class of Offered Certificates, other
than the Class A-1 Certificates, the close
of business on the last day of the month
immediately preceding the month in which
such Distribution Date occurs, or if such
day is not a Business Day, the immediately
preceding Business Day; with respect to
each Distribution Date and the Class A-1
Certificates, 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 immediately
preceding Business Day.
Interest Accrual Period ....... With respect to any Distribution Date and
with respect to each Class of
Certificates, other than the Class A-1
Certificates, the calendar month preceding
the month in which such Distribution Date
occurs.
With respect to the Class A-1 Certificates,
the Interest Accrual Period with respect
to any Distribution Date is the period
commencing on and including the
Distribution Date in the month preceding
the month in which such Distribution Date
occurs (or August 14, 1997 with respect to
the initial Interest Accrual Period) and
ending on and including the day
immediately preceding such Distribution
Date.
Rated Final Distribution Date . As to each Class of Offered Certificates,
the Distribution Date in July 2030, which
is the Distribution Date occurring three
years after the latest maturity date of
any Mortgage Loan.
Due Date ...................... With respect to any Mortgage Loan, the day
each month set forth in the related Note
on which the Monthly Payment is due and
payable, and with respect to any
Distribution Date, the Due Date occurring
in the month in which such Distribution
Date occurs. All of the Mortgage Loans
have Due Dates
S-10
<PAGE>
that occur on the 9th through the 11th day
of each month, or, if such day is not a
business day, either the immediately
preceding or succeeding business day.
Collection Period ............. With respect to a Distribution Date and each
Mortgage Loan, the period beginning on the
day after the Due Date in the month
preceding the month in which such
Distribution Date occurs (or, with respect
to the first Distribution Date, the day
after the Cut-Off Date) and ending at the
close of business on the Due Date in the
month in which such Distribution Date
occurs.
Denominations ................. The Offered Certificates (other than the
Class X-1A and Class X-2 Certificates)
will be issuable in registered form, in
minimum denominations of $10,000 initial
Certificate Principal Amount and multiples
of $1 in excess thereof and the Class X-1A
and Class X-2 Certificates will be
issuable in registered form, in minimum
denominations of $1,000,000 initial
Notional Amount and multiples of $1 in
excess thereof.
Clearance and Settlement ...... Holders of Offered Certificates may hold
their Certificates through any of The
Depository Trust Company ("DTC") (in the
United States) and Cedel Bank, S.A.
("CEDEL") and The Euroclear System
("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. Transfers between
persons holding directly or indirectly
through DTC, CEDEL or Euroclear will be
effected in DTC through the relevant
Depositories of CEDEL or Euroclear. The
Seller may elect to terminate the
book-entry system through DTC with respect
to all or any portion of any Class of the
Offered Certificates. See "Description of
the Offered Certificates--Delivery, Form
and Denomination", "--Book-Entry
Registration" and "--Definitive
Certificates" herein and "Description of
the Certificates--General" in the
Prospectus.
The Mortgage Pool ............. The "Mortgage Pool" will consist of 8
Mortgage Loans, each evidenced by one or
more promissory notes (each, a "Note")
secured by first mortgages, deeds of trust
or similar security instruments
("Mortgages") on commercial properties
(the "Mortgaged Properties"). See
"Description of the Mortgage Pool and the
Underlying Mortgaged Properties" herein.
The Mortgage Loans will be acquired by the
Seller on or before the Closing Date. In
connection with its acquisition of the
Mortgage Loans, the Seller will be the
beneficiary of or will be assigned (and
will in turn assign to the Trustee for the
benefit of the holders of the
Certificates) certain rights in respect of
certain representations and warranties
described herein. See "Description of the
Mortgage Pool Characteristics--General"
and "The Pooling
Agreement--Representations and Warranties;
Repurchase".
S-11
<PAGE>
As of the Cut-Off Date, the Mortgage Loans
will have the following approximate
characteristics:
<TABLE>
<CAPTION>
<S> <C>
Aggregate Principal Balance ........... $977,099,000
Lowest Mortgage Loan Principal Balance $ 52,579,779
Highest Mortgage Loan Principal
Balance .............................. $258,460,281
Average Mortgage Loan Principal
Balance .............................. $122,137,375
Range of Remaining Terms to
Anticipated Repayment Date* .......... 37 to 203 months
Weighted Average Remaining Term to
Anticipated Repayment Date* .......... 106 months
Range of Mortgage Rates** ............. 7.48% to 8.68%
Weighted Average Mortgage Rate** ..... 7.89%
Range of Cut-Off Date LTV Ratios ..... 43.7% to 67.4%
Weighted Average Cut-Off Date LTV
Ratio ................................ 55.1%
Range of Debt Service Coverage
Ratios*** ............................ 1.34x to 2.26x
Weighted Average Debt Service Coverage
Ratio*** ............................. 1.70x
</TABLE>
---------
* In the case of the 380 Madison Loan and
the Whitehall Pool Loan, their
respective maturity dates.
** Excludes the AAPT LIBOR Components.
*** The DSCR for the AAPT Pool Loan assumes
LIBOR of 5.6875%.
Description of the Mortgage Loans
and Properties
A. The Cadillac Fairview Pool
Loan and Mortgaged Properties . The "Cadillac Fairview Pool Loan" had a
principal balance as of the Cut-Off Date
of approximately $258,460,281 and is
evidenced by 8 notes issued by 7 special
purpose Delaware limited partnerships
(collectively, the "Cadillac Fairview
Borrowers"). The Cadillac Fairview Pool
Loan is secured by first priority mortgage
liens encumbering 8 properties located in
Delaware, Louisiana, New York, North
Carolina, Georgia and Mississippi
(collectively, the "Cadillac Fairview
Properties"). The Cadillac Fairview
Borrowers are majority-owned and
controlled by affiliates of the Cadillac
Fairview Corporation Limited, a
corporation amalgamated under the laws of
the Province of Ontario, Canada ("CFCL").
CFCL owns interests in and operates 88
retail and office properties in Canada and
the U.S. The Cadillac Fairview Borrowers
own fee title to 7 of the 8 Cadillac
Fairview Properties and the remaining
Cadillac Fairview Property is owned by the
related Cadillac Fairview Borrower
partially in fee and partially as a
leasehold interest. The 8 notes evidencing
the Cadillac Fairview Pool Loan are
cross-defaulted and cross-collateralized.
S-12
<PAGE>
The Cadillac Fairview Pool Loan bears
interest at a fixed rate per annum equal
to 7.935% (the "Cadillac Fairview Initial
Interest Rate") through and including
December 10, 2003. The Cadillac Fairview
Pool Loan requires monthly payments of
principal and interest of $1,915,988 each
(based on a 30-year amortization schedule
and the Cadillac Fairview Initial Interest
Rate). From and after December 11, 2003
(the "Cadillac Fairview Anticipated
Repayment Date"), the Cadillac Fairview
Pool Loan will bear interest at a fixed
rate per annum equal to the greater of (i)
9.935% and (ii) the yield as of the
Cadillac Fairview Anticipated Repayment
Date, calculated by linear interpolation
of the yields of U.S. Treasury Constant
Maturities, with maturity dates of seven
years plus 2% (the "Cadillac Fairview
Revised Interest Rate"). All interest
accrued at the excess of the Cadillac
Fairview Revised Interest Rate over the
Cadillac Fairview Initial Interest Rate
(the "Cadillac Fairview Excess Interest")
will be deferred and will not be paid
until after the principal balance of the
Cadillac Fairview Pool Loan has been
reduced to zero. Amounts so deferred will,
to the extent permitted by applicable law,
accrue interest at the Cadillac Fairview
Revised Interest Rate. Interest on the
Cadillac Fairview Pool Loan is calculated
based on the actual number of days elapsed
and a 360-day year. The Cadillac Fairview
Pool Loan is scheduled to mature on
November 26, 2026 (the "Cadillac Fairview
Maturity Date"), but may be prepaid
without payment of a yield maintenance
charge or prepayment premium on any Due
Date from and after the Due Date
immediately preceding the Cadillac
Fairview Anticipated Repayment Date.
Additionally, commencing on the Cadillac
Fairview Anticipated Repayment Date, the
Cadillac Fairview Pool Loan requires that
all Cadillac Fairview Excess Cash Flow (as
defined herein under "Description of the
Mortgage Pool and the Underlying Mortgaged
Properties--Description of the Mortgage
Loans--The Cadillac Fairview Pool
Loan--Payment Terms") be applied towards
the reduction of the principal balance of
the Cadillac Fairview Pool Loan. The
scheduled principal balance of the
Cadillac Fairview Pool Loan on the
Cadillac Fairview Anticipated Repayment
Date will be approximately $240,479,577.
The 8 Cadillac Fairview Properties consist
of 7 regional shopping centers and 1
community retail center located in
Delaware, Louisiana, New York, North
Carolina, Georgia and Mississippi. The
Cadillac Fairview Properties contain a
total of approximately 5,451,999 square
feet of GLA (including owned and non-owned
anchor stores) and approximately 2,046,531
square feet of mall store GLA. As of May
23, 1997, approximately 86.0% of the mall
store space was leased (including
approximately 6.1% of mall store space
leased to temporary tenants). Anchor
stores at the Cadillac Fairview Properties
include Macy's, Sears, Dillard's and JC
S-13
<PAGE>
Penney and significant mall store tenants
include The Limited, Foot Locker and The
Gap. Appraisals dated November 20, 1996
determined an aggregate value for the
Cadillac Fairview Properties of
approximately $413,900,000, resulting in a
Cut-Off Date LTV of approximately 62.4%.
The DSCR for the Cadillac Fairview
Properties is approximately 1.56x.
B. The Century Plaza Towers
Loan and Mortgaged Property ... The "Century Plaza Towers Loan" had a
principal balance as of the Cut-Off Date
of approximately $229,369,475 and is
evidenced by a single note issued by One
Hundred Towers L.L.C., a Delaware limited
liability company (the "Century Towers
Borrower") formed for the purpose of
acquiring, owning, operating and
mortgaging the Century Towers Property and
related activities. The Century Plaza
Towers Loan is secured by a first priority
deed of trust lien encumbering 2 office
buildings known as Century Towers and the
appurtenant subterranean six-story parking
facility located in the Century City
market of Los Angeles, California (the
"Century Towers Property"). Century City
is an approximately 184-acre
master-planned urban community located in
West Los Angeles formed in 1961. The
Century Towers Borrower is owned in equal
part by: (i) Morgan Guaranty Trust Company
of New York, as Trustee Under Declaration
of Trust dated December 9, 1960, as
amended, for the Commingled Pension Trust
Fund (Special Situation Investments-Real
Estate) (the "Commingled Fund"); (ii) The
Prudential Insurance Company of America
("Prudential") on behalf of a separate
account established pursuant to a separate
account agreement, the contract holder of
which is State Street Bank and Trust
Company, as Trustee for Telephone Real
Estate Equity Trust ("TREET"), whose
ultimate beneficiaries include employee
benefit plans of AT&T Corp.; and (iii)
Prudential on behalf of a separate account
established pursuant to a separate account
agreement, the contract holder of which is
Mellon Bank, N.A. as Trustee for First
Plaza Group Trust ("FRGT" and together
with the Commingled Fund and TREET, the
"Century Towers Beneficial Owners"), whose
ultimate beneficiaries include employee
benefit plans of General Motors
Corporation and its subsidiaries. The
Century Towers Borrower owns fee title to
the Century Towers Property.
The Century Plaza Towers Loan bears interest
at a fixed rate per annum equal to
8.039125% (the "Century Towers Initial
Interest Rate") through and including
April 8, 2007, calculated for any period
based on a year consisting of twelve
30-day months. From and after April 9,
2007 (the "Century Towers Anticipated
Repayment Date"), the Century Plaza Towers
Loan will bear interest at a fixed rate
per annum equal to 10.039125% (the
"Century Towers Revised Interest
S-14
<PAGE>
Rate"). All interest accrued at the excess
of the Century Towers Revised Interest
Rate over the Century Towers Initial
Interest Rate (the "Century Towers Excess
Interest") will be deferred and will not
be paid until after the principal balance
of the Century Plaza Towers Loan has been
reduced to zero. Amounts so deferred will,
to the extent permitted by applicable law,
accrue interest at the Century Towers
Revised Interest Rate. The Century Plaza
Towers Loan is scheduled to mature on
March 9, 2027, but may be prepaid without
payment of a yield maintenance charge or
prepayment premium on any Due Date from
and after February 9, 2007. The Century
Plaza Towers Loan requires monthly
payments of principal and interest of
approximately $1,693,936 (based on a
30-year amortization schedule and the
Century Towers Initial Interest Rate).
Additionally, commencing with the Due Date
occurring on the Century Towers
Anticipated Repayment Date, the Century
Plaza Towers Loan requires that all
Century Towers Excess Cash Flow (as
defined herein under "Description of the
Mortgage Pool and the Underlying Mortgaged
Properties--Description of the Mortgage
Loans--The Century Plaza Towers
Loan--Payment Terms") be applied towards
the reduction of the principal balance of
the Century Plaza Towers Loan. The
scheduled principal balance of the Century
Plaza Towers Loan on the Century Towers
Anticipated Repayment Date will be
approximately $201,903,199.
The Century Towers Property is improved with
two 44-story Class A office buildings, a
6-level subterranean parking facility, a
retail concourse and a central plaza. The
Century Towers Property contains
approximately 2,252,739 square feet of
rentable office space ("RSF"), 27,460
square feet of retail space and
approximately 135,712 square feet of
storage space, equipment rooms and
miscellaneous space. The 5 largest tenants
by RSF are Johnson & Higgins of California
(137,789 RSF), Sidley & Austin (94,007
RSF), Home Box Office (77,904 RSF),
Barrister Executive Suites (76,242 RSF)
and Kelco Realty Corporation (68,310 RSF).
As of May 31, 1997, the Century Towers
Property was approximately 90.5% leased.
An appraisal dated as of December 6, 1996
determined a value for the Century Towers
Property of approximately $460,000,000,
resulting in a Cut-Off Date LTV of
approximately 49.9%. The DSCR for the
Century Towers Property is approximately
1.76x.
C. The AAPT Pool Loan and
Mortgaged Properties ...... The "AAPT Pool Loan" had a principal balance
as of the Cut-Off Date of approximately
$125,149,361. The AAPT Pool Loan is
comprised of three components (each, a
"Component"), a fixed rate component (the
"AAPT Fixed Component") and two floating
rate components (the "AAPT LIBOR A
Component" and the "AAPT LIBOR B
Component", collectively, the "AAPT LIBOR
Components"). As of
S-15
<PAGE>
the Cut-Off Date, the AAPT Fixed Component
had a principal balance of $75,149,361,
the AAPT LIBOR A Component had a principal
balance of $30,000,000, and the AAPT LIBOR
B Component had a principal balance of
$20,000,000. The AAPT Pool Loan is
evidenced by one fixed rate note and one
floating rate note issued by AAPOP 1,
L.P., a Delaware limited partnership,
Atlantic American Land Development, Inc.,
a Delaware corporation, Iron Run Venture
I, a Pennsylvania general partnership, and
Iron Run Venture II, a Pennsylvania
general partnership (each, an "AAPT
Borrower", and collectively, the "AAPT
Borrowers"). Each of the AAPT Borrowers is
presently organized for the sole purpose
of owning the AAPT Properties and certain
nonvoting capital stock in affiliated
entities. The AAPT Pool Loan is secured by
first priority mortgage liens encumbering
48 properties located in Pennsylvania, New
Jersey, Virginia and North Carolina (each,
an "AAPT Property", and collectively, the
"AAPT Properties"). The AAPT Borrowers are
affiliates of LF Strategic Realty
Investors, L.P., a Delaware limited
partnership which is a private real estate
investment vehicle for institutional
investors. The AAPT Borrowers own fee
title to 44 of the 48 AAPT Properties and
leasehold title in the remaining 4 AAPT
Properties. The mortgages encumbering the
AAPT Properties are cross-defaulted and
cross-collateralized.
The AAPT Fixed Component bears interest at a
fixed rate per annum equal to 7.48% (the
"AAPT Initial Fixed Interest Rate")
through and including July 10, 2007. From
and after July 11, 2007 (the "AAPT Fixed
Component Anticipated Repayment Date"),
the AAPT Fixed Component will bear
interest at a fixed rate per annum equal
to 9.48% (the "AAPT Revised Fixed Interest
Rate"). All interest accrued at the excess
of the AAPT Revised Fixed Interest Rate
over the AAPT Initial Fixed Interest Rate
(the "AAPT Excess Fixed Interest") will be
deferred and will not be paid until after
the principal balance of the AAPT Pool
Loan has been reduced to zero. Amounts so
deferred will, to the extent permitted by
applicable law, accrue interest at the
AAPT Revised Fixed Interest Rate. Interest
on the AAPT Fixed Component is calculated
based on the actual number of days elapsed
and a 360-day year.
The AAPT LIBOR A Component bears interest at
a floating rate per annum equal to LIBOR
(as hereinafter defined) plus 0.93% (the
"AAPT LIBOR A Interest Rate") through and
including July 10, 2004. The AAPT LIBOR B
Component bears interest at a floating
rate per annum equal to LIBOR plus 0.76%
(the "AAPT LIBOR B Interest Rate" and each
of the AAPT LIBOR A Interest Rate and the
AAPT LIBOR B Interest Rate, an "AAPT LIBOR
Interest Rate") through and including July
10, 2004. From and after July 11, 2004
(the "AAPT LIBOR Component Anticipated
Repayment Date"),
S-16
<PAGE>
each of the AAPT LIBOR A Component and the
AAPT LIBOR B Component, respectively, will
bear interest at a floating rate per annum
equal to the sum of (i) the lower of (x)
the AAPT LIBOR Interest Rate applicable to
such AAPT LIBOR Component from time to
time, and (y) a rate that would result in
a blended interest rate on the AAPT Pool
Loan of no more than 8.5% based on the
then outstanding principal balance of the
AAPT Pool Loan and an interest rate on the
AAPT Fixed Component equal to the AAPT
Initial Fixed Interest Rate and (ii) 2.00%
(respectively, the "AAPT Revised LIBOR A
Interest Rate" and the "AAPT Revised LIBOR
B Interest Rate", and each, an "AAPT
Revised LIBOR Interest Rate").
The following tables set forth the maximum
per annum interest rate on the AAPT LIBOR
Components assuming no principal payments
on the AAPT LIBOR Components (including
from AAPT Excess Cash Flow, as defined
below) and only scheduled principal
payments for the AAPT Fixed Component (i)
at the AAPT LIBOR Component Anticipated
Repayment Date, July 11, 2004 and (ii) at
the AAPT Fixed Component Anticipated
Repayment Date, July 11, 2007.
UPON THE AAPT LIBOR
COMPONENT ANTICIPATED REPAYMENT DATE
<TABLE>
<CAPTION>
OUTSTANDING MAXIMUM
PRINCIPAL INTEREST
BALANCE MARGIN RATE
<S> <C> <C> <C>
Fixed
Component..... $ 62,636,191 N/A 7.480%
LIBOR A
Component..... 30,000,000 0.930% 9.846%
LIBOR B
Component..... 20,000,000 0.760% 9.676%
--------------
Total/Weighted
Average....... $112,636,191 0.862% 8.500%
==============
</TABLE>
UPON THE AAPT FIXED
COMPONENT ANTICIPATED REPAYMENT DATE
<TABLE>
<CAPTION>
OUTSTANDING MAXIMUM
PRINCIPAL INTEREST
BALANCE MARGIN RATE
<S> <C> <C> <C>
Fixed
Component..... $ 59,239,423 N/A 7.480%
LIBOR A
Component..... 30,000,000 0.930% 9.777%
LIBOR B
Component..... 20,000,000 0.760% 9.607%
--------------
Total/Weighted
Average....... $109,239,423 0.862% 8.500%
==============
</TABLE>
To the extent principal payments are
received on the LIBOR Components on or
prior to the above-referenced Anticipated
Repayment Dates, the weighted average
maximum interest rates on the LIBOR
Components expressed above would increase.
A portion of the interest accrued at the
AAPT Revised LIBOR Interest Rates, equal
to 2.00% per annum (the "AAPT Excess LIBOR
Interest"), will be deferred and will not
be
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<PAGE>
paid until the earlier to occur of (1) the
aggregate principal balance of the AAPT
LIBOR Components being reduced to zero and
(2) the AAPT Fixed Component Anticipated
Repayment Date, at which time AAPT Excess
LIBOR Interest shall be further deferred
and will not be paid until the principal
balance of the AAPT Pool Loan has been
reduced to zero. Amounts so deferred will,
to the extent permitted by applicable law,
accrue interest at the applicable AAPT
Revised LIBOR Interest Rate. The AAPT
Excess LIBOR Interest and the AAPT Excess
Fixed Interest are sometimes referred to
herein together as the "AAPT Excess
Interest". Interest on the AAPT LIBOR
Components is calculated based on the
actual number of days elapsed and a
360-day year. Although the Due Date for
the AAPT Pool Loan is the 11th day of each
month (or if such day is not a business
day, the immediately preceding business
day), interest on the AAPT LIBOR
Components is calculated for each Due Date
based on the number of days in the period
from and including the Distribution Date
in the month preceding such Due Date (or
from August 13, 1997 in the case of the
Due Date in September 1997) to and
including the day immediately preceding
the Distribution Date immediately after
such Due Date.
The AAPT Borrowers have entered into an
interest rate cap agreement in a notional
amount equal to the aggregate principal
amount of the AAPT LIBOR Components with a
term of seven years, requiring payment by
Bear Stearns Financial Products Inc.,
which currently has a senior unsecured
long-term debt rating of "Aaa", as rated
by Moody's Investors Service, Inc., of all
interest on such notional amount in excess
of 8.70%. See "Risk Factors--The Mortgage
Loans--Risks Relating to the AAPT Interest
Rate Cap Agreement" and "Description of
the Mortgage Pool and the Underlying
Mortgaged Properties--Description of the
Mortgage Loans--The AAPT Pool
Loan--Payment Terms".
The AAPT Pool Loan is scheduled to mature on
July 11, 2027. The AAPT Fixed Component
may be prepaid, in whole or in part,
without payment of any yield maintenance
charge or prepayment premium on the AAPT
Fixed Component Anticipated Repayment Date
and on any Due Date thereafter. The AAPT
LIBOR Components may be prepaid, in whole
or in part, on any Due Date, subject to
the payment of the required prepayment
premium, if any. Commencing on August 11,
1997, the AAPT Fixed Component requires
monthly payments of principal and interest
of $526,404 (based on the principal
balance of the AAPT Pool Loan, a 305-month
amortization schedule and interest at the
AAPT Initial Fixed Interest Rate). From
and after August 11, 2004, the AAPT Fixed
Component requires monthly payments of
principal and interest of $480,249 (based
on the outstanding principal balance of
the AAPT Fixed Component, a 23-year
amortization schedule (based on the
original principal bal-
S-18
<PAGE>
ance of the AAPT Fixed Component) and
interest at the AAPT Initial Fixed
Interest Rate). In addition, the AAPT
Fixed Component requires an additional
payment of principal and interest of
$93,148 on each Due Date until the earlier
of (x) the date of the release of the Main
Street Center Property from the lien of
the related Mortgage and (y) December 11,
2001. See "Description of the Mortgage
Pool and the Underlying Mortgaged
Properties--Description of the Mortgage
Loans--The AAPT Pool Loan--Payment Terms".
The AAPT LIBOR Components require monthly
payments of interest only on the principal
balance of the AAPT LIBOR Components on
each Due Date. Additionally, (i)
commencing on the AAPT LIBOR Component
Anticipated Repayment Date, the AAPT LIBOR
Components require that all AAPT Excess
Cash Flow (as defined below under
"Description of the Mortgage Pool and the
Underlying Mortgaged
Properties--Description of the Mortgage
Loans--The AAPT Pool Loan -- Payment
Terms") be applied toward the reduction of
the principal balance of the AAPT LIBOR
Components pro rata based on the then
outstanding principal balances of the AAPT
LIBOR A Component and the AAPT LIBOR B
Component, until the earlier to occur of
(x) the AAPT LIBOR Components being paid
in full (including accrued interest
thereon) and (y) the AAPT Fixed Component
Anticipated Repayment Date and (ii)
commencing on the AAPT Fixed Component
Anticipated Repayment Date, the AAPT Pool
Loan requires that all AAPT Excess Cash
Flow be applied towards the reduction of
the principal balance of the AAPT Pool
Loan, applied pro rata based on the then
outstanding principal balances of the AAPT
Fixed Component and the respective AAPT
LIBOR Components. All voluntary
prepayments, and any prepayments resulting
from a casualty or condemnation, of the
AAPT Pool Loan will be applied (i) first,
to the AAPT LIBOR A Component until the
AAPT LIBOR A Component shall be paid in
full and (ii) then, to the AAPT LIBOR B
Component. The scheduled principal balance
of the AAPT LIBOR Components on the AAPT
LIBOR Component Anticipated Repayment Date
will be $50,000,000. The scheduled
principal balance of the AAPT Fixed
Component on the AAPT Fixed Component
Anticipated Repayment Date will be
approximately $59,239,423.
The 48 AAPT Properties consist of 34 office
properties, 8 industrial properties, 4
"flex" properties (i.e., properties that
have components of both office and
industrial uses) and 2 undeveloped parcels
of land located in Pennsylvania, New
Jersey, Virginia and North Carolina. The
AAPT Properties contain a total of
approximately 2,862,885 square feet of
GLA. As of June 1, 1997, the AAPT
Properties were approximately 97% leased.
Recent appraisals determined an aggregate
value for the 48 AAPT Properties of
approximately $239,025,000, resulting in a
Cut-Off Date LTV of approxi-
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<PAGE>
mately 52.4%. The DSCR for the AAPT
Properties is approximately 1.72x.
D. 380 Madison Loan and
Mortgaged Property ........ The "380 Madison Loan" had a principal
balance as of the Cut-Off Date of
$89,000,000 and is evidenced by a
promissory note issued by ComMet 380, Inc.
a Maryland corporation formed solely for
the purpose of acquiring, owning,
operating, and managing the 380 Madison
Property (the "380 Madison Borrower"). The
380 Madison Loan is secured by a first
priority mortgage lien encumbering an
office building located at 380 Madison
Avenue, New York, New York (the "380
Madison Property") subject to, among other
items, the 380 Madison Master Lease (as
defined herein). The Comptroller of the
State of New York as Trustee of the Common
Retirement Fund and Stichting
Bedrijfspensioenfonds voor de
Metaalnijverheid are the principal
shareholders of the 380 Madison Borrower,
collectively owning over 99% of the total
outstanding shares of the 380 Madison
Borrower.
The 380 Madison Loan bears interest at a
fixed rate per annum equal to 7.848% (the
"380 Madison Interest Rate"). Interest on
the 380 Madison Loan is computed on the
basis of the actual number of days elapsed
and a 360-day year. The 380 Madison Loan
is scheduled to mature on July 11, 2014
(the "380 Madison Maturity Date").
Commencing on August 11, 1997, and on each
Due Date thereafter, through and including
the Due Date on July 11, 2002, the 380
Madison Loan requires the payment of
interest only. Commencing on August 11,
2002, the 380 Madison Loan requires
monthly payments of principal and interest
of $650,385 (based on a 30-year
amortization schedule and the 380 Madison
Interest Rate), with all remaining
principal due and payable on the 380
Madison Maturity Date. The scheduled
principal balance of the 380 Madison Loan
on the 380 Madison Maturity Date will be
approximately $74,672,522.
The 380 Madison Borrower's fee interest in
the 380 Madison Property is subject to a
net lease (the "380 Madison Master Lease")
of the entire 380 Madison Property, which
terminates on January 26, 2014. The 380
Madison Property consists of a 25-story
office building and a 150-car parking
garage. The 380 Madison Property contains
approximately 769,365 GLA of commercial
office space, approximately 49,354 GLA of
retail space, approximately 34,431 GLA of
storage space and a 3-level 150 car
parking garage. As of June 1997, the 380
Madison Property was approximately 86%
leased, excluding storage. The largest
tenant is The Chase Manhattan Bank with
307,747 GLA. An appraisal of the 380
Madison Property, dated as of June 23,
1997 determined an aggregate value for the
380 Madison Property fee interest, subject
to the 380 Madison Master Lease,
S-20
<PAGE>
of $197,000,000, resulting in a Cut-Off
Date LTV of approximately 45.2%. The DSCR
for the 380 Madison Property is
approximately 2.26x.
E. CAP Pool Loan and
Mortgaged Properties ...... The "CAP Pool Loan" had a principal balance
as of the Cut-Off Date of approximately
$87,946,446 and is evidenced by a note
issued by Commonwealth Atlantic Operating
Properties Inc., a special purpose
Virginia corporation (the "CAP Borrower").
The CAP Pool Loan is secured by first
priority mortgage liens encumbering 25
properties located in Virginia (each, a
"CAP Property", and collectively, the "CAP
Properties"). The CAP Borrower is an
affiliate of LF Strategic Realty
Investors, L.P., a Delaware limited
partnership which is a private real estate
investment vehicle for institutional
investors. The CAP Borrower owns fee title
to all of the CAP Properties. The
mortgages encumbering the CAP Properties
are cross-defaulted and
cross-collateralized as further described
herein.
The CAP Pool Loan bears interest at a fixed
rate per annum equal to 7.48% (the "CAP
Initial Interest Rate") through and
including July 10, 2007. The CAP Pool Loan
requires monthly payments of principal and
interest of $620,372 each (based on a
30-year amortization schedule and the CAP
Initial Interest Rate). From and after
July 11, 2007 (the "CAP Anticipated
Repayment Date"), the CAP Pool Loan will
bear interest at a fixed rate per annum
equal to 9.48% (the "CAP Revised Interest
Rate"). All interest accrued at the excess
of the CAP Revised Interest Rate over the
CAP Initial Interest Rate (the "CAP Excess
Interest") will be deferred and will not
be paid until after the principal balance
of the CAP Pool Loan has been reduced to
zero. Amounts so deferred will, to the
extent permitted by applicable law, accrue
interest at the CAP Revised Interest Rate.
Interest on the CAP Pool Loan is
calculated based on the actual number of
days elapsed and a 360-day year.
The CAP Pool Loan is scheduled to mature on
July 11, 2027 (the "CAP Maturity Date"),
but may be prepaid, in whole or in part,
without payment of a yield maintenance
charge or prepayment premium on any Due
Date from and including the CAP
Anticipated Repayment Date. Additionally,
commencing on the CAP Anticipated
Repayment Date, the CAP Pool Loan requires
that all CAP Excess Cash Flow (as defined
herein under "Description of the Mortgage
Pool and the Underlying Mortgaged
Properties--Description of the Mortgage
Loans--The CAP Pool Loan--Payment Terms")
be applied towards the reduction of the
principal balance of the CAP Pool Loan.
The scheduled principal balance of the CAP
Pool Loan on the CAP Anticipated Repayment
Date will be approximately $76,589,079.
S-21
<PAGE>
The 25 CAP Properties consist of 8 office
properties, 3 industrial properties, 12
flex properties and 2 research and
development properties located in
Virginia. The CAP Properties contain
approximately 1,700,252 square feet of
GLA. As of June 1, 1997, the CAP
Properties were approximately 98% leased.
Recent appraisals determined an aggregate
value for the 25 CAP Properties of
approximately $144,750,000, resulting in a
Cut-Off Date LTV of approximately 60.8%.
The DSCR for the CAP Properties is
approximately 1.60x.
F. The Whitehall Pool Loan and
Mortgaged Properties ...... The "Whitehall Pool Loan" had a principal
balance as of the Cut-Off Date of
approximately $72,228,349 and is evidenced
by a single note issued by WMP II Real
Estate Limited Partnership (the "Whitehall
Borrower"), a special purpose Delaware
limited partnership, secured by first
priority mortgage liens encumbering 11
properties located in California,
Massachusetts, Missouri, New York and
Texas (the "Whitehall Properties"). The
Whitehall Borrower is a wholly-owned
indirect subsidiary of Whitehall Street
Real Estate Limited Partnership III, a
private investment vehicle organized by
The Goldman Sachs Group, L.P. and managed
by affiliates of Goldman, Sachs & Co. for
institutional clients and high net worth
individuals seeking to invest in real
estate. The Whitehall Borrower owns fee
title to 10 of the Whitehall Properties
and a leasehold as to the remaining
Whitehall Property. The mortgages
encumbering the Whitehall Properties are
cross-collateralized and cross-defaulted
as described herein.
The Whitehall Pool Loan bears interest at a
fixed rate per annum equal to 8.68% until
maturity, calculated for any period based
on the actual number of days elapsed and a
360-day year. The Whitehall Pool Loan
requires monthly payments of principal and
interest of $602,560. The Whitehall Pool
Loan is scheduled to mature on September
10, 2000 (the "Whitehall Maturity Date").
The scheduled principal balance of the
Whitehall Pool Loan as of the Whitehall
Maturity Date will be approximately
$69,172,622.
The Whitehall Properties consist of 7 office
properties, 2 retail properties and 2
industrial properties located in
California, Massachusetts, Missouri, New
York and Texas. The Whitehall Properties
contain a total of approximately 1,488,120
square feet of office GLA, approximately
124,394 square feet of retail GLA and
approximately 336,380 square feet of
industrial GLA. As of May 20, 1997, the
office, retail and industrial properties
were approximately 91.6%, 98.3% and 100.0%
leased, respectively. Significant office
tenants at the properties include the
General Services Administration, Auspex
and Seagate Computers; significant retail
tenants at the properties include The Gap
and Equinox Fitness Club; and
S-22
<PAGE>
significant tenants at the industrial
properties include Sun Microsystems and
Applied Materials. Appraisals completed in
July and August 1996 (when the Whitehall
Pool Loan was originated) determined an
aggregate value for the Whitehall
Properties of approximately $165,150,000,
resulting in a Cut-Off Date LTV of
approximately 43.7%. The DSCR for the
Whitehall Properties is approximately
1.74x.
G. The Ritz Plaza Loan and
Mortgaged Property ........ The "Ritz Plaza Loan" had a principal
balance as of the Cut-Off Date of
approximately $62,365,309 and is evidenced
by a single note issued by CS Ritz
Holdings, L.P. (the "Ritz Plaza
Borrower"), a special purpose Delaware
limited partnership, secured by a first
priority mortgage lien encumbering a
mixed-use residential and commercial
property known as The Ritz Plaza, located
at 235-237 West 48th Street, New York, New
York (the "Ritz Plaza Property").
Approximately 60% of the ownership
interests in the Ritz Plaza Borrower are
held by Cadim Holdings U.S., Inc. (a
Delaware corporation and a wholly owned
indirect subsidiary of Caisse de Dep|f.t et
Placement du Quebec, a Quebec public fund
manager) and the remaining ownership
interests are indirectly held by
individual investors.
The Ritz Plaza Loan bears interest at a
fixed rate per annum equal to 8.135% (the
"Ritz Plaza Initial Interest Rate")
through and including April 10, 2007. From
and after April 11, 2007 (the "Ritz Plaza
Anticipated Repayment Date"), the Ritz
Plaza Loan will bear interest at a fixed
rate per annum equal to 10.135% (the "Ritz
Plaza Revised Interest Rate"). All
interest accrued at the excess of the Ritz
Plaza Revised Interest Rate over the Ritz
Plaza Initial Interest Rate (the "Ritz
Plaza Excess Interest") will be deferred
and will not be paid until after the
principal balance of the Ritz Plaza Loan
has been reduced to zero. Amounts so
deferred will, to the extent permitted by
applicable law, accrue interest at the
Ritz Plaza Revised Interest Rate. Interest
on the Ritz Plaza Loan is calculated based
on the actual number of days elapsed and a
360-day year. The Ritz Plaza Loan is
scheduled to mature on April 24, 2027, but
may be prepaid without payment of a yield
maintenance charge or prepayment premium
on and after the Ritz Plaza Anticipated
Repayment Date. The Ritz Plaza Loan
requires monthly payments of principal and
interest of $469,453 (based on a 30-year
amortization schedule and the Ritz Plaza
Initial Interest Rate). Additionally,
commencing on the Ritz Plaza Anticipated
Repayment Date, the Ritz Plaza Loan
requires that all Ritz Plaza Excess Cash
Flow (as defined below under "Description
of the Mortgage Pool and the Underlying
Mortgaged Properties--Description of the
Mortgage Loans--The Ritz Plaza
Loan--Payment Terms") be applied towards
the reduction of the principal balance of
the Ritz Plaza Loan.
S-23
<PAGE>
The scheduled principal balance of the
Ritz Plaza Loan on the Ritz Plaza
Anticipated Repayment Date will be
approximately $55,202,612.
The Ritz Plaza Property consists of a
40-story apartment building with 479
apartment units (consisting of 24 studio
apartments, 400 1-bedroom apartments, and
55 2-bedroom apartments), approximately
25,432 gross rentable square feet of
commercial space, and a 158-car parking
garage. As of June 17, 1997, the
residential portion of the Ritz Plaza
Property was approximately 99% leased, and
the commercial portion of the Ritz Plaza
Property was 100% leased. An appraisal
dated as of April 10, 1997, determined a
value for the Ritz Plaza Property of
$92,500,000, resulting in a Cut-Off Date
LTV of approximately 67.4%. The DSCR for
the Ritz Plaza Property is approximately
1.34x.
H. The Montehiedra Loan
and Mortgaged Property .... The "Montehiedra Loan" had a principal
balance as of the Cut-Off Date of
approximately $52,579,779 and is evidenced
by a single note issued by Vornado
Montehiedra Acquisition L.P. (the
"Montehiedra Borrower"), a special purpose
Delaware limited partnership. The
Montehiedra Loan is secured by a pledge of
a bearer mortgage note and by a first
priority mortgage lien encumbering a
retail shopping center known as
Montehiedra Town Center located in the
district of Rio Piedras, municipality of
San Juan, Puerto Rico (the "Montehiedra
Property"). The Montehiedra Borrower is
owned indirectly by Vornado Realty Trust
and Vornado Realty L.P. Vornado Realty
Trust is the sole general partner of
Vornado Realty L.P. and is a publicly
traded real estate investment trust whose
beneficial interests are listed on the New
York Stock Exchange. The Montehiedra
Borrower owns fee title to the Montehiedra
Property.
The Montehiedra Loan bears interest at a
fixed rate per annum equal to 8.23% (the
"Montehiedra Initial Interest Rate")
through and including May 10, 2007. From
and after May 11, 2007 (the "Montehiedra
Anticipated Repayment Date"), the
Montehiedra Loan will bear interest at a
fixed rate per annum equal to 10.23% (the
"Montehiedra Revised Interest Rate"). All
interest accrued at the excess of the
Montehiedra Revised Interest Rate over the
Montehiedra Initial Interest Rate
("Montehiedra Excess Interest") will be
deferred and will not be paid until after
the principal balance of the Montehiedra
Loan has been reduced to zero. Amounts so
deferred will, to the extent permitted by
applicable law, accrue interest at the
Montehiedra Revised Interest Rate.
Interest on the Montehiedra Loan is
calculated based on the actual number of
days elapsed and a 360-day year. The
Montehiedra Loan is scheduled to mature on
May 11, 2027, but may be prepaid on any
Due Date without payment of a yield
maintenance
S-24
<PAGE>
charge or prepayment premium on and after
the Montehiedra Anticipated Repayment
Date. The Montehiedra Loan requires
monthly payments of principal and interest
of $399,417 each (based on a 30-year
amortization schedule and the Montehiedra
Initial Interest Rate). Additionally,
commencing on the first Due Date after the
Montehiedra Anticipated Repayment Date,
the Montehiedra Loan requires that all
Montehiedra Excess Cash Flow (as defined
herein under "Description of the Mortgage
Pool and the Underlying Mortgaged
Properties--Description of the Mortgage
Loans--The Montehiedra Loan--Payment
Terms") be applied towards the reduction
of the principal balance of the
Montehiedra Loan. The scheduled principal
balance of the Montehiedra Loan on the
Montehiedra Anticipated Repayment Date
will be approximately $46,536,103.
The Montehiedra Property consists of
approximately 525,378 square feet of total
GLA (including anchors), of which
approximately 200,028 square feet is mall
store GLA. The anchor tenants at the
Montehiedra Property include Kmart,
Builder's Square, Marshall's and Caribbean
Theatres. The Montehiedra Property was
approximately 98.9% leased as of May 1,
1997. An appraisal dated as of March 7,
1997, determined a value for the
Montehiedra Property of $92,000,000,
resulting in a Cut-Off Date LTV of
approximately 57.2%. The DSCR for the
Montehiedra Property is approximately
1.69x.
I. The Montehiedra
Partner Loans ............. Simultaneously with the origination of the
Montehiedra Loan, GSMC made a loan to each
of Montehiedra Holding L.P. and
Montehiedra Holding II L.P. (the
"Montehiedra Partner Loans") having an
aggregate principal balance as of August
12, 1997 of approximately $10,276,355. See
"Description of the Mortgage Pool and the
Underlying Mortgaged
Properties--Description of the Mortgage
Loans--The Montehiedra Loan--The
Montehiedra Partner Loans". Payments of
principal of and interest on, and any
other proceeds with respect to, the
Montehiedra Partner Loans will be
deposited into the Class M Distribution
Account and will be allocated and
distributable exclusively to the Class M
Certificates and will not serve as credit
support for any other Class of
Certificates. The Montehiedra Partner
Loans will not be part of the Mortgage
Pool and references in this Prospectus
Supplement to the term "Mortgage Loan" do
not include the Montehiedra Partner Loans.
J. Originators ............... GSMC originated the Century Plaza Towers
Loan, the AAPT Pool Loan, the CAP Pool
Loan and the Montehiedra Loan. To
facilitate loan closings, GSMC engaged
GMACCM to originate the Cadillac Fairview
Pool Loan, the 380 Madison Loan, the
Whitehall Pool Loan and the Ritz Plaza
Loan on GSMC's behalf, and concurrently
with the origination, GSMC
S-25
<PAGE>
acquired a 100% participation interest in
each such Mortgage Loan. GSMC and GMACCM
are collectively referred to herein as the
"Originators". GMACCM will make certain
representations and warranties with
respect to the Mortgage Loans it
originated and GSMC will make certain
representations and warranties (a) with
respect to the Mortgage Loans it
originated, and (b) with respect to the
Mortgage Loans GMACCM originated, but only
to the extent that GMACCM did not make
such representations and warranties (GSMC
and GMACCM in the capacity of making
representations and warranties, being each
referred to as a "Responsible Party").
K. General ................... For a further description of the Mortgage
Loans and Mortgaged Properties, see
"Description of the Mortgage Pool and the
Underlying Mortgaged Properties" and
"Mortgage Pool Characteristics" herein.
Prepayment, Sale, Substitution
and Release Provisions ........ The Mortgage Loans generally prohibit the
transfer or sale of the Mortgaged
Properties (except (a) to certain
permitted transferees and (b) in
connection with a release and related
permitted defeasance or prepayment and
except that the AAPT Pool Loan and the CAP
Pool Loan permit substitution of Mortgaged
Properties if certain conditions are met)
unless the Master Servicer has consented
thereto and there shall have been received
written confirmation from each Rating
Agency that such transfer or sale will
not, in and of itself, cause a downgrade,
qualification or withdrawal of any of the
then current ratings assigned to the
Certificates.
All of the Mortgage Loans (other than the
AAPT LIBOR Components) provide that after
a specified period (a "Defeasance Lockout
Period") and prior to the related
Anticipated Repayment Date (or in the case
of the 380 Madison Loan and the Whitehall
Pool Loan, prior to their respective
maturity dates), the applicable borrower
may obtain the release of one or more of
the Mortgaged Properties from the lien of
the related Mortgage upon the pledge to
the Trustee of noncallable U.S. Treasury
obligations, which generally provide for
payments on or prior to all successive
scheduled Due Dates upon which interest
and principal payments are due under the
related Note through and including the
respective Anticipated Repayment Date, in
amounts equal to the portion of the
scheduled payments due on such dates (or,
in the case of an Anticipated Repayment
Date, an amount determined as if the
related Mortgage Loans were to mature on
such Anticipated Repayment Date) that are
attributable to a portion of the Mortgage
Loan equal to the release amount required
to be paid with respect to the Mortgaged
Property or Properties to be released. In
the event of a release in connection with
a partial defeasance,
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<PAGE>
the Mortgage Loans secured by multiple
Mortgaged Properties generally require
that the principal amount defeased equal
at least a specified amount which is
greater than the Allocated Loan Amount of
the Mortgaged Property so released with
certain exceptions (such as in the event
of a partial prepayment in connection with
a casualty or condemnation). Such Mortgage
Loans also generally require that the debt
service coverage ratio (as such term is
defined in the related loan agreements) of
the remaining Mortgaged Property or
Properties, after giving effect to such
release, be greater than both the debt
service coverage ratio at origination of
the related Mortgage Loan and the debt
service coverage ratio immediately prior
to such release. The terms of the
Whitehall Pool Loan permit the Whitehall
Borrower to partially prepay the Whitehall
Pool Loan during its Defeasance Lockout
Period to cause the release of one or more
Mortgaged Properties necessary to cure a
property level non-payment default with
respect to such Mortgaged Property or
Mortgaged Properties. The AAPT Pool Loan
provides that on any Due Date during the
term of the AAPT Pool Loan, the AAPT
Borrowers may repay all or a portion of
the AAPT LIBOR Components. A condition
precedent to any full or partial
defeasance of the AAPT Fixed Component is
the payment in full of the AAPT LIBOR
Components. The AAPT Pool Loan and the CAP
Pool Loan permit the substitution of
Mortgaged Properties if certain conditions
are met. See "Description of the Mortgage
Pool and the Underlying Mortgaged
Properties--Description of the Mortgage
Loans--The AAPT Pool Loan--Substitution of
Individual Properties" and "--The CAP Pool
Loan--Substitution of Individual
Properties".
All of the Mortgage Loans secured by
multiple Mortgaged Properties (except the
Whitehall Pool Loan) provide that on and
after the related Anticipated Repayment
Date, in connection with a prepayment, the
related borrower may obtain the release of
one or more of the related Mortgaged
Properties from the lien of the related
Mortgage. In addition, the AAPT Pool Loan
provides that at any time during the term
of the AAPT Pool Loan, in connection with
a prepayment of the AAPT LIBOR Components,
the AAPT Borrowers may obtain the release
of one or more of the AAPT Properties from
the lien of the related Mortgages. Each
Mortgage Loan secured by multiple
Mortgaged Properties generally requires
that the related borrower prepay a
specified amount which is greater than the
Allocated Loan Amount of any Mortgaged
Property released in connection with a
partial prepayment, with certain
exceptions such as in the event of a
partial prepayment in connection with a
casualty or condemnation. Such Mortgage
Loans also require that the debt service
coverage ratio (as that term is defined in
the respective loan agreements) of the
remaining Mortgaged Properties, after
giving
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<PAGE>
effect to such release, be at least equal
to the greater of each of the debt service
coverage ratio at origination and the debt
service coverage ratio immediately prior
to the release.
The Offered Certificates ...... The Class A-1 Certificates will have an
initial Certificate Principal Amount of
$50,000,000.
The Class A-2A Certificates will have an
initial Certificate Principal Amount of
$131,100,000.
The Class A-2B Certificates will have an
initial Certificate Principal Amount of
$240,900,000.
The Class A-2C Certificates will have an
initial Certificate Principal Amount of
$30,000,000.
The Class A-2D Certificates will have an
initial Certificate Principal Amount of
$222,190,000.
The Class B Certificates will have an
initial Certificate Principal Amount of
$78,160,000.
The Class C Certificates will have an
initial Certificate Principal Amount of
$14,660,000.
The Class D Certificates will have an
initial Certificate Principal Amount of
$53,750,000.
The Class E Certificates will have an
initial Certificate Principal Amount of
$14,650,000.
The Class F Certificates will have an
initial Certificate Principal Amount of
$48,860,000.
The Class G Certificates will have an
initial Certificate Principal Amount of
$58,620,000.
The Class A-1, Class A-2A, Class A-2B, Class
A-2C, Class A-2D, Class B, Class C, Class
D, Class E, Class F, Class G and Class H
Certificates are collectively referred to
herein as the "Sequential Pay
Certificates".
The Class X-1A Certificates will have an
initial Notional Amount of approximately
$50,000,000. With respect to any
Distribution Date, the Notional Amount of
the Class X-1A Certificates will equal the
aggregate Stated Principal Balance of the
Group 1 Components as of the first day of
the related Interest Accrual Period.
The Class X-2 Certificates will have an
initial Notional Amount of approximately
$892,890,000. The Notional Amount of the
Class X-2 Certificates will generally be
equal to the sum of the Certificate
Principal Amounts of the Class A-2A, Class
A-2B, Class A-2C, Class A-2D, Class B,
Class C, Class D, Class E, Class F and
Class G Certificates, plus the amount of
any unpaid Interest Shortfall on such
Classes.
The Private Certificates ...... The Class X-1B Certificates will have an
initial Notional Amount of approximately
$50,000,000. With respect to any Distribu-
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<PAGE>
tion Date, the Notional Amount of the
Class X-1B Certificates will equal the
aggregate Stated Principal Balance of the
Group 1 Components as of the first day of
the related Interest Accrual Period. The
Class X-1A, Class X-1B and Class X-2
Certificates are sometimes referred to
herein collectively as the "Coupon Strip
Certificates".
The Class H Certificates will have an
initial Certificate Principal Amount of
$34,208,999.
The Class M Certificates will have an
Initial Certificate Principal Amount of
$10,276,354.
The Class Q, Class R, Class MR and Class LR
Certificates will not have Certificate
Principal Amounts or Notional Amounts.
The Class X-1B, Class H, Class M, Class Q,
Class R, Class MR and Class LR
Certificates are not offered hereby.
Pass-Through Rates ............ The per annum rate at which interest accrues
(the "Pass-Through Rate") on each Class of
Offered Certificates during any Interest
Accrual Period will be as follows:
The Pass-Through Rate on the Class A-1
Certificates will be equal to the
"Adjusted LIBOR Rate" which, in general,
equals, for each Distribution Date through
the Distribution Date in July 2004, LIBOR
plus 0.23% and for each Distribution Date
thereafter, the lesser of (i) LIBOR plus
.70% and (ii) the Group 1 WAC Rate (or, if
no Group 1 Components remain outstanding,
10% per annum). See "--Description of the
Mortgage Loans and the Properties--C. The
AAPT Pool Loan and Mortgaged Properties"
above for a description of the AAPT LIBOR
Components on which distributions on the
Class A-1 Certificates are generally
based.
The Pass-Through Rate on the Class A-2A,
Class A-2B, Class A-2C and Class A-2D
Certificates will be equal to 6.940000%,
6.860000%, 6.930000% and 6.940000%,
respectively.
The Pass-Through Rate on the Class X-1A
Certificates is a per annum rate equal to
(A) for each Distribution Date up to and
including the Distribution Date in July
2000, the excess, if any, of (i) the Group
1 WAC Rate, over (ii) the Adjusted LIBOR
Rate (for purposes of this definition
only, adjusting the Adjusted LIBOR Rate to
a rate calculated on the basis of a
360-day year consisting of twelve 30-day
months) and (B) thereafter, 0%.
The Pass-Through Rate on the Class X-2
Certificates is a per annum rate equal to
the weighted average of the Pass-Through
Rates on the Class A-2A Component, the
Class A-2B Component, the Class A-2C
Component, the Class A-2D Component, the
Class B Component, the Class C Component,
the Class D Component, the Class E
Component, the Class F Component and the
Class G Component, weighted on the basis
of their respective Component Notional
Amounts. The Pass-Through Rate on the
Class A-2A Component is a per annum rate
equal to the Adjusted WAC
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<PAGE>
Rate minus the Pass-Through Rate on the
Class A-2A Certificates. The Pass-Through
Rate on the Class A-2B Component is a per
annum rate equal to the Adjusted WAC Rate
minus the Pass-Through Rate on the Class
A-2B Certificates. The Pass-Through Rate
on the Class A-2C Component is a per annum
rate equal to the Adjusted WAC Rate minus
the Pass-Through Rate on the Class A-2C
Certificates. The Pass-Through Rate on the
Class A-2D Component is a per annum rate
equal to the Adjusted WAC Rate minus the
Pass-Through Rate on the Class A-2D
Certificates. The Pass-Through Rate on the
Class B Component is a per annum rate
equal to 0.96%. The Pass-Through Rate on
the Class C Component is a per annum rate
equal to 0.92%. The Pass-Through Rate on
the Class D Component is a per annum rate
equal to 0.90%. The Pass-Through Rate on
the Class E Component is a per annum rate
equal to 0.83%. The Pass-Through Rate on
the Class F Component is a per annum rate
equal to 0.76%. The Pass-Through Rate on
the Class G Component is a per annum rate
equal to 0.29%.
The Pass-Through Rate on the Class B
Certificates is a per annum rate equal to
the Adjusted WAC Rate minus 0.96%.
The Pass-Through Rate on the Class C
Certificates is a per annum rate equal to
the Adjusted WAC Rate minus 0.92%.
The Pass-Through Rate on the Class D
Certificates is a per annum rate equal to
the Adjusted WAC Rate minus 0.90%.
The Pass-Through Rate on the Class E
Certificates is a per annum rate equal to
the Adjusted WAC Rate minus 0.83%.
The Pass-Through Rate on the Class F
Certificates is a per annum rate equal to
the Adjusted WAC Rate minus 0.76%.
The Pass-Through Rate on the Class G
Certificates is a per annum rate equal to
the Adjusted WAC Rate minus 0.29%.
The initial Pass-Through Rate for each Class
of Offered Certificates is set forth on
the cover page of this Prospectus
Supplement.
Calculations of interest on the Offered
Certificates, other than the Class A-1
Certificates, will be made on the basis of
a 360-day year consisting of twelve 30-day
months. Calculations of interest on the
Class A-1 Certificates will be made based
on the actual number of days in the
applicable Interest Accrual Period and a
360-day year.
The Mortgage Pool consists of two groups
(each, a "Loan Group"): "Loan Group 1"
consists of the Group 1 Components and
"Loan Group 2" consists of the Group 2
Loans. The "Group 1 Components" consist of
the AAPT LIBOR Components. The "Group 2
Loans" are the Cadillac Fairview Pool
Loan, the Century Plaza Towers Loan, the
380 Madison Loan, the CAP Pool Loan, the
Whitehall Pool Loan, the Ritz Plaza Loan,
the Montehiedra Loan and the AAPT Fixed
Component.
S-30
<PAGE>
The "Group 1 WAC Rate" for any Distribution
Date is the weighted average of the Net
Mortgage Rates in effect for the Group 1
Components as of their Due Date in the
month preceding the month in which such
Distribution Date occurs weighted on the
basis of their respective Stated Principal
Balances on such Due Date.
The "Adjusted WAC Rate" with respect to any
Distribution Date is a per annum rate
equal to the sum of (A) the product of (i)
the weighted average of the Net Mortgage
Rates in effect for the Group 2 Loans as
of their respective Due Dates in the month
preceding the month in which such
Distribution Date occurs weighted on the
basis of the respective Stated Principal
Balances (as defined herein) of the Group
2 Loans on such Due Dates (the "Group 2
WAC Rate") and (ii) a fraction, the
numerator of which is the aggregate Stated
Principal Balance of the Group 2 Loans as
of their respective Due Dates in the month
preceding the month in which such
Distribution Date occurs and the
denominator of which is the sum of the
aggregate Stated Principal Balance of the
Group 2 Loans as of their respective Due
Dates in the month preceding the month in
which such Distribution Date occurs and
the Group 1 Difference Amount and (B) the
product of (i) the Adjusted LIBOR Rate
(converted to a 30/360 basis) and (ii) a
fraction, the numerator of which is the
Group 1 Difference Amount and the
denominator of which is the sum of the
aggregate Stated Principal Balance of the
Group 2 Loans as of their respective Due
Dates in the month preceding the month in
which such Distribution Date occurs and
the Group 1 Difference Amount; provided,
however, that if the sum of the aggregate
Stated Principal Balance of the Group 2
Loans as of their respective Due Dates in
the month preceding the month in which
such Distribution Date occurs and the
Group 1 Difference Amount is less than or
equal to zero then the Adjusted WAC Rate
will equal the value of such rate in
respect of the last Distribution Date on
which such sum was greater than zero.
The "Group 1 Difference Amount" with respect
to any Distribution Date is the amount
(which may be positive or negative) equal
to the aggregate Stated Principal Balance
of the Group 1 Components as of their Due
Date in the month preceding the month in
which such Distribution Date occurs minus
the Certificate Principal Amount of the
Class A-1 Certificates as of the beginning
of the related Interest Accrual Period.
The "Net Mortgage Rate" with respect to any
Mortgage Loan is a per annum rate equal to
the related Mortgage Rate in effect from
time to time minus the related Servicing
Fee Rate. However, for purposes of
calculating Pass-Through Rates, the Net
Mortgage Rate of such Mortgage Loan for
any Mortgage Loan shall be determined
without regard to
S-31
<PAGE>
any modification, waiver or amendment of
the terms of such Mortgage Loan, whether
agreed to by the Special Servicer or
resulting from a bankruptcy, insolvency or
similar proceeding involving the related
borrower.
The "Mortgage Rate" with respect to any
Mortgage Loan or Component is the per
annum rate in effect from time to time at
which interest accrues on such Mortgage
Loan or Component as stated in the related
Note, in each case without giving effect
to the Excess Rate or the Default Rate.
Notwithstanding the foregoing, if any
Mortgage Loan or Component does not accrue
interest on the basis of a 360-day year
consisting of twelve 30-day months, then,
for purposes of calculating Pass-Through
Rates, other than the Pass-Through Rate on
the Class A-1 Certificates, the Mortgage
Rate of such Mortgage Loan or Component
for any one-month period preceding a
related Due Date will be the annualized
rate at which interest would have to
accrue in respect of such Mortgage Loan or
Component on the basis of a 360-day year
consisting of twelve 30-day months in
order to produce the aggregate amount of
interest actually accrued in respect of
such Mortgage Loan or Component during
such one-month period at the related
Mortgage Rate; provided, however, that
with respect to the AAPT Fixed Component
and the CAP Pool Loan, (i) the Mortgage
Rate for the one-month period preceding
the Due Dates in January and February in
any year which is not a leap year or in
February in any year which is a leap year
will be determined net of the Withheld
Amount, and (ii) the Mortgage Rate for the
one-month period preceding the Due Date in
March will be determined taking into
account the addition of any such Withheld
Amounts.
Distributions ................. On each Distribution Date, each Class of
Offered Certificates will be entitled to
receive distributions of interest in an
amount equal to the Interest Distribution
Amount for such Class and Distribution
Date, to the extent of Available Funds, if
any, remaining after distributions to each
other Class of Certificates that is senior
to such Class of interest and principal to
which each such senior Class is then
entitled and of amounts to reimburse each
such senior Class for Realized Losses
(including interest compounded monthly
thereon) previously allocated to such
senior Classes, as further described under
"Description of the Offered
Certificates--Distributions" herein. The
seniority of a Class relative to other
Classes will be determined in accordance
with the subordination provisions
described under "--Subordination" below.
The "Interest Distribution Amount" with
respect to any Distribution Date and each
Class of Regular Certificates will equal
(A) the sum of (i) the Interest Accrual
Amount for such Distribution Date and (ii)
the Interest Shortfall, if any, for such
Distribution Date, less (B) (i) the amount
of any Excess
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<PAGE>
Prepayment Interest Shortfall allocated to
such Class as described under
"--Subordination" below, and (ii) in the
case of the Class X-2 Certificates only,
the aggregate Reduction Interest
Distribution Amount for such Distribution
Date. The "Interest Accrual Amount", with
respect to any Distribution Date and any
Class of Sequential Pay Certificates, is
equal to interest for the related Interest
Accrual Period at the Pass-Through Rate
for such Class on the related Certificate
Principal Amount; and with respect to any
Distribution Date and the Class X-1A,
Class X-1B or Class X-2 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 applicable Notional Amount
of such Class.
An "Interest Shortfall" with respect to any
Distribution Date for any Class of Regular
Certificates is the sum of (a) the excess,
if any, of (i) the Interest Distribution
Amount for such Class for the immediately
preceding Distribution Date, over (ii) all
distributions of interest (other than any
Excess Interest) made with respect to such
Class of Certificates on the immediately
preceding Distribution Date, and (b) to
the extent permitted by applicable law,
(i) other than in the case of the Class
X-1A, Class X-1B or Class X-2
Certificates, one month's interest on any
such excess at the Pass-Through Rate
applicable to such Class of Certificates
for the current Distribution Date, (ii) in
the case of the Class X-1A or Class X-1B
Certificates, one month's interest on any
such excess at the Group 1 WAC Rate and
(iii) in the case of the Class X-2, one
month's interest on any such excess at the
Adjusted WAC Rate for such Distribution
Date.
For purposes of calculating the Interest
Accrual Amount for any Class of Regular
Certificates and any Distribution Date,
any reduction of Certificate Principal
Amount or Notional Amount, as applicable,
as a result of distributions to such Class
or any related Class, respectively, and
reductions in Certificate Principal Amount
or Notional Amount, as applicable, as a
result of the occurrence and allocations
of Realized Losses on the Distribution
Date occurring in the related Interest
Accrual Period shall be deemed to have
been made on the first day of such
Interest Accrual Period.
In addition, as described under "Description
of the Offered
Certificates--Distributions--Appraisal
Reduction Amounts" herein, if an Appraisal
Reduction Event occurs, distributions of
interest in respect of the Class X-2
Certificates that are attributable to the
notional reductions in Certificate
Principal Amounts of the Class G, Class F,
Class E, Class D, Class C or Class B
Certificates will be payable at a lower
payment priority than the priority
otherwise in effect for distributions of
interest in respect of the Class X-2
Certificates.
On each Distribution Date prior to the
Cross-over Date (as defined below), an
amount equal to the Principal Distribution
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<PAGE>
Amount for each Loan Group will be
distributed, to the extent of available
funds therefor:
FIRST, to the Class A Certificates, in
reduction of their respective Certificate
Principal Amounts in the following order:
(a) first, to the Class A-1 Certificates,
second, to the Class A-2A Certificates,
third, to the Class A-2B Certificates,
fourth, to the Class A-2C Certificates,
and fifth, to the Class A-2D Certificates,
in each case up to an amount equal to the
lesser of (i) the Certificate Principal
Amount thereof and (ii) the Principal
Distribution Amount with respect to Loan
Group 1 for such Distribution Date; (b)
if, after giving effect to the payments
described in clause (a), the Certificate
Principal Amount of the Class A-1
Certificates exceeds the aggregate Stated
Principal Balance of the Group 1
Components as of their Due Date in the
related Collection Period, then to the
Class A-1 Certificates, up to the lesser
of (i) the amount of such excess and (ii)
the Principal Distribution Amount with
respect to Loan Group 2 for such
Distribution Date; and (c) first, to the
Class A-2A Certificates, second, to the
Class A-2B Certificates, third, to the
Class A-2C Certificates, fourth, to the
Class A-2D Certificates, and fifth, to the
Class A-1 Certificates in each case up to
an amount equal to the lesser of (i) the
Certificate Principal Amount thereof and
(ii) the Principal Distribution Amount
with respect to Loan Group 2 for such
Distribution Date, in each case after
giving effect to the payments described in
clauses (a) and (b); provided, that, if
the remaining portion of the Available
Funds for such Distribution Date after
giving effect to payments pursuant to
clause (a) above would be less than the
Principal Distribution Amount with respect
to Loan Group 2 for such date, payments
pursuant to this paragraph shall be made
pursuant to Clauses (a) and (c) above on a
pro rata basis in accordance with the
relative entitlement of each Class of
Class A Certificates before giving effect
to any payments pursuant to clause (b)
above;
SECOND, to the Class B Certificates, in
reduction of the Certificate Principal
Amount thereof, until the Certificate
Principal Amount of such Class is reduced
to zero;
THIRD, to the Class B Certificates, for
unreimbursed amounts of Realized Losses
previously allocated to such Class, plus
interest thereon at the Pass-Through Rate
for such Class compounded monthly from the
date the related Realized Loss was
allocated to such Class;
FOURTH, to the Class C Certificates, in
reduction of the Certificate Principal
Amount thereof, until the Certificate
Principal Amount of such Class is reduced
to zero;
FIFTH, to the Class C Certificates, for
unreimbursed amounts of Realized Losses
previously allocated to such Class, plus
interest thereon at the Pass-Through Rate
for such Class compounded monthly from the
date the related Realized Loss was
allocated to such Class;
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<PAGE>
SIXTH, to the Class D Certificates, in
reduction of the Certificate Principal
Amount thereof, until the Certificate
Principal Amount thereof is reduced to
zero;
SEVENTH, to the Class D Certificates, for
unreimbursed amounts of Realized Losses
previously allocated to such Class, plus
interest thereon at the Pass-Through Rate
compounded monthly from the date the
related Realized Loss was allocated to
such Class;
EIGHTH, to the Class E Certificates, in
reduction of the Certificate Principal
Amount thereof, until the Certificate
Principal Amount thereof is reduced to
zero;
NINTH, to the Class E Certificates, for
unreimbursed amounts of Realized Losses
previously allocated to such Class, plus
interest thereon at the Pass-Through Rate
compounded monthly from the date the
related Realized Loss was allocated to
such Class;
TENTH, to the Class F Certificates, in
reduction of the Certificate Principal
Amount thereof, until the Certificate
Principal Amount thereof is reduced to
zero;
ELEVENTH, to the Class F Certificates, for
the unreimbursed amounts of Realized
Losses previously allocated to such Class,
plus interest thereon at the Pass-Through
Rate compounded monthly from the date the
related Realized Loss was allocated to
such Class;
TWELFTH, to the Class G Certificates, in
reduction of the Certificate Principal
Amount thereof, until the Certificate
Principal Amount thereof is reduced to
zero;
THIRTEENTH, to the Class G Certificates,
for the unreimbursed amounts of Realized
Losses previously allocated to such Class,
plus interest thereon at the Pass-Through
Rate compounded monthly from the date the
related Realized Loss was allocated to
such Class; and
FOURTEENTH, to the Class H Certificates in
accordance with the Pooling Agreement,
in each case to the extent of Available
Funds remaining after required
distributions to all more senior Classes
of Certificates and of interest to such
Class.
On each Distribution Date occurring on and
after the Cross-over Date, regardless of
the allocation of principal payments
described in priority first in the
preceding sentence, an amount equal to the
aggregate of the Principal Distribution
Amounts for both Loan Groups will be
distributed, first, to the Class A-1
Certificates, Class A-2A Certificates,
Class A-2B Certificates, Class A-2C
Certificates, and Class A-2D Certificates,
pro rata, based on their respective
Certificate Principal Amounts, in
reduction of their respective Certificate
Principal Amounts until the Certificate
Principal Amount of each such Class is
reduced to zero; and second, to the
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<PAGE>
Class A-1 Certificates, Class A-2A
Certificates, Class A-2B Certificates,
Class A-2C Certificates, and Class A-2D
Certificates, for unreimbursed amounts of
Realized Losses previously allocated to
such Classes, pro rata, in accordance with
the amount of such unreimbursed Realized
Losses previously allocated to each such
Class. The "Cross-over Date" is the
Distribution Date on which the Certificate
Principal Amount of each Class of
Certificates entitled to distributions of
principal other than the Class A-1, Class
A-2A, Class A-2B, Class A-2C and Class
A-2D Certificates has been reduced to
zero. The Class X-1A, Class X-1B and Class
X-2 Certificates will not be entitled to
any distributions of principal.
The "Principal Distribution Amount" for any
Distribution Date and any Loan Group is
equal to the sum for all Mortgage Loans,
without duplication of (i) the principal
component of all Monthly Payments (other
than Balloon Payments) due on the Due Date
immediately preceding such Distribution
Date (if received, or advanced by the
Master Servicer, Trustee or Fiscal Agent,
in respect of such Distribution Date) with
respect to the Mortgage Loans or
Components, as applicable, in such Loan
Group, (ii) the principal component of all
Extended Monthly Payments due on the
related Due Date (if received, or advanced
by the Master Servicer, Trustee or Fiscal
Agent, in respect of such Distribution
Date) with respect to the Mortgage Loans
or Components, as applicable, in such Loan
Group, (iii) the principal component of
any payment (including any Balloon
Payment) on any Mortgage Loan or Component
in such Loan Group received or applied on
or after the maturity date thereof in the
related Collection Period, (iv) the
portion of Unscheduled Payments allocable
to principal of any Mortgage Loan or
Component in such Loan Group received or
applied during the related Collection
Period, net of the principal portion of
any unreimbursed P&I Advances related to
such Mortgage Loan or Component, (v) the
principal portion of the Repurchase Price
with respect to each Mortgage Loan or
Component in such Loan Group received or
applied during the related Collection
Period from the Trust Fund, and (vi) the
Principal Shortfall, if any, for such
Distribution Date and such Loan Group.
For purposes of the foregoing definition of
Principal Distribution Amount, the term
"Principal Shortfall" for any Distribution
Date and any Loan Group means the amount,
if any, by which (i) the Principal
Distribution Amount for such Loan Group
for the preceding Distribution Date
exceeds (ii) the aggregate amount actually
distributed with respect to principal on
such preceding Distribution Date in
respect of such Principal Distribution
Amount.
Any Prepayment Premiums received on the AAPT
LIBOR Components will be distributed to
the holders of the Class
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<PAGE>
X-1A and Class X-1B Certificates as
follows: (i) to the Class X-1A
Certificates, an amount equal to the
product of (x) the number of Distribution
Dates remaining after such Distribution
Date to and including the Distribution
Date occurring in July 2000, (y) the
applicable Class X-1A Prepayment Factor,
and (z) the amount of principal prepaid
with respect to such Distribution Date,
and (ii) to the Class X-1B Certificates,
the remaining amount of such Prepayment
Premiums. As used above, the "Class X-1A
Prepayment Factor" means (i) an amount
equal to (x) the excess of 0.8715% over
the Initial Class A-1 Margin, divided by
(y) 12, with respect to any prepayment
allocated to AAPT LIBOR A Component, and
(ii) an amount equal to (x) the excess of
0.7015% over the Initial Class A-1 Margin,
divided by (y) 12, with respect to any
prepayment allocated to AAPT LIBOR B
Component. "Initial Class A-1 Margin"
means an amount equal to 0.23%.
Any other Prepayment Premiums received
(which are generally payable only in
connection with Mortgage Loan events of
default) will be distributed to the
holders of the Class X-2, Class A-2A,
Class A-2B, Class A-2C, Class A-2D, Class
B, Class C, Class D, Class E, Class F and
Class G Certificates in the manner and
priority described in "Description of the
Offered
Certificates--Distributions--Prepayment
Premiums".
Any Excess Interest received with respect to
AAPT LIBOR Components will be distributed
to holders of the Class A-1 Certificates
and any Excess Interest received with
respect to the Cadillac Fairview Pool Loan
will be distributed to holders of the
Class A-2B and Class A-2C Certificates,
pro rata, based on their initial
Certificate Principal Amounts. Any Excess
Interest received with respect to any
other Mortgage Loans and the AAPT Fixed
Component will be distributed to holders
of the Class A-2D, Class B, Class C, Class
D, Class E and Class F Certificates, pro
rata, based on their initial Certificate
Principal Amounts.
Except as described in this paragraph, the
holders of the Class M, Class Q, Class R,
Class MR and Class LR Certificates will
not be entitled to distributions of
interest or principal. The holders of the
Class Q Certificates will be entitled to
distributions of Net Default Interest and
the holders of the Class M Certificates
will be entitled to distributions from
payments on the Montehiedra Partner Loans,
in each case, to the extent set forth in
the Pooling Agreement. The holders of the
Class R Certificates will be entitled to
receive any Available Funds remaining in
the Upper-Tier Distribution Account on any
Distribution Date after all distributions
with respect to the Regular Certificates
on such Distribution Date have been made.
The holders of the Class MR Certificates
will be entitled to receive any Available
Funds remaining in the Middle-Tier
Distribution Account on any Distribution
Date after all other required
distributions with respect to the
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regular interests in the Middle-Tier REMIC
on such Distribution Date have been made.
The Class LR Certificateholders will be
entitled to receive any funds remaining in
the Lower-Tier Distribution Account on any
Distribution Date after all distributions
with respect to the regular interests in
the Lower-Tier REMIC on such Distribution
Date have been made. The Class LR
Certificateholders will also be entitled
to receive the proceeds of the remaining
assets in the Lower-Tier REMIC, if any,
after the Certificate Principal Amounts of
the Regular Certificates have been reduced
to zero and the holders of the Regular
Certificates have received all other
distributions to which they are entitled.
It is not anticipated that there will be
any assets remaining in the Lower-Tier
REMIC on such date.
See "Description of the Offered
Certificates--Distributions".
P&I Advances .................. The Master Servicer is required to make an
advance (each, a "P&I Advance") in respect
of delinquent Monthly Payments on the
Mortgage Loans, subject to the limitations
described herein. P&I Advances will
generally equal the delinquent portion of
the Monthly Payment as specified in the
related Note (with interest calculated at
the Net Mortgage Rate plus the Trustee Fee
Rate). If the 380 Madison Borrower or the
Whitehall Borrower defaults on its
obligation to pay amounts due on the
maturity date of the 380 Madison Loan or
the Whitehall Pool Loan, as applicable,
and the Special Servicer elects to extend
the payments on the 380 Madison Loan or
the Whitehall Pool Loan as described in
"The Pooling Agreement--Realization Upon
Mortgage Loans; Modifications" herein, the
Master Servicer will be required to
advance only an amount in respect of the
Extended Monthly Payment equal to the
lesser of (a) the Extended Monthly Payment
or (b) the Monthly Payment or portion
thereof that was due prior to the maturity
date. The Master Servicer will not be
required to advance Default Interest,
Excess Interest, Prepayment Premiums or
Balloon Payments. The amount required to
be advanced in respect of any Distribution
Date and any delinquent Monthly Payments
on a Mortgage Loan that has been subject
to an Appraisal Reduction Event (as
defined herein) will equal (i) the amount
required to be advanced by the Master
Servicer without giving effect to the
related Appraisal Reduction Amount, less
(ii) the product of (a) the amount
required to be advanced by the Master
Servicer in respect of delinquent payments
of interest without giving effect to the
related Appraisal Reduction Amount and (b)
a fraction, the numerator of which is the
Appraisal Reduction Amount and the
denominator of which is the Stated
Principal Balance of such Mortgage Loan as
of the last day of the related Collection
Period. If the Master Servicer fails to
make a required P&I Advance, the Trustee,
as acting or successor Master Servicer,
acting in accor-
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<PAGE>
dance with the Servicing Standard, will be
required to make the P&I Advance, and if
the Trustee fails to make a required P&I
Advance, the Fiscal Agent will be required
to make such P&I Advance, each subject to
a determination of recoverability. See
"The Pooling Agreement--Advances" herein.
Subordination ................. Except as described below, as a means of
providing a certain amount of protection
to the holders of the Class A-1, Class
A-2A, Class A-2B, Class A-2C, Class A-2D,
Class X-1A, Class X-1B and Class X-2
Certificates against losses associated
with delinquent and defaulted Mortgage
Loans, the rights of the holders of the
Class B, Class C, Class D, Class E, Class
F, Class G and Class H Certificates to
receive distributions of interest (other
than Excess Interest) and principal, as
applicable, will be subordinated to such
rights of the holders of the Class A-1,
Class A-2A, Class A-2B, Class A-2C, Class
A-2D, Class X-1A, Class X-1B and Class X-2
Certificates, except to the extent
provided herein with respect to Reduction
Interest Distribution Amounts and
Reduction Interest Shortfalls on the Class
X-2 Certificates resulting from Appraisal
Reductions, as described herein under
"Description of the Offered
Certificates--Distributions--Payment
Priorities" and "--Appraisal Reduction
Amounts''. The Class B Certificates will
likewise be protected by the subordination
of the Class C, Class D, Class E, Class F,
Class G and Class H Certificates. The
Class C Certificates will be likewise
protected by the subordination of the
Class D, Class E, Class F, Class G and
Class H Certificates. The Class D
Certificates will be likewise protected by
the subordination of the Class E, Class F,
Class G and Class H Certificates. The
Class E Certificates will likewise be
protected by the subordination of the
Class F, Class G and Class H Certificates.
The Class F Certificates will likewise be
protected by the subordination of the
Class G and Class H Certificates. The
Class G Certificates will likewise be
protected by the subordination of the
Class H 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
(other than Excess Interest and except
with respect to Reduction Interest
Distribution Amounts and Reduction
Interest Shortfalls on the Class X-2
Certificates) 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 and (ii) by the allocation of
Realized Losses, first, to the Class H
Certificates; second, to the Class G
Certificates; third, to the Class F
Certificates; fourth, to the Class E
Certificates; fifth, to the Class D
Certificates; sixth to the Class C
Certificates; seventh, to the Class B
Certificates; and finally, to the Class
A-1, Class A-2A, Class A-2B, Class A-2C
and Class A-2D Certificates, pro rata,
based on their respective outstanding
Certificate
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<PAGE>
Principal Amounts. No other form of credit
enhancement, including any payments on, or
proceeds with respect to, the Montehiedra
Partner Loans will be available for the
benefit of the holders of the Offered
Certificates. See "Description of the
Offered Certificates" herein.
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, a reduction of the interest
rate of a Mortgage Loan by a bankruptcy
court or other unanticipated or
default-related expenses of the Trust Fund
for which there is no corresponding
collection from the borrower will be
allocated in the same manner as Realized
Losses. Shortfalls in Available Funds
resulting from Excess Prepayment Interest
Shortfalls will be allocated to reduce the
interest entitlement of each Class of
Certificates, pro rata, based upon the
amount of interest which would otherwise
be distributable to each Class (without
giving effect to any Reduction Interest
Distribution Amounts). See "Description of
the Offered
Certificates--Distributions--Payment
Priorities" herein.
Optional Termination; Optional
Mortgage Loan Purchase ....... The Seller, and if the Seller does not
exercise the option, the Master Servicer
and, if neither the Master Servicer nor
the Seller 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 the Montehiedra
Partner Loans, and all property acquired
through exercise of remedies in respect of
any Mortgage Loan or the Montehiedra
Partner Loans, remaining in the Trust
Fund, and thereby effect the 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 Stated Principal
Balance of the Mortgage Loans as of the
Cut-Off Date.
See "The Pooling Agreement--Optional
Termination; Optional Mortgage Loan
Purchase".
Certain Federal Income Tax
Consequences ................. The Trust Fund will include three separate
real estate mortgage investment conduits
(each, a "REMIC"). One REMIC (the
"Lower-Tier REMIC") will hold the Mortgage
Loans and any related property, other than
certain interest payments on the AAPT
LIBOR Components which are deposited
directly into the other two REMICs.
Collections in the Lower-Tier REMIC will
be used to make payments of principal and
interest on regular interests in the
Lower-Tier REMIC held by the second REMIC
(the "Middle-Tier REMIC"). Those payments
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<PAGE>
in turn will be used to make distributions
on the regular interests in the
Middle-Tier REMIC which are held by the
third REMIC (the "Upper-Tier REMIC"), and
which in turn are used to make
distributions on the Certificates (other
than the Class MR, Class LR, Class M and
Class Q Certificates), which represent
interests in the Upper-Tier REMIC. For
ease of presentation, distributions will
generally be described herein as if made
directly from collections on the Mortgage
Loans to the holders of the Certificates.
Elections will be made to treat each of the
Lower-Tier REMIC, the Middle-Tier REMIC
and the Upper-Tier REMIC as REMICs and in
the opinion of counsel, each will qualify
as a REMIC for federal income tax
purposes. The Class A-1, Class A-2A, Class
A-2B, Class A-2C, Class A-2D, Class X-1A,
Class X-1B, Class X-2, Class B, Class C,
Class D, Class E, Class F, Class G and
Class H Certificates (collectively, the
"Regular Certificates") will represent
"regular interests" in the Upper-Tier
REMIC, and the Class R, Class MR and Class
LR Certificates (collectively, the
"Residual Certificates") will be
designated as the sole Classes of
"residual interests" in the Upper-Tier
REMIC, Middle-Tier REMIC and Lower-Tier
REMIC, respectively. In addition, the
Class A-1, Class A-2B, Class A-2C, Class
A-2D, Class B, Class C, Class D, Class E
and Class F Certificates also represent
undivided beneficial interests in portions
of the Excess Interest, which portions of
the Trust Fund will be treated as part of
a grantor trust for federal income tax
purposes. Furthermore, the Class Q
Certificates will represent the right to
receive Net Default Interest and the Class
M Certificates will represent undivided
beneficial interests in the Montehiedra
Partner Loans, which portions of the Trust
Fund will be treated as part of the
grantor trust for federal income tax
purposes.
The regular interests represented by the
Offered Certificates will be treated as
newly originated debt instruments for
federal income tax purposes. Beneficial
owners will be required to report income
thereon in accordance with the accrual
method of accounting. Although not free
from doubt, it is anticipated that the
Class X-1A and Class X-2 Certificates will
be treated as issued with original issue
discount for federal income tax purposes
in an amount equal to the excess of all
distributions of interest expected to be
received thereon over their respective
issue prices including accrued interest.
It is also anticipated that the regular
interests represented by the Class A-2A,
Class A-2B, Class A-2C, Class A-2D, Class
B, Class C, Class D, Class E, Class F and
Class G Certificates will be issued at a
premium for federal income tax purposes.
See "Federal Income Tax Consequences"
herein and "Federal Income Tax
Consequences--REMIC Certificates--Income
from Regular Certificates" in
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<PAGE>
the Prospectus. Although not free from
doubt, it is anticipated that any
Prepayment Premiums allocable to the
Offered Certificates will be ordinary
income to a Certificateholder as such
amounts accrue. See "Federal Income Tax
Consequences" herein.
ERISA Considerations .......... The United States Department of Labor has
issued to the Underwriter an individual
prohibited transaction exemption,
Prohibited Transaction Exemption 89-88
(the "Exemption"), which generally exempts
from the application of certain of the
prohibited transaction provisions of
Sections 406 and 407 of the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), and the excise taxes
imposed by Sections 4975(a) and (b) of the
Internal Revenue Code of 1986, as amended
(the "Code"), and the civil penalties
imposed by 502(i) of ERISA, transactions
relating to the purchase, sale and holding
of pass-through certificates such as the
Class A-1, Class A-2A, Class A-2B, Class
A-2C, Class A-2D, Class X-1A and Class X-2
Certificates by employee benefit plans and
certain other retirement arrangements,
including individual retirement accounts
and Keogh plans, which are subject to
Title I of ERISA and/or Section 4975 of
the Code (each of which is hereinafter
referred to as a "Plan"), collective
investment funds in which such Plans are
invested, and insurance companies using
assets of separate accounts or general
accounts which include assets of Plans (or
which are deemed pursuant to ERISA to
include assets of Plans) and the servicing
and operation of mortgage pools such as
the Mortgage Pool, provided that certain
conditions are satisfied. See "ERISA
Considerations" herein and in the
Prospectus.
The Underwriter believes that the conditions
to the applicability of the Exemption will
generally be met with respect to the Class
A-1, Class A-2A, Class A-2B, Class A-2C,
Class A-2D, Class X-1A and Class X-2
Certificates (the "Senior Offered
Certificates"), other than possibly those
conditions which are dependent on facts
unknown to the Underwriter or which it
cannot control, such as those relating to
the circumstances of the Plan purchaser or
the Plan fiduciary making the decision to
purchase any such Class of Certificates.
However, before purchasing a Senior
Offered Certificate, a fiduciary of a Plan
should make its own determination as to
the availability of the exemptive relief
provided by the Exemption or the
availability of any other exemption and
whether the conditions of any such
exemption will be applicable to the Senior
Offered Certificates.
The Exemption does not apply to the purchase
or holding of Certificates by Plans
sponsored by the Seller, the Underwriter,
the Trustee, the Master Servicer, any
obligor with respect to Mortgage Loans
included in the Trust Fund
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<PAGE>
constituting more than five percent of the
aggregate unamortized principal balance of
the assets in the Trust Fund, or any
affiliate of such parties (the "Restricted
Group"). Borrowers who are acting on
behalf of Plans or who are investing
assets of Plans, and any affiliates of any
such borrowers, should not purchase any of
the Certificates.
THE CLASS B, CLASS C, CLASS D, CLASS E,
CLASS F AND CLASS G CERTIFICATES ARE
SUBORDINATE TO ONE OR MORE OTHER CLASSES
OF CERTIFICATES, AND, ACCORDINGLY, SUCH
CERTIFICATES MAY NOT BE PURCHASED BY OR
TRANSFERRED TO A PLAN OR ANY PERSON ACTING
ON BEHALF OF OR INVESTING THE ASSETS OF
ANY SUCH PLAN, UNLESS SUCH PERSON IS AN
INSURANCE COMPANY INVESTING THE ASSETS OF
ITS GENERAL ACCOUNT UNDER CIRCUMSTANCES
WHEREBY THE PURCHASE AND HOLDING OF ANY
SUCH CERTIFICATE WOULD BE EXEMPT FROM THE
PROHIBITED TRANSACTION PROVISIONS OF ERISA
AND THE CODE UNDER PROHIBITED TRANSACTION
CLASS EXEMPTION 95-60.
Prior to purchasing an Offered Certificate,
an investor who is a "party in interest"
within the meaning of Section 3(14) of
ERISA or a "disqualified person" within
the meaning of Section 4975(e)(2) of the
Code with respect to a Plan whose assets
are directly or indirectly invested in the
Century Towers Borrower should review the
discussion relating to the Century Towers
Borrower set forth in "ERISA
Considerations" herein.
Ratings ....................... It is a condition to the issuance of the
Offered Certificates that (i) each of the
Class A-1, Class A-2A, Class A-2B, Class
A-2C, Class A-2D, Class X-1A, Class X-1B
and Class X-2 Certificates be rated "AAA"
by each of Fitch Investors Service, L.P.
("Fitch") and Duff & Phelp's Credit Rating
Co. ("DCR") and "Aaa" by Moody's Investors
Service, Inc. ("Moody's") (Fitch, DCR and
Moody's, each referred to herein as a
"Rating Agency" and collectively, the
"Rating Agencies"); (ii) the Class B
Certificates be rated "AA" by each of
Fitch and DCR and "Aa2" by Moody's; (iii)
the Class C Certificates be rated "AA-" by
each of Fitch and DCR and "Aa3" by
Moody's; (iv) the Class D Certificates be
rated "A-" by Fitch, "A" by DCR and "A2"
by Moody's; (v) the Class E Certificates
be rated "A-" by each of Fitch and DCR and
"A3" by Moody's; (vi) the Class F
Certificates be rated "BBB" by each of
Fitch and DCR and "Baa2" by Moody's; and
(vii) the Class G Certificates be rated
"BBB-" by Fitch. The ratings on the
Offered Certificates address the
likelihood of the timely receipt by
holders thereof of all distributions of
interest to which they are entitled and,
except in the case of the Class X-1A and
Class X-2 Certificates, distributions of
principal by the Rated Final Distribution
Date. A security
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<PAGE>
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. 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, Excess
Interest or Default Interest or the tax
treatment of the Certificates. A security
rating does not represent any assessment
of the yield to maturity that investors
may experience or the possibility that the
holders of the Class X-1A and Class X-2
Certificates might not fully recover their
initial investment in the event of
delinquencies or defaults, rapid
prepayments (both voluntary and
involuntary), or the application of
Realized Losses. As described herein, the
amounts payable with respect to the Class
X-1A and Class X-2 Certificates consist
only of interest. If all of the Mortgage
Loans were to prepay in the initial month,
with the result that the Class X-1A or
Class X-2 Certificateholders receive only
a single month's interest and thus suffer
a nearly complete loss of their
investment, all amounts "due" to such
holders will nevertheless have been paid,
and such result is consistent with the
rating received on each of the Class X-1A
or Class X-2 Certificates. The ratings do
not address the fact that the Pass-Through
Rates of the Offered Certificates, to the
extent that they are based on the Adjusted
WAC Rate, will be affected by changes
therein and by the existence of Group 1
Difference Amounts and the related
Adjusted LIBOR Rate. See "Ratings" herein
and "Yield Considerations" in the
Prospectus.
Legal Investment .............. The Certificates offered hereby do not
constitute "mortgage related securities"
for purposes of the Secondary Mortgage
Market Enhancement Act of 1984, as amended
("SMMEA"). As a result, the appropriate
characterization of the Offered
Certificates under various legal
investment restrictions, and thus the
ability of investors subject to these
restrictions to purchase the Offered
Certificates of any Class, may be subject
to significant interpretative
uncertainties. In addition, institutions
whose investment activities are subject to
review by federal or state regulatory
authorities may be or may become subject
to restrictions on the investment by such
institutions in certain forms of mortgage
backed securities. Investors should
consult their own legal advisors to
determine the extent to which the Offered
Certificates may be purchased by such
investors. See "Legal Investment" herein
and in the Prospectus.
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<PAGE>
RISK FACTORS
Prospective holders of Offered Certificates should consider, among other
things, the following factors in connection with the purchase of the Offered
Certificates.
THE MORTGAGE LOANS
BORROWER DEFAULT; NONRECOURSE MORTGAGE LOANS. The Mortgage Loans are not
insured or guaranteed, in whole or in part, by any governmental entity, by
any private mortgage or other insurer, or by the Seller, the Originators, the
Master Servicer, the Trustee, the Underwriter, the Fiscal Agent or any of
their respective subsidiaries, shareholders, partners, directors, officers,
employees or other affiliates.
Each Mortgage Loan is 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 and the Underlying
Mortgaged Properties" herein. Consequently, payment on each Mortgage Loan
prior to maturity is dependent primarily on the sufficiency of the net
operating income of the related Mortgaged Property, and at maturity (whether
at scheduled maturity, if applicable, 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 or the ability of the related
borrower to refinance the Mortgaged Property.
All of the Mortgage Loans were originated within one year of the Cut-Off
Date and 6 of the 8 Mortgage Loans were originated within the five months
prior to the Cut-Off Date. Consequently, the Mortgage Loans do not have a
long standing payment history. In the case of the AAPT Pool Loan, the 380
Madison Loan and the CAP Pool Loan (each of which was originated in June
1997), the first regular scheduled payment will not occur under the terms of
such Mortgage Loans until August 11, 1997. See "Description of the Mortgage
Pool and the Underlying Mortgaged Properties--Description of the Mortgage
Loans--The AAPT Pool Loan--Payment Terms", "--The 380 Madison Loan--Payment
Terms" and "--The CAP Pool Loan--Payment Terms" herein.
LIMITATIONS WITH RESPECT TO REPRESENTATIONS AND WARRANTIES. Each
Responsible Party will make certain limited representations and warranties
regarding the Mortgage Loans for which it is acting as a Responsible Party,
and such representations and warranties will be assigned by the Seller to the
Trustee for the benefit of the Certificateholders. See "The Pooling
Agreement--Representations and Warranties; Repurchase" herein and Exhibit B
hereto for a summary of such representations and warranties. A material
breach of such representations and warranties that is not cured within a
specified time period may, under certain circumstances described herein,
obligate the applicable Responsible Party to repurchase the defective
Mortgage Loan or, in the case of the Cadillac Fairview Pool Loan, one or more
of the individual loans made to the Cadillac Fairview Borrowers.
It is possible that one or more Mortgage Loans may contain defects without
giving rise to an obligation to repurchase on the part of the applicable
Responsible Party. If the applicable Responsible Party is required to but
does not cure or remedy a breach of a representation or warranty, payments on
the Offered Certificates may be substantially less than such payments would
be if the applicable Responsible Party had cured or remedied such a breach.
In addition, in the event that a Responsible Party repurchases a Mortgage
Loan, the Repurchase Price will be passed through to the holders of certain
Classes of Certificates with the same effect as if such Mortgage Loan had
been prepaid in full (but without any prepayment premium or yield maintenance
charge), which may adversely affect the yield to maturity on such
Certificates. See "--The Offered Certificates--Special Prepayment, Yield and
Loss Considerations" below.
The obligation of the applicable Responsible Party to repurchase a
Mortgage Loan may constitute the sole remedy available to holders of
Certificates or the Trustee for a breach of a representation or warranty by
the applicable Responsible Party. None of the Seller, the Master Servicer,
the Special Servicer, the Trustee, the Underwriter or the Fiscal Agent will
be obligated to purchase a Mortgage Loan if the applicable Responsible Party
defaults on its obligation to repurchase or cure, and no assurance can be
given that the applicable Responsible Party will fulfill such obligations. If
such obligation is not met with respect to a breach that would cause a
Mortgage Loan not to be a "qualified mortgage" under the
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<PAGE>
REMIC provisions of the Code, the Upper-Tier REMIC, Middle-Tier REMIC and
Lower-Tier REMIC may be disqualified as REMICs. See "The Pooling
Agreement--Representations and Warranties; Repurchase" herein.
COMMERCIAL LENDING GENERALLY. The Mortgage Loans are secured by office
buildings, retail shopping centers, industrial properties, a multifamily
apartment building and two parcels of undeveloped land. Commercial lending is
generally viewed as exposing a lender to a greater risk of loss than
residential one-to-four family lending since it typically involves larger
loans to a single obligor than residential one-to-four family lending.
Lenders typically look to the debt service coverage ratio of a loan secured
by income-producing property as an important measure of the risk of default
on such a loan. See "--Concentration of Mortgage Loans and Mortgaged Property
Types".
Commercial property values and net operating income are subject to
volatility, and net operating income may be sufficient or insufficient to
cover debt service on the related Mortgage Loan at any given time. The
repayment of loans secured by income-producing properties is typically
dependent upon the successful operation of the related real estate project,
the business operated by the tenants and the creditworthiness of such tenants
(i.e., the ability of the applicable property to produce net operating
income) rather than upon the liquidation value of the underlying real estate.
The volatility of property values and net operating income depends upon a
number of factors, including (i) the volatility of property revenue,
determined primarily by (a) the length of tenant lease commitments, (b) the
creditworthiness of tenants, (c) in the case of retail properties
characterized by rentals based all or in part on tenant sales, the volume of
those sales and (d) the variability of other property revenue sources; 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.
Even when the current net operating income is sufficient to cover debt
service, there can be no assurance that this will continue to be the case in
the future. 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 retail space, office space,
industrial space or housing); changes or continued weakness in specific
industry segments; perceptions by prospective tenants and, in the case of
retail properties, retailers and shoppers, of the safety, convenience,
condition, services and attractiveness of the property; the proximity and
availability of competing alternatives to the Mortgaged Property; the
willingness and ability of the property's owner to provide capable management
and adequate maintenance; demographic factors; consumer confidence,
unemployment rates, customer tastes and preferences; retroactive changes to
building or similar codes; and increases in operating expenses (such as
energy costs).
Net operating income from a real estate project may be reduced, and the
borrower's ability to repay the loan impaired, as a result of, among other
things, an increase in vacancy rates for the project, a decline in rental
rates as leases are renewed or entered into with new tenants, an increase in
operating expenses of the project and/or an increase in capital expenditures
needed to maintain the project and make improvements required by tenants. In
the case of Mortgage Loans that are secured by Mortgaged Properties leased to
a single tenant, a deterioration in the financial condition of such tenant,
resulting in a failure to pay rent, may have a disproportionately greater
effect on the net operating income from such Mortgaged Properties than would
be the case with respect to Mortgaged Properties with multiple tenants.
Mortgage Loans secured by Mortgaged Properties leased to a single tenant or
to a small number of tenants are also more susceptible to interruptions of
cash flow if such tenants decide not to renew their leases, since the impact
of such a decision is proportionately greater, the time required to re-lease
the space may be longer and greater capital costs may be incurred in making
the space appropriate for replacement tenants than would be the case with
Mortgaged Properties having a larger number of relatively smaller tenants.
For example, 9 of the AAPT Properties (representing 28.5% of the Allocated
Loan Amount of the AAPT Pool Loan) and 7 of the CAP Properties (representing
28.0% of the Allocated Loan Amount of the CAP Pool Loan) are each leased to a
single tenant. In the case of Mortgage Loans
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secured by Mortgaged Properties having multiple tenants, expenditures for
re-leasing may be more frequent than would be the case with respect to
Mortgaged Properties with single tenants, thereby reducing cash flow
available for debt service payments. In addition, multi-tenanted Mortgaged
Properties may experience higher continuing vacancy rates and greater
volatility in rental income and expenses than single-tenanted Mortgaged
Properties.
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 will increase
over time in the form of increased maintenance and capital improvements
needed to maintain the property. 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.
Additionally, some of the Mortgaged Properties may not readily be
convertible to alternative uses if such Mortgaged Properties were to become
unprofitable due to competition, age of the improvements, decreased demand,
regulatory changes or other factors. The conversion of commercial properties
(particularly industrial properties) to alternate uses generally requires
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 Mortgage Loan, the liquidation
value of any such Mortgaged Property may be substantially less, relative to
the amount owing on the related Mortgage Loan, than would be the case if such
Mortgaged Property were readily adaptable to other uses.
A decline in the real estate market, in the financial condition of a major
tenant or a general decline in the local, regional or national economy will
tend to have a more immediate effect on the net operating income of
properties with short-term revenue sources and may lead to higher rates of
delinquency or defaults. Historical operating results of the Mortgaged
Properties may not be comparable to future operating results. (See
"--Borrowers' Recent Acquisitions of the Mortgaged Properties".) In addition,
other factors may adversely affect the Mortgaged Properties' value without
affecting their current net operating income, including changes in
governmental regulations, fiscal policy and zoning or tax laws; potential
environmental legislation or liabilities or other legal liabilities; the
availability of refinancing; and changes in interest rate levels. 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 used in
connection with the origination of such Mortgage Loan.
Other retail centers, office buildings, industrial properties and
multifamily apartment buildings located in the areas of the Mortgaged
Properties compete with the Mortgaged Properties of such types to attract
retailers, customers and tenants. Increased competition could adversely
affect income from and market value of the Mortgaged Properties.
The availability of credit for obligors to refinance the Mortgage Loans or
sell Mortgaged Properties will be significantly dependent upon economic
conditions in the markets where the Mortgaged Properties are located, as well
as the willingness and ability of lenders to make such loans. Such lenders
typically include banks, insurance companies, finance companies and real
estate investment trusts. The availability of funds in the credit markets
changes over time and there can be no assurance that the availability of such
funds will increase above, or will not contract below, current levels. In
addition, the availability of assets similar to the Mortgaged Properties, and
the competition for available credit, may affect the ability of potential
purchasers to obtain financing for the acquisition of the Mortgaged
Properties. The ability of the Trust Fund to make distributions to the
Certificateholders will depend significantly on the ability of the obligors
to refinance the Mortgage Loans or sell the Mortgaged Properties.
CONCENTRATION OF MORTGAGE LOANS AND MORTGAGED PROPERTY TYPES. The average
principal balance of the Mortgage Loans as of the Cut-Off Date was
approximately $122,137,375. The Cadillac Fairview Pool Loan, the Century
Plaza Towers Loan, the AAPT Pool Loan, the 380 Madison Loan, the CAP Pool
Loan, the Whitehall Pool Loan, the Ritz Plaza Loan and the Montehiedra Loan
represent
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approximately 26.5%, 23.5%, 12.8%, 9.1%, 9.0%, 7.4%, 6.4% and 5.4%,
respectively, of the aggregate principal balance of the Mortgage Pool as of
the Cut-Off Date. Office properties, retail properties, a single multifamily
property and industrial buildings represent approximately 57.0%, 33.2%, 6.4%
and 3.3%, respectively, of the aggregate principal balance of the Mortgage
Pool as of the Cut-Off Date (based on the primary property type for combined
office/industrial and office/retail properties).
A mortgage pool consisting of fewer loans, each having a relatively higher
outstanding principal balance, may result in losses that are more severe,
relative to the size of the pool, than would be the case if the pool
consisted of a greater number of mortgage loans each having a relatively
smaller outstanding principal balance. In addition, the concentration of any
mortgage pool in 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 substantially more severe, relative to the size of
the pool, than would be the case if the aggregate balance of the pool were
more evenly distributed among the mortgage loans in such pool. Because there
are only 8 Mortgage Loans, losses on any one Mortgage Loan may have a
substantial negative effect on the Offered Certificates.
GEOGRAPHIC CONCENTRATION. Repayments by borrowers and the market value of
the Mortgaged Properties could be adversely affected by economic conditions
generally or in regions where 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,
including earthquakes, floods and hurricanes (which may result in uninsured
losses), and other factors which are beyond the control of the borrowers. The
Mortgaged Properties are located in 13 states and Puerto Rico. 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.
For example, improvements on Mortgaged Properties located in California and
Puerto Rico may be more susceptible to certain types of special hazards not
covered by insurance (such as earthquakes and hurricanes) than properties
located in other parts of the country. In addition, the economy of the State
of California would be adversely affected to a greater degree than that of
other areas of the country by certain developments affecting industries
concentrated in that state, and California has experienced significant
downturns in the market value of real estate more recently than the downturns
that have generally affected other areas of the country. A decline in the
general economic condition in regions in which Mortgaged Properties securing
a significant portion of the Mortgage Loans are located could result in a
decrease in commercial property, housing or consumer demand in the region and
the income from and market value of the Mortgaged Properties may be adversely
affected. See the table entitled "Mortgaged Properties by Location" for a
description of the geographic location of the Mortgaged Properties. All of
the Mortgaged Properties securing the AAPT Pool Loan are located in the
Mid-Atlantic region, particularly Pennsylvania, New Jersey, Virginia or North
Carolina. In addition, although the AAPT Pool Loan is secured by 48 Mortgaged
Properties, most of the Mortgaged Properties are located in six business
parks. All of the Mortgaged Properties securing the CAP Pool Loan are located
in Richmond, Virginia or northern Virginia. The table below sets forth the
states in which a significant percentage of the Mortgaged Properties are
located and, except as set forth in the table below, no state contains more
than 5% (by Cut-Off Date Allocated Loan Amount) of the Mortgaged Properties.
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SIGNIFICANT GEOGRAPHIC CONCENTRATION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
PERCENT OF
CUT-OFF DATE CUT-OFF DATE
ALLOCATED ALLOCATED NUMBER OF WEIGHTED AVERAGE
STATE LOAN AMOUNT LOAN AMOUNT PROPERTIES DSCR
- --------------- -------------- -------------- ------------ ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
California ..... $271,054 27.7% 8 1.75x
New York ....... $227,576 23.3% 4 1.72x
Virginia ....... $106,420 10.9% 26 1.70x
Pennsylvania .. $ 79,426 8.1% 35 1.61x
Puerto Rico ... $ 52,580 5.4% 1 1.69x
Louisiana ...... $ 51,096 5.2% 1 1.53x
Mississippi ... $ 50,698 5.2% 1 1.66x
</TABLE>
The aggregate principal balance of the Mortgage Loans secured by Mortgaged
Properties in each state was calculated based on the Cut-Off Date Allocated
Loan Amount of each Mortgaged Property, as described below under "Mortgage
Pool Characteristics--Certain Characteristics of the Mortgage Loans".
RISKS ASSOCIATED WITH OFFICE PROPERTIES. The Whitehall Pool Loan, the
Century Plaza Towers Loan, the 380 Madison Loan, the AAPT Pool Loan and CAP
Pool Loan are all, in whole or part, secured by office properties.
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. See "--Commercial Lending
Generally". For example, The Chase Manhattan Bank leases approximately 31% of
the 380 Madison Property GLA under a lease that is scheduled to expire in the
year 2002.
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 to offer certain amenities to its tenants, including
sophisticated building systems (such as fibrotic 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. 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.
RISKS ASSOCIATED WITH RETAIL PROPERTIES. The Cadillac Fairview Properties,
2 of the Whitehall Properties and the Montehiedra Property are retail
properties. The value of retail properties is significantly affected by 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 may be 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. Anchor tenants in shopping
centers traditionally have been a major factor in the public's perception of
a shopping center. The anchors at a shopping center play an important part in
generating customer traffic and making a center a desirable location for
other tenants of the center. 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 tenant (notwithstanding its continued payment of rent) can have a
material negative effect on the economic performance of a retail property.
For example, Mervyn's has recently closed its stores in 2 of the Cadillac
Fairview Properties. As described in "Description of the Mortgage Pool and
the Underlying Mortgaged
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Properties--Description of the Mortgage Loans--The Cadillac Fairview Pool
Loan--Reserves" herein, JC Penney has acquired one of these stores and one of
the Cadillac Fairview Borrowers has entered into a lease with Upton's for the
other store. There can be no assurance that if other anchor stores in the
Mortgaged Properties were to close the related borrower would be able to
replace such anchors in a timely manner or without incurring additional costs
and adverse economic effects. See "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Borrowers and the
Properties--The Cadillac Fairview Borrowers and Properties" herein. See also
"--Risks Relating to Tenants; Reserves" below. Furthermore, the correlation
between the success of tenant businesses and property value is increased when
the property is a single tenant property.
Unlike office or industrial properties, retail properties also face
competition from sources outside a given real estate market. Factory-outlet
centers, discount shopping centers and clubs, video shopping networks,
catalogue retailers, home shopping networks, direct mail and telemarketing
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. Increased
competition could adversely affect income from and market value of the
Mortgaged Properties. For example, a new regional shopping center, known as
The Westchester, was opened in 1995 near the Cadillac Fairview Property known
as the Galleria at White Plains. In addition, a potentially competing
regional shopping center which is currently under development and is located
within 10 miles from the Montehiedra Property is the subject of a purchase
agreement with affiliates of the Montehiedra Borrower and the Montehiedra
Property Manager and if purchased by such affiliate would be managed by an
affiliate of the Montehiedra Property Manager.
RISKS ASSOCIATED WITH INDUSTRIAL PROPERTIES. The Whitehall Pool Loan, the
AAPT Pool Loan and the CAP Pool Loan are secured in part by industrial
properties. 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. 1 of the Whitehall Properties that is an
industrial property is leased to a single tenant that recently vacated the
property; however, the tenant is continuing to pay rent.
RISKS ASSOCIATED WITH MULTIFAMILY PROPERTIES. The Ritz Plaza Loan is
secured by a multifamily property located in the Borough of Manhattan in the
City of New York. Significant factors determining the value and successful
operation of a multifamily property include the location of the property, the
rental rate in relation to the size of the apartment, the physical attributes
of the 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. There are numerous
multifamily rental properties located in the vicinity of the Ritz Plaza
Property and throughout the Manhattan market that compete with the Ritz Plaza
Property. In addition, apartments comparable to the apartments in the Ritz
Plaza Property are available for purchase in condominium or cooperative
apartment buildings throughout Manhattan. The area in which the Ritz Plaza
Property is located has several sites suitable for construction of competing
properties. One of these sites, located one block from the Ritz Plaza
Property, is currently being developed with a competing multifamily
residential property.
The Ritz Plaza Property is subject to the New York State rent
stabilization laws. These laws limit the amount a landlord may increase rents
to increases set or approved by a governmental agency or body and also limit
the basis on which a landlord may terminate a tenancy or refuse to offer a
tenant a renewal of his or her lease. These limitations on the Ritz Plaza
Borrower's ability to increase rents may impair its ability to repay the Ritz
Plaza Loan from its net operating income or the proceeds of a sale or
refinancing of the Ritz Plaza Property. The Ritz Plaza Property is also the
subject of a tax abatement. See "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Borrowers and the
Properties--The Ritz Plaza Borrower and Property--421-a Exemption; Rent
Stabilization" herein.
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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, 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 rather than lease 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.
RISKS RELATING TO TENANTS; RESERVES. Income from, and the market value of,
the Mortgaged Properties would be adversely affected if space in the
Mortgaged Properties could not be leased or re-leased, if tenants were unable
to meet their lease obligations, if a significant tenant were to become a
debtor in a bankruptcy case under Title 11 of the United States Code (the
"Bankruptcy Code"), or if for any other reason rental payments could not be
collected. Any tenant may, from time to time, experience a downturn in its
business, which may weaken its financial condition and result in a reduction
or failure to make rental payments when due. For example, with respect to
Mortgaged Properties that contain retail space, if tenants' sales were to
decline, percentage rents may decline and tenants may be unable to pay their
rent or other occupancy costs. If a tenant defaults in its obligations to a
borrower, the borrower may experience delays in enforcing its rights as
lessor and may incur substantial costs and experience significant delays
associated with protecting its investment, including costs incurred in
renovating and reletting the property.
Repayment of the Mortgage Loans secured by retail, industrial and office
properties 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. Tables containing information regarding the expiration
dates of certain leases are set forth under "Mortgage Pool
Characteristics--Certain Characteristics of the Mortgage Loans" herein. Even
if vacated space is successfully relet, the costs associated with reletting,
including tenant improvements and leasing commissions, could be substantial
and could reduce cash flow from the Mortgaged Properties.
Most of the Mortgage Loans required that reserves be established upon the
closing of the loan to fund identified capital expenditure items and certain
leasing costs. Most of the Mortgage Loans also require that reserves be
funded on a monthly basis from cash flow of the applicable Mortgaged Property
or Properties which may be used by the applicable borrower to fund ongoing
capital improvements and leasing costs. There can be no assurance that the
reserve amounts established at the closing of a loan will be sufficient to
offset the actual costs of the items for which the reserves were established,
or that cash flow from the properties will be sufficient in the future to
fully fund the ongoing monthly reserve requirements or that such ongoing
monthly reserves will be sufficient to offset the future capital expenditure
and leasing costs of the properties. See "Description of the Mortgage Pool
and the Underlying Mortgaged Properties--Description of the Mortgage Loans"
herein for a discussion of the reserve accounts for each Mortgage Loan.
As of the Cut-Off Date a total of approximately $1.21 million in rent
abatements have been given by the Cadillac Fairview Borrowers to
approximately 14 tenants of the Cadillac Fairview Properties for which
reserves have been established with the mortgagee. Consequently, there is no
significant rent payment history with respect to these tenants, and there can
be no assurance that they will not seek to renegotiate their leases or
default in their obligations to pay rent once the rent abatement period
expires.
The bankruptcy or insolvency of a major tenant or a number of smaller
tenants in retail, office and industrial properties may have an adverse
impact on the Mortgaged Properties affected and the income produced by such
Mortgaged Properties. Under the Bankruptcy Code, a tenant has the option of
assuming or rejecting or, subject to certain conditions, assuming and
assigning to a third party, any unexpired lease. If the tenant assumes its
lease, the tenant must cure all defaults under the lease and provide the
landlord with adequate assurance of its future performance under the lease.
If the tenant rejects the lease, the landlord's claim for breach of the lease
would (absent collateral securing the claim) be treated as a general
unsecured claim against the tenant. The amount of the claim would be limited
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to the amount owed for the unpaid rent reserved under the lease for the
periods prior to the bankruptcy petition (or earlier surrender of the leased
premises) which are unrelated to the rejection, plus the greater of one
year's rent or 15% of the remaining rent reserved under the lease (but not to
exceed three years' rent). If the tenant assigns its lease, the tenant must
cure all defaults under the lease and the proposed assignee must demonstrate
adequate assurance of future performance under the lease.
As of May 23, 1997, approximately 3.3% of the aggregate GLA in the
Cadillac Fairview Properties was occupied by tenants which are in bankruptcy
under the Bankruptcy Code. As of June 16, 1997, approximately 6.1% of the
aggregate GLA in the Montehiedra Property was occupied by tenants which are
in bankruptcy under the Bankruptcy Code, including Edison Brothers and
Discovery Zone.
No assurance can be given that tenants in the Mortgaged Properties will
continue making payments under their leases or that other tenants will not
file for bankruptcy protection in the future or, if any tenants so file, that
they will continue to make rental payments in a timely manner.
RISK OF REDEVELOPMENT OF THE ABC ENTERTAINMENT CENTER. During the term of
the Century Plaza Towers Loan, the ABC Entertainment Center adjacent to the
Century Towers Property is likely to be substantially redeveloped. The
operating and reciprocal easement agreement entered into by the Century
Towers Borrower as well as the Century Plaza Towers Loan documents provide
certain limitations relating to such development. See "Description of the
Mortgage Pool and the Underlying Mortgaged Properties--Description of the
Borrowers and the Properties--The Century Towers Borrower and Property--ABC
Entertainment Center". Currently, the fee interest in and to the ABC
Entertainment Center is owned by a limited liability company, which in turn
is owned by the members in the Century Towers Borrower. Such fee interest is
subject to a ground lease to an unaffiliated third party. Despite this
commonality of ownership between the Century Towers Property and the ABC
Entertainment Center and despite the limitations on redevelopment described
in the operating and reciprocal easement agreement and the Century Plaza
Towers Loan documents, the value of the Century Towers Property may be
diminished as a result of a redevelopment of the ABC Entertainment Center.
Further, there can be no assurances that there will continue to be common
ownership between the Century Towers Property and the leased fee interest in
and to ABC Entertainment Center throughout the term of the Century Plaza
Towers Loan.
RISK ASSOCIATED WITH LACK OF SPECIAL PURPOSE REQUIREMENTS. Although the
Century Plaza Towers Loan documents and limited liability company agreement
of the Century Towers Borrower generally contain the representations,
warranties and covenants customarily employed to ensure that a borrower is a
special-purpose entity (such as limitations on indebtedness, affiliate
transactions and the conduct of other businesses), the Century Towers
Borrower does not have a special-purpose member and does not have an
independent manager whose consent is required to file a voluntary bankruptcy
petition on behalf of the Century Towers Borrower. (Under the Century Plaza
Towers Loan documents, the Century Towers Borrower is required to have a
special-purpose member with an independent director at such time as any of
the owners of the Century Towers Borrower and/or any "Qualified Transferee"
under the Century Plaza Towers Loan documents shall fail to own (either
directly and/or indirectly, including through separate accounts) 51% or more
of, and control the Century Towers Borrower). Similarly, the 380 Madison
Borrower does not have an independent director whose consent would be
required to file a voluntary bankruptcy petition on behalf of the borrower.
(Under the 380 Madison Loan documents, the 380 Madison Borrower is required
to have an independent director at such time as any of the owners of the 380
Madison Borrower or any "Qualified Transferee" under the 380 Madison Loan
documents shall fail to own (either directly or indirectly) 50% or more of
the 380 Madison Borrower.) The purpose of a special-purpose member is to
attempt to avoid a dissolution of the limited liability company as a result
of all of the members becoming debtors under the Bankruptcy Code. The purpose
of an independent member (or an independent director of the special-purpose
member) is to avoid a bankruptcy petition filing on behalf of the borrower
when a member of the borrower is insolvent but the borrower is not. The
direct and indirect owners of the Century Towers Borrower and the 380 Madison
Borrower above are pension plans. See "--Other Activities of Certain of the
AAPT Borrowers" below.
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RISKS RELATED TO THE 380 MADISON LOAN. The 380 Madison Borrower's
interest in the 380 Madison Property is subject to the 380 Madison Master
Lease, which expires on January 26, 2014 (the "380 Madison Master Lease").
The stated maturity date of the 380 Madison Loan is July 11, 2014. The 380
Madison Master Lease obligates the lessee thereunder (the "380 Madison Master
Lessee") to return the 380 Madison Property at the expiration of the 380
Madison Master Lease free and clear of all leases. Therefore, unless the 380
Madison Borrower and 380 Madison Master Lessee otherwise agree, the 380
Madison Borrower will receive the 380 Madison Property upon the expiration of
the 380 Madison Master Lease without any rental income. Depending on the
rental market at that time, the amount of rental income that will ultimately
be achieved may be materially adversely affected. In the event of a default
by the 380 Madison Master Lessee, there would likely be an interruption of
rental payments under the 380 Madison Master Lease and, accordingly,
insufficient funds available to the 380 Madison Borrower to pay debt service
on the 380 Madison Loan. The interruption of rental payments could continue
until the termination of the 380 Madison Master Lease and the repossession of
the 380 Madison Property by the 380 Madison Borrower. Further, tenants might
not wish to lease space at the 380 Madison Property in the latter years of
the 380 Madison Master Lease out of a concern that the 380 Madison Master
Lessee will not be motivated to maintain the 380 Madison Property by
investing additional amounts therein.
The leasehold interest of the 380 Madison Master Lessee is encumbered by a
leasehold mortgage. The 380 Madison Borrower's ability to exercise remedies
against the 380 Madison Master Lessee in the event of the 380 Madison Master
Lessee's default will be subject to the obligation of the 380 Madison
Borrower to notify the leasehold mortgagee and provide the leasehold
mortgagee with an opportunity to cure such default.
Under the terms of the 380 Madison Master Lease, the 380 Madison Borrower
has little control over the operation and management of the 380 Madison
Property. Further, the 380 Madison Master Lessee is obligated to provide only
limited information and inspection rights to the 380 Madison Borrower.
Consequently, the lender under the 380 Madison Loan has similarly limited
rights with respect to the 380 Madison Property.
These possibilities could result in the 380 Madison Borrower being unable
to meet its monthly debt service requirements and/or being unable to repay
the 380 Madison Loan by its stated maturity date.
BORROWERS' RECENT ACQUISITIONS OF THE MORTGAGED PROPERTIES. All of the
borrowers under the Mortgage Loans (other than the Cadillac Fairview
Borrowers and the Whitehall Borrower) acquired their related Mortgaged
Properties contemporaneously with or within 9 months prior to the origination
of the related Mortgage Loan. Accordingly, these borrowers have limited
experience operating the particular Mortgaged Properties, and, therefore
there is a risk that the net operating income and cash flow of such Mortgaged
Properties may vary significantly from their operations, net operating income
and cash flow generated by the Mortgaged Properties under prior ownership and
management.
OTHER ACTIVITIES OF CERTAIN OF THE AAPT BORROWERS. One of the AAPT
Borrowers has been engaged in investments and businesses unrelated to the
Mortgaged Properties securing the AAPT Pool Loan. These investments and
businesses were in the nature of corporate stock and limited partnership
interests, except in two cases, where an AAPT Borrower was a general partner
in a partnership that owned certain other real estate. In addition, two of
the AAPT Borrowers collectively own all of the capital stock of 49 Delaware
corporations that were formed for the purpose of acquiring certain of the
AAPT Properties. These corporations also owned a general partnership interest
in the partnership referred to in clause (b) above. In the event of any
significant liabilities resulting from such prior activities, such borrower
might have insufficient assets to perform its obligations under the AAPT Pool
Loan and might be motivated to seek insolvency protection.
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
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property. Such laws often impose liability whether or 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 generally is not limited under such circumstances and
could exceed the value of the property and/or the aggregate assets of the
owner. In addition, the presence of hazardous or toxic substances, or the
failure to properly remediate such property, may adversely affect the owner's
or operator's ability to refinance using such property as collateral. Persons
who arrange for the disposal or treatment of hazardous or toxic substances
may also be liable for the costs of removal or remediation of such substances
at the disposal or treatment facility. Certain laws impose liability for
release of asbestos-containing materials ("ACMs") into the air or require the
removal or containment of ACMs, and third parties may seek recovery from
owners or operators of real properties for personal injury associated with
ACMs or other exposure to chemicals or other hazardous substances. For all of
these reasons, the presence of, or strong potential for contamination by,
hazardous substances at, on, under, adjacent to, or in a property can
materially adversely affect the value of the property and a borrower's
ability to repay its Mortgage Loan.
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 if (i) agents or employees of a lender are deemed
to have participated in the management of the borrower or (ii) the lender
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.
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 Mortgage
Loans--Environmental Risks" in the Prospectus.
All of the Mortgaged Properties have been subject to either Phase I site
assessments or updates of previously performed Phase I site assessments (and
in several cases, Phase II site assessments) within twelve months preceding
the date of the closing of the related Mortgage Loan. Such assessments were
intended to evaluate the environmental condition of and potential
environmental liabilities associated with the Mortgaged Properties and
included a visual observation of the Mortgaged Properties during a site
visit, a review of certain records concerning the Mortgaged Properties and
publicly available information concerning known conditions at the Mortgaged
Properties or in the vicinity of the Mortgaged Properties, consideration of
the likely presence of ACMs or radon gas in the buildings on the Mortgaged
Properties and of polychlorinated biphenyls ("PCBs") in the electrical
transformers, a discussion of the presence of underground or above-ground
storage tanks, and the preparation of a written report. The assessments
generally did not include sampling or analysis of soil, groundwater or other
environmental media or subsurface investigations. There can be no assurance
that all environmental conditions and risks have been identified in such
environmental assessments.
Certain of the site assessments identified environmental conditions
impacting some of the Mortgaged Properties, including the presence of ACMs,
leaks from chemical storage tanks and on-site spills. The Mortgaged
Properties, including 2 of the Whitehall Properties (One Montvale Avenue and
North Ranch Plaza), the Century Towers Property, several of the AAPT
Properties (7150 Windsor, 6690 Grant Way and the properties comprising the
Masons Mall Building Park) and several of the CAP Properties (the properties
comprising the Greater Dabney Center), presently have or formerly had
laboratories, landfills, waste disposal areas, factories, oil wells, gasoline
stations and/or dry cleaning businesses located on the premises. In addition,
friable and/or non-friable ACMs were found on several Mortgaged Properties,
including the Century Towers Property, 3 of the Whitehall Properties (City
Center, Bennett Park and Hookston Square), 2 of the Cadillac Fairview
Properties (the Galleria at White Plains and Golden East Crossing) and the
380 Madison Property. In each case, required corrective action, including the
implementation of operations and maintenance programs except with respect to
the 380 Madison Property, as recommended by the environmental consultant, has
been undertaken, and in some cases, the related borrowers have made deposits
into environmental reserve accounts for such
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corrective actions. However, there can be no assurance that the reserve
amounts in the reserve accounts described above will be sufficient to
remediate the environmental conditions described above or that all such
environmental conditions have been identified.
Certain of the Mortgaged Properties are in the vicinity of sites
containing LUSTs or other potential sources of groundwater contamination. The
environmental assessments generally do not anticipate that the borrower will
have to undertake remedial investigations or actions at these sites. Further,
CERCLA and many state environmental laws provide for a third-party defense
that generally would preclude liability for a party whose property is
contaminated by off-site sources. In addition, in its final "Policy Toward
Owners of Property Containing Contaminated Aquifers," dated May 24, 1995, the
United States Environmental Protection Agency (the "EPA") stated its position
that, with respect to federal enforcement actions and subject to certain
conditions specified therein, where hazardous substances have come to be
located on or in a property solely as a result of subsurface migration in an
aquifer from a source or sources outside the property, the EPA will not take
enforcement actions against the owner of such property to require the
performance of response actions or the payment of response costs. However,
though the owners of such Mortgaged Properties and the Trust Fund may not be
liable for such contamination, enforcement of the related borrower's or the
Trust Fund's rights against third parties may result in additional
transaction costs and the presence of such contamination or potential
contamination may affect the related borrower's ability to refinance using
such property as collateral or to sell the property to a third party.
A Phase II site assessment was conducted at the Cadillac Fairview Property
known as the North De Kalb Mall to analyze ground water samples from two
on-site ground water monitoring wells that were installed at the property by
a prior owner or operator. The analysis identified the presence of chromium
in one of the monitoring well sites at a level above EPA drinking water
standards. Although the environmental consultants concluded that it was
unlikely that active remediation of the ground water would be required, there
can be no assurance that remediation costs will not be incurred by the
relevant Cadillac Fairview Borrower.
The site assessments for several Mortgaged Properties identified
underground storage tanks previously used to store diesel fuel which are on
LUST lists and are subject to a passive remediation program. Such storage
tanks at some future time may have to be removed by the applicable borrowers.
Likewise, some Mortgaged Properties in addition to those stated herein may
contain ACMs for which abatement will be required. In a few instances,
borrowers have agreed to reserve amounts to pay for required abatements or
remediation. For example, the Century Towers Borrower is obligated to
establish, if the current owners of the Century Towers Borrower fail to own
beneficially 51% or more of the Century Towers Borrower or fail to control
the Century Towers Borrower, an account in the initial amount of $1,003,000
to be disbursed to pay the costs of the abatement of certain asbestos
conditions (less amounts representing costs already expended in abating such
conditions).
For several Mortgaged Properties, the environmental assessments also
recommend limited further investigations or minor repairs; however, based on
the information currently available to the Seller and a review performed by
the related Originator's environmental consultants, the Seller does not
believe any of such other issues would have a material adverse effect on the
related Mortgaged Properties.
The Pooling 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 Agreement will effectively insulate the Trust Fund from
potential liability under environmental laws. See "The Pooling
Agreement--Realization Upon Mortgage Loans; Modifications--Standards for
Conduct Generally in Effecting Foreclosure or the Sale of Defaulted Loans"
herein and "Certain Legal Aspects of the Mortgage Loans--Environmental Risks"
in the Prospectus.
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LIMITATIONS OF APPRAISALS. Appraisals were obtained with respect to each
of the Mortgaged Properties prior to the origination of the applicable
Mortgage Loan. In general, appraisals represent the analysis and opinion of
qualified appraisers and are not guarantees of present or future value. One
appraiser may reach a different conclusion than the conclusion that would be
reached if a different appraiser were appraising such property. Moreover,
appraisals seek to establish the amount a typically motivated buyer would pay
a typically motivated seller and, in certain cases, may have taken into
consideration the purchase price paid by the borrower. 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
appraised values of the Mortgaged Properties presented under "Mortgage Pool
Characteristics" herein is not intended to be a representation as to the
past, present or future market values of the Mortgaged Properties.
RISK OF DIFFERENT TIMING OF MORTGAGE LOAN AMORTIZATION. 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 Mortgaged Properties, types of Mortgaged Properties and
Mortgaged Property characteristics and with respect to the number of
borrowers. Because principal on the Offered Certificates is generally payable
in sequential order, and generally no Class entitled to distributions of
principal receives principal until the Certificate Principal Amount of the
preceding Class or Classes so entitled has been reduced to zero, Classes that
have a later sequential designation (other than the Class A-1 Certificates as
described under "Description of the Offered Certificates--Distributions"
herein) are more likely to be exposed to the risk of concentration discussed
in the preceding sentence than Classes with higher priority.
The 380 Madison Maturity Date is at least seven years after the
Anticipated Repayment Date (or maturity date, in the case of the Whitehall
Pool Loan) of each other Mortgage Loan, and in the event that each Mortgage
Loan is repaid on its Anticipated Repayment Date (or maturity date, in the
case of the Whitehall Pool Loan), the 380 Madison Loan will be the only
Mortgage Loan outstanding during such seven-year period. Consequently, the
payment of interest on and principal in respect of any Offered Certificates
remaining outstanding at such time will be highly sensitive to the
performance of the 380 Madison Loan. See "Description of the Mortgage Pool
and the Underlying Mortgaged Properties--Description of the Mortgage
Loans--The 380 Madison Mortgage Loan--Payment Terms" herein.
REPAYMENT DATE PRINCIPAL BALANCES. All of the Mortgage Loans are expected
to have substantial remaining principal balances as of their respective
Anticipated Repayment Dates and the 380 Madison Loan and the Whitehall Pool
Loan are expected to have substantial remaining principal balances as of
their respective maturity dates. See "Mortgage Pool Characteristics--Certain
Characteristics of the Mortgage Loans" and "Description of the Mortgage Pool
and the Underlying Mortgaged Properties--Description of the Mortgage Loans"
herein. No representation or warranty is made by the Seller as to the ability
of any of the related borrowers to make required Mortgage Loan payments on a
full and timely basis or as to whether a borrower will repay or have the
ability to repay the remaining principal at the Anticipated Repayment Dates
or stated maturity dates of these Mortgage Loans. Mortgage Loans like the 380
Madison Loan and the Whitehall Pool Loan with substantial remaining principal
balances at their stated maturity involve greater degrees of risk at stated
maturity than fully amortizing loans. The ability of a borrower to repay a
loan on its Anticipated Repayment Date or, in the case of the 380 Madison
Loan and the Whitehall Pool Loan, on their respective maturity dates,
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 repay the loan on the Anticipated Repayment Date or stated
maturity date, as the case may be. The ability of a borrower to accomplish
either of these goals will be affected by a number of factors at the time of
attempted refinancing or sale, including the level of available mortgage
credit, the prevailing interest rates, the fair market value of the related
properties, the borrower's equity in the related properties, the financial
condition of the borrower and operating history of the properties, the
occupancy level of the Mortgaged Property, tax laws, prevailing general and
regional economic conditions and the availability of credit for commercial
real estate projects.
OTHER FINANCING. The existence of indebtedness incurred by borrowers other
than the Mortgage Loans could adversely affect the financial viability of
such borrowers. Additional debt increases the
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likelihood that a borrower would lack the resources to perform on its
Mortgage Loan and would seek the protection of a bankruptcy court. In a
bankruptcy proceeding, the Mortgage Loan lender would face certain
limitations (see "--Bankruptcy Limitations on Lenders" below), and the
holders of such additional debt would likely contest the Mortgage Loan
lender's attempt to foreclose on the related Mortgaged Properties.
The AAPT Borrowers and the CAP Borrower are permitted to incur certain
reimbursement obligations in connection with any unsecured AAPT Credit
Facility (as hereinafter defined--See "Description of the Mortgage Pool and
the Underlying Mortgaged Properties--Description of the Mortgage Loans--The
AAPT Pool Loan--Reserves" and "--The CAP Pool Loan--Reserves" herein)
delivered to the Master Servicer in accordance with the terms of the
applicable loan agreement. The relevant loan agreements provide that any
reimbursement obligation under an AAPT Credit Facility may not be secured by
any of the properties under the applicable Mortgage Loan. In addition, the
applicable loan agreements require that (i) the issuing bank's rights with
respect to such reimbursement obligation be fully subordinated to payment of
the related Loan, (ii) no payment shall be made to such bank in respect of
such reimbursement obligation during the occurrence and continuation of an
event of default, and (iii) such bank shall be prohibited from exercising any
and all remedial action against the related borrower(s) in connection with
the AAPT Credit Facility until all obligations under the related loan
documents shall have been paid in full.
The 380 Madison Loan permits the 380 Madison Borrower to incur additional
debt up to an aggregate amount of $20,000,000 ("380 Madison Additional
Debt"), provided that certain conditions specified in the loan agreement are
satisfied, including obtaining a confirmation from the Rating Agencies that
the incurrence of such indebtedness would not result, in and of itself, in a
downgrade, qualification or withdrawal of the then current ratings of the
Certificates.
Simultaneously with the making of the Montehiedra Loan, GSMC made loans to
a limited partner of the Montehiedra Borrower and a limited partner of such
limited partner of the Montehiedra Borrower (the "Montehiedra Partner Loans")
having an aggregate principal balance as of August 12, 1997 of approximately
$10,276,355. The Montehiedra Partner Loans are secured by a pledge of (i) all
of the stock of the managing member of the limited liability company which is
the sole general partner in the Montehiedra Borrower, (ii) all of the limited
liability company interests in the sole general partner in the Montehiedra
Borrower, (iii) all of the limited partnership interests in the Montehiedra
Borrower, and (iv) all of the partnership interests in the sole limited
partner of the Montehiedra Borrower. In addition, the Montehiedra Partner
Loans are guaranteed by Vornado Realty L.P. Upon a default under the
Montehiedra Partner Loans (which include, among others, certain defaults
under the Montehiedra Loan), the lender under the Montehiedra Partner Loans
has the right to accelerate the Montehiedra Partner Loans and to foreclose on
the collateral securing the Montehiedra Partner Loans. See "Description of
the Mortgage Pool and the Underlying Mortgaged Properties--Description of the
Mortgage Loans--The Montehiedra Loan--The Montehiedra Partner Loans" herein.
Simultaneously with the making of the Whitehall Pool Loan by GMACCM, GSMC
made a loan (the "Whitehall Partner Loan") to WMP Real Estate Limited
Partnership ("WMP I") having an aggregate principal balance as of the Cut-Off
Date of approximately $56,000,000. WMP I is a 99% limited partner of the
Whitehall Borrower. The Whitehall Partner Loan is secured by a pledge of (i)
all of the shares of capital stock of WMP II Gen-Par, Inc., the sole general
partner of the Whitehall Borrower, (ii) all of the limited partnership
interests in the Whitehall Borrower, and (iii) certain other rights and
agreements. Upon default under the Whitehall Partner Loan (which include,
among others, certain defaults under the Whitehall Pool Loan), the lender
under the Whitehall Partner Loan has the right to accelerate the Whitehall
Partner Loan and to foreclose on the collateral securing the Whitehall
Partner Loan. In addition, the Whitehall Partner Loan is guaranteed by
Whitehall Real Estate Limited Partnership III. See "Description of the
Mortgage Pool and the Underlying Mortgaged Properties--Description of the
Mortgage Loans--The Whitehall Pool Loan--The Whitehall Partner Loan" herein.
The Whitehall Partner Loan has been purchased by GMACCM. See "--Conflicts of
Interest--Conflicts Between the Master Servicer and the Trust Fund" below.
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Simultaneously with the making of the AAPT Pool Loan, GSMC made loans
(the "AAPT Parent Loans") to AAPOP 3, L.P., a Delaware limited partnership,
and AAP Sub Four, Inc., a Delaware corporation (collectively, the "AAPT
Parent Borrowers") having an aggregate principal balance as of the Cut-Off
Date of approximately $33,300,000. The AAPT Parent Loans are secured by a
pledge of certain direct and indirect equity interests in the AAPT Borrowers
consisting of (i) 100% of the common stock of AAP Sub One, Inc., (ii) 0.25%
of the general partnership interests and 0.25% of the limited partnership
interests in AAPOP 3, L.P., (iii) 98% of the general partnership interests
and 1% of the limited partnership interests in AAPOP 1 (each, an "AAPT
Pledged Subsidiary"), and (iv) an assignment of the interest rate cap
agreement related to the AAPT Parent Loans. In addition, repayment of the
AAPT Parent Loans is cross-guaranteed by the AAPT Parent Borrowers, and the
AAPT Parent Loans are cross-defaulted and cross-collateralized. Upon a
default under the AAPT Parent Loans (which include, among others, certain
defaults under the AAPT Pool Loan), the lender under the AAPT Parent Loan has
the right to accelerate the AAPT Parent Loans and foreclose on the collateral
securing the AAPT Parent Loans. See "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Mortgage Loans--The AAPT
Pool Loan--The AAPT Parent Loans" herein.
The AAPT Parent Loans mature two years prior to the AAPT LIBOR Component
Anticipated Repayment Date. If the AAPT Parent Loans are not repaid in
accordance with their terms, the enforcement efforts of the lender thereunder
may disrupt the operations of the AAPT Borrowers and adversely affect their
ability to perform in accordance with the terms of the AAPT Pool Loan.
Simultaneously with the making of the CAP Pool Loan, GSMC made a loan (the
"CAP Parent Loan") to Commonwealth Atlantic Holdings I, Inc., a Virginia
corporation (the "CAP Parent Borrower") having a principal balance as of the
Cut-Off Date of approximately $25,200,000. The CAP Parent Loan is secured by
a pledge of (i) 100% of the shares of the capital stock of the CAP Borrower
and (ii) an assignment of the interest rate cap agreement related to the CAP
Parent Loan. Upon a default under the CAP Parent Loan (which includes, among
others, certain defaults under the CAP Pool Loan), the lender under the CAP
Parent Loan has the right to accelerate the CAP Parent Loan and foreclose on
the collateral securing the CAP Parent Loan. See "Description of the Mortgage
Pool and the Underlying Mortgaged Properties--Description of the Mortgage
Loans--The CAP Pool Loan--The CAP Parent Loan" herein.
Even though the borrowers are not parties to or obligors under the various
partner and parent loans described above, the existence of such partner and
parent loans could adversely affect the financial viability of the related
borrowers, result in the equity ownership of the related borrower being
transferred to the holders of such partner or parent loans or disrupt the
operations of the related borrower upon the occurrence of any default
thereunder. See also "Certain Legal Aspects of the Mortgage Loans--Secondary
Financing; Due-on-Encumbrance Provisions" in the Prospectus.
The members in the Century Towers Borrower have pledged their membership
interests in the Century Towers Borrower to secure any reimbursement
obligation that may be owed to the issuer of the TI Credit Facility. The
Century Plaza Towers Loan also permits the members of the Century Towers
Borrower to pledge their interests in the Century Towers Borrower to incur
additional debt in the maximum amount of $40,000,000 (the "Century Additional
Debt"), provided that certain conditions specified in the loan agreement are
satisfied.
The AAPT Parent Loans, the CAP Parent Loan, the Whitehall Partner Loan,
the Century Additional Debt and the 380 Madison Additional Debt are
collectively referred to herein as "Affiliate Loans".
RISKS RELATING TO THE AAPT INTEREST RATE CAP AGREEMENT. In connection with
the AAPT Pool Loan, the AAPT Borrowers have entered into the AAPT Interest
Rate Cap Agreement (as defined under "Description of the Mortgage Pool and
the Underlying Mortgaged Properties--Description of the Mortgage Loans--The
AAPT Pool Loan--Payment Terms" herein). The counterparty under the AAPT
Interest Rate Agreement, Bear Stearns Financial Products Inc., currently has
a senior unsecured long-term debt rating of "Aaa" by Moody's. There can be no
assurance, however, that the counterparty will maintain such rating or have
sufficient assets or otherwise be able to fulfill its obligations under the
AAPT Interest Rate Cap Agreement. A counterparty's failure to maintain such
rating will not be a default under the related Mortgage Loan or entitle the
related borrower or lender to any damages. Any
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downgrading, withdrawal or qualification of the rating of the counterparty
could result in the downgrading, withdrawal or qualification of the ratings
on the Class A-1 Certificates.The AAPT Borrowers are under no obligation to
replace the AAPT Interest Rate Cap Agreement or assist the related lender in
finding a replacement interest rate cap agreement in the event of a downgrade
in the counterparty's senior long-term debt rating.
LIMITATIONS ON LOCK BOXES. None of the Century Plaza Towers Loan, the 380
Madison Loan and the Ritz Plaza Loan requires the related borrower to cause
rent and other payments to be made directly into a lock box account
maintained on behalf of the mortgagee but instead allow the borrower to
collect these payments directly until certain events have occurred. Under
each of the Whitehall Pool Loan, the AAPT Pool Loan and the CAP Pool Loan,
rent checks and other payments are permitted to be sent first to the
applicable property manager who is then required to deposit such payments
into an account maintained on behalf of the mortgagee within one day. If
rental payments are not required to be made directly into a lock box account,
there is a risk that the borrower will divert such funds. See "Description of
the Mortgage Pool and the Underlying Mortgaged Properties--Description of the
Mortgage Loans--The Century Plaza Towers Loan--Lockbox", "--The 380 Madison
Loan--Cash Management; Lockbox," "--The Ritz Plaza Loan--Cash Management;
Lockbox", "--The Whitehall Pool Loan--Lockbox", "--The AAPT Pool Loan--Cash
Management; Lockbox" and "--The CAP Pool Loan--Cash Management; Lockbox"
herein.
BANKRUPTCY LIMITATIONS ON LENDERS. Under the Bankruptcy Code, the filing
of a petition in bankruptcy by or against an obligor will stay the exercise
of a power of sale and the commencement or continuation of a foreclosure
action against the real property owned by that obligor. The resulting delay
may be significant. In addition, a court which determines the value of a
mortgaged property to be less than the principal balance of the loan it
secures may (subject to certain protections available to the lender) stop a
lender from foreclosing on the mortgaged property and, as a part of a
restructuring plan, reduce the amount of secured indebtedness to the value of
the mortgaged property as it exists at the time of the proceeding (leaving
the lender as a general unsecured creditor for the difference between that
value and the amount of its outstanding mortgage indebtedness). A bankruptcy
court may also grant a debtor a reasonable time to cure a payment default,
reduce monthly payments due under a mortgage loan, change the rate of
interest due on a mortgage loan or otherwise alter the mortgage loan's
repayment schedule.
Creditors of obligors in bankruptcy are also generally prohibited from
taking any action to obtain repayment of a loan while the bankruptcy case is
pending. Also, under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a junior lienholder may stay the senior
lienholder from taking action to foreclose on such junior lien. In addition,
the obligor's trustee or the obligor, as debtor-in-possession, has certain
special powers to avoid, subordinate or disallow debts. Even if a claim
against a debtor is not avoided or subordinated, the Trustee's recovery with
respect to obligors in bankruptcy proceedings may be significantly delayed,
and the aggregate amount ultimately collected on such Mortgage Loans may be
substantially less than the amount owed. In certain circumstances, the claims
of the Trustee may be subordinated to financing obtained by a
debtor-in-possession subsequent to its bankruptcy.
The Bankruptcy Code may also interfere with or affect the ability of the
Trustee to enforce an assignment by an obligor of rents and leases related to
the mortgaged property if the related obligor is in a bankruptcy proceeding.
Under Section 362 of the Bankruptcy Code, the mortgagee will be stayed from
enforcing the assignment, and the legal proceedings necessary to resolve the
issue can be time consuming and may result in significant delays in the
receipt of the rents. Rents may also escape an assignment thereof (i) to the
extent such rents are used by the obligor to maintain the mortgaged property
or for other court authorized expenses or (ii) to the extent other collateral
may be substituted for the rents.
The ability of the obligors to repay the Mortgage Loans is, in many cases,
dependent on leases of the Mortgaged Properties. To the extent an obligor's
ability to make payment on a Mortgage Loan is
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dependent upon a lease of the related Mortgaged Property, such ability may be
impaired by the commencement of a bankruptcy proceeding relating to a lessee
under such lease, including, in particular, the 380 Madison Master Lessee.
See "--Risks Relating to Tenants; Reserves".
As a result of the foregoing factors, the amount and timing of receipts
with respect to the Mortgage Loans may be materially adversely affected.
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 property
involved, will subject the Lower-Tier 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. The Pooling Agreement provides that the Special Servicer
will be permitted to cause the Lower-Tier REMIC to earn "net income from
foreclosure property" that is subject to tax if it determines that the net
after-tax benefit to Certificateholders is greater than another method of
operating or net leasing the Mortgaged Property. See "Federal Income Tax
Consequences--REMIC Certificates--Income from Residual
Certificates--Prohibited Transactions; Special Taxes" in the Prospectus. In
addition, if the Montehiedra Property is acquired by the Trust Fund as REO
Property, Certificateholders who are not residents of Puerto Rico will be
subject to a withholding tax on gross rental income from the Montehiedra
Property in certain circumstances, and may be subject to other taxes and
filing requirements upon disposition of the Montehiedra Property. See
"Federal Income Tax Consequences" herein.
MANAGEMENT. The successful operation of a real estate project is dependent
on the performance and viability of the property manager of such project.
Different property types vary as to the extent a property manager is involved
in property marketing and operations on a daily basis. Properties deriving
revenues primarily from short-term sources 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, and advising the borrowers so that
maintenance and capital improvements can be carried out in a timely fashion.
There is no assurance regarding the performance of any operators and/or
managers or persons who may become operators and/or managers upon the
expiration or termination of management agreements or following any default
or foreclosure under a Mortgage Loan. In addition, third party property
managers are typically 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. Consequently, 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. See "--Conflicts
of Interest--Conflicts Between Managers and the Borrowers".
RECORDING OF THE MONTEHIEDRA LOAN MORTGAGE. A mortgage cannot be enforced
until the document evidencing the mortgage has been registered. Due to an
extremely large volume of documents presented and pending recordation at the
various registry offices in Puerto Rico, there is a lengthy delay in the
actual registration of all instruments presented, including the mortgage
encumbering the Montehiedra Property. In light of these circumstances, the
Director of Registry of Property has issued a directive to all registrars
establishing an accelerated procedure for the registration of mortgages when
foreclosure is imminent. When the mortgage is actually registered, the
effective date of the recording will be the date the mortgage was originally
presented for recording. There is no risk of unknown intervening liens being
registered, but there can be no assurances that delays in registration of the
Mortgage securing the Montehiedra Loan will not delay a foreclosure of the
Montehiedra Loan.
ENFORCEABILITY. All of the Mortgages include debt-acceleration clauses,
which permit the lender to accelerate the debt upon a monetary or nonmonetary
default of the borrower. The courts of all states and
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Puerto Rico will enforce clauses providing for acceleration in the event of a
material payment default after the giving of appropriate notices. The equity
courts of any jurisdiction, however, may refuse to permit the foreclosure of
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.
All of the Mortgage Loans on Mortgaged Properties that have tenants are
secured by an assignment of leases and rents pursuant to which the borrower
typically assigns 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
borrower defaults, upon the election of, and following notice from, the
lender, the license terminates and the lender is entitled to collect rents.
In certain jurisdictions, such assignments may not be enforceable unless the
lender complies with applicable state law for taking actual possession of the
property or the cash by the lender until the lender secures the appointment
of a receiver before achieving a priority relative to other persons with
interests in the rents related to the Mortgaged Property. In addition, if
bankruptcy or similar proceedings are commenced by or in respect of the
borrower, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of the Mortgage Loans" in the
Prospectus.
STATE LAW LIMITATIONS ON REMEDIES. Several jurisdictions (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 Agreement will require
the Master Servicer or Special Servicer, as applicable, 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, with respect to any Mortgage Loan, the Master Servicer, or Special
Servicer, as applicable, may be required to foreclose first on the Mortgaged
Properties securing such Mortgage Loan 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" and "--State Law Limitations on Lenders" in the
Prospectus.
As a result of the foregoing considerations, among others, the ability of
the Master Servicer or the Special Servicer, as applicable, to realize upon
the Mortgage Loans, may be limited by the application of state laws. Such
actions may also, in certain circumstances, subject the Trust Fund to
liability as a "mortgagee-in-possession" or result in the equitable
subordination of the claims of the Trustee to the claims of other creditors
of the borrower. Under the terms of the Agreement, the Master Servicer or the
Special Servicer, as applicable, may take these state laws into consideration
in deciding which remedy to choose following a default by a borrower.
LEASEHOLD INTERESTS. The interest of the Whitehall Borrower in the land
underlying the Hookston Square Property is a ground leasehold interest (the
"Hookston Ground Lease"). See "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Borrowers and the
Properties--The Whitehall Borrower and Properties" herein. The Cadillac
Fairview Pool Loan is secured by, among other things, a ground leasehold
interest in the land underlying an approximately 2.6 acre portion of the
Dover Mall (consisting of parking spaces and a portion of the ring road) (the
"Dover Mall Ground Lease"). See "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Borrowers and the
Properties--The Cadillac Fairview Borrowers and Properties" herein. The AAPT
Pool Loan is secured by, among other things, ground leasehold interests in
the land underlying the Maschellmac I, II, III and IV Properties (the
"Maschellmac Ground Leases"). See "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Borrowers and the
Properties--The AAPT Borrowers and Properties" herein.
On the bankruptcy of a lessor or a lessee under a ground lease, the debtor
entity has the right to assume or reject the lease. Pursuant to Section
365(h) of the Bankruptcy Code, a lessee whose lease is rejected by a debtor
lessor has the right to remain in possession of its leased premises under the
rent reserved in the lease for the term of the lease (including renewals). In
the event of a lessee/borrower bankruptcy in which such debtor rejects any or
all of its leases, the leasehold mortgagee would have the
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right to succeed to the lessee/borrower's position under the lease only if
the lessor had specifically granted the mortgagee such right. In the event of
concurrent bankruptcy proceedings involving the lessor and the
lessee/borrower, the Trustee may be unable to enforce the bankrupt
lessee/borrower's obligation to refuse to treat a ground lease rejected by a
bankrupt lessor as terminated. In such circumstances, a lease could be
terminated notwithstanding lender protection provisions contained therein or
in the mortgage.
ZONING COMPLIANCE; INSPECTIONS. Several of the Mortgaged Properties
qualify as legally permissible non-conforming uses. Such status may limit the
ability of the borrowers to rebuild the premises "as is" in the event of a
substantial casualty loss with respect thereto. For example, one of the
Whitehall Properties in the Whitehall Pool Loan is a permissible
non-conforming use with respect to both building height requirements and
certain setback requirements of the local zoning authority.
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 were identified in such
inspections. See "Mortgage Pool Characteristics--Underwriting
Standards--Property Condition Assessments" herein for further information
regarding the inspections on the Mortgaged Properties.
AVAILABILITY OF EARTHQUAKE, FLOOD AND OTHER INSURANCE. Although the
Mortgaged Properties are required to be insured against certain risks, there
is a possibility of casualty loss with respect to each Mortgaged Property for
which insurance proceeds may not be adequate (such as floods or earthquakes)
or which may result from risks not covered by insurance (such as supplemental
hurricane insurance). In addition, certain of the Mortgaged Properties are
located in California, Puerto Rico and Texas, which are states that have been
historically at greater risk to acts of nature (such as hurricanes, floods
and earthquakes) than properties located in other states. There can be no
assurance borrowers have complied or will in the future be able to comply
with requirements to maintain adequate insurance with respect to the
Mortgaged Properties. As with all real estate, if reconstruction (for
example, following fire or other casualty) or any major repair or improvement
is required to the property, changes in laws and governmental regulations may
be applicable and may materially affect the cost to, or ability of, the
borrower to effect such reconstruction, major repair or improvement. As a
result of the occurrence of any of these events, the amount realized with
respect to the Mortgage Loans, and the amount available to make distributions
on the Certificates, could be reduced.
The Century Towers Property located in Century City, California is located
in an earthquake zone and the Century Towers Borrower has obtained earthquake
insurance for such property in the amount of the probable maximum loss, as
determined by a seismic engineer retained by the Century Towers Borrower in
connection with the origination of the Century Plaza Towers Loan. The 6
Whitehall Properties located in Milpitas, Pleasant Hill, Long Beach, Santa
Clara, Cupertino and Thousand Oaks, California are each located in an
earthquake zone and the Whitehall Borrower has obtained earthquake insurance
that covers each property in an amount at least equal to the probable maximum
loss for such property as determined by a seismic engineer completed in
August 1996; such coverage, however, is provided through a blanket policy, so
that if one or more earthquakes affected two or more Mortgaged Properties or
other properties within the same policy period, there may be insufficient
coverage under such policy. See "--Risks Associated with Blanket Insurance
Policies". See "Description of the Mortgage Pool and the Underlying Mortgaged
Properties--Description of the Borrowers and the Properties--The Century
Towers Borrower and Property--Seismic Reports" and "--Description of the
Mortgage Loans--The Whitehall Pool Loan--Insurance" herein.
Certain of the Mortgaged Properties are located in flood hazard zones.
Those Mortgaged Properties include 1 Whitehall Property (the Sun Buildings),
4 of the Cadillac Fairview Properties (Dover Mall, Dover Commons, Esplanade
Shopping Mall and Golden East Crossing Mall) and 2 of the AAPT Properties
(Westpark and Maschellmac IV). Each of the Mortgaged Properties in a flood
hazard zone, other than the Maschellmac IV Property, which has no
improvements located in a flood hazard zone, is required to
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be covered by flood insurance. See "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Mortgage Loans--The
Whitehall Pool Loan--Insurance", "The Cadillac Fairview Pool Loan--Insurance"
and "The AAPT Pool Loan--Insurance" herein.
There can be no assurance that the amount of earthquake or flood insurance
currently required or provided would be sufficient to cover damages caused by
an earthquake or flood, or that such insurance will be commercially available
in the future. In addition, earthquake insurance coverage is often not
obtainable from "AA" or higher-rated insurers and the loan documents permit
such insurance to be obtained from such lower rated insurance companies.
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 are likely to 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.
In connection with the origination of the related loan, property inspection
reports were obtained which included limited information regarding compliance
with the ADA. A portion of funds in the capital reserve escrow accounts
established by certain borrowers are required to be used for costs associated
with complying with the ADA. There can be no assurance that the related
Mortgaged Properties will comply with the ADA in all respects once the
related conditions are remedied, that such property-inspection reports
identified all risks or conditions relating to the ADA or that amounts
reserved (if any) are sufficient to pay such costs.
LIMITED CROSS-GUARANTEES OR CROSS-COLLATERALIZATION; LIMITATIONS ON
ENFORCEABILITY OF CROSS-COLLATERALIZATION. The Cadillac Fairview Pool Loan is
comprised of the obligations of the 7 limited partnerships that comprise the
Cadillac Fairview Borrowers, each of which owns at least 1 Cadillac Fairview
Property. Each Cadillac Fairview Borrower has guaranteed the indebtedness
under the Notes of each of the other Cadillac Fairview Borrowers, subject to
limitations based on the net worth of such guaranteeing Cadillac Fairview
Borrower. Each Mortgage of a Cadillac Fairview Borrower secures an individual
Note in the amount of the indebtedness allocated to the Mortgaged Property
plus the indebtedness guaranteed by the Cadillac Fairview Borrower (except
that the Galleria at White Plains secures a total principal indebtedness in
an amount not to exceed $103,650,000, which is the Cadillac Fairview Release
Amount for the Galleria at White Plains). These provisions are designed to
achieve "cross-collateralization," i.e., all of the Cadillac Fairview
Properties are to be security for all or any part of the Notes.
The AAPT Pool Loan is comprised of the joint and several obligation of
each of the AAPT Borrowers, each of which is the holder of a different fee or
leasehold interest in a portion of the AAPT Properties. The interest of each
AAPT Borrower in the AAPT Properties will provide security for the entire
indebtedness represented by the AAPT Pool Loan. These arrangements are
designed primarily to ensure that all of the collateral pledged to secure the
AAPT Pool Loan and the cash flow and rental income generated thereby are
available to support debt service on, and ultimate repayment of, all of the
aggregate indebtedness evidenced by the AAPT Pool Loan. These arrangements
seek to reduce the risk that a single Mortgaged Property securing a loan
might become incapable of generating rental income sufficient to pay debt
service, which could result in defaults and ultimate losses.
The Seller makes no representation that any such cross-collateralization
or cross-default arrangements are enforceable. Such arrangements could be
challenged as fraudulent conveyances by creditors of the related borrower in
an action brought outside a bankruptcy case, or, if such borrower were to
become a debtor in a bankruptcy case, by such borrower. Generally, under
federal and most state fraudulent conveyance statutes, the incurring of an
obligation or the transfer of property or an interest in property (including
the granting of a lien) by a person will be subject to avoidance under
certain circumstances if the person did not receive fair consideration or
reasonably equivalent value in exchange for such obligation or transfer and
(a) was insolvent or was rendered insolvent by such obligation or transfer,
(b) 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 (c)
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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 (or right
to receive credit support) granted by a Cadillac Fairview Borrower or an AAPT
Borrower to secure repayment of the Cadillac Fairview Pool Loan or the AAPT
Pool Loan, respectively, could be avoided if a court were to determine that
(a) such borrower was insolvent at the time of granting the lien or right,
was rendered insolvent by the granting of the lien or right or was left with
inadequate capital, or was not able to pay its debts as they matured and (b)
such borrower did not, when it allowed its Mortgaged Property or Properties
to be encumbered by a lien securing the entire indebtedness represented by
the Cadillac Fairview Pool Loan or the AAPT Pool Loan, as the case may be (or
granted a right to credit support from revenues from its properties), receive
fair consideration or reasonably equivalent value for pledging its Mortgaged
Property or Properties for the benefit of the other Cadillac Fairview
Borrowers or AAPT Borrowers, as the case may be (or granting such interest in
its cash flow). Among other things, a legal challenge to the granting of the
liens and/or the incurring of the obligation by a Cadillac Fairview Borrower
or an AAPT Borrower may focus on the benefits realized by such Cadillac
Fairview Borrower or AAPT Borrower from the respective Mortgage Loan
proceeds, as well as the overall cross-collateralization. If a court were to
find or conclude that the granting of the liens or the incurring of the
obligations associated with the Cadillac Fairview Pool Loan or the AAPT Pool
Loan was an avoidable fraudulent conveyance with respect to a particular
borrower, that court could subordinate all or part of the Cadillac Fairview
Pool Loan or the AAPT Pool Loan, as the case may be, to existing or future
indebtedness of that borrower, recover payments made under the respective
Mortgage Loan, or take other actions detrimental to the holders of the
Certificates, including under certain circumstances, invalidating the
Cadillac Fairview Pool Loan or the AAPT Pool Loan or the Mortgages securing
such loans.
RISKS ASSOCIATED WITH BLANKET INSURANCE POLICIES. Certain of the Mortgaged
Properties are covered by blanket insurance policies which also cover other
properties of the related borrower or its affiliates. In the event that such
policies are drawn on to cover losses on such other properties, the amount of
insurance coverage available under such policies would thereby be reduced and
could be insufficient to cover each Mortgaged Property's insurable risks.
ATTORNMENT CONSIDERATIONS. Some of the operating leases and tenant leases,
including the anchor tenant leases, contain provisions that require the
tenant to attorn to (that is, recognize as landlord under the lease) a
successor owner of the Mortgaged Property following foreclosure. Some of the
leases may be either subordinate to the liens created by the Mortgages or
contain a provision that requires the tenant to subordinate the lease if the
mortgagee agrees to enter into a non-disturbance agreement. Not all leases
were reviewed to ascertain the existence of attornment or subordination
provisions. In some jurisdictions, if tenant leases are subordinate to the
liens created by the mortgage and such leases do not contain adornment
provisions, such leases may terminate upon the transfer of the property to a
foreclosing lender or purchaser at foreclosure. Accordingly, in the case of
the foreclosure of a Mortgaged Property located in such a jurisdiction and
leased to one or more desirable tenants under leases that do not contain
attornment provisions, such Mortgaged Property could experience a further
decline in value if such tenants' leases were terminated (e.g., particularly
if such tenants were paying above-market rents or could not be replaced). If
a Mortgage is subordinate to a lease, the Trust Fund will not (unless it has
otherwise agreed with the tenant) possess the right to dispossess the tenant
upon foreclosure of the property, and if the lease contains provisions
inconsistent with the Mortgage (e.g., provisions relating to application of
insurance proceeds or condemnation awards), the provisions of the lease will
take precedence over the provisions of the Mortgage.
LITIGATION. There may be pending or threatened legal proceedings against
the borrowers and managers of the Mortgaged Properties and their respective
affiliates arising out of the ordinary business of the borrowers, managers
and affiliates. There can be no assurance that such litigation may not have a
material adverse effect on distribution to Certificateholders.
CONFLICTS OF INTEREST.
General. The potential for various conflicts of interest exists with
respect to the offering of the Certificates, including conflicts of interests
among certain of the borrowers, the property or asset managers, the Seller
and Goldman, Sachs & Co., in its capacity as the Underwriter.
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Conflicts Among Affiliates of Goldman, Sachs & Co. At the time of
origination of the Whitehall Pool Loan and the Cadillac Fairview Pool Loan on
behalf of GSMC, the Whitehall Borrower and the Cadillac Fairview Borrowers
were affiliated with GSMC, and upon initial issuance of the Certificates, the
Seller, Goldman, Sachs & Co. and GSMC will be affiliated with the Whitehall
Borrower and the Cadillac Fairview Borrowers. These relationships may have
resulted in terms under the Whitehall Pool Loan and the Cadillac Fairview
Pool Loan that are different than they would have been absent the affiliation
of GSMC with such borrower.
Certain actions taken by the Whitehall Borrower or the Cadillac Fairview
Borrowers in order to maximize their return on investment may be adverse to
the interests of the Certificateholders and may in certain circumstances
result in a default under the applicable Mortgage Loan. In addition, if
affiliates of the Seller, Goldman, Sachs & Co. or GSMC fail to take certain
actions with respect to the Whitehall Borrower or the Cadillac Fairview
Borrowers which they are not required to take (e.g., they fail to voluntarily
contribute additional capital to the Whitehall Borrower or the Cadillac
Fairview Borrowers, as the case may be, to cover cash flow shortfalls), such
inaction may result in a default under the applicable Mortgage Loan. In any
case, such action or inaction may result in an inability on the part of the
Trust Fund to make distributions with respect to the Certificates or may
result in an increase in the rate of amortization on certain of the
Certificates.
Conflicts Between Affiliates of Goldman, Sachs & Co. and the Trust
Fund. Conflicts of interest between affiliates of the Seller, Goldman, Sachs
& Co. and GSMC that engage in the acquisition, development, operation,
financing and disposition of real estate, on the one hand, and the Trust
Fund, on the other hand, may arise because such affiliates will not be
prohibited in any way from engaging in business activities similar to or
competitive with those of the borrowers.
GSMC, an affiliate of the Seller and the Underwriter, currently holds the
AAPT Parent Loan, and the CAP Parent Loan. In addition, GSMC sold its entire
interests in the Whitehall Partner Loan to GMACCM but retains an option to
repurchase that loan from GMACCM. If, following an event of default under one
of those loans, GSMC, as lender under the loan, were to foreclose on its
collateral, GSMC would become the owner of the AAPT Borrowers, the CAP
Borrower or the Whitehall Borrower, as the case may be. If this were to
occur, GSMC, an affiliate of the Seller and the Underwriter, could have a
conflict of interest with the Certificateholders.
Affiliates of the Seller, Goldman, Sachs & Co. and GSMC intend to continue
to actively acquire, develop, operate, finance and dispose of real
estate-related assets in the ordinary course of their business. During the
course of their business activities, affiliates of the Seller, Goldman, Sachs
& Co. and GSMC may acquire, own or sell properties or finance mortgage loans
secured by properties which are in the same markets as the Mortgaged
Properties. In such a case, the interests of such affiliates may differ from
and compete with the interests of the Trust Fund, and decisions made with
respect to such assets may adversely affect the amount and timing of
distributions with respect to the Certificates. In addition, Goldman, Sachs &
Co. and its affiliates may have business, lending or other relationships
with, or equity investments in, obligors under loans or tenants and conflicts
of interest could arise between the interests of the Trust Fund and the
interests of Goldman, Sachs & Co. and such affiliates arising from such
business relationships.
Conflicts Between the Master Servicer and the Trust Fund. The Trust Fund
has been advised by the Master Servicer that it and its affiliates intend to
continue to service existing and new loans for third parties, including
portfolios of loans similar to the Mortgage Loans, in the ordinary course of
their business. These mortgage loans will be in the same markets or have
common owners, obligors and/or property managers as certain of the Mortgage
Loans and Mortgaged Properties securing the Loans. Certain personnel of the
Master Servicer and its affiliates may, on behalf of the Master Servicer,
perform services with respect to the Mortgage Loans at the same time as they
are performing services, on behalf of other persons, with respect to other
mortgage loans in the same markets as the Mortgaged Properties securing the
Mortgage Loans. In such a case, the interests of the Master Servicer and its
affiliates and their other clients may differ from and compete with the
interests of the Trust Fund and such activities may adversely affect the
amount and timing of collections on the Mortgage Loans.
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GMACCM currently holds the Whitehall Partner Loan. If, following an event
of default under the Whitehall Partner Loan, GMACCM, as lender under the
loan, were to foreclose on its collateral, GMACCM would become the owner of
the Whitehall Borrower. An employee benefit plan of an affiliate of GMACCM is
a beneficiary of a trust that is one of the owners of the Century Towers
Borrower. In addition, an employee benefit plan of an affiliate of GMACCM is
an indirect minority owner of the AAPT Borrowers and the CAP Borrower. Such
interests of GMACCM could create conflicts of interest between the
Certificateholders and GMACCM in its capacities as Master Servicer and
Special Servicer. The potential for such conflicts of interest have been
mitigated to some degree with respect to the Century Plaza Towers Loan and
the Whitehall Pool Loan by the appointment of AMRESCO Services as the
subservicer with respect to the Century Plaza Towers Loan and AMRESCO
Management as Special Servicer for both of such Mortgage Loans. In addition,
GMACCM has informed the Seller that the nature and extent of GMACCM's
indirect ownership in the AAPT Borrower and the CAP Borrower are such that
such conflicts of interest with the Certificateholders are unlikely to arise
with respect to the AAPT Pool Loan and the CAP Pool Loan.
Conflicts Between Managers and the Borrowers. Substantially all of the
third party and borrower affiliated property managers for the Mortgaged
Properties (or their affiliates) manage additional properties, including
properties that may compete with the Mortgaged Properties. Moreover,
affiliates of the managers, and certain of the managers themselves, may also
own or manage other properties, including competing properties. Accordingly,
the managers of the Mortgaged Properties may experience conflicts of interest
in the management of such Properties.
THE OFFERED CERTIFICATES
SPECIAL PREPAYMENT, YIELD AND LOSS CONSIDERATIONS. The yield to maturity
on the Offered Certificates will depend, among other things, on 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 Certificates entitled to
distributions of principal. In addition, in the event of any repurchase of
all or a portion of a Mortgage Loan by the applicable Responsible Party from
the Trust Fund under the circumstances described under "The Pooling
Agreement--Representations and Warranties; Repurchase" herein, the Repurchase
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 part or in full
(except that no prepayment premium or yield maintenance charge would be
payable with respect to any such repurchase). In addition, with respect to
any Class of Offered Certificates, to the extent losses on the Mortgage Loans
exceed the aggregate Certificate Principal Amount of the Classes of
Certificates subordinated to such Class, such Class will bear a loss equal to
the amount of such excess up to an amount equal to the outstanding
Certificate Principal Amount thereof. No representation is made as to the
anticipated rate of prepayments (voluntary or involuntary) or rate or amount
of liquidations or losses on the Mortgage Loans or as to the anticipated
yield to maturity of any Offered Certificate. See "Yield, Prepayment and
Maturity Considerations--Yield" herein.
Investors in the Class A-1 Certificates will generally be entitled to
receive distributions of principal from principal payments on the AAPT LIBOR
Components. See "Description of the Offered
Certificates--Distributions--Payment Priorities" herein. Therefore, the Class
A-1 Certificates will be extremely sensitive to the rate and timing of
principal payments (including both voluntary and involuntary prepayments,
delinquencies, defaults and liquidations) on the AAPT Pool Loan and any
repurchase with respect to breaches of representations and warranties with
respect to such Mortgage Loan. In addition, as described under "Description
of Certificates--Distributions" herein, although distributions of interest on
the Class A-1 Certificates will be based on LIBOR, after the Distribution
Date in July 2004, the Class A-1 Certificates will be subject to a cap on the
related Pass-Through Rate. See "Description of the Offered
Certificates--Distributions--Payment Priorities" herein.
The Notional Amount of the Class X-1A Certificates is based upon the
Stated Principal Balance of the Group 1 Components. Therefore, the Class X-1A
Certificates will be extremely sensitive to the rate and timing of principal
payments (including both voluntary and involuntary prepayments,
delinquencies,
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defaults and liquidations) on the AAPT LIBOR Components and any repurchase
with respect to breaches of representations and warranties with respect to
the AAPT LIBOR Components, in each case, from the Closing Date until the July
2000 Due Date for the AAPT LIBOR Components. See "Description of the Offered
Certificates--General" and "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Mortgage Loans--The AAPT
Pool Loan" herein. Although the payment of a Prepayment Premium is required
in connection with a voluntary prepayment of the AAPT LIBOR Components during
such period, there can be no assurance that the AAPT Borrowers would refrain
from prepaying such Components due to the existence of such a Prepayment
Premium, or that such Prepayment Premiums would be held to be enforceable if
challenged. The rate at which voluntary prepayments occur on the Mortgage
Loans will be affected by a variety of factors, including, without
limitation, the terms of the Mortgage Loans, the length of any Prepayment
Lockout Period, the level of prevailing interest rates, the availability of
mortgage credit, the occurrence of casualties or natural disasters and
economic, demographic, tax, legal and other factors, and no representation is
made as to the anticipated rate of prepayments on the AAPT LIBOR Components.
The Notional Amount of the Class X-2 Certificates is based upon the
Certificate Principal Amounts of the Class A-2A, Class A-2B, Class A-2C,
Class A-2D, Class B, Class C, Class D, Class E, Class F and Class G
Certificates. Therefore, the yield to maturity on the Class X-2 Certificates
will be extremely sensitive to the rate and timing of prepayments of
principal (including both voluntary and involuntary prepayments,
delinquencies, defaults and liquidations) on the Mortgage Loans and any
repurchase with respect to breaches of representations and warranties with
respect to the Mortgage Loans to the extent such payments of principal are
allocated to each such Class in reduction of the Certificate Principal Amount
thereof. In addition, as described under "Description of the Offered
Certificates--Distributions--Payment Priorities" and "--Appraisal Reductions
Amounts" herein, if an Appraisal Reduction Event occurs, distributions of
interest in respect of the Class X-2 Certificates that are attributable to
the notional reductions in Certificate Principal Amounts of the Class G,
Class F, Class E, Class D, Class C or Class B Certificates will be payable at
a lower payment priority than the priority otherwise in effect for
distributions of interest in respect of the Class X-2 Certificates.
No Mortgage Loan (other than the AAPT LIBOR Components) permits voluntary
prepayment earlier than the second Due Date prior to the related Anticipated
Repayment Date (or in the case of the 380 Madison Loan and the Whitehall Pool
Loan, prior to their respective maturity dates). See "Description of the
Mortgage Pool and the Underlying Mortgaged Properties--Description of the
Mortgage Loans". However, there is no assurance that involuntary prepayments
will not occur or that the restrictions contained in the related Mortgage
Loans would ultimately be enforceable in legal proceedings. Voluntary
prepayments are permitted with respect to the AAPT LIBOR Components and, in
the case of the Whitehall Pool Loan, to partially prepay the Whitehall Pool
Loan during its Defeasance Lockout Period to cause the release of one or more
Mortgaged Properties necessary to cure a property level non-payment default
with respect to such Mortgaged Property or Mortgaged Properties. The rate at
which voluntary prepayments occur on the Mortgage Loans will be affected by a
variety of factors, including, without limitation, the terms of the Mortgage
Loans (including the length of time during which the Mortgage Loans may not
be voluntarily prepaid (each a "Prepayment Lockout Period"), Defeasance
Lockout Periods and yield maintenance charges and/or prepayment premiums
applicable to the Mortgage Loans and by the extent to which the Master
Servicer or Special Servicer, as the case may be, is able to enforce such
provisions), the level of prevailing interest rates, the availability of
mortgage credit, the occurrence of casualties or natural disasters and
economic, demographic, tax, legal and other factors.
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The Mortgage Loans may be prepaid, in whole or in part without payment of
a yield maintenance charge and/or prepayment premium, on any Due Date on or
after the dates set forth in the following table:
<TABLE>
<CAPTION>
FIRST PERMITTED ANTICIPATED
MORTGAGE LOAN PREPAYMENT DATE REPAYMENT DATE
- -------------------------------- ------------------------- ------------------------
<S> <C> <C>
Whitehall Pool Loan ............. September 10, 2000* September 10, 2000***
Cadillac Fairview Pool Loan .... November 11, 2003 December 11, 2003
Century Plaza Towers Loan ...... February 9, 2007 April 9, 2007
AAPT Pool Loan:
AAPT Fixed Component............ July 11, 2007 July 11, 2007
AAPT LIBOR Components........... July 11, 2000** July 11, 2004
CAP Pool Loan ................... July 11, 2007 July 11, 2007
Ritz Plaza Loan ................. April 11, 2007 April 11, 2007
Montehiedra Loan ................ April 11, 2007 May 11, 2007
380 Madison Loan................. May 12, 2014 July 11, 2014***
</TABLE>
- ------------
* Under the Whitehall Pool Loan, a prepayment may be made prior to the
Whitehall Defeasance Lock-Out Date to cause the release of one or more
of the Whitehall Properties necessary to cure a property level
non-payment default with respect to such Whitehall Property or
Properties.
** The AAPT LIBOR Components may be prepaid with a prepayment premium
until June 11, 2000 and thereafter on any Due Date without the payment
of a prepayment premium or yield maintenance charge.
*** The dates specified for the Whitehall Pool Loan and the 380 Madison
Loan are the maturity dates for such loans.
No yield maintenance charge and/or prepayment premium will be required
under the Mortgage Loans for prepayments in connection with a casualty or
condemnation unless, in the case of most of the Mortgage Loans, an event of
default has occurred and is continuing.
Provisions requiring yield maintenance charges and/or prepayment premiums
may not be enforceable in some states and under federal bankruptcy law, and
may constitute interest for usury purposes. Accordingly, no assurance can be
given that the obligation to pay a yield maintenance charge and/or prepayment
premium will be enforceable under applicable state or federal law or, if
enforceable, that the foreclosure process will be sufficient to pay such
yield maintenance charge and/or prepayment premium. Additionally, although
the collateral substitution provisions related to defeasance are not intended
to be, and do not have the same effect on the Certificateholders as
prepayment there can be no assurance that a court would not interpret such
provisions as requiring a yield maintenance charge and/or prepayment premium
and thus not enforceable under applicable law or as being usurious. See
"Certain Legal Aspects of the Mortgage Loans--Applicability of Usury Laws" in
the Prospectus.
In general, if an Offered Certificate (such as a Class X-1A or Class X-2
Certificate) is purchased by an investor at a premium and principal
distributions thereon occur at a rate faster than anticipated at the time of
purchase, to the extent that the required yield maintenance charge and/or
prepayment premium, if any, are not received by such investor, such
investor's actual yield to maturity may be lower than that assumed at the
time of purchase. Conversely, if an Offered 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 that assumed at the time of purchase.
Each Mortgage Loan (other than the 380 Madison Loan and the Whitehall Pool
Loan which do not have Anticipated Repayment Dates) requires that commencing
on the first Due Date after the related Anticipated Repayment Date (and in
the case of the AAPT Pool Loan, the respective Anticipated Repayment Dates
for each Component thereof), certain cash flow in excess of that required for
debt service and other items with respect to the related Mortgaged Properties
(as described more fully herein "Excess Cash Flow") will be applied towards
the payment of principal until the principal balance of the related Mortgage
Loan has been reduced to zero. Each Mortgage Loan (other than the 380 Madison
Loan and the Whitehall Pool Loan) also provides that principal outstanding
after the related Anticipated Repayment Date will bear interest at a revised
rate (the "Revised Interest Rate") which will be higher (except with respect
to the AAPT LIBOR Components for which the Revised Rate may be lower) than
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previously in effect (the "Initial Interest Rate"). While interest at the
Initial Interest Rate accrues and is payable on a current basis on such
loans, interest at the excess of the Revised Interest Rate over the Initial
Interest Rate (but, in the case of the AAPT Revised LIBOR Rate, only to the
extent of 2.00% per annum) for such loans ("Excess Interest") will be
deferred and will be paid only after the outstanding principal balance of the
related loan has been paid in full. The foregoing features, to the extent
applicable, are designed to increase the likelihood that a Mortgage Loan will
be prepaid by the borrower on the applicable Anticipated Repayment Dates;
however no assurance can be given that any Mortgage Loan will be repaid on
its applicable Anticipated Repayment Date.
As to the AAPT Pool Loan, from and after the AAPT LIBOR Component
Anticipated Repayment Date until the earlier of the repayment of the AAPT
LIBOR Components or the AAPT Fixed Component Anticipated Repayment Date, the
AAPT Excess Cash Flow will be applied in the following order of priority: (a)
to the outstanding principal balance of the AAPT LIBOR Components, pro rata,
based on the then outstanding principal balances of the AAPT LIBOR A
Component and the AAPT LIBOR B Component until the AAPT LIBOR Components are
paid in full and (b) to the AAPT LIBOR Excess Interest. From and after the
AAPT Fixed Component Anticipated Repayment Date, the AAPT Excess Cash Flow
will be applied pro rata towards the payment of the principal of the AAPT
Fixed Component and the AAPT LIBOR Components, until the AAPT Pool Loan is
paid in full.
See "Yield, Prepayment and Maturity Considerations" and "Federal Income
Tax Consequences" herein and "Yield Considerations" and "Federal Income Tax
Consequences" in the Prospectus.
EFFECT OF MORTGAGOR DEFAULTS. The aggregate amount of distributions on the
Offered Certificates, the yield to maturity of the Offered Certificates, the
rate of principal payments on the Offered Certificates and the weighted
average life of the Offered Certificates will be affected by the rate and the
timing of delinquencies and defaults on the Mortgage Loans. If a purchaser of
an Offered 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 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 extreme scenarios, be negative. The timing of any loss on a
liquidated Mortgage Loan will also affect the actual yield to maturity of the
Offered 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.
As and to the extent described herein, the Master 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. Such interest will accrue from (and including) the date on which
the related Advance is made or the related expense incurred through the date
of reimbursement, less any amount of interest previously paid in respect
thereof. The Master 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
Offered Certificates and, consequently, may result in losses being allocated
to the Offered Certificates that would not otherwise have resulted absent the
accrual of such interest. In addition, certain circumstances, including
delinquencies in the payment of principal and interest, will result in a
Mortgage Loan being specially serviced. The Special Servicer is entitled to
compensation for special servicing activities which may result in losses
being allocated to the Offered Certificates that would not otherwise have
resulted. See "The Pooling Agreement--Special Servicers" herein.
Even if losses on the Mortgage Loans are not borne by an investor in a
particular Class of Offered Certificates, such losses may affect the weighted
average life and yield to maturity of such Certificates. Losses on the
Mortgage Loans, to the extent not allocated to such Class of Offered
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
Offered Certificates will depend upon the characteristics of the remaining
Mortgage Loans.
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Delinquencies and defaults on the Mortgage Loans may significantly delay
the receipt of payments by the holder of an Offered 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.
RISKS RELATING TO UNDERWRITTEN NET CASH FLOW. As described under "
Mortgage Pool Characteristics--Certain Characteristics of the Mortgage
Loans", Underwritten Net Cash Flow means cash flow, as adjusted based on a
number of assumptions used by the Seller. No representation is made that the
Underwritten Net Cash Flow set forth herein represents future net cash flows.
Each investor should review these assumptions and make its own determination
of the appropriate assumptions to be used in determining Underwritten Net
Cash Flow.
Underwritten Net Cash Flow reflects calculations and assumptions used by
the Seller and should not be used as a substitute for cash flow as determined
in accordance with GAAP as a measure of the results of a Mortgaged Property's
operation or as a substitute for cash flows from operating activities
determined in accordance with GAAP as a measure of liquidity. For example,
the DSCRs set forth herein for the Mortgage Loans and the Mortgaged
Properties vary, and may vary substantially, from the debt service coverage
ratios for the Mortgage Loans and the Mortgaged Properties as calculated
pursuant to the definition of such ratios as set forth in the related loan
documents. See "Description of the Mortgage Pool--Certain Characteristics of
the Mortgage Loans" for a discussion of the assumptions used in determining
Underwritten Net Cash Flow.
RELATED PARTIES MAY PURCHASE CERTIFICATES. Related parties, including the
Master Servicer, the Special Servicer or affiliates of the borrowers may
purchase all or part of one or more Classes of Certificates. A purchase by
the Master Servicer or Special Servicer, as the case may be, could cause a
conflict between such entity's duties pursuant to the Pooling 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. The Pooling Agreement provides that the Mortgage
Loans shall be administered in accordance with the Servicing Standard without
regard to ownership of any Certificate by the Master Servicer, the Special
Servicer or any affiliate thereof. Under the Pooling Agreement, in the event
that a Certificateholder becomes a lender under any Affiliate Loan, such
Certificateholder will not be entitled to vote for the selection of the
Special Servicer or in connection with directing the Special Servicer's
actions with respect to the related Mortgage Loan.
BOOK-ENTRY REGISTRATION. Each Class of Offered Certificates will be
initially represented by one or more certificates registered in the name of
Cede & Co., as the nominee for DTC, and will not be registered in the names
of the related holders of Certificates or their nominees. As a result,
holders of Offered Certificates will not be recognized as
"Certificateholders" for certain purposes. Hence, those beneficial owners
will be able to exercise the rights of holders of Certificates only
indirectly through DTC, Cedel Bank, S.A. ("CEDEL") and The Euroclear System
("Euroclear") and their participating organizations. See "Description of the
Offered Certificates--Delivery, Form and Denomination" and "--Book-Entry
Registration" herein. A beneficial owner holding a Certificate through the
book-entry system will be entitled to receive the reports and notices
described under the Pooling Agreement (to the extent that its name and
address has been provided to the Certificate Registrar) only through the
facilities of DTC, CEDEL and Euroclear and their respective participants
(except that the reports will be made available directly from the Trustee
upon request). Additionally, certain information made available on the
monthly reports to Certificateholders can be retrieved via facsimile through
LaSalle National Bank's ASAP System by calling (312) 904-2200, and requesting
statement number 272.
LIMITED LIQUIDITY AND MARKET VALUE. There is currently no secondary market
for the Offered Certificates. While the Underwriter has advised the Seller
that it currently intends to make a secondary market in the Offered
Certificates, it is under no obligation to do so. Accordingly, there can be
no assurance that a secondary market for the Offered Certificates will
develop. Moreover, if a secondary market does develop, there can be no
assurance that it will provide holders of Offered Certificates with liquidity
of investment or that it will continue for the life of the Offered
Certificates. The Offered Certificates will not be listed on any securities
exchange. Lack of liquidity could result in a substantial
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decrease in the market value of the Offered Certificates. In addition, the
market value of the Offered 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 any Offered
Certificate at any time.
PASS-THROUGH RATE CONSIDERATIONS. After the Distribution Date in July
2004, the Pass-Through Rate on the Class A-1 Certificates will be subject to
a maximum per annum rate, and, therefore, the yield to investors in such
Class of Certificates may not be as high as that offered by other LIBOR-based
investments which are not subject to such interest rate restrictions. The
Pass-Through Rates on the Class B, Class C, Class D, Class E, Class F and
Class G Certificates are based on the Adjusted WAC Rate of the Mortgage Loans
and the Pass-Through Rate on the Class X-2 Certificates will be partially
based upon the Adjusted WAC Rate of the Mortgage Loans, and all of such
Classes will be affected by disproportionate principal payments on the
Mortgage Loans and the existence of any Group 1 Difference Amounts. Because
certain Mortgage Loans will amortize their principal more quickly than
others, such rate will fluctuate over the life of such Classes of
Certificates. The Adjusted WAC Rate for each Distribution Date, assuming that
each Mortgage Loan prepays on its Anticipated Repayment Date (and that all
scheduled monthly payments are timely made and that no other prepayments
occur), is set forth in Exhibit C hereto. See "Yield, Prepayment and Maturity
Considerations--Yield" herein.
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MORTGAGE POOL CHARACTERISTICS
GENERAL
The Trust Fund will consist primarily of 8 Mortgage Loans with an
aggregate principal balance as of the Cut-Off Date, after deducting payments
of principal due on such date, of $977,099,000. In addition, the Trust Fund
will also include the Montehiedra Partner Loans. See "Description of the
Mortgage Pool and the Underlying Mortgaged Properties--Description of the
Mortgage Loans--The Montehiedra Loan--The Montehiedra Partner Loans" herein.
The Montehiedra Partner Loans will not be a part of the Mortgage Pool and
references to "Mortgage Loans" herein do not include the Montehiedra Partner
Loans. All of the numerical information provided herein with respect to the
Mortgage Loans is provided on an approximate basis. The Mortgage Loans are
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
(each, a "Mortgage") creating a first lien on the interests of the related
borrower's fee and/or leasehold estate in one or more commercial or
multifamily properties (each, a "Mortgaged Property") as set forth on the
following table:
<TABLE>
<CAPTION>
NUMBER OF
MORTGAGED
INTEREST IN PROPERTY ENCUMBERED PROPERTIES
- ------------------------------------- ------------
<S> <C>
Fee Estate ............................ 90
Leasehold Estate ...................... 5
Borrower's Fee and Leasehold Estate*... 1
</TABLE>
- ------------
* "Borrower's Fee and Leasehold Estate" means that the borrower's
interest in the Mortgaged Property consists of a fee interest in a
portion of the property and a leasehold interest in the remaining
portion.
The Mortgaged Properties consist of office buildings, retail properties,
industrial properties, one multifamily property and 2 parcels of undeveloped
land. All of the Mortgage Loans are non-recourse loans so that, in the event
of a borrower default on any Mortgage Loan, recourse is limited to the
Mortgaged Property or Mortgaged Properties securing such Mortgage Loan, as
well as such limited other assets as may have been specifically pledged to
secure such Mortgage Loan, and not against the borrower's other assets or any
assets of the borrower's affiliates. GSMC originated the Century Plaza Towers
Loan, the AAPT Pool Loan, the CAP Pool Loan and the Montehiedra Loan. To
facilitate loan closings, GSMC engaged GMACCM to originate the Cadillac
Fairview Pool Loan, the 380 Madison Loan, the Whitehall Pool Loan and the
Ritz Plaza Loan on GSMC's behalf, and concurrently with the origination, GSMC
acquired a 100% participation interest in each such Mortgage Loan. GSMC and
GMACCM are collectively referred to herein as the "Originators". All of the
Mortgage Loans were underwritten by the Originators in accordance with the
underwriting criteria described herein. Legal title to the Mortgage Loans
originated by GMACCM will have been acquired by GSMC before the Closing Date
and the Seller will purchase the Mortgage Loans on or before the Closing Date
from GSMC pursuant to the Loan Sale Agreement (the "Loan Sale Agreement")
between GSMC and the Seller. The Seller will cause the Mortgage Loans in the
Mortgage Pool to be assigned to LaSalle National Bank, as Trustee (the
"Trustee"), pursuant to the Pooling Agreement. GMACCM, in its capacity as
Master Servicer, will service the Mortgage Loans pursuant to the Pooling
Agreement.
Pursuant to an agreement between GMACCM and GSMC (the "GMACCM Responsible
Party Agreement") with respect to the Whitehall Pool Loan, the Cadillac
Fairview Pool Loan, the Ritz Plaza Loan and the 380 Madison Loan, GMACCM will
make certain representations, warranties and covenants relating to such
Mortgage Loans and may be obligated to repurchase any of such Mortgage Loans
(or with respect to the Cadillac Fairview Pool Loan, one or more of the
separate loans made to the Cadillac Fairview Borrowers) in the event of a
material breach of such representations or warranties. In addition, pursuant
to the Loan Sale Agreement, GSMC will make certain limited representations
and warranties to the Seller with respect to the Mortgage Loans it
originated, and GSMC may be obligated to repurchase such Mortgage Loan in the
event of a material breach of a representation or warranty. See "The Pooling
Agreement--Representations and Warranties; Repurchase" herein and Exhibit B
hereto. Under the
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Loan Sale Agreement, GSMC will assign to the Seller its rights with respect
to the representations, warranties and remedies under the GMACCM Responsible
Party Agreement, and under the Pooling Agreement, the Seller will assign its
rights with respect to (i) certain of the representations, warranties and
remedies in the GMACCM Responsible Party Agreement and (ii) the
representations, warranties and remedies in the Loan Sale Agreement, to the
Trustee for the benefit of the Trust Fund. Except as described herein under
"The Pooling Agreement--Representations and Warranties; Repurchase", the
Seller 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 Responsible Parties will have no obligations with respect to the
Certificates other than pursuant to the limited representations, warranties
and covenants made by them pursuant to the GMACCM Responsible Party Agreement
or the Loan Sale Agreement, as applicable, to the extent assigned by the
Seller to the Trustee. See "The Pooling Agreement--Representations and
Warranties; Repurchase" herein and "The Mortgage Pools--Representations and
Warranties" in the Prospectus.
SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is generally non-recourse and is secured by a Mortgage
or Mortgages encumbering the related borrower's or borrowers' interest in the
related Mortgaged Property or Properties. Each Mortgage Loan is also secured
by an assignment of the related borrower's or borrowers' interest in the
leases, rents and profits of the related Mortgaged Properties. In certain
instances, additional collateral exists in the nature of partial indemnities,
collateral assignments of interest rate cap agreements and the establishment
and pledge of one or more reserve or escrow accounts or letters of credit for
necessary repairs, replacements and environmental remediation, real estate
taxes and insurance premiums, tenant improvements, leasing commissions,
deferred maintenance and/or scheduled capital improvements (such accounts,
"Reserve Accounts"). All of the Mortgage Loans provide for the
indemnification of the related mortgagee by the related borrower(s) for the
presence of any hazardous substances affecting the Mortgaged Property.
Each Mortgage constitutes a first lien on the related Mortgaged
Properties, subject generally only to (i) liens for real estate and other
taxes and special assessments and (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, all of which were
determined to have been acceptable to the related Originator in connection
with the origination of the related Mortgage Loan.
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
All of the Mortgage Loans have Due Dates that occur on the 9th through the
11th day of each month, or, if such day is not a business day, the next or
preceding business day. As of the Cut-Off Date, the Mortgage Loans had the
following characteristics:
<TABLE>
<CAPTION>
<S> <C>
Aggregate Principal Balance ...................................... $977,099,000
Lowest Mortgage Loan Principal Balance ........................... $ 52,579,779
Highest Mortgage Loan Principal Balance .......................... $258,460,281
Average Mortgage Loan Principal Balance .......................... $122,137,375
Range of Remaining Terms to Anticipated Repayment Date* ......... 37 to 203 months
Weighted Average Remaining Term to Anticipated Repayment Date* .. 106 months
Range of Mortgage Rates per annum** .............................. 7.48% to 8.68%
Weighted Average Mortgage Rate** ................................. 7.89%
Range of Cut-Off Date Loan-to-Appraised Value ("LTV") Ratios ..... 43.7% to 67.4%
--------------------
Weighted Average Cut-Off Date LTV Ratios ......................... 55.1%
Range of Debt Service Coverage Ratios*** ......................... 1.34x to 2.26x
Weighted Average Debt Service Coverage Ratio*** .................. 1.70x
</TABLE>
- ------------
* In the case of the 380 Madison Loan and the Whitehall Pool Loan, their
respective maturity dates.
** Excludes the AAPT LIBOR Components.
*** The DSCR for the AAPT Pool Loan assumes LIBOR of 5.6875%
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All of the Mortgage Loans (other than the 380 Madison Loan and the
Whitehall Pool Loan) amortize substantially all of their principal over their
respective terms; the 380 Madison Loan amortizes to only 83.9% of its
original principal amount over its term and the Whitehall Pool Loan amortizes
to only 94.8% of its original principal amount over its term. Each Mortgage
Loan, with the exception of the Whitehall Pool Loan and the 380 Madison Loan,
requires that after a specified date (each, an "Anticipated Repayment Date"),
Excess Cash Flow will be applied towards the reduction of principal, as more
fully described under "Description of the Mortgage Pool and the Underlying
Mortgaged Properties." The following chart lists the Anticipated Repayment
Date for each Mortgage Loan:
<TABLE>
<CAPTION>
FIRST PERMITTED ANTICIPATED
MORTGAGE LOAN PREPAYMENT DATE REPAYMENT DATE
- -------------------------------- ------------------------ ------------------------
<S> <C> <C>
Whitehall Pool Loan.............. September 10, 2000* September 10, 2000***
Cadillac Fairview Pool Loan .... November 11, 2003 December 11, 2003
Century Plaza Towers Loan ...... February 9, 2007 April 9, 2007
AAPT Pool Loan:
AAPT Fixed Component............ July 11, 2007 July 11, 2007
AAPT LIBOR Components........... July 11, 2000** July 11, 2004
CAP Pool Loan ................... July 11, 2007 July 11, 2007
Ritz Plaza Loan ................. April 11, 2007 April 11, 2007
Montehiedra Loan ................ April 11, 2007 May 11, 2007
380 Madison Loan................. May 12, 2014 July 11, 2014***
</TABLE>
- ------------
* Under the Whitehall Pool Loan, a prepayment may be made prior to the
Whitehall Defeasance Lock-Out Date to cause the release of one or more
of the Whitehall Properties necessary to cure a property level
non-payment default with respect to such Whitehall Property or
Properties.
** The AAPT LIBOR Components may be prepaid with a prepayment premium
until June 11, 2000 and thereafter on any Due Date without the payment
of a prepayment premium or yield maintenance charge.
*** The dates specified for the Whitehall Pool Loan and the 380 Madison
Loan are the maturity dates for such loans.
No yield maintenance premium is required for any voluntary prepayments on
the Mortgage Loans after their respective Prepayment Lockout Periods. No
yield maintenance premium will be required under the Mortgage Loans for
prepayments in connection with a casualty or condemnation unless, in the case
of most of the Mortgage Loans, an event of default has occurred and is
continuing. The AAPT Pool Loan permits the prepayment of the AAPT LIBOR
Components, in whole or in part on any Due Date, with the payment of a
prepayment premium equal to 3% of the amount prepaid if the prepayment is
made during the first year of such Mortgage Loan, 2% of the amount prepaid if
such prepayment is made during the second year of such Mortgage Loan, 1% of
the amount prepaid if such prepayment is made during the third year of such
Mortgage Loan and no prepayment premium thereafter. See "Description of the
Mortgage Pool and the Underlying Mortgaged Properties--Description of the
Mortgage Loans--The AAPT Pool Loan--Prepayment" herein.
All of the Mortgage Loans (other than the AAPT LIBOR Components) provide
that after the applicable Defeasance Lockout Period (as defined herein) and
prior to the related Anticipated Repayment Date (or, with respect to the 380
Madison Loan and the Whitehall Pool Loan, their respective maturity dates),
the borrower may obtain the release of one or more of the related Mortgaged
Properties from the lien of the related Mortgage upon, among other things, a
pledge to the Trustee of noncallable U.S. Treasury obligations. Such U.S.
Treasury obligations will provide payments, on or prior to all successive
scheduled Due Dates upon which interest and principal payments are due under
the related note through and including the applicable Anticipated Repayment
Date (or, with respect to the 380 Madison Loan and the Whitehall Pool Loan,
their respective maturity dates), in amounts due on such dates under the
related Note or, in the case of an Anticipated Repayment Date, an amount
determined as if the related Mortgage Loan were to mature on such Anticipated
Repayment Date. In addition, certain Mortgage Loans permit release of less
than all of the related Mortgaged Properties in connection with a partial
defeasance upon the satisfaction of certain debt service coverage ratio
tests. All of the Mortgage
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Loans secured by two or more Mortgaged Properties (other than the AAPT LIBOR
Components) permit the release of the lien of the Mortgage on less than all
of the Mortgaged Properties by pledging U.S. Treasury obligations providing
for payment of principal and interest with respect to a portion of the
Mortgage Loan allocable to the Mortgaged Properties to be released from the
Mortgage lien. The Mortgage Loans also permit (or provide that the Master
Servicer may require) the related borrower, under certain circumstances, to
transfer the pledged U.S. Treasury obligations together with the related Note
or the portion of the related Note secured by such U.S. Treasury obligations
to a successor mortgagor. See "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Mortgage Loans" herein.
The following tables set forth certain information with respect to the
Mortgage Loans and Mortgaged Properties. The statistics in the following
tables were primarily derived from information provided to the Originators by
the respective borrowers. Some of the calculations of the statistics in the
tables were not made with adjustments which would be required under generally
accepted accounting principles ("GAAP"). For purposes of the tables and Annex
A, the defined terms have the meanings described below:
(1) "Total Revenue" as used herein with respect to any Mortgaged Property
or group of Mortgaged Properties generally means, for the year stated,
total revenue generated at such Mortgaged Property or Properties during
the twelve calendar months ended in December 31, 1996, December 31, 1995
or December 31, 1994. For the Ritz Plaza Property and four of the
Whitehall Pool Properties during periods where less than 12 full months of
operating history is available, partial years have been annualized.
(2) "NOI" or "Net Operating Income" as used herein with respect to any
Mortgaged Property or group of Mortgaged Properties means, for the year
stated, the excess of the Total Revenue for such Mortgaged Property or
Properties for the period referenced in item (1) above less the total
operating expenses of such Mortgaged Property or Properties incurred
during such period, without giving effect to any deductions for debt
service, depreciation, amortization, capital expenditures, tenant
improvements, leasing commissions or reserves therefor. For the Ritz Plaza
Property and 4 of the Whitehall Pool Properties during periods where less
than 12 full months of operating history is available, partial years have
been annualized.
NOI and the revenues and expenses used to determine NOI for each
Mortgaged Property are derived from information furnished by the related
borrowers. There can be no assurance that the components of net operating
income for any Mortgaged Property (i.e., revenues and expenses) as
determined under GAAP would be the same as those used in computing the
stated NOI for such Mortgaged Property. Moreover, NOI is not a substitute
for net income as determined in accordance with GAAP as a measure of the
results of a Mortgaged Property's operations or a substitute for cash
flows from operating activities determined in accordance with GAAP as a
measure of liquidity.
(3) "Underwritten Net Cash Flow" as used herein with respect to any
Mortgaged Property or group of Mortgaged Properties generally means cash
flow (as determined by the Seller) for a twelve month period based upon
the following assumptions:
a. Leases in Place: In calculating Underwritten Net Cash Flow, base
rent was generally determined by using Annualized Base Rent and
percentage rent was generally determined by using the percentage rent
that was actually collected during the most recent 12 month time
period. In the case of the Cadillac Fairview Pool Loan, percentage
rent was determined based on prior year store sales and rental
breakpoints based on existing leases.
b. Management Fees: Management fees used in the calculation of
Underwritten Net Cash Flow, which in all cases equal or exceed the
contractual base rate under the management agreements currently in
effect, are as follows: Cadillac Fairview Properties: 3.0% of total
rental payments; Century Towers Property: 1.5% of Total Revenues; AAPT
Properties: 2.5%-4.0% of Total Revenues; 380 Madison Property: not
applicable due to master lease payment; CAP Properties: 3.0%-4.0% of
Total Revenues; Whitehall Properties: 3.0%-5.0% of Total Revenues;
Ritz Plaza Property: 5.0% of Total Revenues; and Montehiedra Property:
4.0% of total rental payments.
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c. Capital Reserves: Annual reserves assumed in calculating
Underwritten Net Cash Flow are as follows: Cadillac Fairview
Properties: $0.20/sf; Century Towers Property: $0.20/sf; AAPT
Properties: $0.15/sf -$0.20/sf; CAP Properties: $0.15/sf -$0.20/sf;
Whitehall Properties: $0.20/sf; Ritz Plaza Property: $250/unit; and
Montehiedra Property: $0.14/sf.
d. Rollover Expenses: Annual expenses of tenant rollover (i.e.,
tenant improvements ("TI") and leasing commissions ("LC")) assumptions
used in calculating Underwritten Net Cash Flow are generally as
follows:
<TABLE>
<CAPTION>
TENANT
IMPROVEMENTS LEASING COMMISSIONS
------------------ -----------------------
BASE RENT
PER AVG. LEASE RENEWAL NEW RENEWAL NEW RENEWAL MANAGEMENT CAPITAL
SQUARE FOOT TERM (YRS.) PROBABILITY TENANT TENANT TENANT TENANT FEES RESERVES
------------- ------------ ------------- -------- --------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cadillac Fairview
Pool Loan .......... NA 7 65% $15 $5 $2.50 $1.50 3% $0.20
Century Plaza
Towers Loan ........ $24 7.75 60% $22 $11 5.00% 2.00% 1.50% $0.20
AAPT Pool Loan ...... $3-$19 5 65% $1-$21 $0-$11 5.00% 2.00% 2.5%-4.0%
$0.15-$0.20
380 Madison Loan* .. NA NA NA NA NA NA NA NA NA
CAP Pool Loan ....... $4-22 6 65% $1-$12 $0-$5 5.00% 2.0% 3.0%-4.0%
$0.15-$0.20
Whitehall Pool Loan $8-$23 5 60% $4-$16 $1-$10 4.5%-6.0% 2.3%-3.5% 3%-5% $0.20
Ritz Plaza Loan** ... $30 10 60% $45 $20 7.50% 3.75% 5%
$250/unit
Montehiedra Loan*** NA 10 60% $6 $0 NA NA 4% $0.14
</TABLE>
- ------------
* Because of the long-term master lease for the 380 Madison Property,
there were no rollover expenses assumed.
** Base Rent, Avg. Lease Term, Renewal Probability, Tenant Improvements
and Leasing Commissions for the Ritz Plaza Property are for the
commercial office space only.
*** Leasing commissions are included in management fees.
e. Occupancy: In calculating Underwritten Net Cash Flow, adjustments
were made to Total Revenues or Annualized Base Rent to reflect maximum
occupancies of the lower of actual, market or 95% for retail,
industrial and office properties and 97% for the multifamily property.
For the Cadillac Fairview Properties, the Montehiedra Property and one
of the Whitehall Properties, leased anchor spaces were excluded from
the determination of maximum occupancy.
f. Taxes: In calculating Underwritten Net Cash Flow, adjustments
were made with respect to the Ritz Plaza Property to increase
operating expenses to account for the amount of tax abatements
currently received by the Ritz Plaza Property and to increase rental
income by the amount that the Ritz Plaza Borrower is permitted under
Section 421-A to increase rent to offset the phase out of the tax
abatement. The adjustments assume that the Ritz Plaza Borrower will be
able to collect annual increases in rent of 2.2% through the tax year
2001/2002.
g. Expenses: In calculating expenses, adjustments were made to
generally incorporate budgeted 1997 expenses as provided by applicable
borrowers.
The management fees and reserves used in calculating Underwritten Net
Cash Flow differ in many cases from the management fees and reserves
provided for under the loan documents for the Mortgage Loans. Further,
actual conditions at the Mortgaged Properties will differ, and may differ
substantially, from the assumed conditions used in calculating
Underwritten Net Cash Flow. In particular, the assumptions regarding
tenant vacancies, renewal rates, tenant improvements and leasing
commissions and other conditions used in calculating Underwritten Net Cash
Flow for the retail and office properties may differ substantially from
actual conditions. Such assumptions may also differ from those used by the
Rating Agencies or by investors. Each investor should make its own
determination of the appropriate assumptions to be used in determining
Underwritten Net Cash Flow.
Underwritten Net Cash Flow reflects the calculations and assumptions used
by the Seller and may or may not reflect the amounts calculated and
adjusted by the Rating Agencies for their own
S-76
<PAGE>
analysis. Underwritten Net Cash Flow and the Debt Service Coverage Ratios
derived therefrom are not a substitute for cash flow as determined in
accordance with GAAP as a measure of the results of the Mortgaged
Property's operations or a substitute for cash flows from operating
activities determined in accordance with GAAP as a measure of liquidity.
Reletting costs and capital expenditures are crucial to the operation of
commercial 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 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 Underwritten Net Cash Flow set forth herein intended to
represent such future net cash flow.
(4) "Value" means, for each of the Mortgaged Properties, the appraised
value of such Mortgaged Property as determined by the appraisal thereof
reviewed in connection with the origination of the related Mortgage Loan.
"Total Value" is the aggregate Value for all of the Mortgaged Properties.
(5) "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 Underwritten 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 Underwritten Net Cash Flow, net operating income 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, defeasance
or otherwise. "Cut-Off Date Allocated Loan Amount" means for each
Mortgaged Property the Allocated Loan Amount of such Mortgaged Property as
of the Cut-Off Date.
(6) "Annual Debt Service" means on any Mortgage Loan, the annual debt
service (interest, including interest allocable to payment of the
Servicing Fee and, if applicable, principal) on such Mortgage Loan for the
twelve month period commencing on the Cut-Off Date.
(7) "Anticipated Repayment Date" for each Mortgage Loan (other than the
380 Madison Loan and the Whitehall Pool Loan) is the date on which (i)
such Mortgage Loan commences to accrue interest at the Revised Interest
Rate for such Mortgage Loan, (ii) all Excess Cash Flow for such Mortgage
Loan is required to be applied to payment of principal of such Mortgage
Loan and (iii) such Mortgage Loan may be voluntarily repaid by the
borrower without payment of a yield maintenance charge or prepayment
premium. There can be no assurance that any Mortgage Loan will be repaid
on its Anticipated Repayment Date. With respect to the 380 Madison Loan
and the Whitehall Pool Loan, for the purpose of the statistics presented
in this section, the 380 Madison Maturity Date and the Whitehall Maturity
Date, respectively, were used as the Anticipated Repayment Date.
With respect to the AAPT Pool Loan, the AAPT Fixed Component has an
Anticipated Repayment Date three years later than the Anticipated
Repayment Date for the AAPT LIBOR Components of such Mortgage Loan. See
"Description of the Mortgage Pool and the Underlying Mortgaged
Properties--Description of the Mortgage Loans--The AAPT Pool Loan--Payment
Terms" herein.
(8) "DSCR" or "Debt Service Coverage Ratio" means (i) the aggregate
Underwritten Net Cash Flow for all of the related Mortgaged Properties
divided by (ii) Annual Debt Service.
The DSCRs set forth herein for the Mortgage Loans and Mortgaged
Properties vary (and may vary substantially) from the debt service
coverage ratios for such Mortgage Loans and Mortgaged Properties as
calculated pursuant to the definition of such ratio as set forth in the
related loan
S-77
<PAGE>
documents. The debt service calculation for each Mortgage Loan as set
forth in its related loan documents is set forth in the description of
such Mortgage Loan herein under the heading "Description of the Mortgage
Pool and the Underlying Mortgaged Properties--Description of the Mortgage
Loans" herein.
(9) "Loan-to-Value Ratio" or "LTV" or "Cut-Off Date LTV" means with
respect to any Mortgage Loan, the principal balance of such Mortgage Loan
as of the Cut-Off Date divided by the aggregate Value of the Mortgaged
Properties securing such Mortgage Loan.
(10) "Anticipated Repayment Date Balance," for each of the Mortgage
Loans, is equal to the outstanding principal amount of such Mortgage Loan
as of its Anticipated Repayment Date (or in the case of the 380 Madison
Loan and the Whitehall Pool Loan, their respective maturity dates), taking
into account scheduled amortization, assuming no prepayments or defaults.
(11) "Anticipated Repayment Date LTV" or "ARD LTV" means with respect to
any Mortgage Loan, the Anticipated Repayment Date Balance for such
Mortgage Loan divided by the aggregate Value of the Mortgaged Properties
securing such Mortgage Loan. Such calculation thus assumes that the
appraised value of the Mortgaged Property or Mortgaged Properties securing
a Mortgage Loan on the Anticipated Repayment Date (or in the case of the
380 Madison Loan and the Whitehall Pool Loan, their respective maturity
dates) is the same as the Value or Values thereof as of the Cut-Off Date.
There can be no assurance that the value of any particular Mortgaged
Property will not have declined or increased from its Value as of the
Cut-Off Date.
(12) "SF/Units" means, in the case of office, industrial or retail
properties, total square footage or GLA (as provided by the borrower), and
in the case of multifamily properties, the number of apartment units.
(13) "GLA" means the square footage of the gross leaseable area.
(14) "Occupancy" or "OCC" means the percentage of SF/Units of the
property that are leased as of the date indicated in the column with the
heading "As of Date".
(15) "Annualized Base Rent" is calculated by multiplying by twelve the
contractual monthly base rent, as of the point in time for which
"Occupancy" was calculated for the related property, as reflected in the
rent rolls provided by the related borrower. With respect to the Cadillac
Fairview Pool Loan, Annualized Base Rent takes into account any rate
increases occurring within six months of the date on which "Occupancy" was
calculated for the related property.
(16) "Average Base Rent Per Square Foot" is calculated by dividing
Annualized Base Rent by total GLA as of the same date as of which the
Annualized Base Rent was calculated.
(17) "First P&I Date" means the first Due Date on which the borrower is
required to pay both principal and interest.
(18) "Original Principal Balance" means the principal balance of the
Mortgage Loan at origination.
(19) "Anticipated Term" means the term of the Mortgage Loan in months
from the date of the first full monthly payment thereon to the related
Anticipated Repayment Date (or in the case of the 380 Madison Loan and the
Whitehall Pool Loan, their respective maturity dates).
(20) "Sales Per SF" means sales, based on the most recent sales data
provided by the applicable borrower to the related Originator, for the
previous applicable 12 month period, or if 12 months of sales data was not
available, such sales data as was available, was either annualized or
excluded.
(21) The term "psf" means per square foot.
(22) "Occupancy Costs" means the sum of minimum rent, percentage rent,
and tenant reimbursements divided by sales.
S-78
<PAGE>
In addition to the tables set forth below, Investors should review the
accompanying notes in the prior section when reading the following
information. A table of Mortgaged Property characteristics is attached as
Annex A to this Prospectus Supplement.
MORTGAGE LOAN CHARACTERISTICS
<TABLE>
<CAPTION>
REMAINING ANTICIPATED
TERM TO FIRST
ORIGINAL ANTICIPATED P&I ANTICIPATED ORIGINAL
NUMBER OF MORTGAGE AMORTIZATION REPAYMENT PAYMENT REPAYMENT STATED PRINCIPAL
LOAN PROPERTIES RATE (MOS.) DATE (MOS.) DATE DATE MATURITY BALANCE
- ------------------------- ----------- ------------- ------------ ------------- ------------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cadillac Fairview Pool
Loan.................... 8 7.935000% 360 76 12/11/96 12/11/03 11/11/26 $260,000,000
Century Plaza Towers Loan 1 8.039125% 360 116 05/09/97 04/09/07 04/09/27 230,000,000
AAPT Pool Loan........... 48 360 119 08/11/97 07/11/07 07/11/27 125,284,000
AAPT Fixed Component.... n.a. 7.480000% ** 119 08/11/97 07/11/07 07/11/27 75,284,000
AAPT LIBOR A LIBOR plus
Component ............. n.a. 0.93% n.a. 83 n.a. 07/11/04 07/11/27 30,000,000
AAPT LIBOR B LIBOR plus
Component ............. n.a. 0.76% n.a. 83 n.a. 07/11/04 07/11/27 20,000,000
380 Madison Loan......... 1 7.848000% *** 203* 08/11/02 n.a. 07/11/14 89,000,000
CAP Pool Loan............ 25 7.480000% 360 119 08/11/97 07/11/07 07/11/27 88,000,000
Whitehall Pool Loan...... 11 8.680000% 300 37* 09/10/96 n.a. 09/10/00 73,000,000
Ritz Plaza Loan.......... 1 8.135000% 360 116 06/11/97 04/11/07 04/24/27 62,500,000
Montehiedra Loan......... 1 8.230000% 360 117 06/11/97 05/11/07 05/11/27 52,700,000
----- --------------
Total/Weighted Average . 96 7.888383% 356 106 $980,484,000
===== ==============
</TABLE>
- ------------
* Remaining term to Maturity Date
** The Fixed Component of the AAPT Pool Loan amortizes on the following
schedule: 1) $4,184,000 fully amortizes in 53 months; 2) $71,100,000
amortizes on a 305-month schedule for the first 84 months and then
amortizes on a 276-month schedule thereafter.
*** The 380 Madison Loan has a 60-month interest-only period and then
amortizes on a 360-month schedule.
PRINCIPAL BALANCES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
PRINCIPAL
CUT-OFF PERCENT OF BALANCE AT ANTICIPATED
DATE CUT-OFF ANTICIPATED ANNUAL UNDERWRITTEN CUT-OFF REPAYMENT
PRINCIPAL DATE PRINCIPAL REPAYMENT APPRAISED DEBT NET CASH DATE DATE
LOAN BALANCE BALANCE DATE VALUE SERVICE FLOW DSCR* LTV LTV**
- --------------- -------------- -------------- -------------- -------------- ------------- -------------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cadillac
Fairview Pool
Loan........... $258,460,281 26.5% $240,479,577 $ 413,900,000 $22,991,860 $ 35,873,856 1.56x 62.4% 58.1%
Century Plaza
Towers Loan.... 229,369,475 23.5 201,899,161 460,000,000 20,327,231 35,718,416 1.76x 49.9% 43.9%
AAPT Pool Loan . 125,149,361 12.8 109,239,423 239,025,000 10,754,856 18,516,754 1.72x 52.4% n.a.
AAPT Fixed
Component..... 75,149,361 7.7 59,239,423 n.a. 7,434,623 n.a. n.a. n.a. 37.1%
AAPT
LIBOR A
Component..... 30,000,000 3.1 30,000,000 n.a. 2,012,823 n.a. n.a. n.a. 47.1%
AAPT
LIBOR B
Component..... 20,000,000 2.0 20,000,000 n.a. 1,307,410 n.a. n.a. n.a. 47.1%
380 Madison
Loan........... 89,000,000 9.1 74,672,522** 197,000,000 7,081,730 16,000,000 2.26x 45.2% 37.9%
CAP Pool Loan .. 87,946,446 9.0 76,589,079 144,750,000 7,444,460 11,938,880 1.60x 60.8% 52.9%
Whitehall Pool
Loan........... 72,228,349 7.4 69,172,622** 165,150,000 7,230,720 12,617,278 1.74x 43.7% 41.9%
Ritz Plaza
Loan........... 62,365,309 6.4 55,202,612 92,500,000 5,633,438 7,573,130 1.34x 67.4% 59.7%
Montehiedra
Loan........... 52,579,779 5.4 46,536,103 92,000,000 4,793,002 8,091,213 1.69x 57.2% 50.6%
------------ ----- ------------ -------------- ----------- ------------ ---- ---- ----
Total/Weighted
Average**...... $977,099,000 100.0% $873,791,099 $1,804,325,000 $86,257,296 $146,329,527 1.70x 55.1% 48.8%**
============ ===== ============ ============== =========== ============ ==== ==== ====
</TABLE>
------------
* Based on Underwritten Net Cash Flow. The DSCR for the AAPT Pool Loan
assumes LIBOR of 5.6875%. The DSCR for the 380 Madison Loan only
reflects the initial interest-only period.
** The 380 Madison Loan and the Whitehall Pool Loan do not have an
Anticipated Repayment Date. The date used to calculate the ARD LTV for
such Mortgage Loans is their stated maturity date. The ARD LTV with
respect to the AAPT Components is based on the aggregate unpaid
principal balance of the AAPT Pool Loan at the applicable ARD for the
applicable Component, assuming in the case of the ARD LTV for the AAPT
Fixed Component that the AAPT LIBOR A Component and AAPT LIBOR B
Component are paid in full on their ARD and collateral relative to the
Cut-Off Date LTV has been released pursuant to a 1.20x release price.
S-79
<PAGE>
LOAN AMOUNT ALLOCATION (IN $MM)
[PIE CHART OMITTED]
MORTGAGED PROPERTIES BY LOCATION
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENT OF
CUT-OFF CUT-OFF TOTAL
DATE DATE UNDERWRITTEN
NUMBER OF ALLOCATED ALLOCATED UNDERWRITTEN CASH APPRAISED PERCENT OF
STATE PROPERTIES LOAN AMOUNT LOAN AMOUNT NET CASH FLOW FLOW VALUE TOTAL VALUE
- --------------- ------------ -------------- --------------- --------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
CALIFORNIA...... 8 $271,054,137 27.7% $ 42,953,331 29.4% $ 559,050,000 31.0%
NEW YORK........ 4 227,575,763 23.3 33,167,085 22.7 405,500,000 22.5
VIRGINIA........ 26 106,420,129 10.9 16,793,306 11.5 177,150,000 9.8
PENNSYLVANIA ... 35 79,425,964 8.1 10,169,412 6.9 154,100,000 8.5
PUERTO RICO..... 1 52,579,779 5.4 8,091,213 5.5 92,000,000 5.1
LOUISIANA....... 1 51,095,609 5.2 6,952,589 4.8 80,000,000 4.4
MISSISSIPPI..... 1 50,697,978 5.2 7,467,031 5.1 85,000,000 4.7
DELAWARE........ 2 35,289,770 3.6 5,033,151 3.4 59,500,000 3.3
GEORGIA......... 2 30,816,418 3.2 4,707,709 3.2 51,400,000 2.8
NORTH CAROLINA . 2 24,832,041 2.5 3,981,421 2.7 43,200,000 2.4
NEW JERSEY...... 11 24,287,389 2.5 3,061,967 2.1 47,325,000 2.6
MISSOURI........ 1 19,185,037 2.0 3,017,421 2.1 36,000,000 2.0
MASSACHUSETTS .. 1 2,117,379 0.2 449,899 0.3 8,000,000 0.4
TEXAS........... 1 1,721,607 0.2 483,992 0.3 6,100,000 0.3
------------ -------------- --------------- --------------- -------------- -------------- -------------
TOTAL/WEIGHTED
AVERAGE ...... 96 $977,099,000 100.0% $146,329,527 100.0% $1,804,325,000 100.0%
============ ============== =============== =============== ============== ============== =============
</TABLE>
[THE FOLLOWING TABLE HAS BEEN RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
CUT-OFF AVERAGE
STATE DATE LTV DSCR
- --------------- ---------- ----------
<S> <C> <C>
CALIFORNIA...... 48.9% 1.75X
NEW YORK........ 58.4% 1.72X
VIRGINIA........ 60.5% 1.70X
PENNSYLVANIA ... 53.8% 1.61X
PUERTO RICO..... 57.2% 1.69X
LOUISIANA....... 63.9% 1.53X
MISSISSIPPI..... 59.6% 1.66X
DELAWARE........ 59.3% 1.60X
GEORGIA......... 60.0% 1.72X
NORTH CAROLINA . 57.5% 1.83X
NEW JERSEY...... 55.4% 1.58X
MISSOURI........ 53.3% 1.57X
MASSACHUSETTS .. 26.5% 2.12X
TEXAS........... 28.2% 2.81X
--------- ----------
TOTAL/WEIGHTED
AVERAGE ...... 55.1% 1.70X
========== ==========
</TABLE>
S-80
<PAGE>
MORTGAGED PROPERTY LOCATIONS
[MAP OF MORTGAGED PROPERTIES]
S-81
<PAGE>
RANGE OF LOAN-TO-VALUE RATIOS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF WEIGHTED
NUMBER OF CUT-OFF DATE CUT-OFF AVERAGE WEIGHTED WEIGHTED
MORTGAGE PRINCIPAL DATE PRINCIPAL MORTGAGE AVERAGE AVERAGE
LOAN-TO-VALUE RATIO LOANS BALANCE BALANCE RATE DSCR LTV
- ------------------------ ----------- -------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
0.4-0.45................. 1 $ 72,228,349 7.4% 8.680% 1.74x 43.7%
0.45-0.5................. 2 318,369,475 32.6 7.986% 1.90x 48.6%
0.5-0.55................. 1 125,149,361 12.8 7.109% 1.72x 52.4%
0.55-0.6................. 1 52,579,779 5.4 8.230% 1.69x 57.2%
0.6-0.65................. 2 346,406,727 35.5 7.819% 1.57x 62.0%
0.65-0.7................. 1 62,365,309 6.4 8.135% 1.34x 67.4%
----------- -------------- -------------- ---------- ---------- ----------
Total/Weighted Average 8 $977,099,000 100.0% 7.888% 1.70x 55.1%
=========== ============== ==============
</TABLE>
RANGE OF LOAN-TO-VALUE RATIOS AS OF THE ANTICIPATED REPAYMENT DATE
<TABLE>
<CAPTION>
PERCENTAGE OF WEIGHTED
NUMBER OF CUT-OFF DATE CUT-OFF DATE AVERAGE WEIGHTED WEIGHTED
ANTICIPATED REPAYMENT MORTGAGE PRINCIPAL PRINCIPAL MORTGAGE AVERAGE AVERAGE
DATE LOAN-TO-VALUE RATIO LOANS BALANCE BALANCE RATE DSCR LTV
- ------------------------ ----------- -------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
0.3-0.4 ................. 2 $214,149,361 21.9% 7.416% 1.95x 49.4%
0.4-0.5 ................. 2 301,597,824 30.9 8.193% 1.75x 48.4%
0.5-0.6 ................. 4 461,351,815 47.2 7.909% 1.55x 62.2%
----------- -------------- -------------- ---------- ---------- ----------
Total/Weighted Average . 8 $977,099,000 100.0% 7.888% 1.70x 55.1%
=========== ============== ==============
</TABLE>
REMAINING TERM TO ANTICIPATED REPAYMENT DATE AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
REMAINING TERM TO PERCENTAGE OF WEIGHTED
ANTICIPATED REPAYMENT DATE NUMBER OF CUT-OFF DATE CUT-OFF DATE AVERAGE WEIGHTED WEIGHTED
AS OF THE CUT-OFF DATE MORTGAGE PRINCIPAL PRINCIPAL MORTGAGE AVERAGE AVERAGE
(MOS.) LOANS BALANCE BALANCE RATE DSCR LTV
- --------------------------- ----------- -------------- --------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
203......................... 1 $ 89,000,000 9.1% 7.848% 2.26x 45.2%
119......................... 2 213,095,807 21.8 7.262% 1.67x 55.8%
117......................... 1 52,579,779 5.4 8.230% 1.69x 57.2%
116......................... 2 291,734,784 29.9 8.060% 1.67x 53.6%
76.......................... 1 258,460,281 26.5 7.935% 1.56x 62.4%
37.......................... 1 72,228,349 7.4 8.680% 1.74x 43.7%
----------- -------------- --------------- ---------- ---------- ----------
Total/Weighted Average .... 8 $977,099,000 100.0% 7.888% 1.70x 55.1%
=========== ============== ===============
</TABLE>
S-82
<PAGE>
The following table sets forth certain characteristics of the Mortgaged
Properties by primary property type.
MORTGAGED PROPERTIES BY PRIMARY PROPERTY TYPE
<TABLE>
<CAPTION>
CUT-OFF PERCENTAGE OF
DATE CUT-OFF DATE
NUMBER OF PERCENTAGE ALLOCATED ALLOCATED APPRAISED
PROPERTY TYPE PROPERTIES OF PROPERTIES LOAN AMOUNT LOAN AMOUNT SF/UNITS VALUE
- --------------- ------------ --------------- -------------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Office.......... 67 69.8% $557,224,754 57.0% 8,309,175 $1,106,950,000
Retail.......... 11 11.5 324,229,154 33.2 3,344,336 532,400,000
Industrial...... 15 15.6 32,000,505 3.3 1,256,263 63,175,000
Multifamily..... 1 1.0 62,365,309 6.4 479 92,500,000
Land............ 2 2.1 1,279,277 0.1 0 9,300,000
------------ --------------- -------------- --------------- --------------
Total/Weighted
Average ...... 96 100.0% $977,099,000 100.0% $1,804,325,000
============ =============== ============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
CUT-OFF DATE MOST MOST
ALLOCATED RECENT RECENT PERCENT OF WEIGHTED WEIGHTED
LOAN AMOUNT PERIOD PERIOD UNDERWRITTEN UNDERWRITTEN AVERAGE AVERAGE
PROPERTY TYPE PER SF/UNIT REVENUE NOI CASH FLOW CASH FLOW DSCR LTV
- --------------- -------------- -------------- -------------- -------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Office.......... $ 67.06 $146,974,195 $ 95,336,814 $ 87,885,545 60.1% 1.81x 51.4%
Retail.......... $ 96.95 77,360,929 47,387,541 46,269,807 31.6 1.59x 61.3%
Industrial...... $ 25.47 7,354,851 6,073,931 4,908,426 3.4 1.76x 51.6%
Multifamily..... $130,199 11,751,306 6,868,898 7,573,130 5.2 1.34x 67.4%
Land............ $ 0.00 NA NA (307,381) (0.2) (3.02)x 14.6%
-------------- -------------- -------------- -------------- ---------- ----------
Total/Weighted
Average ...... $243,441,281 $155,667,184 $146,329,527 100.0% 1.70x 55.1%
============== ============== ============== ==============
</TABLE>
S-83
<PAGE>
PRIMARY PROPERTY TYPE
BY CUT-OFF DATE ALLOCATED LOAN AMOUNT
[PIE CHART OMITTED]
UNDERWRITING STANDARDS
General. The underwriting standards utilized in connection with the
origination of the Mortgage Loans addressed, with respect to each Mortgaged
Property, property valuations and property financial performance,
environmental conditions and physical conditions, as described below.
Appraisals. An appraisal of each of the Mortgaged Properties was
performed. The appraisals were performed by independent MAI appraisers and
determined that, with respect to each Mortgage Loan, at the time of the
appraisal the aggregate value of the related Mortgaged Properties exceeded
the original principal amount of such Mortgage Loan. In general, appraisals
represent the analysis and opinion of qualified experts and are not
guarantees of present or future value. 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.
See "Risk Factors--The Mortgage Loans--Limitations of Appraisals" herein.
Information regarding the value of each Mortgaged Property as of the Cut-Off
Date presented under "--Certain Characteristics of the Mortgage Loans" above
is not intended to be a representation as to the past, present or future
market values of the Mortgaged Properties.
Operating Statements, Financial Data, Occupancy Statements. In connection
with the origination of the Mortgage Loans, the related Originator reviewed
operating statements, financial data, rent rolls and related information or
statements of occupancy rates provided by borrowers and, with respect to the
Mortgage Loans secured by office properties and retail properties, certain
major tenant leases.
Environmental Assessments. As part of the origination, all of the
Mortgaged Properties have been subject to either Phase I site assessments,
updates of previously performed Phase I site assessments, or other site
assessments which were updated and upgraded to comply with Phase I standards
through follow up investigations, within the last eighteen months.
Additionally, all borrowers were required to provide certain environmental
representations, warranties, covenants and indemnities relating to the
existence and use of hazardous substances on the Mortgaged Properties. For a
discussion of environmental issues identified on the Mortgaged Properties,
see "Risk Factors--The Mortgage Loans--Environmental Law Considerations"
herein.
S-84
<PAGE>
Property Condition Assessments. Inspections of the Mortgaged Properties
were conducted by licensed engineers prior to origination of the Mortgage
Loans. Such inspections were generally commissioned to assess the structure,
exterior walls, roofing, interior construction, mechanical and electrical
systems and general conditions of the site, buildings and other improvements
located at each Mortgaged Property. The resulting reports of the inspecting
engineers (the "Property Condition Reports") indicated, where appropriate, a
variety of deferred maintenance items and recommended capital improvements
with respect to each Mortgaged Property, as well as the estimated cost of
such items and improvements. In each instance, the related Originator either
determined that such items and improvements were being addressed by the
related borrowers in a satisfactory manner, or required that they be
addressed post-closing and, in some instances, that reserves be established
to cover the related costs. See "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Mortgage Loans" herein
for descriptions of the reserves or other security provided for deferred
maintenance and capital improvements related to each Mortgaged Property.
There are violations of the ADA at some of the Mortgaged Properties that
are not expected to have a material impact on the value of or earnings from
such properties.
Zoning and Building Code Compliance. Each of the borrowers has, under its
related Mortgage or loan agreement, generally represented as of the date on
which the Mortgage Loan was originated and/or provided a legal opinion, a
title insurance policy endorsement and/or other evidence, to the effect that
the use and operation of the related Mortgaged Properties are in compliance
in all material respects with applicable zoning, land-use, environmental,
building, fire and health ordinances, rules, regulations and orders
applicable to the related Mortgaged Properties.
Property Management. The manager for each Mortgaged Property (except for
the 380 Madison Property) was approved by GSMC in connection with the
origination of the related Mortgage Loan. Generally, a manager is responsible
for responding to changes in the local market, planning and implementing the
rental rate or operating structure, which may include establishing levels of
rent payments or rates, and insuring that maintenance and capital
improvements are carried out in a timely fashion. Upon the occurrence of
certain events specified in each Mortgage Loan, the related management
agreement is terminable by the Master Servicer or terminates unless the
Master Servicer otherwise elects. For a discussion of the management
contracts and the Master Servicer's rights thereunder, see "Description of
the Mortgage Pool and the Underlying Mortgaged Properties--Description of the
Borrowers and the Properties" herein. Neither the Master Servicer nor the
Special Servicer manages any of the Mortgaged Properties and they are not
expected to manage any REO Properties (as defined herein).
ADDITIONAL INFORMATION
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the close of business on the Cut-Off Date, as adjusted for the
scheduled principal payments due on the Mortgage Loans on or before the
Cut-Off Date. The Seller believes that the information set forth herein will
be representative of the characteristics of the Mortgage Pool as it will be
constituted at the time the certificates are issued.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates and will be filed by the Seller,
together with the Pooling Agreement, with the Securities and Exchange
Commission within fifteen days after the initial issuance of the Offered
Certificates.
S-85
<PAGE>
DESCRIPTION OF THE MORTGAGE POOL AND THE UNDERLYING MORTGAGED PROPERTIES
DESCRIPTION OF THE BORROWERS AND THE PROPERTIES
THE CADILLAC FAIRVIEW BORROWERS AND PROPERTIES
The Loan. The Cadillac Fairview Pool Loan had a principal balance as of
the Cut-Off Date of approximately $258,460,281 and is secured by first
priority mortgage liens encumbering the fee interest in 8 retail properties
except for a portion of one property which is a leasehold interest located in
Delaware, Louisiana, New York, North Carolina, Georgia and Mississippi (the
"Cadillac Fairview Properties"). The mortgages encumbering the Cadillac
Fairview Properties are cross-defaulted and cross-collateralized.
The Cadillac Fairview Borrowers. The 7 borrowers under the Cadillac
Fairview Pool Loan are CF Dover Mall L.P., CF Esplanade L.P., CF Golden East
L.P., CF Georgia North DeKalb L.P., CF Northpark L.P., CF Southpark L.P. and
CF Galleria at White Plains L.P., each a special purpose Delaware limited
partnership formed solely for the purpose of owning, operating and managing
the applicable Cadillac Fairview Property (or Properties, in the case of CF
Dover Mall L.P.) owned by it (collectively, the "Cadillac Fairview
Borrowers"). The sole managing general partner of each of the Cadillac
Fairview Borrowers is Cadillac Fairview S.C. Finance Inc. ("CF-SCF"), a
special purpose Delaware corporation formed for the sole purpose of acting as
the managing general partner of the Cadillac Fairview Borrowers. The Cadillac
Fairview Borrowers and CF-SCF are majority-owned and controlled affiliates of
The Cadillac Fairview Corporation Limited, a corporation amalgamated under
the laws of the Province of Ontario, Canada ("CFCL"). CFCL owns interests in
and operates 88 retail and office properties in Canada and in the United
States. CFCL is a wholly-owned subsidiary of Cadillac Fairview, Inc., a
Delaware corporation ("CF Inc.") and CF Inc. is a wholly-owned subsidiary of
Cadillac Fairview Corporation ("CFC"), an Ontario corporation. Whitehall
Street Real Estate Limited Partnership V, a Delaware limited partnership
("Whitehall V"), indirectly owns approximately 23% of the outstanding common
stock of CFC and has the right to appoint three of a total of nine directors
to the board of directors of CFC. Whitehall V is a private investment vehicle
organized by The Goldman Sachs Group, L.P. and managed by Goldman, Sachs &
Co. for institutional clients and high net worth individuals seeking to
invest in real estate.
Security. The Cadillac Fairview Pool Loan is a non-recourse loan, secured
only by the fee and leasehold interests of the Cadillac Fairview Borrowers in
the Cadillac Fairview Properties and certain related collateral (including
assignments of leases and rents, an assignment of agreements, licenses,
permits and contracts and the funds in certain accounts). The mortgage
encumbering the Cadillac Fairview Property known as The Galleria at White
Plains, in White Plains, Westchester County, New York (the "Galleria at White
Plains") secures total outstanding principal indebtedness under the Cadillac
Fairview Pool Loan in an amount not to exceed $103,650,000 which is the
Cadillac Fairview Release Amount (as hereinafter defined) for the Galleria at
White Plains. The Cadillac Fairview Allocated Loan Amount (as hereinafter
defined) for the Galleria at White Plains is $68,690,790. Subject to certain
limited exceptions, neither the Cadillac Fairview Borrowers nor any of their
affiliates is personally liable for payment of the Cadillac Fairview Pool
Loan. The Cadillac Fairview Borrowers have represented that they own good,
marketable and indefeasible fee simple (or, where applicable, leasehold)
title to the Cadillac Fairview Properties free and clear of all liens other
than encumbrances described in the applicable title insurance policies and
other encumbrances permitted by the mortgagee under the loan documents (the
"Cadillac Fairview Permitted Encumbrances"). The title insurance policies
(which will be assigned to the Trust Fund) issued upon the origination of the
Cadillac Fairview Pool Loan insure that each of the Mortgages constitutes a
valid and enforceable first lien on the Cadillac Fairview Properties
encumbered by it, subject to certain exceptions and exclusions from coverage
set forth in the policy.
The Properties. The Cadillac Fairview Properties consist of 7 regional
shopping centers and 1 community shopping center which are located in
Delaware, Louisiana, New York, North Carolina, Georgia, and Mississippi. The
Cadillac Fairview Properties (excluding the retail community center) range in
size from 572,914 square feet to 958,183 square feet and were constructed
between 1965 and 1986.
S-86
<PAGE>
Appraisals dated November 20, 1996 determined an aggregate value for the
Cadillac Fairview Properties of approximately $413,900,000 resulting in an
LTV as of the Cut-Off Date of approximately 62.4%. The DSCR for the Cadillac
Fairview Properties is approximately 1.56x.
For a discussion of certain risks related to the Cadillac Fairview
Properties, see "Risk Factors--The Mortgage Loans--Commercial Lending
Generally" and "--Risks Associated with Retail Properties" herein.
The Galleria at White Plains. The Galleria at White Plains is a four-level
regional shopping center located in White Plains, New York. White Plains is
part of the greater New York metropolitan statistical area in the south
central portion of Westchester County. The mall was built in 1980 and later
renovated in 1993. As of May 23, 1997, 84.9% of the mall store space was
leased (including 4.8% of mall store space occupied by temporary tenants).
The collateral for the Cadillac Fairview Pool Loan consists of mall stores
comprising 326,725 square feet of GLA and the fee interest in the land on
which a non-owned anchor store comprising 227,316 square feet of GLA is
constructed.
TENANTS AT THE GALLERIA AT WHITE PLAINS
<TABLE>
<CAPTION>
CREDIT RATING OPERATING
OF PARENT ANCHOR-OWNED/ LEASE COVENANT
ANCHOR PARENT COMPANY COMPANY* GLA (SF) COLLATERAL EXPIRATION** EXPIRATION***
- ---------------- -------------- --------------- --------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
JC Penney........ JC Penney A2 227,316 Collateral***** 1/31/11 6/17/01
Macy's**** ...... Federated Baa2 328,599 Anchor-Owned N/A 8/1/06
---------
Total Anchor GLA. 555,915
Mall Store GLA .. 326,725
---------
Total GLA........ 882,640
=========
</TABLE>
- ------------
* Reflects Moody's senior unsecured long-term debt rating of the parent
company as of July 11, 1997. In certain cases where the parent
company is not the named anchor, the parent company is not the
obligor under the applicable lease or operating covenant.
** Assuming no renewals.
*** Date of operating covenant expiration is the expiration date of the
covenant requiring that a department store (whether or not as the
named store indicated above) be open and operating.
**** Macy's replaced a Stern's store in July 1996.
***** The Cadillac Fairview Borrower has a fee interest in the land which
is leased pursuant to a ground lease to JC Penney, which owns the
building.
The Northpark Mall. The Northpark Mall is a two-story regional shopping
center located in Ridgeland, Mississippi. Ridgeland is a suburban community
located approximately ten miles from the state capital building in Jackson,
Mississippi. The mall was built in 1984 and is located within the Jackson
metropolitan statistical area. As of May 23, 1997, 97.7% of the mall store
space was leased (including 2.6% of mall store space occupied by temporary
tenants). The collateral for the Cadillac Fairview Pool Loan consists solely
of mall stores comprising 311,458 square feet of GLA.
S-87
<PAGE>
TENANTS AT NORTHPARK MALL
<TABLE>
<CAPTION>
CREDIT RATING OPERATING
OF PARENT ANCHOR-OWNED/ LEASE COVENANT
ANCHOR PARENT COMPANY COMPANY* GLA (SF) COLLATERAL EXPIRATION EXPIRATION**
- ---------------- ----------------- --------------- --------- --------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Dillard's ....... Dillard's A2 150,000 Anchor-Owned N/A 9/12/08
Gayfer's......... Mercantile Stores A1 155,276 Anchor-Owned N/A 9/12/08
JC Penney........ JC Penney A2 136,449 Anchor-Owned N/A 12/9/00
McRae's.......... Proffitt's, Inc. Ba2 205,000 Anchor-Owned N/A 9/12/08
---------
Total Anchor GLA. 646,725
Mall Store GLA .. 311,458
---------
Total GLA........ 958,183
=========
</TABLE>
- ------------
* Reflects Moody's senior unsecured long-term debt rating of the parent
company as of July 11, 1997. In certain cases where the parent company
is not the named anchor, the parent company is not the obligor under
the applicable lease or operating covenant.
** Date of operating covenant expiration is the expiration date of the
covenant requiring that a department store (whether or not as the named
store indicated above) be open and operating.
The Esplanade Shopping Mall. The Esplanade Mall is a two-story regional
shopping center located in Kenner, Louisiana. Kenner is a city in Jefferson
Parish, located approximately 15 miles west of the Central New Orleans
Business District. The mall was opened in two phases in 1985 and 1986. As of
May 23, 1997, 86.2% of the mall store space was leased (including 7.5% of
mall store space occupied by temporary tenants). The collateral for the
Cadillac Fairview Pool Loan consists of one anchor space comprising 46,600
square feet of GLA and mall stores comprising 365,325 square feet of GLA.
TENANTS AT THE ESPLANADE
<TABLE>
<CAPTION>
CREDIT RATING OPERATING
OF PARENT ANCHOR-OWNED/ LEASE COVENANT
ANCHOR PARENT COMPANY COMPANY* GLA (SF) COLLATERAL EXPIRATION** EXPIRATION***
- --------------------- -------------- --------------- --------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Dillard's ............ Dillard's A2 177,940 Anchor-Owned N/A 10/1/11
Dillard's Junior D.S.. Dillard's A2 46,600 Collateral 10/1/11 10/1/11
Macy's................ Federated Baa2 235,518 Anchor-Owned N/A 10/1/01
Mervyn's ............. Dayton Hudson Baa1 84,082 Anchor-Owned N/A 10/9/09
---------
Total Anchor GLA...... 544,140
Mall Store GLA........ 365,325
---------
Total GLA............. 909,465
=========
</TABLE>
- ------------
* Reflects Moody's senior unsecured long-term debt rating of the parent
company as of July 11, 1997. In certain cases where the parent company
is not the named anchor, the parent company is not the obligor under
the applicable lease or operating covenant.
** Assuming no renewals.
*** Date of operating covenant expiration is the expiration date of the
covenant requiring that a department store (whether or not as the named
store indicated above) be open and operating.
The Dover Mall. The Dover Mall is a one-story regional shopping center
located in Dover, Kent County, Delaware. Dover is the state capital of
Delaware and the second largest city in the state. The mall is the only
regional mall in Dover. The mall was built in 1982 and renovated in 1995. As
of May 23, 1997, 88.2% of the mall store space was leased (including 4.6% of
mall store space to temporary
S-88
<PAGE>
tenants). The collateral for the Cadillac Fairview Pool Loan consists of two
anchor spaces comprising 185,980 square feet of GLA and mall stores
comprising 232,281 square feet of GLA. Approximately 2.56 acres of the
property are leased pursuant to a ground lease from the Delaware Department
of Public Safety which terminates (assuming the borrower exercises all
optional extensions) on September 29, 2041.
TENANTS AT DOVER MALL
<TABLE>
<CAPTION>
CREDIT RATING OPERATING
OF PARENT ANCHOR-OWNED/ LEASE COVENANT
ANCHOR PARENT COMPANY COMPANY* GLA (SF) COLLATERAL EXPIRATION** EXPIRATION***
- -------------------------- ---------------- --------------- --------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Boscov's................... Boscov's Not Rated 137,000 Anchor-Owned N/A 8/3/03
JC Penney.................. JC Penney A2 116,480 Anchor-Owned N/A 8/4/03
Sears...................... Sears A2 111,309 Collateral 8/31/02 Expired
Strawbridge & Clothier****. May Dept. Stores A2 74,671 Collateral 8/31/02 N/A
---------
Total Anchor GLA........... 439,460
Mall Store GLA............. 232,281
---------------- ---------
Total GLA.................. 671,741
=========
</TABLE>
- ------------
* Reflects Moody's senior unsecured long-term debt rating of the parent
company as of July 11, 1997. In certain cases where the parent company
is not the named anchor, the parent company is not the obligor under
the applicable lease or operating covenant.
** Assuming no renewals.
*** Date of operating covenant expiration is the expiration date of the
covenant requiring that a department store (whether or not as the named
store indicated above) be open and operating.
**** On May 5, 1997, the May Department Stores Company assumed a lease for
the anchor space formerly occupied by Leggett and informed the Cadillac
Fairview Borrower that it anticipates it will open a Strawbridge &
Clothier department store by November 1997.
Dover Commons. Dover Commons is a single story community retail center
located in Dover, Delaware adjacent to the Dover Mall. The center was
constructed in 1988 and contains 51,976 square feet of GLA. As of May 23,
1997, 91.3% of the store space was leased. The center is anchored by Pier I
Imports (lease expires February 1999) and Dover Furniture (lease expires
February 1998).
The Golden East Crossing Mall. The Golden East Crossing Mall is a
single-story regional shopping center located in Rocky Mount, North Carolina.
The mall is located within the Rocky Mountain metropolitan statistical area
which encompasses the counties of Nash and Edgecombe in northeast North
Carolina. The mall was developed in two phases in 1986 and 1987. As of May
23, 1997, 83.2% of the mall store space was leased (including 6.6% of mall
store space to temporary tenants). The collateral for the Cadillac Fairview
Pool Loan consists of 3 anchor spaces comprising 241,253 square feet of GLA
and mall stores comprising 218,704 square feet of GLA.
S-89
<PAGE>
TENANTS AT GOLDEN EAST CROSSING
<TABLE>
<CAPTION>
CREDIT RATING OPERATING
OF PARENT ANCHOR-OWNED/ COVENANT
ANCHORS PARENT COMPANY COMPANY* GLA (SF) COLLATERAL LEASE EXPIRATION** EXPIRATION***
- ---------------- ------------------ --------------- --------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Belk ............ Belk Not Rated 112,957 Anchor-Owned N/A 10/14/97
JC Penney........ JC Penney A2 81,729 Collateral 8/20/06 N/A
Brody Brothers Dry
Brody's Goods ... Goods Co. Not Rated 69,960 Collateral 7/20/06 N/A
Sears............ Sears A2 89,564 Collateral 10/20/07 10/14/97
---------
Total Anchor GLA. 354,210
Mall Store GLA .. 218,704
---------
Total GLA........ 572,914
=========
</TABLE>
- ------------
* Reflects Moody's senior unsecured long-term debt rating of the parent
company as of July 11, 1997. In certain cases where the parent company
is not the named anchor, the parent company is not the obligor under
the applicable lease or operating covenant.
** Assuming no renewals.
*** Date of operating covenant expiration is the expiration date of the
covenant requiring that a department store (whether or not as the named
store indicated above) be open and operating.
The Shannon Southpark Mall. The Shannon Southpark Mall is a single-story
regional shopping center located in Union City, Georgia. The mall was
constructed in 1980 and is located approximately fifteen miles southwest of
downtown Atlanta. As of May 23, 1997, 77.7% of the mall store space was
leased (including 8.1% of mall store space to temporary tenants). The
collateral for the Cadillac Fairview Pool Loan consists solely of mall stores
comprising 276,505 square feet of GLA.
TENANTS AT SOUTHPARK MALL
<TABLE>
<CAPTION>
CREDIT RATING OPERATING
OF PARENT ANCHOR-OWNED/ LEASE COVENANT
ANCHOR PARENT COMPANY COMPANY* GLA (SF) COLLATERAL EXPIRATION EXPIRATION**
- ---------------- -------------- --------------- --------- --------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Macy's .......... Federated Baa2 147,455 Anchor-Owned N/A Expired
JC Penney***..... JC Penney A2 75,000 Anchor-Owned N/A N/A
Sears............ Sears A2 150,031 Anchor-Owned N/A Expired
Rich's........... Federated Baa2 121,580 Anchor-Owned N/A Expired
---------
Total Anchor GLA. 494,066
Mall Store GLA .. 276,505
---------
Total GLA........ 770,571
=========
</TABLE>
------------
* Reflects Moody's senior unsecured long-term debt rating of the parent
company as of July 11, 1997. In certain cases where the parent company
is not the named anchor, the parent company is not the obligor under
the applicable lease or operating covenant.
** Date of operating covenant expiration is the expiration date of the
covenant requiring that a department store (whether or not as the named
store indicated above) be open and operating.
*** Mervyn's closed its store in early 1997 and on August 1, 1997, sold the
store and the underlying land to JC Penney, which is currently
renovating the store and has informed the Cadillac Fairview Borrower
that it anticipates it will open in the Fall of 1997.
The North DeKalb Mall. The North DeKalb Mall is a single-story regional
shopping center located in Decatur, DeKalb County, Georgia. Decatur is
located approximately 15 miles east of downtown
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<PAGE>
Atlanta. The mall was built in 1965 and later renovated in 1986. As of May
23, 1997, 81.5% of the mall store space was leased (including 15.7% of mall
store space to temporary tenants). The collateral for the Cadillac Fairview
Pool Loan consists of three anchor spaces comprising 178,688 square feet of
GLA and mall stores comprising 263,557 square feet of GLA.
TENANTS AT NORTH DEKALB MALL
<TABLE>
<CAPTION>
CREDIT RATING OPERATING
OF PARENT ANCHOR-OWNED/ LEASE COVENANT
ANCHORS PARENT COMPANY COMPANY* GLA (SF) COLLATERAL EXPIRATION** EXPIRATION***
- ---------------- -------------- --------------- --------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Upton's****...... Upton's Not Rated 75,200 Collateral ***** N/A
Rich's........... Federated Baa2 196,752 Anchor-Owned N/A Expired
AMC Theaters..... AMC Inc. Not Rated 63,395 Collateral 12/31/16 10/17/01
Vacant........... N/A Not Rated 35,605 Collateral N/A N/A
---------
Total Anchor GLA. 370,952
Mall Store GLA .. 263,557
---------
Total GLA........ 634,509
=========
</TABLE>
------------
* Reflects Moody's senior unsecured long-term debt rating of the parent
company as of July 11, 1997. In certain cases where the parent
company is not the named anchor, the parent company is not the
obligor under the applicable lease or operating covenant.
** Assuming no renewals.
*** Date of operating covenant expiration is the expiration date of the
covenant requiring that a department store (whether or not as the
named store indicated above) be open and operating.
**** On July 1, 1997, the Cadillac Fairview Borrower purchased the store
previously owned and occupied by Mervyn's. On July 31, 1997, the
Cadillac Fairview Borrower entered into a lease for the store space
with Upton's, a department store operator based in the southeastern
United States. Upton's has informed the Cadillac Fairview Borrower
that it anticipates it will open the store in November 1997.
***** The term of the lease with Upton's is ten years from the earlier of
(a) the opening of the store or (b) 120 days after the landlord
delivers the store to the tenant, both subject to certain conditions
contained in the lease.
S-91
<PAGE>
PROPERTY CHARACTERISTICS--CADILLAC FAIRVIEW POOL LOAN
<TABLE>
<CAPTION>
% OF % OF
MALL CUT-OFF TOTAL
STORE DATE APPRAISED CUT- UNDERWRITTEN
MALL LEASED ALLOCATED VALUE OFF ANNUALIZED UNDERWRITTEN NET
STORE (AS OF LOAN (AS OF DATE BASE NET CASH CASH
PROPERTY GLA (SF) 5/23/97)* AMOUNT 11/20/96) LTV RENT* FLOW FLOW DSCR
- ----------------- ----------- ---------- -------------- -------------- ------- ------------- -------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Galleria at White
Plains........... 326,725 85% $ 68,690,790 $100,000,000 68.7% $ 8,932,947 $ 8,162,904 22.8% 1.34x
Northpark Mall .. 311,458 98% 50,697,978 85,000,000 59.6% 7,178,418 7,467,031 20.8 1.66x
The Esplanade..... 365,325 86% 51,095,609 80,000,000 63.9% 6,866,714 6,952,589 19.4 1.53x
Dover Mall ....... 232,281 88% 33,003,389 55,500,000 59.5% 4,590,172 4,659,925 13.0 1.59x
Dover Commons..... 51,976 91% 2,286,380 4,000,000 57.2% 496,086 373,226 1.0 1.84x
Golden East
Crossing......... 218,704 83% 21,869,716 38,000,000 57.6% 3,635,299 3,550,472 9.9 1.82x
Shannon Southpark
Mall............. 276,505 78% 20,875,638 35,500,000 58.8% 3,600,719 2,912,517 8.1 1.57x
North DeKalb
Mall............. 263,557 82% 9,940,780 15,900,000 62.5% 3,071,923 1,795,192 5.0 2.03x
----------- -------------- -------------- ------------- -------------- --------------
Total/Weighted
Average ........2,046,531 86% $258,460,281 $413,900,000 62.4% $38,372,278 $35,873,856 100.0% 1.56x
=========== ============== ============== ============= ============== ==============
</TABLE>
- ------------
* Includes temporary tenants
S-92
<PAGE>
TEN LARGEST TENANTS BASED ON ANNUALIZED BASE RENT--CADILLAC FAIRVIEW POOL
LOAN
<TABLE>
<CAPTION>
% OF TOTAL ANNUALIZED
TENANT OR TENANT TENANT % OF TOTAL ANNUALIZED ANNUALIZED BASE RENT
PARENT COMPANY* STORE NAME GLA (SF) GLA BASE RENT BASE RENT PER SF
- ---------------------- ------------------- ----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
The Limited Inc........Abercrombie & Fitch 249,084 8.5% $ 5,215,023 13.6% $20.94
Bath & Body Works
Lane Bryant
Lerner New York
Limited Express
Structure
Victoria's Secret
The Limited Too
The Limited
Woolworth Corp. .......Woolworth 93,812 3.2 1,835,997 4.8 $19.57
Foot Locker
Lady Foot Locker
Kids Foot Locker
Champs
Afterthoughts
Boutique
Kinney's
The Gap, Inc...........The Gap 53,506 1.8 1,516,326 4.0 $28.34
Banana Republic
Gap Kids
Melville Corp..........CVS 35,439 1.2 736,566 1.9 $20.78
Footaction
This End Up
Wilsons
Borders Group Inc. ....WaldenBooks 21,662 0.7 587,715 1.5 $27.13
WaldenKids
Cole's Bookstore
Nine West Group Inc. ..9 & Co. 48,008 1.6 562,627 1.5 $11.72
Nine West
Easy Spirit
Stein Mart
Sears Roebuck & Co. ...Sears 200,873 6.9 533,052 1.4 $ 2.65
The Bombay Company ....The Bombay Company 23,254 0.8 549,101 1.4 $23.61
Kay-Bee Toys...........Kay-Bee Toys 23,474 0.8 504,553 1.3 $21.49
Edison Bros.
Stores Inc.**.........Bakers 20,107 0.7 489,266 1.3 $24.33
J. Riggins
Jeans West
Oak Tree
Size 5-7-9
Wild Pair
----------- ------------ ------------- ------------
Total/Weighted Average
(10 Largest).......... 769,219 28.5 $12,530,226 32.7 $16.29
Remaining (excluding
non-owned anchors) ... 1,925,345 71.5 $25,842,051 67.3 $13.42
----------- ------------ ------------- ------------
Total (excluding
non-owned anchors) .. 2,694,564 100.0% $38,372,277 100.0% $14.24
=========== ============ ============= ============
</TABLE>
- ------------
* The parent company may not be the obligor under the applicable leases.
** Edison Bros. Stores Inc. is currently in bankruptcy under the Bankruptcy
Code.
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<PAGE>
SALES OPERATING HISTORY--CADILLAC FAIRVIEW POOL LOAN*
<TABLE>
<CAPTION>
1995 MALL 1996 MALL
PROPERTY STORE SALES PER SF STORE SALES PER SF OCCUPANCY COST**
- ----------------------------- ------------------ ------------------ ----------------
<S> <C> <C> <C>
The Galleria at White Plains $360.54 $352.45 19.87%
North DeKalb Mall ............ $246.09 $245.29 12.48%
The Esplanade Shopping Mall . $278.13 $284.56 13.85%
Dover Commons................. $108.45 $160.28 13.43%
Dover Mall ................... $275.68 $277.18 13.26%
Golden East Crossing Mall ... $276.20 $275.71 11.59%
Shannon Southpark Mall ....... $215.81 $219.37 14.83%
Northpark Mall ............... $312.04 $312.18 11.93%
Average...................... $288.31 $288.74
</TABLE>
- ------------
* Sales and occupancy cost figures are based solely upon information
provided by tenants who were in occupancy during the entire applicable
twelve-month period.
** Based upon the twelve-month period ending March 1997.
MALL STORE LEASE EXPIRATION SCHEDULE--CADILLAC FAIRVIEW POOL LOAN
<TABLE>
<CAPTION>
ANNUALIZED
YEAR ENDING EXPIRING PERCENT OF TOTAL ANNUALIZED PERCENT OF BASE RENT
DECEMBER 31, SQUARE FEET SQUARE FEET BASE RENT BASE RENT PER SQUARE FEET
- ------------------------ ------------- ---------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
1997 .................... 147,119 7.2% $ 2,673,072 7.4% $18.17
1998 .................... 205,659 10.0 3,851,675 10.7 $18.73
1999 .................... 123,714 6.0 2,481,647 6.9 $20.06
2000 .................... 85,682 4.2 2,192,027 6.1 $25.58
2001 .................... 106,187 5.2 2,214,187 6.1 $20.85
2002 .................... 63,940 3.1 1,636,205 4.5 $25.59
2003 .................... 179,284 8.8 3,922,151 10.9 $21.88
2004 .................... 148,997 7.3 3,771,821 10.5 $25.31
Thereafter .............. 559,614 27.3 13,290,354 36.9 $23.75
Temporary/Vacant* ....... 426,335 20.8 -- 0.0
------------- ---------------- ------------- ------------
Total/Weighted Average 2,046,531 100.0% $36,033,139 100.0% $17.61
============= ================ ============= ============
</TABLE>
- ------------
* Income from temporary tenants not reflected.
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<PAGE>
Appraisals. Appraisals performed within 6 months prior to origination by
Cushman & Wakefield determined an aggregate value for the 8 Cadillac Fairview
Properties of approximately $413,900,000. Each of the appraisers has
indicated that the appraisal was conducted in accordance with the Uniform
Standards of Professional Practice. For a discussion of certain limitations
inherent in determining an appraised value, see "Risk Factors--The Mortgage
Loans--Limitations of Appraisals" herein.
Engineering Report. Property Condition Reports on the Cadillac Fairview
Properties were completed within 6 months prior to loan origination. The
engineering reports concluded that the Cadillac Fairview Properties were
generally in good physical condition but recommended certain immediate
physical needs for which reserves were established at origination. As of July
11, 1997, the reserve balance was $548,141.
Environmental Report. Phase I environmental site assessments were
performed at all of the Cadillac Fairview Properties within 6 months prior to
the origination of the Cadillac Fairview Pool Loan. The assessments
recommended that operations and maintenance programs be implemented at Golden
East Crossing and The Galleria at White Plains to mitigate the possibility of
asbestos-containing materials. Further investigation was also recommended for
Golden East Crossing in connection with the final closure of an underground
storage tank located on the property. While the Phase II environmental site
assessment for Golden East Crossing indicated that no additional action or
investigation was required, no assurances can be given that a material
environmental liability does not exist. A Phase II environmental site
assessment was also conducted at the North DeKalb Mall to analyze ground
water samples from two on-site groundwater monitoring wells. The analysis
identified the presence of chromium in one of the monitoring wells at a level
above EPA drinking water standards. Although no further action is
recommended, no assurances can be given that a material environmental
condition does not exist. See "Risk Factors--The Mortgage
Loans--Environmental Law Considerations" herein.
Property Management. The property manager for all of the Cadillac Fairview
Properties is General Growth Management, Inc. General Growth Management, Inc.
is a subsidiary of General Growth Properties, Inc., one of the largest
managers of third-party retail properties in the nation. The Cadillac
Fairview Borrowers may replace any property manager without the Master
Servicer's prior written consent with (i) any one of certain property
managers (or any of their affiliates), specified in the Cadillac Fairview
Loan Agreement which at the time of its engagement by a Cadillac Fairview
Borrower as manager, is a prominent nationally recognized professional
management company and is the property manager and leasing agent for at least
ten regional malls containing at least six million aggregate leaseable square
feet (inclusive of anchor stores but exclusive of the Cadillac Fairview
Properties); (ii) any affiliate of Cadillac Fairview U.S. Inc. which at the
time of its engagement as manager shall (together with all of its affiliates)
be the property manager and leasing agent for at least ten regional malls
containing at least six million aggregate leaseable square feet (inclusive of
anchor stores but exclusive of the Cadillac Fairview Properties); or (iii)
any prominent nationally recognized professional management company which at
the time of its engagement as manager shall be the property manager and
leasing agent for at least ten regional malls containing at least six million
aggregate leaseable square feet (inclusive of anchor stores but exclusive of
the Cadillac Fairview Properties); provided, however, that prior to any
Cadillac Fairview Borrower engaging any person described in clause (iii)
above as the manager for any Cadillac Fairview Property, the Master Servicer
shall have received a written confirmation from each Rating Agency to the
effect that such engagement of a property manager will not result in a
downgrade, withdrawal or qualification of their respective ratings of the
Certificates in effect immediately prior to such engagement.
Pursuant to the terms of the Cadillac Fairview Pool Loan, the Master
Servicer has the right to terminate any property management agreement with
respect to any Cadillac Fairview Property if (a)(1)(x) the Cadillac Fairview
Debt Service Coverage Ratio (as defined in the Cadillac Fairview Loan
documents) for all of the Cadillac Fairview Properties is less than 1.32:1.0
(assuming a debt constant of 8.75% per annum), and (y) Net Operating Income
(as defined in the Cadillac Fairview Loan documents) for such Cadillac
Fairview Property managed by such manager for the immediately preceding 12
months is less than 75% of the Net Operating Income for such Cadillac
Fairview Property for the 12 months preceding November 1, 1996, or (2) Net
Operating Income for such Cadillac Fairview Property managed by such
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<PAGE>
manager for the immediately preceding 12 months is less than 60% of the Net
Operating Income for such Cadillac Fairview Property for the 12 months
preceding November 1, 1996, provided, that, the Master Servicer's right to
terminate resulting from the occurrence of the events specified in this
clause (a) will be with respect to the Cadillac Fairview Property as to which
the foregoing events have occurred only; (b) the Cadillac Fairview Pool Loan
remains outstanding after the Cadillac Fairview Anticipated Repayment Date;
or (c) there exists an event of default under the Cadillac Fairview Pool Loan
and the Cadillac Fairview Pool Loan or any portion thereof with respect to a
particular Cadillac Fairview Property or Properties has been accelerated.
Pursuant to a Consent of Manager among the related Originator, each Cadillac
Fairview Borrower and the property manager, the property manager has agreed
(i) to the termination rights of the Master Servicer, (ii) that the property
manager will not terminate the property management agreement as a result of a
default by the applicable Cadillac Fairview Borrower without giving the
mortgagee prior notice and the right to cure such default, and (iv) that each
property manager will not amend the property management agreement without the
Master Servicer's consent.
THE CENTURY TOWERS BORROWER AND PROPERTY
The Loan. The Century Plaza Towers Loan had a principal balance as of the
Cut-Off Date of approximately $229,369,475. It is secured by a first priority
deed of trust lien encumbering two office buildings, known as "Century
Towers", and the appurtenant subterranean parking facility (the "Century
Towers Parking Facility"), located in the Century City market, Los Angeles,
California (collectively, the "Century Towers Property"). The Century Plaza
Towers Loan was originated by GSMC on April 9, 1997.
The Borrower. One Hundred Towers L.L.C. (the "Century Towers Borrower") is
a Delaware limited liability company formed for the purpose of acquiring,
owning and operating the Century Towers Property and with no debts other than
the Century Plaza Towers Loan. The Century Towers Borrower has no material
assets other than the Century Towers Property and related interests,
including 100% of the outstanding stock of One Hundred Towers Garage
Corporation (the "Century Towers Parking Facility Tenant"), the tenant under
the Parking Facility Lease, described below. The Century Towers Borrower is
owned in equal parts by: (i) Morgan Guaranty Trust Company of New York, as
Trustee Under Declaration of Trust Dated December 9, 1960, as amended, for
the Commingled Pension Trust Fund (Special Situations Investments--Real
Estate) (the "Commingled Fund"); (ii) The Prudential Insurance Company of
America ("Prudential") on behalf of a separate account established pursuant
to a separate account agreement, the contract holder of which is State Street
Bank and Trust Company, as Trustee for Telephone Real Estate Equity Trust
("TREET"), whose ultimate beneficiaries include employee benefit plans of
AT&T Corp.; and (iii) Prudential on behalf of a separate account established
pursuant to a separate account agreement the contract holder of which is
Mellon Bank, N.A. as Trustee for First Plaza Group Trust ("FPGT", and
together with the Commingled Fund and TREET, the "Century Towers Beneficial
Owners"), whose ultimate beneficiaries consist of employee benefit plans of
General Motors Corporation and its subsidiaries.
Security. The Century Plaza Towers Loan is a non-recourse loan, secured by
the interests of the Century Towers Borrower in the Century Towers Property
and certain related collateral (including an assignment of leases and rents
of the Century Towers Property, a pledge of the stock of the Century Towers
Parking Facility Tenant, assignments of the Operating and Reciprocal Easement
Agreement (described below), certain cash reserves established by the Century
Towers Borrower at the origination of the Century Plaza Towers Loan, and a
direct-draw letter of credit issued by Bayerische Hypotheken-und
Wechsel-Bank, New York Branch ("Hypo Bank")). Such direct-draw letter of
credit is required to be in the initial amount of $11,500,000 subject to
certain scheduled adjustments from year-to-year until the Century Towers
Anticipated Repayment Date, at which time the required amount for the letter
of credit will be $11,500,000 until the Century Towers Maturity Date. Subject
to certain limited exceptions, none of the Century Towers Borrower, any
Century Towers Beneficial Owner and any of their respective affiliates is
personally liable for payment of the Century Plaza Towers Loan. The Century
Towers Borrower has represented that it owns good and marketable fee simple
title to the Century Towers Property free and clear of all liens other than
encumbrances described in the applicable title insurance policies and other
encumbrances permitted under the Century Plaza Towers Loan documents (the
"Century Towers Permitted Encumbrances"). The title insurance policy issued
upon the origination of the
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<PAGE>
Century Towers Loan insures that the Mortgage for the Century Plaza Towers
Loan constitutes a valid and enforceable first lien on the Century Towers
Property, subject to certain exceptions and exclusions from coverage set
forth in the policy.
The Property. The Century Towers Property, built in 1975, is improved with
two 44-story Class A office buildings, a 6-level subterranean parking
facility containing 5,667 parking spaces, retail concourse and central plaza.
The Century Towers Property is located in Century City, California and
contains approximately 2,252,739 square feet of rentable office space, 27,460
square feet of retail space and 135,712 square feet of leaseable storage
space, equipment rooms and miscellaneous space. Century City is an
approximately 184-acre master-planned urban community formed in 1961 and
located in west Los Angeles.
Occupancy and Major Tenants. As of May 31, 1997, the Century Towers
Property was 90.5% leased with an annualized minimum base rent (exclusive of
recoveries) of approximately $52,197,000. The 10 largest tenants based upon
annualized base rent are shown below:
TEN LARGEST TENANTS BASED ON ANNUALIZED BASE RENT--CENTURY PLAZA TOWERS LOAN
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE % OF TOTAL ANNUALIZED
TENANT % OF TOTAL ANNUALIZED ANNUALIZED BASE RENT LEASE
TENANT GLA (SF) GLA BASE RENT ($) BASE RENT PER SF EXPIRATION
- -------------------------- ----------- ------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sidley & Austin............ 94,007 4.1% $ 3,325,908 6.4% $35.38 1/04
Johnson & Higgins*......... 137,789 6.0 2,627,504 5.0 $19.07 3/09
Barrister Executive
Suites.................... 76,242 3.3 2,085,981 4.0 $27.36 6/00
HBO........................ 77,904 3.4 1,663,123 3.2 $21.35 4/03
Kelco Realty............... 68,310 3.0 1,595,047 3.1 $23.35 12/04**
Teledyne, Inc.............. 53,133 2.2 1,477,775 2.8 $27.81 7/11
Foley, Lardner, Weissburg
& Aronson................. 53,440 2.3 1,378,752 2.6 $25.80 2/09
Stroock & Stroock & Lavan
LLP....................... 46,157 2.0 1,367,930 2.6 $29.64 5/98
Century Park Investments .. 52,414 2.3 1,320,833 2.5 $25.20 12/04
Seyfarth, Shaw,
Fairweather and
Geraldson................. 44,192 1.9 1,113,638 2.1 $25.20 12/10
----------- ------------- ------------- ------------- ------------
Total (10 largest)......... 703,588 30.9 17,956,491 34.4 $25.52
Remaining.................. 1,576,611 69.1 34,241,053 65.6 $21.72
----------- ------------- ------------- ------------- ------------
Total/Weighted Avg. ....... 2,280,199 100.0% $52,197,544 100.0% $22.89
=========== ============= ============= ============= ============
</TABLE>
- ------------
* In March 1997, Marsh & McClennan, a publicly-traded company on the New
York Stock Exchange, announced an agreement to acquire Johnson &
Higgins. Johnson & Higgins has notified the Century Towers Borrower
that it desires to vacate its space and is working with the Century
Towers Borrower to facilitate the occupancy of its space with a
sub-tenant or a replacement tenant.
** 17,452 square feet included in the above table expired in 6/97;
however, Kelco Realty is currently remaining in possession on a
month-to-month basis.
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<PAGE>
Lease Expiration Schedule. The following table shows scheduled lease
expirations (assuming no renewal options) for tenants under leases as of May
31, 1997 at The Century Towers Property:
LEASE EXPIRATION SCHEDULE--CENTURY PLAZA TOWERS LOAN
<TABLE>
<CAPTION>
PERCENT OF ANNUALIZED
YEAR ENDING EXPIRING TOTAL SQUARE ANNUALIZED PERCENT OF BASE RENT PER
DECEMBER 31, SQUARE FEET FEET BASE RENT BASE RENT SQUARE FOOT*
- -------------------- ------------- -------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
1997 ................ 149,526 6.6% $ 4,038,426 7.7% $27.01
1998 ................ 193,049 8.5 5,241,351 10.0 $27.15
1999 ................ 210,179 9.2 4,820,553 9.2 $22.94
2000 ................ 197,742 8.7 4,883,931 9.4 $24.70
2001 ................ 167,439 7.3 4,895,206 9.4 $29.24
2002 ................ 107,411 4.7 2,868,214 5.5 $26.70
2003 ................ 213,551 9.4 5,699,211 10.9 $26.69
2004 ................ 311,897 13.7 8,596,476 16.5 $27.56
2005 ................ 31,690 1.4 722,587 1.4 $22.80
2006 ................ 76,253 3.3 1,672,932 3.2 $21.94
Thereafter .......... 405,305 17.8 8,758,658 16.8 $21.61
Vacant .............. 216,157 9.5 -- NA NA
------------- -------------- ------------- ------------
Total/Weighted Avg. 2,280,199 100.0% $52,197,545 100.0% $22.89
============= ============== ============= ============
</TABLE>
------------
* Expiring square feet and annualized base rent per square foot
excludes square feet and annualized base rent attributable to storage
spaces and the parking garage.
Appraisal. The Century Towers appraisal, dated as of December 6, 1996, was
prepared by Cushman & Wakefield of California, Inc. The appraisal estimates
the value of the Century Towers Property to be approximately $460,000,000
(assuming the separation of tax lots described below) resulting in a Cut-Off
Date LTV of approximately 49.9%. The Appraisal was prepared in accordance
with the Uniform Standards of Professional Practice. See "Risk Factors--The
Mortgage Loans--Limitations on Appraisals" herein.
Seismic Reports. A structural and seismic risk assessment of the Century
Towers Property was performed on October 17, 1996 by a third party structural
firm. The seismic report concluded that the Century Towers Property has a
probable maximum loss ("PML") rating of 15.4% with a risk rating of
"Moderately Low". The PML is commonly defined as the potential loss with a
90% confidence level given the occurrence of an earthquake within fifty
years. The Century Towers Borrower has obtained earthquake insurance coverage
in the full amount of such PML. In addition, a second structural and seismic
risk assessment of the Century Towers Property was performed in connection
with the origination of the Century Plaza Towers Loan by a different third
party structural firm which assigned a lower PML rating of 10% to each of the
office towers and 15% to the Century Towers Parking Facility. See "Risk
Factors--The Mortgage Loans--Availability of Earthquake, Flood and Other
Insurance" herein.
Engineering Reports. Certain physical due diligence reports on the Century
Towers Property were completed in October and November 1996 by various third
party due diligence firms. These engineering reports generally concluded that
the Century Towers Property was in good physical condition but recommended
immediate physical needs of approximately $3,500,000. At the origination of
the Century Plaza Towers Loan, a reserve of $1,162,000 was established to
cover a portion of the costs of repairing the identified physical needs and
an additional reserve of $2,000,000 was established to cover the costs of
certain repairs and improvements to the Century Towers Parking Facility. In
addition to the reserved amounts, the Century Towers Borrower has budgeted in
excess of $5,000,000 for capital expenditures in 1997 and 1998 to cover the
remaining items identified by the due diligence reports and other
improvements.
Environmental Assessment. A Phase I environmental assessment dated March
24, 1997 and an asbestos survey dated November 15, 1996 (collectively, the
"Century Towers Environmental Reports") were completed by third party
environmental firms. The Century Towers Environmental Reports noted
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<PAGE>
that certain asbestos-containing materials are being managed pursuant to an
operations and maintenance program in place at the Century Towers Property
and that the Mortgaged Property was formerly the site of oil and gas wells
which were abandoned in 1916, 1937 and 1940. See "Risk Factors--The Mortgage
Loans--Environmental Law Considerations" herein.
ABC Entertainment Center. The leased fee interest in the ABC Entertainment
Center adjacent to the Century Towers Property is currently owned by a
limited liability company, which in turn is owned by the members of the
Century Towers Borrower. Currently, the Entertainment Center is leased
substantially in its entirety to an unaffiliated party pursuant to a ground
lease that expires in 2022 or, upon failure by the tenant to meet certain
requirements set forth in the lease (as amended), 2002. During the term of
the Century Plaza Towers Loan, the ABC Entertainment Center may be
substantially redeveloped. The Century Towers Borrower has entered into an
Operating and Reciprocal Easement Agreement (the "Century Towers OREA")
relating to the operation of the property upon which both the Century Towers
Property and the ABC Entertainment Center are located. With respect to the
Century Towers OREA, the Century Plaza Towers Loan documents provide that (i)
the parking spaces the Century Towers Parking Facility (as defined below)
reserved for the office towers comprising the Century Towers Property shall
not be less than three (3) percent of the existing parking spaces in the
Century Towers Parking Facility, (ii) mortgagee approval will be necessary
for (a) the conversion under the Century Towers OREA of any Exclusive Common
Areas (as defined in the Century Towers OREA) appurtenant to the Century
Towers Property to Common Areas (as defined in the Century Towers OREA), (b)
any alteration or redevelopment of the Common Areas adjacent to the office
towers, that upon completion would have a material adverse effect on the
value of the Century Towers Property, (c) subject to certain limited
exceptions, any alteration to the Century Towers Parking Facility that would
reduce the parking spaces therein by more than 100 spaces, or (d) any
disruption of the customary use of the "carriage parking" area at the Century
Towers Property or the use of any portion of the Century Towers Parking
Facility, provided that (x) the Century Towers Borrower may restrict or
eliminate access to a limited number of spaces on a temporary basis in
connection with the redevelopment of the Century Towers Property or the
Entertainment Center so long as the Century Towers Borrower establishes that
sufficient parking spaces at the Century Towers Parking Facility will remain
available to accommodate the likely customers of the Century Towers Parking
Facility, (y) the Century Towers Borrower may temporarily disrupt the
customary usage of the carriage parking during the redevelopment of the
Entertainment Center or the Century Towers Property if the Century Towers
Borrower is reimbursed by the owners of the Entertainment Center for the lost
income directly attributable to the disruption and (z) the Century Towers
Borrower may disrupt the use of the Century Towers Parking Facility (other
than through an elimination of parking spaces) in a manner that would not
have a material adverse effect on the revenues of the Century Towers Parking
Facility, and (iii) mortgagee shall have the right to approve the proposed
"Design Guidelines" and the "Rules" under the Century Towers OREA, as well as
any material modifications thereof, in each case to the extent the same
relate to the Century Towers Property or certain Common Areas.
Separate Tax Lots. As of the date hereof, the Century Towers Property and
the Entertainment Center have not been legally divided into separate tax
lots, although an application for division is pending. The Century Plaza
Towers Loan documents require that the Century Towers Borrower use
commercially reasonable efforts (including the expenditure of money) to cause
the Century Towers Property to constitute a separate tax lot. Until such
separate tax lot is established, the Century Towers Borrower is prohibited
pursuant to the loan documents from seeking or permitting any of its
affiliates or any other entity to seek approval from or otherwise make or
permit submissions to the Association (as defined in the Century Towers OREA)
with respect to the redevelopment of the Entertainment Center and shall fund
the Tax Lot Reserve Account (as further described in "--Description of the
Mortgage Loans--The Century Plaza Towers Loan--Reserves; TI Credit Facility"
herein).
Chilled Water Plant. The Century Towers Property purchases chilled and
heated water for heating, ventilation and air-conditioning purposes from
Central Plants, Inc. (a party not affiliated with the Century Towers
Borrower), pursuant to a Chilled Water and Heated Water Energy Agreement (the
"Chilled Water Agreement"), which expires on December 31, 2013. The Century
Plaza Towers Loan documents provide that on or before September 30, 2006, the
Century Towers Borrower will be required to have done one
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<PAGE>
of the following: (i) renewed the existing Chilled Water Agreement until at
least December 31, 2020, (ii) executed an agreement with an alternative
source for chilled water for a period extending until at least December 31,
2020, (iii) provided mortgagee evidence of a bona fide refinancing commitment
to be consummated not later than the Century Towers Anticipated Repayment
Date, or (iv) secured 150% of the necessary funds for the construction of an
onsite chilled water plant by virtue of an escrow, credit facility or cash
flow sweep.
Parking Facility. The Century Towers Parking Facility, which contains
5,667 parking spaces, is currently leased to the Century Towers Parking
Facility Tenant which is wholly owned by the Century Towers Borrower and the
stock of which is pledged to the mortgagee. The lease (the "Parking Facility
Lease") expires on December 31, 1998 and requires the Century Towers Parking
Facility Tenant to pay annual base rent (the "Base Parking Rent") (in each
case in equal monthly installments) of $7,044,000 for the period ending May
31, 1997, $8,100,000 for the period commencing June 1, 1997 and ending
December 31, 1997, and $8,400,000 for the period commencing January 1, 1998
and ending December 31, 1998. In addition to the Base Parking Rent, the
Century Towers Parking Facility Tenant is required to pay to the Century
Towers Borrower additional rent ("Additional Parking Rent") for each and
every fiscal year during the term of the Parking Facility Lease in an amount
equal to 35% of the gross revenues for the Century Towers Parking Facility
for such fiscal year in excess of (i) $8,789,311 for the first fiscal year
and (ii) $12,343,176 for the second fiscal year. Provided that no event of
default under the Parking Facility Lease has occurred and is continuing, the
Century Towers Parking Facility Tenant has eight options (each, a "Renewal
Option") to extend the term of the Parking Facility Lease for a renewal term
of one year. If a Renewal Option is exercised by the Century Towers Parking
Facility Tenant, the Base Parking Rent for such renewal term shall be fair
market rent, but in no event less than $8,400,000. During the renewal term,
the threshold used to calculate Additional Parking Rent will be increased by
the same percentage as the increase, if any, of the Base Parking Rent for the
relevant fiscal year. The Century Plaza Towers Loan documents provide with
regard to the Parking Facility Lease that the Century Towers Borrower shall
not (i) materially amend or modify the Parking Facility Lease or waive any
material provision thereof, (ii) permit any direct or indirect assignment or
subletting of the Century Towers Parking Facility Tenant's interest under the
Parking Facility Lease, or (iii) renew or extend the Parking Facility Lease
(except in accordance with its terms (as described above)); and requires the
Century Towers Borrower to re-possess the Century Towers Parking Facility
upon the termination of the Parking Facility Lease.
The Century Plaza Towers Loan documents provide that if the Parking
Facility Lease terminates or expires, no new tenant shall be permitted unless
otherwise agreed to by the mortgagee and made subject to a written
confirmation from the Rating Agencies that permitting such new tenant will
not, in and of itself, result in a reduction, withdrawal or qualification of
any rating then assigned to any outstanding Certificates. The Century Towers
Parking Facility Tenant is required to be a single purpose entity (with no
independent board member requirement), the issued and outstanding stock of
which is at all times 100% owned by the Century Towers Borrower, provided,
that the Century Towers Parking Facility Tenant is permitted to issue to
entities not related to the Century Towers Borrower or any of its members,
non-voting preferred stock having a liquidation value of not more than
$25,000 and a maximum dividend of not more than 10% per annum.
The Century Plaza Towers Loan documents provide further that (i) the
Century Towers Borrower may terminate the Parking Facility Lease and (ii) the
Century Towers Borrower may waive the rent obligation of the tenant to the
extent that revenues from the Century Towers Parking Facility, through no
fault of the tenant thereunder, are insufficient to support the rent
payments.
Property Management. Century Towers is managed by Tooley & Co., a
California corporation (the "Century Towers Property Manager"), pursuant to a
Management Agreement (the "Century Towers Property Management Agreement").
The Century Towers Property Manager also manages the Century Towers Parking
Facility pursuant to a Facility Management Agreement (the "Century Towers
Facility Management Agreement"). The Century Towers Property Manager is
responsible for the operation, management, maintenance, promotion and leasing
of the Century Towers Property. Under the terms of these management
agreements, the Century Towers Property Manager is entitled to a management
fee
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<PAGE>
equal to 1.25% of the rents or other charges for use or occupancy of space or
facilities in the Century Towers Property collected during the preceding
month and to a fee equal to 1.25% of the gross revenues of the Century Towers
Parking Facility collected during the preceding month. Both the Century
Towers Property Management Agreement and the Century Towers Facility
Management Agreement continue until April 1, 1998 and provide for automatic
extension on a month to month basis unless either party terminates upon not
less than 30 days' notice.
Pursuant to its terms, the Century Towers Property Management Agreement
shall terminate, unless otherwise waived by the mortgagee, (i) upon the
acceleration of the Century Plaza Towers Loan, (ii) if the outstanding
balance of the Century Towers Plaza Loan is not repaid upon the Century
Towers Anticipated Repayment Date, or (iii) if, for any trailing 12-month
period, the net cash flow of the Century Towers Property falls below 85% of
the net cash flow for the Century Towers Property for the 12-month period
ending April 1, 1997.
THE AAPT BORROWERS AND PROPERTIES
The Loan. The AAPT Pool Loan had a principal balance as of the Cut-Off
Date of approximately $125,149,361 and is secured by first priority mortgage
liens encumbering 34 office properties, 8 industrial properties, 4 "flex"
properties (i.e., properties that have components of both office and
industrial uses) and 2 parcels of undeveloped land located in Pennsylvania,
New Jersey, Virginia and North Carolina (each an "AAPT Property" and
collectively, the "AAPT Properties"). The AAPT Borrowers own fee title to 44
of the 48 AAPT Properties and leasehold title to the remaining 4 AAPT
Properties. The mortgages encumbering the AAPT Properties are cross-defaulted
and cross-collateralized.
The AAPT Borrowers. The four borrowers under the AAPT Pool Loan are AAPOP
1, L.P., a Delaware limited partnership ("AAPOP 1"), Atlantic American Land
Development, Inc., a Delaware corporation ("AALDI"), Iron Run Venture I, a
Pennsylvania general partnership, and Iron Run Venture II, a Pennsylvania
general partnership. Except as hereinafter described, the AAPT Borrowers have
no material assets other than their respective interests in the AAPT
Properties and related interests. AAPOP 1 owns a nonvoting common stock
interest in Atlantic American Property Management Inc., the property manager
for most of the AAPT Properties. AAPOP 1 and AALDI collectively own all of
the capital stock in 49 corporations ("AAP 1-49") formed shortly prior to the
time that the AAPT Borrowers acquired the AAPT Properties. AALDI and AAP 1-49
collectively own 100% of the nonvoting common stock interests in the general
partner of a partnership that owns a hotel. As described in "Risk
Factors--The Mortgage Loans--Other Activities of Certain of the AAPT
Borrowers" herein, AALDI and AAP 1-49 at one time owned interests in other
entities. The Trustee will be the beneficiary of an indemnity with respect to
any liabilities arising from these unrelated businesses other than the
general partnership interests in the partnership that owns a hotel referred
to above. The AAPT Borrowers are affiliates of LF Strategic Realty Investors,
L.P., a Delaware limited partnership which is a private real estate
investment vehicle for institutional investors.
Security. The AAPT Pool Loan is a non-recourse loan, secured only by the
interests of the AAPT Borrowers in the AAPT Properties and certain related
collateral (including assignments of leases and rents, an assignment of
agreements, licenses, permits and contracts, a pledge of an interest rate cap
agreement and the funds in certain reserve accounts or letters of credit in
lieu thereof). Subject to limited exceptions, neither the AAPT Borrowers nor
any of their affiliates are personally liable for payment of the AAPT Pool
Loan. The AAPT Borrowers have represented that they own good and indefeasible
fee simple title (or, as to the properties in which an AAPT Borrower owns the
leasehold estate, good and marketable title) to the AAPT Properties, free and
clear of all liens other than encumbrances described in the applicable title
insurance policies and other encumbrances permitted by the mortgagee under
the loan documents (the "AAPT Permitted Encumbrances"). The title insurance
policies issued upon the origination of the AAPT Pool Loan (which will be
assigned to the Trust Fund), insure that each of the mortgages securing the
AAPT Pool Loan constitutes a valid and enforceable first lien on the AAPT
Properties encumbered by it, subject to certain exceptions and exclusions
from coverage set forth in the policies.
S-101
<PAGE>
The Properties. The AAPT Properties were constructed between 1975 and
1991 and consist of 34 office properties, 8 industrial properties, 4 flex
properties and 2 parcels of undeveloped land. 45 of the AAPT Properties are
located in 6 separate industrial/office parks and the remaining 3 AAPT
Properties are stand-alone buildings (such properties located within the 6
industrial/office parks and such stand-alone buildings being referred to as
the "AAPT Sub-Groups"). The AAPT Properties are located in North Carolina,
New Jersey, Pennsylvania and Virginia. The AAPT Sub-Groups include properties
containing total GLA ranging from approximately 56,601 to approximately
946,387 square feet. The AAPT Properties contain approximately 2,862,885
square feet of GLA in the aggregate. The occupancy rates of the AAPT
Sub-Groups, as of June 1, 1997, ranged from approximately 83% to 100%, with
an average occupancy of approximately 97%. The AAPT Borrowers own fee title
to 44 of the 48 AAPT Properties and an AAPT Borrower owns the leasehold
estate in the remaining 4 AAPT Properties, located in the Maschellmac Office
Park.
Iron Run Corporate Center. The Iron Run Corporate Center is located in
Allentown, Pennsylvania and consists of 7 industrial properties, 2 office
properties and 2 flex properties and 1 parcel of undeveloped land. All of the
properties were constructed between 1975 and 1991 and range in size from
approximately 33,029 to approximately 153,600 square feet of GLA and total
approximately 940,391 square feet of GLA in the aggregate. The occupancy
rates, as of June 1, 1997, ranged from approximately 85% to 100% with an
average occupancy rate of approximately 99%.
East Gate Center. East Gate Center is located in Moorestown and Mount
Laurel, New Jersey and consists of 8 office properties, 2 flex properties,
and 1 parcel of undeveloped land. All of the properties were constructed
between 1975 and 1986 and range in size from approximately 14,980 to
approximately 118,071 square feet of GLA and total approximately 488,053
square feet of GLA in the aggregate. The occupancy rates, as of June 1, 1997,
ranged from approximately 83% to 100%, with an average occupancy rate of
approximately 95%.
Maschellmac Office Park. Maschellmac Office Park is located in King of
Prussia, Pennsylvania and consists of 4 office properties. The properties
were constructed between 1980 and 1987 and range in size from approximately
74,140 to approximately 74,556 square feet of GLA and total approximately
297,764 square feet of GLA in the aggregate. The occupancy rates, as of June
1, 1997, ranged from approximately 95% to 100%, with an average occupancy
rate of approximately 99%.
The interest of an AAPT Borrower in the land underlying the Maschellmac
Office Park is a ground leasehold interest created under four ground leases
(the "Maschellmac Ground Leases"). The Maschellmac Ground Leases expire on
December 31, 2029, and the lessee has four renewal options of ten years each
for a total additional period of 40 years, ending on December 31, 2069. The
ground rent payable under the Maschellmac Ground Leases increases based on a
formula related to gross rents for the Maschellmac Office Park.
Swedesford Square. Swedesford Square is located in Frazer, Pennsylvania
and consists of 2 office properties. The properties were constructed between
1981 and 1988 and contain approximately 109,800 and 131,017 square feet of
GLA, respectively, totalling 240,817 square feet of GLA in the aggregate. The
occupancy rate for these properties, as of June 1, 1997, was 100%.
Main Street Center. Main Street Center is an office building located in
Richmond, Virginia which was constructed in 1987. The building contains
approximately 422,309 square feet of GLA and, as of June 1, 1997, was
approximately 91% occupied.
Masons Mill Office Park. Masons Mill is located in Bryn Athyn,
Pennsylvania and consists of 14 office properties. The properties were
constructed between 1978 and 1984 and contain approximately 211,813 square
feet of GLA in the aggregate. As of June 1, 1997, these properties were
approximately 92% occupied.
Westpark. Westpark is an office building located in Durham, North Carolina
which was constructed in 1985. Westpark contains approximately 56,345 square
feet of GLA and, as of June 1, 1997, was approximately 100% occupied.
S-102
<PAGE>
1760 Market Street. 1760 Market Street is an office building located in
Philadelphia, Pennsylvania which was constructed in 1981. 1760 Market Street
contains approximately 122,893 square feet of GLA and, as of June 1, 1997,
was approximately 94% occupied.
EM Venture. EM Venture is located in Bristol, Pennsylvania and consists of
1 office and 1 industrial property constructed between 1981 and 1984. The
properties contain approximately 82,500 square feet of GLA in the aggregate
and, as of June 1, 1997, were 100% occupied.
See also "Risk Factors--The Mortgage Loans--Commercial Lending Generally",
"--Risks Associated with Office Properties" and "--Risks Associated with
Industrial Properties" herein for a discussion of certain risks relating to
office and industrial properties.
9 of the AAPT Properties (representing approximately 28.5% of the
Allocated Loan Amount of the AAPT Pool Loan) are each leased to a single
tenant. See "Risk Factors--The Mortgage Loans--Commercial Lending Generally".
PROPERTY CHARACTERISTICS -- AAPT POOL LOAN
<TABLE>
<CAPTION>
CUT-OFF
DATE
NUMBER OCCUPANCY ALLOCATED
OF RATE (AS OF LOAN APPRAISED
PROPERTY PROP. GLA (SF) JUNE 1997) AMOUNT VALUE LTV
- ------------------- -------- ----------- ------------ -------------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Iron Run 12 940,391 99% $ 29,691,033 $ 52,375,000 57.3%
East Gate 11 488,053 95% 24,287,389 47,325,000 51.3%
Maschellmac 4 297,764 99% 20,738,768 41,600,000 51.0%
Swedesford Square 2 240,817 100% 19,402,527 34,600,000 58.1%
Main Street Center 1 422,309 91% 18,473,683 32,400,000 57.0%
Masons Mill 14 211,813 91% 5,451,807 14,200,000 38.4%
1760 Market Street 1 122,893 94% 2,532,488 8,500,000 29.8%
Westpark 1 56,345 100% 2,962,325 5,200,000 59.0%
EM Ventures 2 82,500 100% 1,609,340 2,825,000 57.0%
-------- ----------- -------------- --------------
Total/Weighted Avg. 48 2,862,885 97% $125,149,361 $239,025,000 52.7%
======== =========== ============== ==============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ANNUALIZED ANNUALIZED UNDERWRITTEN
BASE BASE RENT NET CASH
PROPERTY RENT PER SF FLOW DSCR
- ------------------- ------------- ------------ -------------- -------
<S> <C> <C> <C> <C>
Iron Run $ 5,981,703 $ 6.36 $ 3,893,242 1.69x
East Gate 7,612,702 $15.60 3,061,967 1.62x
Maschellmac 5,048,888 $16.96 1,930,496 1.17x
Swedesford Square 3,506,813 $14.56 2,473,701 1.60x
Main Street Center 8,214,093 $19.45 4,854,426 2.21x
Masons Mill 2,572,180 $12.14 1,145,981 2.64x
1760 Market Street 2,113,247 $17.20 505,149 2.45x
Westpark 959,836 $17.03 430,949 1.83x
EM Ventures 341,625 $ 4.14 220,843 1.72x
------------- --------------
Total/Weighted Avg. $36,351,089 $12.70 $18,516,754 1.72x
============= ==============
</TABLE>
TEN LARGEST TENANTS BASED ON ANNUALIZED BASE RENT -- AAPT POOL LOAN
<TABLE>
<CAPTION>
% OF
TOTAL
TENANT PROPERTIES* TENANT GLA (SF) GLA
- -------------------- --------------- --------------- --------
<S> <C> <C> <C>
Bell Atlantic SS, IR, MS, M 281,903 9.7%
DecisionOne SS 145,768 5.0
NationsBank MS 82,394 2.9
Centeon M 95,361 3.3
General Instrument MM 86,754 3.0
Prudential Insurance EG,IR 114,906 4.0
US Government 1760, MS 59,683 2.1
Air Products IR 130,977 4.5
Aetna M 55,323 1.9
Vanguard SS 45,456 1.6
--------------- --------------- --------
Total/Weighted Avg.
(10 largest) 1,098,525 37.9
Remaining 1,764,360 62.1
--------------- --------
Total 2,862,885 100.0%
=============== ========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
% OF TOTAL
ANNUALIZED ANNUALIZED ANNUALIZED BASE
TENANT BASE RENT BASE RENT RENT PER SF LEASE EXPIRATION
- -------------------- ------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C>
Bell Atlantic $ 5,131,151 14.1% $18.20 Sep 97-Jul 00
DecisionOne 2,144,651 5.9 $14.71 Jun 03-Dec 05
NationsBank 2,129,802 6.0 $25.85 May 00
Centeon 1,562,001 4.3 $16.38 Oct 02
General Instrument 1,288,994 3.5 $14.86 Apr 98-Nov 98
Prudential Insurance 1,248,956 3.4 $10.87 Dec 97-May 99
US Government 1,107,763 3.0 $18.56 Dec 98-Jan 04
Air Products 963,999 2.7 $ 7.36 Aug 01-Dec 01
Aetna 926,660 2.5 $16.75 Feb 99
Vanguard 802,753 2.2 $17.66 Jun 06
------------- ------------
Total/Weighted Avg.
(10 largest) 17,306,730 47.6 $15.75
Remaining 19,044,359 52.4
------------- ------------
Total $36,351,089 100.0%
============= ============
</TABLE>
------------
* SS = Swedesford Square; IR = Iron Run; MS = Main Street Center; M =
Maschellmac; EG = East Gate; 1760 = 1760 Market Square; MM = Masons Mill
S-103
<PAGE>
LEASE EXPIRATION SCHEDULE -- AAPT POOL LOAN
<TABLE>
<CAPTION>
PERCENT OF ANNUALIZED
YEAR ENDING EXPIRING TOTAL SQUARE ANNUALIZED PERCENT OF BASE RENT PER
DEC 31 SQUARE FEET FEET BASE RENT BASE RENT SQUARE FOOT
- -------------------- ------------- -------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
1997 ................ 610,859 21.3% $ 5,165,261 14.2% $ 8.46
1998 ................ 489,752 17.1 7,959,941 21.9 $16.25
1999 ................ 450,432 15.7 5,991,314 16.5 $13.30
2000 ................ 404,944 14.1 5,416,983 14.9 $13.38
2001 ................ 318,922 11.1 4,030,820 11.1 $12.64
2002 ................ 193,939 6.8 3,082,605 8.5 $15.89
2003 ................ 65,906 2.3 956,339 2.6 $14.51
2004 ................ 22,384 0.8 367,432 1.0 $16.41
2005 ................ 150,210 5.2 2,271,294 6.2 $15.12
2006 ................ 62,720 2.2 1,109,102 3.1 $17.68
Vacant .............. 92,817 3.2 -- 0.0 --
------------- -------------- ------------- ------------
Total/Weighted Avg. 2,862,885 100.0% $36,351,089 100.0% $12.70
============= ============== ============= ============
</TABLE>
Appraisals. Recent appraisals performed within one month of origination by
Cushman & Wakefield determined an aggregate value for the 48 AAPT Properties
of approximately $239,025,000. Cushman & Wakefield has stated that the
appraisals were conducted in accordance with the Uniform Standards of
Professional Practice. For a discussion of certain limitations inherent in
determining an appraised value, see "Risk Factors--The Mortgage
Loans--Limitation of Appraisals" herein.
Engineering Reports. Property condition reports on the AAPT Properties
were completed in April 1997 and were reviewed by an independent third-party
contractor in June 1997. The engineering reports concluded that the AAPT
Properties were generally in good physical condition but recommended certain
immediate physical needs for which reserves were established at origination.
Environmental Reports. Phase I site assessments were performed at all of
the AAPT Properties in April 1997. The reports were subsequently reviewed by
another independent third-party contractor in June 1997. The reports
recommended (i) the verification of the closure of the leaking underground
storage tank case at Maschellmac, (ii) the removal of potential petroleum
contaminated soils at Swedesford Square, and (iii) the removal or potential
replacement of underground storage tanks at EM Venture, East Gate Center and
Main Street Center. Reserves for all of the aforementioned items were
established at loan origination. There can be no assurance that all
environmental conditions and risks were identified in such environmental
assessments. See "Risk Factors--The Mortgage Loans--Environmental Law
Considerations" herein.
Property Management. All of the AAPT Properties are managed by Atlantic
American Properties Management, Inc., except for Main Street Center, which is
managed by Milby & Associates and Westpark, which is managed by Highwoods
Properties, Co. (each such manager, an "AAPT Property Manager" and
collectively, the "AAPT Property Managers"), pursuant to AAPT Property
Management Agreements (collectively, the "AAPT Property Management
Agreements"). Each AAPT Property Manager is responsible for the operation,
management, maintenance, promotion and leasing of the related AAPT
Properties. Under the terms of the AAPT Property Management Agreements, the
AAPT Property Managers are entitled to management and leasing fees ranging
from 3% to 5% of the gross revenue of the related AAPT Properties during each
month. The AAPT Property Management Agreements terminate on various dates
ranging from September 30, 1997 to May 1, 2002.
Pursuant to the AAPT Pool Loan agreement, the AAPT Borrowers may not,
without the mortgagee's prior written consent and without written
confirmation from each of the Rating Agencies that such action will not
result, in and of itself, in a reduction, withdrawal or qualification of any
rating then assigned to any outstanding Certificates, permit or suffer any
person who is an unaffiliated third party and is not an AAPT Acceptable
Manager (see "--Description of the Mortgage Loans--The AAPT Pool
Loan--Transfer of
S-104
<PAGE>
Properties and Interests in the AAPT Borrowers; Encumbrance" herein) to
manage more than 20% of the aggregate leasable square feet of the AAPT
Properties. If a manager who at the time of its engagement does not manage
more than 20% of the aggregate leasable square feet of the AAPT Properties,
subsequently does so solely by virtue of the sale or transfer of some of the
AAPT Properties, such manager will not be required to be an AAPT Acceptable
Manager.
Pursuant to Consents of Manager, among the related Originator, each AAPT
Borrower and each AAPT Property Manager, each AAPT Property Manager has
agreed (i) that each AAPT Property Manager will not terminate the related
AAPT Property Management Agreement as a result of a default by the applicable
AAPT Borrower without giving the mortgagee prior notice and the right to cure
such default, and (ii) that such AAPT Property Manager will not amend the
related AAPT Property Management Agreement in any material respect without
the mortgagee's consent, except with respect to an AAPT Property which is
substituted for in accordance with the terms of the AAPT Pool Loan Agreement.
THE 380 MADISON BORROWER AND PROPERTY
The Loan. The 380 Madison Loan had a principal balance as of the Cut-Off
Date of approximately $89,000,000 and is secured by a first priority mortgage
lien encumbering a 25-story office building with approximately 769,365 GLA of
commercial office space, approximately 49,354 GLA of retail space,
approximately 34,431 GLA of storage space and a 150-car parking garage,
located at 380 Madison Avenue, in the Borough of Manhattan, County, City and
State of New York (the "380 Madison Property").
The Borrower. ComMet 380, Inc. (the "380 Madison Borrower") is a Maryland
corporation formed solely for the purpose of acquiring, owning, operating,
managing and selling the 380 Madison Property. The 380 Madison Borrower
intends to file an election to be treated as a REIT and has no material
assets other than the 380 Madison Property and related interests.
The Comptroller of the State of New York as Trustee of the Common
Retirement Fund ("NYSCRF") and Stichting Bedrijfspensioenfonds voor de
Metaalnijverheid ("MPMA") are the principal shareholders of the 380 Madison
Borrower, each owning 2,072,050 shares of the voting common stock, which
together represents over 99% of the total outstanding shares of the 380
Madison Borrower (NYSCRF and MPMA, collectively, the "Beneficial Owners").
Security. The 380 Madison Loan is a non-recourse loan, secured only by the
interests of the 380 Madison Borrower in the 380 Madison Property and certain
related collateral (including assignments of leases and rents, an assignment
of agreements, licenses, permits and contracts and the funds in certain
accounts, if such funds are required to be deposited pursuant to the terms of
the 380 Madison Loan documents). The 380 Madison Borrower has represented
that it owns good, marketable and indefeasible fee simple title to the 380
Madison Property, free and clear of all liens other than those of the 380
Madison Master Lease, subtenants thereunder and those encumbrances described
in the applicable title insurance policy and other encumbrances permitted by
the mortgagee under the 380 Madison Loan documents (the "380 Madison
Permitted Encumbrances"). The title insurance policy issued in connection
with the origination of the 380 Madison Loan insures that the mortgage
securing the 380 Madison Loan constitutes a valid and enforceable first lien
on the 380 Madison Property, subject to certain exceptions and exclusions
from coverage set forth in the policy.
The Property. The 380 Madison Property consists of a 25-story office
building subject to the 380 Madison Lease with approximately 769,365 GLA of
commercial office space, approximately 49,354 GLA of retail space,
approximately 34,431 GLA of storage space and a 150-car parking garage
located on Madison Avenue between East 46th and 47th Streets in Midtown
Manhattan.
380 Madison Master Lease. The 380 Madison Property is subject to a net
lease (the "380 Madison Master Lease") which terminates on January 26, 2014
(the "380 Madison Master Lease Termination Date"). Under the 380 Madison
Master Lease, Spartan Madison Corp. (the "380 Madison Master Lessee") is
required to pay an annual net rent of $16,000,000 through January 26, 1999.
Such annual
S-105
<PAGE>
net rent increases to $17,600,000 for a five-year period beginning January
27, 1999, to $19,100,000 for a five-year period beginning January 27, 2004
and to $22,000,000 for the five-year period beginning January 27, 2009 and
ending on the 380 Madison Master Lease Termination Date.
Pursuant to the terms of the 380 Madison Master Lease, the 380 Madison
Master Lessee has the full and sole responsibility for the condition,
operation, maintenance and management of the 380 Madison Property and is
required to use and operate the 380 Madison Property as a first class office
building, and to make all necessary repairs thereto. Under the 380 Madison
Master Lease, the 380 Madison Borrower has the right to enter the 380 Madison
Property, without hindrance from the 380 Madison Master Lessee (a) for the
purpose of ascertaining (i) the condition of the 380 Madison Property, and
(ii) whether the 380 Madison Master Lessee is performing its obligations
under the 380 Madison Master Lease and (b) after notice and passage of
applicable grace periods, to make any necessary repairs to or to perform any
work on the 380 Madison Property that may be necessary by reason of the 380
Madison Master Lessee's failure to make such repairs or to perform such work.
Provided the 380 Madison Master Lessee is not in default under the 380
Madison Master Lease after any applicable period of notice and grace, the 380
Madison Master Lessee may assign its rights and obligations under the 380
Madison Master Lease without the prior consent of the 380 Madison Borrower to
certain permitted transferees. Prior to the 380 Madison Master Lease
Permitted Transfer Date (as defined in the 380 Madison Master Lease), the
consent of the 380 Madison Borrower is required for any such transfer by the
380 Madison Master Lessee. In addition, the 380 Madison Master Lessee may
make one or more leasehold mortgages and collaterally assign its interest in
the 380 Madison Master Lease without the prior consent of the 380 Madison
Borrower. In the event of a default by the 380 Madison Master Lessee under
the 380 Madison Master Lease, the 380 Madison Borrower is required to notify
the mortgagee of the 380 Master Lease of such default and to provide the
leasehold mortgagee with an opportunity to cure such default. The leasehold
interest of the 380 Madison Master Lessee is currently encumbered by a
leasehold mortgage. See "Risk Factors--The Mortgage Loans--Risks Related to
the 380 Madison Loan" herein.
Upon the termination of the 380 Madison Master Lease, whether on the 380
Madison Master Lease Termination Date or upon the occurrence of a default
under the 380 Madison Master Lease beyond applicable periods of notice and
grace, the 380 Madison Master Lessee is required to surrender the 380 Madison
Property to the 380 Madison Borrower "broom clean" and free and clear of
leases, except for those leases agreed to under the 380 Madison Master Lease
and those leases which the 380 Madison Borrower has agreed to pursuant to a
separate agreement between the 380 Madison Borrower and the relevant lessees.
See "Risk Factors--The Mortgage Loans--Risks Related to the 380 Madison Loan"
herein.
Occupancy and Major Tenants. As of June 1997, the 380 Madison Property was
approximately 86% leased, excluding storage, with an estimated annualized
minimum base rent (exclusive of recoveries) of approximately $26,168,630. The
five largest tenants based upon estimated annualized base rent are shown
below:
FIVE LARGEST TENANTS BASED ON ANNUALIZED BASE RENT -- 380 MADISON LOAN*
<TABLE>
<CAPTION>
% OF ESTIMATED % OF TOTAL ANNUALIZED
TENANT TOTAL ANNUALIZED ANNUALIZED BASE RENT LEASE
TENANT GLA (SF) GLA BASE RENT BASE RENT PER SF EXPIRATION
- ------------------------ --------- -------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Chase Manhattan Bank .... 307,747 34.3% $ 9,334,342 35.7% $30.33 5/99, 9/02
US Sprint................ 70,000 7.8 2,450,000 9.4 $35.00 12/97, 12/01
Varig Brazilian
Airlines................ 36,937 4.1 1,772,976 6.8 $48.00 9/10
LDDS Communications...... 60,710 6.8 1,742,376 6.7 $28.70 8/08
Investment Technology
Group** ................ 44,704 5.0 1,654,048 6.3 $37.00 1/13
--------- -------- ------------- ------------
Total/Weighted Avg. (5
largest) ............... 520,098 57.9 16,953,742 64.8 $32.60
Remaining/Weighted Avg. 377,504 42.1 9,291,715 35.2 $24.61
--------- -------- ------------- ------------
Total/Weighted Avg....... 897,602 100.0% $26,245,457 100.0% $29.24
========= ======== ============= ============
</TABLE>
* Property level information about the 380 Madison Property is limited
because the 380 Madison Borrower is the lessor under the 380 Madison
Master Lease. Thus, the information provided herein is from alternative
sources including the 380 Madison appraisal and a constructed rent roll.
** Rental payments commence in January 1998.
S-106
<PAGE>
Lease Expirations. The Chase Manhattan Bank ("Chase") currently occupies
307,747 RSF (as remeasured), of which approximately 29,570 RSF (as
remeasured) is scheduled to expire May 31, 1999 and of which approximately
278,177 RSF (as remeasured) is scheduled to expire on September 30, 2002. Of
the 70,000 RSF leased to US Sprint, approximately 25,520 sq. ft. expires on
December 31, 1997, with the balance coming due on December 31, 2001.
Appraisal. An appraisal dated June 23, 1997 estimates the value of the 380
Madison Property to be approximately $197,000,000, resulting in a Cut-Off
Date LTV of approximately 45.2%. The appraisal indicates it was prepared in
accordance with the Uniform Standards of Professional Practice. See "Risk
Factors--The Mortgage Loans--Limitations on Appraisals" herein.
Engineering Reports. A property condition report was completed on
September 20, 1996 by a third party due diligence firm. The property
condition report concluded that the 380 Madison Property was generally in
good physical condition.
Environmental Assessment. A Phase I environmental assessment dated October
31, 1996 was completed by a third party environmental firm. The report noted
that certain asbestos containing materials are present on the 380 Madison
Property and recommended that an asbestos operations and maintenance plan be
implemented. That plan will not be implemented unless or until the 380
Madison Borrower shall have regained possession of the premises demised under
the 380 Madison Master Lease. There can be no assurance that the Phase I
environmental assessment identified all environmental risks on the property.
See "Risk Factors--The Mortgage Loans--Environmental Law Considerations"
herein.
Property Management. Pursuant to the terms of the 380 Madison Master
Lease, the 380 Madison Property is net leased to the 380 Madison Master
Lessee with the 380 Madison Master Lessee being responsible for the
operation, repair, maintenance and management of the 380 Madison Property.
Property management is performed by HRO International, Ltd. ("HRO") under the
terms of a management agreement between the 380 Madison Master Lessee and
HRO.
Upon the occurrence of any of (i) a material default on the part of the
380 Madison Master Lessee on any of its obligations under the terms and
conditions of the 380 Madison Master Lease such that the 380 Madison Borrower
is entitled to assume obligations of the 380 Madison Master Lessee with
respect to the control, operation and management of the 380 Madison Property;
(ii) the 380 Madison Borrower or a related or affiliated entity becoming (a)
the tenant or subtenant under the 380 Madison Master Lease or (b) the
operator of the 380 Madison Property free and clear of the 380 Madison Master
Lease or pursuant to the terms of the 380 Madison Master Lease; or (iii) the
380 Madison Master Lease terminating or otherwise expiring, the 380 Madison
Property must be managed by either (x) RREEF America L.L.C. or a wholly-owned
subsidiary thereof, but only for so long as RREEF America L.L.C. or such
wholly-owned subsidiary continues to be considered a reputable property
manager; (y) a reputable property management company managing either (1) at
least 5 million rentable square feet of Manhattan office space (class B+ or
better) and at least two buildings of similar size to the 380 Madison
Property, or (2) at least 10 million rentable square feet of office space
(class B+ or better) in the continental United States and at least 2
buildings of similar size as to the 380 Madison Property so long as there is
a separate leasing agent who is also a property manager who meets the
criteria under clause (1) above; or (z) another reputable and experienced
professional management company (1) which has been approved by the mortgagee
(which approval will not be unreasonably withheld or delayed), and (2) as to
which the mortgagee shall have received a written confirmation from the
Rating Agencies that the retention of such management company will not, in
and of itself, result in a reduction, withdrawal or qualification of any
rating then assigned to any outstanding Certificates.
THE CAP BORROWER AND PROPERTIES
The Loan. The CAP Pool Loan had a principal balance as of the Cut-Off Date
of approximately $87,946,446 and is secured by first priority mortgage liens
encumbering 8 office properties, 3 industrial
S-107
<PAGE>
properties, twelve flex properties and two research and development
properties (the "CAP Properties"). The CAP Borrowers own fee title to all 25
CAP Properties. The Mortgages encumbering the CAP Properties are
cross-defaulted and cross-collateralized as described herein.
The CAP Borrower. The borrower under the CAP Pool Loan is Commonwealth
Atlantic Operating Properties Inc., a special purpose Virginia corporation
(the "CAP Borrower"). The CAP Borrower has no material assets other than its
interests in the CAP Properties and related interests. The CAP Borrower is an
affiliate of LF Strategic Realty Investors, L.P., a Delaware limited
partnership which is a private real estate investment vehicle for
institutional investors.
Security. The CAP Pool Loan is a non-recourse loan, secured only by the
interests of the CAP Borrower in the CAP Properties and certain related
collateral (including assignments of leases and rents, an assignment of
agreements, licenses, permits and contracts and the funds in certain reserve
accounts or letters of credit in lieu thereof). Subject to limited
exceptions, neither the CAP Borrower nor any of its affiliates is personally
liable for payment of the CAP Pool Loan. The CAP Borrower has represented
that it owns good and indefeasible fee simple title to the CAP Properties,
free and clear of all liens other than encumbrances described in the
applicable title insurance policies and other encumbrances permitted by the
mortgagee under the loan documents (the "CAP Permitted Encumbrances"). The
title insurance policies issued upon the origination of the CAP Pool Loan
(which will be assigned to the Trust Fund), insure that each of the mortgages
securing the CAP Pool Loan constitutes a valid and enforceable first lien on
the CAP Properties encumbered by it, subject to certain exceptions and
exclusions from coverage set forth in the policies.
The Properties. The CAP Properties were constructed between 1962 and 1996
and consist of 8 office properties, 3 industrial properties, 12 flex
properties and 2 research and development properties. 21 of the CAP
Properties are located in 3 industrial/office parks and the remaining 4 CAP
Properties are stand-alone buildings (such properties located within the 3
industrial/office parks and such stand-alone buildings being referred to as
the "CAP Sub-Groups"). The CAP Properties are located in metropolitan
Richmond and Northern Virginia. The CAP Sub-Groups include properties
containing total GLA ranging in size from approximately 56,076 to
approximately 824,496 square feet. The CAP Properties contain approximately
1,700,252 square feet of GLA in the aggregate. The occupancy rates of the CAP
Sub-Groups, as of June 1, 1997, ranged from approximately 90% to 100%, with
an average occupancy rate of approximately 98%.
Oakwood & Greenwood Centers. Oakwood & Greenwood Centers are located in
Fairfax, Virginia and consist of two office properties. The buildings were
constructed between 1982 and 1985 and contain approximately 278,530 square
feet of GLA in the aggregate. The occupancy rate, as of June 1, 1997, was
approximately 95%. The manager of Oakwood and Greenwood Centers is CB
Commercial Real Estate Group, Inc.
Greater Dabney. Greater Dabney is located in Richmond, Virginia and
consists of twelve flex properties, three industrial properties and two
research and development properties. All of the properties were constructed
between 1962 and 1994 and range in size from approximately 15,389 to
approximately 132,103 square feet of GLA and total approximately 824,496
square feet of GLA in the aggregate. The occupancy rates, as of June 1, 1997,
ranged from approximately 86% to 100%, with an average occupancy rate of
approximately 99%. The manager of Greater Dabney is Morton G. Thalhimer, Inc.
Plaza 1900. Plaza 1900 is an office building located in McLean, Virginia
which was constructed in 1989. The building contains approximately 203,084
square feet of GLA and as of June 1, 1997 was 100% occupied. The manager of
Plaza 1900 is SFRE, Inc.
Campus Point. Campus Point is an office building located in Reston,
Virginia which was constructed in 1985. The building contains approximately
172,448 square feet of GLA and as of June 1, 1997 was 100% occupied. The
manager of Campus Point is Manekin Corporate Services, Inc.
Arboretum VI & VII. Arboretum VI & VII are located in Richmond, Virginia
and consist of two office properties. The buildings were constructed in 1991
and contain approximately 103,986 square feet of GLA in the aggregate. The
average occupancy rate, as of June 1, 1997, was approximately 93%. The
manager of Arboretum VI and VII is CK Industrial Richmond Overhead, Limited
Partnership.
S-108
<PAGE>
Lakebrooke Pointe. Lakebrooke Pointe is an office building located in
Richmond, Virginia which was constructed in 1995. The building contains
approximately 61,632 square feet of GLA and as of June 1, 1997 was 100%
occupied. The manager of Lakebrooke Pointe is CK Industrial Richmond
Overhead, Limited Partnership.
Commerce Center. Commerce Center is an office building located in
Richmond, Virginia which was constructed in 1980. The building contains
approximately 56,076 square feet of GLA and as of June 1, 1997 was 100%
occupied. The manager of Commerce Center is Barnes, Morris, Pardoe & Foster
Management Services, L.L.C.
See "Risk Factors--The Mortgage Loans--Commercial Lending Generally",
"--Risks Associated with Office Properties" and "--Risks Associated with
Industrial Properties" herein for a discussion of certain risks relating to
office and industrial properties.
Seven of the CAP Properties (representing approximately 28.0% of the
Allocated Loan Amount for the CAP Pool Loan) are each leased to a single
tenant. See "Risk Factors--The Mortgage Loans--Commercial Lending Generally"
herein.
PROPERTY CHARACTERISTICS -- CAP POOL LOAN
<TABLE>
<CAPTION>
NUMBER OCCUPANCY CUT-OFF DATE
OF RATE (AS OF ALLOCATED APPRAISED
PROPERTY PROPERTIES GLA (SF) JUNE 1997) LOAN AMOUNT VALUE LTV
- ------------------ ------------ ----------- ------------ -------------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Oakwood &
Greenwood 2 278,530 95% $21,631,827 $ 32,600,000 66.4%
Dabney 17 824,496 99% 19,747,325 34,850,000 56.7%
Plaza 1900 1 203,084 100% 18,665,681 32,500,000 57.4%
Campus Point 1 172,448 100% 15,135,783 23,300,000 65.0%
Arboretum VI & VII 2 103,986 93% 5,343,835 9,000,000 59.4%
Lakebrooke Pointe 1 61,632 100% 4,037,564 6,800,000 59.4%
Commerce Center 1 56,076 100% 3,384,429 5,700,000 59.4%
------------ ----------- -------------- --------------
Total/Weighted
Avg. 25 1,700,252 98% $87,946,444 $144,750,000 60.8%
============ =========== ============== ==============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ANNUALIZED ANNUALIZED UNDERWRITTEN
BASE RENT BASE RENT NET
PROPERTY ($) PER SF CASH FLOW DSCR
- ------------------ ------------- ------------ -------------- -------
<S> <C> <C> <C> <C>
Oakwood &
Greenwood $ 4,199,544 $15.08 $ 2,262,481 1.21x
Dabney 4,112,880 $ 4.99 3,089,187 1.85x
Plaza 1900 4,201,128 $20.69 2,918,932 1.85x
Campus Point 2,284,936 $13.25 1,875,443 1.46x
Arboretum VI & VII 1,433,326 $13.78 808,001 1.79x
Lakebrooke Pointe 977,167 $15.85 581,230 1.70x
Commerce Center 552,349 $ 9.85 403,606 1.41x
------------- --------------
Total/Weighted
Avg. $17,761,330 $10.45 $11,938,880 1.60x
============= ==============
</TABLE>
TEN LARGEST TENANTS BASED ON ANNUALIZED BASE RENT -- CAP POOL LOAN
<TABLE>
<CAPTION>
TENANT % OF
TENANT PROPERTY GLA(SF) TOTAL GLA
- -------------------- -------------------- ----------- -----------
<S> <C> <C> <C>
GRC International .. Plaza 1900 166,597 9.8%
Bell Atlantic* ...... Dabney, Campus Point 172,448 10.1
Logicon Dynamics ... Oakwood & Greenwood 55,029 3.2
Versatility Inc. ... Oakwood & Greenwood 50,973 3.0
Mantech ............. Oakwood & Greenwood 43,848 2.6
Amerlcan Home
Funding ............ Commerce Center 56,076 3.3
National Capitioning
Institute .......... Plaza 1900 36,487 2.2
Kemper .............. Lakebrooke Pointe 31,500 1.9
Capital One Bank ... Westmoreland Plaza 121,815 7.2
Aeroteck ............ Oakwood & Greenwood 19,789 1.2
----------- -----------
Total/Weighted Avg.
(10 largest)........ 754,562 44.4
Remaining/Weighted
Avg. ............... 945,690 55.6
----------- -----------
Total/Weighted Avg. . 1,700,252 100.0%
=========== ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
% OF TOTAL ANNUALIZED
ANNUALIZED ANNUALIZED BASE RENT LEASE
TENANT BASE RENT BASE RENT PER SF EXPIRATION
- -------------------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
GRC International .. $ 3,665,134 20.6% $22.00 May 09
Bell Atlantic* ...... 2,300,625 13.0 $13.34 Apr /01
Logicon Dynamics ... 878,751 5.0 $15.97 May 06-June 07
Versatility Inc. ... 811,520 4.6 $15.92 Dec 04
Mantech ............. 868,190 4.9 $19.80 May 07
Amerlcan Home
Funding ............ 552,349 3.1 $ 9.85 Jan 03
National Capitioning
Institute .......... 535,994 3.0 $14.69 Sep 04
Kemper .............. 508,410 2.9 $16.14 Oct 10
Capital One Bank ... 478,733 2.7 $ 3.93 Dec 98
Aeroteck ............ 395,780 2.2 $20.00 Jun 07
------------- ------------
Total/Weighted Avg.
(10 largest)........ 10,995,486 61.9
Remaining/Weighted
Avg. ............... 6,765,844 38.1
------------- ------------
Total/Weighted Avg. . $17,761,330 100.0%
============= ============
* Includes affiliates of Bell Atlantic.
S-109
<PAGE>
LEASE EXPIRATION SCHEDULE -- CAP POOL LOAN
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED
EXPIRING PERCENT OF BASE RENT
YEAR ENDING SQUARE TOTAL SQUARE ANNUALIZED PERCENT OF PER SQUARE
DEC 31 FEET FEET BASE RENT BASE RENT FEET
- -------------- ----------- -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1997 ....... 83,030 4.9% $ 842,481 4.7% $10.15
1998 ........ 211,887 12.5 1,152,472 6.5 $ 5.44
1999 ........ 203,500 12.0 1,247,175 7.0 $ 6.13
2000 ........ 151,986 8.9 1,086,743 6.1 $ 7.15
2001 ........ 307,876 18.1 3,296,968 18.6 $10.71
2002 ........ 56,235 3.3 406,108 2.3 $ 7.22
2003 ........ 131,363 7.7 1,179,906 6.6 $ 8.98
2004 ........ 146,310 8.6 1,729,133 9.7 $11.82
2005 ........ 17,574 1.0 261,213 1.5 $14.86
2006 ........ 76,738 4.5 1,345,328 7.6 $17.53
Thereafter . 281,232 16.5 5,213,803 29.4 $18.54
Vacant ..... 32,521 1.9 -- 0.0 --
----------- -------------- ------------- ------------
Total/Weighted
Avg. ...... 1,700,252 100.0% $17,761,330 100.0% $10.45
=========== ============== ============= ============
</TABLE>
Appraisals. Appraisals performed within one month of origination by Cushman
& Wakefield determined an aggregate value for the CAP Properties of
approximately $144,750,000. Cushman & Wakefield has indicated that the
appraisals were conducted in accordance with the Uniform Standards of
Professional Practice. For a discussion of certain limitations inherent in
determining an appraised value, see "Risk Factors--The Mortgage
Loans--Limitation of Appraisals" herein.
Engineering Reports. Property condition reports on the CAP Properties were
completed between October and November 1996 and were reviewed by an
independent third-party contractor in June 1997. The engineering reports
concluded that the CAP Properties were generally in good physical condition
but recommended certain immediate physical needs for which reserves were
established at origination.
Environmental Reports. Phase I site assessments were performed at all of
the CAP Properties between June and November 1996. The reports were
subsequently reviewed by another independent third-party contractor in June
1997. The assessments recommended that (i) operations and maintenance
programs with respect to ACMs be implemented at Commerce Center, Oakwood &
Greenwood Centers, Greater Dabney and Plaza 1900, (ii) the underground
storage tanks at Oakwood & Greenwood Centers and Campus Point be upgraded,
and (iii) remedial action be taken at Oakwood and Greenwood Centers with
regard to the apparent impact from current/historic surface release from a
tenant-maintained emergency generator. Reserves for all of the aforementioned
items were established at loan origination. There can be no assurance that
all environmental conditions and risks were identified in such environmental
assessments. See "Risk Factors--The Mortgage Loans--Environmental Law
Considerations" herein.
Property Management. Each CAP Property is managed by either CK Industrial
Richmond Overhead, Limited Partnership, Barnes, Morris, Pardoe & Foster
Management Services, LLC, Morton G. Thalhimer, Inc., Manekin Corporation,
SFRE Inc., or CB Commercial Real Estate Group, Inc. (each a "CAP Property
Manager" and collectively, the "CAP Property Managers"), pursuant to Property
Management Agreements (the "CAP Property Management Agreements"). Each CAP
Property Manager is responsible for the operation, management, maintenance,
promotion and leasing of the related CAP Properties. Under the terms of the
CAP Property Management Agreements, the CAP Property Managers are entitled to
management and leasing fees ranging from 3% to 5% of the gross revenue of the
related CAP Properties during each month. The CAP Property Management
Agreements terminate on various dates prior to June 3, 1999.
Pursuant to the CAP Pool Loan agreement the CAP Borrower may not, without
the mortgagee's prior written consent and without written confirmation from
each of the Rating Agencies that such action
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<PAGE>
will not result, in and of itself, in a reduction, withdrawal or
qualification of any rating then assigned to any outstanding Certificates,
permit or suffer any person who is an unaffiliated third party and is not a
CAP Acceptable Manager (see "--Description of the Mortgage Loans--The CAP
Pool Loan--Transfers of Properties and Interests in the CAP Borrower;
Encumbrance") to manage more than twenty percent (20%) of the aggregate
leaseable square feet of the CAP Properties. If a manager who at the time of
its engagement does not manage more than twenty percent of the aggregate
leaseable square feet of the CAP Properties, subsequently does so solely by
virtue of the sale or transfer of some of the CAP Properties, such manager
will not be required to be a CAP Acceptable Manager.
Pursuant to Consents of Manager, among the related Originator, the CAP
Borrower and each CAP Property Manager, each CAP Property Manager has agreed
(i) that each CAP Property Manager will not terminate the related CAP
Property Management Agreement as a result of a default by the CAP Borrower
without giving the mortgagee prior notice and the right to cure such default
and (ii) that such CAP Property Manager will not amend the related CAP
Property Management Agreement in any material respect without the Master
Servicer's prior written consent, except to the extent necessary to reflect
the substitution of one CAP Property for another in accordance with the terms
of the CAP Pool Loan Agreement.
THE WHITEHALL BORROWER AND PROPERTIES.
The Loan. The Whitehall Pool Loan had a principal balance as of the
Cut-Off Date of approximately $72,228,349 and is secured by first priority
mortgage liens encumbering 7 office properties, 2 retail properties and 2
industrial properties located in California, Massachusetts, Missouri, New
York and Texas (the "Whitehall Properties"). The interest of the Whitehall
Borrower in 10 of the Whitehall Properties is a fee interest and in one of
the Whitehall Properties is a leasehold interest. The mortgages encumbering
the Whitehall Properties are cross-collateralized (subject to the limitation
expressed below under "--Security" with respect to 1511-1515 Third Avenue)
and cross-defaulted.
The Borrower. WMP II Real Estate Limited Partnership (the "Whitehall
Borrower") is a special purpose Delaware limited partnership formed on August
7, 1996 solely for the purpose of owning, operating and managing the
Whitehall Properties. The Whitehall Borrower has no material assets other
than the Whitehall Properties and related interests. The sole general partner
in the Whitehall Borrower is WMP II Gen-Par, Inc. ("WMP II Gen-Par"), a
special purpose Delaware corporation formed for the sole purpose of acting as
the general partner of the Whitehall Borrower. The sole limited partner in
the Whitehall Borrower is WMP Real Estate Limited Partnership, a Delaware
limited partnership ("WMP Limited Partnership") whose sole general partner is
WMP Gen-Par, Inc. ("WMP Gen-Par"). All of the outstanding stock of WMP II
Gen-Par is owned by WMP Limited Partnership. All of the outstanding stock of
WMP Gen-Par is owned by Whitehall Street Real Estate Limited Partnership III,
a Delaware limited partnership ("Whitehall III"). In addition, Whitehall III
is the sole limited partner in WMP Limited Partnership. Whitehall III is a
private investment vehicle organized by The Goldman Sachs Group, L.P. and
managed by affiliates of Goldman, Sachs & Co. for institutional clients and
high net worth individuals seeking to invest in real estate. See "Risk
Factors--The Mortgage Loans--Conflicts of Interest--Conflicts Among
Affiliates of Goldman, Sachs & Co" herein.
Security. The Whitehall Pool Loan is a non-recourse loan, secured only by
the interests of the Whitehall Borrower in the Whitehall Properties and
certain related collateral (including assignments of leases and rents, an
assignment of agreements, licenses, permits and contracts and the funds in
certain accounts). The Mortgage encumbering the Whitehall Property known as
1511-1515 Third Avenue in New York City, New York, secures a total
outstanding principal indebtedness under the Whitehall Pool Loan in an amount
not to exceed $9,500,000, which is the Whitehall Pool Release Amount for the
1511-1515 Third Avenue property. The 1511-1515 Third Avenue Allocated Loan
Amount is $ 7,600,000. Subject to limited exceptions, neither the Whitehall
Borrower nor any of its affiliates is personally liable for payment of the
Whitehall Pool Loan. The Whitehall Borrower has represented that it owns
good, marketable and indefeasible fee simple (or, where applicable,
leasehold) title to the Whitehall Properties free and clear of all liens
other than encumbrances described in the applicable title insurance policies
and other encumbrances permitted by the mortgagee under the loan documents
(the "Whitehall Permitted Encumbrances"). The title insurance policies issued
in connection with the origination of the Whitewall
S-111
<PAGE>
Pool Loan (which will be assigned to the Trust Fund) insure that each of the
Mortgages constitutes a valid and enforceable first lien on the Whitehall
Properties encumbered by it, subject to certain exceptions and exclusions
from coverage set forth in the policy.
The Properties. The Mortgaged Properties securing the Whitehall Pool Loan
are comprised of 7 office properties, 2 retail properties and 2 industrial
properties located in California, Massachusetts, Missouri, New York and
Texas.
Office Properties:
City Center. The City Center property consists of a 1.56 acre improved
site with a 30-story multi-tenant office building and a two-level underground
parking garage containing 325 parking spaces completed in 1978 and was
subsequently renovated in 1992. The City Center property is located at 1100
Main Street, Kansas City, Missouri and contains approximately 639,586 square
feet of GLA. The occupancy rate, as of May 20, 1997, was approximately 88.6%.
The City Center property is managed by Colliers, Turley, Martin, Kerr & Co.
Hookston Square. The Hookston Square property consists of 9.43 acres with
two 3-story multi-tenant office buildings. The Hookston Square property is
located at 3476 Buskirk Avenue, Pleasant Hill, California and was completed
in 1984. The office buildings contain approximately 192,042 square feet of
GLA. The occupancy rate, as of May 20, 1997, was approximately 95.5%. The
Hookston Square property is managed by Insignia-O'Donnell Commercial Group.
The interest of the Whitehall Borrower in the land underlying the Hookston
Square property is a ground leasehold interest created under a ground lease
(the "Hookston Ground Lease"). The Hookston Ground Lease expires on December
31, 2031, and the lessee has 2 renewal options of 25 years each for a total
additional period of 50 years, ending on December 31, 2081. Current rent
payable under the Hookston Ground Lease is $201,736, with adjustments to such
rent every five years based on the Producer Price Index. The next adjustment
date is January 1, 2002.
Downtown Plaza. The Downtown Plaza property consists of 100,146 square
feet of GLA with a 6-story multi-tenant office building and a non-contiguous
parking lot. The Downtown Plaza property is located at 211 East Ocean, Long
Beach, California and was completed in 1982. The occupancy rate, as of May
20, 1997, was approximately 87.8%. The Downtown Plaza property is managed by
Insignia-O'Donnell Commercial Group.
Bennett Park. The Bennett Park property consists of 9.54 acres improved
with three two-story multi-tenant buildings forming an office, research and
development complex. The Bennett Park property is located at 5200 Great
American Parkway, Santa Clara, California and was completed in 1983. The
complex contains approximately 227,699 square feet of GLA. The occupancy
rate, as of May 20, 1997, was approximately 89.4%. The Bennett Park property
is managed by Insignia-O'Donnell Commercial Group.
Stevens Creek. The Stevens Creek property consists of a 4.485 acre
improved site with a 2-story multi-tenant office building. The Stevens Creek
property is located at 19925 Stevens Creek Boulevard, Cupertino, California
and was completed in 1984. The office building contains approximately 77,762
square feet of GLA. The occupancy rate, as of May 20, 1997, was approximately
97.8%. The Stevens Creek property is managed by Insignia-O'Donnell Commercial
Group.
One Montvale. The One Montvale property consists of a 1.79 acre improved
site with a 4-1/2-story multi-tenant office building and a 3-level parking
garage. The One Montvale property is located at One Montvale Avenue,
Stoneham, Massachusetts and was completed in 1890. The office building was
completely renovated in 1987. The office building contains approximately
100,420 square feet of GLA. The occupancy rate, as of May 23, 1997, was
approximately 98.7%. The One Montvale property is managed by Trammell Crow
NE, Inc.
One Northwest. The One Northwest property consists of a 2.73 acre improved
site with a 6-story multi-tenant office building. The One Northwest property
is located at 13831 Northwest Freeway,
S-112
<PAGE>
Houston, Texas and was completed in 1983. The office building contains
approximately 150,465 square feet of GLA. The occupancy rate, as of May 20,
1997, was approximately 85.1%. The One Northwest property is managed by
Transwestern Property Co.
Retail Properties:
North Ranch Plaza. The North Ranch Plaza property consists of an 8.10 acre
improved site with a 1-story, community shopping center. The North Plaza
Ranch property is located at 1125-1145 Lindere Canyon Road, Thousand Oaks,
California and was built in 1991. It has approximately 69,394 square feet of
owned GLA with an additional 50,970 square feet of GLA owned by Vons
Pavilions, the grocery store anchor. The occupancy rate, as of May 20, 1997,
was approximately 87.6%. The North Ranch Plaza property is managed by
Westfield Corporation, Inc.
1511-1515 Third Avenue. The 1511-1515 Third Avenue property is a 4-story
commercial building containing approximately 55,000 square feet of GLA. This
property is located at the corner of 85th Street and Third Avenue, New York,
New York. The occupancy rate, as of May 20, 1997, was approximately 100%. The
1511-1515 Third Avenue property is managed by The Galbreath Company.
Industrial Properties:
San Valente. The San Valente property is a light industrial and bulk
warehouse property completed in 1979, and renovated in 1992, containing
approximately 104,540 square feet of GLA industrial space. The San Valente
property is located at 3200 Patrick Henry Drive, Santa Clara, California. As
of May 20, 1997, the property is 100% leased by a single tenant who has
subsequently subleased it to another tenant, both of whom do not occupy the
space, which, as of the Cut-Off Date, was vacant. The San Valente property is
managed by Insignia-O'Donnell Commercial Group.
Sun Buildings. The Sun Buildings properties consist of light-industrial
and bulk warehouse facilities containing an aggregate of 231,840 square feet
of GLA office space. The Sun Buildings properties are located at 1100
Cadillac Court and 380 Fairway Way, Milpitas, California. These properties
were built in 1980 and 1988, respectively, and are 100% occupied by single
tenants. The Sun Buildings properties are managed by Lincoln Property
Management.
S-113
<PAGE>
PROPERTY CHARACTERISTICS--WHITEHALL POOL LOAN
<TABLE>
<CAPTION>
OCCUPANCY CUT-OFF DATE
(AS OF ALLOCATED APPRAISED
PROPERTY LOCATION GLA (SF) MAY 1997) LOAN AMOUNT VALUE
- ----------------------- ----------------- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
City Center ............ Kansas City, MO 639,586 89% $19,185,037 $ 36,000,000
Bennett Park ........... Santa Clara, CA 227,699 89% 11,507,064 27,100,000
1511-1515 Third Avenue New York, NY 55,000 100% 7,519,663 16,000,000
The Sun Buildings ...... Milpitas, CA 231,840 100% 7,489,981 16,950,000
North Ranch Plaza ...... Thousand Oaks, CA 69,394 87% 5,669,431 10,500,000
Stevens Creek .......... Cupertino, CA 77,762 98% 5,649,643 12,800,000
Hookston Square ........ Pleasant Hill, CA 192,042 96% 5,273,658 14,000,000
San Valente Building .. Santa Clara, CA 104,540 100% 4,650,319 9,700,000
One Montvale Avenue ... Stoneham, MA 100,420 99% 2,117,379 8,000,000
One Northwest Centre .. Houston, TX 150,465 85% 1,721,607 6,100,000
Downtown Plaza ......... Long Beach, CA 100,146 88% 1,444,567 8,000,000
----------- -------------- -------------
Total/Weighted Avg. .. 1,948,894 92% $72,228,349 $165,150,000
=========== ============== =============
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED UNDERWRITTEN
CUT-OFF ANNUALIZED BASE RENT NET CASH
PROPERTY DATE LTV BASE RENT PER SF FLOW DSCR
- ----------------------- ---------- ------------- ------------ -------------- -------
<S> <C> <C> <C> <C> <C>
City Center ............ 53.3% $ 7,733,378 $12.09 $ 3,017,421 1.57x
Bennett Park ........... 42.5% 2,932,733 $12.88 2,073,616 1.80x
1511-1515 Third Avenue 47.0% 2,031,000 $36.93 1,431,051 1.90x
The Sun Buildings ...... 44.2% 1,805,242 $ 7.79 1,317,010 1.76x
North Ranch Plaza ...... 54.0% 1,196,658 $17.24 873,687 1.54x
Stevens Creek .......... 44.1% 1,555,150 $20.00 983,542 1.74x
Hookston Square ........ 37.7% 3,204,675 $16.69 1,129,765 2.14x
San Valente Building .. 47.9% 777,778 $ 7.44 540,803 1.16x
One Montvale Avenue ... 26.5% 1,515,057 $15.09 449,899 2.12x
One Northwest Centre .. 28.2% 1,575,062 $10.47 483,992 2.81x
Downtown Plaza ......... 18.1% 1,444,120 $14.42 316,492 2.19x
------------- --------------
Total/Weighted Avg. .. 43.7% $25,770,853 $13.22 $12,617,278 1.74x
============= ==============
</TABLE>
S-114
<PAGE>
TEN LARGEST TENANTS BASED ON ANNUALIZED BASE RENT--WHITEHALL POOL LOAN
<TABLE>
<CAPTION>
% OF
TENANT TOTAL
TENANT PROPERTY GLA (SF) GLA
- ----------------------- ---------------------- ----------- --------
<S> <C> <C> <C>
General Services City Center 203,776 10.5%
Administration (GSA) One Montvale Avenue
Auspex Bennett Park 161,924 8.3
The Gap 1511-1515 Third Avenue 25,000 1.3
Sun Microsystems The Sun Buildings 125,280 6.4
Seagate Computers Stevens Creek 44,361 2.3
Brown & Caldwell Hookston Square 58,545 3.0
Dickinson Financial City Center 58,530 3.0
Comm. & Power Industry* San Valente 104,540 5.4
Equinox 1511-1515 Third Avenue 30,000 1.5
Applied Materials The Sun Buildings 106,560 5.5
----------- --------
Total (10 largest) 918,516 47.1
Remaining 1,030,378 52.9
----------- --------
Total/Weighted Avg. 1,948,894 100.0%
=========== ========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
% OF TOTAL ANNUALIZED
ANNUALIZED ANNUALIZED BASE RENT LEASE
TENANT BASE RENT BASE RENT PER SF EXPIRATION
- ----------------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
General Services $ 2,984,274 11.6% $14.64 **
Administration (GSA)
Auspex 2,233,009 8.7 $13.79 03/31/98
The Gap 1,331,000 5.2 $53.24 05/10/10
Sun Microsystems 1,127,520 4.4 $ 9.00 06/30/00
Seagate Computers 990,436 3.8 $22.33 08/31/00
Brown & Caldwell 934,380 3.6 $15.96 08/31/00
Dickinson Financial 842,832 3.3 $14.40 12/31/03
Comm. & Power Industry* 777,778 3.0 $ 7.44 03/31/03
Equinox 700,000 2.7 $23.33 02/01/21
Applied Materials 677,722 2.6 $ 6.36 06/30/00
------------- ------------
Total (10 largest) 12,598,950 48.9
Remaining 13,171,903 50.1
------------- ------------
Total/Weighted Avg. $25,770,853 100.0%
============= ============
</TABLE>
------------
* Communication & Power Industry, a subsidiary of Varian Associates, no
longer occupies the subject space.
** Several different leases with varying expirations including one which is
month-to-month.
LEASE EXPIRATION SCHEDULE--WHITEHALL POOL LOAN
<TABLE>
<CAPTION>
PERCENT OF ANNUALIZED
YEAR ENDING EXPIRING TOTAL SQUARE ANNUALIZED PERCENT OF BASE RENT PER SQUARE
DECEMBER 31, SQUARE FEET FEET BASE RENT BASE RENT FOOT
- --------------------- ------------- -------------- ------------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
1997 ................. 141,333 7.3% $ 2,103,699 8.2% $14.88
1998 ................. 363,750 18.7 4,376,430 17.0 $12.03
1999 ................. 155,828 8.0 2,361,366 9.2 $15.15
2000 ................. 483,421 24.8 5,946,857 23.1 $12.30
2001 ................. 182,263 9.4 2,810,173 10.9 $15.42
2002 ................. 102,211 5.2 1,694,873 6.6 $16.58
2003 ................. 138,518 7.1 2,070,097 8.0 $14.94
2004 ................. 126,442 6.5 1,778,589 6.9 $14.07
2005 ................. 16,899 0.9 253,310 1.0 $14.99
2006 ................. 24,394 1.3 344,459 1.3 $14.12
Thereafter ........... 61,970 3.2 2,031,000 7.9 $32.77
Vacant ............... 151,865 7.8 -- 0.0 --
------------- -------------- ------------- ------------ --------------------
Total Weighted Avg. 1,948,894 100.0% $25,770,853 100.0% $13.22
============= ============== ============= ============ ====================
</TABLE>
Appraisal. Recent appraisals performed at the time of origination by
Cushman & Wakefield determined an aggregate value for the eleven Whitehall
Properties of approximately $165,150,000. Each of the appraisers state that
the appraisal was conducted in accordance with the Uniform Standards of
Professional Practice. For a discussion of certain limitations inherent in
determining an appraised value, see "Risk Factors--The Mortgage
Loans--Limitations of Appraisals" herein.
Engineering Report. Property conditions reports on the Whitehall
Properties were completed at the time of loan origination. The engineering
reports concluded that the Whitehall Properties were generally in good
physical condition but recommended immediate physical needs of approximately
$635,690. At the origination of the Whitehall Pool Loan, a reserve of
$794,613 was established to cover the cost of repairing the identified
physical needs. As of July 11, 1997, the remaining funds in the reserve
account were $339,156.
Environmental Report. All of the Whitehall Properties were subjected to
Phase I environmental site assessments at the time of loan origination. Such
assessment recommended an operations and maintenance program for asbestos be
implemented for the Bennett Park, Hookston Square and City Center properties
to mitigate the possibility of asbestos-containing materials. Further
investigation was recommended for the One Montvale Avenue property due to the
site's prior uses as a shoe factory, a furniture factory and a gasoline
station as well as the proximity of sites listed with leaking underground
S-115
<PAGE>
storage tanks and as state hazardous waste sites. While the Phase II
environmental site assessment for the One Montvale Avenue property indicated
that no additional action of investigation was required, no assurances can be
given that a material environmental liability does not exist, see "Risk
Factors -- The Mortgage Loans--Environmental Law Considerations" herein.
Property and Asset Management. The Archon Group, an affiliate of Goldman,
Sachs & Co., is the asset manager for the Whitehall Pool Properties (the
"Whitehall Asset Manager") and is responsible for overseeing the individual
property managers and for other asset management services. The Whitehall
Borrower has agreed that at all times during the term of the Whitehall Pool
Loan it will retain an affiliate of Goldman, Sachs & Co. as its asset manager
for each of the Whitehall Properties. Any permitted transferee of the
Whitehall Borrower may retain an asset manager not affiliated with Goldman,
Sachs & Co., provided that such transferee obtains confirmation from the
Rating Agencies that the retention of such asset manager will not, in and of
itself, result in a reduction, withdrawal or qualification of any rating then
assigned to any outstanding Certificates.
The Whitehall Asset Manager has agreed that its rights under its asset
management agreement are subject and subordinate to the documents evidencing
and relating to the Whitehall Pool Loan. In addition, the Whitehall Borrower
and the Whitehall Asset Manager have agreed that the Whitehall Borrower will
not pay the Whitehall Asset Manager any fee or other sums due to the
Whitehall Asset Manager under the Whitehall Asset Management Agreement if the
Whitehall Borrower has not paid any amounts then due under the Whitehall Pool
Loan or if an event of default has occurred and is continuing under the
Whitehall Pool Loan.
As described above under "--The Properties", the Whitehall Properties are
property managed by seven different property management companies (each, a
"Property Manager"). The Property Manager receives a management fee ranging
from approximately 2.0% to 3.5% of total revenues. Without the mortgagee's
prior written consent, the Whitehall Borrower may replace a Property Manager
for two or fewer properties (other than properties managed by such manager as
of the date of the closing of the Whitehall Pool Loan), with a reputable and
experienced professional management company which has under management at the
time of its engagement leaseable square footage of the same property type at
least equal to the lesser of 1,000,000 square feet and three times the square
footage of the properties to be leased. The Whitehall Borrower may not
replace the Property Managers for three or more properties without first
obtaining a written confirmation from the Rating Agencies that the retention
of such Property Manager will not, in and of itself, result in a reduction,
withdrawal or qualification of any rating then assigned to any outstanding
Certificates.
Pursuant to the Whitehall Pool Loan, the Master Servicer will have the
right to direct the Whitehall Borrower to terminate any property management
agreement with respect to any Whitehall Property (i) upon the occurrence of
an event of default under the Whitehall Pool Loan, or (ii) in the event that
as of the last day of a calendar quarter the Whitehall Debt Service Coverage
Ratio (as defined in the Whitehall Pool Loan documents) is less than 1.25 and
the Net Operating Income (as defined in the Whitehall Pool Loan documents)
for the individual Whitehall Property in question is less than 80% of the Net
Operating Income for such Whitehall Property as of the closing of the
Whitehall Pool Loan. Pursuant to a Manager's Consent and Subordination of
Management Agreement among the related Originator, as lender, the Whitehall
Borrower and each Property Manager, each Property Manager has agreed (i) to
such termination rights of the Master Servicer, (ii) that all liens, rights
and interests owned, claimed or held by each Property Manager in and to any
of the Whitehall Properties are and will be, in all respects, subordinate and
inferior to the liens and security interests created by the Whitehall Pool
Loan; provided that such subordination shall not affect such Property
Manager's rights or remedies against the Whitehall Borrower under the
Whitehall property management agreement for nonpayment of its compensation,
(iii) that each Property Manager will not terminate the related property
management agreement without giving the Master Servicer 45 days notice and
the same rights to cure as the Whitehall Borrower, and (iv) that each
Property Manager will not amend the Whitehall property management agreement
without the Master Servicer's consent.
THE RITZ PLAZA BORROWER AND PROPERTY
The Loan. The Ritz Plaza Loan had a principal balance as of the Cut-Off
Date of approximately $62,365,309 and is secured by a first priority mortgage
lien encumbering a 40-story building with 479
S-116
<PAGE>
apartment units (consisting of 24 studio apartments, 400 1-bedroom
apartments, and 55 2-bedroom apartments), approximately 25,432 gross rentable
feet of commercial space, and a 158-car parking garage, known as The Ritz
Plaza, located at 235-237 West 48th Street, in the Borough of Manhattan,
County, City and State of New York (the "Ritz Plaza Property").
The Borrower. CS Ritz Holdings, L.P. (the "Ritz Plaza Borrower") is a
special purpose Delaware limited partnership formed solely for the purpose of
acquiring, owning, operating, maintaining, managing and selling the Ritz
Plaza Property. The Ritz Plaza Borrower has no material assets other than the
Ritz Plaza Property and related interests. The sole general partner in the
Ritz Plaza Borrower is CS Ritz Holdings Inc. (the "Ritz Plaza General
Partner"), a special purpose Delaware corporation formed for the sole purpose
of acting as the general partner of the Ritz Plaza Borrower.
There are two limited partners in the Ritz Plaza Borrower. One limited
partner, Cadim Holdings U.S., Inc., a Delaware corporation, is a wholly-owned
indirect subsidiary of Caisse de Dep|f.t et Placement du Quebec, a Quebec
public fund manager. The other limited partner is Blue Chip Holdings 48,
L.P., a New York limited partnership owned by three individual investors.
Security. The Ritz Plaza Loan is a non-recourse loan, secured only by the
interests of the Ritz Plaza Borrower in the Ritz Plaza Property and certain
related collateral (including assignments of leases and rents, an assignment
of agreements, licenses, permits and contracts and the funds in certain
accounts). The Ritz Plaza Borrower has represented that it owns good,
marketable and indefeasible fee simple title to the Ritz Plaza Property, free
and clear of all liens other than encumbrances described in the applicable
title insurance policy and other encumbrances permitted by the mortgagee
under the loan documents (the "Ritz Plaza Permitted Encumbrances"). The title
insurance policy issued upon the origination of the Ritz Plaza Loan insures
that the mortgage securing the Ritz Plaza Loan constitutes a valid and
enforceable first lien on the Ritz Plaza Property, subject to certain
exceptions and exclusions from coverage set forth in the policy.
The Property. The Ritz Plaza Property consists of a 40 story apartment
building with 479 residential apartments (consisting of 24 studios, 400
one-bedroom apartments, and 55 two-bedroom apartments) and approximately
25,432 square feet of GLA of commercial space and a 158 space parking garage.
As of June 17, 1997, the occupancy rate of the residential portion of the
Ritz Plaza Property was approximately 99% and the commercial portion of the
Ritz Plaza Property had an average annualized base rent of approximately
$1,422,168 and an occupancy rate of 100% (excluding office space occupied by
the Ritz Plaza Property Manager). The two largest commercial leases
aggregating 86.3% of the annual commercial rent at the Ritz Plaza Property
expire in 2002.
RESIDENTIAL UNITS
<TABLE>
<CAPTION>
RENT
TYPE NO. OF UNITS AVG. SQ. FT. AVG. RENT* PER SQ. FT.
- --------------------- -------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Studio ............... 24 406 $1,200 $35.47
1BR/1BA .............. 400 680 $1,925 $33.97
2BR/2BA .............. 55 1100 $3,050 $33.27
--------------
Total/Weighted Avg. 479 $34.00
==============
</TABLE>
COMMERCIAL UNITS
<TABLE>
<CAPTION>
TYPE NO. OF TENANTS TOTAL SQ. FT. RENT/SQ. FT.* ANNUAL RENT
- --------------- -------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Office/Retail . 3 25,432 $33.90 $ 863,964
Parking/Other . 3 N/A N/A 558,204
-------------- -------------
Total/Weighted
Avg. ......... 6 $1,422,168
============== =============
</TABLE>
- ------------
* Based upon appraisal
S-117
<PAGE>
Appraisal. An appraisal prepared by Koeppel Tener Real Estate Services,
Inc. ("KTR"), dated as of March 31, 1997, determined a value for the Ritz
Plaza Property of approximately $92,500,000. The Ritz Plaza appraisal states
that it was prepared in accordance with FIRREA. See "Risk Factors--The
Mortgage Loans--Limitations on Appraisals" herein.
Engineering Report. A property condition report on the Ritz Plaza Property
dated March 18, 1997 concluded that the property is in good condition and has
no immediate physical needs.
Environmental Site Assessment. A Phase I environmental site assessment
dated August 2, 1996 identified no material environmental conditions for
which further evaluation was recommended. However, there can be no assurance
that a material environmental liability does not exist. See "Risk
Factors--The Mortgage Loans--Environmental Law Considerations" herein.
421-a Exemption; Rent Stabilization. The developer of the Ritz Plaza
Property elected to receive the benefits under the City of New York's Section
421-a tax exemption program. The 421-a program applies to qualifying multiple
dwellings on eligible sites for which construction activity commenced on or
after November 29, 1985. Under the 421-a program, the Ritz Plaza Property is
exempt from a portion of the increase in real estate taxes attributable to
the development of the site for a period of ten years following the year of
completion. The Ritz Plaza Property was exempt from all real estate taxes for
the first two years, with 20% reductions in the exemption in each two-year
period thereafter. The 1997/98 tax year of the City of New York, which begins
on July 1, 1997, will be the seventh year of the Ritz Plaza Property's
participation in the 421-a program.
As a requirement of participation in the 421-a program, the Ritz Plaza
Property's residential units are subject to the New York State Rent
Stabilization Law of 1969, as amended, and the New York State Emergency
Tenant Protection Act of 1974, as amended. In addition, residential rent
increases are regulated by the appropriate governmental body (currently the
Rent Guidelines Board).
The 421-a program does not grant an exemption to the extent that the
non-residential component exceeds 12% of a property. Since 14.2% of the Ritz
Plaza Property is non-residential space, 2.2% of the exemption is not
available to the Ritz Plaza Property each year. However, the Ritz Plaza
Borrower is allowed to charge an annual supplement of 2.2% above regulated
rent increases for so long as the tax abatement remains in effect.
Property Management. The Ritz Plaza Property is managed by Knightsbridge
Management, L.P. (the "Ritz Plaza Property Manager"), an affiliate of the
partners of Blue Chip Holdings 48 L.P., a limited partner of the Ritz Plaza
Borrower, pursuant to an Asset Management Agreement (the "Ritz Plaza Property
Management Agreement"). The Ritz Plaza Property Manager is responsible for
the operation, management, maintenance, promotion and leasing of the Ritz
Plaza Property. Under the terms of the Ritz Plaza Property Management
Agreement, the Ritz Plaza Property Manager is entitled to a management fee
equal to 5% of the gross revenue of the Ritz Plaza Property during each
month. The term of the Ritz Plaza Property Management Agreement continues
until August 25, 2001, and automatically renews for successive one-year terms
unless the Ritz Plaza Borrower terminates the Ritz Plaza Property Management
Agreement by prior written notice.
The Ritz Plaza Borrower may replace the Ritz Plaza Property Manager with
another property management company approved by the Master Servicer (which
approval will not be unreasonably withheld or delayed) as to which the Ritz
Plaza Borrower has first obtained a written confirmation from the Rating
Agencies that the retention of such property manager will not in and of
itself, result in a reduction, withdrawal or qualification of any rating then
assigned to any outstanding Certificates.
Unless otherwise waived by the Master Servicer, upon the occurrence of a
"Major Default" under the Ritz Plaza Loan documents, the Ritz Plaza Borrower
shall, within five (5) Business Days after the Master Servicer's written
request, terminate the Ritz Plaza Property Management Agreement and replace
the Ritz Plaza Property Manager with a property manager meeting the criteria
specified in the preceding paragraph, on commercially reasonable terms and
conditions. Pursuant to a Manager's Consent Agreement among the related
Originator, as lender, the Ritz Plaza Borrower and the Ritz Plaza Property
Manager (the "Manager's Consent"), the Ritz Plaza Property Manager has agreed
(i) to such termination
S-118
<PAGE>
rights of the Master Servicer, (ii) that the Ritz Plaza Property Manager will
not amend the Ritz Plaza Property Management Agreement without the Master
Servicer's consent, and (iii) not to look to the Master Servicer, or to the
Ritz Plaza Borrower's interest in the Ritz Plaza Property, for payment of (x)
any termination fee due in connection therewith or (y) any accrued but unpaid
fees relating to the Ritz Plaza Property outstanding upon the effective date
of such termination.
THE MONTEHIEDRA BORROWER AND PROPERTY
The Loan. The Montehiedra Loan had a principal balance as of the Cut-Off
Date of approximately $52,579,779 and is secured by a first priority mortgage
lien encumbering a retail shopping center, known as Montehiedra Town Center,
located in the district of Rio Piedras, municipality of San Juan, Puerto Rico
(the "Montehiedra Property").
The Borrower. Vornado Montehiedra Acquisition L.P. (the "Montehiedra
Borrower") is a special purpose Delaware limited partnership formed solely
for the purpose of acquiring, owning, operating and managing the Montehiedra
Property. The Montehiedra Borrower has no material assets other than the
Montehiedra Property and related interests. The sole general partner in the
Montehiedra Borrower is Vornado Montehiedra Acquisition LLC ("Montehiedra
LLC"), a special purpose Delaware limited liability company formed for the
sole purpose of acting as the general partner of the Montehiedra Borrower.
The managing member of Montehiedra LLC is Vornado Montehiedra Inc.
("Montehiedra Inc."), a special purpose Delaware corporation formed for the
sole purpose of acting as managing member of Montehiedra LLC. The sole
limited partner in the Montehiedra Borrower is Vornado Montehiedra Holding II
L.P., a Delaware limited partnership ("Montehiedra Holding II LP") whose sole
general partner is Vornado Montehiedra Holding LLC ("Montehiedra Holding
LLC"). The sole limited partner of Montehiedra Holding II LP is Vornado
Montehiedra Holding L.P., a Delaware limited partnership ("Montehiedra
Holding L.P."), whose sole general partner is Montehiedra Holding LLC and
whose sole limited partner is Vornado Realty L.P. ("Vornado LP"), a Delaware
limited partnership. The sole general partner of Vornado LP is Vornado Realty
Trust, a Maryland real estate investment trust. All of the outstanding stock
of Montehiedra Inc. is owned by Vornado Realty Trust. Vornado Realty Trust is
a publicly traded real estate investment trust whose beneficial interests are
listed on the New York Stock Exchange.
Security. The Montehiedra Loan is a non-recourse loan, secured only by the
pledge of a bearer mortgage note and by the interests of the Montehiedra
Borrower in the Montehiedra Property and certain related collateral
(including assignments of leases and rents, an assignment of agreements,
licenses, permits and contracts and the funds in certain accounts). Puerto
Rico imposes a significant tax on the recording of any mortgage, the release
of any mortgage and any material modification of a mortgage (e.g.,
modification of the name of any party or modification of the amount of the
loan). Therefore, it is customary in Puerto Rico for property owners to sell
a property subject to an existing mortgage, for that existing mortgage to
serve as collateral for a new loan by a new lender to a new borrower and for
the note which the mortgage secures to be pledged to the new lender as
collateral for the new loan. Subject to certain limited exceptions, neither
the Montehiedra Borrower nor any of its affiliates is personally liable for
payment of the Montehiedra Loan. The Montehiedra Borrower has represented
that it owns good, marketable and indefeasible fee simple title to the
Montehiedra Property free and clear of all liens other than encumbrances
described in the applicable title insurance policies and other encumbrances
permitted by the mortgagee under the loan documents (the "Montehiedra
Permitted Encumbrances"). The title insurance policy issued upon the
origination of the Montehiedra Loan insures that the Mortgage constitutes a
valid and enforceable first lien on the Montehiedra Property, subject to
certain exceptions and exclusions from coverage set forth in the policy.
The Property. The Montehiedra Property, built in 1994, consists of
approximately 51.76 acres of land and a 525,378 square foot single-story
regional shopping center known as Montehiedra Town Center located in Rio
Piedras in the municipality of San Juan, Puerto Rico. As of May 1, 1997,
98.9% of the total GLA at the Montehiedra Property was leased (excluding
anchors, the mall store space was 97.2% leased).
S-119
<PAGE>
ANCHOR TENANTS AT MONTEHIEDRA TOWN CENTER
<TABLE>
<CAPTION>
CREDIT RATING OF ANCHOR-OWNED/ LEASE COVENANT
ANCHOR PARENT COMPANY PARENT COMPANY* GLA (SF) COLLATERAL EXPIRATION EXPIRATION**
- -------------------- ----------------- ---------------- --------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Kmart ............... Kmart Corporation Ba3 135,333 Collateral 4/30/22**** 4/18/05
Builder's Square*** Kmart Corporation Ba3 110,241 Collateral 4/30/22**** N/A
Caribbean Theaters . Not Rated 50,000 Collateral 6/30/21 N/A
Marshall's .......... TJX Companies Baa2 29,776 Collateral 1/31/10 N/A
---------
Total Anchor GLA ... 325,350
Mall Store GLA ...... 200,028
---------
Total GLA ........... 525,378
</TABLE>
- ------------
* Reflects Moody's senior unsecured long-term debt rating of the parent
company as of July 11, 1997. In certain cases where the parent company
is not the named anchor, the parent company is not the obligor under
the applicable lease or operating company.
** Date of operating covenant expiration is the expiration date of the
covenant requiring that the store be open and operating as a Kmart.
*** Builder's Square leased its space pursuant to a sub-lease from Kmart
which leases the space from the Montehiedra Borrower. On June 30, 1997,
Kmart sold its Builder's Square stores in Puerto Rico, including the
store at the Montehiedra Town Center, to Masso Expo Corp., which has
indicated its intention to continue to operate a home improvement store
on these premises. Kmart Corporation remains liable on the lease with
the Montehiedra Borrower.
**** The Kmart and Builder's Square leases have 75-year terms with
termination rights on the part of the tenant commencing in 2022.
Operating Results. Information regarding the mall store occupancy and
sales per square foot of GLA at Montehiedra Town Center is as follows:
SALES OPERATING HISTORY--MONTEHIEDRA LOAN
<TABLE>
<CAPTION>
MONTEHIEDRA TOWN CENTER 1996 SALES 1996 OCCUPANCY COST
- ----------------------------- ------------ -------------------
<S> <C> <C>
Mall Stores .................. $376.14 8.62%
Kmart ........................ $251.19 4.74%
Builder's Square (see above) N/A N/A
</TABLE>
Sales and occupancy cost figures are based solely upon information provided
by tenants who were in occupancy during the applicable 12-month period.
Builder's Square is not obligated under its lease to report sales.
LEASE EXPIRATION SCHEDULE--MONTEHIEDRA LOAN
<TABLE>
<CAPTION>
PERCENT OF ANNUALIZED
YEAR ENDING EXPIRING TOTAL SQUARE ANNUALIZED PERCENT OF BASE RENT PER
DEC 31 SQUARE FEET FEET BASE RENT BASE RENT SQUARE FOOT
- --------------------- ------------- -------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
1997 ................. 0 0.0% $ 0 0.0% $ 0.00
1998 ................. 0 0.0 0 0.0 $ 0.00
1999 ................. 450 0.1 60,000 0.8 $133.33
2000 ................. 360 0.1 50,400 0.6 $140.00
2001 ................. 180 0.0 47,400 0.6 $263.33
2002 ................. 2,060 0.4 78,350 1.0 $ 38.03
2003 ................. 800 0.2 24,000 0.3 $ 30.00
2004 ................. 25,125 4.8 616,536 7.7 $ 24.54
2005 ................. 106,196 20.2 2,488,479 31.1 $ 23.43
2006 ................. 31,065 5.9 687,789 8.6 $ 22.14
Thereafter ........... 353,542 67.3 3,944,705 49.3 $ 11.16
Vacant ............... 5,600 1.1 -- -- --
------------- -------------- ------------ ------------
Total/Weighted Avg. 525,378 100.0% $7,997,659 100.0% $ 15.22
============= ============== ============ ============
</TABLE>
S-120
<PAGE>
10 LARGEST TENANTS (BASED ON ANNUALIZED BASE RENT)--MONTEHIEDRA LOAN
<TABLE>
<CAPTION>
TENANT % OF TOTAL
TENANT PARENT COMPANY* STORE NAME GLA (SF) GLA
- ---------------------- ---------------------- --------- ------------
<S> <C> <C> <C>
Kmart Corp............. Kmart 245,574 46.7%
Builder's Square**
TJX Cos................ Marshall's 29,776 5.7
Edison Bros.***........ 5-7-9 11,495 2.2
Wild Pair
Bakers
J. Riggins
JW
Oak Tree
Giralda................ 14,615 2.8
Discovery Zone***...... Discovery Zone 10,000 1.9
Caribbean Theatres .... 50,000 9.5
Melville Corp.......... Footaction 7,944 1.5
Thom McAn Footwear****
Petrie Retail Inc.*** . Marianne 10,481 2.0
La Gran Via............ 4,360 0.8
Casa Febus............. 4,360 0.8
------------
TOTAL (10 Largest) ... 388,605 74.0
Remaining ............. 136,773 26.0
--------- ------------
Total/Weighted Avg. 525,378 100.0%
========= ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
% OF TOTAL ANNUALIZED
ANNUALIZED ANNUALIZED TENANT BASE
TENANT PARENT COMPANY* MINIMUM RENT BASE RENT RENT PER SF
- ---------------------- -------------- ------------ -------------
<S> <C> <C> <C>
Kmart Corp............. $2,716,546 33.97% $11.06
TJX Cos................ 342,424 4.28 $11.50
Edison Bros.***........ 273,025 3.41 $23.75
Giralda................ 221,070 2.76 $15.13
Discovery Zone***...... 200,000 2.50 $20.00
Caribbean Theatres .... 350,000 4.38 $ 7.00
Melville Corp.......... 158,880 1.99 $20.00
Petrie Retail Inc.*** . 146,734 1.83 $14.00
La Gran Via............ 109,000 1.36 $25.00
Casa Febus............. 104,640 1.31 $24.00
-------------- ------------
TOTAL (10 Largest) ... 4,622,319 57.80 $11.89
Remaining ............. 3,375,340 42.20 $24.68
-------------- ------------
Total/Weighted Avg. $7,997,659 100.00% $15.22
============== ============
</TABLE>
[FN]
- ------------
* In certain cases where the parent company is not the named anchor, the
parent company is not the obligor under the lease.
** Although the Builder's Square anchor space is now operated by a local
operator, Kmart remains liable for payment of all rents under the
leases.
*** These tenants/parent companies are currently in bankruptcy under the
Bankruptcy Code.
**** Thom McAn Footwear has closed, but its lease is guaranteed by Melville
Corp.
Appraisal. The Montehiedra Appraisal was prepared by Cushman & Wakefield
dated as of March 7, 1997 and determined a market value for the Montehiedra
Property of $92,000,000. The appraisers state that the appraisal was
conducted in accordance with the Uniform Standards of Professional Practice.
See "Risk Factors--The Mortgage Loans--Limitations on Appraisals" herein.
Engineering Report. A property condition report on the Montehiedra
Property was completed at the time the loan was originated. The property
condition report concluded that the Montehiedra Property was generally in
good physical condition but recommended immediate physical needs of
approximately $92,000. At the origination of the Montehiedra Loan, a reserve
of $115,000 was established to cover the cost of repairing the identified
physical needs.
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Environmental Report. The Montehiedra Property was subject to a Phase I
environmental site assessment in connection with the origination of the loan.
A peer review and re-inspection letter report clarified data regarding tenant
operations, utility services and regulatory research. Although the
environmental assessment and the peer review/re-inspection letter report did
not disclose the presence of any material adverse environmental conditions,
no assurances can be given that a material environmental liability does not
exist. See "Risk Factors--The Mortgage Loans--Environmental Law
Considerations" herein.
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Property Management. The Montehiedra Property is managed by MB
Montehiedra Management Corp. (the "Montehiedra Property Manager"), an
affiliate of Manley-Berenson Associates, Inc., pursuant to a Property
Management and Leasing Agreement (the "Montehiedra Property Management
Agreement"). The Montehiedra Property Manager is responsible for the
operation, management, maintenance, promotion and leasing of the Montehiedra
Property. Under the terms of the Montehiedra Property Management Agreement,
the Montehiedra Property Manager is entitled to a management and leasing fee
equal to 4% of the rental income for the preceding month. The term of the
Montehiedra Property Management Agreement continues until April 18, 2000, and
automatically renews for successive one-year terms unless either party
terminates at the end of a term.
Without the mortgagee's prior written consent, the Montehiedra Borrower
may replace the Montehiedra Property Manager with (i) another affiliate of
Manley-Berenson Associates, Inc., (ii) Vornado Realty Trust or an affiliate
thereof, provided that the fee payable does not exceed then current market
rates, or (iii) another property management company as to which the
Montehiedra Borrower has first obtained a written confirmation from the
Rating Agencies that the retention of such property manager will not in and
of itself, result in a reduction, withdrawal or qualification of any rating
then assigned to any outstanding Certificates.
Pursuant to the Montehiedra Loan, the Master Servicer will have the right
to direct the Montehiedra Borrower to terminate the Montehiedra Property
Management Agreement (i) upon the acceleration of the Montehiedra Loan, (ii)
upon the Montehiedra Anticipated Repayment Date, or (iii) if, for any
trailing 12-month period, the net cash flow of the Montehiedra Property falls
below 85% of the net cash flow for the Montehiedra Property for the 12-month
period ending December 31, 1996. Pursuant to a manager's consent agreement
among the related Originator, as lender, the Montehiedra Borrower and the
Montehiedra Property Manager (the "Montehiedra Manager's Consent"), the
Montehiedra Property Manager has agreed (i) to such termination rights of the
Master Servicer, (ii) that the terms and provisions of the Montehiedra
Property Management Agreement with respect to termination of the Montehiedra
Property Management Agreement shall be subordinate to the terms and
provisions of the Montehiedra Loan documents and the Montehiedra Manager's
Consent and (iii) that the Montehiedra Property Manager will not amend the
Montehiedra Property Management Agreement without the Master Servicer's
consent.
Zoning. The Montehiedra Property is located in an area that is zoned for
residential use; the Montehiedra Property is a non-conforming use for which a
zoning variance was obtained from the related planning board. The zoning
variance will remain valid in the event of a casualty and restoration and the
Montehiedra Property can be reconstructed as a retail center.
DESCRIPTION OF THE MORTGAGE LOANS
THE CADILLAC FAIRVIEW POOL LOAN
The Loan. The Cadillac Fairview Pool Loan had a principal balance as of
the Cut-Off Date of approximately $258,640,281 and is secured by first
priority mortgage liens encumbering the fee interest in eight shopping center
properties, except for a portion of one property which is a leasehold
interest, located in Delaware, Louisiana, New York, North Carolina, Georgia
and Mississippi (the "Cadillac Fairview Properties"). Two of the Cadillac
Fairview Properties are located adjacent to each other and are owned by a
single Cadillac Fairview Borrower. The mortgages encumbering the Cadillac
Fairview Properties are cross-collateralized and cross-defaulted.
Payment Terms. The Cadillac Fairview Pool Loan was originated as of
November 26, 1996. The Cadillac Fairview Pool Loan matures on November 26,
2026 (the "Cadillac Fairview Maturity Date") and bears interest at a fixed
rate per annum equal to 7.935% (the "Cadillac Fairview Initial Interest
Rate") through and including December 10, 2003. From and after December 11,
2003 (the "Cadillac Fairview Anticipated Repayment Date"), the Cadillac
Fairview Pool Loan will bear interest at a fixed rate per annum equal to the
greater of (i) 9.935% and (ii) the yield as of the Cadillac Fairview
Anticipated Repayment Date, calculated by linear interpolation of the then
current yields of U.S. Treasury constant
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maturities, with maturity dates of seven years plus 2% (the "Cadillac
Fairview Revised Interest Rate"). Interest on the Cadillac Fairview Pool Loan
is calculated based on the actual number of days elapsed and a 360-day year.
As described below, if the Cadillac Fairview Borrowers do not prepay the
Cadillac Fairview Pool Loan on the Cadillac Fairview Anticipated Repayment
Date, the Cadillac Fairview Borrowers will be required to pay interest at the
Cadillac Fairview Initial Interest Rate (together with principal, as
described below). The interest accrued at the excess of the Cadillac Fairview
Revised Interest Rate over the Cadillac Fairview Initial Interest Rate will
be deferred, and will not be paid until after the principal balance of the
Cadillac Fairview Pool Loan has been reduced to zero. Amounts so deferred
will, to the extent permitted by applicable law, accrue interest at the
Cadillac Fairview Revised Interest Rate (such accrued and deferred interest
and interest thereon at the Cadillac Fairview Revised Interest Rate, the
"Cadillac Fairview Excess Interest").
The Cadillac Fairview Pool Loan requires monthly payments (the "Cadillac
Fairview Monthly Debt Service Payment Amount") of principal and interest of
$1,915,988 each (based on a 30-year amortization schedule and the Cadillac
Fairview Initial Interest Rate). The Due Date for each installment of the
Cadillac Fairview Monthly Debt Service Payment Amount is the 11th day of each
calendar month or, if in any month the 11th day is not a business day, then
the Due Date for that month will be the immediately preceding business day.
Payment of the balance of the principal, if any, together with all accrued
and unpaid interest is required on the Cadillac Fairview Maturity Date.
Commencing on the Cadillac Fairview Anticipated Repayment Date, in addition
to the Cadillac Fairview Monthly Debt Service Payment Amount, the Cadillac
Fairview Borrowers are required to apply 100% of the Cadillac Fairview Excess
Cash Flow (as defined below) for the month preceding the month in which the
Due Date occurs in the following order of priority (a) to the outstanding
principal balance until the Cadillac Fairview Pool Loan has been paid in full
and (b) to the Cadillac Fairview Excess Interest. "Cadillac Fairview Excess
Cash Flow" means the amounts held as collected funds in the deposit account
maintained pursuant to the terms of the loan agreement after the application
of funds (a) to the amounts required to be paid into the tax and insurance
escrow fund as described below under "--Reserves", (b) to the Cadillac
Fairview Monthly Debt Service Payment Amount, (c) to the amounts required to
pay ground rent, if any, (d) to pay the Cadillac Fairview Borrowers' budgeted
operating expenses, (e) to the amounts required to be paid into the leasing
reserve fund described below under "--Reserves", (f) to the amounts required
to be paid into the capital reserve account described below under
"--Reserves", and (g) to pay approved extraordinary capital expenditures. The
scheduled principal balance of the Cadillac Fairview Pool Loan as of the
Cadillac Fairview Anticipated Repayment Date will be approximately
$240,479,577.
After the occurrence and during the continuance of an event of default, to
the extent permitted by applicable law, the entire outstanding principal
balance of the Cadillac Fairview Pool Loan along with due and unpaid interest
thereon will bear interest at a per annum default rate equal to the lesser of
(a) the maximum rate permitted by applicable law and (b) the greater of (x)
5% above the Cadillac Fairview Initial Interest Rate or the Cadillac Fairview
Revised Interest Rate, as applicable, and (y) the prime rate from time to
time as set forth in The Wall Street Journal.
Prepayment. Voluntary prepayment is prohibited under the Cadillac Fairview
Pool Loan until the Due Date that is immediately prior to the Cadillac
Fairview Anticipated Repayment Date, except in connection with certain
casualty or condemnation events. Thereafter, the Cadillac Fairview Pool Loan
may be voluntarily prepaid in whole or in part on any Due Date without
payment of a yield maintenance charge or prepayment premium.
If all or any part of the principal amount of the Cadillac Fairview Pool
Loan is prepaid upon acceleration of the Cadillac Fairview Pool Loan
following the occurrence of an event of default prior to the Cadillac
Fairview Anticipated Repayment Date, the Cadillac Fairview Borrowers will be
required to make a yield maintenance payment in an amount equal to the
excess, if any, of (i) the sum of (A) the aggregate respective present values
of all remaining scheduled interest payments in respect of the Cadillac
Fairview Pool Loan (or the portion of all such interest payments
corresponding to the portion of the principal of the Cadillac Fairview Pool
Loan to be prepaid upon acceleration) for the period from the date of such
prepayment to the Cadillac Fairview Anticipated Repayment Date, discounted
monthly at a rate equal to a specified treasury constant yield and based on a
360-day year of twelve 30-day months
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and (B) the aggregate respective present values of all scheduled principal
payments in respect of the Cadillac Fairview Pool Loan (or the then unpaid
portion thereof to be prepaid upon acceleration) assuming such amount is paid
in full on the Cadillac Fairview Anticipated Repayment Date, discounted
monthly at a rate equal to the specified treasury constant yield and based on
a 360-day year of twelve 30-day months over (ii) the then current outstanding
principal amount of the Cadillac Fairview Pool Loan (or the then unpaid
portion thereof to be prepaid upon acceleration).
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of a Mortgaged Property under the
Cadillac Fairview Pool Loan, the Master Servicer will be entitled, at its
option, to apply such proceeds to prepay the Cadillac Fairview Pool Loan, as
described below under "--Casualty and Condemnation". No prepayment premium or
penalty will be payable upon any mandatory prepayment of the Cadillac
Fairview Pool Loan in connection with casualty or condemnation unless an
event of default has occurred and is continuing, in which case the Cadillac
Fairview Borrowers will be required to pay a yield maintenance payment
calculated in the manner described above.
The Master Servicer may apply certain amounts to the prepayment of the
Cadillac Fairview Pool Loan upon the occurrence of an event of a default.
Release in Exchange for Substitute Collateral. Each of the Cadillac
Fairview Borrowers is permitted on any date after the second anniversary of
the Closing Date to defease all or any portion of the Cadillac Fairview Pool
Loan applicable to it, provided that, among other conditions, the applicable
Cadillac Fairview Borrower gives the Master Servicer at least thirty days'
prior written notice of the date of such defeasance (the "Cadillac Fairview
Defeasance Date"), and provided further that the Cadillac Fairview Borrower
pays on the Cadillac Fairview Defeasance Date (i) all accrued and unpaid
interest on the Cadillac Fairview Pool Loan to but not including such date
(and if the Cadillac Fairview Defeasance Date is not a Due Date, the Cadillac
Fairview Defeasance Deposit (as defined below) will take into account the
interest that would have accrued on the Cadillac Fairview Pool Loan to but
not including the next Due Date), and (ii) all other sums then due under the
Cadillac Fairview Pool Loan and the related loan documents, (iii) the
Cadillac Fairview Defeasance Deposit and (iv) all reasonable costs and
expenses of the Master Servicer incurred in connection with the defeasance.
In addition, the applicable Cadillac Fairview Borrower will be required to
deliver to the Master Servicer among other things (a) a security agreement
granting the Trustee a first priority lien on the Cadillac Fairview
Defeasance Deposit and the U.S. Treasury obligations purchased with the
Cadillac Fairview Defeasance Deposit, (b) an opinion of counsel for the
Cadillac Fairview Borrower in form satisfactory to the Master Servicer
stating, among other things, that the Trustee has a perfected security
interest in the noncallable U.S. Treasury obligations purchased with the
Cadillac Fairview Defeasance Deposit, (c) a confirmation, in form and
substance reasonably satisfactory to the Master Servicer, from a "Big Six"
independent certified public accounting firm, that the Cadillac Fairview
Defeasance Deposit is sufficient to pay all scheduled payments due from the
Cadillac Fairview Borrower under the Cadillac Fairview Pool Loan in
connection with the proposed defeasance and (d) such other certificates,
documents or instruments as the Master Servicer may reasonably request.
"Cadillac Fairview Defeasance Deposit" shall mean an amount equal to the
sum of (i) with respect to a total defeasance, all costs and expenses
(including the purchase price) incurred or to be incurred in the purchase of
noncallable U.S. Treasury obligations necessary to provide payments on or
prior to, but as close as possible to, all successive Due Dates after the
Cadillac Fairview Defeasance Date and through and including the Cadillac
Fairview Anticipated Repayment Date for the entire outstanding aggregate
principal amount of the Cadillac Fairview Pool Loan (including the
outstanding principal balance of the Cadillac Fairview Pool Loan on the
Cadillac Fairview Anticipated Repayment Date), and in amounts equal to the
debt service due on such dates; (ii) with respect to a partial defeasance and
the release of an individual property, (A) the sum of (x) the remaining
outstanding principal amount of the note (other than defeased notes relating
thereto) secured by such individual Cadillac Fairview Property (the "Cadillac
Fairview Base Amount") and (y) a portion of the remaining aggregate
outstanding principal amount of all of the other notes made by the Cadillac
Fairview Borrowers (subject to the requirement that the note made by the
Cadillac Fairview Borrower that owns the Galleria at White Plains will not be
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counted for this purpose until the aggregate principal amount of the Cadillac
Fairview Pool Loan is $70,000,000 or less) equal to the difference between
the Cadillac Fairview Release Amount (as defined below) for such individual
property and the Cadillac Fairview Base Amount plus (B) without duplication
all costs and expenses (including the purchase price) incurred or to be
incurred in the purchase of noncallable U.S. Treasury obligations necessary
to provide payments on or prior to, but as close as possible to, all
successive Due Dates after the Cadillac Fairview Defeasance Date and through
and including the Cadillac Fairview Anticipated Repayment Date, for the
portion of the outstanding aggregate principal balance of the Cadillac
Fairview Pool Loan being defeased (including the outstanding principal
balance of such defeased portion on the Cadillac Fairview Anticipated
Repayment Date) and in amounts equal to the debt service due on such dates
with respect to such defeased portion of the Cadillac Fairview Pool Loan; and
(iii) in all cases, any revenue, documentary stamp or intangible taxes or any
other tax or charge due in connection with the transfer of one or more of the
notes, the creation of one or more defeased notes and undefeased notes, if
applicable, any transfer of one or more defeased notes or otherwise required
to satisfy the terms of the Cadillac Fairview Pool Loan.
Upon receipt of the Cadillac Fairview Defeasance Deposit, the Master
Servicer, using the Cadillac Fairview Defeasance Deposit, will purchase
noncallable U.S. Treasury obligations on behalf of the applicable Cadillac
Fairview Borrower and, in the case of a defeasance in whole, such U.S.
Treasury obligations will serve as the sole collateral for the payments of
the amounts due under the Cadillac Fairview Pool Loan. Upon a deposit of U.S.
Treasury obligations, the applicable Cadillac Fairview Borrower will have the
right to assign the obligation to make payments under the Cadillac Fairview
Pool Loan with respect to the principal amount of the Cadillac Fairview Pool
Loan that has been defeased to an entity designated by the Master
Servicer. If the applicable Cadillac Fairview Borrower does assign such
obligations, the Master Servicer will cause such obligations to be assumed by
a special-purpose bankruptcy-remote entity.
In connection with the defeasance of the Cadillac Fairview Pool Loan, the
applicable Cadillac Fairview Borrower will be permitted to obtain the release
of one or more of the Cadillac Fairview Properties from the lien of the
related Mortgage, provided that no event of default exists and subject to the
further conditions that (a) if the defeasance is in connection with a release
of less than all of the Cadillac Fairview Properties, the Cadillac Fairview
Borrower provides (i) evidence satisfactory to the Master Servicer that
following such release the Cadillac Fairview Debt Service Coverage Ratio with
respect to the remaining Cadillac Fairview Properties will not be less than
the greater of (A) the Cadillac Fairview Debt Service Coverage Ratio for the
twelve months immediately preceding the proposed release and (B) the Cadillac
Fairview Debt Service Coverage Ratio as of the closing of the Cadillac
Fairview Pool Loan and (b) the Cadillac Fairview Borrower defeases a
principal portion of the Cadillac Fairview Pool Loan equal to (i) the
Cadillac Fairview Release Amount of the Cadillac Fairview Property being
released in the case of a release of less than all of the Cadillac Fairview
Properties or (ii) an amount equal to the entire principal balance of the
Cadillac Fairview Pool Loan for a full defeasance in the case of the release
of all of the Cadillac Fairview Properties.
"Cadillac Fairview Debt Service Coverage Ratio" means, as of any date, the
quotient obtained by dividing net operating income for the twelve-month
period immediately preceding, or following, as applicable, such date by the
greater of (x) aggregate interest and principal payments actually due and
payable on the Cadillac Fairview Pool Loan during such twelve-month period
and (y) interest and principal payments on the Cadillac Fairview Pool Loan
during such period assuming a loan constant comprised of interest and
principal of 9.50%.
"Cadillac Fairview Allocated Loan Amount" means, with respect to each
Cadillac Fairview Property, the portion of the principal amount of the
Cadillac Fairview Pool Loan allocated to each such Cadillac Fairview Property
agreed upon by GSMC and the Cadillac Fairview Borrowers and determined as
described under the definition of "Allocated Loan Amount" set forth above
under "Mortgage Pool Characteristics--Certain Characteristics of the Mortgage
Loans".
"Cadillac Fairview Release Amount", with respect to a specified individual
Cadillac Fairview Property, shall mean an amount equal to the excess of (i)
150% of the Cadillac Fairview Allocated Loan
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Amount as of the closing of the Cadillac Fairview Pool Loan, in the case of
Northpark Mall, the Esplanade Mall and the Galleria at White Plains and 125%
of the Cadillac Fairview Allocated Loan Amount for any other Cadillac
Fairview Property over (ii) the scheduled payments of principal made under
the Cadillac Fairview Pool Loan in respect of the Cadillac Fairview Pool Loan
allocated to such individual Cadillac Fairview Property (based on the
relative Cadillac Fairview Allocated Loan Amounts for all of the individual
Cadillac Fairview Properties); provided that in no event shall the Cadillac
Fairview Release Amount be greater than the then outstanding principal amount
of the Cadillac Fairview Pool Loan.
Alteration/Expansion. Except upon compliance with certain conditions set
forth in the loan documents, the Cadillac Fairview Borrowers are prohibited
from making or permitting any demolition, alteration, installation,
improvement or decoration to any individual Cadillac Fairview Property or any
part thereof or expanding or reducing any such property or the improvements
thereon.
Reserves. Pursuant to the terms of the Cadillac Fairview Pool Loan, the
mortgagee of the Cadillac Fairview Pool Loan has established (i) a leasing
reserve account to cover the cost of tenant improvement expenses and leasing
commissions incurred by the Cadillac Fairview Borrowers, which is to be
funded from cash flow in equal amounts of approximately $140,166 per month
(subject to reduction in connection with the release of a Cadillac Fairview
Property), (ii) a capital reserve account to cover the cost of routine
capital improvements (excluding tenant improvements and leasing commissions
and excluding the costs, associated with certain deferred maintenance items
identified at the time of the funding of the Cadillac Fairview Pool Loan), to
be funded from cash flow in equal amounts of approximately $68,166 per month
(subject to reduction in connection with the release of any Cadillac Fairview
Property), (iii) a tax and insurance account to be funded monthly from funds
available in the deposit account in an amount equal to 1/12th of the
aggregate insurance premiums and certain taxes that the Master Servicer
reasonably estimates will be payable in the next ensuing 12 months, (iv) a
capital renovation reserve account in the amount of $3,943,103 for the
payment of the cost of capital renovations at certain Cadillac Fairview
Properties, (v) a tenant inducement reserve account in the amount of
$5,000,000 to fund certain required payments to Macy's in connection with its
lease at the Galleria at White Plains, all of the funds in such account
having been previously disbursed, and (vi) a free rent reserve account in the
amount of $2,233,850 to fund the amount of free rent owed to all tenants at
all of the Cadillac Fairview Properties under leases signed as of the closing
of the Cadillac Fairview Pool Loan for the period from such closing date to
the Cadillac Fairview Anticipated Repayment Date. In addition, a deferred
maintenance reserve fund of $2,137,468 was established at closing of the
Cadillac Fairview Pool Loan to cover the cost of certain deferred maintenance
conditions existing at that time. The amount in the free rent reserve
referred to in clause (vi) above will be adjusted upon the closing of the
offering of the Certificates, to an amount equal to the free rent owed to all
tenants at all of the Cadillac Fairview Properties under leases signed as of
the closing of the offering of the Certificates for the period from such
closing to the Cadillac Fairview Anticipated Repayment Date. As of June 18,
1997, $3,943,103 remains in the capital renovation reserve account referred
to in clause (iv) above, and $2,137,468 remains in the deferred maintenance
reserve fund referred to above.
On July 1, 1997, the Cadillac Fairview Borrower, which owns the North
DeKalb Mall, purchased the store previously owned and occupied by Mervyn's at
the North DeKalb Mall and established a reserve fund with the mortgagee in
the amount of $3,000,000 to fund certain costs of remodelling and refixturing
such store.
In connection with the transaction at the Shannon Southpark Mall whereby
the store previously occupied by Mervyn's has been sold to JC Penney, the
Cadillac Fairview Borrower which owns the North DeKalb Mall has agreed that
(i) if a JC Penney store is not open for business by April 15, 1998 (subject
to extension due to force majeure) or (ii) if prior to the satisfaction of
the condition set forth in (i) above, an anchor store (other than Mervyn's)
closes its store or makes a public statement of its intention to close its
store (each, a "Cadillac Fairview Trigger Event"), then the mortgagee has the
right to require the relevant Cadillac Fairview Borrower to deposit with the
mortgagee on each Due Date, as additional collateral for the Cadillac
Fairview Pool Loan, an amount equal to the Shannon Monthly Deposit. The
"Shannon Monthly Deposit" for any Due Date is the lesser of (A)(x) the
outstanding principal balance of the Note secured by the Shannon Southpark
Mall (the "Shannon Note") as of the date of the Cadillac Fairview Trigger
Event divided by the number of Due Dates to and including the Cadillac
Fairview
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Anticipated Repayment Date minus (y) the amount of scheduled amortization due
and payable in respect of the Shannon Note on such Due Date (the amount in
this clause (A) being the "Base Amount") and (B) the Cadillac Fairview Excess
Cash Flow for the month preceding the month in which the Due Date occurs;
provided that if on any Due Date the amount so deposited is less than the
Base Amount, then the Base Amount for the next Due Date will be increased by
any such deficiency.
Lockbox. The Cadillac Fairview Borrowers are required to direct all
tenants at the Cadillac Fairview Properties to make all checks in respect of
sums due to the Cadillac Fairview Borrowers under the leases and operating
agreements in effect at the Cadillac Fairview Properties payable directly to
a deposit account or a property-level sweep account, in each case to be
maintained by, in the name of and under the sole dominion and control of the
Master Servicer and to deliver all checks and payments directly to the Master
Servicer or its agent.
On each Due Date, provided no default or event of default has occurred and
is continuing, the Master Servicer will distribute funds from the deposit
account in the following order: (a) to the tax and insurance escrow account,
(b) to fund the Cadillac Fairview Monthly Debt Service Payment Amount, (c) to
pay ground rent, if any, for the ground leased Cadillac Fairview Property,
(d) to the Cadillac Fairview Borrowers, an amount equal to the operating
expenses approved by the Master Servicer in the annual budget for the month
immediately prior to the month in which such Due Date occurs (or up to 105%
of such budgeted operating expenses on a cumulative year-to-date basis) and
certain costs related to merchant associations (provided that the Cadillac
Fairview Borrowers shall have delivered to the Master Servicer an officer's
certificate certifying that there is not outstanding for more than 60 days
any amounts claimed by any creditor to be due and owing from the Cadillac
Fairview Borrowers (except for claims any Cadillac Fairview Borrower is in
good faith contesting), and that the amounts disbursed to the Cadillac
Fairview Borrowers pursuant to this clause (d) shall be used by the Cadillac
Fairview Borrowers solely to pay their creditors for costs and expenses
incurred to such date, (e) to the leasing reserve account, the amount of
$140,166 (or such lesser amount as may be applicable), (f) to the capital
reserve account, the amount of $68,166 (or such lesser amount as may be
applicable), (g) from and after the Cadillac Fairview Anticipated Repayment
Date, to pay the costs of extraordinary capital expenditures approved in
writing by the Master Servicer, (h) from and after the Cadillac Fairview
Anticipated Repayment Date, to prepay the notes evidencing the Cadillac
Fairview Pool Loan on a pro rata basis, until the aggregate principal amount
of the notes has been paid in full, (i) from and after the Cadillac Fairview
Anticipated Repayment Date, to pay the Cadillac Fairview Excess Interest with
respect to the notes, (j) to pay the interest accrued and unpaid under the
notes at the excess of the Default Rate over the Cadillac Fairview Initial
Interest Rate or the Cadillac Fairview Revised Interest Rate, as applicable,
and (k) if no event of default has occurred, to the Cadillac Fairview
Borrowers or their designees, any funds remaining in the deposit account;
provided that in the Master Servicer's sole discretion, the Master Servicer
may permit a distribution under this clause (k) notwithstanding the
occurrence of an event of default.
Sale of the Properties or Beneficial Interests in the Cadillac Fairview
Borrowers, Cadillac Fairview U.S. or CFUS Holding. So long as no event of
default occurs and is continuing and subject to the requirements and
conditions described below, the Cadillac Fairview Borrowers may sell, assign,
convey, transfer or otherwise dispose of legal or equitable title to or any
interest in all of the Cadillac Fairview Properties (but not less than all of
the Cadillac Fairview Properties) only collectively, in a single transaction,
and the Cadillac Fairview Borrowers may permit or suffer any owner of a
direct or indirect beneficial interest in any Cadillac Fairview Borrower, or
direct interest in Cadillac Fairview U.S. Inc., a Delaware corporation
("Cadillac Fairview U.S.") or CFUS Holding Corporation, a Delaware
corporation ("CFUS Holding") to transfer such interest only if, after giving
effect to the proposed transaction, (A) the Cadillac Fairview Properties will
be owned directly by one or more single purpose entities, which shall have
assumed in writing and agreed to comply with all the terms, covenants and
conditions set forth in the loan agreement for the Cadillac Fairview Pool
Loan, (B) there shall exist a Qualified Resultant Owner (as defined below) or
Master Servicer shall receive a written confirmation from the Rating Agencies
to the effect that such transfer will not result in a downgrade, withdrawal
or qualification of their respective ratings of the Certificates in effect
immediately prior to such transfer, (C) the manager or managers of the
Cadillac Fairview Properties meets the requirements for managers under the
loan agreement for the Cadillac Fairview Pool Loan, and (D) no event of
default will occur as a result of such transaction.
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For these purposes, "Qualified Resultant Owner" means (i) any one or more
Cadillac Fairview Permitted Owners which own, individually or collectively,
at least a 51% beneficial interest in and control Cadillac Fairview U.S.,
CFUS Holding or each of the Cadillac Fairview Borrowers or (ii) any one of
the specified acceptable managers under the loan agreement for the Cadillac
Fairview Pool Loan which owns at least a 50% direct or indirect beneficial
interest in and has control or veto control over Cadillac Fairview U.S., CFUS
Holding or each of the Cadillac Fairview Borrowers.
As used herein, a "Cadillac Fairview Permitted Owner" means either (I)
certain specified acceptable managers under the loan agreement for the
Cadillac Fairview Pool Loan or any Affiliate of such managers or (II) any
other person that meets all of the following conditions: (1) such person's
long-term unsecured debt is rated at least equal to the then highest rating
assigned to any of the Certificates by each of the Rating Agencies; (2) such
person has a current net worth of at least $250 million and owns total real
estate assets of at least $500 million, in each case exclusive of the
Cadillac Fairview Properties (or, in the case of a pension fund adviser,
controls $1 billion of real estate assets); (3) such person is, or is
controlled by, either a pension fund, a pension fund adviser, an insurance
company, a domestic bank (with total assets of at least $45 billion), or a
person whose long-term unsecured debt is rated at least investment grade by
each of the Rating Agencies; and (4) such person controls at least ten
regional malls containing (in the aggregate) at least six million square feet
of leaseable space.
For these purposes, "control" means having (either directly or indirectly)
primary responsibility to make all material decisions with respect to the
operation, management and disposition of another person's real estate assets
(including decisions regarding sales, acquisitions and financings) rather
than a beneficial ownership requirement, and without being compromised by the
fact that responsibility for such day-to-day operating and management
functions or leasing activities as are ordinarily handled by a property
manager has been delegated by such controlling person pursuant to an
agreement in writing.
For these purposes, "veto control" means having (either directly or
indirectly) the ability to veto all material decisions with respect to the
operation, management and disposition of another person's real estate assets
(including decisions regarding sales, acquisitions and financings) rather
than a beneficial ownership requirement, and without being compromised by the
fact that responsibility for such day-to-day operating and management
functions or leasing activities as are ordinarily handled by a property
manager has been delegated by such veto controlling person pursuant to an
agreement in writing.
Six of the Cadillac Fairview Borrowers are approximately 99% indirectly
owned by Cadillac Fairview U.S. Inc., a Delaware corporation ("Cadillac
Fairview U.S."). One Cadillac Fairview Borrower is indirectly majority owned
and controlled by Cadillac Fairview U.S. and CFUS Holding Corporation, a
Delaware corporation ("CFUS Holding"). Cadillac Fairview U.S. is directly and
indirectly owned by CFUS Holding and CFCL. CFCL is a wholly owned subsidiary
of Cadillac Fairview Inc., a Delaware corporation ("CF Inc."), and CF Inc. is
a wholly owned affiliate or subsidiary of Cadillac Fairview Corporation, an
Ontario corporation.
Pledge or Encumbrance of Beneficial Interests in CFCL. Any owner of a
beneficial interest in CFCL may pledge or otherwise encumber such interest
(and any transfer that might arise as a result of the foreclosure of such
pledge or encumbrance shall be a permitted transfer hereunder); provided,
however, that prior to September 1, 1997, Ontario Teachers' Pension Plan
Board ("Ontario Teachers"), BRE/CF Equity Acquisition L.P. ("BRE/CF"),
Blackstone Real Estate Partners II L.P. ("Blackstone II"), Blackstone Real
Estate Partners IV L.P. ("Blackstone IV"), Blackstone Re Capital Partners II
L.P. ("Blackstone Capital"), Blackstone CF Equity Acquisition L.P.
("Blackstone Equity"), Whitehall Street Real Estate Limited Partnership V
("Whitehall V") and Whitehall Street Real Estate Limited Partnership VI
("Whitehall VI") may pledge any beneficial interest in CFCL owned by such
person only to an institutional lender.
Transfers of Beneficial Interests in Cadillac Fairview Inc., Cadillac
Fairview Corporation or CFCL. Transfers of direct or indirect beneficial
ownership interests in Cadillac Fairview Inc., Cadillac Fairview Corporation
and CFCL, or any of them, shall be permitted transfers if, after giving
effect to such
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transfer, (A) the manager or managers of the Cadillac Fairview Properties
meets the requirements for managers under the Cadillac Fairview Loan
agreement, (B) no event of default shall have occurred and be continuing or
will occur as a result of such transfer and (C) at least one of the following
is true:
(1) one or more members of the Company Control Group (as defined below),
directly or indirectly, own or have control or veto control over the
Cadillac Fairview Borrowers;
(2) the transferee is directly or indirectly owned or controlled (or veto
controlled) by a publicly traded entity that is owned at least 10%
directly or indirectly by one or more members of the Company Control
Group;
(3) the Master Servicer receives a written confirmation from the Rating
Agencies to the effect that such transfer to such prospective transferee
will not result in a downgrade, withdrawal or qualification of their
respective ratings of the Certificates in effect immediately prior to such
transfer;
(4) the transferee is or is controlled by a specified acceptable manager
under the Cadillac Fairview Loan Agreement; or
(5) the transferee is owned or controlled by two or more entities
described in any of the clauses (1) through (4) above.
For these purposes, "Company Control Group" shall mean one or more of (i)
Ontario Teachers, (ii) BRE/CF, (iii) Blackstone II, (iv) Blackstone IV, (v)
Blackstone Capital, (vi) Blackstone Equity, (vii) Whitehall V, (viii)
Whitehall VI, (ix) after August 31, 1997, CFCL or (x) any person that
controls any of the Persons specified in clauses (i) through (ix) above. Also
for these purposes, the terms "control" and "veto control" have the meanings
specified above under "--Sale of the Properties or Beneficial Interests in
the Cadillac Fairview Borrowers, Cadillac Fairview U.S. or CFUS Holding".
Insurance. The Cadillac Fairview Borrowers are required to maintain, at
their sole cost and expense, for the mutual benefit of the Cadillac Fairview
Borrowers and the Trustee, policies of insurance against loss or damage by
standard perils included within the classification "All Risks of Physical
Loss", including earthquake damage. Such insurance must be maintained in an
aggregate amount equal to the then full replacement cost of the Cadillac
Fairview Properties and related assets without deduction for physical
depreciation and must have deductibles no greater than the greater of (x)
five percent of Net Operating Income for such individual Cadillac Fairview
Property or Properties for the twelve month period immediately preceding
November 1, 1996 and (y) $100,000. Each Cadillac Fairview Borrower must also
maintain the following policies of insurance: (a) flood insurance if any part
of an individual Cadillac Fairview Property is located in an area identified
by the Federal Emergency Management Agency as an area federally designated a
"100 year flood plain" and flood insurance is generally available at
reasonable premiums and in such amounts as generally are required by
institutional lenders for similar properties (or, if not so available from a
private carrier, from the federal government at commercially reasonable
premiums to the extent available), in either case, in an amount at least
equal to the lesser of the applicable Cadillac Fairview Allocated Loan Amount
or the maximum limit of coverage available under said program with respect to
such Cadillac Fairview Property; (b) comprehensive general liability
insurance, including broad form property damage, blanket contractual and
personal injuries coverages and containing minimum limits per occurrence of
$10,000,000 for any policy year as well as at least $30,000,000 excess and/or
umbrella liability insurance (provided that if the Cadillac Fairview
Borrowers maintain a blanket liability policy such requirement will be
satisfied if such policy contains no less than a $40,000,000 limit per
occurrence); (c) rental loss and/or business interruption insurance in an
amount equal to the greater of estimated gross revenues from operations from
the Cadillac Fairview Properties and projected operating expenses needed to
maintain and operate the Cadillac Fairview Properties, in each case for two
years; (d) insurance against loss or damage from leakage of sprinkler systems
and explosion of steam boilers, air conditioning equipment and high pressure
piping, and against loss of occupancy or use arising from any such breakdown,
in such amounts as are generally available at reasonable premiums and are
generally required by institutional lenders for properties comparable to each
of the Cadillac Fairview Properties; (e) worker's compensation insurance, as
and to the extent required by applicable law or regulation; (f) during any
period of repair or restoration, builder's
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"all risk" insurance in an amount not less than full insurable value of the
applicable Cadillac Fairview Property; (g) coverage to compensate for the
cost of demolition and the increased cost of construction for any Cadillac
Fairview Property in commercially reasonable amounts as requested by the
Master Servicer; and (h) such other insurance as may from time to time be
reasonably required by the Master Servicer. The Cadillac Fairview Pool Loan
generally requires the Cadillac Fairview Borrowers to obtain the insurance
described above from insurers having claims paying abilities rated "AA" or
better by the Rating Agencies.
Casualty and Condemnation. In the event of a casualty where the loss is in
an aggregate amount less than 30% of the Cadillac Fairview Allocated Loan
Amount for the affected individual Cadillac Fairview Property or a
condemnation where the loss is in an aggregate amount less than 15% of the
Cadillac Fairview Allocated Loan Amount for the affected individual Cadillac
Fairview Property, the Master Servicer shall permit the application of the
insurance and condemnation proceeds (after reimbursement of any reasonable
out-of-pocket expenses incurred by Master Servicer in collecting the
insurance proceeds) to pay, or to reimburse the applicable Cadillac Fairview
Borrower, for the cost of restoring, repairing, replacing or rebuilding the
affected individual Cadillac Fairview Property, in the manner required by the
Cadillac Fairview Loan Agreement, provided and on the condition that, no
default or event of default shall have occurred and be then continuing and,
in the reasonable judgment of the Master Servicer: (i) the individual
Cadillac Fairview Property can be restored to an economic unit not less
valuable (taking into account the effect of the termination of any leases or
operating agreements and the proceeds of any rental loss or business
interruption insurance which the Cadillac Fairview Borrower receives or is
entitled to receive, in each case, due to such casualty or condemnation) and
not less useful than the same was prior to the casualty or condemnation, (ii)
the individual Cadillac Fairview Property after such restoration will
adequately secure the outstanding balance of the Cadillac Fairview Allocated
Loan Amount for such Cadillac Fairview Property, (iii) the restoration can be
completed by the earliest to occur of: (A) the 180th day following the
receipt of the proceeds (or if earlier, the 365th day after the casualty or
condemnation, as applicable), (B) the 180th day prior to the Cadillac
Fairview Maturity Date, and (C) with respect to a casualty the expiration of
the payment period on the rental-loss insurance coverage in respect of such
casualty, and (iv) during the period of the restoration, the sum of (A)
income derived from the affected individual Cadillac Fairview Property, plus
(B) proceeds of rent loss insurance or business interruption insurance, if
any, payable will equal or exceed 105% of the sum of (1) operating expenses
for such individual Cadillac Fairview Property and (2) the debt service in
respect of the Allocated Loan Amount for such individual Cadillac Fairview
Property.
If any of the foregoing conditions are not satisfied, then, unless the
Master Servicer shall otherwise elect, at its sole option, the proceeds shall
be applied to the prepayment of the Cadillac Fairview Pool Loan in accordance
with the terms described below, and the applicable Cadillac Fairview Borrower
shall be entitled to receive a release of the lien affecting such individual
Cadillac Fairview Property in accordance with and subject to the terms of the
Cadillac Fairview Loan Agreement (in which event such proceeds shall be
applied against the Cadillac Fairview Release Amount for such individual
Cadillac Fairview Property).
In the event of a casualty where the loss is in an aggregate amount equal
to or more than 30% of the Allocated Loan Amount for the affected individual
Cadillac Fairview Property or a condemnation where the loss is in an
aggregate amount equal to or more than 15% of the Allocated Loan Amount for
the affected individual Cadillac Fairview Property then the Master Servicer
has the option to apply the proceeds to the prepayment of the Cadillac
Fairview Pool Loan in accordance with the terms described below (and the
applicable Cadillac Fairview Borrower shall be entitled to receive a release
of the lien affecting such individual Cadillac Fairview Property in
accordance with the terms of the Cadillac Fairview Loan Agreement, in which
event such proceeds shall be applied against the Cadillac Fairview Release
Amount for such individual Cadillac Fairview Property) or to reimburse the
applicable Cadillac Fairview Borrower for the cost of any restoration in the
manner described below; provided, however, that if (x) an operating
agreement, any supplemental agreement or a lease with a tenant provides that
such proceeds must be applied to restoring such individual Cadillac Fairview
Property, (y) in the reasonable judgment of the Master Servicer, such
individual Cadillac Fairview Property can be restored within twelve months
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and prior to the Cadillac Fairview Maturity Date to an economic unit not less
valuable and not less useful than the same was prior to the casualty or
condemnation and, after such restoration, such Cadillac Fairview Property
will adequately secure the outstanding balance of the Cadillac Fairview Pool
Loan with respect to such individual Cadillac Fairview Property and (z) no
event of default or material default has occurred and is continuing, the
Master Servicer shall be obligated to make such proceeds available for the
restoration of such individual Cadillac Fairview Property.
Any application of insurance and condemnation to the debt shall be applied
first to the note secured by the affected individual Cadillac Fairview
Property until such note has been paid in full, and then to all of the other
notes (other than the note made by the Cadillac Fairview Borrower that owns
the Galleria of White Plains until the aggregate principal amount of the
Loans has been reduced to $70,000,000 or less) pro rata based on the then
outstanding principal amount of such other notes. Any such application to the
debt shall be applied to those payments of principal and interest last due
under the applicable note or notes and shall not postpone or reduce any
payments otherwise required pursuant to the notes other than such last due
payments.
If a Cadillac Fairview Borrower is entitled pursuant to the foregoing to
reimbursement out of proceeds, such proceeds will be disbursed from time to
time upon the Master Servicer's being furnished with (i) such architect's
certificates, waivers of lien, contractor's sworn statements, title insurance
endorsements, bonds, plats of survey and such other evidences of cost,
payment and performance as are customary and reasonably obtainable by prudent
property owners in the locality in which the individual Cadillac Fairview
Property is located and as the Master Servicer may reasonably require and
approve, and (ii) all plans and specifications for such restoration, such
plans and specifications to be approved by the Master Servicer prior to
commencement of any work. In addition, no payment made prior to the final
completion of the restoration shall exceed 95% of the value of the work
performed from time to time; funds other than proceeds will be disbursed
prior to disbursement of such proceeds; and at all times, the undisbursed
balance of such proceeds remaining in the hands of the Master Servicer,
together with funds deposited for that purpose or irrevocably committed to
the satisfaction of the Master Servicer by or on behalf of such Cadillac
Fairview Borrower for that purpose, will be at least sufficient in the
reasonable judgment of the Master Servicer to pay for the cost of completion
of the restoration, free and clear of all liens or claims for lien. Prior to
any disbursement, the Master Servicer shall have received evidence reasonably
satisfactory to it of the estimated cost of completion of the restoration,
and such Cadillac Fairview Borrower shall have deposited with the Master
Servicer cash or permitted investments in an amount equal to the excess (if
any) of such estimated cost of completion over the net proceeds. Any surplus
which may remain out of proceeds received pursuant to a casualty shall be
paid to such Cadillac Fairview Borrower after payment of such costs of
restoration. Any surplus which may remain out of proceeds received pursuant
to a condemnation shall be escrowed with the Master Servicer as security for
the debt after payment of such costs of restoration.
Financial Reporting. The Cadillac Fairview Borrowers are required to
furnish to the Master Servicer within 85 days following the end of each
fiscal year of the Cadillac Fairview Borrowers, a complete copy of the
Cadillac Fairview Borrowers' annual financial statements, audited by a "Big
Six" accounting firm or another independent certified public accounting firm
reasonably acceptable to the Master Servicer, in accordance with generally
accepted accounting principles, covering the Cadillac Fairview Properties on
a combined basis as well as each individual property, for such fiscal year.
Together with the Cadillac Fairview Borrowers' annual financial statements,
the Cadillac Fairview Borrowers will also furnish to the Master Servicer (A)
an officer's certificate certifying as of the date thereof whether, to the
Cadillac Fairview Borrowers' knowledge, there exists a default or an event of
default, and if such default or event of default exists, the nature thereof,
the period of time it has existed and the action then being taken to remedy
the same; (B) then current rent rolls; and (C) an annual report, for the most
recently completed fiscal year, containing certain prescribed information.
In addition, the Cadillac Fairview Borrowers are required to furnish, or
cause to be furnished, to the Master Servicer on or before the 30th day after
the end of each calendar month, among other items, monthly and year-to-date
operating statements prepared for each calendar month (on an aggregate and on
a property-by-property basis).
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The Cadillac Fairview Borrowers are also required to furnish, or cause to
be furnished, to the Master Servicer on or before the 30th day after the end
of each fiscal quarter, quarterly and year-to-date statements prepared for
such fiscal quarter with respect to each Cadillac Fairview Borrower, with a
balance sheet for such quarter and a comparison of the budgeted income and
expenses and the actual income and expenses for such quarter and year to date
for the Cadillac Fairview Properties on an aggregate and per-property basis.
THE CENTURY PLAZA TOWERS LOAN
The Loan. The Century Plaza Towers Loan had a principal balance as of the
Cut-Off Date of approximately $229,369,475. It is secured by a first priority
deed of trust lien encumbering two office buildings, known as "Century
Towers", and the appurtenant subterranean six-story parking garage (the
"Century Towers Parking Facility"), located in the Century City Market, Los
Angeles, California (collectively, the "Century Towers Property"). The
Century Plaza Towers Loan was originated by GSMC on April 9, 1997.
Payment Terms. The Century Plaza Towers Loan bears interest at a fixed
rate per annum equal to 8.039125% (the "Century Towers Initial Interest
Rate") through and including April 8, 2007. From and after April 9, 2007 (the
"Century Towers Anticipated Repayment Date"), the Century Plaza Towers Loan
accrues interest at a fixed rate per annum equal to 10.039125% (the "Century
Towers Revised Interest Rate"). The Century Plaza Towers Loan matures on
March 9, 2027 (the "Century Towers Maturity Date"). As described below, if
the Century Towers Borrower does not prepay the Century Plaza Towers Loan on
or before the Century Towers Anticipated Repayment Date, the Century Towers
Borrower will be required to pay interest at the Century Towers Initial
Interest Rate (together with principal, as described below), and interest
accrued equal to the excess of the Century Towers Revised Interest Rate over
the Century Towers Initial Interest Rate will be deferred (such accrued and
deferred interest and interest thereon at the Century Towers Revised Interest
Rate, the "Century Towers Excess Interest"). Interest on the Century Plaza
Towers Loan is calculated for any period on the basis of twelve 30-day
months.
The Century Plaza Towers Loan requires monthly payments (the "Century
Towers Monthly Debt Service Payment Amount") of principal and interest of
$1,693,936 (based on a 30-year amortization schedule and the Century Towers
Initial Interest Rate). Payment of the balance of the principal, if any,
together with all accrued and unpaid interest, is required on the Century
Towers Maturity Date. Each Century Towers Monthly Debt Service Payment Amount
is due and payable on the 9th day of the month or, if such day is not a
business day, the next following business day unless (provided the mortgagee
has notified the borrower) the 9th, 10th and 11th days of the month are not
business days, in which case the next preceding business day (a "Century
Towers Due Date"). Commencing with the Century Towers Anticipated Repayment
Date and on each Century Towers Payment Date thereafter, in addition to the
Century Towers Monthly Debt Service Payment Amount, the Century Towers
Borrower is required to apply 100% of the Century Towers Excess Cash Flow (as
defined below) for the month preceding the month in which the Century Towers
Due Date occurs to the outstanding principal balance, until the Century Plaza
Towers Loan has been paid in full, and then, to the Century Towers Excess
Interest. "Century Towers Excess Cash Flow" means the amounts held as
collected funds in the deposit account maintained under the Century Plaza
Towers Loan agreement after the application of funds (a) to the amounts
required to be paid into the tax and insurance escrow fund as described below
under "--Reserves", (b) to the Century Monthly Debt Service Payment Amount,
(c) to the payment of the Century Towers Borrower's approved budgeted
operating expenses, (d) to the TI/Leasing Commissions Reserve Account
described below under "--Reserves", (e) to the capital reserve account
described below under "--Reserves", and (f) to the payment of extraordinary
capital expenditures approved by mortgagee in writing. The scheduled
principal balance of the Century Plaza Towers Loan as of the Century Towers
Anticipated Repayment Date will be $201,899,161.
After the occurrence and during the continuance of an event of default
under the Century Plaza Towers Loan, the entire outstanding principal balance
thereof will bear interest at a per annum rate equal to 300 basis points in
excess of the then-applicable interest rate, but in no event less than 100
basis points in excess of the Citibank, N.A. "base" rate or, if no such "base
rate" is announced, the Citibank "prime rate" plus 1%.
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Prepayment. Voluntary prepayment is prohibited under the Century Plaza
Towers Loan prior to February 9, 2007 (subject to defeasance rights afforded
to the Century Towers Borrower), except in connection with certain casualty
and condemnation events and voluntary prepayment is permitted on any Due Date
from and after February 9, 2007. In the event of a prepayment in connection
with an acceleration of the Century Plaza Towers Loan following an event of
default thereunder, the Century Towers Borrower will be required to pay a
yield maintenance premium equal to the excess, if any, of (i) the sum of (A)
the aggregate respective present values of all remaining scheduled interest
payments in respect of the Century Plaza Towers Loan for the period from the
date of such prepayment to (and including) the Century Towers Anticipated
Repayment Date, discounted monthly at a rate equal to a treasury constant
yield and based on a 360-day year of twelve 30-day months and (B) the
aggregate respective present values of all scheduled principal payments in
respect of the Century Plaza Towers Loan were such amount paid in full on the
Century Towers Anticipated Repayment Date, discounted monthly at a rate equal
to the treasury constant yield and based on a 360-day year of twelve 30-day
months over (ii) the then current outstanding principal amount of the Century
Plaza Towers Loan.
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of the Century Towers Property
under the Century Plaza Towers Loan, the Master Servicer will be entitled, at
its option, to apply such proceeds to the prepayment of the Century Plaza
Towers Loan, as described below under "--Casualty and Condemnation". No
prepayment premium or penalty will be payable upon any mandatory prepayment
of the Century Plaza Towers Loan in connection with casualty or condemnation
unless an event of default has occurred and is continuing thereunder, in
which case the Century Towers Borrower will be required to pay a yield
maintenance payment calculated in the manner described above.
Release in Exchange for Substitute Collateral--Defeasance. The Century
Towers Borrower is permitted on any date after the second anniversary of the
Closing Date to defease all (but not a portion) of the Century Plaza Towers
Loan with U.S. Treasury obligations, provided that, among other conditions,
the Century Towers Borrower gives the Mortgagee at least thirty days' prior
written notice of the date of such defeasance (the "Century Towers Defeasance
Date") and provided further that the Century Towers Borrower pays on the
Century Towers Defeasance Date (i) all accrued and unpaid interest on the
Century Plaza Towers Loan to but not including such date, (ii) all other sums
then due under the Century Plaza Towers Loan and the related loan documents,
(iii) the Century Towers Defeasance Deposit (as defined below) and (iv) all
reasonable costs and expenses of the Mortgagee incurred in connection with
the defeasance. In addition, the Century Towers Borrower will be required to
deliver to the Mortgagee, among other things: (a) a security agreement
granting the Mortgagee a first priority lien on the Century Towers Defeasance
Deposit and the U.S. Treasury obligations purchased with the Century Towers
Defeasance Deposit, (b) an opinion of counsel for the Century Towers Borrower
in form reasonably satisfactory to the Mortgagee stating, among other things,
that the Trustee has a perfected security interest in the U.S. Treasury
obligations purchased with the Century Towers Defeasance Deposit, (c) a
confirmation, in form and substance reasonably satisfactory to the Mortgagee,
from a "Big Six" independent certified public accounting firm, that the
Century Towers Defeasance Deposit is sufficient to pay all scheduled payments
due from the Century Towers Borrower under the Century Plaza Towers Loan in
connection with the proposed defeasance, (d) an Officer's Certificate
certifying that the aforementioned requirements have been met, and (e)
written confirmation from the Rating Agencies that there will be no
downgrade, qualification or withdrawal of the then current ratings of the
Certificates as a result of such defeasance.
"Century Towers Defeasance Deposit" means an amount equal to the sum of
(i) the outstanding principal amount of the Note, (ii) without duplication,
any costs and expenses incurred or to be incurred in the purchase of
noncallable U.S. Treasury obligations providing payments on or prior to, but
as close as possible to, all successive Due Dates upon which interest and
principal payments are required under the Century Plaza Towers Loan after the
Century Towers Defeasance Date and through and including the Century Towers
Anticipated Prepayment Date (including the outstanding principal balance on
the Century Towers Loan on the Century Towers Anticipated Prepayment Date),
and (iii) any revenue, documentary stamp or intangible taxes in connection
with the transfer of the defeased note.
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Upon receipt of the Century Towers Defeasance Deposit, the Master
Servicer, using the Century Towers Defeasance Deposit, will purchase
noncallable U.S. Treasury obligations on behalf of the Century Towers
Borrower, and such U.S. Treasury obligations will serve as the sole
collateral for the payments of the amounts due under the Century Plaza Towers
Loan. Upon a deposit of such U.S. Treasury obligations, the Century Towers
Borrower will have the right to assign the obligation to make payments under
the Century Plaza Towers Loan to an entity designated by the Master Servicer.
In connection with the defeasance of the Century Plaza Towers Loan, the
Century Towers Borrower will be permitted to obtain the release of the deed
of trust lien encumbering the Century Towers Property and all related
collateral.
Other Financing. The Century Plaza Towers Loan documents permit certain
affiliates of the Century Towers Borrower to incur additional debt in the
maximum amount of $40,000,000, provided that certain conditions contained in
the Century Plaza Towers Loan documents are satisfied.
Alterations. Except upon compliance with certain conditions set forth in
the loan agreement, the Century Towers Borrower is prohibited from making or
permitting any demolition, alteration, installation, improvement, expansion
or reduction of or to the Century Towers Property or any part thereof.
Pre-Approved Alterations. The Century Plaza Towers Loan documents specify
certain alterations that have been approved in principle by the mortgagee and
for which no escrow will be required. These approved alterations include
restroom and mechanical upgrades, fire and life safety upgrades, installation
of lighting for the exterior of the Century Towers Property, plaza
improvement, installation of a new ceiling grid, a retrofit of lighting
fixtures, a general upgrade of the garage area and a repair of plaza deck
leaks.
Reserves; TI Credit Facility. Pursuant to the terms of the Century Plaza
Towers Loan, the Century Towers Borrower has established (i) an initial
capital expenditure reserve account in the amount of $7,165,045 for the
payment of all unpaid tenant allowances, tenant improvements and leasing
commissions in respect of certain leases executed prior to the origination of
the Century Plaza Towers Loan, (ii) an account, in amounts which vary from
year to year based on a schedule set forth in the Century Plaza Towers Loan
documents, for the payment of anticipated tenant improvement costs and
leasing commissions (the "TI/Leasing Commissions Reserve Account"), unless
the Century Towers Borrower has delivered instead the TI Credit Facility
(defined below), (iii) an account in the amount of $1,162,000 for the payment
of remediating certain deferred maintenance conditions, and (iv) an account,
to be funded in equal monthly installments of $258,489 between May 1, 1997
and October 1, 1997, to pay real estate taxes (the "Tax Lot Reserve
Account"). In addition, the Century Towers Borrower is obligated, within 30
days after the occurrence of a Triggering Event, as described below under
"--Lockbox", to establish (a) an account, to be subsequently funded from cash
flow from the Century Towers Property, for the payment of routine capital
improvements, and (b) if one or more of Prudential, the Commingled Fund,
TREET and FPGT fail to own 51% of the Century Towers Borrower, an account in
the amount of $1,003,000 for the abatement of certain asbestos conditions
(less amounts representing costs already expended in abating such
conditions), and (c) an escrow account for the deposit, in equal monthly
installments, of insurance premiums and real estate taxes.
Until the Anticipated Repayment Date, the Century Towers Borrower is to
maintain an irrevocable, direct draw letter of credit (the "TI Credit
Facility") in the initial amount of $11,500,000 (subject to certain scheduled
adjustments from year-to-year until the Century Towers Anticipated Repayment
Date at which time it is required to be in the amount of $11,500,000 until
the Century Towers Maturity Date) issued in favor of the mortgagee (and
assigned to the mortgagee) by Hypo Bank, or another bank whose long-term
unsecured debt is rated "AA" or better and otherwise reasonably approved by
the mortgagee and the Rating Agencies in lieu of the TI/Leasing Commissions
Reserve Account. Repayment of any amounts paid in respect of the TI Credit
Facility is secured by the members' ownership interests in the Century Towers
Borrower. See "--Transfer of the Century Towers Borrower and Interests in the
Century Towers Borrower" herein.
Lockbox. Within 30 days after the occurrence and during the continuance of
a Century Towers Triggering Event, the Century Towers Borrower is required to
cause all tenants to deposit their rent
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checks directly into a lockbox account under the control of the mortgagee.
Payments from such account shall be made in the following order of priority:
(i) to required tax and insurance escrows in the required monthly installment
amount, (ii) for the Century Monthly Debt Service Payment Amount, (iii) to
the Century Towers Borrower for budgeted and approved operating expenses,
(iv) to the Century Towers Borrower for approved capital expenditures, (v) to
the TI/Leasing Commissions Reserve Account, (vi) to the Capital Expenditure
Reserve Account in the amount of $39,100.44, (vii) to the Century Towers
Borrower for the payment of discretionary capital expenditures approved by
the Master Servicer, (viii) after the Anticipated Repayment Date, to
mortgagee for repayment of principal until paid in full, (ix) after the
Anticipated Repayment Date, to the mortgagee for the payment of Century
Towers Excess Interest, (x) to the mortgagee for the payment of any interest
that has accrued at the default rate, (xi) provided no event of default has
occurred, to Hypo Bank for interest due and payable on draws from the TI
Credit Facility, (xii) provided no event of default exists, to members in the
Century Towers Borrower in payment of any loans made by such members to other
members of the Century Towers Borrower, and (xiii) provided no event of
default exists, to the Century Towers Borrower.
"Century Towers Triggering Event" means any of the following: (i) the
occurrence of an event of default, beyond applicable periods of notice and
grace, (ii) one of the Century Towers Beneficial Owners and/or Qualified
Transferees (as described under "--Transfer of the Century Towers Property
and Interests in the Century Towers Borrower; Encumbrances") shall fail to
own beneficially at least 51% of or fail to control the Century Towers
Borrower, (iii) the Anticipated Repayment Date shall have occurred and the
Century Plaza Towers Loan shall not have been repaid, and (iv) net operating
income on a trailing 12 month basis shall be less than the net operating
income for the twelve month period ending April 1, 1997. The Century Towers
Triggering Events described in clauses (i), (ii) and (iv) above may be cured
if (x) with respect to clause (i), the event of default in question shall
have been cured prior to any acceleration of the Century Plaza Towers Loan,
(y) with respect to clause (ii), if one or more of the Century Towers
Beneficial Owners and/or Qualified Transferees shall own beneficially
(including through separate accounts) at least 51% of (and controls) the
Century Towers Borrower, and (z) with respect to clause (iv), the Century
Towers Borrower shall escrow with the Mortgagee the excess (as calculated and
escrowed on a monthly basis) of 85% of the net operating income for the 12
month period ending April 1, 1997 over the net operating income on a trailing
12 month basis, provided that the Century Towers Borrower may not rely on
such cure if the net operating income on a trailing 12 month basis falls
below 65% of the net operating income for the 12 month period ending April 1,
1997.
Transfer of the Century Towers Property and Interests in the Century
Towers Borrower; Encumbrances. Unless permitted by the Century Plaza Towers
Loan documents as described below, and with the exception of leases entered
into in accordance therewith and Century Towers Permitted Encumbrances and a
certain lot-line adjustment approved in principle, the Century Towers
Borrower will not without the Mortgagee's consent, not to be unreasonably
withheld or delayed, and a written confirmation from the Rating Agencies that
such action will not, in and of itself, result in a downgrade, withdrawal or
qualification of any rating then assigned to any outstanding Certificates (A)
sell, assign, convey, transfer or otherwise dispose of or encumber legal,
beneficial or equitable interests in all or any part of the Century Towers
Property, (B) permit or suffer any owner, directly or indirectly, of a
beneficial interest in the Century Towers Property to transfer such interest,
whether by transfer of stock or other beneficial interest in any entity or
otherwise, (C) mortgage, hypothecate or otherwise encumber or grant a
security interest in all or any part of the Century Towers Property, or (D)
file a declaration of condominium with respect to the Century Towers
Property. Notwithstanding the foregoing, a sale, assignment, conveyance or
transfer, or other disposition or hypothecation or other encumbrance, of a
direct or indirect beneficial interest in the Century Towers Borrower will be
permitted, if after giving effect to the proposed transaction (i) the Century
Towers Borrower will be owned by a single purpose entity meeting certain
bankruptcy-remote requirements set forth in the Century Plaza Towers Loan
documents, (ii) the Century Towers Borrower will be at least 51% owned
directly or indirectly by a Century Beneficial Owner or by Century Towers
Qualified Transferees (as defined below) or their respective close
affiliates, (iii) if the transfer constitutes a transfer of 25% or more of
the membership interests, stock or other direct equity interests in the
Century Towers Borrower, such transfer will require, among other things, that
the mortgagee receive a legal opinion confirming that the assets of the new
borrower will not be substantively
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consolidated with the assets of certain owners or controlling persons of such
borrower in a bankruptcy or similar proceeding, provided that such legal
opinion will not be required with respect to a transfer of interests in the
Century Towers Borrower among the Century Towers Beneficial Owners (including
transfers from Prudential to any one or more of the Century Towers Beneficial
Owners) and/or any Century Towers Qualified Transferee (as defined below),
unless such transfer causes an owner, Century Towers Beneficial Owner or
other entity to own directly or indirectly 45% or more of the Century Towers
Borrower, and (iv) if the transfer involves the transfer of any interest in a
member or general partner of the Century Towers Borrower which is a required
single purpose entity, or where, as a result of such transfer, any member or
other entity shall own (directly or indirectly) a 45% or more economic or
controlling interest in the Century Towers Borrower, such transfer will
require, among other things, that the mortgagee receive a legal opinion
relating to such single purpose entity and such transferee confirming that
the assets of the transferee will not be substantively consolidated with the
assets of such single purpose entity in a bankruptcy or similar proceeding,
subject to the proviso contained in clause (iii) above.
Under the Century Plaza Towers Loan documents, the members in the Century
Towers Borrower have the right to collaterally assign membership interests
under the Century Towers Borrower's limited liability agreement to Hypo Bank
as the TI Credit Facility issuer, and Hypo Bank has the right to become the
owner of Century Towers Borrower, subject to all of the terms and conditions
described above other than clause (ii) above.
Prudential has the right under the Century Plaza Towers Loan Documents,
without any requirement to obtain consent from, give notice to or provide
legal opinions to mortgagee or any rating agency, to distribute at any time
and from time to time the ownership interest in the Century Towers Borrower,
held in one or both separate accounts to the respective contract holders
thereof.
Except as may be set forth below, the Century Towers Borrower shall have
the right to sell, assign, convey, transfer or otherwise dispose of legal or
equitable title to or any interest in the Century Towers Property if, after
giving effect to the proposed transaction, (A) the Century Towers Property
will be owned by a single purpose entity, (B) the transferee will be at least
51 percent owned and controlled directly or indirectly by one or more Century
Towers Beneficial Owners and/or Qualified Transferees, and (C) no event of
default shall have occurred and be continuing.
"Century Towers Qualified Transferees" means one or more of the following:
(1) (a) a person or entity that either: (x) has a current net worth of $500
million or more and controls office-building equity investments of $1 billion
or more, or if such person or entity is a pension fund advisor, one which
controls at least $1 billion in office-building equity investments, or (y) is
any one of the following: a pension fund, pension trust or pension account
that has total office-building equity investments of $500 million or more,
managed by an entity that controls at least $1 billion in office building
equity investments, and (b) any one of the following: (w) a pension fund,
pension trust or pension account, (x) an insurance company, (y) a national
money-center bank, or (z) an entity with a long-term unsecured debt rating
from Fitch Investors Service (and any other Rating Agency) of at least
investment grade, or (2) any person or entity approved by mortgagee (such
approval not to be unreasonably withheld or delayed) and as to which the
Century Towers Borrower shall have received a written confirmation from the
Rating Agencies that no downgrade, qualification or withdrawal of the ratings
then assigned by such Rating Agency to the Certificates will occur as a
result of the Transfer.
Insurance. The Century Plaza Towers Loan requires the Century Towers
Borrower to maintain the insurance coverages, as well as the insurers (in
some instances), in effect at the time of the closing of the Century Plaza
Towers Loan and, upon termination of such coverages, insurance coverage
complying with the below-stated requirements. The insurance coverage
currently in place for the Century Plaza Towers Loan is as follows:
$500,000,000 per occurrence of all risk insurance provided by a pool of
insurance companies with limits of liability on flood insurance of
$125,000,000 and $75,000,000 of earthquake insurance.
Following the termination of the insurance coverages described above, the
Century Towers Borrower is required to maintain, at its sole cost and
expense, the following insurance: (a) policies of
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insurance against loss or damage by standard perils included within the
classification "All Risks of Physical Loss", maintained in an aggregate
amount equal to the then full replacement cost of the Century Towers Property
and related assets (without deduction for physical depreciation), with
deductibles no greater than those in existence at the time of the closing of
the Century Plaza Towers Loan, provided that the Century Towers Borrower may
have higher deductibles, to the extent the same are commercially reasonable,
but in no event in excess of $150,000 without confirmation from the Rating
Agencies that such deductibles will not result in a downgrade, qualification,
or withdrawal of the ratings then assigned by such Rating Agencies to the
Certificates; (b) earthquake coverages as follows: coverages in the maximum
probable loss amount for the Century Towers Property, 15.4% of the
replacement value of $469,900,000 (the failure to pay the earthquake
insurance deductible by the Century Towers Borrower results in a default
under the Century Towers Loan Documents); (c) flood insurance (if any part of
the Century Towers Property is located in an area identified by the Federal
Emergency Management Agency as an area federally designated a "100 year flood
plain") and flood insurance is generally available at reasonable premiums and
in such amounts as generally are required by institutional lenders for
similar properties (or, if not so available from a private carrier, from the
federal government at commercially reasonable premiums to the extent
available); (d) comprehensive general liability insurance, including broad
form property damage, blanket contractual and personal injuries coverages and
containing minimum limits per occurrence of $10,000,000 for any policy year
as well as at least $40,000,000 excess and/or umbrella liability insurance,
provided that the Century Towers Borrower shall increase its excess and/or
umbrella liability insurance to the extent that claims are asserted against
the primary and excess and/or umbrella coverages in amounts in excess of
$40,000,000 in the aggregate, except to the extent the Century Towers
Borrower reasonably determines that such claims are not likely to result in
paid claims in excess of $40,000,000; (e) rental loss and/or business
interruption insurance in an amount equal to the greater of estimated gross
revenues payable to the Century Towers Borrower and projected operating
expenses needed to maintain and operate the Century Towers Property, in each
case for 18 months; and (f) insurance against loss or damage from leakage of
sprinkler systems and explosion of steam boilers, air conditioning equipment
and high pressure piping, machinery and equipment, pressure vessels or
similar apparatus and against loss of occupancy or use arising from any such
breakdown, in such amounts as are generally available at reasonable premiums
and are generally required by institutional lenders for property comparable
to the Century Towers Property.
Insurers for all-risk coverage must have a claims-paying ability rated
"A-/VIII" or better by Best's Insurance Ratings Guide ("Best's") and not less
than 65% of such coverage shall be provided by insurers with a claims-paying
ability rated "AA" or better by S&P. Insurers providing earthquake coverage
shall have a claims paying ability rated "A-/VIII" or better by Best's and
the first $10,000,000 of such coverage, as well as 75% of all such coverage,
shall be provided by issuers with claims-paying-ability ratings or qualified
insolvency ratings by S&P of investment grade or better. Issuers for the
comprehensive general liability insurance described in clause (d) above must
have a claims-paying ability of "A-/VIII" or better by Best's and not less
than 65% of such coverage shall be provided by insurers with a claims-paying
ability rated "AA" or better by S&P.
Casualty and Condemnation. In the event of a casualty at the Century
Towers Property that involves a loss of less than 30% of the GLA of the
Century Towers Property or a Condemnation that affects less than 15% of the
GLA of the Century Towers Property, the Mortgagee shall permit the
application of the proceeds resulting therefrom (after reimbursement of any
expenses incurred by the Mortgagee) to reimburse the Century Towers Borrower
for the cost of restoring, repairing, replacing or rebuilding the Century
Towers Property, in the manner described below, provided that, no default or
event of default has occurred and is then continuing and, in the reasonable
judgment of the Mortgagee: (i) the Century Towers Property can be restored to
an economically viable unit with a resulting loan to value of not more than
55% and a resulting net operating income of 100% of the net operating income
for the twelve month period ending April 1, 1997; (ii) the restoration can be
completed by the earliest to occur of: (A) the 365th day following the
receipt of the proceeds, or, with rating confirmation, such longer period as
may reasonably be required, (B) the Century Towers Maturity Date, and (C)
with respect to a casualty, the expiration of the payment period on the
rental-loss insurance coverage in respect of such casualty; and (iii) during
the period of the restoration, the sum of (A) income derived from the Century
Towers Property, plus (B) proceeds of rent loss insurance or business
interruption insurance, if any, payable
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together with such other monies as the Century Towers Borrower makes
irrevocably available for the restoration, will equal or exceed the sum of
(1) expenses in connection with the operation of the Century Towers Property
and (2) the debt service on the Century Plaza Towers Loan.
If any of the conditions set forth in the foregoing proviso is not
satisfied, or, if the casualty involves a loss of 30% or more of the GLA in
the Century Towers Property, or if the condemnation affects 15% or more of
the GLA in the Century Towers Property, then, unless the mortgagee elects
otherwise, in its sole discretion, the proceeds will be applied to the
prepayment of the Century Plaza Towers Loan (without prepayment premium or
penalty, other than a yield maintenance premium if an event of default has
occurred and is continuing). Provided no Century Towers Triggering Event
shall have occurred and be continuing, the Century Towers Borrower shall have
the right to receive directly proceeds in the amounts of $5,000,000 or less,
provided all such proceeds and awards shall nevertheless be applied to the
restoration of the Century Towers Property in accordance with the terms of
the Century Plaza Towers Loan documents.
If the Century Towers Borrower is entitled to reimbursement out of
proceeds, such proceeds will be disbursed from time to time upon the
mortgagee being furnished with (i) such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements, bonds,
plats of survey and such other evidences of cost, payment and performance as
the mortgagee may reasonably require and approve, and (ii) all plans and
specifications for such restoration, such plans and specifications to be
approved by the Mortgagee prior to commencement of any work (such approval
not to be unreasonably withheld or delayed). In addition, no payment made
prior to the final completion of the restoration shall exceed 95% of the
value of the work performed from time to time; funds other than proceeds will
be disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of the mortgagee,
together with funds deposited for that purpose or irrevocably committed to
the satisfaction of the mortgagee by or on behalf of the Century Towers
Borrower for that purpose, will be at least sufficient in the reasonable
judgment of the mortgagee to pay for the cost of completion of the
restoration, free and clear of all liens or claims for liens. Prior to any
disbursement, the mortgagee shall have received evidence reasonably
satisfactory to it of the estimated cost of completion of the restoration,
and the Century Towers Borrower shall have deposited with the mortgagee
eligible collateral in an amount equal to the excess (if any) of such
estimated cost of completion over the net proceeds. Any surplus which may
remain out of proceeds received pursuant to a casualty will be paid to the
Century Towers Borrower after payment of such costs of restoration. Any
surplus which may remain out of proceeds received pursuant to a condemnation
will be paid to the Century Towers Borrower or, if certain conditions set
forth in the Century Plaza Towers Loan documents are not met, escrowed with
the mortgagee as security for the Century Plaza Towers Loan after payment of
such costs of restoration.
Financial Reporting. The Century Towers Borrower is required to furnish to
the mortgagee within 90 days following the end of each fiscal year of the
Century Towers Borrower, a complete copy of the Century Towers Borrower's
annual financial statements, audited by a "Big Six" accounting firm or
another independent certified public accounting firm reasonably acceptable to
the mortgagee, in accordance with generally accepted accounting principles,
covering the Century Towers Property, for such fiscal year and containing
balance sheets for the Century Towers Borrower and statements of profit and
loss for the Century Towers Property and the Century Towers Borrower.
Together with the Century Towers Borrower's annual financial statements, the
Century Towers Borrower is also required to furnish to the mortgagee (A) an
officer's certificate certifying as of the date thereof whether, to the
Century Towers Borrower's knowledge, there exists a default or an event of
default, and if such default or event of default exists, the nature thereof,
the period of time it has existed and the action then being taken to remedy
the same; (B) then current rent rolls; and (C) an annual report, for the most
recently completed fiscal year, containing occupancy levels.
In addition, the Century Towers Borrower is required to furnish, or cause
to be furnished, to the mortgagee on or before the 30th day after the end of
each calendar month, the following items, accompanied by a certificate
certifying that such items are true, correct and accurate: (i) any notice
from a tenant under a lease affecting 40,000 or more GLA or two or more
tenant leases affecting in the
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aggregate 100,000 or more GLA, threatening default, alleging a default by
landlord, requesting a lease termination or any other material correspondence
received by the Century Towers Borrower during the subject month and (ii)
monthly and year-to-date operating statements including separate line items
for (x) maintenance, (y) tenant improvements and leasing commissions, and (z)
renovations, expansions and enhancements.
The Century Towers Borrower is also required to furnish, or cause to be
furnished, to the mortgagee, on or before the 35th day after the end of each
calendar quarter, (i) quarterly and year-to-date statements prepared for such
calendar quarter with respect to the Century Towers Borrower, with a balance
sheet for such quarter, (ii) a comparison of the budgeted income and expenses
and the actual income and expenses for such quarter, (iii) an occupancy
report, (iv) a current rent roll and (v) a statement certifying that certain
representations and warranties contained in the Century Plaza Towers Loan
documents are true and complete as of the date of the certification.
The Century Towers Borrower is also required to furnish to mortgagee,
within ten Business Days after request, such further detailed information
with respect to the operation of the Century Towers Property and the
financial affairs of the Century Towers Borrower as may be reasonably
requested by the mortgagee.
The Century Towers Borrower is required to furnish to the mortgagee,
promptly after receipt, a copy of any material notice received by or on
behalf of the Century Towers Borrower from any governmental authority having
jurisdiction over any of the Century Towers Property with respect to an
adverse condition existing or alleged to exist or emanate therefrom or
thereat.
THE AAPT POOL LOAN
The Loan. The AAPT Pool Loan had a principal balance as of the Cut-Off
Date of approximately $125,149,361 and is secured by first priority mortgage
liens encumbering 34 office properties, 8 industrial properties, 4 flex
properties and 2 parcels of undeveloped land located in Pennsylvania, New
Jersey, Virginia and North Carolina (the "AAPT Properties"). The AAPT
Borrowers own fee title to 44 of the 48 AAPT Properties and an AAPT Borrower
owns the leasehold estate in the remaining 4 AAPT Properties. The mortgages
encumbering the AAPT Properties are cross-defaulted and cross-collateralized.
Payment Terms. The AAPT Pool Loan was originated on June 30, 1997. The
AAPT Pool Loan matures on July 11, 2027 (the "AAPT Maturity Date"). The AAPT
Pool Loan is comprised of three components (each, a "Component"), a fixed
rate component (the "AAPT Fixed Component") and two floating rate components
(the "AAPT LIBOR A Component" and the "AAPT LIBOR B Component", collectively,
the "AAPT LIBOR Components"). As of the Cut-Off Date, the AAPT Fixed
Component had a principal balance of approximately $75,149,361, the AAPT
LIBOR A Component had a principal balance of $30,000,000, and the AAPT LIBOR
B Component had a principal balance of $20,000,000.
The AAPT Fixed Component bears interest at a fixed rate per annum equal to
7.48% (the "AAPT Initial Fixed Interest Rate") through and including July 10,
2007. From and after July 11, 2007 (the "AAPT Fixed Component Anticipated
Repayment Date"), the AAPT Fixed Component will bear interest at a fixed rate
per annum equal to 9.48% (the "AAPT Revised Fixed Interest Rate"). All
interest accrued at the excess of the AAPT Revised Fixed Interest Rate over
the AAPT Initial Fixed Interest Rate (the "AAPT Excess Fixed Interest") will
be deferred and will not be paid until after the principal balance of the
AAPT Pool Loan has been reduced to zero. Amounts so deferred will, to the
extent permitted by applicable law, accrue interest at the AAPT Revised Fixed
Interest Rate. Interest on the AAPT Fixed Component is calculated based on
the actual number of days elapsed and a 360-day year.
The AAPT LIBOR A Component bears interest at a floating rate per annum
equal to LIBOR (as hereinafter defined) plus 0.93% (the "AAPT LIBOR A
Interest Rate") through and including July 10, 2004. The AAPT LIBOR B
Component bears interest at a floating rate per annum equal to LIBOR (as
hereinafter defined) plus 0.76% (the "AAPT LIBOR B Interest Rate"; each of
the AAPT LIBOR A Interest Rate and the AAPT LIBOR B Interest Rate, an "AAPT
LIBOR Interest Rate") through and including July 10, 2004. From and after
July 11, 2004 (the "AAPT LIBOR Component Anticipated Repayment Date"), each
of the AAPT LIBOR A Component and the AAPT LIBOR B Component, respectively,
will bear
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interest at a floating rate per annum equal to the sum of (i) the lower of
(x) the AAPT LIBOR Interest Rate applicable to such AAPT LIBOR Component from
time to time, and (y) a rate that would result in a blended interest rate on
the AAPT Pool Loan of no more than 8.5% based on the then outstanding
principal balance of the AAPT Pool Loan and an interest rate on the AAPT
Fixed Component equal to the AAPT Initial Fixed Interest Rate and (ii) 2%
(respectively, the "AAPT Revised LIBOR A Interest Rate" and the "AAPT Revised
LIBOR B Interest Rate", and each, an "AAPT LIBOR Revised Interest Rate"). A
portion of the interest accrued at the AAPT Revised LIBOR Interest Rates, to
the extent of 2.00% per annum (the "AAPT Excess LIBOR Interest"), will be
deferred and will not be paid until the earlier to occur of (1) the aggregate
principal balance of the AAPT LIBOR Components being reduced to zero, and (2)
the AAPT Fixed Component Anticipated Repayment Date, at which time AAPT
Excess LIBOR Interest shall be further deferred and will not be paid until
the principal balance of the AAPT Pool Loan has been reduced to zero. Amounts
so deferred will, to the extent permitted by applicable law, accrue interest
at the applicable AAPT Revised LIBOR Interest Rate. The AAPT Excess LIBOR
Interest and the AAPT Excess Fixed Interest are sometimes referred to herein
together as the "AAPT Excess Interest". Interest on the AAPT LIBOR Components
is calculated based on the actual number of days elapsed and a 360-day year.
Although the Due Date for the AAPT Loan is the 11th day of each month (or if
such day is not a business day, the immediately prior day that is a business
day), interest on the AAPT LIBOR Components is calculated for each Due Date
based on the number of days in the period from and including the Distribution
Date in the month preceding such Due Date (or from August 13, 1997 in the
case of the Due Date in September 1997) to but excluding the Distribution
Date immediately after such Due Date.
Commencing on August 11, 1997, the AAPT Fixed Component requires monthly
payments (the "AAPT Initial Fixed Monthly Debt Service Payment Amount") of
principal and interest of $526,404 (based on the principal balance of the
AAPT Pool Loan, a 305 month amortization schedule and interest at the AAPT
Initial Fixed Interest Rate) through and including July 11, 2004. Thereafter,
the AAPT Fixed Component requires monthly payments (the "AAPT Revised Fixed
Monthly Debt Service Payment Amount") of principal and interest of $480,249
(based on the outstanding principal balance of the AAPT Fixed Component, a 23
year amortization schedule (commencing as of the origination of the AAPT Pool
Loan) and interest at the AAPT Initial Fixed Interest Rate). In addition,
commencing on August 11, 1997, the AAPT Fixed Component requires an
additional monthly payment (the "AAPT Additional Fixed Monthly Debt Service
Payment Amount") of $93,148 on each Due Date until the earlier of (x) the
date of the release of the Main Street Center Property from the lien of the
related Mortgage and (y) December 11, 2001. (The AAPT Initial Fixed Monthly
Debt Service Payment Amount, together with the AAPT Additional Fixed Monthly
Debt Service Payment Amount, or the AAPT Revised Fixed Monthly Debt Service
Payment Amount, as applicable, is referred to herein as the "AAPT Fixed
Monthly Debt Service Payment Amount".) The AAPT LIBOR Components require
monthly payments (the "AAPT LIBOR Monthly Debt Service Payment Amount") of
interest on the principal balance of the AAPT LIBOR Components and, from and
after the AAPT LIBOR Component Anticipated Repayment Date, payments of
principal as described below. The Due Date for each installment of the AAPT
Fixed Monthly Debt Service Payment Amount and the AAPT LIBOR Monthly Debt
Service Payment Amount is the 11th day of each calendar month, or, if in any
month the 11th day is not a business day, then the Due Date for that month
will be the immediately prior business day. Payment of the balance of the
principal, if any, together with all accrued and unpaid interest is required
on the AAPT Maturity Date.
Commencing on the AAPT LIBOR Component Anticipated Repayment Date, in
addition to the AAPT LIBOR Monthly Debt Service Payment Amount and the AAPT
Fixed Monthly Debt Service Payment Amount, the AAPT Borrowers are required to
apply 100% of the AAPT Excess Cash Flow (as defined below) for the month
preceding the month in which the Due Date occurs in the following order of
priority until the sooner of the AAPT LIBOR Components being paid in full and
the AAPT Fixed Component Anticipated Repayment Date: (a) to the outstanding
principal balance of the AAPT LIBOR Components applied pro rata based on the
then outstanding principal balance of the AAPT LIBOR A Component and the AAPT
LIBOR B Component until the AAPT LIBOR Components have been paid in full and
(b) to the AAPT Excess Interest. Additionally, commencing on the AAPT Fixed
Component Anticipated Repayment Date, in addition to the AAPT LIBOR Monthly
Debt Service Payment Amount (to the extent the AAPT
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LIBOR Components are still outstanding) and the AAPT Fixed Monthly Debt
Service Payment Amount, the AAPT Borrowers are required to apply 100% of the
AAPT Excess Cash Flow for the month preceding the month in which the Due Date
occurs in the following order of priority: (a) to the outstanding principal
balance of the AAPT Pool Loan, applied pro rata based on the then outstanding
principal balance of the AAPT Fixed Component and the respective AAPT LIBOR
Components, until the AAPT Pool Loan has been paid in full and (b) to the
AAPT Excess Interest. "AAPT Excess Cash Flow" means the amounts held as
collected funds in the deposit account maintained pursuant to the AAPT Pool
Loan agreement after the application of funds (a) to the amounts required to
be paid into the tax and insurance escrow fund as described below under
"--Reserves", (b) to the ground rent for any ground leased property, (c) to
the AAPT Monthly Debt Service Payment Amount, (d) to the AAPT Borrowers for
budgeted operating expenses, (e) to the leasing reserve account described
below under "--Reserves", to the extent a credit facility therefor has not
been delivered, (f) to the amounts required to be paid into the capital
reserve account described below under "--Reserves", to the extent a credit
facility therefor has not been delivered, (g) to the AAPT Borrowers for
budgeted capital expenditures, and (h) to the AAPT Borrowers for
extraordinary capital expenditures approved by the mortgagee. The scheduled
principal balance of the AAPT LIBOR Components on the AAPT LIBOR Component
Anticipated Repayment Date is $50,000,000. The scheduled principal balance of
the AAPT Fixed Component on the AAPT Fixed Component Anticipated Repayment
Date is $59,239,423.
The following tables set forth the maximum per annum interest rate on the
AAPT LIBOR Components assuming no principal payments on the AAPT LIBOR
Components (including from AAPT Excess Cash Flow) and only scheduled
principal payments for the AAPT Fixed Component (i) at the AAPT LIBOR
Component Anticipated Repayment Date, July 11, 2004, and (ii) at the AAPT
Fixed Component Anticipated Repayment Date, July 11, 2007.
UPON THE AAPT LIBOR COMPONENT ANTICIPATED REPAYMENT DATE
<TABLE>
<CAPTION>
OUTSTANDING MAXIMUM
PRINCIPAL INTEREST
BALANCE MARGIN RATE
-------------- -------- ----------
<S> <C> <C> <C>
Fixed............... $ 62,636,191 N/A 7.480%
LIBOR A Component .. 30,000,000 0.930% 9.846%
LIBOR B Component .. 20,000,000 0.760% 9.676%
--------------
Total/Weighted
Avg................ $112,636,191 0.862% 8.500%
==============
</TABLE>
UPON THE AAPT FIXED COMPONENT ANTICIPATED REPAYMENT DATE
<TABLE>
<CAPTION>
OUTSTANDING MAXIMUM
PRINCIPAL INTEREST
BALANCE MARGIN RATE
-------------- -------- ----------
<S> <C> <C> <C>
Fixed............... $ 59,239,423 N/A 7.480%
LIBOR A Component .. 30,000,000 0.930% 9.777%
LIBOR B Component .. 20,000,000 0.760% 9.607%
--------------
Total/Weighted
Avg................ $109,239,423 0.862% 8.500%
==============
</TABLE>
To the extent principal payments are received on the AAPT LIBOR Components
on or prior to the above-referenced Anticipated Repayment Dates, the weighted
average maximum interest rates on the AAPT LIBOR Components expressed above
would increase.
After the occurrence and during the continuance of an event of default,
the entire outstanding principal balance of the AAPT Pool Loan will bear
interest at a per annum default rate equal to the lesser of (a) the maximum
rate permitted by applicable law and (b) the greater of (x) five percent (5%)
in excess of the then applicable AAPT Interest Rate and (y) the Citibank base
rate on corporate loans.
"LIBOR" means, with respect to each Interest Period for each AAPT LIBOR
Component and for each Interest Accrual Period for the Class A-1
Certificates, the rate for deposits in U.S. Dollars for a one month period
which appears on Telerate Page 3750 as of 11:00 a.m., London time, on the
applicable LIBOR Determination Date. If such rate does not appear on Telerate
Page 3750, the rate for that LIBOR Determination Date will be determined on
the basis of the rates at which deposits in U.S. Dollars are
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offered by the Reference Banks at approximately 11:00 a.m., London time, on
that day to prime banks in the London interbank market for a one-month
period. The mortgagee will request the principal London office of each of the
Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for that LIBOR Determination Date will be
the arithmetic mean of such quotations. If fewer than two quotations are
provided, the rate for that LIBOR Determination Date will be the arithmetic
mean of the rates quoted by major banks in New York City selected by the
mortgagee, at approximately 11:00 a.m., New York City time, on that day for
loans in U.S. Dollars to leading European banks for a one month period.
"LIBOR Determination Date" means, with respect to each Interest Period or
each Interest Accrual Period for the Class A-1 Certificates, the second LIBOR
Business Day preceding the Interest Reset Date. A "LIBOR Business Day" means
a Business Day on which United States dollar deposits may be dealt in on the
London interbank market and on which commercial banks and foreign exchange
markets are open in London. For purposes of this subsection, "Business Day"
means any day other than a Saturday, Sunday or any other day on which
national banks in New York are not open for business. An "Interest Reset
Date" means the first day of each Interest Period. An "Interest Period" with
respect to each Due Date means with respect to the AAPT LIBOR Components, the
period from (and including) the Distribution Date preceding the Due Date, to
(and including) the day immediately preceding the Distribution Date following
such Due Date.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the mortgagee. "Regulation D" means Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and
any successor to all or a portion thereof.
As additional collateral for the AAPT Pool Loan, the AAPT Borrowers have
collaterally assigned to the mortgagee all of the AAPT Borrowers' right,
title and interest in and to the AAPT Interest Rate Cap Agreement. The "AAPT
Interest Rate Cap Agreement" is an interest rate cap agreement in a notional
amount equal to the aggregate principal amount of the AAPT LIBOR Components
between the AAPT Borrowers and Bear Stearns Financial Products Inc., which
currently has a senior unsecured long-term debt rating of "Aaa" as rated by
Moody's, which agreement (i) has a term of not less than seven years and (ii)
requires payment by the counterparty of all interest on such notional amount
in excess of 8.70%. See "Risk Factors--The Mortgage Loans--Risks Relating to
the AAPT Interest Rate Cap Agreement" herein.
Prepayment. Voluntary prepayment of the AAPT Fixed Component is prohibited
prior to the AAPT Fixed Component Anticipated Repayment Date, except in
connection with certain casualty or condemnation events prior to July 11,
2000. From and after the AAPT Fixed Component Anticipated Repayment Date, the
AAPT Fixed Component may be voluntarily prepaid in whole or in part on any
Due Date upon not less than 5 business days' prior notice, specifying the
date on which such prepayment shall occur and the principal amount to be
prepaid, without payment of any yield maintenance charge or prepayment
premium.
The AAPT LIBOR Components may be voluntarily prepaid in whole or in part
on any Due Date upon not less than 5 business days' prior notice, specifying
the date on which such prepayment shall occur and the principal amount to be
prepaid, and payment of a prepayment premium (the "AAPT LIBOR Component
Prepayment Premium"), if any, on or before the date of such prepayment.
Prepayments of the AAPT LIBOR Components shall be applied (i) first, to the
AAPT LIBOR A Component until the AAPT LIBOR A Component shall be paid in
full, and (ii) then, to the AAPT LIBOR B Component. The AAPT LIBOR Component
Prepayment Premium shall be (i) 3% for the period from the date of funding of
the loan to (but excluding) the first anniversary thereof, (ii) 2% for the
period from the first anniversary of the date of the funding of the loan to
(but excluding) the second anniversary thereof, (iii) 1% for the period from
the second anniversary of the date of the funding of the loan to (but
excluding) the third anniversary thereof, in each case, of the principal
amount being prepaid. Thereafter, no AAPT LIBOR Component Prepayment Premium
shall be due or payable. If the AAPT Borrowers deliver such notice of
prepayment
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of all or a portion of the AAPT LIBOR Components to the mortgagee and fail to
prepay the principal amount of the AAPT LIBOR Components on the Due Date set
forth therein, the principal amount of such prepayment designated in such
notice shall bear interest at the AAPT Adjusted Base Rate (as defined in the
following paragraph) until the Due Date after the Due Date on which such
prepayment was designated to be made.
The "AAPT Adjusted Base Rate" means a rate of interest per annum equal to
the higher of (i) the applicable AAPT LIBOR Component Rate and (ii) the lower
of (x) the Base Rate from time to time plus, (1) with respect to the AAPT
LIBOR A Component, 0.93%, and (2) with respect to the AAPT LIBOR B Component,
0.76% and (y) a rate (to be conclusively determined by the Master Servicer,
absent manifest error) that would result in a blended interest rate on the
AAPT Pool Loan of no more than 8.5% based on the outstanding principal
balances of the AAPT Pool Loan and an interest rate on the AAPT Fixed
Component equal to the AAPT Initial Fixed Interest Rate. The "Base Rate"
means, with respect to any Interest Period, the higher of (i) the per annum
rate publicly announced by Citibank, N.A. on the first Business Day of such
Interest Period as its base rate on corporate loans or (ii) 0.5% per annum
above the latest Federal Funds Rate on the first Business Day of such
Interest Period. The "Federal Funds Rate" means, for any period, the rate set
forth in the weekly statistical release designated as H.15 (519), or any
successor publication, published by the Federal Reserve Board (including any
successor, "H.15(519)"), for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any successor publication, the "Composite
3:30 p.m. Quotation") for such day under the caption "Federal Funds Effective
Rate". If on any relevant day the appropriate rate for such previous day is
not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations,
the rate for such day will be the arithmetic mean of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York
time) on that day by each of three (3) leading brokers of Federal funds
transactions in New York City selected by the Master Servicer.
If all or any part of the principal amount of the AAPT Fixed Component is
prepaid upon acceleration of the AAPT Fixed Component following the
occurrence of an event of default prior to the AAPT Fixed Component
Anticipated Repayment Date, the AAPT Borrowers will also be required to make
a yield maintenance payment in an amount equal to the excess, if any, of (i)
the sum of (A) the aggregate respective present values of all remaining
scheduled interest payments in respect of the AAPT Fixed Component (or the
portion of all such interest payments corresponding to the portion of the
principal of the AAPT Fixed Component to be prepaid upon acceleration) for
the period from the date of such prepayment to the AAPT Maturity Date,
discounted monthly at a rate equal to a treasury constant yield and based on
a 360-day year of twelve 30-day months and (B) the aggregate respective
present values of all scheduled principal payments in respect of the AAPT
Fixed Component (or the then unpaid portion thereof to be prepaid upon
acceleration) were such amount paid in full on the AAPT Maturity Date,
discounted monthly at a rate equal to the treasury constant yield and based
on a 360-day year of twelve 30-day months over (ii) the then current
outstanding principal amount of the AAPT Fixed Component (or the then unpaid
portion thereof to be prepaid upon acceleration); provided, however, that if
the result of this calculation is a negative number, the yield maintenance
payment required will be zero. If all or any part of the principal amount of
the AAPT LIBOR Components is prepaid upon acceleration of the AAPT LIBOR
Components following the occurrence of an event of default, the AAPT
Borrowers will also be required to pay the AAPT LIBOR Component Prepayment
Premium, if any.
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of the AAPT Properties under the
AAPT Pool Loan, such proceeds shall be applied to prepay the AAPT Pool Loan,
as described below under "--Casualty and Condemnation". No prepayment premium
or penalty will be payable upon any mandatory prepayment of the AAPT Pool
Loan in connection with casualty or condemnation unless an event of default
has occurred and is continuing, in which case the AAPT Borrowers will be
required to pay a yield maintenance payment and/or prepayment premium
calculated in the manner described above.
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<PAGE>
Prior to the AAPT LIBOR Component Anticipated Repayment Date and, if the
AAPT LIBOR Components have been paid in full, prior to the AAPT Fixed
Component Anticipated Repayment Date, funds on deposit in the low debt
service reserve account may, under certain circumstances, be applied to the
prepayment of the AAPT Pool Loan. See "--Reserves" below. The mortgagee may
apply certain amounts to the prepayment of the AAPT Pool Loan upon the
occurrence of an event of default.
Release in Exchange for Substitute Collateral. Prior to any defeasance of
all or any part of the AAPT Fixed Component, the AAPT Borrowers shall have
prepaid in full the AAPT LIBOR Components including, without limitation, the
AAPT LIBOR Component Prepayment Premium, if any. The AAPT Borrowers are
permitted on any date on or after July 11, 2000 up to but not including the
AAPT Fixed Component Anticipated Repayment Date, to defease all or a portion
of the AAPT Fixed Component, provided that, among other conditions, the AAPT
Borrowers give the mortgagee at least 30 days' prior written notice of the
date of such defeasance (the "AAPT Defeasance Date") and provided further
that the AAPT Borrowers pay on the AAPT Defeasance Date (i) all accrued and
unpaid interest on the AAPT Fixed Component to but not including such date
(and if the AAPT Defeasance Date is not a Due Date, the AAPT Defeasance
Deposit (as defined below) shall take into account the interest that would
have accrued on the AAPT Fixed Component to but not including the next Due
Date), (ii) all other sums then due under the AAPT Fixed Component and the
related loan documents, (iii) the AAPT Defeasance Deposit (as defined below)
and (iv) all reasonable costs and expenses of the mortgagee incurred in
connection with the defeasance. In addition, the AAPT Borrowers will be
required to deliver to the mortgagee, among other things, (a) a security
agreement granting the Trustee a first priority lien on the AAPT Defeasance
Deposit and the U.S. obligations purchased with the AAPT Defeasance Deposit,
(b) an opinion of counsel for the AAPT Borrowers in form reasonably
satisfactory to the mortgagee stating, among other things, that the Trustee
has a perfected security interest in the U.S. obligations purchased with the
AAPT Defeasance Deposit and that, after a defeasance, the AAPT Pool Loan will
continue to be a "qualified mortgage" within the meaning of Section 860D of
the Code and the REMIC will not fail to maintain its status as a "real estate
mortgage investment conduit" within the meaning of Section 860G of the Code
as a result of such defeasance, (c) an agreed upon procedures report from a
"Big Six" independent certified public accounting firm documenting procedures
performed regarding information prepared by the AAPT Borrowers, showing (i)
the stream of income to be generated by the AAPT Defeasance Deposit and (ii)
all Scheduled Defeasance Payments (as hereinafter defined) and other amounts
required to be paid by the AAPT Borrowers in connection with a defeasance,
and a comparison thereof, and (d) such other certificates, documents or
instruments as the mortgagee may reasonably request.
"AAPT Defeasance Deposit" means an amount equal to the sum of (i) the
remaining principal amount of the note evidencing the AAPT Fixed Component
(in the case of a total defeasance), the AAPT Release Amount for the related
AAPT Property (in the case of a partial defeasance with release of an AAPT
Property) or the principal amount of the portion of the AAPT Fixed Component
to be defeased (in the case of a partial defeasance without release of an
AAPT Property), as applicable, (ii) without duplication, all costs and
expenses incurred or to be incurred in the purchase of U.S. government
securities providing payments on or prior to, but as close as possible to,
all successive Due Dates upon which interest and principal payments are
required under the AAPT Fixed Component after the AAPT Defeasance Date and
through and including the AAPT Fixed Component Anticipated Repayment Date,
and in amounts equal to the scheduled payments due on such dates (assuming
for this purpose that the entire unpaid principal balance of the AAPT Fixed
Component is due and payable on the AAPT Fixed Component Anticipated
Repayment Date (the "Scheduled Defeasance Payments"), and (iii) any revenue,
documentary stamp or intangible taxes or any other tax or charge due in
connection with the transfer of one or more of the notes, the creation of one
or more defeased notes and undefeased notes, if applicable, any transfer of
one or more defeased notes or otherwise required to satisfy the terms of the
AAPT Fixed Component.
Upon receipt of the AAPT Defeasance Deposit, the mortgagee, using the AAPT
Defeasance Deposit, will purchase U.S. government securities on behalf of the
applicable AAPT Borrowers and, in the case of a defeasance in whole, such
U.S. obligations will serve as the sole collateral for the payments
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of the amounts due under the AAPT Fixed Component. Upon a deposit of U.S.
government securities, in the case of total defeasance, the AAPT Borrowers
will assign all obligations, rights and duties under the AAPT Pool Loan to an
entity or entities established or designated by the mortgagee (the "AAPT
Successor Borrower"). The AAPT Successor Borrower shall assume, and the AAPT
Borrowers shall be relieved of, the obligations under the AAPT Pool Loan,
other than as specifically provided in the AAPT Pool Loan agreement. The
mortgagee will cause such obligations to be assumed by a special-purpose
bankruptcy-remote entity.
In connection with the defeasance of the AAPT Fixed Component, the
applicable AAPT Borrower will be permitted to obtain the release of one or
more of the AAPT Properties from the lien of the related Mortgage, provided
that no event of default exists and subject to the further conditions that
(a) if the defeasance is in connection with a release of less than all of the
AAPT Properties, the AAPT Borrowers provide (i) evidence satisfactory to the
mortgagee that following such release the AAPT Debt Service Coverage Ratio as
of the date of the proposed release will not be less than the greater of (A)
the AAPT Debt Service Coverage Ratio as of the date of the proposed release
before giving effect to the proposed release and (B) 1.65 to 1.0, and (b) the
AAPT Borrowers defease a principal portion of AAPT Fixed Component equal to
(i) the AAPT Release Amount of the AAPT Property being released in the case
of a release of less than all of the AAPT Properties or (ii) an amount equal
to the entire principal balance of the AAPT Fixed Component for a full
defeasance in the case of the release of all of the AAPT Properties.
"AAPT Debt Service Coverage Ratio" means, for any period, the quotient
obtained by dividing the net operating income of the applicable AAPT
Properties for the twelve month period ending on the last day of the calendar
quarter immediately preceding such date by the greater of (x) the aggregate
interest and principal payments actually due and payable on the portion of
the AAPT Pool Loan (other than any defeased portion of such portion of the
AAPT Pool Loan) equal to the AAPT Allocated Loan Amount in respect of such
AAPT Properties for such period and (y) the aggregate interest and principal
payment on such portion of the AAPT Pool Loan (other than any defeased
portion of such portion of the AAPT Pool Loan) during such period assuming a
loan constant (comprised of interest and amortization) of 9.23%. For purposes
of calculating the AAPT Debt Service Coverage Ratio on or prior to April 30,
1998, for any period prior to April 30, 1997 the aggregate interest and
principal payments shall be calculated assuming a loan constant (comprised of
interest and amortization) of 9.23%. For purposes of calculating the AAPT
Debt Service Coverage Ratio for any prospective period, net operating income
shall be calculated assuming that tenants are in possession, paying rent
(except to the extent that leases expire by their terms during such period
and are not renewed or intended to be renewed by the applicable tenant) and
assuming receipt of such other operating income, and payment of such
operating expenses, as shall be reasonably agreed between the mortgagee and
the AAPT Borrowers, and the aggregate interest and principal payments shall
be calculated assuming a loan constant (comprised of interest and
amortization) of 9.23%.
"AAPT Allocated Loan Amount" means, with respect to each AAPT Property,
the portion of the principal amount of the AAPT Pool Loan allocated to each
such AAPT Property agreed upon by GSMC and the AAPT Borrowers and determined
as described under the definition of "Allocated Loan Amount" set forth above
under "Mortgage Pool Characteristics--Certain Characteristics of the Mortgage
Loans" herein.
"AAPT Release Price" means (a) with respect to the AAPT Property known as
Main Street Center, in the event that the net proceeds from a sale or
transfer thereof or the net proceeds in respect of any casualty or
condemnation in connection therewith (i) are 120% of the AAPT Allocated Loan
Amount for such AAPT Property or less, 120% of the AAPT Allocated Loan Amount
for such AAPT Property, (ii) are 135% of the AAPT Allocated Loan Amount for
such AAPT Property or more, 135% of the AAPT Allocated Loan Amount for such
AAPT Property, or (iii) are greater than 120%, but less than 135%, of the
AAPT Allocated Loan Amount for such AAPT Property, the actual amount of such
net proceeds; and (b) with respect to any other AAPT Property, 120% of the
AAPT Allocated Loan Amount for such AAPT Property.
"AAPT Release Amount" means an amount equal to the excess of (i) the AAPT
Release Price for a particular AAPT Property over (ii) the scheduled payments
of principal made in respect of the AAPT
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Pool Loan allocated to such AAPT Property (based on the relative AAPT
Allocated Loan Amounts for all AAPT Properties), such allocation to be made
only at the time an AAPT Release Amount is to be calculated; provided that in
no event shall (x) the AAPT Release Amount for a particular AAPT Property be
greater than the outstanding principal balance of the AAPT Pool Loan and (y)
any other prepayment of principal of the AAPT Pool Loan result in a reduction
of the AAPT Release Amount.
Alteration. Except upon compliance with certain conditions set forth in
the AAPT Pool Loan documents, each AAPT Borrower is prohibited from (i)
making or permitting any demolition, alteration, installation or improvement
(including in connection with its compliance with any legal requirement) to
the AAPT Property or Properties owned by it or any part thereof or (ii)
expanding or reducing any such AAPT Property or Properties or the
improvements thereon.
Reserves. Pursuant to the terms of the AAPT Pool Loan, the AAPT Borrowers
are required to fund the following reserves: (i) a tax and insurance escrow
account to be funded monthly from funds available in the deposit account in
an amount equal to (a) one-twelfth (1/12) of the taxes, assessments,
impositions and other governmental charges that the mortgagee reasonably
estimates will be payable in the next ensuing 12 months and (b) one-twelfth
(1/12) of the insurance premiums that the mortgagee reasonably estimates will
be payable for the renewal of the coverage required to be maintained under
the AAPT Pool Loan, (ii) a leasing reserve account to cover the cost of
tenant improvement expenses and leasing commissions incurred by the AAPT
Borrowers, which, to the extent an AAPT Credit Facility has not been provided
therefor, is to be funded monthly from funds available in the deposit account
such that the balance in the account shall be not less than the balance
specified for such year in the AAPT Pool Loan agreement (which, for all
calendar years during the term of the AAPT Pool Loan, is $6,264,200, other
than in 2004, in which case such amount will be $8,164,200, and in 2008, in
which case such amount will be $7,464,200) (subject to reduction in
connection with the release of any AAPT Property), (iii) a capital reserve
account to cover the cost of routine capital improvements (excluding tenant
improvements and leasing commissions and excluding the costs associated with
certain deferred maintenance items identified at the time of the closing of
the AAPT Pool Loan), to the extent an AAPT Credit Facility has not been
provided therefor, to be funded from cash flow in equal amounts of
approximately $51,034.42 per month (subject to reduction in connection with
the release of any AAPT Property), (iv) a deferred maintenance reserve
account, funded at the closing of the AAPT Pool Loan, in the initial
aggregate amount of $286,000 for the payment of the cost of capital
renovations at certain AAPT Properties, (v) an unpaid tenant improvements and
leasing commissions account, funded at the closing of the AAPT Pool Loan, in
the initial aggregate amount of $1,345,955 for the payment of unpaid tenant
improvement and leasing commissions costs related to specified leases as of
the date of the closing of the AAPT Pool Loan, (vi) a low debt service
reserve account into which the gross receipts from the AAPT Properties, less
items (i) through (vii) specified in "--Cash Management; Lockbox", to be
funded if, as of any date, the net operating income of the AAPT Properties
for the twelve (12) month period preceding the Due Date is less than
$18,000,000. If, as of any date, the net operating income for the AAPT
Properties for the prior twelve (12) calendar month period is less than
$16,000,000, or an event of default has occurred and is continuing, the
mortgagee shall apply the proceeds of the low debt service reserve account as
a partial prepayment of the AAPT Pool Loan (such amounts shall be reduced if
any AAPT Property is released from the lien of the related Mortgage). If,
after the establishment of the low debt service reserve account, the trailing
12 month net operating income for the AAPT Properties exceeds $18,000,000 for
4 consecutive quarters, and provided no event of default has occurred and is
continuing, all funds in the low debt service reserve account will be
released to the AAPT Borrowers.
For each of the accounts referred to in (ii), (iii), (iv) and (v) above,
an AAPT Credit Facility in lieu thereof may be provided until the AAPT Fixed
Component Anticipated Repayment Date. From and after the AAPT Fixed Component
Anticipated Repayment Date, all such Credit Facilities in lieu of such
accounts shall be replaced with immediately available funds and, to the
extent that immediately available funds have not been deposited in such
accounts prior to the AAPT Fixed Component Anticipated Repayment Date, the
mortgagee shall have the right at any time on or after such date to draw upon
any such Credit Facilities delivered in lieu of deposits and hold the
proceeds of such Credit Facilities and apply the proceeds in accordance with
the terms of the AAPT Pool Loan agreement.
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In connection with the substitution of an individual AAPT Property as
described below, appropriate adjustments will be made to the deferred
maintenance reserve account, the unpaid tenant improvements and leasing
commissions account, and any other reserve accounts specifically allocated to
such individual AAPT Property, or to any AAPT Credit Facility in lieu of
deposits in such account in an amount as the mortgagee shall reasonably
approve. In addition, the threshold amounts for the low debt service reserve
account shall be reduced in the event of the release of any AAPT Property
from the lien of the applicable Mortgage, by an amount equal to the product
of such threshold amount multiplied by a fraction, the numerator of which is
the original AAPT Allocated Loan Amount for such AAPT Property, and the
denominator of which is the original aggregate principal amount of the AAPT
Pool Loan.
An "AAPT Credit Facility" means a clean, irrevocable, unconditional
transferable letter of credit, payable on sight draft only, in favor of the
mortgagee and entitling the mortgagee to draw thereon in New York, New York
or in such other city as the mortgagee's corporate trust office may be
located at the time of issuance of such letter of credit, issued by a
domestic bank or the U.S. agency or branch of a foreign bank the long-term
unsecured debt rating of which at the time such letter of credit is delivered
and throughout the term of such letter of credit is not less than the
Required Rating (as defined below), or, if there are no domestic banks or
U.S. agencies or branches of a foreign bank having such long-term unsecured
debt rating then issuing letters of credit, then such letter of credit may be
issued by a domestic bank the long-term unsecured debt rating of which is not
lower than "AA" by the Rating Agencies and in respect of which (a) any
reimbursement obligation is not secured by any of the AAPT Properties or any
other property pledged to secure the AAPT Pool Loan and (b) the AAPT
Borrowers shall be permitted to have a contingent reimbursement obligation
only in favor of the bank that issued the AAPT Credit Facility, if and only
if, (i) such bank's rights with respect to such reimbursement obligation are
fully subordinated to payment of the AAPT Pool Loan, (ii) no payment shall be
made to such bank in respect of such reimbursement obligation during the
occurrence and continuation of an event of default, and (iii) such bank shall
be prohibited from exercising any and all remedial action against the AAPT
Borrowers in connection therewith until all obligations under the AAPT Pool
Loan documents shall have been paid in full. See "Risk Factors--The Mortgage
Loans--Other Financing" herein. As of the closing date of the AAPT Pool Loan,
The Chase Manhattan Bank and PNC Bank, National Association were specifically
approved as providers of an AAPT Credit Facility, so long as the long term
senior unsecured credit rating of such provider is not less than its rating
as of such date. "Required Rating" means the higher of (i) the highest rating
then assigned by the Rating Agencies to any of the outstanding Certificates
or (ii) "A" (or its equivalent) by S&P and Moody's.
Cash Management; Lockbox. The AAPT Borrowers are required to direct all
tenants at the AAPT Properties to make all checks in respect of sums due to
the AAPT Borrowers under the leases in effect at the AAPT Properties payable
directly to the applicable property-level sweep account, to be maintained
under the sole dominion and control of the mortgagee and to deliver all
checks and payments directly to the applicable property manager for deposit
into the deposit account or the applicable property-level sweep account. The
applicable property manager is required to deposit such checks and payments
into the applicable property-level sweep account or the deposit account on
the same business day such checks and payments are received. The funds in
each property-level sweep account, if greater than or equal to $1,000, shall
be swept daily into the deposit account. The deposit account is to be
maintained in the name of the mortgagee, under the sole dominion and control
of the mortgagee. From and after the AAPT LIBOR Component Anticipated
Repayment Date or if an event of default shall have occurred and be
continuing, the AAPT Borrowers shall direct all tenants at the AAPT
Properties to deliver such checks and payments directly to the mortgagee or
its agent.
On each Due Date, provided no default or event of default has occurred and
is continuing, the mortgagee will distribute funds from the deposit account
in the following order: (i) to the tax and insurance escrow account, (ii) to
the AAPT Borrowers to pay ground rent, if any, for each ground leased AAPT
Property, (iii) to fund the AAPT Monthly Debt Service Payment Amount, (iv) to
the AAPT Borrowers in an amount equal to the budgeted operating expenses (or
if the AAPT Borrowers timely request additional amounts to pay operating
expenses, up to an additional 5% of the budgeted amount for any AAPT
Property, but in no event more than 5% of such month's budgeted amount for
operating expenses)
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for the month immediately prior to the month in which such Due Date occurs
(provided that the AAPT Borrowers shall have delivered to the mortgagee an
officer's certificate certifying that there are not outstanding for more than
60 days any amounts claimed by any creditor to be due and owing from the AAPT
Borrowers (except for claims any AAPT Borrower is in good faith contesting),
and that the amounts disbursed to the AAPT Borrowers pursuant to this clause
(iv) shall be used by the AAPT Borrowers solely to pay their creditors for
costs and expenses incurred to date, (v) to fund the leasing reserve account
to the extent necessary to bring the balance thereof to the applicable
leasing reserve account balance for such year, unless an AAPT Credit Facility
in lieu thereof has been provided and is permitted, (vi) to fund the capital
reserve account in an amount equal to approximately $51,034.42 per month
(subject to reduction in connection with the release of any AAPT Property)
(regardless of the amount in the capital reserve account), unless an AAPT
Credit Facility in lieu thereof has been provided and is permitted, (vii) to
the AAPT Borrowers in an amount equal to the budgeted capital expenses for
the month immediately prior to the month in which such Due Date occurs
(provided that the AAPT Borrowers shall have delivered to the mortgagee an
officer's certificate certifying that there is not outstanding for more than
60 days any amounts claimed by any creditor to be due and owing from the AAPT
Borrowers for prior capital improvements (except for claims any AAPT Borrower
is in good faith contesting and the payment for which the AAPT Borrowers have
escrowed with the mortgagee), and that the amounts disbursed to the AAPT
Borrowers pursuant to this clause (vii) shall be used by the AAPT Borrowers
solely to pay for budgeted capital expenditures, (viii) if applicable, to the
low debt service reserve account, (ix) to pay the costs of extraordinary
capital expenditures approved in writing by the mortgagee, (x) from and after
the AAPT LIBOR Component Anticipated Repayment Date to (but excluding) the
AAPT Fixed Anticipated Repayment Rate, to prepay the principal due under the
AAPT LIBOR Components (pro rata based on the then outstanding principal
amounts of the AAPT LIBOR A Component and the AAPT LIBOR B Component) until
the aggregate principal amount of the AAPT LIBOR Components is paid in full
and then to pay the AAPT LIBOR Excess Interest, (xi) from and after the AAPT
Fixed Component Anticipated Repayment Date, to prepay principal due under the
AAPT Pool Loan (pro rata based on the then outstanding principal amounts of
the AAPT Fixed Component, the AAPT LIBOR A Component and the AAPT LIBOR B
Component) until the aggregate principal balance of the AAPT Pool Loan is
paid in full, and then to pay the AAPT Excess Interest (pro rata based on the
then AAPT Excess Interest due with respect to each of the AAPT Fixed
Component, the AAPT LIBOR A Component and the AAPT LIBOR B Component), (xii)
to the extent payable following an event of default, interest accrued and
unpaid at the excess of the applicable default rate over the applicable
interest rate, (xiii) if no event of default has occurred, to each AAPT
Borrower or its designee, any funds remaining in the deposit account. In the
mortgagee's sole discretion, the mortgagee may permit a distribution under
clause (xiii) above notwithstanding the occurrence of an event of default.
The AAPT Borrowers have directed that any funds transferable to such AAPT
Borrowers, pursuant to clause (xiii) above, be transferred to the AAPT Parent
Borrowers (or their designees). So long as the low debt service reserve
account is required to be maintained, to the extent that funds are available
in the low debt service reserve account, the mortgagee shall, on each Due
Date, transfer funds from such account to the AAPT Parent Borrowers (or their
designees) in such amount as shall be sufficient to pay the monthly debt
service obligations of such AAPT Parent Borrowers under the AAPT Parent
Loans.
Transfer of Properties and Interests in the AAPT Borrowers;
Encumbrance. Unless permitted by the AAPT Pool Loan documents as described
below, and with the exception of leases entered into in accordance therewith
and the AAPT Permitted Encumbrances, each AAPT Borrower will not (A) sell,
assign, convey, transfer or otherwise dispose of or encumber legal,
beneficial or equitable interests in the related AAPT Property or any part
thereof, (B) permit or suffer any owner, directly or indirectly, of a
beneficial interest in the related AAPT Property to transfer such interest,
whether by transfer of stock or other beneficial interest in any entity or
otherwise, (C) mortgage, hypothecate or otherwise encumber or grant a
security interest in the related AAPT Property or any part thereof or (D)
file a declaration of condominium with respect to the related AAPT Property.
So long as no event of default shall have occurred and be continuing and
the AAPT Parent Loans shall have been paid in full in accordance with the
terms thereof, the AAPT Borrowers and each of them may sell, assign, convey,
transfer or otherwise dispose of legal or equitable title to or any interest
in all of the AAPT Properties (but not less than all of the AAPT Properties)
only collectively, in a single transaction, if:
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(A) the transferee of the AAPT Properties assumes in writing all of the
obligations of the AAPT Borrowers under the AAPT Pool Loan, and unless the
transferee is any of Cali Realty Corp., Highwoods Properties, Inc.,
Spieker Properties, Inc., Beacon Properties, or Vornado Realty Trust
(each, a "Listed Permitted Owner") and the transfer occurs within 24
months of the closing date of the AAPT Pool Loan, the mortgagee shall have
received written confirmation from each of the Rating Agencies that the
transfer will not result, in and of itself, in a reduction, withdrawal or
qualification of any rating then assigned to any outstanding Certificates;
(B) the AAPT Properties will be owned directly by one or more single
purpose entities, which at the time of such transfer will be in compliance
with the single-purpose covenants contained in the AAPT Pool Loan
agreement and which shall have assumed in writing (subject to the
exculpation provisions of the AAPT Pool Loan agreement) and agreed to
comply with all the terms, covenants and conditions set forth therein and
the other AAPT Pool Loan documents pursuant to an assumption agreement in
form and substance reasonably satisfactory to the mortgagee, and shall
have delivered to the mortgagee such other documents and deliveries as the
mortgagee may reasonably require to confirm the security interests granted
to it pursuant to the AAPT Pool Loan documents consistent with the
documents and deliveries required by the AAPT Pool Loan agreement;
(C) the transferee is a Listed Permitted Owner and the transfer closes
within 24 months of the closing date of the AAPT Pool Loan or the
transferee is otherwise an AAPT Permitted Owner (as defined below), or
will be wholly owned, directly or indirectly, by such Listed Permitted
Owner or AAPT Permitted Owner;
(D) if 20% or more of the aggregate leaseable square feet of the AAPT
Properties will be managed by an unaffiliated third party property manager
that is not an AAPT Acceptable Manager, the mortgagee has approved of such
manager and has received written confirmation from each of the Rating
Agencies that such action will not result, in and of itself, in a
reduction, withdrawal or qualification of any rating then assigned to any
outstanding Certificates;
(E) no event of default will occur as a result of such transaction; and
(F) if the transfer is not to an affiliate of the AAPT Borrowers, the
proposed transferee must deliver an officer's certificate stating that:
(1) such transferee is an employee benefit plan that is subject to Title I
of ERISA (an "ERISA Plan") or a "plan" within the meaning of Section 4975
of the Code (together with an ERISA Plan, a "Plan") or an entity the
underlying assets of which constitute "plan assets" within the meaning of
29 C.F.R. Section 2510.3-101 and the obligations under the AAPT Pool Loan
agreement are not, and the exercise of rights under the AAPT Pool Loan
agreement will not, constitute a non-exempt prohibited transaction as a
result of such transfer; or (2) the transferee is a "governmental plan"
(as defined Section 3(32) of ERISA), and the obligations under the AAPT
Pool Loan agreement, and the exercise of rights under the AAPT Pool Loan
agreement, do not and will not violate any applicable state statutes
regulating investments by or fiduciary obligations with respect to
governmental plans as a result of such transfer; or (3) the proposed
transferee is neither a Plan nor a "governmental plan", and such proposed
transferee is not subject to state statutes regulating investments by or
fiduciary obligations with respect to "governmental plans" and the
underlying assets of the proposed transferee do not, for purposes of
ERISA, constitute "plan assets" of one or more ERISA Plans within the
meaning of 29 C.F.R. Section 2510.3-101.
An "AAPT Permitted Owner" means a Listed Permitted Owner or a transferee
which (A) has a long-term unsecured debt rating of at least investment grade,
as determined by the Rating Agencies; (B) has a current net worth of at least
$500 million and controls office building and/or industrial real estate
equity assets of at least $1 billion, in each case exclusive of the AAPT
Properties (or, in the case of a pension fund adviser, controls at least $1
billion of office building and/or industrial real estate equity assets) or is
a pension fund, pension trust or pension account that has total assets of at
least $500 million (exclusive of the AAPT Properties), and who is managed by
a person who controls at least $1 billion of office building and/or
industrial property real estate equity assets (exclusive of the AAPT
Properties); (C) is, or is controlled by, either a pension fund, a pension
trust or pension account, an insurance company,
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a national money-center bank or a person who has a long-term unsecured debt
rating of at least investment grade, as determined by the Rating Agencies;
and (D) has an entity structure approved by the mortgagee (such approval not
to be unreasonably withheld, conditioned or delayed).
For these purposes, "control" or "controlling" means having (either
directly or indirectly) primary responsibility to make or veto all material
decisions with respect to the operation, management and disposition of
another person's real estate assets (including decisions regarding sales,
acquisitions and financings) rather than a beneficial ownership requirement,
and without being compromised by the fact that responsibility for such
day-to-day operating and management functions or leasing activities as are
ordinarily handled by a property manager has been delegated by such
controlling person pursuant to an agreement in writing.
An "AAPT Acceptable Manager" means (i) Atlantic American Properties
Management, Inc. or, as to the office properties located in Virginia, Morton
G. Thalhimer, Inc. or (ii) a reputable and experienced professional
management company or an in-house property management department which, at
the time of its engagement by an AAPT Borrower as manager, is (A) if to
manage office properties, manages at least 15 office buildings containing in
the aggregate at least the greater of 1 million leaseable square feet or 3
times the number of leaseable square feet in the AAPT Properties to be
managed (in all cases excluding the AAPT Properties) or (B) if to manage
industrial properties, manages at least 25 industrial buildings containing in
the aggregate at least the greater of 500,000 leaseable square feet or 3
times the number of leaseable square feet in the AAPT Properties to be
managed (in all cases, excluding the AAPT Properties).
The AAPT Borrowers may transfer all of the AAPT Properties owned by the
AAPT Borrowers collectively to AAPOP 1, L.P. or another affiliate of Lazard
Freres Real Estate Investors LLC ("LFREI"), or collectively merge with or
consolidate into AAPOP 1, L.P. or any affiliates thereof or another affiliate
of LFREI, subject to compliance with the applicable provisions of the AAPT
Parent Loan documents, the provisions contained in clauses (B), (D) and (E)
above (except for the requirement that the AAPT Parent Loans be repaid in
full) and the applicable notice requirements.
Transfers of Beneficial Interests in Atlantic American Properties
Trust. Transfers of direct or indirect interests in Atlantic American
Properties Trust, a Maryland real estate investment trust ("AAPT") which is
the indirect parent company of the AAPT Borrowers, shall be permitted so long
as (X) LFREI and/or an affiliate thereof retains at least 51% of the
controlling interests in AAPT, (Y) the AAPT Borrowers shall deliver to the
mortgagee (i) an officer's certificate describing the proposed transaction
and stating that such transaction is permitted by the AAPT Pool Loan
documents, together with any documents upon which such officer's certificate
is based, and (ii) a legal opinion of counsel to the AAPT Borrowers or the
transferee selected by either of them (unless reasonably disapproved by the
mortgagee), in form and substance consistent with similar opinions then being
required by the Rating Agencies, confirming, among other things, that the
assets of the AAPT Borrowers or the new borrowers will not be substantively
consolidated with the assets of certain owners or controlling persons of such
AAPT Borrowers or new borrowers in a bankruptcy or similar proceeding and (Z)
the conditions set forth in "--Transfer of Properties and Interests in the
AAPT Borrowers; Encumbrance" above are satisfied.
Pledges to AAPT Parent Lender. Pledges of ownership interests by limited
partners of any AAPT Borrower and pledges of stock of the general partner or
managing member of any AAPT Borrower, to the AAPT Parent Lender, and any
transfer upon or in lieu of foreclosure in respect of such pledge, and any
subsequent transfer by such pledgee, shall not be a default under the AAPT
Pool Loan.
Substitution of Individual Properties. An AAPT Borrower may substitute for
any AAPT Property owned by such AAPT Borrower, a property (an "AAPT
Substitute Property") of like kind and quality, provided (i) no event of
default shall have occurred and be continuing, (ii) written confirmation from
each of the Rating Agencies that such property substitution will not result,
in and of itself, in a reduction, withdrawal or qualification of any rating
then assigned to any outstanding Certificates shall have been provided, (iii)
the AAPT Debt Service Coverage Ratio for all of the AAPT Properties as of
such date (assuming the proposed substitution of the AAPT Substitute
Property) will be at least equal to the greater of (A) the AAPT Debt Service
Coverage Ratio for all of the AAPT Properties as of such date (including
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the applicable AAPT Property to be substituted) or (B) 1.65 to 1.0, and (iv)
the mortgagee shall have been provided an opinion of counsel (which may be
based on reasonable assumptions and representations and warranties of the
applicable AAPT Borrower) to the effect that a "significant modification" of
the AAPT Pool Loan within the meaning of Treasury Regulations Section
1.860G-2 will not occur by reason of the proposed substitution. The
conditions precedent provided for by the AAPT Pool Loan agreement must be
satisfied as to the AAPT Substitute Property before the AAPT Property being
substituted for will be released from the lien of the related Mortgage. The
AAPT Borrowers are required to pay all costs and expenses in connection with
any such substitution, including, but not limited to, reasonable fees and
disbursements of counsel, appraisal fees, engineering fees, costs of
environmental audits, title insurance premiums, survey charges, mortgage and
documentary stamp taxes, if any, note intangible taxes, if any, and recording
charges.
Insurance. Each AAPT Borrower is required to maintain, at its sole cost
and expense, for the mutual benefit of such AAPT Borrower and the mortgagee,
policies of insurance against loss or damage by standard perils included
within the classification "All Risks of Physical Loss". Such insurance must
be maintained in an aggregate amount equal to the then full replacement cost
of the applicable AAPT Property or Properties and related assets (without
deduction for physical depreciation) and must have deductibles no greater
than the greater of (i) 5% of Net Operating Income for such AAPT Property or
Properties for the 12 month period immediately preceding June 30, 1997 and
(ii) $100,000. To the extent commercially available at reasonably rates if it
is customarily obtained for properties in the vicinity of the applicable AAPT
Property or Properties, earthquake coverage shall be obtained as part of such
policy. Each AAPT Borrower must also maintain the following policies of
insurance: (a) flood insurance if any part of an AAPT Property is located in
an area identified by the Federal Emergency Management Agency as an area
federally designated a "100 year flood plain" and flood insurance is
generally available at commercially reasonable premiums and in such amounts
as generally are required by institutional lenders for similar properties
(or, if not so available from a private carrier, from the federal government
at commercially reasonable premiums to the extent available), in either case,
in an amount at least equal to the lesser of the AAPT Allocated Loan Amount
for such AAPT Property or the maximum limit of coverage available under said
program with respect to such AAPT Property; (b) comprehensive general
liability insurance, including broad form property damage, blanket
contractual and personal injuries (including death resulting therefrom)
coverages and containing minimum limits per occurrence of $2,000,000 for any
policy year, as well as at least $50,000,000 excess and/or umbrella liability
insurance, and at all times, at least $10,000,000 excess and/or umbrella
liability insurance shall be available (such that, at all times, such
coverage shall be maintained against which no claim shall have been asserted)
and maintained for any and all claims, including all legal liability imposed
on the AAPT Borrowers and all related court costs and attorneys fees; (c)
rental loss and/or business interruption insurance in an amount equal to the
greater of estimated gross revenues payable to such AAPT Borrower and
anticipated operating expenses needed to maintain and operate such AAPT
Property or Properties, in each case for 2 years, as adjusted from time to
time; (d) insurance against loss or damage from leakage of sprinkler systems
and explosion of steam boilers, air conditioning equipment and high pressure
piping, machinery and equipment, pressure vessels or similar apparatus and
against loss of occupancy or use arising from any such breakdown, in such
amounts as are generally available at commercially reasonable premiums and
are generally required by institutional lenders for property comparable to
such AAPT Property; (e) worker's compensation insurance with respect to any
employees of such AAPT Borrower, as and to the extent required by any
governmental authority or applicable law or regulation; (f) during any period
of repair or restoration, builder's "all risk" insurance in an amount not
less than full insurable value of the applicable AAPT Property against such
risks (including fire and extended coverage and collapse of the improvements
to agreed limits) as are customarily obtained for such work by prudent owners
in the locality where the applicable AAPT Property is located; (g) coverage
to compensate for the cost of demolition and the increased cost of
construction in an amount reasonably satisfactory to the mortgagee; and (h)
such other insurance as may from time to time be reasonably required by the
mortgagee. The AAPT Pool Loan requires insurers to have claims paying
abilities rated "AA" or better by the applicable Rating Agencies.
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Casualty and Condemnation. In the event of any casualty or condemnation
at an AAPT Property where the loss is in an aggregate amount less than (i) as
to the Main Street Center Property, 30% of the AAPT Allocated Loan Amount for
the affected individual AAPT Property or (ii) with respect to any other AAPT
Property, 45% of the AAPT Allocated Loan Amount for the affected individual
AAPT Property, the mortgagee shall permit the application of the insurance
and condemnation proceeds resulting therefrom (after reimbursement of any
expenses reasonably incurred by the AAPT Borrowers or the mortgagee in
collecting the insurance proceeds) to pay, or to reimburse the applicable
AAPT Borrower, at the option of the applicable AAPT Borrower, for the cost of
restoring, repairing, replacing or rebuilding the affected individual AAPT
Property in the manner described below, provided and on the condition that,
no event of default has occurred and is then continuing and, in the
reasonable judgment of the mortgagee exercised in good faith: (i) the
individual AAPT Property can be restored to an economic unit not less
valuable and not less useful than the same was prior to the casualty or
condemnation, (ii) the restoration can be completed by the earliest to occur
of: (A) the 365th day following the casualty or condemnation, or, with
written confirmation from each of the Rating Agencies that extension of such
period will not, in and of itself, result in a reduction, withdrawal or
qualification of any rating then assigned to any outstanding Certificates,
such longer period as may reasonably be required, (B) the 180th day prior to
the AAPT Maturity Date, and (C) with respect to a casualty, the expiration of
the payment period on the rental-loss insurance coverage in respect of such
casualty, and (iii) during the period of the restoration, the sum of (A)
income derived from the affected individual AAPT Property, plus (B) proceeds
of rent loss insurance or business interruption insurance, if any, payable
will equal or exceed 105% of the sum of (1) operating expenses for such
individual AAPT Property and (2) the debt service in respect of the AAPT
Allocated Loan Amount for such individual AAPT Property.
If any of the foregoing conditions are not satisfied, then, unless the
mortgagee shall otherwise elect, at its sole option, the proceeds shall be
applied to the prepayment of the AAPT Pool Loan in accordance with the terms
described below, and the applicable AAPT Borrower shall be entitled to
receive a release of the lien affecting such individual AAPT Property in
accordance with and subject to the terms of the AAPT Pool Loan agreement (in
which event such proceeds shall be applied against the AAPT Release Amount
for such individual AAPT Property).
In the event of a casualty where the loss is in an aggregate amount equal
to or more than (i) as to the Main Street Center Property, 30% of the AAPT
Allocated Loan Amount for the affected individual AAPT Property or (ii) with
respect to any other AAPT Property, 45% of the AAPT Allocated Loan Amount for
the affected individual AAPT Property (a "Material Casualty" or "Material
Condemnation", as applicable), then the mortgagee shall have the option (to
be exercised by notice given to the applicable AAPT Borrower not later than
the 30th day after the receipt of the proceeds) to apply the net proceeds to
the prepayment of the AAPT Pool Loan in accordance with the terms described
below (and the applicable AAPT Borrower shall be entitled to receive a
release of the lien affecting such individual AAPT Property in accordance
with and subject to the terms of the AAPT Pool Loan agreement (in which event
such proceeds shall be applied against the AAPT Release Amount for such
individual AAPT Property) or to reimburse the applicable AAPT Borrower for
the cost of any restoration in the manner described below (and the mortgagee
shall be deemed to have elected prepayment if it shall fail to have given
notice within said 30-day period)).
Any application of proceeds to the repayment (or defeasance, to the extent
that the AAPT LIBOR Components have been paid in full and such payment occurs
during the period from and after July 11, 2000 up to but not including the
AAPT Fixed Component Anticipated Repayment Date) of the AAPT Pool Loan as
described above shall be without any yield maintenance charge or prepayment
premium, except that if an event of default has occurred and is continuing,
then the AAPT Borrowers will be required to pay the yield maintenance payment
or prepayment premium, if any, that would be required in respect of the
principal being prepaid as a result of an acceleration of the AAPT Pool Loan
after an event of default. Any such application to the repayment of the AAPT
Pool Loan will be applied to those payments of principal and interest last
due under the AAPT Pool Loan and will not postpone or reduce any payments
otherwise required pursuant to the AAPT Pool Loan other than such last due
payments.
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If an AAPT Borrower is entitled to reimbursement out of proceeds, such
proceeds will be disbursed from time to time upon the mortgagee being
furnished with (i) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats of
survey and such other evidences of cost, payment and performance as are
customary and reasonably obtainable by prudent property owners in the
locality in which the applicable AAPT Property is located and as the
mortgagee may reasonably require and approve, and (ii) all plans and
specifications for such restoration, such plans and specifications to be
approved by the mortgagee prior to commencement of any work (such approval
not to be unreasonably withheld or delayed). In addition, no payment made
prior to the final completion of the restoration shall exceed 95% of the
value of the work performed from time to time; funds deposited by the AAPT
Borrower with the mortgagee for any deficiency shall be disbursed prior to
disbursement of such proceeds; and at all times, the undisbursed balance of
such proceeds remaining in the hands of the mortgagee, together with funds
deposited for that purpose or irrevocably committed to the satisfaction of
the mortgagee by or on behalf of such AAPT Borrower for that purpose, will be
at least sufficient in the reasonable judgment of the mortgagee, exercised in
good faith, to pay for the cost of completion of the restoration, free and
clear of all liens or claims for liens. Prior to any disbursement, the
mortgagee shall have received evidence reasonably satisfactory to it of the
estimated cost of completion of the restoration, and such AAPT Borrower shall
have deposited with the mortgagee eligible collateral in an amount equal to
the excess (if any) of such estimated cost of completion over the net
proceeds. Any surplus which may remain out of proceeds received pursuant to a
casualty will be paid to such AAPT Borrower after payment of such costs of
restoration. Any surplus which may remain out of proceeds received pursuant
to a condemnation will be escrowed with the mortgagee as security for the
debt after payment of such costs of restoration.
Financial Reporting. The AAPT Borrowers are required to furnish to the
mortgagee within 85 days following the end of each fiscal year of the AAPT
Borrowers, a complete copy of the AAPT Borrowers' annual combined financial
statements, audited by a "Big Six" accounting firm or another independent
certified public accounting firm reasonably acceptable to the mortgagee,
prepared in accordance with generally accepted accounting principles,
covering the AAPT Borrowers (including the AAPT Properties) on a combined
basis for such fiscal year and containing a combined balance sheet and a
statement of operations. Together with the AAPT Borrowers' annual financial
statements, the AAPT Borrowers will also furnish to the mortgagee (A) an
officer's certificate certifying as of the date thereof whether, to the AAPT
Borrowers' knowledge, there exists a default or an event of default, and if
such default or event of default exists, the nature thereof, the period of
time it has existed and the action then being taken to remedy the same; (B)
then current rent rolls; and (C) an annual report, for the most recently
completed fiscal year, containing certain prescribed information relating to
occupancy levels, capital expenditures, and supplemental data showing results
for each AAPT Property which tie to the most recently prepared annual audited
combined financial statements, among other things.
In addition, the AAPT Borrowers are required to furnish, or cause to be
furnished, to the mortgagee on or before the 30th day after the end of each
calendar month, among other items, monthly and year-to-date operating
statements prepared for each month (on an aggregate and property-by-property
basis).
The AAPT Borrowers are also required to furnish, or cause to be furnished,
to the mortgagee on or before the 40th day after the end of each fiscal
quarter among other items quarterly and year-to-date combined financial
statements prepared for such fiscal quarter with respect to the AAPT
Properties, with a balance sheet as of the end of such quarter together with
a supplemental schedule of net operating income for such quarter on an
aggregate and property-by-property basis which ties to the operating
statements.
Leasing. Subject to certain limitations on the terms thereof and the
performance and enforcement of the rights of AAPT Borrowers thereunder, each
AAPT Borrower may, without prior written consent of the mortgagee, enter
into, renew, modify, and/or amend, and to the extent commercially reasonable,
terminate any lease affecting less than 150,000 square feet of an individual
AAPT Property.
The AAPT Parent Loans. Simultaneously with the making of the AAPT Pool
Loan by GSMC to the AAPT Borrowers, GSMC (the "AAPT Parent Lender") made two
loans (the "AAPT Parent Loans") to
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AAPOP 3, L.P., a Delaware limited partnership, and AAP Sub Four, Inc., a
Delaware corporation (each, an "AAPT Parent Borrower", and together, the
"AAPT Parent Borrowers") having an aggregate principal balance as of the
Cut-Off Date of approximately $33,300,000. The AAPT Parent Loans are secured
by a pledge of direct or indirect equity interests in the AAPT Borrowers
consisting of (i) 100% of the common stock of AAP Sub One, Inc., (ii) 0.25%
of the general partnership interests and 0.25% of the limited partnership
interests in AAPOP 3, L.P., and (iii) 98% of the general partnership
interests and 1% of the limited partnership interests in AAPOP 1 (each, an
"AAPT Pledged Subsidiary") and (iv) an assignment of the interest rate cap
agreement associated with the AAPT Parent Loans. In addition, the AAPT Parent
Loans are cross-defaulted and cross-collateralized, and repayment of the AAPT
Parent Loans is cross-guaranteed by each of the AAPT Parent Borrowers.
Among others, any of (i) a default in the payment of principal or interest
when due, (ii) a default for more than three days in the payment of fees or
other amounts due, (iii) a transfer or encumbrance of the pledged collateral
by any AAPT Parent Borrower or any AAPT Pledged Subsidiary, (iv) a failure by
LFREI or its affiliates to own at least 51% of the controlling interest in
any AAPT Parent Borrower, (v) a bankruptcy or insolvency event that is not
discharged, stayed or dismissed within 60 days, (vi) an attempted assignment
of any AAPT Parent Borrower's rights under the AAPT Parent Loan documents or
(vii) an event of default occurring under the AAPT Pool Loan, constitutes a
default under the AAPT Parent Loans and the AAPT Parent Lender has the right
to accelerate the AAPT Parent Loans and to foreclose on the collateral
securing the AAPT Parent Loans. The AAPT Parent Borrowers may not amend or
modify the AAPT Pool Loan or consent to or seek, and are required to exercise
any rights as an equity holder, if any, to prevent, any action which would
permit the amendment or modification of the AAPT Pool Loan in any manner that
would be adverse, in any material respect to the AAPT Parent Lender. Failure
to comply with the previous sentence beyond the applicable 10 day cure period
will constitute an event of default under the AAPT Parent Loans.
The AAPT Parent Loans bear interest at a floating rate per annum based on
a spread over LIBOR. The AAPT Parent Borrowers have purchased an interest
rate cap agreement in a notional amount equal to the aggregate principal
amount of the AAPT Parent Loans, between the AAPT Parent Borrowers and a
counterparty (as floating rate payor) that has a senior unsecured long-term
debt rating of "Aaa" as rated by Moody's. The highest effective interest rate
for the AAPT Parent Loans, based on such interest rate cap agreement
purchased by the AAPT Parent Borrowers, will be approximately 12%.The AAPT
Parent Loans are scheduled to mature on June 30, 2002. The AAPT Parent Loans
can be prepaid on any Due Date upon 5 days' prior notice specifying the
prepayment date and the amount of principal to be prepaid, and payment of a
prepayment premium of 3% in the first year, 2% in the second year, 1% in the
third year, and no prepayment premium thereafter. The AAPT Parent Loans are
required to be prepaid in part in certain circumstances, including but not
limited to a sale, transfer, or other disposition of ownership of an AAPT
Property or a casualty or condemnation of an AAPT Property in connection with
which an AAPT Borrower is required to repay a portion of the AAPT Pool Loan.
In the event of a sale, transfer or other disposition, or if the lien of the
related Mortgage is otherwise released from an AAPT Property, then each AAPT
Parent Borrower is required to repay its AAPT Parent Loan, or a portion
thereof, in an amount based on the allocated loan amount for such AAPT
Property established for the AAPT Parent Loans. In the event of a casualty or
condemnation, to the extent there are excess proceeds or awards following
application in accordance with the AAPT Pool Loan agreement, each AAPT Parent
Borrower is required to repay its AAPT Parent Loan, or a portion thereof, to
the extent of such available excess proceeds or awards. Failure of an AAPT
Parent Borrower to prepay its AAPT Parent Loan in the foregoing circumstances
will constitute an event of default under the AAPT Parent Loans.
THE 380 MADISON LOAN
The Loan. The 380 Madison Loan had a principal balance as of the Cut-Off
Date of $89,000,000. It is secured by a first priority mortgage lien
encumbering a 25-story office building located at 380 Madison Avenue, in the
Borough of Manhattan, County, City and State of New York.
Payment Terms. The 380 Madison Loan was originated by the related
Originator on June 30, 1997. The 380 Madison Loan matures on July 11, 2014
(the "380 Madison Maturity Date") and
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bears interest at a fixed rate per annum equal to 7.848% calculated on the
basis of the actual number of days in the period in question and a 360-day
year (the "380 Madison Interest Rate").
Commencing with the Due Date on August 11, 1997, and on each and every Due
Date thereafter through and including the Due Date on July 11, 2002, the 380
Madison Loan requires payments of interest in varying amounts based on the
actual number of days in each interest accrual period. Commencing on August
11, 2002, the 380 Madison Loan requires monthly payments of principal and
interest of $650,385 each paid in arrears (based on a 30-year amortization
schedule and the 380 Madison Interest Rate) (the monthly payments set forth
above shall individually and collectively be referred to as the "380 Madison
Monthly Debt Service Payment Amount"). Payment of the balance of the
principal, together with all accrued and unpaid interest is required on the
380 Madison Maturity Date. The scheduled principal balance of the 380 Madison
Loan as of the 380 Madison Maturity Date will be approximately $74,672,522.
After the occurrence and during the continuance of a "Major Default" (as
defined in the 380 Madison Loan documents), the entire outstanding principal
balance of the 380 Madison Loan will bear interest at a per annum default
rate equal to the lesser of (a) the maximum rate permitted by applicable law
or (b) the greater of (i) 500 basis points in excess of the 380 Madison
Interest Rate or (ii) 100 basis points in excess of the Citibank "base" rate.
Prepayment. Voluntary prepayment is prohibited under the 380 Madison Loan
documents except (i) in connection with certain casualty or condemnation
events and (ii) provided no default has occurred under the 380 Madison Loan
which is continuing, within sixty (60) days of the 380 Madison Maturity Date
(not subject to defeasance) provided that if such prepayment does not occur
on a Due Date, the 380 Madison Borrower is required to pay interest to (but
excluding) the next Due Date.
If all or any part of the principal amount of the 380 Madison Loan is
prepaid upon acceleration of the 380 Madison Loan following the occurrence of
an event of default, the 380 Madison Borrower will also be required to make a
yield maintenance payment in an amount equal to the excess, if any, of (i)
the sum of (A) the aggregate respective present values of all remaining
scheduled interest payments in respect of the 380 Madison Loan for the period
from the date of such prepayment to the 380 Madison Maturity Date, discounted
monthly at a rate equal to a treasury constant yield and based on a 360-day
year of twelve 30-day months and (B) the aggregate respective present values
of all scheduled principal payments in respect of the 380 Madison Loan (or
the then unpaid portion thereof to be prepaid upon acceleration) were such
amount paid in full on the 380 Madison Maturity Date, discounted monthly at a
rate equal to the treasury constant yield and based on a 360-day year of
twelve 30-day months over (ii) the then current outstanding principal amount
of the 380 Madison Loan (or the then unpaid portion thereof to be prepaid
upon acceleration).
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of the 380 Madison Property under
the 380 Madison Loan documents, the mortgagee will be entitled, at its
option, to apply such proceeds to prepay the 380 Madison Loan, as described
below under "--Casualty and Condemnation". No prepayment premium or penalty
will be payable upon any mandatory prepayment of the 380 Madison Loan in
connection with casualty or condemnation unless an event of default has
occurred and is continuing, in which case the 380 Madison Borrower will be
required to pay a yield maintenance payment calculated in the manner
described above.
Release in Exchange for Substitute Collateral. The 380 Madison Borrower is
permitted on any Due Date after the second anniversary of the Closing Date to
defease all (but not a portion) of the 380 Madison Loan with U.S. Treasury
obligations, provided that, among other conditions, the 380 Madison Borrower
gives the mortgagee at least thirty days' prior written notice of the date
(which must be a Due Date) of such defeasance (the "380 Madison Defeasance
Date") and provided further that the 380 Madison Borrower pays on the 380
Madison Defeasance Date (i) all accrued and unpaid interest on the 380
Madison Loan to but not including such date, and (ii) all other sums then due
under the 380 Madison Loan and the related loan documents, (iii) the 380
Madison Defeasance Deposit (as defined below) and (iv) all reasonable costs
and expenses of the mortgagee or Master Servicer incurred in connection with
the defeasance. In addition, the 380 Madison Borrower will be required to
deliver to the mortgagee
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among other things (a) all necessary documents to amend and restate the note
in the amount equal to the unpaid principal balance of the note subject to
defeasance, (b) a security agreement granting the Trustee a first priority
lien on the 380 Madison Defeasance Deposit and the U.S. Treasury obligations
purchased with the 380 Madison Defeasance Deposit, (c) an opinion of counsel
for the 380 Madison Borrower in form satisfactory to the mortgagee stating,
among other things, that the Trustee has a perfected security interest in the
U.S. Treasury obligations purchased with the 380 Madison Defeasance Deposit,
(d) a confirmation, in form and substance reasonably satisfactory to the
mortgagee, from a "Big Six" independent certified public accounting firm,
that the 380 Madison Defeasance Deposit is sufficient to pay all scheduled
payments due from the 380 Madison Borrower under the 380 Madison Loan in
connection with the proposed defeasance, and (e) written confirmation from
the Rating Agencies that there will be no downgrade, qualification or
withdrawal of the then current ratings of the Certificates upon defeasance.
"380 Madison Defeasance Deposit" means an amount equal to the sum of (i)
the outstanding principal amount of the Note, (ii) without duplication, any
costs and expenses incurred or to be incurred in the purchase of U.S.
government securities providing payments on or prior to, but as close as
possible to, all successive Due Dates upon which interest and principal
payments are required under the 380 Madison Loan after the 380 Madison
Defeasance Date and through and including the 380 Madison Maturity Date, and
in amounts equal to the scheduled payments due on such dates (assuming for
this purpose that the entire unpaid principal balance of the 380 Madison Loan
is due and payable on the 380 Madison Maturity Date), and (iii) any revenue,
documentary stamp or intangible taxes or any other tax or charge due in
connection with the transfer of the Note, the creation of the defeased note
and any transfer of the defeased note or otherwise required to satisfy the
terms of the 380 Madison Loan.
Upon receipt of the 380 Madison Defeasance Deposit, the mortgagee, using
the 380 Madison Defeasance Deposit, will purchase U.S. Treasury obligations
on behalf of the 380 Madison Borrower and such U.S. Treasury obligations will
serve as the sole collateral for the payments of the amounts due under the
380 Madison Loan. Upon a deposit of U.S. Treasury obligations, the 380
Madison Borrower will have the right to assign the obligation to make
payments under the 380 Madison Loan to a special-purpose bankruptcy-remote
entity designated by the Master Servicer.
In connection with the defeasance of the 380 Madison Loan, the 380 Madison
Borrower will be permitted to obtain the release and satisfaction of the
mortgage encumbering the 380 Madison Property.
Alterations. Except upon compliance with certain conditions set forth in
the loan agreement, the 380 Madison Borrower is prohibited from making or
permitting any demolition, alteration, installation or improvement to the 380
Madison Property or any part thereof.
Reserves. Pursuant to the terms of the 380 Madison Loan, after the
occurrence of an Operating Event and a 380 Madison Loan Trigger Event (each
as defined herein), among other things, and with respect to a NOI Trigger
Event during the continuance thereof (as such terms are hereinafter defined)
the 380 Madison Borrower is required to establish (i) a capital reserve
account to cover the cost of routine capital improvements, to be funded from
cash flow in equal amounts of approximately $14,615 per month, (ii) a tax and
insurance account to be funded monthly from funds available in the deposit
account in an amount equal to 1/12th of the aggregate insurance premiums and
taxes that the mortgagee reasonably estimates will be payable in the next
ensuing 12 months, and (iii) provided the 380 Madison Master Lessee or a
subtenant at the 380 Madison Property has not completed the Asbestos Work (as
hereafter defined), the 380 Madison Borrower shall as soon as reasonably
practical (after the 380 Madison Borrower or an affiliate obtains possession
of the 380 Madison Property) but in no event later than six (6) months after
the later of (x) the 380 Madison Borrower or an affiliate obtains possession
of the Property or (y) the space currently leased by The Chase Manhattan Bank
(the "Bank Space") becoming vacant (the "Removal Deadline"), complete or
cause the appropriate subtenant to complete the removal/remediation of
asbestos in accordance with that certain environmental phase one assessment
dated October 31, 1996 and prepared by Property Solutions Inc. (the "Asbestos
Work"). If the Asbestos Work is not completed by the Removal Deadline, the
380 Madison Borrower agrees to deposit $31,250 with Master Servicer to be
held as additional security for the 380 Madison Loan.
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As used herein, "380 Madison Loan Trigger Event" shall mean the earlier
to occur of: (i) an event of default under the 380 Madison Loan, (ii) one (1)
or both of the Beneficial Owners, a close affiliate thereof or a Qualified
Transferee, fail to own beneficially more than 50% of the 380 Madison
Borrower or fail to control the 380 Madison Borrower, and (iii) if, following
an Operating Event, the net operating income of the 380 Madison Property (as
determined by the mortgagee acting reasonably) is less than $15 million per
year on an annualized basis determined each month for the first 12 month
period or for any trailing 12 month period thereafter. Such 380 Madison Loan
Trigger Event set forth in subparagraph (iii) above (an "NOI Trigger Event")
shall not be deemed to be continuing if (a) the net operating income of the
380 Madison Property is greater than or equal to $15 million per year on an
annualized basis determined each month for a consecutive 6 month period
following the initial NOI Trigger Event or (b) the 380 Madison Borrower
escrows monthly with the mortgagee (as additional security for the Loan) the
monthly portion of the difference (as calculated on an annualized basis)
between $15 million per year over the net operating income of the 380 Madison
Property (as determined by the mortgagee).
Cash Management; Lockbox. From and after the occurrence of an Operating
Event and a 380 Madison Loan Trigger Event and with respect to a NOI Trigger
Event during the continuance thereof, the 380 Madison Borrower is required to
cause all checks and payments received by the 380 Madison Borrower or its
property manager under the 380 Madison Master Lease, any leases or operating
agreements to be deposited into a lockbox account under the control of the
mortgagee. Payments from such account shall be made in the following order of
priority: (i) to fund the tax and insurance account, (ii) to fund operating
expenses in accordance with an approved budget, (iii) to fund the 380 Madison
Monthly Debt Service Payment Amount, (iv) to fund budgeted capital expenses
approved by the mortgagee, (v) to fund the capital reserve account and
amounts needed to replenish the Additional Funds account (if applicable),
(vi) to fund discretionary capital expenses approved by the mortgagee, (vii)
to the payment default interest, if any, and (viii) to the 380 Madison
Borrower or its designee.
Additional Funds. After the occurrence of an event of default under the
380 Madison Loan and after a default under the Master Lease by the Master
Lessee or the termination/cancellation of the Master Lease, the Beneficial
Owners (or Qualified Transferee (hereafter defined), if applicable) must
deposit at least $8.7 million ("Additional Funds") with a bank designated by
the mortgagee within 10 days of the mortgagee's request. The Additional Funds
obligation is a joint and several obligation of the Beneficial Owners (and
Qualified Transferee, if applicable) and such funds are to be held as
additional security for the benefit of the mortgagee and are to be used for
tenant improvement work, leasing commissions, debt service and asbestos
removal if the cash flow from the 380 Madison Property is not sufficient to
pay for the same. The Additional Funds obligation shall be reduced by $4.25
million once the Bank Space is either renewed or leased to a new tenant with
all tenant improvement work and leasing commissions being paid for. The 380
Madison Borrower's right to enforce the Additional Funds obligation of the
Beneficial Owners has been assigned to the mortgagee and the Beneficial
Owners may only be released from this obligation upon transfer of their
shareholder interests in the 380 Madison Borrower to a Qualified Transferee,
if such obligations are guaranteed by the Qualified Transferee. The
obligation to fund the Additional Funds by any Qualified Transferee must be
secured either by a credit facility or guarantee of payment.
Transfer of Property and Interest in the 380 Madison Borrower;
Encumbrance. Unless permitted by the 380 Madison Loan documents as described
below, and with the exception of the 380 Madison Master Lease and those
leases entered into in accordance therewith and 380 Madison Permitted
Encumbrances, the 380 Madison Borrower will not (A) sell, assign, convey,
transfer or otherwise dispose of or encumber legal, beneficial or equitable
interests in the 380 Madison Property or any part thereof, (B) permit or
suffer any owner, directly or indirectly, of a beneficial interest in the 380
Madison Property to transfer such interest, whether by transfer of stock or
other beneficial interest in any entity or otherwise, (C) mortgage,
hypothecate or otherwise encumber or grant a security interest in the 380
Madison Property or any part thereof or (D) file a declaration of condominium
with respect to the 380 Madison Property. Notwithstanding the foregoing,
transfers of equity interests in the 380 Madison Borrower between or among
the existing holders thereof shall be permitted provided that a Beneficial
Owner may transfer its shareholder interest in the 380 Madison Borrower to:
(i) the other Beneficial Owner (or
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Qualified Transferee, if applicable) or certain affiliates thereof or (ii)
any other investor if, after such transfer, (a) one or more of the Beneficial
Owners (or certain affiliates) and/or Qualified Transferee are more than 50%
beneficial owners and controlling parties of the 380 Madison Borrower, and
the 380 Madison Borrower shall deliver to the mortgagee (b) an officer's
certificate describing the proposed transaction and stating that such
transaction is permitted by the 380 Madison Loan documents, together with any
documents upon which such officer's certificate is based, and (c) a legal
opinion of counsel to the 380 Madison Borrower or the transferee selected by
either of them (unless reasonably disapproved by the mortgagee), in form and
substance satisfactory to the applicable rating agencies, confirming, among
other things, that the assets of the 380 Madison Borrower (as constituted
after such transfer) will not be substantively consolidated with the assets
of certain owners or controlling persons of the 380 Madison Borrower in a
bankruptcy or similar proceeding. MPMA may transfer its ownership interest in
the 380 Madison Borrower to NYSCRF or a Qualified Transferee (if applicable)
in exchange for a purchase money note which note may be secured by the
transferred shares.
Except as may be set forth below, the 380 Madison Borrower may only sell,
assign, convey, transfer or otherwise dispose of legal or equitable title to
or any interest in the 380 Madison Property if: (A) the mortgagee consents to
such transfer and has received a written confirmation from the Rating
Agencies that there will be no downgrade, qualification or withdrawal of the
then current ratings of the Certificates upon such transfer; (B) the 380
Madison Property will be owned by a single purpose entity, and which complies
with all covenants and obligations under the 380 Madison Loan agreement and
which has agreed to comply with all the terms, covenants and conditions set
forth therein; (C) the property manager shall be an acceptable manager
required by the 380 Madison Loan documents or otherwise been approved by the
mortgagee and applicable rating agencies; and (D) no event of default shall
have occurred and be continuing; provided, however, that the mortgagee's
consent to such transfer shall not be required if the single purpose entity
is more than 50% owned and controlled directly or indirectly by one or both
of the Beneficial Owners (or close affiliate) and/or by a Qualified
Transferee provided that the remaining conditions to such transfer described
herein shall continue to be required.
As used herein, "Qualified Transferee" shall mean any one of the
following: (a) a pension fund, pension trust or pension account, (b) an
insurance company, (c) a national money-center bank, or (d) a person with a
long-term unsecured debt rating from one rating agency of at least investment
grade, provided such person or entity described in (a)-(d) above is either:
(i) a person with a current net worth of $500 million or more and who
controls office building real estate equity assets (as distinguished from
mortgage assets) with a gross asset value of one billion dollars or more or,
if such person is a pension fund advisor, one which controls (i.e. manages
the assets) office building real estate equity assets (as distinguished from
mortgage assets) with a gross asset value of one billion dollars or more, or
(ii) a pension fund, pension trust or pension account that has total assets
of $500 million or more, managed by a person (which is an asset manager or
investment advisor) that controls (i.e. manages the assets) office building
real estate equity assets (as distinguished from mortgage assets) with a
gross asset value of one billion dollars or more. Notwithstanding the
foregoing, a Qualified Transferee shall also mean any person approved by the
mortgagee (such approval not to be unreasonably withheld or delayed) and
approved by the rating agency. All of the figures above are to be calculated
exclusive of the 380 Madison Property.
Insurance. The 380 Madison Loan documents provide that the existing
insurance requirements set forth in the 380 Madison Master Lease shall be
permissible.
During the term of the 380 Madison Master Lease, the 380 Madison Master
Lessee is required to maintain, at its sole cost and expense, the following
insurance: (a) policies of insurance against loss or damage by fire and
against loss or damage by other risks included under the "Extended Coverage
Endorsement" as presently adopted for use with the "New York Standard Fire
Insurance Policy" in an amount not less than the actual; replacement value
(exclusive of cost of excavation, foundations and footings) of the 380
Madison Property, with a deductible of not more than $50,000; (b) general
public liability insurance protecting and indemnifying the 380 Madison Master
Lessee and the 380 Madison Borrower in its corporate as well as its
representative capacity, if any, against any and all claims for damages to
person or property or for loss of life or of property occurring upon, in, or
about the 380
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Madison Property and the adjoining streets and passageways containing minimum
limits of $50,000,000 in the event of bodily injury or death to any number of
people in any one occurrence and a minimum limit of $10,000,000 for property
damage; (c) boiler and pressure vessel insurance (including pressure pipes)
in an amount reasonably satisfactory to the 380 Madison Borrower; (d) war
risk insurance, when such insurance is obtainable from the U.S. Government or
an agency thereof and a state of war or national or public emergency exists
or threatens, in the lesser of the amount of such coverage available and the
replacement value (exclusive of cost of excavation, foundations and footings)
of the 380 Madison Property; (e) rental loss and occupancy or rental value
insurance in an amount sufficient to meet the payments for 3 years of the
rent, impositions and other items of additional rent payable under the Master
Lease and the debt charges payable by the 380 Madison Master Lessee on any
leasehold mortgage; and (f) such other insurance on the 380 Madison Property
and in such amounts as may be reasonably required by the 380 Madison Borrower
against other insurable hazards commonly insured against in the case of
premises of similar size and location.
If an Operating Event occurs, the following insurance provisions shall
apply: The 380 Madison Borrower is required to maintain, at its sole cost and
expense, policies of insurance against loss or damage by standard perils
included within the classification "All Risks of Physical Loss". Such
insurance must be maintained in an aggregate amount equal to the then full
replacement cost of the 380 Madison Property and related assets (without
deduction for physical depreciation) and must have deductibles no greater
than those in existence at the time of the closing of the 380 Madison Loan,
as increased proportionately with the increase in the Consumer Price Index.
The 380 Madison Borrower must also maintain the following policies of
insurance: (a) flood insurance if any part of the 380 Madison Property is
located in an area identified by the Federal Emergency Management Agency as
an area federally designated a "100 year flood plain" and flood insurance is
generally available at reasonable premiums and in such amounts as generally
are required by institutional lenders for similar property (or, if not so
available from a private carrier, from the federal government at commercially
reasonable premiums to the extent available), in either case, in an amount at
least equal to the lesser of the 380 Madison Loan amount or the maximum limit
of coverage available under said program; (b) comprehensive general liability
insurance, including broad form property damage, blanket contractual and
personal injuries coverages and containing minimum limits per occurrence of
$10,000,000 for any policy year as well as at least $50,000,000 excess and/or
umbrella liability insurance; (c) rental loss and/or business interruption
insurance in an amount sufficient to avoid any co-insurance penalty, and
equal to the greater of estimated gross revenues payable to the 380 Madison
Borrower or projected operating expenses needed to maintain and operate the
380 Madison Property, in each case for 18 months; (d) insurance against loss
or damage from leakage of sprinkler systems and explosion of steam boilers,
air conditioning equipment and high pressure piping, machinery and equipment,
pressure vessels or similar apparatus and against loss of occupancy or use
arising from any such breakdown, in such amounts as are generally available
at reasonable premiums and are generally required by institutional lenders
for property comparable to the 380 Madison Property; (e) worker's
compensation insurance with respect to all employees of the 380 Madison
Borrower, as and to the extent required by applicable law or regulation; (f)
during any period of repair or restoration costing in excess of $25,000,
builder's "all risk" insurance in an amount not less than full insurable
value; (g) coverage to compensate for the cost of demolition and the
increased cost of construction for the 380 Madison Property in an amount
satisfactory to the mortgagee; and (h) such other insurance as may from time
to time be reasonably required by the mortgagee. The 380 Madison Loan
requires insurers to have claims paying abilities rated "AA" (or its
equivalent) or better by the applicable Rating Agencies.
Casualty and Condemnation. In the event of a casualty at the 380 Madison
Property that involves a casualty that affects less than 30% of the entire
rentable square feet of the building or a condemnation at the 380 Madison
Property where the loss affects less than twenty percent (20%) of the entire
rentable square feet of the building, the mortgagee shall permit the
application of the proceeds or award resulting therefrom (after reimbursement
of any expenses incurred by the mortgagee) to pay or reimburse the 380
Madison Borrower or the 380 Madison Master Lessee for the cost of restoring,
repairing, replacing or rebuilding the 380 Madison Property in the manner
described below, provided and on the condition that, no default or event of
default has occurred and is then continuing and, in the reasonable judgment
of the
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mortgagee: (i) the 380 Madison Property can be restored to an economic unit
not less valuable and not less useful than the same was prior to the casualty
or condemnation, (ii) the 380 Madison Property, after such restoration, will
adequately secure the outstanding principal balance of the 380 Madison Loan,
(iii) the restoration can be completed by the earliest to occur of: (A) the
455th day following the receipt of the proceeds or, with rating confirmation,
such longer period as may reasonably be required, (B) the 180th day prior to
the 380 Madison Maturity Date, and (C) with respect to a casualty, the
expiration of the payment period on the rental-loss insurance coverage in
respect of such casualty, and (iv) during the period of the restoration, (aa)
either the cash deposited with or at the direction of the mortgagee or (bb)
the sum of (A) net cash flow derived from the 380 Madison Property, plus (B)
proceeds of rent loss insurance or business interruption insurance, if any,
payable will equal or exceed 125% of the debt service on the 380 Madison
Loan.
If any of the conditions set forth in the foregoing proviso is not
satisfied, then, unless the mortgagee elects otherwise, in its sole
discretion, the proceeds will be applied to the prepayment of the 380 Madison
Loan (without prepayment premium or penalty, other than a yield-maintenance
premium if an event of default has occurred and is continuing) and the 380
Madison Borrower will be entitled to receive a release of the mortgage lien
affecting the 380 Madison Property in accordance with and subject to the
terms described above in connection with a release due to defeasance.
In the event of a casualty where the loss affects 30% or more of the
entire rentable square feet of the building, or a condemnation where the loss
or taking affects 20% or more of the rentable sq. ft. of the building, then
the mortgagee will have the option to apply the net proceeds to the
prepayment of the 380 Madison Loan (and the 380 Madison Borrower will be
entitled to receive a release of the mortgage lien affecting the 380 Madison
Property) or, provided the conditions set forth in the proviso above are
complied with, to have such proceeds applied to reimburse the 380 Madison
Borrower for the cost of any restoration (and the mortgagee will be deemed to
have elected prepayment if it shall fail to have given such notice within 30
days after receipt of the proceeds).
Any application of proceeds to the repayment of the 380 Madison Loan as
described above will be without any prepayment premium or penalty except that
if an event of default has occurred and is continuing, then the 380 Madison
Borrower will be required to pay the yield maintenance payment, if any, that
would be required in respect of the principal being prepaid as a result of an
acceleration of the 380 Madison Loan after an event of default. Any such
application to the repayment of the 380 Madison Loan will be applied to those
payments of principal and interest last due under the 380 Madison Loan and
will not postpone or reduce any payments otherwise required pursuant to the
380 Madison Loan other than such last due payments.
If the 380 Madison Borrower is entitled to payment or reimbursement out of
proceeds, such proceeds will be disbursed from time to time upon the
mortgagee being furnished with (i) such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements, bonds,
plats of survey and such other evidences of cost, payment and performance as
the mortgagee may reasonably require and approve, and (ii) all plans and
specifications for such restoration, such plans and specifications to be
approved by the mortgagee prior to commencement of any work (such approval
not to be unreasonably withheld or delayed). In addition, no payment made
prior to the final completion of the restoration shall exceed 90% of the
value of the work performed from time to time; funds other than proceeds will
be disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of the mortgagee,
together with funds deposited for that purpose or irrevocably committed to
the satisfaction of the mortgagee by or on behalf of the 380 Madison Borrower
for that purpose, will be at least sufficient in the reasonable judgment of
the mortgagee to pay for the cost of completion of the restoration, free and
clear of all liens or claims for liens. Prior to any disbursement, the
mortgagee shall have received evidence reasonably satisfactory to it of the
estimated cost of completion of the restoration, and the 380 Madison Borrower
shall have deposited with the mortgagee eligible collateral in an amount
equal to the estimated cost of completion over the net proceeds. Any surplus
which may remain out of proceeds received pursuant to a casualty will be paid
to the 380 Madison Borrower after payment of such costs of restoration. Any
surplus which may remain out of proceeds received pursuant to a condemnation
will be escrowed with the mortgagee as security for the 380 Madison Loan
after payment of such costs of the restoration.
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Financial Reporting. Prior to the occurrence of an Operating Event (as
defined below), the 380 Madison Borrower shall (A) promptly provide copies of
any and all financial statements, default notices and subleases, received by
or on behalf of the 380 Madison Borrower from or on behalf of the 380 Madison
Master Lessee and (B) furnish to the mortgagee, within 85 days following the
end of each fiscal year of the 380 Madison Borrower, annual financial
statements of the 380 Madison Borrower prepared in accordance with generally
accepted accounting principles and certified by an officer of the 380 Madison
Borrower as true and correct. After the occurrence of an Operating Event and
on an ongoing basis, the 380 Madison Borrower is required to furnish to the
mortgagee within 85 days following the end of each fiscal year of the 380
Madison Borrower, a complete copy of the 380 Madison Borrower's annual
financial statements, audited by a "Big Six" accounting firm or another
independent certified public accounting firm reasonably acceptable to the
mortgagee, in accordance with generally accepted accounting principles,
covering the 380 Madison Property, for such fiscal year and containing
balance sheets for the 380 Madison Borrower and statements of profit and loss
for the 380 Madison Property and the 380 Madison Borrower. Together with the
380 Madison Borrower's annual financial statements, the 380 Madison Borrower
will also furnish to the mortgagee (A) an officer's certificate certifying as
of the date thereof whether, to the 380 Madison Borrower's knowledge, there
exists a default or an event of default, and if such default or event of
default exists, the nature thereof, the period of time it has existed and the
action then being taken to remedy the same; (B) then current rent rolls; and
(C) an annual report, for the most recently completed fiscal year, containing
certain prescribed information.
In addition, after the occurrence of an Operating Event the 380 Madison
Borrower is required to furnish, or cause to be furnished, to the mortgagee
on or before the 30th day after the end of each calendar month, among other
items, monthly and year-to-date operating statements for such month.
Furthermore, after the occurrence of an Operating Event, the 380 Madison
Borrower is also required to furnish, or cause to be furnished, to the
mortgagee on or before the 40th day after the end of each calendar quarter,
among other items, quarterly and year-to-date operating statements with
respect to the 380 Madison Borrower, with a balance sheet for the quarter.
Either prior to or after the occurrence of an Operating Event, the 380
Madison Borrower is also required to furnish to the mortgagee, within 10
business days after request, such further detailed information with respect
to the operation of the 380 Madison Property (to the extent available prior
to the occurrence of an Operating Event) and the financial affairs of the 380
Madison Borrower as may be reasonably requested by the mortgagee.
As used herein, "Operating Event" shall mean either (a) the 380 Madison
Master Lessee materially defaults on any of its obligations under the terms
and conditions of the 380 Madison Master Lease such that the 380 Madison
Borrower is entitled to assume obligations of the 380 Madison Master Lessee
with respect to the control, operation and management of the 380 Madison
Property subject to certain qualifications and limitations; (b) the 380
Madison Borrower or a related or affiliated entity becomes (i) the tenant or
a subtenant under the 380 Madison Master Lease or (ii) the operator of the
380 Madison Property either free and clear of the 380 Madison Master Lease or
pursuant to the terms of the 380 Madison Master Lease; or (c) the 380 Madison
Master Lease is terminated or otherwise expires; provided, however, that an
Operating Event shall not be deemed to have occurred in the event the 380
Madison Borrower is entitled to assume the management, control or operation
of the 380 Madison Property as a result of and only so long as the 380
Madison Master Lease is preventing the 380 Madison Borrower from assuming
such obligations so long as the 380 Madison Borrower is diligently enforcing
the rights under the 380 Madison Master Lease and using its best efforts in
connection therewith.
THE CAP POOL LOAN
The Loan. The CAP Pool Loan had a principal balance as of the Cut-Off Date
of approximately $87,946,446 and is secured by first priority mortgage liens
encumbering the CAP Borrower's fee interest in 8 office properties, 3
industrial properties, 12 flex properties and 2 research and development
properties located in Virginia (the "CAP Properties"). The mortgages
encumbering the CAP Properties are cross-defaulted and cross-collateralized.
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Payment Terms. The CAP Pool Loan was originated on June 30, 1997. The CAP
Pool Loan matures on July 11, 2027 (the "CAP Maturity Date") and bears
interest at a fixed rate per annum equal to 7.48% (the "CAP Initial Interest
Rate") through and including July 10, 2007. From and after July 11, 2007 (the
"CAP Anticipated Repayment Date"), the CAP Pool Loan will bear interest at a
fixed rate per annum equal to 9.48% (the "CAP Revised Interest Rate"). As
described below, if the CAP Borrower does not prepay the CAP Pool Loan on the
CAP Anticipated Repayment Date, the CAP Borrower will be required to pay
interest at the CAP Initial Interest Rate (together with principal, as
described below) and the interest accrued equal to the excess of the CAP
Revised Interest Rate over the CAP Initial Interest Rate will be deferred
(such accrued and deferred interest and interest thereon at the CAP Revised
Interest Rate, the "CAP Excess Interest") and will not be paid until after
the principal balance of the CAP Pool Loan has been reduced to zero. Amounts
so deferred will, to the extent permitted by law, accrue interest at the CAP
Revised Interest Rate. Interest on the CAP Pool Loan is calculated based on
the actual number of days elapsed and a 360-day year.
Commencing on August 11, 1997, the CAP Fixed Loan requires monthly
payments (the "CAP Monthly Debt Service Payment Amount") of principal and
interest of $620,372 (based on a 30 year amortization schedule and the CAP
Initial Interest Rate). The Due Date for each installment of the CAP Monthly
Debt Service Payment Amount is the 11th day of each calendar month, or, if in
any month the 11th day is not a business day, then the Due Date for that
month will be the immediately prior business day. Payment of the balance of
the principal, if any, together with all accrued and unpaid interest is
required on the CAP Maturity Date. Additionally, commencing on the CAP
Anticipated Repayment Date, in addition to the CAP Monthly Debt Service
Payment Amount, the CAP Borrower is required to apply 100% of the CAP Excess
Cash Flow (as defined below) for the month preceding the month in which the
Due Date occurs in the following order of priority: (a) to the outstanding
principal balance until the CAP Pool Loan has been paid in full and (b) to
the CAP Excess Interest. "CAP Excess Cash Flow" means the amounts held as
collected funds in the deposit account maintained pursuant to the loan
agreement after the application of funds (a) to the amounts required to be
paid into the tax and insurance escrow fund as described below under
"--Reserves", (b) to the CAP Monthly Debt Service Payment Amount, (c) to the
CAP Borrower for budgeted operating expenses, (d) to the leasing reserve
account described below under "--Reserves", to the extent a credit facility
therefor has not been delivered, (e) to the amounts required to be paid into
the capital reserve account described below under "--Reserves", to the extent
a credit facility therefor has not been provided, (f) to the CAP Borrower for
budgeted capital expenditures, and (g) to the CAP Borrower for extraordinary
approved capital expenditures. The scheduled principal balance of the CAP
Pool Loan on the CAP Anticipated Repayment Date will be approximately
$76,731,159.
After the occurrence and during the continuance of an event of default,
the entire outstanding principal balance of the CAP Pool Loan will bear
interest at a per annum default rate equal to the lesser of (a) the maximum
rate permitted by applicable law and (b) the greater of (x) 5% in excess of
the CAP Initial Interest Rate or the CAP Revised Interest Rate, as
applicable, and (y) the Citibank base rate on corporate loans.
Prepayment. Voluntary prepayment of the CAP Pool Loan is prohibited prior
to July 11, 2007, which is the CAP Anticipated Repayment Date, except in
connection with certain casualty or condemnation events. From and after the
CAP Anticipated Repayment Date, the CAP Pool Loan may be voluntarily prepaid
in whole or in part on any Due Date upon not less than 5 business days' prior
notice to the mortgagee, specifying the date on which such prepayment shall
occur and the principal amount to be prepaid, without payment of any yield
maintenance charge or prepayment premium.
If all or any part of the principal amount of the CAP Pool Loan is prepaid
upon acceleration of the CAP Pool Loan following the occurrence of an event
of default prior to the CAP Anticipated Repayment Date, the CAP Borrower will
also be required to make a yield maintenance payment in an amount equal to
the excess, if any, of (i) the sum of (A) the aggregate respective present
values of all remaining scheduled interest payments in respect of the CAP
Pool Loan (or the portion of all such interest payments corresponding to the
portion of the principal of the CAP Pool Loan to be prepaid upon
acceleration) for the period from the date of such prepayment to the CAP
Maturity Date, discounted
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monthly at a rate equal to a treasury constant yield and based on a 360-day
year of twelve 30-day months and (B) the aggregate respective present values
of all scheduled principal payments in respect of the CAP Pool Loan (or the
then unpaid portion thereof to be prepaid upon acceleration) were such amount
paid in full on the CAP Maturity Date, discounted monthly at a rate equal to
the treasury constant yield and based on a 360-day year of twelve 30-day
months over (ii) the then current outstanding principal amount of the CAP
Pool Loan (or the then unpaid portion thereof to be prepaid upon
acceleration).
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of the CAP Properties under the CAP
Pool Loan, such proceeds shall be applied to prepay the CAP Pool Loan, as
described below under "--Casualty and Condemnation". No prepayment premium or
penalty will be payable upon any mandatory prepayment of the CAP Pool Loan in
connection with casualty or condemnation unless an event of default has
occurred and is continuing, in which case the CAP Borrower will be required
to pay a yield maintenance payment calculated in the manner described above.
Prior to the CAP Anticipated Repayment Date, funds on deposit in the low
debt service reserve account may, under certain circumstances, be applied to
the prepayment of the CAP Pool Loan. See "--Reserves" below. In addition, the
mortgagee may apply certain amounts to the prepayment of the CAP Pool Loan
upon the occurrence of an event of default.
Release in Exchange for Substitute Collateral. The CAP Borrower is
permitted on any date on or after July 11, 2000 up to but not including the
CAP Anticipated Repayment Date, to defease all or a portion of the CAP Pool
Loan, provided that, among other conditions, the CAP Borrower gives the
mortgagee at least 30 days' prior written notice of the date of such
defeasance (the "CAP Defeasance Date") and provided further that the CAP
Borrower pays on the CAP Defeasance Date (i) all accrued and unpaid interest
on the CAP Pool Loan to but not including such date (and if the CAP
Defeasance Date is not a Due Date, the CAP Defeasance Deposit (as defined
below) shall take into account the interest that would have accrued on the
CAP Pool Loan to but not including the next Due Date) (ii) all other sums
then due under the CAP Pool Loan and the related loan documents, (iii) the
CAP Defeasance Deposit (as defined below) and (iv) all reasonable costs and
expenses of the mortgagee incurred in connection with the defeasance. In
addition, the CAP Borrower will be required to deliver to the mortgagee,
among other things, (a) a security agreement granting the Trustee a first
priority lien on the CAP Defeasance Deposit and the U.S. obligations
purchased with the CAP Defeasance Deposit, (b) an opinion of counsel for the
CAP Borrower in form reasonably satisfactory to the mortgagee stating, among
other things, that the Trustee has a perfected security interest in the U.S.
obligations purchased with the CAP Defeasance Deposit, and that, after a
defeasance, the CAP Pool Loan will continue to be a "qualified mortgage"
within the meaning of Section 860D of the Code and the REMIC will not fail to
maintain its status as a "real estate mortgage investment conduit" within the
meaning of Section 860G of the Code as of the result of such defeasance, (c)
an agreed upon procedures report from a "Big Six" independent certified
public accounting firm documenting procedures performed regarding information
prepared by the AAPT Borrowers, showing (i) the stream of income to be
generated by the CAP Defeasance Deposit and (ii) all Scheduled Defeasance
Payments (as hereinafter defined) and other amounts required to be paid by
the CAP Borrower in connection with a defeasance, and a comparison thereof,
and (d) such other certificates, documents or instruments as the mortgagee
may reasonably request.
"CAP Defeasance Deposit" means an amount equal to the sum of (i) the
remaining principal amount of the note evidencing the CAP Pool Loan (in the
case of a total defeasance), the CAP Release Amount for the related CAP
Property (in the case of a partial defeasance with release of a CAP Property)
or the principal amount of the portion of the CAP Pool Loan to be defeased
(in the case of a partial defeasance without release of a CAP Property), as
applicable, (ii) without duplication, all costs and expenses incurred or to
be incurred in the purchase of U.S. government securities providing payments
on or prior to, but as close as possible to, all successive Due Dates upon
which interest and principal payments are required under the CAP Pool Loan
after the CAP Defeasance Date and through and including the CAP Anticipated
Repayment Date, and in amounts equal to the scheduled payments due on such
dates (assuming for this purpose that the entire unpaid principal balance of
the CAP Pool Loan is due and
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payable on the CAP Anticipated Repayment Date (the "Scheduled Defeasance
Payments"), and (iii) any revenue, documentary stamp or intangible taxes or
any other tax or charge due in connection with the transfer of one or more of
the notes, the creation of one or more defeased notes and undefeased notes,
if applicable, any transfer of one or more defeased notes or otherwise
required to satisfy the terms of the CAP Pool Loan.
Upon receipt of the CAP Defeasance Deposit, the mortgagee, using the CAP
Defeasance Deposit, will purchase U.S. government securities on behalf of the
CAP Borrower and, in the case of a defeasance in whole, such U.S. obligations
will serve as the sole collateral for the payments of the amounts due under
the CAP Pool Loan. Upon a deposit of U.S. government securities, in the case
of total defeasance, the CAP Borrower will assign all obligations, rights and
duties under the CAP Pool Loan to an entity or entities established or
designated by the mortgagee (the "CAP Successor Borrower"). The CAP Successor
Borrower shall assume, and the CAP Borrower shall be relieved of, the
obligations under the CAP Pool Loan, other than as specifically provided by
the CAP Pool Loan agreement. The mortgagee will cause such obligations to be
assumed by a special-purpose bankruptcy-remote entity.
In connection with the defeasance of the CAP Pool Loan, the CAP Borrower
will be permitted to obtain the release of one or more of the CAP Properties
from the lien of the related Mortgage, provided that no event of default
exists and subject to the further conditions that (a) if the defeasance is in
connection with a release of less than all of the CAP Properties, the CAP
Borrower provides (i) evidence satisfactory to the mortgagee that following
such release the CAP Debt Service Coverage Ratio as of the date of the
proposed release will not be less than the greater of (A) the CAP Debt
Service Coverage Ratio as of the date of the proposed release before giving
effect to the proposed release and (B) 1.65 to 1.0, (b) the CAP Borrower
defeases the principal portion of CAP Pool Loan equal to (i) the CAP Release
Amount of the CAP Property being released in the case of a release of less
than all of the CAP Properties or (ii) an amount equal to the entire
principal balance of the CAP Pool Loan for a full defeasance in the case of
the release of all of the CAP Properties.
"CAP Debt Service Coverage Ratio" means, for any period, the quotient
obtained by dividing the net operating income of the applicable CAP
Properties for the twelve month period ending on the last day of the calendar
quarter immediately preceding such date by the greater of (x) the aggregate
interest and principal payments actually due and payable on the portion of
the CAP Pool Loan equal to the CAP Allocated Loan Amount in respect of such
CAP Properties for such period and (y) the aggregate interest and principal
payment on such portion of the CAP Pool Loan (other than any defeased portion
of such portion of the CAP Pool Loan) during such period assuming a loan
constant (comprised of interest and amortization) of 9.23%. For purposes of
calculating the CAP Debt Service Coverage Ratio on or prior to April 30,
1998, for any period prior to April 30, 1997 the aggregate interest and
principal payments shall be calculated assuming a loan constant (comprised of
interest and amortization) of 9.23%. For purposes of calculating the CAP Debt
Service Coverage Ratio for any prospective period, net operating income shall
be calculated assuming that tenants are in possession paying rent (except to
the extent that leases expire by their terms during such period and are not
renewed or intended to be renewed by the applicable tenant) and assuming
receipt of such other operating income, and payment of such other operating
expenses, as shall be reasonably agreed to between the mortgagee and the CAP
Borrower and the aggregate interest and principal payments shall be
calculated assuming a loan constant (comprised of interest and amortization)
of 9.23%.
"CAP Allocated Loan Amount" means, with respect to each CAP Property, the
portion of the principal amount of the CAP Pool Loan allocated to each such
CAP Property agreed upon by GSMC and the CAP Borrower and determined as
described under the definition of "Allocated Loan Amount" set forth above
under "Mortgage Pool Characteristics--Certain Characteristics of the Mortgage
Loans".
"CAP Release Price" means (a) with respect to each of the CAP Properties
known as Plaza 1900, Campus Point, Oakwood Center, and Greenwood Center, in
the event that net proceeds from a sale or transfer thereof or the net
proceeds in respect of any casualty or condemnation in connection therewith
(i) is 120% of the CAP Allocated Loan Amount for such CAP Property or less,
120% of the CAP Allocated
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Loan Amount for such CAP Property, (ii) is 135% of the CAP Allocated Loan
Amount for such CAP Property or more, 135% of the CAP Allocated Loan Amount
for such CAP Property, or (iii) is greater than 120%, but less than 135%, of
the CAP Allocated Loan Amount for such CAP Property, the actual amount of
such net proceeds; and (b) with respect to any other CAP Property, 120% of
the CAP Allocated Loan Amount for such CAP Property.
"CAP Release Amount" means an amount equal to the excess of (i) the CAP
Release Price for a particular CAP Property over (ii) the scheduled payments
of principal made in respect of the CAP Pool Loan allocated to such CAP
Property (based on the relative CAP Allocated Loan Amounts for all CAP
Properties) such allocation to be made only at the time a CAP Release amount
is to be calculated; provided that in no event shall (x) the CAP Release
Amount for a particular CAP Property be greater than the outstanding
principal balance of the CAP Pool Loan and (y) any other prepayment of
principal of the CAP Pool Loan results in a reduction of the CAP Release
Amount.
Alteration. Except upon compliance with certain conditions set forth in
the CAP Pool Loan documents, the CAP Borrower is prohibited from (i) making
or permitting any demolition, alteration, installation or improvement
(including in connection with its compliance with any legal requirement) to
any CAP Property or Properties or (ii) expanding or reducing any CAP Property
or Properties or the improvements thereon.
Reserves. Pursuant to the terms of the CAP Pool Loan, the CAP Borrower is
required to fund the following reserves: (i) a tax and insurance escrow
account to be funded monthly from funds available in the deposit account in
an amount equal to (a) one-twelfth (1/12) of the taxes, assessments,
impositions and other governmental charges that the mortgagee reasonably
estimates will be payable in the next ensuing 12 months and (b) one-twelfth
(1/12) of the insurance premiums that the mortgagee reasonably estimates will
be payable for the renewal of the coverage required to be maintained under
the CAP Pool Loan, (ii) a leasing reserve account to cover the cost of tenant
improvement expenses and leasing commissions incurred by the CAP Borrower,
which, to the extent a CAP Credit Facility has not been provided therefor, is
to be funded monthly from funds available in the deposit account such that
the balance in the account shall be not less than the balance specified for
such year in the CAP Pool Loan agreement (which, for all calendar years
during the term of the CAP Pool Loan except for six years, is $4,400,000, and
for such six years, will range from $4,900,000 to $9,300,000) (subject to
reduction in connection with the release of any CAP Property), (iii) a
capital reserve account to cover the cost of routine capital improvements
(excluding tenant improvements and leasing commissions and excluding the
costs associated with certain deferred maintenance items identified at the
time of the closing of the CAP Pool Loan), to the extent a CAP Credit
Facility (as hereinafter defined) has not been provided therefor, to be
funded from cash flow in equal amounts of approximately $25,107.17 per month
(subject to reduction in connection with the release of any CAP Property),
(iv) a deferred maintenance reserve account, funded at the closing of the CAP
Pool Loan, in the initial aggregate amount of $581,125 for the payment of the
cost of capital renovations at certain CAP Properties, (v) an unpaid tenant
improvements and leasing commissions account, funded at the closing of the
CAP Pool Loan, in the initial aggregate amount of $1,550,575.92 for the
payment of unpaid tenant improvement and leasing commissions costs related to
specified leases as of the date of the closing of the CAP Pool Loan, (vi) a
low debt service reserve account into which the gross revenue from the CAP
Properties, less items (i) through (vi) specified in "--Cash Management;
Lockbox", to be funded if, as of any date, the net operating income of the
CAP Properties for the twelve (12) month period preceding the Due Date shall
be less than $11,000,000. If, as of any date, the net operating income for
the CAP Properties for the prior twelve (12) calendar month period shall be
less than $10,000,000, or an event of default has occurred and is continuing,
the mortgagee shall apply the proceeds of the low debt service reserve
account as a partial prepayment of the CAP Pool Loan (such amounts shall be
reduced if any CAP Property is released from the lien of the related
Mortgage). If, after the establishment of the low debt service reserve
account, the trailing 12 month net operating income for the CAP Properties
exceeds $11,000,000 for 4 consecutive quarters, and provided no event of
default has occurred and is continuing, all funds in the low debt service
reserve account will be released to the CAP Borrower.
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For each of the accounts referred to in (ii), (iii), (iv) and (v) above,
a CAP Credit Facility in lieu thereof may be provided until the CAP
Anticipated Repayment Date. From and after the CAP Anticipated Repayment
Date, all such CAP Credit Facilities in lieu of such accounts shall be
replaced with immediately available funds and, to the extent that immediately
available funds have not been deposited in such accounts prior to the CAP
Anticipated Repayment Date, the mortgagee shall have the right at any time on
or after such date to draw upon any such Credit Facilities delivered in lieu
of deposits and hold the proceeds of such Credit Facilities and apply the
proceeds in accordance with the terms of the CAP Pool Loan agreement.
In connection with the substitution of an individual CAP Property (as
described below), appropriate adjustments will be made to the deferred
maintenance reserve account, the unpaid tenant improvements and leasing
commissions account, and any other reserve accounts specifically allocated to
such individual CAP Property, or to any CAP Credit Facility in lieu of
deposits in such account in an amount as the mortgagee shall reasonably
approve. In addition, the threshold amounts for the low debt service reserve
account shall be reduced in the event of the release of any CAP Property from
the lien of the applicable Mortgage, by an amount equal to the product of
such threshold amount multiplied by a faction, the numerator of which is the
original CAP Allocated Loan Amount for such CAP Property, and the denominator
of which is the original principal amount of the CAP Pool Loan.
A "CAP Credit Facility" means a clean, irrevocable, unconditional
transferable letter of credit, payable on sight draft only, in favor of the
mortgagee and entitling the mortgagee to draw thereon in New York, New York
or in such other city as the mortgagee's corporate trust office may be
located at the time of issuance of such letter of credit, issued by a
domestic bank or the U.S. agency or branch of a foreign bank the long-term
unsecured debt rating of which at the time such letter of credit is delivered
and throughout the term of such letter of credit is not less than the
Required Rating (as defined below), or, if there are no domestic banks or
U.S. agencies or branches of a foreign bank having such long-term unsecured
debt rating then issuing letters of credit, then such letter of credit may be
issued by a domestic bank the long-term unsecured debt rating of which is not
lower than "AA" by the Rating Agencies, and in respect of which (a) any
reimbursement obligation is not secured by any of the CAP Properties or any
other property pledged to secure the CAP Pool Loan and (b) the CAP Borrower
shall be permitted to have a contingent reimbursement obligation only in
favor of the bank that issued the CAP Credit Facility, if and only if, (i)
such bank's rights with respect to such reimbursement obligation are fully
subordinated to payment of the CAP Pool Loan, (ii) no payment shall be made
to such bank in respect of such reimbursement obligation during the
occurrence and continuation of an event of default, and (iii) such bank shall
be prohibited from exercising any and all remedial action against the CAP
Borrower in connection therewith until all obligations under the CAP Pool
Loan documents shall have been paid in full. See "Risk Factors--The Mortgage
Loans--Other Financing" herein. As of the closing date of the CAP Pool Loan,
The Chase Manhattan Bank, PNC Bank, National Association and First Union
National Bank of Virginia were specifically approved as providers of a CAP
Credit Facility, so long as the long term senior unsecured credit rating of
such provider is not less than its rating as of such date. "Required Rating"
means the higher of (i) the highest rating then assigned by the Rating
Agencies to the outstanding Certificates or (ii) "A" (or its equivalent) by
S&P and Moody's.
Cash Management; Lockbox. The CAP Borrower is required to direct all
tenants at the CAP Properties to make all checks in respect of sums due to
the CAP Borrower under the leases in effect at the CAP Properties payable
directly to the applicable property-level sweep account, to be maintained
under the sole dominion and control of the mortgagee and to deliver all
checks and payments directly to the applicable property manager for deposit
into the deposit account or the applicable property-level sweep account. The
applicable property manager is required to deposit such checks and payments
into the applicable property-level sweep account or the deposit account on
the same business day such checks are received. The funds in each
property-level sweep account, if greater than or equal to $1,000, shall be
swept daily into the deposit account. The deposit account is to be maintained
in the name of mortgagee, under the sole dominion and control of the
mortgagee. From and after the CAP Anticipated Repayment Date or if an event
of default shall have occurred and be continuing, the CAP Borrower shall
direct all tenants at the CAP Properties to deliver such checks and payments
directly to the mortgagee or its agent.
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On each Due Date, provided no default or event of default has occurred
and is continuing, the Master Servicer will distribute funds from the deposit
account in the following order: (i) to the tax and insurance escrow account,
(ii) to fund the CAP Monthly Debt Service Payment Amount, (iii) to the CAP
Borrower in an amount equal to the budgeted operating expenses (or if the CAP
Borrower timely requests additional amounts to pay operating expenses, up to
an additional 5% of the budgeted amount for any CAP Property, but in no event
more than 5% of such month's budgeted amount for operating expenses) for the
month immediately prior to the month in which such Due Date occurs (provided
that the CAP Borrower shall have delivered to the mortgagee an officer's
certificate certifying that there is not outstanding for more than 60 days
any amounts claimed by any creditor to be due and owing from the CAP Borrower
(except for claims the CAP Borrower is in good faith contesting), and that
the amounts disbursed to the CAP Borrower pursuant to this clause (iii) shall
be used by the CAP Borrower solely to pay its creditors for costs and
expenses incurred to date, (iv) to fund the leasing reserve account to the
extent necessary to bring the balance thereof to the applicable leasing
reserve account balance for such year unless a CAP Credit Facility in lieu
thereof has been provided and is permitted, (v) to fund the capital reserve
account unless a CAP Credit Facility in lieu thereof has been provided and is
permitted, in an amount equal to approximately $25,107.17 per month (subject
to reduction in connection with the release of any CAP Property (regardless
of the amount in the capital reserve account), unless a CAP Credit Facility
or lieu thereof has been provided and is permitted, (vi) to the CAP Borrower
in an amount equal to the budgeted capital expenses for the month immediately
prior to the month in which such Due Date occurs (provided that the CAP
Borrower shall have delivered to the mortgagee an officer's certificate
certifying that there is not outstanding for more than 60 days any amounts
claimed by any creditor to be due and owing from the CAP Borrower for prior
capital improvements (except for claims the CAP Borrower is in good faith
contesting and the payment for which the CAP Borrower has escrowed with the
mortgagee), and that the amounts disbursed to the CAP Borrower pursuant to
this clause (vi) shall be used by the CAP Borrower solely to pay for budgeted
capital expenditures, (vii) if applicable, to the low debt service reserve
account, (viii) to pay the costs of extraordinary capital expenditures
approved in writing by the mortgagee, (ix) from and after the CAP Anticipated
Repayment Date, to prepay the principal due under the CAP Pool Loan until the
principal balance of the CAP Pool Loan is paid in full, (x) to the CAP Excess
Interest, (xi) to the extent payable following an event of default, interest
accrued and unpaid at the excess of the applicable default rate over the
applicable interest rate, (xii) if no event of default has occurred, to the
CAP Borrower or its designee, any funds remaining in the deposit account. In
the mortgagee's sole discretion, the mortgagee may permit a distribution
under clause (xii) above notwithstanding the occurrence of an event of
default. The CAP Borrower has directed that any funds transferable to the CAP
Borrower, pursuant to clause (xii) above, be transferred to the CAP Parent
Borrower (or its designee). So long as the low debt service reserve account
is required to be maintained, to the extent that funds are available in the
low debt service reserve account, the mortgagee shall, on each Due Date,
transfer funds from such account to the CAP Parent Borrower (or its designee)
in such amount as shall be sufficient to pay the monthly debt service
obligations of the CAP Parent Borrower under the CAP Parent Loan.
Transfer of Properties and Interests in the CAP Borrower;
Encumbrance. Unless permitted by the CAP Pool Loan documents as described
below, and with the exception of leases entered into in accordance therewith
and the CAP Permitted Encumbrances, the CAP Borrower will not (A) sell,
assign, convey, transfer or otherwise dispose of or encumber legal,
beneficial or equitable interests in the CAP Properties or any part thereof,
(B) permit or suffer any owner, directly or indirectly, of a beneficial
interest in the CAP Properties to transfer such interest, whether by transfer
of stock or other beneficial interest in any entity or otherwise, (C)
mortgage, hypothecate or otherwise encumber or grant a security interest in
the CAP Properties or any part thereof or (D) file a declaration of
condominium with respect to the CAP Properties.
So long as no event of default shall have occurred and be continuing and
the CAP Parent Loan shall have been paid in full in accordance with the terms
thereof, the CAP Borrower may sell, assign, convey, transfer or otherwise
dispose of legal or equitable title to or any interest in all of the CAP
Properties (but not less than all of the CAP Properties) only collectively,
in a single transaction, if:
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(A) the transferee of the CAP Properties assumes in writing all of the
obligations of the CAP Borrower under the CAP Pool Loan, and unless the
transferee is any of Cali Realty Corp., Highwoods Properties, Inc.,
Spieker Properties, Inc., Beacon Properties, or Vornado Realty Trust
(each, a "Listed Permitted Owner") and the transfer occurs within 24
months of the closing date of the CAP Pool Loan, the mortgagee shall have
received written confirmation from each of the Rating Agencies that the
transfer will not result, in and of itself, in a reduction, withdrawal or
qualification of any rating then assigned to any outstanding Certificates;
(B) the CAP Properties will be owned directly by one or more single
purpose entities, which at the time of such transfer will be in compliance
with the single-purpose covenants contained in the CAP Pool Loan agreement
and which shall have assumed in writing (subject to the exculpation
provisions of the CAP Pool Loan agreement) and agreed to comply with all
the terms, covenants and conditions set forth therein and the other CAP
Pool Loan documents pursuant to an assumption agreement in form and
substance reasonably satisfactory to the mortgagee, and shall have
delivered to the mortgagee such other documents and deliveries as the
mortgagee may reasonably require to confirm the security interests granted
to it pursuant to the CAP Pool Loan documents consistent with the
documents and deliveries required by the CAP Pool Loan agreement;
(C) the transferee is a Listed Permitted Owner and the transfer closes
within 24 months of the closing date of the CAP Pool Loan or the
transferee is otherwise a CAP Permitted Owner (as defined below), or will
be wholly owned, directly or indirectly, by such Listed Permitted Owner or
CAP Permitted Owner;
(D) if 20% or more of the aggregate leaseable square feet of the CAP
Properties will be managed by an unaffiliated third party property manager
that is not a CAP Acceptable Manager (as defined below), the mortgagee has
approved of such manager and has received written confirmation from each
of the Rating Agencies that such action will not result, in and of itself,
in a reduction, withdrawal or qualification of any rating then assigned to
any outstanding Certificates;
(E) no event of default will occur as a result of such transaction; and
(F) if the transfer is not to an affiliate of the CAP Borrower, the
proposed transferee must deliver an officer's certificate stating that:
(1) such transferee is an employee benefit plan that is subject to Title I
of ERISA (an "ERISA Plan") or a "plan" within the meaning of Section 4975
of the Code (together with an ERISA Plan, a "Plan") or an entity the
underlying assets of which constitute "plan assets" within the meaning of
29 C.F.R. Section 2510.3-101 and the obligations under the CAP Pool Loan
documents are not, and the exercise of rights under the CAP Pool Loan
documents will not, constitute a non-exempt prohibited transaction as a
result of such transfer; or (2) the transferee is a "governmental plan"
(as defined Section 3(32) of ERISA), and the obligations under the CAP
Pool Loan documents, and the exercise of rights under the CAP Pool Loan
documents, do not and will not violate any applicable state statutes
regulating investments by or fiduciary obligations with respect to
governmental plans as a result of such transfer; or (3) the proposed
transferee is neither a Plan nor a "governmental plan", and such proposed
transferee is not subject to state statutes regulating investments by or
fiduciary obligations with respect to "governmental plans" and the
underlying assets of the proposed transferee do not, for purposes of
ERISA, constitute "plan assets" of one or more ERISA Plans within the
meaning of 29 C.F.R. Section 2510.3-101.
A "CAP Permitted Owner" means a Listed Permitted Owner or a transferee
which (A) has a long-term unsecured debt rating of at least investment grade,
as determined by the applicable rating agencies; (B) has a current net worth
of at least $500 million and controls office building and/or industrial real
estate equity assets of at least $1 billion, in each case exclusive of the
CAP Properties (or, in the case of a pension fund adviser, controls at least
$1 billion of office building and/or industrial real estate equity assets) or
is a pension fund, pension trust or pension account that has total assets of
at least $500 million (exclusive of the CAP Properties), and who is managed
by a person who controls at least $1 billion of office building and/or
industrial property real estate equity assets (exclusive of the CAP
Properties); (C) is, or is controlled by, either a pension fund, a pension
trust or pension account, an
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insurance company, a national money-center bank or a person who has a
long-term unsecured debt rating of at least investment grade, as determined
by the applicable rating agencies; and (D) the mortgagee has approved the
entity structure of such transferee (such approval not to be unreasonably
withheld, conditioned or delayed).
For these purposes, "control" or "controlling" means having (either
directly or indirectly) primary responsibility to make or veto all material
decisions with respect to the operation, management and disposition of
another person's real estate assets (including decisions regarding sales,
acquisitions and financings) rather than a beneficial ownership requirement,
and without being compromised by the fact that responsibility for such
day-to-day operating and management functions or leasing activities as are
ordinarily handled by a property manager has been delegated by such
controlling person pursuant to an agreement in writing.
A "CAP Acceptable Manager" means (i) Morton G. Thalhimer, Inc., Atlantic
American Properties Management, Inc. and Commonwealth Atlantic Properties,
Inc. or (ii) is a reputable and experienced professional management company
or an in-house property management department which, at the time of its
engagement by the CAP Borrower as manager, is (A) if to manage office
properties, manages at least 15 office buildings containing in the aggregate
at least the greater of 1 million leaseable square feet or 3 times the number
of leaseable square feet in the CAP Properties to be managed (in all cases
excluding the CAP Properties) or (B) if to manage industrial properties,
manages at least 25 industrial buildings containing in the aggregate at least
the greater of 500,000 leaseable square feet or 3 times the number of
leaseable square feet in the CAP Properties to be managed (in all cases,
excluding the CAP Properties).
Transfers of Beneficial Interests in Commonwealth Atlantic Properties,
Inc. Transfers of direct or indirect interests in Commonwealth Atlantic
Properties, Inc. ("CAPI"), which is the indirect parent company of the CAP
Borrower, shall be permitted so long as (X) LFREI and/or an affiliate thereof
retains at least 51% of the controlling interests in CAPI, (Y) the CAP
Borrower shall deliver to the mortgagee (i) an officer's certificate
describing the proposed transaction and stating that such transaction is
permitted by the CAP Pool Loan documents, together with any documents upon
which such officer's certificate is based, and (ii) a legal opinion of
counsel to the CAP Borrower or the transferee selected by either of them
(unless reasonably disapproved by the mortgagee), in form and substance
consistent with similar opinions then being required by the Rating Agencies,
confirming, among other things, that the assets of the CAP Borrower or the
new borrowers will not be substantively consolidated with the assets of
certain owners or controlling persons of such CAP Borrower or new borrowers
in a bankruptcy or similar proceeding and (Z) the conditions set forth in
"--Transfer of Properties and Interests in the CAP Borrower; Encumbrance"
above are satisfied.
Pledges to CAP Parent Lender. Pledges of stock of the CAP Borrower to the
CAP Parent Lender, and any transfer upon or in lieu of foreclosure in respect
of such pledge, and any subsequent transfer by such pledgee, shall not be a
default under the CAP Pool Loan.
Substitution of Individual Properties. The CAP Borrower may substitute for
any CAP Property owned by the CAP Borrower, a property (a "CAP Substitute
Property") of like kind and quality, provided (i) no event of default shall
have occurred and be continuing, (ii) written confirmation from each of the
Rating Agencies that such property substitution will not result, in and of
itself, in a reduction, withdrawal or qualification of any rating then
assigned to any outstanding Certificates shall have been provided, (iii) the
CAP Debt Service Coverage Ratio for all of the CAP Properties as of such date
(assuming the proposed substitution of the CAP Substitute Property) will be
at least equal to the greater of (A) the CAP Debt Service Coverage Ratio for
all of the CAP Properties as of such date (including the applicable CAP
Property to be substituted) or (B) 1.65 to 1.0, and (iv) the mortgagee shall
have been provided an opinion of counsel (which may be based on reasonable
assumptions and representations and warranties of the CAP Borrower) to the
effect that a "significant modification" of the CAP Pool Loan within the
meaning of Treasury Regulations Section 1.860G-2 will not occur by reason of
the proposed substitution. The conditions precedent provided for by the CAP
Pool Loan agreement must be satisfied as to the CAP Substitute Property
before the CAP Property being substituted for will be released from the lien
of the related
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Mortgage. The CAP Borrower is required to pay all costs and expenses in
connection with any such substitution, including, but not limited to,
reasonable fees and disbursements of counsel, appraisal fees, engineering
fees, costs of environmental audits, title insurance premiums, survey
charges, mortgage and documentary stamp taxes, if any, note intangible taxes,
if any, and recording charges.
Insurance. The CAP Borrower is required to maintain, at its sole cost and
expense, for the mutual benefit of the CAP Borrower and the mortgagee,
policies of insurance against loss or damage by standard perils included
within the classification "All Risks of Physical Loss". Such insurance must
be maintained in an aggregate amount equal to the then full replacement cost
of the applicable CAP Property or Properties and related assets (without
deduction for physical depreciation) and must have deductibles no greater
than the greater of (i) 5% of Net Operating Income for such CAP Property or
Properties for the 12 month period immediately preceding June 30, 1997 and
(ii) $100,000. To the extent commercially available at reasonable rates if it
is customarily obtained for properties in the vicinity of the applicable CAP
Property or Properties, earthquake coverage shall be obtained as part of such
policy. The CAP Borrower must also maintain the following policies of
insurance: (a) flood insurance if any part of a CAP Property is located in an
area identified by the Federal Emergency Management Agency as an area
federally designated a "100 year flood plain" and flood insurance is
generally available at commercially reasonable premiums and in such amounts
as generally are required by institutional lenders for similar properties
(or, if not so available from a private carrier, from the federal government
at commercially reasonable premiums to the extent available), in either case,
in an amount at least equal to the lesser of the CAP Allocated Loan Amount
for such CAP Property or the maximum limit of coverage available under said
program with respect to such CAP Property; (b) comprehensive general
liability insurance, including broad form property damage, blanket
contractual and personal injuries (including death resulting therefrom)
coverages and containing minimum limits per occurrence of $1,000,000 and in
the aggregate per property of $2,000,000 for any policy year, as well as at
least $50,000,000 excess and/or umbrella liability insurance and at all
times, at least $10,000,000 excess and/or umbrella liability insurance shall
be available (such that, at all times, such coverage shall be maintained
against which no claim shall have been asserted) and maintained for any and
all claims, including legal liability imposed on the CAP Borrower and all
related court costs and attorneys fees; (c) rental loss and/or business
interruption insurance in an amount equal to the greater of estimated gross
revenues payable to the CAP Borrower and anticipated operating expenses
needed to maintain and operate the CAP Properties, in each case for 2 years,
as adjusted from time to time; (d) insurance against loss or damage from
leakage of sprinkler systems and explosion of steam boilers, air conditioning
equipment and high pressure piping, machinery and equipment, pressure vessels
or similar apparatus and against loss of occupancy or use arising from any
such breakdown, in such amounts as are generally available at reasonable
premiums and are generally required by institutional lenders for property
comparable to such CAP Property; (e) worker's compensation insurance with
respect to any employees of the CAP Borrower, as and to the extent required
by any governmental authority or applicable law or regulation; (f) during any
period of repair or restoration, builder's "all risk" insurance in an amount
not less than full insurable value of the applicable CAP Property against
such risks (including fire and extended coverage and collapse of the
improvements to agreed limits) as are customarily obtained for such work by
prudent owners in the locality where the applicable CAP Property is located;
(g) coverage to compensate for the cost of demolition and the increased cost
of construction in an amount reasonably satisfactory to the mortgagee; and
(h) such other insurance as may from time to time be reasonably required by
the mortgagee. The CAP Pool Loan requires insurers to have claims paying
abilities rated "AA" or better by the applicable Rating Agencies. However,
for so long as United States Fidelity and Guaranty Corp. has a claims paying
ability rating of not less than its rating as of June 30, 1997, it shall be
deemed an approved insurer.
Casualty and Condemnation. In the event of any casualty or condemnation at
a CAP Property where the loss is in an aggregate amount less than (i) as to
Plaza 1900, Campus Point, Oakwood Center and Greenwood Center, 30% of the CAP
Allocated Loan Amount for the affected individual CAP Property or (ii) with
respect to any other CAP Property, 45% of the CAP Allocated Loan Amount for
the affected individual CAP Property, the mortgagee shall permit the
application of the insurance and condemnation proceeds resulting therefrom
(after reimbursement of any expenses reasonably incurred by the CAP Borrower
or the mortgagee in collecting the insurance proceeds) to pay, or to
reimburse the CAP
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Borrower at the option of the CAP Borrower for the cost of restoring,
repairing, replacing or rebuilding the affected individual CAP Property in
the manner described below, provided and on the condition that, no event of
default has occurred and is then continuing and, in the reasonable judgment
of the mortgagee exercised in good faith: (i) such CAP Property can be
restored to an economic unit not less valuable and not less useful than the
same was prior to the casualty or condemnation, (ii) the restoration can be
completed by the earliest to occur of: (A) the 365th day following the
casualty or condemnation, or, with written confirmation from each of the
Rating Agencies that extension of such period will not, in and of itself,
result in a reduction, withdrawal or qualification of any rating then
assigned to any outstanding Certificates, such longer period as may
reasonably be required, (B) the 180th day prior to the CAP Maturity Date, and
(C) with respect to a casualty, the expiration of the payment period on the
rental-loss insurance coverage in respect of such casualty, and (iii) during
the period of the restoration, the sum of (A) income derived from the
affected individual CAP Property, plus (B) proceeds of rent loss insurance or
business interruption insurance, if any, payable will equal or exceed 105% of
the sum of (1) operating expenses for such individual CAP Property and (2)
the debt service in respect of the CAP Allocated Loan Amount for such
individual CAP Property.
If any of the foregoing conditions are not satisfied, then, unless the
mortgagee shall otherwise elect, at its sole option, the proceeds shall be
applied to the prepayment of the CAP Pool Loan in accordance with the terms
described below, and the CAP Borrower shall be entitled to receive a release
of the lien affecting such individual CAP Property in accordance with and
subject to the terms of the CAP Pool Loan agreement (in which event such
proceeds shall be applied against the CAP Release Amount for such individual
CAP Property).
In the event of a casualty where the loss is in an aggregate amount equal
to or more than (i) as to Plaza 1900, Campus Point, Oakwood Center and
Greenwood Center, 30% of the CAP Allocated Loan Amount for the affected
individual CAP Property or (ii) with respect to any other CAP Property, 45%
of the CAP Allocated Loan Amount for the affected individual CAP Property (a
"Material Casualty" or "Material Condemnation", as applicable), then the
mortgagee shall have the option (to be exercised by notice given to the CAP
Borrower not later than the 30th day after the receipt of the proceeds) to
apply the net proceeds to the prepayment of the CAP Pool Loan in accordance
with the terms described below (and the CAP Borrower shall be entitled to
receive a release of the lien affecting such individual CAP Property in
accordance with and subject to the terms of the CAP Pool Loan agreement (in
which event such proceeds shall be applied against the CAP Release Amount for
such individual CAP Property) or to reimburse the CAP Borrower for the cost
of any restoration in the manner described below (and the mortgagee shall be
deemed to have elected prepayment if it shall fail to have given notice
within said 30-day period)).
Any application of proceeds to the repayment (or defeasance, to the extent
that the payment occurs during the period from and after July 11, 2000 up to
but not including the CAP Anticipated Repayment Date) of the CAP Pool Loan as
described above shall be without any yield maintenance charge or prepayment
premium, except that if an event of default has occurred and is continuing,
then the CAP Borrower will be required to pay the yield maintenance payment,
if any, that would be required in respect of the principal being prepaid as a
result of an acceleration of the CAP Pool Loan after an event of default. Any
such application to the repayment of the CAP Pool Loan will be applied to
those payments of principal and interest last due under the CAP Pool Loan and
will not postpone or reduce any payments otherwise required pursuant to the
CAP Pool Loan other than such last due payments.
If the CAP Borrower is entitled to reimbursement out of proceeds, such
proceeds will be disbursed from time to time upon the mortgagee being
furnished with (i) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats of
survey and such other evidences of cost, payment and performance as are
customary and reasonably obtainable by prudent property owners in the
locality in which the applicable CAP Property is located and as the mortgagee
may reasonably require and approve, and (ii) all plans and specifications for
such restoration, such plans and specifications to be approved by the
mortgagee prior to commencement of any work (such approval not to be
unreasonably withheld or delayed). In addition, no payment made prior to the
final completion of the restoration shall exceed 95% of the value of the work
performed from time to time; funds other than
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proceeds shall be disbursed prior to disbursement of such proceeds; and at
all times, the undisbursed balance of such proceeds remaining in the hands of
the mortgagee, together with funds deposited for that purpose or irrevocably
committed to the satisfaction of the mortgagee by or on behalf of the CAP
Borrower for that purpose, will be at least sufficient in the reasonable
judgment of the mortgagee to pay for the cost of completion of the
restoration, free and clear of all liens or claims for liens. Prior to any
disbursement, the mortgagee shall have received evidence reasonably
satisfactory to it of the estimated cost of completion of the restoration,
and the CAP Borrower shall have deposited with the mortgagee eligible
collateral in an amount equal to the excess (if any) of such estimated cost
of completion over the net proceeds. Any surplus which may remain out of
proceeds received pursuant to a casualty will be paid to the CAP Borrower
after payment of such costs of restoration. Any surplus which may remain out
of proceeds received pursuant to a condemnation will be escrowed with the
mortgagee as security for the debt after payment of such costs of
restoration.
Financial Reporting. The CAP Borrower is required to furnish to the
mortgagee within 85 days following the end of each fiscal year of the CAP
Borrower, a complete copy of the CAP Borrower's annual combined financial
statements, audited by a "Big Six" accounting firm or another independent
certified public accounting firm reasonably acceptable to the mortgagee,
prepared in accordance with generally accepted accounting principles,
covering the CAP Borrower (including the CAP Properties) on a combined basis
for such fiscal year and containing a combined balance sheet and a statement
of operations. Together with the CAP Borrower's annual financial statements,
the CAP Borrower will also furnish to the mortgagee (A) an officer's
certificate certifying as of the date thereof whether, to the CAP Borrower's
knowledge, there exists a default or an event of default, and if such default
or event of default exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy the same; (B) then current
rent rolls; and (C) an annual report, for the most recently completed fiscal
year, containing certain prescribed information relating to occupancy levels,
capital expenditures, and supplemental data showing results for each CAP
Property which tie to the most recently prepared annual audited combined
financial statements, among other things.
In addition, the CAP Borrower is required to furnish, or cause to be
furnished, to the mortgagee on or before the 30th day after the end of each
calendar month among other items, monthly and year-to-date operating
statements prepared for each month (on an aggregate and property-by-property
basis).
The CAP Borrower is also required to furnish, or cause to be furnished, to
the mortgagee on or before the 40th day after the end of each fiscal quarter
among other items quarterly and year-to-date combined financial statements
prepared for such fiscal quarter with respect to the CAP Borrower's
Properties, with a balance sheet as of the end of such quarter together with
a supplemental schedule of net operating income for such quarter on an
aggregate and property-by-property basis which ties to the operating
statements.
Leasing. Subject to certain limitations on the terms thereof and the
performance and enforcement of the CAP Borrower thereunder, the CAP Borrower
may, without prior written consent of the mortgagee, enter into, renew,
modify and/or amend, and to the extent commercially reasonable, terminate any
lease affecting less than 150,000 square feet of an individual CAP Property.
The CAP Parent Loan. Simultaneously with the making of the CAP Pool Loan
by GSMC to the CAP Borrower, GSMC (the "CAP Parent Lender") made a loan (the
"CAP Parent Loan") to Commonwealth Atlantic Holdings I Inc., a Virginia
corporation (the "CAP Parent Borrower"), having an aggregate principal
balance as of the Cut-Off Date of approximately $25,200,000. The CAP Parent
Loan is secured by a pledge of 100% of the shares of the capital stock of the
CAP Borrower and an assignment of interest rate cap associated with the CAP
Parent Loan.
Among other things, any of (i) a default in the payment of principal or
interest when due, (ii) a default for more than three days in the payment of
fees or other amounts due, (iii) a transfer or encumbrance of the pledged
collateral by the CAP Parent Borrower, (iv) a failure by LFREI or its
affiliates to own at least 51% of the controlling interests in the CAP Parent
Borrower, (v) a bankruptcy or insolvency event that is not discharged, stayed
or dismissed within 60 days, (vi) an attempted assignment of the CAP Parent
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Borrower's rights under the CAP Parent Loan documents or (vii) an event of
default occurring under the CAP Pool Loan, constitutes a default under the
CAP Parent Loan, and the CAP Parent Lender has the right to accelerate the
CAP Parent Loan and to foreclose on the collateral securing the CAP Parent
Loan. The CAP Parent Borrower shall not amend or modify the CAP Pool Loan or
consent to or seek, and shall exercise any rights as an equity holder, if
any, to prevent, any action which would permit the amendment or modification
of the CAP Pool Loan in any manner that would be adverse, in any material
respect, to the CAP Parent Lender. Failure to comply with the previous
sentence beyond the applicable 10 day cure period shall constitute an event
of default under the CAP Parent Loan.
The CAP Parent Loan bears interest at a floating rate per annum based on a
spread over LIBOR. The CAP Parent Borrower has purchased an interest rate cap
agreement in a notional amount equal to the principal amount of the CAP
Parent Loan, between the CAP Borrower and a counterparty (as floating rate
payor) that has a senior unsecured long-term debt rating of "Aaa" as rated by
Moody's. The highest effective interest rate for the CAP Parent Loan, based
on such interest rate cap agreement, is approximately 12.2%, subject to
reduction when the outstanding balance of the CAP Parent Loan is reduced to
$13,800,000. The CAP Parent Loan is scheduled to mature on June 30, 2002. The
CAP Parent Loan can be prepaid on any Due Date upon 5 days' prior notice
specifying the prepayment date and the amount of principal to be prepaid, and
payment of a prepayment premium of (i) prior to the reduction of the
outstanding principal balance of the CAP Parent Loan to $13,800,000, 1.5% in
the first year and no prepayment premium thereafter and (ii) from and after
the reduction of the outstanding principal balance of the CAP Parent Loan to
$13,800,000, 3% in the first year, 2% in the second year, 1% in the third
year and no prepayment premium thereafter. The CAP Parent Loan is required to
be prepaid in part in certain circumstances, including but not limited to a
sale, transfer, or other disposition of ownership of a CAP Property or a
casualty or condemnation of a CAP Property in connection with which the CAP
Borrower is required to repay a portion of the loan secured by such property.
In the case of a sale, transfer or other disposition, or if the lien of the
related Mortgage is otherwise released from any CAP Property, then, the CAP
Parent Borrower is required to repay the CAP Parent Loan, or a portion
thereof in an amount based on the allocated loan amount for such CAP Property
established for the CAP Parent Loan. In the case of a casualty or
condemnation, to the extent there are excess proceeds or awards following
application in accordance with the CAP Pool Loan agreement, the CAP Parent
Borrower is required to repay the CAP Parent Loan, or a portion thereof, to
the extent of such available excess proceeds or awards. Failure of the CAP
Parent Borrower to repay the CAP Parent Loan in the foregoing circumstances
shall constitute an event of default under the CAP Parent Loan.
THE WHITEHALL POOL LOAN
The Loan. The Whitehall Pool Loan has a principal balance as of the
Cut-Off Date of approximately $72,228,349 and is secured by first priority
mortgage liens encumbering seven office properties, two retail properties and
two industrial properties located in California, Massachusetts, Missouri, New
York and Texas (the "Whitehall Properties"). The interest of the Whitehall
Borrower in ten of the Whitehall Properties is a fee interest and one of the
Whitehall Properties is a leasehold interest. The mortgages encumbering the
Whitehall Properties are cross-collateralized and cross-defaulted.
Payment Terms. The Whitehall Pool Loan was originated by the related
Originator on August 26, 1996. The Whitehall Pool Loan matures on September
10, 2000 (the "Whitehall Maturity Date") and bears interest at a fixed rate
per annum equal to 8.68% calculated for any period based on the actual number
of days elapsed and a 360-day year (the "Whitehall Interest Rate").
Commencing on September 10, 1996, the Whitehall Pool Loan requires 48
monthly payments (the "Whitehall Monthly Debt Service Payment Amount") of
principal and interest of $602,674 each (based on a 25-year amortization
schedule and the Whitehall Interest Rate) on the 10th day of the month or, if
in any month the 10th day is not a business day, then the Due Date for that
month will be the immediately preceding business day. Payment of the balance
of the principal, if any, together with all accrued and unpaid interest is
required on the Whitehall Maturity Date. The scheduled principal balance of
the Whitehall Pool Loan as of the Whitehall Maturity Date will be
approximately $69,172,622.
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After the occurrence and during the continuance of an event of default,
the entire outstanding principal balance of the Whitehall Pool Loan will bear
interest at a per annum default rate equal to the lesser of the maximum rate
permitted by applicable law and 10.68% per annum.
Prepayment. Voluntary prepayment is prohibited under the Whitehall Pool
Loan prior to the Whitehall Maturity Date, except (i) prior to the Whitehall
Defeasance Lock-Out Date, in connection with the release of an individual
Whitehall Pool Property in respect of which a default under the loan has
occurred so long as after such release no other event of default would exist
and (ii) in connection with certain casualty or condemnation events.
If all or any part of the principal amount of the Whitehall Pool Loan is
prepaid upon acceleration of the Whitehall Pool Loan following the occurrence
of an event of default or as described in clause (i) of the preceding
paragraph, the Whitehall Borrower will also be required to make a yield
maintenance payment in an amount equal to the excess, if any, of (i) the sum
of (A) the aggregate respective present values of all remaining scheduled
interest payments and principal payments in respect of the Whitehall Pool
Loan (or the portion of all such interest payments corresponding to the
portion of the principal of the Whitehall Pool Loan to be prepaid upon
acceleration or as described in clause (i) of the preceding paragraph) for
the period from the date of such prepayment to the Whitehall Maturity Date,
discounted monthly at a rate equal to a treasury constant yield and based on
a 360-day year of twelve 30-day months and (B) the aggregate respective
present values of all scheduled principal payments in respect of the
Whitehall Pool Loan (or the then unpaid portion thereof to be prepaid upon
acceleration) were such amount paid in full on the Whitehall Maturity Date,
discounted monthly at a rate equal to the treasury constant yield and based
on a 360-day year of twelve 30-day months over (ii) the then current
outstanding principal amount of the Whitehall Pool Loan (or the then unpaid
portion thereof to be prepaid upon acceleration).
To the extent that the Whitehall Borrower is not permitted to apply any
insurance proceeds or condemnation awards to the restoration of a Mortgaged
Property under the Whitehall Pool Loan, the mortgagee will be entitled, at
its option, to apply such proceeds to prepay the Whitehall Pool Loan. No
prepayment premium or penalty will be payable upon any mandatory prepayment
of the Whitehall Pool Loan in connection with casualty or condemnation unless
an event of default has occurred and is continuing, in which case the
Whitehall Borrower will be required to pay a yield maintenance payment
calculated in the manner described above.
Release in Exchange for Substitute Collateral. The Whitehall Borrower is
permitted on any date after the second anniversary of the Closing Date (the
"Whitehall Defeasance Lock-Out Date") to defease all or any portion of the
Whitehall Pool Loan, provided that, among other conditions, the Whitehall
Borrower gives the mortgagee at least thirty days' prior written notice of
the date of such defeasance (the "Whitehall Defeasance Date"), and provided
further that the Whitehall Borrower pays on the Whitehall Defeasance Date (i)
all accrued and unpaid interest on the Whitehall Pool Loan to but not
including such date (and if the Whitehall Defeasance Date is not a Due Date,
the Whitehall Defeasance Deposit (as defined below) will include an amount
equal to the interest that would have accrued on the Whitehall Pool Loan to
but not including the next Due Date), (ii) all other sums then due under the
Whitehall Pool Loan and the related loan documents, (iii) the Whitehall
Defeasance Deposit, and (iv) all reasonable costs and expenses of the
mortgagee incurred in connection with the defeasance. In addition, the
Whitehall Borrower will be required to deliver to the mortgagee among other
things (a) a security agreement granting the Trustee a first priority lien on
the Whitehall Defeasance Deposit and the noncallable U.S. Treasury
obligations purchased with the Whitehall Defeasance Deposit, (b) an opinion
of counsel for the Whitehall Borrower in form satisfactory to the mortgagee
stating, among other things, that the Trustee has a first priority perfected
security interest in the noncallable U.S. Treasury obligations purchased with
the Whitehall Defeasance Deposit, (c) a confirmation, in form and substance
reasonably satisfactory to the mortgagee, from a "Big Six" independent
certified public accounting firm, that the Whitehall Defeasance Deposit is
sufficient to pay all scheduled payments due from the borrower under the
Whitehall Pool Loan in connection with the proposed defeasance and (d) such
other certificates, documents or instruments as the mortgagee may reasonably
request.
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"Whitehall Defeasance Deposit" means an amount equal to the sum of (i)
the remaining principal amount of the note evidencing the Whitehall Pool Loan
(in the case of a total defeasance) or the principal amount of the defeased
portion of the note (in the case of a partial defeasance), as applicable,
(ii) without duplication, any costs and expenses incurred or to be incurred
in the purchase of U.S. Treasury obligations providing payments on or prior
to, but as close as possible to, all successive Due Dates upon which interest
and principal payments are required under the Whitehall Pool Loan after the
Whitehall Defeasance Date and through and including the Whitehall Maturity
Date, and in amounts equal to the scheduled payments due on such dates, or in
the case of defeasance of only a portion of the Whitehall Pool Loan, in
amounts equal to a portion of the foregoing payments relating to such portion
of the Whitehall Pool Loan being defeased, and (iii) any revenue, documentary
stamp or intangible taxes or any other tax or charge due in connection with
the transfer of the note, the creation of the defeased note and the
undefeased note, if applicable, any transfer of the defeased note or
otherwise required to satisfy the terms of the Whitehall Pool Loan.
Upon receipt of the Whitehall Defeasance Deposit, the mortgagee, using the
Whitehall Defeasance Deposit, will purchase noncallable U.S. Treasury
obligations on behalf of the Whitehall Borrower and, in the case of a
defeasance in whole, such U.S. Treasury obligations will serve as the sole
collateral for the payments of the amounts due under the Whitehall Pool Loan.
Upon a deposit of U.S. Treasury obligations, the Whitehall Borrower will have
the right to assign the obligation to make payments under the Whitehall Pool
Loan with respect to the principal amount of the Whitehall Pool Loan that has
been defeased to an entity designated by the mortgagee. If the Whitehall
Borrower does assign such obligations, the mortgagee will cause such
obligations to be assumed by a special-purpose bankruptcy-remote entity.
In connection with the defeasance of the Whitehall Pool Loan, the
Whitehall Borrower will be permitted to obtain the release of one or more of
the Whitehall Properties from the lien of the related Mortgage, provided that
no event of default exists and subject to the further conditions that (a) if
the defeasance is in connection with a release of less than all of the
Whitehall Properties, the Whitehall Borrower provides (i) evidence
satisfactory to the mortgagee that following such release the Whitehall Debt
Service Coverage Ratio will not be less than the greater of (A) the Whitehall
Debt Service Coverage Ratio for the twelve months immediately preceding the
proposed release and (B) 1.4 to 1.0 and (b) the Whitehall Borrower defeases a
principal portion of the Whitehall Pool Loan equal to (i) the Whitehall
Release Amount (as defined below) of the Whitehall Property being released in
the case of a release of less than all of the Whitehall Properties or (ii) an
amount equal to the entire principal balance of the Whitehall Pool Loan for a
full defeasance in the case of the release of all of the Whitehall
Properties.
"Whitehall Debt Service Coverage Ratio" means, for any period, the
quotient obtained by dividing net operating income for such period (excluding
any net operating income for the Whitehall Property being released) by the
greater of (x) aggregate interest and principal payments actually due and
payable on the Whitehall Pool Loan during such period and (y) interest and
principal payments on the Whitehall Pool Loan during such period assuming a
loan constant of 10.09% per annum (excluding the portion of such payments
relating to the Whitehall Pool Loan being defeased).
"Whitehall Allocated Loan Amount" means, with respect to each Whitehall
Property, the portion of the principal amount of the Whitehall Pool Loan
allocated to each such Whitehall Property agreed upon by the related
Originator and the Whitehall Borrower and determined as described under the
definition of "Allocated Loan Amount" set forth under "Mortgage Pool
Characteristics--Certain Characteristics of the Mortgage Loans."
"Whitehall Release Amount", with respect to a specified individual
Whitehall Property, shall mean an amount equal to the excess of (i) 125% of
the Whitehall Allocated Loan Amount for such individual Whitehall Property
over (ii) the scheduled payments of principal made under the Whitehall Pool
Loan in respect of the Whitehall Pool Loan allocated to such individual
Whitehall Property (based on the relative Whitehall Allocated Loan Amounts
for all of the individual Whitehall Properties); provided that in no event
shall the Whitehall Release Amount be greater than the then outstanding
principal amount of the Whitehall Pool Loan.
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Alteration/Expansion. Except upon compliance with certain conditions set
forth in the Whitehall Pool Loan agreement, the Whitehall Borrower is
prohibited from making or permitting any demolition, alteration,
installation, improvement or decoration to any individual Whitehall Property
or any part thereof or expanding or reducing any such property or the
improvements thereon.
Reserves. Pursuant to the terms of the Whitehall Pool Loan, the Whitehall
Lender has established (i) a leasing reserve account to cover the cost of
tenant improvement expenses and leasing commissions incurred by the Whitehall
Borrower, which is to be maintained with a minimum balance of at least
$4,100,000 (subject to reduction in connection with the release of a
Whitehall Property), (ii) a capital reserve account to cover the cost of
routine capital improvements (excluding tenant improvements and leasing
commissions and excluding the costs, associated with certain deferred
maintenance items identified at the time of the funding of the Whitehall Pool
Loan), to be funded from cash flow in equal amounts of approximately $33,600
per month (subject to reduction in connection with the release of any
Whitehall Property) and (iii) a tax and insurance account to be funded
monthly from funds available in the deposit account in an amount equal to
1/12th of the aggregate insurance premiums and taxes that the mortgagee
reasonably estimates will be payable in the next ensuing 12 months. In
addition, a deferred maintenance reserve fund of $794,613 was established at
closing of the Whitehall Pool Loan to cover the cost of certain deferred
maintenance conditions.
Lockbox. The Whitehall Borrower is required to direct all tenants at the
Whitehall Properties to make all checks in respect of sums due to the
Whitehall Borrower under the leases and operating agreements in effect at the
Whitehall Properties payable to the order of a deposit account or a
property-level sweep account, in each case to be maintained by, in the name
of and under the sole dominion and control of the mortgagee. Prior to the
request of the mortgagee, which may occur only after the occurrence of an
event of default, the Whitehall Borrower will have the right to receive (or
have its property manager receive) rent checks, record such receipt and, on
the same business day as each such check is received, deposit the same in the
deposit account or a property-level sweep account. If the mortgagee shall so
request and an event of default has occurred and is continuing, the Whitehall
Borrower will be required to notify each tenant and other person making
payments in respect of any of the Whitehall Properties to deliver such checks
and payments directly to the mortgagee or its agent.
On each Due Date, provided no default or event of default has occurred and
is continuing, the mortgagee will distribute funds from the deposit account
in the following order: (a) to fund the tax and insurance account, (b) to
fund the Whitehall Monthly Debt Service Payment Amount, (c) to the Whitehall
Borrower in an amount equal to the operating expenses approved by the
mortgagee in the annual budget for the month immediately prior to the month
in which such Due Date occurs (provided that the Whitehall Borrower shall
have provided the mortgagee with an officer's certificate certifying that,
among other things, the Whitehall Borrower does not have any unpaid claims of
creditors more than 60 days past due and that the amounts disbursed as
described in this clause (c) will be used solely to pay creditors, (d) to the
leasing reserve account in an amount, if any, necessary to bring the account
balance to $4,100,000 (or such lesser amount as may be required under the
Whitehall Pool Loan), (e) to fund $33,600 (or such lesser amount as may be
applicable) to the capital reserve account, (f) to the mortgagee in an amount
equal to the interest, if any, then accrued and unpaid under the Whitehall
Pool Loan at the excess of the default rate over the Whitehall Interest Rate;
and (g) to the Whitehall Borrower or its designee.
Transfer of Properties and Interest in the Whitehall Borrower;
Encumbrance. Unless permitted by the Whitehall Pool Loan documents as
described below, and with the exception of leases entered into in accordance
therewith and Whitehall Permitted Encumbrances, the Whitehall Borrower will
not, with respect to any individual Whitehall Property, (A) sell, assign,
convey, transfer or otherwise dispose of or encumber legal, beneficial or
equitable interests in all or any part thereof, (B) permit or suffer any
owner, directly or indirectly, of a beneficial interest therein to transfer
such interest, whether by transfer of stock or other beneficial interest in
any entity or otherwise, (C) mortgage, hypothecate or otherwise encumber or
grant a security interest in all or any part thereof or (D) file a
declaration of condominium with respect to any such individual Whitehall
Property. Notwithstanding the foregoing, a sale, assignment, conveyance or
transfer, or other disposition or hypothecation or other encumbrance of a
direct or indirect
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beneficial interest in the Whitehall Borrower will be permitted if after
giving effect to the proposed transaction, Whitehall III, Whitehall Street
Real Estate Limited Partnership IV and/or one or more of their respective
affiliates will continue to own at least 51% of the ownership interest in the
Whitehall Properties and to control the Whitehall Borrower, provided,
however, (x) if the above described transfer constitutes a transfer of 25% or
more of the stock or other direct equity ownership interests in the Whitehall
Borrower or a transfer of a general partnership interest in the Whitehall
Borrower, such transfer will require, among other things, that the mortgagee
receive a legal opinion confirming that the assets of the new borrower will
not be substantively consolidated with the assets of certain owners or
controlling persons of such borrower in a bankruptcy or similar proceeding
and (y) if the above described transfer involves the transfer of any interest
in a general partner of the Whitehall Borrower which is a single purpose
entity, such transfer will require, among other things, that the mortgagee
receive a legal opinion relating to such single purpose entity and such
transferee confirming that the assets of the transferee will not be
substantively consolidated with the assets of such single purpose entity in a
bankruptcy or similar proceeding.
Except as may be set forth below, the Whitehall Borrower may only sell,
assign, convey, transfer or otherwise dispose of legal or equitable title to
or any interest in all (but not less than all) of the Whitehall Properties
if, after giving effect to the proposed transaction, (A) the purchaser
assumes in writing all of the obligations of the Whitehall Borrower under the
Whitehall Pool Loan and, as a condition to such transfer, the mortgagee has
received written confirmation from each of the Rating Agencies that the
transfer will not result, in and of itself, in a reduction, withdrawal or
qualification of any rating then assigned to any outstanding Certificates,
(B) the Whitehall Properties will be owned by a single purpose entity which,
at the time of such transfer, will be in compliance with the covenants
contained in the loan agreement relating to the Whitehall Pool Loan and which
will have assumed in writing (subject to the non-recourse provisions
described above under "Security") and agreed to comply with all the terms,
covenants and conditions set forth in the loan agreement, (C) the transferee
will be a Whitehall Permitted Owner (as defined below) or be wholly owned,
directly or indirectly, by a Whitehall Permitted Owner, (D) if the present
property manager or an affiliate thereof does not continue to act as property
manager of such individual Whitehall Property, then the applicable property
manager must be a reputable and experienced professional management company
satisfying certain minimum standards set forth in the loan agreement and (E)
no event of default shall have occurred and be continuing.
As used herein, a "Whitehall Permitted Owner" means any one of the
following: (a) Whitehall III and/or Whitehall Street Real Estate Limited
Partnership IV, (b) a person that, together with its affiliates, has a
current net worth of at least $150 million and controls total assets of at
least $300 million, in each case exclusive of the Whitehall Properties (or,
in the case of a pension fund advisor, one which controls $1 billion of
assets), (c) a pension fund, account or trust or an investment vehicle
established by such an entity, that has total assets of $150 million,
exclusive of the Whitehall Properties, and which is managed by a person that
controls at least $300 million in real estate assets, or (d) a person in
which one or more of the persons, together with their Affiliates, described
in (a) through (c) above collectively own (directly or indirectly) at least a
51% interest in and control the Whitehall Borrower.
For purposes of this definition, "control" means primary responsibility to
make or veto all material decisions with respect to the operation,
management, financing and disposition of the specified interest, rather than
a beneficial ownership requirement, and without being compromised by the fact
that responsibility for such day-to-day operating and management functions or
leasing activities as are ordinarily handled by a property manager has been
delegated by such controlling person pursuant to an agreement in writing.
Insurance. The Whitehall Borrower is required to maintain, at its sole
cost and expense, for the mutual benefit of the Whitehall Borrower and the
Trustee, policies of insurance against loss or damage by standard perils
included within the classification "All Risks of Physical Loss". Such
insurance must be maintained in an aggregate amount equal to the then full
replacement cost of the Whitehall Properties and related assets without
deduction for physical depreciation) and must have deductibles no greater
than those in existence at the time of the closing of the Whitehall Pool
Loan. The Whitehall Borrower must also maintain the following policies of
insurance: (a) flood insurance if any part of an individual
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Whitehall Property is located in an area identified by the Federal Emergency
Management Agency as an area federally designated a "100 year flood plain"
and flood insurance is generally available at reasonable premiums and in such
amounts as generally are required by institutional lenders for similar
properties (or, if not so available from a private carrier, from the federal
government at commercially reasonable premiums to the extent available), in
either case, in an amount at least equal to the lesser of the allocated loan
amount applicable to such Whitehall Property or the maximum limit of coverage
available under said program with respect to such Whitehall Property; (b)
comprehensive general liability insurance, including broad form property
damage, blanket contractual and personal injuries coverages and containing
minimum limits per occurrence of $10,000,000 for any policy year as well as
at least $30,000,000 excess and/or umbrella liability insurance; (c) rental
loss and/or business interruption insurance in an amount equal to the greater
of estimated gross revenues payable to the Whitehall Borrower and projected
operating expenses needed to maintain and operate the Whitehall Properties,
in each case for two years; (d) insurance against loss or damage from leakage
of sprinkler systems and explosion of steam boilers, air conditioning
equipment and high pressure piping, and against loss of occupancy or use
arising from any such breakdown, in such amounts as are generally available
at reasonable premiums and are generally required by institutional lenders
for properties comparable to each of the Whitehall Properties; (e) worker's
compensation insurance, as and to the extent required by applicable law or
regulation; (f) during any period of repair or restoration costing in excess
of $20,000, builder's "all risk" insurance in an amount not less than full
insurable value; (g) coverage to compensate for the cost of demolition and
the increased cost of construction for any Whitehall Property in an amount
satisfactory to the mortgagee; and (h) such other insurance as may from time
to time be reasonably required by the mortgagee. The Whitehall Pool Loan
requires the Whitehall Borrower to obtain the insurance described above from
insurers having claims paying abilities rated "AA" or better by the Rating
Agencies or, if the insurance program is substantially similar to the
insurance program in place on the closing date of the Whitehall Pool Loan,
"A" or better by the Rating Agencies.
In addition, the Whitehall Borrower must maintain earthquake coverages at
substantially the same levels that were being carried at the time of the
closing of the Whitehall Pool Loan or such lesser amounts as may be
acceptable to the Rating Agencies (such acceptance to be evidenced by written
confirmation from each Rating Agency that the proposed coverage would not, in
and of itself, result in a reduction, withdrawal or qualification of any
rating then assigned to any outstanding Certificate). The Whitehall
Properties located in Santa Clara, Milpitas, Pleasant Hill, Thousand Oaks,
Long Beach and Cupertino, California are each located in an earthquake zone
and the Whitehall Borrower has obtained earthquake insurance for these
properties.
Casualty and Condemnation. In the event of a casualty or a condemnation at
any Whitehall Property, the mortgagee shall permit the application of the
proceeds resulting therefrom (after reimbursement of any expenses incurred by
the mortgagee) to reimburse the Whitehall Borrower for the cost of restoring,
repairing, replacing or rebuilding the affected individual Whitehall
Property, in the manner described below, provided and on the condition that,
no default or event of default has occurred and is then continuing and, in
the reasonable judgment of the mortgagee: (i) the individual Whitehall
Property can be restored to an economic unit not less valuable (taking into
account the effect of the termination of any leases or material agreements
due to such casualty or condemnation) and not less useful than the same was
prior to the casualty or condemnation, (ii) the individual Whitehall Property
after such restoration will adequately secure a portion of the outstanding
balance of the Whitehall Pool Loan equal to the Allocated Loan Amount for
such property, (iii) the restoration can be completed by the earliest to
occur of: (A) the 180th day following the receipt of the proceeds (or if
earlier, the 365th day after the casualty or condemnation, as applicable),
or, with rating confirmation, such longer period as may reasonably be
required, (B) the 180th day prior to the Whitehall Maturity Date, and (C)
with respect to a casualty, the expiration of the payment period on the
rental-loss insurance coverage in respect of such casualty, and (iv) during
the period of the restoration, the sum of (A) income derived from the
affected individual Whitehall Property, plus (B) proceeds of rent loss
insurance or business interruption insurance, if any, payable will equal or
exceed 105% of the sum of (1) expenses in connection with the operation of
such individual Whitehall Property and (2) the debt service in respect of the
amount of the Whitehall Pool Loan allocable to such property (provided that
the foregoing condition shall be deemed
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satisfied if the net operating income derived from the affected property
during the period of restoration (including proceeds of rent loss insurance
or business interruption insurance, if any, payable) shall not be less than
such net operating income prior to the casualty or condemnation in question).
If any of the conditions set forth in the foregoing proviso is not
satisfied, then, unless the mortgagee elects otherwise, in its sole
discretion, the proceeds will be applied to the prepayment of the Whitehall
Pool Loan (without prepayment premium or penalty, other than a yield
maintenance premium if an event of default has occurred and is continuing)
and the Whitehall Borrower shall be entitled to receive a release of the
mortgage lien affecting such individual Whitehall Property in accordance with
and subject to the terms described above in connection with a release due to
defeasance (in which event such proceeds will be applied against the
Whitehall Release Amount for such property).
In the event of a casualty where the loss is in an aggregate amount equal
to or more than 33.333% of the casualty/condemnation threshold established
for such individual Whitehall Property in the loan agreement (such threshold
being approximately 176% of the Whitehall Allocated Loan Amount for each
individual Whitehall Property), or a condemnation where the loss is in an
aggregate amount equal to or more than 20% of the casualty/condemnation
threshold, then the Whitehall Borrower will have the option (to be exercised
by notice to the mortgagee given not later than the 30th day after the
receipt of the proceeds) to apply the net proceeds to the prepayment of the
Whitehall Pool Loan (and the Whitehall Borrower will be entitled to receive a
release of the mortgage lien affecting such individual Whitehall Property, in
which event such proceeds shall be applied against the Whitehall Release
Amount for such property) or, provided the conditions set forth in the
proviso above are complied with, to have such proceeds applied to reimburse
the Whitehall Borrower for the cost of any restoration as described below
(and the Whitehall Borrower will be deemed to have elected restoration if it
shall fail to have given such notice within said 30-day period).
Any application of proceeds to the repayment of the Whitehall Pool Loan as
described above will be without any prepayment premium or penalty except that
if an event of default has occurred and is continuing, then the Whitehall
Borrower will be required to pay the yield maintenance payment, if any, that
would be required in respect of the principal being prepaid as a result of an
acceleration of the Whitehall Pool Loan after an event of default. Any such
application to the repayment of the Whitehall Pool Loan will be applied to
those payments of principal and interest last due under the Whitehall Pool
Loan and will not postpone or reduce any payments otherwise required pursuant
to the Whitehall Pool Loan other than such last due payments.
If the Whitehall Borrower is entitled to reimbursement out of proceeds,
such proceeds will be disbursed from time to time upon the mortgagee being
furnished with (i) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats of
survey and such other evidences of cost, payment and performance as the
mortgagee may reasonably require and approve, and (ii) all plans and
specifications for such restoration, such plans and specifications to be
approved by the mortgagee prior to commencement of any work (such approval
not to be unreasonably withheld or delayed). In addition, no payment made
prior to the final completion of the restoration shall exceed 90% of the
value of the work performed from time to time; funds other than proceeds will
be disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of the mortgagee,
together with funds deposited for that purpose or irrevocably committed to
the satisfaction of the mortgagee by or on behalf of the Whitehall Borrower
for that purpose, will be at least sufficient in the reasonable judgment of
the mortgagee to pay for the cost of completion of the restoration, free and
clear of all liens or claims for liens. Prior to any disbursement, the
mortgagee shall have received evidence reasonably satisfactory to it of the
estimated cost of completion of the restoration, and the Whitehall Borrower
shall have deposited with the mortgagee eligible collateral in an amount
equal to the excess (if any) of such estimated cost of completion over the
net proceeds. Any surplus which may remain out of proceeds received pursuant
to a casualty will be paid to Whitehall Borrower after payment of such costs
of restoration. Any surplus which may remain out of proceeds received
pursuant to a condemnation will be escrowed with mortgagee as security for
the Whitehall Pool Loan after payment of such costs of restoration.
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Financial Reporting. The Whitehall Borrower is required to use best
efforts to furnish to the mortgagee within 85 days, and in any event within
90 days following the end of each fiscal year of the Whitehall Borrower, a
complete copy of the Whitehall Borrower's annual financial statements,
audited by a "Big Six" accounting firm or another independent certified
public accounting firm reasonably acceptable to the mortgagee, in accordance
with generally accepted accounting principles, covering the Whitehall
Properties on a combined basis as well as each individual property, for such
fiscal year. Together with the Whitehall Borrower's annual financial
statements, the Whitehall Borrower will also furnish to the mortgagee then
current rent rolls and an annual report, for the most recently completed
fiscal year, containing certain prescribed information relating to occupancy
levels and capital expenditures, among other matters.
In addition, the Whitehall Borrower is required to furnish, or cause to be
furnished, to the mortgagee on or before the 30th day after the end of each
calendar month, among other items, monthly and year to date operating
statements prepared for each calendar month (on a property-by-property
basis).
The Whitehall Borrower is also required to furnish, or cause to be
furnished, to the mortgagee on or before the 38th day after the end of each
calendar quarter, quarterly and year to date statements prepared for such
calendar quarter with respect to the Whitehall Borrower, with a balance sheet
for such quarter and a comparison of the budgeted income and expenses and the
actual income and expenses for such quarter and year to date for the
Whitehall Properties on an aggregate and per-property basis.
The Whitehall Borrower is also required to furnish to mortgagee, within 10
business days after request, such further detailed information with respect
to the operation of any of the Whitehall Properties and the financial affairs
of the Whitehall Borrower as may be reasonably requested by the mortgagee.
The Whitehall Partner Loan. Simultaneously with the making of the
Whitehall Pool Loan by the related Originator to the Whitehall Borrower, GSMC
made a loan (the "Whitehall Partner Loan") to WMP Real Estate Limited
Partnership ("WMP I") having an aggregate principal balance as of the Cut-Off
Date of approximately $56,000,000 and evidenced by a note issued by WMP I in
the principal amount of $56,000,000. As described above under "--The
Borrower", WMP I is the sole limited partner in the Whitehall Borrower. The
Whitehall Partner Loan is secured by a pledge of (i) all of the shares of
capital stock of WMP II Gen-Par, Inc., the sole general partner of the
Whitehall Borrower, (ii) all of the limited partnership interests in the
Whitehall Borrower, and (iii) certain other rights and agreements. In
addition, repayment of the Whitehall Partner Loan is guaranteed by Whitehall
III and Whitehall Street Real Estate Limited Partnership IV. The current
holder of the Whitehall Partner Loan is the Master Servicer. See "Risk
Factors--The Mortgage Loans--Conflicts of Interest--Conflicts Relating to the
Master Servicer".
Among others, any of (i) a default in the payment of principal, (ii) a
default for more than three days in the payment of interest, fees or other
amounts, (iii) a bankruptcy or insolvency event that is not discharged,
stayed or dismissed within 60 days, or (iv) an assignment of the Whitehall
Borrower's rights under the Whitehall Pool Loan in contravention of the
Whitehall Pool Loan documents constitutes a default under the Whitehall
Partner Loan and the mortgagee under the Whitehall Partner Loan has the right
to accelerate the Whitehall Partner Loan and to foreclose on the collateral
securing the Whitehall Partner Loan.
The Whitehall Partner Loan bears interest at a floating rate per annum
equal to LIBOR plus 1.75% (or plus 2.30% if the Maturity of the Whitehall
Partner Loan is extended to August 12, 1999 in accordance with the Whitehall
Partner Loan documents), calculated for any period based on the actual number
of days elapsed and a 360-day year. The Whitehall Partner Loan is scheduled
to mature on February 12, 1998, unless extended to August 12, 1999 upon the
satisfaction of certain conditions set forth in the Whitehall Partner Loan.
The Whitehall Partner Loan can be prepaid at any time without yield
maintenance or penalty.
THE RITZ PLAZA LOAN
The Loan. The Ritz Plaza Loan had a principal balance as of the Cut-Off
Date of approximately $62,365,309 and is secured by a first priority mortgage
lien encumbering a 40-story building with 479 apartment units (consisting of
24 studio apartments, 400 1-bedroom apartments, and 55 2-bedroom
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apartments), approximately 25,432 gross rentable square feet of commercial
space, and a 158-car parking garage, known as The Ritz Plaza, located at
235-237 West 48th Street, in the Borough of Manhattan, County, City and State
of New York (the "Ritz Plaza Property").
Payment Terms. The Ritz Plaza Loan was originated as of April 25, 1997.
The Ritz Plaza Loan matures on April 24, 2027 (the "Ritz Plaza Maturity
Date") and bears interest at a fixed rate per annum equal to 8.135% (the
"Ritz Plaza Initial Interest Rate") through April 10, 2007. From April 11,
2007 (the "Ritz Plaza Anticipated Repayment Date") at a fixed rate per annum
equal to 10.135% (the "Ritz Plaza Revised Interest Rate"). As described
below, if the Ritz Plaza Borrower does not prepay the Ritz Plaza Loan on the
Ritz Plaza Anticipated Repayment Date, the Ritz Plaza Borrower will be
required only to pay interest at the Ritz Plaza Initial Interest Rate
(together with principal, as described below). The interest accrued equal to
the excess of the Ritz Plaza Revised Interest Rate over the Ritz Plaza
Initial Interest Rate will be deferred and, to the extent permitted by
applicable law, accrue interest at the Ritz Plaza Revised Interest Rate (such
accrued and deferred interest and interest thereon at the Ritz Plaza Revised
Interest Rate, the "Ritz Plaza Excess Interest"). Interest on the Ritz Plaza
Loan is calculated based on the actual number of days elapsed and a 360-day
year.
Commencing on June 11, 1997, the Ritz Plaza Loan requires monthly payments
(the "Ritz Plaza Monthly Debt Service Payment Amount") of principal and
interest of $469,453 each (based on a 30-year amortization schedule and the
Ritz Plaza Initial Interest Rate). The Due Date for each installment of the
Ritz Plaza Monthly Debt Service Amount is the 11th day of each calendar
month, or, if in any month the 11th day is not a business day, then the Due
Date for that month will be the immediately prior business day. Payment of
the balance of the principal, if any, together with all accrued and unpaid
interest is required on the Ritz Plaza Maturity Date. Commencing on the first
Due Date after the Ritz Plaza Anticipated Repayment Date, in addition to the
Ritz Plaza Monthly Debt Service Payment Amount, the Ritz Plaza Borrower is
required to apply 100% of the Ritz Plaza Excess Cash Flow (as defined below)
for the month preceding the month in which such Due Date occurs in the
following order of priority (a) to the outstanding principal balance until
the Ritz Plaza Loan has been paid in full and (b) to the Ritz Plaza Excess
Interest. "Ritz Plaza Excess Cash Flow" means the amounts held as collected
funds in the deposit account maintained pursuant to the terms of the loan
agreement after the application of funds (a) to the amounts required to be
paid into the tax and insurance escrow fund as described below under
"--Reserves", (b) to the Ritz Plaza Monthly Debt Service Payment Amount, (c)
to the amounts required to be paid into the capital reserve account described
below under "--Reserves", and (d) to pay the Ritz Plaza Borrower's budgeted
operating expenses and capital expenditures (not previously reserved for) and
approved extraordinary capital expenditures. The scheduled principal balance
of the Ritz Plaza Loan as of the Ritz Plaza Anticipated Repayment Date will
be approximately $55,284,787.
After the occurrence and during the continuance of a "Major Default" (as
defined in the Ritz Plaza Loan documents), the entire outstanding principal
balance of the Ritz Plaza Loan along with the due and unpaid interest thereon
will bear interest at a per annum default rate equal to the lesser of (a) the
maximum rate permitted by applicable law and (b) 500 basis points in excess
of the then applicable interest rate, but in no event less than 100 basis
points in excess of the Citibank "base" rate.
Prepayment. Voluntary prepayment is prohibited under the Ritz Plaza Loan
prior to the Ritz Plaza Anticipated Repayment Date, except in connection with
certain casualty or condemnation events. Thereafter, the Ritz Plaza Loan may
be voluntarily prepaid in whole or in part without payment of a yield
maintenance charge or prepayment premium.
If all or any part of the principal amount of the Ritz Plaza Loan is
prepaid upon acceleration of the Ritz Plaza Loan following the occurrence of
an event of default, the Ritz Plaza Borrower will also be required to make a
yield maintenance payment in an amount equal to the excess, if any, of (i)
the sum of (A) the aggregate respective present values of all remaining
scheduled interest payments in respect of the Ritz Plaza Loan (or the portion
of all such interest payments corresponding to the portion of the principal
of the Ritz Plaza Loan to be prepaid upon acceleration) for the period from
the date of such prepayment upon acceleration to the Ritz Plaza Anticipated
Repayment Date, discounted monthly at a rate equal to a specified treasury
constant yield and based on a 360-day year of twelve 30-day months
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and (B) the aggregate respective present values of all scheduled principal
payments in respect of the Ritz Plaza Loan (or the then unpaid portion
thereof to be prepaid upon acceleration) assuming such amount is paid in full
on the Ritz Plaza Maturity Date, discounted monthly at a rate equal to a
specified treasury constant yield and based on a 360-day year of twelve
30-day months over (ii) the then current outstanding principal amount of the
Ritz Plaza Loan (or the then unpaid portion thereof to be prepaid upon
acceleration).
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of the Ritz Plaza Property under
the Ritz Plaza Loan, the mortgagee will be entitled, at its option, to apply
such proceeds to prepay the Ritz Plaza Loan, as described below under
"--Casualty and Condemnation". No prepayment premium or penalty will be
payable upon any mandatory prepayment of the Ritz Plaza Loan in connection
with casualty or condemnation unless an event of default has occurred and is
continuing, in which case the Ritz Plaza Borrower will be required to pay a
yield maintenance payment calculated in the manner described above.
The mortgagee may apply certain amounts to the prepayment of the Ritz
Plaza Loan upon the occurrence of an event of default.
Release in Exchange for Substitute Collateral. The Ritz Plaza Borrower is
permitted on any date after the second anniversary of the Closing Date to
defease all or any portion of the Ritz Plaza Loan, provided that, among other
conditions, the Ritz Plaza Borrower gives the Master Servicer at least thirty
days' prior written notice of the date (which must be a scheduled Due Date)
of such defeasance (the "Ritz Plaza Defeasance Date") and provided further
that the Ritz Plaza Borrower pays on the Ritz Plaza Defeasance Date (i) all
accrued and unpaid interest on the Ritz Plaza Loan to but not including such
date, and (ii) all other sums (other than scheduled interest or principal
payments) then due under the Ritz Plaza Loan and the related loan documents,
(iii) the Ritz Plaza Defeasance Deposit (as defined below) and (iv) all
reasonable costs and expenses of the mortgagee incurred in connection with
the defeasance. In addition, the Ritz Plaza Borrower will be required to
deliver to the mortgagee among other things (a) a security agreement granting
the Trustee a first priority lien on the Ritz Plaza Defeasance Deposit and
the noncallable U.S. Treasury obligations purchased with the Ritz Plaza
Defeasance Deposit, (b) an opinion of counsel for the Ritz Plaza Borrower in
form satisfactory to the mortgagee stating, among other things, that the
Trustee has a perfected security interest in the noncallable U.S. Treasury
obligations purchased with the Ritz Plaza Defeasance Deposit, (c) a
confirmation, in form and substance reasonably satisfactory to the mortgagee,
from a "Big Six" independent certified public accounting firm, that the Ritz
Plaza Defeasance Deposit is sufficient to pay all scheduled payments due from
the Ritz Plaza Borrower under the Ritz Plaza Loan in connection with the
proposed defeasance, (d) written confirmation from the Rating Agencies that
such defeasance will not, in and of itself, result in the reduction,
withdrawal or qualification of any rating then assigned to any outstanding
Certificates and (e) such other certificates, documents or instruments as the
mortgagee may reasonably request.
"Ritz Plaza Defeasance Deposit" shall mean an amount equal to the sum of
(i) the remaining principal amount of the note evidencing the Ritz Plaza Loan
(in the case of a total defeasance) or in the principal amount of the
defeased portion of the note (in the case of a partial defeasance), as
applicable, (ii) without duplication, any costs and expenses incurred or to
be incurred in the purchase of noncallable U.S. Treasury obligations
providing payments on or prior to, but as close as possible to, all
successive Due Dates upon which interest and principal payments are required
under the Ritz Plaza Loan after the Ritz Plaza Defeasance Date and through
and including the Ritz Plaza Anticipated Repayment Date, and in amounts equal
to the debt service due on such dates (assuming for this purpose that the
entire unpaid principal balance of the Ritz Plaza Loan is due and payable on
the Ritz Plaza Anticipated Repayment Date), and (iii) any revenue,
documentary stamp or intangible taxes or any other tax or charge due in
connection with the transfer of the note, the creation of the defeased note
and the undefeased note, if applicable or any transfer of the defeased note
or otherwise required to satisfy the terms of the Ritz Plaza Loan.
Upon receipt of the Ritz Plaza Defeasance Deposit, the mortgagee, using
the Ritz Plaza Defeasance Deposit, will purchase noncallable U.S. Treasury
obligations on behalf of the Ritz Plaza
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Borrower and such U.S. Treasury obligations will serve as the sole collateral
for the payments of the amounts due under the Ritz Plaza Loan. Upon a deposit
of U.S. obligations, the Ritz Plaza Borrower will have the right to assign
the obligation to make payments under the Ritz Plaza Loan with respect to the
principal amount of the Ritz Plaza Loan that has been defeased to an entity
designated by the mortgagee. If the Ritz Plaza Borrower does assign such
obligations, the Master Servicer will cause such obligations to be assumed by
a special-purpose entity.
In connection with the defeasance of the Ritz Plaza Loan, the Ritz Plaza
Borrower will be permitted to obtain the release of the mortgage encumbering
the Ritz Plaza Property.
Alterations. Except upon compliance with certain conditions set forth in
the Ritz Plaza Loan documents, the Ritz Plaza Borrower is prohibited from
making or permitting any demolition, alteration, installation, improvement or
decoration to the Ritz Plaza Property or any part thereof or expanding or
reducing the Ritz Plaza Property or the improvements thereon.
Reserves. Pursuant to the terms of the Ritz Plaza Loan, the Ritz Plaza
Borrower is required to fund the following reserves: (a) a capital reserve
account to be funded each Ritz Plaza Due Date in an amount equal to the
excess, if any, of (i) $15,966.67 over (ii) the amount expended by the Ritz
Plaza Borrower for capital items related to the Ritz Plaza Property through
the second calendar month prior to the applicable Due Date (but only to the
extent not previously reimbursed out of same reserve account or deducted in
computing such reserve payment); (b) a leasing reserve equal to $28.00 per
square foot of the portion of the Ritz Plaza Property demised pursuant to any
expiring commercial lease, to be funded not less than 180 days prior to the
expiration of each commercial lease of a portion of the Ritz Plaza Property,
unless the Ritz Plaza Borrower delivers to the mortgagee a fully executed
replacement lease for the portion of the Ritz Plaza Property demised pursuant
to said expiring lease, and provides evidence reasonably satisfactory to the
Master Servicer and each Rating Agency of the Ritz Plaza Borrower's ability
to pay for the required tenant improvement costs and leasing commissions; (c)
a debt service reserve funded at or prior to closing, in the amount of the
sum of the Ritz Plaza Monthly Debt Service Amount plus the required monthly
payment to the tax and insurance escrow account (as increased or decreased
from time to time); (d) a low debt service reserve equal to the gross revenue
from the Ritz Plaza Property less debt service payments due on the Ritz Plaza
Loan, taxes, insurance, reserves under the Ritz Plaza Loan, and operating
expenses to be funded if, as of any date, a Low Debt Service Trigger Event
shall have occurred and a Low Debt Service Return Event (as those terms are
defined in the Ritz Plaza Loan documents) shall have not occurred (if, as of
any date, the net cash flow of the Ritz Plaza Property for the prior twelve
calendar month period shall be less than $5,575,000, the mortgagee shall
apply the proceeds of the low debt service reserve account as a partial
prepayment of the Ritz Plaza Loan); and (e) a tax and insurance escrow
account to be funded monthly with (i) one-twelfth of the taxes and other
charges required to be paid under the Ritz Plaza Loan and (ii) one-twelfth of
the insurance premiums payable for the renewal of the coverage required to be
maintained under the Ritz Plaza Loan.
If (i) the Ritz Plaza Borrower has deposited sufficient funds in the tax
and insurance escrow to timely make the required payments therefrom and the
mortgagee fails to apply such funds to make the required payments (if not
permitted to apply such funds for other purposes pursuant to the Ritz Plaza
Loan documents) or (ii) the mortgagee has underestimated the required
deposits into the tax and insurance escrow account, and as a result, the
funds deposited therein are insufficient to timely make the required
payments, and the mortgagee does not advance funds on behalf of the Ritz
Plaza Borrower to timely make such payments, the mortgagee is required to
indemnify and hold harmless the Ritz Plaza Borrower and the Ritz Plaza
Property from any amounts due because of such late payment or non-payment of
required payments from such escrow account.
Cash Management; Lockbox. Until a Ritz Plaza Lockbox Trigger Event (as
defined below) shall have occurred, the Ritz Plaza Borrower shall deposit all
receipts from operation of the Ritz Plaza Property into the Ritz Plaza
Borrower's income account (the "Income Account"). Effective on the sixth day
of each calendar month (or, if such date is not a business day, then on the
business day immediately thereafter), and continuing until the payment of all
items due on the Due Date in such month, all funds in the Income Account will
be transferred by the mortgagee to one or more accounts controlled by the
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mortgagee on account of the items due on such Due Date. The Ritz Plaza
Borrower will cause the mortgagee to be authorized to initiate such transfer
of funds from the Income Account to the mortgagee. If sufficient funds timely
to make all payments to the mortgagee as set forth above are not released to
the mortgagee pursuant to said automatic transfer, the Ritz Plaza Borrower
shall pay such amounts as are due not later than the Ritz Plaza Due Date;
failure to do so will constitute an event of default under the Ritz Plaza
Loan. A "Ritz Plaza Lockbox Trigger Event" shall mean the earlier to occur of
a "Major Default" (as defined in the Ritz Plaza Loan documents) and the Ritz
Plaza Anticipated Repayment Date.
From and after a Ritz Plaza Lockbox Trigger Event, the Ritz Plaza Borrower
shall enter into a deposit account agreement with the mortgagee and a bank
selected by the mortgagee, which shall provide for the establishment of a
deposit account to be maintained by, in the name of and under the sole
dominion and control of the mortgagee. The Ritz Plaza Borrower is required to
direct all tenants and other parties to operating agreements to make all
checks and payments in respect of sums due under the leases and operating
agreements in effect at the Ritz Plaza Property payable directly to the
deposit account and to deliver such checks and payments directly to the
mortgagee or its agent.
On each Due Date, provided no default or event of default has occurred and
is continuing, the Master Servicer will distribute funds from the deposit
account in the following order: (i) to the tax and insurance account, (ii) to
fund the Ritz Plaza Monthly Debt Service Payment Amount, (iii) to the capital
reserve account, if required, (iv) to the Ritz Plaza Borrower, an amount
equal to the budgeted operating expenses for the month immediately prior to
the month in which such Due Date occurs (or up to 105% of the budget
operating expenses on a cumulative year-to-date basis) provided that the Ritz
Plaza Borrower shall have delivered to the mortgagee an officer's certificate
certifying that, among other things, there are not outstanding for more than
60 days any amounts claimed by any creditor to be due (except for claims the
Ritz Plaza Borrower is contesting in good faith) and that the amounts
disbursed to the Ritz Plaza Borrower pursuant to this clause (iv) will be
used solely to pay creditors for costs and expenses incurred to such date,
(v) from and after the Ritz Plaza Anticipated Repayment Date, to the payment
of the outstanding principal balance of the Ritz Plaza Loan until the
principal amount of the Ritz Plaza Loan has been paid in full, (vi) from and
after a "Low Debt Service Reserve Trigger Event" until a "Low Debt Service
Reserve Return Event" (as those terms are defined in the Ritz Plaza Loan
documents), the remaining receipts to the low debt service reserve, (vii)
from and after the Ritz Plaza Anticipated Repayment Date, to the payment of
the Ritz Plaza Excess Interest, and (viii) to the Ritz Plaza Borrower or its
designee any funds remaining in the deposit account; provided that in the
mortgagee's sole discretion, the mortgagee may permit a distribution under
this clause (viii) notwithstanding the occurrence of a default or an event of
default.
Transfer of the Ritz Plaza Property or Beneficial Interests in the Ritz
Plaza Borrower; Encumbrance. Unless permitted by the Ritz Plaza Loan
documents as described below, and with the exception of leases entered into
in accordance therewith and Ritz Plaza Permitted Encumbrances, the Ritz Plaza
Borrower will not (A) sell, assign, convey, transfer or otherwise dispose of
or encumber legal, beneficial or equitable interests in the Ritz Plaza
Property or any part thereof, (B) permit or suffer any owner, directly or
indirectly, of a beneficial interest in the Ritz Plaza Property to transfer
such interest, whether by transfer of stock or other beneficial interest in
any entity or otherwise, (C) mortgage, hypothecate or otherwise encumber or
grant a security interest in the Ritz Plaza Property or any part thereof or
(D) file a declaration of condominium with respect to the Ritz Plaza
Property.
Unless permitted by the Ritz Plaza Loan documents as described below, the
Ritz Plaza Borrower may only sell, assign, convey, transfer or otherwise
dispose of legal or equitable title to or any interest in the Ritz Plaza
Property if (A) the mortgagee shall have received written confirmation from
each of the Rating Agencies that such transfer, in and of itself, will not
result in a reduction, withdrawal or qualification of any rating then
assigned to any outstanding Certificates, provided, that such written
confirmation shall not be required with respect to any transfer which is
described in the following paragraph; (B) simultaneously with the closing of
such transfer, the mortgagee receives payment of a fee equal to 1% of the
outstanding amount of the Ritz Plaza Loan, in immediately available funds,
provided, that no such fee shall be due with respect to any transfer of
equity interests in the Ritz Plaza Borrower among the then-current holders
thereof either (i) which is described in the following paragraph or (ii) with
respect to
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which written confirmation from each of the Rating Agencies, as described in
(A) above, has been issued; (C) after giving effect to the proposed
transaction, (1) the Ritz Plaza Property will be owned by a single purpose
entity, which at the time of such transfer will be in compliance with the
single-purpose covenants contained in the Ritz Plaza Loan agreement and which
shall have assumed in writing (subject to the exculpation provisions of the
Ritz Plaza Loan agreement) and agreed to comply with all the terms, covenants
and conditions set forth therein, (2) except if the property manager is the
Ritz Plaza Property Manager, the property manager must have been approved by
the mortgagee and shall have received written confirmation from the Rating
Agencies that the appointment of such manager will not, in and of itself,
result in a reduction, qualification or withdrawal of any ratings then
assigned to any outstanding Certificates, and (3) no event of default shall
have occurred and be continuing; and (D) if the transfer is not to an
affiliate of the Ritz Plaza Borrower, the proposed transferee must deliver an
officer's certificate stating that: (1) such transferee is an employee
benefit plan that is a Plan and the obligations under the Ritz Plaza Loan
agreement are not, and the exercise of rights under the Ritz Plaza Loan
agreement will not, constitute a non-exempt prohibited transaction; or (2)
the transferee is a "governmental plan" (as defined in Section 3(32) of
ERISA), and the obligations under the Ritz Plaza Loan agreement, and the
exercise of rights under the Ritz Plaza Loan agreement, do not and will not
violate any applicable state statutes regulating investments by or fiduciary
obligations with respect to governmental plans; or (3) the proposed
transferee is neither a Plan nor a "governmental plan", and such proposed
transferee is not subject to state statutes regulating investments by or
fiduciary obligations with respect to "governmental plans" and the underlying
assets of the proposed transferee do not, for purposes of ERISA, constitute
assets of Employee Benefit Plans holding an equity interest in such proposed
transferee.
Transfers of equity interests in the Ritz Plaza Borrower between or among
the existing holders thereof (or their affiliates) shall be permitted so long
as (X) Cadim, Inc. shall remain in direct or indirect control of the Ritz
Plaza Borrower, and (Y) the Ritz Plaza Borrower shall deliver to mortgagee
(i) an officer's certificate describing the proposed transaction and stating
that such transaction is permitted by the Ritz Plaza Loan documents, together
with any documents upon which such officer's certificate is based, and (ii) a
legal opinion of counsel to the Ritz Plaza Borrower or the transferee
selected by either of them (unless reasonably disapproved by the mortgagee),
in form and substance consistent with similar opinions then being required by
the Rating Agencies, confirming, among other things, that the assets of the
Ritz Plaza Borrower (as constituted after such transfer) will not be
substantively consolidated with the assets of certain owners or controlling
persons of the Ritz Plaza Borrower in a bankruptcy or similar proceeding.
Nothing in the Ritz Plaza Loan documents shall be deemed to prohibit indirect
transfers of equity interests in the Ritz Plaza Borrower caused solely by the
transfer of ownership of Cadim, Inc. (whether by acquisition, consolidation,
disposition, merger, sale, or otherwise).
Insurance. The Ritz Plaza Borrower is required to maintain, at its sole
cost and expense, for the mutual benefit of the Ritz Plaza Borrower and the
mortgagee, policies of insurance against loss or damage by standard perils
included within the classification "All Risks of Physical Loss". Such
insurance must be maintained in an aggregate amount equal to the then full
replacement cost of the Ritz Plaza Property and related assets without
deduction for physical depreciation and must have deductibles no greater than
those in existence at the time of the closing of the Ritz Plaza Loan, as
increased proportionately with the increase in the Consumer Price Index. The
Ritz Plaza Borrower must also maintain the following policies of insurance:
(a) flood insurance if any part of the Ritz Plaza Property is located in an
area identified by the Federal Emergency Management Agency as an area
federally designated a "100 year flood plain" and flood insurance is
generally available at reasonable premiums and in such amounts as generally
are required by institutional lenders for similar properties (or, if not so
available from a private carrier, from the federal government at commercially
reasonable premiums to the extent available), in either case, in an amount at
least equal to the lesser of the Ritz Plaza Loan amount or the maximum limit
of coverage available under said program (the Ritz Plaza Property is not
currently in a flood zone); (b) comprehensive general liability insurance,
including broad form property damage, blanket contractual and personal
injuries coverages and containing minimum limits per occurrence of
$10,000,000 for any policy year as well as at least $50,000,000 excess and/or
umbrella liability insurance; (c) rental loss and/or business interruption
insurance in an amount and equal to the greater of estimated gross revenues
payable from operations from the Ritz Plaza Property and projected
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operating expenses needed to maintain and operate the Ritz Plaza Property, in
each case for up to the next 18 months; (d) insurance against loss or damage
from leakage of sprinkler systems and explosion of steam boilers, air
conditioning equipment and high pressure piping, machinery and equipment,
pressure vessels or similar apparatus and against loss of occupancy or use
arising from any such breakdown, in such amounts as are generally available
at reasonable premiums and are generally required by institutional lenders
for properties comparable to the Ritz Plaza Property; (e) worker's
compensation insurance with respect to all employees of the Ritz Plaza
Borrower, as and to the extent required by applicable law or regulation; (f)
during any period of repair or restoration costing in excess of $25,000,
builder's "all risk" insurance in an amount not less than full insurable
value of the Ritz Plaza Property; (g) coverage to compensate for the cost of
demolition and the increased cost of construction for the Ritz Plaza Property
in an amount satisfactory to the mortgagee; and (h) such other insurance as
may from time to time be reasonably required by the mortgagee. The Ritz Plaza
Loan requires insurers to have claims paying abilities rated "AA" (or its
equivalent) or better by the Rating Agencies.
Casualty and Condemnation. In the event of a casualty at the Ritz Plaza
Property where the loss is in an aggregate amount less than 30% of the
outstanding principal balance of the Ritz Plaza Loan or a condemnation at the
Ritz Plaza Property (which condemnation is not exclusively of the plaza
which, as of the date of closing of the Ritz Plaza Loan, is on the westerly
side of the building on the Ritz Plaza Property) where loss in an aggregate
amount less than 15% of the outstanding principal balance of the Ritz Plaza
Loan, the mortgagee shall permit the application of the insurance or
condemnation proceeds (after reimbursement of any expenses incurred by the
mortgagee) to pay, or to reimburse the Ritz Plaza Borrower, for the cost of
restoring, repairing, replacing or rebuilding the Ritz Plaza Property, in the
manner described below, provided and on the condition that, no default or
event of default has occurred and is then continuing and, in the reasonable
judgment of the mortgagee: (i) the Ritz Plaza Property can be restored to an
economic unit not less valuable (taking into account the effect of the
termination of any leases or operating agreements due to such casualty or
condemnation) and not less useful than the same was prior to the casualty or
condemnation, (ii) the Ritz Plaza Property, after such restoration, will
adequately secure the outstanding principal balance of the Ritz Plaza Loan,
(iii) the restoration can be completed by the earliest to occur of: (A) the
180th day following the receipt of the proceeds (or, if earlier, the 365th
day following the casualty or condemnation, as applicable), or, with written
confirmation from each of the Rating Agencies that the extension of such
period will not, in and of itself, result in the reduction, withdrawal or
qualification of any rating then assigned to any outstanding Certificates,
such longer period as may reasonably be required, (B) the 180th day prior to
the Ritz Plaza Anticipated Repayment Date, and (C) with respect to a
casualty, the expiration of the payment period on the rental-loss insurance
coverage in respect of such casualty, and (iv) during the period of the
restoration, the sum of (A) net cash flow derived from the Ritz Plaza
Property, plus (B) proceeds of rent loss insurance or business interruption
insurance, if any, payable will equal or exceed 125% of the debt service on
the Ritz Plaza Loan.
If any of the foregoing conditions are not satisfied, then, unless the
mortgagee elects otherwise, at its sole option, the proceeds will be applied
to the prepayment of the Ritz Plaza Loan (without prepayment premium or
penalty, other than a yield maintenance premium if an event of default has
occurred and is continuing) and the Ritz Plaza Borrower will be entitled to
receive a release of the mortgage lien affecting the Ritz Plaza Property in
accordance with and subject to the terms of the Ritz Plaza Loan documents.
In the event of a casualty where the loss is in an aggregate amount equal
to or more than 30% of the outstanding principal amount of the Ritz Plaza
Loan, or a condemnation (other than exclusively of the plaza area referenced
above) where the loss is in an aggregate amount equal to or more than 15% of
the outstanding principal balance of the Ritz Plaza Loan, then the mortgagee
will have the option to apply the net proceeds to the prepayment of the Ritz
Plaza Loan (and the Ritz Plaza Borrower shall be entitled to receive a
release of the mortgage lien affecting the Ritz Plaza Property in accordance
with the terms of the Ritz Plaza Loan agreement) or, provided the conditions
set forth in the proviso above are complied with, to have such proceeds
applied to reimburse the Ritz Plaza Borrower for the cost of any restoration
in the manner described below (and the mortgagee will be deemed to have
elected prepayment if it shall fail to have given such notice within 30 days
after receipt of the proceeds).
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Any application of proceeds to the repayment of the Ritz Plaza Loan as
described above will be without any prepayment premium or penalty except that
if an event of default has occurred and is continuing, then the Ritz Plaza
Borrower will be required to pay the yield maintenance payment, if any, that
would be required in respect of the principal being prepaid as a result of an
acceleration of the Ritz Plaza Loan after an event of default. Any such
application to the repayment of the Ritz Plaza Loan will be applied to those
payments of principal and interest last due under the Ritz Plaza Loan and
will not postpone or reduce any payments otherwise required pursuant to the
Ritz Plaza Loan other than such last due payments.
If the Ritz Plaza Borrower is entitled pursuant to the foregoing to
payment on its behalf or reimbursement out of proceeds, such proceeds will be
disbursed from time to time upon the mortgagee being furnished with (i) such
architect's certificates, waivers of lien, contractor's sworn statements,
title insurance endorsements, bonds, plats of survey and such other evidences
of cost, payment and performance as the mortgagee may reasonably require and
approve, and (ii) all plans and specifications for such restoration, such
plans and specifications to be approved by the mortgagee prior to
commencement of any work (such approval not to be unreasonably withheld or
delayed). In addition, no payment made prior to the final completion of the
restoration shall exceed 90% of the value of the work performed from time to
time; funds other than proceeds will be disbursed prior to disbursement of
such proceeds; and at all times, the undisbursed balance of such proceeds
remaining in the hands of the mortgagee, together with funds deposited for
that purpose or irrevocably committed to the satisfaction of the mortgagee by
or on behalf of the Ritz Plaza Borrower for that purpose, will be at least
sufficient in the reasonable judgment of the mortgagee to pay for the cost of
completion of the restoration, free and clear of all liens or claims for
liens. Prior to any disbursement, the mortgagee shall have received evidence
reasonably satisfactory to it of the estimated cost of completion of the
restoration, and the Ritz Plaza Borrower shall have deposited with the
mortgagee eligible collateral in an amount equal to the excess (if any) of
such estimated cost of completion over the net proceeds. Any surplus which
may remain out of proceeds received pursuant to a casualty will be paid to
the Ritz Plaza Borrower after payment of such costs of restoration. Any
surplus which may remain out of proceeds received pursuant to a condemnation
will be escrowed with the mortgagee as security for the Ritz Plaza Loan after
payment of such costs of restoration.
Financial Reporting. The Ritz Plaza Borrower is required to furnish to the
Master Servicer within 85 days following the end of each fiscal year of the
Ritz Plaza Borrower, a complete copy of the Ritz Plaza Borrower's annual
financial statements, audited by a "Big Six" accounting firm or another
independent certified public accounting firm reasonably acceptable to the
Master Servicer, in accordance with generally accepted accounting principles,
covering the Ritz Plaza Property, for such fiscal year and containing balance
sheets for the Ritz Plaza Borrower and statements of profit and loss for the
Ritz Plaza Property and the Ritz Plaza Borrower. Together with the Ritz Plaza
Borrower's annual financial statements, the Ritz Plaza Borrower will also
furnish to the mortgagee (A) an officer's certificate certifying as of the
date thereof whether, to the Ritz Plaza Borrower's knowledge, there exists a
default or event of default, and if such default or event of default exists,
the nature thereof, the period of time it has existed and the action being
taken to remedy the same; (B) then current rent rolls; and (C) an annual
report, for the most recently completed fiscal year, containing certain
prescribed information relating to occupancy levels and capital expenditures,
among other matters.
In addition, the Ritz Plaza Borrower is required to furnish, or cause to
be furnished, to the mortgagee on or before the 30th day after the end of
each calendar month, among other items, monthly and year-to-date operating
statements for each calendar month.
The Ritz Plaza Borrower is also required to furnish, or cause to be
furnished, to the mortgagee on or before the 40th day after the end of each
calendar quarter, quarterly and year-to-date operating statements prepared
for such quarter with respect to the Ritz Plaza Borrower, with a balance
sheet for the quarter and an occupancy report on the Ritz Plaza Property.
THE MONTEHIEDRA LOAN
The Loan. The Montehiedra Loan had a principal balance as of the Cut-Off
Date of approximately $52,579,779 and is secured by a pledge of a bearer
mortgage note in the principal amount of
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$63,000,000 and a first priority mortgage lien encumbering a retail shopping
center, known as Montehiedra Town Center, located in the district of Rio
Piedras, municipality of San Juan, Puerto Rico (the "Montehiedra Property").
Payment Terms. The Montehiedra Loan matures on May 11, 2027 (the
"Montehiedra Maturity Date") and bears interest at a fixed rate per annum
equal to 8.23% (the "Montehiedra Initial Interest Rate") through May 10,
2007, and from May 11, 2007 (the "Montehiedra Anticipated Repayment Date") at
a fixed rate per annum (the "Montehiedra Revised Interest Rate") equal to
10.23%. As described below, if the Montehiedra Borrower does not prepay the
Montehiedra Loan on the Montehiedra Anticipated Repayment Date, the
Montehiedra Borrower will be required to pay interest at the Montehiedra
Initial Interest Rate (together with principal, as described below) and the
interest accrued equal to the excess of the Montehiedra Revised Interest Rate
over the Montehiedra Initial Interest Rate will be deferred (such accrued and
deferred interest and interest thereon at the Montehiedra Revised Interest
Rate, the "Montehiedra Excess Interest"). Interest on the Montehiedra Loan is
calculated for any period based on the actual number of days elapsed and a
360-day year.
The Montehiedra Loan requires monthly payments (the "Montehiedra Monthly
Debt Service Payment Amount") of principal and interest of $399,417 each
(based on a 30-year amortization schedule and the Montehiedra Initial
Interest Rate). The Due Date for each installment of the Montehiedra Debt
Service Payment Amount is the 11th day of each calendar month or, if in any
month the 11th day is not a business day, then the Due Date for that month
will be the preceding business day. Payment of the balance of the principal,
if any, together with all accrued and unpaid interest is required on the
Montehiedra Maturity Date. Commencing on the first Due Date after the
Montehiedra Anticipated Repayment Date, in addition to the Montehiedra
Monthly Debt Service Payment Amount, the Montehiedra Borrower is required to
apply 100% of the Montehiedra Excess Cash Flow (as defined below) for the
month preceding the month in which the Due Date occurs in the following order
of priority (a) to the outstanding principal balance until the Montehiedra
Loan has been paid in full and (b) to the Montehiedra Excess Interest.
"Montehiedra Excess Cash Flow" means the amounts held as collected funds in
the deposit account maintained under the loan agreement after the application
of funds (a) to the amounts required to be paid into the tax and insurance
escrow fund as described below under "--Reserves", and (b) to the Montehiedra
Monthly Debt Service Payment Amount, (c) to the amounts required to be paid
into the leasing reserve fund described below under "--Reserves", (d) to the
amounts required to be paid into the capital reserve account described below
under "--Reserves", (e) to pay the Montehiedra Borrower's budgeted operating
expenses and capital expenditures (not previously reserved for) and approved
extraordinary capital expenditures. The scheduled principal balance of the
Montehiedra Loan as of the Montehiedra Anticipated Repayment Date will be
approximately $46,536,103.
After the occurrence and during the continuance of an event of default,
the entire outstanding principal balance of the Montehiedra Loan will bear
interest at a per annum default rate equal to the lesser of the maximum rate
permitted by applicable law and 2% in excess of the then applicable interest
rate but in no event less than 1% in excess of the Citibank "base" rate.
Prepayment. Voluntary prepayment is prohibited under the Montehiedra Loan
prior to the Montehiedra Anticipated Repayment Date, except in connection
with certain casualty or condemnation events. From and after the Montehiedra
Anticipated Repayment Date the Montehiedra Loan may be prepaid on any Due
Date in whole or in part without payment of a yield maintenance charge or
prepayment premium.
If all or any part of the principal amount of the Montehiedra Loan is
prepaid upon acceleration of the Montehiedra Loan following the occurrence of
an event of default, the Montehiedra Borrower will also be required to make a
yield maintenance payment in an amount equal to the excess, if any, of (i)
the sum of (A) the aggregate respective present values of all remaining
scheduled interest payments in respect of the Montehiedra Loan (or the
portion of all such interest payments corresponding to the portion of the
principal of the Montehiedra Loan to be prepaid upon acceleration) for the
period from the date of such prepayment to the Montehiedra Anticipated
Repayment Date, discounted monthly at a rate equal to a treasury constant
yield and based on a 360-day year of twelve 30-day months and (B) the
aggregate
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respective present values of all scheduled principal payments in respect of
the Montehiedra Loan (or the then unpaid portion thereof to be prepaid upon
acceleration) were such amount paid in full on the Montehiedra Anticipated
Repayment Date, discounted monthly at a rate equal to the treasury constant
yield and based on a 360-day year of twelve 30-day months over (ii) the then
current outstanding principal amount of the Montehiedra Loan (or the then
unpaid portion thereof to be prepaid upon acceleration).
To the extent any insurance proceeds or condemnation awards are not
required to be applied to the restoration of the Montehiedra Property under
the Montehiedra Loan, the Master Servicer will be entitled, at its option, to
apply such proceeds to prepay the Montehiedra Loan, as described below under
"--Casualty or Condemnation." No prepayment premium or penalty will be
payable upon any mandatory prepayment of the Montehiedra Loan in connection
with casualty or condemnation unless an event of default has occurred and is
continuing, in which case the Montehiedra Borrower will be required to pay a
yield maintenance payment calculated in the manner described above.
The mortgagee may apply certain amounts to the prepayment of the
Montehiedra Loan upon the occurence of an event of default.
Release in Exchange for Substitute Collateral. The Montehiedra Borrower is
permitted on any date after the second anniversary of the Closing Date to
defease all (but not a portion) of the Montehiedra Loan, provided that, among
other conditions, the Montehiedra Borrower gives the mortgagee at least
thirty days' prior written notice of the date (which must be a scheduled Due
Date) of such defeasance (the "Montehiedra Defeasance Date") and provided
further that the Montehiedra Borrower pays on the Montehiedra Defeasance Date
(i) all accrued and unpaid interest on the Montehiedra Loan to but not
including such date, and (ii) all other sums then due under the Montehiedra
Loan and the related loan documents, (iii) the Montehiedra Defeasance Deposit
and (iv) all reasonable costs and expenses of the mortgagee incurred in
connection with the defeasance. In addition, the Montehiedra Borrower will be
required to deliver to the mortgagee among other things (a) a security
agreement granting the Trustee a first priority lien on the Montehiedra
Defeasance Deposit and the noncallable U.S. Treasury obligations purchased
with the Montehiedra Defeasance Deposit, (b) an opinion of counsel for the
Montehiedra Borrower in form satisfactory to the mortgagee stating, among
other things, that the Trustee has a perfected security interest in the U.S.
Treasury obligations purchased with the Montehiedra Defeasance Deposit, (c) a
confirmation, in form and substance reasonably satisfactory to the mortgagee,
from a "Big Six" independent certified public accounting firm, that the
Montehiedra Defeasance Deposit is sufficient to pay all scheduled payments
due from the borrower under the Montehiedra Loan in connection with the
proposed defeasance, and (d) confirmation that all conditions to defeasance
have been met from any applicable Rating Agency that has required as a
condition to defeasance that such confirmation be obtained.
"Montehiedra Defeasance Deposit" means an amount equal to the sum of (i)
any costs and expenses incurred or to be incurred in the purchase of
noncallable U.S. Treasury obligations providing payments on or prior to, but
as close as possible to, all successive Due Dates upon which interest and
principal payments are required under the Montehiedra Loan after the
Montehiedra Defeasance Date and through and including the Montehiedra
Anticipated Repayment Date, and in amounts equal to the scheduled payments
due on such dates (assuming for this purpose that the entire unpaid principal
balance of the Montehiedra Loan is due and payable on the Montehiedra
Anticipated Repayment Date), and (ii) any revenue, documentary stamp or
intangible taxes or any other tax or charge due in connection with the
transfer of the note, the creation of the defeased note and the undefeased
note, if applicable, any transfer of the defeased note or otherwise required
to satisfy the terms of the Montehiedra Loan.
Upon receipt of the Montehiedra Defeasance Deposit, the mortgagee, using
the Montehiedra Defeasance Deposit, will purchase noncallable U.S. Treasury
obligations on behalf of the Montehiedra Borrower and such U.S. Treasury
obligations will serve as the sole collateral for the payments of the amounts
due under the Montehiedra Loan. Upon a deposit of U.S. obligations, the
Montehiedra Borrower will have the right to assign the obligation to make
payments under the Montehiedra Loan to an entity designated by the mortgagee.
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In connection with the defeasance of the Montehiedra Loan, the
Montehiedra Borrower will be permitted to obtain the release of the bearer
mortgage note and the release of the mortgage encumbering the Montehiedra
Property.
Alterations. Except upon compliance with certain conditions set forth in
the Montehiedra Loan agreement, the Montehiedra Borrower is prohibited from
making or permitting any demolition, alteration, installation, improvement or
decoration to the Montehiedra Property or any part thereof.
"Montehiedra Debt Service Coverage Ratio" means, for any period, the
quotient obtained by dividing net operating income for such period by the
greater of (x) aggregate interest and principal payments actually due and
payable on the Montehiedra Loan during such period and (y) interest and
principal payments on the Montehiedra Loan during such period assuming a loan
constant of 9.02% per annum.
Reserves. Pursuant to the terms of the Montehiedra Loan, the mortgagee has
established (a) a leasing reserve account to cover the cost of tenant
improvement expenses and leasing commissions incurred by the Montehiedra
Borrower, to be funded from cash flow in equal amounts of approximately (i)
$4,460 per month from May 11, 1997 through May 11, 2000 and (ii) $10,000 per
month from June 11, 2000 until repayment of the Montehiedra Loan, (b) a
capital reserve account to cover the cost of routine capital improvements
(excluding tenant improvements and leasing commissions and excluding the
costs, associated with certain deferred maintenance items identified at the
time of the funding of the Montehiedra Loan), to be funded from cash flow in
equal amounts of approximately $6,570 per month and (c) a tax and insurance
account to be funded monthly from funds available in the deposit account in
an amount equal to 1/12th of the aggregate insurance premiums and taxes that
the mortgagee reasonably estimates will be payable in the next ensuing 12
months. In addition, a deferred maintenance reserve fund of $115,000 was
established at closing of the Montehiedra Loan to cover the cost of certain
deferred maintenance conditions existing at that time.
Lockbox. The Montehiedra Borrower is required to direct all tenants at the
Montehiedra Property to make all checks in respect of sums due to the
Montehiedra Borrower under the leases and operating agreements in effect at
the Montehiedra Property payable directly to a deposit account to be
maintained by, in the name of and under the sole dominion and control of the
mortgagee and to deliver all checks and payments directly to the mortgagee or
its agent.
On each Due Date, provided no default or event of default has occurred and
is continuing, the Master Servicer will distribute funds from the deposit
account (a) if prior to the Montehiedra Anticipated Repayment Date, in the
following order: (i) to fund the tax and insurance account, (ii) to fund the
Montehiedra Monthly Debt Service Payment Amount, (iii) to the Montehiedra
Borrower in an amount equal to the budgeted operating expenses (or up to 105%
of the budget operating expenses on a cumulative year-to-date basis) for the
month immediately prior to the month in which such Due Date occurs (provided
that the Montehiedra Borrower shall have provided the Master Servicer with an
officer's certificate certifying that, among other things, the Montehiedra
Borrower does not have any unpaid claims of creditors more than 60 days' past
due and that the amounts disbursed as described in this clause (iii) will be
used solely to pay creditors, (iv) to fund the leasing reserve account in the
applicable amount set forth above under "--Reserves", (v) to fund $6,570 to
the capital reserve account, (vi) to the Master Servicer in an amount equal
to the interest, if any, then accrued and unpaid under the Montehiedra Loan
at the excess of the default rate over the Montehiedra Initial Interest Rate;
and (vii) to the Montehiedra Borrower or its designee or (b) if on or after
the Montehiedra Anticipated Repayment Date, in the following order: (i) to
fund the tax and insurance account, (ii) to fund the Montehiedra Monthly Debt
Service Payment Amount, (iii) to the Montehiedra Borrower in an amount equal
to the budgeted operating expenses (or up to 105% of the budget operating
expenses on a cumulative year-to-date basis) for the month immediately prior
to the month in which such Due Date occurs (provided that the Montehiedra
Borrower shall have provided the mortgagee with an officer's certificate
certifying that, among other things, the Montehiedra Borrower does not have
any unpaid claims of creditors more than 60 days' past due and that the
amounts disbursed as described in this clause (iii) will be used solely to
pay creditors, (iv) to fund $10,000 to the leasing reserve account, (v) to
fund $6,570 to the capital reserve account, (vi) to fund extraordinary
capital expenditures approved by the mortgagee, (vii) to the payment of the
outstanding principal balance of the Montehiedra Loan until the principal
amount of the Montehiedra Loan has been paid in full, (viii) to the payment
of the Montehiedra Excess Interest, (ix) to the mortgagee in an amount equal
to the interest, if any, then accrued and unpaid under the Montehiedra Loan
at the excess of the default rate over the Montehiedra Initial Interest Rate
or the Montehiedra Revised Interest Rate, as applicable; and (x) to the
Montehiedra Borrower or its designee.
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Transfer of Property and Interest in the Montehiedra Borrower;
Encumbrance. Unless permitted by the Montehiedra Loan documents as described
below, and with the exception of leases entered into in accordance therewith
and Montehiedra Permitted Encumbrances, the Montehiedra Borrower will not (A)
sell, assign, convey, transfer or otherwise dispose of or encumber legal,
beneficial or equitable interests in all or any part of the Montehiedra
Property, (B) permit or suffer any owner, directly or indirectly, of a
beneficial interest in the Montehiedra Property to transfer such interest,
whether by transfer of stock or other beneficial interest in any entity or
otherwise, (C) mortgage, hypothecate or otherwise encumber or grant a
security interest in all or any part of the Montehiedra Property, or (D)
subject the Montehiedra Property to a Puerto Rico horizontal property regime
or file a declaration of condominium with respect to the Montehiedra
Property. Notwithstanding the foregoing, a sale, assignment, conveyance or
transfer, or other disposition or hypothecation or other encumbrance of a
direct or indirect beneficial interest in the Montehiedra Borrower will be
permitted, if after giving effect to the proposed transaction, the
Montehiedra Borrower will be at least 51% owned directly or indirectly by
Vornado Realty Trust, any entity into which Vornado Realty Trust is merged or
consolidated or to which Vornado Realty Trust sells all or substantially all
of its assets, or any entity in which Vornado Realty Trust is the sole
operating partner, provided, however, (x) if the above described transfer
constitutes a transfer of 25% or more of the stock or other direct equity
ownership interests in the Montehiedra Borrower or a transfer of a general
partnership interest in the Montehiedra Borrower, such transfer will require,
among other things, that the mortgagee receive a legal opinion confirming
that the assets of the new borrower will not be substantively consolidated
with the assets of certain owners or controlling persons of such borrower in
a bankruptcy or similar proceeding, (y) if the above described transfer
involves the transfer of any interest in a general partner of the Montehiedra
Borrower which is a single purpose entity, such transfer will require, among
other things, that the mortgagee receive a legal opinion relating to such
single purpose entity and such transferee confirming that the assets of the
transferee will not be substantively consolidated with the assets of such
single purpose entity in a bankruptcy or similar proceeding, and (z) the
Montehiedra Borrower will be directly owned by a single purpose entity.
Except as may be set forth below, the Montehiedra Borrower may only sell,
assign, convey, transfer or otherwise dispose of legal or equitable title to
or any interest in the Montehiedra Property if, after giving effect to the
proposed transaction, (A) the Montehiedra Property will be owned by a single
purpose entity which, at the time of such transfer, will be in compliance
with the covenants contained in the loan agreement relating to the
Montehiedra Loan and which will have assumed in writing (subject to the
non-recourse provisions described above under "Security") and agreed to
comply with all the terms, covenants and conditions set forth in the loan
agreement, (B) the transferee will be at least 51 percent owned and
controlled directly or indirectly by Vornado Realty Trust, any entity with
which Vornado Realty Trust is merged or consolidated or to which Vornado
Realty Trust sells all or substantially all of its assets, or any entity in
which Vornado Realty Trust is the sole operating partner, (C) if the present
property manager or an affiliate thereof does not continue to act as property
manager of the Montehiedra Property, then the applicable property manager
must satisfy certain minimum standards set forth in the loan agreement and
(D) no event of default shall have occurred and be continuing. Prior to any
such permitted transfer, the Montehiedra Borrower will deliver an opinion of
counsel confirming that the assets of the Montehiedra Borrower and of its
managing general partner or managing member will not be substantively
consolidated with the assets of the owners or controlling entities of the
Montehiedra Borrower in the event of a bankruptcy or similar proceeding.
Insurance. The Montehiedra Borrower is required to maintain, at its sole
cost and expense, for the mutual benefit of the Montehiedra Borrower and the
Mortgagee, policies of insurance against loss or damage by standard perils
included within the classification "All Risks of Physical Loss". Such
insurance must be maintained in an aggregate amount equal to the then full
replacement cost of the Montehiedra Property and related assets (without
deduction for physical depreciation) and must have deductibles no greater
than those in existence at the time of the closing of the Montehiedra Loan.
In addition, the Montehiedra Borrower must maintain hurricane coverages at
the "full replacement cost" level for the Montehiedra Property. The
Montehiedra Borrower is not required to carry insurance with respect to the
portion of the Montehiedra Property subject to a lease with Kmart or Builders
Square or the portion of the Montehiedra Property used as a movie theater,
provided that (1) the respective lease provides that the
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tenant thereunder shall insure the portion of the Montehiedra Property
demised by its lease with coverage in the aggregate amount of the then full
replacement costs of its demised premises and the equipment thereof (without
deduction for physical depreciation), subject to deductibles, and (2) in the
event that such insurance shall have a rating lower than the insurance
required to be provided by the Montehiedra Borrower in the event such tenants
self-insure, the Montehiedra Borrower shall maintain policies of insurance
insuring against loss or damage in the event of non-performance on the part
of any tenant's insurer, or on the part of a tenant in the event the tenant
self-insures, in accordance with the terms of its lease. The Montehiedra
Borrower must also maintain the following policies of insurance: (a) flood
insurance if any part of the Montehiedra Property is located in an area
identified by the Federal Emergency Management Agency as an area federally
designated a "100 year flood plain" and flood insurance is generally
available at reasonable premiums and in such amounts as generally are
required by institutional lenders for similar property (or, if not so
available from a private carrier, from the federal government at commercially
reasonable premiums to the extent available), in either case, in an amount at
least equal to the lesser of the Montehiedra Loan amount or the maximum limit
of coverage available under said program (the Montehiedra Property is not
currently in a flood zone); (b) comprehensive general liability insurance,
including broad form property damage, blanket contractual and personal
injuries coverages and containing minimum limits per occurrence of $1,000,000
for any policy year as well as at least $39,000,000 excess and/or umbrella
liability insurance, provided that if there are one or more claims in
connection with a property other than the Montehiedra Property that result in
the amount of excess and/or umbrella liability coverage to be less than
$30,000,000, the coverage will again be increased to $39,000,000; (c) rental
loss and/or business interruption insurance in an amount equal to the greater
of estimated gross revenues payable to the Montehiedra Borrower and projected
operating expenses needed to maintain and operate the Montehiedra Property,
in each case for 18 months; (d) insurance against loss or damage from leakage
of sprinkler systems and explosion of steam boilers, air conditioning
equipment and high pressure piping, machinery and equipment, pressure vessels
or similar apparatus and against loss of occupancy or use arising from any
such breakdown, in such amounts as are generally available at reasonable
premiums and are generally required by institutional lenders for property
comparable to the Montehiedra Property; (e) worker's compensation insurance
(the Puerto Rico State Insurance Fund) with respect to all employees in
Puerto Rico, as and to the extent required by applicable law or regulation;
(f) during any period of repair or restoration costing in excess of
$1,000,000, builder's "all risk" insurance in an amount not less than full
insurable value; (g) coverage to compensate for the cost of demolition and
the increased cost of construction for any Montehiedra Property in an amount
satisfactory to the mortgagee; and (h) such other insurance as may from time
to time be reasonably required by the mortgagee. The Montehiedra Loan
requires insurers for all-risk coverage to have claims paying abilities rated
"AA" or better by S&P and "A-XI" or better by Best's and insurers for all
other coverage to have claims paying abilities rated "A" or better by S&P and
"A-XI" or better by Best's.
Casualty and Condemnation. In the event of a casualty at the Montehiedra
Property that involves a loss of less than 30% of the outstanding principal
balance of the Montehiedra Loan or a condemnation at the Montehiedra Property
where the loss is in an aggregate amount less than 20% of the outstanding
principal balance of the Montehiedra Loan, the mortgagee shall permit the
application of the proceeds resulting therefrom (after reimbursement of any
expenses incurred by the mortgagee) to reimburse the Montehiedra Borrower for
the cost of restoring, repairing, replacing or rebuilding the affected
individual Montehiedra Property, in the manner described below, provided and
on the condition that, no default or event of default has occurred and is
then continuing and, in the reasonable judgment of the mortgagee: (i) the
Montehiedra Property after such restoration will adequately secure the
outstanding principal balance of the Montehiedra Loan, (ii) the restoration
can be completed by the earliest to occur of: (A) the 183rd day following the
receipt of the proceeds, or, with rating confirmation, such longer period as
may reasonably be required, (B) the Montehiedra Maturity Date, and (C) with
respect to a casualty, the expiration of the payment period on the
rental-loss insurance coverage in respect of such casualty, and (iii) during
the period of the restoration, the sum of (A) income derived from the
Montehiedra Property, plus (B) proceeds of rent loss insurance or business
interruption insurance, if any, payable together with such other monies as
the Montehiedra Borrower makes irrevocably available for the restoration,
will equal or exceed the sum of (1) expenses in connection with the operation
of the Montehiedra Property and (2) the debt service on the Montehiedra Loan.
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If any of the conditions set forth in the foregoing proviso is not
satisfied, then, unless the mortgagee elects otherwise, in its sole
discretion, the proceeds will be applied to the prepayment of the Montehiedra
Loan (without prepayment premium or penalty, other than a yield maintenance
premium if an event of default has occurred and is continuing) and the
Montehiedra Borrower will be entitled to receive a release of the bearer
mortgage note and the mortgage lien affecting the Montehiedra Property in
accordance with and subject to the terms described above in connection with a
release due to defeasance. Notwithstanding the foregoing, in the event of a
casualty or condemnation where a tenant occupying more than 10,000 square
feet requires the Montehiedra Borrower to restore all or a portion of the
Montehiedra Property, the mortgagee must permit the insurance proceeds to be
applied to the restoration rather than the repayment of the Montehiedra Loan,
unless an event of default has occurred and is continuing.
In the event of a casualty where the loss is in an aggregate amount equal
to or more than 30% of the outstanding principal amount of the Montehiedra
Loan, or a condemnation where the loss is in an aggregate amount equal to or
more than 20% of the outstanding principal balance of the Montehiedra Loan,
then the mortgagee will have the option to apply the net proceeds to the
prepayment of the Montehiedra Loan (and the Montehiedra Borrower will be
entitled to receive a release of the bearer mortgage note and the mortgage
lien affecting the Montehiedra Property) or, provided the conditions set
forth in the proviso above are complied with, to have such proceeds applied
to reimburse the Montehiedra Borrower for the cost of any restoration (and
the mortgagee will be deemed to have elected restoration if it shall fail to
have given such notice within said 30-day period), provided, however, that if
an operating agreement or a lease with a tenant occupying in excess of 10,000
rentable square feet provides that the proceeds must be applied to the
restoration, the mortgagee will be required to apply the proceeds to
restoration unless an event of default has occurred and is continuing.
Any application of proceeds to the repayment of the Montehiedra Loan as
described above will be without any prepayment premium or penalty except that
if an event of default has occurred and is continuing, then the Montehiedra
Borrower will be required to pay the yield maintenance payment, if any, that
would be required in respect of the principal being prepaid as a result of an
acceleration of the Montehiedra Loan after an event of default. Any such
application to the repayment of the Montehiedra Loan will be applied to those
payments of principal and interest last due under the Montehiedra Loan and
will not postpone or reduce any payments otherwise required pursuant to the
Montehiedra Loan other than such last due payments.
If the Montehiedra Borrower is entitled to reimbursement out of proceeds,
such proceeds will be disbursed from time to time upon the mortgagee being
furnished with (i) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats of
survey and such other evidences of cost, payment and performance as the
mortgagee may reasonably require and approve, and (ii) all plans and
specifications for such restoration, such plans and specifications to be
approved by the mortgagee prior to commencement of any work (such approval
not to be unreasonably withheld or delayed). In addition, no payment made
prior to the final completion of the restoration shall exceed 95% of the
value of the work performed from time to time; funds other than proceeds will
be disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of the mortgagee,
together with funds deposited for that purpose or irrevocably committed to
the satisfaction of the mortgagee by or on behalf of the Montehiedra Borrower
for that purpose, will be at least sufficient in the reasonable judgment of
the mortgagee to pay for the cost of completion of the restoration, free and
clear of all liens or claims for liens. Prior to any disbursement, the
mortgagee shall have received evidence reasonably satisfactory to it of the
estimated cost of completion of the restoration, and the Montehiedra Borrower
shall have deposited with the mortgagee eligible collateral in an amount
equal to the excess (if any) of such estimated cost of completion over the
net proceeds. Any surplus which may remain out of proceeds received pursuant
to a casualty will be paid to the Montehiedra Borrower after payment of such
costs of restoration. Any surplus which may remain out of proceeds received
pursuant to a condemnation will be escrowed with mortgagee as security for
the Montehiedra Loan after payment of such costs of restoration.
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Financial Reporting. The Montehiedra Borrower is required to furnish to
the Master Servicer within 90 days following the end of each fiscal year of
the Montehiedra Borrower, a complete copy of the Montehiedra Borrower's
annual financial statements, audited by a "Big Six" accounting firm or
another independent certified public accounting firm reasonably acceptable to
the Master Servicer, in accordance with generally accepted accounting
principles, covering the Montehiedra Property, for such fiscal year and
containing balance sheets for the Montehiedra Borrower and statements of
profit and loss for the Montehiedra Property and the Montehiedra Borrower.
Together with the Montehiedra Borrower's annual financial statements, the
Montehiedra Borrower will also furnish to the mortgagee then current rent
rolls and an annual report, for the most recently completed fiscal year,
containing certain prescribed information relating to occupancy levels and
capital expenditures, among other matters.
In addition, the Montehiedra Borrower is required to furnish, or cause to
be furnished, to the Master Servicer on or before the 30th day after the end
of each calendar month, any monthly reports, including a comparison of the
actual income, expense and net cash flow to annual budget, the Montehiedra
Borrower receives from the property manager.
The Montehiedra Borrower is also required to furnish, or cause to be
furnished, to the mortgagee on or before the 45th day after the end of each
calendar quarter, quarterly and year to date statements prepared for such
calendar quarter with respect to the Montehiedra Borrower, with a balance
sheet for such quarter.
Recording. Due to an extremely large volume of documents presented and
pending recordation at the various registry offices in Puerto Rico, there is
a lengthy delay in the actual registration of all instruments presented,
including the mortgage encumbering the Montehiedra Property. The mortgage
cannot be enforced until the document has been registered. In light of these
circumstances, the Director of Registry of Property has issued a directive to
all Registrars establishing an accelerated procedure for the registration of
mortgages when foreclosure is imminent. When the mortgage is actually
registered, the effective date of the recording will be the date the mortgage
was originally presented for recording. Since all instruments are stamped
when presented and a presentation diary is kept by the Registrar, there is no
risk of unknown intervening liens being registered. Until the mortgage is
actually registered, the mortgagee will have recourse to Vornado LP in
certain limited circumstances such as the commission of fraud or
misappropriation of funds by the Montehiedra Borrower.
The Montehiedra Partner Loans. Simultaneously with the making of the
Montehiedra Loan by the related Originator to the Montehiedra Borrower, GSMC
made a loan to each of Montehiedra Holding L.P. and Montehiedra Holding II
L.P. (each a "Montehiedra Partner Loan" and together, the "Montehiedra
Partner Loans") having an aggregate principal balance as of August 12, 1997
of approximately $10,276,355 and evidenced by (i) a note issued by
Montehiedra Holding L.P. in the initial principal amount of $9,800,000 and
(ii) a note issued by Montehiedra Holding II L.P. in the initial principal
amount of $500,000. As described above under "--Description of the Borrowers
and the Properties--The Borrower and Property", Montehiedra Holding II L.P.
is the sole limited partner in the Montehiedra Borrower and Montehiedra
Holding L.P. is the sole limited partner in Montehiedra Holding II L.P. The
Montehiedra Partner Loans are secured by a pledge of (i) all of the stock of
Montehiedra Inc., the managing member of the sole general partner in the
Montehiedra Borrower, (ii) all of the limited liability company interests
(other than those held by Montehiedra Inc.) in Montehiedra LLC, the sole
general partner in the Montehiedra Borrower, (iii) all of the limited
partnership interests in the Montehiedra Borrower, and (iv) all of the
partnership interests in Montehiedra Holding II, L.P., the sole limited
partner of the Montehiedra Borrower. In addition, repayment of the
Montehiedra Partner Loans is guaranteed by Vornado Realty L.P.
Any of (i) a default in the payment of the Monthly Debt Service Payment
Amount, (ii) a default for more than ten days in the payment of other
Montehiedra Loan payment, (iii) a bankruptcy or insolvency event that is not
discharged, stayed or dismissed within 90 days, or (iv) an assignment of the
Montehiedra Borrower's rights under the Montehiedra Loan in contravention of
the Montehiedra Loan documents constitutes a default under the Montehiedra
Partner Loans and the lender under the Montehiedra Partner Loans has the
right to accelerate the Montehiedra Partner Loans and to foreclose on the
collateral securing the Montehiedra Partner Loans.
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Each of the Montehiedra Partner Loans bears interest at a fixed rate per
annum equal to 8.25%, calculated for any period based on the actual number of
days elapsed and a 360-day year. Commencing on June 12, 1997, the Montehiedra
Partner Loans require 144 monthly payments of principal and interest in an
aggregate amount of $78,212 each (based on a 30-year amortization schedule
and the interest rate referred to above). The Montehiedra Partner Loans are
scheduled to mature on May 12, 2009. The Montehiedra Partner Loans can be
prepaid without a yield maintenance charge or prepayment premium on or after
May 12, 2007. Since all of the cash flow from the Montehiedra Property will
be used to service the Montehiedra Loan after the Montehiedra Anticipated
Repayment Date, no cash flow from the Montehiedra Property will be available
to service the Montehiedra Partner Loans after that date.
In connection with its guaranty of the Montehiedra Partner Loans, Vornado
Realty L.P. has covenanted that: (i) it will not incur any indebtedness, if,
after giving effect thereto, the aggregate principal amount of all of its
outstanding indebtedness is greater than 60% of the sum of (a) Total Assets
as of the end of the fiscal quarter ended immediately prior to the incurrence
of such indebtedness and (b) the increase in Total Assets since the end of
such quarter, including any increase in the Total Assets resulting from the
incurrence of such additional indebtedness (such increase, together with
Total Assets, is referred as "Adjusted Total Assets"); (ii) it will not incur
any secured indebtedness if, after giving effect thereto, the aggregate
amount of all outstanding secured indebtedness is greater than 40% of
Adjusted Total Assets; (iii) it will not incur any indebtedness if its
consolidated income available for debt service for the four consecutive
fiscal quarters most recently ended prior to the date of the incurrence of
such indebtedness, on a pro forma basis, would be less than 1.5 times the
annual service charge on all indebtedness outstanding immediately after the
incurrence of such additional indebtedness; and (iv) it will maintain total
unencumbered assets equal to (a) until termination of the Existing Finance
Facility, 150% of unsecured indebtedness; and (b) from and after termination
of the Existing Finance Facility, 175% of unsecured indebtedness. As used in
this paragraph, "Total Assets" means as of any date the sum of (i) earnings
before interest, taxes, depreciation and amortization for the 12 month period
then ended capitalized at a rate of 10% per annum, (ii) without duplication,
the cost basis of properties of Vornado Realty L.P. and its majority-owned
subsidiaries under construction as certified by Vornado Realty L.P. and (iii)
all other assets of Vornado Realty L.P. and its majority-owned subsidiaries
on a consolidated basis determined in accordance with GAAP (but excluding
intangibles and accounts receivable) and "Existing Finance Facility" means
indebtedness issued pursuant to the Indenture, dated as of November 24, 1993
between Vornado Finance Corp. and Bankers Trust Company, as Trustee, relating
to $227,000,000 6.36% Collateralized Notes Due December 1, 2000.
The Montehiedra Borrowers are not permitted to, among other things, (i)
incur additional indebtedness other than current accounts payable in the
ordinary course of business, (ii) incur any liens, other than certain
permitted liens, with respect to their property, (iii) sell their property,
(iv) assign any right to receive income, (v) make distributions at any time
after the occurrence and during the continuance of an event of default under
the Montehiedra Partner Loans or (vi) enter into a merger or consolidation.
The following are, among other things, events of default under the
Montehiedra Partner Loans: (i) default in the payment of principal or
interest, (ii) default in the payment of any other amounts owed that continue
for 10 days; (iii) transfers or encumbrances of the collateral pledged to the
lender in violation of the terms of the Montehiedra Partner Loans; (iv) if
the Montehiedra Partner Borrowers or Vornado Realty L.P. or general partners
of any of the foregoing (a) make an assignment for the benefit of creditors,
(b) are not paying their debts as they become due, (c) have a receiver,
liquidator or trustee appointed for them, (d) are adjudicated a bankrupt or
insolvent or a petition for bankruptcy is filed against them, provided that
if the events specified in (c) and (d) are involuntary and not consented to
any such event will be an event of default upon the same not being
discharged, stayed or dismissed within 60 days; (v) an event of default under
the other Montehiedra Partner Loan; (vi) a violation of covenants and the
expiration of applicable cure periods; (vii) an event of default under the
Montehiedra Loan and the acceleration of the Montehiedra Loan; (viii) a
payment or bankruptcy event of default under the Montehiedra Loan or
violation by the Montehiedra Borrower of the prohibition on assignment of its
rights and interests under the Montehiedra Loan; or (ix) if the Montehiedra
Loan is no longer outstanding, the occurrence of an event with respect to the
Montehiedra Borrower that would have constituted an event of default under
the Montehiedra Loan and would have permitted acceleration of the Montehiedra
Loan.
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DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling Agreement and will
consist of twenty classes (each, a "Class") to be designated as the Class A-1
Certificates, the Class A-2A Certificates, the Class A-2B Certificates, the
Class A-2C Certificates and the Class A-2D Certificates (collectively, the
"Class A Certificates"), the Class B Certificates, the Class C Certificates,
the Class D Certificates, the Class E Certificates, the Class F Certificates,
the Class G Certificates, the Class H Certificates, the Class X-1A
Certificates and the Class X-1B Certificates (collectively, the "Class X-1
Certificates"), the Class X-2 Certificates, the Class M Certificates, the
Class Q Certificates, the Class R Certificates, the Class MR Certificates and
the Class LR Certificates. The Class H, Class X-1B, Class M, Class Q, Class
R, Class MR and Class LR Certificates (collectively, the "Private
Certificates") are not offered hereby.
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 on behalf of the Trust Fund
through foreclosure or deed in lieu of foreclosure (upon acquisition, an "REO
Property"); (iii) the Montehiedra Partner Loans and all payments under and
proceeds of the Montehiedra Partner Loans due after the Cut-Off Date; (iv)
any property acquired on behalf of the Trust Fund through foreclosure upon
the collateral securing the Montehiedra Partner Loans; (v) such funds or
assets as from time to time are deposited in the Collection Account, the
Lower-Tier Distribution Account, the Middle-Tier Distribution Account, the
Upper-Tier Distribution Account, the Interest Reserve Account, the Excess
Interest Distribution Account, the Class Q Distribution Account, the Class M
Distribution Account, and any account established in connection with REO
Properties (an "REO Account"); (vi) the rights of the mortgagee under all
insurance policies with respect to the Mortgage Loans; (vii) certain rights
and remedies under the Loan Sale Agreement; and (viii) all of the mortgagee's
right, title and interest in the Reserve Accounts, the Lock Box Accounts and
the AAPT Interest Rate Cap Agreement. The Certificates do not represent an
interest in or obligation of the Seller, the Originators, the Master
Servicer, the Trustee, the Fiscal Agent, the Underwriter, the borrowers, the
property managers or any of their respective affiliates.
Upon initial issuance, the Class A-1, Class A-2A, Class A-2B, Class A-2C,
Class A-2D, Class B, Class C, Class D, Class E, Class F, Class G and Class H
Certificates (collectively, the "Sequential Pay Certificates") and the Class
X-1A, Class X-1B and Class X-2 Certificates will have the following
Certificate Principal Amount or Notional Amount (in each case, subject to a
variance of plus or minus 5%):
<TABLE>
<CAPTION>
INITIAL CERTIFICATE PRINCIPAL
CLASS AMOUNT OR NOTIONAL AMOUNT
- ------------ -----------------------------
<S> <C>
Class A-1.... $ 50,000,000
Class A-2A .. $131,100,000
Class A-2B .. $240,900,000
Class A-2C .. $ 30,000,000
Class A-2D .. $222,190,000
Class B...... $ 78,160,000
Class C...... $ 14,660,000
Class D...... $ 53,750,000
Class E...... $ 14,650,000
Class F...... $ 48,860,000
Class G...... $ 58,620,000
Class H...... $ 34,208,999
Class X-1A .. $ 50,000,000
Class X-1B .. $ 50,000,000
Class X-2.... $892,890,000
</TABLE>
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The Certificate Principal Amount of any Class of Sequential Pay
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 (other than the Montehiedra Partner Loans); provided, however,
that in the event that Realized Losses previously allocated to a Class of
Certificates in reduction of their Certificate Principal Amounts are
recovered subsequent to the reduction of the Certificate Principal Amount of
such Class to zero, such Class may receive distributions in respect of such
recoveries in accordance with the priorities set forth under
"--Distributions--Payment Priorities" herein. The respective Certificate
Principal Amount of each Class of Certificates entitled to distributions of
principal 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 Class X-1A, Class X-1B and Class X-2 Certificates will not have
Certificate Principal Amounts. Each such Class will represent the right to
receive distributions of interest accrued as described herein on a notional
principal amount (a "Notional Amount"). The Notional Amounts of the Class
X-1A and Class X-1B Certificates will each equal the aggregate Stated
Principal Balance of the Group 1 Components. The Notional Amount of the Class
X-2 Certificates will generally equal the aggregate Certificate Principal
Amounts of the Class A-2A, Class A-2B, Class A-2C, Class A-2D, Class B, Class
C, Class D, Class E, Class F and Class G Certificates outstanding from time
to time, plus the amount of any unpaid Interest Shortfall on such Classes.
For convenience in describing interest distributions, the Class X-2
Certificates will be deemed to consist of 10 components, the "Class A-2A
Component", the "Class A-2B Component", the "Class A-2C Component", the
"Class A-2D Component", the "Class B Component", the "Class C Component", the
"Class D Component", the "Class E Component", the "Class F Component" and the
"Class G Component", each of which will have a notional amount (each, a
"Component Notional Amount") equal to, and will reduce proportionally with,
the Certificate Principal Amounts of the Class A-2A, Class A-2B, Class A-2C,
Class A-2D, Class B, Class C, Class D, Class E, Class F and Class G
Certificates outstanding from time to time, plus the amount of any unpaid
Interest Shortfall on such Classes, respectively,
The Mortgage Pool consists of two groups (each, a "Loan Group"). "Loan
Group 1" consists of the Group 1 Components, and "Loan Group 2" consists of
the Group 2 Loans. The "Group 1 Components" are the AAPT LIBOR Components,
and the "Group 2 Loans" are the Cadillac Fairview Pool Loan, the Century
Plaza Towers Loan, the 380 Madison Loan, the CAP Pool Loan, the Whitehall
Pool Loan, the Ritz Plaza Loan, the Montehiedra Loan and the AAPT Fixed
Component.
The respective Certificate Principal Amount of each Class of Certificates
entitled to distributions of principal 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
Amounts of each of the Class X-1A and Class X-1B Certificates will be reduced
to the extent of all reductions in the aggregate Stated Principal Balance of
the Group 1 Components. The Notional Amounts of the Class X-1A and Class X-1B
Certificates will for purposes of distributions on each Distribution Date
each equal the aggregate Stated Principal Balance of the Group 1 Components
as of the first day of the related Interest Accrual Period. The Notional
Amount of the Class X-2 Certificates will be reduced to the extent of all
reductions in the aggregate of the Certificate Principal Amounts of the
Sequential Pay Certificates (other than the Class A-1 and Class H
Certificates). The Notional Amount of the Class X-2 Certificates will for
purposes of distributions on each Distribution Date equal the aggregate of
the Certificate Principal Amounts of the Sequential Pay Certificates (other
than the Class A-1 and Class H Certificates) as of the first day of the
related Interest Accrual Period.
DISTRIBUTIONS
METHOD, TIMING AND AMOUNT. Distributions on the Certificates will be made
on the second Business Day following the 11th day of each month, commencing
on September 15, 1997 (each, a "Distribution Date"). All distributions (other
than the final distribution on any Certificate) will be made by the Trustee
to the persons in whose names the Certificates (other than the Class A-1
Certificates) are registered at the close of business on the last day of the
month immediately preceding the month in
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which the related Distribution Date occurs, or if such day is not a Business
Day, the immediately preceding Business Day; provided, that the "Record Date"
with respect to holders of the Class A-1 Certificates will be 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 immediately preceding
Business Day. 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, or otherwise (b) by
check mailed to such Certificateholder. The final distribution on any Offered
Certificates will be made in like manner, but only upon presentment or
surrender (for notation that the Certificate Principal Amount thereof has
been reduced to zero) of such Certificate at the location specified in the
notice to the Certificateholder 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 Offered Certificate is equal to
the initial denomination thereof as of the Closing Date divided by the
initial Certificate Principal Amount of the related Class.
The aggregate distribution to be made on the Certificates on any
Distribution Date will equal the Available Funds. The "Available Funds" for a
Distribution Date will be the sum of (i) all Monthly Payments, Balloon
Payments or other receipts on account of principal and interest on or in
respect of the Mortgage Loans (including Unscheduled Payments and Net REO
Proceeds, if any) received by the Master Servicer in the related Collection
Period, (ii) all other amounts required to be deposited in the Collection
Account by the Master Servicer pursuant to the Pooling Agreement in respect
of such Distribution Date that are allocable to the Mortgage Loans, including
all P&I Advances made by the Master Servicer, the Trustee or the Fiscal
Agent, as applicable, in respect of such Distribution Date, and any interest
or other income earned on funds in the Interest Reserve Account, (iii) for
the Distribution Date occurring in each March, the related Withheld Amounts
as described herein under "The Pooling Agreement--Accounts--Interest Reserve
Account" and required to be deposited in the Lower-Tier Distribution Account
pursuant to the Pooling Agreement and (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 Master Servicer Remittance Date
but excluding the following:
(a) amounts permitted to be used to reimburse the Master 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 Agreement--Advances";
(b) the aggregate amount of the Servicing Fee (which includes the fees for
both the Trustee and the Master Servicer) payable to the Master Servicer and
the amounts payable to the Special Servicer described herein under "The
Pooling Agreement--Special Servicer" in each case in respect of such
Distribution Date, and all amounts in the nature of late fees, loan
modification fees, extension fees, loan service transaction fees, demand
fees, beneficiary statement charges, assumption fees, modification fees and
similar fees, and reinvestment earnings on payments received with respect to
the Mortgage Loans which the Master Servicer or Special Servicer is entitled
to receive as additional servicing compensation pursuant to the terms of the
Pooling Agreement (together with the Servicing Fee, "Servicing
Compensation");
(c) all amounts representing scheduled Monthly Payments due after the
related Due Date;
(d) to the extent permitted by the Pooling Agreement, that portion of
liquidation proceeds, insurance proceeds and condemnation proceeds with
respect to a Mortgage Loan which represents any unpaid Servicing Compensation
as described herein, to which the Master Servicer, the Special Servicer or
the Trustee is entitled;
(e) all amounts representing certain unanticipated or default related
expenses reimbursable or payable to the Master Servicer, the Special
Servicer, the Trustee or Fiscal Agent and other amounts permitted to be
retained by the Master Servicer or withdrawn pursuant to the Pooling
Agreement in respect of various items, including indemnities;
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(f) Prepayment Premiums;
(g) Default Interest;
(h) Excess Interest;
(i) with respect to the AAPT Fixed Component and the CAP Pool Loan and any
Distribution Date occurring in each February, and in any January occurring in
a year that is not a leap year, the related Withheld Amount as described
under "The Pooling Agreement--Accounts--Interest Reserve Account" herein;
(j) all amounts received with respect to each Mortgage Loan previously
purchased or repurchased pursuant to the Pooling 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;
(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,
the Middle-Tier REMIC or the Lower-Tier REMIC under the circumstances and to
the extent described in the Pooling Agreement; and
(l) all amounts received on or in respect of the Montehiedra Partner
Loans.
"Monthly Payment" with respect to any Mortgage Loan (other than any REO
Mortgage Loan) or Component and any Due Date is the scheduled monthly payment
of principal (if any) and interest at the related Mortgage Rate which is
payable by the related borrower on such Due Date, but not including any
Balloon Payment. 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 Agreement.
"Balloon Payment" means with respect to the 380 Madison Loan and the
Whitehall Pool Loan, the payments due on their respective stated maturity
dates.
"Unscheduled Payments" are all net liquidation proceeds, net insurance
proceeds and net condemnation proceeds payable under the Mortgage Loans, any
Principal Prepayment, any Repurchase Price received with respect to a
Mortgage Loan and any other payments under or with respect to the Mortgage
Loans not scheduled to be made, but excluding Prepayment Premiums, Excess
Interest and Default Interest and excluding any amount paid in connection
with the release of the related Mortgaged Property through defeasance.
"Prepayment Premiums" are payments received on a Mortgage Loan as the
result of the receipt of certain Unscheduled Payments, other than any amount
paid in connection with the release of the related Mortgaged Property through
defeasance, which are intended to compensate the mortgagee for an early and
unscheduled receipt of principal.
"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 (other than the proceeds of a
liquidation thereof) net of any insurance premiums, taxes, assessments and
other costs and expenses permitted to be paid therefrom pursuant to the
Pooling Agreement.
"Principal Prepayments" are unscheduled payments of principal permitted to
be made by a borrower under the terms of a Mortgage Loan and received from
the borrower.
"Collection Period" with respect to a Distribution Date and each Mortgage
Loan is the period beginning on the day after the Due Date in the month
preceding the month in which such Distribution Date occurs (or, in the case
of the Distribution Date occurring on September 15, 1997, beginning on the
day after the Cut-Off Date) and ending on the Due Date in the month in which
such Distribution Date occurs.
"Net Default Interest" with respect to any Mortgage Loan or Component is
any Default Interest accrued on such Mortgage Loan or Component less amounts
required to pay the Master Servicer, the Special Servicer, the Trustee or
Fiscal Agent, as applicable, interest on Advances at the Advance Rate.
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"Default Interest" with respect to any Mortgage Loan or Component is
interest accrued on such Mortgage Loan or Component at the excess of (i) the
related Default Rate over (ii) the sum of the related Mortgage Rate plus, if
applicable, the related Excess Rate.
"Default Rate" with respect to any Mortgage Loan or Component is the per
annum rate at which interest accrues on such Mortgage Loan following any
event of default on such Mortgage Loan or Component including a default in
the payment of a Monthly Payment.
"Excess Rate" with respect to each of the Mortgage Loans (other than the
380 Madison Loan and the Whitehall Pool Loan) and each Component is the
excess of the related Revised Interest Rate over the related Initial Interest
Rate (or, with respect to the AAPT LIBOR Components, 2.00% per annum).
"Excess Interest" with respect to each of the Mortgage Loans (other than
the 380 Madison Loan and the Whitehall Pool Loan) and each Component is the
interest accrued at the related Excess Rate in respect of such Mortgage Loan,
plus interest thereon, to the extent permitted by applicable law, at the
related Revised Interest 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 Sequential Pay Certificates, is equal to interest for the
related Interest Accrual Period at the Pass-Through Rate for such Class on
the related Certificate Principal Amount (provided, that for interest accrual
purposes any distributions in reduction of Certificate Principal Amount or
reductions in Certificate Principal Amount 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); and "Interest Accrual Amount" with respect to any
Distribution Date and the Class X-1A, Class X-1B and Class X-2 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
applicable Notional Amount (provided, that for interest accrual purposes any
distributions in reduction of Notional Amount or reductions in Notional
Amount as a result of allocations of Realized Losses on the Distribution Date
occurring in an Interest Accrual Period shall be deemed to have been made on
the first day of such Interest Accrual Period) of such Class. Calculations of
interest on the Certificates, other than the Class A-1 Certificates, will be
made on the basis of a 360-day year consisting of twelve 30-day months.
Calculation of interest due in respect of the Class A-1 Certificates will be
made based on the actual number of days in the related Interest Accrual
Period and a 360-day year.
The "Interest Distribution Amount" with respect to any Distribution Date
and each Class of Regular Certificates will equal (A) the sum of (i) the
Interest Accrual Amount for such Distribution Date and (ii) the Interest
Shortfall, if any, for such Distribution Date, less (B) the sum of (i) any
Excess Prepayment Interest Shortfall allocated to such Class on such
Distribution Date, and (ii) in the case of the Class X-2 Certificates only,
the aggregate Reduction Interest Distribution Amount for such Distribution
Date.
The "Interest Accrual Period" with respect to any Distribution Date and
(a) with respect to each Class of Certificates other than the Class A-1
Certificates, is the calendar month preceding the month in which such
Distribution Date occurs, and (b) with respect to the Class A-1 Certificates
is the period commencing on the Distribution Date in the month preceding the
month in which such Distribution Date occurs (or August 14, 1997 with respect
to the initial Interest Accrual Period) and ending on and including the day
immediately preceding such Distribution Date.
Each Interest Accrual Period with respect to each Class of Certificates
other than the Class A-1 Certificates is assumed to consist of 30 days, and
with respect to the Class A-1 Certificates is assumed to consist of the
actual number of days occurring in such Interest Accrual Period.
An "Interest Shortfall" with respect to any Distribution Date for any
Class of Regular Certificates is the sum of (a) the excess, if any, of (i)
the Interest Distribution Amount for such Class for the immediately preceding
Distribution Date, over (ii) all distributions of interest (other than Excess
Interest) made with respect to such Class of Certificates on the immediately
preceding Distribution Date, and (b) to the extent
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permitted by applicable law, (i) other than in the case of the Class X-1A,
Class X-1B or Class X-2 Certificates, one month's interest on any such excess
at the Pass-Through Rate applicable to such Class of Certificates for the
current Distribution Date, (ii) in the case of the Class X-1A and Class X-1B
Certificates, one month's interest on any such excess at the Group 1 WAC Rate
for such Distribution Date and (iii) in the case of the Class X-2
Certificates, one month's interest on any such excess at the Adjusted WAC
Rate for such Distribution Date.
The "Reduction Interest Distribution Amount" for the Class X-2
Certificates with respect to any Distribution Date and each of clauses Third,
Sixth, Ninth, Twelfth, Fifteenth and Eighteenth in the second to last
paragraph under this "Payment Priorities" section is the amount of interest
accrued for the related Interest Accrual Period at the applicable Reduction
Interest Pass-Through Rate for such Interest Accrual Period on the aggregate
amount of Appraisal 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 "--Appraisal Reduction Amounts."
The "Reduction Interest Pass-Through Rate" with respect to any
Distribution Date is (i) with respect to the Class G Certificates, 0.29%,
(ii) with respect to the Class F Certificates, 0.76%, (iii) with respect to
the Class E Certificates, 0.83%, (iv) with respect to the Class D
Certificates, 0.90%, (v) with respect to the Class C Certificates, 0.92%, and
(iv) with respect to the Class B Certificates, 0.96%.
A "Reduction Interest Shortfall" for the Class X-2 Certificates with
respect to any Distribution Date and each of clauses Third, Sixth, Ninth,
Twelfth, Fifteenth and Eighteenth in the second to last paragraph under this
"Payment Priorities" section, is the sum of (a) the excess, if any, of (i)
the Reduction Interest Distribution Amount for the immediately preceding
Distribution Date with respect to such clause Third, Sixth, Ninth, Twelfth,
Fifteenth or Eighteenth, as applicable, over (ii) all distributions made in
respect of the Reduction Interest Distribution Amount with respect to such
clause Third, Sixth, Ninth, Twelfth, Fifteenth or Eighteenth, as applicable,
and (b) one month's interest on any such excess at the Adjusted WAC Rate for
such Distribution Date.
The "Pass-Through Rate" for any Class of Regular Certificates for any
Interest Accrual Period is the per annum rate at which interest accrues on
the Certificates of such Class during such Interest Accrual Period, as
follows:
The Pass-Through Rate on the Class A-1 Certificates is equal to the
"Adjusted LIBOR Rate" which equals, for each Distribution Date through the
Distribution Date in July 2004, LIBOR plus .23%, and for each Distribution
Date thereafter, the lesser of (i) LIBOR plus .70% and (ii) the Group 1
WAC Rate (or if no Group 1 Components remain outstanding, 10% per annum).
For a description of LIBOR, see "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Mortgage Loans--The
AAPT Pool Loan--Payment Terms" herein.
The Pass-Through Rate on the Class A-2A Certificates is equal to
6.940000%.
The Pass-Through Rate on the Class A-2B Certificates is equal to
6.860000%.
The Pass-Through Rate on the Class A-2C Certificates is equal to
6.930000%.
The Pass-Through Rate on the Class A-2D Certificates is equal to
6.940000%.
The Pass-Through Rate on the Class B Certificates is equal to the
Adjusted WAC Rate minus 0.96%.
The Pass-Through Rate on the Class C Certificates is equal to the
Adjusted WAC Rate minus 0.92%.
The Pass-Through Rate on the Class D Certificates is equal to the
Adjusted WAC Rate minus 0.90%.
The Pass-Through Rate on the Class E Certificates is equal to the
Adjusted WAC Rate minus 0.83%.
The Pass-Through Rate on the Class F Certificates is equal to the
Adjusted WAC Rate minus 0.76%.
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The Pass-Through Rate on the Class G Certificates is equal to the
Adjusted WAC Rate minus 0.29%.
The Pass-Through Rate on the Class H Certificates is equal to the
Adjusted WAC Rate.
The Pass-Through Rate on the Class X-1A Certificates is equal to (A) for
each Distribution Date up to and including the Distribution Date in July
2000, the excess, if any, of (i) the Group 1 WAC Rate, over (ii) the
Adjusted LIBOR Rate (for purposes of this definition only, adjusting the
Adjusted LIBOR Rate to a rate calculated on the basis of a 360-day year
consisting of twelve 30-day months) and (B) thereafter, 0%.
The Pass-Through Rate on the Class X-1B Certificates is equal to (A) for
each Distribution Date up to and including the Distribution Date in July
2000, 0%, and (B) thereafter, the excess, if any of (i) the Group 1 WAC
Rate, over (ii) the Adjusted LIBOR Rate (for purposes of this definition
only, adjusting the Adjusted LIBOR Rate to a rate calculated on the basis
of a 360-day year consisting of twelve 30-day months).
The Pass-Through Rate on the Class X-2 Certificates is a per annum rate
equal to the weighted average of the Pass-Through Rates on the Class A-2A
Component, the Class A-2B Component, the Class A-2C Component, the Class
A-2D Component, the Class B Component, the Class C Component, the Class D
Component, the Class E Component, the Class F Component and the Class G
Component, weighted on the basis of their respective Component Notional
Amounts. The Pass-Through Rate on the Class A-2A Component is a per annum
rate equal to the Adjusted WAC Rate minus the Pass-Through Rate on the
Class A-2A Certificates. The Pass-Through Rate on the Class A-2B Component
is a per annum rate equal to the Adjusted WAC Rate minus the Pass-Through
Rate on the Class A-2B Certificates. The Pass-Through Rate on the Class
A-2C Component is a per annum rate equal to the Adjusted WAC Rate minus
the Pass-Through Rate on the Class A-2C Certificates. The Pass-Through
Rate on the Class A-2D Component is a per annum rate equal to the Adjusted
WAC Rate minus the Pass-Through Rate on the Class A-2D Certificates. The
Pass-Through Rate on the Class B Component is a per annum rate equal to
0.96%. The Pass-Through Rate on the Class C Component is a per annum rate
equal to 0.92%. The Pass-Through Rate on the Class D Component is a per
annum rate equal to 0.90%. The Pass-Through Rate on the Class E Component
is a per annum rate equal to 0.83%. The Pass-Through Rate on the Class F
Component is a per annum rate equal to 0.76%. The Pass-Through Rate on the
Class G Component is a per annum rate equal to 0.29%.
The initial Pass-Through Rate for each Class of Offered Certificates is
set forth on the cover page of this Prospectus Supplement.
The "Group 1 WAC Rate" for any Distribution Date is the weighted average
of the Net Mortgage Rates in effect for the Group 1 Components as of their
Due Date in the month preceding the month in which such Distribution Date
occurs weighted on the basis of their respective Stated Principal Balances on
such Due Date.
The "Adjusted WAC Rate" with respect to any Distribution Date is a per
annum rate equal to the sum of (A) the product of (i) the weighted average of
the Net Mortgage Rates in effect for the Group 2 Loans as of their respective
Due Dates in the month preceding the month in which such Distribution Date
occurs weighted on the basis of the respective Stated Principal Balances of
the Group 2 Loans on such Due Dates (the "Group 2 WAC Rate") and (ii) a
fraction, the numerator of which is the aggregate Stated Principal Balance of
the Group 2 Loans as of their respective Due Dates in the month preceding the
month in which such Distribution Date occurs and the denominator of which is
the sum of the aggregate Stated Principal Balance of the Group 2 Loans as of
their respective Due Dates in the month preceding the month in which such
Distribution Date occurs and the Group 1 Difference Amount and (B) the
product of (i) the Adjusted LIBOR Rate (converted to a 30/360 basis) and (ii)
a fraction, the numerator of which is the Group 1 Difference Amount and the
denominator of which is the sum of the aggregate Stated Principal Balance of
the Group 2 Loans as of their respective Due Dates in the month preceding the
month in which such Distribution Date occurs and the Group 1 Difference
Amount; provided, however,
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that if the sum of the aggregate Stated Principal Balance of the Group 2
Loans as of their respective Due Dates in the month preceding the month in
which such Distribution Date occurs and the Group 1 Difference Amount is less
than or equal to zero, then the Adjusted WAC Rate will equal the value of
such rate in respect of the last Distribution Date on which such sum was
greater than zero.
The "Group 1 Difference Amount" with respect to any Distribution Date is
the amount (which may be positive or negative) equal to the aggregate Stated
Principal Balance of the Group 1 Components as of their Due Date in the month
preceding the month in which such Distribution Date occurs minus the
Certificate Principal Amount of the Class A-1 Certificates as of the
beginning of the related Interest Accrual Period.
As the result of the foregoing calculations, the Adjusted WAC Rate for any
Distribution Date will equal the Group 2 WAC Rate if the aggregate Stated
Principal Balance of the Group 1 Components as of their Due Dates in the
month preceding the month in which such Distribution Date occurs equals the
Certificate Principal Amount of the Class A-1 Certificates at the beginning
of the related Interest Accrual Period. If the aggregate Stated Principal
Balance of the Group 1 Components and the Certificate Principal Amount of the
Class A-1 Certificates differ as of such dates, the Classes of Regular
Certificates other than the Class A-1, Class X-1A and Class X-1B Certificates
will be allocated all interest on the Group 2 Loans, plus or minus interest
at the Adjusted LIBOR Rate on the difference between the aggregate Stated
Principal Balance of the Group 1 Components and the Certificate Principal
Amount of the Class A-1 Certificates.
The "Regular Certificates" are the Class A-1, Class A-2A, Class A-2B,
Class A-2C, Class A-2D, Class B, Class C, Class D, Class E, Class F, Class G,
Class H, Class X-1A, Class X-1B and Class X-2 Certificates.
The "Net Mortgage Rate" with respect to any Mortgage Loan or Component is
a per annum rate equal to the related Mortgage Rate in effect from time to
time minus the related Servicing Fee Rate. However, for purposes of
calculating Pass-Through Rates, the Net Mortgage Rate of such Mortgage Loan
or Component shall be determined without regard to any modification, waiver
or amendment of the terms, whether agreed to by the Special Servicer or
resulting from a bankruptcy, insolvency or similar proceeding involving the
related borrower.
The "Mortgage Rate" with respect to any Mortgage Loan or Component is the
per annum rate at which interest accrues on such Mortgage Loan or Component
as stated in the related Note in each case without giving effect to the
Excess Rate or the Default Rate. Notwithstanding the foregoing, if any
Mortgage Loan or Component does not accrue interest on the basis of a 360-day
year consisting of twelve 30-day months, then, for purposes of calculating
Pass-Through Rates other than the Pass-Through Rate on the Class A-1
Certificates, the Mortgage Rate of such Mortgage Loan or Component for any
one-month period preceding a related Due Date will be the annualized rate at
which interest would have to accrue in respect of such Mortgage Loan or
Component on the basis of a 360-day year consisting of twelve 30-day months
in order to produce the aggregate amount of interest actually accrued in
respect of such Mortgage Loan or Component during such one-month period at
the related Mortgage Rate; provided, however, that with respect to the AAPT
Fixed Component and the CAP Pool Loan, (i) the Mortgage Rate for the one
month period preceding the Due Dates in January and February in any year
which is not a leap year or in February in any year which is a leap year will
be determined net of the Withheld Amount, and (ii) the Mortgage Rate for the
one-month period preceding the Due Date in March will be determined taking
into account the addition of any such Withheld Amounts.
The "Stated Principal Balance" of any Mortgage Loan or Component at any
date of determination will equal (a) the principal balance as of the Cut-Off
Date of such Mortgage Loan or Component, minus (b) the sum of (i) the
principal portion of each Monthly Payment or, if applicable, Extended Monthly
Payment due on such Mortgage Loan or Component after the Cut-Off Date and
prior to such date of determination, if received from the borrower or
advanced by the Master Servicer, Trustee or Fiscal Agent, (ii) all Balloon
Payments, voluntary and involuntary principal prepayments and other
unscheduled collections of principal received with respect to such Mortgage
Loan or Component, to the extent distributed to holders of the Certificates
or applied to other payments required under the Pooling Agreement before such
date of determination and (iii) any adjustment thereto as a result of a
reduction
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of principal by a bankruptcy court or as a result of a modification reducing
the principal amount due on such Mortgage Loan or Component. The Stated
Principal Balance of a Mortgage Loan or Component 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 or Component. The Stated Principal Balance of a defaulted
Mortgage Loan or Component with respect to which the Master Servicer or the
Special Servicer has determined that it has received all payments and
recoveries which it expects to be finally recoverable on such Mortgage Loan
or Component is zero.
The "Principal Distribution Amount" for any Distribution Date and any Loan
Group will be equal to the sum, without duplication, of:
(i) the principal component of all scheduled Monthly Payments (other than
Balloon Payments) due on the Due Date immediately preceding such
Distribution Date (if received, or advanced by the Master Servicer,
Trustee or Fiscal Agent, in respect of such Distribution Date) with
respect to the Mortgage Loans or Components, as applicable, in such Loan
Group;
(ii) the principal component of all Extended Monthly Payments due on the
related Due Date (if received, or advanced by the Master Servicer, Trustee
or Fiscal Agent, in respect of such Distribution Date) with respect to the
Mortgage Loans or Components, as applicable, in such Loan Group;
(iii) the principal component of any payment (including any Balloon
Payment) on any Mortgage Loan or Component in such Loan Group received on
or after the maturity date thereof in the related Collection Period;
(iv) the portion of Unscheduled Payments allocable to principal of any
Mortgage Loan or Component in such Loan Group received or applied during
the related Collection Period, net of the principal portion of any
unreimbursed P&I Advances related to such Mortgage Loan or Component;
(v) the principal portion of the Repurchase Price with respect to each
Mortgage Loan or Component in such Loan Group purchased, during the
related Collection from the Trust Fund; and
(vi) the Principal Shortfall, if any, for such Distribution Date and such
Loan Group.
For purposes of the foregoing definition of Principal Distribution Amount,
the term "Principal Shortfall" for any Distribution Date and any Loan Group
means the amount, if any, by which (i) the Principal Distribution Amount for
such Loan Group for the preceding Distribution Date, exceeds (ii) the
aggregate amount actually distributed with respect to principal on such
preceding Distribution Date in respect of such Principal Distribution Amount.
An "REO Mortgage Loan" is any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property.
On each Distribution Date prior to the Cross-over Date, the Available
Funds for such Distribution Date will be distributed in the following amounts
and order of priority:
(i) First, pro rata, in respect of interest, to the Class A-1, Class A-2A,
Class A-2B, Class A-2C, Class A-2D, Class X-1A, Class X-1B and Class X-2
Certificates, up to an amount equal to, and pro rata as among such Classes in
accordance with, the Interest Distribution Amounts of such Classes;
(ii) Second, to the Class A Certificates, in reduction of their respective
Certificate Principal Amounts in the following order: (a) first, to the Class
A-1 Certificates, second, to the Class A-2A Certificates, third, to the Class
A-2B Certificates, fourth, to the Class A-2C Certificates, and fifth, to the
Class A-2D Certificates, in each case up to an amount equal to the lesser of
(i) the Certificate Principal Amount thereof and (ii) the Principal
Distribution Amount with respect to Loan Group 1 for such Distribution Date;
(b) if, after giving effect to the payments described in clause (a), the
Certificate Principal Amount of the Class A-1 Certificates exceeds the
aggregate Stated Principal Balance of the Group 1 Components as of their Due
Date in the related Collection Period, then to the Class A-1 Certificates, up
to the lesser of (i) the amount of such excess and (ii) the Principal
Distribution Amount with respect to Loan Group 2 for
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such Distribution Date; and (c) first, to the Class A-2A Certificates,
second, to the Class A-2B Certificates, third, to the Class A-2C
Certificates, fourth to the Class A-2D Certificates and fifth, to the Class
A-1 Certificates in each case up to an amount equal to the lesser of (i) the
Certificate Principal Amount thereof and (ii) the Principal Distribution
Amount with respect to Loan Group 2 for such Distribution Date, in each case
after giving effect to the payments described in clauses (a) and (b);
provided, that, if the remaining portion of the Available Funds for such
Distribution Date after giving effect to payments pursuant to clause (a)
above would be less than the Principal Distribution Amount with respect to
Loan Group 2 for such date, payments pursuant to this paragraph shall be made
pursuant to clauses (a) and (c) above on a pro rata basis in accordance with
the relative entitlement of each Class of Class A Certificates before giving
effect to any payments pursuant to clause (b) above;
(iii) Third, pro rata, (A) to the Class B Certificates, in respect of
interest, up to an amount equal to the aggregate Interest Distribution Amount
of such Class, (B) to the Class X-2 Certificates in respect of the Reduction
Interest Distribution Amount attributable to the notional reduction in the
Certificate Principal Amount of the Class B Certificates as described below
under "--Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the Class
X-2 Certificates, up to an amount equal to the aggregate unpaid Reduction
Interest Shortfalls for such Distribution Date;
(iv) Fourth, to the Class B Certificates, in reduction of the Certificate
Principal Amount thereof, up to an amount equal to the Principal Distribution
Amount less the portion of the Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Principal Amount thereof
is reduced to zero;
(v) Fifth, to the Class B Certificates, an amount equal to the aggregate
of unreimbursed Realized Losses previously allocated to such Class, plus
interest thereon at the Pass-Through Rate for such Class compounded monthly
from the date the related Realized Loss was allocated to such Class;
(vi) Sixth, pro rata, (A) to the Class C Certificates, in respect of
interest, up to an amount equal to the aggregate Interest Distribution Amount
of such Class, (B) to the Class X-2 Certificates in respect of the Reduction
Interest Distribution Amount attributable to the notional reduction in the
Certificate Principal Amount of the Class C Certificates as described below
under "--Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the Class
X-2 Certificates, up to an amount equal to the aggregate unpaid Reduction
Interest Shortfalls for such Distribution Date;
(vii) Seventh, to the Class C Certificates, in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Principal
Amount thereof is reduced to zero;
(viii) Eighth, to the Class C Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such Class,
plus interest thereon at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such Class;
(ix) Ninth, pro rata, (A) to the Class D Certificates in respect of
interest, up to an amount equal to the aggregate Interest Distribution Amount
of such Class, (B) to the Class X-2 Certificates in respect of the Reduction
Interest Distribution Amount attributable to the notional reduction in the
Certificate Principal Amount of the Class D Certificates as described below
under "--Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the Class
X-2 Certificates, up to an amount equal to the aggregate unpaid Reduction
Interest Shortfalls for such Distribution Date;
(x) Tenth, to the Class D Certificates, in reduction of the Certificate
Principal Amount thereof, up to an amount equal to the Principal Distribution
Amount less the portion of the Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Principal Amount thereof
is reduced to zero;
(xi) Eleventh, to the Class D Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such Class,
plus interest thereon at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such Class;
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(xii) Twelfth, pro rata, (A) to the Class E Certificates in respect of
interest, up to an amount equal to the aggregate Interest Distribution Amount
of such Class, (B) to the Class X-2 Certificates in respect of the Reduction
Interest Distribution Amount attributable to the notional reduction in the
Certificate Principal Amount of the Class E Certificates as described below
under "--Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the Class
X-2 Certificates, up to an amount equal to the aggregate unpaid Reduction
Interest Shortfalls for such Distribution Date;
(xiii) Thirteenth, to the Class E Certificates in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Principal
Amount thereof is reduced to zero;
(xiv) Fourteenth, to the Class E Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such Class,
plus interest thereon at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such Class;
(xv) Fifteenth, pro rata, (A) to the Class F Certificates in respect of
interest, up to an amount equal to the aggregate Interest Distribution Amount
of such Class, (B) to the Class X-2 Certificates in respect of the Reduction
Interest Distribution Amount attributable to the notional reduction in the
Certificate Principal Amount of the Class F Certificates as described below
under "--Appraisal Reduction Amounts," up to an amount equal to the aggregate
Reduction Interest Distribution Amount so attributable and (C) to the Class
X-2 Certificates, up to an amount equal to the aggregate unpaid Reduction
Interest Shortfalls for such Distribution Date;
(xvi) Sixteenth, to the Class F Certificates in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Principal
Amount thereof is reduced to zero;
(xvii) Seventeenth, to the Class F Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such Class,
plus interest thereon at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such Class;
(xviii) Eighteenth, pro rata, (A) to the Class G Certificates in respect
of interest, up to an amount equal to the aggregate Interest Distribution
Amount of such Class, (B) to the Class X-2 Certificates in respect of the
Reduction Interest Distribution Amount attributable to the notional reduction
in the Certificate Principal Amount of the Class G Certificates as described
below under "--Appraisal Reduction Amounts," up to an amount equal to the
aggregate Reduction Interest Distribution Amount so attributable and (C) to
the Class X-2 Certificates, up to an amount equal to the aggregate unpaid
Reduction Interest Shortfalls for such Distribution Date;
(xix) Nineteenth, to the Class G Certificates in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Principal
Amount thereof is reduced to zero; and
(xx) Twentieth, to the Class G Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such Class,
plus interest thereon at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such Class;
and
(xxi) Twenty-first, to the Class H Certificates in respect of interest, up
to an amount equal to the aggregate Interest Distribution Amount of such
Class;
(xxii) Twenty-second, to the Class H Certificates in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Principal
Amount thereof is reduced to zero;
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(xxiii) Twenty-third, to the Class H Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such Class,
plus interest thereon at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such Class;
and
(xxiv) Twenty-fourth, to the Class R Certificates, any amounts remaining
in the Upper-Tier Distribution Account, to the Class MR Certificates, any
amounts remaining in the Middle-Tier Distribution Account, and to the Class
LR Certificates, any amounts remaining in the Lower-Tier Distribution
Account.
On each Distribution Date occurring on and after the Cross-over Date,
regardless of the allocation of principal payments described in priority
Second above, an amount equal to the aggregate of both Principal Distribution
Amounts will be distributed, first, to the Class A-1, Class A-2A, Class A-2B,
Class A-2C and Class A-2D Certificates, pro rata, based on their respective
Certificate Principal Amounts, in reduction of their respective Certificate
Principal Amounts, until the Certificate Principal Amount of each such Class
is reduced to zero, and, second, to the Class A-1, Class A-2A, Class A-2B,
Class A-2C and Class A-2D Certificates for unreimbursed amounts of Realized
Losses previously allocated to such Classes, pro rata in accordance with the
amount of such unreimbursed Realized Losses so allocated. The "Cross-over
Date" is the Distribution Date on which the Certificate Principal Amount of
each Class of Certificates entitled to distributions of principal (other than
the Class A-1, Class A-2A, Class A-2B, Class A-2C and Class A-2D
Certificates) has been reduced to zero.
All references to "pro rata" in the preceding clauses, unless otherwise
specified, mean pro rata based upon the amount distributable pursuant to such
clause.
PREPAYMENT PREMIUMS. On any Distribution Date, Prepayment Premiums
collected during the related Collection Period will be distributed to the
holders of the Classes of Offered Certificates as described below.
Prepayment Premiums received during any Collection Period with respect to
the AAPT LIBOR Components will be distributed on the following Distribution
Date to the holders of the Class X-1A Certificates and the Class X-1B
Certificates as follows: (i) to the Class X-1A Certificates, an amount equal
to the product of (x) the number of Distribution Dates remaining after such
Distribution Date to and including the Distribution Date occurring in July
2000, (y) the applicable Class X-1A Prepayment Factor, and (z) the amount of
principal prepaid with respect to such Distribution Date, and (ii) to the
Class X-1B Certificates, the remaining amount of such Prepayment Premiums. As
used above, the "Class X-1A Prepayment Factor" means (i) an amount equal to
(x) the excess of 0.8715% over the Initial Class A-1 Margin, divided by (y)
12, with respect to any prepayment allocated to AAPT LIBOR A Component, and
(ii) an amount equal to (x) the excess of 0.7015% over the Initial Class A-1
Margin, divided by (y) 12, with respect to any prepayment allocated to AAPT
LIBOR B Component. "Initial Class A-1 Margin" means an amount equal to 0.23%.
Any other Prepayment Premiums (which are generally payable only in
connection with Mortgage Loan events of default) received during any
Collection Period will be distributed on the following Distribution Date as
follows: to each of the Class A-2A, Class A-2B, Class A-2C, Class A-2D, Class
B, Class C, Class D, Class E, Class F and Class G Certificates, for each such
Class an amount equal to the product of (a) a fraction, the numerator of
which is the amount distributed as principal to such Class on such
Distribution Date, and the denominator of which is the total amount
distributed as principal to all Classes of Offered Certificates (other than
the Class A-1 Certificates) on such Distribution Date, (b) the Base Interest
Fraction for the related Principal Prepayment and such Class of Certificates
and (c) the aggregate amount of Prepayment Premiums collected on such
Principal Prepayment during the related Collection Period. Any Prepayment
Premiums collected during the related Collection Period remaining after such
distributions will be distributed to the holders of the Class X-2
Certificates.
The "Base Interest Fraction" with respect to any Principal Prepayment on
any Mortgage Loan and with respect to any Class of Offered Certificates is a
fraction (A) whose numerator is the greater of (x) zero and (y) the excess of
(i) the Pass-Through Rate on such Class of Offered Certificates for such
Distribution Date over (ii) the sum of the discount rate used in accordance
with the related Mortgage
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Loan documents in calculating the Prepayment Premiums with respect to such
Principal Prepayment and the Spread Rate (as defined below) for such Class of
Offered Certificates, and (B) whose denominator is the excess of (i) the
Mortgage Rate on the related Mortgage Loan over (ii) the discount rate used
in accordance with the related Mortgage Loan documents in calculating the
Prepayment Premiums with respect to such Principal Prepayment; provided,
however, that under no circumstances shall the Base Interest Fraction be
greater than one. If such discount rate is greater than the Mortgage Rate on
the related Mortgage Loan, then the Base Interest Fraction shall equal zero.
The "Spread Rate" for the Class A-2A Certificates is 0.15% per annum, for
the Class A-2B Certificates is 0.20% per annum, for the Class A-2C
Certificates is 0.25% per annum, for the Class A-2D Certificates is 0.30% per
annum, for the Class B Certificates is 0.35% per annum, for the Class C
Certificates is 0.40% per annum, for the Class D Certificates is 0.45% per
annum, for the Class E Certificates is 0.50% per annum, for the Class F
Certificates is 0.55% per annum and for the Class G Certificates is 0.60% per
annum.
See "Certain Legal Aspects of the Mortgage Loans--Enforceability of
Certain Provisions--Prepayment Provisions" in the Prospectus regarding the
enforceability of Prepayment Premiums.
EXCESS INTEREST. On each Distribution Date, the Trustee shall distribute
any Excess Interest received during the related Collection Period to holders
of Certificates as follows: (i) any Excess Interest received with respect to
the AAPT LIBOR Components, to the holders of the Class A-1 Certificates, (ii)
any Excess Interest received with respect to the Cadillac Fairview Pool Loan,
to the holders of the Class A-2B and Class A-2C Certificates, pro rata, based
on their initial Certificate Principal Amounts, and (iii) any Excess Interest
received with respect to any other Mortgage Loans (other than the 380 Madison
Loan and Whitehall Pool Loan, which do not provide for Excess Interest) and
the AAPT Fixed Component, to the holders of the Class A-2D, Class B, Class C,
Class D, Class E and Class F Certificates, pro rata, based on their initial
Certificate Principal Amounts.
CLASS Q AND CLASS M DISTRIBUTIONS. On each Distribution Date, Net Default
Interest received in the related Collection Period with respect to a default
on a Mortgage Loan will be distributed solely to the Class Q Certificates, to
the extent set forth in the Pooling Agreement. Payments on the Montehiedra
Partner Loans received in the related Collection Periods will be available
for distribution solely to the Class M Certificates, as set forth in the
Pooling Agreement. The Class Q and Class M Certificates are not entitled to
any other distributions.
REALIZED LOSSES. The Certificate Principal Amount of each Class of
Certificates entitled to distributions of principal will be reduced without
distribution on any Distribution Date as a write-off to the extent of any
Realized Loss allocated to such Class on such 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 Principal Amount
of all such Classes of Certificates after giving effect to distributions made
on such Distribution Date exceeds the aggregate Stated Principal Balance of
the Mortgage Loans after giving effect to any payments of principal received
or advanced with respect to the Due Date occurring immediately prior to such
Distribution Date. Any such write-offs will be applied to such Classes of
Certificates in the following order, until each is reduced to zero: first, to
the Class H Certificates; second, to the Class G Certificates; third, to the
Class F Certificates; fourth, to the Class E Certificates; fifth, to the
Class D Certificates; sixth, to the Class C Certificates; seventh, to the
Class B Certificates and, finally, pro rata, to the Class A-1, Class A-2A,
Class A-2B, Class A-2C and Class A-2D Certificates, based on their respective
Certificate Principal Amounts. Any amounts recovered in respect of any
amounts previously written off as Realized Losses will be distributed to the
Classes of Certificates described above in reverse order of allocation of
Realized Losses thereto.
Shortfalls in Available Funds resulting from additional servicing
compensation other than the Servicing Fee, interest on Advances to the extent
not covered by Default Interest, extraordinary expenses of the Trust Fund, a
reduction of 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 or other unanticipated or default-related expenses will be allocated
to each Class of Certificates in the same manner as Realized Losses. Excess
Prepayment Interest Shortfalls will be allocated to each Class of
Certificates, pro rata,
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based upon the amount of interest which would have otherwise been
distributable to each Class (without giving effect to any Reduction Interest
Distribution Amount). The Notional Amount of the Class X-2 Certificates will
be reduced to reflect reductions in the Certificate Principal Amount of the
Class A-2A, Class A-2B, Class A-2C, Class A-2D, Class B, Class C, Class D,
Class E, Class F and Class G Certificates resulting from allocations of
Realized Losses.
The "Prepayment Interest Shortfall", with respect to any Distribution Date
and any Mortgage Loan, is equal to the amount of any shortfall in collections
of interest, adjusted to the applicable Net Mortgage Rate, resulting from a
Principal Prepayment on such Mortgage Loan during the related Collection
Period and prior to the Due Date in such Collection Period. Such shortfall
may result because interest on a Principal Prepayment in full is paid by the
related borrower only to the date of prepayment.
The "Excess Prepayment Interest Shortfall" with respect to any
Distribution Date, is the aggregate amount by which the Prepayment Interest
Shortfall with respect to all Principal Prepayments received during the
related Collection Period exceeds the aggregate Servicing Fee (minus the
Trustee Fee) available to be paid to the Master Servicer for such
Distribution Date.
APPRAISAL REDUCTION AMOUNTS. In the event that an Appraisal Reduction
Event occurs with respect to a Mortgage Loan, (i) the amount advanced by the
Master Servicer with respect to delinquent payments of interest with respect
to the related Mortgage Loan will be reduced as described under "--Appraisal
Reductions" below, (ii) the Voting Rights of certain Classes will be reduced
as described under "The Pooling Agreement--Amendment" herein, and (iii)
distributions of interest in respect of the Class X-2 Certificates that are
attributable to the notional reductions in Certificate Principal Amounts
described below will be payable at a lower payment priority than the priority
otherwise in effect for distributions of interest in respect of the Class X-2
Certificates. The reduction of interest advanced by the Master Servicer will
have the effect of reducing the amount available to be distributed as
interest on the then most subordinate Class or Classes of Certificates and,
potentially, a portion of the amount available to be distributed as interest
on the Class X-2 Certificates.
The Certificate Principal Amount of each of the Class H, Class G, Class F,
Class E, Class D, Class C and Class B Certificates will be notionally reduced
(solely for purposes of determining the payment priority of interest on the
Class X-2 Certificates in respect of Reduction Interest Distribution Amounts
and determining the Voting Rights of the related Classes) on any Distribution
Date to the extent of any Appraisal Reduction Amounts allocated to such Class
on such Distribution Date. To the extent that the aggregate of the Appraisal
Reduction Amounts for any Distribution Date exceed such Certificate Principal
Amount, such excess will be applied, subject to any reversal described below,
to notionally reduce the Certificate Principal Amount of the next most
subordinate Class of Certificates on the next Distribution Date. Any such
reductions will be applied in the following order of priority: first, to the
Class H Certificates; second, to the Class G Certificates; third, to the
Class F Certificates; fourth, to the Class E Certificates; fifth, to the
Class D Certificates; sixth, to the Class C Certificates; and finally, to the
Class B Certificates (provided in each case that no Certificate Principal
Amount in respect of any such Class may be notionally reduced below zero).
See "--Payment Priorities" above and "--Appraisal Reductions" below.
SUBORDINATION
As a means of providing a certain amount of protection to the holders of
the Class A-1, Class A-2A, Class A-2B, Class A-2C, Class A-2D, Class X-1 and
Class X-2 Certificates against losses associated with delinquent and
defaulted Mortgage Loans, the rights of the holders of the Class B, Class C,
Class D, Class E, Class F, Class G and Class H Certificates to receive
distributions of interest (other than Excess Interest) and principal, as
applicable, will be subordinated to such rights of the holders of the Class
A-1, Class A-2A, Class A-2B, Class A-2C, Class A-2D, Class X-1 and Class X-2
Certificates. The Class B Certificates will likewise be protected by the
subordination of the Class C, Class D, Class E, Class F, Class G and Class H
Certificates. The Class C Certificates will likewise be protected by the
subordination of the Class D, Class E, Class F, Class G and Class H
Certificates. The Class D Certificates will likewise be protected by the
subordination of the Class E, Class F, Class G and Class H Certificates. The
Class E Certificates will likewise be protected by the subordination of the
Class F,
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Class G and Class H Certificates. The Class F Certificates will likewise be
protected by the subordination of the Class G and Class H Certificates. The
Class G Certificates will likewise be protected by the subordination of the
Class H 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 and (ii) by the allocation of Realized Losses first, to
the Class H Certificates; second, to the Class G Certificates; third, to the
Class F Certificates; fourth to the Class E Certificates; fifth, to the Class
D Certificates; sixth, to the Class C Certificates; seventh, to the Class B
Certificates; and, finally, to the Class A-1, Class A-2A, Class A-2B, Class
A-2C and Class A-2D Certificates, pro rata, based on their respective
Certificate Principal Amounts. No other form of credit enhancement, including
any payments on or other receipts with respect to the Montehiedra Partner
Loans will be available for the benefit of the holders of the Offered
Certificates.
APPRAISAL REDUCTIONS
With respect to the first 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) 90 days 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) 60 days after a receiver has been appointed, (v)
immediately after a borrower declares bankruptcy, and (vi) immediately after
a Mortgage Loan becomes an REO Mortgage Loan each, (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 as of the last day of the related Collection Period 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 Master Servicer as an Advance) over (ii) the sum of (A)
to the extent not previously advanced by the Master 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 and assessments and insurance
premiums and all other amounts, including, if applicable, ground rents, due
and unpaid under the Mortgage Loan (which taxes, premiums and other amounts
have not been the subject of an Advance). 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 Special Servicer will be
required to estimate the value of the related Mortgaged Properties (the
"Special Servicer's Appraisal Reduction Estimate") and such estimate will be
used for purposes of determining the Appraisal Reduction Amount. Within 60
days after the Special Servicer receives notice or is otherwise aware of an
Appraisal Reduction Event, the Special Servicer will be required to obtain an
independent MAI appraisal, the cost of which will be paid by the Master
Servicer as a Property Advance. On the first Distribution Date occurring on
or after the delivery of such independent MAI appraisal, the Special 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 Special Servicer's Appraisal Reduction Estimate).
Annual updates of such independent MAI appraisal will be obtained during the
continuance of an Appraisal Reduction Event and the Appraisal Reduction
Amount will be adjusted accordingly.
Upon payment in full or liquidation of any Mortgage Loan for which an
Appraisal Reduction Amount has been determined, such Appraisal Reduction
Amount will be eliminated.
DELIVERY, FORM AND DENOMINATION
The Offered Certificates (other than the Class X-1A and Class X-2
Certificates) will be issued, maintained and transferred in the book-entry
form only in denominations of $10,000 initial Certificate
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Principal Amount, and in multiples of $1 in excess thereof, and the Class
X-1A and Class X-2 Certificates will be issued, maintained and transferred in
the book-entry form only in denominations of $1,000,000 initial Notional
Amount, and in multiples of $1 in excess thereof.
The Offered 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 Seller has been informed by DTC that DTC's nominee will be Cede &
Co. No holder of an Offered Certificate will be entitled to receive a
certificate issued in fully registered, certificated form (each, a
"Definitive Certificate") representing its interest in such Class, except
under the limited circumstances described below under "--Definitive
Certificates." Unless and until Definitive Certificates are issued, all
references to actions by holders of the Offered Certificates will refer to
actions taken by DTC upon instructions received from holders of Offered
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 Offered Certificates will refer to payments,
notices, reports and statements to DTC or Cede & Co., as the registered
holder of the Offered Certificates, for distribution to holders of Offered
Certificates through its Participants in accordance with DTC procedures;
provided, however, that to the extent that the party to the Pooling Agreement
responsible for distributing any report, statement or other information has
been provided with the name of the beneficial owner of a Certificate (or the
prospective transferee of such beneficial owner), such report, statement or
other information will be provided to such beneficial owner (or prospective
transferee).
Until Definitive Certificates are issued in respect of the Offered
Certificates, interests in the Offered 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 Offered Certificates.
A "Certificateholder" or "holder" under the Pooling Agreement will be the
person in whose name a Certificate is registered in the certificate register
maintained pursuant to the Pooling Agreement, except that solely for the
purpose of giving any consent or taking any action pursuant to the Pooling
Agreement, any Certificate registered in the name of the Seller, the Trustee,
the Master Servicer, the Special Servicer, a manager of a Mortgaged Property,
a mortgagor or any person affiliated with the Seller, the Trustee, the Master
Servicer, or the Special Servicer, such Certificate 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 Agreement, any Certificates
beneficially owned by the Master Servicer, the Special Servicer or an
affiliate of the Master Servicer or the Special Servicer will be deemed to be
outstanding, provided that such amendment does not relate to compensation of
the Master Servicer or the Special Servicer, or otherwise benefit the Master
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
Master Servicer or an affiliate thereof will be deemed to be outstanding,
provided that the Special Servicer is not the Master Servicer. The Percentage
Interest of any Offered Certificate of any Class will be equal to the
percentage obtained by dividing the denomination of such Certificate by the
aggregate initial Certificate Principal Amount of such Class of Certificates.
See "Description of the Certificates--General" in the Prospectus.
BOOK-ENTRY REGISTRATION
Holders of Offered 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 depositories
(collectively, the "Depositories") which in turn will hold such positions in
customers' securities accounts in the Depositories' names on the books of
DTC. DTC is a limited purpose trust company organized
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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 Depository; 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. If the transaction complies with all relevant
requirements, Euroclear or CEDEL, as the case may be, will then deliver
instructions to the Depository to take action to effect final settlement on
its behalf.
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.
The holders of Offered Certificates that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of,
or other interests in, Offered Certificates may do so only through
Participants and Indirect Participants. In addition, holders of Offered
Certificates will receive all distributions of principal and interest from
the Trustee through the Participants who in turn will receive them from DTC.
Under a book-entry format, holders of Offered Certificates may experience
some delay in their receipt of payments, since such payments will be
forwarded by the Trustee to Cede & Co., as nominee for DTC. DTC will forward
such payments to its Participants, which thereafter will forward them to
Indirect Participants or beneficial owners of Offered Certificates.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Offered Certificates among Participants on whose behalf it acts with respect
to the Offered Certificates and to receive and transmit distributions of
principal of, and interest on, the Offered Certificates. Participants and
Indirect Participants with which the holders of Offered Certificates have
accounts with respect to the Offered Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective holders of Offered Certificates. Accordingly, although the
holders of Offered Certificates will not possess the Offered Certificates,
the Rules provide a mechanism by which Participants will receive payments on
Offered 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
Offered 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.
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DTC has advised the Seller that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling Agreement only
at the direction of one or more Participants to whose accounts with DTC the
Offered 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.
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.
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.
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.
Although DTC, Euroclear and CEDEL have implemented the foregoing
procedures in order to facilitate transfers of interests in Global
Certificates among Participants of DTC, Euroclear and CEDEL, they are under
no obligation to perform or to continue to comply with such procedures, and
such procedures may be discontinued at any time. None of the Seller, the
Trustee, the Master Servicer, the Special Servicers or the Underwriter will
have any responsibility for the performance by DTC, Euroclear or CEDEL or
their respective direct or indirect Participants of their respective
obligations under the rules and procedures governing their operations. The
information herein concerning DTC, CEDEL and Euroclear and their book-entry
systems has been obtained from sources believed to be reliable, but the
Seller takes no responsibility for the accuracy or completeness thereof.
DEFINITIVE CERTIFICATES
Definitive Certificates will be delivered to beneficial owners of Offered
Certificates ("Certificate Owners") (or their nominees) only if (i) DTC is no
longer willing or able properly to discharge its responsibilities as
depository with respect to the Offered Certificates, and the Seller is unable
to locate a qualified successor, (ii) the Seller or the Trustee, at its sole
option, elects to terminate the book-entry system through DTC, or (iii) after
the occurrence of an Event of Default under the Pooling Agreement,
Certificate Owners representing a majority in principal amount of the Offered
Certificates of any Class 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 such
Certificate Owners.
Upon the occurrence of any of the events described in clauses (i) through
(iii) in the immediately preceding paragraph, DTC is required to notify all
affected DTC Participants of the availability through DTC of Definitive
Certificates. Upon delivery of Definitive Certificates, the Trustee,
Certificate Registrar and Master Servicer will recognize the holders of such
Definitive Certificates as holders under the Pooling Agreement ("Holders").
Distributions of principal of 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 in the Prospectus and the Pooling
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.
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TRANSFER RESTRICTIONS
Each Class B, Class C, Class D, Class E, Class F and Class G Certificate
will bear a legend substantially to the effect that such Certificate may not
be purchased by a transferee that is (A) an employee benefit plan or other
retirement arrangement, including an individual retirement account or a Keogh
plan, which is subject to Title I of ERISA, or Section 4975 of the Code, or a
"governmental plan" (as defined in Section 3(32) of ERISA) that is subject to
any federal, state or local law ("Similar Law") which is, to a material
extent, similar to the foregoing provisions of ERISA of the Code (each, a
"Plan"), or (B) a collective investment fund in which Plans are invested, an
insurance company using assets of separate accounts or general accounts which
include assets of Plans (or which are deemed pursuant to ERISA or any Similar
Law to include assets of Plans) or other person acting on behalf of any such
Plan or using the assets of any such Plan, other than an insurance company
using the assets of its general account under circumstances whereby such
purchase and the subsequent holding of such Certificate by such insurance
company would be exempt from the prohibited transaction provisions of ERISA
and the Code under Prohibited Transaction Class Exemption 95-60.
Holders of Class B, Class C, Class D, Class E, Class F and Class G
Certificates that are in book-entry form will be deemed to have represented
that they are not persons or entities referred to in clause (A) or (B) of the
legend described in the preceding paragraph. In the event that holders of the
Class B, Class C, Class D, Class E, Class F and Class G Certificates become
entitled to receive Definitive Certificates under the circumstances described
under "--Definitive Certificates," each prospective transferee of a Class B,
Class C, Class D, Class E, Class F and Class G Certificate that is a
Definitive Certificate will be required to either deliver to the Seller, the
Certificate Registrar and the Trustee a representation letter substantially
in the form set forth as an exhibit to the Pooling Agreement stating that
such transferee is not a person or entity referred to in clause (A) or (B) of
the legend or provide an opinion to the Seller, the Certificate Registrar and
the Trustee as described in the Pooling Agreement. Any transfer of a Class B,
Class C, Class D, Class E, Class F and Class G Certificate that would result
in a prohibited transaction under ERISA or Section 4975 of the Code, or a
materially similar characterization under any Similar Law will be deemed
absolutely null and void ab initio.
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YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
YIELD
The yield to maturity on the Offered Certificates will depend upon the
price paid by the Certificateholders, the rate and timing of the
distributions in reduction of Certificate Principal Amounts or Notional
Amounts, as applicable, of the related Classes of Certificates and the rate,
timing and severity of losses on the Mortgage Loans and the extent to which
such losses are allocable in reduction of the Certificate Principal Amounts
or Notional Amounts, as applicable, of such Classes of Certificates, as well
as prevailing interest rates at the time of payment or loss realization.
The yield to maturity on the Class A-1 Certificates will be highly
sensitive to changes in the level of the LIBOR such that decreasing levels of
LIBOR will have a negative effect to investors in the Class A-1 Certificates.
Investors in the Class A-1 Certificates should consider the risk that lower
than anticipated levels of LIBOR could result in lower yields to investors
than the anticipated yields. The effect of the maximum interest rate on the
AAPT LIBOR Components after the AAPT LIBOR Component Anticipated Repayment
Date would be to limit the amount by which the Pass-Through Rate on the Class
A-1 Certificates can increase as a result of increases in LIBOR. Such effect
will be exacerbated as the proportion of the aggregate Stated Principal
Balances of the AAPT LIBOR Components to the Stated Principal Balance of the
AAPT Fixed Component increases. See "Description of the Mortgage Pool and the
Underlying Mortgaged Properties--Description of the Mortgage Loans--The AAPT
Pool Loan--Payment Terms" herein.
Holders of the Class A-1 Certificates generally will be entitled to
receive distributions of principal from principal payments on the AAPT LIBOR
Components. Pursuant to the terms of the AAPT Pool Loan, scheduled payments
of principal on such Mortgage Loan will not be applied to reduce the
principal balance of the AAPT LIBOR Components until July 11, 2004; provided,
however, that any principal prepayment (including both voluntary and
involuntary prepayments, delinquencies, defaults and liquidations) received
with respect to the AAPT Pool Loan prior to the AAPT Fixed Component
Anticipated Repayment Date will be applied to reduce the principal balance of
the AAPT LIBOR Components to zero prior to applying any such principal
prepayment to the applicable AAPT Fixed Component. As described under
"Description of the Mortgage Pool and the Underlying Mortgaged
Properties--Description of the Mortgage Loans--The AAPT Pool
Loan--Prepayment" herein, the AAPT LIBOR Components can be prepaid in whole
or part at any time, and commencing on July 11, 2000, without payment of any
prepayment premium or penalty. Therefore the Class A-1 Certificates will be
extremely sensitive to the rate and timing of unscheduled principal payments
(including both voluntary and involuntary prepayments, delinquencies,
defaults and liquidations) on the AAPT Pool Loan, the payments with respect
to breaches of representations and warranties with respect to such Mortgage
Loan.
The rate of distributions in reduction of the Certificate Principal Amount
or Notional Amounts, as applicable, of any Class of Offered Certificates, the
aggregate amount of distributions on any Class of Offered Certificates and
the yield to maturity of any Class of Offered 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 Principal Amount or
Notional Amounts, as applicable, may result from repurchases of Mortgage
Loans made by the Responsible Parties due to missing or defective
documentation or breaches of representations and warranties with respect to
the Mortgage Loans as described herein under "The Pooling
Agreement--Representations and Warranties; Repurchase" or purchases of the
Mortgage Loans in the manner described under "The Pooling Agreement--Optional
Termination; Optional Mortgage Loan Purchase."
Disproportionate principal payments (whether resulting from differences in
amortization terms, prepayments following expirations of the respective
Prepayment Lockout Periods or otherwise) on the Mortgage Loans and the
existence of any Group 1 Difference Amounts will affect the Pass-Through Rate
of the Class X-2, Class B, Class C, Class D, Class E, Class F and Class G
Certificates for one or more future periods and therefore the yield on such
Classes.
S-215
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The Certificate Principal Amount or Notional Amounts, as applicable, of
any Class of Offered Certificates may be reduced without distributions
thereon as a result of the occurrence and allocation of Realized Losses,
reducing the maximum amount distributable in respect of Certificate Principal
Amount, if applicable, as well as the amount of interest that would have
accrued on such Certificates 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 applicable Certificateholders in
reduction of the Certificate Principal Amounts 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 Notional Amount of the Class X-2 Certificates is based upon
the Certificate Principal Amounts of the Class A-2A, Class A-2B, Class A-2C,
Class A-2D, Class B, Class C, Class D, Class E, Class F and Class G
Certificates, the yield to maturity on the Class X-2 Certificates will be
extremely sensitive to the rate and timing of prepayments of principal
(including both voluntary and involuntary prepayments, delinquencies,
defaults and liquidations) on the Mortgage Loans and any repurchase with
respect to breaches of representations and warranties with respect to the
Mortgage Loans to the extent such payments of principal are allocated to each
such Class in reduction of the Certificate Principal Amount thereof. In
addition, as described under "Description of the Offered
Certificates--Distributions--Appraisal Reduction Amounts" herein, if an
Appraisal Reduction Event occurs, distributions of interest in respect of the
Class X-2 Certificates that are attributable to the notional reductions in
Certificate Principal Amounts of the Class G, Class F, Class E, Class D,
Class C or Class B Certificates will be payable at a lower payment priority
than the priority otherwise in effect for distributions of interest in
respect of the Class X-2 Certificates.
The Notional Amount of the Class X-1A Certificates is based upon the
Stated Principal Balance of the Group 1 Components. Therefore, the Class X-1A
Certificates will be extremely sensitive to the rate and timing of principal
payments (including both voluntary and involuntary prepayments,
delinquencies, defaults and liquidations) on the AAPT LIBOR Components and
any repurchase with respect to breaches of representations and warranties
with respect to the AAPT LIBOR Components, in each case, from the Closing
Date until the July 2000 Due Date for the AAPT LIBOR Components. See
"Description of the Offered Certificates--General" herein. Although the
payment of a Prepayment Premium is required in connection with a voluntary
prepayment of the AAPT LIBOR Components during such period, there can be no
assurance that the AAPT Borrowers would refrain from prepaying such
Components due to the existence of such Prepayment Premiums, or that such
Prepayment Premiums would be held to be enforceable if challenged. The rate
at which voluntary prepayments occur on the Mortgage Loans will be affected
by a variety of factors, including, without limitation, the terms of the
Mortgage Loans, the length of any Prepayment Lockout Period, the level of
prevailing interest rates, the availability of mortgage credit, the
occurrence of casualties or natural disasters and economic, demographic, tax,
legal and other factors, and no representation is made as to the anticipated
rate of prepayments on the AAPT LIBOR Components.
Certificateholders are not entitled to receive distributions of Monthly
Payments 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 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, geographic,
social and other factors, including the level of mortgage interest rates and
the rate at which borrowers default on their mortgage loans. The terms of the
Mortgage Loans (in particular, the term of any Prepayment Lockout Period, the
extent to which Prepayment Premiums are due with respect to any principal
prepayments, the right of the mortgagee to apply condemnation and casualty
proceeds to prepay the Mortgage Loan, the availability of certain rights to
defease all or a portion of the Mortgage Loan, and any increase in the
interest rate and the application of Excess Cash Flow, if applicable, to
prepay the related Mortgage Loan) may affect the rate of principal payments
on Mortgage Loans, and consequently, the yield to maturity of the Classes of
Offered Certificates. See "Mortgage Pool Characteristics" and "Description of
the Mortgage Pool and the Underlying Mortgaged Properties" herein.
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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, the greater the effect on such
investor's yield to maturity. As a result, the effect on such investor's
yield of principal payments occurring at a rate higher (or lower) than the
rate anticipated by the investor during the period immediately following the
issuance of the Offered Certificates would not be fully offset by a
subsequent like reduction (or increase) in the rate of principal payments.
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 Offered
Certificates. In addition, although Excess Cash Flow is applied to reduce
principal of the respective Mortgage Loans (other than with respect to the
380 Madison Loan and the Whitehall Pool Loan) 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
Offered Certificates based on the anticipated yield to maturity of such Class
of Offered 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 Offered Certificates
is purchased at a discount or a premium and the degree to which the timing of
payments on such Class of Offered Certificates is sensitive to prepayments
will determine the extent to which the yield to maturity of such Class of
Offered Certificates may vary from the anticipated yield. An investor should
carefully consider the associated risks, including, in the case of any
Offered 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 Offered 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 Offered Certificates entitled to distributions of
principal, 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 such amounts distributed to it may be lower than the
applicable Pass-Through Rate. Conversely, slower rates of prepayments on the
Mortgage Loans, and therefore, of amounts distributable in reduction of
principal balance of the Offered Certificates entitled to distributions of
principal, may coincide with periods of high prevailing interest rates.
During such periods, the amount of principal distributions resulting from
prepayments available to an investor in such Certificates for reinvestment at
such high prevailing interest rates may be relatively small.
The effective yield to holders of Offered Certificates (other than the
Class A-1 Certificates) will be lower than the yield otherwise produced by
the applicable Pass-Through Rate and applicable purchase prices because while
interest will accrue during each Interest Accrual Period, the distribution of
such interest will not be made until the Distribution Date immediately
following such Interest Accrual Period, and principal paid on any
Distribution Date will not bear interest during the period from the end of
such Interest Accrual Period to the Distribution Date that follows.
YIELD ON THE OFFERED CERTIFICATES
The yield to maturity of Offered Certificates will be sensitive to the
rate and timing of principal payments (including voluntary and involuntary
prepayments and repurchases), delinquencies and liquidations on the Mortgage
Loans.
The following tables indicate the assumed purchase price (before adding
accrued interest, if any), expressed as a percentage of the applicable
Certificate Principal Amount, and (a) the hypothetical pre-tax yield to
maturity on the Offered Certificates (other than the Class A-1 Certificates),
stated on a corporate bond equivalent basis, based on certain hypothetical
scenarios, or (b) the hypothetical discounted margin, as described below, on
the Class A-1 Certificates. The pre-tax yields to maturity set forth in the
tables below were calculated by determining the monthly discount rate that,
when applied to
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the assumed stream of cash flows to be paid on the Offered Certificates
(other than the Class A-1 Certificates), would cause the discounted present
value of such assumed cash flows to equal the assumed purchase price thereof,
plus accrued interest, if any, as basis points and by converting such monthly
rates to corporate bond equivalent rates. The discounted margins set forth in
the tables below for the Class A-1 Certificates were calculated in accordance
with standard formulas for mortgage-backed securities published by the Public
Securities Association to represent the increment over LIBOR that causes the
assumed purchase price of the Class A-1 Certificates to equal the discounted
present value of its cash flows, compounded monthly. Such calculations of
yield and discounted margin do not take into account variations that may
occur in the interest rates at which investors may be able to reinvest funds
received by them as distributions on the Offered Certificates and
consequently, do not purport to reflect the return on any investment in the
Offered Certificates when such reinvestment rates are considered.
For purposes of preparing the tables, it was assumed that (i) each of the
Mortgage Loans has the following characteristics as of the Cut-Off Date:
<TABLE>
<CAPTION>
REMAINING
TERM TO
ANTICIPATED REMAINING
CUT-OFF DATE REPAYMENT TERM TO ASSUMED
PRINCIPAL DATE MATURITY INTEREST SERVICING NET CASH
MORTGAGE LOAN BALANCE (MONTHS) (MONTHS) ACCRUAL FEE FLOW
-------------------------- -------------- ------------- ----------- ------------ ----------- -------------
CADILLAC FAIRVIEW POOL
<S> <C> <C> <C> <C> <C> <C> <C>
1. Loan....................... $258,460,281 76 351 Actual/360 0.0385% $35,873,856
2. Century Plaza Towers Loan . $229,369,475 116 356 30/360 0.0335% $35,718,416
3.(A) AAPT Fixed Component ..... $ 75,149,361 119 359 Actual/360 0.0585% $18,691,677
(B) AAPT LIBOR Components .... $ 50,000,000 83 359 Actual/360 0.0585% **
4. 380 Madison Loan........... $ 89,000,000 203* 203 Actual/360 0.0485% $16,000,000
5. CAP Pool Loan.............. $ 87,946,446 119 359 Actual/360 0.0585% $11,867,823
6. Whitehall Pool Loan........ $ 72,228,349 37* 37 Actual/360 0.0735% $12,617,278
7. Ritz Plaza Loan............ $ 62,365,309 116 356 Actual/360 0.0485% $ 7,573,130
8. Montehiedra Loan........... $ 52,579,779 117 356 Actual/360 0.0635% $ 8,091,213
</TABLE>
------------
* Remaining Term to Maturity Date.
** The assumed net cash flow on the AAPT Pool Loan is $18,691,677 in the
aggregate.
(ii) each Mortgage Loan will pay principal and interest in accordance with
its terms and scheduled payments will be timely received; (iii) the
Responsible Parties do not repurchase any Mortgage Loan as described herein
under "The Pooling Agreement--Representations and Warranties; Repurchase";
(iv) none of the Seller, Master Servicer or the Class LR Certificateholders
exercise the right to cause early termination of the Trust Fund; (v) the
Pass-Through Rate on the Class A-1 Certificates is fixed at 5.8628% per
annum, and the Pass-Through Rate on the Class A-1 Certificates increases to
6.3328% per annum on each Distribution Date after the Distribution Date in
July 2004; (vi) the Closing Date is August 14, 1997; (vii) with respect to
the accrual of interest on the Cadillac Fairview Pool Loan after the Cadillac
Fairview Anticipated Repayment Date, the Cadillac Fairview Revised Interest
Rate will be equal to 9.935% per annum; (viii) for purposes of determining
Pass-Through Rates, interest on the AAPT Fixed Component will be calculated
so that the Interest Reserve Account will not be needed; (ix) there are no
delinquencies; (x) partial prepayments on the Mortgage Loans are permitted,
but are assumed not to affect the amortization schedules; (xi) no Prepayment
Premiums are collected except as otherwise noted in the tables; (xii) there
are no Prepayment Interest Shortfalls or Appraisal Reduction Amounts; (xiii)
distributions on the Offered Certificates are made on the 13th day of the
month (each assumed to be a Business Day); (xiv) no Balloon Payment is
extended beyond its maturity date; (xv) each Mortgage Loan bears interest at
the related Mortgage Rate as described herein; (xvi) the Servicing Fee is
calculated on a 30/360 basis; and (xvii) unless otherwise specified in the
Scenarios described below, the Mortgage Loans do not prepay (assumptions (i)
through (xvii) above are collectively referred to as the "Mortgage Loan
Assumptions").
In the case of Scenario 1 below, it is assumed that all of the Mortgage
Loans having Anticipated Repayment Dates are prepaid in full ("Scenario 1")
on their respective Anticipated Repayment Dates and, in the case of the 380
Madison Loan and the Whitehall Pool Loan, the Balloon Payments due on such
Mortgage Loans are paid on respective maturity dates for such Mortgage Loans.
In the case of Scenario 2, it is assumed that the Balloon Payments due on the
380 Madison Loan and the Whitehall
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Pool Loan are paid on the respective maturity dates for such Mortgage Loans
and that all other Mortgage Loans are prepaid in full on the first Due Dates
on which prepayments in full can be made without payment of any Prepayment
Premium. In the case of Scenario 3, it is assumed that the Balloon Payments
due on the 380 Madison Loan and the Whitehall Pool Loan are paid on the
respective maturity dates for such Mortgage Loans, that all other Mortgage
Loans receive prepayments of principal after their respective Anticipated
Repayment Dates in an amount equal to 80% of assumed net cash flow without
payment of any Prepayment Premium until the earlier of (a) 5 years after the
Anticipated Repayment Date, and thereupon any remaining unpaid principal
balance is paid in full or (b) the date on which the unpaid principal balance
is paid in full, and that no Excess Interest is paid on any Mortgage Loan or
Component. In the case of Scenario 4, it is assumed that all of the Balloon
Payments due on the 380 Madison Loan and the Whitehall Pool Loan are paid on
the respective maturity dates for such Mortgage Loans, that all other
Mortgage Loans receive prepayments of principal after their respective
Anticipated Repayment Dates in an amount equal to 80% of assumed net cash
flow without payment of any Prepayment Premium until the earlier of (a) 5
years after the Anticipated Repayment Date, and thereupon any remaining
unpaid principal balance is paid in full or (b) the date on which the unpaid
principal balance is paid in full, and that Excess Interest is paid, on those
Mortgage Loans or Components that accrue Excess Interest, from assumed net
cash flow commencing on and after the unpaid principal balance of the
applicable Mortgage Loan or Component has been paid in full. In the case of
Scenario 5, it is assumed that the Balloon Payments due on the 380 Madison
Loan and the Whitehall Pool Loan are paid on the respective maturity dates
for such Mortgage Loans, that all other Mortgage Loans receive prepayments of
principal after their respective Anticipated Repayment Dates in an amount
equal to 120% of assumed net cash flow without payment of any Prepayment
Premium until the earlier of (a) 5 years after the Anticipated Repayment
Date, and thereupon any remaining unpaid principal balance is paid in full or
(b) the date on which the unpaid principal balance is paid in full, and that
no Excess Interest is paid on any Mortgage Loan or Component. In the case of
Scenario 6, it is assumed that all of the Balloon Payments due on the 380
Madison Loan and the Whitehall Pool Loan are paid on the respective maturity
dates for such Mortgage Loans, that all other Mortgage Loans receive
prepayments of principal after their respective Anticipated Repayment Dates
in an amount equal to 120% of assumed net cash flow without payment of any
Prepayment Premium until the earlier of (a) 5 years after the Anticipated
Repayment Date, and thereupon any remaining unpaid principal balance is paid
in full or (b) the date on which the unpaid principal balance is paid in
full, and that Excess Interest is paid, on those Mortgage Loans or Components
that accrue Excess Interest, from assumed net cash flow commencing on and
after the unpaid principal balance of the applicable Mortgage Loan or
Component has been paid in full. Scenarios 1, 2, 3, 4, 5 and 6 are
collectively referred to herein as the "Scenarios".
For purposes of these tables, "modified duration" has been calculated
using the modified Macaulay Duration as specified in the "PSA Standard
Formulas". The Macaulay Duration is calculated as the present value weighted
average time to receive future payments of principal and interest, and the
PSA Standards Formula modified duration is calculated by dividing the
Macaulay Duration by the appropriate semi-annual compounding factor. The
modified duration shown in the following tables, in each case, relates to the
yield shown immediately above such modified duration number. Purchase prices
are expressed in 32nds (i.e. 101-16 means 101 16/32%).
CLASS A-1
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
99-16...................... 32 42 43 111 38 76 Discount Margin (bps)
99-24...................... 27 32 40 108 34 73 Discount Margin (bps)
100-00...................... 23 23 37 105 31 69 Discount Margin (bps)
100-08...................... 19 14 34 102 27 66 Discount Margin (bps)
100-16...................... 14 5 31 99 24 62 Discount Margin (bps)
Weighted Average
Life (years) .............. 6.9 2.9 11.7 11.7 8.9 8.9
First Principal
Distribution Date ......... 7/04 7/00 8/04 8/04 8/04 8/04
Last Principal Distribution
Date ...................... 7/04 7/00 4/12 4/12 7/10 7/10
</TABLE>
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<PAGE>
CLASS A-2A
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- ---------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
100-16....................... 6.774% 6.774% 6.774% 6.774% 6.774% 6.774%
101-00....................... 6.593 6.593 6.593 6.593 6.593 6.593
101-16....................... 6.414 6.414 6.414 6.414 6.414 6.414
Modified duration (years) .. 2.75 2.75 2.75 2.75 2.75 2.75
102-00....................... 6.235% 6.235% 6.235% 6.235% 6.235% 6.235%
102-16....................... 6.058 6.058 6.058 6.058 6.058 6.058
Weighted Average Life
(years) .................... 3.2 3.2 3.2 3.2 3.2 3.2
First Principal Distribution
Date........................ 09/97 09/97 09/97 09/97 09/97 09/97
Last Principal Distribution
Date ....................... 12/03 11/03 12/03 12/03 12/03 12/03
</TABLE>
CLASS A-2B
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- ---------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
100-16....................... 6.813% 6.812% 6.857% 7.512% 6.849% 7.435%
101-00....................... 6.714 6.711 6.787 7.443 6.774 7.362
101-16....................... 6.615 6.612 6.718 7.374 6.700 7.288
Modified duration (years) .. 5.00 4.95 7.13 7.20 6.64 6.73
102-00....................... 6.517% 6.513% 6.649% 7.306% 6.626% 7.215%
102-16....................... 6.420 6.414 6.581 7.239 6.553 7.143
Weighted Average Life
(years) .................... 6.3 6.2 10.2 10.2 9.2 9.2
First Principal Distribution
Date ....................... 12/03 11/03 12/03 12/03 12/03 12/03
Last Principal Distribution
Date ....................... 12/03 12/03 12/08 12/08 08/08 08/08
</TABLE>
CLASS A-2C
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
100-16...................... 6.909% 6.909% 6.935% 7.544% 6.934% 7.448%
101-00...................... 6.826 6.826 6.870 7.479 6.869 7.383
101-16...................... 6.744 6.744 6.806 7.415 6.803 7.318
Modified duration (years) . 6.00 6.00 7.65 7.69 7.57 7.61
102-00...................... 6.663% 6.662% 6.742% 7.351% 6.739% 7.254%
102-16...................... 6.582 6.581 6.678 7.288 6.674 7.190
Weighted Average Life
(years) ................... 8.1 8.1 11.3 11.3 11.1 11.1
First Principal
Distribution Date ......... 12/03 12/03 12/08 12/08 08/08 08/08
Last Principal Distribution
Date ...................... 04/07 02/07 12/08 12/08 11/08 11/08
</TABLE>
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<PAGE>
CLASS A-2D
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
100-16...................... 6.934% 6.933% 6.954% 7.421% 6.948% 7.334%
101-00...................... 6.862 6.860 6.895 7.362 6.885 7.272
101-16...................... 6.790 6.787 6.836 7.304 6.822 7.210
Modified duration (years) . 6.86 6.78 8.39 8.50 7.84 7.95
102-00...................... 6.719% 6.715% 6.778% 7.247% 6.759% 7.148%
102-16...................... 6.648 6.644 6.720 7.189 6.697 7.087
Weighted Average
Life (years) .............. 9.7 9.5 13.2 13.2 11.8 11.8
First Principal
Distribution Date ......... 04/07 02/07 12/08 12/08 11/08 11/08
Last Principal Distribution
Date ...................... 04/07 04/07 04/12 04/12 07/10 07/10
</TABLE>
CLASS B
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
100-16...................... 6.991% 6.990% 7.017% 7.453% 7.015% 7.370%
101-00...................... 6.919 6.917 6.962 7.398 6.957 7.312
101-16...................... 6.847 6.845 6.906 7.344 6.899 7.255
Modified duration (years) . 6.86 6.83 8.94 9.01 8.51 8.59
102-00...................... 6.775% 6.773% 6.852% 7.289% 6.841% 7.197%
102-16...................... 6.704 6.702 6.797 7.235 6.784 7.141
Weighted Average
Life (years) .............. 9.7 9.7 14.7 14.7 13.5 13.5
First Principal
Distribution Date ......... 04/07 04/07 04/12 04/12 07/10 07/10
Last Principal Distribution
Date ...................... 05/07 04/07 04/12 04/12 09/11 09/11
</TABLE>
CLASS C
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
100-16...................... 7.030% 7.028% 7.058% 7.493% 7.058% 7.402%
101-00...................... 6.958 6.956 7.002 7.438 7.002 7.345
101-16...................... 6.887 6.885 6.947 7.383 6.945 7.289
Modified duration (years) . 6.92 6.91 8.92 8.99 8.76 8.82
102-00...................... 6.816% 6.814% 6.892% 7.328% 6.889% 7.234%
102-16...................... 6.746 6.743 6.837 7.274 6.834 7.179
Weighted Average
Life (years) .............. 9.9 9.9 14.7 14.7 14.2 14.2
First Principal
Distribution Date ......... 05/07 04/07 04/12 04/12 09/11 09/11
Last Principal Distribution
Date ...................... 07/07 07/07 04/12 04/12 12/11 12/11
</TABLE>
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<PAGE>
CLASS D
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
100-16...................... 7.050% 7.047% 7.077% 7.509% 7.080% 7.418%
101-00...................... 6.978 6.976 7.021 7.454 7.024 7.362
101-16...................... 6.907 6.905 6.966 7.399 6.968 7.307
Modified duration (years) . 6.94 6.94 8.95 9.02 8.88 8.94
102-00...................... 6.837% 6.834% 6.912% 7.345% 6.913% 7.252%
102-16...................... 6.767 6.764 6.857 7.291 6.858 7.198
Weighted Average
Life (years) .............. 9.9 9.9 14.8 14.8 14.6 14.6
First Principal
Distribution Date ......... 07/07 07/07 04/12 04/12 12/11 12/11
Last Principal Distribution
Date ...................... 07/07 07/07 07/12 07/12 04/12 04/12
</TABLE>
CLASS E
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
100-16...................... 7.121% 7.119% 7.147% 7.575% 7.152% 7.487%
101-00...................... 7.050 7.047 7.092 7.520 7.096 7.431
101-16...................... 6.978 6.976 7.037 7.466 7.040 7.376
Modified duration (years) . 6.91 6.91 8.95 9.02 8.87 8.92
102-00...................... 6.907% 6.905% 6.982% 7.411% 6.985% 7.321%
102-16...................... 6.837 6.834 6.928 7.357 6.930 7.266
Weighted Average
Life (years) .............. 9.9 9.9 14.9 14.9 14.7 14.7
First Principal
Distribution Date ......... 07/07 07/07 07/12 07/12 04/12 04/12
Last Principal Distribution
Date ...................... 07/07 07/07 07/12 07/12 04/12 04/12
</TABLE>
CLASS F
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
100-16...................... 7.193% 7.190% 7.219% 7.644% 7.223% 7.555%
101-00...................... 7.121 7.118 7.163 7.589 7.167 7.499
101-16...................... 7.049 7.047 7.108 7.534 7.111 7.444
Modified duration (years) . 6.89 6.89 8.91 8.98 8.85 8.91
102-00...................... 6.978% 6.976% 7.053% 7.480% 7.056% 7.389%
102-16...................... 6.908 6.905 6.998 7.426 7.001 7.334
Weighted Average
Life (years) .............. 9.9 9.9 14.9 14.9 14.8 14.8
First Principal
Distribution Date ......... 07/07 07/07 07/12 07/12 04/12 04/12
Last Principal Distribution
Date ...................... 07/07 07/07 07/12 07/12 07/12 07/12
</TABLE>
S-222
<PAGE>
CLASS G
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE (%) SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
100-16...................... 7.690% 7.688% 7.702% 7.702% 7.705% 7.705%
101-00...................... 7.633 7.631 7.647 7.647 7.650 7.650
101-16...................... 7.577 7.575 7.592 7.592 7.596 7.596
Modified duration (years) . 8.71 8.72 9.06 9.06 9.07 9.07
102-00...................... 7.521% 7.519% 7.538% 7.538% 7.542% 7.542%
102-16...................... 7.465 7.463 7.485 7.485 7.488 7.488
Weighted Average
Life (years) .............. 15.4 15.4 16.4 16.4 16.4 16.4
First Principal
Distribution Date ......... 07/07 07/07 07/12 07/12 07/12 07/12
Last Principal Distribution
Date ...................... 07/14 07/14 07/14 07/14 07/14 07/14
</TABLE>
The following tables indicate the assumed purchase price (before adding
accrued interest), expressed as a percentage of the Class X-1A Notional
Amount, and the hypothetical pre-tax yield to maturity on the Class X-1A
Certificates, stated on a corporate bond equivalent basis, assuming that AAPT
LIBOR Components prepay in full (i) with the payment of the applicable fixed
prepayment penalty, and (ii) without the payment of any prepayment penalty.
CLASS X-1A
ASSUMING PREPAYMENT PENALTY*
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE OCTOBER 1997 JULY 1998 JULY 1999 JULY 2000
- ---------------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1-19+ 86.722% 15.974% 9.900% 9.120%
1-20 78.381 14.646 9.115 8.428
1-20+ 70.358 13.340 8.342 7.746
1-21 62.639 12.056 7.581 7.076
1-21+ 55.208 10.792 6.832 6.416
</TABLE>
------------
* Assumes (i) the AAPT LIBOR Components prepay in full in the indicated
month and (ii) prepayment penalties required with respect to the AAPT
LIBOR Components are paid.
CLASS X-1A
ASSUMING NO PREPAYMENT PENALTY*
<TABLE>
<CAPTION>
ASSUMED PURCHASE
PRICE OCTOBER 1997 JULY 1998 JULY 1999 JULY 2000
- --------------------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1-19+ -199.990% -120.377% -26.104% 9.120%
1-20 -199.991 -120.987 -26.867 8.428
1-20+ -199.991 -121.586 -27.618 7.746
1-21 -199.991 -122.174 -28.357 7.076
1-21+ -199.992 -122.751 -29.085 6.416
</TABLE>
------------
* Assumes (i) the AAPT LIBOR Components prepay in full in the indicated
month and (ii) no prepayment penalties are paid.
The following tables indicate the assumed purchase price (before adding
accrued interest), expressed as a percentage of the Class X-2 Notional
Amount, and the hypothetical pre-tax yield to maturity on the Class X-2
Certificates, stated on a corporate bond equivalent basis, based on certain
hypothetical scenarios. The tables have been prepared based on the Mortgage
Loan Assumptions.
S-223
<PAGE>
CLASS X-2
ASSUMING 0% DEFAULTS
<TABLE>
<CAPTION>
ASSUMED PURCHASE SCENARIOS 3 & SCENARIOS 5 &
PRICE SCENARIO 1 SCENARIO 2 4 6
- --------------------- ------------ ----------- -------------- --------------
<S> <C> <C> <C> <C>
5-15 7.631% 7.470% 12.760% 11.945%
5-15+ 7.552 7.392 12.692 11.876
5-16 7.474 7.313 12.625 11.807
5-16+ 7.396 7.235 12.559 11.738
5-17 7.319 7.157 12.493 11.670
</TABLE>
CLASS X-2
ASSUMING 50% DEFAULTS*
<TABLE>
<CAPTION>
ASSUMED PURCHASE
PRICE AUGUST 2002 AUGUST 2007
- --------------------- ------------- -------------
<S> <C> <C>
5-15 7.603% 7.599%
5-15+ 7.525 7.520
5-16 7.447 7.442
5-16+ 7.369 7.364
5-17 7.292 7.286
</TABLE>
------------
* Assumes (i) the assumptions stated under Scenario 1, (ii) a principal
balance of Mortgage Loans equal to 50% of the Certificate Principal
Amount of the Class H Certificates ($17,104,499.50) defaults in the
indicated month (which defaulted amount is allocated to all then
outstanding Mortgage Loans pro rata), and (iii) there is a 50% loss
severity and 0 months to liquidation.
CLASS X-2
ASSUMING 50% DEFAULTS*
<TABLE>
<CAPTION>
ASSUMED PURCHASE
PRICE AUGUST 2002 AUGUST 2007
- --------------------- ------------- -------------
<S> <C> <C>
5-15 7.797% 7.634%
5-15+ 7.719 7.556
5-16 7.641 7.478
5-16+ 7.564 7.400
5-17 7.487 7.322
</TABLE>
------------
* Assumes (i) the assumptions stated under Scenario 1, (ii) a principal
balance of Mortgage Loans equal to 50% of the Certificate Principal
Amount of the Class H Certificates ($17,104,499.50) defaults in the
indicated month (which defaulted amount is allocated to all then
outstanding Mortgage Loans pro rata), and (iii) there is a 100% loss
severity and 0 months to liquidation.
CLASS X-2
ASSUMING 100% DEFAULTS*
<TABLE>
<CAPTION>
ASSUMED PURCHASE
PRICE AUGUST 2002 AUGUST 2007
- --------------------- ------------- -------------
<S> <C> <C>
5-15 7.589% 7.566%
5-15+ 7.511 7.487
5-16 7.433 7.409
5-16+ 7.356 7.331
5-17 7.279 7.253
</TABLE>
------------
* Assumes (i) the assumptions stated under Scenario 1, (ii) a principal
balance of Mortgage Loans equal to 100% of the Certificate Principal
Amount of the Class H Certificates ($34,208,999.00) defaults in the
indicated month (which defaulted amount is allocated to all then
outstanding Mortgage Loans pro rata), and (iii) there is a 50% loss
severity and 0 months to liquidation.
S-224
<PAGE>
CLASS X-2
ASSUMING 100% DEFAULTS*
<TABLE>
<CAPTION>
ASSUMED PURCHASE
PRICE AUGUST 2002 AUGUST 2007
- --------------------- ------------- -------------
<S> <C> <C>
5-15 8.036% 7.638%
5-15+ 7.959 7.559
5-16 7.882 7.481
5-16+ 7.806 7.403
5-17 7.730 7.326
</TABLE>
------------
* Assumes (i) the assumptions stated under Scenario 1, (ii) a principal
balance of Mortgage Loans equal to 100% of the Certificate Principal
Amount of the Class H Certificates ($34,208,999.00) defaults in the
indicated month (which defaulted amount is allocated to all then
outstanding Mortgage Loans pro rata), and (iii) there is a 100% loss
severity and 0 months to liquidation.
CLASS X-2
ASSUMING 200% DEFAULTS*
<TABLE>
<CAPTION>
ASSUMED PURCHASE
PRICE AUGUST 2002 AUGUST 2007
- --------------------- ------------- -------------
<S> <C> <C>
5-15 7.621% 7.501%
5-15+ 7.544 7.421
5-16 7.467 7.342
5-16+ 7.390 7.264
5-17 7.314 7.186
</TABLE>
------------
* Assumes (i) the assumptions stated under Scenario 1, (ii) a principal
balance of Mortgage Loans equal to 200% of the Certificate Principal
Amount of the Class H Certificates ($68,417,998.00) defaults in the
indicated month (which defaulted amount is allocated to all then
outstanding Mortgage Loans pro rata), and (iii) there is a 50% loss
severity and 0 months to liquidation.
It is highly unlikely that principal of the Mortgage Loans will be repaid
consistent with the assumptions underlying any one of the Scenarios. The
Mortgage Loans will not have all of the characteristics assumed for purposes
of the Scenarios. Yield and discounted margin will be affected by prepayment
rates, Balloon Payment extensions and, primarily in the case of the Class A-1
and Class X-2 Certificates (to the extent of any Group 1 Difference Amounts),
LIBOR levels that actually occur during the life of the Offered Certificates
and, in the case of the Class A-1 Certificates, the effect of the maximum
Pass-Through Rate on the Class A-1 Certificates after the Distribution Date
in July 2004 all of which may differ, and may differ significantly, from the
Modeling Assumptions. There can be no assurance that the pre-tax yields or
discounted margins, as applicable, on the Offered Certificates will
correspond to any of the pre-tax yields or discounted margins, as applicable,
shown herein or that the aggregate purchase prices of the Offered
Certificates will be as assumed. Investors must make their own decisions as
to the appropriate prepayment assumptions to be used in deciding whether to
purchase the Offered Certificates.
RATED FINAL DISTRIBUTION DATE
The "Rated Final Distribution Date" is the Distribution Date occurring
three years after the latest maturity date of any Mortgage Loan. 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 Principal
Amount of each Class of Offered Certificates will be reduced to zero
significantly earlier than the Rated Final Distribution Date. However,
delinquencies on Mortgage Loans could result in final distributions in
reduction of the Certificate Principal Amount of one or more Classes after
the Rated Final Distribution Date of such Class or Classes.
S-225
<PAGE>
WEIGHTED AVERAGE LIFE OF OFFERED 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
Principal Amount. The weighted average lives of the Offered 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, voluntary or involuntary prepayments or liquidations.
The weighted average lives of the Offered Certificates may also be
affected to the extent that additional distributions in reduction of the
Certificate Principal Amount of such Certificates occur as a result of the
repurchase or purchase of Mortgage Loans from the Trust Fund as described
under "The Pooling Agreement--Representations and Warranties; Repurchase" or
"--Optional Termination; Optional Mortgage Loan Purchase" 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. The tables of "Percentage of Initial Certificate Principal Amount
Outstanding For Each Designated Scenario" set forth below indicate the
weighted average life of each Class of Offered Certificates and set forth the
percentage of the initial Certificate Principal Amount of such Offered
Certificates that would be outstanding after each of the dates shown based on
the assumptions for each of the designated Scenarios described above under
"--Yield on the Offered Certificates." The tables have also been prepared on
the basis of the Mortgage Loan Assumptions described under "--Yield on the
Offered Certificates." The Mortgage Loan Assumptions made in preparing the
previous and following tables are expected to vary, and may vary
significantly, from the actual performance of the Mortgage Loans. It is
highly unlikely that principal of the Mortgage Loans will be repaid
consistent with the 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.
S-226
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-1
-------------------------------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4 SCENARIOS 5 AND 6
- ------------------------------------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Initial Percent....................... 100% 100% 100% 100%
August 13, 1998....................... 100% 100% 100% 100%
August 13, 1999....................... 100% 100% 100% 100%
August 13, 2000....................... 100% 0% 100% 100%
August 13, 2001....................... 100% 0% 100% 100%
August 13, 2002....................... 100% 0% 100% 100%
August 13, 2003....................... 100% 0% 100% 100%
August 13, 2004....................... 0% 0% 99% 98%
August 13, 2005....................... 0% 0% 87% 70%
August 13, 2006....................... 0% 0% 74% 41%
August 13, 2007....................... 0% 0% 61% 11%
August 13, 2008....................... 0% 0% 56% 8%
August 13, 2009....................... 0% 0% 51% 5%
August 13, 2010....................... 0% 0% 45% 0%
August 13, 2011....................... 0% 0% 39% 0%
August 13, 2012....................... 0% 0% 0% 0%
Weighted Average Life (in years) ..... 6.9 2.9 11.7 8.9
First Principal Distribution Date .... 7/04 7/00 8/04 8/04
Last Principal Distribution Date ..... 7/04 7/00 4/12 7/10
</TABLE>
- ------------
(1) Assuming that the 13th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-1 Certificates is determined
by (i) multiplying the amount of each distribution or allocation in
reduction of Certificate Principal Amount 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 or allocations in reduction of Certificate
Principal Amount referred to in clause (i).
S-227
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-2A
-------------------------------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4 SCENARIOS 5 AND 6
- ------------------------------------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Initial Percent....................... 100% 100% 100% 100%
August 13, 1998....................... 93% 93% 93% 93%
August 13, 1999....................... 86% 86% 86% 86%
August 13, 2000....................... 79% 79% 79% 79%
August 13, 2001....................... 18% 18% 18% 18%
August 13, 2002....................... 11% 11% 11% 11%
August 13, 2003....................... 2% 2% 2% 2%
August 13, 2004....................... 0% 0% 0% 0%
August 13, 2005....................... 0% 0% 0% 0%
Weighted Average Life (in years) ..... 3.2 3.2 3.2 3.2
First Principal Distribution Date .... 9/97 9/97 9/97 9/97
Last Principal Distribution Date ..... 12/03 11/03 12/03 12/03
</TABLE>
- ------------
(1) Assuming that the 13th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-2A Certificates is determined
by (i) multiplying the amount of each distribution or allocation in
reduction of Certificate Principal Amount 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 or allocations in reduction of Certificate
Principal Amount referred to in clause (i).
S-228
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-2B
-------------------------------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4 SCENARIOS 5 AND 6
- ------------------------------------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Initial Percent....................... 100% 100% 100% 100%
August 13, 1998....................... 100% 100% 100% 100%
August 13, 1999....................... 100% 100% 100% 100%
August 13, 2000....................... 100% 100% 100% 100%
August 13, 2001....................... 100% 100% 100% 100%
August 13, 2002....................... 100% 100% 100% 100%
August 13, 2003....................... 100% 100% 100% 100%
August 13, 2004....................... 0% 0% 95% 91%
August 13, 2005....................... 0% 0% 87% 76%
August 13, 2006....................... 0% 0% 79% 61%
August 13, 2007....................... 0% 0% 68% 39%
August 13, 2008....................... 0% 0% 51% 0%
August 13, 2009....................... 0% 0% 0% 0%
Weighted Average Life (in years) ..... 6.3 6.2 10.2 9.2
First Principal Distribution Date .... 12/03 11/03 12/03 12/03
Last Principal Distribution Date ..... 12/03 12/03 12/08 8/08
</TABLE>
- ------------
(1) Assuming that the 13th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-2B Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount 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 Principal Amount referred to in clause (i).
S-229
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-2C
-------------------------------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4 SCENARIOS 5 AND 6
- ------------------------------------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Initial Percent....................... 100% 100% 100% 100%
August 13, 1998....................... 100% 100% 100% 100%
August 13, 1999....................... 100% 100% 100% 100%
August 13, 2000....................... 100% 100% 100% 100%
August 13, 2001....................... 100% 100% 100% 100%
August 13, 2002....................... 100% 100% 100% 100%
August 13, 2003....................... 100% 100% 100% 100%
August 13, 2004....................... 80% 80% 100% 100%
August 13, 2005....................... 52% 52% 100% 100%
August 13, 2006....................... 22% 22% 100% 100%
August 13, 2007....................... 0% 0% 100% 100%
August 13, 2008....................... 0% 0% 100% 86%
August 13, 2009....................... 0% 0% 0% 0%
Weighted Average Life (in years) ..... 8.1 8.1 11.3 11.1
First Principal Distribution Date .... 12/03 12/03 12/08 8/08
Last Principal Distribution Date ..... 4/07 2/07 12/08 11/08
</TABLE>
- ------------
(1) Assuming that the 13th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-2C Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount 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 Principal Amount referred to in clause (i).
S-230
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-2D
-------------------------------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4 SCENARIOS 5 AND 6
- ------------------------------------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Initial Percent....................... 100% 100% 100% 100%
August 13, 1998....................... 100% 100% 100% 100%
August 13, 1999....................... 100% 100% 100% 100%
August 13, 2000....................... 100% 100% 100% 100%
August 13, 2001....................... 100% 100% 100% 100%
August 13, 2002....................... 100% 100% 100% 100%
August 13, 2003....................... 100% 100% 100% 100%
August 13, 2004....................... 100% 100% 100% 100%
August 13, 2005....................... 100% 100% 100% 100%
August 13, 2006....................... 100% 100% 100% 100%
August 13, 2007....................... 0% 0% 100% 100%
August 13, 2008....................... 0% 0% 100% 100%
August 13, 2009....................... 0% 0% 70% 31%
August 13, 2010....................... 0% 0% 55% 0%
August 13, 2011....................... 0% 0% 38% 0%
August 13, 2012....................... 0% 0% 0% 0%
Weighted Average Life (in years) ..... 9.7 9.5 13.2 11.8
First Principal Distribution Date .... 4/07 2/07 12/08 11/08
Last Principal Distribution Date ..... 4/07 4/07 4/12 7/10
</TABLE>
- ------------
(1) Assuming that the 13th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-2D Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount 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 Principal Amount referred to in clause (i).
S-231
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4 SCENARIOS 5 AND 6
- ------------------------------------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Initial Percent....................... 100% 100% 100% 100%
August 13, 1998....................... 100% 100% 100% 100%
August 13, 1999....................... 100% 100% 100% 100%
August 13, 2000....................... 100% 100% 100% 100%
August 13, 2001....................... 100% 100% 100% 100%
August 13, 2002....................... 100% 100% 100% 100%
August 13, 2003....................... 100% 100% 100% 100%
August 13, 2004....................... 100% 100% 100% 100%
August 13, 2005....................... 100% 100% 100% 100%
August 13, 2006....................... 100% 100% 100% 100%
August 13, 2007....................... 0% 0% 100% 100%
August 13, 2008....................... 0% 0% 100% 100%
August 13, 2009....................... 0% 0% 100% 100%
August 13, 2010....................... 0% 0% 100% 91%
August 13, 2011....................... 0% 0% 100% 5%
August 13, 2012....................... 0% 0% 0% 0%
Weighted Average Life (in years) ..... 9.7 9.7 14.7 13.5
First Principal Distribution Date .... 4/07 4/07 4/12 7/10
Last Principal Distribution Date ..... 5/07 4/07 4/12 9/11
</TABLE>
- ------------
(1) Assuming that the 13th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class B Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount 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 Principal Amount referred to in clause (i).
S-232
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4 SCENARIOS 5 AND 6
- ------------------------------------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Initial Percent....................... 100% 100% 100% 100%
August 13, 1998....................... 100% 100% 100% 100%
August 13, 1999....................... 100% 100% 100% 100%
August 13, 2000....................... 100% 100% 100% 100%
August 13, 2001....................... 100% 100% 100% 100%
August 13, 2002....................... 100% 100% 100% 100%
August 13, 2003....................... 100% 100% 100% 100%
August 13, 2004....................... 100% 100% 100% 100%
August 13, 2005....................... 100% 100% 100% 100%
August 13, 2006....................... 100% 100% 100% 100%
August 13, 2007....................... 0% 0% 100% 100%
August 13, 2008....................... 0% 0% 100% 100%
August 13, 2009....................... 0% 0% 100% 100%
August 13, 2010....................... 0% 0% 100% 100%
August 13, 2011....................... 0% 0% 100% 100%
August 13, 2012....................... 0% 0% 0% 0%
Weighted Average Life (in years) ..... 9.9 9.9 14.7 14.2
First Principal Distribution Date .... 5/07 4/07 4/12 9/11
Last Principal Distribution Date ..... 7/07 7/07 4/12 12/11
</TABLE>
- ------------
(1) Assuming that the 13th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class C Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount 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 Principal Amount referred to in clause (i).
S-233
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS D
-------------------------------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4 SCENARIOS 5 AND 6
- ------------------------------------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Initial Percent....................... 100% 100% 100% 100%
August 13, 1998....................... 100% 100% 100% 100%
August 13, 1999....................... 100% 100% 100% 100%
August 13, 2000....................... 100% 100% 100% 100%
August 13, 2001....................... 100% 100% 100% 100%
August 13, 2002....................... 100% 100% 100% 100%
August 13, 2003....................... 100% 100% 100% 100%
August 13, 2004....................... 100% 100% 100% 100%
August 13, 2005....................... 100% 100% 100% 100%
August 13, 2006....................... 100% 100% 100% 100%
August 13, 2007....................... 0% 0% 100% 100%
August 13, 2008....................... 0% 0% 100% 100%
August 13, 2009....................... 0% 0% 100% 100%
August 13, 2010....................... 0% 0% 100% 100%
August 13, 2011....................... 0% 0% 100% 100%
August 13, 2012....................... 0% 0% 0% 0%
Weighted Average Life (in years) ..... 9.9 9.9 14.8 14.6
First Principal Distribution Date .... 7/07 7/07 4/12 12/11
Last Principal Distribution Date ..... 7/07 7/07 7/12 4/12
</TABLE>
- ------------
(1) Assuming that the 13th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class D Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount 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 Principal Amount referred to in clause (i).
S-234
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS E
-------------------------------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4 SCENARIOS 5 AND 6
- ------------------------------------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Initial Percent....................... 100% 100% 100% 100%
August 13, 1998....................... 100% 100% 100% 100%
August 13, 1999....................... 100% 100% 100% 100%
August 13, 2000....................... 100% 100% 100% 100%
August 13, 2001....................... 100% 100% 100% 100%
August 13, 2002....................... 100% 100% 100% 100%
August 13, 2003....................... 100% 100% 100% 100%
August 13, 2004....................... 100% 100% 100% 100%
August 13, 2005....................... 100% 100% 100% 100%
August 13, 2006....................... 100% 100% 100% 100%
August 13, 2007....................... 0% 0% 100% 100%
August 13, 2008....................... 0% 0% 100% 100%
August 13, 2009....................... 0% 0% 100% 100%
August 13, 2010....................... 0% 0% 100% 100%
August 13, 2011....................... 0% 0% 100% 100%
August 13, 2012....................... 0% 0% 0% 0%
Weighted Average Life (in years) ..... 9.9 9.9 14.9 14.7
First Principal Distribution Date .... 7/07 7/07 7/12 4/12
Last Principal Distribution Date ..... 7/07 7/07 7/12 4/12
</TABLE>
- ------------
(1) Assuming that the 13th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class E Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount 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 Principal Amount referred to in clause (i).
S-235
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS F
-------------------------------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4 SCENARIOS 5 AND 6
- ------------------------------------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Initial Percent....................... 100% 100% 100% 100%
August 13, 1998....................... 100% 100% 100% 100%
August 13, 1999....................... 100% 100% 100% 100%
August 13, 2000....................... 100% 100% 100% 100%
August 13, 2001....................... 100% 100% 100% 100%
August 13, 2002....................... 100% 100% 100% 100%
August 13, 2003....................... 100% 100% 100% 100%
August 13, 2004....................... 100% 100% 100% 100%
August 13, 2005....................... 100% 100% 100% 100%
August 13, 2006....................... 100% 100% 100% 100%
August 13, 2007....................... 0% 0% 100% 100%
August 13, 2008....................... 0% 0% 100% 100%
August 13, 2009....................... 0% 0% 100% 100%
August 13, 2010....................... 0% 0% 100% 100%
August 13, 2011....................... 0% 0% 100% 100%
August 13, 2012....................... 0% 0% 0% 0%
Weighted Average Life (in years) ..... 9.9 9.9 14.9 14.8
First Principal Distribution Date .... 7/07 7/07 7/12 4/12
Last Principal Distribution Date ..... 7/07 7/07 7/12 7/12
</TABLE>
- ------------
(1) Assuming that the 13th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class F Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount 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 Principal Amount referred to in clause (i).
S-236
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS G
-------------------------------------------------------------------------
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIOS 3 AND 4 SCENARIOS 5 AND 6
- ------------------------------------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Initial Percent....................... 100% 100% 100% 100%
August 13, 1998....................... 100% 100% 100% 100%
August 13, 1999....................... 100% 100% 100% 100%
August 13, 2000....................... 100% 100% 100% 100%
August 13, 2001....................... 100% 100% 100% 100%
August 13, 2002....................... 100% 100% 100% 100%
August 13, 2003....................... 100% 100% 100% 100%
August 13, 2004....................... 100% 100% 100% 100%
August 13, 2005....................... 100% 100% 100% 100%
August 13, 2006....................... 100% 100% 100% 100%
August 13, 2007....................... 86% 86% 100% 100%
August 13, 2008....................... 84% 84% 100% 100%
August 13, 2009....................... 82% 82% 100% 100%
August 13, 2010....................... 80% 80% 100% 100%
August 13, 2011....................... 77% 77% 100% 100%
August 13, 2012....................... 75% 75% 75% 75%
August 13, 2013....................... 72% 72% 72% 72%
August 13, 2014....................... 0% 0% 0% 0%
Weighted Average Life (in years) ..... 15.4 15.4 16.4 16.4
First Principal Distribution Date .... 7/07 7/07 7/12 7/12
Last Principal Distribution Date ..... 7/14 7/14 7/14 7/14
</TABLE>
- ------------
(1) Assuming that the 13th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class G Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Principal Amount 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 Principal Amount referred to in clause (i).
S-237
<PAGE>
THE POOLING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of August 11, 1997 (the "Pooling Agreement"), by and
among the Seller, the Master Servicer, each Special Servicer, the Trustee and
the Fiscal Agent.
Reference is made to the Prospectus for important information in addition
to that set forth herein regarding the terms of the Pooling Agreement and
terms and conditions of the Offered Certificates. The Seller will provide to
a prospective or actual holder of an Offered Certificate without charge, upon
written request, a copy (without exhibits) of the Pooling Agreement. Requests
should be addressed to GS Mortgage Securities Corporation II, 85 Broad
Street, New York, New York 10004; Attention: J. Theodore Borter.
ASSIGNMENT OF THE MORTGAGE LOANS
On the Closing Date, the Seller will sell, transfer or otherwise convey,
assign or cause the assignment of the Mortgage Loans and the Montehiedra
Partner Loans, without recourse, to the Trustee for the benefit of the
holders of Certificates. On or prior to the Closing Date, the Seller will
cause to be delivered to the Trustee, with respect to each Mortgage Loan (i)
the original Note endorsed without recourse to the order of the Trustee, as
trustee; (ii) the original Mortgage(s) or counterpart(s) thereof; (iii) the
assignment(s) of the Mortgage(s) in recordable form in favor of the Trustee;
(iv) to the extent not contained in the Mortgages, the original assignment of
leases and rents or counterpart thereof; (v) if applicable, the original
assignment of assignment of leases and rents to the Trustee; (vi) where
applicable, a copy of the UCC-1 financing statements, if any, including UCC-3
assignments; (vii) the original lender's title insurance policy (or marked
commitments to insure); and (viii) originals or copies of environmental
indemnities, collateral assignments of management agreements and such other
loan documents as are in the possession of the Seller, including original
assignments thereof to the Trustee, unless the Seller is delayed in making
such delivery by reason of the fact that such documents shall not have been
returned by the appropriate recording office in which case it shall notify
the Trustee in writing of such delay and shall deliver such documents to the
Trustee promptly upon the Seller's receipt thereof.
The Trustee, or any custodian for the Trustee, will hold such documents in
trust for the benefit of the holders of Certificates. The Trustee is
obligated to review such documents for each Mortgage Loan (in certain cases
only to the extent such documents are identified by the Seller as being part
of the related mortgage file) within 45 days after the later of delivery or
execution of the Pooling Agreement and report any missing documents or
certain types of defects therein to the Seller and the applicable Responsible
Party.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
In the Pooling Agreement, the Seller will assign the representations and
warranties made by each Responsible Party in the Loan Sale Agreement and the
GMACCM Responsible Party Agreement to the Trustee for the benefit of
Certificateholders. The representations and warranties to be assigned to the
Trustee for the benefit of the Certificateholders are set forth on Exhibit B
to this Prospectus Supplement.
The Pooling Agreement requires that the Master Servicer, the Special
Servicer or the Trustee notify the applicable Responsible Party and the
Seller upon its becoming aware of any breach of any representation or
warranty with respect to a Mortgage Loan that materially and adversely
affects the value of such Mortgage Loan or the interests of the holders of
the Certificates therein. The GMACCM Responsible Party Agreement provides
that with respect to the Cadillac Fairview Pool Loan, the 380 Madison Loan,
the Whitehall Pool Loan and the Ritz Plaza Loan, upon a breach by GMACCM of
the representations and warranties set forth in the GMACCM Responsible Party
Agreement, that remains uncured and which materially and adversely affects
the value of such Mortgage Loan or the interests of the Certificateholders
therein, GMACCM will repurchase such Mortgage Loan (or, in the case of the
Cadillac Fairview Pool Loan, one or more of the individual loans made to the
Cadillac Fairview Borrowers) at the Repurchase Price. In the Loan Sale
Agreement, GSMC will make the representations and warranties set forth in
Exhibit B with respect to the Mortgage Loans originated by GSMC and with
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<PAGE>
respect to the Mortgage Loans originated by GMACCM, but only to the extent
that GMACCM did not make such representations and warranties in the GMACCM
Responsible Party Agreement, and that upon a breach of any of such
representations and warranties that remains uncured and which materially and
adversely affects the value of such Mortgage Loan, or the interest of the
Certificateholders therein, GSMC will repurchase such Mortgage Loan at the
Repurchase Price. The Pooling Agreement will provide that the Trustee will
enforce the rights of the Trust Fund and Certificateholders under the Loan
Sale Agreement and the GMACCM Responsible Party Agreement.
Notwithstanding the foregoing, the Pooling Agreement will provide that
upon discovery by the Trustee, the Special Servicer or the Master 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 party shall give prompt notice thereof to the Seller and the
applicable Responsible Party and within 90 days after such discovery, if such
breach cannot be cured within such period the applicable Responsible Party
will be required to purchase such Mortgage Loan from the Trust Fund at the
Repurchase Price and if GMACCM is not obligated to repurchase such Mortgage
Loan pursuant to the terms of the GMACCM Responsible Party Agreement, GSMC
will be required to purchase such Mortgage Loan from the Trust Fund at the
Repurchase Price.
The obligations of the Responsible Parties 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 Responsible
Parties with respect to a Mortgage Loan. None of the Seller, the Master
Servicer, the Special Servicer, the Trustee, the Fiscal Agent or any of their
respective affiliates will be obligated to purchase a Mortgage Loan if the
Responsible Parties default on their obligation to repurchase or cure, and no
assurance can be given that the Responsible Parties will fulfill such
obligations. See "The Seller" in the Prospectus. If such obligation is not
met as to a Mortgage Loan that is not a "qualified mortgage," the Upper-Tier
REMIC, Middle-Tier REMIC and Lower-Tier REMIC may be disqualified.
The "Repurchase Price" with respect to a Mortgage Loan (or portion
thereof, in the case of the Cadillac Fairview Pool Loan) shall be equal to
the sum of (i) the outstanding principal balance of such Mortgage Loan (or
relevant portion thereof) as of the date of purchase, (ii) all accrued and
unpaid interest on such Mortgage Loan (or relevant portion thereof) at the
related Mortgage Rate, in effect from time to time, to but not including the
Due Date in the Collection Period of purchase, (iii) all related unreimbursed
Property Advances plus accrued and unpaid interest on related Advances at the
Advance Rate, and unpaid Special Servicing Fees allocable to such Mortgage
Loan (or relevant portion thereof) and (iv) all reasonable out-of-pocket
expenses reasonably incurred by the Master Servicer, the Special Servicer,
the Seller and the Trustee in respect of the breach giving rise to the
repurchase obligation, including any expenses arising out of the enforcement
of the repurchase obligation, which are reimbursable to such parties under
the terms of the Pooling Agreement.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Pooling Agreement requires each of the Master Servicer and the Special
Servicer to service and administer the Mortgage Loans on behalf of the Trust
Fund in the best interests of and for the benefit of all of the holders of
Certificates (as determined by the Master Servicer or the Special Servicer in
the exercise of its good faith and reasonable judgment) in accordance with
applicable law, the terms of the Pooling 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 and diligence as is normal and usual in
its general mortgage servicing and REO Property management activities on
behalf of third parties or on behalf of itself, whichever is higher, with
respect to mortgage loans and REO properties that are comparable to the
Mortgaged Properties, and in each event with a view to the timely collection
of all scheduled payments of principal and interest under the Mortgage Loans
or, if a Mortgage Loan comes into and continues in default and if, in the
good faith and reasonable judgment of the Special Servicer, no satisfactory
arrangements can be made for the collection of the delinquent payments, the
maximization of the recovery on such Mortgage Loan to the Certificateholders
(as a collective whole) on a present value basis (the relevant discounting of
anticipated collection that will be distributable to Certificateholders to be
performed at the related Net Mortgage Rate), but without regard to (i) any
known relationship that the Master Servicer or the Special Servicer, or an
affiliate of the Master Servicer or the Special Servicer, as
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<PAGE>
applicable, may have with the borrowers or any other parties to the Pooling
Agreement; (ii) the ownership of any Certificate by the Master Servicer or
the Special Servicer or any affiliate of the Master Servicer or the Special
Servicer, as applicable, (iii) the Master Servicer's or the Special
Servicer's obligation, as applicable, to make Advances; (iv) the right of the
Master Servicer (or any affiliate thereof) or the Special Servicer (or any
affiliate thereof), as the case may be, to receive reimbursement of costs, or
the sufficiency of any compensation for its services under the Pooling
Agreement or with respect to any particular transaction; or (v) the
ownership, servicing or management for others or itself, by the Master
Servicer or the Special Servicer of any other mortgage loans or properties or
the Affiliate Loans (the "Servicing Standard"). The Master 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 Agreement. The Century Plaza Towers Loan will be subserviced by
AMRESCO Services, a wholly-owned subsidiary of AMRESCO, Inc., and an
affiliate of AMRESCO Management. For more information on AMRESCO Services,
see "--Special Servicers" herein. The Montehiedra Loan will be subserviced by
an affiliate of Banco Popular de Puerto Rico. Notwithstanding any
subservicing agreement, the Master Servicer or Special Servicers, as
applicable, shall remain primarily liable to the Trustee and
Certificateholders for the servicing and administering of the Mortgage Loans
in accordance with the provisions of the Pooling Agreement without diminution
of such obligation or liability by virtue of such subservicing agreement. Any
subservicing agreement entered into by the Master Servicer or Special
Servicer, as applicable, will provide that it may be assumed or terminated by
the Trustee, or any successor Master Servicer or Special Servicer, if the
Trustee, or any successor Master Servicer or Special Servicer, has assumed
the duties of the Master Servicer or Special Servicer, respectively. The
Pooling Agreement provides, however, that none of the Master Servicer, the
Special Servicer, or 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 any action
in good faith, or for errors in judgment. The foregoing provision would not
protect the Master Servicer or the Special Servicer for the breach of its
representations or warranties in the Pooling Agreement, the breach of certain
specified covenants therein 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 its obligations or duties under the Pooling
Agreement. The Trustee or any other successor Master Servicer assuming the
obligations of the Master Servicer under the Pooling Agreement will be
entitled to the compensation to which the Master Servicer would have been
entitled after the date of the assumption of the Master Servicer's
obligations. If no successor Master Servicer can be obtained to perform such
obligations for such compensation, additional amounts payable to such
successor Master Servicer will be treated as Realized Losses.
The Master Servicer initially will be responsible for the servicing and
administration of the entire Mortgage Pool. The duties of the Special
Servicer relate to Specially Serviced Mortgage Loans and to any REO Property.
The Pooling 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);
provided, however, that, with respect to any of the Mortgage Loans with
respect to which the Master Servicer owns any portion of the related
Affiliate Loan, such Mortgage Loan will become a Specially Serviced Mortgage
Loan immediately upon any monetary default under such Mortgage Loan; (ii) the
Master 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 Master Servicer an
inability to pay or a hardship in paying the Mortgage Loan in accordance with
its terms; (iv) the Master Servicer has received notice that the borrower has
become the subject of any bankruptcy, insolvency or similar proceeding,
admitted in writing the inability to pay its debts as they come due or made
an assignment for the benefit of creditors; (v) the Master 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
Master Servicer has notice (other than a failure by the borrower to pay
principal or interest) and which materially and adversely affects the
interests of the Certificateholders has occurred and remained unremedied for
the applicable grace period specified in the Mortgage Loan (or, if no grace
period is specified, 60 days); provided, that a default requiring a Property
Advance will be deemed to materially and adversely affect the interests of
Certificateholders; or
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<PAGE>
(vii) in the opinion of the Master Servicer (consistent with the Servicing
Standard) a default under a Mortgage Loan is imminent and such Mortgage Loan
deserves the attention of the Special Servicer; provided however, that a
Mortgage Loan will cease to be a Specially Serviced Mortgage Loan (a) with
respect to the circumstances described in clauses (i) and (ii) above, when
the borrower thereunder has brought the Mortgage Loan current 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 Master Servicer, or (c) with
respect to the circumstances described in clause (vi) above, when such
default is cured; provided, in any 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. With respect to any
Specially Serviced Mortgage Loan the Master Servicer will transfer its
servicing responsibilities to the Special Servicer, but will continue to
receive payments on such Mortgage Loan (including amounts collected by the
Special Servicer), to make certain calculations with respect to such Mortgage
Loan and to make remittances and prepare certain reports to the
Certificateholders with respect to such Mortgage Loan and upon the curing of
such events the servicing of such Mortgage Loan will be returned to the
Master Servicer.
The Pooling Agreement requires the Master 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 Servicing Standard. Consistent with the above, the Master Servicer
or the Special Servicer may, in its discretion, waive any late payment charge
or penalty fee in connection with any delinquent Monthly Payment with respect
to any Mortgage Loan. For any Mortgage Loan with respect to which, under the
terms of the related loan documents, the mortgagee may, in its discretion,
apply insurance proceeds, condemnation awards or escrowed funds to the
prepayment of such loan prior to the expiration of the related Prepayment
Lockout Period, the Master Servicer or Special Servicer, as applicable, may
only require such a prepayment if the Master Servicer or Special Servicer, as
applicable, has determined in accordance with the Servicing Standard that
such prepayment is in the best interest of all Certificateholders. The Master
Servicer and the Special Servicer will be directed in the Pooling Agreement
not to take any enforcement action other than requests for payment with
respect to payment of Excess Interest or principal in excess of the principal
component of the Monthly Payment prior to the final maturity date. The Master
Servicer will also be permitted to forgive the payment of Excess Interest
under the circumstances described under "--Realization Upon Mortgage Loans;
Modifications" below. With respect to any defaulted Mortgage Loan, subject to
the restrictions set forth below under "--Realization Upon Mortgage Loans;
Modifications," 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 Special Servicer may elect to extend a Specially Serviced
Mortgage Loan (subject to conditions described herein) notwithstanding its
decision to foreclose on certain of the Mortgaged Properties.
ADVANCES
The Master Servicer will be obligated to advance, on the Business Day
immediately preceding a Distribution Date (the "Master Servicer Remittance
Date"), an amount (each such amount, a "P&I Advance") equal to the total or
any portion of the Monthly Payment (with interest calculated at the Net
Mortgage Rate plus the Trustee Fee Rate) on a Mortgage Loan 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 Master Servicer
Remittance Date), or, with respect to a Mortgage Loan for which the Special
Servicer has elected to extend the payments as described in "--Realization
Upon Mortgage Loans; Modifications" herein, the amount equal to the lesser of
(a) the related Extended Monthly Payment or (b) the Monthly Payment (with
interest calculated at the Net Mortgage Rate plus the Trustee Fee Rate) that
was due prior to the maturity date; provided, however, that the Master
Servicer will not be required to make a P&I Advance to the extent it
determines that such Advance would not ultimately be recoverable out of
related late payments, net insurance proceeds, net condemnation proceeds, net
liquidation proceeds and certain other collections with respect to such
Mortgage Loan as to which such Advances were made. The Master Servicer will
not be required or permitted to make an advance for Excess
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<PAGE>
Interest, Default Interest, Prepayment Premiums or Balloon Payments. The
amount required to be advanced by the Master Servicer with respect to any
Distribution Date in respect of scheduled payments (or Extended Monthly
Payments) on Mortgage Loans that have been subject to an Appraisal Reduction
Event will equal (i) the amount required to be advanced by the Master
Servicer without giving effect to such Appraisal Reduction Amounts less (ii)
an amount equal to the product of (x) the amount required to be advanced by
the Master Servicer in respect to delinquent payments of interest without
giving effect to such Appraisal Reduction Amounts, and (y) a fraction, the
numerator of which is the Appraisal Reduction Amount with respect to such
Mortgage Loan and the denominator of which is the Stated Principal Balance as
of the last day of the related Collection Period.
The Master Servicer will also be obligated (subject to the limitations
described herein) to make cash advances ("Property Advances," and together
with P&I Advances, "Advances") to pay delinquent real estate taxes, ground
lease rent payments, assessments and hazard insurance premiums and to cover
other similar costs and expenses necessary to preserve the priority of or
enforce the related Mortgage or to maintain such Mortgaged Property. In
addition, the Special Servicer may be obligated to make certain Property
Advances with respect to Specially Serviced Mortgage Loans.
Notwithstanding the foregoing, in the event that the Master Servicer or
any of its affiliates forecloses on any of the collateral for any of the
Affiliate Loans and thereby becomes the direct or indirect owner of the
borrower on the related Mortgage Loan, the Pooling Agreement will require the
Special Servicer with respect to the related Mortgage Loan (whether or not
such Mortgage Loan is a Specially Serviced Mortgage Loan) to make any
required Advances with respect to the related Mortgage Loan thereafter.
The obligation of the Master 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 Agreement continues through the
foreclosure of such Mortgage Loan and until the liquidation of the Mortgage
Loan or related Mortgaged Properties. Advances are intended to provide a
limited amount of liquidity, not to guarantee or insure against losses. None
of the Master Servicer, the 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 ultimately recoverable by the Master Servicer,
the Special Servicer, the Trustee or the Fiscal Agent, as applicable, out of
related late payments, net insurance proceeds, net condemnation proceeds, net
liquidation proceeds and certain other collections with respect to the
Mortgage Loan as to which such Advances were made. In addition, if the Master
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 ultimately recoverable from the foregoing
sources, then the Master Servicer, the Special Servicer, the Trustee or the
Fiscal Agent, as applicable, will be entitled to be reimbursed for such
Advance, plus interest thereon at the Advance Rate, 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 (or in the case of the Trustee or Fiscal Agent, the
Seller) setting forth such judgment or determination of nonrecoverability and
the procedures and considerations of the Master 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 Master Servicer or the Special Servicer in its good faith discretion such
as related income and expense statements, rent rolls, occupancy status,
property inspections, inquiries by the Master Servicer, the Special Servicer,
the Trustee or the Fiscal Agent, as applicable, and an independent appraisal
performed in accordance with MAI standards and methodologies on the
applicable Mortgaged Properties).
To the extent the Master Servicer or Special Servicer fails to make an
Advance it is required to make under the Pooling 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 Agreement. The Trustee and the
Fiscal Agent (or the Master Servicer with respect to a Property Advance
required to be made by the Special Servicer) will be entitled to rely
conclusively on any non-recoverability determination of the Master Servicer
(or the Special Servicer). See "--Duties of the Trustee" and "--Duties of the
Fiscal Agent" below.
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The Master Servicer, the Special Servicer, the Trustee or the Fiscal
Agent, as applicable, will be entitled to reimbursement for any Advance made
by it equal to the amount of such Advance and interest accrued thereon at the
Advance Rate from (i) late payments on the Mortgage Loan by the Mortgagor,
(ii) insurance proceeds, condemnation proceeds or liquidation proceeds from
the sale of the defaulted Mortgage Loan or the related Mortgaged Property 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 Master Servicer, the Special Servicer, the Trustee and the Fiscal
Agent will each be entitled to receive interest on Advances at the Prime Rate
(the "Advance Rate"), compounded monthly, as of each Master Servicer
Remittance Date and the Master 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. 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 Wall Street
Journal, New York edition.
ACCOUNTS
Lock Box Accounts. With respect to each Mortgage Loan other than the
Century Plaza Towers Loan, the 380 Madison Loan and the Ritz Plaza Loan, one
or more accounts in the name of the mortgagee (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 borrower. See
"Description of the Mortgage Pool and the Underlying Mortgaged
Properties--Description of the Mortgage Loans". Agreements governing the Lock
Box Accounts provide that the borrower has no withdrawal or transfer rights
with respect thereto and that funds on deposit in the Lock Box Accounts are
periodically swept into the Collection Account with the balance, if any, to
be remitted to the related borrower. With respect to the Ritz Plaza Loan, (i)
until a Ritz Plaza Lock Box Trigger Event has occurred, commencing on the
sixth day of each month, and continuing until all amounts due on the next Due
Date have been funded, the Ritz Plaza Borrower is required to deposit all
funds in the Income Account maintained by the Ritz Plaza Borrower into a Lock
Box Account and (ii) upon the occurrence of a Ritz Plaza Lock Box Trigger
Event the Ritz Plaza Borrower is required to establish a Lock Box Account.
Upon the occurrence of a Century Towers Triggering Event, the Century Towers
Borrower is required to establish a Lock Box Account. Upon the occurrence of
an Operating Event and a 380 Madison Trigger Event and during the continuance
of an NOI Trigger Event, the 380 Madison Borrower is required to establish a
Lock Box Account. The Lock Box Accounts will not be assets of the REMICs.
Collection Account. On each Due Date, the Master Servicer will be required
to withdraw from each Lock Box Account an amount equal to the Monthly Payment
on the related Mortgage Loan and deposit such amount into a segregated
account (the "Collection Account") established pursuant to the Pooling
Agreement for application towards the Monthly Payment due on the related
Mortgage Loan. With respect to the Century Plaza Towers Loan and the 380
Madison Loan, to the extent the borrowers thereunder are not required to
maintain a Lock Box Account, the Master Servicer will direct such borrower to
pay their Monthly Payments on each Due Date directly into the Collection
Account. Any excess funds in the Lock Box Accounts 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 Master Servicer is aware
has occurred and is continuing with respect to such Mortgage Loan. However,
after the Anticipated Repayment Date for a Mortgage Loan, all amounts in the
related Lock Box Account in excess of the amount necessary to fund the
Monthly Payment and Reserve Accounts will be applied to (i) operating and
capital expenses (except to the extent such expenses will be met through
disbursements from the Reserve Accounts), (ii) the reduction of the principal
balance of the related Mortgage Loan until such principal is paid in full and
(iii) if applicable, Excess Interest, in that order and the Master Servicer
will be required to withdraw the amounts referred to in clauses (ii) and
(iii) above from the Lock Box Accounts and deposit them into the Collection
Account on each Due Date. The Master 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 deposited into any Reserve
Account.
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Distribution Accounts. The Trustee will establish and maintain three
segregated accounts (the "Lower-Tier Distribution Account", the "Middle-Tier
Distribution Account" and the "Upper-Tier Distribution Account") in the name
of the Trustee for the benefit of the holders of Certificates entitled to
distributions therefrom. With respect to each Distribution Date, the Master
Servicer will disburse from the Collection Account and deposit into the
Lower-Tier Distribution Account, to the extent of funds on deposit in the
Collection Account, on the Master 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 Compensation representing the
Trustee Fee. In addition, the Master Servicer will deposit all P&I Advances
into the Lower-Tier Distribution Account on the related Master Servicer
Remittance Date. To the extent the Master Servicer fails to do so, the
Trustee or the Fiscal Agent will deposit all P&I Advances into the Lower-Tier
Distribution Account as described herein. On each Distribution Date, the
Trustee will withdraw amounts distributable on such date on the Regular
Certificates and on the Class MR and Class R Certificates (which are expected
to be zero) from the Lower-Tier Distribution Account and deposit such amounts
in the Middle-Tier Distribution Account before withdrawing them and, in turn,
depositing them in the Upper-Tier Distribution Account. See "Description of
the Offered Certificates--Distributions" herein.
Interest Reserve Account. The Trustee will establish and maintain an
"Interest Reserve Account" in the name of the Trustee for the benefit of the
holders of the Certificates. On each Master Servicer Remittance Date
occurring in February and on any Master Servicer Remittance Date occurring in
any January which occurs in a year that is not a leap year, the Master
Servicer will be required to deposit, in respect of the AAPT Fixed Component
and the CAP Pool Loan, an amount equal to one day's interest at the related
Mortgage Rate on the respective Stated Principal Balance, as of the Due Date
in the month preceding the month in which such Master Servicer Remittance
Date occurs, of the AAPT Fixed Component and the CAP Pool Loan, to the extent
a Monthly Payment or P&I Advance is made in respect thereof (all amounts so
deposited in any consecutive January (if applicable) and February, "Withheld
Amounts"). On each Master Servicer Remittance Date occurring in March, the
Master Servicer will be required to withdraw from the Interest Reserve
Account an amount equal to the Withheld Amounts from the preceding January
(if applicable) and February, if any, and deposit such amount into the
Lower-Tier Distribution Account.
The Trustee will also establish and maintain one or more segregated
accounts for the "Excess Interest Distribution Account" in the name of the
Trustee for the benefit of the Certificateholders entitled to distributions
therefrom, the "Class Q Distribution Account" in the name of the Trustee for
the benefit of the holders of the Class Q Certificates and the "Class M
Distribution Account" in the name of the Trustee for the benefit of the
holders of the Class M Certificates.
The Collection Account, the Lower-Tier Distribution Account, the
Middle-Tier Distribution Account, the Upper-Tier Distribution Account, the
Interest Reserve Account, the Excess Interest Distribution Account, the Class
Q Distribution Account and the Class M Distribution Account will be held in
the name of the Trustee (or the Master Servicer on behalf of the Trustee) on
behalf of the holders of Certificates and the Master Servicer will be
authorized to make withdrawals from the Collection Account and the Interest
Reserve Account. Each of the Collection Account, any REO Account, the
Lower-Tier Distribution Account, the Middle-Tier Distribution Account, the
Upper-Tier Distribution Account, the Interest Reserve Account, any escrow
account, the Excess Interest Distribution Account, the Class Q Distribution
Account and the Class M Distribution Account will be either (i) (A) an
account maintained with either a federal or state chartered depository
institution or trust company the long term unsecured debt obligations (or
short-term unsecured debt obligations if the account holds funds for less
than 30 days) or commercial paper of which are rated by each of the Rating
Agencies in its highest rating category at all times (or in the case of the
REO Account, Collection Account, Interest Reserve Account and Escrow Account,
the long term unsecured debt obligations (or short-term unsecured debt
obligations if the account holds funds for less than 30 days) of which are
rated at least "AA-" by Fitch and DCR and "Aa3" by Moody's or, if applicable,
the short term rating equivalent thereof) or (B) as to which the Master
Servicer or the Trustee, as applicable, 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
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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 (an "Eligible Bank"). Amounts on
deposit in the Collection Account, the Interest Reserve Account and any REO
Account may be invested in certain United States government securities and
other high-quality investments specified in the Pooling Agreement ("Permitted
Investments"). Interest or other income earned on funds in the Collection
Account will be paid to the Master Servicer 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 deposited into the Collection
Account.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The Master Servicer may make withdrawals from the Collection Account for
the following purposes, to the extent permitted and in the priorities
provided in the Pooling Agreement: (i) to remit on or before each Master
Servicer Remittance Date (A) to the Lower-Tier 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 Class Q Distribution
Account an amount equal to the Net Default Interest received in the related
Collection Period, if any, (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 above under "--Accounts--Interest Reserve Account";
(ii) to pay or reimburse the Master Servicer, the Special Servicer, the
Trustee or the Fiscal Agent, as applicable, pursuant to the terms of the
Pooling Agreement for Advances made by any of them and interest on Advances,
the Master Servicer's, the Trustee's or the Fiscal Agent's right, as
applicable, to reimbursement for items described in this clause (ii) being
limited as described above under "--Advances"; (iii) to pay on or before each
Master Servicer Remittance Date to the Master Servicer and the Special
Servicer as compensation, the aggregate unpaid Servicing Compensation (not
including the portion of the Servicing Compensation representing the Trustee
Fee) in respect of the immediately preceding Interest Accrual Period; (iv) to
pay on or before each Distribution Date to any person with respect to each
Mortgage Loan or REO Property that has previously been purchased or
repurchased by such person pursuant to the Pooling Agreement, all amounts
received thereon during the related Collection Period and subsequent to the
date as of which the amount required to effect such purchase or repurchase
was determined; (v) to the extent not reimbursed or paid pursuant to any of
the above clauses, to reimburse or pay the Master Servicer, the Special
Servicer, the Trustee, the Fiscal Agent and/or the Seller for unpaid
Servicing Compensation (in the case of the Master Servicer, the Special
Servicer or the Trustee), and certain other unreimbursed expenses incurred by
such person pursuant to and to the extent reimbursable under the Pooling
Agreement and to satisfy any indemnification obligations of the Trust Fund
under the Pooling Agreement; (vi) to pay to the Trustee amounts requested by
it to pay any taxes imposed on the Upper-Tier REMIC, the Middle-Tier REMIC or
the Lower-Tier REMIC; (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.
SUCCESSOR MANAGER
With respect to each Mortgage Loan, the Master Servicer or the Special
Servicer, as applicable, will enforce the Trustee's rights with respect to
the manager under the related Mortgage Loan and management agreement. In the
event the Master Servicer or the Special Servicer is entitled itself to
terminate, or to cause the related borrower to terminate, the manager under
the Mortgage Loan, the Master Servicer or the Special Servicer, as the case
may be, will promptly give notice of its right to terminate the manager to
the Trustee (who will copy the holders of Certificates and the Rating
Agencies). The most subordinate Class of Certificates then outstanding
(provided, however, that for purposes of determining the most subordinate
Class, in the event that the Class A Certificates are the only Classes
outstanding (other than any Class of Coupon Strip Certificates or the Class
Q, Class M or Residual Certificates), the Class A Certificates and the Coupon
Strip Certificates together will be treated as the most subordinate Class of
Certificates) will have the right to recommend termination of the manager,
and
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if so, to recommend a Successor Manager (as defined below). Holders of
Certificates representing Voting Rights of greater than 50% of such
subordinate Class of Certificates will have ten Business Days from the
receipt of such notice to respond to such notice. Upon receipt of a
recommendation to terminate the manager and appoint a Successor Manager, the
Master Servicer or the Special Servicer, as the case may be, will give notice
of such recommendation to the Trustee (who will copy the holders of
Certificates) and effect such recommendation unless: (i) within five business
days of the receipt of notice of such recommendation holders of Certificates
representing Voting Rights of greater than 50% of any Class of Certificates
which is assigned a rating by any Rating Agency on the Closing Date reject
such proposed Successor Manager; or (ii) the Master Servicer or the Special
Servicer, as the case may be, determines that effecting such recommendation
to terminate is not consistent with the Servicing Standard and either (A)
within 30 days of giving notice of such recommendation to all holders of
Certificates (other than those holders making such recommendation) the notice
of rejection described in clause (i) above is given to the Master Servicer or
the Special Servicer, as the case may be, or (B) notwithstanding the lack of
such rejection, the Master Servicer or Special Servicer elects not to effect
such recommendation. If the Master Servicer or the Special Servicer, as the
case may be, does not receive a required response (or if the response
received is inconsistent) and the Master Servicer or the Special Servicer, as
the case may be, determines it is consistent with the Servicing Standard to
terminate the manager or in the event the manager is otherwise terminated or
resigns under the related Mortgage or management agreement, the Master
Servicer or the Special Servicer, as applicable, shall use its best efforts,
or if applicable cause the related borrower, to retain a Successor Manager
(or the recommended Successor Manager, if any) on terms substantially similar
to the existing management agreement or, failing that, on terms as favorable
to the Trust Fund as can reasonably be obtained. For purposes of this
paragraph, a "Successor Manager" shall be reasonably acceptable to the Master
Servicer or the Special Servicer, as applicable, shall not cause a
qualification, withdrawal or downgrading of any of the ratings assigned to
the Certificates by the Rating Agencies, as evidenced in writing, and shall
be a professional management corporation or business entity which manages,
and is experienced in managing, other comparable commercial properties and
meets any criteria in the related loan documents.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
Subject to certain exceptions in the case of certain of the Mortgage Loans
(see "Description of the Mortgage Pool and the Underlying Mortgaged
Properties" herein), the Mortgage Loans contain provisions in the nature of
"due-on-sale" clauses, which by their terms (a) provide that the Mortgage
Loans shall, 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
Master Servicer or the Special Servicer, with respect to Specially Serviced
Mortgage Loans, 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 Master 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 Master Servicer or the Special Servicer, as applicable,
determines that granting such consent would be likely to result in a greater
recovery, the Master 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 proposed
transfer is in compliance with the terms of the related Mortgage and (b) the
Master 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 any of the then current ratings assigned to the Certificates.
Subject to certain exceptions in the case of certain of the Mortgage Loans
(see "Description of the Mortgage Pool and the Underlying Mortgaged
Properties" herein), the Mortgage Loans contain provisions in the nature of a
"due-on-encumbrance" clause which by their terms (a) provide that the
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Mortgage Loans shall, 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
Master 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 Master 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--Enforceability of
Certain Provisions" in the Prospectus.
INSPECTIONS
The Master Servicer (or with respect to any Specially Serviced Mortgage
Loan, the Special Servicer) is required to inspect or cause to be inspected
each Mortgaged Property at such times and in such manner as are consistent
with the Servicing Standards, but in any event (i) the Master Servicer is
required to inspect each Mortgaged Property with an Allocated Loan Amount of
(a) $5,000,000 or more at least once every 12 months and (b) less than
$5,000,000 at least once every 24 months, in each case commencing in August
1998 (or at such other times, provided each Rating Agency has confirmed in
writing to the Master 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 Master Servicer (or with respect
to Specially Serviced Mortgage Loans, the Special Servicer) is required to
inspect the related Mortgaged Properties as soon as practicable and
thereafter at least every twelve months until such condition ceases to exist.
The cost of any such inspection shall be borne by the Master Servicer unless
the related Mortgage Loan is a Specially Serviced Mortgage Loan, in which
case such cost will be borne by the Trust Fund.
EVIDENCE AS TO COMPLIANCE
The Pooling Agreement requires that each of the Master Servicer and the
Special Servicer cause a nationally recognized firm of independent public
accountants (which may render other services to the Master Servicer), which
is a member of the American Institute of Certified Public Accountants, to
furnish to the Trustee on or before April 15 of each year, beginning April
15, 1998, a report which expresses an opinion to the effect that the
assertion of management of the Master Servicer or the Special Servicer that
it has maintained an effective internal control system over the servicing of
mortgage loans including the Mortgage Loans for the preceding calendar year
is fairly stated, based on an examination, conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers
or the Audit Program for Mortgages serviced for FHLMC, except for such
exceptions stated in such report.
The Pooling Agreement also requires each of the Master Servicer and the
Special Servicer to deliver to the Trustee, on or before April 15 of each
year, beginning April 15, 1998, an officers' certificate of the Master
Servicer or the Special Servicer, as the case may be, stating that, to the
best of each such officer's knowledge, the Master Servicer or the Special
Servicer, as the case may be, has fulfilled its obligations under the Pooling
Agreement in all material respects throughout the preceding calendar year or,
if there has been a default, specifying each default known to each such
officer, and that it has maintained an effective internal control system over
the servicing of mortgage loans including the Mortgage Loans.
CERTAIN MATTERS REGARDING THE SELLER, THE MASTER SERVICER AND THE SPECIAL
SERVICER
Each of the Master Servicer and each Special Servicer may assign its
rights and delegate its duties and obligations under the Pooling Agreement in
connection with the sale or transfer of a substantial
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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 of the Rating Agencies that such
assignment or delegation will not cause a qualification, withdrawal or
downgrading of the then current ratings assigned to the Certificates. The
Pooling Agreement provides that the Master Servicer or the Special Servicer,
as the case may be, may not otherwise resign from its obligations and duties
as Master Servicer or the Special Servicer, as the case may be, 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 a successor Master Servicer or Special
Servicer has assumed the obligations of the Master Servicer or the Special
Servicer under the Pooling Agreement. The Trustee or any other successor
Master Servicer or Special Servicer assuming the obligations of the Master
Servicer or the Special Servicer under the Pooling Agreement will be entitled
to the compensation to which the Master Servicer or the Special Servicer
would have been entitled. If no successor Master Servicer or Special Servicer
can be obtained to perform such obligations for such compensation, additional
amounts payable to such successor Master Servicer or Special Servicer will be
treated as Realized Losses.
The Pooling Agreement also provides that none of the Seller, the Master
Servicer, the Special Servicer, nor any director, officer, employee or agent
of the Seller, the Master 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 Agreement, or for errors in judgment; provided, however, that
neither the Seller, the Master Servicer, the Special Servicer nor any such
person will be protected against any liability which would otherwise be
imposed by reason of (i) any breach of warranty or representation, or other
representation or specific liability provided in the Pooling Agreement, or
(ii) any willful misconduct, bad faith, fraud or negligence in the
performance of duties thereunder or by reason of reckless disregard of
obligations or duties thereunder. The Pooling Agreement further provides that
the Seller, the Master Servicer, the Special Servicer and any director,
officer, employee or agent of the Seller, the Master Servicer or the Special
Servicer will be entitled to indemnification by the Trust Fund for any loss,
liability or expense incurred in connection with or relating to the Pooling
Agreement or the Certificates, other than any loss, liability or expense (i)
incurred 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, in each case by the person being
indemnified; (ii) imposed by any taxing authority if such loss, liability or
expense is not specifically reimbursable pursuant to the terms of the Pooling
Agreement, or (iii) with respect to any such party, resulting from the breach
by such party of any of its representations or warranties contained in the
Pooling Agreement.
In addition, the Pooling Agreement provides that none of the Seller, the
Master 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 Agreement and which in its opinion does not
expose it to any expense or liability. The Seller, the Master 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
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 Seller, the Master
Servicer and the Special Servicer will be entitled to be reimbursed therefor
from the Collection Account.
The Seller is not obligated to monitor or supervise the performance of the
Master Servicer, the Special Servicer or the Trustee under the Pooling
Agreement. The Seller may, but is not obligated to, enforce the obligations
of the Master Servicer or the Special Servicer under the Pooling Agreement
and may, but is not obligated to, perform or cause a designee to perform any
defaulted obligation of the Master Servicer or the Special Servicer or
exercise any right of the Master Servicer or the Special Servicer under the
Pooling Agreement. In the event the Seller undertakes any such action, it
will be reimbursed and indemnified by the Trust Fund in accordance with the
standard set forth above. Any such action by the Seller will not relieve the
Master Servicer or the Special Servicer of its obligations under the Pooling
Agreement.
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Any person into which the Seller or the Master Servicer may be merged or
consolidated, or any person resulting from any merger or consolidation to
which the Seller or the Master Servicer is a party, or any person succeeding
to the business of the Seller or the Master Servicer, will be the successor
of the Seller or the Master Servicer, as the case may be, under the Pooling
Agreement, and shall be deemed to have assumed all of the liabilities and
obligations of the Seller or the Master Servicer under the Pooling Agreement.
EVENTS OF DEFAULT
Events of default of the Master Servicer (each, with respect to the Master
Servicer, an "Event of Default") under the Pooling Agreement consist, among
other things, of (i) any failure by the Master Servicer to remit to the
Collection Account or any failure by the Master Servicer to remit to the
Trustee for deposit into the Upper-Tier Distribution Account, Middle-Tier
Distribution Account, Lower-Tier Distribution Account, Interest Reserve
Account, Excess Interest Distribution Account, Class Q Distribution Account
or Class M Distribution Account any amount required to be so remitted at the
time required to be remitted pursuant to the Pooling Agreement; or (ii) any
failure by the Master Servicer duly to observe or perform in any material
respect any of its other covenants or agreements or the material breach of
its representations or warranties under the Pooling Agreement which continues
unremedied for thirty (30) days after the giving of written notice of such
failure to the Master Servicer by the Seller or the Trustee, or to the Master
Servicer and to the Seller and the Trustee by the holders of Certificates
evidencing Percentage Interests of at least 25% of any affected Class and if
such default is not capable of being cured within such 30 day period and the
Master Servicer is diligently pursuing such cure, the Master Servicer shall
be entitled to an additional 30 day period; or (iii) any failure by the
Master Servicer to make any Advances as required pursuant to the Pooling
Agreement; or (iv) confirmation in writing by any Rating Agency that not
terminating the Master Servicer would, in and of itself, cause the
then-current rating assigned to any Class of Certificates to be qualified,
withdrawn or downgraded; or (v) certain events of bankruptcy, insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings and certain actions by, on behalf of or against the Master
Servicer indicating its insolvency or inability to pay its obligations.
Events of default of the Special Servicer (each, with respect to the
Special Servicer, an "Event of Default") under the Pooling Agreement consist,
among other things, of (i) any failure by the Special Servicer to remit to
the Collection Account any amount so required under the Pooling Agreement; or
(ii) any failure by the Special Servicer duly to observe or perform in any
material respect any of its other covenants or agreements, or the material
breach of its representations or warranties under the Pooling Agreement which
continues unremedied for a period of 30 days after the giving of written
notice of such failure to the Special Servicer by the Master Servicer, the
Seller or the Trustee, or to the Special Servicer, the Master Servicer, the
Seller and the Trustee by the holders of Certificates evidencing Percentage
Interests of at least 25% of any affected Class; or (iii) confirmation in
writing by any Rating Agency that not terminating the Special Servicer would,
in and of itself, cause the then-current rating assigned to any Class of
Certificates to be qualified, withdrawn or downgraded; (iv) certain events of
bankruptcy, insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings and certain actions by, on behalf of or
against the Special Servicer indicating its insolvency or inability to pay
its obligations; or (v) the Special Servicer has acquired a direct or
indirect ownership interest in any Affiliate Loan.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default with respect to the Master Servicer (acting as
Master 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 Master Servicer as Master
Servicer under the Pooling Agreement and in and to the Trust Fund. If an
Event of Default with respect to the Master Servicer (acting as Master
Servicer or Special Servicer) described in clause (v) in the second preceding
paragraph occurs, the rights and obligations of the Master Servicer under the
Pooling Agreement shall automatically terminate. Notwith-
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standing the foregoing, upon any termination of the Master Servicer under the
Pooling Agreement, the Master Servicer will continue to be entitled to
receive all accrued and unpaid servicing compensation through the date of
termination plus reimbursement for all Advances and interest on such Advances
as provided in the Pooling Agreement. In the event that the Master Servicer
is also the Special Servicer and the Master Servicer is terminated, the
Master Servicer will also be terminated as Special Servicer.
On and after the date of termination following an Event of Default by the
Master Servicer, the Trustee will succeed to all authority and power of the
Master Servicer (and the Special Servicer if the Special Servicer is also the
Master Servicer) under the Pooling Agreement and will be entitled to the
compensation arrangements to which the Master Servicer (and the Special
Servicer if the Special Servicer is also the Master 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 Fitch and DCR and
"Aa2" by Moody's or if the Rating Agencies do not provide written
confirmation that the succession of the Trustee as Master Servicer or Special
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 then current ratings
assigned to any Class of Certificates as evidenced in writing by each Rating
Agency to act as successor to the Master Servicer or Special Servicer under
the Pooling 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 compensation payable to such
successor exceeds that to which the predecessor Master Servicer was entitled,
the additional servicing compensation will be allocated to the Certificates
in the same manner as Realized Losses.
If the Special Servicer is not the Master Servicer and an Event of Default
with respect to the Special Servicer occurs, the Trustee may, and at the
direction of the holders of at least 25% of the aggregate Voting Rights of
all Certificateholders, the Trustee will, terminate the Special Servicer and
the Trustee will succeed to all the power and authority of the Special
Servicer under the Pooling Agreement, unless such termination and succession
would result in the downgrading, qualification or withdrawal of the then
current ratings assigned to any Class of Certificates, as evidenced in
writing by each Rating Agency, in which case, a successor Special Servicer
shall be appointed in accordance with the Pooling Agreement. The Trustee or
other successor Special Servicer which succeeds to the power and authority of
the Special Servicer will be entitled to the compensation to which the
Special Servicer would have been entitled.
No Certificateholder will have any right under the Pooling Agreement to
institute any proceeding with respect to the Pooling Agreement or the
Mortgage Loans, unless, with respect to the Pooling Agreement, such holder
previously shall have given to the Trustee a written notice of a default
under the Pooling Agreement, and of the continuance thereof, and unless also
the holders of Certificates of each Class affected thereby evidencing
Percentage Interests of at least 25% of such Class shall have made written
request of the Trustee to institute such proceeding in its own name as
Trustee under the Pooling 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 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 Agreement may be amended at any time by the Seller, the Master
Servicer, the Special Servicer, the Trustee and the Fiscal Agent without the
consent of any of the holders of Certificates (i) to
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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 status of each of the Upper-Tier REMIC, the Middle-Tier REMIC
and Lower-Tier REMIC as a REMIC, or to prevent the imposition of any material
state or local taxes; (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; (v) to amend or
supplement any provisions therein to the extent necessary or desirable to
maintain the rating assigned to each of the Classes of Certificates by each
Rating Agency; and (vi) to make any other provisions with respect to matters
which are not inconsistent with any other provisions therein and will not
result in a qualification withdrawal or downgrading of the then current
ratings assigned to the Certificates. The Pooling Agreement provides that no
such amendment shall cause the Upper-Tier REMIC, the Middle-Tier REMIC or the
Lower-Tier REMIC to fail to qualify as a REMIC.
The Pooling Agreement may also be amended from time to time by the Seller,
the Master 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 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 Master
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 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 Agreement; or (iv) amend the section in the Pooling Agreement
relating to the amendment of the Pooling 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.
The "Voting Rights" assigned to each Class shall be (a) 0% in the case of
the Class Q, Class M, Class R, Class MR, and Class LR Certificates, (b) 0.25%
in the case of the Class X-1A Certificates, until the Distribution Date in
July 2000, and 0% thereafter, 0% in the case of the Class X-1B Certificates
until the Distribution Date in July 2000, and 0.25% thereafter and 2.0% in
the case of the Class X-2 Certificates; provided that the Voting Rights of
each of the Class X-1A, X-1B and Class X-2 Certificates will be reduced to
zero upon the reduction of the Notional Amount of each such Class to zero;
(the sum of such percentages for each such Class outstanding is the "Fixed
Voting Rights Percentage"), (c) in the case of the Class A-1, Class A-2A,
Class A-2B, Class A-2C, Class A-2D, Class B, Class C, Class D, Class E, Class
F, Class G and Class H Certificates, a percentage equal to the product of (i)
100% minus the Fixed Voting Rights Percentage multiplied by (ii) a fraction,
the numerator of which is equal to the aggregate outstanding Certificate
Principal Amount of any such Class (which will be reduced for this purpose by
the amount of any Appraisal Reduction Amounts notionally allocated to such
Class, if applicable) and the denominator of which is equal to the aggregate
outstanding Certificate Principal Amounts of all Classes of Certificates. The
Voting Rights of any Class of Certificates shall be allocated among holders
of Certificates of such Class in proportion to their respective Percentage
Interests.
REALIZATION UPON MORTGAGE LOANS; MODIFICATIONS
SPECIALLY SERVICED MORTGAGE LOANS; APPRAISALS; EXTENSIONS. Within 60 days
following the occurrence of an Appraisal Reduction Event, the Special
Servicer will be required to obtain an appraisal of the Mortgaged Property or
REO Property, as the case may be, from an independent appraiser in accordance
with MAI standards (an "Updated Appraisal"); provided, that, the Special
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. The cost of any Updated Appraisal shall be a Property
Advance to be paid by the Master Servicer.
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Following a default in the payment of any principal balance and accrued
interest remaining unpaid on the maturity date of a Mortgage Loan, the
Special Servicer may either foreclose or elect to grant up to two consecutive
one-year extensions 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 maturity date (or the first anniversary thereof
in the case of the second extension), the related borrower had made twelve
consecutive Monthly Payments (or Extended Monthly Payments in the case of the
second extension) on or prior to their Due Dates, (ii) the Special Servicer
determines that (A) extension of such Mortgage Loan is consistent with the
servicing standard described herein 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, (iii) such
extension requires that all cash flow on all related Mortgaged 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, (iv)
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 and (v) such extension requires the
related borrower to make Extended Monthly Payments. The Special Servicer's
determination to extend shall be made in the Special Servicer's good faith
judgment, and may, but is not required to be, based on an Updated Appraisal.
The Special Servicer will not agree to any extension of a Mortgage Loan
beyond the date which is two years prior to the Rated Final Distribution
Date. If such borrower fails to make an Extended Monthly Payment during the
initial extension period, no further extensions will be granted. The
"Extended Monthly Payment" with respect to any extension of a Mortgage Loan
that is delinquent in the payment of any principal balance and accrued
interest remaining unpaid on its maturity date, is equal to (a) the principal
portion of a revised monthly payment (which will be calculated based on an
amortization schedule which would fully amortize such principal balance and
accrued interest over a term that does not extend past the date occurring two
years prior to the Rated Final Distribution Date (commencing on the maturity
date of such Mortgage Loan) and an interest rate no less than the Mortgage
Rate with respect to such Mortgage Loan), and (b) interest at the applicable
Default Rate; provided, however, that the Special Servicer may agree that the
Extended Monthly Payments may include interest at a rate lower than the
related Default Rate (but, except as otherwise provided in the Pooling
Agreement, not lower than the related Mortgage Rate). In no event will the
Special Servicer be permitted to extend any Mortgage Loan at a rate lower
than the Mortgage Rate.
The Master Servicer or Special Servicer shall be permitted, in its
discretion, to waive all or any accrued Excess Interest if, prior to the
related maturity date, the related borrower has requested the right to prepay
the Mortgage Loan in full together with all payments required by the Mortgage
Loan in connection with such prepayment except for all or a portion of
accrued Excess Interest, provided that the Master Servicer or Special
Servicer, as applicable, determines that (i) in the absence of the waiver of
such Excess Interest, there is a reasonable likelihood that the Mortgage Loan
will not be paid in full on the related Maturity Date and (ii) waiver of the
right to such accrued Excess Interest is reasonably likely to produce a
greater payment in the aggregate to Certificateholders on a present value
basis than a refusal to waive the right to such Excess Interest. Any such
waiver shall not be effective until such prepayment is tendered.
STANDARDS FOR CONDUCT GENERALLY IN EFFECTING FORECLOSURE OR THE SALE OF
DEFAULTED LOANS. In connection with any foreclosure, enforcement of the loan
documents, 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.
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Notwithstanding anything herein to the contrary, the Pooling Agreement
will provide that the Special Servicer will not, on behalf of the Trust Fund,
obtain title to a Mortgaged Property as a result of or in lieu of foreclosure
or otherwise, and will not otherwise acquire possession of, or take any other
action with respect to, any Mortgaged Property if, as a result of any such
action, the Trustee, or 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, to a co-trustee or to its nominee, on
behalf of holders of Certificates. Notwithstanding any such acquisition of
title and cancellation of the related Mortgage Loan, such Mortgage Loan shall
be considered to be an REO Mortgage Loan held in the Trust Fund until such
time as the related REO Property shall be sold by the Trust Fund and shall be
reduced only by collections net of expenses.
If the Trust Fund acquires a Mortgaged Property by foreclosure or
deed-in-lieu of foreclosure upon a default of a Mortgage Loan, the Pooling
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 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 Lower-Tier REMIC
will not be taxable on income received with respect to a 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 Lower-Tier REMIC, 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, 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. The Pooling Agreement
provides that the Special Servicer will be permitted to cause the Lower-Tier
REMIC to earn "net income from foreclosure property" that is subject to tax
if it determines that the net after-tax benefit to Certificateholders is
greater than another method of operating or net leasing the Mortgaged
Property. See "Federal Income Tax Consequences--REMIC Certificates--Income
from Residual Certificates--Prohibited Transactions; Special Taxes" in the
Prospectus.
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The Pooling Agreement will provide that the Special Servicer may offer to
sell to any person any defaulted Mortgage Loan or any REO Property, or may
offer to purchase any Specially Serviced Mortgage Loan or any REO Property,
if and when the Special Servicer determines, consistent with the Servicing
Standard, 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 Agreement, including extensions thereof. The Special
Servicer is required to give the Trustee not less than five days' prior
written notice of its intention to sell any Specially Serviced Mortgage Loan
or REO Property, in which case the Special Servicer is required to accept the
highest offer (of at least three offers) 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, or is determined to be a
fair price by the Trustee (based solely upon updated independent appraisals
received by the Trustee), if the highest offeror is affiliated with the
Special Servicer. 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 Pooling Agreement will not obligate the Special Servicer 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.
Following a default in the payment of principal or interest on a Mortgage
Loan, the Special Servicer, after consultation and agreement by the Master
Servicer, may elect not to foreclose or institute similar proceedings or
modify the loan (as described below) and instead the Master Servicer shall
continue to make P&I Advances with respect to such delinquencies so long as
the Special Servicer, in its reasonable judgment, after consultation and
agreement by the Master Servicer, concludes (a) that the election not to
foreclose or modify would likely result in a greater recovery, on a present
value basis, than would foreclosure or modification and (b) such P&I Advances
will not be Nonrecoverable Advances. With respect to such conclusions, the
Master Servicer may conclusively rely (absent manifest error) on the Special
Servicer's computations and analysis.
MODIFICATIONS. During the term of a Mortgage Loan, the Special Servicer,
may, consistent with the Servicing Standard, agree to modify such Specially
Serviced Mortgage Loan to reduce the amount of principal (but, except as
otherwise provided below, not interest) payable monthly on such Mortgage Loan
provided that (a) a material default in respect of payment 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 is reasonably likely to produce a greater
recovery to Certificateholders, on a net present value basis, than would
liquidation; (b) the Special Servicer terminates the related manager (unless
the Special Servicer determines that retaining such manager is conducive to
maintaining the value of the related Mortgaged Properties); and (c) the
Special Servicer may only agree to reductions of principal lasting a period
of no more than twelve consecutive months and, in the aggregate, to no more
than three reductions of twelve months or less each; provided, however,
Certificateholders representing greater than 66 2/3% of all Voting Rights may
direct the Special Servicer not to agree to any such modification. The
Special Servicer will promptly
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provide a copy of such proposed modification to the Master Servicer, the
Rating Agencies and the Trustee. The Trustee will, within five Business Days,
notify, in writing, all of the Certificateholders that have Voting Rights of
such proposed modification. For purposes of determining whether
Certificateholders representing 66 2/3% of all Voting Rights have directed
the Special Servicer not to agree to such modification, each
Certificateholder will have 15 days to respond to such notice, and any
Certificateholder that has not responded within such time period will be
deemed to have consented to such modification. In the event that the Special
Servicer is directed not to agree to such modification, the Special Servicer
will continue to have the options described elsewhere herein, including
foreclosure, subject to the following paragraph, or, if applicable, extension
of the related Mortgage Loan.
Additionally, the Special Servicer may, consistent with the Servicing
Standard, agree to any modification, waiver or amendment of any term or
forgive or defer interest on and principal of, and/or add collateral for, any
Specially Serviced Mortgage Loan with the consent of Certificateholders
representing 100% of the Percentage Interests of the most subordinate Class
of Certificates then outstanding (the "Directing Class"), subject, however,
to each of the following limitations, conditions and restrictions: (a) a
material default in respect of 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 net present value
basis, than would liquidation; (b) no reduction in the scheduled monthly
payment of interest on any Mortgage Loan as result of such modification,
waiver or amendment may result in an Interest Shortfall to any Class other
than the Directing Class, determined as of the date of such modification,
waiver or amendment; (c) any reduction in the scheduled monthly payment of
principal and/or interest on any Mortgage Loan must require that all cash
flow on all related Mortgaged 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; (d) the Special Servicer may
only agree to reductions of principal and/or interest lasting a period of no
more than twelve consecutive months and, in the aggregate, to no more than
three periods of twelve months or less each; (e) the Special Servicer may not
reduce any Prepayment Premium or Prepayment Lockout Period; (f) the Special
Servicer may not forgive an aggregate amount of principal of the Mortgage
Loans in excess of the Certificate Principal Amount of the Directing Class
less the sum of (x) the aggregate amount of Appraisal Reduction Amounts then
outstanding and (y) the aggregate amount of Interest Shortfalls and Reduction
Interest Shortfalls then outstanding (other than with respect to the
Directing Class); and (g) 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. For the purpose of
determining the Percentage Interest of the Directing Class, the Certificates
held by any Certificateholder that holds, or whose affiliate holds, any debt
of any of the borrowers, or any of the affiliates of the borrowers, under the
Mortgage Loans, shall not be taken into consideration. If the
Certificateholders representing 100% of the Percentage Interests of the
second most subordinate Class of Certificates then outstanding consent to
such modification, waiver or amendment, the Directing Class for purposes of
the determinations made in clauses (b) and (f) shall include the second most
subordinate Class of Certificates and the amount by which principal can be
reduced shall not be in excess of 80% of the aggregate principal balance of
both such Classes less the items specified in clauses (f)(x) and (y) above. A
modification pursuant to this paragraph is not subject to the veto of
Certificateholders set forth in the preceding paragraph.
The Master Servicer or the Special Servicer, as applicable, shall be
permitted to modify, waive or amend any term of a Mortgage Loan that is not
in default or as to which default is not reasonably foreseeable if, and only
if, such modification, waiver or amendment (a) would not be "significant" as
such term is defined in Code Section 1001 or Treasury Regulations Section
1.860G-2(b)(3), as evidenced by an Opinion of Counsel, (b) would be in
accordance with the Servicing Standard and (c) would not
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adversely affect in any material respect the interest of any
Certificateholder not consenting thereto. The consent thereto of the majority
of Percentage Interests of each Class of Certificates affected thereby or
written confirmation from each Rating Agency that such modification, waiver
or amendment will not result in a qualification, withdrawal or downgrading of
the then-current ratings assigned to the Certificates shall not be required
but shall be conclusive evidence that such modification, waiver or amendment
would not adversely affect in any material respect the interest of any
Certificateholder not consenting thereto. The Master Servicer or the Special
Servicer, as applicable, shall provide copies of any modifications, waiver or
amendment to each Rating Agency.
OPTIONAL TERMINATION; OPTIONAL MORTGAGE LOAN PURCHASE
The Seller and, if the Seller does not exercise its option, the Master
Servicer and, if neither the Seller nor the Master Servicer exercises its
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 all of the Mortgage Loans and the Montehiedra Partner Loans and all
property acquired in respect of any Mortgage Loan or the Montehiedra Partner
Loans 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
Stated 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 and the
Montehiedra Partner Loans included in the Trust Fund as of the last day of
the month preceding such Distribution Date; (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 and the Montehiedra Partner
Loans (including any Mortgage Loans and the Montehiedra Partner Loans as to
which title to the related Mortgaged Property (or the pledged collateral in
the case of the Montehiedra Partner Loans) has been acquired) at the Mortgage
Rate (plus the Excess Rate, to the extent applicable) to the last day of the
Interest Accrual Period preceding such Distribution Date, and (D)
unreimbursed Property Advances, and unpaid servicing compensation, special
servicing compensation, Trustee Fees and Trust Fund expenses, in each case to
the extent permitted under the Pooling Agreement with interest on all
unreimbursed Advances at the Advance Rate and (ii) the aggregate fair market
value of the Mortgage Loans and the Montehiedra Partner Loans and all other
property acquired in respect of any Mortgage Loan or the Montehiedra Partner
Loans in the Trust Fund, on the last day of the month preceding such
Distribution Date, as determined by an independent appraiser acceptable to
the Master Servicer, together with one month's interest thereon at the
related Mortgage Rates (or interest rate in the case of the Montehiedra
Partner Loans). There can be no assurance that payment of the Certificate
Principal Amount, if any, of each outstanding Class of Certificates plus
accrued interest would be made in full in the event of such a termination of
the Trust Fund. See "Description of the Certificates--Termination" in the
Prospectus.
Any Mortgage Loan purchased under the circumstances described in the
preceding paragraph will be purchased subject to a continuing right of (i)
the holders of the Class Q Certificates to receive from the purchaser(s),
from time to time, payments corresponding to Default Interest with respect to
such Mortgage Loan and (ii) the holders of the Classes of Certificates
entitled to receive the Excess Interest with respect to such Mortgage Loan,
to receive from the purchaser(s), from time to time, payments corresponding
to Excess Interest with respect to such Mortgage Loan.
THE TRUSTEE
LaSalle National Bank, a national banking association with its principal
offices in Chicago, Illinois, will act as Trustee pursuant to the Pooling
Agreement. The Trustee's corporate trust office is located at 135 South
LaSalle Street, Chicago, Illinois 60674-4107, Attention: Asset Backed
Securities Trust Services Group-GSMSCII-GL I.
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The Trustee may resign at any time by giving written notice to the
Seller, the Master Servicer and the Rating Agencies, provided that no such
resignation shall be effective until a successor has been appointed. Upon
such notice, the Seller will appoint a successor trustee reasonably
acceptable to the Master Servicer. 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 Seller 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 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 Seller, the Master
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 Fitch and DCR and "Aa2" by
Moody's, 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 the
Fiscal Agent under the Pooling Agreement, the Trustee and the Fiscal Agent
will continue to be entitled to receive all accrued and unpaid compensation
through the date of termination plus reimbursement for all Advances made by
them and interest thereon as provided in the Pooling 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 Agreement, the Trustee will be entitled to receive
a monthly fee (the "Trustee Fee") at a specified rate (the "Trustee Fee
Rate"), payable by the Master Servicer out 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
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 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. The
Master Servicer and the Special Servicer each 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 the Master Servicer's or the Special Servicer's duties as
applicable, under the Pooling Agreement or by reason of reckless disregard of
its respective obligations and duties under the Pooling 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 Seller 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 Seller 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 Agreement.
DUTIES OF THE TRUSTEE
The Trustee (except for the information under the first paragraph of
"--The Trustee") and the Master Servicer (except for the information under
"--The Master Servicer") will make no representation as to the validity or
sufficiency of the Pooling Agreement, the Certificates or the Mortgage Loans,
this Prospectus Supplement or related documents.
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In the event that the Master Servicer fails to make a required Advance,
the Trustee (or with respect to a Property Advance required to be made by the
Special Servicer, the Master Servicer, and if the Master Servicer so fails,
the Trustee), will be obligated to 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 Master Servicer or Special Servicer, as applicable, that
an Advance, if made, would not be recoverable. The Trustee will be entitled
to reimbursement for each Advance made by it in the same manner and to same
extent as the Master Servicer or Special Servicer, as applicable.
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 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 Agreement.
In addition, pursuant to the Pooling Agreement, the Trustee, at the cost
and expense of the Seller, based upon reports, documents, and other
information provided to the Trustee, will file with the Securities and
Exchange Commission (the "Commission"), in respect of the Trust and the
Certificates, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) required
to be filed with the Commission pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934, as amended, and any other Form 8-K
reports required to be filed pursuant to the Pooling Agreement.
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 Agreement. The
Fiscal Agent's office is located at 135 South LaSalle Street, Chicago,
Illinois 60674-4107.
The Fiscal Agent may not resign except (i) in the event of the resignation
or removal of the Trustee (in which event, the Fiscal Agent shall be deemed
to have been removed), (ii) upon determination that it may no longer perform
such obligations and duties under applicable law, or (iii) upon written
confirmation from the Rating Agencies that such resignation, without the
appointment of a successor Fiscal Agent, will not in and of itself result in
a downgrade qualification or withdrawal of the then current rating of any
Class of Certificates. Any such determination is required to be evidenced by
an opinion of counsel to such effect delivered to the Seller and the Trustee.
Except as provided in (iii) above, no resignation or removal of the Fiscal
Agent shall become effective until a successor fiscal agent acceptable to
each Rating Agency, as evidenced in writing (which may be the Trustee) shall
have assumed the Fiscal Agent's obligations and duties under the Pooling
Agreement. The Fiscal Agent will not be accountable for the use or
application by the Seller, the Master 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 Seller, the Master Servicer or
the Special Servicer in respect of the assignment of the Mortgage Loans to
the Trust Fund, or any funds deposited in or withdrawn from the Lock Box
Accounts, Cash Collateral Accounts, Reserve Accounts, Collection Account,
Upper-Tier Distribution Account, Middle-Tier Distribution Account, Lower-Tier
Distribution Account, Interest Reserve Account, Excess Interest Distribution
Account, Class Q Distribution Account, Class M Distribution Account or any
other account maintained by or on behalf of the Master Servicer or the
Special Servicer, nor will the Fiscal Agent be required to perform, or be
responsible for the manner of performance of, any of the obligations of the
Master Servicer or the Special Servicer under the Pooling Agreement.
DUTIES OF THE FISCAL AGENT
The Fiscal Agent will make no representation as to the validity or
sufficiency of the Pooling Agreement, the Certificates, the Mortgage Loan,
this Prospectus Supplement (except for the information in the first sentence
under the preceding section with the heading "--The Fiscal Agent") or related
documents. The duties and obligations of the Fiscal Agent consist only of
making Advances as described
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below and in "--Advances" above; the Fiscal Agent shall not be liable except
for the performance of such duties and obligations. The Fiscal Agent will not
be accountable for the use or application by the Seller, the Master 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 Seller, the Master Servicer or the Special Servicer in respect of the
assignment of the Mortgage Loans to the Trust Fund, or any funds deposited in
or withdrawn from the Lock Box Accounts, Cash Collateral Accounts, Reserve
Accounts, Collection Account, Upper-Tier Distribution Account, Middle-Tier
Distribution Account, Lower-Tier Distribution Account, Interest Reserve
Account, Excess Interest Distribution Account, Class Q Distribution Account,
Class M Distribution Account or any other account maintained by or on behalf
of the Master Servicer or the Special Servicer, nor will the Fiscal Agent be
required to perform, or be responsible for the manner of performance of, any
of the obligations of the Master Servicer or the Special Servicer under the
Pooling Agreement.
In the event that the Master Servicer and the Trustee fail to make a
required Advance, the Fiscal Agent will be obligated to 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 Master Servicer, Special 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 Master Servicer.
THE MASTER SERVICER
GMAC Commercial Mortgage Corporation ("GMACCM") will initially act as the
Master Servicer. The following information has been provided by GMACCM. None
of the Seller, the Trustee, the Underwriter, or any of their respective
affiliates takes any responsibility therefor or makes any representation or
warranty as to the accuracy or completeness thereof.
GMACCM, a corporation organized under the laws of the State of California,
is a wholly-owned direct subsidiary of GMAC Mortgage Group, Inc., which in
turn is a wholly-owned direct subsidiary of General Motors Acceptance
Corporation. The principal offices of GMACCM are located at 650 Dresher Road,
Horsham, Pennsylvania 19044. Its telephone number is (215) 328-4622. As of
December 31, 1996, GMACCM was the servicer of a portfolio of multifamily and
commercial mortgage loans totaling approximately $24.8 billion in aggregate
outstanding principal amounts. Neither the Master Servicer, its parent nor
any of its affiliates will guarantee the Certificates or the assets included
in the Trust Fund.
Pursuant to the terms of the Pooling Agreement, the Master Servicer will
be required to indemnify the Seller and the Trustee for any losses, fines,
judgments, costs and expenses incurred by them as a result of the Master
Servicer's willful misfeasance, bad faith or negligent failure to comply with
its duties and obligations under the Pooling Agreement.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Pursuant to the Pooling Agreement, the Master 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 sum for each
Mortgage Loan of the product of (i) 1/12 times a per annum rate of (a) with
respect to the Cadillac Fairview Pool Loan, .0385%; (b) with respect to the
Century Plaza Towers Loan, .0335%; (c) with respect to each of the 380
Madison Loan and the Ritz Plaza Loan, .0485%; (d) with respect to each
Component of the AAPT Pool Loan and with respect to the CAP Pool Loan,
.0585%; (e) with respect to the Whitehall Pool Loan, .0735%; and (f) with
respect to the Montehiedra Loan, .0635% (in each case, the "Servicing Fee
Rate") and (ii) the Stated Principal Balance of such Mortgage Loan or
Component, provided, that such amounts shall be computed on the basis of the
same principal amount and for the same period respecting which any related
interest payment due or deemed due on the related Mortgage Loan is computed.
The Servicing Fee includes the compensation payable to the Master Servicer
and the Trustee Fee. With respect to any Distribution Date, to the extent
that there are Prepayment Interest Shortfalls with respect
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to Principal Prepayments received during the related Collection Period, the
Servicing Fee payable to the Master Servicer with respect to all the Mortgage
Loans (but not the fees payable to the Trustee) for the related Distribution
Date shall be reduced up to the amount sufficient to fully offset such
Prepayment Interest Shortfalls. The Master Servicer's portion of the
Servicing Fee relating to each Mortgage Loan will be retained by the Master
Servicer from payments and collections (including insurance proceeds,
condemnation proceeds and liquidation proceeds) in respect of such Mortgage
Loan. The Master Servicer will also be entitled to retain as additional
servicing compensation all investment income earned on amounts on deposit in
the Collection Account and the Reserve Accounts (to the extent not payable to
the related borrower under the related Mortgage Loan or applicable law). The
Servicing Fee includes certain amounts which will be paid to the Seller as
compensation for arranging on-going monitoring and surveillance of the
Certificates by the Rating Agencies and for certain filing fees and related
expenses.
In addition, the Master Servicer shall be entitled to receive, as
additional servicing compensation, to the extent permitted by applicable law
and the related Mortgage Loans, any late payment charges, assumption fees,
loan modification fees, extension fees, loan service transaction fees,
beneficiary statement charges or similar items (but not including any yield
maintenance charge or prepayment premiums), in each case to the extent
received and not required to be deposited or retained in the Collection
Account pursuant to the Pooling Agreement.
The Master Servicer will pay all expenses incurred in connection with its
responsibilities under the Pooling Agreement (subject to reimbursement as
described herein), including all fees of any subservicers retained by it.
SPECIAL SERVICERS
GMACCM will initially be appointed as special servicer of the Mortgage
Loans, other than the Century Plaza Towers Loan and the Whitehall Pool Loan,
and AMRESCO Management, Inc., a Texas corporation ("AMRESCO Management"),
will initially be appointed as special servicer of the Century Plaza Towers
Loan and the Whitehall Pool Loan (GMACCM and AMRESCO Management in such
capacity, or any party succeeding GMACCM or AMRESCO Management in such
capacity, the "Special Servicer"). The Special Servicer will, among other
things, oversee the resolution of non-performing Mortgage Loans and act as
disposition manager of REO Properties. The Pooling Agreement will provide
that although more than one Special Servicer may be appointed, only one
Special Servicer may specially service any Mortgage Loan.
AMRESCO Management is a wholly owned subsidiary of AMRESCO, INC., a
publicly traded (NASDAQ) company. The principal offices of AMRESCO Management
are located at 700 North Pearl Street, Suite 2400, Dallas, Texas 75201.
AMRESCO Services, L.P., is a Delaware limited partnership and a
wholly-owned subsidiary of AMRESCO, INC. The principal offices of AMRESCO
Services are located at 235 Peachtree Street, N.E., Suite 900, Atlanta,
Georgia 30303. AMRESCO Services, L.P. was formed in July, 1997 and all of the
assets and employees of the AMRESCO Services operating division of AMRESCO
Management were transferred to it effective as of August 1, 1997.
As of May 31, 1997, AMRESCO, INC.'s portfolio consisted of approximately
9,681 loans with an aggregate principal balance of approximately $18.3
billion. The portfolio is significantly diversified both geographically and
by product type. AMRESCO Management will provide special servicing for the
Century Plaza Towers Loan and the Whitehall Pool Loan and AMRESCO Services
will subservice the Century Plaza Towers Loan.
In addition to AMRESCO Services' loan servicing capabilities, AMRESCO
Management has expertise in all areas of asset management including loan
workouts, asset valuation, environmental reviews, and REO management and
disposition and is an active purchaser of unrated and sub-investment grade
interests in commercial mortgage backed securities. The principal task of
AMRESCO Management's asset management division is the management, turnaround,
and capital recovery of
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distressed and underperforming real estate loans and foreclosed real estate
assets. The asset management division of AMRESCO Management and AMRESCO
Services, is also responsible for the valuation of portfolios in connection
with the purchase of commercial mortgage backed securities.
The information concerning AMRESCO Management and AMRESCO Services set
forth herein has been provided by AMRESCO Management and AMRESCO Services and
none of the Seller, the Master Servicer, the Trustee, the Fiscal Agent or the
Underwriter makes any representation or warranty as to the accuracy thereof.
The Special Servicer will, among other things, oversee the resolution of
non-performing Mortgage Loans and act as disposition manager of REO
Properties. The Pooling 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, in the event that the
Class A Certificates and the Coupon Strip Certificates are the only Classes
outstanding, the Class A Certificates and the Coupon Strip Certificates
together will be treated as the subordinate Class) may replace the Special
Servicer, provided that each Rating Agency confirms to the Trustee in writing
that such replacement, will not cause a qualification, withdrawal or
downgrading of the then-current ratings assigned to any Class of
Certificates.
The Pooling Agreement provides that if the Master Servicer is acting as
the Special Servicer with respect to a Mortgage Loan, and the Master Servicer
acquires any Affiliate Loan related to such Mortgage Loan, the Master
Servicer shall promptly resign as Special Servicer with respect to such
Mortgage Loan, and if the Master Servicer fails to promptly resign, the
Trustee will be required to terminate the Master Servicer as Special Servicer
with respect to such Mortgage Loan, and the holders of the most subordinate
Class of Certificates then outstanding will then appoint a successor Special
Servicer.
Pursuant to the Pooling Agreement, the Special Servicer will be entitled
to certain fees, including a special servicing fee (and if the Special
Servicer is the Master Servicer, such fees will be in addition to the
Servicing Fee), payable with respect to each Interest Accrual Period, equal
to the product of (i) 1/12 times a per annum rate of .35% and (ii) the Stated
Principal Balance of each related Specially Serviced Mortgage Loan (the
"Special Servicing Fee"); provided, that such amounts shall be computed on
the basis of the same principal amount and for the same period respecting
which any related interest payment due or deemed due on the related Mortgage
Loan is computed. The Special Servicer will be entitled, in addition to the
Special Servicing Fee, to receive a "Liquidation Fee" equal to .75% of the
amount equal to (x) the proceeds of the sale of any Mortgage Loan or REO
Property minus (y) any broker's commission and related brokerage referral
fees and to receive a "Rehabilitation Fee" with respect to any Mortgage Loan
which ceases to be specially serviced and has made three consecutive Monthly
Payments on or prior to the related Due Dates after the Mortgage Loan has
ceased to be a Specially Serviced Mortgage Loan in an amount equal to .75% of
the highest Stated Principal Balance of such Mortgage Loan during the period
in which it was specially serviced; provided, however, that such
Rehabilitation Fee shall be due only once for each Mortgage Loan during the
term of the Pooling Agreement. However, no Liquidation 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 any
Responsible Party as described herein under "--Representations and
Warranties; Repurchase," (ii) by the Master Servicer, the Seller or the
Certificateholders as described herein under "--Optional Termination;
Optional Mortgage Loan Purchase," or (iii) in certain other limited
circumstances. Each of the foregoing fees, along with certain expenses
related to special servicing of a Mortgage Loan, shall be payable out of
funds otherwise available to make payments on the Certificates.
MASTER SERVICER AND SPECIAL SERVICER PERMITTED TO BUY CERTIFICATES
The Master Servicer and the Special Servicer will be permitted to purchase
any Class of Certificates. Such a purchase by the Master Servicer or the
Special Servicer could cause a conflict relating to the Master Servicer's or
the Special Servicer's duties pursuant to the Pooling Agreement and the
Master Servicer's or the 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
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Pooling Agreement provides that the Master 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 Master
Servicer or the Special Servicer or any affiliate thereof. Additionally, the
Pooling Agreement provides that (i) an affiliate of a borrower may not vote
with respect to matters where there is a potential conflict of interest, (ii)
any Certificateholder that is also the holder of any debt of any of the
affiliates of any of the borrowers under the Mortgage Loans may not vote with
respect to selecting, or directing the actions of the Special Servicer with
respect to such Mortgage Loan, and (iii) the Special Servicer may not be the
holder of any debts of the affiliates of the borrowers under the Mortgage
Loans.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Trustee is obligated to mail to each
Certificateholder, to the Seller, the Paying Agent, the Master Servicer, the
Special Servicer and the Rating Agencies a statement setting forth certain
information with respect to the Mortgage Loans and the Certificates required
pursuant to the Pooling Agreement. Certain information made available on the
monthly reports to Certificateholders can be retrieved via facsimile through
LaSalle National Bank's ASAP System by calling (312) 904-2200, and requesting
statement No. 272. In addition, to the extent provided to it by the Master
Servicer, the Trustee shall make available upon request to each
Certificateholder and Rating Agency a quarterly report and an annual summary
of quarterly reports setting forth certain information with respect to the
borrowers and the Mortgaged Properties. Such quarterly and annual summaries
will be prepared by the Master Servicer solely from information provided to
the Master Servicer pursuant to the Mortgage Loans without modification,
interpretation or analysis (except that the Master Servicer will use its best
efforts to isolate management fees and funded reserves from borrower reported
expenses, if necessary) and the Master Servicer shall not be responsible for
the completeness or accuracy of such information (except that the Master
Servicer will use its best efforts to correct patent errors). Certain
information regarding the Mortgage Loans will be made available by the
Trustee in electronic format through a dial-up bulletin board service
available by calling (714) 282-3990. The Master Servicer may but is not
required to make available certain additional information over the Internet.
A form of the monthly reports is included herein as Exhibit D. Within a
reasonable period of time after each calendar year, the Trustee is obligated
to furnish to each person who at any time during such calendar year was the
holder of a Certificate a statement containing certain information with
respect to the Certificates required pursuant to the Pooling Agreement,
aggregated for such calendar year or portion thereof during which such person
was a Certificateholder. See "Description of the Certificates--Reports to
Certificateholders" in the Prospectus.
The Trustee will mail to each Certificateholder upon written request
(provided that each Certificateholder may only make one request per month and
will be required to pay any expenses incurred by the Trustee in connection
with the provision of such information), the Current Report on Form 8-K filed
by the Trustee, which will include copies of all quarterly and annual
summaries and a list of all quarterly and annual financial statements and
other financial and property information of the borrowers provided to the
Master Servicer pursuant to the Mortgage Loans (to the extent not
inconsistent with the related borrower's rights under the Mortgage Loan or
applicable law) as well as notice of certain events with respect to the
Mortgage Loans which may affect Certificateholders, such as amendments,
modifications and waivers, imminent or actual defaults and proposed
prepayments. Additionally, the Master Servicer shall make available (to the
extent not inconsistent with the related borrower's rights under the Mortgage
Loan or applicable law) to the Rating Agencies and to the Trustee, which
shall make available to the Certificateholders upon written request (provided
that each such Certificateholder will be required to pay any expenses
incurred by the Trustee in connection with the provision of such
information), information relating to the Mortgaged Properties or the
borrowers which has been provided to the Master Servicer pursuant to the
Mortgage Loans, including financial and operating statements and other
information specified on the list described in the previous sentence and
provided to the Master Servicer pursuant to the Mortgage Loans.
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CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans in California (approximately 27.7% of the Mortgage Loans by
Cut-Off Date Allocated Loan Amount), New York (approximately 23.3% of the
Mortgage Loans by Cut-Off Date Allocated Loan Amount), Virginia
(approximately 10.9% of the Mortgage Loans by Cut-Off Date Allocated Loan
Amount), Pennsylvania (approximately 8.1% of the Mortgage Loans by Cut-Off
Date Allocated Loan Amount), Puerto Rico (approximately 5.4% of the Mortgage
Loans by Cut-Off Date Allocated Loan Amount), Louisiana (approximately 5.2%
of the Mortgage Loans by Cut-Off Date Allocated Loan Amount), and Mississippi
(approximately 5.2% of the Mortgage Loans by Cut-Off Date Allocated Loan
Amount) which are general in nature. The summaries do not purport to be
complete and are qualified in their entirety by reference to the applicable
federal and state laws governing the Mortgage Loans.
California, New York, Virginia, Pennsylvania, Puerto Rico, Louisiana and
Mississippi and various other states have imposed statutory prohibitions or
limitations that limit the remedies of a mortgagee under a mortgage or a
beneficiary under a deed of trust. All of the Mortgage Loans are nonrecourse
loans as to which, in the event of default by a borrower, recourse may be had
only against the specific property pledged to secure the Mortgage Loan and
not against the borrower's other assets. Even if recourse is available
pursuant to the terms of the Mortgage Loan, certain states have adopted
statutes which impose prohibitions against or limitations on such recourse.
The limitations described below and similar or other restrictions in other
jurisdictions where Mortgaged Properties are located may restrict the ability
of the Master Servicer or the Special Servicer, as applicable, to realize on
the Mortgage Loans and may adversely affect the amount and timing of receipts
on the Mortgage Loans.
California statutes limit the right of the beneficiary to obtain a
deficiency judgment against the trustor (i.e., obligor) following the
non-judicial foreclosure sale under a deed of trust. A deficiency judgment is
a personal judgment against the obligor in most cases equal to the difference
between the amount due to the beneficiary and the fair market value of the
collateral. No deficiency judgment is permitted under California law
following a nonjudicial sale under the power of sale provision in a deed of
trust. Other California statutes require the beneficiary to exhaust the
security afforded under the deed of trust by foreclosure in an attempt to
satisfy the full debt before bringing a personal action (if otherwise
permitted) against the obligor for recovery of the debt except in certain
cases involving environmentally impaired real property. California case law
has held that acts such as an offset of an unpledged account or the
application of rents from secured property prior to foreclosure, under some
circumstances, constitute violations of such statutes. Violations of such
statutes may result in the loss of some or all of the security under the
loan. Finally, other statutory provisions in California limit any deficiency
judgment (if otherwise permitted) against the former trustor following a
judicial sale to the excess of the outstanding debt over the greater of (i)
the fair market value of the property at the time of the public sale or (ii)
the amount of the winning bid in the foreclosure, and give the borrower a
one-year period within which to redeem the property. California statutes also
provide priority to certain tax liens over the lien of previously recorded
deeds of trust.
Under New York law, while a foreclosure may proceed either judicially or
non-judicially, nonjudicial foreclosures are virtually unused today. Under
New York law, upon default of a mortgage, a mortgagee is generally presented
with the choice of either proceeding in equity to foreclose upon the
mortgaged property or to proceed at law and sue on the note. New York law
does not require that the mortgagee must bring a foreclosure action before
being entitled to sue on the note. However, once having begun a foreclosure
action or an action to sue on the note or guaranty, a mortgagee is generally
not permitted to initiate the other without leave of court. New York does not
restrict a mortgagee from seeking a deficiency judgment. In order to obtain a
deficiency judgment, a series of procedural and substantive requirements must
be satisfied. In New York, liens for unpaid real estate taxes take priority
over the lien of a previously recorded mortgage.
Foreclosure of the lien of a deed of trust in Virginia typically and most
efficiently is accomplished by a non-judicial trustee's sale under a power of
sale provision in the deed of trust. Judicial foreclosure also can be, but
rarely is, used. In a non-judicial foreclosure, public notice of the
trustee's sale, containing
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certain information, must be given for the time period prescribed in the deed
of trust, but subject to statutory minimums. After such notice, the Trustee
may sell the real estate, usually acting through an auctioneer. In a judicial
foreclosure, after notice to all interested parties, a full hearing and
judgment in favor of the lienholder, the court orders a foreclosure sale to
be conducted by a sheriff or court-appointed commissioner in chancery. In
either type of foreclosure sale, the borrower has no right to redeem the
property. A deficiency judgment for a recourse loan may be obtained. Further,
under Virginia law, for certain circumstances and for certain time periods, a
lienholder has the statutory right to obtain a court-appointed receiver,
either with or without notice to the borrower, to collect, protect and
disburse the real property's rents and revenues, and otherwise to maintain
and preserve the real property, pursuant to the court's instructions.
Mortgage Loans in Pennsylvania are generally secured by mortgages on the
related real estate. Foreclosure of a mortgage is accomplished by foreclosure
in judicial proceedings. Such proceedings are regulated by statutes and rules
and subject throughout to the court's equitable powers. Public notice of the
judgment of foreclosure and sale and the amount of the judgment is given for
a statutory period of time after which the mortgaged real estate is sold by
referee at public auction. The proceeds received by the referee from the sale
are applied first to the cost and expenses of the sale and then in
satisfaction of the indebtedness secured by the mortgage. After satisfaction
of any other claims or liens, the remaining proceeds are generally payable to
the mortgagor. There is no right of redemption after foreclosure sale in
Pennsylvania. In certain circumstances, deficiency judgments may be obtained.
The remedy of appointment of receiver for the mortgaged real estate is
infrequently used.
Commercial mortgage loans in Puerto Rico are generally evidenced by the
execution of a promissory note in favor of the mortgagee and a "mortgage
note" payable to the bearer thereof is then pledged to the mortgagee as
security for the promissory note. The mortgage note in turn is secured by a
mortgage on certain real property of the mortgagor. Notwithstanding the
existence of both the promissory note and the bearer mortgage note, the
mortgagor has only a single indebtedness to the mortgagee and in the event of
default the mortgagee may bring a single unitary action to proceed directly
against the mortgaged property without any requirement to take any separate
action under the promissory or mortgage notes. Priority between mortgage
instruments depends on their terms and generally on the order of filing with
the appropriate Registry of Property of Puerto Rico. Foreclosure of a
mortgage is generally accomplished by judicial action. The action is
initiated by the service of legal pleadings upon all parties having an
interest in the real property. Delays in completion of the foreclosure may
occasionally result from difficulties in locating necessary parties. When the
mortgagee's right to foreclose is contested, the legal proceedings necessary
to resolve the issue can be time-consuming. At the completion of the judicial
foreclosure proceedings, if the mortgagee prevails, the court generally
issues a judgment of foreclosure and appoints a marshall or other court
officer to conduct the sale of the property. Such sales are made in
accordance with procedures set forth in the Mortgage and Property Registry
Act (Act No. 198 of August 8, 1979). The purchaser at such sale acquires the
estate or interest in real property covered by the mortgage. Generally, the
terms of the deed of mortgage and Puerto Rico law control the amount of
foreclosure expenses and costs, including attorneys' fees, which may be
recovered by a lender. The courts of Puerto Rico will enforce clauses
providing for acceleration in the event of a material payment default after
giving effect to any appropriate notices. The courts of Puerto Rico, however,
may refuse to foreclose a mortgage on grounds of equity when an acceleration
of the indebtedness would be inequitable or unjust or the circumstances would
render the acceleration unconscionable.
Mortgage loans in Louisiana are generally secured by special conventional
mortgages on the related real estate. Foreclosure may be by ordinary or
executory process. Ordinary process involves judicial trial proceedings
resulting in a judgment and a writ of fieri facias with the property being
sold. Executory process is available where the mortgage is granted in an
authentic act before a notary public and witnesses. Executory process
requires the filing of a petition in court to which is attached the original
note and a certified copy of the mortgage which results in a writ of seizure
and sale being issued to the appropriate sheriff who auctions the property.
There is no right of redemption after foreclosure sale. In certain cases,
deficiency judgments may be obtained. Receivers, known in Louisiana as
"Keepers", may be appointed at the time the petition for foreclosure is
filed.
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Under Mississippi law, a deed of trust can be foreclosed by a proceeding
in the chancery court or by a sale in accordance with its terms and
applicable statutory procedures. The contractual power of sale is a widely
accepted method of foreclosing on a Mississippi deed of trust. There is no
period of redemption under Mississippi law following a valid foreclosure,
regardless of whether it is effected through judicial proceeding or power of
sale. In addition, Mississippi statutes do not restrict a secured creditor
from seeking a deficiency judgment, so long as the action is commenced within
one year of the date of the foreclosure or non-judicial sale of the mortgaged
property. Mississippi courts have held, however, that a secured creditor
bears the burden of proving entitlement to a deficiency judgment under
principles of equity, which proof must include a showing that the creditor
has endeavored to collect the debt from the mortgaged property and that the
value of the property obtained through foreclosure did not satisfy the debt.
In Mississippi, liens for unpaid real estate taxes have priority over the
lien of a previously recorded deed of trust.
In some states, foreclosure may result in automatic termination of
subordinate leases in the absence of either (i) an agreement to the contrary
between the foreclosing lender and the tenant or (ii) circumstances in which
it would be inequitable to permit such termination. In addition, in all
states, real property taxes have priority over the lien of previously
recorded mortgages or deeds of trust and in some states and under certain
circumstances, mechanics' liens and materialmen's liens may also take
priority over the lien of previously recorded mortgages or deeds of trust.
Foreclosure under either a mortgage or a deed of trust or the sale by the
referee or other designated official or by the trustee is often a public
sale. However, because of the difficulty a potential buyer at the sale might
have in determining the exact status of title to the property subject to the
lien of the mortgage or deed of trust and the redemption rights that may
exist, and because the physical condition and financial performance of the
property may have deteriorated during the foreclosure proceedings and/or for
a variety of other reasons, a third party may be unwilling to purchase the
property at the foreclosure sale. Some states require that the lender
disclose to potential bidders at a trustee's sale all known facts materially
affecting the value of the property. Such disclosure may have an adverse
effect on the trustee's or mortgagee's ability to sell the property or upon
the sale price.
USE OF PROCEEDS
The net proceeds from the sale of Offered Certificates will be used by the
Seller to pay the purchase price of the Mortgage Loans.
FEDERAL INCOME TAX CONSEQUENCES
Elections will be made to treat the portion of the Trust Fund exclusive of
the Reserve Accounts, the Lock Box Accounts, the Excess Interest, the Excess
Interest Distribution Account, the Default Interest, the Class Q Distribution
Account, the Montehiedra Partner Loans and the Class M Distribution Account,
and, in the opinion of Cadwalader, Wickersham & Taft, special tax counsel to
the Seller, such portion of the Trust Fund will qualify, as three separate
REMICs (the "Upper-Tier REMIC", the "Middle-Tier REMIC" and the "Lower-Tier
REMIC," respectively) within the meaning of Code Section 860D. The Reserve
Accounts and the Lock Box Accounts will be treated as beneficially owned by
the respective borrowers for federal income tax purposes. The Lower-Tier
REMIC will hold the Mortgage Loans (exclusive of the Excess Interest and the
Default Interest and exclusive of certain portions of the interest payable on
the AAPT LIBOR Components, which will be deposited directly into the
Middle-Tier REMIC and the Upper-Tier REMIC), proceeds therefrom, the
Collection Account, the Lower-Tier Distribution Account and any REO Property,
and will issue (i) certain uncertificated classes of regular interests (the
"Lower-Tier Regular Interests") to the Middle-Tier REMIC and (ii) the Class
LR Certificates, which will represent the sole class of residual interests in
the Lower-Tier REMIC. The Middle-Tier REMIC will hold the Lower-Tier Regular
Interests, a portion of the interest payable on the AAPT LIBOR Components and
the Middle-Tier Distribution Account in which distributions thereon will be
deposited, and will issue (i) certain uncertificated classes of regular
interests (the "Middle-Tier Regular Interests") and (ii) the Class MR
Certificates, which will represent the sole Class of residual interests in
the Middle-Tier REMIC. The Upper-Tier REMIC will hold the Middle-Tier REMIC
Regular Interests, a portion of the interest payable
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on the AAPT LIBOR Components and the Upper-Tier Distribution Account in which
distributions thereon will be deposited and will issue (i) classes of regular
interests represented by the Regular Certificates and (ii) the Class R
Certificates, which will represent the sole class of residual interests in
the Upper-Tier REMIC. In addition, the Class A-1, Class A-2B, Class A-2C,
Class A-2D, Class B, Class C, Class D, Class E and Class F Certificates will
represent pro rata undivided beneficial interests in designated portions of
the Excess Interest and the related portions of the Excess Interest
Distribution Account, which portion of the Trust Fund will be treated as part
of a grantor trust for federal income tax purposes. Although holders of these
Classes of Certificates will be required to allocate their purchase price
between their interests in the regular interests in the Upper-Tier REMIC and
their beneficial interests in Excess Interest based on the relative fair
market values of each, it is anticipated that the rights to Excess Interest
will have negligible value as of the Closing Date. The Class Q Certificates
will represent pro rata undivided beneficial interests in the portion of the
Trust Fund consisting of Default Interest (subject to an obligation to pay
interest on Advances to the Master Servicer, Special Servicer or Trustee, as
the case may be) in respect of the Mortgage Loans and the Class Q
Distribution Account, and such portion will be treated as part of the grantor
trust for federal income tax purposes. The Class M Certificates will
represent pro rata undivided beneficial interests in the portion of the Trust
Fund consisting of the Montehiedra Partner Loans and the Class M Distribution
Account, and such portion will be treated as part of the grantor trust for
federal income tax purposes.
The Offered Certificates will be treated as "real estate assets" under
Code Section 856(c)(5)(A), to the extent that the assets of the REMICs are so
treated. The interest on the Offered Certificates will be "interest on
obligations secured by mortgages on real property" described in Code Section
856(c)(3)(B) for a real estate investment trust, in the same proportion that
the income of the REMICs is so treated.
A beneficial owner's interest in an Offered Certificate will qualify for
the foregoing treatments under Sections 856(c)(5)(A) and 856(c)(3)(B) in
their entirety if at least 95% of the REMICs' assets qualify for such
treatment, and otherwise will qualify to the extent of the REMICs' percentage
of such assets. A Mortgage Loan that has been defeased with U.S. Treasury
securities will not qualify for such treatment. A beneficial owner's interest
in an Offered Certificate will constitute "loans . . . secured by an interest
in real property which is . . . residential real property" within the meaning
of Code Section 7701(a)(19)(C)(v) in the case of a domestic building and loan
association only to the extent of the portion of the Ritz Plaza Loan not
attributable to commercial use. The Lower-Tier REMIC, the Middle-Tier REMIC
and the Upper-Tier REMIC will be treated as one REMIC solely for the purpose
of making the foregoing determinations.
The regular interests represented by the Offered Certificates generally
will be treated as newly originated debt instruments for federal income tax
purposes. Beneficial owners of the Offered Certificates will be required to
report income on the regular interests represented by the Offered
Certificates in accordance with the accrual method of accounting and any
income from Excess Interest as such amounts are received or accrued by the
Trust Fund, based on their own methods of accounting. See "Federal Income Tax
Consequences--REMIC Certificates--Income from Regular Certificates--General"
in the Prospectus.
It is anticipated that the regular interests represented by the Class
A-2A, Class A-2B, Class A-2C, Class A-2D, Class B, Class C, Class D, Class E,
Class F and Class G Certificates will be issued at a premium for federal
income tax purposes.
Although unclear for federal income tax purposes, it is anticipated that
the Class X-1A and Class X-2 Certificates will be treated as issued with
original issue discount in an amount equal to the excess of all distributions
of interest expected to be received thereon over their respective issue
prices (including accrued interest). Any "negative" amounts of original issue
discount on the Class X-1A and Class X-2 Certificates attributable to rapid
prepayment with respect to the Mortgage Loans will not be deductible
currently, but may be offset against future positive accruals of original
issue discount, if any. Finally, a holder of a Class X-1A or Class X-2
Certificate may be entitled to a loss deduction to the extent it becomes
certain that such holder will not recover a portion of its basis in such
Certificate, assuming no further prepayments. In the alternative, it is
possible that rules similar to the "noncontingent bond
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method" of the contingent interest rules in the OID Regulations, as amended
on June 12, 1996, may be promulgated with respect to the Class X-1A and Class
X-2 Certificates. Under the noncontingent bond method, if the interest
payable for any period is greater or less than the amount projected, the
amount of income included for that period would be either increased or
decreased accordingly. Any net reduction in the income accrual for the
taxable year below zero (a "Negative Adjustment") would be treated by a
Certificateholder as ordinary loss to the extent of prior income accruals and
would be carried forward to offset future interest accruals. At maturity, any
remaining Negative Adjustment would be treated as a loss on retirement of the
Certificate. The legislative history of relevant Code provisions indicates,
however, that negative amounts of original issue discount on an instrument
such as a REMIC regular interest may not give rise to taxable losses in any
accrual period prior to the instrument's disposition or retirement. Thus, it
is not clear whether any losses resulting from a Negative Adjustment would be
recognized currently or be carried forward until disposition or retirement of
the debt obligation. However, unless and until otherwise required under
applicable regulations, the Seller does not intend to treat the payments of
interest on the Class X-1A and Class X-2 Certificates as contingent interest.
The prepayment assumption that will be used to accrue original issue
discount, to amortize premium of an initial owner, or to determine whether
original issue discount is de minimis will be Scenario 1 as described under
"Yield, Prepayment and Maturity Considerations--Yield on the Offered
Certificates" above.
Although not free from doubt, it is anticipated that any prepayment
premiums will be treated as ordinary income to the extent allocable to
beneficial owners of the Offered Certificates as such amounts become due to
such beneficial owners.
At any time subsequent to the acquisition of the Montehiedra Property as
REO Property, the Trust Fund, as a non-resident of the Commonwealth of Puerto
Rico, will be subject to 29% Commonwealth of Puerto Rico withholding tax on
gross rental income from the Montehiedra Property if it is not deemed to be
engaged in a trade or business within the Commonwealth of Puerto Rico. The
Trust Fund could also be subject to taxation of gain or loss and tax return
filing requirements in the Commonwealth of Puerto Rico upon disposition of
the Montehiedra Property. Such Puerto Rico taxes would reduce the proceeds of
the Montehiedra Property available to pay unpaid interest and principal on
the Montehiedra Loan. Investors should consult their own tax advisors
regarding the specific tax consequences of ownership of the Montehiedra
Property as REO Property by the Trust Fund.
ERISA CONSIDERATIONS
The purchase by or transfer to an employee benefit plan or other
retirement arrangement, including an individual retirement account or a Keogh
plan, which is subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or Section 4975 of the Code, or a
"governmental plan" (as defined in Section 3(32) of ERISA) that is subject to
any federal, state or local law ("Similar Law") which is, to a material
extent, similar to the foregoing provisions of ERISA or the Code (each, a
"Plan"), or a collective investment fund in which such Plans are invested, an
insurance company using the assets of separate accounts or general accounts
which include assets of Plans (or which are deemed pursuant to ERISA or
Similar Law to include assets of Plans) or other persons acting on behalf of
any such Plan or using the assets of any such Plan of the Class B, Class C,
Class D, Class E, Class F and Class G Certificates (the "Subordinate Offered
Certificates") is restricted. See "Description of the Offered
Certificates--Transfer Restrictions." Accordingly, except as specifically
referenced herein, the following discussion does not purport to discuss the
considerations under ERISA or Section 4975 of the Code with respect to the
purchase, holding or disposition of the Subordinate Offered Certificates. For
purposes of the following discussion all references to the Offered
Certificates, unless otherwise indicated, shall be deemed to exclude the
Subordinate Offered Certificates.
As described in the Prospectus under "ERISA Considerations," ERISA and the
Code impose certain duties and restrictions on Plans and certain persons who
perform services for Plans. For example, unless exempted, investment by a
Plan in the Offered Certificates may constitute or give rise to a prohibited
transaction under ERISA or the Code. There are certain exemptions issued by
the United States Department of Labor (the "Department") that may be
applicable to an investment by a Plan in the
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Offered Certificates. The Department has granted to the Underwriter an
administrative exemption (Prohibited Transaction Exemption 89-88, 54 Fed.
Reg. 42581 (October 17, 1989), as amended, 55 Fed. Reg. 48939 (November 23,
1990)), referred to herein as the "Exemption," for certain mortgage-backed
and asset-backed certificates underwritten in whole or in part by the
Underwriter. The Exemption might be applicable to the initial purchase, the
holding, and the subsequent resale by a Plan of certain certificates, such as
the Offered Certificates, underwritten by the Underwriter, representing
interests in pass-through trusts that consist of certain receivables, loans
and other obligations, provided that the conditions and requirements of the
Exemption are satisfied. The loans described in the Exemption include
mortgage loans such as the Mortgage Loans. However, it should be noted that
in issuing the Exemption, the Department may not have considered interests in
pools of the exact nature as some of the Offered Certificates.
Among the conditions that must be satisfied for the Exemption to apply are
the following:
(1) The acquisition of Offered Certificates by a Plan is on terms
(including the price for the Offered Certificates) that are at least as
favorable to the Plan as they would be in an arm's length transaction with
an unrelated party;
(2) The rights and interests evidenced by Offered Certificates acquired
by the Plan are not subordinated to the rights and interests evidenced by
other Certificates of the Trust Fund;
(3) The Offered Certificates acquired by the Plan have received a rating
at the time of such acquisition that is in one of the three highest
generic rating categories from any of Moody's, DCR, Fitch or Standard &
Poor's Ratings Group ("S&P");
(4) The Trustee must not be an affiliate of any other member of the
Restricted Group (as defined below);
(5) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of Offered Certificates represents not
more than reasonable compensation for underwriting the Offered
Certificates. The sum of all payments made to and retained by the Seller
pursuant to the assignment of the Mortgage Loans to the Trust Fund
represents not more than the fair market value of such Mortgage Loans. The
sum of all payments made to and retained by the Master Servicer and any
other servicer represents not more than reasonable compensation for such
person's services under the Pooling Agreement and reimbursement of such
person's reasonable expenses in connection therewith; and
(6) The Plan investing in the Offered Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933.
The Trust Fund must also meet the following requirements:
(a) the corpus of the Trust Fund must consist solely of assets of the
type that have been included in other investment pools;
(b) certificates evidencing interests in such other investment pools
must have been rated in one of the three highest rating categories of
Moody's, Fitch, DCR or S&P for at least one year prior to the Plan's
acquisition of the Offered Certificates pursuant to the Exemption; and
(c) certificates evidencing interests in such other investment pools
must have been purchased by investors other than Plans for at least
one year prior to any Plan's acquisition of the Offered Certificates
pursuant to the Exemption.
If all of the conditions of the Exemption are met, whether or not a Plan's
assets would be deemed to include an ownership interest in the Mortgage Loans
in the Mortgage Pool, the acquisition, holding and resale of the Offered
Certificates by Plans would be exempt from certain of the prohibited
transaction provisions of ERISA and the Code.
Moreover, the Exemption can provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur if a
Plan fiduciary causes a Plan to acquire certificates in a trust in which the
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fiduciary (or its affiliate) is an obligor on the receivables, loans or
obligations held in the trust provided that, among other requirements, (a) in
the case of an acquisition in connection with the initial issuance of
certificates, at least fifty percent of each Class of certificates in which
Plans have invested is acquired by persons independent of the Restricted
Group and at least fifty percent of the aggregate interest in the trust is
acquired by persons independent of the Restricted Group; (b) such fiduciary
(or its affiliate) is an obligor with respect to five percent or less of the
fair market value of the obligations contained in the trust; (c) the Plan's
investment in certificates of any class does not exceed twenty-five percent
of all of the certificates of that class outstanding at the time of the
acquisition; and (d) immediately after the acquisition no more than
twenty-five percent of the assets of the Plan with respect to which such
person is a fiduciary are invested in certificates representing an interest
in one or more trusts containing assets sold or serviced by the same entity.
The Exemption does not apply to the purchasing or holding of Offered
Certificates by Plans sponsored by the Seller, the Underwriter, the Trustee,
the Master Servicer, any obligor with respect to Mortgage Loans included in
the Trust Fund constituting more than five percent of the aggregate
unamortized principal balance of the assets in the Trust Fund, or any
affiliate of such parties (the "Restricted Group"). Borrowers who are acting
on behalf of Plans or who are investing assets of Plans, and any affiliates
of any such borrowers, should not purchase any of the Offered Certificates.
The Underwriter believes that the conditions to the applicability of the
Exemption will generally be met with respect to the Class A-1, Class A-2A,
Class A-2B, Class A-2C, Class A-2D, Class X-1A and Class X-2 Certificates,
other than possibly those conditions which are dependent on facts unknown to
the Underwriter or which it cannot control, such as those relating to the
circumstances of the Plan purchaser or the Plan fiduciary making the decision
to purchase any such Class of Offered Certificates. However, before
purchasing an Offered Certificate, a fiduciary of a Plan should make its own
determination as to the availability of the exemptive relief provided by the
Exemption or the availability of any other prohibited transaction exemptions,
and whether the conditions of any such exemption will be applicable to the
Offered Certificates. THE CLASS B, CLASS C, CLASS D, CLASS E, CLASS F AND
CLASS G CERTIFICATES ARE SUBORDINATE TO ONE OR MORE OTHER CLASSES OF
CERTIFICATES AND, ACCORDINGLY, SUCH CERTIFICATES MAY NOT BE PURCHASED BY OR
TRANSFERRED TO A PLAN OR ANY PERSON ACTING ON BEHALF OF OR INVESTING THE
ASSETS OF A PLAN, UNLESS SUCH PERSON IS AN INSURANCE COMPANY INVESTING THE
ASSETS OF ITS GENERAL ACCOUNT UNDER CIRCUMSTANCES WHEREBY THE PURCHASE AND
HOLDING OF ANY SUCH CERTIFICATE WOULD BE EXEMPT FROM THE PROHIBITED
TRANSACTION PROVISIONS OF ERISA AND THE CODE UNDER PROHIBITED TRANSACTION
CLASS EXEMPTION 95-60.
Any fiduciary of a Plan considering whether to purchase an Offered
Certificate should also carefully review with its own legal advisors the
applicability of the fiduciary duty and prohibited transaction provisions of
ERISA and the Code to such investment. See "ERISA Considerations" in the
Prospectus. A fiduciary of a governmental plan should make its own
determination as to the need for and the availability of any exemptive relief
under any Similar Law.
The sale of Certificates to a Plan is in no respect a representation by
the Seller or the Underwriter that this investment meets all relevant legal
requirements with respect to investments by Plans generally or any particular
Plan, or that this investment is appropriate for Plans generally or any
particular Plan.
If the assets of the Century Towers Borrower were deemed to be Plan
assets, and if the purchase of an Offered Certificate (including, for
purposes of this paragraph, a Subordinate Offered Certificate) were deemed to
be an indirect loan to the Century Towers Borrower, then the purchase of an
Offered Certificate by an investor that is a "party in interest" within the
meaning of Section 3(14) of ERISA or a "disqualified person" within the
meaning of Section 4975(e)(2) of the Code (each, a "Party in Interest") with
respect to a Plan whose assets are invested in the Century Towers Borrower
may constitute a prohibited transaction under ERISA or the Code. There are
certain prohibited transaction exemptions which may apply to the purchase of
an Offered Certificate by such a Party in Interest, including Prohibited
Transaction Class Exemption ("PTCE") 84-14 (relating to certain transactions
effected by a "qualified
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professional asset manager"), PTCE 96-23 (relating to certain transactions
effected by an "in-house asset manager"), PTCE 90-1 (relating to certain
transactions involving insurance company pooled separate accounts), PTCE
91-38 (relating to certain transactions involving bank collective investment
funds), and Prohibited Transaction Exemption 84-142 (relating to certain
transactions arising in connection with real estate investments by pension
trusts with respect to which AT&T Corp. serves as named fiduciary). Prior to
purchasing an Offered Certificate, an investor should, in consultation with
its legal advisers, determine whether it is a Party in Interest with respect
to a Plan whose assets are invested in the Century Towers Borrower and should
make its own determination as to the need for and availability of exemptive
relief under ERISA and the Code. In particular, any investor with a
relationship to a Plan whose interest in the Commingled Fund, when combined
with the interests of any other Plans maintained by the same employee or
employee organization, exceeds ten percent of the total of all interests in
such fund, or a Plan covering employees of General Motors Corporation or its
subsidiaries, or a Plan which has invested in TREET, should consult with its
legal advisers regarding whether such relationship would preclude relief
under one or more of the foregoing exemptions.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related securities"
for purposes of SMMEA. No representation is made as to the proper
characterization of the Offered Certificates for legal investment purposes,
financial regulatory purposes, or other purposes, or as to the ability of
particular investors to purchase the Offered Certificates of any Class under
applicable legal investment restrictions. These uncertainties may adversely
affect the liquidity of the Offered 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 Offered Certificates constitute
legal investments for them or are subject to investment, capital or other
restrictions. See "Legal Investment" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement between
the Seller and the Underwriter, the Offered Certificates will be purchased
from the Seller by the Underwriter, an affiliate of the Seller and GSMC, upon
issuance. Distribution of the Offered Certificates will be made by the
Underwriter from time to time in negotiated transactions or otherwise at
varying prices to be determined at the time of sale. Proceeds to the Seller
from the sale of the Offered Certificates will be $1,005,685,202, plus
accrued interest, if any, from August 1, 1997 (or August 14, 1997 in the case
of the Class A-1 Certificates), before deducting expenses payable by the
Seller.
In connection with the purchase and sale of the Offered Certificates, the
Underwriter may be deemed to have received compensation from the Seller in
the form of underwriting discounts. One or more affiliates of the Underwriter
have entered into and may, in the future, enter into other financing
arrangements with affiliates of some or all of the borrowers.
GSMC, the Seller and the Underwriter will, upon the initial issuance of
the Certificates, be affiliated with the Whitehall Borrower and the Cadillac
Fairview Borrowers, and GSMC was, at the origination of the loans to such
borrowers, affiliated with such borrowers. GSMC, an affiliate of the
Underwriter and the Seller, currently holds the AAPT Parent Loans and the CAP
Parent Loan, and an option to repurchase the Whitehall Partner Loan from
GMACCM, and if GSMC were to foreclose on the collateral for any of these
loans following an event of default, GSMC would become the owner of the AAPT
Borrowers, the CAP Borrower or the Whitehall Borrower, as applicable. Certain
affiliates of the Underwriter, including GSMC and the Seller, engage in, and
intend to continue to engage in, the acquisition, development, operation,
financing and disposition of real estate-related assets in the ordinary
course of their business, and are not prohibited in any way from engaging in
business activities similar to or competitive with those of the borrowers.
See "Risk Factors--The Mortgage Loans--Other Financing", "--Conflicts of
Interest", "Description of the Mortgage Pool and the Underlying Mortgaged
Properties--Description of the
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Mortgage Loans--The AAPT Pool Loan--The AAPT Parent Loans", "--The CAP Pool
Loan--The CAP Parent Loan", "--The Whitehall Pool Loan--The Whitehall Partner
Loans", and "--The Montehiedra Loan--The Montehiedra Partner Loan".
The Seller has been advised by the Underwriter that, subject to applicable
laws and regulations, it currently intends to make a market in the Offered
Certificates following completion of the offering. However, it is not
obligated to do so and any market making may be discontinued at any time
without notice. In addition, such market-making activity will be subject to
the limits imposed by the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended. There can be no assurance that
an active trading market will develop or be sustained following the
completion of the offering.
As and to the extent required by applicable law, this Prospectus
Supplement and the accompanying Prospectus may be used by Goldman, Sachs &
Co. in connection with offers and sales of the Offered Certificates in
certain market-making transactions at prices related to prevailing market
prices at the time of sale. The Seller will not receive any proceeds from
such transactions. Goldman, Sachs & Co. may act as principal or agent in such
transactions.
The Seller has agreed to indemnify the Underwriter against, or make
contributions to the Underwriter with respect to, certain liabilities,
including liabilities under the Securities Act of 1933.
In connection with the offering, the Underwriter may purchase and sell the
Offered Certificates in the open market. These transactions may include
purchases to cover short positions created by the Underwriter in connection
with the offering. Short positions created by the Underwriter involve the
sale by the Underwriter of a greater number of Certificates than they are
required to purchase from the Seller in the offering. The Underwriter also
may impose a penalty bid, whereby selling concessions allowed to broker-deals
in respect of the securities sold in the offering may be reclaimed by the
Underwriter if such Certificates are repurchased by the Underwriter in
covering transactions. These activities may maintain or otherwise affect the
market price of the Certificates, which may be higher than the price that
might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be
affected in the over-the-counter market or otherwise.
This Prospectus Supplement and the Prospectus may only be issued or passed
on in the United Kingdom to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom this Prospectus Supplement and
the Prospectus may otherwise lawfully be issued or passed on.
The Trust Fund described in this Prospectus Supplement 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 (as amended).
EXPERTS
The combined financial statements of Certain Entities Under Common Control
of Cadillac Fairview S.C. Finance Inc. as of December 31, 1996 and 1995, and
for each of the years in the three-year period ending December 31, 1996, have
been included in this Prospectus Supplement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, upon the authority of said firm as experts in accounting
and auditing.
The audited statements of revenue and certain expenses of the Century
Plaza Towers for the years ended December 1996, 1995 and 1994 included in
this Prospectus Supplement have been audited by Ernst & Young LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said report.
Cushman & Wakefield, Inc. and Koeppel Tener Real Estate Services, Inc. are
each an independent real estate brokerage, appraisal, management and
consulting firm, and have appraised the current fair
S-271
<PAGE>
market value of the Mortgaged Properties. The results of such appraisals and
references to such firms are set forth in the information included in this
Prospectus Supplement under the heading "Description of the Mortgage Pool and
the Underlying Mortgaged Properties--Description of the Borrowers and the
Properties" and in the complete report available for inspection at the
corporate trust office of the Trustee, and such summary report, together with
information based on the complete report included in this Prospectus
Supplement, have been included in this Prospectus Supplement in reliance upon
the authority of Cushman & Wakefield, Inc. and Koeppel Tener Real Estate
Services, Inc. as experts on real estate appraisals.
VALIDITY OF OFFERED CERTIFICATES
The validity of the Offered Certificates will be passed upon for the
Seller by Sullivan & Cromwell, New York, New York and for the Underwriter by
Cadwalader, Wickersham & Taft, New York, New York. The material federal
income tax consequences of the Offered Certificates will be passed upon for
the Seller by Cadwalader, Wickersham & Taft.
RATINGS
It is a condition to the issuance of the Offered Certificates that (i)
each of the Class A-1, Class A-2A, Class A-2B, Class A-2C, Class A-2D, Class
X-1A, Class X-1B and Class X-2 Certificates be rated "AAA" by each of Fitch
and DCR and "Aaa" by Moody's; (ii) the Class B Certificates be rated "AA" by
each of Fitch and DCR and "Aa2" by Moody's; (iii) the Class C Certificates be
rated "AA-" by each of Fitch and DCR and "Aa3" by Moody's; (iv) the Class D
Certificates be rated "A-" by Fitch, "A" by DCR and "A2" by Moody's; (v) the
Class E Certificates be rated "A-" by each of Fitch and DCR and "A3" by
Moody's; (vi) the Class F Certificates be rated "BBB" by each of Fitch and
DCR and "Baa2" by Moody's and (vii) the Class G Certificates be rated "BBB-"
by Fitch. The ratings on the Offered Certificates address the likelihood of
the timely receipt by holders thereof of all distributions of interest to
which they are entitled and, except in the case of the Class X-1A and Class
X-2 Certificates, distributions of principal by the Rated Final Distribution
Date. 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. 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 or the tax treatment of the
Certificates. The ratings do not address the fact that the Pass-Through Rates
of the Offered Certificates, to the extent that they are based on the
Adjusted WAC Rate, will be affected by changes therein due to variations in
the rates of amortization of the Mortgage Loans and by the existence of Group
1 Difference Amounts and the related Adjusted LIBOR Rate. See "Risk Factors"
herein and "Yield Considerations" in the Prospectus.
The Rating Agencies' ratings on mortgage pass-through certificates address
the likelihood of the receipt by holders of payments to which they are
entitled by the Rated Final Distribution Date. The Rating Agencies' ratings
take into consideration the credit quality of the mortgage pool, structural
and legal aspects associated with the Certificates, and the extent to which
the payment stream in the mortgage pool is adequate to make payments required
under the Certificates. Ratings on mortgage pass-through certificates do not,
however, represent an assessment of the likelihood, timing or frequency of
principal prepayments (both voluntary and involuntary) by mortgagors, or the
degree to which such prepayments might differ from those originally
anticipated. 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 or the possibility that
the holders of the Class X-1A or Class X-2 Certificates might not fully
recover their initial investment in the event of delinquencies or defaults or
rapid prepayments of the Mortgage Loans (including both voluntary and
involuntary prepayments) or the application of Realized Losses. As described
herein, the amounts payable with respect to the Class X-1A or Class X-2
Certificates consist only of interest. If all of the Mortgage Loans were to
prepay in the initial month, with the result that the Class X-1A or Class X-2
Certificateholders receive only a single month's interest and thus suffer a
nearly complete loss of their investment, all amounts "due" to such holders
will
S-272
<PAGE>
nevertheless have been paid, and such result is consistent with the rating
received on each of the Class X-1A or Class X-2 Certificates. Accordingly,
the ratings of the Class X-1A or Class X-2 Certificates should be evaluated
independently from similar ratings on other types of securities.
There can be no assurance as to whether any rating agency not requested to
rate the Offered Certificates will nonetheless issue a rating and, if so,
what such rating would be. A rating assigned to the Offered Certificates by a
rating agency that has not been requested by the Seller to do so may be lower
than the rating assigned by the Rating Agencies pursuant to the Seller's
request.
The rating of the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency.
S-273
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
<TABLE>
<CAPTION>
<S> <C>
380 Madison Additional Debt .................................. S-57
380 Madison Borrower ......................................... S-20, S-105
380 Madison Defeasance Date .................................. S-155
380 Madison Defeasance Deposit ............................... S-156
380 Madison Interest Rate .................................... S-20, S-155
380 Madison Loan ............................................. S-20
380 Madison Loan Trigger Event ............................... S-157
380 Madison Master Lease ..................................... S-20, S-53, S-105
380 Madison Master Lease Termination Date .................... S-105
380 Madison Master Lessee .................................... S-53, S-105
380 Madison Maturity Date .................................... S-20, S-154
380 Madison Monthly Debt Service Payment Amount .............. S-155
380 Madison Permitted Encumbrances ........................... S-105
380 Madison Property ......................................... S-20, S-105
AALDI ........................................................ S-101
AAP 1-49 ..................................................... S-101
AAPOP 1 ...................................................... S-101
AAPT ......................................................... S-150
AAPT Acceptable Manager ...................................... S-150
AAPT Additional Fixed Monthly Debt Service Payment Amount ... S-140
AAPT Adjusted Base Rate ...................................... S-143
AAPT Allocated Loan Amount ................................... S-145
AAPT Borrower ................................................ S-16
AAPT Borrowers ............................................... S-16
AAPT Credit Facility ......................................... S-147
AAPT Debt Service Coverage Ratio ............................. S-145
AAPT Defeasance Date ......................................... S-144
AAPT Defeasance Deposit ...................................... S-144
AAPT Excess Cash Flow ........................................ S-141
AAPT Excess Fixed Interest ................................... S-16, S-139
AAPT Excess Interest ......................................... S-18, S-140
AAPT Excess LIBOR Interest ................................... S-17, S-140
AAPT Fixed Component ......................................... S-15, S-139
AAPT Fixed Component Anticipated Repayment Date .............. S-16, S-139
AAPT Fixed Monthly Debt Service Payment Amount ............... S-140
AAPT Initial Fixed Interest Rate ............................. S-16, S-139
AAPT Initial Fixed Monthly Debt Service Payment Amount ...... S-140
AAPT Interest Rate Cap Agreement ............................. S-142
AAPT LIBOR A Component ....................................... S-15, S-139
AAPT LIBOR A Interest Rate ................................... S-16, S-139
AAPT LIBOR B Component ....................................... S-15, S-139
AAPT LIBOR B Interest Rate ................................... S-16, S-139
AAPT LIBOR Component Anticipated Repayment Date .............. S-16, S-139
AAPT LIBOR Component Prepayment Premium ...................... S-142
AAPT LIBOR Components ........................................ S-15, S-139
AAPT LIBOR Interest Rate ..................................... S-16, S-139
AAPT LIBOR Monthly Debt Service Payment Amount ............... S-140
AAPT LIBOR Revised Interest Rate ............................. S-140
AAPT Maturity Date ........................................... S-139
S-274
<PAGE>
AAPT Parent Borrower ......................................... S-154
AAPT Parent Borrowers ........................................ S-58, S-154
AAPT Parent Lender ........................................... S-153
AAPT Parent Loans ............................................ S-58, S-153
AAPT Permitted Encumbrances .................................. S-101
AAPT Permitted Owner ......................................... S-149
AAPT Pledged Subsidiary ...................................... S-58, S-154
AAPT Pool Loan ............................................... S-15
AAPT Properties .............................................. S-16, S-101, S-139
AAPT Property ................................................ S-16, S-101
AAPT Property Management Agreements .......................... S-104
AAPT Property Manager ........................................ S-104
AAPT Property Managers ....................................... S-104
AAPT Release Amount ......................................... S-145
AAPT Release Price ........................................... S-145
AAPT Revised Fixed Interest Rate ............................. S-16, S-139
AAPT Revised Fixed Monthly Debt Service Payment Amount ...... S-140
AAPT Revised LIBOR A Interest Rate ........................... S-17, S-140
AAPT Revised LIBOR B Interest Rate ........................... S-17, S-140
AAPT Revised LIBOR Interest Rate ............................. S-17
AAPT Sub-Groups .............................................. S-102
AAPT Substitute Property ..................................... S-150
AAPT Successor Borrower ...................................... S-145
ACMs ......................................................... S-54
ADA .......................................................... S-63
Additional Funds ............................................. S-157
Additional Parking Rent ...................................... S-100
Adjusted LIBOR Rate .......................................... S-29, S-201
Adjusted Total Assets ........................................ S-195
Adjusted WAC Rate ............................................ S-31, S-202
Advance Rate ................................................. S-243
Advances ..................................................... S-242
Affiliate Loans .............................................. S-58
Allocated Loan Amount ........................................ S-77, S-125,
S-145, S-164,
S-175
AMRESCO Management ........................................... S-9, S-260
AMRESCO Services ............................................. S-9
Annual Debt Service .......................................... S-77
Annualized Base Rent ......................................... S-78
Anticipated Repayment Date ................................... S-6, S-74, S-77
Anticipated Repayment Date Balance ........................... S-78
Anticipated Repayment Date LTV ............................... S-78
Anticipated Term ............................................. S-78
Appraisal Reduction Amount ................................... S-210
Appraisal Reduction Event .................................... S-210
ARD LTV ...................................................... S-6, S-78
Asbestos Work ................................................ S-156
Available Funds .............................................. S-198
Average Base Rent Per Square Foot ............................ S-78
Balloon Payment .............................................. S-199
Bank Space ................................................... S-156
S-275
<PAGE>
Bankruptcy Code .............................................. S-51
Base Amount .................................................. S-127
Base Interest Fraction ....................................... S-207
Base Parking Rent ............................................ S-100
Base Rate .................................................... S-143
Beneficial Owners ............................................ S-105
Best's ....................................................... S-137
Blackstone Capital ........................................... S-128
Blackstone Equity ............................................ S-128
Blackstone II ................................................ S-128
Blackstone IV ................................................ S-128
BRE/CF ....................................................... S-128
Business Day ................................................. S-10, S-142
Cadillac Fairview Allocated Loan Amount ...................... S-125
Cadillac Fairview Anticipated Repayment Date ................. S-13, S-122
Cadillac Fairview Base Amount ................................ S-124
Cadillac Fairview Borrowers .................................. S-12, S-86
Cadillac Fairview Debt Service Coverage Ratio ................ S-125
Cadillac Fairview Defeasance Date ............................ S-124
Cadillac Fairview Defeasance Deposit ......................... S-124
Cadillac Fairview Excess Cash Flow ........................... S-123
Cadillac Fairview Excess Interest ............................ S-13, S-123
Cadillac Fairview Initial Interest Rate ...................... S-13, S-122
Cadillac Fairview Maturity Date .............................. S-13, S-122
Cadillac Fairview Monthly Debt Service Payment Amount ....... S-123
Cadillac Fairview Permitted Encumbrances ..................... S-86
Cadillac Fairview Permitted Owner ............................ S-128
Cadillac Fairview Pool Loan .................................. S-12
Cadillac Fairview Properties ................................. S-12, S-86, S-122
Cadillac Fairview Release Amount ............................. S-125
Cadillac Fairview Revised Interest Rate ...................... S-13, S-123
Cadillac Fairview Trigger Event .............................. S-126
Cadillac Fairview U.S. ....................................... S-127, S-128
CAP Acceptable Manager ....................................... S-169
CAP Allocated Loan Amount .................................... S-164
CAP Anticipated Repayment Date ............................... S-21, S-162
CAP Borrower ................................................. S-21, S-108
CAP Credit Facility .......................................... S-166
CAP Debt Service Coverage Ratio .............................. S-164
CAP Defeasance Date .......................................... S-163
CAP Defeasance Deposit ....................................... S-163
CAP Excess Cash Flow ......................................... S-162
CAP Excess Interest .......................................... S-21, S-162
CAP Initial Interest Rate .................................... S-21, S-162
CAP Maturity Date ............................................ S-21, S-162
CAP Monthly Debt Service Payment Amount ...................... S-162
CAP Parent Borrower .......................................... S-58, S-172
CAP Parent Lender ............................................ S-172
CAP Parent Loan .............................................. S-58, S-172
CAP Permitted Encumbrances ................................... S-108
CAP Permitted Owner .......................................... S-168
S-276
<PAGE>
CAP Pool Loan ................................................ S-21
CAP Properties ............................................... S-21, S-108, S-161
CAP Property Management Agreements ........................... S-110
CAP Property Manager ......................................... S-110
CAP Property Managers ........................................ S-110
CAP Release Amount ........................................... S-165
CAP Release Price ............................................ S-164
CAP Revised Interest Rate .................................... S-21, S-162
CAP Sub-Groups ............................................... S-108
CAP Substitute Property ...................................... S-169
CAP Successor Borrower ....................................... S-164
CAPI ......................................................... S-169
CEDEL ........................................................ S-1, S-11, S-70
CEDEL Participants ........................................... S-213
Century Additional Debt ...................................... S-58
Century Plaza Towers Loan .................................... S-14
Century Towers Anticipated Repayment Date .................... S-14, S-132
Century Towers Beneficial Owners ............................. S-14, S-96
Century Towers Borrower ...................................... S-14, S-96
Century Towers Defeasance Date ............................... S-133
Century Towers Defeasance Deposit ............................ S-133
Century Towers Due Date ...................................... S-132
Century Towers Environmental Reports ......................... S-98
Century Towers Excess Cash Flow .............................. S-132
Century Towers Excess Interest ............................... S-15, S-132
Century Towers Facility Management Agreement ................. S-100
Century Towers Initial Interest Rate ......................... S-14, S-132
Century Towers Maturity Date ................................. S-132
Century Towers Monthly Debt Service Payment Amount .......... S-132
Century Towers OREA .......................................... S-99
Century Towers Parking Facility .............................. S-96, S-132
Century Towers Parking Facility Tenant ....................... S-96
Century Towers Permitted Encumbrances ........................ S-96
Century Towers Property ...................................... S-14, S-96, S-132
Century Towers Property Management Agreement ................. S-100
Century Towers Property Manager .............................. S-100
Century Towers Qualified Transferees ......................... S-136
Century Towers Revised Interest Rate ......................... S-14, S-132
Century Towers Triggering Event .............................. S-135
CERCLA ....................................................... S-54
Certificate Owners ........................................... S-213
Certificate Principal Amount ................................. S-3
Certificate Registrar ........................................ S-211
Certificateholder ............................................ S-211
Certificates ................................................. S-1, S-9
CF Inc. ...................................................... S-86, S-128
CFC .......................................................... S-86
CFCL ......................................................... S-12, S-86
CF-SCF ....................................................... S-86
CFUS Holding ................................................. S-127, S-128
Chase ........................................................ S-107
S-277
<PAGE>
Chilled Water Agreement ...................................... S-99
Class ........................................................ S-3, S-196
Class A Certificates ......................................... S-196
Class A-2A Component ......................................... S-197
Class A-2B Component ......................................... S-197
Class A-2C Component ......................................... S-197
Class A-2D Component ......................................... S-197
Class B Component ............................................ S-197
Class C Component ............................................ S-197
Class D Component ............................................ S-197
Class E Component ............................................ S-197
Class F Component ............................................ S-197
Class G Component ............................................ S-197
Class M Distribution Account ................................. S-244
Class Q Distribution Account ................................. S-244
Class X-1 Certificates ....................................... S-196
Class X-1A Prepayment Factor ................................. S-37, S-207
Code ......................................................... S-42
Collection Account ........................................... S-243
Collection Period ............................................ S-199
Commingled Fund .............................................. S-14, S-96
Commission ................................................... S-258
Company Control Group ........................................ S-129
Component .................................................... S-15, S-139
Component Notional Amount .................................... S-197
Composite 3:30 p.m. Quotation ................................ S-143
Coupon Strip Certificates .................................... S-29
Cross-over Date .............................................. S-36, S-207
Cut-Off Date ................................................. S-10
Cut-Off Date Allocated Loan Amount ........................... S-77
Cut-Off Date LTV ............................................. S-6, S-78
DCR .......................................................... S-43
Debt Service Coverage Ratio .................................. S-77
Default Interest ............................................. S-200
Default Rate ................................................. S-200
Defeasance Lockout Period .................................... S-26
Definitive Certificate ....................................... S-211
Department ................................................... S-267
Depositories ................................................. S-211
Directing Class .............................................. S-255
Distribution Date ............................................ S-3, S-197
Dover Mall Ground Lease ...................................... S-61
DSCR ......................................................... S-6, S-77
DTC .......................................................... S-1, S-11
Due Date ..................................................... S-10
Eligible Bank ................................................ S-245
EPA .......................................................... S-55
ERISA ........................................................ S-42, S-267
ERISA Plan ................................................... S-149, S-168
Euroclear .................................................... S-1, S-11, S-70
Euroclear Participants ....................................... S-213
S-278
<PAGE>
Event of Default ............................................. S-249
Excess Cash Flow ............................................. S-68
Excess Interest .............................................. S-69, S-200
Excess Interest Distribution Account ......................... S-244
Excess Prepayment Interest Shortfall ......................... S-209
Excess Rate .................................................. S-200
Exemption .................................................... S-42, S-268
Existing Finance Facility .................................... S-195
Extended Monthly Payment ..................................... S-252
Federal Funds Rate ........................................... S-143
First P&I Date ............................................... S-78
Fiscal Agent ................................................. S-3, S-10
Fitch ........................................................ S-43
Fixed Voting Rights Percentage ............................... S-251
Form 8-K ..................................................... S-85
FPGT ......................................................... S-96
FRGT ......................................................... S-14
GAAP ......................................................... S-75
Galleria at White Plains ..................................... S-86
GLA .......................................................... S-78
GMACCM ....................................................... S-259
GMACCM Responsible Party Agreement ........................... S-72
Group 1 Components ........................................... S-30, S-197
Group 1 Difference Amount .................................... S-31, S-203
Group 1 WAC Rate ............................................. S-31, S-202
Group 2 Loans ................................................ S-30, S-197
Group 2 WAC Rate ............................................. S-31, S-202
GSMC ......................................................... S-1, S-9
H.15(519) .................................................... S-143
holder ....................................................... S-211
Holders ...................................................... S-213
Hookston Ground Lease ........................................ S-61, S-112
HRO .......................................................... S-107
Hypo Bank .................................................... S-96
Income Account ............................................... S-183
Indirect Participants ........................................ S-212
Initial Class A-1 Margin ..................................... S-37, S-207
Initial Interest Rate ........................................ S-69
Interest Accrual Amount ...................................... S-33, S-200
Interest Accrual Period ...................................... S-200
Interest Distribution Amount ................................. S-32, S-200
Interest Period .............................................. S-142
Interest Reserve Account ..................................... S-244
Interest Reset Date .......................................... S-142
Interest Shortfall ........................................... S-33, S-200
KTR .......................................................... S-118
LC ........................................................... S-76
LFREI ........................................................ S-150
LIBOR ........................................................ S-141
LIBOR Business Day ........................................... S-142
LIBOR Determination Date ..................................... S-142
S-279
<PAGE>
Liquidation Fee .............................................. S-261
Listed Permitted Owner ....................................... S-149, S-168
Loan Group ................................................... S-30, S-197
Loan Group 1 ................................................. S-3, S-30, S-197
Loan Group 2 ................................................. S-3, S-30, S-197
Loan Sale Agreement .......................................... S-72
Loan-to-Value Ratio .......................................... S-78
Lock Box Accounts ............................................ S-243
Lower-Tier Distribution Account .............................. S-244
Lower-Tier Regular Interests ................................. S-265
Lower-Tier REMIC ............................................. S-3, S-40, S-265
LTV .......................................................... S-73, S-78
Manager's Consent ............................................ S-118
Maschellmac Ground Leases .................................... S-61, S-102
Master Servicer .............................................. S-3, S-9
Master Servicer Remittance Date .............................. S-241
Material Casualty ............................................ S-152, S-171
Material Condemnation ........................................ S-152, S-171
Middle-Tier Distribution Account ............................. S-244
Middle-Tier Regular Interests ................................ S-265
Middle-Tier REMIC ............................................ S-40, S-265
Montehiedra Anticipated Repayment Date ....................... S-24, S-188
Montehiedra Borrower ......................................... S-24, S-119
Montehiedra Debt Service Coverage Ratio ...................... S-190
Montehiedra Defeasance Date .................................. S-189
Montehiedra Defeasance Deposit ............................... S-189
Montehiedra Excess Cash Flow ................................. S-188
Montehiedra Excess Interest .................................. S-24, S-188
Montehiedra Holding II LP .................................... S-119
Montehiedra Holding LLC ...................................... S-119
Montehiedra Holding L.P. ..................................... S-119
Montehiedra Inc .............................................. S-119
Montehiedra Initial Interest Rate ............................ S-24, S-188
Montehiedra LLC .............................................. S-119
Montehiedra Loan ............................................. S-24
Montehiedra Manager's Consent ................................ S-122
Montehiedra Maturity Date .................................... S-188
Montehiedra Monthly Debt Service Payment Amount .............. S-188
Montehiedra Partner Loan ..................................... S-194
Montehiedra Partner Loans .................................... S-25, S-194
Montehiedra Permitted Encumbrances ........................... S-119
Montehiedra Property ......................................... S-24, S-119, S-188
Montehiedra Property Management Agreement .................... S-122
Montehiedra Property Manager ................................. S-122
Montehiedra Revised Interest Rate ............................ S-24, S-188
Monthly Payment .............................................. S-199
Moody's ...................................................... S-43
Mortgage ..................................................... S-72
Mortgage Loan Assumptions .................................... S-218
Mortgage Loans ............................................... S-1
Mortgage Pool ................................................ S-1, S-11
S-280
<PAGE>
Mortgage Rate ................................................ S-32, S-203
Mortgaged Properties ......................................... S-1, S-11
Mortgaged Property ........................................... S-72
Mortgages .................................................... S-11
MPMA ......................................................... S-105
Net Default Interest ......................................... S-199
Net Mortgage Rate ............................................ S-31, S-203
Net Operating Income ......................................... S-75
Net REO Proceeds ............................................. S-199
NOI .......................................................... S-75
NOI Trigger Event ............................................ S-157
Note ......................................................... S-11, S-72
Notional Amount .............................................. S-3, S-197
NYSCRF ....................................................... S-105
OCC .......................................................... S-78
Occupancy .................................................... S-78
Occupancy Costs .............................................. S-78
Offered Certificates ......................................... S-3
Ontario Teachers ............................................. S-128
Operating Event .............................................. S-161
Original Principal Balance ................................... S-78
Originators .................................................. S-26, S-72
Parking Facility Lease ....................................... S-100
Participants ................................................. S-211
Party in Interest ............................................ S-269
Pass-Through Rate ............................................ S-3, S-29, S-201
PCBs ......................................................... S-54
Percentage Interest .......................................... S-198
Permitted Investments ........................................ S-245
P&I Advance .................................................. S-38, S-241
Plan ......................................................... S-42, S-149,
S-168, S-214,
S-267
PML .......................................................... S-98
Pooling Agreement ............................................ S-9, S-238
Prepayment Interest Shortfall ................................ S-209
Prepayment Lockout Period .................................... S-67
Prepayment Premiums .......................................... S-199
Principal Distribution Amount ................................ S-36, S-204
Principal Prepayments ........................................ S-199
Principal Shortfall .......................................... S-36, S-204
Principal Window ............................................. S-6
Private Certificates ......................................... S-3, S-196
pro rata ..................................................... S-207
Property Advances ............................................ S-242
Property Condition Reports ................................... S-85
Property Manager ............................................. S-116
Prudential ................................................... S-14, S-96
psf .......................................................... S-78
PTCE ......................................................... S-269
Qualified Resultant Owner .................................... S-128
Qualified Transferee ......................................... S-158
S-281
<PAGE>
Rated Final Distribution Date ................................ S-225
Rating Agencies .............................................. S-43
Rating Agency ................................................ S-43
Realized Loss ................................................ S-208
Record Date .................................................. S-198
Reduction Interest Distribution Amount ....................... S-201
Reduction Interest Pass-Through Rate ......................... S-201
Reduction Interest Shortfall ................................. S-201
Reference Banks .............................................. S-142
Regular Certificates ......................................... S-3, S-41, S-203
Regulation D ................................................. S-142
Rehabilitation Fee ........................................... S-261
REMIC ........................................................ S-3, S-40
Removal Deadline ............................................. S-156
Renewal Option ............................................... S-100
REO Account .................................................. S-196
REO Mortgage Loan ............................................ S-204
REO Property ................................................. S-196
Repurchase Price ............................................. S-239
Required Rating .............................................. S-147
Reserve Accounts ............................................. S-73
Residual Certificates ........................................ S-41
Responsible Party ............................................ S-26
Restricted Group ............................................. S-43, S-269
Revised Interest Rate ........................................ S-68
Ritz Plaza Anticipated Repayment Date ........................ S-23, S-181
Ritz Plaza Borrower .......................................... S-23, S-117
Ritz Plaza Defeasance Date ................................... S-182
Ritz Plaza Defeasance Deposit ................................ S-182
Ritz Plaza Excess Cash Flow .................................. S-181
Ritz Plaza Excess Interest ................................... S-23, S-181
Ritz Plaza General Partner ................................... S-117
Ritz Plaza Initial Interest Rate ............................. S-23, S-181
Ritz Plaza Loan .............................................. S-23
Ritz Plaza Lockbox Trigger Event ............................. S-184
Ritz Plaza Maturity Date ..................................... S-181
Ritz Plaza Monthly Debt Service Payment Amount ............... S-181
Ritz Plaza Permitted Encumbrances ............................ S-117
Ritz Plaza Property .......................................... S-23, S-117, S-181
Ritz Plaza Property Management Agreement ..................... S-118
Ritz Plaza Property Manager .................................. S-118
Ritz Plaza Revised Interest Rate ............................. S-23, S-181
RSF .......................................................... S-15
Rules ........................................................ S-99, S-212
Sales Per SF ................................................. S-78
Scenario 1 ................................................... S-218
Scenarios .................................................... S-219
Scheduled Defeasance Payments ................................ S-144, S-164
Seller ....................................................... S-1, S-9
Sequential Pay Certificates .................................. S-28, S-196
Servicing Compensation ....................................... S-198
S-282
<PAGE>
Servicing Fee ................................................ S-259
Servicing Fee Rate ........................................... S-259
Servicing Standard ........................................... S-240
SF/Units ..................................................... S-78
Shannon Note ................................................. S-126
Similar Law .................................................. S-214, S-267
SMMEA ........................................................ S-44
S&P .......................................................... S-268
Special Servicer ............................................. S-260
Special Servicer's Appraisal Reduction Estimate .............. S-210
Special Servicing Fee ........................................ S-261
Specially Serviced Mortgage Loan ............................. S-240
Spread Rate .................................................. S-208
Stated Principal Balance ..................................... S-203
Subordinate Offered Certificates ............................. S-267
Successor Manager ............................................ S-246
Tax Lot Reserve Account ...................................... S-134
Telerate Page 3750 ........................................... S-142
Terms and Conditions ......................................... S-213
TI ........................................................... S-76
TI Credit Facility ........................................... S-134
TI/Leasing Commissions Reserve Account ....................... S-134
Total Assets ................................................. S-195
Total Revenue ................................................ S-75
Total Value .................................................. S-77
TREET ........................................................ S-14, S-96
Trust Fund ................................................... S-1
Trust REMICs ................................................. S-3
Trustee ...................................................... S-3, S-9, S-72
Trustee Fee .................................................. S-257
Trustee Fee Rate ............................................. S-257
Underwriter .................................................. S-1, S-9
Underwritten Net Cash Flow ................................... S-75
Unscheduled Payments ......................................... S-199
Updated Appraisal ............................................ S-251
Upper-Tier Distribution Account .............................. S-244
Upper-Tier REMIC ............................................. S-3, S-41, S-265
Value ........................................................ S-77
Vornado LP ................................................... S-119
Voting Rights ................................................ S-251
Weighted Average Life ........................................ S-6
Whitehall Allocated Loan Amount .............................. S-175
Whitehall Asset Manager ...................................... S-116
Whitehall Borrower ........................................... S-22, S-111
Whitehall Debt Service Coverage Ratio ........................ S-175
Whitehall Defeasance Date .................................... S-174
Whitehall Defeasance Deposit ................................. S-175
Whitehall Defeasance Lock-Out Date ........................... S-174
Whitehall III ................................................ S-111
Whitehall Interest Rate ...................................... S-173
Whitehall Maturity Date ...................................... S-22, S-173
S-283
<PAGE>
Whitehall Monthly Debt Service Payment Amount ................ S-173
Whitehall Partner Loan ....................................... S-57, S-180
Whitehall Permitted Encumbrances ............................. S-111
Whitehall Permitted Owner .................................... S-177
Whitehall Pool Loan .......................................... S-22
Whitehall Properties ......................................... S-22, S-111, S-173
Whitehall Release Amount ..................................... S-175
Whitehall V .................................................. S-86, S-128
Whitehall VI ................................................. S-128
Withheld Amounts ............................................. S-244
WMP Gen-Par .................................................. S-111
WMP I ........................................................ S-57, S-180
WMP II Gen-Par ............................................... S-111
WMP Limited Partnership ......................................
</TABLE>
S-284
<PAGE>
EXHIBIT A-1
FINANCIAL INFORMATION
CADILLAC FAIRVIEW PROPERTIES
<TABLE>
<CAPTION>
<S> <C>
Combined Interim Financial Statements (unaudited) ............................... A-1-2
Combined Financial Statements ................................................... A-1-6
Independent Auditors' Report .................................................... A-1-7
Combined Balance Sheets, Combined Statements of Operations and Owners' Equity
(Deficiency) and Combined Statements of Cash Flow ............................. A-1-8
Notes to Combined Financial Statements .......................................... A-1-11
</TABLE>
A-1-1
<PAGE>
CERTAIN ENTITIES UNDER
COMMON CONTROL OF CADILLAC
FAIRVIEW S.C. FINANCE INC.
------------------------
Combined Interim Financial Statements
April, 1997 and 1996
(unaudited)
A-1-2
<PAGE>
CERTAIN ENTITIES UNDER
COMMON CONTROL OF CADILLAC
FAIRVIEW S.C. FINANCE INC.
Combined Balance Sheer
as at April 30, 1997, with comparative figures for 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
($000)
<S> <C> <C>
ASSETS
------
Rental properties ....................... $250,599 $ 235,964
Amounts receivable....................... 3,996 10,180
Cash and cash equivalents................ 7,830 9,104
Other assets............................. 18,167 12,690
---------- -----------
$280,592 $ 267,938
========== ===========
LIABILITIES
-----------
Debt on rental properties................ $259,162 $ 243,359
Advances from owners and affiliates ..... -- 133,829
Accounts payable and accrued
liabilities............................. 5,918 9,958
Deferred income.......................... 148 1,241
---------- -----------
265,228 388,387
OWNERS' EQUITY (DEFICIT)
------------------------
Owners' equity (deficit)................. 15,364 (120,449)
---------- -----------
$280,592 $ 267,938
========== ===========
</TABLE>
A-1-3
<PAGE>
CERTAIN ENTITIES UNDER
COMMON CONTROL OF CADILLAC
FAIRVIEW S.C. FINANCE INC.
Combined Statement of Operations and Owners' Equity (Deficit)
For the six months ended April 30, 1997, with comparative figures for 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
($000)
<S> <C> <C>
Revenue:
Rental revenue ................................... $ 32,609 $ 33,814
Interest income................................... 118 233
----------- -----------
32,727 34,047
Expenses:
Operating expenses................................ 10,148 10,625
Realty tax........................................ 2,640 2,687
Depreciation and amortization..................... 6,139 6,139
Interest expense.................................. 10,708 19,220
----------- -----------
$ 29,635 $ 38,670
----------- -----------
Net income (loss) before minority interest ....... 3,092 (4,624)
Minority interest.................................. (175) 306
----------- -----------
Net income (loss)................................ 2,917 (4,318)
Owners' deficit, beginning of period.............. (130,255) (112,126)
Capital contributions (distributions) and
advances......................................... 142,702 (4,005)
----------- -----------
Owners' equity (deficit), end of period .......... $ 15,364 $(120,449)
=========== ===========
</TABLE>
A-1-4
<PAGE>
CERTAIN ENTITIES UNDER
COMMON CONTROL OF CADILLAC
FAIRVIEW S.C. FINANCE INC.
Combined Statement of Cash Flow
For the six months ended April 30, 1997, with comparative figures for 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
($000)
<S> <C> <C>
CASH FLOW FROM OPERATIONS:
Net income (loss) ............................................... $ 3,092 $ (4,624)
Items not affecting cash:
Depreciation and amortization................................... 6,139 6,139
Minority interest's share of net income......................... 175 306
Changes in:
Amounts receivable............................................. 5,737 (1,418)
Accounts payable and accrued liabilities....................... (155,143) 805
Deferred income ............................................... (81) 218
Other assets................................................... 609 20,498
----------- ----------
Cash provided by operating activities......................... (139,472) 21,924
----------- ----------
FINANCING ACTIVITIES:
Proceeds from debt on rental porperties ......................... 20,364 --
Repayments of debt on rental properties.......................... -- (1,328)
Capital contributions (distributions) and advances from owners
and affiliates.................................................. 142,702 (4,005)
----------- ----------
Cash provided from (required by) financing activities ........ 163,066 (5,333)
----------- ----------
INVESTING ACTIVITIES:
Additions to rental properties................................... (16,583) (20,774)
----------- ----------
Net increase (decrease) in cash and cash equivalents ............. 7,011 (4,183)
Cash and cash equivalents, beginning of period.................... 819 13,287
----------- ----------
Cash and cash equivalents, end of period.......................... $ 7,830 $ 9,104
=========== ==========
</TABLE>
A-1-5
<PAGE>
KPMG
CERTAIN ENTITIES UNDER
COMMON CONTROL OF CADILLAC
FAIRVIEW S.C. FINANCE INC.
------------------------
Combined Financial Statements
December 31, 1996 and 1995
(With Independent Auditors' Report Thereon)
A-1-6
<PAGE>
[KPMG LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Cadillac Fairview S.C. Finance Inc.:
We have audited the combined balance sheets of Certain Entities Under Common
Control of Cadillac Fairview S.C. Finance Inc. (collectively, the Company) at
December 31, 1996 and 1995, and the combined statements of operations and
owners' equity (deficiency) and cash flow for each of the years in the
three-year period ended December 31, 1996. These combined financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the combined financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
combined financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Certain
Entities Under Common Control of Cadillac Fairview S.C. Finance Inc. at
December 31, 1996 and 1995, and the results of its combined operations and its
combined cash flow for each of the years in the three-year period ended
December 31, 1996 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
April 17, 1997
A-1-7
<PAGE>
CERTAIN ENTITIES UNDER COMMON CONTROL OF
CADILLAC FAIRVIEW S.C. FINANCE INC.
Combined Balance Sheets
as at December 31, 1996, with comparative figures for 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
($000)
<S> <C> <C>
ASSETS
------
Rental properties (Note 2)................ $237,703 238,355
Amounts receivable (Note 3) .............. 9,534 8,921
Cash and cash equivalents ................ 1,021 14,661
Other assets (Note 4)..................... 34,165 13,597
---------- -----------
$282,423 275,534
========== ===========
LIABILITIES
-----------
Debt on rental properties (Note 5) ...... 259,902 244,167
Advances from owners and affiliates ..... -- 134,474
Accounts payable and accrued liabilities 7,788 9,318
Deferred income .......................... 151 828
---------- -----------
267,841 388,787
OWNERS' EQUITY (DEFICIENCY)
---------------------------
Owners' equity (deficiency) .............. 14,582 (113,253)
---------- -----------
$282,423 275,534
========== ===========
</TABLE>
See accompanying notes to combined financial statements.
A-1-8
<PAGE>
CERTAIN ENTITIES UNDER COMMON CONTROL OF
CADILLAC FAIRVIEW S.C. FINANCE INC.
Combined Statements of Operations and Owners' Equity (Deficiency)
For the year ended December 31, 1996 with comparative figures for
1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
($000)
<S> <C> <C> <C>
Revenue:
Rental ..................................................... $ 63,926 66,786 62,596
Interest and other ......................................... 920 667 126
----------- ----------- ----------
64,846 67,453 62,722
----------- ----------- ----------
Expenses:
Property operating ......................................... 26,517 26,349 26,682
Interest on debt ........................................... 36,577 39,210 34,744
Depreciation and amortization .............................. 11,356 10,156 10,043
----------- ----------- ----------
74,450 75,715 71,469
----------- ----------- ----------
Loss on sale of land ....................................... -- -- (203)
Loss before minority interest .............................. (9,604) (8,262) (8,950)
Minority interest ........................................... (1,391) (759) (596)
----------- ----------- ----------
Net loss before extraordinary item ........................ (8,213) (7,503) (8,354)
Extraordinary item--loss on extinguishment of debt (Note 5) 15,781 -- --
----------- ----------- ----------
Net loss .................................................. (23,994) (7,503) (8,354)
Owners' deficiency, beginning of the year ................... (113,253) (101,753) (92,640)
Capital contributions ....................................... 1,143 -- 1,381
Cash distributions .......................................... (8,672) (3,997) (2,140)
Acquisition of minority interest ............................ (1,969) -- --
Conversion of advances from owners and affiliates to equity 161,327 -- --
----------- ----------- ----------
Owners' equity (deficiency), end of the year ................ $ 14,582 (113,253) (101,753)
=========== =========== ==========
</TABLE>
See accompanying notes to combined financial statements.
A-1-9
<PAGE>
CERTAIN ENTITIES UNDER COMMON CONTROL OF
CADILLAC FAIRVIEW S.C. FINANCE INC.
Combined Statements of Cash Flow
For the year ended December 31, 1996 with comparative figures for
1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
($000)
<S> <C> <C> <C>
CASH FLOW FROM OPERATIONS:
Net loss.................................................... $ (23,994) (7,503) (8,354)
Items not affecting cash:
Extraordinary item--loss on extinguishment of debt ....... 15,781 -- --
Depreciation and amortization ............................. 11,356 10,156 10,043
Loss on sale of land ...................................... -- -- 203
Minority interest's share of net loss ..................... 1,391 759 596
Changes in:
Amounts receivable ....................................... (613) (279) 175
Accounts payable and accrued liabilities ................. (5,555) 1,049 589
Accrued interest on advances from owners and affiliates . 10,457 11,008 6,108
Deferred income .......................................... (677) (12) (13)
Other assets ............................................. (4,994) (1,428) 303
----------- --------- ---------
Cash provided by operating activities ................. 3,152 13,750 9,650
----------- --------- ---------
FINANCING ACTIVITES:
Proceeds from debt on rental properties .................... 260,000 -- --
Repayments of debt on rental properties .................... (259,155) (2,458) (1,996)
Proceeds from debt deposited into reserve accounts, net ... (13,357) -- --
Refinancing costs .......................................... (8,687) -- --
Advances from owners and affiliates ........................ 16,396 4,690 1,167
Cash contributions ......................................... 1,143 -- 1,381
Cash distributions ......................................... (8,672) (3,997) (2,140)
----------- --------- ---------
Cash required by financing activities ................. (12,332) (1,765) (1,588)
----------- --------- ---------
INVESTING ACTIVITIES:
Additions to rental properties, net of related payables ... (4,460) (3,879) (7,801)
Proceeds from sale of land, net of related expenses ....... -- -- 293
----------- --------- ---------
Cash required by investing activities ....................... (4,460) (3,879) (7,508)
----------- --------- ---------
Net increase (decrease) in cash and cash equivalents ....... (13,640) 8,106 554
Cash and cash equivalents, beginning of year ................ 14,661 6,555 6,001
----------- --------- ---------
Cash and cash equivalents, end of year ...................... $ 1,021 14,661 6,555
=========== ========= =========
SUPPLEMENTAL INVESTING AND FINANCING ACTIVITIES:
Acquisition of minority interest ........................... $ 1,969 -- --
=========== ========= =========
Conversion of advances from owners and affiliates to equity $ 161,327 -- --
=========== ========= =========
Write-off of unamortized tenant improvements ............... $ -- 434 170
=========== ========= =========
Escrow deposit funded by advance from owners and affiliates $ -- -- 4,275
=========== ========= =========
</TABLE>
See accompanying notes to combined financial statements.
A-1-10
<PAGE>
CERTAIN ENTITIES UNDER COMMON CONTROL OF
CADILLAC FAIRVIEW S.C. FINANCE INC.
Notes to Combined Financial Statements
December 31, 1996 and 1995
(tabular amounts in $000, except as otherwise noted)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) GENERAL
Cadillac Fairview S.C. Finance Inc. (CFSC) is a Delaware corporation formed
on October 15, 1996 and is a wholly owned subsidiary of Cadillac Fairview
U.S., Inc. (CFUS). CFUS has elected to be treated as a real estate
investment trust (REIT) for federal and state income tax purposes. CFUS
is controlled by The Cadillac Fairview Corporation Limited (CFCL), a
Canadian corporation.
The accompanying combined financial statements include certain entities
under common control of CFSC and represent the combined accounts of the
following operating entities which own regional shopping centers subject
to the loan agreement (Note 5) (collectively, the CFSC Properties):
<TABLE>
<CAPTION>
ENTITY (CFSC OWNERSHIP INTEREST) REGIONAL SHOPPING CENTER AND LOCATION
-------------------------------- -------------------------------------
<S> <C>
CF Dover Mall L.P., Inc. (100%) Dover Mall (and Dover Commons strip
center)--Dover, Delaware
CF Esplanade L.P. (100%--See Note 5) Esplanade--Jefferson Parish, Louisiana
CF Golden East L.P. (100%) Golden East--Nash County, North Carolina
CF Georgia North DeKalb L.P. (100%) Market Square--North DeKalb, Georgia
CF Northpark L.P. (80%) Northpark Mall--Jackson, Mississippi
CF Southpark L.P. (100%) Shannon Southpark Mall--Union City, Georgia
CF Galleria White Plains L.P. (100%) The Galleria--White Plains, New York
</TABLE>
CFSC Properties does not operate as a separate legal entity. All significant
intercompany accounts and transactions have been eliminated.
(B) RENTAL PROPERTIES
The rental properties are recorded at the lower of cost less accumulated
depreciation and net recoverable amount.
Depreciation of buildings and improvements is provided on a straight-line
basis so as to fully depreciate the buildings and improvements over their
estimated useful lives of 35 years.
(Continued)
A-1-11
<PAGE>
CERTAIN ENTITIES UNDER COMMON CONTROL OF
CADILLAC FAIRVIEW S.C. FINANCE INC.
Notes to Combined Financial Statements, Continued
Depreciation on equipment is provided on a straight-line basis over
periods up to 5 years.
Leasing charges are deferred and amortized over the term of the related
leases. Other deferred charges are amortized over the terms appropriate to
the expenditure.
(C) INCOME TAXES
The CFSC Properties operate as partnerships and have not provided for income
tax expense or recovery on its accounting income or loss, as such amounts
are included in the returns of each partner or shareholder. Prior to the
reorganization of the CFSC Properties as single-purpose entities (Note
5), Cadillac Fairview Shopping Center Properties (Delaware), Inc.
operated as a qualified REIT subsidiary of CFUS.
(D) LEASES
The CFSC Properties, as lessor, have retained substantially all of the risks
and benefits of ownership and accounts for their leases as operating
leases. Rental income is recognized over the term of the lease using the
effective monthly rent. Assets held for leasing purposes are classified
as rental properties.
As a lessee, the CFSC Properties account for their leases as operating
leases.
(E) CASH FLOW STATEMENT
For the purposes of the combined statement of cash flow, CFSC Properties
consider all short-term deposits with a maturity of three months or less
to be cash equivalents.
Interest of $31,292,000 was paid during the year (1995--$25,767,000;
1994--$27,552,000).
(F) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures
About Fair Value of Financial Instruments, requires entities to disclose
the SFAS 107 value of all financial assets and liabilities for which it
is practicable to estimate. Value is defined in the statement as the
amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or
liquidation sale. The CFSC Properties believe the carrying amount of its
financial instruments included in the combined balance sheet (other than
mortgages and other loans) approximates SFAS 107 value due to the
relatively short maturity of these instruments. There is no quoted market
value available for any of the CFSC Properties' debt instruments.
Mortgage loans with a carrying balance of $259,902,000 approximates the
SFAS 107 value as the interest rate and terms approximate market at
December 31, 1996 (1995--$244,167,000 carrying value with an estimated
SFAS 107 value of $289,243,000 calculated by discounting the scheduled
loan payments to maturity).
(Continued)
A-1-12
<PAGE>
CERTAIN ENTITIES UNDER COMMON CONTROL OF
CADILLAC FAIRVIEW S.C. FINANCE INC.
Notes to Combined Financial Statements, Continued
(G) IMPAIRMENT OF LONG-LIVED ASSETS
CFSC Properties adopted the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of, (SFAS 121), on January 1, 1996.
SFAS 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or change in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future undiscounted
net cash flows expected to be generated by the asset. If such assets are
considered to be impairment, the impairment to be recognized is measured
by the amount of which the carrying amount of the assets exceed the fair
value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell. Adoption of SFAS
121 did not have an impact on financial position, results of operations,
or liquidity of CFSC Properties.
(H) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
combined financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
(2) RENTAL PROPERTIES
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land........................................... $ 47,232 45,854
Buildings and improvements..................... 292,870 288,013
Equipment...................................... 2,256 2,477
---------- ---------
342,358 336,344
Less accumulated depreciation and
amortization.................................. 104,655 97,989
---------- ---------
$237,703 238,355
========== =========
</TABLE>
(3) AMOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accounts receivable............ $2,785 2,542
Accrued rental income
(Note 7)...................... 6,749 6,379
-------- -------
$9,534 8,921
======== =======
</TABLE>
(Continued)
A-1-13
<PAGE>
CERTAIN ENTITIES UNDER COMMON CONTROL OF
CADILLAC FAIRVIEW S.C. FINANCE INC.
Notes to Combined Financial Statements, Continued
(4) OTHER ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Prepaid expenses and other
assets........................... $ 4,089 7,457
Deferred expenses................. 8,585 1,865
Restricted cash................... 21,491 4,275
--------- -------
$34,165 13,597
========= =======
</TABLE>
(5) DEBT ON RENTAL PROPERTIES
On November 26, 1996, each of the CFSC Properties obtained financing from an
affiliate of a shareholder of CFCL to refinance the existing mortgage
loans, pay costs of the refinancing, and fund certain reserves as defined
in the Loan Agreement. In connection with the refinancing, each of the
CFSC Properties was reorganized as a single-purpose entity. The
reorganized CFSC Properties and the amount of the financing are as
follows:
<TABLE>
<CAPTION>
Successor Entity/Predecessor Entity 1996 1995
----------------------------------- ---- ----
<S> <C> <C>
CF Dover Mall L.P./Cadillac Fairview Shopping Center Properties
(Delaware), Inc.................................................. $ 35,500 37,000
CF Esplanade L.P./C.F. Kenner Associates Limited Partnership ..... 51,400 57,203
CF Golden East L.P./C.F. Rocky Mount Associates................... 22,000 26,025
CF Georgia North DeKalb L.P./C.F.-H North DeKalb Center
Associates....................................................... 10,000 36,003
CF Northpark L.P./Ridgeland Associates............................ 51,000 33,776
CF Southpark L.P./C.F. Shannon Associates......................... 21,000 16,736
CF Galleria White Plains L.P./C.F. White Plains Associates ....... 69,100 37,424
---------- --------
$260,000 244,167
========== ========
</TABLE>
The loans have a stated maturity date of November 26, 2026 and are repayable
in monthly installments of principal and interest at 7.935% through
November 26, 2003. Thereafter the loans bear interest at 9.935% payable
in monthly installments of principal and interest at 7.935% with interest
of 2% deferred and added to the debt balance and accruing interest at
9.935%. It is the intention of CFSC Properties to repay or refinance the
loans on November 26, 2003. After November 26, 2003, Available Cash Flow,
as defined, is to be used to prepay pro rata the outstanding principal
amounts of the loans, with the exception of the C.F. White Plains
Associates loan, and then deferred interest.
(Continued)
A-1-14
<PAGE>
CERTAIN ENTITIES UNDER COMMON CONTROL OF
CADILLAC FAIRVIEW S.C. FINANCE INC.
Notes to Combined Financial Statements, Continued
Principal repayments of mortgage loans are due approximately as follows:
<TABLE>
<CAPTION>
<S> <C>
Years ending December 31:
1997 $ 2,162
1998 2,342
1999 2,538
2000 2,691
2001 2,975
Subsequent to 2001 247,194
---------
$259,902
=========
</TABLE>
Pursuant to the loan agreement, CF Southpark L.P. (Shannon shopping center)
is subject to a mandatory prepayment at the election of the lender if
certain events occur prior to October 17, 1998, as defined. An anchor
tenant announced its intention to close its store at the Shannon Shopping
Center, which is an event that allows the lender the option to demand
prepayment of the loan. CFSC Properties is in the final stages of
negotiation with a replacement tenant and management is having
discussions with the lender to permit the loan to remain outstanding.
The loan agreement requires the CFSC Properties to deposit all receipts in a
lock-box deposit account and fund tax and escrow, leasing, and capital
reserve accounts, as defined. Total restricted cash at December 31, 1996,
pursuant to the loan agreement is $19,641,000.
The mortgage loans are cross collateralized by the properties held within
the respective partnerships. The Loan Agreement contains financial
covenants regarding minimum net operating income and coverage ratios.
In connection with the refinancing, the CFSC Properties recognized a loss,
including prepayment penalties, on the extinguishment of the existing
mortgage loans of $15,781,000, all of which was recorded at November 26,
1996 (date of extinguishment) as an extraordinary item in the
accompanying combined statement of operations and owners' equity
(deficiency).
In connection with the reorganization of the CFSC Properties into single
purpose entities on November 26, 1996, the net assets of the predecessor
entity were contributed to the successor entity and all advances from
owners and affiliates were converted to equity.
(Continued)
A-1-15
<PAGE>
CERTAIN ENTITIES UNDER COMMON CONTROL OF
CADILLAC FAIRVIEW S.C. FINANCE INC.
Notes to Combined Financial Statements, Continued
The balance of mortgage loans refinanced on November 26, 1996 is as follows:
<TABLE>
<CAPTION>
Weighted-average
interest rates at
November 26, 1996 Amount
----------------- ----------
<S> <C> <C>
Mortgage loans:
At fixed rates 11% $203,464
At variable
rates 7% 35,265
---------
$238,729
=========
</TABLE>
Refinanced mortgage loans described above were secured by real estate
assets. Refinanced loans of $70,522,000 were subject to additional
interest, if earned. For the period from January 1, 1996 to November 26,
1996, additional interest amounted to $1,754,000 (1995--$1,816,000;
1994--$689,000). In addition, appreciation interest of $1,200,000 on a
certain mortgage loan was paid on maturity on November 1, 1996. The
amount has been recognized on a straight-line basis over the related loan
term and $60,000 has been included as interest expense (1995 and
1994--$240,000).
In connection with the refinancing described above, a wholly owned
subsidiary of CFUS purchased the venture partner's 5% limited partnership
interest in C.F. Kenner Associates Limited Partnership by assuming the
limited partner's net deficit of $1,969,000 in the partnership.
(6) RELATED PARTY TRANSACTIONS
Related party transactions not disclosed elsewhere are outlined below:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest incurred on advances from owners and
affiliates (prior to the conversion to equity) at
variable rates ranging from 5.91% to 10.25% at
November 26, 1996 $10,457 11,287 8,261
Fees and expenses paid or payable to affiliates of a
shareholder of CFCL as of December 31, 1996 in
connection with the refinancing (see Note 5). 5,252 -- --
</TABLE>
(Continued)
A-1-16
<PAGE>
CERTAIN ENTITIES UNDER COMMON CONTROL OF
CADILLAC FAIRVIEW S.C. FINANCE INC.
Notes to Combined Financial Statements, Continued
(7) LEASING ACTIVITIES
The CFSC properties as a lessor, have entered into noncancelable operating
leases which expire on various dates through 2016.
The future minimum lease payments to be received under these operating
leases as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Years ending October 31:
------------------------
1997 $ 35,509
1998 32,932
1999 30,518
2000 28,687
2001 26,782
Subsequent to 2001 99,333
---------
$253,761
=========
</TABLE>
Percentage rents included in rental income were approximately $1,449,000 for
the year ended December 31, 1996 (1995--$2,725,000; 1994--$2,091,000).
A number of tenant leases provide for free rent or scheduled rent increases
during the term of the leases. Generally accepted accounting principles
require that rental income be recorded for the period of occupancy using
the effective monthly rent, which is the average monthly rent for the
entire period of occupancy during the term of the lease. Included in
(deducted from) rental income for the year ended December 31, 1996 is
approximately $370,000 [1995--($267,000); 1994--$355,000] as a result of
lease payments differing from the effective monthly rent described above.
A-1-17
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT A-2
FINANCIAL INFORMATION
CENTURY PLAZA TOWERS
---------------------
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Report of Independent Accountants...................... A-2-3
Statement of Revenues and Certain Expenses
(unaudited)........................................... A-2-4
Notes to Statement of Revenues and Certain Expenses ... A-2-5
Report of Independent Auditors......................... A-2-8
Statements of Revenues and Certain Expenses............ A-2-9
Notes to Statements of Revenues and Certain Expenses .. A-2-10
</TABLE>
A-2-1
<PAGE>
The Century Plaza Towers
Statement of Revenues and Certain Expenses
(Unaudited)
Three Months ended March 31, 1997
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Review Report of Independent Accountants.................. 1
Statement of Revenues and Certain Expenses (Unaudited)
Statement of Revenues and Certain Expenses................ 2
Notes to Statement of Revenues and Certain Expenses ...... 3
</TABLE>
A-2-2
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD]
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
To the Members
One Hundred Towers L.L.C.
We have reviewed the accompanying statement of revenues and certain expenses
of the Century Plaza Towers owned by Delta Towers Joint Venture (the Venture)
for the three months ended March 31, 1997. All information in this statement
is the representation of the management of the Venture.
We conducted our review in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. A review consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope that an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the accompanying
statement of revenues and certain expenses taken as a whole. Accordingly, we
do not express such an opinion.
The accompanying statement of revenues and certain expenses were prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Prospectus Supplement relating to
the GS Mortgage Securities Corporation II Commercial Mortgage Pass-Through
Certificates, Series 1997-GL I, and are not intended to be a complete
presentation of the Venture's revenues and expenses.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying statement of revenues and certain expenses
in order for them to be in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Los Angeles, California
April 21, 1997
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
A-2-3
<PAGE>
The Century Plaza Towers
Statement of Revenues and Certain Expenses
(Unaudited)
Three Months ended March 31, 1997
<TABLE>
<CAPTION>
<S> <C>
REVENUES:
Rental income.......................... $12,875,424
Garage revenues........................ 2,676,037
Other.................................. 58,295
-------------
Total revenues.......................... 15,609,756
-------------
EXPENSES:
Operating.............................. 3,346,201
Garage................................. 388,722
Maintenance............................ 892,714
Management and administrative.......... 1,060,926
Insurance.............................. 766,125
Taxes.................................. 706,528
-------------
Total expenses.......................... 7,161,216
-------------
Excess of revenue over certain
expenses............................... $ 8,448,540
=============
</TABLE>
See accompanying notes.
A-2-4
<PAGE>
THE CENTURY PLAZA TOWERS
Notes to Statement of Revenues and Certain Expenses
(Unaudited)
THREE MONTHS ENDED MARCH 31, 1997
1. ORGANIZATION AND OPERATIONS
Delta Towers Joint Venture (the Venture), a California general partnership, is
a joint venture between Prudential Insurance Company of America (Prudential)
and DT Towers Limited Partnership. The Venture owns two office buildings known
as the "Century Plaza Towers," the parking garage beneath the buildings, and
the land under the ABC Entertainment Center, located in Los Angeles,
California. On April 2, 1997, the Venture transferred the Century Plaza Towers
to One Hundred Towers L.L.C., a newly formed entity, and subsequently closed
operations and dissolved.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying statement of revenues and certain expenses include the
revenues and expenses attributed to the buildings and the parking garage.
Interest income, interest expense, depreciation expense and amortization
expense have been excluded form the accompanying statement since these income
and expense items will not be comparable to the future operation of the
property. In addition, the revenues and expenses relating to the ABC
Entertainment Center have been excluded from the accompanying statement since.
subsequent to April 2, 1997, the ABC Entertainment Center will no longer be
reported as part of the Century Plaza Towers.
RENTAL INCOME
Rental revenue is recognized on a straight-line basis over the terms of the
related leases.
INCOME TAXES
No provision has been made for income taxes in the accompanying statement of
revenues and certain expense, since such taxes, if any, are the separate
liability of the venturers.
USE OF ESTIMATES
The preparation of the statement of revenues and certain expense in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the statement of
revenues and certain expenses and accompanying notes. Actual results could
differ from those estimates.
A-2-5
<PAGE>
THE CENTURY PLAZA TOWERS
Notes to Statement of Revenues and Certain Expenses
(Unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY TAXES
Included in taxes are real property taxes assessed based on the historical cost
of the property.
3. RELATED PARTY TRANSACTIONS
The Venture has entered into a property management and leasing agreement with
Premisys Real Estate Services, Inc. (Premisys), a subsidiary of Prudential.
Management fees of $401,722, leasing commissions of $407,364, and $909,141 of
reimbursements for certain payroll and fringe benefits were paid to Premisys
during the reported period.
Prudential and certain of its affiliates lease office space in the Century
Plaza Towers. Rental income includes income earned from these affiliates during
the reported period of $351,134.
4. COMMITMENTS AND CONTINGENCIES
The Venture is a party to various claims and legal actions. Management is
vigorously contesting these claims and actions and believes that the
probability of an unfavorable outcome from such proceedings, in the aggregate,
is remote and would not have a material adverse effect on the accompanying
statement of revenues and certain expense of the Venture.
In addition, the Venture has various commitments, including the completion of
contracts, arising in the usual course of business.
A-2-6
<PAGE>
THE CENTURY PLAZA TOWERS
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors ........................... 1
Statements of Revenues and Certain Expenses
Statements of Revenues and Certain Expenses .............. 2
Notes to Statements of Revenues and Certain Expenses .... 3
</TABLE>
A-2-7
<PAGE>
ERNST & YOUNG LLP LOGO
REPORT OF INDEPENDENT AUDITORS
To the Members
One Hundred Towers L.L.C.
We have audited the accompanying statements of revenues and certain expenses of
the Century Plaza Towers owned by Delta Towers Joint Venture (the Venture) for
each of the three years in the period ended December 31, 1996. These statements
are the responsibility of the Venture's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the basis of accounting used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying statements of revenues and certain expenses were prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Prospectus Supplement relating to the
GS Mortgage Securities Corporation II Commercial Mortgage Pass-Through
Certificates, Series 1997-GL I, and are not intended to be a complete
presentation of the Venture's revenues and expenses.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the revenues and certain expenses of the Venture for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Los Angeles, California
May 13, 1997
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
A-2-8
<PAGE>
The Century Plaza Towers
Statements of Revenues and Certain Expenses
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------
<S> <C> <C> <C>
Revenues:
Rental income ........................... $46,540,490 $48,039,045 $47,485,117
Garage revenues ......................... 10,765,692 10,014,278 10,165,915
Other ................................... 2,901,848 213,917 387,890
------------- ------------- -------------
Total revenues ........................... 60,208,030 58,267,240 58,038,922
------------- ------------- -------------
Expenses:
Operating ............................... 11,756,278 11,760,272 11,923,314
Garage .................................. 1,961,158 2,062,285 2,251,976
Maintenance ............................. 3,005,475 3,101,315 3,812,769
Management and administrative ........... 3,322,492 2,543,700 3,385,695
Insurance ............................... 3,116,084 2,437,847 1,455,035
Taxes ................................... 2,798,580 2,714,096 2,662,179
------------- ------------- -------------
Total expenses ........................... 25,960,067 24,619,515 25,490,968
------------- ------------- -------------
Excess of revenues over certain expenses $34,247,963 $33,647,725 $32,547,954
============= ============= =============
</TABLE>
See accompanying notes and Report of Independent Auditors.
A-2-9
<PAGE>
THE CENTURY PLAZA TOWERS
Notes to Statements of Revenues and Certain Expenses
Years ended December 31, 1996, 1995 and 1994
1. ORGANIZATION AND OPERATIONS
Delta Towers Joint Venture (the Venture), a California General partnership,
owns two office buildings known as the "Century Plaza Towers," the parking
garage beneath the buildings, and the land under the ABC Entertainment Center,
located in Los Angeles, California. The Venture was owned by AP Properties,
Ltd. (AP), whose general partner is an affiliate of JMB Realty Corporation
(JMB), and Prudential Insurance Company of America (Prudential). On March 10,
1995, AP assigned its interest in the Venture to DT Towers Limited Partnership.
On April 2, 1997, the Venture transferred the Century Plaza Towers to One
Hundred Towers L.L.C., a newly formed entity, and subsequently closed
operations and dissolved.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying statements of revenues and certain expenses include the
revenues and expenses attributed to the buildings and the parking garage.
Interest income, interest expense, depreciation expense and amortization
expense have been excluded from the accompanying statement since these revenue
and expense items will not be comparable to the future operation of the
property. In addition, the revenues and expenses relating to the ABC
Entertainment Center have been excluded from the accompanying statement since,
subsequent to April 2, 1997, the ABC Entertainment Center will no longer be
reported as part of the Century Plaza Towers.
RENTAL INCOME
Rental revenue is recognized on a straight-line basis over the terms of the
related leases.
INCOME TAXES
No provision has been made for income taxes in the accompanying statement of
revenues and certain expense, since such taxes, if any, are the separate
liability of the venturers.
A-2-10
<PAGE>
THE CENTURY PLAZA TOWERS
Notes to Statements of Revenues and Certain Expenses (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of the statements of revenues and certain expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
statement of revenues and certain expenses and accompanying notes. Actual
results could differ from those estimates.
PROPERTY TAXES
Included in taxes are real property taxes assessed based on the historical cost
of the property.
RELATED PARTY TRANSACTIONS
The Venture has entered into a property management and leasing agreement with
Premisys Real Estate Services, Inc. (Premisys), a subsidiary of Prudential.
Management fees of $1,545,452, $1,438,079 and $1,474,663 and leasing
commissions of $1,762,583, $1,003,992 and $2,017,158 were paid to Premisys
during 1996, 1995 and 1994, respectively. During 1996, 1995 and 1994, the
Venture reimbursed Premisys $1,918,587, $1,773,242 and $1,464,130,
respectively, for certain payroll and fringe benefits.
In 1995 and 1994, the Venture paid $1,992,614 and $866,354 for property and
liability insurance to affiliates of Prudential, respectively.
Prudential and certain of its affiliates lease office space in the Century
Plaza Towers. Rental income includes amounts earned from these affiliates,
totaling approximately $1,759,465, $1,811,000 and $1,624,000 during 1996, 1995
and 1994, respectively.
A-2-11
<PAGE>
THE CENTURY PLAZA TOWERS
Notes to Statements of Revenues and Certain Expenses (continued)
4. COMMITMENTS AND CONTINGENCIES
The Venture is a party to various claims and legal actions. Management is
vigorously contesting these claims and actions and believes that the
probability of an unfavorable outcome from such proceedings, in the aggregate,
is remote and would not have a material adverse effect on the accompanying
statements of revenues and certain expenses of the Venture.
In addition, the Venture has various commitments, including the completion of
contracts, arising in the usual course of business.
A-2-12
<PAGE>
EXHIBIT A-3
FINANCIAL INFORMATION
AAPT PROPERTIES
<TABLE>
<CAPTION>
<S> <C>
Summarized Financial Information..................... A-3-2
</TABLE>
A-3-1
<PAGE>
EXHIBIT A-3
SUMMARIZED FINANCIAL INFORMATION FOR
AAPT PROPERTIES
(unaudited)
<TABLE>
<CAPTION>
YEAR ENDED 4 MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
Total Revenues................. $36,476,870 $12,933,600
Total of Certain Expenses (see
note below)................... 12,558,945 4,349,527
----------------- --------------
Excess of revenues over
certain expenses (see note
below)........................ $23,917,925 $ 8,584,073
================= ==============
</TABLE>
- ------------
Note to Summarized Financial Information: "Certain expenses" do not give
effect to any deductions for debt service, depreciation, amortization,
capital expenditures, tenant improvements, leasing commissions or reserves
therefor.
A-3-2
<PAGE>
EXHIBIT B
For purposes of the representations and warranties, the date of
origination of each of the 380 Madison Loan and the Ritz Plaza Loan is the
date on which the Originator funded such loan, took an assignment of the
existing note and mortgage from the prior lender. With respect to each
Mortgage Loan, as of the Closing Date (except as may be specified in the
representation and warranty or on Schedule 1 to this Exhibit B):
(i) The information set forth in the mortgage loan schedule attached to
the Responsible Party Agreement or Loan Sale Agreement (as applicable) as
to the Mortgage Loan is true and correct in all material respects;
(ii) The applicable Responsible Party is the sole owner and holder of the
Mortgage Loan and has good and marketable title thereto, has full right,
power and authority to sell and assign such Mortgage Loan free and clear
of any interest or claim of a third party;
(iii) The Mortgage Loan has not been since the date of origination by the
applicable Originator, and currently is not, thirty or more days
delinquent, and the mortgagor is not in default thereunder beyond any
applicable grace period for the payment of any obligation to pay principal
and interest, taxes, insurance premiums and required reserves;
(iv) The applicable Originator has not advanced funds, or knowingly
received any advance of funds from a party other than the mortgagor
subject to the related Mortgage, directly or indirectly, for the payment
of any amount required by the Mortgage Loan;
(v) (A) The Mortgage Loan documents have been duly and properly executed,
and (B) the Mortgage Loan documents are legal, valid and binding
obligations of the mortgagor, and their terms are enforceable against the
mortgagor, subject only to bankruptcy, insolvency, moratorium, fraudulent
transfer, fraudulent conveyance, and similar laws affecting rights of
creditors generally and to the application of general principles of
equity;
(vi) The lien of each Mortgage is insured by an ALTA lender's title
insurance policy or its equivalent as adopted in the applicable
jurisdiction issued by a nationally recognized title insurance company,
insuring Originator, its successors and assigns, as to the first priority
lien of the Mortgage in the original principal amount of the Mortgage Loan
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, in the reasonable
judgment of the Responsible Party, materially interferes with the current
use of the related Mortgaged Property or the security intended to be
provided by such Mortgage or with the mortgagor's ability to pay its
obligations when they become due or the value of the related Mortgaged
Property, (c) the exceptions (general and specific) set forth in such
policy, none of which, individually or in the aggregate, in the reasonable
judgment of the Responsible Party, materially interferes with the security
intended to be provided by such Mortgage or with the mortgagor's ability
to pay its obligations when they become due (or if a title insurance
policy has not yet been issued in respect of the Mortgage Loan, a policy
meeting the foregoing description is evidenced by a commitment for title
insurance "marked-up" at the closing of the Mortgage Loan ), and (d) with
respect to the 380 Madison Loan, the 380 Madison Master Lease. To the
applicable Responsible Party's actual knowledge, no material claims have
been made under such title policy and no claims have been made thereunder;
(vii) As of the date of origination of the Mortgage Loan, and to the best
knowledge of the applicable Responsible Party, there are no mechanics',
materialman's or other similar liens or claims which have been filed for
work, labor or materials affecting the Mortgaged Property which are or may
be liens prior to, or equal or coordinate with, the lien of the Mortgage,
unless such lien is insured against under the related title insurance
policy;
(viii) (A) As of the date of origination of the Mortgage Loan, each
building or other improvement located on any Mortgaged Property was
insured by a fire and extended perils insurance policy, issued by an
insurer or reinsured by an insurer meeting the requirements of the
Mortgage Loan documents, in an amount not less than the replacement cost
of the Mortgaged Property; each
B-1
<PAGE>
Mortgaged Property was also covered by business interruption insurance and
comprehensive general liability insurance in amounts generally required by
institutional lenders for similar properties (or with respect to the Ritz
Plaza Property, amounts generally required by the applicable Originator);
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; and (B) the loan documents obligate the mortgagor to maintain
all such insurance (provided, however, that in the case of the 380 Madison
Loan, the 380 Madison Master Lessee may maintain such insurance in lieu of
the 380 Madison Borrower) and, at the mortgagor's failure to do so (or,
with respect to the 380 Madison Loan, at the Master Lessee's failure to do
so), authorize the mortgagee to maintain such insurance at the mortgagor's
cost and expense and to seek reimbursement therefor from such mortgagor;
(ix) Except as set forth on Schedule 1 attached hereto, as of the most
recent date of inspection of each Mortgaged Property by the applicable
Responsible Party, based solely on the applicable Responsible Party's
review of the Property Condition Reports and the applicable Responsible
Party's most recent visual inspection of the Mortgaged Property, no
building or other improvement on any Mortgaged Property has been affected
in any material manner or suffered any material loss as a result of any
fire, wind, explosion, accident, riot, war, or act of God or the public
enemy, and each Mortgaged Property is free of any material damage that
would affect materially and adversely the value of the Mortgaged Property
as security for the Mortgage Loan and is in good repair. The applicable
Responsible Party has neither received notice, nor is otherwise aware of,
any proceedings pending for the total condemnation of any Mortgaged
Property or a partial condemnation of any portion material to the
borrower's ability to perform its obligations under its related Mortgage
Loan;
(x) To the applicable Responsible Party's best knowledge, after review of
compliance confirmations from applicable municipalities, survey and/or
title insurance endorsements, none of the improvements (except, in the
case of the 380 Madison Loan, as disclosed in the survey therefor)
included for the purpose of determining the appraised value of each
Mortgaged Property at the time of the origination of the Mortgage Loan
lies outside of the boundaries and building restriction lines of the
Mortgaged Property, and no improvements on adjoining properties materially
encroach upon the Mortgaged Property except those which are insured
against by the title insurance policy (including endorsements thereto)
issued in connection with the Mortgage Loan, and all improvements on the
Mortgaged Property comply with the applicable zoning laws and/or set-back
ordinances in force when improvements were added (except, in the case of
the 380 Madison Loan, for the parking garage usage as noted on Schedule 1
hereto and the legal non-conforming use with respect to density
requirements);
(xi) The Mortgage Loan does not violate applicable usury laws.
(xii) Except as set forth in Schedule 1 hereto, since the date of
origination of the Mortgage Loan by the applicable Originator, the terms
of the Mortgage Loan have not been impaired, waived, altered, satisfied,
canceled, subordinated or modified in any respect (except with respect to
modifications the economic terms of which are reflected in the mortgage
loan schedule and which are evidenced by documents in the Mortgage Loan
file delivered to the Trustee) and no portion of the Mortgaged Property
has been released from the lien of the Mortgage in any manner;
(xiii) All applicable mortgage recording taxes and other filing fees have
been paid in full or deposited with the issuer of the title insurance
policy issued in connection with the Mortgage Loan for payment upon
recordation of the relevant documents;
(xiv) Each assignment of leases and rents, if any, creates a valid
assignment of, or a valid security interest in, certain rights under the
related leases, subject only to a license granted to the relevant
mortgagor to exercise certain rights and to perform certain obligations of
the lessor under such leases, including the right to operate the related
Mortgaged Property, subject only to those exceptions described in clause
(vi) above. To the best of the applicable Responsible Party's
B-2
<PAGE>
knowledge and without affirmative investigation, no person other than the
relevant mortgagor owns any interest in any payments due under such leases
that is superior to or of equal priority with the mortgagee's interest
therein, subject only to those exceptions described in clause (vi) above;
(xv) Each Mortgage, upon due recordation, is a valid and enforceable
first lien on the related Mortgaged Property, subject only to those
exceptions described in clause (vi) above;
(xvi) The applicable Responsible Party has not taken any action, nor has
knowledge that the mortgagor has taken any action, that would cause the
representations and warranties made by the mortgagor in the Mortgage Loan
documents not to be true;
(xvii) The proceeds of the Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder and the applicable
Responsible Party covenants that it will not make any future advances
under the Mortgage Loan to the mortgagor. Except for the escrows and
disbursements therefrom as contemplated by the loan agreement, any
mortgagor requirements for on or off-site improvements or as to
disbursement of any escrow funds therefor have been complied with;
(xviii) The applicable Responsible Party has inspected or caused to be
inspected each Mortgaged Property within the past twelve months preceding
the date hereof;
(xix) The Mortgage Loan does not have a shared appreciation feature,
other contingent interest feature or negative amortization;
(xx) The Mortgage Loan is a whole loan and contains no equity
participation by the lender;
(xxi) No fraudulent acts were committed by the applicable Responsible
Party in connection with the origination process of the Mortgage Loan;
(xxii) All taxes and governmental assessments that prior to the closing
date of the Mortgage Loan became due and owing in respect of each
Mortgaged Property have been paid, or an escrow of funds in an amount
sufficient to cover such payments has been established or are insured
against by the title insurance policy issued in connection with the
origination of the Mortgage Loan;
(xxiii) To the extent required under applicable law, the applicable
Responsible Party was authorized to transact and do business in each
jurisdiction in which a Mortgaged Property is located at all times when it
held the Mortgage Loan;
(xxiv) To the best knowledge of the applicable Responsible Party and
except as set forth on Schedule 1 hereto, there is no material default,
breach, violation or event of acceleration existing under any of the
Mortgage Loan documents and the applicable Responsible Party has not
received actual notice of any event (other than payments due but not yet
delinquent) 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; no waiver of the
foregoing exists and no person other than the holder of the Note may
declare any of the foregoing;
(xxv) Each Mortgage contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for the
realization against each related Mortgaged Property of the material
benefits of the security, including realization by judicial or, if
applicable, non-judicial foreclosure, and there is no exemption available
to the mortgagor which would materially interfere with such right to
foreclosure;
(xxvi) (A) With respect to each Mortgaged Property, a Phase I
environmental report and, in certain cases, a Phase II environmental
report or an update to such Phase I report was conducted by a licensed
qualified engineer. The applicable Responsible Party has reviewed each
such report and update. (B) The applicable Responsible Party, having made
no independent inquiry other than reviewing the environmental reports and
updates referenced herein and without other investigation or inquiry, has
no knowledge of any material and adverse environmental condition or
circumstance affecting any Mortgaged Property that was not disclosed in
the related report and/or update. The applicable Responsible Party has not
received any actual notice of a material violation of CERCLA
B-3
<PAGE>
or any applicable federal, state or local environmental law with respect
to any Mortgaged Property that was not disclosed in the related report
and/or update. (C) The applicable Responsible Party has not taken any
actions which would cause any Mortgaged Property not to be in compliance
with all federal, state and local laws pertaining to environmental
hazards;
(xxvii) The Mortgage Loan agreement contains provisions for the
acceleration of the payment of the unpaid principal balance of the
Mortgage Loan if (A) the mortgagor voluntarily transfers or encumbers all
or any portion of any related Mortgaged Property, or (B) any direct or
indirect interest in mortgagor is voluntarily transferred or assigned,
other than, in each case as permitted under the terms and conditions of
the Mortgage Loan documents;
(xxviii) In connection with the origination of the Mortgage Loan (other
than the 380 Madison Loan), the applicable Originator has received an
opinion of counsel (with customary exceptions, qualifications and
assumptions) to the effect that: (A) when each Mortgage and assignment of
leases and rents, if any, are duly recorded and indexed in the appropriate
state and local offices for such recording and indexing, and when the
related UCC financing statements are filed and indexed in the appropriate
state and local offices for such filing and indexing, such recording and
filings shall be sufficient to perfect the lien on the Mortgaged Property
described therein; (B) no re-recording or re-filing of any said
instruments will be necessary to continue the perfection and priority of
the Mortgage lien against the related Mortgaged Property, other than
filing UCC continuation statements with the appropriate state and local
offices as required under the law of the applicable state to continue the
perfection of the liens perfected by the UCC financing statements; and (C)
when recorded and filed as provided above, each related Mortgage and
assignment of leases and rents, if any, shall constitute a valid,
enforceable and perfected lien on, and security interest in, the related
Mortgaged Property;
(xxix) To the best of the applicable Responsible Party's knowledge and
without affirmative investigation or inquiry, there is no pending action,
suit or proceeding, arbitration or governmental investigation against the
mortgagor or any Mortgaged Property an adverse outcome of which could
materially affect the mortgagor's performance of its obligations under the
Mortgage Loan documents;
(xxx) The Mortgage Loan was originated by the applicable Responsible
Party and complies in all material respects with the applicable
Responsible Party's underwriting policies in effect as of the origination
date of the Mortgage Loan, except as described on any exceptions report
delivered to the lender prior to the Closing Date and except to the extent
that such policies are modified and/or superseded;
(xxxi) The origination, servicing and collection practices used by the
applicable Responsible Party have been in all respects legal, proper and
prudent and have met customary industry standards except to the extent
that, in connection with its origination, such standards were modified by
the Responsible Party in its reasonable discretion;
(xxxii) Except as set forth in the loan agreement for the Cadillac
Fairview Loan in connection with the assignment, transfer or conveyance of
any individual Mortgage, the Note and Mortgage contain no provision
limiting the right or ability of the applicable Originator to assign,
transfer and convey the Mortgage to any other person or entity;
(xxxiii) If any Mortgaged Property is subject to any leases, to the best
of the Responsible Party's knowledge, the mortgagor is the owner and
holder of the landlord's interest under any leases, and the related
Mortgage and assignment of leases and rents, if any, provides for the
appointment of a receiver for rents or allows the mortgagee to enter into
possession to collect rent or provide for rents to be paid directly to
mortgagee in the event of a default, subject to the exceptions described
in clause (vi) hereof;
(xxxiv) If a Mortgage is a deed of trust, a trustee, duly qualified under
applicable law to serve as such, has been properly designated and
currently so serves and is named in the deed of trust, and no fees or
expenses are or will become payable to the trustee under the deed of
trust, except in connection with the sale or release of the Mortgaged
Property following default or payment of the loan;
B-4
<PAGE>
(xxxv) Any insurance proceeds in respect of a casualty 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 the repair or
restoration progresses, or to the payment of the outstanding principal
balance of the Mortgage Loan together with any accrued interest thereon,
except to the extent of any excess proceeds after restoration and, with
respect to the 380 Madison Loan, subject to the terms of the 380 Madison
Master Lease;
(xxxvi) Based on the applicable Responsible Party's review of the
100-year flood plain map provided by FEMA, except for the Mortgaged
Properties set forth on Schedule 1, no Mortgaged Property is located in a
special flood hazard area (Zone A) as defined by the Federal Insurance
Administration and with respect to the Mortgaged Properties set forth on
Schedule 1, flood insurance coverage has been obtained;
(xxxvii) With respect to any Mortgage which is secured in whole or in
part by the interest of a borrower as a lessee under a ground lease and
based upon the terms of the ground lease or an estoppel letter from the
ground lessor (and, with respect to the Maschellmac Ground Leases, such
other sources as the Responsible Party deemed appropriate) the following
apply to such ground lease:
A. The ground lease or a memorandum thereof has been duly recorded,
the ground lease permits the interest of the lessee thereunder to be
encumbered by the related Mortgage, does not restrict the use of the
Mortgaged Property, lessee, its successors and assigns in a manner
that would adversely affect the security provided by the related
Mortgage, and there has not been a material change in the terms of the
ground lease since its recordation, with the exception of written
instruments which are part of the related Mortgage Loan documents
delivered to the Trustee.
B. The ground lease is not subject to any liens or encumbrances
superior to, or of equal priority with, the related Mortgage, other
than the related ground lessor's related fee interest.
C. The borrower's interest in the ground lease is assignable to the
holder of the Mortgage upon notice to, but without the consent of, the
lessor thereunder and, in the event that it is so assigned, it is
further assignable by the trustee and its successors and assigns upon
notice to, but without a need to obtain the consent of, such lessor.
D. To the best of the Responsible Party's knowledge, as of the
origination date of the Mortgage Loan, the ground lease was in full
force and effect and no material default had occurred under the ground
lease and there was no existing condition which, but for the passage
of time or the giving of notice, would result in a default under the
terms of the ground lease. Since the origination date of the Mortgage
Loan, no notice of default under the ground lease has been received by
the holder of the Mortgage.
E. The ground lease requires the lessor thereunder to give notice of
any default by the lessee to the mortgagee; and the ground lease, or
an estoppel letter received by the mortgagee from the lessor, further
provides that notice of termination given under the ground lease is
not effective against the mortgagee unless a copy of the notice has
been delivered to the mortgagee in the manner described in such ground
lease or estoppel letter.
F. The mortgagee is permitted a reasonable opportunity (including,
where necessary, sufficient time to gain possession of the interest of
the lessee under the ground lease) to cure any default under the
ground lease, which is curable after the receipt of notice of any
default before the lessor thereunder may terminate the ground lease.
G. The ground lease has a term which extends not less than 10 years
beyond the maturity date of the related Mortgage Loan.
H. The ground lease requires the lessor to enter into a new lease
with the mortgagee upon termination of the ground lease for any
reason, including rejection of the ground lease in a bankruptcy
proceeding, provided the mortgagee cures the lessee's defaults.
B-5
<PAGE>
I. Under the terms of the ground lease and the related Mortgage,
taken together, any related insurance proceeds 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 the proceeds as the repair or restoration
progresses, or to the payment of the outstanding principal balance of
the Mortgage Loan together with any accrued interest thereon.
J. Such ground lease does not impose any material restrictions on
subletting.
K. Either the ground lease or the related Mortgage contains the
borrower's covenant that such ground lease shall not be amended,
canceled, or terminated without the prior written consent of the
mortgagee.
L. Except as set forth on Schedule 1, either the ground lease or an
estoppel letter contains a covenant that the lessor thereunder is not
permitted, in the absence of an uncured default under the ground
lease, to disturb the possession, interest or quiet enjoyment of any
lessee in the relevant portion of the Mortgaged Property subject to
such ground lease for any reason, or in any manner, which would
materially adversely affect the security provided by the related
Mortgage;
(xxxviii) The Mortgage Loan is directly secured by a Mortgage on one or
more commercial properties, and the value assigned by the Responsible
Party, based on appraised values and subject to such adjustments as the
Responsible Party deemed necessary pursuant to its underwriting standards
as modified in connection with its origination of the Mortgage Loan (the
"Responsible Party's Appraised Value") with respect to such property or
properties was, in the aggregate, at least equal to 125% of the principal
balance of the Mortgage Loan at origination; provided that the Responsible
Party's Appraised Value must first be reduced by (1) the amount of any
lien on the property or properties that is senior to the Mortgage Loan and
(2) a proportionate amount of any lien that is in parity with the relevant
Mortgage Loan;
(xxxix) With respect to each Mortgaged Property, a Property Condition
Report was prepared by a licensed engineer. The applicable Responsible
Party has reviewed such Property Condition Report. Except as provided in
the Property Condition Reports, to the best of the applicable Responsible
Party's knowledge, based solely on its review of such Property Condition
Report, certificates of occupancy and building permits, as applicable,
have been issued with respect to the Mortgaged Property (subject, with
respect to the 380 Madison Loan, to the item noted on Schedule 1);
(xl) Any escrow accounts for taxes or other reserves required to be
funded on the date of origination of the Mortgage Loan pursuant to the
Mortgage Loan documents have been funded and, to the actual knowledge of
the Responsible Party, with respect to the Cadillac Fairview Pool Loan and
Whitehall Pool Loan, all such escrow accounts required to have been funded
as of the Cut-Off Date (taking into account any applicable notice and
grace period) have been funded;
(xli) The related Assignment of Mortgage constitutes a legal, valid and
binding assignment of such Mortgage to the Seller, and the related
reassignment of assignment of leases and rents, if any, constitutes a
legal, valid and binding assignment thereof to the Seller; and
(xliii) The related Note is not, and has not been since the date of
origination of the Mortgage Loan, secured by any collateral except the
lien of the related Mortgage, any related assignment of leases and rents
and any related security agreement and escrow agreement; the security for
the Mortgage Loan consists only of the related Mortgaged Property or
Properties, any leases (including without limitation any credit leases)
thereof, and any appurtenances, fixtures and other property located
thereon; and such Mortgaged Property or Properties do not secure any
mortgage loan other than the Mortgage Loan being transferred and assigned
to the Seller hereunder (except for Mortgage Loans, if any, which are
cross-collateralized with other Mortgage Loans being conveyed to the
Seller or subsequent transferee hereunder and identified on the mortgage
loan schedule.
B-6
<PAGE>
SCHEDULE 1 TO EXHIBIT B
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
1. Representation and Warranty (ix)
With respect to the Cadillac Fairview Loan and the Golden East
Crossing Mall, the Responsible Party noted some hurricane damage at
its inspection at the time of origination. A recent inspection by
representatives of Seller indicated the repair of such damage.
2. Representation and Warranty (x) and (xxxix)
With respect to the 380 Madison Loan, the usage of the parking garage
is not in compliance with the certificate of occupancy, dated March
10, 1992, in that parking spaces are not exclusively for tenants' use
but are rented out to the general public.
3. Representation and Warranty (xii) and (xxiv)
With respect to the Cadillac Fairview Loan, when Mervyn's announced
that it was closing its store at the Shannon Southpark Mall, the
mortgagee had the right under the loan agreement for the Cadillac
Fairview Loan to require the relevant Cadillac Fairview Borrower to
prepay the Note secured by the Shannon Southpark Mall. The mortgagee
has agreed to waive this right if certain conditions described in the
Prospectus Supplement are met. If such conditions are met, the
mortgagee will have the right to require the relevant Cadillac
Fairview Borrower to deposit additional cash collateral with the
mortgagee. See "Description of the Mortgage Pool and the Underlying
Mortgaged Properties--Description of the Mortgage Loans--The Cadillac
Fairview Pool Loan--Reserves" herein.
4. Representation and Warranty (xxxvi)
The following Mortgaged Properties are located in a special flood
hazard areas (Zone A):
Whitehall Properties:
Sun Buildings
Cadillac Fairview Properties:
Dover Mall
Dover Commons
Esplanade
Golden East
AAPT Properties:
Westpark
Maschellmac IV (portions of parcel, but not improvements)
5. Representation and Warranty (xxxix)
a) With respect to the Cadillac Fairview Pool Loan, building permits
were not obtainable for the North DeKalb Mall and the Golden East
Crossings Mall, and a certificate of occupancy was not obtainable
for the North DeKalb Mall.
b) With respect to the Whitehall Pool Loan,
i) For the Sun Buildings, the building permit for the 380 Fairview
Way property was issued but not finalized (final inspection was
not performed) and no certificates of occupancy were obtainable
because they are not issued by the municipality.
ii) For the North Ranch Plaza property, no building permits were
obtainable except for Building E, 465 Linden Canyon and no
certificates of occupancy were obtainable.
iii) For the 1511-1515 Third Avenue property, no certificate of
occupancy was obtainable.
B-7
<PAGE>
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<PAGE>
EXHIBIT C
ADJUSTED WAC RATE
<TABLE>
<CAPTION>
DISTRIBUTION DATE
(ASSUMING THAT THE 13TH
DAY OF EACH MONTH
IS THE DISTRIBUTION
DATE) WAC
<S> <C>
September 13, 1997. = 8.11
October 13, 1997 .. = 7.91
November 13, 1997 . = 8.11
December 13, 1997 . = 7.91
January 13, 1998 .. = 8.11
February 13, 1998 . = 8.11
March 13, 1998..... = 7.52
April 13, 1998..... = 8.11
May 13, 1998....... = 7.91
June 13, 1998...... = 8.11
July 13, 1998...... = 7.91
August 13, 1998 ... = 8.11
September 13, 1998. = 8.11
October 13, 1998 .. = 7.91
November 13, 1998 . = 8.11
December 13, 1998 . = 7.91
January 13, 1999 .. = 8.11
February 13, 1999 . = 8.11
March 13, 1999..... = 7.52
April 13, 1999..... = 8.11
May 13, 1999....... = 7.91
June 13, 1999...... = 8.11
July 13, 1999...... = 7.91
August 13, 1999 ... = 8.11
September 13, 1999. = 8.11
October 13, 1999 .. = 7.91
November 13, 1999 . = 8.11
December 13, 1999 . = 7.91
January 13, 2000 .. = 8.11
February 13, 2000 . = 8.11
March 13, 2000..... = 7.72
April 13, 2000..... = 8.11
May 13, 2000....... = 7.92
June 13, 2000...... = 8.11
July 13, 2000...... = 7.92
August 13, 2000 ... = 8.11
September 13, 2000. = 8.11
October 13, 2000 .. = 7.86
November 13, 2000 . = 8.05
December 13, 2000 . = 7.86
January 13, 2001 .. = 8.05
February 13, 2001 . = 8.05
March 13, 2001..... = 7.48
April 13, 2001..... = 8.05
May 13, 2001....... = 7.86
June 13, 2001...... = 8.05
July 13, 2001...... = 7.86
August 13, 2001 ... = 8.05
September 13, 2001. = 8.05
October 13, 2001 .. = 7.86
November 13, 2001 . = 8.05
December 13, 2001 . = 7.86
January 13, 2002 .. = 8.05
February 13, 2002 . = 8.05
March 13, 2002..... = 7.48
April 13, 2002..... = 8.05
May 13, 2002....... = 7.86
June 13, 2002...... = 8.05
July 13, 2002...... = 7.86
August 13, 2002 ... = 8.05
September 13, 2002. = 8.05
October 13, 2002 .. = 7.86
November 13, 2002 . = 8.05
December 13, 2002 . = 7.86
January 13, 2003 .. = 8.05
February 13, 2003 . = 8.05
March 13, 2003..... = 7.48
April 13, 2003..... = 8.05
May 13, 2003....... = 7.86
June 13, 2003...... = 8.05
July 13, 2003...... = 7.86
August 13, 2003 ... = 8.05
September 13, 2003. = 8.05
October 13, 2003 .. = 7.86
November 13, 2003 . = 8.05
December 13, 2003 . = 7.86
January 13, 2004 .. = 8.00
February 13, 2004 . = 8.00
<PAGE>
March 13, 2004..... = 7.68
April 13, 2004..... = 8.00
May 13, 2004....... = 7.84
June 13, 2004...... = 8.00
July 13, 2004...... = 7.84
August 13, 2004 ... = 8.00
September 13,
2004.............. = 8.00
October 13, 2004 .. = 7.84
C-1
<PAGE>
DISTRIBUTION DATE
(ASSUMING THAT THE 13TH
DAY OF EACH MONTH
IS THE DISTRIBUTION
DATE) WAC
November 13, 2004 . = 8.00
December 13, 2004 . = 7.84
January 13, 2005 .. = 8.00
February 13, 2005 . = 8.00
March 13, 2005..... = 7.52
April 13, 2005..... = 8.00
May 13, 2005....... = 7.84
June 13, 2005...... = 8.00
July 13, 2005...... = 7.84
August 13, 2005 ... = 8.00
September 13, 2005. = 8.00
October 13, 2005 .. = 7.84
November 13, 2005 . = 8.00
December 13, 2005 . = 7.84
January 13, 2006 .. = 8.00
February 13, 2006 . = 8.00
March 13, 2006..... = 7.52
April 13, 2006..... = 8.00
May 13, 2006....... = 7.84
June 13, 2006...... = 8.00
July 13, 2006...... = 7.84
August 13, 2006 ... = 8.00
September 13, 2006. = 8.00
October 13, 2006 .. = 7.84
November 13, 2006 . = 8.00
December 13, 2006 . = 7.84
January 13, 2007 .. = 8.00
February 13, 2007 . = 8.00
March 13, 2007..... = 7.52
April 13, 2007..... = 8.00
May 13, 2007....... = 7.67
June 13, 2007...... = 7.82
July 13, 2007...... = 7.57
August 13, 2007 ... = 8.06
September 13, 2007. = 8.06
October 13, 2007 .. = 7.80
November 13, 2007 . = 8.06
December 13, 2007 . = 7.80
January 13, 2008 .. = 8.06
February 13, 2008 . = 8.06
March 13, 2008..... = 7.54
April 13, 2008..... = 8.06
May 13, 2008....... = 7.80
June 13, 2008...... = 8.06
July 13, 2008...... = 7.80
August 13, 2008 ... = 8.06
September 13, 2008. = 8.06
October 13, 2008 .. = 7.80
November 13, 2008 . = 8.06
December 13, 2008 . = 7.80
January 13, 2009 .. = 8.06
February 13, 2009 . = 8.06
March 13, 2009..... = 7.28
April 13, 2009..... = 8.06
May 13, 2009....... = 7.80
June 13, 2009...... = 8.06
July 13, 2009...... = 7.80
August 13, 2009 ... = 8.06
September 13, 2009. = 8.06
October 13, 2009 .. = 7.80
November 13, 2009 . = 8.06
December 13, 2009 . = 7.80
January 13, 2010 .. = 8.06
February 13, 2010 . = 8.06
March 13, 2010..... = 7.28
April 13, 2010..... = 8.06
May 13, 2010....... = 7.80
June 13, 2010...... = 8.06
July 13, 2010...... = 7.80
August 13, 2010 ... = 8.06
September 13, 2010. = 8.06
October 13, 2010 .. = 7.80
November 13, 2010 . = 8.06
December 13, 2011 . = 7.80
January 13, 2011 .. = 8.06
February 13, 2011 . = 8.06
March 13, 2011..... = 7.28
April 13, 2011..... = 8.06
May 13, 2011....... = 7.80
June 13, 2011...... = 8.06
July 13, 2011...... = 7.80
August 13, 2011 ... = 8.06
September 13, 2011. = 8.06
October 13, 2011 .. = 7.80
November 13, 2011 . = 8.06
December 13, 2011 . = 7.80
January 13, 2012 .. = 8.06
February 13, 2012 . = 8.06
March 13, 2012..... = 7.54
April 13, 2012..... = 8.06
May 13, 2012....... = 7.80
June 13, 2012...... = 8.06
July 13, 2012...... = 7.80
August 13, 2012 ... = 8.06
September 13,
2012.............. = 8.06
October 13, 2012 .. = 7.80
C-2
<PAGE>
DISTRIBUTION DATE
(ASSUMING THAT THE 13TH
DAY OF EACH MONTH
IS THE DISTRIBUTION
DATE) WAC
November 13, 2012 . = 8.06
December 13, 2012 . = 7.80
January 13, 2013 .. = 8.06
February 13, 2013 . = 8.06
March 13, 2013..... = 7.28
April 13, 2013..... = 8.06
May 13, 2013....... = 7.80
June 13, 2013...... = 8.06
July 13, 2013...... = 7.80
August 13, 2013 ... = 8.06
September 13, 2013. = 8.06
October 13, 2013 .. = 7.80
November 13, 2013 . = 8.06
December 13, 2013 . = 7.80
January 13, 2014 .. = 8.06
February 13, 2014 . = 8.06
March 13, 2014..... = 7.28
April 13, 2014..... = 8.06
May 13, 2014....... = 7.80
June 13, 2014...... = 8.06
July 13, 2014...... = 7.80
</TABLE>
C-3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
<CAPTION>
FORM OF REPORTS TO CERTIFICATEHOLDERS
EXHIBIT D
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
===================================================================================================================================
REPORTING PACKAGE CONTENTS
Page Number Description
--------------- -----------
<S> <C> <C>
Table of Contents 1 Summary of Reports
REMIC Certificate Report 2 Payment information by Certificate Class
Certificate Interest Calculation 3-4 Detail interest payment information by Certificate Class
Servicing-Related Information 5
Aggregate Loan Status Report 6 Rolling 15 months of summarized loan status information
Delinquency Detail Report 7 Detail listing of all loans not paid through the most recent
payment due date
Property Table Reports 8 Update of selected stratification tables for all outstanding
loans and properties
Loan and Property Level Detail Listing (Updated
Annex A) 9 Current status of all loans and properties assigned to the
trust on the Closing Date
Special Servicing Summary and Detail 10-11 Current summary information regarding loans now speciallys
serviced
Loan Modification Detail 12 Cumulative list and detail of all loan modifications executed
since the Closing Date
REO Property Information 13 Current list and detail of all REO properties
===================================================================================================================================
D-1
PAGE 1 OF 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
REMIC CERTIFICATE REPORT
===================================================================================================================================
ORIGINAL OPENING PRINCIPAL PRINCIPAL NEGATIVE CLOSING INTEREST INTEREST PREPAYMENT PASS-THROUGH
CLASS FACE VALUE(1) BALANCE PAYMENT ADJ. OR LOSS AMORTIZATION BALANCE PAYMENT ADJUSTMENT PREMIUMS RATE(2)
CUSIP PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 NEXT RATE(3)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
Notes: (1) N denotes national balance not included in total (2) Interest paid minus interest adjustment minus deferred interest
accrual (3) Estimated
D-2
PAGE 2 OF 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
CERTIFICATE INTEREST ALLOCATIONS
===================================================================================================================================
CERTIFICATE INTEREST ALLOCATIONS
Accrued Interest Beginning Ending
Class Interest Distributed Upaid Interest Unpaid Interest
===================================================================================================================================
<S> <C> <C> <C> <C>
TOTALS:
===================================================================================================================================
Current Realized Losses
Cumulative Realized Losses
Prepayment Interest Shortfall
Excess Prepayment Interest Shortfall
Servicer Prepayment Interest Shortfall
===================================================================================================================================
D-3
PAGE 3 OF 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
CERTIFICATE INTEREST ALLOCATIONS
===================================================================================================================================
<S> <C>
Beginning Stated Principal Balance
Outstanding Purchased or Repurchased Loans
Repurchase Price
Beginning Reserve Account Balance
-------------------------------------------------------------
Loan Aggregate Reserve Aggregate Escrow
Name Balance Balance
==============================================================
TOTALS:
==============================================================
D-4
PAGE 4 OF 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
==================================================================================================================================
<S> <C>
SERVICING-RELATED INFORMATION
Servicing Fees (including per $1,000)
Special Servicing Fees (including per $1,000)
Additional Servicing Compensation
Interest Shortfall
Default, Net Default, and Excess Interest
P&I and Property Advance Detail
Prepayment Premium Collection
==================================================================================================================================
D-5
PAGE 5 OF 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
AGGREGATE LOAN STATUS INFORMATION
- -----------------------------------------------------------------------------------------------------------------------------------
Delinq Delinq Delinq Foreclosure/ Net Weighted
Distribution 1 Month 2 Months 3+ Months Bankruptcy REO Modifications Prepayments Avg.
----------------------------------------------------------------------------------------------------------------------
Date # Balance # Balance # Balance # Balance # Balance # Balance # Balance Coupon Remit
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Note: Foreclosure and REO Totals are Included in the Appropriate Delinquency Aging Category
D-6
PAGE 6 OF 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
DELINQUENCY LOAN DETAIL
- -----------------------------------------------------------------------------------------------------------------------------------
OUTSTANDING SPECIAL
LOAN AND CURRENT OUTSTANDING PROPERTY ADVANCE LOAN SERVICER
PROPERTY LOAN PAID THRU P&I P&I PROTECTION DESCRIPTION STATUS TRANSFER FORECLOSURE BANKRUPTCY
NAME GROUP PERIOD DATE ADVANCES ADVANCE* ADVANCES (1) (2) DATE DATE DATE REO DATE
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTALS: 0.00 0.00 0.00
===================================================================================================================================
(1) Advance Description 0. P&I Advance - Late Pament but less than one month delinquent
1. P&I Advance - Loan delinquent 1 month
2. P&I Advance - Loan delinquent 2 months
3. P&I Advance - Loan delinquent 3 months or more
4. P&I Advance - Loan in Grace Period
5. P&I Advance - Assumed Schedule Payment
(2) Loan Status 1. Specially Serviced
2. Foreclosure
3. Bankruptcy
4. REO
5. Prepay in Full
6. DPO
7. Foreclosure Sale
8. Bankruptcy Sale
9. REO Disposition
10. Modification / Workout
===================================================================================================================================
* Oustanding P&I Advances include the current period P&I Advance
D-7
PAGE 7 OF 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
===================================================================================================================================
<S> <C>
PROPERTY TABLE REPORTS
Undated Collateral Tables as they appear in Prospectus
===================================================================================================================================
D-8
PAGE 8 OF 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
LOAN LEVEL DETAIL
- -----------------------------------------------------------------------------------------------------------------------------------
SPECIAL PREPAY- PRE-
LOAN AND PRO- SERVICER NEG BEGINNING SCHEDULED MENTS/ PRE- PAID PAYMENT
PROPERTY GRP PERTY TRANSFER MATURITY AM SCHEDULED NOTE PRINCIPAL LIQUID- PAYMENT THROUGH PREMIUM LOAN
NAME ID TYPE DATE STATE DATE (Y/N) BALANCE RATE PAYMENT ATIONS DATE DATE AMOUNT STATUS(*)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Additional fields will be provided from Annex A in
prospectus, including updated occupancies, NOIs and
DSCRs. A detailed operating statement report will also be
prepared periodically for each property.
- -----------------------------------------------------------------------------------------------------------------------------------
(*) Legend 1) Specially Serviced 4) REO 7) Foreclosure Sale 10) Modification/Workout
2) Foreclosure 5) Prepay in Full 8) Bankruptcy Sale
3) Bankruptcy 6) DPO 9) REO Disposition
- -----------------------------------------------------------------------------------------------------------------------------------
D-9
PAGE 9 OF 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
SPECIALLY SERVICED LOAN SUMMARY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Number of Loans as of the Closing Date 0
Principal Balance as of the Closing Date 0.00
Current Number of Loans 0
Current Outstanding Principal Balance 0.00
Current Number of Specially Serviced Loans 0
Current Outstanding Principal Balance of Specially Serviced Loans 0.00
Percent of Specially Serviced Loans (per Current Number of Loans) 0.0000%
Percent of Specially Serviced Loans (per Current Outstanding Principal Balance) 0.0000%
-------------------------------------------------------------------------------------------------------------------------
CURRENT CURRENT
PRINCIPAL PRINCIPAL
CURRENT BALANCE AS A % BALANCE AS A %
NUMBER OF INITIAL PRINCIPAL OF SPECIALLY OF TOTAL POOL
SPECIALLY SERVICED LOAN STATUS LOANS PRINCIPAL BALANCE BALANCE SERVICED LOANS BALANCE
-------------------------------------------------------------------------------------------------------------------------
1) Request for waiver of Prepayment Premium
2) Payment Default
3) Request for Loan Modification or Workout
4) Loans with Borrower Bankruptcy
5) Loans in Process of Foreclosure
6) Loans now REO Property
7) Loans Paid Off
8) Loans Returned to Master Servicer
-------------------------------------------------------------------------------------------------------------------------
Total 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
D-10
PAGE 10 OF 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
SPECIALLY SERVICED LOAN DETAIL
- -----------------------------------------------------------------------------------------------------------------------------------
Special Debt Specially
Loan and Servicer Sched Sched Net Service Serviced
Property Transfer Principal Interest Maturity Property Operating Coverage Status
Name Date Balance Rate Date Type State Income NOI Date Ratio Code*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
*Legend: 1) Request for waiver of Prepayment Premium 4) Loans with Borrower Bankruptcy 7) Loan Paid Off
2) Payment Default 5) Loans in Process of Foreclosure 8) Loans Returned to Master Servicer
3) Request for Loan Modification or Workout 6) Loans now REO Property
- -----------------------------------------------------------------------------------------------------------------------------------
D-11
PAGE 11 OF 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
MODIFIED LOAN DETAIL
- -----------------------------------------------------------------------------------------------------------------------------------
Loan and
Modification Property Modification Modification
Date Name Date Description
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
D-12
PAGE 12 OF 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$942,890,000
GS MORTGAGE SECURITIES CORP II Statement Date:
GMAC COMMERCIAL MORTGAGE CORPORATION, AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AND AMRESCO MANAGEMENT, AS SPECIAL SERVICERS Prior Payment:
LASALLE NATIONAL BANK, AS TRUSTEE Record Date:
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, 1997-GL I WAC:
WAM:
REO PROPERTY INFORMATION
===================================================================================================================================
Property Date Loan Principal Updated Appraised Final Recovery Proceeds Deposited in Cumulative REO
Name Became REO Balance Value Determination Date Collection Account Revenues Collected
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
D-13
PAGE 13 OF 13
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE PROPERTY
LOAN PROPERTY NAME TYPE ADDRESS CITY
- -------- -------------------------- ---------- ----------------------------------------- ---------------------
<S> <C> <C> <C> <C>
CADILLAC FAIRVIEW POOL
1 Galleria at White Plains Retail 100 Main Street White Plains
2 The Esplanade Retail West Esplanade Avenue Kenner
3 Northpark Mall Retail 1200 East County Line Road Ridgeland
4 Dover Mall Retail 3054 Dover Mall Dover
5 Golden East Crossing Retail Benvenue Road and U.S. Highway 301 Bypass Rocky Mount
- --------------------------------------------------------------------------------------------------------------
6 Shannon Southpark Mall Retail 1000 Shannon Southpark Union City
7 North DeKalb Mall Retail 2050 Lawrenceville Highway Decatur
8 Dover Commons Retail 1200 North DuPont Highway Dover
TOTAL:
- --------------------------------------------------------------------------------------------------------------
CENTURY PLAZA TOWERS Office 2029-2049 Century Park East Los Angeles
- --------------------------------------------------------------------------------------------------------------
WHITEHALL POOL
1 City Center Office 1100 Main Street Kansas City
2 Bennett Park Office 5200 Great American Parkway Santa Clara
3 1511-1515 Third Avenue Retail 1511-1515 Third Avenue New York
4 Sun Buildings Industrial 1100 Cadillac Court and 380 Fairview Way Milpitas
5 North Ranch Plaza Retail 1125-1145 Lindero Canyon Road Thousand Oaks
- --------------------------------------------------------------------------------------------------------------
6 Stevens Creek Office 19925 Stevens Creek Boulevard Cupertino
7 Hookston Square Office 3476 Buskirk Avenue Pleasant Hill
8 San Valente Building Industrial 3200 Patrick Henry Drive Santa Clara
9 One Montvale Avenue Office One Montvale Avenue Stoneham
10 One Northwest Center Office 13831 Northwest Freeway Houston
- --------------------------------------------------------------------------------------------------------------
11 Downtown Plaza Office 211 East Ocean Boulevard Long Beach
TOTAL:
- --------------------------------------------------------------------------------------------------------------
MONTEHIEDRA Retail Montehiedra Ave & State Road 52 Rio Piedras, San Juan
- --------------------------------------------------------------------------------------------------------------
CAP POOL
1 Arboretum VI Office 9011 Arboretum Parkway Richmond
2 Arboretum VII Office 9211 Aboretum Parkway Richmond
3 Lakebrooke Pointe Office 4805 Lake Brook Pointe Richmond
4 Commerce Center Office 2812 Emerywood Parkway Richmond
5 Dabney I Office 2256 A-H Dabney Road Richmond
- --------------------------------------------------------------------------------------------------------------
6 Dabney II Office 2251 A-J Dabney Road Richmond
7 Dabney III Office 2112-2124 Tomlynn Road Richmond
8 Dabney IV Office 2161-2179 Tomlynn Street Richmond
9 Dabney V Office 2200-2224 Tomlynn Street Richmond
10 Dabney VI Office 2277 A-L Dabney Road Richmond
- --------------------------------------------------------------------------------------------------------------
11 Dabney VII Office 2246 A-N Dabney Road Richmond
12 Dabney VIII Office 2130 -2146 Tomlynn Road Richmond
13 Dabney IX Office 2248 A-O Dabney Road Richmond
14 Dabney X Office 2201-2247 Tomlynn Street Richmond
15 Dabney XI Office 2221-2245 Dabney Road Richmond
- --------------------------------------------------------------------------------------------------------------
16 Dabney A-1 (NNN) Industrial 2240 Dabney Road Richmond
17 Dabney A-2 (NNN) Industrial 2244 Dabney Road Richmond
18 Morton Marks (NNN) Industrial 2201 Dabney Street Richmond
19 2110 Tomlyn (NNN) Industrial 2110 Tomlynn Street Richmond
20 Brittons Hill (NNN) Office 2511-23 Britton's Road Richmond
- --------------------------------------------------------------------------------------------------------------
21 Westmoreland Plaza (NNN) Industrial 1957 Westmoreland Street Richmond
22 Plaza 1900 Office 1900 Gallows Road McLean
23 Campus Point Office 1880 Campus Point Reston
24 Oakwood Center Office 11781 Lee Jackson Highway Fairfax
25 Greenwood Corporate Center Office 12015 Lee Jackson Highway Fairfax
TOTAL:
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CUT-OFF
DATE
ALLOCATED CUT-OFF 1994
MORTGAGE YEAR BUILT/ TOTAL OCCUPANCY LOAN APPRAISED DATE TOTAL
LOAN STATE ZIP RENOVATED SF/UNITS OCCUPANCY AS OF DATE AMOUNT VALUE LTV REVENUE
- -------- ----- ----- ----------- --------- --------- ---------- ------------ ------------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CADILLAC
FAIRVIEW POOL
1 NY 10601 1980/1993 326,725 85% 23-May-97 $ 68,690,790 $100,000,000 68.7% $17,187,826
2 LA 70065 1985-86 411,925 86% 23-May-97 $ 51,095,609 $ 80,000,000 63.9% $11,658,939
3 MS 39157 1984 311,458 98% 23-May-97 $ 50,697,978 $ 85,000,000 59.6% $ 9,336,566
4 DE 19901 1982 418,261 88% 23-May-97 $ 33,003,390 $ 55,500,000 59.5% $ 7,788,001
5 NC 27804 1986-87 459,957 83% 23-May-97 $ 21,869,716 $ 38,000,000 57.6% $ 4,672,092
- ------------------------------------------------------------------------------------------------------------------
6 GA 30291 1980 276,505 78% 23-May-97 $ 20,875,638 $ 35,500,000 58.8% $ 6,719,770
7 GA 30033 1965/1986 437,757 82% 23-May-97 $9,940,780 $ 15,900,000 62.5% $ 5,232,721
8 DE 19901 1988 51,976 91% 23-May-97 $2,286,380 $ 4,000,000 57.2% $ 664,139
--------- ------- ------------ ------------- ----- -----------
2,694,564 86% $258,460,281 $413,900,000 62.4% $63,260,054
- ------------------------------------------------------------------------------------------------------------------
CENTURY PLAZA
TOWERS CA 90067 1975 2,280,199 91% 31-May-97 $229,369,475 $460,000,000 49.9% $58,038,922
- ------------------------------------------------------------------------------------------------------------------
WHITEHALL POOL
1 MO 64152 1978/1992 639,586 89% 20-May-97 $ 19,185,037 $ 36,000,000 53.3% $ 5,605,221
2 CA 95054 1983 227,699 89% 20-May-97 $ 11,507,064 $ 27,100,000 42.5% $ 2,389,336
3 NY 10028 1917/1990 55,000 100% 20-May-97 $ 7,519,663 $ 16,000,000 47.0% $ 1,619,252
4 CA 95035 1980/1988 231,840 100% 20-May-97 $ 7,489,981 $ 16,950,000 44.2% --
5 CA 91362 1991 69,394 88% 20-May-97 $ 5,669,431 $ 10,500,000 54.0% $ 1,263,160
- ------------------------------------------------------------------------------------------------------------------
6 CA 95014 1984 77,762 98% 20-May-97 $ 5,649,643 $ 12,800,000 44.1% $ 446,670
7 CA 94523 1984 192,042 95% 20-May-97 $ 5,273,659 $ 14,000,000 37.7% --
8 CA 95054 1979/1992 104,540 100% 20-May-97 $ 4,650,319 $ 9,700,000 47.9% --
9 MA 02180 1890/1987 100,420 99% 23-May-97 $ 2,117,379 $ 8,000,000 26.5% --
10 TX 77040 1983 150,465 85% 20-May-97 $ 1,721,606 $ 6,100,000 28.2% $ 885,059
- ------------------------------------------------------------------------------------------------------------------
11 CA 90802 1982/1996 100,146 88% 20-May-97 $ 1,444,567 $ 8,000,000 18.1% --
--------- ------- ------------ ------------- ----- -----------
1,948,894 92% $ 72,228,348 $165,150,000 43.7% $12,208,699
- ------------------------------------------------------------------------------------------------------------------
MONTEHIEDRA
PR 00926 1994 525,378 99% 01-May-97 $ 52,579,779 $ 92,000,000 57.2% --
- ------------------------------------------------------------------------------------------------------------------
CAP POOL
1 VA 23236 1991 73,195 92% 01-Jun-97 $ 4,156,316 $ 7,000,000 59.4% $ 1,155,492
2 VA 23236 1991 30,791 96% 01-Jun-97 $ 1,187,519 $ 2,000,000 59.4% $ 397,931
3 VA -- 1996 61,632 100% 01-Jun-97 $ 4,037,564 $ 6,800,000 59.4% --
4 VA 23294 1980 56,076 100% 01-Jun-97 $ 3,384,429 $ 5,700,000 59.4% $ 545,493
5 VA 23230 1982 33,600 100% 01-Jun-97 $ 712,511 $ 1,200,000 59.4% $ 122,398
- ------------------------------------------------------------------------------------------------------------------
6 VA 23230 1983 42,000 90% 01-Jun-97 $ 831,263 $ 1,400,000 59.4% $ 154,716
7 VA 23230 1984 23,850 100% 01-Jun-97 $ 534,384 $ 900,000 59.4% $ 120,628
8 VA 23230 1985 41,550 100% 01-Jun-97 $ 890,639 $ 1,500,000 59.4% $ 183,104
9 VA 23230 1985 45,353 100% 01-Jun-97 $ 1,128,143 $ 1,900,000 59.4% $ 249,833
10 VA 23230 1986 50,400 100% 01-Jun-97 $ 1,128,143 $ 1,900,000 59.4% $ 221,744
- ------------------------------------------------------------------------------------------------------------------
11 VA 23230 1987 33,419 100% 01-Jun-97 $ 950,015 $ 1,600,000 59.4% $ 252,482
12 VA 23230 1988 29,700 100% 01-Jun-97 $ 712,511 $ 1,200,000 59.4% $ 199,571
13 VA 23230 1989 30,263 86% 01-Jun-97 $ 771,887 $ 1,300,000 59.4% $ 220,762
14 VA 23230 1989 85,844 100% 01-Jun-97 $ 2,434,414 $ 4,100,000 59.4% $ 379,459
15 VA 23230 1994 45,250 100% 01-Jun-97 $ 1,306,271 $ 2,300,000 56.8% $ 48,615
- ------------------------------------------------------------------------------------------------------------------
16 VA 23230 1984 15,389 100% 01-Jun-97 $ 231,138 $ 1,200,000 19.3% $ 134,653
17 VA 23230 1993 33,050 100% 01-Jun-97 $ 1,317,460 $ 2,600,000 50.7% $ -
18 VA 23230 1962/1985 45,000 100% 01-Jun-97 $ 890,639 $ 1,500,000 59.4% $ 141,840
19 VA 23230 1965 15,910 100% 01-Jun-97 $ 326,568 $ 550,000 59.4% $ 27,584
20 VA 23230 1987 132,103 100% 01-Jun-97 $ 2,671,918 $ 4,500,000 59.4% $ 538,275
- ------------------------------------------------------------------------------------------------------------------
21 VA 23230 1975/1993 121,815 100% 01-Jun-97 $ 2,909,421 $ 5,200,000 56.0% $ 173,318
22 VA -- 1989 203,084 100% 01-Jun-97 $ 18,665,681 $ 32,500,000 57.4% $ 4,631,041
23 VA -- 1985 172,448 100% 01-Jun-97 $ 15,135,783 $ 23,300,000 65.0% $ 2,582,072
24 VA 22033 1982 127,569 100% 01-Jun-97 $ 9,549,185 $ 13,800,000 59.2% $ 1,128,563
25 VA 22033 1985 150,961 92% 01-Jun-97 $ 12,082,642 $ 18,800,000 64.3% $ 1,615,766
--------- ------- ------------ ------------- ------ -----------
1,700,252 98% $ 87,946,446 $144,750,000 60.8% $15,225,340
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES: Flex space is assumed to be of type Office while R&D space is assumed
to be of type Industrial.
The DSCR for the AAPT Pool loan incorporates the initial Base Libor
Rate of 5.6875%.
<PAGE>
ANNEX A
<TABLE>
<CAPTION>
1995 1996 UNDERWRITTEN
TOTAL TOTAL 1994 1995 1996 NET CASH
REVENUE REVENUE TOTAL NOI TOTAL NOI TOTAL NOI FLOW DSCR FEE/LEASEHOLD
- ------------- ------------- ------------- ------------- ------------- -------------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$19,611,310 $16,577,417 $ 8,739,377 $11,508,093 $ 8,610,439 $ 8,162,904 1.34x Simple
$11,833,019 $11,827,000 $ 7,233,247 $ 7,491,618 $ 7,599,000 $ 6,952,589 1.53 Simple
$10,386,165 $11,611,040 $ 5,701,751 $ 6,604,760 $ 7,640,196 $ 7,467,031 1.66 Simple
$ 7,876,070 $ 7,814,097 $ 5,321,473 $ 5,429,217 $ 5,065,029 $ 4,659,925 1.59 Simple/Ground Lease
$ 5,192,267 $ 5,160,776 $ 2,980,535 $ 3,576,051 $ 3,327,000 $ 3,550,472 1.82 Simple
- ------------------------------------------------------------------------------------------------------------------
$ 7,126,255 $ 6,827,113 $ 3,568,815 $ 3,910,942 $ 3,812,000 $ 2,912,517 1.57 Simple
$ 4,760,948 $ 4,109,000 $ 2,368,303 $ 1,916,927 $ 1,355,768 $ 1,795,192 2.03 Simple
$ 551,950 $ -- $ 581,463 $ 520,392 $ -- $ 373,226 1.84 Simple
- ------------------------------------------------------------------------------------------------------------------
$67,337,984 $63,926,443 $36,494,964 $40,958,000 $37,409,432 $35,873,856 1.56x
- ------------- ------------- ------------- ------------- ------------- -------------- -------- --------------------
$58,267,240 $60,208,030 $32,547,954 $33,647,725 $34,247,963 $35,718,416 1.76x Simple
- ------------------------------------------------------------------------------------------------------------------
$ 7,566,067 $ 7,559,677 $ 1,908,130 $ 3,620,993 $ 3,786,623 $ 3,017,421 1.57 Simple
$ 2,932,171 $ 3,360,695 $ 1,825,930 $ 2,025,541 $ 2,533,766 $ 2,073,616 1.80 Simple
$ 1,594,568 $ 1,619,038 $ 1,228,676 $ 1,260,317 $ 1,082,785 $ 1,431,051 1.90 Simple
$ 2,281,634 $ 2,134,102 -- $ 2,122,354 $ 1,663,685 $ 1,317,010 1.76 Simple
$ 1,354,338 $ 1,519,222 $ 888,328 $ 992,819 $ 1,132,041 $ 873,687 1.54 Simple
- ------------------------------------------------------------------------------------------------------------------
$ 707,261 $ 1,484,995 $ 305,487 $ 392,016 $ 1,076,175 $ 983,542 1.74 Simple
$ 2,748,603 $ 2,982,323 -- $ 1,143,862 $ 1,400,880 $ 1,129,765 2.14 Ground Lease
$ 818,350 $ 891,367 -- $ 666,044 $ 745,714 $ 540,803 1.16 Simple
$ 1,057,278 $ 1,633,586 -- $ 375,108 $ 979,678 $ 449,899 2.12 Simple
$ 1,320,437 $ 1,538,587 $ 164,189 $ 478,753 $ 680,429 $ 483,992 2.81 Simple
- ------------------------------------------------------------------------------------------------------------------
$ 1,445,741 $ 1,615,339 -- $ 561,984 $ 818,777 $ 316,492 2.19 Simple
- ------------- ------------- ------------- ------------- ------------- -------------- -------- --------------------
$23,826,449 $26,338,931 $ 6,320,740 $13,639,791 $15,900,553 $12,617,278 1.74x
- ------------------------------------------------------------------------------------------------------------------
$ 7,752,556 $10,296,226 $ 5,628,216 $ 7,763,283 $ 8,091,213 1.69x Simple
- ------------------------------------------------------------------------------------------------------------------
$ 1,083,219 $ 1,037,795 $ 713,828 $ 666,344 $ 672,613 $ 580,027 1.65 Simple
$ 356,137 $ 380,057 $ 244,644 $ 201,293 $ 237,622 $ 227,974 2.27 Simple
$ 101,877 $ 868,685 $ (653) $ 63,097 $ 562,208 $ 581,230 1.70 Simple
$ 555,708 $ 596,552 $ 464,307 $ 449,798 $ 480,369 $ 403,606 1.41 Simple
$ 155,340 $ 172,302 $ 89,603 $ 119,422 $ 146,075 $ 117,421 1.95 Simple
- ------------------------------------------------------------------------------------------------------------------
$ 177,384 $ 200,508 $ 127,323 $ 144,620 $ 171,501 $ 130,001 1.85 Simple
$ 127,976 $ 70,329 $ 97,595 $ 98,690 $ 50,899 $ 82,699 1.83 Simple
$ 182,080 $ 211,989 $ 145,072 $ 153,954 $ 193,581 $ 140,376 1.86 Simple
$ 246,662 $ 253,226 $ 203,398 $ 177,384 $ 213,149 $ 176,920 1.85 Simple
$ 197,513 $ 188,962 $ 201,049 $ 156,834 $ 157,737 $ 179,765 1.88 Simple
- ------------------------------------------------------------------------------------------------------------------
$ 209,917 $ 239,889 $ 210,033 $ 164,638 $ 199,414 $ 160,081 1.99 Simple
$ 177,245 $ 181,408 $ 171,277 $ 143,355 $ 148,072 $ 116,866 1.94 Simple
$ 216,827 $ 225,822 $ 184,279 $ 157,489 $ 174,169 $ 151,243 2.32 Simple
$ 545,134 $ 574,035 $ 289,395 $ 451,465 $ 482,162 $ 383,330 1.86 Simple
$ 260,812 $ 276,714 $ 21,569 $ 218,944 $ 230,271 $ 192,018 1.74 Simple
- ------------------------------------------------------------------------------------------------------------------
$ 158,716 $ 168,621 $ 106,782 $ 139,903 $ 148,586 $ 83,083 4.25 Simple
$ 223,087 $ 260,078 $ (4,247) $ 190,488 $ 232,299 $ 174,817 1.57 Simple
$ 153,362 $ 158,062 $ 121,687 $ 130,479 $ 138,372 $ 119,777 1.59 Simple
$ 55,685 $ 69,817 $ 21,932 $ 48,670 $ 64,422 $ 56,546 2.05 Simple
$ 536,089 $ 580,416 $ 479,468 $ 445,576 $ 498,278 $ 414,078 1.83 Simple
- ------------------------------------------------------------------------------------------------------------------
$ 502,040 $ 514,563 $ 89,192 $ 447,294 $ 453,644 $ 410,166 1.67 Simple
$ 5,182,149 $ 4,697,272 $ 3,055,346 $ 4,075,965 $ 3,483,626 $ 2,918,932 1.85 Simple
$ 2,696,410 $ 2,845,029 $ 2,205,867 $ 2,280,459 $ 2,349,328 $ 1,875,443 1.46 Simple
$ 213,258 $ 1,764,281 $ 478,665 $ 171,483 $ 1,081,936 $ 862,080 1.07 Simple
$ 150,268 $ 1,842,724 $ 750,079 $ 108,804 $ 922,846 $ 1,400,401 1.30 Simple
- ------------- ------------- ------------- ------------- ------------- -------------- -------- --------------------
$14,464,895 $18,379,136 $10,467,490 $11,406,448 $13,493,179 $11,938,880 1.60x
- ------------------------------------------------------------------------------------------------------------------
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
MORTGAGE PROPERTY
LOAN PROPERTY NAME TYPE ADDRESS CITY
- -------- ------------------------ ----------- -------------------------- ------------------
<S> <C> <C> <C> <C>
RITZ PLAZA Multifamily 235-237 West 48th Street New York
- -------------------------------------------------------------------------------------------
AAPT POOL
1 Maschellmac I Office 1000 First Avenue King of Prussia
2 Maschellmac II Office 1020 First Avenue King of Prussia
3 Maschellmac III Office 1040 First Avenue King of Prussia
4 Maschellmac IV Office 1060 First Avenue King of Prussia
5 1760 MSA Partnership Office 1760 Market Street Philadelphia
- -------------------------------------------------------------------------------------------
6 7450 Tilghman Office 7450 Tilghman Street Allentown
7 7535 Windsor Office 7535 Windsor Drive Allentown
8 7150 Windsor Office 7150 Windsor Drive Allentown
9 7010 Snowdrift Office 7010 Snowdrift Allentown
10 304 Harper Office 304 Harper Drive Moorestown
- -------------------------------------------------------------------------------------------
11 305 Harper Office 305 Harper Drive Moorestown
12 303 Fellowship Office 303 Fellowship Drive Mount Laurel
13 305 Fellowship Office 305 Fellowship Drive Mount Laurel
14 307 Fellowship Office 307 Fellowship Drive Mount Laurel
15 309 Fellowship Office 309 Fellowship Drive Mount Laurel
- -------------------------------------------------------------------------------------------
16 700 East Gate Office 700 East Gate Drive Mount Laurel
17 701 East Gate Office 701 East Gate Drive Mount Laurel
18 815 East Gate Office 815 East Gate Drive Mount Laurel
19 817 East Gate Office 817 East Gate Drive Mount Laurel
20 Main Street Center Office 600 East Main Street Richmond
- -------------------------------------------------------------------------------------------
21 Westpark 1 Office 4364 South Alston Drive Durham
22 E-M Venture -Office Office 155 Rittenhouse Circle Bristol
23 E-M Venture -Industrial Industrial 180 Rittenhouse Circle Bristol
24 7020 Snowdrift Industrial 7020 Snowdrift Allentown
25 6845 Snowdrift Industrial 6845 Snowdrift Drive Allentown
- -------------------------------------------------------------------------------------------
26 6755 Snowdrift Industrial 6755 Snowdrift Drive Allentown
27 6810 Tilghman Industrial 6810 Tilghman Allentown
28 6690 Grant Way Industrial 6690 Grant Way Allentown
29 6670 Grant Way Industrial 6670 Grant Way Allentown
30 7055 Ambassador Industrial 7055 Ambassador Drive Allentown
- -------------------------------------------------------------------------------------------
31 50 Swedesford Square Office 50 East Swedesford Road Frazer
32 52 Swedesford Square Office 52 East Swedesford Road Frazer
33 Iron Run Land Land -- Allentown
34 East Gate Land Land -- Mount Laurel
35 Masons Mill Building 1 Office 3401 Masons Mill Road Huntington Valley
- -------------------------------------------------------------------------------------------
36 Masons Mill Building 2 Office 3401 Masons Mill Road Huntington Valley
37 Masons Mill Building 3 Office 3401 Masons Mill Road Huntington Valley
38 Masons Mill Building 4 Office 3501 Masons Mill Road Huntington Valley
39 Masons Mill Building 5 Office 3501 Masons Mill Road Huntington Valley
40 Masons Mill Building 6 Office 3401 Masons Mill Road Huntington Valley
- -------------------------------------------------------------------------------------------
41 Masons Mill Building 7 Office 1800 Byberry Road Huntington Valley
42 Masons Mill Building 8 Office 1800 Byberry Road Huntington Valley
43 Masons Mill Building 9 Office 1800 Byberry Road Huntington Valley
44 Masons Mill Building 10 Office 1800 Byberry Road Huntington Valley
45 Masons Mill Building 11 Office 1800 Byberry Road Huntington Valley
- -------------------------------------------------------------------------------------------
46 Masons Mill Building 12 Office 1800 Byberry Road Huntington Valley
47 Masons Mill Building 13 Office 1800 Byberry Road Huntington Valley
48 Masons Mill Building 14 Office 1800 Byberry Road Huntington Valley
Masons Mill -Rollup Office Masons Mill & Byberry Road Huntington Valley
TOTAL:
- ------------------------------------------------------------------------------------------------
380 MADISON Office 380 Madison Avenue New York
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CUT-OFF
DATE
ALLOCATED CUT-OFF 1994
MORTGAGE YEAR BUILT/ TOTAL OCCUPANCY LOAN APPRAISED DATE TOTAL
LOAN STATE ZIP RENOVATED SF/UNITS OCCUPANCY AS OF DATE AMOUNT VALUE LTV REVENUE
- -------- ----- ----- ----------- --------- --------- ---------- ------------ ------------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AAPT POOL
1 PA 19406 1980/92 74,140 95% 01-Jun-97 $ 4,494,177 $ 8,900,000 50.5% $1,311,354
2 PA 19406 1984/91 74,556 100% 01-Jun-97 $ 5,742,979 $11,000,000 52.2% $1,067,360
3 PA 19406 1985/93 74,512 100% 01-Jun-97 $ 5,883,536 $11,300,000 52.1% $ 638,798
4 PA 19406 1987/91 74,556 100% 01-Jun-97 $ 4,618,076 $10,400,000 44.4% $1,091,664
5 PA 19101 1981/92 122,893 94% 01-Jun-97 $ 2,532,488 $ 8,500,000 29.8% $1,312,838
- ---------------------------------------------------------------------------------------------------------------
6 PA 18051 1986 100,000 100% 01-Jun-97 $ 4,173,741 $ 6,725,000 62.1% $ 990,265
7 PA 18051 1985/94 129,223 98% 01-Jun-97 $ 8,045,450 $11,500,000 70.0% $1,483,725
8 PA 18051 1988 49,420 100% 01-Jun-97 $ 2,135,036 $ 3,750,000 56.9% $ 443,156
9 PA 18051 1991 33,029 85% 01-Jun-97 $ 1,309,488 $ 2,300,000 56.9% $ 341,247
10 NJ 08057 1975/1992 29,537 91% 01-Jun-97 $ 760,479 $ 1,850,000 41.1% $ 383,236
- ---------------------------------------------------------------------------------------------------------------
11 NJ 08057 1979/92 14,980 100% 01-Jun-97 $ 512,409 $ 900,000 56.9% $ 79,639
12 NJ 08054 1979/91 53,135 94% 01-Jun-97 $ 2,448,174 $ 4,300,000 56.9% $ 760,218
13 NJ 08054 1980/92 53,959 98% 01-Jun-97 $ 2,903,648 $ 5,100,000 56.9% $ 694,302
14 NJ 08054 1981/92 54,169 83% 01-Jun-97 $ 2,448,174 $ 4,300,000 56.9% $ 786,962
15 NJ 08054 1982/92 55,351 95% 01-Jun-97 $ 2,562,043 $ 4,500,000 56.9% $ 740,142
- ---------------------------------------------------------------------------------------------------------------
16 NJ 08054 1984/1992 118,071 100% 01-Jun-97 $ 6,376,639 $11,200,000 56.9% $ 959,190
17 NJ 08054 1986/95 58,000 100% 01-Jun-97 $ 3,871,531 $ 6,800,000 56.9% $ 915,378
18 NJ 08054 1986 25,500 87% 01-Jun-97 $ 953,649 $ 1,675,000 56.9% $ 213,323
19 NJ 08054 1986 25,351 100% 01-Jun-97 $ 910,948 $ 1,600,000 56.9% $ 182,323
20 VA 23219 1987 422,309 91% 01-Jun-97 $ 18,473,683 $32,400,000 57.0% $8,136,495
- ---------------------------------------------------------------------------------------------------------------
21 NC 27713 1985/95 56,345 100% 01-Jun-97 $ 2,962,325 $ 5,200,000 57.0% $ 831,790
22 PA 19007 1981/94 22,500 100% 01-Jun-97 $ 712,097 $ 1,250,000 57.0% $ --
23 PA 19007 1984/94 60,000 100% 01-Jun-97 $ 897,243 $ 1,575,000 57.0% $ 225,000
24 PA 18051 1975 41,390 100% 01-Jun-97 $ 783,307 $ 1,375,000 57.0% $ 159,978
25 PA 18051 1975 93,000 100% 01-Jun-97 $ 2,022,356 $ 3,550,000 57.0% $ 315,412
- ---------------------------------------------------------------------------------------------------------------
26 PA 18051 1988 125,000 100% 01-Jun-97 $ 2,506,583 $ 4,700,000 53.3% $ 745
27 PA 18051 1975 54,844 100% 01-Jun-97 $ 1,025,420 $ 2,075,000 49.4% $ 187,116
28 PA 18051 1982 88,000 100% 01-Jun-97 $ 1,965,389 $ 3,450,000 57.0% $ 366,272
29 PA 18051 1979 72,885 100% 01-Jun-97 $ 1,623,582 $ 2,850,000 57.0% $ 322,589
30 PA 18051 1991 153,600 100% 01-Jun-97 $ 3,361,099 $ 5,900,000 57.0% $ 583,421
- ------------------------------------------------------------------ --------------------------------------------
31 PA 19355 1988 109,800 100% 01-Jun-97 $ 9,376,197 $ 17,000,000 55.2% $ 1,966,262
32 PA 19355 1981 131,017 100% 01-Jun-97 $ 10,026,330 $ 17,600,000 57.0% $ 2,533,502
33 PA 18051 -- -- 0% 01-Jun-97 $ 739,582 $ 4,200,000 17.6% --
34 NJ 08054 -- -- 0% 01-Jun-97 $ 539,695 $ 5,100,000 10.6% --
35 PA 19006 1978/91 17,415 100% 01-Jun-97 $ 448,245 $ 1,167,517 38.4% --
- ----------------------------------------------------------------------------------------------------------------
36 PA 19006 1978/91 12,000 100% 01-Jun-97 $ 308,868 $ 804,491 38.4% --
37 PA 19006 1979/91 12,000 100% 01-Jun-97 $ 308,868 $ 804,491 38.4% --
38 PA 19006 1979/91 11,880 83% 01-Jun-97 $ 305,780 $ 796,446 38.4% --
39 PA 19006 1978/91 16,060 100% 01-Jun-97 $ 413,369 $ 1,076,677 38.4% --
40 PA 19006 1979/91 16,060 100% 01-Jun-97 $ 413,369 $ 1,076,677 38.4% --
- ----------------------------------------------------------------------------------------------------------------
41 PA 19006 1980/94 16,365 76% 01-Jun-97 $ 421,219 $ 1,097,124 38.4% --
42 PA 19006 1980/94 18,000 82% 01-Jun-97 $ 463,302 $ 1,206,736 38.4% --
43 PA 19006 1980/94 12,000 100% 01-Jun-97 $ 308,868 $ 804,491 38.4% --
44 PA 19006 1980/94 18,039 100% 01-Jun-97 $ 464,255 $ 1,209,217 38.4% --
45 PA 19006 1984 12,000 100% 01-Jun-97 $ 308,868 $ 804,491 38.4% --
- -----------------------------------------------------------------------------------------------------------------
46 PA 19006 1984 17,994 80% 01-Jun-97 $ 463,148 $ 1,206,333 38.4% --
47 PA 19006 1984 14,000 100% 01-Jun-97 $ 360,346 $ 938,573 38.4% --
48 PA 19006 1984 18,000 64% 01-Jun-97 $ 463,302 $ 1,206,736 38.4% --
PA 1978-1982 211,813 90% 01-Jun-97 $ 5,451,808 $ 14,200,000 38.4% $ 1,780,895
--------- ------------ ------------ ---- ------------
2,862,885 97% $125,149,361 $239,025,000 52.4% $31,804,597
- -----------------------------------------------------------------------------------------------------------------
380 MADISON
NY 10017 1952/90 897,602 86% 23-Jun-97 $ 89,000,000 $197,000,000 45.2% $16,000,000
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES: Flex space is assumed to be of type Office while R&D space is assumed
to be of type Industrial.
The DSCR for the AAPT Pool loan incorporates the initial Base Libor
Rate of 5.6875%.
<PAGE>
<TABLE>
<CAPTION>
1995 1996 UNDERWRITTEN
TOTAL TOTAL 1994 1995 1996 NET CASH
REVENUE REVENUE TOTAL NOI TOTAL NOI TOTAL NOI FLOW DSCR FEE/LEASEHOLD
- ------------- ------------- ------------- ------------- ------------- -------------- -------- -------------------
<S> <C> <C> <C> <C> <C>
$10,818,337 $11,751,306 $ 7,130,157 $ 6,519,906 $ 6,868,898 $ 7,573,130 1.34x Simple
- ------------- ------------- ------------- ------------- ------------- -------------- -------- -------------------
$ 1,347,237 $ 1,343,349 $ 649,799 $ 680,882 $ 651,592 $ 397,011 1.22 Leasehold
$ 225,827 $ 1,191,415 $ 964,064 $ (89,195) $ 740,203 $ 509,824 1.12 Leasehold
$ 898,408 $ 1,093,683 $ 293,434 $ 500,526 $ 653,083 $ 543,161 1.16 Leasehold
$ 1,198,616 $ 1,155,817 $ 414,423 $ 724,996 $ 576,477 $ 480,500 1.52 Leasehold
$ 1,790,089 $ 2,054,648 $ 166,331 $ 486,822 $ 759,669 $ 505,149 2.47 Simple
- -----------------------------------------------------------------------------------------------------------------
$ 990,000 $ 990,000 $ 940,472 $ 957,494 $ 916,212 $ 715,903 2.16 Simple
$ 1,546,031 $ 1,617,749 $ 938,434 $ 1,037,216 $ 1,089,880 $ 746,875 1.27 Simple
$ 503,060 $ 447,865 $ 396,916 $ 397,759 $ 306,987 $ 270,674 1.60 Simple
$ 342,465 $ 346,062 $ 263,942 $ 262,419 $ 252,393 $ 183,748 1.77 Simple
$ 318,339 $ 202,679 $ 139,006 $ 105,412 $ (2,274) $ 79,673 1.32 Simple
- -----------------------------------------------------------------------------------------------------------------
$ 101,881 $ 105,598 $ 71,916 $ 90,606 $ 88,703 $ 63,162 1.56 Simple
$ 814,808 $ 825,191 $ 435,077 $ 463,392 $ 475,821 $ 323,756 1.68 Simple
$ 789,721 $ 830,023 $ 415,576 $ 482,532 $ 515,998 $ 352,900 1.63 Simple
$ 814,554 $ 779,740 $ 439,841 $ 453,662 $ 442,938 $ 355,633 1.83 Simple
$ 875,028 $ 867,392 $ 421,874 $ 542,827 $ 517,104 $ 366,430 1.80 Simple
- -----------------------------------------------------------------------------------------------------------------
$ 1,585,064 $ 2,010,592 $ 288,973 $ 778,617 $ 1,211,889 $ 733,811 1.45 Simple
$ 968,004 $ 1,023,740 $ 606,904 $ 646,812 $ 682,904 $ 719,859 1.83 Simple
$ 290,133 $ 268,013 $ 108,618 $ 162,644 $ 167,141 $ 135,748 1.80 Simple
$ 236,424 $ 288,646 $ 72,672 $ 147,933 $ 177,757 $ 137,656 1.91 Simple
$ 8,398,494 $ 8,629,074 $ 5,521,042 $ 5,704,125 $ 5,953,366 $ 4,854,426 2.22 Simple
- -----------------------------------------------------------------------------------------------------------------
$ 862,587 $ 834,784 $ 462,268 $ 512,217 $ 439,189 $ 430,949 1.83 Simple
$ 70,333 $ 140,625 $ (90,159) $ 28,192 $ 128,468 $ 91,381 1.62 Simple
$ 201,000 $ 201,000 $ 219,644 $ 190,867 $ 189,431 $ 129,462 1.82 Simple
$ 136,932 $ 167,468 $ 143,425 $ 121,303 $ 123,300 $ 115,945 1.87 Simple
$ 368,769 $ 454,278 $ 276,736 $ 347,305 $ 377,795 $ 307,923 1.92 Simple
- -----------------------------------------------------------------------------------------------------------------
$ 112,746 $ 513,271 $ (109,843) $ 88,602 $ 418,211 $ 385,741 1.94 Simple
$ 170,258 $ 212,355 $ 164,680 $ 159,220 $ 171,466 $ 141,011 1.74 Simple
$ 386,980 $ 454,905 $ 338,682 $ 367,283 $ 379,259 $ 321,912 2.07 Simple
$ 349,795 $ 414,259 $ 297,545 $ 324,640 $ 346,709 $ 281,742 2.19 Simple
$ 610,033 $ 740,706 $ 565,582 $ 585,627 $ 621,038 $ 522,488 1.96 Simple
- -----------------------------------------------------------------------------------------------------------------
$ 2,044,913 $ 1,561,356 $ 1,964,662 $ 2,036,296 $ 1,565,556 $ 1,251,404 1.68 Simple
$ 1,620,221 $ 2,173,638 $ 1,457,898 $ 699,539 $ 1,315,724 $ 1,222,297 1.54 Simple
-- -- -- -- -- $ (100,720) (1.72) Simple
-- -- -- -- -- $ (206,661) (4.83) Simple
-- -- -- -- -- -- -- Simple
- -----------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- Simple
-- -- -- -- -- -- -- Simple
-- -- -- -- -- -- -- Simple
-- -- -- -- -- -- -- Simple
-- -- -- -- -- -- -- Simple
- -----------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- Simple
-- -- -- -- -- -- -- Simple
-- -- -- -- -- -- -- Simple
-- -- -- -- -- -- -- Simple
-- -- -- -- -- -- -- Simple
- -----------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- Simple
-- -- -- -- -- -- -- Simple
-- -- -- -- -- -- -- Simple
$ 2,327,886 $ 2,601,287 $ 893,672 $ 1,520,947 $ 1,729,887 $ 1,145,981 2.65
- ------------- ------------- ------------- ------------- ------------- -------------- -------- -------------------
$33,296,636 $36,541,208 $20,134,106 $21,519,519 $23,983,876 $18,516,754 1.72x
- -----------------------------------------------------------------------------------------------------------------
$16,000,000 $16,000,000 $16,000,000 $16,000,000 $16,000,000 $16,000,000 2.26x Simple
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROSPECTUS
GS MORTGAGE SECURITIES CORPORATION II
SELLER
COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES (ISSUABLE IN SERIES)
GS Mortgage Securities Corporation II (the "Seller") from time to time
will offer Commercial Mortgage Pass-Through Certificates (the "Offered
Certificates") in series (each, a "Series") by means of this Prospectus and a
separate Prospectus Supplement for each Series. If specified in the related
Prospectus Supplement, a Series may include one or more Classes of
certificates (together with the Offered Certificates, the "Certificates") not
offered by means of this Prospectus. The Certificates of each Series will
evidence beneficial ownership interests in a trust fund (each, a "Trust
Fund") to be established by the Seller. The Certificates of a Series may be
divided into two or more Classes which may have different interest rates and
which may receive principal payments in differing proportions and at
different times. In addition, rights of the holders of certain Classes to
receive principal and interest may be subordinated to those of other Classes.
Each Trust Fund will consist primarily of a pool (each, a "Mortgage Pool")
of (i) one or more mortgage loans secured by first, second or more junior
liens on commercial real estate properties, multifamily residential
properties and/or mixed residential/commercial properties, and related
property and interests, or (ii) certain financial leases and similar
arrangements equivalent to such mortgage loans as described herein and in the
related Prospectus Supplement (the "Mortgage Loans"), conveyed to such Trust
Fund by the Seller, and other assets, including any reserve funds established
with respect to a Series, insurance policies on the Mortgage Loans, letters
of credit, certificate guarantee insurance policies or other credit
enhancements described in the related Prospectus Supplement. If so specified
in the related Prospectus Supplement, the Mortgage Loans included in a
Mortgage Pool may also include participation interests in such types of
mortgage loans and installment contracts for the sale of such types of
properties. The Mortgage Loans will have fixed or adjustable interest rates.
Some Mortgage Loans will fully amortize over their remaining terms to
maturity and others will provide for balloon payments at maturity. Unless
otherwise specified in the related Prospectus Supplement, the Mortgage Loans
will be non-recourse obligations of the mortgagors. The Mortgage Loans will
be either seasoned or newly originated Mortgage Loans acquired by the Seller
from third parties, which third parties may or may not be the originators of
such Mortgage Loans and may or may not be affiliates of the Seller.
Information regarding each Series of Certificates, including interest and
principal payment provisions for each Class of Offered Certificates, as well
as information regarding the size, composition and other characteristics of
the Mortgage Pool relating to such Series, will be furnished in the related
Prospectus Supplement. The Mortgage Loans, other than, if so specified in the
related Prospectus Supplement, Specially Serviced Mortgage Loans, will be
serviced by a Master Servicer identified in the related Prospectus
Supplement. If so specified in the related Prospectus Supplement, Mortgage
Loans that become Specially Serviced Mortgage Loans (as described in such
Prospectus Supplement) will be serviced by a Special Servicer identified
therein.
The Certificates will not represent an obligation of or an interest in the
Seller or any affiliate thereof. Unless otherwise specified in the related
Prospectus Supplement, the Certificates will not be insured or guaranteed by
any governmental agency or instrumentality. Unless otherwise specified in the
related Prospectus Supplement, the Mortgage Loans will not be insured or
guaranteed by any governmental agency or instrumentality or any insurer.
The Seller, as specified in the related Prospectus Supplement, may elect
to treat all or a specified portion of the related Trust Fund as one or more
"real estate mortgage investment conduits" (each a "REMIC"), for federal
income tax purposes. If such an election is made, each Class of Certificates
of a Series will be either "regular interests" or "residual interests", as
specified in the related Prospectus Supplement. If no such election is made,
the Trust Fund, as specified in the related Prospectus Supplement, may elect
to be treated as a "financial asset securitization investment trust"
("FASIT"), or if no such election is made, will be classified as a grantor
trust for federal income tax purposes. See "FEDERAL INCOME TAX CONSEQUENCES."
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.
THE OFFERED CERTIFICATES ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS. IN
PARTICULAR, NO INVESTOR SHOULD PURCHASE CERTIFICATES OF ANY CLASS UNLESS THE
INVESTOR UNDERSTANDS AND IS ABLE TO BEAR THE PREPAYMENT, YIELD, LIQUIDITY AND
MARKET RISKS ASSOCIATED WITH THAT CLASS.
THE RISKS ASSOCIATED WITH THE OFFERED CERTIFICATES MAY MAKE THEM
UNSUITABLE FOR SOME INVESTORS. SEE "RISK FACTORS" ON PAGE 4 HEREIN. THE
OFFERED CERTIFICATES ARE COMPLEX SECURITIES AND IT IS IMPORTANT THAT EACH
INVESTOR IN ANY CLASS OF OFFERED CERTIFICATES POSSESS, EITHER ALONE OR
TOGETHER WITH AN INVESTMENT ADVISOR, THE EXPERTISE NECESSARY TO EVALUATE THE
INFORMATION CONTAINED AND INCORPORATED IN THIS PROSPECTUS AND THE RELATED
PROSPECTUS SUPPLEMENT IN THE CONTEXT OF THAT INVESTOR'S FINANCIAL SITUATION.
<PAGE>
THE YIELD OF EACH CLASS OF OFFERED CERTIFICATES WILL DEPEND UPON, AMONG
OTHER THINGS, ITS PURCHASE PRICE, ITS SENSITIVITY TO THE RATE AND TIMING OF
PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS, DEFAULTS AND LIQUIDATIONS) ON THE
MORTGAGE LOANS AND THE ACTUAL CHARACTERISTICS OF THE MORTGAGE LOANS. MORTGAGE
LOAN PREPAYMENT RATES ARE LIKELY TO FLUCTUATE SIGNIFICANTLY FROM TIME TO
TIME. INVESTORS SHOULD CONSIDER THE ASSOCIATED RISKS, INCLUDING:
O FAST MORTGAGE LOAN PREPAYMENT RATES CAN REDUCE THE YIELDS OF THE
OFFERED CERTIFICATES, INCLUDING ANY INTEREST-ONLY CLASSES, PURCHASED
AT A PREMIUM OVER THEIR PRINCIPAL AMOUNTS.
O SLOW MORTGAGE LOAN PREPAYMENT RATES CAN REDUCE THE YIELDS OF THE
OFFERED CERTIFICATES, INCLUDING ANY PRINCIPAL-ONLY CLASSES, PURCHASED
AT A DISCOUNT TO THEIR PRINCIPAL AMOUNTS.
O SMALL DIFFERENCES IN THE ACTUAL CHARACTERISTICS OF THE MORTGAGE LOANS
CAN AFFECT THE WEIGHTED AVERAGE LIVES AND YIELDS OF THE OFFERED
CERTIFICATES.
SEE "RISK FACTORS" AND "YIELD CONSIDERATIONS" IN THIS PROSPECTUS AND "RISK
FACTORS" AND "YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS" IN THE RELATED
PROSPECTUS SUPPLEMENT.
---------------------
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters, as more fully
described under "PLAN OF DISTRIBUTION" herein and in the related Prospectus
Supplement. Affiliates of the Seller may from time to time act as agents or
underwriters in connection with the sale of the Offered Certificates.
Offerings of certain Classes of the Certificates, as specified in the related
Prospectus Supplement, may be made in one or more transactions exempt from
the registration requirements of the Securities Act of 1933, as amended. Such
offerings are not being made pursuant to the Registration Statement of which
this Prospectus forms a part.
There will have been no secondary market for any Series of the Offered
Certificates prior to the offering thereof. There can be no assurance that
such a market will develop for the Offered Certificates of any Series or, if
it does develop, that it will continue.
This Prospectus may not be used to consummate sales of the Offered
Certificates unless accompanied by a Prospectus Supplement.
---------------------
The date of this Prospectus is June 9, 1997
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to each Series of Offered Certificates
will, among other things, set forth with respect to such Series of Offered
Certificates, to the extent applicable thereto: (i) any structural features,
such as multiple levels of trusts or the use of special finance vehicles to
hold the Mortgage Pool, used in structuring the transaction; (ii) the
identity of each Class within such Series; (iii) the initial aggregate
principal amount, the interest rate (the "Pass-Through Rate") (or the method
for determining such rate) and the authorized denominations of each Class of
Offered Certificates of such Series; (iv) certain information concerning the
Mortgage Loans relating to such Series, including the principal amount, type
and characteristics of such Mortgage Loans on the Cut-Off Date for such
Series of Offered Certificates, and, if applicable, the amount of any Reserve
Fund for such Series; (v) the identity of the Master Servicer; (vi) the
identity of the Special Servicer, if any, and the characteristics of any
Specially Serviced Mortgage Loans; (vii) the method of selection and powers
of any Operating Advisor directing and approving actions of the Special
Servicer; (viii) the circumstances, if any, under which the Offered
Certificates of such Series are subject to redemption prior to maturity; (ix)
the final scheduled distribution date of each Class of Offered Certificates
of such Series; (x) the method used to calculate the aggregate amount of
principal available and required to be applied to the Offered Certificates of
such Series on each Distribution Date; (xi) the order of the application of
principal and interest payments to each Class of Offered Certificates of such
Series and the allocation of principal to be so applied; (xii) the extent of
subordination of any Subordinate Certificates; (xiii) the principal amount of
each Class of Offered Certificates of such Series that would be outstanding
on specified Distribution Dates, if the Mortgage Loans relating to such
Series were prepaid at various assumed rates; (xiv) the Distribution Dates
for each Class of Offered Certificates of such Series; (xv) the
representations and warranties to be made by the Seller and any other entity,
in respect of the Mortgage Loans; (xvi) if applicable, relevant financial
information with respect to the Borrower(s) and the Mortgaged Properties
underlying the Mortgage Loans relating to such Series; (xvii) information
with respect to the terms of the Subordinate Certificates or Residual
Certificates, if any, of such Series, (xviii) additional information with
respect to any Credit Enhancement or cash flow agreement relating to such
Series and, if the Certificateholders of such Series will be materially
dependent upon any provider of Credit Enhancement or any cash flow agreement
counterparty for timely payment of interest and/or principal on their
Certificates, information (including financial statements) regarding such
provider or counterparty; (xix) additional information with respect to the
plan of distribution of such Series; (xx) whether the Offered Certificates of
such Series will be available in definitive form or through the book-entry
facilities of The Depository Trust Company or another depository; (xxi) if a
Trust Fund contains a concentration of Mortgage Loans having a single
Borrower, including affiliates thereof, or Mortgage Loans secured by
Mortgaged Properties leased to a single lessee, including affiliates thereof,
representing 20% or more of the aggregate principal balance of the Mortgage
Loans in such Trust Fund, financial statements for such Mortgaged Properties
as well as specific information with respect to such Mortgage Loans,
Mortgaged Properties and, to the extent material, leases and additional
information concerning any common ownership, common management or common
control of, or cross-default, cross-collateralization or similar provisions
relating to, such Mortgaged Properties and the concentration of credit risk
thereon; (xxii) if a Trust Fund contains a concentration of Mortgage Loans
having a single Borrower, including affiliates thereof, or Mortgage Loans
secured by Mortgaged Properties leased to a single lessee, including
affiliates thereof, representing 10% or more, but less than 20%, of the
aggregate principal balance of the Mortgage Loans in such Trust Fund,
selected financial information with respect to such Mortgaged Properties as
well as, to the extent material, specific information with respect to any
common ownership, common management or common control of, or cross-default,
cross-collateralization or similar provisions relating to, such Mortgaged
Properties and the concentration of credit risk thereon; (xxiii) if
applicable, additional information concerning any known concerns regarding
unique economic or other factors where there is a material concentration of
any of the Mortgage Loans in a specific geographic region; (xxiv) if
applicable, additional financial and other information concerning individual
Mortgaged Properties when there is a substantial concentration of one or a
few Mortgage Loans in a jurisdiction or region thereof experiencing economic
difficulties which may have a material effect on such Mortgaged Properties;
(xxv) if a Trust Fund contains a substantial concentration of one or a few
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Mortgage Loans in a single jurisdiction, a description of material
differences, if any, between the legal aspects of Mortgage Loans in such
jurisdiction and the summary of general legal aspects of Mortgage Loans set
forth under "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS;" and (xxvi) the
rating assigned to each Class of Offered Certificates by the nationally
recognized statistical rating organization or organizations identified
therein.
ADDITIONAL INFORMATION
This Prospectus contains, and the Prospectus Supplement for each Series of
Offered Certificates will contain, a summary of the material terms of the
documents referred to herein and therein, but neither contains nor will
contain all of the information set forth in the Registration Statement (the
"Registration Statement") of which this Prospectus and the related Prospectus
Supplement is a part. For further information, reference is made to such
Registration Statement and the exhibits thereto which the Seller has filed
with the Securities and Exchange Commission (the "Commission"), under the
Securities Act of 1933, as amended (the "Act"). Statements contained in this
Prospectus and any Prospectus Supplement as to the contents of any contract
or other document referred to are summaries and in each instance reference is
made to the copy of the contract or other document filed as an exhibit to the
Registration Statement. Copies of the Registration Statement may be obtained
from the Commission, upon payment of the prescribed charges, or may be
examined free of charge at the Commission's offices. Reports and other
information filed with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission
at Seven World Trade Center, 13th Floor, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. 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. Copies of the Agreement pursuant to which a
Series of Certificates is issued will be provided to each person to whom a
Prospectus and the related Prospectus Supplement are delivered, upon written
or oral request directed to the Seller at 85 Broad Street, SC Level, New
York, New York 10004 (phone: 212/902-1171), Attention: Prospectus Department.
The Master Servicer or the Trustee will be required to mail to Holders of
Offered Certificates of each Series periodic unaudited reports concerning the
related Trust Fund. Unless and until definitive Certificates are issued, such
reports may be sent on behalf of the related Trust Fund to Cede & Co., as
nominee of The Depository Trust Company ("DTC") and registered Holder of the
Offered Certificates, pursuant to the applicable Agreement. If so specified
in the related Prospectus Supplement, such reports may be sent to beneficial
owners identified to the Master Servicer or Trustee. Such reports may also be
available to holders of interests in the Certificates upon request to their
respective DTC participants. See "DESCRIPTION OF THE CERTIFICATES -- Reports
to Certificateholders." The Seller will file or cause to be filed with the
Commission such periodic reports with respect to each Trust Fund as are
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder. Reports
filed by the Seller with the Commission pursuant to the Exchange Act will be
filed by means of the EDGAR system and therefor should be available at the
Commission's site on the Web.
INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE
All documents filed by the Seller pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Offered Certificates of a Series
shall be deemed to be incorporated by reference into this Prospectus and to
be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
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other subsequently filed document which is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Seller will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such
person, a copy of any and all of the documents incorporated herein by
reference (not including the exhibits to such documents, unless such exhibits
are specifically incorporated by reference in such documents). Requests for
such copies should be directed to the office of the Secretary, 85 Broad
Street, New York, New York 10004 (phone: 212/902-1000).
RISK FACTORS
COMMERCIAL AND MULTIFAMILY LENDING GENERALLY.
Commercial and multifamily lending generally is viewed as exposing the
lender to a greater risk of loss than one-to four-family residential lending.
Commercial and multifamily lending typically involves larger loans to single
borrowers or groups of related borrowers than residential one-to-four-family
mortgage loans. Further, the repayment of loans secured by income producing
properties is typically dependent upon the successful operation of the
related real estate project. If the cash flow from the project is reduced
(for example, if leases are not obtained or renewed), the borrower's ability
to repay the loan may be impaired. Commercial and multifamily real estate can
be affected significantly by the supply and demand in the market for the type
of property securing the loan and, therefore, may be subject to adverse
economic conditions. Market values may vary as a result of economic events or
governmental regulations outside the control of the borrower or lender that
impact the cash flow of the property, for example, laws which may require
modifications to properties such as the Americans with Disabilities Act, and
rent control laws in the case of multifamily mortgage loans. See "CERTAIN
LEGAL ASPECTS OF THE MORTGAGE LOANS" -- Certain Laws and Regulations,"
"--Type of Mortgaged Property" and "--Americans With Disabilities Act"
herein.
Unless otherwise specified in the related Prospectus Supplement, no new
appraisals of the Mortgaged Properties will be obtained and no new valuations
will be assigned to the Mortgage Loans by the Seller in connection with the
offering of the Offered Certificates. It is possible that the market values
of the Mortgaged Properties underlying a Series of Certificates will have
declined since the origination of the related Mortgage Loans.
LIMITED OBLIGATIONS.
The Certificates of any Series will represent beneficial ownership
interests solely in the assets of the related Trust Fund and will not
represent an interest in or obligation of the Seller, the Originator, the
Trustee, the Master Servicer, the Special Servicer or any other person. The
related Agreement will provide that the Holders of the Certificates will have
no rights or remedies against the Seller or any of its affiliates for any
losses or other claims in connection with the Certificates or the Mortgage
Loans other than the repurchase of the Mortgage Loans by the Seller, if
specifically set forth in such Agreement. Distributions on any Class of
Certificates will depend solely on the amount and timing of payments and
other collections in respect of the related Mortgage Loans. There can be no
assurance that these amounts, together with other payments and collections in
respect of the related Mortgage Loans, will be sufficient to make full and
timely distributions on any Offered Certificates. Except to the extent
described in the related Prospectus Supplement, neither the Offered
Certificates nor the Mortgage Loans will be insured or guaranteed, in whole
or in part, by the United States or any governmental entity or by any private
mortgage or other insurer.
LIMITED LIQUIDITY.
There will have been no secondary market for any Series of the Offered
Certificates prior to the offering thereof. There can be no assurance that
such a market will develop or, if it does develop, that it will provide
holders of the Offered Certificates with liquidity of investment or continue
for the life of the Offered Certificates.
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VARIABILITY IN AVERAGE LIFE OF OFFERED CERTIFICATES.
The payment experience on the related Mortgage Loans will affect the
actual payment experience on and the weighted average lives of the Offered
Certificates and, accordingly, may affect the yield on the Offered
Certificates. Prepayments on the Mortgage Loans will be influenced by the
prepayment provisions of the related Notes and also may be affected by a
variety of economic, geographic and other factors, including the difference
between the interest rates on the Mortgage Loans (giving consideration to the
cost of refinancing) and prevailing mortgage rates and the availability of
refinancing for commercial mortgage loans. In general, if prevailing interest
rates fall significantly below the interest rates on the Mortgage Loans, the
rate of prepayment on the Mortgage Loans would be expected to increase.
Conversely, if prevailing interest rates rise significantly above the
Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment would
be expected to decrease.
Certain of the Mortgage Loans may provide for a Prepayment Premium in
connection with the prepayment thereof, and certain of the Mortgage Loans may
prohibit prepayments of principal in whole or in part during a specified
period. See "DESCRIPTION OF THE MORTGAGE POOL AND THE UNDERLYING MORTGAGED
PROPERTIES" in the related Prospectus Supplement for a description of the
Prepayment Premiums and lockout periods, if any, for the Mortgage Loans
underlying a Series of Certificates. Such Prepayment Premiums and lockout
periods can, but do not necessarily, provide a material deterrent to
prepayments. In addition, in certain jurisdictions, the enforceability of
provisions in mortgage loans prohibiting prepayment or providing for the
payment of prepayment premiums has been questioned as described under
"CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS -- Enforceability of Certain
Provisions -- Prepayment Provisions." The Seller makes no representation or
warranty as to the effect of such Prepayment Premiums or lockout periods on
the rate of prepayment of the related Mortgage Loans.
The extent to which the Master Servicer or Special Servicer, if any,
forecloses upon, takes title to and disposes of any Mortgaged Property
related to a Mortgage Loan will affect the weighted average lives of the
Offered Certificates. If a significant number of the related Mortgage Loans
are foreclosed upon by the Master Servicer or Special Servicer, if any, and
depending upon the amount and timing of recoveries from related REO
Properties, the weighted average lives of Offered Certificates may be
shortened.
Delays in liquidations of defaulted Mortgage Loans and modifications
extending the maturity of Mortgage Loans will tend to extend the payment of
principal of the Mortgage Loans. Because the ability of the Borrower to make
a Balloon Payment typically will depend upon its ability either to refinance
the Mortgage Loan or to sell the related Mortgaged Property, if a significant
number of the Mortgage Loans underlying a Series of Certificates have Balloon
Payments due at maturity, there is a risk that a number of such Mortgage
Loans may default at maturity, or that the Master Servicer or Special
Servicer, if any, may extend the maturity of a number of such Mortgage Loans
in connection with workouts. No representation or warranty is made by the
Seller as to the ability of any of the related Borrowers to make required
Mortgage Loan payments on a full and timely basis, including Balloon Payments
at the maturity of such Mortgage Loans. In the case of defaults, recovery of
proceeds may be delayed by, among other things, bankruptcy of the Borrower or
adverse conditions in the market where the Mortgaged Property is located.
Shortfalls in distributions to Certificateholders also may result from losses
incurred with respect to Mortgage Loans due to uninsured risks or
insufficient hazard insurance proceeds and from any indemnification of the
Master Servicer or Special Servicer in connection with legal actions relating
to the Agreement or Certificates.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS.
Many of the legal aspects of the Mortgage Loans are governed by the laws
of the jurisdiction in which the respective Mortgaged Properties are located
(which laws may vary substantially). These laws may affect the ability to
foreclose on, and the value of, the Mortgaged Properties securing the
Mortgage Loans. For example, state law determines what proceedings are
required for foreclosure, whether the borrower and any foreclosed junior
lienors may redeem the property, whether and to what extent recourse to the
borrower is permitted, what rights junior mortgagees have and whether the
amount of fees and interest that lenders may charge is limited. In addition,
the laws of some jurisdictions may
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render certain provisions of the Mortgage Loans unenforceable, such as
prepayment provisions, due-on-sale and acceleration provisions. Installment
Contracts and Financial Leases also may be subject to similar legal
requirements. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS" herein.
Delays in liquidations of defaulted Mortgage Loans and shortfalls in amounts
realized upon liquidation as a result of the application of such laws may
result in delays and shortfalls in payments to Certificateholders.
ENVIRONMENTAL LAW CONSIDERATIONS.
The Agreement for each Series generally will provide that an updated phase
I environmental assessment be obtained with respect to any Mortgaged Property
prior to acquiring title thereto or assuming its operation. This requirement
effectively precludes assuming ownership, control or management of the
related Mortgaged Property until a satisfactory environmental assessment is
obtained (or any required remedial action is taken), reducing the likelihood
that the related Trust Fund will become liable for any environmental
condition affecting a Mortgaged Property, but making it more difficult to
foreclose. However, there can be no assurance that the requirements of the
Agreement will in fact insulate the Trust Fund from liability for
environmental conditions.
Under the laws of certain states, failure to perform the remediation of
environmental conditions required or demanded by the state may give rise to a
lien on a Mortgaged Property or a restriction on the right of the owner to
transfer the Mortgaged Property to ensure the reimbursement of remediation
costs incurred by the state. Although the costs of remedial action could be
substantial, the state of the law in certain of these jurisdictions presently
is unclear as to whether and under what circumstances such costs (or the
requirements to otherwise undertake remedial actions) would be imposed on a
secured lender such as the Trust Fund. However, under the laws of some states
and under applicable federal law, a lender may be liable for such costs in
certain circumstances as the "owner" or "operator" of the Mortgaged Property.
See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS -- Environmental
Considerations" herein.
EARLY TERMINATION.
The Trust Fund for a Series of Certificates may be subject to optional
termination by the Master Servicer, the Special Servicer, if any, (if all of
the Mortgage Loans are Specially Serviced Mortgage Loans), or Holders of
certain Classes of Certificates under certain circumstances. In the event of
such termination, Holders of the Offered Certificates might receive some
principal payments earlier than otherwise, which could adversely affect their
anticipated yield to maturity. See "THE AGREEMENT -- Optional Termination"
herein.
THE SELLER
The Seller was incorporated in the State of Delaware on November 16, 1995,
for the purpose of engaging in the business, among other things, of acquiring
and depositing mortgage assets in trusts in exchange for certificates
evidencing interests in such trusts and selling or otherwise distributing
such certificates. The principal executive offices of the Seller are located
at 85 Broad Street, New York, New York 10004. Its telephone number is (212)
902-1000. The Seller will not have any material assets other than the Trust
Funds.
Neither the Seller, nor any of its affiliates will insure or guarantee
distributions on the Certificates of any Series. The Agreement (as defined
below) for each Series will provide that the Holders of the Certificates for
such Series will have no rights or remedies against the Seller or any of its
affiliates for any losses or other claims in connection with the Certificates
or the Mortgage Loans other than the repurchase of the Mortgage Loans by the
Seller, if specifically set forth in such Agreement.
The Certificate of Incorporation, as amended, of the Seller provides that
a director of the corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent that such exemption from liability or limitation thereof
is not permitted under the Delaware General Corporation Law as currently in
effect or as may be amended. In addition,
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the Bylaws of the Seller provide that the Seller shall indemnify to the full
extent permitted by law any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person or such person's
testator or intestate is or was a director, officer or employee of the Seller
or serves or served, at the request of the Seller, any other enterprise as a
director, officer or employee. Insofar as indemnification for liabilities
arising under the Act may be permitted to directors, officers and controlling
persons of the Seller pursuant to the foregoing provisions, or otherwise, the
Seller 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.
USE OF PROCEEDS
The Seller intends to apply all or substantially all of the net proceeds
from the sale of each Series offered hereby and by the related Prospectus
Supplement to acquire the Mortgage Loans relating to such Series, to
establish the Reserve Funds, if any, for the Series, to obtain other Credit
Enhancement, if any, for the Series, to pay costs incurred in connection with
structuring and issuing the Certificates and for general corporate purposes.
Certificates may be exchanged by the Seller for Mortgage Loans.
DESCRIPTION OF THE CERTIFICATES*
The Certificates of each Series will be issued pursuant to a separate
Pooling and Servicing Agreement (the "Agreement")** to be entered into among
the Seller, the Master Servicer, the Special Servicer, if any, and the
Trustee for that Series and any other parties described in the related
Prospectus Supplement, substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus is a part or in such other
form as may be described in the related Prospectus Supplement. The following
summaries describe certain provisions expected to be common to each Series
and the Agreement with respect to the underlying Trust Fund. However, the
Prospectus Supplement for each Series will describe more fully additional
characteristics of the Offered Certificates and any additional provisions of
the related Agreement.
At the time of issuance, it is anticipated that the Offered Certificates
of each Series will be rated "investment grade," typically one of the four
highest generic rating categories, by at least one nationally recognized
statistical rating organization at the request of the Seller. Each of such
rating organizations specified in the related Prospectus Supplement as rating
the Offered Certificates of the related Series at the request of the Seller
is hereinafter referred to as a "Rating Agency." 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. There can be no
assurance as to whether any rating agency not requested to rate the Offered
Certificates will nonetheless issue a rating and, if so, what such rating
would be. A rating assigned to the Offered Certificates by a rating agency
that has not been requested by the Seller to do so may be lower than the
rating assigned by a rating agency pursuant to the Seller's request.
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* Whenever in this Prospectus the terms "Certificates," "Trust Fund"
and "Mortgage Pool" are used, such terms will be deemed to apply,
unless the context indicates otherwise, to a specific Series of
Certificates, the Trust Fund underlying the related Series and the
related Mortgage Pool.
** In the case of a Funding Note (as described below), some or all of
the provisions described herein as being part of the Agreement may be
found in other contractual documents connected with such Funding
Note, such as a collateral indenture or a separate servicing
agreement, and the term "Agreement" as used in this Prospectus will
include such other contractual documents. The Prospectus Supplement
for a Series in which a Funding Note is used will describe such other
contractual documents and will indicate in which documents various
provisions mentioned in this Prospectus are to be found and any
modifications to such provisions.
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GENERAL
The Certificates of each Series will be issued in registered or book-entry
form and will represent beneficial ownership interests in the Trust Fund
created pursuant to the Agreement for such Series. The Trust Fund for each
Series will consist of the following, to the extent provided in the
Agreement: (i) the Mortgage Pool, consisting primarily of the Mortgage Loans
conveyed to the Trustee pursuant to the Agreement; (ii) all payments on or
collections in respect of the Mortgage Loans due on or after the date
specified in the related Prospectus Supplement; (iii) all property acquired
by foreclosure or deed in lieu of foreclosure with respect to the Mortgage
Loans; and (iv) such other assets or rights, such as a Funding Note, as are
described in the related Prospectus Supplement. In addition, the Trust Fund
for a Series may include various forms of Credit Enhancement, such as, but
not limited to, insurance policies on the Mortgage Loans, letters of credit,
certificate guarantee insurance policies, the right to make draws upon one or
more Reserve Funds or other arrangements acceptable to each Rating Agency
rating the Offered Certificates. See "CREDIT ENHANCEMENT." Such other assets,
if any, will be described more fully in the related Prospectus Supplement.
The Prospectus Supplement for any Series will describe any specific
features of the transaction established in connection with the holding of the
underlying Mortgage Pool. For example, if so indicated in the Prospectus
Supplement, at the time the Mortgage Loans are to be acquired from a third
party and conveyed to the Trust Fund, the third party may establish a
bankruptcy-remote special-purpose entity or a trust, to which the Mortgage
Loans will be conveyed and which in turn will issue to the Trustee a debt
instrument collateralized by, having recourse only to, and paying through
payments (which may be net of servicing fees and any retained yield) from,
the Mortgage Pool (a "Funding Note"), and such debt instrument may be
conveyed to the Trust Fund as the medium for holding the Mortgage Pool.
If specified in the related Prospectus Supplement, Certificates of a given
Series may be issued in a single Class or two or more Classes which may pay
interest at different rates, may represent different allocations of the right
to receive principal and interest payments, and certain of which may be
subordinated to other Classes in the event of shortfalls in available cash
flow from the underlying Mortgage Loans or realized losses on the underlying
Mortgage Loans. Alternatively, or in addition, if so specified in the related
Prospectus Supplement, Classes may be structured to receive principal
payments in sequence. The related Prospectus Supplement may provide that each
Class in a group of Classes structured to receive sequential payments of
principal will be entitled to be paid in full before the next Class in the
group is entitled to receive any principal payments, or may provide for
partially concurrent principal payments among one or more of such Classes. If
so specified in the related Prospectus Supplement, a Class of Offered
Certificates may also provide for payments of principal only or interest only
or for disproportionate payments of principal and interest. Subordinate
Certificates of a given Series of Offered Certificates may be offered in the
same Prospectus Supplement as the Senior Certificates of such Series or may
be offered in a separate Prospectus Supplement or may be offered in one or
more transactions exempt from the registration requirements of the Act. Each
Class of Offered Certificates of a Series will be issued in the minimum
denominations specified in the related Prospectus Supplement.
The Prospectus Supplement for any Series including types of Classes
similar to any of those described above will contain a description of their
characteristics and risk factors, including, as applicable, (i) mortgage
principal prepayment effects on the weighted average lives of such Classes,
(ii) the risk that interest only, or disproportionately interest weighted,
Classes purchased at a premium may not return their purchase prices under
rapid prepayment scenarios and (iii) the degree to which an investor's yield
is sensitive to principal prepayments.
The Offered Certificates of each Series will be freely transferable and
exchangeable at the office specified in the related Agreement and Prospectus
Supplement; provided, however, that certain Classes of Offered Certificates
may be subject to transfer restrictions described in the related Prospectus
Supplement.
If specified in the related Prospectus Supplement, the Offered
Certificates may be transferable only in book-entry form through the
facilities of The Depository Trust Company or another depository identified
in such Prospectus Supplement.
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If the Certificates of a Class are transferable only on the books of The
Depository Trust Company (the "Depository"), no person acquiring such a
Certificate that is in book-entry form (each, a "beneficial owner") will be
entitled to receive a physical certificate representing such Certificate
except in the limited circumstances described in the related Prospectus
Supplement. Instead, such Certificates will be registered in the name of a
nominee of the Depository, and beneficial interests therein will be held by
investors through the book-entry facilities of the Depository, as described
herein. The Seller has been informed by the Depository that its nominee will
be Cede & Co. Accordingly, Cede & Co. is expected to be the holder of record
of any such Certificates that are in book-entry form.
If the Certificates of a Class are transferable only on the books of the
Depository, each beneficial owner's ownership of such a Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or
other financial intermediary (each, a "Financial Intermediary") that
maintains the beneficial owner's account for such purpose. In turn, the
Financial Intermediary's ownership of such Certificate will be recorded on
the records of the Depository (or of a participating firm that acts as agent
for the Financial Intermediary, whose interest will in turn be recorded on
the records of the Depository, if the beneficial owner's Financial
Intermediary is not a Depository participant). Beneficial ownership of a
book-entry Certificate may only be transferred in compliance with the
procedures of such Financial Intermediaries and Depository participants.
Because the Depository can act only on behalf of participants, who in turn
act on behalf of indirect participants and certain banks, the ability of a
beneficial owner to pledge book-entry Certificates to persons or entities
that do not participate in the Depository system, or to otherwise act with
respect to such book-entry Certificates, may be limited due to the lack of a
physical certificate for such book-entry Certificates.
The Depository, which is a New York-chartered limited purpose trust
company, performs services for its participants, some of whom (and/or their
representatives) own the Depository. In accordance with its normal procedure,
the Depository is expected to record the positions held by each Depository
participant in the book-entry Certificates, whether held for its own account
or as a nominee for another person. In general, beneficial ownership of
Certificates will be subject to the rules, regulations and procedures
governing the Depository and Depository participants as are in effect from
time to time.
If the Offered Certificates are transferable on the books of the
Depository, the Depository, or its nominee as record holder of the Offered
Certificates, will be recognized by the Seller and the Trustee as the owner
of such Certificates for all purposes, including notices and consents. In the
event of any solicitation of consents from or voting by Certificateholders
pursuant to the Agreement, the Trustee may establish a reasonable record date
and give notice of such record date to the Depository. In turn, the
Depository will solicit votes from the beneficial owners in accordance with
its normal procedures, and the beneficial owners will be required to comply
with such procedures in order to exercise their voting rights through the
Depository.
Distributions of principal of and interest on the book-entry Certificates
will be made on each Distribution Date to the Depository or its nominee. The
Depository will be responsible for crediting the amount of such payments to
the accounts of the applicable Depository participants in accordance with the
Depository's normal procedures. Each Depository participant will be
responsible for disbursing such payments to the beneficial owners for which
it is holding book-entry Certificates and to each Financial Intermediary for
which it acts as agent. Each such Financial Intermediary will be responsible
for disbursing funds to the beneficial owners of the book-entry Certificates
that it represents.
The information herein concerning the Depository and its book-entry system
has been obtained from sources believed to be reliable, but the Seller takes
no responsibility for the accuracy or completeness thereof.
In the event a depository other than The Depository Trust Company is
identified in a Prospectus Supplement, information similar to that set forth
above will be provided with respect to such depository and its book-entry
facilities in such Prospectus Supplement.
DISTRIBUTIONS ON CERTIFICATES
Distributions of principal and interest on the Certificates of each Series
will be made to the registered holders thereof ("Certificateholders" or
"Holders") by the Trustee (or such other paying agent as may be
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identified in the related Prospectus Supplement) on the day (the
"Distribution Date") specified in the related Prospectus Supplement,
beginning in the period specified in the related Prospectus Supplement
following the establishment of the related Trust Fund. Distributions for each
Series will be made by check mailed to the address of the person entitled
thereto as it appears on the certificate register for such Series maintained
by the Trustee, by wire transfer or by such other method as is specified in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the final distribution in retirement of the
Certificates of each Series will be made only upon presentation and surrender
of the Certificates at the office or agency specified in the notice to the
Certificateholders of such final distribution. In addition, the Prospectus
Supplement relating to each Series will set forth the applicable due period,
prepayment period, record date, Cut-Off Date and determination date in
respect of each Series of Certificates.
With respect to each Series of Certificates on each Distribution Date, the
Trustee (or such other paying agent as may be identified in the related
Prospectus Supplement) will distribute to the Certificateholders the amounts
of principal and/or interest, calculated as described in the related
Prospectus Supplement, that are due to be paid on such Distribution Date. In
general, such amounts will include previously undistributed payments of
principal (including principal prepayments, if any) and interest on the
Mortgage Loans (or amounts in respect thereof) received by the Trustee after
a date specified in the related Prospectus Supplement (the "Cut-Off Date")
and prior to the day preceding each Distribution Date specified in the
related Prospectus Supplement.
The related Prospectus Supplement for any Series of Certificates will
specify, for any Distribution Date on which the principal balance of the
Mortgage Loans is reduced due to losses, the priority and manner in which
such losses will be allocated. Unless otherwise specified in the related
Prospectus Supplement, losses on Mortgage Loans generally will be allocated
after all proceeds of defaulted Mortgage Loans have been received by reducing
the outstanding Certificate Principal Amount of the most subordinate
outstanding Class of Certificates. If specified in the related Prospectus
Supplement, losses may be estimated on the basis of a qualified appraisal of
the Mortgaged Property and allocated prior to the final liquidation of the
Mortgaged Property. The related Prospectus Supplement for any Series of
Certificates also will specify the manner in which principal prepayments,
negative amortization and interest shortfalls will be allocated among the
Classes of Certificates.
ACCOUNTS
It is expected that the Agreement for each Series of Certificates will
provide that the Trustee establish an account (the "Distribution Account")
into which the Master Servicer will deposit amounts held in the Collection
Account and from which account distributions will be made with respect to a
given Distribution Date. On each Distribution Date, the Trustee will apply
amounts on deposit in the Distribution Account generally to make
distributions of interest and principal to the Certificateholders in the
manner described in the related Prospectus Supplement.
It is also expected that the Agreement for each Series of Certificates
will provide that the Master Servicer establish and maintain a special trust
account (the "Collection Account") in the name of the Trustee for the benefit
of Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer will deposit into the Collection Account, as
more fully described in the related Prospectus Supplement (other than in
respect of principal of, or interest on, the Mortgage Loans due on or before
the Cut-Off Date): (1) all payments on account of principal, including
principal prepayments, on the Mortgage Loans; (2) all payments on account of
interest on the Mortgage Loans and all Prepayment Premiums; (3) all proceeds
from any insurance policy relating to a Mortgage Loan ("Insurance Proceeds")
other than proceeds applied to restoration of the related Mortgaged Property
or otherwise applied in accordance with the terms of the related Mortgage
Loans; (4) all proceeds from the liquidation of a Mortgage Loan ("Liquidation
Proceeds"), including the sale of any Mortgaged Property acquired on behalf
of the Trust Fund through foreclosure or deed in lieu of foreclosure ("REO
Property"); (5) all proceeds received in connection with the taking of a
Mortgaged Property by eminent domain; (6) any amounts required to be
deposited by the Master Servicer to cover net losses on Permitted Investments
made with funds held in the Collection Account; (7) any amounts required to
be deposited
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in connection with the application of co-insurance clauses, flood damage to
REO Properties and blanket policy deductibles; (8) any amounts required to be
deposited from income with respect to any REO Property and deposited in the
REO Account (to the extent the funds in the REO Account exceed the expenses
of operating and maintaining REO Properties and reserves established
therefor); (9) any Advance made by the Master Servicer that is required to be
deposited therein pursuant to the Agreement; and (10) any amounts received
from Borrowers which represent recoveries of Property Protection Expenses.
Unless otherwise specified in the related Prospectus Supplement, the Special
Servicer, if any, will be required to remit immediately to the Master
Servicer for deposit in the Collection Account any amounts of the types
described above that it receives in respect of the Specially Serviced
Mortgage Loans. "Prepayment Premium" means any premium paid or payable by the
related Borrower in connection with any principal prepayment on any Mortgage
Loan. "Property Protection Expenses" comprise certain costs and expenses
incurred in connection with defaulted Mortgage Loans, acquiring title or
management of REO Property or the sale of defaulted Mortgage Loans or REO
Properties, as more fully described in the related Agreement. As set forth in
the Agreement for each Series, the Master Servicer will be entitled to make
from time to time certain withdrawals from the Collection Account to, among
other things: (i) remit certain amounts for the related Distribution Date
into the Distribution Account; (ii) to the extent specified in the related
Prospectus Supplement, reimburse Property Protection Expenses and pay taxes,
assessments and insurance premiums and certain third-party expenses in
accordance with the Agreement; (iii) pay accrued and unpaid servicing fees to
the Master Servicer out of all Mortgage Loan collections; and (iv) reimburse
the Master Servicer, the Special Servicer, if any, the Trustee and the Seller
for certain expenses and provide indemnification to the Seller, the Master
Servicer, the Trustee and, if applicable, the Special Servicer, as described
in the Agreement.
The amounts at any time credited to the Collection Account may be invested
in Permitted Investments that are payable on demand or in general mature or
are subject to withdrawal or redemption on or before the business day
preceding the next succeeding Master Servicer Remittance Date. The Master
Servicer will be required to remit amounts required for distribution to
Certificateholders to the Distribution Account on the business day preceding
the related Distribution Date that is specified in the related Prospectus
Supplement (the "Master Servicer Remittance Date"). Unless otherwise set
forth in the related Prospectus Supplement, the income from the investment of
funds in the Collection Account in Permitted Investments will constitute
additional servicing compensation for the Master Servicer, and the risk of
loss of funds in the Collection Account resulting from such investments will
be borne by the Master Servicer. The amount of any such loss will be required
to be deposited by the Master Servicer in the Collection Account immediately
as realized.
It is expected that the Agreement for each Series of Certificates will
provide that a special trust account (the "REO Account") will be established
and maintained in order to be used in connection with each REO Property and,
if specified in the related Prospectus Supplement, certain other Mortgaged
Properties. To the extent set forth in the Agreement, certain withdrawals
from the REO Account will be made to, among other things, (i) make
remittances to the Collection Account as required by the Agreement, (ii) pay
taxes, assessments, insurance premiums, other amounts necessary for the
proper operation, management and maintenance of the REO Properties and such
other Mortgaged Properties and certain third-party expenses in accordance
with the Agreement (including expenses relating to any appraisal, property
inspection and environmental assessment reports required by the Agreement)
and (iii) provide for the reimbursement of certain expenses in respect of the
REO Properties and such Mortgaged Properties.
The amount at any time credited to each REO Account will be fully insured
to the maximum coverage possible or will be invested in Permitted Investments
that mature, or are subject to withdrawal or redemption, on or before the
business day on which such amounts are required to be remitted to the Master
Servicer for deposit in the Collection Account. Unless otherwise specified in
the related Prospectus Supplement, the income from the investment of funds in
the REO Account in Permitted Investments shall be deposited in the REO
Account for remittance to the Collection Account, and the risk of loss of
funds in the REO Account resulting from such investments will be borne by the
Trust Fund.
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Unless otherwise specified in the related Prospectus Supplement,
"Permitted Investments" will consist of one or more of the following:
(i) direct obligations of, or guaranteed as to timely payment of principal
and interest by, the United States or any agency or instrumentality thereof
provided that such obligations are backed by the full faith and credit of the
United States;
(ii) direct obligations of, or guaranteed as to timely payment of
principal and interest by, the Federal Home Loan Mortgage Corporation
("FHLMC"), the Federal National Mortgage Association or the Federal Farm
Credit System, provided that any such obligation, at the time of purchase of
such obligation or contractual commitment providing for the purchase thereof,
is qualified by each Rating Agency as an investment of funds backing
securities having ratings equivalent to each Rating Agency's highest initial
rating of the Certificates;
(iii) demand and time deposits in, or certificates of deposit of, or
bankers' acceptances issued by, any bank or trust company, savings and loan
association or savings bank, provided that, in the case of obligations that
are not fully FDIC-insured deposits, the commercial paper and /or long-term
unsecured debt obligations of such depository institution or trust company
(or in the case of the principal depository institution in a holding company
system, the commercial paper or long-term unsecured debt obligations of such
holding company) have the highest rating available for such securities by
each Rating Agency (in the case of commercial paper) or have received one of
the two highest ratings available for such securities by each Rating Agency
(in the case of long-term unsecured debt obligations), or such lower rating
as will not result in the downgrading or withdrawal of the rating or ratings
then assigned to the Certificates by any Rating Agency;
(iv) general obligations of, or obligations guaranteed by, any state of
the United States or the District of Columbia receiving one of the two
highest long-term debt ratings available for such securities by each Rating
Agency, or such lower rating as will not result in the downgrading or
withdrawal of the rating or ratings then assigned to the Certificates by any
such Rating Agency;
(v) commercial or finance company paper (including both
non-interest-bearing discount obligations and interest-bearing obligations
payable on demand or on a specified date not more than one year after the
date of issuance thereof) that is rated by each Rating Agency in its highest
short-term unsecured rating category at the time of such investment or
contractual commitment providing for such investment, and is issued by a
corporation the outstanding senior long-term debt obligations of which are
then rated by each Rating Agency in one of its two highest long-term
unsecured rating categories, or such lower rating as will not result in the
downgrading or withdrawal of the rating or ratings then assigned to the
Certificates by any Rating Agency;
(vi) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation rated in one of the two highest ratings
available to such issuers by each Rating Agency at the time of such
investment, provided that any such agreement must by its terms provide that
it is terminable by the purchaser without penalty in the event any such
rating is at any time lower than such level;
(vii) repurchase obligations with respect to any security described in
clause (i) or (ii) above entered into with a depository institution or trust
company (acting as principal) meeting the ratings standard described in (iii)
above;
(viii) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any state
thereof and rated by each Rating Agency in one of its two highest long-term
unsecured rating categories at the time of such investment or contractual
commitment providing for such investment, subject to such limitations, if
any, as are provided in the related Agreement;
(ix) units of taxable money market funds which funds are regulated
investment companies, seek to maintain a constant net asset value per share
and invest solely in obligations backed by the full faith and credit of the
United States, and have been designated in writing by each Rating Agency as
Permitted Investments with respect to this definition;
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(x) if previously confirmed in writing to the Trustee, any other demand,
money market or time deposit, or any other obligation, security or
investment, as may be acceptable to each Rating Agency as an investment of
funds backing securities having ratings equivalent to each Rating Agency's
highest initial rating of the Certificates; and
(xi) such other obligations as are acceptable as Permitted Investments to
each Rating Agency; provided, however, that (a) such instrument or security
shall qualify as a "cash flow investment" pursuant to the Internal Revenue
Code of 1986, as amended (the "Code") and (b) no instrument or security shall
be a Permitted Investment if (i) such instrument or security evidences a
right to receive only interest payments or (ii) the stated interest rate on
such investment is in excess of 120% of the yield to maturity produced by the
price at which such investment was purchased.
As described in the related Prospectus Supplement, for a Series of
Certificates where the underlying Mortgage Loans are held through a Funding
Note, some of the accounts described above may be held by the issuer or
collateral trustee of such Funding Note.
AMENDMENT
The Agreement for each Series will provide that it may be amended by the
parties thereto without the consent of any of the Certificateholders (i) to
cure any ambiguity, (ii) to correct or supplement any provision therein that
may be inconsistent with any other provision therein or in the Prospectus
Supplement, (iii) to maintain the rating or ratings assigned to the
Certificates by a Rating Agency or (iv) to make other provisions with respect
to matters or questions arising under the Agreement which are not materially
inconsistent with the provisions of the Agreement, provided that any such
amendment pursuant to clause (iv) above will not, as evidenced by an opinion
of counsel acceptable to the Seller and the Trustee, or as otherwise
specified in the Agreement and the related Prospectus Supplement, adversely
affect in any material respect the interests of any Certificateholder.
Unless otherwise specified in the related Prospectus Supplement, each
Agreement also will provide that it may be amended by the parties thereto
with the consent of the Holders of Certificates representing an aggregate
outstanding principal amount of not less than 66 2/3% of each Class of
Certificates affected by the proposed amendment for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of the Agreement or modifying in any manner the rights of Certificateholders;
provided, however, that no such amendment may (i) reduce in any manner the
amount of, or delay the timing of, payments received on Mortgage Loans which
are required to be distributed on any Certificate without the consent of each
affected Certificateholder, (ii) reduce the aforesaid percentage of
Certificates the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all Certificates then
outstanding, or (iii) alter the servicing standard set forth in the
Agreement. Further, the Agreement for each Series may provide that the
parties thereto, at any time and from time to time, without the consent of
the Certificateholders, may amend the Agreement to modify, eliminate or add
to any of its provisions to such extent as shall be necessary to maintain the
qualification of the Trust Fund as a REMIC or a FASIT, as the case may be, or
to prevent the imposition of any additional state or local taxes, at all
times that any of the Certificates are outstanding; provided, however, that
such action, as evidenced by an opinion of counsel acceptable to the Trustee,
is necessary or helpful to maintain such qualification or to prevent the
imposition of any such taxes, and would not adversely affect in any material
respect the interest of any Certificateholder.
The Agreement relating to each Series may provide that no amendment to
such Agreement will be made unless there has been delivered in accordance
with such Agreement an opinion of counsel to the effect that such amendment
will not cause such Series to fail to qualify as a REMIC or a FASIT, as the
case may be, at any time that any of the Certificates are outstanding or
cause a tax to be imposed on the Trust Fund under the REMIC or FASIT
provisions of the Code.
The Prospectus Supplement for a Series may describe other or different
provisions concerning the amendment of the related Agreement.
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TERMINATION
Unless otherwise specified in the related Prospectus Supplement, the
obligations of the parties to the Agreement for each Series will terminate
upon: (i) the purchase of all of the assets of the related Trust Fund, as
described in the related Prospectus Supplement; (ii) the later of (a) the
distribution to Certificateholders of that Series of final payment with
respect to the last outstanding Mortgage Loan or (b) the disposition of all
property acquired upon foreclosure or deed in lieu of foreclosure with
respect to the last outstanding Mortgage Loan and the remittance to the
Certificateholders of all funds due under the Agreement; (iii) the sale of
the assets of the related Trust Fund after the principal amounts of all
Certificates have been reduced to zero under certain circumstances set forth
in the Agreement; or (iv) mutual consent of the parties and all
Certificateholders. With respect to each Series, the Trustee will give or
cause to be given written notice of termination of the Agreement to each
Certificateholder and, unless otherwise specified in the related Prospectus
Supplement, the final distribution under the Agreement will be made only upon
surrender and cancellation of the related Certificates at an office or agency
specified in the notice of termination.
REPORTS TO CERTIFICATEHOLDERS
Concurrently with each distribution for each Series, the Trustee (or such
other paying agent as may be identified in the related Prospectus Supplement)
will make available to each Certificateholder several monthly reports setting
forth such information as is specified in the Agreement and described in the
related Prospectus Supplement, which may include the following information,
if applicable:
(i) a Distribution Date Statement that provides, among other things,
standard information as to principal and interest distributions, Certificate
Principal Amounts, Advances and Scheduled Principal Balances of the Mortgage
Loans;
(ii) a Mortgage Loan Status Report, which provides updated information
regarding the Mortgage Loans and a loan-by-loan listing showing loan name,
property type, location, unpaid principal balance, interest rate, paid
through date and maturity date, which loan-by-loan listing may be made
available electronically;
(iii) a Financial Status Report, which provides, among other things,
revenue, net operating income and debt service coverage ratio for certain
Mortgage Loans;
(iv) a Delinquent Loan Status Report, which provides, among other things,
loan name, loan number and unpaid principal balance of Mortgage Loans which
are delinquent 30-59 days, 60-89 days, 90 days or more, or are in foreclosure
but have not yet become REO Properties;
(v) an Historical Loan Modification Report, which provides, among other
things, information on those Mortgage Loans which have been modified;
(vi) an Historical Loss Estimate Report, which provides on a loan-by-loan
basis, among other things, the aggregate amount of Liquidation Proceeds,
liquidation expenses and realized losses for certain Specially Serviced
Mortgage Loans;
(vii) an REO Status Report, which provides, among other things, for each
REO Property, the date of acquisition, net operating income and the value of
such REO Property (based on the most recent appraisal or valuation); and
(viii) a Watch List, which provides, among other things, a list of
Mortgage Loans in jeopardy of becoming Specially Serviced Mortgage Loans.
THE TRUSTEE
The Seller will select a bank or trust company to act as trustee (the
"Trustee") under the Agreement for each Series and the Trustee will be
identified in the related Prospectus Supplement.
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THE MORTGAGE POOLS
GENERAL
Each Mortgage Pool will consist of one or more mortgage loans secured by
first, second or more junior mortgages, deeds of trust or similar security
instruments ("Mortgages") on, or installment contracts ("Installment
Contracts") for the sale of or financial leases and other similar
arrangements equivalent to such mortgage loans on, fee simple or leasehold
interests in commercial real property, multifamily residential property,
mixed residential/commercial property, and related property and interests
(each such interest or property, as the case may be, a "Mortgaged Property").
Each such mortgage loan, lease or Installment Contract is herein referred to
as a "Mortgage Loan."
Mortgage Loans will be of one or more of the following types:
1. Mortgage Loans with fixed interest rates;
2. Mortgage Loans with adjustable interest rates;
3. Mortgage Loans with principal balances that fully amortize over their
remaining terms to maturity;
4. Mortgage Loans whose principal balances do not fully amortize but
instead provide for a substantial principal payment at the stated maturity
of the loan;
5. Mortgage Loans that provide for recourse against only the Mortgaged
Properties;
6. Mortgage Loans that provide for recourse against the other assets of
the related Borrowers; and
7. any other types of Mortgage Loans described in the related Prospectus
Supplement.
Certain Mortgage Loans ("Simple Interest Loans") may provide that
scheduled interest and principal payments thereon are applied first to
interest accrued from the last date to which interest has been paid to the
date such payment is received and the balance thereof is applied to
principal, and other Mortgage Loans may provide for payment of interest in
advance rather than in arrears.
Mortgage Loans may also be secured by one or more assignments of leases
and rents, management agreements, security agreements, or rents, fixtures and
personalty or operating agreements relating to the Mortgaged Property and in
some cases by certain letters of credit, personal guarantees or both.
Pursuant to an assignment of leases and rents, the obligor (the "Borrower")
on the related promissory note (the "Note") assigns its right, title and
interest as landlord under each lease and the income derived therefrom to the
related lender, while retaining a right, or in some cases a license, to
collect the rents for so long as there is no default. If the Borrower
defaults, the license terminates and the related lender is entitled to
collect the rents from tenants to be applied to the monetary obligations of
the Borrower. State law may limit or restrict the enforcement of the
assignment of leases and rents by a lender until the lender takes possession
of the related Mortgaged Property and a receiver is appointed. See "CERTAIN
LEGAL ASPECTS OF THE MORTGAGE LOANS -- Leases and Rents."
Certain Mortgage Loans may provide for "equity participations" which, as
specified in the related Prospectus Supplement, may or may not be assigned to
the Trust Fund. If so specified in the related Prospectus Supplement, the
Mortgage Loans may provide for holdbacks of certain of the proceeds of such
loans. In such event, the amount of such holdback will be deposited by the
Seller into an escrow account held by the Trustee unless otherwise specified
in the related Prospectus Supplement.
Unless otherwise specified in the Prospectus Supplement for a Series, the
Mortgage Loans will not be insured or guaranteed by the United States, any
governmental agency or any private mortgage insurer.
Unless otherwise specified therein, the Prospectus Supplement relating to
each Series will provide specific information regarding the characteristics
of the Mortgage Loans, as of the Cut-Off Date, including, among other things:
(i) the aggregate principal balance of the Mortgage Loans and the largest,
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smallest and average principal balance of the Mortgage Loans; (ii) the types
of properties securing the Mortgage Loans and the aggregate principal balance
of the Mortgage Loans secured by each type of property; (iii) the interest
rate or range of interest rates of the Mortgage Loans and the weighted
average Mortgage Interest Rate of the Mortgage Loans; (iv) the original and
remaining terms to stated maturity of the Mortgage Loans and the seasoning of
the Mortgage Loans; (v) the earliest and latest origination date and maturity
date and the weighted average original and remaining terms to stated maturity
of the Mortgage Loans; (vi) the loan-to-valuation ratios at origination and
current loan balance-to-original valuation ratios of the Mortgage Loans;
(vii) the geographic distribution of the Mortgaged Properties underlying the
Mortgage Loans; (viii) the minimum interest rates, margins, adjustment caps,
adjustment frequencies, indices and other similar information applicable to
adjustable rate Mortgage Loans; (ix) the debt service coverage ratios
relating to the Mortgage Loans; (x) information with respect to the
prepayment provisions, if any, of the Mortgage Loans; (xi) information as to
the payment characteristics of the Mortgage Loans, including, without
limitation, balloon payment and other amortization provisions; and (xii)
payment delinquencies, if any, relating to the Mortgage Loans. If specified
in the related Prospectus Supplement, the Seller may segregate the Mortgage
Loans in a Mortgage Pool into separate "Mortgage Loan Groups" (as described
in the related Prospectus Supplement) as part of the structure of the
payments of principal and interest on the Certificates of a Series. In such
case, the Seller may disclose the above-specified information by Mortgage
Loan Group. In the event that the Mortgage Loans consist of financial leases
or Installment Contracts, the related Prospectus Supplement will provide
appropriate specific information analogous to that described above.
The Seller will file a current report on Form 8-K (the "Form 8-K") with
the Securities and Exchange Commission within 15 days after the initial
issuance of each Series of Certificates (each, a "Closing Date"), as
specified in the related Prospectus Supplement, which will set forth
information with respect to the Mortgage Loans included in the Trust Fund for
a Series as of the related Closing Date. The Form 8-K will be available to
the Certificateholders of the related Series promptly after its filing.
UNDERWRITING AND INTERIM SERVICING STANDARDS APPLICABLE TO THE MORTGAGE LOANS
Unless otherwise indicated in the related Prospectus Supplement, the
Mortgage Loans in the Mortgage Pool underlying the Certificates of a Series
will be newly-originated or seasoned Mortgage Loans and will be purchased or
otherwise acquired from third parties, which third parties may or may not be
originators of such Mortgage Loans and may or may not be affiliates of the
Seller. The origination standards and procedures applicable to such Mortgage
Loans may differ from Series to Series or among the Mortgage Loans in a given
Mortgage Pool, depending on the identity of the originator or originators. In
the case of seasoned Mortgage Loans, the procedures by which such Mortgage
Loans have been serviced from their origination to the time of their
inclusion in the related Mortgage Pool may also differ from Series to Series
or among the Mortgage Loans in a given Mortgage Pool.
The related Prospectus Supplement for each Series will provide information
as to the origination standards and procedures applicable to the Mortgage
Loans in the related Mortgage Pool and, to the extent applicable and
material, will provide information as to the servicing of such Mortgage Loans
prior to their inclusion in the Mortgage Pool.
ASSIGNMENT OF MORTGAGE LOANS
At the time of issuance of the Certificates of each Series, the Seller
will cause the Mortgage Loans (or, in the case of a structure using a Funding
Note, the Funding Note) to be assigned to the Trustee, together with, as more
fully specified in the related Prospectus Supplement, all payments due on or
with respect to such Mortgage Loans (or Funding Note), other than principal
and interest due on or before the Cut-Off Date and principal prepayments
received on or before the Cut-Off Date. The Trustee, concurrently with such
assignment, will execute and deliver Certificates evidencing the beneficial
ownership interests in the related Trust Fund to the Seller in exchange for
the Mortgage Loans. Each Mortgage Loan will be identified in a schedule
appearing as an exhibit to the Agreement for the related Series (the
"Mortgage Loan Schedule"). The Mortgage Loan Schedule will include, among
other things, as to each Mortgage Loan, information as to its outstanding
principal balance as of the close of business
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on the Cut-Off Date, as well as information respecting the interest rate, the
scheduled monthly (or other periodic) payment of principal and interest as of
the Cut-Off Date and the maturity date of each Note.
In addition, except to the extent otherwise specified in the related
Prospectus Supplement, the Seller will, as to each Mortgage Loan, deliver to
the Trustee: (i) the Note, endorsed to the order of the Trustee without
recourse; (ii) the Mortgage and an executed assignment thereof in favor of
the Trustee or otherwise as required by the Agreement; (iii) any assumption,
modification or substitution agreements relating to the Mortgage Loan; (iv) a
lender's title insurance policy (or owner's policy in the case of a financial
lease or an Installment Contract), together with its endorsements, or, in the
case of Mortgage Loans that are not covered by title insurance, an attorney's
opinion of title issued as of the date of origination of the Mortgage Loan;
(v) if the assignment of leases, rents and profits is separate from the
Mortgage, an executed re-assignment of assignment of leases, rents and
profits to the Trustee; (vi) a copy of any recorded UCC-1 financing
statements and related continuation statements, together with (in the case of
such UCC-1 financing statements which are in effect as of the Closing Date)
an original executed UCC-2 or UCC-3 statement, in a form suitable for filing,
disclosing the assignment to the Trustee of a security interest in any
personal property constituting security for the repayment of the Mortgage;
and (vii) such other documents as may be described in the Agreement (such
documents, collectively, the "Mortgage Loan File"). Unless otherwise
expressly permitted by the Agreement, all documents included in the Mortgage
Loan File are to be original executed documents; provided, however, that in
instances where the original recorded Mortgage, Mortgage assignment or any
document necessary to assign the Seller's interest in financial leases or
Installment Contracts to the Trustee, as described in the Agreement, has been
retained by the applicable jurisdiction or has not yet been returned from
recordation, the Seller may deliver a photocopy thereof certified to be the
true and complete copy of the original thereof submitted for recording, and
the Master Servicer will cause the original of each such document which is
unavailable because it is being or has been submitted for recordation and has
not yet been returned, to be delivered to the Trustee as soon as available.
The Trustee will hold the Mortgage Loan File for each Mortgage Loan in
trust for the benefit of all Certificateholders. Pursuant to the Agreement,
the Trustee is obligated to review the Mortgage Loan File for each Mortgage
Loan within a specified number of days after the execution and delivery of
the Agreement. Unless otherwise specified in the related Prospectus
Supplement, if any document in the Mortgage Loan File is found to be
defective in any material respect, the Trustee will promptly notify the
Seller, the originator of the related Mortgage Loan or such other party as is
designated in the related Agreement (the "Responsible Party") and the Master
Servicer. Unless otherwise specified in the related Prospectus Supplement, if
the Responsible Party cannot cure such defect within the time period
specified in such Prospectus Supplement, the Responsible Party will be
obligated to either substitute the affected Mortgage Loan with a Substitute
Mortgage Loan or Loans, or to repurchase the related Mortgage Loan from the
Trustee within the time period specified in such Prospectus Supplement at a
price specified therein, expected to be generally equal to the principal
balance thereof as of the date of purchase or, in the case of a Series as to
which an election has been made to treat the related Trust Fund as a REMIC,
at such other price as may be necessary to avoid a tax on a prohibited
transaction, as described in Section 860F(a) of the Code, in each case
together with accrued interest at the applicable Mortgage Interest Rate to
the first day of the month following such repurchase, plus the amount of any
unreimbursed advances made by the Master Servicer in respect of such Mortgage
Loan. Unless otherwise specified in the related Prospectus Supplement, this
substitution or purchase obligation will constitute the sole remedy available
to the Holders of Certificates or the Trustee for a material defect in a
constituent document.
The related Prospectus Supplement will describe procedures for the review
and holding of Mortgage Loans in the case of a structure using a Funding
Note.
REPRESENTATIONS AND WARRANTIES
To the extent specified in the related Prospectus Supplement, the
Responsible Party with respect to each Mortgage Loan will have made certain
representations and warranties in respect of such Mortgage Loan and such
representations and warranties will have been assigned to the Trustee and/or
the Seller
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will have made certain representations and warranties in respect of the
Mortgage Loans directly to the Trustee. Such representations and warranties
will be set forth in an annex to the related Prospectus Supplement. Upon the
discovery of the breach of any such representation or warranty in respect of
a Mortgage Loan that materially and adversely affects the interests of the
Certificateholders of the related Series, the Responsible Party or the
Seller, as the case may be, will be obligated either to cure such breach in
all material respects within the time period specified in such Prospectus
Supplement, to replace the affected Mortgage Loan with a Substitute Mortgage
Loan or Loans or to repurchase such Mortgage Loan at a price specified
therein, expected to be generally equal to the unpaid principal balance
thereof at the date of repurchase or, in the case of a Series of Certificates
as to which the Seller has elected to treat the related Trust Fund as a
REMIC, as defined in the Code, at such other price as may be necessary to
avoid a tax on a prohibited transaction, as described in Section 860F(a) of
the Code, in each case together with accrued interest at the per annum
interest rate applicable for the related Mortgage Loan (the "Mortgage Rate"),
to the first day of the month following such repurchase and the amount of any
unreimbursed advances made by the Master Servicer in respect of such Mortgage
Loan. The Master Servicer will be required to enforce such obligation of the
Responsible Party or the Seller for the benefit of the Trustee and the
Certificateholders, following the practices it would employ in its good faith
business judgment were it the owner of such Mortgage Loan. Unless otherwise
specified in the related Prospectus Supplement and subject to the ability of
the Responsible Party or the Seller to cure such breach in all material
respects or deliver Substitute Mortgage Loans for certain Mortgage Loans as
described below, such repurchase obligation will constitute the sole remedy
available to the Certificateholders of such Series for a breach of a
representation or warranty by the Responsible Party or the Seller.
The proceeds of any repurchase of a Mortgage Loan will be deposited,
subject to certain limitations set forth in the related Agreement, into the
Collection Account.
Within the period of time specified in the related Prospectus Supplement,
following the date of issuance of a Series of Certificates, the Responsible
Party or the Seller, as the case may be, may deliver to the Trustee Mortgage
Loans ("Substitute Mortgage Loans") in substitution for any one or more of
the Mortgage Loans ("Defective Mortgage Loans") initially included in the
Trust Fund (or in the Mortgage Pool underlying a Funding Note) but which do
not conform in one or more respects to the description thereof contained in
the related Prospectus Supplement, as to which a breach of a representation
or warranty is discovered, which breach materially and adversely affects the
interests of the Certificateholders, or as to which a document in the related
Mortgage Loan File is defective in any material respect. Unless otherwise
specified in the related Prospectus Supplement, the required characteristics
of any Substitute Mortgage Loan will generally include, among other things,
that such Substitute Mortgage Loan on the date of substitution, will (i) have
an outstanding principal balance, after deduction of all scheduled payments
due in the month of substitution, not in excess of the outstanding principal
balance of the Defective Mortgage Loan (the amount of any shortfall to be
distributed to Certificateholders in the month of substitution), (ii) have a
Mortgage Interest Rate not less than (and not more than 1% greater than) the
Mortgage Interest Rate of the Defective Mortgage Loan, (iii) have a remaining
term to maturity not greater than (and not more than one year less than) that
of the Defective Mortgage Loan and (iv) comply with all of the
representations and warranties set forth in the Agreement as of the date of
substitution.
If so specified in the related Prospectus Supplement, other entities may
also make representations and warranties with respect to the Mortgage Loans
included in a Mortgage Pool. Unless otherwise specified in such Prospectus
Supplement, such other entity will have the same obligations with respect to
such representations and warranties as the Responsible Party or the Seller.
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SERVICING OF THE MORTGAGE LOANS
GENERAL
The Prospectus Supplement related to a Series will identify the master
servicer (the "Master Servicer") to service and administer the Mortgage Loans
as described below, and will set forth certain information concerning the
Master Servicer. The Master Servicer will be responsible for servicing the
Mortgage Loans pursuant to the Agreement for the related Series. The Master
Servicer may have other business relationships with the Seller and its
affiliates.
If so specified in the related Prospectus Supplement, the servicing of
certain Mortgage Loans that are in default or otherwise require special
servicing (the "Specially Serviced Mortgage Loans") will be performed by a
special servicer (the "Special Servicer"). Certain information concerning the
Special Servicer and the standards for determining which Mortgage Loans will
become Specially Serviced Mortgage Loans will be set forth in such Prospectus
Supplement. Subject to the terms of the related Agreement, the Special
Servicer (and not the Master Servicer) will then be responsible for (a)
negotiating modifications, waivers, amendments and other forbearance
arrangements with the Borrower of any Specially Serviced Mortgage Loan,
subject to the limitations described under "--Modifications, Waivers and
Amendments" below; (b) foreclosing on such Specially Serviced Mortgage Loan
if no suitable arrangements can be made to cure the default in the manner
specified in the related Prospectus Supplement; and (c) supervising the
management and operation of the related Mortgaged Property if acquired
through foreclosure or a deed in lieu of foreclosure. The Special Servicer
may have other business relationships with the Seller and its affiliates.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer and the Special Servicer, if any, may subcontract the
servicing of all or a portion of the Mortgage Loans to one or more
sub-servicers. Such sub-servicers may have other business relationships with
the Seller and its affiliates.
SERVICING STANDARDS
The Master Servicer and, except when acting at the direction of any
Operating Advisor, the Special Servicer, if any, will be required to service
and administer the Mortgage Loans solely in the best interests of and for the
benefit of the Certificateholders (as determined by the Master Servicer or
the Special Servicer, if any, as the case may be, in its reasonable judgment
without taking into account differing payment priorities among the Classes of
the related Series of Certificates and any conflicts of interest involving
it), in accordance with the terms of the Agreement and the Mortgage Loans
and, to the extent consistent with such terms, in the same manner in which,
and with the same care, skill, prudence and diligence with which, it services
and administers similar mortgage loans in other portfolios, giving due
consideration to the customary and usual standards of practice of prudent
institutional commercial mortgage lenders and loan servicers. If so specified
in the related Prospectus Supplement, the Master Servicer and Special
Servicer, if any, may also be required to service and administer the Mortgage
Loans in the best interest of an insurer or guarantor or in accordance with
the provisions of a related Funding Note.
OPERATING ADVISOR
If so specified in the related Prospectus Supplement, an advisor (the
"Operating Advisor") may be selected to advise, direct and approve
recommendations of the Special Servicer with respect to certain decisions
relating to the servicing of the Specially Serviced Mortgage Loans. The
related Prospectus Supplement will provide specific information with respect
to the following matters: (i) the duration of the term of the Operating
Advisor; (ii) the method of selection of the Operating Advisor; (iii) certain
decisions as to which the Operating Advisor will have the power to direct and
approve actions of the Special Servicer (for example, foreclosure of a
Mortgaged Property securing a Specially Serviced Mortgage Loan, modification
of a Specially Serviced Mortgage Loan, extension of the maturity of a
Specially Serviced Mortgage Loan beyond a specified term and methods of
compliance with environmental laws) and (iv) the information, recommendations
and reports to be provided to the Operating Advisor by the Special Servicer.
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COLLECTIONS AND OTHER SERVICING PROCEDURES
The Master Servicer and, with respect to any Specially Serviced Mortgage
Loans, the Special Servicer, if any, will make efforts to collect all
payments called for under the Mortgage Loans and will, consistent with the
related Agreement, follow such collection procedures as it deems necessary or
desirable. Consistent with the above, unless otherwise specified in the
related Prospectus Supplement, the Master Servicer or Special Servicer, if
any, may, in its discretion, waive any late payment or assumption charge or
penalty interest in connection with any late payment or assumption of a
Mortgage Loan and, if so specified in the related Prospectus Supplement, may
extend the due dates for payments due on a Note.
It is expected that the Agreement for each Series will provide that the
Master Servicer establish and maintain an escrow account (the "Escrow
Account") in which the Master Servicer will be required to deposit amounts
received from each Borrower, if required by the terms of the related Note,
for the payment of taxes, assessments, certain mortgage and hazard insurance
premiums and other comparable items. The Special Servicer, if any, will be
required to remit amounts received for such purposes on Mortgage Loans
serviced by it for deposit in the Escrow Account and will be entitled to
direct the Master Servicer to make withdrawals from the Escrow Account as may
be required for the servicing of such Mortgage Loans. Withdrawals from the
Escrow Account may be made to effect timely payment of taxes, assessments,
mortgage and hazard insurance premiums and comparable items, to refund to
Borrowers amounts determined to be overages, to remove amounts deposited
therein in error, to pay interest to Borrowers on balances in the Escrow
Account, if required, to repair or otherwise protect the Mortgaged Properties
and to clear and terminate such account. Unless otherwise set forth in the
related Prospectus Supplement, the Master Servicer will be entitled to all
income on the funds in the Escrow Account invested in Permitted Investments
not required to be paid to Borrowers under applicable law. The Master
Servicer will be responsible for the administration of the Escrow Account. If
amounts on deposit in the Escrow Account are insufficient to pay any tax,
insurance premium or other similar item when due, such item will be payable
from amounts on deposit in the Collection Account or otherwise in the manner
set forth in the Prospectus Supplement and Agreement for the related Series.
INSURANCE
Unless otherwise specified in the related Prospectus Supplement, the
Agreement for each Series will require that the Master Servicer maintain or
require each Borrower to maintain insurance in accordance with the related
Mortgage, which generally will include a standard fire and hazard insurance
policy with extended coverage. To the extent required by the related
Mortgage, the coverage of each such standard hazard insurance policy will be
in an amount that is not less than the lesser of 90% of the replacement cost
of the improvements securing such Mortgage Loan or the outstanding principal
balance owing on such Mortgage Loan. Unless otherwise specified in the
related Prospectus Supplement, if a Mortgaged Property was located at the
time of origination of the related Mortgage Loan in a federally designated
special flood hazard area, the Master Servicer also will maintain or require
the related Borrower to maintain in accordance with the related Mortgage
flood insurance in an amount equal to the lesser of the unpaid principal
balance of the related Mortgage Loan and the maximum amount obtainable with
respect to the Mortgaged Property. To the extent set forth in the related
Prospectus Supplement, the cost of any such insurance maintained by the
Master Servicer will be an expense of the Trust Fund payable out of the
Collection Account. The Master Servicer or, if so specified in the related
Prospectus Supplement, the Special Servicer, if any, will cause to be
maintained fire and hazard insurance with extended coverage on each REO
Property in an amount specified in the related Prospectus Supplement and
expected to generally be equal to the greater of (i) an amount necessary to
avoid the application of any coinsurance clause contained in the related
insurance policy and (ii) 90% of the replacement cost of the improvements
which are a part of such property. Unless otherwise specified in the related
Prospectus Supplement, the cost of any such insurance with respect to an REO
Property will be an expense of the Trust Fund payable out of amounts on
deposit in the related REO Account or, if such amounts are insufficient, from
the Collection Account. The Master Servicer or, if so specified in the
related Prospectus Supplement, the Special Servicer, if any, will maintain
flood insurance providing substantially the same coverage as described above
on any REO Property which was located
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in a federally designated special flood hazard area at the time the related
Mortgage Loan was originated. The related Agreement may provide that the
Master Servicer or the Special Servicer, if any, as the case may be, may
satisfy its obligation to cause hazard policies to be maintained by
maintaining a master, or single interest, insurance policy insuring against
losses on the Mortgage Loans or REO Properties, as the case may be. The
incremental cost of such insurance allocable to any particular Mortgage Loan,
if not borne by the related Borrower, will be an expense of the Trust Fund
unless otherwise specified by the related Prospectus Supplement.
Alternatively, the Master Servicer may satisfy its obligation by maintaining,
at its expense, a blanket policy (i.e., not a single interest or master
policy) insuring against losses on the Mortgage Loans or REO Properties, as
the case may be. If such a blanket policy contains a deductible clause, the
Master Servicer or the Special Servicer, if any, as the case may be, will be
obligated to deposit in the Collection Account all sums which would have been
deposited therein but for such clause.
In general, the standard form of fire and hazard extended coverage policy
will cover physical damage to, or destruction of, the improvements on the
Mortgaged Property caused by fire, lightning, explosion, smoke, windstorm,
hail, riot, strike and civil commotion, subject to the conditions and
exclusions particularized in each policy. Since the standard hazard insurance
policies relating to the Mortgage Loans generally will be underwritten by
different insurers and will cover Mortgaged Properties located in various
jurisdictions, such policies will not contain identical terms and conditions.
The most significant terms thereof, however, generally will be determined by
state law and conditions. Most such policies typically 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), nuclear reaction, wet or dry rot, vermin, rodents,
insects or domestic animals, theft and, in certain cases, vandalism. The
foregoing list is merely indicative of certain kinds of uninsured risks and
is not intended to be all-inclusive. Any losses incurred with respect to
Mortgage Loans due to uninsured risks (including earthquakes, mudflows and
floods) or insufficient hazard insurance proceeds could affect distributions
to the Certificateholders.
The standard hazard insurance policies covering Mortgaged Properties
securing Mortgage Loans typically will contain a "coinsurance" clause which,
in effect, will require the insured at all times to carry insurance of a
specified percentage (generally 80% to 90%) of the full replacement value of
the dwellings, structures and other improvements on the Mortgaged Property in
order to recover the full amount of any partial loss. If the insured's
coverage falls below this specified percentage, such clause will typically
provide that the insurer's liability in the event of partial loss will not
exceed the greater of (i) the actual cash value (the replacement cost less
physical depreciation) of the structures and other improvements damaged or
destroyed and (ii) such proportion of the loss, without deduction for
depreciation, as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such dwellings, structures and
other improvements.
In addition, to the extent required by the related Mortgage, the Master
Servicer or Special Servicer, if any, may require the Borrower to maintain
other forms of insurance including, but not limited to, loss of rent
endorsements, business interruption insurance and comprehensive public
liability insurance, and the related Agreement may require the Master
Servicer or Special Servicer, if any, to maintain public liability insurance
with respect to any REO Properties. Any cost incurred by the Master Servicer
or Special Servicer, if any, in maintaining any such insurance policy will be
added to the amount owing under the Mortgage Loan where the terms of the
Mortgage Loan so permit; provided, however, that the addition of such cost
will not be taken into account for purposes of calculating the distribution
to be made to Certificateholders. Such costs may be recovered by the Master
Servicer and the Special Servicer, if any, from the Collection Account, with
interest thereon, as provided by the Agreement.
Unless otherwise specified in the related Prospectus Supplement, no pool
insurance policy, special hazard insurance policy, bankruptcy bond,
repurchase bond or guarantee insurance will be maintained with respect to the
Mortgage Loans.
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
Unless otherwise specified in the related Prospectus Supplement, the
Agreement for each Series will require that the Master Servicer and the
Special Servicer, if any, obtain and maintain in effect a fidelity
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bond or similar form of insurance coverage (which may provide blanket
coverage) or any combination thereof insuring against loss occasioned by
fraud, theft or other intentional misconduct of the officers, employees and
agents of the Master Servicer or the Special Servicer, as the case may be.
The related Agreement may allow the Master Servicer and the Special Servicer,
if any, to self-insure against loss occasioned by the errors and omissions of
the officers, employees and agents of the Master Servicer or Special
Servicer, as the case may be, so long as certain criteria set forth in the
Agreement are met.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer's principal compensation for its activities under the
Agreement for each Series will come from the payment to it or retention by
it, with respect to each payment of interest on a Mortgage Loan, of a
"Servicing Fee" (as defined in the related Prospectus Supplement). The exact
amount or method of calculating such Servicing Fee will be established in the
Prospectus Supplement and Agreement for the related Series. Since the
aggregate unpaid principal balance of the Mortgage Loans will generally
decline over time, the Master Servicer's servicing compensation will
ordinarily decrease as the Mortgage Loans amortize.
In addition, the Agreement for a Series may provide that the Master
Servicer will be entitled to receive, as additional compensation, (i)
Prepayment Premiums, late fees and certain other fees collected from
Borrowers and (ii) any interest or other income earned on funds deposited in
the Collection Account (as described under "DESCRIPTION OF THE CERTIFICATES
- -- Accounts") and, except to the extent such income is required to be paid to
the related Borrowers, the Escrow Account.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer will pay the fees and expenses of the Trustee.
The exact amount or method of calculating the servicing fee of the Special
Servicer, if any, and the source from which such fee will be paid will be
described in the Prospectus Supplement for the related Series.
In addition to the compensation described above, the Master Servicer and
the Special Servicer, if any (or any other party specified in the related
Prospectus Supplement), may retain, or be entitled to the reimbursement of,
such other amounts and expenses as are described in the related Prospectus
Supplement.
ADVANCES
The related Prospectus Supplement will set forth the obligations, if any,
of the Master Servicer to make any advances ("Advances") with respect to
delinquent payments on Mortgage Loans, payments of taxes, insurance and
property protection expenses or otherwise. Any such Advances will be made in
the form and manner described in the Prospectus Supplement and Agreement for
the related Series. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer will be obligated to make such an Advance
only to the extent that the Master Servicer has determined that such Advance
will be recoverable. In the event that the Master Servicer determines that it
is required to make an Advance, it will, on or prior to the related
Distribution Date, deposit in the account specified in the Prospectus
Supplement an amount equal to such Advance. Any funds thus advanced,
including Advances previously made that the Master Servicer determines are
not ultimately recoverable, are reimbursable to the Master Servicer from
amounts in the Collection Account to the extent and in the manner described
in the related Prospectus Supplement.
If a Borrower makes a principal payment between scheduled payment dates,
the Borrower may be required to pay interest on the prepayment amount only to
the date of prepayment. If and to the extent described in the related
Prospectus Supplement, the Master Servicer's Servicing Fee may be reduced or
the Master Servicer may be otherwise obligated to advance funds to the extent
necessary to remit interest on any such full or partial prepayment received
from the date of receipt thereof to the next succeeding scheduled payment
date.
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MODIFICATIONS, WAIVERS AND AMENDMENTS
If so specified in the related Prospectus Supplement, the Agreement for
each Series will provide that the Master Servicer may have the discretion,
subject to certain conditions set forth therein, to modify, waive or amend
certain of the terms of any Mortgage Loan without the consent of the Trustee
or any Certificateholder. The extent to which the Master Servicer may modify,
waive or amend any terms of the Mortgage Loans without such consent will be
specified in the related Prospectus Supplement.
Subject to the terms and conditions set forth in the Agreement, the
Special Servicer, if any, may modify, waive or amend the terms of any
Specially Serviced Mortgage Loan if the Special Servicer determines that a
material default has occurred or a payment default has occurred or is
reasonably foreseeable. The Special Servicer, if any, may extend the maturity
date of such Mortgage Loan to a date not later than the date described in the
related Prospectus Supplement. The ability of the Special Servicer to modify,
waive or amend the terms of any Mortgage Loan may be subject to such
additional limitations, including approval requirements, as are set forth in
the related Prospectus Supplement.
Subject to the terms and conditions set forth in the Agreement, the
Special Servicer, if any, will not agree to any modification, waiver or
amendment of the payment terms of a Mortgage Loan unless the Special Servicer
has determined that such modification, waiver or amendment is reasonably
likely to produce a greater recovery on a present value basis than
liquidation of the Mortgage Loan or has made such other determination
described in the related Prospectus Supplement. Prior to agreeing to any such
modification, waiver or amendment of the payment terms of a Mortgage Loan,
the Special Servicer, if any, will give notice thereof in the manner set
forth in the Prospectus Supplement and Agreement for the related Series.
The Prospectus Supplement for a Series may describe other or different
provisions concerning the modification, waiver or amendment of the terms of
the related Mortgage Loans, including, without limitation, requirements for
the approval of an Operating Advisor.
EVIDENCE OF COMPLIANCE
The Agreement for each Series will provide that the Master Servicer and
the Special Servicer, if any, at their own expense, each will cause a firm of
independent public accountants to furnish to the Trustee, annually on or
before a date specified in the Agreement, a statement as to compliance with
the Agreement by the Master Servicer or Special Servicer, as the case may be.
In addition, the Agreement will provide that the Master Servicer and the
Special Servicer, if any, each will deliver to the Trustee, annually on or
before a date specified in the Agreement, a statement signed by an officer to
the effect that, based on a review of its activities during the preceding
calendar year, to the best of such officer's knowledge, the Master Servicer
or Special Servicer, as the case may be, has fulfilled its obligations under
the Agreement throughout such year or, if there has been a default in the
fulfillment of any such obligation, specifying each such default and the
nature and status thereof, and, in the case of a Series of Certificates as to
which a REMIC or FASIT election has been made, whether the Master Servicer or
the Special Servicer, as the case may be, has received a challenge from the
Internal Revenue Service as to the status of the Trust Fund as a REMIC or
FASIT.
CERTAIN MATTERS WITH RESPECT TO THE MASTER SERVICER, THE SPECIAL SERVICER AND
THE TRUSTEE
Unless otherwise specified in the related Prospectus Supplement, the
Agreement for each Series will provide that neither the Master Servicer nor
the Special Servicer, if any, nor any of their directors, officers, employees
or agents will be under any liability to the Trust Fund or the
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement, or for errors in
judgment; provided, however, that neither the Master Servicer nor the Special
Servicer, if any, nor any such person will be protected against any breach of
representations or warranties made by the Master Servicer or the Special
Servicer, as the case may be, in the Agreement, against any specific
liability imposed on the Master Servicer or the Special Servicer, as the case
may be, pursuant to the Agreement, or any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith,
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or negligence in the performance of its duties or by reason of reckless
disregard of its obligations and duties thereunder. The Agreement will
further provide that the Master Servicer, the Special Servicer, if any, and
any of their directors, officers, employees or agents will be entitled to
indemnification by the Trust Fund and will be held harmless against any loss,
liability or expense incurred in connection with any legal action relating to
the Agreement or the Certificates, other than any loss, liability or expense
incurred (i) by reason of willful misfeasance, bad faith or negligence in the
performance of their duties or by reason of reckless disregard of their
obligations and duties thereunder or (ii) in certain other circumstances
specified in the Agreement. Any loss resulting from such indemnification will
reduce amounts distributable to Certificateholders and, unless otherwise
provided in the related Prospectus Supplement, will be borne pro rata by all
Certificateholders without regard to subordination, if any, of one Class to
another.
Unless otherwise provided in the related Prospectus Supplement, neither
the Master Servicer nor the Special Servicer, if any, may resign from its
obligations and duties under the Agreement except upon a determination that
its performance of its duties thereunder is no longer permissible under
applicable law. No such resignation of the Master Servicer will become
effective until the Trustee or a successor Master Servicer has assumed the
Master Servicer's obligations and duties under the Agreement. No such
resignation of a Special Servicer will become effective until the Trustee,
the Master Servicer or a successor Special Servicer has assumed the Special
Servicer's obligations and duties under the Agreement.
The Trustee under each Agreement will be named in the related Prospectus
Supplement. The commercial bank or trust company serving as Trustee may have
normal banking relationships with the Seller, the Master Servicer, the
Special Servicer, if any, and their respective affiliates.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee may resign from its obligations under the Agreement at any time, in
which event a successor Trustee will be appointed. In addition, the Seller
may remove the Trustee if the Trustee ceases to be eligible to act as Trustee
under the Agreement or if the Trustee becomes insolvent, at which time the
Seller will become obligated to appoint a successor Trustee. The Trustee also
may be removed at any time by the Holders of Certificates evidencing the
Voting Rights specified in the related Prospectus Supplement. Any resignation
and removal of the Trustee, and the appointment of a successor Trustee, will
not become effective until acceptance of such appointment by the successor
Trustee.
EVENTS OF DEFAULT
Unless otherwise provided in the related Prospectus Supplement, events of
default (each, an "Event of Default") with respect to the Master Servicer and
the Special Servicer, if any, under the Agreement for each Series will
include: (i) with respect to the Master Servicer, any failure by the Master
Servicer to deposit in the Collection Account or remit to the Trustee for
deposit in the Distribution Account for distribution to Certificateholders
any payment required to be made by the Master Servicer under the terms of the
Agreement on the day required pursuant to the terms of the Agreement; (ii)
with respect to the Special Servicer, if any, any failure by the Special
Servicer to remit to the Master Servicer for deposit in the Collection
Account on the day required any amounts received by it in respect of a
Specially Serviced Mortgage Loan and required to be so remitted; (iii) with
respect to the Master Servicer and the Special Servicer, if any, any failure
on the part of the Master Servicer or the Special Servicer, as the case may
be, duly to observe or perform in any material respect any other of the
covenants or agreements on the part of the Master Servicer or the Special
Servicer, as the case may be, which failure continues unremedied for a period
of 90 days after written notice of such failure has been given to the Master
Servicer or the Special Servicer, as the case may be; (iv) with respect to
the Master Servicer or the Special Servicer, if any, the entering against the
Master Servicer or the Special Servicer, as the case may be, of a decree or
order of a court, agency or supervisory authority for the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, provided that any such decree
or order shall have remained in force undischarged or unstayed for a period
of 60 days; (v) with respect to the Master Servicer or the Special Servicer,
if any, the consent by the Master Servicer or the Special
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Servicer, as the case may be, to the appointment of a conservator or receiver
or liquidator or liquidating committee in any insolvency, readjustment of
debt, marshalling of assets and liabilities, voluntary liquidation or similar
proceedings of or relating to it or of or relating to all or substantially
all of its property; and (vi) with respect to the Master Servicer or the
Special Servicer, if any, the admission by the Master Servicer or Special
Servicer, as the case may be, in writing of its inability to pay its debts
generally as they become due, the filing by the Master Servicer or the
Special Servicer, as the case may be, of a petition to take advantage of any
applicable insolvency or reorganization statute or the making of an
assignment for the benefit of its creditors or the voluntary suspension of
the payment of its obligations.
As long as an Event of Default remains unremedied, the Trustee may, and as
long as an Event of Default remains unremedied or under certain other
circumstances, if any, described in the related Prospectus Supplement at the
written direction of the Holders of Certificates holding at least the
percentage specified in the Prospectus Supplement of all of the Voting Rights
of the Class or Classes specified therein shall, by written notice to the
Master Servicer or Special Servicer, as the case may be, terminate all of the
rights and obligations of the Master Servicer or the Special Servicer, as the
case may be, whereupon the Trustee or another successor Master Servicer or
Special Servicer appointed by the Trustee will succeed to all authority and
power of the Master Servicer or Special Servicer under the Agreement and will
be entitled to similar compensation arrangements. "Voting Rights" means the
portion of the voting rights of all Certificates that is allocated to any
Certificate in accordance with the terms of the Agreement.
CREDIT ENHANCEMENT
GENERAL
If specified in the related Prospectus Supplement for any Series, credit
enhancement may be provided with respect to one or more Classes thereof or
the related Mortgage Loans (the "Credit Enhancement"). Credit Enhancement may
be in the form of the subordination of one or more Classes of the
Certificates of such Series, the establishment of one or more reserve funds,
overcollateralization, a letter of credit, certificate guarantee insurance
policies, the use of cross-support features or another method of Credit
Enhancement described in the related Prospectus Supplement, or any
combination of the foregoing.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Credit Enhancement will not provide protection against all risks
of loss and will not guarantee repayment of the entire principal balance of
the Certificates and interest thereon. If losses occur which exceed the
amount covered by Credit Enhancement or which are not covered by the Credit
Enhancement, Certificateholders will bear their allocable share of
deficiencies.
If Credit Enhancement is provided with respect to a Series, or the related
Mortgage Loans, the related Prospectus Supplement will include a description
of (a) the amount payable under such Credit Enhancement, (b) any conditions
to payment thereunder not otherwise described herein, (c) the conditions (if
any) under which the amount payable under such Credit Enhancement may be
reduced and under which such Credit Enhancement may be terminated or replaced
and (d) the material provisions of any agreement relating to such Credit
Enhancement. Additionally, the related Prospectus Supplement will set forth
certain information with respect to the issuer of any third-party Credit
Enhancement, including (i) a brief description of its principal business
activities, (ii) its principal place of business, place of incorporation and
the jurisdiction under which it is chartered or licensed to do business,
(iii) if applicable, the identity of regulatory agencies which exercise
primary jurisdiction over the conduct of its business and (iv) its total
assets, and its stockholders' or policyholders' surplus, if applicable, as of
the date specified in such Prospectus Supplement. In addition, if the
Certificateholders of such Series will be materially dependent upon any
provider of Credit Enhancement for timely payment of interest and/or
principal on their Certificates, the related Prospectus Supplement will
include audited financial statements on a comparative basis for at least the
prior two years and any other appropriate financial information regarding
such provider.
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SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more Classes
of a Series may be subordinate Certificates. If so specified in the related
Prospectus Supplement, the rights of the Holders of subordinate Certificates
(the "Subordinate Certificates") to receive distributions of principal and
interest on any Distribution Date will be subordinated to such rights of the
Holders of senior Certificates (the "Senior Certificates") to the extent
specified in the related Prospectus Supplement. The Agreement may require a
trustee that is not the Trustee to be appointed to act on behalf of Holders
of Subordinate Certificates.
A Series may include one or more Classes of Senior Certificates entitled
to receive cash flows remaining after distributions are made to all other
Senior Certificates of such Series. Such right to receive payments will
effectively be subordinate to the rights of other Holders of Senior
Certificates. A Series also may include one or more Classes of Subordinate
Certificates entitled to receive cash flows remaining after distributions are
made to other Subordinate Certificates of such Series. If so specified in the
related Prospectus Supplement, the subordination of a Class may apply only in
the event of (or may be limited to) certain types of losses not covered by
insurance policies or other credit support, such as losses arising from
damage to property securing a Mortgage Loan not covered by standard hazard
insurance policies.
The related Prospectus Supplement will set forth information concerning
the amount of subordination of a Class or Classes of Subordinate Certificates
in a Series, the circumstances in which such subordination will be
applicable, the manner, if any, in which the amount of subordination will
decrease over time, the manner of funding any related Reserve Fund and the
conditions under which amounts in any applicable Reserve Fund will be used to
make distributions to Holders of Senior Certificates and/or to Holders of
Subordinate Certificates or be released from the applicable Trust Fund.
CROSS-SUPPORT FEATURES
If the Mortgage Pool for a Series is divided into separate Mortgage Loan
Groups, each backing a separate Class or Classes of a Series, credit support
may be provided by a cross-support feature which requires that distributions
be made on Senior Certificates backed by one Mortgage Loan Group prior to
distributions on Subordinate Certificates backed by another Mortgage Loan
Group within the Trust Fund. The related Prospectus Supplement for a Series
which includes a cross-support feature will describe the manner and
conditions for applying such cross-support feature.
LETTER OF CREDIT
If specified in the related Prospectus Supplement, a letter of credit with
respect to a Series of Certificates will be issued by the bank or financial
institution specified in such Prospectus Supplement (the "Letter of Credit
Bank"). Under the letter of credit, the Letter of Credit Bank will be
obligated to honor drawings thereunder in an aggregate fixed dollar amount,
net of unreimbursed payments thereunder, equal to the percentage specified in
the related Prospectus Supplement of the aggregate principal balance of the
Mortgage Loans on the applicable Cut-Off Date or of one or more Classes of
Certificates (the "Letter of Credit Percentage"). If so specified in the
related Prospectus Supplement, the letter of credit may permit drawings in
the event of losses not covered by insurance policies or other credit
support, such as losses arising from damage not covered by standard hazard
insurance policies. The amount available under the letter of credit will, in
all cases, be reduced to the extent of the unreimbursed payments thereunder.
The obligations of the Letter of Credit Bank under the letter of credit for
any Series of Certificates will expire at the earlier of the date specified
in the related Prospectus Supplement or the termination of the Trust Fund. A
copy of the letter of credit for a Series, if any, will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed within
15 days of issuance of the Certificates of the applicable Series.
CERTIFICATE GUARANTEE INSURANCE
If so specified in the related Prospectus Supplement, certificate
guarantee insurance, if any, with respect to a Series of Certificates will be
provided by one or more insurance companies. Such certificate
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guarantee insurance will guarantee, with respect to one or more Classes of
Certificates of the applicable Series, timely distributions of interest and
principal to the extent set forth in or determined in the manner specified in
the related Prospectus Supplement. If so specified in the related Prospectus
Supplement, the certificate guarantee insurance will also guarantee against
any payment made to a Certificateholder which is subsequently covered as a
"voidable preference" payment under the Bankruptcy Code. A copy of the
certificate guarantee insurance policy for a Series, if any, will be filed
with the Commission as an exhibit to a Current Report on Form 8-K to be filed
with the Commission within 15 days of issuance of the Certificates of the
applicable Series.
RESERVE FUNDS
If specified in the related Prospectus Supplement, one or more reserve
funds (each, a "Reserve Fund") may be established with respect to a Series,
in which cash, a letter of credit, Permitted Investments or a combination
thereof, in the amounts, if any, specified in the related Prospectus
Supplement will be deposited. The Reserve Funds for a Series may also be
funded over time by depositing therein a specified amount of the
distributions received on the applicable Mortgage Loans if specified in the
related Prospectus Supplement. The Seller may pledge the Reserve Funds to a
separate collateral agent specified in the related Prospectus Supplement.
Amounts on deposit in any Reserve Fund for a Series, together with the
reinvestment income thereon, if any, will be applied by the Trustee for the
purposes, in the manner, and to the extent specified in the related
Prospectus Supplement. A Reserve Fund may be provided to increase the
likelihood of timely payments of principal of, and interest on, the
Certificates, if required as a condition to the rating of such Series by each
Rating Agency. If so specified in the related Prospectus Supplement, Reserve
Funds may be established to provide limited protection, in an amount
satisfactory to each Rating Agency, against certain types of losses not
covered by insurance policies or other credit support, such as losses arising
from damage not covered by standard hazard insurance policies. Reserve Funds
also may be established for other purposes and in such amounts as will be
specified in the related Prospectus Supplement. Following each Distribution
Date amounts in any Reserve Fund in excess of any amount required to be
maintained therein may be released from the Reserve Fund under the conditions
and to the extent specified in the related Prospectus Supplement and will not
be available for further application by the Trustee.
Moneys deposited in any Reserve Fund will be invested in Permitted
Investments at the direction of the Seller, except as otherwise specified in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, any reinvestment income or other gain from such
investments will be credited to the related Reserve Fund for such Series, and
any loss resulting from such investments will be charged to such Reserve
Fund. If specified in the related Prospectus Supplement, such income or other
gain may be payable to the Master Servicer as additional servicing
compensation, and any loss resulting from such investment will be borne by
the Master Servicer. The Reserve Fund, if any, for a Series will not be a
part of the Trust Fund unless otherwise specified in the related Prospectus
Supplement, but the right of the Trustee to make draws on the Reserve Fund
will be an asset of the Trust Fund.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such
Reserve Fund, the balance required to be maintained in the Reserve Fund, the
manner in which such required balance will decrease over time, the manner of
funding such Reserve Fund, the purpose for which funds in the Reserve Fund
may be applied to make distributions to Certificateholders and use of
investment earnings from the Reserve Fund, if any.
SWAP AGREEMENT
If so specified in the Prospectus Supplement relating to a Series of
Certificates, the Trust Fund will enter into or obtain an assignment of a
swap agreement pursuant to which the Trust Fund will have the right to
receive, and may have the obligation to make, certain payments of interest
(or other payments) as set forth or determined as described therein. The
Prospectus Supplement relating to a Series of
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Certificates having the benefit of an interest rate swap agreement will
describe the material terms of such agreement and the particular risks
associated with the interest rate swap feature, including market and credit
risk, the effect of counterparty defaults and other risks, if any. The
Prospectus Supplement relating to such Series of Certificates also will set
forth certain information relating to the corporate status, ownership and
credit quality of the counterparty or counterparties to such swap agreement.
In addition, if the Certificateholders of such Series will be materially
dependent upon any counterparty for timely payment of interest and/or
principal on their Certificates, the related Prospectus Supplement will
include audited financial statements on a comparative basis for at least the
prior two years and any other appropriate financial information regarding
such counterparty. A swap agreement may include one or more of the following
types of arrangements, or another arrangement described in the related
Prospectus Supplement.
Interest Rate Swap. In an interest rate swap, the Trust Fund will exchange
the stream of interest payments on the Mortgage Loans for another stream of
interest payments based on a notional amount, which may be equal to the
principal amount of the Mortgage Loans as it declines over time.
Interest Rate Caps. In an interest rate cap, the Trust Fund or the swap
counterparty, in exchange for a fee, will agree to compensate the other if a
particular interest rate index rises above a rate specified in the swap
agreement. The fee for the cap may be a single up-front payment to or from
the Trust Fund, or a series of payments over time.
Interest Rate Floors. In an interest rate floor, the Trust Fund or the
swap counterparty, in exchange for a fee, will agree to compensate the other
if a particular interest rate index falls below a rate or level specified in
the swap agreement. As with interest rate caps, the fee may be a single
up-front payment or it may be paid periodically.
Interest Rate Collars. An interest rate collar is a combination of an
interest rate cap and an interest rate floor. One party agrees to compensate
the other if a particular interest rate index rises above the cap and, in
exchange, will be compensated if the interest rate index falls below the
floor.
YIELD CONSIDERATIONS
GENERAL
The yield to maturity on any Class of Offered Certificates will depend
upon, among other things, the price at which such Certificates are purchased,
the amount and timing of any delinquencies and losses incurred by such Class,
the rate and timing of payments of principal on the Mortgage Loans, and the
amount and timing of recoveries and Insurance Proceeds from REO Mortgage
Loans and related REO Properties, which, in turn, will be affected by the
amortization schedules of the Mortgage Loans, the timing of principal
payments (particularly Balloon Payments) on the related Mortgage Loans
(including delay in such payments resulting from modifications and
extensions), the rate of principal prepayments, including prepayments by
Borrowers and prepayments resulting from defaults, repurchases arising in
connection with certain breaches of the representations and warranties made
in the Agreement and the exercise of the right of optional termination of the
Trust Fund. Generally, prepayments on the Mortgage Loans will tend to shorten
the weighted average lives of each Class of Certificates, whereas delays in
liquidations of defaulted Mortgage Loans and modifications extending the
maturity of Mortgage Loans will tend to lengthen the weighted average lives
of each Class of Certificates. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS -- Enforceability of Certain Provisions" for a description of certain
provisions of each Agreement and statutory, regulatory and judicial
developments that may affect the prepayment experience and maturity
assumptions on the Mortgage Loans.
PREPAYMENT AND MATURITY ASSUMPTIONS
The related Prospectus Supplement may indicate that the related Mortgage
Loans may be prepaid in full or in part at any time, generally without
prepayment premium. Alternatively, a Trust Fund may include Mortgage Loans
that have significant restrictions on the ability of a Borrower to prepay
without incurring a prepayment premium or to prepay at all. As described
above, the prepayment experience of
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the Mortgage Loans will affect the weighted average life of the Offered
Certificates. A number of factors may influence prepayments on multifamily
and commercial loans, including enforceability of due-on-sale clauses,
prevailing mortgage market interest rates and the availability of mortgage
funds, changes in tax laws (including depreciation benefits for
income-producing properties), changes in Borrowers' net equity in the
Mortgaged Properties, servicing decisions, prevailing general economic
conditions and the relative economic vitality of the areas in which the
Mortgaged Properties are located, the terms of the Mortgage Loans (for
example, the existence of due-on-sale clauses), the quality of management of
any income-producing Mortgaged Properties and, in the case of Mortgaged
Properties held for investment, the availability of other opportunities for
investment. A number of factors may discourage prepayments on multifamily
loans and commercial loans, including the existence of any lockout or
prepayment premium provisions in the underlying Note. A lockout provision
prevents prepayment within a certain time period after origination. A
prepayment premium imposes an additional charge on a borrower who wishes to
prepay. Some of the Mortgage Loans may have substantial principal balances
due at their stated maturities ("Balloon Payments"). Balloon Payments involve
a greater degree of risk than fully amortizing loans because the ability of
the Borrower to make a Balloon Payment typically will depend upon its ability
either to refinance the loan or to sell the related Mortgaged Property. The
ability of a Borrower to accomplish either of these goals will be affected by
a number of factors, including the level of available mortgage rates at the
time of the attempted sale or refinancing, the Borrower's equity in the
related Mortgaged Property, the financial condition of the Borrower and
operating history of the related Mortgaged Property, tax laws, prevailing
economic conditions and the availability of credit for commercial real estate
projects generally. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS --
Enforceability of Certain Provisions."
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.
Conversely, if the purchaser of a Certificate offered at a premium calculates
its anticipated yield to maturity based on an assumed rate of distributions
of principal that is slower than that actually experienced on the Mortgage
Loans, the actual yield to maturity will be lower than that so calculated. In
either case, the effect of voluntary and involuntary prepayments of the
Mortgage Loans on the yield on one or more Classes of the Certificates of
such Series in the related Trust Fund may be mitigated or exacerbated by any
provisions for sequential or selective distribution of principal to such
Classes.
The timing of changes in the rate of principal payments on the Mortgage
Loans may significantly affect an investor's actual yield to maturity, even
if the average rate of distributions of principal is consistent with an
investor's expectation. In general, the earlier a principal payment is
received on the Mortgage Loans and distributed on a Certificate, the greater
the effect on such investor's yield to maturity. The effect of an investor's
yield of principal payments occurring at a rate higher (or lower) than the
rate anticipated by the investor during a given period may not be offset by a
subsequent like decrease (or increase) in the rate of principal payments.
The weighted average life of a Certificate refers to the average amount of
time that will elapse from the date of issuance of the Certificate until each
dollar of principal is repaid to the Certificateholders. The weighted average
life of the Offered Certificates will be influenced by the rate at which
principal on the Mortgage Loans is paid, which may be in the form of
scheduled amortization or prepayments. Prepayments on mortgage loans are
commonly measured relative to a prepayment standard or model. The model used
in any Prospectus Supplement, unless otherwise indicated therein, represents
an assumed constant rate of prepayment each month relative to the then
outstanding principal balance of a pool of new mortgage loans.
There can be no assurance that the Mortgage Loans will prepay at any rate
mentioned in any Prospectus Supplement. In general, if prevailing interest
rates fall below the Mortgage Interest Rates on the Mortgage Loans, the rate
of prepayment can be expected to increase.
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CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans which are general in nature. Because many of the legal aspects
of mortgage loans are governed by the laws of the jurisdictions where the
related mortgaged properties are located (which laws may vary substantially),
the following summaries do not purport to be complete, to reflect the laws of
any particular jurisdiction, to reflect all the laws applicable to any
particular Mortgage Loan or to encompass the laws of all jurisdictions in
which the properties securing the Mortgage Loans are situated. In the event
that the Trust Fund for a given Series includes Mortgage Loans having
material characteristics other than as described below, the related
Prospectus Supplement will set forth additional legal aspects relating
thereto.
MORTGAGES AND DEEDS OF TRUST GENERALLY
The Mortgage Loans (other than financial leases and Installment Contracts)
included in the Mortgage Pool for a Series will consist of loans secured by
either mortgages or deeds of trust or other similar security instruments.
There are two parties to a mortgage, the mortgagor, who is the borrower and
owner of the mortgaged property, and the mortgagee, who is the lender. In a
mortgage transaction, the mortgagor delivers to the mortgagee a note, bond or
other written evidence of indebtedness and a mortgage. A mortgage creates a
lien upon the real property encumbered by the mortgage as security for the
obligation evidenced by the note, bond or other evidence of indebtedness.
Although a deed of trust is similar to a mortgage, a deed of trust has three
parties, the borrower-property owner called the trustor (similar to a
mortgagor), a lender called the beneficiary (similar to a mortgagee), and a
third-party grantee called the trustee. Under a deed of trust, the borrower
irrevocably grants the property to the trustee, until the debt is paid, in
trust for the benefit of the beneficiary to secure payment of the obligation
generally with a power of sale. The trustee's authority under a deed of trust
and the mortgagee's authority under a mortgage are governed by applicable
law, the express provisions of the deed of trust or mortgage, and, in some
cases, the directions of the beneficiary.
The real property covered by a mortgage is most often the fee estate in
land and improvements. However, a mortgage may encumber other interests in
real property such as a tenant's interest in a lease of land or improvements,
or both, and the leasehold estate created by such lease. A mortgage covering
an interest in real property other than the fee estate requires special
provisions in the instrument creating such interest or in the mortgage to
protect the mortgagee against termination of such interest before the
mortgage is paid. Certain representations and warranties in the related
Agreement will be made with respect to the Mortgage Loans which are secured
by an interest in a leasehold estate.
Priority of the lien on mortgaged property created by mortgages and deeds
of trust depends on their terms and, generally, on the order of filing with a
state, county or municipal office, although such priority may in some states
be altered by the mortgagee's or beneficiary's knowledge of unrecorded liens,
leases or encumbrances against the mortgaged property. However, filing or
recording does not establish priority over governmental claims for real
estate taxes and assessments or, in some states, for reimbursement of
remediation costs of certain environmental conditions. See "--Environmental
Risks." In addition, the Code provides priority to certain tax liens over the
lien of the mortgage.
INSTALLMENT CONTRACTS
The Mortgage Loans included in the Mortgage Pool for a Series 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 purchaser. As with mortgage or deed of
trust financing, during the effective period of the Installment Contract, the
borrower generally is 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
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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 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.
FINANCIAL LEASES
The Mortgage Loans included in the Mortgage Pool for a Series also may
consist of financial leases. Under a financial lease on real property, the
lessor retains legal title to the leased property and enters into an
agreement with the lessee (hereinafter referred to in this Section as the
"lessee") under which the lessee makes lease payments approximately equal to
the principal and interest payments that would be required on a mortgage note
for a loan covering the same property. Title to the real estate typically is
conveyed to the lessee at the end of the lease term for a price approximately
equal to the remaining unfinanced equity, determined by reference to the
unpaid principal amount, market value, or another method specified in the
related agreement. As with Installment Contracts, the lessee generally is
responsible for maintaining the property in good condition and for paying
real estate taxes, assessments and hazard insurance premiums associated with
the property during the lease term. The related Prospectus Supplement will
describe the specific legal incidents of any financial leases that are
included in the Mortgage Pool for a Series.
RIGHTS OF MORTGAGEES OR BENEFICIARIES
The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order as the mortgagee or beneficiary may determine. Thus, in the event
improvements on the property are damaged or destroyed by fire or other
casualty, or in the event the property is taken by condemnation, the
mortgagee or beneficiary under the senior mortgage or deed of trust will have
the prior right to collect any insurance proceeds payable under a hazard
insurance policy and any award of damages in connection with the condemnation
and to apply the same to the indebtedness secured by the senior mortgage or
deed of trust. Proceeds in excess of the amount of senior mortgage
indebtedness will, in most cases, be applied to the indebtedness of a junior
mortgage or trust deed, if any. The laws of certain states may limit the
ability of mortgagees or beneficiaries to apply the proceeds of hazard
insurance and partial condemnation awards to the secured indebtedness. In
such states, the mortgagor or trustor must be allowed to use the proceeds of
hazard insurance to repair the damage unless the security of the mortgagee or
beneficiary has been impaired. Similarly, in certain states, the mortgagee or
beneficiary is entitled to the award for a partial condemnation of the real
property security only to the extent that its security is impaired.
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The form of mortgage or deed of trust used by many institutional lenders
typically contains a "future advance" clause, which provides, in essence,
that additional amounts advanced to or on behalf of the mortgagor or trustor
by the mortgagee or beneficiary are to be secured by the mortgage or deed of
trust. While such a clause is valid under the laws of most states, the
priority of any advance made under the clause depends, in some states, on
whether the advance was an "obligatory" or "optional" advance. If the
mortgagee or beneficiary is obligated to advance the additional amounts, the
advance may be entitled to receive the same priority as amounts initially
made under the mortgage or deed of trust, notwithstanding that there may be
intervening junior mortgages or deeds of trust and other liens between the
date of recording of the mortgage or deed of trust and the date of the future
advance, and notwithstanding that the mortgagee or beneficiary had actual
knowledge of such intervening junior mortgages or deeds of trust and other
liens at the time of the advance. Where the mortgagee or beneficiary is not
obligated to advance the additional amounts and has actual knowledge of the
intervening junior mortgages or deeds of trust and other liens, the advance
may be subordinate to such intervening junior mortgages or deeds of trust and
other liens. Priority of advances under a "future advance" clause rests, in
many other states, on state law giving priority to all advances made under
the related loan agreement up to a "credit limit" amount stated in the
recorded mortgage.
Another provision typically found in the form of the mortgage or deed of
trust used by many institutional lenders obligates the mortgagor or trustor
to pay before delinquency all taxes and assessments on the property and, when
due, all encumbrances, charges and liens on the property which appear prior
to the mortgage or deed of trust, to provide and maintain fire insurance on
the property, to maintain and repair the property and not to commit or permit
any waste thereof, and to appear in and defend any action or proceeding
purporting to affect the property or the rights of the mortgagee or
beneficiary under the mortgage or deed of trust. Upon a failure of the
mortgagor or trustor to perform any of these obligations, the mortgagee or
beneficiary is given the right under the mortgage or deed of trust to perform
the obligation itself, at its election, with the mortgagor or trustor
agreeing to reimburse the mortgagee or beneficiary for any sums expended by
the mortgagee or beneficiary on behalf of the trustor. All sums so expended
by the mortgagee or beneficiary become part of the indebtedness secured by
the mortgage or deed of trust.
The form of mortgage or deed of trust used by many institutional lenders
typically requires the mortgagor or trustor to obtain the consent of the
mortgagee or beneficiary in respect of actions affecting the mortgaged
property, including, without limitation, leasing activities (including new
leases and termination or modification of existing leases), alterations and
improvements to buildings forming a part of the mortgaged property and
management and leasing agreements for the mortgaged property. Tenants will
often refuse to execute a lease unless the mortgagee or beneficiary executes
a written agreement with the tenant not to disturb the tenant's possession of
its premises in the event of a foreclosure. A senior mortgagee or beneficiary
may refuse to consent to matters approved by a junior mortgagee or
beneficiary with the result that the value of the security for the junior
mortgage or deed of trust is diminished. For example, a senior mortgagee or
beneficiary may decide not to approve a lease or to refuse to grant to a
tenant a non-disturbance agreement. If, as a result, the lease is not
executed, the value of the mortgaged property may be diminished.
FORECLOSURE
Foreclosure of a mortgage is generally accomplished by judicial action
initiated by the service of legal pleadings upon all necessary parties having
an interest in the real property. Delays in completion of foreclosure may
occasionally result from difficulties in locating such necessary parties.
When the mortgagee's right to foreclose is contested, the legal proceedings
necessary to resolve the issue can be time consuming. A judicial foreclosure
may be subject to most of the delays and expenses of other litigation,
sometimes requiring up to several years to complete. At the completion of the
judicial foreclosure proceedings, if the mortgagee prevails, the court
ordinarily issues a judgment of foreclosure and appoints a referee or other
designated official to conduct the sale of the property. Such sales are made
in accordance with procedures which vary from state to state. The purchaser
at such sale acquires
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the estate or interest in real property covered by the mortgage. If the
mortgage covered the tenant's interest in a lease and leasehold estate, the
purchaser will acquire such tenant's interest subject to the tenant's
obligations under the lease to pay rent and perform other covenants contained
therein.
In a majority of cases, foreclosure of a deed of trust is accomplished by
a non-judicial trustee's sale under a specific provision in the deed of trust
and/or applicable statutory requirements which authorizes the trustee,
generally following a request from the beneficiary/lender, to sell the
property at public sale upon any default by the borrower under the terms of
the note or deed of trust. A number of states may also require that a lender
provide notice of acceleration of a note to the borrower. Notice requirements
under a trustee's sale vary from state to state. In some states, prior to the
trustee's sale the trustee must record a notice of default and send a copy to
the borrower-trustor, to any person who has recorded a request for a copy of
a notice of default and notice of sale and to any successor in interest to
the trustor. In addition, the trustee must provide notice in some states to
any other person having an interest in the real property, including any
junior lienholders, and to certain other persons connected with the deed of
trust. In some states, the borrower, or any other person having a junior
encumbrance on the real estate, may, during a reinstatement period, cure the
default by paying the entire amount in arrears plus the costs and expenses
(in some states, limited to reasonable costs and expenses) incurred in
enforcing the obligation. Generally, state law controls the amount of
foreclosure expenses and costs, including attorneys' fees, which may be
recovered by a lender. If the deed of trust is not reinstated, a notice of
sale must be posted in a public place and, in most states, published for a
specific period of time in one or more newspapers. In addition, some state
laws require that a copy of the notice of sale be posted on the property and
sent to all parties having an interest in the real property.
In case of foreclosure under either a mortgage or a deed of trust, the
sale by the referee or other designated official or by the trustee is often a
public sale. However, because of the difficulty a potential buyer at the sale
might have in determining the exact status of title to the property subject
to the lien of the mortgage or deed of trust and the redemption rights that
may exist (see "--Rights of Redemption" below), and because the physical
condition and financial performance of the property may have deteriorated
during the foreclosure proceedings and/or for a variety of other reasons, a
third party may be unwilling to purchase the property at the foreclosure
sale. Some states require that the lender disclose to potential bidders at a
trustee's sale all known facts materially affecting the value of the
property. Such disclosure may have an adverse effect on the trustee's ability
to sell the property or the sale price thereof. Potential buyers may further
question the prudence of purchasing 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 the reasoning of Durrett with respect to
fraudulent conveyances under applicable bankruptcy law. In Durrett and its
progeny, the Fifth Circuit and other courts held that the transfer of real
property pursuant to a non-collusive, regularly conducted foreclosure sale
was subject to the fraudulent transfer provisions of the applicable
bankruptcy laws, including the requirement that the price paid for the
property constitute "fair consideration." The reasoning and result of Durrett
and its progeny in respect of the federal bankruptcy code, as amended from
time to time (11 U.S.C.) (the "Bankruptcy Code") was rejected, however, 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 and other
reasons, it is common for the lender to purchase the property from the
trustee, referee or other designated official for an amount equal to the
lesser of the fair market value of such property and the outstanding
principal amount of the indebtedness secured by the mortgage or deed of
trust, together with accrued and unpaid interest and the expenses of
foreclosure, in which event, if the amount bid by the lender equals the full
amount of such debt, interest and expenses, the mortgagee's debt will be
extinguished. Thereafter, the lender will assume the burdens of ownership,
including paying operating expenses and real estate taxes and making repairs.
The lender is then obligated as an owner until it can arrange a sale of the
property to a third party. Frequently, the lender employs a third party
management company to manage and operate the property. The costs of operating
and maintaining commercial 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 nursing
or convalescent homes or hospitals may be particularly significant because of
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the expertise, knowledge and, especially 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 franchisor's) 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, an
increasing number of states require that any environmental hazards be
eliminated 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
Risks" below. As a result, a lender could realize an overall loss on a
mortgage loan even if the related mortgaged property is sold at foreclosure
or resold after it is acquired through foreclosure for an amount equal to the
full outstanding principal amount of the mortgage loan, plus accrued
interest.
In foreclosure proceedings, some courts have applied general equitable
principles. These equitable principles are generally designed to relieve the
borrower from the legal effect of the borrower's defaults under the loan
documents. Examples of judicial remedies that have been fashioned include
judicial requirements that the lender undertake affirmative and expensive
actions to determine the causes of the borrower's default and the likelihood
that the borrower will be able to reinstate the loan. In some cases, courts
have substituted their judgment for the lender's judgment and have required
that lenders reinstate loans or recast payment schedules in order to
accommodate borrowers who are suffering from temporary financial disability.
In other cases, courts have limited the right of the lender to foreclose if
the default under the mortgage instrument is not monetary, such as the
borrower's failing to maintain adequately the property or the borrower's
executing a second mortgage or deed of trust affecting the property. Finally,
some courts have been faced with the issue of whether or not federal or state
constitutional provisions reflecting due process concerns for adequate notice
require that borrowers under deeds of trust or mortgages receive notices in
addition to the statutorily-prescribed minimum notice. For the most part,
these cases have upheld the notice provisions as being reasonable or have
found that the sale by a trustee under a deed of trust, or under a mortgage
having a power of sale, does not involve sufficient state action to afford
constitutional protections to the borrower. There may, however, be state
transfer taxes due and payable upon obtaining such properties at foreclosure.
Such taxes could be substantial.
Under the REMIC provisions of the Code (if applicable) and the related
Agreement, the Master Servicer or Special Servicer, if any, may be required
to hire an independent contractor to operate any REO Property. The costs of
such operation may be significantly greater than the costs of direct
operation by the Master Servicer or Special Servicer, if any. Under the REMIC
provisions of the Code, property acquired by foreclosure generally must not
be held for more than two years. With respect to a Series of Certificates for
which an election is made to qualify the Trust Fund or a part thereof as a
REMIC, the 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 applicable REMIC
provisions.
STATE LAW LIMITATIONS ON LENDERS
In some states, after sale pursuant to a deed of trust or foreclosure of a
mortgage, the borrower and foreclosed junior lienors are given a statutory
period in which to redeem the property from the foreclosure sale. In some
states, redemption may occur only upon payment of the entire principal
balance of the loan, accrued interest and expenses of foreclosure. In some
states, redemption may be authorized even if the former borrower pays only a
portion of the sums due. The effect of these types of statutory rights of
redemption is to diminish the ability of the lender to sell the foreclosed
property. Such rights of redemption would defeat the title of any purchaser
from the lender subsequent to foreclosure or sale under a deed of trust.
Consequently, the practical effect of the redemption right is to force the
lender to retain the property and pay the expenses of ownership until the
redemption period has run. See "--Rights of Redemption" below.
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Certain states have imposed statutory prohibitions against or limitations
on recourse to the borrower. For example, some state statutes limit the right
of the beneficiary or mortgagee to obtain a deficiency judgment against the
borrower following foreclosure or sale under a deed of trust. A deficiency
judgment is a personal judgment against the former borrower equal in most
cases to the difference between the net amount realized upon the public sale
of the real property and the amount due to the lender. Other statutes require
the beneficiary or mortgagee to exhaust the security afforded under a deed of
trust or mortgage by foreclosure in an attempt to satisfy the full debt
before bringing a personal action against the borrower on the debt without
first exhausting such security. In some states, the lender, if it first
pursues judgment through a personal action against the borrower on the debt,
may be deemed to have elected a remedy and may thereafter be precluded from
exercising remedies with respect to the security. Consequently, the practical
effect of the election requirement, when applicable, is that lenders will
usually proceed first against the security rather than bringing personal
action against the borrower. Other statutory provisions limit any deficiency
judgment against the former borrower 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 beneficiary or a mortgagee from obtaining a large deficiency
judgment against the former borrower as a result of low bids or the absence
of bids at the judicial sale. See "--Anti-Deficiency Legislation; Bankruptcy
Laws" below.
ENVIRONMENTAL RISKS
Real property pledged as security to a lender may be subject to potential
environmental risks. Of particular concern may be those mortgaged properties
which are, or have been, the site of manufacturing, industrial or disposal
activity. Such environmental risks may give rise to a diminution in value of
property securing any Mortgage Loan or, in certain circumstances as more
fully described below, liability for cleanup costs or other remedial actions,
which liability could exceed the value of such property or the principal
balance of the related Mortgage Loan. In certain circumstances, a lender may
choose not to foreclose on contaminated property rather than risk incurring
liability for remedial actions.
Under the laws of certain states, failure to perform any remedial action
required or demanded by the state of any condition or circumstance that (i)
may pose an imminent or substantial endangerment to the public health or
welfare or the environment, (ii) may result in a release or threatened
release of any hazardous material, or (iii) may give rise to any
environmental claim or demand (each such condition or circumstance, an
"Environmental Condition") may, in certain circumstances, give rise to a lien
on the property to ensure the reimbursement of remedial costs incurred by the
state. In several states, such lien has priority over the lien of an existing
mortgage against such property. In any case, the value of a Mortgaged
Property as collateral for a Mortgage Loan could be adversely affected by the
existence of an Environmental Condition.
The state of the law is currently unclear as to whether and under what
circumstances cleanup costs, or the obligation to take remedial actions, can
be imposed on a secured lender such as the Trust Fund with respect to each
Series. Under the laws of some states and under the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), a lender may be liable as an "owner or operator" for costs of
addressing releases or threatened releases of hazardous substances on a
mortgaged property if such lender or its agents or employees have
participated in the management of the operations of the borrower, even though
the environmental damage or threat was caused by a prior owner or other third
party. Excluded from CERCLA's definition of "owner or operator," however, is
a person "who without participating in the management of the facility, holds
indicia of ownership primarily to protect his security interest (the "secured
creditor exemption").
Notwithstanding the secured creditor exemption, a lender may be held
liable under CERCLA as an owner or operator, if such lender or its employees
or agents participate in management of the property. Judicial decisions
interpreting the secured creditor exemption had varied widely, and one
decision, United States v. Fleet Factors Corp., 901 F.2d 1550 (11th Cir.
1990), cert. denied, 498 U.S. 1046 (1991), had indicated that a lender's mere
power to affect and influence a borrower's operations might be sufficient to
subject the lender to CERCLA liability. However, on September 30, 1996, the
Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of
1996 (the "Lender Liability Act")
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became law. The Lender Liability Act clarifies the secured creditor exemption
to impose liability only on a secured lender who exercises control over
operational aspects of the facility and thus is "participating in
management." A number of environmentally related activities before the loan
is made and during its pendency, as well as "workout" steps to protect a
security interest, are identified as permissible to protect a security
interest without triggering liability. The Lender Liability Act also
identifies the circumstances in which foreclosure and post-foreclosure
activities will not trigger CERCLA liability.
The Lender Liability Act also amends the federal Solid Waste Disposal Act
to limit the liability of lenders holding a security interest for costs of
cleaning up contamination for underground storage tanks. However, the Lender
Liability Act has no effect on other federal or state environmental laws
similar to CERCLA that may impose liability on lenders and other persons, and
not all of those laws provide for a secured creditor exemption. Liability
under many of these laws may exist even if the lender did not cause or
contribute to the contamination and regardless of whether the lender has
actually taken possession of the property through foreclosure, deed in lieu
of foreclosure or otherwise. Moreover, such liability is not limited to the
original or unamortized principal balance of a loan or to the value of a
property securing a loan.
Except as otherwise specified in the related Prospectus Supplement, at the
time the Mortgage Loans were originated, it is possible that no environmental
assessment or a very limited environmental assessment of the Mortgaged
Properties was conducted.
The related Agreement will provide that the Master Servicer or the Special
Servicer, if any, acting on behalf of the Trust Fund, may not acquire title
to, or possession of, a Mortgaged Property underlying a Mortgage Loan, take
over its operation or take any other action that might subject a given Trust
Fund to liability under CERCLA or comparable laws unless the Master Servicer
or Special Servicer, if any, has previously determined, based upon a phase I
assessment (as described below) or other specified environmental assessment
prepared by a person who regularly conducts such environmental assessments,
that the Mortgaged Property is in compliance with applicable environmental
laws and that there are no circumstances relating to use, management or
disposal of any hazardous materials for which investigation, monitoring,
containment, clean-up or remediation could be required under applicable
environmental laws, or that it would be in the best economic interest of a
given Trust Fund to take such actions as are necessary to bring the Mortgaged
Property into compliance therewith or as may be required under such laws. A
phase I assessment generally involves identification of recognized
environmental conditions based on records review, site reconnaissance and
interviews, but does not involve more intrusive investigation such as
sampling or testing of materials. This requirement effectively precludes
enforcement of the security for the related Note until a satisfactory
environmental assessment is obtained or any required remedial action is
taken, reducing the likelihood that a given Trust Fund will become liable for
any Environmental Condition affecting a Mortgaged Property, but making it
more difficult to realize on the security for the Mortgage Loan. However,
there can be no assurance that any environmental assessment obtained by the
Master Servicer will detect all possible Environmental Conditions or that the
other requirements of the Agreement, even if fully observed by the Master
Servicer and the Special Servicer, if any, will in fact insulate a given
Trust Fund from liability for Environmental Conditions.
If a lender is or becomes liable for clean-up costs, it may bring an
action for contribution against the current owners or operators, the owners
or operators at the time of on-site disposal activity or any other party who
contributed to the environmental hazard, but such persons or entities may be
bankrupt or otherwise judgment proof. Furthermore, such action against the
Borrower may be adversely affected by the limitations on recourse in the loan
documents. Similarly, in some states anti-deficiency legislation and other
statutes requiring the lender to exhaust its security before bringing a
personal action against the borrower-trustor (see "--Anti-Deficiency
Legislation; Bankruptcy Laws" below) may curtail the lender's ability to
recover from its borrower the environmental clean-up and other related costs
and liabilities incurred by the lender. Shortfalls occurring as the result of
imposition of any clean-up costs will be addressed in the Prospectus
Supplement and Agreement for the related Series.
RIGHTS OF REDEMPTION
In approximately one-third of the states, after foreclosure sale pursuant
to a deed of trust or a mortgage, the borrower and certain foreclosed junior
lienors are given a specified period in which to
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redeem the property from the foreclosure sale. In some states, redemption may
occur only upon payment of the entire principal balance of the loan, accrued
interest and expenses of foreclosure. In other states, redemption may be
authorized if the former borrower pays only a portion of the sums due. The
effect of a right of redemption is to diminish the ability of the lender to
sell the foreclosed property. The right of redemption may defeat the title of
any purchaser at a foreclosure sale or any purchaser from the lender
subsequent to a foreclosure sale or sale under a deed of trust. Certain
states permit a lender to avoid a post-sale redemption by waiving its right
to a deficiency judgment. Consequently, the practical effect of the
post-foreclosure redemption right is often to force the lender to retain the
property and pay the expenses of ownership until the redemption period has
run. Whether the lender has any rights to recover these expenses from a
borrower who redeems the property depends on the applicable state statute.
The related Prospectus Supplement will contain a description of any statutes
that prohibit recovery of such expenses from a borrower in states where a
substantial number of the Mortgaged Properties for a particular Series are
located. In some states, there is no right to redeem property after a
trustee's sale under a deed of trust.
Borrowers under Installment Contracts generally do not have the benefits
of redemption periods such as may exist in the same jurisdiction for mortgage
loans. Where redemption statutes do exist under state laws for Installment
Contracts, the redemption period is usually far shorter than for mortgages.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGEES
The Mortgage Pool for a Series may include Mortgage Loans secured by
mortgages or deeds of trust some of which are junior to other mortgages or
deeds of trust, some of which may be held by other lenders or institutional
investors. The rights of the Trust Fund (and therefore the
Certificateholders), as mortgagee under a junior mortgage or beneficiary
under a junior deed of trust, are subordinate to those of the mortgagee under
the senior mortgage or beneficiary under the senior deed of trust, including
the prior rights of the senior mortgagee to receive hazard insurance and
condemnation proceeds and to cause the property securing the Mortgage Loan to
be sold upon default of the borrower or trustor, thereby extinguishing the
junior mortgagee's or junior beneficiary's lien unless the junior mortgagee
or junior beneficiary asserts its subordinate interest in the property in
foreclosure litigation and, possibly, satisfies the defaulted senior mortgage
or deed of trust. As discussed more fully below, a junior mortgagee or junior
beneficiary may satisfy a defaulted senior loan in full and, in some states,
may cure such default and loan. In most states, no notice of default is
required to be given to a junior mortgagee or junior beneficiary and junior
mortgagees or junior beneficiaries are seldom given notice of defaults on
senior mortgages. In order for a foreclosure action in some states to be
effective against a junior mortgagee or junior beneficiary, the junior
mortgagee or junior beneficiary must be named in any foreclosure action, thus
giving notice to junior lienors.
ANTI-DEFICIENCY LEGISLATION; BANKRUPTCY LAWS
Some of the Mortgage Loans included in the Mortgage Pool for a Series will
be nonrecourse loans as to which, in the event of default by a Borrower,
recourse may be had only against the specific property pledged to secure the
related Mortgage Loan and not against the Borrower's other assets. Even if
recourse is available pursuant to the terms of the Mortgage Loan against the
Borrower's assets in addition to the Mortgaged Property, certain states have
imposed statutory prohibitions which impose prohibitions against or
limitations on such recourse. For example, some state statutes limit the
right of the beneficiary or mortgagee to obtain a deficiency judgment against
the borrower following foreclosure or sale under a deed of trust. A
deficiency judgment is a personal judgment against the former borrower equal
in most cases to the difference between the net amount realized upon the
public sale of the real property and the amount due to the lender. Other
statutes require the beneficiary or mortgagee to exhaust the security
afforded under a deed of trust or mortgage by foreclosure in an attempt to
satisfy the full debt before bringing a personal action against the borrower.
In certain states, the lender has the option of bringing a personal action
against the borrower 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
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the security. Consequently, the practical effect of the election requirement,
when applicable, is that lenders will usually proceed first against the
security rather than bringing a personal action against the borrower. Other
statutory provisions limit any deficiency judgment against the former
borrower 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 beneficiary or a
mortgagee from obtaining a large deficiency judgment against the former
borrower as a result of low bids or the absence of bids at the judicial sale.
Numerous statutory provisions, including the Bankruptcy Code and state
laws affording relief to debtors, may interfere with and delay the ability of
the secured mortgage lender to obtain payment of the loan, 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, often, no interest or principal payments are
made during the course of the bankruptcy proceeding. The delay and
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, including, without limitation, any junior
mortgagee or beneficiary, may stay the senior lender from taking action to
foreclose out such junior lien. Certain of the Mortgaged Properties may have
a junior "wraparound" mortgage or deed of trust encumbering such Mortgaged
Property. In general terms, a "wraparound" mortgage is a junior mortgage
where the full amount of the mortgage is increased by an amount equal to the
principal balance of the senior mortgage and where the junior lender agrees
to pay the senior mortgage out of the payments received from the mortgagor
under the "wraparound" mortgage. As with other junior mortgages, the filing
of a petition under the Bankruptcy Code by or on behalf of such a
"wraparound" mortgagee may stay the senior lender from taking action to
foreclose upon such junior "wraparound" mortgage.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage or deed
of trust 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 the 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 monthly 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 the Bankruptcy Code, 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. Other types of significant modifications
to the terms of the mortgage may be acceptable to the bankruptcy court, often
depending on the particular facts and circumstances of the specific case.
Federal bankruptcy law may also interfere with or affect the ability of
the secured mortgage lender to enforce an assignment by a mortgagor of rents
and leases related to the mortgaged property if the related mortgagor is in a
bankruptcy proceeding. Under Section 362 of the Bankruptcy Code, the
mortgagee will be stayed from enforcing the assignment, and the legal
proceedings necessary to resolve the issue can be time-consuming and may
result in significant delays in the receipt of the rents. Rents may also
escape an assignment thereof (i) if the assignment is not fully perfected
under state law prior to commencement of the bankruptcy proceeding, (ii) to
the extent such rents are used by the borrower to maintain the mortgaged
property, or for other court authorized expenses, or (iii) to the extent
other collateral may be substituted for the rents.
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To the extent a mortgagor's ability to make payment on a mortgage loan is
dependent on payments 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, federal bankruptcy law generally provides that a trustee or
debtor in possession in a bankruptcy or reorganization case under the
Bankruptcy Code 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. Furthermore, there is
likely to be a period of time between the date upon which a lessee files a
bankruptcy petition and the date upon which the lease is assumed or rejected.
Although the lessee is obligated to make all lease payments currently with
respect to the post-petition period, there is a risk that such payments will
not be made due to the lessee's poor financial condition. If the lease is
rejected, the lessor will be treated as an unsecured creditor with respect to
its claim for damages for termination of the lease and the mortgagor must
relet the mortgaged property before the flow of lease payments will
recommence. In addition, pursuant to Section 502(b) (6) of the Bankruptcy
Code, a lessor's damages for lease rejection are limited.
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.
STATUTORY LIABILITIES
The Internal Revenue Code of 1986, as amended, provides priority to
certain tax liens over the lien of the mortgage. In addition, substantive
requirements are imposed upon mortgage lenders in connection with the
origination and the servicing of mortgage loans by numerous federal and some
state consumer protection laws. These laws include the federal
Truth-in-Lending Act, Real Estate Settlement Procedures Act, Equal Credit
Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act, and
related statutes. These federal laws impose specific statutory liabilities
upon lenders who originate mortgage loans and who fail to comply with the
provisions of the law. In some cases, this liability may affect assignees of
the mortgage loans.
ENFORCEABILITY OF CERTAIN PROVISIONS
Prepayment Provisions
Courts generally enforce claims requiring prepayment fees unless
enforcement would be unconscionable. However, the laws of certain states may
render prepayment fees unenforceable after a mortgage loan has been
outstanding for a certain number of years, or may limit the amount of any
prepayment fee to a specified percentage of the original principal amount of
the mortgage loan, to a specified percentage of the outstanding principal
balance of a mortgage loan, or to a fixed number of months' interest on the
prepaid amount. In certain states, prepayment fees payable on default or
other involuntary acceleration of a mortgage loan may not be enforceable
against the mortgagor. Some state statutory provisions may also treat certain
prepayment fees as usurious if in excess of statutory limits. See
"--Applicability of Usury Laws." Some of the Mortgage Loans included in the
Mortgage Pool for a Series may not require the payment of specified fees as a
condition to prepayment or such requirements have expired, and to the extent
some Mortgage Loans do require such fees, such fees may not necessarily deter
Borrowers from prepaying their Mortgage Loans.
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Due-on-Sale Provisions
The enforceability of due-on-sale clauses has been the subject of
legislation or litigation in many states, and in some cases, typically
involving single family residential mortgage transactions, their
enforceability has been limited or denied. In any event, in situations
relating primarily to residential properties, the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn-St Germain Act") 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 exceptions. As a result,
due-on-sale clauses have become generally enforceable except in those states
whose legislatures exercised their authority to regulate the enforceability
of such clauses with respect to mortgage loans that were (i) originated or
assumed during the "window period" under the Garn-St Germain Act, which ended
in all cases not later than October 15, 1982, and (ii) originated by lenders
other than national banks, federal savings institutions and federal credit
unions. FHLMC has taken the position in its published mortgage servicing
standards that, out of a total of eleven "window period states," five states
(Arizona, Michigan, Minnesota, New Mexico and Utah) have enacted statutes
extending, on various terms and for varying periods, the prohibition on
enforcement of due-on-sale clauses with respect to certain categories of
window period loans. Also, the Garn-St Germain Act does "encourage" lenders
to permit assumption of loans at the original rate of interest or at some
other rate less than the average of the original rate and the market rates.
Unless otherwise specified in the related Prospectus Supplement, the
Agreement for each Series will provide that if any Mortgage Loan contains a
provision in the nature of a "due-on-sale" clause, which by its terms
provides that: (i) such Mortgage Loan 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 (ii) such Mortgage Loan may not be
assumed without the consent of the related mortgagee in connection with any
such sale or other transfer, then, for so long as such Mortgage Loan is
included in the Trust Fund, the Master Servicer, on behalf of the Trustee,
shall take such actions as it deems to be in the best interest of the
Certificateholders in accordance with the servicing standard set forth in the
Agreement, and may waive or enforce any due-on-sale clause contained in the
related Note or Mortgage.
In addition, under federal bankruptcy law, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances,
be eliminated in any modified mortgage resulting from such bankruptcy
proceeding.
Acceleration on Default
Some of the Mortgage Loans included in the Mortgage Pool for a Series will
include a "debt acceleration" clause, which permits the lender to accelerate
the full debt upon a monetary or nonmonetary default of the borrower. State
courts generally 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.
Forms of notes, mortgages and deeds of trust used by lenders may contain
provisions obligating the borrower to pay a late charge if payments are not
timely made. In certain states, there are or may be specific limitations upon
the late charges which a lender may collect from a borrower for delinquent
payments.
Upon foreclosure, courts have applied general equitable principles. These
equitable principles are generally designed to relieve the borrower from the
legal effect of his defaults under the loan documents. Examples of judicial
remedies that have been fashioned include judicial requirements that the
lender undertake affirmative and expensive actions to determine the causes of
the borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's judgment and have required that lenders reinstate loans or
recast payment
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schedules in order to accommodate borrowers who are suffering from temporary
financial disability. In other cases, courts have limited the right of the
lender to foreclose if the default under the mortgage instrument is not
monetary, such as the borrower's failing to maintain adequately the property
or the borrower's executing a second mortgage or deed of trust affecting the
property. Finally, some courts have been faced with the issue of whether or
not federal or state constitutional provisions reflecting due process
concerns for adequate notice require that borrowers under deeds of trust or
mortgages receive notices in addition to the statutorily-prescribed minimum.
For the most part, these cases have upheld the notice provisions as being
reasonable or have found that the sale by a trustee under a deed of trust, or
by a mortgagee under a mortgage having a power of sale, does not involve
sufficient state action to afford constitutional protections to the borrower.
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.
Soldiers' and Sailors' Relief Act
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), an individual Borrower who enters military
service after the origination of such Borrower's Mortgage Loan (including a
Borrower who is in reserve status at the time of the origination of the
Mortgage Loan and is later called to active duty) may not be charged interest
(including fees and charges) above an annual rate of 6% during the period of
such Borrower's active duty status, unless a court orders otherwise upon
application of the lender. Any shortfall in interest collections resulting
from the application of the Relief Act, to the extent not covered by any
applicable credit enhancements, could result in losses to the Holders of the
Certificates. 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 later called to active duty) after
origination of the related Mortgage Loan, no information can be provided as
to the number of Mortgage Loans that may be affected by the Relief Act. Some
of the Mortgaged Properties relating to Mortgage Loans included in the
Mortgage Pool for a Series may be owned by Borrowers who are individuals
currently in the military. In addition, the Relief Act imposes limitations
which would impair the ability of the Master Servicer to foreclose on an
affected Mortgage Loan during the Borrower's period of active duty status
and, under certain circumstances, during an additional three months
thereafter. Thus, in the event that such a Mortgage Loan goes into default,
there may be delays and losses occasioned by the inability to realize upon
the Mortgaged Property in a timely fashion.
Forfeitures in Drug and RICO Proceedings
Federal law permits the government to forfeit real property that has been
purchased with the proceeds of certain crimes (including drug trafficking,
racketeering, money laundering, and fraud affecting financial institutions),
and real property that has been used to facilitate certain crimes (including
drug trafficking and money laundering). Forfeitures of real property usually
are accomplished through criminal or civil judicial proceedings. In a
criminal proceeding, forfeiture is imposed as a form of punishment following
conviction of the property owner. Under certain circumstances, the government
may even seize the defendant's real property before a conviction. In a civil
forfeiture, the government brings an action against the real property, rather
than the wrongdoer, based on the legal fiction that the property itself has
been tainted by crime.
The government must publish notice of the forfeiture proceeding and may
give direct notice to all parties known to have an alleged interest in the
property, including holders of mortgage loans. A
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mortgage lender may avoid forfeiture of its interest in the property if it
can establish that: (i) its mortgage was executed and recorded before
commission of the crime upon which the forfeiture is based, or (ii) the
lender did not know of or consent to the underlying unlawful conduct. The
U.S. Department of Justice has adopted an expedited settlement policy
designed to resolve the claims of lienholders holding mortgages against
properties that are subject to forfeiture.
APPLICABILITY OF USURY LAWS
State and federal usury laws limit the interest that lenders are entitled
to receive on a mortgage loan. In determining whether a given transaction is
usurious, courts may include charges in the form of "points" and "fees" as
"interest," but may exclude payments in the form of "reimbursement of
foreclosure expenses" or other charges found to be distinct from "interest."
If, however, the amount charged for the use of the money loaned is found to
exceed a statutorily established maximum rate, the form employed and the
degree of overcharge are both immaterial. Statutes differ in their provision
as to the consequences of a usurious loan. One group of statutes requires the
lender to forfeit the interest above the applicable limit or imposes a
specified penalty. Under this statutory scheme, the borrower may have the
recorded mortgage or deed of trust cancelled upon paying its debt with lawful
interest, or the lender may foreclose, but only for the debt plus lawful
interest. A second group of statutes is more severe. A violation of this type
of usury law results in the invalidation of the transaction, thereby
permitting the borrower to have the recorded mortgage or deed of trust
cancelled without any payment and prohibiting the lender from foreclosing.
Under the Agreement, a representation and warranty will be made (or the
benefit of such a representation and warranty will be assigned to the Trust
Fund) to the effect that the Mortgage Loans included in a given Trust Fund
complied at origination with applicable laws, including usury laws. Unless
otherwise provided in the related Prospectus Supplement, if this
representation and warranty is breached with respect to any Mortgage Loan in
a manner that materially and adversely affects the interests of
Certificateholders and is not cured within the period of time specified in
the related Prospectus Supplement, a Substitute Mortgage Loan will be
substituted for such Mortgage Loan or such Mortgage Loan will be repurchased
in accordance with the applicable Agreement. See "THE MORTGAGE POOLS --
Representations and Warranties."
The Agreement for each Series will provide that the Master Servicer not
charge interest in excess of that permitted under any applicable state and
federal usury laws, notwithstanding that the applicable Note may provide for
a higher rate.
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.
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LEASES AND RENTS
Some of the Mortgage Loans included in the Mortgage Pool for a Series may
be secured by an assignment of leases and rents, either through a separate
document of assignment or as incorporated in the related mortgage. Under such
assignments, the borrower under the mortgage loan typically assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while retaining a license to collect the rents for
so long as there is no default under the mortgage loan. The manner of
perfecting the lender's interest in rents may depend on whether the
borrower's assignment was absolute or one granted as security for the loan.
Failure to properly perfect the lender's interest in rents may result in the
loss of a substantial pool of funds which could otherwise serve as a source
of repayment for the loan. In the event the borrower defaults, the license
terminates and the lender may be entitled to collect rents. Some state laws
may require that to perfect its interest in rents, the lender must take
possession of the property and/or obtain judicial appointment of a receiver
before becoming entitled to collect the rents. Lenders that actually take
possession of the property, however, may incur potentially substantial risks
attendant to being a mortgagee in possession. Such risks include liability
for environmental clean-up costs and other risks inherent to property
ownership. In addition, if bankruptcy or similar proceedings are commenced by
or in respect of the borrower, the lender's ability to collect the rents may
be adversely affected. In the event of borrower default, the amount of rent
the lender is able to collect from the tenants can significantly affect the
value of the lender's security interest.
SECONDARY FINANCING; DUE-ON-ENCUMBRANCE PROVISIONS
Some of the Mortgage Loans included in the Mortgage Pool for a Series may
not restrict secondary financing, thereby permitting the Borrower to use the
Mortgaged Property as security for one or more additional loans. Some of the
Mortgage Loans may preclude secondary financing (often by permitting the
first lender to accelerate the maturity of its loan if the Borrower further
encumbers the Mortgaged Property) or may require the consent of the senior
lender to any junior or substitute financing; however, such provisions may be
unenforceable in certain jurisdictions under certain circumstances. Unless
otherwise specified in the related Prospectus Supplement, the Agreement for
each Series will provide that if any Mortgage Loan contains a provision in
the nature of a "due-on-encumbrance" clause, which by its terms: (i) provides
that such Mortgage Loan 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 (ii) requires the consent of the related mortgagee to
the creation of any such lien or other encumbrance on the related Mortgaged
Property, then for so long as such Mortgage Loan is included in a given Trust
Fund, the Master Servicer or, if such Mortgage Loan is a Specially Serviced
Mortgage Loan, the Special Servicer, if any, on behalf of such Trust Fund,
shall exercise (or decline to exercise) any right it may have as the
mortgagee of record with respect to such Mortgage Loan (x) to accelerate the
payments thereon, or (y) to withhold its consent to the creation of any such
lien or other encumbrance, in a manner consistent with the servicing standard
set forth in the Agreement.
Where the Borrower encumbers the Mortgaged Property with one or more
junior liens, the senior lender is subjected to additional risk. First, the
Borrower may have difficulty servicing and repaying multiple loans. Second,
acts of the senior lender which 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 Borrower 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 an
existing junior lender is prejudiced or the Borrower is additionally
burdened. Third, if the Borrower defaults on the senior loan and/or any
junior loan or loans, the existence of junior loans and actions taken by
junior lenders can impair the security available to the senior lender and can
interfere with, delay and in certain circumstances even prevent the taking of
action by the senior lender. Fourth, the bankruptcy of a junior lender may
operate to stay foreclosure or similar proceedings by the senior lender.
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
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material diminution in the value of a Mortgaged Property which could,
together with the possibility of limited alternative uses for a particular
Mortgaged Property (e.g., 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 franchisor, manager or 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.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following generally describes the anticipated material federal income
tax consequences of purchasing, owning and disposing of Certificates. It does
not address special rules which may apply to particular types of investors.
The authorities on which this discussion is based are subject to change or
differing interpretations, and any such change or interpretation could apply
retroactively. Investors should consult their own tax advisors regarding the
Certificates.
For purposes of this discussion, unless otherwise specified, the term
"Mortgage Loans" will be used to refer to Mortgage Loans and Installment
Contracts, and the term "Owner" will refer to the beneficial owner of a
Certificate. In the event that the Mortgage Pool for any Series of
Certificates consists of financial leases or the Trust Fund enters into a
Swap Agreement, the related Prospectus Supplement will describe any
additional or different federal income tax consequences of purchasing, owning
and disposing of such Certificates.
REMIC ELECTIONS
Under the Internal Revenue Code of 1986, as amended (the "Code"), an
election may be made to treat the Trust Fund related to each Series of
Certificates (or segregated pools of assets within the Trust
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Fund) as a "real estate mortgage investment conduit" ("REMIC") within the
meaning of Section 860D(a) of the Code. If one or more REMIC elections are
made, the Certificates of any Class will be either "regular interests" in a
REMIC within the meaning of Section 860G(a)(1) of the Code ("Regular
Certificates") or "residual interests" in a REMIC within the meaning of
Section 860G(a)(2) of the Code ("Residual Certificates"). The Prospectus
Supplement for each Series of Certificates will indicate whether an election
will be made to treat the Trust Fund as one or more REMICs, and if so, which
Certificates will be Regular Certificates and which will be Residual
Certificates.
If a REMIC election is made, the Trust Fund, or each portion thereof that
is treated as a separate REMIC, will be referred to as a "REMIC Pool". If the
Trust Fund is comprised of two REMIC Pools, one will be an "Upper-Tier REMIC"
and one a "Lower-Tier REMIC". The assets of the Lower-Tier REMIC will consist
of the Mortgage Loans and related Trust Fund assets. The assets of the
Upper-Tier REMIC will consist of all of the regular interests issued by the
Lower-Tier REMIC.
The discussion below under the heading "REMIC Certificates" considers
Series for which a REMIC election will be made. Series for which no such
election will be made are addressed under "Non-REMIC Certificates".
REMIC CERTIFICATES
The discussion in this section applies only to a Series of Certificates
for which a REMIC election is made.
Tax Opinion.
Qualification as a REMIC requires ongoing compliance with certain
conditions. Upon the issuance of each Series of Certificates for which a
REMIC election is made, Cleary, Gottlieb, Steen & Hamilton or another law
firm identified in the related Prospectus Supplement, counsel to the Seller,
will deliver its opinion generally to the effect that, with respect to each
such Series of Certificates, under then existing law and assuming compliance
by the Seller, the Master Servicer, the Special Servicer, if any, and the
Trustee for such Series with all of the provisions of the related Agreement
(and such other agreements and representations as may be referred to in such
opinion), each REMIC Pool will be a REMIC, and the Certificates of such
Series will be treated as either Regular Certificates or Residual
Certificates. This opinion will be filed as an Exhibit to the Form 8-K
relating to such Series of Certificates.
Status of Certificates.
The Certificates will be:
O ASSETS DESCRIBED IN CODE SECTION 7701(A)(19)(C); AND
O "REAL ESTATE ASSETS" UNDER CODE SECTION 856(C)(5)(A),
to the extent the assets of the related REMIC Pool are so treated. Interest
on the Regular Certificates will be "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 the income
of the REMIC Pool is so treated. If at all times 95% or more of the assets or
income of the REMIC Pool qualifies under the foregoing Code sections, the
Certificates (and income thereon) will so qualify in their entirety.
The rules described in the preceding paragraph will be applied to a Trust
Fund consisting of two REMIC Pools as if the Trust Fund were a single REMIC
holding the assets of the Lower-Tier REMIC.
Income from Regular Certificates.
General. Except as otherwise provided in this tax discussion, Regular
Certificates will be taxed as newly originated debt instruments for federal
income tax purposes. Interest, original issue discount and market discount
accrued on a Regular Certificate will be ordinary income to the Owner. All
Owners must account for interest income under the accrual method of
accounting, which may result in the inclusion of amounts in income that are
not currently distributed in cash.
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On January 27, 1994 the Internal Revenue Service adopted regulations
applying the original issue discount rules of the Code (the "OID
Regulations"). Except as otherwise noted, the discussion below is based on
the OID Regulations.
Original Issue Discount. Certain Regular Certificates may have "original
issue discount." An Owner must include original issue discount in income as
it accrues, without regard to the timing of payments.
The total amount of original issue discount on a Regular Certificate is
the excess of its "stated redemption price at maturity" over its "issue
price." The issue price for any Regular Certificate is the price (including
any accrued interest) at which a substantial portion of the Class of
Certificates including such Regular Certificate are first sold to the public.
In general, the stated redemption price at maturity is the sum of all
payments made on the Regular Certificate, other than payments of interest
that (i) are actually payable at least annually over the entire life of the
Certificates and (ii) are based on a single fixed rate or variable rate (or
certain combinations of fixed and variable rates). The stated redemption
price at maturity of a Regular Certificate always includes its original
principal amount, but generally does not include distributions of stated
interest, except in the case of accrual certificates, and, as discussed
below, Interest Only Certificates. An "Interest Only Certificate" is a
Certificate entitled to receive distributions of some or all of the interest
on the Mortgage Loans or other assets in a REMIC Pool and that has either a
notional or nominal principal amount. Special rules for Regular Certificates
that provide for interest based on a variable rate are discussed below in
"Income from Regular Certificates-Variable Rate Regular Certificates".
With respect to an Interest Only Certificate, the stated redemption price
at maturity is likely to be the sum of all payments thereon, determined in
accordance with the Prepayment Assumption (as defined below). In that event,
Interest Only Certificates would always have original issue discount.
Alternatively, in the case of an Interest Only Certificate with some
principal amount, the stated redemption price at maturity might be determined
under the general rules described in the preceding paragraph. If, applying
those rules, the stated redemption price at maturity were considered to equal
the principal amount of such Certificate, then the rules described below
under "Premium" would apply. The Prepayment Assumption is the assumed rate of
prepayment of the Mortgage Loans used in pricing the Regular Certificates.
The Prepayment Assumption will be set forth in the related Prospectus
Supplement.
Under a de minimis rule, original issue discount on a Regular Certificate
will be considered zero if it is less than 0.25% of the Certificate's stated
redemption price at maturity multiplied by the Certificate's weighted average
maturity. The weighted average maturity of a Regular Certificate is computed
based on the number of full years (i.e., rounding down partial years) each
distribution of principal (or other amount included in the stated redemption
price at maturity) is scheduled to be outstanding. The schedule of such
distributions likely should be determined in accordance with the Prepayment
Assumption.
The Owner of a Regular Certificate generally must include in income the
original issue discount that accrues for each day on which the Owner holds
such Certificate, including the date of purchase, but excluding the date of
disposition. The original issue discount accruing in any period equals:
PV End + Dist -PV Beg
Where:
PV End = present value of all remaining distributions to be made as of
the end of the period;
Dist = distributions made during the period includable in the stated
redemption price at maturity; and
PV Beg = present value of all remaining distributions as of the beginning
of the period.
The present value of the remaining distributions is calculated based on (i)
the original yield to maturity of the Regular Certificate, (ii) events
(including actual prepayments) that have occurred prior to the end of the
period and (iii) the Prepayment Assumption. For these purposes, the original
yield to maturity of a Regular Certificate will be calculated based on its
issue price, assuming that the Certificate will be prepaid in all periods in
accordance with the Prepayment Assumption, and with compounding at the end of
each accrual period used in the formula.
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Assuming the Regular Certificates have monthly Distribution Dates,
original issue discount would be computed under the formula generally for the
one-month periods (or shorter initial period) ending on each Distribution
Date. The original issue discount accruing during any accrual period is
divided by the number of days in the period to determine the daily portion of
original issue discount for each day.
The daily portions of original issue discount generally will increase if
prepayments on the underlying Mortgage Loans exceed the Prepayment Assumption
and decrease if prepayments are slower than the Prepayment Assumption
(changes in the rate of prepayments having the opposite effect in the case of
an Interest Only Certificate). If the relative principal payment priorities
of the Classes of Regular Certificates of a Series change, any increase or
decrease in the present value of the remaining payments to be made on any
such Class will affect the computation of original issue discount for the
period in which the change in payment priority occurs.
If original issue discount computed as described above is negative for any
period, the Owner generally will not be allowed a current deduction for the
negative amount but instead will be entitled to offset such amount only
against future positive original issue discount from such Certificate.
However, while not free from doubt, such an Owner may be entitled to deduct
"negative original issue discount" to the extent the Owner's adjusted basis
(as defined in "Sale or Exchange of Certificates" below) in the Certificate
remaining after such deduction is not less than the principal amount of the
Certificate.
Acquisition Premium. If an Owner of a Regular Certificate acquires such
Certificate at a price greater than its "adjusted issue price," but less than
its remaining stated redemption price at maturity, the daily portion for any
day (as computed above) is reduced by an amount equal to the product of (i)
such daily portion and (ii) a fraction, the numerator of which is the amount
by which the price exceeds the adjusted issue price and the denominator of
which is the sum of the daily portions for such Regular Certificate for all
days on and after the date of purchase. The adjusted issue price of a Regular
Certificate on any given day is its issue price, increased by all original
issue discount that has accrued on such Certificate and reduced by the amount
of all previous distributions on such Certificate of amounts included in its
stated redemption price at maturity.
Market Discount. A Regular Certificate may have market discount (as
defined in the Code). Market discount equals the excess of the adjusted issue
price of a Certificate over the Owner's adjusted basis in the Certificate.
The Owner of a Certificate with market discount must report ordinary interest
income, as the Owner receives distributions on the Certificate of principal
or other amounts included in its stated redemption price at maturity, equal
to the lesser of (a) the excess of the amount of those distributions over the
amount, if any, of accrued original issue discount on the Certificate or (b)
the portion of the market discount that has accrued and not previously been
included in income. Also, such Owner must treat gain from the disposition of
the Certificate as ordinary income to the extent of any accrued, but
unrecognized, market discount. Alternatively, an Owner may elect in any
taxable year to include market discount in income currently as it accrues on
all market discount instruments acquired by the Owner in that year or
thereafter. An Owner may revoke such an election only with the consent of the
Internal Revenue Service.
In general terms, market discount on a Regular Certificate may be treated,
at the Owner's election, as accruing either (a) on the basis of a constant
yield (similar to the method described above for accruing original issue
discount) or (b) alternatively, either (i) in the case of a Regular
Certificate issued without original issue discount, in the ratio of stated
interest distributable in the relevant period to the total stated interest
remaining to be distributed from the beginning of such period (computed
taking into account the Prepayment Assumption) or (ii) in the case of a
Regular Certificate issued with original issue discount, in the ratio of the
amount of original issue discount accruing in the relevant period to the
total remaining original issue discount at the beginning of such period. An
election to accrue market discount on a Regular Certificate on a constant
yield basis is irrevocable with respect to that Certificate.
An Owner may be required to defer a portion of the deduction for interest
expense on any indebtedness that the Owner incurs or maintains in order to
purchase or carry a Regular Certificate that has market discount. The
deferred amount would not exceed the market discount that has accrued but not
been taken into income. 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.
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Market discount with respect to a Regular Certificate will be considered
to be zero if such market discount is de minimis under a rule similar to that
described above in the fourth paragraph under "Original Issue Discount".
Owners should consult their own tax advisors regarding the application of the
market discount rules as well as the advisability of making any election with
respect to market discount.
Discount on a Regular Certificate that is neither original issue discount
nor market discount, as defined above, must be allocated ratably among the
principal payments on the Certificate and included in income (as gain from
the sale or exchange of the Certificate) as the related principal payments
are made (whether as scheduled payments or prepayments).
Premium. A Regular Certificate, other than an accrual certificate or, as
discussed above under "Original Issue Discount", an Interest Only
Certificate, purchased at a cost (net of accrued interest) greater than its
principal amount generally is considered to be purchased at a premium. The
Owner may elect under Code Section 171 to amortize such premium under the
constant yield method, using the Prepayment Assumption. To the extent the
amortized premium is allocable to interest income from the Regular
Certificate, it is treated as an offset to such interest rather than as a
separate deduction. An election made by an Owner would generally apply to all
its debt instruments and may not be revoked without the consent of the
Internal Revenue Service.
Special Election to Apply OID Rules. In lieu of the rules described above
with respect to de minimis discount, acquisition premium, market discount and
premium, an Owner of a Regular Certificate may elect to accrue such discount,
or adjust for such premium, by applying the principles of the OID rules
described above. An election made by a taxpayer with respect to one
obligation can affect other obligations it holds. Owners should consult with
their tax advisors regarding the merits of making this election.
Variable Rate Regular Certificates. The Regular Certificates may provide
for interest that varies based on an interest rate index. The OID Regulations
provide special rules for calculating income from certain "variable rate debt
instruments" or "VRDIs." A debt instrument must meet certain technical
requirements to qualify as a VRDI, which are outlined in the next paragraph.
Under the regulations, income on a VRDI is calculated by (1) creating a
hypothetical debt instrument that pays fixed interest at rates equivalent to
the variable interest, (2) applying the original issue discount rules of the
Code to that fixed rate instrument, and (3) adjusting the income accruing in
any accrual period by the difference between the assumed fixed interest
amount and the actual amount for the period. In general, where a variable
rate on a debt instrument is based on an interest rate index (such as LIBOR),
a fixed rate equivalent to a variable rate is determined based on the value
of the index as of the issue date of the debt instrument. In cases where
rates are reset at different intervals over the life of a VRDI, adjustments
are made to ensure that the equivalent fixed rate for each accrual period is
based on the same reset interval.
A debt instrument must meet a number of requirements in order to qualify
as a VRDI. A VRDI cannot be issued at a premium above its principal amount
that exceeds a specified percentage of its principal amount (15%, or if less
1.5% times its weighted average life). As a result, Interest Only
Certificates will never be VRDIs. Also, a debt instrument that pays interest
based on a multiple of an interest rate index is not a VRDI if the multiple
is less than 0.65 or greater than 1.35, unless, in general, interest is paid
based on a single formula that lasts over the life of the instrument. A debt
instrument is not a VRDI if it is subject to caps and floors, unless they
remain the same over the life of the instrument or are not expected to change
significantly the yield on the instrument. Variable rate Regular Certificates
other than Interest Only Certificates may or may not qualify as VRDIs
depending on their terms.
In a case where a variable rate Regular Certificate does not qualify as a
VRDI, it will be treated under the OID Regulations as a contingent payment
debt instrument. The Internal Revenue Service issued final regulations
addressing contingent payment debt instruments, but such regulations are not
applicable by their terms to REMIC regular interests. Because no guidance has
been provided with regard to types of variable rate interests other than
VRDIs, until further guidance with regard to such variable rate Regular
Certificates is forthcoming, one method of calculating income on such a
Regular Certificate that appears to be reasonable would be to apply the
principles governing VRDIs outlined above.
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Subordinated Certificates. Certain Series of Certificates may contain one
or more Classes of Subordinated Certificates. In the event there are defaults
or delinquencies on the related Mortgage Loans, amounts that otherwise would
be distributed on a Class of Subordinated Certificates may instead be
distributed on other, more senior Classes of Certificates. Since Owners of
Regular Certificates are required to report income under an accrual method,
Owners of Subordinated Certificates will be required to report income without
giving effect to delays and reductions in distributions on such Certificates
attributable to defaults or delinquencies on the Mortgage Loans, except to
the extent that it can be established that amounts are uncollectible. As a
result, the amount of income reported by an Owner of a Subordinated
Certificate in any period could significantly exceed the amount of cash
distributed to such Owner in that period. The Owner eventually will be
allowed a loss (or will be allowed to report a lesser amount of income) to
the extent that the aggregate amount of distributions on the Subordinated
Certificate is reduced as a result of defaults and delinquencies on the
Mortgage Loans. Such a loss could in some circumstances be a capital loss.
Also, the timing and amount of such losses or reductions in income are
uncertain. Owners of Subordinated Certificates should consult their tax
advisors on these points.
Income from Residual Certificates.
Taxation of REMIC Income. Generally, Owners of Residual Certificates in a
REMIC Pool ("Residual Owners") must report ordinary income or loss equal to
their pro rata shares (based on the portion of all Residual Certificates they
own) of the taxable income or net loss of the REMIC. Such income must be
reported regardless of the timing or amounts of distributions on the Residual
Certificates.
The taxable income of a REMIC Pool is generally determined under the
accrual method of accounting in the same manner as the taxable income of an
individual taxpayer. Taxable income is generally gross income, including
interest and original issue discount income, if any, on the assets of the
REMIC Pool and income from the amortization of any premium on Regular
Certificates, minus deductions. Market discount (as defined in the Code) with
respect to Mortgage Loans held by a REMIC Pool is recognized in the same
fashion as if it were original issue discount. Deductions include interest
and original issue discount expense on the Regular Certificates, reasonable
servicing fees attributable to the REMIC Pool, other administrative expenses
and amortization of any premium on assets of the REMIC Pool. As previously
discussed, the timing of recognition of "negative original issue discount,"
if any, on a Regular Certificate is uncertain; as a result, the timing of
recognition of the corresponding income to the REMIC Pool is also uncertain.
If the Trust Fund consists of an Upper-Tier REMIC and a Lower-Tier REMIC,
the regular interests issued by the Lower-Tier REMIC to the Upper-Tier REMIC
will be treated as a single debt instrument for purposes of the original
issue discount provisions. A determination that these regular interests can
not be treated as a single debt instrument would have a material adverse
effect on the Owners of Residual Certificates issued by the Lower-Tier REMIC.
A Residual Owner may not amortize the cost of its Residual Certificate.
Taxable income of the REMIC Pool, however, will not include cash received by
the REMIC Pool that represents a recovery of the REMIC Pool's initial basis
in its assets, and such basis will include the issue price of the Residual
Certificates (assuming the issue price is positive). Such recovery of basis
by the REMIC Pool will have the effect of amortization of the issue price of
the Residual Certificate over its life. The period of time over which such
issue price is effectively amortized, however, may be longer than the
economic life of the Residual Certificate. The issue price of a Residual
Certificate is the price at which a substantial portion of the Class of
Certificates including the Residual Certificate are first sold to the public
(or if the Residual Certificate is not publicly offered, the price paid by
the first buyer).
A subsequent Residual Owner must report the same amounts of taxable income
or net loss attributable to the REMIC Pool as an original Owner. No
adjustments are made to reflect the purchase price.
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Losses. A Residual Owner that is allocated a net loss of the REMIC Pool
may not deduct such loss currently to the extent it exceeds the Owner's
adjusted basis (as defined in "Sale or Exchange of Certificates" below) in
its Residual Certificate. A Residual Owner that is a U.S. person (as defined
below in "Taxation of Certain Foreign Investors"), however, may carry over
any disallowed loss to offset any taxable income generated by the same REMIC
Pool.
Excess Inclusions. A portion of the taxable income allocated to a Residual
Certificate is subject to special tax rules. That portion, referred to as an
"excess inclusion," is calculated for each calendar quarter and equals the
excess of such taxable income for the quarter over the daily accruals for the
quarter. The daily accruals equal the product of (i) 120% of the federal
long-term rate under Code Section 1274(d) for the month which includes the
Closing Date (determined on the basis of quarterly compounding and properly
adjusted for the length of the quarter) and (ii) the adjusted issue price of
the Certificate at the beginning of such quarter. The adjusted issue price of
a Residual Certificate at the beginning of a quarter is the issue price of
the Certificate, increased by the amount of daily accruals on the Certificate
for all prior quarters, and decreased (but not below zero) by any prior
distributions on the Certificate. If the aggregate value of the Residual
Certificates is not considered to be "significant," then to the extent
provided in Treasury regulations, a Residual Owner's entire share of REMIC
taxable income will be treated as an excess inclusion. The regulations that
have been adopted under Code Sections 860A through 86OG (the "REMIC
Regulations") do not contain such a rule.
Excess inclusions generally may not be offset by unrelated losses or loss
carryforwards or carrybacks of a Residual Owner. In addition, for all taxable
years beginning after August 20, 1996, and unless a Residual Owner elects
otherwise for all other taxable years, the alternate minimum taxable income
of a Residual Owner for a taxable year may not be less than the Residual
Owner's excess inclusions for the taxable year and excess inclusions are
disregarded when calculating a Residual Owner's alternate minimum tax net
operating loss deduction.
Excess inclusions are treated as unrelated business taxable income for an
organization subject to the tax on unrelated business income. In addition,
under Treasury regulations yet to be issued, if a real estate investment
trust, regulated investment company or certain other pass-through entities
are Residual Owners, a portion of the distributions made by such entities may
be treated as excess inclusions.
Distributions. Distributions on a Residual Certificate (whether at their
scheduled times or as a result of prepayments) generally will not result in
any taxable income or loss to the Residual Owner. If the amount of any
distribution exceeds a Residual Owner's adjusted basis in its Residual
Certificate, however, the Residual Owner will recognize gain (treated as gain
from the sale or exchange of its Residual Certificate) to the extent of such
excess. See "Sale or Exchange of Certificates" below.
Prohibited Transactions; Special Taxes. Net income recognized by a REMIC
Pool from "prohibited transactions" is subject to a 100% tax and is
disregarded in calculating the REMIC Pool's taxable income. In addition, a
REMIC Pool is subject to federal income tax at the highest corporate rate on
"net income from foreclosure property" (which has a technical definition). A
100% tax also applies to certain contributions to a REMIC Pool made after it
is formed. It is not anticipated that any REMIC Pool will (i) engage in
prohibited transactions in which it recognizes a significant amount of net
income, (ii) receive contributions of property that are subject to tax, or
(iii) derive a significant amount of net income from foreclosure property
that is subject to tax.
Negative Value Residual Certificates. The federal income tax treatment of
any consideration paid to a transferee on a transfer of a Residual
Certificate is unclear. Such a transferee should consult its tax advisor. The
preamble to the REMIC Regulations indicates that the Internal Revenue Service
may issue future guidance on the tax treatment of such payments.
In addition, on December 23, 1996, the Internal Revenue Service released
final regulations under Code Section 475 (the "Mark to Market Regulations")
relating to the requirement that a dealer mark certain securities to market.
The Mark to Market Regulations provide that a residual interest is not a
"security" for the purposes of Section 475 of the Code, and thus is not
subject to the mark to market rules.
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THE METHOD OF TAXATION OF RESIDUAL CERTIFICATES DESCRIBED IN THIS SECTION
CAN PRODUCE A SIGNIFICANTLY LESS FAVORABLE AFTER-TAX RETURN FOR A RESIDUAL
CERTIFICATE THAN WOULD BE THE CASE IF THE CERTIFICATE WERE TAXABLE AS A DEBT
INSTRUMENT. ALSO, A RESIDUAL OWNER'S RETURN MAY BE ADVERSELY AFFECTED BY THE
EXCESS INCLUSIONS RULES DESCRIBED ABOVE. IN CERTAIN PERIODS, TAXABLE INCOME
AND THE RESULTING TAX LIABILITY FOR A RESIDUAL OWNER MAY EXCEED ANY
DISTRIBUTIONS IT RECEIVES. IN ADDITION, A SUBSTANTIAL TAX MAY BE IMPOSED ON
CERTAIN TRANSFERORS OF A RESIDUAL CERTIFICATE AND CERTAIN RESIDUAL OWNERS
THAT ARE "PASS-THRU" ENTITIES. SEE "TRANSFERS OF RESIDUAL CERTIFICATES"
BELOW. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS BEFORE PURCHASING A
RESIDUAL CERTIFICATE.
Sale or Exchange of Certificates.
An Owner generally will recognize gain or loss upon sale or exchange of a
Regular or Residual Certificate equal to the difference between the amount
realized and the Owner's adjusted basis in the Certificate. The adjusted
basis in a Certificate generally will equal the cost of the Certificate,
increased by income previously recognized, and reduced (but not below zero)
by previous distributions, and by any amortized premium in the case of a
Regular Certificate, or net losses allowed as a deduction in the case of a
Residual Certificate.
Except as described below, any gain or loss on the sale or exchange of a
Certificate held as a capital asset will be capital gain or loss and will be
long-term or short-term depending on whether the Certificate has been held
for more than one year. Such gain or loss will be ordinary income or loss (i)
for a bank or thrift institution, and (ii) in the case of a Regular
Certificate, (a) to the extent of any accrued, but unrecognized, market
discount, or (b) to the extent income recognized by the Owner is less than
the income that would have been recognized if the yield on such Certificate
were 110% of the applicable federal rate under Code Section 1274(d).
A Residual Owner should be allowed a loss upon termination of the REMIC
Pool equal to the amount of the Owner's remaining adjusted basis in its
Residual Certificates. Whether the termination will be treated as a sale or
exchange (resulting in a capital loss) is unclear.
Except as provided in Treasury regulations, the wash sale rules of Code
Section 1091 will apply to dispositions of a Residual Certificate where the
seller of the interest, during the period beginning six months before the
sale or disposition of the interest and ending six months after such sale or
disposition, acquires (or enters into any other transaction that results in
the application of Code Section 1091) any REMIC residual interest, or any
interest in a "taxable mortgage pool" (such as a non-REMIC owner trust) that
is economically comparable to a residual interest.
Taxation of Certain Foreign Investors.
Regular Certificates. A Regular Certificate held by an Owner that is a
non-U.S. person (as defined below), and that has no connection with the
United States other than owning the Certificate, will not be subject to U.S.
withholding or income tax with respect to the Certificate provided such Owner
(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 an appropriate statement, signed under
penalties of perjury, identifying the Owner and stating, among other things,
that the Owner is a non-U.S. person and provided further, with respect to
interest income from a Regular Certificate (including original issue
discount), that such interest is not "contingent". If these conditions are
not met, a 30% withholding tax will apply to interest (including original
issue discount) unless an income tax treaty reduces or eliminates such tax or
unless the interest is effectively connected with the conduct of a trade or
business within the United States by such Owner. In the latter case, such
Owner will be subject to United States federal income tax with respect to all
income from the Certificate at regular rates then applicable to U.S.
taxpayers (and in the case of a corporation, possibly also the branch profits
tax).
The term "non-U.S. person" means any person other than a U.S. person. A
U.S. person is a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or
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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 (i) a U.S. court is able to exercise primary
supervision over the trust's administration and (ii) one or more U.S.
fiduciaries have the authority to control all of the trust's substantial
decisions.
Residual Certificates. A Residual Owner that is a non-U.S. person, and
that has no connection with the United States other than owning a Residual
Certificate, will not be subject to U.S. withholding or income tax with
respect to the Certificate (other than with respect to excess inclusions)
provided that (i) the conditions described in the second preceding paragraph
with respect to Regular Certificates are met and (ii) in the case of a
Residual Certificate in a REMIC Pool holding Mortgage Loans, the Mortgage
Loans were originated after July 18, 1984. Excess inclusions are subject to a
30% withholding tax in all events (notwithstanding any contrary tax treaty
provisions) when distributed to the Residual Owner (or when the Residual
Certificate is disposed of). The Code grants the Treasury Department
authority to issue regulations requiring excess inclusions to be taken into
account earlier if necessary to prevent avoidance of tax. The REMIC
Regulations do not contain such a rule. The preamble thereto states that the
Internal Revenue Service is considering issuing regulations concerning
withholding on distributions to foreign holders of residual interests to
satisfy accrued tax liability due to excess inclusions.
With respect to a Residual Certificate that has been held at any time by a
non-U.S. person, the Trustee (or its agent) will be entitled to withhold (and
to pay to the Internal Revenue Service) any portion of any payment on such
Residual Certificate that the Trustee reasonably determines is required to be
withheld. If the Trustee (or its agent) reasonably determines that a more
accurate determination of the amount required to be withheld from a
distribution can be made within a reasonable period after the scheduled date
for such distribution, it may hold such distribution in trust for the
Residual Owner until such determination can be made.
Special tax rules and restrictions that apply to transfers of Residual
Certificates to and from non-U.S. persons are discussed in the next section.
Transfers of Residual Certificates.
Special tax rules and restrictions apply to transfers of Residual
Certificates to disqualified organizations or foreign investors, and to
transfers of noneconomic Residual Certificates.
Disqualified Organizations. In order to comply with the REMIC rules of the
Code, the Agreement will provide that no legal or beneficial interest in a
Residual Certificate may be transferred to, or registered in the name of, any
person unless (i) the proposed purchaser provides to the Trustee an
"affidavit" (within the meaning of the REMIC Regulations) to the effect that,
among other items, such transferee is not a "disqualified organization" (as
defined below), is not purchasing a Residual Certificate as an agent for a
disqualified organization (i.e., as a broker, nominee, or other middleman)
and is not an entity (a "Book-Entry Nominee") that holds REMIC residual
securities as nominee to facilitate the clearance and settlement of such
securities through electronic book-entry changes in accounts of participating
organizations and (ii) the transferor states in writing to the Trustee that
it has no actual knowledge that such affidavit is false.
If despite these restrictions a Residual Certificate is transferred to a
disqualified organization, the transfer may result in a tax equal to the
product of (i) the present value of the total anticipated future excess
inclusions with respect to such Certificate and (ii) the highest corporate
marginal federal income tax rate. Such a tax generally is imposed on the
transferor, except that if the transfer is through an agent for a
disqualified organization, the agent is liable for the tax. A transferor is
not liable for such tax if the transferee furnishes to the transferor an
affidavit that the transferee is not a disqualified organization and, as of
the time of the transfer, the transferor does not have actual knowledge that
the affidavit is false.
A disqualified organization may hold an interest in a REMIC Certificate
through a "pass-thru entity" (as defined below). In that event, the pass-thru
entity is subject to tax (at the highest corporate marginal federal income
tax rate) on excess inclusions allocable to the disqualified organization.
However, such tax will not apply to the extent the pass-thru entity receives
affidavits from record holders of interests in the entity stating that they
are not disqualified organizations and the entity does not have actual
knowledge that the affidavits are false.
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For these purposes, (i) "disqualified organization" means the United
States, any state or political subdivision thereof, any foreign government,
any international organization, any agency or instrumentality of any of the
foregoing, certain organizations that are exempt from taxation under the Code
(including tax on excess inclusions) and certain corporations operating on a
cooperative basis, and (ii) "pass-thru entity" means any regulated investment
company, real estate investment trust, common trust fund, partnership, trust
or estate and certain corporations operating on a cooperative basis. Except
as may be provided in Treasury regulations, any person holding an interest in
a pass-thru entity as a nominee for another will, with respect to that
interest, be treated as a pass-thru entity.
Foreign Investors. Under the REMIC Regulations, a transfer of a Residual
Certificate to a non-U.S. person that will not hold the Certificate in
connection with a U.S. trade or business will be disregarded for all federal
tax purposes if the Certificate has "tax avoidance potential." A Residual
Certificate has tax avoidance potential unless, at the time of transfer, the
transferor reasonably expects that:
(i) for each excess inclusion, the REMIC will distribute to the transferee
residual interest holder an amount that will equal at least 30 percent of the
excess inclusion, and
(ii) each such amount will be distributed at or after the time at which
the excess inclusion accrues and not later than the close of the calendar
year following the calendar year of accrual.
A transferor has such reasonable expectation if the above test would be
met assuming that the REMIC's Mortgage Loans will prepay at each rate between
50 percent and 200 percent of the Prepayment Assumption.
The REMIC Regulations also provide that a transfer of a Residual
Certificate from a non-U.S. person to a U.S. person (or to a non-U.S. person
that will hold the Certificate in connection with a U.S. trade or business)
is disregarded if the transfer has "the effect of allowing the transferor to
avoid tax on accrued excess inclusions."
In light of these provisions, the Agreement provides that a Residual
Certificate may not be purchased by or transferred to any person that is not
a U.S. person, unless (i) such person holds the Certificate in connection
with the conduct of a trade or business within the United States and
furnishes the transferor and the Trustee with an effective Internal Revenue
Service Form 4224, or (ii) the transferee delivers to both the transferor and
the Trustee an opinion of nationally recognized tax counsel to the effect
that such transfer is in accordance with the requirements of the Code and the
regulations promulgated thereunder and that such transfer will not be
disregarded for federal income tax purposes.
Noneconomic Residual Certificates. Under the REMIC Regulations, a transfer
of a "noneconomic" Residual Certificate will be disregarded for all federal
income tax purposes if a significant purpose of the transfer is to impede the
assessment or collection of tax. Such a purpose exists if the transferor, at
the time of the transfer, either knew or should have known that the
transferee would be unwilling or unable to pay taxes due on its share of the
taxable income of the REMIC. A transferor is presumed to lack such knowledge
if:
(i) the transferor conducted, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and found that the
transferee had historically paid its debts as they came due and found no
significant evidence to indicate that the transferee will not continue to pay
its debts as they become due, and
(ii) the transferee represents to the transferor that it understands that,
as the holder of the noneconomic residual interest, it may incur tax
liabilities in excess of any cash flows generated by the interest and that it
intends to pay taxes associated with holding the residual interest as they
become due.
A Residual Certificate (including a Certificate with significant value at
issuance) is noneconomic unless, at the time of the transfer, (i) the present
value of the expected future distributions on the Certificate at least equals
the product of the present value of the anticipated excess inclusions and the
highest corporate income tax rate in effect for the year in which the
transfer occurs, and (ii) the transferor reasonably expects that the
transferee will receive distributions on the Certificate, at or after the
time at which taxes accrue, in an amount sufficient to pay the taxes.
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The Agreement will provide that no legal or beneficial interest in a
Residual Certificate may be transferred to, or registered in the name of, any
person unless the transferor represents to the Trustee that it has conducted
the investigation of the transferee, and made the findings, described in the
preceding paragraph, and the proposed transferee provides to the Trustee the
transferee representations described in the preceding paragraph, and agrees
that it will not transfer the Certificate to any person unless that person
agrees to comply with the same restrictions on future transfers.
Servicing Compensation and Other REMIC Pool Expenses.
Under Code Section 67, an individual, estate or trust is allowed certain
itemized deductions only to the extent that such deductions, in the
aggregate, exceed 2% of the Owner's adjusted gross income, and such a person
is not allowed such deductions to any extent in computing its alternative
minimum tax liability. Under Treasury regulations, if such a person is an
Owner of a REMIC Certificate, the REMIC Pool is required to allocate to such
a person its share of the servicing fees and administrative expenses paid by
a REMIC together with an equal amount of income. Those fees and expenses are
deductible as an offset to the additional income, but subject to the 2%
floor.
In the case of a REMIC Pool that has multiple classes of Regular
Certificates with staggered maturities, fees and expenses of the REMIC Pool
would be allocated entirely to the Owners of Residual Certificates. However,
if the REMIC Pool were a "single-class REMIC" as defined in applicable
Treasury regulations, such deductions would be allocated proportionately
among the Regular and Residual Certificates.
Reporting and Administrative Matters.
Annual reports will be made to the Internal Revenue Service, and to
Holders of record of Regular Certificates, and Owners of Regular Certificates
holding through a broker, nominee or other middleman, that are not excepted
from the reporting requirements, of accrued interest, original issue
discount, information necessary to compute accruals of market discount,
information regarding the percentage of the REMIC Pool's assets meeting the
qualified assets tests described above under "Status of Certificates" and,
where relevant, allocated amounts of servicing fees and other Code Section 67
expenses. Holders not receiving such reports may obtain such information from
the related REMIC by contacting the person designated in IRS Publication 938.
Quarterly reports will be made to Residual Holders showing their allocable
shares of income or loss from the REMIC Pool, excess inclusions, and Code
Section 67 expenses.
The Trustee or its agent will sign and file federal income tax returns for
each REMIC Pool. To the extent allowable and if so specified in the related
Prospectus Supplement, the Seller will act as the tax matters person for each
REMIC Pool. Each Owner of a Residual Certificate, by the acceptance of its
Residual Certificate, agrees that the Seller will act as the Owner's agent in
the performance of any duties required of the Owner in the event that the
Owner is the tax matters person.
An Owner of a Residual Certificate is required to treat items on its
federal income tax return consistently with the treatment of the items on the
REMIC Pool's return, unless the Owner owns 100% of the Residual Certificate
for the entire calendar year or the Owner either files a statement
identifying the inconsistency or establishes that the inconsistency resulted
from incorrect information received from the REMIC Pool. The Internal Revenue
Service may assess a deficiency resulting from a failure to comply with the
consistency requirement without instituting an administrative proceeding at
the REMIC level. Any person that holds a Residual Certificate as a nominee
for another person may be required to furnish the REMIC Pool, in a manner to
be provided in Treasury regulations, the name and address of such other
person and other information.
Non-REMIC Certificates
If no REMIC election is made, the Trust Fund may either elect to be
treated as a "financial asset securitization investment trust" ("FASIT") or
qualify as a grantor trust. The Prospectus Supplement for each Series of
Certificates for which no REMIC election is made will address the material
federal income tax consequences of an investment in such Certificates.
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STATE TAX CONSIDERATIONS
In addition to the Federal income tax consequences described in "FEDERAL
INCOME TAX CONSEQUENCES," potential investors should consider the state
income tax consequences of the acquisition, ownership, and disposition of the
Certificates. State income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport to describe
any aspect of the income tax laws of any state. Therefore, potential
investors should consult their own tax advisors with respect to the various
state tax consequences of an investment in the Certificates.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on employee benefit plans subject to ERISA
("ERISA Plans") and prohibits certain transactions between ERISA Plans and
persons who are parties in interest (as defined under ERISA) ("parties in
interest") with respect to such Plans. The Code prohibits a similar set of
transactions between certain plans ("Code Plans," and together with ERISA
Plans, "Plans") and persons who are disqualified persons (as defined in the
Code) with respect to Code Plans.
Investments by ERISA Plans and entities the assets of which are deemed to
include plan assets are subject to ERISA's general fiduciary requirements,
including the requirement of investment prudence and diversification and the
requirement that investments be made in accordance with the documents
governing the ERISA Plan. Before investing in a Certificate, an ERISA Plan
fiduciary should consider, among other factors, whether to do so is
appropriate in view of the overall investment policy and liquidity needs of
the ERISA Plan. Such fiduciary should especially consider the sensitivity of
the investments to the rate of principal payments (including prepayments) on
the Mortgage Loans, as discussed in the Prospectus Supplement related to a
Series.
PROHIBITED TRANSACTIONS
Section 406 of ERISA and Section 4975 of the Code prohibit parties in
interest and disqualified persons with respect to ERISA Plans and Code Plans
from engaging in certain transactions involving such Plans and their assets
unless a statutory or administrative exemption applies to the transaction.
Section 4975 of the Code and Sections 502(i) and 502(l) of ERISA provide for
the imposition of certain excise taxes and civil penalties on certain persons
that engage or participate in such prohibited transactions. The Depositor,
the Master Servicer, the Special Servicer, if any, the Trustee or certain
affiliates thereof might be considered or might become parties in interest or
disqualified persons with respect to an ERISA Plan or a Code Plan. If so, the
acquisition or holding of Certificates by or on behalf of such Plan could be
considered to give rise to a "prohibited transaction" within the meaning of
ERISA and/or the Code unless an administrative exemption described below or
some other exemption is available.
Special caution should be exercised before the assets of a Plan are used
to purchase a Certificate if, with respect to such assets, the Depositor, the
Master Servicer, the Special Servicer, if any, the Trustee or an affiliate
thereof either: (a) has investment discretion with respect to the investment
of such assets of such Plan; or (b) has authority or responsibility to give,
or regularly gives investment advise with respect to such assets for a fee
and pursuant to an agreement or understanding that such advice will serve as
a primary basis for investment decisions with respect to such assets and that
such advice will be based on the particular investment needs of the Plan.
Further, if the assets included in a Trust Fund were deemed to constitute
"plan assets," it is possible that an ERISA Plan's investment in the
Certificates might be deemed to constitute a delegation, under ERISA, of the
duty to manage plan assets by the fiduciary deciding to invest in the
Certificates, and certain transactions involved in the operation of the Trust
Fund might be deemed to constitute prohibited transactions under ERISA and/or
the Code. Neither ERISA nor the Code define the term "plan assets."
The U.S. Department of Labor (the "Department") has issued regulations
(the "Regulations") concerning whether or not a Plan's assets would be deemed
to include an interest in the underlying
55
<PAGE>
assets of an entity (such as the Trust Fund) for purposes of the reporting
and disclosure and general fiduciary responsibility provisions of ERISA, as
well as for the prohibited transaction provisions of ERISA and the Code, if
the Plan acquires an "equity interest" (such as a Certificate) in such an
entity.
Certain exceptions are provided in the Regulations whereby an investing
Plan's assets would be deemed merely to include its interest in the
Certificates instead of being deemed to include an interest in the assets of
the Trust Fund. However, it cannot be predicted in advance nor can there be a
continuing assurance whether such exceptions may be met, because of the
factual nature of certain of the rules set forth in the Regulations. For
example, one of the exceptions in the Regulations states that the underlying
assets of an entity will not be considered "plan assets" if less than 25% of
the value of all classes of equity interest are held by "benefit plan
investors," which are defined as ERISA Plans, Code Plans, and employee
benefit plans not subject to ERISA (for example, governmental plans), but
this exemption is tested immediately after each acquisition of an equity
interest in the entity whether upon initial issuance or in the secondary
market.
Pursuant to the Regulations, if the assets of the Trust Fund were deemed
to be plan assets by reason of a Plan's investment in any Certificates, such
plan assets would include an undivided interest in the Mortgage Loans, the
mortgages underlying the Mortgage Loans and any other assets held in the
Trust Fund. Therefore, because the Mortgage Loans and other assets held in
the Trust Fund may be deemed to be the assets of each Plan that purchases
Certificates, in the absence of an exemption, the purchase, sale or holding
of Certificates of any Series or Class by a Plan might result in a prohibited
transaction and the imposition of civil penalties or excise taxes. The
Department has issued administrative exemptions from application of certain
prohibited transaction restrictions of ERISA and the Code to several
underwriters of mortgage-backed securities (each, an "Underwriter's
Exemption"). Such an Underwriter's Exemption can only apply to
mortgage-backed securities which, among other conditions, are sold in an
offering with respect to which such underwriter serves as the sole or a
managing underwriter, or as a selling or placement agent. If such an
Underwriter's Exemption might be applicable to a Series of Certificates, the
related Prospectus Supplement will refer to such possibility.
UNRELATED BUSINESS TAXABLE INCOME -- RESIDUAL INTERESTS
The purchase of a Certificate evidencing an interest in the Residual
Interest in a Series that is treated as a REMIC by any person, including any
employee benefit plan that is exempt from federal income tax under Code
Section 501(a), including most varieties of ERISA Plans, may give rise to
"unrelated business taxable income" as described in Code Sections 511-515 and
860E. Further, prior to the purchase of an interest in a Residual Interest, a
prospective transferee may be required to provide an affidavit to a
transferor that it is not, nor is it purchasing an interest in a Residual
Interest on behalf of, a "Disqualified Organization," which term as defined
above includes certain tax-exempt entities not subject to Code Section 511,
such as certain governmental plans, as discussed above under "FEDERAL INCOME
TAX CONSEQUENCES -- Income from Residual Certificates" and "--Transfers of
Residual Certificates."
DUE TO THE COMPLEXITY OF THESE RULES AND THE PENALTIES IMPOSED UPON
PERSONS INVOLVED IN PROHIBITED TRANSACTIONS, IT IS PARTICULARLY IMPORTANT
THAT INDIVIDUALS RESPONSIBLE FOR INVESTMENT DECISIONS WITH RESPECT TO ERISA
PLANS AND CODE PLANS CONSULT WITH THEIR COUNSEL REGARDING THE CONSEQUENCES
UNDER ERISA AND/OR THE CODE OF THEIR ACQUISITIONS AND OWNERSHIP OF
CERTIFICATES.
THE SALE OF CERTIFICATES TO A PLAN IS IN NO RESPECT A REPRESENTATION BY
THE SELLER OR THE APPLICABLE UNDERWRITER THAT THIS INVESTMENT MEETS ALL
RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY PLANS GENERALLY OR
ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR PLANS
GENERALLY OR ANY PARTICULAR PLAN.
56
<PAGE>
LEGAL INVESTMENT
THE SECONDARY MORTGAGE MARKET ENHANCEMENT ACT
The Prospectus Supplement for each Series will identify those Classes of
Offered Certificates, if any, which constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984
("SMMEA"). The appropriate characterization of those Offered Certificates not
qualifying as "mortgage related securities" ("Non-SMMEA Certificates") under
various legal investment restrictions, and thus the ability of investors
subject to these restrictions to purchase such Certificates, may be subject
to significant interpretive uncertainties. Accordingly, investors whose
investment authority is subject to legal restrictions should consult their
own legal advisors to determine whether and to what extent the Non-SMMEA
Certificates constitute legal investments for them.
A Class or Classes of Certificates of a Series will constitute "mortgage
related securities" ("SMMEA Certificates") for so long as they (i) are rated
in one of the two highest rating categories by at least one nationally
recognized statistical rating organization and (ii) are part of a Series
evidencing interests in a Trust Fund consisting of loans originated by
certain types of originators as specified in SMMEA. As "mortgage related
securities," the SMMEA Certificates will constitute legal investments for
persons, trusts, corporations, partnerships, associations, business trusts
and business entities (including, but not limited to, state-chartered savings
banks, commercial banks, savings and loan associations and insurance
companies, as well as trustees and state government employee retirement
systems) created pursuant to or existing under the laws of the United States
or of any state (including the District of Columbia and Puerto Rico) whose
authorized investments are subject to state regulation to the same extent
that, under applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any agency or instrumentality
thereof constitute legal investments for such entities. Pursuant to SMMEA, a
number of states enacted legislation, on or before the October 3, 1991 cutoff
for such enactments, limiting to varying extents the ability of certain
entities (in particular, insurance companies) to invest in "mortgage related
securities" secured by liens on residential, or mixed residential and
commercial properties, in most cases by requiring the affected investors to
rely solely upon existing state law, and not SMMEA. Pursuant to Section 347
of the Riegle Community Development and Regulatory Improvement Act of 1994,
which amended the definition of "mortgage related security" to include, in
relevant part, Certificates satisfying the rating and qualified originator
requirements for "mortgage related securities," but evidencing interests in a
Trust Fund consisting, in whole or in part, of first liens on one or more
parcels of real estate upon which are located one or more commercial
structures, states were authorized to enact legislation, on or before
September 23, 2001, specifically referring to Section 347 and prohibiting or
restricting the purchase, holding or investment by state-regulated entities
in such types of Certificates. Accordingly, the investors affected by any
such state legislation, when and if enacted, will be authorized to invest in
SMMEA Certificates only to the extent provided in such legislation.
SMMEA also amended the legal investment authority of federally chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in mortgage
related securities without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in such securities, and
national banks may purchase such securities for their own account without
regard to the limitations generally applicable to investment securities set
forth in 12 U.S.C. Section 24 (Seventh), subject in each case to such
regulations as the applicable federal regulatory authority may prescribe. In
this connection, effective December 31, 1996, the Office of the Comptroller
of the Currency (the "OCC") has amended 12 C.F.R. Part 1 to authorize
national banks to purchase and sell for their own account, without limitation
as to a percentage of the bank's capital and surplus (but subject to
compliance with certain general standards concerning "safety and soundness"
and retention of credit information in 12 C.F.R. Section 1.5), certain "Type
IV securities," defined in 12 C.F.R. Section 1.2(l) to include certain
"commercial mortgage-related securities" and "residential mortgage-related
securities." As so defined, "commercial mortgage-related security" and
"residential mortgage-related security" mean, in relevant part, "mortgage
related security" within the meaning of SMMEA, provided that, in the case of
a "commercial mortgage-related security," it "represents ownership of a
promissory note or certificate of interest or participation that is directly
57
<PAGE>
secured by a first lien on one or more parcels of real estate upon which one
or more commercial structures are located and that is fully secured by
interests in a pool of loans to numerous obligors." In the absence of any
rule or administrative interpretation by the OCC defining the term "numerous
obligors," no representation is made as to whether any Class of Certificates
will qualify as "commercial mortgage-related securities," and thus as "Type
IV securities," for investment by national banks. Federal credit unions
should review the National Credit Union Administration ("NCUA") Letter to
Credit Unions No. 96, as modified by Letter to Credit Unions No. 108, which
includes guidelines to assist federal credit unions in making investment
decisions for mortgage related securities. The NCUA has adopted rules which
prohibit federal credit unions from investing in certain mortgage related
securities (including securities such as certain Series, Classes or
subclasses of Certificates), except under limited circumstances.
All depository institutions considering an investment in the 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 FDIC, the OCC and the Office of Thrift Supervision, and by the
NCUA (with certain modifications), prohibits depository institutions from
investing in certain "high-risk mortgage securities" (including Securities
such as certain Series, Classes or subclasses of the Certificates), 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
Certificates, as certain Series, Classes or subclasses may be deemed
unsuitable investments, or may otherwise be restricted, under such rules,
policies or guidelines (in certain instances irrespective of SMMEA).
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, with regard to any
Certificates issued in book-entry form, provisions which may restrict or
prohibit investments in securities which are issued in book-entry form.
INVESTORS SHOULD CONSULT WITH THEIR OWN LEGAL ADVISORS IN DETERMINING
WHETHER, AND TO WHAT EXTENT, THE CERTIFICATES CONSTITUTE LEGAL INVESTMENTS
FOR SUCH INVESTORS.
Except as to the status of SMMEA Certificates identified in the Prospectus
Supplement for a Series as "mortgage related securities" under SMMEA, no
representation is made as to the proper characterization of the Certificates
for legal investment or financial institution regulatory purposes or other
purposes, or as to the ability of particular investors to purchase
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 Certificates) may adversely affect the liquidity of
the Certificates.
THE APPRAISAL REGULATIONS
Pursuant to Title XI of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA"), the Board of Governors of the Federal
Reserve System, the OCC, the Federal Deposit Insurance Corporation and the
Office of Thrift Supervision have adopted regulations (the "Appraisal
Regulations") applicable to bank holding companies and their non-bank
subsidiaries, state-chartered banks that are members of the Federal Reserve
System, national banks, state-chartered banks that are not members of the
Federal Reserve System and savings associations, respectively. The Appraisal
Regulations, which are substantially similar, although not identical, for
each agency, generally require the affected institutions and entities to
obtain appraisals performed by state-certified or state-licensed appraisers
(each, a "FIRREA Appraisal") in connection with a wide range of real
estate-related transactions, including the purchase of interests in loans
secured by real estate in the form of
58
<PAGE>
mortgage-backed securities, unless an exemption applies. With respect to
purchases of mortgage-backed securities, the Appraisal Regulations provide
for an exemption from the requirement of obtaining new FIRREA Appraisals for
the properties securing the underlying loans so long as at the time of
origination each such loan was the subject of either a FIRREA Appraisal, or,
if a FIRREA Appraisal was not required, met the appraisal requirements of the
appropriate regulator.
No assurance can be given that each of the underlying Mortgage Loans in a
Mortgage Pool will have been the subject of a FIRREA Appraisal or, if a
FIRREA Appraisal was not required, an appraisal that conformed to the
requirements of the appropriate regulator at origination. To the extent
available, information will be provided in the Prospectus Supplement with
respect to appraisals on the Mortgage Loans underlying each Series of
Certificates. However, such information may not be available on every
Mortgage Loan. Prospective investors that may be subject to the Appraisal
Regulations are advised to consult with their legal advisors and/or the
appropriate regulators with respect to the effect of such regulations on
their ability to invest in a particular Series of Certificates.
PLAN OF DISTRIBUTION
The Certificates offered hereby and by means of the related Prospectus
Supplements will be offered through one or more of the methods described
below. The Prospectus Supplement with respect to each such Series of
Certificates will describe the method of offering of such Series of
Certificates, including the initial public offering or purchase price of each
Class of Certificates or the method by which such price will be determined
and the net proceeds to the Seller of such sale.
The Offered Certificates will be offered through the following methods
from time to time and offerings may be made concurrently through more than
one of these methods or an offering of a particular Series of Certificates
may be made through a combination of two or more of these methods:
1. By negotiated firm commitment underwriting and public reoffering by
underwriters specified in the applicable Prospectus Supplement;
2. By placements by the Seller with investors through dealers; and
3. By direct placements by the Seller with investors.
Unless otherwise specified in the related Prospectus Supplement, if
underwriters are used in a sale of any Offered Certificates, such
Certificates will be acquired by the underwriters for their own account and
may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying
prices to be determined at the time of sale or at the time of commitment
thereof. Firm commitment underwriting and public reoffering by underwriters
may be done through underwriting syndicates or through one or more firms
acting alone. The specific managing underwriter or underwriters, if any, with
respect to the offer and sale of the Offered Certificates of a particular
Series will be set forth on the cover of the related Prospectus Supplement
and the members of the underwriting syndicate, if any, will be named in such
Prospectus Supplement. If so specified in the related Prospectus Supplement,
the Offered Certificates will be distributed in a firm commitment
underwriting, subject to the terms and conditions of the underwriting
agreement, by Goldman, Sachs & Co. acting as underwriter with other
underwriters, if any, named therein. The Seller is an affiliate of Goldman,
Sachs & Co. See "The Seller" herein. The Prospectus Supplement will describe
any discounts and commissions to be allowed or paid by the Seller to the
underwriters, any other items constituting underwriting compensation and any
discounts and commissions to be allowed or paid to the dealers. The
obligations of the underwriters will be subject to certain conditions
precedent. The underwriters with respect to a sale of any Class of
Certificates will be obligated to purchase all such Certificates if any are
purchased. The Seller and, if specified in the Prospectus Supplement, a
selling Certificateholder will agree to indemnify the underwriters against
certain civil liabilities, including liabilities under the Act or will
contribute to payments required to be made in respect thereof.
In the ordinary course of business, Goldman, Sachs & Co., or its
affiliates, and the Seller may engage in various securities and financing
transactions, including repurchase agreements to provide interim financing of
the Seller's mortgage loans pending the sale of such mortgage loans or
interests therein, including the Certificates.
59
<PAGE>
If specified in the Prospectus Supplement relating to a Series of
Certificates, a holder of one or more Classes of Offered Certificates that is
required to deliver a prospectus in connection with the offer and sale
thereof may offer and sell, pursuant to this Prospectus and a related
Prospectus Supplement, such Classes directly, through one or more
underwriters to be designated at the time of the offering of such
Certificates or through dealers acting as agent and/or principal. The
specific managing underwriter or underwriters, if any, with respect to any
such offer and sale of Certificates by unaffiliated parties will be set forth
on the cover of the Prospectus Supplement applicable to such Certificates and
the members of the underwriting syndicate, if any, will be named in such
Prospectus Supplement, and the Prospectus Supplement will describe any
discounts and commissions to be allowed or paid by such unaffiliated parties
to the underwriters, any other items constituting underwriting compensation
and any discounts and commissions to be allowed or paid to any dealers
participating in such offering. Any offerings described in this paragraph may
be restricted in the manner specified in such Prospectus Supplement. Such
transactions may be effected at market prices prevailing at the time of sale,
at negotiated prices or at fixed prices. The underwriters and dealers
participating in such selling Certificateholder's offering of such
Certificates may receive compensation in the form of underwriting discounts
or commissions from such selling Certificateholder, and such dealers may
receive commissions from the investors purchasing such Certificates for whom
they may act as agent (which discounts or commissions will not exceed those
customary in those types of transactions involved). Any dealer that
participates in the distribution of such Certificates may be deemed to be an
"underwriter" within the meaning of the Act, and any commissions and
discounts received by such dealer and any profit on the resale of such
Certificates by such dealer might be deemed to be underwriting discounts and
commissions under the Act.
If the Certificates of a Series are offered other than through
underwriters, the related Prospectus Supplement will contain information
regarding the nature of such offering and any agreements to be entered into
between the Seller and dealers and/or the Seller and the purchasers of such
Certificates. Purchasers of Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be
"underwriters" within the meaning of the Act in connection with reoffers and
sales by them of Certificates. Holders of Certificates should consult with
their legal advisors in this regard prior to any such reoffer or sale.
The place and time of delivery for each Series of Certificates offered
hereby and by means of the related Prospectus Supplement will be set forth in
the Prospectus Supplement with respect to such series.
LEGAL MATTERS
Certain legal matters relating to the Certificates offered hereby will be
passed upon for the Seller by Cleary, Gottlieb, Steen & Hamilton or by other
counsel identified in the related Prospectus Supplement.
60
<PAGE>
- -------------------------------------------------------------------------------
GRANDE LOAN (TM)/(SM) I: COLLATERAL TERM SHEET
- -------------------------------------------------------------------------------
$942,890,000 (APPROXIMATE)
GS MORTGAGE SECURITIES CORPORATION II
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-GLI
[GRANDE LOAN/GOLDMAN SACHS LOGO]
<TABLE>
<CAPTION>
CUT-OFF DATE PRINCIPAL BALANCE
NUMBER OF ------------------------------ CUT-OFF
LOAN NAME PROPERTIES PROPERTY TYPE ($000'S) % BY BALANCE DATE LTV
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cadillac Fairview Pool 8 Retail $258,460 26.5% 62%
Century Plaza Towers 1 Office 229,369 23.5 50
AAPT Pool (1) 48 Office, Ind. 125,149 12.8 52
380 Madison 1 Office 89,000 9.1 45
CAP Pool (2) 25 Office, Ind. 87,946 9.0 61
Whitehall Pool 11 Retail, Office, Ind. 72,228 7.4 44
Ritz Plaza 1 Multifamily 62,365 6.4 67
Montehiedra 1 Retail 52,580 5.4 57
--- -------- ----- --
TOTAL/WEIGHTED AVERAGE 96 $977,099(3) 100% (3) 55%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) "AAPT" is the Atlantic American Properties Trust Pool Loan.
(2) "CAP" is the Commonwealth Atlantic Pool.
(3) Balances may not sum to total due to rounding.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by
the issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
CADILLAC FAIRVIEW POOL LOAN
- -------------------------------------------------------------------------------
LOAN INFORMATION
PRINCIPAL BALANCE: ORIGINAL CUT-OFF DATE (1)
------------------ -------- ----------------
$260,000,000 $258,460,281
ORIGINATION DATE: November 26, 1996
INTEREST RATE: 7.935%
AMORTIZATION: 30 years
HYPERAMORTIZATION: After the ARD, interest rate
increases to the greater of 9.935% or the 7 year UST +
2%. All excess cash flow is used to reduce outstanding
principal balance; the additional 2% interest is
deferred until the principal balance is zero.
ANTICIPATED
REPAYMENT DATE
("ARD"): December 11, 2003
MATURITY DATE: November 26, 2026
THE BORROWER/ 7 separate special-purpose borrowing
SPONSOR: entities controlled by the Cadillac
Fairview Corporation Limited, which
owns interests in and operates
approximately 88 properties in the
U.S. & Canada.
CALL PROTECTION: Two-year prepayment lockout from the
date of the securitization with U.S.
Treasury defeasance thereafter until
the payment date prior to the ARD.
CUT-OFF DATE
LOAN/NRSF: $95.92
REMOVAL OF Management may be terminated if (i)
PROPERTY MANAGER: DSCR falls below 1.32x (using a
constant of 8.75%) and NOI for the trailing 12 months
is less than 75% of NOI for the 12 months preceding
11/1/96; (ii) NOI for the trailing 12 months is less
than 60% of NOI for the 12 months preceding 11/1/96;
(iii) any of the loans are outstanding after the
optional prepayment date; or (iv) there exists an
event of default and any of the loans has been
accelerated.
UP FRONT Free Rent: $1,210,000
RESERVES (3): Capital Renovation: $3,943,103
Deferred Maintenance: $548,141
Leasing Reserve: $988,003
ONGOING RESERVES: Leasing Reserve: $140,166/month
Cap Ex: $68,166/month
COLLECTION ACCOUNT: Hard Lockbox
CROSS-
COLLATERALIZATION/
DEFAULT: Yes
PARTNER LOANS: None
-------------------- ---------------------------------------
PROPERTY INFORMATION
SINGLE
ASSET/PORTFOLIO: Portfolio
PROPERTY
TYPE: Retail
PROPERTY LOCATION BY ALLOCATED LOAN AMOUNT
[GRAPHIC OMITTED]
OCCUPANCY: See Property Description Table
YEAR BUILT: See Property Description Table
THE COLLATERAL: 7 regional malls and one community
center, encompassing total GLA of
5,451,999 SF.
Anchors include Dillard's, JC Penney,
Sears and AMC Theaters
PROPERTY MANAGEMENT: General Growth Management, Inc.
1996 NET
OPERATING INCOME: $37,409,432
UNDERWRITTEN NET CASH
FLOW: $35,873,856
APPRAISED VALUE: $413,900,000
APPRAISED BY: Cushman & Wakefield
APPRAISAL DATE: November 20, 1996
CUT-OFF DATE LTV: 62%
DSCR (2): 1.56x
------------------------------------------------------------------------------
(1) August 11, 1997.
(2) Based on Underwritten Net Cash Flow.
(3) Amounts remaining in Up Front Reserve Accounts as of 7/11/97.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by
the issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
CADILLAC FAIRVIEW POOL LOAN
- -------------------------------------------------------------------------------
PROPERTY DESCRIPTION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% OF MALL STORE
TOTAL OWNED YEAR SPACE LEASED
PROPERTY LOCATION GLA GLA BUILT/RENOVATED (AS OF 5/23/97)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Galleria at White Plains White Plains, NY 882,640 326,725 1980/1993 85%
Esplanade Shopping Mall Kenner, LA 909,465 411,925 1985-86 86
Northpark Mall Ridgeland, MS 958,183 311,458 1984 98
Dover Mall Dover, DE 671,741 418,261 1982 88
Golden East Crossing Mall Rocky Mount, NC 572,914 459,957 1986-87 83
Shannon Southpark Mall Union City, GA 770,571 276,505 1980 78
North DeKalb Mall Decatur, GA 634,509 437,757 1965/1986 82
Dover Commons Dover, DE 51,976 51,976 1988 91
----------- ----------- --
TOTAL 5,451,999 2,694,564 86%(1)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CUT-OFF DATE MALL STORE
ALLOCATED LOAN APPRAISED CUT-OFF DATE SALES PSF UNDERWRITTEN NET
PROPERTY AMOUNT VALUE LTV (1996) CASH FLOW DSCR (2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Galleria at White Plains $ 68,690,790 $100,000,000 68.7% $352 $8,162,904 1.34x
Esplanade Shopping Mall 51,095,609 80,000,000 63.9 285 6,952,589 1.53
Northpark Mall 50,697,978 85,000,000 59.6 312 7,467,031 1.66
Dover Mall 33,003,390 55,500,000 59.5 277 4,659,925 1.59
Golden East Crossing Mall 21,869,716 38,000,000 57.6 276 3,550,472 1.82
Shannon Southpark Mall 20,875,638 35,500,000 58.8 219 2,912,517 1.57
North DeKalb Mall 9,940,780 15,900,000 62.5 245 1,795,192 2.03
Dover Commons 2,286,380 4,000,000 57.2 160 373,226 1.84
------------- ------------- ---- --- ------------ ----
TOTAL $258,460,281 $413,900,000 62.4% $289 $35,873,856 1.56X
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
LEASE EXPIRATION SCHEDULE -- MALL STORES ONLY
<TABLE>
<CAPTION>
YEAR ENDING DEC. 31 EXPIRING SF % OF TOTAL SF (3) ANNUALIZED TENANT BASE RENT % OF TOTAL BASE RENT (3)
- ----------------------- --------------------------- -------------------- -------------------------------- ------------------------
<S> <C> <C> <C> <C>
1997 147,119 7.2% $2,673,072 7.4 %
1998 205,659 10.0 3,851,675 10.7
1999 123,714 6.0 2,481,647 6.9
2000 85,682 4.2 2,192,027 6.1
2001 106,187 5.2 2,214,187 6.1
2002 63,940 3.1 1,636,205 4.5
2003 179,284 8.8 3,922,151 10.9
2004 148,997 7.3 3,771,821 10.5
Thereafter 559,614 27.3 13,290,354 36.9
Vacant (1) 426,335 20.8 -- --
---------- ------------- ---------------------- ------
TOTAL 2,046,531 100.0% $36,033,139 100.0 %
- ----------------------- --------------------------- -------------------- -------------------------------- ------------------------
</TABLE>
(1) Includes 6.1% temporary tenants. Income for temporary tenants not
included.
(2) Based upon Underwritten Net Cash Flow.
(3) May not add to 100.0% due to rounding.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by
the issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
CADILLAC FAIRVIEW POOL LOAN
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S
PARENT CREDIT RATING OF ANCHOR-OWNED/
MALL ANCHOR TENANT COMPANY (1) PARENT COMPANY (5) GLA COLLATERAL LEASE EXPIRY
- ------------------------- ------------------ ------------------- ------------------- ----------- ------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Galleria of White JC Penney JC Penney A2 227,316 Collateral (6) 1/2011
Plains
Macy's Federated Baa2 328,599 Anchor Owned N.A.
-------
555,915
=======
Northpark Mall Dillard's Dillard's A2 150,000 Anchor Owned N.A.
Gayfer's Mercantile Stores A1 155,276 Anchor Owned N.A.
JC Penney JC Penney A2 136,449 Anchor Owned N.A.
McRae's Proffitts Ba2 205,000 Anchor Owned N.A.
-------
646,725
=======
Esplanade Shopping Mall Dillard's Dillard's A2 177,940 Anchor Owned N.A.
Dillard's Junior
D.S. Dillard's A2 46,600 Collateral 9/2011
Macy's Federated Baa2 235,518 Anchor Owned N.A.
Mervyn's Dayton Hudson Baa1 84,082 Anchor Owned N.A.
--------
544,140
========
Dover Mall Boscov's Boscov's Not Rated 137,000 Anchor Owned N.A.
JC Penney JC Penney A2 116,480 Anchor Owned N.A.
Sears Sears A2 111,309 Collateral 8/2002
Strawbridge &
Clothier May Dept. Stores A2 74,671 Collateral 8/2002
(2) --------
439,460
=======
Golden East Crossing Belk Belk Not Rated 112,957 Anchor Owned N.A.
JC Penney JC Penney A2 81,729 Collateral 8/2006
Brody's Brody Brothers
Dry Goods Co. Not Rated 69,960 Collateral 7/2006
Sears Sears A2 89,564 Collateral 10/2007
--------
354,210
========
Shannon Southpark Mall Macy's Federated Baa2 147,455 Anchor Owned N.A.
JC Penney (3) JC Penney A2 75,000 Anchor Owned N.A.
Sears Sears A2 150,031 Anchor Owned N.A.
Rich's Federated Baa2 121,580 Anchor Owned N.A.
-------
494,066
=======
North DeKalb Mall Rich's Federated Baa2 196,752 Anchor Owned N.A.
Upton's American Retail
Group Not Rated 75,200 Collateral (4)
AMC Theaters AMC Inc. Ba3 63,395 Collateral 12/2016
Vacant Vacant N.A. 35,605 Collateral N.A.
---------
370,952
=========
</TABLE>
(1) In certain cases where the parent company is not the named anchor, the
parent company is not the obligor under the applicable lease or operating
covenant.
(2) May Dept. Stores assumed lease of prior anchor and has informed Borrower
of its intention to open a Strawbridge & Clothier.
(3) Mervyn's closed its store in early 1997 and on August 1, 1997, sold the
store and the underlying land to JC Penney. JC Penney is currently
renovating the store and anticipates opening in the Fall of 1997.
(4) The term of the lease with Upton's is ten years from the earlier of the
opening of the store or 120 days after the landlord delivers the store to
the tenant, subject to certain conditions in the lease.
(5) Reflects Moody's Investors Service's senior unsecured long-term credit
rating of parent company as of July 11, 1997.
(6) Fee interest in land subject to a ground lease.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by
the issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
CENTURY PLAZA TOWERS LOAN
- -------------------------------------------------------------------------------
LOAN INFORMATION
PRINCIPAL BALANCE: ORIGINAL CUT-OFF DATE (1)
$230,000,000 $229,369,475
ORIGINATION DATE: April 9, 1997
INTEREST RATE: 8.039125%
AMORTIZATION: 30 years
HYPERAMORTIZATION: After the ARD, interest rate increases to 10.039125%
and all excess cash flow is used to reduce outstanding
principal balance; the additional 2% interest is
deferred until principal balance is zero.
ANTICIPATED REPAYMENT
DATE ("ARD"): April 9, 2007
MATURITY DATE: March 9, 2027
THE BORROWER/ SPONSOR: One Hundred Towers L.L.C., which
includes Morgan Guaranty as Trustee for its Commingled
Pension Fund Real Estate, and 2 separate accounts
established by Prudential, one on behalf of,
indirectly, employee benefit plans of AT&T and another
on behalf of, indirectly, employee benefit plans of
General Motors.
CALL PROTECTION: Two year prepayment lockout from the
date of the securitization with U.S.
Treasury defeasance thereafter until
the second payment date prior to the
ARD.
CUT-OFF DATE
LOAN/NRSF: $101.82
REMOVAL OF PROPERTY May be terminated (i) upon the
MANAGER: acceleration of the loan, (ii) if
outstanding balance is not repaid upon anticipated
repayment date or (iii) if for any trailing 12-month
period, net cash flow less than 85% of net cash flow
for 12 months ending 5/1/97 (subject to certain cure
right by borrower).
UP FRONT RESERVES: Capital Expenditures: $7,165,045
Deferred Maintenance: $1,162,000
Parking Garage: $2,000,000
ONGOING RESERVES: Letter of credit in lieu of TI/LCs
Reserve Account: Initial amount of $11,500,000
COLLECTION ACCOUNT: None; upon the occurrence of a
"Triggering Event," a hard lockbox is
established.
CROSS-COLLATERALIZATION/
DEFAULT: Not Applicable
PARTNER LOANS: None currently; $40,000,000 permitted.
- ------------------------------------------------------------------------------
PROPERTY INFORMATION
SINGLE
ASSET/PORTFOLIO: Single Asset
PROPERTY
TYPE: Office
LOCATION: 2029-2049 Century Park East
Los Angeles, CA
OCCUPANCY: 90.5% (as of May 31, 1997)
YEAR BUILT: 1975
THE COLLATERAL: 2,280,199 square feet of rentable
office and retail space in two twin
44-story office towers. Six-story,
subterranean 5,667-space parking
garage
MAJOR OFFICE TENANTS
------------------------
NRSF EXPIRATION
Johnson & Higgins of
California (3) 137,789 SF 3/31/09
Sidley & Austin 94,007 SF 1/31/04
HBO 77,904 SF 4/30/03
Barrister Executive Suites 76,242 SF 6/30/00
Kelco Realty Corp. 68,310 SF 12/31/04
PROPERTY MANAGEMENT: Tooley & Company
1996 NET OPERATING
INCOME: $34,247,963
UNDERWRITTEN NET CASH
FLOW: $35,718,416
APPRAISED VALUE: $460,000,000
APPRAISED BY: Cushman & Wakefield
APPRAISAL DATE: December 6, 1996
CUT-OFF DATE LTV: 50%
DSCR (2): 1.76x
- -------------------------------------------------------------
(1) August 11, 1997.
(2) Based upon Underwritten Net Cash Flow.
(3) Johnson & Higgins of California has informed the Borrower that it desires
to vacate its space and is working with the Borrower to facilitate the
occupancy of its space with a subtenant or a replacement tenant.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by
the issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
CENTURY PLAZA TOWERS LOAN
- -------------------------------------------------------------------------------
LEASE EXPIRATION SCHEDULE
<TABLE>
<CAPTION>
YEAR ENDING DEC. 31 EXPIRING SF % OF TOTAL SF (1) ANNUALIZED TENANT BASE RENT % OF TOTAL BASE RENT (1)
- -------------------------- ------------------- ----------------------- -------------------------------- --------------------------
<S> <C> <C> <C> <C>
1997 149,526 6.6% $ 4,038,426 7.7%
1998 193,049 8.5 5,241,351 10.0
1999 210,179 9.2 4,820,553 9.2
2000 197,742 8.7 4,883,931 9.4
2001 167,439 7.3 4,895,206 9.4
2002 107,411 4.7 2,868,214 5.5
2003 213,551 9.4 5,699,211 10.9
2004 311,897 13.7 8,596,476 16.5
2005 31,690 1.4 722,587 1.4
2006 76,253 3.3 1,672,932 3.2
Thereafter 405,305 17.8 8,758,658 16.8
Vacant 216,157 9.5 -- 0.0
---------- -------- ---------- -------
TOTAL 2,280,199 100.0% $52,197,545 100.0%
- -------------------------- ------------------- ----------------------- -------------------------------- --------------------------
</TABLE>
(1) May not add to 100.0% due to rounding.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by
the issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
ATLANTIC AMERICAN PROPERTIES TRUST ("AAPT") POOL LOAN
- -------------------------------------------------------------------------------
LOAN INFORMATION
PRINCIPAL BALANCE: ORIGINAL CUT-OFF DATE (1)
Fixed $ 75,284,000 $ 75,149,361
Floating A 30,000,000 30,000,000
Floating B 20,000,000 20,000,000
------------ ------------
TOTAL $125,284,000 $125,149,361
ORIGINATION DATE: June 30,1997
INTEREST RATE: Fixed: Fixed at 7.48%
Floating A: Floating at LIBOR + 93 bps
Floating B: Floating at LIBOR + 76 bps
INTEREST RATE CAP: Floating A & B: LIBOR strike at 8.70%
AMORTIZATION: Fixed: $4,184,000 fully amortized
over 53-month term; $71,100,000 amortized over 305-
month term for first 84 months; 276 month schedule for
the 36 months thereafter. Floating A & B: Interest
only for the first 84 months.
HYPERAMORTIZATION: Fixed: After month 120
Floating A & B: After month 84
ANTICIPATED
REPAYMENT DATE Fixed: July 11, 2007
("ARD"): Floating A & B: July 11, 2004
MATURITY DATE: July 11, 2027
THE BORROWER/ Four separate borrowing entities
SPONSOR: sponsored by LF Strategic Realty
Investors, L.P.
CALL PROTECTION: Fixed: Prepayment lockout until July
11, 2000 with U.S. Treasury
defeasance thereafter until July 11,
2007.
Floating A & B: 3% penalty in year 1, 2% penalty in
year 2, 1% penalty in year 3 and nothing thereafter.
CUT-OFF DATE
LOAN/NRSF: $43.71
REMOVAL OF PROPERTY No management kickout prior to event
MANAGER: of default. Cash flow in excess of
debt service is escrowed if trailing twelve months'
NOI is less than $18,000,000.
UP FRONT RESERVES: Unpaid TI/Leasing Commissions: $1,345,955
Deferred Maintenance: $286,000
TI/Leasing Commissions: $6,264,200
ONGOING RESERVES: TI/Leasing Commissions: Must
maintain minimum balance of $6,264,200
Capital Reserve: $612,413 per year
COLLECTION ACCOUNT: Sweep Account
CROSS-COLLATERALIZATION/
DEFAULT: Yes
PARTNER LOANS: $32,967,000 and $333,000 are both
issued to affiliates of AAPT and are
secured by partnership liens.
- ---------------------------------------------------------------
PROPERTY INFORMATION
SINGLE ASSET/
PORTFOLIO: Portfolio
PROPERTY
TYPE: Office, Flex, Industrial, and Land
PROPERTY LOCATION BY ALLOCATED LOAN AMOUNT
[GRAPHIC OMITTED]
OCCUPANCY: See Property Description Table
YEAR BUILT: See Property Description Table
THE COLLATERAL: 38 office & flex, 8 industrial, and 2
land properties
PROPERTY MANAGEMENT: Atlantic American Properties
Management, Inc., Milby & Associates,
and Highwoods
1996 NET OPERATING
INCOME: $23,983,876
UNDERWRITTEN NET CASH
FLOW: $18,516,754
APPRAISED VALUE: $239,025,000
APPRAISED BY: Cushman & Wakefield
APPRAISAL DATE: July 1997
CUT-OFF DATE LTV: 52%
DSCR (2): 1.72x
- ----------------------- ---------------------------------------
(1) August 11, 1997.
(2) Based upon Underwritten Net Cash Flow and LIBOR of 5.6875%.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by
the issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
ATLANTIC AMERICAN PROPERTIES TRUST ("AAPT") POOL LOAN
- -------------------------------------------------------------------------------
PROPERTY DESCRIPTION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PROPERTY LOCATION TOTAL RSF YEAR BUILT OCCUPANCY (AS OF JUNE 1,
1997)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maschellmac I King of Prussia, PA 74,140 1980 95%
Maschellmac II King of Prussia, PA 74,556 1984 100
Maschellmac III King of Prussia, PA 74,512 1985 100
Maschellmac IV King of Prussia, PA 74,556 1987 100
1760 Market Street Philadelphia, PA 122,893 1981 94
7450 Tilghman Street Allentown, PA 100,000 1986 100
7535 Windsor Drive Allentown, PA 129,223 1985 98
7150 Windsor Drive Allentown, PA 49,420 1988 100
7010 Snowdrift Road Allentown, PA 33,029 1991 85
Masons Mill Building 1 Bryn Athyn, PA 17,415 1978-1991 100
Masons Mill Building 2 Bryn Athyn, PA 12,000 1978-1991 100
Masons Mill Building 3 Bryn Athyn, PA 12,000 1979-1991 100
Masons Mill Building 4 Bryn Athyn, PA 11,880 1979-1991 83
Masons Mill Building 5 Bryn Athyn, PA 16,060 1978-1994 100
Masons Mill Building 6 Bryn Athyn, PA 16,060 1979-1994 100
Masons Mill Building 7 Bryn Athyn, PA 16,365 1980-1994 76
Masons Mill Building 8 Bryn Athyn, PA 18,000 1980-1994 82
Masons Mill Building 9 Bryn Athyn, PA 12,000 1980-1994 100
Masons Mill Building 10 Bryn Athyn, PA 18,039 1980-1994 100
Masons Mill Building 11 Bryn Athyn, PA 12,000 1984 100
Masons Mill Building 12 Bryn Athyn, PA 17,994 1984 80
Masons Mill Building 13 Bryn Athyn, PA 14,000 1984 100
Masons Mill Building 14 Bryn Athyn, PA 18,000 1984 64
304 Harper Drive Moorestown, NJ 29,537 1975 91
305 Harper Drive Moorestown, NJ 14,980 1979 100
303 Fellowship Drive Mount Laurel, NJ 53,135 1979 94
305 Fellowship Drive Mount Laurel, NJ 53,959 1980 98
307 Fellowship Drive Mount Laurel, NJ 54,169 1981 83
309 Fellowship Drive Mount Laurel, NJ 55,351 1982 95
700 East Gate Drive Mount Laurel, NJ 118,071 1984 100
701 East Gate Drive Mount Laurel, NJ 58,000 1986 100
815 East Gate Drive Mount Laurel, NJ 25,500 1986 87
817 East Gate Drive Mount Laurel, NJ 25,351 1986 100
Main Street Center Richmond, VA 422,309 1987 91
Westpark 1 Durham, NC 56,345 1985 100
EM Venture 2 Bristol, PA 22,500 1984 100
EM Venture 1 Bristol, PA 60,000 1981 100
7020 Snowdrift Road Allentown, PA 41,390 1975 100
6845 Snowdrift Road Allentown, PA 93,000 1975 100
6755 Snowdrift Drive Allentown, PA 125,000 1988 100
6810 Tilghman Street Allentown, PA 54,844 1975 100
6690 Grant Way Allentown, PA 88,000 1982 100
6670 Grant Way Allentown, PA 72,885 1979 100
7055 Ambassador Drive Allentown, PA 153,600 1991 100
50 East Swedesford Road Frazer, PA 109,800 1988 100
52 Swedesford Square Frazer, PA 131,017 1981 100
Iron Run Land Allentown, PA N/A N/A N/A
East Gate Land Mount Laurel, NJ N/A N/A N/A
------------ ---
TOTAL 2,862,885 97%
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by
the issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN (TM)/(SM) I: COLLATERAL TERM SHEET
ATLANTIC AMERICAN PROPERTIES TRUST ("AAPT") POOL LOAN
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROPERTY DESCRIPTION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUT-OFF DATE
ALLOCATED LOAN APPRAISED CUT-OFF DATE UNDERWRITTEN
PROPERTY AMOUNT VALUE LTV NET CASH FLOW DSCR (1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maschellmac I $4,494,177 $ 8,900,000 50.5% $397,011 1.11x
Maschellmac II 5,742,979 11,000,000 52.2 509,824 1.11
Maschellmac III 5,883,536 11,300,000 52.1 543,161 1.16
Maschellmac IV 4,618,076 10,400,000 44.4 480,500 1.31
1760 Market Street 2,532,488 8,500,000 29.8 505,149 2.51
7450 Tilghman Street 4,173,741 6,725,000 62.1 715,903 2.15
7535 Windsor Drive 8,045,450 11,500,000 70.0 746,875 1.17
7150 Windsor Drive 2,135,036 3,750,000 56.9 270,674 1.59
7010 Snowdrift Road 1,309,488 2,300,000 56.9 183,748 1.76
Masons Mill Rollup 5,451,808 14,200,000 38.4 1,145,981 2.65
304 Harper Drive 760,479 1,850,000 41.1 79,673 1.32
305 Harper Drive 512,409 900,000 56.9 63,162 1.55
303 Fellowship Drive 2,448,174 4,300,000 56.9 323,756 1.66
305 Fellowship Drive 2,903,648 5,100,000 56.9 352,900 1.53
307 Fellowship Drive 2,448,174 4,300,000 56.9 355,633 1.82
309 Fellowship Drive 2,562,043 4,500,000 56.9 366,430 1.80
700 East Gate Drive 6,376,639 11,200,000 56.9 733,811 1.45
701 East Gate Drive 3,871,531 6,800,000 56.9 719,859 2.34
815 East Gate Drive 953,649 1,675,000 56.9 135,748 1.79
817 East Gate Drive 910,948 1,600,000 56.9 137,656 1.90
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon Underwritten Net Cash Flow and LIBOR of 5.6875%.
(Continued on Next Page)
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by
the issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
ATLANTIC AMERICAN PROPERTIES TRUST ("AAPT") POOL LOAN
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROPERTY DESCRIPTION (CONTINUED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CUT-OFF DATE
ALLOCATED LOAN APPRAISED CUT-OFF DATE UNDERWRITTEN
PROPERTY AMOUNT VALUE LTV NET CASH FLOW DSCR (1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Main Street Center $18,473,683 $ 32,400,000 57.0% $ 4,854,426 2.15x
Westpark 1 2,962,325 5,200,000 57.0 430,949 1.83
EM Venture 2 712,097 1,250,000 57.0 91,381 1.61
EM Venture 1 897,243 1,575,000 57.0 129,462 1.81
7020 Snowdrift Road 783,307 1,375,000 57.0 115,945 1.86
6845 Snowdrift Road 2,022,356 3,550,000 57.0 307,923 1.91
6755 Snowdrift Road 2,506,583 4,700,000 53.3 385,741 1.93
6810 Tilghman Street 1,025,420 2,075,000 49.4 141,011 1.73
6690 Grant Way 1,965,389 3,450,000 57.0 321,912 2.06
6670 Grant Way 1,623,582 2,850,000 57.0 281,742 2.18
7055 Ambassador Drive 3,361,099 5,900,000 57.0 522,488 1.95
50 East Swedesford Road 9,376,197 17,000,000 55.2 1,251,404 1.68
52 Swedesford Square 10,026,330 17,600,000 57.0 1,222,297 1.53
Iron Run Land 739,582 4,200,000 17.6 (100,720) (1.71)
East Gate Land 539,695 5,100,000 10.6 (206,661) (4.81)
-------------- ------------- ---- ------------ -----
TOTAL $125,149,361 $239,025,000 52.4% $18,516,754 1.72X
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon Underwritten Net Cash Flow and LIBOR of 5.6875%.
LEASE EXPIRATION SCHEDULE - TOTAL PORTFOLIO
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDING DEC. 31 EXPIRING SF % OF TOTAL SF ANNUALIZED TENANT BASE RENT % OF TOTAL BASE RENT
- -------------------------- ------------------------ ----------------------- ------------------------------ ------------------------
<S> <C> <C> <C> <C>
1997 610,859 21.3% $ 5,165,261 14.2%
1998 489,752 17.1 7,959,941 21.9
1999 450,432 15.7 5,991,314 16.5
2000 404,944 14.1 5,416,983 14.9
2001 318,922 11.1 4,030,820 11.1
2002 193,939 6.8 3,082,605 8.5
2003 65,906 2.3 956,339 2.6
2004 22,384 0.8 367,432 1.0
2005 150,210 5.2 2,271,294 6.2
2006 62,720 2.2 1,109,102 3.1
Thereafter -- 0.0 -- 0.0
Vacant 92,817 3.2 -- 0.0
----------- ------ ---------------- ------
TOTAL 2,862,885 100.0% $36,351,089 100.0%
- -------------------------- ------------------------ ----------------------- ------------------------------ ------------------------
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and not by
the issuer of the securities or any of its affiliates. Goldman, Sachs & Co. is
acting as underwriter and not acting as agent for the issuer or its affiliates
in connection with the proposed transaction. The issuer has not prepared or
taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- ------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
380 MADISON LOAN
- ------------------------------------------------------------------------------
LOAN INFORMATION
PRINCIPAL BALANCE: ORIGINAL CUT-OFF DATE (1)
------------------ -------- ----------------
$89,000,000 $89,000,000
ORIGINATION DATE: June 30, 1997
INTEREST RATE: 7.848%
AMORTIZATION: First 5 years interest only
30 years thereafter
HYPERAMORTIZATION: Not Applicable
ANTICIPATED
REPAYMENT DATE
("ARD"): Not Applicable
MATURITY DATE: July 11, 2014
THE BORROWER/ ComMet, Inc. is a Maryland
SPONSOR: corporation whose principal
shareholders are the Comptroller of the State of New
York as Trustee of the Common Retirement Fund and
Stichting Bedrijfspensioen fonds voor de
Metaalnijverheid.
CALL PROTECTION: Two-year prepayment lockout from
the date of securitization with
U.S. Treasury defeasance
thereafter until two payment dates
prior to the maturity date.
CUT-OFF DATE LOAN/
NRSF: $99.15
REMOVAL OF
PROPERTY MANAGER: (2)
UP FRONT RESERVES: None
ONGOING RESERVES: (2)
COLLECTION ACCOUNT: None; upon the occurrence of a
"Trigger Event" or certain events of
default, a hard lockbox is established.
CROSS-COLLATERALIZATION/
DEFAULT: Not Applicable
ADDITIONAL DEBT: Up to $20 million permitted subject
to rating agency confirmation and
upon pledge of equity interest in
borrower.
------------------------------------------------------------
PROPERTY INFORMATION
SINGLE
ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Office
LOCATION: 380 Madison Avenue
New York, NY
OCCUPANCY: 86% (as of June 23, 1997)
YEAR
BUILT/RENOVATED: 1952/1990
THE COLLATERAL: Fee interest subject to a master
lease in 897,602 net rentable square
feet comprised of:
Office Space: 769,365 NRSF
Retail Space: 49,354 NRSF
Storage Space: 34,431 NRSF
Garage Space: 44,452 NRSF
(150 spaces)
The building is master leased for a term which expires
1/26/2014 to Spartan Madison Corp. The master lease is
fully net and is subordinate to the mortgage; rent
payments are made in advance, in equal monthly
installments, according to the following schedule:
PERIOD ANNUAL RENT
------------------- -------------------
1/27/94-1/26/99 $16.0 million
1/27/99-1/26/04 17.6 million
1/27/04-1/26/09 19.1 million
1/27/09-1/26/14 22.0 million
--------------------------------------
MAJOR OFFICE TENANTS
--------------------------------------
NRSF EXPIRATION
Chase Manhattan Bank 307,747 SF 9/30/02
Sprint Comm. Co. 70,000 SF 12/31/01
LDDS World Com 60,710 SF 8/31/08
------------------- ------------------
PROPERTY
MANAGEMENT: HRO International LTD
1996 NET
OPERATING INCOME: $16,000,000 (master lease payment)
UNDERWRITTEN NET
CASH FLOW: $16,000,000
APPRAISED VALUE: $197,000,000
APPRAISED BY: Koeppel Tener Real Estate Services,
Inc.
APPRAISAL DATE: June 23, 1997
CUT-OFF DATE LTV: 45%
DSCR (3): 2.26x
-------------------- ---------------------------------------
(1) August 11, 1997.
(2) Apply upon "Triggering Event" only.
(3) Based upon Underwritten Net Cash Flow and the debt service during the
initial interest-only period.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
COMMONWEALTH ATLANTIC PROPERTIES ("CAP") POOL LOAN
- -------------------------------------------------------------------------------
LOAN INFORMATION
PRINCIPAL BALANCE: ORIGINAL CUT-OFF DATE (1)
- ------------------ -------- ----------------
$88,000,000 $87,946,446
ORIGINATION DATE: June 30, 1997
INTEREST RATE: 7.48%
AMORTIZATION: 30 years
HYPERAMORTIZATION: After the ARD, interest rate increases to 9.48% and all
excess cash flow is used to reduce outstanding
principal balance; the additional 2% interest is
deferred until principal balance is zero.
ANTICIPATED
REPAYMENT DATE
("ARD"): July 11, 2007
MATURITY DATE: July 11, 2027
THE BORROWER/ Commonwealth Atlantic Operating
SPONSOR: Properties Inc. sponsored by LF
Strategic Realty Investors, L.P.
CALL PROTECTION: Prepayment lockout until July 11, 2000
with U.S. Treasury defeasance
thereafter until July 11, 2007.
CUT-OFF DATE
LOAN/NRSF: $51.73
REMOVAL OF PROPERTY No management kickout prior to event
MANAGER: of default. Cash flow in excess of
debt service is escrowed if trailing twelve months' NOI
falls below $11,000,000.
UP FRONT RESERVES: Unpaid TI/Leasing Commissions:
$1,550,576
Deferred Maintenance: $581,125
TI/Leasing Commissions: $4,900,000
ONGOING RESERVES: TI/Leasing Commissions: Must maintain
minimum balance of $4,400,000
Capital Reserves: $301,286 per year
COLLECTION ACCOUNT: Sweep Account
CROSS-COLLATERALIZATION/
DEFAULT: Yes
PARTNER LOANS: $25,200,000 issued to Commonwealth
Atlantic Holding I Inc. is secured by
a partnership lien.
- ------------------------------------------------------------------------------
PROPERTY INFORMATION
SINGLE ASSET/
PORTFOLIO: Portfolio
PROPERTY
TYPE: Office, Flex, Industrial, and
Research & Development
LOCATION: Metropolitan Richmond and Northern
Virginia
OCCUPANCY: See Property Description Table
YEAR BUILT: See Property Description Table
THE COLLATERAL: 20 office & flex properties and 5
industrial & research & development
facilities
PROPERTY MANAGEMENT: Morton G. Thalhimer, Childress Klein,
Barnes Morris, Savage Fogarty,
Manekin Corporation, CB Commercial
1996 NET OPERATING
INCOME: $13,493,179
UNDERWRITTEN NET CASH
FLOW: $11,938,880
APPRAISED VALUE: $144,750,000
APPRAISED BY: Cushman & Wakefield
APPRAISAL DATE: June 1997
CUT-OFF DATE LTV: 61%
DSCR (2): 1.60x
- ---------------------------------------------------------------
(1) August 11, 1997.
(2) Based upon Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
COMMONWEALTH ATLANTIC PROPERTIES ("CAP") POOL LOAN
PROPERTY DESCRIPTION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL YEAR OCCUPANCY
PROPERTY LOCATION RSF BUILT/RENOVATED (AS OF JUNE 1, 1997)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arboretum VI Richmond, VA 73,195 1991 92%
Arboretum VII Richmond, VA 30,791 1991 96
Lakebrooke Pointe Richmond, VA 61,632 1995 100
Commerce Center Richmond, VA 56,076 1980 100
Dabney I Richmond, VA 33,600 1982 100
Dabney II Richmond, VA 42,000 1983 90
Dabney III Richmond, VA 23,850 1984 100
Dabney IV Richmond, VA 41,550 1985 100
Dabney V Richmond, VA 45,353 1985 100
Dabney VI Richmond, VA 50,400 1986 100
Dabney VII Richmond, VA 33,419 1987 100
Dabney VIII Richmond, VA 29,700 1988 100
Dabney IX Richmond, VA 30,263 1989 86
Dabney X Richmond, VA 85,844 1989 100
Dabney XI Richmond, VA 45,250 1994 100
Dabney A-1 Richmond, VA 15,389 1984 100
Dabney A-2 Richmond, VA 33,050 1993 100
Morton Marks Richmond, VA 45,000 1962/1985 100
2110 Tomlyn Street Richmond, VA 15,910 1965 100
Brittons Hill Richmond, VA 132,103 1987 100
Westmoreland Plaza Richmond, VA 121,815 1975/1993 100
Plaza 1900 McLean, VA 203,084 1989 100
Campus Point Reston, VA 172,448 1985 100
Oakwood Center Fairfax, VA 127,569 1982 100
Greenwood Center Fairfax, VA 150,961 1985 92
--------- ----
TOTAL 1,700,252 98%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
COMMONWEALTH ATLANTIC PROPERTIES ("CAP") POOL LOAN
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CUT-OFF DATE
ALLOCATED LOAN APPRAISED CUT-OFF DATE UNDERWRITTEN
PROPERTY AMOUNT VALUE LTV NET CASH FLOW DSCR (1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Arboretum VI $ 4,156,316 $ 7,000,000 59.4% $ 580,027 1.65x
Arboretum VII 1,187,519 2,000,000 59.4 227,974 2.27
Lakebrooke Pointe 4,037,564 6,800,000 59.4 581,230 1.70
Commerce Center 3,384,429 5,700,000 59.4 403,606 1.41
Dabney I 712,511 1,200,000 59.4 117,421 1.95
Dabney II 831,263 1,400,000 59.4 130,001 1.85
Dabney III 534,384 900,000 59.4 82,699 1.83
Dabney IV 890,639 1,500,000 59.4 140,376 1.86
Dabney V 1,128,143 1,900,000 59.4 176,920 1.85
Dabney VI 1,128,143 1,900,000 59.4 179,765 1.88
Dabney VII 950,015 1,600,000 59.4 160,081 1.99
Dabney VIII 712,511 1,200,000 59.4 116,866 1.94
Dabney IX 771,887 1,300,000 59.4 151,243 2.31
Dabney X 2,434,414 4,100,000 59.4 383,330 1.86
Dabney XI 1,306,271 2,300,000 56.8 192,018 1.74
Dabney A-1 231,138 1,200,000 19.3 83,083 4.25
Dabney A-2 1,317,460 2,600,000 50.7 174,817 1.57
Morton Marks 890,639 1,500,000 59.4 119,777 1.59
2110 Tomlyn Street 326,568 550,000 59.4 56,546 2.05
Brittons Hill 2,671,918 4,500,000 59.4 414,078 1.83
Westmoreland Plaza 2,909,421 5,200,000 56.0 410,166 1.67
Plaza 1900 18,665,681 32,500,000 57.4 2,918,932 1.85
Campus Point 15,135,783 23,300,000 65.0 1,875,443 1.46
Oakwood Center 9,549,185 13,800,000 69.2 862,080 1.07
Greenwood Center 12,082,642 18,800,000 64.3 1,400,401 1.37
---------- ------------ ---- --------- ----
TOTAL $87,946,446 $144,750,000 60.8% $11,938,880 1.60X
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon Underwritten Net Cash Flow.
LEASE EXPIRATION SCHEDULE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDING DEC. 31 EXPIRING SF % OF TOTAL SF ANNUALIZED TENANT BASE RENT % OF TOTAL BASE RENT
- ----------------------- ------------------------ ------------------- --------------------------------- ---------------------------
<S> <C> <C> <C> <C>
1997 83,030 4.9% $ 842,481 4.7%
1998 211,887 12.5 1,152,472 6.5
1999 203,500 12.0 1,247,175 7.0
2000 151,986 8.9 1,086,743 6.1
2001 307,876 18.1 3,296,968 18.6
2002 56,235 3.3 406,108 2.3
2003 131,363 7.7 1,179,906 6.6
2004 146,310 8.6 1,729,133 9.7
2005 17,574 1.0 261,213 1.5
2006 76,738 4.5 1,345,328 7.6
Thereafter 281,232 16.5 5,213,803 29.4
Vacant 32,521 1.9 -- 0.0
----------- ------- ---------------- -------
TOTAL 1,700,252 100.0% $17,761,330 100.0%
- ----------------------- ------------------------ ------------------- --------------------------------- ---------------------------
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
WHITEHALL POOL LOAN
- -------------------------------------------------------------------------------
LOAN INFORMATION
PRINCIPAL BALANCE: ORIGINAL CUT-OFF DATE (1)
------------------ -------- ----------------
$73,000,000 $72,228,349
ORIGINATION DATE: August 26, 1996
INTEREST RATE: 8.68%
AMORTIZATION: 25 years
HYPERAMORTIZATION: Not Applicable
ANTICIPATED
REPAYMENT DATE
("ARD"): Not Applicable
MATURITY DATE: September 10, 2000
THE BORROWER/ WMP II Real Estate Limited
SPONSOR: Partnership, a special-purpose
Delaware limited partnership which is controlled by
Whitehall Street Real Estate Limited Partnership III.
CALL PROTECTION: Two-year prepayment lockout from the
date of the securitization with U.S.
Treasury defeasance thereafter.
CUT-OFF DATE LOAN/
NRSF: $37.06
REMOVAL OF Management of any property may be
PROPERTY MANAGER: terminated: (i) upon the occurrence
of an event of default, or (ii) if as of the last day
of any calendar quarter DSCR is less than 1.25 and the
NOI for an individual property is less than 80% of the
NOI for such property as of the closing date of the
loan.
UP FRONT RESERVES: Deferred Maintenance: $339,156(3)
TI/Leasing Commissions: $4,100,000
ONGOING RESERVES: Cap Ex: $.21 psf/year
TI/Leasing Commissions: Must maintain
minimum balance of $4,100,000
COLLECTION ACCOUNT: Sweep Account
CROSS-COLLATERALIZATION/
DEFAULT: Yes
PARTNER LOANS: $56,000,000 note is secured by
partnership liens and guaranteed by Whitehall III and
Whitehall Street Real Estate Limited Partnership IV.
----------------------------------------------------------------------------
PROPERTY INFORMATION
SINGLE ASSET/
PORTFOLIO: Portfolio
PROPERTY TYPE: Office, Retail, Industrial
PROPERTY LOCATION BY ALLOCATED LOAN AMOUNT
[GRAPHIC OMITTED]
OCCUPANCY: See Property Description Table
YEAR BUILT: See Property Description Table
THE COLLATERAL: 7 office, 2 retail, and 2 industrial
properties
PROPERTY Colliers Turley Martin, Galbreath
MANAGEMENT: Co., Insignia-O'Donnell Commercial
Group, Lincoln Property Co., Trammell
Crow NE, Inc., Transwestern Property
Co., Westfield Co.
1996 NET OPERATING
INCOME: $15,900,553
UNDERWRITTEN
NET CASH FLOW: $12,617,278
APPRAISED VALUE: $165,150,000
APPRAISED BY: Cushman & Wakefield
APPRAISAL DATE: July, August 1996
CUT-OFF DATE LTV: 44%
DSCR (2): 1.74x
-------------------------------------------------------------------
(1) August 11, 1997.
(2) Based on Underwritten Net Cash Flow.
(3) Amount remaining in up Front Reserve Account as of 7/11/97
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
WHITEHALL POOL LOAN
- -------------------------------------------------------------------------------
PROPERTY DESCRIPTION
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NET YEAR OCCUPANCY
PROPERTY PROPERTY TYPE LOCATION RENTABLE SF BUILT/RENOVATED (AS OF MAY 20, 1997)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
City Center Office Kansas City, MO 639,586 1978/1992 89%
Bennett Park Office Santa Clara, CA 227,699 1983 89
1511-1515 Third Avenue Retail New York, NY 55,000 1917/1990 100
The Sun Buildings Industrial Milpitas, CA 231,840 1980/1988 100
North Ranch Plaza Retail Thousand Oaks, CA 69,394 1991 88
Stevens Creek Office Cupertino, CA 77,762 1984 98
Hookston Square Office Pleasant Hill, CA 192,042 1984 95
San Valente Building Industrial Santa Clara, CA 104,540 1979/1992 100
One Montvale Avenue Office Stoneham, MA 100,420 1890/1987 99
One Northwest Centre Office Houston, TX 150,465 1983 85
Downtown Plaza Office Long Beach, CA 100,146 1982/1996 88
---------- ----
TOTAL 1,948,894 92%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CUT-OFF DATE
ALLOCATED LOAN APPRAISED UNDERWRITTEN
PROPERTY AMOUNT VALUE CUT-OFF DATE LTV NET CASH FLOW DSCR (1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
City Center $19,185,037 $ 36,000,000 53.3% $ 3,017,421 1.57x
Bennett Park 11,507,064 27,100,000 42.5 2,073,616 1.80
1511-1515 Third Avenue 7,519,663 16,000,000 47.0 1,431,051 1.90
The Sun Buildings 7,489,981 16,950,000 44.2 1,317,010 1.76
North Ranch Plaza 5,669,431 10,500,000 54.0 873,687 1.54
Stevens Creek 5,649,643 12,800,000 44.1 983,542 1.74
Hookston Square 5,273,658 14,000,000 37.7 1,129,765 2.14
San Valente Building 4,650,319 9,700,000 47.9 540,803 1.16
One Montvale Avenue 2,117,379 8,000,000 26.5 449,899 2.12
One Northwest Centre 1,721,607 6,100,000 28.2 483,992 2.81
Downtown Plaza 1,444,567 8,000,000 18.1 316,492 2.19
----------- ------------- ----- ------------ ----
TOTAL $72,228,349 $165,150,000 43.7% $12,617,278 1.74x
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
LEASE EXPIRATION SCHEDULE - TOTAL PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDING DEC. 31 EXPIRING SF % OF TOTAL SF ANNUALIZED TENANT BASE RENT % OF TOTAL BASE RENT
- -------------------------- ------------------- ----------------------- -------------------------------- --------------------------
<S> <C> <C> <C> <C>
1997 141,333 7.3% $ 2,103,699 8.2%
1998 363,750 18.7 4,376,430 17.0
1999 155,828 8.0 2,361,366 9.2
2000 483,421 24.8 5,946,857 23.1
2001 182,263 9.4 2,810,173 10.9
2002 102,211 5.2 1,694,873 6.6
2003 138,518 7.1 2,070,097 8.0
2004 126,442 6.5 1,778,589 6.9
2005 16,899 0.9 253,310 1.0
2006 24,394 1.3 344,459 1.3
Thereafter 61,970 3.2 2,031,000 7.9
Vacant 151,865 7.8 -- 0.0
---------- ------ -------------- -------
TOTAL 1,948,894 100.0% (2) $25,770,853 100.0% (2)
- -------------------------- ------------------- ----------------------- -------------------------------- --------------------------
</TABLE>
(1) Based upon Underwritten Net Cash Flow.
(2) May not add to 100.0% due to rounding.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regarding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
RITZ PLAZA LOAN
- -------------------------------------------------------------------------------
LOAN INFORMATION
PRINCIPAL BALANCE: ORIGINAL CUT-OFF DATE (1)
- ------------------ -------- ----------------
$62,500,000 $62,365,309
ORIGINATION DATE: April 25, 1997
INTEREST RATE: 8.135%
AMORTIZATION: 30 years
HYPERAMORTIZATION: After the ARD, interest rate increases to 10.135% and
all excess cash flow is used to reduce outstanding
principal balance; the additional 2% interest is
deferred until the principal balance is zero.
ANTICIPATED REPAYMENT
DATE ("ARD"): April 11, 2007
MATURITY DATE: April 24, 2027
THE BORROWER/ SPONSOR: CS Ritz Holdings, L.P., is a
special-purpose Delaware limited partnership. The
institutional limited partner is Cadim Holdings, which
is owned by a Quebec public employees' retirement fund
manager. The other limited partner is an entity
controlled by three individuals.
CALL PROTECTION: Two-year prepayment lockout from the
date of the securitization with U.S.
Treasury defeasance thereafter until
the ARD.
CUT-OFF DATE
LOAN/UNIT: $130,199
REMOVAL OF PROPERTY No management kickout prior to event
MANAGER: of default. Alternatively, cash flow
in excess of debt service is escrowed
if net cash flow falls below
$6,400,000.
UP FRONT RESERVES: Cap Ex: $15,967
ONGOING RESERVES: Cap Ex: $400/unit/year
COLLECTION ACCOUNT: No lockbox provided there is no event
of default. The borrower's operating account is swept
by lender starting the 6th of the month until debt
service and reserves are paid. One month debt service,
tax, and insurance reserved at closing.
CROSS-COLLATERALIZATION/
DEFAULT: Not Applicable
PARTNER LOANS: None
- ---------------------------------------------------------------
PROPERTY INFORMATION
SINGLE ASSET/
PORTFOLIO: Single Asset
PROPERTY TYPE: Highrise Multifamily
LOCATION: 235-237 W. 48th Street
New York, NY
OCCUPANCY: Residential: 99% (as of June 17, 1997)
Commercial: 100% (as of June 17, 1997)
YEAR BUILT: 1990
THE COLLATERAL: 40-story, 479-unit multifamily
building in New York City
Residential: 341,261 NRSF
Commercial: 25,432 NRSF
Parking: 158 spaces
PROPERTY MANAGEMENT: Knightsbridge Management, L.P.
1996 NET
OPERATING INCOME: $6,868,898
UNDERWRITTEN
NET CASH FLOW: $7,573,130
APPRAISED VALUE: $92,500,000
APPRAISED BY: Koeppel Tener Real Estate Services,
Inc.
APPRAISAL DATE: April 10, 1997
CUT-OFF DATE LTV: 67%
DSCR (2): 1.34x
- ---------------------------------------------------------------------------
(1) August 11, 1997.
(2) Based upon Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regar-ding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
MONTEHIEDRA LOAN
- -------------------------------------------------------------------------------
LOAN INFORMATION
PRINCIPAL BALANCE: ORIGINAL CUT-OFF DATE (1)
$52,700,000 $52,579,779
ORIGINATION DATE: April 18, 1997
INTEREST RATE: 8.23%
AMORTIZATION: 30 years
HYPERAMORTIZATION: After the ARD, interest rate increases to 10.23% and
all excess cash flow is used to reduce outstanding
principal balance; the additional 2% interest is
deferred until the principal balance is zero.
ANTICIPATED
REPAYMENT DATE
("ARD"): May 11, 2007
MATURITY DATE: May 11, 2027
THE BORROWER/ Vornado Montehiedra Acquisitions L.P.,
SPONSOR: a special-purpose Delaware Limited
Partnership, 100% owned by subsidiaries of Vornado
Realty Trust, a publicly-traded REIT.
CALL PROTECTION: Two-year prepayment lockout from the
date of the securitization with U.S.
Treasury defeasance thereafter, until
the payment date prior to the ARD.
CUT-OFF DATE
LOAN/NRSF: $100.08
REMOVAL OF May be terminated (i) upon the
PROPERTY MANAGER: acceleration of the Montehiedra loan,
(ii) upon the Anticipated Repayment Date, or (iii) if,
for any trailing 12-month period, the net cash flow
falls below 85% of the net cash flow for the 12-month
period ending 12/31/96.
UP FRONT RESERVES: Deferred Maintenance: $115,000
ONGOING RESERVES: Cap Ex: $.15 psf/year
TI/Leasing Commissions:
5/11/97 - 5/11/00: $.10psf/year
6/11/00 - Full repayment: $.23 psf/year
COLLECTION ACCOUNT: Hard Lockbox
CROSS-COLLATERALIZATION/
DEFAULT: Not Applicable
PARTNER LOANS: $9,800,000 note and $500,000 note are
secured by partnership liens and are
guaranteed by Vornado Realty L.P..
------------------------------------------------------------
PROPERTY INFORMATION
SINGLE ASSET/
PORTFOLIO: Single Asset
PROPERTY TYPE: Retail
LOCATION: Montehiedra Avenue and State Road 52
Rio Piedras
San Juan, Puerto Rico
OCCUPANCY: 99% (as of May 1, 1997)
YEAR BUILT: 1994
THE COLLATERAL: 525,378 SF anchored retail center
with three additional free standing
buildings located in the Rio Piedras
sector of San Juan, Puerto Rico.
Anchored by Kmart, Builder's Square
(2), Marshall's, Caribbean Theater.
1996 Mall Store Sales per SF was
$376.14
MAJOR RETAIL TENANTS
------------------------------------------
NRSF EXPIRATION
---------- ----------------
Kmart 135,333 SF 4/30/22
Builder's Square (2) 110,241 SF 4/30/22
Caribbean Theater 50,000 SF 6/30/21
Marshall's 29,776 SF 1/31/10
PROPERTY MANAGEMENT: Manley-Berenson Associates, Inc.
1996 NET OPERATING
INCOME: $7,763,283
UNDERWRITTEN NET
CASH FLOW: $8,091,213
APPRAISED VALUE: $92,000,000
APPRAISED BY: Cushman & Wakefield
APPRAISAL DATE: March 7, 1997
CUT-OFF DATE LTV: 57%
DSCR (3): 1.69x
- -----------------------------------------------------------------------------
(1) August 11, 1997.
(2) Borrower has been informed that Builder's Square store, which is
subleased from Kmart, was sold to Masso Expo Corp. on June 30, 1997.
Masso Expo Corp. has informed the Montehiedra Borrower of its intent to
continue operating the store as a home improvement store possibly under a
different name. Kmart is still obligated under the lease for lease
payments.
(3) Based upon Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regar-ding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: COLLATERAL TERM SHEET
MONTEHIEDRA LOAN
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LEASE EXPIRATION SCHEDULE
YEAR ENDING DEC. 31 EXPIRING SF % OF TOTAL SF ANNUALIZED TENANT BASE RENT % OF TOTAL BASE RENT
- -------------------------- -------------------- ---------------------- -------------------------------- --------------------------
<S> <C> <C> <C> <C>
1997 0 0.0% $ 0 0.0%
1998 0 0.0 0 0.0
1999 450 0.1 60,000 0.8
2000 360 0.1 50,400 0.6
2001 180 0.0 47,400 0.6
2002 2,060 0.4 78,350 1.0
2003 800 0.2 24,000 0.3
2004 25,125 4.8 616,536 7.7
2005 106,196 20.2 2,488,479 31.1
2006 31,065 5.9 687,789 8.6
Thereafter 353,542 67.3 3,944,705 49.3
Vacant 5,600 1.1 -- --
--------- ------ -------------- ------
TOTAL 525,378 100.0%(1) $7,997,659 100.0%(1)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) May not add to 100.0% due to rounding.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regar-ding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- ------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: STRUCTURAL TERM SHEET
- ------------------------------------------------------------------------------
$942,890,000 (APPROXIMATE)
GS MORTGAGE SECURITIES CORPORATION II
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-GL I
OVERVIEW OF THE CERTIFICATES:
ANTICIPATED
PRINCIPAL RATINGS:
NOTIONAL MOODY'S/ AVG. MOD. ANTICIPATED
BALANCE DUFF & LIFE DUR. PRINCIPAL CREDIT
CLASS (1) ($000'S) PHELPS/FITCH (YRS)(2) (YRS)(2) WINDOW(2) SUPPORT
- -------------------------------------------------------------------------------
Publicly Offered Securities:
A-1 $ 50,000 Aaa/AAA/AAA 6.92 5.51 7/04 31.0%
A-2A 131,100 Aaa/AAA/AAA 3.19 2.75 9/97-12/03 31.0
A-2B 240,900 Aaa/AAA/AAA 6.33 5.00 12/03 31.0
A-2C 30,000 Aaa/AAA/AAA 8.08 6.00 12/03-4/07 31.0
A-2D 222,190 Aaa/AAA/AAA 9.67 6.85 4/07 31.0
B 78,160 Aa2/AA/AA 9.71 6.85 4/07-5/07 23.0
C 14,660 Aa3/AA-/AA- 9.87 6.92 5/07-7/07 21.5
D 53,760 A2/A/A- 9.92 6.93 7/07 16.0
E 14,650 A3/A-/A- 9.92 6.90 7/07 14.5
F 48,860 Baa2/BBB/BBB 9.92 6.89 7/07 9.5
G 58,620 NR/NR/BBB- 15.41 8.81 7/07-7/14 3.5
X-1A 50,000 Aaa/AAA/AAA
X-2 892,890 Aaa/AAA/AAA
Privately Offered Securities:
H $34,209 NR/NR/BB
X-1B 50,000 Aaa/AAA/AAA
- ---------------------------------------------------------------
(1) Other Privately Offered Certificates are not represented in this table.
(2) Assuming payment in full based on 0 CPR at the earlier of ARD or
Maturity Date. See Scenario 1 in the Prospectus Supplement.
[ ] ALL LOANS (EXCEPT THE AAPT FLOATING RATE COMPONENT)
LOCKED OUT WITH U.S. TREASURY DEFEASANCE THEREAFTER
[ ] PROPERTY APPRAISALS INCLUDED WITH THE OFFERING CIRCULAR
ON CD-ROM
[ ] MONTHLY ONGOING PROPERTY-LEVEL FINANCIAL REPORTING FOR 7
OF THE LOANS
KEY FEATURES:
MORTGAGE LOAN SELLER: GS Mortgage Securities
Corporation II
UNDERWRITER: Goldman, Sachs & Co.
MASTER SERVICER: GMAC Commercial Mortgage
Corporation ("GMACCM")
SPECIAL SERVICER: GMACCM: All loans except Century
Plaza Towers and
Whitehall Pool
AMRESCO Management: Century
Plaza Towers,
Whitehall Pool
TRUSTEE: LaSalle National Bank
FISCAL AGENT: ABN AMRO Bank N.V.
EXPECTED PRICING: On or about August 7, 1997
EXPECTED SETTLEMENT: On or about August 14, 1997
CUT-OFF DATE August 11, 1997
FIRST PAYMENT DATE: September 15, 1997
DISTRIBUTION DATE: The second Business Day
following the 11th day of each
month
INTEREST ACCRUAL PERIOD: Class A-1: Prior Distribution
Date to the day preceding the
current Distribution Date. All
other Classes: Prior calendar
month
DAY COUNT: Class A-1: Actual/360, all
other classes: 30/360
RATED FINAL DISTRIBUTION
DATE: July 11, 2030
CLEAN UP CALL: 1% of the Cut-Off date principal
balance
ERISA ELIGIBLE: The Underwriter believes that
the conditions to the
applicability of the
Underwriter's exemption will
generally be met with respect to
the Classes A-1, A-2A, A-2B,
A-2C, A-2D, X-1A, and X-2
Certificates
STRUCTURE: Sequential Pay
TAX TREATMENT: REMIC
RATING AGENCIES: Moody's, Duff & Phelps, Fitch
SERVICER ADVANCING: Yes
MINIMUM DENOMINATION: $10,000
DELIVERY: DTC/CEDEL/Euroclear
- -----------------------------------------------------------------------------
SELECTED LOAN DATA:
CUT-OFF DATE BALANCE: (as of August 11, 1997) $977,099,000
NUMBER OF MORTGAGE LOANS: 8
NUMBER OF PROPERTIES: 96
WEIGHTED AVERAGE COUPON: 7.89%
WEIGHTED AVERAGE DSCR: 1.70x
WEIGHTED AVERAGE CUT-OFF DATE LTV: 55.1%
WEIGHTED AVERAGE LTV AT ARD (1) (2): 48.8%
WEIGHTED AVERAGE REMAINING TERM TO ARD : 106 months
WEIGHTED AVERAGE SEASONING : 5 months
(1) For the Whitehall Pool Loan and the 380 Madison Loan,
the Maturity Date is used as the Anticipated Repayment
Date.
(2) "ARD" is the Anticipated Repayment Date.
OVERVIEW OF THE LOANS
CUT-OFF DATE PRINCIPAL BALANCE
------------------------------
NUMBER
OF PROPERTY % BY
LOAN NAME PROPERTIES TYPE ($000'S) BALANCE LTV
----------------------------------------------------------------
Cadillac
Fairview Pool 8 Retail $258,460 26.5% 62%
Century Plaza
Towers 1 Office 229,369 23.5 50
AAPT (1) 48 Office, Ind 125,149 12.8 52
380 Madison 1 Office 89,000 9.1 45
CAP Pool (2) 25 Office, Ind 87,946 9.0 61
Whitehall Pool 11 Retail,
Office, Ind 72,228 7.4 44
Ritz Plaza 1 Multifamily 62,365 6.4 67
Montehiedra 1 Retail 52,580 5.4 57
--- ------- ----- --
TOTAL 96 $977,099(3) 100%(1) 55%
- ------------------------------------------------------------------
(1) "AAPT" is the Atlantic American Properties Trust Pool Loan.
(2) "CAP" is the Commonwealth Atlantic Properties Pool.
(3) Balances may not sum to total due to rounding.
GEOGRAPHIC DIVERSIFICATION
CUT-OFF DATE PRINCIPAL BALANCE
---------------------------------------
NUMBER
GEOGRAPHIC OF % BY
DISTRIBUTION PROPERTIES ($000'S) BALANCE DSCR LTV
- -------------------------------------------------------------------
California 8 $271,054 27.7% 1.75x 48.9%
New York 4 227,576 23.3 1.72 58.4
Virginia 26 106,420 10.9 1.70 60.5
Pennsylvania 35 79,426 8.1 1.61 53.8
Puerto Rico 1 52,580 5.4 1.59 57.2
Louisiana 1 51,096 5.2 1.53 63.9
Mississippi 1 50,698 5.2 1.66 59.6
Delaware 2 35,290 3.6 1.60 59.3
Georgia 2 30,816 3.2 1.72 60.0
Other 16 72,143 7.4 1.69 54.1
---- --- ---- ------ -----
TOTAL 96 $977,099 100.0% 1.70x 55.1%
- -------------------------------------------------------------------
DIVERSIFICATION BY PROPERTY TYPE
CUT-OFF DATE PRINCIPAL BALANCE
---------------------------------------
NUMBER
PROPERTY OF % BY
TYPE PROPERTIES ($000'S) BALANCE DSCR LTV
- -------------------------------------------------------------------
Office 67 $557,225 57.0% 1.81x 51.4%
Retail 11 324,229 33.2 1.59 61.3
Multi-Family 1 62,365 6.4 1.34 67.4
Industrial 15 32,001 3.3 1.76 51.6
Land 2 1,279 0.1 (3.02) 14.6
----- --------- ------ ------ -----
TOTAL 96 $977,099(1) 100.0% 1.70x 55.1%
- --------------------------------------------------------------------
(1) Balances may not sum to total due to rounding.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regar-ding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- ------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: STRUCTURAL TERM SHEET
- ------------------------------------------------------------------------------
$942,890,000 (APPROXIMATE)
GS MORTGAGE SECURITIES CORPORATION II
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-GL I
OVERVIEW OF CERTIFICATES
<TABLE>
<CAPTION>
APPROXIMATE SECURITIES STRUCTURE
PRINCIPAL/ ANTICIPATED ANTICIPATED
NOTIONAL RATINGS: MOODY'S/ AVG. PRINCIPAL CREDIT
CLASS (1) BALANCE DUFF & PHELPS/FITCH % OF TOTAL DESCRIPTION LIFE (YRS)(2) WINDOW (2) SUPPORT
- ---------------- ---------------- --------------------- ----------- ---------------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Publicly Offered Securities:
A-1 $ 50,000,000 Aaa/AAA/AAA 5.1% LIBOR + 0.23% 6.92 7/04 31.0%
A-2A 131,100,000 Aaa/AAA/AAA 13.4 Fixed 6.94% 3.19 9/97-12/03 31.0
A-2B 240,900,000 Aaa/AAA/AAA 24.7 Fixed 6.86% 6.33 12/03 31.0
A-2C 30,000,000 Aaa/AAA/AAA 3.1 Fixed 6.93% 8.08 12/03-4/07 31.0
A-2D 222,190,000 Aaa/AAA/AAA 22.7 Fixed 6.94% 9.67 4/07 31.0
B 78,160,000 Aa2/AA/AA 8.0 Adjusted WAC less 9.71 4/07-5/07 23.0
.96%
C 14,660,000 Aa3/AA-/AA- 1.5 Adjusted WAC less 9.87 5/07-7/07 21.5
.92%
D 53,750,000 A2/A/A- 5.5 Adjusted WAC less 9.92 7/07 16.0
.90%
E 14,650,000 A3/A-/A- 1.5 Adjusted WAC less 9.92 7/07 14.5
.83%
F 48,860,000 Baa2/BBB/BBB 5.0 Adjusted WAC less 9.92 7/07 9.5
.76%
G 58,620,000 NR/NR/BBB- 6.0 Adjusted WAC less 15.41 7/07-7/14 3.5
.29%
X-1A 50,000,000 Aaa/AAA/AAA WAC/IO
X-2 892,890,000 Aaa/AAA/AAA WAC/IO
Privately Offered Securities:
H $34,208,999 NR/NR/BB 3.5% Adjusted WAC
X-1B 50,000,000 Aaa/AAA/AAA WAC/IO
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Other Privately Offered Certificates are not represented in this table.
(2) Assuming payment in full based on 0 CPR at the earlier of ARD or Maturity
Date. See Scenario 1 in the Prospectus Supplement.
GROUP 2 (FIXED)
[GRAPHIC OMITTED]
Note: This chart intends to reflect the size of each Class and the approximate
certificate coupon under the Scenario I base case.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regar-ding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- ------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: STRUCTURAL TERM SHEET
- ------------------------------------------------------------------------------
$942,890,000 (APPROXIMATE)
GS MORTGAGE SECURITIES CORPORATION II
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-GL I
STRUCTURAL OVERVIEW
PRINCIPAL CASH FLOW TIMELINE FOR GROUP 2 CERTIFICATES (1)
[GRAPHIC OMITTED]
(1) Assuming payment in full at the earlier of ARD or Maturity Date, based on
0 CPR. See Scenario 1 in the Prospectus Supplement.
Note: Time 0 is assumed to be September 15, 1997.
FINAL PRINCIPAL PAYMENT DATE FOR GROUP 2 CERTIFICATES (2)
[GRAPHIC OMITTED]
Note: Time 0 is assumed to be September 15, 1997.
(1) For the Whitehall Pool Loan and the 380 Madison Loan, the Maturity Date
is used as the Anticipated Repayment Date.
(2) Assuming payment in full at the earlier of ARD or Maturity Date based on
0 CPR. See Scenario 1 in the Prospectus Supplement.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regar-ding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- ------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: STRUCTURAL TERM SHEET
- ------------------------------------------------------------------------------
$942,890,000 (APPROXIMATE)
GS MORTGAGE SECURITIES CORPORATION II
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-GL I
STRUCTURAL OVERVIEW (CONTINUED)
[ ] The Mortgage Pool will consist of two Loan Groups:
-- Loan Group 1: Floating rate components of AAPT Pool Loan
-- Loan Group 2: Fixed rate component of AAPT Pool Loan and all
other Mortgage Loans
[ ] Loan Group 1 will be allocated in the following payment priorities:
Class A-1, A-2A, A-2B, A-2C, A-2D, B, C, D, E, F, G and H
Loan Group 2 will be allocated in the following payment priorities:
Class A-1 to the extent of undercollateralization; then Class A-2A,
A-2B, A-2C, A-2D, A1, B, C, D, E, F, G, and H
[ ] The Class A-1 Coupon will equal 1-month LIBOR+ 0.23% through the
Distribution Date in July 2004 and thereafter the lesser of 1-month
LIBOR+ 0.70% and the Group 1 WAC Rate or if Loan Group 1 is no longer
outstanding, 10%
[ ] Class A-1 will pay interest on an Actual/360 basis. All other Classes
will pay interest on a 30/360 basis
[ ] All fixed components are locked out from prepayment until a minimum
of 2 years from the closing of the securitization. After the lockout
period, each fixed component is prepayable based on full U.S.
Treasury defeasance of anticipated loan cash flows
CALL PROTECTION TIME LINE
[GRAPHIC OMITTED]
Note: Time 0 is assumed to be the expected closing date, August 14, 1997.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regar-ding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- ------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: STRUCTURAL TERM SHEET
- ------------------------------------------------------------------------------
$942,890,000 (APPROXIMATE)
GS MORTGAGE SECURITIES CORPORATION II
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-GL I
OVERVIEW OF THE LOANS
<TABLE>
<CAPTION>
CUT-OFF
DATE CUT-OFF
BALANCE PROPERTY NUMBER OF UNDERWRITTEN INTEREST AMORT DATE ARD ARD LOCKOUT MATURITY/
PROPERTY ($000'S) TYPE PROPERTIES NCF (000'S) RATE (YRS) DSCR(1) LTV BALANCE LTV(1) TERM (2)ARD(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cadillac
Fairview Pool $258,460 Retail 8 $ 35,874 7.935% 30 1.56x 63% $240,480 58% 2 yrs 12/11/03
Century Plaza
Towers 229,369 Office 1 35,719 8.039 30 1.76 50 201,899 44 2 yrs 4/09/07
AAPT Pool 125,149 Office, Ind 48 18,517 (4) (5) 1.72(6) 52 59,239(7) 37(13) (8) (9)
380 Madison 89,000 Office 1 16,000 7.848 (10) 2.26 45 74,673 38 2 yrs 7/11/14
CAP Pool 87,946 Office, Ind 25 11,939 7.480 30 1.60 61 76,589 53 (7) 7/01/07
Whitehall Pool 72,228 Retail,
Office, Ind 11 12,617 8.680 25 1.74 44 69,173 42 N.A. 9/10/00
Ritz Plaza 62,365 Multifamily 1 7,573 8.135 30 1.34 67 55,203 60 2 yrs 4/11/07
Montehiedra 52,580 Retail 1 8,091 8.230 30 1.69 57 46,536 51 2 yrs 5/11/07
-------- ----- --------- ----- -- --------
TOTAL/
WEIGHTED AVG $977,099(11) 96 $146,330 7.889% 1.70x 55% $822,792 49%(12)
</TABLE>
(1) Based on Underwritten Net Cash Flow.
(2) Lockout is from the date of the securitization.
(3) For the Whitehall Loan and the 380 Madison Loan, the Maturity Date is
used as the Anticipated Payment Date.
(4) $75,149,361 fixed at 7.48%; $30,000,000 floating at LIBOR + 93 bps,
$20,000,000 floating at LIBOR + 76 bps.
(5) $4,117,801 fully amortizing over a 53 month term; $71,100,000 amortizing
over a 305 month term for the first 84 months thereafter a 276 month
schedule for the next 36 months; $50,000,000 interest only for the first
84 months.
(6) For the AAPT LIBOR components, LIBOR is assumed to be 5.6875%.
(7) For the AAPT Pool Loan, the balance is shown as of July 11, 2007, the ARD
for the fixed component.
(8) Locked out until July 11, 2000; does not apply to AAPT floating
component.
(9) $71,031,559: 7/11/07; $50,000,000: 7/11/04.
(10 First five years, interest only; 30 year amortization thereafter.
(11) Balances may not sum to total due to rounding.
(12) LTV at the AAPT LIBOR Component Anticipated Repayment Date was utilized.
(13) Assumes ratable collateral liquidation for floating loans pay off.
CREDIT-ENHANCING LOAN FEATURES
<TABLE>
<CAPTION>
PRINCIPAL REMOVAL OF RESERVE LOCK BOX/ CROSS
LOAN REPAYMENT PROPERTY MANAGER ACCOUNTS (1) SWEEP ACCOUNT COLLATERALIZATION REPORTING
- ------------------------- ------------------- --------------------- ------------- ---------------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cadillac Fairview Pool ARD (2) Yes All (4) Hard Lockbox Yes M/Q/Y
Century Plaza Towers ARD (2) Yes All (5) Springing N.A. M/Q/Y
Lockbox
AAPT Pool ARD (2)(3) Low DSCR Reserve All Sweep Account Yes M/Q/Y
380 Madison Avenue Maturity N.A. N.A. Springing N.A. Y
Lockbox
CAP Pool ARD (2) Low DSCR Reserve All Sweep Account Yes M/Q/Y
Whitehall Pool Maturity Yes All Sweep Account Yes M/Q/Y
Ritz Plaza ARD (2) Low DSCR Reserve Cap Ex Springing N.A. M/Q/Y
Lockbox
Montehiedra Town Center ARD (2) Yes All Hard Lockbox N.A. M/Q/Y
- ------------------------- ------------------- --------------------- ------------- ---------------- ----------------- ------------
</TABLE>
(1) Reserve accounts include both up front and ongoing reserves. "All"
includes TI/LC/DM/Cap Ex.
(2) At the Anticipated Repayment Date, if the loan has not been repaid in
full, hyperamortization commences. Specifically, the interest rate
increases by 2% and all excess cash flow is used to reduce the
outstanding principal balance; the additional 2% interest is deferred
until the principal balance is zero.
(3) Only applies to the fixed-rate component of the AAPT loan.
(4) Free Rent Reserve, Tenant Inducement and Capital Renovations as well.
(5) Letter in lieu of TI/L Reserves in an initial amount of $11.5 million.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regar-ding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
[GRAPHIC OMITTED]
- ------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: STRUCTURAL TERM SHEET
- ------------------------------------------------------------------------------
$942,890,000 (APPROXIMATE)
GS MORTGAGE SECURITIES CORPORATION II
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-GL I
OVERVIEW OF THE COLLATERAL
GEOGRAPHIC DIVERSIFICATION BY
CUT-OFF DATE LOAN AMOUNTS
[GRAPHIC OMITTED]
PROPERTY-TYPE DISTRIBUTION BY
CUT-OFF DATE LOAN AMOUNTS
[GRAPHIC OMITTED]
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regar-ding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
- ------------------------------------------------------------------------------
GRANDE LOAN(TM)/(SM) I: STRUCTURAL TERM SHEET
- ------------------------------------------------------------------------------
$942,890,000 (APPROXIMATE)
GS MORTGAGE SECURITIES CORPORATION II
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-GL I
- --------------------------------------------------------------------------------
ADDITIONAL LOAN INFORMATION
- --------------------------------------------------------------------------------
[ ] REMOVAL OF THE SPECIAL SERVICER
The Pooling Agreement provides that holders of Certificates evidencing
greater than 50% of the Percentage Interests of the most subordinate
Class of Certificates then outstanding may replace the Special Servicer
provided that each Rating Agency confirms that such replacement will not
cause a qualification, withdrawal or downgrading of the then-current
ratings assigned to any Class of Certificates.
[ ] APPRAISAL REDUCTIONS
With respect to the first 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) 90 days 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) 60 days after a receiver has been appointed, (v) immediately after
a borrower declares bankruptcy and (vi) immediately after a Mortgage
Loan becomes an REO Mortgage Loan each, 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 as of the last day of the related Collection Period
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 Master Servicer as an Advance)
over (ii) the sum of (A) to the extent not previously advanced by the
Master 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 and assessments and insurance premiums and all other
amounts, including, if applicable, ground rents, due and unpaid under
the Mortgage Loan (which taxes, premiums and other amounts have not been
the subject of an Advance). 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 Special Servicer
will be required to estimate the value of the related Mortgaged
Properties (the "Special Servicer's Appraisal Reduction Estimate") and
such estimate will be used for purposes of determining the Appraisal
Reduction Amount. Within 60 days after the Special Servicer receives
notice or is otherwise aware of an Appraisal Reduction Event, the
Special Servicer will be required to obtain an independent MAI
appraisal, the cost of which will be paid by the Master Servicer as a
Property Advance.
[ ] SPECIAL SERVICER/LOAN MODIFICATIONS
The initial Special Servicer will be (i) GMACCM with respect to the
Mortgaged Loans, other than the Century Plaza Towers Loan and the
Whitehall Pool Loan, and (ii) AMRESCO Management, Inc. with respect to
the Century Plaza Towers Loan and the Whitehall Pool Loan. The Special
Servicer will be responsible for servicing loans that, in general, are
in default or are in imminent default and for administering REO
properties. The Special Servicer may modify such loans, if such
modification is consistent with the terms of the Pooling Agreement and,
in the sole good faith of the Special Servicer's judgment, such
modification is in the best interests of the Certificateholders.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do no represent that it is
accurate or complete and it should not be relied upon as such. By accepting
this material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may
not pertain to any securities that will actually be sold. The information
contained in this material may be based on assumptions regarding market
conditions and other matters as reflected therein. We make no representations
regar-ding the reasonableness of such assumptions or the likelihood that any of
such assumptions will coincide with actual market conditions or events, and
this material should not be relied upon for such purposes. We and our
affiliates, officers, directors, partners and employees, including persons
involved in the preparation or issuance of this material may, from time to
time, have long or short positions in, and buy or sell, the securities
mentioned herein or derivatives thereof (including options). This material may
be filed with the Securities and Exchange Commission (the "SEC") and
incorporated by reference into an effective registration statement previously
filed with the SEC under Rule 415 of the Securities Act of 1933, including in
cases where the material does not pertain to securities that are ultimately
offered for sale pursuant to such registration statement. Information
contained in this material is current as of the date appearing on this
material only. Information in this material regarding the securities and the
assets backing any securities discussed herein supersedes all prior
information regarding such securities and assets. Any information in the
material, whether regarding the assets backing any securities discussed herein
or otherwise, will be superseded by the information included in the final
prospectus for any securities actually sold to you.
This material is furnished to you solely by Goldman, Sachs & Co. and
not by the issuer of the securities or any of its affiliates. Goldman, Sachs &
Co. is acting as underwriter and not acting as agent for the issuer or its
affiliates in connection with the proposed transaction. The issuer has not
prepared or taken part in the preparation of these materials.
<PAGE>
INSTRUCTIONS TO INSTALL CD-ROM FOR GRANDE LOANTM/SM SECURITIZATION
FOR USERS WITH PRE-INSTALLED ACROBAT READERS
o Insert the disk in the CD-ROM drive and double-click on the drive icon.
o Please note that folder names correspond to respective mortgage loans.
Double-click on the folder you are interested in reviewing. In case of
single asset mortgage, you will see only one Acrobat(1) file. For pooled
mortgages, you will see a list of Acrobat files.
o Double-click on the file you wish to review.
o Acrobat Reader will display the contents of the file (the appraisal) on
the screen.
o Once in the Acrobat Reader, use the "Help" menu, which is located in the
upper right hand corner of the screen, to learn more about Acrobat Reader.
FOR USERS WHO NEED TO INSTALL ACROBAT READERS
o Insert the disk in the CD-ROM drive and double-click on the drive icon.
o If you are a WINDOWS 95 or WINDOWS NT user, please double-click on the
"Win95" folder. Once inside the folder, double-click on the "Ar32e30.exe"
file (the installation program). Follow instructions of the installation
program.
o If you are a WINDOWS 3.1 user, please double-click on the "Win 3.1"
folder. Once inside the folder, double-click on the "Ar16e30.exe" file
(the installation program). Follow instructions of the installation
program.
o Please note that folder names correspond to respective mortgage loans.
Double-click on the folder you are interested in reviewing. In case of
single asset mortgage, you will see only one Acrobat file. For pooled
mortgages, you will see a list of Acrobat files.
o Acrobat Reader will display the contents of the file (the appraisal) on
the screen.
o Once in the Acrobat Reader(1), use the "Help" menu, which is located in
the upper right hand corner of the screen, to learn more about Acrobat
Reader.
- ------------
(1) Adobe and Acrobat are registered trademarks of Adobe Systems
Incorporated.
<PAGE>
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the
Prospectus Supplement. The information contained in this CD ROM does not
appear elsewhere in paper form in this Prospectus Supplement and must be
considered as part of, and together with, the information contained elsewhere
in this Prospectus Supplement and the Prospectus. The information contained
in this CD ROM has been filed by the Seller with the Securities and Exchange
Commission as part of a Current Report on Form 8-K, which is incorporated by
reference in this Prospectus Supplement, and is also available through the
public reference branch of the Securities and Exchange Commission. Defined
terms used in this CD ROM but not otherwise defined therein shall have the
respective meanings assigned to them in the paper portion of the Prospectus
Supplement and the Prospectus. All of the information contained in this CD
ROM is subject to the same limitations and qualifications contained in this
Prospectus Supplement and the Prospectus. Prospective investors are strongly
urged to read the paper portion of this Prospectus Supplement and the
Prospectus in its entirety prior to accessing this CD ROM. If this CD ROM was
not received in a sealed package, there can be no assurances that it remains
in its original format and should not be relied upon for any purpose.
Prospective investors may contact J. Theodore Borter of Goldman, Sachs & Co.
at (212) 902-3857 to receive an original copy of the CD ROM. Upon opening the
appraisal file contained on this CD ROM, a legend will be displayed, which
should be read carefully.
This diskette contains Loan Characteristics/Schedule of Additional
Information for Mortgage Loans in Microsoft Excel(1) Version 7.0 format. The
information contained in this diskette appears elsewhere in paper form in
this Prospectus Supplement and must be considered as part of, and together
with, the information contained elsewhere in this Prospectus Supplement and
the Prospectus. Defined terms used in this diskette but not otherwise defined
therein shall have the respective meanings assigned to them in the paper
portion of the Prospectus Supplement and Prospectus. All of the information
contained in this diskette is subject to the same limitations and
qualifications contained elsewhere in this Prospectus Supplement and the
Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety
prior to accessing this diskette. If this diskette was not received in a
sealed package, there can be no assurances that it remains in its original
format and should not be relied upon for any purpose. Prospective investors
may contact J. Theodore Borter of Goldman, Sachs & Co. at (212) 902-3857 to
receive an original copy of the diskette. Upon opening the Microsoft Excel
file contained on this diskette, a legend will be displayed, which should be
read carefully.
- ------------
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS
PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE SELLER OR THE TRUST FUND SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT
PAGE
---------
<S> <C>
Executive Summary.................................. S-5
Summary of Prospectus Supplement................... S-9
Risk Factors....................................... S-45
Mortgage Pool Characteristics...................... S-72
Description of the Mortgage Pool and the
Underlying Mortgaged Properties................... S-86
Description of the Offered Certificates............ S-196
Yield, Prepayment and Maturity Considerations ..... S-215
The Pooling Agreement.............................. S-238
Certain Legal Aspects of the Mortgage Loans ....... S-263
Use of Proceeds.................................... S-265
Federal Income Tax Consequences.................... S-265
ERISA Considerations............................... S-267
Legal Investment................................... S-270
Underwriting ...................................... S-270
Experts............................................ S-271
Validity of Offered Certificates................... S-272
Ratings ........................................... S-272
Index of Significant Definitions................... S-274
Exhibit A--Financial Information................... A-1
Exhibit B--Representations and Warranties ......... B-1
Exhibit C--Adjusted WAC Rates...................... C-1
Exhibit D--Form of Reports to Certificateholders .. D-1
Annex A--Mortgaged Properties Characteristics ..... A-1
PROSPECTUS
Prospectus Supplement.............................. 2
Additional Information............................. 3
Incorporation of Certain Information By Reference . 3
Risk Factors....................................... 4
The Seller......................................... 6
Use of Proceeds.................................... 7
Description of The Certificates.................... 7
The Mortgage Pools................................. 15
Servicing of The Mortgage Loans.................... 19
Credit Enhancement................................. 25
Swap Agreement..................................... 27
Yield Considerations............................... 28
Certain Legal Aspects of The Mortgage Loans ....... 30
Federal Income Tax Consequences.................... 44
State Tax Considerations........................... 55
ERISA Considerations............................... 55
Legal Investment................................... 57
Plan of Distribution............................... 59
Legal Matters...................................... 60
</TABLE>
<PAGE>
$942,890,000
GS MORTGAGE
SECURITIES CORPORATION II,
SELLER
COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 1997-GL I
<TABLE>
<CAPTION>
<S> <C>
CLASS A-1 CERTIFICATES $50,000,000
CLASS A-2A CERTIFICATES $131,100,000
CLASS A-2B CERTIFICATES $240,900,000
CLASS A-2C CERTIFICATES $30,000,000
CLASS A-2D CERTIFICATES $222,190,000
CLASS X-1A CERTIFICATES $50,000,000
CLASS X-2 CERTIFICATES $892,890,000
CLASS B CERTIFICATES $78,160,000
CLASS C CERTIFICATES $14,660,000
CLASS D CERTIFICATES $53,750,000
CLASS E CERTIFICATES $14,650,000
CLASS F CERTIFICATES $48,860,000
CLASS G CERTIFICATES $58,620,000
</TABLE>
[Insert Goldman, Sachs & Co. Logo to come]
GOLDMAN, SACHS & CO.
