SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report: July 29, 1997
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(Date of earliest event reported)
GS Mortgage Securities Corporation II
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(Exact name of registrant as specified in its charter)
Delaware 33-99774-02 22-3442024
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(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number Identification No.)
Incorporation
85 Broad Street, New York, N.Y. 10004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 902-1000
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Item 5. Other Events.
The Registrant is offering certain classes of its Commercial Mortgage
Pass-Through Certificates, Series 1997-GL I (the "Certificates") pursuant to a
Preliminary Prospectus Supplement dated July 22, 1997 (the "Preliminary
Prospectus Supplement") and related Prospectus dated June 9, 1997 (the
"Prospectus" and collectively with the Preliminary Prospectus Supplement, the
"Preliminary Prospectus"), which was filed with the Commission on July 25, 1997
pursuant to Rule 424(b). The Registrant proposes also to offer two additional
classes of the Certificates, the Class X-1A and the Class X-2 (collectively, the
"Offered Class X Certificates" and together with the other classes of
Certificates offered pursuant to the Final Prospectus, the "Offered
Certificates") pursuant to the final, completed form of the Preliminary
Prospectus (the "Final Prospectus"), which will be filed with the Commission
pursuant to Rule 424 under the Securities Act of 1933, as amended (the "Act").
The offering and sale of Offered Certificates will be registered pursuant to the
Act under the Registrant's Registration Statement on Form S-3 (No. 333-27083)
(the "Registration Statement").
Set forth below is a description of certain characteristics of the Offered
Class X Certificates which are not described in the Preliminary Prospectus.
THE INFORMATION CONTAINED HEREIN REGARDING THE OFFERED CLASS X CERTIFICATES
DOES NOT CONTAIN A COMPLETE DESCRIPTION OF THE OFFERED CLASS X CERTIFICATES. THE
INFORMATION CONTAINED HEREIN IS INTENDED TO SUPPLEMENT THE INFORMATION REGARDING
THE OFFERED CLASS X CERTIFICATES CONTAINED IN THE PRELIMINARY PROSPECTUS, WHICH
IS AVAILABLE UPON REQUEST BY CONTACTING J. THEODORE BORTER AT (212) 902-3857.
POTENTIAL INVESTORS IN THE OFFERED CLASS X CERTIFICATES ARE URGED TO READ THE
PRELIMINARY PROSPECTUS AND THE FINAL PROSPECTUS IN FULL. SALES OF THE OFFERED
CLASS X CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED
THE FINAL PROSPECTUS. See "Index of Significant Definitions" in the Preliminary
Prospectus Supplement for the location of meanings of capitalized terms used but
not defined herein.
Any statement or information contained herein or in the Computational
Materials referred to below shall be modified and superseded by statements or
information contained in the Final Prospectus.
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 Class X
Certificates initially will be represented by Certificates registered in the
name of Cede & Co., as nominee of DTC. The interests of beneficial owners of the
Offered Class X Certificates will be represented by book entries on the records
of participating members of DTC. Definitive Certificates will be available for
the Offered Class X Certificates only under the circumstances described in the
Preliminary Prospectus. For more information regarding the book-entry system and
DTC, investors are urged to read "Description of the Offered
Certificates--Delivery, Form and Denomination", "--Book-Entry Registration" and
"--Definitive Certificates" in the Preliminary Prospectus Supplement.
It is a condition to the issuance of the Offered Class X Certificates that
they be rated "AAA" by each of Duff & Phelp's Credit Rating Co. and Fitch
Investors Service, L.P., and "Aaa" by Moody's Investors Service, Inc.
In addition to any other distributions required to be made on any
Distribution Date, any Prepayment Premiums collected on the AAPT LIBOR
Components will be distributed to the holders of the Class X-1A and Class X-1B
Certificates on each Distribution Date 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, 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 ______%.
Prospective purchasers of the Offered Class X Certificates should consider,
among other things, the following risk factors (as well as the risk factors set
forth under "Risk Factors" in the Preliminary Prospectus) in connection with an
investment in the Offered Class X Certificates.
The yield to maturity on the Offered Class X Certificates will depend upon
the price paid by investors, the rate and timing of distributions that result in
a reduction of Notional Amounts of the 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 Notional Amounts 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 Offered Class X 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 respective Notional Amounts of the Offered
Class X Certificates. 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" in the Preliminary
Prospectus Supplement, 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).
Realized Losses on the Group 1 Components and Realized Losses allocated to the
Class G, Glass F, Class E, Class D, Class C, Class B, Class A-2D, Class A-2C,
Class A-2B or Class A-2A Certificates will have the effect of reducing the
Notional Amount of the Class X-1A and Class X-2 Certificates, respectively, and
thereby reducing such Classes' interest entitlements. 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 Class X Certificate. See "Yield, Prepayment and
Maturity Considerations" in the Preliminary Prospectus Supplement.
In general, in the case of Certificates purchased at a premium (such as the
Class X-1A and Class X-2 Certificates) when principal distributions thereon (or
reductions in the related Notional Amount) occur at a rate faster than
anticipated at the time of purchase, the investor's actual yield to maturity
will be lower than that assumed at the time of purchase and may be significantly
lower, resulting in a failure of the holders to recover their initial
investment. See "Yield, Prepayment and Maturity Considerations" and in the
Preliminary Prospectus Supplement.
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" in the Preliminary Prospectus Supplement. 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 such Prepayment Premiums would be held to be enforceable if
challenged, or that the AAPT Borrower would refrain from prepaying such
Components due to the existence of such Prepayment Premiums. 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. See "Risk Factors--The Offered Certificates--Special
Prepayment, Yield and Loss Considerations" in the Preliminary Prospectus
Supplement.
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--Appraisal Reductions"
in the Preliminary Prospectus Supplement, 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.
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.
Finally, the effective yield to holders of Offered Class X 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.
Attached hereto as an exhibit are certain computational materials (the
"Computational Materials"). The Registrant hereby incorporates the Computational
Materials by reference in the Registration Statement and the Final Prospectus.
The following information is intended to supplement the information
contained in the Preliminary Prospectus Supplement concerning the Montehiedra
Loan:
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, one hundred fifty percent
(150%) of unsecured indebtedness; and (b) from and after termination of the
Existing Finance Facility, one hundred seventy-five percent (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. As
described more fully in the Preliminary Prospectus, payments of principal,
interest and any other proceeds with respect to the Montehiedra Partner Loans
will be allocated and distributed exclusively to the Class M Certificates and
will not serve as credit support for nay other Class of Certificates. The Class
M Certificates are not being offered pursuant to the Preliminary Prospectus or
the Final Prospectus.
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 others, 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 continued 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.
(c) Exhibits
Exhibit 99. Computational Materials.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf of the Registrant
by the undersigned thereunto duly authorized.
GS MORTGAGE SECURITIES CORPORATION II
By: /s/ Marvin Kabatznick
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Name: Marvin Kabatznick
Title: Chief Executive Officer
Date: July 29, 1997
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Exhibit Index
Format Exhibit No. Description Page
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P 99 Computational Materials 8
IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THESE COMPUTATIONAL MATERIALS ARE
BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION.
EXHIBIT 99
COMPUTATIONAL MATERIALS
